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G.R. No. 165881. April 19, 2006.

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OSCAR VILLAMARIA, JR., petitioner, vs. COURT OF APPEALS and JERRY V. BUSTAMANTE, respondents.
Actions; Appeals; Pleadings and Practice; The remedy of an aggrieved party from a Court of Appeals decision is a
petition for review on certiorari under Rule 45 of the Rules of Court and not the independent action of certiorari
under Rule 65.We agree with respondents contention that the remedy of petitioner from the CA decision
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* FIRST DIVISION.
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Villamaria, Jr. vs. Court of Appeals
was to file a petition for review on certiorari under Rule 45 of the Rules of Court and not the independent action of
certiorari under Rule 65. Petitioner had 15 days from receipt of the CA resolution denying his motion for the
reconsideration within which to file the petition under Rule 45. But instead of doing so, he filed a petition for
certiorari under Rule 65 on November 22, 2004, which did not, however, suspend the running of the 15-day
reglementary period; consequently, the CA decision became final and executory upon the lapse of the reglementary
period for appeal. Thus, on this procedural lapse, the instant petition stands to be dismissed.
Same; Same; Same; A petition for certiorari under Rule 65 may be considered as filed under Rule 45, conformably
with the principle that rules of procedure are to be construed liberally, provided that the petition is filed within the
reglementary period under Section 2, Rule 45 of the Rules of Court, and where valid and compelling circumstances
warrant that the petition be resolved on its merits.We have also ruled that a petition for certiorari under Rule 65
may be considered as filed under Rule 45, conformably with the principle that rules of procedure are to be construed
liberally, provided that the petition is filed within the reglementary period under Section 2, Rule 45 of the Rules of
Court, and where valid and compelling circumstances warrant that the petition be resolved on its merits. In this
case, the petition was filed within the reglementary period and petitioner has raised an issue of substance: whether

the existence of a boundary-hulog agreement negates the employer-employee relationship between the vendor and
vendee, and, as a corollary, whether the Labor Arbiter has jurisdiction over a complaint for illegal dismissal in such
case.
Same; Jurisdictions; The rule is that, the nature of an action and the subject matter thereof, as well as, which court
or agency of the government has jurisdiction over the same, are determined by the material allegations of the
complaint in relation to the law involved and the character of the reliefs prayed for, whether or not the
complainant/plaintiff is entitled to any or all of such reliefs.The rule is that, the nature of an action and the subject
matter thereof, as well as, which court or agency of the government has jurisdiction over the same, are determined
by the material allegations of the complaint in relation to the law involved and the character of the reliefs prayed
for, whether or not the complainant/plaintiff is entitled to any or all
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of such reliefs. A prayer or demand for relief is not part of the petition of the cause of action; nor does it enlarge the
cause of action stated or change the legal effect of what is alleged. In determining which body has jurisdiction over a
case, the better policy is to consider not only the status or relationship of the parties but also the nature of the
action that is the subject of their controversy.
Same; Labor Law; Not every dispute between an employer and employee involves matters that only the Labor
Arbiter and the National Labor Relations Commission can resolve in the exercise of their adjudicatory or quasijudicial powersactions between employers and employees where the employer-employee relationship is merely
incidental is within the exclusive original jurisdiction of the regular courts.An employer-employee relationship is an
indispensable jurisdictional requisite. The jurisdiction of Labor Arbiters and the NLRC under Article 217 of the Labor
Code is limited to disputes arising from an employer-employee relationship which can only be resolved by reference
to the Labor Code, other labor statutes or their collective bargaining agreement. Not every dispute between an
employer and employee involves matters that only the Labor Arbiter and the NLRC can resolve in the exercise of
their adjudicatory or quasi-judicial powers. Actions between employers and employees where the employeremployee relationship is merely incidental is within the exclusive original jurisdiction of the regular courts. When the

principal relief is to be granted under labor legislation or a collective bargaining agreement, the case falls within the
exclusive jurisdiction of the Labor Arbiter and the NLRC even though a claim for damages might be asserted as an
incident to such claim.
Labor Law; Common Carriers; Boundary System; Words and Phrases; Jeepney owner/operator-driver relationship
under the boundary system is that of employer-employee and not lessor-lessee; The boundary system is a scheme
by an owner/operator engaged in transporting passengers as a common carrier to primarily govern the
compensation of the driver, that is, the latters daily earnings are remitted to the owner/operator less the excess of
the boundary which represents the drivers compensation.As early as 1956, the Court ruled in National Labor
Union v. Dinglasan, 98 Phil. 649 (1956), that the jeepney owner/operator-driver relationship under the boundary
system is that of employer-employee and not lessor-lessee. This doctrine was affirmed, under similar factual
settings, in Mag574

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boo v. Bernardo, 7 SCRA 952 (1963), and Lantaco, Sr. v. Llamas, 108 SCRA 502 (1981), and was analogously applied
to govern the relationships between auto-calesa owner/operator and driver, bus owner/operator and conductor, and
taxi owner/operator and driver. The boundary system is a scheme by an owner/operator engaged in transporting
passengers as a common carrier to primarily govern the compensation of the driver, that is, the latters daily
earnings are remitted to the owner/operator less the excess of the boundary which represents the drivers
compensation. Under this system, the owner/operator exercises control and supervision over the driver. It is unlike in
lease of chattels where the lessor loses complete control over the chattel leased but the lessee is still ultimately
responsible for the consequences of its use. The management of the business is still in the hands of the
owner/operator, who, being the holder of the certificate of public convenience, must see to it that the driver follows
the route prescribed by the franchising and regulatory authority, and the rules promulgated with regard to the
business operations. The fact that the driver does not receive fixed wages but only the excess of the boundary
given to the owner/operator is not sufficient to change the relationship between them. Indubitably, the driver
performs activities which are usually necessary or desirable in the usual business or trade of the owner/operator.

Same; Same; Same; Novation; An obligation is not novated by an instrument that expressly recognizes the old one,
changes only the terms of payment, and adds other obligations not incompatible with the old provisions or where
the new contract merely supplements the previous one.Under the Kasunduan, respondent was required to remit
P550.00 daily to petitioner, an amount which represented the boundary of petitioner as well as respondents partial
payment (hulog) of the purchase price of the jeepney. Respondent was entitled to keep the excess of his daily
earnings as his daily wage. Thus, the daily remittances also had a dual purpose: that of petitioners boundary and
respondents partial payment (hulog) for the vehicle. This dual purpose was expressly stated in the Kasunduan. The
well-settled rule is that an obligation is not novated by an instrument that expressly recognizes the old one, changes
only the terms of payment, and adds other obligations not incompatible with the old provisions or where the new
contract merely supplements the previous one. The two obligations of the respondent to remit to petitioner the
boundary-hulog can stand together.
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Contracts; Interpretation of Contracts; The intention of the contracting parties should be ascertained by looking at
the words used to project their intention, that is, all the words, not just a particular word or two or more words
standing alone.In resolving an issue based on contract, this Court must first examine the contract itself, keeping in
mind that when the terms of the agreement are clear and leave no doubt as to the intention of the contracting
parties, the literal meaning of its stipulations shall prevail. The intention of the contracting parties should be
ascertained by looking at the words used to project their intention, that is, all the words, not just a particular word or
two or more words standing alone. The various stipulations of a contract shall be interpreted together, attributing to
the doubtful ones that sense which may result from all of them taken jointly. The parts and clauses must be
interpreted in relation to one another to give effect to the whole. The legal effect of a contract is to be determined
from the whole read together.
Same; Sales; A contract is one of conditional sale, oftentimes referred to as contract to sell, if the ownership or title
over the property sold is retained by the vendor, and is not passed to the vendee unless and until there is full
payment of the purchase price and/or upon faithful compliance with the other terms and conditions that may
lawfully be stipulated.The parties expressly agreed that petitioner, as vendor, and respondent, as vendee, entered

into a contract to sell the jeepney on a daily installment basis of P550.00 payable in four years and that petitioner
would thereafter become its owner. A contract is one of conditional sale, oftentimes referred to as contract to sell, if
the ownership or title over the property sold is retained by the vendor, and is not passed to the vendee unless and
until there is full payment of the purchase price and/or upon faithful compliance with the other terms and conditions
that may lawfully be stipulated. Such payment or satisfaction of other preconditions, as the case may be, is a
positive suspensive condition, the failure of which is not a breach of contract, casual or serious, but simply an event
that would prevent the obligation of the vendor to convey title from acquiring binding force. Stated differently, the
efficacy or obligatory force of the vendors obligation to transfer title is subordinated to the happening of a future
and uncertain event so that if the suspensive condition does not take place, the parties would stand as if the
conditional obligation had never existed. The vendor may extrajudicially terminate the operation of the contract,
refuse conveyance, and
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retain the sums or installments already received, where such rights are expressly provided for.
Identification (I.D.) Cards; In a business establishment, an identification card is usually provided not just as a security
measure but to mainly identify the holder thereof as a bona fide employee of the firm who issues it.Petitioner, as
the owner of the vehicle and the holder of the franchise, is entitled to exercise supervision and control over the
respondent, by seeing to it that the route provided in his franchise, and the rules and regulations of the Land
Transportation Regulatory Board are duly complied with. Moreover, in a business establishment, an identification
card is usually provided not just as a security measure but to mainly identify the holder thereof as a bona fide
employee of the firm who issues it.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

The facts are stated in the opinion of the Court.

Elenita P. Tec-Rodriguez for petitioner.


Prosencio D. Jaso for respondent.
CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari under Rule 65 of the Revised Rules of Court assailing the Decision1
and Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 78720 which set aside the Resolution3 of the National
Labor Relations Commission (NLRC) in NCR-30-08-03247-00, which in turn affirmed the Decision4 of the Labor
Arbiter dismissing the complaint filed by respondent Jerry V. Bustamante.
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1 Penned by Associate Justice Renato C. Dacudao, with Associate Justices Lucas P. Bersamin and Celia C. LibreaLeagogo, concurring; Rollo, pp. 20-36.
2 Rollo, p. 38.
3 Penned by Presiding Commissioner Raul T. Aquino, with Commissioners Victoriano R. Calaycay and Angelita A.
Gacutan, concurring.
4 Penned by Labor Arbiter Edgardo M. Madriaga.
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Villamaria, Jr. vs. Court of Appeals
Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a sole proprietorship engaged in assembling
passenger jeepneys with a public utility franchise to operate along the Baclaran-Sucat route. By 1995, Villamaria
stopped assembling jeepneys and retained only nine, four of which he operated by employing drivers on a

boundary basis. One of those drivers was respondent Bustamante who drove the jeepney with Plate No. PVU-660.
Bustamante remitted P450.00 a day to Villamaria as boundary and kept the residue of his daily earnings as
compensation for driving the vehicle. In August 1997, Villamaria verbally agreed to sell the jeepney to Bustamante
under the boundary-hulog scheme, where Bustamante would remit to Villarama P550.00 a day for a period of four
years; Bustamante would then become the owner of the vehicle and continue to drive the same under Villamarias
franchise. It was also agreed that Bustamante would make a downpayment of P10,000.00.
On August 7, 1997, Villamaria executed a contract entitled Kasunduan ng Bilihan ng Sasakyan sa Pamamagitan ng
Boundary-Hulog5 over the passenger jeepney with Plate No. PVU-660, Chassis No. EVER95-38168-C and Motor No.
SL-26647. The parties agreed that if Bustamante failed to pay the boundary-hulog for three days, Villamaria Motors
would hold on to the vehicle until Bustamante paid his arrears, including a penalty of P50.00 a day; in case
Bustamante failed to remit the daily boundary-hulog for a period of one week, the Kasunduan would cease to have
legal effect and Bustamante would have to return the vehicle to Villamaria Motors.
Under the Kasunduan, Bustamante was prohibited from driving the vehicle without prior authority from Villamaria
Motors. Thus, Bustamante was authorized to operate the vehicle to transport passengers only and not for other
purposes. He was also required to display an identification card
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5 CA Rollo, pp. 68-70.


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SUPREME COURT REPORTS ANNOTATED
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in front of the windshield of the vehicle; in case of failure to do so, any fine that may be imposed by government
authorities would be charged against his account. Bustamante further obliged himself to pay for the cost of
replacing any parts of the vehicle that would be lost or damaged due to his negligence. In case the vehicle sustained
serious damage, Bustamante was obliged to notify Villamaria Motors before commencing repairs. Bustamante was

not allowed to wear slippers, short pants or undershirts while driving. He was required to be polite and respectful
towards the passengers. He was also obliged to notify Villamaria Motors in case the vehicle was leased for two or
more days and was required to attend any meetings which may be called from time to time. Aside from the
boundary-hulog, Bustamante was also obliged to pay for the annual registration fees of the vehicle and the premium
for the vehicles comprehensive insurance. Bustamante promised to strictly comply with the rules and regulations
imposed by Villamaria for the upkeep and maintenance of the jeepney.
Bustamante continued driving the jeepney under the supervision and control of Villamaria. As agreed upon, he made
daily remittances of P550.00 in payment of the purchase price of the vehicle. Bustamante failed to pay for the
annual registration fees of the vehicle, but Villamaria allowed him to continue driving the jeepney.
In 1999, Bustamante and other drivers who also had the same arrangement with Villamaria Motors failed to pay
their respective boundary-hulog. This prompted Villamaria to serve a Paalala,6 reminding them that under the
Kasunduan, failure to pay the daily boundary-hulog for one week, would mean their respective jeepneys would be
returned to him without any complaints. He warned the drivers that the Kasunduan would henceforth be strictly
enforced and urged them to comply with their obligation to avoid litigation.
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6 Id., at p. 71.
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On July 24, 2000, Villamaria took back the jeepney driven by Bustamante and barred the latter from driving the
vehicle.
On August 15, 2000, Bustamante filed a Complaint7 for Illegal Dismissal against Villamaria and his wife Teresita. In
his Position Paper,8 Bustamante alleged that he was employed by Villamaria in July 1996 under the boundary
system, where he was required to remit P450.00 a day. After one year of continuously working for them, the spouses

Villamaria presented the Kasunduan for his signature, with the assurance that he (Bustamante) would own the
jeepney by March 2001 after paying P550.00 in daily installments and that he would thereafter continue driving the
vehicle along the same route under the same franchise. He further narrated that in July 2000, he informed the
Villamaria spouses that the surplus engine of the jeepney needed to be replaced, and was assured that it would be
done. However, he was later arrested and his drivers license was confiscated because apparently, the replacement
engine that was installed was taken from a stolen vehicle. Due to negotiations with the apprehending authorities,
the jeepney was not impounded. The Villamaria spouses took the jeepney from him on July 24, 2000, and he was no
longer allowed to drive the vehicle since then unless he paid them P70,000.00.
Bustamante prayed that judgment be rendered in his favor, thus:
WHEREFORE, in the light of the foregoing, it is most respectfully prayed that judgment be rendered ordering the
respondents, jointly and severally, the following:
1. Reinstate complainant to his former position without loss of seniority rights and execute a Deed of Sale in favor of
the complainant relative to the PUJ with Plate No. PVU-660;
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7 Id., at p. 52.
8 Id., at pp. 53-62.
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2. Ordering the respondents to pay backwages in the amount of P400.00 a day and other benefits computed from
July 24, 2000 up to the time of his actual reinstatement;
3. Ordering respondents to return the amount of P10,000.00 and P180,000.00 for the expenses incurred by the
complainant in the repair and maintenance of the subject jeep;

4. Ordering the respondents to refund the amount of One Hundred (P100.00) Pesos per day counted from August 7,
1997 up to June 2000 or a total of P91,200.00;
5. To pay moral and exemplary damages of not less than P200,000.00;
6. Attorneys fee[s] of not less than 10% of the monetary award.
Other just and equitable reliefs under the premises are also being prayed for.9
In their Position Paper,10 the spouses Villamaria admitted the existence of the Kasunduan, but alleged that
Bustamante failed to pay the P10,000.00 downpayment and the vehicles annual registration fees. They further
alleged that Bustamante eventually failed to remit the requisite boundary-hulog of P550.00 a day, which prompted
them to issue the Paalaala. Instead of complying with his obligations, Bustamante stopped making his remittances
despite his daily trips and even brought the jeepney to the province without permission. Worse, the jeepney figured
in an accident and its license plate was confiscated; Bustamante even abandoned the vehicle in a gasoline station in
Sucat, Paraaque City for two weeks. When the security guard at the gasoline station requested that the vehicle be
retrieved and Teresita Villamaria asked Bustamante for the keys, Bustamante told her: Di kunin ninyo. When the
vehicle was finally retrieved, the tires were worn, the alternator was gone, and the battery was no longer working.
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9 Id., at pp. 59-60.


10 Id., at pp. 63-67.
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Citing the cases of Cathedral School of Technology v. NLRC11 and Canlubang Security Agency Corporation v.
NLRC,12 the spouses Villamaria argued that Bustamante was not illegally dismissed since the Kasunduan executed
on August 7, 1997 transformed the employer-employee relationship into that of vendor-vendee. Hence, the spouses

concluded, there was no legal basis to hold them liable for illegal dismissal. They prayed that the case be dismissed
for lack of jurisdiction and patent lack of merit.
In his Reply,13 Bustamante claimed that Villamaria exercised control and supervision over the conduct of his
employment. He maintained that the rulings of the Court in National Labor Union v. Dinglasan,14 Magboo v.
Bernardo,15 and Citizens League of Free Workers v. Abbas16 are germane to the issue as they define the nature of
the owner/operator-driver relationship under the boundary system. He further reiterated that it was the Villamaria
spouses who presented the Kasunduan to him and that he conformed thereto only upon their representation that he
would own the vehicle after four years. Moreover, it appeared that the Paalala was duly received by him, as he,
together with other drivers, was made to affix his signature on a blank piece of paper purporting to be an
attendance sheet.
On March 15, 2002, the Labor Arbiter rendered judgment17 in favor of the spouses Villamaria and ordered the
complaint dismissed on the following ratiocination:
Respondents presented the contract of Boundary-Hulog, as well as the PAALALA, to prove their claim that
complainant violated
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11 G.R. No. 101438, October 13, 1992, 214 SCRA 551.


12 G.R. No. 97492, December 8, 1992, 216 SCRA 280.
13 CA Rollo, pp. 73-78.
14 98 Phil. 649 (1956).
15 117 Phil. 966; 7 SCRA 952 (1963).
16 124 Phil. 638; 18 SCRA 71 (1966).
17 CA Rollo, pp. 46-50.
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the terms of their contract and afterwards abandoned the vehicle assigned to him. As against the foregoing, [the]
complaints (sic) mere allegations to the contrary cannot prevail.
Not having been illegally dismissed, complainant is not entitled to damages and attorneys fees.18
Bustamante appealed the decision to the NLRC,19 insisting that the Kasunduan did not extinguish the employeremployee relationship between him and Villamaria. While he did not receive fixed wages, he kept only the excess of
the boundary-hulog which he was required to remit daily to Villamaria under the agreement. Bustamante maintained
that he remained an employee because he was engaged to perform activities which were necessary or desirable to
Villamarias trade or business.
The NLRC rendered judgment20 dismissing the appeal for lack of merit, thus:
WHEREFORE, premises considered, complainants appeal is hereby DISMISSED for reasons not stated in the Labor
Arbiters decision but mainly on a jurisdictional issue, there being none over the subject matter of the
controversy.21
The NLRC ruled that under the Kasunduan, the juridical relationship between Bustamante and Villamaria was that of
vendor and vendee, hence, the Labor Arbiter had no jurisdiction over the complaint. Bustamante filed a Motion for
Reconsideration, which the NLRC resolved to deny on May 30, 2003.22
Bustamante elevated the matter to the CA via Petition for Certiorari, alleging that the NLRC erred
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18 Id., at p. 50.
19 Id., at pp. 81-95.
20 Id., at pp. 30-42.
21 Id., at pp. 41-42.

22 Id., at pp. 44-45.


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I

IN DISMISSING PETITIONERS APPEAL FOR REASON NOT STATED IN THE LABOR ARBITERS DECISION, BUT MAINLY
ON JURISDICTIONAL ISSUE;
II

IN DISREGARDING THE LAW AND PREVAILING JURISPRUDENCE WHEN IT DECLARED THAT THE RELATIONSHIP WHICH
WAS ESTABLISHED BETWEEN PETITIONER AND THE PRIVATE RESPONDENT WAS DEFINITELY A MATTER WHICH IS
BEYOND THE PROTECTIVE MANTLE OF OUR LABOR LAWS.23
Bustamante insisted that despite the Kasunduan, the relationship between him and Villamaria continued to be that
of employer-employee and as such, the Labor Arbiter had jurisdiction over his complaint. He further alleged that it is
common knowledge that operators of passenger jeepneys (including taxis) pay their drivers not on a regular
monthly basis but on commission or boundary basis, or even the boundary-hulog system. Bustamante asserted that
he was dismissed from employment without any lawful or just cause and without due notice.
For his part, Villamaria averred that Bustamante failed to adduce proof of their employer-employee relationship. He
further pointed out that the Dinglasan case pertains to the boundary system and not the boundary-hulog system,
hence inapplicable in the instant case. He argued that upon the execution of the Kasunduan, the juridical tie
between him and Bustamante was transformed into a vendor-vendee relationship. Noting that he was engaged in
the manufacture and sale of jeepneys and not in the business of transporting passengers for consideration,

Villamaria contended that the daily fees which Bustmante paid were actually periodic installments for the the vehicle
and were not the same fees as understood in the boundary system. He added that the bound_______________

23 Id., at p. 15.
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ary-hulog plan was basically a scheme to help the driver-buyer earn money and eventually pay for the unit in full,
and for the owner to profit not from the daily earnings of the driver-buyer but from the purchase price of the unit
sold. Villamaria further asserted that the apparently restrictive conditions in the Kasunduan did not mean that the
means and method of driver-buyers conduct was controlled, but were mere ways to preserve the vehicle for the
benefit of both parties: Villamaria would be able to collect the agreed purchase price, while Bustamante would be
assured that the vehicle would still be in good running condition even after four years. Moreover, the right of vendor
to impose certain conditions on the buyer should be respected until full ownership of the property is vested on the
latter. Villamaria insisted that the parallel circumstances obtaining in Singer Sewing Machine Company v. Drilon24
has analogous application to the instant issue.
In its Decision25 dated August 30, 2004, the CA reversed and set aside the NLRC decision. The fallo of the decision
reads:
UPON THE VIEW WE TAKE IN THIS CASE, THUS, the impugned resolutions of the NLRC must be, as they are hereby
are, REVERSED AND SET ASIDE, and judgment entered in favor of petitioner:
1. Sentencing private respondent Oscar Villamaria, Jr. to pay petitioner Jerry Bustamante separation pay computed
from the time of his employment up to the time of termination based on the prevailing minimum wage at the time of
termination; and,

2. Condemning private respondent Oscar Villamaria, Jr. to pay petitioner Jerry Bustamante back wages computed
from the time of his dismissal up to March 2001 based on the prevailing minimum wage at the time of his dismissal.
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24 G.R. No. 91307, January 24, 1991, 193 SCRA 270.


25 CA Rollo, pp. 175-191.
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Without Costs.
SO ORDERED.26
The appellate court ruled that the Labor Arbiter had jurisdiction over Bustamantes complaint. Under the Kasunduan,
the relationship between him and Villamaria was dual: that of vendor-vendee and employer-employee. The CA
ratiocinated that Villamarias exercise of control over Bustamantes conduct in operating the jeepney is inconsistent
with the formers claim that he was not engaged in the transportation business. There was no evidence that
petitioner was allowed to let some other person drive the jeepney.
The CA further held that, while the power to dismiss was not mentioned in the Kasunduan, it did not mean that
Villamaria could not exercise it. It explained that the existence of an employment relationship did not depend on how
the worker was paid but on the presence or absence of control over the means and method of the employees work.
In this case, Villamarias directives (to drive carefully, wear an identification card, don decent attire, park the vehicle
in his garage, and to inform him about provincial trips, etc.) was a means to control the way in which Bustamante
was to go about his work. In view of Villamarias supervision and control as employer, the fact that the boundary
represented installment payments of the purchase price on the jeepney did not remove the parties employeremployee relationship.

While the appellate court recognized that a weeks default in paying the boundary-hulog constituted an additional
cause for terminating Bustamantes employment, it held that the latter was illegally dismissed. According to the CA,
assuming that Bustamante failed to make the required payments as claimed by Villamaria, the latter nevertheless
failed to take steps to recover the unit and waited for Bustamante to abandon it. It also pointed out that Villamaria
neither submitted
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26 Id., at p. 190.
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any police report to support his claim that the vehicle figured in a mishap nor presented the affidavit of the gas
station guard to substantiate the claim that Bustamante abandoned the unit.
Villamaria received a copy of the decision on September 8, 2004, and filed, on September 17, 2004, a motion for
reconsideration thereof. The CA denied the motion in a Resolution27 dated November 2, 2004, and Villamaria
received a copy thereof on November 8, 2004.
Villamaria, now petitioner, seeks relief from this Court via petition for review on certiorari under Rule 65 of the Rules
of Court, alleging that the CA committed grave abuse of its discretion amounting to excess or lack of jurisdiction in
reversing the decision of the Labor Arbiter and the NLRC. He claims that the CA erred in ruling that the juridical
relationship between him and respondent under the Kasunduan was a combination of employer-employee and
vendor-vendee relationships. The terms and conditions of the Kasunduan clearly state that he and respondent
Bustamante had entered into a conditional deed of sale over the jeepney; as such, their employer-employee
relationship had been transformed into that of vendor-vendee. Petitioner insists that he had the right to reserve his
title on the jeepney until after the purchase price thereof had been paid in full.

In his Comment on the petition, respondent avers that the appropriate remedy of petitioner was an appeal via a
petition for review on certiorari under Rule 45 of the Rules of Court and not a special civil action of certiorari under
Rule 65. He argues that petitioner failed to establish that the CA committed grave abuse of its discretion amounting
to excess or lack of jurisdiction in its decision, as the said ruling is in accord with law and the evidence on record.
Respondent further asserts that the Kasunduan presented to him by petitioner which provides for a boundary-hulog
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27 Rollo, p. 38.
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scheme was a devious circumvention of the Labor Code of the Philippines. Respondent insists that his juridical
relationship with petitioner is that of employer-employee because he was engaged to perform activities which were
necessary or desirable in the usual business of petitioner, his employer.
In his Reply, petitioner avers that the Rules of Procedure should be liberally construed in his favor; hence, it
behooves the Court to resolve the merits of his petition.
We agree with respondents contention that the remedy of petitioner from the CA decision was to file a petition for
review on certiorari under Rule 45 of the Rules of Court and not the independent action of certiorari under Rule 65.
Petitioner had 15 days from receipt of the CA resolution denying his motion for the reconsideration within which to
file the petition under Rule 45.28 But instead of doing so, he filed a petition for certiorari under Rule 65 on November
22, 2004, which did not, however, suspend the running of the 15-day reglementary period; consequently, the CA
decision became final and executory upon the lapse of the reglementary period for appeal. Thus, on this procedural
lapse, the instant petition stands to be dismissed.29

It must be stressed that the recourse to a special civil action under Rule 65 of the Rules of Court is proscribed by the
remedy of appeal under Rule 45. As the Court elaborated in Tomas Claudio Memorial College, Inc. v. Court of
Appeals:30
We agree that the remedy of the aggrieved party from a decision or final resolution of the CA is to file a petition for
review on certiorari under Rule 45 of the Rules of Court, as amended, on questions of facts or issues of law within
fifteen days from notice of the said resolution. Otherwise, the decision of the CA shall become final and executory.
The remedy under Rule 45 of the Rules of Court is a
_______________

28 SECTION 2, RULE 45, RULES OF COURT.


29 Nippon Paint Employees Union-Olalia v. Court of Appeals, G.R. No. 159010, November 19, 2004, 443 SCRA 286,
292.
30 G.R. No. 152568, February 16, 2004, 423 SCRA 122.
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Villamaria, Jr. vs. Court of Appeals
mode of appeal to this Court from the decision of the CA. It is a continuation of the appellate process over the
original case. A review is not a matter of right but is a matter of judicial discretion. The aggrieved party may,
however, assail the decision of the CA via a petition for certiorari under Rule 65 of the Rules of Court within sixty
days from notice of the decision of the CA or its resolution denying the motion for reconsideration of the same. This
is based on the premise that in issuing the assailed decision and resolution, the CA acted with grave abuse of
discretion, amounting to excess or lack of jurisdiction and there is no plain, speedy and adequate remedy in the
ordinary course of law. A remedy is considered plain, speedy and adequate if it will promptly relieve the petitioner
from the injurious effect of the judgment and the acts of the lower court.

The aggrieved party is proscribed from filing a petition for certiorari if appeal is available, for the remedies of appeal
and certiorari are mutually exclusive and not alternative or successive. The aggrieved party is, likewise, barred from
filing a petition for certiorari if the remedy of appeal is lost through his negligence. A petition for certiorari is an
original action and does not interrupt the course of the principal case unless a temporary restraining order or a writ
of preliminary injunction has been issued against the public respondent from further proceeding. A petition for
certiorari must be based on jurisdictional grounds because, as long as the respondent court acted within its
jurisdiction, any error committed by it will amount to nothing more than an error of judgment which may be
corrected or reviewed only by appeal.31
However, we have also ruled that a petition for certiorari under Rule 65 may be considered as filed under Rule 45,
conformably with the principle that rules of procedure are to be construed liberally, provided that the petition is filed
within the reglementary period under Section 2, Rule 45 of the Rules of Court, and where valid and compelling
circumstances warrant that the petition be resolved on its merits.32 In this case, the petition was filed within the
reglementary period and petitioner has raised an issue of substance: whether the exis_______________

31 Id., at p. 132.
32 Nippon Paint Employees Union-Olalia v. Court of Appeals, supra note 29.
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tence of a boundary-hulog agreement negates the employer-employee relationship between the vendor and vendee,
and, as a corollary, whether the Labor Arbiter has jurisdiction over a complaint for illegal dismissal in such case.
We resolve these issues in the affirmative.

The rule is that, the nature of an action and the subject matter thereof, as well as, which court or agency of the
government has jurisdiction over the same, are determined by the material allegations of the complaint in relation to
the law involved and the character of the reliefs prayed for, whether or not the complainant/plaintiff is entitled to
any or all of such reliefs.33 A prayer or demand for relief is not part of the petition of the cause of action; nor does it
enlarge the cause of action stated or change the legal effect of what is alleged.34 In determining which body has
jurisdiction over a case, the better policy is to consider not only the status or relationship of the parties but also the
nature of the action that is the subject of their controversy.35
Article 217 of the Labor Code, as amended, vests on the Labor Arbiter exclusive original jurisdiction only over the
following:
x x x (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive
jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for
decision without extension, even in the absence of stenographic notes, the following cases involving all workers,
whether agricultural or non-agricultural:
_______________

33 Capiral v. Valenzuela, 440 Phil. 458, 465; 391 SCRA 759, 765 (2002); Herrera v. Bollos, 424 Phil. 850, 856; 374
SCRA 107, 111 (2002).
34 Regalado, REMEDIAL LAW COMPENDIUM, Vol. I, 6th ed., 141.
35 Bernardo, Sr. v. Court of Appeals, 331 Phil. 962, 980; 263 SCRA 660, 675 (1996).
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Villamaria, Jr. vs. Court of Appeals
1. Unfair labor practice cases;
2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file involving wage, rates of pay,
hours of work, and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations;
5. Cases arising from violation of Article 264 of this Code, including questions involving the legality of strikes and
lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relationship, including those of persons in domestic or household service, involving
an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for
reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of collective bargaining agreements, and those arising
from the interpretation or enforcement of company personnel policies shall be disposed of by the Labor Arbiter by
referring the same to the grievance machinery and voluntary arbitration as may be provided in said agreements.
In the foregoing cases, an employer-employee relationship is an indispensable jurisdictional requisite.36 The
jurisdiction of Labor Arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes arising from an
employer-employee relationship which can only be resolved by reference to the Labor Code, other labor statutes or
their collective bargaining agreement.37 Not every dispute between an employer and employee involves matters
that only the Labor
_______________

36 Philippine Airlines, Inc. v. National Labor Relations Commission, 331 Phil. 937, 958; 263 SCRA 638, 655 (1996).
37 Georg Grotjahn GMBH & Co. v. Isnani, G.R. No. 109272, August 10, 1994, 235 SCRA 216, 221.
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Arbiter and the NLRC can resolve in the exercise of their adjudicatory or quasi-judicial powers. Actions between
employers and employees where the employer-employee relationship is merely incidental is within the exclusive
original jurisdiction of the regular courts.38 When the principal relief is to be granted under labor legislation or a
collective bargaining agreement, the case falls within the exclusive jurisdiction of the Labor Arbiter and the NLRC
even though a claim for damages might be asserted as an incident to such claim.39
We agree with the ruling of the CA that, under the boundary-hulog scheme incorporated in the Kasunduan, a dual
juridical relationship was created between petitioner and respondent: that of employer-employee and vendorvendee. The Kasunduan did not extinguish the employer-employee relationship of the parties extant before the
execution of said deed.
As early as 1956, the Court ruled in National Labor Union v. Dinglasan40 that the jeepney owner/operator-driver
relationship under the boundary system is that of employer-employee and not lessor-lessee. This doctrine was
affirmed, under similar factual settings, in Magboo v. Bernardo41 and Lantaco, Sr. v. Llamas,42 and was analogously
applied to govern the relationships between auto-calesa owner/operator and
_______________

38 Eviota v. Court of Appeals, 455 Phil. 118, 129; 407 SCRA 394, 402 (2003).
39 Tolosa v. National Labor Relations Commission, 449 Phil. 271, 282; 401 SCRA 291, 300 (2003).
40 Supra note 14.
41 Supra note 15.
42 195 Phil. 325; 108 SCRA 502 (1981).
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Villamaria, Jr. vs. Court of Appeals


driver,43 bus owner/operator and conductor,44 and taxi owner/ operator and driver.45
The boundary system is a scheme by an owner/operator engaged in transporting passengers as a common carrier to
primarily govern the compensation of the driver, that is, the latters daily earnings are remitted to the
owner/operator less the excess of the boundary which represents the drivers compensation. Under this system, the
owner/operator exercises control and supervision over the driver. It is unlike in lease of chattels where the lessor
loses complete control over the chattel leased but the lessee is still ultimately responsible for the consequences of
its use. The management of the business is still in the hands of the owner/operator, who, being the holder of the
certificate of public convenience, must see to it that the driver follows the route prescribed by the franchising and
regulatory authority, and the rules promulgated with regard to the business operations. The fact that the driver does
not receive fixed wages but only the excess of the boundary given to the owner/operator is not sufficient to
change the relationship between them. Indubitably, the driver performs activities which are usually necessary or
desirable in the usual business or trade of the owner/operator.46
Under the Kasunduan, respondent was required to remit P550.00 daily to petitioner, an amount which represented
the boundary of petitioner as well as respondents partial pay_______________

43 Citizens League of Freeworkers v. Abbas, 124 Phil. 638; 18 SCRA 71 (1966).


44 Doce v. Workmens Compensation Commission, 104 Phil. 946 (1958).
45 Jardin v. National Labor Relations Commission, 383 Phil. 187; 326 SCRA 299 (2000); Paguio Transport Corporation
v. National Labor Relations Commission, G.R. No. 119500, August 28, 1998, 294 SCRA 657; Martinez vs. National
Labor Relations Commission, G.R. No. 117495, May 29, 1997, 272 SCRA 793.
46 Jardin vs. National Labor Relations Commission, supra, at pp. 197-198; p. 309.
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ment (hulog) of the purchase price of the jeepney. Respondent was entitled to keep the excess of his daily earnings
as his daily wage. Thus, the daily remittances also had a dual purpose: that of petitioners boundary and
respondents partial payment (hulog) for the vehicle. This dual purpose was expressly stated in the Kasunduan. The
well-settled rule is that an obligation is not novated by an instrument that expressly recognizes the old one, changes
only the terms of payment, and adds other obligations not incompatible with the old provisions or where the new
contract merely supplements the previous one.47 The two obligations of the respondent to remit to petitioner the
boundary-hulog can stand together.
In resolving an issue based on contract, this Court must first examine the contract itself, keeping in mind that when
the terms of the agreement are clear and leave no doubt as to the intention of the contracting parties, the literal
meaning of its stipulations shall prevail.48 The intention of the contracting parties should be ascertained by looking
at the words used to project their intention, that is, all the words, not just a particular word or two or more words
standing alone. The various stipulations of a contract shall be interpreted together, attributing to the doubtful ones
that sense which may result from all of them taken jointly.49 The parts and clauses must be interpreted in relation to
one another to give effect to the whole. The legal effect of a contract is to be determined from the whole read
together.50
_______________

47 California Bus Lines, Inc. v. State Investment House, Inc., G.R. No. 147950, December 11, 2003, 418 SCRA 297,
309-310.
48 Milwaukee Industries Corporation v. Pampanga III Electric Cooperative, Inc., G.R. No. 152569, May 31, 2004, 430
SCRA 389, 396.
49 ARTICLE 1374, NEW CIVIL CODE.
50 Rivera v. Espiritu, 425 Phil. 169, 184; 374 SCRA 351, 363-364 (2002).
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Under the Kasunduan, petitioner retained supervision and control over the conduct of the respondent as driver of
the jeepney, thus:
Ang mga patakaran, kaugnay ng bilihang ito sa pamamagitan ng boundary hulog ay ang mga sumusunod:
1. Pangangalagaan at pag-iingatan ng TAUHAN NG IKALAWANG PANIG ang sasakyan ipinagkatiwala sa kanya ng
TAUHAN NG UNANG PANIG.
2. Na ang sasakyan nabanggit ay gagamitin lamang ng TAUHAN NG IKALAWANG PANIG sa paghahanapbuhay bilang
pampasada o pangangalakal sa malinis at maayos na pamamaraan.
3. Na ang sasakyan nabanggit ay hindi gagamitin ng TAUHAN NG IKALAWANG PANIG sa mga bagay na
makapagdudulot ng kahihiyan, kasiraan o pananagutan sa TAUHAN NG UNANG PANIG.
4. Na hindi ito mamanehohin ng hindi awtorisado ng opisina ng UNANG PANIG.
5. Na ang TAUHAN NG IKALAWANG PANIG ay kina-kailangang maglagay ng ID Card sa harap ng windshield upang sa
pamamagitan nito ay madaliang malaman kung ang nagmamaneho ay awtorisado ng VILLAMARIA MOTORS o hindi.
6. Na sasagutin ng TAUHAN NG IKALAWANG PANIG ang [halaga ng] multa kung sakaling mahuli ang sasakyang ito na
hindi nakakabit ang ID card sa wastong lugar o anuman kasalanan o kapabayaan.
7. Na sasagutin din ng TAUHAN NG IKALAWANG PANIG ang materyales o piyesa na papalitan ng nasira o nawala ito
dahil sa kanyang kapabayaan.
8. Kailangan sa VILLAMARIA MOTORS pa rin ang garahe habang hinuhulugan pa rin ng TAUHAN NG IKALAWANG
PANIG ang nasabing sasakyan.
9. Na kung magkaroon ng mabigat na kasiraan ang sasakyang ipinagkaloob ng TAUHAN NG UNANG PANIG, ang
TAUHAN NG IKALAWANG PANIG ay obligadong itawag ito muna sa VILLAMARIA MOTORS bago ipagawa sa alin mang
Motor Shop na awtorisado ng VILLAMARIA MOTORS.
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10. Na hindi pahihintulutan ng TAUHAN NG IKALAWANG PANIG sa panahon ng pamamasada na ang nagmamaneho
ay naka-tsinelas, naka short pants at nakasando lamang. Dapat ang nagmamaneho ay laging nasa maayos ang
kasuotan upang igalang ng mga pasahero.
11. Na ang TAUHAN NG IKALAWANG PANIG o ang awtorisado niyang driver ay magpapakita ng magandang asal sa
mga pasaheros at hindi dapat magsasalita ng masama kung sakali man may pasaherong pilosopo upang maiwasan
ang anumang kaguluhan na maaaring kasangkutan.
12. Na kung sakaling hindi makapagbigay ng BOUNDARY HULOG ang TAUHAN NG IKALAWANG PANIG sa loob ng
tatlong (3) araw ay ang opisina ng VILLAMARIA MOTORS ang may karapatang mangasiwa ng nasabing sasakyan
hanggang matugunan ang lahat ng responsibilidad. Ang halagang dapat bayaran sa opisina ay may karagdagang
multa ng P50.00 sa araw-araw na ito ay nasa pangangasiwa ng VILLAMARIA MOTORS.
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng BOUNDARY HULOG sa loob ng isang
linggo ay nangangahulugan na ang kasunduang ito ay wala ng bisa at kusang ibabalik ng TAUHAN NG IKALAWANG
PANIG ang nasabing sasakyan sa TAUHAN NG UNANG PANIG.
14. Sasagutin ng TAUHAN NG IKALAWANG PANIG ang bayad sa rehistro, comprehensive insurance taon-taon at kahit
anong uri ng aksidente habang ito ay hinuhulugan pa sa TAUHAN NG UNANG PANIG.
15. Na ang TAUHAN NG IKALAWANG PANIG ay obligadong dumalo sa pangkalahatang pagpupulong ng VILLAMARIA
MOTORS sa tuwing tatawag ang mga tagapangasiwa nito upang maipaabot ang anumang mungkahi sa ikasusulong
ng samahan.
16. Na ang TAUHAN NG IKALAWANG PANIG ay makikiisa sa lahat ng mga patakaran na magkakaroon ng pagbabago
o karagdagan sa mga darating na panahon at hindi magiging hadlang sa lahat ng mga balakin ng VILLAMARIA
MOTORS sa lalo pang ipagtatagumpay at ikakatibay ng Samahan.
17. Na ang TAUHAN NG IKALAWANG PANIG ay hindi magiging buwaya sa pasahero upang hindi kainisan ng kapwa
driver at maiwasan ang pagkakasangkot sa anumang gulo.

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Villamaria, Jr. vs. Court of Appeals
18. Ang nasabing sasakyan ay hindi kalilimutang siyasatin ang kalagayan lalo na sa umaga bago pumasada, at sa
hapon o gabi naman ay sisikapin mapanatili ang kalinisan nito.
19. Na kung sakaling ang nasabing sasakyan ay maaarkila at aabutin ng dalawa o higit pang araw sa lalawigan ay
dapat lamang na ipagbigay alam muna ito sa VILLAMARIA MOTORS upang maiwasan ang mga anumang suliranin.
20. Na ang TAUHAN NG IKALAWANG PANIG ay iiwasan ang pakikipag-unahan sa kaninumang sasakyan upang
maiwasan ang aksidente.
21. Na kung ang TAUHAN NG IKALAWANG PANIG ay mayroon sasabihin sa VILLAMARIA MOTORS mabuti man or
masama ay iparating agad ito sa kinauukulan at iwasan na iparating ito kung [kani-kanino] lamang upang maiwasan
ang anumang usapin. Magsadya agad sa opisina ng VILLAMARIA MOTORS.
22. Ang mga nasasaad sa KASUNDUAN ito ay buong galang at puso kong sinasang-ayunan at buong sikap na
pangangalagaan ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan at gagamitin lamang ito sa
paghahanapbuhay at wala nang iba pa.51
The parties expressly agreed that petitioner, as vendor, and respondent, as vendee, entered into a contract to sell
the jeepney on a daily installment basis of P550.00 payable in four years and that petitioner would thereafter
become its owner. A contract is one of conditional sale, oftentimes referred to as contract to sell, if the ownership or
title over the property sold is retained by the vendor, and is not passed to the vendee unless and until there is full
payment of the purchase price and/or upon faithful compliance with the other terms and conditions that may
lawfully be stipulated.52 Such payment or satisfaction of other preconditions, as the case may be, is a positive
suspensive condition, the failure of which is not a breach of contract, casual or serious, but simply an
_______________

51 CA Rollo, pp. 68-70.


52 Republic v. David, G.R. No. 155634, August 16, 2004, 436 SCRA 577, 590-591; Philippine National Bank v. Court of
Appeals, 330 Phil. 1048, 1065-1066; 262 SCRA 464, 479 (1996).
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event that would prevent the obligation of the vendor to convey title from acquiring binding force.53 Stated
differently, the efficacy or obligatory force of the vendors obligation to transfer title is subordinated to the
happening of a future and uncertain event so that if the suspensive condition does not take place, the parties would
stand as if the conditional obligation had never existed.54 The vendor may extrajudicially terminate the operation of
the contract, refuse conveyance, and retain the sums or installments already received, where such rights are
expressly provided for.55
Under the boundary-hulog scheme, petitioner retained ownership of the jeepney although its material possession
was vested in respondent as its driver. In case respondent failed to make his P550.00 daily installment payment for a
week, the agreement would be of no force and effect and respondent would have to return the jeepney to petitioner;
the employer-employee relationship would likewise be terminated unless petitioner would allow respondent to
continue driving the jeepney on a boundary basis of P550.00 daily despite the termination of their vendor-vendee
relationship.
The juridical relationship of employer-employee between petitioner and respondent was not negated by the
foregoing
_______________

53 Laforteza v. Machuca, 389 Phil. 167, 180; 333 SCRA 643, 658-659 (2000); Heirs of Pedro Escanlar v. Court of
Appeals, 346 Phil. 158, 171; 281 SCRA 176, 188 (1997); Odyssey Park, Inc. v. Court of Appeals, 345 Phil. 475, 484;
280 SCRA 253, 260 (1997); Philippine National Bank v. Court of Appeals, supra; Adelfa Properties, Inc. v. Court of

Appeals, 310 Phil. 623, 637; 240 SCRA 565, 577 (1995); Pingol v. Court of Appeals, G.R. No. 102909, September 6,
1993, 226 SCRA 118; Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 150 Phil. 114, 125-126; 43 SCRA 93,
101 (1972).
54 Philippine National Bank v. Court of Appeals, supra.
55 Valarao v. Court of Appeals, G.R. No. 130347, March 3, 1999, 304 SCRA 155, 162-165; Heirs of Pedro Escanlar v.
Court of Appeals, supra; Odyssey Park, Inc. v. Court of Appeals, supra, at p. 485; p. 261; Luzon Brokerage Co., Inc. v.
Maritime Building Co., Inc., supra, at p. 130; pp. 104-105.
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stipulation in the Kasunduan, considering that petitioner retained control of respondents conduct as driver of the
vehicle. As correctly ruled by the CA:
The exercise of control by private respondent over petitioners conduct in operating the jeepney he was driving is
inconsistent with private respondents claim that he is, or was, not engaged in the transportation business; that,
even if petitioner was allowed to let some other person drive the unit, it was not shown that he did so; that the
existence of an employment relation is not dependent on how the worker is paid but on the presence or absence of
control over the means and method of the work; that the amount earned in excess of the boundary hulog is
equivalent to wages; and that the fact that the power of dismissal was not mentioned in the Kasunduan did not
mean that private respondent never exercised such power, or could not exercise such power.
Moreover, requiring petitioner to drive the unit for commercial use, or to wear an identification card, or to don a
decent attire, or to park the vehicle in Villamaria Motors garage, or to inform Villamaria Motors about the fact that
the unit would be going out to the province for two days of more, or to drive the unit carefully, etc. necessarily
related to control over the means by which the petitioner was to go about his work; that the ruling applicable here is
not Singer Sewing Machine but National Labor Union since the latter case involved jeepney owners/operators and
jeepney drivers, and that the fact that the boundary here represented installment payment of the purchase price

on the jeepney did not withdraw the relationship from that of employer-employee, in view of the overt presence of
supervision and control by the employer.56
Neither is such juridical relationship negated by petitioners claim that the terms and conditions in the Kasunduan
relative to respondents behavior and deportment as driver was for his and respondents benefit: to insure that
respondent would be able to pay the requisite daily installment of P550.00, and that the vehicle would still be in
good condition despite the lapse of four years. What is primordial is
_______________

56 Rollo, pp. 31-32.


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that petitioner retained control over the conduct of the respondent as driver of the jeepney.
Indeed, petitioner, as the owner of the vehicle and the holder of the franchise, is entitled to exercise supervision and
control over the respondent, by seeing to it that the route provided in his franchise, and the rules and regulations of
the Land Transportation Regulatory Board are duly complied with. Moreover, in a business establishment, an
identification card is usually provided not just as a security measure but to mainly identify the holder thereof as a
bona fide employee of the firm who issues it.57
As respondents employer, it was the burden of petitioner to prove that respondents termination from employment
was for a lawful or just cause, or, at the very least, that respondent failed to make his daily remittances of P550.00
as boundary. However, petitioner failed to do so. As correctly ruled by the appellate court:
It is basic of course that termination of employment must be effected in accordance with law. The just and
authorized causes for termination of employment are enumerated under Articles 282, 283 and 284 of the Labor
Code.

Parenthetically, given the peculiarity of the situation of the parties here, the default in the remittance of the
boundary hulog for one week or longer may be considered an additional cause for termination of employment. The
reason is because the Kasunduan would be of no force and effect in the event that the purchaser failed to remit the
boundary hulog for one week. The Kasunduan in this case pertinently stipulates:
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng BOUNDARY HULOG sa loob ng isang
linggo ay NANGANGAHULUGAN na ang kasunduang ito ay wala ng bisa at kusang ibabalik ng TAUHAN NG
IKALAWANG PANIG ang nasabing sasakyan sa TAUHAN NG UNANG PANIG na wala ng paghahabol pa.
_______________

57 Domasig v. National Labor Relations Commission, 330 Phil. 518, 524; 261 SCRA 779, 785 (1996).
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Moreover, well-settled is the rule that, the employer has the burden of proving that the dismissal of an employee is
for a just cause. The failure of the employer to discharge this burden means that the dismissal is not justified and
that the employee is entitled to reinstatement and back wages.
In the case at bench, private respondent in his position paper before the Labor Arbiter, alleged that petitioner failed
to pay the miscellaneous fee of P10,000.00 and the yearly registration of the unit; that petitioner also stopped
remitting the boundary hulog, prompting him (private respondent) to issue a Paalala, which petitioner however
ignored; that petitioner even brought the unit to his (petitioners) province without informing him (private
respondent) about it; and that petitioner eventually abandoned the vehicle at a gasoline station after figuring in an
accident. But private respondent failed to substantiate these allegations with solid, sufficient proof. Notably, private
respondents allegation viz., that he retrieved the vehicle from the gas station, where petitioner abandoned it,
contradicted his statement in the Paalala that he would enforce the provision (in the Kasunduan) to the effect that

default in the remittance of the boundary hulog for one week would result in the forfeiture of the unit. The Paalala
reads as follows:
Sa lahat ng mga kumukuha ng sasakyan
Sa pamamagitan ng BOUNDARY HULOG

Nais ko pong ipaalala sa inyo ang Kasunduan na inyong pinirmahan particular na ang paragrapo 13 na nagsasaad
na kung hindi kayo makapagbigay ng Boundary Hulog sa loob ng isang linggo ay kusa ninyong ibabalik ang nasabing
sasakyan na inyong hinuhulugan ng wala ng paghahabol pa.
Mula po sa araw ng inyong pagkatanggap ng Paalala na ito ay akin na pong ipatutupad ang nasabing Kasunduan
kayat aking pinaaalala sa inyong lahat na tuparin natin ang nakalagay sa kasunduan upang maiwasan natin ito.
Hinihiling ko na sumunod kayo sa hinihingi ng paalalang ito upang hindi na tayo makaabot pa sa korte kung
sakaling hindi ninyo isasauli ang inyong sasakyan na hinuhulugan na ang mga magagastos ay kayo pa ang
magbabayad sapagkat ang hindi ninyo pagtupad sa kasunduan ang naging dahilan ng pagsampa ng kaso.
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Sumasainyo
Attendance: 8/27/99

(The Signatures appearing herein

include (sic) that of petitioners)


(Sgd.)

OSCAR VILLAMARIA, JR.


If it were true that petitioner did not remit the boundary hulog for one week or more, why did private respondent not
forthwith take steps to recover the unit, and why did he have to wait for petitioner to abandon it?
On another point, private respondent did not submit any police report to support his claim that petitioner really
figured in a vehicular mishap. Neither did he present the affidavit of the guard from the gas station to substantiate
his claim that petitioner abandoned the unit there.58
Petitioners claim that he opted not to terminate the employment of respondent because of magnanimity is negated
by his (petitioners) own evidence that he took the jeepney from the respondent only on July 24, 2000.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of the Court of Appeals in CA-G.R. SP No.
78720 is AFFIRMED. Costs against petitioner.
SO ORDERED.
Panganiban (C.J., Chairperson), Ynares-Santiago, Austria-Martinez and Chico-Nazario, JJ., concur.
Petition denied, judgment affirmed.
Notes.In this jurisdiction, the dictum adhered to is that the nature of an action is determined by the allegations in
the body of the pleadings or complaint itself, rather than by its title or heading. (Gochan vs. Gochan, 372 SCRA 256
[2001])
_______________

58 Rollo, pp. 32-33.


602

602
SUPREME COURT REPORTS ANNOTATED
In the Matter of the Petition for Habeas Corpus, Ashraf Kunting
Where there are ambiguities in a contract of adhesion, such ambiguities are to be construed against the party that
prepared it, but if the stipulations are clear and leave no doubt on the intention of the parties, the literal meaning of
its stipulations must be held controlling. (Wood Technology Corporation vs. Equitable Banking Corporation, 451 SCRA
724 [2005])
o0o

Copyright 2015 Central Book Supply, Inc. All rights reserved. [Villamaria, Jr. vs. Court of Appeals, 487 SCRA
571(2006)]

VOL. 398, FEBRUARY 27, 2003


301
Sy vs. Court of Appeals
G.R. No. 142293. February 27, 2003.*
VICENTE SY, TRINIDAD PAULINO, 6BS TRUCKING CORPORATION, and SBT1 TRUCKING CORPORATION,
petitioners, vs. HON. COURT OF APPEALS and JAIME SAHOT, respondents.
Labor Law; Labor Code; Employer-employee Relationship; Elements to determine the existence of an employment
relationship.The elements to determine the existence of an employment relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to
control the employees conduct. The most important element is the employers control of the employees conduct,
not only as to the result of the work to be done, but also as to the means and methods to accomplish it.
Same; Same; Same; Evidence; If doubt exists between the evidence presented by the employer and the employee,
the scales of justice must be tilted in favor of the latter.Time and again this Court has said that if doubt exists
between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of
the latter. Here, we entertain no doubt. Private respondent since the beginning was an employee of, not an
industrial partner in, the trucking business.
Same; Same; Same; Same; Article 277 (b) of the Labor Code puts the burden of proving that the dismissal of an
employee was for a valid or authorized cause on the employer, without distinction whether the employer admits or
does not admit the dismissal; Requisites for an employees dismissal to be valid.In termination cases, the burden
is upon the employer to show by substantial evidence that the termination was for lawful cause and validly made.
Article 277(b) of the Labor Code puts the burden of
______________

* SECOND DIVISION.
1 Sometimes referred to as SB Trucking Corp. in some parts of the records.
302

302
SUPREME COURT REPORTS ANNOTATED
Sy vs. Court of Appeals
proving that the dismissal of an employee was for a valid or authorized cause on the employer, without distinction
whether the employer admits or does not admit the dismissal. For an employees dismissal to be valid, (a) the
dismissal must be for a valid cause, and (b) the employee must be afforded due process.
Same; Same; Same; Same; The requirement for a medical certificate under Article 284 of the Labor Code cannot be
dispensed with.As this Court stated in Triple Eight Integrated Services, Inc. vs. NLRC, the requirement for a medical
certificate under Article 284 of the Labor Code cannot be dispensed with; otherwise, it would sanction the unilateral
and arbitrary determination by the employer of the gravity or extent of the employees illness and thus defeat the
public policy in the protection of labor.
Same; Same; Same; Same; Procedural due process was not observed in the separation of private respondent by the
management of the trucking company; Employer required to furnish an employee with two written notices before
the latter is dismissed.From the records, it clearly appears that procedural due process was not observed in the
separation of private respondent by the management of the trucking company. The employer is required to furnish
an employee with two written notices before the latter is dismissed: (1) the notice to apprise the employee of the
particular acts or omissions for which his dismissal is sought, which is the equivalent of a charge; and (2) the notice
informing the employee of his dismissal, to be issued after the employee has been given reasonable opportunity to
answer and to be heard on his defense.
PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.


Albon & Serrano Law Office for petitioners.
Cabio Law Offices and Associates for private respondent.
QUISUMBING, J.:

This petition for review seeks the reversal of the decision2 of the Court of Appeals dated February 29, 2000, in CAG.R. SP No. 52671, affirming with modification the decision3 of the National
______________

2 Rollo, pp. 9-17.


3 Id., at pp. 88-95.
303

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303
Sy vs. Court of Appeals
Labor Relations Commission promulgated on June 20, 1996 in NLRC NCR CA No. 010526-96. Petitioners also pray for
the reinstatement of the decision4 of the Labor Arbiter in NLRC NCR Case No. 00-09-06717-94.
Culled from the records are the following facts of this case:
Sometime in 1958, private respondent Jaime Sahot5 started working as a truck helper for petitioners family-owned
trucking business named Vicente Sy Trucking. In 1965, he became a truck driver of the same family business,
renamed T. Paulino Trucking Service, later 6Bs Trucking Corporation in 1985, and thereafter known as SBT Trucking
Corporation since 1994. Throughout all these changes in names and for 36 years, private respondent continuously
served the trucking business of petitioners.
In April 1994, Sahot was already 59 years old. He had been incurring absences as he was suffering from various
ailments. Particularly causing him pain was his left thigh, which greatly affected the performance of his task as a
driver. He inquired about his medical and retirement benefits with the Social Security System (SSS) on April 25,
1994, but discovered that his premium payments had not been remitted by his employer.

Sahot had filed a week-long leave sometime in May 1994. On May 27th, he was medically examined and treated for
EOR, presleyopia, herpertensive retinopathy G II (Annexes G-5 and G-3, pp. 48, 104, respectively),6 HPM, UTI,
Osteoarthritis (Annex G-4, p. 105),7 and heart enlargement (Annex G, p. 107).8 On said grounds, Belen Paulino
of the SBT Trucking Service management told him to file a formal request for extension of his leave. At the end of his
week-long absence, Sahot applied for extension of his leave for the whole month of June, 1994. It was at this time
when petitioners allegedly threatened to terminate his employment should he refuse to go back to work.
At this point, Sahot found himself in a dilemma. He was facing dismissal if he refused to work. But he could not retire
on pension
______________

4 Id., at pp. 145-150.


5 Substituted herein by his wife Editha Sahot, Jaime Sahot died on May 1, 1996, per Certificate of Death, Rollo, p.
241.
6 Rollo, pp. 131, 133.
7 Id., at p. 132.
8 Id., at p. 128.
304

304
SUPREME COURT REPORTS ANNOTATED
Sy vs. Court of Appeals
because petitioners never paid his correct SSS premiums. The fact remained he could no longer work as his left
thigh hurt abominably. Petitioners ended his dilemma. They carried out their threat and dismissed him from work,
effective June 30, 1994. He ended up sick, jobless and penniless.

On September 13, 1994, Sahot filed with the NLRC NCR Arbitration Branch, a complaint for illegal dismissal,
docketed as NLRC NCR Case No. 00-09-06717-94. He prayed for the recovery of separation pay and attorneys fees
against Vicente Sy and Trinidad Paulino-Sy, Belen Paulino, Vicente Sy Trucking, T. Paulino Trucking Service, 6Bs
Trucking and SBT Trucking, herein petitioners.
For their part, petitioners admitted they had a trucking business in the 1950s but denied employing helpers and
drivers. They contend that private respondent was not illegally dismissed as a driver because he was in fact
petitioners industrial partner. They add that it was not until the year 1994, when SBT Trucking Corporation was
established, and only then did respondent Sahot become an employee of the company, with a monthly salary that
reached P4,160.00 at the time of his separation.
Petitioners further claimed that sometime prior to June 1, 1994, Sahot went on leave and was not able to report for
work for almost seven days. On June 1, 1994, Sahot asked permission to extend his leave of absence until June 30,
1994. It appeared that from the expiration of his leave, private respondent never reported back to work nor did he
file an extension of his leave. Instead, he filed the complaint for illegal dismissal against the trucking company and
its owners.
Petitioners add that due to Sahots refusal to work after the expiration of his authorized leave of absence, he should
be deemed to have voluntarily resigned from his work. They contended that Sahot had all the time to extend his
leave or at least inform petitioners of his health condition. Lastly, they cited NLRC Case No. RE-4997-76, entitled
Manuelito Jimenez, et al. vs. T. Paulino Trucking Service, as a defense in view of the alleged similarity in the factual
milieu and issues of said case to that of Sahots, hence they are in pan materia and Sahots complaint ought also to
be dismissed.
The NLRC NCR Arbitration Branch, through Labor Arbiter Ariel Cadiente Santos, ruled that there was no illegal
dismissal in
305

VOL. 398, FEBRUARY 27, 2003


305
Sy vs. Court of Appeals

Sahots case. Private respondent had failed to report to work. Moreover, said the Labor Arbiter, petitioners and
private respondent were industrial partners before January 1994. The Labor Arbiter concluded by ordering
petitioners to pay financial assistance of P15,000 to Sahot for having served the company as a regular employee
since January 1994 only.
On appeal, the National Labor Relations Commission modified the judgment of the Labor Arbiter. It declared that
private respondent was an employee, not an industrial partner, since the start. Private respondent Sahot did not
abandon his job but his employment was terminated on account of his illness, pursuant to Article 2849 of the Labor
Code. Accordingly, the NLRC ordered petitioners to pay private respondent separation pay in the amount of
P60,320.00, at the rate of P2,080.00 per year for 29 years of service.
Petitioners assailed the decision of the NLRC before the Court of Appeals. In its decision dated February 29, 2000,
the appellate court affirmed with modification the judgment of the NLRC. It held that private respondent was indeed
an employee of petitioners since 1958. It also increased the amount of separation pay awarded to private
respondent to P74,880, computed at the rate of P2,080 per year for 36 years of service from 1958 to 1994. It
decreed:
WHEREFORE, the assailed decision is hereby AFFIRMED with MODIFICATION. SB Trucking Corporation is hereby
directed to pay complainant Jaime Sahot the sum of SEVENTY-FOUR THOUSAND EIGHT HUNDRED EIGHTY
(P74,880.00) PESOS as and for his separation pay.10
Hence, the instant petition anchored on the following contentions:
______________

9 ART. 284. Disease as ground for termination.An employer may terminate the services of an employee who has
been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial
to his health as well as to the health of his co-employees: Provided, That he is paid separation pay equivalent to at
least one (1) month salary or to one-half month salary for every year of service, whichever is greater, a fraction of at
least six (6) months being considered as one (1) whole year.
10 Rollo, p. 17.
306

306
SUPREME COURT REPORTS ANNOTATED
Sy vs. Court of Appeals
I

RESPONDENT COURT OF APPEALS IN PROMULGATING THE QUESTION[ED] DECISION AFFIRMING WITH MODIFICATION
THE DECISION OF NATIONAL LABOR RELATIONS COMMISSION DECIDED NOT IN ACCORD WITH LAW AND PUT AT
NAUGHT ARTICLE 402 OF THE CIVIL CODE.11
II

RESPONDENT COURT OF APPEALS VIOLATED SUPREME COURT RULING THAT THE NATIONAL LABOR RELATIONS
COMMISSION IS BOUND BY THE FACTUAL FINDINGS OF THE LABOR ARBITER AS THE LATTER WAS IN A BETTER
POSITION TO OBSERVE THE DEMEANOR AND DEPORTMENT OF THE WITNESSES IN THE CASE OF ASSOCIATION OF
INDEPENDENT UNIONS IN THE PHILIPPINES VERSUS NATIONAL CAPITAL REGION (305 SCRA 233).12
III

PRIVATE RESPONDENT WAS NOT DISMISS[ED] BY RESPONDENT SBT TRUCKING CORPORATION.13


Three issues are to be resolved: (1) Whether or not an employer-employee relationship existed between petitioners
and respondent Sahot; (2) Whether or not there was valid dismissal; and (3) Whether or not respondent Sahot is
entitled to separation pay.
Crucial to the resolution of this case is the determination of the first issue. Before a case for illegal dismissal can
prosper, an employer-employee relationship must first be established.14
Petitioners invoke the decision of the Labor Arbiter Ariel Cadiente Santos which found that respondent Sahot was not
an employee but was in fact, petitioners industrial partner.15 It is con______________

11 Id., at p. 32.
12 Id., at p. 37.
13 Id., at p. 42.
14 Palomado v. National Labor Relations Commission, 257 SCRA 680, 695 (1996).
15 The Labor Arbiter based this pronouncement on alleged res judicata. It appears that a decision was rendered in
another case, NLRC Case No. RE 4997-76, where Labor Arbiter Crescencio J. Ramos declared that other drivers also
in the same company, were declared to be industrial
307

VOL. 398, FEBRUARY 27, 2003


307
Sy vs. Court of Appeals
tended that it was the Labor Arbiter who heard the case and had the opportunity to observe the demeanor and
deportment of the parties. The same conclusion, aver petitioners, is supported by substantial evidence.16 Moreover,
it is argued that the findings of fact of the Labor Arbiter was wrongly overturned by the NLRC when the latter made
the following pronouncement:
We agree with complainant that there was error committed by the Labor Arbiter when he concluded that
complainant was an industrial partner prior to 1994. A computation of the age of complainant shows that he was
only twenty-three (23) years when he started working with respondent as truck helper. How can we entertain in our
mind that a twenty-three (23) year old man, working as a truck helper, be considered an industrial partner. Hence
we rule that complainant was only an employee, not a partner of respondents from the time complainant started
working for respondent.17
Because the Court of Appeals also found that an employer-employee relationship existed, petitioners aver that the
appellate courts decision gives an imprimatur to the illegal finding and conclusion of the NLRC.

Private respondent, for his part, denies that he was ever an industrial partner of petitioners. There was no written
agreement, no proof that he received a share in petitioners profits, nor was there anything to show he had any
participation with respect to the running of the business.18
The elements to determine the existence of an employment relationship are: (a) the selection and engagement of
the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control the
employees conduct. The most important element is the employers control of the employees conduct,
______________

partners and not employees. Labor Arbiter Ariel Cadiente Santos adopted said findings. See Rollo, p. 114.
16 Consisting of the position paper of Petitioners and of a decision in a similar case decided by Labor Arbiter
Crescencio J. Ramos in NLRC Case No. RG-4997-76, entitled Manuelito Jimenez, et al. versus T. Paulino Trucking
Service. See Rollo, pp. 35, 112-121.
17 Rollo, pp. 91-92.
18 Id., at p. 236.
308

308
SUPREME COURT REPORTS ANNOTATED
Sy vs. Court of Appeals
not only as to the result of the work to be done, but also as to the means and methods to accomplish it.19
As found by the appellate court, petitioners owned and operated a trucking business since the 1950s and by their
own allegations, they determined private respondents wages and rest day.20 Records of the case show that private
respondent actually engaged in work as an employee. During the entire course of his employment he did not have
the freedom to determine where he would go, what he would do, and how he would do it. He merely followed
instructions of petitioners and was content to do so, as long as he was paid his wages. Indeed, said the CA, private

respondent had worked as a truck helper and driver of petitioners not for his own pleasure but under the latters
control.
Article 176721 of the Civil Code states that in a contract of partnership two or more persons bind themselves to
contribute money, property or industry to a common fund, with the intention of dividing the profits among
themselves.22 Not one of these circumstances is present in this case. No written agreement exists to prove the
partnership between the parties. Private respondent did not contribute money, property or industry for the purpose
of engaging in the supposed business. There is no proof that he was receiving a share in the profits as a matter of
course, during the period when the trucking business was under operation. Neither is there any proof that he had
actively participated in the management, administration and adoption of policies of the business. Thus, the NLRC
and the CA did not err in reversing the finding of
______________

19 Caurdanetaan Piece Workers Union v. Laguesma, 286 SCRA 401, 420 (1998); Maraguinot, Jr. v. NLRC, 284 SCRA
539, 552 (1998); AFP Mutual Benefit Association, Inc. v. NLRC, 267 SCRA 47, 57 (1997); Aurora Land Projects Corp. v.
NLRC, 266 SCRA 48, 59 (1997); Encyclopedia Britannica (Phils.), Inc. v. NLRC, 264 SCRA 1, 6-7 (1996).
20 Rollo, p. 54.
21 ART. 1767. By the contract of partnership two or more persons bind themselves to contribute money, property, or
industry to a common fund, with the intention of dividing the profits among themselves. Two or more persons may
also form a partnership for the exercise of a profession.
22 Afisco Insurance Corporation v. Court of Appeals, 302 SCRA 1, 13 (1999).
309

VOL. 398, FEBRUARY 27, 2003


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Sy vs. Court of Appeals
the Labor Arbiter that private respondent was an industrial partner from 1958 to 1994.

On this point, we affirm the findings of the appellate court and the NLRC. Private respondent Jaime Sahot was not an
industrial partner but an employee of petitioners from 1958 to 1994. The existence of an employer-employee
relationship is ultimately a question of fact23 and the findings thereon by the NLRC, as affirmed by the Court of
Appeals, deserve not only respect but finality when supported by substantial evidence. Substantial evidence is such
amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.24
Time and again this Court has said that if doubt exists between the evidence presented by the employer and the
employee, the scales of justice must be tilted in favor of the latter.25 Here, we entertain no doubt. Private
respondent since the beginning was an employee of, not an industrial partner in, the trucking business.
Coming now to the second issue, was private respondent validly dismissed by petitioners?
Petitioners contend that it was private respondent who refused to go back to work. The decision of the Labor Arbiter
pointed out that during the conciliation proceedings, petitioners requested respondent Sahot to report back for work.
However, in the same proceedings, Sahot stated that he was no longer fit to continue working, and instead he
demanded separation pay. Petitioners then retorted that if Sahot did not like to work as a driver anymore, then he
could be given a job that was less strenuous, such as working as a checker. However, Sahot declined that
suggestion. Based on the foregoing recitals, petitioners assert that it is clear that Sahot was not dismissed but it was
of his own volition that he did not report for work anymore.
In his decision, the Labor Arbiter concluded that:
______________

23 Santos v. National Labor Relations Commission, 293 SCRA 113, 125 (1998).
24 Triple Eight Integrated Services, Inc. v. NLRC, 299 SCRA 608, 614 (1998).
25 Id., at pp. 614-15.
310

310
SUPREME COURT REPORTS ANNOTATED

Sy vs. Court of Appeals


While it may be true that respondents insisted that complainant continue working with respondents despite his
alleged illness, there is no direct evidence that will prove that complainants illness prevents or incapacitates him
from performing the function of a driver. The fact remains that complainant suddenly stopped working due to
boredom or otherwise when he refused to work as a checker which certainly is a much less strenuous job than a
driver.26
But dealing the Labor Arbiter a reversal on this score the NLRC, concurred in by the Court of Appeals, held that:
While it was very obvious that complainant did not have any intention to report back to work due to his illness which
incapacitated him to perform his job, such intention cannot be construed to be an abandonment. Instead, the same
should have been considered as one of those falling under the just causes of terminating an employment. The
insistence of respondent in making complainant work did not change the scenario.
It is worthy to note that respondent is engaged in the trucking business where physical strength is of utmost
requirement (sic). Complainant started working with respondent as truck helper at age twenty-three (23), then as
truck driver since 1965. Complainant was already fifty-nine (59) when the complaint was filed and suffering from
various illness triggered by his work and age.
x x x27
In termination cases, the burden is upon the employer to show by substantial evidence that the termination was for
lawful cause and validly made.28 Article 277(b) of the Labor Code puts the burden of proving that the dismissal of
an employee was for a valid or authorized cause on the employer, without distinction whether the employer admits
or does not admit the dismissal.29 For an employees dismissal to be valid, (a) the dismissal must be for a valid
cause, and (b) the employee must be afforded due process.30
Article 284 of the Labor Code authorizes an employer to terminate an employee on the ground of disease, viz.:
______________

26 Rollo, p. 149.
27 Id., at p. 93.
28 Supra, note 24 at p. 615.

29 Sevillana v. I.T. (International) Corp., 356 SCRA 451, 466 (2001).


30 Id., at p. 467.
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Sy vs. Court of Appeals
Art. 284. Disease as a ground for terminationAn employer may terminate the services of an employee who has
been found to be suffering from any disease and whose continued employment is prohibited by law or prejudicial to
his health as well as the health of his co-employees: x x x
However, in order to validly terminate employment on this ground, Book VI, Rule I, Section 8 of the Omnibus
Implementing Rules of the Labor Code requires:
Sec. 8. Disease as a ground for dismissalWhere the employee suffers from a disease and his continued
employment is prohibited by law or prejudicial to his health or to the health of his co-employees, the employer shall
not terminate his employment unless there is a certification by competent public health authority that the disease is
of such nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical
treatment. If the disease or ailment can be cured within the period, the employer shall not terminate the employee
but shall ask the employee to take a leave. The employer shall reinstate such employee to his former position
immediately upon the restoration of his normal health. (Italics supplied).
As this Court stated in Triple Eight Integrated Services, Inc. vs. NLRC,31 the requirement for a medical certificate
under Article 284 of the Labor Code cannot be dispensed with; otherwise, it would sanction the unilateral and
arbitrary determination by the employer of the gravity or extent of the employees illness and thus defeat the public
policy in the protection of labor.
In the case at bar, the employer clearly did not comply with the medical certificate requirement before Sahots
dismissal was effected. In the same case of Sevillana vs. I.T. (International) Corp., we ruled:
Since the burden of proving the validity of the dismissal of the employee rests on the employer, the latter should
likewise bear the burden of showing that the requisites for a valid dismissal due to a disease have been complied

with. In the absence of the required certification by a competent public health authority, this Court has ruled against
the validity of the employees dismissal. It is therefore incumbent upon the private respondents to prove by the
quantum of evidence required by law that petitioner was not dismissed, or if dismissed, that the dismissal was not
ille______________

31 Supra, note 24 at p. 618.


312

312
SUPREME COURT REPORTS ANNOTATED
Sy vs. Court of Appeals
gal; otherwise, the dismissal would be unjustified. This Court will not sanction a dismissal premised on mere
conjectures and suspicions, the evidence must be substantial and not arbitrary and must be founded on clearly
established facts sufficient to warrant his separation from work.32
In addition, we must likewise determine if the procedural aspect of due process had been complied with by the
employer.
From the records, it clearly appears that procedural due process was not observed in the separation of private
respondent by the management of the trucking company. The employer is required to furnish an employee with two
written notices before the latter is dismissed: (1) the notice to apprise the employee of the particular acts or
omissions for which his dismissal is sought, which is the equivalent of a charge; and (2) the notice informing the
employee of his dismissal, to be issued after the employee has been given reasonable opportunity to answer and to
be heard on his defense.33 These, the petitioners failed to do, even only for record purposes. What management did
was to threaten the employee with dismissal, then actually implement the threat when the occasion presented itself
because of private respondents painful left thigh.
All told, both the substantive and procedural aspects of due process were violated. Clearly, therefore, Sahots
dismissal is tainted with invalidity.

On the last issue, as held by the Court of Appeals, respondent Jaime Sahot is entitled to separation pay. The law is
clear on the matter. An employee who is terminated because of disease is entitled to separation pay equivalent to
at least one month salary or to one-half month salary for every year of service, whichever is greater x x x.34
Following the formula set in Art. 284 of the Labor Code, his separation pay was computed by the appellate court at
P2,080 times 36 years (1958 to 1994) or P74,880. We agree with the computation, after noting that his last monthly
salary was P4,160.00 so that one-half thereof is P2,080.00. Finding no reversible error nor grave abuse of discretion
on the part of appellate court, we are constrained to sustain its decision. To avoid further delay in the payment due
the separated worker, whose claim was
______________

32 Supra, note 29 at 468.


33 Tiu v. NLRC, 251 SCRA 540, 551 (1992).
34 Labor Code, Art. 284, see note 9, supra.
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Sy vs. Court of Appeals
filed way back in 1994, this decision is immediately executory. Otherwise, six percent (6%) interest per annum
should be charged thereon, for any delay, pursuant to provisions of Civil Code.
WHEREFORE, the petition is DENIED and the decision of the Court of Appeals dated February 29, 2000 is AFFIRMED.
Petitioners must pay private respondent Jaime Sahot his separation pay for 36 years of service at the rate of one-half
monthly pay for every year of service, amounting to P74,880.00, with interest of six per centum (6%) per annum
from finality of this decision until fully paid.
Costs against petitioners.
SO ORDERED.

Bellosillo (Chairman), Mendoza and Callejo, Sr., JJ., concur.


Austria-Martinez, J., No part. Ponente in CA.
Petition denied, judgment affirmed.
Note.The power of control is the most decisive factor in determining the existence of an employer-employee
relationship. (Religious of the Virgin Mary vs. National Labor Relations Commission, 316 SCRA 614 [1999])
o0o

314

Copyright 2015 Central Book Supply, Inc. All rights reserved. [Sy vs. Court of Appeals, 398 SCRA 301(2003)]

448
SUPREME COURT REPORTS ANNOTATED

Makati Haberdashery, Inc. vs. NLRC


G.R. Nos. 83380-81. November 15, 1989.*
MAKATI HABERDASHERY, INC., JORGE LEDESMA and CECILIO G. INOCENCIO, petitioners, vs. NATIONAL
LABOR RELATIONS COMMISSION, CEFERINA J. DIOSANA (Labor Arbiter, Department of Labor and
Employment, National Capital Region), SANDIGAN NG MANGGAGAWANG PILIPINO (SANDIGAN)TUCP
and its members, JACINTO GARCIANO, ALFREDO C. BASCO, VICTORIO Y. LAURETO, ESTER NARVAEZ,
EUGENIO L. ROBLES, BELEN N. VISTA, ALEJANDRO A. ESTRABO, VEVENCIO TIRO, CASIMIRO ZAPATA,
GLORIA ESTRABO, LEONORA MENDOZA, MACARIA G. DIMPAS, MERILYN A. VIRAY, LILY OPINA, JANET
SANGDANG, JOSEFINA ALCOCEBA and MARIA ANGELES, respondents.
Labor Relations; Employer-Employee Relationship; Four-Fold Test of Employer-Employee Relationship; Control Test,
Defined.We have repeatedly held in countless decisions that the test of employer-employee relationship is fourfold: (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. It is the so-called control test that is the most important element.
This simply means the determination of whether the employer controls or has reserved
________________

* THIRD DIVISION.
449

VOL. 179, NOVEMBER 15, 1989


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Makati Haberdashery, Inc. vs. NLRC
the right to control the employee not only as to the result of the work but also as to the means and method by which
the same is to be accomplished.
Labor Standards; Private respondents are not entitled to service incentive leave pay and holiday pay because as
piece-rate workers they fall under the exceptions set forth in the implementing rules.On the other hand, while

private respondents are entitled to Minimum Wage, COLA and 13th Month Pay, they are not entitled to service
incentive leave pay because as piece-rate workers being paid at a fixed amount for performing work irrespective of
time consumed in the performance thereof, they fall under one of the exceptions stated in Section 1(d), Rule V,
Implementing Regulations, Book III, Labor Code. For the same reason private respondents cannot also claim holiday
pay (Section 1(e), Rule IV, Implementing Regulations, Book III, Labor Code).
Labor Law; Dismissal of Employees; An employer has the right to dismiss an employee whose continuance in the
service is inimical to the employers interest.Assuming that such acts do not constitute abandonment of their jobs
as insisted by private respondents, their blatant disregard of their employers memorandum is undoubtedly an open
defiance to the lawful orders of the latter, a justifiable ground for termination of employment by the employer
expressly provided for in Article 283(a) of the Labor Code as well as a clear indication of guilt for the commission of
acts inimical to the interests of the employer, another justifiable ground for dismissal under the same Article of the
Labor Code, paragraph (c). Well established in our jurisprudence is the right of an employer to dismiss an employee
whose continuance in the service is inimical to the employers interest.
Same; Same; Right to dismiss for just and valid cause pertains in the first place to the employer.Finally, it has been
established that the right to dismiss or otherwise impose disciplinary sanctions upon an employee for just and valid
cause, pertains in the first place to the employer, as well as the authority to determine the existence of said cause in
accordance with the norms of due process. There is no evidence that the employer violated said norms. On the
contrary, private respondents who vigorously insist on the existence of employer-employee relationship, because of
the supervision and control of their employer over them, were the very ones who exhibited their lack of respect and
regard for their employers rules.
PETITION for certiorari to review the decision of the National Labor Relations Commission.

450

450
SUPREME COURT REPORTS ANNOTATED
Makati Haberdashery, Inc. vs. NLRC
The facts are stated in the opinion of the Court.

Ledesma, Saludo & Associates for petitioners.


Pablo S. Bernardo for private respondents.
FERNAN, C.J.:

This petition for certiorari involving two separate cases filed by private respondents against herein petitioners assails
the decision of respondent National Labor Relations Commission in NLRC CASE No. 7-2603-84 entitled Sandigan Ng
Manggagawang Pilipino (SANDIGAN)TUCP etc., et al. v. Makati Haberdashery and/or Toppers Makati, et al. and
NLRC CASE No. 2-428-85 entitled Sandigan Ng Manggagawang Pilipino (SANDIGAN)TUCP etc., et al. v. Toppers
Makati, et al., affirming the decision of the Labor Arbiter who jointly heard and decided aforesaid cases, finding: (a)
petitioners guilty of illegal dismissal and ordering them to reinstate the dismissed workers and (b) the existence of
employer-employee relationship and granting respondent workers by reason thereof their various monetary claims.
The undisputed facts are as follows:
Individual complainants, private respondents herein, have been working for petitioner Makati Haberdashery, Inc. as
tailors, seamstress, sewers, basters (manlililip) and plantsadoras. They are paid on a piece-rate basis except Maria
Angeles and Leonila Serafina who are paid on a monthly basis. In addition to their piece-rate, they are given a daily
allowance of three (P3.00) pesos provided they report for work before 9:30 a.m. everyday.
Private respondents are required to work from or before 9:30 a.m. up to 6:00 or 7:00 p.m. from Monday to Saturday
and during peak periods even on Sundays and holidays.
On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor organization of the respondent workers, filed a
complaint docketed as NLRC NCR Case No. 7-2603-84 for (a) underpayment of the basic wage; (b) underpayment of
living allowance; (c) non-payment of overtime work; (d) non-payment of holiday pay; (e) non-payment of service
incentive pay; (f) 13th month pay; and (g) benefits provided for under Wage Orders Nos. 1, 2,
451

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451

Makati Haberdashery, Inc. vs. NLRC


3, 4 and 5.1
During the pendency of NLRC NCR Case No. 7-2603-84, private respondent Dioscoro Pelobello left with Salvador
Rivera, a salesman of petitioner Haberdashery, an open package which was discovered to contain a jusi barong
tagalog. When confronted, Pelobello replied that the same was ordered by respondent Casimiro Zapata for his
customer. Zapata allegedly admitted that he copied the design of petitioner Haberdashery. But in the afternoon,
when again questioned about said barong, Pelobello and Zapata denied ownership of the same. Consequently a
memorandum was issued to each of them to explain on or before February 4, 1985 why no action should be taken
against them for accepting a job order which is prejudicial and in direct competition with the business of the
company.2 Both respondents allegedly did not submit their explanation and did not report for work.3 Hence, they
were dismissed by petitioners on February 4, 1985. They countered by filing a complaint for illegal dismissal
docketed as NLRC NCR Case No. 2-428-85 on February 5, 1985.4
On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered judgment, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in NLRC NCR Case No. 2-428-85 finding respondents guilty of illegal
dismissal and ordering them to reinstate Dioscoro Pelobello and Casimiro Zapata to their respective or similar
positions without loss of seniority rights, with full backwages from July 4, 1985 up to actual reinstatement. The
charge of unfair labor practice is dismissed for lack of merit.
In NLRC NCR Case No. 7-26030-84, the complainants claims for underpayment re violation of the minimum wage
law is hereby ordered dismissed for lack of merit.
Respondents are hereby found to have violated the decrees on the cost of living allowance, service incentive leave
pay and the 13th Month Pay. In view thereof, the economic analyst of the Commission is directed to compute the
monetary awards due each complainant based on the available records of the respondents retroactive as of
________________

1 Rollo, p. 22.
2 Rollo, pp. 105-106.
3 Rollo, p. 27.

4 Rollo, p. 23.
452

452
SUPREME COURT REPORTS ANNOTATED
Makati Haberdashery, Inc. vs. NLRC
three years prior to the filing of the instant case.
SO ORDERED.5
From the foregoing decision, petitioners appealed to the NLRC. The latter on March 30, 1988 affirmed said decision
but limited the backwages awarded the Dioscoro Pelobello and Casimiro Zapata to only one (1) year.6
After their motion for reconsideration was denied, petitioners filed the instant petition raising the following issues:
I

THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTS


BETWEEN PETITIONER HABERDASHERY AND RESPONDENTS WORKERS.
II

THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS WORKERS ARE ENTITLED TO MONETARY
CLAIMS DESPITE THE FINDING THAT THEY ARE NOT ENTITLED TO MINIMUM WAGE.
III

THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS PELOBELLO AND ZAPATA WERE ILLEGALLY
DISMISSED.7

The first issue which is the pivotal issue in this case is resolved in favor of private respondents. We have repeatedly
held in countless decisions that the test of employer-employee relationship is four-fold: (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. It is the socalled control test that is the most important element.8This
________________

5 Rollo, pp. 29-30.


6 Rollo, pp. 49-50.
7 Rollo, p. 8.
8 Bautista v. Inciong, G.R. No. 52824, March 16, 1988; Continen453

VOL. 179, NOVEMBER 15, 1989


453
Makati Haberdashery, Inc. vs. NLRC
simply means the determination of whether the employer controls or has reserved the right to control the employee
not only as to the result of the work but also as to the means and method by which the same is to be
accomplished.9
The facts at bar indubitably reveal that the most important requisite of control is present. As gleaned from the
operations of petitioner, when a customer enters into a contract with the haberdashery or its proprietor, the latter
directs an employee who may be a tailor, pattern maker, sewer or plantsadora to take the customers
measurements, and to saw the pants, coat or shirt as specified by the customer. Supervision is actively manifested
in all these aspectsthe manner and quality of cutting, sewing and ironing.
Furthermore, the presence of control is immediately evident in this memorandum issued by Assistant Manager
Cecilio B. Inocencio, Jr. dated May 30, 1981 addressed to Toppers Makati Tailors which reads in part:

4. Effective immediately, new procedures shall be followed:


A.To follow instruction and orders from the undersigned, Roger Valderama, Ruben Delos Reyes and Ofel Bautista.
Other than this person (sic) must ask permission to the above mentioned before giving orders or instructions to the
tailors.
B.Before accepting the job orders tailors must check the materials, job orders, due dates and other things to
maximize the efficiency of our production. The materials should be check (sic) if it is match (sic) with the sample,
together with the number of the job order.
C. Effective immediately all job orders must be finished one day before the due date. This can be done by proper
scheduling of job order and if you will cooperate with your supervisors. If you have
________________

tal Marble Corporation, et al. v. NLRC, G.R. No. 43825, May 9, 1988; Asim, et al. v. Castro, G.R. No. 75063-64, June
30, 1988; Brotherhood Labor Unity Movt. in the Philippines v. Zamora, 147 SCRA 49 [1987]; Investment Planning
Corp. of the Phil. v. Social Security System, 21 SCRA 924 [1967]; Mafinco v. Ople, 70 SCRA 139 [1976]; Rosario
Brothers v. Ople, L-53590, 131 SCRA 72 [1984]; Shipside, Inc. v. NLRC, G.R. No. 50358, 118 SCRA 99 [1982];
American President Lines v. Clave, et al., G.R. No. 51641, 114 SCRA 826 [1982].
9 Social Security System v. Court of Appeals, 156 SCRA 383 [1987].
454

454
SUPREME COURT REPORTS ANNOTATED
Makati Haberdashery, Inc. vs. NLRC
many due dates for certain day, advise Ruben or Ofel at once so that they can make necessary adjustment on due
dates.
D. AlterationBefore accepting alteration person attending on customs (sic) must ask first or must advise the
tailors regarding the due dates so that we can eliminate what we call Bitin.

E. If there is any problem regarding supervisors or co-tailor inside our shop, consult with me at once settle the
problem. Fighting inside the shop is strictly prohibited. Any tailor violating this memorandum will be subject to
disciplinary action.
For strict compliance.10
From this memorandum alone, it is evident that petitioner has reserved the right to control its employees not only as
to the result but also the means and methods by which the same are to be accomplished. That private respondents
are regular employees is further proven by the fact that they have to report for work regularly from 9:30 a.m. to 6:00
or 7:00 p.m. and are paid an additional allowance of P3.00 daily if they report for work before 9:30 a.m. and which is
forfeited when they arrive at or after 9:30 a.m.11
Since private respondents are regular employees, necessarily the argument that they are independent contractors
must fail. As established in the preceding paragraphs, private respondents did not exercise independence in their
own methods, but on the contrary were subject to the control of petitioners from the beginning of their tasks to their
completion. Unlike independent contractors who generally rely on their own resources, the equipment, tools,
accessories, and paraphernalia used by private respondents are supplied and owned by petitioners. Private
respondents are totally dependent on petitioners in all these aspects.
Coming now to the second issue, there is no dispute that private respondents are entitled to the Minimum Wage as
mandated by Section 2(g) of Letter of Instruction No. 829, Rules Implementing Presidential Decree No. 1614 and
reiterated in Section 3(f), Rules Implementing Presidential Decree 1713 which explicitly states that, All employees
paid by the result shall
________________

10 Rollo, pp. 80-81.


11 Rollo, p. 44.
455

VOL. 179, NOVEMBER 15, 1989


455

Makati Haberdashery, Inc. vs. NLRC


receive not less than the applicable new minimum wage rates for eight (8) hours work a day, except where a
payment by result rate has been established by the Secretary of Labor x x x.12 No such rate has been established
in this case.
But all these notwithstanding, the question as to whether or not there is in fact an underpayment of minimum wages
to private respondents has already been resolved in the decision of the Labor Arbiter where he stated: Hence, for
lack of sufficient evidence to support the claims of the complainants for alleged violation of the minimum wage, their
claims for underpayment re violation of the Minimum Wage Law under Wage Orders Nos. 1, 2, 3, 4, and 5 must
perforce fall.13
The records show that private respondents did not appeal the above ruling of the Labor Arbiter to the NLRC; neither
did they file any petition raising that issue in the Supreme Court. Accordingly, insofar as this case is concerned, that
issue has been laid to rest. As to private respondents, the judgment may be said to have attained finality. For it is a
well-settled rule in this jurisdiction that an appellee who has not himself appealed cannot obtain from the appellate
court, any affirmative relief other than the ones granted in the decision of the court below.14
As a consequence of their status as regular employees of the petitioners, they can claim cost of living allowance.
This is apparent from the provision defining the employees entitled to said allowance, thus: . . . All workers in the
private sector, regardless of their position, designation or status, and irrespective of the method by which their
wages are paid.15
Private respondents are also entitled to claim their 13th Month Pay under Section 3(e) of the Rules and Regulations
Implementing P.D. No. 851 which provides:
Section 3. Employers covered.The Decree shall apply to all employers except to:
________________

12 Rules and Regulations Implementing P.D. 928.


13 Rollo, p. 29.
14 Alba v. Santander, G.R. No. L-28409, April 15, 1988.

15 Section 3, Rules Implementing Wage No. 1; Section 1 Chapter 3 of the Rules Implementing Wage No. 2; Section 1
Chapter 3 of the Rules Implementing Wage No. 5.
456

456
SUPREME COURT REPORTS ANNOTATED
Makati Haberdashery, Inc. vs. NLRC
xxx

xxx

xxx

(e) Employers of those who are paid on purely commission, boundary, or task basis, and those who are paid a fixed
amount for performing a specific work, irrespective of the time consumed in the performance thereof, except where
the workers are paid on piece-rate basis in which case the employer shall be covered by this issuance insofar as
such workers are concerned. (Italics supplied.)
On the other hand, while private respondents are entitled to Minimum Wage, COLA and 13th Month Pay, they are not
entitled to service incentive leave pay because as piece-rate workers being paid at a fixed amount for performing
work irrespective of time consumed in the performance thereof, they fall under one of the exceptions stated in
Section 1(d), Rule V, Implementing Regulations, Book III, Labor Code. For the same reason private respondents
cannot also claim holiday pay (Section 1(e), Rule IV, Implementing Regulations, Book III, Labor Code).
With respect to the last issue, it is apparent that public respondents have misread the evidence, for it does show
that a violation of the employers rules has been committed and the evidence of such transgression, the copied
barong tagalog, was in the possession of Pelobello who pointed to Zapata as the owner. When required by their
employer to explain in a memorandum issued to each of them, they not only failed to do so but instead went on
AWOL (absence without official leave), waited for the period to explain to expire and for petitioner to dismiss them.
They thereafter filed an action for illegal dismissal on the far-fetched ground that they were dismissed because of
union activities. Assuming that such acts do not constitute abandonment of their jobs as insisted by private
respondents, their blatant disregard of their employers memorandum is undoubtedly an open defiance to the lawful
orders of the latter, a justifiable ground for termination of employment by the employer expressly provided for in
Article 283(a) of the Labor Code as well as a clear indication of guilt for the commission of acts inimical to the
interests of the employer, another justifiable ground for dismissal under the same Article of the Labor Code,

paragraph (c). Well established in our jurisprudence is the right of an employer to dismiss an employee whose
continuance in
457

VOL. 179, NOVEMBER 15, 1989


457
Makati Haberdashery, Inc. vs. NLRC
the service is inimical to the employers interest.16
In fact the Labor Arbiter himself to whom the explanation of private respondents was submitted gave no credence to
their version and found their excuses that said barong tagalog was the one they got from the embroiderer for the
Assistant Manager who was investigating them, unbelievable.
Under the circumstances, it is evident that there is no illegal dismissal of said employees. Thus, We have ruled that:
No employer may rationally be expected to continue in employment a person whose lack of morals, respect and
loyalty to his employer, regard for his employers rules, and appreciation of the dignity and responsibility of his
office, has so plainly and completely been bared.
That there should be concern, sympathy, and solicitude for the rights and welfare of the working class, is meet and
proper. That in controversies between a laborer and his master, doubts reasonably arising from the evidence, or in
the interpretation of agreements and writings should be resolved in the formers favor, is not an unreasonable or
unfair rule. But that disregard of the employers own rights and interests can be justified by that concern and
solicitude is unjust and unacceptable. (Stanford Microsystems, Inc. v. NLRC, 157 SCRA 414-415 [1988]).
The law is protecting the rights of the laborer authorizes neither oppression nor self-destruction of the employer.17
More importantly, while the Constitution is committed to the policy of social justice and the protection of the working
class, it should not be supposed that every labor dispute will automatically be decided in favor of labor.18
Finally, it has been established that the right to dismiss or otherwise impose discriplinary sanctions upon an
employee for just and valid cause, pertains in the first place to the employer, as well as the authority to determine
the existence of said cause

________________

16 San Miguel Corporation v. NLRC, 142 SCRA 377 [1986].


17 Manila Trading & Supply Co. v. Zulueta, 69 Phil. 485 [1939]; Allied Banking Corp. v. Castro, 156 SCRA 789, 800
[1987].
18 Sosito v. Aguinaldo Development Corp., 156 SCRA 392, 396 [1987].
458

458
SUPREME COURT REPORTS ANNOTATED
Makati Haberdashery, Inc. vs. NLRC
in accordance with the norms of due process.19
There is no evidence that the employer violated said norms. On the contrary, private respondents who vigorously
insist on the existence of employer-employee relationship, because of the supervision and control of their employer
over them, were the very ones who exhibited their lack of respect and regard for their employers rules.
Under the foregoing facts, it is evident that petitioner Haberdashery had valid grounds to terminate the services of
private respondents.
WHEREFORE, the decision of the National Labor Relations Commission dated March 30, 1988 and that of the Labor
Arbiter dated June 10, 1986 are hereby modified. The complaint filed by Pelobello and Zapata for illegal dismissal
docketed as NLRC NCR Case No. 2-428-85 is dismissed for lack of factual and legal bases. Award of service incentive
leave pay to private respondents is deleted.
SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin and Corts, JJ., concur.
Decision modified. Complaint dismissed.

Note.The employer has the right to dismiss an employee whose continuance in the service is inimical to the
employers interest. (San Miguel Corp. vs. National Labor Relations Commission, 142 SCRA 376)
o0o

________________

19 Richardson v. Demetriou, 142 SCRA 505 [1986].


459

Copyright 2015 Central Book Supply, Inc. All rights reserved. [Makati Haberdashery, Inc. vs. NLRC, 179 SCRA
448(1989)]

VOL. 286, FEBRUARY 24, 1998


401
Caurdanetaan Piece Workers Union vs. Laguesma
G.R. No. 113542. February 24, 1998.*
CAURDANETAAN PIECE WORKERS UNION, represented by JUANITO P. COSTALES, JR. in his capacity as
union president, petitioner, vs. UNDERSECRETARY BIENVENIDO E. LAGUESMA and CORFARM GRAINS,
INC., respondents.
G.R. No. 114911. February 24, 1998.*
CAURDANETAAN PIECE WORKERS ASSOCIATION as represented by JUANITO P. COSTALES, JR., president,
petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, CORFARM GRAINS, INC. and/or TEODY C.
RAPISORA and HERMINIO RABANG, respondents.
Labor Law; Employer-Employee Relationship; Four-fold test to determine the existence of an employer-employee
relation.To determine the existence of an employer-employee relation, this Court has consistently applied the
four-fold test which has the following elements: (1) the power to hire, (2) the payment of wages, (3) the power to
dismiss, and (4) the power to controlthe last being the most important element.
Same; Same; CPWU members were regular employees of private respondent.It is undeniable that petitioners
members worked as cargadores for private respondent. They loaded, unloaded and piled sacks of palay from the
warehouses to the cargo trucks and from the cargo trucks to the buyers. This work is directly related, necessary and
vital to the operations of Corfarm. Moreover, Corfarm did not even allege, much less prove, that petitioners
members have substantial capital or investment in the form of tools, equipment, machineries, [and] work premises,
among others. Furthermore, said respondent did not contradict petitioners allegation that it paid wages directly to
these workers without the intervention of any third-party independent contractor. It also wielded the power of
dismissal over petitioners; in fact, its exercise of this power was the progenitor of the Second Case. Clearly, the
workers are not independent contractors. Applying Article 280 of the Labor Code, we hold
_______________

* FIRST DIVISION.
402

402
SUPREME COURT REPORTS ANNOTATED
Caurdanetaan Piece Workers Union vs. Laguesma
that the CPWU members were regular employees of private respondent. Their tasks were essential in the usual
business of private respondent.
Same; Due Process; Due process is not violated where a person is given the opportunity to be heard, but chooses
not to give his side of the case.Private respondent had been duly informed of the pendency of the illegal dismissal
case, but it chose not to participate therein without any known justifiable cause. The labor arbiter sent notices of
hearing or arbitration to the parties, requiring them to submit position papers at 1:30 p.m. on November 14, 1992.
Respondent Corfarm did not attend the hearing. According to Respondent NLRC, there was no proof that Respondent
Corfarm received such notice. In any case, petitioner filed a Motion to Admit Amended Complaint on December 23,
1992. Again, another notice for hearing or arbitration on January 7, 1993 was sent to the parties. This was received
by petitioners counsel as evidenced by the registry return receipt duly signed by private respondents counsel, Atty.
Alfonso Bince, Jr. It was only on January 28, 1993, however, that Atty. Bince entered his appearance as counsel for
Respondent Corfarm. On May 10, 1993, Corfarm was again given a new period of ten (10) days within which to
submit its position paper and documentary evidence; otherwise, [the labor arbiter] will be constrained to resolve
this case based on available evidence on record. As evidenced by a registry return receipt, a copy of said directive
was received by respondents counsel on May 25, 1993. Still and all, Corfarm failed to file its position paper. Clearly,
private respondent was given an opportunity to present its evidence, but it failed or refused to avail itself of this
opportunity without any legal reason. Due process is not violated where a person is given the opportunity to be
heard, but chooses not to give his side of the case.
Same; Dismissal; Evidence; The findings of the labor arbiter on the question of illegal dismissal were based on
credible, competent and substantial evidence.Contrary to the conclusions of the NLRC and the arguments of
private respondent, the findings of the labor arbiter on the question of illegal dismissal were based on credible,
competent and substantial evidence.

Same; Same; Same; Proceedings before labor agencies merely require the parties to submit their respective
affidavits and position papers.It is to be borne in mind that proceedings before labor
403

VOL. 286, FEBRUARY 24, 1998


403
Caurdanetaan Piece Workers Union vs. Laguesma
agencies merely require the parties to submit their respective affidavits and position papers. Adversarial trial is
addressed to the sound discretion of the labor arbiter. To establish a cause of action, only substantial evidence is
necessary; i.e., such relevant evidence as a reasonable mind might accept as adequate to support a conclusion,
even if other minds equally reasonable might conceivably opine otherwise.
Same; Same; Same; The National Labor Relations Commission, like the labor arbiter, is authorized to decide cases
based on the position papers and other documents submitted, without resorting to the technical rules of evidence.
It must be stressed that labor laws mandate the speedy administration of justice, with least attention to
technicalities but without sacrificing the fundamental requisites of due process. In this light, the NLRC, like the labor
arbiter, is authorized to decide cases based on the position papers and other documents submitted, without
resorting to the technical rules of evidence. Verily, Respondent NLRC noted several documentary evidence sufficient
to arrive at a just decision. Indeed, the evidence on record clearly supports the conclusion of the labor arbiter that
the petitioners were employees of respondent, and that they were illegally dismissed.
Same; Same; Same; In illegal dismissal cases, the employer always has the burden of proof, and his failure to
discharge this duty results in a finding that the dismissal was unjustified.It is axiomatic that in illegal dismissal
cases, the employer always has the burden of proof, and his failure to discharge this duty results in a finding that the
dismissal was unjustified. Having defaulted from filing its position paper, Respondent Corfarm is deemed to have
waived its right to present evidence and counter the allegations of petitioners members.
SPECIAL CIVIL ACTIONS in the Supreme Court. Certiorari.

The facts are stated in the opinion of the Court.

Alfonso A. Osias for petitioner.


Yulo, Torres, Tarriela & Bello for private respondents.
404

404
SUPREME COURT REPORTS ANNOTATED
Caurdanetaan Piece Workers Union vs. Laguesma
PANGANIBAN, J.:

The Court reiterates some fundamental labor doctrines: (1) this Court may review factual determinations where the
findings of the med-arbiter conflict with those of the undersecretary of labor; (2) an employer-employee relationship
may be established by substantial evidence; (3) procedural due process is satisfied by the grant of an opportunity to
be heard and an actual adversarial-type trial is not required; (4) the NLRC commits grave abuse of discretion when it
remands a case to the labor arbiter in spite of ample pieces of evidence on record which are sufficient to decide the
case directly; and (5) where illegal dismissal is proven, the workers are entitled to back wages and other similar
benefits without deductions or conditions.
Statement of the Case
These doctrines are used by the Court in resolving these consolidated petitions for certiorari under Rule 65,
challenging the resolutions of Undersecretary Bienvenido Laguesma and the National Labor Relations Commission.
First Case
In G.R. No. 113542, hereafter referred to as the First Case, Petitioner Caurdanetaan Piece Workers Union/Association
(CPWU) prays for the nullification and reversal of Undersecretary Laguesmas Order dated January 4, 1994 in OS-MAA-8-119-93 (RO100-9207-RU-001), which granted Respondent Corfarms motion for reconsideration and dismissed
peti-tioners prayer for certification election. The dispositive portion of the assailed Order reads as follows:1
WHEREFORE, the questioned Order is hereby set aside and a new one issued dismissing the petition for certification
election for lack of merit.

_______________

1 Rollo of G.R. No. 113542, p. 35.


405

VOL. 286, FEBRUARY 24, 1998


405
Caurdanetaan Piece Workers Union vs. Laguesma
In his earlier Order dated September 7, 1993, Laguesma affirmed Med-Arbiter Sinamar E. Limos order of March 18,
1993 which disposed as follows:2
IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, the above-entitled petition is hereby granted. Consequently,
the motion to dismiss filed by Corfarm Grains, Inc. is denied.
Let a certification election be conducted among the rank-and-file employees of Corfarm Grains, Inc., within ten (10)
days from receipt hereof, with the following choices:
1. Caurdanetaan Piece Workers Union;
2. No Union
A pre-election conference is hereby set on March 29, 1993 at 2:00 oclock in the afternoon at the DOLE, Dagupan
District Office, Mayombo District, Dagupan City to thresh out the mechanics of the Certification Election. Employer
Corfarm Grains, Inc. is hereby directed to present its employment records for the period covering January to June
1992 evidencing payment of salaries of its employees.
Let the parties be notified accordingly.
Aggrieved by Respondent Laguesmas subsequent Order dated January 27, 19943 denying its motion for
reconsideration, petitioner filed this recourse before this Court.
Second Case

In G.R. No. 114911, hereafter referred to as the Second Case, petitioner assails the Resolution promulgated on February 16, 1994 in NLRC CA No. L-0011094 by the National
_______________

2 Ibid., p. 47; Order in RO100-9207-RU-001, p. 7.


3 Rollo, pp. 37-38. The text reads:
WHEREFORE, the motion for reconsideration is hereby denied for lack of merit and the Order dated 04 January
1994, STANDS.
No further motion of similar nature shall hereinafter be entertained.
4 Appealed from SUB-RAB-01-11-7-0184-92.
406

406
SUPREME COURT REPORTS ANNOTATED
Caurdanetaan Piece Workers Union vs. Laguesma
Labor Relations Commission (Respondent NLRC),5 the dispositive portion of which reads:6
WHEREFORE, the Decision of the Labor Arbiter dated 14 September 1993 is hereby SET ASIDE. Let the records of
the case be REMANDED to the Arbitration Branch of origin for immediate appropriate proceedings.
The labor arbiters decision that was reversed by Respondent NLRC disposed as follows:7
WHEREFORE, judgment is hereby rendered as follows:
1. Declaring individual complainants dismissal illegal;
2. Declaring respondent guilty of unfair labor practice;
3. Ordering respondent to pay the 928 complainants the following:

_______________

5 Third Division composed of Presiding Comm. Lourdes C. Javier, ponente; and Comm. Ireneo B. Bernardo and
Joaquin A. Tano-dra, concurring.
6 Rollo of G.R. No. 114911, p. 59; Resolution, p. 12.
7 Rollo of G.R. No. 114911, pp. 48-49; Resolution, pp. 1-2.
8 The Records of NLRC Case No. SUB-RAB-01-11-7-0184-92 reveal from the Joint Affidavit sworn to by petitioners
members that there are really 95 members (pp. 96-97):

NAMES
DATE OF EMPLOYMENT
1.
ABAN, Ricardo
November 15, 1983
2.
ABAN, Rogelio
September 9, 1979
3.
ABUAN, Renato
January 5, 1988
4.
ABUAN, Ernesto

January 6, 1988
5.
AGUDIA, Carlito
August 3, 1977
6.
ACCUAR, Remegio
April 10, 1992
7.
ARQUINES, Warlito
January 10, 1978
8.
ARQUINES, Edgardo
May 5, 1990
9.
ARQUINES, Jimmy
January 5, 1987
10.
AGUDIA, Dominador
August 24, 1980
11.
BAYBAYAN, Leopoldo
March 9, 1985

12.
BAYACA, Virgilio
January 15, 1987
13.
BEJOSANO, Orlando
February 20, 1988
14.
BENITEZ, Roger
January 20, 1987
15.
BENITEZ, Felix
April 4, 1990
407

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Caurdanetaan Piece Workers Union vs. Laguesma
a) 13th month pay limited to three years in the amount of P4,788.00 each;
_______________

16.
BENITEZ, Noel

January 5, 1990
17.
BUGAOAN, Rogelio
January 3, 1988
18.
BUGAOAN, Ernesto
March 5, 1989
19.
BUGAOAN, Dominador
January 12, 1988
20.
BIACO, Elmer
April 5, 1991
21.
COSTALES, Juanito P., Jr.
October 8, 1982
22.
COSTALES, Armando
January 20, 1977
23.
COSTALES, Rolly
February 2, 1982

24.
COSTALES, Nestor
March 18, 1983
25.
BUGAOAN, Rodrigo
January 3, 1988
26.
COSTALES, Herminio
April 5, 1990
27.
COSTALES, Carlito
October 14, 1976
28.
COSTALES, Reynaldo
October 9, 1982
29.
COSTALES, Pedro
November 12, 1984
30.
COSTALES, Jaime
November 4, 1981
31.

COSTALES, Willy
July 15, 1982
32.
CASUGA, Marcelino, Jr.
November 15, 1991
33.
CASUGA, Marcelo
January 2, 1990
34.
CASING, Armando
May 15, 1978
35.
CASING, Dominador, Jr.
November 15, 1985
36.
CASING, Carlos
January 3, 1987
37.
CASEM, Silverio
November 8, 1988
38.
CASTRO, Oscar

August 7, 1980
39.
CELIS, Benjamin
January 7, 1988
40.
CELIS, Arturo
January 10, 1980
41.
CELIS, Rolando
August 15, 1991
42.
CORPUZ, Benjamin
April 7, 1984
43.
CORPUZ, Diosdado
January 20, 1986
44.
CORPUZ, Eugene
April 5, 1990
45.
CRUZ, Nemesio
March 13, 1989

46.
DIOCALES, Juan, Jr.
October 20, 1977
47.
ESPIRITU, Goody
May 2, 1992
48.
EUGENIO, Carlos
February 8, 1986
49.
EUGENIO, Eddie
March 15, 1988
50.
FRONDA, Virgilio
August 10, 1989
51.
GALVEZ, Carlito
November 5, 1985
52.
GALVEZ, Dominador
March 14, 1983
53.

GALVEZ, Renato
March 14, 1985
54.
GABATIN, Rodolfo
March 15, 1986
55.
GUZMAN, Romy de
June 20, 1991
56.
GUZMAN, Carlos de
January 4, 1986
57.
GAGOTE, Ronnie
May 2, 1992
58.
GUARINO, Ireneo, Jr.
January 3, 1991
408

408
SUPREME COURT REPORTS ANNOTATED
Caurdanetaan Piece Workers Union vs. Laguesma

b) service incentive leave pay in the amount of P855.00 each for three years;
c) underpaid wages covering the period June 1989 to June 1992 which amount to P47,040.00 each;
d) backwages reckoned from June 1992, the date of dismissal[,] to September 1993, the date of promulgation of the
decision or a period of 14 months, in the amount of P22,344.00 each;
e) refund of P12.00/day deduction limited to three years which amounts to P12,096 each; and
f) to pay the complainants P1,000.00 each as damages.
_______________

59.
JOSE, Samuel
January 3, 1991
60.
LADIA, Honorato
May 10, 1992
61.
LADIA, Eugenio
January 15, 1991
62.
LAURETA, Warlito
January 3, 1988
63.
LAURETA, Roberto

January 3, 1988
64.
LICOS, Roland
May 2, 1992
65.
LUNA, Anthony de
October 28, 1982
66.
LUNA, Avelino de
September 7, 1977
67.
MACABIO, Nacano
March 1, 1992
68.
MACABIO, Humano
October 20, 1978
69.
MALLARI, Rogelio
May 2, 1992
70.
MARCADEJAS, Rodrigo
January 3, 1987

71.
MARCADEJAS, Danilo
January 23, 1988
72.
MENDENILLA, Juanito
January 5, 1988
73.
MOLINA, Rodolfo
January 5, 1988
74.
OCAMPO, Rogelio
October 10, 1978
75.
OCAMPO, Arsenio
April 5, 1982
76.
PACETIS, Julio
July 20, 1989
77.
PALANG, Romeo
March 15, 1984
78.

PADILLA, Gerry
January 2, 1990
79.
PARIAOAN, Cesar
March 5, 1978
80.
PASION, Asterio
May 10, 1991
81.
RAMOS, Danilo
January 3, 1992
82.
REYES, Henry de los
June 5, 1988
88.
SALUDO, Eddie
January 25, 1989
89.
SERIOZA, Noel
January 5, 1990
90.
TAMAYO, Leovigildo

December 10, 1991


91.
VALDEZ, Vic
October 28, 1988
92.
VALDEZ, Ruben
March 19, 1987
93.
VALENZUELA, Federico
August 19, 1983
94.
VALENZUELA, Marlo
April 5, 1989
95.
VENTURA, Benjamin, Jr.
January 3, 1987
409

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409
Caurdanetaan Piece Workers Union vs. Laguesma
4. To reinstate the complainants to their former position[s] immediately.

All other claims are hereby dismissed for lack of merit.


In a Resolution promulgated on March 28, 1994, Respondent NLRC denied petitioners motion for reconsideration.9
The Facts

In his Consolidated Memorandum, the solicitor general recited the following pertinent facts, which we find amply
supported by the records:10
Petitioner union has ninety-two (92) members who worked as cargador at the warehouse and ricemills of private
respondent [referring to Respondent Corfarm] at Umingan, Pangasinan since 1982. As cargadores, they loaded,
unloaded and piled sacks of palay from the warehouse to the cargo trucks and those brought by cargo trucks for
delivery to different places. They were paid by private respondent on a piece rate basis. When private respondent
denied some benefits to these cargadores, the latter organized petitioner union. Upon learning of its formation,
private respondent barred its members from working with them and replaced [them] with non-members of the union
sometime in the middle of 1992.
On July 9, 1992, petitioner filed [a petition] for certification election before the Regional Office No. 1 of the
Department of Labor and Employment, San Fernando, La Union docketed as RO100-9207-RU-001.
While this petition for certification election was pending, petitioner also filed on November 16, 1992, a complaint for
illegal dismissal, unfair labor practice, refund of illegal deductions, payment of wage differentials, various pecuniary
benefits provided by laws, damages, legal interest, reinstatement and attorneys fees, against private respondent
before the Regional Arbitration Branch No. 1 of Dagupan City, docketed as NLRC RAB Case No. 01-117-0184-92.
_______________

9 Rollo of G.R. No. 114911, p. 62; Resolution, p. 1.


10 Rollo of G.R. No. 113542, pp. 250-254; Consolidated Memorandum, pp. 2-6.
410

410

SUPREME COURT REPORTS ANNOTATED


Caurdanetaan Piece Workers Union vs. Laguesma
On November 24, 1992, Labor Arbiter Ricardo Olairez in NLRC Case No. Sub-Rab 01-117-0184-92, directed the
parties to submit position paper on or before December 14, 1992, and to appear for hearing on the said date. Only
the complainant petitioner submitted its position paper on December 3, 1992.
Likewise in the scheduled hearing on December 14, 1992, private respondent did not appear[;] thus Labor Arbiter
Olairez allowed the president of petitioner union Juanito Costales to testify and present its evidence ex-parte.
On December 16, 1992, another notice was sent to the parties to appear on [the] January 7, 1993 hearing by Labor
Arbiter Emiliano de Asis.
Before the scheduled hearing on January 7, 1993, complainant petitioner filed a motion to amend complaint and to
admit amended complaint. It also filed the following:
1. Affidavit of Juanito Costales, Jr., dated November 24, 1992;
2. Joint affidavit of Ricardo Aban, Armando Casing, Benjamin Corpuz, Danny Margadejas, Fidel Fortunato, Henry de
los Reyes, Anthony de Luna, Warlito Arguilles, Dominador Aguda, Marcelino Cayuda, Jr., Jaime Costales and Juanito
Mendenilla dated December 30, 1992;
3. Joint affidavit of Juanito Costales and Armando Casing dated January 7, 1993;
4. Affidavit signed by individual union members.
On March 18, 1993, Med-Arbiter Sinamar E. Limos issued an Order granting the petition for certification election
earlier filed.
Meanwhile, Labor Arbiter Rolando D. Gambito in the illegal dismissal case issued the May 20, 1993 Order, the
dispositive portion [of] which reads:
WHEREFORE, respondents are hereby ordered to submit their position paper, together with their documentary
evidence, if any, within TEN (10) days from receipt of the order, otherwise we will be constrained to resolve this case
based on available evidence on record.
On September 7, 1993, public respondent Laguesma issued a Resolution denying the appeal filed by private
respondent against

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Caurdanetaan Piece Workers Union vs. Laguesma
the order of Med-Arbiter Limos granting the petition for certification election.
Acting on said denial, private respondent filed a motion for reconsideration which was granted in an Order dated
January 4, 1994 by public respondent Laguesma dismissing the petition for certification election for lack of
employer-employee relationship.
Petitioner in turn filed a motion for reconsideration of the January 4, 1994, Order but it was denied by public
respondent Laguesma in his January 27, 1994 Order which reaffirmed the dismissal of petition for certification
election.
Thus, the union filed its first petition for certiorari assailing the Orders of January 4 and 27, 1994 of public
respondent Laguesma dismissing the petition for certification election. The said petition is captioned as
Caurdanetaan Piece Workers Union, petitioner, vs. Hon. Bienvenido Laguesma, et al., respondents, docketed as
G.R. No. 113542 and raffled to the Second Division of this Honorable Court.
On September 14, 1993, Labor Arbiter Rolando D. Gambito issued his decision finding the dismissal of petitioners
members illegal. On appeal by both parties, Respondent NLRCas earlier statedset aside the appealed decision
and remanded the case to the labor arbiter for further proceedings. Peti-tioners motion for reconsideration was later
denied.
The solicitor general, who was supposed to represent both public respondents, joined petitioner and filed a
Manifestation and Motion (In Lieu of Comment) dated July 25, 1994, praying that the petition in the First Case be
granted and that judgment be rendered annulling11 the assailed Orders of Respondent Laguesma. The Republics
counsel likewise filed another Manifestation and Motion (In Lieu of Comment) dated October 4, 1994 in the Second
Case, praying that judgment be rendered annulling the resolution of Public Respondent NLRC dated February 16,
1994 and March 28, 1994 and order[ing] public respondent to proceed with the
_______________

11 Rollo of G.R. No. 113542, p. 133.


412

412
SUPREME COURT REPORTS ANNOTATED
Caurdanetaan Piece Workers Union vs. Laguesma
case instead of remanding the same to the labor arbiter of origin.12
In a Resolution dated March 29, 1995,13 this Court ordered the consolidation of the two cases.14
Public Respondents Rulings
In the First Case
Public Respondent Laguesma premised the dismissal of the petition for certification election on the absence of an
employer-employee relationship between petitioners members and private respondent. Professing reliance on the
control test in determining employer-employee relationship, his Order dated January 4, 199415 explained:
It is settled in this jurisdiction that the most important factor in determining the existence of employer-employee
relationship is the control test or the question of whether or not the supposed employer exercises control over the
means and methods by which the work is to be done. In the instant case, it is not disputed that movant does not
exercise any degree of control over how the loading or unloading of cavans of palays to or from the trucks, to or
from the rice mills. Movants only concern is that said cavans of palay are loaded/unloaded. Absent therefore, the
power to control not only the end to be achieved but also the means to be used in reaching such end, no employeremployee relationship could be said to have been established. We also noted that some of petitioners members
including its president, Juanito Costales, Jr., admitted in separate
_______________

12 Rollo of G.R. No. 114911, p. 180.

13 Rollo of G.R. No. 113542, p. 233.


14 The case was deemed submitted for resolution on September 23, 1996, when the Court received petitioners
Manifestation of Compliance dated September 13, 1996, pursuant to the Resolution of the Court dated August 19,
1996. The same Resolution directed private respondent to comment on petitioners ex parte motion, but due to
private respondents failure to do so, it is deemed to have waived the right to do so.
15 Rollo of G.R. No. 113542, pp. 34-35; Order, pp. 2-3.
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Caurdanetaan Piece Workers Union vs. Laguesma
sworn statements that they offer and actually perform loading and unloading work for various rice mills in
Pangasinan and that the performance of said work depends on the availability of work in said mills. They also
categorically stated that there is no employer-employee relationship between petitioner and movant. To our mind,
said declarations being made against interest deserve much evidentiary weight. Considering therefore, the
foregoing, we have no alternative but to dismiss the petition for lack of employer-employee relationship.
In the Second Case
On the other hand, Respondent NLRC ordered the remand of the case to the arbitration branch for further
proceedings because the issues at hand need further threshing out. Stressing the principle that allegations must
be proved by competent and credible evidence, it held:16
There is no question that under the Rules of the Commission, complaints may be resolved on the basis of the
Position Papers submitted by the parties and that the parties may be deemed to have waived their right to present
evidence after they have been given an opportunity to do so. These procedural rules, however should be read in
conjunction with the time[-]honored principle that allegations must be proved and established by competent and
credible evidence. In other words, mere allegations would not suffice despite the absence of evidence to the
contrary.

In subject case, complainants-appellants allegations that they are laborers of respondents-appellants receiving
P45.00 per days work of eight hours (p. 2, Amended Position Paper dated December 14, 1992, p. 31 Records; p. 2
Amended Complaint dated 16 December 1992, p. 70, Records) appears to be in conflict with their earlier assertions
that they are paid on the basis of the number of cavans of palay moved, piled, hauled and unloaded from trucks or
haulers multiplied by P0.12 [per] sack or cavan. And for the days earning respondents used to be obliged to pay
P57.00 per days earning(p. 2, Position Paper dated 24 November 1992; p. 17, Records).
_______________

16 Rollo of G.R. No. 114911, pp. 56-57; Resolution, pp. 9-10.


414

414
SUPREME COURT REPORTS ANNOTATED
Caurdanetaan Piece Workers Union vs. Laguesma
Similarly attached to the records is a narrative report of [the] DOLE inspector where it was mentioned that Juanito
Costales, Jr., is the owner of Carcado Contracting Services and is not an employee of Corefarm [sic] Grains (Narrative
Report dated August 4, 1992, p. 10 Records).
Another reason why subject case should be remanded to the Labor Arbiter below is the fact that the personality of
complainant union has been raised in issue before the proper forum and adverse decision on the matter will
definitely affect the whole proceedings.
Furthermore, records show that an Amended Complaint was filed on December 23, 1992. This amended complaint
made no mention of the affidavits of Juanito Costales, Jr. and the 92 other workers which documents were filed in
January 1993. Likewise, the amended complaint contains but a general statement that the 92 workers of Corefarm
[sic] Grains have been employed since 1982 which was adopted by the Labor Arbiter below in his decision
notwithstanding the fact that a number of these workers started working with respondent after 1982. Some of whom
worked with the company in 1990 (Joint Affidavit dated 7 January 1993, pp. 96-98, Records). Notwithstanding this

fact, the Labor Arbiter in the decision under consideration allowed refund of alleged deduction for a period of three
years. In the same manner, payment of salary differential was also granted.
Indeed the issues at hand need further threshing out. Under the Rules, the Labor Arbiter is authorized to thresh out
issues (sec. 4, Rule V). As it is, we are not convinced by the conclusions of the Labor Arbiter.
The ends of justice would better be served if all parties are granted further opportunity to ventilate their respective
positions.
The Issues
In its Consolidated Memorandum dated September 19, 1995 filed before us, petitioner raises the following grounds
in support of its petition:17
_______________

17 Rollo of G.R. No. 113542, pp. 292-293; Consolidated Memorandum for Petitioners, pp. 12-13; original text in
upper case.
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Caurdanetaan Piece Workers Union vs. Laguesma
1. Grave abuse of discretion or acting in excess of jurisdiction, which is equivalent to lack of jurisdiction on the part
of public respondent in setting aside the labor arbiters decision and in remanding this case to the office of origin for
further proceedings is not necessary when in fact the mandatory requirements of due process have been observed
by the labor arbiter in rendering decision on the case;
2. Remand of the case to office of origin for further proceedings on matters already passed upon properly by the
labor arbiter is contrary to the rule of speedy labor justice and the [sic] social justice and to afford protection to labor
policy of the Philippine Constitution, which is a command that should not be disregarded by the courts in resolving
labor cases;

3. Remand of the case to the labor arbiter would only prolong social unrest and the suffering of injurious effects of
illegal dismissal by the 92 illegally dismissed workers[;] hence, said remand of the case without justification
constitutes an oppressive act committed by public respondent.
Simply put, the issues are as follows:
1. Whether Respondent Laguesma acted with grave abuse of discretion in ordering the dismissal of the petition for
certification election
2. Whether Respondent NLRC acted with grave abuse of discretion in remanding the illegal dismissal case to the
labor arbiter for further proceedings
The present controversy hinges on whether an employer-employee relationship between the CPWU members and
Respondent Corfarm has been established by substantial evidence.
The Courts Ruling
The two petitions are meritorious.
416

416
SUPREME COURT REPORTS ANNOTATED
Caurdanetaan Piece Workers Union vs. Laguesma
Main Issue: Employer-Employee Relationship
First Case: Certification Election
Petitioner contends that Respondent Laguesma committed grave abuse of discretion in dismissing the petition for
certification election by relying on private respondents bare allegation, in its motion for reconsideration, of lack of
employer-employee relationship.18 According to petitioner, Respondent Laguesma cannot reverse his Decision in
the absence of a concomitant change in his factual findings.19 Petitioner insists that all its members were
employees of private respondent, viz.:20

The 92 workers, who are all union members of petitioner herein have been rendering actual manual services as
cargadores in the warehouse and rice mills of private respondent, performing activities usually related to or
desirable by [sic] the business or trade of private respondent who is engaged in the buy and sell of palay as well as
warehousing of said commodity and milling the same for sale to customers in the form of milled rice. The 92 workers
have performed their activities for the last ten (10) years prior to their having been illegally dismissed from
employment on June 18, 1992 or thereabouts.
Petitioner adds that many of its members received Christmas bonuses from private respondent.21
On the other hand, Respondent Corfarm describes the contentions of petitioner as
off-tangent, if not irrelevant.

First, the authority of the DOLE Secretary to decide appeals in representation cases is undeniable (see e.g., Sections
9 and 10 of Rule V, Book V, of the Implementing Rules and Regulations of the Labor
_______________

18 Rollo of G.R. No. 113542, pp. 20-21; Petition, pp. 14-15.


19 Ibid., p. 22; Petition, p. 16.
20 Ibid., p. 27; Petition, p. 27.
21 Ibid., p. 24; Petition, p. 18.
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Caurdanetaan Piece Workers Union vs. Laguesma

Code; also Art. 259, appeal from certification election orders, labor code). Second, petitioner completely misses the
point that the granting and denial of a motion for reconsideration involves the exercise of discretion. As submitted
by the Public Respondent in its Comment, among the ends to which a Motion for Reconsideration is addressed, one
is precisely to convince the court that its ruling is erroneous and improper, contrary to law or the evidence, x x x
(Emphasis found in the original.)
Corfarm insists that the challenged Order of Respondent Laguesma dated January 4, 1994 rests on solid findings of
fact which should be accorded respect and finality.22 It attacks the petitioners allegationthat it has 92 workers
who worked as cargador at its warehousesas gratuitous and not supported by any evidence x x x [because] as
late as this time of day in the litigation of this case, who exactly are those 92 workers cannot be known from the
records.23 (Emphasis in original.)
Private respondent further argues that RJL Martinez Fishing Corp. vs. NLRC,24 cited by the solicitor general, has a
factual situation different from the case at bar. Waiting time, unlike that in RJL Martinez Fishing Corp., does not
obtain here.25 Likewise allegedly inapplicable are the rulings in Villavilla vs. Court of Appeals26 and in Brotherhood
Labor Unity Movement vs. Zamora.27
Respondent Corfarm denies that it had the power of control, rationalizing that petitioners members were streethired workers engaged from time to time to do loading and unloading work x x x[;] [t]here [was] no superintendentin_______________

22 Ibid., pp. 332-333; Respondent Corfarms Consolidated Memorandum, pp. 19-20.


23 Ibid., pp. 337-338; Respondent Corfarms Consolidated Memorandum, pp. 24-25.
24 127 SCRA 454, January 31, 1984.
25 Rollo of G.R. 113542, pp. 338-339; Respondent Corfarm Consolidated Memorandum, pp. 25-26.
26 212 SCRA 488, August 11, 1992.
27 147 SCRA 49, January 7, 1987.
418

418
SUPREME COURT REPORTS ANNOTATED
Caurdanetaan Piece Workers Union vs. Laguesma
charge x x x to give orders x x x[;] [and] there [were] no gate passes issued, nor tools, equipment and paraphernalia
issued by Corfarm for loading/unloading x x x.28 It attributes error to the solicitor generals reliance on Article
28029 of the Labor Code. Citing Brent School, Inc. vs. Zamora,30 private respondent asserts that a literal application
of such article will result in absurdity, where petitioners members will be regular employees not only of
respondents but also of several other rice mills, where they were allegedly also under service. Finally, Corfarm
submits that the OSGs position is negated by the fact that petitioners members contracted for loading and
unloading services with respondent company when such work was available and when they felt like it x x x.31
We rule for petitioners. Section 5, Rule 133 of the Rules of Court mandates that in cases filed before administrative
or quasi-judicial bodies, like the Department of Labor, a fact may be established by substantial evidence, i.e. that
amount
_______________

28 Rollo of G.R. No. 113542, pp. 339-343; Respondent Corfarms Consolidated Memorandum, pp. 26-30.
29 Article 280. Regular and casual employment.The provisions of written agreements to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer, except where the employment has been fixed for a specific project or undertaking
the completion or termination of which has been determined at the time of the engagement of the employee or
where the work or services to be performed is seasonal in nature and the employment is for the duration of the
season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his employment shall
continue while such activity exists.

30 181 SCRA 702, February 5, 1990.


31 Rollo of G.R. No. 113542, pp. 344-346; Respondents Corfarm Consolidated Memorandum, pp. 31-33.
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419
Caurdanetaan Piece Workers Union vs. Laguesma
of evidence which a reasonable mind might accept as adequate to justify a conclusion.32 Also fundamental is the
rule granting not only respect but even finality to factual findings of the Department of Labor, if supported by
substantial evidence. Such findings are binding upon this Court, unless petitioner is able to show that the secretary
of labor (or the undersecretary acting in his place) has arbitrarily disregarded or misapprehended evidence before
him to such an extent as to compel a contrary conclusion if such evidence were properly appreciated. This is rooted
in the principle that this Court is not a trier of facts, and that the determinations made by administrative bodies on
matters falling within their respective fields of specialization or expertise are accorded respect.33 Also well-settled is
the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and that the
findings thereon by the labor authorities shall be accorded not only respect but even finality when supported by
substantial evidence.34 Finally, in certiorari proceedings under Rule 65, this Court does not, as a rule, evaluate the
sufficiency of
_______________

32 Interorient Maritime Enterprises, Inc., et al. vs. National Labor Relations Commission, et al., G.R. No. 115497,
September 16, 1996, citing Rase vs. National Labor Relations Commission, 237 SCRA 523, October 7, 1994, Atlas
Consolidated Mining and Development Corp. vs. Factoran, 154 SCRA 49, 54, September 15, 1987; Ang Tibay vs.
Court of Industrial Relations, 69 Phil. 635, 642; Police Commission vs. Lood, 127 SCRA 762, February 24, 1984;
Klaveness Maritime Agency, Inc. vs. Palmos, 232 SCRA 448, May 20, 1994; Zarate vs. Hon. Norma C. Olegario, et al.,
G.R. No. 90655, October 7, 1996.
33 Palomado vs. National Labor Relations Commission, 257 SCRA 680, June 28, 1996.

34 AFP Mutual Benefit Association, Inc. vs. National Labor Relations Commission, et al., G.R. No. 102199, January 28,
1997 citing North Davao Mining Corporation vs. National Labor Relations Commission, 254 SCRA 721, 731, March 13,
1996; Great Pacific Life Assurance Corporation vs. National Labor Relations Commission, 187 SCRA 694, 660,
February 4, 1994; Inter-Orient Maritime Enterprises, Inc. vs. National Labor Relations Commission, 235 SCRA 268,
277, August 11, 1994.
420

420
SUPREME COURT REPORTS ANNOTATED
Caurdanetaan Piece Workers Union vs. Laguesma
evidence upon which the labor officials based their determinations. The inquiry is essentially limited to whether they
acted without or in excess of jurisdiction or with grave abuse of discretion.35 However, this doctrine is not absolute.
Where the labor officers findings are contrary to those of the med-arbiter, the Courtin the exercise of its equity
jurisdictionmay wade into and reevaluate such findings,36 which we now embark on in this case.37
To determine the existence of an employer-employee relation, this Court has consistently applied the four-fold test
which has the following elements: (1) the power to hire, (2) the payment of wages, (3) the power to dismiss, and (4)
the power to controlthe last being the most important element.38
Our examination of the case records indubitably shows the presence of an employer-employee relationship. Relying
on the evidence adduced by the petitioners, Respondent Laguesma himself affirmed the presence of such
connection. Thus, in his Order dated September 7, 1993, he astutely held:39
_______________

35 Ilocos Sur Electric Cooperative, Inc. vs. National Labor Relations Commission, 241 SCRA 36, 50, February 1, 1995;
Busmente, Jr. vs. National Labor Relations Commission, 195 SCRA 710, April 8, 1991; Aguilar vs. Tan, 31 SCRA 205,
January 30, 1970; Pacis vs. Averia, 18 SCRA 907, November 29, 1966.
36 See Raycor Aircontrol Systems, Inc. vs. National Labor Relations Commission, G.R. No. 114290, September 9,
1996.

37 Cf. Hilario Magcalas, et al. vs. National Labor Relations Commission, et al., G.R. No. 100333, March 13, 1997.
38 AFP Mutual Benefit Association, Inc. vs. National Labor Relations Commission, G.R. No. 102199, January 28, 1997
citing Insular Life Assurance Co., Ltd. vs. NLRC, 179 SCRA 459, 464, November 15, 1989; Rhoune-Poulenc
Agrochemicals Philippines, Inc. vs. NLRC, 217 SCRA 249, 255, January 19, 1993; and Villuga vs. NLRC, 225 SCRA 537,
546, August 23, 1993; Villavilla vs. Court of Appeals, 212 SCRA 488, August 11, 1992.
39 Rollo of G.R. No. 113542, pp. 52-53.
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Caurdanetaan Piece Workers Union vs. Laguesma
Anent the first issue, we find the annexes submitted by the respondent company not enough to prove that herein
petitioner is indeed an independent contractor. The existence of an independent contractor relationship is generally
established by the following criteria. The contractor is carrying on an independent business; [the] nature and extent
of the work; the skill required; the term and duration of the relationship; the right to assign the performance of a
specified piece of work; the control and supervision over the workers; payment of the contractors workers; the
control and the supervision over the workers; the control of the premises; the duty to supply the premises, tools,
appliances, materials and laborers, and the mode, manner and terms of payment. [Brotherhood Labor Unity
Movement of the Philippines vs. Zamora, 147 SCRA 49 (198) [sic]].
None of the above criteria exists in the case at bar. The absence of a written contract which specifies the
performance of a specified piece of work, the nature and extent of the work and the term and duration of the
relationship between herein petitioner and respondent company belies the latters [sic] allegation that the former is
indeed and [sic] independent contractor.
Also, respondent failed to show by clear and convincing proof that herein respondent has the substantial capital or
investment to qualify as an independent contractor under the law. The premises, tools, equipments [sic] and
paraphernalia are all supplied by respondent company. It is only the manpower or labor force which the alleged
contractor supplies, suggesting the existence of a labor only contracting scheme which is prohibited by law.
Further, if herein petitioner is indeed an independent contractor, it should have offered its services to other

companies and not to work [sic] exclusively for the respondent company. It is therefore, clear that the alleged J.P.
Costales, Jr. Cargador Services cannot be considered as an independent contractor as defined by law.
In his subsequent order. Respondent Laguesma inexplicably reversed his above ruling and held that there was no
employer-employee relationship on the ground that Respondent Corfarm exercised no power of control over the
alleged employees.
It may be asked, why the sudden change of mind on the part of Respondent Laguesma? No additional pieces of
evidence were adduced and no existing ones were identified by Laguesma to support such strange reversal. The
unblemished
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Caurdanetaan Piece Workers Union vs. Laguesma
fact is that private respondent was the recruiter and employer of petitioners members.
Shoppers Gain Supermart vs. NLRC40 provides the standard to determine whether a worker is an independent
contractor:
The applicable law is not Article 280 of the Labor Code which is cited by petitioners, but Art. 106, which provides:
Art. 106. Contractor or subcontractor.Whenever an employer enters into a contract with another person for the
performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be
paid in accordance with the provisions of this Code.
xxx

xxx

xxx

xxx

xxx

xxx

There is labor-only contracting where the person supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers
recruited and placed by such persons are performing activities which are directly related to the principal business of
such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer

who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by
him. (emphasis supplied)
In accordance with the above provision, petitioner corporation is deemed the direct employer of the private
respondents and thus liable for all benefits to which such workers are entitled, like wages, separation benefits and so
forth. There is no denying the fact that private respondents work as merchandisers, cashiers, baggers, check-out
personnel, sales ladies, warehousemen and so forth were directly related, necessary and vital to the day-to-day
operations of the supermarket; their jobs involved normal and regular functions in the ordinary business of the
petitioner corporation. Given the nature
_______________

40 259 SCRA 411, 419-420, July 26, 1996, per Panganiban, J.; See also Philippine Bank of Communications vs. NLRC,
146 SCRA 347, December 19, 1986; Ecal vs. NLRC, 195 SCRA 224, March 13, 1991.
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of their functions and responsibilities, it is improbable that petitioner did not exercise direct control over their work.
Moreover, there is no evidenceas in fact, petitioners do not even allegethat aside from supplying the manpower,
the labor agencies have substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others.
It is undeniable that petitioners members worked as cargadores for private respondent. They loaded, unloaded and
piled sacks of palay from the warehouses to the cargo trucks and from the cargo trucks to the buyers. This work is
directly related, necessary and vital to the operations of Corfarm. Moreover, Corfarm did not even allege, much less
prove, that petitioners members have substantial capital or investment in the form of tools, equipment,
machineries, [and] work premises, among others. Furthermore, said respondent did not contradict petitioners
allegation that it paid wages directly to these workers without the intervention of any third-party independent

contractor. It also wielded the power of dismissal over petitioners; in fact, its exercise of this power was the
progenitor of the Second Case. Clearly, the workers are not independent contractors.
Applying Article 28041 of the Labor Code, we hold that the CPWU members were regular employees of private
respondent. Their tasks were essential in the usual business of private respondent.
_______________

41 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.
xxx

xxx

x x x.

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Caurdanetaan Piece Workers Union vs. Laguesma
As we have ruled in an earlier case, the question of whether an employer-employee relationship exists in a certain
situation has bedevilled the courts. Businessmen, with the aid of lawyers, have tried to avoid or sidestep such
relationship, because that juridical vinculum engenders obligations connected with workmens compensation, social
security, medicare, minimum wage, termination pay and unionism.42 All too familiarly, Respondent Corfarm sought
refuge from these obligations. However, the records of this case clearly support the existence of the juridical
vinculum.
RJL Martinez Fishing Corporation,43 cited by the solicitor general, is relevant because petitioners members were
also made to wait for loading and unloading of cavans of palay to and from the storage areas and to and from the

milling areas.44 This waiting time does not denigrate the regular employment of petitioners members. As ruled in
that case:45
x x x Besides, the continuity of employment is not the determining factor, but rather whether the work of the
laborer is part of the regular business or occupation of the employer. (fn: Article 281, Labor Code, as amended;
Philippine Fishing Boat Officers and Engineer[s] Union vs. Court of Industrial Relations, 112 SCRA 159 (1982). We are
thus in accord with the findings of respondent NLRC in this regard.
Although it may be that private respondents alternated their employment on different vessels when they were not
assigned to petitioners boats, that did not affect their employee status. The evidence also establishes that
petitioners had a fleet of fishing vessels with about 65 ship captains, and as private respondents contended, when
they finished with one vessel they were instructed to wait for the next. As respondent NLRC had found:
_______________

42 Mafinco Trading Corporation vs. Ople, 70 SCRA 139, 159, March 25, 1976.
43 Per Melencio-Herrera, J.
44 Rollo of G.R. No. 113542, p. 342; Respondents Consolidated Memorandum, p. 29.
45 At pp. 460-461.
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We further find that the employer-employee relationship between the parties herein is not co-terminous with each
loading and unloading job. As earlier shown, respondents are engaged in the business of fishing. For this purpose,
they have a fleet of fishing vessels. Under this situation, respondents activity of catching fish is a continuous
process and could hardly be considered as seasonal in nature. So that the activities performed by herein
complainants, i.e. unloading the catch of tuna fish from respondents vessels and then loading the same to

refrigerated vans, are necessary or desirable in the business of respondents. This circumstance makes the
employment of complainants a regular one, in the sense that it does not depend on any specific project or seasonal
activity. (fn: NLRC Decision, p. 94, Rollo.)
Alleged Admission of Lack of Employer-Employee Relationship
Respondent Corfarm argues that some of petitioners members including its president, Juanito P. Costales, Jr.[,]
admitted that they work for various rice mills in Pangasinan and that there is no employer-employee relations
between them and private respondents. It adds that the solicitor general, by arguing that there was an employeremployee relationship, attempts to substitute [his] judgment [with] that of public respondent undersecretary x x x
who found such admissions against self-interest on the part of petitioners members x x x.46
These arguments are negligible. The alleged admissions cannot be taken against petitioners cause. First, the
contents of the admissions are highly suspect. The records reveal that the admissions of Juanito Costales, Jr.,47
Carlito Costales48 and Juanito Medenilla49 were in the form of affidavits50 of
_______________

46 Rollo of G.R. No. 113542, p. 337; Private Respondents Consolidated Memorandum, p. 24.
47 Records of OS-A-8-119-93, p. 138.
48 Records of OS-A-8-119-93, p. 139.
49 Records of OS-A-8-119-93, p. 140.
50 Photocopies only.
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adhesion which were identical in content, differentiated only by the typewritten names and the signatures of the
workers. Second, only three of the workers executed such affidavits. Clearly, the admissions in such affidavits cannot
work against petitioner unions cause. Such pro forma and identical affidavits do not prove lack of employeremployee relationship against all members of petitioner. Third, the employer-employee relationship is clearly proven
by substantial evidence. Corfarm sorely failed to show that petitioners members were independent contractors. We
rule that no particular form of proof is required to prove the existence of an employer-employee relationship. Any
competent and relevant evidence may show the relationship. If only documentary evidence would be required to
demonstrate that relationship, no scheming employer would ever be brought before the bar of justice.51 Fourth, and
in any event, the alleged admissions of the three workers that they worked with other rice mills do not work against
them. Assuming arguendo that they did work with other rice mills, this was required by the imperative of meeting
their basic needs.52
The employer-employee relationship having been duly established, the holding of a certification election necessarily
follows. It bears stressing that there should be no unnecessary obstacle to the holding of such election,53 for it is a
statutory
_______________

51 Opulencia Ice Plant and Storage vs. NLRC, 228 SCRA 473, 478, December 15, 1993.
52 Industrial-Commercial-Agricultural Workers Organization vs. Court of Industrial Relations, et al., Resolution on
Motion for Reconsideration, 16 SCRA 562, 568, March 31, 1966.
53 See Warren Manufacturing Workers Union vs. Bureau of Labor Relations, 159 SCRA 387, March 30, 1988; General
Textiles Allied Workers Association vs. Director of Bureau of Labor Relations, 84 SCRA 430, July 31, 1978; Philippine
Association of Free Labor Unions (PAFLU) vs. Bureau of Labor Relations, 69 SCRA 132, January 27, 1976.
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policy that should not be circumvented.54 We have held that, in the absence of a legal impediment, the holding of a
certification election is the most democratic method of determining the employees choice of their bargaining
representative. It is the best means to settle controversies and disputes involving union representation. Indeed, it is
the keystone of industrial democracy.55
Second Case: Illegal Dismissal
Petitioner assails the NLRC for setting aside the labor arbiters decision and remanding the case for further
proceedings. Petitioner argues that the order of remand will only prolong the agony of the 92 union members and
their families for living or existing without jobs and earnings to give them support. Further, petitioner contends:56
The Labor Arbiter had rendered a decision (Annex D, Petition) on September 14, 1993 in favor of petitioner based
on the available records of the case after giving more than ample opportunities to private respondents herein to
submit their position paper and other pleadings alleging their evidences [sic] against the causes of action of
petitioner alleged in the complaint for illegal dismissal, unfair labor practice, non-payment of various benefits
granted by existing laws during their employment, illegal deductions or diminution of their underpaid daily wages,
non-payment of wage increases and other causes of action pleaded by the complainant or herein petitioner.
_______________

54 Belyca Corporation vs. Ferrer-Calleja, 168 SCRA 184, November 29, 1988; Philippine Airlines Employees
Association (PALEA) vs. Ferrer-Calleja, 162 SCRA 426, June 22, 1988; George and Peter Lines, Inc. vs. Associated
Labor Unions (ALU), 134 SCRA 82, January 17, 1985.
55 Trade Unions of the Philippines vs. Laguesma, 233 SCRA 565, June 30, 1994.
56 Rollo of G.R. No. 113542, p. 300; Petitioners Memorandum, p. 20.
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In short, Labor Arbiter Rolando Gambito rendered his decision based on the records of the case including evidence
available on record and after observing due process of law.
To support his opposition against the remand of the case, petitioner recites the chronological events of the case,
viz.:57
In the case at bar, private respondents were notified earlier in the latter part of 1992 regarding the pendency of the
complaint for illegal dismissal, unfair labor practice, damages, etc., but said respondents did not appear during the
initial hearing of the case [before] Labor Arbiter Ricardo Olairez, then the Arbiter handling the case. The case was reset for hearing at some other dates. On April 22, 1993, Atty. Alfonso C. Bince, Jr. appeared as counsel for
respondents at Dagupan City. Atty. Bince committed to the Labor Arbiter that the former will file the position paper
for his clients (Corfarm Grains, Inc., et al.) within ten (10) days from April 22, 1993, but still private respondents
Position Paper was not filed.
On May 20, 1993, Labor Arbiter Rolando Gambito, who took over the case for illegal dismissal, etc. filed by
petitioner, issued an order to private respondents directing the latter (respondents) to submit their Position Paper
together with THEIR DOCUMENTARY EXHIBITS, if any, within 10 days from receipt of the order. Still, private
respondents counsel failed to submit private respondents Position Paper relative to the petitioners complaint for
illegal dismissal, unfair labor practice, etc. which is involved in G.R. No. 114911 pending action by this Honorable
Court.
Thus, the Labor Arbiter rendered his decision on the case in favor of petitioner and/or the 92 illegally dismissed
workers based on the position paper filed by the latter and available records of the case. (Emphasis in original.)
On the other hand, Respondent Corfarm submits that the labor arbiters decision should be set aside not only for
lack of competent and credible evidence but also for lack of procedural due process. Corfarm further contends
that in spite of the pendency of its motions to cross-examine peti_______________

57 Rollo of G.R. No. 113542, pp. 300-301; Petitioners Memorandum, pp. 20-21.
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tioners witnesses and to suspend proceedings, the labor arbiter ordered the submission of its position paper and
documentary evidence within ten (10) days.58 Respondent Corfarm insists:59
Indeed, although proceedings before a Labor Arbiter are supposed to be non-litigious and the technicalities in the
courts of law need not be strictly applied, the proceedings should nevertheless be subject to the requirements of
due process as provided in Section 7, Rule 7 of the NLRC Rules of Procedure. (See also Phil. Telegraph and Telephone
Corp. vs. NLRC, 183 SCRA 451).
We agree with petitioner. Private respondent was not denied procedural due process, and the labor arbiters decision
was based on competent, credible and substantial evidence.
Procedural Due Process Observed
Private respondent had been duly informed of the pendency of the illegal dismissal case, but it chose not to
participate therein without any known justifiable cause. The labor arbiter sent notices of hearing or arbitration to the
parties, requiring them to submit position papers at 1:30 p.m. on November 14, 1992.60 Respondent Corfarm did
not attend the hearing. According to Respondent NLRC, there was no proof that Respondent Corfarm received such
notice. In any case, petitioner filed a Motion to Admit Amended Complaint on December 23, 1992. Again, another
notice for hearing or arbitration on January 7, 1993 was sent to the parties.61 This was received by petitioners
counsel as evidenced by the registry return receipt duly signed by private respondents counsel, Atty. Alfonso Bince,
Jr. It was only on January 28, 1993, however, that Atty. Bince entered his appearance as counsel for
_______________

58 Rollo of G.R. No. 113542, pp. 328-330; Respondents Consolidated Memorandum, pp. 15-17.
59 Rollo of G.R. No. 113542, pp. 330-331; pp. 17-18.
60 Records of NLRC Case No. SUB-RAB 01-11-7-0184-92, p. 15.
61 Id., p. 42.

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Caurdanetaan Piece Workers Union vs. Laguesma
Respondent Corfarm.62 On May 10, 1993, Corfarm was again given a new period of ten (10) days within which to
submit its position paper and documentary evidence; otherwise, [the labor arbiter] will be constrained to resolve
this case based on available evidence on record.63 As evidenced by a registry return receipt, a copy of said
directive was received by respondents counsel on May 25, 1993. Still and all, Corfarm failed to file its position paper.
Clearly, private respondent was given an opportunity to present its evidence, but it failed or refused to avail itself of
this opportunity without any legal reason. Due process is not violated where a person is given the opportunity to be
heard, but chooses not to give his side of the case.64
Labor Arbiters Decision Based on Credible, Competent and Substantial Evidence
Contrary to the conclusions of the NLRC and the arguments of private respondent, the findings of the labor arbiter
on the question of illegal dismissal were based on credible, competent and substantial evidence.
It is to be borne in mind that proceedings before labor agencies merely require the parties to submit their respective
affidavits and position papers. Adversarial trial is addressed to the sound discretion of the labor arbiter. To establish
a cause of action, only substantial evidence is necessary; i.e., such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion, even if other minds equally reasonable might conceivably opine
otherwise.65 As ruled in Manalo vs. Roldan-Confesor:66
_______________

62 Id., p. 197.
63 Id., p. 247.
64 Philippine Savings Bank vs. NLRC, 261 SCRA 409, September 4, 1996.
65 Santos vs. Court of Appeals, 229 SCRA 524, January 27, 1994, per Romero, J.

66 215 SCRA 808, November 19, 1992, per Bellosillo, J.


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Clear and convincing proof is x x x more than mere preponderance, but not to extent of such certainty as is
required beyond reasonable doubt as in criminal cases x x x (fn: Blacks Law Dictionary, 5th Ed., p. 227, citing Fred
C. Walker Agency, Inc. v. Lucas, 215 Va. 535, 211 S.E. 2d 88, 92) while substantial evidence x x x consists of more
than a mere scintilla of evidence but may be somewhat less than a preponderance x x x x (fn: Ibid., p. 1281, citing
Marker v. Finch, D.C. Del., 322 F. Supp. 905, 910) Consequently, in the hierarchy of evidentiary values, We find proof
beyond reasonable doubt at the highest level, followed by clear and convincing evidence, preponderance of
evidence, and substantial evidence, in that order.
Evidence to determine the validity of petitioners claims, which the labor arbiter relied upon, was available to
Respondent NLRC. These pieces of evidence are in the case records, as aptly pointed out by the solicitor general:67
[Regarding] the quoted second sentence of public respondent NLRCs Resolution that allegations must be proved
and established by competent evidence, and that mere allegations would not suffice despite the absence of
evidence to the contrary, suffice it to say that there is ample evidence on record to support the Labor Arbiters
decision, to wit: 1) Narrative report of DOLE inspector Crisanto Rey Dingle noting some violation of underpayment of
minimum wage and underpayment of 13th month pay (page 10, record); 2) affidavit of union officers and individual
union members, stating their various claims (page 80-195, Record). Despite such evidence and an opportunity
afforded to private respondent to present its evidence and position paper as borne out by the notice of hearing
issued by Labor Arbiter Olairez dated November 14, 1992, with advice to the parties to submit their position paper
(p. 14 Record) and the Order issued by Labor Arbiter Gambito dated May 20, 1993; requiring private respondents to
submit their position paper, together with their documentary evidence (p. 247, record), private respondent failed to
submit its position paper and countervailing evidence which should have met squarely the allegations and evidence
adduced by the petitioner. Thus, in the absence of private respondents position paper and countervailing evidence,
the Labor Arbiter cannot be
_______________

67 Rollo of G.R. No. 113542, pp. 266-267; solicitor generals Consolidated Memorandum, pp. 18-19.
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SUPREME COURT REPORTS ANNOTATED
Caurdanetaan Piece Workers Union vs. Laguesma
faulted in deciding the case based on the available evidence on record.
It must be stressed that labor laws mandate the speedy administration of justice, with least attention to
technicalities but without sacrificing the fundamental requisites of due process. In this light, the NLRC, like the labor
arbiter, is authorized to decide cases based on the position papers and other documents submitted, without
resorting to the technical rules of evidence.68 Verily, Respondent NLRC noted several documentary evidence
sufficient to arrive at a just decision. Indeed, the evidence on record clearly supports the conclusion of the labor
arbiter that the petitioners were employees of respondent, and that they were illegally dismissed.69
The NLRC points to conflicts and inconsistencies in the evidence on record. We are not convinced. These alleged
inconsistencies are too flimsy and too tenuous no preclude a just decision. The finding that Juanito Costales, Jr. was
an employee of respondent was allegedly inconsistent with his admission that he was the owner of Carcado
Contracting Services. As earlier observed, the inconsistency is irrelevant. Juan Costales, Jr. was an employee of
Corfarm. Owning this alleged outfit is not inconsistent with such employment. The NLRC also questioned the amount
of the employees compensation. In one instance, the workers stated that they were receiving P45.00 per days
work of eight hours. In another, they claimed that they were paid P0.12 per sack or cavan. These allegedly differ
from their allegation that Corfarm used to be obliged to pay P57.00 per days earning. The alleged inconsistencies
are more apparent than real. Records reveal that the P57 was the promised compensation; however,
_______________

68 Domasig vs. National Labor Relations Commission, 261 SCRA 779, 781, 787, September 16, 1996 citing cases of
Sigma Personnel Services vs. NLRC, 224 SCRA 181 (1993) and Cagampan, et al. vs. NLRC, et al., 195 SCRA 533
(1991).
69 See citation under public respondents ruling on G.R. No. 114911; Rollo of G.R. No. 114911, pp. 57-58; February
16, 1994 Resolution, pp. 10-12.
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there was an unauthorized deduction of P12; thus, the amount of P45 per day.70 The claim of P0.12 per sack or
cavan is the basic computation of how workers or haulers earn their wage for the day.71 In any event, the alleged
inconsistencies do not affect or diminish the established fact that petitioners members were regular employees who
were illegally dismissed.
Why Respondent NLRC refused to rule directly on the appeal escapes us. The remand of a case or an issue to the
labor arbiter for further proceedings is unnecessary, considering that the NLRC was in a position to resolve the
dispute based on the records before it and particularly where the ends of justice would be served thereby.72
Remanding the case would needlessly delay the resolution of the case which has been pending since 1992.73 As
already observed, the evidence on record clearly supports the findings of the labor arbiter.
_______________

70 The allegations read (NLRC Case No. SUB-RAB 01-11-7-0184-92, p. 31):


Hence, union members or workers engaged to work were informed that their compensation would be P57.00 per
day upon start of their employment.
However, P12.00 out of the P57.00 supposed earnings or daily wage of each worker is withheld by individual
respondents from each workers compensation during their employment (beginning employment until illegally

dismissed on June 18, 1992 when individual respondents got wind of the formation or organization of a labor union
into what is now known as the Caurdanetaan Piece Workers Union). Only P45.00, out of the P57.00 supposed daily
wage of each worker, was actually paid to each worker. x x x.
71 Rollo of G.R. No. 114911, p. 72; Labor Arbiters Decision, p. 5.
72 See Heirs of Crisanta Y. Gabriel-Almoradie vs. Court of Appeals, 229 SCRA 15, 29, January 4, 1994; Escudero vs.
Dulay, 158 SCRA 69, February 23, 1988; Roman Catholic Archbishop of Manila vs. Court of Appeals, 198 SCRA 300,
June 19, 1991.
73 To reiterate, Petitioner filed a petition for certification election on July 9, 1992 and an illegal dismissal case on
November 16, 1992.
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Caurdanetaan Piece Workers Union vs. Laguesma
Pursuant to the doctrine that this Court has a duty to settle, whenever possible, the entire controversy in a single
proceeding, leaving no root or branch to bear the seeds of future litigation, we now resolve all issues.74
It is axiomatic that in illegal dismissal cases, the employer always has the burden of proof,75 and his failure to
discharge this duty results in a finding that the dismissal was unjustified.76 Having defaulted from filing its position
paper, Respondent Corfarm is deemed to have waived its right to present evidence and counter the allegations of
petitioners members. In the same light, we sustain the labor arbiters holding in respect of unfair labor practice.77
As ruled by Labor Arbiter Rolando D. Gambito:78
_______________

74 Aspi vs. Court of Appeals, 236 SCRA 94, September 1, 1994; Hydro Resources Constructors Corp. vs. Court of
Appeals, 204 SCRA 309, November 29, 1991; De Leon vs. Court of Appeals, 205 SCRA 612, January 30, 1992.

75 Raycor Aircontrol Systems, Inc. vs. NLRC, 261 SCRA 589, September 9, 1996 citing Golden Donuts, Inc. vs. NLRC,
230 SCRA 153, February 21, 1994, and Mapalo vs. NLRC, 233 SCRA 266, June 17, 1994.
76 Uy vs. National Labor Relations Commission, 261 SCRA 505, September 6, 1996.
77 The following uniform allegations of petitioners members are undisputed (Records of NLRC Case No. SUB-RAB 0111-7-0184-92, pp. 102-195):
5. That since June 18, 1992 up to the present, my co-workers and I were prevented by armed men from entering
the premises of our employer at Caurdanetaan, Umingan, Pangasinan on account of the formation and organization
of our labor union known as the Caurdanetaan Piece Workers Union, which is duly registered with the Department of
Labor and Employment; that no just, legal and valid cause exists for our employer to prevent us (workers) from
performing our work since June 18, 1992 up to the present inasmuch as we are regular workers of our employer and
for not paying various pecuniary benefits legally due and payable to us during employment.
78 Rollo of G.R. No. 114911, p. 76.
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The last issue: Instead of sitting down with the individual complainants or the union officers to discuss their
demands, respondents resorted to mass lay-off of all the members of the union and replaced them with outsiders.
This is clearly a case of union busting which Art. 248 of the Labor Code prohibits. Art. 248 provides that It shall be
unlawful for an employer to commit any of the following unfair labor practice (a) To interfere with, restrain or coerce
employees in the exercise of their right to self-organization; (b) x x x (c) To contract out service or functions being
performed by union members when such will interfere with, restrain or coerce employees in the exercise of their
rights to self-organization.
In view of recent jurisprudence,79 we are correcting some items in the labor arbiters decision. The thirteenth month
pay awarded should be computed for each year of service from the time each employee was hired up to the date of
his actual reinstatement. The same computation applies to the award of the service incentive leave80 and

underpaid wages. Each employee is to be paid the remaining underpaid wages from the date of his or her hiring in
accordance with the then prevailing wage legislations. Likewise, a refund of P12 shall be computed for each day of
service of each employee, to be reckoned from the date such employee was hired. The damages awarded should be
sustained because the employer acted in bad faith.81 Back wages are to be computed from the date of dismissal up
to the date of actual reinstatement without any deductions or conditions. This is in consonance with Fernandez, et al.
vs. National Labor Relations Commission:82
x x x Accordingly, the award to petitioners of backwages for three years should be modified in accordance with
Article 279 of the Labor Code, as amended by R.A. 6715, by giving them full back_______________

79 Bustamante vs. National Labor Relations Commission, (Resolution), 265 SCRA 61, November 28, 1996, per
Padilla, J.
80 Fernandez, et al. vs. National Labor Relations Commission, G.R. No. 105892, January 28, 1998, per Panganiban, J.
81 Bernardo vs. National Labor Relations Commission, 255 SCRA 108, 121, March 15, 1996.
82 Supra. See also Bustamante vs. NLRC, supra.
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wages without conditions and limitations, the dismissals having occurred after the effectivity of the amendatory law
on March 21, 1989. Thus, the Court held in Bustamante:
The clear legislative intent of the amendment in Rep. Act No. 6715 is to give more benefits to workers than was
previously given them under the Mercury Drug rule or the deduction of earnings elsewhere rule. Thus, a closer
adherence to the legislative policy behind Rep. Act No. 6715 points to full backwages as meaning exactly that, i.e.,

without deducting from backwages the earnings derived elsewhere by the concerned employee during the period of
his illegal dismissal.
WHEREFORE, both petitions are GRANTED. In G.R. No. 113542, Respondent Laguesmas Orders dated January 4,
1994 and January 27, 1994 are REVERSED and SET ASIDE; whereas his Order dated September 7, 1993 is
REINSTATED. In G.R. No. 114911, Respondent NLRCs Resolutions promulgated on February 16, 1994 and March 28,
1994 are likewise REVERSED AND SET ASIDE. The Labor Arbiters decision dated September 14, 1993 is reinstated
with MODIFICATIONS as set out in this Decision. Respondent NLRC is ORDERED to COMPUTE the monetary benefits
awarded in accordance with this Decision and to submit its compliance thereon within thirty days from notice of this
Decision.
SO ORDERED.
Davide, Jr. (Chairman), Bellosillo, Vitug and Quisumbing, JJ., concur.
Petitions granted.
Note.Power to control over the employees conduct is generally regarded as determinative of the existence of
employer-employee relationship. (Tiu vs. National Labor Relations Commission, 254 SCRA 1 [1996])
o0o

437

Copyright 2015 Central Book Supply, Inc. All rights reserved. [Caurdanetaan Piece Workers Union vs. Laguesma,
286 SCRA 401(1998)]Maraguinot, Jr. vs. NLRC (Second Division)
G.R. No. 120969. January 22, 1998.*
ALEJANDRO MARAGUINOT, JR. and PAULINO ENERO, petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION (SECOND DIVISION) composed of Presiding Commissioner RAUL T. AQUINO, Commissioner
ROGELIO I. RAYALA and Commissioner VICTORIANO R. CALAYCAY (Ponente), VIC DEL ROSARIO and VIVA
FILMS, respondents.

Labor Law; Classification of Employment; As labor-only contracting is prohibited, the law considers the person or
entity engaged in the same a mere agent or intermediary of the direct employer.As labor-only contracting is
prohibited, the law considers the person or entity engaged in the same a mere agent or intermediary of the direct
employer. But even by the preceding standards, the associate producers of VIVA cannot be considered labor-only
contractors as they did not supply, recruit nor hire the workers. In the instant case, it was Juanita Cesario, Shooting
Unit Supervisor and an employee of VIVA, who recruited crew members from an available group of
_______________

* FIRST DIVISION.
540

540
SUPREME COURT REPORTS ANNOTATED
Maraguinot, Jr. vs. NLRC (Second Division)
free-lance workers which includes the complainants Maraguinot and Enero. And in their Memorandum, private
respondents declared that the associate producer hires the services of . . . 6) camera crew which includes (a)
cameraman; (b) the utility crew; (c) the technical staff; (d) generator man and electrician; (e) clapper; etc. . . . This
clearly showed that the associate producers did not supply the workers required by the movie project.
Same; Same; The employer-employee relationship between peti tioners and VIVA can further be established by the
control test; Elements to determine the existence of an employment relationship.The employer-employee
relationship between petitioners and VIVA can further be established by the control test. While four elements are
usually considered in determining the existence of an employment relationship, namely: (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 employees conduct, the most important element is the employers control of the employees conduct,
not only as to the result of the work to be done but also as to the means and methods to accomplish the same.
These four elements are present here.

Same; Same; Requisites before a project employee or a member of a work pool may acquire the status of a regular
employee.A project employee or a member of a work pool may acquire the status of a regular employee when the
following concur: 1) There is a continuous rehiring of project employees even after cessation of a project; and 2) The
tasks performed by the alleged project employee are vital, necessary and indispensable to the usual business or
trade of the employer.
Same; Same; Same; The length of time during which the employee was continuously re-hired is not controlling, but
merely serves as a badge of regular employment.However, the length of time during which the employee was
continuously re-hired is not controlling, but merely serves as a badge of regular employment.
Same; Same; Same; No impediment to apply Policy Instruction No. 20/Department Order No. 19 to industries other
than the construction industry.While Lao admittedly involved the construction industry, to which Policy Instruction
No. 20/Department Order No. 19 regarding work pools specifically applies, there seems to be no
541

VOL. 284, JANUARY 22, 1998


541
Maraguinot, Jr. vs. NLRC (Second Division)
impediment to applying the underlying principles to industries other than the construction industry. Neither may it
be argued that a substantial distinction exists between the projects undertaken in the construction industry and the
motion picture industry. On the contrary, the raison d etre of both industries concern projects with a foreseeable
suspension of work.
Same; Same; Same; Courts ruling does not mean that simply because an employee is a project or work pool
employee even outside the construction industry, he is deemed, ipso jure, a regular employee.The Courts ruling
here is meant precisely to give life to the constitutional policy of strengthening the labor sector, but, we stress, not
at the expense of management. Lest it be misunderstood, this ruling does not mean that simply because an
employee is a project or work pool employee even outside the construction industry, he is deemed, ipso jure, a
regular employee. All that we hold today is that once a project or work pool employee has been: (1) continuously, as
opposed to intermittently, re-hired by the same employer for the same tasks or nature of tasks; and (2) these tasks
are vital, necessary and indispensable to the usual business or trade of the employer, then the employee must be
deemed a regular employee, pursuant to Article 280 of the Labor Code and jurisprudence. To rule otherwise would

allow circumvention of labor laws in industries not falling within the ambit of Policy Instruction No. 20/Department
Order No. 19, hence allowing the prevention of acquisition of tenurial security by project or work pool employees
who have already gained the status of regular employees by the employers conduct.
Same; Same; Same; Petitioners are now entitled to back wages and reinstatement without loss of seniority rights
and other benefits that may have accrued.In closing then, as petitioners had already gained the status of regular
employees, their dismissal was unwarranted, for the cause invoked by private respondents for petitioners dismissal,
viz., completion of project, was not, as to them, a valid cause for dismissal under Article 282 of the Labor Code. As
such, petitioners are now entitled to back wages and reinstatement, without loss of seniority rights and other
benefits that may have accrued. Nevertheless, following the principles of suspension of work and no pay
between the end of one project and the start of a new one, in computing petitioners back wages, the amounts
corresponding to what could have been earned during the periods from the date peti542

542
SUPREME COURT REPORTS ANNOTATED
Maraguinot, Jr. vs. NLRC (Second Division)
tioners were dismissed until their reinstatement when petitioners respective Shooting Units were not undertaking
any movie projects, should be deducted.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

The facts are stated in the opinion of the Court.


Jose C. Evangelista and Norma T. Garciano for petitioners.
Bengzon, Narciso, Cudala, Pecson, Bengson & Jimenez for private respondents.
DAVIDE, JR., J.:

By way of this special civil action for certiorari under Rule 65 of the Rules of Court, petitioners seek to annul the 10
February 1995 Decision1 of the National Labor Relations Commission (hereafter NLRC), and its 6 April 1995
Resolution2 denying the motion to reconsider the former in NLRC-NCR-CA No. 006195-94. The decision reversed that
of the Labor Arbiter in NLRC-NCR-Case No. 00-07-03994-92.
The parties present conflicting sets of facts.
Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by private respondents on 18 July 1989 as part
of the filming crew with a salary of P375.00 per week. About four months later, he was designated Assistant
Electrician with a weekly salary of P400.00, which was increased to P450.00 in May 1990. In June 1991, he was
promoted to the rank of Electrician with a weekly salary of P475.00, which was increased to P593.00 in September
1991.
Petitioner Paulino Enero, on his part, claims that private respondents employed him in June 1990 as a member of the
_______________

1 Per Commissioner Victoriano R. Calaycay, with Commissioners Raul T. Aquino and Rogelio I. Rayala, concurring.
Annex A of Petition, Rollo, 20-29.
2 Rollo, 30.
543

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543
Maraguinot, Jr. vs. NLRC (Second Division)
shooting crew with a weekly salary of P375.00, which was increased to P425.00 in May 1991, then to P475.00 on 21
December 1991.3
Petitioners tasks consisted of loading, unloading and arranging movie equipment in the shooting area as instructed
by the cameraman, returning the equipment to Viva Films warehouse, assisting in the fixing of the lighting
system, and performing other tasks that the cameraman and/or director may assign.4

Sometime in May 1992, petitioners sought the assistance of their supervisor, Mrs. Alejandria Cesario, to facilitate
their request that private respondents adjust their salary in accordance with the minimum wage law. In June 1992,
Mrs. Cesario informed petitioners that Mr. Vic del Rosario would agree to increase their salary only if they signed a
blank employment contract. As petitioners refused to sign, private respondents forced Enero to go on leave in June
1992, then refused to take him back when he reported for work on 20 July 1992. Meanwhile, Maraguinot was
dropped from the company payroll from 8 to 21 June 1992, but was returned on 22 June 1992. He was again asked
to sign a blank employment contract, and when he still refused, private respondents terminated his services on 20
July 1992.5 Petitioners thus sued for illegal dismissal6 before the Labor Arbiter.
On the other hand, private respondents claim that Viva Films (hereafter VIVA) is the trade name of Viva Productions,
Inc., and that it is primarily engaged in the distribution and exhibition of moviesbut not in the business of making
movies; in the same vein, private respondent Vic del Rosario is merely an executive producer, i.e., the financier who
invests a
_______________

3 Complaint, 1; Original Record (OR), 2; Rollo, 3-4.


4 Position Paper for Complainant, 1; OR, 37; Rollo, 4.
5 Position Paper for Complainant, 2; OR, 38; Petition, 3-4; Rollo, 4-5.
6 OR, 2-4.
544

544
SUPREME COURT REPORTS ANNOTATED
Maraguinot, Jr. vs. NLRC (Second Division)
certain sum of money for the production of movies distributed and exhibited by VIVA.7
Private respondents assert that they contract persons called producersalso referred to as associate producers8
to produce or make movies for private respondents; and contend that petitioners are project employees of the

associate producers who, in turn, act as independent contractors. As such, there is no employer-employee
relationship between petitioners and private respondents.
Private respondents further contend that it was the associate producer of the film Mahirap Maging Pogi, who hired
petitioner Maraguinot. The movie shot from 2 July up to 22 July 1992, and it was only then that Maraguinot was
released upon payment of his last salary, as his services were no longer needed. Anent petitioner Enero, he was
hired for the movie entitled Sigaw ng Puso, later re-titled Narito ang Puso. He went on vacation on 8 June 1992,
and by the time he reported for work on 20 July 1992, shooting for the movie had already been completed.9
After considering both versions of the facts, the Labor Arbiter found as follows:
On the first issue, this Office rules that complainants are the employees of the respondents. The producer cannot be
considered as an independent contractor but should be considered only as a labor-only contractor and as such, acts
as a mere agent of the real employer, the herein respondents. Respondents even failed to name and specify who are
the producers. Also, it is an admitted fact that the complainants received their salaries from the respondents. The
case cited by the respondents, Rosario Brothers, Inc. vs. Ople, 131 SCRA 72 does not apply in this case.
It is very clear also that complainants are doing activities which are necessary and essential to the business of the
respon_______________

7 Respondents Position Paper, 1; OR, 8; Comment, 1; Rollo, 47.


8 Annexes 4 and 4-A, Private Respondents Position Paper before the Labor Arbiter; OR, 28-29.
9 Respondents Position Paper, 5-6; OR, 12-13; Comment, 4-6; Rollo, 50-52.
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Maraguinot, Jr. vs. NLRC (Second Division)

dents, that of movie-making. Complainant Maraguinot worked as an electrician while complainant Enero worked as a
crew [member].10
Hence, the Labor Arbiter, in his decision of 20 December 1993, decreed as follows:
WHEREFORE, judgment is hereby rendered declaring that complainants were illegally dismissed.
Respondents are hereby ordered to reinstate complainants to their former positions without loss [of] seniority rights
and pay their backwages starting July 21, 1992 to December 31, 1993 temporarily computed in the amount of
P38,000.00 for complainant Paulino Enero and P46,000.00 for complainant Alejandro Maraguinot, Jr. and thereafter
until actually reinstated.
Respondents are ordered to pay also attorneys fees equivalent to ten (10%) and/or P8,400.00 on top of the
award.11
Private respondents appealed to the NLRC (docketed as NLRC NCR-CA No. 006195-94). In its decision12 of 10
February 1995, the NLRC found the following circumstances of petitioners work clearly established:
1. Complainants [petitioners herein] were hired for specific movie projects and their employment was co-terminus
with each movie project the completion/termination of which are pre-determined, such fact being made known to
complainants at the time of their engagement.
xxx
2. Each shooting unit works on one movie project at a time. And the work of the shooting units, which work
independently from each other, are not continuous in nature but depends on the availability of movie projects.
3. As a consequence of the non-continuous work of the shooting units, the total working hours logged by
complainants in a month show extreme variations. . . For instance, complainant Mara
_______________

10 Quoted from Petition, 7; Rollo, 8.


11 Quoted from NLRC decision, Annex A of Petition; Rollo, 20.
12 Supra, note 1.

546

546
SUPREME COURT REPORTS ANNOTATED
Maraguinot, Jr. vs. NLRC (Second Division)
guinot worked for only 1.45 hours in June 1991 but logged a total of 183.25 hours in January 1992. Complainant
Enero logged a total of only 31.57 hours in September 1991 but worked for 183.35 hours the next month, October
1991.
4. Further shown by respondents is the irregular work schedule of complainants on a daily basis. Complainant
Maraguinot was supposed to report on 05 August 1991 but reported only on 30 August 1991, or a gap of 25 days.
Complainant Enero worked on 10 September 1991 and his next scheduled working day was 28 September 1991, a
gap of 18 days.
5. The extremely irregular working days and hours of complainants work explain the lump sum payment for
complainants services for each movie project. Hence, complainants were paid a standard weekly salary regardless
of the number of working days and hours they logged in. Otherwise, if the principle of no work no pay was strictly
applied, complainants earnings for certain weeks would be very negligible.
6. Respondents also alleged that complainants were not prohibited from working with such movie companies like
Regal, Seiko and FPJ Productions whenever they are not working for the independent movie producers engaged by
respondents. . . This allegation was never rebutted by complainants and should be deemed admitted.
The NLRC, in reversing the Labor Arbiter, then concluded that these circumstances, taken together, indicated that
complainants (herein petitioners) were project employees.
After their motion for reconsideration was denied by the NLRC in its Resolution13 of 6 April 1995, petitioners filed the
instant petition, claiming that the NLRC committed grave abuse of discretion amounting to lack or excess of
jurisdiction in: (1) finding that petitioners were project employees; (2) ruling that petitioners were not illegally
dismissed; and (3) reversing the decision of the Labor Arbiter.
To support their claim that they were regular (and not project) employees of private respondents, petitioners cited
their performance of activities that were necessary or desir-

____________________

13 Supra, note 2.
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Maraguinot, Jr. vs. NLRC (Second Division)
able in the usual trade or business of private respondents and added that their work was continuous, i.e., after one
project was completed they were assigned to another project. Petitioners thus considered themselves part of a work
pool from which private respondents drew workers for assignment to different projects. Petitioners lamented that
there was no basis for the NLRCs conclusion that they were project employees, while the associate producers were
independent contractors; and thus reasoned that as regular employees, their dismissal was illegal since the same
was premised on a false cause, namely, the completion of a project, which was not among the causes for dismissal
allowed by the Labor Code.
Private respondents reiterate their version of the facts and stress that their evidence supports the view that
petitioners are project employees; point to petitioners irregular work load and work schedule; emphasize the NLRCs
finding that petitioners never controverted the allegation that they were not prohibited from working with other
movie companies; and ask that the facts be viewed in the context of the peculiar characteristics of the movie
industry.
The Office of the Solicitor General (OSG) is convinced that this petition is improper since petitioners raise questions
of fact, particularly, the NLRCs finding that petitioners were project employees, a finding supported by substantial
evidence; and submits that petitioners reliance on Article 280 of the Labor Code to support their contention that
they should be deemed regular employees is misplaced, as said section merely distinguishes between two types of
employees, i.e., regular employees and casual employees, for purposes of determining the right of an employee to
certain benefits.

The OSG likewise rejects petitioners contention that since they were hired not for one project, but for a series of
projects, they should be deemed regular employees. Citing Mamansag v. NLRC,14 the OSG asserts that what
matters is that there was a time-frame for each movie project made known to petitioners at the time of their hiring.
In closing, the OSG dis___________________

14 218 SCRA 722 [1993].


548

548
SUPREME COURT REPORTS ANNOTATED
Maraguinot, Jr. vs. NLRC (Second Division)
agrees with petitioners claim that the NLRCs classification of the movie producers as independent contractors had
no basis in fact and in law, since, on the contrary, the NLRC took pains in explaining its basis for its decision.
As regards the propriety of this action, which the Office of the Solicitor General takes issue with, we rule that a
special civil action for certiorari under Rule 65 of the Rules of Court is the proper remedy for one who complains that
the NLRC acted in total disregard of evidence material to or decisive of the controversy.15 In the instant case,
petitioners allege that the NLRCs conclusions have no basis in fact and in law, hence the petition may not be
dismissed on procedural or jurisdictional grounds.
The judicious resolution of this case hinges upon, first, the determination of whether an employer-employee
relationship existed between petitioners and private respondents or any one of private respondents. If there was
none, then this petition has no merit; conversely, if the relationship existed, then petitioners could have been
unjustly dismissed.
A related question is whether private respondents are engaged in the business of making motion pictures. Del
Rosario is necessarily engaged in such business as he finances the production of movies. VIVA, on the other hand,
alleges that it does not make movies, but merely distributes and exhibits motion pictures. There being no further

proof to this effect, we cannot rely on this self-serving denial. At any rate, and as will be discussed below, private
respondents evidence even supports the view that VIVA is engaged in the business of making movies.
We now turn to the critical issues. Private respondents insist that petitioners are project employees of associate
producers who, in turn, act as independent contractors. It is settled that the contracting out of labor is allowed only
in case of job contracting. Section 8, Rule VIII, Book III of the Omnibus
__________________

15 See Sajonas v. NLRC, 183 SCRA 182, 186 [1990].


549

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Maraguinot, Jr. vs. NLRC (Second Division)
Rules Implementing the Labor Code describes permissible job contracting in this wise:
Sec. 8. Job contracting.There is job contracting permissible under the Code if the following conditions are met:
(1) The contractor carries on an independent business and undertakes the contract work on his own account under
his own responsibility according to his own manner and method, free from the control and direction of his employer
or principal in all matters connected with the performance of the work except as to the results thereof; and
(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises,
and other materials which are necessary in the conduct of his business.
Assuming that the associate producers are job contractors, they must then be engaged in the business of making
motion pictures. As such, and to be a job contractor under the preceding description, associate producers must have
tools, equipment, machinery, work premises, and other materials necessary to make motion pictures. However, the
associate producers here have none of these. Private respondents evidence reveals that the movie-making
equipment are supplied to the producers and owned by VIVA. These include generators,16 cables and wooden
platforms,17 cameras and shooting equipment18; in fact, VIVA likewise owns the trucks used to transport the

equipment.19 It is thus clear that the associate producer merely leases the equipment from VIVA.20 Indeed, private
respondents Formal Offer of Documentary Evidence stated one of the purposes of Exhibit 148 as:
___________________

16 TSN, 12 October 1992, 9-10; OR, 106-107; TSN, 25 January 1993, 12; OR, 246.
17 TSN, 25 January 1993, 54-55; OR, 288-289.
18 Id., 12, 14-15; Id., 246, 248-249.
19 Id., 12-13; Id., 246-247.
20 Respondents Position Paper, 12; OR, 19.
550

550
SUPREME COURT REPORTS ANNOTATED
Maraguinot, Jr. vs. NLRC (Second Division)
To prove further that the independent Producers rented Shooting Unit No. 2 from Viva to finish their films.21
While the purpose of Exhibits 149, 149-A and 149-B was:
[T]o prove that the movies of Viva Films were contracted out to the different independent Producers who rented
Shooting Unit No. 3 with a fixed budget and time-frame of at least 30 shooting days or 45 days whichever comes
first.22
Private respondents further narrated that VIVAs generators broke down during petitioners last movie project, which
forced the associate producer concerned to rent generators, equipment and crew from another company.23 This
only shows that the associate producer did not have substantial capital nor investment in the form of tools,
equipment and other materials necessary for making a movie. Private respondents in effect admit that their
producers, especially petitioners last producer, are not engaged in permissible job contracting.

If private respondents insist that their associate producers are labor contractors, then these producers can only be
laboronly contractors, defined by the Labor Code as follows:
Art. 106. Contractor or subcontractor.x x x
There is labor-only contracting where the person supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers
recruited and placed by such persons are performing activities which are directly related to the principal business of
such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer
who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by
him.
A more detailed description is provided by Section 9, Rule VIII, Book III of the Omnibus Rules Implementing the Labor
Code:
____________________

21 OR, 340.
22 Id., 341.
23 Respondents Position Paper, 12; OR, 19.
551
VOL. 284, JANUARY 22, 1998
551
Maraguinot, Jr. vs. NLRC (Second Division)
Sec. 9. Labor-only contracting.(a) Any person who undertakes to supply workers to an employer shall be deemed
to be engaged in labor-only contracting where such person:
(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and
other materials; and

(2) The workers recruited and placed by such person are performing activities which are directly related to the
principal business or operations of the employer in which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be
considered merely as an agent or intermediary of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
(c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate orders whether
or not the contracting out of labor is permissible in the light of the circumstances of each case and after considering
the operating needs of the employer and the rights of the workers involved. In such case, he may prescribe
conditions and restrictions to insure the protection and welfare of the workers.
As labor-only contracting is prohibited, the law considers the person or entity engaged in the same a mere agent or
intermediary of the direct employer. But even by the preceding standards, the associate producers of VIVA cannot be
considered labor-only contractors as they did not supply, recruit nor hire the workers. In the instant case, it was
Juanita Cesario, Shooting Unit Supervisor and an employee of VIVA, who recruited crew members from an available
group of freelance workers which includes the complainants Maraguinot and Enero.24 And in their Memorandum,
private respondents declared that the associate producer hires the services of . . . 6) camera crew which includes
(a) cameraman; (b) the utility crew; (c) the technical staff; (d) generator man and electrician;
___________________

24 Respondents Position Paper, 4; OR, 11.


552

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SUPREME COURT REPORTS ANNOTATED
Maraguinot, Jr. vs. NLRC (Second Division)
(e) clapper; etc. . . .25 This clearly showed that the associate producers did not supply the workers required by the
movie project.

The relationship between VIVA and its producers or associate producers seems to be that of agency,26 as the latter
make movies on behalf of VIVA, whose business is to make movies. As such, the employment relationship between
petitioners and producers is actually one between petitioners and VIVA, with the latter being the direct employer.
The employer-employee relationship between petitioners and VIVA can further be established by the control test.
While four elements are usually considered in determining the existence of an employment relationship, namely: (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 employees conduct, the most important element is the employers control of the
employees conduct, not only as to the result of the work to be done but also as to the means and methods to
accomplish the same.27 These four elements are present here. In their position paper submitted to the Labor
Arbiter, private respondents narrated the following circumstances:
[T]he PRODUCER has to work within the limits of the budget he is given by the company, for as long as the ultimate
finish[ed] product is acceptable to the company . . .
To ensure that quality films are produced by the PRODUCER who is an independent contractor, the company likewise
employs a Supervising PRODUCER, a Project accountant and a Shooting unit supervisor. The Companys Supervising
PRODUCER is Mr. Eric
__________________

25 Memorandum, 3; Rollo, 118.


26 The Civil Code defines a contract of agency in this wise: Art. 1868. By the contract of agency a person binds
himself to render some service or to do something in representation or on behalf of another, with the consent or
authority of the latter.
27 Encyclopedia Britannica (Phils.) v. NLRC, 264 SCRA 1, 7 [1996]; Aurora Land Projects Corporation v. NLRC, G.R.
No. 114733, 2 January 1997, 5-6.
553

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Maraguinot, Jr. vs. NLRC (Second Division)


Cuatico, the Project accountant varies from time to time, and the Shooting Unit Supervisor is Ms. Alejandria Cesario.
The Supervising PRODUCER acts as the eyes and ears of the company and of the Executive Producer to monitor the
progress of the PRODUCERs work accomplishment. He is there usually in the field doing the rounds of inspection to
see if there is any problem that the PRODUCER is encountering and to assist in threshing out the same so that the
film project will be finished on schedule. He supervises about 3 to 7 movie projects simultaneously [at] any given
time by coordinating with each film PRODUCER. The Project Accountant on the other hand assists the PRODUCER
in monitoring the actual expenses incurred because the company wants to insure that any additional budget
requested by the PRODUCER is really justified and warranted especially when there is a change of original plans to
suit the tast[e] of the company on how a certain scene must be presented to make the film more interesting and
more commercially viable. (emphasis ours)
VIVAs control is evident in its mandate that the end result must be a quality film acceptable to the company. The
means and methods to accomplish the result are likewise controlled by VIVA, viz., the movie project must be finished
within schedule without exceeding the budget, and additional expenses must be justified; certain scenes are subject
to change to suit the taste of the company; and the Supervising Producer, the eyes and ears of VIVA and del
Rosario, intervenes in the movie-making process by assisting the associate producer in solving problems
encountered in making the film.
It may not be validly argued then that petitioners are actually subject to the movie directors control, and not VIVAs
direction. The director merely instructs petitioners on how to better comply with VIVAs requirements to ensure that
a quality film is completed within schedule and without exceeding the budget. At bottom, the director is akin to a
supervisor who merely oversees the activities of rank-and-file employees with control ultimately resting on the
employer.
554

554
SUPREME COURT REPORTS ANNOTATED
Maraguinot, Jr. vs. NLRC (Second Division)
Moreover, appointment slips28 issued to all crew members state:

During the term of this appointment you shall comply with the duties and responsibilities of your position as well as
observe the rules and regulations promulgated by your superiors and by Top Management.
The words superiors and Top Management can only refer to the superiors and Top Management of VIVA. By
commanding crew members to observe the rules and regulations promulgated by VIVA, the appointment slips only
emphasize VIVAs control over petitioners.
Aside from control, the element of selection and engagement is likewise present in the instant case and exercised by
VIVA. A sample appointment slip offered by private respondents to prove that members of the shooting crew except
the driver are project employees of the Independent Producers29 reads as follows:
VIVA PRODUCTIONS, INC.
16 Sct. Albano St.
Diliman, Quezon City

PEDRO NICOLAS

Date: June 15, 1992

______________
APPOINTMENT SLIP

You are hereby appointed as SOUNDMAN for the film project entitled MANAMBIT. This appointment shall be
effective upon the commencement of the said project and shall continue to be effective until the completion of the
same.
For your services you shall receive the daily/weekly/monthly compensation of P812.50.
_________________

28 Annexes 5, 5-A to 5-D of Respondents Position Paper; OR, 30-34.


29 OR, 389.

555

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Maraguinot, Jr. vs. NLRC (Second Division)
During the term of this appointment you shall comply with the duties and responsibilities of your position as well as
observe the rules and regulations promulgated by your superiors and by Top Management.
Very truly yours,
(an illegible signature)
CONFORME:
________________

Name of appointee

Signed in the presence of:


_______________

Notably, nowhere in the appointment slip does it appear that it was the producer or associate producer who hired
the crew members; moreover, it is VIVAs corporate name which appears on the heading of the appointment slip.
What likewise tells against VIVA is that it paid petitioners salaries as evidenced by vouchers, containing VIVAs
letterhead, for that purpose.30
All the circumstances indicate an employment relationship between petitioners and VIVA alone, thus the inevitable
conclusion is that petitioners are employees only of VIVA.

The next issue is whether petitioners were illegally dismissed. Private respondents contend that petitioners were
project employees whose employment was automatically terminated with the completion of their respective
projects. Petitioners assert that they were regular employees who were illegally dismissed.
It may not be ignored, however, that private respondents expressly admitted that petitioners were part of a work
pool;31
______________

30 Exhibits 155, 155-A, 155-B, 156, to 164, inclusive, OR, 351-356.


31 Respondents Position Paper, 4; OR, 11; Supplemental Position Paper, 1; OR, 301.
556

556
SUPREME COURT REPORTS ANNOTATED
Maraguinot, Jr. vs. NLRC (Second Division)
and, while petitioners were initially hired possibly as project employees, they had attained the status of regular
employees in view of VIVAs conduct.
A project employee or a member of a work pool may acquire the status of a regular employee when the following
concur:
1) There is a continuous rehiring of project employees even after cessation of a project;32 and
2) The tasks performed by the alleged project employee are vital, necessary and indispensable to the usual
business or trade of the employer.33
However, the length of time during which the employee was continuously re-hired is not controlling, but merely
serves as a badge of regular employment.34

In the instant case, the evidence on record shows that petitioner Enero was employed for a total of two (2) years and
engaged in at least eighteen (18) projects, while petitioner Maraguinot was employed for some three (3) years and
worked on at least twenty-three (23) projects.35 Moreover, as
_________________

32 Philippine National Construction Corp. v. NLRC, 174 SCRA 191, 193 [1989].
33 Capitol Industrial Construction Groups v. NLRC, 221 SCRA 469, 473-474 [1993].
34 Tomas Lao Construction, et al. v. NLRC, et al., G.R. No. 116781, 5 September 1997, at 7.
35 According to private respondents (Annex 4 of Respondents Position Paper; OR, 28), Enero was part of Shooting
Unit II, which worked on the following films:
FILM
DATE
STARTED
DATE
COMPLETED
ASSOCIATE
PRODUCER
LOVE AT FIRST SIGHT
1/3/90
2/16/90
MARIVIC ONG
PAIKOT-IKOT
1/26/90

3/11/90
EDITH MANUEL
ROCKY & ROLLY
2/13/90
3/29/90
M. ONG
PAIKOT-IKOT (addl. 1/2)
3/12/90
4/3/90
E. MANUEL
557

VOL. 284, JANUARY 22, 1998


557
Maraguinot, Jr. vs. NLRC (Second Division)
petitioners tasks involved, among other chores, the loading, unloading and arranging of movie equipment in the
shooting
_______________

ROCKY & ROLLY (2nd contract)


4/6/90
5/20/90

M. ONG
NARDONG TOOTHPICK
4/4/90
5/18/90
JUN CHING
BAKIT KAY TAGAL NG SANDALI
6/26/90
8/9/90
E.MANUEL
BAKIT KAY TAGAL (2nd contract)
8/10/90
9/23/90
E.MANUEL
HINUKAY KO NA ANG LIBINGAN MO
9/6/90
10/20/90
JUN CHING
MAGING SINO KA MAN
10/25/90
12/8/90
SANDY STA. MARIA
M. SINO KA MAN (2nd contract)

12/9/90
1/22/91
SANDY S.
NOEL JUICO
1/29/91
3/14/91
JUN CHING
NOEL JUICO (2nd contract)
3/15/91
4/6/91
JUN CHING
ROBIN GOOD
5/7/91
6/20/91
M. ONG
UTOL KONG HOODLUM#1
6/23/91
8/6/91
JUN CHING
KAPUTOL NG ISANG AWIT
8/18/91
10/2/91

SANDY S.
DARNA
10/4/91
11/18/91
E. MANUEL
DARNA (addl. 1/2)
11/20/91
12/12/91
E. MANUEL
MAGNONG REHAS
12/13/91
1/27/92
BOBBY GRIMALT
M. REHAS (2nd contract)
1/28/92
3/12/92
B. GRIMALT
HIRAM NA MUKHA
3/15/92
4/29/92
M. ONG
HIRAM (2nd contract)

5/1/92
6/14/92
M. ONG
KAHIT AKOY BUSABOS
5/28/92
7/7/92
JERRY OHARA
SIGAW NG PUSO
7/1/92
8/4/92
M. ONG
SIGAW (addl. 1/2)
8/15/92
9/5/92
M. ONG
NGAYON AT KAILANMAN
9/6/92
10/20/92
SANDY STA. MARIA
While Maraguinot was a member of Shooting Unit III, which made the following movies (Annex 4-A of Respondents
Position Paper; OR, 29):
558

558
SUPREME COURT REPORTS ANNOTATED
Maraguinot, Jr. vs. NLRC (Second Division)
area as instructed by the cameramen, returning the equipment to the Viva Films warehouse, and assisting in the
fixing of the lighting system, it may not be gainsaid that these tasks were vital, necessary and indispensable to
the usual business or trade of the employer. As regards the underscored phrase, it has been held that this is
ascertained by
_______________

FILM
DATE STARTED
DATE COMPLETED
ASSOCIATE PRODUCER
GUMAPANG KA SA LUSAK
1/27/90
3/12/90
JUN CHING
PETRANG KABAYO
2/19/90
4/4/90
RUTH GRUTA
LUSAK (2nd contract)

3/14/90
4/27/90
JUN CHING
P. KABAYO (addl. 1/2 contract)
4/21/90
5/13/90
RUTH GRUTA
BADBOY
6/15/90
7/29/90
EDITH MANUEL
BADBOY (2nd contract)
7/30/90
8/21/90
E. MANUEL
ANAK NI BABY AMA
9/2/90
10/16/90
RUTH GRUTA
A.B. AMA (addl. 1/2)
10/17/90
11/8/90

RUTH GRUTA
A.B. AMA (addl. 2nd 1/2)
11/9/90
12/1/90
R. GRUTA
BOYONG MANALAC
11/30/90
1/14/91
MARIVIC ONG
HUMANAP KA NG PANGET
1/20/91
3/5/91
EDITH MANUEL
H. PANGET (2nd contract)
3/10/91
4/23/91
E. MANUEL
B. MANALAC (2nd contract)
5/22/91
7/5/91
M. ONG
ROBIN GOOD (2nd contract)

7/7/91
8/20/91
M. ONG
PITONG GAMOL
8/30/91
10/13/91
M. ONG
P. GAMOL (2nd contract)
10/14/91
11/27/91
M. ONG
GREASE GUN GANG
12/28/91
2/10/92
E. MANUEL
ALABANG GIRLS (1/2 contract)
3/4/92
3/26/92
M. ONG
BATANG RILES
3/9/92
3/30/92

BOBBY GRIMALT
UTOL KONG HOODLUM (part2)
3/22/92
5/6/92
B. GRIMALT
UTOL (addl. 1/2 ontract)
5/7/92
5/29/92
B. GRIMALT
MANDURUGAS (2nd contract)
5/25/92
7/8/92
JERRY OHARA
MAHIRAP MAGING POGI
7/2/92
8/15/92
M. ONG
559

VOL. 284, JANUARY 22, 1998


559
Maraguinot, Jr. vs. NLRC (Second Division)

considering the nature of the work performed and its relation to the scheme of the particular business or trade in its
entirety.36
A recent pronouncement of this Court anent project or work pool employees who had attained the status of regular
employees proves most instructive:
The denial by petitioners of the existence of a work pool in the company because their projects were not continuous
is amply belied by petitioners themselves who admit that: x x x
A work pool may exist although the workers in the pool do not receive salaries and are free to seek other
employment during temporary breaks in the business, provided that the worker shall be available when called to
report for a project. Although primarily applicable to regular seasonal workers, this set-up can likewise be applied to
project workers insofar as the effect of temporary cessation of work is concerned. This is beneficial to both the
employer and employee for it prevents the unjust situation of coddling labor at the expense of capital and at the
same time enables the workers to attain the status of regular employees. Clearly, the continuous rehiring of the
same set of employees within the framework of the Lao Group of Companies is strongly indicative that private
respondents were an integral part of a work pool from which petitioners drew its workers for its various projects.
In a final attempt to convince the Court that private respondents were indeed project employees, petitioners point
out that the workers were not regularly maintained in the payroll and were free to offer their services to other
companies when there were no ongoing projects. This argument however cannot defeat the workers status of
regularity. We apply by analogy the case of IndustrialCommercial-Agricultural Workers Organization v. CIR [16 SCRA
562, 567-68 (1966)] which deals with regular seasonal employees. There we held: x x x
Truly, the cessation of construction activities at the end of every project is a foreseeable suspension of work. Of
course, no compensation can be demanded from the employer because the stoppage of operations at the end of a
project and before the start of a new one is
__________________

36 De Leon v. NLRC, 176 SCRA 615, 621 [1989].


560

560
SUPREME COURT REPORTS ANNOTATED
Maraguinot, Jr. vs. NLRC (Second Division)
regular and expected by both parties to the labor relations. Similar to the case of regular seasonal employees, the
employment relation is not severed by merely being suspended. [citing Manila Hotel Co. v. CIR, 9 SCRA 186 (1963)]
The employees are, strictly speaking, not separated from services but merely on leave of absence without pay until
they are reemployed. Thus we cannot affirm the argument that non-payment of salary or non-inclusion in the payroll
and the opportunity to seek other employment denote project employment.37 (italics supplied)
While Lao admittedly involved the construction industry, to which Policy Instruction No. 20/Department Order No.
1938 regarding work pools specifically applies, there seems to be no impediment to applying the underlying
principles to industries other than the construction industry.39 Neither may it be argued that a substantial distinction
exists between the projects undertaken in the construction industry and the motion picture industry. On the
contrary, the raison d etre of both industries concern projects with a foreseeable suspension of work.
At this time, we wish to allay any fears that this decision unduly burdens an employer by imposing a duty to re-hire a
project employee even after completion of the project for which he was hired. The import of this decision is not to
impose a positive and sweeping obligation upon the employer to re-hire project employees. What this decision
merely accomplishes is a judicial recognition of the employment status of a project or work pool employee in
accordance with what is fait accompli, i.e., the continuous re-hiring by the employer of project or work pool
employees who perform tasks necessary or desirable to the employers usual business or trade. Let it
_________________

37 Tomas Lao, supra note 34, at 7-9.


38 The former was issued by then Secretary of Labor Blas F. Ople, while the latter, superseding the former, is dated
1 April 1993.
39 See for instance Chua v. Civil Service Commission, 206 SCRA 65, 76 [1992], where the Court was ready to
appreciate the badges of regular employment even against Government as an employer.
561

VOL. 284, JANUARY 22, 1998


561
Maraguinot, Jr. vs. NLRC (Second Division)
not be said that this decision coddles labor, for as Lao has ruled, project or work pool employees who have gained
the status of regular employees are subject to the no work-no pay principle, to repeat:
A work pool may exist although the workers in the pool do not receive salaries and are free to seek other
employment during temporary breaks in the business, provided that the worker shall be available when called to
report for a project. Although primarily applicable to regular seasonal workers, this set-up can likewise be applied to
project workers insofar as the effect of temporary cessation of work is concerned. This is beneficial to both the
employer and employee for it prevents the unjust situation of coddling labor at the expense of capital and at the
same time enables the workers to attain the status of regular employees.
The Courts ruling here is meant precisely to give life to the constitutional policy of strengthening the labor sector,40
but, we stress, not at the expense of management. Lest it be misunderstood, this ruling does not mean that simply
because an employee is a project or work pool employee even outside the construction industry, he is deemed, ipso
jure, a regular employee. All that we hold today is that once a project or work pool employee has been: (1)
continuously, as opposed to intermittently, re-hired by the same employer for the same tasks or nature of tasks; and
(2) these tasks are vital, necessary and indispensable to the usual business or trade of the employer, then the
employee must be deemed a regular employee, pursuant to Article 280 of the Labor Code and jurisprudence. To rule
otherwise would allow circumvention of labor laws in industries not falling within the ambit of Policy Instruction No.
20/Department Order No. 19, hence allowing the prevention of acquisition of tenurial security by project or work pool
employees who have already gained the status of regular employees by the employers conduct.
___________________

40 Section 3, Article XIII, 1987 Constitution.


562

562
SUPREME COURT REPORTS ANNOTATED
Maraguinot, Jr. vs. NLRC (Second Division)
In closing then, as petitioners had already gained the status of regular employees, their dismissal was unwarranted,
for the cause invoked by private respondents for petitioners dismissal, viz., completion of project, was not, as to
them, a valid cause for dismissal under Article 282 of the Labor Code. As such, petitioners are now entitled to back
wages and reinstatement, without loss of seniority rights and other benefits that may have accrued.41 Nevertheless,
following the principles of suspension of work and no pay between the end of one project and the start of a new
one, in computing petitioners back wages, the amounts corresponding to what could have been earned during the
periods from the date petitioners were dismissed until their reinstatement when petitioners respective Shooting
Units were not undertaking any movie projects, should be deducted.
Petitioners were dismissed on 20 July 1992, at a time when Republic Act No. 6715 was already in effect. Pursuant to
Section 34 thereof which amended Section 279 of the Labor Code of the Philippines and Bustamante v. NLRC,42
petitioners are entitled to receive full back wages from the date of their dismissal up to the time of their
reinstatement, without deducting whatever earnings derived elsewhere during the period of illegal dismissal,
subject, however, to the above observations.
WHEREFORE, the instant petition is GRANTED. The assailed decision of the National Labor Relations Commission in
NLRC NCR CA No. 006195-94 dated 10 February 1995, as well as its Resolution dated 6 April 1995, are hereby
ANNULLED and SET ASIDE for having been rendered with grave abuse of discretion, and the decision of the Labor
Arbiter in NLRC NCR Case No. 00-07-03994-92 is REINSTATED, subject, however, to the modification above
mentioned in the computation of back wages.
No pronouncement as to costs.
___________________

41 Section 3, Rule 1, Book VI, Omnibus Rules Implementing the Labor Code.
42 265 SCRA 61 [1996].
563

VOL. 284, JANUARY 22, 1998


563
People vs. Gil
SO ORDERED.
Bellosillo, Vitug and Kapunan, JJ., concur.
Petition granted; Assailed decision annulled.
Note.A labor-only contractor is considered merely an agent of the employer. (Philippine School of Business
Administration (PSBA) Manila vs. National Labor Relations Commission, 261 SCRA 189 [1996])
o0o

Copyright 2015 Central Book Supply, Inc. All rights reserved. [Maraguinot, Jr. vs. NLRC (Second Division), 284
SCRA 539(1998)]
VOL. 284, JANUARY 22, 1998
con665
Bautista vs. Inciong
No. L-52824. March 16, 1988.*
REYNALDO BAUTISTA, petitioner, vs. HON. AMADO C. INCIONG, in his capacity as Deputy Minister of
Labor and ASSOCIATED LABOR UNIONS (ALU), respondents.
Labor; Illegal dismissal; Labor union; A labor union can be considered an employer of persons who work for it.
There is nothing in the records which support the Deputy Minister's conclusion that the petitioner is not an employee
of respondent ALU. The mere fact that the respondent is a labor union does not mean that it cannot be considered
an employer of the persons who work for it. Much less should it be exempted from the very labor laws which it
espouses as a labor organization.

Same; Same; Same; Employer-employee relationship; Factors in ascertaining the existence of an employer-employee
relationship.In the case of Brotherhood Labor Unity Movement in the Philippines v. Zamora, (147 SCRA 49, 54), we
outlined the factors in ascertaining an employer-employee relationship: ln determining the existence of an
employer-employee relationship, the elements that are generally considered are the following: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to
control the employee with respect to the means and methods by which the work is to be accomplished. It is the socalled 'control test' that is the most important element (Investment Planning Corp. of the Phils. v. The Social Security
System, 21 SCRA 924; Mafinco Trading Corp. y. Ople, supra, and Rosario Brothers, Inc. v. Ople, 131 SCRA 72.)"
Same; Same; Same; Same; Petitioner as an employee of respondent labor union in case at bar, proven.In the case
at bar. the Regional Director correctly found that the petitioner was an employee of the respondent union as
reflected in the latter's individual payroll sheets and shown by the petitioner's membership with the Social Security
System (SSS) and the respondent union's share of remittances in the petitioner's favor. Even more significant, is the
respondent union's act of filing a clearance application with the MOL to terminate the petitioner's services. Bautista
was selected and hired by the Union. He was paid wages by the Union, ALU had the power to dismiss him as indeed
it dismissed him. And definitely, the Union tightly controlled
______________

* THlRD DIVISION.
666

666
SUPREME COURT REPORTS ANNOTATED
Bautista vs. Inciong
the work of Bautista as one of its organizers. There is absolutely no factual or legal basis for Deputy Minister
Inciong's decision.
Same; Same; Same; If employee's reinstatement is not feasible, the employee shall be paid, separation pay by the
employer; Case at bar.We are, thus, constrained to reverse the findings of the respondent Deputy Minister.

However, the records show that antipathy and antagonism between the petitioner and the respondent union militate
against the former's reinstatement. ALU would not want to have a union organizer whom it does not trust and who
could sabotage its efforts to unionize commercial and industrial establishments. Severance pay, therefore, is more
proper and in order.
PETITION to review the decision of the Deputy Minister of Labor.
The facts are stated in the opinion of the Court.
GUTIERREZ, JR., J.:

This is an illegal dismissal case. The respondent Deputy Minister dismissed the complaint of herein petitioner
principally on the ground that no employer-employee relationship existed between the petitioner and respondent
Associated Labor Unions (ALU).
The facts as found by the National Capital Region Director of the then Ministry of Labor (MOL) Region IV are as
follows:
"Complainant (petitioner) was employed by ALU as 'Organizer' in 1972 with a starting salary of P250.00 a month. As
such he paid his monthly SSS contributions, with the respondent as his employer. On March 15, 1979, He was left in
the office of ALU while his other coorganizers were in Cainta, Rizal attending a certification election at Chrysler
Philippines, as he was not the organizer assigned in said company. On March 16, 1979, he went on sick leave for ten
(10) days. His SSS sickness benefit application form signed by ALU's physician was given to ALU for submission to
the SSS. On March 16, 1979, complainant reported back for work upon expiration of his leave but was informed by
ALU's Area Vice-President for Luzon of his termination effective March 15, 1979. Hence, this complaint filed on March
28, 1979. On April 18, 1979, however, ALU filed a clearance application to terminate complainant's services effective
March 16, 1979 on the ground of abandonment of work," (p. 48, Rollo)
667

VOL. 158, MARCH 16, 1988


667
Bautista vs. Inciong

Based on these findings, the Director ruled in favor of the petitioner and ordered the respondent Union to reinstate
the petitioner to his former position with full backwages and to pay him emergency allowance, 13th month pay and
to refund his Mutual Aid Fund Deposit in the amount of P370.00
Respondent ALU appealed to the Ministry of Labor. On October 23, 1979. the respondent Deputy Minister set aside
the order of the Director and dismissed the petitioner's complaint for lack of merit. In his order, the Deputy Minister
found that the petitioner was merely accomodated by the respondent union after he was dismissed by his former
employer sometime in 1972 and that his membership coverage with the SSS which shows that respondent ALU is
the one paying the employer's share in the premiums is not conclusive proof that respondent is the petitioner's
employer because such payments were performed by the respondent as a favor for all those who were performing
full time union activities with it to entitle them to SSS benefits. The Deputy Minister further ruled that the nonexistence of an employer-employee relationship between the parties is bolstered by the fact that respondent ALU is
not an entity for profit but a duly registered labor union whose sole purpose is the representation of its bona fide
organization units where it is certified as such.
In this petition, the petitioner contends that the respondent Deputy Minister committed grave abuse of discretion in
holding that there was no employer-employee relationship between him and the respondent union so much so that
he is not entitled to the benefits that he is praying for.
We agree with the petitioner.
There is nothing in the records which support the Deputy Minister's conclusion that the petitioner is not an employee
of respondent ALU. The mere fact that the respondent is a labor union does not mean that it cannot be considered
an employer of the persons who work for it. Much less should it be exempted from the very labor laws which it
espouses as a labor organization. In the case of Brotherhood Labor Unity Movement in the Philippines v. Zamora,
(147 SCRA 49, 54), we outlined the factors in ascertaining an employer-employee relationship:
668

668
SUPREME COURT REPORTS ANNOTATED
Bautista vs. Inciong

In determining the existence of an employer-employee relationship, the elements that are generally considered are
the following: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employer's power to control the employee with respect to the means and methods by which
the work is to be accomplished. It is the so-called 'control test' that is the most important element (Investment
Planning Corp. of the Phils. v. The Social Security System, 21 SCRA 924; Mafinco Trading Corp. v. Ople, supra, and
Rosario Brothers, Inc. v. Ople, 131 SCRA 72)."
In the case at bar, the Regional Director correctly found that the petitioner was an employee of the respondent
union as reflected in the latter's individual payroll sheets and shown by the petitioner's membership with the Social
Security System (SSS) and the respondent union's share of remittances in the petitioner's favor. Even more
significant, is the respondent union's act of filing a clearance application with the MOL to terminate the petitioner's
services. Bautista was selected and hired by the Union. He was paid wages by the Union. ALU had the power to
dismiss him as indeed it dismissed him. And definitely, the Union tightly controlled the work of Bautista as one of its
organizers. There is absolutely no factual or legal basis for Deputy Minister Inciong's decision.
We are, thus, constrained to reverse the findings of the respondent Deputy Minister. However, the records show that
antipathy and antagonism between the petitioner and the respondent union militate against the former's
reinstatement. ALU would not want to have a union organizer whom it does not trust and who could sabotage its
efforts to unionize commercial and industrial establishments. Severance pay, therefore, is more proper and in order.
As we have ruled in the case of Asiaworld Publishing House, Inc. v. Hon. Blas Ople, et al., (G.R. No. 56398, July 23,
1987) quoting the case of Balaquezon EWTU v. Zamora, (97 SCRA 5, 8):
It should be underscored that the backwages are being awarded on the basis of equity or in the nature of severance
pay. This means that a monetary award is to be paid to the striking employees as an alternative to reinstatement
which can no longer be effected in view of the long passage of time or because of the realities of the situation.
(Italics supplied)
669

VOL. 158, MARCH 16, 1988


669
Alano vs. Employees' Compensation Commission

WHEREFORE, the petition is hereby GRANTED and the decision of the respondent Deputy Minister is ANNULLED and
SET ASIDE. The Order of Regional Director Francisco L. Estrella is REINSTATED and ordered executed but instead of
returning the petitioner to his former position, the private respondent is ordered to pay him an amount equal to his
backwages for only three years and the separation pay to which he may be entitled as of the end of the three year
period under the applicable law or collective bargaining agreement,
SO ORDERED.
Fernan (Chairman), Feliciano, Bidin and Corts, JJ., concur.
Petition granted. Decision annulled and set aside.
Note.In determining the existence of employee-employer relationship, the following elements are generally
considered. namely: (1) The selection and engagement of the employee; (2) The payment of wages; (3) The power
of dismissal; and (4) The power to control the employee's conductalthough the latter is the most important
element. (Shipside, Incorporated vs. National Labor Relations Commission, 118 SCRA 99.)
o0o

Copyright 2015 Central Book Supply, Inc. All rights reserved. [Bautista vs. Inciong, 158 SCRA 665(1988)]
364
SUPREME COURT REPORTS ANNOTATED
Orlando Farms Growers Association vs. NLRC
G.R. No. 129076. November 25, 1998.*
ORLANDO FARMS GROWERS ASSOCIATION/GLICERIO AOVER, petitioner, vs. THE HONORABLE NATIONAL LABOR
RELATIONS COMMISSION (FIFTH DIVISION), ANTONIO PAQUIT, ESTHER BONGGOT, FRANCISCO BAUG, LEOCADIO
ORDONO, REBECCA MOREN, MARCELINA HONTIVEROS, MARTIN ORDONO, TITO ORDONO, FE ORDONO, ERNIE
COLON, EUSTIQUIO GELDO, DANNY SAM, JOEL PIAMONTE, FEDERICO PASTOLERO, VIRGINIA BUSANO, EDILMIRO
ALDION, EUGENIO BETICAN, JR. and BERNARDO OPERIO, respondents.
Labor Law; Certiorari; The authority of the Supreme Court to review the findings of the National Labor Relations
Commission is limited to allegations of lack of jurisdiction or grave abuse of discre-tion.The arguments adduced

before us do not warrant the nullification of the findings made by the Labor Arbiter and the NLRC as the
determination of the existence of an employer-employee relationship between the party-litigants, being a question
of fact, is amply supported by substantial evidence, as can be gathered from a perfunctory reading, not only of the
pleadings submitted, but from the assailed decision, as well. Thus, the authority of this Court to review the findings
of the NLRC is limited to allegations of lack of jurisdiction or grave abuse of discretion.
Same; Employer-Employee Relationship; An unregistered association may be an employer independent of the
respective members it representsthe law does not require an employer to be registered
_________________

* THIRD DIVISION.
365

VOL. 299, NOVEMBER 25, 1998


365
Orlando Farms Growers Association vs. NLRC
before he may come within the purview of the Labor Code.The contention that petitioner, being an unregistered
association and having been formed solely to serve as an effective medium for dealing collectively with Stanfilco,
does not exist in law and, therefore, cannot be considered an employer, is misleading. This assertion can easily be
dismissed by reference to Article 212(e) of the Labor Code, as amended, which defines an employer as any person
acting in the interest of an employer, directly or indirectly. Following a careful scrutiny of the said provision, the
Court concludes that the law does not require an employer to be registered before he may come within the purview
of the Labor Code, consistent with the established rule in statutory construction that when the law does not
distinguish, we should not distinguish. To do otherwise would bring about a situation whereby employees are denied,
not only redress of their grievances, but, more importantly, the protection and benefits accorded to them by law if
their employer happens to be an unregistered association.
Same; Same; Considerations in the Determination of the Existence of an Employer-Employee Relationship.To
reiterate, as held in the case of Filipinas Broadcasting Network, Inc. v. NLRC, the following are generally considered

in the determination of the existence of an employer-employee relationship: (1) the manner of selection and
engagement; (2) the payment of wages; (3) the presence or absence of the power of dismissal; and (4) the presence
or absence of the power of control; of these four, the last one being the most important.
Same; Same; Evidence; Factual findings of the National Labor Relations Commission, particularly when they coincide
with those of the Labor Arbiter, are accorded respect, even finality, and will not be disturbed for as long as such
findings are supported by substantial evidence.In spite of the overwhelming evidence sufficient to justify a
conclusion that respondents were indeed employees of petitioner, the latter, nevertheless, maintain the
preposterous claim that the ID card, circulars and memoranda were issued merely to facilitate the efficient use of
common resources, as well as to promote uniform rules in the work establishment. On this score, we defer to the
observations made by the NLRC when it ruled that, while the original purpose of the formation of the association was
merely to provide the landowners a unified voice in dealing with Stanfilco, petitioner however exceeded its avowed
intentions when its subsequent actions
366

366
SUPREME COURT REPORTS ANNOTATED
Orlando Farms Growers Association vs. NLRC
reenforced only too clearly its admitted role of employer. As reiterated all too often, factual findings of the NLRC,
particularly when they coincide with those of the Labor Arbiter, are accorded respect, even finality, and will not be
disturbed for as long as such findings are supported by substantial evidence.
Same; Same; Illegal Dismissals; There are two (2) facets of valid termination of employment: (a) the legality of the
act of dismissal, i.e., the dismissal must be under any of the just causes provided under Article 282 of the Labor
Code; and (b) the legality of the manner of dismissal, otherwise known as the two-notice rule.It is settled that in
termination disputes, the employer bears the burden of proving that the dismissal is for just cause, failing which it
would mean that the dismissal is not justified and the employer is entitled to reinstatement. The dismissal of
employees must be made within the parameters of the law and pursuant to the basic tenets of equity, justice and
fair play. In Brahm Industries, Inc. v. NLRC, the Court explained that there are two (2) facets of valid termination of
employment: (a) the legality of the act of dismissal, i.e., the dismissal must be under any of the just causes provided
under Art. 282 of the Labor Code; and (b) the legality of the manner of dismissal, which means that there must be

observance of the requirements of due process, otherwise known as the two-notice rule. Thus, the employer is
required to furnish the employee with a written notice containing a statement of the cause for termination and to
afford said employee ample opportunity to be heard and to defend himself with the assistance of his representative,
if he so desires. The employer is also required to notify the worker in writing of the decision to dismiss him, stating
clearly the reasons therefore.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

The facts are stated in the opinion of the Court.


Platon, Martinez, Flores, San Pedro & Leao for petitioners.
Koronado B. Apuzen for private respondents.
ROMERO, J.:

It is a settled doctrine that an employer-employee relationship can be deduced from the existence of the following
ele367

VOL. 299, NOVEMBER 25, 1998


367
Orlando Farms Growers Association vs. NLRC
ments: (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.
The principal issue to be resolved in the instant petition is whether or not an unregistered association may be an
employer independent of the respective members it represents.
The evidence reveals the ensuing facts:

Petitioner Orlando Farms Growers Association, with copetitioner Glicerio Aover as its President, is an association of
landowners engaged in the production of export quality bananas located in Kinamayan, Sto. Tomas, Davao del Norte,
established for the sole purpose of dealing collectively with Stanfilco on matters concerning technical services, canal
maintenance, irrigation and pest control, among others. Respondents, on the other hand, were hired as farm workers
by several member-landowners but, nonetheless, were made to perform functions as packers and harvesters in the
plantation of petitioner association.
After respondents were dismissed on various dates from January 8, 1993 to July 30, 1994, several complaints were
filed against petitioner for illegal dismissal and monetary benefits. Based on similar grounds, the same were
consolidated in the office of Labor Arbiter Newton R. Sancho who, in a decision dated September 6, 1995, ordered
their reinstatement, viz.:
WHEREFORE, judgment is hereby rendered declaring the dismissal of the 20 above-named complainants ILLEGAL,
and ordering respondents Orlando Farms Growers Association/Glicerio Aover to REINSTATE them immediately to
their former or equivalent positions, and to PAY individual complainants their respective backwages and other
benefits (wage differentials, 13th month pay and holiday pay) appearing opposite their names above set forth,
including moral damages and attorneys fees, in the total amount of P1,047,720.92 only.
All other claims are dismissed for lack of merit.
As becoming a collective association, respondents liabilities to complainants are joint and solidary, with its
responsible officers.
368

368
SUPREME COURT REPORTS ANNOTATED
Orlando Farms Growers Association vs. NLRC
The case of Loran Paquit and Lovilla Dorlones1 is dropped for having been amicably settled.
In case of appeal, backwages and other benefits shall accrue but in no case exceeding 3 years, without any
qualification or deduction.
SO ORDERED.2

On appeal, the National Labor Relations Commission (NLRC) affirmed the same in toto in a decision dated December
26, 1996. Its motion for reconsideration having been denied on February 25, 1997, petitioner filed the instant
petition for certiorari.
Petitioner alleged that the NLRC erred in finding that respondents were its employees and not of the individual
landowners which fact can easily be deduced from the payments made by the latter of respondents Social Security
System (SSS) contributions. Moreover, it could have never exercised the power of control over them with regard to
the manner and method by which the work was to be accomplished, which authority remain vested with the
landowners despite becoming members thereof.
The arguments adduced before us do not warrant the nullification of the findings made by the Labor Arbiter and the
NLRC as the determination of the existence of an employer-employee relationship between the party-litigants, being
a question of fact, is amply supported by substantial evidence, as can be gathered from a perfunctory reading, not
only of the pleadings submitted, but from the assailed decision, as well. Thus, the authority of this Court to review
the findings of the NLRC is limited to allegations of lack of jurisdiction or grave abuse of discretion.
The contention that petitioner, being an unregistered association and having been formed solely to serve as an
affective medium for dealing collectively with Stanfilco, does not exist
__________________

1 Should read as Lorna Paquit and Lovella Dorlones.


2 Rollo, p. 17.
369

VOL. 299, NOVEMBER 25, 1998


369
Orlando Farms Growers Association vs. NLRC
in law and, therefore, cannot be considered an employer, is misleading. This assertion can easily be dismissed by
reference to Article 212(e) of the Labor Code, as amended, which defines an employer as any person acting in the

interest of an employer, directly or indirectly. Following a careful scrutiny of the said provision, the Court concludes
that the law does not require an employer to be registered before he may come within the purview of the Labor
Code, consistent with the established rule in statutory construction that when the law does not distinguish, we
should not distinguish. To do otherwise would bring about a situation whereby employees are denied, not only
redress of their grievances, but, more importantly, the protection and benefits accorded to them by law if their
employer happens to be an unregistered association.
To reiterate, as held in the case of Filipinas Broadcasting Network, Inc. v. NLRC,3 the following are generally
considered in the determination of the existence of an employer-employee relationship: (1) the manner of selection
and engagement; (2) the payment of wages; (3) the presence or absence of the power of dismissal; and (4) the
presence or absence of the power of control; of these four, the last one being the most important.
In the instant case, the following circumstances which support the existence of employer-employee relations cannot
be denied. During the subsistence of the association, several circulars and memoranda were issued concerning,
among other things, absences without formal request, loitering in the work area and disciplinary measures with
which every worker is enjoined to comply. Furthermore, the employees were issued identification cards which the
Court, in the case of Domasig v. NLRC,4 construed, not only as a security measure but mainly to identify the holder
as a bonafide employee of the firm. However, what makes the relationship explicit is the power of the petitioner to
enter into compromise agreements involving money claims filed by three of its employees,
___________________

3 G.R. No. 118892, March 11, 1998.


4 261 SCRA 779 (1996).
370

370
SUPREME COURT REPORTS ANNOTATED
Orlando Farms Growers Association vs. NLRC

namely: Lorna Paquit, Lovella Dorlones and Jasmine Espanola. If petitioners disclaimer were to be believed, what
benefit would accrue to it in settling an employer-employee dispute to which it allegedly lay no claim?
In spite of the overwhelming evidence sufficient to justify a conclusion that respondents were indeed employees of
petitioner, the latter, nevertheless, maintain the preposterous claim that the ID card, circulars and memoranda were
issued merely to facilitate the efficient use of common resources, as well as to promote uniform rules in the work
establishment. On this score, we defer to the observations made by the NLRC when it ruled that, while the original
purpose of the formation of the association was merely to provide the landowners a unified voice in dealing with
Stanfilco, petitioner however exceeded its avowed intentions when its subsequent actions reenforced only too
clearly its admitted role of employer. As reiterated all too often, factual findings of the NLRC, particularly when they
coincide with those of the Labor Arbiter, are accorded respect, even finality, and will not be disturbed for as long as
such findings are supported by substantial evidence.5
Prescinding from the foregoing, we now address the issue of whether or not petitioner had a valid ground to dismiss
respondents from their respective employment.
It is settled that in termination disputes, the employer bears the burden of proving that the dismissal is for just
cause, failing which it would mean that the dismissal is not justified and the employer is entitled to reinstatement.6
The dismissal of employees must be made within the parameters of the law and pursuant to the basic tenets of
equity, justice and fair play.7 In Brahm Industries, Inc. v. NLRC,8 the Court explained that there are two (2) facets of
valid termination of
____________________

5 Belaunzaran v. NLRC, 265 SCRA 800 (1996).


6 PLDT v. NLRC, 276 SCRA 462 (1997).
7 Philippine-Singapore Transport Services, Inc. v. NLRC, 277 SCRA 506 (1997).
8 280 SCRA 828 (1997).
371

VOL. 299, NOVEMBER 25, 1998

371
Orlando Farms Growers Association vs. NLRC
employment: (a) the legality of the act of dismissal, i.e., the dismissal must be under any of the just causes provided
under Art. 2829 of the Labor Code; and (b) the legality of the manner of dismissal, which means that there must be
observance of the requirements of due process, otherwise known as the two-notice rule. Thus, the employer is
required to furnish the employee with a written notice containing a statement of the cause for termination and to
afford said employee ample opportunity to be heard and to defend himself with the assistance of his representative,
if he so desires. The employer is also required to notify the worker in writing of the decision to dismiss him, stating
clearly the reasons therefore.10
In the instant case, petitioner severed employment relations when it whimsically dismissed the respondents in utter
disregard of the safeguards underscored in the Constitution, as well as in the Labor Code. Petitioner failed to
controvert the allegation that it was responsible for the dismissal of the employees. Instead of denying the same or
otherwise imputing liability on its member-landowner by naming the employees allegedly in his employ, petitioner
was silent on the issue and harped on the non-existence of employer-employee relationship between the parties,
which contention we find to be tangential. However related the issue might seem, it would
_________________

9 ART. 282. Termination by employer.An employer may terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative
in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any immediate member
of his family or his duty authorized representative; and
(e) Other causes analogous to the foregoing.
10 Padilla v. NLRC, 273 SCRA 457 (1997).

372

372
SUPREME COURT REPORTS ANNOTATED
Orlando Farms Growers Association vs. NLRC
have been more relevant for the petitioner to have presented ample evidence before the NLRC and this Court to
justify its exoneration from liability. Having failed in this respect, we deem it fatal to its defense.
For having been dismissed without a valid cause and for non-observance of the due process requirement,
respondents, consistent with recent jurisprudence laid down in the case of Bustamante v. NLRC,11 are entitled to
receive full backwages from the date of their dismissal up to the time of their reinstatement. The order, therefore, of
the labor arbiter limiting backwages to a period of three (3) years in the event of an appeal, is erroneous.
WHEREFORE, in view of the foregoing, the petition is hereby DISMISSED and the decision of the National Labor
Relations Commission dated September 6, 1995 is AFFIRMED subject to the deletion of the award of moral damages
and attorneys fees. The Court, however, is remanding this case to Labor Arbiter Newton R. Sancho to specify in the
dispositive portion of his decision the names of the respondents and the amount that each is entitled to.
SO ORDERED.
Narvasa (C.J., Chairman), Kapunan, Purisima and Pardo, JJ., concur.
Petition dismissed, judgment affirmed with modification.
Notes.The question whether an employer-employee relationship exists is a question of fact, and as long as the
findings of the labor agencies on this question are supported by evidence, the findings will not be disturbed on
review in the Supreme Court. (Algon Engineering Construction Corporation vs. National Labor Relations Commission,
280 SCRA 188 [1997])
__________________

11 265 SCRA 61 (1996).

373

VOL. 299, NOVEMBER 25, 1998


373
Economic Intelligence and Investigation Bureau vs., Court of Appeals
The scheme of an employer in hiring workers on a uniformly fixed contract basis and replacing them upon the
expiration of their contracts with other workers on the same employment status was apparently designed to prevent
the casual employees from attaining the status of a regular employee. (Pure Foods Corporation vs. National Labor
Relations Commission, 283 SCRA 133 [1997])
o0o
Copyright 2015 Central Book Supply, Inc. All rights reserved. [Orlando Farms Growers Association vs. NLRC, 299
SCRA 364(1998)]
VOL. 170, FEBRUARY 8, 1989
25
San Miguel Brewery Sales Force Union (PTGWO) vs. Ople
G.R. No. 53515. February 8, 1989.*
SAN MIGUEL BREWERY SALES FORCE UNION (PTGWO), petitioner, vs. HON. BLAS F. OPLE, as Minister of
Labor and SAN MIGUEL CORPORATION, respondents.
Labor Law; Labor Relations; Unfair Labor Practice; The free will of management to conduct its own business affairs to
achieve its purpose cannot be denied.Public respondent was correct in holding that the CDS is a valid exercise of
management prerogatives: Except as limited by special laws, an employer is free to regulate, according to his own
discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, 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 work. x x x (NLU
vs. Insular La Yebana Co., 2 SCRA 924; Republic Savings Bank vs. CIR, 21 SCRA 226, 235.) (Perfecto V. Hernandez,
Labor Relations Law, 1985 Ed., p. 44.) Every business enterprise endeavors to increase its profits. In the process, it

may adopt or devise means designed towards that goal. In Abott Laboratories vs. NLRC, 154 SCRA 713, We ruled: x x
x Even as the law is solicitous of the welfare of the employees, it must also protect the right of an employer to
exercise what are clearly management prerogatives. The free will of management to conduct its own business affairs
to achieve its purpose cannot be denied. So long as a companys management prerogatives are exercised in good
faith for the advancement of the employers interest and not for the purpose of defeating or circumventing the
rights of the employees under special laws or under valid agreements, this Court will uphold them (LVN Pictures
Workers vs. LVN, 35 SCRA 147; Phil. American Embroideries vs. Embroidery and Garment Workers, 26 SCRA 634; Phil.
Refining Co. vs. Garcia, 18 SCRA 110).
PETITION for certiorari to review the order of the Minister of Labor.

The facts are stated in the opinion of the Court.


Lorenzo F. Miravite for petitioner.
Isidro D. Amoroso for New San Miguel Corp. Sales Force Union.
_______________

* FIRST DIVISION.
26

26
SUPREME COURT REPORTS ANNOTATED
San Miguel Brewery Sales Force Union (PTGWO) vs. Ople
Siguion Reyna, Montecillo & Ongsiako for private respondent.
GRIO-AQUINO, J.:

This is a petition for review of the Order dated February 28, 1980 of the Minister of Labor in Labor Case No. AJML069-79, approving the private respondents marketing scheme, known as the Complementary Distribution System
(CDS), and dismissing the petitioner labor unions complaint for unfair labor practice.
On April 17, 1978, a collective bargaining agreement (effective on May 1, 1978 until January 31, 1981) was entered
into by petitioner San Miguel Corporation Sales Force Union (PTGWO), and the private respondent, San Miguel
Corporation, Section 1, of Article IV of which provided as follows:
Art. IV, Section 1. Employees within the appropriate bargaining unit shall be entitled to a basic monthly
compensation plus commission based on their respective sales. (p. 6, Annex A; p. 113, Rollo.)
In September 1979, the company introduced a marketing scheme known as the Complementary Distribution
System (CDS) whereby its beer products were offered for sale directly to wholesalers through San Miguels sales
offices.
The labor union (herein petitioner) filed a complaint for unfair labor practice in the Ministry of Labor, with a notice of
strike on the ground that the CDS was contrary to the existing marketing scheme whereby the Route Salesmen were
assigned specific territories within which to sell their stocks of beer, and wholesalers had to buy beer products from
them, not from the company. It was alleged that the new marketing scheme violates Section 1, Article IV of the
collective bargaining agreement because the introduction of the CDS would reduce the take-home pay of the
salesmen and their truck helpers for the company would be unfairly competing with them.
The complaint filed by the petitioner against the respondent company raised two issues: (1) whether the CDS
violates the collective bargaining agreement, and (2) whether it is an indirect way of busting the union.
27

VOL. 170, FEBRUARY 8, 1989


27
San Miguel Brewery Sales Force Union (PTGWO) vs. Ople
In its order of February 28, 1980, the Minister of Labor found:
x x x We see nothing in the record as to suggest that the unilateral action of the employer in inaugurating the new
sales scheme was designed to discourage union organization or diminish its influence, but rather it is undisputable

that the establishment of such scheme was part of its overall plan to improve efficiency and economy and at the
same time gain profit to the highest. While it may be admitted that the introduction of new sales plan somewhat
disturbed the present set-up, the change however was too insignificant as to convince this Office to interpret that
the innovation interferred with the workers right to self-organization.
Petitioners conjecture that the new plan will sow dissatisfaction from its ranks is already a prejudgment of the
plans viability and effectiveness. It is like saying that the plan will not work out to the workers [benefit] and
therefore management must adopt a new system of marketing. But what the petitioner failed to consider is the fact
that corollary to the adoption of the assailed marketing technique is the effort of the company to compensate
whatever loss the workers may suffer because of the new plan over and above than what has been provided in the
collective bargaining agreement. To us, this is one indication that the action of the management is devoid of any
anti-union hues. (pp. 24-25, Rollo.)
The dispositive part of the Ministers Order reads:
WHEREFORE, premises considered, the notice of strike filed by the petitioner, San Miguel Brewery Sales Force
Union-PTGWO is hereby dismissed. Management however is hereby ordered to pay an additional three (3) months
back adjustment commissions over and above the adjusted commission under the complementary distribution
system. (p. 26, Rollo.)
The petition has no merit.
Public respondent was correct in holding that the CDS is a valid exercise of management prerogatives:
Except as limited by special laws, an employer is free to regulate, according to his own discretion and judgment, all
aspects of employment, including hiring, work assignments, working methods, 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 work. x x x (NLU vs. Insular La Yebana Co., 2
SCRA 924;
28

28
SUPREME COURT REPORTS ANNOTATED

San Miguel Brewery Sales Force Union (PTGWO) vs. Ople


Republic Savings Bank vs. CIR, 21 SCRA 226, 235.) (Perfecto V. Hernandez, Labor Relations Law, 1985 Ed., p. 44.)
(Italics ours.)
Every business enterprise endeavors to increase its profits. In the process, it may adopt or devise means designed
towards that goal. In Abott Laboratories vs. NLRC, 154 SCRA 713, We ruled:
x x x Even as the law is solicitous of the welfare of the employees, it must also protect the right of an employer to
exercise what are clearly management prerogatives. The free will of management to conduct its own business affairs
to achieve its purpose cannot be denied.
So long as a companys management prerogatives are exercised in good faith for the advancement of the
employers interest and not for the purpose of defeating or circumventing the rights of the employees under special
laws or under valid agreements, this Court will uphold them (LVN Pictures Workers vs. LVN, 35 SCRA 147; Phil.
American Embroideries vs. Embroidery and Garment Workers, 26 SCRA 634; Phil. Refining Co. vs. Garcia, 18 SCRA
110). San Miguel Corporations offer to compensate the members of its sales force who will be adversely affected by
the implementation of the CDS, by paying them a so-called back adjustment commission to make up for the
commissions they might lose as a result of the CDS, proves the companys good faith and lack of intention to bust
their union.
WHEREFORE, the petition for certiorari is dismissed for lack of merit.
SO ORDERED.
Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.
Petition dismissed.
Note.In labor cases the procedural principles discussed by Justice Barredo in his dissenting opinion must yield to
the social justice and protection to labor provisions of the Constitution. (Air Manila, Inc. vs. Court of Industrial
Relations, 101 SCRA 472.)
o0o

29

Copyright 2015 Central Book Supply, Inc. All rights reserved. [San Miguel Brewery Sales Force Union (PTGWO) vs.
Ople, 170 SCRA 25(1989)]

452
SUPREME COURT REPORTS ANNOTATED
National Sugar Refineries Corporation vs. NLRC
G.R. No. 101761. March 24, 1993.*
NATIONAL SUGAR REFINERIES CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION
and NBSR SUPERVISORY UNION, (PACIWU) TUCP, respondents.
Labor Law; Constitutional Law; While social justice has an inclination to give favor and protection to the working
class, the cause of the labor sector is not upheld at all times as the management has also a right entitled to respect
and enforcement in the interest of simple fair play.While the Constitution is committed to the policy of social
justice and the protection of the working class, it should not be supposed that every labor dispute will be
automatically decided in favor of labor. Management also has its own rights which, as such, are entitled to respect
and enforcement in the interest of simple fair play. Out of its concern for those with less privileges in life, this Court
has inclined more often than not toward the worker and upheld his cause in his conflicts with the employer. Such
favoritism, however, has not blinded us to the rule that justice is in every case for the deserving, to be dispensed in
the light of the established facts and the applicable law and doctrine.

Same; Classification of Employment; Criterion which determines whether a particular employee is within the
definition of a statute is the character of work performed rather than title or nomenclature of position held.The
question whether a given employee is exempt from the benefits of the law is a factual one dependent on the
circumstances of the particular case. In determining whether an employee is within the terms of the statutes, the
criterion is the character of the work performed, rather than the title of the employee's position. Consequently, while
generally this Court is not supposed to review the factual findings of respondent commission, substantial justice and
the peculiar circumstances obtaining herein mandate a deviation from the rule.
Same; Same; Same; Overtime pay, etc.; Supervisory employees discharging functions that qualify them as officers
or members of the managerial staff considered exempt from the coverage of Article 82 of the Labor Code and
therefore, not entitled to overtime, rest day and holiday payThe members of respondent union discharge duties
and responsibilities which ineluctably qualify them as officers or members of the
______________

* SECOND DIVISION.
453

VOL. 220, MARCH 24, 1993


453
National Sugar Refineries Corporation vs. NLRC
managerial staff, as defined in Section 2, Rule I, Book III of the aforestated Rules to Implement the Labor Code, viz.:
x x x Under the facts obtaining in this case, we are constrained to agree with petitioner that the union members
should be considered as officers or members of the managerial staff and are, therefore, exempt from the coverage
of Article 82. Perforce, they are not entitled to overtime, rest day and holiday pay.
Same; Same; Same; Same; Payment of the questioned benefits has not ripened into a contractual obligation as
payment thereof was made at a time when they were rightfully entitled thereto.We likewise do not subscribe to
the finding of the labor arbiter that the payment of the questioned benefits to the union members has ripened into a
contractual obligation. x x x The members of respondent union were paid the questioned benefits for the reason

that, at that time, they were rightfully entitled thereto. Prior to the JE Program, they could not be categorically
classified as members or officers of the managerial staff considering that they were then treated merely on the
same level as rank-and-file. Consequently, the payment thereof could not be construed as constitutive of voluntary
employer practice, which cannot now be unilaterally withdrawn by petitioner.
Same; Same; Same; Same; Same; Entitlement to benefits provided for by law requires prior compliance with
conditions set forth therein.Quintessentially, with the promotion of the union members, they are no longer entitled
to the benefits which attach and pertain exclusively to their former positions. Entitlement to the benefits provided
for by law requires prior compliance with the conditions set forth therein. With the promotion of the members of
respondent union, they occupied positions which no longer meet the requirements imposed by law. Their assumption
of these positions removed them from the coverage of the law, ergo, their exemption therefrom.
Same; Management Prerogatives; Promotion of employees is a recognized management prerogative to be exercised
in good faith; Case at bar.Promotion of its employees is one of the jurisprudentiallyrecognized exclusive
prerogatives of management, provided it is done in good faith. In the case at bar, private respondent union has
miserably failed to convince this Court that the petitioner acted in bad faith in implementing the JE Program. There is
no showing that the JE Program was intended to circumvent the law and deprive the members of respondent union
of the benefits they used to receive.
PETITION for certiorari of the decision of the National Labor
454

454
SUPREME COURT REPORTS ANNOTATED
National Sugar Refineries Corporation vs. NLRC
Relations Commission.
The facts are stated in the opinion of the Court.
Jose Mario C. Bunag for petitioner.
The Solicitor General and the Chief Legal Officer, NLRC, for public respondent.

Zoilo V. de la Cruz for private respondent.


REGALADO, J.:

The main issue presented for resolution in this original petition for certiorari is whether supervisory employees, as
defined in Article 212(m), Book V of the Labor Code, should be considered as officers or members of the managerial
staff under Article 82, Book III of the same Code, and hence are not entitled to overtime, rest day and holiday pay.
Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which is fully owned and controlled by
the Government, operates three (3) sugar refineries located at Bukidnon, Iloilo and Batangas. The Batangas refinery
was privatized on April 11, 1992 pursuant to Proclamation No. 50.1 Private respondent union represents the former
supervisors of the NASUREFCO Batangas Sugar Refinery, namely, the Technical Assistant to the Refinery Operations
Manager, Shift Sugar Warehouse Supervisor, Senior Financial/Budget Analyst, General Accountant, Cost Accountant,
Sugar Accountant, Junior Financial/Budget Analyst, Shift Boiler Supervisor, Shift Operations Chemist, Shift Electrical
Supervisor, General Services Supervisor, Instrumentation Supervisor, Community Development Officer, Employment
and Training Supervisor, Assistant Safety and Security Officer, Head of Personnel Services, Head Nurse, Property
Warehouse Supervisor, Head of Inventory Control Section, Shift Process Supervisor, Assistant Shift Process
Supervisor, Shift R/M Supervisor, Day Maintenance Supervisor and Motorpool Supervisor.
On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program affecting all employees, from rank-and-file to
deRollo, 209.
455

VOL. 220, MARCH 24, 1993


455
National Sugar Refineries Corporation vs. NLRC
partment heads. The JE Program was designed to rationalize the duties and functions of all positions, reestablish
levels of responsibility, and reorganize both wage and operational structures. Jobs were ranked according to effort,
responsibility, training and working conditions and relative worth of the job. As a result, all positions were re-

evaluated, and all employees including the members of respondent union were granted salary adjustments and
increases in benefits commensurate to their actual duties and functions.
We glean from the records that for about ten years prior to the JE Program, the members of respondent union were
treated in the same manner as rank-and-file employees. As such, they used to be paid overtime, rest day and
holiday pay pursuant to the provisions of Articles 87, 93 and 94 of the Labor Code, as amended. With the
implementation of the JE Program, the following adjustments were made: (1) the members of respondent union were
re-classified under levels S-5 to S-8 which are considered managerial staff for purposes of compensation and
benefits; (2) there was an increase in basic pay on the average of 50% of their basic pay prior to the JE Program,
with the union members now enjoying a wide gap (P1,269.00 per month) in basic pay compared to the highest paid
rank-and-file employee; (3) longevity pay was increased on top of alignment adjustments; (4) they were entitled to
increased company COLA of P225.00 per month; and (5) there was a grant of P100.00 allowance for rest day/holiday
work.
On May 11, 1990, petitioner NASUREFCO recognized herein respondent union, which was organized pursuant to
Republic Act No. 6715 allowing supervisory employees to form their own unions, as the bargaining representative of
all the supervisory employees at the NASUREFCO Batangas Sugar Refinery.
Two years after the implementation of the JE Program, specifically on June 20, 1990, the members of herein
respondent union filed a complaint with the executive labor arbiter for non-payment of overtime, rest day and
holiday pay allegedly in violation of Article 100 of the Labor Code.
On January 7, 1991, Executive Labor Arbiter Antonio C. Pido rendered a decision2 disposing as follows:
_____________

2 Annex E, Petition; Rollo, 51, 56-57.


456

456
SUPREME COURT REPORTS ANNOTATED
National Sugar Refineries Corporation vs. NLRC

"WHEREFORE, premises considered, respondent National Sugar Refineries Corporation is hereby directed to
1. pay the individual members of complainant union the usual overtime pay, restday pay and holiday pay enjoyed by
them instead of the P100.00 special allowance which was implemented on June 11, 1988; and
2. pay the individual members of complainant union the difference in money value between the P100.00 special
allowance and the overtime pay, restday pay and holiday pay that they ought to have received from June 1, 1988.
All other claims are hereby dismissed for lack of merit.
SO ORDERED."
In finding for the members of herein respondent union, the labor arbiter ruled that the long span of time during
which the benefits were being paid to the supervisors has caused the payment thereof to ripen into a contractual
obligation; that the complainants cannot be estopped from questioning the validity of the new compensation
package despite the fact that they have been receiving the benefits therefrom, considering that respondent union
was formed only a year after the implementation of the Job Evaluation Program, hence there was no way for the
individual supervisors to express their collective response thereto prior to the formation of the union; and the
comparative computations presented by the private respondent union showed that the P 100.00 special allowance
given by NASUREFCO fell short of what the supervisors ought to receive had the overtime pay, rest day pay and
holiday pay not been discontinued, which arrangement, therefore, amounted to a diminution of benefits.
On appeal, in a decision promulgated on July 19, 1991 by its Third Division, respondent National Labor Relations
Commission (NLRC) affirmed the decision of the labor arbiter on the ground that the members of respondent union
are not managerial employees, as defined under Article 212(m) of the Labor Code and, therefore, they are entitled
to overtime, rest day and holiday pay. Respondent NLRC declared that these supervisory employees are merely
exercising recommendatory powers subject to the evaluation, review and final action by their department heads;
their responsibilities do not require the exercise of discretion and independent judgment; they do not participate in
the formulation of management policies nor in the hiring or firing of employ457

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National Sugar Refineries Corporation vs. NLRC


ees; and their main function is to carry out the ready policies and plans of the corporation.3 Reconsideration of said
decision was denied in a resolution of public respondent dated August 30, 1991.4
Hence this petition for certiorari, with petitioner NASUREFCO asseverating that public respondent commission
committed a grave abuse of discretion in refusing to recognize the fact that the members of respondent union are
members of the managerial staff who are not entitled to overtime, rest day and holiday pay; and in making
petitioner assume the "double burden" of giving the benefits due to rank-and-file employees together with those due
to supervisors under the JE Program.
We find creditable merit in the petition and the extraordinary writ of certiorari shall accordingly issue.
The primordial issue to be resolved herein is whether the members of respondent union are entitled to overtime, rest
day and holiday pay. Before this can be resolved, however, it must of necessity be ascertained first whether or not
the union members, as supervisory employees, are to be considered as officers or members of the managerial staff
who are exempt from the coverage of Article 82 of the Labor Code.
It is not disputed that the members of respondent union are supervisory employees, as defined under Article
212(m), Book V of the Labor Code on Labor Relations, which reads:
"(m) 'Managerial employee' is one who is vested with powers or prerogatives to lay down and execute management
policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees. Supervisory
employees are those who, in the interest of the employer, effectively recommend such managerial actions if the
exercise of such authority is not merely routinary or clerical in nature but requires the use of independent judgment.
All employees not falling within any of the above definitions are considered rank-and-file employees for purposes of
this Book."
Respondent NLRC, in holding that the union members are entitled to overtime, rest day and holiday pay, and in
ruling that
_____________

3 Annex A, id.; ibid., 20-27; NLRC Case CA No. L-000058; penned by Pres. Comm. Lourdes C. Javier, with the
concurrence of Comm. Ireneo B. Bernardo and Rogelio I. Rayala.

4 Rollo, 28-29.
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SUPREME COURT REPORTS ANNOTATED
National Sugar Refineries Corporation vs. NLRC
the latter are not managerial employees, adopted the definition stated in the aforequoted statutory provision.
Petitioner, however, avers that for purposes of determining whether or not the members of respondent union are
entitled to overtime, rest day and holiday pay, said employees should be considered as "officers or members of the
managerial staff' as defined under Article 82, Book III of the Labor Code on 'Working Conditions and Rest Periods"
and amplified in Section 2, Rule I, Book III of the Rules to Implement the Labor Code, to wit:
"Art. 82. Coverage.The provisions of this title shall apply to employees in all establishments and undertakings
whether for profit or not, but not to government employees, managerial employees, field personnel, members of the
family of the employer who are dependent on him for support, domestic helpers, persons in the personal service of
another, and workers who are paid by results as determined by the Secretary of Labor in appropriate regulations.
"As used herein, 'managerial employees' refer to those whose primary duty consists of the management of the
establishment in which they are employed or of a department or subdivision thereof, and to other officers or
members of the managerial staff." (Emphasis supplied.)
xxx
"Sec. 2. Exemption.The provisions of this rule shall not apply to the following persons if they qualify for exemption
under the condition set forth herein:
xxx
(b) Managerial employees, if they meet all of the following conditions, namely:
(1) Their primary duty consists of the management of the establishment in which they are employed or of a
department or subdivision thereof;

(2) They customarily and regularly direct the work of two or more employees therein;
(3) They have the authority to hire or fire other employees of lower rank; or their suggestions and recommendations
as to the hiring and firing and as to the promotion or any other change of status of other employees are given
particular weight.
(c) Officers or members of a managerial staff if they perform the following duties and responsibilities:
(1) The primary duty consists of the performance of work directly related to management policies of their employer;
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National Sugar Refineries Corporation vs. NLRC
(2) Customarily and regularly exercise discretion and independent judgment;
(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty consists of the
management of the establishment in which he is employed or subdivision thereof; or (ii) execute under general
supervision work along specialized or technical lines requiring special training, experience, or knowledge; or (iii)
execute under general supervision special assignments and tasks; and
(4) Who do not devote more than 20 percent of their hours worked in a work-week to activities which are not directly
and closely related to the performance of the work described in paragraphs (1), (2), and (3) above."
It is the submission of petitioner that while the members of respondent union, as supervisors, may not be occupying
managerial positions, they are clearly officers or members of the managerial staff because they meet all the
conditions prescribed by law and, hence, they are not entitled to overtime, rest day and holiday pay. It contends that
the definition of managerial and supervisory employees under Article 212(m) should be made to apply only to the
provisions on Labor Relations, while the right of said employees to the questioned benefits should be considered in
the light of the meaning of a managerial employee and of the officers or members of the managerial staff, as
contemplated under Article 82 of the Code and Section 2, Rule I, Book III of the implementing rules. In other words,
for purposes of forming and joining unions, certification elections, collective bargaining, and so forth, the union
members are supervisory employees. In terms of working conditions and rest periods and entitlement to the

questioned benefits, however, they are officers or members of the managerial staff, hence they are not entitled
thereto.
While the Constitution is committed to the policy of social justice and the protection of the working class, it should
not be supposed that every labor dispute will be automatically decided in favor of labor. Management also has its
own rights which, as such, are entitled to respect and enforcement in the interest of simple fair play. Out of its
concern for those with less privileges in life, this Court has inclined more often than not toward the worker and
upheld his cause in his conflicts with the employer. Such favoritism, however, has not blinded us to the rule that
460

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SUPREME COURT REPORTS ANNOTATED
National Sugar Refineries Corporation vs. NLRC
justice is in every case for the deserving, to be dispensed in the light of the established facts and the applicable law
and doctrine.5
This is one such case where we are inclined to tip the scales of justice in favor of the employer.
The question whether a given employee is exempt from the benefits of the law is a factual one dependent on the
circumstances of the particular case. In determining whether an employee is within the terms of the statutes, the
criterion is the character of the work performed, rather than the title of the employee's position.6
Consequently, while generally this Court is not supposed to review the factual findings of respondent commission,
substantial justice and the peculiar circumstances obtaining herein mandate a deviation from the rule.
A cursory perusal of the Job Value Contribution Statements7 of the union members will readily show that these
supervisory employees are under the direct supervision of their respective department superintendents and that
generally they assist the latter in planning, organizing, staffing, directing, controlling, communicating and in making
decisions in attaining the company's set goals and objectives. These supervisory employees are likewise responsible
for the effective and efficient operation of their respective departments. More specifically, their duties and functions
include, among others, the following operations whereby the employee:
1) assists the department superintendent in the following:

a) planning of systems and procedures relative to department activities;


b) organizing and scheduling of work activities of the department, which includes employee shifting schedule and
manning complement;
c) decision making g by providing relevant information data and other inputs;
d) attaining the company's set goals and objectives by
_____________

5 Sosito vs. Aguinaldo Development Corporation, 156 SCRA 392 (1987).


6 56 C.J.S., Master and Servant, Sec. 151(11).
7 Annexes I to I-23, Petition; Rollo, 84-149.
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National Sugar Refineries Corporation vs. NLRC
giving his full support;
e) selecting the appropriate man to handle the job in the department; and
f) preparing annual departmental budget;
2) observes, follows and implements company policies at all times and recommends disciplinary action on erring
subordinates;
3) trains and guides subordinates on how to assume responsibilities and become more productive;
4) conducts semi-annual performance evaluation of his subordinates and recommends necessary action for their
development/advancement;

5) represents the superintendent or the department when appointed and authorized by the former;
6) coordinates and communicates with other inter and intra department supervisors when necessary;
7) recommends disciplinary actions/promotions;
8) recommends measures to improve work methods, equipment performance, quality of service and working
conditions;
9) sees to it that safety rules and regulations and procedure are implemented and followed by all NASUREFCO
employees, recommends revisions or modifications to said rules when deemed necessary, and initiates and prepares
reports for any observed abnormality within the refinery;
10) supervises the activities of all personnel under him and sees to it that instructions to subordinates are properly
implemented; and
11) performs other related tasks as may be assigned by his immediate superior.
From the foregoing, it is apparent that the members of respondent union discharge duties and responsibilities which
ineluctably qualify them as officers or members of the managerial staff, as defined in Section 2, Rule I, Book III of the
aforestated Rules to Implement the Labor Code, viz.: (1) their primary duty consists of the performance of work
directly related to management policies of their employer; (2) they customarily and regularly exercise discretion and
independent judgment; (3) they regularly and directly assist the managerial employee whose primary duty consists
of the management of a department of the establishment in which they are employed; (4) they execute, under
general supervision, work along specialized or technical lines requiring special training, experience, or knowledge;
(5) they execute, under general supervision, special assignments and tasks; and
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SUPREME COURT REPORTS ANNOTATED
National Sugar Refineries Corporation vs. NLRC
(6) they do not devote more than 20% of their hours worked in a work-week to activities which are not directly and
clearly related to the performance of their work hereinbefore described.

Under the facts obtaining in this case, we are constrained to agree with petitioner that the union members should be
considered as officers or members of the managerial staff and are, therefore, exempt from the coverage of Article
82. Perforce, they are not entitled to overtime, rest day and holiday pay.
The distinction made by respondent NLRC on the basis of whether or not the union members are managerial
employees, to determine the latter's entitlement to the questioned benefits, is misplaced and inappropriate. It is
admitted that these union members are supervisory employees and this is one instance where the nomenclatures or
titles of their jobs conform with the nature of their functions. Hence, to distinguish them from a managerial
employee, as defined either under Articles 82 or 212(m) of the Labor Code, is puerile and inefficacious. The
controversy actually involved here seeks a determination of whether or not these supervisory employees ought to
be considered as officers or members of the managerial staff. The distinction, therefore, should have been made
along that line and its corresponding conceptual criteria.
II. We likewise do not subscribe to the finding of the labor arbiter that the payment of the questioned benefits to the
union members has ripened into a contractual obligation.
A. Prior to the JE Program, the union members, while being supervisors, received benefits similar to the rank-and-file
employees such as overtime, rest day and holiday pay, simply because they were treated in the same manner as
rank-and-file employees, and their basic pay was nearly on the same level as those of the latter, aside from the fact
that their specific functions and duties then as supervisors had not been properly defined and delineated from those
of the rank-and-file. Such fact is apparent from the clarification made by petitioner in its motion for reconsideration8
filed with respondent commission in NLRC Case No. CA No. I-000058, dated August 16, 1991, wherein it lucidly
explained:
_____________

8 Annex G, Petition; Rollo, 72.


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National Sugar Refineries Corporation vs. NLRC


"But, complainants no longer occupy the same positions they held before the JE Program. Those positions formerly
classified as 'supervisory' and found after the JE Program to be rank-and-file were classified correctly and continue to
receive overtime, holiday and restday pay. As to them, the practice subsists.
"However, those whose duties confirmed them to be supervisory, were re-evaluated, their duties re-defined and in
most cases their organizational positions re-designated to confirm their superior rank and duties. Thus, after the JE
program, complainants cannot be said to occupy the same positions."9
It bears mention that this positional submission was never refuted nor controverted by respondent union in any of its
pleadings filed before herein public respondent or with this Court. Hence, it can be safely concluded therefrom that
the members of respondent union were paid the questioned benefits for the reason that, at that time, they were
rightfully entitled thereto. Prior to the JE Program, they could not be categorically classified as members or officers of
the managerial staff considering that they were then treated merely on the same level as rankand-file.
Consequently, the payment thereof could not be construed as constitutive of voluntary employer practice, which
cannot now be unilaterally withdrawn by petitioner. To be considered as such, it should have been practiced over a
long period of time, and must be shown to have been consistent and deliberate.10
The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to
continue giving the benefits knowing fully well that said employees are not covered by the law requiring payment
thereof.11 In the case at bar, respondent union failed to sufficiently establish that petitioner has been motivated or
is wont to give these benefits out of pure generosity.
B. It remains undisputed that with the implementation of the JE Program, the members of private respondent union
were
_____________

9 Rollo, 79.
10 Globe Mackay Cable and Radio Corporation, et al. vs. NLRC, et al., 163 SCRA 71 (1988).
11 Oceanic Pharmacal Employees Union (FFW) vs. Inciong, et al., 94 SCRA 270 (1979).
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SUPREME COURT REPORTS ANNOTATED
National Sugar Refineries Corporation us. NLRC
re-classified under levels S-5 to S-8 which were considered under the program as managerial staff for purposes of
compensation and benefits, that they occupied re-evaluated positions, and that their basic pay was increased by an
average of 50% of their basic salary prior to the JE Program. In other words, after the JE Program there was an ascent
in position, rank and salary. This in essence is a promotion which is defined as the advancement from one position to
another with an increase in duties and responsibilities as authorized by law, and usually accompanied by an increase
in salary.12
Quintessentially, with the promotion of the union members, they are no longer entitled to the benefits which attach
and pertain exclusively to their former positions. Entitlement to the benefits provided for by law requires prior
compliance with the conditions set forth therein. With the promotion of the members of respondent union, they
occupied positions which no longer meet the requirements imposed by law. Their assumption of these positions
removed them from the coverage of the law, ergo, their exemption therefrom.
As correctly pointed out by petitioner, if the union members really wanted to continue receiving the benefits which
attach to their former positions, there was nothing to prevent them from refusing to accept their promotions and
their corresponding benefits. As the saying goes, they cannot have their cake and eat it too or, as petitioner
suggests, they should not, as a simple matter of law and fairness, get the best of both worlds at the expense of
NASUREFCO.
Promotion of its employees is one of the jurisprudentially-recognized exclusive prerogatives of management,
provided it is done in good faith. In the case at bar, private respondent union has miserably failed to convince this
Court that the petitioner acted in bad faith in implementing the JE Program. There is no showing that the JE Program
was intended to circumvent the law and deprive the members of respondent union of the benefits they used to
receive.
Not so long ago, on this particular score, we had the occasion to
_____________

12 Millares vs. Subido, et al., 20 SCRA 954 (1967); Dosch vs. NLRC, et al., 123 SCRA 296 (1983).
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National Sugar Refineries Corporation vs. NLRC
hold that:
"x x x it is the prerogative of management to regulate, according to its discretion and judgment, all aspects of
employment. This flows from the established rule that labor law does not authorize the substitution of the judgment
of the employer in the conduct of its business. Such management prerogative may be availed of without fear of any
liability so long as it is exercised in good faith for the advancement of the employers' interest and not for the
purpose of defeating or circumventing the rights of employees under special laws or valid agreement and are not
exercised in a malicious, harsh, oppressive, vindictive or wanton manner or out of malice or spite."13
WHEREFORE, the impugned decision and resolution of respondent National Labor Relations Commission
promulgated on July 19, 1991 and August 30, 1991, respectively, are hereby ANNULLED and SET ASIDE for having
been rendered and adopted with grave abuse of discretion, and the basic complaint of private respondent union is
DISMISSED.
Narvasa (C.J., Chairman), Padilla, Nocon and Campos, Jr., JJ., concur.
Resolution annulled and set aside.
Note.Entitlement to overtime pay must first be established by proof that said overtime work was actually
performed, before an employee may avail of said benefit (Cagampan vs. National Labor Relations Commission, 195
SCRA 533).
o0o

_____________

13 Wise and Co., Inc. vs. Wise and Co., Inc. Employees Union-NATU, et al., 178 SCRA 536 (1989).
466

Copyright 2015 Central Book Supply, Inc. All rights reserved. [National Sugar Refineries Corporation vs. NLRC, 220
SCRA 452(1993)]

94
SUPREME COURT REPORTS ANNOTATED
Pearanda vs. Baganga Plywood Corporation
G.R. No. 159577. May 3, 2006.*
CHARLITO PEARANDA, petitioner, vs. BAGANGA PLYWOOD CORPORATION and HUDSON CHUA,
respondents.
Labor Law; Civil Procedure; Rules of procedure must be adopted to help promote, not frustrate, substantial justice;
The court frowns upon the practice of dismissing cases purely on procedural grounds.The Petition filed with the CA
shows a prima facie case. Petitioner attached his evidence to challenge the finding that he was a managerial
employee. In his Motion for Reconsideration, petitioner also submitted the pleadings before the labor arbiter in an
attempt to comply with the CA rules. Evidently, the CA could have ruled on the Petition on the basis of these
attachments. Petitioner should be deemed in substantial compliance with the procedural requirements. Under these

extenuating circumstances, the Court does not hesitate to grant liberality in favor of petitioner and to tackle his
substantive arguments in the present case. Rules of procedure must be adopted to help promote, not frustrate,
substantial justice. The Court frowns upon the practice of dismissing cases purely on procedural grounds.
Considering that there was substantial compliance, a liberal interpretation of procedural rules in this labor case is
more in keeping with the constitutional mandate to secure social justice.
Same; Labor Standards; Managerial Employees; Managerial employees are exempted from the coverage of labor
standards; Labor standards provide the working conditions of employees including entitlement to overtime pay and
premium pay for working on rest days; Managerial employees are those whose primary duty consists of the
management of the establishment in which they are employed or of a department or subdivision.Article 82 of the
Labor Code exempts managerial employees from the coverage of labor standards. Labor standards provide the
working conditions of employees, including entitlement to overtime pay and premium pay for working on rest days.
Under this provision, managerial employees are those whose primary duty consists of the management of the
establishment in which they are employed or of a department or subdivision.
_______________

* FIRST DIVISION.
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Pearanda vs. Baganga Plywood Corporation
Same; Same; Same; Who are deemed managerial employees.The Implementing Rules of the Labor Code state that
managerial employees are those who meet the following conditions: (1) Their primary duty consists of the
management of the establishment in which they are employed or of a department or subdivision thereof; (2) They
customarily and regularly direct the work of two or more employees therein; (3) They have the authority to hire or
fire other employees of lower rank; or their suggestions and recommendations as to the hiring and firing and as to
the promotion or any other change of status of other employees are given particular weight.

Same; Same; Same; Like managerial employees, officers and members of the managerial staff are not entitled to the
provisions of law on labor standards.The Court disagrees with the NLRCs finding that petitioner was a managerial
employee. However, petitioner was a member of the managerial staff, which also takes him out of the coverage of
labor standards. Like managerial employees, officers and members of the managerial staff are not entitled to the
provisions of law on labor standards.
Same; Same; Same; The term foreman implies that he was the representative of management over the workers and
the operation of the department.Noteworthy, even petitioner admitted that he was a supervisor. In his Position
Paper, he stated that he was the foreman responsible for the operation of the boiler. The term foreman implies that
he was the representative of management over the workers and the operation of the department. Petitioners
evidence also showed that he was the supervisor of the steam plant.
PETITION for review on certiorari of the resolutions of the Court of Appeals.

The facts are stated in the opinion of the Court.


Angela A. Librado for petitioner.
Leo Caubang for private respondent.
PANGANIBAN, C.J.:

Managerial employees and members of the managerial staff are exempted from the provisions of the Labor Code on
96

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SUPREME COURT REPORTS ANNOTATED
Pearanda vs. Baganga Plywood Corporation
labor standards. Since petitioner belongs to this class of employees, he is not entitled to overtime pay and premium
pay for working on rest days.

The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the January 27, 20032 and July 4,
20033 Resolutions of the Court of Appeals (CA) in CA-G.R. SP No. 74358. The earlier Resolution disposed as follows:
WHEREFORE, premises considered, the instant petition is hereby DISMISSED.4
The latter Resolution denied reconsideration.
On the other hand, the Decision of the National Labor Relations Commission (NLRC) challenged in the CA disposed
as follows:
WHEREFORE, premises considered, the decision of the Labor Arbiter below awarding overtime pay and premium
pay for rest day to complainant is hereby REVERSED and SET ASIDE, and the complaint in the above-entitled case
dismissed for lack of merit.5
The Facts
Sometime in June 1999, Petitioner Charlito Pearanda was hired as an employee of Baganga Plywood Corporation
(BPC) to take charge of the operations and maintenance of its
_______________

1 Rollo, pp. 4-11.


2 Id., at pp. 64-65 & 298-299. Former Sixteenth Division. Penned by Justice Rodrigo V. Cosico (Division chairperson),
with the concurrence of Justices Rebecca De Guia-Salvador and Regalado E. Maambong (members).
3 Id., at pp. 51-52.
4 Id., at pp. 65 & 299.
5 Id., at p. 34.
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Pearanda vs. Baganga Plywood Corporation
steam plant boiler.6 In May 2001, Pearanda filed a Complaint for illegal dismissal with money claims against BPC
and its general manager, Hudson Chua, before the NLRC.7
After the parties failed to settle amicably, the labor arbiter8 directed the parties to file their position papers and
submit supporting documents.9 Their respective allegations are summarized by the labor arbiter as follows:
[Pearanda] through counsel in his position paper alleges that he was employed by respondent [Baganga] on March
15, 1999 with a monthly salary of P5,000.00 as Foreman/Boiler Head/Shift Engineer until he was illegally terminated
on December 19, 2000. Further, [he] alleges that his services [were] terminated without the benefit of due process
and valid grounds in accordance with law. Furthermore, he was not paid his overtime pay, premium pay for working
during holidays/rest days, night shift differentials and finally claims for payment of damages and attorneys fees
having been forced to litigate the present complaint.
Upon the other hand, respondent [BPC] is a domestic corporation duly organized and existing under Philippine laws
and is represented herein by its General Manager HUDSON CHUA, [the] individual respondent. Respondents thru
counsel allege that complainants separation from service was done pursuant to Art. 283 of the Labor Code. The
respondent [BPC] was on temporary closure due to repair and general maintenance and it applied for clearance with
the Department of Labor and Employment, Regional Office No. XI to shut down and to dismiss employees (par. 2
position paper). And due to the insistence of herein complainant he was paid his separation benefits (Annexes C
and D, ibid.). Consequently, when respondent [BPC] partially reopened in January 2001, [Pearanda] failed to
reapply. Hence, he was not terminated from employment much less illegally. He opted to severe employment when
he insisted payment of his separation benefits. Furthermore, being a managerial employee he is not entitled to
overtime pay and if ever he rendered
_______________

6 Petitioners Memorandum, p. 3; Rollo, p. 266.


7 Id., at p. 2; Id., at p. 265.
8 The labor arbiter assigned to the case was Arturo L. Gamolo.

9 Decision of the Labor Arbiter, p. 1; Rollo, p. 21.


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SUPREME COURT REPORTS ANNOTATED
Pearanda vs. Baganga Plywood Corporation
services beyond the normal hours of work, [there] was no office order/or authorization for him to do so. Finally,
respondents allege that the claim for damages has no legal and factual basis and that the instant complaint must
necessarily fail for lack of merit.10
The labor arbiter ruled that there was no illegal dismissal and that petitioners Complaint was premature because he
was still employed by BPC.11 The temporary closure of BPCs plant did not terminate his employment, hence, he
need not reapply when the plant reopened.
According to the labor arbiter, petitioners money claims for illegal dismissal was also weakened by his quitclaim and
admission during the clarificatory conference that he accepted separation benefits, sick and vacation leave
conversions and thirteenth month pay.12
Nevertheless, the labor arbiter found petitioner entitled to overtime pay, premium pay for working on rest days, and
attorneys fees in the total amount of P21,257.98.13
Ruling of the NLRC
Respondents filed an appeal to the NLRC, which deleted the award of overtime pay and premium pay for working on
rest days. According to the Commission, petitioner was not entitled to these awards because he was a managerial
employee.14
Ruling of the Court of Appeals
In its Resolution dated January 27, 2003, the CA dismissed Pearandas Petition for Certiorari. The appellate court
held that he failed to: 1) attach copies of the pleadings submitted
_______________

10 Id., at p. 2; Id., at p. 22.


11 Id., at p. 3; Id., at p. 23.
12 Id., at p. 4; Id., at p. 24.
13 Id., at p. 5; Id., at p. 25.
14 NLRC Resolution dated May 8, 2002, p. 2; Rollo, p. 33.
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Pearanda vs. Baganga Plywood Corporation
before the labor arbiter and NLRC; and 2) explain why the filing and service of the Petition was not done by personal
service.15
In its later Resolution dated July 4, 2003, the CA denied reconsideration on the ground that petitioner still failed to
submit the pleadings filed before the NLRC.16
Hence this Petition.17
The Issues
Petitioner states the issues in this wise:
The [NLRC] committed grave abuse of discretion amounting to excess or lack of jurisdiction when it entertained the
APPEAL of the respondent[s] despite the lapse of the mandatory period of TEN DAYS.
The [NLRC] committed grave abuse of discretion amounting to an excess or lack of jurisdiction when it rendered the
assailed RESOLUTIONS dated May 8, 2002 and AUGUST 16, 2002 REVERSING AND SETTING ASIDE the FACTUAL AND
LEGAL FINDINGS of the [labor arbiter] with respect to the following:

I. The finding of the [labor arbiter] that [Pearanda] is a regular, common employee entitled to monetary benefits
under Art. 82 [of the Labor Code].
II. The finding that [Pearanda] is entitled to the payment of OVERTIME PAY and OTHER MONETARY BENEFITS.18
_______________

15 Assailed CA Resolution dated January 27, 2003, pp. 1-2; Rollo, pp. 298-299.
16 Assailed CA Resolution dated July 4, 2003, p. 1; Id., at p. 51.
17 This Petition was deemed submitted for decision on June 29, 2005 upon this Courts receipt of petitioners
Memorandum, which he signed with the assistance of Atty. Angela A. Librado. Respondents Memorandum, signed by
Atty. Leo N. Caubang, was received by this Court on May 26, 2005.
18 Petitioners Memorandum, pp. 5-6; Rollo, pp. 268-269.
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SUPREME COURT REPORTS ANNOTATED
Pearanda vs. Baganga Plywood Corporation
The Courts Ruling
The Petition is not meritorious.
The CA dismissed Pearandas Petition on purely technical grounds, particularly with regard to the failure to submit
supporting documents.
In Atillo v. Bombay,19 the Court held that the crucial issue is whether the documents accompanying the petition
before the CA sufficiently supported the allegations therein. Citing this case, Piglas-Kamao v. NLRC20 stayed the
dismissal of an appeal in the exercise of its equity jurisdiction to order the adjudication on the merits.

The Petition filed with the CA shows a prima facie case. Petitioner attached his evidence to challenge the finding that
he was a managerial employee.21 In his Motion for Reconsideration, petitioner also submitted the pleadings before
the labor arbiter in an attempt to comply with the CA rules.22 Evidently, the CA could have ruled on the Petition on
the basis of these attachments. Petitioner should be deemed in substantial compliance with the procedural
requirements.
Under these extenuating circumstances, the Court does not hesitate to grant liberality in favor of petitioner and to
tackle his substantive arguments in the present case. Rules of procedure must be adopted to help promote, not
frustrate, sub_______________

19 351 SCRA 361, February 7, 2001.


20 357 SCRA 640, May 9, 2001.
21 Petitioner attached his pay slips and job designation, and the companys manpower schedule as Annexes C,
D, and E (CA Rollo, pp. 20-31).
22 Petitioner submitted the parties position papers before the labor arbiter and their respective supporting
documents (CA Rollo, pp. 43-64).
101

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101
Pearanda vs. Baganga Plywood Corporation
stantial justice.23 The Court frowns upon the practice of dismissing cases purely on procedural grounds.24
Considering that there was substantial compliance,25 a liberal interpretation of procedural rules in this labor case is
more in keeping with the constitutional mandate to secure social justice.26
First Issue: Timeliness of Appeal

Under the Rules of Procedure of the NLRC, an appeal from the decision of the labor arbiter should be filed within 10
days from receipt thereof.27
Petitioners claim that respondents filed their appeal beyond the required period is not substantiated. In the
pleadings before us, petitioner fails to indicate when respondents received the Decision of the labor arbiter. Neither
did the petitioner attach a copy of the challenged appeal. Thus, this Court has no means to determine from the
records when the 10-day period commenced and terminated. Since petitioner utterly failed to support his claim that
respondents appeal was filed out of time, we need not belabor that point. The
_______________

23 Chua v. Absolute Management Corporation, 412 SCRA 547, October 16, 2003; Pacific Life Assurance Corporation
v. Sison, 359 Phil. 332; 299 SCRA 16, November 20, 1998; Gregorio v. Court of Appeals, 72 SCRA 120, July 28, 1976.
24 Pacific Life Assurance Corporation v. Sison, Id.; Empire Insurance Company v. National Labor Relations
Commission, 355 Phil. 694; 294 SCRA 263, August 14, 1998; People Security, Inc. v. National Labor Relations
Commission, 226 SCRA 146, September 8, 1993; Tamargo v. Court of Appeals, 209 SCRA 518, June 3, 1992.
25 Chua v. Absolute Management Corporation, supra note 23; Cusi-Hernandez v. Diaz, 336 SCRA 113, July 18, 2000.
26 CONSTITUTION Art. II, Sec. 18 and Art. XIII, Sec. 3. See Ablaza v. Court of Industrial Relations, 126 SCRA 247,
December 21, 1983.
27 New Rules of Procedure of the National Labor Relations Commission, Rule VI, Sec. 1.
102

102
SUPREME COURT REPORTS ANNOTATED
Pearanda vs. Baganga Plywood Corporation
parties alleging have the burden of substantiating their allegations.28
Second Issue: Nature of Employment

Petitioner claims that he was not a managerial employee, and therefore, entitled to the award granted by the labor
arbiter.
Article 82 of the Labor Code exempts managerial employees from the coverage of labor standards. Labor standards
provide the working conditions of employees, including entitlement to overtime pay and premium pay for working on
rest days.29 Under this provision, managerial employees are those
_______________

28 RULES OF COURT, Rule 131, Sec. 1.


29 Labor standards is found in Book 3 of the Labor Code, entitled Conditions of Employment. Arts. 87 and 93
provide:
Art. 87. Overtime work.Work may be performed beyond eight (8) hours a day provided that the employee is paid
for the overtime work, an additional compensation equivalent to his regular wage plus at least twenty-five (25%) per
cent thereof. Work performed beyond eight hours on a holiday or rest day shall be paid an additional compensation
equivalent to the rate of the first eight hours on a holiday or rest day plus at least thirty percent thereof.
Art. 93. Compensation for rest day, Sunday or holiday work.(a) Where an employee is made or permitted to work
on his scheduled rest day, he shall be paid an additional compensation of at least thirty percent (30%) of his regular
wage. An employee shall be entitled to such additional compensation for work performed on Sunday only when it is
his established rest day.
(b) When the nature of the work of the employee is such that he has no regular workdays and no regular rest days
can be scheduled, he shall be paid an additional compensation of at least thirty percent (30%) of his regular wage
for work performed on Sundays and holidays.
103

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103
Pearanda vs. Baganga Plywood Corporation

whose primary duty consists of the management of the establishment in which they are employed or of a
department or subdivision.30
The Implementing Rules of the Labor Code state that managerial employees are those who meet the following
conditions:
(1) Their primary duty consists of the management of the establishment in which they are employed or of a
department or subdivision thereof;
(2) They customarily and regularly direct the work of two or more employees therein;
(3) They have the authority to hire or fire other employees of lower rank; or their suggestions and
recommendations as to the hiring and firing and as to the promotion or any other change of status of other
employees are given particular weight.31
The Court disagrees with the NLRCs finding that petitioner was a managerial employee. However, petitioner was a
_______________

(c) Work performed on any special holiday shall be paid an additional compensation of at least thirty percent (30%)
of the regular wage of the employee. Where such holiday work falls on the employees scheduled rest day, he shall
be entitled to an additional compensation of at least fifty percent (50%) of his regular wage.
(d) Where the collective bargaining agreement or other applicable employment contract stipulates the payment of a
higher premium pay than that prescribed under this Article, the employer shall pay such higher rate.
30 The other definition of a managerial employee found in the Labor Code Art. 212(m) is in connection with labor
relations or the right to engage in unionization. Under this provision, a managerial employee is one vested with
powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay off,
recall, discharge, assign or discipline employees. C. AZUCENA, EVERYONES LABOR CODE, 58 (2001 ed.).
31 Implementing Rules of the Labor Code, Book III, Rule I, Sec. 2(b).
104

104

SUPREME COURT REPORTS ANNOTATED


Pearanda vs. Baganga Plywood Corporation
member of the managerial staff, which also takes him out of the coverage of labor standards. Like managerial
employees, officers and members of the managerial staff are not entitled to the provisions of law on labor
standards.32 The Implementing Rules of the Labor Code define members of a managerial staff as those with the
following duties and responsibilities:
(1) The primary duty consists of the performance of work directly related to management policies of the employer;
(2) Customarily and regularly exercise discretion and independent judgment;
(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty consists of the
management of the establishment in which he is employed or subdivision thereof; or (ii) execute under general
supervision work along specialized or technical lines requiring special training, experience, or knowledge; or (iii)
execute under general supervision special assignments and tasks; and
(4) who do not devote more than 20 percent of their hours worked in a workweek to activities which are not directly
and closely related to the performance of the work described in paragraphs (1), (2), and (3) above.33
As shift engineer, petitioners duties and responsibilities were as follows:
1. To supply the required and continuous steam to all consuming units at minimum cost.
2. To supervise, check and monitor manpower workmanship as well as operation of boiler and accessories.
3. To evaluate performance of machinery and manpower.
4. To follow-up supply of waste and other materials for fuel.
5. To train new employees for effective and safety while working.
_______________

32 LABOR CODE, Art. 82.


33 Implementing Rules of the Labor Code, Book III, Rule I, Sec. 2(c).

105

VOL. 489, MAY 3, 2006


105
Pearanda vs. Baganga Plywood Corporation
6. Recommend parts and supplies purchases.
7. To recommend personnel actions such as: promotion, or disciplinary action.
8. To check water from the boiler, feedwater and softener, regenerate softener if beyond hardness limit.
9. Implement Chemical Dosing.
10. Perform other task as required by the superior from time to time.34
The foregoing enumeration, particularly items 1, 2, 3, 5 and 7 illustrates that petitioner was a member of the
managerial staff. His duties and responsibilities conform to the definition of a member of a managerial staff under
the Implementing Rules.
Petitioner supervised the engineering section of the steam plant boiler. His work involved overseeing the operation
of the machines and the performance of the workers in the engineering section. This work necessarily required the
use of discretion and independent judgment to ensure the proper functioning of the steam plant boiler. As
supervisor, petitioner is deemed a member of the managerial staff.35
Noteworthy, even petitioner admitted that he was a supervisor. In his Position Paper, he stated that he was the
foreman responsible for the operation of the boiler.36 The term foreman implies that he was the representative of
management over the workers and the operation of the department.37
_______________

34 Job Description, submitted as petitioners Annex to his Memorandum; Rollo, p. 312.

35 See Quebec v. National Labor Relations Commission, 361 Phil. 555; 301 SCRA 627, January 22, 1999; Salazar v.
National Labor Relations Commission, 326 Phil. 288; 256 SCRA 273, April 17, 1996; National Sugar Refineries
Corporation v. National Labor Relations Commission, 220 SCRA 452, March 24, 1993.
36 Petitioners Position Paper, p. 1; Rollo, p. 14.
37 WEBSTERS THIRD NEW INTERNATIONAL DICTIONARY, 889 (1976).
106

106
SUPREME COURT REPORTS ANNOTATED
Pearanda vs. Baganga Plywood Corporation
Petitioners evidence also showed that he was the supervisor of the steam plant.38 His classification as supervisor is
further evident from the manner his salary was paid. He belonged to the 10% of respondents 354 employees who
were paid on a monthly basis; the others were paid only on a daily basis.39 On the basis of the foregoing, the Court
finds no justification to award overtime pay and premium pay for rest days to petitioner.
WHEREFORE, the Petition is DENIED. Costs against petitioner.
SO ORDERED.
Ynares-Santiago, Austria-Martinez and Callejo, Sr., JJ., concur.
Chico-Nazario, J., On Official Leave.
Petition denied.
Note.The formulation of a wage structure through the classification of employees is a matter of management
judgment and discretion (Bankard Employees Union-Workers Alliance Trade Union vs. National Labor Relations
Commission, 423 SCRA 148 [2004])
o0o

_______________

38 Servicing Schedule, submitted as petitioners Annex to his Memorandum; Rollo p. 315.


39 Respondents Termination Report submitted to the Department of Labor and Employment; Rollo, pp. 49-61.
107

Copyright 2015 Central Book Supply, Inc. All rights reserved. [Pearanda vs. Baganga Plywood Corporation, 489
SCRA 94(2006)]

VOL. 8, JULY 31, 1963


613
San Miguel Brewery, Inc. vs. Democratic Labor Org.
No. L-18353. July 31, 1963.
SAN MIGUEL BREWERY, INC., petitioner, vs. DEMOCRATIC LABOR ORGANIZATION, ET AL., respondents.
Labor laws; Eight-Hour Labor Law; No application to outside or field sales personnel.Where after the morning roll
call the outside or field sales personnel leave the plant of the company to go on their respective sales routes and
they do not have a daily time record but the sales routes are so planned that they can be completed within 8 hours
at most, and they receive monthly salaries and sales commissions in variable amounts, so that they are made to
work beyond the required eight hours similar to piece work, "pakiao", or commission basis regardless of the time

employed, and the employees' participation depends on their industry, it is held that the Eight-Hour Labor Law has
no application to said outside or field sales personnel and that they are not entitled to overtime compensation.
Same; Same; Night salary differentials retroactive.Watchmen who rendered night duties once every three weeks
continuously during the period of their employment should be paid 25% additional compensation for work from 6:00
to 12:00 p.m. and 75% additional compensation for work from 12:01 to 6:00 in the morning retroactive prior to date
of demand because a similar claim had been filed long before and had been the subject of negotiation between the
union and the company which culminated in a strike which fizzled out with the understanding that such claim should
be settled in court.
Same; Same; Sundays and holidays pay.Watchmen who work on Sundays and holidays are entitled to extra pay for
work done during these days although they are paid on a monthly basis and are given one day off. Section 4 of
Commonwealth Act No. 444 expressly provides that no employer may compel an employee to work during Sundays
and legal holidays unless he is paid an additional sum of his regular compensation. This proviso is mandatory,
regardless of the nature of the compensation. The only exception is with regard to public utilities who perform some
public service.
PETITION for review of a decision of the Court of Industrial Relations.

The facts are stated in the opinion of the Court.


Paredes, Poblador, Cruz & Nazareno for petitioner.
Delfin N. Mercader for respondents.
BAUTISTA ANGELO, J.:

614

614
SUPREME COURT REPORTS ANNOTATED
San Miguel Brewery, Inc. vs. Democratic Labor Org.

On January 27. 1955. the Democratic Labor Association filed complaint against the San Miguel Brewery, Inc.
embodying 12 demands for the betterment of the conditions of employment of its members. The company filed its
answer to the complaint specifically denying its material averments and answering the demands point by point. The
company asked for the dismissal of the complaint.
At the hearing held sometime in September, 1955, the union manifested its desire to confine its claim to its
demands for overtime, night-shift differential pay, and attorney's fees, although it was allowed to present evidence
on service rendered during Sundays and holidays, or on its claim for additional separation pay and sick and vacation
leave compensation.
After the case had been submitted for decision, Presiding Judge Jose S. Bautista, who was commissioned to receive
the evidence, rendered decision expressing his disposition with regard to the points embodied in the complaint on
which evidence was presented. Specifically, the disposition insofar as those points covered by this petition for review
are concerned, is as follows:
1. With regard to overtime compensation, Judge Bautista held that the provisions of the Eight-Hour Labor Law apply
to the employees concerned for those working in the field or engaged in the sale of the company's products outside
its premises and consequently they should be paid the extra compensation accorded them by said law in addition to
the monthly salary and commission earned by them, regardless of the meal allowance given to employees who work
up to late at night.
2. As to employees who work at night, Judge Bautista decreed that they be paid their corresponding salary
differentials for work done at night prior to January 1, 1949 with the present qualification fication: 25% on the basis
of their salary to those who work from 6:00 to 12:00 p.m., and 75% to those who work from 12:01 to 6:00 in the
morning.
3. With regard to work done during Sundays and holidays, Judge Bautista also decreed that the employees
concerned be paid an additional compensation of 25% as provided for in Commonwealth Act No. 444 even if they
had been paid a compensation on monthly salary basis.
The demands, for the application of the Minimum Wage Law to workers paid on "pakiao" basis, payment
615

VOL. 8, JULY 31, 1963

615
San Miguel Brewery, Inc. vs. Democratic Labor Org.
of accumulated vacation and sick leave and attorney's fees, as well as the award of additional separation pay, were
either dismissed, denied, or set aside.
Its motion for reconsideration having been denied by the industrial court en banc, which affirmed the decision of the
court a quo with few exceptions, the San Miguel Brewery, Inc. interposed the present petition for review. Anent the
finding of the court a quo, as affirmed by the Court of Industrial Relations, to the effect that outside or field sales
personnel are entitled to the benefits of the Eight-Hour Labor Law, the pertinent facts are as follows:
After the morning roll call, the employees leave the plant of the company to go on their respective sales routes
either at 7:00 a.m. for soft drinks trucks, or 8:00 a.m. for beer trucks. They do not have a daily time record. The
company never require them to start their work as outside sales personnel earlier than the above schedule.
The sales routes are so planned that they can be completed within 8 hours at most, or that the employees could
make their sales on their routes within such number of hours variable in the sense that sometimes they can be
completed in less than 8 hours, sometimes 6 to 7 hours, or more. The moment these outside or field employees
leave the plant and while in their sales routes they are on their own, and often times when the sales are completed,
or when making short trip deliveries only, they go back to the plant, load again, and make another round of sales.
These employees receive monthly salaries and sales commissions in variable amounts. The amount of compensation
they receive is uncertain depending upon their individual efforts or industry. Besides the monthly salary, they are
paid sales commission that range from P30, P40, sometimes P60, P70, to sometimes P90, P100, and P109 a month,
at the rate of P0.01 to P0.01-1/2 per case.
It is contended that since the employees concerned are
616

616
SUPREME COURT REPORTS ANNOTATED
San Miguel Brewery, Inc. vs. Democratic Labor Org.

paid a commission on the sales they make outside of the required 8 hours besides the fixed salary that is paid to
them, the Court of Industrial Relations erred in ordering that they be paid an overtime compensation as required by
the Eight-Hour Labor Law for the reason that the commission they are paid already takes the place of such overtime
compensation. Indeed, it is claimed, overtime compensation is an additional pay for work or services rendered in
excess of 8 hours a day by an employee, and if the employee is already given extra compensation for labor
performed in excess of 8 hours a day, he is not covered by the law. His situation, the company contends, can be
likened to an employee who is paid on piece-work, "pakiao", or commission basis, which is expressly excluded from
the operation of the Eight-Hour Labor Law.1
We are in accord with this view, for in our opinion the Eight-Hour Labor Law only has application where an employee
or laborer is paid on a monthly or daily basis, or is paid a monthly or daily compensation, in which case, if he is
made to work beyond the requisite period of 8 hours, he should be paid the additional compensation prescribed by
law. This law has no application when the employee or laborer is paid on a piece-work, "pakiao", or commission
basis, regardless of the time employed. The philosophy behind this exemption is that his earnings in the form of
commission based on the gross receipts of the day. His participation depends upon his industry so that the more
hours he employs in the work the greater are his gross returns and the higher his commission. This philosophy is
better explained in Jewel Tea Co. v. Williams, C.C.A. Okla., 118 F. 2d 202, as follows:
"The reasons for excluding an outside salesman are fairly apparent. Such salesman, to a greater extent, works
individualIy. There are no restrictions respecting the time he shall work and he can earn as much or as little, within
the range of his ability, as his ambition dictates. In lieu of overtime he ordinarily receives commissions as extra
compensation. He works away from his employer's place of business, is not subject to
________________

1 Section 2, Commonwealth Act No. 444; Lara v. Del Rosario, L-6339, April 20, 1964.
617

VOL. 8, JULY 31, 1963


617
San Miguel Brewery, Inc. vs. Democratic Labor Org.

the personal supervision of his employer, and his employer has no way of knowing the number of hours he works
per day."
True it is that the employees concerned are paid a fixed salary for their month of service, such as Benjamin Sevilla, a
salesman, P215; Mariano Ruedas, a truck driver, P155; Alberto Alpaza and Alejandro Empleo, truck helpers, P125
each, and sometimes they work in excess of the required 8-hour period of work, but for their extra work they are
paid a commission which is in lieu of the extra compensation to which they are entitled. The record shows that these
employees during the period of their employment were paid sales commission ranging from P30, P40, sometimes
P60, P70, to sometimes P90, P100 and P109 a month depending on the volume of their sales and their rate of
commission per case. And so, insofar as the extra work they perform, they can be considered as employees paid on
piece work, "pakiao", or commission basis. The Department of Labor, called upon to implement the Eight-Hour Labor
Law, is of this opinion when on December 9, 1957 it made the ruling on a query submitted to it, thru the Director of
the Bureau of Labor Standards, to the effect that field sales personnel receiving regular monthly salaries, plus
commission, are not subject to the Eight-Hour Labor Law. Thus, on this point, said official stated:
"x x x Moreover, when a fieldman receives a regular monthly salary plus commission on percentage basis of his
sales, it is also the established policy of the Office to consider his commission as payment for the extra time he
renders in excess of eight hours, .thereby classifying him as if he were on piece-work basis, and therefore,
technically speaking, he is not subject to the Eight-Hour Labor Law."
We are, therefore, of the opinion that the industrial court erred in holding that the Eight-Hour Labor Law applies to
the employees composing the outside service force and in ordering that they be paid the corresponding additional
compensation.
With regard to the claim for night salary differentials, the industrial court found that claimants Magno
618

618
SUPREME COURT REPORTS ANNOTATED
San Miguel Brewery, Inc. vs. Democratic Labor Org.
Johnson and Jose Sanchez worked with the respondent company during the period specified by them in their
testimony and that watchmen Zoilo Iliga, Inocentes Prescillas and Daniel Cauyca rendered night duties once every

three weeks continuously during the period of the employment and that they were never given any additional
compensation aside from their monthly regular salaries. The court found found that the company started paying
night differentials only in January, 1949 but never before that time. And so it ordered that the employees concerned
be paid 25% additional compensation for those who worked from 6:00 to 12:00 p.m. and 75% additional
compensation for those who worked from 12:01 to 6:00 in the morning. It is now contended that this ruling is
erroneous because an award for night shift differentials cannot be given retroactive effect but can only be
entertained from the date of demand which was on January 27, 1953, citing in support thereof our ruling in
Earnshaws Docks & Honolulu Iron Works v. The Court of Industrial Relations, et al., L-8896, January 25, 1957.
This ruling, however, has no application here for it appears that before the filing of the petition concerning this claim
a similar one had already been filed long ago which had been the subject of negotiations between the union and the
company which culminated in a strike in 1952. Unfortunately, however, the strike fizzled out and the strikers were
ordered to return to work with the understanding that the claim for night salary differentials should be settled in
court. It is perhaps for this reason that the court a quo granted this claim in spite of the objection of the company to
the contrary.
The remaining point to be determined refers to the claim for pay for Sundays and holidays for service performed by
some claimants who were watchmen or security guards. It is contended that these employees are not entitled to
extra pay for work done during these days because they are paid on a monthly basis and are given one day off
which may take the place of the work they may perform either on Sunday or any holiday.
619

VOL. 8, JULY 31, 1963


619
People vs. Pagulayan
We disagree with this claim because it runs counter to law. Section 4 of Commonwealth Act No. 444 expressly
provides that no person, firm or corporation may compel an employee or laborer to work during Sundays and legal
holidays unless he is paid an additional sum of 25% of his regular compensation. This proviso is mandatory,
regardless of the nature of compensation. The only exception is with regard to public utilities who perform some
public service.

WHEREFORE, the decision of the industrial court is hereby modified as follows: the award with regard to extra work
performed by those employed in the outside or field sales force is set aside. The rest of the decision insofar as work
performed on Sundays and holidays covering watchmen and security guards, as well as the award for night salary
differentials, is affirmed. No costs.
Bengzon, C.J., Labrador, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.
Padilla, J., took no part.
Decision affirmed with modification.
Notes.Likewise, a taxi-driver receiving uncertain and variable amount depending upon the work done or the result
of said work (piece work) irrespective of the amount of time employed, was held not covered by the Eight-Hour
Labor Law. (Lara vs. Del Rosario, L-6339, April 20, 1954, 94 Phil. 780)
But see Red V Coconut Products, Ltd. vs. Court of Industrial Relations, L-21348, June 30, 1966, 17 SCRA 553, where
the Eight-Hour Labor Law was applied to the socalled "piece-workers".
________________

Copyright 2015 Central Book Supply, Inc. All rights reserved. [San Miguel Brewery, Inc. vs. Democratic Labor Org.,
8 SCRA 613(1963)]

578
SUPREME COURT REPORTS ANNOTATED
Auto Bus Transport Systems, Inc. vs. Bautista
G.R. No. 156367. May 16, 2005.*
AUTO BUS TRANSPORT SYSTEMS, INC., petitioner, vs. ANTONIO BAUTISTA, respondent.
Labor Law; Service Incentive Leave; Field Personnel; Words and Phrases; The phrase other employees whose
performance is unsupervised by the employer in Section 1(D), Rule V, Book III of the Implementing Rules and
Regulations of the Labor Code must not be understood as a separate classification of employees to which service

incentive leave shall not be grantedrather, it serves as an amplification of the interpretation of the definition of
field personnel under the Labor Code as those whose actual hours of work in the field cannot be determined with
reasonable certainty; Employees engaged on task or contract basis or paid on purely commission basis are not
automatically exempted from the grant of service incentive leave, unless, they fall under the classification of field
personnel.A careful perusal of said provisions of law will result in the conclusion that the grant of service
incentive leave has been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to
those employees not explicitly excluded by Section 1 of Rule V. According to the Implementing Rules, Service
Incentive Leave shall not apply to employees classified as field personnel. The phrase other employees whose
performance is unsupervised by the employer must not be understood as a separate classification of employees to
which service incentive leave shall not be granted. Rather, it serves as an amplification of the interpretation of the
definition of field personnel under the Labor Code as those whose actual hours of work in the field cannot be
determined with reasonable certainty. The same is true with respect to the phrase those who are engaged on task
or contract basis, purely commission basis. Said phrase should be related with field personnel, applying the rule
on ejusdem generis that general and unlimited terms are restrained and limited by the particular terms that they
follow. Hence, employees engaged on task or contract basis or paid on purely commission basis are not
automatically exempted from the grant of service incentive leave, unless, they fall under the classification of field
personnel.
_______________

* SECOND DIVISION.
579

VOL. 458, MAY 16, 2005


579
Auto Bus Transport Systems, Inc. vs. Bautista
Same; Same; Same; Same; What must be ascertained in order to resolve the issue of propriety of the grant of
service incentive leave to a bus driver-conductor is whether or not he is a field personnel; According to the Labor
Code, field personnel shall refer to nonagricultural employees who regularly perform their duties away from the
principal place of business or branch office of the employer and whose actual hours of work in the field cannot be

determined with reasonable certainty.Petitioners contention that respondent is not entitled to the grant of service
incentive leave just because he was paid on purely commission basis is misplaced. What must be ascertained in
order to resolve the issue of propriety of the grant of service incentive leave to respondent is whether or not he is a
field personnel. According to Article 82 of the Labor Code, field personnel shall refer to non-agricultural employees
who regularly perform their duties away from the principal place of business or branch office of the employer and
whose actual hours of work in the field cannot be determined with reasonable certainty. This definition is further
elaborated in the Bureau of Working Conditions (BWC), Advisory Opinion to Philippine Technical-Clerical Commercial
Employees Association which states that: As a general rule, [field personnel] are those whose performance of their
job/service is not supervised by the employer or his representative, the workplace being away from the principal
office and whose hours and days of work cannot be determined with reasonable certainty; hence, they are paid
specific amount for rendering specific service or performing specific work. If required to be at specific places at
specific times, employees including drivers cannot be said to be field personnel despite the fact that they are
performing work away from the principal office of the employee.
Same; Same; Same; Same; The definition of a field personnel is not merely concerned with the location where the
employee regularly performs his duties but also with the fact that the employees performance is unsupervised by
the employerin order to conclude whether an employee is a field employee, it is also necessary to ascertain if
actual hours of work in the field can be determined with reasonable certainty by the employer.At this point, it is
necessary to stress that the definition of a field personnel is not merely concerned with the location where the
employee regularly performs his duties but also with the fact that the employees performance is unsupervised by
the employer. As discussed above, field personnel are those who regularly perform their duties away from the
principal
580

580
SUPREME COURT REPORTS ANNOTATED
Auto Bus Transport Systems, Inc. vs. Bautista
place of business of the employer and whose actual hours of work in the field cannot be determined with reasonable
certainty. Thus, in order to conclude whether an employee is a field employee, it is also necessary to ascertain if
actual hours of work in the field can be determined with reasonable certainty by the employer. In so doing, an

inquiry must be made as to whether or not the employees time and performance are constantly supervised by the
employer.
Same; Same; Same; Same; Bus Drivers and Conductors; A bus driver-conductor, not being a field personnel but a
regular employee who performs tasks usually necessary and desirable to the usual trade of the companys business,
is entitled to the grant of service incentive leave.As observed by the Labor Arbiter and concurred in by the Court of
Appeals: It is of judicial notice that along the routes that are plied by these bus companies, there are its inspectors
assigned at strategic places who board the bus and inspect the passengers, the punched tickets, and the
conductors reports. There is also the mandatory once-a-week car barn or shop day, where the bus is regularly
checked as to its mechanical, electrical, and hydraulic aspects, whether or not there are problems thereon as
reported by the driver and/or conductor. They too, must be at specific place as [sic] specified time, as they generally
observe prompt departure and arrival from their point of origin to their point of destination. In each and every depot,
there is always the Dispatcher whose function is precisely to see to it that the bus and its crew leave the premises at
specific times and arrive at the estimated proper time. These, are present in the case at bar. The driver, the
complainant herein, was therefore under constant supervision while in the performance of this work. He cannot be
considered a field personnel. We agree in the above disquisition. Therefore, as correctly concluded by the appellate
court, respondent is not a field personnel but a regular employee who performs tasks usually necessary and
desirable to the usual trade of petitioners business. Accordingly, respondent is entitled to the grant of service
incentive leave.
Same; Same; Prescription; In the computation of the three-year prescriptive period, a determination must be made
as to the period when the act constituting a violation of the workers right to the benefits being claimed was
committed.It is settled jurisprudence that a cause of action has three elements, to wit, (1) a right in favor of the
plaintiff by whatever means and under whatever law it arises or is
581

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581
Auto Bus Transport Systems, Inc. vs. Bautista
created; (2) an obligation on the part of the named defendant to respect or not to violate such right; and (3) an act
or omission on the part of such defendant violative of the right of the plaintiff or constituting a breach of the

obligation of the defendant to the plaintiff. To properly construe Article 291 of the Labor Code, it is essential to
ascertain the time when the third element of a cause of action transpired. Stated differently, in the computation of
the three-year prescriptive period, a determination must be made as to the period when the act constituting a
violation of the workers right to the benefits being claimed was committed. For if the cause of action accrued more
than three (3) years before the filing of the money claim, said cause of action has already prescribed in accordance
with Article 291.
Same; Same; Same; It is essential to recognize that the service incentive leave is a curious animal in relation to
other benefits granted by law to every employee; If the employee entitled to service incentive leave does not use or
commute the same, he is entitled upon his resignation or separation from work to the commutation of his accrued
service incentive leave.It is essential at this point, however, to recognize that the service incentive leave is a
curious animal in relation to other benefits granted by the law to every employee. In the case of service incentive
leave, the employee may choose to either use his leave credits or commute it to its monetary equivalent if not
exhausted at the end of the year. Furthermore, if the employee entitled to service incentive leave does not use or
commute the same, he is entitled upon his resignation or separation from work to the commutation of his accrued
service incentive leave. As enunciated by the Court in Fernandez v. NLRC: The clear policy of the Labor Code is to
grant service incentive leave pay to workers in all establishments, subject to a few exceptions. Section 2, Rule V,
Book III of the Implementing Rules and Regulations provides that [e]very employee who has rendered at least one
year of service shall be entitled to a yearly service incentive leave of five days with pay. Service incentive leave is a
right which accrues to every employee who has served within 12 months, whether continuous or broken reckoned
from the date the employee started working, including authorized absences and paid regular holidays unless the
working days in the establishment as a matter of practice or policy, or that provided in the employment contracts, is
less than 12 months, in which case said period shall be considered as one year. It is also commutable to its money
equiva582

582
SUPREME COURT REPORTS ANNOTATED
Auto Bus Transport Systems, Inc. vs. Bautista

lent if not used or exhausted at the end of the year. In other words, an employee who has served for one year is
entitled to it. He may use it as leave days or he may collect its monetary value. To limit the award to three years, as
the solicitor general recommends, is to unduly restrict such right.
Same; Same; Same; With regard to service incentive leave, the three-year prescriptive period commences, not at
the end of the year when the employee becomes entitled to the commutation of his service incentive leave, but
from the time when the employer refuses to pay its monetary equivalent after demand or commutation or upon
termination of the employees services, as the case may be.Correspondingly, it can be conscientiously deduced
that the cause of action of an entitled employee to claim his service incentive leave pay accrues from the moment
the employer refuses to remunerate its monetary equivalent if the employee did not make use of said leave credits
but instead chose to avail of its commutation. Accordingly, if the employee wishes to accumulate his leave credits
and opts for its commutation upon his resignation or separation from employment, his cause of action to claim the
whole amount of his accumulated service incentive leave shall arise when the employer fails to pay such amount at
the time of his resignation or separation from employment. Applying Article 291 of the Labor Code in light of this
peculiarity of the service incentive leave, we can conclude that the three (3)-year prescriptive period commences,
not at the end of the year when the employee becomes entitled to the commutation of his service incentive leave,
but from the time when the employer refuses to pay its monetary equivalent after demand of commutation or upon
termination of the employees services, as the case may be.
Same; Same; Same; Social Justice; The Courts construal of Art. 291 of the Labor Code, vis--vis the rules on service
incentive leave, is in keeping with the rudimentary principle that in the implementation and interpretation of the
provisions of the Labor Code and its implementing regulations, the workingmans welfare should be the primordial
and paramount consideration.The above construal of Art. 291, vis--vis the rules on service incentive leave, is in
keeping with the rudimentary principle that in the implementation and interpretation of the provisions of the Labor
Code and its implementing regulations, the workingmans welfare should be the primordial and paramount
consideration. The policy is to extend the applicabil583

VOL. 458, MAY 16, 2005


583
Auto Bus Transport Systems, Inc. vs. Bautista

ity of the decree to a greater number of employees who can avail of the benefits under the law, which is in
consonance with the avowed policy of the State to give maximum aid and protection to labor.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.


Edmundo A. Cruz for petitioner.
Joseph D. Sagampud, Jr. for private respondent.
CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari assailing the Decision1 and Resolution2 of the Court of Appeals
affirming the Decision3 of the National Labor Relations Commission (NLRC). The NLRC ruling modified the Decision of
the Labor Arbiter (finding respondent entitled to the award of 13th month pay and service incentive leave pay) by
deleting the award of 13th month pay to respondent.
The Facts
Since 24 May 1995, respondent Antonio Bautista has been employed by petitioner Auto Bus Transport Systems, Inc.
(Autobus), as driver-conductor with travel routes Manila-Tuguegarao via Baguio, Baguio- Tuguegarao via Manila and
Manila-Tabuk via Baguio. Respondent was paid on commission basis, seven percent (7%) of the total gross income
per travel, on a twice a month basis.
_______________

1 CA-G.R. SP No. 68395, dated 06 May 2002, penned by Associate Justice Andres B. Reyes, Jr. with Associate Justices
Conrado M. Vasquez, Jr. and Mario L. Guaria, III, concurring.
2 Dated 12 December 2002.
3 NLRC NCR CA No. 026584-2000 (NLRC Case No. RAB CAR 02-0088-00), dated 28 September 2001.

584

584
SUPREME COURT REPORTS ANNOTATED
Auto Bus Transport Systems, Inc. vs. Bautista
On 03 January 2000, while respondent was driving Autobus No. 114 along Sta. Fe, Nueva Vizcaya, the bus he was
driving accidentally bumped the rear portion of Autobus No. 124, as the latter vehicle suddenly stopped at a sharp
curve without giving any warning.
Respondent averred that the accident happened because he was compelled by the management to go back to
Roxas, Isabela, although he had not slept for almost twenty-four (24) hours, as he had just arrived in Manila from
Roxas, Isabela. Respondent further alleged that he was not allowed to work until he fully paid the amount of
P75,551.50, representing thirty percent (30%) of the cost of repair of the damaged buses and that despite
respondents pleas for reconsideration, the same was ignored by management. After a month, management sent
him a letter of termination.
Thus, on 02 February 2000, respondent instituted a Complaint for Illegal Dismissal with Money Claims for
nonpayment of 13th month pay and service incentive leave pay against Autobus.
Petitioner, on the other hand, maintained that respon-dents employment was replete with offenses involving
reckless imprudence, gross negligence, and dishonesty. To support its claim, petitioner presented copies of letters,
memos, irregularity reports, and warrants of arrest pertaining to several incidents wherein respondent was involved.
Furthermore, petitioner avers that in the exercise of its management prerogative, respondents employment was
terminated only after the latter was provided with an opportunity to explain his side regarding the accident on 03
January 2000.
On 29 September 2000, based on the pleadings and supporting evidence presented by the parties, Labor Arbiter
Monroe C. Tabingan promulgated a Decision,4 the dispositive portion of which reads:
_______________

4 NLRC Case No. RAB-CAR-02-0088-00.


585

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585
Auto Bus Transport Systems, Inc. vs. Bautista
WHEREFORE, all premises considered, it is hereby found that the complaint for Illegal Dismissal has no leg to stand
on. It is hereby ordered DISMISSED, as it is hereby DISMISSED.
However, still based on the above-discussed premises, the respondent must pay to the complainant the following:
a. his 13th month pay from the date of his hiring to the date of his dismissal, presently computed at P78,117.87;
b. his service incentive leave pay for all the years he had been in service with the respondent, presently computed
at P13,788.05.
All other claims of both complainant and respondent are hereby dismissed for lack of merit.5
Not satisfied with the decision of the Labor Arbiter, petitioner appealed the decision to the NLRC which rendered its
decision on 28 September 2001, the decretal portion of which reads:
[T]he Rules and Regulations Implementing Presidential Decree No. 851, particularly Sec. 3 provides:
Section 3. Employers covered.The Decree shall apply to all employers except to:
xxx

xxx

xxx

e) employers of those who are paid on purely commission, boundary, or task basis, performing a specific work,
irrespective of the time consumed in the performance thereof.
x x x.

Records show that complainant, in his position paper, admitted that he was paid on a commission basis.

In view of the foregoing, we deem it just and equitable to modify the assailed Decision by deleting the award of 13th
month pay to the complainant.
...
_______________

5 Rollo, pp. 46-47.


586

586
SUPREME COURT REPORTS ANNOTATED
Auto Bus Transport Systems, Inc. vs. Bautista
WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by deleting the award of 13th month pay. The
other findings are AFFIRMED.6
In other words, the award of service incentive leave pay was maintained. Petitioner thus sought a reconsideration of
this aspect, which was subsequently denied in a Resolution by the NLRC dated 31 October 2001.
Displeased with only the partial grant of its appeal to the NLRC, petitioner sought the review of said decision with
the Court of Appeals which was subsequently denied by the appellate court in a Decision dated 06 May 2002, the
dispositive portion of which reads:
WHEREFORE, premises considered, the Petition is DISMISSED for lack of merit; and the assailed Decision of
respondent Commission in NLRC NCR CA No. 026584-2000 is hereby AFFIRMED in toto. No costs.7
Hence, the instant petition.
Issues
1. Whether or not respondent is entitled to service incentive leave;

2. Whether or not the three (3)-year prescriptive period provided under Article 291 of the Labor Code, as amended,
is applicable to respondents claim of service incentive leave pay.
Ruling of the Court
The disposition of the first issue revolves around the proper interpretation of Article 95 of the Labor Code vis--vis
Section 1(D), Rule V, Book III of the Implementing Rules and Regulations of the Labor Code which provides:
_______________

6 Rollo, pp. 52-53.


7 CA Decision, p. 10; Rollo, p. 24.
587

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587
Auto Bus Transport Systems, Inc. vs. Bautista
Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE
(a) Every employee who has rendered at least one year of service shall be entitled to a yearly service incentive
leave of five days with pay.
Book III, Rule V: SERVICE INCENTIVE LEAVE
SECTION 1. Coverage.This rule shall apply to all employees except:
...
(d) Field personnel and other employees whose performance is unsupervised by the employer including those who
are engaged on task or contract basis, purely commission basis, or those who are paid in a fixed amount for
performing work irrespective of the time consumed in the performance thereof;

...

A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive leave has
been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to those employees not
explicitly excluded by Section 1 of Rule V. According to the Implementing Rules, Service Incentive Leave shall not
apply to employees classified as field personnel. The phrase other employees whose performance is unsupervised
by the employer must not be understood as a separate classification of employees to which service incentive leave
shall not be granted. Rather, it serves as an amplification of the interpretation of the definition of field personnel
under the Labor Code as those whose actual hours of work in the field cannot be determined with reasonable
certainty.8
The same is true with respect to the phrase those who are engaged on task or contract basis, purely commission
basis. Said phrase should be related with field personnel, applying the rule on ejusdem generis that general and
unlimited terms are restrained and limited by the particular terms that they
_______________

8 See Mercidar Fishing Corporation v. National Labor Relations Commission, G.R. No. 112574, 08 October 1998, 297
SCRA 440.
588

588
SUPREME COURT REPORTS ANNOTATED
Auto Bus Transport Systems, Inc. vs. Bautista
follow.9 Hence, employees engaged on task or contract basis or paid on purely commission basis are not
automatically exempted from the grant of service incentive leave, unless, they fall under the classification of field
personnel.

Therefore, petitioners contention that respondent is not entitled to the grant of service incentive leave just because
he was paid on purely commission basis is misplaced. What must be ascertained in order to resolve the issue of
propriety of the grant of service incentive leave to respondent is whether or not he is a field personnel.
According to Article 82 of the Labor Code, field personnel shall refer to non-agricultural employees who regularly
perform their duties away from the principal place of business or branch office of the employer and whose actual
hours of work in the field cannot be determined with reasonable certainty. This definition is further elaborated in the
Bureau of Working Conditions (BWC), Advisory Opinion to Philippine Technical-Clerical Commercial Employees
Association10 which states that:
As a general rule, [field personnel] are those whose performance of their job/service is not supervised by the
employer or his representative, the workplace being away from the principal office and whose hours and days of
work cannot be determined with reasonable certainty; hence, they are paid specific amount for rendering specific
service or performing specific work. If required to be at specific places at specific times, employees including drivers
cannot be said to be field personnel despite the fact that they are performing work away from the principal office of
the employee. [Emphasis ours]
To this discussion by the BWC, the petitioner differs and postulates that under said advisory opinion, no employee
would ever be considered a field personnel because every
_______________

9 Cebu Institute of Technology v. Ople, G.R. No. L- 58870, 18 December 1987, 156 SCRA 629, 672, citing Vera v.
Cuevas, G.R. No. L-33693, 31 May 1979, 90 SCRA 379.
10 06 April 1989; Rollo. p. 20.
589

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589
Auto Bus Transport Systems, Inc. vs. Bautista

employer, in one way or another, exercises control over his employees. Petitioner further argues that the only
criterion that should be considered is the nature of work of the employee in that, if the employees job requires that
he works away from the principal office like that of a messenger or a bus driver, then he is inevitably a field
personnel.
We are not persuaded. At this point, it is necessary to stress that the definition of a field personnel is not merely
concerned with the location where the employee regularly performs his duties but also with the fact that the
employees performance is unsupervised by the employer. As discussed above, field personnel are those who
regularly perform their duties away from the principal place of business of the employer and whose actual hours of
work in the field cannot be determined with reasonable certainty. Thus, in order to conclude whether an employee is
a field employee, it is also necessary to ascertain if actual hours of work in the field can be determined with
reasonable certainty by the employer. In so doing, an inquiry must be made as to whether or not the employees
time and performance are constantly supervised by the employer.
As observed by the Labor Arbiter and concurred in by the Court of Appeals:
It is of judicial notice that along the routes that are plied by these bus companies, there are its inspectors assigned
at strategic places who board the bus and inspect the passengers, the punched tickets, and the conductors reports.
There is also the mandatory once-a-week car barn or shop day, where the bus is regularly checked as to its
mechanical, electrical, and hydraulic aspects, whether or not there are problems thereon as reported by the driver
and/or conductor. They too, must be at specific place as [sic] specified time, as they generally observe prompt
departure and arrival from their point of origin to their point of destination. In each and every depot, there is always
the Dispatcher whose function is precisely to see to it that the bus and its crew leave the premises at specific times
and arrive at the estimated proper time. These, are present in the case at bar. The driver, the complainant herein,
was therefore
590

590
SUPREME COURT REPORTS ANNOTATED
Auto Bus Transport Systems, Inc. vs. Bautista
under constant supervision while in the performance of this work. He cannot be considered a field personnel.11

We agree in the above disquisition. Therefore, as correctly concluded by the appellate court, respondent is not a
field personnel but a regular employee who performs tasks usually necessary and desirable to the usual trade of
petitioners business. Accordingly, respondent is entitled to the grant of service incentive leave.
The question now that must be addressed is up to what amount of service incentive leave pay respondent is entitled
to.
The response to this query inevitably leads us to the correlative issue of whether or not the three (3)-year
prescriptive period under Article 291 of the Labor Code is applicable to respondents claim of service incentive leave
pay.
Article 291 of the Labor Code states that all money claims arising from employer-employee relationship shall be filed
within three (3) years from the time the cause of action accrued; otherwise, they shall be forever barred.
In the application of this section of the Labor Code, the pivotal question to be answered is when does the cause of
action for money claims accrue in order to determine the reckoning date of the three-year prescriptive period.
It is settled jurisprudence that a cause of action has three elements, to wit, (1) a right in favor of the plaintiff by
whatever means and under whatever law it arises or is created; (2) an obligation on the part of the named
defendant to respect or not to violate such right; and (3) an act or omission on the part of such defendant violative
of the right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff.12
_______________

11 Rollo, pp. 45-46.


12 Baliwag Transit, Inc. v. Ople, G.R. No. 57642, 16 March 1989, 171 SCRA 250, citing Agric. Credit & Cooperative
Financing
591

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591
Auto Bus Transport Systems, Inc. vs. Bautista

To properly construe Article 291 of the Labor Code, it is essential to ascertain the time when the third element of a
cause of action transpired. Stated differently, in the computation of the three-year prescriptive period, a
determination must be made as to the period when the act constituting a violation of the workers right to the
benefits being claimed was committed. For if the cause of action accrued more than three (3) years before the filing
of the money claim, said cause of action has already prescribed in accordance with Article 291.13
Consequently, in cases of nonpayment of allowances and other monetary benefits, if it is established that the
benefits being claimed have been withheld from the employee for a period longer than three (3) years, the amount
pertaining to the period beyond the three-year prescriptive period is therefore barred by prescription. The amount
that can only be demanded by the aggrieved employee shall be limited to the amount of the benefits withheld
within three (3) years before the filing of the complaint.14
It is essential at this point, however, to recognize that the service incentive leave is a curious animal in relation to
other benefits granted by the law to every employee. In the case of service incentive leave, the employee may
choose to either use his leave credits or commute it to its monetary equivalent if not exhausted at the end of the
year.15 Furthermore, if the employee entitled to service incentive leave does not use or
_______________

Administration v. Alpha Ins. & Surety Co., Inc., G.R. No. L-24566, 29 July 1968, 24 SCRA 151; Summit Guaranty and
Insurance Co., Inc. v. De Guzman, G.R. No. L-50997, 30 June 1987, 151 SCRA 389; Tormon v. Cutanda, G.R. No. L18785, 23 December 1963, 9 SCRA 698.
13 See De Guzman, et al. v. Court of Appeals and Nasipit Lumber Co., G.R. No. 132257, 12 October 1998, 297 SCRA
743.
14 See E. Ganzon, Inc. v. National Labor Relations Commission, G.R. No. 123769, 22 December 1999, 321 SCRA 434.
15 Fernandez v. National Labor Relations Commission, G.R. No. 105892, 28 January 1998, 349 Phil 65; 285 SCRA
149.
592

592

SUPREME COURT REPORTS ANNOTATED


Auto Bus Transport Systems, Inc. vs. Bautista
commute the same, he is entitled upon his resignation or separation from work to the commutation of his accrued
service incentive leave. As enunciated by the Court in Fernandez v. NLRC:16
The clear policy of the Labor Code is to grant service incentive leave pay to workers in all establishments, subject to
a few exceptions. Section 2, Rule V, Book III of the Implementing Rules and Regulations provides that [e]very
employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five
days with pay. Service incentive leave is a right which accrues to every employee who has served within 12
months, whether continuous or broken reckoned from the date the employee started working, including authorized
absences and paid regular holidays unless the working days in the establishment as a matter of practice or policy, or
that provided in the employment contracts, is less than 12 months, in which case said period shall be considered as
one year. It is also commutable to its money equivalent if not used or exhausted at the end of the year. In other
words, an employee who has served for one year is entitled to it. He may use it as leave days or he may collect its
monetary value. To limit the award to three years, as the solicitor general recommends, is to unduly restrict such
right.17 [Italics supplied]
Correspondingly, it can be conscientiously deduced that the cause of action of an entitled employee to claim his
service incentive leave pay accrues from the moment the employer refuses to remunerate its monetary equivalent if
the employee did not make use of said leave credits but instead chose to avail of its commutation. Accordingly, if
the employee wishes to accumulate his leave credits and opts for its commutation upon his resignation or
separation from employment, his cause of action to claim the whole amount of his accumulated service incentive
leave shall arise when the employer fails to pay such amount at the time of his resignation or separation from
employment.
_______________

16 Ibid.
17 Ibid., pp. 94-95.
593

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593
Auto Bus Transport Systems, Inc. vs. Bautista
Applying Article 291 of the Labor Code in light of this peculiarity of the service incentive leave, we can conclude that
the three (3)-year prescriptive period commences, not at the end of the year when the employee becomes entitled
to the commutation of his service incentive leave, but from the time when the employer refuses to pay its monetary
equivalent after demand of commutation or upon termination of the employees services, as the case may be.
The above construal of Art. 291, vis--vis the rules on service incentive leave, is in keeping with the rudimentary
principle that in the implementation and interpretation of the provisions of the Labor Code and its implementing
regulations, the workingmans welfare should be the primordial and paramount consideration.18 The policy is to
extend the applicability of the decree to a greater number of employees who can avail of the benefits under the law,
which is in consonance with the avowed policy of the State to give maximum aid and protection to labor.19
In the case at bar, respondent had not made use of his service incentive leave nor demanded for its commutation
until his employment was terminated by petitioner. Neither did petitioner compensate his accumulated service
incentive leave pay at the time of his dismissal. It was only upon his filing of a complaint for illegal dismissal, one
month from the time of his dismissal, that respondent demanded from his former employer commutation of his
accumulated leave credits. His cause of action to claim the payment of his accumulated ser_______________

18 Abella v. National Labor Relations Commission, G.R. No. L-71813, 20 July 1987, 152 SCRA 140, citing Volkschel
Labor Union v. Bureau of Labor Relations, G.R. No. L-45824, 19 June 1985, 137 SCRA 43.
19 Sarmiento v. Employees Compensation Commission, G.R. No. L-68648, 24 September 1986, 144 SCRA 421, citing
Cristobal v. Employees Compensation Commission, G.R. No. L-49280, 26 Febru-ary 1981, 103 SCRA 329; Acosta v.
Employees Compensation Commission, G.R. No. L-55464, 12 November 1981, 109 SCRA 209.
594

594

SUPREME COURT REPORTS ANNOTATED


Auto Bus Transport Systems, Inc. vs. Bautista
vice incentive leave thus accrued from the time when his employer dismissed him and failed to pay his accumulated
leave credits.
Therefore, the prescriptive period with respect to his claim for service incentive leave pay only commenced from the
time the employer failed to compensate his accumulated service incentive leave pay at the time of his dismissal.
Since respondent had filed his money claim after only one month from the time of his dismissal, necessarily, his
money claim was filed within the prescriptive period provided for by Article 291 of the Labor Code.
WHEREFORE, premises considered, the instant petition is hereby DENIED. The assailed Decision of the Court of
Appeals in CA-G.R. SP. No. 68395 is hereby AFFIRMED. No Costs.
SO ORDERED.
Puno (Chairman), Austria-Martinez, Callejo, Sr. and Tinga, JJ., concur.
Petition denied, assailed decision affirmed.
Notes.Although fishermen perform non-agricultural work away from their employers business offices, the fact
remains that throughout the duration of their work they are under the effective control and supervision of the
employer through the vessels patron or master. (Mercidar Fishing Corporation vs. National Labor Relations
Commission, 297 SCRA 440 [1998])
Piece-rate employees are not entitled to service incentive leave pay as well as holiday pay even if they are entitled
to other benefits like COLA and 13th month pay. (Mark Roche International vs. National Labor Relations Commission,
313 SCRA 356 [1999])
o0o

595

Copyright 2015 Central Book Supply, Inc. All rights reserved. [Auto Bus Transport Systems, Inc. vs. Bautista, 458
SCRA 578(2005)]

200
SUPREME COURT REPORTS ANNOTATED
Union of Filipro Employees vs. Vivar, Jr.
G.R. No. 79255. January 20, 1992.*
UNION OF FILIPRO EMPLOYEES (UFE), petitioner, vs. BENIGNO VIVAR, JR., NATIONAL LABOR RELATIONS COMMISSION
and NESTL PHILIPPINES, INC. (formerly FILIPRO, INC.), respondents.
Labor Law; Field personnel; Holiday pay; Respondent's sales personnel are not covered by the holiday pay. The law
requires that the actual hours of work in the field be reasonably ascertained.The Court
______________

* EN BANC.
201

VOL. 205, JANUARY 20, 1992

201
Union of Filipro Employees vs. Vivar, Jr.
does not agree. The law requires that the actual hours of work in the field be reasonably ascertained. The company
has no way of determining whether or not these sales personnel, even if they report to the office before 8:00 a.m.
prior to field work and come back at 4:30 p.m., really spend the hours in between in actual field work. We concur
with the following disquisition by the respondent arbitrator: "The requirement for the salesmen and other similarly
situated employees to report for work at the office at 8:00 a.m. and return at 4:00 or 4:30 p.m. is not within the
realm of work in the field as defined in the Code but an exercise of purely management prerogative of providing
administrative control over such personnel. This does not in any manner provide a reasonable level of determination
on the actual field work of the employees which can be reasonably ascertained. The theoretical analysis that
salesmen and other similarly-situated workers regularly report for work at 8:00 a.m. and return to their home station
at 4:00 or 4:30 p.m., creating the assumption that their field work is supervised, is surface projection. Actual field
work begins after 8:00 a.m. when the sales personnel follow their field itinerary, and ends immediately before 4:00
or 4:30 p.m. when they report back to their office. The period between 8:00 a.m. and 4:00 or 4:30 p.m. comprises
their hours of work in the field, the extent or scope and result of which are subject to their individual capacity and
industry and which 'cannot be determined with reasonable certainty.' This is the reason why effective supervision
over field work of salesmen and medical representatives, truck drivers and merchandisers is practically a physical
impossibility. Consequently, they are excluded from the ten holidays with pay award.' (Rollo, pp. 36-37)
Same; Same; Same; Actual hours of work; Respondent's sales personnel are evaluated by the result of their work
and not by the actual hours of field work which are hardly susceptible to determination.The criteria for granting
incentive bonus are: (1) attaining or exceeding sales volume based on sales target; (2) good collection performance;
(3) proper compliance with good market hygiene; (4) good merchandising work; (5) minimal market returns and (6)
proper truck maintenance. (Rollo, p. 190) The above criteria indicate that these sales personnel are given incentive
bonuses precisely because of the difficulty in measuring their actual hours of field work. These employees are
evaluated by the result of their work and not by the actual hours of field work which are hardly susceptible to
determination.
Same; Same; Overtime, night differential, sick and vacation leave pay; There is no merit in respondent Nestl's claim
of overpayment of overtime and night differential pay and sick and vacation leave bene202

202
SUPREME COURT REPORTS ANNOTATED
Union of Filipro Employees vs. Vivar, Jr.
fits, the computation of which are all based on the daily rate, since the daily rate is still the same before and after
the grant of holiday pay.Following the criterion laid down in the Chartered Bank case, the use of 251 days' divisor
by respondent Filipro indicates that holiday pay is not yet included in the employee's salary, otherwise the divisor
should have been 261. It must be stressed that the daily rate, assuming there are no intervening salary increases, is
a constant figure for the purpose of computing overtime and night differential pay and commutation of sick and
vacation leave credits. Necessarily, the daily rate should also be the same basis for computing the 10 unpaid
holidays. The respondent arbitrator's order to change the divisor from 251 to 261 days would result in a lower daily
rate which is violative of the prohibition on non-diminution of benefits found in Article 100 of the Labor Code. To
maintain the same daily rate if the divisor is adjusted to 261 days, then the dividend, which represents the
employee's annual salary, should correspondingly be increased to incorporate the holiday pay. To illustrate, if prior to
the grant of holiday pay, the employee's annual salary is P25,100, then dividing such figure by 251 days, his daily
rate is P1 00.00. After the payment of 10 days' holiday pay, his annual salary already includes holiday pay and totals
P26,100 (P25,100 + 1,000). Dividing this by 261 days, the daily rate is still P1 00.00. There is thus no merit in
respondent Nestl's claim of overpayment of overtime and night differential pay and sick and vacation leave
benefits, the computation of which are all based on the daily rate, since the daily rate is still the same before and
after the grant of holiday pay.
Same; Same; Same; Civil Law; Obligations and Contracts; Solutio indebiti; Nestl's invocation of solutio indebiti or
payment by mistake due to its use of 251 days as divisor must fail in light of the Labor Code mandate that "all
doubts in the implementation and interpretation of this Code, including its implementing rules and regulations shall
be resolved in favor of labor."Respondent Nestl's invocation of solutio indebiti, or payment by mistake, due to its
use of 251 days as divisor must fail in light of the Labor Code mandate that "all doubts in the implementation and
interpretation of this code, including its implementing rules and regulations, shall be resolved in favor of labor."
(Article 4). Moreover, prior to September 1,1980, when the company was on a 6-day working schedule, the divisor
used by the company was 303, indicating that the 10 holidays were likewise not paid. When Filipro shifted to a 5-day
working schedule on September 1,1980, it had the chance to rectify its error, if ever there was one, but did not do
so. It is now too late to allege payment by mistake.
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Union of Filipro Employees vs. Vivar, Jr.
PETITION to review the order of the National Labor Relations Commission.

The facts are stated in the opinion of the Court.


Jose C. Espinas for petitioner.
Siguion Reyna, Montecillo & Ongsiako for private respondent.
GUTIERREZ, JR., J.:

This labor dispute stems from the exclusion of sales personnel from the holiday pay award and the change of the
divisor in the computation of benefits from 251 to 261 days.
On November 8, 1985, respondent Filipro, Inc. (now Nestl Philippines, Inc.) filed with the National Labor Relations
Commission (NLRC) a petition for declaratory relief seeking a ruling on its rights and obligations respecting claims of
its monthly paid employees for holiday pay in the light of the Court's decision in Chartered Bank Employees
Association v. Ople (138 SCRA 273 [1985]).
Both Filipro and the Union of Filipro Employees (UFE) agreed to submit the case for voluntary arbitration and
appointed respondent Benigno Vivar, Jr. as voluntary arbitrator. On January 2,1980, Arbitrator Vivar rendered a
decision directing Filipro to:
"pay its monthly paid employees holiday pay pursuant to Article 94 of the Code, subject only to the exclusions and
limitations specified in Article 82 and such other legal restrictions as are provided for in the Code." (Rollo, p. 31)
Filipro filed a motion for clarification seeking (1) the limitation of the award to three years, (2) the exclusion of
salesmen, sales representatives, truck drivers, merchandisers and medical representatives (hereinafter referred to
as sales personnel) from the award of the holiday pay; and (3) deduction from the holiday pay award of
overpayment for overtime, night differential, vacation and sick leave benefits due to the use of 251 divisor. (Rollo,
pp. 138-145)

Petitioner UFE answered that the award should be made effective from the date of effectivity of the Labor Code, that
their
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SUPREME COURT REPORTS ANNOTATED
Union of Filipro Employees vs. Vivar, Jr.
sales personnel are not field personnel and are therefore entitled to holiday pay, and that the use of 251 as divisor is
an established employee benefit which cannot be diminished.
On January 14, 1986, the respondent arbitrator issued an order declaring that the effectivity of the holiday pay
award shall retroact to November 1, 1974, the date of effectivity of the Labor Code. He adjudged, however, that the
company's sales personnel are field personnel and, as such, are not entitled to holiday pay. He likewise ruled that
with the grant of 10 days' holiday pay, the divisor should be changed from 251 to 261 and ordered the
reimbursement of overpayment for overtime, night differential, vacation and sick leave pay due to the use of 251
days as divisor.
Both Nestl and UFE filed their respective motions for partial reconsideration. Respondent Arbitrator treated the two
motions as appeals and forwarded the case to the NLRC which issued a resolution dated May 25, 1987 remanding
the case to the respondent arbitrator on the ground that it has no jurisdiction to review decisions in voluntary
arbitration cases pursuant to Article 263 of the Labor Code as amended by Section 10, Batas Pambansa Blg. 130 and
as implemented by Section 5 of the rules implementing B.P. Blg. 130.
However, in a letter dated July 6, 1987, the respondent arbitrator refused to take cognizance of the case reasoning
that he had no more jurisdiction to continue as arbitrator because he had resigned from service effective May
1,1986.
Hence, this petition.
The petitioner union raises the following issues:
1) Whether or not Nestl's sales personnel are entitled to holiday pay; and

2) Whether or not, concomitant with the award of holiday pay, the divisor should be changed from 251 to 261 days
and whether or not the previous use of 251 as divisor resulted in overpayment for overtime, night differential,
vacation and sick leave pay.
The petitioner insists that respondent's sales personnel are not field personnel under Article 82 of the Labor Code.
The respondent company controverts this assertion.
Under Article 82, field personnel are not entitled to holiday pay. Said article defines field personnel as "nonagricultural
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Union of Filipro Employees vs. Vivar, Jr.
employees who regularly perform their duties away from the principal place of business or branch office of the
employer and whose actual hours of work in the field cannot be determined with reasonable certainty."
The controversy centers on the interpretation of the clause "whose actual hours of work in the field cannot be
determined with reasonable certainty."
It is undisputed that these sales personnel start their field work at 8:00 a.m. after having reported to the office and
come back to the office at 4:00 p.m. or 4:30 p.m. if they are Makatibased.
The petitioner maintains that the period between 8:00 a.m. to 4:00 or 4:30 p.m. comprises the sales personnel's
working hours which can be determined with reasonable certainty.
The Court does not agree. The law requires that the actual hours of work in the field be reasonably ascertained. The
company has no way of determining whether or not these sales personnel, even if they report to the office before
8:00 a.m. prior to field work and come back at 4:30 p.m., really spend the hours in between in actual field work.
We concur with the following disquisition by the respondent arbitrator:
"The requirement for the salesmen and other similarly situated employees to report for work at the office at 8:00
a.m. and return at 4:00 or 4:30 p.m. is not within the realm of work in the field as defined in the Code but an

exercise of purely management prerogative of providing administrative control over such personnel. This does not in
any manner provide a reasonable level of determination on the actual field work of the employees which can be
reasonably ascertained. The theoretical analysis that salesmen and other similarly-situated workers regularly report
for work at 8:00 a.m. and return to their home station at 4:00 or 4:30 p.m., creating the assumption that their field
work is supervised, is surface projection. Actual field work begins after 8:00 a.m. when the sales personnel follow
their field itinerary, and ends immediately before 4:00 or 4:30 p.m. when they report back to their office. The period
between 8:00 a.m. and 4:00 or 4:30 p.m. comprises their hours of work in the field, the extent or scope and result of
which are subject to their individual capacity and industry and which 'cannot be determined with reasonable
certainty.' This is the reason why effective supervision over field work of salesmen and medical representatives,
truck drivers and merchandisers is practi206

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Union of Filipro Employees vs. Vivar, Jr.
cally a physical impossibility. Consequently, they are excluded from the ten holidays with pay award.' (Rollo, pp. 3637)
Moreover, the requirement that "actual hours of work in the field cannot be determined with reasonable certainty"
must be read in conjunction with Rule IV, Book III of the Implementing Rules which provides:
"Rule IV Holidays with Pay
Section 1. CoverageThis rule shall apply to all employees except:
xxx

xxx

xxx

(e) Field personnel and other employees whose time and performance is unsupervised by the employer x x x (Italics
supplied)
While contending that such rule added another element not found in the law (Rollo, p. 13), the petitioner
nevertheless attempted to show that its affected members are not covered by the abovementioned rule. The

petitioner asserts that the company's sales personnel are strictly supervised as shown by the SOD (Supervisor of the
Day) schedule and the company circular dated March 15, 1984 (Annexes 2 and 3, Rollo, pp. 53-55).
Contrary to the contention of the petitioner, the Court finds that the aforementioned rule did not add another
element to the Labor Code definition of field personnel. The clause "whose time and performance is unsupervised by
the employer" did not amplify but merely interpreted and expounded the clause "whose actual hours of work in the
field cannot be determined with reasonable certainty." The former clause is still within the scope and purview of
Article 82 which defines field personnel. Hence, in deciding whether or not an employee's actual working hours in
the field can be determined with reasonable certainty, query must be made as to whether or not such employee's
time and performance is constantly supervised by the employer.
The SOD schedule adverted to by the petitioner does not in the least signify that these sales personnel's time and
performance are supervised. The purpose of this schedule is merely to ensure that the sales personnel are out of the
office not later than 8:00 a.m. and are back in the office not earlier than 4:00 p.m.
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Union of Filipro Employees vs. Vivar, Jr.
Likewise, the Court fails to see how the company can monitor the number of actual hours spent in field work by an
employee through the imposition of sanctions on absenteeism contained in the company circular of March 15, 1984.
The petitioner claims that the fact that these sales personnel are given incentive bonus every quarter based on their
performance is proof that their actual hours of work in the field can be determined with reasonable certainty.
The Court thinks otherwise.
The criteria for granting incentive bonus are: (1) attaining or exceeding sales volume based on sales target; (2) good
collection performance; (3) proper compliance with good market hygiene; (4) good merchandising work; (5) minimal
market returns and (6) proper truck maintenance. (Rollo, p. 190)

The above criteria indicate that these sales personnel are given incentive bonuses precisely because of the difficulty
in measuring their actual hours of field work. These employees are evaluated by the result of their work and not by
the actual hours of field work which are hardly susceptible to determination.
In San Miguel Brewery, Inc. v. Democratic Labor Organization (8 SCRA 613 [1963]), the Court had occasion to discuss
the nature of the job of a salesman. Citing the case of Jewel Tea Co. v. Williams, C.C.A. Okla., 118 F. 2d 202, the Court
stated:
'The reasons for excluding an outside salesman are fairly apparent. Such a salesman, to a greater extent, works
individually. There are no restrictions respecting the time he shall work and he can earn as much or as little, within
the range of his ability, as his ambition dictates. In lieu of overtime he ordinarily receives commissions as extra
compensation. He works away from his employer's place of business, is not subject to the personal supervision of his
employer, and his employer has no way of knowing the number of hours he works per day."
While in that case the issue was whether or not salesmen were entitled to overtime pay, the same rationale for their
exclusion as field personnel from holiday pay benefits also applies.
The petitioner union also assails the respondent arbitrator's ruling that, concomitant with the award of holiday pay,
the
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Union of Filipro Employees vs. Vivar, Jr.
divisor should be changed from 251 to 261 days to include the additional 10 holidays and the employees should
reimburse the amounts overpaid by Filipro due to the use of 251 days' divisor. Arbitrator Vivar's rationale for his
decision is as follows:
"xxx The new doctrinal policy established which ordered payment of ten holidays certainly adds to or accelerates the
basis of conversion and computation by ten days. With the inclusion of ten holidays as paid days, the divisor is no
longer 251 but 261 or 262 if election day is counted. This is indeed an extremely difficult legal question of
interpretation which accounts for what is claimed as falling within the concept of 'solutio indebiti.'

When the claim of the Union for payment of ten holidays was granted, there was a consequent need to abandon that
251 divisor. To maintain it would create an impossible situation where the employees would benefit with additional
ten days with pay but would simultaneously enjoy higher benefits by discarding the same ten days for purposes of
computing overtime and night time services and considering sick and vacation leave credits. Therefore,
reimbursement of such overpayment with the use of 251 as divisor arises concomitant with the award of ten
holidays with pay.' (Rollo, p. 34)
The divisor assumes an important role in determining whether or not holiday pay is already included in the monthly
paid employee's salary and in the computation of his daily rate. This is the thrust of our pronouncement in Chartered
Bank Employees Association v. Ople (supra). In that case, We held:
"It is argued that even without the presumption found in the rules and in the policy instruction, the company
practice indicates that the monthly salaries of the employees are so computed as to include the holiday pay
provided by law. The petitioner contends otherwise.
One strong argument in favor of the petitioner's stand is the fact that the Chartered Bank, in computing overtime
compensation for its employees, employs a 'divisor' of 251 days. The 251 working days divisor is the result of
subtracting all Saturdays, Sundays and the ten (10) legal holidays from the total number of calendar days in a year.
If the employees are already paid for all non-working days, the divisor should be 365 and not 251."
In the petitioner's case, its computation of daily rate, since September 1,1980, is as follows:
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Union of Filipro Employees vs. Vivar, Jr.
monthly rate x 12 months
251 days

Following the criterion laid down in the Chartered Bank case, the use of 251 days' divisor by respondent Filipro
indicates that holiday pay is not yet included in the employee's salary, otherwise the divisor should have been 261.
It must be stressed that the daily rate, assuming there are no intervening salary increases, is a constant figure for
the purpose of computing overtime and night differential pay and commutation of sick and vacation leave credits.
Necessarily, the daily rate should also be the same basis for computing the 10 unpaid holidays.
The respondent arbitrator's order to change the divisor from 251 to 261 days would result in a lower daily rate which
is violative of the prohibition on non-diminution of benefits found in Article 100 of the Labor Code. To maintain the
same daily rate if the divisor is adjusted to 261 days, then the dividend, which represents the employee's annual
salary, should correspondingly be increased to incorporate the holiday pay. To illustrate, if prior to the grant of
holiday pay, the employee's annual salary is P25,100, then dividing such figure by 251 days, his daily rate is
P100.00. After the payment of 10 days' holiday pay, his annual salary already includes holiday pay and totals
P26,100 (P25,100 + 1,000). Dividing this by 261 days, the daily rate is still P100.00. There is thus no merit in
respondent Nestl's claim of overpayment of overtime and night differential pay and sick and vacation leave
benefits, the computation of which are all based on the daily rate, since the daily rate is still the same before and
after the grant of holiday pay.
Respondent Nestl's invocation of solutio indebiti, or payment by mistake, due to its use of 251 days as divisor must
fail in light of the Labor Code mandate that "all doubts in the implementation and interpretation of this Code,
including its implementing rules and regulations, shall be resolved in favor of labor." (Article 4). Moreover, prior to
September 1, 1980, when the company was on a 6-day working schedule, the divisor used by the company was 303,
indicating that the 10 holidays were likewise not paid. When Filipro shifted to a 5-day working schedule on
September 1,1980, it had the chance to rectify its
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Union of Filipro Employees vs. Vivar, Jr.
error, if ever there was one, but did not do so. It is now too late to allege payment by mistake.

Nestl also questions the voluntary arbitrator's ruling that holiday pay should be computed from November 1, 1974.
This ruling was not questioned by the petitioner union as obviously, said decision was favorable to it. Technically,
therefore, respondent Nestl should have filed a separate petition raising the issue of effectivity of the holiday pay
award. This Court has ruled that an appellee who is not an appellant may assign errors in his brief where his purpose
is to maintain the judgment on other grounds, but he cannot seek modification or reversal of the judgment or
affirmative relief unless he has also appealed. (Franco v. Intermediate Appellate Court, 178 SCRA 331 [1989], citing
La Campana Food Products, Inc. v. Philippine Commercial and Industrial Bank, 142 SCRA 394 [1986]). Nevertheless,
in order to fully settle the issues so that the execution of the Court's decision in this case may not be needlessly
delayed by another petition, the Court resolved to take up the matter of effectivity of the holiday pay award raised
by Nestl.
Nestl insists that the reckoning period for the application of the holiday pay award is 1985 when the Chartered
Bank decision, promulgated on August 28, 1985, became final and executory, and not from the date of effectivity of
the Labor Code. Although the Court does not entirely agree with Nestl, we find its claim meritorious.
In Insular Bank of Asia and America Employees' Union (IBAAEU) v. Inciong, 132 SCRA 663 [1984], hereinafter
referred to as the IBAA case, the Court declared that Section 2, Rule IV, Book III of the implementing rules and Policy
Instruction No. 9, issued by the then Secretary of Labor on February 16, 1976 and April 23, 1976, respectively, and
which excluded monthly paid employees from holiday pay benefits, are null and void. The Court therein reasoned
that, in the guise of clarifying the Labor Code's provisions on holiday pay, the aforementioned implementing rule and
policy instruction amended them by enlarging the scope of their exclusion. The Chartered Bank case reiterated the
above ruling and added the 'divisor' test.
However, prior to their being declared null and void, the implementing rule and policy instruction enjoyed the
presumption of validity and hence, Nestl's non-payment of the holiday
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Union of Filipro Employees vs. Vivar, Jr,
benefit up to the promulgation of the IBAA case on October 23, 1984 was in compliance with these presumably valid
rule and policy instruction.

In the case of De Agbayani v. Philippine National Bank, 38 SCRA 429 [1971], the Court discussed the effect to be
given to a legislative or executive act subsequently declared invalid:
xxx

xxx

xxx

"xxx It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act
must have been in force and had to be complied with. This is so as until after the judiciary, in an appropriate case,
declares its invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have
changed their positions. What could be more fitting than that in a subsequent litigation regard be had to what has
been done while such legislative or executive act was in operation and presumed to be valid in all respects. It is now
accepted as a doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely
to reflect awareness that precisely because the judiciary is the government organ which has the final say on whether
or not a legislative or executive measure is valid, a period of time may have elapsed before it can exercise the power
of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and
justice then, if there be no recognition of what had transpired prior to such adjudication.
"In the language of an American Supreme Court decision: 'The actual existence of a statute, prior to such a
determination [of unconstitutionality], is an operative fact and may have consequences which cannot justly be
ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various aspects,with respect to particular relations, individual and
corporate, and particular conduct, private and official.' (Chicot County Drainage Dist. v. Baxter States Bank, 308 US
371, 374 [1940]). This language has been quoted with approval in a resolution in Araneta v. Hill (93 Phil. 1002
[1953]) and the decision in Manila Motor Co., Inc. v. Flores (99 Phil., 738 [1956]). An even more recent instance is
the opinion of Justice Zaldivar speaking for the Court in Fernandez v. Cuerva and Co. (21 SCRA 1095 [1967])." (At pp.
434-435)
The "operative fact" doctrine realizes that in declaring a law or rule null and void, undue harshness and resulting
unfairness must be avoided. It is now almost the end of 1991. To require
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SUPREME COURT REPORTS ANNOTATED
Union of Filipro Employees vs. Vivar, Jr.

various companies to reach back to 1975 now and nullify acts done in good faith is unduly harsh. 1984 is a fairer
reckoning period under the facts of this case.
Applying the aforementioned doctrine to the case at bar, it is not far-fetched that Nestl, relying on the implicit
validity of the implementing rule and policy instruction before this Court nullified them, and thinking that it was not
obliged to give holiday pay benefits to its monthly paid employees, may have been moved to grant other
concessions to its employees, especially in the collective bargaining agreement. This possibility is bolstered by the
fact that respondent Nestl's employees are among the highest paid in the industry. With this consideration, it would
be unfair to impose additional burdens on Nestl when the non-payment of the holiday benefits up to 1984 was not
in any way attributed to Nestl's fault.
The Court thereby resolves that the grant of holiday pay be effective, not from the date of promulgation of the
Chartered Bank case nor from the date of effectivity of the Labor Code, but from October 23, 1984, the date of
promulgation of the IBAA case.
WHEREFORE, the order of the voluntary arbitrator is hereby MODIFIED. The divisor to be used in computing holiday
pay shall be 251 days. The holiday pay as above directed shall be computed from October 23, 1984. In all other
respects, the order of the respondent arbitrator is hereby AFFIRMED.
SO ORDERED.
Narvasa (C.J), Melencio-Herrera, Paras, Feliciano, Padilla, Bidin, Medialdea, Grio-Aquino, Regalado, Davide, Jr. and
Romero, JJ., concur.
Cruz, J., No part. Related to one of the counsel.
Nocon, J., No part. Did not participate in the deliberations.
Order affirmed with modification.
Note.Management prerogatives are not absolute prerogatives, but are subject to limitations found in law, a
collective bargaining agreement, or general principles of fair play and justice. (UST vs. NLRC, 190 SCRA 758.)
213
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