ANGELINA

No. 170087
Petitioner,
Present:

FRANCISCO, G.R.

o P
a
n
g
a
n
i
b
a
n
,
C
.
J
.
(
C
h
a
ir
p
e
r
s
o
n
),
- versus - Ynares-Santiago,
Austria-Martinez,
o C
a
ll
e
j
o
,
S

r.
,
a
n
d
o C
h
i
c
o
N
a
z
a
ri
o
,
J
J
.
NATIONAL LABOR RELATIONS
COMMISSION, KASEI
CORPORATION,
SEIICHIRO TAKAHASHI,
TIMOTEO
ACEDO, DELFIN LIZA, IRENE
BALLESTEROS, TRINIDAD
LIZA Promulgated:
and RAMON ESCUETA,
Respondents.
August 31, 2006
x
--------------------------------------------------------------------------------------x
DECISION

 YNARES-SANTIAGO, J.:
This
petition
for
review
on certiorari under Rule 45 of the
Rules of Court seeks to annul
and set aside the Decision and
Resolution of the Court of
Appeals dated October 29,
2004[1] and October 7, 2005,
[2]
respectively, in CA-G.R. SP
No.
78515
dismissing
the
complaint
for
constructive
dismissal
filed
by
herein
petitioner
Angelina
Francisco. The appellate court
reversed and set aside the
Decision of the National Labor
Relations Commission (NLRC)
dated April 15, 2003,[3] in NLRC
NCR CA No. 032766-02 which
affirmed with modification the
decision of the Labor Arbiter
dated July 31, 2002,[4] in NLRCNCR Case No. 30-10-0-489-01,
finding that private respondents
were liable for constructive
dismissal.
In 1995, petitioner was hired by
Kasei Corporation during its
incorporation stage. She was
designated as Accountant and
Corporate Secretary and was
assigned to handle all the
accounting
needs
of
the
company. She
was
also
designated as Liaison Officer to
the City of Makati to secure
business permits, construction

permits and other licenses for the

initial operation of the company.[5]
- Although
she
was
designated as Corporate
Secretary, she was not
entrusted
with
the
corporate
documents;
neither did she attend any
board meeting nor required
to
do
so.She
never
prepared
any
legal
document
and
never
represented the company
as
its
Corporate
Secretary. However,
on
some occasions, she was
prevailed upon to sign
documentation
for
the
[6]
company.
- In 1996, petitioner was
designated
Acting
Manager. The corporation
also hired Gerry Nino as
accountant in lieu of
petitioner. As
Acting
Manager, petitioner was
assigned
to
handle
recruitment
of
all
employees and perform
management
administration
functions;
represent the company in
all
dealings
with
government
agencies,
especially with the Bureau
of Internal Revenue (BIR),
Social Security System
(SSS) and in the city
government of Makati; and
to administer all other

matters pertaining
operation
of
Restaurant which is
and operated by
Corporation.[7]

to the
Kasei
owned
Kasei

- For five years, petitioner

performed the duties of
Acting
Manager. As
of
December 31, 2000 her
salary was P27,500.00 plus
P3,000.00
housing
allowance and a 10% share
in the profit of Kasei
Corporation.[8]
- In January 2001, petitioner
was replaced by Liza R.
Fuentes
as
Manager. Petitioner alleged
that she was required to
sign a prepared resolution
for her replacement but she
was assured that she
would still be connected
with
Kasei
Corporation. Timoteo
Acedo, the designated
Treasurer, convened a
meeting of all employees of
Kasei Corporation and
announced that nothing
had changed and that
petitioner
was
still
connected
with
Kasei
Corporation as Technical
Assistant to Seiji Kamura
and in charge of all BIR
matters.[9]
- Thereafter,
Corporation

Kasei
reduced her

salary by P2,500.00 a
month beginning January
up to September 2001 for a
total
reduction
of
P22,500.00
as
of
September 2001.Petitioner
was not paid her mid-year
bonus allegedly because
the company was not
earning well. On October
2001, petitioner did not
receive her salary from the
company. She
made
repeated follow-ups with
the company cashier but
she was advised that the
company was not earning
well.[10]
- On October 15, 2001,
petitioner asked for her
salary from Acedo and the
rest of the officers but she
was informed that she is no
longer connected with the
company.[11]
- Since she was no longer
paid her salary, petitioner
did not report for work and
filed
an
action
for
constructive
dismissal
before the labor arbiter.
- Private
respondents
averred that petitioner is
not an employee of Kasei
Corporation. They alleged
that petitioner was hired in
1995 as one of its technical
consultants on accounting
matters
and
act

concurrently as Corporate
Secretary. As
technical
consultant,
petitioner
performed her work at her
own
discretion
without
control and supervision of
Kasei
Corporation.
Petitioner had no daily time
record and she came to the
office
any
time
she
wanted. The
company
never interfered with her
work except that from time
to time, the management
would ask her opinion on
matters relating to her
profession. Petitioner
did
not go through the usual
procedure of selection of
employees,
but
her
services were engaged
through a Board Resolution
designating
her
as
technical
consultant. The
money
received
by
petitioner
from
the
corporation
was
her
professional fee subject to
the
10%
expanded
withholding
tax
on
professionals, and that she
was not one of those
reported to the BIR or SSS
as one of the companys
employees.[12]
- Petitioners designation as
technical
consultant
depended solely upon the
will of management. As
such, her consultancy may
be terminated any time

considering
that
her
services
were
only
temporary in nature and
dependent on the needs of
the corporation.
- To prove that petitioner was
not an employee of the
corporation,
private
respondents submitted a
list of employees for the
years 1999 and 2000 duly
received by the BIR
showing that petitioner was
not among the employees
reported to the BIR, as well
as a list of payees subject
to expanded withholding
tax
which
included
petitioner. SSS
records
were
also
submitted
showing that petitioners
latest employer was Seiji
Corporation.[13]
- The Labor Arbiter found
that petitioner was illegally
dismissed, thus:
- WHEREFORE,
premises considered,
judgment is hereby
rendered as follows:
finding complainant an
employee of respondent
corporation;
declaring
complainants
dismissal as illegal;
ordering respondents to
reinstate complainant to

her former position without

loss of seniority rights and
jointly and severally pay
complainant her money
claims in accordance with
the following computation:
- Backwages 10/2001
07/2002 275,000.00
(27,500 x
10 mos.)
- Salary
Differentials
(01/2001
09/2001) 22,500.00
- Housing
Allowance
(01/2001
07/2002) 57,000.00
- Midyear
Bonus
2001 27,500.00
- 13th Month
Pay 27,500.00
- 10% share in the
profits of Kasei
Corp.
from
1996-2001 361,
175.00
- Moral and exemplary
damages 100,000.00
- 10%
Attorneys
fees 87,076.50
P957,742.
50
- If reinstatement is no
longer
feasible,
respondents
are
ordered
to
pay
complainant
separation pay with
additional backwages
that would accrue up

to actual payment of
separation pay.
- SO ORDERED.[14]
- On April 15, 2003, the
NLRC
affirmed
with
modification the Decision of
the Labor Arbiter, the
dispositive portion of which
reads:
PREMISES
CONSIDERED,
the Decision of
July 31, 2002 is
hereby
MODIFIED as
follows:
Respondents
are directed to
pay
complainant
separation pay
computed
at
one month per
year of service
in addition to
full backwages
from
October
2001 to July 31,
2002;
The
awards
representing
moral
and
exemplary
damages and
10% share in
profit in the

respective
accounts
of
P100,000.00
and
P361,175.00
are deleted;
The award of
10% attorneys
fees shall be
based on salary
differential
award only;
The
awards
representing
salary
differentials,
housing
allowance, mid
year bonus and
13th month pay
are AFFIRMED.
SO ORDERED.
[15]

On appeal, the Court of Appeals

reversed the NLRC decision,
thus:
- WHEREFORE,
the
instant petition is
hereby
GRANTED.
The decision of the
National
Labor
Relations
Commissions dated
April 15, 2003 is
hereby REVERSED
and SET ASIDE and

a new one is hereby

rendered dismissing
the complaint filed by
private
respondent
against
Kasei
Corporation, et al. for
constructive
dismissal.
- SO ORDERED.[16]
The appellate court denied
petitioners
motion
for
reconsideration,
hence,
the
present recourse.
- The core issues to be
resolved in this case are (1)
whether there was an
employer-employee
relationship
between
petitioner
and
private
respondent
Kasei
Corporation; and if in the
affirmative, (2) whether
petitioner
was
illegally
dismissed.
- Considering the conflicting
findings by the Labor
Arbiter and the National
Labor
Relations
Commission on one hand,
and the Court of Appeals
on the other, there is a
need to reexamine the
records to determine which
of
the
propositions
espoused
by
the
contending
parties
is

supported by
evidence.[17]

substantial

- We held in Sevilla v. Court

of Appeals[18] that in this
jurisdiction, there has been
no
uniform
test
to
determine the existence of
an
employer-employee
relation. Generally, courts
have relied on the so-called
right of control test where
the person for whom the
services are performed
reserves a right to control
not only the end to be
achieved but also the
means to be used in
reaching
such
end. In
addition to the standard of
right-of-control, the existing
economic
conditions
prevailing between the
parties, like the inclusion of
the employee in the
payrolls, can help in
determining the existence
of an employer-employee
relationship.
- However, in certain cases
the control test is not
sufficient to give a complete
picture of the relationship
between the parties, owing
to the complexity of such a
relationship where several
positions have been held
by the worker. There are
instances when, aside from
the employers power to
control the employee with

respect to the means and

methods by which the work
is to be accomplished,
economic realities of the
employment relations help
provide a comprehensive
analysis
of
the
true
classification
of
the
individual,
whether
as
employee,
independent
contractor, corporate officer
or some other capacity.
- The better approach would
therefore be to adopt a twotiered test involving: (1) the
putative employers power
to control the employee
with respect to the means
and methods by which the
work is to be accomplished;
and (2) the underlying
economic realities of the
activity or relationship.
- This two-tiered test would
provide
us
with
a
framework of analysis,
which would take into
consideration the totality of
circumstances surrounding
the true nature of the
relationship between the
parties. This is especially
appropriate in this case
where there is no written
agreement or terms of
reference to base the
relationship on; and due to
the complexity of the
relationship based on the
various
positions
and

responsibilities given to the

worker over the period of
the latters employment.
- The control test initially
found application in the
case of Viaa v. Al-Lagadan
and
Piga,[19] and
lately
in Leonardo v. Court of
Appeals,[20] where we held
that there is an employeremployee
relationship
when the person for whom
the services are performed
reserves the right to control
not only the end achieved
but also the manner and
means used to achieve that
end.
- In Sevilla v. Court of
Appeals,[21] we
observed
the need to consider the
existing
economic
conditions
prevailing
between the parties, in
addition to the standard of
right-of-control like the
inclusion of the employee
in the payrolls, to give a
clearer
picture
in
determining the existence
of an employer-employee
relationship based on an
analysis of the totality of
economic circumstances of
the worker.
- Thus, the determination of
the relationship between
employer and employee
depends
upon
the

circumstances of the whole

economic activity,[22] such
as: (1) the extent to which
the services performed are
an integral part of the
employers business; (2) the
extent of the workers
investment in equipment
and facilities; (3) the nature
and degree of control
exercised by the employer;
(4) the workers opportunity
for profit and loss; (5) the
amount of initiative, skill,
judgment
or
foresight
required for the success of
the claimed independent
enterprise;
(6)
the
permanency and duration
of the relationship between
the
worker
and
the
employer; and (7) the
degree of dependency of
the worker upon the
employer for his continued
employment in that line of
business.[23]
- The proper standard of
economic dependence is
whether the worker is
dependent on the alleged
employer for his continued
employment in that line of
business.[24] In the United
States, the touchstone of
economic
reality
in
analyzing
possible
employment relationships
for purposes of the Federal
Labor Standards Act is
dependency.[25] By analogy,

the benchmark of economic

reality in analyzing possible
employment relationships
for purposes of the Labor
Code ought to be the
economic dependence of
the worker on his employer.
- By applying the control test,
there is no doubt that
petitioner is an employee of
Kasei Corporation because
she was under the direct
control and supervision of
Seiji
Kamura,
the
corporations
Technical
Consultant. She reported
for work regularly and
served in various capacities
as Accountant, Liaison
Officer,
Technical
Consultant, Acting Manager
and Corporate Secretary,
with substantially the same
job functions, that is,
rendering accounting and
tax
services
to
the
company and performing
functions necessary and
desirable for the proper
operation of the corporation
such as securing business
permits and other licenses
over an indefinite period of
engagement.
- Under
the
broader
economic reality test, the
petitioner can likewise be
said to be an employee of
respondent
corporation
because she had served
the company for six years

before
her
dismissal,
receiving check vouchers
indicating
her
salaries/wages,
benefits,
th
13 month pay, bonuses
and allowances, as well as
deductions
and
Social
Security contributions from
August
1,
1999
to
December
18,
2000.
[26]
When petitioner was
designated
General
Manager,
respondent
corporation made a report
to the SSS signed by Irene
Ballesteros. Petitioners
membership in the SSS as
manifested by a copy of the
SSS specimen signature
card which was signed by
the President of Kasei
Corporation
and
the
inclusion of her name in the
on-line inquiry system of
the SSS evinces the
existence of an employeremployee
relationship
between petitioner and
respondent corporation.[27]
- It is therefore apparent that
petitioner is economically
dependent on respondent
corporation
for
her
continued employment in
the latters line of business.
- In Domasig v. National
Labor
Relations
[28]
Commission, we
held
that
in
a
business
establishment,
an

identification
card
is
provided not only as a
security
measure
but
mainly to identify the holder
thereof as a bona fide
employee of the firm that
issues it. Together with the
cash vouchers covering
petitioners salaries for the
months stated therein,
these matters constitute
substantial
evidence
adequate to support a
conclusion that petitioner
was an employee of private
respondent.
- We likewise ruled in Flores
v.
Nuestro[29] that
a
corporation who registers
its workers with the SSS is
proof that the latter were
the
formers
employees. The coverage
of Social Security Law is
predicated on the existence
of an employer-employee
relationship.
- Furthermore, the affidavit of
Seiji
Kamura
dated
December 5, 2001 has
clearly established that
petitioner never acted as
Corporate Secretary and
that her designation as
such
was
only
for
convenience. The
actual
nature of petitioners job
was as Kamuras direct
assistant with the duty of
acting as Liaison Officer in

representing the company

to
secure
construction
permits, license to operate
and other requirements
imposed by government
agencies. Petitioner was
never
entrusted
with
corporate documents of the
company, nor required to
attend the meeting of the
corporation. She was never
privy to the preparation of
any document for the
corporation, although once
in a while she was required
to
sign
prepared
documentation
for
the
[30]
company.
- The second affidavit of
Kamura dated March 7,
2002 which repudiated the
December 5, 2001 affidavit
has
been
allegedly
withdrawn
by
Kamura
himself from the records of
the case.[31] Regardless of
this fact, we are convinced
that the allegations in the
first affidavit are sufficient
to establish that petitioner
is an employee of Kasei
Corporation.
- Granting arguendo, that the
second affidavit validly
repudiated the first one,
courts do not generally look
with favor on any retraction
or recanted testimony, for it
could have been secured
by considerations other

than to tell the truth and

would make solemn trials a
mockery and place the
investigation of the truth at
the mercy of unscrupulous
witnesses.[32] A recantation
does not necessarily cancel
an earlier declaration, but
like any other testimony the
same is subject to the test
of credibility and should be
received with caution.[33]
- Based on the foregoing,
there can be no other
conclusion that petitioner is
an employee of respondent
Kasei
Corporation. She
was selected and engaged
by
the
company
for
compensation,
and
is
economically
dependent
upon respondent for her
continued employment in
that line of business. Her
main job function involved
accounting
and
tax
services
rendered
to
respondent corporation on
a regular basis over an
indefinite
period
of
engagement. Respondent
corporation
hired
and
engaged
petitioner
for
compensation, with the
power to dismiss her for
cause. More importantly,
respondent corporation had
the power to control
petitioner with the means
and methods by which the
work is to be accomplished.

- The
corporation
constructively
dismissed
petitioner when it reduced
her salary by P2,500 a
month from January to
September
2001. This
amounts to an illegal
termination of employment,
where the petitioner is
entitled
to
full
backwages. Since
the
position of petitioner as
accountant is one of trust
and confidence, and under
the principle of strained
relations,
petitioner
is
further
entitled
to
separation pay, in lieu of
reinstatement.[34]
- A diminution of pay is
prejudicial to the employee
and
amounts
to
constructive
dismissal. Constructive
dismissal is an involuntary
resignation resulting in
cessation of work resorted
to
when
continued
employment
becomes
impossible, unreasonable
or unlikely; when there is a
demotion in rank or a
diminution in pay; or when
a
clear
discrimination,
insensibility or disdain by
an
employer
becomes
unbearable
to
an
[35]
employee. In Globe
Telecom, Inc. v. FlorendoFlores,[36] we ruled that
where an employee ceases

to work due to a demotion

of rank or a diminution of
pay,
an
unreasonable
situation
arises
which
creates an adverse working
environment rendering it
impossible
for
such
employee
to
continue
working
for
her
employer. Hence,
her
severance
from
the
company was not of her
own making and therefore
amounted to an illegal
termination of employment.
- In affording full protection to
labor, this Court must
ensure
equal
work
opportunities regardless of
sex, race or creed. Even as
we, in every case, attempt
to carefully balance the
fragile relationship between
employees and employers,
we are mindful of the fact
that the policy of the law is
to apply the Labor Code to
a greater number of
employees. This
would
enable employees to avail
of the benefits accorded to
them by law, in line with the
constitutional
mandate
giving maximum aid and
protection
to
labor,
promoting their welfare and
reaffirming it as a primary
social economic force in
furtherance of social justice
and national development.

- WHEREFORE, the petition

is GRANTED. The
Decision and Resolution of
the Court of Appeals dated
October 29, 2004 and
October
7,
2005,
respectively, in CA-G.R. SP
No.
78515
are ANNULLED and SET
ASIDE. The Decision of the
National Labor Relations
Commission dated April 15,
2003 in NLRC NCR CA No.
032766-02,
isREINSTATED. The case
is REMANDED to
the
Labor Arbiter for the
recomputation of petitioner
Angelina Franciscos full
backwages from the time
she was illegally terminated
until the date of finality of
this
decision,
and
separation
pay
representing
one-half
month pay for every year of
service, where a fraction of
at least six months shall be
considered as one whole
year.
- SO ORDERED.

 [G.R. No. 138051. June 10,

2004]
JOSE Y. SONZA, petitioner, vs.
ABS-CBN BROADCASTING
CORPORATION, respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for
review on certiorari[1] assailing
the 26 March 1999 Decision[2] of
the Court of Appeals in CA-G.R.
SP No. 49190 dismissing the
petition filed by Jose Y. Sonza
(SONZA). The Court of Appeals
affirmed the findings of the
National Labor Relations
Commission (NLRC), which
affirmed the Labor Arbiters
dismissal of the case for lack of
jurisdiction.
The Facts
In May 1994, respondent ABSCBN Broadcasting Corporation
(ABS-CBN) signed an Agreement
(Agreement) with the Mel and
Jay Management and
Development Corporation
(MJMDC). ABS-CBN was
represented by its corporate
officers while MJMDC was
represented by SONZA, as
President and General Manager,
and Carmela Tiangco
(TIANGCO), as EVP and
Treasurer. Referred to in the
Agreement as AGENT, MJMDC
agreed to provide SONZAs
services exclusively to ABS-CBN
as talent for radio and

television. The Agreement listed

the services SONZA would
render to ABS-CBN, as follows:
Co-host for Mel & Jay radio
program, 8:00 to 10:00 a.m.,
Mondays to Fridays;
Co-host for Mel & Jay television
program, 5:30 to 7:00 p.m.,
Sundays.[3]
ABS-CBN agreed to pay for
SONZAs services a monthly
talent fee of P310,000 for the first
year and P317,000 for the
second and third year of the
Agreement. ABS-CBN would pay
the talent fees on the 10th and
25th days of the month.
On 1 April 1996, SONZA wrote a
letter to ABS-CBNs President,
Eugenio Lopez III, which reads:
Dear Mr. Lopez,
We would like to call your
attention to the Agreement dated
May 1994 entered into by your
goodself on behalf of ABS-CBN
with our company relative to our
talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza
irrevocably resigned in view of
recent events concerning his
programs and career. We
consider these acts of the station
violative of the Agreement and
the station as in breach
thereof. In this connection, we
hereby serve notice of rescission
of said Agreement at our instance
effective as of date.
Mr. Sonza informed us that he is
waiving and renouncing recovery

of the remaining amount

stipulated in paragraph 7 of the
Agreement but reserves the right
to seek recovery of the other
benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager[4]
On 30 April 1996, SONZA filed a
complaint against ABS-CBN
before the Department of Labor
and Employment, National
Capital Region in Quezon
City. SONZA complained that
ABS-CBN did not pay his
salaries, separation pay, service
incentive leave pay, 13th month
pay, signing bonus, travel
allowance and amounts due
under the Employees Stock
Option Plan (ESOP).
On 10 July 1996, ABS-CBN filed
a Motion to Dismiss on the
ground that no employeremployee relationship existed
between the parties. SONZA filed
an Opposition to the motion
on 19 July 1996.
Meanwhile, ABS-CBN continued
to remit SONZAs monthly talent
fees through his account at
PCIBank, Quezon Avenue
Branch, Quezon City. In July
1996, ABS-CBN opened a new
account with the same bank
where ABS-CBN deposited
SONZAs talent fees and other

payments due him under the

Agreement.
In his Order dated 2 December
1996, the Labor Arbiter[5] denied
the motion to dismiss and
directed the parties to file their
respective position papers. The
Labor Arbiter ruled:
In this instant case, complainant
for having invoked a claim that he
was an employee of respondent
company until April 15, 1996 and
that he was not paid certain
claims, it is sufficient enough as
to confer jurisdiction over the
instant case in this Office. And as
to whether or not such claim
would entitle complainant to
recover upon the causes of
action asserted is a matter to be
resolved only after and as a
result of a hearing. Thus, the
respondents plea of lack of
employer-employee relationship
may be pleaded only as a matter
of defense. It behooves upon it
the duty to prove that there really
is no employer-employee
relationship between it and the
complainant.
The Labor Arbiter then
considered the case submitted
for resolution. The parties
submitted their position papers
on 24 February 1997.
On 11 March 1997, SONZA filed
a Reply to Respondents Position
Paper with Motion to Expunge
Respondents Annex 4 and Annex
5 from the Records. Annexes 4
and 5 are affidavits of ABS-CBNs

witnesses Soccoro Vidanes and

Rolando V. Cruz. These
witnesses stated in their affidavits
that the prevailing practice in the
television and broadcast industry
is to treat talents like SONZA as
independent contractors.
The Labor Arbiter rendered his
Decision dated 8 July
1997 dismissing the complaint for
lack of jurisdiction.[6] The
pertinent parts of the decision
read as follows:
xxx
While Philippine jurisprudence
has not yet, with certainty,
touched on the true nature of the
contract of a talent, it stands to
reason that a talent as abovedescribed cannot be considered
as an employee by reason of the
peculiar circumstances
surrounding the engagement of
his services.
It must be noted
that complainant was engaged
by respondent by reason of his
peculiar skills and talent as a
TV host and a radio
broadcaster. Unlike an
ordinary employee, he was free
to perform the services he
undertook to render in
accordance with his own
style. The benefits conferred to
complainant under the May 1994
Agreement are certainly very
much higher than those generally
given to employees. For one,
complainant Sonzas monthly
talent fees amount to a

staggering P317,000. Moreover,

his engagement as a talent was
covered by a specific
contract. Likewise, he was not
bound to render eight (8) hours of
work per day as he worked only
for such number of hours as may
be necessary.
The fact that per the May 1994
Agreement complainant was
accorded some benefits normally
given to an employee is
inconsequential. Whatever
benefits complainant enjoyed
arose from specific agreement
by the parties and not by
reason of employer-employee
relationship. As correctly put by
the respondent, All these benefits
are merely talent fees and other
contractual benefits and should
not be deemed as salaries,
wages and/or other remuneration
accorded to an employee,
notwithstanding the
nomenclature appended to these
benefits. Apropos to this is the
rule that the term or
nomenclature given to a
stipulated benefit is not
controlling, but the intent of the
parties to the Agreement
conferring such benefit.
The fact that complainant was
made subject to respondents
Rules and Regulations,
likewise, does not detract from
the absence of employeremployee relationship. As held
by the Supreme Court, The line
should be drawn between rules

that merely serve as guidelines

towards the achievement of the
mutually desired result without
dictating the means or methods
to be employed in attaining it,
and those that control or fix the
methodology and bind or restrict
the party hired to the use of such
means. The first, which aim only
to promote the result, create no
employer-employee relationship
unlike the second, which address
both the result and the means to
achieve it. (Insular Life
Assurance Co., Ltd. vs. NLRC, et
al., G.R. No. 84484, November
15, 1989).
x x x (Emphasis supplied)[7]
SONZA appealed to the
NLRC. On 24 February 1998, the
NLRC rendered a Decision
affirming the Labor Arbiters
decision. SONZA filed a motion
for reconsideration, which the
NLRC denied in its Resolution
dated 3 July 1998.
On 6 October 1998, SONZA filed
a special civil action for certiorari
before the Court of Appeals
assailing the decision and
resolution of the NLRC. On 26
March 1999, the Court of Appeals
rendered a Decision dismissing
the case.[8]
Hence, this petition.
The Rulings of the NLRC and
Court of Appeals
The Court of Appeals affirmed
the NLRCs finding that no
employer-employee relationship
existed between SONZA and

ABS-CBN. Adopting the NLRCs

decision, the appellate court
quoted the following findings of
the NLRC:
x x x the May 1994 Agreement
will readily reveal that MJMDC
entered into the contract merely
as an agent of complainant
Sonza, the principal. By all
indication and as the law puts it,
the act of the agent is the act of
the principal itself. This fact is
made particularly true in this
case, as admittedly MJMDC is a
management company devoted
exclusively to managing the
careers of Mr. Sonza and his
broadcast partner, Mrs. Carmela
C. Tiangco. (Opposition to Motion
to Dismiss)
Clearly, the relations of principal
and agent only accrues between
complainant Sonza and MJMDC,
and not between ABS-CBN and
MJMDC. This is clear from the
provisions of the May 1994
Agreement which specifically
referred to MJMDC as the
AGENT. As a matter of fact,
when complainant herein
unilaterally rescinded said May
1994 Agreement, it was MJMDC
which issued the notice of
rescission in behalf of Mr. Sonza,
who himself signed the same in
his capacity as President.
Moreover, previous contracts
between Mr. Sonza and ABSCBN reveal the fact that
historically, the parties to the said
agreements are ABS-CBN and

Mr. Sonza. And it is only in the

May 1994 Agreement, which is
the latest Agreement executed
between ABS-CBN and Mr.
Sonza, that MJMDC figured in
the said Agreement as the agent
of Mr. Sonza.
We find it erroneous to assert
that MJMDC is a mere labor-only
contractor of ABS-CBN such that
there exist[s] employer-employee
relationship between the latter
and Mr. Sonza. On the contrary,
We find it indubitable, that
MJMDC is an agent, not of ABSCBN, but of the talent/contractor
Mr. Sonza, as expressly admitted
by the latter and MJMDC in the
May 1994 Agreement.
It may not be amiss to state that
jurisdiction over the instant
controversy indeed belongs to
the regular courts, the same
being in the nature of an action
for alleged breach of contractual
obligation on the part of
respondent-appellee. As squarely
apparent from complainantappellants Position Paper, his
claims for compensation for
services, 13th month pay, signing
bonus and travel allowance
against respondent-appellee are
not based on the Labor Code but
rather on the provisions of the
May 1994 Agreement, while his
claims for proceeds under Stock
Purchase Agreement are based
on the latter. A portion of the
Position Paper of complainantappellant bears perusal:

Under [the May 1994 Agreement]

with respondent ABS-CBN, the
latter contractually bound itself to
pay complainant a signing bonus
consisting of shares of stockswith
FIVE HUNDRED THOUSAND
PESOS (P500,000.00).
Similarly, complainant is also
entitled to be paid 13th month pay
based on an amount not lower
than the amount he was
receiving prior to effectivity of
(the) Agreement.
Under paragraph 9 of (the May
1994 Agreement), complainant is
entitled to a commutable travel
benefit amounting to at least One
Hundred Fifty Thousand Pesos
(P150,000.00) per year.
Thus, it is precisely because of
complainant-appellants own
recognition of the fact that his
contractual relations with ABSCBN are founded on the New
Civil Code, rather than the Labor
Code, that instead of merely
resigning from ABS-CBN,
complainant-appellant served
upon the latter a notice of
rescission of Agreement with the
station, per his letter dated April
1, 1996, which asserted that
instead of referring to unpaid
employee benefits, he is waiving
and renouncing recovery of the
remaining amount stipulated in
paragraph 7 of the Agreement
but reserves the right to such
recovery of the other benefits
under said Agreement. (Annex 3
of the respondent ABS-CBNs

Motion to Dismiss dated July 10,

1996).
Evidently, it is precisely by
reason of the alleged violation of
the May 1994 Agreement and/or
the Stock Purchase Agreement
by respondent-appellee that
complainant-appellant filed his
complaint.Complainantappellants claims being anchored
on the alleged breach of contract
on the part of respondentappellee, the same can be
resolved by reference to civil law
and not to labor
law. Consequently, they are
within the realm of civil law and,
thus, lie with the regular
courts. As held in the case of
Dai-Chi Electronics
Manufacturing vs. Villarama, 238
SCRA 267, 21 November
1994, an action for breach of
contractual obligation is
intrinsically a civil dispute.
[9]
(Emphasis supplied)
The Court of Appeals ruled that
the existence of an employeremployee relationship between
SONZA and ABS-CBN is a
factual question that is within the
jurisdiction of the NLRC to
resolve.[10] A special civil action
for certiorari extends only to
issues of want or excess of
jurisdiction of the NLRC.[11] Such
action cannot cover an inquiry
into the correctness of the
evaluation of the evidence which
served as basis of the NLRCs
conclusion.[12] The Court of

Appeals added that it could not

re-examine the parties evidence
and substitute the factual findings
of the NLRC with its own.[13]
The Issue
In assailing the decision of the
Court of Appeals, SONZA
contends that:
THE COURT OF APPEALS
GRAVELY ERRED IN
AFFIRMING THE NLRCS
DECISION AND REFUSING TO
FIND THAT AN EMPLOYEREMPLOYEE RELATIONSHIP
EXISTED BETWEEN SONZA
AND ABS-CBN, DESPITE THE
WEIGHT OF CONTROLLING
LAW, JURISPRUDENCE AND
EVIDENCE TO SUPPORT
SUCH A FINDING.[14]
The Courts Ruling
We affirm the assailed decision.
No convincing reason exists to
warrant a reversal of the decision
of the Court of Appeals affirming
the NLRC ruling which upheld the
Labor Arbiters dismissal of the
case for lack of jurisdiction.
The present controversy is one of
first impression. Although
Philippine labor laws and
jurisprudence define clearly the
elements of an employeremployee relationship, this is the
first time that the Court will
resolve the nature of the
relationship between a television
and radio station and one of its
talents. There is no case law
stating that a radio and television

program host is an employee of

the broadcast station.
The instant case involves big
names in the broadcast industry,
namely Jose Jay Sonza, a known
television and radio personality,
and ABS-CBN, one of the biggest
television and radio networks in
the country.
SONZA contends that the Labor
Arbiter has jurisdiction over the
case because he was an
employee of ABS-CBN. On the
other hand, ABS-CBN insists that
the Labor Arbiter has no
jurisdiction because SONZA was
an independent contractor.
Employee or Independent
Contractor?
The existence of an employeremployee relationship is a
question of fact. Appellate courts
accord the factual findings of the
Labor Arbiter and the NLRC not
only respect but also finality
when supported by substantial
evidence.[15] Substantial evidence
means such relevant evidence as
a reasonable mind might accept
as adequate to support a
conclusion.[16] A party cannot
prove the absence of substantial
evidence by simply pointing out
that there is contrary evidence on
record, direct or
circumstantial. The Court does
not substitute its own judgment
for that of the tribunal in
determining where the weight of
evidence lies or what evidence is
credible.[17]

SONZA maintains that all

essential elements of an
employer-employee relationship
are present in this case. Case
law has consistently held that the
elements of an employeremployee relationship are: (a) the
selection and engagement of the
employee; (b) the payment of
wages; (c) the power of
dismissal; and (d) the employers
power to control the employee on
the means and methods by which
the work is accomplished.[18] The
last element, the socalled control test, is the most
important element.[19]
- Selection and
Engagement of Employee
ABS-CBN engaged SONZAs
services to co-host its television
and radio programs because of
SONZAs peculiar skills, talent
and celebrity status. SONZA
contends that the discretion used
by respondent in specifically
selecting and hiring complainant
over other broadcasters of
possibly similar experience and
qualification as complainant
belies respondents claim of
independent contractorship.
Independent contractors often
present themselves to possess
unique skills, expertise or talent
to distinguish them from ordinary
employees. The specific
selection and hiring of
SONZA,because of his unique
skills, talent and celebrity
status not possessed by

ordinary employees, is a
circumstance indicative, but not
conclusive, of an independent
contractual relationship. If
SONZA did not possess such
unique skills, talent and celebrity
status, ABS-CBN would not have
entered into the Agreement with
SONZA but would have hired him
through its personnel department
just like any other employee.
In any event, the method of
selecting and engaging SONZA
does not conclusively determine
his status. We must consider all
the circumstances of the
relationship, with the control test
being the most important
element.
- Payment of Wages
ABS-CBN directly paid SONZA
his monthly talent fees with no
part of his fees going to MJMDC.
SONZA asserts that this mode of
fee payment shows that he was
an employee of ABSCBN. SONZA also points out that
ABS-CBN granted him benefits
and privileges which he would
not have enjoyed if he were truly
the subject of a valid job contract.
All the talent fees and benefits
paid to SONZA were the result of
negotiations that led to the
Agreement. If SONZA were ABSCBNs employee, there would be
no need for the parties to
stipulate on benefits such as
SSS, Medicare, x x x and
13th month pay[20] which the law
automatically incorporates into

every employer-employee
contract.[21] Whatever benefits
SONZA enjoyed arose from
contract and not because of an
employer-employee relationship.
[22]

SONZAs talent fees, amounting

to P317,000 monthly in the
second and third year, are so
huge and out of the ordinary that
they indicate more an
independent contractual
relationship rather than an
employer-employee
relationship. ABS-CBN agreed to
pay SONZA such huge talent
fees precisely because of
SONZAs unique skills, talent and
celebrity status not possessed by
ordinary employees. Obviously,
SONZA acting alone possessed
enough bargaining power to
demand and receive such huge
talent fees for his services. The
power to bargain talent fees way
above the salary scales of
ordinary employees is a
circumstance indicative, but not
conclusive, of an independent
contractual relationship.
The payment of talent fees
directly to SONZA and not to
MJMDC does not negate the
status of SONZA as an
independent contractor. The
parties expressly agreed on such
mode of payment. Under the
Agreement, MJMDC is the
AGENT of SONZA, to whom
MJMDC would have to turn over

any talent fee accruing under the

Agreement.
- Power of Dismissal
For violation of any provision of
the Agreement, either party
may terminate their
relationship. SONZA failed to
show that ABS-CBN could
terminate his services on
grounds other than breach of
contract, such as retrenchment to
prevent losses as provided under
labor laws.[23]
During the life of the Agreement,
ABS-CBN agreed to pay
SONZAs talent fees as long as
AGENT and Jay Sonza shall
faithfully and completely perform
each condition of this Agreement.
[24]
Even if it suffered severe
business losses, ABS-CBN could
not retrench SONZA because
ABS-CBN remained obligated to
pay SONZAs talent fees during
the life of the Agreement. This
circumstance indicates an
independent contractual
relationship between SONZA and
ABS-CBN.
SONZA admits that even after
ABS-CBN ceased broadcasting
his programs, ABS-CBN still paid
him his talent fees. Plainly, ABSCBN adhered to its undertaking
in the Agreement to continue
paying SONZAs talent fees
during the remaining life of the
Agreement even if ABS-CBN
cancelled SONZAs programs
through no fault of SONZA.[25]

SONZA assails the Labor Arbiters

interpretation of his rescission of
the Agreement as an admission
that he is not an employee of
ABS-CBN. The Labor Arbiter
stated that if it were true that
complainant was really an
employee, he would merely
resign, instead. SONZA did
actually resign from ABS-CBN
but he also, as president of
MJMDC, rescinded the
Agreement.SONZAs letter clearly
bears this out.[26] However, the
manner by which SONZA
terminated his relationship with
ABS-CBN is immaterial. Whether
SONZA rescinded the Agreement
or resigned from work does not
determine his status as employee
or independent contractor.
- Power of Control
Since there is no local precedent
on whether a radio and television
program host is an employee or
an independent contractor, we
refer to foreign case law in
analyzing the present case.
The United States Court of
Appeals, First Circuit, recently
held in Alberty-Vlez v.
Corporacin De Puerto Rico
Para La Difusin Pblica (WIPR)
[27]
that a television program host
is an independent contractor. We
quote the following findings of
the U.S. court:
Several factors favor classifying
Alberty as an independent
contractor. First, a television
actress is a skilled position

requiring talent and training

not available on-the-job. x x x
In this regard, Alberty possesses
a masters degree in public
communications and journalism;
is trained in dance, singing, and
modeling; taught with the drama
department at the University of
Puerto Rico; and acted in several
theater and television
productions prior to her affiliation
with Desde Mi Pueblo. Second,
Alberty provided the tools and
instrumentalities necessary for
her to perform. Specifically, she
provided, or obtained sponsors to
provide, the costumes, jewelry,
and other image-related supplies
and services necessary for her
appearance. Alberty disputes that
this factor favors independent
contractor status because WIPR
provided the equipment
necessary to tape the
show. Albertys argument is
misplaced. The equipment
necessary for Alberty to
conduct her job as host of Desde
Mi Pueblo related to her
appearance on the show.Others
provided equipment for filming
and producing the show, but
these were not the primary tools
that Alberty used to perform her
particular function. If we accepted
this argument, independent
contractors could never work on
collaborative projects because
other individuals often provide
the equipment required for
different aspects of the
collaboration. x x x

Third, WIPR could not assign

Alberty work in addition to
filming Desde Mi
Pueblo. Albertys contracts with
WIPR specifically provided that
WIPR hired her professional
services as Hostess for the
Program Desde Mi Pueblo. There
is no evidence that WIPR
assigned Alberty tasks in addition
to work related to these
tapings. x x x[28] (Emphasis
supplied)
Applying the control test to the
present case, we find that
SONZA is not an employee but
an independent contractor. The
control test is the most
important test our courts apply
in distinguishing an employee
from an independent contractor.
[29]
This test is based on the
extent of control the hirer
exercises over a worker. The
greater the supervision and
control the hirer exercises, the
more likely the worker is deemed
an employee. The converse
holds true as well the less control
the hirer exercises, the more
likely the worker is considered an
independent contractor.[30]
First, SONZA contends that ABSCBN exercised control over the
means and methods of his work.
SONZAs argument is
misplaced. ABS-CBN engaged
SONZAs services specifically to
co-host the Mel & Jay programs.
ABS-CBN did not assign any
other work to SONZA. To perform

his work, SONZA only needed his

skills and talent. How SONZA
delivered his lines, appeared on
television, and sounded on radio
were outside ABS-CBNs
control. SONZA did not have to
render eight hours of work per
day. The Agreement required
SONZA to attend only rehearsals
and tapings of the shows, as well
as pre- and post-production staff
meetings.[31] ABS-CBN could not
dictate the contents of SONZAs
script. However, the Agreement
prohibited SONZA from criticizing
in his shows ABS-CBN or its
interests.[32] The clear implication
is that SONZA had a free hand
on what to say or discuss in his
shows provided he did not attack
ABS-CBN or its interests.
We find that ABS-CBN was not
involved in the actual
performance that produced the
finished product of SONZAs
work.[33] ABS-CBN did not instruct
SONZA how to perform his
job.ABS-CBN merely reserved
the right to modify the program
format and airtime schedule for
more effective programming.
[34]
ABS-CBNs sole concern was
the quality of the shows and their
standing in the ratings. Clearly,
ABS-CBN did not exercise
control over the means and
methods of performance of
SONZAs work.
SONZA claims that ABS-CBNs
power not to broadcast his shows
proves ABS-CBNs power over

the means and methods of the

performance of his
work. Although ABS-CBN did
have the option not to broadcast
SONZAs show, ABS-CBN was
still obligated to pay SONZAs
talent fees. Thus, even if ABSCBN was completely dissatisfied
with the means and methods of
SONZAs performance of his
work, or even with the quality or
product of his work, ABS-CBN
could not dismiss or even
discipline SONZA. All that ABSCBN could do is not to broadcast
SONZAs show but ABS-CBN
must still pay his talent fees in
full.[35]
Clearly, ABS-CBNs right not to
broadcast SONZAs show,
burdened as it was by the
obligation to continue paying in
full SONZAs talent fees, did not
amount to control over the means
and methods of the performance
of SONZAs work. ABS-CBN
could not terminate or discipline
SONZA even if the means and
methods of performance of his
work - how he delivered his lines
and appeared on television - did
not meet ABS-CBNs
approval. This proves that ABSCBNs control was limited only to
the result of SONZAs work,
whether to broadcast the final
product or not. In either case,
ABS-CBN must still pay SONZAs
talent fees in full until the expiry
of the Agreement.

 In Vaughan, et al. v. Warner, et

al.,[36] the United States Circuit
Court of Appeals ruled that
vaudeville performers were
independent contractors although
the management reserved the
right to delete objectionable
features in their shows. Since the
management did not have control
over the manner of performance
of the skills of the artists, it could
only control the result of the work
by deleting objectionable
features.[37]
SONZA further contends that
ABS-CBN exercised control over
his work by supplying all
equipment and crew. No doubt,
ABS-CBN supplied the
equipment, crew and airtime
needed to broadcast the Mel &
Jay programs. However, the
equipment, crew and airtime are
not the tools and instrumentalities
SONZA needed to perform his
job. What SONZA principally
needed were his talent or skills
and the costumes necessary for
his appearance. [38] Even though
ABS-CBN provided SONZA with
the place of work and the
necessary equipment, SONZA
was still an independent
contractor since ABS-CBN did
not supervise and control
his work. ABS-CBNs sole
concern was for SONZA to
display his talent during the airing
of the programs.[39]
A radio broadcast specialist who
works under minimal supervision

is an independent contractor.
[40]
SONZAs work as television
and radio program host required
special skills and talent, which
SONZA admittedly
possesses. The records do not
show that ABS-CBN exercised
any supervision and control over
how SONZA utilized his skills and
talent in his shows.
Second, SONZA urges us to rule
that he was ABS-CBNs employee
because ABS-CBN subjected him
to its rules and standards of
performance. SONZA claims that
this indicates ABS-CBNs control
not only [over] his manner of
work but also the quality of his
work.
The Agreement stipulates that
SONZA shall abide with the rules
and standards of
performance covering
talents[41] of ABS-CBN. The
Agreement does not require
SONZA to comply with the rules
and standards of performance
prescribed for employees of ABSCBN. The code of conduct
imposed on SONZA under the
Agreement refers to the
Television and Radio Code of the
Kapisanan ng mga Broadcaster
sa Pilipinas (KBP), which has
been adopted by the COMPANY
(ABS-CBN) as its Code of Ethics.
[42]
The KBP code applies to
broadcasters, not to employees
of radio and television
stations. Broadcasters are not
necessarily employees of radio

and television stations. Clearly,

the rules and standards of
performance referred to in the
Agreement are those applicable
to talents and not to employees
of ABS-CBN.
In any event, not all rules
imposed by the hiring party on
the hired party indicate that the
latter is an employee of the
former.[43] In this case, SONZA
failed to show that these rules
controlled his performance. We
find that these general rules are
merely guidelines towards the
achievement of the mutually
desired result, which are toprating television and radio
programs that comply with
standards of the industry. We
have ruled that:
Further, not every form of control
that a party reserves to himself
over the conduct of the other
party in relation to the services
being rendered may be accorded
the effect of establishing an
employer-employee relationship.
The facts of this case fall
squarely with the case of Insular
Life Assurance Co., Ltd. vs.
NLRC. In said case, we held that:
Logically, the line should be
drawn between rules that merely
serve as guidelines towards the
achievement of the mutually
desired result without dictating
the means or methods to be
employed in attaining it, and
those that control or fix the
methodology and bind or restrict

the party hired to the use of such

means. The first, which aim only
to promote the result, create no
employer-employee relationship
unlike the second, which address
both the result and the means
used to achieve it.[44]
The Vaughan case also held that
one could still be an independent
contractor although the hirer
reserved certain supervision to
insure the attainment of the
desired result. The hirer,
however, must not deprive the
one hired from performing his
services according to his own
initiative.[45]
Lastly, SONZA insists that the
exclusivity clause in the
Agreement is the most extreme
form of control which ABS-CBN
exercised over him.
This argument is futile. Being an
exclusive talent does not by itself
mean that SONZA is an
employee of ABS-CBN. Even an
independent contractor can
validly provide his services
exclusively to the hiring party. In
the broadcast industry, exclusivity
is not necessarily the same as
control.
The hiring of exclusive talents is
a widespread and accepted
practice in the entertainment
industry.[46] This practice is not
designed to control the means
and methods of work of the
talent, but simply to protect the
investment of the broadcast
station. The broadcast station

normally spends substantial

amounts of money, time and
effort in building up its talents as
well as the programs they appear
in and thus expects that said
talents remain exclusive with the
station for a commensurate
period of time.[47] Normally, a
much higher fee is paid to talents
who agree to work exclusively for
a particular radio or television
station. In short, the huge talent
fees partially compensates for
exclusivity, as in the present
case.
MJMDC as Agent of SONZA
SONZA protests the Labor
Arbiters finding that he is a talent
of MJMDC, which contracted out
his services to ABS-CBN. The
Labor Arbiter ruled that as a
talent of MJMDC, SONZA is not
an employee of ABSCBN. SONZA insists that
MJMDC is a labor-only contractor
and ABS-CBN is his employer.
In a labor-only contract, there are
three parties involved: (1) the
labor-only contractor; (2) the
employee who is ostensibly
under the employ of the laboronly contractor; and (3) the
principal who is deemed the real
employer. Under this
scheme, the labor-only
contractor is the agent of the
principal. The law makes the
principal responsible to the
employees of the labor-only
contractor as if the principal itself
directly hired or employed the

employees.[48] These
circumstances are not present in
this case.
There are essentially only two
parties involved under the
Agreement, namely, SONZA and
ABS-CBN. MJMDC merely acted
as SONZAs agent. The
Agreement expressly states that
MJMDC acted as the AGENT of
SONZA. The records do not
show that MJMDC acted as ABSCBNs agent. MJMDC, which
stands for Mel and Jay
Management and Development
Corporation, is a corporation
organized and owned by SONZA
and TIANGCO. The President
and General Manager of MJMDC
is SONZA himself. It is absurd to
hold that MJMDC, which is
owned, controlled, headed and
managed by SONZA, acted as
agent of ABS-CBN in entering
into the Agreement with SONZA,
who himself is represented by
MJMDC. That would make
MJMDC the agent of both ABSCBN and SONZA.
As SONZA admits, MJMDC is a
management company
devoted exclusively to
managing the careers of SONZA
and his broadcast partner,
TIANGCO. MJMDC is not
engaged in any other business,
not even job contracting. MJMDC
does not have any other function
apart from acting as agent of
SONZA or TIANGCO to promote

their careers in the broadcast and

television industry.[49]
Policy Instruction No. 40
SONZA argues that Policy
Instruction No. 40 issued by then
Minister of Labor Blas Ople on 8
January 1979 finally settled the
status of workers in the
broadcast industry. Under this
policy, the types of employees in
the broadcast industry are the
station and program employees.
Policy Instruction No. 40 is a
mere executive issuance which
does not have the force and
effect of law. There is no legal
presumption that Policy
Instruction No. 40 determines
SONZAs status. A mere
executive issuance cannot
exclude independent contractors
from the class of service
providers to the broadcast
industry. The classification of
workers in the broadcast industry
into only two groups under Policy
Instruction No. 40 is not binding
on this Court, especially when
the classification has no basis
either in law or in fact.
Affidavits of ABS-CBNs
Witnesses
SONZA also faults the Labor
Arbiter for admitting the affidavits
of Socorro Vidanes and Rolando
Cruz without giving his counsel
the opportunity to cross-examine
these witnesses.SONZA brands
these witnesses as incompetent
to attest on the prevailing
practice in the radio and

television industry. SONZA views

the affidavits of these witnesses
as misleading and irrelevant.
While SONZA failed to crossexamine ABS-CBNs witnesses,
he was never prevented from
denying or refuting the
allegations in the affidavits. The
Labor Arbiter has the discretion
whether to conduct a formal (trialtype) hearing after the
submission of the position papers
of the parties, thus:
Section 3. Submission of Position
Papers/Memorandum
xxx
These verified position papers
shall cover only those claims and
causes of action raised in the
complaint excluding those that
may have been amicably settled,
and shall be accompanied by all
supporting documents including
the affidavits of their respective
witnesses which shall take the
place of the latters direct
testimony. x x x
Section 4. Determination of
Necessity of Hearing.
Immediately after the submission
of the parties of their position
papers/memorandum, the Labor
Arbiter shall motu propio
determine whether there is need
for a formal trial or hearing. At
this stage, he may, at his
discretion and for the purpose of
making such determination, ask
clarificatory questions to further
elicit facts or information,
including but not limited to the

subpoena of relevant
documentary evidence, if any
from any party or witness.[50]
The Labor Arbiter can decide a
case based solely on the position
papers and the supporting
documents without a formal trial.
[51]
The holding of a formal
hearing or trial is something that
the parties cannot demand as a
matter of right.[52] If the Labor
Arbiter is confident that he can
rely on the documents before
him, he cannot be faulted for not
conducting a formal trial, unless
under the particular
circumstances of the case, the
documents alone are
insufficient. The proceedings
before a Labor Arbiter are nonlitigious in nature. Subject to the
requirements of due process, the
technicalities of law and the rules
obtaining in the courts of law do
not strictly apply in proceedings
before a Labor Arbiter.
Talents as Independent
Contractors
ABS-CBN claims that there exists
a prevailing practice in the
broadcast and entertainment
industries to treat talents like
SONZA as independent
contractors. SONZA argues that
if such practice exists, it is void
for violating the right of labor to
security of tenure.
The right of labor to security of
tenure as guaranteed in the
Constitution[53] arises only if there
is an employer-employee

relationship under labor laws. Not

every performance of services for
a fee creates an employeremployee relationship. To hold
that every person who renders
services to another for a fee is an
employee - to give meaning to
the security of tenure clause - will
lead to absurd results.
Individuals with special skills,
expertise or talent enjoy the
freedom to offer their services as
independent contractors. The
right to life and livelihood
guarantees this freedom to
contract as independent
contractors. The right of labor to
security of tenure cannot operate
to deprive an individual,
possessed with special skills,
expertise and talent, of his right
to contract as an independent
contractor. An individual like an
artist or talent has a right to
render his services without any
one controlling the means and
methods by which he performs
his art or craft. This Court will not
interpret the right of labor to
security of tenure to compel
artists and talents to render their
services only as employees. If
radio and television program
hosts can render their services
only as employees, the station
owners and managers can
dictate to the radio and television
hosts what they say in their
shows. This is not conducive to
freedom of the press.

 Different Tax Treatment of

Talents and Broadcasters
The National Internal Revenue
Code (NIRC)[54] in relation to
Republic Act No. 7716,[55] as
amended by Republic Act No.
8241,[56] treats talents, television
and radio broadcasters
differently. Under the NIRC,
these professionals are subject to
the 10% value-added tax (VAT)
on services they
render. Exempted from the VAT
are those under an employeremployee relationship.[57] This
different tax treatment accorded
to talents and broadcasters
bolters our conclusion that they
are independent contractors,
provided all the basic elements of
a contractual relationship are
present as in this case.
Nature of SONZAs Claims
SONZA seeks the recovery of
allegedly unpaid talent fees,
13th month pay, separation pay,
service incentive leave, signing
bonus, travel allowance, and
amounts due under the
Employee Stock Option Plan. We
agree with the findings of the
Labor Arbiter and the Court of
Appeals that SONZAs claims
are all based on the May 1994
Agreement and stock option
plan, and not on the Labor
Code. Clearly, the present case
does not call for an application of
the Labor Code provisions but an
interpretation and implementation
of the May 1994 Agreement. In

effect, SONZAs cause of action

is for breach of contract which is
intrinsically a civil dispute
cognizable by the regular courts.
[58]

WHEREFORE, we DENY the

petition. The assailed Decision of
the Court of Appeals dated 26
March 1999 in CA-G.R. SP No.
49190 is AFFIRMED. Costs
against petitioner.
SO ORDERED.
BITOY JAVIER
(DANILO P. JAVIER),
Petitioner,

- versus -

FLY ACE
CORPORATION/
FLORDELYN
CASTILLO,
Respondents.

G.R

Pre

CA
PE
Ch
AB
PE
ME

Pro

Feb

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

DECISION

MENDOZA, J.:

This is a petition under Rule 45 of

the Rules of Civil Procedure
assailing the March 18, 2010
Decision[1] of the Court of
Appeals (CA) and its June 7,
2010 Resolution,[2]in CA-G.R. SP
No. 109975, which reversed the
May 28, 2009 Decision[3] of the
National Labor Relations
Commission (NLRC) in the case
entitled Bitoy Javier v. Fly
Ace/Flordelyn Castillo,[4] holding
that petitioner Bitoy
Javier (Javier) was illegally
dismissed from employment and
ordering Fly Ace Corporation (Fly
Ace) to pay backwages and
separation pay in lieu of
reinstatement.

Antecedent Facts

On May 23, 2008, Javier filed a

complaint before the NLRC for

underpayment of salaries and

other labor standard benefits. He
alleged that he was an employee
of Fly Ace since September
2007, performing various tasks at
the respondents warehouse such
as cleaning and arranging the
canned items before their
delivery to certain locations,
except in instances when he
would be ordered to accompany
the companys delivery vehicles,
as pahinante; that he reported for
work from Monday to Saturday
from 7:00 oclock in the morning
to 5:00 oclock in the afternoon;
that during his employment, he
was not issued an identification
card and payslips by the
company; that on May 6, 2008,
he reported for work but he was
no longer allowed to enter the
company premises by the
security guard upon the
instruction of Ruben Ong (Mr.
Ong), his superior;[5] that after
several minutes of begging to the
guard to allow him to enter, he
saw Ong whom he approached
and asked why he was being
barred from entering the
premises; that Ong replied by
saying,Tanungin mo anak
mo; [6] that he then went home
and discussed the matter with his
family; that he discovered that
Ong had been courting his
daughter Annalyn after the two
met at a fiesta celebration in
Malabon City; that Annalyn tried
to talk to Ong and convince him
to spare her father from trouble

but he refused to accede; that

thereafter, Javier was terminated
from his employment without
notice; and that he was neither
given the opportunity to refute the
cause/s of his dismissal from
work.

To support his allegations, Javier

presented an affidavit of one
Bengie Valenzuela who alleged
that Javier was a stevedore
or pahinante of Fly Ace from
September 2007 to January
2008. The said affidavit was
subscribed before the Labor
Arbiter (LA).[7]

For its part, Fly Ace averred that

it was engaged in the business of
importation and sales of
groceries. Sometime in
December 2007, Javier was
contracted by its employee, Mr.
Ong, as extra helper on
a pakyaw basis at an agreed rate
of 300.00 per trip, which was
later increased to 325.00 in
January 2008. Mr. Ong
contracted Javier roughly 5 to 6
times only in a month whenever
the vehicle of its contracted
hauler, Milmar Hauling Services,
was not available. On April 30,
2008, Fly Ace no longer needed
the services of Javier. Denying
that he was their employee, Fly
Ace insisted that there was no
illegal dismissal.[8] Fly

Ace submitted a copy of its

agreement with Milmar Hauling
Services and copies of
acknowledgment receipts
evidencing payment to Javier for
his contracted services bearing
the words, daily
manpower (pakyaw/piece rate
pay) and the latters
signatures/initials.

Ruling of the Labor Arbiter

On November 28, 2008, the LA

dismissed the complaint for lack
of merit on the ground that Javier
failed to present proof that he
was a regular employee of Fly
Ace. He wrote:

Complainant has no employee ID

showing his employment with the
Respondent nor any document
showing that he received the
benefits accorded to regular
employees of the Respondents.
His contention that Respondent
failed to give him said ID and
payslips implies that indeed he
was not a regular employee of
Fly Ace considering that
complainant was a helper and
that Respondent company has
contracted a regular trucking for
the delivery of its products.

 Respondent Fly Ace is not

engaged in trucking business but
in the importation and sales of
groceries. Since there is a
regular hauler to deliver its
products, we give credence to
Respondents claim that
complainant was contracted on
pakiao basis.
As to the claim for underpayment
of salaries, the payroll presented
by the Respondents showing
salaries of workers on pakiao
basis has evidentiary weight
because although the signature
of the complainant appearing
thereon are not uniform, they
appeared to be his true
signature.
xxxx
Hence, as complainant received
the rightful salary as shown by
the above described payrolls,
Respondents are not liable for
salary differentials. [9]
Ruling of the NLRC

On appeal with the NLRC, Javier

was favored. It ruled that the LA
skirted the argument of Javier
and immediately concluded that
he was not a regular employee
simply because he failed to
present proof. It was of the view
that a pakyaw-basis arrangement
did not preclude the existence of
employer-employee relationship.
Payment by result x x xis a
method of compensation and

does not define the essence of

the relation. It is a mere method
of computing compensation, not
a basis for determining the
existence or absence of an
employer-employee relationship.
[10]
The NLRC further averred that
it did not follow that a worker was
a job contractor and not an
employee, just because the work
he was doing was not directly
related to the employers trade or
business or the work may be
considered as extra helper as in
this case; and that the
relationship of an employer and
an employee was determined by
law and the same would prevail
whatever the parties may call it.
In this case, the NLRC held that
substantial evidence was
sufficient basis for judgment on
the existence of the employeremployee relationship. Javier
was a regular employee of Fly
Ace because there was
reasonable connection between
the particular activity performed
by the employee (as a
pahinante) in relation to the usual
business or trade of the employer
(importation, sales and delivery
of groceries). He may not be
considered as an independent
contractor because he could not
exercise any judgment in the
delivery of company products. He
was only engaged as a helper.

 Finding Javier to be a regular

employee, the NLRC ruled that
he was entitled to a security of
tenure. For failing to present
proof of a valid cause for his
termination, Fly Ace was found to
be liable for illegal dismissal of
Javier who was likewise entitled
to backwages and separation pay
in lieu of reinstatement. The
NLRC thus ordered:
WHEREFORE, premises
considered, complainants appeal
is partially GRANTED. The
assailed Decision of the labor
arbiter is VACATED and a new
one is hereby entered holding
respondent FLY ACE
CORPORATION guilty of illegal
dismissal and non-payment of
13th month pay. Consequently, it
is hereby ordered to pay
complainant DANILO Bitoy
JAVIER the following:

Backwages 45,770.83
Separation pay, in
lieu of
reinstatement - 8,450.
00
Unpaid 13th month
pay
(proportionate) - 5,63
3.33
TOTAL -59,854.16

All other claims are dismissed for

lack of merit.

SO ORDERED.[11]

Ruling of the Court of Appeals

On March 18, 2010, the CA

annulled the NLRC findings that
Javier was indeed a former
employee of Fly Ace and
reinstated the dismissal of
Javiers complaint as ordered by
the LA. The CA exercised its
authority to make its own factual
determination anent the issue of
the existence of an employeremployee relationship between
the parties.According to the CA:

xxx

In an illegal dismissal case

the onus probandi rests on the
employer to prove that its
dismissal was for a valid cause.
However, before a case for illegal
dismissal can prosper, an
employer-employee relationship
must first be established. x x x it
is incumbent upon private
respondent to prove the

employee-employer relationship
by substantial evidence.

xxx

It is incumbent upon private

respondent to prove, by
substantial evidence, that he is
an employee of petitioners, but
he failed to discharge his burden.
The non-issuance of a companyissued identification card to
private respondent supports
petitioners contention that private
respondent was not its employee.
[12]

The CA likewise added that

Javiers failure to present salary
vouchers, payslips, or other
pieces of evidence to bolster his
contention, pointed to the
inescapable conclusion that he
was not an employee of Fly
Ace. Further, it found that Javiers
work was not necessary and
desirable to the business or trade
of the company, as it was only
when there were scheduled
deliveries, which a regular
hauling service could not deliver,
that Fly Ace would contract the
services of Javier as an extra
helper. Lastly, the CA declared
that the facts alleged by Javier
did not pass the control test.

He contracted work outside the

company premises; he was not
required to observe definite hours
of work; he was not required to
report daily; and he was free to
accept other work elsewhere as
there was no exclusivity of his
contracted service to the
company, the same being coterminous with the trip only.
[13]
Since no substantial evidence
was presented to establish an
employer-employee relationship,
the case for illegal dismissal
could not prosper.

The petitioners moved for

reconsideration, but to no avail.

Hence, this appeal anchored on

the following grounds:

I.
WHETHER THE HONORABLE
COURT OF APPEALS ERRED
IN HOLDING THAT THE
PETITIONER WAS NOT A
REGULAR EMPLOYEE OF FLY
ACE.
II.
WHETHER THE HONORABLE
COURT OF APPEALS ERRED
IN HOLDING THAT THE
PETITIONER IS NOT ENTITLED
TO HIS MONETARY CLAIMS.[14]

 The petitioner contends that

other than its bare allegations
and self-serving affidavits of the
other employees, Fly Ace has
nothing to substantiate its claim
that Javier was engaged on
a pakyaw basis. Assuming that
Javier was indeed hired on
a pakyaw basis, it does not
preclude his regular employment
with the company. Even the
acknowledgment receipts bearing
his signature and the confirming
receipt of his salaries will not
show the true nature of his
employment as they do not
reflect the necessary details of
the commissioned task. Besides,
Javiers tasks as pahinante are
related, necessary and desirable
to the line of business by Fly Ace
which is engaged in the
importation and sale of grocery
items. On days when there were
no scheduled deliveries, he
worked in petitioners warehouse,
arranging and cleaning the stored
cans for delivery to clients.
[15]
More importantly, Javier was
subject to the control and
supervision of the company, as
he was made to report to the
office from Monday to Saturday,
from 7:00 oclock in the morning
until 5:00 oclock in the afternoon.
The list of deliverable goods,
together with the corresponding
clients and their respective
purchases and addresses, would
necessarily have been prepared
by Fly Ace. Clearly, he was

subjected to compliance with

company rules and regulations
as regards working hours,
delivery schedule and output,
and his other duties in the
warehouse.[16]

The petitioner chiefly relied

on Chavez v. NLRC,[17] where the
Court ruled that payment to a
worker on a per trip basis is not
significant because this is merely
a method of computing
compensation and not a basis for
determining the existence of
employer-employee relationship.
Javier likewise invokes the rule
that, in controversies between a
laborer and his master, x x x
doubts reasonably arising from
the evidence should be resolved
in the formers favour. The policy
is reflected is no less than the
Constitution, Labor Code and
Civil Code.[18]

Claiming to be an employee of
Fly Ace, petitioner asserts that he
was illegally dismissed by the
latters failure to observe
substantive and procedural due
process. Since his dismissal was
not based on any of the causes
recognized by law, and was
implemented without notice,
Javier is entitled to separation
pay and backwages.

 In its Comment,[19] Fly Ace insists

that there was no substantial
evidence to prove employeremployee relationship. Having a
service contract with Milmar
Hauling Services for the purpose
of transporting and delivering
company products to customers,
Fly Ace contracted Javier as an
extra helper or pahinante on a
mere per trip basis. Javier, who
was actually a loiterer in the area,
only accompanied and assisted
the company driver when Milmar
could not deliver or when the
exigency of extra deliveries
arises for roughly five to six times
a month. Before making a
delivery, Fly Ace would turn over
to the driver and Javier the
delivery vehicle with its loaded
company products. With the
vehicle and products in their
custody, the driver and Javier
would leave the company
premises using their own means,
method, best judgment and
discretion on how to deliver, time
to deliver, where and [when] to
start, and manner of delivering
the products.[20]

Fly Ace dismisses Javiers claims

of employment as baseless
assertions. Aside from his bare
allegations, he presented nothing
to substantiate his status as an
employee. It is a basic rule of
evidence that each party must
prove his affirmative allegation. If

he claims a right granted by law,

he must prove his claim by
competent evidence, relying on
the strength of his own evidence
and not upon the weakness of his
opponent.[21] Invoking the case
of Lopez v. Bodega City,[22] Fly
Ace insists that in an illegal
dismissal case, the burden of
proof is upon the complainant
who claims to be an employee. It
is essential that an employeremployee relationship be proved
by substantial evidence. Thus, it
cites:

In an illegal dismissal case,

the onus probandi rests on the
employer to prove that its
dismissal of an employee was for
a valid cause. However, before a
case for illegal dismissal can
prosper, an employer-employee
relationship must first be
established.
Fly Ace points out that Javier
merely offers factual assertions
that he was an employee of Fly
Ace, which are unfortunately not
supported by proof, documentary
or otherwise.[23] Javier simply
assumed that he was an
employee of Fly Ace, absent any
competent or relevant evidence
to support it. He performed his
contracted work outside the
premises of the respondent; he

was not even required to report

to work at regular hours; he was
not made to register his time in
and time out every time he was
contracted to work; he was not
subjected to any disciplinary
sanction imposed to other
employees for company
violations; he was not issued a
company I.D.; he was not
accorded the same benefits
given to other employees; he was
not registered with the Social
Security System (SSS) as
petitioners employee; and, he
was free to leave, accept and
engage in other means of
livelihood as there is no
exclusivity of his contracted
services with the petitioner, his
services being co-terminus with
the trip only. All these lead to the
conclusion that petitioner is not
an employee of the respondents.

Fly Ace likewise claims that

Javiers function as
a pahinante was not directly
related or necessary to its
principal business of importation
and sales of groceries. Even
without Javier, the business could
operate its usual course as it did
not involve the business of inland
transportation. Lastly, the
acknowledgment receipts bearing
Javiers signature and
words pakiao rate, referring to his
earned salaries on a per trip
basis, have evidentiary weight
that the LA correctly considered
in arriving at the conclusion that
Javier was not an employee of
the company.

The Court affirms the assailed

CA decision.

[24]

Moreover, Fly Ace claims that it

had no right to control the result,
means, manner and methods by
which Javier would perform his
work or by which the same is to
be accomplished.[25] In other
words, Javier and the company
driver were given a free hand as
to how they would perform their
contracted services and neither
were they subjected to definite
hours or condition of work.

It must be noted that the issue of

Javiers alleged illegal dismissal is
anchored on the existence of an
employer-employee relationship
between him and Fly Ace. This is
essentially a question of fact.
Generally, the Court does not
review errors that raise factual
questions. However, when there
is conflict among the factual
findings of the antecedent
deciding bodies like the LA, the
NLRC and the CA, it is proper, in
the exercise of Our equity
jurisdiction, to review and reevaluate the factual issues and to

look into the records of the case

and re-examine the questioned
findings.[26] In dealing with factual
issues in labor cases, substantial
evidence that amount of relevant
evidence which a reasonable
mind might accept as adequate
to justify a conclusion is
sufficient.[27]

As the records bear out, the LA

and the CA found Javiers claim of
employment with Fly Ace as
wanting and deficient. The Court
is constrained to agree. Although
Section 10, Rule VII of the New
Rules of Procedure of the
NLRC[28] allows a relaxation of
the rules of procedure and
evidence in labor cases, this rule
of liberality does not mean a
complete dispensation of
proof. Labor officials are enjoined
to use reasonable means to
ascertain the facts speedily and
objectively with little regard to
technicalities or formalities but
nowhere in the rules are they
provided a license to completely
discount evidence, or the lack of
it. The quantum of proof required,
however, must still be satisfied.
Hence, when confronted with
conflicting versions on factual
matters, it is for them in the
exercise of discretion to
determine which party deserves
credence on the basis of
evidence received, subject only
to the requirement that their

decision must be supported by

substantial evidence.
[29]
Accordingly, the petitioner
needs to show by substantial
evidence that he was indeed an
employee of the company
against which he claims illegal
dismissal.

Expectedly, opposing parties

would stand poles apart and
proffer allegations as different as
chalk and cheese. It is, therefore,
incumbent upon the Court to
determine whether the party on
whom the burden to prove lies
was able to hurdle the same. No
particular form of evidence is
required to prove the existence of
such employer-employee
relationship. Any competent and
relevant evidence to prove the
relationship may be
admitted. Hence, while no
particular form of evidence is
required, a finding that such
relationship exists must still rest
on some substantial evidence.
Moreover, the substantiality of
the evidence depends on its
quantitative as well as
its qualitative aspects.[30]Although
substantial evidence is not a
function of quantity but rather of
quality, the x x x circumstances of
the instant case demand that
something more should have
been proffered. Had there been
other proofs of employment, such
as x x x inclusion in petitioners

payroll, or a clear exercise of

control, the Court would have
affirmed the finding of employeremployee relationship.[31]

In sum, the rule of thumb

remains: the onus probandi falls
on petitioner to establish or
substantiate such claim by the
requisite quantum of evidence.
[32]
Whoever claims entitlement to
the benefits provided by law
should establish his or her right
thereto x x x.[33] Sadly, Javier
failed to adduce substantial
evidence as basis for the grant of
relief.

In this case, the LA and the CA

both concluded that Javier failed
to establish his employment with
Fly Ace. By way of evidence on
this point, all that Javier
presented were his self-serving
statements purportedly showing
his activities as an employee of
Fly Ace. Clearly, Javier failed to
pass the substantiality
requirement to support his
claim. Hence, the Court sees no
reason to depart from the
findings of the CA.

While Javier remains firm in his

position that as an employed
stevedore of Fly Ace, he was

made to work in the company

premises during weekdays
arranging and cleaning grocery
items for delivery to clients, no
other proof was submitted to
fortify his claim. The lone affidavit
executed by one Bengie
Valenzuela was unsuccessful in
strengthening Javiers cause. In
said document, all Valenzuela
attested to was that he would
frequently see Javier at the
workplace where the latter was
also hired as stevedore.
[34]
Certainly, in gauging the
evidence presented by Javier, the
Court cannot ignore the
inescapable conclusion that his
mere presence at the workplace
falls short in proving employment
therein. The supporting affidavit
could have, to an extent,
bolstered Javiers claim of being
tasked to clean grocery items
when there were no scheduled
delivery trips, but no information
was offered in this subject simply
because the witness had no
personal knowledge of Javiers
employment status in the
company. Verily, the Court cannot
accept Javiers statements, hook,
line and sinker.

The Court is of the considerable

view that on Javier lies the
burden to pass the well-settled
tests to determine the existence
of an employer-employee
relationship, viz: (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. Of these elements, the
most important criterion is
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 methods by which
the result is to be accomplished.
[35]

In this case, Javier was not able

to persuade the Court that the
above elements exist in his
case. He could not submit
competent proof that Fly Ace
engaged his services as a
regular employee; that Fly Ace
paid his wages as an employee,
or that Fly Ace could dictate what
his conduct should be while at
work. In other words, Javiers
allegations did not establish that
his relationship with Fly Ace had
the attributes of an employeremployee relationship on the
basis of the above-mentioned
four-fold test. Worse, Javier was
not able to refute Fly Aces
assertion that it had an
agreement with a hauling
company to undertake the
delivery of its goods. It was also
baffling to realize that Javier did
not dispute Fly Aces denial of his
services exclusivity to the

company. In short, all that Javier

laid down were bare allegations
without corroborative proof.

Fly Ace does not dispute having

contracted Javier and paid him
on a per trip rate as a stevedore,
albeit on a pakyaw basis. The
Court cannot fail to note that Fly
Ace presented documentary
proof that Javier was indeed paid
on a pakyaw basis per the
acknowledgment receipts
admitted as competent evidence
by the LA. Unfortunately for
Javier, his mere denial of the
signatures affixed therein cannot
automatically sway us to ignore
the documents because forgery
cannot be presumed and must be
proved by clear, positive and
convincing evidence and the
burden of proof lies on the party
alleging forgery.[36]

Considering the above findings,

the Court does not see the
necessity to resolve the second
issue presented.

One final note. The Courts

decision does not contradict the
settled rule that payment by the
piece is just a method of
compensation and does not
define the essence of the

relation.[37] Payment on a piecerate basis does not negate

regular employment. The term
wage is broadly defined in Article
97 of the Labor Code as
remuneration or earnings,
capable of being expressed in
terms of money whether fixed or
ascertained on a time, task, piece
or commission basis. Payment by
the piece is just a method of
compensation and does not
define the essence of the
relations. Nor does the fact that
the petitioner is not covered by
the SSS affect the employeremployee relationship. However,
in determining whether the
relationship is that of employer
and employee or one of an
independent contractor, each
case must be determined on its
own facts and all the features of
the relationship are to be
considered.[38] Unfortunately for
Javier, the attendant facts and
circumstances of the instant case
do not provide the Court with
sufficient reason to uphold his
claimed status as employee of
Fly Ace.

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 rights

which are entitled to respect and

enforcement in the interest of
simple fair play. Out of its
concern for the less privileged in
life, the 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 the Court 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.
[39]

WHEREFORE, the petition

is DENIED. The March 18,
2010 Decision of the Court of
Appeals and its June 7,
2010 Resolution, in CA-G.R. SP
No. 109975, are
herebyAFFIRMED.
SO ORDERED.
G.R. No. 87700 June 13, 1990
SAN MIGUEL CORPORATION
EMPLOYEES UNION-PTGWO,
DANIEL S.L. BORBON II,
HERMINIA REYES, MARCELA
PURIFICACION, ET
AL., petitioners,
vs.
HON. JESUS G. BERSAMIRA,
IN HIS CAPACITY AS
PRESIDING JUDGE OF
BRANCH 166, RTC, PASIG, and
SAN MIGUEL
CORPORATION, respondents.
Romeo C. Lagman for
petitioners.

 Jardeleza, Sobrevinas, Diaz,

Mayudini & Bodegon for
respondents.
MELENCIO-HERRERA, J.:
Respondent Judge of the
Regional Trial Court of Pasig,
Branch 166, is taken to task by
petitioners in this special civil
action for certiorari and
Prohibition for having issued the
challenged Writ of Preliminary
Injunction on 29 March 1989 in
Civil Case No. 57055 of his Court
entitled "San Miguel Corporation
vs. SMCEU-PTGWO, et als."
Petitioners' plea is that said Writ
was issued without or in excess
of jurisdiction and with grave
abuse of discretion, a labor
dispute being involved. Private
respondent San Miguel
Corporation (SanMig. for short),
for its part, defends the Writ on
the ground of absence of any
employer-employee relationship
between it and the contractual
workers employed by the
companies Lipercon Services,
Inc. (Lipercon) and D'Rite
Service Enterprises (D'Rite),
besides the fact that the Union is
bereft of personality to represent
said workers for purposes of
collective bargaining. The
Solicitor General agrees with the
position of SanMig.
The antecedents of the
controversy reveal that:

Sometime in 1983 and 1984,

SanMig entered into contracts for
merchandising services with
Lipercon and D'Rite (Annexes K
and I, SanMig's Comment,
respectively). These companies
are independent contractors duly
licensed by the Department of
Labor and Employment (DOLE).
SanMig entered into those
contracts to maintain its
competitive position and in
keeping with the imperatives of
efficiency, business expansion
and diversity of its operation. In
said contracts, it was expressly
understood and agreed that the
workers employed by the
contractors were to be paid by
the latter and that none of them
were to be deemed employees or
agents of SanMig. There was to
be no employer-employee
relation between the contractors
and/or its workers, on the one
hand, and SanMig on the other.
Petitioner San Miguel
Corporation Employees UnionPTWGO (the Union, for brevity)
is the duly authorized
representative of the monthly
paid rank-and-file employees of
SanMig with whom the latter
executed a Collective Bargaining
Agreement (CBA) effective 1 July
1986 to 30 June 1989 (Annex A,
SanMig's Comment). Section 1 of
their CBA specifically provides
that "temporary, probationary, or
contract employees and workers
are excluded from the bargaining

unit and, therefore, outside the

scope of this Agreement."
In a letter, dated 20 November
1988 (Annex C, Petition), the
Union advised SanMig that some
Lipercon and D'Rite workers had
signed up for union membership
and sought the regularization of
their employment with SMC. The
Union alleged that this group of
employees, while appearing to be
contractual workers supposedly
independent contractors, have
been continuously working for
SanMig for a period ranging from
six (6) months to fifteen (15)
years and that their work is
neither casual nor seasonal as
they are performing work or
activities necessary or desirable
in the usual business or trade of
SanMig. Thus, it was contended
that there exists a "labor-only"
contracting situation. It was then
demanded that the employment
status of these workers be
regularized.
On 12 January 1989 on the
ground that it had failed to
receive any favorable response
from SanMig, the Union filed a
notice of strike for unfair labor
practice, CBA violations, and
union busting (Annex D, Petition).
On 30 January 1989, the Union
again filed a second notice of
strike for unfair labor practice
(Annex F, Petition).
As in the first notice of strike.
Conciliatory meetings were held
on the second notice.

Subsequently, the two (2) notices

of strike were consolidated and
several conciliation conferences
were held to settle the dispute
before the National Conciliation
and Mediation Board (NCMB) of
DOLE (Annex G, Petition).
Beginning 14 February 1989 until
2 March 1989, series of pickets
were staged by Lipercon and
D'Rite workers in various SMC
plants and offices.
On 6 March 1989, SMC filed a
verified Complaint for Injunction
and Damages before respondent
Court to enjoin the Union from:
representing and/or acting for
and in behalf of the employees of
LIPERCON and/or D'RITE for the
purposes of collective bargaining;
calling for and holding a strike
vote, to compel plaintiff to hire
the employees or workers of
LIPERCON and D'RITE;
inciting, instigating and/or
inducing the employees or
workers of LIPERCON and
D'RITE to demonstrate and/or
picket at the plants and offices of
plaintiff within the bargaining unit
referred to in the CBA,...;
staging a strike to compel plaintiff
to hire the employees or workers
of LIPERCON and D'RITE;
using the employees or workers
of LIPERCON AND D'RITE to
man the strike area and/or picket
lines and/or barricades which the
defendants may set up at the
plants and offices of plaintiff

within the bargaining unit referred

to in the CBA ...;
intimidating, threatening with
bodily harm and/or molesting the
other employees and/or contract
workers of plaintiff, as well as
those persons lawfully
transacting business with plaintiff
at the work places within the
bargaining unit referred to in the
CBA, ..., to compel plaintiff to hire
the employees or workers of
LIPERCON and D'RITE;
blocking, preventing, prohibiting,
obstructing and/or impeding the
free ingress to, and egress from,
the work places within the
bargaining unit referred to in the
CBA .., to compel plaintiff to hire
the employees or workers of
LIPERCON and D'RITE;
preventing and/or disrupting the
peaceful and normal operation of
plaintiff at the work places within
the bargaining unit referred to in
the CBA, Annex 'C' hereof, to
compel plaintiff to hire the
employees or workers of
LIPERCON and D'RITE. (Annex
H, Petition)
Respondent Court found the
Complaint sufficient in form and
substance and issued a
Temporary Restraining Order for
the purpose of maintaining
the status quo, and set the
application for Injunction for
hearing.
In the meantime, on 13 March
1989, the Union filed a Motion to
Dismiss SanMig's Complaint on

the ground of lack of jurisdiction

over the case/nature of the
action, which motion was
opposed by SanMig. That Motion
was denied by respondent Judge
in an Order dated 11 April 1989.
After several hearings on
SanMig's application for
injunctive relief, where the parties
presented both testimonial and
documentary evidence on 25
March 1989, respondent Court
issued the questioned Order
(Annex A, Petition) granting the
application and enjoining the
Union from Committing the acts
complained of, supra.
Accordingly, on 29 March 1989,
respondent Court issued the
corresponding Writ of Preliminary
Injunction after SanMig had
posted the required bond of
P100,000.00 to answer for
whatever damages petitioners
may sustain by reason thereof.
In issuing the Injunction,
respondent Court rationalized:
The absence of employeremployee relationship negates
the existence of labor dispute.
Verily, this court has jurisdiction
to take cognizance of plaintiff's
grievance.
The evidence so far presented
indicates that plaintiff has
contracts for services with
Lipercon and D'Rite. The
application and contract for
employment of the defendants'
witnesses are either with
Lipercon or D'Rite. What could

be discerned is that there is no

employer-employee relationship
between plaintiff and the
contractual workers employed by
Lipercon and D'Rite. This,
however, does not mean that a
final determination regarding the
question of the existence of
employer-employee relationship
has already been made. To finally
resolve this dispute, the court
must extensively consider and
delve into the manner of
selection and engagement of the
putative employee; the mode of
payment of wages; the presence
or absence of a power of
dismissal; and the Presence or
absence of a power to control the
putative employee's conduct.
This necessitates a full-blown
trial. If the acts complained of are
not restrained, plaintiff would,
undoubtedly, suffer irreparable
damages. Upon the other hand, a
writ of injunction does not
necessarily expose defendants to
irreparable damages.
Evidently, plaintiff has
established its right to the relief
demanded. (p. 21, Rollo)
Anchored on grave abuse of
discretion, petitioners are now
before us seeking nullification of
the challenged Writ. On 24 April
1989, we issued a Temporary
Restraining Order enjoining the
implementation of the Injunction
issued by respondent Court. The
Union construed this to mean
that "we can now strike," which it

superimposed on the Order and

widely circulated to entice the
Union membership to go on
strike. Upon being apprised
thereof, in a Resolution of 24
May 1989, we required the
parties to "RESTORE the status
quo ante declaration of strike" (p.
2,62 Rollo).
In the meantime, however, or on
2 May 1989, the Union went on
strike. Apparently, some of the
contractual workers of Lipercon
and D'Rite had been laid off. The
strike adversely affected thirteen
(13) of the latter's plants and
offices.
On 3 May 1989, the National
Conciliation and Mediation Board
(NCMB) called the parties to
conciliation. The Union stated
that it would lift the strike if the
thirty (30) Lipercon and D'Rite
employees were recalled, and
discussion on their other
demands, such as wage
distortion and appointment of
coordinators, were made.
Effected eventually was a
Memorandum of Agreement
between SanMig and the Union
that "without prejudice to the
outcome of G.R. No. 87700 (this
case) and Civil Case No. 57055
(the case below), the laid-off
individuals ... shall be recalled
effective 8 May 1989 to their
former jobs or equivalent
positions under the same terms
and conditions prior to "lay-off"
(Annex 15, SanMig Comment). In

turn, the Union would

immediately lift the pickets and
return to work.
After an exchange of pleadings,
this Court, on 12 October 1989,
gave due course to the Petition
and required the parties to submit
their memoranda simultaneously,
the last of which was filed on 9
January 1990.
The focal issue for determination
is whether or not respondent
Court correctly assumed
jurisdiction over the present
controversy and properly issued
the Writ of Preliminary Injunction
to the resolution of that question,
is the matter of whether, or not
the case at bar involves, or is in
connection with, or relates to a
labor dispute. An affirmative
answer would bring the case
within the original and exclusive
jurisdiction of labor tribunals to
the exclusion of the regular
Courts.
Petitioners take the position that
'it is beyond dispute that the
controversy in the court a
quo involves or arose out of a
labor dispute and is directly
connected or interwoven with the
cases pending with the NCMBDOLE, and is thus beyond the
ambit of the public respondent's
jurisdiction. That the acts
complained of (i.e., the mass
concerted action of picketing and
the reliefs prayed for by the
private respondent) are within the
competence of labor tribunals, is

beyond question" (pp. 6-7,

Petitioners' Memo).
On the other hand, SanMig
denies the existence of any
employer-employee relationship
and consequently of any labor
dispute between itself and the
Union. SanMig submits, in
particular, that "respondent Court
is vested with jurisdiction and
judicial competence to enjoin the
specific type of strike staged by
petitioner union and its officers
herein complained of," for the
reasons that:
- The exclusive bargaining
representative of an
employer unit cannot strike
to compel the employer to
hire and thereby create an
employment relationship
with contractual workers,
especially were the
contractual workers were
recognized by the union,
under the governing
collective bargaining
agreement, as excluded
from, and therefore
strangers to, the bargaining
unit.
- A strike is a coercive
economic weapon granted
the bargaining
representative only in the
event of a deadlock in a
labor dispute over 'wages,
hours of work and all other
and of the employment' of
the employees in the unit.
The union leaders cannot

instigate a strike to compel

the employer, especially on
the eve of certification
elections, to hire strangers
or workers outside the unit,
in the hope the latter will
help re-elect them.
- Civil courts have the
jurisdiction to enjoin the
above because this specie
of strike does not arise out
of a labor dispute, is an
abuse of right, and violates
the employer's
constitutional liberty to hire
or not to hire. (SanMig's
Memorandum, pp. 475476, Rollo).
We find the Petition of a
meritorious character.
A "labor dispute" as defined in
Article 212 (1) of the Labor Code
includes "any controversy or
matter concerning terms and
conditions of employment or the
association or representation of
persons in negotiating, fixing,
maintaining, changing, or
arranging the terms and
conditions of employment,
regardless of whether the
disputants stand in the proximate
relation of employer and
employee."
While it is SanMig's submission
that no employer-employee
relationship exists between itself,
on the one hand, and the
contractual workers of Lipercon
and D'Rite on the other, a labor
dispute can nevertheless exist

"regardless of whether the

disputants stand in the proximate
relationship of employer and
employee" (Article 212 [1], Labor
Code, supra) provided the
controversy concerns, among
others, the terms and conditions
of employment or a "change" or
"arrangement" thereof (ibid). Put
differently, and as defined by law,
the existence of a labor dispute is
not negative by the fact that the
plaintiffs and defendants do not
stand in the proximate relation of
employer and employee.
That a labor dispute, as defined
by the law, does exist herein is
evident. At bottom, what the
Union seeks is to regularize the
status of the employees
contracted by Lipercon and
D'Rite in effect, that they be
absorbed into the working unit of
SanMig. This matter definitely
dwells on the working
relationship between said
employees vis-a-vis SanMig.
Terms, tenure and conditions of
their employment and the
arrangement of those terms are
thus involved bringing the matter
within the purview of a labor
dispute. Further, the Union also
seeks to represent those
workers, who have signed up for
Union membership, for the
purpose of collective bargaining.
SanMig, for its part, resists that
Union demand on the ground that
there is no employer-employee
relationship between it and those

workers and because the

demand violates the terms of
their CBA. Obvious then is that
representation and association,
for the purpose of negotiating the
conditions of employment are
also involved. In fact, the
injunction sought by SanMig was
precisely also to prevent such
representation. Again, the matter
of representation falls within the
scope of a labor dispute. Neither
can it be denied that the
controversy below is directly
connected with the labor dispute
already taken cognizance of by
the NCMB-DOLE (NCMB-NCRNS-01- 021-89; NCMB NCR NS01-093-83).
Whether or not the Union
demands are valid; whether or
not SanMig's contracts with
Lipercon and D'Rite constitute
"labor-only" contracting and,
therefore, a regular employeremployee relationship may, in
fact, be said to exist; whether or
not the Union can lawfully
represent the workers of Lipercon
and D'Rite in their demands
against SanMig in the light of the
existing CBA; whether or not the
notice of strike was valid and the
strike itself legal when it was
allegedly instigated to compel the
employer to hire strangers
outside the working unit; those
are issues the resolution of which
call for the application of labor
laws, and SanMig's cause's of
action in the Court below are

inextricably linked with those

issues.
The precedent in Layno vs. de la
Cruz (G.R. No. L-29636, 30 April
1965, 13 SCRA 738) relied upon
by SanMig is not controlling as in
that case there was no
controversy over terms, tenure or
conditions, of employment or the
representation of employees that
called for the application of labor
laws. In that case, what the
petitioning union demanded was
not a change in working terms
and conditions, or the
representation of the employees,
but that its members be hired as
stevedores in the place of the
members of a rival union, which
petitioners wanted discharged
notwithstanding the existing
contract of the arrastre company
with the latter union. Hence, the
ruling therein, on the basis of
those facts unique to that case,
that such a demand could hardly
be considered a labor dispute.
As the case is indisputably linked
with a labor dispute, jurisdiction
belongs to the labor tribunals. As
explicitly provided for in Article
217 of the Labor Code, prior to its
amendment by R.A. No. 6715 on
21 March 1989, since the suit
below was instituted on 6 March
1989, Labor Arbiters have
original and exclusive jurisdiction
to hear and decide the following
cases involving all workers
including "1. unfair labor practice
cases; 2. those that workers may

file involving wages, hours of

work and other terms and
conditions of employment; ... and
5. cases arising from any
violation of Article 265 of this
Code, including questions
involving the legality of striker
and lockouts. ..." Article 217 lays
down the plain command of the
law.
The claim of SanMig that the
action below is for damages
under Articles 19, 20 and 21 of
the Civil Code would not suffice
to keep the case within the
jurisdictional boundaries of
regular Courts. That claim for
damages is interwoven with a
labor dispute existing between
the parties and would have to be
ventilated before the
administrative machinery
established for the expeditious
settlement of those disputes. To
allow the action filed below to
prosper would bring about "split
jurisdiction" which is obnoxious to
the orderly administration of
justice (Philippine
Communications, Electronics and
Electricity Workers Federation vs.
Hon. Nolasco, L-24984, 29 July
1968, 24 SCRA 321).
We recognize the proprietary
right of SanMig to exercise an
inherent management
prerogative and its best business
judgment to determine whether it
should contract out the
performance of some of its work
to independent contractors.

However, the rights of all workers

to self-organization, collective
bargaining and negotiations, and
peaceful concerted activities,
including the right to strike in
accordance with law (Section 3,
Article XIII, 1987 Constitution)
equally call for recognition and
protection. Those contending
interests must be placed in
proper perspective and
equilibrium.
WHEREFORE, the Writ
of certiorari is GRANTED and the
Orders of respondent Judge of
25 March 1989 and 29 March
1989 are SET ASIDE. The Writ of
Prohibition is GRANTED and
respondent Judge is enjoined
from taking any further action in
Civil Case No. 57055 except for
the purpose of dismissing it.
The status quo ante declaration
of strike ordered by the Court on
24 May 1989 shall be observed
pending the proceedings in the
National Conciliation Mediation
Board-Department of Labor and
Employment, docketed as
NCMB-NCR-NS-01-02189 and
NCMB-NCR-NS-01-093-83. No
costs.
SO ORDERED.

 RAUL G. LOCSIN and G.R. No.

185251
EDDIE B. TOMAQUIN,
Petitioners,
Present:
YNARES-SANTIAGO, J.,
Chairperson,
- versus - CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.
PHILIPPINE LONG
DISTANCE Promulgated:
TELEPHONE COMPANY,
Respondent. October 2, 2009
x---------------------------------------------------------------------------------------x
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on
Certiorari under Rule 45 seeks
the reversal of the May 6, 2008
Decision[1] and November 4,
2008 Resolution[2] of the Court of
Appeals (CA) in CA-G.R. SP No.
97398, entitled Philippine Long
Distance Telephone Company v.

National Labor Relations

Commission, Raul G. Locsin and
Eddie B. Tomaquin. The assailed
decision set aside the
Resolutions of the National Labor
Relations Commission (NLRC)
dated October 28,
2005 and August 28, 2006 which
in turn affirmed the Decision
datedFebruary 13, 2004 of the
Labor Arbiter. The assailed
resolution, on the other hand,
denied petitioners motion for
reconsideration of the assailed
decision.
The Facts
On November 1, 1990,
respondent Philippine Long
Distance Telephone Company
(PLDT) and the Security and
Safety Corporation of the
Philippines (SSCP) entered into a
Security Services
Agreement[3] (Agreement)
whereby SSCP would provide
armed security guards to PLDT
to be assigned to its various
offices.
Pursuant to such agreement,
petitioners Raul Locsin and Eddie
Tomaquin, among other security
guards, were posted at a PLDT
office.
On August 30, 2001, respondent
issued a Letter dated August 30,
2001 terminating the Agreement
effective October 1, 2001.[4]

 Despite the termination of the

Agreement, however, petitioners
continued to secure the premises
of their assigned office. They
were allegedly directed to remain
at their post by representatives of
respondent. In support of their
contention, petitioners provided
the Labor Arbiter with copies of
petitioner Locsins pay slips for
the period of January to
September 2002.[5]
Then, on September 30, 2002,
petitioners services were
terminated.
Thus, petitioners filed a complaint
before the Labor Arbiter for illegal
dismissal and recovery of money
claims such as overtime pay,
holiday pay, premium pay for
holiday and rest day, service
incentive leave pay, Emergency
Cost of Living Allowance, and
moral and exemplary damages
against PLDT.
The Labor Arbiter rendered a
Decision finding PLDT liable for
illegal dismissal. It was explained
in the Decision that petitioners
were found to be employees of
PLDT and not of SSCP. Such
conclusion was arrived at with
the factual finding that petitioners
continued to serve as guards of
PLDTs offices. As such
employees, petitioners were
entitled to substantive and
procedural due process before

termination of employment. The

Labor Arbiter held that
respondent failed to observe
such due process requirements.
The dispositive portion of the
Labor Arbiters Decision reads:
WHEREFORE, premises
considered, judgment is hereby
rendered ordering respondent
Philippine Long Distance and
Telephone Company (PLDT) to
pay complainants Raul E. Locsin
and Eddie Tomaquin their
separation pay and back wages
computed as follows:
NAME SEPARATION
PAY BACKWAGES
Raul E.
Locsin P127,500.00
P240,954.67
Eddie B.
Tomaquin P127,500.0
0 P240,954.67
P736,909.34
All other claims are DISMISSED
for want of factual basis.
Let the computation made by the
Computation and Examination
Unit form part of this decision.
SO ORDERED.
PLDT appealed the above
Decision to the NLRC which
rendered a Resolution

affirming in toto the Arbiters

Decision.
Thus, PDLT filed a Motion for
Reconsideration of the NLRCs
Resolution which was also
denied.
Consequently, PLDT filed a
Petition for Certiorari with the CA
asking for the nullification of the
Resolution issued by the NLRC
as well as the Labor Arbiters
Decision. The CA rendered the
assailed decision granting PLDTs
petition and dismissing
petitioners complaint. The
dispositive portion of the CA
Decision provides:
WHEREFORE, the instant
Petition for Certiorari is
GRANTED. The Resolutions
dated October 28,
2005 and August 28, 2006 of the
National Labor Relations
Commission are ANNULLED and
SET ASIDE. Private respondents
complaint against Philippine Long
Distance Telephone Company is
DISMISSED.
SO ORDERED.
The CA applied the four-fold test
in order to determine the
existence of an employeremployee relationship between
the parties but did not find such
relationship. It determined that
SSCP was not a labor-only

contractor and was an

independent contractor having
substantial capital to operate and
conduct its own business. The
CA further bolstered its decision
by citing the Agreement whereby
it was stipulated that there shall
be no employer-employee
relationship between the security
guards and PLDT.
Anent the pay slips that were
presented by petitioners, the CA
noted that those were issued by
SSCP and not PLDT; hence,
SSCP continued to pay the
salaries of petitioners after the
Agreement. This fact allegedly
proved that petitioners continued
to be employees of
SSCP albeit performing their
work at PLDTs premises.
From such assailed decision,
petitioners filed a motion for
reconsideration which was
denied in the assailed resolution.
Hence, we have this petition.
The Issues
Whether or not; complainants
extended services to the
respondent for one (1) year
from October 1, 2001, the
effectivity of the termination of
the contract of complainants
agency SSCP, up to September
30, 2002, without a renewed
contract, constitutes an

employer-employee relationship
between respondent and the
complainants.
Whether or not; in accordance to
the provision of the Article 280 of
the Labor Code, complainants
extended services to the
respondent for another one (1)
year without a contract be
considered as contractual
employment.
Whether or not; in accordance to
the provision of the Article 280 of
the Labor Code, does
complainants thirteen (13) years
of service to the respondent with
manifestation to the respondent
thirteen (13) years renewal of its
security contract with the
complainant agency SSCP, can
be considered only as seasonal
in nature or fixed as [specific
projects] or undertakings and its
completion or termination can be
dictated as [controlled] by the
respondent anytime they wanted
to.
Whether or not; complainants
from being an alleged contractual
employees of the respondent for
thirteen (13) years as they were
then covered by a contract,
becomes regular employees of
the respondent as the one (1)
year extended services of the
complainants were not covered
by a contract, and can be
considered as direct employment

pursuant to the provision of the

Article 280 of the Labor Code.
Whether or not; the Court of
Appeals committed grave abuse
of discretion when it set aside
and [annulled] the labor [arbiters]
decision and of the NLRCs
resolution declaring the dismissal
of the complainant as illegal.[6]
The Courts Ruling
This petition is hereby granted.
An Employer-Employee
Relationship Existed Between
the Parties
It is beyond cavil that there was
no employer-employee
relationship between the parties
from the time of petitioners first
assignment to respondent by
SSCP in 1988 until the alleged
termination of the Agreement
between respondent and SSCP.
In fact, this was the conclusion
that was reached by this Court
in Abella v. Philippine Long
Distance Telephone Company,
[7]
where we ruled that petitioners
therein, including herein
petitioners, cannot be considered
as employees of PLDT. It bears
pointing out that petitioners were
among those declared to be
employees of their respective
security agencies and not of
PLDT.

 The only issue in this case is

whether petitioners became
employees of respondent after
the Agreement between SSCP
and respondent was terminated.
This must be answered in the
affirmative.
Notably, respondent does not
deny the fact that petitioners
remained in the premises of their
offices even after the Agreement
was terminated. And it is this fact
that must be explained.
To recapitulate, the CA, in
rendering a decision in favor of
respondent, found that: (1)
petitioners failed to prove that
SSCP was a labor-only
contractor; and (2) petitioners are
employees of SSCP and not of
PLDT.
In arriving at such conclusions,
the CA relied on the provisions of
the Agreement, wherein SSCP
undertook to supply PLDT with
the required security guards,
while furnishing PLDT with a
performance bond in the amount
of PhP 707,000. Moreover, the
CA gave weight to the provision
in the Agreement that SSCP
warranted that it carry on an
independent business and has
substantial capital or investment
in the form of equipment, work
premises, and other materials

which are necessary in the

conduct of its business.
Further, in determining that no
employer-employee relationship
existed between the parties, the
CA quoted the express provision
of the Agreement, stating that no
employer-employee relationship
existed between the parties
herein. The CA disregarded the
pay slips of Locsin considering
that they were in fact issued by
SSCP and not by PLDT.
From the foregoing explanation
of the CA, the fact remains that
petitioners remained at their post
after the termination of the
Agreement. Notably, in its
Comment datedMarch 10, 2009,
[8]
respondent never denied that
petitioners remained at their post
until September 30, 2002. While
respondent denies the alleged
circumstances stated by
petitioners, that they were told to
remain at their post by
respondents Security Department
and that they were informed by
SSCP Operations Officer
Eduardo Juliano that their
salaries would be coursed
through SSCP as per
arrangement with PLDT, it does
not state why they were not
made to vacate their posts.
Respondent said that it did not
know why petitioners remained at
their posts.

 Rule 131, Section 3(y) of the

Rules of Court provides:
SEC. 3. Disputable
presumptions.The following
presumptions are satisfactory if
uncontradicted, but may be
contradicted and overcome by
other evidence:
xxxx
(y) That things have happened
according to the ordinary course
of nature and the ordinary habits
of life.
In the ordinary course of things,
responsible business owners or
managers would not allow
security guards of an agency with
whom the owners or managers
have severed ties with to
continue to stay within the
business premises. This is
because upon the termination of
the owners or managers
agreement with the security
agency, the agencys undertaking
of liability for any damage that
the security guard would cause
has already been terminated.
Thus, in the event of an accident
or otherwise damage caused by
such security guards, it would be
the business owners and/or
managers who would be liable
and not the agency. The
business owners or managers
would, therefore, be opening
themselves up to liability for acts

of security guards over whom the

owners or managers allegedly
have no control.
At the very least, responsible
business owners or managers
would inquire or learn why such
security guards were remaining
at their posts, and would have a
clear understanding of the
circumstances of the guards stay.
It is but logical that responsible
business owners or managers
would be aware of the situation in
their premises.
We point out that with
respondents hypothesis, it would
seem that SSCP was paying
petitioners salaries while
securing respondents premises
despite the termination of their
Agreement. Obviously, it would
only be respondent that would
benefit from such a situation. And
it is seriously doubtful that a
security agency that was
established for profit would allow
its security guards to secure
respondents premises when the
Agreement was already
terminated.
From the foregoing
circumstances, reason dictates
that we conclude that petitioners
remained at their post under the
instructions of respondent. We
can further conclude that
respondent dictated upon
petitioners that the latter perform
their regular duties to secure the

premises during operating hours.

This, to our mind and under the
circumstances, is sufficient to
establish the existence of an
employer-employee relationship.
Certainly, the facts as narrated by
petitioners are more believable
than the irrational denials made
by respondent. Thus, we ruled
in Lee Eng Hong v. Court of
Appeals:[9]
Evidence, to be believed, must
not only proceed from the mouth
of a credible witness, but it must
be credible in itself such as the
common experience and
observation of mankind can
approve as probable under the
circumstances. We have no test
of the truth of human testimony,
except its conformity to our
knowledge, observation and
experience. Whatever is
repugnant to these belongs to the
miraculous and is outside judicial
cognizance (Castaares v. Court
of Appeals, 92 SCRA 568
[1979]).
To reiterate, while respondent
and SSCP no longer had any
legal relationship with the
termination of the Agreement,
petitioners remained at their post
securing the premises of
respondent while receiving their
salaries, allegedly from SSCP.
Clearly, such a situation makes
no sense, and the denials
proffered by respondent do not

shed any light to the situation. It

is but reasonable to conclude
that, with the behest and,
presumably, directive of
respondent, petitioners continued
with their services. Evidently,
such are indiciaof control that
respondent exercised over
petitioners.
Such power of control has been
explained as the right to control
not only the end to be achieved
but also the means to be used in
reaching such end.[10] With the
conclusion that respondent
directed petitioners to remain at
their posts and continue with their
duties, it is clear that respondent
exercised the power of control
over them; thus, the existence of
an employer-employee
relationship.
In Tongko v. The Manufacturers
Life Insurance Co. (Phils.) Inc.,
[11]
we reiterated the oft repeated
rule that control is the most
important element in the
determination of the existence of
an employer-employee
relationship:
In the determination of whether
an employer-employee
relationship exists between two
parties, this Court applies the
four-fold test to determine the
existence of the elements of such
relationship. In Pacific
Consultants International Asia,

Inc. v. Schonfeld, the Court set

out the elements of an employeremployee relationship, thus:
Jurisprudence is firmly settled
that whenever the existence of
an employment relationship is in
dispute, four elements constitute
the reliable yardstick: (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. It is the so-called control
test which constitutes the most
important index of the existence
of the employer-employee
relationship that is, whether the
employer controls or has
reserved the right to control the
employee not only as to the
result of the work to be done but
also as to the means and
methods by which the same is to
be accomplished. Stated
otherwise, an employeremployee relationship exists
where the person for whom the
services are performed reserves
the right to control not only the
end to be achieved but also the
means to be used in reaching
such end.
Furthermore, Article 106 of the
Labor Code contains a provision
on contractors, to wit:
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.
In the event that the contractor or
subcontractor fails to pay the
wages of his employees in
accordance with this Code, the
employer shall be jointly and
severally liable with his contractor
or subcontractor to such
employees to the extent of the
work performed under the
contract, in the same manner and
extent that he is liable to
employees directly employed by
him.
The Secretary of Labor and
Employment may, by
appropriate regulations,
restrict or prohibit the
contracting-out of labor to
protect the rights of workers
established under this Code. In
so prohibiting or restricting, he
may make appropriate
distinctions between laboronly contracting and job
contracting as well as
differentiations within these
types of contracting and
determine who among the
parties involved shall be
considered the employer for
purposes of this Code, to
prevent any violation or

circumvention of any provision

of this Code.
There is labor-only contracting
where the person supplying
workers to an 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 person 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.)
Thus, the Secretary of Labor
issued Department Order No. 182002, Series of 2002,
implementing Art. 106 as follows:
Section 5. Prohibition against
labor-only contracting.Labor-only
contracting is hereby declared
prohibited. For this purpose,
labor-only contracting shall refer
to an arrangement where the
contractor or subcontractor
merely recruits, supplies or
places workers to perform a job,
work or service for a principal,
and any of the following elements
are present:

- The contractor or
subcontractor does not
have substantial capital or
investment which relates to
the job, work or service to
be performed and the
employees recruited,
supplied or placed by such
contractor or subcontractor
are performing activities
which are directly related to
the main business of the
principal; or
- the contractor does not
exercise the right to
control over the
performance of the work
of the contractual
employee.
The foregoing provisions shall be
without prejudice to the
application of Article 248 (C) of
the Labor Code, as amended.
Substantial capital or investment
refers to capital stocks and
subscribed capitalization in the
case of corporations, tools,
equipment, implements,
machineries and work premises,
actually and directly used by the
contractor or subcontractor in the
performance or completion of the
job, work or service contracted
out.
The right to control shall refer to
the right reserved to the person
for whom the services of the

contractual workers are

performed, to determine not only
the end to be achieved, but also
the manner and means to be
used in reaching that end.
On the other hand, Sec. 7 of the
department order contains the
consequence of such labor-only
contracting:
Section 7. Existence of an
employer-employee
relationship.The contractor or
subcontractor shall be
considered the employer of the
contractual employee for
purposes of enforcing the
provisions of the Labor Code and
other social legislation. The
principal, however, shall be
solidarily liable with the
contractor in the event of any
violation of any provision of the
Labor Code, including the failure
to pay wages.
The principal shall be deemed
the employer of the contractual
employee in any of the following
cases as declared by a
competent authority:
where there is
labor-only
contracting; or
where the contracting
arrangement falls
within the prohibitions
provided in Section 6

(Prohibitions) hereof.
(Emphasis supplied.)
Evidently, respondent having the
power of control over petitioners
must be considered as
petitioners employerfrom the
termination of the Agreement
onwardsas this was the only time
that any evidence of control was
exhibited by respondent over
petitioners and in light of our
ruling in Abella.[12] Thus, as aptly
declared by the NLRC,
petitioners were entitled to the
rights and benefits of employees
of respondent, including due
process requirements in the
termination of their services.
Both the Labor Arbiter and NLRC
found that respondent did not
observe such due process
requirements. Having failed to do
so, respondent is guilty of illegal
dismissal.
WHEREFORE, we SET
ASIDE the CAs May 6,
2008 Decision and November 4,
2008 Resolution in CA-G.R. SP
No. 97398. We
hereby REINSTATE the Labor
Arbiters Decision dated February
13, 2004 and the NLRCs
Resolutions dated October 28,
2005 and August 28, 2006.
No costs.
SO ORDERED.

 PEOPLES BROADCASTING
SERVICE (BOMBO RADYO
PHILS., INC.),
Petitioner,

- versus -

THE SECRETARY OF THE

DEPARTMENT OF LABOR
AND EMPLOYMENT, THE
REGIONAL DIRECTOR, DOLE
REGION VII, and
JANDELEON JUEZAN,
Respondents.

x---------------------------------------------------------------------------------------x
RESOLUTION
VELASCO, JR., J.:
In a Petition for Certiorari under
Rule 65, petitioner Peoples
Broadcasting Service, Inc.
(Bombo Radyo Phils., Inc.)

questioned the Decision and

Resolution of the Court of
Appeals (CA) dated October 26,
2006 and June 26, 2007,
respectively, in C.A. G.R. CEBSP No. 00855.
Private respondent Jandeleon
Juezan filed a complaint against
petitioner with the Department of
Labor and Employment (DOLE)
Regional Office No. VII, Cebu
City, for illegal deduction,
nonpayment of service incentive
leave, 13th month pay, premium
pay for holiday and rest day and
illegal diminution of benefits,
delayed payment of wages and
noncoverage of SSS, PAG-IBIG
and Philhealth.[1] After the
conduct of summary
investigations, and after the
parties submitted their position
papers, the DOLE Regional
Director found that private
respondent was an employee of
petitioner, and was entitled to his
money claims.[2] Petitioner sought
reconsideration of the Directors
Order, but failed. The Acting
DOLE Secretary dismissed
petitioners appeal on the ground
that petitioner submitted a Deed
of Assignment of Bank Deposit
instead of posting a cash or
surety bond.When the matter
was brought before the CA,
where petitioner claimed that it
had been denied due process, it
was held that petitioner was
accorded due process as it had

been given the opportunity to be

heard, and that the DOLE
Secretary had jurisdiction over
the matter, as the jurisdictional
limitation imposed by Article 129
of the Labor Code on the power
of the DOLE Secretary under Art.
128(b) of the Code had been
repealed by Republic Act No.
(RA) 7730.[3]
In the Decision of this Court, the
CA Decision was reversed and
set aside, and the complaint
against petitioner was
dismissed. The dispositive
portion of the Decision reads as
follows:
WHEREFORE, the petition
is GRANTED. The Decision
dated 26 October 2006 and the
Resolution dated 26 June 2007
of the Court of Appeals in C.A.
G.R. CEB-SP No. 00855
areREVERSED and SET
ASIDE. The Order of the then
Acting Secretary of the
Department of Labor and
Employment dated 27 January
2005 denying petitioners appeal,
and the Orders of the Director,
DOLE Regional Office No. VII,
dated 24 May 2004 and 27
February 2004, respectively,
are ANNULLED. The complaint
against petitioner is DISMISSED.
[4]

The Court found that there was

no employer-employee
relationship between petitioner

and private respondent. It was

held that while the DOLE may
make a determination of the
existence of an employeremployee relationship, this
function could not be coextensive with the visitorial and
enforcement power provided in
Art. 128(b) of the Labor Code, as
amended by RA 7730. The
National Labor Relations
Commission (NLRC) was held to
be the primary agency in
determining the existence of an
employer-employee
relationship. This was the
interpretation of the Court of the
clause in cases where the
relationship of employeremployee still exists in Art.
128(b).[5]
From this Decision, the Public
Attorneys Office (PAO) filed a
Motion for Clarification of
Decision (with Leave of
Court). The PAO sought to clarify
as to when the visitorial and
enforcement power of the DOLE
be not considered as coextensive with the power to
determine the existence of an
employer-employee relationship.
[6]
In its Comment,[7] the DOLE
sought clarification as well, as to
the extent of its visitorial and
enforcement power under the
Labor Code, as amended.
The Court treated the Motion for
Clarification as a second motion

for reconsideration, granting said

motion and reinstating the
petition.[8] It is apparent that there
is a need to delineate the
jurisdiction of the DOLE
Secretary vis--vis that of the
NLRC.

RA 7730, the first sentence

reads, Notwithstanding the
provisions of Articles 129 and
217 of this Code to the contrary,
and in cases where the
relationship of employeremployee still exists, the
Secretary of Labor and
Employment or his duly
authorized representatives shall
have the power to issue
compliance orders to give effect
to the labor standards provisions
of this Code and other labor
legislation based on the findings
of labor employment and
enforcement officers or industrial
safety engineers made in the
course of inspection. It is clear
and beyond debate that an
employer-employee relationship
must exist for the exercise of the
visitorial and enforcement power
of the DOLE. The question now
arises, may the DOLE make a
determination of whether or not
an employer-employee
relationship exists, and if so, to
what extent?

Under Art. 129 of the Labor

Code, the power of the DOLE
and its duly authorized hearing
officers to hear and decide any
matter involving the recovery of
wages and other monetary
claims and benefits was qualified
by the proviso that the complaint
not include a claim for
reinstatement, or that the
aggregate money claims not
exceed PhP 5,000. RA 7730, or
an Act Further Strengthening the
Visitorial and Enforcement
Powers of the Secretary of Labor,
did away with the PhP 5,000
limitation, allowing the DOLE
Secretary to exercise its visitorial
and enforcement power for
claims beyond PhP 5,000. The
only qualification to this
expanded power of the DOLE
was only that there still be an
existing employer-employee
relationship.

The first portion of the question

must be answered in the
affirmative.

It is conceded that if there is no

employer-employee relationship,
whether it has been terminated or
it has not existed from the start,
the DOLE has no
jurisdiction. Under Art. 128(b) of
the Labor Code, as amended by

The prior decision of this Court in

the present case accepts such
answer, but places a limitation
upon the power of the DOLE, that
is, the determination of the
existence of an employeremployee relationship cannot be

co-extensive with the visitorial

and enforcement power of the
DOLE. But even in conceding the
power of the DOLE to determine
the existence of an employeremployee relationship, the Court
held that the determination of the
existence of an employeremployee relationship is still
primarily within the power of the
NLRC, that any finding by the
DOLE is merely preliminary.
This conclusion must be
revisited.
No limitation in the law was
placed upon the power of the
DOLE to determine the existence
of an employer-employee
relationship. No procedure was
laid down where the DOLE would
only make a preliminary finding,
that the power was primarily held
by the NLRC. The law did not say
that the DOLE would first seek
the NLRCs determination of the
existence of an employeremployee relationship, or that
should the existence of the
employer-employee relationship
be disputed, the DOLE would
refer the matter to the NLRC. The
DOLE must have the power to
determine whether or not an
employer-employee relationship
exists, and from there to decide
whether or not to issue
compliance orders in accordance
with Art. 128(b) of the Labor
Code, as amended by RA 7730.

The DOLE, in determining the

existence of an employeremployee relationship, has a
ready set of guidelines to follow,
the same guide the courts
themselves use. The elements to
determine the existence of an
employment relationship are: (1)
the selection and engagement of
the employee; (2) the payment of
wages; (3) the power of
dismissal; (4) the employers
power to control the employees
conduct.[9] The use of this test is
not solely limited to the NLRC.
The DOLE Secretary, or his or
her representatives, can utilize
the same test, even in the course
of inspection, making use of the
same evidence that would have
been presented before the
NLRC.
The determination of the
existence of an employeremployee relationship by the
DOLE must be respected. The
expanded visitorial and
enforcement power of the DOLE
granted by RA 7730 would be
rendered nugatory if the alleged
employer could, by the simple
expedient of disputing the
employer-employee relationship,
force the referral of the matter to
the NLRC. The Court issued the
declaration that at least a prima
facie showing of the absence of
an employer-employee
relationship be made to oust the
DOLE of jurisdiction. But it is

precisely the DOLE that will be

faced with that evidence, and it is
the DOLE that will weigh it, to
see if the same does successfully
refute the existence of an
employer-employee relationship.
If the DOLE makes a finding that
there is an existing employeremployee relationship, it takes
cognizance of the matter, to the
exclusion of the NLRC. The
DOLE would have no jurisdiction
only if the employer-employee
relationship has already been
terminated, or it appears, upon
review, that no employeremployee relationship existed in
the first place.
The Court, in limiting the power
of the DOLE, gave the rationale
that such limitation would
eliminate the prospect of
competing conclusions between
the DOLE and the NLRC. The
prospect of competing
conclusions could just as well
have been eliminated by
according respect to the DOLE
findings, to the exclusion of the
NLRC, and this We believe is the
more prudent course of action to
take.
This is not to say that the
determination by the DOLE is
beyond question or
review. Suffice it to say, there are
judicial remedies such as a
petition for certiorari under Rule
65 that may be availed of, should

a party wish to dispute the

findings of the DOLE.
It must also be remembered that
the power of the DOLE to
determine the existence of an
employer-employee relationship
need not necessarily result in an
affirmative finding. The DOLE
may well make the determination
that no employer-employee
relationship exists, thus divesting
itself of jurisdiction over the
case. It must not be precluded
from being able to reach its own
conclusions, not by the parties,
and certainly not by this Court.
Under Art. 128(b) of the Labor
Code, as amended by RA 7730,
the DOLE is fully empowered to
make a determination as to the
existence of an employeremployee relationship in the
exercise of its visitorial and
enforcement power, subject to
judicial review, not review by the
NLRC.
There is a view that despite Art.
128(b) of the Labor Code, as
amended by RA 7730, there is
still a threshold amount set by
Arts. 129 and 217 of the Labor
Code when money claims are
involved, i.e., that if it is for PhP
5,000 and below, the jurisdiction
is with the regional director of the
DOLE, under Art. 129, and if the
amount involved exceeds PhP
5,000, the jurisdiction is with the

labor arbiter, under Art. 217. The

view states that despite the
wording of Art. 128(b), this would
only apply in the course of
regular inspections undertaken
by the DOLE, as differentiated
from cases under Arts. 129 and
217, which originate from
complaints. There are several
cases, however, where the Court
has ruled that Art. 128(b) has
been amended to expand the
powers of the DOLE Secretary
and his duly authorized
representatives by RA 7730. In
these cases, the Court resolved
that the DOLE had the
jurisdiction, despite the amount of
the money claims
involved. Furthermore, in these
cases, the inspection held by the
DOLE regional director was
prompted specifically by a
complaint. Therefore, the
initiation of a case through a
complaint does not divest the
DOLE Secretary or his duly
authorized representative of
jurisdiction under Art. 128(b).
To recapitulate, if a complaint is
brought before the DOLE to give
effect to the labor standards
provisions of the Labor Code or
other labor legislation, and there
is a finding by the DOLE that
there is an existing employeremployee relationship, the DOLE
exercises jurisdiction to the
exclusion of the NLRC. If the
DOLE finds that there is no

employer-employee relationship,
the jurisdiction is properly with
the NLRC. If a complaint is filed
with the DOLE, and it is
accompanied by a claim for
reinstatement, the jurisdiction is
properly with the Labor Arbiter,
under Art. 217(3) of the Labor
Code, which provides that the
Labor Arbiter has original and
exclusive jurisdiction over those
cases involving wages, rates of
pay, hours of work, and other
terms and conditions of
employment, if accompanied by a
claim for reinstatement. If a
complaint is filed with the NLRC,
and there is still an existing
employer-employee relationship,
the jurisdiction is properly with
the DOLE. The findings of the
DOLE, however, may still be
questioned through a petition for
certiorari under Rule 65 of the
Rules of Court.
In the present case, the finding of
the DOLE Regional Director that
there was an employer-employee
relationship has been subjected
to review by this Court, with the
finding being that there was no
employer-employee relationship
between petitioner and private
respondent, based on the
evidence presented. Private
respondent presented selfserving allegations as well as
self-defeating evidence.[10] The
findings of the Regional Director
were not based on substantial

evidence, and private respondent

failed to prove the existence of
an employer-employee
relationship. The DOLE had no
jurisdiction over the case, as
there was no employer-employee
relationship present. Thus, the
dismissal of the complaint
against petitioner is proper.
WHEREFORE, the Decision of
this Court in G.R. No. 179652 is
hereby AFFIRMED, with
the MODIFICATION that in the
exercise of the DOLEs visitorial
and enforcement power, the
Labor Secretary or the latters
authorized representative shall
have the power to determine the
existence of an employeremployee relationship, to the
exclusion of the NLRC.
SO ORDERED.
ERNESTO G. YMBONG,
Petitioner,

- versus -

ABS-CBN BROADCASTING
CORPORATION,
VENERANDA SY AND
DANTE LUZON,
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - ------------------------ - - -x
DECISION
VILLARAMA, JR., J.:
Before us is a Rule 45 Petition
seeking to set aside the August
22, 2007 Decision[1] and
September 18, 2008
Resolution[2] of the Court of
Appeals (CA) in CA-G.R. SP No.
86206 declaring petitioner to
have resigned from work and not
illegally dismissed.
The antecedent facts follow:
Petitioner Ernesto G. Ymbong
started working for ABS-CBN
Broadcasting Corporation (ABSCBN) in 1993 at its regional
station in Cebu as a television
talent, co-anchoringHoy
Gising and TV Patrol Cebu. His
stint in ABS-CBN later extended
to radio when ABS-CBN Cebu
launched its AM station DYAB in
1995 where he worked as drama
and voice talent, spinner,
scriptwriter and public affairs
program anchor.
Like Ymbong, Leandro
Patalinghug also worked for ABSCBN Cebu. Starting 1995, he
worked as talent, director and
scriptwriter for various radio
programs aired over DYAB.

 On January 1, 1996, the ABSCBN Head Office

in Manila issued Policy No. HRER-016 or the Policy on
Employees Seeking Public
Office. The pertinent portions
read:
Any employee who intends to
run for any public office
position, must file his/her letter
of resignation, at least thirty (30)
days prior to the official filing of
the certificate of candidacy either
for national or local election.
xxxx
Further, any employee who
intends to join a political
group/party or even with no
political affiliation but who
intends to openly and
aggressively campaign for a
candidate or group of
candidates (e.g. publicly
speaking/endorsing candidate,
recruiting campaign workers,
etc.) must file a request for
leave of absence subject to
managements approval. For
this particular reason, the
employee should file the leave
request at least thirty (30) days
prior to the start of the planned
leave period.
x x x x[3] [Emphasis and
underscoring supplied.]
Because of the impending May
1998 elections and based on his
immediate recollection of the
policy at that time, Dante Luzon,
Assistant Station Manager of

DYAB issued the following

memorandum:
TO : ALL CONCERNED
FROM : DANTE LUZON
DATE : MARCH 25, 1998
SUBJECT : AS STATED
Please be informed that per
company policy, any
employee/talent who wants to
run for any position in the
coming election will have to
file a leave of absence the
moment he/she files his/her
certificate of candidacy.
The services rendered by the
concerned employee/talent to
this company will then be
temporarily suspended for the
entire campaign/election period.
For strict compliance.
[4]
[Emphasis and underscoring
supplied.]
Luzon, however, admitted that
upon double-checking of the
exact text of the policy and
subsequent confirmation with the
ABS-CBN Head Office, he saw
that the policy actually required
suspension for those who intend
to campaign for a political party
or candidate and resignation for
those who will actually run in the
elections.[5]
After the issuance of the March
25, 1998 Memorandum, Ymbong
got in touch
with Luzon. Luzon claims that
Ymbong approached him and
told him that he would leave radio
for a couple of months because

he will campaign for the

administration ticket. It was only
after the elections that they found
out that Ymbong actually ran for
public office himself at the
eleventh hour. Ymbong, on the
other hand, claims that in
accordance with the March 25,
1998 Memorandum, he informed
Luzon through a letter that he
would take a few months leave of
absence from March 8, 1998 to
May 18, 1998 since he was
running for councilor of LapuLapu City.
As regards Patalinghug,
Patalinghug
approached Luzon and advised
him that he will run as councilor
for Naga, Cebu. According to
Luzon, he clarified to Patalinghug
that he will be considered
resigned and not just on leave
once he files a certificate of
candidacy. Thus, Patalinghug
wrote Luzon the following letter
on April 13, 1998:
Dear Mr. Luzon,
Im submitting to you my letter of
resignation as your Drama
Production Chief and Talent due
to your companys policy that
every person connected to ABSCBN that should seek an elected
position in the government will be
forced to resigned (sic) from his
position. So herewith Im
submitting my resignation with a
hard heart. But Im still hoping to
be connected again with your
prestigious company after the

election[s] should you feel that Im

still an asset to your drama
production department. Im
looking forward to that day and
Im very happy and proud that I
have served for two and a half
years the most stable and the
most prestigious Radio and TV
Network in the Philippines.
As a friend[,] wish me luck and
Pray for me. Thank you.

Very Truly Yours,

(Sgd.)
Leandro Boy Patalinghug[6]
Unfortunately, both Ymbong and
Patalinghug lost in the May 1998
elections.
Later, Ymbong and Patalinghug
both tried to come back to ABSCBN Cebu. According to Luzon,
he informed them that they
cannot work there anymore
because of company policy. This
was stressed even in subsequent
meetings and they were told that
the company was not allowing
any exceptions. ABS-CBN,
however, agreed out of pure
liberality to give them a chance to
wind up their participation in the
radio drama, Nagbabagang
Langit, since it was rating well
and to avoid an abrupt
ending. The agreed winding-up,
however, dragged on for so long
prompting Luzon to issue to

Ymbong the following

memorandum dated September
14, 1998:
TO : NESTOR YMBONG
FROM : DANTE LUZON
SUBJECT : AS STATED
DATE : 14 SEPT. 1998
Please be reminded that your
services as drama talent had
already been automatically
terminated when you ran for a
local government position last
election.
The Management however gave
you more than enough time to
end your drama participation and
other involvement with the drama
department.
It has been decided therefore
that all your drama participation
shall be terminated effective
immediately. However, your
involvement as drama
spinner/narrator of the drama
NAGBA[BA]GANG LANGIT
continues until its writer/director
Mr. Leandro Patalinghug wraps it
up one week upon receipt of a
separate memo issued to him.[7]
Ymbong in contrast contended
that after the expiration of his
leave of absence, he reported
back to work as a regular talent
and in fact continued to receive
his salary. OnSeptember 14,
1998, he received a
memorandum stating that his
services are being terminated
immediately, much to his
surprise. Thus, he filed an illegal

dismissal complaint[8]against
ABS-CBN, Luzon and DYAB
Station Manager Veneranda
Sy. He argued that the ground
cited by ABS-CBN for his
dismissal was not among those
enumerated in theLabor Code, as
amended. And even granting
without admitting the existence of
the company policy supposed to
have been violated, Ymbong
averred that it was necessary
that the company policy meet
certain requirements before
willful disobedience of the policy
may constitute a just cause for
termination. Ymbong further
argued that the company policy
violates his constitutional right to
suffrage.[9]
Patalinghug likewise filed an
illegal dismissal
complaint[10] against ABS-CBN.
ABS-CBN prayed for the
dismissal of the complaints
arguing that there is no
employer-employee relationship
between the company
and Ymbong and
Patalinghug. ABS-CBN
contended that they are
not employees but talents as
evidenced by their talent
contracts. However,
notwithstanding their status,
ABS-CBN has a standing policy
on persons connected with the
company whenever they will run
for public office.[11]
On July 14, 1999, the Labor
Arbiter rendered a

decision[12] finding the dismissal

of Ymbong and Patalinghug
illegal, thus:
WHEREFORE, in the light of the
foregoing, judgment is rendered
finding the dismissal of the two
complainants illegal. An order is
issued directing respondent
ABS[-]CBN to immediately
reinstate complainants to their
former positions without loss of
seniority rights plus the payment
of backwages in the amount of
P200,000.00 to each
complainant.
All other claims are dismissed.
SO ORDERED.[13]
The Labor Arbiter found that
there exists an employeremployee relationship between
ABS-CBN and Ymbong and
Patalinghug considering the
stipulations in their appointment
letters/talent contracts. The Labor
Arbiter noted particularly that the
appointment letters/talent
contracts imposed conditions in
the performance of their work,
specifically on attendance and
punctuality, which effectively
placed them under the control of
ABS-CBN. The Labor Arbiter
likewise ruled that although the
subject company policy is
reasonable and not contrary to
law, the same was not made
known to Ymbong and
Patalinghug and in fact was
superseded by another one
embodied in the March 25, 1998
Memorandum issued by

Luzon. Thus, there is no valid or

authorized cause in terminating
Ymbong and Patalinghug from
their employment.
In its memorandum of
appeal[14] before the National
Labor Relations Commission
(NLRC), ABS-CBN contended
that the Labor Arbiter has no
jurisdiction over the case
because there is no employeremployee relationship between
the company
and Ymbong and Patalinghug, an
d that Sy and Luzon mistakenly
assumed that Ymbong and
Patalinghug could just file a leave
of absence since they are only
talents and not employees. In its
Supplemental Appeal,[15] ABSCBN insisted that Ymbong and
Patalinghug were engaged as
radio talents for DYAB dramas
and personality programs and
their contract is one between a
self-employed contractor and the
hiring party which is a standard
practice in the broadcasting
industry. It also argued that the
Labor Arbiter should not have
made much of the provisions on
Ymbongs attendance and
punctuality since such
requirement is a dictate of the
programming of the station, the
slating of shows at regular time
slots, and availability of recording
studios not an attempt to
exercise control over the manner
of his performance of the
contracted anchor work within his

scheduled spot on air. As for the

pronouncement that the company
policy has already been
superseded by the March 25,
1998 Memorandum issued
by Luzon, the latter already
clarified that it was the very policy
he sought to enforce. This matter
was relayed by Luzon to
Patalinghug when the latter
disclosed his plans to join the
1998 elections while Ymbong
only informed the company that
he was campaigning for the
administration ticket and the
company had no inkling that he
will actually run until the issue
was already moot and
academic. ABS-CBN further
contended that Ymbong and
Patalinghugs reinstatement is
legally and physically impossible
as the talent positions they
vacated no longer exist. Neither
is there basis for the award of
back wages since they were not
earning a monthly salary but paid
talent fees on a per
production/per script
basis. Attached to the
Supplemental Appeal is a Sworn
Statement[16] of Luzon.
On March 8, 2004, the NLRC
rendered a decision[17] modifying
the labor arbiters decision.
The fallo of the NLRC decision
reads:
WHEREFORE, premises
considered, the decision of Labor
Arbiter Nicasio C. Aninon

dated 14 July 1999 is MODIFIED,

to wit:
Ordering respondent ABS-CBN
to reinstate complainant Ernesto
G. Ymbong and to pay his full
backwages computed from 15
September 1998 up to the time of
his actual reinstatement.
SO ORDERED.[18]
The NLRC dismissed ABS-CBNs
Supplemental Appeal for being
filed out of time. The NLRC ruled
that to entertain the same would
be to allow the parties to submit
their appeal on piecemeal basis,
which is contrary to the agencys
duty to facilitate speedy
disposition of cases. The NLRC
also held that ABS-CBN wielded
the power of control over
Ymbong and Patalinghug,
thereby proving the existence of
an employer-employee
relationship between them.
As to the issue of whether they
were illegally dismissed, the
NLRC treated their cases
differently. In the case of
Patalinghug, it found that he
voluntarily resigned from
employment on April 21,
1998 when he submitted his
resignation letter. The NLRC
noted that although the tenor of
the resignation letter is somewhat
involuntary, he knew that it is the
policy of the company that every
person connected therewith
should resign from his
employment if he seeks an
elected position in the

government. As to Ymbong,
however, the NLRC ruled
otherwise. It ruled that the March
25, 1998 Memorandum merely
states that an employee who
seeks any elected position in the
government will only merit the
temporary suspension of his
services. It held that under the
principle of social justice, the
March 25, 1998 Memorandum
shall prevail and ABS-CBN is
estopped from enforcing the
September 14, 1998
memorandum issued to Ymbong
stating that his services had been
automatically terminated when he
ran for an elective position.
ABS-CBN moved to reconsider
the NLRC decision, but the same
was denied in a Resolution
dated June 21, 2004.[19]
Imputing grave abuse of
discretion on the NLRC, ABSCBN filed a petition for
certiorari[20] before the CA
alleging that:
I.
RESPONDENT NLRC
COMMITTED A GRAVE ABUSE
OF DISCRETION AND
SERIOUSLY MISAPPRECIATED
THE FACTS IN NOT HOLDING
THAT RESPONDENT YMBONG
IS A FREELANCE RADIO
TALENT AND MEDIA
PRACTITIONERNOT A
REGULAR EMPLOYEE OF
PETITIONERTO WHOM
CERTAIN PRODUCTION WORK
HAD BEEN OUTSOURCED BY

ABS-CBN CEBU UNDER AN

INDEPENDENT
CONTRACTORSHIP
SITUATION, THUS RENDERING
THE LABOR COURTS
WITHOUT JURISDICTION
OVER THE CASE IN THE
ABSENCE OF EMPLOYMENT
RELATIONS BETWEEN THE
PARTIES.

II.
RESPONDENT NLRC
COMMITTED A GRAVE ABUSE
OF DISCRETION IN
DECLARING RESPONDENT
YMBONG TO BE A REGULAR
EMPLOYEE OF PETITIONER
AS TO CREATE A
CONTRACTUAL EMPLOYMENT
RELATION BETWEEN THEM
WHEN NONE EXISTS OR HAD
BEEN AGREED UPON OR
OTHERWISE INTENDED BY
THE PARTIES.

III.
EVEN ASSUMING THE
ALLEGED EMPLOYMENT
RELATION TO EXIST FOR THE
SAKE OF ARGUMENT,
RESPONDENT NLRC IN ANY
CASE COMMITTED A GRAVE
ABUSE OF DISCRETION IN
NOT SIMILARLY UPHOLDING
AND APPLYING COMPANY
POLICY NO. HR-ER-016 IN THE
CASE OF RESPONDENT

YMBONG AND DEEMING HIM

AS RESIGNED AND
DISQUALIFIED FROM
FURTHER ENGAGEMENT AS A
RADIO TALENT IN ABS-CBN
CEBU AS A CONSEQUENCE
OF HIS CANDIDACY IN THE
1998 ELECTIONS, AS
RESPONDENT NLRC HAD
DONE IN THE CASE OF
PATALINGHUG.

IV.
RESPONDENT NLRC
COMMITTED A GRAVE ABUSE
OF DISCRETION AND DENIED
DUE PROCESS TO
PETITIONER IN REFUSING TO
CONSIDER ITS
SUPPLEMENTAL APPEAL,
DATED OCTOBER 18, 1999,
FOR BEING FILED OUT OF
TIME CONSIDERING THAT THE
FILING OF SUCH A PLEADING
IS NOT IN ANY CASE
PROSCRIBED AND
RESPONDENT NLRC IS
AUTHORIZED TO CONSIDER
ADDITIONAL EVIDENCE ON
APPEAL; MOREOVER,
TECHNICAL RULES OF
EVIDENCE DO NOT APPLY IN
LABOR CASES.

V.
RESPONDENT NLRC
COMMITTED A GRAVE ABUSE
OF DISCRETION IN GRANTING

THE RELIEF OF
REINSTATEMENT AND
BACKWAGES TO
RESPONDENT YMBONG
SINCE HE NEVER OCCUPIED
ANY REGULAR POSITION IN
PETITIONER FROM WHICH HE
COULD HAVE BEEN ILLEGALLY
DISMISSED, NOR ARE ANY OF
THE RADIO PRODUCTIONS IN
WHICH HE HAD DONE TALENT
WORK FOR PETITIONER STILL
EXISTING. INDEED, THERE IS
NO BASIS WHATSOEVER FOR
THE AWARD OF BACKWAGES
TO RESPONDENT YMBONG IN
THE AMOUNT OF P200,000.00
CONSIDERING THAT, AS
SHOWN BY THE
UNCONTROVERTED
EVIDENCE, HE WAS NOT
EARNING A MONTHLY SALARY
OF P20,000.00, AS HE FALSELY
CLAIMS, BUT WAS PAID
TALENT FEES ON A PER
PRODUCTION/PER SCRIPT
BASIS WHICH AVERAGED
LESS THAN P10,000.00 PER
MONTH IN TALENT FEES ALL
IN ALL.[21]
On August 22, 2007, the CA
rendered the assailed decision
reversing and setting aside
the March 8, 2004 Decision
and June 21, 2004 Resolution of
the NLRC. The CA declared
Ymbong resigned from
employment and not to have
been illegally dismissed. The
award of full back wages in his
favor was deleted accordingly.

 The CA ruled that ABS-CBN is

estopped from claiming that
Ymbong was not its employee
after applying the provisions of
Policy No. HR-ER-016 to him. It
noted that said policy is entitled
Policy on Employees Seeking
Public Office and the guidelines
contained therein specifically
pertain to employees and did not
even mention talents or
independent contractors. It held
that it is a complete turnaround
on ABS-CBNs part to later argue
that Ymbong is only a radio talent
or independent contractor and
not its employee. By applying the
subject company policy on
Ymbong, ABS-CBN had explicitly
recognized him to be an
employee and not merely an
independent contractor.
The CA likewise held that the
subject company policy is the
controlling guideline and
therefore, Ymbong should be
considered resigned from ABSCBN. While Luzon has policymaking power as assistant radio
manager, he had no authority to
issue a memorandum that had
the effect of repealing or
superseding a subsisting
policy. Contrary to the findings of
the Labor Arbiter, the subject
company policy was effective at
that time and continues to be
valid and subsisting up to the
present. The CA cited
Patalinghugs resignation letter to
buttress this conclusion, noting

that Patalinghug openly admitted

in his letter that his resignation
was in line with the said company
policy. Since ABS-CBN applied
Policy No. HR-ER-016 to
Patalinghug, there is no reason
not to apply the same regulation
to Ymbong who was on a similar
situation as the former. Thus, the
CA found that the NLRC
overstepped its area of discretion
to a point of grave abuse in
declaring Ymbong to have been
illegally terminated. The CA
concluded that there is no illegal
dismissal to speak of in the
instant case as Ymbong is
considered resigned when he ran
for an elective post pursuant to
the subject company policy.
Hence, this petition.
Petitioner argues that the CA
gravely erred: (1) in upholding
Policy No. HR-ER-016; (2) in
upholding the validity of the
termination of Ymbongs services;
and (3) when it reversed the
decision of the NLRC 4th Division
of Cebu City which affirmed the
decision of Labor Arbiter Nicasio
C. Anion.[22]
Ymbong argues that the subject
company policy is a clear
interference and a gross violation
of an employees right to
suffrage. He is surprised why it
was easy for the CA to rule
that Luzons memorandum ran
counter to an existing policy while
on the other end, it did not see
that it was in conflict with the

constitutional right to suffrage. He

also points out that the issuance
of the March 25, 1998
Memorandum was precisely an
exercise of the management
power to which an employee like
him must respect; otherwise, he
will be sanctioned for
disobedience or worse, even
terminated. He was not in a
position to know which between
the two issuances was correct
and as far as he is concerned,
the March 25, 1998
Memorandum superseded the
subject company
policy. Moreover, ABS-CBN
cannot disown acts of its officers
most especially since it
prejudiced his property rights.[23]
As to the validity of his dismissal,
Ymbong contends that the
ground relied upon by ABS-CBN
is not among the just and
authorized causes provided in
the Labor Code, as
amended. And even assuming
the subject company policy
passes the test of validity under
the pretext of the right of the
management to discipline and
terminate its employees, the
exercise of such right is not
without bounds. Ymbong avers
that his automatic termination
was a blatant disregard of his
right to due process. He was
never asked to explain why he
did not tender his resignation
before he ran for public office as

mandated by the subject

company policy.[24]
Ymbong likewise asseverates
that both the Labor Arbiter and
the NLRC were consistent in their
findings that he was illegally
dismissed. It is settled that
factual findings of labor
administrative officials, if
supported by substantial
evidence, are accorded not only
great respect but even finality.[25]
ABS-CBN, for its part, counters
that the validity of policies such
as Policy No. HR-ER-016 has
long been upheld by this Court
which has ruled that a media
company has a right to impose a
policy providing that employees
who file their certificates of
candidacy in any election shall be
considered resigned.
[26]
Moreover, case law has
upheld the validity of the exercise
of management prerogatives
even if they appear to limit the
rights of employees as long as
there is no showing that
management prerogatives were
exercised in a manner contrary to
law.[27] ABS-CBN contends that
being the largest media and
entertainment company in the
country, its reputation stems not
only from its ability to deliver
quality entertainment programs
but also because of neutrality
and impartiality in delivering
news.[28]
ABS-CBN further argues that
nothing in the company policy

prohibits its employees from

either accepting a public
appointive position or from
running for public office. Thus, it
cannot be considered as violative
of the constitutional right of
suffrage. Moreover, the Supreme
Court has recognized the
employers right to enforce
occupational qualifications as
long as the employer is able to
show the existence of a
reasonable business necessity in
imposing the questioned
policy. Here, Policy No. HR-ER016 itself states that it was issued
to protect the company from any
public misconceptions and [t]o
preserve its objectivity, neutrality
and credibility. Thus, it cannot be
denied that it is reasonable under
the circumstances.[29]
ABS-CBN likewise opposes
Ymbongs claim that he was
terminated. ABS-CBN argues
that on the contrary, Ymbongs
unilateral act of filing his
certificate of candidacy is an
overt act tantamount to voluntary
resignation on his part by virtue
of the clear mandate found in
Policy No. HR-ER-016. Ymbong,
however, failed to file his
resignation and in fact misled his
superiors by making them believe
that he was going on leave to
campaign for the administration
candidates but in fact, he actually
ran for councilor. He also claims
to have fully
apprised Luzon through a letter

of his intention to run for public

office, but he failed to adduce a
copy of the same.[30]
As to Ymbongs argument that the
CA should not have reversed the
findings of the Labor Arbiter and
the NLRC, ABS-CBN
asseverates that the CA is not
precluded from making its own
findings most especially if upon
its own review of the case, it has
been revealed that the NLRC, in
affirming the findings of the Labor
Arbiter, committed grave abuse
of discretion amounting to lack or
excess of jurisdiction when it
failed to apply the subject
company policy in Ymbongs case
when it readily applied the same
to Patalinghug.[31]
Essentially, the issues to be
resolved in the instant petition
are: (1) whether Policy No. HRER-016 is valid; (2) whether the
March 25, 1998 Memorandum
issued by Luzonsuperseded
Policy No. HR-ER-016; and (3)
whether Ymbong, by seeking an
elective post, is deemed to have
resigned and not dismissed by
ABS-CBN.
Policy No. HR-ER-016 is valid.
This is not the first time that this
Court has dealt with a policy
similar to Policy No. HR-ER016. In the case of Manila
Broadcasting Company v. NLRC,
[32]
this Court ruled:
What is involved in this case is
an unwritten company policy
considering any employee who

files a certificate of candidacy for

any elective or local office as
resigned from the
company.Although 11(b) of R.A.
No. 6646 does not require mass
media commentators and
announcers such as private
respondent to resign from their
radio or TV stations but only to
go on leave for the duration of
the campaign period, we think
that the company may
nevertheless validly require them
to resign as a matter of policy. In
this case, the policy is justified on
the following grounds:
Working for the government and
the company at the same time is
clearly disadvantageous and
prejudicial to the rights
and interest not only of the
company but the public as well.
In the event an employee wins in
an election, he cannot fully serve,
as he is expected to do, the
interest of his employer. The
employee has to serve two (2)
employers, obviously detrimental
to the interest of both the
government and the private
employer.
In the event the employee loses
in the election, the impartiality
and cold neutrality of an
employee as broadcast
personality is suspect, thus
readily eroding and adversely
affecting the confidence and trust
of the listening public to
employers station.[33]

ABS-CBN, like Manila

Broadcasting Company, also had
a valid justification for Policy No.
HR-ER-016. Its rationale is
embodied in the policy itself, to
wit:
Rationale:
ABS-CBN BROADCASTING
CORPORATION strongly
believes that it is to the best
interest of the company to
continuously remain
apolitical. While it encourages
and supports its employees to
have greater political
awareness and for them to
exercise their right to suffrage,
the company, however, prefers
to remain politically
independent and unattached to
any political individual or
entity.
Therefore, employees who
[intend] to run for public office
or accept political appointment
should resign from their
positions, in order to protect
the company from any public
misconceptions. To preserve
its objectivity, neutrality and
credibility, the company
reiterates the following policy
guidelines for strict
implementation.
x x x x[34] [Emphasis supplied.]
We have consistently held that 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.[35] In the instant
case, ABS-CBN validly justified
the implementation of Policy No.
HR-ER-016. It is well within its
rights to ensure that it maintains
its objectivity and credibility and
freeing itself from any
appearance of impartiality so that
the confidence of the viewing and
listening public in it will not be in
any way eroded. 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.[36]
It is worth noting that such
exercise of management
prerogative has earned a stamp
of approval from no less than our
Congress itself when
on February 12, 2001, it enacted
Republic Act No. 9006, otherwise
known as the Fair Election Act.
Section 6.6 thereof reads:
6.6. Any mass media
columnist, commentator,
announcer, reporter, on-air
correspondent or personality
who is a candidate for any
elective public office or is a
campaign volunteer for or
employed or retained in any

capacity by any candidate or

political party shall be deemed
resigned, if so required by
their employer, or shall take a
leave of absence from his/her
work as such during the
campaign period: Provided, That
any media practitioner who is an
official of a political party or a
member of the campaign staff of
a candidate or political party shall
not use his/her time or space to
favor any candidate or political
party. [Emphasis and
underscoring supplied.]
Policy No. HR-ER-016 was not
superseded by the March 25,
1998 Memorandum
The CA correctly ruled that
though Luzon, as Assistant
Station Manager for Radio of
ABS-CBN, has policy-making
powers in relation to his principal
task of administering the
networks radio station in
the Cebu region, the exercise of
such power should be in accord
with the general rules and
regulations imposed by the ABSCBN Head Office to its
employees. Clearly, the March
25, 1998 Memorandum issued
by Luzon which only requires
employees to go on leave if they
intend to run for any elective
position is in absolute
contradiction with Policy No. HRER-016 issued by the ABS-CBN
Head Office in Manila which
requires the resignation, not only
the filing of a leave of absence, of

any employee who intends to run

for public office. Having been
issued beyond the scope of his
authority, the March 25, 1998
Memorandum is therefore void
and did not supersede Policy No.
HR-ER-016.
Also worth noting is that Luzon in
his Sworn Statement admitted
the inaccuracy of his recollection
of the company policy when he
issued the March 25, 1998
Memorandum and stated therein
that upon double-checking of the
exact text of the policy statement
and subsequent confirmation with
the ABS-CBN Head Office in
Manila, he learned that the policy
required resignation for those
who will actually run in elections
because the company wanted to
maintain its independence. Since
the officer who himself issued the
subject memorandum
acknowledged that it is not in
harmony with the Policy issued
by the upper management, there
is no reason for it to be a source
of right for Ymbong.
Ymbong is deemed resigned
when he ran for councilor.
As Policy No. HR-ER-016 is the
subsisting company policy and
not Luzons March 25, 1998
Memorandum, Ymbong is
deemed resigned when he ran
for councilor.
We find no merit in Ymbongs
argument that [his] automatic
termination x x x was a blatant
[disregard] of [his] right to due

process as he was never asked

to explain why he did not tender
his resignation before he ran for
public office as mandated by [the
subject company policy].
[37]
Ymbongs overt act of running
for councilor of Lapu-Lapu City is
tantamount to resignation on his
part. He was separated from
ABS-CBN not because he was
dismissed but because he
resigned. Since there was no
termination to speak of, the
requirement of due process in
dismissal cases cannot be
applied to Ymbong. Thus, ABSCBN is not duty-bound to ask him
to explain why he did not tender
his resignation before he ran for
public office as mandated by the
subject company policy.
In addition, we do not subscribe
to Ymbongs claim that he was
not in a position to know which of
the two issuances was
correct. Ymbong most likely than
not, is fully aware that the
subsisting policy is Policy No.
HR-ER-016 and not the March
25, 1998 Memorandum and it
was for this reason that, as
stated by Luzon in his Sworn
Statement, he only told the latter
that he will only campaign for the
administration ticket and not
actually run for an elective
post. Ymbong claims he had fully
apprised Luzon by letter of his
plan to run and even filed a leave
of absence but records are bereft
of any proof of said

claim. Ymbong claims that the

letter stating his intention to go
on leave to run in the election is
attached to his Position Paper as
Annex A, a perusal of said
pleading attached to his petition
before this Court, however, show
that Annex A was not his letter to
Luzon but the September 14,
1998 Memorandum informing
Ymbong that his services had
been automatically terminated
when he ran for a local
government position.
Moreover, as pointed out by ABSCBN, had Ymbong been truthful
to his superiors, they would have
been able to clarify to him the
prevailing company policy and
inform him of the consequences
of his decision in case he decides
to run, as Luzon did in
Patalinghugs case.
WHEREFORE, the petition for
review on certiorari
is DENIED for lack of merit.
With costs against petitioner.
SO ORDERED.
G.R. No. 126297
February 11, 2008
PROFESSIONAL SERVICES,
INC., petitioner,
vs.
THE COURT OF APPEALS and
NATIVIDAD and ENRIQUE
AGANA, respondents,
x- - - - - - - - - - - - - - - - - - - - - - - ----x
G.R. No. 126467
February 11, 2008

NATIVIDAD (Substituted by her

children MARCELINO AGANA
III, ENRIQUE AGANA, JR.,
EMMA AGANA ANDAYA,
JESUS AGANA, and RAYMUND
AGANA) and ENRIQUE
AGANA, petitioners,
vs.
THE COURT OF APPEALS and
JUAN FUENTES, respondents,
x- - - - - - - - - - - - - - - - - - - - - - - ----x
G.R. No. 127590
February 11, 2008
MIGUEL AMPIL, petitioner,
vs.
THE COURT OF APPEALS and
NATIVIDAD AGANA and
ENRIQUE AGANA, respondents.
RESOLUTION
SANDOVAL-GUTIERREZ, J.:
As the hospital industry changes,
so must the laws and
jurisprudence governing hospital
liability. The immunity from
medical malpractice traditionally
accorded to hospitals has to be
eroded if we are to balance the
interest of the patients and
hospitals under the present
setting.
Before this Court is a motion for
reconsideration filed by
Professional Services, Inc. (PSI),
petitioner in G.R. No. 126297,
assailing the Courts First
Division Decision dated January
31, 2007, finding PSI and Dr.
Miguel Ampil, petitioner in G.R.

No. 127590, jointly and severally

liable for medical negligence.
A brief revisit of the antecedent
facts is imperative.
On April 4, 1984, Natividad
Agana was admitted at the
Medical City General Hospital
(Medical City) because of
difficulty of bowel movement and
bloody anal discharge. Dr. Ampil
diagnosed her to be suffering
from "cancer of the sigmoid."
Thus, on April 11, 1984, Dr.
Ampil, assisted by the medical
staff1 of Medical City, performed
an anterior resection surgery
upon her. During the surgery, he
found that the malignancy in her
sigmoid area had spread to her
left ovary, necessitating the
removal of certain portions of it.
Thus, Dr. Ampil obtained the
consent of Atty. Enrique Agana,
Natividads husband, to permit
Dr. Juan Fuentes, respondent in
G.R. No. 126467, to perform
hysterectomy upon Natividad.
Dr. Fuentes performed and
completed the hysterectomy.
Afterwards, Dr. Ampil took over,
completed the operation and
closed the incision. However, the
operation appeared to be flawed.
In the corresponding Record of
Operation dated April 11, 1984,
the attending nurses entered
these remarks:
sponge count lacking 2
announced to surgeon searched
done (sic) but to no avail
continue for closure.

After a couple of days, Natividad

complained of excruciating pain
in her anal region. She consulted
both Dr. Ampil and Dr. Fuentes
about it. They told her that the
pain was the natural
consequence of the surgical
operation performed upon her.
Dr. Ampil recommended that
Natividad consult an oncologist to
treat the cancerous nodes which
were not removed during the
operation.
On May 9, 1984, Natividad,
accompanied by her husband,
went to the United States to seek
further treatment. After four (4)
months of consultations and
laboratory examinations,
Natividad was told that she was
free of cancer. Hence, she was
advised to return to the
Philippines.
On August 31, 1984, Natividad
flew back to the Philippines, still
suffering from pains. Two (2)
weeks thereafter, her daughter
found a piece of gauze protruding
from her vagina. Dr. Ampil was
immediately informed. He
proceeded to Natividads house
where he managed to extract by
hand a piece of gauze measuring
1.5 inches in width. Dr. Ampil
then assured Natividad that the
pains would soon vanish.
Despite Dr. Ampils assurance,
the pains intensified, prompting
Natividad to seek treatment at
the Polymedic General Hospital.
While confined thereat, Dr.

Ramon Gutierrez detected the

presence of a foreign object in
her vagina -- a foul-smelling
gauze measuring 1.5 inches in
width. The gauze had badly
infected her vaginal vault. A
recto-vaginal fistula had formed
in her reproductive organ which
forced stool to excrete through
the vagina. Another surgical
operation was needed to remedy
the situation. Thus, in October
1984, Natividad underwent
another surgery.
On November 12, 1984,
Natividad and her husband filed
with the Regional Trial Court,
Branch 96, Quezon City a
complaint for damages against
PSI (owner of Medical City), Dr.
Ampil and Dr. Fuentes.
On February 16, 1986, pending
the outcome of the above case,
Natividad died. She was duly
substituted by her above-named
children (the Aganas).
On March 17, 1993, the trial court
rendered judgment in favor of
spouses Agana finding PSI, Dr.
Ampil and Dr. Fuentes jointly and
severally liable. On appeal, the
Court of Appeals, in its Decision
dated September 6, 1996,
affirmed the assailed judgment
with modification in the sense
that the complaint against Dr.
Fuentes was dismissed.
PSI, Dr. Ampil and the Aganas
filed with this Court separate
petitions for review on certiorari.
On January 31, 2007, the Court,

through its First Division,

rendered a Decision holding that
PSI is jointly and severally liable
with Dr. Ampil for the following
reasons: first, there is an
employer-employee relationship
between Medical City and Dr.
Ampil. The Court relied
on Ramos v. Court of
Appeals,2 holding that for the
purpose of apportioning
responsibility in medical
negligence cases, an employeremployee relationship in effect
exists between hospitals and
their attending and visiting
physicians; second, PSIs act of
publicly displaying in the lobby of
the Medical City the names and
specializations of its accredited
physicians, including Dr. Ampil,
estopped it from denying the
existence of an employeremployee relationship between
them under the doctrine of
ostensible agency or agency
by estoppel; and third, PSIs
failure to supervise Dr. Ampil and
its resident physicians and
nurses and to take an active step
in order to remedy their
negligence rendered it directly
liable under the doctrine of
corporate negligence.
In its motion for reconsideration,
PSI contends that the Court erred
in finding it liable under Article
2180 of the Civil Code, there
being no employer-employee
relationship between it and its
consultant, Dr. Ampil. PSI

stressed that the Courts

Decision in Ramos holding that
"an employer-employee
relationship in effect exists
between hospitals and their
attending and visiting physicians
for the purpose of apportioning
responsibility" had been reversed
in a subsequent
Resolution.3 Further, PSI argues
that the doctrine of ostensible
agency or agency by
estoppelcannot apply because
spouses Agana failed to establish
one requisite of the doctrine, i.e.,
that Natividad relied on the
representation of the hospital in
engaging the services of Dr.
Ampil. And lastly, PSI maintains
that thedoctrine of corporate
negligence is misplaced
because the proximate cause of
Natividads injury was Dr. Ampils
negligence.
The motion lacks merit.
As earlier mentioned, the First
Division, in its assailed Decision,
ruled that an employer-employee
relationship "in effect" exists
between the Medical City and Dr.
Ampil. Consequently, both are
jointly and severally liable to the
Aganas. This ruling proceeds
from the following ratiocination
in Ramos:
We now discuss the
responsibility of the hospital in
this particular incident. The
unique practice (among private
hospitals) of filling up specialist
staff with attending and visiting

"consultants," who are allegedly

not hospital employees, presents
problems in apportioning
responsibility for negligence in
medical malpractice
cases. However, the difficulty is
only more apparent than real.
In the first place, hospitals
exercise significant control in
the hiring and firing of
consultants and in the conduct
of their work within the
hospital premises. Doctors who
apply for "consultant" slots,
visiting or attending, are required
to submit proof of completion of
residency, their educational
qualifications; generally, evidence
of accreditation by the
appropriate board (diplomate),
evidence of fellowship in most
cases, and references. These
requirements are carefully
scrutinized by members of the
hospital administration or by a
review committee set up by the
hospital who either accept or
reject the application. This is
particularly true with respondent
hospital.
After a physician is accepted,
either as a visiting or attending
consultant, he is normally
required to attend clinicopathological conferences,
conduct bedside rounds for
clerks, interns and residents,
moderate grand rounds and
patient audits and perform
other tasks and
responsibilities, for the

privilege of being able to

maintain a clinic in the
hospital, and/or for the
privilege of admitting patients
into the hospital. In addition to
these, the physicians
performance as a specialist is
generally evaluated by a peer
review committee on the basis
of mortality and morbidity
statistics, and feedback from
patients, nurses, interns and
residents. A consultant remiss
in his duties, or a consultant
who regularly falls short of the
minimum standards
acceptable to the hospital or
its peer review committee, is
normally politely terminated.
In other words, private hospitals
hire, fire and exercise real control
over their attending and visiting
"consultant" staff.
While "consultants" are not,
technically employees, a point
which respondent hospital
asserts in denying all
responsibility for the patients
condition, the control
exercised, the hiring, and the
right to terminate consultants
all fulfill the important
hallmarks of an employeremployee relationship, with the
exception of the payment of
wages. In assessing whether
such a relationship in fact
exists, the control test is
determining. Accordingly, on
the basis of the foregoing, we
rule that for the purpose of

allocating responsibility in
medical negligence cases, an
employer-employee
relationship in effect exists
between hospitals and their
attending and visiting
physicians. This being the case,
the question now arises as to
whether or not respondent
hospital is solidarily liable with
respondent doctors for
petitioners condition.
The basis for holding an
employer solidarily responsible
for the negligence of its
employee is found in Article 2180
of the Civil Code which considers
a person accountable not only for
his own acts but also for those of
others based on the formers
responsibility under a relationship
of partia ptetas.
Clearly, in Ramos, the Court
considered the peculiar
relationship between a hospital
and its consultants on the bases
of certain factors. One such
factor is the "control test" wherein
the hospital exercises control in
the hiring and firing of
consultants, like Dr. Ampil, and in
the conduct of their work.
Actually, contrary to PSIs
contention, the Court did not
reverse its ruling in Ramos. What
it clarified was that the De Los
Santos Medical Clinic did not
exercise control over its
consultant, hence, there is no
employer-employee relationship
between them. Thus, despite the

granting of the said hospitals

motion for reconsideration, the
doctrine in Ramos stays, i.e., for
the purpose of allocating
responsibility in medical
negligence cases, an employeremployee relationship exists
between hospitals and their
consultants.
In the instant cases, PSI merely
offered a general denial of
responsibility, maintaining that
consultants, like Dr. Ampil, are
"independent contractors," not
employees of the hospital. Even
assuming that Dr. Ampil is not an
employee of Medical City, but an
independent contractor, still the
said hospital is liable to the
Aganas.
In Nograles, et al. v. Capitol
Medical Center, et al.,4 through
Mr. Justice Antonio T. Carpio, the
Court held:
The question now is whether
CMC is automatically exempt
from liability considering that Dr.
Estrada is an independent
contractor-physician.
In general, a hospital is not liable
for the negligence of an
independent contractorphysician. There is, however, an
exception to this principle. The
hospital may be liable if the
physician is the "ostensible"
agent of the hospital. (Jones v.
Philpott, 702 F. Supp. 1210
[1988]) This exception is also
known as the "doctrine of
apparent authority." (Sometimes

referred to as the apparent or

ostensible agency theory. [King v.
Mitchell, 31 A.D.3rd 958, 819 N.Y.
S.2d 169 (2006)].
xxx
The doctrine of apparent
authority essentially involves two
factors to determine the liability of
an independent contractorphysician.
The first factor focuses on the
hospitals manifestations and is
sometimes described as an
inquiry whether the hospital acted
in a manner which would lead a
reasonable person to conclude
that the individual who was
alleged to be negligent was an
employee or agent of the
hospital. (Diggs v. Novant Health,
Inc., 628 S.E.2d 851 (2006)
citing Hylton v. Koontz, 138 N.C.
App. 629 (2000). In this regard,
the hospital need not make
express representations to the
patient that the treating
physician is an employee of
the hospital; rather a
representation may be general
and implied. (Id.)
The doctrine of apparent
authority is a specie of the
doctrine of estoppel. Article 1431
of the Civil Code provides that
"[t]hrough estoppel, an admission
or representation is rendered
conclusive upon the person
making it, and cannot be denied
or disproved as against the
person relying thereon." Estoppel
rests on this rule: "Whether a

party has, by his own declaration,

act, or omission, intentionally and
deliberately led another to
believe a particular thing true,
and to act upon such belief, he
cannot, in any litigation arising
out of such declaration, act or
omission, be permitted to falsify
it. (De Castro v. Ginete, 137 Phil.
453 [1969], citing Sec. 3, par. A,
Rule 131 of the Rules of Court.
See also King v. Mitchell, 31
A.D.3rd 958, 819 N.Y.S.2d 169
[2006]).
xxx
The second factor focuses on the
patients reliance. It is sometimes
characterized as an inquiry on
whether the plaintiff acted in
reliance upon the conduct of the
hospital or its agent, consistent
with ordinary care and prudence.
(Diggs v. Novant Health, Inc.)
PSI argues that the doctrine of
apparent authority cannot apply
to these cases because spouses
Agana failed to establish proof of
their reliance on the
representation of Medical City
that Dr. Ampil is its employee.
The argument lacks merit.
Atty. Agana categorically testified
that one of the reasons why he
chose Dr. Ampil was that he
knew him to be a staff member
of Medical City, a prominent
and known hospital.
Q Will you tell us what
transpired in your visit to Dr.
Ampil?

A Well, I saw Dr. Ampil at the

Medical City, I know him to be a
staff member there, and I told
him about the case of my wife
and he asked me to bring my
wife over so she could be
examined. Prior to that, I have
known Dr. Ampil, first, he was
staying in front of our house, he
was a neighbor, second, my
daughter was his student in the
University of the East School of
Medicine at Ramon Magsaysay;
and when my daughter opted to
establish a hospital or a clinic, Dr.
Ampil was one of our consultants
on how to establish that hospital.
And from there, I have known
that he was a specialist when it
comes to that illness.
Atty. Agcaoili
On that particular occasion, April
2, 1984, what was your reason
for choosing to contact Dr. Ampil
in connection with your wifes
illness?
A First, before that, I have known
him to be a specialist on that part
of the body as a
surgeon; second, I have known
him to be a staff member of the
Medical City which is a
prominent and known
hospital.And third, because he is
a neighbor, I expect more than
the usual medical service to be
given to us, than his ordinary
patients.5
Clearly, PSI is estopped from
passing the blame solely to Dr.
Ampil. Its act of displaying his

name and those of the other

physicians in the public directory
at the lobby of the hospital
amounts to holding out to the
public that it offers quality
medical service through the listed
physicians. This justifies Atty.
Aganas belief that Dr. Ampil was
a member of the hospitals
staff. It must be stressed that
under the doctrine of apparent
authority, the question in every
case is whether the principal
has by his voluntary act placed
the agent in such a situation
that a person of ordinary
prudence, conversant with
business usages and the
nature of the particular
business, is justified in
presuming that such agent has
authority to perform the
particular act in question.6 In
these cases, the circumstances
yield a positive answer to the
question.
The challenged Decision also
anchors its ruling on the doctrine
of corporate
responsibility.7 The duty of
providing quality medical service
is no longer the sole prerogative
and responsibility of the
physician. This is because the
modern hospital now tends to
organize a highly-professional
medical staff whose
competence and performance
need also to be monitored by the
hospital commensurate with its
inherent responsibility to provide

quality medical care.8 Such

responsibility includes the
proper supervision of the
members of its medical staff.
Accordingly, the hospital has
the duty to make a reasonable
effort to monitor and oversee
the treatment prescribed and
administered by the physicians
practicing in its premises.
Unfortunately, PSI had been
remiss in its duty. It did not
conduct an immediate
investigation on the reported
missing gauzes to the great
prejudice and agony of its
patient. Dr. Jocson, a member of
PSIs medical staff, who testified
on whether the hospital
conducted an investigation, was
evasive, thus:
Q We go back to the
operative technique, this was
signed by Dr. Puruganan, was
this submitted to the hospital?
A Yes, sir, this was
submitted to the hospital with
the record of the patient.
Q Was the hospital
immediately informed about
the missing sponges?
A That is the duty of the
surgeon, sir.
Q As a witness to an
untoward incident in the
operating room, was it not
your obligation, Dr., to also
report to the hospital because
you are under the control and
direction of the hospital?

 A The hospital already had

the record of the two OS
missing, sir.
Q If you place yourself in the
position of the hospital, how
will you recover.
A You do not answer my
question with another
question.
Q Did the hospital do
anything about the missing
gauzes?
A The hospital left it up to
the surgeon who was doing
the operation, sir.
Q Did the hospital
investigate the surgeon who
did the operation?
A I am not in the position to
answer that, sir.
Q You never did hear the
hospital investigating the
doctors involved in this case
of those missing sponges, or
did you hear something?
xxxxxx
A I think we already made a
report by just saying that two
sponges were missing, it is up
to the hospital to make the
move.
Atty. Agana
Precisely, I am asking you if
the hospital did a move, if the
hospital did a move.
A I cannot answer that.
Court
By that answer, would you
mean to tell the Court that you

were aware if there was such a

move done by the hospital?
A I cannot answer that, your
honor, because I did not have
any more follow-up of the case
that happened until now.9
The above testimony obviously
shows Dr. Jocsons lack of
concern for the patients. Such
conduct is reflective of the
hospitals manner of
supervision. Not only did PSI
breach its duty to oversee or
supervise all persons who
practice medicine within its
walls, it also failed to take an
active step in fixing the
negligence committed. This
renders PSI, not only vicariously
liable for the negligence of Dr.
Ampil under Article 2180 of the
Civil Code, but also directly
liable for its own negligence
under Article 2176.
Moreover, there is merit in the
trial courts finding that the failure
of PSI to conduct an investigation
"established PSIs part in the
dark conspiracy of silence and
concealment about the
gauzes." The following testimony
of Atty. Agana supports such
findings, thus:
Q You said you relied on the
promise of Dr. Ampil and despite
the promise you were not able to
obtain the said record. Did you
go back to the record custodian?
A I did not because I was
talking to Dr. Ampil. He
promised me.

 Q After your talk to Dr.

Ampil, you went to the record
custodian?
A I went to the record
custodian to get the clinical
record of my wife, and I was
given a portion of the records
consisting of the findings,
among them, the entries of the
dates, but not the operating
procedure and operative
report.10
In sum, we find no merit in the
motion for reconsideration.
WHEREFORE, we DENY PSIs
motion for reconsideration with
finality.
SO ORDERED.
G.R. No. 186621
March
12, 2014
SOUTH EAST INTERNATIONAL
RATTAN, INC. and/or
ESTANISLAO1 AGBAY, Petitione
rs,
vs.
JESUS J.
COMING, Respondent.
DECISION
VILLARAMA, JR., J.:
Before the Court is a petition for
review on certiorari under Rule
45 to reverse and set aside the
Decision2 dated February 21,
2008 and Resolution3 dated
February 9, 2009 of the Court of
Appeals (CA) in CA-GR. CEB-SP
No. 02113.
Petitioner South East
International Rattan, Inc. (SEIRI)
is a domestic corporation

engaged in the business of

manufacturing and exporting
furniture to various countries with
principal place of business at
Paknaan, Mandaue City, while
petitioner Estanislao Agbay, as
per records, is the President and
General Manager of SEIRI.4
On November 3, 2003,
respondent Jesus J. Coming filed
a complaint5 for illegal dismissal,
underpayment of wages, nonpayment of holiday pay, 13th
month pay and service incentive
leave pay, with prayer for
reinstatement, back wages,
damages and attorneys fees.
Respondent alleged that he was
hired by petitioners as Sizing
Machine Operator on March 17,
1984. His work schedule is from
8:00 a.m. to 5:00 p.m. Initially, his
compensation was on "pakiao"
basis but sometime in June 1984,
it was fixed at P150.00 per day
which was paid weekly. In 1990,
without any apparent reason, his
employment was interrupted as
he was told by petitioners to
resume work in two months time.
Being an uneducated person,
respondent was persuaded by
the management as well as his
brother not to complain, as
otherwise petitioners might
decide not to call him back for
work. Fearing such
consequence, respondent
accepted his fate. Nonetheless,
after two months he reported

back to work upon order of

management.6
Despite being an employee for
many years with his work
performance never questioned by
petitioners, respondent was
dismissed on January 1, 2002
without lawful cause. He was told
that he will be terminated
because the company is not
doing well financially and that he
would be called back to work only
if they need his services again.
Respondent waited for almost a
year but petitioners did not call
him back to work. When he finally
filed the complaint before the
regional arbitration branch, his
brother Vicente was used by
management to persuade him to
withdraw the case.7
On their part, petitioners denied
having hired respondent
asserting that SEIRI was
incorporated only in 1986, and
that respondent actually worked
for SEIRIs furniture suppliers
because when the company
started in 1987 it was engaged
purely in buying and exporting
furniture and its business
operations were suspended from
the last quarter of 1989 to August
1992. They stressed that
respondent was not included in
the list of employees submitted to
the Social Security System
(SSS). Moreover, respondents
brother, Vicente Coming,
executed an affidavit8 in support
of petitioners position while Allan

Mayol and Faustino Apondar

issued notarized
certifications9that respondent
worked for them instead.10
With the denial of petitioners that
respondent was their employee,
the latter submitted an
affidavit11 signed by five former
co-workers stating that
respondent was one of the
pioneer employees who worked
in SEIRI for almost twenty years.
In his Decision12 dated April 30,
2004, Labor Arbiter Ernesto F.
Carreon ruled that respondent is
a regular employee of SEIRI and
that the termination of his
employment was illegal. The
dispositive portion of the decision
reads:
WHEREFORE, premises
considered, judgment is hereby
rendered ordering the respondent
South East (Intl.) Rattan, Inc. to
pay complainant Jesus J.
Coming the following:
1. Separation
pay

P114,40
0.00

2. Backwages

P
30,400.
00

3. Wage
differential

P
15,015.
00

4. 13th month
pay

P
5,958.0

0
5. Holiday pay

P
4,000.0
0

6. Service
incentive leave
pay

P
2,000.0
0

Total award

P171,77
3.00

The other claims and the case

against respondent Estanislao
Agbay are dismissed for lack of
merit.
SO ORDERED.13
Petitioners appealed to the
National Labor Relations
Commission (NLRC)-Cebu City
where they submitted the
following additional evidence: (1)
copies of SEIRIs payrolls and
individual pay records of
employees;14 (2) affidavit15 of
SEIRIs Treasurer, Angelina
Agbay; and (3) second
affidavit16 of Vicente Coming.
On July 28, 2005, the NLRCs
Fourth Division rendered its
Decision,17 the dispositive portion
of which states:
WHEREFORE, premises
considered, the decision of the
Labor Arbiter is hereby SET
ASIDE and VACATED and a new

one entered DISMISSING the

complaint.
SO ORDERED.18
The NLRC likewise denied
respondents motion for
reconsideration.19
Respondent elevated the case to
the CA via a petition for certiorari
under Rule 65.
By Decision dated February 21,
2008, the CA reversed the NLRC
and ruled that there existed an
employer-employee relationship
between petitioners and
respondent who was dismissed
without just and valid cause.
The CA thus decreed:
WHEREFORE, in view of the
foregoing, the petition is hereby
GRANTED. The assailed
Decision dated July 28, 2005
issued by the National Labor
Relations Commission (NLRC),
Fourth Division, Cebu City in
NLRC Case No. V-000625-2004
is REVERSED and SET ASIDE.
The Decision of the Labor Arbiter
dated April 30, 2004 is
REINSTATED with
MODIFICATION on the
computation of backwages which
should be computed from the
time of illegal termination until the
finality of this decision.
Further, the Labor Arbiter is
directed to make the proper
adjustment in the computation of
the award of separation pay as
well as the monetary awards of
wage differential, 13th month

pay, holiday pay and service

incentive leave pay.
SO ORDERED.20
Petitioners filed a motion for
reconsideration but the CA
denied it under Resolution dated
February 9, 2009.
Hence, this petition raising the
following issues:
6.1
WHETHER UNDER THE FACTS
AND EVIDENCE ON RECORD,
THE FINDING OF THE
HONORABLE COURT OF
APPEALS THAT THERE EXISTS
EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN
PETITIONERS AND
RESPONDENT IS IN ACCORD
WITH LAW AND APPLICABLE
DECISIONS OF THIS
HONORABLE COURT.
6.2
WHETHER THE HONORABLE
COURT OF APPEALS
CORRECTLY APPRECIATED IN
ACCORDANCE WITH
APPLICABLE LAW AND
JURISPRUDENCE THE
EVIDENCE PRESENTED BY
BOTH PARTIES.
6.3
WHETHER UNDER THE FACTS
AND EVIDENCE PRESENTED,
THE FINDING OF THE
HONORABLE COURT OF
APPEALS THAT PETITIONERS
ARE LIABLE FOR ILLEGAL
DISMISSAL OF RESPONDENT
IS IN ACCORD WITH

APPLICABLE LAW AND

JURISPRUDENCE.
6.4
WHETHER UNDER THE FACTS
PRESENTED, THE RULING OF
THE HONORABLE COURT OF
APPEALS THAT THE
BACKWAGES DUE THE
RESPONDENT SHOULD BE
COMPUTED FROM THE TIME
OF ILLEGAL TERMINATION
UNTIL THE FINALITY OF THE
DECISION IS SUPPORTED BY
PREVAILING
JURISPRUDENCE.21
Resolution of the first issue is
paramount in view of petitioners
denial of the existence of
employer-employee relationship.
The issue of whether or not an
employer-employee relationship
exists in a given case is
essentially a question of fact. As
a rule, this Court is not a trier of
facts and this applies with greater
force in labor cases.22 Only errors
of law are generally reviewed by
this Court.23 This rule is not
absolute, however, and admits of
exceptions. For one, the Court
may look into factual issues in
labor cases when the factual
findings of the Labor Arbiter, the
NLRC, and the CA are
conflicting.24 Here, the findings of
the NLRC differed from those of
the Labor Arbiter and the CA,
which compels the Courts
exercise of its authority to review
and pass upon the evidence

presented and to draw its own

conclusions therefrom.25
To ascertain the existence of an
employer-employee relationship
jurisprudence has invariably
adhered to the four-fold test, to
wit: (1) the selection and
engagement of the employee; (2)
the payment of wages; (3) the
power of dismissal; and (4) the
power to control the employees
conduct, or the so-called "control
test."26 In resolving the issue of
whether such relationship exists
in a given case, substantial
evidence that amount of
relevant evidence which a
reasonable mind might accept as
adequate to justify a conclusion
is sufficient. Although no
particular form of evidence is
required to prove the existence of
the relationship, and any
competent and relevant evidence
to prove the relationship may be
admitted, a finding that the
relationship exists must
nonetheless rest on substantial
evidence.27
In support of their claim that
respondent was not their
employee, petitioners presented
Employment Reports to the SSS
from 1987 to 2002, the
Certifications issued by Mayol
and Apondar, two affidavits of
Vicente Coming, payroll sheets
(1999-2000), individual pay
envelopes and employee
earnings records (1999-2000)
and affidavit of Angelina Agbay

(Treasurer and Human

Resources Officer). The payroll
and pay records did not include
the name of respondent. The
affidavit of Ms. Agbay stated that
after SEIRI started its business in
1986 purely on export trading, it
ceased operations in 1989 as
evidenced by Certification dated
January 18, 1994 from the
Securities and Exchange
Commission (SEC); that when
business resumed in 1992, SEIRI
undertook only a little of
manufacturing; that the company
never hired any workers for
varnishing and pole sizing
because it bought the same from
various suppliers, including
Faustino Apondar; respondent
was never hired by SEIRI; and
while it is true that Mr. Estanislao
Agbay is the company President,
he never dispensed the salaries
of workers.28
In his first affidavit, Vicente
Coming averred that:
[Jesus Coming] is a furniture
factory worker. In 1982 to 1986,
he was working with Ben Mayol
as round core maker/splitter.
Thereafter, we joined Okay Okay
Yard owned by Amelito
Montececillo. This is a rattan
trader with business address
near Cebu Rattan Factory on a
"Pakiao" basis.
However, Jesus and I did not
stay long at Okay Okay Yard and
instead we joined Eleuterio
Agbay in Labogon, Cebu in 1989.

In 1991, we went back to Okay

Okay located near the residence
of Atty. Vicente de la Serna in
Mandaue City. We were on a
"pakiao" basis. We stayed put
until 1993 when we resigned and
joined Dodoy Luna in Labogon,
Mandaue City as classifier until
1995. In 1996[,] Jesus rested. It
was only in 1997 that he worked
back. He replaced me, as a
classifier in Rattan Traders
owned by Allan Mayol. But then,
towards the end of the year, he
left the factory and relaxed in our
place of birth, in Sogod, Cebu.
It was only towards the end of
1999 that Jesus was taken back
by Allan Mayol as sizing machine
operator. However, the work was
off and on basis. Not regular in
nature, he was harping a side
line job with me knowing that I
am now working with Faustino
Apondar that supplies rattan
furnitures [sic] to South East
(Intl) Rattan, Inc. As a brother, I
allowed Jesus to work with me
and collect the proceeds of his
services as part of my collectibles
from Faustino Apondar since I
was on a "pakiao" basis. He was
working at his pleasure. Which
means, he works if he likes to?
That will be until 10:00 oclock in
the evening.
x x x x29
The Certification dated January
20, 2004 of Allan Mayol reads:
This is to certify that I personally
know Jesus Coming, the brother

of Vicente Coming. Jesus is a

rattan factory worker and he was
working with me as rattan pole
sizing/classifier of my business
from 1997 up to part of 1998
when he left my factory at will. I
took him back towards the end of
1999, this time as a sizing
machine operator. In all these
years, his services are not
regular. He works only if he likes
to.30
Faustino Apondar likewise issued
a Certification which states:
This is to certify that I am a
maker/supplier of finished Rattan
Furniture. As such, I have several
rattan furniture workers under
me, one of whom is Vicente
Coming, the brother of Jesus
Coming.
That sometime in 1999, Vicente
pleaded to me for a side line job
of his brother, Jesus who was
already connected with Allan
Mayol. Having vouched for the
integrity of his brother and
knowing that the job is temporary
in character, I allowed Jesus to
work with his brother Vicente.
However, the proceeds will be
collected together with his
brother Vicente since it was the
latter who was working with me.
He renders services to his
brother work only after the
regular working hours but off and
on basis.31
On the other hand, respondent
submitted the affidavit executed
by Eleoterio Brigoli, Pedro Brigoli,

Napoleon Coming, Efren Coming

and Gil Coming who all attested
that respondent was their coworker at SEIRI.
Their affidavit reads:
We, the undersigned, all of legal
ages, Filipino, and resident[s] of
Cebu, after having been duly
sworn to in accordance with law,
depose and say:
That we are former employees of
SOUTH EAST RATTAN which is
owned by Estan Eslao Agbay;
That we personally know JESUS
COMING considering that we
worked together in one company
SOUTH EAST RATTANT [sic];
That we together with JESUS
COMING are all under the
employ of ESTAN ESLAO
AGBAY considering that the latter
is the one directly paying us and
holds the absolute control of all
aspects of our employment;
That it is not true that JESUS
COMING is under the employ of
one person other than ESTAN
ESLAO AGBAY OF SOUTH
EAST RATTAN;
That Jesus Coming is one of the
pioneer employees of SOUTH
EAST RATTAN and had been
employed therein for almost
twenty years;
That we executed this affidavit to
attest to the truth of the foregoing
facts and to deny any contrary
allegation made by the company
against his employment with
SOUTH EAST RATTAN.32

In his decision, Labor Arbiter

Carreon found that respondents
work as sizing machine operator
is usually necessary and
desirable to the rattan furniture
business of petitioners and their
failure to include respondent in
the employment report to SSS is
not conclusive proof that
respondent is not their employee.
As to the affidavit of Vicente
Coming, Labor Arbiter Carreon
did not give weight to his
statement that respondent is not
petitioners employee but that of
one Faustino Apondar. Labor
Arbiter Carreon was not
convinced that Faustino Apondar
is an independent contractor who
has a contractual relationship
with petitioners.
In reversing the Labor Arbiter, the
NLRC reasoned as follows:
First complainant alleged that he
worked continuously from March
17, 1984 up to January 21,
2002.1wphi1 Records reveal
however that South East (Intl.)
Rattan, Inc. was incorporated
only last July 18, 1986 (p. 55
records)[.] Moreover, when they
started to actually operate in
1987, the company was engaged
purely on "buying and exporting
rattan furniture" hence no
manufacturing employees were
hired. Furthermore, from the last
quarter of 1989 up to August of
1992, the company suspended
operations due to economic
reverses as per Certification

issued by the Securities and

Exchange Commission (p. 56
records)[.]
Second, for all his insistence that
he was a regular employee,
complainant failed to present a
single payslip, voucher or a copy
of a company payroll showing
that he rendered service during
the period indicated therein. x x x
From the above established facts
we are inclined to give weight
and credence to the Certifications
of Allan Mayol and Faustino
Apondar, both suppliers of
finished Rattan Furniture (pp.
442-43, records). It appears that
complainant first worked with
Allan Mayol and later with
Faustino Apondar upon the
proddings of his brother Vicente.
Vicentes affidavit as to
complainants employment
history was more detailed and
forthright. x x x
xxxx
In the case at bar, there is
likewise substantial evidence to
support our findings that
complainant was not an
employee of respondents. Thus:
Complainants name does not
appear in the list of employees
reported to the SSS.
His name does not also appear in
the sample payrolls of
respondents employees.
The certification of Allan Mayol
and Fasutino Apondar[,] supplier
of finished rattan products[,] that

complainant had at one time or

another worked with them.
The Affidavit of Vicente Coming,
complainants full brother[,]
attesting that complainant had
never been an employee of
respondent. The only connection
was that their employer Faustino
Apondar supplies finished rattan
products to respondents.33
On the other hand, the CA gave
more credence to the
declarations of the five former
employees of petitioners that
respondent was their co-worker
in SEIRI. One of said affiants is
Vicente Comings own son, Gil
Coming. Vicente averred in his
second affidavit that when he
confronted his son, the latter
explained that he was merely told
by their Pastor to sign the
affidavit as it will put an end to
the controversy. Vicente insisted
that his son did not know the
contents and implications of the
document he signed. As to the
absence of respondents name in
the payroll and SSS employment
report, the CA observed that the
payrolls submitted were only from
January 1, 1999 to December 29,
2000 and not the entire period of
eighteen years when respondent
claimed he worked for SEIRI. It
further noted that the names of
the five affiants, whom petitioners
admitted to be their former
employees, likewise do not
appear in the aforesaid
documents. According to the CA,

it is apparent that petitioners

maintained a separate payroll for
certain employees or willfully
retained a portion of the payroll.
x x x As to the "control test", the
following facts indubitably reveal
that respondents wielded control
over the work performance of
petitioner, to wit: (1) they required
him to work within the company
premises; (2) they obliged
petitioner to report every day of
the week and tasked him to
usually perform the same job; (3)
they enforced the observance of
definite hours of work from 8
oclock in the morning to 5
oclock in the afternoon; (4) the
mode of payment of petitioners
salary was under their discretion,
at first paying him on pakiao
basis and thereafter, on daily
basis; (5) they implemented
company rules and regulations;
(6) [Estanislao] Agbay directly
paid petitioners salaries and
controlled all aspects of his
employment and (7) petitioner
rendered work necessary and
desirable in the business of the
respondent company.34
We affirm the CA.
In Tan v. Lagrama,35 the Court
held that the fact that a worker
was not reported as an employee
to the SSS is not conclusive
proof of the absence of
employer-employee relationship.
Otherwise, an employer would be
rewarded for his failure or even

neglect to perform his

obligation.36
Nor does the fact that
respondents name does not
appear in the payrolls and pay
envelope records submitted by
petitioners negate the existence
of employer-employee
relationship. For a payroll to be
utilized to disprove the
employment of a person, it must
contain a true and complete list
of the employee.37 In this case,
the exhibits offered by petitioners
before the NLRC consisting of
copies of payrolls and pay
earnings records are only for the
years 1999 and 2000; they do not
cover the entire 18-year period
during which respondent
supposedly worked for SEIRI.
In their comment to the petition
filed by respondent in the CA,
petitioners emphasized that in
the certifications issued by Mayol
and Apondar, it was shown that
respondent was employed and
working for them in those years
he claimed to be working for
SEIRI. However, a reading of the
certification by Mayol would show
that while the latter claims to
have respondent under his
employ in 1997, 1998 and 1999,
respondents services were not
regular and that he works only if
he wants to. Apondars
certification likewise stated that
respondent worked for him since
1999 through his brother Vicente
as "sideline" but only after regular

working hours and "off and on"

basis. Even assuming the truth of
the foregoing statements, these
do not foreclose respondents
regular or full-time employment
with SEIRI. In effect, petitioners
suggest that respondent was
employed by SEIRIs suppliers,
Mayol and Apondar but no
competent proof was presented
as to the latters status as
independent contractors.
In the same comment, petitioners
further admitted that the five
affiants who attested to
respondents employment with
SEIRI are its former workers
whom they describe as
"disgruntled workers of SEIRI"
with an axe to grind against
petitioners, and that their
execution of affidavit in support of
respondents claim is "their very
way of hitting back the
management of SEIRI after
disciplinary measures were
meted against them."38 This
allegation though was not
substantiated by petitioners.
Instead, after the CA rendered its
decision reversing the NLRCs
ruling, petitioners subsequently
changed their theory by denying
the employment relationship with
the five affiants in their motion for
reconsideration, thus:
x x x Since the five workers were
occupying and working on a
leased premises of the private
respondent, they were called
workers of SEIRI (private

respondent). Such admission

however, does not connote
employment. For the truth of the
matter, all of the five employees
of the supplier assigned at the
leased premises of the private
respondent. Because of the
recommendation of the private
respondent with regards to the
disciplinary measures meted on
the five workers, they wanted to
hit back against the private
respondent. Their motive to
implicate private respondent was
to vindicate. Definitely, they have
an axe to grind against the
private respondent. Mention has
to be made that despite the
dismissal of these five (5)
witnesses from their service,
none of them ever went to the
National Labor [Relations]
Commission and invoked their
rights, if any, against their
employer or at the very least
against the respondent. The
reason is obvious, since they
knew pretty well that they were
not employees of SEIRI but
rather under the employ of Allan
Mayol and Faustino Apondar,
working on a leased premise of
respondent. x x x39
Petitioners admission that the
five affiants were their former
employees is binding upon them.
While they claim that respondent
was the employee of their
suppliers Mayol and Apondar,
they did not submit proof that the
latter were indeed independent

contractors; clearly, petitioners

failed to discharge their burden of
proving their own affirmative
allegation.40 There is thus no
showing that the five former
employees of SEIRI were
motivated by malice, bad faith or
any ill-motive in executing their
affidavit supporting the claims of
respondent.
In any controversy between a
laborer and his master, doubts
reasonably arising from the
evidence are resolved in favor of
the laborer.41
As a regular employee,
respondent enjoys the right to
security of tenure under Article
27942 of the Labor Code and may
only be dismissed for a just43 or
authorized44 cause, otherwise the
dismissal becomes illegal.
Respondent, whose employment
was terminated without valid
cause by petitioners, is entitled to
reinstatement without loss of
seniority rights and other
privileges and to his full back
wages, inclusive of allowances
and other benefits or their
monetary equivalent, computed
from the time his compensation
was withheld from him up to the
time of his actual reinstatement.
Where reinstatement is no longer
viable as an option, back wages
shall be computed from the time
of the illegal termination up to the
finality of the decision.
Separation pay equivalent to one
month salary for every year of

service should likewise be

awarded as an alternative in case
reinstatement in not possible.45
WHEREFORE, the petition for
review on certiorari is DENIED.
The Decision dated February 21,
2008 and Resolution dated
February 9, 2009 of the Court of
Appeals in CA-G.R. No. CEB-SP
No. 02113 are hereby
AFFIRMED and UPHELD.
Petitioners to pay the costs of
suit.
SO ORDERED.
G.R. No. 192998
April
2, 2014
BERNARD A. TENAZAS, JAIME
M. FRANCISCO and ISIDRO G.
ENDRACA, Petitioners,
vs.
R. VILLEGAS TAXI
TRANSPORT and ROMUALDO
VILLEGAS, Respondents.
DECISION
REYES, J.:
This is a petition for review on
certiorari1 filed under Rule 45 of
the Rules of Court, assailing the
Decision2 dated March 11, 2010
and Resolution3 dated June 28,
2010 of the Court of Appeals
(CA) in CA-G.R. SP No. 111150,
which affirmed with modification
the Decision4 dated June 23,
2009 of the National Labor
Relations Commission (NLRC) in
NLRC LAC Case No. 07-00264808.
The Antecedent Facts

 On July 4, 2007, Bernard A.

Tenazas (Tenazas) and Jaime M.
Francisco (Francisco) filed a
complaint for illegal dismissal
against R. Villegas Taxi Transport
and/or Romualdo Villegas
(Romualdo) and Andy Villegas
(Andy) (respondents). At that
time, a similar case had already
been filed by Isidro G. Endraca
(Endraca) against the same
respondents. The two (2) cases
were subsequently consolidated.5
In their position paper,6 Tenazas,
Francisco and Endraca
(petitioners) alleged that they
were hired and dismissed by the
respondents on the following
dates:

N
a
m
e

D
at
e
of
Hi
rin
g

D
at
e
of
Di
s
mi
ss
al

Sa
lar
y

B
er
na
rd
A.
Te
na
za
s

10
/1
99
7

07
/0
3/
07

Bo
un
da
ry
Sy
ste
m

Ja

04

06

Bo

im
e
M.
Fr
an
ci
sc
o
Isi
dr
o
G.
E
nd
ra
ca

/1
0/
04

04
/2
00
0

/0
4/
07

un
da
ry
Sy
ste
m

03
/0
6/
06

Bo
un
da
ry
Sy
ste
m7

Relaying the circumstances of his

dismissal, Tenazas alleged that
on July 1, 2007, the taxi unit
assigned to him was sideswiped
by another vehicle, causing a
dent on the left fender near the
driver seat. The cost of repair for
the damage was estimated
at P500.00. Upon reporting the
incident to the company, he was
scolded by respondents
Romualdo and Andy and was told
to leave the garage for he is
already fired. He was even
threatened with physical harm
should he ever be seen in the
companys premises again.
Despite the warning, Tenazas
reported for work on the following
day but was told that he can no
longer drive any of the
companys units as he is already
fired.8

 Francisco, on the other hand,

averred that his dismissal was
brought about by the companys
unfounded suspicion that he was
organizing a labor union. He was
instantaneously terminated,
without the benefit of procedural
due process, on June 4, 2007.9
Endraca, for his part, alleged that
his dismissal was instigated by
an occasion when he fell short of
the required boundary for his taxi
unit. He related that before he
was dismissed, he brought his
taxi unit to an auto shop for an
urgent repair. He was charged
the amount of P700.00 for the
repair services and the
replacement parts. As a result, he
was not able to meet his
boundary for the day. Upon
returning to the company garage
and informing the management
of the incident, his drivers
license was confiscated and was
told to settle the deficiency in his
boundary first before his license
will be returned to him. He was
no longer allowed to drive a taxi
unit despite his persistent pleas.10
For their part, the respondents
admitted that Tenazas and
Endraca were employees of the
company, the former being a
regular driver and the latter a
spare driver. The respondents,
however, denied that Francisco
was an employee of the company
or that he was able to drive one
of the companys units at any
point in time.11

The respondents further alleged

that Tenazas was never
terminated by the company. They
claimed that on July 3, 2007,
Tenazas went to the company
garage to get his taxi unit but was
informed that it is due for
overhaul because of some
mechanical defects reported by
the other driver who takes turns
with him in using the same. He
was thus advised to wait for
further notice from the company if
his unit has already been fixed.
On July 8, 2007, however, upon
being informed that his unit is
ready for release, Tenazas failed
to report back to work for no
apparent reason.12
As regards Endraca, the
respondents alleged that they
hired him as a spare driver in
February 2001. They allow him to
drive a taxi unit whenever their
regular driver will not be able to
report for work. In July 2003,
however, Endraca stopped
reporting for work without
informing the company of his
reason. Subsequently, the
respondents learned that a
complaint for illegal dismissal
was filed by Endraca against
them. They strongly maintained,
however, that they could never
have terminated Endraca in
March 2006 since he already
stopped reporting for work as
early as July 2003. Even then,
they expressed willingness to
accommodate Endraca should he

wish to work as a spare driver for

the company again since he was
never really dismissed from
employment anyway.13
On May 29, 2008, the petitioners,
by registered mail, filed a Motion
to Admit Additional
Evidence.14 They alleged that
after diligent efforts, they were
able to discover new pieces of
evidence that will substantiate
the allegations in their position
paper. Attached with the motion
are the following: (a) Joint
Affidavit of the petitioners;15 (2)
Affidavit of Good Faith of Aloney
Rivera, a co-driver;16 (3) pictures
of the petitioners wearing
company shirts;17 and (4)
Tenazas Certification/Record of
Social Security System (SSS)
contributions.18
The Ruling of the Labor Arbiter
On May 30, 2008, the Labor
Arbiter (LA) rendered a
Decision,19 which pertinently
states, thus:
In the case of complainant Jaime
Francisco, respondents
categorically denied the
existence of an employeremployee relationship. In this
situation, the burden of proof
shifts to the complainant to prove
the existence of a regular
employment. Complainant
Francisco failed to present
evidence of regular employment
available to all regular
employees, such as an
employment contract, company

ID, SSS, withholding tax

certificates, SSS membership
and the like.
In the case of complainant Isidro
Endraca, respondents claim that
he was only an extra driver who
stopped reporting to queue for
available taxi units which he
could drive. In fact, respondents
offered him in their Position
Paper on record, immediate
reinstatement as extra taxi driver
which offer he refused.
In case of Bernard Tenazas, he
was told to wait while his taxi was
under repair but he did not report
for work after the taxi was
repaired. Respondents[,] in their
Position Paper, on record
likewise, offered him immediate
reinstatement, which offer he
refused.
We must bear in mind that the
complaint herein is one of actual
dismissal. But there was no
formal investigations, no show
cause memos, suspension
memos or termination memos
were never issued. Otherwise
stated, there is no proof of overt
act of dismissal committed by
herein respondents.
We are therefore constrained to
rule that there was no illegal
dismissal in the case at bar.
The situations contemplated by
law for entitlement to separation
pay does [sic] not apply.
WHEREFORE, premises
considered, instant consolidated

complaints are hereby dismissed

for lack of merit.
SO ORDERED.20
The Ruling of the NLRC
Unyielding, the petitioners
appealed the decision of the LA
to the NLRC. Subsequently, on
June 23, 2009, the NLRC
rendered a Decision,21 reversing
the appealed decision of the LA,
holding that the additional pieces
of evidence belatedly submitted
by the petitioners sufficed to
establish the existence of
employer-employee relationship
and their illegal dismissal. It held,
thus:
In the challenged decision, the
Labor Arbiter found that it cannot
be said that the complainants
were illegally dismissed, there
being no showing, in the first
place, that the respondent [sic]
terminated their services. A
portion thereof reads:
"We must bear in mind that the
complaint herein is one of actual
dismissal. But there were no
formal investigations, no show
cause memos, suspension
memos or termination memos
were never issued. Otherwise
stated, there is no proof of overt
act of dismissal committed by
herein respondents.
We are therefore constrained to
rule that there was no illegal
dismissal in the case at bar."
Issue: [W]hether or not the
complainants were illegally
dismissed from employment.

It is possible that the

complainants Motion to Admit
Additional Evidence did not reach
the Labor Arbiters attention
because he had drafted the
challenged decision even before
they submitted it, and thereafter,
his staff attended only to clerical
matters, and failed to bring the
motion in question to his
attention. It is now up to this
Commission to consider the
complainants additional
evidence. Anyway, if this
Commission must consider
evidence submitted for the first
time on appeal (Andaya vs.
NLRC, G.R. No. 157371, July 15,
2005), much more so must it
consider evidence that was
simply overlooked by the Labor
Arbiter.
Among the additional pieces of
evidence submitted by the
complainants are the following:
(1) joint affidavit (records, p. 5152) of the three (3) complainants;
(2) affidavit (records, p. 53) of
Aloney Rivera y Aldo; and (3)
three (3) pictures (records, p. 54)
referred to by the complainant in
their joint affidavit showing them
wearing t-shirts bearing the name
and logo of the respondents
company.
xxxx
WHEREFORE, the decision
appealed from is hereby
REVERSED. Respondent
Rom[u]aldo Villegas doing
business under the name and

style Villegas Taxi Transport is

hereby ordered to pay the
complainants the following (1) full
backwages from the date of their
dismissal (July 3, 2007 for
Tena[z]as, June 4, 2004 for
Francisco, and March 6, 2006 for
Endraca[)] up to the date of the
finality of this decision[;] (2)
separation pay equivalent to one
month for every year of service;
and (3) attorneys fees equivalent
to ten percent (10%) of the total
judgment awards.
SO ORDERED.22
On July 24, 2009, the
respondents filed a motion for
reconsideration but the NLRC
denied the same in its
Resolution23 dated September
23, 2009.
The Ruling of the CA
Unperturbed, the respondents
filed a petition for certiorari with
the CA. On March 11, 2010, the
CA rendered a
Decision,24 affirming with
modification the Decision dated
June 23, 2009 of the NLRC. The
CA agreed with the NLRCs
finding that Tenazas and Endraca
were employees of the company,
but ruled otherwise in the case of
Francisco for failing to establish
his relationship with the
company. It also deleted the
award of separation pay and
ordered for reinstatement of
Tenazas and Endraca. The
pertinent portions of the decision
read as follows:

At the outset, We declare that

respondent Francisco failed to
prove that an employer-employee
relationship exists between him
and R. Transport. If there is no
employer-employee relationship
in the first place, the duty of R.
Transport to adhere to the labor
standards provisions of the Labor
Code with respect to Francisco is
questionable.
xxxx
Although substantial evidence is
not a function of quantity but
rather of quality, the peculiar
environmental circumstances of
the instant case demand that
something more should have
been proffered. Had there been
other proofs of employment, such
as Franciscos inclusion in R.R.
Transports payroll, this Court
would have affirmed the finding
of employer-employee
relationship.1wphi1 The NLRC,
therefore, committed grievous
error in ordering R. Transport to
answer for Franciscos claims.
We now tackle R. Transports
petition with respect to Tenazas
and Endraca, who are both
admitted to be R. Transports
employees. In its petition, R.
Transport puts forth the theory
that it did not terminate the
services of respondents but that
the latter deliberately abandoned
their work. We cannot subscribe
to this theory.
xxxx

 Considering that the complaints

for illegal dismissal were filed
soon after the alleged dates of
dismissal, it cannot be inferred
that respondents Tenazas and
Endraca intended to abandon
their employment. The
complainants for dismissal are, in
themselves, pleas for the
continuance of employment.
They are incompatible with the
allegation of abandonment. x x x.
For R. Transports failure to
discharge the burden of proving
that the dismissal of respondents
Tenazas and Endraca was for a
just cause, We are constrained to
uphold the NLRCs conclusion
that their dismissal was not
justified and that they are entitled
to back wages. Because they
were illegally dismissed, private
respondents Tenazas and
Endraca are entitled to
reinstatement and back wages x
x x.
xxxx
However, R. Transport is correct
in its contention that separation
pay should not be awarded
because reinstatement is still
possible and has been offered. It
is well[-]settled that separation
pay is granted only in instances
where reinstatement is no longer
feasible or appropriate, which is
not the case here.
xxxx
WHEREFORE, the Decision of
the National Labor Relations
Commission dated 23 June 2009,

in NLRC LAC Case No. 07002648-08, and its Resolution

dated 23 September 2009
denying reconsideration thereof
are AFFIRMED with
MODIFICATION in that the award
of Jaime Franciscos claims is
DELETED. The separation pay
granted in favor of Bernard
Tenazas and Isidro Endraca is,
likewise, DELETED and their
reinstatement is ordered instead.
SO ORDERED.25 (Citations
omitted)
On March 19, 2010, the
petitioners filed a motion for
reconsideration but the same
was denied by the CA in its
Resolution26 dated June 28,
2010.
Undeterred, the petitioners filed
the instant petition for review on
certiorari before this Court on
July 15, 2010.
The Ruling of this Court
The petition lacks merit.
Pivotal to the resolution of the
instant case is the determination
of the existence of employeremployee relationship and
whether there was an illegal
dismissal. Remarkably, the LA,
NLRC and the CA had varying
assessment on the matters at
hand. The LA believed that, with
the admission of the
respondents, there is no longer
any question regarding the status
of both Tenazas and Endraca
being employees of the company.
However, he ruled that the same

conclusion does not hold with

respect to Francisco whom the
respondents denied to have ever
employed or known. With the
respondents denial, the burden
of proof shifts to Francisco to
establish his regular employment.
Unfortunately, the LA found that
Francisco failed to present
sufficient evidence to prove
regular employment such as
company ID, SSS membership,
withholding tax certificates or
similar articles. Thus, he was not
considered an employee of the
company. Even then, the LA held
that Tenazas and Endraca could
not have been illegally dismissed
since there was no overt act of
dismissal committed by the
respondents.27
On appeal, the NLRC reversed
the ruling of the LA and ruled that
the petitioners were all
employees of the company. The
NLRC premised its conclusion on
the additional pieces of evidence
belatedly submitted by the
petitioners, which it supposed,
have been overlooked by the LA
owing to the time when it was
received by the said office. It
opined that the said pieces of
evidence are sufficient to
establish the circumstances of
their illegal termination. In
particular, it noted that in the
affidavit of the petitioners, there
were allegations about the
companys practice of not issuing
employment records and this was

not rebutted by the respondents.

It underscored that in a situation
where doubt exists between
evidence presented by the
employer and the employee, the
scales of justice must be tilted in
favor of the employee. It awarded
the petitioners with: (1) full
backwages from the date of their
dismissal up to the finality of the
decision; (2) separation pay
equivalent to one month of salary
for every year of service; and (3)
attorneys fees.
On petition for certiorari, the CA
affirmed with modification the
decision of the NLRC, holding
that there was indeed an illegal
dismissal on the part of Tenazas
and Endraca but not with respect
to Francisco who failed to
present substantial evidence,
proving that he was an employee
of the respondents. The CA
likewise dismissed the
respondents claim that Tenazas
and Endraca abandoned their
work, asseverating that
immediate filing of a complaint for
illegal dismissal and persistent
pleas for continuance of
employment are incompatible
with abandonment. It also
deleted the NLRCs award of
separation pay and instead
ordered that Tenazas and
Endraca be reinstated.28
"Well-settled is the rule that the
jurisdiction of this Court in a
petition for review on certiorari
under Rule 45 of the Revised

Rules of Court is limited to

reviewing only errors of law, not
of fact, unless the factual findings
complained of are completely
devoid of support from the
evidence on record, or the
assailed judgment is based on a
gross misapprehension of
facts."29 The Court finds that
none of the mentioned
circumstances is present in this
case.
In reviewing the decision of the
NLRC, the CA found that no
substantial evidence was
presented to support the
conclusion that Francisco was an
employee of the respondents and
accordingly modified the NLRC
decision. It stressed that with the
respondents denial of employeremployee relationship, it
behooved Francisco to present
substantial evidence to prove that
he is an employee before any
question on the legality of his
supposed dismissal becomes
appropriate for discussion.
Francisco, however, did not offer
evidence to substantiate his
claim of employment with the
respondents. Short of the
required quantum of proof, the
CA correctly ruled that the
NLRCs finding of illegal
dismissal and the monetary
awards which necessarily follow
such ruling lacked factual and
legal basis and must therefore be
deleted.

The action of the CA finds

support in Anonas Construction
and Industrial Supply Corp., et al.
v. NLRC, et al.,30where the Court
reiterated:
[J]udicial review of decisions of
the NLRC via petition for
certiorari under Rule 65, as a
general rule, is confined only to
issues of lack or excess of
jurisdiction and grave abuse of
discretion on the part of the
NLRC. The CA does not assess
and weigh the sufficiency of
evidence upon which the LA and
the NLRC based their
conclusions. The issue is limited
to the determination of whether
or not the NLRC acted without or
in excess of its jurisdiction, or
with grave abuse of discretion in
rendering the resolution, except if
the findings of the NLRC are not
supported by substantial
evidence.31 (Citation omitted and
emphasis ours)
It is an oft-repeated rule that in
labor cases, as in other
administrative and quasi-judicial
proceedings, "the quantum of
proof necessary is substantial
evidence, or such amount of
relevant evidence which a
reasonable mind might accept as
adequate to justify a
conclusion."32 "[T]he burden of
proof rests upon the party who
asserts the affirmative of an
issue."33 Corollarily, as Francisco
was claiming to be an employee
of the respondents, it is

incumbent upon him to proffer

evidence to prove the existence
of said relationship.
"[I]n determining the presence or
absence of an employeremployee relationship, the Court
has consistently looked for the
following incidents, to wit: (a) the
selection and engagement of the
employee; (b) the payment of
wages; (c) the power of
dismissal; and (d) the employers
power to control the employee on
the means and methods by which
the work is accomplished. The
last element, the so-called control
test, is the most important
element."34
There is no hard and fast rule
designed to establish the
aforesaid elements. Any
competent and relevant evidence
to prove the relationship may be
admitted. Identification cards,
cash vouchers, social security
registration, appointment letters
or employment contracts,
payrolls, organization charts, and
personnel lists, serve as
evidence of employee status.35
In this case, however, Francisco
failed to present any proof
substantial enough to establish
his relationship with the
respondents. He failed to present
documentary evidence like
attendance logbook, payroll, SSS
record or any personnel file that
could somehow depict his status
as an employee. Anent his claim
that he was not issued with

employment records, he could

have, at least, produced his
social security records which
state his contributions, name and
address of his employer, as his
co-petitioner Tenazas did. He
could have also presented
testimonial evidence showing the
respondents exercise of control
over the means and methods by
which he undertakes his work.
This is imperative in light of the
respondents denial of his
employment and the claim of
another taxi operator, Emmanuel
Villegas (Emmanuel), that he was
his employer. Specifically, in his
Affidavit,36 Emmanuel alleged
that Francisco was employed as
a spare driver in his taxi garage
from January 2006 to December
2006, a fact that the latter failed
to deny or question in any of the
pleadings attached to the records
of this case. The utter lack of
evidence is fatal to Franciscos
case especially in cases like his
present predicament when the
law has been very lenient in not
requiring any particular form of
evidence or manner of proving
the presence of employeremployee relationship.
In Opulencia Ice Plant and
Storage v. NLRC,37 this Court
emphasized, thus:
No particular form of evidence is
required to prove the existence of
an employer-employee
relationship. Any competent and
relevant evidence to prove the

relationship may be admitted.

For, if only documentary
evidence would be required to
show that relationship, no
scheming employer would ever
be brought before the bar of
justice, as no employer would
wish to come out with any trace
of the illegality he has authored
considering that it should take
much weightier proof to invalidate
a written instrument.38
Here, Francisco simply relied on
his allegation that he was an
employee of the company without
any other evidence supporting
his claim. Unfortunately for him, a
mere allegation in the position
paper is not tantamount to
evidence.39 Bereft of any
evidence, the CA correctly ruled
that Francisco could not be
considered an employee of the
respondents.
The CAs order of reinstatement
of Tenazas and Endraca, instead
of the payment of separation pay,
is also well in accordance with
prevailing jurisprudence. In
Macasero v. Southern Industrial
Gases Philippines,40 the Court
reiterated, thus:
[A]n illegally dismissed employee
is entitled to two reliefs:
backwages and
reinstatement.1wphi1 The two
reliefs provided are separate and
distinct. In instances where
reinstatement is no longer
feasible because of strained
relations between the employee

and the employer, separation pay

is granted. In effect, an illegally
dismissed employee is entitled to
either reinstatement, if viable, or
separation pay if reinstatement is
no longer viable, and backwages.
The normal consequences of
respondents illegal dismissal,
then, are reinstatement without
loss of seniority rights, and
payment of backwages computed
from the time compensation was
withheld up to the date of actual
reinstatement. Where
reinstatement is no longer viable
as an option, separation pay
equivalent to one (1) month
salary for every year of service
should be awarded as an
alternative. The payment of
separation pay is in addition to
payment of
backwages.41 (Emphasis
supplied)
Clearly, it is only when
reinstatement is no longer
feasible that the payment of
separation pay is ordered in lieu
thereof. For instance, if
reinstatement would only
exacerbate the tension and
strained relations between the
parties, or where the relationship
between the employer and the
employee has been unduly
strained by reason of their
irreconcilable differences, it
would be more prudent to order
payment of separation pay
instead of reinstatement.42

 This doctrine of strained

relations, however, should not be
used recklessly or applied
loosely43 nor be based on
impression alone. "It bears to
stress that reinstatement is the
rule and, for the exception of
strained relations to apply, it
should be proved that it is likely
that if reinstated, an atmosphere
of antipathy and antagonism
would be generated as to
adversely affect the efficiency
and productivity of the employee
concerned."44
Moreover, the existence of
strained relations, it must be
emphasized, is a question of fact.
In Golden Ace Builders v.
Talde,45 the Court underscored:
Strained relations must be
demonstrated as a fact, however,
to be adequately supported by
evidencesubstantial evidence
to show that the relationship
between the employer and the
employee is indeed strained as a
necessary consequence of the
judicial controversy.46 (Citations
omitted and emphasis ours)
After a perusal of the NLRC
decision, this Court failed to find
the factual basis of the award of
separation pay to the petitioners.
The NLRC decision did not state
the facts which demonstrate that
reinstatement is no longer a
feasible option that could have
justified the alternative relief of
granting separation pay instead.

The petitioners themselves

likewise overlooked to allege
circumstances which may have
rendered their reinstatement
unlikely or unwise and even
prayed for reinstatement
alongside the payment of
separation pay in their position
paper.47 A bare claim of strained
relations by reason of termination
is insufficient to warrant the
granting of separation pay.
Likewise, the filing of the
complaint by the petitioners does
not necessarily translate to
strained relations between the
parties. As a rule, no strained
relations should arise from a valid
and legal act asserting ones
right.48 Although litigation may
also engender a certain degree
of hostility, the understandable
strain in the parties relation
would not necessarily rule out
reinstatement which would,
otherwise, become the rule rather
the exception in illegal dismissal
cases.49 Thus, it was a prudent
call for the CA to delete the
award of separation pay and
order for reinstatement instead,
in accordance with the general
rule stated in Article 27950 of the
Labor Code.
Finally, the Court finds the
computation of the petitioners'
backwages at the rate of P800.00
daily reasonable and just under
the circumstances. The said rate
is consistent with the ruling of this
Court in Hyatt Taxi Services, Inc.

v. Catinoy,51 which dealt with the

same matter.
WHEREFORE, in view of the
foregoing disquisition, the petition
for review on certiorari is
DENIED. The Decision dated
March 11, 2010 and Resolution
dated June 28, 2010 of the Court
of Appeals in CA-G.R. SP No.
111150 are AFFIRMED.
SO ORDERED.
[G.R. NO. 167622 : November
7, 2008]
GREGORIO V.
TONGKO, Petitioner v. THE
MANUFACTURERS LIFE
INSURANCE CO. (PHILS.), INC.
and RENATO A. VERGEL DE
DIOS,Respondents.
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on
Certiorari under Rule 45 seeks
the reversal of the March 29,
2005 Decision1 of the Court of
Appeals (CA) in CA-G.R. SP No.
88253, entitled The
Manufacturers Life Insurance Co.
(Phils.), Inc. v. National Labor
Relations Commission and
Gregorio V. Tongko. The
assailed decision set aside the
Decision dated September 27,
2004 and Resolution dated
December 16, 2004 rendered by
the National Labor Relations
Commission (NLRC) in NLRC
NCR CA No. 040220-04.

The Facts

Manufacturers Life Insurance Co.

(Phils.), Inc. (Manulife) is a
domestic corporation engaged in
life insurance business. Renato
A. Vergel De Dios was, during
the period material, its President
and Chief Executive Officer.
Gregorio V. Tongko started his
professional relationship with
Manulife on July 1, 1977 by virtue
of a Career Agent's
Agreement2 (Agreement) he
executed with Manulife.
In the Agreement, it is provided
that:
It is understood and agreed that
the Agent is an independent
contractor and nothing contained
herein shall be construed or
interpreted as creating an
employer-employee relationship
between the Company and the
Agent.
xxxx
a) The Agent shall canvass for
applications for Life Insurance,
Annuities, Group policies and
other products offered by the
Company, and collect, in
exchange for provisional receipts
issued by the Agent, money due
or to become due to the
Company in respect of
applications or policies obtained
by or through the Agent or from
policyholders allotted by the

Company to the Agent for

servicing, subject to subsequent
confirmation of receipt of
payment by the Company as
evidenced by an Official Receipt
issued by the Company directly
to the policyholder.
xxxx
The Company may terminate this
Agreement for any breach or
violation of any of the provisions
hereof by the Agent by giving
written notice to the Agent within
fifteen (15) days from the time of
the discovery of the breach. No
waiver, extinguishment,
abandonment, withdrawal or
cancellation of the right to
terminate this Agreement by the
Company shall be construed for
any previous failure to exercise
its right under any provision of
this Agreement.
Either of the parties hereto may
likewise terminate his Agreement
at any time without cause, by
giving to the other party fifteen
(15) days notice in writing. x x x
In 1983, Tongko was named as a
Unit Manager in Manulife's Sales
Agency Organization. In 1990,
he became a Branch Manager.
As the CA found, Tongko's gross
earnings from his work at
Manulife, consisting of
commissions, persistency
income, and management

overrides, may be summarized

as follows:
Jan
uar
y to
De
ce
mb
er
10,
200
2

P 865,096.07

200
1

6,214,737.11

200
0

8,003,180.38

199
9

6,797,814.05

199
8

4,805,166.34

199
7

2,822,620.003

The problem started sometime in

2001, when Manulife instituted
manpower development
programs in the regional sales
management level. Relative
thereto, De Dios addressed a
letter dated November 6,
20014 to Tongko regarding an
October 18, 2001 Metro North
Sales Managers Meeting. In the
letter, De Dios stated:
The first step to transforming
Manulife into a big league player
has been very clear - to increase

the number of agents to at least

1,000 strong for a start. This may
seem diametrically opposed to
the way Manulife was run when
you first joined the organization.
Since then, however, substantial
changes have taken place in the
organization, as these have been
influenced by developments both
from within and without the
company.
xxxx
The issues around agent
recruiting are central to the
intended objectives hence the
need for a Senior Managers'
meeting earlier last month when
Kevin O'Connor, SVP - Agency,
took to the floor to determine
from our senior agency leaders
what more could be done to
bolster manpower development.
At earlier meetings, Kevin had
presented information where
evidently, your Region was the
lowest performer (on a per
Manager basis) in terms of
recruiting in 2000 and, as of
today, continues to remain one of
the laggards in this area.
While discussions, in general,
were positive other than for
certain comments from your end
which were perceived to be
uncalled for, it became clear that
a one-on-one meeting with you
was necessary to ensure that you
and management, were on the
same plane. As gleaned from

some of your previous comments

in prior meetings (both in group
and one-on-one), it was not clear
that we were proceeding in the
same direction.
Kevin held subsequent series of
meetings with you as a result,
one of which I joined briefly. In
those subsequent meetings you
reiterated certain views, the
validity of which we challenged
and subsequently found as
having no basis.
With such views coming from
you, I was a bit concerned that
the rest of the Metro North
Managers may be a bit confused
as to the directions the company
was taking. For this reason, I
sought a meeting with everyone
in your management team,
including you, to clear the air, so
to speak.
This note is intended to confirm
the items that were discussed at
the said Metro North Region's
Sales Managers meeting held at
the 7/F Conference room last 18
October.
xxxx
Issue # 2: "Some Managers are
unhappy with their earnings and
would want to revert to the
position of agents."
This is an often repeated issue
you have raised with me and with

Kevin. For this reason, I placed

the issue on the table before the
rest of your Region's Sales
Managers to verify its validity. As
you must have noted, no Sales
Manager came forward on their
own to confirm your statement
and it took you to name Malou
Samson as a source of the same,
an allegation that Malou herself
denied at our meeting and in your
very presence.
This only confirms, Greg, that
those prior comments have no
solid basis at all. I now believe
what I had thought all along, that
these allegations were simply
meant to muddle the issues
surrounding the inability of your
Region to meet its agency
development objectives!
Issue # 3: "Sales Managers are
doing what the company asks
them to do but, in the process,
they earn less."
xxxx
All the above notwithstanding, we
had your own records checked
and we found that you made a lot
more money in the Year 2000
versus 1999. In addition, you also
volunteered the information to
Kevin when you said that you
probably will make more money
in the Year 2001 compared to
Year 2000. Obviously, your above
statement about making "less
money" did not refer to you but

the way you argued this point

had us almost believing that you
were spouting the gospel of truth
when you were not. x x x
xxxx
All of a sudden, Greg, I have
become much more worried
about your ability to lead this
group towards the new direction
that we have been discussing
these past few weeks, i.e.,
Manulife's goal to become a
major agency-led distribution
company in the Philippines.
While as you claim, you have not
stopped anyone from recruiting, I
have never heard you proactively
push for greater agency
recruiting. You have not been
proactive all these years when it
comes to agency growth.
xxxx
I cannot afford to see a major
region fail to deliver on its
developmental goals next year
and so, we are making the
following changes in the interim:
You will hire at your expense a
competent assistant who can
unload you of much of the routine
tasks which can be easily
delegated. This assistant should
be so chosen as to complement
your skills and help you in the
areas where you feel "may not be
your cup of tea".

You have stated, if not implied,

that your work as Regional
Manager may be too taxing for
you and for your health. The
above could solve this problem.
xxxx
Effective immediately, Kevin and
the rest of the Agency Operations
will deal with the North Star
Branch (NSB) in autonomous
fashion. x x x
I have decided to make this
change so as to reduce your
span of control and allow you to
concentrate more fully on
overseeing the remaining groups
under Metro North, your Central
Unit and the rest of the Sales
Managers in Metro North. I will
hold you solely responsible for
meeting the objectives of these
remaining groups.
xxxx
The above changes can end at
this point and they need not go
any further. This, however, is
entirely dependent upon you. But
you have to understand that
meeting corporate objectives by
everyone is primary and will not
be compromised. We are
meeting tough challenges next
year and I would want everybody
on board. Any resistance or
holding back by anyone will be
dealt with accordingly.

Subsequently, De Dios wrote

Tongko another letter dated
December 18, 2001,5 terminating
Tongko's services, thus:
It would appear, however, that
despite the series of meetings
and communications, both oneon-one meetings between
yourself and SVP Kevin
O'Connor, some of them with me,
as well as group meetings with
your Sales Managers, all these
efforts have failed in helping you
align your directions with
Management's avowed agency
growth policy.
xxxx
On account thereof, Management
is exercising its prerogative under
Section 14 of your Agents
Contract as we are now issuing
this notice of termination of your
Agency Agreement with us
effective fifteen days from the
date of this letter.
Therefrom, Tongko filed a
Complaint dated November 25,
2002 with the NLRC against
Manulife for illegal dismissal.
The case, docketed as NLRC
NCR Case No. 11-10330-02, was
raffled to Labor Arbiter Marita V.
Padolina.
In the Complaint, Tongko, in a bid
to establish an employeremployee relationship, alleged
that De Dios gave him specific
directives on how to manage his

area of responsibility in the

latter's letter dated November 6,
2001. He further claimed that
Manulife exercised control over
him as follows:
Such control was certainly
exercised by respondents over
the herein complainant. It was
Manulife who hired, promoted
and gave various assignments to
him. It was the company who set
objectives as regards
productions, recruitment, training
programs and all activities
pertaining to its business.
Manulife prescribed a Code of
Conduct which would govern in
minute detail all aspects of the
work to be undertaken by
employees, including the sales
process, the underwriting
process, signatures, handling of
money, policyholder service,
confidentiality, legal and
regulatory requirements and
grounds for termination of
employment. The letter of Mr. De
Dios dated 06 November 2001
left no doubt as to who was in
control. The subsequent
termination letter dated 18
December 2001 again
established in no uncertain terms
the authority of the herein
respondents to control the
employees of Manulife. Plainly,
the respondents wielded control
not only as to the ends to be
achieved but the ways and
means of attaining such ends.6

Tongko bolstered his argument

by citing Insular Life Assurance
Co., Ltd. v. NLRC
(4th Division)7 and Great Pacific
Life Assurance Corporation v.
NLRC,8 which Tongko claimed to
be similar to the instant case.
Tongko further claimed that his
dismissal was without basis and
that he was not afforded due
process. He also cited the
Manulife Code of Conduct by
which his actions were controlled
by the company.
Manulife then filed a Position
Paper with Motion to Dismiss
dated February 27, 2003,9 in
which it alleged that Tongko is
not its employee, and that it did
not exercise "control" over him.
Thus, Manulife claimed that the
NLRC has no jurisdiction over the
case.
In a Decision dated April 15,
2004, Labor Arbiter Marita V.
Padolina dismissed the complaint
for lack of an employer-employee
relationship. Padolina found that
applying the four-fold test in
determining the existence of an
employer-employee relationship,
none was found in the instant
case. The dispositive portion
thereof states:
WHEREFORE, premises
considered, judgment is hereby
rendered DISMISSING the
instant complaint for lack of

jurisdiction, there being no

employer-employee relationship
between the parties.
SO ORDERED.
Tongko appealed the arbiter's
Decision to the NLRC which
reversed the same and rendered
a Decision dated September 27,
2004 finding Tongko to have
been illegally dismissed.
The NLRC's First Division, while
finding an employer-employee
relationship between Manulife
and Tongko applying the four-fold
test, held Manulife liable for
illegal dismissal. It further stated
that Manulife exercised control
over Tongko as evidenced by the
letter dated November 6, 2001 of
De Dios and wrote:
The above-mentioned letter
shows the extent to which
respondents controlled
complainant's manner and
means of doing his work and
achieving the goals set by
respondents. The letter shows
how respondents concerned
themselves with the manner
complainant managed the Metro
North Region as Regional Sales
Manager, to the point that
respondents even had a say on
how complainant interacted with
other individuals in the Metro
North Region. The letter is in fact
replete with comments and
criticisms on how complainant
carried out his functions as

Regional Sales Manager.

More importantly, the letter

contains an abundance of
directives or orders that are
intended to directly affect
complainant's authority and
manner of carrying out his
functions as Regional Sales
Manager.10 x x x
Additionally, the First Division
also ruled that:
Further evidence of
[respondents'] control over
complainant can be found in the
records of the case. [These] are
the different codes of conduct
such as the Agent Code of
Conduct, the Manulife Financial
Code of Conduct, and the
Manulife Financial Code of
Conduct Agreement, which serve
as the foundations of the power
of control wielded by respondents
over complainant that is further
manifested in the different
administrative and other tasks
that he is required to perform.
These codes of conduct
corroborate and reinforce the
display of respondents' power of
control in their 06 November
2001 Letter to complainant.11
The fallo of the September 27,
2004 Decision reads:
WHEREFORE, premises
considered, the appealed
Decision is hereby reversed and
set aside. We find complainant
to be a regular employee of
respondent Manulife and that he

was illegally dismissed from

employment by respondents.
In lieu of reinstatement,
respondent Manulife is hereby
ordered to pay complainant
separation pay as above set
forth. Respondent Manulife is
further ordered to pay
complainant backwages from the
time he was dismissed on 02
January 2002 up to the finality of
this decision also as indicated
above.
xxxx
All other claims are hereby
dismissed for utter lack of merit.
From this Decision, Manulife filed
a motion for reconsideration
which was denied by the NLRC
First Division in a Resolution
dated December 16, 2004.12
Thus, Manulife filed an appeal
with the CA docketed as CA-G.R.
SP No. 88253. Thereafter, the CA
issued the assailed Decision
dated March 29, 2005, finding the
absence of an employeremployee relationship between
the parties and deeming the
NLRC with no jurisdiction over
the case. The CA arrived at this
conclusion while again applying
the four-fold test. The CA found
that Manulife did not exercise
control over Tongko that would
render the latter an employee of

Manulife. The dispositive portion

reads:
WHEREFORE, premises
considered, the present petition
is hereby GRANTED and the writ
prayed for accordingly
GRANTED. The assailed
Decision dated September 27,
2004 and Resolution dated
December 16, 2004 of the
National Labor Relations
Commission in NLRC NCR Case
No. 00-11-10330-2002 (NLRC
NCR CA No. 040220-04) are
hereby ANNULLED and SET
ASIDE. The Decision dated April
15, 2004 of Labor Arbiter Marita
V. Padolina is hereby
REINSTATED.
Hence, Tongko filed this petition
and presented the following
issues:
A

The Court of Appeals committed

grave abuse of discretion in
granting respondents' petition for
certiorari.
B

The Court of Appeals committed

grave abuse of discretion in
annulling and setting aside the
Decision dated September 27,
2004 and Resolution dated
December 16, 2004 in finding
that there is no employeremployee relationship between
petitioner and respondent.


The Court of Appeals committed
grave abuse of discretion in
annulling and setting aside the
Decision dated September 27,
2004 and Resolution dated
December 16, 2004 which found
petitioner to have been illegally
dismissed and ordered his
reinstatement with payment of
backwages.13
Restated, the issues are: (1) Was
there an employer-employee
relationship between Manulife
and Tongko? and (2) If yes, was
Manulife guilty of illegal
dismissal?

The Court's Ruling

This petition is meritorious.

Tongko Was An Employee of

Manulife

The basic issue of whether or not

the NLRC has jurisdiction over
the case resolves itself into the
question of whether an employeremployee relationship existed
between Manulife and Tongko. If
no employer-employee
relationship existed between the
two parties, then jurisdiction over
the case properly lies with the
Regional Trial Court.
In the determination of whether
an employer-employee
relationship exists between two
parties, this Court applies the

four-fold test to determine the

existence of the elements of such
relationship. In Pacific
Consultants International Asia,
Inc. v. Schonfeld, the Court set
out the elements of an employeremployee relationship, thus:
Jurisprudence is firmly settled
that whenever the existence of
an employment relationship is in
dispute, four elements constitute
the reliable yardstick: (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's
conduct. It is the so-called
"control test" which constitutes
the most important index of the
existence of the employeremployee relationship that is,
whether the employer controls or
has reserved the right to control
the employee not only as to the
result of the work to be done but
also as to the means and
methods by which the same is to
be accomplished. Stated
otherwise, an employeremployee relationship exists
where the person for whom the
services are performed reserves
the right to control not only the
end to be achieved but also the
means to be used in reaching
such end.14
The NLRC, for its part, applied
the four-fold test and found the
existence of all the elements and
declared Tongko an employee of

Manulife. The CA, on the other

hand, found that the element of
control as an indicator of the
existence of an employeremployee relationship was
lacking in this case. The NLRC
and the CA based their rulings on
the same findings of fact but
differed in their interpretations.
The NLRC arrived at its
conclusion, first, on the basis of
the letter dated November 6,
2001 addressed by De Dios to
Tongko. According to the NLRC,
the letter contained "an
abundance of directives or orders
that are intended to directly affect
complainant's authority and
manner of carrying out his
functions as Regional Sales
Manager." It enumerated these
"directives" or "orders" as follows:
You will hire at your expense a
competent assistant who can
unload you of much of the routine
tasks which can be easily
delegated. x x x
xxxx
This assistant should be hired
immediately.
Effective immediately, Kevin and
the rest of the Agency Operations
will deal with the North Star
Branch (NSB) in autonomous
fashion x x x.
xxxx

I have decided to make this

change so as to reduce your
span of control and allow you to
concentrate more fully on
overseeing the remaining groups
under Metro North, your Central
Unit and the rest of the Sales
Managers in Metro North. x x x
Any resistance or holding back
by anyone will be dealt with
accordingly.
I have been straightforward in
this my letter and I know that we
can continue to work together...
but it will have to be on my terms.
Anything else is unacceptable!
The NLRC further ruled that the
different codes of conduct that
were applicable to Tongko served
as the foundations of the power
of control wielded by Manulife
over Tongko that is further
manifested in the different
administrative and other tasks
that he was required to perform.
The NLRC also found that
Tongko was required to render
exclusive service to Manulife,
further bolstering the existence of
an employer-employee
relationship.
Finally, the NLRC ruled that
Tongko was integrated into a
management structure over
which Manulife exercised control,
including the actions of its

officers. The NLRC held that

such integration added to the fact
that Tongko did not have his own
agency belied Manulife's claim
that Tongko was an independent
contractor.
The CA, however, considered the
finding of the existence of an
employer-employee relationship
by the NLRC as far too sweeping
having as its only basis the letter
dated November 6, 2001 of De
Dios. The CA did not concur with
the NLRC's ruling that the
elements of control as pointed
out by the NLRC are "sufficient
indicia of control that negates
independent contractorship and
conclusively establish an
employer-employee relationship
between"15 Tongko and Manulife.
The CA ruled that there is no
employer-employee relationship
between Tongko and Manulife.
An impasse appears to have
been reached between the CA
and the NLRC on the sole issue
of control over an employee's
conduct. It bears clarifying that
such control not only applies to
the work or goal to be done but
also to the means and methods
to accomplish it.16 In Sonza v.
ABS-CBN Broadcasting
Corporation, we explained that
not all forms of control would
establish an employer-employee
relationship, to wit:

Further, not every form of control

that a party reserves to himself
over the conduct of the other
party in relation to the services
being rendered may be accorded
the effect of establishing an
employer-employee relationship.
The facts of this case fall
squarely with the case of Insular
Life Assurance Co., Ltd. vs.
NLRC. In said case, we held that:
Logically, the line should be
drawn between rules that
merely serve as guidelines
towards the achievement of
the mutually desired result
without dictating the means or
methods to be employed in
attaining it, and those that
control or fix the methodology
and bind or restrict the party
hired to the use of such
means. The first, which aim
only to promote the result,
create no employer-employee
relationship unlike the second,
which address both the result
and the means used to achieve
it.17 (Emphasis supplied.)
We ruled in Insular Life
Assurance Co., Ltd. v.
NLRC (Insular) that:
It is, therefore, usual and
expected for an insurance
company to promulgate a set of
rules to guide its commission
agents in selling its policies that
they may not run afoul of the law
and what it requires or prohibits.
Of such a character are the rules
which prescribe the qualifications

of persons who may be insured,

subject insurance applications to
processing and approval by the
Company, and also reserve to
the Company the determination
of the premiums to be paid and
the schedules of payment. None
of these really invades the
agent's contractual prerogative to
adopt his own selling methods or
to sell insurance at his own time
and convenience, hence cannot
justifiably be said to establish an
employer-employee relationship
between him and the company.18
Hence, we ruled in Insular that no
employer-employee relationship
existed therein. However, such
ruling was tempered with the
qualification that had there been
evidence that the company
promulgated rules or regulations
that effectively controlled or
restricted an insurance agent's
choice of methods or the
methods themselves in selling
insurance, an employeremployee relationship would
have existed. In other words, the
Court in Insular in no way
definitively held that insurance
agents are not employees of
insurance companies, but rather
made the same a case-to-case
basis. We held:
The respondents limit themselves
to pointing out that Basiao's
contract with the Company bound
him to observe and conform to
such rules and regulations as the
latter might from time to time

prescribe. No showing has

been made that any such rules
or regulations were in fact
promulgated, much less that
any rules existed or were
issued which effectively
controlled or restricted his
choice of methods or the
methods themselves of selling
insurance. Absent such
showing, the Court will not
speculate that any exceptions
or qualifications were imposed
on the express provision of the
contract leaving Basiao "...
free to exercise his own
judgment as to the time, place
and means of soliciting
insurance."19 (Emphasis
supplied.)
There is no conflict between our
rulings in Insular and in Great
Pacific Life Assurance
Corporation. We said in the latter
case:
[I]t cannot be gainsaid that
Grepalife had control over private
respondents' performance as
well as the result of their efforts.A
cursory reading of their
respective functions as
enumerated in their contracts
reveals that the company
practically dictates the manner
by which their jobs are to be
carried out. For instance, the
District Manager must properly
account, record and document
the company's funds spot-check
and audit the work of the zone
supervisors, conserve the

company's business in the district

through `reinstatements', follow
up the submission of weekly
remittance reports of the debit
agents and zone supervisors,
preserve company property in
good condition, train
understudies for the position of
district manager, and maintain his
quota of sales (the failure of
which is a ground for
termination). On the other hand,
a zone supervisor must direct
and supervise the sales activities
of the debit agents under him,
conserve company property
through "reinstatements",
undertake and discharge the
functions of absentee debit
agents, spot-check the records of
debit agents, and insure proper
documentation of sales and
collections by the debit
agents.20 (Emphasis supplied.)
Based on the foregoing cases, if
the specific rules and regulations
that are enforced against
insurance agents or managers
are such that would directly affect
the means and methods by which
such agents or managers would
achieve the objectives set by the
insurance company, they are
employees of the insurance
company.
In the instant case, Manulife had
the power of control over Tongko
that would make him its
employee. Several factors
contribute to this conclusion.

In the Agreement dated July 1,

1977 executed between Tongko
and Manulife, it is provided that:
The Agent hereby agrees to
comply with all regulations and
requirements of the Company as
herein provided as well as
maintain a standard of
knowledge and competency in
the sale of the Company's
products which satisfies those set
by the Company and sufficiently
meets the volume of new
business required of Production
Club membership.21
Under this provision, an agent of
Manulife must comply with three
(3) requirements: (1) compliance
with the regulations and
requirements of the company; (2)
maintenance of a level of
knowledge of the company's
products that is satisfactory to the
company; and (3) compliance
with a quota of new businesses.
Among the company regulations
of Manulife are the different
codes of conduct such as the
Agent Code of Conduct, Manulife
Financial Code of Conduct, and
Manulife Financial Code of
Conduct Agreement, which
demonstrate the power of control
exercised by the company over
Tongko. The fact that Tongko
was obliged to obey and comply
with the codes of conduct was
not disowned by respondents.

Thus, with the company

regulations and requirements
alone, the fact that Tongko was
an employee of Manulife may
already be established. Certainly,
these requirements controlled the
means and methods by which
Tongko was to achieve the
company's goals.
More importantly, Manulife's
evidence establishes the fact that
Tongko was tasked to perform
administrative duties that
establishes his employment with
Manulife.
In its Comment (Re: Petition for
Review dated 15 April 2005)
dated August 5, 2005, Manulife
attached affidavits of its agents
purportedly to support its claim
that Tongko, as a Regional Sales
Manager, did not perform any
administrative functions. An
examination of these affidavits
would, however, prove the
opposite.
In an Affidavit dated April 28,
2003,22 John D. Chua, a Regional
Sales Manager of Manulife,
stated:
On September 1, 1996, my
services were engaged by
Manulife as an Agency Regional
Sales Manager ("RSM") for Metro
South Region pursuant to an
Agency Contract. As such RSM, I
have the following functions:

- Refer and recommend

prospective agents to
Manulife
- Coach agents to become
productive
- Regularly meet with, and
coordinate activities of
agents affiliated to my
region.
While Amada Toledo, a Branch
Manager of Manulife, stated in
her Affidavit dated April 29,
200323 that:
In January 1997, I was assigned
as a Branch Manager ("BM") of
Manulife for the Metro North
Sector;
As such BM, I render the
following services:
- Refer and recommend
prospective agents to
Manulife;
- Train and coordinate
activities of other
commission agents;
- Coordinate activities of
Agency Managers who, in
turn, train and coordinate
activites of other
commission agents;
- Achieve agreed production
objectives in terms of Net
Annualized Commissions
and Case Count and
recruitment goals; and

- Sell the various products of

Manulife to my personal
clients.
While Ma. Lourdes Samson, a
Unit Manager of Manulife, stated
in her Affidavit dated April 28,
200324 that:
In 1977, I was assigned as a Unit
Manager ("UM") of North Peaks
Unit, North Star Branch, Metro
North Region;
As such UM, I render the
following services:
- To render or recommend
prospective agents to be
licensed, trained and
contracted to sell Manulife
products and who will be
part of my Unit;
- To coordinate activities of
the agents under my Unit in
their daily, weekly and
monthly selling activities,
making sure that their
respective sales targets are
met;

- To provide opportunities to
motivate my agents to
succeed like conducting
promos to increase sales
activities and encouraging
them to be involved in
company and industry
activities.
- To provide opportunities for
professional growth to my
agents by encouraging
them to be a member of the
LUCAP (Life Underwriters
Association of the
Philippines).
A comparison of the above
functions and those contained in
the Agreement with those cited
in Great Pacific Life Assurance
Corporation25reveals a striking
similarity that would more than
support a similar finding as in that
case. Thus, there was an
employer-employee relationship
between the parties.

- To conduct periodic training

sessions for my agents to
further enhance their sales
skills.

Additionally, it must be pointed

out that the fact that Tongko was
tasked with recruiting a certain
number of agents, in addition to
his other administrative functions,
leads to no other conclusion that
he was an employee of Manulife.

- To assist my agents with

their sales activities by way
of joint fieldwork,
consultations and one-onone evaluation and
analysis of particular
accounts.

In his letter dated November 6,

2001, De Dios harped on the
direction of Manulife of becoming
a major agency-led distribution
company whereby greater
agency recruitment is required of

the managers, including Tongko.

De Dios made it clear that agent
recruitment has become the
primary means by which Manulife
intends to sell more policies.
More importantly, it is Tongko's
alleged failure to follow this
principle of recruitment that led to
the termination of his
employment with Manulife. With
this, it is inescapable that Tongko
was an employee of Manulife.

Tongko Was Illegally

Dismissed

In its Petition for Certiorari dated

January 7, 200526 filed before the
CA, Manulife argued that even if
Tongko is considered as its
employee, his employment was
validly terminated on the ground
of gross and habitual neglect of
duties, inefficiency, as well as
willful disobedience of the lawful
orders of Manulife. Manulife
stated:
In the instant case, private
respondent, despite the written
reminder from Mr. De Dios
refused to shape up and
altogether disregarded the latter's
advice resulting in his laggard
performance clearly indicative of
his willful disobedience of the
lawful orders of his superior. x x x
xxxx
As private respondent has
patently failed to perform a very

fundamental duty, and that is to

yield obedience to all reasonable
rules, orders and instructions of
the Company, as well as gross
failure to reach at least minimum
quota, the termination of his
engagement from Manulife is
highly warranted and therefore,
there is no illegal dismissal to
speak of.
It is readily evident from the
above-quoted portions of
Manulife's petition that it failed to
cite a single iota of evidence to
support its claims. Manulife did
not even point out which order or
rule that Tongko disobeyed. More
importantly, Manulife did not point
out the specific acts that Tongko
was guilty of that would constitute
gross and habitual neglect of
duty or disobedience. Manulife
merely cited Tongko's alleged
"laggard performance," without
substantiating such claim, and
equated the same to
disobedience and neglect of duty.
We cannot, therefore, accept
Manulife's position.
In Quebec, Sr. v. National Labor
Relations Commission, we ruled
that:
When there is no showing of a
clear, valid and legal cause for
the termination of employment,
the law considers the matter a
case of illegal dismissal and the
burden is on the employer to
prove that the termination was for

a valid or authorized cause. This

burden of proof appropriately lies
on the shoulders of the employer
and not on the employee
because a worker's job has some
of the characteristics of property
rights and is therefore withinthe
constitutional mantle of
protection. No person shall be
deprived of life, liberty or property
without due process of law, nor
shall any person be denied the
equal protection of the laws.
Apropos thereto, Art. 277, par.
(b), of the Labor Code mandates
in explicit terms that the burden
of proving the validity of the
termination of employment rests
on the employer. Failure to
discharge this evidentialburden
would necessarily mean that the
dismissal was not justified, and,
therefore, illegal.27
We again ruled in Times
Transportation Co., Inc. v.
National Labor Relations
Commission that:
The law mandates that the
burden of proving the validity of
the termination of employment
rests with the employer. Failure
to discharge this evidentiary
burden would necessarily mean
that the dismissal was not
justified, and, therefore, illegal.
Unsubstantiated suspicions,
accusations and conclusions of
employers do not provide for
legal justification for dismissing
employees. In case of doubt,

such cases should be resolved in

favor of labor, pursuant to the
social justice policy of our labor
laws and Constitution.28
This burden of proof was clarified
in Community Rural Bank of San
Isidro (N.E.), Inc. v. Paez to
mean substantial evidence, to
wit:
The Labor Code provides that an
employer may terminate the
services of an employee for just
cause and this must be
supported by substantial
evidence. The settled rule in
administrative and quasi-judicial
proceedings is that proof beyond
reasonable doubt is not required
in determining the legality of an
employer's dismissal of an
employee, and not even a
preponderance of evidence is
necessary as substantial
evidence is considered sufficient.
Substantial evidence is more
than a mere scintilla of evidence
or relevant evidence as a
reasonable mind might accept as
adequate to support a
conclusion, even if other minds,
equally reasonable, might
conceivably opine otherwise.29
Here, Manulife failed to
overcome such burden of proof.
It must be reiterated that Manulife
even failed to identify the specific
acts by which Tongko's
employment was terminated
much less support the same with
substantial evidence. To repeat,
mere conjectures cannot work to

deprive employees of their

means of livelihood. Thus, it must
be concluded that Tongko was
illegally dismissed.
Moreover, as to Manulife's failure
to comply with the twin notice
rule, it reasons that Tongko not
being its employee is not entitled
to such notices. Since we have
ruled that Tongko is its employee,
however, Manulife clearly failed
to afford Tongko said notices.
Thus, on this ground too,
Manulife is guilty of illegal
dismissal. In Quebec, Sr., we
also stated:
Furthermore, not only does our
legal system dictate that the
reasons for dismissing a worker
must be pertinently
substantiated, it also mandates
that the manner of dismissal
must be properly done,otherwise,
the termination itself is gravely
defective and may be declared
unlawful.30
For breach of the due process
requirements, Manulife is liable to
Tongko in the amount of PhP
30,000 as indemnity in the form
of nominal damages.31
Finally, Manulife raises the issue
of the correctness of the
computation of the award to
Tongko made by the NLRC by
claiming that Songco v. National
Labor Relations Commission32 is
inapplicable to the instant case,
considering that Songco was

dismissed on the ground of

retrenchment.
An examination
of Songco reveals that it may be
applied to the present case. In
that case, Jose Songco was a
salesman of F.E. Zuellig (M), Inc.
which terminated the services of
Songco on the ground of
retrenchment due to financial
losses. The issue raised to the
Court, however, was whether
commissions are considered as
part of wages in order to
determine separation pay. Thus,
the fact that Songco was
dismissed due to retrenchment
does not hamper the application
thereof to the instant case. What
is pivotal is that we ruled
in Songco that commissions are
part of wages for the
determination of separation pay.
Article 279 of the Labor Code on
security of tenure pertinently
provides that:
In cases of regular employment
the employer shall not terminate
the services of an employee
except for a just cause or when
authorized by this Title. An
employee who is unjustly
dismissed from work shall be
entitled to reinstatement without
loss of seniority rights and other
privileges and to his full
backwages, inclusive of
allowances, and to his other
benefits or their monetary

equivalent computed from the

time his compensation was
withheld from him up to the time
of his actual reinstatement.
In Triad Security & Allied
Services, Inc. v. Ortega,
Jr. (Triad), we thus stated that an
illegally dismissed employee
shall be entitled to backwages
and separation pay, if
reinstatement is no longer viable:
As the law now stands, an
illegally dismissed employee is
entitled to two reliefs, namely:
backwages and reinstatement.
These are separate and distinct
from each other. However,
separation pay is granted where
reinstatement is no longer
feasible because of strained
relations between the employee
and the employer. In effect, an
illegally dismissed employee is
entitled to either reinstatement, if
viable, or separation pay if
reinstatement is no longer viable
and backwages.33
Taking into consideration the
cases of Songco and Triad, we
find correct the computation of
the NLRC that the monthly gross
wage of Tongko in 2001 was PhP
518,144.76. For having been
illegally dismissed, Tongko is
entitled to reinstatement with full
backwages under Art. 279 of the
Labor Code. Due to the strained
relationship between Manulife
and Tongko, reinstatement,
however, is no longer advisable.
Thus, Tongko will be entitled to

backwages from January 2, 2002

(date of dismissal) up to the
finality of this decision.
Moreover, Manulife will pay
Tongko separation pay of one (1)
month salary for every year of
service that is from 1977 to 2001
amounting to PhP 12,435,474.24,
considering that reinstatement is
not feasible. Tongko shall also be
entitled to an award of attorney's
fees in the amount of ten percent
(10%) of the aggregate amount
of the above awards.
WHEREFORE, the petition is
hereby GRANTED. The assailed
March 29, 2005 Decision of the
CA in CA-G.R. SP No. 88253
is REVERSED and SET ASIDE.
The Decision dated September
27, 2004 of the NLRC
isREINSTATED with the following
modifications:
Manulife shall pay Tongko the
following:
(1) Full backwages, inclusive of
allowances and other benefits or
their monetary equivalent from
January 2, 2002 up to the finality
of this Decision;
(2) Separation pay of one (1)
month salary for every year of
service from 1977 up to 2001
amounting to PhP 12,435,474.24;
(3) Nominal damages of PhP
30,000 as indemnity for violation
of the due process requirements;

and
(4) Attorney's fees equivalent to
ten percent (10%) of the
aforementioned backwages and
separation pay.
Costs against respondent
Manulife.
SO ORDERED.

TELEVISION AND
PRODUCTION G.R. No. 167648
EXPONENTS, INC. and/or
ANTONIO
P. TUVIERA, Present:
Petitioners,
QUISUMBING, J.,
Chairperson,
CARPIO,
- versus - CARPIO
MORALES,
TINGA, and
VELASCO, JR., JJ.
ROBERTO C. SERVAA,
Respondent. Promulgated:
January 28, 2008
x---------------------------------------------------------------------------x
DECISION

TINGA, J.:
This petition for review under
Rule 45 assails the 21 December
2004 Decision[1] and 8 April
2005 Resolution[2] of the Court of
Appeals declaring Roberto
Servaa (respondent) a regular
employee of petitioner Television
and Production Exponents, Inc.
(TAPE). The appellate court
likewise ordered TAPE to pay
nominal damages for its failure to
observe statutory due process in
the termination of respondents
employment for authorized
cause.
TAPE is a domestic corporation
engaged in the production of
television programs, such as the
long-running variety program, Eat
Bulaga!. Its president is Antonio
P. Tuviera (Tuviera). Respondent
Roberto C. Servaa had served as
a security guard for TAPE from
March 1987 until he was
terminated on 3 March 2000.
Respondent filed a complaint for
illegal dismissal and nonpayment
of benefits against TAPE. He
alleged that he was first
connected with Agro-Commercial
Security Agency but was later on
absorbed by TAPE as a regular
company guard. He was detailed
at Broadway Centrum in Quezon
City where Eat Bulaga! regularly

staged its productions. On 2

March 2000, respondent received
a memorandum informing him of
his impending dismissal on
account of TAPEs decision to
contract the services of a
professional security agency. At
the time of his termination,
respondent was receiving a
monthly salary of P6,000.00. He
claimed that the holiday pay,
unpaid vacation and sick leave
benefits and other monetary
considerations were withheld
from him. He further contended
that his dismissal was
undertaken without due process
and violative of existing labor
laws, aggravated by nonpayment
of separation pay.[3]
In a motion to dismiss which was
treated as its position paper,
TAPE countered that the labor
arbiter had no jurisdiction over
the case in the absence of an
employer-employee relationship
between the parties. TAPE made
the following assertions: (1) that
respondent was initially
employed as a security guard for
Radio Philippines Network (RPN9); (2) that he was tasked to
assist TAPE during its live
productions, specifically, to
control the crowd; (3) that when
RPN-9 severed its relationship
with the security agency, TAPE
engaged respondents services,
as part of the support group and
thus a talent, to provide security

service to production staff, stars

and guests of Eat Bulaga! as well
as to control the audience during
the one-and-a-half hour noontime
program; (4) that it was agreed
that complainant would render
his services until such time that
respondent company shall have
engaged the services of a
professional security agency; (5)
that in 1995, when his contract
with RPN-9 expired, respondent
was retained as a talent and a
member of the support group,
until such time that TAPE shall
have engaged the services of a
professional security agency; (6)
that respondent was not
prevented from seeking other
employment, whether or not
related to security services,
before or after attending to his
Eat Bulaga! functions; (7) that
sometime in late 1999, TAPE
started negotiations for the
engagement of a professional
security agency, the Sun Shield
Security Agency; and (8) that on
2 March 2000, TAPE issued
memoranda to all talents, whose
functions would be rendered
redundant by the engagement of
the security agency, informing
them of the managements
decision to terminate their
services.[4]

 TAPE averred that respondent

was an independent contractor
falling under the talent group
category and was working under
a special arrangement which is
recognized in the industry.[5]
Respondent for his part insisted
that he was a regular employee
having been engaged to perform
an activity that is necessary and
desirable to TAPEs business for
thirteen (13) years.[6]
On 29 June 2001, Labor Arbiter
Daisy G. Cauton-Barcelona
declared respondent to be a
regular employee of TAPE. The
Labor Arbiter relied on the nature
of the work of respondent, which
is securing and maintaining order
in the studio, as necessary and
desirable in the usual business
activity of TAPE. The Labor
Arbiter also ruled that the
termination was valid on the
ground of redundancy, and
ordered the payment of
respondents separation pay
equivalent to one (1)-month pay
for every year of service. The
dispositive portion of the decision
reads:
WHEREFORE, complainants
position is hereby declared
redundant. Accordingly,
respondents are hereby ordered
to pay complainant his separation
pay computed at the rate of one
(1) month pay for every year of

service or in the total amount

of P78,000.00.[7]

On appeal, the National Labor

Relations Commission (NLRC) in
a Decision[8] dated 22 April
2002 reversed the Labor Arbiter
and considered respondent a
mere program employee, thus:
We have scoured the records of
this case and we find nothing to
support the Labor Arbiters
conclusion that complainant was
a regular employee.
xxxx
The primary standard to
determine regularity of
employment is the reasonable
connection between the
particular activity performed by
the employee in relation to the
usual business or trade of the
employer. This connection can be
determined by considering the
nature and work performed and
its relation to the scheme of the
particular business or trade in its
entirety. x x x Respondent
company is engaged in the
business of production of
television shows. The records of
this case also show that
complainant was employed by
respondent company beginning
1995 after respondent company
transferred from RPN-9 to GMA-

7, a fact which complainant does

not dispute. His last salary
was P5,444.44 per month. In
such industry, security services
may not be deemed necessary
and desirable in the usual
business of the employer. Even
without the performance of such
services on a regular basis,
respondents companys business
will not grind to a halt.
xxxx
Complainant was indubitably a
program employee of respondent
company. Unlike [a] regular
employee, he did not observe
working hours x x x. He worked
for other companies, such as MZet TV Production, Inc. at the
same time that he was working
for respondent company. The
foregoing indubitably shows that
complainant-appellee was a
program employee. Otherwise,
he would have two (2) employers
at the same time.[9]

Respondent filed a motion for

reconsideration but it was denied
in a Resolution[10] dated 28 June
2002.
Respondent filed a petition for
certiorari with the Court of
Appeals contending that the
NLRC acted with grave abuse of
discretion amounting to lack or

excess of jurisdiction when it

reversed the decision of the
Labor Arbiter. Respondent
asserted that he was a regular
employee considering the nature
and length of service rendered.[11]
Reversing the decision of the
NLRC, the Court of Appeals
found respondent to be a regular
employee. We quote the
dispositive portion of the
decision:
IN LIGHT OF THE FOREGOING,
the petition is
hereby GRANTED. The Decision
dated 22 April 2002 of the public
respondent NLRC reversing the
Decision of the Labor Arbiter and
its Resolution dated 28 June
2002 denying petitioners motion
for reconsideration
are REVERSED and SET
ASIDE. The Decision dated 29
June 2001 of the Labor Arbiter
is REINSTATED withMODIFICAT
ION in that private respondents
are ordered to pay jointly and
severally petitioner the amount
of P10,000.00 as nominal
damages for non-compliance
with the statutory due process.
SO ORDERED.[12]
Finding TAPEs motion for
reconsideration without merit, the
Court of Appeals issued a

Resolution[13] dated 8 April

2005 denying said motion.
TAPE filed the instant petition for
review raising substantially the
same grounds as those in its
petition for certiorari before the
Court of Appeals. These matters
may be summed up into one
main issue: whether an
employer-employee relationship
exists between TAPE and
respondent.
On 27 September 2006, the
Court gave due course to the
petition and considered the case
submitted for decision.[14]
At the outset, it bears emphasis
that the existence of employeremployee relationship is
ultimately a question of
fact. Generally, only questions of
law are entertained in appeals by
certiorari to the Supreme Court.
This rule, however, is not
absolute. Among the several
recognized exceptions is when
the findings of the Court of
Appeals and Labor Arbiters, on
one hand, and that of the NLRC,
on the other, are conflicting,[15] as
obtaining in the case at bar.
Jurisprudence is abound with
cases that recite the factors to be
considered in determining the
existence of employer-employee
relationship, namely: (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
method by which the work is to
be accomplished.[16] The most
important factor involves the
control test. Under the control
test, there is an employeremployee relationship when the
person for whom the services are
performed reserves the right to
control not only the end achieved
but also the manner and means
used to achieve that end.[17]
In concluding that respondent
was an employee of TAPE, the
Court of Appeals applied the fourfold test in this wise:
First. The selection and hiring of
petitioner was done by private
respondents. In fact, private
respondents themselves
admitted having engaged the
services of petitioner only in 1995
after TAPE severed its relations
with RPN Channel 9.
By informing petitioner through
the Memorandum dated 2 March
2000, that his services will be
terminated as soon as the
services of the newly hired
security agency begins, private
respondents in effect
acknowledged petitioner to be
their employee. For the right to
hire and fire is another important

element of the employeremployee relationship.

Second. Payment of wages is
one of the four factors to be
considered in determining the
existence of employer-employee
relation. . . Payment as admitted
by private respondents was given
by them on a monthly basis at a
rate of P5,444.44.
Third. Of the four elements of the
employer-employee relationship,
the control test is the most
important. x x x

The bundy cards representing

the time petitioner had reported
for work are evident proofs of
private respondents control over
petitioner more particularly with
the time he is required to report
for work during the noontime
program of Eat Bulaga! If it were
not so, petitioner would be free to
report for work anytime even not
during the noontime program of
Eat Bulaga! from11:30
a.m. to 1:00 p.m. and still gets his
compensation for being a
talent. Precisely, he is being paid
for being the security of Eat
Bulaga! during the abovementioned period. The daily time
cards of petitioner are not just for
mere record purposes as claimed

by private respondents. It is a
form of control by the
management of private
respondent TAPE.[18]
TAPE asseverates that the Court
of Appeals erred in applying the
four-fold test in determining the
existence of employer-employee
relationship between it and
respondent. With respect to the
elements of selection, wages and
dismissal, TAPE proffers the
following arguments: that it never
hired respondent, instead it was
the latter who offered his services
as a talent to TAPE; that the
Memorandum dated 2 March
2000 served on respondent was
for the discontinuance of the
contract for security services and
not a termination letter; and that
the talent fees given to
respondent were the pre-agreed
consideration for the services
rendered and should not be
construed as wages. Anent the
element of control, TAPE insists
that it had no control over
respondent in that he was free to
employ means and methods by
which he is to control and
manage the live audiences, as
well as the safety of TAPEs stars
and guests.[19]

The position of TAPE is

untenable. Respondent was first
connected with Agro-Commercial

Security Agency, which assigned

him to assist TAPE in its live
productions. When the security
agencys contract with RPN-9
expired in 1995, respondent was
absorbed by TAPE or, in the
latters language, retained as
talent.[20] Clearly, respondent was
hired by TAPE. Respondent
presented his identification
card[21] to prove that he is indeed
an employee of TAPE. It has
been in held that 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.[22]
Respondent claims to have been
receiving P5,444.44 as his
monthly salary while TAPE
prefers to designate such amount
as talent fees. Wages, as defined
in the Labor Code, are
remuneration or earnings,
however designated, capable of
being expressed in terms of
money, whether fixed or
ascertained on a time, task, piece
or commission basis, or other
method of calculating the same,
which is payable by an employer
to an employee under a written or
unwritten contract of employment
for work done or to be done, or
for service rendered or to be
rendered. It is beyond dispute
that respondent received a fixed
amount as monthly

compensation for the services he

rendered to TAPE.

The Memorandum informing

respondent of the discontinuance
of his service proves that TAPE
had the power to dismiss
respondent.
Control is manifested in the
bundy cards submitted by
respondent in evidence. He was
required to report daily and
observe definite work hours. To
negate the element of control,
TAPE presented a certification
from M-Zet Productions to prove
that respondent also worked as a
studio security guard for said
company. Notably, the said
certificate categorically stated
that respondent reported for work
on Thursdays from 1992 to
1995. It can be recalled that
during said period, respondent
was still working for RPN-9. As
admitted by TAPE, it absorbed
respondent in late 1995.[23]
TAPE further denies exercising
control over respondent and
maintains that the latter is an
independent contractor.[24] Aside
from possessing substantial
capital or investment, a legitimate
job contractor or subcontractor
carries on a distinct and
independent business and
undertakes to perform the job,

work or service on its own

account and under its own
responsibility according to its own
manner and method, and free
from the control and direction of
the principal in all matters
connected with the performance
of the work except as to the
results thereof.[25] TAPE failed to
establish that respondent is an
independent contractor. As found
by the Court of Appeals:
We find the annexes submitted
by the private respondents
insufficient to prove that herein
petitioner is indeed an
independent contractor. None of
the above conditions exist in the
case at bar. Private respondents
failed to show that petitioner has
substantial capital or investment
to be qualified as an independent
contractor. They likewise failed to
present 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 private respondent
TAPE.[26]

TAPE relies on Policy Instruction

No. 40, issued by the Department
of Labor, in classifying
respondent as a program

employee and equating him to be

an independent contractor.
Policy Instruction No. 40 defines
program employees as
x x x those whose skills, talents
or services are engaged by the
station for a particular or specific
program or undertaking and who
are not required to observe
normal working hours such that
on some days they work for less
than eight (8) hours and on other
days beyond the normal work
hours observed by station
employees and are allowed to
enter into employment contracts
with other persons, stations,
advertising agencies or
sponsoring companies. The
engagement of program
employees, including those hired
by advertising or sponsoring
companies, shall be under a
written contract specifying,
among other things, the nature of
the work to be performed, rates
of pay and the programs in which
they will work. The contract shall
be duly registered by the station
with the Broadcast Media Council
within three (3) days from its
consummation.[27]
TAPE failed to adduce any
evidence to prove that it complied
with the requirements laid down
in the policy instruction. It did not
even present its contract with

respondent.Neither did it comply

with the contract-registration
requirement.
Even granting arguendo that
respondent is a program
employee, stills, classifying him
as an independent contractor is
misplaced. The Court of Appeals
had this to say:
We cannot subscribe to private
respondents conflicting
theories. The theory of private
respondents that petitioner is an
independent contractor runs
counter to their very own
allegation that petitioner is a
talent or a program employee. An
independent contractor is not an
employee of the employer, while
a talent or program employee is
an employee. The only difference
between a talent or program
employee and a regular
employee is the fact that a
regular employee is entitled to all
the benefits that are being prayed
for. This is the reason why private
respondents try to seek refuge
under the concept of an
independent contractor
theory. For if petitioner were
indeed an independent
contractor, private respondents
will not be liable to pay the
benefits prayed for in petitioners
complaint.[28]
More importantly, respondent had
been continuously under the

employ of TAPE from 1995 until

his termination in March 2000, or
for a span of 5 years. Regardless
of whether or not respondent had
been performing work that is
necessary or desirable to the
usual business of TAPE,
respondent is still considered a
regular employee under Article
280 of the Labor Code which
provides:

Art. 280. Regular and Casual

Employment.The provisions of
written agreement to the contrary
notwithstanding and regardless
of the oral agreement of the
parties, an employment shall be
deemed to be regular where the
employee has been engaged to
perform activities which are
usually necessary or desirable in
the usual business or trade of the
employer, except where the
employment has been fixed for a
specific project or undertaking
the completion or termination of
which has been determined at
the time of engagement of the
employee or where the work or
service to be performed is
seasonal in nature and
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.
As a regular employee,
respondent cannot be terminated
except for just cause or when
authorized by law.[29] It is clear
from the tenor of the 2 March
2000 Memorandum that
respondents termination was due
to redundancy. Thus, the Court of
Appeals correctly disposed of this
issue, viz:
Article 283 of the Labor Code
provides that the employer may
also terminate the employment of
any employee due to the
installation of labor saving
devices, redundancy,
retrenchment to prevent losses or
the closing or cessation of
operation of the establishment or
undertaking unless the closing is
for the purpose of circumventing
the provisions of this Title, by
serving a written notice on the
workers and the Ministry of Labor
and Employment at least one (1)
month before the intended date
thereof. In case of termination
due to the installation of labor
saving devices or redundancy,

the worker affected thereby shall

be entitled to a separation pay
equivalent to at least his one (1)
month pay or to at least one (1)
month pay for every year or
service, whichever is higher.
xxxx
We uphold the finding of the
Labor Arbiter that complainant
[herein petitioner] was terminated
upon [the] managements option
to professionalize the security
services in its operations. x x
x However, [we] find that
although petitioners services [sic]
was for an authorized cause, i.e.,
redundancy, private respondents
failed to prove that it complied
with service of written notice to
the Department of Labor and
Employment at least one month
prior to the intended date of
retrenchment. It bears stressing
that although notice was served
upon petitioner through a
Memorandum dated 2 March
2000, the effectivity of his
dismissal is fifteen days from the
start of the agencys take over
which was on 3 March
2000. Petitioners services with
private respondents were
severed less than the month
requirement by the law.
Under prevailing jurisprudence
the termination for an authorized
cause requires payment of

separation pay. Procedurally, if

the dismissal is based on
authorized causes under Articles
283 and 284, the employer must
give the employee and the
Deparment of Labor and
Employment written notice 30
days prior to the effectivity of his
separation. Where the dismissal
is for an authorized cause but
due process was not observed,
the dismissal should be
upheld. While the procedural
infirmity cannot be cured, it
should not invalidate the
dismissal. However, the employer
should be liable for noncompliance with procedural
requirements of due process.
xxxx
Under recent jurisprudence, the
Supreme Court fixed the amount
of P30,000.00 as nominal
damages. The basis of the
violation of petitioners right to
statutory due process by the
private respondents warrants the
payment of indemnity in the form
of nominal damages. The amount
of such damages is addressed to
the sound discretion of the court,
taking into account the relevant
circumstances. We believe this
form of damages would serve to
deter employer from future
violations of the statutory due
process rights of the
employees. At the very least, it

provides a vindication or
recognition of this fundamental
right granted to the latter under
the Labor Code and its
Implementing Rules. Considering
the circumstances in the case at
bench, we deem it proper to fix it
at P10,000.00.[30]
In sum, we find no reversible
error committed by the Court of
Appeals in its assailed decision.
However, with respect to the
liability of petitioner Tuviera,
president of TAPE, absent any
showing that he acted with
malice or bad faith in terminating
respondent, he cannot be held
solidarily liable with TAPE.
[31]
Thus, the Court of Appeals
ruling on this point has to be
modified.
WHEREFORE, the assailed
Decision and Resolution of the
Court of Appeals are AFFIRMED
with MODIFICATION in that only
petitioner Television and
Production Exponents, Inc. is
liable to pay respondent the
amount of P10,000.00 as
nominal damages for noncompliance with the statutory due
process and petitioner Antonio P.
Tuviera is accordingly absolved
from liability.
SO ORDERED.

 [G.R. No. 87098. November 4,

1996]
ENCYCLOPAEDIA
BRITANNICA (PHILIPPINES),
INC., petitioner, vs. NATIONAL
LABOR RELATIONS
COMMISSION, HON. LABOR
ARBITER TEODORICO L.
DOGELIO and BENJAMIN
LIMJOCO, respondents.
DECISION
TORRES, JR., J.:
Encyclopaedia Britannica
(Philippines), Inc. filed this
petition for certiorari to annul and
set aside the resolution of the
National Labor Relations
Commission, Third Division, in
NLRC Case No. RB IV-5158-76,
dated December 28, 1988, the
dispositive portion of which
reads:
WHEREFORE, in view of all the
foregoing, the decision dated
December 7, 1982 of then Labor
Arbiter Teodorico L. Dogelio is
hereby AFFIRMED, and the
instant appeal is hereby
DISMISSED for lack of merit.
SO ORDERED.[1]
Private respondent Benjamin
Limjoco was a Sales Division
Manager of petitioner
Encyclopaedia Britannica and
was in charge of selling
petitioners products through
some sales representatives. As
compensation, private
respondent received
commissions from the products

sold by his agents. He was also

allowed to use petitioners name,
goodwill and logo. It was,
however, agreed upon that office
expenses would be deducted
from private respondents
commissions. Petitioner would
also be informed about
appointments, promotions, and
transfers of employees in private
respondents district.
On June 14, 1974, private
respondent Limjoco resigned
from office to pursue his private
business. Then on October 30,
1975, he filed a complaint against
petitioner Encyclopaedia
Britannica with the Department of
Labor and Employment, claiming
for non-payment of separation
pay and other benefits, and also
illegal deduction from his sales
commissions.
Petitioner Encyclopaedia
Britannica alleged that
complainant Benjamin Limjoco
(Limjoco, for brevity) was not its
employee but an independent
dealer authorized to promote and
sell its products and in return,
received commissions therefrom.
Limjoco did not have any salary
and his income from the
petitioner company was
dependent on the volume of
sales accomplished.He also had
his own separate office, financed
the business expenses, and
maintained his own
workforce. The salaries of his
secretary, utility man, and sales

representatives were chargeable

to his commissions. Thus,
petitioner argued that it had no
control and supervision over the
complainant as to the manner
and means he conducted his
business operations. The latter
did not even report to the office of
the petitioner and did not observe
fixed office hours. Consequently,
there was no employer-employee
relationship.
Limjoco maintained otherwise.
He alleged that he was hired by
the petitioner in July 1970, was
assigned in the sales
department, and was earning an
average of P4,000.00 monthly as
his sales commission. He was
under the supervision of the
petitioners officials who issued to
him and his other personnel,
memoranda, guidelines on
company policies, instructions
and other orders. He was,
however, dismissed by the
petitioner when the LaurelLangley Agreement expired. As a
result thereof, Limjoco asserts
that in accordance with the
established company practice
and the provisions of the
collective bargaining agreement,
he was entitled to termination pay
equivalent to one month salary,
the unpaid benefits (Christmas
bonus, midyear bonus, clothing
allowance, vacation leave, and
sick leave), and the amounts
illegally deducted from his
commissions which were then

used for the payments of office

supplies, office space, and
overhead expenses.
On December 7, 1982, Labor
Arbiter Teodorico Dogelio, in a
decision ruled that Limjoco was
an employee of the petitioner
company. Petitioner had control
over Limjoco since the latter was
required to make periodic reports
of his sales activities to the
company. All transactions were
subject to the final approval of
the petitioner, an evidence that
petitioner company had active
control on the sales
activities. There was therefore,
an employer-employee
relationship and necessarily,
Limjoco was entitled to his
claims. The decision also ordered
petitioner company to pay the
following:
To pay complainant his
separation pay in the total
amount of P16,000.00;
To pay complainant his unpaid
Christmas bonus for three years
or the amount of P12,000.00;
To pay complainant his unpaid
mid-year bonus equivalent to
one-half month pay or the total
amount of P6,000.00;
To pay complainant his accrued
vacation leave equivalent to 15
days per year of service, or the
total amount of P6,000.00;
To pay complainant his unpaid
clothing allowance in the total
amount of P600.00; and

 To pay complainant his accrued

sick leave equivalent to 15 days
per year of service or the total
amount of P6,000.00.[2]
On appeal, the Third Division of
the National Labor Relations
Commission affirmed the
assailed decision. The
Commission opined that there
was no evidence supporting the
allegation that Limjoco was an
independent contractor or
dealer. The petitioner still
exercised control over Limjoco
through its memoranda and
guidelines and even prohibitions
on the sale of products other than
those authorized by it. In short,
the petitioner company dictated
how and where to sell its
products. Aside from that fact,
Limjoco passed the costs to the
petitioner chargeable against his
future commissions. Such
practice proved that he was not
an independent dealer or
contractor for it is required by law
that an independent contractor
should have substantial capital or
investment.
Dissatisfied with the outcome of
the case, petitioner
Encyclopaedia Britannica now
comes to us in this petition
for certiorari and injunction with
prayer for preliminary
injunction. On April 3, 1989, this
Court issued a temporary
restraining order enjoining the
enforcement of the decision
dated December 7, 1982.

The following are the arguments

raised by the petitioner:
I
The respondent NLRC gravely
abused its discretion in holding
that appellants contention that
appellee was an independent
contractor is not supported by
evidence on record.
II
Respondent NLRC committed
grave abuse of discretion in not
passing upon the validity of the
pronouncement of the
respondent Labor Arbiter granting
private respondents claim for
payment of Christmas bonus,
Mid-year bonus, clothing
allowance and the money
equivalent of accrued and
unused vacation and sick leave.
The NLRC ruled that there
existed an employer-employee
relationship and petitioner failed
to disprove this finding. We do
not agree.
In determining the existence of
an employer-employee
relationship the following
elements must be present: 1)
selection and engagement of the
employee; 2) payment of wages;
3) power of dismissal; and 4) the
power to control the employees
conduct. Of the above, control of
employees conduct is commonly
regarded as the most crucial and
determinative indicator of the
presence or absence of an
employer-employee relationship.
[3]
Under the control test, an

employer-employee relationship
exists where the person for
whom the services are performed
reserves the right to control not
only the end to be achieved, but
also the manner and means to be
used in reaching that end.[4]
The fact that petitioner issued
memoranda to private
respondents and to other division
sales managers did not prove
that petitioner had actual control
over them. The different
memoranda were merely
guidelines on company policies
which the sales managers follow
and impose on their respective
agents. It should be noted that in
petitioners business of selling
encyclopedias and books, the
marketing of these products was
done through dealership
agreements. The sales
operations were primarily
conducted by independent
authorized agents who did not
receive regular compensations
but only commissions based on
the sales of the products. These
independent agents hired their
own sales representatives,
financed their own office
expenses, and maintained their
own staff. Thus, there was a
need for the petitioner to issue
memoranda to private
respondent so that the latter
would be apprised of the
company policies and
procedures. Nevertheless,
private respondent Limjoco and

the other agents were free to

conduct and promote their sales
operations. The periodic reports
to the petitioner by the agents
were but necessary to update the
company of the latters
performance and business
income.
Private respondent was not an
employee of the petitioner
company. While it was true that
the petitioner had fixed the prices
of the products for reason of
uniformity and private respondent
could not alter them, the latter,
nevertheless, had free rein in the
means and methods for
conducting the marketing
operations. He selected his own
personnel and the only reason
why he had to notify the
petitioner about such
appointments was for purpose of
deducting the employees salaries
from his commissions. This he
admitted in his testimonies, thus:
Q. Yes, in other words you were
on what is known as P&L basis
or profit and loss basis?
- That is right.
Q. If for an instance, just example
your sales representative in any
period did not produce any sales,
you would not get any money
from Britannica, would you?
- No, sir.
Q. In fact, Britannica by doing the
accounting for you as division
manager was merely making it
easy for you to concentrate all
your effort in selling and you dont

worry about accounting, isnt that

so?
Yes, sir.
Q. In fact whenever you hire a
secretary or trainer you merely
hire that person and notify
Britannica so that Encyclopaedia
Britannica will give the salaries
and deduct it from your earnings,
isnt that so?
- In certain cases I just hired
people previously
employed by
Encyclopaedia Britannica.
xxx
Q. In this Exhibit 2 you were
informing Encyclopaedia
Britannica that you have hired a
certain person and you were
telling Britannica how her salary
was going to be taken cared of, is
it not?
Yes, sir.
Q. You said here, please be
informed that we have appointed
Miss Luz Villan as division trainer
effective May 1, 1971 at P550.00
per month her salary will be
chargeable to the Katipunan and
Bayanihan Districts, signed by
yourself. What is the Katipunan
and Bayanihan District?
Those were districts under my
division.
Q. In effect you were telling
Britannica that you have hired
this person and you should
charge her salary to me, is that
right?
Yes, sir.[5]

Private respondent was merely

an agent or an independent
dealer of the petitioner. He was
free to conduct his work and he
was free to engage in other
means of livelihood. At the time
he was connected with the
petitioner company, private
respondent was also a director
and later the president of the
Farmers Rural Bank. Had he
been an employee of the
company, he could not be
employed elsewhere and he
would be required to devote full
time for petitioner. If private
respondent was indeed an
employee, it was rather unusual
for him to wait for more than a
year from his separation from
work before he decided to file his
claims. Significantly, when
Limjoco tendered his resignation
to petitioner on June 14, 1974, he
stated, thus:
"Re: Resignation
I am resigning as manager of the
EB Capitol Division effective 16
June 1974.
This decision was brought about
by conflict with other interests
which lately have increasingly
required my personal attention. I
feel that in fairness to the
company and to the people under
my supervision I should
relinquish the position to
someone who can devote fulltime to the Division.
I wish to thank you for all the
encouragement and assistance

you have extended to me and to

my group during my long
association with Britannica.
Evidently, Limjoco was aware of
conflict with other interests which
xxx have increasingly required
my personal attention (p. 118,
Records). At the very least, it
would indicate that petitioner has
no effective control over the
personal activities of Limjoco,
who as admitted by the latter had
other conflict of interest requiring
his personal attention.
In ascertaining whether the
relationship is that of employeremployee or one of independent
contractor, each case must be
determined by its own facts and
all features of the relationship are
to be considered.[6] The records
of the case at bar showed that
there was no such employeremployee relationship.
As stated earlier, the element of
control is absent; where a person
who works for another does so
more or less at his own pleasure
and is not subject to definite
hours or conditions of work, and
in turn is compensated according
to the result of his efforts and not
the amount thereof, we should
not find that the relationship of
employer and employee exists.
[7]
In fine, there is nothing in the
records to show or would indicate
that complainant was under the
control of the petitioner in respect
of the means and methods[8] in

the performance of complainants

work.
Consequently, private respondent
is not entitled to the benefits
prayed for.
In view of the foregoing
premises, the petition is hereby
GRANTED, and the decision of
the NLRC is hereby REVERSED
AND SET ASIDE.
SO ORDERED.

ATOK BIG WEDGE

COMPANY, INC.,
Petitioner,

- versus -

JESUS P. GISON,
Respondent.
x---------------------------------------------- - - -x
DECISION
PERALTA, J.:
This is a petition for review
on certiorari seeking to reverse
and set aside the

G.R

Pre

CA
VE
BR
PE
SE
Pro

Au

Decision[1] dated May 31, 2005 of

the Court of Appeals (CA) in CAG.R. SP No. 87846, and the
Resolution[2] dated August 23,
2005 denying petitioners motion
for reconsideration.
The procedural and factual
antecedents are as follows:
Sometime in February 1992,
respondent Jesus P. Gison was
engaged as part-time consultant
on retainer basis by petitioner
Atok Big Wedge Company, Inc.
through its then Asst. VicePresident and Acting Resident
Manager, Rutillo A. Torres. As a
consultant on retainer basis,
respondent assisted petitioner's
retained legal counsel with
matters pertaining to the
prosecution of cases against
illegal surface occupants within
the area covered by the
company's mineral
claims. Respondent was likewise
tasked to perform liaison work
with several government
agencies, which he said was his
expertise.
Petitioner did not require
respondent to report to its office
on a regular basis, except when
occasionally requested by the
management to discuss matters
needing his expertise as a
consultant. As payment for his
services, respondent received a

retainer fee of P3,000.00 a

month,[3] which was delivered to
him either at his residence or in a
local restaurant. The parties
executed a retainer agreement,
but such agreement was
misplaced and can no longer be
found.
The said arrangement continued
for the next eleven years.
Sometime thereafter, since
respondent was getting old, he
requested that petitioner cause
his registration with the Social
Security System (SSS), but
petitioner did not accede to his
request. He later reiterated his
request but it was ignored by
respondent considering that he
was only a
retainer/consultant. On February
4, 2003, respondent filed a
Complaint[4] with the SSS against
petitioner for the latter's refusal to
cause his registration with the
SSS.
On the same date, Mario D.
Cera, in his capacity as resident
manager of petitioner, issued a
Memorandum[5] advising
respondent that within 30 days
from receipt thereof, petitioner is
terminating his retainer contract
with the company since his
services are no longer necessary.
On February 21, 2003,
respondent filed a Complaint[6] for

illegal dismissal, unfair labor

practice, underpayment of
wages, non-payment of
13th month pay, vacation pay, and
sick leave pay with the National
Labor Relations Commission
(NLRC), Regional Arbitration
Branch (RAB), Cordillera
Administrative Region, against
petitioner, Mario D. Cera, and
Teofilo R. Asuncion, Jr. The case
was docketed as NLRC Case No.
RAB-CAR-02-0098-03.
Respondent alleged that:
x x x [S]ometime in January
1992, Rutillo A. Torres, then the
resident manager of respondent
Atok Big Wedge Co., Inc., or Atok
for brevity, approached him and
asked him if he can help the
companys problem involving the
700 million pesos crop damage
claims of the residents living at
the minesite of Atok. He
participated in a series of
dialogues conducted with the
residents. Mr. Torres offered to
pay him P3,000.00 per month
plus representation expenses. It
was also agreed upon by him
and Torres that his participation
in resolving the problem was
temporary and there will be no
employer-employee relationship
between him and Atok. It was
also agreed upon that his
compensation, allowances and
other expenses will be paid
through disbursement vouchers.

On February 1, 1992 he joined

Atok. One week thereafter, the
aggrieved crop damage
claimants barricaded the only
passage to and from the
minesite. In the early morning
of February 1, 1992, a dialogue
was made by Atok and the crop
damage claimants. Unfortunately,
Atoks representatives, including
him, were virtually held hostage
by the irate claimants who
demanded on the spot payment
of their claims. He was able to
convince the claimants to release
the company representatives
pending referral of the issue to
higher management.
A case was filed in court for the
lifting of the barricades and the
court ordered the lifting of the
barricade. While Atok was
prosecuting its case with the
claimants, another case erupted
involving its partner, Benguet
Corporation. After Atok parted
ways with Benguet Corporation,
some properties acquired by the
partnership and some
receivables by Benguet
Corporation was the problem. He
was again entangled with
documentation, conferences,
meetings, planning, execution
and clerical works. After two
years, the controversy was
resolved and Atok received its
share of the properties of the
partnership, which is about 5

million pesos worth of equipment

and condonation of Atoks
accountabilities with Benguet
Corporation in the amount
of P900,000.00.
In the meantime, crop damage
claimants lost interest in pursuing
their claims against Atok and
Atok was relieved of the burden
of paying 700 million pesos. In
between attending the problems
of the crop damage issue, he
was also assigned to do liaison
works with the SEC, Bureau of
Mines, municipal government of
Itogon, Benguet, the Courts and
other government offices.
After the crop damage claims
and the controversy were
resolved, he was permanently
assigned by Atok to take charge
of some liaison matters and
public relations
in Baguio andBenguet Province,
and to report regularly to Atoks
office in Manila to attend
meetings and so he had to stay
in Manila at least one week a
month.
Because of his length of service,
he invited the attention of the top
officers of the company that he is
already entitled to the benefits
due an employee under the law,
but management ignored his
requests. However, he continued
to avail of his representation
expenses and reimbursement of

company-related expenses. He
also enjoyed the privilege of
securing interest free salary
loans payable in one year
through salary deduction.
In the succeeding years of his
employment, he was designated
as liaison officer, public relation
officer and legal assistant, and to
assist in the ejection of illegal
occupants in the mining claims of
Atok.
Since he was getting older, being
already 56 years old, he
reiterated his request to the
company to cause his registration
with the SSS. His request was
again ignored and so he filed a
complaint with the SSS. After
filing his complaint with the SSS,
respondents terminated his
services.[7]
On September 26, 2003, after the
parties have submitted their
respective pleadings, Labor
Arbiter Rolando D. Gambito
rendered a Decision[8] ruling in
favor of the petitioner. Finding no
employer-employee relationship
between petitioner and
respondent, the Labor Arbiter
dismissed the complaint for lack
of merit.
Respondent then appealed the
decision to the NLRC.

 On July 30, 2004, the NLRC,

Second Division, issued a
Resolution[9] affirming the
decision of the Labor
Arbiter. Respondent filed a
Motion for Reconsideration, but it
was denied in the
Resolution[10] dated September
30, 2004.
Aggrieved, respondent filed a
petition for review under Rule 65
of the Rules of Court before the
CA questioning the decision and
resolution of the NLRC, which
was later docketed as CA-G.R.
SP No. 87846. In support of his
petition, respondent raised the
following issues:
- Whether or not the
Decision of the Honorable
Labor Arbiter and the
subsequent Resolutions of
the Honorable Public
Respondent affirming the
same, are in harmony with
the law and the facts of the
case;
- Whether or not the
Honorable Labor Arbiter
Committed a Grave Abuse
of Discretion in Dismissing
the Complaint of Petitioner
and whether or not the
Honorable Public
Respondent Committed a
Grave Abuse of Discretion
when it affirmed the said
Decision.[11]

On May 31, 2005, the CA

rendered the assailed Decision
annulling and setting aside the
decision of the NLRC, the
decretal portion of which reads:
WHEREFORE, the petition
is GRANTED. The
assailed Resolution of the
National Labor Relations
Commission dismissing
petitioner's complaint for illegal
dismissal isANNULLED and SET
ASIDE. Private respondent Atok
Big Wedge Company
Incorporated is ORDERED to
reinstate petitioner Jesus P.
Gison to his former or equivalent
position without loss of seniority
rights and to pay him full
backwages, inclusive of
allowances and other benefits or
their monetary equivalent
computed from the time these
were withheld from him up to the
time of his actual and effective
reinstatement. This case is
ordered REMANDED to the
Labor Arbiter for the proper
computation of backwages,
allowances and other benefits
due to petitioner.Costs against
private respondent Atok Big
Wedge Company Incorporated.
SO ORDERED.[12]
In ruling in favor of the
respondent, the CA opined,

among other things, that both the

Labor Arbiter and the NLRC may
have overlooked Article 280 of
the Labor Code,[13] or the
provision which distinguishes
between two kinds of
employees, i.e., regular and
casual employees. Applying the
provision to the respondent's
case, he is deemed a regular
employee of the petitioner after
the lapse of one year from his
employment. Considering also
that respondent had been
performing services for the
petitioner for eleven years,
respondent is entitled to the
rights and privileges of a regular
employee.
The CA added that although
there was an agreement between
the parties that respondent's
employment would only be
temporary, it clearly appears that
petitioner disregarded the same
by repeatedly giving petitioner
several tasks to
perform. Moreover, although
respondent may have waived his
right to attain a regular status of
employment when he agreed to
perform these tasks on a
temporary employment status,
still, it was the law that
recognized and considered him a
regular employee after his first
year of rendering service to
petitioner. As such, the waiver
was ineffective.

Hence, the petition assigning the

following errors:
WHETHER OR NOT THE
COURT OF APPEALS DECIDED
QUESTIONS OF SUBSTANCE
CONTRARY TO LAW AND
APPLICABLE RULINGS OF
THIS HONORABLE COURT
WHEN IT GAVE DUE COURSE
TO THE PETITION FOR
CERTIORARI DESPITE THE
FACT THAT THERE WAS NO
SHOWING THAT THE
NATIONAL LABOR RELATIONS
COMMISSION COMMITTED
GRAVE ABUSE OF
DISCRETION.
II.
WHETHER OR NOT
THE COURT OF APPEALS
DECIDED QUESTIONS OF
SUBSTANCE CONTRARY TO
THE LAW AND APPLICABLE
RULINGS OF THIS
HONORABLE COURT WHEN IT
BASED ITS FINDING THAT
RESPONDENT IS ENTITLED TO
REGULAR EMPLOYMENT ON A
PROVISION OF LAW THAT
THIS HONORABLE COURT
HAS DECLARED TO BE
INAPPLICABLE IN CASE THE
EXISTENCE OF AN
EMPLOYER-EMPLOYEE
RELATIONSHIP IS IN DISPUTE
OR IS THE FACT IN ISSUE.
III.
WHETHER OR NOT
THE COURT OF APPEALS

DECIDED QUESTIONS OF
SUBSTANCE CONTRARY TO
LAW AND APPLICABLE
RULINGS OF THIS
HONORABLE COURT WHEN IT
ERRONEOUSLY FOUND THAT
RESPONDENT IS A REGULAR
EMPLOYEE OF THE COMPANY.
IV. WHETHER OR NOT THE
COURT OF APPEALS DECIDED
QUESTIONS OF SUBSTANCE
CONTRARY TO LAW AND
APPLICABLE RULINGS OF
THIS HONORABLE COURT
WHEN IT ERRONEOUSLY
DIRECTED RESPONDENT'S
REINSTATEMENT DESPITE
THE FACT THAT THE NATURE
OF THE SERVICES HE
PROVIDED TO THE COMPANY
WAS SENSITIVE AND
CONFIDENTIAL.[14]

employee relationship between

the petitioner and the
respondent. Petitioner contends
that where the existence of an
employer-employee relationship
is in dispute, Article 280 of the
Labor Code is inapplicable. The
said article only set the distinction
between a casual employee from
a regular employee for purposes
of determining the rights of an
employee to be entitled to certain
benefits.
Petitioner insists that respondent
is not a regular employee and not
entitled to reinstatement.
On his part, respondent
maintains that he is an employee
of the petitioner and that the CA
did not err in ruling in his favor.
The petition is meritorious.

Petitioner argues that since the

petition filed by the respondent
before the CA was a petition
for certiorari under Rule 65 of the
Rules of Court, the CA should
have limited the issue on whether
or not there was grave abuse of
discretion on the part of the
NLRC in rendering the resolution
affirming the decision of the
Labor Arbiter.
Petitioner also posits that the CA
erred in applying Article 280 of
the Labor Code in determining
whether there was an employer-

At the outset, respondent's

recourse to the CA was the
proper remedy to question the
resolution of the NLRC. It bears
stressing that there is no appeal
from the decision or resolution of
the NLRC. As this Court
enunciated in the case of St.
Martin Funeral Home v. NLRC,
[15]
the special civil action
of certiorari under Rule 65 of the
Rules of Civil Procedure, which is
filed before the CA, is the proper
vehicle for judicial review of
decisions of the NLRC. The
petition should be initially filed

before the Court of Appeals in

strict observance of the doctrine
on hierarchy of courts as the
appropriate forum for the relief
desired.[16] This Court not being a
trier of facts, the resolution of
unclear or ambiguous factual
findings should be left to the CA
as it is procedurally equipped for
that purpose. From the decision
of the Court of Appeals, an
ordinary appeal under Rule 45 of
the Rules of Civil Procedure
before the Supreme Court may
be resorted to by the
parties. Hence, respondent's
resort to the CA was appropriate
under the circumstances.
Anent the primordial issue of
whether or not an employeremployee relationship exists
between petitioner and
respondent.
Well-entrenched is the doctrine
that the existence of an
employer-employee relationship
is ultimately a question of fact
and that the findings thereon by
the Labor Arbiter and the NLRC
shall be accorded not only
respect but even finality when
supported by substantial
evidence.[17] Being a question of
fact, the determination whether
such a relationship exists
between petitioner and
respondent was well within the
province of the Labor Arbiter and
the NLRC. Being supported by

substantial evidence, such

determination should have been
accorded great weight by the CA
in resolving the issue.
To ascertain the existence of an
employer-employee relationship
jurisprudence has invariably
adhered to the four-fold test, to
wit: (1) the selection and
engagement of the employee; (2)
the payment of wages; (3) the
power of dismissal; and (4) the
power to control the employee's
conduct, or the so-called "control
test."[18] Of these four, the last
one is the most important.[19] The
so-called control test is
commonly regarded as the most
crucial and determinative
indicator of the presence or
absence of an employeremployee relationship. Under the
control test, an employeremployee relationship exists
where the person for whom the
services are performed reserves
the right to control not only the
end achieved, but also the
manner and means to be used in
reaching that end.[20]
Applying the aforementioned test,
an employer-employee
relationship is apparently absent
in the case at bar. Among other
things, respondent was not
required to report everyday
during regular office hours of
petitioner. Respondent's monthly
retainer fees were paid to him

either at his residence or a local

restaurant. More importantly,
petitioner did not prescribe the
manner in which respondent
would accomplish any of the
tasks in which his expertise as a
liaison officer was needed;
respondent was left alone and
given the freedom to accomplish
the tasks using his own means
and method. Respondent was
assigned tasks to perform, but
petitioner did not control the
manner and methods by which
respondent performed these
tasks. Verily, the absence of the
element of control on the part of
the petitioner engenders a
conclusion that he is not an
employee of the petitioner.
Moreover, the absence of the
parties' retainership agreement
notwithstanding, respondent
clearly admitted that petitioner
hired him in a limited capacity
only and that there will be no
employer-employee relationship
between them. As averred in
respondent's Position Paper:[21]
For the participation of
complainant regarding this
particular problem of Atok, Mr.
Torres offered him a pay in the
amount of Php3,000.00 per
month plus representation
expenses. It was also agreed by
Mr. Torres and the complainant
that his participation on this
particular problem of Atok will be

temporary since the problem was

then contemplated to be limited
in nature, hence, there will be no
employer-employee relationship
between him and
Atok. Complainant agreed on this
arrangement. It was also agreed
that complainant's
compensations, allowances,
representation expenses and
reimbursement of companyrelated expenses will be
processed and paid through
disbursement vouchers;[22]
Respondent was well aware of
the agreement that he was hired
merely as a liaison or consultant
of the petitioner and he agreed to
perform tasks for the petitioner
on a temporary employment
status only. However, respondent
anchors his claim that he became
a regular employee of the
petitioner based on his
contention that the temporary
aspect of his job and its limited
nature could not have lasted for
eleven years unless some time
during that period, he became a
regular employee of the petitioner
by continually performing
services for the company.
Contrary to the conclusion of the
CA, respondent is not an
employee, much more a regular
employee of petitioner. The
appellate court's premise that
regular employees are those who
perform activities which are

desirable and necessary for the

business of the employer is not
determinative in this case. In fact,
any agreement may provide that
one party shall render services
for and in behalf of another, no
matter how necessary for the
latter's business, even without
being hired as an employee.
[23]
Hence, respondent's length of
service and petitioner's repeated
act of assigning respondent
some tasks to be performed did
not result to respondent's
entitlement to the rights and
privileges of a regular employee.
Furthermore, despite the fact that
petitioner made use of the
services of respondent for eleven
years, he still cannot be
considered as a regular
employee of petitioner.Article 280
of the Labor Code, in which the
lower court used to buttress its
findings that respondent became
a regular employee of the
petitioner, is not applicable in the
case at bar. Indeed, the Court
has ruled that said provision is
not the yardstick for determining
the existence of an employment
relationship because it merely
distinguishes between two kinds
of employees, i.e., regular
employees and casual
employees, for purposes of
determining the right of an
employee to certain benefits, to
join or form a union, or to security
of tenure; it does not apply where

the existence of an employment

relationship is in dispute.[24] It is,
therefore, erroneous on the part
of the Court of Appeals to rely on
Article 280 in determining
whether an employer-employee
relationship exists between
respondent and the petitioner
Considering that there is no
employer-employee relationship
between the parties, the
termination of respondent's
services by the petitioner after
due notice did not constitute
illegal dismissal warranting his
reinstatement and the payment of
full backwages, allowances and
other benefits.
WHEREFORE, premises
considered, the petition
is GRANTED. The Decision and
the Resolution of the Court of
Appeals in CA-G.R. SP No.
87846, are REVERSEDand SET
ASIDE. The Resolutions
dated July 30,
2004 and September 30, 2004 of
the National Labor Relations
Commission are REINSTATED
SECOND DIVISION
THELMA DUMPITMURILLO,
Petitioner,

G.R. No

Present:

QUISUM

 - versus -

,
Murillo as a newscaster and co CARPIO, anchor for Balitang-Balita, an
early evening news program. The
CARPIO MORALES,
TINGA, and contract was for a period of three
months. It was renewed under
VELASCO, JR.,
Talent Contracts Nos. NT951915, NT96-3002, NT98-4984

[5]
COURT OF APPEALS,
Promulgated:and NT99-5649. In addition,
petitioners services were
ASSOCIATED
engaged for the program Live on
BROADCASTING
Five. On September 30, 1999,
COMPANY, JOSE
after four years of repeated
JAVIER AND EDWARD
June 8, 2007renewals, petitioners talent
TAN,
contract expired. Two weeks after
Respondents.
the expiration of the last contract,
petitioner sent a letter to Mr. Jose
x- - - - - - - - - - - - - - - - - - - - - - Javier, Vice President for News
-----------------------and Public Affairs of ABC,
- - - -x
informing the latter that she was
DECISION
still interested in renewing her
QUISUMBING, J.:
contract subject to a salary
This petition seeks to reverse
increase. Thereafter, petitioner
and set aside both the
stopped reporting for
Decision[1] dated January 30,
work. OnNovember 5, 1999, she
2004 of the Court of Appeals in
wrote Mr. Javier another letter,
[6]
CA-G.R. SP No. 63125 and its
which we quote verbatim:
[2]
Resolution dated June 23,
xxxx
2004 denying the motion for
Dear Mr. Javier:
reconsideration. The Court of
On October 20, 1999, I wrote you
Appeals had overturned the
a letter in answer to your query
Resolution[3] dated August 30,
by way of a marginal note what
2000 of the National Labor
terms and conditions in response
Relations Commission (NLRC)
to my first letter dated October
ruling that petitioner was illegally
13, 1999. To date, or for more
dismissed.
than fifteen (15) days since then,
The facts of the case are as
I have not received any formal
follows:
written reply. xxx
On October 2, 1995, under Talent
In view hereof, should I not
Contract No. NT95-1805,
receive any formal response from
[4]
private respondent Associated
you until Monday, November 8,
Broadcasting Company (ABC)
1999, I will deem it as a
hired petitioner Thelma Dumpit-

constructive dismissal of my
services.
xxxx
A month later, petitioner sent a
demand letter[7] to ABC,
demanding: (a) reinstatement to
her former position; (b) payment
of unpaid wages for services
rendered from September 1 to
October 20, 1999 and full
backwages; (c) payment of
13th month pay,
vacation/sick/service incentive
leaves and other monetary
benefits due to a regular
employee starting March 31,
1996. ABC replied that a check
covering petitioners talent fees
for September 16 to October 20,
1999 had been processed and
prepared, but that the other
claims of petitioner had no basis
in fact or in law.
On December 20, 1999,
petitioner filed a
complaint[8] against ABC, Mr.
Javier and Mr. Edward Tan, for
illegal constructive dismissal,
nonpayment of salaries, overtime
pay, premium pay, separation
pay, holiday pay, service
incentive leave pay, vacation/sick
leaves and 13th month pay in
NLRC-NCR Case No. 30-1200985-99. She likewise
demanded payment for moral,
exemplary and actual damages,
as well as for attorneys fees.
The parties agreed to submit the
case for resolution after
settlement failed during the

mandatory
conference/conciliation. On Marc
h 29, 2000, the Labor Arbiter
dismissed the complaint.[9]
On appeal, the NLRC reversed
the Labor Arbiter in a Resolution
dated August 30, 2000. The
NLRC held that an employeremployee relationship existed
between petitioner and ABC; that
the subject talent contract was
void; that the petitioner was a
regular employee illegally
dismissed; and that she was
entitled to reinstatement and
backwages or separation pay,
aside from 13th month pay and
service incentive leave pay,
moral and exemplary damages
and attorneys fees. It held as
follows:
WHEREFORE, the Decision of
the Arbiter dated 29 March
2000 is hereby REVERSED/SET
ASIDE and a NEW
ONE promulgated:
declaring
respondents to have
illegally dismissed
complainant from her
regular work therein
and thus, ordering
them to reinstate her
in her former position
without loss of
seniority right[s] and
other privileges and
to pay her full
backwages, inclusive
of allowances and
other benefits,

including 13th month

pay based on her
said latest rate
of P28,000.00/mo.
from the date of her
illegal dismissal on 21
October 1999 up to
finality hereof, or at
complainants option,
to pay her separation
pay of one (1) month
pay per year of
service based on said
latest monthly rate,
reckoned from date of
hire on 30 September
1995 until finality
hereof;
to pay complainants
accrued SILP
[Service Incentive
Leave Pay] of 5 days
pay per year and
13th month pay for the
years 1999, 1998 and
1997 of P19,236.00
and P84,000.00,
respectively and her
accrued salary from
16 September 1999
to 20 October 1999
of P32,760.00 plus
legal interest at 12%
from date of judicial
demand on 20
December 1999 until
finality hereof;
to pay complainant
moral damages
of P500,000.00,
exemplary damages

of P350,000.00 and
10% of the total of the
adjudged monetary
awards as attorneys
fees.
Other monetary claims of
complainant are dismissed for
lack of merit.
SO ORDERED.[10]
After its motion for
reconsideration was denied, ABC
elevated the case to the Court of
Appeals in a petition for certiorari
under Rule 65. The petition was
first dismissed for failure to attach
particular documents,[11] but was
reinstated on grounds of the
higher interest of justice.[12]
Thereafter, the appellate court
ruled that the NLRC committed
grave abuse of discretion, and
reversed the decision of the
NLRC.[13] The appellate court
reasoned that petitioner should
not be allowed to renege from the
stipulations she had voluntarily
and knowingly executed by
invoking the security of tenure
under the Labor Code. According
to the appellate court, petitioner
was a fixed-term employee and
not a regular employee within the
ambit of Article 280[14] of the
Labor Code because her job, as
anticipated and agreed upon,
was only for a specified time.[15]
Aggrieved, petitioner now comes
to this Court on a petition for
review, raising issues as follows:
I.

 THIS HONORABLE COURT

CAN REVIEW THE FINDINGS
OF THE HONORABLE COURT
OF APPEALS, THE DECISION
OF WHICH IS NOT IN ACCORD
WITH LAW OR WITH THE
APPLICABLE DECISIONS OF
THE SUPREME COURT[;]
II.
THE PRO-FORMA TALENT
CONTRACTS, AS CORRECTLY
FOUND BY THE NLRC FIRST
DIVISION, ARE ANTIREGULARIZATION
DEVICES WHICH MUST BE
STRUCK DOWN FOR
REASONS OF PUBLIC
POLICY[;]

III.
BY REASON OF THE
CONTINUOUS AND
SUCCESSIVE RENEWALS OF
THE THREE-MONTH TALENT
CONTRACTS, AN EMPLOYEREMPLOYEE RELATIONSHIP
WAS CREATED AS PROVIDED
FOR UNDER ARTICLE 280 OF
THE LABOR CODE[;]
IV.
BY THE CONSTRUCTIVE
DISMISSAL OF HEREIN
PETITIONER, AS A REGULAR
EMPLOYEE, THERE WAS A
DENIAL OF PETITIONERS
RIGHT TO DUE PROCESS
THUS ENTITLING HER TO THE
MONEY CLAIMS AS STATED IN
THE COMPLAINT[.][16]

The issues for our disposition

are: (1) whether or not this Court
can review the findings of the
Court of Appeals; and (2)
whether or not under Rule 45 of
the Rules of Court the Court of
Appeals committed a reversible
error in its Decision.
On the first issue, private
respondents contend that the
issues raised in the instant
petition are mainly factual and
that there is no showing that the
said issues have been resolved
arbitrarily and without basis. They
add that the findings of the Court
of Appeals are supported by
overwhelming wealth of evidence
on record as well as prevailing
jurisprudence on the matter.[17]
Petitioner however contends that
this Court can review the findings
of the Court of Appeals, since the
appellate court erred in deciding
a question of substance in a way
which is not in accord with law or
with applicable decisions of this
Court.[18]
We agree with petitioner.
Decisions, final orders or
resolutions of the Court of
Appeals in any case regardless
of the nature of the action or
proceeding involved may be
appealed to this Court through a
petition for review. This remedy
is a continuation of the appellate
process over the original case,
[19]
and considering there is no
congruence in the findings of the
NLRC and the Court of Appeals

regarding the status of

employment of petitioner, an
exception to the general rule that
this Court is bound by the
findings of facts of the appellate
court,[20] we can review such
findings.
On the second issue, private
respondents contend that the
Court of Appeals did not err when
it upheld the validity of the talent
contracts voluntarily entered into
by petitioner. It further stated that
prevailing jurisprudence has
recognized and sustained the
absence of employer-employee
relationship between a talent and
the media entity which engaged
the talents services on a per
talent contract basis, citing the
case of Sonza v. ABS-CBN
Broadcasting Corporation.[21]
Petitioner avers however that an
employer-employee relationship
was created when the private
respondents started to merely
renew the contracts repeatedly
fifteen times or for four
consecutive years.[22]
Again, we agree with petitioner.
The Court of Appeals committed
reversible error when it held that
petitioner was a fixed-term
employee. Petitioner was a
regular employee under
contemplation of law. The
practice of having fixed-term
contracts in the industry does not
automatically make all talent
contracts valid and compliant
with labor law. The assertion that

a talent contract exists does not

necessarily prevent a regular
employment status.[23]
Further, the Sonza case is not
applicable. In Sonza, the
television station did not instruct
Sonza how to perform his job.
How Sonza delivered his lines,
appeared on television, and
sounded on radio were outside
the television stations control.
Sonza had a free hand on what
to say or discuss in his shows
provided he did not attack the
television station or its interests.
Clearly, the television station did
not exercise control over the
means and methods of the
performance of Sonzas work.
[24]
In the case at bar, ABC had
control over the performance of
petitioners work. Noteworthy too,
is the comparatively low P28,000
monthly pay of
petitioner[25] vis the P300,000 a
month salary of Sonza,[26]that all
the more bolsters the conclusion
that petitioner was not in the
same situation as Sonza.
The contract of employment of
petitioner with ABC had the
following stipulations:
xxxx
- SCOPE OF
SERVICES TALENT
agrees to devote his/her
talent, time, attention and
best efforts in the
performance of his/her
duties and responsibilities
as Anchor/Program

Host/Newscaster of the
Program, in accordance
with the direction of ABC
and/or its authorized
representatives.

- DUTIES AND
RESPONSIBILITIES TALE
NT shall:

Render his/her
services as a
newscaster on the
Program;
Be involved in newsgathering operations
by conducting
interviews on- and
off-the-air;
Participate in live
remote coverages
when called upon;
Be available for any
other news
assignment, such as
writing, research or
camera work;
Attend production
meetings;
On assigned days, be
at the studios at least
one (1) hour before
the live telecasts;
Be present promptly
at the studios and/or
other place of
assignment at the

time designated by
ABC;
Keep abreast of the
news;
Give his/her full
cooperation to ABC
and its duly
authorized
representatives in the
production and
promotion of the
Program; and
Perform such other
functions as may be
assigned to him/her
from time to time.
xxxx
1.3 COMPLIANCE WITH
STANDARDS, INSTRUCTIONS
AND OTHER RULES AND
REGULATIONS TALENT agrees
that he/she will promptly and
faithfully comply with the
requests and instructions, as well
as the program standards,
policies, rules and regulations of
ABC, the KBP and the
government or any of its
agencies and instrumentalities.[27]
xxxx
In Manila Water Company, Inc. v.
Pena,[28] we said that the
elements to determine the
existence of an employment
relationship are: (a) the selection
and engagement of the
employee, (b) the payment of
wages, (c) the power of
dismissal, and (d) the employers
power to control. The most
important element is the

employers control of the

employees conduct, not only as
to the result of the work to be
done, but also as to the means
and methods to accomplish it.[29]
The duties of petitioner as
enumerated in her employment
contract indicate that ABC had
control over the work of
petitioner. Aside from control,
ABC also dictated the work
assignments and payment of
petitioners wages. ABC also had
power to dismiss her. All these
being present, clearly, there
existed an employment
relationship between petitioner
and ABC.
Concerning regular employment,
the law provides for two kinds of
employees, namely: (1) those
who are engaged to perform
activities which are usually
necessary or desirable in the
usual business or trade of the
employer; and (2) those who
have rendered at least one year
of service, whether continuous or
broken, with respect to the
activity in which they are
employed.[30] In other words,
regular status arises from either
the nature of work of the
employee or the duration of his
employment.[31] In Benares v.
Pancho,[32] we very succinctly
said:
[T]he primary standard for
determining regular employment
is the reasonable connection
between the particular activity

performed by the employee vis-vis the usual trade or business of

the employer. This connection
can be determined by
considering the nature of the
work performed and its relation to
the scheme of the particular
business or trade in its entirety. If
the employee has been
performing the job for at least a
year, even if the performance is
not continuous and merely
intermittent, the law deems
repeated and continuing need for
its performance as sufficient
evidence of the necessity if not
indispensability of that activity to
the business. Hence, the
employment is considered
regular, but only with respect to
such activity and while such
activity exists.[33]
In our view, the requisites for
regularity of employment have
been met in the instant
case. Gleaned from the
description of the scope of
services aforementioned,
petitioners work was necessary
or desirable in the usual business
or trade of the employer which
includes, as a pre-condition for its
enfranchisement, its participation
in the governments news and
public information
dissemination. In addition, her
work was continuous for a period
of four years. This repeated
engagement under contract of
hire is indicative of the necessity
and desirability of the petitioners

work in private respondent ABCs

business.[34]
The contention of the appellate
court that the contract was
characterized by a valid fixedperiod employment is
untenable. For such contract to
be valid, it should be shown that
the fixed period was knowingly
and voluntarily agreed upon by
the parties. There should have
been no force, duress or
improper pressure brought to
bear upon the employee; neither
should there be any other
circumstance that vitiates the
employees consent.[35] It should
satisfactorily appear that the
employer and the employee dealt
with each other on more or less
equal terms with no moral
dominance being exercised by
the employer over the employee.
[36]
Moreover, fixed-term
employment will not be
considered valid where, from the
circumstances, it is apparent that
periods have been imposed to
preclude acquisition of tenurial
security by the employee.[37]
In the case at bar, it does not
appear that the employer and
employee dealt with each other
on equal terms. Understandably,
the petitioner could not object to
the terms of her employment
contract because she did not
want to lose the job that she
loved and the workplace that she
had grown accustomed to,
[38]
which is exactly what

happened when she finally

manifested her intention to
negotiate. Being one of the
numerous
newscasters/broadcasters of
ABC and desiring to keep her job
as a broadcasting practitioner,
petitioner was left with no choice
but to affix her signature of
conformity on each renewal of
her contract as already prepared
by private respondents;
otherwise, private respondents
would have simply refused to
renew her contract. Patently, the
petitioner occupied a position of
weakness vis--vis the
employer. Moreover, private
respondents practice of
repeatedly extending petitioners
3-month contract for four years is
a circumvention of the acquisition
of regular status. Hence, there
was no valid fixed-term
employment between petitioner
and private respondents.
While this Court has recognized
the validity of fixed-term
employment contracts in a
number of cases, it has
consistently emphasized that
when the circumstances of a
case show that the periods were
imposed to block the acquisition
of security of tenure, they should
be struck down for being contrary
to law, morals, good customs,
public order or public policy.[39]
As a regular employee, petitioner
is entitled to security of tenure
and can be dismissed only for

just cause and after due

compliance with procedural due
process. Since private
respondents did not observe due
process in constructively
dismissing the petitioner, we hold
that there was an illegal
dismissal.
WHEREFORE, the challenged
Decision dated January 30,
2004 and Resolution dated June
23, 2004 of the Court of Appeals
in CA-G.R. SP No. 63125, which
held that the petitioner was a
fixed-term employee,
are REVERSED and SET
ASIDE. The NLRC decision
is AFFIRMED.
Costs against private
respondents.
SO ORDERED.
JOSE MEL BERNARTE, G.R.
No. 192084
Petitioner,

Present:

- versus - CARPIO, J.,

Chairperson,
BRION,
DEL CASTILLO,*
PEREZ, and
SERENO, JJ.
PHILIPPINE BASKETBALL
ASSOCIATION (PBA), JOSE
EMMANUEL M. EALA,
and Promulgated:
PERRY MARTINEZ,
Respondents. September 14,
2011

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

 Complainants (Jose
Mel Bernarte and Renato Guevar
ra) aver that they were invited to
join the PBA as referees. During
the leadership of Commissioner
Emilio Bernardino, they were
made to sign contracts on a yearto-year basis. During the term of
Commissioner Eala, however,
changes were made on the terms
of their employment.
Complainant Bernarte, for
instance, was not made to sign a
contract during the first
conference of the All-Filipino Cup
which was from February 23,
2003 to June 2003. It was only
during the second conference
when he was made to sign a one
and a half month contract for the
period July 1 to August 5, 2003.
On January 15,
2004, Bernarte received a letter
from the Office of the
Commissioner advising him that
his contract would not be
renewed citing his unsatisfactory
performance on and off the court.
It was a total shock
for Bernarte who was awarded
Referee of the year in 2003. He
felt that the dismissal was caused
by his refusal to fix a game upon
order of Ernie De Leon.
On the other hand,
complainant Guevarra alleges
that he was invited to join the
PBA pool of referees in February

2001. On March 1, 2001, he

signed a contract as trainee.
Beginning 2002, he signed a
yearly contract as Regular Class
C referee. On May 6, 2003,
respondent Martinez issued a
memorandum
to Guevarra expressing
dissatisfaction over his
questioning on the assignment of
referees officiating out-of-town
games. Beginning February
2004, he was no longer made to
sign a contract.
Respondents aver, on the other
hand, that complainants entered
into two contracts of retainer with
the PBA in the year 2003. The
first contract was for the period
January 1, 2003 to July 15, 2003;
and the second was for
September 1 to December 2003.
After the lapse of the latter
period, PBA decided not to renew
their contracts.

Complainants were not illegally

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

 In her 31 March 2005

Decision,5 the Labor
Arbiter6 declared petitioner an
employee whose dismissal by
respondents was illegal.
Accordingly, the Labor Arbiter
ordered the reinstatement of
petitioner and the payment
of backwages, moral and
exemplary damages and
attorneys fees, to wit:
WHEREFORE, premises
considered all respondents who
are here found to have illegally
dismissed complainants are
hereby ordered to (a) reinstate
complainants within thirty (30)
days from the date of receipt of
this decision and to solidarily pay
complainants:

backwages from
January 1, 2004
up to the finality of
this Decision,
which to date is
moral damages
3. exemplary damages

10% attorneys
fees
TOTAL

75.0
or a total of P1,152,250.00
The rest of the claims are hereby
dismissed for lack of merit or
basis.
SO ORDERED.7
In its 28 January 2008
Decision,8 the NLRC affirmed the
Labor Arbiters judgment. The
dispositive portion of the NLRCs
decision reads:
WHEREFORE, the appeal is
hereby DISMISSED. The
Decision of Labor
Arbiter Teresita D. Castillon-Lora
dated March 31, 2005 is
AFFIRMED.
JOSE SO ORDERED.9
MEL
BERNA
RTE
Respondents filed a petition for
certiorari with the Court of
Appeals, which overturned the
P536,2
decisions of the NLRC and Labor
50.00 Arbiter. The dispositive portion of
100,00 the Court of Appeals decision
0.00
reads:
50,000.
00 WHEREFORE, the petition is
hereby GRANTED. The
assailed Decision dated January
68,625. 28, 2008 and Resolution dated
00
August 26, 2008 of the National
Labor Relations Commission
P754,8 areANNULLED and SET ASIDE.

Private respondents complaint

before the Labor Arbiter
is DISMISSED.
SO ORDERED.10

The Court of Appeals Ruling

Moreover, this Court disagrees

with the Labor Arbiters finding (as
affirmed by the NLRC) that the
Contracts of Retainer show that
petitioners have control over
private respondents.
xxxx

The Court of Appeals found

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

Neither do We agree with the

NLRCs affirmance of the Labor
Arbiters conclusion that private
respondents repeated hiring
made them regular employees by
operation of law.11

While the NLRC agreed that the

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

The Issues
The main issue in this case is
whether petitioner is an
employee of respondents, which
in turn determines whether
petitioner was illegally dismissed.
Petitioner raises the procedural
issue of whether the Labor
Arbiters decision has become
final and executory for failure of
respondents to appeal with the
NLRC within
the reglementaryperiod.
The Ruling of the Court

 The petition is bereft of merit.

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

Jr., immediately issued the first

registry notice to claim on July
12, 2005 by the addressee. The
second and third notices were
issued on July 21 and August 1,
2005, respectively.
That the subject registered letter
was returned to the sender (RTS)
because the addressee failed to
claim it after our one month
retention period elapsed. Said
registered letter was dispatched
from this office to Manila CPO
(RTS) under bill #6, line 7,
page1, column 1, on September
8, 2005.12
Section 10, Rule 13 of the Rules
of Court provides:
SEC. 10. Completeness of
service. Personal service is
complete upon actual delivery.
Service by ordinary mail is
complete upon the expiration of
ten (10) days after mailing,
unless the court otherwise
provides. Service by registered
mail is complete upon actual
receipt by the addressee, or after
five (5) days from the date he
received the first notice of the
postmaster, whichever date is
earlier.
The rule on service by registered
mail contemplates two

situations: (1) actual service the

completeness of which is
determined upon receipt by the
addressee of the registered mail;
and (2) constructive service the
completeness of which is
determined upon expiration of
five days from the date the
addressee received the first
notice of the postmaster.13
Insofar as constructive service is
concerned, there must be
conclusive proof that a first notice
was duly sent by the postmaster
to the addressee.14 Not only is it
required that notice of the
registered mail be issued but that
it should also be delivered to and
received by the
addressee.15 Notably, the
presumption that official duty has
been regularly performed is not
applicable in this situation. It is
incumbent upon a party who
relies on constructive service to
prove that the notice was sent to,
and received by, the addressee.16
The best evidence to prove that
notice was sent would be a
certification from the postmaster,
who should certify not only that
the notice was issued or sent but
also as to how, when and to
whom the delivery and receipt
was made. The mailman may
also testify that the notice was
actually delivered.17

In this case, petitioner failed to

present any concrete proof as to
how, when and to whom the
delivery and receipt of the three
notices issued by the post office
was made. There is no
conclusive evidence showing that
the post office notices were
actually received by respondents,
negating petitioners claim of
constructive service of the Labor
Arbiters decision on respondents.
The Postmasters Certification
does not sufficiently prove that
the three notices were delivered
to and received by respondents;
it only indicates that the post
office issued the three notices.
Simply put, the issuance of the
notices by the post office is not
equivalent to delivery to and
receipt by the addressee of the
registered mail. Thus, there is no
proof of completed constructive
service of the Labor Arbiters
decision on respondents.
At any rate, the NLRC declared
the issue on the finality of the
Labor Arbiters decision moot as
respondents appeal was
considered in the interest of
substantial justice. We agree with
the NLRC. The ends of justice
will be better served if we resolve
the instant case on the merits
rather than allowing the
substantial issue of whether
petitioner is an independent
contractor or an employee linger

and remain unsettled due to

procedural technicalities.
The existence of an employeremployee relationship is
ultimately a question of fact. As a
general rule, factual issues are
beyond the province of this
Court. However, this rule admits
of exceptions, one of which is
where there are conflicting
findings of fact between the Court
of Appeals, on one hand, and the
NLRC and Labor Arbiter, on the
other, such as in the present
case.18
To determine the existence of an
employer-employee relationship,
case law has consistently applied
the four-fold test, to wit: (a) the
selection and engagement of the
employee; (b) the payment of
wages; (c) the power of
dismissal; and (d) the employers
power to control the employee on
the means and methods by which
the work is accomplished. The
so-calledcontrol test is the most
important indicator of the
presence or absence of an
employer-employee
relationship.19
In this case, PBA admits
repeatedly engaging petitioners
services, as shown in the retainer
contracts. PBA pays petitioner a
retainer fee, exclusive of per
diem or allowances, as stipulated

in the retainer contract. PBA can

terminate the retainer contract for
petitioners violation of its terms
and conditions.
However, respondents argue that
the all-important element of
control is lacking in this case,
making petitioner an independent
contractor and not an employee
of respondents.
Petitioner contends otherwise.
Petitioner asserts that he is an
employee of respondents since
the latter exercise control over
the performance of his work.
Petitioner cites the following
stipulations in the retainer
contract which evidence control:
(1) respondents classify or rate a
referee; (2) respondents require
referees to attend all basketball
games organized or authorized
by the PBA, at least one hour
before the start of the first game
of each day; (3) respondents
assign petitioner to officiate
ballgames, or to act as alternate
referee or substitute; (4) referee
agrees to observe and comply
with all the requirements of the
PBA governing the conduct of the
referees whether on or off the
court; (5) referee agrees (a) to
keep himself in good physical,
mental, and emotional condition
during the life of the contract; (b)
to give always his best effort and
service, and loyalty to the PBA,
and not to officiate as referee in

any basketball game outside of

the PBA, without written prior
consent of the Commissioner; (c)
always to conduct himself on and
off the court according to the
highest standards of honesty or
morality; and (6) imposition of
various sanctions for violation of
the terms and conditions of the
contract.
The foregoing stipulations hardly
demonstrate control over the
means and methods by which
petitioner performs his work as a
referee officiating a PBA
basketball game. The contractual
stipulations do not pertain to,
much less dictate, how and when
petitioner will blow the whistle
and make calls. On the contrary,
they merely serve as rules of
conduct or guidelines in order to
maintain the integrity of the
professional basketball league.
As correctly observed by the
Court of Appeals, how could a
skilled referee perform his job
without blowing a whistle and
making calls? x x x [H]ow can the
PBA control the performance of
work of a referee without
controlling his acts of blowing the
whistle and making calls?20
In Sonza v. ABS-CBN
Broadcasting
Corporation,21 which determined
the relationship between a
television and radio station and
one of its talents, the Court held

that not all rules imposed by the

hiring party on the hired party
indicate that the latter is an
employee of the former. The
Court held:
We find that these general rules
are merely guidelines towards
the achievement of the mutually
desired result, which are toprating television and radio
programs that comply with
standards of the industry. We
have ruled that:
Further, not every form of control
that a party reserves to himself
over the conduct of the other
party in relation to the services
being rendered may be accorded
the effect of establishing an
employer-employee relationship.
The facts of this case fall
squarely with the case of Insular
Life Assurance Co., Ltd. v. NLRC.
In said case, we held that:
Logically, the line should be
drawn between rules that merely
serve as guidelines towards the
achievement of the mutually
desired result without dictating
the means or methods to be
employed in attaining it, and
those that control or fix the
methodology and bind or restrict
the party hired to the use of such
means. The first, which aim only
to promote the result, create no
employer-employee relationship
unlike the second, which address

both the result and the means

used to achieve it.22
We agree with respondents that
once in the playing court, the
referees exercise their own
independent judgment, based on
the rules of the game, as to when
and how a call or decision is to
be made. The referees decide
whether an infraction was
committed, and the PBA cannot
overrule them once the decision
is made on the playing court. The
referees are the only, absolute,
and final authority on the playing
court. Respondents or any of the
PBA officers cannot and do not
determine which calls to make or
not to make and cannot control
the referee when he blows the
whistle because such authority
exclusively belongs to the
referees. The very nature of
petitioners job of officiating a
professional basketball game
undoubtedly calls for freedom of
control by respondents.
Moreover, the following
circumstances indicate that
petitioner is an independent
contractor: (1) the referees are
required to report for work only
when PBA games are scheduled,
which is three times a week
spread over an average of only
105 playing days a year, and they
officiate games at an average of
two hours per game; and (2) the
only deductions from the fees

received by the referees are

withholding taxes.
In other words, unlike regular
employees who ordinarily report
for work eight hours per day for
five days a week, petitioner is
required to report for work only
when PBA games are scheduled
or three times a week at two
hours per game. In addition,
there are no deductions for
contributions to the Social
Security
System, Philhealth or Pag-Ibig,
which are the usual deductions
from employees salaries. These
undisputed circumstances
buttress the fact that petitioner is
an independent contractor, and
not an employee of respondents.
Furthermore, the applicable
foreign case law declares that a
referee is an independent
contractor, whose special skills
and independent judgment
are required specifically for such
position and cannot possibly be
controlled by the hiring party.
In Yonan v. United States Soccer
Federation, Inc.,23 the United
States District Court of Illinois
held that plaintiff, a soccer
referee, is an independent
contractor, and not an employee
of defendant which is the
statutory body that governs
soccer in the United States. As
such, plaintiff was not entitled to

protection by the Age

Discrimination in Employment
Act. The U.S. District Court ruled:
Generally, if an employer has the
right to control and direct the
work of an individual, not only as
to the result to be achieved, but
also as to details by which the
result is achieved, an
employer/employee relationship
is likely to exist. The Court must
be careful to distinguish between
control[ling] the conduct of
another party contracting party by
setting out in detail his
obligations consistent with the
freedom of contract, on the one
hand, and the discretionary
control an employer daily
exercises over its employees
conduct on the other.
Yonan asserts that the
Federation closely supervised his
performance at each soccer
game he officiated by giving him
an assessor, discussing his
performance, and controlling
what clothes he wore while on
the field and traveling. Putting
aside that the Federation did not,
for the most part, control what
clothes he wore, the Federation
did not supervise Yonan, but
rather evaluated his performance
after matches. That the
Federation evaluated Yonan as a
referee does not mean that he
was an employee. There is no
question that parties retaining

independent contractors may

judge the performance of those
contractors to determine if the
contractual relationship should
continue. x x x
It is undisputed that the
Federation did not control the
way Yonan refereed his games.
He had full discretion and
authority, under the Laws of the
Game, to call the game as he
saw fit. x x x In a similar vein,
subjecting Yonan to qualification
standards and procedures like
the Federations registration and
training requirements does not
create an employer/employee
relationship. x x x
A position that requires special
skills and independent judgment
weights in favor of independent
contractor status. x x x Unskilled
work, on the other hand,
suggests an employment
relationship. x x xHere, it is
undisputed that soccer
refereeing, especially at the
professional and international
level, requires a great deal of skill
and natural ability. Yonan asserts
that it was the Federations
training that made him a top
referee, and that suggests he
was an employee. Though
substantial training supports an
employment inference, that
inference is dulled significantly or
negated when the putative
employers activity is the result of

a statutory requirement, not the

employers choice. x x x
In McInturff v. Battle Ground
Academy of Franklin,24 it was
held that the umpire was not
an agent of the Tennessee
Secondary School Athletic
Association (TSSAA), so the
players vicarious liability claim
against the association should
be dismissed. In finding that
the umpire is an independent
contractor, the Court of
Appeals of Tennesse ruled:
The TSSAA deals with umpires to
achieve a result-uniform rules for
all baseball games played
between TSSAA member
schools. The TSSAA does not
supervise regular season games.
It does not tell an official how to
conduct the game beyond the
framework established by the
rules. The TSSAA does not, in
the vernacular of the case law,
control the means and method by
which the umpires work.
In addition, the fact that PBA
repeatedly hired petitioner does
not by itself prove that petitioner
is an employee of the former. For
a hired party to be considered an
employee, the hiring party must
have control over the means and
methods by which the hired party
is to perform his work, which is
absent in this case. The

continuous rehiring by PBA of

petitioner simply signifies the
renewal of the contract between
PBA and petitioner, and
highlights the satisfactory
services rendered by petitioner
warranting such contract
renewal. Conversely, if PBA
decides to discontinue petitioners
services at the end of the term
fixed in the contract, whether for
unsatisfactory services, or
violation of the terms and
conditions of the contract, or for
whatever other reason, the same
merely results in the non-renewal
of the contract, as in the present
case. The non-renewal of the
contract between the parties
does not constitute illegal
dismissal of petitioner by
respondents.
WHEREFORE, we DENY the
petition and AFFIRM the assailed
decision of the Court of Appeals.
SO ORDERED.

G.R. No. 119268

February
23, 2000
ANGEL JARDIN, DEMETRIO
CALAGOS, URBANO
MARCOS, ROSENDO
MARCOS, LUIS DE LOS
ANGELES, JOEL ORDENIZA

and AMADO
CENTENO, petitioners,
vs.
NATIONAL LABOR RELATIONS
COMMISSION (NLRC) and
GOODMAN TAXI (PHILJAMA
INTERNATIONAL,
INC.) respondents.
QUISUMBING, J.:
This special civil action
for certiorari seeks to annul the
decision1 of public respondent
promulgated on October 28,
1994, in NLRC NCR CA No.
003883-92, and its
resolution2 dated December 13,
1994 which denied petitioners
motion for reconsideration.
Petitioners were drivers of private
respondent, Philjama
International Inc., a domestic
corporation engaged in the
operation of "Goodman Taxi."
Petitioners used to drive private
respondent's taxicabs every
other day on a 24-hour work
schedule under the boundary
system. Under this arrangement,
the petitioners earned an
average of P400.00 daily.
Nevertheless, private respondent
admittedly regularly deducts from
petitioners, daily earnings the
amount of P30.00 supposedly for
the washing of the taxi units.
Believing that the deduction is
illegal, petitioners decided to form
a labor union to protect their
rights and interests.
Upon learning about the plan of
petitioners, private respondent

refused to let petitioners drive

their taxicabs when they reported
for work on August 6, 1991, and
on succeeding days. Petitioners
suspected that they were singled
out because they were the
leaders and active members of
the proposed union. Aggrieved,
petitioners filed with the labor
arbiter a complaint against
private respondent for unfair
labor practice, illegal dismissal
and illegal deduction of washing
fees. In a decision3 dated August
31, 1992, the labor arbiter
dismissed said complaint for lack
of merit.
On appeal, the NLRC (public
respondent herein), in a decision
dated April 28, 1994, reversed
and set aside the judgment of the
labor arbiter. The labor tribunal
declared that petitioners are
employees of private respondent,
and, as such, their dismissal
must be for just cause and after
due process. It disposed of the
case as follows:
WHEREFORE, in view of all the
foregoing considerations, the
decision of the Labor Arbiter
appealed from is hereby SET
ASIDE and another one entered:
- Declaring the respondent
company guilty of illegal
dismissal and accordingly it
is directed to reinstate the
complainants, namely,
Alberto A. Gonzales, Joel T.
Morato, Gavino Panahon,
Demetrio L. Calagos,

Sonny M. Lustado, Romeo

Q. Clariza, Luis de los
Angeles, Amado Centino,
Angel Jardin, Rosendo
Marcos, Urbano Marcos,
Jr., and Joel Ordeniza, to
their former positions
without loss of seniority and
other privileges
appertaining thereto; to pay
the complainants full
backwages and other
benefits, less earnings
elsewhere, and to
reimburse the drivers the
amount paid as washing
charges; and
- Dismissing the charge of
unfair [labor] practice for
insufficiency of evidence.
SO ORDERED.4
Private respondent's first motion
for reconsideration was denied.
Remaining hopeful, private
respondent filed another motion
for reconsideration. This time,
public respondent, in its
decision5 dated October 28,
1994, granted aforesaid second
motion for reconsideration. It
ruled that it lacks jurisdiction over
the case as petitioners and
private respondent have no
employer-employee relationship.
It held that the relationship of the
parties is leasehold which is
covered by the Civil Code rather
than the Labor Code, and
disposed of the case as follows:
VIEWED IN THE LIGHT OF ALL
THE FOREGOING, the Motion

under reconsideration is hereby

given due course.
Accordingly, the Resolution of
August 10, 1994, and the
Decision of April 28, 1994 are
hereby SET ASIDE. The Decision
of the Labor Arbiter subject of the
appeal is likewise SET ASIDE
and a NEW ONE ENTERED
dismissing the complaint for lack
of jurisdiction.
No costs.
SO ORDERED.6
Expectedly, petitioners sought
reconsideration of the labor
tribunal's latest decision which
was denied. Hence, the instant
petition.
In this recourse, petitioners
allege that public respondent
acted without or in excess of
jurisdiction, or with grave abuse
of discretion in rendering the
assailed decision, arguing that:
I
THE NLRC HAS NO
JURISDICTION TO ENTERTAIN
RESPONDENT'S SECOND
MOTION FOR
RECONSIDERATION WHICH IS
ADMITTEDLY A PLEADING
PROHIBITED UNDER THE
NLRC RULES, AND TO GRANT
THE SAME ON GROUNDS NOT
EVEN INVOKED THEREIN.
II
THE EXISTENCE OF AN
EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN THE
PARTIES IS ALREADY A

SETTLED ISSUE
CONSTITUTING RES
JUDICATA, WHICH THE NLRC
HAS NO MORE JURISDICTION
TO REVERSE, ALTER OR
MODIFY.
III
IN ANY CASE, EXISTING
JURISPRUDENCE ON THE
MATTER SUPPORTS THE VIEW
THAT PETITIONERS-TAXI
DRIVERS ARE EMPLOYEES OF
RESPONDENT TAXI
COMPANY.7
The petition is impressed with
merit.
The phrase "grave abuse of
discretion amounting to lack or
excess of jurisdiction" has settled
meaning in the jurisprudence of
procedure. It means such
capricious and whimsical
exercise of judgment by the
tribunal exercising judicial or
quasi-judicial power as to amount
to lack of power.8 In labor cases,
this Court has declared in several
instances that disregarding rules
it is bound to observe constitutes
grave abuse of discretion on the
part of labor tribunal.
In Garcia vs. NLRC,9 private
respondent therein, after
receiving a copy of the labor
arbiter's decision, wrote the labor
arbiter who rendered the decision
and expressed dismay over the
judgment. Neither notice of
appeal was filed nor cash or
surety bond was posted by
private respondent.

Nevertheless, the labor tribunal

took cognizance of the letter from
private respondent and treated
said letter as private
respondent's appeal. In
a certiorari action before this
Court, we ruled that the labor
tribunal acted with grave abuse
of discretion in treating a mere
letter from private respondent as
private respondent's appeal in
clear violation of the rules on
appeal prescribed under Section
3(a), Rule VI of the New Rules of
Procedure of NLRC.
In Philippine Airlines Inc. vs.
NLRC,10 we held that the labor
arbiter committed grave abuse of
discretion when he failed to
resolve immediately by written
order a motion to dismiss on the
ground of lack of jurisdiction and
the supplemental motion to
dismiss as mandated by Section
15 of Rule V of the New Rules of
Procedure of the NLRC.
In Unicane Workers Union-CLUP
vs. NLRC,11 we held that the
NLRC gravely abused its
discretion by allowing and
deciding an appeal without an
appeal bond having been filed as
required under Article 223 of the
Labor Code.
In Maebo vs. NLRC,12 we
declared that the labor arbiter
gravely abused its discretion in
disregarding the rule governing
position papers. In this case, the
parties have already filed their
position papers and even agreed

to consider the case submitted

for decision, yet the labor arbiter
still admitted a supplemental
position paper and
memorandum, and by taking into
consideration, as basis for his
decision, the alleged facts
adduced therein and the
documents attached thereto.
In Gesulgon vs. NLRC,13 we held
that public respondent gravely
abused its discretion in treating
the motion to set aside judgment
and writ of execution as a petition
for relief of judgment. In doing so,
public respondent had, without
sufficient basis, extended the
reglementary period for filing
petition for relief from judgment
contrary to prevailing rule and
case law.
In this case before us, private
respondent exhausted
administrative remedy available
to it by seeking reconsideration of
public respondent's decision
dated April 28, 1994, which public
respondent denied. With this
motion for reconsideration, the
labor tribunal had ample
opportunity to rectify errors or
mistakes it may have committed
before resort to courts of justice
can be had.14 Thus, when private
respondent filed a second motion
for reconsideration, public
respondent should have forthwith
denied it in accordance with Rule
7, Section 14 of its New Rules of
Procedure which allows only one

motion for reconsideration from

the same party, thus:
Sec. 14. Motions for
Reconsideration. Motions for
reconsideration of any order,
resolution or decision of the
Commission shall not be
entertained except when based
on palpable or patent errors,
provided that the motion is under
oath and filed within ten (10)
calendar days from receipt of the
order, resolution or decision with
proof of service that a copy of the
same has been furnished within
the reglementary period the
adverse party and provided
further, that only one such motion
from the same party shall be
entertained. [Emphasis supplied]
The rationale for allowing only
one motion for reconsideration
from the same party is to assist
the parties in obtaining an
expeditious and inexpensive
settlement of labor cases. For
obvious reasons, delays cannot
be countenanced in the
resolution of labor disputes. The
dispute may involve no less than
the livelihood of an employee and
that of his loved ones who are
dependent upon him for food,
shelter, clothing, medicine, and
education. It may as well involve
the survival of a business or an
industry.15
As correctly pointed out by
petitioner, the second motion for
reconsideration filed by private
respondent is indubitably a

prohibited pleading16 which

should have not been entertained
at all. Public respondent cannot
just disregard its own rules on the
pretext of "satisfying the ends of
justice",17 especially when its
disposition of a legal controversy
ran afoul with a clear and long
standing jurisprudence in this
jurisdiction as elucidated in the
subsequent discussion. Clearly,
disregarding a settled legal
doctrine enunciated by this Court
is not a way of rectifying an error
or mistake. In our view, public
respondent gravely abused its
discretion in taking cognizance
and granting private respondent's
second motion for
reconsideration as it wrecks the
orderly procedure in seeking
reliefs in labor cases.
But, there is another compelling
reason why we cannot leave
untouched the flip-flopping
decisions of the public
respondent. As mentioned earlier,
its October 28, 1994 judgment is
not in accord with the applicable
decisions of this Court. The labor
tribunal reasoned out as follows:
On the issue of whether or not
employer-employee relationship
exists, admitted is the fact that
complainants are taxi drivers
purely on the "boundary system".
Under this system the driver
takes out his unit and pays the
owner/operator a fee commonly
called "boundary" for the use of
the unit. Now, in the

determination the existence of

employer-employee relationship,
the Supreme Court in the case
of Sara, et al., vs. Agarrado, et al.
(G.R. No. 73199, 26 October
1988) has applied the following
four-fold test: "(1) the selection
and engagement of the
employee; (2) the payment of
wages; (3) the power of
dismissal; and (4) the power of
control the employees conduct."
"Among the four (4) requisites",
the Supreme Court stresses that
"control is deemed the most
important that the other requisites
may even be disregarded".
Under the control test, an
employer-employee relationship
exists if the "employer" has
reserved the right to control the
"employee" not only as to the
result of the work done but also
as to the means and methods by
which the same is to be
accomplished. Otherwise, no
such relationship exists. (Ibid.)
Applying the foregoing
parameters to the case herein
obtaining, it is clear that the
respondent does not pay the
drivers, the complainants herein,
their wages. Instead, the drivers
pay a certain fee for the use of
the vehicle. On the matter of
control, the drivers, once they are
out plying their trade, are free to
choose whatever manner they
conduct their trade and are
beyond the physical control of the
owner/operator; they themselves

determine the amount of revenue

they would want to earn in a
day's driving; and, more
significantly aside from the fact
that they pay for the gasoline
they consume, they likewise
shoulder the cost of repairs on
damages sustained by the
vehicles they are driving.
Verily, all the foregoing attributes
signify that the relationship of the
parties is more of a leasehold or
one that is covered by a charter
agreement under the Civil Code
rather than the Labor Code.18
The foregoing ratiocination goes
against prevailing jurisprudence.
In a number of cases decided by
this Court,19 we ruled that the
relationship between jeepney
owners/operators on one hand
and jeepney drivers on the other
under the boundary system is
that of employer-employee and
not of lessor-lessee. We
explained that in the lease of
chattels, the lessor loses
complete control over the chattel
leased although the lessee
cannot be reckless in the use
thereof, otherwise he would be
responsible for the damages to
the lessor. In the case of jeepney
owners/operators and jeepney
drivers, the former exercise
supervision and control over the
latter. The management of the
business is in the owner's hands.
The owner as holder of the
certificate of public convenience
must see to it that the driver

follows the route prescribed by

the franchising authority and the
rules promulgated as regards its
operation. Now, the fact that the
drivers do not receive fixed
wages but get only that in excess
of the so-called "boundary" they
pay to the owner/operator is not
sufficient to withdraw the
relationship between them from
that of employer and employee.
We have applied by analogy the
abovestated doctrine to the
relationships between bus
owner/operator and bus
conductor,20 auto-calesa
owner/operator and driver,21 and
recently between taxi
owners/operators and taxi
drivers.22 Hence, petitioners are
undoubtedly employees of
private respondent because as
taxi drivers they perform activities
which are usually necessary or
desirable in the usual business or
trade of their employer.
As consistently held by this
Court, termination of employment
must be effected in accordance
with law. The just and authorized
causes for termination of
employment are enumerated
under Articles 282, 283 and 284
of the Labor Code. The
requirement of notice and
hearing is set-out in Article 277
(b) of the said Code. Hence,
petitioners, being employees of
private respondent, can be
dismissed only for just and
authorized cause, and after

affording them notice and hearing

prior to termination. In the instant
case, private respondent had no
valid cause to terminate the
employment of petitioners.
Neither were there two (2) written
notices sent by private
respondent informing each of the
petitioners that they had been
dismissed from work. These lack
of valid cause and failure on the
part of private respondent to
comply with the twin-notice
requirement underscored the
illegality surrounding petitioners'
dismissal.
Under the law, an employee who
is unjustly dismissed from work
shall be entitled to reinstatement
without loss of seniority rights
and other privileges and to his full
backwages, inclusive of
allowances, and to his other
benefits or their monetary
equivalent computed from the
time his compensation was
withheld from him up to the time
of his actual reinstatement.23 It
must be emphasized, though,
that recent judicial
pronouncements24 distinguish
between employees illegally
dismissed prior to the effectivity
of Republic Act No. 6715 on
March 21, 1989, and those
whose illegal dismissals were
effected after such date. Thus,
employees illegally dismissed
prior to March 21, 1989, are
entitled to backwages up to three
(3) years without deduction or

qualification, while those illegally

dismissed after that date are
granted full backwages inclusive
of allowances and other benefits
or their monetary equivalent from
the time their actual
compensation was withheld from
them up to the time of their actual
reinstatement. The legislative
policy behind Republic Act No.
6715 points to "full backwages"
as meaning exactly that, i.e.,
without deducting from
backwages the earnings derived
elsewhere by the concerned
employee during the period of his
illegal dismissal. Considering that
petitioners were terminated from
work on August 1, 1991, they are
entitled to full backwages on the
basis of their last daily earnings.
With regard to the amount
deducted daily by private
respondent from petitioners for
washing of the taxi units, we view
the same as not illegal in the
context of the law. We note that
after a tour of duty, it is
incumbent upon the driver to
restore the unit he has driven to
the same clean condition when
he took it out. Car washing after
a tour of duty is indeed a practice
in the taxi industry and is in fact
dictated by fair play.25 Hence, the
drivers are not entitled to
reimbursement of washing
charges.1wphi1.nt
WHEREFORE, the instant
petition is GRANTED. The
assailed DECISION of public

respondent dated October 28,

1994, is hereby SET ASIDE. The
DECISION of public respondent
dated April 28, 1994, and its
RESOLUTION dated December
13, 1994, are hereby
REINSTATED subject to
MODIFICATION. Private
respondent is directed to
reinstate petitioners to their
positions held at the time of the
complained dismissal. Private
respondent is likewise ordered to
pay petitioners their full
backwages, to be computed from
the date of dismissal until their
actual reinstatement. However,
the order of public respondent
that petitioners be reimbursed the
amount paid as washing charges
is deleted. Costs against private
respondents.
SO ORDERED.
[G.R. No. 146530. January 17,
2005]
PEDRO
CHAVEZ, petitioner, vs. NATIO
NAL LABOR RELATIONS
COMMISSION, SUPREME
PACKAGING, INC. and ALVIN
LEE, Plant
Manager,respondents.
DECISION
CALLEJO, SR., J.:
Before the Court is the petition
for review on certiorari of the
Resolution[1] dated December 15,
2000 of the Court of Appeals
(CA) reversing its Decision dated
April 28, 2000 in CA-G.R. SP No.
52485. The assailed resolution

reinstated the Decision dated

July 10, 1998 of the National
Labor Relations Commission
(NLRC), dismissing the complaint
for illegal dismissal filed by herein
petitioner Pedro Chavez. The
said NLRC decision similarly
reversed its earlier Decision
dated January 27, 1998 which,
affirming that of the Labor Arbiter,
ruled that the petitioner had been
illegally dismissed by
respondents Supreme
Packaging, Inc. and Mr. Alvin
Lee.
The case stemmed from the
following facts:
The respondent company,
Supreme Packaging, Inc., is in
the business of manufacturing
cartons and other packaging
materials for export and
distribution. It engaged the
services of the petitioner, Pedro
Chavez, as truck driver on
October 25, 1984. As such, the
petitioner was tasked to deliver
the respondent companys
products from its factory in
Mariveles, Bataan, to its various
customers, mostly in Metro
Manila. The respondent company
furnished the petitioner with a
truck. Most of the petitioners
delivery trips were made at
nighttime, commencing at 6:00
p.m. from Mariveles, and
returning thereto in the afternoon
two or three days after. The
deliveries were made in
accordance with the routing slips

issued by respondent company

indicating the order, time and
urgency of delivery. Initially, the
petitioner was paid the sum
of P350.00 per trip. This was
later adjusted to P480.00 per trip
and, at the time of his alleged
dismissal, the petitioner was
receiving P900.00 per trip.
Sometime in 1992, the petitioner
expressed to respondent Alvin
Lee, respondent companys plant
manager, his (the petitioners)
desire to avail himself of the
benefits that the regular
employees were receiving such
as overtime pay, nightshift
differential pay, and 13th month
pay, among others. Although he
promised to extend these
benefits to the petitioner,
respondent Lee failed to actually
do so.
On February 20, 1995, the
petitioner filed a complaint for
regularization with the Regional
Arbitration Branch No. III of the
NLRC in San Fernando,
Pampanga. Before the case
could be heard, respondent
company terminated the services
of the petitioner. Consequently,
on May 25, 1995, the petitioner
filed an amended complaint
against the respondents for
illegal dismissal, unfair labor
practice and non-payment of
overtime pay, nightshift
differential pay, 13th month pay,
among others. The case was

docketed as NLRC Case No.

RAB-III-02-6181-95.
The respondents, for their part,
denied the existence of an
employer-employee relationship
between the respondent
company and the petitioner. They
averred that the petitioner was an
independent contractor as
evidenced by the contract of
service which he and the
respondent company entered
into. The said contract provided
as follows:
That the Principal [referring to
Supreme Packaging, Inc.], by
these presents, agrees to hire
and the Contractor [referring to
Pedro Chavez], by nature of their
specialized line or service jobs,
accepts the services to be
rendered to the Principal, under
the following terms and
covenants heretofore mentioned:
That the inland transport
delivery/hauling activities to be
performed by the contractor to
the principal, shall only cover
travel route from Mariveles to
Metro Manila. Otherwise, any
change to this travel route shall
be subject to further agreement
by the parties concerned.
That the payment to be made by
the Principal for any hauling or
delivery transport services fully
rendered by the Contractor shall
be on a per trip basis depending
on the size or classification of the
truck being used in the transport
service, to wit:

- If the hauling or delivery

service shall require a truck
of six wheeler, the payment
on a per trip basis from
Mariveles to Metro Manila
shall be THREE
HUNDRED PESOS
(P300.00) and EFFECTIVE
December 15, 1984.
- If the hauling or delivery
service require a truck of
ten wheeler, the payment
on a per trip basis,
following the same route
mentioned, shall be THREE
HUNDRED FIFTY
(P350.00) Pesos and
Effective December 15,
1984.
That for the amount involved, the
Contractor will be to [sic] provide
for [sic] at least two (2) helpers;
The Contractor shall exercise
direct control and shall be
responsible to the Principal for
the cost of any damage to, loss
of any goods, cargoes, finished
products or the like, while the
same are in transit, or due to
reckless [sic] of its men utilized
for the purpose above
mentioned;
That the Contractor shall have
absolute control and disciplinary
power over its men working for
him subject to this agreement,
and that the Contractor shall hold
the Principal free and harmless
from any liability or claim that
may arise by virtue of the
Contractors non-compliance to

the existing provisions of the

Minimum Wage Law, the
Employees Compensation Act,
the Social Security System Act,
or any other such law or decree
that may hereafter be enacted, it
being clearly understood that any
truck drivers, helpers or men
working with and for the
Contractor, are not employees
who will be indemnified by the
Principal for any such claim,
including damages incurred in
connection therewith;
This contract shall take effect
immediately upon the signing by
the parties, subject to renewal on
a year-to-year basis.[2]
This contract of service was
dated December 12, 1984. It was
subsequently renewed twice, on
July 10, 1989 and September 28,
1992. Except for the rates to be
paid to the petitioner, the terms of
the contracts were substantially
the same. The relationship of the
respondent company and the
petitioner was allegedly governed
by this contract of service.
The respondents insisted that the
petitioner had the sole control
over the means and methods by
which his work was
accomplished. He paid the
wages of his helpers and
exercised control over them. As
such, the petitioner was not
entitled to regularization because
he was not an employee of the
respondent company. The
respondents, likewise,

maintained that they did not

dismiss the petitioner. Rather, the
severance of his contractual
relation with the respondent
company was due to his violation
of the terms and conditions of
their contract. The petitioner
allegedly failed to observe the
minimum degree of diligence in
the proper maintenance of the
truck he was using, thereby
exposing respondent company to
unnecessary significant
expenses of overhauling the said
truck.
After the parties had filed their
respective pleadings, the Labor
Arbiter rendered the Decision
dated February 3, 1997, finding
the respondents guilty of illegal
dismissal. The Labor Arbiter
declared that the petitioner was a
regular employee of the
respondent company as he was
performing a service that was
necessary and desirable to the
latters business. Moreover, it was
noted that the petitioner had
discharged his duties as truck
driver for the respondent
company for a continuous and
uninterrupted period of more than
ten years.
The contract of service invoked
by the respondents was declared
null and void as it constituted a
circumvention of the
constitutional provision affording
full protection to labor and
security of tenure. The Labor
Arbiter found that the petitioners

dismissal was anchored on his

insistent demand to be
regularized. Hence, for lack of a
valid and just cause therefor and
for their failure to observe the
due process requirements, the
respondents were found guilty of
illegal dismissal. The dispositive
portion of the Labor Arbiters
decision states:
WHEREFORE, in the light of the
foregoing, judgment is hereby
rendered declaring respondent
SUPREME PACKAGING, INC.
and/or MR. ALVIN LEE, Plant
Manager, with business address
at BEPZ, Mariveles, Bataan guilty
of illegal dismissal, ordering said
respondent to pay complainant
his separation pay equivalent to
one (1) month pay per year of
service based on the average
monthly pay ofP10,800.00 in lieu
of reinstatement as his
reinstatement back to work will
not do any good between the
parties as the employment
relationship has already become
strained and full backwages from
the time his compensation was
withheld on February 23, 1995 up
to January 31, 1997 (cut-off date)
until compliance, otherwise, his
backwages shall continue to run.
Also to pay complainant his 13th
month pay, night shift differential
pay and service incentive leave
pay hereunder computed as
follows:
- Backwages .. P248,400.00

- Separation
Pay .... P140,400.00
- 13th month
pay .P 10,800.00
- Service Incentive Leave
Pay .. 2,040.00
TOTAL P401,640.00
Respondent is also ordered to
pay ten (10%) of the amount due
the complainant as attorneys
fees.
SO ORDERED.[3]
The respondents seasonably
interposed an appeal with the
NLRC. However, the appeal was
dismissed by the NLRC in its
Decision[4] dated January 27,
1998, as it affirmed in toto the
decision of the Labor Arbiter. In
the said decision, the NLRC
characterized the contract of
service between the respondent
company and the petitioner as a
scheme that was resorted to by
the respondents who, taking
advantage of the petitioners
unfamiliarity with the English
language and/or legal niceties,
wanted to evade the effects and
implications of his becoming a
regularized employee.[5]
The respondents sought
reconsideration of the January
27, 1998 Decision of the NLRC.
Acting thereon, the NLRC
rendered another
Decision[6] dated July 10, 1998,
reversing its earlier decision and,
this time, holding that no
employer-employee relationship
existed between the respondent

company and the petitioner. In

reconsidering its earlier decision,
the NLRC stated that the
respondents did not exercise
control over the means and
methods by which the petitioner
accomplished his delivery
services. It upheld the validity of
the contract of service as it
pointed out that said contract was
silent as to the time by which the
petitioner was to make the
deliveries and that the petitioner
could hire his own helpers whose
wages would be paid from his
own account. These factors
indicated that the petitioner was
an independent contractor, not an
employee of the respondent
company.
The NLRC ruled that the contract
of service was not intended to
circumvent Article 280 of the
Labor Code on the regularization
of employees. Said contract,
including the fixed period of
employment contained therein,
having been knowingly and
voluntarily entered into by the
parties thereto was declared valid
citing Brent School, Inc. v.
Zamora.[7] The NLRC, thus,
dismissed the petitioners
complaint for illegal dismissal.
The petitioner sought
reconsideration of the July 10,
1998 Decision but it was denied
by the NLRC in its Resolution
dated September 7, 1998. He
then filed with this Court a
petition for certiorari, which was

referred to the CA following the

ruling in St. Martin Funeral Home
v. NLRC.[8]
The appellate court rendered the
Decision dated April 28, 2000,
reversing the July 10, 1998
Decision of the NLRC and
reinstating the decision of the
Labor Arbiter. In the said
decision, the CA ruled that the
petitioner was a regular
employee of the respondent
company because as its truck
driver, he performed a service
that was indispensable to the
latters business. Further, he had
been the respondent companys
truck driver for ten continuous
years. The CA also reasoned that
the petitioner could not be
considered an independent
contractor since he had no
substantial capital in the form of
tools and machinery. In fact, the
truck that he drove belonged to
the respondent company. The CA
also observed that the routing
slips that the respondent
company issued to the petitioner
showed that it exercised control
over the latter. The routing slips
indicated the chronological order
and priority of delivery, the
urgency of certain deliveries and
the time when the goods were to
be delivered to the customers.
The CA, likewise, disbelieved the
respondents claim that the
petitioner abandoned his job
noting that he just filed a
complaint for regularization. This

actuation of the petitioner

negated the respondents
allegation that he abandoned his
job. The CA held that the
respondents failed to discharge
their burden to show that the
petitioners dismissal was for a
valid and just cause. Accordingly,
the respondents were declared
guilty of illegal dismissal and the
decision of the Labor Arbiter was
reinstated.
In its April 28, 2000 Decision, the
CA denounced the contract of
service between the respondent
company and the petitioner in
this wise:
In summation, we rule that with
the proliferation of contracts
seeking to prevent workers from
attaining the status of regular
employment, it is but necessary
for the courts to scrutinize with
extreme caution their legality and
justness. Where from the
circumstances it is apparent that
a contract has been entered into
to preclude acquisition of tenurial
security by the employee, they
should be struck down and
disregarded as contrary to public
policy and morals. In this case,
the contract of service is just
another attempt to exploit the
unwitting employee and deprive
him of the protection of the Labor
Code by making it appear that
the stipulations of the parties
were governed by the Civil Code
as in ordinary transactions.[9]

 However, on motion for

reconsideration by the
respondents, the CA made a
complete turn around as it
rendered the assailed Resolution
dated December 15, 2000
upholding the contract of service
between the petitioner and the
respondent company. In
reconsidering its decision, the CA
explained that the extent of
control exercised by the
respondents over the petitioner
was only with respect to the
result but not to the means and
methods used by him. The CA
cited the following circumstances:
(1) the respondents had no say
on how the goods were to be
delivered to the customers; (2)
the petitioner had the right to
employ workers who would be
under his direct control; and (3)
the petitioner had no working
time.
The fact that the petitioner had
been with the respondent
company for more than ten years
was, according to the CA, of no
moment because his status was
determined not by the length of
service but by the contract of
service. This contract, not being
contrary to morals, good
customs, public order or public
policy, should be given the force
and effect of law as between the
respondent company and the
petitioner. Consequently, the CA
reinstated the July 10, 1998
Decision of the NLRC dismissing

the petitioners complaint for

illegal dismissal.
Hence, the recourse to this Court
by the petitioner. He assails the
December 15, 2000 Resolution of
the appellate court alleging that:
(A)
THE COURT OF APPEALS
COMMITTED A GRAVE ABUSE
OF DISCRETION AMOUNTING
TO EXCESS OF JURISDICTION
IN GIVING MORE
CONSIDERATION TO THE
CONTRACT OF SERVICE
ENTERED INTO BY
PETITIONER AND PRIVATE
RESPONDENT THAN ARTICLE
280 OF THE LABOR CODE OF
THE PHILIPPINES WHICH
CATEGORICALLY DEFINES A
REGULAR EMPLOYMENT
NOTWITHSTANDING ANY
WRITTEN AGREEMENT TO
THE CONTRARY AND
REGARDLESS OF THE ORAL
AGREEMENT OF THE
PARTIES;
(B)
THE COURT OF APPEALS
COMMITTED A GRAVE ABUSE
OF DISCRETION AMOUNTING
TO EXCESS OF JURISDICTION
IN REVERSING ITS OWN
FINDINGS THAT PETITIONER
IS A REGULAR EMPLOYEE
AND IN HOLDING THAT THERE
EXISTED NO EMPLOYEREMPLOYEE RELATIONSHIP
BETWEEN PRIVATE
RESPONDENT AND
PETITIONER IN AS MUCH AS

THE CONTROL TEST WHICH IS

CONSIDERED THE MOST
ESSENTIAL CRITERION IN
DETERMINING THE
EXISTENCE OF SAID
RELATIONSHIP IS NOT
PRESENT.[10]
The threshold issue that needs to
be resolved is whether there
existed an employer-employee
relationship between the
respondent company and the
petitioner. We rule in the
affirmative.
The elements to determine the
existence of an employment
relationship are: (1) the selection
and engagement of the
employee; (2) the payment of
wages; (3) the power of
dismissal; and (4) the employers
power to control the employees
conduct.[11] 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.[12] All the four
elements are present in this
case.
First. Undeniably, it was the
respondents who engaged the
services of the petitioner without
the intervention of a third party.
Second. Wages are defined as
remuneration or earnings,
however designated, capable of
being expressed in terms of
money, whether fixed or
ascertained on a time, task, piece

or commission basis, or other

method of calculating the same,
which is payable by an employer
to an employee under a written or
unwritten contract of employment
for work done or to be done, or
for service rendered or to be
rendered.[13] That the petitioner
was paid on a per trip basis is not
significant. This is merely a
method of computing
compensation and not a basis for
determining the existence or
absence of employer-employee
relationship. One may be paid on
the basis of results or time
expended on the work, and may
or may not acquire an
employment status, depending
on whether the elements of an
employer-employee relationship
are present or not.[14] In this case,
it cannot be gainsaid that the
petitioner received compensation
from the respondent company for
the services that he rendered to
the latter.
Moreover, under the Rules
Implementing the Labor Code,
every employer is required to pay
his employees by means of
payroll.[15] The payroll should
show, among other things, the
employees rate of pay,
deductions made, and the
amount actually paid to the
employee. Interestingly, the
respondents did not present the
payroll to support their claim that
the petitioner was not their
employee, raising speculations

whether this omission proves that

its presentation would be adverse
to their case.[16]
Third. The respondents power to
dismiss the petitioner was
inherent in the fact that they
engaged the services of the
petitioner as truck driver. They
exercised this power by
terminating the petitioners
services albeit in the guise of
severance of contractual relation
due allegedly to the latters
breach of his contractual
obligation.
Fourth. As earlier opined, of the
four elements of the employeremployee relationship, the
control test is the most important.
Compared to an employee, an
independent contractor is one
who carries on a distinct and
independent business and
undertakes to perform the job,
work, or service on its own
account and under its own
responsibility according to its own
manner and method, free from
the control and direction of the
principal in all matters connected
with the performance of the work
except as to the results thereof.
[17]
Hence, while an independent
contractor enjoys independence
and freedom from the control and
supervision of his principal, an
employee is subject to the
employers power to control the
means and methods by which the
employees work is to be
performed and accomplished.[18]

Although the respondents denied

that they exercised control over
the manner and methods by
which the petitioner
accomplished his work, a careful
review of the records shows that
the latter performed his work as
truck driver under the
respondents supervision and
control. Their right of control was
manifested by the following
attendant circumstances:
The truck driven by the petitioner
belonged to respondent
company;
There was an express instruction
from the respondents that the
truck shall be used exclusively to
deliver respondent companys
goods; [19]
Respondents directed the
petitioner, after completion of
each delivery, to park the truck in
either of two specific places only,
to wit: at its office in Metro Manila
at 2320 Osmea Street, Makati
City or at BEPZ, Mariveles,
Bataan;[20] and
Respondents determined how,
where and when the petitioner
would perform his task by issuing
to him gate passes and routing
slips. [21]
- The routing slips indicated
on the column REMARKS,
the chronological order and
priority of delivery such as
1st drop, 2nd drop, 3rd drop,
etc. This meant that the
petitioner had to deliver the
same according to the

order of priority indicated

therein.
- The routing slips, likewise,
showed whether the goods
were to be delivered
urgently or not by the word
RUSH printed thereon.
- The routing slips also
indicated the exact time as
to when the goods were to
be delivered to the
customers as, for example,
the words tomorrow
morning was written on slip
no. 2776.
These circumstances, to the
Courts mind, prove that the
respondents exercised control
over the means and methods by
which the petitioner
accomplished his work as truck
driver of the respondent
company. On the other hand, the
Court is hard put to believe the
respondents allegation that the
petitioner was an independent
contractor engaged in providing
delivery or hauling services when
he did not even own the truck
used for such services. Evidently,
he did not possess substantial
capitalization or investment in the
form of tools, machinery and
work premises. Moreover, the
petitioner performed the delivery
services exclusively for the
respondent company for a
continuous and uninterrupted
period of ten years.
The contract of service to the
contrary notwithstanding, the

factual circumstances earlier

discussed indubitably establish
the existence of an employeremployee relationship between
the respondent company and the
petitioner. It bears stressing that
the existence of an employeremployee relationship cannot be
negated by expressly repudiating
it in a contract and providing
therein that the employee is an
independent contractor when, as
in this case, the facts clearly
show otherwise. Indeed, the
employment status of a person is
defined and prescribed by law
and not by what the parties say it
should be.[22]
Having established that there
existed an employer-employee
relationship between the
respondent company and the
petitioner, the Court shall now
determine whether the
respondents validly dismissed
the petitioner.
As a rule, the employer bears the
burden to prove that the
dismissal was for a valid and just
cause.[23] In this case, the
respondents failed to prove any
such cause for the petitioners
dismissal. They insinuated that
the petitioner abandoned his job.
To constitute abandonment,
these two factors must concur:
(1) the failure to report for work or
absence without valid or
justifiable reason; and (2) a clear
intention to sever employeremployee relationship.

[24]

Obviously, the petitioner did

not intend to sever his
relationship with the respondent
company for at the time that he
allegedly abandoned his job, the
petitioner just filed a complaint for
regularization, which was
forthwith amended to one for
illegal dismissal. A charge of
abandonment is totally
inconsistent with the immediate
filing of a complaint for illegal
dismissal, more so when it
includes a prayer for
reinstatement.[25]
Neither can the respondents
claim that the petitioner was
guilty of gross negligence in the
proper maintenance of the truck
constitute a valid and just cause
for his dismissal. Gross
negligence implies a want or
absence of or failure to exercise
slight care or diligence, or the
entire absence of care. It evinces
a thoughtless disregard of
consequences without exerting
any effort to avoid them.[26] The
negligence, to warrant removal
from service, should not merely
be gross but also habitual.[27] The
single and isolated act of the
petitioners negligence in the
proper maintenance of the truck
alleged by the respondents does
not amount to gross and habitual
neglect warranting his dismissal.
The Court agrees with the
following findings and conclusion
of the Labor Arbiter:

As against the gratuitous

allegation of the respondent that
complainant was not dismissed
from the service but due to
complainants breach of their
contractual relation, i.e., his
violation of the terms and
conditions of the contract, we are
very much inclined to believe
complainants story that his
dismissal from the service was
anchored on his insistent
demand that he be considered a
regular employee. Because
complainant in his right senses
will not just abandon for that
reason alone his work especially
so that it is only his job where he
depends chiefly his existence
and support for his family if he
was not aggrieved by the
respondent when he was told
that his services as driver will be
terminated on February 23, 1995.
[28]

Thus, the lack of a valid and just

cause in terminating the services
of the petitioner renders his
dismissal illegal. Under Article
279 of the Labor Code, an
employee who is unjustly
dismissed is entitled to
reinstatement, without loss of
seniority rights and other
privileges, and to the payment of
full backwages, inclusive of
allowances, and other benefits or
their monetary equivalent,
computed from the time his
compensation was withheld from
him up to the time of his actual

reinstatement.[29] However, as
found by the Labor Arbiter, the
circumstances obtaining in this
case do not warrant the
petitioners reinstatement. A more
equitable disposition, as held by
the Labor Arbiter, would be an
award of separation pay
equivalent to one month for every
year of service from the time of
his illegal dismissal up to the
finality of this judgment in
addition to his full backwages,
allowances and other benefits.
WHEREFORE, the instant
petition is GRANTED. The
Resolution dated December 15,
2000 of the Court of Appeals
reversing its Decision dated April
28, 2000 in CA-G.R. SP No.
52485 is REVERSED and SET
ASIDE. The Decision dated
February 3, 1997 of the Labor
Arbiter in NLRC Case No. RABIII-02-6181-5, finding the
respondents guilty of illegally
terminating the employment of
petitioner Pedro Chavez, is
REINSTATED.
SO ORDERED.

LA BOTTLERS (PHILS.), G.R.

No. 146881
INC./ERIC MONTINOLA,
Manager,
Petitioners, Present:
PUNO, C.J., Chairperson,
SANDOVAL-GUTIERREZ,
- versus - CORONA,
AZCUNA, and
GARCIA, JJ.
DR. DEAN N.
CLIMACO, Promulgated:
Respondent.
February 5, 2007
x
--------------------------------------------------------------------------------------x
DECISION
AZCUNA, J.:
This is a petition for review on
certiorari of the Decision of the
Court of Appeals[1] promulgated
on July 7, 2000, and its
Resolution promulgated
on January 30, 2001, denying
petitioners motion for
reconsideration. The Court of
Appeals ruled that an employer-

employee relationship exists

between respondent Dr. Dean N.
Climaco and petitioner CocaCola Bottlers Phils., Inc. (CocaCola), and that respondent was
illegally dismissed.
Respondent Dr. Dean N. Climaco
is a medical doctor who was
hired by petitioner Coca-Cola
Bottlers Phils., Inc. by virtue of a
Retainer Agreement that stated:
WHEREAS, the
COMPANY desires to engage on
a retainer basis the services of a
physician and the said DOCTOR
is accepting such engagement
upon terms and conditions
hereinafter set forth;
NOW, THEREFORE, in
consideration of the
premises and the mutual
agreement hereinafter contained,
the parties agree as follows:
This Agreement shall only be for
a period of one (1) year
beginning January 1, 1988 up
to December 31, 1988. The said
term notwithstanding, either party
may terminate the contract upon
giving a thirty (30)-day written
notice to the other.
The compensation to be paid by
the company for the services of
the DOCTOR is hereby fixed at

PESOS: Three Thousand Eight

Hundred (P3,800.00) per
month. The DOCTOR may
charge professional fee for
hospital services rendered in line
with his specialization. All
payments in connection with the
Retainer Agreement shall be
subject to a withholding tax of ten
percent (10%) to be withheld by
the COMPANY under the
Expanded Withholding Tax
System. In the event the
withholding tax rate shall be
increased or decreased by
appropriate laws, then the rate
herein stipulated shall
accordingly be increased or
decreased pursuant to such laws.
That in consideration of the
above mentioned retainers fee,
the DOCTOR agrees to perform
the duties and obligations
enumerated in the
COMPREHENSIVE MEDICAL
PLAN, hereto attached as Annex
A and made an integral part of
this Retainer Agreement.
That the applicable provisions in
the Occupational Safety and
Health Standards, Ministry of
Labor and Employment shall be
followed.
That the DOCTOR shall be
directly responsible to the
employee concerned and their
dependents for any injury inflicted
on, harm done against or

damage caused upon the

employee of the COMPANY or
their dependents during the
course of his examination,
treatment or consultation, if such
injury, harm or damage was
committed through professional
negligence or incompetence or
due to the other valid causes for
action.
That the DOCTOR shall observe
clinic hours at the COMPANYS
premises from Monday to
Saturday of a minimum of two (2)
hours each day or a maximum
of TWO (2) hours each day or
treatment
from 7:30 a.m. to 8:30 a.m. and 3
:00 p.m. to 4:00 p.m.,
respectively unless such
schedule is otherwise changed
by the COMPANY as [the]
situation so warrants, subject to
the Labor Code provisions on
Occupational Safety and Health
Standards as the COMPANY
may determine. It is understood
that the DOCTOR shall stay at
least two (2) hours a day in the
COMPANY clinic and that such
two (2) hours be devoted to the
workshift with the most number of
employees. It is further
understood that the DOCTOR
shall be on call at all times during
the other workshifts to attend to
emergency case[s];
That no employee-employer
relationship shall exist between

the COMPANY and the DOCTOR

whilst this contract is in effect,
and in case of its termination, the
DOCTOR shall be entitled only to
such retainer fee as may be due
him at the time of termination.[2]
The Comprehensive Medical
Plan,[3] which contains the duties
and responsibilities of
respondent, adverted to in the
Retainer Agreement, provided:
-

OBJECTIVE

These objectives have been set

to give full consideration to [the]
employees and dependents
health:
Prompt and adequate treatment
of occupational and nonoccupational injuries and
diseases.
To protect employees from any
occupational health hazard by
evaluating health factors related
to working conditions.
To encourage employees [to]
maintain good personal health by
setting up employee orientation
and education on health, hygiene
and sanitation, nutrition, physical
fitness, first aid training, accident
prevention and personnel safety.
To evaluate other matters relating
to health such as absenteeism,
leaves and termination.

 To give family planning

motivations.

Conduct health education

programs and present education
materials.

- COVERAGE
All employees and their
dependents are embraced by this
program.

Coordinate with Safety

Committee in developing specific
studies and program to minimize
environmental health hazards.

The health program shall cover

pre-employment and annual p.e.,
hygiene and sanitation,
immunizations, family planning,
physical fitness and athletic
programs and other activities
such as group health education
program, safety and first aid
classes, organization of health
and safety committees.

Give family planning motivations.

Periodically, this program will be

reviewed and adjusted based on
employees needs.

The Retainer Agreement,

which began on January 1,
1988, was renewed annually. The
last one expired on December
31, 1993. Despite the nonrenewal of the Retainer
Agreement, respondent
continued to perform his
functions as company doctor to
Coca-Cola until he received a
letter[4] dated March 9, 1995 from
petitioner company concluding
their retainership
agreement effective 30 days from
receipt thereof.

- ACTIVITIES
Annual Physical Examination.
Consultations, diagnosis and
treatment of occupational and
non-occupational illnesses and
injuries.
Immunizations necessary for job
conditions.
Periodic inspections for food
services and rest rooms.

Coordinate with Personnel

Department regarding physical
fitness and athletic programs.
Visiting and follow-up treatment
of Company employees and their
dependents confined in the
hospital.

It is noted that as early as

September 1992, petitioner was
already making inquiries
regarding his status with
petitioner company. First, he

wrote a letter addressed to Dr.

Willie Sy, the Acting President
and Chairperson of the
Committee on Membership,
Philippine College of
Occupational Medicine. In
response, Dr. Sy wrote a
letter[5] to the Personnel Officer of
Coca-Cola Bottlers
Phils., Bacolod City, stating that
respondent should be considered
as a regular part-time physician,
having served the company
continuously for four (4) years.
He likewise stated that
respondent must receive all the
benefits and privileges of an
employee under Article 157 (b)
[6]
of the Labor Code.
Petitioner company, however, did
not take any action. Hence,
respondent made another inquiry
directed to the Assistant Regional
Director, Bacolod City District
Office of the Department of Labor
and Employment (DOLE), who
referred the inquiry to the Legal
Service of the DOLE, Manila. In
his letter[7] dated May 18, 1993,
Director Dennis P. Ancheta, Legal
Service, DOLE, stated that he
believed that an employeremployee relationship existed
between petitioner and
respondent based on the
Retainer Agreement and the
Comprehensive Medical Plan,
and the application of the fourfold test. However, Director
Ancheta emphasized that the

existence of employer-employee
relationship is a question of
fact. Hence, termination disputes
or money claims arising from
employer-employee relations
exceeding P5,000 may be filed
with the National Labor Relations
Commission (NLRC). He stated
that their opinion is strictly
advisory.
An inquiry was likewise
addressed to the Social Security
System (SSS). Thereafter, Mr.
Romeo R. Tupas, OIC-FID
of SSS-Bacolod City, wrote a
letter[8] to the Personnel Officer of
Coca-Cola Bottlers Phils., Inc.
informing the latter that the legal
staff of his office was of the
opinion that the services of
respondent partake of the nature
of work of a regular company
doctor and that he was,
therefore, subject to social
security coverage.
Respondent inquired from the
management of petitioner
company whether it was
agreeable to recognizing him as
a regular employee. The
management refused to do so.
On February 24, 1994,
respondent filed a
Complaint[9] before the
NLRC, Bacolod City, seeking
recognition as a regular
employee of petitioner company
and prayed for the payment of all

benefits of a regular employee,

including 13th Month Pay, Cost of
Living Allowance, Holiday Pay,
Service Incentive Leave Pay, and
Christmas Bonus. The case
was docketed as RAB Case No.
06-02-10138-94.
While the complaint was pending
before the Labor Arbiter,
respondent received a letter
dated March 9, 1995 from
petitioner company concluding
their retainership
agreement effective thirty (30)
days from receipt thereof. This
prompted respondent to file a
complaint for illegal dismissal
against petitioner company with
the NLRC, BacolodCity. The case
was docketed as RAB Case No.
06-04-10177-95.
In a Decision[10] dated November
28, 1996, Labor Arbiter Jesus N.
Rodriguez, Jr. found that
petitioner company lacked the
power of control over
respondents performance of his
duties, and recognized as valid
the Retainer Agreement between
the parties. Thus, the Labor
Arbiter dismissed respondents
complaint in the first case, RAB
Case No. 06-02-10138-94. The
dispositive portion of the Decision
reads:
WHEREFORE, premises
considered, judgment is hereby
rendered dismissing the instant

complaint seeking recognition as

a regular employee.
SO ORDERED.[11]
In a Decision[12] dated February
24, 1997, Labor Arbiter Benjamin
Pelaez dismissed the case for
illegal dismissal (RAB Case No.
06-04-10177-95) in view of the
previous finding of Labor Arbiter
Jesus N. Rodriguez, Jr. in RAB
Case No. 06-02-10138-94
that complainant therein, Dr.
Dean Climaco, is not an
employee of Coca-Cola Bottlers
Phils., Inc.
Respondent appealed both
decisions to the NLRC, Fourth
Division, Cebu City.
In a Decision[13] promulgated
on November 28, 1997, the
NLRC dismissed the appeal in
both cases for lack of merit. It
declared that no employeremployee relationship existed
between petitioner company and
respondent based
on the provisions of the Retainer
Agreement which contract
governed respondents
employment.
Respondents motion for
reconsideration was denied by
the NLRC in a
Resolution[14] promulgated
on August 7, 1998.

 Respondent filed a petition for

review with the Court of Appeals.
In a Decision promulgated on
July 7, 2000, the Court of
Appeals ruled that an employeremployee relationship existed
between petitioner company and
respondent after applying the
four-fold test: (1) the power to
hire the employee; (2) the
payment of wages; (3) the power
of dismissal; and (4) the
employers power to control the
employee with respect to the
means and methods by which the
work is to be accomplished.
The Court of Appeals held:
The Retainer Agreement
executed by and between the
parties, when read together with
the Comprehensive Medical Plan
which was made an integral part
of the retainer agreements,
coupled with the actual services
rendered by the petitioner, would
show that all the elements of the
above test are present.
First, the agreements provide
that the COMPANY desires to
engage on a retainer basis the
services of a physician and the
said DOCTOR is accepting such
engagement x x x (Rollo, page
25). This clearly shows that
Coca-Cola exercised its power to
hire the services of petitioner.

Secondly, paragraph (2) of the

agreements showed that
petitioner would be entitled to a
final compensation of Three
Thousand Eight Hundred Pesos
per month, which amount was
later raised to Seven Thousand
Five Hundred on the latest
contract. This would represent
the element of payment of
wages.
Thirdly, it was provided in
paragraph (1) of the agreements
that the same shall be valid for a
period of one year. The said term
notwithstanding, either party may
terminate the contract upon
giving a thirty (30) day written
notice to the other. (Rollo, page
25). This would show that CocaCola had the power of dismissing
the petitioner, as it later on did,
and this could be done for no
particular reason, the sole
requirement being the formers
compliance with the 30-day
notice requirement.
Lastly, paragraphs (3) and (6) of
the agreements reveal that CocaCola exercised the most
important element of all, that is,
control, over the conduct of
petitioner in the latters
performance of his duties as a
doctor for the company.
It was stated in paragraph (3)
that the doctor agrees to perform
the duties and obligations

enumerated in the
Comprehensive Medical Plan
referred to above. In paragraph
(6), the fixed and definite hours
during which the petitioner must
render service to the company is
laid down.
We say that there exists CocaColas power to control petitioner
because the particular objectives
and activities to be observed and
accomplished by the latter are
fixed and set under the
Comprehensive Medical Plan
which was made an integral part
of the retainer
agreement. Moreover, the times
for accomplishing these
objectives and activities are
likewise controlled and
determined by the
company. Petitioner is subject to
definite hours of work, and due to
this, he performs his duties to
Coca-Cola not at his own
pleasure but according to the
schedule dictated by the
company.
In addition, petitioner was
designated by Coca-Cola to be a
member of its Bacolod Plants
Safety Committee. The minutes
of the meeting of the said
committee dated February 16,
1994included the name of
petitioner, as plant physician, as
among those comprising the
committee.

It was averred by Coca-Cola in

its comment that they exercised
no control over petitioner for the
reason that the latter was not
directed as to the procedure and
manner of performing his
assigned tasks. It went as far as
saying that petitioner was not told
how to immunize, inject, treat or
diagnose the employees of the
respondent (Rollo, page 228).
We believe that if the control test
would be interpreted this strictly,
it would result in an absurd and
ridiculous situation wherein we
could declare that an entity
exercises control over anothers
activities only in instances where
the latter is directed by the former
on each and every stage of
performance of the particular
activity. Anything less than that
would be tantamount to no
control at all.
To our minds, it is sufficient if the
task or activity, as well as the
means of accomplishing it, is
dictated, as in this case where
the objectives and activities were
laid out, and the specific time for
performing them was fixed by the
controlling party.[15]
Moreover, the Court of Appeals
declared that respondent should
be classified as a regular
employee having rendered six
years of service as plant
physician by virtue of several

renewed retainer agreements. It

underscored the provision in
Article 280[16] of the Labor Code
stating that any employee who
has rendered at least one year of
service, whether such service is
continuous or broken, shall be
considered a regular employee
with respect to the activity in
which he is employed, and his
employment shall continue while
such activity exists. Further, it
held that the termination of
respondents services without any
just or authorized cause
constituted illegal dismissal.
In addition, the Court of Appeals
found that respondents dismissal
was an act oppressive to labor
and was effected in a wanton,
oppressive or malevolent manner
which entitled respondent to
moral and exemplary damages.
The dispositive portion of the
Decision reads:
WHEREFORE, in view of the
foregoing, the Decision of the
National Labor Relations
Commission dated November 28,
1997 and its Resolution
dated August 7, 1998 are found
to have been issued with grave
abuse of discretion in applying
the law to the established facts,
and are hereby REVERSED and
SET ASIDE, and private
respondent Coca-Cola Bottlers,
Phils.. Inc. is hereby ordered to:

Reinstate the petitioner with full

backwages without loss of
seniority rights from the time his
compensation was withheld up to
the time he is actually reinstated;
however, if reinstatement is no
longer possible, to pay the
petitioner separation pay
equivalent to one (1) months
salary for every year of service
rendered, computed at the rate of
his salary at the time he was
dismissed, plus backwages.
Pay petitioner moral damages in
the amount of P50,000.00.
Pay petitioner exemplary
damages in the amount
of P50,000.00.
Give to petitioner all other
benefits to which a regular
employee of Coca-Cola is
entitled from the time petitioner
became a regular employee (one
year from effectivity date of
employment) until the time of
actual payment.
SO ORDERED.[17]
Petitioner company filed a motion
for reconsideration of the
Decision of the Court of Appeals.
In a Resolution promulgated
on January 30, 2001, the Court
of Appeals stated that petitioner

company noted that its Decision

failed to mention whether
respondent was a full-time or
part-time regular employee. It
also questioned how the benefits
under their Collective Bargaining
Agreement which the Court
awarded to respondent could be
given to him considering that
such benefits were given only to
regular employees who render a
full days work of not less that
eight hours. It was admitted that
respondent is only required to
work for two hours per day.
The Court of Appeals clarified
that respondent was a regular
part-time employee and should
be accorded all the proportionate
benefits due to this category of
employees of [petitioner]
Corporation under the CBA. It
sustained its decision on all other
matters sought to be
reconsidered.
Hence, this petition filed by CocaCola Bottlers Phils., Inc.
The issues are:
THAT THE HONORABLE
COURT OF APPEALS
COMMITTED REVERSIBLE
ERROR, BASED ON A
SUBSTANTIAL QUESTION OF
LAW, IN REVERSING THE
FINDINGS OF THE LABOR
ARBITERS AND THE NATIONAL
LABOR RELATIONS

COMMISSION, CONTRARY TO
THE DECISIONS OF THE
HONORABLE SUPREME
COURT ON THE MATTER.
THAT THE HONORABLE
COURT OF APPEALS
COMMITTED REVERSIBLE
ERROR, BASED ON A
SUBSTANTIAL QUESTION OF
LAW, IN REVERSING THE
FINDINGS OF THE LABOR
ARBITERS AND THE NATIONAL
LABOR RELATIONS
COMMISSION, AND HOLDING
INSTEAD THAT THE WORK OF
A PHYSICIAN IS NECESSARY
AND DESIRABLE TO THE
BUSINESS OF SOFTDRINKS
MANUFACTURING, CONTRARY
TO THE RULINGS OF THE
SUPREME COURT IN
ANALOGOUS CASES.
THAT THE HONORABLE
COURT OF APPEALS
COMMITTED REVERSIBLE
ERROR, BASED ON A
SUBSTANTIAL QUESTION OF
LAW, IN REVERSING THE
FINDINGS OF THE LABOR
ARBITERS AND THE NATIONAL
LABOR RELATIONS
COMMISSION, AND HOLDING
INSTEAD THAT THE
PETITIONERS EXERCISED
CONTROL OVER THE WORK
OF THE RESPONDENT.
THAT THE HONORABLE
COURT OF APPEALS

COMMITTED REVERSIBLE
ERROR, BASED ON A
SUBSTANTIAL QUESTION OF
LAW, IN REVERSING THE
FINDINGS OF THE LABOR
ARBITERS AND THE NATIONAL
LABOR RELATIONS
COMMISSION, AND FINDING
THAT THERE IS EMPLOYEREMPLOYEE RELATIONSHIP
PURSUANT TO ARTICLE 280
OF THE LABOR CODE.
THAT THE HONORABLE
COURT OF APPEALS
COMMITTED REVERSIBLE
ERROR, BASED ON A
SUBSTANTIAL QUESTION OF
LAW, IN REVERSING THE
FINDINGS OF THE LABOR
ARBITERS AND THE NATIONAL
LABOR RELATIONS
COMMISSION, AND FINDING
THAT THERE EXISTED
ILLEGAL DISMISSAL WHEN
THE EMPLOYENT OF THE
RESPONDENT WAS
TERMINATED WITHOUT JUST
CAUSE.
THAT THE HONORABLE
COURT OF APPEALS
COMMITTED REVERSIBLE
ERROR, BASED ON A
SUBSTANTIAL QUESTION OF
LAW, IN REVERSING THE
FINDINGS OF THE LABOR
ARBITERS AND THE NATIONAL
LABOR RELATIONS
COMMISSION, AND FINDING
THAT THE RESPONDENT IS A

REGULAR PART TIME

EMPLOYEE WHO IS ENTITLED
TO PROPORTIONATE
BENEFITS AS A REGULAR
PART TIME EMPLOYEE
ACCORDING TO THE
PETITIONERS CBA.
THAT THE HONORABLE
COURT OF APPEALS
COMMITTED REVERSIBLE
ERROR, BASED ON A
SUBSTANTIAL QUESTION OF
LAW, IN REVERSING THE
FINDINGS OF THE LABOR
ARBITERS AND THE NATIONAL
LABOR RELATIONS
COMMISSION, AND FINDING
THAT THE RESPONDENT IS
ENTITLED TO MORAL AND
EXEMPLARY DAMAGES.

The main issue in this case is

whether or not there exists an
employer-employee relationship
between the parties. The
resolution of the main issue will
determine whether the
termination of respondents
employment is illegal.
The Court, in determining the
existence of an employeremployee relationship, has
invariably adhered to the four-fold
test: (1) the selection and
engagement of the employee; (2)
the payment of wages; (3) the
power of dismissal; and (4) the

power to control the employees

conduct, or the so-called control
test, considered to be the most
important element.[18]
The Court agrees with the finding
of the Labor Arbiter and the
NLRC that the circumstances of
this case show that no employeremployee relationship exists
between the parties. The Labor
Arbiter and the NLRC correctly
found that petitioner company
lacked the power of control over
the performance by respondent
of his duties. The Labor Arbiter
reasoned that the
Comprehensive Medical Plan,
which contains the respondents
objectives, duties and
obligations, does not tell
respondent how to conduct his
physical examination, how to
immunize, or how to diagnose
and treat his patients, employees
of [petitioner] company, in each
case. He likened this case to that
of Neri v. National Labor
Relations Commission,[19] which
held:
In the case of petitioner Neri, it is
admitted that FEBTC issued a
job description which detailed her
functions as a radio/telex
operator. However, a cursory
reading of the job description
shows that what was sought to
be controlled by FEBTC was
actually the end result of the task,
e.g., that the daily incoming and

outgoing telegraphic transfer of

funds received and relayed by
her, respectively, tallies with that
of the register. The guidelines
were laid down merely to ensure
that the desired end result was
achieved. It did not, however, tell
Neri how the radio/telex machine
should be operated.
In effect, the Labor Arbiter held
that petitioner company, through
the Comprehensive Medical
Plan, provided guidelines merely
to ensure that the end result was
achieved, but did not control the
means and methods by which
respondent performed his
assigned tasks.
The NLRC affirmed the findings
of the Labor Arbiter and stated
that it is precisely because the
company lacks the power of
control that the contract provides
that respondent shall be directly
responsible to the employee
concerned and their dependents
for any injury, harm or damage
caused through professional
negligence, incompetence or
other valid causes of action.
The Labor Arbiter also correctly
found that the provision in the
Retainer Agreement that
respondent was on call during
emergency cases did not make
him a regular employee. He
explained, thus:

 Likewise, the allegation of

complainant that since he is on
call at anytime of the day and
night makes him a regular
employee is offtangent. Complainant does not
dispute the fact that outside of
the two (2) hours that he is
required to be at respondent
companys premises, he is not at
all further required to just sit
around in the premises and wait
for an emergency to occur so as
to enable him from using such
hours for his own benefit and
advantage. In fact, complainant
maintains his own private clinic
attending to his private practice in
the city, where he services his
patients, bills them accordingly -and if it is an employee of
respondent company who is
attended to by him for special
treatment that needs
hospitalization or operation, this
is subject to a special
billing. More often than not, an
employee is required to stay in
the employers workplace or
proximately close thereto that he
cannot utilize his time effectively
and gainfully for his own
purpose. Such is not the
prevailing situation here.

In addition, the Court finds that

the schedule of work and the
requirement to be on call for
emergency cases do not amount

to such control, but are

necessary incidents to the
Retainership Agreement.
The Court also notes that the
Retainership Agreement granted
to both parties the power to
terminate their relationship upon
giving a 30-day notice. Hence,
petitioner company did not wield
the sole power of dismissal or
termination.
The Court agrees with the Labor
Arbiter and the NLRC that there
is nothing wrong with the
employment of respondent as a
retained physician of petitioner
company and upholds the validity
of the Retainership Agreement
which clearly stated that no
employer-employee relationship
existed between the parties. The
Agreement also stated that it was
only for a period of 1 year
beginning January 1,
1988 to December 31, 1998, but
it was renewed on a yearly basis.
Considering that there is no
employer-employee relationship
between the parties, the
termination of the Retainership
Agreement, which is in
accordance with the provisions of
the Agreement, does not
constitute illegal dismissal of
respondent. Consequently, there
is no basis for the moral and
exemplary damages granted by
the Court of Appeals to

respondent due to his alleged

illegal dismissal.
WHEREFORE, the petition
is GRANTED and the Decision
and Resolution of the Court of
Appeals
are REVERSED and SET
ASIDE. The Decision and
Resolution dated November 28,
1997 and August 7, 1998,
respectively, of the National
Labor Relations Commission
are REINSTATED.
No costs.
SO ORDERED.
MELENCIO GABRIEL, G.R. No.
146989
represented by surviving spouse,
FLORDELIZA V. GABRIEL,
Petitioner, Present:
PUNO, C.J., Chairperson,
- versus - SANDOVALGUTIERREZ,
CORONA,
AZCUNA, and
GARCIA, JJ.
NELSON BILON,
ANGEL BRAZIL
AND ERNESTO PAGAYGAY,
Respondents. Promulgated:
February 7, 2007
x
--------------------------------------------

-------------------------------------------x
DECISION
AZCUNA, J.:
This is a petition for review on
certiorari[1] assailing the Decision
and Resolution of the Court of
Appeals, respectively
dated August 4,
2000 and February 7, 2001, in
CA-G.R. SP No. 52001 entitled
Nelson Bilon, et al. v. National
Labor Relations Commission, et
al.
The challenged decision
reversed and set aside the
decision[2] of the National Labor
Relations Commission (NLRC)
dismissing respondents
complaint for illegal dismissal and
illegal deductions, and reinstating
the decision of the Labor Arbiter
finding petitioner guilty of illegal
dismissal but not of illegal
deductions subject to the
modification that respondents be
immediately reinstated to their
former positions without loss of
seniority rights and privileges
instead of being paid separation
pay.
Petitioner, represented by his
surviving spouse, Flordeliza V.
Gabriel, was the owner-operator

of a public transport business,

Gabriel Jeepney, with a fleet of
54 jeepneysplying the BaclaranDivisoria-Tondo route. Petitioner
had a pool of drivers, which
included respondents, operating
under a boundary system
of P400 per day.
The facts are as follows:
[3]

On November 15, 1995,

respondents filed their separate
complaints for illegal dismissal,
illegal deductions, and separation
pay against petitioner with the
National Labor Relations
Commission (NLRC). These
were consolidated and docketed
as NLRC-NCR Case No. 00-1107420-95.[4]
On December 15, 1995, the
complaint was
amended, impleading as party
respondent the Bacoor Transport
Service Cooperative, Inc., as
both parties are members of the
cooperative.
Respondents alleged the
following:
- That they were regular
drivers of Gabriel Jeepney,
driving their respective
units bearing Plate Nos.
PHW 553, NXU 155, and
NWW 557, under a
boundary system of P400
per day,
plying Baclaran to Divisoria

via Tondo, and vice versa,

since December 1990,
November 1984 and
November 1991,
respectively, up to April 30,
1995,[5] driving five

days a week, with average daily

earnings of P400;
- That they were
required/forced to pay
additional P55.00 per day
for the following: a) P20.00
police protection; b) P20.00
washing; c) P10.00 deposit;
and [d)] P5.00 garage fees;
- That there is no law
providing the operator to
require the drivers to pay
police protection, deposit,
washing, and garage fees.
- That on April 30, 1995,
petitioner told them not to
drive anymore, and when
they went to the garage to
report for work the next
day, they were not given a
unit to drive; and
- That the boundary drivers
of passenger jeepneys are
considered regular
employees of
the jeepney operators.
Being such, they are
entitled to security of
tenure. Petitioner, however,

dismissed them without

factual and legal basis, and
without due process.
On his part, petitioner contended
that:
- He does not remember if
the respondents were ever
under his employ as drivers
of his
passenger jeepneys. Certai
n, however, is the fact that
neither the respondents nor
other drivers who worked
for him were ever
dismissed by him. As a
matter of fact, some of his
former drivers just stopped
reporting for work, either
because they found some
other employment or drove
for other operators, and like
the respondents, the next
time he heard from them
was when they started
fabricating unfounded
complaints against him;
- He made sure that none of
the jeepneys would stay
idle even for a day so he
could collect his earnings;
hence, it had been his
practice to establish a pool
of drivers. Had respondents
manifested their desire to
drive his units, it would
have been immaterial

whether they were his

former drivers or not. As
long as they obtained the
necessary licenses and
references, they would
have been accommodated
and placed on schedule;
- While he was penalized or
made to pay a certain
amount in connection with
similar complaints by other
drivers in a previous case
before this, it was not
because his culpability was
established, but due to
technicalities involving
oversight and negligence
on his part by not
participating in any stage of
the investigation thereof;
and
- Respondents claim that
certain amounts, as
enumerated in the
complaint, were deducted
from their days earnings is
preposterous. Indeed, there
were times when
deductions were made
from the days earnings of
some drivers, but such
were installment payments
for the amount previously
advanced to them. Most
drivers, when they got
involved in accidents or
violations of traffic
regulations, managed to
settle them, and in the
process they had to spend

some money, but most of

the time they did not have
the needed amount so they
secured cash advances
from him, with the
understanding that the
same should be paid back
by installments through
deductions from their daily
earnings or boundary.
On the other
hand, Bacoor Transport Service
Cooperative, Inc. (BTSCI)
declared that it should not be
made a party to the case
because: 1) [I]t has nothing to do
with the employment of its
member-drivers. The matter is
between the member-operator
and their respective memberdrivers. The member-drivers
tenure of employment,
compensation, work conditions,
and other aspects of employment
are matters of arrangement
between them and the memberoperators concerned, and the
BTSCI has nothing to do with it,
as can be inferred from the
Management Agreement
between BTSCI and the memberoperators; and 2) [T]he amount
allegedly deducted from
respondents and the purpose for
which they were applied were
matters that the cooperative was
not aware of, and much less
imposed on them.

On September 17, 1996,

respondents filed a motion to reraffle the case for the reason that
the Labor Arbiter (Hon. Roberto I.
Santos) failed to render his
decision within thirty (30)
calendar days, without extension,
after the submission of the case
for decision.
On September 18, 1996, said
Labor Arbiter inhibited himself
from further handling the case
due to personal reasons.
On November 8, 1996, Labor
Arbiter Ricardo C. Nora, to whom
the case was re-raffled, ordered
the parties to file their respective
memoranda within ten days, after
which the case was deemed
submitted for resolution.
On March 17, 1997, the Labor
Arbiter (Hon. Ricardo C. Nora)
handed down his decision,
the dispositive portion of which is
worded as follows:
WHEREFORE, premises
considered, judgment is hereby
rendered declaring the illegality
of [respondents] dismissal and
ordering
[petitioner] Melencio Gabriel to
pay the [respondents] the total
amount of ONE MILLION
THIRTY FOUR THOUSAND
PESOS [P1,034,000,]
representing
[respondents] backwages and
separation pay as follows:

 Nelson Bilon
Backwages P 284,800
Separation
Pay 26,400 P 321,200
Angel Brazil
Backwages P 294,800
Separation Pay 96,800 391,600
Ernesto Pagaygay
Backwages P 294,800
Separation Pay 26,400 321,200
P 1,034,000
[Petitioner] Melencio Gabriel is
likewise ordered to pay attorneys
fees equivalent to five percent
(5%) of the judgment award or
the amount of P51,700 within ten
(10) days from receipt of this
Decision.
All other issues are dismissed for
lack of merit.
SO ORDERED.[6]
Incidentally, on April 4, 1997,
petitioner passed away. On April
18, 1997, a copy of the above
decision was delivered personally
to petitioners house. According to
respondents, petitioners surviving
spouse, Flordeliza Gabriel, and
their daughter, after reading the
contents of the decision and after

they had spoken to their counsel,

refused to receive the same.
Nevertheless, Bailiff Alfredo
V. Estonactoc left a copy of the
decision with petitioners wife and
her daughter but they both
refused to sign and acknowledge
receipt of the decision.[7]
The labor arbiters decision was
subsequently served by
registered mail at petitioners
residence and the same was
received on May 28, 1997.
On May 16, 1997, counsel for
petitioner filed an entry of
appearance with motion to
dismiss the case for the reason
that petitioner passed away last
April 4, 1997.
On June 5, 1997, petitioner
appealed the labor arbiters
decision to the National Labor
Relations Commission, First
Division, contending that the
labor arbiter erred:
In holding that [petitioner] Gabriel
dismissed the complainants, Arb.
Nora committed a serious error in
the findings of fact which, if not
corrected, would cause grave or
irreparable damage or injury to
[petitioner] Gabriel;
In holding that strained relations
already exist between the parties,
justifying an award of separation
pay in lieu of reinstatement, Arb.
Nora not only committed a
serious error in the findings of

fact, but he also abused his

discretion;
In computing the amount
of backwages allegedly due
[respondents] from 30 April
1995 to 15 March 1997, Arb.
Nora abused his discretion,
considering that the case had
been submitted for decision as
early as 1 March 1996 and that
the same should have been
decided as early as 31 March
1996;
In using P400.00 and 22 days as
factors in computing the amount
of backwages allegedly due
[respondents], Arb. Nora abused
his discretion and committed a
serious error in the findings of
fact, considering that there was
no factual or evidentiary
basis therefor;
In using 33.5 months as factor in
the computation of the amount
of backwages allegedly due
[respondents], Arb. Nora
committed a serious error in the
findings of fact[,] because even if
it is assumed that backwages are
due from 30 April 1995 to 15
March 1997, the period between
the two dates is only 22 months,
and not 33 months as stated in
the appealed decision; and
In not dismissing the case[,]
despite notice of the death of
[petitioner] Gabriel before final

judgment, Arb. Nora abused his

discretion and committed a
serious error of law.[8]
On July 3, 1997, respondents
filed a motion to dismiss
petitioners appeal on the ground
that the surety bond is defective
and the appeal was filed out of
time, which move was opposed
by petitioner.
Subsequently, on April 28, 1998,
the NLRC promulgated its first
decision, the dispositive portion
of which reads:
WHEREFORE, premises
considered, the appealed
decision is hereby reversed and
set aside. The above-entitled
case is hereby dismissed for lack
of employer-employee
relationship.
SO ORDERED.[9]
Respondents filed a motion for
reconsideration. They claimed
that the decision did not discuss
the issue of the timeliness of the
appeal. The lack of employeremployee relationship was
mentioned in
the dispositive portion, which
issue was not raised before the
labor arbiter or discussed in the
body of the questioned decision.
In view of the issues raised by
respondents in their motion, the
NLRC rendered its second

decision on October 29, 1998.

The pertinent portions are hereby
quoted thus:
In the case at bar,
[petitioner] Melencio Gabriel was
not represented by counsel
during the pendency of the case.
A decision was rendered by the
Labor Arbiter a quo on March 17,
1997 while Mr. Gabriel passed
away on April 4, 1997 without
having received a copy thereof
during his lifetime. The decision
was only served on April 18,
1997 when he was no longer
around to receive the same. His
surviving spouse and daughter
cannot automatically substitute
themselves as party
respondents. Thus, when the
bailiff tendered a copy of the
decision to them, they were not in
a position to receive them. The
requirement of leaving a copy at
the partys residence is not
applicable in the instant case
because this presupposes that
the party is still living and is just
not available to receive the
decision.
The preceding considered, the
decision of the labor arbiter has
not become final because there
was no proper service of copy
thereof to [petitioner] .
Undoubtedly, this case is for
recovery of money which does
not survive, and considering that

the decision has not become

final, the case should have been
dismissed and the appeal no
longer entertained.
WHEREFORE, in view of the
foregoing, the Decision of April
28, 1998 is set aside and
vacated. Furthermore, the instant
case is dismissed and
complainants are directed to
pursue their claim against the
proceedings for the settlement of
the estate of the
deceased Melencio Gabriel.
SO ORDERED.[10]
Aggrieved by the decision of the
NLRC, respondents elevated the
case to the Court of Appeals (CA)
by way of a petition
for certiorari. On August 4, 2000,
the CA reversed the decisions of
the NLRC:
Article 223 of the Labor Code
categorically mandates that an
appeal by the employer may be
perfected only upon the posting
of a cash bond or surety bond
x x x. It is beyond peradventure
then that the non-compliance
with the above conditio sine qua
non, plus the fact that the appeal
was filed beyond
the reglementary period, should
have been enough reasons to
dismiss the appeal.

 In any event, even

conceding ex gratia that such
procedural infirmity [were]
inexistent, this petition would still
be tenable based on substantive
aspects.
The public respondents decision,
dated April 28, 1998, is
egregiously wrong insofar as it
was anchored on the absence of
an employer-employee
relationship. Well-settled is the
rule that the boundary system
used in jeepney and (taxi)
operations presupposes an
employer-employee relationship
(National Labor Union
v. Dinglasan, 98 Phil. 649) .
The NLRC ostensibly tried to
redeem itself by vacating the
decision April 28, 1998. By so
doing, however, it did not actually
resolve the matter definitively. It
merely relieved itself of such
burden by suggesting that the
petitioners pursue their claim
against the proceedings for the
settlement of the estate of the
deceased Melencio Gabriel.
In the instant case, the decision
(dated March 17, 1997) of the
Labor Arbiter became final
and executory on account of the
failure of the private respondent
to perfect his appeal on time.
Thus, we disagree with the
ratiocination of the NLRC that the

death of the private respondent

on April 4, 1997 ipso
facto negates recovery of the
money claim against the
successors-in-interest . Rather,
this situation comes within the
aegis of Section 3, Rule III of the
NLRC Manual on Execution of
Judgment, which provides:
SECTION 3. Execution in Case
of Death of Party. Where a party
dies after the finality of the
decision/entry of judgment of
order, execution thereon may
issue or one already issued may
be enforced in the following
cases:
- xxx;
- In case of death of the
losing party, against his
successor-in-interest,
executor or administrator;
- In case of death of the
losing party after execution
is actually levied upon any
of his property, the same
may be sold for the
satisfaction thereof, and the
sheriff making the sale shall
account to his successorin-interest, executor or
administrator for any
surplus in his hands.
Notwithstanding the foregoing
disquisition though, We are not
entirely in accord with the labor
arbiters decision awarding
separation pay in favor of the

petitioners. In this regard, it [is]

worth mentioning that
in Kiamco v. NLRC,
[11]
citing Globe-Mackay Cable
and Radio Corp. v. NLRC,[12] the
Supreme Court qualified the
application of the strained
relations principle when it held - If in the wisdom of the Court,
there may be a ground or
grounds for the non-application of
the above-cited provision (Art.
279, Labor Code) this should be
by way of exception, such as
when the reinstatement may be
inadmissible due to ensuing
strained relations between the
employer and employee.
In such cases, it should be
proved that the employee
concerned occupies a position
where he enjoys the trust and
confidence of his employer, and
that it is likely that if reinstated,
an atmosphere of antipathy and
antagonism may be generated as
to adversely affect the efficiency
and productivity of the employee
concerned x x x Obviously, the
principle of strained relations
cannot be applied
indiscriminately. Otherwise,
reinstatement can never be
possible simply because some
hostility is invariably engendered
between the parties as a result of
litigation. That is human nature.

Besides, no strained relations

should arise from a valid legal act
of asserting ones right;
otherwise[,] an employee who
shall assert his right could be
easily separated from the service
by merely paying his separation
pay on the pretext that his
relationship with his employer
had already become strained.
Anent the award of backwages,
the Labor Arbiter erred in
computing the same from the
date the petitioners were illegally
dismissed (i.e. April 30, 1995) up
to March 15, 1997, that is two (2)
days prior to the rendition of his
decision (i.e. March 17, 1997).
WHEREFORE, premises
considered, the petition is
GRANTED, hereby REVERSING
and SETTING ASIDE the
assailed decisions of the National
Labor Relations Commission,
dated April 28, 1998 ans October
29, 1998. Consequently, the
decision of the Labor Arbiter,
dated March 17, 1997, is hereby
REINSTATED, subject to the
MODIFICATION that the private
respondent is ORDERED to
immediately REINSTATE
petitioners Nelson Bilon, Angel
Brazil and Ernesto Pagaygay to
their former position without loss
of seniority rights and privileges,
with fullbackwages from the date
of their dismissal until their actual

reinstatement. Costs against

private respondent.
SO ORDERED.[13]
Petitioner filed a motion for
reconsideration but the same
was denied by the CA in a
resolution dated February 7,
2001.
Hence, this petition raising the
following issues:[14]
I
THE COURT OF APPEALS
ERRED IN FINDING THAT
PETITIONERS APPEAL TO THE
NATIONAL LABOR RELATIONS
COMMISSION WAS FILED OUT
OF TIME.
II
THE COURT OF APPEALS
ERRED IN HOLDING THAT THE
ALLEGED DEFECTS IN
PETITIONERS APPEAL
BOND WERE OF SUCH
GRAVITY AS TO PREVENT THE
APPEAL FROM BEING
PERFECTED.
III
THE COURT OF APPEALS
ERRED IN GRANTING
RESPONDENTS PETITION FOR
CERTIORARI DESPITE THE
FACT THAT THE SAME
ASSAILED A DECISION WHICH
HAD BEEN VACATED IN FAVOR

OF A NEW ONE WHICH, IN

TURN, HAS SOLID LEGAL
BASIS.
IV
THE COURT OF APPEALS
ERRED IN APPLYING SECTION
3, RULE III, OF THE MANUAL
ON EXECUTION OF
JUDGMENT OF THE NATIONAL
LABOR RELATIONS
COMMISSION WHICH, BY ITS
OWN EXPRESS TERMS, IS
NOT APPLICABLE.
A resolution of the case requires
a brief discussion of two issues
which touch upon the procedural
and substantial aspects of the
case thus: a) whether petitioners
appeal was filed out of time; and
b) whether the claim survives.
As regards the first issue, the
Court considers the service of
copy of the decision of the labor
arbiter to have been validly made
on May 28, 1997 when it was
received through registered mail.
As correctly pointed out by
petitioners wife, service of a copy
of the decision could not have
been validly effected on April 18,
1997 because petitioner passed
away on April 4, 1997.
Section 4, Rule III of the New
Rules of Procedure of the NLRC
provides:

 SEC. 4. Service of Notices and

Resolutions. (a) Notices or
summons and copies of orders,
resolutions or decisions shall be
served on the parties to the case
personally by the bailiff or
authorized public officer within
three (3) days from receipt
thereof or by registered mail;
Provided, That where a party is
represented by counsel or
authorized representative,
service shall be made on such
counsel or authorized
representative; Provided further,
That in cases of decision and
final awards, copies thereof shall
be served on both parties and
their counsel .
For the purpose of computing the
period of appeal, the same shall
be counted from receipt of such
decisions, awards or orders by
the counsel of record.
The bailiff or officer
personally serving the
notice, order,
resolution or decision
shall submit his return
within two (2) days
from date of service
thereof, stating legibly
in his return, his
name, the names of
the persons served
and the date of
receipt which return
shall be immediately
attached and shall

form part of the

records of the case. If
no service
was effected, the
serving officer shall
state the reason
therefore in the
return.
Section 6, Rule 13 of the Rules of
Court which is suppletory to the
NLRC Rules of Procedure states
that: [s]ervice of the papers may
be made by delivering personally
a copy to the party or his
counsel, or by leaving it in his
office with his clerk or with a
person having charge thereof. If
no person is found in his office,
or his office is not known, or he
has no office, then by leaving the
copy, between the hours of eight
in the morning and six in the
evening, at the partys or
counsels residence, if known,
with a person of sufficient age
and discretion then residing
therein.
The foregoing provisions
contemplate a situation wherein
the party to the action is alive
upon the delivery of a copy of the
tribunals decision. In the present
case, however, petitioner died
before a copy of the labor
arbiters decision was served
upon him. Hence, the above
provisions do not apply. As aptly
stated by the NLRC:

 In the case at bar,

respondent Melencio Gabriel was
not represented by counsel
during the pendency of the case.
A decision was rendered by the
Labor Arbiter a quo on March 17,
1997 while Mr. Gabriel passed
away on April 4, 1997, without
having received a copy thereof
during his lifetime. The decision
was only served on April 18,
1997 when he was no longer
around to receive the same. His
surviving spouse and daughter
cannot automatically substitute
themselves as party
respondents. Thus, when the
bailiff tendered a copy of the
decision to them, they were not in
a position to receive them. The
requirement of leaving a copy at
the partys residence is not
applicable in the instant case
because this presupposes that
the party is still living and is not
just available to receive the
decision.
The preceding considered, the
decision of the Labor Arbiter has
not become final because there
was no proper service of copy
thereof to party respondent.[15]
Thus, the appeal filed on behalf
of petitioner on June 5,
1997 after receipt of a copy of the
decision via registered mail
on May 28, 1997 was within the
ten-day reglementaryperiod

prescribed under Section 223 of

the Labor Code.
On the question whether
petitioners surety bond was
defective, Section 6, Rule VI of
the New Rules of Procedure of
the NLRC provides:
SEC. 6. Bond. In case the
decision of a Labor Arbiter
involves monetary award, an
appeal by the employer shall be
perfected only upon the posting
of a cash or surety bond issued
by a reputable bonding company
duly accredited by the
Commission or the Supreme
Court in an amount equivalent to
the monetary award, exclusive of
moral and exemplary damages
and attorneys fees.
The employer as well as counsel
shall submit a joint declaration
under oath attesting that the
surety bond posted is genuine
and that it shall be in effect until
final disposition of the case.
The Commission may, in
meritorious cases and upon
Motion of the Appellant, reduce
the amount of the bond. (As
amended on Nov. 5, 1993).
The Court believes that petitioner
was able to comply substantially
with the requirements of the

above Rule. As correctly pointed

out by the NLRC:
While we agree with
complainants-appellees that the
posting of the surety bond is
jurisdictional, We do not believe
that the defects imputed to the
surety bond posted for and in
behalf of respondent-appellant
Gabriel are of such character as
to affect the jurisdiction of this
Commission to entertain the
instant appeal.
It matters not that, by the terms
of the bond posted, the Liability
of the surety herein shall expire
on June 5, 1998 and this bond
shall be automatically cancelled
ten (10) days after the expiration.
After all, the bond is
accompanied by the joint
declaration under oath of
respondent-appellants surviving
spouse and counsel attesting that
the surety bond is genuine and
shall be in effect until the final
disposition of the case.
Anent complainantsappellees contention that the
surety bond posted is defective
for being in the name of BTSCI
which did not appeal and for
having been entered into by Mrs.
Gabriel withoutBTSCIs authority,
the same has been rendered
moot and academic by the
certification issued by Gil CJ. San
Juan, Vice-President of the

bonding company to the effect

that Eastern Assurance and
Surety Corporation Bond No.
2749 was posted for and on
behalf appellant Melencio Gabriel
and/or his heirs and that (T)he
name Bacoor Transport Service
Cooperative, Inc. was indicated
in said bond due merely in (sic)
advertence.
At any rate, the Supreme Court
has time and again ruled that
while Article 223 of the Labor
Code, as amended requiring a
cash or surety bond in the
amount equivalent to the
monetary award in the judgment
appealed from for the appeal to
be perfected, may be considered
a jurisdictional requirement,
nevertheless, adhering to the
principle that substantial justice is
better served by allowing the
appeal on the merits threshed out
by this Honorable Commission,
the foregoing requirement of the
law should be given a liberal
interpretation (Pantranco North
Express, Inc. v.Sison, 149 SCRA
238; C.W. Tan Mfg. v. NLRC, 170
SCRA 240; YBL v. NLRC, 190
SCRA 160; Rada v. NLRC, 205
SCRA 69; Star Angel Handicraft
v. NLRC, 236 SCRA 580).[16]
On the other hand, with regard to
the substantive aspect of the
case, the Court agrees with the
CA that an employer-employee

relationship existed between

petitioner and respondents.
In Martinez v. National Labor
Relations Commission,
[17]
citing National Labor Union
v. Dinglasan,[18] the Court ruled
that:
[T]he relationship
between jeepney owners/operato
rs and jeepney drivers under the
boundary system is that of
employer-employee and not
of lessor-lessee because in the
lease of chattels the lessor loses
complete control over the chattel
leased although the lessee
cannot be reckless in the use
thereof, otherwise he would be
responsible for the damages to
the lessor. In the case
of jeepney owners/operators
and jeepney drivers, the former
exercises supervision and control
over the latter. The fact that the
drivers do not receive fixed
wages but get only that in excess
of the so-called boundary [that]
they pay to the owner/operator is
not sufficient to withdraw the
relationship between them from
that of employer and employee.
Thus, private respondents were
employees because they had
been engaged to perform
activities which were usually
necessary or desirable in the
usual business or trade of the
employer.[19]

The same principle was

reiterated in the case
of Paguio Transport Corporation
v. NLRC.[20]
The Court also agrees with the
labor arbiter and the CA that
respondents were illegally
dismissed by petitioner.
Respondents were not accorded
due process.[21] Moreover,
petitioner failed to show that the
cause
for termination falls under any of
the grounds enumerated in
Article 282

(then Article 283)[22] of the Labor

Code.[23] Consequently,
respondents are entitled to
reinstatement without loss of
seniority rights and other
privileges and to their
fullbackwages computed from the
date of dismissal up to the time of
their actual reinstatement in
accordance with Article 279 of
the Labor Code.
Reinstatement is obtainable in
this case because it has not been
shown that there is an ensuing
strained relations between
petitioner and respondents. This
is pursuant to the principle laid
down in Globe-Mackay Cable
and Radio Corporation v.
NLRC[24] as quoted earlier in the
CA decision.

 With regard to respondents

monetary claim, the same shall
be governed by Section 20 (then
Section 21), Rule 3 of the Rules
of Court which provides:
SEC. 20. Action on contractual
money claims. When the action is
for recovery of money arising
from contract, express or implied,
and the defendant dies before
entry of final judgment in the
court in which the action was
pending at the time of such
death, it shall not be dismissed
but shall instead be allowed to
continue until entry of final
judgment. A favorable judgment
obtained by the plaintiff therein
shall be enforced in the manner
provided in these Rules for
prosecuting claims against the
estate of a deceased person.
(21a)
In relation to this, Section 5, Rule
86 of the Rules of Court states:
SEC. 5. Claims which must be
filed under the notice. If not
filed, barred ; exceptions. All
claims for money against the
decedent arising from contract,
express or implied, whether the
same be due, not due, or
contingent, ... and judgment for
money against the decedent,
must be filed within the time
limited in the notice; otherwise

they are barred forever, except

that they may be setforth as
counterclaims in any action that
the executor or administrator may
bring against the claimants.
Thus, in accordance with the
above Rules, the money claims
of respondents must be filed
against the estate of
petitioner Melencio Gabriel.[25]
WHEREFORE, the petition
is DENIED. The Decision and
Resolution of the Court of
Appeals dated August 4,
2000 and February 7, 2001,
respectively, in CA-G.R. SP No.
52001 are AFFIRMED but with
the MODIFICATION that the
money claims of respondents
should be filed against the estate
of Melencio Gabriel, within such
reasonable time from the finality
of this Decision as the estate
court may fix.
No costs.
SO ORDERED.
G.R. No. 109704 January 17,
1995
ALFREDO B. FELIX, petitioner,
vs.
DR. BRIGIDA BUENASEDA, in
her capacity as Director, and
ISABELO BAEZ, JR., in his
capacity as Administrator, both
of the National Center for

Mental Health, and the CIVIL

SERVICE
COMMISSION,respondents.

KAPUNAN, J.:
Taking advantage of this Court's
decisions involving the removal
of various civil servants pursuant
to the general reorganization of
the government after the EDSA
Revolution, petitioner assails his
dismissal as Medical Specialist I
of the National Center for Mental
Health (formerly the National
Mental Hospital) as illegal and
violative of the constitutional
provision on security of tenure
allegedly because his removal
was made pursuant to an invalid
reorganization.
In Mendoza vs. Quisumbing 1 and
the consolidated cases involving
the reorganization of various
government departments and
agencies we held:
We are constrained to set aside
the reorganizations embodied in
these consolidated petitions
because the heads of
departments and agencies
concerned have chosen to rely
on their own concepts of
unlimited discretion and
"progressive" ideas on
reorganization instead of showing
that they have faithfully complied
with the clear letter and spirit of
the two Constitutions and the
statutes affecting
reorganization. 2

In De Guzman vs. CSC 3, we

upheld the principle, laid down by
Justice J.B.L. Reyes in Cruz vs.
Primicias 4 that a valid abolition of
an office neither results in a
separation or removal, likewise
upholding the corollary principle
that "if the abolition is void, the
incumbent is deemed never to
have ceased to hold office," in
sustaining therein petitioner's
right to the position she held prior
to the reorganization.
The instant petition on its face
turns on similar facts and issues,
which is, that petitioner's removal
from a permanent position in the
National Center for Mental Health
as a result of the reorganization
of the Department of Health was
void.
However, a closer look at the
facts surrounding the instant
petition leads us to a different
conclusion.
After passing the Physician's
Licensure Examinations given by
the Professional Regulation
Commission in June of 1979,
petitioner, Dr. Alfredo B. Felix,
joined the National Center for
Mental Health (then the National
Mental Hospital) on May 26,
1980 as a Resident Physician
with an annual salary of
P15,264.00. 5 In August of 1983,
he was promoted to the position
of Senior Resident Physician 6 a
position he held until the Ministry
of Health reorganized the
National Center for Mental Health

(NCMH) in January of 1988,

pursuant to Executive Order No.
119.
Under the reorganization,
petitioner was appointed to the
position of Senior Resident
Physician in a temporary capacity
immediately after he and other
employees of the NCMH
allegedly tendered their courtesy
resignations to the Secretary of
Health. 7 In August of 1988,
petitioner was promoted to the
position of Medical Specialist I
(Temporary Status), which
position was renewed the
following year. 8
In 1988, the Department of
Health issued Department Order
No. 347 which required board
certification as a prerequisite for
renewal of specialist positions in
various medical centers,
hospitals and agencies of the
said department. Specifically,
Department Order No. 347
provided that specialists working
in various hospitals and branches
of the Department of Health be
recognized as "Fellows" of their
respective specialty societies
and/or "Diplomates" of their
specialty boards or both. The
Order was issued for the purpose
of upgrading the quality of
specialties in DOH hospitals by
requiring them to pass rigorous
theoretical and clinical (bedside)
examinations given by
recognized specialty boards, in

keeping up with international

standards of medical practice.
Upon representation of the
Chiefs of Hospitals of various
government hospitals and
medical centers, (then) Secretary
of Health Alfredo Bengzon issued
Department Order No. 347
providing for an extension of
appointments of Medical
Specialist positions in cases
where the termination of medical
specialist who failed to meet the
requirement for board
certification might result in the
disruption of hospital services.
Department Order No. 478
issued the following guidelines:
As a general policy, the provision
of Department Order No. 347,
Sec. 4 shall apply unless the
Chief of Hospital requests for
exemption, certifies that its
application will result in the
disruption of the delivery service
together with the steps taken to
implement Section 4, and submit
a plan of action, lasting no more
than 3-years, for the eventual
phase out of non-Board certified
medical specialties.
Medical specialist recommended
for extension of appointment
shall meet the following minimum
criteria:
- DOH medical specialist
certified
- Has been in the service of
the Department at least
three (3) years prior to
December 1988.

- Has applied or taken the

specialty board
examination.
Each recommendation for
extension of appointment must
be individually justified to show
not only the qualification of the
recommendee, but also what
steps he has taken to be board
certified.
Recommendation for extension
of appointment shall be
evaluated on a case to case
basis.
As amended, the other provisions
of Department Order No. 34/s.
1988 stands.
Petitioner was one of the
hundreds of government medical
specialist who would have been
adversely affected by
Department Order No. 347 since
he was no yet accredited by the
Psychiatry Specialty Board.
Under Department Order No.
478, extension of his
appointment remained subject to
the guidelines set by the said
department order. On August 20,
1991, after reviewing petitioner's
service record and performance,
the Medical Credentials
Committee of the National Center
for Mental Health recommended
non-renewal of his appointment
as Medical Specialist I, informing
him of its decision on August 22,
1991. He was, however, allowed
to continue in the service, and
receive his salary, allowances
and other benefits even after

being informed of the termination

of his appointment.
On November 25, 1991, an
emergency meeting of the Chiefs
of Service was held to discuss,
among other matters, the
petitioner's case. In the said
meeting Dr. Vismindo de Grecia,
petitioner's immediate supervisor,
pointed out petitioner's poor
performance, frequent tardiness
and inflexibility as among the
factors responsible for the
recommendation not to renew his
appointment. 9 With one
exception, other department
heads present in the meeting
expressed the same
opinion, 10 and the overwhelming
concensus was for non-renewal.
The matter was thereafter
referred to the Civil Service
Commission, which on February
28, 1992 ruled that "the
temporary appointment (of
petitioner) as Medical Specialist I
can be terminated at any
time . . ." and that "[a]ny renewal
of such appointment is within the
discretion of the appointing
authority." 11 Consequently, in a
memorandum dated March 25,
1992 petitioner was advised by
hospital authorities to vacate his
cottage since he was no longer
with said memorandum petitioner
filed a petition with the Merit
System Protection Board (MSPB)
complaining about the alleged
harassment by respondents and
questioning the non-renewal of

his appointment. In a Decision

rendered on July 29, 1992, the
(MSPB) dismissed petitioner's
complaint for lack of merit, finding
that:
As an apparent incident of the
power to appoint, the renewal of
a temporary appointment upon or
after its expiration is a matter
largely addressed to the sound
discretion of the appointing
authority. In this case, there is no
dispute that Complainant was a
temporary employee and his
appointment expired on August
22, 1991. This being the case,
his re-appointment to his former
position or the renewal of his
temporary appointment would be
determined solely by the proper
appointing authority who is the
Secretary, Department of Health
upon the favorable
recommendation of the Chief of
Hospital III, NCMH. The Supreme
Court in the case of Central Bank
vs. Civil Service CommissionG.R.
Nos. 80455-56 dated April 10,
1989, held as follows:
The power of appointment is
essentially a political question
involving considerations of
wisdom which only the appointing
authority can decide.
In this light, Complainant
therefore, has no basis in law to
assail the non-renewal of his
expired temporary appointment
much less invoke the aid of this
Board cannot substitute its
judgment to that of the appointing

authority nor direct the latter to

issue an appointment in the
complainant's favor.
Regarding the alleged
Department Order secured by the
complainant from the Department
of Health (DOH), the Board finds
the same inconsequential. Said
Department Order merely
allowed the extension of tenure
of Medical Specialist I for a
certain period but does not
mandate the renewal of the
expired appointment.
The Board likewise finds as
baseless complainant's allegation
of harassment. It should be noted
that the subsistence, quarters
and laundry benefits provided to
the Complainant were in
connection with his employment
with the NCMH. Now that his
employment ties with the said
agency are severed, he
eventually loses his right to the
said benefits. Hence, the Hospital
Management has the right to take
steps to prevent him from the
continuous enjoyment thereof,
including the occupancy of the
said cottage, after his cessation
form office.
In sum, the actuations of Dr.
Buenaseda and Lt. Col. Balez
are not shown to have been
tainted with any legal infirmity,
thus rendering as baseless, this
instant complaint.
Said decision was appealed to
the Civil Service Commission
which dismissed the same in its

Resolution dated December 1,

1992. Motion for Reconsideration
was denied in CSC Resolution
No. 93-677 dated February 3,
1993, hence this appeal, in which
petitioner interposes the following
assignments of errors:
I
THE PUBLIC RESPONDENT
CIVIL SERVICE COMMISSION
ERRED IN HOLDING THAT BY
SUBMITTING HIS COURTESY
RESIGNATION AND
ACCEPTING HIS TEMPORARY
APPOINTMENT PETITIONER
HAD EFFECTIVELY DIVESTED
HIMSELF OF HIS SECURITY
OF TENURE, CONSIDERING
THE CIRCUMSTANCES OF
SUCH COURTESY
RESIGNATION AND
ACCEPTANCE OF
APPOINTMENT.
II
THE RESPONDENT
COMMISSION IN NOT
DECLARING THAT THE
CONVERSION OF THE
PERMANENT APPOINTMENT
OF PETITIONER TO
TEMPORARY WAS DONE IN
BAD FAITH IN THE GUISE OF
REORGANIZATION AND THUS
INVALID, BEING VIOLATIVE OF
THE PETITIONER'S RIGHT OF
SECURITY OF TENURE.
Responding to the instant
petition, 12 the Solicitor General
contends that 1) the petitioner's
temporary appointment after the
reorganization pursuant to E.O.

No. 119 were valid and did not

violate his constitutional right of
security of tenure; 13 2) petitioner
is guilty of estoppel or laches,
having acquiesced to such
temporary appointments from
1988 to 1991; 14 and 3) the
respondent Commission did not
act with grave abuse of discretion
in affirming the petitioner's nonrenewal of his appointment at the
National Center for Mental
Hospital. 15
We agree.
The patent absurdity of
petitioner's posture is readily
obvious. A residency or resident
physician position in a medical
specialty is never a permanent
one. Residency connotes training
and temporary status. It is the
step taken by a physician right
after post-graduate internship
(and after hurdling the Medical
Licensure Examinations) prior to
his recognition as a specialist or
sub-specialist in a given field.
A physician who desires to
specialize in Cardiology takes a
required three-year accredited
residency in Internal Medicine
(four years in DOH hospitals) and
moves on to a two or three-year
fellowship or residency in
Cardiology before he is allowed
to take the specialty
examinations given by the
appropriate accrediting college.
In a similar manner, the
accredited Psychiatrist goes
through the same stepladder

process which culminates in his

recognition as a fellow or
diplomate (or both) of the
Psychiatry Specialty Board. 16
This upward movement from
residency to specialist rank,
institutionalized in the residency
training process, guarantees
minimum standards and skills
and ensures that the physician
claiming to be a specialist will not
be set loose on the community
without the basic knowledge and
skills of his specialty. Because
acceptance and promotion
requirements are stringent,
competitive, and based on merit.
acceptance to a first year
residency program is no guaranty
that the physician will complete
the program. Attribution rates are
high. Some programs are
pyramidal. Promotion to the next
post-graduate year is based on
merit and performance
determined by periodic
evaluations and examinations of
knowledge, skills and bedside
manner. 17 Under this system,
residents, specialty those in
university teaching
hospitals18 enjoy their right to
security of tenure only to the
extent that they periodically make
the grade, making the situation
quite unique as far as physicians
undergoing post-graduate
residencies and fellowships are
concerned. While physicians (or
consultants) of specialist rank are
not subject to the same stringent
evaluation procedures, 19

specialty societies require

continuing education as a
requirement for accreditation for
good standing, in addition to peer
review processes based on
performance, mortality and
morbidity audits, feedback from
residents, interns and medical
students and research output.
The nature of the contracts of
resident physicians meet
traditional tests for determining
employer-employee
relationships, but because the
focus of residency is training,
they are neither here nor there.
Moreover, stringent standards
and requirements for renewal of
specialist-rank positions or for
promotion to the next postgraduate residency year are
necessary because lives are
ultimately at stake.
Petitioner's insistence on being
reverted back to the status
quo prior to the reorganizations
made pursuant to Executive
Order No. 119 would therefore be
akin to a college student asking
to be sent back to high
school and staying there. From
the position of senior resident
physician, which he held at the
time of the government
reorganization, the next logical
step in the stepladder process
was obviously his promotion to
the rank of Medical Specialist I, a
position which he apparently
accepted not only because of the
increase in salary and rank but

because of the prestige and

status which the promotion
conferred upon him in the
medical community. Such status,
however, clearly carried with it
certain professional
responsibilities including the
responsibility of keeping up with
the minimum requirements of
specialty rank, the responsibility
of keeping abreast with current
knowledge in his specialty rank,
the responsibility of completing
board certification requirements
within a reasonable period of
time. The evaluation made by the
petitioner's peers and superiors
clearly showed that he was
deficient in a lot of areas, in
addition to the fact that at the
time of his non-renewal, he was
not even board-certified.
It bears emphasis that at the time
of petitioner's promotion to the
position of Medical Specialist I
(temporary) in August of 1988, no
objection was raised by him
about the change of position or
the temporary nature of
designation. The pretense of
objecting to the promotion to
specialist rank apparently came
only as an afterthought, three
years later, following the nonrenewal of his position by the
Department of Health.
We lay stress to the fact that
petitioner made no attempt to
oppose earlier renewals of his
temporary Specialist I contracts
in 1989 and 1990, clearly

demonstrating his acquiescence

to if not his unqualified
acceptance of the promotion
(albeit of a temporary nature)
made in 1988. Whatever
objections petitioner had against
the earlier change from the status
of permanent senior resident
physician to temporary senior
physician were neither pursued
nor mentioned at or after his
designation as Medical Specialist
I (Temporary). He is therefore
estopped from insisting upon a
right or claim which he had
plainly abandoned when he, from
all indications, enthusiastically
accepted the promotion. His
negligence to assert his claim
within a reasonable time, coupled
with his failure to repudiate his
promotion to a temporary
position, warrants a presumption,
in the words of this Court
in Tijam vs. Sibonghanoy, 20 that
he "either abandoned (his claim)
or declined to assert it."
There are weighty reasons of
public policy and convenience
which demand that any claim to
any position in the civil service,
permanent, temporary of
otherwise, or any claim to a
violation of the constitutional
provision on security of tenure be
made within a reasonable period
of time. An assurance of some
degree of stability in the civil
service is necessary in order to
avoid needless disruptions in the
conduct of public business.

Delays in the statement of a right

to any position are strongly
discouraged. 21 In the same
token, the failure to assert a
claim or the voluntary acceptance
of another position in
government, obviously without
reservation, leads to a
presumption that the civil servant
has either given up his claim of
has already settled into the new
position. This is the essence
of laches which is the failure or
neglect, for an unreasonable and
unexplained length of time to do
that which, by exercising due
diligence, could or should have
been done earlier; it is the
negligence or omission to assert
a right within a reasonable time,
warranting a presumption that the
party entitled to assert it either
has abandoned it or declined to
assert it. 22
In fine, this petition, on its
surface, seems to be an ordinary
challenge against the validity of
the conversion of petitioner's
position from permanent resident
physician status to that of a
temporary resident physician
pursuant to the government
reorganization after the EDSA
Revolution. What is unique to
petitioner's averments is the fact
that he hardly attempts to
question the validity of his
removal from his position of
Medical Specialist I (Temporary)
of the National Center for Mental
Health, which is plainly the

pertinent issue in the case at

bench. The reason for this is at
once apparent, for there is a
deliberate and dishonest attempt
to a skirt the fundamental issue
first, by falsely claiming that
petitioner was forced to submit
his courtesy resignation in 1987
when he actually did not; and
second, by insisting on a right of
claim clearly abandoned by his
acceptance of the position of
Medical Specialist I (Temporary),
which is hence barred by laches.
The validity of the government
reorganization of the Ministry of
Health pursuant to E.O. 119 not
being the real issue in the case at
bench, we decline to make any
further pronouncements relating
to petitioner's contentions relating
to the effect on him of the
reorganization except to say that
in the specific case of the change
in designation from permanent
resident physician
to temporary resident physician,
a change was necessary, overall,
to rectify a ludicrous situation
whereby some government
resident physicians were
erroneously being classified as
permanent resident physicians in
spite of the inherently temporary
nature of the designation. The
attempts by the Department of
Health not only to streamline
these positions but to make them
conform to current standards of
specialty practice is a step in a
positive direction. The patient

who consults with a physician of

specialist rank should at least be
safe in the assumption that the
government physician of
specialist rank: 1.) has completed
all necessary requirements at
least assure the public at large
that those in government centers
who claim to be specialists in
specific areas of Medicine
possess the minimum knowledge
and skills required to fulfill that
first and foremost maxim,
embodied in the Hippocratic
Oath, that they do their patients
no harm. Primium non nocere.
Finally, it is crystal clear, from the
facts of the case at bench, that
the petitioner accepted a
temporary appointment (Medical
Specialist I). As respondent Civil
Service Commission has
correctly pointed out 23, the
appointment was for a definite
and renewable period which,
when it was not renewed, did not
involve a dismissal but an
expiration of the petitioner's term.
ACCORDINGLY, the petition is
hereby DISMISSED, for lack of
merit.
[G.R. No. 156367. May 16, 2005]
AUTO BUS TRANSPORT
SYSTEMS, INC., petitioner,
vs. ANTONIO
BAUTISTA, respondent.
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review
on Certiorari assailing the
Decision[1] and Resolution[2] of the

Court of Appeals affirming the

Decision[3] 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 ManilaTuguegarao via Baguio, BaguioTuguegarao 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.
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 respondents
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:
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:
- his 13th month pay from the
date of his hiring to the
date of his dismissal,
presently computed at
P78,117.87;
- 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
- 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. xxx.
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.
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
Whether or not respondent is
entitled to service incentive
leave;
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:
Art. 95. RIGHT TO SERVICE
INCENTIVE LEAVE
- 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:

 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 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 TechnicalClerical Commercial Employees
Association[10] 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
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 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]

 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 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.
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
service 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.

G.R. No. 195466

July 2,
2014
ARIEL L. DAVID, doing
business under the name and
style "YIELS HOG
DEALER," Petitioner,
vs.
JOHN G.
MACASIO, Respondent.
DECISION
BRION, J.:
We resolve in this petition for
review on certiorari1 the
challenge to the November 22,
2010 decision2 and the January
31, 2011 resolution3 of the Court
of Appeals (CA) in CA-G.R. SP
No. 116003. The CA decision
annulled and set aside the May
26, 2010 decision4 of the National
Labor Relations Commission
(NLRC)5 which, in turn, affirmed
the April 30, 2009 Decision6 of
the Labor Arbiter (LA). The LA's
decision dismissed respondent
John G. Macasio's monetary
claims.
The Factual Antecedents
In January 2009, Macasio filed
before the LA a
complaint7 against petitioner Ariel
L. David, doing business under
the name and style "Yiels Hog
Dealer," for non-payment of
overtime pay, holiday pay and
13th month pay. He also claimed
payment for moral and exemplary
damages and attorneys fees.

Macasio also claimed payment

for service incentive leave (SIL).8
Macasio alleged9 before the LA
that he had been working as a
butcher for David since January
6, 1995. Macasio claimed that
David exercised effective control
and supervision over his work,
pointing out that David: (1) set
the work day, reporting time and
hogs to be chopped, as well as
the manner by which he was to
perform his work; (2) daily paid
his salary of P700.00, which was
increased from P600.00 in
2007, P500.00 in 2006
and P400.00 in 2005; and (3)
approved and disapproved his
leaves. Macasio added that
David owned the hogs delivered
for chopping, as well as the work
tools and implements; the latter
also rented the workplace.
Macasio further claimed that
David employs about twenty-five
(25) butchers and delivery
drivers.
In his defense,10 David claimed
that he started his hog dealer
business in 2005 and that he only
has ten employees. He alleged
that he hired Macasio as a
butcher or chopper on "pakyaw"
or task basis who is, therefore,
not entitled to overtime pay,
holiday pay and 13th month pay
pursuant to the provisions of the
Implementing Rules and
Regulations (IRR) of the Labor
Code. David pointed out that
Macasio: (1) usually starts his

work at 10:00 p.m. and ends at

2:00 a.m. of the following day or
earlier, depending on the volume
of the delivered hogs; (2)
received the fixed amount
of P700.00 per engagement,
regardless of the actual number
of hours that he spent chopping
the delivered hogs; and (3) was
not engaged to report for work
and, accordingly, did not receive
any fee when no hogs were
delivered.
Macasio disputed Davids
allegations.11 He argued that,
first, David did not start his
business only in 2005. He
pointed to the Certificate of
Employment12 that David issued
in his favor which placed the date
of his employment, albeit
erroneously, in January 2000.
Second, he reported for work
every day which the payroll or
time record could have easily
proved had David submitted
them in evidence.
Refuting Macasios
submissions,13 David claims that
Macasio was not his employee
as he hired the latter on "pakyaw"
or task basis. He also claimed
that he issued the Certificate of
Employment, upon Macasios
request, only for overseas
employment purposes. He
pointed to the "Pinagsamang
Sinumpaang
Salaysay,"14 executed by
Presbitero Solano and
Christopher (Antonio Macasios

co-butchers), to corroborate his

claims.
In the April 30, 2009
decision,15 the LA dismissed
Macasios complaint for lack of
merit. The LA gave credence to
Davids claim that he engaged
Macasio on "pakyaw" or task
basis. The LA noted the following
facts to support this finding: (1)
Macasio received the fixed
amount of P700.00 for every
work done, regardless of the
number of hours that he spent in
completing the task and of the
volume or number of hogs that
he had to chop per engagement;
(2) Macasio usually worked for
only four hours, beginning from
10:00 p.m. up to 2:00 a.m. of the
following day; and (3)
the P700.00 fixed wage far
exceeds the then prevailing daily
minimum wage of P382.00. The
LA added that the nature of
Davids business as hog dealer
supports this "pakyaw" or task
basis arrangement.
The LA concluded that as
Macasio was engaged on
"pakyaw" or task basis, he is not
entitled to overtime, holiday, SIL
and 13th month pay.
The NLRCs Ruling
In its May 26, 2010
decision,16 the NLRC affirmed the
LA ruling.17 The NLRC observed
that David did not require
Macasio to observe an eight hour
work schedule to earn the
fixed P700.00 wage; and that

Macasio had been performing a

non-time work, pointing out that
Macasio was paid a fixed amount
for the completion of the
assigned task, irrespective of the
time consumed in its
performance. Since Macasio was
paid by result and not in terms of
the time that he spent in the
workplace, Macasio is not
covered by the Labor Standards
laws on overtime, SIL and
holiday pay, and 13th month pay
under the Rules and Regulations
Implementing the 13th month pay
law.18
Macasio moved for
reconsideration19 but the NLRC
denied his motion in its August
11, 2010 resolution,20prompting
Macasio to elevate his case to
the CA via a petition for
certiorari.21
The CAs Ruling
In its November 22, 2010
decision,22 the CA partly granted
Macasios certiorari petition and
reversed the NLRCs ruling for
having been rendered with grave
abuse of discretion.
While the CA agreed with the
LAand the NLRC that Macasio
was a task basis employee, it
nevertheless found Macasio
entitled to his monetary claims
following the doctrine laid down
in Serrano v. Severino Santos
Transit.23The CA explained that
as a task basis employee,
Macasio is excluded from the
coverage of holiday, SIL and 13th

month pay only if he is likewise a

"field personnel." As defined by
the Labor Code, a "field
personnel" is one who performs
the work away from the office or
place of work and whose regular
work hours cannot be determined
with reasonable certainty. In
Macasios case, the elements
that characterize a "field
personnel" are evidently lacking
as he had been working as a
butcher at Davids "Yiels Hog
Dealer" business in Sta. Mesa,
Manila under Davids supervision
and control, and for a fixed
working schedule that starts at
10:00 p.m.
Accordingly, the CA awarded
Macasios claim for holiday, SIL
and 13th month pay for three
years, with 10% attorneys fees
on the total monetary award. The
CA, however, denied Macasios
claim for moral and exemplary
damages for lack of basis.
David filed the present petition
after the CA denied his motion for
reconsideration24 in the CAs
January 31, 2011 resolution.25
The Petition
In this petition,26 David maintains
that Macasios engagement was
on a "pakyaw" or task basis.
Hence, the latter is excluded from
the coverage of holiday, SIL and
13th month pay. David reiterates
his submissions before the lower
tribunals27 and adds that he
never had any control over the
manner by which Macasio

performed his work and he

simply looked on to the "endresult." He also contends that he
never compelled Macasio to
report for work and that under
their arrangement, Macasio was
at liberty to choose whether to
report for work or not as other
butchers could carry out his
tasks. He points out that Solano
and Antonio had, in fact, attested
to their (David and Macasios)
established "pakyawan"
arrangement that rendered a
written contract unnecessary. In
as much as Macasio is a task
basis employee who is paid the
fixed amount of P700.00 per
engagement regardless of the
time consumed in the
performance David argues that
Macasio is not entitled to the
benefits he claims. Also, he
posits that because he engaged
Macasio on "pakyaw" or task
basis then no employeremployee relationship exists
between them.
Finally, David argues that factual
findings of the LA, when affirmed
by the NLRC, attain finality
especially when, as in this case,
they are supported by substantial
evidence. Hence, David posits
that the CA erred in reversing the
labor tribunals findings and
granting the prayed monetary
claims.
The Case for the Respondent
Macasio counters that he was not
a task basis employee or a "field

personnel" as David would have

this Court believe.28 He reiterates
his arguments before the lower
tribunals and adds that, contrary
to Davids position, theP700.00
fee that he was paid for each day
that he reported for work does
not indicate a "pakyaw" or task
basis employment as this amount
was paid daily, regardless of the
number or pieces of hogs that he
had to chop. Rather, it indicates a
daily-wage method of payment
and affirms his regular
employment status. He points out
that David did not allege or
present any evidence as regards
the quota or number of hogs that
he had to chop as basis for the
"pakyaw" or task basis payment;
neither did David present the
time record or payroll to prove
that he worked for less than eight
hours each day. Moreover, David
did not present any contract to
prove that his employment was
on task basis. As David failed to
prove the alleged task basis or
"pakyawan" agreement, Macasio
concludes that he was Davids
employee. Procedurally, Macasio
points out that Davids
submissions in the present
petition raise purely factual
issues that are not proper for a
petition for review on certiorari.
These issues whether he
(Macasio) was paid by result or
on "pakyaw" basis; whether he
was a "field personnel"; whether
an employer-employee
relationship existed between him

and David; and whether David

exercised control and supervision
over his work are all factual in
nature and are, therefore,
proscribed in a Rule 45 petition.
He argues that the CAs factual
findings bind this Court, absent a
showing that such findings are
not supported by the evidence or
the CAs judgment was based on
a misapprehension of facts. He
adds that the issue of whether an
employer-employee relationship
existed between him and David
had already been settled by the
LA29 and the NLRC30 (as well as
by the CA per Macasios
manifestation before this Court
dated November 15, 2012),31 in
his favor, in the separate illegal
case that he filed against David.
The Issue
The issue revolves around the
proper application and
interpretation of the labor law
provisions on holiday, SIL and
13th month pay to a worker
engaged on "pakyaw" or task
basis. In the context of the Rule
65 petition before the CA, the
issue is whether the CA correctly
found the NLRC in grave abuse
of discretion in ruling that
Macasio is entitled to these labor
standards benefits.
The Courts Ruling
We partially grant the petition.
Preliminary considerations: the
Montoya ruling and the factualissue-bar rule

 In this Rule 45 petition for review

on certiorari of the CAs decision
rendered under a Rule 65
proceeding, this Courts power of
review is limited to resolving
matters pertaining to any
perceived legal errors that the CA
may have committed in issuing
the assailed decision. This is in
contrast with the review for
jurisdictional errors, which we
undertake in an original certiorari
action. In reviewing the legal
correctness of the CA decision,
we examine the CA decision
based on how it determined the
presence or absence of grave
abuse of discretion in the NLRC
decision before it and not on the
basis of whether the NLRC
decision on the merits of the case
was correct.32 In other words, we
have to be keenly aware that the
CA undertook a Rule 65 review,
not a review on appeal, of the
NLRC decision challenged before
it.33
Moreover, the Courts power in a
Rule 45 petition limits us to a
review of questions of law raised
against the assailed CA
decision.34
In this petition, David essentially
asks the question whether
Macasio is entitled to holiday, SIL
and 13th month pay. This one is
a question of law. The
determination of this question of
law however is intertwined with
the largely factual issue of
whether Macasio falls within the

rule on entitlement to these

claims or within the exception. In
either case, the resolution of this
factual issue presupposes
another factual matter, that is, the
presence of an employeremployee relationship between
David and Macasio.
In insisting before this Court that
Macasio was not his employee,
David argues that he engaged
the latter on "pakyaw" or task
basis. Very noticeably, David
confuses engagement on
"pakyaw" or task basis with the
lack of employment relationship.
Impliedly, David asserts that their
"pakyawan" or task basis
arrangement negates the
existence of employment
relationship.
At the outset, we reject this
assertion of the petitioner.
Engagement on "pakyaw" or task
basis does not characterize the
relationship that may exist
between the parties, i.e., whether
one of employment or
independent contractorship.
Article 97(6) of the Labor Code
defines wages as "xxx the
remuneration or earnings,
however designated, capable of
being expressed in terms of
money, whether fixed or
ascertained on a time, task,
piece, or commission basis, or
other method of calculating the
same, which is payable by an
employer to an employee under a
written or unwritten contract of

employment for work done or to

be done, or for services rendered
or to be rendered[.]"35 In relation
to Article 97(6), Article 10136 of
the Labor Code speaks of
workers paid by results or those
whose pay is calculated in terms
of the quantity or quality of their
work output which includes
"pakyaw" work and other nontime work.
More importantly, by implicitly
arguing that his engagement of
Macasio on "pakyaw" or task
basis negates employeremployee relationship, David
would want the Court to engage
on a factual appellate review of
the entire case to determine the
presence or existence of that
relationship. This approach
however is not authorized under
a Rule 45 petition for review of
the CA decision rendered under a
Rule 65 proceeding.
First, the LA and the NLRC
denied Macasios claim not
because of the absence of an
employer-employee but because
of its finding that since Macasio is
paid on pakyaw or task basis,
then he is not entitled to SIL,
holiday and 13th month pay.
Second, we consider it crucial,
that in the separate illegal
dismissal case Macasio filed with
the LA, the LA, the NLRC and the
CA uniformly found the existence
of an employer-employee
relationship.37

In other words, aside from being

factual in nature, the existence of
an employer-employee
relationship is in fact a non-issue
in this case. To reiterate, in
deciding a Rule 45 petition for
review of a labor decision
rendered by the CA under 65, the
narrow scope of inquiry is
whether the CA correctly
determined the presence or
absence of grave abuse of
discretion on the part of the
NLRC. In concrete question form,
"did the NLRC gravely abuse its
discretion in denying Macasios
claims simply because he is paid
on a non-time basis?"
At any rate, even if we indulge
the petitioner, we find his claim
that no employer-employee
relationship exists baseless.
Employing the control test,38 we
find that such a relationship exist
in the present case.
Even a factual review shows that
Macasio is Davids employee
To determine the existence of an
employer-employee relationship,
four elements generally need to
be considered, namely: (1) the
selection and engagement of the
employee; (2) the payment of
wages; (3) the power of
dismissal; and (4) the power to
control the employees conduct.
These elements or indicators
comprise the so-called "four-fold"
test of employment relationship.
Macasios relationship with David
satisfies this test.

 First, David engaged the services

of Macasio, thus satisfying the
element of "selection and
engagement of the employee."
David categorically confirmed this
fact when, in his "Sinumpaang
Salaysay," he stated that "nag
apply po siya sa akin at kinuha
ko siya na chopper[.]"39 Also,
Solano and Antonio stated in
their "Pinagsamang Sinumpaang
Salaysay"40 that "[k]ami po ay
nagtratrabaho sa Yiels xxx na
pag-aari ni Ariel David bilang
butcher" and "kilalanamin si xxx
Macasio na isa ring butcher xxx
ni xxx David at kasama namin
siya sa aming trabaho."
Second, David paid Macasios
wages.Both David and Macasio
categorically stated in their
respective pleadings before the
lower tribunals and even before
this Court that the former had
been paying the latter P700.00
each day after the latter had
finished the days task. Solano
and Antonio also confirmed this
fact of wage payment in their
"Pinagsamang Sinumpaang
Salaysay."41 This satisfies the
element of "payment of wages."
Third, David had been setting the
day and time when Macasio
should report for work. This
power to determine the work
schedule obviously implies power
of control. By having the power to
control Macasios work schedule,
David could regulate Macasios
work and could even refuse to

give him any assignment, thereby

effectively dismissing him.
And fourth, David had the right
and power to control and
supervise Macasios work as to
the means and methods of
performing it. In addition to
setting the day and time when
Macasio should report for work,
the established facts show that
David rents the place where
Macasio had been performing his
tasks. Moreover, Macasio would
leave the workplace only after he
had finished chopping all of the
hog meats given to him for the
days task. Also, David would still
engage Macasios services and
have him report for work even
during the days when only few
hogs were delivered for
butchering.
Under this overall setup, all those
working for David, including
Macasio, could naturally be
expected to observe certain rules
and requirements and David
would necessarily exercise some
degree of control as the chopping
of the hog meats would be
subject to his specifications. Also,
since Macasio performed his
tasks at Davids workplace, David
could easily exercise control and
supervision over the former.
Accordingly, whether or not David
actually exercised this right or
power to control is beside the
point as the law simply requires
the existence of this power to
control 4243 or, as in this case, the

existence of the right and

opportunity to control and
supervise Macasio.44
In sum, the totality of the
surrounding circumstances of the
present case sufficiently points to
an employer-employee
relationship existing between
David and Macasio.
Macasio is engaged on "pakyaw"
or task basis
At this point, we note that all
three tribunals the LA, the
NLRC and the CA found that
Macasio was engaged or paid on
"pakyaw" or task basis. This
factual finding binds the Court
under the rule that factual
findings of labor tribunals when
supported by the established
facts and in accord with the laws,
especially when affirmed by the
CA, is binding on this Court.
A distinguishing characteristic of
"pakyaw" or task basis
engagement, as opposed to
straight-hour wage payment, is
the non-consideration of the time
spent in working. In a task-basis
work, the emphasis is on the task
itself, in the sense that payment
is reckoned in terms of
completion of the work, not in
terms of the number of time
spent in the completion of
work.45 Once the work or task is
completed, the worker receives a
fixed amount as wage, without
regard to the standard
measurements of time generally
used in pay computation.

In Macasios case, the

established facts show that he
would usually start his work at
10:00 p.m. Thereafter, regardless
of the total hours that he spent at
the workplace or of the total
number of the hogs assigned to
him for chopping, Macasio would
receive the fixed amount
of P700.00 once he had
completed his task. Clearly, these
circumstances show a "pakyaw"
or task basis engagement that all
three tribunals uniformly found.
In sum, the existence of
employment relationship between
the parties is determined by
applying the "four-fold" test;
engagement on "pakyaw" or task
basis does not determine the
parties relationship as it is simply
a method of pay computation.
Accordingly, Macasio is Davids
employee, albeit engaged on
"pakyaw" or task basis.
As an employee of David paid on
pakyaw or task basis, we now go
to the core issue of whether
Macasio is entitled to holiday,
13th month, and SIL pay.
On the issue of Macasios
entitlement to holiday, SIL and
13th month pay
The LA dismissed Macasios
claims pursuant to Article 94 of
the Labor Code in relation to
Section 1, Rule IV of the IRR of
the Labor Code, and Article 95 of
the Labor Code, as well as
Presidential Decree (PD) No.
851. The NLRC, on the other

hand, relied on Article 82 of the

Labor Code and the Rules and
Regulations Implementing PD
No. 851. Uniformly, these
provisions exempt workers paid
on "pakyaw" or task basis from
the coverage of holiday, SIL and
13th month pay.
In reversing the labor tribunals
rulings, the CA similarly relied on
these provisions, as well as on
Section 1, Rule V of the IRR of
the Labor Code and the Courts
ruling in Serrano v. Severino
Santos Transit.46 These labor law
provisions, when read together
with the Serrano ruling, exempt
those engaged on "pakyaw" or
task basis only if they qualify as
"field personnel."
In other words, what we have
before us is largely a question of
law regarding the correct
interpretation of these labor code
provisions and the implementing
rules; although, to conclude that
the worker is exempted or
covered depends on the facts
and in this sense, is a question of
fact: first, whether Macasio is a
"field personnel"; and second,
whether those engaged on
"pakyaw" or task basis, but who
are not "field personnel," are
exempted from the coverage of
holiday, SIL and 13th month pay.
To put our discussion within the
perspective of a Rule 45 petition
for review of a CA decision
rendered under Rule 65 and
framed in question form, the legal

question is whether the CA

correctly ruled that it was grave
abuse of discretion on the part of
the NLRC to deny Macasios
monetary claims simply because
he is paid on a non-time basis
without determining whether he is
a field personnel or not.
To resolve these issues, we need
tore-visit the provisions involved.
Provisions governing SIL and
holiday pay
Article 82 of the Labor Code
provides the exclusions from the
coverage of Title I, Book III of the
Labor Code - provisions
governing working conditions and
rest periods.
Art. 82. Coverage. The
provisions of [Title I] 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.
xxxx
"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. [emphases and
underscores ours]
Among the Title I provisions are
the provisions on holiday pay
(under Article 94 of the Labor
Code) and SIL pay (under Article
95 of the Labor Code). Under
Article 82,"field personnel" on
one hand and "workers who are
paid by results" on the other
hand, are not covered by the Title
I provisions. The wordings of
Article82 of the Labor Code
additionally categorize workers
"paid by results" and "field
personnel" as separate and
distinct types of employees who
are exempted from the Title I
provisions of the Labor Code.
The pertinent portion of Article 94
of the Labor Code and its
corresponding provision in the
IRR47 reads:
Art. 94. Right to holiday pay. (a)
Every worker shall be paid his
regular daily wage during regular
holidays, except in retail and
service establishments regularly
employing less than (10)
workers[.] [emphasis ours]
xxxx
SECTION 1. Coverage. This
Rule shall apply to all employees
except:
xxxx
(e)Field personnel and other
employees whose time and
performance is unsupervised by
the employer including those who

are engaged on task or contract

basis, purely commission basis,
or those who are paid a fixed
amount for performing work
irrespective of the time
consumed in the performance
thereof. [emphases ours]
On the other hand, Article 95 of
the Labor Code and its
corresponding provision in the
IRR48 pertinently provides:
Art. 95. Right to service incentive.
(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.
- This provision shall not
apply to those who are
already enjoying the benefit
herein provided, those
enjoying vacation leave
with pay of at least five
days and those employed
in establishments regularly
employing less than ten
employees or in
establishments exempted
from granting this benefit
by the Secretary of Labor
and Employment after
considering the viability or
financial condition of such
establishment. [emphases
ours]
xxxx
Section 1. Coverage. This rule
shall apply to all employees
except:
xxxx

 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 a fixed
amount for
performing work
irrespective of the
time consumed in the
performance thereof.
[emphasis ours]
Under these provisions, the
general rule is that holiday and
SIL pay provisions cover all
employees. To be excluded from
their coverage, an employee
must be one of those that these
provisions expressly exempt,
strictly in accordance with the
exemption. Under the IRR,
exemption from the coverage of
holiday and SIL pay refer to "field
personnel and other employees
whose time and performance is
unsupervised by the employer
including those who are engaged
on task or contract basis[.]" Note
that unlike Article 82 of the Labor
Code, the IRR on holiday and SIL
pay do not exclude employees
"engaged on task basis" as a
separate and distinct category
from employees classified as
"field personnel." Rather, these
employees are altogether

merged into one classification of

exempted employees.
Because of this difference, it may
be argued that the Labor Code
may be interpreted to mean that
those who are engaged on task
basis, per se, are excluded from
the SIL and holiday payment
since this is what the Labor Code
provisions, in contrast with the
IRR, strongly suggest. The
arguable interpretation of this rule
may be conceded to be within the
discretion granted to the LA and
NLRC as the quasi-judicial
bodies with expertise on labor
matters.
However, as early as 1987 in the
case of Cebu Institute of
Technology v. Ople49 the phrase
"those who are engaged on task
or contract basis" in the rule has
already been interpreted to mean
as follows:
[the phrase] should however, 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 xxx Clearly,
petitioner's teaching personnel
cannot be deemed field
personnel which refers "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. [Par. 3, Article 82,

Labor Code of the Philippines].
Petitioner's claim that private
respondents are not entitled to
the service incentive leave
benefit cannot therefore be
sustained.
In short, the payment of an
employee on task or pakyaw
basis alone is insufficient to
exclude one from the coverage of
SIL and holiday pay. They are
exempted from the coverage of
Title I (including the holiday and
SIL pay) only if they qualify as
"field personnel." The IRR
therefore validly qualifies and
limits the general exclusion of
"workers paid by results" found in
Article 82 from the coverage of
holiday and SIL pay. This is the
only reasonable interpretation
since the determination of
excluded workers who are paid
by results from the coverage of
Title I is "determined by the
Secretary of Labor in appropriate
regulations."
The Cebu Institute Technology
ruling was reiterated in 2005 in
Auto Bus Transport Systems,
Inc., v. Bautista:
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.
The Autobus ruling was in turn
the basis of Serrano v. Santos
Transit which the CA cited in
support of granting Macasios
petition.
In Serrano, the Court, applying
the rule on ejusdem
generis50 declared that
"employees engaged on task or
contract basis xxx are not
automatically exempted from the
grant of service incentive leave,
unless, they fall under the

classification of field
personnel."51 The Court
explained that the phrase
"including those who are
engaged on task or contract
basis, purely commission basis"
found in Section 1(d), Rule V of
Book III of the IRR should not be
understood as a separate
classification of employees to
which SIL shall not be granted.
Rather, as with its preceding
phrase - "other employees whose
performance is unsupervised by
the employer" - the phrase
"including those who are
engaged on task or contract
basis" serves to amplify the
interpretation of the Labor Code
definition of "field personnel" as
those "whose actual hours of
work in the field cannot be
determined with reasonable
certainty."
In contrast and in clear departure
from settled case law, the LA and
the NLRC still interpreted the
Labor Code provisions and the
IRR as exempting an employee
from the coverage of Title I of the
Labor Code based simply and
solely on the mode of payment of
an employee. The NLRCs utter
disregard of this consistent
jurisprudential ruling is a clear act
of grave abuse of discretion.52 In
other words, by dismissing
Macasios complaint without
considering whether Macasio
was a "field personnel" or not, the
NLRC proceeded based on a

significantly incomplete
consideration of the case. This
action clearly smacks of grave
abuse of discretion.
Entitlement to holiday pay
Evidently, the Serrano ruling
speaks only of SIL pay. However,
if the LA and the NLRC had only
taken counsel from Serrano and
earlier cases, they would have
correctly reached a similar
conclusion regarding the
payment of holiday pay since the
rule exempting "field personnel"
from the grant of holiday pay is
identically worded with the rule
exempting "field personnel" from
the grant of SIL pay. To be clear,
the phrase "employees engaged
on task or contract basis "found
in the IRR on both SIL pay and
holiday pay should be read
together with the exemption of
"field personnel."
In short, in determining whether
workers engaged on "pakyaw" or
task basis" is entitled to holiday
and SIL pay, the presence (or
absence) of employer
supervision as regards the
workers time and performance is
the key: if the worker is simply
engaged on pakyaw or task
basis, then the general rule is
that he is entitled to a holiday pay
and SIL pay unless exempted
from the exceptions specifically
provided under Article 94 (holiday
pay) and Article95 (SIL pay) of
the Labor Code. However, if the
worker engaged on pakyaw or

task basis also falls within the

meaning of "field personnel"
under the law, then he is not
entitled to these monetary
benefits.
Macasio does not fall under the
classification of "field personnel"
Based on the definition of field
personnel under Article 82, we
agree with the CA that Macasio
does not fall under the definition
of "field personnel." The CAs
finding in this regard is supported
by the established facts of this
case: first, Macasio regularly
performed his duties at Davids
principal place of business;
second, his actual hours of work
could be determined with
reasonable certainty; and, third,
David supervised his time and
performance of duties. Since
Macasio cannot be considered a
"field personnel," then he is not
exempted from the grant of
holiday, SIL pay even as he was
engaged on "pakyaw" or task
basis.
Not being a "field personnel," we
find the CA to be legally correct
when it reversed the NLRCs
ruling dismissing Macasios
complaint for holiday and SIL pay
for having been rendered with
grave abuse of discretion.
Entitlement to 13th month pay
With respect to the payment of
13th month pay however, we find
that the CA legally erred in
finding that the NLRC gravely

abused its discretion in denying

this benefit to Macasio.1wphi1
The governing law on 13th month
pay is PD No. 851.53
As with holiday and SIL pay, 13th
month pay benefits generally
cover all employees; an
employee must be one of those
expressly enumerated to be
exempted. Section 3 of the Rules
and Regulations Implementing
P.D. No. 85154 enumerates the
exemptions from the coverage of
13th month pay benefits. Under
Section 3(e), "employers of those
who are paid on xxx task basis,
and those who are paid a fixed
amount for performing a specific
work, irrespective of the time
consumed in the performance
thereof"55 are exempted.
Note that unlike the IRR of the
Labor Code on holiday and SIL
pay, Section 3(e) of the Rules
and Regulations Implementing
PD No. 851 exempts employees
"paid on task basis" without any
reference to "field personnel."
This could only mean that insofar
as payment of the 13th month
pay is concerned, the law did not
intend to qualify the exemption
from its coverage with the
requirement that the task worker
be a "field personnel" at the
same time.
WHEREFORE, in light of these
considerations, we hereby
PARTIALLY GRANT the petition
insofar as the payment of 13th
month pay to respondent is

concerned. In all other aspects,

we AFFIRM the decision dated
November 22, 2010 and the
resolution dated January 31,
2011 of the Court of Appeals in
CA-G.R. SP No. 116003.
SO ORDERED.
G.R. No. 199166
April
20, 2015
NELSON V. BEGINO, GENER
DEL VALLE, MONINA A VILALLORIN AND MA. CRISTINA
SUMAYAO,Petitioners,
vs.
ABS-CBN CORPORATION
(FORMERLY, ABS-CBN
BROADCASTING
CORPORATION) AND AMALIA
VILLAFUERTE, Respondents.
DECISION
PEREZ, J.:
The existence of an employeremployee relationship is at the
heart of this Petition for Review
on Certiorari filed pursuant to
Rule 45 of the Rules of Court,
primarily assailing the 29 June
2011 Decision1 rendered by the
Fourth Division of the Court of
Appeals (CA) in CA-G.R. SP No.
116928 which ruled out said
relationship between the parties.
The Facts
Respondent ABS-CBN
Corporation (formerly ABS-CBN
Broadcasting Corporation) is a
television and radio broadcasting
corporation which, for its
Regional Network Group in Naga
City, employed respondent

Amalia Villafuerte (Villafuerte) as

Manager. There is no dispute
regarding the fact that, thru
Villafuerte, ABS-CBN engaged
the services of petitioners Nelson
Begino (Begino) and Gener Del
Valle (Del Valle) sometime in
1996 as Cameramen/Editors for
TV Broadcasting. Petitioners Ma.
Cristina Sumayao (Sumayao)
and Monina Avila-Llorin (Llorin)
were likewise similarly engaged
as reporters sometime in 1996
and 2002, respectively. With their
services engaged by
respondents thru Talent
Contracts which, though regularly
renewed over the years, provided
terms ranging from three (3)
months to one (1) year,
petitioners were given Project
Assignment Forms which
detailed, among other matters,
the duration of a particular project
as well as the budget and the
daily technical requirements
thereof. In the aforesaid
capacities, petitioners were
tasked with coverage of news
items for subsequent daily airings
in respondents TV Patrol Bicol
Program.2
While specifically providing that
nothing therein shall be deemed
or construed to establish an
employer-employee relationship
between the parties, the
aforesaid Talent Contracts
included, among other matters,
provisions on the following
matters: (a) the Talents creation

and performance of work in

accordance with the ABS-CBNs
professional standards and
compliance with its policies and
guidelines covering intellectual
property creators, industry codes
as well as the rules and
regulations of the Kapisanan ng
mga Broadcasters sa Pilipinas
(KBP) and other regulatory
agencies; (b) the Talents nonengagement in similar work for a
person or entity directly or
indirectly in competition with or
adverse to the interests of ABSCBN and non-promotion of any
product or service without prior
written consent; and (c) the
results-oriented nature of the
talents work which did not
require them to observe normal
or fixed working
hours.3 Subjected to contractors
tax, petitioners remunerations
were denominated as Talent
Fees which, as of last renewal,
were admitted to be pegged per
airing day at P273.35 for Begino,
P 302.92 for Del Valle, P 323.08
for Sumayao and P 315.39 for
Llorin.4
Claiming that they were regular
employees of ABS-CBN,
petitioners filed against
respondents the
complaint5docketed as Sub-RAB
05-04- 00041-07 before the
National Labor Relations
Commissions (NLRC) SubRegional Arbitration Branch No.
5, Naga City. In support of their

claims for regularization,

underpayment of overtime pay,
holiday pay, 13th month pay,
service incentive leave pay,
damages and attorney's fees,
petitioners alleged that they
performed functions necessary
and desirable in ABS-CBN's
business. Mandated to wear
company IDs and provided all the
equipment they needed,
petitioners averred that they
worked under the direct control
and supervision of Villafuerte
and, at the end of each day, were
informed about the news to be
covered the following day, the
routes they were to take and,
whenever the subject of their
news coverage is quite distant,
even the start of their workday.
Due to the importance of the
news items they covered and the
necessity of their completion for
the success of the program,
petitioners claimed that, under
pain of immediate termination,
they were bound by the
companys policy on, among
others, attendance and
punctuality.6
Aside from the constant
evaluation of their actions,
petitioners were reportedly
subjected to an annual
competency assessment
alongside other ABS-CBN
employees, as condition for their
continued employment. Although
their work involved dealing with
emergency situations at any time

of the day or night, petitioners

claimed that they were not paid
the labor standard benefits the
law extends to regular
employees. To avoid paying what
is due them, however,
respondents purportedly resorted
to the simple expedient of using
said Talent Contracts and/or
Project Assignment Forms which
denominated petitioners as
talents, despite the fact that they
are not actors or TV hosts of
special skills. As a result of this
iniquitous situation, petitioners
asseverated that they merely
earned an average of P7,000.00
to P8,000.00 per month, or
decidedly lower than
the P21,773.00 monthly salary
ABS-CBN paid its regular rankand-file employees. Considering
their repeated re-hiring by
respondents for ostensible fixed
periods, this situation had gone
on for years since TV Patrol Bicol
has continuously aired from 1996
onwards.7
In refutation of the foregoing
assertions, on the other hand,
respondents argued that,
although it occasionally engages
in production and generates
programs thru various means,
ABS-CBN is primarily engaged in
the business of broadcasting
television and radio content. Not
having the full manpower
complement to produce its own
program, the company had
allegedly resorted to engaging

independent contractors like

actors, directors, artists,
anchormen, reporters,
scriptwriters and various
production and technical staff,
who offered their services in
relation to a particular program.
Known in the industry as talents,
such independent contractors
inform ABSCBN of their
availability and were required to
accomplish Talent Information
Forms to facilitate their
engagement for and appearance
on designated project days.
Given the unpredictability of
viewer preferences, respondents
argued that the company cannot
afford to provide regular work for
talents with whom it negotiates
specific or determinable
professional fees on a per
project, weekly or daily basis,
usually depending on the budget
allocation for a project.8
Respondents insisted that,
pursuant to their Talent Contracts
and/or Project Assignment
Forms, petitioners were hired as
talents, to act as reporters and/or
cameramen for TV Patrol Bicol
for designated periods and rates.
Fully aware that they were not
considered or to consider
themselves as employees of a
particular production or film outfit,
petitioners were supposedly
engaged on the basis of the
skills, knowledge or expertise
they already possessed and, for
said reason, required no further

training from ABS-CBN. Although

petitioners were inevitably
subjected to some degree of
control, the same was allegedly
limited to the imposition of
general guidelines on conduct
and performance, simply for the
purpose of upholding the
standards of the company and
the strictures of the industry.
Never subjected to any control or
restrictions over the means and
methods by which they
performed or discharged the
tasks for which their services
were engaged, petitioners were,
at most, briefed whenever
necessary regarding the general
requirements of the project to be
executed.9
Having been terminated during
the pendency of the case,
Petitioners filed on 10 July 2007
a second complaint against
respondents, for regularization,
payment of labor standard
benefits, illegal dismissal and
unfair labor practice, which was
docketed as Sub-RAB 05-0800107-07. Upon respondents
motion, this complaint was
dismissed for violation of the
rules against forum shopping in
view of the fact that the
determination of the issues in the
second case hinged on the
resolution of those raised in the
first.10 On 19 December 2007,
however, Labor Arbiter Jesus
Orlando Quiones (Labor Arbiter
Quiones) resolved Sub-RAB 05-

04-00041-07 in favor of
petitioners who, having rendered
services necessary and related to
ABS-CBNs business for more
than a year, were determined to
be its regular employees. With
said conclusion found to be
buttressed by, among others, the
exclusivity clause and
prohibitions under petitioners
Talent Contracts and/or Project
Assignment Forms which evinced
respondents control over
them,11 Labor Arbiter Quiones
disposed of the case in the
following wise:
WHEREFORE, finding merit in
the causes of action set forth by
the complainants, judgment is
hereby rendered declaring
complainants MONINA AVILALLORIN, GENER L. DEL VALLE,
NELSON V. BEGINO and MA.
CRISTINA V. SUMAYAO, as
regular employees of respondent
company, ABS-CBN
BROADCASTING
CORPORATION.
Accordingly, respondent ABSCBN Broadcasting Corporation is
hereby ORDERED to pay
complainants, subject to the
prescriptive period provided
under Article 291 of the Labor
Code, however applicable, the
total amount of Php2,440,908.36,
representing salaries/wage
differentials, holiday pay, service
incentive leave pay and 13th
month pay, to include 10% of the
judgment award as attorneys

fees of the judgment award

(computation of the monetary
awards are attached hereto as
integral part of this decision).
Moreover, respondents are
directed to admit back
complainants to work under the
same terms and conditions
prevailing prior to their separation
or, at respondents' option, merely
reinstated in the payroll.
Other than the above, all other
claims and charges are ordered
DISMISSED for lack of merit.12
Aggrieved by the foregoing
decision, respondents elevated
the case on appeal before the
NLRC, during the pendency of
which petitioners filed a third
complaint against the former, for
illegal dismissal, regularization,
nonpayment of salaries and 13th
month pay, unfair labor practice,
damages and attorneys fees. In
turn docketed as NLRC Case No.
Sub-RAB-V-05-03-00039-08, the
complaint was raffled to Labor
Arbiter Quiones who issued an
Order dated 30 April 2008,
inhibiting himself from the case
and denying respondents motion
to dismiss on the grounds of res
judicata and forum
shopping.13 Finding that
respondents control over
petitioners was indeed manifest
from the exclusivity clause and
prohibitions in the Talent
Contracts and/or Project
Assignment Forms, on the other
hand, the NLRC rendered a

Decision dated 31 March 2010,

affirming said Labor Arbiters
appealed decision.14 Undeterred
by the NLRCs 31 August 2010
denial of their motion for
reconsideration,15 respondents
filed the Rule 65 petition for
certiorari docketed before the CA
as CA-G.R. SP No. 116928
which, in addition to taking
exceptions to the findings of the
assailed decision, faulted
petitioners for violating the rule
against forum shopping.16
On 29 June 2011, the CA
rendered the herein assailed
decision, reversing the findings of
the Labor Arbiter and the NLRC.
Ruling out the existence of forum
shopping on the ground that
petitioners' second and third
complaints were primarily
anchored on their termination
from employment after the filing
of their first complaint, the CA
nevertheless discounted the
existence of an employeremployee relation between the
parties upon the following
findings and conclusions: (a)
petitioners, were engaged by
respondents as talents for
periods, work and the program
specified in the Talent Contracts
and/or Project Assignment Forms
concluded between them; (b)
instead of fixed salaries,
petitioners were paid talent fees
depending on the budget
allocated for the program to
which they were assigned; (c)

being mainly concerned with the

result, respondents did not
exercise control over the manner
and method by which petitioner
accomplished their work and, at
most, ensured that they complied
with the standards of the
company, the KBP and the
industry; and, (d) the existence of
an employer-employee
relationship is not necessarily
established by the exclusivity
clause and prohibitions which are
but terms and conditions on
which the parties are allowed to
freely stipulate.17
Petitioners motion for
reconsideration of the foregoing
decision was denied in the CA's
3 October 2011
Resolution,18 hence, this petition.
The Issues
Petitioners seek the reversal of
the CAs assailed Decision and
Resolution on the affirmative of
the following issues:
Whether or not the CA seriously
and reversibly erred in not
dismissing respondents petition
for certiorari in view of the fact
that they did file a Notice of
Appeal at the NLRC level and did
not, by themselves or through
their duly authorized
representative, verify and certify
the Memorandum of Appeal they
filed thereat, in accordance with
the NLRC Rules of Procedure;
and 2. Whether or not the CA
seriously and reversibly erred in
brushing aside the determination

made by both the Labor Arbiter

and the NLRC of the existence of
an employer-employee
relationship between the parties,
despite established jurisprudence
supporting the same.
The Court's Ruling
The Court finds the petition
impressed with merit.
Petitioners preliminarily fault the
CA for not dismissing
respondents Rule 65 petition for
certiorari in view of the fact that
the latter failed to file a Notice of
Appeal from the Labor Arbiters
decision and to verify and certify
the Memorandum of Appeal they
filed before the NLRC. While
concededly required under the
NLRC Rules of Procedure,
however, these matters should
have been properly raised during
and addressed at the appellate
stage before the NLRC. Instead,
the record shows that the NLRC
took cognizance of respondents
appeal and proceeded to resolve
the same in favor of petitioners
by affirming the Labor Arbiters
decision. Not having filed their
own petition for certiorari to take
exception to the liberal attitude
the NLRC appears to have
adopted towards its own rules of
procedure, petitioners were
hardly in the proper position to
raise the same before the CA or,
for that matter, before this Court
at this late stage. Aside from the
settled rule that a party who has
not appealed is not entitled to

affirmative relief other than the

ones granted in the
decision19 rendered, liberal
interpretation of procedural rules
on appeal had, on occasion,
been favored in the interest of
substantive justice.20
Although the existence of an
employer-employee relationship
is, on the other hand, a question
of fact21 which is ordinarily not the
proper subject of a Rule 45
petition for review on certiorari
like the one at bar, the conflicting
findings between the labor
tribunals and the CA justify a
further consideration of the
matter.22 To determine the
existence of said relation, case
law has consistently applied the
four-fold test, to wit: (a) the
selection and engagement of the
employee; (b) the payment of
wages;(c) the power of dismissal;
and (d) the employer's power to
control the employee on the
means and methods by which the
work is accomplished.23 Of these
criteria, the so-called "control
test" is generally regarded as the
most crucial and determinative
indicator of the presence or
absence of an employeremployee relationship. Under this
test, an employer-employee
relationship is said to exist where
the person for whom the services
are performed reserves the right
to control not only the end result
but also the manner and means
utilized to achieve the same.24

In discounting the existence of

said relationship between the
parties, the CA ruled that
Petitioners' services were, first
and foremost, engaged thru their
Talent Contracts and/or Project
Assignment Forms which
specified the work to be
performed by them, the project to
which they were assigned, the
duration thereof and their rates of
pay according to the budget
therefor allocated. Because they
are imbued with public interest, it
cannot be gainsaid, however, that
labor contracts are subject to the
police power of the state and are
placed on a higher plane than
ordinary contracts. The
recognized supremacy of the law
over the nomenclature of the
contract and the stipulations
contained therein is aimed at
bringing life to the policy
enshrined in the Constitution to
afford protection to
labor.25 Insofar as the nature of
ones employment is concerned,
Article 280 of the Labor Code of
the Philippines also provides as
follows:
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 service 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 actually
exists.
It has been ruled that the
foregoing provision contemplates
four kinds of employees, namely:
(a) regular employees or those
who have been engaged to
perform activities which are
usually necessary or desirable in
the usual business or trade of the
employer; (b) project employees
or those whose 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; (c)
seasonal employees or those

who work or perform services

which are seasonal in nature,
and the employment is for the
duration of the season; and (d)
casual employees or those who
are not regular, project, or
seasonal employees.26 To the
foregoing classification of
employee, jurisprudence has
added that of contractual or fixed
term employee which, if not for
the fixed term, would fall under
the category of regular
employment in view of the nature
of the employees engagement,
which is to perform activity
usually necessary or desirable in
the employers business.27
The Court finds that,
notwithstanding the
nomenclature of their Talent
Contracts and/or Project
Assignment Forms and the terms
and condition embodied therein,
petitioners are regular employees
of ABS-CBN. Time and again, it
has been ruled that the test to
determine whether employment
is regular or not is the reasonable
connection between the activity
performed by the employee in
relation to the business or trade
of the employer.28 As
cameramen/editors and
reporters, petitioners were
undoubtedly performing functions
necessary and essential to ABSCBNs business of broadcasting
television and radio content. It
matters little that petitioners
services were engaged for

specified periods for TV Patrol

Bicol and that they were paid
according to the budget allocated
therefor. Aside from the fact that
said program is a regular
weekday fare of the ABS-CBNs
Regional Network Group in Naga
City, the record shows that, from
their initial engagement in the
aforesaid capacities, petitioners
were continuously re-hired by
respondents over the years. To
the mind of the Court,
respondents repeated hiring of
petitioners for its long-running
news program positively
indicates that the latter were
ABS-CBNs regular employees.
If the employee has been
performing the job for at least
one year, even if the performance
is not continuous or merely
intermittent, the law deems the
repeated or continuing
performance as sufficient
evidence of the necessity, if not
indispensability of that activity in
the business.29 Indeed, an
employment stops being coterminous with specific projects
where the employee is
continuously re-hired due to the
demands of the employers
business.30When circumstances
show, moreover, that
contractually stipulated periods of
employment have been imposed
to preclude the acquisition of
tenurial security by the employee,
this Court has not hesitated in
striking down such arrangements

as contrary to public policy,

morals, good customs or public
order.31 The nature of the
employment depends, after all,
on the nature of the activities to
be performed by the employee,
considering the nature of the
employers business, the
duration and scope to be done,
and, in some cases, even the
length of time of the performance
and its continued existence.32 In
the same manner that the
practice of having fixed-term
contracts in the industry does not
automatically make all talent
contracts valid and compliant
with labor law, it has,
consequently, been ruled that the
assertion that a talent contract
exists does not necessarily
prevent a regular employment
status.33
As cameramen/editors and
reporters, it also appears that
petitioners were subject to the
control and supervision of
respondents which, first and
foremost, provided them with the
equipments essential for the
discharge of their functions.
Prepared at the instance of
respondents, petitioners Talent
Contracts tellingly provided that
ABS-CBN retained "all creative,
administrative, financial and legal
control" of the program to which
they were assigned. Aside from
having the right to require
petitioners "to attend and
participate in all promotional or

merchandising campaigns,
activities or events for the
Program," ABS-CBN required the
former to perform their functions
"at such locations and
Performance/Exhibition
Schedules" it provided or, subject
to prior notice, as it chose
determine, modify or change.
Even if they were unable to
comply with said schedule,
petitioners were required to give
advance notice, subject to
respondents
approval.34 However obliquely
worded, the Court finds the
foregoing terms and conditions
demonstrative of the control
respondents exercised not only
over the results of petitioners
work but also the means
employed to achieve the same.
In finding that petitioners were
regular employees, the NLRC
further ruled that the exclusivity
clause and prohibitions in their
Talent Contracts and/or Project
Assignment Forms were likewise
indicative of respondents control
over them. Brushing aside said
finding, however, the CA applied
the ruling in Sonza v. ABS-CBN
Broadcasting
Corporation35 where similar
restrictions were considered not
necessarily determinative of the
existence of an employeremployee relationship.
Recognizing that independent
contractors can validly provide
his exclusive services to the

hiring party, said case enunciated

that guidelines for the
achievement of mutually desired
results are not tantamount to
control. As correctly pointed out
by petitioners, however, parallels
cannot be expediently drawn
between this case and that of
Sonza case which involved a
well-known television and radio
personality who was legitimately
considered a talent and amply
compensated as such. While
possessed of skills for which they
were modestly recompensed by
respondents, petitioners lay no
claim to fame and/or unique
talents for which talents like
actors and personalities are hired
and generally compensated in
the broadcast industry.
Later echoed in Dumpit-Murillo v.
Court of Appeals,36 this Court has
rejected the application of the
ruling in the Sonza case to
employees similarly situated as
petitioners in ABS-CBN
Broadcasting Corporation v.
Nazareno.37The following
distinctions were significantly
observed between employees
like petitioners and television or
radio personalities like Sonza, to
wit:
First. In the selection and
engagement of respondents, no
peculiar or unique skill, talent or
celebrity status was required
from them because they were
merely hired through petitioners

personnel department just like

any ordinary employee.
Second. The so-called "talent
fees" of respondents correspond
to wages given as a result of an
employer-employee
relationship.1wphi1 Respondent
s did not have the power to
bargain for huge talent fees, a
circumstance negating
independent contractual
relationship.
Third. Petitioner could always
discharge respondents should it
find their work unsatisfactory, and
respondents are highly
dependent on the petitioner for
continued work.
Fourth. The degree of control and
supervision exercised by
petitioner over respondents
through its supervisors negates
the allegation that respondents
are independent contractors.
The presumption is that when the
work done is an integral part of
the regular business of the
employer and when the worker,
relative to the employer, does not
furnish an independent business
or professional service, such
work is a regular employment of
such employee and not an
independent contractor. The
Court will peruse beyond any
such agreement to examine the
facts that typify the parties actual
relationship.38 (Emphasis
omitted)
Rather than the project and/or
independent contractors

respondents claim them to be, it

is evident from the foregoing
disquisition that petitioners are
regular employees of ABS-CBN.
This conclusion is borne out by
the ineluctable showing that
petitioners perform functions
necessary and essential to the
business of ABS-CBN which
repeatedly employed them for a
long-running news program of its
Regional Network Group in Naga
City. In the course of said
employment, petitioners were
provided the equipments they
needed, were required to comply
with the Company's policies
which entailed prior approval and
evaluation of their performance.
Viewed from the prism of these
considerations, we find and so
hold that the CA reversibly erred
when it overturned the NLRC's
affirmance of the Labor Arbiter's
finding that an employeremployee relationship existed
between the parties. Given the
fact, however, that Sub-RAB-V05-03-00039-08 had not been
consolidated with this case and
appears, for all intents and
purposes, to be pending still,
the Court finds that the
reinstatement of petitioners
ordered by said labor officer and
tribunal should, as a relief
provided in case of illegal
dismissal, be left for
determination in said case.
WHEREFORE, the Court of
Appeals' assailed Decision dated

29 June 2011 and Resolution

dated 3 October 2011 in CA-G.R.
SP No. 116928 are REVERSED
and SET ASIDE. Except for the
reinstatement of Nelson V.
Begino, Gener Del Valle, Monina
Avila-Llorin and Ma. Cristina

Sumayao, the National Labor and

Relations Commission's 31
March 2010 Decision is,
accordingly, REINSTATED.
SO ORDERED.