DY KEH BENG, petitioner, vs. INTERNATIONAL LABOR and MARINE UNION OF THE PHILIPPINES, ET AL., respondents. G.R. No.

L-32245
May 25, 1979
FACTS:
- Petitioner, Dy Keh Beng, proprietor of basket factory, was charged
with ULP for discriminatory acts defined under Sec 4(a), subparagraph (1 & 4), R.A. No. 875 by dismissing on September
28-29, 1960, respectively, Carlos N. Solano and Ricardo Tudla for
their union activities.
After PI was conducted, a case was filed in the CIR for in behalf of
the ILMUP and two of its members, Solano and Tudla. Dy Keh Beng
contended that he did not know Tudla and that Solano was not his
employee because the latter came to the establishment only when
there was work which he did on pakiaw basis. According to Dy Keh
Beng, Solano was not his employee for the following reasons:
(1) Solano never stayed long enough at Dys establishment;
(2) Solano had to leave as soon as he was through with the
order given him by Dy;
(3) When there were no orders needing his services there
was nothing for him to do;
(4) When orders came to the shop that his regular workers
could not fill it was then that Dy went to his address in
Caloocan and fetched him for these orders; and
(5) Solano's work with Dy's establishment was not
continuous.
- According to petitioner, these facts show that respondents
Solano and Tudla are only piece workers, not employees under
Republic Act 875, where an employee is referred to as:
o shall include any employee and shall not be limited to
the employee of a particular employer unless the act
explicitly states otherwise and shall include any
individual whose work has ceased as a consequence of,
or in connection with any current labor dispute or
because of any ulp and who has not obtained any other
substantially equivalent and regular employment.
- while an employer
o includes any person acting in the interest of an
employer, directly or indirectly but shall not include
any labor organization (otherwise than when acting
as an employer) or anyone acting in the capacity of
officer or agent of such labor organization
- Petitioner also contends that the private respondents "did not
meet the control test in the fight of the ... definition of the
terms employer and employee, because there was no
evidence to show that petitioner had the right to direct the
manner and method of respondent's work. He points to the
case of Madrigal Shipping Co., Inc. v. Nieves Baens del
Rosario, et al., L-13130, October 31, 1959, where the Court
ruled that:
The test ... of the existence of employee and employer
relationship is whether there is an understanding between the
parties that one is to render personal services to or for the
benefit of the other and recognition by them of the right of one
to order and control the other in the performance of the work
and to direct the manner and method of its performance.
The CIR found that there existed an employee-employer
relationship between Dy Keh Beng and complainants Tudla and
Solano, although Solano was admitted to have worked on piece
basis.
Hence, this petition for certiorari.

With regard to the control test the SC said that

o It should be borne in mind that the control test calls
merely for the existence of the right to control the
manner of doing the work, not the actual exercise of
the right.
Considering the finding by the Hearing Examiner that the
establishment of Dy Keh Beng is "engaged in the manufacture of
baskets known as kaing, it is natural to expect that those working
under Dy would have to observe, among others, Dy's
requirements of size and quality of the kaing. Some control
would necessarily be exercised by Dy as the making of the kaing
would be subject to Dy's specifications. Parenthetically, since the
work on the baskets is done at Dy's establishments, it can be
inferred that the proprietor Dy could easily exercise control on
the men he employed.

The petition was dismissed. The Court affirmed the decision of the
CIR.
MARAGUINOT VS. NLRC
Davide, Jr., J. | January 22, 1998

FACTS:
- Alejandro Maraguinot (Maraguinot) alleges that he was employed
by Viva Films (Viva) as part of the filming crew. He was later
designated as Assistant Electrician and then later promoted to
Electrician.
- Paulinmo Enero (Enero) likewise claims that Viva hired him as a
member of the shooting crew.
- Maraguinot and Eneros tasks consisted of loading, unloading and
arranging movie equipment in the shooting area.
- They later asked the company that their salaries be adjusted in
accordance with the minimum wage law. In response, the company
said that they would grant the adjustment provided they signed a
blank employment contract. When they refused, they were forced
to go on leave. Upon his return, the company refused to take
Enero back. As regards Maraguinot, he was dropped from the
company payroll, but was later returned. When again he refused to
sign the blank contract, his services were terminated.
- Maraguinot and Enero then sued for illegal dismissal.
- VIVA CLAIMS that they contract persons called
producers/assistant producers to make movies and contend
that Maraguinot and Enero are project employees of these
producers who act as independent contractors. Hence there is
no employer-employee relationship between them. In addition,
Viva claims that Maraguinot was hired for the movie Mahirap
Maging Pogi, while Enero was hired for the movie Sigaw ng
Puso.
- LABOR ARBITER: ruled in favor of Maraguinot and Enero and held
that they were employees of Viva and as such were illegally
dismissed by the latter.
- NLRC: reversed the LA and ruled that the circumstances of the
case showed that they were only project employees of Viva.
ISSUES:
- WON Maraguinot and Enero are employees of Viva.
- WON they were illegally dismissed.
HELD:
- They were regular employees.
- They were illegally dismissed.
RATIO:
ISSUE 1
- Viva claims that the producers were job contractors.
o However, under Section 8 of Rule VIII, Book III of the
ISSUE:
Omnibus Rules Implementing the Labor Code, to be
considered a job contractor, such associate producers
Whether or not an employee employer relation existed between
must have tools, equipment, machinery, work premises and
petitioner Dy Keh Beng and the respondents Solano and Tudla.
other materials necessary to make motion picture. The
associate producers had none of these, and that in fact, the
HELD:
movie making equipment is owned by Viva.
- The SC also noted the decision of Justice Paras in the case of
o
Given that, these producers can be considered only as
Sunrise Coconut Products Co. Vs. CIR (83 Phil 518, 523):
labor-only contractors. As such is prohibited, the law
o judicial notice of the fact that the so-called "pakyaw"
considers the person or entity engaged in the same a mere
system mentioned in this case as generally practiced in our
agent or intermediary of the direct employer.
country, is, in fact, a labor contract -between employers
and employees, between capitalists and laborers.

BUT EVEN GIVEN THAT, these producers cannot be

considered as job contractors, much less labor-only
contractors as they did not supply, recruit nor hire the
workers. In this case, it was Viva who recruited the crew
members from an available groups of freelance workers which
include the complainants.
The relationship between Viva and its producers seem to be that of
agency as the latter makes movies on behalf of Viva whose
business is that of making movies.
The existence of an employer-employee relationship between
Maraguinot & Enero and Viva is further supported by the
following:
o The four elements under 4-fold test are present.
o CONTROL: Viva has a Supervising Producer that monitors
the progress of the producers. Viva, in effect, controls the
outcome of the film and the means through which it is
produced.
o SELECTION AND SUPERVISION: Viva issued
appointment slips with their corporate name as the
heading.
o SALARIES: It was likewise Viva who paid the employees
salaries.

ISSUE 2
- While Maraguinot and Enero were possibly initially hired as project
employees, they had attained the status of regular employees.
- A project employee or a member of a work pool may acquire
the status of a regular employee when the ff. concur:
o There is a continuous rehiring of project employees
even after cessation of the project.
o The tasks performed are vital, necessary and
indispensable to the usual business or trade of the
employer.
- The length of time during which the employee was continuously
rehired is not controlling, but merely serves as a badge of regular
employment.
- In this case, Enero was employed for 2 years and engaged in at
least 18 projects; while Maragunot was employed for 3 years and
worked on at least 23 projects.
- Citing Lao vs. NLRC, the could held that a work pool may exist
although the workers in the pool do not receive salaries and are
free to seek other employment during temporary breaks in the
business, provided that the workers shall be available when called
to report for a project. Although primarily applicable to regular
seasonal workers, this setup can likewise be applied to project
workers in so far as the effect of temporary cessation of work is
concerned.
- Once a project or work pool employee has been (a)
continuously, as opposed to intermittently, rehired by the
same employer for the same tasks or nature of tasks; (b) these
tasks are vital, necessary, and indispensable to the usual
business or trade of the employer, then the employee must be
deemed a regular employee, pursuant to Article 280 of the
Labor Code and jurisprudence.
- As Maraguinot and Enero have already gained the status of regular
employees, their dismissal was unwarranted since the cause
invoked for their dismissal (completion of the project) is not one of
the valid causes for termination under Article 282 of the Labor
Code.
INSULAR LIFE CO., LTD. VS NLRC (179 SCRA 459)

The company terminated the Agency Managers Contract. Basiao

sued the company in a civil action. Thus, the company terminated
Basiaos engagement under the first contract and stopped
payment of his commissions.

ISSUE:
W/N Basiao had become the companys employee by virtue of the
contract, thereby placing his claim for unpaid commissions
HELD:
- No. Rules and regulations governing the conduct of the business are
provided for in the Insurance Code. These rules merely serve as
guidelines towards the achievement of the mutually desired result
without dictating the means or methods to be employed in attaining it.
Its aim is only to promote the result, thereby creating no employeremployee relationship. It is usual and expected for an insurance
company to promulgate a set of rules to guide its commission agents
in selling its policies which prescribe the qualifications of persons
who may be insured. None of these really invades the agents
contractual prerogative to adopt his own selling methods or to sell
insurance at his own time and convenience, hence cannot justifiable
be said to establish an employer-employee relationship between
Basiao and the company.
- The respondents limit themselves to pointing out that Basiaos
contract with the company bound him to observe and conform to
such rules. No showing that such rules were in fact promulgated
which effectively controlled or restricted his choice of methods of
selling insurance.
- Therefore, Basiao was not an employee of the petitioner, but a
commission agent, an independent contract whose claim for
unpaid commissions should have been litigated in an ordinary
civil action.
WHEREFORE, THE COMPLAIN OF BASIAO IS DISMISSED.
INSULAR LIFE ASSURANCE CO, LTD. VS NLRC (287 SCRA 476)
ROGELIO NOGALES vs. CAPITOL MEDICAL CENTER et al.
G.R. No. 142625
December 19, 2006
Facts:
- Pregnant with her fourth child, Corazon Nogales ("Corazon"), who
was then 37 years old, was under the exclusive prenatal care of
Dr. Oscar Estrada ("Dr. Estrada") beginning on her fourth month of
pregnancy or as early as December 1975. Around midnight of 25
May 1976, Corazon started to experience mild labor pains
prompting Corazon and Rogelio Nogales ("Spouses Nogales") to
see Dr. Estrada at his home. After examining Corazon, Dr. Estrada
advised her immediate admission to the Capitol Medical Center
("CMC"). At 6:13 a.m., Corazon started to experience
convulsionsAt 6:22 a.m., Dr. Estrada, assisted by Dr. Villaflor,
applied low forceps to extract Corazon's baby. In the process, a
1.0 x 2.5 cm. piece of cervical tissue was allegedly torn.At 6:27
a.m., Corazon began to manifest moderate vaginal bleeding which
rapidly became profuse. Corazon died at 9:15 a.m. The cause of
death was "hemorrhage, post partum.
Issue:

Whether or not CMC is vicariously liable for the negligence of Dr.

FACTS:
Estrada.
- Insular Life (company) and Basiao entered into a contract by which
Basiao was authorized to solicit for insurance in accordance with
Ruling:
the rules of the company. He would also receive compensation, in
- Private hospitals, hire, fire and exercise real control over their
the form of commissions. The contract also contained the relations
attending and visiting "consultant" staff. The basis for holding
of the parties, duties of the agent and the acts prohibited to him
an employer solidarily responsible for the negligence of its
including the modes of termination.
employee is found in Article 2180 of the Civil Code which
- After 4 years, the parties entered into another contract an
considers a person accountable not only for his own acts but also
Agency Managers Contact and to implement his end of it,
for those of others based on the former's responsibility under a
Basiao organized an agency while concurrently fulfilling his
relationship of patria potestas.
commitment under the first contract.
- In general, a hospital is not liable for the negligence of an
independent contractor-physician.

o EXCEPTION: If the physician is the "ostensible" agent of the

hospital. This exception is also known as the "doctrine of
apparent authority.
For a hospital to be liable under the doctrine of apparent authority,
a plaintiff must show that:
(1) the hospital, or its agent, acted in a manner that would lead a
reasonable person to conclude that the individual who was
alleged to be negligent was an employee or agent of the
hospital;
(2) where the acts of the agent create the appearance of
authority, the plaintiff must also prove that the hospital had
knowledge of and acquiesced in them; and
(3) the plaintiff acted in reliance upon the conduct of the hospital
or its agent, consistent with ordinary care and prudence.
In the instant case, CMC impliedly held out Dr. Estrada as a
member of its medical staff. Through CMC's acts, CMC clothed
Dr. Estrada with apparent authority thereby leading the Spouses
Nogales to believe that Dr. Estrada was an employee or agent of
CMC.

CALAMBA MEDICAL CENTER VS NLRC

GR NO. 1764848
NOVEMBER 25, 2008

work, and is compensated according to the result of his efforts and

not the amount thereof, the element of control is absent.
PROFESSIONAL SERVICES, INC. VS CA
GR NO. 126297
FEBRUARY 2, 2010
FACTS:
Enrique Agana told his wife Natividad Agana to go look for their
neighbor, Dr. Ampil, a surgeon staff member of Medical City, a
prominent and known hospital
- Medical City was owned by PSI
- Natividad suffered from injury due to 2 gauges left inside her body
so they sued Professional Inc. (PSI)
- Despite, the report of 2 missing gauzes after the operation PSI did
NOT initiate an investigation
ISSUE:
-

W/N PSI should be liable for tort.

HELD: YES. 15M + 12% int. until full satisfaction.
-

FACTS:
- Ronaldo Lanzanas and Merceditha Lanzanas are doctors employed by Calamba Medical Center, Inc. They are given a retainers fee by
the hospital as well as shares from fees obtained from patients.
- One time, Ronaldo was overheard by Dr. Trinidad talking to another
doctor about how low the admission rate to the hospital is. That
conversation was reported to Dr. Desipeda who was then the
Medical Director of the hospital.
- Eventually Ronaldo was suspended. Ronaldo filed a case for Illegal
Suspension in March 1998. In the same month, the rank and file
employees organized a strike against the hospital for unfair labor
practices. Desipeda eventually fired Ronaldo for his alleged
participation in the strike, which is not allowed under the Labor
Code for he is a managerial employee. Desipeda also fired
Merceditha on the ground that she is the wife of Ronaldo who
naturally sympathizes with him.
- LABOR ARBITER: ruled that there was no Illegal Suspension for
there was no employer-employee relationship because the hospital has no control over Ronaldo as he is a doctor who even gets shares
from the hospitals earnings.
- The National Labor Relations Commission as well as the Court of Appeals reversed the LA.
ISSUE:
Whether or not there is an employer-employee relationship?
HELD: YES.
- Under the control test, an employment relationship exists between
a physician and a hospital if the hospital controls both the means
and the details of the process by which the physician is to
accomplish his task. There is control in this case because of
the fact that Desipeda schedules the hours of work for
Ronaldo and his wife.
- The doctors are also registered by the hospital under the SSS
which is premised on an employer-employee relationship.
- There is Illegal Dismissal committed against Rolando for there was
no notice and hearing held. It was never shown that Rolando
joined the strike. But even if he did, he has the right to do so for he
is not a part of the managerial or supervisory employees. As a
doctor, their decisions are still subject to revocation or revision by
Desipeda.
- There is Illegal Dismissal committed against Merceditha for the
ground therefor was not mentioned in Article 282 of the Labor
Code.

While PSI had no power to control the means/method by which Dr.

Ampil conducted the surgery on Natividad, they had the power to
review or cause the review
The nature of the relationship between the hospital and the
physicians is an employer-employee relationship since the
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, are required to
submit proof of completion of residency, their educational
qualifications, evidence of accreditation by the appropriate board
(diplomate), evidence of fellowship in most cases, and references.
These requirements in other words, private hospitals, hire, fire and
exercise real control over their attending and visiting consultant
staff. The hiring, and the right to terminate consultants all fulfill the
important hallmarks of an employer-employee relationship, with the
exception of the payment of wages. PSI publicly displays in the
lobby of the Medical City Hospital the names and specializations of
the physicians associated or accredited by it, including those of Dr.
Ampil and Dr. Fuentes.
PSI had the duty to tread on as captain of the ship for the purpose
of ensuing the safety of the patients availing themselves of its
services and facilities
PSI defined its standards of corporate conduct:
1. Even after her operation to ensure her safety as a patient
2. NOT limited to record the 2 missing gauzes
3. Extended to determining Dr. Ampils role in it, bringing the
matter to his attention and correcting his negligence
Admission bars itself from arguing that its corp. resp. is NOT yet in
existence at the time Natividad underwent treatment
Dr. Ampil - medial negligence
PSI - Corporate Negligence

NOTE: Liability unique to this case because of implied agency and

admitted corporate duty 26 years already and Dr. Ampil's status could no
longer be ascertained
CASUMPANG VS CORTEJO
GR NO. 171127
MARCH 11, 2015
FACTS:
Mrs.JesusaCortejo brought her 11-year old son, EdmerCortejo (Edmer),
to the Emergency Room of the San Juan de Dios Hospital (SJDH)
because of difficulty in breathing, chest pain, stomach pain, and fever.
Dr Casumpang, the attending physician using only a stethoscope, he
confirmed
the
initial
diagnosis
of
"Bronchopneumonia."

When is Control (One of the Four Tests of Employer-Employee

Relationship) Absent?
Mrs.Cortejo recalled entertaining doubts on the doctor's diagnosis. She
immediately advised Dr.Casumpang that Edmer had a high fever, and
Where a person who works for another does so more or less at his had no colds or cough 10 but Dr.Casumpang merely told her that her son's
own pleasure and is not subject to definite hours or conditions of

"bloodpressure is just being active,"11 and remarked that "that's the usual (1)The doctor committed inexcusable lack of precaution in diagnosing
bronchopneumonia,
no
colds,
no
phlegm."12 and treating the patient.
Dr.Casumpang next visited and examined Edmer at 9:00 in the morning
the following day.13 Still suspicious about his son's illness, Mrs.Cortejo
again called Dr.Casumpang's attention and stated that Edmer had a
fever, throat irritation, as well as chest and stomach pain. Mrs.Cortejo
also alerted Dr.Casumpang about the traces of blood in Edmer's sputum.
Dr.Casumpang simply nodded, inquired if Edmer has an asthma, and
reassured Mrs.Cortejo that Edmer's illness is bronchopneumonia. 14

Medical Malpractice Suit as a Specialized Area of Tort Law

The claim for damages is based on the petitioning doctors' negligence in

diagnosing and treating the deceased Edmer, the child of the
respondent. It is a medical malpractice suit, an action available to
victims to redress a wrong committed by medical professionals who
caused bodily harm to, or the death of, a patient. 33 As the term is used,
the suit is brought whenever a medical practitioner or health care
At around 11:30 in the morning of April 23, 1988, Edmer vomited "phlegm provider fails to meet the standards demanded by his profession, or
with blood streak"15prompting the respondent (Edmer's father) to request deviates from this standard, and causes injury to the patient.
for
a
doctor
at
the
nurses'
station. 16
The
Elements
of
a
Medical
Malpractice
Suit
Forty-five minutes later, Dr. Ruby Sanga-Miranda (Dr. Miranda), one of
the resident physicians of SJDH, arrived. She claimed that although The elements of medical negligence are: (1) duty; (2) breach; (3)
aware that Edmer had vomited "phlegm with blood streak," she failed to injury;
and
(4)
proximate
causation.
examine the blood specimen because the respondent washed it away.
She then advised the respondent to preserve the specimen for In the present case, the physician-patient relationship between
examination.
Dr.Casumpang and Edmer was created when the latter's parents sought
the medical services of Dr.Casumpang, and the latter knowingly
Thereafter, Dr. Miranda conducted a physical check-up covering Edmer's accepted Edmer as a patient. With respect to Dr. Miranda, her assumed
head, eyes, nose, throat, lungs, skin and abdomen; and found that the obligation to provide resident supervision over the latter. Whether or
Edmer had a low-grade non-continuing fever, and rashes that were not not Dr.Casumpang and Dr. Miranda committed a breach of duty is to be
typical of dengue fever.Dr. Miranda then examined Edmer's "sputum with measured by the yardstick of professional standards observed by the
blood"
and
noted
that
he
was
bleeding.
other members of the medical profession in good standing under similar
circumstances.49 We find that Dr.Casumpang, as Edmer's attending
At 4:40 in the afternoon, Dr. Miranda called up Dr.Casumpang at his physician, did not act according to these standards and, hence,
clinic and told him about Edmer's condition.22 Upon being informed, was guilty of breach of duty. We do not find Dr. Miranda liable for
Dr.Casumpang ordered several procedures done including:hematocrit, the
reasons
discussed
below.
hemoglobin, blood typing, blood transfusion and tourniquet tests.
Dr.Casumpang's Negligence
Dr. Miranda advised Edmer's parents that the blood test results showed
that Edmer was suffering from "Dengue Hemorrhagic Fever." One hour a. Negligence in the Diagnosis
later, Dr.Casumpang arrived at Edmer's room and he recommended his
transfer to the Intensive Care Unit (ICU), to which the respondent At the trial, Dr.Casumpang declared that a doctor's impression regarding
consented. Since the ICU was then full, Dr.Casumpang suggested to the a patient's illness is 90% based on the physical examination, the
respondent that they hire a private nurse. The respondent, however, information given by the patient or the latter's parents, and the patient's
insisted on transferring his son to Makati Medical Center. medical history. It will be recalled that during Dr.Casumpang's first and
second visits to Edmer, he already had knowledge of Edmer's laboratory
After the respondent had signed the waiver, Dr.Casumpang, for the last test result (CBC), medical history, and symptoms (i.e., fever, rashes,
time, checked Edmer's condition, found that his blood pressure was rapid breathing, chest and stomach pain, throat irritation, difficulty in
stable, and noted that he was "comfortable." The respondent requested breathing, and traces of blood in the sputum).
for an ambulance but he was informed that the driver was nowhere to be
found. This prompted him to hire a private ambulance that cost him However, these information did not lead Dr.Casumpang to the
P600.00.23
possibility that Edmer could be suffering from either dengue fever,
or dengue hemorrhagic fever, as he clung to his diagnosis of
At 12:00 midnight, Edmer, accompanied by his parents and by broncho pneumonia. This means that given the symptoms exhibited,
Dr.Casumpang, was transferred to Makati Medical Center.
Dr.Casumpang already ruled out the possibility of other diseases like
dengue.
Dr.Casumpang immediately gave the attending physician the patient's
clinical history and laboratory exam results. Upon examination, the In the present case, evidence on record established that in confirming
attending physician diagnosed "Dengue Fever Stage IV" that was the diagnosis of bronchopneumonia, Dr.Casumpang selectively
already in its irreversible stage.
appreciated some and not all of the symptoms presented, and failed to
promptly conduct the appropriate tests to confirm his findings. In sum,
Edmer died at 4:00 in the morning of April 24, 1988. 24 His Death Dr.Casumpang failed to timely detect dengue fever, which
Certificate indicated the cause of death as "Hypovolemic failure, especially when reasonable prudence would have shown that
Shock/hemorrhagic shock;" "Dengue Hemorrhagic Fever Stage IV." indications of dengue were evident and/or foreseeable, constitutes
negligence.
Believing that Edmer's death was caused by the negligent and erroneous
diagnosis of his doctors, the respondent instituted an action for damages a. Negligence in the Treatment and Management of Dengue
against SJDH, and its attending physicians: Dr.Casumpang and Dr.
Miranda (collectively referred to as the "petitioners") before the RTC of Apart from failing to promptly detect dengue fever, Dr.Casumpang
Makati City.
also failed to
promptlyundertake
the
proper
medical
1. ISSUE: Whether or not the petitioning doctors had committed management needed for this disease.
"inexcusable lack of precaution" in diagnosing and in treating Dr.
Miranda
is
Not
Liable
for
Negligence
the patient;
2. Whether or not the petitioner hospital is solidarity liable with the In considering the case of Dr. Miranda, the junior resident physician who
petitioning doctors;
was on-duty at the time of Edmer's confinement, we see the need to
3. Whether or not there is a causal connection between the draw distinctions between the responsibilities and corresponding liability
petitioners' negligent act/omission and the patient's resulting of Dr.Casumpang, as the attending physician, and that of Dr. Miranda.
death; and
Dr. Miranda was not entirely faultless. Nevertheless, her failure to
RULING:
discern the import of Edmer's second bleeding does not
necessarily amount to negligence as the respondent himself admitted

that Dr. Miranda failed to examine the blood specimen because he

washed it away. In addition, considering the diagnosis previously made
by two doctors, and the uncontroverted fact that the burden of final
diagnosis pertains to the attending physician (in this case,
Dr.Casumpang), we believe that Dr. Miranda's error was merely an
honest mistake of judgment influenced in no small measure by her status
in the hospital hierarchy; hence, she should not be held liable for medical
negligence.

(2)

We

now

discuss

the

liability

of

the

hospital.

The respondent submits that SJDH should not only be held vicariously
liable for the petitioning doctors' negligence but also for its own
negligence. He claims that SJDH fell short of its duty of providing its
patients with the necessary facilities and equipment as shown by the
following circumstances:
(a) SJDH was not equipped with proper paging system;

After the said letter, Sonza filed with the Department of Labor and
Employment a complaint alleging that ABS-CBN did not pay his
salaries, separation pay, service incentive pay,13th month pay,
signing bonus, travel allowance and amounts under the
Employees Stock Option Plan (ESOP). ABS-CBN contended that
no employee-employer relationship existed between the parties.
However, ABS-CBN continued to remit Sonzas monthly talent fees
but opened another account for the same purpose.
Labor Arbiter: dismissed the complaint and found that there is no
employee-employer relationship. The LA ruled that he is not an
employee by reason of his peculiar skill and talent as a TV host
and a radio broadcaster. Unlike an ordinary employee, he was free
to perform his services in accordance with his own style. NLRC
and CA affirmed the LA. Should there be any complaint, it does not
arise from an employer-employee relationship but from a breach of
contract.

ISSUE:
Whether or not there was employer-employee relationship between the
(b) the number of its doctors is not proportionate to the number of parties.
patients;
HELD:
(c) SJDH was not equipped with a bronchoscope;
There is no employer-employee relationship between Sonza and
ABS-CBN. Petition denied. Judgment decision affirmed.
(d) when Edmer's oxygen was removed, the medical staff did not
immediately provide him with portable oxygen;
- Case law has consistently held that the elements of an employeeemployer relationship are selection and engagement of the employee,
(e) when Edmer was about to be transferred to another hospital, SJDH's
the payment of wages, the power of dismissal and the employers
was not ready and had no driver; and
power to control the employee on the means and methods by which
the work is accomplished. The last element, the so-called "control
(f) despiteEdmer's critical condition, there was no doctor attending to
test", is the most important element.
him from 5:30 p.m. of April 22, to 9:00 a.m. of April 23, 1988.
A. Selection and Engagement of Employee
SJDH on the other hand disclaims liability by claiming that the petitioning ABS-CBN engaged SONZAs services to co-host its television and radio
doctors are not its employees but are mere consultants and independent programs because of SONZAs peculiar skills, talent and celebrity status.
contractors.
SONZA contends that the discretion used by respondent in specifically
selecting and hiring complainant over other broadcasters of possibly
We affirm the hospital's liability not on the basis of Article 2180 of the similar experience and qualification as complainant belies respondents
Civil Code, but on the basis of the doctrine of apparent authority or claim of independent contractorship.
agency
by
estoppel.
However, independent contractors often present themselves to possess
(3)
The Causation BetweenDr.Casumpang's Negligent unique skills, expertise or talent to distinguish them from ordinary
Act/Omission, and the Patient's Resulting Death was Adequately employees. The specific selection and hiring of SONZA, because of
his unique skills, talent and celebrity status not possessed by
Proven
ordinary employees, is a circumstance indicative, but not
Dr.Jaudian's testimony strongly suggests that due to Dr.Casumpang's conclusive, of an independent contractual relationship. If SONZA
failure to timely diagnose Edmer with dengue, the latter was not did not possess such unique skills, talent and celebrity status, ABS-CBN
immediately given the proper treatment. In fact, even after would not have entered into the Agreement with SONZA but would have
Dr.Casumpang had discovered Edmer's real illness, he still failed to hired him through its personnel department just like any other employee.
promptly perform the standard medical procedure. We agree with these
B. Payment of Wages
findings.
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
SONZA VS ABS-CBN BROADCASTING CORP
shows that he was an employee of ABS-CBN. SONZA also points out
431 SCRA 583
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.
FACTS:
- In May 1994, ABS-CBN signed an agreement with the Mel and Jay
Management and Development Corporation (MJMDC). ABS-CBN All the talent fees and benefits paid to SONZA were the result of
was represented by its corporate officers while MJMDC was negotiations that led to the Agreement. If SONZA were ABS-CBNs
represented by Sonza, as President and general manager, and employee, there would be no need for the parties to stipulate on benefits
Tiangco as its EVP and treasurer. Referred to in the agreement as such as SSS, Medicare, x x x and 13th month pay which the law
agent, MJMDC agreed to provide Sonzas services exclusively to automatically incorporates into every employer-employee contract.
ABS-CBN as talent for radio and television. ABS-CBN agreed to Whatever benefits SONZA enjoyed arose from contract and not because
pay Sonza a monthly talent fee of P310, 000 for the first year and of an employer-employee relationship. In addition, SONZAs talent fees
are so huge and out of the ordinary that they indicate more an
P317, 000 for the second and third year.
- On April 1996, Sonza wrote a letter to ABS-CBN's President, independent contractual relationship rather than an employer-employee
Eugenio Lopez III, where he irrevocably resigned in view of the relationship. ABS-CBN agreed to pay SONZA such huge talent fees
recent events concerning his program and career. The acts of the precisely because of SONZAs unique skills, talent and celebrity status
station are violative of the Agreement and said letter will serve as not possessed by ordinary employees.
notice of rescission of said contract. The letter also contained the
waiver and renunciation for recovery of the remaining amount C. Power of Dismissal
stipulated but reserves the right to seek recovery of the other For violation of any provision of the Agreement, either party may
terminate their relationship. SONZA failed to show that ABS-CBN could
benefits under said Agreement.
terminate his services on grounds other than breach of contract, such as
retrenchment to prevent losses as provided under labor laws.

During the life of the Agreement, ABS-CBN agreed to pay SONZAs

talent fees as long as AGENT and Jay Sonza shall faithfully and
completely perform each condition of this Agreement. Even if it suffered
severe business losses, ABS-CBN could not retrench SONZA because
ABS-CBN remained obligated to pay SONZAs talent fees during the life
of the Agreement. This circumstance indicates an independent
contractual relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his
programs, ABS-CBN still paid him his talent fees. Plainly, ABS-CBN
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.
D. Power of Control
First, SONZA contends that ABS-CBN 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. 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. 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.
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 of ABS-CBN. The
Agreement does not require SONZA to comply with the rules and
standards of performance prescribed for employees of ABS-CBN.
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. 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.

ABS-CBN BROADCASTING CORPORATION VS MARLYN

NAZARENO, et. Al.
SEPTEMBER 26, 2006
FACTS:
- Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is
engaged in the broadcasting business and owns a network of
television and radio stations, whose operations revolve around the
broadcast, transmission, and relay of telecommunication signals.
- The respondents Nazareno, Gerzon, Deiparine, and Lerasan as
production assistants (PAs) on different dates were employed by the
Petitioner, assigned at the news and public affairs, for various radio
programs in the Cebu Broadcasting Station, with a monthly
compensation of P4,000. They were issued ABS-CBN employees
identification cards and were required to work for a minimum of
eight hours a day, including Sundays and holidays. They were
under the control and supervision of Assistant Station Manager
Dante J. Luzon, and News Manager Leo Lastimosa.
- On December 19, 1996, petitioner and the ABS-CBN Rank-and-File
Employees executed a Collective Bargaining Agreement (CBA) to
be effective during the period from December 11, 1996 to December
11, 1999. However, since petitioner refused to recognize PAs as
part of the bargaining unit, respondents were not included to the
CBA.
- On October 12, 2000, respondents filed a Complaint for Recognition
of Regular Employment Status, Underpayment of Overtime Pay,
Holiday Pay, Premium Pay, Service Incentive Pay, Sick Leave Pay,
and 13th Month Pay with Damages against the petitioner before the
NLRC. The Labor Arbiter directed the parties to submit their
respective position paper however they failed to file their position
papers within the reglementary period, Labor Arbiter Jose G.
Gutierrez dismissed the complaint without prejudice for lack of
interest to pursue the case. Respondents received a copy of the
Order on May 16, 2001. Instead of re-filing their complaint with the
NLRC within 10 days from May 16, 2001, they filed, on June 11,
2001, an Earnest Motion to Refile Complaint with Motion to Admit
Position Paper and Motion to Submit Case for Resolution. The
Labor Arbiter granted this motion in an Order dated June 18, 2001,
and forthwith admitted the position paper of the complainants.
- On July 30, 2001, the Labor Arbiter rendered judgment in favor of
the respondents, and declared that they were regular employees of
petitioner; as such, they were awarded monetary benefits. On
appeal to the NLRC, it ruled that respondents were entitled to the
benefits under the CBA because they were regular employees who
contributed to the profits of petitioner through their labor. Petitioner
thus filed a petition for certiorari under Rule 65 of the Rules of Court
before the CA, raising both procedural and substantive issues. CA
Affirmed the ruling of the NLRC.

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. In this case, SONZA
failed to show that these rules controlled his performance. We find that ISSUE:
these general rules are merely guidelines towards the achievement of - Whether the appellate court committed palpable and serious error
the mutually desired result, which are top-rating television and radio
of law when it affirmed the rulings of the NLRC, and entertained
programs that comply with standards of the industry.
respondents appeal from the decision of the Labor Arbiter despite
the admitted lapse of the reglementary period within which to
perfect the appeal.
Lastly, SONZA insists that the exclusivity clause in the Agreement is the
most extreme form of control which ABS-CBN exercised over him. This HELD
argument is futile. Being an exclusive talent does not by itself mean - We agree with petitioners contention that the perfection of an
that SONZA is an employee of ABS-CBN. Even an independent
appeal within the statutory or reglementary period is not only
contractor can validly provide his services exclusively to the hiring party.
mandatory, but also jurisdictional; failure to do so renders the
In the broadcast industry, exclusivity is not necessarily the same as
assailed decision final and executory and deprives the appellate
control.
court or body of the legal authority to alter the final judgment, much
less entertain the appeal. However, this Court has time and again
The hiring of exclusive talents is a widespread and accepted practice in
ruled that in exceptional cases, a belated appeal may be given due
the entertainment industry. This practice is not designed to control the
course if greater injustice may occur if an appeal is not given due
means and methods of work of the talent, but simply to protect the
course than if the reglementary period to appeal were strictly
investment of the broadcast station. The broadcast station normally
followed. The Court resorted to this extraordinary measure even at
spends substantial amounts of money, time and effort in building up its
the expense of sacrificing order and efficiency if only to serve the
talents as well as the programs they appear in and thus expects that said
greater principles of substantial justice and equity.
talents remain exclusive with the station for a commensurate period of - In the case at bar, the NLRC did not commit a grave abuse of its
time. Normally, a much higher fee is paid to talents who agree to work
discretion in giving Article 223 of the Labor Code a liberal
exclusively for a particular radio or television station. In short, the huge
application to prevent the miscarriage of justice. Technicality should
talent fees partially compensates for exclusivity, as in the present
not be allowed to stand in the way of equitably and completely
case.
resolving the rights and obligations of the parties. We have held in a

catena of cases that technical rules are not binding in labor cases Associated Broadcasting Company (ABC) hired Thelma Dumpit-Murillo
and are not to be applied strictly if the result would be detrimental to under a talent contract as a newscaster and co-anchor for Balitangthe workingman.
Balita, an early evening news program. The contract was for a period of
three months. After four years of repeated renewals, petitioners talent
NELSON V. BEGINO, GENER DEL VALLE, MONINA A VILA-LLORIN contract expired. Two weeks after the expiration of the last contract,
AND MA. CRISTINA SUMAYAO, Petitioners,
petitioner sent a letter to Mr. Jose Javier, Vice President for News and
vs.
Public Affairs of ABC, informing the latter that she was still interested in
ABS-CBN CORPORATION (FORMERLY, ABS-CBN BROADCASTING renewing her contract subject to a salary increase. Thereafter, petitioner
CORPORATION) AND AMALIA VILLAFUERTE, Respondents.
stopped reporting for work. She sent a demand letter to ABC,
G.R. NO. 199166, 20 APRIL 2015.
demanding reinstatement, payment of unpaid wages and full backwages,
payment of 13th month pay, vacation/sick/service incentive leaves and
PEREZ, J.:
other monetary benefits due to a regular employee. ABC replied that a
- Respondent ABS-CBN, through Respondent Villafuerte, engaged check covering petitioners talent fees had been processed and
the services of Petitioners as cameramen, editors or reporters for prepared, but that the other claims of petitioner had no basis in fact or in
TV Broadcasting. Petitioners signed regularly renewed Talent law.
Contracts (3 months - 1 year) and Project Assignment Forms which
detailed the duration, budget and daily technical requirements of a The Labor Arbiter dismissed the complaint for illegal constructive
particular project. Petitioners were tasked with coverage of news dismissal. NLRC reversed.
items for subsequent daily airings in Respondents TV Patrol Bicol
Program.
ISSUE:
- The Talent Contract has an exclusivity clause and provides that
nothing therein shall be deemed or construed to establish an Whether or not Murillo is an employee of Associated Broadcasting
employer-employee relationship between the parties.
Company.
- Petitioners filed against Respondents a complaint for regularization
before the NLRC's Arbitration branch.
Ruling:
- In support of their complaint, Petitioners claimed that they worked
under the direct control of Respondent Villafuerte - they were Thelma Dumpit-Murillo was a regular employee under
mandated to wear company IDs, they were provided the necessary contemplation of law. The practice of having fixed-term contracts in the
equipment, they were informed about the news to be covered the industry does not automatically make all talent contracts valid and
following day, and they were bound by the companys policy on compliant with labor law. The assertion that a talent contract exists
attendance and punctuality.
does not necessarily prevent a regular employment status.
- Respondents countered that, pursuant to their Talent Contracts and
Project Assignment Forms, Petitioners were hired as talents to act Further, the Sonza case is not applicable. In Sonza, the television station
as reporters, editors and/or cameramen. Respondents further did not exercise control over the means and methods of the performance
claimed they never imposed control as to how Petitioners of Sonzas work. In the case at bar, ABC had control over the
discharged their duties. At most, they were briefed regarding the performance of petitioners work. Noteworthy too, is the comparatively
general requirements of the project to be executed.
low P28,000 monthly pay of petitioner vis the P300,000 a month salary of
- While the case was pending, Petitioners contracts were terminated, Sonza, that all the more bolsters the conclusion that petitioner was not in
prompting the latter to file a second complaint for illegal dismissal.
the same situation as Sonza.
- The Arbitration Branch ruled that Petitioners were regular
employees, and ordered Respondents to reinstate the Petitioners.
The duties of petitioner as enumerated in her employment contract
- The NLRC affirmed the ruling, but the CA overturned the decision.
indicate that ABC had control over the work of petitioner. Aside
from control, ABC also dictated the work assignments and payment
ISSUE: W/N Petitioners are regular employees of Respondents. of petitioners wages. ABC also had power to dismiss her. All
these being present, clearly, there existed an employment
RULING: YES.
relationship between petitioner and ABC.
- Of the criteria to determine whether there is an employeremployee relationship, the so-called "control test" is generally Concerning regular employment, the requisites for regularity of
regarded as the most crucial and determinative indicator of the employment have been met in the instant case. Petitioners work was
said relationship.
necessary or desirable in the usual business or trade of the employer
- Under this test, an employer-employee relationship is said to which includes, as a pre-condition for its enfranchisement, its
exist where the person for whom the services are performed participation in the governments news and public information
reserves the right to control not only the end result but also dissemination. In addition, her work was continuous for a period of four
the manner and means utilized to achieve the same.
years. This repeated engagement under contract of hire is indicative of
- Notwithstanding the nomenclature of their Talent Contracts and/or the necessity and desirability of the petitioners work in private
Project Assignment Forms and the terms and condition embodied respondent ABCs business. As a regular employee, petitioner is entitled to
therein, petitioners are regular employees of ABS-CBN.
security of tenure and can be dismissed only for just cause and after due
- As cameramen, editors and reporters, it appears that Petitioners compliance with procedural due process. Since private respondents did not
were subject to the control and supervision of Respondents which observe due process in constructively dismissing the petitioner, there
provided them with the equipment essential for the discharge of was an illegal dismissal.
their functions. The exclusivity clause and prohibitions in their FUJI TELEVISION NETWORK INC. VS ESPIRITU
Talent Contract were likewise indicative of Respondents' control GR NO. 204944-45
over them, however obliquely worded.
DECEMBER 3, 2014
- Also,the presumption is that when the work done is an integral
part of the regular business of the employer and when the worker FACTS:
does not furnish an independent business or professional service, Arlene S. Espiritu (Arlene) was engaged by Fuji Television Network, Inc.
such work is a regular employment of such employee and not an (Fuji) as a news correspondent/producer tasked to report Philippine
independent contractor.
news to Fuji through its Manila Bureau field office. The employment
contract was initially for one year, but was successively renewed on a
THELMA DUMPIT-MURILLO VS CA
yearly basis with salary adjustments upon every renewal.
GR NO. 164652
JUNE 8, 2007
In January 2009, Arlene was diagnosed with lung cancer. She informed
Fuji about her condition, and the Chief of News Agency of Fuji, Yoshiki
FACTS:
Aoki, informed the former that the company had a problem with renewing

her contract considering her condition. Arlene insisted she was still fit to shall reinstate such employee to his former position immediately upon
work as certified by her attending physician.
the restoration of his normal health.
After a series of verbal and written communications, Arlene and Fuji
signed a non-renewal contract. In consideration thereof, Arlene
acknowledged the receipt of the total amount of her salary from MarchMay 2009, year-end bonus, mid-year bonus and separation pay.
However, Arlene executed the non-renewal contract under protest.

CASE HISTORY:
Labor Arbiter dismissed the complaint and held that Arlene was not a
regular employee but an independent contractor.

The NLRC reversed the Labor Arbiters decision and ruled that Arlene
was a regular employee since she continuously rendered services that
Arlene filed a complaint for illegal dismissal with the NCR Arbitration were necessary and desirable to Fujis business.
Branch of the NLRC, alleging that she was forced to sign the nonrenewal contract after Fuji came to know of her illness. She also alleged The Court of Appeals affirmed that NLRC ruling with modification that
that Fuji withheld her salaries and other benefits when she refused to Fuji immediately reinstate Arlene to her position without loss of seniority
sign, and that she was left with no other recourse but to sign the non- rights and that she be paid her backwages and other emoluments
renewal contract to get her salaries.
withheld from her. The Court of Appeals agreed with the NLRC that
Arlene was a regular employee, engaged to perform work that was
ISSUES:
necessary or desirable in the business of Fuji, and the successive
1. Was Arlene an independent contractor?
renewals of her fixed-term contract resulted in regular employment. The
2. Was Arlene a regular employee?
case of Sonza does not apply in the case because Arlene was not
3. Was Arlene illegally dismissed?
contracted on account of a special talent or skill. Arlene was illegally
4. Did the Court of Appeals correctly awarded reinstatement, dismissed because Fuji failed to comply with the requirements of
damages and attorneys fees?
substantive and procedural due process. Arlene, in fact, signed the nonrenewal contract under protest as she was left without a choice.
LAWS:
Fuji filed a petition for review on certiorari under Rule 45 before the
Art. 280. Regular and casual employment. The provisions of written Supreme Court, alleging that Arlene was hired as an independent
agreement to the contrary notwithstanding and regardless of the oral contractor; that Fuji had no control over her work; that the employment
agreement of the parties, an employment shall be deemed to be regular contracts were renewed upon Arlenes insistence; that there was no
where the employee has been engaged to perform activities which are illegal dismissal because she freely agreed not to renew her fixed-term
usually necessary or desirable in the usual business or trade of the contract as evidenced by her email correspondences.
employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been Arlene filed a manifestation stating that the SC could not take jurisdiction
determined at the time of the engagement of the employee or where the over the case since Fuji failed to authorize Corazon Acerden, the
work or services to be performed is seasonal in nature and the assigned attorney-in-fact for Fuji, to sign the verification.
employment
is
for
the
duration
of
the
season.
RULING:
An employment shall be deemed to be casual if it is not covered by the 1. Arlene was not an independent contractor.
preceding paragraph; Provided, That, any employee who has rendered
at least one year of service, whether such service is continuous or Fuji alleged that Arlene was an independent contractor citing the Sonza
broken, shall be considered a regular employee with respect to the case. She was hired because of her skills. Her salary was higher than
activity in which he is employed and his employment shall continue while the normal rate. She had the power to bargain with her employer. Her
such activity exist.
contract was for a fixed term. It also stated that Arlene was not forced to
sign the non-renewal agreement, considering that she sent an email with
Art. 279. Security of tenure. In cases of regular employment, the another version of her non-renewal agreement.
employer shall not terminate the services of an employee except for a
just cause of when authorized by this Title. An employee who is unjustly Arlene argued (1) that she was a regular employee because Fuji had
dismissed from work shall be entitled to reinstatement without loss of control and supervision over her work; (2) that she based her work on
seniority rights and other privileges and to his full backwages, inclusive instructions from Fuji; (3) that the successive renewal of her contracts for
of allowances, and to his other benefits or their monetary equivalent four years indicated that her work was necessary and desirable; (4) that
computed from the time his compensation was withheld from him up to the payment of separation pay indicated that she was a regular
the time of his actual reinstatement.
employee; (5) that the Sonza case is not applicable because she was a
plain reporter for Fuji; (6) that her illness was not a ground for her
Thus, on the right to security of tenure, no employee shall be dismissed, dismissal; (7) that she signed the non-renewal agreement because she
unless there are just or authorized causes and only after compliance with was not in a position to reject the same.
procedural and substantive due process is conducted.
The level of protection to labor must be determined on the basis of the
Art. 284. Disease as ground for termination. An employer may nature of the work, qualifications of the employee, and other relevant
terminate the services of an employee who has been found to be circumstances such as but not limited to educational attainment and
suffering from any disease and whose continued employment is other
special
qualifications.
prohibited by law or is prejudicial to his health as well as to the health of
his co-employees: Provided, That he is paid separation pay equivalent to Fujis argument that Arlene was an independent contractor under a fixedat least one (1) month salary or to one-half (1/2) month salary for every term contract is contradictory. Employees under fixed-term contracts
year of service, whichever is greater, a fraction of at least six (6) months cannot be independent contractors because in fixed-term contracts, an
being considered as one (1) whole year.
employer-employee relationship exists. The test in this kind of
contract is not the necessity and desirability of the employees
Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the activities, but the day certain agreed upon by the parties for the
Labor Code. Disease as a ground for dismissal. Where the employee commencement
and
termination
of
the
employment
suffers from a disease and his continued employment is prohibited by relationship. For regular employees, the necessity and desirability of
law or prejudicial to his health or to the health of his co-employees, the their work in the usual course of the employers business are the
employer shall not terminate his employment unless there is a determining factors. On the other hand, independent contractors do
certification by a competent public health authority that the disease is of not have employer-employee relationships with their principals.
such nature or at such a stage that it cannot be cured within a period of
six (6) months even with proper medical treatment. If the disease or
ailment can be cured within the period, the employer shall not terminate
the employee but shall ask the employee to take a leave. The employer

To determine the status of employment, the existence of employer- resignation prepared by Fuji. The existence of a fixed-term contract
employee relationship must first be settled with the use of the four-fold should not mean that there can be no illegal dismissal. Due process
test, especially the qualifications for the power to control.
must still be observed.
The distinction is in this guise:
Rules that merely serve as guidelines towards the achievement of a
mutually desired result without dictating the means or methods to
be employed creates no employer-employee relationship; whereas
those that control or fix the methodology and bind or restrict the
party hired to the use of such means creates the relationship.
In application, Arlene was hired by Fuji as a news producer, but there
was no evidence that she was hired for her unique skills that would
distinguish her from ordinary employees. Her monthly salary appeared to
be a substantial sum. Fuji had the power to dismiss Arlene, as provided
for in her employment contract. The contract also indicated that Fuji had
control over her work as she was rquired to report for 8 hours from
Monday to Friday. Fuji gave her instructions on what to report and even
her mode of transportation in carrying out her functions was controlled.

Moreoever, disease as a ground for termination under Article 284 of the

Labor Code and Book VI, Rule 1, Section 8 of the Omnibus Rules
Implementing the Labor Code require two requirements to be complied
with: (1) the employees disease cannot be cured within six months and
his continued employment is prohibited by law or prejudicial to his health
as well as to the health of his co-employees; and (2) certification issued
by a competent public health authority that even with proper medical
treatment, the disease cannot be cured within six months. The burden of
proving compliance with these requisites is on the employer. Noncompliance leads to illegal dismissal. BlesvirtualLawlibrary
Arlene was not accorded due process. After informing her employer of
her lung cancer, she was not given the chance to present medical
certificates. Fuji immediately concluded that Arlene could no longer
perform her duties because of chemotherapy. Neither did it suggest for
her to take a leave. It did not present any certificate from a competent
public health authority.

Therefore, Arlene could not be an independent contractor.

Therefore, Arlene was illegally dismissed.
2.

Arlene was a regular employee with a fixed-term contract.

4.

In determining whether an employment should be considered regular or

non-regular, the applicable test is the reasonable connection
between the particular activity performed by the employee in
relation to the usual business or trade of the employer. The
standard, supplied by the law itself, is whether the work undertaken is
necessary or desirable in the usual business or trade of the
employer, a fact that can be assessed by looking into the nature of the
services rendered and its relation to the general scheme under which the
business or trade is pursued in the usual course. It is distinguished from
a specific undertaking that is divorced from the normal activities required
in carrying on the particular business or trade.

The Court of Appeals correctly awarded reinstatement, damages

and attorneys fees.

The Court of Appeals awarded moral and exemplary damages and

attorneys fees. It also ordered reinstatement, as the grounds when
separation pay was awarded in lieu of reinstatement were not proven.
The Labor Code provides in Article 279 that illegally dismissed
employees are entitled to reinstatement, backwages including
allowances, and all other benefits.

Separation pay in lieu of reinstatement is allowed only (1) when the

employer has ceased operations; (2) when the employees position is no
However, there may be a situation where an employees work is longer available; (3) strained relations; and (4) a substantial period has
necessary but is not always desirable in the usual course of business of lapsed from date of filing to date of finality.
the employer. In this situation, there is no regular employment.
The doctrine of strained relations should be strictly applied to avoid
Fujis Manila Bureau Office is a small unit and has a few employees. deprivation of the right to reinstatement. In the case at bar, no
Arlene had to do all activities related to news gathering.
evidence was presented by Fuji to prove that reinstatement was no
longer feasible. Fuji did not allege that it ceased operations or that
A news producer plans and supervises newscast [and] works with Arlenes position was no longer feasible. Nothing showed that the
reporters in the field planning and gathering information, including reinstatement would cause an atmosphere of antagonism in the
monitoring and getting news stories, rporting interviewing subjects in workplace.
front of a video camera, submission of news and current events reports
pertaining to the Philippines, and traveling to the regional office in Moral damages are awarded when the dismissal is attended by bad
Thailand. She also had to report for work in Fujis office in Manila from faith or fraud or constitutes an act oppressive to labor, or is done in a
Mondays to Fridays, eight per day. She had no equipment and had to manner contrary to good morals, good customs or public policy. On the
use the facilities of Fuji to accomplish her tasks. other hand, exemplary damages may be awarded when the dismissal
was effected in a wanton, oppressive or malevolent manner.
The successive renewals of her contract indicated the necessity and
desirability of her work in the usual course of Fujis business. Because of After Arlene had informed Fuji of her cancer, she was informed that there
this, Arlene had become a regular employee with the right to security of would be problems in renewing her contract on account of her condition.
tenure.
This information caused Arlene mental anguish, serious anxiety, and
wounded feelings. The manner of her dismissal was effected in an
Arlenes contract indicating a fixed term did not automatically mean that oppressive approach with her salary and other benefits being withheld
she could never be a regular employee. For as long as it was the until May 5, 2009, when she had no other choice but to sign the nonemployee who requested, or bargained, that the contract have a definite renewal
contract.
date of termination, or that the fixed-term contract be freely entered into
by the employer and the employee, then the validity of the fixed-term With regard to the award of attorneys fees, Article 111 of the Labor Code
contract will be upheld.
states that [i]n cases of unlawful withholding of wages, the culpable
party may be assessed attorneys fees equivalent to ten percent of the
3. Arlene was illegally dismissed.
amount of wages recovered. In actions for recovery of wages or where
an employee was forced to litigate and, thus, incur expenses to protect
As a regular employee, Arlene was entitled to security of tenure his rights and interest, the award of attorneys fees is legally and morally
under Article 279 of the Labor Code and could be dismissed only for justifiablen. Due to her illegal dismissal, Arlene was forced to litigate.
just or authorized causaes and after observance of due process.
Therefore, the awards for reinstatement, damages and attorneys
The expiration of the contract does not negate the finding of illegal fees were proper.
dismissal. The manner by which Fuji informed Arlene of non-renewal
through email a month after she informed Fuji of her illness is tantamount Fixed Term Employment
to constructive dismissal. Further, Arlene was asked to sign a letter of

1) The fixed period of employment was knowingly and voluntarily agreed

upon by the parties without any force, duress, or improper pressure
being brought to bear upon the employee and absent any other
circumstances
vitiating
his
consent;
or
2) It satisfactorily appears that the employer and the employee dealt with
each other on more or less equal terms with no moral dominance
exercised by the former or the latter.
These indications, which must be read together, make the Brent doctrine
applicable only in a few special cases wherein the employer and
employee are on more or less in equal footing in entering into the
contract. The reason for this is evident: when a prospective employee,
on account of special skills or market forces, is in a position to make
demands upon the prospective employer, such prospective employee
needs less protection than the ordinary worker. Lesser limitations on the
parties freedom of contract are thus required for the protection of the
employee.155 (Citations omitted)
For as long as the guidelines laid down in Brent are satisfied, this court
will recognize the validity of the fixed-term contract. (GMA Network, Inc.
vs. Pabriga)
Independent Contractor

Since no employer-employee relationship exists between independent

contractors and their principals, their contracts are governed by the Civil
Code provisions on contracts and other applicable laws.
Regular Employees
Contracts of employment are different and have a higher level of
regulation because they are impressed with public interest. Article 13,
Section 3 of the 1987 Constitution provides full protection to labor.
Apart from the Constitutional guarantee, Article 1700 of the Civil Code
states that : The relations between capital and labor are not merely
contractual. They are so impressed with public interest that labor
contracts must yield to the common good. Therefore, such contracts are
subject to the special laws on labor unions, collective bargaining, strikes
and lockouts, closed shop, wages, working conditions, hours of labor and
similar subjects.
In contracts of employment, the employer and the employee are not on
equal footing. Thus, it is subject to regulatory review by the labor
tribunals and courts of law. The law serves to equalize the unequal. The
labor force is a special class that is constitutionally protected because of
the inequality between capital and labor. This presupposes that the labor
force is weak.

LEGEND HOTEL MANILA VS HERNANI S. REALUYO

GR NO. 153511
One who carries on a distinct and independent business and undertakes JULY 18, 2011
to perform the job, work, or service on its own account and under ones
own responsibility according to ones own manner and method, free from SUMMARY:
the control and direction of the principal in all matters connected with the Realuyo/Roa was a pianist in the employ of Legend, with the restaurant
performance of the work except as to the results thereof.
manager of Legend providing control over the manner of work of
No employer-employee relationship exists between the independent Realuyo. Eventually, Realuyo was dismissed, which prompted him to file
contractors and their principals.
an illegal dismissal complaint. The Court ruled that an ER-EE
Art. 106. Contractor or subcontractor. Whenever an employer enters relationship exists and enumerated the factors involved in the Four-Fold
into a contract with another person for the performance of the formers test, which is the yardstick used to determine the existence of an ER-EE
work, the employees of the contractor and of the latters subcontractor, if relationship used by the Court.
any, shall be paid in accordance with the provisions of this Code.
DOCTRINE:
The Secretary of Labor and Employment may, by appropriate The Court enumerated the Four-Fold doctrine used to determine whether
regulations, restrict or prohibit the contracting-out of labor to protect the or not an ER-EE relationship exists. The factors to consider are
rights of workers established under this Code. In so prohibiting or [SWeDE]:
a. Selection powers of the employer
restricting, he may make appropriate distinctions between labor-only
b. Wage payment of the employer
contracting and job contracting as well as differentiations within these
c. Dismissal powers of the employer
types of contracting and determine who among the parties involved shall
d. Employee control or the control test
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 FACTS:
an employer does not have substantial capital or investment in the form This is a labor case involving Realuyo, with stage name Joey Roa, a
of tools, equipment, machineries, work premises, among others, and the pianist employed by Legend Hotel. Realuyo filed a complaint for alleged
workers recruited and placed by such person are performing activities ULP, constructive illegal dismissal, and underpayment of premium pay
th
which are directly related to the principal business of such employer. In for holidays, separation pay, service incentive leave pay, and 13 month
such cases, the person or intermediary shall be considered merely as an pay, with further prayer for attorneys fees and moral and exemplary
agent of the employer who shall be responsible to the workers in the damages.
same manner and extent as if the latter were directly employed by him.
Realuyo averred that he had worked as a pianist for the Legend Hotels
Department Order No. 18-A, Series of 2011, Section 3
Tanglaw Restaurant from September 1992, starting with an initial rate of
(c) . . . an arrangement whereby a principal agrees to put out or farm out P400/night, eventually increasing to P750/night. He could not choose the
with a contractor the performance or completion of a specific job, work or time of his performance, as it was fixed from 7:00 pm to 10:00 pm for 3-6
times per week. He also stated that the Legend Hotels restaurant
service within a definite or predetermined period, regardless of whether
manager required him to follow the hotel motif, and that he had been
such job, work or service is to be performed or completed within or
subjected to the rules on employees representation checks and chits
outside the premises of the principal.
This department order also states that there is a trilateral relationship in (which was a privilege given to employees).
legitimate job contracting and subcontracting arrangements among the
principal, contractor, and employees of the contractor. There is no On July 9, 1999, however, hotel management informed Realuyo that,
employer-employee relationship between the contractor and principal due to cost-cutting measures undertaken by the hotel, his services would
who engages the contractors services, but there is an employer- no longer be required effective July 30, 1999 (only 21 days after
employee relationship between the contractor and workers hired to informing him of his dismissal). Realuyo insisted, however, that the hotel
was lucratively operating at the time of filing of the complaint.
accomplish the work for the principal.
Jurisprudence has recognized another kind of independent contractor:
individuals with unique skills and talents that set them apart from In its defense, Legend denied the existence of any employer-employee
ordinary employees. There is no trilateral relationship in this case (ER-EE) relationship with Realuyo, and that he was only a talent
because the independent contractor himself or herself performs the work engaged to provide live music at Legends Madison Coffee Shop for 3
hours/day on 2 days/week. Legend also averred that, due to the
for the principal. In other words, the relationship is bilateral.
There are different kinds of independent contractors: those engaged in economic crisis, management was constrained to dispense with his
legitimate job contracting and those who have unique skills and talents services.
that set them apart from ordinary employees.
The Labor Arbiter (LA) dismissed the complaint for lack of merit upon the
finding that there was no ER-EE relationship between Realuyo and

Legend. This finding was based on the admission of Realuyo on a letter

stating that what he received from Legend in exchange for his services
was a talent fee and not a salary. This was reinforced by the fact that
Realuyo received his salary nightly, unlike the other employees who
received their salaries monthly. Upon appeal, the NLRC affirmed the
same.

The restaurants manager required him at certain times to

perform only Tagalog songs or music, or to wear barong
Tagalog to conform to the Filipiniana motif; and
He was subjected to the rules on employees
representation check and chits, a privilege granted to
other employees.

The CA, however, reversed the LA and NLRC, stating that the four
elements of ER-EE relationship exists, most importantly the element of
employee control in the form of the supervision and control exercised by
the restaurant manager of Legend.

It must be noted that the employer need not actually supervise the
performance of duties by the employee, for it sufficed that the
employer has the right to wield that power.

ISSUES/HELD:
1. WON Realuyo was an employee of Legend Hotel. YES, ER-EE
relationship existed between the parties.
2. WON Realuyo was validly terminated.

Finally, the Court pointed out that Legend possessed the power to
dismiss Realuyo in that the memorandum informing Realuyo of the
discontinuance of his service because of the present business or
financial condition of Legend showed that the latter had the power
to dismiss him from employment.

RATIO:
2.
1. The Court found for Realuyo in stating that an ER-EE relationship
indeed existed between the parties. The Court enumerated the fourfold test factors, namely:
Power to select the employee
Payment of employees wages
Power to dismiss the employee
Exercise of control over the methods and results by which
the work of the employee is accomplished (employee
control)
Applying these factors to the case at hand, the Court found that
Realuyo was indeed Legend Hotels employee. He was employed
as a pianist in the Madison Coffee Shop and Tanglaw Restaurant
from September 1992 until July 1999.
Legend was found to have wielded the power of selection when it
entered into the service contract with Realuyo, as well as express
written recommendations by the restaurant manager for increase of
remuneration.
Further to this, the Court pointed out that, despite the denomination
of the received remuneration as talent fees, these
remunerations were considered as included in the term wage
in the sense and context of the Labor Code, regardless of the
designation. As stated in Article 97(f) of the Labor Code:
Wage paid to any employee shall mean the remuneration or
earnings, however designated, capable of being expressed in
terms of money, whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of calculating the
same, which is payable by an employer to an employee under
a written or unwritten contract of employment for work done or
to be done, or for services rendered or to be rendered, and
includes the fair and reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee.
From the case, it was clear that Realuyo indeed received
compensation for services rendered as the hotels pianist.
Also, the fact that Realuyo worked for less than 8 hours/day was of
no consequence and did not detract from finding for the existence of
the ER-EE relationship. In providing that the "normal hours of work
of any employee shall not exceed eight (8) hours a day," Article 83
of the Labor Code only set a maximum of number of hours as
"normal hours of work" but did not prohibit work of less than eight
hours.

It must be noted that retrenchment is one of the authorized causes

for the dismissal of employees recognized by the Labor Code. It is a
management prerogative resorted to by employers to avoid or to
minimize business losses. Article 283 of the Labor Code states:
Article 283. Closure of establishment and reduction of
personnel. The employer may also terminate the
employment of any employee due to the installation of laborsaving 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. xxx. In case of retrenchment to prevent losses and in
cases of closures or cessation of operations of establishment
or undertaking not due to serious business losses or financial
reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half (1/2) month pay for every year
of service, whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year.
The Court has provided the standards that an employer should
meet to justify retrenchment, namely:
(a) The expected losses should be substantial and not merely
de minimis in extent;
(b) The substantial losses apprehended must be reasonably
imminent;
(c) The retrenchment must be reasonably necessary and likely
to effectively prevent the expected losses; and
(d) The alleged losses, if already incurred, and the expected
imminent losses sought to be forestalled must be proved by
sufficient and convincing evidence.
From the case itself, the Court concluded that the burden of proof of
Legend to prove that the dismissal was for a valid or authorized
cause was not given by Legend, as it did not submit evidence of the
losses to its business operations and the economic chaos it would
imminently suffer. The statements regarding Realuyos termination
due to present business/financial condition were considered as
insufficient to show a valid retrenchment. As a result, the Court
cannot allow the termination of Realuyo due to retrenchment.
However, the lapse of time since the retrenchment may have made
a return to the job as unfeasible, therefore the Court ordered
Legend to pay separation pay at the rate of 1 month pay for every
year of service rendered, as well as full backwages.

WPP MARKETING COMMUNICATIONS, INC., ET. AL. VS JOCELYN

M. GALERA
Thirdly, the power of control over the work of Realuyo, considered
GR NO. 169207
as the most significant determinant of the existence of an ER-EE
relationship, was seen on the following facts:
FACTS:
He could not choose the time of his performance, which
petitioners had fixed from 7:00 pm to 10:00 pm, three to
Petitioner is Jocelyn Galera (GALERA), an American citizen who was
six times a week;
recruited from the United States of America by private respondent John
He could not choose the place of his performance;
Steedman, Chairman-WPP Worldwide and Chief Executive Officer of

Mindshare, Co., a corporation based in Hong Kong, China, to work in the

Philippines for private respondent WPP Marketing Communications, Inc.
(WPP), a corporation registered and operating under the laws of
Philippines.

sought to be dismissed with two written notices before termination of

employment can be legally effected: (1) notice which apprises the
employee of the particular acts or omissions for which his dismissal is
sought; and (2) the subsequent notice which informs the employee of the
employers decision to dismiss him. Failure to comply with the
Employment of GALERA with private respondent WPP became effective requirements taints the dismissal with illegality. WPPs acts clearly show
on September 1, 1999 solely on the instruction of the CEO and upon that Galeras dismissal did not comply with the two-notice rule.
signing of the contract, without any further action from the Board of
Directors of private respondent WPP.
The employment permit must be acquired prior to employment.
Four months had passed when private respondent WPP filed before the
Bureau of Immigration an application for petitioner GALERA to receive a The law and the rules are consistent in stating that the employment
working visa, wherein she was designated as Vice President of WPP. permit must be acquired prior to employment. The Labor Code states:
Petitioner alleged that she was constrained to sign the application in "Any alien seeking admission to the Philippines for employment
order that she could remain in the Philippines and retain her purposes and any domestic or foreign employer who desires to engage
employment.
an alien for employment in the Philippines shall obtain an employment
permit
from
the
Department
of
Labor."
On December 14, 2000, petitioner GALERA alleged she was verbally
notified by private respondent STEEDMAN that her services had been Galera cannot come to this Court with unclean hands. To grant Galeras
terminated from private respondent WPP. A termination letter followed prayer is to sanction the violation of the Philippine labor laws requiring
the next day. Thus, a complaint for illegal dismissal was filed against aliens to secure work permits before their employment. We hold that the
WPP.
status quo must prevail in the present case and we leave the parties
where they are. Hence, Galera is not entitled to monetary awards. This
The LA held that WPP, Steedman, Webster, and Lansang liable for illegal ruling, however, does not bar Galera from seeking relief from other
dismissal and damages. Arbiter Madriaga stated that Galera was not jurisdictions.
only illegally dismissed but was also not accorded due process. The
NLRC reversed the LA decision. The NLRC stressed that Galera was WPP MARKETING COMMUNICATIONS, INC., ET. AL. VS JOCELYN
WPPs Vice-President, and therefore, a corporate officer at the time she M. GALERA
was removed by the Board of Directors. Such being the case, the GR NO. 169207
imperatives of law require that we hold that the Arbiter below had no and
jurisdiction over Galeras case as, again, she was a corporate officer at JOCELYN M. GALERA VS WPP MARKETING COMMUNICATIONS,
the
time
of
her
removal. INC., ET. AL.
GR NO. 169239
On appeal, the CA reversed the NLRC decision. It ruled that a person MARCH 25, 2010
could be considered a "corporate officer" only if appointed as such by a
corporations Board of Directors, or if pursuant to the power given them FACTS:
by either the Articles of Incorporation or the By-Laws.
Petitioner Jocelyn M. Galera is an American citizen, who was hired by
respondent John Steedman, Chairman of WPP Worldwide and Chief
ISSUE:
Executive Officer of Mindshare, Co., a corporation based in Hong Kong,
Whether or not the LA had jurisdiction over the case
China, to work in the Philippines for private respondent WPP Marketing
Communications, Inc. (WPP), a corporation registered and operating
COMMERCIAL LAW
under the laws of Philippines. Under the employment contract, Galera
would commence employment on September 1, 1999, with the position
Under Section 25 of the Corporation Code, the corporate officers are the of Managing Director of Mindshare Philippines. Thus, without obtaining
president, secretary, treasurer and such other officers as may be an alien employment permit, Galera commenced her employment with
provided
in
the
by-laws. WPP Philippines on the said date. It was only after four months from the
time she commenced employment that private respondent WPP filed
An examination of WPPs by-laws resulted in a finding that Galeras before the Bureau of Immigration an application for petitioner Galera to
appointment as a corporate officer (Vice-President with the operational receive a working visa. In the application, she was designated as Vicetitle of Managing Director of Mindshare) during a special meeting of President of WPP. Petitioner alleged that she was constrained to sign the
WPP's Board of Directors is an appointment to a non-existent corporate application in order that she could remain in the Philippines and retain
office. WPPs by-laws provided for only one Vice-President. At the time of her employment.
Galeras appointment on 31 December 1999, WPP already had one VicePresident in the person of Webster. Galera cannot be said to be a On December 14, 2000, private respondent Galera was verbally
director of WPP also because all five directorship positions provided in informed by Steedman that her employment had been terminated. She
the by-laws are already occupied. Finally, WPP cannot rely on its received her termination letter the following day. Her termination
Amended By-Laws to support its argument that Galera is a corporate prompted Galera to commence a complaint for illegal dismissal before
officer. The Amended By-Laws provided for more than one Vice- the labor arbiter. The labor arbiter found WPP, Steedman, Webster, and
President and for two additional directors. Even though WPPs Lansang liable for illegal dismissal and damages. Furthermore the labor
stockholders voted for the amendment on 31 May 2000, the SEC arbiter stated that Galera was not only illegally dismissed but was also
approved the amendments only on 16 February 2001. Galera was not accorded due process, saying that Galera was not given an
dismissed on 14 December 2000. WPP, Steedman, Webster, and opportunity by WPP to defend herself and explain her side. Thus, WPP
Lansang did not present any evidence that Galeras dismissal took effect did not observe both substantive and procedural due process in
with the action of WPP's Board of Directors.
terminating Galeras employment. The labor arbiter ordered WPP to
reinstate Galera and to pay her backwages, transportation and housing
Galera being an employee, then the Labor Arbiter and the NLRC benefits, and moral and exemplary damages, among others.
have
jurisdiction
over
the
present
case.
On appeal, the NLRC reversed the labor arbiters ruling. The NLRC ruled
LABOR LAW
that Galera was WPPs Vice-President, and therefore, a corporate officer
at the time she was removed by the Board of Directors on 14 December
WPPs dismissal of Galera lacked both substantive and procedural due 2000. The NLRC ruled that the labor arbiter had no jurisdiction over the
process. Apart from Steedman's letter dated 15 December 2000 to case because being a corporate officer, a case arising from her
Galera, WPP failed to prove any just or authorized cause for Galeras termination is considered as an intra-corporate dispute, which was
dismissal.
cognizable by the Securities and Exchange Commission under P.D. 902A (but now by the Regional Trial Courts designated as Commercial
The law further requires that the employer must furnish the worker Courts by the Supreme Court pursuant to Section 5.2 of RA No.8799).

The Court of Appeals reversed the NLRC. It ruled that Galeras

appointment by the Board of Directors of the WPP as Vice President for
Media had no legal effect as WPPs by-laws provided for only one VicePresident, which at that time was occupied. Furthermore, WPPs by-laws
did not include a managing director as among its corporate officers. The
Court of Appeals ordered WPP to pay Galera backwages and separation
pay, as well as housing benefits, moral and exemplary damages, and
attorneys fees, among others. The case was subsequently elevated to
the Supreme Court.

of Labor. Section 4, Rule XIV, Book 1 of the Implementing Rules and

Regulations provides, among others, that if an alien enters the country
under a non-working visa and wishes to be employed thereafter, he may
only be allowed to be employed upon presentation of a duly approved
employment
permit.
Galera cannot come to this Court with unclean hands. To grant Galeras
prayer is to sanction the violation of the Philippine labor laws requiring
aliens to secure work permits before their employment. We hold that the
status quo must prevail in the present case and we leave the parties
where they are. This ruling, however, does not bar Galera from seeking
relief from other jurisdictions.

Issues:
1. Is Galera an employee or a corporate officer of WPP?
SEMBLANTE VS CA
2. Did the labor arbiter have jurisdiction over the case?
GR NO 196426
3. Was Galera illegally dismissed?
AUGUST 15, 2011
4. Is Galera entitled to collect the award of backwages and damages
even if she did not have an alien employment permit when she FACTS:
commenced her employment in the Philippines?
PETITIONERS Marticio Semblante and Dubrick Pilar were hired
Ruling (First Issue): Galera is an employee of WPP. She is not a by private respondents Vicente and Maria Luisa Loot as official
corporate officer of WPP. An examination of WPPs by-laws resulted in a masiador and sentenciador, respectively, of their Gallera de
finding that Galeras appointment as a corporate officer (Vice-President Mandaue, a cockpit.
with the operational title of Managing Director of Mindshare) during a
special meeting of WPPs Board of Directors is an appointment to a non- As the masiador, Semblante would call and take the bets from the
existent corporate office. WPPs by-laws provided for only one Vice- gamecock owners and other bettors and order the start of the
President. At the time of Galeras appointment on December 31, 1999, cockfight. He would also distribute the winnings after deducting
WPP already had one Vice-President in the person of Webster. Galera the arriba, or the commission for the cockpit. As the sentenciador,
cannot be said to be a director of WPP also because all five directorship Pilar would oversee the proper gaffing of fighting cocks determine
positions provided in the by-laws are already occupied.
the fighting cocks physical condition and capabilities to continue
the cockfight, and eventually declare the result of the cockfight.
The appellate court further justified that Galera was an employee and not
a corporate officer by subjecting WPP and Galeras relationship to the For their services as masiador and sentenciador, Semblante was
four-fold test: (a) the selection and engagement of the employee; (b) the paid P2,000 per week or P8,000 per month, while Pilar was paid
payment of wages; (c) the power of dismissal; and (d) the employers P3,500 a week or P14,000 a month. They worked every Tuesday,
power to control the employee with respect to the means and methods Wednesday, Saturday and Sunday every week, excluding monthly
by which the work is to be accomplished. The appellate court found that derbies and cockfights held on special holidays.
Sections 1 and 4 of the employment contract mandate where and how
often she is to perform her work; Sections 3, 5, 6 and 7 show that wages In a complaint for illegal dismissal, the Labor Arbiter found
she receives are completely controlled by WPP; and Sections 10 and 11 petitioners to be regular employees of respondents. In their
clearly state that she is subject to the regular disciplinary procedures of appeal to the National Labor Relations Commission (NLRC),
WPP.
respondents belatedly put up an appeal bond. The NLRC after a
Motion for Reconsideration by respondents, entertained the
(Second Issue): The Labor Arbiter had jurisdiction over the illegal appeal and found that there was no employer-employee
dismissal complaint filed by Galera. Galera being an employee, the relationship between petitioners and respondents. The Court of
Labor Arbiter and the NLRC had jurisdiction over her illegal dismissal Appeals (CA) upheld the decision of the NLRC.
complaint. Article 217 of the Labor Code vests the Labor Arbiter with the
jurisdiction to hear and decide, among others termination disputes, Can the decision be justified?
involving workers, whether agricultural or non-agricultural.
Ruling:
(Third Issue): Yes, WPPs dismissal of Galera lacked both substantive
and procedural due process.
YES. While respondents had failed to post their bond within the
10-day period provided above, it is evident, on the other hand,
WPP failed to prove any just or authorized cause for Galeras dismissal. that petitioners are not employees of respondents, since their
WPP was unable to substantiate the allegations of Steedmans relationship fails to pass muster the four-fold test of employment
December 15, 2000 letter to Galera, (questioning her leadership and We have repeatedly mentioned in countless decisions: (1) the
competence). Galera, on the other hand, presented documentary selection and engagement of the employee; (2) the payment of
evidence in the form of congratulatory letters, including one from wages; (3) the power of dismissal; and (4) the power to control the
Steedman, which contents are diametrically opposed to the December employees conduct, which is the most important element.
15, 2000 letter. Also, the law requires that the employer must furnish the
worker sought to be dismissed with two written notices before As found by both the NLRC and the CA, respondents had no part
termination of employment can be legally effected: (1) notice which in petitioners selection and management; petitioners
apprises the employee of the particular acts or omissions for which his compensation was paid out of the arriba (which is a percentage
dismissal is sought; and (2) the subsequent notice which informs the deducted from the total bets), not by petitioners; and petitioners
employee of the employers decision to dismiss him. Failure to comply performed their functions as masiador and sentenciador free from
with the requirements taints the dismissal with illegality. WPPs acts the direction and control of respondents. In the conduct of their
clearly show that Galeras dismissal did not comply with the two-notice work, petitioners relied mainly on their expertise that is
rule.
characteristic of the cockfight gambling, and were never given by
respondents any tool needed for the performance of their work.
(Fourth Issue): No, Galera could not claim the employees benefits she
is entitled under Philippine Labor Laws. The law and the rules are Respondents, not being petitioners employers, could never have
consistent in stating that the employment permit must be acquired prior dismissed, legally or illegally, petitioners, since respondents were
to employment. Article 40 of the Labor Code states: "Any alien seeking without power or prerogative to do so in the first place. The rule on
admission to the Philippines for employment purposes and any domestic the posting of an appeal bond cannot defeat the substantive rights
or foreign employer who desires to engage an alien for employment in of respondents to be free from an unwarranted burden of
the Philippines shall obtain an employment permit from the Department answering for an illegal dismissal for which they were never

responsible. (Marticio Semblante and Dubrick Pilar vs. CA, G.R.

No. 196426, Aug. 15, 2011).
LIRIO VS GENOVIA
GR NO. 169757
NOVEMBER 23, 2011
FACTS:
Respondent was allegedly hired on August 15, 2001 as studio
manager by petitioner Lirio, owner of Celkor Ad Sonicmix
Recording Studio (Celkor). A few days after he started working as
a studio manager, petitioner approached him and told him about
his project to produce an album for his 15-year-old daughter.
Petitioner asked respondent to compose and arrange songs for
Celine and promised that he (Lirio) would draft a contract to
assure respondent of his compensation for such services. As
agreed upon, the additional services that respondent would render
included composing and arranging musical scores only, while the
technical aspect in producing the album, such as digital editing,
mixing and sound engineering would be performed by respondent
in his capacity as studio manager for which he was paid on a
monthly
basis.
Respondent reminded petitioner about his compensation as
composer and arranger of the album. Petitioner verbally assured
him that he would be duly compensated. By mid-November 2001,
respondent finally finished the compositions and musical
arrangements of the songs to be included in the album.
Thereafter, respondent was tasked by petitioner to prepare official
correspondence, establish contacts and negotiate with various
radio stations, malls, publishers, record companies and
manufacturers, record bars and other outlets in preparation for the
promotion of the said album. By early February 2002, the album
was
in
its
manufacturing
stage.
On February 26, 2002, respondent again reminded petitioner
about the contract on his compensation as composer and
arranger of the album. Petitioner told respondent that since he
was practically a nobody and had proven nothing yet in the music
industry, respondent did not deserve a high compensation, and he
should be thankful that he was given a job to feed his family.
Petitioner informed respondent that he was entitled only to 20% of
the net profit, and not of the gross sales of the album, and that the
salaries he received and would continue to receive as studio
manager of Celkor would be deducted from the said 20% net
profit share. Respondent objected and insisted that he be properly
compensated. On March 14, 2002, petitioner verbally terminated
respondent's services, and he was instructed not to report for
work. On July 9, 2002, respondent Wilmer D. Genovia filed a
complaint against petitioner for illegal dismissal, non-payment of
commission and award of moral and exemplary damages.
Petitioner asserted that from the aforesaid terms and conditions,
his relationship with respondent is one of an informal partnership
under Article 1767 of the New Civil Code, since they agreed to
contribute money, property or industry to a common fund with the
intention of dividing the profits among themselves. Petitioner had
no control over the time and manner by which respondent
composed or arranged the songs, except on the result thereof.
ISSUE:
I. Whether or not an employer-employee relationship existed
between
petitioner
and
respondent
HELD:
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 employer's power to control the employee's conduct.

The most important element is the employer's control of the
employee's conduct, not only as to the result of the work to be
done, but also as to the means and methods to accomplish it.
It is settled that 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.
In this case, the documentary evidence presented by respondent
to prove that he was an employee of petitioner are as follows: (a)
a document denominated as "payroll" certified correct by
petitioner, which showed that respondent received a monthly
salary of P7,000.00 (P3,500.00 every 15th of the month and
another P3,500.00 every 30th of the month) with the
corresponding deductions due to absences incurred by
respondent; and (2) copies of petty cash vouchers, showing the
amounts he received and signed for in the payrolls.
The said documents showed that petitioner hired respondent as
an employee and he was paid monthly wages of P7,000.00.
Petitioner wielded the power to dismiss as respondent stated that
he was verbally dismissed by petitioner, and respondent,
thereafter, filed an action for illegal dismissal against petitioner.
The power of control refers merely to the existence of the power. It
is not essential for the employer to actually supervise the
performance of duties of the employee, as it is sufficient that the
former has a right to wield the power. Nevertheless, petitioner
stated in his Position Paper that it was agreed that he would help
and teach respondent how to use the studio equipment. In such
case, petitioner certainly had the power to check on the progress
and
work
of
respondent.
On the other hand, petitioner failed to prove that his
relationship with respondent was one of partnership. Such
claim was not supported by any written agreement. It is a
well-settled doctrine, that if doubts exist between the
evidence presented by the employer and the employee, the
scales of justice must be tilted in favor of the latter.
Based on the foregoing, it is clear that an employer-employee
relationship existed between petitioner and respondent.
ANGELINA FRANCISCO VS NLRC
GR NO. 170087
AUGUST 31, 2006
FACTS:
Angelina Francisco was hired by Kasei Corporation during the
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 Liason Officer
to the City of Manila to secure permits for the operation of
the company.
In 1996, she was designated as Acting Manager. She was
assigned to handle recruitment of all employees and perform
management administration functions. In 2001, she was replaced
by Liza Fuentes as Manager. Kasei Corporation reduced her
salary to P2,500 per month which was until September. She
asked for her salary but was informed that she was no longer
connected to the company. She did not anymore report to work
since she was not paid for her salary. She filed an action for
constructive dismissal with the Labor Arbiter.
Kasei Corporation however averred in its defense that:
- 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 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

petitioner's latest employer was Seiji Corporation

DECISION OF LOWER COURTS:
*Labor arbiter: Francisco was illegally dismissed.
*NLRC: affirmed LA.
*CA: reversed NLRC.
*CA (motion for reconsideration): denied.
Hence, the present petition.
ISSUE/S:
(1) WON there was an employer-employee relationship between
petitioner and private respondent Kasei Corporation; and if in the
affirmative,
(2) WON petitioner was illegally dismissed.
RATIO:
1. YES
The court held 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.
The better approach would therefore be to adopt a two-tiered
test involving:
*CONTROL TEST - YES
*ECONOMIC CONDITIONS -YES
(1) CONTROL TEST: 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) ECONOMICA CONDITIONS: the underlying ECONOMIC
REALITIES of the activity or relationship.
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. It is therefore apparent that petitioner is
economically dependent on respondent corporation for her
continued employment in the latters line of business.
Under the broader economic reality test, the petitioner can
likewise be said to be an employee of respondent corporation
because she had served the company for six years before her
dismissal, receiving check vouchers indicating her salaries/wages,
benefits, 13th month pay, bonuses and allowances, as well as
deductions and Social Security contributions from August 1, 1999
to December 18, 2000.
In Sevilla v. Court of Appeals, the court 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, 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.
The proper standard of economic dependence is whether the
worker is dependent on the alleged employerfor his continued
employment in that line of business.
(2) YES, she was illegally dismissed. A diminution of pay is
prejudicial to the employee and amounts to constructive dismissal.
Constructive dismissal is an involuntary resignation resulting in
cessation of work resorted to when continued employment
becomes impossible, unreasonable or unlikely; when there is a
demotion in rank or a diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes
unbearable
to
an
employee
NOTE:
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.
OROZCO VS CA
GR NO. 192558
FEBRUARY 12, 2012
FACTS:
In March 1990, Wilhelmina Orozco was hired as a writer by the
Philippine Daily Inquirer (PDI). She was the columnist of Feminist
Reflections under the Lifestyle section of the publication. She
writes on a weekly basis and on a per article basis (P250300/article).
In 1991, Leticia Magsanoc as the editor-in-chief sought to improve
the Lifestyle section of the paper. She said there were too many
Lifestyle writers and that it was time to reduce the number of
writers. Orozcos column was eventually dropped.
Orozco filed for a case for Illegal Dismissal against PDI and
Magsanoc. Orozco won in the Labor Arbiter where the
arbiter ruled that there exists an employer-employee relationship
between PDI and Orozco.
The case eventually reached the Court of Appeals where the CA
ruled that there is no such relationship.
Orozco insists that by applying the four-fold test, it can be seen
that she is an employee of PDI; Orozco insists that PDI had been
exercising the power of control over her because:
a) PDI provides the guidelines as to what her article content
should be;
b) PDI sets deadlines as to when Orozco must submit her
article/s;
c) PDI controls the number of articles to be submitted by Orozco;
d) PDI requires a certain discipline from their writers so as to
maintain their readership.
ISSUE/HELD:
Whether or not Orozco is an employee of PDI, and is yes, whether
she
was
illegally
dismissed.
NO
RATIO:
We rule for PDI.
The existence of an employer-employee relationship is essentially
a questions of fact. Factual findings of quasi-judicial agencies like

the NLRC are generally accorded respect and finality if supported

by
substantial
evidence.
Considering that the CA's findings are in direct conflict with those
of the Labor Arbiter and NLRC, this Court must now make its own
examination and evaluation of the facts of this case.
It is true the Orozce herself admitted that she was not and had not
been considered respondent's employee because the terms of
works were arbitrarily decided upon by PDI.
This Court has constantly adhered to the FOUR-FOLD TEST to
determine whether there exists an employee-employer
relationship between parties. The four elements of an employee
relationship are the selection and engagement of the employee;
the payment of wages; the power of dismissal; and the employer's
power to control the employee's conduct.
Of these four elements, it is the power of control which is most
crucial and most determinative factor, so important in fact the the
other elements may even be disregarded. In other words, the test
is whether the employer controls or has reserved the right to
control the employee, not only as to the work done, but also as to
the means and methods by which the same is accomplished.
Orozco argues that several factors exist to prove that PDI
exercised control over her and her work. But as to whether this is
the form of control that our labor laws contemplate such as to
establish an employer-employee relationship between Orozco and
PDI,
it
is
not.
Orozco has misconstrued the CONTROL TEST as did the Labor
Arbiter and the NLRC.
Not all rules imposed by the hiring party on the hired party indicate
that the latter is an employee of the former. Rules which serve as
general guidelines towards the achievement of the mutually
desired result are not indicative of the power of control.
Orozco has not shown the PDI, acting through its editors, dictated
how she was to write or produce her articles each week. Aside
from the constraints presented by the space allocation of her
column, there were no restraints on her creativity. The perceived
constraint on Orozco's column was dictated by her own choice of
her column's perspective.
The newspaper's power to approve or reject publication of any
specific article she wrote for her column cannot be the control
contemplated in the control test as it is but logical that one who
commissions another to do a piece of work should have the right
to accept or reject the product. The important factor to consider in
the control test is still the elements of control over how the work
itself is done, not just the end result thereof.
Where a person who works for another performs his job more
or less at his own pleasure, in the manner he sees fit, subject
to definite hours or conditions of work, and is compensated
according to the result of his efforts and not the amount
thereof, no employer-employee relationship exists.
Aside from the control test, this Court has also used the
ECONOMIC REALITY TEST. The economic realities prevailing
within the activity or between the parties are examined, taking into
consideration the totality of the circumstances surrounding the
true nature of the relationship between the parties.
Orozco's main occupation is not as a columnist for respondent but
as a women's rights advocate working in various womens'
organizations. She also contributes articles to other publications.
Thus, it cannot be said that Orozco was dependent on PDI for her
continued employment in PDI's line of business.
The inevitable conclusion is that Orozco was not PDI's employee
but an INDEPENDENT CONTRACTOR, engaged to do
independent work.

JAVIER VS FLY ACE CORPORATION

GR NO. 192558
FEBRUARY 15, 2012
FACTS:
Javier an employee of Fly Ace performing various work for the
latter filed a complaint before the NLRC for underpayment of
salaries and other labor standard benefits.
He alleged 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 pay slips by the company; that 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; 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;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.
For its part, Fly Ace denied the existence of employer-employee
relationship between them and Javier as the latter was only called
roughly 5 to 6 times only in a month whenever the vehicle of its
contracted hauler, Milmar Hauling Services, was not available.
Labor Arbiter dismissed the complaint ruling that 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.
On appeal, NLRC reversed the decisin of the LA. It was of the
view that a pakyaw-basis arrangement did not preclude the
existence of employer-employee relationship. Payment by result x
x x is 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. 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.
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. However, on appeal,
CA reversed the ruling of NLRC
The CA ruled thatJaviers 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 co-terminous with the trip only. Since no
substantial evidence was presented to establish an employeremployee relationship, the case for illegal dismissal could not

prosper. Hence, this appeal.

submit a resignation letter as the same was supposedly required

for applying for a position at Royale.

ISSUE:
Whether or not there exist an employer-employee relationship
between Javier and Fly Ace, thereby holding the latter guilty of
illegal
dismissal.
HELD:

The

CA's

decision

was

sustained.

LABOR LAW
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. 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.Accordingly,
the petitioner needs to show by substantial evidence that he was
indeed an employee of the company against which he claims
illegal
dismissal.
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. Whoever claims entitlement to the benefits
provided by law should establish his or her right thereto x x x.
Sadly, Javier failed to adduce substantial evidence as basis for the
grant of relief.
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.
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.
DENIED.
JARL CONSTRUCTION AND ARMANDO K. TEJADA VS
SIMEON A. ATENCIO
GR NO. 175969
AUGUST 1, 2012
TIMOTEO SARONA VS. NATIONAL LABOR RELATIONS
COMMISSION, ROYALE SECURITY AGENCY, ET.AL.
GR NO. 185280
JANUARY 18, 2012
FACTS:
The petitioner, who was hired by Sceptre as a security guard, was
asked by Karen Therese Tan, Sceptre's Operations Manager, to

Martin informed him that he would no longer be given any

assignment per the instructions of Aida Sabalones-Tan, general
manager of Sceptre. This prompted him to file a complaint for
illegal dismissal. While complainant is entitled to backwages, we
are aware that his stint with respondent Royale lasted only for one
(1) month and three (3) days such that it is our considered view
that his backwages should be limited to only three (3) months. The
petitioner does not deny that he has received the full amount of
his backwages and separation pay as provided under the NLRC's
November 2005 Decision. However, he claims that this does not
preclude this Court from modifying a decision that is tainted with
grave abuse of discretion or issued without jurisdiction.
ISSUE:
Whether the petitioner's backwages should be limited to his salary
for three (3) months
RULING: NO.
In case separation pay is awarded and reinstatement is no longer
feasible, backwages shall be computed from the time of illegal
dismissal up to the finality of the decision should separation pay
not be paid in the meantime. It is the employee's actual receipt of
the full amount of his separation pay that will effectively terminate
the employment of an illegaly dismissed employee. Otherwise, the
employer-employee relationship subsists and the illegally
dismissed employee is entitled to backwages, taking into account
the increases and other benefits, including the 13 th month pay, that
were received by his co-employees who are not dismissed. It is
the obligation of the employer to pay an illegally dismissed
employee or worker the whole amount of the salaries or wages,
plus all other benefits and bonuses and general increases, to
which he would have been normally entitled had he not been
dismissed and had not stopped working.
Sarona vs NLRC 2012 (COMREV)
FACTS:
Petitioner, a security guard in Sceptre since April 1976,
was asked by Sceptres operations manager on June
2003, to submit a resignation letter as a requirement for
an application in Royale and to fill up an employment
application form for the said company. He was then
assigned at Highlight Metal Craft Inc. from July 29 to
August 8, 2003 and was later transferred to Wide Wide
World Express Inc. On September 2003, he was
informed that his assignment at WWWE Inc. was
withdrawn because Royale has been allegedly replaced
by another security agency which he later discovered to
be untrue. Nevertheless, he was once again assigned at
Highlight Metal sometime in September 2003 and when
he reported at Royales office on October 1, 2003, he
was informed that he would no longer be given any
assignment as instructed by Sceptres general manager.
He thus filed acomplaint for illegal dismissal. The LA
ruled in petitioners favor as he found him illegally
dismissed and was not convinced by the respondents
claim on petitioners abandonment.
Respondents were ordered to pay back wages
computed from the day he was dismissed up to
the promulgation of his decision on May 11, 2005.The
LA also ordered for the payment of separation pay but
refused to pierce Royales corporate veil.
Respondents appealed to the NLRC claiming that the
LA acted with grave abuse of discretion upon ruling on
the illegal dismissal of petitioner. NLRC partially affirmed
the LAs decision with regard to petitioners illegal
dismissal and separation pay but modified the amount
of backwages and limited it to only 3 months of his last
month salary reducing P95, 600 to P15, 600 since he
worked for Royale for only 1 month and 3 days.
Petitioner did not appeal to LA but raised the validity of

LAs findings on piercing Royales corporate personality

and computation of his separation pay and such petition
was dismissed by the NLRC. Petitioner elevated
NLRCs decision to the CA on a petition for certiorari,
and the CA disagreed with the NLRCs decision of not
proceeding to review the evidence for determining
if Royale is Sceptres alter ego that would warrant
the piercing of its corporate veil.
Issue:

Ruling:

Whether or not Royales corporate fiction should be

pierced for the purpose of compelling it to recognize the
petitioners length of service with Sceptre and for
holding it liable for the benefits that have accrued to
him arising from his employment with Sceptre.
Whether or not petitioners back wages should be
limited to his salary for 3 months
The doctrine of piercing the corporate veil is applicable
on alter ego cases, where a corporation is merely a
farce since it is a mere alter ego or business conduit of
a person, or where the corporation is so organized and
controlled and its affairs are so conducted as to make it
merely an instrumentality, agency, conduit or adjunct
of another corporation.
The respondents scheme reeks of bad faith and fraud
and compassionate justice dictates that Royale and
Sceptre be merged as a single entity, compelling
Royale to credit and recognize the petitioners length of
service with Sceptre. The respondents cannot use the
legal fiction of a separate corporate personality for ends
subversive of the policy and purpose behind its
creation or which could not have been intended by law
to which it owed its being.
Also, Sceptre and Royale have the same principal
place of business. As early as October 14, 1994, Aida
and Wilfredo became the owners of the property used
by Sceptre as its principal place of business by virtue of
a Deed of Absolute Sale they executed with
Roso. Royale, shortly after its incorporation, started to
hold office in the same property. These, the
respondents failed to dispute.
Royale also claimed a right to the cash bond which the
petitioner posted when he was still with Sceptre. If
Sceptre and Royale are indeed separate entities,
Sceptre should have released the petitioners cash
bond when he resigned and Royale would have
required the petitioner to post a new cash bond in its
favor.
The way on how petitioner was made to resign from
Sceptre then later on made an employee of Royale,
reflects the use of the legal fiction of the separate
corporate personality and is an implication of continued
employment. Royale is a continuation or successor or
Sceptre since the employees of Sceptre and of Royale
are the same and said companies have the same
principal place of business.
Because petitioners rights were violated and his
employer has not changed, he is entitled to separation
pay which must be computed from the time he
was hired until the finality of this decision. Royale is
also ordered to pay him backwages from his dismissal
on October 1, 2003 until the finality of this decision.
However, the amount already received by petitioner
from the respondents shall be deducted. He is
also awarded moral and exemplary damages amounting
to P 25, 000.00 each for his dismissal which was tainted
with bad faith and fraud. Petition is granted. CAs
decision is reversed and set aside.

DE LEON ET. AL. VS NLRC

GR NO. 112661
MAY 30, 2001

FACTS:
Petitioners are security guards assigned in the premises of
Fortune Tobacco Services, Inc. (FTC) pursuant to a contract for
security services with Fortune Integrated Services Inc. (FISI).
Sometime after, FISI stockholders executed a Deed of Sale of
Shares of Stock in favor of a group of new stockholders, it also
amended its Articles of Incorporation changing its name to
Magnum Integrated Services, Inc. (MISI). FTC terminated the
contract with FISI which resulted in the displacement of some 582
security guards assigned to FTC, including petitioners herein.
FTC Labor Union which is an affiliate of NAFLU, sent a Notice of
Strike which resulted in the picketing of the premises of FTC,
however, RTC of Pasig, issued a writ of injunction to enjoin the
picket. Petitioners then filed the instant case to the Arbitration
branch of the NLRC.
Petitioners that they were regular employees of FTC which was
also using the corporate names FISI and MISI, averring that they
work under the control and supervision of FTCs security
supervisors, and that, they were dismissed without just cause and
due process. They also claimed that their dismissal was the
design of their employer to bust their newly organized union.
Respondent FTC, on the other hand, maintained that there was
no EE-ER relationship, that petitioners were employee of MISI a
separate and distinct corporation from FTC.
LA ruled for respondents. NLRC reversed.
Issue: WON respondents are guilty of ULP.
Held: Yes, respondents are guilty of ULP.
Ratio: Respondents were guilty of interfering with the right
of petitioners to self-organization which constitutes unfair
labor practice under Article 248 of the Labor Code. Petitioners
have been employed with FISI since the 1980s and have since
been posted at the premises of FTC (main factory plant, tobacco
re-drying plant and warehouse). FISI, while having its own
corporate identity, was a mere instrumentality of FTC, tasked
to provide protection and security in the company premises.
The 2 corporations had identical stockholders and the same
business address. FISI also had no other clients except FTC and
other companies belonging to the Lucio Tan group of companies.
Moreover, the early payslips of petitioners show that their salaries
were initially paid by FTC. To enforce their rightful benefits under
the laws on Labor Standards, petitioners formed a union which
was later certified as bargaining agent of all the security
guards. On February 1, 1991, the stockholders of FISI sold
all their participations in the corporation to a new set of
stockholders which renamed the corporation Magnum Integrated
Services, Inc. On October 15, 1991, FTC, without any reason,
pre-terminated its contract of security services with MISI and
contracted 2 other agencies to provide security services for its
premises. This resulted in the displacement of petitioners. As
MISI had no other clients, it failed to give new assignments
to petitioners. Petitioners have remained unemployed since
then. All these facts indicate a concerted effort on the part of
respondents to remove petitioners from the company and thus
abate the growth of the union and block its actions to
enforce their demands in accordance with the Labor Standards
laws.
The test of whether an employer has interfered with and
coerced employees within the meaning of section (a) (1) is
whether the employer has engaged in conduct which it may
reasonably be said tends to interfere with the free exercise
of employees rights under section 3 of the Act, and it is not
necessary that there be direct evidence that any employee was in
fact intimidated or coerced by statements of threats of the
employer if there is a reasonable inference that anti-union
conduct of the employer does have an adverse effect on self-

organization and collective bargaining.

A corporation is an entity separate and distinct from its
stockholders and from other corporations to which it is
connected. However, when the concept of separate legal entity is
used to defeat public convenience, justify wrong, protect fraud or
defend crime, the law will regard the corporation as an association
of persons, or in case of two corporations, merge them into one.
The separate juridical personality of a corporation may also
be disregarded when such corporation is a mere alter ego
or business conduit of another person. FISI was a mere adjunct
of FTC. FISI, by virtue of a contract for security services, provided
FTC with security guards to safeguard its premises. However,
records show that FISI and FTC have the same owners and
business address, and FISI provided security services only to
FTC and other companies belonging to the Lucio Tan group of
companies. The purported sale of the shares of the former
stockholders to a new set of stockholders who changed the
name of the corporation to Magnum Integrated Services, Inc.
appears to be part of a scheme to terminate the services of
FISIs security guards posted at the premises of FTC and bust
their newly-organized union which was then beginning to become
active in demanding the companys compliance with Labor
Standards laws. Under these circumstances, the Court
cannot allow FTC to use its separate corporate personality
to shield itself from liability for illegal acts committed against its
employees.
IN VIEW WHEREOF, petition is GRANTED. The assailed
resolutions of the NLRC are SET ASIDE. Respondents are hereby
ordered to pay petitioners their full backwages, and to reinstate
them to their former position without loss of seniority rights and
privileges, or to award them separation pay in case reinstatement
is no longer possible.
PHILIPPINE BANK OF COMMUNICATIONS VS NLRC
FACTS:
Petitioner PBC and the Corporate Executive Search Inc. (CESI)
entered into a letter agreement under which CESI undertook to
provide "Temporary Services" to petitioner consisting of the
"temporary services" of eleven (11) messengers. Ricardo Orpiada,
one of the messengers, was thus assigned to work with the
petitioner bank. As such, he rendered services to the bank, within
the premises of the bank and alongside other people also
rendering services to the bank. But later on, Orpiada was
withdrawn from PBC as his services were no longer needed.
Orpiada filed a complaint against petitioner for illegal dismissal
and failure to pay the 13th month pay. The labor arbiter rendered
a decision ordering the reinstatement of the former with full back
wages and 13th month pay. Upon appeal, the NLRC affirmed the
decision.
Hence, this petition for certiorari.
ISSUE:
WON the relationship between PBC and CESI, by virtue of the
contractual agreement, was one of employer and labor-only
contractor
RULING:
YES. CESI was engaged in "labor-only" contracting vis-a-vis the
petitioner bank and in respect of Orpiada, and that consequently,
the petitioner bank is liable to Orpiada as if he had been directly
employed not only by CESI but also by the bank.
Under the general rule set out in the first and second paragraphs
of Article 106, an employer who enters into a contract with a
contractor for the performance of work for the employer, does not
thereby create an employer- employee relationship between
himself and the employees of the contractor. Nonetheless, when a
contractor fails to pay the wages of his employees in accordance
with the Labor Code, the employer who contracted out the job to
the contractor becomes jointly and severally liable with his
contractor to the employees of the latter "to the extent of the work

performed under the contract" as if such employer were the

employer of the contractor's employees.
A similar situation obtains where there is "labor only" contracting.
The "labor-only" contractor i.e. "the person or intermediary"
is considered "merely as an agent of the employer." The employer
is made by statute responsible to the employees of the "labor
only" contractor as if such employees had been directly employed
by the employer.
Section 9 of Rule VIII of Book III of the Omnibus Rules
Implementing the Labor Code provides as follows:
Sec. 9. Labor-only contracting. (a) Any person who undertakes
to supply workers to an employer shall be deemed to be engaged
in labor-only contracting where such person:
(1) Does not have substantial capital or investment x x x;
(2) The workers recruited and placed by such person are
performing activities which are directly related x x x;
(b) Labor-only contracting as defined herein is hereby prohibited
and the person acting as contractor shall be considered merely as
an agent or intermediary of the employer who shall be responsible
to the workers in the same manner and extent as if the latter were
directly employed by him.
xxx
In contrast, job contracting out a particular job to an independent
contractor is defined by the Implementing Rules as follows:
Sec. 8. Job contracting. There is job contracting permissible
under the Code if the following conditions are met:
(1)
The contractor carries on an independent business and
undertakes the contract work on his own account under his own
responsibility according to his own manner and method, free from
the control and direction of his employer or principal in all matters
connected with the performance of the work except as to the
results thereof; and
(2) The contractor has substantial capital or investment x x x;
The bank and CESI urge that CESI is not properly regarded as a
"labor-only" contractor upon the ground that CESI is possessed of
substantial capital or investment in the form of office equipment,
tools and trained service personnel. We are unable to agree with
the bank and CESI on this score. The undertaking given by CESI
in favor of the bank was not the performance of a specific job
for instance, the carnage and delivery of documents and parcels
to the addresses thereof. Orpiada utilized the premises and office
equipment of the bank and not those of CESI. Messengerial work
the delivery of documents to designated persons whether
within the bank premises or not is of course directly related to
the day-to-day operations of the bank. Section 9(2) quoted above
does not require for its applicability that the petitioner must be
engaged in the delivery of items as a distinct and separate line of
business.
Succinctly put, CESI is not a parcel delivery company: as its name
indicates, it is a recruitment and placement corporation placing
bodies, as it were, in different client companies for longer or
shorter periods of time.
Moreover, the letter agreement itself merely required CESI to
furnish the bank with eleven messengers for "a contract period
from January 19, 1976 .
"The eleven messengers were thus supposed to render
"temporary" services for an indefinite or unstated period of time.
Assuming that Orpiada could properly be regarded as a casual
(as distinguished from a regular) employee of the bank, he
became entitled to be regarded as a regular employee of the
bank, as soon as he had completed one year of service to the
bank. Employers may not terminate the service of a regular
employee except for a just cause or when authorized under the
Labor Code (Article 280, Labor Code). It is not difficult to see that
to uphold the contractual arrangement between the bank and
CESI would in effect be to permit employers to avoid the necessity
of hiring regular or permanent employees and to enable them to

keep their employees indefinitely on a temporary or casual status,

thus to deny them security of tenure in their jobs. Article 106 of the
Labor Code is precisely designed to prevent such a result.
Petition denied.

SAN MIGUEL CORP VS SEMILLANO

GR NO, 164257
JULY 5, 2010
RELEVANT FACTS:
Semillano et al filed a complaint for illegal dismissal with
the Labor Arbiter against AMPCO, Merlyn V. Polidario,
SMC and Rufino I. Yatar on July 17, 1995.
The complainants claimed that they were fillers of SMC
Bottling Plant, engaged in activities necessary and
desirable in the usual business of SMC. They assert,
therefore, that they are regular employees of SMC.
SMC utilized AMPCO, thus making it appear that the
latter was the complainants employer, with intentions of
evading the responsibility of paying the benefits due to
the complainants. The complainants further claim that
AMPCO and SMC failed to give them their 13 th month
pay, and that they were prevented from entering the
premises of SMC.
In its defense, SMC raised that it is not the employer of
the complainants; that AMPCO is their employer
because it is an independent contractor. AMPCO
directly paid their salaries and respective benefits.
On April 30, 1988, Labor Arbiter Jesus N. Rodriguez, Jr.
rendered his decision in favor of Semillano et al,
ordering that the complainants be reinstated without
loss of seniority rights and payment of full backwages;
and to pay the complainants counsel attorneys fees
10% of the total award. The complainants filed a motion
for partial execution of the LAs decision, but SMC filed
its opposition to the motion.
Semillano et al appealed the LA decision to the NLRC.
The Fourth Division affirmed the decision of the LA, with
minor modifications in favour of Semillano et al.
SMC moved for a reconsideration of the NLRCs
decision on February 28, 2002. The NLRC reversed its
earlier ruling, and instead held AMPCO liable to pay for
the respondents backwages, salaries, allowances and
attorneys fees. The respondents filed their motion for
reconsideration, but this was denied.
Feeling aggrieved, respondents filed a petition for
review on certiorari with the Court of Appeals, which
acted favourably in May 24, 2008. It applied the same
control test that the NLRC used, but found that SMC
exercised control over the respondents, and had the
power of dismissal as well. The CA added that AMPCO
was engaged in labor-only contracting since its capital
of nearly one million pesos was insufficient to qualify as
an independent contractor.
SMC filed a motion for reconsideration, but this was
denied by the CA. A petition for review on certiorari was
filed with the Supreme Court thereafter.
SMC argues that the CA erred in assuming that it
exercised control over the respondents simply because
they worked within the premises of the company. SMC
relied on the provision of its service contract with
AMPCO, wherein it was stipulated that the latter was to
provide the materials, tools and equipment needed to
carry out the services contracted out by SMC. The
contract also provides that AMPCO shall have exclusive
discretion over its personnel, and that it also determines
their wages.
SMC added that the respondents actions are for their
regularization as employees of SMC something that is
not recognized or allowed by law.
ISSUE:
Whether or not AMPCO is a legitimate job contractor.
HELD:

Generally, the findings of the LA and NLRC are

regarded with much respect and finality when supported
with sufficient evidence and affirmed by the CA.
Although there are many signs that AMPCO is indeed
an independent contractor, other factors prove
otherwise. First, the LA found no evidence that AMPCO
had substantial capital or investment. The NLRC stated
that AMPCOs main business is trading, maintaining a
store catering to members and the public thus making
its activity of job contracting with SMC only a sideline.
Thus AMPCOs substantial capital is invested and used
in its trading business.
The petitioner could not prove that AMPCO had
substantial tools and equipment for use in segregation
and piling for SMC. The NLCR earlier pointed out that
AMPCO had no fixed assets that it could have used in
any way for the completion of its contracted service with
the petitioner. The only logical conclusion is that the
tools and equipment used by the respondents are
owned by SMC, thus proving that AMPCO has no
independent business.
The Court is not convinced that AMPCO exercised
exclusive direction in the discharge of respondents,
based on Merlyn Polidarios instructions to the
respondents to wait for further instructions from SMCs
supervisor after being prevented from entering SMC
premises. Therefore, it would be logical to conclude that
SMC wielded the power of control.
AMPCOs Certificate of Registration as an Independent
Contractor issued by the proper Regional office of the
DOLE is not conclusive evidence. The totality of facts
and surrounding circumstances must also be
considered. Therefore, SMC (principal employer) is
liable along with AMPCO (labor-only contractor) for all
the respondents rightful claims.
The petition is DENIED, and the February 19, 2004
decision of the CA AFFIRMED.

ALVIADO VS PROCTOR AND GAMBLE PHIL, INC.

GR NO. 160506
JUNE 6, 2011
FACTS:
Petitioners worked as merchandisers of P&G from various dates,
allegedly starting as early as 1982 or as late as June 1991, to
either
May
5,
1992orMarch
11,
1993.
They all individually signed employment contracts with either
Promm-Gem or SAPS for periods of more or less five months at a
time.They were assigned at different outlets, supermarkets and
stores where they handled all the products of P&G.They received
their
wages
from
Promm-Gem
or
SAPS.
SAPS and Promm-Gem imposed disciplinary measures on erring
merchandisers for reasons such as habitual absenteeism,
dishonesty or changing day-off without prior notice.
P&G is principally engaged in the manufacture and production of
different consumer and health products, which it sells on a
wholesale basis to various supermarkets and distributors. To
enhance consumer awareness and acceptance of the products,
P&G entered into contracts with Promm-Gem and SAPS for the
promotion
and
merchandising
of
its
products.
In December 1991, petitioners filed a complaint against P&G for
regularization, service incentive leave pay and other benefits with
damages.The complaint was later amendedto include the matter
of
their
subsequent
dismissal.
OnNovember 29, 1996, the Labor Arbiter dismissed the complaint
for lack of merit and ruled that there was no employer-employee
relationship between petitioners and P&G.He found that the
selection and engagement of the petitioners, the payment of their

wages, the power of dismissal and control with respect to the

means and methods by which their work was accomplished, were
all done and exercised by Promm-Gem/SAPS.He further found
that Promm-Gem and SAPS were legitimate independent job
contractors. On appeal, the NLRC dismissed the same.
Petitioners filed a motion for reconsideration but the motion was
denied
in
theNovember
19,
1998Resolution.
Petitioners likewise failed to have a favrable decision in the CA
hence,
this
petition.
ISSUE:
Whether or not Promm-Gem and SAPS are labor-only contractors
or
legitimate
job
contractors?
HELD:
The petition is granted.
LABOR LAW
Article 106 of the Labor Code and its implementing rules allow
contracting arrangements for the performance of specific jobs,
works or services. Indeed, it is management prerogative to farm
out any of its activities, regardless of whether such activity is
peripheral or core in nature.However, in order for such
outsourcing to be valid, it must be made to anindependent
contractorbecause the current labor rules expressly prohibit laboronly
contracting.
To emphasize, there is labor-only contracting when the contractor
or sub-contractor merely recruits, supplies or places workers to
perform a job, work or service for a principalandanyof the
following elements are present: (i) The contractor or subcontractor
does not have substantial capital or investment which relates to
the job, work or service to be performedandthe employees
recruited, supplied or placed by such contractor or subcontractor
are performing activities which are directly related to the main
business of the principal;or (ii) The contractor does not exercise
the right to control over the performance of the work of
thecontractualemployee.
In the instant case,thefinancialstatementsof Promm-Gem show
that it has authorized capital stock ofP1 million and a paid-in
capital, or capital available for operations, ofP500,000.00 as of
1990. It also has long term assets worthP432,895.28 and current
assets ofP719,042.32.Promm-Gem has also proven that it
maintained its own warehouse and office space with a floor area
of 870 square meters. It also had under its name three registered
vehicles which were used for its promotional/merchandising
business. Promm-Gem also has other clientsaside from P&G.
Under the circumstances, Promm-Gem has substantial investment
which relates to the work to be performed.These factors negate
the existence of the element specified in Section 5(i) of DOLE
Department
Order
No.
18-02.
The records also show that Promm-Gem supplied its complainantworkers with the relevant materials, such as markers, tapes, liners
and cutters, necessary for them to perform their work.PrommGem also issued uniforms to them. It is also relevant to mention
that Promm-Gem already considered the complainants working
under it as its regular, not merely contractual or project,
employees.This circumstance negates the existence of element
(ii) as stated in Section 5 of DOLE Department Order No. 18-02,
which speaks ofcontractualemployees. This, furthermore, negates
on the part of Promm-Gem bad faith and intent to circumvent
labor laws which factors have often been tipping points that lead
the Court to strike down the employment practice or agreement
concerned as contrary to public policy, morals, good customs or
public
order.
Under the circumstances, Promm-Gem cannot be considered as a
labor-only contractor. Thus, it is a legitimate independent
contractor.

On the other hand, the Articles of Incorporation of SAPS shows

that it has a paid-in capital of onlyP31,250.00.There is no other
evidence presented to show how much its working capital and
assets are.Furthermore, there is no showing of substantial
investment in tools, equipment or other assets.
It is clear that SAPS having a paid-in capital of onlyP31,250 - has
no substantial capital.SAPS lack of substantial capital is
underlined by the records which show that its payroll for its
merchandisers alone for one month would already
totalP44,561.00.It had 6-month contracts withP&G.Yet SAPS
failed to show that it could complete the 6-month contracts using
its own capital and investment.Its capital is not even sufficient for
one months payroll. SAPS failed to show that its paid-in capital
ofP31,250.00 is sufficient for the period required for it to generate
its
needed
revenue
to
sustain
its
operations
independently.Substantial capital refers to capitalization used in
theperformance or completionof the job, work or service
contracted out.In the present case, SAPS has failed to show
substantial
capital.
Furthermore, the petitioners have been charged with the
merchandising and promotion of the products of P&G, an activity
that has already been considered by the Court as doubtlessly
directly related to the manufacturing business, which is the
principal business of P&G.Considering that SAPS has no
substantial capital or investment and the workers it recruited are
performing activities which are directly related to the principal
business of P&G, we find that the former is engaged in labor-only
contracting.
Where labor-only contracting exists, the Labor Code itself
establishes an employer-employee relationship between the
employer and the employees of the labor-only contractor. The
statute establishes this relationship for a comprehensive purpose:
to prevent a circumvention of labor laws. The contractor is
considered merely an agent of the principal employer and the
latter is responsible to the employees of the labor-only contractor
as if such employees had been directly employed by the principal
employer.
LABOR LAW
In cases of regular employment, the employer shall not terminate
the services of an employee except for a justor authorized cause.
In the instant case, the termination letters given by Promm-Gem
to its employees uniformly specified the cause of dismissal as
grave
misconduct
and
breach
of
trust.
Misconduct has been defined as improper or wrong conduct; the
transgression of some established and definite rule of action, a
forbidden act, a dereliction of duty, unlawful in character implying
wrongful intent and not mere error of judgment.The misconduct to
be serious must be of such grave and aggravated character and
not merely trivial and unimportant.To be a just cause for dismissal,
such misconduct (a) must be serious; (b) must relate to the
performance of the employees duties; and (c) must show that the
employee has become unfit to continue working for the employer.
In the instant case, petitioners-employees of Promm-Gem may
have committed an error of judgment in claiming to be employees
of P&G, but it cannot be said that they were motivated by any
wrongful intent in doing so.As such, they are only found them
guilty of only simple misconduct for assailing the integrity of
Promm-Gem as a legitimate and independent promotion firm.A
misconduct which is not serious or grave, as that existing in the
instant case, cannot be a valid basis for dismissing an employee.
Meanwhile, loss of trust and confidence, as a ground for
dismissal, must be based on the willful breach of the trust reposed
in the employee by his employer.Ordinary breach will not suffice.A
breach of trust is willful if it is done intentionally, knowingly and
purposely, without justifiable excuse, as distinguished from an act
done carelessly, thoughtlessly, heedlessly or inadvertently.

Loss of trust and confidence, as a cause for termination of

employment, is premised on the fact that the employee concerned
holds a position of responsibility or of trust and confidence.As
such, he must be invested with confidence on delicate matters,
such as custody, handling or care and protection of the property
and assets of the employer.And, in order to constitute a just cause
for dismissal, the act complained of must be work-related and
must show that the employee is unfit to continue to work for the
employer. In the instant case, the petitioners-employees of
Promm-Gem have not been shown to be occupying positions of
responsibility or of trust and confidence. Neither is there any
evidence to show that they are unfit to continue to work as
merchandisers for Promm-Gem. Thus, there was no valid cause
for the dismissal of petitioners-employees of Promm-Gem.
While Promm-Gem had complied with the procedural aspect of
due process in terminating the employment of petitionersemployees,i.e., giving two notices and in between such notices,
an opportunity for the employees to answer and rebut the charges
against them, it failed to comply with the substantive aspect of due
process as the acts complained of neither constitute serious
misconduct nor breach of trust.Hence, the dismissal is illegal.
With regard to the petitioners placed with P&G by SAPS, they
were given no written notice of dismissal.The records show that
upon receipt by SAPS of P&Gs letter terminating their
Merchandising Services Contact effective March 11, 1993, they in
turn verbally informed the concerned petitioners not to report for
work
anymore.
Neither SAPS nor P&G dispute the existence of these
circumstances.Parenthetically, unlike Promm-Gem which
dismissed its employees for grave misconduct and breach of trust
due to disloyalty, SAPS dismissed its employees upon the
initiation of P&G.It is evident that SAPS does not carry on its own
business because the termination of its contract with P&G
automatically meant for it also the termination of its employees
services.It is obvious from its act that SAPS had no other clients
and had no intention of seeking other clients in order to further its
merchandising business.From all indications SAPS, existed to
cater solely to the need of P&G for the supply of employees in the
latters merchandising concerns only.Under the circumstances
prevailing in the instant case, we cannot consider SAPS as
anindependent contractor.
In termination cases, the burden of proof rests upon the employer
to show that the dismissal is for just and valid cause. In the instant
case, P&G failed to discharge the burden of proving the legality
and validity of the dismissals of those petitioners who are
considered its employees. Hence, the dismissals necessarily were
not
justified
and
are
therefore
illegal.
CIVIL LAW
Moral and exemplary damages are recoverable where the
dismissal of an employee was attended by bad faith or fraud or
constituted an act oppressive to labor or were done in a manner
contrary to morals, good customs or public policy.
With regard to the employees of Promm-Gem, there being no
evidence of bad faith, fraud or any oppressive act on the part of
the latter, we find no support for the award of damages.
As for P&G, the records show that it dismissed its employees
through SAPS in a manner oppressive to labor. The sudden and
peremptory barring of the concerned petitioners from work, and
from admission to the work place, after just a one-day verbal
notice,andfor no valid cause bellows oppression and utter
disregard of the right to due process of the concerned
petitioners.Hence, an award of moral damages is called for.
Attorneys fees may likewise be awarded to the concerned
petitioners
who
wereillegallydismissedinbadfaithandwerecompelledtolitigateorincur

expenses to protect their rights by reason of the oppressive act of

P&G.
LABOR LAW
Lastly, under Article 279 of the Labor Code, an employee who is
unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges, inclusive of
allowances, and other benefits or their monetary equivalent from
the time the compensation was withheld up to the time of actual
reinstatement. Hence, all the petitioners, having been illegally
dismissed are entitled to reinstatement without loss of seniority
rights and with full back wages and other benefits from the time of
their illegal dismissal up to the time of their actual reinstatement.
The decision and resolution of the Court of Appeals are reversed
and set aside. The case is remanded to the NLRC.
EPARWA SECURITY AND JANITORIAL SERVICES VS LICEO
DE CAGAYAN UNIVERSITY
GR NO. 150402
NOVEMBER 28, 2006
FACTS:
Eparwa and LDCU, through their representatives, entered into a
contract for Security Services. Eparwa allocated the contracted
amount of 5,000 pesos per security guard per month. Eleven
security guards whom Eparwa assigned to LDCU from December
1, 1997 to November 30, 1998 filed a complaint before the
National Labor Relations Commission's (NLRC). The complaint
was filed against both Eparwa and LDCU for underpayment of
salary, legal holiday pay, 13th month pay, rest day, service
incentive leave, night shift differential and overtime pay. LDCU
made a cross-claim and prayed that Eparwa should reimburse
LDCU for any payment to the security guards.
The Labor Arbiter found that the security guards are entitled to
wage differentials and premium for holiday work and rest day. The
Labor Arbiter held Eparwa and LDCU solidarily liable pursuant to
Art. 109 of the Labor Code. LDCU filed an appeal before the
NLRC. LDCU agreed with the Labor Arbiters decision on the
security guards entitlement to salary differential but challenged the
propriety of the amount of the award. LDCU alleged that security
guards not similarly situated were granted uniform monetary
awards and that the decision did not include the basis of the
computation of the amount of the award. Eparwa filed an appeal
before the NLRC. For its part, Eparwa questioned it liability for the
security guards claims and the awarded cross-claims amounts.
The NLRC resolved Eparwa and LDCUs separate appeals in it
Resolution. The NLRC found that the security guards are entitled
to wage differentials and premium for holiday and rest day work.
Although the NLRC held Epawa and LDCU solidarily liable for
wage differentials and premium for holiday and rest day work, the
NLRC did not require Eparwa to reimburse LDCU for its payment
to the security guards. Eparwa and LDCU filed separate motions
for partial reconsideration of the Resolution. LDCU questioned the
NLRCs deletion of LDCUs entitlement to reimbursement by
Eparwa. Eparwa prayed that LDCU be made to reimburse Eparwa
for whatever amount it may pay to the security guards. The NLRC
declared that although Eparwa and LDCU are solidarily liable to
the security guards for the monetary award, LDCU alone is
ultimately liable. LDCU filed a petition for certiorari before the
appellate court assailing the NLRCs decision. LDCU took issue
with the NLRCs order that LDU should reimburse Eparwa. LDCU
started that this would free Eparwa from any liability for payment
of the security guards money claims.
The Appellate Court granted LDCUs petition and reinstated the
Labor Arbiters decision. The Appellate Court also allowed LDCU
to claim reimbursement from Eparwa. Eparwa filed a motion
reconsideration of the appellate courts decision. Eparwa stressed
that jurisprudence is consistent in ruling that the ultimate liability
for the payment of the monetary award rests with LDCU alone.
The appellate court denied Eparwa motion for reconsideration for

lack of merit.
Issue:
Is LDCU alone ultimately liable to the security guards for the wage
differentials and premium for holiday and rest day pay.
Held: YES.
For the security guards, the actual source of the payment of their
wage differentials and premiums for holiday and rest day work
does not matter as long as they are paid. This is the import of
Eparwa and LDCUs solitary liability. Creditors, such as the
security guards, may collect from anyone for the solitary debtors.
Soldiarly liability does not mean that, as between themselves, two
solidary debtors are liable for only half of the payment. LDCUs
ultimately liability comes into play because of the expiration of the
contracts for security services. There is no privity of contract
between the security guards and LDCU, but LDCU's liability to the
security guards remains because Art. 106, 107 and 109 of the
Labor Code. Eparwa is already precluded from asking LDCU for
an adjustment in the contract price because of the expiration of
the contract, but Eparwa's liability to the security guards remains
because of their employer-employee relationship. In lieu, of an
adjustment in the contract Eparwa may claim reimbursement from
LDCU for any payment it may make to the security guards.
However, LDCU cannot claim any reimbursement from Eparwa for
any payment it may make to the security guards.

emphasize, declaring that a particular act falls within the concept

of management prerogative is significantly different from
acknowledging that such act is a valid exercise thereof.
What the VA and the CA correctly ruled was that the Companys
act of contracting out/outsourcing is within the purview of
management prerogative. Both did not say, however, that such act
is a valid exercise thereof. Obviously, this is due to the recognition
that the CBA provisions agreed upon by Goya and the Union
delimit the free exercise of management prerogative pertaining to
the hiring of contractual employees. A collective bargaining
agreement is the law between the parties. A collective bargaining
agreement or CBA refers to the negotiated contract between a
legitimate labor organization and the employer concerning wages,
hours of work and all other terms and conditions of employment in
a bargaining unit. As in all contracts, the parties in a CBA may
establish such stipulations, clauses, terms and conditions as they
may deem convenient provided these are not contrary to law,
morals, good customs, public order or public policy.
Thus, where the CBA is clear and unambiguous, it becomes the
law between the parties and compliance therewith is mandated by
the express policy of the law. As repeatedly held, the exercise of
management prerogative is not unlimited; it is subject to the
limitations found in law, collective bargaining agreement or the
general principles of fair play and justice.
Petition is DENIED.

GOYA, INC. VS GOYA, INC. EMPLOYEES UNION-FFW

GR NO. 170054
JANUARY 21, 2013

AVELINO S. ALELIN VS PETRON CORPORATION

GR NO. 177592
JUNE 9, 2014 (separate page)

FACTS:
NITO ENTERPRISES VS NLRC
Petitioner Goya Inc. (Goya) hired contractual employees from
PESO Resources Development Corporation (PESO). This
prompted Goya, Inc. Employees Union-FFW (Union) to request for
a grievance conference on the ground that the contractual
workers do not belong to the categories of employees stipulated in
their CBA. The Union also argued that hiring contractual
employees is contrary to the union security clause embodied in
the CBA. When the matter remained unresolved, the grievance
was referred to the NCMB for voluntary arbitration. The Union
argued that Goya is guilty of ULP for gross violation of the CBA.
The voluntary arbitrator dismissed the Unions charge of ULP but
Goya was directed to observe and comply with the CBA. While the
Union moved for partial consideration of the VA decision, Goya
immediately filed a petition for review before the Court of Appeals
to set aside the VAs directive to observe and comply with the CBA
commitment pertaining to the hiring of casual employees. Goya
argued that hiring contractual employees is a valid management
prerogative. The Court of Appeals dismissed the petition.
ISSUE:
Whether the act of hiring contractual employees is a valid exercise
of management prerogative?
HELD: The petition must fail.
LABOR LAW: (management prerogative; collective bargaining
agreement)
The CA did not commit serious error when it sustained the ruling
that the hiring of contractual employees from PESO was not in
keeping with the intent and spirit of the CBA. In this case, a
complete and final adjudication of the dispute between the parties
necessarily called for the resolution of the related and incidental
issue of whether the Company still violated the CBA but without
being guilty of ULP as, needless to state, ULP is committed only if
there is gross violation of the agreement.
Goya kept on harping that both the VA and the CA conceded that
its engagement of contractual workers from PESO was a valid
exercise of management prerogative. It is confused. To

FACTS:
Petitioner Nitto Enterprises, a company engaged in the sale of
glass and aluminum products, hired Roberto Capili
sometime in May 1990 as an apprentice machinist,
molder and coremaker as evidenced by an apprenticeship
agreement 2for a period of six (6) months from May 28, 1990 to
November 28, 1990 with a daily wage rate of P66.75 which was
75% of the applicable minimum wage. On August 2, 1990,
Roberto Capili who was handling a piece of glass which he was
working on, accidentally hit and injured the leg of an office
secretary who was treated at a nearby hospital. Further,
Capili entered a workshop within the office premises
which was not his work station. There, he operated one of the
power press machines without authority and in the process
injured his left thumb. The following day he was asked
to resign. Three days after, , private respondent formally filed
before the NLRC Arbitration Branch, National Capital Region a
complaint for illegal dismissal and payment of other monetary
benefits.
The Labor Arbiter rendered his decision finding the
termination of private respondent as valid and dismissing
the money claim for lack of merit. On appeal, NLRC issued an
order reversing the decision of the Labor Arbiter. The NLRC
declared that Capili was a regular employee of Nitto Enterprises
and not an apprentice. Consequently, Labor Arbiter issued a Writ
of Execution ordering for the reinstatement of Capili
and to collect
his back
wages.
Petitioner, Nitto
Enterprises filed a case to the Supreme Court.
ISSUE: Does the NLRC correctly rule that Capili is a regular
employee and not an apprentice of Nitto Enterprises?
LAW: Article 280 of the Labor Code
RULING:
Yes. The apprenticeship agreement between petitioner

and private respondent was executed on May 28, 1990

allegedly employing the latter as an apprentice in the
trade of "care maker/molder. However, the apprenticeship
Agreement was filed only on June 7, 1990.Notwithstanding the
absence of approval by the Department of Labor and
Employment, the apprenticeship agreement was enforced the day it was
signed. The act of filing the proposed apprenticeship
program with the Department of Labor and Employment is
a preliminary step towards its final approval and does not
instantaneously give rise to an employer-apprentice relationship.
Nitto Enterprises did not comply with the requirements
of the law. It is mandated that apprenticeship agreements
entered into by the employer and apprentice shall be entered only
in accordance with the apprenticeship program duly approved by
the Minister of Labor and Employment. Thus, the apprenticeship
agreement has no force and effect; and Capili is considered to be
a regular employee of the company.
OPINION:
I concur with the Courts findings that since the apprenticeship
agreement between petitioner and private respondent have no
force and effect in the absence of a valid apprenticeship program
duly approved by the DOLE, private respondent's assertion that
he was hired not as an apprentice but as a delivery boy
("kargador" or "pahinante") deserves credence. He should rightly
be considered as a regular employee of petitioner as defined by
Article 280 of the Labor Code.
BERNARDO VS NLRC
FACTS
1. Complainants numbering 43 (p. 176, Records) are deaf-mutes
who were hired on various periods from 1988 to 1993 by
respondent Far East Bank and Trust Co. as Money Sorters and
Counters through Employment Contract for Handicapped
Workers.
2. By the time this case arose, there were fifty-six (56) deaf-mutes
employed under said agreement
3. Disclaiming that complainants were regular employees,
respondent Far East Bank and Trust Company maintained that
complainants who are a special class of workersthe hearing
impaired employees were hired temporarily under [a] special
employment arrangement which was a result of overtures made
by some civic and political personalities to the respondent Bank;
that complainants were hired due to pakiusap
4. LA: DISMISSED. NLRC: Art 280 does not apply. What applies
is Art 80, thus the contract shall be the law between the parties.
ISSUE 1
W/N employees were illegally dismissed YES, but only those
who worked for more than 6 months and whose contracts are
renewed 27 total
HELD
The facts, viewed in light of the Labor Code and the Magna Carta
for Disabled Persons, indubitably show that the petitioners, except
sixteen of them, should be deemed regular employees. As such,
they have acquired legal rights that this Court is duty-bound to
protect and uphold, not as a matter of compassion but as a
consequence of law and justice
Bank alleges that these contracts were prepared in accordance
with Art. 80 which states that any worker who employs
handicapped workers shall, in entering into an employment
agreement, provide the duration of the employment period.
However, succeeding events and the enactment of RA No. 7277
(the Magna Carta for Disabled Persons), justify the application of
Article 280
From the 56 handicapped workers hired under the contract, 37
were renewed
This renewal is an indicator that their tasks were beneficial and
necessary to the bank

More importantly, these facts show that they were qualified to

perform the responsibilities of their positions. In other words, their
disability did not render them unqualified or unfit for the tasks
assigned to them.
Magna Carta for Disabled Persons mandates that a qualified
disabled employee should be given the same terms and
conditions of employment as a qualified able-bodied person.
Section 5 of the Magna Carta provides A qualified disabled
employee shall be subject to the same terms and conditions of
employment and the same compensation, privileges. . . as a
qualified able bodied person
The fact that the employees were qualified disabled persons
necessarily removes the employment contracts from the ambit of
Article 80. Since the Magna Carta accords them the rights of
qualified able-bodied persons, they are thus covered by Article
280 of the Labor Code
Now the test to determine WON an employee is regular can be
found in De Leon v. NLRC (based on Art. 280):
The test is whether the former is usually necessary or
desirable in the usual business or trade of the employer, by
considering the nature of the work performed and its relation
to the scheme of the particular business or trade in its
entirety.
Also if the employee has been performing the job for at least one
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.
As applied to the case
Without a doubt, the task of counting and sorting bills isnecessary
and desirable to the business of respondent bank. With the
exception of sixteen of them, petitioners performed these tasks for
more than six months. Thus twenty-seven petitioners should be
deemed regular employees
Therefore, the twenty-seven petitioners are entitled to security of
tenure; their services may be terminated only for a just or
authorized cause. Because respondent failed to show such cause,
they are deemed illegally dismissed.
Since bank claimes their job was no longer needed (tellers have
the responsibility of counting the money), petitioners are hereby
awarded separation pay in lieu of reinstatement
Other arguments of the respondents answered
On applicability of Brent School v. Zamora
The case upheld the validity of an employment contract with a
fixed term.
However, the court notes that the decisive determinant in term
employment should not be the activities that the employee is
called upon to perform but the day certain agreed upon the
parties. Also, where from the circumstances it is apparent that the
periods have been imposed to preclude acquisition of tenurial
security by the employee, they should be struck down or
disregarded as contrary to public policy and morals.
In this case, Article 280 and not Article 80 applies because
petitioners are qualified for their positions. (Art 80 refers to
disabled persons differently qualified that those non-disabled)
Moreover, a contract of employment is impressed with public
interest. Provisions of applicable statutes are deemed written into
the contract, and the parties are not at liberty to insulate
themselves and their relationships from the impact of labor laws
by mere stipulations
That petitioners were merely accomodated employees

This fact does not change the nature of their employment. An

employee is regular because of the nature of work and the length
of service, not because of the mode or even the reason for hiring
them.
That the petitioners were informed from the start that they could
not beome regular employees
The character of employment is determined not by stipulations in
the contract, but by the nature of the work performed.
Final statement from the ponencia:
The noble objectives of Magna Carta for Disabled Persons are not
based merely on charity or accommodation, but on justice and the
equal treatment of qualified persons, disabled or not. In the
present case, the handicap of petitioners (deaf-mutes) is not a
hindrance to their work. The eloquent proof of this statement is the
repeated renewal of their employment contracts.
DISPO
NLRC reversed. Backwages and separation pay for 27 of the
petitioners
GENERAL MILLING CORP VS TORRES
FACTS:
Earl Timothy Cone is a US citizen, who was hired by General
Milling as a sports consultant and assistant coach. He possessed
an alien employment permit which was changed to pre-arranged
employee by the Board of Special Inquiry of the Commission on
Immigration and Deportation. GMC requested that Cones
employment permit be changed to a full-fledged coach, which was
contested by The Basketball Coaches Association of the
Philippines. Alleging that GMC failed to show that there is no
competent person in the Philippines to do the coaching job.
Secretary of Labor cancelled Cones employment permit.
ISSUE:
Whether or not the Secretary of Labor act with grave abuse of
discretion in revoking Cones Alien Employment Permit?
HELD:
The Secretary of Labor did not act with grave abuse of discretion
in revoking Cones Alien Employment Permit. GMCs claim that
hiring of a foreign coach is an employers prerogative has no legal
basis. Under Section 40 of the Labor Code, an employer seeking
employment of an alien must first obtain an employment permit
from the Department of labor. GMCs right to choose whom to
employ is limited by the statutory requirement of an employment
permit.
The Labor Code empowers the Labor Secretary to determine as
to the availability of the services of a person in the Philippines
who is competent, able and willing at the time of the application to
perform the services for which an alien is desired.
G.R. No. 93666 April 22, 1991
Gen. Milling Corp and Earl Cone, petitioners
vs Hon. Torres in his capacity as secretary of Labor and
Employment, et. al.
Ponente: Feliciano

director. The alien employment is valid until December 1990.

Private respondent BCAP appealed the issuance of said alien
employment permit to the secretary of labor who issued a decision
ordering the cancellation of Cone's employment permit on the
ground that there was no showing that there is no person in the
Philippines who is competent, able and willing to perform the
services required nor that the hiring of Cone redound to the
national interest.
GMC filed a motion for reconsideration and 2 supplemental
motions for reconsideration but were bothe denied by acting
secretary Laguesma.
ISSUE:
GMC before the court on a petition for certiorari alleging that: (1)
Secretary of Labor gravely abused his discretion when he revoked
the alien employment permit and (2) labor code does not
empower secretary to determine if the employment of an alien
would redound to national interest.
RULING: Petition dismissed.
Court considers that petitioners have failed to show any grave
abuse of discretion on the part of secretary. The alleged failure to
notify petitioners of the appeal filed by BCAP was cured when
petitioners were allowed to file their motion for reconsideration
before secretary of labor.
GMC's claim that hiring of a foreign coach is an employer's
prerogative has no legal basis at all. Under article 40 of labor
code, an employment permit is required to hire a foreigner, as it
applies to "non-resident aliens".
GMS can't claim that Secretary's decision would amount to an
impairment of the obligations of contracts because Labor code
requires alien employment permits to enter a contract of
employment for foreigners.
GMC's contention that Secretary of labor should have deferred to
the findings of Comm. On Immigration and Deportation as to the
necessity of employing Cone is also without basis. The labor code
specifically empowers secretary to make a determination as to the
availability of the services of a person in the Philippines.
ALMODIEL VS NLRC
FACTS:
Petitioner was a CPA hired in 1987, as cost accounting manager
of respondent Raytheon Philippines, Inc. through a
reputable placement firm, John Clements Consultants,
Inc. He was informed of the abolition of his position on
the ground of redundancy, a month before the actual
termination and transfer to the other department. He
sued for illegal dismissal. He claims that since his
department is to be declared redundant, he should have
been manager of the Payroll/ Mis/ Fin Department. As a
BS Accountancy graduate, CPA with MBA units, 21
years of work experience and a natural born Filipino, he
claims that he is better qualified than Ang Tan Chai
ISSUE:
Was the promotion of Ang Tan Chai valid?

FACTS:
May 1989, the NCR-Dept.Labor and Employment issued Alien
Employment permit in favor of petitioner earl cone, a US citizen as
sports consultant and assistant coach for GMC. Dec. 1989 then
GMC and Cone entered into a contract of employment. Then
January 1990, the board of special inquiry of the commission and
deportation approved Cone's application for a change of
admission status from temporary visitor to pre-arranged
employee. On Feb. 1990, GMC requested for renewal of Cone's
alien employment permit which was granted by DOLE regional

Held:
Yes, the determination of the qualification and fitness of workers
for hiring and firing, promotion or reassignment are exclusive
prerogatives of management. An objection found on the ground
that one has better credentials over the appointee is frowned upon
so long as the latter possesses the minimum qualifications for the
position. Since petitioner did not allege Ang to not qualify for the
position, the Court cannot substitute its discretion and judgment
for that which is clearly and exclusively management prerogative.

PACIFIC CONSULTANTS INTERNATIONAL ASIA INC. VS

SCHONFELD
FACTS:
Respondent is a Canadian citizen.
Pacicon Philippines, Inc. (PPI) is a corporation in accordance
with the laws of the Philippines and is a subsidiary of Pacific
Consultants International of Japan (PCIJ).
In 1997, PCIJ decided to engage in consultancy services for
water and sanitation in the Philippines and respondent was
employed by PCIJ as PPI sector manager in the Philippines. His
salary was to be paid partly by PPI and PCIJ.
1998, PCIJs President, Henrichsen, transmitted a letter of
employment to respondent in Canada in which respondent signed
and sent a copy to the Henrichsen.
In the arbitration clause of the contract, it stated that any
question arising between them which can not be settled amicably,
is to be settled by the Court of Arbitration in London.
Respondent received his compensation from PPI in February
to June 1998, November to December 1998, and January to
August 1999.
He was also reimbursed by PPI for the expenses he incurred
in connection with his work as sector manager. He reported for
work in Manila except for occasional assignments abroad, and
received instructions from Henrichsen.
On May 5, 1999, respondent received a letter from Henrichsen
informing him that his employment had been terminated effective
August 4, 1999.
However, on July 24, 1999, Henrichsen, requested respondent
to stay put in his job after August 5, 1999.
Respondent continued his work with PPI until October 1, 1999.
Respondent filed with PPI several money claims, including
unpaid salary, leave pay, air fare from Manila to Canada, and cost
of shipment of goods to Canada. PPI partially settled some of his
claims (US$5,635.99), but refused to pay the rest.
In 2000, respondent filed a Complaint for Illegal Dismissal
against petitioners PPI and Henrichsen with the Labor Arbiter.
The Labor Arbiter rendered a decision granting petitioners
Motion to Dismiss. And the NLRC likewise agreed with the
disquisitions of the Labor Arbiter.
On a petition for certiorari with the CA, the CA declared that
respondent was an employee of PPI. And reversed and set aside
the decision of the NLRC.
ISSUE:
WON there is an employment relationship existed between
petitioners and respondent despite that respondent is a foreign
national and was hired abroad by a foreign corporation and
executed their contract abroad.
HELD:
The petition is denied for lack of merit.
We agree with the conclusion of the CA that there was an
employer-employee relationship between petitioner PPI and
respondent using the four-fold test.
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
relationshipthat 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 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
means to be used in reaching such end.
In the case at bar, the power to control and supervise
petitioners work performance devolved upon the respondent
company.

Likewise, the power to terminate the employment relationship

was exercised by the President of the respondent company. An
employer-employee relationship may indeed exist even in the
absence of a written contract, so long as the four elements
mentioned in the Mafinco case are all present.
WHEREFORE, the petition is DENIED. The Decision of the Court
of Appeals is AFFIRMED. This case is REMANDED to the Labor
Arbiter for disposition of the case on the merits.
UNITED TOURIST PROMOTIONS (UTP) VS HARLAND B.
KEMPLIN
FACTS:
In 1995, Jersey, with the help of two American expatriates,
Kemplin and the late Mike Dunne, formed UTP, a sole
proprietorship business entity engaged in the printing and
distribution of promotional brochures and maps for tourists.
In 2002, UTP employed Kemplin to be its President for a period of
five years, to commence on March 1, 2002 and to end on March
1, 2007, "renewable for the same period, subject to new terms
and
conditions".
Kemplin continued to render his services to UTP even after his
fixed term contract of employment expired. On May 12, 2009,
Kemplin, signing as President of UTP, entered into advertisement
agreements
with
Pizza
Hut
and
M.
Lhuillier.
On July 30, 2009, UTPs legal counsel sent Kemplin a letter
informing his Employment contract has expired and never been
renewed. However, because of his past services to companys
clients, by coming to the office, as such he was given monthly
commissions
with
allowances.
But because of his inhuman treatment to the rank and file
employees which caused great damage and prejudices to the
company, a case for Grave Oral Threat pending Preliminary
Investigation, a Summary Deportation and for Grave Coercion and
Grave Threats was filed. Subsequently, he received a notice from
UTPs counsel ordering him to cease and desist from entering the
premises
of
UTP
offices.
Kemplin filed before the NLRC a Complaint against UTP and its
officer for: (a) illegal dismissal; (b) non-payment of salaries, 13th
month and separation pay, and retirement benefits; (c) payment of
actual, moral and exemplary damages and monthly commission
ofP200,0000.00; and (d) recovery of the company car, which was
forcibly taken from him, personal laptop, office paraphernalia and
personal
books.
He claimed that even after the expiration of his employment
contract on March 1, 2007, he rendered his services as President
and
General
Manager
of
UTP.
UTP, on its part, argued that the termination letter sent to Kemplin
on July 30, 2009 was based on (a) the expiration of the fixed term
employment contract they had entered into, and (b) an employers
prerogative to terminate an employee, who commits criminal and
illegal
acts
prejudicial
to
business.
The LA held in favor of Kemplin adjudging he was illegally
dismissed
by
UTP
and
Jersey.
LA

Joses

ratiocinations

are:

Kemplin was able to show that he was still officially connected

with [UTP] as he signed in his capacity as President of UTP an
advertisement agreements with Pizza Hut and M. Lhuillier Phils.
as late as May 12, 2009. This only goes to show that [UTP and
Jerseys] theory of toleration has no basis in fact.
It would appear now, per record, that Kemplin was allowed to
continue performing and suffered to work much beyond the

expiration of his contract. Such being the case, Kemplins fixed

term employment contract was converted to a regular one under
Art. 280 of the Labor Code, as amended. Viernes vs. NLRC, et al.,
G.R.
No.
108405,
April
4,
2003.
Kemplins tenure having now been converted to regular
employment, he now enjoys security of tenure under Art. 279 of
the Labor Code, as amended. Simply put, Kemplin may only be
dismissed for cause and after affording him the procedural
requirement of notice and hearing. Otherwise, his dismissal will be
illegal.
UTP and Jersey argued that Kemplin was not illegally terminated,
for his termination was according to Art. 282 of the Labor Code, as
amended, i.e., loss of trust and confidence allegedly for various
and
serious
offenses.
However, upon closer scrutiny, in trying to justify Kemplins
dismissal on the ground of loss of trust and confidence, [UTP and
Jersey] failed to observe the procedural requirements of notice
and hearing, or more particularly, the two-notice rule. It would
appear that [UTP and Jerseys] cease and desist letter
compressed the two notices in one. Besides, the various and
serious offenses alluded thereto were not legally established
before [Kemplins] separation. Ostensibly, Kemplin was not
confronted with these offenses and given the opportunity to
explain
himself.
Respondents miserably failed to discharge their onus probandi.
Hence,
illegal
dismissal
lies.
The

NLRC

affirmed

LA

Joses

Decision.

When appealed to the CA, it affirmed the disquisitions of the LA

and
NLRC.
Hence,
this
petition
ISSUE: Whether or not the CA erred in invalidating the termination
of
Kemplin.
HELD: The Court of Appeals decision is sustained.
The
LABOR

instant

petition

is

partially

meritorious.
LAW

The advertisement agreementswith Pizza Hut and M. Lhuillier

entered into by Kemplin, who signed the documents as President
of UTP on May 12, 2009, or more than two years after the
supposed expiration of his employment contract. They validate
Kemplins claim that he, indeed, continued to render his services
as President of UTP well beyond March 2, 2007.
Moreover, in the letterdated July 30, 2009, Kemplin was ordered
to cease and desist from entering the premises of UTP. The twin
requirements of notice and hearing were not complied with by
respondents.
The charges against Kemplin were not clearly specified. While the
letter stated that Kemplins employment contract had expired, it
likewise made general references to alleged criminal suits filed
against him. One who reads the letter is inevitably bound to ask if
Kemplin is being terminated due to the expiration of his contract,
or by reason of the pendency of suits filed against him. Anent the
pendency of criminal suits, the statement is substantially bare.
It also bears stressing that the letter failed to categorically indicate
which of the policies of UTP did Kemplin violate to warrant his
dismissal from service. Further, Kemplin was never given the
chance to refute the charges against him as no hearing and
investigation were conducted. Corollarily, in the absence of a
hearing and investigation, the existence of just cause to terminate
Kemplin could not have been sufficiently established.
Kemplin should have been promptly apprised of the issue of loss
of trust and confidence in him before and not after he was already

dismissed.
LABOR

LAW

APO Chemical Manufacturing Corporation v. Bides, G.R. No.

186002, September 19, 2012is instructive anent the instances
when separation pay and not reinstatement shall be ordered. The
Court is well aware 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.
Under the doctrine of strained relations, the payment of separation
pay is considered an acceptable alternative to reinstatement when
the latter option is no longer desirable or viable. On one hand,
such payment liberates the employee from what could be a highly
oppressive work environment. On the other hand, it releases the
employer from the grossly unpalatable obligation of maintaining in
its employ a worker it could no longer trust. Moreover, the doctrine
of strained relations has been made applicable to cases where the
employee decides not to be reinstated and demands for
separation
pay.
LABOR

LAW

Being a managerial employee, the petitioner is not entitled to 13th

month pay. Pursuant to Memorandum Order No. 28, as
implemented by the Revised Guidelines on the Implementation of
the 13th Month Pay Law dated November 16, 1987, managerial
employees are exempt from receiving such benefit without
prejudice to the granting of other bonuses, in lieu of the 13th
month pay, to managerial employees upon the employer's
discretion. In Torres v. Rural Bank of San Juan, Inc., G.R. No.
184520,
March
13,
2013.
The award to Harland B. Kemplin of a 13th month benefit was
deleted. In lieu of his reinstatement, he is awarded separation pay
to be computed at the rate of one (1) month pay for every year of
service, with a fraction of at least six (6) months considered as
one whole year to be reckoned from the time of his employment
on March 1, 2002 until the finality of this Decision.
DREAMLAND RESORT VS STEPHEN B, JOHNSON
PETIONERS CLAIM:
Dreamland Hotel Resort (Dreamland) and its President, Westley
J. Prentice (Prentice) (petitioners) alleged the following facts in the
instant petition:
Dreamland is a corporation duly registered with the Securities and
Exchange Commission It is engaged in the hotel, restaurant and
allied businesses. Respondent Stephen B. Johnson is an
Australian citizen who came to the Philippines as a
businessman/investor without the authority to be employed as the
employee/officer of any business as he was not able to secure his
Alien Employment Permit ["AEP"]
As a fellow Australian citizen, Johnson was able to convince
Prentice to accept his offer to invest in Dreamland and at the
same time provide his services as Operations Manager of
Dreamland with a promise that he will secure an AEP and Tax
Identification Number ["TIN" for brevity] prior to his assumption of
work.
Sometime on June 21, 2007, Prentice and Johnson entered into
an Employment Agreement, which stipulates among others, that
the Johnson shall serve as Operations Manager of Dreamland
from August 1, 2007 and shall serve as such for a period of three
(3) years.
Before entering into the said agreement, Prentice required the
submission of the AEP and TIN from Johnson. Johnson promised

that the same shall be supplied within one (1) month from the
signing of the contract because the application for the TIN and
AEP were still under process. Thus[,] it was agreed that the
efficacy of the said agreement shall begin after one (1) month or
on August 1, 2007. x x
Johnson worked as a hotel and resort Operations Manager only at
that time. He worked for only about three (3) weeks until he
suddenly abandoned his work and subsequently resigned as
Operations Manager starting November 3, 2007. He never
reported back to work despite several attempts of Prentice to
clarify his issues.
RESPONDENTS CLAIM:

Injunction under Rule 47.

The CA DISMISSED the petition for lack of proof of authority and
affidavit of service of filing as required by Section 13 of the 1997
Rules of Procedure. The subsequent motion for reconsideration
filed by the petitioners was likewise denied by the CA in a
Resolution dated February 11, 2010.
ISSUE:
1. WETHER OR NOT THE HONORABLE [CA] COMMITTED A
REVERSIBLE ERROR IN NOT GIVING DUE CONSIDERATION
TO THE MERITS OF THE PETITIONERS PETITION AND IN
NOT GRANTING THEIR PRAYER FOR TEMPORARY
RESTRAINING ORDER.

Respondent Stephen B. Johnson (Johnson) averred that:

HELD: The petition is partially granted.
There is also no truth to the allegation that it was [Johnson] who
"offered" and "convinced" petitioner Prentice to "invest" in and
provide his services to petitioner Dreamland Hotel Resort. The
truth of the matter is that it was petitioners who actively advertised
for a resort manager for Dreamland Hotel.
It was in response to these advertisements that private
respondent Johnson contacted petitioners to inquire on the terms
for employment offered. It was Prentice who offered employment
and convinced Johnson to give out a loan, purportedly so the
resort can be completed and operational by August 2007.
Believing the representations of petitioner Prentice, private
respondent Johnson accepted the employment as Resort
Manager and loaned money to petitioners [consisting of] his
retirement pay in the amount of One Hundred Thousand US
Dollars (USD 100,000.00) to finish construction of the resort.
From the start of August 2007, as stipulated in the Employment
Agreement, respondent Johnson already reported for work. It was
then that he found out to his dismay that the resort was far from
finished. However, he was instructed to supervise construction
and speak with potential guests.
As [Johnson] remained unpaid since August 2007 and he has
loaned all his money to petitioners, he asked for his salary after
the resort was opened in October 2007 but the same was not
given to him by petitioners. [Johnson] became very alarmed with
the situation as it appears that there was no intention to pay him
his salary, which he now depended on for his living as he has
been left penniless. He was also denied the benefits promised him
as part of his compensation such as service vehicles, meals and
insurance.
On January 31, 2008, Johnson filed a Complaint for illegal
dismissal and non-payment of salaries, among others, against the
petitioners.
Labor Arbiter dismissed Johnsons complaint for lack of merit with
the finding that he voluntarily resigned from his employment and
was not illegally dismissed. We quote:
There being competent, concrete and substantial evidence to
confirm the voluntary resignation of [Johnson] from his
employment, there was no illegal dismissal committed against him
and for him to be entitled to reinstatement to his former position
and backwages.
Dissatisfied, Johnson appealed to the National Labor Relations
Commission (NLRC).
The NLRC REVERSED the decision.
Consequently, the petitioners elevated the NLRC decision to the
CA by way of Petition for Certiorari with Prayer for the Issuance of
a Temporary Restraining Order and/or Writ of Preliminary

At its inception, the Court takes note of the Resolutions dated

December 14, 2009 and February 11, 2010 of the CA dismissing
the Petition for Certiorari due to the following infirmities:
1. The affiant has no proof of authority to file the petition in behalf
of petitioner Dreamland.
2. The petition has no appended affidavit of service to show proof
of service of filing as required by Sec. 13 of the 1997 Rules of
Civil Procedure.
"While it is desirable that the Rules of Court be faithfully observed,
courts should not be so strict about procedural lapses that do not
really impair the proper administration of justice. If the rules are
intended to ensure the proper and orderly conduct of litigation, it is
because of the higher objective they seek which are the
attainment of justice and the protection of substantive rights of the
parties. Thus, the relaxation of procedural rules, or saving a
particular case from the operation of technicalities when
substantial justice requires it, as in the instant case, should no
longer be subject to cavil."
Brushing aside technicalities, in the utmost interest of substantial
justice and taking into consideration the varying and conflicting
factual deliberations by the LA and the NLRC, the Court shall now
delve into the merits of the case.
As it could not be determined with absolute certainty whether or
not Johnson rendered the services he mentioned during the
material time, doubt must be construed in his favor for the reason
that "the consistent rule is that if doubt exists between the
evidence presented by the employer and that by the employee,
the scales of justice must be tilted in favor of the latter." For the
petitioners failure to disprove that Johnson started working on
August 1, 2007, as stated on the employment contract, payment
of his salaries on said date, even prior to the opening of the hotel
is warranted.
Another argument posited by the petitioners is that the
employment contract executed by the parties is inefficacious
because the employment contract is subject to the presentation of
Johnson of his Alien Employment Permit (AEP) and Tax
Identification Number (TIN).
Again, this statement is wanting of merit.
Johnson has adduced proof that as a permanent resident, he is
exempted from the requirement of securing an AEP as expressed
under Department Order No. 75-06, Series of 2006 of the
Department of Labor and Employment (DOLE), which we quote:
Rule I- Coverage and Exemption

2. Exemption. The following categories of foreign nationals are

exempt from securing an employment permit:
2.7 Resident foreign nationals
Anent the requirement of securing a TIN to make the contract of
employment efficacious, records show that Johnson secured his
TIN only on December 2007 after his resignation as operations
manager. Nevertheless, this does not negate the fact that the
contract of employment had already become effective even prior
to such date.
In addition to the foregoing, there is no stipulation in the
employment contract itself that the same shall only be effective
upon the submission of AEP and TIN.
As regards the NLRC findings that Johnson was constructively
dismissed and did not abandon his work, the Court is in
consonance with this conclusion with the following basis:
Even the most reasonable employee would consider quitting his
job after working for three months and receiving only an
insignificant fraction of his salaries. There was, therefore, not an
abandonment of employment nor a resignation in the real sense,
but a constructive dismissal, which is defined as an involuntary
resignation resorted to when continued employment is rendered
impossible, unreasonable or unlikely.
The petitioners aver that considering that Johnson tendered his
resignation and abandoned his work, it is his burden to prove that
his resignation was not voluntary on his part.
It is impossible, unreasonable or unlikely that any employee, such
as Johnson would continue working for an employer who does not
pay him his salaries. Applying the Courts pronouncement in
Duldulao v. CA, the Court construes that the act of the petitioners
in not paying Johnson his salaries for three months has become
unbearable on the latters part that he had no choice but to cede
his employment with them. The Court quotes the pertinent
sections of Johnsons resignation letter which reflects the real
reason why he was resigning as operations manager of the hotel.
The statement only goes to show that while it was Johnson who
tendered his resignation, it was due to the petitioners acts that he
was constrained to resign.
Since Johnson was constructively dismissed, he was illegally
dismissed. As to the reliefs granted to an employee who is illegally
dismissed. Thus, an illegally dismissed employee is entitled to two
reliefs: backwages and reinstatement. 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.
Under the doctrine of strained relations, the payment of separation
pay is considered an acceptable alternative to reinstatement when
the latter option is no longer desirable or viable.
In the present case, the NLRC found that due to the strained
relations between the parties, separation pay is to be awarded to

Johnson in lieu of his reinstatement.

The NLRC held that Johnson is entitled to backwages from
November 3, 2007 up to the finality of the decision; separation pay
equivalent to one month salary; and unpaid salaries from August
1, 2007 to November 1, 2007 amounting to a total of
P172,800.00.41
While the Court agrees with the NLRC that the award of
separation pay and unpaid salaries is warranted. Accordingly, the
award of backwages should be computed from November 3, 2007
to August 1, 2010 - which is three years from August 1, 2007.
Furthermore, separation pay is computed from the
commencement of employment up to the time of termination,
including the imputed service for which the employee is entitled to
backwages. As one-month salary is awarded as separation pay for
every year of service, including imputed service, Johnson should
be paid separation pay equivalent to his three-month salary for the
three-year contract.