1

Republic of the Philippines

provide SONZAs services exclusively to ABS-CBN as talent for

reserves the right to seek recovery of the other

radio and television. The Agreement listed the services SONZA

benefits under said Agreement.

would render to ABS-CBN, as follows:

SUPREME COURT
Manila

Thank you for your attention.

a. Co-host for Mel & Jay radio program, 8:00 to 10:00
a.m., Mondays to Fridays;

Very truly yours,

FIRST DIVISION
b. Co-host for Mel & Jay television program, 5:30 to
G.R. No. 138051

June 10, 2004

(Sgd.)

7:00 p.m., Sundays.3

JOSE Y. SONZA
President and Gen.

JOSE Y. SONZA, petitioner,

ABS-CBN agreed to pay for SONZAs services a monthly talent

vs.

fee of P310,000 for the first year and P317,000 for the second

ABS-CBN BROADCASTING CORPORATION, respondent.

and third year of the Agreement. ABS-CBN would pay the talent

On 30 April 1996, SONZA filed a complaint against ABS-CBN

fees on the 10th and 25th days of the month.

before the Department of Labor and Employment, National

DECISION
CARPIO, J.:

Manager4

Capital Region in Quezon City. SONZA complained that ABS-CBN

On 1 April 1996, SONZA wrote a letter to ABS-CBNs President,

did not pay his salaries, separation pay, service incentive leave

Eugenio Lopez III, which reads:

pay, 13th month pay, signing bonus, travel allowance and

amounts due under the Employees Stock Option Plan ("ESOP").

The Case

Dear Mr. Lopez,

On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the

Before this Court is a petition for review on certiorari 1 assailing

We would like to call your attention to the Agreement

ground that no employer-employee relationship existed

the 26 March 1999 Decision2 of the Court of Appeals in CA-G.R.

dated May 1994 entered into by your goodself on

between the parties. SONZA filed an Opposition to the motion

SP No. 49190 dismissing the petition filed by Jose Y. Sonza

behalf of ABS-CBN with our company relative to our

on 19 July 1996.

("SONZA"). The Court of Appeals affirmed the findings of the

talent JOSE Y. SONZA.

National Labor Relations Commission ("NLRC"), which affirmed

the Labor Arbiters dismissal of the case for lack of jurisdiction.
The Facts

Meanwhile, ABS-CBN continued to remit SONZAs monthly

As you are well aware, Mr. Sonza irrevocably resigned

talent fees through his account at PCIBank, Quezon Avenue

in view of recent events concerning his programs and

Branch, Quezon City. In July 1996, ABS-CBN opened a new

career. We consider these acts of the station violative

account with the same bank where ABS-CBN deposited SONZAs

of the Agreement and the station as in breach thereof.

talent fees and other payments due him under the Agreement.

In May 1994, respondent ABS-CBN Broadcasting Corporation

In this connection, we hereby serve notice of rescission

("ABS-CBN") signed an Agreement ("Agreement") with the Mel

of said Agreement at our instance effective as of date.

and Jay Management and Development Corporation ("MJMDC").

ABS-CBN was represented by its corporate officers while MJMDC
was represented by SONZA, as President and General Manager,
and Carmela Tiangco ("TIANGCO"), as EVP and Treasurer.
Referred to in the Agreement as "AGENT," MJMDC agreed to

In his Order dated 2 December 1996, the Labor Arbiter 5 denied

the motion to dismiss and directed the parties to file their

Mr. Sonza informed us that he is waiving and

respective position papers. The Labor Arbiter ruled:

renouncing recovery of the remaining amount

stipulated in paragraph 7 of the Agreement but

In this instant case, complainant for having invoked a

claim that he was an employee of respondent company

until April 15, 1996 and that he was not paid certain

It must be noted that complainant was engaged by

Court, "The line should be drawn between rules that

claims, it is sufficient enough as to confer jurisdiction

respondent by reason of his peculiar skills and

merely serve as guidelines towards the achievement of

over the instant case in this Office. And as to whether

talent as a TV host and a radio broadcaster.

the mutually desired result without dictating the

or not such claim would entitle complainant to recover

Unlike an ordinary employee, he was free to

means or methods to be employed in attaining it, and

upon the causes of action asserted is a matter to be

perform the services he undertook to render in

those that control or fix the methodology and bind or

resolved only after and as a result of a hearing. Thus,

accordance with his own style. The benefits

restrict the party hired to the use of such means. The

the respondents plea of lack of employer-employee

conferred to complainant under the May 1994

first, which aim only to promote the result, create no

relationship may be pleaded only as a matter of

Agreement are certainly very much higher than those

employer-employee relationship unlike the second,

defense. It behooves upon it the duty to prove that

generally given to employees. For one, complainant

which address both the result and the means to

there really is no employer-employee relationship

Sonzas monthly talent fees amount to a

achieve it." (Insular Life Assurance Co., Ltd. vs. NLRC,

between it and the complainant.

staggering P317,000. Moreover, his engagement as a

et al., G.R. No. 84484, November 15, 1989).

talent was covered by a specific contract. Likewise, he

x x x (Emphasis supplied)7

The Labor Arbiter then considered the case submitted for

was not bound to render eight (8) hours of work per

resolution. The parties submitted their position papers on 24

day as he worked only for such number of hours as

February 1997.

may be necessary.

On 11 March 1997, SONZA filed a Reply to Respondents

The fact that per the May 1994 Agreement

SONZA filed a motion for reconsideration, which the NLRC

Position Paper with Motion to Expunge Respondents Annex 4

complainant was accorded some benefits normally

denied in its Resolution dated 3 July 1998.

and Annex 5 from the Records. Annexes 4 and 5 are affidavits of

given to an employee is inconsequential. Whatever

ABS-CBNs witnesses Soccoro Vidanes and Rolando V. Cruz.

benefits complainant enjoyed arose from specific

On 6 October 1998, SONZA filed a special civil action for

These witnesses stated in their affidavits that the prevailing

agreement by the parties and not by reason of

certiorari before the Court of Appeals assailing the decision and

practice in the television and broadcast industry is to treat

employer-employee relationship. As correctly put

resolution of the NLRC. On 26 March 1999, the Court of Appeals

talents like SONZA as independent contractors.

by the respondent, "All these benefits are merely

rendered a Decision dismissing the case.8

SONZA appealed to the NLRC. On 24 February 1998, the NLRC

rendered a Decision affirming the Labor Arbiters decision.

talent fees and other contractual benefits and should

The Labor Arbiter rendered his Decision dated 8 July 1997
6

not be deemed as salaries, wages and/or other

dismissing the complaint for lack of jurisdiction. The pertinent

remuneration accorded to an employee,

parts of the decision read as follows:

notwithstanding the nomenclature appended to these

Hence, this petition.

The Rulings of the NLRC and Court of Appeals

benefits. Apropos to this is the rule that the term or

xxx
While Philippine jurisprudence has not yet, with

nomenclature given to a stipulated benefit is not

The Court of Appeals affirmed the NLRCs finding that no

controlling, but the intent of the parties to the

employer-employee relationship existed between SONZA and

Agreement conferring such benefit."

ABS-CBN. Adopting the NLRCs decision, the appellate court

certainty, touched on the "true nature of the contract

quoted the following findings of the NLRC:

of a talent," it stands to reason that a "talent" as

The fact that complainant was made subject to

above-described cannot be considered as an employee

respondents Rules and Regulations, likewise,

x x x the May 1994 Agreement will readily reveal that

by reason of the peculiar circumstances surrounding

does not detract from the absence of employer-

MJMDC entered into the contract merely as an agent of

the engagement of his services.

employee relationship. As held by the Supreme

complainant Sonza, the principal. By all indication and

as the law puts it, the act of the agent is the act of the

It may not be amiss to state that jurisdiction over the

merely resigning from ABS-CBN, complainant-appellant

principal itself. This fact is made particularly true in

instant controversy indeed belongs to the regular

served upon the latter a notice of rescission of

this case, as admittedly MJMDC is a management

courts, the same being in the nature of an action for

Agreement with the station, per his letter dated April 1,

company devoted exclusively to managing the careers

alleged breach of contractual obligation on the part of

1996, which asserted that instead of referring to

of Mr. Sonza and his broadcast partner, Mrs. Carmela

respondent-appellee. As squarely apparent from

unpaid employee benefits, he is waiving and

C. Tiangco. (Opposition to Motion to Dismiss)

complainant-appellants Position Paper, his claims for

renouncing recovery of the remaining amount

compensation for services, 13th month pay, signing

stipulated in paragraph 7 of the Agreement but

Clearly, the relations of principal and agent only

bonus and travel allowance against respondent-

reserves the right to such recovery of the other

accrues between complainant Sonza and MJMDC, and

appellee are not based on the Labor Code but rather

benefits under said Agreement. (Annex 3 of the

not between ABS-CBN and MJMDC. This is clear from

on the provisions of the May 1994 Agreement, while

respondent ABS-CBNs Motion to Dismiss dated July 10,

the provisions of the May 1994 Agreement which

his claims for proceeds under Stock Purchase

1996).

specifically referred to MJMDC as the AGENT. As a

Agreement are based on the latter. A portion of the

matter of fact, when complainant herein unilaterally

Position Paper of complainant-appellant bears perusal:

rescinded said May 1994 Agreement, it was MJMDC

Evidently, it is precisely by reason of the alleged

violation of the May 1994 Agreement and/or the Stock

which issued the notice of rescission in behalf of Mr.

Under [the May 1994 Agreement] with

Purchase Agreement by respondent-appellee that

Sonza, who himself signed the same in his capacity as

respondent ABS-CBN, the latter contractually

complainant-appellant filed his complaint.

President.

bound itself to pay complainant a signing

Complainant-appellants claims being anchored on the

bonus consisting of shares of stockswith

alleged breach of contract on the part of respondent-

Moreover, previous contracts between Mr. Sonza and

FIVE HUNDRED THOUSAND PESOS

appellee, the same can be resolved by reference to

ABS-CBN reveal the fact that historically, the parties to

(P500,000.00).

civil law and not to labor law. Consequently, they are

the said agreements are ABS-CBN and Mr. Sonza. And

within the realm of civil law and, thus, lie with the

it is only in the May 1994 Agreement, which is the

Similarly, complainant is also entitled to be

regular courts. As held in the case of Dai-Chi

latest Agreement executed between ABS-CBN and Mr.

paid 13th month pay based on an amount not

Electronics Manufacturing vs. Villarama, 238 SCRA 267,

Sonza, that MJMDC figured in the said Agreement as

lower than the amount he was receiving prior

21 November 1994, an action for breach of

the agent of Mr. Sonza.

to effectivity of (the) Agreement.

contractual obligation is intrinsically a civil

dispute.9 (Emphasis supplied)

We find it erroneous to assert that MJMDC is a mere

Under paragraph 9 of (the May 1994

labor-only contractor of ABS-CBN such that there

Agreement), complainant is entitled to a

The Court of Appeals ruled that the existence of an employer-

exist[s] employer-employee relationship between the

commutable travel benefit amounting to at

employee relationship between SONZA and ABS-CBN is a

latter and Mr. Sonza. On the contrary, We find it

least One Hundred Fifty Thousand Pesos

factual question that is within the jurisdiction of the NLRC to

indubitable, that MJMDC is an agent, not of ABS-CBN,

(P150,000.00) per year.

resolve.10 A special civil action for certiorari extends only to

issues of want or excess of jurisdiction of the NLRC.11 Such

but of the talent/contractor Mr. Sonza, as expressly

admitted by the latter and MJMDC in the May 1994

Thus, it is precisely because of complainant-appellants

action cannot cover an inquiry into the correctness of the

Agreement.

own recognition of the fact that his contractual

evaluation of the evidence which served as basis of the NLRCs

relations with ABS-CBN are founded on the New Civil

conclusion.12 The Court of Appeals added that it could not re-

Code, rather than the Labor Code, that instead of

examine the parties evidence and substitute the factual

findings of the NLRC with its own.

13

SONZA contends that the Labor Arbiter has jurisdiction over the

qualification as complainant belies respondents claim of

case because he was an employee of ABS-CBN. On the other

independent contractorship."

hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction

The Issue

because SONZA was an independent contractor.

Independent contractors often present themselves to possess

unique skills, expertise or talent to distinguish them from

In assailing the decision of the Court of Appeals, SONZA

Employee or Independent Contractor?

contends that:

ordinary employees. The specific selection and hiring of

SONZA, because of his unique skills, talent and celebrity

The existence of an employer-employee relationship is a

status not possessed by ordinary employees, is a

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING

question of fact. Appellate courts accord the factual findings of

circumstance indicative, but not conclusive, of an independent

THE NLRCS DECISION AND REFUSING TO FIND THAT

the Labor Arbiter and the NLRC not only respect but also finality

contractual relationship. If SONZA did not possess such unique

AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED

when supported by substantial evidence.15 Substantial evidence

skills, talent and celebrity status, ABS-CBN would not have

BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT

means such relevant evidence as a reasonable mind might

entered into the Agreement with SONZA but would have hired

OF CONTROLLING LAW, JURISPRUDENCE AND

accept as adequate to support a conclusion.16 A party cannot

him through its personnel department just like any other

prove the absence of substantial evidence by simply pointing

employee.

EVIDENCE TO SUPPORT SUCH A FINDING.

14

out that there is contrary evidence on record, direct or

The Courts Ruling
We affirm the assailed decision.

circumstantial. The Court does not substitute its own judgment

In any event, the method of selecting and engaging SONZA

for that of the tribunal in determining where the weight of

does not conclusively determine his status. We must consider

evidence lies or what evidence is credible.

17

all the circumstances of the relationship, with the control test

being the most important element.

No convincing reason exists to warrant a reversal of the

SONZA maintains that all essential elements of an employer-

decision of the Court of Appeals affirming the NLRC ruling which

employee relationship are present in this case. Case law has

upheld the Labor Arbiters dismissal of the case for lack of

consistently held that the elements of an employer-employee

jurisdiction.

relationship are: (a) the selection and engagement of the

ABS-CBN directly paid SONZA his monthly talent fees with no

B. Payment of Wages

employee; (b) the payment of wages; (c) the power of

part of his fees going to MJMDC. SONZA asserts that this mode

The present controversy is one of first impression. Although

dismissal; and (d) the employers power to control the

of fee payment shows that he was an employee of ABS-CBN.

Philippine labor laws and jurisprudence define clearly the

employee on the means and methods by which the work is

SONZA also points out that ABS-CBN granted him benefits and

elements of an employer-employee relationship, this is the first

accomplished.18 The last element, the so-called "control test",

privileges "which he would not have enjoyed if he were truly the

time that the Court will resolve the nature of the relationship

is the most important element.

19

subject of a valid job contract."

between a television and radio station and one of its "talents."

There is no case law stating that a radio and television program

A. Selection and Engagement of Employee

host is an employee of the broadcast station.

All the talent fees and benefits paid to SONZA were the result of
negotiations that led to the Agreement. If SONZA were ABS-

ABS-CBN engaged SONZAs services to co-host its television

CBNs employee, there would be no need for the parties to

The instant case involves big names in the broadcast industry,

and radio programs because of SONZAs peculiar skills, talent

stipulate on benefits such as "SSS, Medicare, x x x and 13th

namely Jose "Jay" Sonza, a known television and radio

and celebrity status. SONZA contends that the "discretion used

month pay"20 which the law automatically incorporates into

personality, and ABS-CBN, one of the biggest television and

by respondent in specifically selecting and hiring complainant

every employer-employee contract.21 Whatever benefits SONZA

radio networks in the country.

over other broadcasters of possibly similar experience and

enjoyed arose from contract and not because of an employeremployee relationship.

22

obligated to pay SONZAs talent fees during the life of the

is a skilled position requiring talent and training

Agreement. This circumstance indicates an independent

not available on-the-job. x x x In this regard, Alberty

contractual relationship between SONZA and ABS-CBN.

possesses a masters degree in public communications

SONZAs talent fees, amounting to P317,000 monthly in the

and journalism; is trained in dance, singing, and

second and third year, are so huge and out of the ordinary that

SONZA admits that even after ABS-CBN ceased broadcasting his

modeling; taught with the drama department at the

they indicate more an independent contractual relationship

programs, ABS-CBN still paid him his talent fees. Plainly, ABS-

University of Puerto Rico; and acted in several theater

rather than an employer-employee relationship. ABS-CBN

CBN adhered to its undertaking in the Agreement to continue

and television productions prior to her affiliation with

agreed to pay SONZA such huge talent fees precisely because

paying SONZAs talent fees during the remaining life of the

"Desde Mi Pueblo." Second, Alberty provided the

of SONZAs unique skills, talent and celebrity status not

Agreement even if ABS-CBN cancelled SONZAs programs

"tools and instrumentalities" necessary for her

possessed by ordinary employees. Obviously, SONZA acting

through no fault of SONZA.

25

to perform. Specifically, she provided, or obtained

alone possessed enough bargaining power to demand and

sponsors to provide, the costumes, jewelry, and other

receive such huge talent fees for his services. The power to

SONZA assails the Labor Arbiters interpretation of his rescission

image-related supplies and services necessary for her

bargain talent fees way above the salary scales of ordinary

of the Agreement as an admission that he is not an employee of

appearance. Alberty disputes that this factor favors

employees is a circumstance indicative, but not conclusive, of

ABS-CBN. The Labor Arbiter stated that "if it were true that

independent contractor status because WIPR provided

an independent contractual relationship.

complainant was really an employee, he would merely resign,

the "equipment necessary to tape the show." Albertys

instead." SONZA did actually resign from ABS-CBN but he also,

argument is misplaced. The equipment necessary for

as president of MJMDC, rescinded the Agreement. SONZAs

Alberty to conduct her job as host of "Desde Mi Pueblo"

The payment of talent fees directly to SONZA and not to MJMDC

26

does not negate the status of SONZA as an independent

letter clearly bears this out.

contractor. The parties expressly agreed on such mode of

SONZA terminated his relationship with ABS-CBN is immaterial.

However, the manner by which

related to her appearance on the show. Others

provided equipment for filming and producing the

payment. Under the Agreement, MJMDC is the AGENT of SONZA,

Whether SONZA rescinded the Agreement or resigned from

show, but these were not the primary tools that Alberty

to whom MJMDC would have to turn over any talent fee accruing

work does not determine his status as employee or independent

used to perform her particular function. If we accepted

under the Agreement.

contractor.

this argument, independent contractors could never

work on collaborative projects because other

C. Power of Dismissal

D. Power of Control

individuals often provide the equipment required for

different aspects of the collaboration. x x x

For violation of any provision of the Agreement, either party

Since there is no local precedent on whether a radio and

may terminate their relationship. SONZA failed to show that

television program host is an employee or an independent

Third, WIPR could not assign Alberty work in

ABS-CBN could terminate his services on grounds other than

contractor, we refer to foreign case law in analyzing the present

addition to filming "Desde Mi Pueblo." Albertys

breach of contract, such as retrenchment to prevent losses as

case. The United States Court of Appeals, First Circuit, recently

contracts with WIPR specifically provided that WIPR

held in Alberty-Vlez v. Corporacin De Puerto Rico Para

hired her "professional services as Hostess for the

La Difusin Pblica ("WIPR")27that a television program host

Program Desde Mi Pueblo." There is no evidence that

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

is an independent contractor. We quote the following findings of

WIPR assigned Alberty tasks in addition to work related

SONZAs talent fees as long as "AGENT and Jay Sonza shall

the U.S. court:

to these tapings. x x x28 (Emphasis supplied)

provided under labor laws.

23

faithfully and completely perform each condition of this

Agreement."24 Even if it suffered severe business losses, ABS-

Several factors favor classifying Alberty as an

Applying the control test to the present case, we find that

CBN could not retrench SONZA because ABS-CBN remained

independent contractor. First, a television actress

SONZA is not an employee but an independent contractor. The

control test is the most important test our courts apply in

SONZA claims that ABS-CBNs power not to broadcast his shows

crew and airtime are not the "tools and instrumentalities"

distinguishing an employee from an independent

proves ABS-CBNs power over the means and methods of the

SONZA needed to perform his job. What SONZA principally

contractor.29 This test is based on the extent of control the hirer

performance of his work. Although ABS-CBN did have the option

needed were his talent or skills and the costumes necessary for

exercises over a worker. The greater the supervision and control

not to broadcast SONZAs show, ABS-CBN was still obligated to

his appearance.38Even though ABS-CBN provided SONZA with

the hirer exercises, the more likely the worker is deemed an

pay SONZAs talent fees... Thus, even if ABS-CBN was

the place of work and the necessary equipment, SONZA was

employee. The converse holds true as well the less control the

completely dissatisfied with the means and methods of

still an independent contractor since ABS-CBN did not supervise

hirer exercises, the more likely the worker is considered an

SONZAs performance of his work, or even with the quality or

and control his work. ABS-CBNs sole concern was for SONZA to

product of his work, ABS-CBN could not dismiss or even

display his talent during the airing of the programs. 39

independent contractor.

30

discipline SONZA. All that ABS-CBN could do is not to broadcast

First, SONZA contends that ABS-CBN exercised control over the

SONZAs show but ABS-CBN must still pay his talent fees in

A radio broadcast specialist who works under minimal

means and methods of his work.

full.35

supervision is an independent contractor.40 SONZAs work as

SONZAs argument is misplaced. ABS-CBN engaged SONZAs

Clearly, ABS-CBNs right not to broadcast SONZAs show,

talent, which SONZA admittedly possesses. The records do not

services specifically to co-host the "Mel & Jay" programs. ABS-

burdened as it was by the obligation to continue paying in full

show that ABS-CBN exercised any supervision and control over

CBN did not assign any other work to SONZA. To perform his

SONZAs talent fees, did not amount to control over the means

how SONZA utilized his skills and talent in his shows.

work, SONZA only needed his skills and talent. How SONZA

and methods of the performance of SONZAs work. ABS-CBN

delivered his lines, appeared on television, and sounded on

could not terminate or discipline SONZA even if the means and

Second, SONZA urges us to rule that he was ABS-CBNs

radio were outside ABS-CBNs control. SONZA did not have to

methods of performance of his work - how he delivered his lines

employee because ABS-CBN subjected him to its rules and

render eight hours of work per day. The Agreement required

and appeared on television - did not meet ABS-CBNs approval.

standards of performance. SONZA claims that this indicates

SONZA to attend only rehearsals and tapings of the shows, as

This proves that ABS-CBNs control was limited only to the result

ABS-CBNs control "not only [over] his manner of work but also

well as pre- and post-production staff meetings.31 ABS-CBN

of SONZAs work, whether to broadcast the final product or not.

the quality of his work."

could not dictate the contents of SONZAs script. However, the

In either case, ABS-CBN must still pay SONZAs talent fees in

Agreement prohibited SONZA from criticizing in his shows ABS-

full until the expiry of the Agreement.

television and radio program host required special skills and

CBN or its interests.

32

The Agreement stipulates that SONZA shall abide with the rules
and standards of performance "covering talents"41 of ABS-

The clear implication is that SONZA had a

36

free hand on what to say or discuss in his shows provided he did

In Vaughan, et al. v. Warner, et al.,

not attack ABS-CBN or its interests.

Circuit Court of Appeals ruled that vaudeville performers were

the rules and standards of performance prescribed for

independent contractors although the management reserved

employees of ABS-CBN. The code of conduct imposed on SONZA

We find that ABS-CBN was not involved in the actual

the right to delete objectionable features in their shows. Since

under the Agreement refers to the "Television and Radio Code of

performance that produced the finished product of SONZAs

the management did not have control over the manner of

the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has

performance of the skills of the artists, it could only control the

been adopted by the COMPANY (ABS-CBN) as its Code of

result of the work by deleting objectionable features.37

Ethics."42 The KBP code applies to broadcasters, not to

33

work.

ABS-CBN did not instruct SONZA how to perform his job.

ABS-CBN merely reserved the right to modify the program

the United States

format and airtime schedule "for more effective

CBN. The Agreement does not require SONZA to comply with

employees of radio and television stations. Broadcasters are not

programming."34 ABS-CBNs sole concern was the quality of the

SONZA further contends that ABS-CBN exercised control over

necessarily employees of radio and television stations. Clearly,

shows and their standing in the ratings. Clearly, ABS-CBN did

his work by supplying all equipment and crew. No doubt, ABS-

the rules and standards of performance referred to in the

not exercise control over the means and methods of

CBN supplied the equipment, crew and airtime needed to

Agreement are those applicable to talents and not to employees

performance of SONZAs work.

broadcast the "Mel & Jay" programs. However, the equipment,

of ABS-CBN.

In any event, not all rules imposed by the hiring party on the

This argument is futile. Being an exclusive talent does not by

There are essentially only two parties involved under the

hired party indicate that the latter is an employee of the

itself mean that SONZA is an employee of ABS-CBN. Even an

Agreement, namely, SONZA and ABS-CBN. MJMDC merely acted

former.43 In this case, SONZA failed to show that these rules

independent contractor can validly provide his services

as SONZAs agent. The Agreement expressly states that MJMDC

controlled his performance. We find that these general rules are

exclusively to the hiring party. In the broadcast industry,

acted as the "AGENT" of SONZA. The records do not show that

merely guidelines towards the achievement of the mutually

exclusivity is not necessarily the same as control.

MJMDC acted as ABS-CBNs agent. MJMDC, which stands for Mel

desired result, which are top-rating television and radio

programs that comply with standards of the industry. We have
ruled that:

and Jay Management and Development Corporation, is a

The hiring of exclusive talents is a widespread and accepted
practice in the entertainment industry.

46

This practice is not

corporation organized and owned by SONZA and TIANGCO. The

President and General Manager of MJMDC is SONZA himself. It is

designed to control the means and methods of work of the

absurd to hold that MJMDC, which is owned, controlled, headed

Further, not every form of control that a party reserves to

talent, but simply to protect the investment of the broadcast

and managed by SONZA, acted as agent of ABS-CBN in entering

himself over the conduct of the other party in relation to the

station. The broadcast station normally spends substantial

into the Agreement with SONZA, who himself is represented by

services being rendered may be accorded the effect of

amounts of money, time and effort "in building up its talents as

MJMDC. That would make MJMDC the agent of both ABS-CBN

establishing an employer-employee relationship. The facts of

well as the programs they appear in and thus expects that said

and SONZA.

this case fall squarely with the case of Insular Life Assurance

talents remain exclusive with the station for a commensurate

Co., Ltd. vs. NLRC. In said case, we held that:

period of time."47 Normally, a much higher fee is paid to talents

As SONZA admits, MJMDC is a management company

who agree to work exclusively for a particular radio or television

devoted exclusively to managing the careers of SONZA and his

Logically, the line should be drawn between rules that

station. In short, the huge talent fees partially compensates for

broadcast partner, TIANGCO. MJMDC is not engaged in any

merely serve as guidelines towards the achievement of

exclusivity, as in the present case.

other business, not even job contracting. MJMDC does not have

the mutually desired result without dictating the

means or methods to be employed in attaining it, and

any other function apart from acting as agent of SONZA or

MJMDC as Agent of SONZA

TIANGCO to promote their careers in the broadcast and

television industry.49

those that control or fix the methodology and bind or

restrict the party hired to the use of such means. The

SONZA protests the Labor Arbiters finding that he is a talent of

first, which aim only to promote the result, create no

MJMDC, which contracted out his services to ABS-CBN. The

employer-employee relationship unlike the second,

Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an

which address both the result and the means used to

employee of ABS-CBN. SONZA insists that MJMDC is a "labor-

SONZA argues that Policy Instruction No. 40 issued by then

only" contractor and ABS-CBN is his employer.

Minister of Labor Blas Ople on 8 January 1979 finally settled the

achieve it.

44

Policy Instruction No. 40

status of workers in the broadcast industry. Under this policy,

The Vaughan case also held that one could still be an

In a labor-only contract, there are three parties involved: (1) the

the types of employees in the broadcast industry are the station

independent contractor although the hirer reserved certain

"labor-only" contractor; (2) the employee who is ostensibly

and program employees.

supervision to insure the attainment of the desired result. The

under the employ of the "labor-only" contractor; and (3) the

hirer, however, must not deprive the one hired from performing

principal who is deemed the real employer. Under this

Policy Instruction No. 40 is a mere executive issuance which

scheme, the "labor-only" contractor is the agent of the

does not have the force and effect of law. There is no legal

principal. The law makes the principal responsible to the

presumption that Policy Instruction No. 40 determines SONZAs

Lastly, SONZA insists that the "exclusivity clause" in the

employees of the "labor-only contractor" as if the principal itself

status. A mere executive issuance cannot exclude independent

Agreement is the most extreme form of control which ABS-CBN

directly hired or employed the employees.48 These

contractors from the class of service providers to the broadcast

exercised over him.

circumstances are not present in this case.

industry. The classification of workers in the broadcast industry

his services according to his own initiative.

45

into only two groups under Policy Instruction No. 40 is not

motu propio determine whether there is need for a

Individuals with special skills, expertise or talent enjoy the

binding on this Court, especially when the classification has no

formal trial or hearing. At this stage, he may, at his

freedom to offer their services as independent contractors. The

basis either in law or in fact.

discretion and for the purpose of making such

right to life and livelihood guarantees this freedom to contract

determination, ask clarificatory questions to further

as independent contractors. The right of labor to security of

elicit facts or information, including but not limited to

tenure cannot operate to deprive an individual, possessed with

the subpoena of relevant documentary evidence, if any

special skills, expertise and talent, of his right to contract as an

from any party or witness.50

independent contractor. An individual like an artist or talent has

Affidavits of ABS-CBNs Witnesses

SONZA also faults the Labor Arbiter for admitting the affidavits
of Socorro Vidanes and Rolando Cruz without giving his counsel
the
opportunity to cross-examine these witnesses. SONZA brands

a right to render his services without any one controlling the

The Labor Arbiter can decide a case based solely on the

means and methods by which he performs his art or craft. This

position papers and the supporting documents without a formal

Court will not interpret the right of labor to security of tenure to

trial.51 The holding of a formal hearing or trial is something that

compel artists and talents to render their services only as

52

these witnesses as incompetent to attest on the prevailing

the parties cannot demand as a matter of right.

practice in the radio and television industry. SONZA views the

Arbiter is confident that he can rely on the documents before

If the Labor

employees. If radio and television program hosts can render

their services only as employees, the station owners and

affidavits of these witnesses as misleading and irrelevant.

him, he cannot be faulted for not conducting a formal trial,

managers can dictate to the radio and television hosts what

unless under the particular circumstances of the case, the

they say in their shows. This is not conducive to freedom of the

While SONZA failed to cross-examine ABS-CBNs witnesses, he

documents alone are insufficient. The proceedings before a

press.

was never prevented from denying or refuting the allegations in

Labor Arbiter are non-litigious in nature. Subject to the

the affidavits. The Labor Arbiter has the discretion whether to

requirements of due process, the technicalities of law and the

conduct a formal (trial-type) hearing after the submission of the

rules obtaining in the courts of law do not strictly apply in

position papers of the parties, thus:

proceedings before a Labor Arbiter.

Different Tax Treatment of Talents and Broadcasters

The National Internal Revenue Code ("NIRC") 54 in relation to
Republic Act No. 7716,55 as amended by Republic Act No.

Section 3. Submission of Position Papers/Memorandum

Talents as Independent Contractors

8241,56 treats talents, television and radio broadcasters

differently. Under the NIRC, these professionals are subject to

xxx

ABS-CBN claims that there exists a prevailing practice in the

the 10% value-added tax ("VAT") on services they render.

broadcast and entertainment industries to treat talents like

Exempted from the VAT are those under an employer-employee

These verified position papers shall cover only those

SONZA as independent contractors. SONZA argues that if such

relationship.57 This different tax treatment accorded to talents

claims and causes of action raised in the complaint

practice exists, it is void for violating the right of labor to

and broadcasters bolters our conclusion that they are

excluding those that may have been amicably settled,

security of tenure.

independent contractors, provided all the basic elements of a

and shall be accompanied by all supporting documents

contractual relationship are present as in this case.

including the affidavits of their respective witnesses

The right of labor to security of tenure as guaranteed in the

which shall take the place of the latters direct

Constitution53 arises only if there is an employer-employee

testimony. x x x

relationship under labor laws. Not every performance of

Nature of SONZAs Claims

services for a fee creates an employer-employee relationship. To

SONZA seeks the recovery of allegedly unpaid talent fees, 13th

Section 4. Determination of Necessity of Hearing.

hold that every person who renders services to another for a

month pay, separation pay, service incentive leave, signing

Immediately after the submission of the parties of their

fee is an employee - to give meaning to the security of tenure

bonus, travel allowance, and amounts due under the Employee

position papers/memorandum, the Labor Arbiter shall

clause - will lead to absurd results.

Stock Option Plan. We agree with the findings of the Labor

Arbiter and the Court of Appeals that SONZAs claims are all
based on the May 1994 Agreement and stock option
plan, and not on the Labor Code. Clearly, the present case

does not call for an application of the Labor Code provisions but
Republic of the Philippines
SUPREME COURT
Manila

an interpretation and implementation of the May 1994

Agreement. In effect, SONZAs cause of action is for breach of
contract which is intrinsically a civil dispute cognizable by the

SECOND DIVISION

regular courts.58
WHEREFORE, we DENY the petition. The assailed Decision of
the Court of Appeals dated 26 March 1999 in CA-G.R. SP No.
49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.

G.R. No. 138254

July 30, 2004

ANGELITO L. LAZARO, Proprietor of Royal Star

Marketing, petitioner,
vs.
SOCIAL SECURITY COMMISSION, ROSALINA LAUDATO,
SOCIAL SECURITY SYSTEM and THE HONORABLE COURT
OF APPEALS, respondents.

DECISION

TINGA, J.:
Before us is a Petition for Review under Rule 45, assailing
the Decision1 of the Court of Appeals Fifteenth Division2 in CAG.R. Sp. No. 40956, promulgated on 20 November 1998, which
affirmed two rulings of the Social Security Commission ("SSC")
dated 8 November 1995 and 24 April 1996.
Private respondent Rosalina M. Laudato ("Laudato") filed a
petition before the SSC for social security coverage and
remittance of unpaid monthly social security contributions
against her three (3) employers. Among the respondents was
herein petitioner Angelito L. Lazaro ("Lazaro"), proprietor of
Royal Star Marketing ("Royal Star"), which is engaged in the
business of selling home appliances.3 Laudato alleged that
despite her employment as sales supervisor of the sales agents
for Royal Star from April of 1979 to March of 1986, Lazaro had
failed during the said period, to report her to the SSC for
compulsory coverage or remit Laudato's social security
contributions.4

Lazaro denied that Laudato was a sales supervisor of Royal Star,

averring instead that she was a mere sales agent whom he paid
purely on commission basis. Lazaro also maintained that
Laudato was not subjected to definite hours and conditions of
work. As such, Laudato could not be deemed an employee of
Royal Star.5
After the parties submitted their respective position papers, the
SSC promulgated a Resolution6 dated 8 November 1995 ruling
in favor of Laudato.7 Applying the "control test," it held that
Laudato was an employee of Royal Star, and ordered Royal Star
to pay the unremitted social security contributions of Laudato in
the amount of Five Thousand Seven Pesos and Thirty Five
Centavos (P5,007.35), together with the penalties totaling
Twenty Two Thousand Two Hundred Eighteen Pesos and Fifty
Four Centavos (P22,218.54). In addition, Royal Star was made
liable to pay damages to the SSC in the amount of Fifteen
Thousand Six Hundred Eighty Pesos and Seven Centavos
(P15,680.07) for not reporting Laudato for social security
coverage, pursuant to Section 24 of the Social Security Law. 8
After Lazaro's Motion for Reconsideration before the SSC was
denied,9 Lazaro filed a Petition for Review with the Court of
Appeals. Lazaro reiterated that Laudato was merely a sales
agent who was paid purely on commission basis, not included in
the company payroll, and who neither observed regular working
hours nor accomplished time cards.
In its assailed Decision, the Court of Appeals noted that Lazaro's
arguments were a reprise of those already presented before the
SSC.10 Moreover, Lazaro had not come forward with particulars
and specifics in his petition to show that the Commission's
ruling is not supported by substantial evidence. 11 Thus, the
appellate court affirmed the finding that Laudato was an
employee of Royal Star, and hence entitled to coverage under
the Social Security Law.
Before this Court, Lazaro again insists that Laudato was not
qualified for social security coverage, as she was not an
employee of Royal Star, her income dependent on a generation
of sales and based on commissions.12 It is argued that Royal
Star had no control over Laudato's activities, and that under the
so-called "control test," Laudato could not be deemed an
employee.13
It is an accepted doctrine that for the purposes of coverage
under the Social Security Act, the determination of employeremployee relationship warrants the application of the "control
test," that is, whether the employer controls or has reserved the
right to control the employee, not only as to the result of the
work done, but also as to the means and methods by which the

same is accomplished.14 The SSC, as sustained by the Court of

Appeals, applying the control test found that Laudato was an
employee of Royal Star. We find no reversible error.
Lazaro's arguments are nothing more but a mere reiteration of
arguments unsuccessfully posed before two bodies: the SSC
and the Court of Appeals. They likewise put to issue factual
questions already passed upon twice below, rather than
questions of law appropriate for review under a Rule 45 petition.
The determination of an employer-employee relationship
depends heavily on the particular factual circumstances
attending the professional interaction of the parties. The Court
is not a trier of facts15 and accords great weight to the factual
findings of lower courts or agencies whose function is to resolve
factual matters.16
Lazaro's arguments may be dispensed with by applying
precedents. Suffice it to say, the fact that Laudato was paid by
way of commission does not preclude the establishment of an
employer-employee relationship. InGrepalife v. Judico,17 the
Court upheld the existence of an employer-employee
relationship between the insurance company and its agents,
despite the fact that the compensation that the agents on
commission received was not paid by the company but by the
investor or the person insured.18 The relevant factor remains, as
stated earlier, 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.19
Neither does it follow that a person who does not observe
normal hours of work cannot be deemed an employee.
In Cosmopolitan Funeral Homes, Inc. v. Maalat,20 the employer
similarly denied the existence of an employer-employee
relationship, as the claimant according to it, was a "supervisor
on commission basis" who did not observe normal hours of
work. This Court declared that there was an employer-employee
relationship, noting that "[the] supervisor, although
compensated on commission basis, [is] exempt from the
observance of normal hours of work for his compensation is
measured by the number of sales he makes." 21
It should also be emphasized that the SSC, also as upheld by
the Court of Appeals, found that Laudato was a sales supervisor
and not a mere agent.22 As such, Laudato oversaw and
supervised the sales agents of the company, and thus was
subject to the control of management as to how she
implements its policies and its end results. We are disinclined to
reverse this finding, in the absence of countervailing evidence
from Lazaro and also in light of the fact that Laudato's calling
cards from Royal Star indicate that she is indeed a sales
supervisor.

The finding of the SSC that Laudato was an employee of Royal

Star is supported by substantial evidence. The SSC examined
the cash vouchers issued by Royal Star to Laudato,23 calling
cards of Royal Star denominating Laudato as a "Sales
Supervisor" of the company,24 and Certificates of Appreciation
issued by Royal Star to Laudato in recognition of her unselfish
and loyal efforts in promoting the company.25 On the other
hand, Lazaro has failed to present any convincing contrary
evidence, relying instead on his bare assertions. The Court of
Appeals correctly ruled that petitioner has not sufficiently
shown that the SSC's ruling was not supported by substantial
evidence.
A piece of documentary evidence appreciated by the SSC is
Memorandum dated 3 May 1980 of Teresita Lazaro, General
Manager of Royal Star, directing that no commissions were to
be given on all "main office" sales from walk-in customers and
enjoining salesmen and sales supervisors to observe this new
policy.26 The Memorandum evinces the fact that, contrary to
Lazaro's claim, Royal Star exercised control over its sales
supervisors or agents such as Laudato as to the means and
methods through which these personnel performed their work.
Finally, Lazaro invokes our ruling in the 1987 case of Social
Security System v. Court of Appeals27 that a person who works
for another at his own pleasure, subject to definite hours or
conditions of work, and is compensated according to the result
of his effort is not an employee.28 The citation is odd for Lazaro
to rely upon, considering that in the cited case, the Court
affirmed the employee-employer relationship between a sales
agent and the cigarette firm whose products he sold.29 Perhaps
Lazaro meant instead to cite our 1969 ruling in the similarlytitled case of Social Security System v. Court of Appeals,30 also
cited in the later eponymous ruling, whose disposition is more
in accord with Lazaro's argument.
Yet, the circumstances in the 1969 case are very different from
those at bar. Ruling on the question whether jockeys were
considered employees of the Manila Jockey Club, the Court
noted that the jockeys were actually subjected to the control of
the racing steward, whose authority in turn was defined by the
Games and Amusements Board.31 Moreover, the jockey's choice
as to which horse to mount was subject to mutual agreement
between the horse owner and the jockey, and beyond the
control of the race club.32 In the case at bar, there is no showing
that Royal Star was similarly precluded from exerting control or
interference over the manner by which Laudato performed her
duties. On the contrary, substantial evidence as found by the
SSC and the Court of Appeals have established the element of
control determinative of an employer-employee relationship. We
affirm without hesitation.

10

WHEREFORE, the Petition is DENIED and the

assailed Decision of the Court of Appeals dated 20 November
1998 is AFFIRMED. Costs against petitioner.
SO ORDERED.

3
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 157214

June 7, 2005

PHILIPPINE GLOBAL COMMUNICATIONS, INC., petitioner,

vs.
RICARDO DE VERA, respondent.
DECISION
GARCIA, J.:
Before us is this appeal by way of a petition for review
on certiorari from the 12 September 2002 Decision1 and the 13
February 2003 Resolution2 of the Court of Appeals in CA-G.R. SP
No. 65178, upholding the finding of illegal dismissal by the
National Labor Relations Commission against petitioner.
As culled from the records, the pertinent facts are:
Petitioner Philippine Global Communications, Inc. (PhilCom), is a
corporation engaged in the business of communication services
and allied activities, while respondent Ricardo De Vera is a
physician by profession whom petitioner enlisted to attend to
the medical needs of its employees. At the crux of the
controversy is Dr. De Veras status vis a vis petitioner when the
latter terminated his engagement.
It appears that on 15 May 1981, De Vera, via a letter dated 15
May 1981,3 offered his services to the petitioner, therein
proposing his plan of works required of a practitioner in
industrial medicine, to include the following:

11

1. Application of preventive medicine including

periodic check-up of employees;
2. Holding of clinic hours in the morning and afternoon
for a total of five (5) hours daily for consultation
services to employees;
3. Management and treatment of employees that may
necessitate hospitalization including emergency cases
and accidents;
4. Conduct pre-employment physical check-up of
prospective employees with no additional medical fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative function
such as accomplishing medical forms, evaluating
conditions of employees applying for sick leave of
absence and subsequently issuing proper certification,
and all matters referred which are medical in nature.
The parties agreed and formalized respondents proposal in a
document denominated as RETAINERSHIP CONTRACT4 which
will be for a period of one year subject to renewal, it being
made clear therein that respondent will cover "the retainership
the Company previously had with Dr. K. Eulau" and that
respondents "retainer fee" will be at P4,000.00 a month. Said
contract was renewed yearly.5 The retainership arrangement
went on from 1981 to 1994 with changes in the retainers fee.
However, for the years 1995 and 1996, renewal of the contract
was only made verbally.
The turning point in the parties relationship surfaced in
December 1996 when Philcom, thru a letter6 bearing on the
subject boldly written as "TERMINATION RETAINERSHIP
CONTRACT", informed De Vera of its decision to discontinue the
latters "retainers contract with the Company effective at the
close of business hours of December 31, 1996" because
management has decided that it would be more practical to
provide medical services to its employees through accredited
hospitals near the company premises.
On 22 January 1997, De Vera filed a complaint for illegal
dismissal before the National Labor Relations Commission
(NLRC), alleging that that he had been actually employed by
Philcom as its company physician since 1981 and was
dismissed without due process. He averred that he was
designated as a "company physician on retainer basis" for
reasons allegedly known only to Philcom. He likewise professed

that since he was not conversant with labor laws, he did not
give much attention to the designation as anyway he worked on
a full-time basis and was paid a basic monthly salary plus fringe
benefits, like any other regular employees of Philcom.
On 21 December 1998, Labor Arbiter Ramon Valentin C. Reyes
came out with a decision7 dismissing De Veras complaint for
lack of merit, on the rationale that as a "retained physician"
under a valid contract mutually agreed upon by the parties, De
Vera was an "independent contractor" and that he "was not
dismissed but rather his contract with [PHILCOM] ended when
said contract was not renewed after December 31, 1996".
On De Veras appeal to the NLRC, the latter, in a decision 8 dated
23 October 2000, reversed (the word used is "modified") that of
the Labor Arbiter, on a finding that De Vera is Philcoms "regular
employee" and accordingly directed the company to reinstate
him to his former position without loss of seniority rights and
privileges and with full backwages from the date of his dismissal
until actual reinstatement. We quote the dispositive portion of
the decision:
WHEREFORE, the assailed decision is modified in that
respondent is ordered to reinstate complainant to his former
position without loss of seniority rights and privileges with full
backwages from the date of his dismissal until his actual
reinstatement computed as follows:
Backwages:
a)

13th Month Pay:

1/12 of P1,750,185.00

c)

Travelling allowance:
P1,000.00 x 39.33 mos.

WHEREFORE, premises considered, the assailed judgment of

public respondent, dated 23 October 2000, isMODIFIED. The
award of traveling allowance is deleted as the same is hereby
DELETED. Instead of reinstatement, private respondent shall be
paid separation pay computed at one (1) month salary for every
year of service computed from the time private respondent
commenced his employment in 1981 up to the actual payment
of the backwages and separation pay. The awards of backwages
and 13th month pay STAND.
SO ORDERED.
In time, Philcom filed a motion for reconsideration but was
denied by the appellate court in its resolution of 13 February
2003.11

THE COURT OF APPEALS ERRED IN SUSTAINING THE DECISION

OF THE NATIONAL LABOR RELATIONS COMMISSION AND
P1,750,185.00 RENDERING THE QUESTIONED DECISION AND RESOLUTION IN A
WAY THAT IS NOT IN ACCORD WITH THE FACTS AND APPLICABLE
LAWS AND JURISPRUDENCE WHICH DISTINGUISH LEGITIMATE
145,848.75
JOB CONTRACTING AGREEMENTS FROM THE EMPLOYEREMPLOYEE RELATIONSHIP.
39,330.00
We GRANT.

GRAND TOTAL
The decision stands in other aspects.

On 12 September 2002, the Court of Appeals rendered a

decision,10 modifying that of the NLRC by deleting the award of
traveling allowance, and ordering payment of separation pay to
De Vera in lieu of reinstatement, thus:

Hence, Philcoms present recourse on its main submission that -

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

b)

the Court of Appeals on a petition for certiorari, thereat

docketed as CA-G.R. SP No. 65178, imputing grave abuse of
discretion amounting to lack or excess of jurisdiction on the part
of the NLRC when it reversed the findings of the labor arbiter
and awarded thirteenth month pay and traveling allowance to
De Vera even as such award had no basis in fact and in law.

P1,935,363.75 Under Rule 45 of the Rules of Court, only questions of law may
be reviewed by this Court in decisions rendered by the Court of
Appeals. There are instances, however, where the Court departs
from this rule and reviews findings of fact so that substantial
justice may be served. The exceptional instances are where:

SO ORDERED.
With its motion for reconsideration having been denied by the
NLRC in its order of 27 February 2001,9 Philcom then went to

"xxx xxx xxx (1) the conclusion is a finding grounded entirely on

speculation, surmise and conjecture; (2) the inference made is
manifestly mistaken; (3) there is grave abuse of discretion; (4)

12

the judgment is based on a misapprehension of facts; (5) the

findings of fact are conflicting; (6) the Court of Appeals went
beyond the issues of the case and its findings are contrary to
the admissions of both appellant and appellees; (7) the findings
of fact of the Court of Appeals are contrary to those of the trial
court; (8) said findings of facts are conclusions without citation
of specific evidence on which they are based; (9) the facts set
forth in the petition as well as in the petitioners main and reply
briefs are not disputed by the respondents; and (10) the
findings of fact of the Court of Appeals are premised on the
supposed absence of evidence and contradicted by the
evidence on record."12

required by such position and I am confident that I can serve

the best interests of your employees, medically.

employee relationship between petitioner and respondent, in

addition to the following factual settings:

My plan of works and targets shall cover the duties and

responsibilities required of a practitioner in industrial medicine
which includes the following:

The fact that the complainant was not considered an employee

was recognized by the complainant himself in a signed letter to
the respondent dated April 21, 1982 attached as Annex G to the
respondents Reply and Rejoinder. Quoting the pertinent portion
of said letter:

1. Application of preventive medicine

including periodic check-up of employees;
2. Holding of clinic hours in the morning and
afternoon for a total of five (5) hours daily for
consultation services to employees;

As we see it, the parties respective submissions revolve on the

primordial issue of whether an employer-employee relationship
exists between petitioner and respondent, the existence of
which is, in itself, a question of fact13 well within the province of
the NLRC. Nonetheless, given the reality that the NLRCs
findings are at odds with those of the labor arbiter, the Court,
consistent with its ruling in Jimenez vs. National Labor Relations
Commission,14 is constrained to look deeper into the attendant
circumstances obtaining in this case, as appearing on record.

3. Management and treatment of employees

that may necessitate hospitalization including
emergency cases and accidents;
4. Conduct pre-employment physical check-up
of prospective employees with no additional
medical fee;

In a long line of decisions,15 the Court, in determining the

existence of an employer-employee relationship, has invariably
adhered to the four-fold test, to wit: [1] the selection and
engagement of the employee; [2] the payment of wages; [3]
the power of dismissal; and [4] the power to control the
employees conduct, or the so-called "control test", considered
to be the most important element.
Applying the four-fold test to this case, we initially find that it
was respondent himself who sets the parameters of what his
duties would be in offering his services to petitioner. This is
borne by no less than his 15 May 1981 letter16 which, in full,
reads:
"May 15, 1981
Mrs. Adela L. Vicente
Vice President, Industrial Relations
PhilCom, Paseo de Roxas
Makati, Metro Manila

5. Conduct home visits whenever necessary;

6. Attend to certain medical administrative
functions such as accomplishing medical
forms, evaluating conditions of employees
applying for sick leave of absence and
subsequently issuing proper certification, and
all matters referred which are medical in
nature.
On the subject of compensation for the services that I propose
to render to the corporation, you may state an offer based on
your belief that I can very well qualify for the job having worked
with your organization for sometime now.
I shall be very grateful for whatever kind attention you may
extend on this matter and hoping that it will merit acceptance, I
remain
Very truly yours,

Madam:
I shall have the time and effort for the position of Company
physician with your corporation if you deemed it necessary. I
have the necessary qualifications, training and experience

(signed)
RICARDO V. DE VERA, M.D."
Significantly, the foregoing letter was substantially the basis of
the labor arbiters finding that there existed no employer-

To carry out your memo effectively and to provide a systematic

and workable time schedule which will serve the best interests
of both the present and absent employee, may I propose an
extended two-hour service (1:00-3:00 P.M.) during which period
I can devote ample time to both groups depending upon the
urgency of the situation. I shall readjust my private schedule to
be available for the herein proposed extended hours, should
you consider this proposal.
As regards compensation for the additional time and services
that I shall render to the employees, it is dependent on your
evaluation of the merit of my proposal and your confidence on
my ability to carry out efficiently said proposal.
The tenor of this letter indicates that the complainant was
proposing to extend his time with the respondent and seeking
additional compensation for said extension. This shows that the
respondent PHILCOM did not have control over the schedule of
the complainant as it [is] the complainant who is proposing his
own schedule and asking to be paid for the same. This is proof
that the complainant understood that his relationship with the
respondent PHILCOM was a retained physician and not as an
employee. If he were an employee he could not negotiate as to
his hours of work.
The complainant is a Doctor of Medicine, and presumably, a
well-educated person. Yet, the complainant, in his position
paper, is claiming that he is not conversant with the law and did
not give much attention to his job title- on a retainer basis. But
the same complainant admits in his affidavit that his service for
the respondent was covered by a retainership contract [which]
was renewed every year from 1982 to 1994. Upon reading the
contract dated September 6, 1982, signed by the complainant
himself (Annex C of Respondents Position Paper), it clearly
states that is a retainership contract. The retainer fee is
indicated thereon and the duration of the contract for one year
is also clearly indicated in paragraph 5 of the Retainership
Contract. The complainant cannot claim that he was unaware
that the contract was good only for one year, as he signed the
same without any objections. The complainant also accepted its
renewal every year thereafter until 1994. As a literate person
and educated person, the complainant cannot claim that he

13

does not know what contract he signed and that it was renewed
on a year to year basis.17
The labor arbiter added the indicia, not disputed by respondent,
that from the time he started to work with petitioner, he never
was included in its payroll; was never deducted any contribution
for remittance to the Social Security System (SSS); and was in
fact subjected by petitioner to the ten (10%) percent
withholding tax for his professional fee, in accordance with the
National Internal Revenue Code, matters which are simply
inconsistent with an employer-employee relationship. In the
precise words of the labor arbiter:
"xxx xxx xxx After more than ten years of services to PHILCOM,
the complainant would have noticed that no SSS deductions
were made on his remuneration or that the respondent was
deducting the 10% tax for his fees and he surely would have
complained about them if he had considered himself an
employee of PHILCOM. But he never raised those issues. An
ordinary employee would consider the SSS payments important
and thus make sure they would be paid. The complainant never
bothered to ask the respondent to remit his SSS contributions.
This clearly shows that the complainant never considered
himself an employee of PHILCOM and thus, respondent need
not remit anything to the SSS in favor of the complainant." 18
Clearly, the elements of an employer-employee relationship are
wanting in this case. We may add that the records are replete
with evidence showing that respondent had to bill petitioner for
his monthly professional fees.19 It simply runs against the grain
of common experience to imagine that an ordinary employee
has yet to bill his employer to receive his salary.
We note, too, that the power to terminate the parties
relationship was mutually vested on both. Either may terminate
the arrangement at will, with or without cause. 20
Finally, remarkably absent from the parties arrangement is the
element of control, whereby the employer has reserved the
right to control the employee not only as to the result of the
work done but also as to the means and methods by which the
same is to be accomplished.21
Here, petitioner had no control over the means and methods by
which respondent went about performing his work at the
company premises. He could even embark in the private
practice of his profession, not to mention the fact that
respondents work hours and the additional compensation
therefor were negotiated upon by the parties. 22 In fine, the
parties themselves practically agreed on every terms and
conditions of respondents engagement, which thereby negates

the element of control in their relationship. For sure, respondent

has never cited even a single instance when petitioner
interfered with his work.
Yet, despite the foregoing, all of which are extant on record,
both the NLRC and the Court of Appeals ruled that respondent is
petitioners regular employee at the time of his separation.
Partly says the appellate court in its assailed decision:
Be that as it may, it is admitted that private respondents
written retainer contract was renewed annually from 1981 to
1994 and the alleged renewal for 1995 and 1996, when it was
allegedly terminated, was verbal.
Article 280 of the Labor code (sic) provides:
The provisions of written agreement to the
contrary notwithstanding and regardless of the oral
agreements of the parties, an employment shall be deemed
to be regular where the employee has been engaged to perform
in the usual business or trade of the employer, except where
the employment has been fixed for a specific project or
undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or
where the work or services to be performed is seasonal in
nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not
covered by the preceding paragraph: Provided, That,
any employee who has rendered at least one (1) year of
service, whether such is continuous or broken,shall be
considered a regular with respect to the activity in which
he is employed and his employment shall continue while such
activity exists.
Parenthetically, the position of company physician, in the case
of petitioner, is usually necessary and desirable because the
need for medical attention of employees cannot be foreseen,
hence, it is necessary to have a physician at hand. In fact, the
importance and desirability of a physician in a company
premises is recognized by Art. 157 of the Labor Code, which
requires the presence of a physician depending on the number
of employees and in the case at bench, in petitioners case, as
found by public respondent, petitioner employs more than 500
employees.
Going back to Art. 280 of the Labor Code, it was made therein
clear that the provisions of a written agreement to the contrary
notwithstanding or the existence of a mere oral agreement, if

the employee is engaged in the usual business or trade of the

employer, more so, that he rendered service for at least one
year, such employee shall be considered as
a regular employee. Private respondent herein has been with
petitioner since 1981 and his employment was not for a specific
project or undertaking, the period of which was pre-determined
and neither the work or service of private respondent seasonal.
(Emphasis by the CA itself).
We disagree to the foregoing ratiocination.
The appellate courts premise that regular employees are those
who perform activities which are desirable and necessary for
the business of the employer is not determinative in this case.
For, we take it that any agreement may provide that one party
shall render services for and in behalf of another, no matter
how necessary for the latters business, even without being
hired as an employee. This set-up is precisely true in the case
of an independent contractorship as well as in an agency
agreement. Indeed, Article 280 of the Labor Code, quoted by
the appellate court, is not the yardstick for determining the
existence of an employment relationship. As it is, the provision
merely distinguishes between two (2) kinds of employees, i.e.,
regular and casual. It does not apply where, as here, the very
existence of an employment relationship is in dispute.23
Buttressing his contention that he is a regular employee of
petitioner, respondent invokes Article 157 of the Labor Code,
and argues that he satisfies all the requirements thereunder.
The provision relied upon reads:
ART. 157. Emergency medical and dental services. It shall be
the duty of every employer to furnish his employees in any
locality with free medical and dental attendance and facilities
consisting of:
(a) The services of a full-time registered nurse when
the number of employees exceeds fifty (50) but not
more than two hundred (200) except when the
employer does not maintain hazardous workplaces, in
which case the services of a graduate first-aider shall
be provided for the protection of the workers, where no
registered nurse is available. The Secretary of Labor
shall provide by appropriate regulations the services
that shall be required where the number of employees
does not exceed fifty (50) and shall determine by
appropriate order hazardous workplaces for purposes
of this Article;
(b) The services of a full-time registered nurse, a parttime physician and dentist, and an emergency clinic,

14

when the number of employees exceeds two hundred

(200) but not more than three hundred (300); and
(c) The services of a full-time physician, dentist and
full-time registered nurse as well as a dental clinic, and
an infirmary or emergency hospital with one bed
capacity for every one hundred (100) employees when
the number of employees exceeds three hundred
(300).
In cases of hazardous workplaces, no employer shall engage the
services of a physician or dentist who cannot stay in the
premises of the establishment for at least two (2) hours, in the
case of those engaged on part-time basis, and not less than
eight (8) hours in the case of those employed on full-time basis.
Where the undertaking is nonhazardous in nature, the physician
and dentist may be engaged on retained basis, subject to such
regulations as the Secretary of Labor may prescribe to insure
immediate availability of medical and dental treatment and
attendance in case of emergency.
Had only respondent read carefully the very statutory provision
invoked by him, he would have noticed that in non-hazardous
workplaces, the employer may engage the services of a
physician "on retained basis." As correctly observed by the
petitioner, while it is true that the provision requires employers
to engage the services of medical practitioners in certain
establishments depending on the number of their employees,
nothing is there in the law which says that medical practitioners
so engaged be actually hired as employees,24 adding that the
law, as written, only requires the employer "to retain", not
employ, a part-time physician who needed to stay in the
premises of the non-hazardous workplace for two (2) hours.25
Respondent takes no issue on the fact that petitioners business
of telecommunications is not hazardous in nature. As such,
what applies here is the last paragraph of Article 157 which, to
stress, provides that the employer may engage the services of a
physician and dentist "on retained basis", subject to such
regulations as the Secretary of Labor may prescribe. The
successive "retainership" agreements of the parties definitely
hue to the very statutory provision relied upon by respondent.
Deeply embedded in our jurisprudence is the rule that courts
may not construe a statute that is free from doubt. Where the
law is clear and unambiguous, it must be taken to mean exactly
what it says, and courts have no choice but to see to it that the
mandate is obeyed.26 As it is, Article 157 of the Labor Code
clearly and unequivocally allows employers in non-hazardous
establishments to engage "on retained basis" the service of a
dentist or physician. Nowhere does the law provide that the

physician or dentist so engaged thereby becomes a regular

employee. The very phrase that they may be engaged "on
retained basis", revolts against the idea that this engagement
gives rise to an employer-employee relationship.
With the recognition of the fact that petitioner consistently
engaged the services of respondent on a retainer basis, as
shown by their various "retainership contracts", so can
petitioner put an end, with or without cause, to their
retainership agreement as therein provided.27
We note, however, that even as the contracts entered into by
the parties invariably provide for a 60-day notice requirement
prior to termination, the same was not complied with by
petitioner when it terminated on 17 December 1996 the
verbally-renewed retainership agreement, effective at the close
of business hours of 31 December 1996.
Be that as it may, the record shows, and this is admitted by
both parties,28 that execution of the NLRC decision had already
been made at the NLRC despite the pendency of the present
recourse. For sure, accounts of petitioner had already been
garnished and released to respondent despite the previous
Status Quo Order29 issued by this Court. To all intents and
purposes, therefore, the 60-day notice requirement has become
moot and academic if not waived by the respondent himself.
WHEREFORE, the petition is GRANTED and the challenged
decision of the Court of Appeals REVERSED and SET ASIDE. The
21 December 1998 decision of the labor arbiter is REINSTATED.
No pronouncement as to costs.

4
Republic of the Philippines

SO ORDERED.

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 164156

September 26, 2006

ABS-CBN BROADCASTING CORPORATION, petitioner,

vs.
MARLYN NAZARENO, MERLOU GERZON, JENNIFER
DEIPARINE, and JOSEPHINE LERASAN,respondents.

15

DECISION

a) Prepare, arrange airing of commercial broadcasting based on

On December 19, 1996, petitioner and the ABS-CBN Rank-and-

the daily operations log and digicart of respondent ABS-CBN;

File Employees executed a Collective Bargaining Agreement

CALLEJO, SR., J.:

(CBA) to be effective during the period from December 11, 1996

b) Coordinate, arrange personalities for air interviews;

to December 11, 1999. However, since petitioner refused to

Before us is a petition for review on certiorari of the Decision 1 of

recognize PAs as part of the bargaining unit, respondents were

the Court of Appeals (CA) in CA-G.R. SP No. 76582 and the

c) Coordinate, prepare schedule of reporters for scheduled news

Resolution denying the motion for reconsideration thereof. The

reporting and lead-in or incoming reports;

CA affirmed the Decision and Resolution of the National Labor

not included to the CBA.6

On July 20, 2000, petitioner, through Dante Luzon, issued a

Relations Commission (NLRC) in NLRC Case No. V-000762-2001

d) Facilitate, prepare and arrange airtime schedule for public

Memorandum informing the PAs that effective August 1, 2000,

(RAB Case No. VII-10-1661-2001) which likewise affirmed, with

service announcement and complaints;

they would be assigned to non-drama programs, and that the

modification, the decision of the Labor Arbiter declaring the

respondents Marlyn Nazareno, Merlou Gerzon, Jennifer

DYAB studio operations would be handled by the studio

e) Assist, anchor program interview, etc; and

technician. Thus, their revised schedule and other assignments

Deiparine and Josephine Lerasan as regular employees.

would be as follows:
f) Record, log clerical reports, man based control radio.

The Antecedents

Monday Saturday
Their respective working hours were as follows:

Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is

engaged in the broadcasting business and owns a network of

4:30 A.M. 8:00 A.M. Marlene Nazareno.

Name Time No. of Hours

television and radio stations, whose operations revolve around

the broadcast, transmission, and relay of telecommunication

Miss Nazareno will then be assigned at the Research Dept.

1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7

signals. It sells and deals in or otherwise utilizes the airtime it

generates from its radio and television operations. It has a

From 8:00 A.M. to 12:00

8:00 A.M.-12:00 noon

franchise as a broadcasting company, and was likewise issued a

license and authority to operate by the National

4:30 P.M. 12:00 MN Jennifer Deiparine

2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7

Telecommunications Commission.

Sunday
3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs.

Petitioner employed respondents Nazareno, Gerzon, Deiparine,

and Lerasan as production assistants (PAs) on different dates.

5:00 A.M. 1:00 P.M. Jennifer Deiparine

9:00 A.M.-6:00 P.M. (WF) 9 hrs.

They were assigned at the news and public affairs, for various
radio programs in the Cebu Broadcasting Station, with a

1:00 P.M. 10:00 P.M. Joy Sanchez

4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.

monthly compensation of P4,000. They were issued ABS-CBN

Respondent Gerzon was assigned as the full-time PA of the TV

employees identification cards and were required to work for a

The PAs were under the control and supervision of Assistant

minimum of eight hours a day, including Sundays and holidays.

Station Manager Dante J. Luzon, and News Manager Leo

They were made to perform the following tasks and duties:

Lastimosa.

News Department reporting directly to Leo Lastimosa.

On October 12, 2000, respondents filed a Complaint for
Recognition of Regular Employment Status, Underpayment of
Overtime Pay, Holiday Pay, Premium Pay, Service Incentive Pay,

16

Sick Leave Pay, and 13th Month Pay with Damages against the

Date employed: September 15, 1995

Exhibit "F" - ABS-CBN Employees Identification Card

Length of service: 5 years & nine (9) months

Exhibit "F-1" - ABS-CBN Salary Voucher from Aug.

II. Merlou Gerzon - ABS-CBN Employees Identification Card

Exhibit "F-2" & 2000 to Jan. 2001

Exhibit "C"

Exhibit "F-3"

Exhibit "D"

Exhibit "F-4" - Certification dated July 6, 2000

Exhibit "D-1" &

Acknowledging regular status of

Exhibit "D-2" - ABS-CBN Salary Voucher from March

Complainant Joy Sanchez Lerasan

following allegations:

1999 to January 2001 at P4,000.00

Signed by ABS-CBN Administrative

1. Complainants were engaged by respondent ABS-CBN as

Date employed: September 1, 1995

Officer May Kima Hife

Length of service: 5 years & 10 months

Date employed: April 15, 1998

complaint on November 20, 2000.

III. Marlene Nazareno

Length of service: 3 yrs. and one (1) month9

Machine copies of complainants ABS-CBN Employees

Exhibit "E" - ABS-CBN Employees Identification Card

Respondents insisted that they belonged to a "work pool" from

petitioner before the NLRC. The Labor Arbiter directed the

parties to submit their respective position papers. Upon
respondents failure to file their position papers within the
reglementary period, Labor Arbiter Jose G. Gutierrez issued an
Order dated April 30, 2001, dismissing the complaint without
prejudice for lack of interest to pursue the case. Respondents
7

received a copy of the Order on May 16, 2001. Instead of refiling 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
8

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. Respondents made the

regular and full-time employees for a continuous period of more

than five (5) years with a monthly salary rate of Four Thousand
(P4,000.00) pesos beginning 1995 up until the filing of this

Identification Card and salary vouchers are hereto attached as

which petitioner chose persons to be given specific assignments

follows, thus:

Exhibit "E" - ABS-CBN Salary Voucher from Nov.

at its discretion, and were thus under its direct supervision and

I. Jennifer Deiparine:

Exhibit "E-1" & 1999 to December 2000

be rendered in their favor, thus:

Exhibit "A" - ABS-CBN Employees Identification Card

Exhibit :E-2"

WHEREFORE, premises considered, this Honorable Arbiter is

Exhibit "B", - ABS-CBN Salary Voucher from Nov.

Date employed: April 17, 1996

defendants to pay complainants the following:

Exhibit "B-1" & 1999 to July 2000 at P4,000.00

Length of service: 5 years and one (1) month

1. One Hundred Thousand Pesos (P100,000.00) each

Exhibit "B-2"

IV. Joy Sanchez Lerasan

and by way of moral damages;

control regardless of nomenclature. They prayed that judgment

most respectfully prayed, to issue an order compelling

17

2. Minimum wage differential;

radio station. Petitioner asserted that as PAs, the complainants

(b) Serbisyo de Arevalo

were issued talent information sheets which are updated from

3. Thirteenth month pay differential;

time to time, and are thus made the basis to determine the

(c) Arangkada (evening edition)

programs to which they shall later be called on to assist. The

4. Unpaid service incentive leave benefits;

program assignments of complainants were as follows:

(d) Balitang K (local version)

5. Sick leave;

a. Complainant Nazareno assists in the programs:

(e) Abante Sugbu

6. Holiday pay;

1) Nagbagang Balita (early morning edition)

(f) Pangutana Lang

7. Premium pay;

2) Infor Hayupan

2) On Thursdays

8. Overtime pay;

3) Arangkada (morning edition)

Nagbagang Balita

9. Night shift differential.

4) Nagbagang Balita (mid-day edition)

3) On Saturdays

Complainants further pray of this Arbiter to declare them

b. Complainant Deiparine assists in the programs:

(a) Nagbagang Balita

1) Unzanith

(b) Info Hayupan

2) Serbisyo de Arevalo

(c) Arangkada (morning edition)

3) Arangkada (evening edition)

(d) Nagbagang Balita (mid-day edition)

equitable under the premises.10

4) Balitang K (local version)

4) On Sundays:

For its part, petitioner alleged in its position paper that the

5) Abante Subu

(a) Siesta Serenata

6) Pangutana Lang

(b) Sunday Chismisan

c. Complainant Gerzon assists in the program:

(c) Timbangan sa Hustisya

1) On Mondays and Tuesdays:

(d) Sayri ang Lungsod

(a) Unzanith

(e) Haranahan11

regular and permanent employees of respondent ABS-CBN as a

condition precedent for their admission into the existing union
and collective bargaining unit of respondent company where
they may as such acquire or otherwise perform their obligations
thereto or enjoy the benefits due therefrom.
Complainants pray for such other reliefs as are just and

respondents were PAs who basically assist in the conduct of a

particular program ran by an anchor or talent. Among their
duties include monitoring and receiving incoming calls from
listeners and field reporters and calls of news sources;
generally, they perform leg work for the anchors during a
program or a particular production. They are considered in the
industry as "program employees" in that, as distinguished from
regular or station employees, they are basically engaged by the
station for a particular or specific program broadcasted by the

18

Petitioner maintained that PAs, reporters, anchors and talents

_________

occasionally "sideline" for other programs they produce, such as

drama talents in other productions. As program employees, a

2. That the Labor Arbiter erred in depriving the respondent of its

Constitutional right to due process of law;

P48,100.00

PAs engagement is coterminous with the completion of the

3. That the Labor Arbiter erred in denying respondents Motion

program, and may be extended/renewed provided that the

plus ten (10%) percent Attorneys Fees or a TOTAL aggregate

for Reconsideration on an interlocutory order on the ground that

program is on-going; a PA may also be assigned to new

amount of PESOS: FIFTY TWO THOUSAND NINE HUNDRED TEN

the same is a prohibited pleading;

programs upon the cancellation of one program and the

(P52,910.00).

commencement of another. As such program employees, their

compensation is computed on a program basis, a fixed amount

4. That the Labor Arbiter erred when he ruled that the

Respondent Veneranda C. Sy is absolved from any liability.

complainants are regular employees of the respondent;

SO ORDERED.13

5. That the Labor Arbiter erred when he ruled that the

for performance services irrespective of the time consumed. At

any rate, petitioner claimed, as the payroll will show,
respondents were paid all salaries and benefits due them under
the law.12

complainants are entitled to 13th month pay, service incentive

However, the Labor Arbiter did not award money benefits as

leave pay and salary differential; and

provided in the CBA on his belief that he had no jurisdiction to

Petitioner also alleged that the Labor Arbiter had no jurisdiction

interpret and apply the agreement, as the same was within the

6. That the Labor Arbiter erred when he ruled that complainants

to involve the CBA and interpret the same, especially since

jurisdiction of the Voluntary Arbitrator as provided in Article 261

are entitled to attorneys fees.14

respondents were not covered by the bargaining unit.

of the Labor Code.

On July 30, 2001, the Labor Arbiter rendered judgment in favor

Respondents counsel received a copy of the decision on August

of the respondents, and declared that they were regular

29, 2001. Respondent Nazareno received her copy on August

employees of petitioner; as such, they were awarded monetary

27, 2001, while the other respondents received theirs on

WHEREFORE, premises considered, the decision of Labor Arbiter

benefits. The fallo of the decision reads:

September 8, 2001. Respondents signed and filed their Appeal

Jose G. Gutierrez dated 30 July 2001 is SET ASIDE and VACATED

Memorandum on September 18, 2001.

and a new one is entered ORDERING respondent ABS-CBN

On November 14, 2002, the NLRC rendered judgment modifying

WHEREFORE, the foregoing premises considered, judgment is

the decision of the Labor Arbiter. The fallo of the decision reads:

Broadcasting Corporation, as follows:

hereby rendered declaring the complainants regular employees

For its part, petitioner filed a motion for reconsideration, which

of the respondent ABS-CBN Broadcasting Corporation and

the Labor Arbiter denied and considered as an appeal,

1. To pay complainants of their wage differentials and other

directing the same respondent to pay complainants as follows:

conformably with Section 5, Rule V, of the NLRC Rules of

benefits arising from the CBA as of 30 September 2002 in the

Procedure. Petitioner forthwith appealed the decision to the

aggregate amount of Two Million Five Hundred, Sixty-One

I - Merlou A. Gerzon P12,025.00

NLRC, while respondents filed a partial appeal.

Thousand Nine Hundred Forty-Eight Pesos and 22/100

II - Marlyn Nazareno 12,025.00

In its appeal, petitioner alleged the following:

III - Jennifer Deiparine 12,025.00

1. That the Labor Arbiter erred in reviving or re-opening this

(P2,561,948.22), broken down as follows:

a. Deiparine, Jennifer - P 716,113.49
case which had long been dismissed without prejudice for more
IV - Josephine Sanchez Lerazan 12,025.00

b. Gerzon, Merlou - 716,113.49

than thirty (30) calendar days;

c. Nazareno, Marlyn - 716,113.49

19

d. Lerazan, Josephine Sanchez - 413,607.75

Total - P 2,561,948.22
2. To deliver to the complainants Two Hundred Thirty-Three

The NLRC ruled that respondents were entitled to the benefits

position paper on time is not a ground to strike out the paper

under the CBA because they were regular employees who

from the records, much less dismiss a complaint.

contributed to the profits of petitioner through their labor. The

NLRC cited the ruling of this Court in New Pacific Timber &

Anent the substantive issues, the appellate court stated that

Supply Company v. National Labor Relations Commission.16

respondents are not mere project employees, but regular

(233) sacks of rice as of 30 September 2002 representing their

rice subsidy in the CBA, broken down as follows:

employees who perform tasks necessary and desirable in the

Petitioner filed a motion for reconsideration, which the NLRC

usual trade and business of petitioner and not just its project

denied.

employees. Moreover, the CA added, the award of benefits

a. Deiparine, Jennifer - 60 Sacks

b. Gerzon, Merlou - 60 Sacks

accorded to rank-and-file employees under the 1996-1999 CBA

Petitioner thus filed a petition for certiorari under Rule 65 of the

is a necessary consequence of the NLRC ruling that

Rules of Court before the CA, raising both procedural and

respondents, as PAs, are regular employees.

substantive issues, as follows: (a) whether the NLRC acted

c. Nazareno, Marlyn - 60 Sacks
d. Lerazan, Josephine Sanchez - 53 Sacks
Total 233 Sacks; and

without jurisdiction in admitting the appeal of respondents; (b)

Finding no merit in petitioners motion for reconsideration, the

whether the NLRC committed palpable error in scrutinizing the

CA denied the same in a Resolution17 dated June 16, 2004.

reopening and revival of the complaint of respondents with the

Labor Arbiter upon due notice despite the lapse of 10 days from

Petitioner thus filed the instant petition for review on certiorari

their receipt of the July 30, 2001 Order of the Labor Arbiter; (c)

and raises the following assignments of error:

whether respondents were regular employees; (d) whether the

3. To grant to the complainants all the benefits of the CBA after

NLRC acted without jurisdiction in entertaining and resolving the

1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT

30 September 2002.

claim of the respondents under the CBA instead of referring the

JURISDICTION AND GRAVELY ERRED IN UPHOLDING THE

same to the Voluntary Arbitrators as provided in the CBA; and

NATIONAL LABOR RELATIONS COMMISSION NOTWITHSTANDING

(e) whether the NLRC acted with grave abuse of discretion when

THE PATENT NULLITY OF THE LATTERS DECISION AND

it awarded monetary benefits to respondents under the CBA

RESOLUTION.

SO ORDERED.

15

The NLRC declared that the Labor Arbiter acted conformably

although they are not members of the appropriate bargaining

with the Labor Code when it granted respondents motion to

unit.

refile the complaint and admit their position paper. Although

2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN

AFFIRMING THE RULING OF THE NLRC FINDING RESPONDENTS

respondents were not parties to the CBA between petitioner and

On February 10, 2004, the CA rendered judgment dismissing

REGULAR EMPLOYEES.

the ABS-CBN Rank-and-File Employees Union, the NLRC

the petition. It held that the perfection of an appeal shall be

nevertheless granted and computed respondents monetary

upon the expiration of the last day to appeal by all parties,

3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN

benefits based on the 1999 CBA, which was effective until

should there be several parties to a case. Since respondents

AFFIRMING THE RULING OF THE NLRC AWARDING CBA BENEFITS

September 2002. The NLRC also ruled that the Labor Arbiter

received their copies of the decision on September 8, 2001

TO RESPONDENTS.18

had jurisdiction over the complaint of respondents because they

(except respondent Nazareno who received her copy of the

acted in their individual capacities and not as members of the

decision on August 27, 2001), they had until September 18,

Considering that the assignments of error are interrelated, the

union. Their claim for monetary benefits was within the context

2001 within which to file their Appeal Memorandum. Moreover,

Court shall resolve them simultaneously.

of Article 217(6) of the Labor Code. The validity of respondents

the CA declared that respondents failure to submit their

claim does not depend upon the interpretation of the CBA.

20

Petitioner asserts that the appellate court committed palpable

appeal were strictly followed.19 The Court resorted to this

due process when the Labor Arbiter admitted respondents

and serious error of law when it affirmed the rulings of the

extraordinary measure even at the expense of sacrificing order

position paper without requiring it to file a comment before

NLRC, and entertained respondents appeal from the decision of

and efficiency if only to serve the greater principles of

admitting said position paper. The essence of due process in

the Labor Arbiter despite the admitted lapse of the

substantial justice and equity.

20

administrative proceedings is simply an opportunity to explain

reglementary period within which to perfect the same.

ones side or an opportunity to seek reconsideration of the

Petitioner likewise maintains that the 10-day period to appeal

In the case at bar, the NLRC did not commit a grave abuse of its

action or ruling complained of. Obviously, there is nothing in the

must be reckoned from receipt of a partys counsel, not from

discretion in giving Article 22321 of the Labor Code a liberal

records that would suggest that petitioner had absolute lack of

the time the party learns of the decision, that is, notice to

application to prevent the miscarriage of justice. Technicality

opportunity to be heard.27 Petitioner had the right to file a

counsel is notice to party and not the other way around. Finally,

should not be allowed to stand in the way of equitably and

motion for reconsideration of the Labor Arbiters admission of

petitioner argues that the reopening of a complaint which the

completely resolving the rights and obligations of the

respondents position paper, and even file a Reply thereto. In

Labor Arbiter has dismissed without prejudice is a clear

parties.22 We have held in a catena of cases that technical rules

fact, petitioner filed its position paper on April 2, 2001. It must

violation of Section 1, Rule V of the NLRC Rules; such order of

are not binding in labor cases and are not to be applied strictly

be stressed that Article 280 of the Labor Code was encoded in

dismissal had already attained finality and can no longer be set

if the result would be detrimental to the workingman.23

our statute books to hinder the circumvention by unscrupulous

aside.

employers of the employees right to security of tenure by

Admittedly, respondents failed to perfect their appeal from the

indiscriminately and absolutely ruling out all written and oral

Respondents, on the other hand, allege that their late appeal is

decision of the Labor Arbiter within the reglementary period

agreements inharmonious with the concept of regular

a non-issue because it was petitioners own timely appeal that

therefor. However, petitioner perfected its appeal within the

employment defined therein.28

empowered the NLRC to reopen the case. They assert that

period, and since petitioner had filed a timely appeal, the NLRC

although the appeal was filed 10 days late, it may still be given

acquired jurisdiction over the case to give due course to its

We quote with approval the following pronouncement of the

due course in the interest of substantial justice as an exception

appeal and render the decision of November 14, 2002. Case law

NLRC:

to the general rule that the negligence of a counsel binds the

is that the party who failed to appeal from the decision of the

client. On the issue of the late filing of their position paper, they

Labor Arbiter to the NLRC can still participate in a separate

The complainants, on the other hand, contend that respondents

maintain that this is not a ground to strike it out from the

appeal timely filed by the adverse party as the situation is

assailed the Labor Arbiters order dated 18 June 2001 as

records or dismiss the complaint.

considered to be of greater benefit to both parties.

24

violative of the NLRC Rules of Procedure and as such is violative

of their right to procedural due process. That while suggesting

We find no merit in the petition.

We find no merit in petitioners contention that the Labor

that an Order be instead issued by the Labor Arbiter for

Arbiter abused his discretion when he admitted respondents

complainants to refile this case, respondents impliedly submit

We agree with petitioners contention that the perfection of an

position paper which had been belatedly filed. It bears stressing

that there is not any substantial damage or prejudice upon the

appeal within the statutory or reglementary period is not only

that the Labor Arbiter is mandated by law to use every

refiling, even so, respondents suggestion acknowledges

mandatory, but also jurisdictional; failure to do so renders the

reasonable means to ascertain the facts in each case speedily

complainants right to prosecute this case, albeit with the

assailed decision final and executory and deprives the appellate

and objectively, without technicalities of law or procedure, all in

burden of repeating the same procedure, thus, entailing

25

court or body of the legal authority to alter the final judgment,

the interest of due process.

much less entertain the appeal. However, this Court has time

appellate court, respondents failure to submit a position paper

Indeed, as stressed by the

additional time, efforts, litigation cost and precious time for the
Arbiter to repeat the same process twice. Respondents

and again ruled that in exceptional cases, a belated appeal may

on time is not a ground for striking out the paper from the

suggestion, betrays its notion of prolonging, rather than

be given due course if greater injustice may occur if an appeal

records, much less for dismissing a complaint. 26 Likewise, there

promoting the early resolution of the case.

is not given due course than if the reglementary period to

is simply no truth to petitioners assertion that it was denied

21

Although the Labor Arbiter in his Order dated 18 June 2001

vs. UIC Teaching and Non-Teaching Personnel Employees, G.R.

factual in nature; nonetheless, the Court is constrained to

which revived and re-opened the dismissed case without

No. 144702, July 31, 2001).

resolve it due to its tremendous effects to the legions of

prejudice beyond the ten (10) day reglementary period had

production assistants working in the Philippine broadcasting

inadvertently failed to follow Section 16, Rule V, Rules

"In admitting the respondents position paper albeit late, the

Procedure of the NLRC which states:

Labor Arbiter acted within her discretion. In fact, she is enjoined

industry.

by law to use every reasonable means to ascertain the facts in

We agree with respondents contention that where a person has

"A party may file a motion to revive or re-open a case dismissed

each case speedily and objectively, without technicalities of law

rendered at least one year of service, regardless of the nature

without prejudice within ten (10) calendar days from receipt of

or procedure, all in the interest of due process". (Panlilio vs.

of the activity performed, or where the work is continuous or

notice of the order dismissing the same; otherwise, his only

NLRC, 281 SCRA 53).

intermittent, the employment is considered regular as long as

remedy shall be to re-file the case in the arbitration branch of

origin."

the activity exists, the reason being that a customary

The respondents were given by the Labor Arbiter the

appointment is not indispensable before one may be formally

opportunity to submit position paper. In fact, the respondents

declared as having attained regular status. Article 280 of the

the same is not a serious flaw that had prejudiced the

had filed their position paper on 2 April 2001. What is material

Labor Code provides:

respondents right to due process. The case can still be refiled

in the compliance of due process is the fact that the parties are

because it has not yet prescribed. Anyway, Article 221 of the

given the opportunities to submit position papers.

Labor Code provides:

ART. 280. REGULAR AND CASUAL EMPLOYMENT.The provisions

of written agreement to the contrary notwithstanding and

"Due process requirements are satisfied where the parties are

regardless of the oral agreement of the parties, an employment

"In any proceedings before the Commission or any of the Labor

given the opportunities to submit position papers". (Laurence

shall be deemed to be regular where the employee has been

Arbiters, the rules of evidence prevailing in courts of law or

vs. NLRC, 205 SCRA 737).

engaged to perform activities which are usually necessary or

equity shall not be controlling and it is the spirit and intention of

this Code that the Commission and its members and the Labor
Arbiters shall use every and all reasonable means to ascertain

desirable in the usual business or trade of the employer except

Thus, the respondent was not deprived of its Constitutional right
to due process of law.

29

the facts in each case speedily and objectively and without

where the employment has been fixed for a specific project or

undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or

regard to technicalities of law or procedure, all in the interest of

We reject, as barren of factual basis, petitioners contention that

where the work or services to be performed is seasonal in

due process."

respondents are considered as its talents, hence, not regular

nature and the employment is for the duration of the season.

employees of the broadcasting company. Petitioners claim that

The admission by the Labor Arbiter of the complainants

the functions performed by the respondents are not at all

In Universal Robina Corporation v. Catapang,31 the Court

Position Paper and Supplemental Manifestation which were

necessary, desirable, or even vital to its trade or business is

reiterated the test in determining whether one is a regular

belatedly filed just only shows that he acted within his

belied by the evidence on record.

employee:

means to ascertain the facts in each case speedily and

Case law is that this Court has always accorded respect and

The primary standard, therefore, of determining regular

objectively, without regard to technicalities of law or procedure,

finality to the findings of fact of the CA, particularly if they

employment is the reasonable connection between the

all in the interest of due process. Indeed, the failure to submit a

coincide with those of the Labor Arbiter and the National Labor

particular activity performed by the employee in relation to the

position paper on time is not a ground for striking out the paper

Relations Commission, when supported by substantial

usual trade or business of the employer. The test is whether the

from the records, much less for dismissing a complaint in the

evidence.30 The question of whether respondents are regular or

former is usually necessary or desirable in the usual business or

case of the complainant. (University of Immaculate Conception

project employees or independent contractors is essentially

trade of the employer. The connection can be determined by

discretion as he is enjoined by law to use every reasonable

22

considering the nature of work performed and its relation to the

scheme of the particular business or trade in its entirety. Also, if

such person is also then deemed to be regular with respect to

such activity and while such activity exists.

34

the employee has been performing the job for at least a year,

acquiesces, much less the procedure of hiring the employee or

the manner of paying the salary or the actual time spent at
work. It is the character of the activities performed in relation to

even if the performance is not continuous and merely

Not considered regular employees are "project employees," the

the particular trade or business taking into account all the

intermittent, the law deems repeated and continuing need for

completion or termination of which is more or less determinable

circumstances, and in some cases the length of time of its

its performance as sufficient evidence of the necessity if not

at the time of employment, such as those employed in

performance and its continued existence.36 It is obvious that

indispensability of that activity to the business. Hence, the

connection with a particular construction project, and "seasonal

one year after they were employed by petitioner, respondents

employment is considered regular, but only with respect to such

employees" whose employment by its nature is only desirable

became regular employees by operation of law.37

activity and while such activity exists.

32

As elaborated by this Court in Magsalin v. National Organization

of Working Men:

33

for a limited period of time. Even then, any employee who has
rendered at least one year of service, whether continuous or

Additionally, respondents cannot be considered as project or

intermittent, is deemed regular with respect to the activity

program employees because no evidence was presented to

performed and while such activity actually exists.

show that the duration and scope of the project were

determined or specified at the time of their engagement. Under

Even while the language of law might have been more

It is of no moment that petitioner hired respondents as

existing jurisprudence, project could refer to two distinguishable

definitive, the clarity of its spirit and intent, i.e., to ensure a

"talents." The fact that respondents received pre-agreed "talent

types of activities. First, a project may refer to a particular job or

"regular" workers security of tenure, however, can hardly be

fees" instead of salaries, that they did not observe the required

undertaking that is within the regular or usual business of the

doubted. In determining whether an employment should be

office hours, and that they were permitted to join other

employer, but which is distinct and separate, and identifiable as

considered regular or non-regular, the applicable test is the

productions during their free time are not conclusive of the

such, from the other undertakings of the company. Such job or

reasonable connection between the particular activity

nature of their employment. Respondents cannot be considered

undertaking begins and ends at determined or determinable

performed by the employee in relation to the usual business or

"talents" because they are not actors or actresses or radio

times. Second, the term project may also refer to a particular

trade of the employer. The standard, supplied by the law itself,

specialists or mere clerks or utility employees. They are regular

job or undertaking that is not within the regular business of the

is whether the work undertaken is necessary or desirable in the

employees who perform several different duties under the

employer. Such a job or undertaking must also be identifiably

usual business or trade of the employer, a fact that can be

control and direction of ABS-CBN executives and supervisors.

separate and distinct from the ordinary or regular business

assessed by looking into the nature of the services rendered

operations of the employer. The job or undertaking also begins

and ends at determined or determinable times. 38

and its relation to the general scheme under which the business

Thus, there are two kinds of regular employees under the law:

or trade is pursued in the usual course. It is distinguished from a

(1) those engaged to perform activities which are necessary or

specific undertaking that is divorced from the normal activities

desirable in the usual business or trade of the employer; and (2)

The principal test is whether or not the project employees were

required in carrying on the particular business or trade. But,

those casual employees who have rendered at least one year of

assigned to carry out a specific project or undertaking, the

although the work to be performed is only for a specific project

service, whether continuous or broken, with respect to the

duration and scope of which were specified at the time the

or seasonal, where a person thus engaged has been performing

activities in which they are employed.

35

employees were engaged for that project.39

the job for at least one year, even if the performance is not
continuous or is merely intermittent, the law deems the

The law overrides such conditions which are prejudicial to the

In this case, it is undisputed that respondents had continuously

repeated and continuing need for its performance as being

interest of the worker whose weak bargaining situation

performed the same activities for an average of five years.

sufficient to indicate the necessity or desirability of that activity

necessitates the succor of the State. What determines whether

Their assigned tasks are necessary or desirable in the usual

to the business or trade of the employer. The employment of

a certain employment is regular or otherwise is not the will or

business or trade of the petitioner. The persisting need for their

word of the employer, to which the worker oftentimes

services is sufficient evidence of the necessity and

23

indispensability of such services to petitioners business or

trade.

40

While length of time may not be a sole controlling test

qualification as complainant belies respondents claim of

SONZAs talent fees, amounting to P317,000 monthly in the

independent contractorship."

second and third year, are so huge and out of the ordinary that

for project employment, it can be a strong factor to determine

they indicate more an independent contractual relationship

whether the employee was hired for a specific undertaking or in

Independent contractors often present themselves to possess

rather than an employer-employee relationship. ABS-CBN

fact tasked to perform functions which are vital, necessary and

unique skills, expertise or talent to distinguish them from

agreed to pay SONZA such huge talent fees precisely because

indispensable to the usual trade or business of the

ordinary employees. The specific selection and hiring of SONZA,

of SONZAS unique skills, talent and celebrity status not

employer.41We note further that petitioner did not report the

because of his unique skills, talent and celebrity status not

possessed by ordinary employees. Obviously, SONZA acting

termination of respondents employment in the particular

possessed by ordinary employees, is a circumstance indicative,

alone possessed enough bargaining power to demand and

"project" to the Department of Labor and Employment Regional

but not conclusive, of an independent contractual relationship.

receive such huge talent fees for his services. The power to

Office having jurisdiction over the workplace within 30 days

If SONZA did not possess such unique skills, talent and celebrity

bargain talent fees way above the salary scales of ordinary

following the date of their separation from work, using the

status, ABS-CBN would not have entered into the Agreement

employees is a circumstance indicative, but not conclusive, of

prescribed form on employees termination/

with SONZA but would have hired him through its personnel

an independent contractual relationship.

dismissals/suspensions.42

department just like any other employee.

As gleaned from the records of this case, petitioner itself is not

In any event, the method of selecting and engaging SONZA

does not negate the status of SONZA as an independent

certain how to categorize respondents. In its earlier pleadings,

does not conclusively determine his status. We must consider

contractor. The parties expressly agreed on such mode of

petitioner classified respondents as program employees, and in

all the circumstances of the relationship, with the control test

payment. Under the Agreement, MJMDC is the AGENT of SONZA,

later pleadings, independent contractors. Program employees,

being the most important element.

to whom MJMDC would have to turn over any talent fee accruing

The payment of talent fees directly to SONZA and not to MJMDC

under the Agreement.44

or project employees, are different from independent

contractors because in the case of the latter, no employer-

B. Payment of Wages

employee relationship exists.

In the case at bar, however, the employer-employee

Petitioners reliance on the ruling of this Court in Sonza v. ABSCBN Broadcasting Corporation

43

is misplaced. In that case, the

ABS-CBN directly paid SONZA his monthly talent fees with no

relationship between petitioner and respondents has been

part of his fees going to MJMDC. SONZA asserts that this mode

proven.

of fee payment shows that he was an employee of ABS-CBN.

Court explained why Jose Sonza, a well-known television and

SONZA also points out that ABS-CBN granted him benefits and

First. In the selection and engagement of respondents, no

radio personality, was an independent contractor and not a

privileges "which he would not have enjoyed if he were truly the

peculiar or unique skill, talent or celebrity status was required

regular employee:

subject of a valid job contract."

from them because they were merely hired through petitioners

A. Selection and Engagement of Employee

All the talent fees and benefits paid to SONZA were the result of

personnel department just like any ordinary employee.

negotiations that led to the Agreement. If SONZA were ABS-

Second. The so-called "talent fees" of respondents correspond

ABS-CBN engaged SONZAS services to co-host its television

CBNs employee, there would be no need for the parties to

to wages given as a result of an employer-employee

and radio programs because of SONZAS peculiar skills, talent

stipulate on benefits such as "SSS, Medicare, x x x and 13th

relationship. Respondents did not have the power to bargain for

and celebrity status. SONZA contends that the "discretion used

month pay which the law automatically incorporates into every

huge talent fees, a circumstance negating independent

by respondent in specifically selecting and hiring complainant

employer-employee contract. Whatever benefits SONZA

contractual relationship.

over other broadcasters of possibly similar experience and

enjoyed arose from contract and not because of an employeremployee relationship.

24

Third. Petitioner could always discharge respondents should it

agreement is precisely because they were classified and treated

of Appeals in CA-G.R. SP No. 76582 are AFFIRMED. Costs against

find their work unsatisfactory, and respondents are highly

as project employees by petitioner.

petitioner.

As earlier stated, it is not the will or word of the employer which

SO ORDERED.

dependent on the petitioner for continued work.

Fourth. The degree of control and supervision exercised by

determines the nature of employment of an employee but the

petitioner over respondents through its supervisors negates the

nature of the activities performed by such employee in relation

allegation that respondents are independent contractors.

to the particular business or trade of the employer. Considering

that We have clearly found that private respondents are regular

The presumption is that when the work done is an integral part

employees of petitioner, their exclusion from the said CBA on

of the regular business of the employer and when the worker,

the misplaced belief of the parties to the said agreement that

relative to the employer, does not furnish an independent

they are project employees, is therefore not proper. Finding said

business or professional service, such work is a regular

private respondents as regular employees and not as mere

employment of such employee and not an independent

project employees, they must be accorded the benefits due

contractor.

45

The Court will peruse beyond any such agreement

under the said Collective Bargaining Agreement.

to examine the facts that typify the parties actual

relationship.46

A collective bargaining agreement is a contract entered into by

the union representing the employees and the employer.

It follows then that respondents are entitled to the benefits

However, even the non-member employees are entitled to the

provided for in the existing CBA between petitioner and its rank-

benefits of the contract. To accord its benefits only to members

and-file employees. As regular employees, respondents are

of the union without any valid reason would constitute undue

Republic of the Philippines

entitled to the benefits granted to all other regular employees

discrimination against non-members. A collective bargaining

SUPREME COURT

of petitioner under the CBA.47 We quote with approval the ruling

agreement is binding on all employees of the company.

of the appellate court, that the reason why production

Therefore, whatever benefits are given to the other employees

assistants were excluded from the CBA is precisely because

of ABS-CBN must likewise be accorded to private respondents

they were erroneously classified and treated as project

who were regular employees of petitioner.

Manila
FIRST DIVISION

48

G.R. No. 170087 August 31, 2006

employees by petitioner:
Besides, only talent-artists were excluded from the CBA and not
x x x The award in favor of private respondents of the benefits

production assistants who are regular employees of the

ANGELINA FRANCISCO, Petitioner,

accorded to rank-and-file employees of ABS-CBN under the

respondents. Moreover, under Article 1702 of the New Civil

vs.

1996-1999 CBA is a necessary consequence of public

Code: "In case of doubt, all labor legislation and all labor

NATIONAL LABOR RELATIONS COMMISSION, KASEI

respondents ruling that private respondents as production

contracts shall be construed in favor of the safety and decent

CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO ACEDO,

assistants of petitioner are regular employees. The monetary

living of the laborer."

DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and

RAMON ESCUETA,Respondents.

award is not considered as claims involving the interpretation or

implementation of the collective bargaining agreement. The

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for

reason why production assistants were excluded from the said

lack of merit. The assailed Decision and Resolution of the Court

DECISION

25

YNARES-SANTIAGO, J.:

with government agencies, especially with the Bureau of

Since she was no longer paid her salary, petitioner did not

Internal Revenue (BIR), Social Security System (SSS) and in the

report for work and filed an action for constructive dismissal

This petition for review on certiorari under Rule 45 of the Rules

city government of Makati; and to administer all other matters

before the labor arbiter.

of Court seeks to annul and set aside the Decision and

pertaining to the operation of Kasei Restaurant which is owned

Resolution of the Court of Appeals dated October 29, 2004

October 7, 2005,

and

and operated by Kasei Corporation.

Private respondents averred that petitioner is not an employee

respectively, in CA-G.R. SP No. 78515

of Kasei Corporation. They alleged that petitioner was hired in

dismissing the complaint for constructive dismissal filed by

For five years, petitioner performed the duties of Acting

1995 as one of its technical consultants on accounting matters

herein petitioner Angelina Francisco. The appellate court

Manager. As of December 31, 2000 her salary was P27,500.00

and act concurrently as Corporate Secretary. As technical

reversed and set aside the Decision of the National Labor

plus P3,000.00 housing allowance and a 10% share in the profit

consultant, petitioner performed her work at her own discretion

Relations Commission (NLRC) dated April 15, 2003,

in NLRC

of Kasei Corporation.

without control and supervision of Kasei Corporation. Petitioner

NCR CA No. 032766-02 which affirmed with modification the

decision of the Labor Arbiter dated July 31, 2002,

in NLRC-NCR

had no daily time record and she came to the office any time
In January 2001, petitioner was replaced by Liza R. Fuentes as

she wanted. The company never interfered with her work

Case No. 30-10-0-489-01, finding that private respondents were

Manager. Petitioner alleged that she was required to sign a

except that from time to time, the management would ask her

liable for constructive dismissal.

prepared resolution for her replacement but she was assured

opinion on matters relating to her profession. Petitioner did not

that she would still be connected with Kasei Corporation.

go through the usual procedure of selection of employees, but

In 1995, petitioner was hired by Kasei Corporation during its

Timoteo Acedo, the designated Treasurer, convened a meeting

her services were engaged through a Board Resolution

incorporation stage. She was designated as Accountant and

of all employees of Kasei Corporation and announced that

designating her as technical consultant. The money received by

Corporate Secretary and was assigned to handle all the

nothing had changed and that petitioner was still connected

petitioner from the corporation was her professional fee subject

accounting needs of the company. She was also designated as

with Kasei Corporation as Technical Assistant to Seiji Kamura

to the 10% expanded withholding tax on professionals, and that

Liaison Officer to the City of Makati to secure business permits,

and in charge of all BIR matters.

she was not one of those reported to the BIR or SSS as one of

construction permits and other licenses for the initial operation

of the company.

the companys employees.

12

Thereafter, Kasei Corporation reduced her salary by P2,500.00 a

month beginning January up to September 2001 for a total

Petitioners designation as technical consultant depended solely

Although she was designated as Corporate Secretary, she was

reduction of P22,500.00 as of September 2001. Petitioner was

upon the will of management. As such, her consultancy may be

not entrusted with the corporate documents; neither did she

not paid her mid-year bonus allegedly because the company

terminated any time considering that her services were only

attend any board meeting nor required to do so. She never

was not earning well. On October 2001, petitioner did not

temporary in nature and dependent on the needs of the

prepared any legal document and never represented the

receive her salary from the company. She made repeated

corporation.

company as its Corporate Secretary. However, on some

follow-ups with the company cashier but she was advised that

occasions, she was prevailed upon to sign documentation for

the company was not earning well.

the company.

10

To prove that petitioner was not an employee of the

corporation, private respondents submitted a list of employees

On October 15, 2001, petitioner asked for her salary from Acedo

for the years 1999 and 2000 duly received by the BIR showing

In 1996, petitioner was designated Acting Manager. The

and the rest of the officers but she was informed that she is no

that petitioner was not among the employees reported to the

corporation also hired Gerry Nino as accountant in lieu of

longer connected with the company.

11

BIR, as well as a list of payees subject to expanded withholding

petitioner. As Acting Manager, petitioner was assigned to handle

tax which included petitioner. SSS records were also submitted

recruitment of all employees and perform management

showing that petitioners latest employer was Seiji

administration functions; represent the company in all dealings

Corporation.

13

26

The Labor Arbiter found that petitioner was illegally dismissed,

If reinstatement is no longer feasible, respondents are ordered

respondent against Kasei Corporation, et al. for constructive

thus:

to pay complainant separation pay with additional backwages

dismissal.

that would accrue up to actual payment of separation pay.

WHEREFORE, premises considered, judgment is hereby

SO ORDERED.

16

14

rendered as follows:

SO ORDERED.

1. finding complainant an employee of respondent corporation;

On April 15, 2003, the NLRC affirmed with modification the

The appellate court denied petitioners motion for

reconsideration, hence, the present recourse.

Decision of the Labor Arbiter, the dispositive portion of which

2. declaring complainants dismissal as illegal;

reads:

The core issues to be resolved in this case are (1) whether there

3. ordering respondents to reinstate complainant to her former

PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby

private respondent Kasei Corporation; and if in the affirmative,

position without loss of seniority rights and jointly and severally

MODIFIED as follows:

(2) whether petitioner was illegally dismissed.

1) Respondents are directed to pay complainant separation pay

Considering the conflicting findings by the Labor Arbiter and the

computed at one month per year of service in addition to full

National Labor Relations Commission on one hand, and the

backwages from October 2001 to July 31, 2002;

Court of Appeals on the other, there is a need to reexamine the

was an employer-employee relationship between petitioner and

pay complainant her money claims in accordance with the

following computation:
a. Backwages 10/2001 07/2002 275,000.00

records to determine which of the propositions espoused by the

(27,500 x 10 mos.)

2) The awards representing moral and exemplary damages and

contending parties is supported by substantial evidence.

17

10% share in profit in the respective accounts of P100,000.00

b. Salary Differentials (01/2001 09/2001) 22,500.00

and P361,175.00 are deleted;

We held in Sevilla v. Court of Appeals

18

that in this jurisdiction,

there has been no uniform test to determine the existence of an

c. Housing Allowance (01/2001 07/2002) 57,000.00

3) The award of 10% attorneys fees shall be based on salary

employer-employee relation. Generally, courts have relied on

differential award only;

the so-called right of control test where the person for whom

d. Midyear Bonus 2001 27,500.00

e. 13th Month Pay 27,500.00

the services are performed reserves a right to control not only

4) The awards representing salary differentials, housing

the end to be achieved but also the means to be used in

allowance, mid year bonus and 13th month pay are AFFIRMED.

reaching such end. In addition to the standard of right-ofcontrol, the existing economic conditions prevailing between

f. 10% share in the profits of Kasei

SO ORDERED.

15

the parties, like the inclusion of the employee in the payrolls,

can help in determining the existence of an employer-employee

Corp. from 1996-2001 361,175.00

On appeal, the Court of Appeals reversed the NLRC decision,

relationship.

thus:
g. Moral and exemplary damages 100,000.00
h. 10% Attorneys fees 87,076.50
P957,742.50

However, in certain cases the control test is not sufficient to

WHEREFORE, the instant petition is hereby GRANTED. The

give a complete picture of the relationship between the parties,

decision of the National Labor Relations Commissions dated

owing to the complexity of such a relationship where several

April 15, 2003 is hereby REVERSED and SET ASIDE and a new

positions have been held by the worker. There are instances

one is hereby rendered dismissing the complaint filed by private

when, aside from the employers power to control the employee

27

with respect to the means and methods by which the work is to

relationship based on an analysis of the totality of economic

the corporation such as securing business permits and other

be accomplished, economic realities of the employment

circumstances of the worker.

licenses over an indefinite period of engagement.

classification of the individual, whether as employee,

Thus, the determination of the relationship between employer

Under the broader economic reality test, the petitioner can

independent contractor, corporate officer or some other

and employee depends upon the circumstances of the whole

likewise be said to be an employee of respondent corporation

relations help provide a comprehensive analysis of the true

capacity.

economic activity,

22

such as: (1) the extent to which the

because she had served the company for six years before her

services performed are an integral part of the employers

dismissal, receiving check vouchers indicating her

The better approach would therefore be to adopt a two-tiered

business; (2) the extent of the workers investment in

salaries/wages, benefits, 13th month pay, bonuses and

test involving: (1) the putative employers power to control the

equipment and facilities; (3) the nature and degree of control

allowances, as well as deductions and Social Security

employee with respect to the means and methods by which the

exercised by the employer; (4) the workers opportunity for

contributions from August 1, 1999 to December 18,

work is to be accomplished; and (2) the underlying economic

profit and loss; (5) the amount of initiative, skill, judgment or

2000.

realities of the activity or relationship.

foresight required for the success of the claimed independent

respondent corporation made a report to the SSS signed by

enterprise; (6) the permanency and duration of the relationship

Irene Ballesteros. Petitioners membership in the SSS as

This two-tiered test would provide us with a framework of

between the worker and the employer; and (7) the degree of

manifested by a copy of the SSS specimen signature card which

analysis, which would take into consideration the totality of

dependency of the worker upon the employer for his continued

was signed by the President of Kasei Corporation and the

circumstances surrounding the true nature of the relationship

employment in that line of business.

23

26

When petitioner was designated General Manager,

inclusion of her name in the on-line inquiry system of the SSS

between the parties. This is especially appropriate in this case

evinces the existence of an employer-employee relationship

The proper standard of economic dependence is whether the

base the relationship on; and due to the complexity of the

worker is dependent on the alleged employer for his continued

relationship based on the various positions and responsibilities

employment in that line of business.

given to the worker over the period of the latters employment.

touchstone of economic reality in analyzing possible

dependent on respondent corporation for her continued

employment relationships for purposes of the Federal Labor

employment in the latters line of business.

The control test initially found application in the case of Viaa v.

Al-Lagadan and Piga,
Appeals,

20

19

and lately in Leonardo v. Court of

where we held that there is an employer-employee

relationship when the person for whom the services are

Standards Act is dependency.

24

In the United States, the

between petitioner and respondent corporation.

27

where there is no written agreement or terms of reference to

It is therefore apparent that petitioner is economically

25

By analogy, the benchmark of

28

economic reality in analyzing possible employment

In Domasig v. National Labor Relations Commission,

relationships for purposes of the Labor Code ought to be the

that in a business establishment, an identification card is

economic dependence of the worker on his employer.

provided not only as a security measure but mainly to identify

performed reserves the right to control not only the end

we held

the holder thereof as a bona fide employee of the firm that

achieved but also the manner and means used to achieve that

By applying the control test, there is no doubt that petitioner is

issues it. Together with the cash vouchers covering petitioners

end.

an employee of Kasei Corporation because she was under the

salaries for the months stated therein, these matters constitute

direct control and supervision of Seiji Kamura, the corporations

substantial evidence adequate to support a conclusion that

Technical Consultant. She reported for work regularly and

petitioner was an employee of private respondent.

In Sevilla v. Court of Appeals,

21

we observed the need to

consider the existing economic conditions prevailing between

served in various capacities as Accountant, Liaison Officer,

the parties, in addition to the standard of right-of-control like

Technical Consultant, Acting Manager and Corporate Secretary,

We likewise ruled in Flores v. Nuestro

the inclusion of the employee in the payrolls, to give a clearer

with substantially the same job functions, that is, rendering

registers its workers with the SSS is proof that the latter were

picture in determining the existence of an employer-employee

accounting and tax services to the company and performing

the formers employees. The coverage of Social Security Law is

29

that a corporation who

functions necessary and desirable for the proper operation of

28

predicated on the existence of an employer-employee

was selected and engaged by the company for compensation,

In affording full protection to labor, this Court must ensure equal

relationship.

and is economically dependent upon respondent for her

work opportunities regardless of sex, race or creed. Even as we,

continued employment in that line of business. Her main job

in every case, attempt to carefully balance the fragile

Furthermore, the affidavit of Seiji Kamura dated December 5,

function involved accounting and tax services rendered to

relationship between employees and employers, we are mindful

2001 has clearly established that petitioner never acted as

respondent corporation on a regular basis over an indefinite

of the fact that the policy of the law is to apply the Labor Code

Corporate Secretary and that her designation as such was only

period of engagement. Respondent corporation hired and

to a greater number of employees. This would enable

for convenience. The actual nature of petitioners job was as

engaged petitioner for compensation, with the power to dismiss

employees to avail of the benefits accorded to them by law, in

Kamuras direct assistant with the duty of acting as Liaison

her for cause. More importantly, respondent corporation had the

line with the constitutional mandate giving maximum aid and

Officer in representing the company to secure construction

power to control petitioner with the means and methods by

protection to labor, promoting their welfare and reaffirming it as

permits, license to operate and other requirements imposed by

which the work is to be accomplished.

a primary social economic force in furtherance of social justice

government agencies. Petitioner was never entrusted with

and national development.

corporate documents of the company, nor required to attend

The corporation constructively dismissed petitioner when it

the meeting of the corporation. She was never privy to the

reduced her salary by P2,500 a month from January to

WHEREFORE, the petition is GRANTED. The Decision and

preparation of any document for the corporation, although once

September 2001. This amounts to an illegal termination of

Resolution of the Court of Appeals dated October 29, 2004 and

in a while she was required to sign prepared documentation for

employment, where the petitioner is entitled to full backwages.

October 7, 2005, respectively, in CA-G.R. SP No. 78515

Since the position of petitioner as accountant is one of trust and

are ANNULLED and SET ASIDE. The Decision of the National

confidence, and under the principle of strained relations,

Labor Relations Commission dated April 15, 2003 in NLRC NCR

The second affidavit of Kamura dated March 7, 2002 which

petitioner is further entitled to separation pay, in lieu of

CA No. 032766-02, isREINSTATED. The case is REMANDED to

repudiated the December 5, 2001 affidavit has been allegedly

reinstatement.

the company.

30

34

the Labor Arbiter for the recomputation of petitioner Angelina

withdrawn by Kamura himself from the records of the

case.

31

Regardless of this fact, we are convinced that the

Franciscos full backwages from the time she was illegally

A diminution of pay is prejudicial to the employee and amounts

terminated until the date of finality of this decision, and

allegations in the first affidavit are sufficient to establish that

to constructive dismissal. Constructive dismissal is an

separation pay representing one-half month pay for every year

petitioner is an employee of Kasei Corporation.

involuntary resignation resulting in cessation of work resorted

of service, where a fraction of at least six months shall be

to when continued employment becomes impossible,

considered as one whole year.

Granting arguendo, that the second affidavit validly repudiated

unreasonable or unlikely; when there is a demotion in rank or a

the first one, courts do not generally look with favor on any

diminution in pay; or when a clear discrimination, insensibility

retraction or recanted testimony, for it could have been secured

or disdain by an employer becomes unbearable to an

by considerations other than to tell the truth and would make

employee.

solemn trials a mockery and place the investigation of the truth

ruled that where an employee ceases to work due to a

at the mercy of unscrupulous witnesses.

32

A recantation does

35

In Globe Telecom, Inc. v. Florendo-Flores,

36

we

demotion of rank or a diminution of pay, an unreasonable

not necessarily cancel an earlier declaration, but like any other

situation arises which creates an adverse working environment

testimony the same is subject to the test of credibility and

rendering it impossible for such employee to continue working

should be received with caution.

33

SO ORDERED.

for her employer. Hence, her severance from the company was
not of her own making and therefore amounted to an illegal

Based on the foregoing, there can be no other conclusion that

termination of employment.

petitioner is an employee of respondent Kasei Corporation. She

29

admixed with dextrose, 5%, in lactated Ringers' solution, at the

rate of eight to ten micro-drops per minute.
CARPIO, J.:
The Case
This petition for review1 assails the 6 February 1998
Decision2 and 21 March 2000 Resolution3 of the Court of
Appeals in CA-G.R. CV No. 45641. The Court of Appeals
affirmed in toto the 22 November 1993 Decision4 of the
Regional Trial Court of Manila, Branch 33, finding Dr. Oscar
Estrada solely liable for damages for the death of his patient,
Corazon Nogales, while absolving the remaining respondents of
any liability. The Court of Appeals denied petitioners' motion for
reconsideration.
The Facts

6
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 142625

December 19, 2006

ROGELIO P. NOGALES, for himself and on behalf of the

minors, ROGER ANTHONY, ANGELICA, NANCY, and
MICHAEL CHRISTOPHER, all surnamed
NOGALES, petitioners,
vs.
CAPITOL MEDICAL CENTER, DR. OSCAR ESTRADA, DR. ELY
VILLAFLOR, DR. ROSA UY, DR. JOEL ENRIQUEZ, DR.
PERPETUA LACSON, DR. NOE ESPINOLA, and NURSE J.
DUMLAO, respondents.

DECISION

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. While
Corazon was on her last trimester of pregnancy, Dr. Estrada
noted an increase in her blood pressure and development of leg
edema5 indicating preeclampsia,6 which is a dangerous
complication of pregnancy.7
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").
On 26 May 1976, Corazon was admitted at 2:30 a.m. at the CMC
after the staff nurse noted the written admission request8 of Dr.
Estrada. Upon Corazon's admission at the CMC, Rogelio Nogales
("Rogelio") executed and signed the "Consent on Admission and
Agreement"9 and "Admission Agreement."10 Corazon was then
brought to the labor room of the CMC.
Dr. Rosa Uy ("Dr. Uy"), who was then a resident physician of
CMC, conducted an internal examination of Corazon. Dr. Uy then
called up Dr. Estrada to notify him of her findings.
Based on the Doctor's Order Sheet,11 around 3:00 a.m., Dr.
Estrada ordered for 10 mg. of valium to be administered
immediately by intramuscular injection. Dr. Estrada later
ordered the start of intravenous administration of syntocinon

According to the Nurse's Observation Notes, 12 Dr. Joel Enriquez

("Dr. Enriquez"), an anesthesiologist at CMC, was notified at
4:15 a.m. of Corazon's admission. Subsequently, when asked if
he needed the services of an anesthesiologist, Dr. Estrada
refused. Despite Dr. Estrada's refusal, Dr. Enriquez stayed to
observe Corazon's condition.
At 6:00 a.m., Corazon was transferred to Delivery Room No. 1 of
the CMC. At 6:10 a.m., Corazon's bag of water ruptured
spontaneously. At 6:12 a.m., Corazon's cervix was fully dilated.
At 6:13 a.m., Corazon started to experience convulsions.
At 6:15 a.m., Dr. Estrada ordered the injection of ten grams of
magnesium sulfate. However, Dr. Ely Villaflor ("Dr. Villaflor"),
who was assisting Dr. Estrada, administered only 2.5 grams of
magnesium sulfate.
At 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. The baby came
out in an apnic, cyanotic, weak and injured condition.
Consequently, the baby had to be intubated and resuscitated by
Dr. Enriquez and Dr. Payumo.
At 6:27 a.m., Corazon began to manifest moderate vaginal
bleeding which rapidly became profuse. Corazon's blood
pressure dropped from 130/80 to 60/40 within five minutes.
There was continuous profuse vaginal bleeding. The assisting
nurse administered hemacel through a gauge 19 needle as a
side drip to the ongoing intravenous injection of dextrose.
At 7:45 a.m., Dr. Estrada ordered blood typing and cross
matching with bottled blood. It took approximately 30 minutes
for the CMC laboratory, headed by Dr. Perpetua Lacson ("Dr.
Lacson"), to comply with Dr. Estrada's order and deliver the
blood.
At 8:00 a.m., Dr. Noe Espinola ("Dr. Espinola"), head of the
Obstetrics-Gynecology Department of the CMC, was apprised of
Corazon's condition by telephone. Upon being informed that
Corazon was bleeding profusely, Dr. Espinola ordered
immediate hysterectomy. Rogelio was made to sign a "Consent
to Operation."13
Due to the inclement weather then, Dr. Espinola, who was
fetched from his residence by an ambulance, arrived at the CMC
about an hour later or at 9:00 a.m. He examined the patient

30

and ordered some resuscitative measures to be administered.

Despite Dr. Espinola's efforts, Corazon died at 9:15 a.m. The
cause of death was "hemorrhage, post partum." 14
On 14 May 1980, petitioners filed a complaint for
damages15 with the Regional Trial Court16 of Manila against CMC,
Dr. Estrada, Dr. Villaflor, Dr. Uy, Dr. Enriquez, Dr. Lacson, Dr.
Espinola, and a certain Nurse J. Dumlao for the death of
Corazon. Petitioners mainly contended that defendant
physicians and CMC personnel were negligent in the treatment
and management of Corazon's condition. Petitioners charged
CMC with negligence in the selection and supervision of
defendant physicians and hospital staff.
For failing to file their answer to the complaint despite service
of summons, the trial court declared Dr. Estrada, Dr. Enriquez,
and Nurse Dumlao in default.17 CMC, Dr. Villaflor, Dr. Uy, Dr.
Espinola, and Dr. Lacson filed their respective answers denying
and opposing the allegations in the complaint. Subsequently,
trial ensued.
After more than 11 years of trial, the trial court rendered
judgment on 22 November 1993 finding Dr. Estrada solely liable
for damages. The trial court ruled as follows:
The victim was under his pre-natal care, apparently,
his fault began from his incorrect and inadequate
management and lack of treatment of the preeclamptic condition of his patient. It is not disputed
that he misapplied the forceps in causing the delivery
because it resulted in a large cervical tear which had
caused the profuse bleeding which he also failed to
control with the application of inadequate injection of
magnesium sulfate by his assistant Dra. Ely Villaflor.
Dr. Estrada even failed to notice the erroneous
administration by nurse Dumlao of hemacel by way of
side drip, instead of direct intravenous injection, and
his failure to consult a senior obstetrician at an early
stage of the problem.
On the part however of Dra. Ely Villaflor, Dra. Rosa Uy,
Dr. Joel Enriquez, Dr. Lacson, Dr. Espinola, nurse J.
Dumlao and CMC, the Court finds no legal justification
to find them civilly liable.
On the part of Dra. Ely Villaflor, she was only taking
orders from Dr. Estrada, the principal physician of
Corazon Nogales. She can only make suggestions in
the manner the patient maybe treated but she cannot
impose her will as to do so would be to substitute her
good judgment to that of Dr. Estrada. If she failed to

correctly diagnose the true cause of the bleeding

which in this case appears to be a cervical laceration,
it cannot be safely concluded by the Court that Dra.
Villaflor had the correct diagnosis and she failed to
inform Dr. Estrada. No evidence was introduced to
show that indeed Dra. Villaflor had discovered that
there was laceration at the cervical area of the
patient's internal organ.
On the part of nurse Dumlao, there is no showing that
when she administered the hemacel as a side drip, she
did it on her own. If the correct procedure was directly
thru the veins, it could only be because this was what
was probably the orders of Dr. Estrada.
While the evidence of the plaintiffs shows that Dr. Noe
Espinola, who was the Chief of the Department of
Obstetrics and Gynecology who attended to the patient
Mrs. Nogales, it was only at 9:00 a.m. That he was able
to reach the hospital because of typhoon Didang
(Exhibit 2). While he was able to give prescription in
the manner Corazon Nogales may be treated, the
prescription was based on the information given to him
by phone and he acted on the basis of facts as
presented to him, believing in good faith that such is
the correct remedy. He was not with Dr. Estrada when
the patient was brought to the hospital at 2:30 o'clock
a.m. So, whatever errors that Dr. Estrada committed on
the patient before 9:00 o'clock a.m. are certainly the
errors of Dr. Estrada and cannot be the mistake of Dr.
Noe Espinola. His failure to come to the hospital on
time was due to fortuitous event.
On the part of Dr. Joel Enriquez, while he was present
in the delivery room, it is not incumbent upon him to
call the attention of Dr. Estrada, Dra. Villaflor and also
of Nurse Dumlao on the alleged errors committed by
them. Besides, as anesthesiologist, he has no authority
to control the actuations of Dr. Estrada and Dra.
Villaflor. For the Court to assume that there were errors
being committed in the presence of Dr. Enriquez would
be to dwell on conjectures and speculations.
On the civil liability of Dr. Perpetua Lacson, [s]he is a
hematologist and in-charge of the blood bank of the
CMC. The Court cannot accept the theory of the
plaintiffs that there was delay in delivering the blood
needed by the patient. It was testified, that in order
that this blood will be made available, a laboratory test
has to be conducted to determine the type of blood,
cross matching and other matters consistent with
medical science so, the lapse of 30 minutes maybe

considered a reasonable time to do all of these things,

and not a delay as the plaintiffs would want the Court
to believe.
Admittedly, Dra. Rosa Uy is a resident physician of the
Capitol Medical Center. She was sued because of her
alleged failure to notice the incompetence and
negligence of Dr. Estrada. However, there is no
evidence to support such theory. No evidence was
adduced to show that Dra. Rosa Uy as a resident
physician of Capitol Medical Center, had knowledge of
the mismanagement of the patient Corazon Nogales,
and that notwithstanding such knowledge, she
tolerated the same to happen.
In the pre-trial order, plaintiffs and CMC agreed that
defendant CMC did not have any hand or participation
in the selection or hiring of Dr. Estrada or his assistant
Dra. Ely Villaflor as attending physician[s] of the
deceased. In other words, the two (2) doctors were not
employees of the hospital and therefore the hospital
did not have control over their professional conduct.
When Mrs. Nogales was brought to the hospital, it was
an emergency case and defendant CMC had no choice
but to admit her. Such being the case, there is
therefore no legal ground to apply the provisions of
Article 2176 and 2180 of the New Civil Code referring
to the vicarious liability of an employer for the
negligence of its employees. If ever in this case there
is fault or negligence in the treatment of the deceased
on the part of the attending physicians who were
employed by the family of the deceased, such civil
liability should be borne by the attending physicians
under the principle of "respondeat superior".
WHEREFORE, premises considered, judgment is hereby
rendered finding defendant Dr. Estrada of Number 13
Pitimini St. San Francisco del Monte, Quezon City civilly
liable to pay plaintiffs: 1) By way of actual damages in
the amount of P105,000.00; 2) By way of moral
damages in the amount of P700,000.00; 3) Attorney's
fees in the amount of P100,000.00 and to pay the
costs of suit.
For failure of the plaintiffs to adduce evidence to
support its [sic] allegations against the other
defendants, the complaint is hereby ordered
dismissed. While the Court looks with disfavor the filing
of the present complaint against the other defendants
by the herein plaintiffs, as in a way it has caused them
personal inconvenience and slight damage on their
name and reputation, the Court cannot accepts [sic]

31

however, the theory of the remaining defendants that

plaintiffs were motivated in bad faith in the filing of this
complaint. For this reason defendants' counterclaims
are hereby ordered dismissed.
SO ORDERED.18
Petitioners appealed the trial court's decision. Petitioners
claimed that aside from Dr. Estrada, the remaining respondents
should be held equally liable for negligence. Petitioners pointed
out the extent of each respondent's alleged liability.
On 6 February 1998, the Court of Appeals affirmed the decision
of the trial court.19 Petitioners filed a motion for reconsideration
which the Court of Appeals denied in its Resolution of 21 March
2000.20
Hence, this petition.
Meanwhile, petitioners filed a Manifestation dated 12 April
200221 stating that respondents Dr. Estrada, Dr. Enriquez, Dr.
Villaflor, and Nurse Dumlao "need no longer be notified of the
petition because they are absolutely not involved in the issue
raised before the [Court], regarding the liability of
[CMC]."22 Petitioners stressed that the subject matter of this
petition is the liability of CMC for the negligence of Dr. Estrada. 23
The Court issued a Resolution dated 9 September
200224 dispensing with the requirement to submit the correct
and present addresses of respondents Dr. Estrada, Dr. Enriquez,
Dr. Villaflor, and Nurse Dumlao. The Court stated that with the
filing of petitioners' Manifestation, it should be understood that
they are claiming only against respondents CMC, Dr. Espinola,
Dr. Lacson, and Dr. Uy who have filed their respective
comments. Petitioners are foregoing further claims against
respondents Dr. Estrada, Dr. Enriquez, Dr. Villaflor, and Nurse
Dumlao.
The Court noted that Dr. Estrada did not appeal the decision of
the Court of Appeals affirming the decision of the Regional Trial
Court. Accordingly, the decision of the Court of Appeals,
affirming the trial court's judgment, is already final as against
Dr. Oscar Estrada.
Petitioners filed a motion for reconsideration25 of the Court's 9
September 2002 Resolution claiming that Dr. Enriquez, Dr.
Villaflor and Nurse Dumlao were notified of the petition at their
counsels' last known addresses. Petitioners reiterated their
imputation of negligence on these respondents. The Court

denied petitioners' Motion for Reconsideration in its 18 February

2004 Resolution.26

While it found the amount of damages fair and reasonable, the

Court of Appeals held that no interest could be imposed on
unliquidated claims or damages.

The Court of Appeals' Ruling

In its Decision of 6 February 1998, the Court of Appeals upheld
the trial court's ruling. The Court of Appeals rejected petitioners'
view that the doctrine in Darling v. Charleston Community
Memorial Hospital27 applies to this case. According to the Court
of Appeals, the present case differs from the Darling case since
Dr. Estrada is an independent contractor-physician whereas
the Darling case involved a physician and a nurse who were
employees of the hospital.
Citing other American cases, the Court of Appeals further held
that the mere fact that a hospital permitted a physician to
practice medicine and use its facilities is not sufficient to render
the hospital liable for the physician's negligence. 28 A hospital is
not responsible for the negligence of a physician who is an
independent contractor.29
The Court of Appeals found the cases of Davidson v.
Conole30 and Campbell v. Emma Laing Stevens
Hospital31applicable to this case. Quoting Campbell, the Court of
Appeals stated that where there is no proof that defendant
physician was an employee of defendant hospital or that
defendant hospital had reason to know that any acts of
malpractice would take place, defendant hospital could not be
held liable for its failure to intervene in the relationship of
physician-patient between defendant physician and plaintiff.
On the liability of the other respondents, the Court of Appeals
applied the "borrowed servant" doctrine considering that Dr.
Estrada was an independent contractor who was merely
exercising hospital privileges. This doctrine provides that once
the surgeon enters the operating room and takes charge of the
proceedings, the acts or omissions of operating room personnel,
and any negligence associated with such acts or omissions, are
imputable to the surgeon.32 While the assisting physicians and
nurses may be employed by the hospital, or engaged by the
patient, they normally become the temporary servants or
agents of the surgeon in charge while the operation is in
progress, and liability may be imposed upon the surgeon for
their negligent acts under the doctrine of respondeat superior.33
The Court of Appeals concluded that since Rogelio engaged Dr.
Estrada as the attending physician of his wife, any liability for
malpractice must be Dr. Estrada's sole responsibility.

The Issue
Basically, the issue in this case is whether CMC is vicariously
liable for the negligence of Dr. Estrada. The resolution of this
issue rests, on the other hand, on the ascertainment of the
relationship between Dr. Estrada and CMC. The Court also
believes that a determination of the extent of liability of the
other respondents is inevitable to finally and completely dispose
of the present controversy.
The Ruling of the Court
The petition is partly meritorious.
On the Liability of CMC
Dr. Estrada's negligence in handling the treatment and
management of Corazon's condition which ultimately resulted in
Corazon's death is no longer in issue. Dr. Estrada did not appeal
the decision of the Court of Appeals which affirmed the ruling of
the trial court finding Dr. Estrada solely liable for damages.
Accordingly, the finding of the trial court on Dr. Estrada's
negligence is already final.
Petitioners maintain that CMC is vicariously liable for Dr.
Estrada's negligence based on Article 2180 in relation to Article
2176 of the Civil Code. These provisions pertinently state:
Art. 2180. The obligation imposed by article 2176 is
demandable not only for one's own acts or omissions,
but also for those of persons for whom one is
responsible.
xxxx
Employers shall be liable for the damages caused by
their employees and household helpers acting within
the scope of their assigned tasks, even though the
former are not engaged in any business or industry.
xxxx
The responsibility treated of in this article shall cease
when the persons herein mentioned prove that they

32

observed all the diligence of a good father of a family

to prevent damage.
Art. 2176. Whoever by act or omission causes damage
to another, there being fault or negligence, is obliged
to pay for the damage done. Such fault or negligence,
if there is no pre-existing contractual relation between
the parties, is called a quasi-delict and is governed by
the provisions of this Chapter.
Similarly, in the United States, a hospital which is the employer,
master, or principal of a physician employee, servant, or agent,
may be held liable for the physician's negligence under the
doctrine of respondeat superior.34
In the present case, petitioners maintain that CMC, in allowing
Dr. Estrada to practice and admit patients at CMC, should be
liable for Dr. Estrada's malpractice. Rogelio claims that he knew
Dr. Estrada as an accredited physician of CMC, though he
discovered later that Dr. Estrada was not a salaried employee of
the CMC.35 Rogelio further claims that he was dealing with CMC,
whose primary concern was the treatment and management of
his wife's condition. Dr. Estrada just happened to be the specific
person he talked to representing CMC.36 Moreover, the fact that
CMC made Rogelio sign a Consent on Admission and Admission
Agreement37 and a Consent to Operation printed on the
letterhead of CMC indicates that CMC considered Dr. Estrada as
a member of its medical staff.
On the other hand, CMC disclaims liability by asserting that Dr.
Estrada was a mere visiting physician and that it admitted
Corazon because her physical condition then was classified an
emergency obstetrics case.38
CMC alleges that Dr. Estrada is an independent contractor "for
whose actuations CMC would be a total stranger." CMC
maintains that it had no control or supervision over Dr. Estrada
in the exercise of his medical profession.
The Court had the occasion to determine the relationship
between a hospital and a consultant or visiting physician and
the liability of such hospital for that physician's negligence
in Ramos v. Court of Appeals,39 to wit:
In the first place, hospitals exercise significant control
in the hiring and firing of consultants and in the
conduct of their work within the hospital premises.
Doctors who apply for "consultant" slots, visiting or
attending, are required to submit proof of completion
of residency, their educational qualifications; generally,

evidence of accreditation by the appropriate board

(diplomate), evidence of fellowship in most cases, and
references. These requirements are carefully
scrutinized by members of the hospital administration
or by a review committee set up by the hospital who
either accept or reject the application. This is
particularly true with respondent hospital.
After a physician is accepted, either as a visiting or
attending consultant, he is normally required to attend
clinico-pathological conferences, conduct bedside
rounds for clerks, interns and residents, moderate
grand rounds and patient audits and perform other
tasks and responsibilities, for the privilege of being
able to maintain a clinic in the hospital, and/or for the
privilege of admitting patients into the hospital. In
addition to these, the physician's performance as a
specialist is generally evaluated by a peer review
committee on the basis of mortality and morbidity
statistics, and feedback from patients, nurses, interns
and residents. A consultant remiss in his duties, or a
consultant who regularly falls short of the minimum
standards acceptable to the hospital or its peer review
committee, is normally politely terminated.
In other words, private hospitals, hire, fire and exercise
real control over their attending and visiting
"consultant" staff. While "consultants" are not,
technically employees, a point which respondent
hospital asserts in denying all responsibility for
the patient's condition, the control exercised,
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. In assessing
whether such a relationship in fact exists, the
control test is determining. Accordingly, on the
basis of the foregoing, we rule that for the
purpose of allocating responsibility in medical
negligence cases, an employer-employee
relationship in effect exists between hospitals
and their attending and visiting physicians. This
being the case, the question now arises as to whether
or not respondent hospital is solidarily liable with
respondent doctors for petitioner's condition.
The basis for holding an employer solidarily
responsible for the negligence of its employee is found
in Article 2180 of the Civil Code which considers a
person accountable not only for his own acts but also
for those of others based on the former's responsibility

under a relationship of patria potestas. x x

x40 (Emphasis supplied)
While the Court in Ramos did not expound on the control test,
such test essentially determines whether an employment
relationship exists between a physician and a hospital based on
the exercise of control over the physician as to details.
Specifically, the employer (or the hospital) must have the right
to control both the means and the details of the process by
which the employee (or the physician) is to accomplish his
task.41
After a thorough examination of the voluminous records of this
case, the Court finds no single evidence pointing to CMC's
exercise of control over Dr. Estrada's treatment and
management of Corazon's condition. It is undisputed that
throughout Corazon's pregnancy, she was under the exclusive
prenatal care of Dr. Estrada. At the time of Corazon's admission
at CMC and during her delivery, it was Dr. Estrada, assisted by
Dr. Villaflor, who attended to Corazon. There was no showing
that CMC had a part in diagnosing Corazon's condition. While
Dr. Estrada enjoyed staff privileges at CMC, such fact alone did
not make him an employee of CMC.42 CMC merely allowed Dr.
Estrada to use its facilities43 when Corazon was about to give
birth, which CMC considered an emergency. Considering these
circumstances, Dr. Estrada is not an employee of CMC, but an
independent contractor.
The question now is whether CMC is automatically exempt from
liability considering that Dr. Estrada is an independent
contractor-physician.
In general, a hospital is not liable for the negligence of an
independent contractor-physician. There is, however, an
exception to this principle. The hospital may be liable if the
physician is the "ostensible" agent of the hospital.44 This
exception is also known as the "doctrine of apparent
authority."45 In Gilbert v. Sycamore Municipal Hospital,46 the
Illinois Supreme Court explained the doctrine of apparent
authority in this wise:
[U]nder the doctrine of apparent authority a hospital
can be held vicariously liable for the negligent acts of a
physician providing care at the hospital, regardless of
whether the physician is an independent contractor,
unless the patient knows, or should have known, that
the physician is an independent contractor. The
elements of the action have been set out as follows:
"For a hospital to be liable under the doctrine of
apparent authority, a plaintiff must show that: (1) the

33

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."
The element of "holding out" on the part of the hospital
does not require an express representation by the
hospital that the person alleged to be negligent is an
employee. Rather, the element is satisfied if the
hospital holds itself out as a provider of emergency
room care without informing the patient that the care
is provided by independent contractors.
The element of justifiable reliance on the part of the
plaintiff is satisfied if the plaintiff relies upon the
hospital to provide complete emergency room care,
rather than upon a specific physician.
The doctrine of apparent authority essentially involves two
factors to determine the liability of an independent-contractor
physician.
The first factor focuses on the hospital's manifestations and is
sometimes described as an inquiry whether the hospital acted
in a manner which would lead a reasonable person to conclude
that the individual who was alleged to be negligent was an
employee or agent of the hospital.47 In this regard, the
hospital need not make express representations to the
patient that the treating physician is an employee of the
hospital; rather a representation may be general and
implied.48
The doctrine of apparent authority is a species of the doctrine of
estoppel. Article 1431 of the Civil Code provides that "[t]hrough
estoppel, an admission or representation is rendered conclusive
upon the person making it, and cannot be denied or disproved
as against the person relying thereon." Estoppel rests on this
rule: "Whenever a party has, by his own declaration, act, or
omission, intentionally and deliberately led another to believe a
particular thing true, and to act upon such belief, he cannot, in
any litigation arising out of such declaration, act or omission, be
permitted to falsify it."49
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. CMC cannot now repudiate such authority.
First, CMC granted staff privileges to Dr. Estrada. CMC extended
its medical staff and facilities to Dr. Estrada. Upon Dr. Estrada's
request for Corazon's admission, CMC, through its personnel,
readily accommodated Corazon and updated Dr. Estrada of her
condition.
Second, CMC made Rogelio sign consent forms printed on CMC
letterhead. Prior to Corazon's admission and supposed
hysterectomy, CMC asked Rogelio to sign release forms, the
contents of which reinforced Rogelio's belief that Dr. Estrada
was a member of CMC's medical staff.50 The Consent on
Admission and Agreement explicitly provides:
KNOW ALL MEN BY THESE PRESENTS:
I, Rogelio Nogales, of legal age, a resident of 1974 M.
H. Del Pilar St., Malate Mla., being the
father/mother/brother/sister/spouse/relative/
guardian/or person in custody of Ma. Corazon, and
representing his/her family, of my own volition and free
will, do consent and submit said Ma. Corazon to Dr.
Oscar Estrada (hereinafter referred to as Physician) for
cure, treatment, retreatment, or emergency
measures, that the Physician, personally or by
and through the Capitol Medical Center and/or
its staff, may use, adapt, or employ such means,
forms or methods of cure, treatment,
retreatment, or emergency measures as he may
see best and most expedient; that Ma. Corazon
and I will comply with any and all rules,
regulations, directions, and instructions of the
Physician, the Capitol Medical Center and/or its
staff; and, that I will not hold liable or responsible and
hereby waive and forever discharge and hold free the
Physician, the Capitol Medical Center and/or its staff,
from any and all claims of whatever kind of nature,
arising from directly or indirectly, or by reason of said
cure, treatment, or retreatment, or emergency
measures or intervention of said physician, the Capitol
Medical Center and/or its staff.
x x x x51 (Emphasis supplied)
While the Consent to Operation pertinently reads, thus:

I, ROGELIO NOGALES, x x x, of my own volition and

free will, do consent and submit said CORAZON
NOGALES to Hysterectomy, by the Surgical Staff and
Anesthesiologists of Capitol Medical
Center and/or whatever succeeding operations,
treatment, or emergency measures as may be
necessary and most expedient; and, that I will not hold
liable or responsible and hereby waive and forever
discharge and hold free the Surgeon, his assistants,
anesthesiologists, the Capitol Medical Center and/or its
staff, from any and all claims of whatever kind of
nature, arising from directly or indirectly, or by reason
of said operation or operations, treatment, or
emergency measures, or intervention of the Surgeon,
his assistants, anesthesiologists, the Capitol Medical
Center and/or its staff.52 (Emphasis supplied)
Without any indication in these consent forms that Dr. Estrada
was an independent contractor-physician, the Spouses Nogales
could not have known that Dr. Estrada was an independent
contractor. Significantly, no one from CMC informed the Spouses
Nogales that Dr. Estrada was an independent contractor. On the
contrary, Dr. Atencio, who was then a member of CMC Board of
Directors, testified that Dr. Estrada was part of CMC's surgical
staff.53
Third, Dr. Estrada's referral of Corazon's profuse vaginal
bleeding to Dr. Espinola, who was then the Head of the
Obstetrics and Gynecology Department of CMC, gave the
impression that Dr. Estrada as a member of CMC's medical staff
was collaborating with other CMC-employed specialists in
treating Corazon.
The second factor focuses on the patient's reliance. It is
sometimes characterized as an inquiry on whether the plaintiff
acted in reliance upon the conduct of the hospital or its agent,
consistent with ordinary care and prudence. 54
The records show that the Spouses Nogales relied upon a
perceived employment relationship with CMC in accepting Dr.
Estrada's services. Rogelio testified that he and his wife
specifically chose Dr. Estrada to handle Corazon's delivery not
only because of their friend's recommendation, but more
importantly because of Dr. Estrada's "connection with a
reputable hospital, the [CMC]." 55 In other words, Dr. Estrada's
relationship with CMC played a significant role in the Spouses
Nogales' decision in accepting Dr. Estrada's services as the
obstetrician-gynecologist for Corazon's delivery. Moreover, as
earlier stated, there is no showing that before and during
Corazon's confinement at CMC, the Spouses Nogales knew or
should have known that Dr. Estrada was not an employee of
CMC.

34

Further, the Spouses Nogales looked to CMC to provide the best

medical care and support services for Corazon's delivery. The
Court notes that prior to Corazon's fourth pregnancy, she used
to give birth inside a clinic. Considering Corazon's age then, the
Spouses Nogales decided to have their fourth child delivered at
CMC, which Rogelio regarded one of the best hospitals at the
time.56 This is precisely because the Spouses Nogales feared
that Corazon might experience complications during her
delivery which would be better addressed and treated in a
modern and big hospital such as CMC. Moreover, Rogelio's
consent in Corazon's hysterectomy to be performed by a
different physician, namely Dr. Espinola, is a clear indication of
Rogelio's confidence in CMC's surgical staff.
CMC's defense that all it did was "to extend to [Corazon] its
facilities" is untenable. The Court cannot close its eyes to the
reality that hospitals, such as CMC, are in the business of
treatment. In this regard, the Court agrees with the observation
made by the Court of Appeals of North Carolina in Diggs v.
Novant Health, Inc.,57 to wit:
"The conception that the hospital does not undertake
to treat the patient, does not undertake to act through
its doctors and nurses, but undertakes instead simply
to procure them to act upon their own responsibility,
no longer reflects the fact. Present day hospitals, as
their manner of operation plainly demonstrates,
do far more than furnish facilities for treatment.
They regularly employ on a salary basis a large
staff of physicians, nurses and internes [sic], as
well as administrative and manual workers, and
they charge patients for medical care and
treatment, collecting for such services, if
necessary, by legal action. Certainly, the person
who avails himself of 'hospital facilities' expects
that the hospital will attempt to cure him, not
that its nurses or other employees will act on
their own responsibility." x x x (Emphasis supplied)
Likewise unconvincing is CMC's argument that petitioners are
estopped from claiming damages based on the Consent on
Admission and Consent to Operation. Both release forms consist
of two parts. The first part gave CMC permission to administer
to Corazon any form of recognized medical treatment which the
CMC medical staff deemed advisable. The second part of the
documents, which may properly be described as the releasing
part, releases CMC and its employees "from any and all claims"
arising from or by reason of the treatment and operation.
The documents do not expressly release CMC from liability for
injury to Corazon due to negligence during her treatment or
operation. Neither do the consent forms expressly exempt CMC

from liability for Corazon's death due to negligence during such

treatment or operation. Such release forms, being in the nature
of contracts of adhesion, are construed strictly against
hospitals. Besides, a blanket release in favor of hospitals "from
any and all claims," which includes claims due to bad faith or
gross negligence, would be contrary to public policy and thus
void.
Even simple negligence is not subject to blanket release in favor
of establishments like hospitals but may only mitigate liability
depending on the circumstances.58 When a person needing
urgent medical attention rushes to a hospital, he cannot bargain
on equal footing with the hospital on the terms of admission
and operation. Such a person is literally at the mercy of the
hospital. There can be no clearer example of a contract of
adhesion than one arising from such a dire situation. Thus, the
release forms of CMC cannot relieve CMC from liability for the
negligent medical treatment of Corazon.
On the Liability of the Other Respondents
Despite this Court's pronouncement in its 9 September
200259 Resolution that the filing of petitioners' Manifestation
confined petitioners' claim only against CMC, Dr. Espinola, Dr.
Lacson, and Dr. Uy, who have filed their comments, the Court
deems it proper to resolve the individual liability of the
remaining respondents to put an end finally to this more than
two-decade old controversy.
a) Dr. Ely Villaflor
Petitioners blame Dr. Ely Villaflor for failing to diagnose the
cause of Corazon's bleeding and to suggest the correct remedy
to Dr. Estrada.60 Petitioners assert that it was Dr. Villaflor's duty
to correct the error of Nurse Dumlao in the administration of
hemacel.
The Court is not persuaded. Dr. Villaflor admitted administering
a lower dosage of magnesium sulfate. However, this was after
informing Dr. Estrada that Corazon was no longer in convulsion
and that her blood pressure went down to a dangerous
level.61 At that moment, Dr. Estrada instructed Dr. Villaflor to
reduce the dosage of magnesium sulfate from 10 to 2.5 grams.
Since petitioners did not dispute Dr. Villaflor's allegation, Dr.
Villaflor's defense remains uncontroverted. Dr. Villaflor's act of
administering a lower dosage of magnesium sulfate was not out
of her own volition or was in contravention of Dr. Estrada's
order.
b) Dr. Rosa Uy

Dr. Rosa Uy's alleged negligence consisted of her failure (1) to

call the attention of Dr. Estrada on the incorrect dosage of
magnesium sulfate administered by Dr. Villaflor; (2) to take
corrective measures; and (3) to correct Nurse Dumlao's wrong
method of hemacel administration.
The Court believes Dr. Uy's claim that as a second year resident
physician then at CMC, she was merely authorized to take the
clinical history and physical examination of Corazon. 62 However,
that routine internal examination did not ipso facto make Dr. Uy
liable for the errors committed by Dr. Estrada. Further,
petitioners' imputation of negligence rests on their baseless
assumption that Dr. Uy was present at the delivery room.
Nothing shows that Dr. Uy participated in delivering Corazon's
baby. Further, it is unexpected from Dr. Uy, a mere resident
physician at that time, to call the attention of a more
experienced specialist, if ever she was present at the delivery
room.
c) Dr. Joel Enriquez
Petitioners fault Dr. Joel Enriquez also for not calling the
attention of Dr. Estrada, Dr. Villaflor, and Nurse Dumlao about
their errors.63 Petitioners insist that Dr. Enriquez should have
taken, or at least suggested, corrective measures to rectify such
errors.
The Court is not convinced. Dr. Enriquez is an anesthesiologist
whose field of expertise is definitely not obstetrics and
gynecology. As such, Dr. Enriquez was not expected to correct
Dr. Estrada's errors. Besides, there was no evidence of Dr.
Enriquez's knowledge of any error committed by Dr. Estrada
and his failure to act upon such observation.
d) Dr. Perpetua Lacson
Petitioners fault Dr. Perpetua Lacson for her purported delay in
the delivery of blood Corazon needed.64 Petitioners claim that
Dr. Lacson was remiss in her duty of supervising the blood bank
staff.
As found by the trial court, there was no unreasonable delay in
the delivery of blood from the time of the request until the
transfusion to Corazon. Dr. Lacson competently explained the
procedure before blood could be given to the patient. 65 Taking
into account the bleeding time, clotting time and crossmatching, Dr. Lacson stated that it would take approximately
45-60 minutes before blood could be ready for
transfusion.66 Further, no evidence exists that Dr. Lacson
neglected her duties as head of the blood bank.

35

e) Dr. Noe Espinola

Petitioners argue that Dr. Espinola should not have ordered
immediate hysterectomy without determining the underlying
cause of Corazon's bleeding. Dr. Espinola should have first
considered the possibility of cervical injury, and advised a
thorough examination of the cervix, instead of believing
outright Dr. Estrada's diagnosis that the cause of bleeding was
uterine atony.

should each earn legal interest at the rate of six percent (6%)
per annum computed from the date of the judgment of the trial
court. The Court affirms the rest of the Decision dated 6
February 1998 and Resolution dated 21 March 2000 of the Court
of Appeals in CA-G.R. CV No. 45641.

COCA COLA BOTTLERS (PHILS.), INC./ERIC MONTINOLA,

Manager, Petitioners,
vs.
DR. DEAN N. CLIMACO, Respondent.

SO ORDERED.

DECISION
AZCUNA, J.:

Dr. Espinola's order to do hysterectomy which was based on the

information he received by phone is not negligence. The Court
agrees with the trial court's observation that Dr. Espinola, upon
hearing such information about Corazon's condition, believed in
good faith that hysterectomy was the correct remedy. At any
rate, the hysterectomy did not push through because upon Dr.
Espinola's arrival, it was already too late. At the time, Corazon
was practically dead.

This is a petition for review on certiorari of the Decision of the

Court of Appeals1 promulgated on July 7, 2000, and its
Resolution promulgated on January 30, 2001, denying
petitioners motion for reconsideration. The Court of Appeals
ruled that an employer-employee relationship exists between

f) Nurse J. Dumlao

respondent Dr. Dean N. Climaco and petitioner Coca-Cola

Bottlers Phils., Inc. (Coca-Cola), and that respondent was

In Moore v. Guthrie Hospital Inc.,67 the US Court of Appeals,

Fourth Circuit, held that to recover, a patient complaining of
injuries allegedly resulting when the nurse negligently injected
medicine to him intravenously instead of intramuscularly had to
show that (1) an intravenous injection constituted a lack of
reasonable and ordinary care; (2) the nurse injected medicine
intravenously; and (3) such injection was the proximate cause
of his injury.
In the present case, there is no evidence of Nurse Dumlao's
alleged failure to follow Dr. Estrada's specific instructions. Even
assuming Nurse Dumlao defied Dr. Estrada's order, there is no
showing that side-drip administration of hemacel proximately
caused Corazon's death. No evidence linking Corazon's death
and the alleged wrongful hemacel administration was
introduced. Therefore, there is no basis to hold Nurse Dumlao
liable for negligence.

illegally dismissed.
Respondent Dr. Dean N. Climaco is a medical doctor who was
hired by petitioner Coca-Cola Bottlers Phils., Inc. by virtue of a
Retainer Agreement that stated:
WHEREAS, the COMPANY desires to engage on a retainer basis
the services of a physician and the said DOCTOR is accepting
such engagement upon terms and conditions hereinafter set
7
Republic of the Philippines
SUPREME COURT

On the Award of Interest on Damages

Manila

The award of interest on damages is proper and allowed under

Article 2211 of the Civil Code, which states that in crimes and
quasi-delicts, interest as a part of the damages may, in a proper
case, be adjudicated in the discretion of the court. 68

FIRST DIVISION
G.R. No. 146881

WHEREFORE, the Court PARTLY GRANTS the petition. The

Court finds respondent Capitol Medical Center vicariously liable
for the negligence of Dr. Oscar Estrada. The amounts
of P105,000 as actual damages andP700,000 as moral damages

forth;

February 5, 2007

NOW, THEREFORE, in consideration of the premises and the

mutual agreement hereinafter contained, the parties agree as
follows:
1. This Agreement shall only be for a period of one (1)
year beginning January 1, 1988 up to December 31,
1988. The said term notwithstanding, either party may
terminate the contract upon giving a thirty (30)-day
written notice to the other.

36

2. The compensation to be paid by the company for

6. That the DOCTOR shall observe clinic hours at the

2. To protect employees from any occupational health

the services of the DOCTOR is hereby fixed at

COMPANYS premises from Monday to Saturday of a

hazard by evaluating health factors related to working

PESOS:Three Thousand Eight Hundred (P3,800.00) per

minimum of two (2) hours each day or a maximum

conditions.

month. The DOCTOR may charge professional fee for

of TWO (2) hours each day or treatment from 7:30 a.m.

hospital services rendered in line with his

to8:30 a.m. and 3:00 p.m. to 4:00 p.m., respectively

3. To encourage employees [to] maintain good

specialization. All payments in connection with the

unless such schedule is otherwise changed by the

personal health by setting up employee orientation

Retainer Agreement shall be subject to a withholding

COMPANY as [the] situation so warrants, subject to the

and education on health, hygiene and sanitation,

tax of ten percent (10%) to be withheld by the

Labor Code provisions on Occupational Safety and

nutrition, physical fitness, first aid training, accident

COMPANY under the Expanded Withholding Tax

Health Standards as the COMPANY may determine. It is

prevention and personnel safety.

System. In the event the withholding tax rate shall be

understood that the DOCTOR shall stay at least two (2)

increased or decreased by appropriate laws, then the

hours a day in the COMPANY clinic and that such two

4. To evaluate other matters relating to health such as

rate herein stipulated shall accordingly be increased or

(2) hours be devoted to the workshift with the most

absenteeism, leaves and termination.

decreased pursuant to such laws.

number of employees. It is further understood that the

DOCTOR shall be on call at all times during the other

3. That in consideration of the above mentioned

5. To give family planning motivations.

workshifts to attend to emergency case[s];

retainers fee, the DOCTOR agrees to perform the

B. COVERAGE

duties and obligations enumerated in the

7. That no employee-employer relationship shall exist

COMPREHENSIVE MEDICAL PLAN, hereto attached as

between the COMPANY and the DOCTOR whilst this

1. All employees and their dependents are embraced

Annex "A" and made an integral part of this Retainer

contract is in effect, and in case of its termination, the

by this program.

Agreement.

DOCTOR shall be entitled only to such retainer fee as

may be due him at the time of termination.2

4. That the applicable provisions in the Occupational

2. The health program shall cover pre-employment and

annual p.e., hygiene and sanitation, immunizations,

Safety and Health Standards, Ministry of Labor and

The Comprehensive Medical Plan,3 which contains the duties

family planning, physical fitness and athletic programs

Employment shall be followed.

and responsibilities of respondent, adverted to in the Retainer

and other activities such as group health education

Agreement, provided:

program, safety and first aid classes, organization of

5. That the DOCTOR shall be directly responsible to the

employee concerned and their dependents for any

health and safety committees.

A. OBJECTIVE

injury inflicted on, harm done against or damage

3. Periodically, this program will be reviewed and

caused upon the employee of the COMPANY or their

These objectives have been set to give full consideration to

dependents during the course of his examination,

[the] employees and dependents health:

treatment or consultation, if such injury, harm or

adjusted based on employees needs.

C. ACTIVITIES

damage was committed through professional

1. Prompt and adequate treatment of occupational and

negligence or incompetence or due to the other valid

non-occupational injuries and diseases.

1. Annual Physical Examination.

causes for action.

37

2. Consultations, diagnosis and treatment of

Acting President and Chairperson of the Committee on

Respondent inquired from the management of petitioner

occupational and non-occupational illnesses and

Membership, Philippine College of Occupational Medicine. In

company whether it was agreeable to recognizing him as a

injuries.

response, Dr. Sy wrote a letter5 to the Personnel Officer of Coca-

regular employee. The management refused to do so.

Cola Bottlers Phils., Bacolod City, stating that respondent should

3. Immunizations necessary for job conditions.
4. Periodic inspections for food services and rest

be considered as a regular part-time physician, having served

On February 24, 1994, respondent filed a Complaint 9 before the

the company continuously for four (4) years. He likewise stated

NLRC, Bacolod City, seeking recognition as a regular employee

that respondent must receive all the benefits and privileges of

of petitioner company and prayed for the payment of all

rooms.

an employee under Article 157 (b) of the Labor Code.

benefits of a regular employee, including 13th Month Pay, Cost

of Living Allowance, Holiday Pay, Service Incentive Leave Pay,

5. Conduct health education programs and present

Petitioner company, however, did not take any action. Hence,

and Christmas Bonus. The case was docketed as RAB Case No.

education materials.

respondent made another inquiry directed to the Assistant

06-02-10138-94.

Regional Director, Bacolod City District Office of the Department

6. Coordinate with Safety Committee in developing

of Labor and Employment (DOLE), who referred the inquiry to

7

While the complaint was pending before the Labor Arbiter,

specific studies and program to minimize

the Legal Service of the DOLE, Manila. In his letter dated May

respondent received a letter dated March 9, 1995 from

environmental health hazards.

18, 1993, Director Dennis P. Ancheta, Legal Service, DOLE,

petitioner company concluding their retainership agreement

stated that he believed that an employer-employee relationship

effective thirty (30) days from receipt thereof. This prompted

existed between petitioner and respondent based on the

respondent to file a complaint for illegal dismissal against

7. Give family planning motivations.

Retainer Agreement and the Comprehensive Medical Plan, and

petitioner company with the NLRC, Bacolod City. The case was

8. Coordinate with Personnel Department regarding

the application of the "four-fold" test. However, Director

docketed as RAB Case No. 06-04-10177-95.

physical fitness and athletic programs.

Ancheta emphasized that the existence of employer-employee

relationship is a question of fact. Hence, termination disputes or

In a Decision10 dated November 28, 1996, Labor Arbiter Jesus N.

9. Visiting and follow-up treatment of Company

money claims arising from employer-employee relations

Rodriguez, Jr. found that petitioner company lacked the power of

employees and their dependents confined in the

exceeding P5,000 may be filed with the National Labor Relations

control over respondents performance of his duties, and

hospital.

Commission (NLRC). He stated that their opinion is strictly

recognized as valid the Retainer Agreement between the

advisory.

parties. Thus, the Labor Arbiter dismissed respondents

The Retainer Agreement, which began on January 1, 1988, was

complaint in the first case, RAB Case No. 06-02-10138-94. The

renewed annually. The last one expired on December 31, 1993.

An inquiry was likewise addressed to the Social Security System

Despite the non-renewal of the Retainer Agreement, respondent

(SSS). Thereafter, Mr. Romeo R. Tupas, OIC-FID of SSS-Bacolod

continued to perform his functions as company doctor to Coca-

City, wrote a letter8 to the Personnel Officer of Coca-Cola

WHEREFORE, premises considered, judgment is hereby

Cola until he received a letter dated March 9, 1995 from

Bottlers Phils., Inc. informing the latter that the legal staff of his

rendered dismissing the instant complaint seeking recognition

petitioner company concluding their retainership agreement

office was of the opinion that the services of respondent partake

as a regular employee.

effective 30 days from receipt thereof.

of the nature of work of a regular company doctor and that he

was, therefore, subject to social security coverage.

dispositive portion of the Decision reads:

SO ORDERED.11

It is noted that as early as September 1992, petitioner was

already making inquiries regarding his status with petitioner

In a Decision12 dated February 24, 1997, Labor Arbiter Benjamin

company. First, he wrote a letter addressed to Dr. Willie Sy, the

Pelaez dismissed the case for illegal dismissal (RAB Case No.

38

06-04-10177-95) in view of the previous finding of Labor Arbiter

First, the agreements provide that "the COMPANY desires to

Comprehensive Medical Plan which was made an integral part

Jesus N. Rodriguez, Jr. in RAB Case No. 06-02-10138-94 that

engage on a retainer basis the services of a physician and the

of the retainer agreement. Moreover, the times for

complainant therein, Dr. Dean Climaco, is not an employee of

said DOCTOR is accepting such engagement x x x" (Rollo,

accomplishing these objectives and activities are likewise

Coca-Cola Bottlers Phils., Inc.

page 25). This clearly shows that Coca-Cola exercised its power

controlled and determined by the company. Petitioner is subject

to hire the services of petitioner.

to definite hours of work, and due to this, he performs his duties

Respondent appealed both decisions to the NLRC, Fourth

Division, Cebu City.

to Coca-Cola not at his own pleasure but according to the

Secondly, paragraph (2) of the agreements showed that

schedule dictated by the company.

petitioner would be entitled to a final compensation of Three

In a Decision13 promulgated on November 28, 1997, the NLRC

Thousand Eight Hundred Pesos per month, which amount was

In addition, petitioner was designated by Coca-Cola to be a

dismissed the appeal in both cases for lack of merit. It declared

later raised to Seven Thousand Five Hundred on the latest

member of its Bacolod Plants Safety Committee. The minutes

that no employer-employee relationship existed between

contract. This would represent the element of payment of

of the meeting of the said committee dated February 16, 1994

petitioner company and respondent based on the provisions of

wages.

included the name of petitioner, as plant physician, as among

the Retainer Agreement which contract governed respondents

employment.

those comprising the committee.

Thirdly, it was provided in paragraph (1) of the agreements that
the same shall be valid for a period of one year. "The said term

It was averred by Coca-Cola in its comment that they exercised

Respondents motion for reconsideration was denied by the

notwithstanding, either party may terminate the contract upon

no control over petitioner for the reason that the latter was not

NLRC in a Resolution14 promulgated on August 7, 1998.

giving a thirty (30) day written notice to the other." (Rollo,

directed as to the procedure and manner of performing his

page 25). This would show that Coca-Cola had the power of

assigned tasks. It went as far as saying that "petitioner was not

dismissing the petitioner, as it later on did, and this could be

told how to immunize, inject, treat or diagnose the employees

done for no particular reason, the sole requirement being the

of the respondent (Rollo, page 228). We believe that if the

formers compliance with the 30-day notice requirement.

"control test" would be interpreted this strictly, it would result in

Respondent filed a petition for review with the Court of Appeals.

In a Decision promulgated on July 7, 2000, the Court of Appeals
ruled that an employer-employee relationship existed between

an absurd and ridiculous situation wherein we could declare

petitioner company and respondent after applying the four-fold

Lastly, paragraphs (3) and (6) of the agreements reveal that

that an entity exercises control over anothers activities only in

test: (1) the power to hire the employee; (2) the payment of

Coca-Cola exercised the most important element of all, that is,

instances where the latter is directed by the former on each and

wages; (3) the power of dismissal; and (4) the employers power

control, over the conduct of petitioner in the latters

every stage of performance of the particular activity. Anything

to control the employee with respect to the means and methods

performance of his duties as a doctor for the company.

less than that would be tantamount to no control at all.

It was stated in paragraph (3) that the doctor agrees to perform

To our minds, it is sufficient if the task or activity, as well as the

the duties and obligations enumerated in the Comprehensive

means of accomplishing it, is dictated, as in this case where the

by which the work is to be accomplished.

The Court of Appeals held:

Medical Plan referred to above. In paragraph (6), the fixed and

objectives and activities were laid out, and the specific time for

The Retainer Agreement executed by and between the parties,

definite hours during which the petitioner must render service

performing them was fixed by the controlling party. 15

when read together with the Comprehensive Medical Plan which

to the company is laid down.

was made an integral part of the retainer agreements, coupled

Moreover, the Court of Appeals declared that respondent should

with the actual services rendered by the petitioner, would show

We say that there exists Coca-Colas power to control petitioner

be classified as a regular employee having rendered six years of

that all the elements of the above test are present.

because the particular objectives and activities to be observed

service as plant physician by virtue of several renewed retainer

and accomplished by the latter are fixed and set under the

agreements. It underscored the provision in Article 280 16 of the

39

Labor Code stating that "any employee who has rendered at

3. Pay petitioner exemplary damages in the amount

SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE

least one year of service, whether such service is continuous or

of P50,000.00.

FINDINGS OF THE LABOR ARBITERS AND THE

broken, shall be considered a regular employee with respect to

NATIONAL LABOR RELATIONS COMMISSION, CONTRARY

the activity in which he is employed, and his employment shall

4. Give to petitioner all other benefits to which a

TO THE DECISIONS OF THE HONORABLE SUPREME

continue while such activity exists." Further, it held that the

regular employee of Coca-Cola is entitled from the

COURT ON THE MATTER.

termination of respondents services without any just or

time petitioner became a regular employee (one year

authorized cause constituted illegal dismissal.

from effectivity date of employment) until the time of

2. THAT THE HONORABLE COURT OF APPEALS

actual payment.

COMMITTED REVERSIBLE ERROR, BASED ON A

In addition, the Court of Appeals found that respondents

dismissal was an act oppressive to labor and was effected in a

SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE

SO ORDERED.

17

wanton, oppressive or malevolent manner which entitled

respondent to moral and exemplary damages.

FINDINGS OF THE LABOR ARBITERS AND THE

NATIONAL LABOR RELATIONS COMMISSION, AND

Petitioner company filed a motion for reconsideration of the

HOLDING INSTEAD THAT THE WORK OF A PHYSICIAN IS

Decision of the Court of Appeals.

NECESSARY AND DESIRABLE TO THE BUSINESS OF

The dispositive portion of the Decision reads:

SOFTDRINKS MANUFACTURING, CONTRARY TO THE

In a Resolution promulgated on January 30, 2001, the Court of

RULINGS OF THE SUPREME COURT IN ANALOGOUS

WHEREFORE, in view of the foregoing, the Decision of the

Appeals stated that petitioner company noted that its Decision

CASES.

National Labor Relations Commission dated November 28, 1997

failed to mention whether respondent was a full-time or part-

and its Resolution dated August 7, 1998 are found to have been

time regular employee. It also questioned how the benefits

3. THAT THE HONORABLE COURT OF APPEALS

issued with grave abuse of discretion in applying the law to the

under their Collective Bargaining Agreement which the Court

COMMITTED REVERSIBLE ERROR, BASED ON A

established facts, and are hereby REVERSED and SET ASIDE,

awarded to respondent could be given to him considering that

SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE

and private respondent Coca-Cola Bottlers, Phils.. Inc. is hereby

such benefits were given only to regular employees who render

FINDINGS OF THE LABOR ARBITERS AND THE

ordered to:

a full days work of not less that eight hours. It was admitted

NATIONAL LABOR RELATIONS COMMISSION, AND

that respondent is only required to work for two hours per day.

HOLDING INSTEAD THAT THE PETITIONERS EXERCISED

1. Reinstate the petitioner with full backwages without

CONTROL OVER THE WORK OF THE RESPONDENT.

loss of seniority rights from the time his compensation

The Court of Appeals clarified that respondent was a "regular

was withheld up to the time he is actually reinstated;

part-time employee and should be accorded all the

4. THAT THE HONORABLE COURT OF APPEALS

however, if reinstatement is no longer possible, to pay

proportionate benefits due to this category of employees of

COMMITTED REVERSIBLE ERROR, BASED ON A

the petitioner separation pay equivalent to one (1)

[petitioner] Corporation under the CBA." It sustained its decision

SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE

months salary for every year of service rendered,

on all other matters sought to be reconsidered.

FINDINGS OF THE LABOR ARBITERS AND THE

computed at the rate of his salary at the time he was

NATIONAL LABOR RELATIONS COMMISSION, AND

dismissed, plus backwages.

Hence, this petition filed by Coca-Cola Bottlers Phils., Inc.

2. Pay petitioner moral damages in the amount

The issues are:

FINDING THAT THERE IS EMPLOYER-EMPLOYEE

RELATIONSHIP PURSUANT TO ARTICLE 280 OF THE
LABOR CODE.

of P50,000.00.
1. THAT THE HONORABLE COURT OF APPEALS

5. THAT THE HONORABLE COURT OF APPEALS

COMMITTED REVERSIBLE ERROR, BASED ON A

COMMITTED REVERSIBLE ERROR, BASED ON A

40

SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE

The Court agrees with the finding of the Labor Arbiter and the

professional negligence, incompetence or other valid causes of

FINDINGS OF THE LABOR ARBITERS AND THE

NLRC that the circumstances of this case show that no

action.

NATIONAL LABOR RELATIONS COMMISSION, AND

employer-employee relationship exists between the parties. The

FINDING THAT THERE EXISTED ILLEGAL DISMISSAL

Labor Arbiter and the NLRC correctly found that petitioner

The Labor Arbiter also correctly found that the provision in the

WHEN THE EMPLOYENT OF THE RESPONDENT WAS

company lacked the power of control over the performance by

Retainer Agreement that respondent was on call during

TERMINATED WITHOUT JUST CAUSE.

respondent of his duties. The Labor Arbiter reasoned that the

emergency cases did not make him a regular employee. He

Comprehensive Medical Plan, which contains the respondents

explained, thus:

6. THAT THE HONORABLE COURT OF APPEALS

objectives, duties and obligations, does not tell respondent

COMMITTED REVERSIBLE ERROR, BASED ON A

"how to conduct his physical examination, how to immunize, or

Likewise, the allegation of complainant that since he is on call

SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE

how to diagnose and treat his patients, employees of

at anytime of the day and night makes him a regular employee

FINDINGS OF THE LABOR ARBITERS AND THE

[petitioner] company, in each case." He likened this case to that

is off-tangent. Complainant does not dispute the fact that

19

NATIONAL LABOR RELATIONS COMMISSION, AND

of Neri v. National Labor Relations Commission,

which held:

FINDING THAT THE RESPONDENT IS A REGULAR PART

outside of the two (2) hours that he is required to be at

respondent companys premises, he is not at all further required

TIME EMPLOYEE WHO IS ENTITLED TO PROPORTIONATE

In the case of petitioner Neri, it is admitted that FEBTC issued a

to just sit around in the premises and wait for an emergency to

BENEFITS AS A REGULAR PART TIME EMPLOYEE

job description which detailed her functions as a radio/telex

occur so as to enable him from using such hours for his own

ACCORDING TO THE PETITIONERS CBA.

operator. However, a cursory reading of the job description

benefit and advantage. In fact, complainant maintains his own

shows that what was sought to be controlled by FEBTC was

private clinic attending to his private practice in the city, where

7. THAT THE HONORABLE COURT OF APPEALS

actually the end result of the task, e.g., that the daily incoming

he services his patients, bills them accordingly -- and if it is an

COMMITTED REVERSIBLE ERROR, BASED ON A

and outgoing telegraphic transfer of funds received and relayed

employee of respondent company who is attended to by him for

SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE

by her, respectively, tallies with that of the register. The

special treatment that needs hospitalization or operation, this is

FINDINGS OF THE LABOR ARBITERS AND THE

guidelines were laid down merely to ensure that the desired end

subject to a special billing. More often than not, an employee is

NATIONAL LABOR RELATIONS COMMISSION, AND

result was achieved. It did not, however, tell Neri how the

required to stay in the employers workplace or proximately

FINDING THAT THE RESPONDENT IS ENTITLED TO

radio/telex machine should be operated.

close thereto that he cannot utilize his time effectively and

MORAL AND EXEMPLARY DAMAGES.

gainfully for his own purpose. Such is not the prevailing

In effect, the Labor Arbiter held that petitioner company,

situation here.1awphi1.net

The main issue in this case is whether or not there exists an

through the Comprehensive Medical Plan, provided guidelines

employer-employee relationship between the parties. The

merely to ensure that the end result was achieved, but did not

In addition, the Court finds that the schedule of work and the

resolution of the main issue will determine whether the

control the means and methods by which respondent performed

requirement to be on call for emergency cases do not amount

termination of respondents employment is illegal.

his assigned tasks.

to such control, but are necessary incidents to the Retainership

The Court, in determining the existence of an employer-

The NLRC affirmed the findings of the Labor Arbiter and stated

employee relationship, has invariably adhered to the four-fold

that it is precisely because the company lacks the power of

The Court also notes that the Retainership Agreement granted

test: (1) the selection and engagement of the employee; (2) the

control that the contract provides that respondent shall be

to both parties the power to terminate their relationship upon

payment of wages; (3) the power of dismissal; and (4) the

directly responsible to the employee concerned and their

giving a 30-day notice. Hence, petitioner company did not wield

power to control the employees conduct, or the so-called

dependents for any injury, harm or damage caused through

the sole power of dismissal or termination.

Agreement.

"control test," considered to be the most important element.

18

41

The Court agrees with the Labor Arbiter and the NLRC that there

assistance and discharge billings, in addition to their fixed

is nothing wrong with the employment of respondent as a

monthly retainer.2

retained physician of petitioner company and upholds the

validity of the Retainership Agreement which clearly stated that

The work schedules of the members of the team of resident

no employer-employee relationship existed between the parties.

physicians were fixed by petitioner's medical director Dr. Raul

The Agreement also stated that it was only for a period of 1

Desipeda (Dr. Desipeda). And they were issued identification

year beginning January 1, 1988 to December 31, 1998, but it

cards3 by petitioner and were enrolled in the Social Security

was renewed on a yearly basis.

System (SSS).4 Income taxes were withheld from them.5

Republic of the Philippines

Considering that there is no employer-employee relationship

SUPREME COURT

between the parties, the termination of the Retainership

Manila

Agreement, which is in accordance with the provisions of the

Agreement, does not constitute illegal dismissal of respondent.

SECOND DIVISION

Consequently, there is no basis for the moral and exemplary

damages granted by the Court of Appeals to respondent due to
his alleged illegal dismissal.
WHEREFORE, the petition is GRANTED and the Decision and
Resolution of the Court of Appeals are REVERSED and SET
ASIDE. The Decision and Resolution dated November 28, 1997
and August 7, 1998, respectively, of the National Labor

G.R. No. 176484

CALAMBA MEDICAL CENTER, INC., petitioner

vs.
NATIONAL LABOR RELATIONS COMMISSION, RONALDO
LANZANAS AND MERCEDITHA*LANZANAS, respondents.

Relations Commission are REINSTATED.

No costs.
SO ORDERED.

November 25, 2008

DECISION
CARPIO MORALES, J.:
The Calamba Medical Center (petitioner), a privately-owned
hospital, engaged the services of medical doctors-spouses
Ronaldo Lanzanas (Dr. Lanzanas) and Merceditha Lanzanas (Dr.
Merceditha) in March 1992 and August 1995, respectively, as
part of its team of resident physicians. Reporting at the hospital
twice-a-week on twenty-four-hour shifts, respondents were paid
a monthly "retainer" of P4,800.00 each.1 It appears that
resident physicians were also given a percentage share out of
fees charged for out-patient treatments, operating room

On March 7, 1998, Dr. Meluz Trinidad (Dr. Trinidad), also a

resident physician at the hospital, inadvertently overheard a
telephone conversation of respondent Dr. Lanzanas with a
fellow employee, Diosdado Miscala, through an extension
telephone line. Apparently, Dr. Lanzanas and Miscala were
discussing the low "census" or admission of patients to the
hospital.6
Dr. Desipeda whose attention was called to the above-said
telephone conversation issued to Dr. Lanzanas a Memorandum
of March 7, 1998 reading:
As a Licensed Resident Physician employed in
Calamba Medical Center since several years ago,
the hospital management has committed upon you
utmost confidence in the performance of duties
pursuant thereto. This is the reason why you were
awarded the privilege to practice in the hospital and
were entrusted hospital functions to serve the interest
of both the hospital and our patients using your
capability for independent judgment.
Very recently though and unfortunately, you have
committed acts inimical to the interest of the hospital,
the details of which are contained in the hereto
attached affidavit of witness.

42

You are therefore given 24 hours to explain why

In a memorandum16 of April 22, 1998, Dr. Desipeda echoed the

employment effective today, April 25,

no disciplinary action should be taken against

April 22, 1998 order of the Secretary of Labor directing all union

1998, without prejudice to further action for revocation

you.

officers and members to return-to-work "on or April 23, 1998,

of your license before the Philippine [sic] Regulations

except those employees that were already terminated or are

[sic] Commission.17 (Emphasis and underscoring

Pending investigation of your case, you are

serving disciplinary actions." Dr. Desipeda thus ordered the

supplied)

hereby placed under 30-days [sic] preventive

officers and members of the union to "report for work as soon

suspension effective upon receipt

as possible" to the hospital's personnel officer and administrator

Dr. Lanzanas thus amended his original complaint to include

for "work scheduling, assignments and/or re-assignments."

illegal dismissal.18 His and Dr. Merceditha's complaints were

hereof. (Emphasis, italics and underscoring supplied)

consolidated and docketed as NLRC CASE NO. RAB-IV-3-9879Inexplicably, petitioner did not give respondent Dr. Merceditha,

Petitioner later sent Dr. Lanzanas a notice of termination which

who was not involved in the said incident, any work schedule

he received on April 25, 1998, indicating as grounds therefor his

after sending her husband Dr. Lanzanas the memorandum,8 nor

failure to report back to work despite the DOLE order and his

By Decision19 of March 23, 1999, Labor Arbiter Antonio R.

inform her the reason therefor, albeit she was later informed by

supposed role in the striking union, thus:

Macam dismissed the spouses' complaints for want of

the Human Resource Department (HRD) officer that that was

part of petitioner's cost-cutting measures.9
Responding to the memorandum, Dr. Lanzanas, by letter of
March 9, 1998,

10

admitted that he spoke with Miscala over the

phone but that their conversation was taken out of context by

98-L.

jurisdiction upon a finding that there was no employerOn April 23, 1998, you still did not report for work

employee relationship between the parties, the fourth requisite

despite memorandum issued by the CMC Medical

or the "control test" in the determination of an employment

Director implementing the Labor Secretary's

bond being absent.

ORDER. The same is true on April 24, 1998 and April

25, 1998,--you still did not report for work [sic].

Dr. Trinidad.

On appeal, the NLRC, by Decision20 of May 3, 2002, reversed the

Labor Arbiter's findings, disposing as follows:

You are likewise aware that you were observed (re:

On March 14, 1998,11 the rank-and-file employees union of

signatories [sic] to the Saligang Batas of BMCMC-

WHEREFORE, the assailed decision is set aside. The

petitioner went on strike due to unresolved grievances over

UWP) to be unlawfully participating as member in the

respondents are ordered to pay the complainants their

rank-and-file union's concerted activities despite

full backwages; separation pay of one month salary for

knowledge that your position in the hospital

every year of service in lieu of reinstatement; moral

On March 20, 1998, Dr. Lanzanas filed a complaint for illegal

is managerial in nature (Nurses, Orderlies, and staff of

damages of P500,000.00 each; exemplary damages

suspension13 before the National Labor Relations Commission

the Emergency Room carry out your orders using your

ofP250,000.00 each plus ten percent (10%) of the total

(NLRC)-Regional Arbitration Board (RAB) IV. Dr. Merceditha

independent judgment) which participation is expressly

award as attorney's fees.

subsequently filed a complaint for illegal dismissal. 14

prohibited by the New Labor Code and which

terms and conditions of employment.

12

prohibition was sustained by the Med-

SO ORDERED.21

In the meantime, then Sec. Cresenciano Trajano of the

Arbiter's ORDER dated February 24, 1998. (Emphasis

Department of Labor and Employment (DOLE) certified the

and italics in the original; underscoring partly in the

Petitioner's motion for reconsideration having been denied, it

labor dispute to the NLRC for compulsory arbitration and issued

original and partly supplied)

brought the case to the Court of Appeals on certiorari.

officers and employees of petitioner pending resolution of the

For these reasons as grounds for termination,

The appellate court, by June 30, 2004 Decision,22 initially

labor dispute.15

you are hereby terminated for cause from

granted petitioner's petition and set aside the NLRC ruling.

on April 21, 1998 return-to-work Order to the striking union

43

However, upon a subsequent motion for reconsideration filed by

The appellate court thus declared that respondents were

SO ORDERED.26 (Emphasis and italics in the original;

respondents, itreinstated the NLRC decision in an Amended

illegally dismissed.

underscoring supplied)

Decision23 dated September 26, 2006 but tempered the award

to each of the spouses of moral and exemplary damages

x x x. The petitioner's ground for dismissing

Preliminarily, the present petition calls for a determination of

to P100,000.00 and P50,000.00, respectively and omitted the

respondent Ronaldo Lanzanas was based on his

whether there exists an employer-employee

award of attorney's fees.

alleged participation in union activities, specifically in

relationship27 between petitioner and the spouses-respondents.

joining the strike and failing to observe the return-toIn finding the existence of an employer-employee relationship

work order issued by the Secretary of Labor. Yet,

Denying the existence of such relationship, petitioner argues

between the parties, the appellate court held:

the petitioner did not adduce any piece of evidence to

that the appellate court, as well as the NLRC, overlooked its

show that respondent Ronaldo indeed participated in

twice-a-week reporting arrangement with respondents who are

the strike. x x x.

free to practice their profession elsewhere the rest of the week.

x x x. While it may be true that the respondents are

given the discretion to decide on how to treat the

And it invites attention to the uncontroverted allegation that

petitioner's patients, the petitioner has not denied nor

In the case of respondent Merceditha Lanzanas, the

respondents, aside from their monthly retainers, were entitled

explained why its Medical Director still has the direct

petitioner's explanation that "her marriage to

to one-half of all suturing, admitting, consultation, medico-legal

supervision and control over the respondents.

complainant Ronaldo has given rise to the presumption

and operating room assistance fees.28 These circumstances, it

The fact is the petitioner's Medical Director still has

that her sympat[hies] are likewise with her husband"

stresses, are clear badges of the absence of any employment

to approve the schedule of duties of the

as a ground for her dismissal is unacceptable. Such is

relationship between them.

respondents. The respondents stressed that the

not one of the grounds to justify the termination of her

petitioner's Medical Director also issuesinstructions

employment.25 (Underscoring supplied)

This Court is unimpressed.

or orders to the respondents relating to the

means and methods of performing their

The fallo of the appellate court's decision reads:

duties, i.e. admission of patients, manner of

Under the "control test," an employment relationship exists

between a physician and a hospital if the hospital controls both

characterizing cases, treatment of cases, etc.,

WHEREFORE, the instant Motion for

the means and the details of the process by which the physician

and may even overrule, review or revise the

Reconsideration is GRANTED, and the Court's decision

is to accomplish his task.29

decisions of the resident physicians. This was not

dated June 30, 2004, is SET ASIDE. In lieu thereof, a

controverted by the petitioner. The foregoing factors

new judgment is entered, as follows:

taken together are sufficient to constitute the fourth

Where a person who works for another does so more or less at

his own pleasure and is not subject to definite hours or

element, i.e. control test, hence, the existence of the

WHEREFORE, the petition is DISMISSED. The

conditions of work, and is compensated according to the result

employer-employee relationship. In denying that it had

assailed decision dated May 3, 2002 and

of his efforts and not the amount thereof, the element of control

control over the respondents, the petitioner alleged

order dated September 24, 2002 of the NLRC

is absent.30

that the respondents were free to put up their own

in NLRC NCR CA No. 019823-99 are AFFIRMED

clinics or to accept other retainership agreement with

with the MODIFICATION that the moral and

As priorly stated, private respondents maintained specific work-

the other hospitals. But, the petitioner failed to

exemplary damages are reduced

schedules, as determined by petitioner through its medical

substantiate the allegation with substantial evidence.

to P100,000.00 each and P50,000.00 each,

director, which consisted of 24-hour shifts totaling forty-eight

(Emphasis and underscoring supplied)24

respectively.

hours each week and which were strictly to be observed under

pain of administrative sanctions.

44

That petitioner exercised control over respondents gains light

conduct and behavior, and offenses against persons, property

Dr. Lanzanas was neither a managerial nor supervisory

from the undisputed fact that in the emergency room, the

and the hospital's interest.

employee but part of the rank-and-file. This is the import of the

operating room, or any department or ward for that matter,

Secretary of Labor's Resolution of May 22, 1998 in OS A-05-15-

respondents' work is monitored through its nursing supervisors,

More importantly, petitioner itself provided incontrovertible

charge nurses and orderlies. Without the approval or consent of

proof of the employment status of respondents, namely, the

petitioner or its medical director, no operations can be

identification cards it issued them, the payslips33 and BIR W-2

undertaken in those areas. For control test to apply, it is not

(now 2316) Forms which reflect their status as employees, and

essential for the employer to actually supervise the

the classification as "salary" of their remuneration. Moreover, it

In the motion to dismiss it filed before the Med-Arbiter,

performance of duties of the employee, it being enough that it

enrolled respondents in the SSS and Medicare (Philhealth)

the employer (CMC) alleged that 24 members of

program. It bears noting at this juncture that mandatory

petitioner are supervisors, namely x x x Rolando

coverage under the SSS Law34 is premised on the existence of

Lanzonas [sic] x x x.

has the right to wield the power.

31

35

98 which reads:
xxxx

With respect to respondents' sharing in some hospital fees, this

an employer-employee relationship,

scheme does not sever the employment tie between them and

compulsory coverage of the self-employed. It would be

A close scrutiny of the job descriptions of the alleged

petitioner as this merely mirrors additional form or another form

preposterous for an employer to report certain persons as

supervisors narrated by the employer only proves that

of compensation or incentive similar to what commission-based

employees and pay their SSS premiums as well as their wages if

except for the contention that these employees

employees receive as contemplated in Article 97 (f) of the Labor

they are not its employees.

except in cases of

36

Code, thus:

allegedly supervise, they do not however recommend

any managerial action. At most, their job is

And if respondents were not petitioner's employees, how does it

merely routinary in nature and consequently,

"Wage" paid to any employee shall mean the

account for its issuance of the earlier-quoted March 7, 1998

they cannot be considered supervisory

remuneration or earning, however designated, capable

memorandum explicitly stating that respondent is "employed"

employees.

of being expressed in terms of money, whether fixed

in it and of the subsequent termination letter indicating

or ascertained on a time, task, piece, or

respondent Lanzanas' employment status.

commission basis, or other method of calculating

They are not therefore barred from membership

in the union of rank[-]and[-]file, which the

the same, which is payable by an employer to an

Finally, under Section 15, Rule X of Book III of the Implementing

petitioner [the union] is seeking to represent in the

employee under a written or unwritten contract of

Rules of the Labor Code, an employer-employee relationship

instant case.38 (Emphasis and underscoring supplied)

employment for work done or to be done, or for

exists between the resident physicians and the training

services rendered or to be rendered and includes the

hospitals, unless there is a training agreement between them,

fair and reasonable value, as determined by the

and the training program is duly accredited or approved by the

Secretary of Labor, of board, lodging, or other facilities

appropriate government agency. In respondents' case, they

Admittedly, Dr. Lanzanas was a union member in the hospital,

customarily furnished by the employer to the

were not undergoing any specialization training. They were

which is considered indispensable to the national interest. In

employee. x x x (Emphasis and underscoring supplied),

considered non-training general practitioners,37 assigned at the

labor disputes adversely affecting the continued operation of a

emergency rooms and ward sections.

hospital, Article 263(g) of the Labor Code provides:

xxxx

Respondents were in fact made subject to petitioner-hospital's

Code of Ethics,32 the provisions of which cover administrative

Turning now to the issue of dismissal, the Court upholds the

and disciplinary measures on negligence of duties, personnel

appellate court's conclusion that private respondents were

illegally dismissed.

ART. 263. STRIKES, PICKETING, AND LOCKOUTS.

xxxx

45

(g) x x x x

Order, failing to comply with which is punishable by dismissal or

loss of employment status.

40

not with respect to his supposed participation in the strike and

failure to heed the return-to-work order.

x x x x. In labor disputes adversely affecting the

continued operation of such hospitals, clinics or

Participation in a strike and intransigence to a return-to-work

As for the case of Dr. Merceditha, her dismissal was worse, it

medical institutions, it shall be the duty of the

order must, however, be duly proved in order to justify

having been effected without any just or authorized cause and

striking union or locking-out employer to provide and

immediate dismissal in a "national interest" case. As the

without observance of due process. In fact, petitioner never

maintain an effective skeletal workforce of medical and

appellate court as well as the NLRC observed, however, there is

proferred any valid cause for her dismissal except its view that

other health personnel, whose movement and services

nothing in the records that would bear out Dr. Lanzanas' actual

"her marriage to [Dr. Lanzanas] has given rise to the

shall be unhampered and unrestricted, as are

participation in the strike. And the medical director's

presumption that her sympath[y] [is] with her husband; [and

41

necessary to insure the proper and adequate

Memorandum

protection of the life and health of its patients, most

general directive to all union officers and members to return-to-

of April 22, 1998 contains nothing more than a

that when [Dr. Lanzanas] declared that he was going to boycott

the scheduling of their workload by the medical doctor, he was

especially emergency cases, for the duration of the

work. Mere membership in a labor union does not ipso

presumed to be speaking for himself [and] for his wife

strike or lockout. In such cases, the Secretary of Labor

facto mean participation in a strike.

Merceditha."46

within twenty-four hours from knowledge of the

Dr. Lanzanas' claim that, after his 30-day preventive suspension

Petitioner's contention that Dr. Merceditha was a member of the

occurrence of such strike or lockout, jurisdiction over

ended on or before April 9, 1998, he was never given any work

union or was a participant in the strike remained just that. Its

the same or certify to the Commission for compulsory

schedule42 was not refuted by petitioner. Petitioner in fact never

termination of her employment on the basis of her conjugal

arbitration. For this purpose, the contending

released any findings of its supposed investigation into Dr.

relationship is not analogous to

parties are strictly enjoined to comply with such

Lanzanas' alleged "inimical acts."

and Employment is mandated to immediately assume,

any of the causes enumerated in Article 28247 of the Labor

orders, prohibitions and/or injunctions as are

issued by the Secretary of Labor and

Petitioner thus failed to observe the two requirements,before

Code. Mere suspicion or belief, no matter how strong, cannot

Employment or the Commission, under pain of

dismissal can be effected notice and hearing which

substitute for factual findings carefully established through

immediate disciplinary action, including

constitute essential elements of the statutory process; the first

orderly procedure.48

dismissal or loss of employment status or

to apprise the employee of the particular acts or omissions for

payment by the locking-out employer of

which his dismissal is sought, and the second to inform the

43

backwages, damages and other affirmative

employee of the employer's decision to dismiss him.

relief, even criminal prosecution against either

observance of these requirements runs afoul of the procedural

Non-

44

The Court even notes that after the proceedings at the NLRC,
petitioner never even mentioned Dr. Merceditha's case. There is
thus no gainsaying that her dismissal was both substantively

or both of them.

mandate.

and procedurally infirm.

x x x x (Emphasis and underscoring supplied)

The termination notice sent to and received by Dr. Lanzanas on

Adding insult to injury was the circulation by petitioner of a

April 25, 1998 was the first and only time that he was apprised

"watchlist" or "watch out list"49 including therein the names of

An assumption or certification order of the DOLE Secretary

of the reason for his dismissal. He was not afforded, however,

respondents. Consider the following portions of Dr. Merceditha's

automatically results in a return-to-work of all striking workers,

even the slightest opportunity to explain his side. His was a

Memorandum of Appeal:

whether a corresponding return-to-work order had been

"termination upon receipt" situation. While he was priorly made

issued.39 The DOLE Secretary in fact issued a return-to-work

to explain on his telephone conversation with Miscala,45 he was

3. Moreover, to top it all, respondents have circulated a

so called "Watch List" to other hospitals, one of which

46

[was] procured from Foothills Hospital in Sto. Tomas,

The circulation of such list containing names of alleged union

Batangas [that] contains her name. The object of the

members intended to prevent employment of workers for union

said list is precisely to harass Complainant and malign

activities similarly constitutes unfair labor practice, thereby

her good name and reputation. This is not only

giving a right of action for damages by the employees

unprofessional, but runs smack of oppression as CMC is

prejudiced.52

trying permanently deprived [sic] Complainant of her

livelihood by ensuring that she is barred from

A word on the appellate court's deletion of the award of

practicing in other hospitals.

attorney's fees. There being no basis advanced in deleting it, as

exemplary damages were correctly awarded,53 the award of

4. Other co-professionals and brothers in the

attorney's fees should be reinstated.

profession are fully aware of these "watch out" lists

and as such, her reputation was not only besmirched,

WHEREFORE, the Decision of the Court of Appeals in CA-G.R.

but was damaged, and she suffered social humiliation

SP No. 75871 is AFFIRMED withMODIFICATION in that the

as it is of public knowledge that she was dismissed

award by the National Labor Relations Commission of 10% of

from work. Complainant came from a reputable and

the total judgment award as attorney's fees is reinstated. In all

respected family, her father being a retired full Colonel

other aspects, the decision of the appellate court is affirmed.

in the Army, Col. Romeo A. Vente, and her brothers and

sisters are all professionals, her brothers, Arnold and

SO ORDERED.

Romeo Jr., being engineers. The Complainant has a

family protection [sic] to protect. She likewise has a
professional reputation to protect, being a licensed
physician. Both her personal and professional
reputation were damaged as a result of the unlawful
acts of the respondents.50
While petitioner does not deny the existence of such list, it
pointed to the lack of any board action on its part to initiate
such listing and to circulate the same, viz:
20. x x x. The alleged watchlist or "watch out list," as
termed by complainants, were merely lists obtained by
one Dr. Ernesto Naval of PAMANA Hospital. Said list
was given by a stockholder of respondent who
was at the same time a stockholder of PAMAN[A]
Hospital. The giving of the list was not a Board
action.51 (Emphasis and underscoring supplied)

47

Shangri-la claimed, however, that petitioners were not its

In so deciding, the NLRC held that the Arbiter erred in

employees but of respondent doctor whom it retained via

interpreting Article 157 in relation to Article 280 of the Labor

Memorandum of Agreement (MOA)2 pursuant to Article 157 of

Code, as what is required under Article 157 is that the employer

the Labor Code, as amended.

should provide the services of medical personnel to its

employees, but nowhere in said article is a provision that nurses

Republic of the Philippines

SUPREME COURT
Manila

Respondent doctor for her part claimed that petitioners were

are required to be employed; that contrary to the finding of the

already working for the previous retained physicians of Shangri-

Arbiter, even if Article 280 states that if a worker performs work

la before she was retained by Shangri-la; and that she

usually necessary or desirable in the business of the employer,

maintained petitioners services upon their request.

he cannot be automatically deemed a regular employee; and

that the MOA amply shows that respondent doctor was in fact

SECOND DIVISION
G.R. No. 178827

March 4, 2009

By Decision3 of May 6, 2003, Labor Arbiter Ernesto F. Carreon

engaged by Shangri-la on a retainer basis, under which she

declared petitioners to be regular employees of Shangri-la. The

could hire her own nurses and other clinic personnel.

Arbiter thus ordered Shangri-la to grant them the wages and

JEROMIE D. ESCASINAS and EVAN RIGOR

benefits due them as regular employees from the time their

Brushing aside petitioners contention that since their

SINGCO, Petitioners,

services were engaged.

application for employment was addressed to Shangri-la, it was

really Shangri-la which hired them and not respondent doctor,

vs.
SHANGRI-LA'S MACTAN ISLAND RESORT and DR. JESSICA

In finding petitioners to be regular employees of Shangri-la, the

the NLRC noted that the applications for employment were

J.R. PEPITO, Respondents.

Arbiter noted that they usually perform work which is necessary

made by persons who are not parties to the case and were not

and desirable to Shangri-las business; that they observe clinic

shown to have been actually hired by Shangri-la.

DECISION

hours and render services only to Shangri-las guests and

employees; that payment for their salaries were recommended

On the issue of payment of wages, the NLRC held that the fact

to Shangri-las Human Resource Department (HRD); that

that, for some months, payment of petitioners wages were

respondent doctor was Shangri-las "in-house" physician, hence,

recommended by Shangri-las HRD did not prove that it was

Registered nurses Jeromie D. Escasinas and Evan Rigor Singco

also an employee; and that the MOA between Shangri-la and

Shangri-la which pays their wages. It thus credited respondent

(petitioners) were engaged in 1999 and 1996, respectively, by

respondent doctor was an "insidious mechanism in order to

doctors explanation that the recommendations for payment

Dr. Jessica Joyce R. Pepito (respondent doctor) to work in her

circumvent [the doctors] tenurial security and that of the

were based on the billings she prepared for salaries

clinic at respondent Shangri-las Mactan Island Resort (Shangri-

employees under her."

of additional nurses during Shangri-las peak months of

CARPIO MORALES, J.:

operation, in accordance with the retainership agreement, the

la) in Cebu of which she was a retained physician.

Shangri-la and respondent doctor appealed to the NLRC.

guests payments for medical services having been paid directly

In late 2002, petitioners filed with the National Labor Relations

Petitioners appealed too, but only with respect to the non-award

to Shanrgi-la.

Commission (NLRC) Regional Arbitration Branch No. VII (NLRC-

to them of some of the benefits they were claiming.

Petitioners thereupon brought the case to the Court of Appeals

RAB No. VII) a complaint1 for regularization, underpayment of

wages, non-payment of holiday pay, night shift differential and

By Decision4 dated March 31, 2005, the NLRC granted Shangri-

which, by Decision5 of May 22, 2007, affirmed the NLRC

13th month pay differential against respondents, claiming that

las and respondent doctors appeal and dismissed petitioners

Decision that no employer-employee relationship exists

they are regular employees of Shangri-la. The case was

complaint for lack of merit, it finding that no employer-

between Shangri-la and petitioners. The appellate court

docketed as RAB Case No. 07-11-2089-02.

employee relationship exists between petitioner and Shangri-la.

concluded that all aspects of the employment of petitioners

48

being under the supervision and control of respondent doctor

In its Comment,7 Shangri-la questions the Special Powers of

does not exceed fifty (50) and shall determine by

and since Shangri-la is not principally engaged in the business

Attorneys (SPAs) appended to the petition for being inadequate.

appropriate order hazardous workplaces for purposes

of providing medical or healthcare services, petitioners could

On the merits, it prays for the disallowance of the petition,

of this Article;

not be regarded as regular employees of Shangri-la.

contending that it raises factual issues, such as the validity of

the MOA, which were never raised during the proceedings

(b) The services of a full-time registered nurse, a part-

Petitioners motion for reconsideration having been denied by

before the Arbiter, albeit passed upon by him in his Decision;

time physician and dentist, and an emergency clinic,

Resolution6 of July 10, 2007, they interposed the present

that Article 157 of the Labor Code does not make it mandatory

when the number of employees exceeds two hundred

recourse.

for a covered establishment to employ health personnel; that

(200) but not more than three hundred (300); and

the services of nurses is not germane nor indispensable to its

Petitioners insist that under Article 157 of the Labor Code,

operations; and that respondent doctor is a legitimate individual

(c) The services of a full-time physician, dentist and

Shangri-la is required to hire a full-time registered nurse, apart

independent contractor who has the power to hire, fire and

full-time registered nurse as well as a dental clinic, and

from a physician, hence, their engagement should be deemed

supervise the work of the nurses under her.

an infirmary or emergency hospital with one bed

as regular employment, the provisions of the MOA

capacity for every one hundred (100) employees when

notwithstanding; and that the MOA is contrary to public policy

The resolution of the case hinges, in the main, on the correct

the number of employees exceeds three hundred

as it circumvents tenurial security and, therefore, should be

interpretation of Art. 157 vis a vis Art. 280 and the provisions on

(300).

struck down as being void ab initio. At most, they argue, the

permissible job contracting of the Labor Code, as amended.

MOA is a mere job contract.

In cases of hazardous workplaces, no employer shall engage the

The Court holds that, contrary to petitioners postulation, Art.

services of a physician or dentist who cannot stay in the

And petitioners maintain that respondent doctor is a labor-only

157 does not require the engagement of full-time nurses

premises of the establishment for at least two (2) hours, in the

contractor for she has no license or business permit and no

as regular employees of a company employing not less

case of those engaged on part-time basis, and not less than

business name registration, which is contrary to the

than 50 workers. Thus, the Article provides:

eight (8) hours in the case of those employed on full-time basis.

requirements under Sec. 19 and 20 of the Implementing Rules

and Regulations of the Labor Code on sub-contracting.

Where the undertaking is nonhazardous in nature, the physician

ART. 157. Emergency medical and dental services. It shall be

and dentist may be engaged on retained basis, subject to such

the duty of every employer to furnish his employees in any

regulations as the Secretary of Labor may prescribe to insure

Petitioners add that respondent doctor cannot be a legitimate

locality with free medical and dental attendance and facilities

immediate availability of medical and dental treatment and

independent contractor, lacking as she does in substantial

consisting of:

attendance in case of emergency. (Emphasis and underscoring

capital, the clinic having been set-up and already operational

supplied)

when she took over as retained physician; that respondent

(a) The services of a full-time registered nurse when

doctor has no control over how the clinic is being run, as shown

the number of employees exceeds fifty (50) but not

Under the foregoing provision, Shangri-la, which employs more

by the different orders issued by officers of Shangri-la

more than two hundred (200) except when the

than 200 workers, is mandated to "furnish" its employees with

forbidding her from receiving cash payments and several

employer does not maintain hazardous workplaces, in

the services of a full-time registered nurse, a part-time

purchase orders for medicines and supplies which were coursed

which case the services of a graduate first-aider shall

physician and dentist, and an emergency clinic which means

thru Shangri-las Purchasing Manager, circumstances

be provided for the protection of the workers, where no

that it should provide or make available such medical and allied

indubitably showing that she is not an independent contractor

registered nurse is available. The Secretary of Labor

services to its employees, not necessarily to hire or employ a

but a mere agent of Shangri-la.

shall provide by appropriate regulations the services

service provider. As held in Philippine Global Communications

that shall be required where the number of employees

vs. De Vera:8

49

x x x while it is true that the provision requires employers to

Sec. 8. Job contracting. There is job contracting permissible

the same manner and extent as if the latter were

engage the services of medical practitioners in certain

under the Code if the following conditions are met:

directly employed by him.

establishments depending on the number of their

employees, nothing is there in the law which says that medical

(1) The contractor carries on an independent business

(c) For cases not falling under this Article, the

practitioners so engaged be actually hired as employees,

and undertakes the contract work on his own account

Secretary of Labor shall determine through appropriate

adding that the law, as written, only requires the employer "to

under his own responsibility according to his own

orders whether or not the contracting out of labor is

retain", not employ, a part-time physician who needed to stay in

manner and method, free from the control and

permissible in the light of the circumstances of each

the premises of the non-hazardous workplace for two (2) hours.

direction of his employer or principal in all matters

case and after considering the operating needs of the

(Emphasis and underscoring supplied)1avvphi1

connected with the performance of the work except as

employer and the rights of the workers involved. In

to the results thereof; and

such case, he may prescribe conditions and restrictions

The term "full-time" in Art. 157 cannot be construed as referring

to insure the protection and welfare of the workers.

to the type of employment of the person engaged to provide

(2) The contractor has substantial capital or

the services, for Article 157 must not be read alongside Art.

investment in the form of tools, equipment,

(Emphasis supplied)

2809 in order to vest employer-employee relationship on the

machineries, work premises, and other materials which

The existence of an independent and permissible contractor

employer and the person so engaged. So De Vera teaches:

are necessary in the conduct of his business.

relationship is generally established by considering the

following determinants: whether the contractor is carrying on an

x x x For, we take it that any agreement may provide that one

Sec. 9. Labor-only contracting. (a) Any person who undertakes

independent business; the nature and extent of the work; the

party shall render services for and in behalf of another, no

to supply workers to an employer shall be deemed to be

skill required; the term and duration of the relationship; the

matter how necessary for the latters business, even without

engaged in labor-only contracting where such person:

right to assign the performance of a specified piece of work; the

being hired as an employee. This set-up is precisely true in

control and supervision of the work to another; the employer's

the case of an independent contractorship as well as in an

(1) Does not have substantial capital or

power with respect to the hiring, firing and payment of the

agency agreement. Indeed, Article 280 of the Labor Code,

investment in the form of tools,

contractor's workers; the control of the premises; the duty to

quoted by the appellate court, is not the yardstick for

equipment, machineries, work premises

supply the premises, tools, appliances, materials and labor; and

determining the existence of an employment relationship. As it

and other materials; and

the mode, manner and terms of payment. 11

employees, i.e., regular and casual. x x x10 (Emphasis and

(2) The workers recruited and placed by

On the other hand, existence of an employer- employee

underscoring supplied)

such persons are performing activities

relationship is established by the presence of the following

is, the provision merely distinguishes between two (2) kinds of

which are directly related to the

determinants: (1) the selection and engagement of the workers;

The phrase "services of a full-time registered nurse" should thus

principal business or operations of the

(2) power of dismissal; (3) the payment of wages by whatever

be taken to refer to the kind of services that the nurse will

employer in which workers are habitually

means; and (4) the power to control the worker's conduct, with

render in the companys premises and to its employees, not the

employed.

the latter assuming primacy in the overall consideration.12

manner of his engagement.

(b) Labor-only contracting as defined herein is hereby

Against the above-listed determinants, the Court holds that

As to whether respondent doctor can be considered a legitimate

prohibited and the person acting as contractor shall be

respondent doctor is a legitimate independent contractor. That

independent contractor, the pertinent sections of DOLE

considered merely as an agent or intermediary of the

Shangri-la provides the clinic premises and medical supplies for

Department Order No. 10, series of 1997, illuminate:

employer who shall be responsible to the workers in

use of its employees and guests does not necessarily prove that

50

respondent doctor lacks substantial capital and investment.

it is to safety matters; while the letter19 dated May 17, 2004

Besides, the maintenance of a clinic and provision of medical

from Shangri-las Assistant Financial Controller, Lotlot Dagat,

services to its employees is required under Art. 157, which are

forbidding the clinic from receiving cash payments from the

not directly related to Shangri-las principal business operation

resorts guests is a matter of financial policy in order to ensure

of hotels and restaurants.

proper sharing of the proceeds, considering that Shangri-la and

respondent doctor share in the guests payments for medical

As to payment of wages, respondent doctor is the one who

services rendered. In fine, as Shangri-la does not control how

underwrites the following: salaries, SSS contributions and other

the work should be performed by petitioners, it is not

benefits of the staff13; group life, group personal accident

petitioners employer.

insurance and life/death insurance

14

for the staff with minimum

benefit payable at 12 times the employees last drawn salary,

WHEREFORE, the petition is hereby DENIED. The Decision of the

as well as value added taxes and withholding taxes, sourced

Court of Appeals dated May 22, 2007 and the Resolution dated

from her P60,000.00 monthly retainer fee and 70% share of the

July 10, 2007 are AFFIRMED.

service charges from Shangri-las guests who avail of the clinic

services. It is unlikely that respondent doctor would report

SO ORDERED.

petitioners as workers, pay their SSS premium as well as their

wages if they were not indeed her employees. 15
With respect to the supervision and control of the nurses and
clinic staff, it is not disputed that a document, "Clinic Policies
and Employee Manual"16 claimed to have been prepared by
respondent doctor exists, to which petitioners gave their
conformity17 and in which they acknowledged their co-terminus
employment status. It is thus presumed that said document,
and not the employee manual being followed by Shangri-las
regular workers, governs how they perform their respective
tasks and responsibilities.
Contrary to petitioners contention, the various office directives
issued by Shangri-las officers do not imply that it is Shangri-las
management and not respondent doctor who exercises control
over them or that Shangri-la has control over how the doctor
and the nurses perform their work. The letter 18 addressed to
respondent doctor dated February 7, 2003 from a certain Tata L.
Reyes giving instructions regarding the replenishment of
emergency kits is, at most, administrative in nature, related as

51

The following facts have been stated in our Decision of

November 7, 2008, now under reconsideration, but are
repeated, simply for purposes of clarity.
The contractual relationship between Tongko and Manulife had
two basic phases. The first or initial phase began on July 1,
1977, under a Career Agents Agreement (Agreement) that
provided:
It is understood and agreed that the Agent is an independent
contractor and nothing contained herein shall be construed or
interpreted as creating an employer-employee relationship
between the Company and the Agent.
xxxx

10
Republic of the Philippines
SUPREME COURT
Manila

a) The Agent shall canvass for applications for Life Insurance,

Annuities, Group policies and other products offered by the
Company, and collect, in exchange for provisional receipts
issued by the Agent, money due to or become due to the
Company in respect of applications or policies obtained by or
through the Agent or from policyholders allotted by the
Company to the Agent for servicing, subject to subsequent
confirmation of receipt of payment by the Company as
evidenced by an Official Receipt issued by the Company directly
to the policyholder.
xxxx

EN BANC
G.R. No. 167622

June 29, 2010

GREGORIO V. TONGKO, Petitioner,

vs.
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC.
and RENATO A. VERGEL DE DIOS,Respondents.
RESOLUTION
BRION, J.:
This resolves the Motion for Reconsideration1 dated December
3, 2008 filed by respondent The Manufacturers Life Insurance
Co. (Phils.), Inc. (Manulife) to set aside our Decision of
November 7, 2008. In the assailed decision, we found that an
employer-employee relationship existed between Manulife and
petitioner Gregorio Tongko and ordered Manulife to pay Tongko
backwages and separation pay for illegal dismissal.

The Company may terminate this Agreement for any breach or

violation of any of the provisions hereof by the Agent by giving
written notice to the Agent within fifteen (15) days from the
time of the discovery of the breach. No waiver, extinguishment,
abandonment, withdrawal or cancellation of the right to
terminate this Agreement by the Company shall be construed
for any previous failure to exercise its right under any provision
of this Agreement.
Either of the parties hereto may likewise terminate his
Agreement at any time without cause, by giving to the other
party fifteen (15) days notice in writing.2
Tongko additionally agreed (1) to comply with all regulations
and requirements of Manulife, and (2) to maintain a standard of
knowledge and competency in the sale of Manulifes products,
satisfactory to Manulife and sufficient to meet the volume of the
new business, required by his Production Club membership.3

The second phase started in 1983 when Tongko was named Unit
Manager in Manulifes Sales Agency Organization. In 1990, he
became a Branch Manager. Six years later (or in 1996), Tongko
became a Regional Sales Manager.4
Tongkos gross earnings consisted of commissions, persistency
income, and management overrides. Since the beginning,
Tongko consistently declared himself self-employed in his
income tax returns. Thus, under oath, he declared his gross
business income and deducted his business expenses to arrive
at his taxable business income. Manulife withheld the
corresponding 10% tax on Tongkos earnings.5
In 2001, Manulife instituted manpower development programs
at the regional sales management level. Respondent Renato
Vergel de Dios wrote Tongko a letter dated November 6, 2001
on concerns that were brought up during the October 18, 2001
Metro North Sales Managers Meeting. De Dios wrote:
The first step to transforming Manulife into a big league player
has been very clear to increase the number of agents to at
least 1,000 strong for a start. This may seem diametrically
opposed to the way Manulife was run when you first joined the
organization. Since then, however, substantial changes have
taken place in the organization, as these have been influenced
by developments both from within and without the company.
xxxx
The issues around agent recruiting are central to the intended
objectives hence the need for a Senior Managers meeting
earlier last month when Kevin OConnor, SVP-Agency, took to
the floor to determine from our senior agency leaders what
more could be done to bolster manpower development. At
earlier meetings, Kevin had presented information where
evidently, your Region was the lowest performer (on a per
Manager basis) in terms of recruiting in 2000 and, as of today,
continues to remain one of the laggards in this area.
While discussions, in general, were positive other than for
certain comments from your end which were perceived to be
uncalled for, it became clear that a one-on-one meeting with
you was necessary to ensure that you and management, were
on the same plane. As gleaned from some of your previous
comments in prior meetings (both in group and one-on-one), it
was not clear that we were proceeding in the same direction.
Kevin held subsequent series of meetings with you as a result,
one of which I joined briefly. In those subsequent meetings you

52

reiterated certain views, the validity of which we challenged

and subsequently found as having no basis.
With such views coming from you, I was a bit concerned that
the rest of the Metro North Managers may be a bit confused as
to the directions the company was taking. For this reason, I
sought a meeting with everyone in your management team,
including you, to clear the air, so to speak.
This note is intended to confirm the items that were discussed
at the said Metro North Regions Sales Managers meeting held
at the 7/F Conference room last 18 October.
xxxx
Issue # 2: "Some Managers are unhappy with their earnings
and would want to revert to the position of agents."
This is an often repeated issue you have raised with me and
with Kevin. For this reason, I placed the issue on the table
before the rest of your Regions Sales Managers to verify its
validity. As you must have noted, no Sales Manager came
forward on their own to confirm your statement and it took you
to name Malou Samson as a source of the same, an allegation
that Malou herself denied at our meeting and in your very
presence.
This only confirms, Greg, that those prior comments have no
solid basis at all. I now believe what I had thought all along, that
these allegations were simply meant to muddle the issues
surrounding the inability of your Region to meet its agency
development objectives!
Issue # 3: "Sales Managers are doing what the company asks
them to do but, in the process, they earn less."
xxxx
All the above notwithstanding, we had your own records
checked and we found that you made a lot more money in the
Year 2000 versus 1999. In addition, you also volunteered the
information to Kevin when you said that you probably will make
more money in the Year 2001 compared to Year 2000.
Obviously, your above statement about making "less money"
did not refer to you but the way you argued this point had us
almost believing that you were spouting the gospel of truth
when you were not. x x x

All of a sudden, Greg, I have become much more worried about

your ability to lead this group towards the new direction that we
have been discussing these past few weeks, i.e., Manulifes goal
to become a major agency-led distribution company in the
Philippines. While as you claim, you have not stopped anyone
from recruiting, I have never heard you proactively push for
greater agency recruiting. You have not been proactive all these
years when it comes to agency growth.

Subsequently, de Dios wrote Tongko another letter, dated

December 18, 2001, terminating Tongkos services:
It would appear, however, that despite the series of meetings
and communications, both one-on-one meetings between
yourself and SVP Kevin OConnor, some of them with me, as
well as group meetings with your Sales Managers, all these
efforts have failed in helping you align your directions with
Managements avowed agency growth policy.

xxxx
I cannot afford to see a major region fail to deliver on its
developmental goals next year and so, we are making the
following changes in the interim:
1. You will hire at your expense a competent assistant who can
unload you of much of the routine tasks which can be easily
delegated. This assistant should be so chosen as to
complement your skills and help you in the areas where you
feel "may not be your cup of tea."
You have stated, if not implied, that your work as Regional
Manager may be too taxing for you and for your health. The
above could solve this problem.
xxxx
2. Effective immediately, Kevin and the rest of the Agency
Operations will deal with the North Star Branch (NSB) in
autonomous fashion. x x x

xxxx
On account thereof, Management is exercising its prerogative
under Section 14 of your Agents Contract as we are now issuing
this notice of termination of your Agency Agreement with us
effective fifteen days from the date of this letter. 7
Tongko responded by filing an illegal dismissal complaint with
the National Labor Relations Commission (NLRC) Arbitration
Branch. He essentially alleged despite the clear terms of the
letter terminating his Agency Agreement that he was
Manulifes employee before he was illegally dismissed. 8
Thus, the threshold issue is the existence of an employment
relationship. A finding that none exists renders the question of
illegal dismissal moot; a finding that an employment
relationship exists, on the other hand, necessarily leads to the
need to determine the validity of the termination of the
relationship.
A. Tongkos Case for Employment Relationship

I have decided to make this change so as to reduce your span

of control and allow you to concentrate more fully on
overseeing the remaining groups under Metro North, your
Central Unit and the rest of the Sales Managers in Metro North. I
will hold you solely responsible for meeting the objectives of
these remaining groups.
xxxx
The above changes can end at this point and they need not go
any further. This, however, is entirely dependent upon you. But
you have to understand that meeting corporate objectives by
everyone is primary and will not be compromised. We are
meeting tough challenges next year, and I would want
everybody on board. Any resistance or holding back by anyone
will be dealt with accordingly.6

Tongko asserted that as Unit Manager, he was paid an annual

over-rider not exceeding P50,000.00, regardless of production
levels attained and exclusive of commissions and bonuses. He
also claimed that as Regional Sales Manager, he was given a
travel and entertainment allowance of P36,000.00 per year in
addition to his overriding commissions; he was tasked with
numerous administrative functions and supervisory authority
over Manulifes employees, aside from merely selling policies
and recruiting agents for Manulife; and he recommended and
recruited insurance agents subject to vetting and approval by
Manulife. He further alleges that he was assigned a definite
place in the Manulife offices when he was not in the field at
the 3rd Floor, Manulife Center, 108 Tordesillas corner Gallardo
Sts., Salcedo Village, Makati City for which he never paid any
rental. Manulife provided the office equipment he used,
including tables, chairs, computers and printers (and even office
stationery), and paid for the electricity, water and telephone

xxxx

53

bills. As Regional Sales Manager, Tongko additionally asserts

that he was required to follow at least three codes of conduct.9
B. Manulifes Case Agency Relationship with Tongko
Manulife argues that Tongko had no fixed wage or salary. Under
the Agreement, Tongko was paid commissions of varying
amounts, computed based on the premium paid in full and
actually received by Manulife on policies obtained through an
agent. As sales manager, Tongko was paid overriding sales
commission derived from sales made by agents under his
unit/structure/branch/region. Manulife also points out that it
deducted and withheld a 10% tax from all commissions Tongko
received; Tongko even declared himself to be self-employed and
consistently paid taxes as suchi.e., he availed of tax
deductions such as ordinary and necessary trade, business and
professional expenses to which a business is entitled.
Manulife asserts that the labor tribunals have no jurisdiction
over Tongkos claim as he was not its employee as
characterized in the four-fold test and our ruling in Carungcong
v. National Labor Relations Commission.10
The Conflicting Rulings of the Lower Tribunals
The labor arbiter decreed that no employer-employee
relationship existed between the parties. However, the NLRC
reversed the labor arbiters decision on appeal; it found the
existence of an employer-employee relationship and concluded
that Tongko had been illegally dismissed. In the petition for
certiorari with the Court of Appeals (CA), the appellate court
found that the NLRC gravely abused its discretion in its ruling
and reverted to the labor arbiters decision that no employeremployee relationship existed between Tongko and Manulife.
Our Decision of November 7, 2008
In our Decision of November 7, 2008, we reversed the CA ruling
and found that an employment relationship existed between
Tongko and Manulife. We concluded that Tongko is Manulifes
employee for the following reasons:
1. Our ruling in the first Insular11 case did not foreclose
the possibility of an insurance agent becoming an
employee of an insurance company; if evidence exists
showing that the company promulgated rules or
regulations that effectively controlled or restricted an
insurance agents choice of methods or the methods
themselves in selling insurance, an employeremployee relationship would be present. The

determination of the existence of an employeremployee relationship is thus on a case-to-case basis

depending on the evidence on record.
2. Manulife had the power of control over Tongko,
sufficient to characterize him as an employee, as
shown by the following indicators:
2.1 Tongko undertook to comply with
Manulifes rules, regulations and other
requirements, i.e., the different codes of
conduct such as the Agent Code of Conduct,
the Manulife Financial Code of Conduct, and
the Financial Code of Conduct Agreement;
2.2 The various affidavits of Manulifes
insurance agents and managers, who
occupied similar positions as Tongko, showed
that they performed administrative duties
that established employment with
Manulife;12 and
2.3 Tongko was tasked to recruit some agents
in addition to his other administrative
functions. De Dios letter harped on the
direction Manulife intended to take, viz.,
greater agency recruitment as the primary
means to sell more policies; Tongkos alleged
failure to follow this directive led to the
termination of his employment with Manulife.
The Motion for Reconsideration
Manulife disagreed with our Decision and filed the present
motion for reconsideration on the following GROUNDS:
1. The November 7[, 2008] Decision violates Manulifes
right to due process by: (a) confining the review only to
the issue of "control" and utterly disregarding all the
other issues that had been joined in this case; (b)
mischaracterizing the divergence of conclusions
between the CA and the NLRC decisions as confined
only to that on "control"; (c) grossly failing to consider
the findings and conclusions of the CA on the majority
of the material evidence, especially [Tongkos]
declaration in his income tax returns that he was a
"business person" or "self-employed"; and (d) allowing
[Tongko] to repudiate his sworn statement in a public
document.

2. The November 7[, 2008] Decision contravenes

settled rules in contract law and agency, distorts not
only the legal relationships of agencies to sell but also
distributorship and franchising, and ignores the
constitutional and policy context of contract law vis-vis labor law.
3. The November 7[, 2008] Decision ignores the
findings of the CA on the three elements of the fourfold test other than the "control" test, reverses wellsettled doctrines of law on employer-employee
relationships, and grossly misapplies the "control test,"
by selecting, without basis, a few items of evidence to
the exclusion of more material evidence to support its
conclusion that there is "control."
4. The November 7[, 2008] Decision is judicial
legislation, beyond the scope authorized by Articles 8
and 9 of the Civil Code, beyond the powers granted to
this Court under Article VIII, Section 1 of the
Constitution and contravenes through judicial
legislation, the constitutional prohibition against
impairment of contracts under Article III, Section 10 of
the Constitution.
5. For all the above reasons, the November 7[, 2008]
Decision made unsustainable and reversible errors,
which should be corrected, in concluding that
Respondent Manulife and Petitioner had an employeremployee relationship, that Respondent Manulife
illegally dismissed Petitioner, and for consequently
ordering Respondent Manulife to pay Petitioner
backwages, separation pay, nominal damages and
attorneys fees.13
THE COURTS RULING
A. The Insurance and the Civil Codes;
the Parties Intent and Established
Industry Practices
We cannot consider the present case purely from a labor law
perspective, oblivious that the factual antecedents were set in
the insurance industry so that the Insurance Code primarily
governs. Chapter IV, Title 1 of this Code is wholly devoted to
"Insurance Agents and Brokers" and specifically defines the
agents and brokers relationship with the insurance company
and how they are governed by the Code and regulated by the
Insurance Commission.

54

The Insurance Code, of course, does not wholly regulate the

"agency" that it speaks of, as agency is a civil law matter
governed by the Civil Code. Thus, at the very least, three sets of
laws namely, the Insurance Code, the Labor Code and the Civil
Code have to be considered in looking at the present case.
Not to be forgotten, too, is the Agreement (partly reproduced on
page 2 of this Dissent and which no one disputes) that the
parties adopted to govern their relationship for purposes of
selling the insurance the company offers. To forget these other
laws is to take a myopic view of the present case and to add to
the uncertainties that now exist in considering the legal
relationship between the insurance company and its "agents."
The main issue of whether an agency or an employment
relationship exists depends on the incidents of the relationship.
The Labor Code concept of "control" has to be compared and
distinguished with the "control" that must necessarily exist in a
principal-agent relationship. The principal cannot but also have
his or her say in directing the course of the principal-agent
relationship, especially in cases where the companyrepresentative relationship in the insurance industry is an
agency.
a. The laws on insurance and agency
The business of insurance is a highly regulated commercial
activity in the country, in terms particularly of who can be in the
insurance business, who can act for and in behalf of an insurer,
and how these parties shall conduct themselves in the
insurance business. Section 186 of the Insurance Code provides
that "No person, partnership, or association of persons shall
transact any insurance business in the Philippines except as
agent of a person or corporation authorized to do the business
of insurance in the Philippines." Sections 299 and 300 of the
Insurance Code on Insurance Agents and Brokers, among other
provisions, provide:
Section 299. No insurance company doing business in the
Philippines, nor any agent thereof, shall pay any commission or
other compensation to any person for services in obtaining
insurance, unless such person shall have first procured from the
Commissioner a license to act as an insurance agent of such
company or as an insurance broker as hereinafter provided.
No person shall act as an insurance agent or as an insurance
broker in the solicitation or procurement of applications for
insurance, or receive for services in obtaining insurance, any
commission or other compensation from any insurance
company doing business in the Philippines or any agent thereof,
without first procuring a license so to act from the
Commissioner x x x The Commissioner shall satisfy himself as

to the competence and trustworthiness of the applicant and

shall have the right to refuse to issue or renew and to suspend
or revoke any such license in his discretion.1avvphi1.net
Section 300. Any person who for compensation solicits or
obtains insurance on behalf of any insurance company or
transmits for a person other than himself an application for a
policy or contract of insurance to or from such company or
offers or assumes to act in the negotiating of such insurance
shall be an insurance agent within the intent of this section and
shall thereby become liable to all the duties, requirements,
liabilities and penalties to which an insurance agent is subject.
The application for an insurance agents license requires a
written examination, and the applicant must be of good moral
character and must not have been convicted of a crime
involving moral turpitude.14 The insurance agent who collects
premiums from an insured person for remittance to the
insurance company does so in a fiduciary capacity, and an
insurance company which delivers an insurance policy or
contract to an authorized agent is deemed to have authorized
the agent to receive payment on the companys
behalf.15 Section 361 further prohibits the offer, negotiation, or
collection of any amount other than that specified in the policy
and this covers any rebate from the premium or any special
favor or advantage in the dividends or benefit accruing from the
policy.
Thus, under the Insurance Code, the agent must, as a matter of
qualification, be licensed and must also act within the
parameters of the authority granted under the license and
under the contract with the principal. Other than the need for a
license, the agent is limited in the way he offers and negotiates
for the sale of the companys insurance products, in his
collection activities, and in the delivery of the insurance
contract or policy. Rules regarding the desired results (e.g., the
required volume to continue to qualify as a company agent,
rules to check on the parameters on the authority given to the
agent, and rules to ensure that industry, legal and ethical rules
are followed) are built-in elements of control specific to an
insurance agency and should not and cannot be read as
elements of control that attend an employment relationship
governed by the Labor Code.
On the other hand, the Civil Code defines an agent as a "person
[who] binds himself to render some service or to do something
in representation or on behalf of another, with the consent or
authority of the latter."16 While this is a very broad definition
that on its face may even encompass an employment
relationship, the distinctions between agency and employment
are sufficiently established by law and jurisprudence.

Generally, the determinative element is the control exercised

over the one rendering service. The employer controls the
employee both in the results and in the means and manner of
achieving this result. The principal in an agency relationship, on
the other hand, also has the prerogative to exercise control over
the agent in undertaking the assigned task based on the
parameters outlined in the pertinent laws.
Under the general law on agency as applied to insurance, an
agency must be express in light of the need for a license and for
the designation by the insurance company. In the present case,
the Agreement fully serves as grant of authority to Tongko as
Manulifes insurance agent.17 This agreement is supplemented
by the companys agency practices and usages, duly accepted
by the agent in carrying out the agency.18 By authority of the
Insurance Code, an insurance agency is for compensation,19 a
matter the Civil Code Rules on Agency presumes in the absence
of proof to the contrary.20 Other than the compensation, the
principal is bound to advance to, or to reimburse, the agent the
agreed sums necessary for the execution of the agency. 21 By
implication at least under Article 1994 of the Civil Code, the
principal can appoint two or more agents to carry out the same
assigned tasks,22 based necessarily on the specific instructions
and directives given to them.
With particular relevance to the present case is the provision
that "In the execution of the agency, the agent shall act in
accordance with the instructions of the principal." 23 This
provision is pertinent for purposes of the necessary control that
the principal exercises over the agent in undertaking the
assigned task, and is an area where the instructions can intrude
into the labor law concept of control so that minute
consideration of the facts is necessary. A related article is
Article 1891 of the Civil Code which binds the agent to render
an account of his transactions to the principal.
B. The Cited Case
The Decision of November 7, 2008 refers to the first Insular and
Grepalife cases to establish that the company rules and
regulations that an agent has to comply with are indicative of
an employer-employee relationship.24 The Dissenting Opinions
of Justice Presbitero Velasco, Jr. and Justice Conchita Carpio
Morales also cite Insular Life Assurance Co. v. National Labor
Relations Commission (second Insular case) 25 to support the
view that Tongko is Manulifes employee. On the other hand,
Manulife cites the Carungcong case and AFP Mutual Benefit
Association, Inc. v. National Labor Relations Commission
(AFPMBAI case)26 to support its allegation that Tongko was not
its employee.

55

A caveat has been given above with respect to the use of the
rulings in the cited cases because none of them is on all fours
with the present case; the uniqueness of the factual situation of
the present case prevents it from being directly and readily cast
in the mold of the cited cases. These cited cases are
themselves different from one another; this difference
underscores the need to read and quote them in the context of
their own factual situations.
The present case at first glance appears aligned with the facts
in the Carungcong, the Grepalife, and the second Insular Life
cases. A critical difference, however, exists as these cited cases
dealt with the proper legal characterization of a subsequent
management contract that superseded the original agency
contract between the insurance company and its agent.
Carungcong dealt with a subsequent Agreement making
Carungcong a New Business Manager that clearly superseded
the Agreement designating Carungcong as an agent
empowered to solicit applications for insurance. The Grepalife
case, on the other hand, dealt with the proper legal
characterization of the appointment of the Ruiz brothers to
positions higher than their original position as insurance agents.
Thus, after analyzing the duties and functions of the Ruiz
brothers, as these were enumerated in their contracts, we
concluded that the company practically dictated the manner by
which the Ruiz brothers were to carry out their jobs. Finally, the
second Insular Life case dealt with the implications of de los
Reyes appointment as acting unit manager which, like the
subsequent contracts in the Carungcong and the Grepalife
cases, was clearly defined under a subsequent contract. In all
these cited cases, a determination of the presence of the Labor
Code element of control was made on the basis of the
stipulations of the subsequent contracts.
In stark contrast with the Carungcong, the Grepalife, and the
second Insular Life cases, the only contract or document extant
and submitted as evidence in the present case is the
Agreement a pure agency agreement in the Civil Code context
similar to the original contract in the first Insular Life case and
the contract in the AFPMBAI case. And while Tongko was later on
designated unit manager in 1983, Branch Manager in 1990, and
Regional Sales Manager in 1996, no formal contract regarding
these undertakings appears in the records of the case. Any such
contract or agreement, had there been any, could have at the
very least provided the bases for properly ascertaining the
juridical relationship established between the parties.
These critical differences, particularly between the present case
and the Grepalife and the second Insular Life cases, should
therefore immediately drive us to be more prudent and cautious
in applying the rulings in these cases.

C. Analysis of the Evidence

c.1. The Agreement
The primary evidence in the present case is the July 1, 1977
Agreement that governed and defined the parties relations
until the Agreements termination in 2001. This Agreement
stood for more than two decades and, based on the records of
the case, was never modified or novated. It assumes primacy
because it directly dealt with the nature of the parties
relationship up to the very end; moreover, both parties never
disputed its authenticity or the accuracy of its terms.
By the Agreements express terms, Tongko served as an
"insurance agent" for Manulife, not as an employee. To be sure,
the Agreements legal characterization of the nature of the
relationship cannot be conclusive and binding on the courts; as
the dissent clearly stated, the characterization of the juridical
relationship the Agreement embodied is a matter of law that is
for the courts to determine. At the same time, though, the
characterization the parties gave to their relationship in the
Agreement cannot simply be brushed aside because it
embodies their intent at the time they entered the Agreement,
and they were governed by this understanding throughout their
relationship. At the very least, the provision on the absence of
employer-employee relationship between the parties can be an
aid in considering the Agreement and its implementation, and in
appreciating the other evidence on record.
The parties legal characterization of their intent, although not
conclusive, is critical in this case because this intent is not
illegal or outside the contemplation of law, particularly of the
Insurance and the Civil Codes. From this perspective, the
provisions of the Insurance Code cannot be disregarded as this
Code (as heretofore already noted) expressly envisions a
principal-agent relationship between the insurance company
and the insurance agent in the sale of insurance to the
public.1awph!1 For this reason, we can take judicial notice that
as a matter of Insurance Code-based business practice, an
agency relationship prevails in the insurance industry for the
purpose of selling insurance. The Agreement, by its express
terms, is in accordance with the Insurance Code model when it
provided for a principal-agent relationship, and thus cannot
lightly be set aside nor simply be considered as an agreement
that does not reflect the parties true intent. This intent,
incidentally, is reinforced by the system of compensation the
Agreement provides, which likewise is in accordance with the
production-based sales commissions the Insurance Code
provides.

Significantly, evidence shows that Tongkos role as an insurance

agent never changed during his relationship with Manulife. If
changes occurred at all, the changes did not appear to be in the
nature of their core relationship. Tongko essentially remained an
agent, but moved up in this role through Manulifes recognition
that he could use other agents approved by Manulife, but
operating under his guidance and in whose commissions he had
a share. For want of a better term, Tongko perhaps could be
labeled as a "lead agent" who guided under his wing other
Manulife agents similarly tasked with the selling of Manulife
insurance.
Like Tongko, the evidence suggests that these other agents
operated under their own agency agreements. Thus, if Tongkos
compensation scheme changed at all during his relationship
with Manulife, the change was solely for purposes of crediting
him with his share in the commissions the agents under his
wing generated. As an agent who was recruiting and guiding
other insurance agents, Tongko likewise moved up in terms of
the reimbursement of expenses he incurred in the course of his
lead agency, a prerogative he enjoyed pursuant to Article 1912
of the Civil Code. Thus, Tongko received greater
reimbursements for his expenses and was even allowed to use
Manulife facilities in his interactions with the agents, all of
whom were, in the strict sense, Manulife agents approved and
certified as such by Manulife with the Insurance Commission.
That Tongko assumed a leadership role but nevertheless wholly
remained an agent is the inevitable conclusion that results from
the reading of the Agreement (the only agreement on record in
this case) and his continuing role thereunder as sales agent,
from the perspective of the Insurance and the Civil Codes and in
light of what Tongko himself attested to as his role as Regional
Sales Manager. To be sure, this interpretation could have been
contradicted if other agreements had been submitted as
evidence of the relationship between Manulife and Tongko on
the latters expanded undertakings. In the absence of any such
evidence, however, this reading based on the available
evidence and the applicable insurance and civil law provisions
must stand, subject only to objective and evidentiary Labor
Code tests on the existence of an employer-employee
relationship.
In applying such Labor Code tests, however, the enforcement of
the Agreement during the course of the parties relationship
should be noted. From 1977 until the termination of the
Agreement, Tongkos occupation was to sell Manulifes
insurance policies and products. Both parties acquiesced with
the terms and conditions of the Agreement. Tongko, for his part,
accepted all the benefits flowing from the Agreement,
particularly the generous commissions.

56

Evidence indicates that Tongko consistently clung to the view

that he was an independent agent selling Manulife insurance
products since he invariably declared himself a business or selfemployed person in his income tax returns. This consistency
with, and action made pursuant to the Agreement were
pieces of evidence that were never mentioned nor
considered in our Decision of November 7, 2008. Had they
been considered, they could, at the very least, serve as
Tongkos admissions against his interest. Strictly speaking,
Tongkos tax returns cannot but be legally significant because
he certified under oath the amount he earned as gross business
income, claimed business deductions, leading to his net taxable
income. This should be evidence of the first order that cannot
be brushed aside by a mere denial. Even on a laymans view
that is devoid of legal considerations, the extent of his annual
income alone renders his claimed employment status
doubtful.27
Hand in hand with the concept of admission against interest in
considering the tax returns, the concept of estoppel a legal
and equitable concept28 necessarily must come into play.
Tongkos previous admissions in several years of tax returns as
an independent agent, as against his belated claim that he was
all along an employee, are too diametrically opposed to be
simply dismissed or ignored. Interestingly, Justice Velascos
dissenting opinion states that Tongko was forced to declare
himself a business or self-employed person by Manulifes
persistent refusal to recognize him as its
employee.29 Regrettably, the dissent has shown no basis
for this conclusion, an understandable omission since no
evidence in fact exists on this point in the records of the
case. In fact, what the evidence shows is Tongkos full
conformity with, and action as, an independent agent until his
relationship with Manulife took a bad turn.
Another interesting point the dissent raised with respect to the
Agreement is its conclusion that the Agreement negated any
employment relationship between Tongko and Manulife so that
the commissions he earned as a sales agent should not be
considered in the determination of the backwages and
separation pay that should be given to him. This part of the
dissent is correct although it went on to twist this conclusion by
asserting that Tongko had dual roles in his relationship with
Manulife; he was an agent, not an employee, in so far as he sold
insurance for Manulife, but was an employee in his capacity as
a manager. Thus, the dissent concluded that Tongkos
backwages should only be with respect to his role as Manulifes
manager.
The conclusion with respect to Tongkos employment as a
manager is, of course, unacceptable for the legal, factual and
practical reasons discussed in this Resolution. In brief,

the factual reason is grounded on the lack of evidentiary

support of the conclusion that Manulife exercised control over
Tongko in the sense understood in the Labor Code. The legal
reason, partly based on the lack of factual basis, is the
erroneous legal conclusion that Manulife controlled Tongko and
was thus its employee. The practical reason, on the other
hand, is the havoc that the dissents unwarranted conclusion
would cause the insurance industry that, by the laws own
design, operated along the lines of principal-agent relationship
in the sale of insurance.
c.2. Other Evidence of Alleged Control
A glaring evidentiary gap for Tongko in this case is the lack of
evidence on record showing that Manulife ever exercised
means-and-manner control, even to a limited extent, over
Tongko during his ascent in Manulifes sales ladder. In 1983,
Tongko was appointed unit manager. Inexplicably, Tongko never
bothered to present any evidence at all on what this
designation meant. This also holds true for Tongkos
appointment as branch manager in 1990, and as Regional Sales
Manager in 1996. The best evidence of control the agreement
or directive relating to Tongkos duties and responsibilities was
never introduced as part of the records of the case. The reality
is, prior to de Dios letter, Manulife had practically left Tongko
alone not only in doing the business of selling insurance, but
also in guiding the agents under his wing. As discussed below,
the alleged directives covered by de Dios letter, heretofore
quoted in full, were policy directions and targeted results that
the company wanted Tongko and the other sales groups to
realign with in their own selling activities. This is the reality that
the parties presented evidence consistently tells us.
What, to Tongko, serve as evidence of labor law control are the
codes of conduct that Manulife imposes on its agents in the sale
of insurance. The mere presentation of codes or of rules and
regulations, however, is not per se indicative of labor law
control as the law and jurisprudence teach us.
As already recited above, the Insurance Code imposes
obligations on both the insurance company and its agents in the
performance of their respective obligations under the Code,
particularly on licenses and their renewals, on the
representations to be made to potential customers, the
collection of premiums, on the delivery of insurance policies, on
the matter of compensation, and on measures to ensure ethical
business practice in the industry.
The general law on agency, on the other hand, expressly allows
the principal an element of control over the agent in a manner
consistent with an agency relationship. In this sense, these

control measures cannot be read as indicative of labor law

control. Foremost among these are the directives that the
principal may impose on the agent to achieve the assigned
tasks, to the extent that they do not involve the means and
manner of undertaking these tasks. The law likewise obligates
the agent to render an account; in this sense, the principal may
impose on the agent specific instructions on how an account
shall be made, particularly on the matter of expenses and
reimbursements. To these extents, control can be imposed
through rules and regulations without intruding into the labor
law concept of control for purposes of employment.
From jurisprudence, an important lesson that the first Insular
Life case teaches us is that a commitment to abide by the rules
and regulations of an insurance company does not ipso facto
make the insurance agent an employee. Neither do guidelines
somehow restrictive of the insurance agents conduct
necessarily indicate "control" as this term is defined in
jurisprudence. Guidelines indicative of labor law "control,"
as the first Insular Life case tells us, should not merely
relate to the mutually desirable result intended by the
contractual relationship; they must have the nature of
dictating the means or methods to be employed in attaining
the result, or of fixing the methodology and of binding or
restricting the party hired to the use of these means. In fact,
results-wise, the principal can impose production quotas and
can determine how many agents, with specific territories, ought
to be employed to achieve the companys objectives. These are
management policy decisions that the labor law element of
control cannot reach. Our ruling in these respects in the first
Insular Life case was practically reiterated in Carungcong. Thus,
as will be shown more fully below, Manulifes codes of
conduct,30 all of which do not intrude into the insurance agents
means and manner of conducting their sales and only control
them as to the desired results and Insurance Code norms,
cannot be used as basis for a finding that the labor law concept
of control existed between Manulife and Tongko.
The dissent considers the imposition of administrative and
managerial functions on Tongko as indicative of labor law
control; thus, Tongko as manager, but not as insurance agent,
became Manulifes employee. It drew this conclusion from what
the other Manulife managers disclosed in their affidavits (i.e.,
their enumerated administrative and managerial functions) and
after comparing these statements with the managers in
Grepalife. The dissent compared the control exercised by
Manulife over its managers in the present case with the control
the managers in the Grepalife case exercised over their
employees by presenting the following matrix:31
Duties of Manulifes Manager

Duties

57

- to render or recommend prospective agents to be

licensed, trained and contracted to sell Manulife
products and who will be part of my Unit

- to coordinate activities of the agents under [the

managers] Unit in [the agents] daily, weekly and
monthly selling activities, making sure that their
respective sales targets are met;
- to conduct periodic training sessions for [the]
agents to further enhance their sales skill; and
- to assist [the] agents with their sales activities by
way of joint fieldwork, consultations and one-onone evaluation and analysis of particular accounts

the District Managers duty in Grepalife is to

properly account, record, and document the company's
- train understudies funds,
for thespot-check
position ofand
district
manager
audit
the work of the zone
supervisors, conserve the company's business in the
district through "reinstatements," follow up the
submission of weekly remittance reports of the debit
agents and zone supervisors, preserve company
property in good condition, train understudies for the
position of district managers, and maintain his quota of
- properly account, record
andfailure
document
the companys
sales (the
of which
is a ground for termination).
funds, spot-check and audit the work of the zone
supervisors, x x x follow up the submission of weekly

the
Zone
(also in Grepalife) has the
remittance reports
of
the
debitSupervisors
agents and zone
supervisors
duty to direct and supervise the sales activities of the
debit agents under him, conserve company property
through "reinstatements," undertake and discharge
- direct and supervise the sales activities of the debit
the functions of absentee debit agents, spot-check the
agents under him, x x x undertake and discharge the
records of debit agents, and insure proper
functions of absentee debit agents, spot-check the
documentation of sales and collections by the debit
record of debit agents, and insure proper
agents.
documentation of sales and collections of debit agents.

Aside from these affidavits however, no other evidence exists

regarding the effects of Tongkos additional roles in Manulifes
sales operations on the contractual relationship between them.
To the dissent, Tongkos administrative functions as recruiter,
trainer, or supervisor of other sales agents constituted a
substantive alteration of Manulifes authority over Tongko and
the performance of his end of the relationship with Manulife. We
could not deny though that Tongko remained, first and
foremost, an insurance agent, and that his additional role as
Branch Manager did not lessen his main and dominant role as
insurance agent; this role continued to dominate the relations
between Tongko and Manulife even after Tongko assumed his
leadership role among agents. This conclusion cannot be denied
because it proceeds from the undisputed fact that Tongko and
Manulife never altered their July 1, 1977 Agreement, a
distinction the present case has with the contractual changes
made in the second Insular Life case. Tongkos results-based
commissions, too, attest to the primacy he gave to his role as
insurance sales agent.
The dissent apparently did not also properly analyze and
appreciate the great qualitative difference that exists between:

the Manulife managers role is to coordinate activities

of the agents under the managers Unit in the agents
daily, weekly, and monthly selling activities, making
sure that their respective sales targets are met.

These job contents are worlds apart in terms of "control." In

Grepalife, the details of how to do the job are specified and predetermined; in the present case, the operative words are the
"sales target," the methodology being left undefined except to
the extent of being "coordinative." To be sure, a "coordinative"
standard for a manager cannot be indicative of control; the
standard only essentially describes what a Branch Manager is
the person in the lead who orchestrates activities within the
group. To "coordinate," and thereby to lead and to orchestrate,
is not so much a matter of control by Manulife; it is simply a
statement of a branch managers role in relation with his agents
from the point of view of Manulife whose business Tongkos
sales group carries.
A disturbing note, with respect to the presented affidavits and
Tongkos alleged administrative functions, is the selective
citation of the portions supportive of an employment
relationship and the consequent omission of portions leading to
the contrary conclusion. For example, the following portions of
the affidavit of Regional Sales Manager John Chua, with
counterparts in the other affidavits, were not brought out in the
Decision of November 7, 2008, while the other portions
suggesting labor law control were highlighted. Specifically, the
following portions of the affidavits were not brought out: 32
1.a. I have no fixed wages or salary since my services
are compensated by way of commissions based on the
computed premiums paid in full on the policies
obtained thereat;

1.b. I have no fixed working hours and employ my own

method in soliticing insurance at a time and place I see
fit;
1.c. I have my own assistant and messenger who
handle my daily work load;
1.d. I use my own facilities, tools, materials and
supplies in carrying out my business of selling
insurance;
xxxx
6. I have my own staff that handles the day to day
operations of my office;
7. My staff are my own employees and received
salaries from me;
xxxx
9. My commission and incentives are all reported to
the Bureau of Internal Revenue (BIR) as income by a
self-employed individual or professional with a ten (10)
percent creditable withholding tax. I also remit monthly
for professionals.
These statements, read with the above comparative analysis of
the Manulife and the Grepalife cases, would have readily
yielded the conclusion that no employer-employee relationship
existed between Manulife and Tongko.
Even de Dios letter is not determinative of control as it
indicates the least amount of intrusion into Tongkos exercise of
his role as manager in guiding the sales agents. Strictly viewed,
de Dios directives are merely operational guidelines on how
Tongko could align his operations with Manulifes re-directed
goal of being a "big league player." The method is to expand
coverage through the use of more agents. This requirement for
the recruitment of more agents is not a means-and-method
control as it relates, more than anything else, and is directly
relevant, to Manulifes objective of expanded business
operations through the use of a bigger sales force whose
members are all on a principal-agent relationship. An important
point to note here is that Tongko was not supervising regular
full-time employees of Manulife engaged in the running of the
insurance business; Tongko was effectively guiding his corps of
sales agents, who are bound to Manulife through the same
Agreement that he had with Manulife, all the while sharing in

58

these agents commissions through his overrides. This is the

lead agent concept mentioned above for want of a more
appropriate term, since the title of Branch Manager used by the
parties is really a misnomer given that what is involved is not a
specific regular branch of the company but a corps of nonemployed agents, defined in terms of covered territory, through
which the company sells insurance. Still another point to
consider is that Tongko was not even setting policies in the way
a regular company manager does; company aims and
objectives were simply relayed to him with suggestions on how
these objectives can be reached through the expansion of a
non-employee sales force.
Interestingly, a large part of de Dios letter focused on income,
which Manulife demonstrated, in Tongkos case, to be
unaffected by the new goal and direction the company had set.
Income in insurance agency, of course, is dependent on results,
not on the means and manner of selling a matter for Tongko
and his agents to determine and an area into which Manulife
had not waded. Undeniably, de Dios letter contained a directive
to secure a competent assistant at Tongkos own expense. While
couched in terms of a directive, it cannot strictly be understood
as an intrusion into Tongkos method of operating and
supervising the group of agents within his delineated territory.
More than anything else, the "directive" was a signal to Tongko
that his results were unsatisfactory, and was a suggestion on
how Tongkos perceived weakness in delivering results could be
remedied. It was a solution, with an eye on results, for a
consistently underperforming group; its obvious intent was to
save Tongko from the result that he then failed to grasp that
he could lose even his own status as an agent, as he in fact
eventually did.
The present case must be distinguished from the second Insular
Life case that showed the hallmarks of an employer-employee
relationship in the management system established. These
were: exclusivity of service, control of assignments and removal
of agents under the private respondents unit, and furnishing of
company facilities and materials as well as capital described as
Unit Development Fund. All these are obviously absent in the
present case. If there is a commonality in these cases, it is in
the collection of premiums which is a basic authority that can
be delegated to agents under the Insurance Code.
As previously discussed, what simply happened in Tongkos case
was the grant of an expanded sales agency role that recognized
him as leader amongst agents in an area that Manulife
defined. Whether this consequently resulted in the
establishment of an employment relationship can be
answered by concrete evidence that corresponds to the
following questions:

as lead agent, what were Tongkos specific functions

and the terms of his additional engagement;

was he paid additional compensation as a so-called

Area Sales Manager, apart from the commissions he
received from the insurance sales he generated;

what can be Manulifes basis to terminate his status as

lead agent;

can Manulife terminate his role as lead agent

separately from his agency contract; and

to what extent does Manulife control the means and

methods of Tongkos role as lead agent?

The answers to these questions may, to some extent, be

deduced from the evidence at hand, as partly discussed above.
But strictly speaking, the questions cannot definitively and
concretely be answered through the evidence on record. The
concrete evidence required to settle these questions is simply
not there, since only the Agreement and the anecdotal
affidavits have been marked and submitted as evidence.
Given this anemic state of the evidence, particularly on the
requisite confluence of the factors determinative of the
existence of employer-employee relationship, the Court cannot
conclusively find that the relationship exists in the present case,
even if such relationship only refers to Tongkos additional
functions. While a rough deduction can be made, the answer
will not be fully supported by the substantial evidence needed.
Under this legal situation, the only conclusion that can be made
is that the absence of evidence showing Manulifes control over
Tongkos contractual duties points to the absence of any
employer-employee relationship between Tongko and Manulife.
In the context of the established evidence, Tongko remained an
agent all along; although his subsequent duties made him a
lead agent with leadership role, he was nevertheless only an
agent whose basic contract yields no evidence of means-andmanner control.
This conclusion renders unnecessary any further discussion of
the question of whether an agent may simultaneously assume
conflicting dual personalities. But to set the record straight, the
concept of a single person having the dual role of agent and
employee while doing the same task is a novel one in our
jurisprudence, which must be viewed with caution especially
when it is devoid of any jurisprudential support or precedent.

The quoted portions in Justice Carpio-Morales

dissent,33 borrowed from both the Grepalife and the second
Insular Life cases, to support the duality approach of the
Decision of November 7, 2008, are regrettably far removed from
their context i.e., the cases factual situations, the issues they
decided and the totality of the rulings in these cases and
cannot yield the conclusions that the dissenting opinions drew.
The Grepalife case dealt with the sole issue of whether the Ruiz
brothers appointment as zone supervisor and district manager
made them employees of Grepalife. Indeed, because of the
presence of the element of control in their contract of
engagements, they were considered Grepalifes employees.
This did not mean, however, that they were simultaneously
considered agents as well as employees of Grepalife; the
Courts ruling never implied that this situation existed insofar as
the Ruiz brothers were concerned. The Courts statement the
Insurance Code may govern the licensing requirements and
other particular duties of insurance agents, but it does not bar
the application of the Labor Code with regard to labor standards
and labor relations simply means that when an insurance
company has exercised control over its agents so as to make
them their employees, the relationship between the parties,
which was otherwise one for agency governed by the Civil Code
and the Insurance Code, will now be governed by the Labor
Code. The reason for this is simple the contract of agency has
been transformed into an employer-employee relationship.
The second Insular Life case, on the other hand, involved the
issue of whether the labor bodies have jurisdiction over an
illegal termination dispute involving parties who had two
contracts first, an original contract (agency contract), which
was undoubtedly one for agency, and another subsequent
contract that in turn designated the agent acting unit manager
(a management contract). Both the Insular Life and the labor
arbiter were one in the position that both were agency
contracts. The Court disagreed with this conclusion and held
that insofar as the management contract is concerned, the
labor arbiter has jurisdiction. It is in this light that we remanded
the case to the labor arbiter for further proceedings. We never
said in this case though that the insurance agent had effectively
assumed dual personalities for the simple reason that the
agency contract has been effectively superseded by the
management contract. The management contract provided that
if the appointment was terminated for any reason other than for
cause, the acting unit manager would be reverted to agent
status and assigned to any unit.
The dissent pointed out, as an argument to support its
employment relationship conclusion, that any doubt in the
existence of an employer-employee relationship should be
resolved in favor of the existence of the relationship.34This

59

observation, apparently drawn from Article 4 of the Labor Code,

is misplaced, as Article 4 applies only when a doubt exists in the
"implementation and application" of the Labor Code and its
implementing rules; it does not apply where no doubt exists as
in a situation where the claimant clearly failed to substantiate
his claim of employment relationship by the quantum of
evidence the Labor Code requires.
On the dissents last point regarding the lack of jurisprudential
value of our November 7, 2008 Decision, suffice it to state that,
as discussed above, the Decision was not supported by the
evidence adduced and was not in accordance with controlling
jurisprudence. It should, therefore, be reconsidered and
abandoned, but not in the manner the dissent suggests as the
dissenting opinions are as factually and as legally erroneous as
the Decision under reconsideration.

11
Republic of the Philippines

In light of these conclusions, the sufficiency of Tongkos failure

to comply with the guidelines of de Dios letter, as a ground for
termination of Tongkos agency, is a matter that the labor
tribunals cannot rule upon in the absence of an employeremployee relationship. Jurisdiction over the matter belongs to
the courts applying the laws of insurance, agency and
contracts.
WHEREFORE, considering the foregoing discussion, we REVERSE
our Decision of November 7, 2008, GRANTManulifes motion for
reconsideration and, accordingly, DISMISS Tongkos petition.
No costs.
SO ORDERED.

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 196426

August 15, 2011

MARTICIO SEMBLANTE and DUBRICK PILAR, Petitioners,

vs.
COURT OF APPEALS, 19th DIVISION, now SPECIAL
FORMER 19th DIVISION, GALLERA DE MANDAUE /
SPOUSES VICENTE and MARIA LUISA LOOT, Respondents.
DECISION
VELASCO, JR., J.:
Before Us is a Petition for Review on Certiorari under Rule 45,
assailing and seeking to set aside the Decision1and
Resolution2 dated May 29, 2009 and February 23, 2010,
respectively, of the Court of Appeals (CA) in CA-G.R. SP No.
03328. The CA affirmed the October 18, 2006 Resolution 3 of the

60

National Labor Relations Commission (NLRC), Fourth Division

In answer, respondents denied that petitioners were their

that there was no employer-employee relationship between

(now Seventh Division), in NLRC Case No. V-000673-2004.

employees and alleged that they were associates of

petitioners and respondents, respondents having no part in the

respondents independent contractor, Tomas Vega. Respondents

selection and engagement of petitioners, and that no separate

Petitioners Marticio Semblante (Semblante) and Dubrick Pilar

claimed that petitioners have no regular working time or day

individual contract with respondents was ever executed by

(Pilar) assert that they were hired by respondents-spouses

and they are free to decide for themselves whether to report for

petitioners.10

Vicente and Maria Luisa Loot, the owners of Gallera de Mandaue

work or not on any cockfighting day. In times when there are

(the cockpit), as the official masiador and sentenciador,

few cockfights in Gallera de Mandaue, petitioners go to other

Following the denial by the NLRC of their Motion for

respectively, of the cockpit sometime in 1993.

cockpits in the vicinity. Lastly, petitioners, so respondents

Reconsideration, per Resolution dated January 12, 2007,

assert, were only issued identification cards to indicate that

petitioners went to the CA on a petition for certiorari. In support

As the masiador, Semblante calls and takes the bets from the

they were free from the normal entrance fee and to differentiate

of their petition, petitioners argued that the NLRC gravely

gamecock owners and other bettors and orders the start of the

them from the general public.6

abused its discretion in entertaining an appeal that was not

cockfight. He also distributes the winnings after deducting the

perfected in the first place. On the other hand, respondents

arriba, or the commission for the cockpit. Meanwhile, as the

In a Decision dated June 16, 2004, Labor Arbiter Julie C.

argued that the NLRC did not commit grave abuse of discretion,

sentenciador, Pilar oversees the proper gaffing of fighting cocks,

Rendoque found petitioners to be regular employees of

since they eventually posted their appeal bond and that their

determines the fighting cocks physical condition and

respondents as they performed work that was necessary and

appeal was so meritorious warranting the relaxation of the rules

capabilities to continue the cockfight, and eventually declares

indispensable to the usual trade or business of respondents for

in the interest of justice.11

the result of the cockfight.

For their services as masiador and sentenciador, Semblante

a number of years. The Labor Arbiter also ruled that petitioners

were illegally dismissed, and so ordered respondents to pay

In its Decision dated May 29, 2009, the appellate court found

petitioners their backwages and separation pay. 7

for respondents, noting that referees and bet-takers in a

receives PhP 2,000 per week or a total of PhP 8,000 per month,

cockfight need to have the kind of expertise that is

while Pilar gets PhP 3,500 a week or PhP 14,000 per month.

Respondents counsel received the Labor Arbiters Decision on

characteristic of the game to interpret messages conveyed by

They work every Tuesday, Wednesday, Saturday, and Sunday

September 14, 2004. And within the 10-day appeal period, he

mere gestures. Hence, petitioners are akin to independent

every week, excluding monthly derbies and cockfights held on

filed the respondents appeal with the NLRC on September 24,

contractors who possess unique skills, expertise, and talent to

special holidays. Their working days start at 1:00 p.m. and last

2004, but without posting a cash or surety bond equivalent to

distinguish them from ordinary employees. Further, respondents

until 12:00 midnight, or until the early hours of the morning

the monetary award granted by the Labor Arbiter. 8

did not supply petitioners with the tools and instrumentalities

depending on the needs of the cockpit. Petitioners had both

they needed to perform work. Petitioners only needed their

been issued employees identification cards5 that they wear

It was only on October 11, 2004 that respondents filed an

unique skills and talents to perform their job as masiador and

every time they report for duty. They alleged never having

appeal bond dated October 6, 2004. Hence, in a

sentenciador.12 The CA held:

incurred any infraction and/or violation of the cockpit rules and

Resolution dated August 25, 2005, the NLRC denied the appeal

regulations.

for its non-perfection.

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

interpretation of the rules in deciding labor cases. In this case,

On November 14, 2003, however, petitioners were denied entry

Subsequently, however, the NLRC, acting on respondents

the appeal bond was filed, although late. Moreover, an

into the cockpit upon the instructions of respondents, and were

Motion for Reconsideration, reversed its Resolution on the

exceptional circumstance obtains in the case at bench which

informed of the termination of their services effective that date.

postulate that their appeal was meritorious and the filing of an

warrants a relaxation of the bond requirement as a condition for

This prompted petitioners to file a complaint for illegal dismissal

appeal bond, albeit belated, is a substantial compliance with

perfecting the appeal. This case is highly meritorious that

against respondents.

the rules. The NLRC held in its Resolution of October 18, 2006

61

propels this Court not to strictly apply the rules and thus

"masiador" and "sentenciador". As such, they had all the tools

cannot prevent courts from exercising their duties to determine

prevent a grave injustice from being done.

they needed to perform their work. (Emphasis supplied.)

and settle, equitably and completely, the rights and obligations

of the parties.17 This is one case where the exception to the

As elucidated by the NLRC, the circumstances obtaining in this

The CA refused to reconsider its Decision. Hence, petitioners

case wherein no actual employer-employee exists between the

came to this Court, arguing in the main that the CA committed

petitioners and the private respondents [constrain] the

a reversible error in entertaining an appeal, which was not

While respondents had failed to post their bond within the 10-

relaxation of the rules. In this regard, we find no grave abuse

perfected in the first place.

day period provided above, it is evident, on the other hand, that

attributable to the administrative body.

xxxx
Petitioners are duly licensed "masiador" and "sentenciador" in

general rule lies.

petitioners are NOT employees of respondents, since their

Indeed, the posting of a bond is indispensable to the perfection

relationship fails to pass muster the four-fold test of

of an appeal in cases involving monetary awards from the

employment We have repeatedly mentioned in countless

Decision of the Labor Arbiter.13 Article 223 of the Labor Code

decisions: (1) the selection and engagement of the employee;

provides:

(2) the payment of wages; (3) the power of dismissal; and (4)

the cockpit owned by Lucia Loot. Cockfighting, which is a part of

the power to control the employees conduct, which is the most

important element.18 1avvphi1

our cultural heritage, has a peculiar set of rules. It is a game

Article 223. Appeal. Decisions, awards, or orders of the Labor

based on the fighting ability of the game cocks in the cockpit.

Arbiter are final and executory unless appealed to the

The referees and bet-takers need to have that kind of expertise

Commission by any or both parties within ten (10) calendar

As found by both the NLRC and the CA, respondents had no part

that is characteristic of the cockfight gambling who can

days from receipt of such decisions, awards, or orders. Such

in petitioners selection and management; 19petitioners

interpret the message conveyed even by mere gestures. They

appeal may be entertained only on any of the following

compensation was paid out of the arriba (which is a percentage

ought to have the talent and skill to get the bets from numerous

grounds:

deducted from the total bets), not by petitioners;20 and

cockfighting aficionados and decide which cockerel to put in the

arena. They are placed in that elite spot where they can control

petitioners performed their functions as masiador and

xxxx

sentenciador free from the direction and control of

respondents.21 In the conduct of their work, petitioners relied

the game and the crowd. They are not given salaries by cockpit
owners as their compensation is based on the "arriba". In fact,

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

mainly on their "expertise that is characteristic of the cockfight

they can offer their services everywhere because they are duly

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

gambling,"22 and were never given by respondents any tool

licensed by the GAB. They are free to choose which cockpit

or surety bond issued by a reputable bonding company duly

needed for the performance of their work.23

arena to enter and offer their expertise. Private respondents

accredited by the Commission in the amount equivalent to the

cannot even control over the means and methods of the

monetary award in the judgment appealed from. (Emphasis

Respondents, not being petitioners employers, could never

manner by which they perform their work. In this light, they are

supplied.)

have dismissed, legally or illegally, petitioners, since

akin to independent contractors who possess unique skills,

respondents were without power or prerogative to do so in the

expertise and talent to distinguish them from ordinary

Time and again, however, this Court, considering the

first place. The rule on the posting of an appeal bond cannot

employees.

substantial merits of the case, has relaxed this rule on, and

defeat the substantive rights of respondents to be free from an

excused the late posting of, the appeal bond when there are

unwarranted burden of answering for an illegal dismissal for

strong and compelling reasons for the liberality,14such as the

which they were never responsible.1avvphi1

Furthermore, private respondents did not supply petitioners

15

with the tools and instrumentalities they needed to perform

prevention of miscarriage of justice extant in the case

their work. Petitioners only needed their talent and skills to be a

special circumstances in the case combined with its legal merits

or the amount and the issue involved.

16

or the

After all, technical rules

Strict implementation of the rules on appeals must give way to

the factual and legal reality that is evident from the records of

62

this case.24 After all, the primary objective of our laws is to

The Case

dispense justice and equity, not the contrary.

This is a petition for review1 of the 17 December 2009

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

WHEREFORE, We DENY this petition and AFFIRM the May 29,

2009 Decision and February 23, 2010 Resolution of the CA, and
the October 18, 2006 Resolution of the NLRC.
SO ORDERED.

The Facts
The facts, as summarized by the NLRC and quoted by the Court
of Appeals, are as follows:
Complainants (Jose Mel Bernarte and Renato Guevarra) aver
that they were invited to join the PBA as referees. During the
leadership of Commissioner Emilio Bernardino, they were made
to sign contracts on a year-to-year basis. During the term of
Commissioner Eala, however, changes were made on the terms
of their employment.
Complainant Bernarte, for instance, was not made to sign a
contract during the first conference of the All-Filipino Cup which
was from February 23, 2003 to June 2003. It was only during the
second conference when he was made to sign a one and a half
month contract for the period July 1 to August 5, 2003.

12
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 192084

September 14, 2011

JOSE MEL BERNARTE, Petitioner,

vs.
PHILIPPINE BASKETBALL ASSOCIATION (PBA), JOSE
EMMANUEL M. EALA, and PERRY MARTINEZ,Respondents.

On January 15, 2004, Bernarte received a letter from the Office

of the Commissioner advising him that his contract would not
be renewed citing his unsatisfactory performance on and off the
court. It was a total shock for Bernarte who was awarded
Referee of the year in 2003. He felt that the dismissal was
caused by his refusal to fix a game upon order of Ernie De Leon.
On the other hand, complainant Guevarra alleges that he was
invited to join the PBA pool of referees in February 2001. On
March 1, 2001, he signed a contract as trainee. Beginning 2002,
he signed a yearly contract as Regular Class C referee. On May
6, 2003, respondent Martinez issued a memorandum to
Guevarra expressing dissatisfaction over his questioning on the
assignment of referees officiating out-of-town games. Beginning
February 2004, he was no longer made to sign a contract.

DECISION
CARPIO, J.:

Respondents aver, on the other hand, that complainants

entered into two contracts of retainer with the PBA in the year
2003. The first contract was for the period January 1, 2003 to
July 15, 2003; and the second was for September 1 to

63

December 2003. After the lapse of the latter period, PBA

decided not to renew their contracts.

WHEREFORE, the appeal is hereby DISMISSED. The Decision of

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

Complainants were not illegally dismissed because they were

not employees of the PBA. Their respective contracts of retainer
were simply not renewed. PBA had the prerogative of whether
or not to renew their contracts, which they knew were fixed. 4
5

In her 31 March 2005 Decision, the Labor Arbiter declared

petitioner an employee whose dismissal by respondents was
illegal. Accordingly, the Labor Arbiter ordered the reinstatement
of petitioner and the payment of backwages, moral and
exemplary damages and attorneys fees, to wit:
WHEREFORE, premises considered all respondents who are here
found to have illegally dismissed complainants are hereby
ordered to (a) reinstate complainants within thirty (30) days
from the date of receipt of this decision and to solidarily pay
complainants:
JOSE MEL
BERNARTE
1. backwages from January
1, 2004 up to the finality of
this Decision, which to date
is

P536,250.00

2. moral damages

100,000.00

3. exemplary damages

100,000.00

4. 10% attorney's fees

68,625.00

TOTAL
or a total of P1,152,250.00

P754,875.00

RENATO
GUEVARRA

SO ORDERED.9

The main issue in this case is whether petitioner is an employee

of respondents, which in turn determines whether petitioner
was illegally dismissed.

Respondents filed a petition for certiorari with the Court of

Appeals, which overturned the decisions of the NLRC and Labor
Arbiter. The dispositive portion of the Court of Appeals decision
reads:

Petitioner raises the procedural issue of whether the Labor

Arbiters decision has become final and executory for failure of
respondents to appeal with the NLRC within the reglementary
period.

WHEREFORE, the petition is hereby GRANTED. The

assailed Decision dated January 28, 2008 and Resolutiondated
August 26, 2008 of the National Labor Relations Commission
are ANNULLED and SET ASIDE. Private respondents
complaint before the Labor Arbiter is DISMISSED.
SO ORDERED.

10

The Court of Appeals Ruling

The Court of Appeals found petitioner an independent

P211,250.00 contractor since respondents did not exercise any form of
control over the means and methods by which petitioner
performed his work as a basketball referee. The Court of
Appeals held:
50,000.00

While the NLRC agreed that the PBA has no control over the
50,000.00 referees acts of blowing the whistle and making calls during
basketball games, it, nevertheless, theorized that the said acts
36,125.00 refer to the means and methods employed by the referees in
officiating basketball games for the illogical reason that said
P397,375.00 acts refer only to the referees skills. How could a skilled referee
perform his job without blowing a whistle and making calls?
Worse, how can the PBA control the performance of work of a
referee without controlling his acts of blowing the whistle and
making calls?

The rest of the claims are hereby dismissed for lack of merit or
basis.
SO ORDERED.7
In its 28 January 2008 Decision,8 the NLRC affirmed the Labor
Arbiters judgment. The dispositive portion of the NLRCs
decision reads:

The Issues

Moreover, this Court disagrees with the Labor Arbiters finding

(as affirmed by the NLRC) that the Contracts of Retainer show
that petitioners have control over private respondents.
xxxx
Neither do We agree with the NLRCs affirmance of the Labor
Arbiters conclusion that private respondents repeated hiring
made them regular employees by operation of law. 11

The Ruling of the Court

The petition is bereft of merit.
The Court shall first resolve the procedural issue posed by
petitioner.
Petitioner contends that the Labor Arbiters Decision of 31
March 2005 became final and executory for failure of
respondents to appeal with the NLRC within the prescribed
period. Petitioner claims that the Labor Arbiters decision was
constructively served on respondents as early as August 2005
while respondents appealed the Arbiters decision only on 31
March 2006, way beyond the reglementary period to appeal.
Petitioner points out that service of an unclaimed registered
mail is deemed complete five days from the date of first notice
of the post master. In this case three notices were issued by the
post office, the last being on 1 August 2005. The unclaimed
registered mail was consequently returned to sender. Petitioner
presents the Postmasters Certification to prove constructive
service of the Labor Arbiters decision on respondents. The
Postmaster certified:
xxx
That upon receipt of said registered mail matter, our registry in
charge, Vicente Asis, Jr., immediately issued the first registry
notice to claim on July 12, 2005 by the addressee. The second
and third notices were issued on July 21 and August 1, 2005,
respectively.
That the subject registered letter was returned to the sender
(RTS) because the addressee failed to claim it after our one
month retention period elapsed. Said registered letter was
dispatched from this office to Manila CPO (RTS) under bill #6,
line 7, page1, column 1, on September 8, 2005.12
Section 10, Rule 13 of the Rules of Court provides:

64

SEC. 10. Completeness of service. Personal service is

complete upon actual delivery. Service by ordinary mail is
complete upon the expiration of ten (10) days after mailing,
unless the court otherwise provides. Service by registered mail
is complete upon actual receipt by the addressee, or after five
(5) days from the date he received the first notice of the
postmaster, whichever date is earlier.
The rule on service by registered mail contemplates two
situations: (1) actual service the completeness of which is
determined upon receipt by the addressee of the registered
mail; and (2) constructive service the completeness of which is
determined upon expiration of five days from the date the
addressee received the first notice of the postmaster.13
Insofar as constructive service is concerned, there must be
conclusive proof that a first notice was duly sent by the
postmaster to the addressee.14 Not only is it required that notice
of the registered mail be issued but that it should also be
delivered to and received by the addressee.15 Notably, the
presumption that official duty has been regularly performed is
not applicable in this situation. It is incumbent upon a party who
relies on constructive service to prove that the notice was sent
to, and received by, the addressee.16
The best evidence to prove that notice was sent would be a
certification from the postmaster, who should certify not only
that the notice was issued or sent but also as to how, when and
to whom the delivery and receipt was made. The mailman may
also testify that the notice was actually delivered.17
In this case, petitioner failed to present any concrete proof as to
how, when and to whom the delivery and receipt of the three
notices issued by the post office was made. There is no
conclusive evidence showing that the post office notices were
actually received by respondents, negating petitioners claim of
constructive service of the Labor Arbiters decision on
respondents. The Postmasters Certification does not sufficiently
prove that the three notices were delivered to and received by
respondents; it only indicates that the post office issued the
three notices. Simply put, the issuance of the notices by the
post office is not equivalent to delivery to and receipt by the
addressee of the registered mail. Thus, there is no proof of
completed constructive service of the Labor Arbiters decision
on respondents.
At any rate, the NLRC declared the issue on the finality of the
Labor Arbiters decision moot as respondents appeal was
considered in the interest of substantial justice. We agree with
the NLRC. The ends of justice will be better served if we resolve
the instant case on the merits rather than allowing the

substantial issue of whether petitioner is an independent

contractor or an employee linger and remain unsettled due to
procedural technicalities.
The existence of an employer-employee relationship is
ultimately a question of fact. As a general rule, factual issues
are beyond the province of this Court. However, this rule admits
of exceptions, one of which is where there are conflicting
findings of fact between the Court of Appeals, on one hand, and
the NLRC and Labor Arbiter, on the other, such as in the present
case.18
To determine the existence of an employer-employee
relationship, case law has consistently applied the four-fold test,
to wit: (a) the selection and engagement of the employee; (b)
the payment of wages; (c) the power of dismissal; and (d) the
employers power to control the employee on the means and
methods by which the work is accomplished. The so-called
"control test" is the most important indicator of the presence
or absence of an employer-employee relationship.19
In this case, PBA admits repeatedly engaging petitioners
services, as shown in the retainer contracts. PBA pays petitioner
a retainer fee, exclusive of per diem or allowances, as stipulated
in the retainer contract. PBA can terminate the retainer contract
for petitioners violation of its terms and conditions.
However, respondents argue that the all-important element of
control is lacking in this case, making petitioner an independent
contractor and not an employee of respondents.
Petitioner contends otherwise. Petitioner asserts that he is an
employee of respondents since the latter exercise control over
the performance of his work. Petitioner cites the following
stipulations in the retainer contract which evidence control: (1)
respondents classify or rate a referee; (2) respondents require
referees to attend all basketball games organized or authorized
by the PBA, at least one hour before the start of the first game
of each day; (3) respondents assign petitioner to officiate
ballgames, or to act as alternate referee or substitute; (4)
referee agrees to observe and comply with all the requirements
of the PBA governing the conduct of the referees whether on or
off the court; (5) referee agrees (a) to keep himself in good
physical, mental, and emotional condition during the life of the
contract; (b) to give always his best effort and service, and
loyalty to the PBA, and not to officiate as referee in any
basketball game outside of the PBA, without written prior
consent of the Commissioner; (c) always to conduct himself on
and off the court according to the highest standards of honesty
or morality; and (6) imposition of various sanctions for violation
of the terms and conditions of the contract.

The foregoing stipulations hardly demonstrate control over the

means and methods by which petitioner performs his work as a
referee officiating a PBA basketball game. The contractual
stipulations do not pertain to, much less dictate, how and when
petitioner will blow the whistle and make calls. On the contrary,
they merely serve as rules of conduct or guidelines in order to
maintain the integrity of the professional basketball league. As
correctly observed by the Court of Appeals, "how could a skilled
referee perform his job without blowing a whistle and making
calls? x x x [H]ow can the PBA control the performance of work
of a referee without controlling his acts of blowing the whistle
and making calls?"20
In Sonza v. ABS-CBN Broadcasting Corporation,21 which
determined the relationship between a television and radio
station and one of its talents, the Court held that not all rules
imposed by the hiring party on the hired party indicate that the
latter is an employee of the former. The Court held:
We find that these general rules are merely guidelines towards
the achievement of the mutually desired result, which are toprating television and radio programs that comply with standards
of the industry. We have ruled that:
Further, not every form of control that a party reserves to
himself over the conduct of the other party in relation to the
services being rendered may be accorded the effect of
establishing an employer-employee relationship. The facts of
this case fall squarely with the case of Insular Life Assurance
Co., Ltd. v. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely
serve as guidelines towards the achievement of the mutually
desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of
such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second,
which address both the result and the means used to achieve
it.22
We agree with respondents that once in the playing court, the
referees exercise their own independent judgment, based on
the rules of the game, as to when and how a call or decision is
to be made. The referees decide whether an infraction was
committed, and the PBA cannot overrule them once the
decision is made on the playing court. The referees are the only,
absolute, and final authority on the playing court. Respondents
or any of the PBA officers cannot and do not determine which
calls to make or not to make and cannot control the referee
when he blows the whistle because such authority exclusively

65

belongs to the referees. The very nature of petitioners job of

officiating a professional basketball game undoubtedly calls for
freedom of control by respondents.
Moreover, the following circumstances indicate that petitioner is
an independent contractor: (1) the referees are required to
report for work only when PBA games are scheduled, which is
three times a week spread over an average of only 105 playing
days a year, and they officiate games at an average of two
hours per game; and (2) the only deductions from the fees
received by the referees are withholding taxes.
In other words, unlike regular employees who ordinarily report
for work eight hours per day for five days a week, petitioner is
required to report for work only when PBA games are scheduled
or three times a week at two hours per game. In addition, there
are no deductions for contributions to the Social Security
System, Philhealth or Pag-Ibig, which are the usual deductions
from employees salaries. These undisputed circumstances
buttress the fact that petitioner is an independent contractor,
and not an employee of respondents.
Furthermore, the applicable foreign case law declares that a
referee is an independent contractor, whose special skills and
independent judgment are required specifically for such position
and cannot possibly be controlled by the hiring party.
In Yonan v. United States Soccer Federation, Inc.,23 the United
States District Court of Illinois held that plaintiff, a soccer
referee, is an independent contractor, and not an employee of
defendant which is the statutory body that governs soccer in
the United States. As such, plaintiff was not entitled to
protection by the Age Discrimination in Employment Act. The
U.S. District Court ruled:
Generally, "if an employer has the right to control and direct the
work of an individual, not only as to the result to be achieved,
but also as to details by which the result is achieved, an
employer/employee relationship is likely to exist." The Court
must be careful to distinguish between "control[ling] the
conduct of another party contracting party by setting out in
detail his obligations" consistent with the freedom of contract,
on the one hand, and "the discretionary control an employer
daily exercises over its employees conduct" on the other.
Yonan asserts that the Federation "closely supervised" his
performance at each soccer game he officiated by giving him
an assessor, discussing his performance, and controlling what
clothes he wore while on the field and traveling. Putting aside
that the Federation did not, for the most part, control what
clothes he wore, the Federation did not supervise Yonan, but

rather evaluated his performance after matches. That the

Federation evaluated Yonan as a referee does not mean that he
was an employee. There is no question that parties retaining
independent contractors may judge the performance of those
contractors to determine if the contractual relationship should
continue. x x x
It is undisputed that the Federation did not control the way
Yonan refereed his games.1wphi1 He had full discretion and
authority, under the Laws of the Game, to call the game as he
saw fit. x x x In a similar vein, subjecting Yonan to qualification
standards and procedures like the Federations registration and
training requirements does not create an employer/employee
relationship. x x x
A position that requires special skills and independent judgment
weights in favor of independent contractor status. x x x
Unskilled work, on the other hand, suggests an employment
relationship. x x x Here, it is undisputed that soccer refereeing,
especially at the professional and international level, requires "a
great deal of skill and natural ability." Yonan asserts that it was
the Federations training that made him a top referee, and that
suggests he was an employee. Though substantial training
supports an employment inference, that inference is dulled
significantly or negated when the putative employers activity is
the result of a statutory requirement, not the employers choice.
xxx
24

In McInturff v. Battle Ground Academy of Franklin, it was held

that the umpire was not an agent of the Tennessee Secondary
School Athletic Association (TSSAA), so the players vicarious
liability claim against the association should be dismissed. In
finding that the umpire is an independent contractor, the Court
of Appeals of Tennesse ruled:
The TSSAA deals with umpires to achieve a result-uniform rules
for all baseball games played between TSSAA member schools.
The TSSAA does not supervise regular season games. It does
not tell an official how to conduct the game beyond the
framework established by the rules. The TSSAA does not, in the
vernacular of the case law, control the means and method by
which the umpires work.

warranting such contract renewal. Conversely, if PBA decides to

discontinue petitioners services at the end of the term fixed in
the contract, whether for unsatisfactory services, or violation of
the terms and conditions of the contract, or for whatever other
reason, the same merely results in the non-renewal of the
contract, as in the present case. The non-renewal of the
contract between the parties does not constitute illegal
dismissal of petitioner by respondents.
WHEREFORE, we DENY the petition and AFFIRM the assailed
decision of the Court of Appeals. SO ORDERED.
13
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 169757

November 23, 2011

CESAR C. LIRIO, doing business under the name and

style of CELKOR AD SONICMIX, Petitioner,
vs.
WILMER D. GENOVIA, Respondent.
DECISION
PERALTA, J.:
This is a petition for review on certiorari of the decision of the
Court of Appeals in CA-G.R. SP No. 88899 dated August 4, 2005
and its Resolution dated September 21, 2005, denying

In addition, the fact that PBA repeatedly hired petitioner does

not by itself prove that petitioner is an employee of the former.
For a hired party to be considered an employee, the hiring party
must have control over the means and methods by which the
hired party is to perform his work, which is absent in this case.
The continuous rehiring by PBA of petitioner simply signifies the
renewal of the contract between PBA and petitioner, and
highlights the satisfactory services rendered by petitioner

petitioners motion for reconsideration.

The Court of Appeals reversed and set aside the resolution of
the NLRC, and reinstated the decision of the Labor Arbiter with
modification, finding that respondent is an employee of
petitioner, and that respondent was illegally dismissed and

66

entitled to the payment of backwages and separation pay in

while the technical aspect in producing the album, such as

music industry, respondent did not deserve a high

lieu of reinstatement.

digital editing, mixing and sound engineering would be

compensation, and he should be thankful that he was given a

performed by respondent in his capacity as studio manager for

job to feed his family. Petitioner informed respondent that he

which he was paid on a monthly basis. Petitioner instructed

was entitled only to 20% of the net profit, and not of the gross

respondent that his work on the album as composer and

sales of the album, and that the salaries he received and would

On July 9, 2002, respondent Wilmer D. Genovia filed a complaint

arranger would only be done during his spare time, since his

continue to receive as studio manager of Celkor would be

against petitioner Cesar Lirio and/or Celkor Ad Sonicmix

other work as studio manager was the priority. Respondent then

deducted from the said 20% net profit share. Respondent

Recording Studio for illegal dismissal, non-payment of

started working on the album.

objected and insisted that he be properly compensated. On

The facts are as follows:

commission and award of moral and exemplary damages.

March 14, 2002, petitioner verbally terminated respondents

Respondent alleged that before the end of September 2001, he

services, and he was instructed not to report for work.

In his Position Paper,1 respondent Genovia alleged, among

reminded petitioner about his compensation as composer and

others, that on August 15, 2001, he was hired as studio

arranger of the album. Petitioner verbally assured him that he

Respondent asserts that he was illegally dismissed as he was

manager by petitioner Lirio, owner of Celkor Ad Sonicmix

would be duly compensated. By mid-November 2001,

terminated without any valid grounds, and no hearing was

Recording Studio (Celkor). He was employed to manage and

respondent finally finished the compositions and musical

conducted before he was terminated, in violation of his

operate Celkor and to promote and sell the recording studio's

arrangements of the songs to be included in the album. Before

constitutional right to due process. Having worked for more

services to music enthusiasts and other prospective clients. He

the month ended, the lead and back-up vocals in the ten (10)

than six months, he was already a regular employee. Although

received a monthly salary of P7,000.00. They also agreed that

songs were finally recorded and completed. From December

he was a so called "studio manager," he had no managerial

he was entitled to an additional commission of P100.00 per

2001 to January 2002, respondent, in his capacity as studio

powers, but was merely an ordinary employee.

hour as recording technician whenever a client uses the studio

manager, worked on digital editing, mixing and sound

for recording, editing or any related work. He was made to

engineering of the vocal and instrumental audio files.

report for work from Monday to Friday from 9:00 a.m. to 6 p.m.

Respondent prayed for his reinstatement without loss of

seniority rights, or, in the alternative, that he be paid separation

On Saturdays, he was required to work half-day only, but most

Thereafter, respondent was tasked by petitioner to prepare

pay, backwages and overtime pay; and that he be awarded

of the time, he still rendered eight hours of work or more. All the

official correspondence, establish contacts and negotiate with

unpaid commission in the amount ofP2,000.00 for services

employees of petitioner, including respondent, rendered

various radio stations, malls, publishers, record companies and

rendered as a studio technician as well as moral and exemplary

overtime work almost everyday, but petitioner never kept a

manufacturers, record bars and other outlets in preparation for

damages.

daily time record to avoid paying the employees overtime pay.

the promotion of the said album. By early February 2002, the

album was in its manufacturing stage. ELECTROMAT,

Respondents evidence consisted of the Payroll dated July 31,

Respondent stated that a few days after he started working as a

manufacturer of CDs and cassette tapes, was tapped to do the

2001 to March 15, 2002, which was certified correct by

studio manager, petitioner approached him and told him about

job. The carrier single of the album, which respondent

petitioner,2 and Petty Cash Vouchers3 evidencing receipt of

his project to produce an album for his 15-year-old daughter,

composed and arranged, was finally aired over the radio on

payroll payments by respondent from Celkor.

Celine Mei Lirio, a former talent of ABS-CBN Star Records.

February 22, 2002.

In defense, petitioner stated in his Position Paper4 that

Petitioner asked respondent to compose and arrange songs for

Celine and promised that he (Lirio) would draft a contract to

On February 26, 2002, respondent again reminded petitioner

respondent was not hired as studio manager, composer,

assure respondent of his compensation for such services. As

about the contract on his compensation as composer and

technician or as an employee in any other capacity of Celkor.

agreed upon, the additional services that respondent would

arranger of the album. Petitioner told respondent that since he

Respondent could not have been hired as a studio manager,

render included composing and arranging musical scores only,

was practically a nobody and had proven nothing yet in the

since the recording studio has no personnel except petitioner.

67

Petitioner further claimed that his daughter Celine Mei Lirio, a

the use thereof; and Celine Mei Lirio would sing the songs. They

145,778.6 (basic P7,000.00 x 19.6 mos.=P133,000.00

former contract artist of ABS-CBN Star Records, failed to come

embarked on the production of the album on or about the third

+ 1/12 thereof as 13th month pay of P11,083.33 +

up with an album as the latter aborted its project to produce

week of August 2002.

SILP P7,000/32.62 days=P214.59/day x 5=P1,072.96 x

one. Thus, he decided to produce an album for his daughter and

1.58 yrs.=P1,695.27);separation pay

established a recording studio, which he named Celkor Ad

Petitioner asserted that from the aforesaid terms and

Sonicmix Recording Studio. He looked for a composer/arranger

conditions, his relationship with respondent is one of an

who would compose the songs for the said album. In July 2001,

informal partnership under Article 17675 of the New Civil Code,

2) To pay complainant's unpaid commission

Bob Santiago, his son-in-law, introduced him to respondent, who

since they agreed to contribute money, property or industry to

of P2,000.00;

claimed to be an amateur composer, an arranger with limited

a common fund with the intention of dividing the profits among

experience and musician without any formal musical training.

themselves. Petitioner had no control over the time and manner

3) To pay him moral and exemplary damages in the

According to petitioner, respondent had no track record as a

by which respondent composed or arranged the songs, except

combined amount of P75,000.00.

composer, and he was not known in the field of music.

on the result thereof. Respondent reported to the recording

Nevertheless, after some discussion, respondent verbally

studio between 10:00 a.m. and 12:00 noon. Hence, petitioner

Other monetary claims of complainant are dismissed for lack of

agreed with petitioner to co-produce the album based on the

contended that no employer-employee relationship existed

merit.7

following terms and conditions: (1) petitioner shall provide all

between him and the respondent, and there was no illegal

the financing, equipment and recording studio; (2) Celine Mei

dismissal to speak of.

Lirio shall sing all the songs; (3) respondent shall act as

of P22,750.00 (P7,000.00 x 3.25 yrs.);

The Labor Arbiter stated that petitioners denial of the

employment relationship cannot overcome respondents

composer and arranger of all the lyrics and the music of the five

On October 31, 2003, Labor Arbiter Renaldo O. Hernandez

positive assertion and documentary evidence proving that

songs he already composed and the revival songs; (4) petitioner

rendered a decision,6 finding that an employer-employee

petitioner hired respondent as his employee.8

shall have exclusive right to market the album; (5) petitioner

relationship existed between petitioner and respondent, and

was entitled to 60% of the net profit, while respondent and

that respondent was illegally dismissed. The dispositive portion

Petitioner appealed the decision of the Labor Arbiter to the

Celine Mei Lirio were each entitled to 20% of the net profit; and

of the decision reads:

National Labor Relations Commission (NLRC).

a month, which shall be deductible from his share of the net

WHEREFORE, premises considered, we find that respondents

In a Resolution7 dated October 14, 2004, the NLRC reversed and

profits and only until such time that the album has been

CELKOR AD SONICMIX RECORDING STUDIO and/ or CESAR C.

set aside the decision of the Labor Arbiter. The dispositive

produced.

LIRIO (Owner), have illegally dismissed complainant in his

portion of the Resolution reads:

(6) respondent shall be entitled to draw advances of P7,000.00

status as regular employee and, consequently, ORDERING said

According to petitioner, they arrived at the foregoing sharing of

respondents:

profits based on the mutual understanding that respondent was

WHEREFORE, premises considered, the Appeal is GRANTED.

Accordingly, the Decision appealed from is REVERSED and,

just an amateur composer with no track record whatsoever in

1) To pay him full backwages from date of illegal

hence, SET ASIDE and a new one ENTERED dismissing the

the music industry, had no definite source of income, had

dismissal on March 14, 2002 until finality of this

instant case for lack of merit.9

limited experience as an arranger, had no knowledge of the use

decision and, in lieu of reinstatement, to [pay] his

of sound mixers or digital arranger and that petitioner would

separation pay of one (1) month pay per year of

The NLRC stated that respondent failed to prove his

help and teach him how to use the studio equipment; that

service reckoned from [the] date of hire on August 15,

employment tale with substantial evidence. Although the NLRC

petitioner would shoulder all the expenses of production and

2001 until finality of this decision, which as of date

agreed that respondent was able to prove that he received

provide the studio and equipment as well as his knowledge in

amounts to full backwages total of

gross pay less deduction and net pay, with the corresponding

68

Certification of Correctness by petitioner, covering the period

Petitioner states that respondent appealed to the Court of

committed grave abuse of discretion when it declared that no

from July 31, 2001 to March 15, 2002, the NLRC held that

Appeals via a petition for certiorari under Rule 65, which will

employer-employee relationship exists between the petitioner

respondent failed to proved with substantial evidence that he

prosper only if there is a showing of grave abuse of discretion or

and the private respondents, since the petitioner failed to prove

was selected and engaged by petitioner, that petitioner had the

an act without or in excess of jurisdiction on the part of the

such fact by substantial evidence."16

13

power to dismiss him, and that they had the power to control

NLRC.

However, petitioner contends that the Court of Appeals

him not only as to the result of his work, but also as to the

decided the case not in accordance with law and applicable

Errors of judgment, as distinguished from errors of jurisdiction,

means and methods of accomplishing his work.

rulings of this Court as petitioner could not find any portion in

are not within the province of a special civil action for certiorari,

the Decision of the Court of Appeals ruling that the NLRC acted

which is merely confined to issues of jurisdiction or grave abuse

Respondents motion for reconsideration was denied by the

without or in excess of jurisdiction or with grave abuse of

of discretion.17 By grave abuse of discretion is meant such

NLRC in a Resolution9 dated December 14, 2004.

discretion amounting to lack or excess of jurisdiction. Petitioner

capricious and whimsical exercise of judgment as is equivalent

submits that the Court of Appeals could not review an error of

to lack of jurisdiction, and it must be shown that the discretion

Respondent filed a petition for certiorari before the Court of

judgment by the NLRC raised before it on a petition for

was exercised arbitrarily or despotically.18

Appeals.

certiorari under Rule 65 of the 1997 Rules of Civil Procedure.

On August 4, 2005, the Court of Appeals rendered a

decision

10

reversing and setting aside the resolution of the

NLRC, and reinstating the decision of the Labor Arbiter, with

Moreover, petitioner contends that it was error on the part of

The Court of Appeals, therefore, could grant the petition for

the Court of Appeals to review the finding of facts of the NLRC

certiorari if it finds that the NLRC, in its assailed decision or

on whether there exists an employer-employee relationship

resolution, committed grave abuse of discretion by capriciously,

between the parties.

whimsically, or arbitrarily disregarding evidence that is material

modification in regard to the award of commission and

damages. The Court of Appeals deleted the award of

to or decisive of the controversy; and it cannot make this

Petitioners argument lacks merit.

determination without looking into the evidence of the

parties.19 Necessarily, the appellate court can only evaluate the

commission, and moral and exemplary damages as the same

were not substantiated. The dispositive portion of the Court of

It is noted that respondent correctly sought judicial review of

materiality or significance of the evidence, which is alleged to

Appeals decision reads:

the decision of the NLRC via a petition for certiorari under Rule

have been capriciously, whimsically, or arbitrarily disregarded

65 of the Rules of Court filed before the Court of Appeals in

by the NLRC, in relation to all other evidence on record. 20 Thus,

WHEREFORE, the petition is GRANTED and the assailed

accordance with the decision of the Court in St. Martin Funeral

contrary to the contention of petitioner, the Court of Appeals

resolutions dated October 14, 2004 and December 14, 2004 are

Home v. NLRC,14 which held:

can review the finding of facts of the NLRC and the evidence of

hereby REVERSED and SET ASIDE. Accordingly, the decision

the parties to determine whether the NLRC gravely abused its

dated October 31, 2003 of the Labor Arbiter

Therefore, all references in the amended Section 9 of B.P. No.

discretion in finding that no employer-employee relationship

is REINSTATED, with the modification that the awards of

129 to supposed appeals from the NLRC to the Supreme

existed between petitioner and respondent.21

11

commission and damages are deleted. (Emphasis supplied.)

Petitioners motion for reconsideration was denied for lack of
12

Court are interpreted and hereby declared to mean and refer to

petitions for certiorari under Rule 65. Consequently, all such

Respondent raised before the Court of Appeals the following

petitions should henceforth be initially filed in the Court of

issues:

merit by the Court of Appeals in its Resolution dated

Appeals in strict observance of the doctrine on the hierarchy of

September 21, 2005.

courts as the appropriate forum for the relief desired. 15

Hence, petitioner Lirio filed this petition.

The Court of Appeals stated in its decision that the issue it had

BURDEN OF PROVING THAT EMPLOYMENT RELATIONS EXISTED

to resolve was "whether or not the public respondent [NLRC]

BETWEEN THE PETITIONER AND THE PRIVATE RESPONDENTS TO

I. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION

COMMITTED GRAVE ABUSE OF DISCRETION IN SHIFTING THE

69

THE FORMER, IN VIOLATION OF ESTABLISHED PROVISION OF

Respondent Lirio's so-called existence of a partnership

In petitions for review, only errors of law are generally reviewed

LAWS AND JURISPRUDENCE.

agreement was not substantiated and his assertion

by this Court. This rule, however, is not ironclad.25Where the

thereto, in the face of complainant's evidence,

issue is shrouded by a conflict of factual perceptions by the

II. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION

constitute but a self-serving assertion, without

lower court or the lower administrative body, in this case, the

COMMITTED GRAVE ABUSE OF DISCRETION IN HOLDING THAT

probative value, a mere invention to justify the illegal

NLRC, this Court is constrained to review the factual findings of

NO EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN THE

dismissal.

the Court of Appeals.26

xxxx

Before a case for illegal dismissal can prosper, it must first be

PETITIONER AND THE PRIVATE RESPONDENTS.

III. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION

established that an employer-employee relationship existed

between petitioner and respondent.27

COMMITTED GRAVE ABUSE OF DISCRETION IN DISREGARDING

Indeed, we find credible that what caused complainant's

THE PETITIONER'S PAYROLL AND THE PETTY CASH VOUCHERS

dismissal on March 14, 2002 was due to his refusal to

AS AN INDICIA OF EMPLOYMENT RELATIONS BETWEEN

respondent's Lirio's insistences on merely giving him 20% based

The elements to determine the existence of an employment

PETITIONER AND THE PRIVATE RESPONDENTS.22

on net profit on sale of the album which he composed and

relationship are: (a) the selection and engagement of the

arranged during his free time and, moreover, that salaries

employee; (b) the payment of wages; (c) the power of

Between the documentary evidence presented by respondent

which he received would be deducted therefrom, which

dismissal; and (d) the employers power to control the

and the mere allegation of petitioner without any proof by way

obviously, soured the relations from the point of view of

employees conduct. The most important element is the

of any document evincing their alleged partnership agreement,

respondent Lirio.23

employers control of the employees conduct, not only as to

the Court of Appeals agreed with the Labor Arbiter that

the result of the work to be done, but also as to the means and

petitioner failed to substantiate his claim that he had a

Hence, based on the finding above and the doctrine that "if

partnership with respondent, citing the Labor Arbiters finding,

doubt exists between the evidence presented by the employer

thus:

and the employee, the scales of justice must be tilted in favor of

the latter,"

24

the Court of Appeals reversed the resolution of the

methods to accomplish it.28

It is settled that no particular form of evidence is required to
prove the existence of an employer-employee

In this case, complainant's evidence is substantial enough to

NLRC and reinstated the decision of the Labor Arbiter with

relationship.29 Any competent and relevant evidence to prove

prove the employment relationship that on August 14, 2001, he

modification. Even if the Court of Appeals was remiss in not

the relationship may be admitted.30

was hired as 'Studio manager' by respondent Lirio to manage

stating it in definite terms, it is implied that the Court of Appeals

and operate the recording studio and to promote and sell its

found that the NLRC gravely abused its discretion in finding that

In this case, the documentary evidence presented by

services to music enthusiasts and clients, proven by his receipt

no employer-employee relationship existed between petitioner

respondent to prove that he was an employee of petitioner are

for this purpose from said respondent a fixed monthly

and respondent based on the evidence on record.

as follows: (a) a document denominated as "payroll" (dated July

compensation of P7,000.00, with commission of P100.00 per

31, 2001 to March 15, 2002) certified correct by

hour when serving as recording technician, shown by the payroll

We now proceed to the main issue raised before this Court:

petitioner,31 which showed that respondent received a monthly

from July 31, 2001-March 15, 2002. The said evidence points to

Whether or not the decision of the Court of Appeals is in

salary of P7,000.00 (P3,500.00 every 15th of the month and

complainant's hiring as employee so that the case comes within

accordance with law, or whether or not the Court of Appeals

another P3,500.00 every 30th of the month) with the

the purview of our jurisdiction on labor disputes between an

erred in reversing and setting aside the decision of the NLRC,

corresponding deductions due to absences incurred by

employer and an employee. x x x.

and reinstating the decision of the Labor Arbiter with

respondent; and (2) copies of petty cash vouchers,32 showing

modification.

the amounts he received and signed for in the payrolls.

70

The said documents showed that petitioner hired respondent as

an employee and he was paid monthly wages ofP7,000.00.

evidence presented by the private respondent company is not

convincing. x x x

SO ORDERED.

37

Petitioner wielded the power to dismiss as respondent stated

that he was verbally dismissed by petitioner, and respondent,

Based on the foregoing, the Court agrees with the Court of

thereafter, filed an action for illegal dismissal against petitioner.

Appeals that the evidence presented by the parties showed that

The power of control refers merely to the existence of the

an employer-employee relationship existed between petitioner

power.33 It is not essential for the employer to actually supervise

and respondent.

the performance of duties of the employee, as it is sufficient

that the former has a right to wield the power.34Nevertheless,

In termination cases, the burden is upon the employer to show

petitioner stated in his Position Paper that it was agreed that he

by substantial evidence that the termination was for lawful

would help and teach respondent how to use the studio

cause and validly made.38 Article 277 (b) of the Labor

equipment. In such case, petitioner certainly had the power to

Code39 puts the burden of proving that the dismissal of an

check on the progress and work of respondent.

employee was for a valid or authorized cause on the employer,

without distinction whether the employer admits or does not

On the other hand, petitioner failed to prove that his

admit the dismissal.40 For an employees dismissal to be valid,

relationship with respondent was one of

(a) the dismissal must be for a valid cause, and (b) the

partnership.1wphi1 Such claim was not supported by any

employee must be afforded due process.41 Procedural due

written agreement. The Court notes that in the payroll dated

process requires the employer to furnish an employee with two

July 31, 2001 to March 15, 2002,35 there were deductions from

written notices before the latter is dismissed: (1) the notice to

the wages of respondent for his absence from work, which

apprise the employee of the particular acts or omissions for

negates petitioners claim that the wages paid were advances

which his dismissal is sought, which is the equivalent of a

for respondents work in the partnership. In Nicario v. National

charge; and (2) the notice informing the employee of his

Labor Relations Commission,36 the Court held:

dismissal, to be issued after the employee has been given

reasonable opportunity to answer and to be heard on his

It is a well-settled doctrine, that if doubts exist between the

defense.42 Petitioner failed to comply with these legal

evidence presented by the employer and the employee, the

requirements; hence, the Court of Appeals correctly affirmed

scales of justice must be tilted in favor of the latter. It is a time-

the Labor Arbiters finding that respondent was illegally

honored rule that in controversies between a laborer and his

dismissed, and entitled to the payment of backwages, and

master, doubts reasonably arising from the evidence, or in the

separation pay in lieu of reinstatement.

interpretation of agreements and writing should be resolved in

the formers favor. The policy is to extend the doctrine to a

WHEREFORE, the petition is DENIED. The Decision of the Court

greater number of employees who can avail of the benefits

of Appeals in CA-G.R. SP No. 88899, dated August 4, 2005, and

under the law, which is in consonance with the avowed policy of

its Resolution dated September 21, 2005, are AFFIRMED.

the State to give maximum aid and protection of labor. This rule
should be applied in the case at bar, especially since the

No costs.

71

between him and respondents, thereby reversing the ruling by

the National Labor Relations Commission (NLRC) to the effect
that he was the employee of respondents.
Antecedents
Petitioner maintained that respondent BCC Product Sales Inc.
(BCC) and its President, respondent Terrance Ty (Ty), employed
him as comptroller starting from September 1995 with a
monthly salary of P20,000.00 to handle the financial aspect of
BCCs business;2 that on October 19,1995, the security guards

14

of BCC, acting upon the instruction of Ty, barred him from

Republic of the Philippines
SUPREME COURT
Baguio

entering the premises of BCC where he then worked; that his

attempts to report to work in November and December 12,
1995 were frustrated because he continued to be barred from
entering the premises of BCC;3 and that he filed a complaint

FIRST DIVISION

dated December 28, 1995 for illegal dismissal, reinstatement

with full backwages, non-payment of wages, damages and

G.R. No. 163700

April 18, 2012

attorneys fees.4

CHARLIE JAO, Petitioner,

Respondents countered that petitioner was not their employee

vs.

but the employee of Sobien Food Corporation (SFC), the major

BCC PRODUCTS SALES INC., and TERRANCE

creditor and supplier of BCC; and that SFC had posted him as its

TY, Respondents.

comptroller in BCC to oversee BCCs finances and business

operations and to look after SFCs interests or investments in
DECISION

BERSAMIN, J.:

BCC.5
Although Labor Arbiter Felipe Pati ruled in favor of petitioner on
June 24, 1996,6 the NLRC vacated the ruling and remanded the

The issue is whether petitioner was respondents employee or

case for further proceedings.7 Thereafter, Labor Arbiter Jovencio

not. Respondents denied an employer-employee relationship

Ll. Mayor rendered a new decision on September 20, 2001,

with petitioner, who insisted the contrary.

dismissing petitioners complaint for want of an employeremployee relationship between the parties.8 Petitioner appealed

Through his petition for review on certiorari, petitioner appeals

the September 20, 2001 decision of Labor Arbiter Mayor.

the decision promulgated by the Court of Appeals (CA) on

February 27, 2004,1 finding no employee-employer relationship

72

On July 31, 2002, the NLRC rendered a decision reversing Labor

requisite for employment, especially with such a delicate

unfortunately, other than the bare assertions of the private

Arbiter Mayors decision, and declaring that petitioner had been

position in the company. Neither is there any proof of his

respondent which he miserably failed to substantiate, we find

illegally dismissed. It ordered the payment of unpaid salaries,

appointment nor is there any showing that the parties entered

nothing therein that would decisively indicate that the petitioner

backwages and 13th month pay, separation pay and attorneys

into an employment contract, stipulating thereof that he will

BCC exercised the fundamental power of control over the

fees.9 Respondents moved for the reconsideration of the NLRC

receive P20,000.00/month salary as comptroller, before the

private respondent in relation to his employmentnot even the

decision, but their motion for reconsideration was denied on

private respondent commenced with his work as such. Second,

ID issued to the private respondent and the affidavits executed

September 30, 2002.10 Thence, respondents assailed the NLRC

as clearly established on record, the private respondent was not

by Bertito Jemilla and Rogelio Santias. At best, these pieces of

decision on certiorari in the CA.

included in the petitioner companys payroll during the time of

documents merely suggest the existence of employer-employee

his alleged employment with the former. True, the name of the

relationship as intimated by the NLRC. On the contrary, it would

private respondent Charlie Jao appears in the payroll however it

appear that the said sworn statement provided a substantial

does not prove that he has received his remuneration for his

basis to support the contention that the private respondent

On February 27, 2004, the CA promulgated its assailed

services. Notably, his name was not among the employees who

worked at the petitioner BCC as SFCs representative, being its

decision,11 holding:

will receive their salaries as represented by the payrolls.

major creditor and supplier of goods and merchandise.

Ruling of the CA

Instead, it appears therein as a comptroller who is authorized to

Moreover, as clearly pointed out by the petitioner in his Reply to

After a judicious review of the records vis--vis the respective

approve the same. Suffice it to state that it is rather obscure for

the private respondents Comment, it is unnatural for SFC to

posturing of the contending parties, we agree with the finding

a certified public accountant doing the functions of a

still employ the private respondent "to oversee and supervise

that no employer-employee relationship existed between

comptroller from September 1995 up to December 1995 not to

collections of account receivables due SFC from its customers or

petitioner BCC and the private respondent. On this note, the

receive his salary during the said period. Verily, such scenario

clients" like the herein petitioner BCC on a date later than

conclusion of the public respondent must be reversed for being

does not conform with the usual and ordinary experience of

December, 1995 considering that a criminal complaint has

issued with grave abuse of discretion.

man. Coming now to the most controlling factor, the records

already been instituted against him.

indubitably reveal the undisputed fact that the petitioner

"Etched in an unending stream of cases are the four (4)

company did not have nor did not exercise the power of control

Sadly, the private respondent failed to sufficiently discharge the

standards in determining the existence of an employer-

over the private respondent. It did not prescribe the manner by

burden of showing with legal certainty that employee-employer

employee relationship, namely, (a) the manner of selection and

which the work is to be carried out, or the time by which the

relationship existed between the parties. On the other hand, it

engagement of the putative employee; (b) the mode of

private respondent has to report for and leave from work. As

was clearly shown by the petitioner that it neither exercised

payment of wages; (c) the presence or absence of power of

already stated, the power of control is such an important factor

control nor supervision over the conduct of the private

dismissal; and, (d) the presence or absence of control of the

that other requisites may even be disregarded. In Sevilla v.

respondents employment. Hence, the allegation that there is

putative employees conduct." Of these powers the power of

Court of Appeals, the Supreme Court emphatically held, thus:

employer-employee relationship must necessarily fail.

"The "control test," under which the person for whom

Consequently, a discussion on the issue of illegal dismissal

the services are rendered reserves the right to direct

therefore becomes unnecessary.

control over the employees conduct is generally regarded as

determinative of the existence of the relationship.
Apparently, in the case before us, all these four elements are

not only the end to be achieved but also the means for

absent. First, there is no proof that the services of the private

reaching such end, is generally relied on by the courts."

respondent were engaged to perform the duties of a comptroller

WHEREFORE, premises considered, the petition is GRANTED.

The assailed Decision of the public respondent NLRC dated July

in the petitioner company. There is no proof that the private

We have carefully examined the evidence submitted by the

respondent has undergone a selection procedure as a standard

private respondent in the formal offer of evidence and

31, 2002 and the Resolution dated September 30, 2002 are

73

REVERSED and SET ASIDE. Accordingly, the decision of the

only questions of law. Nor may the Court be bound to analyze

petitioner was only for the purpose of facilitating his entry into

Labor Arbiter dated September 20, 2001 is hereby REINSTATED.

and weigh again the evidence adduced and considered in the

the BCC premises in relation to his work of overseeing the

proceedings below.16 This rule is not absolute, however, and

financial operations of BCC for SFC; that the ID should not be

admits of exceptions. For one, the Court may look into factual

considered as evidence of petitioners employment in

issues in labor cases when the factual findings of the Labor

BCC;19 that petitioner executed an affidavit in March

Arbiter, the NLRC, and the CA are conflicting. 17

1996,20 stating, among others, as follows:

SO ORDERED.
After the CA denied petitioners motion for reconsideration on
May 14, 2004,

12

he filed a motion for extension to file petition

for review, which the Court denied through the resolution dated

Here, the findings of the NLRC differed from those of the Labor

1. I am a CPA (Certified Public Accountant) by

July 7, 2004 for failure to render an explanation on why the

Arbiter and the CA. This conflict among such adjudicating

profession but presently associated with, or employed

service of copies of the motion for extension on respondents

offices compels the Courts exercise of its authority to review

by, Sobien Food Corporation with the same business

was not personally made.13The denial notwithstanding, he filed

and pass upon the evidence presented and to draw its own

address as abovestated;

his petition for review on certiorari. The Court denied the

conclusions therefrom.

petition on August 18, 2004 in view of the denial of the motion

2. In the course of my association with, or employment

for extension of time and the continuing failure of petitioner to

To prove his employment with BCC, petitioner offered the

by, Sobien Food Corporation (SFC, for short), I have

render the explanation as to the non-personal service of the

following: (a) BCC Identification Card (ID) issued to him stating

been entrusted by my employer to oversee and

his name and his position as "comptroller," and bearing his

supervise collections on account of receivables due

picture, his signature, and the signature of Ty; (b) a payroll of

SFC from its customers or clients; for instance, certain

BCC for the period of October 1-15, 1996 that petitioner

checks due and turned over by one of SFCs customers

approved as comptroller; (c) various bills and receipts related to

is BCC Product Sales, Inc., operated or run by one

expenditures of BCC bearing the signature of petitioner; (d)

Terrance L. Ty, (President and General manager),

various checks carrying the signatures of petitioner and Ty, and,

pursuant to, or in accordance with, arrangements or

The sole issue is whether or not an employer-employee

in some checks, the signature of petitioner alone; (e) a court

agreement thereon; such arrangement or agreement is

relationship existed between petitioner and BCC. A finding on

order showing that the issuing court considered petitioners ID

duly confirmed by said Terrance Ty, as shown or

the existence of an employer-employee relationship will

as proof of his employment with BCC; (f) a letter of petitioner

admitted by him in a public instrument executed

automatically warrant a finding of illegal dismissal, considering

dated March 1, 1997 to the Department of Justice on his filing of

therefor, particularly par. 2 of that certain Counter-

that respondents did not state any valid grounds to dismiss

a criminal case for estafa against Ty for non-payment of wages;

Affidavit executed and subscribed on December 11,

petitioner.

(g) affidavits of some employees of BCC attesting that

1995, xerox copy of which is hereto attached, duly

petitioner was their co-employee in BCC; and (h) a notice of

marked as Annex "A" and made integral part hereof.

petition on respondents.

14

However, upon a motion for

reconsideration, the Court reinstated the petition for review on

certiorari and required respondents to comment.

15

Issue

Ruling

raffle dated December 5, 1995 showing that petitioner, being

an employee of BCC, received the notice of raffle in behalf of

3. Despite such admission of an arrangement, or

The petition lacks merit.

BCC.18

agreement insofar as BCC-checks were delivered to, or

The existence of an employer-employee relationship is a

Respondents denied that petitioner was BCCs employee. They

to blemish my reputation or to cause me dishonor as

question of fact. Generally, a re-examination of factual findings

affirmed that SFC had installed petitioner as its comptroller in

well as to impute unto myself the commission of a

cannot be done by the Court acting on a petition for review on

BCC to oversee and supervise SFCs collections and the account

crime, state in another public instrument executed

certiorari because the Court is not a trier of facts but reviews

of BCC to protect SFCs interest; that their issuance of the ID to

therefor in that:

turned over in favor of SFC, Mr. Terrance Ty, in a desire

74

"3. That all the said 158 checks were unlawfully appropriated by

patent animosity and strained relations between him and

That So, who had earlier merely "retained" petitioner as his

a certain Charlie Jao absolutely without any authority from BCC

respondents in such circumstances, indeed, how could he still

accountant, thereafter employed petitioner as a "retained"

and the same were reportedly turned over by said Mr. Jao to a

efficiently perform in behalf of SFC the essential responsibility

accountant after his supposed illegal dismissal by BCC raised a

person who is not an agent or is not authorized representative

to "oversee and supervise collections" at BCC? Surely,

doubt as to his employment by BCC, and rather confirmed

of BCC."

respondents would have vigorously objected to any

respondents assertion of petitioner being an employee of SFC

arrangement with SFC involving him.

while he worked at BCC.

duly marked as Annex "B" and made integral part hereof.

We note that petitioner executed the affidavit in March 1996 to

Moreover, in determining the presence or absence of an

(emphasis supplied)

refute a statement Ty himself made in his own affidavit dated

employer-employee relationship, the Court has consistently

December 11, 1995 to the effect that petitioner had illegally

looked for the following incidents, to wit: (a) the selection and

appropriated some checks without authority from

engagement of the employee; (b) the payment of wages; (c) the

xerox copy of which document (Affidavit) is hereto attached,

and that the affidavit constituted petitioners admission of the

22

arrangement or agreement between BCC and SFC for the latter

BCC.

to appoint a comptroller to oversee the formers operations.

authority to receive the checks pursuant to the arrangements

Petitioner thereby sought to show that he had the

power of dismissal; and (d) the employers power to control the

employee on the means and methods by which the work is

between SFC and BCC. This showing would aid in fending off the

accomplished. The last element, the so-called control test, is

Petitioner counters, however, that the affidavit did not establish

criminal charge respondents filed against him arising from his

the most important element.24

the absence of an employer-employee relationship between him

mishandling of the checks. Naturally, the circumstances

and respondents because it had been executed in March 1996,

petitioner adverted to in his March 1996 affidavit concerned

Hereunder are some of the circumstances and incidents

or after his employment with respondents had been terminated

those occurring before December 11, 1995, the same period

occurring while petitioner was supposedly employed by BCC

on December 12, 1995; and that the affidavit referred to his

when he actually worked as comptroller in BCC.

that debunked his claim against respondents.

Further, an affidavit dated September 5, 2000 by Alfredo So, the

It can be deduced from the March 1996 affidavit of petitioner

President of SFC, whom petitioner offered as a rebuttal witness,

that respondents challenged his authority to deliver some 158

lent credence to respondents denial of petitioners

checks to SFC. Considering that he contested respondents

subsequent employment by SFC following the termination of his

employment by BCC.21
We cannot side with petitioner.

employment. So declared in that affidavit, among others, that

challenge by pointing to the existing arrangements between

Our perusal of the affidavit of petitioner compels a conclusion

he had known petitioner for being "earlier his retained

BCC and SFC, it should be clear that respondents did not

similar to that reached by the CA and the Labor Arbiter to the

accountant having his own office but did not hold office" in

exercise the power of control over him, because he thereby

effect that the affidavit actually supported the contention that

SFCs premises; that Ty had approached him (So) "looking for an

acted for the benefit and in the interest of SFC more than of

petitioner had really worked in BCC as SFCs representative. It

accountant or comptroller to be employed by him (Ty) in [BCCs]

BCC.

does seem more natural and more believable that petitioners

distribution business" of SFCs general merchandise, and had

affidavit was referring to his employment by SFC even while he

later asked him on his opinion about petitioner; and that he (So)

In addition, petitioner presented no document setting forth the

was reporting to BCC as a comptroller in behalf of SFC. As

had subsequently learned that "Ty had already employed

terms of his employment by BCC.1wphi1 The failure to present

respondents pointed out, it was implausible for SFC to still post

[petitioner] as his comptroller as of September 1995."

23

him to oversee and supervise the collections of accounts

such agreement on terms of employment may be

understandable and expected if he was a common or ordinary

receivables due from BCC beyond December 1995 if, as he

The statements of So really supported respondents position in

laborer who would not jeopardize his employment by

insisted, BCC had already illegally dismissed him and had even

that petitioners association with SFC prior to his supposed

demanding such document from the employer, but may not

prevented him from entering the premises of BCC. Given the

employment by BCC went beyond mere acquaintance with So.

75

square well with his actual status as a highly educated

by the aforestated circumstances showing him to be the

professional.

employee of SFC, not of BCC.

Petitioners admission that he did not receive his salary for the

WHEREFORE, the Court AFFIRMS the decision of the Court of

three months of his employment by BCC, as his complaint for

Appeals; and ORDERS petitioner to pay the costs of suit.

illegal dismissal and non-payment of wages

25

and the criminal

case for estafa he later filed against the respondents for nonpayment of wages

26

SO ORDERED.

indicated, further raised grave doubts

about his assertion of employment by BCC. If the assertion was

true, we are puzzled how he could have remained in BCCs
employ in that period of time despite not being paid the first
salary of P20,000.00/month. Moreover, his name did not appear
in the payroll of BCC despite him having approved the payroll as

15

comptroller.
Republic of the Philippines
Lastly, the confusion about the date of his alleged illegal

SUPREME COURT

dismissal provides another indicium of the insincerity of

Manila

petitioners assertion of employment by BCC. In the petition for

FIRST DIVISION

review on certiorari, he averred that he had been barred from

entering the premises of BCC on October 19, 1995,27 and thus
was illegally dismissed. Yet, his complaint for illegal dismissal

G.R. No. 153511

July 18, 2012

stated that he had been illegally dismissed on December 12,

1995 when respondents security guards barred him from

LEGEND HOTEL (MANILA), owned by TITANIUM

entering the premises of BCC,28 causing him to bring his

CORPORATION, and/or, NELSON NAPUD, in his capacity

complaint only on December 29, 1995, and after BCC had

as the President of Petitioner Corporation, Petitioner,

already filed the criminal complaint against him. The wide gap

vs.

between October 19, 1995 and December 12, 1995 cannot be

HERNANI S. REALUYO, also known as JOEY

dismissed as a trivial inconsistency considering that the several

ROA, Respondent.

incidents affecting the veracity of his assertion of employment

DECISION

by BCC earlier noted herein transpired in that interval.

With all the grave doubts thus raised against petitioners claim,

BERSAMIN, J.:

we need not dwell at length on the other proofs he presented,

like the affidavits of some of the employees of BCC, the ID, and

This labor case for illegal dismissal involves a pianist employed

the signed checks, bills and receipts. Suffice it to be stated that

to perform in the restaurant of a hotel. On August 9, 1999,

such other proofs were easily explainable by respondents and

respondent, whose stage name was Joey R. Roa, filed a

76

complaint for alleged unfair labor practice, constructive illegal

xxx

Respondent assailed the decision of the NLRC in the Court of

dismissal, and the underpayment/nonpayment of his premium

Appeals (CA) on certiorari.

pay for holidays, separation pay, service incentive leave pay,

On the pivotal issue of whether or not there existed an

and 13111 month pay. He prayed for attorney's fees, moral

employer-employee relationship between the parties, our

On February 11, 2002, the CA set aside the decision of the

damages off P100,000.00 and exemplary damages for

finding is in the negative. The finding finds support in the

NLRC,6 holding:

P100,000.00.1

service contract dated September 1, 1992 xxx.

xxx

Respondent averred that he had worked as a pianist at the

xxx

Legend Hotels Tanglaw Restaurant from September 1992 with

Applying the above-enumerated elements of the employee-

an initial rate of P400.00/night that was given to him after each

Even if we grant the initial non-existence of the service

employer relationship in this case, the question to be asked is,

nights performance; that his rate had increased to

contract, as complainant suggests in his reply (third paragraph,

are those elements present in this case?

P750.00/night; and that during his employment, he could not

page 4), the picture would not change because of the admission

choose the time of performance, which had been fixed from

by complainant in his letter dated October 8, 1996 (Annex "C")

7:00 pm to 10:00 pm for three to six times/week. He added that

that what he was receiving was talent fee and not salary.

the Legend Hotels restaurant manager had required him to

The answer to this question is in the affirmative.

xxx

conform with the venues motif; that he had been subjected to

This is reinforced by the undisputed fact that complainant

the rules on employees representation checks and chits, a

received his talent fee nightly, unlike the regular employees of

Well settled is the rule that of the four (4) elements of

privilege granted to other employees; that on July 9, 1999, the

the hotel who are paid by monthly xxx.

employer-employee relationship, it is the power of control that

management had notified him that as a cost-cutting measure

his services as a pianist would no longer be required effective

is more decisive.
xxx

July 30, 1999; that he disputed the excuse, insisting that Legend

In this regard, public respondent failed to take into

Hotel had been lucratively operating as of the filing of his

And thus, absent the power to control with respect to the means

consideration that in petitioners line of work, he was

complaint; and that the loss of his employment made him bring

and methods by which his work was to be accomplished, there

supervised and controlled by respondents restaurant manager

is no employer-employee relationship between the parties xxx.

who at certain times would require him to perform only tagalog

his complaint.

songs or music, or wear barong tagalog to conform with

In its defense, petitioner denied the existence of an employer-

xxx

Filipiniana motif of the place and the time of his performance is

employee relationship with respondent, insisting that he had

fixed by the respondents from 7:00 pm to 10:00 pm, three to six

been only a talent engaged to provide live music at Legend

WHEREFORE, this case must be, as it is hereby, DISMISSED for

times a week. Petitioner could not choose the time of his

Hotels Madison Coffee Shop for three hours/day on two days

lack of merit.

performance. xxx.

country constrained management to dispense with his services.

SO ORDERED.4

As to the status of petitioner, he is considered a regular

On December 29, 1999, the Labor Arbiter (LA) dismissed the

Respondent appealed, but the National Labor Relations

each week; and stated that the economic crisis that had hit the
employee of private respondents since the job of the petitioner
complaint for lack of merit upon finding that the parties had no
employer-employee relationship.3 The LA explained thusly:

Commission (NLRC) affirmed the LA on May 31, 2001.

was in furtherance of the restaurant business of respondent

hotel. Granting that petitioner was initially a contractual
employee, by the sheer length of service he had rendered for

77

private respondents, he had been converted into a regular

IV. XXX WHEN IT NULLIFIED THE DECISION DATED MAY

employee xxx.

31, 2001 IN NLRC NCR CA NO. 023404-2000 OF THE

Certiorari was a proper recourse

NLRC AS WELL AS ITS RESOLUTION DATED JUNE 29,

Petitioner contends that respondents petition for certiorari was

2001 IN FAVOR OF HEREIN PETITIONER HOTEL WHEN

improper as a remedy against the NLRC due to its raising mainly

HEREIN RESPONDENT ROA FAILED TO SHOW PROOF

questions of fact and because it did not demonstrate that the

xxx In other words, the dismissal was due to retrenchment in

THAT THE NLRC AND THE LABOR ARBITER HAVE

NLRC was guilty of grave abuse of discretion.

order to avoid or minimize business losses, which is recognized

COMMITTED GRAVE ABUSE OF DISCRETION OR LACK

by law under Article 283 of the Labor Code, xxx.

OF JURISDICTION IN THEIR RESPECTIVE DECISIONS.

xxx

The contention is unwarranted. There is no longer any doubt

that a petition for certiorari brought to assail the decision of the

xxx
WHEREFORE, foregoing premises considered, this petition is
GRANTED. xxx.

V. XXX WHEN IT OVERLOOKED THE FACT THAT THE

NLRC may raise factual issues, and the CA may then review the

PETITION WHICH ROA FILED IS IMPROPER SINCE IT

decision of the NLRC and pass upon such factual issues in the

RAISED QUESTIONS OF FACT.

process.8 The power of the CA to review factual issues in the

exercise of its original jurisdiction to issue writs of certiorari is

Issues
In this appeal, petitioner contends that the CA erred:

VI. XXX WHEN IT GAVE DUE COURSE TO THE PETITION

based on Section 9 of Batas Pambansa Blg. 129, which

FILED BY ROA WHEN IT IS CLEARLY IMPROPER AND

pertinently provides that the CA "shall have the power to try

SHOULD HAVE BEEN DISMISSED OUTRIGHT

cases and conduct hearings, receive evidence and perform any

CONSIDERING THAT A PETITION FOR CERTIORARI

and all acts necessary to resolve factual issues raised in cases

UNDER RULE 65 IS LIMITED ONLY TO QUESTIONS OR

falling within its original and appellate jurisdiction, including the

I. XXX WHEN IT RULED THAT THERE IS THE EXISTENCE

ISSUES OF GRAVE ABUSE OF DISCRETION OR LACK OF

power to grant and conduct new trials or further proceedings."

OF EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE

JURISDICTION COMMITTED BY THE NLRC OR THE

PETITIONER HOTEL AND RESPONDENT ROA.

LABOR ARBITER, WHICH ISSUES ARE NOT PRESENT IN

Substantive Issue No. 1:

THE CASE AT BAR.

II. XXX IN FINDING THAT ROA IS A REGULAR EMPLOYEE

Employer-employee relationship existed between the parties

AND THAT THE TERMINATION OF HIS SERVICES WAS

The assigned errors are divided into the procedural issue of

ILLEGAL. THE CA LIKEWISE ERRED WHEN IT DECLARED

whether or not the petition for certiorari filed in the CA was the

We next ascertain if the CA correctly found that an employer-

THE REINSTATEMENT OF ROA TO HIS FORMER

proper recourse; and into two substantive issues, namely: (a)

employee relationship existed between the parties.

POSITION OR BE GIVEN A SEPARATION PAY EQUIVALENT

whether or not respondent was an employee of petitioner; and

TO ONE MONTH FOR EVERY YEAR OF SERVICE FROM

(b) if respondent was petitioners employee, whether he was

The issue of whether or not an employer-employee relationship

SEPTEMBER 1999 UNTIL JULY 30, 1999 CONSIDERING

validly terminated.

existed between petitioner and respondent is essentially a

question of fact.9 The factors that determine the issue include

THE ABSENCE OF AN EMPLOYMENT RELATIONSHIP

BETWEEN THE PARTIES.

Ruling

III. XXX WHEN IT DECLARED THAT ROA IS ENTITLED TO

The appeal fails.

who has the power to select the employee, who pays the
employees wages, who has the power to dismiss the employee,
the work of the employee is accomplished.10 Although no

BACKWAGES, SERVICE INCENTIVE LEAVE AND OTHER

BENEFITS CONSIDERING THAT THERE IS NO EMPLOYER
EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES.

and who exercises control of the methods and results by which

Procedural Issue:

particular form of evidence is required to prove the existence of

the relationship, and any competent and relevant evidence to

78

prove the relationship may be admitted,11 a finding that the

restricted to those fixed in the written contract, for other

xxx wage paid to any employee shall mean the remuneration or

relationship exists must nonetheless rest on substantial

factors, like the nature of the work the employee has been

earnings, however designated, capable of being expressed in

evidence, which is that amount of relevant evidence that a

called upon to perform, are also considered. The law affords

terms of money, whether fixed or ascertained on a time, task,

reasonable mind might accept as adequate to justify a

protection to an employee, and does not countenance any

piece, or commission basis, or other method of calculating the

conclusion.12

attempt to subvert its spirit and intent. Any stipulation in writing

same, which is payable by an employer to an employee under a

can be ignored when the employer utilizes the stipulation to

written or unwritten contract of employment for work done or to

Generally, the Court does not review factual questions,

deprive the employee of his security of tenure. The inequality

be done, or for services rendered or to be rendered, and

primarily because the Court is not a trier of facts. However,

that characterizes employer-employee relations generally tips

includes the fair and reasonable value, as determined by the

where, like here, there is a conflict between the factual findings

the scales in favor of the employer, such that the employee is

Secretary of Labor, of board, lodging, or other facilities

of the Labor Arbiter and the NLRC, on the one hand, and those

often scarcely provided real and better options.

15

customarily furnished by the employer to the employee.

of the CA, on the other hand, it becomes proper for the Court, in
the exercise of its equity jurisdiction, to review and re-evaluate

Secondly, petitioner argues that whatever remuneration was

Clearly, respondent received compensation for the services he

the factual issues and to look into the records of the case and

given to respondent were only his talent fees that were not

rendered as a pianist in petitioners hotel. Petitioner cannot use

included in the definition of wage under the Labor Code; and

the service contract to rid itself of the consequences of its

that such talent fees were but the consideration for the service

employment of respondent. There is no denying that whatever

contract entered into between them.

amounts he received for his performance, howsoever

re-examine the questioned findings.

13

A review of the circumstances reveals that respondent was,

indeed, petitioners employee. He was undeniably employed as
a pianist in petitioners Madison Coffee Shop/Tanglaw

designated by petitioner, were his wages.

The argument is baseless.

Restaurant from September 1992 until his services were

It is notable that under the Rules Implementing the Labor Code

Respondent was paid P400.00 per three hours of performance

and as held in Tan v. Lagrama,17 every employer is required to

from 7:00 pm to 10:00 pm, three to six nights a week. Such rate

pay his employees by means of a payroll, which should show in

First of all, petitioner actually wielded the power of selection at

of remuneration was later increased to P750.00 upon restaurant

each case, among others, the employees rate of pay,

the time it entered into the service contract dated September 1,

manager Velazcos recommendation. There is no denying that

deductions made from such pay, and the amounts actually paid

1992 with respondent. This is true, notwithstanding petitioners

the remuneration denominated as talent fees was fixed on the

to the employee. Yet, petitioner did not present the payroll of its

insistence that respondent had only offered his services to

basis of his talent and skill and the quality of the music he

employees to bolster its insistence of respondent not being its

provide live music at petitioners Tanglaw Restaurant, and

played during the hours of performance each night, taking into

employee.

despite petitioners position that what had really transpired was

account the prevailing rate for similar talents in the

a negotiation of his rate and time of availability. The power of

entertainment industry.16

terminated on July 9, 1999.

selection was firmly evidenced by, among others, the express

That respondent worked for less than eight hours/day was of no

consequence and did not detract from the CAs finding on the

written recommendation dated January 12, 1998 by Christine

Respondents remuneration, albeit denominated as talent fees,

existence of the employer-employee relationship. In providing

Velazco, petitioners restaurant manager, for the increase of his

was still considered as included in the term wage in the sense

that the " normal hours of work of any employee shall not

and context of the Labor Code, regardless of how petitioner

exceed eight (8) hours a day," Article 83 of the Labor Code only

chose to designate the remuneration. Anent this, Article 97(f) of

set a maximum of number of hours as "normal hours of work"

the Labor Code clearly states:

but did not prohibit work of less than eight hours.

remuneration.

14

Petitioner could not seek refuge behind the service contract

entered into with respondent. It is the law that defines and
governs an employment relationship, whose terms are not

79

Thirdly, the power of the employer to control the work of the

b. He could not choose the place of his performance;

employee is considered the most significant determinant of the

Retrenchment is one of the authorized causes for the dismissal

of employees recognized by the Labor Code. It is a

existence of an employer-employee relationship.18 This is the

c. The restaurants manager required him at certain

management prerogative resorted to by employers to avoid or

so-called control test, and is premised on whether the person

times to perform only Tagalog songs or music, or to

to minimize business losses. On this matter, Article 283 of the

for whom the services are performed reserves the right to

wear barong Tagalog to conform to the Filipiniana

Labor Code states:

control both the end achieved and the manner and means used

motif; and

to achieve that end.19

Article 283. Closure of establishment and reduction of

d. He was subjected to the rules on employees

personnel. The employer may also terminate the employment

Petitioner submits that it did not exercise the power of control

representation check and chits, a privilege granted to

of any employee due to the installation of labor-saving devices,

over respondent and cites the following to buttress its

other employees.

redundancy, retrenchment to prevent losses or the closing or

submission, namely: (a) respondent could beg off from his

cessation of operation of the establishment or undertaking

nightly performances in the restaurant for other engagements;

Relevantly, it is worth remembering that the employer need not

unless the closing is for the purpose of circumventing the

(b) he had the sole prerogative to play and perform any musical

actually supervise the performance of duties by the employee,

provisions of this Title, by serving a written notice on the

arrangements that he wished; (c) although petitioner, through

for it sufficed that the employer has the right to wield that

workers and the Ministry of Labor and Employment at least one

its manager, required him to play at certain times a particular

power.

(1) month before the intended date thereof. xxx. In case of

music or song, the music, songs, or arrangements, including the

retrenchment to prevent losses and in cases of closures or

beat or tempo, were under his discretion, control and direction;

Lastly, petitioner claims that it had no power to dismiss

cessation of operations of establishment or undertaking not due

(d) the requirement for him to wear barong Tagalog to conform

respondent due to his not being even subject to its Code of

to serious business losses or financial reverses, the separation

with the Filipiniana motif of the venue whenever he performed

Discipline, and that the power to terminate the working

pay shall be equivalent to one (1) month pay or at least one-

was by no means evidence of control; (e) petitioner could not

relationship was mutually vested in the parties, in that either

half (1/2) month pay for every year of service, whichever is

require him to do any other work in the restaurant or to play the

party might terminate at will, with or without cause.

higher. A fraction of at least six (6) months shall be considered

piano in any other places, areas, or establishments, whether or

one (1) whole year.

not owned or operated by petitioner, during the three hour

The claim is contrary to the records. Indeed, the memorandum

period from 7:00 pm to 10:00 pm, three to six times a week;

informing respondent of the discontinuance of his service

The Court has laid down the following standards that an

and (f) respondent could not be required to sing, dance or play

because of the present business or financial condition of

employer should meet to justify retrenchment and to foil abuse,

another musical instrument.

petitioner

20

showed that the latter had the power to dismiss him

namely:

from employment.21
A review of the records shows, however, that respondent
performed his work as a pianist under petitioners supervision

(a) The expected losses should be substantial and not

Substantive Issue No. 2:

merely de minimis in extent;

Validity of the Termination

(b) The substantial losses apprehended must be

and control. Specifically, petitioners control of both the end

achieved and the manner and means used to achieve that end
was demonstrated by the following, to wit:

reasonably imminent;
Having established that respondent was an employee whom

a. He could not choose the time of his performance,

petitioner terminated to prevent losses, the conclusion that his

(c) The retrenchment must be reasonably necessary

which petitioners had fixed from 7:00 pm to 10:00 pm,

termination was by reason of retrenchment due to an

and likely to effectively prevent the expected losses;

three to six times a week;

authorized cause under the Labor Code is inevitable.

and

80

(d) The alleged losses, if already incurred, and the

finality of this decision, and full backwages from the time his

expected imminent losses sought to be forestalled

compensation was withheld until the finality of this decision.

must be proved by sufficient and convincing

evidence.22

WHEREFORE, we DENY the petition for review on certiorari, and

AFFIRM the decision of the Court of Appeals promulgated on

Anent the last standard of sufficient and convincing evidence, it

February 11, 2002, subject to the modification that should

ought to be pointed out that a less exacting standard of proof

reinstatement be no longer feasible, petitioner shall pay to

would render too easy the abuse of retrenchment as a ground

respondent separation pay of one month for every year of

for termination of services of employees.23

service computed from September 1992 until the finality of this

decision, and full backwages from the time his compensation

Was the retrenchment of respondent valid?

was withheld until the finality of this decision.

In termination cases, the burden of proving that the dismissal

Costs of suit to be paid by the petitioners.

was for a valid or authorized cause rests upon the employer.

Here, petitioner did not submit evidence of the losses to its

SO ORDERED.

business operations and the economic havoc it would thereby

imminently sustain. It only claimed that respondents
termination was due to its "present business/financial
condition." This bare statement fell short of the norm to show a
valid retrenchment. Hence, we hold that there was no valid
cause for the retrenchment of respondent.
Indeed, not every loss incurred or expected to be incurred by an
employer can justify retrenchment.1wphi1 The employer must
prove, among others, that the losses are substantial and that
the retrenchment is reasonably necessary to avert such losses.
Thus, by its failure to present sufficient and convincing evidence
to prove that retrenchment was necessary, respondents
termination due to retrenchment is not allowed.
The Court realizes that the lapse of time since the retrenchment
might have rendered respondent's reinstatement to his former
job no longer feasible. If that should be true, then petitioner
should instead pay to him separation pay at the rate of one.
month pay for every year of service computed from September
1992 (when he commenced to work for the petitioners) until the

81

RESOLUTION

of petitioners and under their direct control and supervision. In

support of his claim, he submitted, among others, copies of his

PERLAS-BERNABE, J.:

time cards, Official Business Itinerary Slips, Daily Attendance

Sheets and other documents prescribing the manner in which

The Petition for Review on Certiorari1 assails the August 31,

2

his tasks were to be accomplished under the control of the

2011 and November 23, 2011 Resolutions of the Court of

petitioners and acknowledging his status as a regular employee

Appeals (CA) in CA-G.R. SP No. 113015 which affirmed the

of the corporation.

September 10, 2009 Decision and December 15, 2009

Resolution5 of the National Labor Relations Commission (NLRC)

On the other hand, petitioners, in their position paper,8 asserted

finding respondent Francisco N.Dakila (respondent Dakila) to

that respondent Dakilawas a consultant and not their regular

have been illegally dismissed.

employee. The latter was not included in petitioners' payroll and

paid a fixed amount under the consultancy contract. He was not

The Factual Antecedents

required to observe regular working hours and was free to

adopt means and methods to accomplish his task except as to

Respondent Dakila was employed by petitionercorporation as

the results of the work required of him. Hence, no employer-

early as 1987 and terminated for cause in April 1997 when the

employee relationship existed between them. Moreover,

corporation was sold. In May 1997, he was rehired as consultant

respondentDakila terminated his contract in a letter dated April

by the petitioners under a Contract for Consultancy

19, 2007, thus, negating his dismissal.

Services6 dated April 30, 1997.

Ruling of the Labor Arbiter
Thereafter, in a letter7 dated April 19, 2007, respondent Dakila

16
Republic of the Philippines
SUPREME COURT

informed petitioners of his compulsory retirement effective May

On May 28, 2008, Labor Arbiter Thomas T. Que, Jr. rendered a

2, 2007 and sought for the payment of his retirement benefits

Decision9 finding respondent Dakila to have been illegally

pursuant to the Collective Bargaining Agreement. His request,

dismissed and ordered his reinstatement with full backwages

however, was not acted upon. Instead, he was terminated from

computed from the time of his dismissal on May 1, 2007 until

service effective May 1, 2007.

his actual reinstatement as well as the payment of his unpaid

Manila
SECOND DIVISION
G.R. No. 199547

September 24, 2012

benefits under the Collective Bargaining Agreement (CBA). He

Consequently, respondent Dakila filed a complaint for

declared respondent Dakila to be a regular employee on the

constructive illegal dismissal, non-payment of retirement

basis of the unrebutted documentary evidence showing that he

benefits, under/non-payment of wages and other benefits of a

was under the petitioners' direct control and supervision and

regular employee, and damages against petitioners, The New

performed tasks that were either incidental or usually desirable

Philippine Skylanders, Inc. and its President and General

and necessary in the trade or business of petitioner corporation

THE NEW PHILIPPINE SKYLANDERS, INC. and/or JENNIFER

Manager, Jennifer M. Eano-Bote, before the NLRC. He averred,

for a period of ten years. Having been dismissed without cause

M. ENANO-BOTE, Petitioners,

among others, that the consultancy contract was a scheme to

and notice, respondent Dakila was awarded moral and

vs.

deprive him of the benefits of regularization, claiming to have

exemplary damages in the amount of P 50,000.00 each. He is

FRANCISCO N. DAKILA, Respondent.

assumed tasks necessary and desirable in the trade or business

82

also entitled to avail of thecorporation's retirement benefits

In the Resolution13 dated August 31, 2011, the CA dismissed the

case is only a day. Consequently, the award of reinstatement

upon his reinstatement.

petition for failure to show that the NLRC committed grave

wages pending appeal must be deleted for lack of basis.

abuse of discretion in affirming the LA's Decision. It found the

Ruling of the NLRC

factual findings of the LA and the NLRC to be supported by

Similarly, the Court finds no basis to hold petitioner Jennifer M.

substantial evidence and thus, should be accorded respect and

Eano-Bote, President and General Manager of The New

On appeal, the NLRC sustained the Labor Arbiter's (LA) finding

finality. Petitioners' motion for reconsideration therefrom was

Philippine Skylanders, Inc., jointly and severally liable with the

that respondent Dakila was a regular employee and that his

likewise denied in the Resolution14 dated November 23, 2011.

corporation for the payment of the monetary awards. The mere

dismissal was illegal. However, it noted that since he was

lack of authorized or just cause to terminate one's employment

already beyond the retirement age, his reinstatement was no

Hence, the instant petition reiterating the arguments raised

and the failure to observe due process do not ipso facto mean

longer feasible. As such, it ordered the payment of his

before the CA.

that the corporate officer acted with malice or bad faith. 15 There

retirement pay to be computed from 1997 until the date of the

decision. Moreover, it found respondent Dakila entitled to

must be independent proof of malice or bad faith which was not

Ruling of the Court

reinstatement wages from the time petitioners received a copy

established in this case. Perforce, petitioner Jennifer M. EanoBote cannot be made personally liable for the liabilities of the

of the LAs Decision on July 7, 2008 up to the date of the NLRC's

The issue of illegal dismissal is premised on the existence of an

corporation which, by legal fiction, has a personality separate

decision. Thus, it ordered the petitioners to pay respondent

employer-employee relationship between the parties herein. It

and distinct from its officers, stockholders and members.

Dakila the additional amount of P 278,508.33representing

is essentially a question of fact, beyond the ambit of a petition

Moreover, for lack of factual and legal bases, the awards of

reinstatement wages and retirement pay. 10

for review on certiorari under Rule 45 of the Rules of Court

moral and exemplary damages cannot also be

unless there is a clear showing of palpable error or arbitrary

sustained.161wphi1

The petitioners' motion for reconsideration having been denied

in the Resolution

11

dated December 15, 2009, they filed a

petition for certiorari12 before the CA raising the following errors:

(1) the complaint should have been dismissed against

disregard of evidence which does not obtain in this case.

Records reveal that both the LA and the NLRC, as affirmed by

WHEREFORE, premises considered, the petition is PARTLY

the CA, have found substantial evidence to show that

GRANTED. The assailed August 31, 2011 and November 23,

respondent Dakila was a regular employee who was dismissed

2011 Resolutions of the Court of Appeals in CA-G.R. SP No.

without cause.

113015 are MODIFIED as follows:

petitioner Jennifer M. Eano-Bote absent any showing

of bad faith;
(2) respondent Dakila is not a regular employee;

Following Article 279 of the Labor Code, an employee who is

(1) petitioner Jennifer M. Eano-Bote is ABSOLVED from

unjustly dismissed from work is entitled to reinstatement

liability for payment of respondent Francisco N.

without loss of seniority rights and other privileges and to his

Dakila's monetary awards;

full backwages computed from the time he was illegally

(3) respondent was not illegally dismissed as it was the

dismissed. However, considering that respondent Dakila was

(2) the awards of reinstatement wages pending appeal

respondent who resigned; and

terminated on May 1, 2007, or one (1) day prior to his

as well as the moral and exemplary damages are

compulsory retirement on May 2, 2007, his reinstatement is no

ordered DELETED; and

(4) theLAs monetary award has no basis.

Ruling of the CA

longer feasible. Accordingly, the NLRC correctly held him

entitled to the payment of his retirement benefits pursuant to

(3) the computation of backwages should be limited

the CBA. On the other hand, his backwages should be computed

only for a day prior to his compulsory retirement.

only for days prior to his compulsory retirement which in this

The rest of the decision stands.

83

SO ORDERED.

17

THIRD DIVISION
G.R. No. 171482, March 12, 2014
ASHMOR M. TESORO, PEDRO ANG AND GREGORIO
SHARP, Petitioners, v. METRO MANILA RETREADERS, INC.
(BANDAG) AND/OR NORTHERN LUZON RETREADERS, INC.
(BANDAG) AND/OR POWER TIRE AND RUBBER CORP.
(BANDAG), Respondents.
DECISION
ABAD, J.:
This case concerns the effect on the status of employment of
employees who entered into a Service Franchise Agreement
with their employer.
The Facts and the Case
On various dates between 1991 and 1998, petitioners Ashmor
M. Tesoro, Pedro Ang, and Gregorio Sharp used to work as
salesmen for respondents Metro Manila Retreaders, Inc.,
Northern Luzon Retreaders, Inc., or Power Tire and Rubber
Corporation, apparently sister companies, collectively called
Bandag. Bandag offered repair and retread services for used
tires. In 1998, however, Bandag developed a franchising

84

scheme that would enable others to operate tire and retreading

businesses using its trade name and service system.
Petitioners quit their jobs as salesmen and entered into
separate Service Franchise Agreements (SFAs) with Bandag for
the operation of their respective franchises. Under the SFAs,
Bandag would provide funding support to the petitioners subject
to a regular or periodic liquidation of their revolving funds. The
expenses out of these funds would be deducted from
petitioners sales to determine their incomes.
At first, petitioners managed and operated their respective
franchises without any problem. After a length of time, however,
they began to default on their obligations to submit periodic
liquidations of their operational expenses in relation to the
revolving funds Bandag provided them. Consequently, Bandag
terminated their respective SFA.
Aggrieved, petitioners filed a complaint for constructive
dismissal, nonpayment of wages, incentive pay, 13th month
pay and damages against Bandag with the National Labor
Relations Commission (NLRC). Petitioners contend that,
notwithstanding the execution of the SFAs, they remained to be
Bandags employees, the SFAs being but a circumvention of
their status as regular employees.
For its part, Bandag pointed out that petitioners freely resigned
from their employment and decided to avail themselves of the
opportunity to be independent entrepreneurs under the
franchise scheme that Bandag had. Thus, no employer
employee relationship existed between petitioners and Bandag.
On March 14, 2003 the Labor Arbiter rendered a Decision,
dismissing the complaint on the ground that no employer
employee relationship existed between Bandag and petitioners.
Upon petitioners appeal to the NLRC the latter affirmed on June
30, 2003 the Labor Arbiters Decision. It also denied petitioners
motion for reconsideration. Undaunted, petitioners filed a
petition for certiorari under Rule 65 with the Court of Appeals
(CA) ascribing grave abuse of discretion. On July 29, 2005 the
CA rendered a Decision,1 dismissing the petition for lack of
merit. It also denied their motion for reconsideration on
February 7, 2006.
Issue of the Case
The only issue presented in this case is whether or not
petitioners remained to be Bandags salesmen under the
franchise scheme it entered into with them.
Ruling of the Court
Franchising is a business method of expansion that allows an

individual or group of individuals to market a product or a

service and to use of the patent, trademark, trade name and
the systems prescribed by the owner.2 In this case, Bandags
SFAs created on their faces an arrangement that gave
petitioners the privilege to operate and maintain Bandag
branches in the way of franchises, providing tire repair and
retreading services, with petitioners earning profits based on
the performance of their branches.
The question is: did petitioners remain to be Bandags
employees after they began operating those branches? The
tests for determining employeremployee relationship are: (a)
the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the
employers power to control the employee with respect to the
means and methods by which the work is to be accomplished.
The last is called the control test, the most important
element.3
When petitioners agreed to operate Bandags franchise
branches in different parts of the country, they knew that this
substantially changed their former relationships. They were to
cease working as Bandags salesmen, the positions they
occupied before they ventured into running separate Bandag
branches. They were to cease receiving salaries or
commissions. Their incomes were to depend on the profits they
made. Yet, petitioners did not then complain of constructive
dismissal. They took their chances, ran their branches, Gregorio
Sharp in La Union for several months and Ashmor Tesoro in
Baguio and Pedro Ang in Pangasinan for over a year. Clearly,
their belated claim of constructive dismissal is quite hollow.
It is pointed out that Bandag continued, like an employer, to
exercise control over petitioners work. It points out that
Bandag: (a) retained the right to adjust the price rates of
products and services; (b) imposed minimum processed tire
requirement (MPR); (c) reviewed and regulated credit
applications; and (d) retained the power to suspend petitioners
services for failure to meet service standards.
But uniformity in prices, quality of services, and good business
practices are the essence of all franchises. A franchisee will
damage the franchisors business if he sells at different prices,
renders different or inferior services, or engages in bad
business practices. These business constraints are needed to
maintain collective responsibility for faultless and reliable
service to the same class of customers for the same prices.

Franchising involves the use of an established business

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

This is not the control contemplated in employeremployee

relationships. Control in such relationships addresses the details
of day to day work like assigning the particular task that has to
be done, monitoring the way tasks are done and their results,
and determining the time during which the employee must
report for work or accomplish his assigned task.

85

18
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 195190

July 28, 2014

ROYALE HOMES MARKETING CORPORATION, Petitioner,

vs.
FIDEL P. ALCANTARA [deceased], substituted by his
heirs, Respondent.
DECISION
DEL CASTILLO, J.:
Not every form of control that a hiring party imposes on the
hired party is indicative of employee-employer relationship.

86

Rules and regulations that merely serve as guidelines towards

Carmina Sotto. Alcantara alleged that he is a regular employee

competed with its business, and even recruited some of its

the achievement of a mutually desired result without dictating

of Royale Homes since he is performing tasks that are

sales agents. Although this was against the exclusivity clause of

the means and methods of accomplishing it do not establish

necessary and desirable to its business; that in 2003 the

the contract, Royale Homes still offered to accept Alcantaras

company gave him P1.2 million for the services he rendered to

wife back so she could continue to engage in real estate

it; that in the first week of November 2003, however, the

brokerage, albeit exclusively for Royale Homes. In a special

This Petition for Review on Certiorari assails the June 23, 2010

executive officers of Royale Homes told him that they were

management committee meeting on October 8,2003, however,

Decision3 of the Court of Appeals (CA) in CA-G.R. SP No. 109998

wondering why he still had the gall to come to office and sit at

Alcantara announced publicly and openly that he would leave

employer-employee relationship.

10

which (i) reversed and set aside the February 23, 2009

his table;

Decision4 of the National Labor Relations Commission (NLRC),

Homes amounted to his dismissal from work without any valid

and that the actsof the executive officers of Royale

longer finish the unexpired term of his contract. He has decided

(ii) ordered petitioner Royale Homes Marketing Corporation

or just cause and in gross disregard of the proper procedure for

to join his wifeand pursue their own brokerage business. Royale

(Royale Homes) to pay respondent Fidel P. Alcantara (Alcantara)

dismissing employees. Thus, he alsoimpleaded the corporate

Homes accepted Alcantaras decision. It then threw a

backwages and separation pay, and (iii) remanded the case to

officers who, he averred, effected his dismissal in bad faith and

despedidaparty in his honor and, subsequently, appointed a

the Labor Arbiter for the proper determination and computation

in an oppressive manner.

new independent contractor. Two months after herelinquished

of said monetary awards.

his post, however, Alcantara appeared in Royale Homes and

Alcantara prayed to be reinstated tohis former position without

Also assailed in this Petition isthe January 18, 2011

loss of seniority rights and other privileges, as well as to be paid

Resolution5 of the CA denying Royale Homes Motion for

backwages, moral and exemplary damages, and attorneys

the company by the end of October 2003 and that he would no

Reconsideration, as well as its Supplemental thereto.

submitted a letter claiming that he was illegally dismissed.

Ruling of the Labor Arbiter

fees. He further sought that the ownership of the Mitsubishi

Adventure with Plate No. WHD-945 be transferred to his name.

On September 7, 2005,the Labor Arbiter rendered a

Decision11 holding that Alcantara is an employee of Royale

Factual Antecedents
Royale Homes, on the other hand, vehemently denied that

Homes with a fixed-term employment period from January 1 to

In 1994, Royale Homes, a corporation engaged in marketing

Alcantara is its employee. It argued that the appointment paper

December 31, 2003 and that the pre-termination of his contract

real estates, appointed Alcantara asits Marketing Director for a

of Alcantara isclear that it engaged his services as an

was against the law.Hence, Alcantara is entitled to an amount

fixed period of one year. His work consisted mainly of marketing

independent sales contractorfor a fixed term of one year only.

which he may have earned on the average for the unexpired

Royale Homes realestate inventories on an exclusive basis.

He never received any salary, 13th month pay, overtime pay or

portion of the contract. With regard to the impleaded corporate

Royale Homes reappointed him for several consecutive years,

holiday pay from Royale Homes as hewas paid purely on

officers, the Labor Arbiter absolved them from any liability.

the last of which covered the period January 1 to December 31,

commission basis. In addition, Royale Homes had no control on

2003 where he held the position of Division 5 Vice-President-

how Alcantara would accomplish his tasks and responsibilities

Sales.8

as he was free to solicit sales at any time and by any manner

Proceedings before the Labor Arbiter

which he may deem appropriateand necessary. He is even free

WHEREFORE, premises considered, judgment is hereby

to recruit his own sales personnel to assist him in pursuance of

rendered ordering the respondent Royale Homes Marketing

his sales target.

Corp. to pay the complainant the total amount of TWO

On December 17, 2003, Alcantara filed a Complaint for Illegal

9

The dispositive portion of the Labor Arbiters Decision reads:

HUNDRED SEVENTY SEVEN THOUSAND PESOS (P277,000.00)

Dismissal against Royale Homes and its President Matilde

According to Royale Homes, Alcantara decided to leave the

representing his compensation/commission for the unexpired

Robles, Executive Vice-President for Administration and Finance

company after his wife, who was once connectedwith it as a

term of his contract.

Ma. Melinda Bernardino, and Executive Vice- President for Sales

sales agent, had formed a brokerage company that directly

87

All other claims are dismissed for lack of merit.

SO ORDERED.12

WHEREFORE, premises considered, the Decision of Labor Arbiter

caseto the Labor Arbiter to determine the same and the

Dolores Peralta-Beley dated September 5, 2005 is REVERSED

monetary award he is entitled to. With regard to the corporate

and SET ASIDE and a NEW ONE rendered dismissing the

officers, the CA absolved them from any liability for want of

complaint for lack of jurisdiction.

clear proof that they assented to the patently unlawful acts or

Both parties appealed the Labor Arbiters Decision to the NLRC.

Royale Homes claimed that the Labor Arbiter grievously erred

that they are guilty of bad faith orgross negligence. Thus:

SO ORDERED.

14

inruling that there exists an employer-employee relationship

WHEREFORE, in view of the foregoing, the instant PETITION is

15

between the parties. It insisted that the contract between them

Alcantara moved for reconsideration.

expressly statesthat Alcantara is an independent contractor and

May 29, 2009, however, the NLRC denied his motion.

In a Resolution

16

dated

not an ordinary employee. Ithad no control over the means and

GRANTED. The assailed decision of the National Labor Relations

Commission in NLRC NCR CASE NO. 00-12-14311-03 NLRC CA
NO. 046104-05 dated February 23, 2009 as well as the

methods by which he performed his work. RoyaleHomes

Alcantara thus filed a Petition for Certiorari 17 with the CA

Resolution dated May 29, 2009 are hereby SET ASIDE and a new

likewise assailed the award of P277,000.00 for lack of basis as it

imputing grave abuse of discretion on the partof the NLRC in

one is entered ordering the respondent company to pay

did not pre-terminate the contract. It was Alcantara who chose

ruling that he is not an employee of Royale Homes and that it is

petitioner backwages which shall be computed from the time of

not to finish the contract.

the regular courts which have jurisdiction over the issue of

his illegal termination in October 2003 up to the finality of this

whether the pre-termination of the contract is valid.

decision, plus separation pay equivalent to one month salary for

Alcantara, for his part, argued that the Labor Arbiter erred in
ruling that his employment was for a fixed-term and that he is

every year of service. This case is REMANDED to the Labor

Ruling of the Court of Appeals

not entitled to backwages, reinstatement, unpaid commissions,

and damages.

Arbiter for the proper determination and computation of back

wages, separation pay and other monetary benefits that

On June 23, 2010, the CA promulgated its Decision 18 granting

petitioner is entitled to.

Alcantaras Petition and reversing the NLRCs Decision. Applying

Ruling of the National LaborRelations Commission

the four-fold and economic reality tests, it held thatAlcantara is

SO ORDERED.19

an employee of Royale Homes. Royale Homes exercised some

On February 23, 2009, the NLRC rendered its Decision,13 ruling

degree of control over Alcantara since his job, as observed by

Royale Homes filed a Motion for Reconsideration20 and a

that Alcantara is not an employee but a mere independent

the CA, is subject to company rules, regulations, and periodic

Supplemental Motion for Reconsideration.21 In a

contractor of Royale Homes. It based its ruling mainly on the

evaluations. He was also bound by the company code of ethics.

Resolution22 dated January 18, 2011, however, the CA denied

contract which does not require Alcantara to observe regular

Moreover, the exclusivity clause of the contract has made

said motions.

working hours. He was also free to adopt the selling methods he

Alcantara economically dependent on Royale Homes,

deemed most effective and can even recruit sales agents to

supporting the theory that he is anemployee of said company.

Issues

assist him in marketing the inventories of Royale Homes. The

NLRC also considered the fact that Alcantara was not receiving

The CA further held that Alcantaras termination from

Hence, this Petition where Royale Homes submits before this

monthly salary, but was being paid on commission basis as

employment was without any valid or just cause, and it was

Court the following issues for resolution:

stipulated in the contract. Being an independent contractor, the

carried out in violation of his right to procedural due process.

NLRC concluded that Alcantaras Complaint iscognizable by the

Thus, the CA ruled that he isentitled to backwages and

regular courts.

separation pay, in lieu of reinstatement. Considering,however,

The falloof the NLRC Decision reads:

A.

that the CA was not satisfied with the proofadduced to establish

WHETHER THE COURT OF APPEALS HAS DECIDED THE

the amount of Alcantaras annual salary, it remanded the

INSTANT CASE NOT IN ACCORD WITH LAW AND

88

APPLICABLE DECISIONS OF THE SUPREME COURT

rules and regulations, code of ethics, periodic evaluation, and

executed in pursuanceof their mutual agreement. While the

WHEN IT REVERSED THE RULING OF THE NLRC

exclusivity clause of contract. RoyaleHomes maintains that it is

existence of employer-employee relationship is a matter of law,

DISMISSING THE COMPLAINT OF RESPONDENT FOR

expected to exercise some degree of control over its

the characterization made by the parties in their contract as to

LACK OF JURISDICTION AND CONSEQUENTLY, IN

independent contractors,but that does not automatically result

the nature of their juridical relationship cannot be simply

FINDING THAT RESPONDENT WAS ILLEGALLY

in the existence ofemployer-employee relationship. For control

ignored, particularly in this case where the parties written

DISMISSED[.]

to be consideredas a proof tending to establish employer-

contractunequivocally states their intention at the time they

employee relationship, the same mustpertain to the means and

entered into it. In Tongko v. The Manufacturers LifeInsurance Co.

method of performing the work; not on the relationship of the

(Phils.), Inc.,25 it was held that:

B.

independent contractors among themselves or their persons or

WHETHER THE COURT OF APPEALS COMMITTED A

their source of living.

To be sure, the Agreements legal characterization of the nature

SERIOUS ERROR OF LAW IN DISREGARDING THE EN

of the relationship cannot be conclusive and binding on the

BANCRULING OF THIS HONORABLE COURT IN THE

Royale Homes further asserts that it neither hired nor wielded

courts; x x x the characterization of the juridical relationship the

CASEOF TONGKO VS. MANULIFE, AND IN BRUSHING

the power to dismiss Alcantara. It was Alcantara who openly

Agreement embodied is a matter of law that is for the courts to

ASIDE THE APPLICABLE RULINGS OF SONZA VS. ABS

and publicly declared that he was pre-terminating his fixed-term

determine. At the same time, though, the characterization the

CBN AND CONSULTA V. CA[.]

contract.

parties gave to their relationship in the Agreement cannot

simply be brushed aside because it embodiestheir intent at the

C.
WHETHER THE COURT OF APPEALS COMMITTED A

The pivotal issue to be resolved in this case is whether

time they entered the Agreement, and they were governed by

Alcantara was an independent contractor or anemployee of

this understanding throughout their relationship. At the very

Royale Homes.

least, the provision on the absence of employer- employee

SERIOUS ERROR OF LAW IN DENYING THE MOTION FOR

relationship between the parties can be an aid in considering

RECONSIDERATION OF PETITIONER AND IN REFUSING

TO CORRECT ITSELF[.]

Our Ruling

the Agreement and its implementation, and in appreciating the

23

other evidence on record.26

The Petition is impressed with merit.
In this case, the contract,27 duly signed and not disputed by the

Royale Homes contends that its contract with Alcantara is clear

and unambiguous it engaged his services as an independent

The determination of whether a party who renders services to

parties, conspicuously provides that "no employer-employee

contractor. This can be readily seen from the contract stating

another is an employee or an independent contractor involves

relationship exists between" Royale Homes and Alcantara, as

that no employer-employee relationship exists between the

an evaluation of factual matters which, ordinarily, is not within

well as his sales agents. It is clear that they did not want to be

parties; that Alcantara was free to solicit sales at any time and

the province of this Court. In view of the conflicting findings of

bound by employer-employee relationship atthe time ofthe

by any manner he may deem appropriate; that he may recruit

the tribunals below, however, this Court is constrained to go

signing of the contract. Thus:

sales personnel to assist him in marketing Royale Homes

over the factual matters involved in this case.

24

inventories; and, thathis remunerations are dependent on his

sales performance.

January 24, 2003

The juridical relationship of the parties based on their written
contract

MR. FIDEL P. ALCANTARA

ruling that it exercised control over Alcantara based on a

The primary evidence of the nature of the parties relationship

13 Rancho I

shallow ground that his performance is subject to company

in this case is the written contract that they signed and

Royale Homes likewise argues that the CA grievously erred in

89

Marikina City
Dear Mr. Alcantara,

understood, however, that no employer-employee

to wit: (1) the selection and engagement of the employee; (2)

relationship exists between us, that of your sales

the payment of wages; (3) the power of dismissal; and (4) the

personnel/agents, and that you shall hold our company

employers power to control the employee with respect to the

x x x, its officers and directors, free and harmless from

means and methods by which the work is to be

This will confirm yourappointment as Division 5

any and all claims of liability and damages arising from

accomplished.29 Among the four, the most determinative factor

VICE[-]PRESIDENTSALES of ROYALE HOMES MARKETING

and/or incident to the marketing of our real estate

in ascertaining the existence of employeremployee relationship

CORPORATION effective January 1, 2003 to December 31, 2003.

inventories.

is the "right of control test".30 "It is deemed to be such an

important factor that the other requisites may even be

Your appointment entails marketing our real estate inventories

We reserve, however, our right to terminate this agreement in

disregarded."31 This holds true where the issues to be resolved

on an EXCLUSIVE BASIS under such price, terms and condition

case of violation of any company rules and regulations, policies

iswhether a person who performs work for another is the latters

to be provided to you from time to time.

and code of ethics upon notice for justifiable reason.

employee or is an independent contractor,32 as in this case. For

As such, you can solicit sales at any time and by any manner

Your performance shall be subject toperiodic evaluation based

the right to control not only the end to beachieved, but also the

which you deem appropriate and necessary to market our real

on factors which shall be determined by the management.

means by which such end is reached, employer-employee

where the person for whom the services are performed reserves

relationship is deemed to exist.33

estate inventories subject to rules, regulations and code of

ethics promulgated by the company. Further, you are free to

If you are amenable to the foregoing terms and conditions,

recruit sales personnel/agents to assist you in marketing of our

please indicate your conformity by signing on the space

In concluding that Alcantara is an employee of RoyaleHomes,

inventories provided that your personnel/agents shall first

provided below and return [to] us a duplicate copy of this letter,

the CA ratiocinated that since the performance of his tasks is

attend the required seminars and briefing to be conducted by

duly accomplished, to constitute as our agreement on the

subject to company rules, regulations, code of ethics, and

us from time to time for the purpose of familiarizing them of

matter.(Emphasis ours)

periodic evaluation, the element of control is present.

attendance of which shall be a condition precedent for their

Since "the terms of the contract are clear and leave no doubt

The Court disagrees.

accreditation by us.

upon the intention of the contracting parties, the literal

terms and conditionsof sale, the natureof property sold, etc.,

meaning of itsstipulations should control."28 No construction is

Not every form of control is indicative of employer-employee

That as such Division 5 VICE[-]PRESIDENT-SALES you shall be

even needed asthey already expressly state their intention.

relationship.1wphi1 A person who performs work for another

entitled to:

Also, this Court adopts the observation of the NLRC that it is

and is subjected to its rules, regulations, and code of ethics

rather strange on the part of Alcantara, an educated man and a

does not necessarily become an employee.34 As long as the

1. Commission override of 0.5% for all option sales

veteran sales broker who claimed to be receiving P1.2 million as

level of control does not interfere with the means and methods

beginning January 1, 2003 booked by your sales

his annual salary, not to have contested the portion of the

of accomplishing the assigned tasks, the rules imposed by the

agents.

contract expressly indicating that he is not an employee of

hiring party on the hired party do not amount to the labor law

Royale Homes if their true intention were otherwise.

concept of control that is indicative of employer-employee

2. Budget allocation depending on your divisions sale

relationship. In Insular Life Assurance Co., Ltd. v. National Labor

performance as per our budget guidelines.

The juridical relationship of the parties based on Control Test

Relations Commission35 it was pronounced that:

3. Sales incentive and other forms of company support

In determining the existence of an employer-employee

Logically, the line should be drawn between rules that merely

which may be granted from time to time. It is

relationship, this Court has generally relied on the four-fold test,

serve as guidelines towards the achievement of the mutually

90

desired result without dictating the means or methods to be

jurisprudence. Guidelines indicative of labor law "control," as

Royale Homes in all matters connected therewith, except as to

employed in attaining it, and those that control or fix the

the first Insular Lifecase tells us, should not merely relate to the

the results thereof.40

methodology and bind or restrict the party hired to the use of

mutually desirable result intended by the contractual

such means. The first, which aim only to promote the result,

relationship; they must have the nature of dictating the means

Neither does the repeated hiring of Alcantara prove the

create no employeremployee relationship unlike the second,

or methods to beemployed in attaining the result, or of fixing

existence of employer-employee relationship.41 As discussed

which address both the result and the means used to achieve it.

the methodology and of binding or restricting the party hired to

above, the absence of control over the means and

x x x36

the use of these means.In fact, results-wise, the principal can

methodsdisproves employer-employee relationship. The

impose production quotas and can determine how many agents,

continuous rehiring of Alcantara simply signifies the renewal of

In this case, the Court agrees with Royale Homes that the rules,

with specific territories, ought to be employed to achieve the

his contract with Royale Homes, and highlights his satisfactory

regulations, code of ethics, and periodic evaluation alluded to

companys objectives. These are management policy decisions

services warranting the renewal of such contract. Nor does the

byAlcantara do not involve control over the means and methods

that the labor law element of control cannot reach. Our ruling in

exclusivity clause of contract establish the existence of the

by which he was to performhis job. Understandably, Royale

these respects in the first Insular Lifecase was practically

labor law concept of control. In Consulta v. Court of Appeals,42 it

Homes has to fix the price, impose requirements on prospective

reiterated in Carungcong. Thus, as will be shown more fully

was held that exclusivity of contract does not necessarily result

buyers, and lay down the terms and conditionsof the sale,

below, Manulifes codes of conduct, all of which do not intrude

in employer-employee relationship, viz:

including the mode of payment, which the independent

into the insurance agents means and manner of conducting

contractors must follow. It is also necessary for Royale Homes to

their sales and only control them as to the desired results and

x x x However, the fact that the appointment required Consulta

allocateits inventories among its independent contractors,

Insurance Code norms, cannot be used as basis for a finding

to solicit business exclusively for Pamana did not mean that

determine who has priority in selling the same, grant

that the labor law concept of control existed between Manulife

Pamana exercised control over the means and methods of

commission or allowance based on predetermined criteria, and

and Tongko.37 (Emphases in the original)

Consultas work as the term control is understood in labor

regularly monitor the result of their marketing and sales efforts.

jurisprudence. Neither did it make Consulta an employee of

But tothe mind of this Court, these do not pertain to the means

As the party claiming the existence of employer-employee

Pamana. Pamana did not prohibit Consulta from engaging in any

and methods of how Alcantara was to perform and accomplish

relationship, it behoved upon Alcantara to prove the elements

other business, or from being connected with any other

his task of soliciting sales. They do not dictate upon him the

thereof, particularly Royale Homes power of control over the

company, for aslong as the business [of the] company did not

38

He, however,

compete with Pamanas business.43

details of how he would solicit sales or the manner as to how he

means and methods of accomplishing the work.

would transact business with prospective clients. In Tongko, this

failed to cite specificrules, regulations or codes of ethics that

Court held that guidelines or rules and regulations that do

supposedly imposed control on his means and methods of

The same scenario obtains in this case. Alcantara was not

notpertain to the means or methodsto be employed in attaining

soliciting sales and dealing with prospective clients. On the

prohibited from engaging in any other business as long as he

the result are not indicative of control as understood inlabor

other hand, this case is replete with instances that negate the

does not sell projects of Royale Homes competitors. He can

law. Thus:

element of control and the existence of employer-employee

engage in selling various other products or engage in unrelated

relationship. Notably, Alcantara was not required to observe

businesses.

From jurisprudence, an important lesson that the first Insular

definite working hours.39 Except for soliciting sales,

Lifecase teaches us is that a commitment to abide by the rules

RoyaleHomes did not assign other tasks to him. He had full

and regulations of an insurance company does not ipso

control over the means and methods of accomplishing his tasks

factomake the insurance agent an employee. Neither do

as he can "solicit sales at any time and by any manner which

The element of payment of wages is also absent in thiscase. As

guidelines somehow restrictive of the insurance agents conduct

[he may] deem appropriate and necessary." He performed his

provided in the contract, Alcantaras remunerations consist only

necessarily indicate "control" as this term is defined in

tasks on his own account free from the control and direction of

of commission override of 0.5%, budget allocation, sales

Payment of Wages

91

incentive and other forms of company support. There is no proof

LEONEN, J.:

that he received fixed monthly salary. No payslip or payroll was

It is the burden of the employer to prove that a person whose

services it pays for is an independent contractor rather than a
regular employee with or without a fixed term. That a person
has a disease does not per se entitle the employer to terminate
his or her services. Termination is the last resort. At the very
least, a competent public health authority must certify that the
disease cannot be cured within six ( 6) months, even with
appropriate treatment.

ever presented and there is no proof that Royale Homes

deducted from his supposed salary withholding tax or that it
registered him with the Social Security System, Philippine
Health Insurance Corporation, or Pag-Ibig Fund. In fact, his
Complaint merely states a ballpark figure of his alleged salary
of P100,000.00, more or less. All of these indicate an
independent contractual relationship.44 Besides, if Alcantara

We decide this petition for review1 on certiorari filed by Fuji

Television Network, Inc., seeking the reversal of the Court of
Appeals Decision2 dated June 25, 2012, affirming with
modification the decision3 of the National Labor Relations
Commission.

indeed consideredhimself an employee of Royale Homes, then

he, an experienced and professional broker, would have
complained that he was being denied statutorily mandated
benefits. But for nine consecutive years, he kept mum about it,

In 2005, Arlene S. Espiritu ("Arlene") was engaged by Fuji

Television Network, Inc. ("Fuji") asa news
correspondent/producer4 "tasked to report Philippine news to
Fuji through its Manila Bureau field office."5 Arlenes
employment contract initially provided for a term of one (1)
year but was successively renewed on a yearly basis with salary
adjustment upon every renewal.6 Sometime in January 2009,
Arlenewas diagnosed with lung cancer.7She informed Fuji about
her condition. In turn, the Chief of News Agency of Fuji, Yoshiki
Aoki, informed Arlene "that the company will have a problem
renewing her contract"8 since it would be difficult for her to
perform her job.9She "insisted that she was still fit to work as
certified by her attending physician."10

signifying that he has agreed, consented, and accepted the fact

that he is not entitled tothose employee benefits because he is
an independent contractor.
This Court is, therefore,convinced that Alcantara is not an
employee of Royale Homes, but a mere independent contractor.
The NLRC is, therefore, correct in concluding that the Labor
Arbiter has no jurisdiction over the case and that the same is
cognizable by the regular courts.
WHEREFORE, the instant Petition is hereby GRANTED. The June
23, 2010 Decision of the Court of Appeals in CA-G.R. SP No.

19

109998 is REVERSED and SET ASIDE. The February 23, 2009

Decision of the National Labor Relations Commission is
REINSTATED and AFFIRMED. SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 204944-45

December 3, 2014

FUJI TELEVISION NETWORK, INC., Petitioner,

vs.
ARLENE S. ESPIRITU, Respondent.
DECISION

After several verbal and written communications, 11 Arlene and

Fuji signed a non-renewal contract on May 5, 2009 where it was
stipulated that her contract would no longer be renewed after
its expiration on May 31, 2009. The contract also provided that
the parties release each other from liabilities and
responsibilities under the employment contract. 12
In consideration of the non-renewal contract, Arlene
"acknowledged receipt of the total amount of US$18,050.00
representing her monthly salary from March 2009 to May 2009,
year-end bonus, mid-year bonus, and separation
pay."13 However, Arlene affixed her signature on the nonrenewal
contract with the initials "U.P." for "under protest." 14
On May 6, 2009, the day after Arlene signed the non-renewal
contract, she filed a complaint for illegal dismissal and
attorneys fees with the National Capital Region Arbitration
Branch of the National Labor Relations Commission. She alleged
that she was forced to sign the nonrenewal contract when Fuji
came to know of her illness and that Fuji withheld her salaries

92

and other benefits for March and April 2009 when she refused
to sign.15

3) Whether or not Espirituis entitled to damages and

attorneys fees.28

Arlene claimed that she was left with no other recourse but to
sign the non-renewal contract, and it was only upon signing that
she was given her salaries and bonuses, in addition to
separation pay equivalent to four (4) years.16

In the assailed decision, the Court of Appeals affirmed

the National Labor Relations Commission with the
modification that Fuji immediately reinstate Arlene to
her position as News Producer without loss of seniority
rights, and pay her backwages, 13th-month pay, midyear and year-end bonuses, sick leave and vacation
leave with pay until reinstated, moral damages,
exemplary damages, attorneysfees, and legal interest
of 12% per annum of the total monetary awards. 29 The
Court of Appeals ruled that:

7. The amount of P100,000.00 as moral damages;

8. The amount of P50,000.00 as exemplary damages;

In the decision17 dated September 10, 2009, Labor Arbiter

Corazon C. Borbolla dismissed Arlenes complaint. 18Citing Sonza
v. ABS-CBN19 and applying the four-fold test, the Labor Arbiter
held that Arlene was not Fujis employee but an independent
contractor.20
Arlene appealed before the National Labor Relations
Commission. In its decision dated March 5, 2010, the National
Labor Relations Commission reversed the Labor Arbiters
decision.21 It held that Arlene was a regular employee with
respect to the activities for which she was employed since she
continuously rendered services that were deemednecessary
and desirable to Fujis business.22 The National Labor Relations
Commission ordered Fuji to pay Arlene backwages, computed
from the date of her illegal dismissal.23 The dispositive portion
of the decision reads:
WHEREFORE, premises considered, judgment is hereby
rendered GRANTING the instant appeal. The Decision of the
Labor Arbiter dated 19 September 2009 is hereby REVERSED
and SET ASIDE, and a new one is issued ordering respondentsappellees to pay complainant-appellant backwages computed
from the date of her illegal dismissal until finality of this
Decision.

WHEREFORE, for lack of merit, the petition of Fuji Television

Network, Inc. and Yoshiki Aoki is DENIED and the petition of
Arlene S. Espiritu is GRANTED. Accordingly, the Decision dated
March 5, 2010 of the National Labor Relations Commission, 6th
Division in NLRC NCR Case No. 05-06811-09 and its subsequent
Resolution dated April 26, 2010 are hereby AFFIRMED with
MODIFICATIONS, as follows:
Fuji Television, Inc. is hereby ORDERED to immediately
REINSTATE Arlene S. Espiritu to her position as News Producer
without loss of seniority rights and privileges and to pay her the
following:
1. Backwages at the rate of $1,900.00 per month
computed from May 5, 2009 (the date of dismissal),
until reinstated;
2. 13th Month Pay at the rate of $1,900.00 per annum
from the date of dismissal, until reinstated;

SO ORDERED.24
Arlene and Fuji filed separat emotions for
reconsideration.25 Both motions were denied by the National
Labor Relations Commission for lack of merit in the resolution
dated April 26, 2010.26 From the decision of the National Labor
Relations Commission, both parties filed separate petitions for
certiorari27 before the Court of Appeals. The Court of Appeals
consolidated the petitions and considered the following issues
for resolution:
1) Whether or not Espirituis a regular employee or a
fixed-term contractual employee;
2) Whether or not Espiritu was illegally dismissed; and

3. One and a half (1 1/2) months pay or $2,850.00 as

midyear bonus per year from the date of dismissal,
until reinstated;
4. One and a half (1 1/2) months pay or $2,850.00 as
year-end bonus per year from the date of dismissal,
until reinstated;
5. Sick leave of 30 days with pay or $1,900.00 per year
from the date of dismissal, until reinstated; and
6. Vacation leave with pay equivalent to 14 days or
$1,425.00 per annum from date of dismissal, until
reinstated.

9. Attorneys fees equivalent to 10% of the total

monetary awards herein stated; and
10. Legal interest of twelve percent (12%) per annum
of the total monetary awards computed from May 5,
2009, until their full satisfaction.
The Labor Arbiter is hereby DIRECTED to make another
recomputation of the above monetary awards consistent with
the above directives.
SO ORDERED.30
In arriving at the decision, the Court of Appeals held that Arlene
was a regular employee because she was engaged to perform
work that was necessary or desirable in the business of
Fuji,31 and the successive renewals of her fixed-term contract
resulted in regular employment.32
According to the Court of Appeals, Sonzadoes not apply in order
to establish that Arlene was an independent contractor because
she was not contracted on account of any peculiar ability,
special talent, or skill.33 The fact that everything used by Arlene
in her work was owned by Fuji negated the idea of job
contracting.34
The Court of Appeals also held that Arlene was illegally
dismissed because Fuji failed to comply with the requirements
of substantive and procedural due process necessary for her
dismissal since she was a regular employee. 35
The Court of Appeals found that Arlene did not sign the nonrenewal contract voluntarily and that the contract was a mere
subterfuge by Fuji to secure its position that it was her choice
not to renew her contract. She was left with no choice since Fuji
was decided on severing her employment.36
Fuji filed a motion for reconsideration that was denied in the
resolution37 dated December 7, 2012 for failure to raise new
matters.38
Aggrieved, Fuji filed this petition for review and argued that the
Court of Appeals erred in affirming with modification the
National Labor Relations Commissions decision, holding that

93

Arlene was a regular employee and that she was illegally

dismissed. Fuji also questioned the award of monetary claims,
benefits, and damages.39

shall re-hire her if she was still interested to work for Fuji. 59 For
Fuji, Arlenes e-mail showed that she had the power to
bargain.60

Fuji points out that Arlene was hired as a stringer, and it

informed her that she would remain one.40 She was hired as an
independent contractor as defined in Sonza.41 Fuji had no
control over her work.42 The employment contracts were
executed and renewed annually upon Arlenes insistence to
which Fuji relented because she had skills that distinguished her
from ordinary employees.43 Arlene and Fuji dealt on equal terms
when they negotiated and entered into the employment
contracts.44 There was no illegal dismissal because she freely
agreed not to renew her fixed-term contract as evidenced by
her e-mail correspondences with Yoshiki Aoki.45 In fact, the
signing of the non-renewal contract was not necessary to
terminate her employment since "such employment terminated
upon expiration of her contract." 46 Finally, Fuji had dealt with
Arlene in good faith, thus, she should not have been awarded
damages.47

Fuji then posits that the Court of Appeals erred when it held that
the elements of an employer-employee relationship are present,
particularly that of control;61 that Arlenes separation from
employment upon the expiration of her contract constitutes
illegal dismissal;62 that Arlene is entitled to reinstatement;63 and
that Fuji is liable to Arlene for damages and attorneys fees.64

Fuji alleges that it did not need a permanent reporter since the
news reported by Arlene could easily be secured from other
entities or from the internet.48 Fuji "never controlled the manner
by which she performed her functions."49 It was Arlene who
insisted that Fuji execute yearly fixed-term contracts so that she
could negotiate for annual increases in her pay.50
Fuji points out that Arlene reported for work for only five (5)
days in February 2009, three (3) days in March 2009, and one
(1) day in April 2009.51 Despite the provision in her employment
contract that sick leaves in excess of 30 days shall not be paid,
Fuji paid Arlene her entire salary for the months of March, April,
and May; four(4) months of separation pay; and a bonus for two
and a half months for a total of US$18,050.00.52 Despite having
received the amount of US$18,050.00, Arlene still filed a case
for illegal dismissal.53
Fuji further argues that the circumstances would show that
Arlene was not illegally dismissed. The decision tonot renew her
contract was mutually agreed upon by the parties as indicated
in Arlenes e-mail54 dated March 11, 2009 where she consented
to the non-renewal of her contract but refused to sign
anything.55 Aoki informed Arlene in an e-mail56 dated March 12,
2009 that she did not need to sign a resignation letter and that
Fuji would pay Arlenes salary and bonus until May 2009 as well
as separation pay.57
Arlene sent an e-mail dated March 18, 2009 with her version of
the non-renewal agreement that she agreed to sign this
time.58 This attached version contained a provision that Fuji

This petition for review on certiorari under Rule 45 was filed on

February 8, 2013.65 On February 27, 2013, Arlene filed a
manifestation66 stating that this court may not take jurisdiction
over the case since Fuji failed to authorize Corazon E. Acerden
to sign the verification.67 Fuji filed a comment on the
manifestation68 on March 9, 2013.
Based on the arguments of the parties, there are procedural
and substantive issues for resolution:
I. Whether the petition for review should be dismissed
as Corazon E. Acerden, the signatory of the verification
and certification of non forum shopping of the petition,
had no authority to sign the verification and
certification on behalf of Fuji;
II. Whether the Court of Appeals correctly determined
that no grave abuse of discretion was committed by
the National Labor Relations Commission when it ruled
that Arlene was a regular employee, not an
independent contractor, and that she was illegally
dismissed; and
III. Whether the Court of Appeals properly modified the
National Labor Relations Commissions decision by
awarding reinstatement, damages, and attorneys fees.
The petition should be dismissed.
I
Validity of the verification and certification against forum
shopping
In its comment on Arlenes manifestation, Fuji alleges that
Corazon was authorized to sign the verification and certification
of non-forum shopping because Mr. Shuji Yano was empowered
under the secretarys certificate to delegate his authority to

sign the necessary pleadings, including the verification and

certification against forum shopping.69
On the other hand, Arlene points outthat the authority given to
Mr. Shuji Yano and Mr. Jin Eto in the secretarys certificate is only
for the petition for certiorari before the Court of Appeals.70 Fuji
did not attach any board resolution authorizing Corazon orany
other person tofile a petition for review on certiorari with this
court.71 Shuji Yano and Jin Eto could not re-delegate the power
thatwas delegated to them.72 In addition, the special power of
attorney executed by Shuji Yano in favor of Corazon indicated
that she was empowered to sign on behalf of Shuji Yano, and
not on behalf of Fuji.73
The Rules of Court requires the
submission of verification and
certification against forum shopping
Rule 7, Section 4 of the 1997 Rules of Civil Procedure provides
the requirement of verification, while Section 5 of the same rule
provides the requirement of certification against forum
shopping. These sections state:
SEC. 4. Ver if ica tio n. Except when otherwise specifically
required by law or rule, pleadings need not be under oath,
verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read
the pleading and that the allegations therein are true and
correct of his knowledge and belief.
A pleading required to be verifiedwhich containsa verification
based on "information and belief," or upon "knowledge,
information and belief," or lacks a proper verification, shall be
treated as an unsigned pleading.
SEC. 5. Certification against forum shopping. The plaintiff or
principal party shall certify under oath in the complaint orother
initiatory pleading asserting a claim for relief or in a sworn
certification annexed thereto and simultaneously filed
therewith: (a) that he has not theretofore commenced any
action or filed any claim involving the same issues in any court,
tribunal or quasi-judicial agency and, to the best of his
knowledge, no such other action or claim is pending therein; (b)
if there is such other pending action or claim, a complete
statement of the present status thereof; and (c) if he should
thereafter learn that the same or similar action or claim has
been filed or is pending, he shall report that fact within five (5)
days therefrom to the court wherein his aforesaid complaint or
initiatory pleading has been filed.

94

Failure to comply with the foregoing requirements shall not be

curable by mere amendment of the complaint or other initiatory
pleading but shall be cause for the dismissal of the case without
prejudice, unless otherwise provided, upon motion and after
hearing. The submission of a false certification or noncompliance with any of the undertakings therein shall constitute
indirect contempt ofcourt, without prejudice to the
corresponding administrative and criminalactions. If the acts of
the party or his counsel clearly constitute willful and deliberate
forum shopping, the same shall be ground for summary
dismissal with prejudice and shall constitute direct contempt, as
well as a cause for administrative sanctions.
Section 4(e) of Rule 4574 requires that petitions for review
should "contain a sworn certification against forum shopping as
provided in the last paragraph of section 2, Rule 42." Section 5
of the same rule provides that failure to comply with any
requirement in Section 4 is sufficient ground to dismiss the
petition.
Effects of non-compliance
Uy v. Landbank75 discussed the effect of non-compliance with
regard to verification and stated that:
[t]he requirement regarding verification of a pleading is formal,
not jurisdictional. Such requirement is simply a condition
affecting the form of pleading, the non-compliance of which
does not necessarily render the pleading fatally defective.
Verification is simply intended to secure an assurance that the
allegations in the pleading are true and correct and not the
product of the imagination or a matter of speculation, and that
the pleading is filed in good faith. The court may order the
correction of the pleading if the verification is lacking or act on
the pleading although it is not verified, if the attending
circumstances are such that strict compliance with the rules
may be dispensed with inorder that the ends of justice may
thereby be served.76 (Citations omitted)
Shipside Incorporated v. Court of Appeals77 cited the discussion
in Uy and differentiated its effect from non-compliance with the
requirement of certification against forum shopping:
On the other hand, the lack of certification against forum
shopping is generally not curable by the submission thereof
after the filing of the petition. Section 5, Rule 45 of the 1997
Rules of Civil Procedure provides that the failure of the
petitioner tosubmit the required documents that should
accompany the petition, including the certification against
forum shopping, shall be sufficient ground for the dismissal
thereof. The same rule applies to certifications against forum

shopping signed by a person on behalf of a corporation which

are unaccompanied by proof that said signatory is authorized to
file a petition on behalf of the corporation.78 (Emphasis
supplied) Effects of substantial compliance with the requirement
of verification and certification against forum shopping

fatally defective. The court may order its submission or

correction or act on the pleading if the attending
circumstances are such that strict compliance with the
Rule may be dispensed with in order that the ends of
justice may be served thereby.

Although the general rule is that failure to attach a verification

and certification against forum shopping isa ground for
dismissal, there are cases where this court allowed substantial
compliance.

3) Verification is deemed substantially complied with

when one who has ample knowledge to swear to the
truth of the allegations in the complaint or petition
signs the verification, and when matters alleged in the
petition have been made in good faith or are true and
correct.

In Loyola v. Court of Appeals,79 petitioner Alan Loyola submitted

the required certification one day after filing his electoral
protest.80 This court considered the subsequent filing as
substantial compliance since the purpose of filing the
certification is to curtail forum shopping.81
In LDP Marketing, Inc. v. Monter,82 Ma. Lourdes Dela Pea signed
the verification and certification against forum shopping but
failed to attach the board resolution indicating her authority to
sign.83 In a motion for reconsideration, LDP Marketing attached
the secretarys certificate quoting the board resolution that
authorized Dela Pea.84 Citing Shipside, this court deemed the
belated submission as substantial compliance since LDP
Marketing complied with the requirement; what it failed to do
was to attach proof of Dela Peas authority to sign.85 Havtor
Management Phils., Inc. v. National Labor Relations
Commission86 and General Milling Corporation v. National Labor
Relations Commission87 involved petitions that were dismissed
for failure to attach any document showing that the signatory
on the verification and certification against forum-shopping was
authorized.88 In both cases, the secretarys certificate was
attached to the motion for reconsideration. 89 This court
considered the subsequent submission of proof indicating
authority to sign as substantial compliance.90 Altres v.
Empleo91 summarized the rules on verification and certification
against forum shopping in this manner:
For the guidance of the bench and bar, the Court restates in
capsule form the jurisprudential pronouncements . . . respecting
non-compliance with the requirement on, or submission of
defective, verification and certification against forum shopping:
1) A distinction must be made between noncompliance with the requirement on or submission of
defective verification, and noncompliance with the
requirement on or submission of defective certification
against forum shopping.
2) As to verification, non-compliance therewith or a
defect therein does not necessarily render the pleading

4) As to certification against forum shopping, noncompliance therewith or a defect therein, unlike in

verification, is generally not curable by its subsequent
submission or correction thereof, unless there is a need
to relax the Rule on the ground of "substantial
compliance" or presence of "special circumstances or
compelling reasons."
5) The certification against forum shopping must be
signed by all the plaintiffs or petitioners in a case;
otherwise, those who did not sign will be dropped as
parties to the case. Under reasonable or justifiable
circumstances, however, as when all the plaintiffs or
petitioners share a common interest and invoke a
common cause of action or defense, the signature of
only one of them inthe certification against forum
shopping substantially complies with the Rule.
6) Finally, the certification against forum shopping
must be executed by the party-pleader, not by his
counsel. If, however, for reasonable or justifiable
reasons, the party-pleader is unable to sign, he must
execute a Special Power of Attorney designating his
counsel of record to sign on his behalf.92
There was substantial compliance
by Fuji Television Network, Inc.
Being a corporation, Fuji exercises its power to sue and be sued
through its board of directors or duly authorized officers and
agents. Thus, the physical act of signing the verification and
certification against forum shopping can only be done by
natural persons duly authorized either by the corporate by-laws
or a board resolution.93
In its petition for review on certiorari, Fuji attached Hideaki
Otas secretarys certificate,94 authorizing Shuji Yano and Jin Eto

95

to represent and sign for and on behalf of Fuji. 95 The secretarys

certificate was duly authenticated96by Sulpicio Confiado,
Consul-General of the Philippines in Japan. Likewise attached to
the petition is the special power of attorney executed by Shuji
Yano, authorizing Corazon to sign on his behalf.97 The
verification and certification against forum shopping was signed
by Corazon.98
Arlene filed the manifestation dated February 27, 2013, arguing
that the petition for review should be dismissed because
Corazon was not duly authorized to sign the verification and
certification against forum shopping.
Fuji filed a comment on Arlenes manifestation, stating that
Corazon was properly authorized to sign. On the basis of the
secretarys certificate, Shuji Yano was empowered to delegate
his authority.
Quoting the board resolution dated May 13, 2010, the
secretary's certificate states:
(a) The Corporation shall file a Petition for Certiorari
with the Court of Appeals, against Philippines National
Labor Relations Commission ("NLRC") and Arlene S.
Espiritu, pertaining to NLRC-NCR Case No. LAC 00002697-09, RAB No. 05-06811-00 and entitled "Arlene
S. Espiritu v. Fuji Television Network, Inc./Yoshiki Aoki",
and participate in any other subsequent proceeding
that may necessarily arise therefrom, including but not
limited to the filing of appeals in the appropriate
venue;
(b) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they
are hereby authorized, to verify and execute the
certification against nonforum shopping which may be
necessary or required to be attached to any pleading
to [sic] submitted to the Court of Appeals; and the
authority to so verify and certify for the Corporation in
favor of the said persons shall subsist and remain
effective until the termination of the said case;
....
(d) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they
are hereby authorized, to represent and appear on
behalf the [sic] Corporation in all stages of the [sic]
this case and in any other proceeding that may
necessarily arise thereform [sic], and to act in the
Corporations name, place and stead to determine,

propose, agree, decide, do, and perform any and all of

the following:
1. The possibility of amicable settlement or of
submission to alternative mode of dispute
resolution;
2. The simplification of the issue;
3. The necessity or desirability of
amendments to the pleadings;
4. The possibility of obtaining stipulation or
admission of facts and documents; and
5. Such other matters as may aid in the
prompt disposition of the action.99 (Emphasis
in the original; Italics omitted)
Shuji Yano executed a special power of attorney appointing Ms.
Ma. Corazon E. Acerden and Mr. Moises A. Rollera as his
attorneys-in-fact.100 The special power of attorney states:
That I, SHUJI YANO, of legal age, Japanese national, with office
address at 2-4-8 Daiba, Minato-Ku, Tokyo, 137-8088 Japan, and
being the representative of Fuji TV, INc., [sic] (evidenced by the
attached Secretarys Certificate) one of the respondents in
NLRC-NCR Case No. 05-06811-00 entitled "Arlene S. Espiritu v.
Fuji Television Network, Inc./Yoshiki Aoki", and subsequently
docketed before the Court of Appeals asC.A. G.R. S.P. No.
114867 (Consolidated with SP No. 114889) do hereby make,
constitute and appoint Ms. Ma. Corazon E. Acerden and Mr.
Moises A. Rolleraas my true and lawful attorneys-infact for me
and my name, place and stead to act and represent me in the
above-mentioned case, with special power to make admission/s
and stipulations and/or to make and submit as well as to accept
and approve compromise proposals upon such terms and
conditions and under such covenants as my attorney-in-fact
may deem fit, and to engage the services of Villa Judan and
Cruz Law Officesas the legal counsel to represent the Company
in the Supreme Court;
The said Attorneys-in-Fact are hereby further authorized to
make, sign, execute and deliver such papers ordocuments as
may be necessary in furtherance of the power thus granted,
particularly to sign and execute the verification and certification
of non-forum shopping needed to be filed.101 (Emphasis in the
original)

In its comment102 on Arlenes manifestation, Fuji argues that

Shuji Yano could further delegate his authority because the
board resolution empowered him to "act in the Corporations
name, place and stead to determine, propose, agree, decided
[sic], do and perform any and all of the following: . . . such other
matters as may aid in the prompt disposition of the
action."103 To clarify, Fuji attached a verification and certification
against forum shopping, but Arlene questions Corazons
authority to sign. Arlene argues that the secretarys certificate
empowered Shuji Yano to file a petition for certiorari before the
Court of Appeals, and not a petition for review before this court,
and that since Shuji Yanos authority was delegated to him, he
could not further delegate such power. Moreover, Corazon was
representing Shuji Yano in his personal capacity, and not in his
capacity as representative of Fuji.
A review of the board resolution quoted in the secretarys
certificate shows that Fuji shall "file a Petition for Certiorari with
the Court of Appeals"104 and "participate in any other
subsequent proceeding that may necessarily arise therefrom,
including but not limited to the filing of appeals in the
appropriate venue,"105 and that Shuji Yano and Jin Eto are
authorized to represent Fuji "in any other proceeding that may
necessarily arise thereform [sic]." 106As pointed out by Fuji, Shuji
Yano and Jin Eto were also authorized to "act in the
Corporations name, place and stead to determine, propose,
agree, decide, do, and perform anyand all of the following: . . .
5. Such other matters as may aid in the prompt disposition of
the action."107
Considering that the subsequent proceeding that may arise
from the petition for certiorari with the Court of Appeals is the
filing of a petition for review with this court, Fuji substantially
complied with the procedural requirement.
On the issue of whether Shuji Yano validly delegated his
authority to Corazon, Article 1892 of the Civil Code of the
Philippines states:
ART. 1892. The agent may appoint a substitute if the principal
has not prohibited him from doing so; but he shall be
responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without
designating the person, and the person appointed was
notoriously incompetent or insolvent. All acts of the
substitute appointed against the prohibition of the
principal shall be void.

96

The secretarys certificate does not state that Shuji Yano is

prohibited from appointing a substitute. In fact, heis empowered
to do acts that will aid in the resolution of this case.
This court has recognized that there are instances when officials
or employees of a corporation can sign the verification and
certification against forum shopping without a board resolution.
In Cagayan Valley Drug Corporation v. CIR,108 it was held that:
In sum, we have held that the following officials or employees of
the company can sign the verification and certification without
need of a board resolution: (1) the Chairperson of the Board of
Directors, (2) the President of a corporation, (3) the General
Manager or Acting General Manager, (4) Personnel Officer, and
(5) an Employment Specialist in a labor case.
While the above cases109 do not provide a complete listing of
authorized signatories to the verification and certification
required by the rules, the determination of the sufficiency of the
authority was done on a case to case basis. The rationale
applied in the foregoing cases is to justify the authority of
corporate officers or representatives of the corporation to sign
the verification or certificate against forum shopping, being in a
position to verify the truthfulness and correctness of the
allegations in the petition.110
Corazons affidavit111 states that she is the "office manager and
resident interpreter of the Manila Bureau of Fuji Television
Network, Inc."112 and that she has "held the position for the last
twenty-three years."113
As the office manager for 23 years,Corazon can be considered
as having knowledge of all matters in Fujis Manila Bureau Office
and is in a position to verify "the truthfulness and the
correctness of the allegations in the Petition." 114
Thus, Fuji substantially complied with the requirements of
verification and certification against forum shopping.
Before resolving the substantive issues in this case, this court
will discuss the procedural parameters of a Rule 45 petition for
review in labor cases.
II

Commission. It merely states that "[t]he decision of the

Commission shall be final and executory after ten (10) calendar
days from receipt thereof by the parties." Being final, it is no
longer appealable. However, the finality of the National Labor
Relations Commissions decisions does not mean that there is
no more recourse for the parties.
In St. Martin Funeral Home v. National Labor Relations
Commission,116 this court cited several cases117 and rejected the
notion that this court had no jurisdiction to review decisions of
the National Labor Relations Commission. It stated that this
court had the power to review the acts of the National Labor
Relations Commission to see if it kept within its jurisdiction in
deciding cases and alsoas a form of check and balance. 118This
court then clarified that judicial review of National Labor
Relations Commission decisions shall be by way of a petition for
certiorari under Rule 65. Citing the doctrine of hierarchy of
courts, it further ruled that such petitions shall be filed before
the Court of Appeals. From the Court of Appeals, an aggrieved
party may file a petition for review on certiorari under Rule 45.
A petition for certiorari under Rule 65 is an original action where
the issue is limited to grave abuse of discretion. As an original
action, it cannot be considered as a continuation of the
proceedings of the labor tribunals.
On the other hand, a petition for review on certiorari under Rule
45 is a mode of appeal where the issue is limited to questions of
law. In labor cases, a Rule 45 petition is limited toreviewing
whether the Court of Appeals correctly determined the presence
or absence of grave abuse of discretion and deciding other
jurisdictional errors of the National Labor Relations
Commission.119
In Odango v. National Labor Relations Commission, 120 this court
explained that a petition for certiorari is an extraordinary
remedy that is "available only and restrictively in truly
exceptional cases"121 and that its sole office "is the correction of
errors of jurisdiction including commission of grave abuse of
discretion amounting to lack or excess of jurisdiction." 122 A
petition for certiorari does not include a review of findings of
fact since the findings of the National Labor Relations
Commission are accorded finality.123 In cases where the
aggrieved party assails the National Labor Relations
Commissions findings, he or she must be able to show that the
Commission "acted capriciously and whimsically or in total
disregard of evidence material to the controversy." 124

Procedural parameters of petitions for review in labor cases

Article 223 of the Labor Code115 does not provide any mode of
appeal for decisions of the National Labor Relations

When a decision of the Court of Appeals under a Rule 65

petition is brought to this court by way of a petition for review
under Rule 45, only questions of law may be decided upon. As

held in Meralco Industrial v. National Labor Relations

Commission:125
This Court is not a trier of facts. Well-settled is the rule that the
jurisdiction of this Court ina petition for review on certiorari
under Rule 45 of the Revised Rules of Court is limited to
reviewing only errors of law, not of fact, unless the factual
findings complained of are completely devoid of support from
the evidence on record, or the assailed judgment is based on a
gross misapprehension of facts. Besides, factual findings of
quasi-judicial agencies like the NLRC, when affirmed by the
Court of Appeals, are conclusive upon the parties and binding
on this Court.126
Career Philippines v. Serna,127 citing Montoya v. Transmed,128 is
instructive on the parameters of judicial review under Rule 45:
As a rule, only questions of law may be raised in a Rule 45
petition. In one case, we discussed the particular parameters of
a Rule 45 appeal from the CAs Rule 65 decision on a labor case,
as follows:
In a Rule 45 review, we consider the correctness of the assailed
CA decision, in contrast with the review for jurisdictional error
that we undertake under Rule 65. Furthermore, Rule 45 limits us
to the review of questions of law raised against the assailed CA
decision. In ruling for legal correctness, we have to view the CA
decision in the same context that the petition for certiorari it
ruled upon was presented to it; we have to examine the CA
decision from the prism of whether it correctly determined the
presence or absence of grave abuse of discretion in the NLRC
decision before it, not on the basis of whether the NLRC
decision on the merits of the case was correct. In other words,
we have to be keenly aware that the CA undertook a Rule 65
review, not a review on appeal, of the NLRC decision challenged
before it.129 (Emphasis in the original)
Justice Brions dissenting opinion in Abott Laboratories,
PhiIippines v. Aicaraz130 discussed that in petitions for review
under Rule 45, "the Court simply determines whether the legal
correctness of the CAs finding that the NLRC ruling . . . had
basis in fact and in Iaw."131 In this kind of petition, the proper
question to be raised is, "Did the CA correctly determine
whether the NLRC committed grave abuse of discretion in ruling
on the case?"132
Justice Brions dissenting opinion also laid down the following
guidelines:

97

If the NLRC ruling has basis in the evidence and the applicable
law and jurisprudence, then no grave abuse of discretion exists
and the CA should so declare and, accordingly, dismiss the
petition. If grave abuse of discretion exists, then the CA must
grant the petition and nullify the NLRC ruling, entering at the
same time the ruling that isjustified under the evidence and the
governing law, rules and jurisprudence. In our Rule 45 review,
this Court must denythe petition if it finds that the CA correctly
acted.133 (Emphasis in the original)
These parameters shall be used in resolving the substantive
issues in this petition.

In labor cases, the quantum of proof required is substantial

evidence.136 "Substantial evidence" has been defined as "such
amount of relevant evidence which a reasonable mind might
accept as adequate to justify a conclusion." 137
If Arlene was a regular employee, we then determine whether
she was illegally dismissed. In complaints for illegal dismissal,
the burden of proof is on the employee to prove the fact of
dismissal.138 Once the employee establishes the fact of
dismissal, supported by substantial evidence, the burden of
proof shifts tothe employer to show that there was a just or
authorized cause for the dismissal and that due process was
observed.139

III
IV
Determination of employment status; burden of proof
In this case, there is no question thatArlene rendered services
to Fuji. However, Fuji alleges that Arlene was an independent
contractor, while Arlene alleges that she was a regular
employee. To resolve this issue, we ascertain whether an
employer-employee relationship existed between Fuji and
Arlene.
This court has often used the four-fold test to determine the
existence of an employer-employee relationship. Under the fourfold test, the "control test" is the most important. 134 As to how
the elements in the four-fold test are proven, this court has
discussed that:
[t]here is no hard and fast rule designed to establish the
aforesaid elements. Any competent and relevant evidence to
prove the relationship may be admitted. Identification cards,
cash vouchers, social security registration, appointment letters
or employment contracts, payrolls, organization charts, and
personnel lists, serve as evidence of employee status.135
If the facts of this case vis--vis the four-fold test show that an
employer-employee relationship existed, we then determine the
status of Arlenes employment, i.e., whether she was a regular
employee. Relative to this, we shall analyze Arlenes fixed-term
contract and determine whether it supports her argument that
she was a regular employee, or the argument of Fuji that she
was an independent contractor. We shall scrutinize whether the
nature of Arlenes work was necessary and desirable to Fujis
business or whether Fuji only needed the output of her work. If
the circumstances show that Arlenes work was necessary and
desirable to Fuji, then she is presumed to be a regular
employee. The burden of proving that she was an independent
contractor lies with Fuji.

Whether the Court of Appeals correctly affirmed the National

Labor
Relations Commissions finding that Arlene was a regular
employee
Fuji alleges that Arlene was anindependent contractor, citing
Sonza v. ABS-CBN and relying on the following facts: (1) she
was hired because of her skills; (2) her salary was US$1,900.00,
which is higher than the normal rate; (3) she had the power to
bargain with her employer; and (4) her contract was for a fixed
term. According to Fuji, the Court of Appeals erred when it ruled
that Arlene was forcedto sign the non-renewal agreement,
considering that she sent an email with another version of the
non-renewal agreement.140 Further, she is not entitled tomoral
damages and attorneys fees because she acted in bad faith
when she filed a labor complaint against Fuji after receiving
US$18,050.00 representing her salary and other
benefits.141 Arlene argues that she was a regular employee
because Fuji had control and supervision over her work. The
news events that she covered were all based on the instructions
of Fuji.142 She maintains that the successive renewal of her
employment contracts for four (4) years indicates that her work
was necessary and desirable.143 In addition, Fujis payment of
separation pay equivalent to one (1) months pay per year of
service indicates that she was a regular employee.144 To further
support her argument that she was not an independent
contractor, she states that Fuji owns the laptop computer and
mini-camera that she used for work.145 Arlene also argues that
Sonza is not applicable because she was a plain reporter for
Fuji, unlike Jay Sonza who was a news anchor, talk show host,
and who enjoyed a celebrity status.146 On her illness, Arlene
points outthat it was not a ground for her dismissal because her
attending physician certified that she was fit to work.147

Arlene admits that she signed the non-renewal agreement with

quitclaim, not because she agreed to itsterms, but because she
was not in a position to reject the non-renewal agreement.
Further, she badly needed the salary withheld for her
sustenance and medication.148 She posits that her acceptance
of separation pay does not bar filing of a complaint for illegal
dismissal.149
Article 280 of the Labor Code provides that:
Art. 280. Regular and casual employment.The provisions of
written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment
shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except
where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or
where the work or services to be performed is seasonal in
nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered
by the preceding paragraph; Provided, That, any employee who
has rendered at least one year of service, whether such service
is continuous or broken, shall be considered a regular employee
with respect to the activity in which heis employed and his
employment shall continue while such activity exist.
This provision classifies employees into regular, project,
seasonal, and casual. It further classifies regular employees into
two kinds: (1) those "engaged to perform activities which are
usually necessary or desirable in the usual business or trade of
the employer"; and (2) casual employees who have "rendered
at least one year of service, whether such service is continuous
or broken."
Another classification of employees, i.e., employees with fixedterm contracts, was recognized in Brent School, Inc. v.
Zamora150 where this court discussed that:
Logically, the decisive determinant in the term employment
should not be the activities that the employee is called upon to
perform, but the day certain agreed upon by the parties for the
commencement and termination of their employment
relationship, a day certainbeing understood to be "that which
must necessarily come, although it may not be known
when."151 (Emphasis in the original)

98

This court further discussed that there are employment

contracts where "a fixed term is an essential and natural
appurtenance"152 such as overseas employment contracts and
officers in educational institutions.153
Distinctions among fixed-term
employees, independent contractors,
and regular employees
GMA Network, Inc. v. Pabriga154 expounded the doctrine on fixed
term contracts laid down in Brentin the following manner:
Cognizant of the possibility of abuse in the utilization of fixed
term employment contracts, we emphasized in Brentthat 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 as contrary to public
policy or morals. We thus laid down indications or criteria under
which "term employment" cannot be said to be in
circumvention of the law on security of tenure, namely:
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: whena
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 Brentare satisfied, this
court will recognize the validity of the fixed-term contract.
In Labayog v. M.Y. San Biscuits, Inc.,156 this court upheld the
fixedterm employment of petitioners because from the time
they were hired, they were informed that their engagement was
for a specific period. This court stated that:

[s]imply put, petitioners were notregular employees. While their

employment as mixers, packers and machine operators was
necessary and desirable in the usual business ofrespondent
company, they were employed temporarily only, during periods
when there was heightened demand for production.
Consequently, there could have been no illegal dismissal when
their services were terminated on expiration of their contracts.
There was even no need for notice of termination because they
knew exactly when their contracts would end. Contracts of
employment for a fixed period terminate on their own at the
end of such period.
Contracts of employment for a fixed period are not unlawful.
What is objectionable is the practice of some scrupulous
employers who try to circumvent the law protecting workers
from the capricious termination of employment.157 (Citation
omitted)
Caparoso v. Court of Appeals158 upheld the validity of the fixedterm contract of employment. Caparoso and Quindipan were
hired as delivery men for three (3) months. At the end of the
third month, they were hired on a monthly basis. In total, they
were hired for five (5) months. They filed a complaint for illegal
dismissal.159 This court ruled that there was no evidence
indicating that they were pressured into signing the fixed-term
contracts. There was likewise no proof that their employer was
engaged in hiring workers for five (5) months onlyto prevent
regularization. In the absence of these facts, the fixed-term
contracts were upheld as valid.160 On the other hand, an
independent contractor is defined as:
. . . one who carries on a distinct and independent business and
undertakes 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 the control and direction of
the principal in all matters connected with the performance of
the work except as to the results thereof.161
In view of the "distinct and independent business" of
independent contractors, no employer-employee relationship
exists between independent contractors and their principals.
Independent contractors are recognized under Article 106 of the
Labor Code:
Art. 106. Contractor or subcontractor. Whenever an employer
enters into a contract with another person for the performance
of the formers work, the employees of the contractor and of the
latters subcontractor, if any, shall be paid in accordance with
the provisions of this Code.

The Secretary of Labor and Employment may, by appropriate

regulations, restrict or prohibit the contracting-out of labor to
protect the rights of workers established under this Code. In so
prohibiting or restricting, he may make appropriate distinctions
between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine
who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying
workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed
by such person are performing activities which are directly
related to the principal business of such employer. In such
cases, the person or intermediary shall be considered merely as
an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latterwere
directly employed by him.
In Department Order No. 18-A, Seriesof 2011, of the
Department of Labor and Employment, a contractor is defined
as having:
Section 3. . . .
....
(c) . . . an arrangement whereby a principal agrees to put out or
farm out with a contractor the performance or completion of a
specific job, work or service within a definite or predetermined
period, regardless of whether such job, work or service is to be
performed or completed within oroutside the premises of the
principal.
This department order also states that there is a trilateral
relationship in legitimate job contracting and subcontracting
arrangements among the principal, contractor, and employees
of the contractor. There is no employer-employee relationship
between the contractor and principal who engages the
contractors services, but there is an employer-employee
relationship between the contractor and workers hired to
accomplish the work for the principal.162
Jurisprudence has recognized another kind of independent
contractor: individuals with unique skills and talents that set
them apart from ordinary employees. There is no trilateral
relationship in this case because the independent contractor

....

99

himself or herself performs the work for the principal. In other

words, the relationship is bilateral.
In Orozco v. Court of Appeals,163 Wilhelmina Orozco was a
columnist for the Philippine Daily Inquirer. This court ruled that
she was an independent contractor because of her "talent, skill,
experience, and her unique viewpoint as a feminist
advocate."164 In addition, the Philippine Daily Inquirer did not
have the power of control over Orozco, and she worked at her
own pleasure.165
Semblante v. Court of Appeals166 involved a masiador167 and a
sentenciador.168 This court ruled that "petitioners performed
their functions as masiadorand sentenciador free from the
direction and control of respondents"169 and that the masiador
and sentenciador "relied mainly on their expertise that is
characteristic of the cockfight gambling."170 Hence, no
employer-employee relationship existed.
Bernarte v. Philippine Basketball Association171 involved a
basketball referee. This court ruled that "a referee is an
independent contractor, whose special skills and independent
judgment are required specifically for such position and cannot
possibly be controlled by the hiring party." 172

On the other hand, contracts of employment are different and

have a higher level of regulation because they are impressed
with public interest. Article XIII, Section 3 of the 1987
Constitution provides full protection to labor:
ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS
....
LABOR
Section 3. The State shall afford full protection to labor, local
and overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization,
collective bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with law.
They shall be entitled to security of tenure, humane conditions
of work, and a living wage. They shall also participate in policy
and decision-making processes affecting their rights and
benefits as may be provided by law.

In these cases, the workers were found to be independent

contractors because of their unique skills and talents and the
lack of control over the means and methods in the performance
of their work.

The State shall promote the principle of shared responsibility

between workers and employers and the preferential use of
voluntary modes in settling disputes, including conciliation, and
shall enforce their mutual compliance therewith to foster
industrial peace.

In other words, there are different kinds of independent

contractors: those engaged in legitimate job contracting and
those who have unique skills and talents that set them apart
from ordinary employees.

The State shall regulate the relations between workers and

employers, recognizing the right of labor to its just share in the
fruits of production and the right of enterprises to reasonable
returns on investments, and to expansion and growth.

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.173

Apart from the constitutional guarantee of protection to labor,

Article 1700 of the Civil Code states:

A contract is defined as "a meeting of minds between two

persons whereby one binds himself, with respect to the other,
to give something or to render some service."174 Parties are free
to stipulate on terms and conditions in contracts as long as
these "are not contrary to law, morals, good customs, public
order, or public policy."175 This presupposes that the parties to a
contract are on equal footing. Theycan bargain on terms and
conditions until they are able to reach an agreement.

ART. 1700. 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.176 This presupposes that the labor force is

weak. However, the level of protection to labor should vary from
case to case; otherwise, the state might appear to be too
paternalistic in affording protection to labor. As stated in GMA
Network, Inc. v. Pabriga, the ruling in Brent applies in cases
where it appears that the employer and employee are on equal
footing.177 This recognizes the fact that not all workers are weak.
To reiterate the discussion in GMA Network v. Pabriga:
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. 178
The level of protection to labor mustbe determined on the basis
of the nature of the work, qualifications of the employee, and
other relevant circumstances.
For example, a prospective employee with a bachelors degree
cannot be said to be on equal footing witha grocery bagger with
a high school diploma. Employees who qualify for jobs requiring
special qualifications such as "[having] a Masters degree" or
"[having] passed the licensure exam" are different from
employees who qualify for jobs that require "[being a] high
school graduate; withpleasing personality." In these situations,
it is clear that those with special qualifications can bargain with
the employer on equal footing. Thus, the level of protection
afforded to these employees should be different.
Fujis argument that Arlene was an independent contractor
under a fixed-term contract is contradictory. Employees under
fixed-term contracts cannot be independent contractors
because in fixed-term contracts, an employer-employee
relationship exists. The test in this kind of contract is not the
necessity and desirability of the employees activities, "but the
day certain agreed upon by the parties for the commencement
and termination of the employment relationship."179 For regular
employees, the necessity and desirability of their work in the
usual course of the employers business are the determining
factors. On the other hand, independent contractors do not
have employer-employee relationships with their principals.
Hence, before the status of employment can be determined, the
existence of an employer-employee relationship must be
established.
The four-fold test180 can be used in determining whether an
employeremployee relationship exists. The elements of the fourfold test are the following: (1) the selection and engagement of
the employee; (2) the payment of wages; (3) the power of

100

dismissal; and (4) the power of control, which is the most

important element.181
The "power of control" was explained by this court in Corporal,
Sr. v. National Labor Relations Commission:182
The power to control refers to the existence of the power and
not necessarily to the actual exercise thereof, nor is it essential
for the employer to actually supervise the performance of
duties of the employee. It is enough that the employer has the
right to wield that power.183 (Citation omitted)
Orozco v. Court of Appeals further elucidated the meaning of
"power of control" and stated the following:
Logically, the line should be drawn between rules that merely
serve as guidelines towards the achievement of the mutually
desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of
such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second,
which address both the result and the means used to achieve it.
. . .184 (Citation omitted)
In Locsin, et al. v. Philippine Long Distance Telephone
Company,185 the "power of control" was defined as "[the] right
to control not only the end to be achieved but also the means to
be used in reaching such end."186
Here, the Court of Appeals applied Sonza v. ABS-CBN and
Dumpit Murillo v. Court of Appeals187 in determining whether
Arlene was an independent contractor or a regular employee.
In deciding Sonza and Dumpit-Murillo, this court used the fourfold test. Both cases involved newscasters and anchors.
However, Sonza was held to be an independent contractor,
while Dumpit-Murillo was held to be a regular employee.
Comparison of the Sonza and
Dumpit-Murillo cases using
the four-fold test
Sonza was engaged by ABS-CBN in view of his "unique skills,
talent and celebrity status not possessed by ordinary
employees."188 His work was for radio and television
programs.189 On the other hand, Dumpit-Murillo was hired by
ABC as a newscaster and co-anchor.190 Sonzas talent fee
amounted to P317,000.00 per month, which this court found to

be a substantial amount that indicatedhe was an independent

contractor rather than a regular employee.191 Meanwhile,
Dumpit-Murillos monthly salary was P28,000.00, a very low
amount compared to what Sonza received.192

On the power to control, Arlene alleged that Fuji gave her

instructions on what to report.202 Even the mode of
transportation in carrying out her functions was controlled by
Fuji. Paragraph 6 of her contract states:

Sonza was unable to prove that ABS-CBN could terminate his

services apart from breach of contract. There was no indication
that he could be terminated based on just or authorized causes
under the Labor Code. In addition, ABS-CBN continued to pay
his talent fee under their agreement, even though his programs
were no longer broadcasted.193 Dumpit-Murillo was found to
have beenillegally dismissed by her employer when they did not
renew her contract on her fourth year with ABC.194

6. During the travel to carry out work, if there is change of place

or change of place of work, the train, bus, or public transport
shall be used for the trip. If the Employee uses the private car
during the work and there is an accident the Employer shall not
be responsible for the damage, which may be caused to the
Employee.203

In Sonza, this court ruled that ABS-CBN did not control how
Sonza delivered his lines, how he appeared on television, or
how he sounded on radio.195 All that Sonza needed was his
talent.196 Further, "ABS-CBN could not terminate or discipline
SONZA even if the means and methods of performance of his
work . . . did not meet ABS-CBNs approval." 197 In DumpitMurillo, the duties and responsibilities enumerated in her
contract was a clear indication that ABC had control over her
work.198
Application of the four-fold test
The Court of Appeals did not err when it relied on the ruling in
Dumpit-Murillo and affirmed the ruling of the National Labor
Relations Commission finding that Arlene was a regular
employee. Arlene was hired by Fuji as a news producer, but
there was no showing that she was hired because of unique
skills that would distinguish her from ordinary employees.
Neither was there any showing that she had a celebrity status.
Her monthly salary amounting to US$1,900.00 appears tobe a
substantial sum, especially if compared to her salary whenshe
was still connected with GMA.199 Indeed, wages may indicate
whether oneis an independent contractor. Wages may also
indicate that an employee is able to bargain with the employer
for better pay. However, wages should not be the conclusive
factor in determining whether one is an employee or an
independent contractor.
Fuji had the power to dismiss Arlene, as provided for in
paragraph 5 of her professional employment contract.200Her
contract also indicated that Fuji had control over her work
because she was required to work for eight (8) hours from
Monday to Friday, although on flexible time.201 Sonza was not
required to work for eight (8) hours, while Dumpit-Murillo had to
be in ABC to do both on-air and off-air tasks.

Thus, the Court of Appeals did not err when it upheld the
findings of the National Labor Relations Commission that Arlene
was not an independent contractor.
Having established that an employer-employee relationship
existed between Fuji and Arlene, the next questions for
resolution are the following: Did the Court of Appeals correctly
affirm the National Labor Relations Commission that Arlene had
become a regular employee? Was the nature of Arlenes work
necessary and desirable for Fujis usual course of business?
Arlene was a regular employee
with a fixed-term contract
The test for determining regular employment is whether there is
a reasonable connection between the employees activities and
the usual business of the employer. Article 280 provides that
the nature of work must be "necessary or desirable in the usual
business or trade of the employer" as the test for determining
regular employment. As stated in ABS-CBN Broadcasting
Corporation v. Nazareno:204
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 incarrying on the particular business or trade. 205
However, there may be a situation where an employees work is
necessary but is not always desirable inthe usual course of

101

business of the employer. In this situation, there is no regular

employment.
In San Miguel Corporation v. National Labor Relations
Commission,206 Francisco de Guzman was hired to repair
furnaces at San Miguel Corporations Manila glass plant. He had
a separate contract for every furnace that he repaired. He filed
a complaint for illegal dismissal three (3) years after the end of
his last contract.207 In ruling that de Guzman did not attain the
status of a regular employee, this court explained:
Note that the plant where private respondent was employed for
only seven months is engaged in the manufacture of glass, an
integral component of the packaging and manufacturing
business of petitioner. The process of manufacturing glass
requires a furnace, which has a limited operating life. Petitioner
resorted to hiring project or fixed term employees in having said
furnaces repaired since said activity is not regularly performed.
Said furnaces are to be repaired or overhauled only in case of
need and after being used continuously for a varying period of
five (5) to ten (10) years. In 1990, one of the furnaces of
petitioner required repair and upgrading. This was an
undertaking distinct and separate from petitioner's business of
manufacturing glass. For this purpose, petitioner must hire
workers to undertake the said repair and upgrading. . . .
....
Clearly, private respondent was hired for a specific project that
was not within the regular business of the corporation. For
petitioner is not engaged in the business of repairing furnaces.
Although the activity was necessary to enable petitioner to
continue manufacturing glass, the necessity therefor arose only
when a particular furnace reached the end of its life or
operating cycle. Or, as in the second undertaking, when a
particular furnace required an emergency repair. In other words,
the undertakings where private respondent was hired primarily
as helper/bricklayer have specified goals and purposes which
are fulfilled once the designated work was completed.
Moreover, such undertakings were also identifiably separate
and distinct from the usual, ordinary or regular business
operations of petitioner, which is glass manufacturing. These
undertakings, the duration and scope of which had been
determined and made known to private respondent at the time
of his employment, clearly indicated the nature of his
employment as a project employee.208
209

Fuji is engaged in the business of broadcasting, including

news programming.210 It is based in Japan211 and has overseas
offices to cover international news.212

Based on the record, Fujis Manila Bureau Office is a small

unit213 and has a few employees.214 As such, Arlene had to do all
activities related to news gathering. Although Fuji insists that
Arlene was a stringer, it alleges that her designation was "News
Talent/Reporter/Producer."215
A news producer "plans and supervises newscast . . . [and]
work[s] with reporters in the field planning and gathering
information. . . ."216 Arlenes tasks included "[m]onitoring and
[g]etting [n]ews [s]tories, [r]eporting interviewing subjects in
front of a video camera,"217 "the timely submission of news and
current events reports pertaining to the Philippines[,] and
traveling [sic] to [Fujis] regional office in Thailand." 218 She also
had to report for work in Fujis office in Manila from Mondays to
Fridays, eight (8) hours per day.219 She had no equipment and
had to use the facilities of Fuji to accomplish her tasks.
The Court of Appeals affirmed the finding of the National Labor
Relations Commission that the successive renewals of Arlenes
contract indicated the necessity and desirability of her work in
the usual course of Fujis business. Because of this, Arlene had
become a regular employee with the right to security of
tenure.220 The Court of Appeals ruled that:
Here, Espiritu was engaged by Fuji as a stinger [sic] or news
producer for its Manila Bureau. She was hired for the primary
purpose of news gathering and reporting to the television
networks headquarters. Espiritu was not contracted on account
of any peculiar ability or special talent and skill that she may
possess which the network desires to make use of.
Parenthetically, ifit were true that Espiritu is an independent
contractor, as claimed by Fuji, the factthat everything that she
uses to perform her job is owned by the company including the
laptop computer and mini camera discounts the idea of job
contracting.221
Moreover, the Court of Appeals explained that Fujis argument
that no employer-employee relationship existed in view of the
fixed-term contract does not persuade because fixed-term
contracts of employment are strictly construed. 222 Further, the
pieces of equipment Arlene used were all owned by Fuji,
showing that she was a regular employee and not an
independent contractor.223
The Court of Appeals likewise cited Dumpit-Murillo, which
involved fixed-term contracts that were successively renewed
for four (4) years.224 This court held that "[t]his repeated
engagement under contract of hire is indicative of the necessity
and desirability of the petitioners work in private respondent
ABCs business."225

With regard to Fujis argument that Arlenes contract was for a

fixed term, the Court of Appeals cited Philips Semiconductors,
Inc. v. Fadriquela226 and held that where an employees contract
"had been continuously extended or renewed to the same
position, with the same duties and remained in the employ
without any interruption,"227 then such employee is a regular
employee. The continuous renewal is a scheme to prevent
regularization. On this basis, the Court of Appeals ruled in favor
of Arlene.
As stated in Price, et al. v. Innodata Corp., et al.: 228
The employment status of a person is defined and prescribed by
law and not by what the parties say it should be. Equally
important to consider is that a contract of employment is
impressed with public interest such that labor contracts must
yield to the common good. Thus, 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 and regulations by simply
contracting with each other.229 (Citations omitted)
Arlenes contract indicating a fixed term did not automatically
mean that she could never be a regular employee. This is
precisely what Article 280 seeks to avoid. The ruling in Brent
remains as the exception rather than the general rule.
Further, an employee can be a regular employee with a fixedterm contract. The law does not preclude the possibility that a
regular employee may opt to have a fixed-term contract for
valid reasons. This was recognized in Brent: For as long as it
was the employee who requested, or bargained, that the
contract have a "definite date of termination," or that the fixedterm contract be freely entered into by the employer and the
employee, then the validity of the fixed-term contract will be
upheld.230
V
Whether the Court of Appeals correctly affirmed
the National Labor Relations Commissions finding of illegal
dismissal
Fuji argues that the Court of Appeals erred when it held that
Arlene was illegally dismissed, in view of the non-renewal
contract voluntarily executed by the parties. Fuji also argues
that Arlenes contract merely expired; hence, she was not
illegally dismissed.231

102

Arlene alleges that she had no choice but to sign the nonrenewal contract because Fuji withheldher salary and benefits.
With regard to this issue, the Court of Appeals held:
We cannot subscribe to Fujis assertion that Espiritus contract
merely expired and that she voluntarily agreed not to renew the
same. Even a cursory perusal of the subject Non-Renewal
Contract readily shows that the same was signed by Espiritu
under protest. What is apparent is that the Non-Renewal
Contract was crafted merely as a subterfuge to secure Fujis
position that it was Espiritus choice not to renew her
contract.232
As a regular employee, Arlene was entitled to security of tenure
and could be dismissed only for just or authorized causes and
after the observance of due process.
The right to security of tenureis guaranteed under Article XIII,
Section 3 of the 1987 Constitution: ARTICLE XIII. SOCIAL JUSTICE
AND HUMAN RIGHTS
....
LABOR
....
It shall guarantee the rights of all workers to self-organization,
collective bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with law.
They shall be entitled to security of tenure, humane conditions
of work, and a living wage. They shall also participate in policy
and decision-making processes affecting their rights and
benefits as may be provided by law.
Article 279 of the Labor Code also provides for the right to
security of tenure and states the following:
Art. 279. Security of tenure.In cases of regular employment, the
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 dismissed from work shall be entitled
to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances,
and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from
him up to the time of his actual reinstatement.

Thus, on the right to security of tenure, no employee shall be

dismissed, unless there are just orauthorized causes and only
after compliance with procedural and substantive due process is
conducted.
Even probationary employees are entitled to the right to
security of tenure. This was explained in Philippine Daily
Inquirer, Inc. v. Magtibay, Jr.:233
Within the limited legal six-month probationary period,
probationary employees are still entitled to security of tenure. It
is expressly provided in the afore-quoted Article 281 that a
probationary employee may be terminated only on two
grounds: (a) for just cause, or (b) when he fails to qualify as a
regular employee in accordance with reasonable standards
made known by the employer to the employee at the time of
his engagement.234 (Citation omitted)
The expiration of Arlenes contract does not negate the finding
of illegal dismissal by Fuji. The manner by which Fuji informed
Arlene that her contract would no longer be renewed is
tantamount to constructive dismissal. To make matters worse,
Arlene was asked to sign a letter of resignation prepared by
Fuji.235 The existence of a fixed-term contract should not mean
that there can be no illegal dismissal. Due process must still be
observed in the pre-termination of fixed-term contracts of
employment.
In addition, the Court of Appeals and the National Labor
Relations Commission found that Arlene was dismissed because
of her health condition. In the non-renewal agreement executed
by Fuji and Arlene, it is stated that:
WHEREAS, the SECOND PARTY is undergoing chemotherapy
which prevents her from continuing to effectively perform her
functions under the said Contract such as the timely submission
of news and current events reports pertaining to the Philippines
and travelling [sic] to the FIRST PARTYs regional office in
Thailand.236 (Emphasis supplied)
Disease as a ground for termination is recognized under Article
284 of the Labor Code:
Art. 284. Disease as ground for termination. An employer may
terminate the services of an employee who has been found to
be suffering from any disease and whose continued
employment is prohibited by law or is prejudicial to his health as
well as to the health of his co-employees: Provided, That he is
paid separation pay equivalent to at least one (1) month salary
or to one-half (1/2) month salary for every year of service,

whichever is greater, a fraction of at least six (6) months being

considered as one (1) whole year.
Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing
the Labor Code provides:
Sec. 8. Disease as a ground for dismissal. Where the employee
suffers from a disease and his continued employment is
prohibited by law or prejudicial to his healthor to the health of
his coemployees, the employer shall not terminate his
employment unless there is a certification by a competent
public health authority that the disease is of such nature or at
such a stage that it cannot be cured within a period of six (6)
months even with proper medical treatment. If the disease or
ailment can be cured within the period, the employer shall not
terminate the employee but shall ask the employee to take a
leave. The employer shall reinstate such employee to his former
position immediately upon the restoration of his normal health.
For dismissal under Article 284 to bevalid, two requirements
must be complied with: (1) the employees disease cannot be
cured within six (6) 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 (6)
months.237 The burden of proving compliance with these
requisites is on the employer.238 Noncompliance leads to the
conclusion that the dismissal was illegal.239
There is no evidence showing that Arlene was 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. It did not ask her how her
condition would affect her work. Neither did it suggest for her to
take a leave, even though she was entitled to sick leaves.
Worse, it did not present any certificate from a competent
public health authority. What Fuji did was to inform her thather
contract would no longer be renewed, and when she did not
agree, her salary was withheld. Thus, the Court of Appeals
correctly upheld the finding of the National Labor Relations
Commission that for failure of Fuji to comply with due process,
Arlene was illegally dismissed.240
VI
Whether the Court of Appeals properly modified
the National Labor Relations Commissions decision
when it awarded reinstatement, damages, and attorneys fees

103

The National Labor Relations Commission awarded separation

pay in lieu of reinstatement, on the ground that the filing of the
complaint for illegal dismissal may have seriously strained
relations between the parties. Backwages were also awarded, to
be computed from date of dismissal until the finality of the
National Labor Relations Commissions decision. However, only
backwages were included in the dispositive portion because the
National Labor Relations Commission recognized that Arlene
had received separation pay in the amount of US$7,600.00. The
Court of Appeals affirmed the National Labor Relations
Commissions decision but modified it by awarding moral and
exemplary damages and attorneys fees, and all other benefits
Arlene was entitled to under her contract with Fuji. The Court of
Appeals also ordered reinstatement, reasoning that the grounds
when separation pay was awarded in lieu of reinstatement were
not proven.241
Article 279 of the Labor Code provides:
Art. 279. Security of tenure. In cases of regular employment,
the employer shall not terminate the services of an employee
except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be entitled
to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances,
and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from
him up to the time of his actual reinstatement. (Emphasis
supplied)
The Court of Appeals modification of the National Labor
Relations Commissions decision was proper because the law
itself provides that illegally dismissed employees are entitled to
reinstatement, backwages including allowances, and all other
benefits.
On reinstatement, the National Labor Relations Commission
ordered payment of separation pay in lieu of reinstatement,
reasoning "that the filing of the instant suit may have seriously
abraded the relationship of the parties so as to render
reinstatement impractical." 242 The Court of Appeals reversed
this and ordered reinstatement on the ground that separation
pay in lieu of reinstatement is allowed only in several instances
such as (1) when the employer has ceased operations; (2) when
the employees position is no longer available; (3) strained
relations; and (4) a substantial period has lapsed from date of
filing to date of finality.243
On this matter, Quijano v. Mercury Drug Corp.244 is instructive:

Well-entrenched is the rule that an illegally dismissed employee

is entitled to reinstatement as a matter of right. . . .
To protect labors security of tenure, we emphasize that the
doctrine of "strained relations" should be strictly applied so as
not to deprive an illegally dismissed employee of his right to
reinstatement. Every labor dispute almost always results in
"strained relations" and the phrase cannot be given an
overarching interpretation, otherwise, an unjustly dismissed
employee can never be reinstated.245 (Citations omitted)
The Court of Appeals reasoned that strained relations are a
question of fact that must be supported by evidence. 246 No
evidence was presented by Fuji to prove that reinstatement was
no longer feasible. Fuji did not allege that it ceased operations
or that Arlenes position was no longer available. Nothing in the
records shows that Arlenes reinstatement would cause an
atmosphere of antagonism in the workplace. Arlene filed her
complaint in 2009. Five (5) years are not yet a substantial
period247 to bar reinstatement.
On the award of damages, Fuji argues that Arlene is notentitled
to the award of damages and attorneys fees because the nonrenewal agreement contained a quitclaim, which Arlene signed.
Quitclaims in labor cases do not bar illegally dismissed
employees from filing labor complaints and money claim. As
explained by Arlene, she signed the non-renewal agreement out
of necessity. In Land and Housing Development Corporation v.
Esquillo,248this court explained: We have heretofore explained
that the reason why quitclaims are commonly frowned upon as
contrary to public policy, and why they are held to be
ineffective to bar claims for the full measure of the workers
legal rights, is the fact that the employer and the employee
obviously do not stand on the same footing. The employer
drove the employee to the wall. The latter must have to get
holdof money. Because, out of a job, he had to face the harsh
necessities of life. He thus found himself in no position to resist
money proffered. His, then, is a case of adherence, not of
choice.249
With regard to the Court of Appeals award of moral and
exemplary damages and attorneys fees, this court has
recognized in several cases that moral damages are awarded
"when the dismissal is attended by bad faith or fraud or
constitutes an act oppressive to labor, or is done in a manner
contrary to good morals, good customs or public policy." 250 On
the other hand, exemplary damages may be awarded when the
dismissal was effected "in a wanton, oppressive or malevolent
manner."251

The Court of Appeals and National Labor Relations Commission

found that after Arlene had informed Fuji of her cancer, she was
informed that there would be problems in renewing her contract
on account of her condition. This information caused Arlene
mental anguish, serious anxiety, and wounded feelings that can
be gleaned from the tenor of her email dated March 11, 2009. A
portion of her email reads:
I WAS SO SURPRISED . . . that at a time when I am at my lowest,
being sick and very weak, you suddenly came to deliver to me
the NEWS that you will no longer renew my contract.1awp+
+i1 I knew this will come but I never thought that you will be so
heartless and insensitive to deliver that news just a month
after I informed you that I am sick. I was asking for patience and
understanding and your response was not to RENEW my
contract.252
Apart from Arlenes illegal dismissal, the manner of her
dismissal was effected in an oppressive approach withher salary
and other benefits being withheld until May 5, 2009, when she
had no other choice but to sign the non-renewal contract. Thus,
there was legal basis for the Court of Appeals to modify the
National Labor Relations Commissions decision.
However, Arlene receivedher salary for May
2009.253 Considering that the date of her illegal dismissal was
May 5, 2009,254 this amount may be subtracted from the total
monetary award. With regard to the award of attorneys fees,
Article 111 of the Labor Code states that "[i]n cases of unlawful
withholding of wages, the culpable party may be assessed
attorneys fees equivalent to ten percent of the amount of
wages recovered." Likewise, this court has recognized that "in
actions for recovery of wages or where an employee was forced
to litigate and, thus, incur expenses to protect his rights and
interest, the award of attorneys fees is legallyand morally
justifiable."255 Due to her illegal dismissal, Arlene was forced to
litigate.
In the dispositive portion of its decision, the Court of Appeals
awarded legal interest at the rate of 12% per annum.256 In view
of this courts ruling in Nacar v. Gallery Frames, 257 the legal
interest shall be reducd to a rate of 6% per annum from July 1,
2013 until full satisfaction.
WHEREFORE, the petition is DENIED. The assailed Court of
Appeals decision dated June 25, 2012 is AFFIRMED with the
modification that backwages shall be computed from June 2009.
Legal interest shall be computed at the rate of 6% per annum of
the total monetary award from date of finality of this decision
until full satisfaction.

104

SO ORDERED.

retrenchment program of respondent Pepsi-Cola Products

Philippines, Inc. as a valid exercise of management prerogative.
The facts follow.
Respondent Pepsi-Cola Products Philippines, Inc. (PCPPI) is a
domestic corporation engaged in the manufacturing, bottling
and distribution of soft drink products, which operates plants all
over the country, one of which is the Tanauan Plant in Tanauan,
Leyte.
In 1999, PCPPIs Tanauan Plant allegedly incurred business
losses in the total amount of Twenty-Nine Million One Hundred
Sixty-Seven Thousand and Three Hundred Ninety
(P29,167,390.00) Pesos. To avert further losses, PCPPI
implemented a company-wide retrenchment program
denominated as Corporate-wide Rightsizing Program (CRP) from
1999 to 2000, and retrenched forty-seven (47) employees of its
Tanauan Plant on July 31, 1999.

20

On September 24, 1999, twenty-seven (27) of said

employees,5 led by Anecito Molon (Molon, et al.), filed
complaints for illegal dismissal before the NLRC which were
docketed as NLRC RAB Cases Nos. VIII-9-0432-99 to 9-0458-99,
entitled Molon, et al. v. Pepsi-Cola Products, Philippines, Inc.

THIRD DIVISION
G.R. No. 176908, March 25, 2015
PURISIMO M. CABAOBAS, EXUPERIO C. MOLINA,
GILBERTO V. OPINION, VICENTE R. LAURON, RAMON M.
DE PAZ, JR., ZACARIAS E. CARBO, JULITO G.
ABARRACOSO, DOMINGO B. GLORIA, AND FRANCISCO P.
CUMPIO, Petitioners, v. PEPSI-COLA PRODUCTS,
PHILIPPINES, INC., Respondents.
DECISION
PERALTA, J.:
This is a petition for review on certiorari under Rule 45 of the
Rules of Court, assailing the Court of Appeals (CA)
Decision1 dated July 31, 2006, and its Resolution2 dated
February 21, 2007 in CA-G.R. S.P. No. 81712. The assailed
decision denied the petition for certiorari filed by petitioners
Purisimo M. Cabaobas, Exuperio C. Molina, Gilberto V. Opinion,
Vicente R. Lauron, Ramon M. De Paz, Jr., Zacarias E. Carbo, Julito
G. Abarracoso, Domingo B. Gloria and Francisco P. Cumpio,
seeking a partial nullification of the Decision3 dated September
11, 2002 of the National Labor Relations Commission (NLRC) in
NLRC Certified Case No. V-000001-2000.4 The NLRC dismissed
petitioners' complaints for illegal dismissal and declared the

On January 15, 2000, petitioners, who are permanent and

regular employees of the Tanauan Plant, received their
respective letters, informing them of the cessation of their
employment on February 15, 2000, pursuant to PCPPI's CRP.
Petitioners then filed their respective complaints for illegal
dismissal before the National Labor Relations Commission
Regional Arbitration Branch No. VIII in Tacloban City. Said
complaints were docketed as NLRC RAB VIII-03-0246-00 to 030259-00, entitled Kempis, et al. v. Pepsi-Cola Products,
Philippines, Inc.
In their Consolidated Position Paper,6 petitioners alleged that
PCPPI was not facing serious financial losses because after their
termination, it regularized four (4) employees and hired
replacements for the forty-seven (47) previously dismissed
employees. They also alleged that PCPPI's CRP was just
designed to prevent their union, Leyte Pepsi-Cola Employees
Union-Associated Labor Union (LEPCEU-ALU), from becoming
the certified bargaining agent of PCPPI's rank-and-file
employees.
In its Position Paper,7 PCPPI countered that petitioners were
dismissed pursuant to its CRP to save the company from total
bankruptcy and collapse; thus, it sent notices of termination to
them and to the Department of Labor and Employment. In
support of its argument that its CRP is a valid exercise of
management prerogative, PCPPI submitted audited financial
statements showing that it suffered financial reverses in 1998 in

105

the total amount of SEVEN HUNDRED MILLION

(P700,000,000.00) PESOS, TWENTY- SEVEN MILLION
(P27,000,000.00) PESOS of which was allegedly incurred in the
Tanauan Plant in 1999.
On December 15, 2000, Labor Arbiter Vito C. Bose rendered a
Decision8 finding the dismissal of petitioners as illegal, the
dispositive portion of which reads:chanRoblesvirtualLawlibrary
WHEREFORE, premises duly considered, judgment is hereby
rendered finding the dismissal of the ten (10) complainants
herein illegal. Consequently, respondent Pepsi-Cola Products
Phils., Inc. (PCPPI) is ordered to reinstate them to their former
positions without loss of seniority rights and to pay them full
backwages and other benefits reckoned from February 16, 2000
until they are actually reinstated, which as of date amounted to
NINE HUNDRED FORTY-SEVEN THOUSAND FIVE HUNDRED FIFTYEIGHT PESOS AND THIRTY-TWO CENTAVOS (P947,558.32)
inclusive of the 10% attorney's fees.
Other claims are dismissed for lack of merit.
SO ORDERED.9cralawred
cralawlawlibrary
PCPPI appealed from the Decision of the Labor Arbiter to the
Fourth Division of the NLRC of Tacloban City. Meanwhile, the
NLRC consolidated all other cases involving PCPPI and its
dismissed employees.
On September 11, 2002, the NLRC rendered a Consolidated
Decision,10 the dispositive portion of which
states:chanRoblesvirtualLawlibrary
WHEREFORE, judgment is hereby rendered:
(1) DECLARING, in NLRC Certified Case No. V-000001-2000
(NLRC NCR CC No. 000171-99), Pepsi-Cola Products Philippines,
Incorporated, not guilty of union busting/unfair labor practice,
and dismissing LEPCEU-ALU's Notice of Strike dated July 19,
1999;ChanRoblesVirtualawlibrary
(2) DECLARING, in the subsumed NLRC Case No. 7-0301-99,
LEPCEU-ALU's strike on July 23, 1999 ILLEGAL for having been
conducted without legal authority and without observing the 7day strike vote notice requirement as provided in Section 2 and
Section 7 of Rule XXII, Book V of the Omnibus Rules
Implementing Art. 263 (c) and (f) of the Labor Code, but
DENYING PEPSI-COLA's supplemental prayer to declare loss of
employment status of union leaders and some of its members
as identification of officers and members, and the knowing
participation of union officers in the illegal strike, or that of the
officers and members in illegal acts during the strike, have not

been established;ChanRoblesVirtualawlibrary
(3) DISMISSING in the subsumed NLRC Injunction Case No. V000013-99, LEPCEU-ALU's Petition for a Writ of Preliminary
Injunction with Prayer for the Issuance of Temporary Restraining
Order, because Pepsi Cola had already implemented its
Corporate-wide CRP in the exercise of management prerogative.
Moreover, LEPCEU-ALU had adequate remedy in
law;ChanRoblesVirtualawlibrary
(4) DISMISSING, in subsumed case NLRC RAB VIII Cases Nos. 90432-99 to 9-0459-99 (Molon, et al. vs. PCPPI) all the complaints
for Illegal Dismissal except that of Saunder Santiago T.
Remandaban III, for having been validly and finally settled by
the parties, and ORDERING PEPSI COLA Products Phils., Inc. to
reinstate Saunder Santiago T. Remandaban III to his former
position without loss of seniority rights but without
backwages;ChanRoblesVirtualawlibrary
(5) Nullifying, in NLRC Consolidated Case No. V-00007101 (RAB VIII cases nos. 3-0246-2000 to 3-0258-2000;
Kempis, et al. vs. PCPPI), the Executive Labor Arbiter's
Decisions dated December 15, 2000, and DISMISSING the
complaints for illegal dismissal, and in its stead
DECLARING the retrenchment program of Pepsi Cola
Products Phils., Inc. pursuant to its CRP, a valid exercise
of management prerogatives; Further, ORDERING Pepsi
Cola Products Philippines, Inc. to pay the following
complainants their package separation benefits of 1 &
months salary for every year of service, plus
commutation of all vacation and sick leave credits in the
respective amounts hereunder indicated opposite their
names:
1. ARTEMIO S. KEMPIS

P167,486.8
0
2. EXUPERIO C. MOLINA
168,196.3
8
3. GILBERTO V. OPINION
31,799.74
4. PURISIMO M. CABAOBAS 165,466.0

9
5. VICENTE P. LAURON
167,325.8
6
6. RAMON M. DE PAZ, JR. - 109,652.9
8
7. ZACARIAS E. CARBO
160,376.4
7
8. JULITO C. ABARRACOSO 161,366.4
4
9. DOMINGO B. GLORIA
26,119.26
10. FRANCISCO P. CUMPIO 165,204.4
1

(6) DECLARING, in NLRC Injunction Case No. V-000003-2001,

Pepsi-Cola's Petition for Injunction and Application for
immediate issuance of Temporary Restraining Order, moot and
academic, and DISMISSING the same; Further, DECLARING moot
and academic all incidents to the case of Kempis, et al. vs.
PCPPI (NLRC Case No. V-000071-2000 relating to the execution
or implementation of the nullified Decision dated December 15,
2000, and likewise, nullifying them.
All other claims and petitions are dismissed for want of merit.
SO ORDERED.11cralawlawlibrary
Petitioners and PCPPI filed their respective motions for
reconsideration of the consolidated decision, which the NLRC
denied in a Resolution12 dated September 15, 2003. Dissatisfied,
petitioners filed a petition for certiorari with the CA [docketed as
CA-G.R. SP No. 81712 and raffled to the Eighteenth (18 th)
Division]. On July 31, 2006, the CA rendered a Decision, denying
their petition and affirming the NLRC Decision dated September
11, 2002, the dispositive portion of which
reads:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the petition filed in this
case is hereby DENIEDand the decision dated September 11,
2002, and the resolution dated September 15, 2003,
promulgated by the National Labor Relations Commission,
Fourth Division in NLRC Certified Case No. V-000001-2000 (NCR
CC. No. 000171-99) are hereby AFFIRMED.
SO ORDERED.13cralawlawlibrary
On February 21, 2007, the CA 18th Division issued a
Resolution14 denying petitioners' motion for reconsideration.
In contrast, when Molon, et al. earlier questioned the
consolidated decision of the NLRC via a petition
for certiorari [docketed as CA-G.R. SP No. 82354 and raffled to
its Twentieth (20th) Division], the CA rendered on March 31,
2006 a Decision15 granting their petition and reversing the same
NLRC Decision dated September 11, 2002, the dispositive
portion of which states:chanRoblesvirtualLawlibrary
IN LIGHT OF ALL THE FOREGOING, the instant petition
is GRANTED. The decision of the NLRC dated September 11,
2002 is hereby REVERSED and SET ASIDE and judgment is
rendered as follows:
Declaring the strike conducted on July 23, 1999 as legal, it
falling under the exception of Article 263, Labor
Code;ChanRoblesVirtualawlibrary
Declaring the manner by which the corporate rightsizing
program or retrenchment was effected by PEPSI-COLA to be

106

contrary to the prescribed rules and

procedure;ChanRoblesVirtualawlibrary

DISMISSING THEIR COMPLAINTS FOR ILLEGAL

DISMISSAL.17cralawlawlibrary

Declaring that petitioners were illegally terminated. Their

reinstatement to their former positions or its equivalent is
hereby ordered, without loss of seniority rights and privileges
and PEPSI-COLA is also ordered the payment of their backwages
from the time of their illegal dismissal up to the date of their
actual reinstatement. If reinstatement is not feasible because of
strained relations or abolition of their respective positions, the
payment of separation pay equivalent to 1 month salary for
every year of service, a fraction of at least 6 months shall be
considered a whole year. The monetary considerations received
by some of the employees shall be deducted from the total
amount they ought to receive from the company.
Attorney's fees equivalent to 10% of the amount which
petitioners may recover pursuant to Article 111 of the Labor
Code is also awarded.

The three issues raised by petitioners boil down to the legality

of their dismissal pursuant to PCPPI's retrenchment program.

No pronouncement as to costs.
SO ORDERED.16cralawlawlibrary
Aggrieved, petitioners come before the Court in this petition for
review on certiorari assailing the CA 18th Division Decision dated
July 31, 2006, and its Resolution dated February 21, 2007 on
these grounds:chanRoblesvirtualLawlibrary
A.
THE HONORABLE COURT OF APPEALS, SPECIAL FORMER
EIGHTEENTH DIVISION, COMMITTED AN ERROR OF LAW WHEN
IT IGNORED THE EARLIER DECISION OF THE TWENTIETH
DIVISION ON THE SAME FACTUAL AND LEGAL
ISSUES.chanroblesvirtuallawlibrary
B.
THE HONORABLE COURT OF APPEALS, SPECIAL FORMER
EIGHTEENTH DIVISION, COMMITTED AN ERROR OF LAW WHEN
IT REFUSED TO REVERSE THE DECISION OF THE NATIONAL
LABOR RELATIONS COMMISSION, FOURTH DIVISION, DESPITE
PRIVATE RESPONDENTS FAILURE TO COMPLY WITH THE
REQUISITES OF A VALID
RETRENCHMENT.chanroblesvirtuallawlibrary
C.
THE HONORABLE COURT OF APPEALS, SPECIAL FORMER
EIGHTEENTH DIVISION, COMMITTED AN ERROR OF LAW WHEN
IT AFFIRMED THE DECISION OF THE NATIONAL LABOR
RELATIONS COMMISSION, FOURTH DIVISION, DECLARING AS
LEGAL THE ILLEGAL DISMISSAL OF PETITIONERS AND

The petition has no merit.

During the pendency of the petition, the Court rendered a
Decision dated February 18, 2013 in the related case of PepsiCola Products Philippines, Inc. v. Molon,18 the dispositive portion
of which reads:chanRoblesvirtualLawlibrary
WHEREFORE, the petition is GRANTED. The assailed March 31,
2006 Decision and September 18, 2006 Resolution of the Court
of Appeals in CA-G.R. SP No. 82354 are hereby REVERSED and
SET ASIDE. Accordingly, the September 11, 2002 Decision of the
National Labor Relations Commission is hereby REINSTATED
insofar as (1) it dismissed subsumed cases NLRC-RAB VIII Case
Nos. 9-0432-99 to 9-0458-99 and; (2) ordered the reinstatement
of respondent Saunder Santiago Remandaban III without loss of
seniority rights but without backwages in NLRC-RAB VIII Case
No. 9-0459-99.
SO ORDERED.
cralawlawlibrary
Subsumed cases NLRC-RAB VIII Case Nos. 9-0432-99 to 9-045899 pertain to the dismissal of the complaints for illegal dismissal
filed by Molon, et al., the 27 former co-employees of petitioners
in PCPPI. On the issue of whether the retrenchment of the
petitioners' former co-employees was in accord with law, the
Court ruled that PCPPI had validly implemented its
retrenchment program,viz.:chanRoblesvirtualLawlibrary
Essentially, the prerogative of an employer to retrench its
employees must be exercised only as a last resort, considering
that it will lead to the loss of the employees' livelihood. It is
justified only when all other less drastic means have been tried
and found insufficient or inadequate. Corollary thereto, the
employer must prove the requirements for a valid retrenchment
by clear and convincing evidence; otherwise, said ground for
termination would be susceptible to abuse by scheming
employers who might be merely feigning losses or reverses in
their business ventures in order to ease out employees. These
requirements are:
(1) That retrenchment is reasonably necessary and likely to
prevent business losses which, if already incurred, are not
merely de minimis, but substantial, serious, actual and real, or if
only expected, are reasonably imminent as perceived
objectively and in good faith by the employer;
(2) That the employer served written notice both to the
employees and to the Department of Labor and Employment at

least one month prior to the intended date of retrenchment;

(3) That the employer pays the retrenched employees
separation pay equivalent to one (1) month pay or at least onehalf () month pay for every year of service, whichever is
higher;
(4) That the employer exercises its prerogative to retrench
employees in good faith for the advancement of its interest and
not to defeat or circumvent the employees right to security of
tenure; and
(5) That the employer used fair and reasonable criteria in
ascertaining who would be dismissed and who would be
retained among the employees, such as status, efficiency,
seniority, physical fitness, age, and financial hardship for
certain workers.
In due regard of these requisites, the Court observes that Pepsi
had validly implemented its retrenchment program:
(1) Records disclose that both the CA and the NLRC had already
determined that Pepsi complied with the requirements of
substantial loss and due notice to both the DOLE and the
workers to be retrenched. The pertinent portion of the CAs
March 31, 2006 Decision reads:
In the present action, the NLRC held that PEPSI-COLAs financial
statements are substantial evidence which carry great
credibility and reliability viewed in light of the financial crisis
that hit the country which saw multinational corporations
closing shops and walking away, or adapting [sic] their own
corporate rightsizing program. Since these findings are
supported by evidence submitted before the NLRC, we resolve
to respect the same. x x x x The notice requirement was also
complied with by PEPSI-COLA when it served notice of the
corporate rightsizing program to the DOLE and to the fourteen
(14) employees who will be affected thereby at least one (1)
month prior to the date of retrenchment. (Citations omitted)
It is axiomatic that absent any clear showing of abuse,
arbitrariness or capriciousness, the findings of fact by the NLRC,
especially when affirmed by the CA as in this case are
binding and conclusive upon the Court. Thus, given that there
lies no discretionary abuse with respect to the foregoing
findings, the Court sees no reason to deviate from the same.
(2) Records also show that the respondents had already been
paid the requisite separation pay as evidenced by the
September 1999 quitclaims signed by them. Effectively, the
said quitclaims serve inter alia the purpose of acknowledging
receipt of their respective separation pays. Appositely,
respondents never questioned that separation pay arising from
their retrenchment was indeed paid by Pepsi to them. As such,
the foregoing fact is now deemed conclusive.
(3) Contrary to the CAs observation that Pepsi had singled out
members of the LEPCEU-ALU in implementing its retrenchment
program, records reveal that the members of the company

107

union (i.e., LEPCEU-UOEF#49) were likewise among those

retrenched.
Also, as aptly pointed out by the NLRC, Pepsis Corporate
Rightsizing Program was a company-wide program which had
already been implemented in its other plants in Bacolod, Iloilo,
Davao, General Santos and Zamboanga. Consequently, given
the general applicability of its retrenchment program, Pepsi
could not have intended to decimate LEPCEU-ALUs
membership, much less impinge upon its right to selforganization, when it employed the same.
In fact, it is apropos to mention that Pepsi and its employees
entered into a collective bargaining agreement on October 17,
1995 which contained a union shop clause requiring
membership in LEPCEU-UOEF#49, the incumbent bargaining
union, as a condition for continued employment. In this regard,
Pepsi had all the reasons to assume that all employees in the
bargaining unit were all members of LEPCEU-UOEF#49;
otherwise, the latter would have already lost their employment.
In other words, Pepsi need not implement a retrenchment
program just to get rid of LEPCEU-ALU members considering
that the union shop clause already gave it ample justification to
terminate them. It is then hardly believable that union
affiliations were even considered by Pepsi in the selection of the
employees to be retrenched.
Moreover, it must be underscored that Pepsis management
exerted conscious efforts to incorporate employee participation
during the implementation of its retrenchment program.
Records indicate that Pepsi had initiated sit-downs with its
employees to review the criteria on which the selection of who
to be retrenched would be based. This is evidenced by the
report of NCMB Region VIII Director Juanito Geonzon which
states that Pepsis] [m]anagement conceded on the proposal
to review the criteria and to sit down for more positive steps to
resolve the issue.
Lastly, the allegation that the retrenchment program was a
mere subterfuge to dismiss the respondents considering Pepsis
subsequent hiring of replacement workers cannot be given
credence for lack of sufficient evidence to support the same.
Verily, the foregoing incidents clearly negate the claim that the
retrenchment was undertaken by Pepsi in bad faith.
(5) On the final requirement of fair and reasonable criteria for
determining who would or would not be dismissed, records
indicate that Pepsi did proceed to implement its rightsizing
program based on fair and reasonable criteria recommended by
the company supervisors.
Therefore, as all the requisites for a valid retrenchment are
extant, the Court finds Pepsis rightsizing program and the

consequent dismissal of respondents in accord with

law.19cralawlawlibrary
In view of the Court's ruling in Pepsi-Cola Products Philippines,
Inc. v. Molon,20 PCPPI contends that the petition for review
on certiorari should be denied and the CA decision should be
affirmed under the principle of stare decisis.
The Court sustains PCPPI's contention.
The principle of stare decisis et non quieta movere (to adhere to
precedents and not to unsettle things which are established) is
well entrenched in Article 8 of the New Civil Code which states
that judicial decisions applying or interpreting the laws or the
Constitution shall form part of the legal system of the
Philippines.
In Pepsi-Cola Products Philippines, Incorporated v.
Pagdanganan,21 the Court explained such principle in this
wise:chanRoblesvirtualLawlibrary
The doctrine of stare decisis embodies the legal maxim that a
principle or rule of law which has been established by the
decision of a court of controlling jurisdiction will be followed in
other cases involving a similar situation. It is founded on the
necessity for securing certainty and stability in the law and
does not require identity of or privity of parties. This is
unmistakable from the wordings of Article 8 of the Civil Code. It
is even said that such decisions assume the same authority as
the statute itself and, until authoritatively abandoned,
necessarily become, to the extent that they are applicable, the
criteria which must control the actuations not only of those
called upon to decide thereby but also of those in duty bound to
enforce obedience thereto. Abandonment thereof must be
based only on strong and compelling reasons, otherwise, the
becoming virtue of predictability which is expected from this
Court would be immeasurably affected and the publics
confidence in the stability of the solemn pronouncements
diminished.22cralawlawlibrary
In Philippine Carpet Manufacturing Corporation v.
Tagyamon,23 the Court further held:chanRoblesvirtualLawlibrary
Under the doctrine of stare decisis, when a court has laid down
a principle of law as applicable to a certain state of facts, it will
adhere to that principle and apply it to all future cases in which
the facts are substantially the same, even though the parties
may be different. Where the facts are essentially different,
however, stare decisis does not apply, for a perfectly sound
principle as applied to one set of facts might be entirely
inappropriate when a factual variant is
introduced.24cralawlawlibrary

Guided by the jurisprudence on stare decisis, the remaining

question is whether the factual circumstances of this present
case are substantially the same as the Pepsi-Cola Products
Philippines, Inc. v. Molon case.25cralawred
The Court rules in the affirmative.
There is no dispute that the issues, subject matters and causes
of action between the parties inPepsi-Cola Products Philippines,
Inc. v. Molon26 and the present case are identical, namely, the
validity of PCPPI's retrenchment program, and the legality of its
employees' termination. There is also substantial identity of
parties because there is a community of interest between the
parties in the first case and the parties in the second case, even
if the latter was not impleaded in the first case. 27The
respondents in Pepsi-Cola Products Philippines, Inc. v.
Molon28 are petitioners' former co-employees and co-union
members of LEPCEU-ALU who were also terminated pursuant to
the PCPPI's retrenchment program. The only difference between
the two cases is the date of the employees'
termination, i.e., Molon, et al. belong to the first batch of
employees retrenched on July 31, 1999, while petitioners belong
to the second batch retrenched on February 15, 2000. That the
validity of the same PCPPI retrenchment program had already
been passed upon and, thereafter, sustained in the related case
of Pepsi-Cola Products Philippines, Inc. v. Molon,29 albeit
involving different parties, impels the Court to accord a similar
disposition and uphold the legality of same program. To be sure,
the Court is well aware of the pronouncement in Philippine
Carpet Manufacturing Corporation v.
Tagyamon,30 that:chanRoblesvirtualLawlibrary
The doctrine though is not cast in stone for upon a showing that
circumstances attendant in a particular case override the great
benefits derived by our judicial system from the doctrine
of stare decisis, the Court is justified in setting it aside. For the
Court, as the highest court of the land, may be guided but is not
controlled by precedent. Thus, the Court, especially with a new
membership, is not obliged to follow blindly a particular
decision that it determines, after re-examination, to call for a
rectification.cralawlawlibrary
However, abandonment of the ruling in Pepsi-Cola Products
Philippines, Inc. v. Molon31 on the same issue of the validity of
PCPPI's retrenchment program must be based only on strong
and compelling reasons. After a careful review of the records,
the Court finds no such reasons were shown to obtain in this
case.
Even upon evaluation of petitioners' arguments on its supposed
merits, the Court still finds no reason to disturb the CA ruling
that affirmed the NLRC. In their petition for review

108

on certiorari, petitioners argue that PCPPI failed to prove that it

was suffering from financial losses, and that its financial
statements were perplexing. In support of their argument, they
cite the observation of the Labor Arbiter that the alleged losses
amounting to P1.2 billion in PCPPI's audited financial statements
included those of two subsidiaries that were not yet in
commercial operation, interest payments on short-term and
long-term debts, and the adverse effect of the peso
devaluation.32 They also cite the Dissenting Opinion of
Commissioner Edgardo M. Enerlan that the Majority decision
ignored the previous financial statement and relied on the new
document presented by PCPPI during the appeal stage, and that
the accountant admitted that the financial statement as of and
for the year ended June 30, 2000 and 1999 are still
incomplete.33 They also insist that PCPPI failed to explain its
acts of regularizing four (4) employees and hiring sixty-three
(63) replacements and additional workers.
Petitioners' arguments are untenable.
At the outset, the issues petitioners raised would entail an
inquiry into the factual veracity of the evidence presented by
the parties, the determination of which is not the Court's
statutory function. Indeed, petitioners are asking the Court to
sift through the evidence on record and pass upon whether
PCPPI had, in fact, suffered from serious business losses. That
task, however, would be contrary to the well-settled principle
that the Court is not a trier of facts, and cannot re-examine and
re-evaluate the probative value of the evidence presented to
the Labor Arbiter, and the NLRC, which formed the basis of the
questioned CA decision.34cralawred
At any rate, the Court finds that the September 11, 2002 NLRC
Decision has exhaustively discussed PCPPI's compliance with
the requirement that for a retrenchment to be valid, such must
be reasonably necessary and likely to prevent business losses
which, if already incurred, are not merelyde minimis, but
substantial, serious, actual and real, to
wit:chanRoblesvirtualLawlibrary
More pertinent would have been SGV & Co.'s report to the
stockholder. It says:
The accompanying statement of assets, liabilities and home
office account of Tanauan Operations of Pepsi-Cola Products
Philippines, Inc. ('company') as of June 30, 1999 and the related
statement of income for the year then ended, are integral parts
of the financial statements of the company taken as a whole. In
1999, the Company's Tanauan Operations incurred a net loss of
P29,167,390 as reported in such plant's financial statement
(ANNEX I) which forms part of the audited consolidated financial
statements as of and for the year ended June 30, 1999, to which
we have rendered our opinion dated October 28, 1999, attached
hereto as ANNEX II.

On the other hand, the accompanying financial statements as of

and for the year ended June 30, 2000 of the company's Tanauan
Plant operations, which reported a net loss P22,327,175 (ANNEX
III) areincluded in the financial statements of the company
taken as a whole as also hereto attached (as ANNEX IV). The
financial statements were accordingly derived from the
Company's accounting records, with certain adjustments and
are subject to any additional adjustments as may be disclosed
upon the completion of an audit of the financial statements of
the company taken as a whole, which is currently in progress.
Since the audit of the company's financial statements as of and
for the year ended June 2000 has not yet been completed, we
are unable to express and we do not express our opinion on the
statement of assets, liabilities and home office account of
Tanauan operations of the company as of June 30, 2000 and the
related statement if income for the year then ended.
The statements of assets, liabilities and home office account
and the related statements of income of the company's Tanauan
Operations are not intended to be a complete presentation of
the company's financial statement as of end for the year ended
June 30, 2000 and 1999.
The letter of SGV & Co. was accompanied by a consolidat[ed]
statement of Income and Deficit (supplementary schedule)
showing a net loss of P29,167,000. in the company's Tanauan
Operations as of June 30, 1999, and P22,328,000 as of June
2000. This illustrates that the income statements and the
balance sheets pertaining to the Tanauan Plant Operations as
prepared by Rodante F. Ramos were audited by SGV & Co. This
situation would have been avoided had the persistent requests
for ample opportunity to present evidence made by the
respondent were not persistently denied by the Executive Labor
Arbiter.
At least the Income Statements and the Balance Sheets
regularly prepared and submitted by AVR-Asst. Controller
Rodante Ramos to SGV & Co. for audit are substantial evidence
which carry great credibility and responsibility viewed in the
light of the financial crisis that hit the country which saw
multinational corporations closing shops and walking away, or
adapting their own corporate rightsizing
programs.35cralawlawlibrary
The aforequoted NLRC ruling also explains why there is no merit
in Commissioner Enerlan's contention that the incomplete
financial statements as of and for the year ended June 30, 2000
and 1999 are inconclusive to establish that PCPPI incurred
serious business losses. Given that the financial statements are
incomplete, the independent auditing firm, SGV & Co., aptly
explained nonetheless that they were derived from the PCPPI's
accounting records, and were subject to further adjustments
upon the completion of the audit of financial statements of the
company taken as a whole, which was then in progress. The

Court thus agrees with the CA and the NLRC that the letter of
SGV & Co., accompanied by a consolidated Statement of
Income and Deficit showing a net loss of P29,167,000. in the
company's Tanauan Operations as of June 30, 1999, and
P22,328,000 as of June 2000,36 is sufficient and convincing proof
of serious business losses which justified PCPPI's retrenchment
program. After all, the settled rule in quasi-judicial proceedings
is that proof beyond reasonable doubt is not required in
determining the legality of an employer's dismissal of an
employee, and not even a preponderance of evidence is
necessary, as substantial evidence is considered
sufficient.37 Substantial evidence is more than a mere scintilla of
evidence or relevant evidence as a reasonable mind might
accept as adequate to support a conclusion, even if other
minds, equally reasonable, might conceivably opine
otherwise.38cralawred
There is likewise no merit in Commissioner Enerlan's dissenting
opinion that the majority decision ignored the previous financial
statement and relied on the new document presented by PCPPI
during the appeal stage. Such act of the majority is sanctioned
by no less than Article 221 of the Labor Code, as amended, and
Section 10, Rule VII of the 2011 NLRC Rules of Procedure which
provide that in any proceeding before the Commission or any of
the Labor Arbiters, the rules of evidence prevailing in courts of
law or equity shall not be controlling and it is the spirit and
intention of the Code that the Commission and its members and
the Labor Arbiters shall use every and all reasonable means to
ascertain the facts in each case speedily and objectively and
without regard to technicalities of law or procedure, all in the
interest of due process.
On PCPPI's alleged failure to explain its acts of regularizing four
(4) employees and hiring sixty-thee (63) replacements and
additional workers, the Court upholds the NLRC's correct ruling
thereon,viz.:chanRoblesvirtualLawlibrary
Let Us squarely tackle this issue of replacements in the cases of
the complainants in this case. We bear in mind that
replacements refer to the regular workers subjected to
retrenchment, occupying regular positions in the company
structure. Artemio Kempis, a filer mechanic with a salary of
P9,366.00 was replaced by Rogelio Castil. Rogelio Castil was
hired through an agency named Helpmate Janitorial Services.
Castils employer is Helpmate Janitorial Services. How can a
janitorial service employee perform function of a filer
mechanic? How much does Pepsi Cola pay Helpmate Janitorial
Services for the contract of service? These questions
immediately come to mind. Being not a regular employee of
Pepsi Cola, he is not a replacement of Kempis. The idea of
rightsizing is to reduce the number of workers and related
functions and trim down, streamline, or simplify the structure of
the organization to the level of utmost efficiency and

109

productivity in order to realize profit and survive. After the CRP

shall have been implemented, the desired size of the
corporation is attained. Engaging the services of service
contractors does not expand the size of the corporate structure.
In this sense, the retrenched workers were not replaced.
The same is true in the case of Exuperio C. Molina who was
allegedly replaced by Eddie Piamonte, an employee of, again,
Helpmate Janitorial Services; of Gilberto V. Opinion who was
allegedly replaced by Norlito Ulahay, an employee of Nestor
Ortiga General Services; of Purisimo M. Cabasbas who was
allegedly replaced by Christopher Albadrigo, an employee of
Helpmate Janitorial Services; of Vicente R. Lauron who was
allegedly replaced by Wendylen Bron, an employee of Doublt
N General Services; of Ramon M. de Paz, who was disabled,
and replaced by Alex Dieta, an employee of Nestor Ortiga
General Services; and of Zacarias E. Carbo who was allegedly
replaced by an employee of Double N General Services. x x
x39cralawlawlibrary
On petitioners' contention that the true motive of the
retrenchment program was to prevent their union, LEPCEU-ALU,
from becoming the certified bargaining agent of all the rankand-file employees of PCPPI, such issue of union-busting was
duly resolved in the September 11, 2002 NLRC Decision, as
follows:chanRoblesvirtualLawlibrary
The issue of union busting has been debunked by Us in the
Certified Notice of Strike Case No. V-000001-2000. We said in
that case that Pepsi Cola, in the selection of workers to be
retrenched, did not take into consideration union affiliation
because the unit was supposed to be composed of all members
of good standing of LEPCEU-UOEF#49 there being a UNION
SHOP provision in the existing CBA. In the conciliation
conference, PEPSI COLA expressed its willingness to sit down
with unions and review the criteria. When this was suggested by
the conciliator, the idea was then and there rejected by the
unions, giving the impression that the real conflict was interunion. There being no cooperation from the unions, PEPSI COLA
went on with the first batch of retrenchment involving 47
workers. It bears stressing that all 47 workers signed individual
release and quitclaims and settled their complaints with
respondent Pepsi Cola, apparently with the assistance of
LEPCEU-ALU. It is awkward for LEPCEU-ALU to argue that a
serious corporate-wide rightsizing program cannot be
implemented in PEPSI-COLA Tanauan Plant because a nascent
unrecognized union would probably be busted. Even the
Executive Labor Arbiter did not take this issue up in his
Decision. The issue does not merit
consideration.40cralawlawlibrary

Cola Products Philippines, Inc. v.

Molon,41 thus:chanRoblesvirtualLawlibrary
Mindful of their nature, the Court finds it difficult to attribute
any act of union busting or ULP on the part of Pepsi considering
that it retrenched its employees in good faith. As earlier
discussed, Pepsi tried to sit-down with its employees to arrive at
mutually beneficial criteria which would have been adopted for
their intended retrenchment. In the same vein, Pepsis
cooperation during the NCMB-supervised conciliation
conferences can also be gleaned from the records. Furthermore,
the fact that Pepsis rightsizing program was implemented on a
company-wide basis dilutes respondents claim that Pepsis
retrenchment scheme was calculated to stymie its union
activities, much less diminish its constituency. Therefore, absent
any perceived threat to LEPCEU-ALUs existence or a violation of
respondents right to self-organizationas demonstrated by the
foregoing actuationsPepsi cannot be said to have committed
union busting or ULP in this case.cralawlawlibrary
Finally, this case does not fall within any of the recognized
exceptions42 to the rule that only questions of law are proper in
a petition for review on certiorari under Rule 45 of the Rules of
Court. Settled is the rule that factual findings of labor officials,
who are deemed to have acquired expertise in matters within
their respective jurisdiction, are generally accorded not only
respect but even finality, and bind us when supported by
substantial evidence.43 Certainly, it is not the Court's function to
assess and evaluate the evidence all over again, particularly
where the findings of both the CA and the NLRC
coincide.44cralawred
WHEREFORE, the petition is DENIED. The Court of Appeals
Decision dated July 31, 2006, and its Resolution dated February
21, 2007 in CA-G.R. SP No. 81712, are AFFIRMED.
SO ORDERED.chanroblesvirtuallawlibrary
21
Republic of the Philippines
SUPREME COURT
Baguio City
FIRST DIVISION
G.R. No. 199166

April 20, 2015

Significantly, the foregoing NLRC ruling was validated in Pepsi-

110

NELSON V. BEGINO, GENER DEL VALLE, MONINA A VILA-

daily technical requirements thereof. In the aforesaid capacities,

averred that they worked under the direct control and

LLORIN AND MA. CRISTINA SUMAYAO,Petitioners,

petitioners were tasked with coverage of news items for

supervision of Villafuerte and, at the end of each day, were

vs.

subsequent daily airings in respondents TV Patrol Bicol

informed about the news to be covered the following day, the

ABS-CBN CORPORATION (FORMERLY, ABS-CBN

Program.

routes they were to take and, whenever the subject of their

BROADCASTING CORPORATION) AND AMALIA

VILLAFUERTE, Respondents.
DECISION
PEREZ, J.:

news coverage is quite distant, even the start of their workday.

While specifically providing that nothing therein shall be

Due to the importance of the news items they covered and the

deemed or construed to establish an employer-employee

necessity of their completion for the success of the program,

relationship between the parties, the aforesaid Talent Contracts

petitioners claimed that, under pain of immediate termination,

included, among other matters, provisions on the following

they were bound by the companys policy on, among others,

matters: (a) the Talents creation and performance of work in

attendance and punctuality.6

accordance with the ABS-CBNs professional standards and

The existence of an employer-employee relationship is at the

compliance with its policies and guidelines covering intellectual

Aside from the constant evaluation of their actions, petitioners

heart of this Petition for Review on Certiorari filed pursuant to

property creators, industry codes as well as the rules and

were reportedly subjected to an annual competency

Rule 45 of the Rules of Court, primarily assailing the 29 June

regulations of the Kapisanan ng mga Broadcasters sa Pilipinas

assessment alongside other ABS-CBN employees, as condition

2011 Decision1 rendered by the Fourth Division of the Court of

(KBP) and other regulatory agencies; (b) the Talents non-

for their continued employment. Although their work involved

Appeals (CA) in CA-G.R. SP No. 116928 which ruled out said

engagement in similar work for a person or entity directly or

dealing with emergency situations at any time of the day or

relationship between the parties.

indirectly in competition with or adverse to the interests of ABS-

night, petitioners claimed that they were not paid the labor

CBN and non-promotion of any product or service without prior

standard benefits the law extends to regular employees. To

written consent; and (c) the results-oriented nature of the

avoid paying what is due them, however, respondents

The Facts

talents work which did not require them to observe normal or

purportedly resorted to the simple expedient of using said

Respondent ABS-CBN Corporation (formerly ABS-CBN

fixed working hours.3 Subjected to contractors tax, petitioners

Talent Contracts and/or Project Assignment Forms which

Broadcasting Corporation) is a television and radio broadcasting

remunerations were denominated as Talent Fees which, as of

denominated petitioners as talents, despite the fact that they

corporation which, for its Regional Network Group in Naga City,

last renewal, were admitted to be pegged per airing day

are not actors or TV hosts of special skills. As a result of this

employed respondent Amalia Villafuerte (Villafuerte) as

at P273.35 for Begino, P 302.92 for Del Valle, P 323.08 for

iniquitous situation, petitioners asseverated that they merely

Manager. There is no dispute regarding the fact that, thru

Sumayao and P 315.39 for Llorin.4

earned an average of P7,000.00 to P8,000.00 per month, or

Villafuerte, ABS-CBN engaged the services of petitioners Nelson

Begino (Begino) and Gener Del Valle (Del Valle) sometime in

decidedly lower than the P21,773.00 monthly salary ABS-CBN

Claiming that they were regular employees of ABS-CBN,
5

paid its regular rank-and-file employees. Considering their

1996 as Cameramen/Editors for TV Broadcasting. Petitioners

petitioners filed against respondents the complaint docketed as

repeated re-hiring by respondents for ostensible fixed periods,

Ma. Cristina Sumayao (Sumayao) and Monina Avila-Llorin

Sub-RAB 05-04- 00041-07 before the National Labor Relations

this situation had gone on for years since TV Patrol Bicol has

(Llorin) were likewise similarly engaged as reporters sometime

Commissions (NLRC) Sub-Regional Arbitration Branch No. 5,

continuously aired from 1996 onwards.7

in 1996 and 2002, respectively. With their services engaged by

Naga City. In support of their claims for regularization,

respondents thru Talent Contracts which, though regularly

underpayment of overtime pay, holiday pay, 13th month pay,

In refutation of the foregoing assertions, on the other hand,

renewed over the years, provided terms ranging from three (3)

service incentive leave pay, damages and attorney's fees,

respondents argued that, although it occasionally engages in

months to one (1) year, petitioners were given Project

petitioners alleged that they performed functions necessary and

production and generates programs thru various means, ABS-

Assignment Forms which detailed, among other matters, the

desirable in ABS-CBN's business. Mandated to wear company

CBN is primarily engaged in the business of broadcasting

duration of a particular project as well as the budget and the

IDs and provided all the equipment they needed, petitioners

television and radio content. Not having the full manpower

111

complement to produce its own program, the company had

respondents, for regularization, payment of labor standard

Moreover, respondents are directed to admit back complainants

allegedly resorted to engaging independent contractors like

benefits, illegal dismissal and unfair labor practice, which was

to work under the same terms and conditions prevailing prior to

actors, directors, artists, anchormen, reporters, scriptwriters

docketed as Sub-RAB 05-08-00107-07. Upon respondents

their separation or, at respondents' option, merely reinstated in

and various production and technical staff, who offered their

motion, this complaint was dismissed for violation of the rules

the payroll.

services in relation to a particular program. Known in the

against forum shopping in view of the fact that the

industry as talents, such independent contractors inform

determination of the issues in the second case hinged on the

Other than the above, all other claims and charges are ordered

ABSCBN of their availability and were required to accomplish

resolution of those raised in the first.10 On 19 December 2007,

DISMISSED for lack of merit.12

Talent Information Forms to facilitate their engagement for and

however, Labor Arbiter Jesus Orlando Quiones (Labor Arbiter

appearance on designated project days. Given the

Quiones) resolved Sub-RAB 05-04-00041-07 in favor of

Aggrieved by the foregoing decision, respondents elevated the

unpredictability of viewer preferences, respondents argued that

petitioners who, having rendered services necessary and

case on appeal before the NLRC, during the pendency of which

the company cannot afford to provide regular work for talents

related to ABS-CBNs business for more than a year, were

petitioners filed a third complaint against the former, for illegal

with whom it negotiates specific or determinable professional

determined to be its regular employees. With said conclusion

dismissal, regularization, nonpayment of salaries and 13th

fees on a per project, weekly or daily basis, usually depending

found to be buttressed by, among others, the exclusivity clause

month pay, unfair labor practice, damages and attorneys fees.

and prohibitions under petitioners Talent Contracts and/or

In turn docketed as NLRC Case No. Sub-RAB-V-05-03-00039-08,

Project Assignment Forms which evinced respondents control

the complaint was raffled to Labor Arbiter Quiones who issued

on the budget allocation for a project.

11

Respondents insisted that, pursuant to their Talent Contracts

over them,

and/or Project Assignment Forms, petitioners were hired as

following wise:

Labor Arbiter Quiones disposed of the case in the

an Order dated 30 April 2008, inhibiting himself from the case

and denying respondents motion to dismiss on the grounds of
res judicata and forum shopping.13 Finding that respondents

talents, to act as reporters and/or cameramen for TV Patrol Bicol

for designated periods and rates. Fully aware that they were not

WHEREFORE, finding merit in the causes of action set forth by

control over petitioners was indeed manifest from the

considered or to consider themselves as employees of a

the complainants, judgment is hereby rendered declaring

exclusivity clause and prohibitions in the Talent Contracts and/or

particular production or film outfit, petitioners were supposedly

complainants MONINA AVILA-LLORIN, GENER L. DEL VALLE,

Project Assignment Forms, on the other hand, the NLRC

engaged on the basis of the skills, knowledge or expertise they

NELSON V. BEGINO and MA. CRISTINA V. SUMAYAO, as regular

rendered a Decision dated 31 March 2010, affirming said Labor

already possessed and, for said reason, required no further

employees of respondent company, ABS-CBN BROADCASTING

Arbiters appealed decision.14 Undeterred by the NLRCs 31

training from ABS-CBN. Although petitioners were inevitably

CORPORATION.

August 2010 denial of their motion for

reconsideration,15 respondents filed the Rule 65 petition for

subjected to some degree of control, the same was allegedly

limited to the imposition of general guidelines on conduct and

Accordingly, respondent ABS-CBN Broadcasting Corporation is

certiorari docketed before the CA as CA-G.R. SP No. 116928

performance, simply for the purpose of upholding the standards

hereby ORDERED to pay complainants, subject to the

which, in addition to taking exceptions to the findings of the

of the company and the strictures of the industry. Never

prescriptive period provided under Article 291 of the Labor

assailed decision, faulted petitioners for violating the rule

subjected to any control or restrictions over the means and

Code, however applicable, the total amount of

against forum shopping.16

methods by which they performed or discharged the tasks for

Php2,440,908.36, representing salaries/wage differentials,

which their services were engaged, petitioners were, at most,

holiday pay, service incentive leave pay and 13th month pay, to

On 29 June 2011, the CA rendered the herein assailed decision,

briefed whenever necessary regarding the general

include 10% of the judgment award as attorneys fees of the

reversing the findings of the Labor Arbiter and the NLRC. Ruling

requirements of the project to be executed.9

judgment award (computation of the monetary awards are

out the existence of forum shopping on the ground that

attached hereto as integral part of this decision).

petitioners' second and third complaints were primarily

Having been terminated during the pendency of the case,

anchored on their termination from employment after the filing

Petitioners filed on 10 July 2007 a second complaint against

of their first complaint, the CA nevertheless discounted the

112

existence of an employer-employee relation between the

employer-employee relationship between the parties, despite

wages;(c) the power of dismissal; and (d) the employer's power

parties upon the following findings and conclusions: (a)

established jurisprudence supporting the same.

to control the employee on the means and methods by which

the work is accomplished.23 Of these criteria, the so-called

petitioners, were engaged by respondents as talents for

periods, work and the program specified in the Talent Contracts

The Court's Ruling

and/or Project Assignment Forms concluded between them; (b)

instead of fixed salaries, petitioners were paid talent fees

"control test" is generally regarded as the most crucial and

determinative indicator of the presence or absence of an

The Court finds the petition impressed with merit.

depending on the budget allocated for the program to which

employer-employee relationship. Under this test, an employeremployee relationship is said to exist where the person for

they were assigned; (c) being mainly concerned with the result,

Petitioners preliminarily fault the CA for not dismissing

whom the services are performed reserves the right to control

respondents did not exercise control over the manner and

respondents Rule 65 petition for certiorari in view of the fact

not only the end result but also the manner and means utilized

method by which petitioner accomplished their work and, at

that the latter failed to file a Notice of Appeal from the Labor

to achieve the same.24

most, ensured that they complied with the standards of the

Arbiters decision and to verify and certify the Memorandum of

company, the KBP and the industry; and, (d) the existence of an

Appeal they filed before the NLRC. While concededly required

In discounting the existence of said relationship between the

employer-employee relationship is not necessarily established

under the NLRC Rules of Procedure, however, these matters

parties, the CA ruled that Petitioners' services were, first and

by the exclusivity clause and prohibitions which are but terms

should have been properly raised during and addressed at the

foremost, engaged thru their Talent Contracts and/or Project

and conditions on which the parties are allowed to freely

appellate stage before the NLRC. Instead, the record shows that

Assignment Forms which specified the work to be performed by

the NLRC took cognizance of respondents appeal and

them, the project to which they were assigned, the duration

proceeded to resolve the same in favor of petitioners by

thereof and their rates of pay according to the budget therefor

Petitioners motion for reconsideration of the foregoing decision

affirming the Labor Arbiters decision. Not having filed their own

allocated. Because they are imbued with public interest, it

was denied in the CA's 3 October 2011 Resolution,18 hence, this

petition for certiorari to take exception to the liberal attitude the

cannot be gainsaid, however, that labor contracts are subject to

petition.

NLRC appears to have adopted towards its own rules of

the police power of the state and are placed on a higher plane

procedure, petitioners were hardly in the proper position to

than ordinary contracts. The recognized supremacy of the law

raise the same before the CA or, for that matter, before this

over the nomenclature of the contract and the stipulations

Court at this late stage. Aside from the settled rule that a party

contained therein is aimed at bringing life to the policy

Petitioners seek the reversal of the CAs assailed Decision and

who has not appealed is not entitled to affirmative relief other

enshrined in the Constitution to afford protection to

Resolution on the affirmative of the following issues:

than the ones granted in the decision19 rendered, liberal

labor.25 Insofar as the nature of ones employment is concerned,

interpretation of procedural rules on appeal had, on occasion,

Article 280 of the Labor Code of the Philippines also provides as

been favored in the interest of substantive justice.20

follows:

Although the existence of an employer-employee relationship is,

ART. 280. Regular and Casual Employment. The provisions of

stipulate.

17

The Issues

1. Whether or not the CA seriously and reversibly erred in not

dismissing respondents petition for certiorari in view of the fact
that they did file a Notice of Appeal at the NLRC level and did

21

not, by themselves or through their duly authorized

on the other hand, a question of fact

representative, verify and certify the Memorandum of Appeal

the proper subject of a Rule 45 petition for review on certiorari

regardless of the oral agreement of the parties, an employment

they filed thereat, in accordance with the NLRC Rules of

like the one at bar, the conflicting findings between the labor

shall be deemed to be regular where the employee has been

Procedure; and 2. Whether or not the CA seriously and

tribunals and the CA justify a further consideration of the

engaged to perform activities which are usually necessary or

22

which is ordinarily not

To determine the existence of said relation, case law

written agreement to the contrary notwithstanding and

reversibly erred in brushing aside the determination made by

matter.

both the Labor Arbiter and the NLRC of the existence of an

has consistently applied the four-fold test, to wit: (a) the

desirable in the usual business or trade of the employer, except

where the employment has been fixed for a specific project or

selection and engagement of the employee; (b) the payment of

undertaking the completion or termination of which has been

113

determined at the time of the engagement of the employee or

the employee in relation to the business or trade of the

28

where the work or service to be performed is seasonal in nature

employer.

As cameramen/editors and reporters, petitioners

and the employment is for the duration of the season.

were undoubtedly performing functions necessary and essential

that a talent contract exists does not necessarily prevent a

regular employment status.33

to ABS-CBNs business of broadcasting television and radio

As cameramen/editors and reporters, it also appears that

An employment shall be deemed to be casual if it is not covered

content. It matters little that petitioners services were engaged

petitioners were subject to the control and supervision of

by the preceding paragraph: Provided, That, any employee who

for specified periods for TV Patrol Bicol and that they were paid

respondents which, first and foremost, provided them with the

has rendered at least one year of service, whether such service

according to the budget allocated therefor. Aside from the fact

equipments essential for the discharge of their functions.

is continuous or broken, shall be considered a regular employee

that said program is a regular weekday fare of the ABS-CBNs

Prepared at the instance of respondents, petitioners Talent

with respect to the activity in which he is employed and his

Regional Network Group in Naga City, the record shows that,

Contracts tellingly provided that ABS-CBN retained "all creative,

employment shall continue while such actually exists.

from their initial engagement in the aforesaid capacities,

administrative, financial and legal control" of the program to

petitioners were continuously re-hired by respondents over the

which they were assigned. Aside from having the right to

It has been ruled that the foregoing provision contemplates four

years. To the mind of the Court, respondents repeated hiring of

require petitioners "to attend and participate in all promotional

kinds of employees, namely: (a) regular employees or those

petitioners for its long-running news program positively

or merchandising campaigns, activities or events for the

who have been engaged to perform activities which are usually

indicates that the latter were ABS-CBNs regular employees.

Program," ABS-CBN required the former to perform their

necessary or desirable in the usual business or trade of the

functions "at such locations and Performance/Exhibition

employer; (b) project employees or those whose employment

If the employee has been performing the job for at least one

Schedules" it provided or, subject to prior notice, as it chose

has been fixed for a specific project or undertaking, the

year, even if the performance is not continuous or merely

determine, modify or change. Even if they were unable to

completion or termination of which has been determined at the

intermittent, the law deems the repeated or continuing

comply with said schedule, petitioners were required to give

time of the engagement of the employee; (c) seasonal

performance as sufficient evidence of the necessity, if not

advance notice, subject to respondents approval.34 However

employees or those who work or perform services which are

indispensability of that activity in the business.29 Indeed, an

obliquely worded, the Court finds the foregoing terms and

seasonal in nature, and the employment is for the duration of

employment stops being co-terminous with specific projects

conditions demonstrative of the control respondents exercised

the season; and (d) casual employees or those who are not

where the employee is continuously re-hired due to the

not only over the results of petitioners work but also the means

regular, project, or seasonal employees.26 To the foregoing

demands of the employers business.30When circumstances

employed to achieve the same.

classification of employee, jurisprudence has added that of

show, moreover, that contractually stipulated periods of

contractual or fixed term employee which, if not for the fixed

employment have been imposed to preclude the acquisition of

In finding that petitioners were regular employees, the NLRC

term, would fall under the category of regular employment in

tenurial security by the employee, this Court has not hesitated

further ruled that the exclusivity clause and prohibitions in their

view of the nature of the employees engagement, which is to

in striking down such arrangements as contrary to public policy,

Talent Contracts and/or Project Assignment Forms were likewise

31

perform activity usually necessary or desirable in the

morals, good customs or public order.

employers business.27

employment depends, after all, on the nature of the activities to

The nature of the

indicative of respondents control over them. Brushing aside

said finding, however, the CA applied the ruling in Sonza v. ABS-

be performed by the employee, considering the nature of the

CBN Broadcasting Corporation35 where similar restrictions were

The Court finds that, notwithstanding the nomenclature of their

employers business, the duration and scope to be done, and, in

considered not necessarily determinative of the existence of an

Talent Contracts and/or Project Assignment Forms and the terms

some cases, even the length of time of the performance and its

employer-employee relationship. Recognizing that independent

and condition embodied therein, petitioners are regular

continued existence.32 In the same manner that the practice of

contractors can validly provide his exclusive services to the

employees of ABS-CBN. Time and again, it has been ruled that

having fixed-term contracts in the industry does not

hiring party, said case enunciated that guidelines for the

the test to determine whether employment is regular or not is

automatically make all talent contracts valid and compliant with

achievement of mutually desired results are not tantamount to

the reasonable connection between the activity performed by

labor law, it has, consequently, been ruled that the assertion

control. As correctly pointed out by petitioners, however,

114

parallels cannot be expediently drawn between this case and

The presumption is that when the work done is an integral part

Relations Commission's 31 March 2010 Decision is, accordingly,

that of Sonza case which involved a well-known television and

of the regular business of the employer and when the worker,

REINSTATED.

radio personality who was legitimately considered a talent and

relative to the employer, does not furnish an independent

amply compensated as such. While possessed of skills for which

business or professional service, such work is a regular

they were modestly recompensed by respondents, petitioners

employment of such employee and not an independent

lay no claim to fame and/or unique talents for which talents like

contractor. The Court will peruse beyond any such agreement to

actors and personalities are hired and generally compensated in

examine the facts that typify the parties actual

the broadcast industry.

relationship.38 (Emphasis omitted)

Later echoed in Dumpit-Murillo v. Court of Appeals, 36 this Court

Rather than the project and/or independent contractors

has rejected the application of the ruling in the Sonza case to

respondents claim them to be, it is evident from the foregoing

employees similarly situated as petitioners in ABS-CBN

disquisition that petitioners are regular employees of ABS-CBN.

Broadcasting Corporation v. Nazareno.37The following

This conclusion is borne out by the ineluctable showing that

distinctions were significantly observed between employees like

petitioners perform functions necessary and essential to the

petitioners and television or radio personalities like Sonza, to

business of ABS-CBN which repeatedly employed them for a

wit:

long-running news program of its Regional Network Group in

SO ORDERED.

Naga City. In the course of said employment, petitioners were

First. In the selection and engagement of respondents, no

provided the equipments they needed, were required to comply

peculiar or unique skill, talent or celebrity status was required

with the Company's policies which entailed prior approval and

from them because they were merely hired through petitioners

evaluation of their performance. Viewed from the prism of these

personnel department just like any ordinary employee.

considerations, we find and so hold that the CA reversibly erred

when it overturned the NLRC's affirmance of the Labor Arbiter's

Second. The so-called "talent fees" of respondents correspond

finding that an employer-employee relationship existed

to wages given as a result of an employer-employee

between the parties. Given the fact, however, that Sub-RAB-V-

relationship.1wphi1 Respondents did not have the power to

05-03-00039-08 had not been consolidated with this case and

bargain for huge talent fees, a circumstance negating

appears, for all intents and purposes, to be pending still, the

independent contractual relationship.

Court finds that the reinstatement of petitioners ordered by said

labor officer and tribunal should, as a relief provided in case of

Third. Petitioner could always discharge respondents should it

illegal dismissal, be left for determination in said case.

find their work unsatisfactory, and respondents are highly

dependent on the petitioner for continued work.

WHEREFORE, the Court of Appeals' assailed Decision dated 29

June 2011 and Resolution dated 3 October 2011 in CA-G.R. SP

Fourth. The degree of control and supervision exercised by

No. 116928 are REVERSED and SET ASIDE. Except for the

petitioner over respondents through its supervisors negates the

reinstatement of Nelson V. Begino, Gener Del Valle, Monina

allegation that respondents are independent contractors.

Avila-Llorin and Ma. Cristina Sumayao, the National Labor and

115

SECOND DIVISION
G.R. No. 200114, August 24, 2015
SOCIAL SECURITY SYSTEM, Petitioner, v. DEBBIE
UBAA, Respondent.
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari1 assails: 1) the July 29,
2011 Decision2 of the Court of Appeals (CA) denying the Petition
for Certiorari in CA-G.R. SP No. 110006 and affirming the March
6, 2007 Order3 of the Regional Trial Court (RTC) of Daet,
Camarines Norte, Branch 39 in Civil Case No. 7304; and 2) the
CA's January 10, 2012 Resolution4 denying petitioner's Motion
for Reconsideration of the herein assailed Decision.
Factual Antecedents
On December 26, 2002, respondent Debbie Ubana filed a civil
case for damages against the DBP Service Corporation,
petitioner Social Security System (SSS), and the SSS Retirees
Association5before the RTC of Daet, Camarines Norte. The case
was docketed as Civil Case No. 7304 and assigned to RTC
Branch 39.

22

In her Complaint,6 respondent alleged that in July 1995, she

applied for employment with the petitioner. However, after
passing the examinations and accomplishing all the
requirements for employment, she was instead referred to DBP
Service Corporation for "transitory employment." She took the
pre-employment examination given by DBP Service Corporation
and passed the same. On May 20, 1996, she was told to report
for training to SSS, Naga City branch, for immediate
deployment to SSS Daet branch. On May 28, 1996, she was
made to sign a six-month Service Contract Agreement7 by DBP
Service Corporation, appointing her as clerk for assignment with
SSS Daet branch effective May 27, 1996, with a daily wage of
only P171.00. She was assigned as "Frontliner" of the SSS
Members Assistance Section until December 15, 1999. From
December 16, 1999 to May 15, 2001, she was assigned to the

116

Membership Section as Data Encoder. On December 16, 2001,

she was transferred to the SSS Retirees Association as
Processor at the Membership Section until her resignation on
August 26, 2002. As Processor, she was paid only P229.00 daily
or P5,038.00 monthly, while a regular SSS Processor receives a
monthly salary of P18,622.00 or P846.45 daily wage. Her May
28, 1996 Service Contract Agreement with DBP Service
Corporation was never renewed, but she was required to work
for SSS continuously under different assignments with a
maximum daily salary of only P229.00; at the same time, she
was constantly assured of being absorbed into the SSS plantilla.
Respondent claimed she was qualified for her position as
Processor, having completed required training and passed the
SSS qualifying examination for Computer Operations Course
given by the National Computer Institute, U.P. Diliman from May
16 to June 10, 2001, yet she was not given the proper salary.
Because of the oppressive and prejudicial treatment by SSS,
she was forced to resign on August 26, 2002 as she could no
longer stand being exploited, the agony of dissatisfaction,
anxiety, demoralization, and injustice. She asserted that she
dedicated six years of her precious time faithfully serving SSS,
foregoing more satisfying employment elsewhere, yet she was
merely exploited and given empty and false promises; that
defendants conspired to exploit her and violate civil service
laws and regulations and Civil Code provisions on Human
Relations, particularly Articles 19, 20, and 21. 8 As a result, she
suffered actual losses by way of unrealized income, moral and
exemplary damages, attorney's fees and litigation expenses.
Respondent prayed for an award of P572,682.67 actual
damages representing the difference between the legal and
proper salary she should have received and the actual salary
she received during her six-year stint with petitioner;
P300,000.00 moral damages; exemplary damages at the
discretion of the court; P20,000.00 attorney's fees and
P1,000.00 appearance fees; and other just and equitable relief.
Petitioner and its co-defendants SSS Retirees Association and
DBP Service Corporation filed their respective motions to
dismiss, arguing that the subject matter of the case and
respondent's claims arose out of employer-employee relations,
which are beyond the RTC's jurisdiction and properly cognizable
by the National Labor Relations Commission (NLRC).
Respondent opposed the motions to dismiss, arguing that
pursuant to civil service rules and regulations, service contracts
such as her Service Contract Agreement with DBP Service
Corporation should cover only a) lump sum work or services
such as janitorial, security or consultancy services, and b) piece
work or intermittent jobs of short duration not exceeding six
months on a daily basis.9She posited that her service contract
involved the performance of sensitive work, and not merely
janitorial, security, consultancy services, or work of intermittent
or short duration. In fact, she was made to work continuously

even after the lapse of her 6-month service contract. Citing Civil
Service Commission Memorandum Circular No. 40, respondent
contended that the performance of functions outside of the
nature provided in the appointment and receiving salary way
below that received by regular SSS employees amount to an
abuse of rights; and that her cause of action is anchored on the
provisions of the Civil Code on Human Relations.
Ruling of the Regional Trial Court
On October 1, 2003, the RTC issued an Order10 dismissing
respondent's complaint for lack of jurisdiction, stating that her
claim for damages "has a reasonable causal connection with her
employer-employee relations with the defendants"11 and "is
grounded on the alleged fraudulent and malevolent manner by
which the defendants conspired with each other in exploiting
[her], which is a clear case of unfair labor practice," 12 falling
under the jurisdiction of the Labor Arbiter of the NLRC. Thus, it
decreed:cralawlawlibrary
WHEREFORE, premises considered, the aforementioned Motion
to Dismiss the complaint of the herein plaintiff for lack of
jurisdiction is hereby GRANTED. The above-entitled complaint is
hereby DISMISSED.
SO ORDERED.13
Respondent moved for reconsideration. On March 6, 2007, the
RTC issued another Order14 granting respondent's motion for
reconsideration. The trial court held:cralawlawlibrary
Section 2(1), Art. K-B, 1987 Constitution, expressly provides that
"the civil service embraces all branches, subdivisions,
instrumentalities, and agencies of the government, including
government-owned or controlled corporation[s] with original
charters." Corporations with original charters are those which
have been created by special law[s] and not through the
general corporation law. In contrast, labor law claims against
government-owned and controlled corporations without original
charters fall within the jurisdiction of the Department of Labor
and Employment and not the Civil Service Commission. (Light
Rail Transit Authority vs. Perfecto Venus, March 24, 2006.)
Having been created under an original charter, RA No. 1161 as
amended by R.A. 8282, otherwise known as the Social Security
Act of 1997, the SSS is governed by the provision[s] of the Civil
Service Commission. However, since the SSS denied the
existence of an employer-employee relationship, and the case is
one for Damages, it is not the Civil Service Commission that has
jurisdiction to try the case, but the regular courts.
A perusal of the Complaint filed by the plaintiff against the
defendant SSS clearly shows that the case is one for Damages.
Paragraph 15 of her complaint states,

thus:ChanRoblesvirtualLawlibrary
xxx. Likewise, they are contrary to the Civil Code provisions on
human relations which [state], among others, that Every
person, must in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his
due and observe honesty and good faith (Article 19) and that
Every person who, contrary to law, willfully or negligently
[causes] damages to another, shall indemnify the latter for the
same. (Art. 20)
"Article 19 provides a rule of conduct that is consistent with an
orderly and harmonious relationship between and among men
and women It codifies the concept of what is justice and fair
play so that abuse of right by a person will be prevented. Art.
20 speaks of general sanction for all other provisions of law
which do not especially provide their own sanction. Thus,
anyone, who, whether willfully or negligently, in the exercise of
his legal right or duty, causes damage to another, shall
indemnify his or her victim for injuries suffered thereby."
(Persons and Family Relations, Sta. Maria, Melencio, Jr. (2004)
pp. 31-32.)
Wherefore, all premises considered, the Motion for
Reconsideration is hereby GRANTED. The case against
defendant Social Security System represented by its President is
hereby reinstated in the docket of active civil cases of this
court.
SO ORDERED.15 [Italics in the original]
Petitioner moved for reconsideration, but the RTC stood its
ground in its June 24, 2009 Order16cralawrednad
Ruling of the Court of Appeals
In a Petition for Certiorari17 filed with the CA and docketed as
CA-G.R. SP No. 110006, petitioner sought a reversal of the RTC's
June 24, 2009 and March 6, 2007 Orders and the reinstatement
of its original October 1, 2003 Order dismissing Civil Case No.
7304, insisting that the trial court did not have jurisdiction over
respondent's claims for "unrealized salary income" and other
damages, which constitute a labor dispute cognizable only by
the labor tribunals. Moreover, it claimed that the assailed
Orders of the trial court were issued with grave abuse of
discretion. It argued that the trial court gravely erred in
dismissing the case only as against its co-defendants DBP
Service Corporation and SSS Retirees Association and
maintaining the charge against it, considering that its grounds
for seeking dismissal are similar to those raised by the two. It
maintained that DBP Service Corporation and SSS Retirees
Association are legitimate independent job contractors engaged
by it to provide manpower services since 2001, which thus
makes respondent an employee of these two entities and not of
SSS; and that since it is not the respondent's employer, then

117

there is no cause of action against it.

On July 29, 2011, the CA issued the assailed Decision containing
the following pronouncement:cralawlawlibrary
Hence, petitioner seeks recourse before this Court via this
Petition for Certiorarichallenging the RTC Orders. For the
resolution of this Court is the sole issue of:cralawlawlibrary
WHETHER OR NOT THE RTC HAS JURISDICTION TO HEAR AND
DECIDE CIVIL CASE NO. 7304.
The petition is devoid of merits.
The rule is that, the nature of an action and the subject matter
thereof, as well as, which court or agency of the government
has jurisdiction over the same, are determined by the material
allegations of the complaint in relation to the law involved and
the character of the reliefs prayed for, whether or not the
complainant/plaintiff is entitled to any or all of such reliefs. A
prayer or demand for relief is not part of the petition of the
cause of action; nor does it enlarge the cause of action stated
or change the legal effect of what is alleged. In determining
which body has jurisdiction over a case, the better policy is to
consider not only the status or relationship of the parties but
also the nature of the action that is the subject of their
controversy.
A careful perusal of Ubana's Complaint in Civil Case No. 7304
unveils that Ubana's claim is rooted on the principle of abuse of
right laid in the New Civil Code. She was claiming damages
based on the alleged exploitation [perpetrated] by the
defendants depriving her of her rightful income. In asserting
that she is entitled to the damages claimed, [she] invoked not
the provisions of the Labor Code or any other labor laws but the
provisions on human relations under the New Civil Code.
Evidently, the determination of the respective rights of the
parties herein, and the ascertainment whether there were
abuses of such rights, do not call for the application of the labor
laws but of the New Civil Code. Apropos thereto, the resolution
of the issues raised in the instant complaint does not require
the expertise acquired by labor officials. It is the courts of
general jurisdiction, which is the RTC in this case, which has the
authority to hear and decide Civil Case No. 7304.
Not every dispute between an employer and employee involves
matters that only labor arbiters and the NLRC can resolve in the
exercise of their adjudicatory or quasi-judicial powers. Where
the claim to the principal relief sought is to be resolved not by
reference to the Labor Code or other labor relations statute or a
collective bargaining agreement but by the general civil law,
the jurisdiction over the dispute belongs to the regular courts of
justice and not to the Labor Arbiter and the NLRC. In such
situations, [resolution] of the dispute requires expertise, not in
labor management relations nor in wage structures and other
terms and conditions of employment, but rather in the
application of the general civil law. Clearly, such claims fall

outside the area of competence or expertise ordinarily ascribed

to Labor Arbiters and the NLRC and the rationale for granting
jurisdiction over such claims to these agencies disappears.
It is the character of the principal relief sought that appears
essential in this connection. Where such principal relief is to be
granted under labor legislation or a collective bargaining
agreement, the case should fall within the jurisdiction of the
Labor Arbiter and the NLRC, even though a claim for damages
might be asserted as an incident to such claim.
The pivotal question is whether the Labor Code has any
relevance to the principal relief sought in the complaint. As
pointed out earlier, Ubana did not seek refuge from the Labor
Code in asking for the award of damages. It was the
transgression of Article[s] 19 and 20 of the New Civil Code that
she was insisting in wagering this case. The primary relief
sought herein is for moral and exemplary damages for the
abuse of rights. The claims for actual damages for unrealized
income are the natural consequence for abuse of such rights.
While it is true that labor arbiters and the NLRC have jurisdiction
to award not only reliefs provided by labor laws, but also
damages governed by the Civil Code, these reliefs must still be
based on an action that has a reasonable causal connection
with the Labor Code, other labor statutes, or collective
bargaining agreements. Claims for damages under paragraph 4
of Article 217 must have a reasonable causal connection with
any of the claims provided for in the article in order to be
cognizable by the labor arbiter. Only if there is such a
connection with the other claims can the claim for damages be
considered as arising from employer-employee relations. In the
present case, Ubana's claim for damages is not related to any
other claim under Article 217, other labor statutes, or collective
bargaining agreements.
All told, it is ineluctable that it is the regular courts that has [sic]
jurisdiction to hear and decide Civil Case No. 7304. In Tolosa v.
NLRC,18 the Supreme Court held that, "[i]t is not the NLRC but
the regular courts that have jurisdiction over action for
damages, in which the employer-employee relations is merely
incidental, and in which the cause of action proceeds from a
different source of obligation such as tort. Since petitioner's
claim for damages is predicated on a quasi-delict or tort that
has no reasonable causal connection with any of the claims
provided for in Article 217, other labor statutes or collective
bargaining agreements, jurisdiction over the action lies with the
regular courts not with the NLRC or the labor arbiters." The
same rule applies in this case.
WHEREFORE, premises considered, the instant petition is
DENIED and the Order dated March 6, 2007 of the Regional Trial
Court, Branch 39 of Daet, Camarines Norte in Civil Case No.
7304 is hereby AFFIRMED.

SO ORDERED.19
Petitioner filed a Motion for Reconsideration,20 but the CA denied
the same in its January 10, 2012 Resolution. 21 Hence, the
present Petition.
Issue
Petitioner simply submits that the assailed CA dispositions are
contrary to law and jurisprudence.
Petitioner's Arguments
Praying that the assailed CA dispositions be set aside and that
the RTC's October 1, 2003 Order dismissing Civil Case No. 7304
be reinstated, petitioner essentially maintains in its Petition and
Reply22 that respondent's claims arose from and are in fact
centered on her previous employment. It maintains that there is
a direct causal connection between respondent's claims and her
employment, which brings the subject matter within the
jurisdiction of the NLRC. Petitioner contends that respondent's
other claims are intimately intertwined with her claim of actual
damages which are cognizable by the NLRC. Moreover,
petitioner alleges that its existing manpower services
agreements with DBP Service Corporation and SSS Retirees
Association are legitimate; and that some of respondent's
claims may not be entertained since these pertain to benefits
enjoyed by government employees, not by employees
contracted via legitimate manpower service providers. Finally,
petitioner avers that the nature and character of the reliefs
prayed for by the respondent are directly within the jurisdiction
not of the courts, but of the labor tribunals.
Respondent's Arguments
In her Comment,23 respondent maintains that her case is
predicated not on labor laws but on Articles 19 and 20 of the
Civil Code for petitioner's act of exploiting her and enriching
itself at her expense by not paying her the correct salary
commensurate to the position she held within SSS. Also, since
there is no employer-employee relationship between her and
petitioner, as the latter itself admits, then her case is not
cognizable by the Civil Service Commission (CSC) either; that
since the NLRC and the CSC have no jurisdiction over her case,
then it is only the regular courts which can have jurisdiction
over her claims. She argues that the CA is correct in ruling that
her case is rooted in the principle of abuse of rights under the
Civil Code; and that the Petition did not properly raise issues of
law.
Our Ruling
The Court denies the Petition.

118

In Home Development Mutual Fund v. Commission on Audit,24 it

was held that while they performed the work of regular
government employees, DBP Service Corporation personnel are
not government personnel, but employees of DBP Service
Corporation acting as an independent contractor. Applying the
foregoing pronouncement to the present case, it can be said
that during respondent's stint with petitioner, she never
became an SSS employee, as she remained an employee of
DBP Service Corporation and SSS Retirees Association - the two
being independent contractors with legitimate service contracts
with SSS.
Indeed, "[i]n legitimate job contracting, no employer-employee
relation exists between the principal and the job contractor's
employees. The principal is responsible to the job contractor's
employees only for the proper payment of
wages."25cralawredcralawrednad
In her Complaint, respondent acknowledges that she is not
petitioner's employee, but that precisely she was promised that
she would be absorbed into the SSS plantilla after all her years
of service with SSS; and that as SSS Processor, she was paid
only P229.00 daily or P5,038.00 monthly, while a regular SSS
Processor receives a monthly salary of P18,622.00, or P846.45
daily wage. In its pleadings, petitioner denied the existence of
an employer-employee relationship between it and respondent;
in fact, it insists on the validity of its service agreements with
DBP Service Corporation and SSS Retirees Association meaning that the latter, and not SSS, are respondent's true
employers. Since both parties admit that there is no
employment relation between them, then there is no dispute
cognizable by the NLRC. Thus, respondent's case is premised on
the claim that in paying her only P229.00 daily - or P5,038.00
monthly - as against a monthly salary of P18,622.00, or P846.45
daily wage, paid to a regular SSS Processor at the time,
petitioner exploited her, treated her unfairly, and unjustly
enriched itself at her expense.
For Article 217 of the Labor Code to apply, and in order for the
Labor Arbiter to acquire jurisdiction over a dispute, there must
be an employer-employee relation between the parties
thereto.chanrobleslaw
x x x It is well settled in law and jurisprudence that where no
employer-employee relationship exists between the parties and
no issue is involved which may be resolved by reference to the
Labor Code, other labor statutes or any collective bargaining
agreement, it is the Regional Trial Court that has jurisdiction, x x
x The action is within the realm of civil law hence jurisdiction
over the case belongs to the regular courts. While the resolution
of the issue involves the application of labor laws, reference to
the labor code was only for the determination of the solidary
liability of the petitioner to the respondent where no employeremployee relation exists. Article 217 of the Labor Code as

amended vests upon the labor arbiters exclusive original

jurisdiction only over the following:ChanRoblesvirtualLawlibrary
1. Unfair labor practices;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases
that workers may file involving wages, rates of pay, hours of
work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of
damages arising from employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code,
including questions involving legality of strikes and lockouts;
and
6. Except claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims, arising from
employer- employee relations, including those of persons in
domestic or household service, involving an amount exceeding
five thousand pesos (P5,000.00) regardless of whether
accompanied with a claim for reinstatement.

for equal work'" has been "impregnably institutionalized;"

"[p]ersons who work with substantially equal qualifications,
skill, effort and responsibility, under similar conditions, should
be paid similar salaries."27 "That public policy abhors inequality
and discrimination is beyond contention. Our Constitution and
laws reflect the policy against these evils. The Constitution in
the Article on Social Justice and Human Rights exhorts Congress
to 'give highest priority to the enactment of measures that
protect and enhance the right of all people to human dignity,
reduce social, economic, and political inequalities.' The very
broad Article 19 of the Civil Code requires every person, 'in the
exercise of his rights and in the performance of his duties, [to]
act with justice, give everyone his due, and observe honesty
and good faith'."28cralawrednad
WHEREFORE, the Petition is DENIED. The assailed July 29,
2011 Decision and January 10, 2012 Resolution of the Court of
Appeals in CA-G.R. SP No. 110006 are AFFIRMED. The case is
ordered remanded with dispatch to the Regional Trial Court of
Daet, Camarines Norte, Branch 39, for continuation of
proceedings.
SO ORDERED.

In all these cases, an employer-employee relationship is an

indispensable jurisdictional requisite x x x.26
Since there is no employer-employee relationship between the
parties herein, then there is no labor dispute cognizable by the
Labor Arbiters or the NLRC.
There being no employer-employee relation or any other
definite or direct contract between respondent and petitioner,
the latter being responsible to the former only for the proper
payment of wages, respondent is thus justified in filing a case
against petitioner, based on Articles 19 and 20 of the Civil Code,
to recover the proper salary due her as SSS Processor. At first
glance, it is indeed unfair and unjust that as, Processor who has
worked with petitioner for six long years, she was paid only
P5,038.00 monthly, or P229.00 daily, while a regular SSS
employee with the same designation and who performs
identical functions is paid a monthly salary of P18,622.00, or
P846.45 daily wage. Petitioner may not hide under its service
contracts to deprive respondent of what is justly due her. As a
vital government entity charged with ensuring social security, it
should lead in setting the example by treating everyone with
justice and fairness. If it cannot guarantee the security of those
who work for it, it is doubtful that it can even discharge its
directive to promote the social security of its members in line
with the fundamental mandate to promote social justice and to
insure the well-being and economic security of the Filipino
people.

23
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 118978 May 23, 1997

PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY, *
petitioner,
vs.

In this jurisdiction, the "long honored legal truism of 'equal pay

119

NATIONAL LABOR RELATIONS COMMISSION and GRACE

the probationary period to cover 150 days. In the job application

On November 23, 1993, Labor Arbiter Irenarco R. Rimando

DE GUZMAN, respondents.

form that was furnished her to be filled up for the purpose, she

handed down a decision declaring that private respondent, who

indicated in the portion for civil status therein that she was

had already gained the status of a regular employee, was

single although she had contracted marriage a few months

illegally dismissed by petitioner. Her reinstatement, plus

earlier, that is, on May 26, 1991. 3

payment of the corresponding back wages and COLA, was

REGALADO, J.:

correspondingly ordered, the labor arbiter being of the firmly

It now appears that private respondent had made the same

expressed view that the ground relied upon by petitioner in

Seeking relief through the extraordinary writ of certiorari,

representation in the two successive reliever agreements which

dismissing private respondent was clearly insufficient, and that

petitioner Philippine Telegraph and Telephone Company

she signed on June 10, 1991 and July 8, 1991. When petitioner

it was apparent that she had been discriminated against on

(hereafter, PT & T) invokes the alleged concealment of civil

supposedly learned about the same later, its branch supervisor

account of her having contracted marriage in violation of

status and defalcation of company funds as grounds to

in Baguio City, Delia M. Oficial, sent to private respondent a

company rules.

terminate the services of an employee. That employee, herein

memorandum dated January 15, 1992 requiring her to explain

private respondent Grace de Guzman, contrarily argues that

the discrepancy. In that memorandum, she was reminded about

On appeal to the National Labor Relations Commission (NLRC),

what really motivated PT & T to terminate her services was her

the company's policy of not accepting married women for

said public respondent upheld the labor arbiter and, in its

having contracted marriage during her employment, which is

employment. 4

decision dated April 29, 1994, it ruled that private respondent

prohibited by petitioner in its company policies. She thus claims

had indeed been the subject of an unjust and unlawful

that she was discriminated against in gross violation of law,

In her reply letter dated January 17, 1992, private respondent

discrimination by her employer, PT & T. However, the decision

such a proscription by an employer being outlawed by Article

stated that she was not aware of PT&T's policy regarding

of the labor arbiter was modified with the qualification that

136 of the Labor Code.

married women at the time, and that all along she had not

Grace de Guzman deserved to be suspended for three months

deliberately hidden her true civil status. Petitioner nonetheless

in view of the dishonest nature of her acts which should not be

Grace de Guzman was initially hired by petitioner as a reliever,

remained unconvinced by her explanations. Private respondent

condoned. In all other respects, the NLRC affirmed the decision

specifically as a "Supernumerary Project Worker," for a fixed

was dismissed from the company effective January 29,

of the labor arbiter, including the order for the reinstatement of

period from November 21, 1990 until April 20, 1991 vice one

1992, 6 which she readily contested by initiating a complaint for

private respondent in her employment with PT & T.

C.F. Tenorio who went on maternity leave. Under the Reliever

illegal dismissal, coupled with a claim for non-payment of cost

Agreement which she signed with petitioner company, her

of living allowances (COLA), before the Regional Arbitration

The subsequent motion for reconsideration filed by petitioner

employment was to be immediately terminated upon expiration

Branch of the National Labor Relations Commission in Baguio

was rebuffed by respondent NLRC in its resolution of November

of the agreed period. Thereafter, from June 10, 1991 to July 1,

City.

9, 1994, hence this special civil action assailing the aforestated

1991, and from July 19, 1991 to August 8, 1991, private

decisions of the labor arbiter and respondent NLRC, as well as

respondent's services as reliever were again engaged by

At the preliminary conference conducted in connection

petitioner, this time in replacement of one Erlinda F. Dizon who

therewith, private respondent volunteered the information, and

went on leave during both periods. 2 After August 8, 1991, and

this was incorporated in the stipulation of facts between the

1. Decreed in the Bible itself is the universal norm that women

pursuant to their Reliever Agreement, her services were

parties, that she had failed to remit the amount of P2,380.75 of

should be regarded with love and respect but, through the ages,

terminated.

her collections. She then executed a promissory note for that

men have responded to that injunction with indifference, on the

the denial resolution of the latter.

amount in favor of petitioner . All of these took place in a

hubristic conceit that women constitute the inferior sex.

On September 2, 1991, private respondent was once more

formal proceeding and with the agreement of the parties and/or

Nowhere has that prejudice against womankind been so

asked to join petitioner company as a probationary employee,

their counsel.

pervasive as in the field of labor, especially on the matter of

120

equal employment opportunities and standards. In the

order-bride" practice for a fee and the export of female labor to

3. Acknowledged as paramount in the due process scheme is

Philippine setting, women have traditionally been considered as

countries that cannot guarantee protection to the rights of

the constitutional guarantee of protection to labor and security

falling within the vulnerable groups or types of workers who

women workers; Republic Act No. 7192

must be safeguarded with preventive and remedial social

"Women in Development and Nation Building Act," which affords

qua non prior to severance of the employment ties of an

legislation against discriminatory and exploitative practices in

women equal opportunities with men to act and to enter into

individual under his employ, to convincingly establish, through

hiring, training, benefits, promotion and retention.

contracts, and for appointment, admission, training, graduation,

substantial evidence, the existence of a valid and just cause in

and commissioning in all military or similar schools of the

dispensing with the services of such employee, one's labor

The Constitution, cognizant of the disparity in rights between

Armed Forces of the Philippines and the Philippine National

being regarded as constitutionally protected property.

men and women in almost all phases of social and political life,

Police; Republic Act No. 7322

provides a gamut of protective provisions. To cite a few of the

benefits granted to women in the private sector; Republic Act

primordial ones, Section 14, Article II 8on the Declaration of

No. 7877

Principles and State Policies, expressly recognizes the role of

the workplace and in the education and training environment;

women in nation-building and commands the State to ensure, at

and Republic Act No. 8042,

all times, the fundamental equality before the law of women

Overseas Filipinos Act of 1995," which prescribes as a matter of

methods and assignments, as well as regulations on the

and men. Corollary thereto, Section 3 of Article XIII 9 (the

policy, inter alia, the deployment of migrant workers, with

transfer of employees, lay-off of workers, and the discipline,

progenitor whereof dates back to both the 1935 and 1973

emphasis on women, only in countries where their rights are

dismissal, and recall of employees.

Constitution) pointedly requires the State to afford full

secure. Likewise, it would not be amiss to point out that in the

employer is free to regulate, according to his discretion and

protection to labor and to promote full employment and

Family Code,

equality of employment opportunities for all, including an

greatly enhanced and expanded.

16

15

14

also known as the

increasing the maternity

which outlaws and punishes sexual harassment in

18

17

or the "Migrant Workers and

women's rights in the field of civil law have been

assurance of entitlement to tenurial security of all workers.

Similarly, Section 14 of Article XIII

10

mandates that the State

of tenure. Thus, an employer is required, as a condition sine

On the other hand, it is recognized that regulation of manpower

by the company falls within the so-called management
prerogatives, which prescriptions encompass the matter of
hiring, supervision of workers, work assignments, working

19

As put in a case, an

best business judgment, all aspects of employment, "from

hiring to firing," except in cases of unlawful discrimination or
those which may be provided by law.

20

In the Labor Code, provisions governing the rights of women

shall protect working women through provisions for

workers are found in Articles 130 to 138 thereof. Article 130

In the case at bar, petitioner's policy of not accepting or

opportunities that would enable them to reach their full

involves the right against particular kinds of night work while

considering as disqualified from work any woman worker who

potential.

Article 132 ensures the right of women to be provided with

contracts marriage runs afoul of the test of, and the right

facilities and standards which the Secretary of Labor may

against, discrimination, afforded all women workers by our labor

2. Corrective labor and social laws on gender inequality have

establish to ensure their health and safety. For purposes of labor

laws and by no less than the Constitution. Contrary to

emerged with more frequency in the years since the Labor Code

and social legislation, a woman working in a nightclub, cocktail

petitioner's assertion that it dismissed private respondent from

was enacted on May 1, 1974 as Presidential Decree No. 442,

lounge, massage clinic, bar or other similar establishments shall

employment on account of her dishonesty, the record discloses

largely due to our country's commitment as a signatory to the

be considered as an employee under Article 138. Article 135, on

clearly that her ties with the company were dissolved principally

United Nations Convention on the Elimination of All Forms of

the other hand, recognizes a woman's right against

because of the company's policy that married women are not

discrimination with respect to terms and conditions of

qualified for employment in PT & T, and not merely because of

employment on account simply of sex. Finally, and this brings

her supposed acts of dishonesty.

Discrimination Against Women (CEDAW).

11

Principal among these laws are Republic Act No. 6727

12

which

us to the issue at hand, Article 136 explicitly prohibits

explicitly prohibits discrimination against women with respect to

discrimination merely by reason of the marriage of a female

That it was so can easily be seen from the memorandum sent to

terms and conditions of employment, promotion, and training

employee.

private respondent by Delia M. Oficial, the branch supervisor of

opportunities; Republic Act No. 6955

13

which bans the "mail-

the company, with the reminder, in the words of the latter, that

121

"you're fully aware that the company is not accepting married

Petitioner would asseverate, therefore, that while it has nothing

company funds, as an additional ground to dismiss her from

women employee (sic), as it was verbally instructed to

against marriage, it nonetheless takes umbrage over the

employment, is somewhat insincere and self-serving.

concealment of that fact. This improbable reasoning, with

Concededly, private respondent admitted in the course of the

branch supervisor, private respondent was made to understand

interstitial distinctions, perturbs the Court since private

proceedings that she failed to remit some of her collections, but

that her severance from the service was not only by reason of

respondent may well be minded to claim that the imputation of

that is an altogether different story. The fact is that she was

her concealment of her married status but, over and on top of

dishonesty should be the other way around.

dismissed solely because of her concealment of her marital

you."

21

Again, in the termination notice sent to her by the same

that, was her violation of the company's policy against marriage

("and even told you that married women employees are not

status, and not on the basis of that supposed defalcation of

Petitioner would have the Court believe that although private

company funds. That the labor arbiter would thus consider

respondent defied its policy against its female employees

petitioner's submissions on this supposed dishonesty as a mere

this seems to be the curious reason why it was made to appear

contracting marriage, what could be an act of insubordination

afterthought, just to bolster its case for dismissal, is a

in the initiatory pleadings that petitioner was represented in this

was inconsequential. What it submits as unforgivable is her

perceptive conclusion born of experience in labor cases. For,

case only by its said supervisor and not by its highest ranking

concealment of that marriage yet, at the same time, declaring

there was no showing that private respondent deliberately

officers who would otherwise be solidarily liable with the

that marriage as a trivial matter to which it supposedly has no

misappropriated the amount or whether her failure to remit the

objection. In other words, PT & T says it gives its blessings to its

same was through negligence and, if so, whether the

female employees contracting marriage, despite the maternity

negligence was in nature simple or grave. In fact, it was merely

Verily, private respondent's act of concealing the true nature of

leaves and other benefits it would consequently respond for and

agreed that private respondent execute a promissory note to

her status from PT & T could not be properly characterized as

which obviously it would have wanted to avoid. If that employee

refund the same, which she did, and the matter was deemed

willful or in bad faith as she was moved to act the way she did

confesses such fact of marriage, there will be no sanction; but if

settled as a peripheral issue in the labor case.

mainly because she wanted to retain a permanent job in a

such employee conceals the same instead of proceeding to the

stable company. In other words, she was practically forced by

confessional, she will be dismissed. This line of reasoning does

Private respondent, it must be observed, had gained regular

that very same illegal company policy into misrepresenting her

not impress us as reflecting its true management policy or that

status at the time of her dismissal. When she was served her

civil status for fear of being disqualified from work. While loss of

we are being regaled with responsible advocacy.

walking papers on January 29, 1992, she was about to complete

applicable [sic] or accepted in our company.")

corporation.

22

Parenthetically,

23

confidence is a just cause for termination of employment, it

should not be simulated.

24

It must rest on an actual breach of

the probationary period of 150 days as she was contracted as a

This Court should be spared the ennui of strained reasoning and

probationary employee on September 2, 1991. That her

the tedium of propositions which confuse through less than

dismissal would be effected just when her probationary period

candid arguments. Indeed, petitioner glosses over the fact that

was winding down clearly raises the plausible conclusion that it

it was its unlawful policy against married women, both on the

was done in order to prevent her from earning security of

aspects of qualification and retention, which compelled private

tenure.

respondent to conceal her supervenient marriage. It was,

company as reliever were undoubtedly those of a regular

In the present controversy, petitioner's expostulations that it

however, that very policy alone which was the cause of private

employee, even if the same were for fixed periods, as she

dismissed private respondent, not because the latter got

respondent's secretive conduct now complained of. It is then

performed activities which were essential or necessary in the

married but because she concealed that fact, does have a

apropos to recall the familiar saying that he who is the cause of

usual trade and business of PT & T.

hollow ring. Her concealment, so it is claimed, bespeaks

the cause is the cause of the evil caused.

determining regular employment is the reasonable connection

duty committed by the employee and not on the employer's

caprices.

25

Furthermore, it should never be used as a

subterfuge for causes which are improper, illegal, or

unjustified.

26

dishonesty hence the consequent loss of confidence in her

which justified her dismissal.

27

On the other hand, her earlier stints with the

28

The primary standard of

between the activity performed by the employee in relation to

Finally, petitioner's collateral insistence on the admission of

the business or trade of the employer.

29

private respondent that she supposedly misappropriated

122

As an employee who had therefore gained regular status, and

Child Labor Law," which amended paragraph (c), Section 12 of

32

as she had been dismissed without just cause, she is entitled to

Republic Act No. 679,

reinstatement without loss of seniority rights and other

Employment of Women and Children, to Provide Penalties for

affected or their labor unions in challenging

privileges and to full back wages, inclusive of allowances and

Violations Thereof, and for Other Purposes." The forerunner to

the validity of the policy, the same was able

Republic Act No. 679, on the other hand, was Act No. 3071

to obtain a momentary reprieve. A close look

had undeniably committed an act of dishonesty in concealing

which became law on March 16, 1923 and which regulated the

at Section 8 of said decree, which amended

her status, albeit under the compulsion of an unlawful

employment of women and children in shops, factories,

paragraph (c) of Section 12 of Republic Act

imposition of petitioner, the three-month suspension imposed

industrial, agricultural, and mercantile establishments and other

No. 679, reveals that it is exactly the same

by respondent NLRC must be upheld to obviate the impression

places of labor in the then Philippine Islands.

provision reproduced verbatim in Article 136

other benefits or their monetary equivalent.

30

However, as she

entitled "An Act to Regulate the

as the Women and Child Labor Law, was

promulgated. But for the timidity of those

or inference that such act should be condoned. It would be

unfair to the employer if she were to return to its fold without

of the Labor Code, which was promulgated on

It would be worthwhile to reflect upon and adopt here the
33

any sanction whatsoever for her act which was not totally

rationalization in Zialcita, et al. vs. Philippine Air Lines,

justified. Thus, her entitlement to back wages, which shall be

decision that emanated from the Office of the President. There,

computed from the time her compensation was withheld up to

a policy of Philippine Air Lines requiring that prospective flight

It cannot be gainsaid that, with the reiteration

the time of her actual reinstatement, shall be reduced by

attendants must be single and that they will be automatically

of the same provision in the new Labor Code,

deducting therefrom the amount corresponding to her three

separated from the service once they marry was declared void,

all policies and acts against it are deemed

months suspension.

it being violative of the clear mandate in Article 136 of the

illegal and therefore abrogated. True, Article

Labor Code with regard to discrimination against married

132 enjoins the Secretary of Labor to

women. Thus:

establish standards that will ensure the safety

4. The government, to repeat, abhors any stipulation or policy in

May 1, 1974 to take effect six (6) months

the nature of that adopted by petitioner PT & T. The Labor Code

state, in no uncertain terms, as follows:

later, or on November 1, 1974.

and health of women employees and in

Of first impression is the incompatibility of the

appropriate cases shall by regulation require

respondent's policy or regulation with the

employers to determine appropriate minimum

Art. 136. Stipulation against marriage. It

codal provision of law. Respondent is resolute

standards for termination in special

shall be unlawful for an employer to require as

in its contention that Article 136 of the Labor

occupations, such as those of flight

a condition of employment or continuation of

Code applies only to women employed in

attendants, but that is precisely the factor

employment that a woman shall not get

ordinary occupations and that the prohibition

that militates against the policy of

married, or to stipulate expressly or tacitly

against marriage of women engaged in

respondent. The standards have not yet been

that upon getting married, a woman

extraordinary occupations, like flight

established as set forth in the first paragraph,

employee shall be deemed resigned or

attendants, is fair and reasonable, considering

nor has the Secretary of Labor issued any

separated, or to actually dismiss, discharge,

the pecularities of their chosen profession.

regulation affecting flight attendants.

We cannot subscribe to the line of reasoning

It is logical to presume that, in the absence of

pursued by respondent. All along, it knew that

said standards or regulations which are as yet

the controverted policy has already met its

to be established, the policy of respondent

doom as early as March 13, 1973 when

against marriage is patently illegal. This finds

discriminate or otherwise prejudice a woman

employee merely by reason of marriage.
This provision had a studied history for its origin can be traced
to Section 8 of Presidential Decree No. 148,
the "Women and

31

better known as

Presidential Decree No. 148, otherwise known

123

support in Section 9 of the New Constitution,

the provisions of Articles 52 and 216 of the

gets married. Branding the policy of the employer as an

which provides:

New Civil Code on the preservation of

example of "discriminatory chauvinism" tantamount to denying

marriage as an inviolable social institution

equal employment opportunities to women simply on account

Sec. 9. The State shall afford protection to

and the family as a basic social institution,

of their sex, the appellate court struck down said employer

labor, promote full employment and equality

respectively, as bases for its policy of non-

policy as unlawful in view of its repugnance to the Civil Code,

in employment, ensure equal work

marriage. In both instances, respondent

Presidential Decree No. 148 and the Constitution.

opportunities regardless of sex, race, or

predicates absence of a flight attendant from

creed, and regulate the relations between

her home for long periods of time as

Under American jurisprudence, job requirements which

workers and employees. The State shall

contributory to an unhappy married life. This

establish employer preference or conditions relating to the

assure the rights of workers to self-

is pure conjecture not based on actual

marital status of an employee are categorized as a "sex-plus"

organization, collective bargaining, security of

conditions, considering that, in this modern

discrimination where it is imposed on one sex and not on the

tenure, and just and humane conditions of

world, sophisticated technology has narrowed

other. Further, the same should be evenly applied and must not

work . . . .

the distance from one place to another.

inflict adverse effects on a racial or sexual group which is

Moreover, respondent overlooked the fact that

protected by federal job discrimination laws. Employment rules

Moreover, we cannot agree to the

married flight attendants can program their

that forbid or restrict the employment of married women, but

respondent's proposition that termination

lives to adapt to prevailing circumstances and

do not apply to married men, have been held to violate Title VII

from employment of flight attendants on

events.

of the United States Civil Rights Act of 1964, the main federal

account of marriage is a fair and reasonable

statute prohibiting job discrimination against employees and

Article 136 is not intended to apply only to

safety, protection and welfare, as no basis has

women employed in ordinary occupations, or

been laid therefor. Actually, respondent claims

it should have categorically expressed so. The

Further, it is not relevant that the rule is not directed against all

that its concern is not so much against the

sweeping intendment of the law, be it on

women but just against married women. And, where the

continued employment of the flight attendant

special or ordinary occupations, is reflected in

employer discriminates against married women, but not against

merely by reason of marriage as observed by

the whole text and supported by Article 135

married men, the variable is sex and the discrimination is

the Secretary of Labor, but rather on the

that speaks of non-discrimination on the

unlawful.

consequence of marriage-pregnancy.

employment of women.

employee must remain unmarried could be justified as a "bona

Respondent discussed at length in the instant

applicants on the basis of, among other things, sex.

35

standard designed for their own health,

36

Upon the other hand, a requirement that a woman

fide occupational qualification," or BFOQ, where the particular

appeal the supposed ill effects of pregnancy

The judgment of the Court of Appeals in Gualberto, et

on flight attendants in the course of their

al. vs. Marinduque Mining & Industrial Corporation

employment. We feel that this needs no

as void a policy of the same nature. In said case, respondent, in

spreading work in the workplace. A requirement of that nature

further discussion as it had been adequately

dismissing from the service the complainant, invoked a policy of

would be valid provided it reflects an inherent quality

explained by the Secretary of Labor in his

the firm to consider female employees in the project it was

reasonably necessary for satisfactory job performance. Thus, in

decision of May 2, 1976.

undertaking as separated the moment they get married due to

one case, a no-marriage rule applicable to both male and

34

considered

requirements of the job would justify the same, but not on the
ground of a general principle, such as the desirability of

lack of facilities for married women. Respondent further claimed

female flight attendants, was regarded as unlawful since the

In a vain attempt to give meaning to its

that complainant was employed in the project with an oral

restriction was not related to the job performance of the flight

position, respondent went as far as invoking

understanding that her services would be terminated when she

attendants.

37

124

5. Petitioner's policy is not only in derogation of the provisions

SO ORDERED.

of Article 136 of the Labor Code on the right of a woman to be

free from any kind of stipulation against marriage in connection
with her employment, but it likewise assaults good morals and
public policy, tending as it does to deprive a woman of the
freedom to choose her status, a privilege that by all accounts
inheres in the individual as an intangible and inalienable
right.

38

Hence, while it is true that the parties to a contract may

establish any agreements, terms, and conditions that they may

deem convenient, the same should not be contrary to law,
morals, good customs, public order, or public policy.

39

Carried

to its logical consequences, it may even be said that petitioner's

policy against legitimate marital bonds would encourage illicit
or common-law relations and subvert the sacrament of
marriage.
Parenthetically, the Civil Code provisions on the contract of
labor state that the relations between the parties, that is, of

24

capital and labor, are not merely contractual, impressed as they

Republic of the Philippines

are with so much public interest that the same should yield to
the common good.

40

SUPREME COURT

It goes on to intone that neither capital

Manila

nor labor should visit acts of oppression against the other, nor
impair the interest or convenience of the public.

41

In the final
SECOND DIVISION

reckoning, the danger of just such a policy against marriage

followed by petitioner PT & T is that it strikes at the very
essence, ideals and purpose of marriage as an inviolable social

G.R. No. 162994

September 17, 2004

institution and, ultimately, of the family as the foundation of the

nation.

42

That it must be effectively interdicted here in all its

DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and

indirect, disguised or dissembled forms as discriminatory

PEDRO A. TECSON, petitioners,

conduct derogatory of the laws of the land is not only in order

vs.

but imperatively required.

GLAXO WELLCOME PHILIPPINES, INC., Respondent.

RESOLUTION

ON THE FOREGOING PREMISES, the petition of Philippine

Telegraph and Telephone Company is hereby DISMISSED for lack
of merit, with double costs against petitioner.

TINGA, J.:

125

Confronting the Court in this petition is a novel question, with

Subsequently, Tecson entered into a romantic relationship with

3

In November 1999, Glaxo transferred Tecson to the Butuan City-

constitutional overtones, involving the validity of the policy of a

Bettsy, an employee of Astra Pharmaceuticals (Astra), a

Surigao City-Agusan del Sur sales area. Tecson asked Glaxo to

pharmaceutical company prohibiting its employees from

competitor of Glaxo. Bettsy was Astras Branch Coordinator in

reconsider its decision, but his request was denied.

marrying employees of any competitor company.

Albay. She supervised the district managers and medical

This is a Petition for Review on Certiorari assailing

representatives of her company and prepared marketing

Tecson sought Glaxos reconsideration regarding his transfer

strategies for Astra in that area.

and brought the matter to Glaxos Grievance Committee. Glaxo,

the Decision1 dated May 19, 2003 and the Resolution dated

however, remained firm in its decision and gave Tescon until

March 26, 2004 of the Court of Appeals in CA-G.R. SP No.

Even before they got married, Tecson received several

February 7, 2000 to comply with the transfer order. Tecson

62434.2

reminders from his District Manager regarding the conflict of

defied the transfer order and continued acting as medical

interest which his relationship with Bettsy might engender. Still,

representative in the Camarines Sur-Camarines Norte sales

love prevailed, and Tecson married Bettsy in September 1998.

area.

representative on October 24, 1995, after Tecson had

In January 1999, Tecsons superiors informed him that his

During the pendency of the grievance proceedings, Tecson was

undergone training and orientation.

marriage to Bettsy gave rise to a conflict of interest. Tecsons

paid his salary, but was not issued samples of products which

superiors reminded him that he and Bettsy should decide which

were competing with similar products manufactured by Astra.

Thereafter, Tecson signed a contract of employment which

one of them would resign from their jobs, although they told

He was also not included in product conferences regarding such

stipulates, among others, that he agrees to study and abide by

him that they wanted to retain him as much as possible

products.

existing company rules; to disclose to management any existing

because he was performing his job well.

Petitioner Pedro A. Tecson (Tecson) was hired by respondent

Glaxo Wellcome Philippines, Inc. (Glaxo) as medical

or future relationship by consanguinity or affinity with co-

Because the parties failed to resolve the issue at the grievance

employees or employees of competing drug companies and

Tecson requested for time to comply with the company policy

machinery level, they submitted the matter for voluntary

should management find that such relationship poses a possible

against entering into a relationship with an employee of a

arbitration. Glaxo offered Tecson a separation pay of one-half

conflict of interest, to resign from the company.

competitor company. He explained that Astra, Bettsys

() month pay for every year of service, or a total

employer, was planning to merge with Zeneca, another drug

of P50,000.00 but he declined the offer. On November 15, 2000,

The Employee Code of Conduct of Glaxo similarly provides that

company; and Bettsy was planning to avail of the redundancy

the National Conciliation and Mediation Board (NCMB) rendered

an employee is expected to inform management of any existing

package to be offered by Astra. With Bettsys separation from

its Decision declaring as valid Glaxos policy on relationships

or future relationship by consanguinity or affinity with co-

her company, the potential conflict of interest would be

between its employees and persons employed with competitor

employees or employees of competing drug companies. If

eliminated. At the same time, they would be able to avail of the

companies, and affirming Glaxos right to transfer Tecson to

management perceives a conflict of interest or a potential

attractive redundancy package from Astra.

another sales territory.

employment with the company, the management and the

In August 1999, Tecson again requested for more time resolve

Aggrieved, Tecson filed a Petition for Review with the Court of

employee will explore the possibility of a "transfer to another

the problem. In September 1999, Tecson applied for a transfer

Appeals assailing the NCMB Decision.

department in a non-counterchecking position" or preparation

in Glaxos milk division, thinking that since Astra did not have a

for employment outside the company after six months.

milk division, the potential conflict of interest would be

On May 19, 2003, the Court of Appeals promulgated

eliminated. His application was denied in view of Glaxos "least-

its Decision denying the Petition for Review on the ground that

movement-possible" policy.

the NCMB did not err in rendering its Decision. The appellate

conflict between such relationship and the employees

Tecson was initially assigned to market Glaxos products in the

Camarines Sur-Camarines Norte sales area.

court held that Glaxos policy prohibiting its employees from

126

having personal relationships with employees of competitor

companies is a valid exercise of its management prerogatives.

Tecson filed a Motion for Reconsideration of the appellate

violate the equal protection clause; and that Tecsons

respondent if the management finds that his relationship with

reassignment from the Camarines Norte-Camarines Sur sales

an employee of a competitor company would be detrimental to

area to the Butuan City-Surigao City and Agusan del Sur sales

the interests of Glaxo.14

area does not amount to constructive dismissal. 9

courts Decision, but the motion was denied by the appellate

court in its Resolution dated March 26, 2004.

Glaxo likewise insists that Tecsons reassignment to another

Glaxo insists that as a company engaged in the promotion and

sales area and his exclusion from seminars regarding

sale of pharmaceutical products, it has a genuine interest in

respondents new products did not amount to constructive

Petitioners filed the instant petition, arguing therein that (i) the

ensuring that its employees avoid any activity, relationship or

dismissal.

Court of Appeals erred in affirming the NCMBs finding that the

interest that may conflict with their responsibilities to the

Glaxos policy prohibiting its employees from marrying an

company. Thus, it expects its employees to avoid having

It claims that in view of Tecsons refusal to resign, he was

employee of a competitor company is valid; and (ii) the Court of

personal or family interests in any competitor company which

relocated from the Camarines Sur-Camarines Norte sales area

Appeals also erred in not finding that Tecson was constructively

may influence their actions and decisions and consequently

to the Butuan City-Surigao City and Agusan del Sur sales area.

dismissed when he was transferred to a new sales territory, and

deprive Glaxo of legitimate profits. The policy is also aimed at

Glaxo asserts that in effecting the reassignment, it also

deprived of the opportunity to attend products seminars and

preventing a competitor company from gaining access to its

considered the welfare of Tecsons family. Since Tecsons

training sessions.6

secrets, procedures and policies.10

hometown was in Agusan del Sur and his wife traces her roots

Petitioners contend that Glaxos policy against employees

It likewise asserts that the policy does not prohibit marriage per

region to the Butuan City sales area would be favorable to him

marrying employees of competitor companies violates the equal

se but only proscribes existing or future relationships with

and his family as he would be relocating to a familiar territory

protection clause of the Constitution because it creates invalid

employees of competitor companies, and is therefore not

and minimizing his travel expenses.15

distinctions among employees on account only of marriage.

violative of the equal protection clause. It maintains that

They claim that the policy restricts the employees right to

considering the nature of its business, the prohibition is based

to Butuan City, Glaxo assumed that his transfer from the Bicol

marry.

on valid grounds.

11

In addition, Glaxo avers that Tecsons exclusion from the

seminar concerning the new anti-asthma drug was due to the
fact that said product was in direct competition with a drug

They also argue that Tecson was constructively dismissed as

According to Glaxo, Tecsons marriage to Bettsy, an employee of

which was soon to be sold by Astra, and hence, would pose a

shown by the following circumstances: (1) he was transferred

Astra, posed a real and potential conflict of interest. Astras

potential conflict of interest for him. Lastly, the delay in

from the Camarines Sur-Camarines Norte sales area to the

products were in direct competition with 67% of the products

Tecsons receipt of his sales paraphernalia was due to the mix-

Butuan-Surigao-Agusan sales area, (2) he suffered a diminution

sold by Glaxo. Hence, Glaxos enforcement of the foregoing

up created by his refusal to transfer to the Butuan City sales

in pay, (3) he was excluded from attending seminars and

policy in Tecsons case was a valid exercise of its management

area (his paraphernalia was delivered to his new sales area

training sessions for medical representatives, and (4) he was

prerogatives.12 In any case, Tecson was given several months to

instead of Naga City because the supplier thought he already

prohibited from promoting respondents products which were

remedy the situation, and was even encouraged not to resign

transferred to Butuan).16

competing with Astras products.

but to ask his wife to resign form Astra instead.

13

The Court is tasked to resolve the following issues: (1) Whether

In its Comment on the petition, Glaxo argues that the company

Glaxo also points out that Tecson can no longer question the

the Court of Appeals erred in ruling that Glaxos policy against

policy prohibiting its employees from having a relationship with

assailed company policy because when he signed his contract

its employees marrying employees from competitor companies

and/or marrying an employee of a competitor company is a

of employment, he was aware that such policy was stipulated

is valid, and in not holding that said policy violates the equal

valid exercise of its management prerogatives and does not

therein. In said contract, he also agreed to resign from

127

protection clause of the Constitution; (2) Whether Tecson was

supplier or other businesses which may

No reversible error can be ascribed to the Court of Appeals

constructively dismissed.

consciously or unconsciously influence their

when it ruled that Glaxos policy prohibiting an employee from

actions or decisions and thus deprive Glaxo

having a relationship with an employee of a competitor

The Court finds no merit in the petition.

Wellcome of legitimate profit.

company is a valid exercise of management prerogative.

The stipulation in Tecsons contract of employment with Glaxo

b. To refrain from using their position in Glaxo

Glaxo has a right to guard its trade secrets, manufacturing

being questioned by petitioners provides:

Wellcome or knowledge of Company plans to

formulas, marketing strategies and other confidential programs

advance their outside personal interests, that

and information from competitors, especially so that it and

of their relatives, friends and other

Astra are rival companies in the highly competitive

businesses.

pharmaceutical industry.

or future relationship you may have, either by

c. To avoid outside employment or other

The prohibition against personal or marital relationships with

consanguinity or affinity with co-employees or

interests for income which would impair their

employees of competitor companies upon Glaxos employees is

employees of competing drug companies. Should it

effective job performance.

reasonable under the circumstances because relationships of

10. You agree to disclose to management any existing

pose a possible conflict of interest in management

that nature might compromise the interests of the company. In

discretion, you agree to resign voluntarily from the

d. To consult with Management on such

laying down the assailed company policy, Glaxo only aims to

Company as a matter of Company policy.

activities or relationships that may lead to

protect its interests against the possibility that a competitor

conflict of interest.

company will gain access to its secrets and procedures.

17
1.1. Employee Relationships
The same contract also stipulates that Tescon agrees to abide

That Glaxo possesses the right to protect its economic interests

cannot be denied. No less than the Constitution recognizes the

by the existing company rules of Glaxo, and to study and

Employees with existing or future relationships either

right of enterprises to adopt and enforce such a policy to

become acquainted with such policies.18 In this regard, the

by consanguinity or affinity with co-employees of

protect its right to reasonable returns on investments and to

Employee Handbook of Glaxo expressly informs its employees

competing drug companies are expected to disclose

expansion and growth.20 Indeed, while our laws endeavor to

of its rules regarding conflict of interest:

such relationship to the Management. If management

give life to the constitutional policy on social justice and the

perceives a conflict or potential conflict of interest,

protection of labor, it does not mean that every labor dispute

every effort shall be made, together by management

will be decided in favor of the workers. The law also recognizes

1. Conflict of Interest

and the employee, to arrive at a solution within six (6)

that management has rights which are also entitled to respect

Employees should avoid any activity, investment

months, either by transfer to another department in a

and enforcement in the interest of fair play. 21

relationship, or interest that may run counter to the

non-counter checking position, or by career

responsibilities which they owe Glaxo Wellcome.

preparation toward outside employment after Glaxo

As held in a Georgia, U.S.A case,22 it is a legitimate business

Wellcome. Employees must be prepared for possible

practice to guard business confidentiality and protect a

resignation within six (6) months, if no other solution is

competitive position by even-handedly disqualifying from jobs

Specifically, this means that employees are expected:

19

feasible.

male and female applicants or employees who are married to a

a. To avoid having personal or family interest,

competitor. Consequently, the court ruled than an employer

financial or otherwise, in any competitor

that discharged an employee who was married to an employee

128

of an active competitor did not violate Title VII of the Civil Rights

aimed at restricting a personal prerogative that

. . . In this case, petitioners transfer to another place

Act of 1964. The Court pointed out that the policy was applied

belongs only to the individual. However, an employees

of assignment was merely in keeping with the policy of

to men and women equally, and noted that the employers

personal decision does not detract the employer from

the company in avoidance of conflict of interest, and

business was highly competitive and that gaining inside

exercising management prerogatives to ensure

thus validNote that [Tecsons] wife holds a sensitive

information would constitute a competitive advantage.

maximum profit and business success. . .28

supervisory position as Branch Coordinator in her

23

employer-company which requires her to work in close

The challenged company policy does not violate the equal

The Court of Appeals also correctly noted that the assailed

coordination with District Managers and Medical

protection clause of the Constitution as petitioners erroneously

company policy which forms part of respondents Employee

Representatives. Her duties include monitoring sales of

suggest. It is a settled principle that the commands of the equal

Code of Conduct and of its contracts with its employees, such

Astra products, conducting sales drives, establishing

protection clause are addressed only to the state or those

as that signed by Tescon, was made known to him prior to his

and furthering relationship with customers, collection,

acting under color of its authority.24 Corollarily, it has been held

employment. Tecson, therefore, was aware of that restriction

monitoring and managing Astras inventoryshe

in a long array of U.S. Supreme Court decisions that the equal

when he signed his employment contract and when he entered

therefore takes an active participation in the market

protection clause erects no shield against merely private

into a relationship with Bettsy. Since Tecson knowingly and

war characterized as it is by stiff competition among

voluntarily entered into a contract of employment with Glaxo,

pharmaceutical companies. Moreover, and this is

the stipulations therein have the force of law between them

significant, petitioners sales territory covers

conduct, however, discriminatory or wrongful.

25

The only

exception occurs when the state29 in any of its manifestations or

actions has been found to have become entwined or involved in

and, thus, should be complied with in good faith."

the wrongful private conduct.27 Obviously, however, the

therefore estopped from questioning said policy.

29

He is

exception is not present in this case. Significantly, the company

Camarines Sur and Camarines Norte while his wife is

supervising a branch of her employer in Albay. The
proximity of their areas of responsibility, all in the

actually enforced the policy after repeated requests to the

The Court finds no merit in petitioners contention that Tescon

same Bicol Region, renders the conflict of interest not

employee to comply with the policy. Indeed, the application of

was constructively dismissed when he was transferred from the

only possible, but actual, as learning by one spouse of

the policy was made in an impartial and even-handed manner,

Camarines Norte-Camarines Sur sales area to the Butuan City-

the others market strategies in the region would be

with due regard for the lot of the employee.

Surigao City-Agusan del Sur sales area, and when he was

inevitable. [Managements] appreciation of a conflict of

excluded from attending the companys seminar on new

interest is therefore not merely illusory and wanting in

In any event, from the wordings of the contractual provision and

products which were directly competing with similar products

factual basis31

the policy in its employee handbook, it is clear that Glaxo does

manufactured by Astra. Constructive dismissal is defined as a

not impose an absolute prohibition against relationships

quitting, an involuntary resignation resorted to when continued

In Abbott Laboratories (Phils.), Inc. v. National Labor Relations

between its employees and those of competitor companies. Its

employment becomes impossible, unreasonable, or unlikely;

Commission,32 which involved a complaint filed by a medical

employees are free to cultivate relationships with and marry

when there is a demotion in rank or diminution in pay; or when

representative against his employer drug company for illegal

persons of their own choosing. What the company merely seeks

a clear discrimination, insensibility or disdain by an employer

dismissal for allegedly terminating his employment when he

30

to avoid is a conflict of interest between the employee and the

becomes unbearable to the employee.

company that may arise out of such relationships. As succinctly

conditions are present in the instant case. The record does not

None of these

refused to accept his reassignment to a new area, the Court

upheld the right of the drug company to transfer or reassign its

explained by the appellate court, thus:

show that Tescon was demoted or unduly discriminated upon by

employee in accordance with its operational demands and

reason of such transfer. As found by the appellate court, Glaxo

requirements. The ruling of the Court therein, quoted

The policy being questioned is not a policy against

properly exercised its management prerogative in reassigning

hereunder, also finds application in the instant case:

marriage. An employee of the company remains free to

Tecson to the Butuan City sales area:

marry anyone of his or her choosing. The policy is not

129

By the very nature of his employment, a drug

25

The evidence for the petitioners show that respondents Ronaldo

salesman or medical representative is expected to

D. Simbol (Simbol), Wilfreda N. Comia (Comia) and Lorna E.

travel. He should anticipate reassignment according to

Republic of the Philippines

the demands of their business. It would be a poor drug

SUPREME COURT
Manila

corporation which cannot even assign its

representatives or detail men to new markets calling

Simbol was employed by the company on October 27, 1993. He

met Alma Dayrit, also an employee of the company, whom he

SECOND DIVISION

for opening or expansion or to areas where the need

for pushing its products is great. More so if such
reassignments are part of the employment contract. 33

Estrella (Estrella) were all regular employees of the company. 1

married on June 27, 1998. Prior to the marriage, Ongsitco

advised the couple that should they decide to get married, one

G.R. No. 164774

April 12, 2006

of them should resign pursuant to a company policy

promulgated in 1995,2 viz.:

As noted earlier, the challenged policy has been implemented

STAR PAPER CORPORATION, JOSEPHINE ONGSITCO &

by Glaxo impartially and disinterestedly for a long period of

SEBASTIAN CHUA, Petitioners,

1. New applicants will not be allowed to be hired if in

time. In the case at bar, the record shows that Glaxo gave

vs.

case he/she has [a] relative, up to [the] 3rd degree of

Tecson several chances to eliminate the conflict of interest

RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E.

relationship, already employed by the company.

brought about by his relationship with Bettsy. When their

ESTRELLA, Respondents.

relationship was still in its initial stage, Tecsons supervisors at

2. In case of two of our employees (both singles [sic],

DECISION

Glaxo constantly reminded him about its effects on his

one male and another female) developed a friendly

employment with the company and on the companys interests.

After Tecson married Bettsy, Glaxo gave him time to resolve the

relationship during the course of their employment and

PUNO, J.:

then decided to get married, one of them should resign

to preserve the policy stated above.3

conflict by either resigning from the company or asking his wife

to resign from Astra. Glaxo even expressed its desire to retain

We are called to decide an issue of first impression: whether the

Tecson in its employ because of his satisfactory performance

policy of the employer banning spouses from working in the

Simbol resigned on June 20, 1998 pursuant to the company

and suggested that he ask Bettsy to resign from her company

same company violates the rights of the employee under the

policy.4

instead. Glaxo likewise acceded to his repeated requests for

Constitution and the Labor Code or is a valid exercise of

more time to resolve the conflict of interest. When the problem

management prerogative.

could not be resolved after several years of waiting, Glaxo was

Comia was hired by the company on February 5, 1997. She met

Howard Comia, a co-employee, whom she married on June 1,

constrained to reassign Tecson to a sales area different from

At bar is a Petition for Review on Certiorari of the Decision of the

2000. Ongsitco likewise reminded them that pursuant to

that handled by his wife for Astra. Notably, the Court did not

Court of Appeals dated August 3, 2004 in CA-G.R. SP No. 73477

company policy, one must resign should they decide to get

terminate Tecson from employment but only reassigned him to

reversing the decision of the National Labor Relations

married. Comia resigned on June 30, 2000.5

another area where his home province, Agusan del Sur, was

Commission (NLRC) which affirmed the ruling of the Labor

included. In effecting Tecsons transfer, Glaxo even considered

Arbiter.

the welfare of Tecsons family. Clearly, the foregoing dispels any

suspicion of unfairness and bad faith on the part of Glaxo.34

Estrella was hired on July 29, 1994. She met Luisito Zuiga
(Zuiga), also a co-worker. Petitioners stated that Zuiga, a

Petitioner Star Paper Corporation (the company) is a corporation

engaged in trading principally of paper products. Josephine

WHEREFORE, the Petition is DENIED for lack of merit. Costs

Ongsitco is its Manager of the Personnel and Administration

against petitioners. SO ORDERED.

Department while Sebastian Chua is its Managing Director.

married man, got Estrella pregnant. The company allegedly

could have terminated her services due to immorality but she
opted to resign on December 21, 1999.6

130

The respondents each signed a Release and Confirmation

[T]his company policy was decreed pursuant to what the

On appeal to this Court, petitioners contend that the Court of

Agreement. They stated therein that they have no money and

respondent corporation perceived as management prerogative.

Appeals erred in holding that:

property accountabilities in the company and that they release

This management prerogative is quite broad and encompassing

the latter of any claim or demand of whatever nature. 7

for it covers hiring, work assignment, working method, time,

1. x x x the subject 1995 policy/regulation is violative

place and manner of work, tools to be used, processes to be

of the constitutional rights towards marriage and the

Respondents offer a different version of their dismissal. Simbol

followed, supervision of workers, working regulations, transfer

family of employees and of Article 136 of the Labor

and Comia allege that they did not resign voluntarily; they were

of employees, work supervision, lay-off of workers and the

Code; and

compelled to resign in view of an illegal company policy. As to

discipline, dismissal and recall of workers. Except as provided

respondent Estrella, she alleges that she had a relationship with

for or limited by special law, an employer is free to regulate,

2. x x x respondents resignations were far from

co-worker Zuiga who misrepresented himself as a married but

according to his own discretion and judgment all the aspects of

voluntary.14

separated man. After he got her pregnant, she discovered that

employment. (Citations omitted.)

he was not separated. Thus, she severed her relationship with

We affirm.

him to avoid dismissal due to the company policy. On November

On appeal to the NLRC, the Commission affirmed the decision of

30, 1999, she met an accident and was advised by the doctor at

the Labor Arbiter on January 11, 2002.

10

the Orthopedic Hospital to recuperate for twenty-one (21) days.

The 1987 Constitution15 states our policy towards the protection

of labor under the following provisions, viz.:

She returned to work on December 21, 1999 but she found out

Respondents filed a Motion for Reconsideration but was denied

that her name was on-hold at the gate. She was denied entry.

by the NLRC in a Resolution11 dated August 8, 2002. They

Article II, Section 18. The State affirms labor as a primary social

She was directed to proceed to the personnel office where one

appealed to respondent court via Petition for Certiorari.

economic force. It shall protect the rights of workers and

of the staff handed her a memorandum. The memorandum

promote their welfare.

stated that she was being dismissed for immoral conduct. She

In its assailed Decision dated August 3, 2004, the Court of

refused to sign the memorandum because she was on leave for

Appeals reversed the NLRC decision, viz.:

xxx

twenty-one (21) days and has not been given a chance to

explain. The management asked her to write an explanation.

WHEREFORE, premises considered, the May 31, 2002

12

Decision of the National Labor Relations Commission is

Article XIII, Sec. 3. The State shall afford full protection to labor,

However, after submission of the explanation, she was

(sic)

nonetheless dismissed by the company. Due to her urgent need

hereby REVERSED and SET ASIDE and a new one is entered as

local and overseas, organized and unorganized, and promote

full employment and equality of employment opportunities for

for money, she later submitted a letter of resignation in

follows:

all.

exchange for her thirteenth month pay.8

(1) Declaring illegal, the petitioners dismissal from

It shall guarantee the rights of all workers to self-organization,

Respondents later filed a complaint for unfair labor practice,

employment and ordering private respondents to

collective bargaining and negotiations, and peaceful concerted

constructive dismissal, separation pay and attorneys fees. They

reinstate petitioners to their former positions without

activities, including the right to strike in accordance with law.

averred that the aforementioned company policy is illegal and

loss of seniority rights with full backwages from the

They shall be entitled to security of tenure, humane conditions

contravenes Article 136 of the Labor Code. They also contended

time of their dismissal until actual reinstatement; and

of work, and a living wage. They shall also participate in policy

that they were dismissed due to their union membership.

and decision-making processes affecting their rights and

(2) Ordering private respondents to pay petitioners

On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario

attorneys fees amounting to 10% of the award and the

dismissed the complaint for lack of merit, viz.:

cost of this suit.13

benefits as may be provided by law.

131

The State shall promote the principle of shared responsibility

The rule does not require the woman employee to resign. The

impact. Under the disparate treatment analysis, the

between workers and employers, recognizing the right of labor

employee spouses have the right to choose who between them

plaintiff must prove that an employment policy is discriminatory

to its just share in the fruits of production and the right of

should resign. Further, they are free to marry persons other

on its face. No-spouse employment policies requiring an

enterprises to reasonable returns on investments, and to

than co-employees. Hence, it is not the marital status of the

employee of a particular sex to either quit, transfer, or be

expansion and growth.

employee, per se, that is being discriminated. It is only intended

fired are facially discriminatory. For example, an employment

to carry out its no-employment-for-relatives-within-the-third-

policy prohibiting the employer from hiring wives of male

degree-policy which is within the ambit of the prerogatives of

employees, but not husbands of female employees, is

The Civil Code likewise protects labor with the following

16

discriminatory on its face.22

provisions:

management.

Art. 1700. The relation between capital and labor are not merely

It is true that the policy of petitioners prohibiting close relatives

On the other hand, to establish disparate impact, the

contractual. They are so impressed with public interest that

from working in the same company takes the nature of an anti-

complainants must prove that a facially neutral policy has a

labor contracts must yield to the common good. Therefore, such

nepotism employment policy. Companies adopt these policies to

disproportionate effect on a particular class. For example,

contracts are subject to the special laws on labor unions,

prevent the hiring of unqualified persons based on their status

although most employment policies do not expressly indicate

17

collective bargaining, strikes and lockouts, closed shop, wages,

as a relative, rather than upon their ability.

working conditions, hours of labor and similar subjects.

focus upon the potential employment problems arising from the

These policies

which spouse will be required to transfer or leave the company,

the policy often disproportionately affects one sex.23

perception of favoritism exhibited towards relatives.

Art. 1702. In case of doubt, all labor legislation and all labor

The state courts rulings on the issue depend on their

contracts shall be construed in favor of the safety and decent

With more women entering the workforce, employers are also

interpretation of the scope of marital status discrimination

living for the laborer.

enacting employment policies specifically prohibiting spouses

within the meaning of their respective civil rights acts. Though

from working for the same company. We note that two types of

they agree that the term "marital status" encompasses

The Labor Code is the most comprehensive piece of legislation

employment policies involve spouses: policies banning only

discrimination based on a person's status as either married,

protecting labor. The case at bar involves Article 136 of the

spouses from working in the same company (no-spouse

single, divorced, or widowed, they are divided on whether the

Labor Code which provides:

employment policies), and those banning all immediate

term has a broader meaning. Thus, their decisions vary.24

family members, including spouses, from working in the same

Art. 136. It shall be unlawful for an employer to require as a

company (anti-nepotism employment policies).18

The courts narrowly25 interpreting marital status to refer only

condition of employment or continuation of employment that a

woman employee shall not get married, or to stipulate

to a person's status as married, single, divorced, or widowed

Unlike in our jurisdiction where there is no express prohibition
19

expressly or tacitly that upon getting married a woman

on marital discrimination,

employee shall be deemed resigned or separated, or to actually

the United States prohibiting marital discrimination. Some state

21

there are twenty state statutes

20

in

have been confronted with the issue of whether no-

reason that if the legislature intended a broader definition it

would have either chosen different language or specified its
intent. They hold that the relevant inquiry is if one is married

dismiss, discharge, discriminate or otherwise prejudice a

courts

woman employee merely by reason of her marriage.

spouse policies violate their laws prohibiting both marital status

status discrimination to include only whether a person is single,

and sex discrimination.

married, divorced, or widowed and not the "identity,

Respondents submit that their dismissal violates the above

rather than to whom one is married. They construe marital

occupation, and place of employment of one's spouse." These

provision. Petitioners allege that its policy "may appear to be

In challenging the anti-nepotism employment policies in the

courts have upheld the questioned policies and ruled that they

contrary to Article 136 of the Labor Code" but it assumes a new

United States, complainants utilize two theories of employment

did not violate the marital status discrimination provision of

meaning if read together with the first paragraph of the rule.

discrimination: the disparate treatment and the disparate

their respective state statutes.

132

The courts that have broadly26 construed the term "marital

The concept of a bona fide occupational qualification is not

general principle, such as the desirability of spreading work in

status" rule that it encompassed the identity, occupation and

foreign in our jurisdiction. We employ the standard

the workplace. A requirement of that nature would be valid

employment of one's spouse. They strike down the no-spouse

ofreasonableness of the company policy which is parallel to

provided it reflects an inherent quality reasonably

employment policies based on the broad legislative intent of the

the bona fide occupational qualification requirement. In the

necessary for satisfactory job performance.37 (Emphases

state statute. They reason that the no-spouse employment

recent case of Duncan Association of Detailman-PTGWO

supplied.)

policy violate the marital status provision because it arbitrarily

and Pedro Tecson v. Glaxo Wellcome Philippines,

discriminates against all spouses of present employees without

Inc.,34 we passed on the validity of the policy of a

The cases of Duncan and PT&T instruct us that the

regard to the actual effect on the individual's qualifications or

pharmaceutical company prohibiting its employees from

requirement of reasonableness must be clearly established to

work performance.27 These courts also find the no-spouse

marrying employees of any competitor company. We held that

uphold the questioned employment policy. The employer has

employment policy invalid for failure of the employer to present

Glaxo has a right to guard its trade secrets, manufacturing

the burden to prove the existence of a reasonable business

any evidence of business necessity other than the general

formulas, marketing strategies and other confidential programs

necessity. The burden was successfully discharged in Duncan

perception that spouses in the same workplace might adversely

and information from competitors. We considered the

but not in PT&T.

affect the business.28 They hold that the absence of such

prohibition against personal or marital relationships with

a bona fide occupational qualification 29 invalidates a rule

employees of competitor companies upon Glaxos

We do not find a reasonable business necessity in the case at

denying employment to one spouse due to the current

employeesreasonable under the circumstances because

bar.

employment of the other spouse in the same office.

30

Thus, they

relationships of that nature might compromise the interests of

rule that unless the employer can prove that the reasonable

Glaxo. In laying down the assailed company policy, we

Petitioners sole contention that "the company did not just want

demands of the business require a distinction based on marital

recognized that Glaxo only aims to protect its interests against

to have two (2) or more of its employees related between the

status and there is no better available or acceptable policy

the possibility that a competitor company will gain access to its

third degree by affinity and/or consanguinity"38 is lame. That the

which would better accomplish the business purpose, an

secrets and procedures.35

second paragraph was meant to give teeth to the first

paragraph of the questioned rule39 is evidently not the valid

employer may not discriminate against an employee based on

the identity of the employees spouse.31 This is known as

The requirement that a company policy must

thebona fide occupational qualification exception.

be reasonable under the circumstances to qualify as a valid

We note that since the finding of a bona fide occupational

reasonable business necessity required by the law.

exercise of management prerogative was also at issue in the

It is significant to note that in the case at bar, respondents were

1997 case of Philippine Telegraph and Telephone

hired after they were found fit for the job, but were asked to

36

qualification justifies an employers no-spouse rule, the

Company v. NLRC.

exception is interpreted strictly and narrowly by these state

in violation of petitioners policy of disqualifying from work any

In said case, the employee was dismissed

show how the marriage of Simbol, then a Sheeting Machine

courts. There must be a compelling business necessity for which

woman worker who contracts marriage. We held that the

Operator, to Alma Dayrit, then an employee of the Repacking

no alternative exists other than the discriminatory practice.32 To

company policy violates the right against discrimination

Section, could be detrimental to its business operations. Neither

justify a bona fide occupational qualification, the employer must

afforded all women workers under Article 136 of the Labor

did petitioners explain how this detriment will happen in the

prove two factors: (1) that the employment qualification is

Code, but established a permissible exception, viz.:

case of Wilfreda Comia, then a Production Helper in the

reasonably related to the essential operation of the job

resign when they married a co-employee. Petitioners failed to

Selecting Department, who married Howard Comia, then a

involved; and, (2) that there is a factual basis for believing that

[A] requirement that a woman employee must remain

helper in the cutter-machine. The policy is premised on the

all or substantially all persons meeting the qualification would

unmarried could be justified as a "bona fide occupational

mere fear that employees married to each other will be less

be unable to properly perform the duties of the job.33

qualification," or BFOQ, where the particular requirements of

efficient. If we uphold the questioned rule without valid

the job would justify the same, but not on the ground of a

justification, the employer can create policies based on an

133

unproven presumption of a perceived danger at the expense of

Estrella claims that she was pressured to submit a resignation

an employees right to security of tenure.

letter because she was in dire need of money. We examined the

records of the case and find Estrellas contention to be more in

Petitioners contend that their policy will apply only when one

accord with the evidence. While findings of fact by

employee marries a co-employee, but they are free to marry

administrative tribunals like the NLRC are generally given not

persons other than co-employees. The questioned policy may

only respect but, at times, finality, this rule admits of

not facially violate Article 136 of the Labor Code but it creates a

exceptions,42 as in the case at bar.

disproportionate effect and under the disparate impact theory,

the only way it could pass judicial scrutiny is a showing that it

Estrella avers that she went back to work on December 21,

is reasonable despite the discriminatory, albeit

1999 but was dismissed due to her alleged immoral conduct. At

disproportionate, effect. The failure of petitioners to prove a

first, she did not want to sign the termination papers but she

legitimate business concern in imposing the questioned policy

was forced to tender her resignation letter in exchange for her

cannot prejudice the employees right to be free from arbitrary

thirteenth month pay.

26
Republic of the Philippines
SUPREME COURT
Manila

discrimination based upon stereotypes of married persons

working together in one company.40

The contention of petitioners that Estrella was pressured to

THIRD DIVISION

resign because she got impregnated by a married man and she

Lastly, the absence of a statute expressly prohibiting marital

could not stand being looked upon or talked about as

discrimination in our jurisdiction cannot benefit the petitioners.

immoral43 is incredulous. If she really wanted to avoid

The protection given to labor in our jurisdiction is vast and

embarrassment and humiliation, she would not have gone back

DEL MONTE PHILIPPINES, INC., Petitioner,

extensive that we cannot prudently draw inferences from the

to work at all. Nor would she have filed a suit for illegal

vs.

legislatures silence41 that married persons are not protected

dismissal and pleaded for reinstatement. We have held that in

LOLITA VELASCO, Respondent.

under our Constitution and declare valid a policy based on a

voluntary resignation, the employee is compelled by personal

prejudice or stereotype. Thus, for failure of petitioners to

reason(s) to dissociate himself from employment. It is done with

present undisputed proof of a reasonable business necessity,

the intention of relinquishing an office, accompanied by the act

we rule that the questioned policy is an invalid exercise of

of abandonment.

management prerogative. Corollarily, the issue as to whether

then file a complaint for illegal dismissal. Given the lack of

respondents Simbol and Comia resigned voluntarily has become

sufficient evidence on the part of petitioners that the

Before this Court is a Petition for Certiorari under Rule 45

moot and academic.

resignation was voluntary, Estrellas dismissal is declared

seeking to reverse and set aside the Decision1 dated July 23,

illegal.

2001 of the Court of Appeals (CA) in CA-G.R. SP No. 56571

44

Thus, it is illogical for Estrella to resign and

As to respondent Estrella, the Labor Arbiter and the NLRC based

G.R. NO. 153477

March 6, 2007

DECISION
AUSTRIA-MARTINEZ, J.:

which affirmed the Decision dated May 27, 1999 of the National

their ruling on the singular fact that her resignation letter was

IN VIEW WHEREOF, the Decision of the Court of Appeals in

Labor Relations Commission (NLRC); and the CA

written in her own handwriting. Both ruled that her resignation

CA-G.R. SP No. 73477 dated August 3, 2004

Resolution2 dated May 7, 2002 which denied the petitioner's

was voluntary and thus valid. The respondent court failed to

isAFFIRMED.1avvphil.net

Motion for Reconsideration.

SO ORDERED.

The facts of the case, as stated by the CA, are as follows:

categorically rule whether Estrella voluntarily resigned but

ordered that she be reinstated along with Simbol and Comia.

134

Lolita M. Velasco (respondent) started working with Del Monte

infection, a pregnancy-borne, at the time she committed the

The NLRC held that, under the company rules, the employee

Philippines (petitioner) on October 21, 1976 as a seasonal

alleged absences. She explained that for her absence from work

may make a subsequent justification of her absenteeism, which

employee and was regularized on May 1, 1977. Her latest

on August 15, 16, 17 & 18, 1994 she had sent an application for

she was able to do in the instant case; that while it is not

assignment was as Field Laborer.

leave to her supervisor, Prima Ybaez. Thereafter, she went to

disputed that the respondent incurred absences exceeding six

the company hospital for check-up and was advised accordingly

(6) days within one employment year a ground for dismissal

On June 16, 1987, respondent was warned in writing due to her

to rest in quarters for four (4) days or on August 27 to 30, 1994.

under the company rules the petitioner actually admitted the

absences. On May 4, 1991, respondent, thru a letter, was again

Still not feeling well, she failed to work on September 1, 1994

fact that the respondent had been pregnant, hence, negating

warned in writing by petitioner about her absences without

and was again advised two days of rest in quarters on

petitioners assertion that the respondent failed to give any

permission and a forfeiture of her vacation leave entitlement for

September 2-3, 1994. Unable to recover, she went to see an

explanation of her absences; that the records bear the

the year 1990-1991 was imposed against her.

outside doctor, Dr. Marilyn Casino, and the latter ordered her to

admission of petitioners officer of the receipt of the hospital

rest for another five (5) consecutive days, or from September 5

record showing the cause of her absences ("RIQ advice" or

On September 14, 1992, another warning letter was sent to

to 9, 1994. She declared she did not file the adequate leave of

"rest-in-quarters") for August 19-20, 1994 which, in turn, could

respondent regarding her absences without permission during

absence because a medical certificate was already sufficient

already serve as reference in resolving the absences on August

the year 1991-1992. Her vacation entitlement for the said

per company policy. On September 10, 1994 she failed to report

15 to 18; that the petitioner further admitted that the

employment year affected was consequently forfeited.

to work but sent an application for leave of absence to her

respondent was under "RIQ advice" on September 2-3, 1994

supervisor, Prima Ybaez, which was not anymore accepted.

In view of the said alleged absences without permission, on

and yet insisted in including these dates among respondents

16 purported unexplained absences; that it is sufficient notice

September 17, 1994, a notice of hearing was sent to

On April 13, 1998, the Labor Arbiter dismissed the Complaint for

for the petitioner, "a plain laborer" with "unsophisticated

respondent notifying her of the charges filed against her for

lack of merit. The Labor Arbiter held that the respondent was an

judgment," to send word to her employer through a co-worker

violating the Absence Without Official Leave rule: that is for

incorrigible absentee; that she failed to file leaves of absence;

on August 15 to 16, 1994 that she was frequently vomiting; that

excessive absence without permission on August 15-18, 29-31

that her absences in 1986 and 1987 were without permission;

the sheer distance between respondents home and her

and September 1-10, 1994. The hearing was set on September

that the petitioner gave the respondent several chances to

workplace made it difficult to send formal notice; that

23, 1994.

reform herself; and that the respondent did not justify her

respondent even sent her child of tender age to inform her

failure to appear during the scheduled hearings and failed to

supervisor about her absence on September 5, 1994 due to

explain her absences.

stomach ache, but her child failed to approach the officer

Respondent having failed to appear on September 23, 1994

hearing, another notice of hearing was sent to her resetting the

because her child felt ashamed, if not mortified; that

investigation on September 30, 1994. It was again reset to

Respondent appealed to the NLRC. On May 29, 1999, the NLRC

respondents narration that she had to bear pains during her

October 5, 1994.

issued its Resolution, the dispositive portion of which reads:

absences on September 21 to 27, 1994 is credible; that she

dared not venture through the roads for fear of forest creatures

On January 10, 1995, after hearing, the petitioner terminated

WHEREFORE, foregoing considered, the instant decision is

or predators; that the petitioner is guilty of unlawfully

the services of respondent effective January 16, 1994 due to

hereby VACATED and a new one entered declaring the dismissal

discharging respondent on account of her pregnancy under

excessive absences without permission.

of complainant as ILLEGAL. In consonance with Art. 279 of the

Article 137(2) of the Labor Code; and, that petitioners

Labor [Code], her reinstatement with full backwages from the

reference to the previous absenteeism of respondent is

Feeling aggrieved, respondent filed a case for illegal dismissal

date of her termination from employment to her actual

misplaced because the latter had already been penalized

against petitioner asserting that her dismissal was illegal

reinstatement is necessarily decreed.4

therefor.

because she was on the family way suffering from urinary tract

135

Petitioners Motion for Reconsideration was denied on

I.

September 30, 1999.

The petitioner posits the following arguments: (a) The evidence

proffered by the respondent, to wit: (1) the Discharge Summary

The court of appeals seriously erred In considering respondents

indicating that she had been admitted to the Phillips Memorial

The petitioner then appealed to the CA. On July 23, 2001, the

Excessive aWOPs as justified Simply on account of her

Hospital on August 23, 1994 and discharged on August 26,

CA promulgated its Decision the dispositive portion of which

pregnancy.

1994, and that she had been advised to "rest in quarters" for

states:

four days from August 27, 1994 to August 30, 1994, and (2) the
II.

VIEWED IN THE LIGHT OF ALL THE FOREGOING, the instant

Medical Certificate issued by Dr. Marilyn M. Casino stating that

respondent had sought consultation on September 4, 2002

petition is DISMISSED, the Resolutions, dated May 27, 1999 and

THE COURT OF APPEALS SERIOUSLY ERRED IN NOT

because of spasm in the left iliac region, and was advised to

September 30, 1999 of the National Labor Relations

CONSIDERING THAT RESPONDENTS LATEST STRING OF

rest for five days (from September 4, 1994 up to September 8,

Commission in NLRC CA No. M-003926-98, are hereby

ABSENCES INCURRED WITHOUT ANY PRIOR PERMISSION, AND

1994), due to urinary tract infection, all in all establish

AFFIRMED in toto.

AS ABOVE SHOWN, WITHOUT ANY VALID JUSTIFICATION, TAKEN

respondents sickness only from August 23, 1994 up to August

TOGETHER WITH HER DAMAGING awop history, established her

30, 1994 and from September 4, 1994 up to September 8,

gross and habitual neGlect of duties, a just and valid ground for

1994. In other words, respondent was absent without

dismissal.

permission on several other days which were not supported by

SO ORDERED.

In affirming the NLRC, the CA held that absences due to a

any other proof of illness, specifically, on August 15, 16, 17, 18,

justified cause cannot be a ground for dismissal; that it is

III.

undisputed that the respondent was pregnant at the time she

31, 1994 and September 1, 2, 3, 9, and 10, 1994, and, hence,

she is guilty of ten unjustified absences; (b) Per Filflex Industrial

incurred the absences in question; that the certification issued

The court of appeals seriously erred in holding that

and Manufacturing Co. v. National Labor Relations Commission

by a private doctor duly established this fact; that it was no less

respondents dismissal was in violation of article 137

(Filflex),7 if the medical certificate fails to refer to the specific

than petitioners company doctor who advised the respondent

(prohibiting an employer to discharge an employee on account

period of the employees absence, then such absences,

to have rest-in-quarters for four days on account of a

of her pregnancy).

attributable to chronic asthmatic bronchitis, are not supported

pregnancy- related sickness; that it had been duly established

by competent proof and, hence, they are unjustified. By parity

that respondent filed leaves of absence though the last had

IV.

been refused by the company supervisor; that the dismissal of

of reasoning, in the absence of evidence indicating any

pregnancy-borne illness outside the period stated in

an employee due to prolonged absence with leave by reason of

The court of appeals seriously erred in awarding full backwages

respondents medical certificate, such illness ought not to be

illness duly established by the presentation of a medical

in favor of respondent notwithstanding petitioners evident

considered as an acceptable excuse for respondents excessive

certificate is not justified; that it is undisputed that respondents

good faith.

sickness was pregnancy-related; that under Article 137(2) of the

absences without leave; (c) Respondents latest string of

absences, taken together with her long history of absenteeism

Labor Code, the petitioner committed a prohibited act in

The essential question is whether the employment of

without permission, established her gross and habitual neglect

discharging a woman on account of her pregnancy.

respondent had been validly terminated on the ground of

of duties, as established by jurisprudence; (d) The respondent

excessive absences without permission. Corollary to this is the

was dismissed not by reason of her pregnancy but on account

On May 7, 2002, the CA denied petitioners Motion for

question of whether the petitioner discharged the respondent

of her gross and habitual neglect of duties. In other words, her

Reconsideration.

on account of pregnancy, a prohibited act.

pregnancy had no bearing on the decision to terminate her

employment; and, (e) Her state of pregnancy per se could not

Hence, the instant Petition raising the following issues:

excuse her from filing prior notice for her absence.

136

Petitioners arguments are without merit.

First. The Filflex Industrial and Manufacturing Co. case is not

company doctor who advised the respondent to have "rest-in-

remains in the records of said proceedings. For

quarters" for four days on account of a pregnancy-related

respondent to isolate the absences of complainant in

sickness.9

August and mid-September, 1994 from the absences she

applicable, principally because the nature and gravity of the

incurred later in said month without submitting any

illness involved in that case chronic asthmatic bronchitis are

On this note, this Court upholds and adopts the finding of the

evidence that these were due to causes not in manner

different from the conditions that are present in the instant

NLRC, thus:

associated with her [ ] condition renders its justification

case, which is pregnancy and its related illnesses.

of complainants dismissal clearly not convincing under

In this jurisdiction tardiness and absenteeism, like

the circumstances.

The Court takes judicial notice of the fact that the condition of

abandonment, are recognized forms of neglect of duties, the

asthmatic bronchitis may be intermittent, in contrast to

existence of which justify the dismissal of the erring employee.

Despite contrary declaration, the records bear the

pregnancy which is a continuing condition accompanied by

Respondents rule penalizing with discharge any employee who

admission of respondents P/A North Supervisor, PB

various symptoms and related illnesses. Hence, as to the

has incurred six (6) or more absences without permission

Ybanez, of her receipt of the hospital record showing

former, if the medical certificate or other proof proffered by the

or subsequent justification is admittedly within the purview of

complainants RIQ advice for August 19-20, 1994 which

worker fails to correspond with the dates of absence, then it can

the foregoing standard.

could already serve as respondents reference in

be reasonably concluded that, absent any other proof, such

resolving the latters absences on August 15 to 18,

absences are unjustified. This is the ruling in Filflex which

However, while it is not disputed that complainant incurred

1994. Respondent further admitted complainant was

cannot be applied in a straight-hand fashion in cases of

absences exceeding six (6) days as she actually failed to report

under RIQ advice on September 2-3, 1994, yet, insisted

pregnancy which is a long-term condition accompanied by an

for work from August 15-18, 23-26, 29-31, September 1-3, 5-10,

in including these dates among her 16 purported

assortment of related illnesses.

12-17, 21-24, 26-30, and October 1-3, 1994, her being

unexplained absences justifying termination of her

pregnant at the time these absences were incurred is

employment.10 (emphasis supplied)

In this case, by the measure of substantial evidence, what is

not questioned and is even admitted by respondent. It

controlling is the finding of the NLRC and the CA that

thus puzzles us why respondent asserts complainant failed to

Petitioners contention that the cause for the dismissal was

respondent was pregnant and suffered from related ailments. It

explain satisfactorily her absences on August 15-18, 29-31,

gross and habitual neglect unrelated to her state of pregnancy

would be unreasonable to isolate such condition strictly to the

September 1-3 and 5-10, 1994, yet reconsidered the rest of her

is unpersuasive.

dates stated in the Medical Certificate or the Discharge

absences for being covered with "rest-in-quarters" (RIQ) advice

Summary. It can be safely assumed that the absences that are

from its hospital personnel when this advice was

The Court agrees with the CA in concluding that respondents

not covered by, but which nonetheless approximate, the dates

unquestionably issued in consideration of the physiological and

sickness was pregnancy-related and, therefore, the petitioner

stated in the Discharge Summary and Medical Certificate, are

emotional changes complainant, a conceiving mother, naturally

cannot terminate respondents services because in doing so,

due to the continuing condition of pregnancy and related

developed. Medical and health reports abundantly

petitioner will, in effect, be violating the Labor Code which

illnesses, and, hence, are justified absences.

disclose that during the first trimester of pregnancy,

prohibits an employer to discharge an employee on account of

expectant mothers are plagued with morning sickness,

the latters pregnancy.11

As the CA and the NLRC correctly noted, it is not disputed that

frequent urination, vomiting and fatigue all of which

respondent was pregnant and that she was suffering from

complainant was similarly plagued with. Union official

urinary tract infection, and that her absences were due to such

IBB Lesnas observation on complainant being [sic]

facts. The petitioner admits these facts in its Petition for

apparently not feeling well during the investigation

Review. And, as the CA aptly held, it was no less than the

Article 137 of the Labor Code provides:

Art. 137. Prohibited acts. It shall be unlawful for any employer:

conducted by respondent on October 5, 1994 even

137

(1) To deny any woman employee the benefits

particular circumstances obtaining in the present case.

provided for in this Chapter or to discharge any woman

Petitioner puts much emphasis on respondents "long history" of

employed by him for the purpose of preventing her

unauthorized absences committed several years beforehand.

from enjoying any of the benefits provided under this

However, petitioner cannot use these previous infractions to lay

Code;

down a pattern of absenteeism or habitual disregard of

company rules to justify the dismissal of respondent. The

(2) To discharge such woman on account of her

undeniable fact is that during her complained absences in 1994,

pregnancy, while on leave or in confinement due

respondent was pregnant and suffered related illnesses. Again,

to her pregnancy; or

it must be stressed that respondents discharge by reason of

absences caused by her pregnancy is covered by the prohibition

(3) To discharge or refuse the admission of such

under the Labor Code. Since her last string of absences is

woman upon returning to her work for fear that she

justifiable and had been subsequently explained, the petitioner

may again be pregnant. (Emphasis supplied)

had no legal basis in considering these absences together with

her prior infractions as gross and habitual neglect.

Second. The petitioner stresses that many women go through

pregnancy and yet manage to submit prior notices to their

The Court is convinced that the petitioner terminated the

employer, especially if "there is no evidence on record

services of respondent on account of her pregnancy which

indicating a condition of such gravity as to preclude efforts at

justified her absences and, thus, committed a prohibited act

notifying petitioner of her absence from work in series." 12 But it

rendering the dismissal illegal.

must be emphasized that under petitioners company rules,

absences may be subsequently justified.13 The Court finds no

In fine, the Court finds no cogent reason to disturb the findings

cogent reason to disturb the findings of the NLRC and the CA

of the CA and the NLRC.

that the respondent was able to subsequently justify her

absences in accordance with company rules and policy; that the

WHEREFORE, the petition is DENIED for lack of merit. The

respondent was pregnant at the time she incurred the

Decision dated July 23, 2001 and the Resolution dated May 7,

absences; that this fact of pregnancy and its related illnesses

2002 of the Court of Appeals are AFFIRMED.

had been duly proven through substantial evidence; that the

respondent attempted to file leaves of absence but the

No pronouncement as to costs.

petitioners supervisor refused to receive them; that she could

not have filed prior leaves due to her continuing condition; and

SO ORDERED.

that the petitioner, in the last analysis, dismissed the

respondent on account of her pregnancy, a prohibited act.
Third. Petitioners reliance on the jurisprudential rule that the
totality of the infractions of an employee may be taken into
account to justify the dismissal, is tenuous considering the

138

27

should be awarded in favor of the employee as an act of social

On February 25, 1989, petitioner underwent weight check. It

justice or based on equity. This is so because his dismissal is not

was discovered that he gained, instead of losing, weight. He

for serious misconduct. Neither is it reflective of his moral

was overweight at 215 pounds, which is 49 pounds beyond the

character.

limit. Consequently, his off-duty status was retained.

The Facts

Republic of the Philippines

personally visited petitioner at his residence to check on the

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 168081

October 17, 2008

On October 17, 1989, PAL Line Administrator Gloria Dizon

Petitioner Armando G. Yrasuegui was a former international

progress of his effort to lose weight. Petitioner weighed 217

flight steward of Philippine Airlines, Inc. (PAL). He stands five

pounds, gaining 2 pounds from his previous weight. After the

feet and eight inches (58") with a large body frame. The proper

visit, petitioner made a commitment3 to reduce weight in a

weight for a man of his height and body structure is from 147 to

letter addressed to Cabin Crew Group Manager Augusto Barrios.

166 pounds, the ideal weight being 166 pounds, as mandated

The letter, in full, reads:

by the Cabin and Crew Administration Manual1 of PAL.

Dear Sir:

ARMANDO G. YRASUEGUI, petitioners,

vs.

The weight problem of petitioner dates back to 1984. Back

PHILIPPINE AIRLINES, INC., respondents.

then, PAL advised him to go on an extended vacation leave

I would like to guaranty my commitment towards a weight loss

from December 29, 1984 to March 4, 1985 to address his

from 217 pounds to 200 pounds from today until 31 Dec. 1989.

DECISION

weight concerns. Apparently, petitioner failed to meet the

companys weight standards, prompting another leave without

From thereon, I promise to continue reducing at a reasonable

REYES, R.T., J.:

pay from March 5, 1985 to November 1985.

percentage until such time that my ideal weight is achieved.

THIS case portrays the peculiar story of an international flight

After meeting the required weight, petitioner was allowed to

Likewise, I promise to personally report to your office at the

steward who was dismissed because of his failure to adhere to

return to work. But petitioners weight problem recurred. He

designated time schedule you will set for my weight check.

the weight standards of the airline company.

again went on leave without pay from October 17, 1988 to

February 1989.

Respectfully Yours,

He is now before this Court via a petition for review on

F/S Armando Yrasuegui4

certiorari claiming that he was illegally dismissed. To buttress

On April 26, 1989, petitioner weighed 209 pounds, 43 pounds

his stance, he argues that (1) his dismissal does not fall under

over his ideal weight. In line with company policy, he was

282(e) of the Labor Code; (2) continuing adherence to the

removed from flight duty effective May 6, 1989 to July 3, 1989.

Despite the lapse of a ninety-day period given him to reach his

weight standards of the company is not a bona fide

He was formally requested to trim down to his ideal weight and

ideal weight, petitioner remained overweight. On January 3,

occupational qualification; and (3) he was discriminated against

report for weight checks on several dates. He was also told that

1990, he was informed of the PAL decision for him to remain

because other overweight employees were promoted instead of

he may avail of the services of the company physician should

grounded until such time that he satisfactorily complies with the

being disciplined.

he wish to do so. He was advised that his case will be evaluated

weight standards. Again, he was directed to report every two

on July 3, 1989.

weeks for weight checks.

After a meticulous consideration of all arguments pro and con,

We uphold the legality of dismissal. Separation pay, however,

139

Petitioner failed to report for weight checks. Despite that, he

condoned by PAL since "no action has been taken by the

was given one more month to comply with the weight

company" regarding his case "since 1988." He also claimed that

requirement. As usual, he was asked to report for weight check

PAL discriminated against him because "the company has not

on different dates. He was reminded that his grounding would

been fair in treating the cabin crew members who are similarly

continue pending satisfactory compliance with the weight

situated."

standards.

b. Attorneys fees of five percent (5%) of the total award.

SO ORDERED.14
The Labor Arbiter held that the weight standards of PAL are

reasonable in view of the nature of the job of

On December 8, 1992, a clarificatory hearing was held where

petitioner.15 However, the weight standards need not be

Again, petitioner failed to report for weight checks, although he

petitioner manifested that he was undergoing a weight

complied with under pain of dismissal since his weight did not

was seen submitting his passport for processing at the PAL Staff

reduction program to lose at least two (2) pounds per week so

hamper the performance of his duties.16 Assuming that it did,

Service Division.

as to attain his ideal weight.10

petitioner could be transferred to other positions where his

weight would not be a negative factor.17 Notably, other

On April 17, 1990, petitioner was formally warned that a

On June 15, 1993, petitioner was formally informed by PAL that

overweight employees, i.e., Mr. Palacios, Mr. Cui, and Mr.

repeated refusal to report for weight check would be dealt with

due to his inability to attain his ideal weight, "and considering

Barrios, were promoted instead of being disciplined.18

accordingly. He was given another set of weight check

the utmost leniency" extended to him "which spanned a period

dates.6 Again, petitioner ignored the directive and did not report

covering a total of almost five (5) years," his services were

for weight checks. On June 26, 1990, petitioner was required to

explain his refusal to undergo weight checks.

considered terminated "effective immediately."

11

Both parties appealed to the National Labor Relations

Commission (NLRC).19

When petitioner tipped the scale on July 30, 1990, he weighed

His motion for reconsideration having been denied, 12 petitioner

On October 8, 1999, the Labor Arbiter issued a writ of execution

filed a complaint for illegal dismissal against PAL.

directing the reinstatement of petitioner without loss of

seniority rights and other benefits.20

at 212 pounds. Clearly, he was still way over his ideal weight of
166 pounds.

Labor Arbiter, NLRC and CA Dispositions

On February 1, 2000, the Labor Arbiter denied21 the Motion to

From then on, nothing was heard from petitioner until he

On November 18, 1998, Labor Arbiter Valentin C. Reyes

followed up his case requesting for leniency on the latter part of

ruled13 that petitioner was illegally dismissed. The dispositive

1992. He weighed at 219 pounds on August 20, 1992 and 205

part of the Arbiter ruling runs as follows:

Quash Writ of Execution22 of PAL.

On March 6, 2000, PAL appealed the denial of its motion to
quash to the NLRC.23

pounds on November 5, 1992.

WHEREFORE, in view of the foregoing, judgment is hereby
On November 13, 1992, PAL finally served petitioner a Notice of

rendered, declaring the complainants dismissal illegal, and

On June 23, 2000, the NLRC rendered judgment24 in the

Administrative Charge for violation of company standards on

ordering the respondent to reinstate him to his former position

following tenor:

weight requirements. He was given ten (10) days from receipt

or substantially equivalent one, and to pay him:

of the charge within which to file his answer and submit

controverting evidence.

WHEREFORE, premises considered[,] the Decision of the

a. Backwages of Php10,500.00 per month from his dismissal on

Arbiter dated 18 November 1998 as modified by our findings

June 15, 1993 until reinstated, which for purposes of appeal is

herein, is hereby AFFIRMED and that part of the dispositive

On December 7, 1992, petitioner submitted his

hereby set from June 15, 1993 up to August 15, 1998

portion of said decision concerning complainants entitlement to

Answer.9 Notably, he did not deny being overweight. What he

at P651,000.00;

backwages shall be deemed to refer to complainants

claimed, instead, is that his violation, if any, had already been

entitlement to his full backwages, inclusive of allowances and to

140

his other benefits or their monetary equivalent instead of

and is hereby SET ASIDE. The private respondents complaint is

In this Rule 45 petition for review, the following issues are posed

simply backwages, from date of dismissal until his actual

hereby DISMISSED. No costs.

for resolution:

reinstatement or finality hereof. Respondent is enjoined to

manifests (sic) its choice of the form of the reinstatement of

SO ORDERED.32

I.

complainant, whether physical or through payroll within ten (10)

days from notice failing which, the same shall be deemed as

The CA opined that there was grave abuse of discretion on the

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN

complainants reinstatement through payroll and execution in

part of the NLRC because it "looked at wrong and irrelevant

HOLDING THATPETITIONERS OBESITY CAN BE A GROUND FOR

33

case of non-payment shall accordingly be issued by the Arbiter.

considerations"

Both appeals of respondent thus, are DISMISSEDfor utter lack

Contrary to the NLRC ruling, the weight standards of PAL are

of merit.

25

in evaluating the evidence of the parties.

DISMISSAL UNDER PARAGRAPH (e) OF ARTICLE 282 OF THE

LABOR CODE OF THE PHILIPPINES;

meant to be a continuing qualification for an employees

position.34 The failure to adhere to the weight standards is

II.

According to the NLRC, "obesity, or the tendency to gain weight

an analogous cause for the dismissal of an employee under

uncontrollably regardless of the amount of food intake, is a

Article 282(e) of the Labor Code in relation to Article 282(a). It is

disease in itself."

26

As a consequence, there can be no

intentional defiance or serious misconduct by petitioner to the

lawful order of PAL for him to lose weight.

27

not willful disobedience as the NLRC seemed to suggest.

35

Said

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN

HOLDING THATPETITIONERS DISMISSAL FOR OBESITY CAN BE

the CA, "the element of willfulness that the NLRC decision cites

PREDICATED ON THE "BONA FIDE OCCUPATIONAL

is an irrelevant consideration in arriving at a conclusion on

QUALIFICATION (BFOQ) DEFENSE";

whether the dismissal is legally proper."36 In other words, "the

Like the Labor Arbiter, the NLRC found the weight standards of

relevant question to ask is not one of willfulness but one of

PAL to be reasonable. However, it found as unnecessary the

reasonableness of the standard and whether or not the

Labor Arbiter holding that petitioner was not remiss in the

employee qualifies or continues to qualify under this

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN

performance of his duties as flight steward despite being

standard."37

HOLDING THATPETITIONER WAS NOT UNDULY DISCRIMINATED

overweight. According to the NLRC, the Labor Arbiter should

have limited himself to the issue of whether the failure of

III.

AGAINST WHEN HE WAS DISMISSED WHILE OTHER

Just like the Labor Arbiter and the NLRC, the CA held that the
38

petitioner to attain his ideal weight constituted willful defiance

weight standards of PAL are reasonable.

of the weight standards of PAL.28

legally dismissed because he repeatedly failed to meet the

Thus, petitioner was

OVERWEIGHT CABIN ATTENDANTS WERE EITHER GIVEN FLYING

DUTIES OR PROMOTED;

prescribed weight standards.39 It is obvious that the issue of

PAL moved for reconsideration to no avail.

29

Thus, PAL elevated

the matter to the Court of Appeals (CA) via a petition

escaping the result of his dismissal for being overweight. 40

for certiorari under Rule 65 of the 1997 Rules of Civil

Procedure.

30

By Decision dated August 31, 2004, the CA reversed 31 the NLRC:

IV.

discrimination was only invoked by petitioner for purposes of

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED
WHEN IT BRUSHED ASIDE PETITIONERS CLAIMS FOR
On May 10, 2005, the CA denied petitioners motion for

REINSTATEMENT [AND] WAGES ALLEGEDLY FOR BEING MOOT

reconsideration.41 Elaborating on its earlier ruling, the CA held

AND ACADEMIC.43 (Underscoring supplied)

that the weight standards of PAL are a bona fide occupational

qualification which, in case of violation, "justifies an employees

WHEREFORE, premises considered, we hereby GRANT the

separation from the service."

Our Ruling

42

petition. The assailed NLRC decision is declared NULL and VOID

I. The obesity of petitioner is a ground for dismissal

Issues

under Article 282(e)

44

of the Labor Code.

141

A reading of the weight standards of PAL would lead to no other

illness."46 Relying on Nadura v. Benguet Consolidated, Inc.,47 he

accorded due process. Here, petitioner was accorded utmost

conclusion than that they constitute a continuing qualification of

says his dismissal is illegal:

leniency. He was given more than four (4) years to comply with

an employee in order to keep the job. Tersely put, an employee

the weight standards of PAL.

may be dismissed the moment he is unable to comply with his

Conscious of the fact that Naduras case cannot be made to fall

ideal weight as prescribed by the weight standards. The

squarely within the specific causes enumerated in

In the case at bar, the evidence on record militates against

dismissal of the employee would thus fall under Article 282(e)

subparagraphs 1(a) to (e), Benguet invokes the provisions of

petitioners claims that obesity is a disease. That he was able to

of the Labor Code. As explained by the CA:

subparagraph 1(f) and says that Naduras illness occasional

reduce his weight from 1984 to 1992 clearly shows that it is

attacks of asthma is a cause analogous to them.

possible for him to lose weight given the proper attitude,

x x x [T]he standards violated in this case were not mere

determination, and self-discipline. Indeed, during the

"orders" of the employer; they were the "prescribed weights"

Even a cursory reading of the legal provision under

clarificatory hearing on December 8, 1992, petitioner himself

that a cabin crew must maintain in order to qualify for and

consideration is sufficient to convince anyone that, as the trial

claimed that "[t]he issue is could I bring my weight down to

keep his or her position in the company. In other words,

court said, "illness cannot be included as an analogous cause by

ideal weight which is 172, then the answer is yes. I can do it

they were standards that establish continuing

any stretch of imagination."

now."49

failure to maintain these standards does not fall under Article

It is clear that, except the just cause mentioned in sub-

True, petitioner claims that reducing weight is costing him "a lot

282(a) whose express terms require the element of willfulness

paragraph 1(a), all the others expressly enumerated in the law

of expenses."50 However, petitioner has only himself to blame.

in order to be a ground for dismissal. The failure to meet the

are due to the voluntary and/or willful act of the employee. How

He could have easily availed the assistance of the company

employers qualifying standards is in fact a ground that does

Naduras illness could be considered as "analogous" to any of

physician, per the advice of PAL.51He chose to ignore the

not squarely fall under grounds (a) to (d) and is therefore one

them is beyond our understanding, there being no claim or

suggestion. In fact, he repeatedly failed to report when required

that falls under Article 282(e) the "other causes analogous to

pretense that the same was contracted through his own

to undergo weight checks, without offering a valid explanation.

the foregoing."

voluntary act.48

Thus, his fluctuating weight indicates absence of willpower

By its nature, these "qualifying standards" are norms that

The reliance on Nadura is off-tangent. The factual milieu

apply prior to and after an employee is hired. They

in Nadura is substantially different from the case at

Petitioner cites Bonnie Cook v. State of Rhode Island,

apply prior to employment because these are the standards

bar.First, Nadura was not decided under the Labor Code. The

Department of Mental Health, Retardation and

a job applicant must initially meet in order to be hired. They

law applied in that case was Republic Act (RA) No.

Hospitals,52decided by the United States Court of Appeals (First

apply after hiring because an employee must continue to

1787. Second, the issue of flight safety is absent in Nadura,

Circuit). In that case, Cook worked from 1978 to 1980 and from

meet these standards while on the job in order to keep his job.

thus, the rationale there cannot apply here. Third, inNadura, the

1981 to 1986 as an institutional attendant for the mentally

Under this perspective, a violation is not one of the faults for

employee who was a miner, was laid off from work because of

retarded at the Ladd Center that was being operated by

which an employee can be dismissed pursuant to pars. (a) to (d)

illness, i.e., asthma. Here, petitioner was dismissed for his

respondent. She twice resigned voluntarily with an unblemished

of Article 282; the employee can be dismissed simply because

failure to meet the weight standards of PAL. He was not

record. Even respondent admitted that her performance met

he no longer "qualifies" for his job irrespective of whether or not

dismissed due to illness. Fourth, the issue in Nadura is whether

the Centers legitimate expectations. In 1988, Cook re-applied

the failure to qualify was willful or intentional. x x x 45

or not the dismissed employee is entitled to separation pay and

for a similar position. At that time, "she stood 52" tall and

qualifications for an employees position. In this sense, the

rather than an illness.

damages. Here, the issue centers on the propriety of the

weighed over 320 pounds." Respondent claimed that the

Petitioner, though, advances a very interesting argument. He

dismissal of petitioner for his failure to meet the weight

morbid obesity of plaintiff compromised her ability to evacuate

claims that obesity is a "physical abnormality and/or

standards of PAL.Fifth, in Nadura, the employee was not

142

patients in case of emergency and it also put her at greater risk

In fine, We hold that the obesity of petitioner, when placed in

Second, in British Columbia Public Service Employee

of serious diseases.

the context of his work as flight attendant, becomes an

Commission (BSPSERC) v. The British Columbia Government

analogous cause under Article 282(e) of the Labor Code that

and Service Employees Union (BCGSEU),63 the Supreme Court

Cook contended that the action of respondent amounted to

justifies his dismissal from the service. His obesity may not be

of Canada adopted the so-called "Meiorin Test" in determining

discrimination on the basis of a handicap. This was in direct

unintended, but is nonetheless voluntary. As the CA correctly

whether an employment policy is justified. Under this test, (1)

violation of Section 504(a) of the Rehabilitation Act of

puts it, "[v]oluntariness basically means that the just cause is

the employer must show that it adopted the standard for a

1973,53 which incorporates the remedies contained in Title VI of

solely attributable to the employee without any external force

purpose rationally connected to the performance of the

the Civil Rights Act of 1964. Respondent claimed, however, that

influencing or controlling his actions. This element runs through

job;64 (2) the employer must establish that the standard is

morbid obesity could never constitute a handicap within the

all just causes under Article 282, whether they be in the nature

reasonably necessary65 to the accomplishment of that work-

purview of the Rehabilitation Act. Among others, obesity is a

of a wrongful action or omission. Gross and habitual neglect, a

related purpose; and (3) the employer must establish that the

mutable condition, thus plaintiff could simply lose weight and

recognized just cause, is considered voluntary although it lacks

standard is reasonably necessary in order to accomplish the

rid herself of concomitant disability.

the element of intent found in Article 282(a), (c), and (d)."

54

legitimate work-related purpose. Similarly, in Star Paper

Corporation v. Simbol,66 this Court held that in order to justify a

The appellate Court disagreed and held that morbid obesity is a

II. The dismissal of petitioner can be predicated on the bona fide

BFOQ, the employer must prove that (1) the employment

disability under the Rehabilitation Act and that respondent

occupational qualification defense.

qualification is reasonably related to the essential operation of

discriminated against Cook based on "perceived" disability. The

the job involved; and (2) that there is factual basis for believing

evidence included expert testimony that morbid obesity is a

Employment in particular jobs may not be limited to persons of

that all or substantially all persons meeting the qualification

physiological disorder. It involves a dysfunction of both the

a particular sex, religion, or national origin unless the employer

would be unable to properly perform the duties of the job. 67

metabolic system and the neurological appetite suppressing

can show that sex, religion, or national origin is an actual

signal system, which is capable of causing adverse effects

qualification for performing the job. The qualification is called a

In short, the test of reasonableness of the company policy is

within the musculoskeletal, respiratory, and cardiovascular

bona fide occupational qualification (BFOQ).55 In the United

used because it is parallel to BFOQ.68 BFOQ is valid "provided it

systems. Notably, the Court stated that "mutability is relevant

States, there are a few federal and many state job

reflects an inherent quality reasonably necessary for

only in determining the substantiality of the limitation flowing

discrimination laws that contain an exception allowing an

satisfactory job performance."69

from a given impairment," thus "mutability only precludes those

employer to engage in an otherwise unlawful form of prohibited

conditions that an individual can easily and quickly reverse by

discrimination when the action is based on a BFOQ necessary to

behavioral alteration."

the normal operation of a business or enterprise.

56

In Duncan Association of Detailman-PTGWTO v. Glaxo Wellcome

Philippines, Inc.,70 the Court did not hesitate to pass upon the
validity of a company policy which prohibits its employees from

Unlike Cook, however, petitioner is not morbidly obese. In the

Petitioner contends that BFOQ is a statutory defense. It does

marrying employees of a rival company. It was held that the

words of the District Court for the District of Rhode Island, Cook

not exist if there is no statute providing for it.57Further, there is

company policy is reasonable considering that its purpose is the

was sometime before 1978 "at least one hundred pounds more

no existing BFOQ statute that could justify his dismissal.

58

protection of the interests of the company against possible

than what is considered appropriate of her height." According to

the Circuit Judge, Cook weighed "over 320 pounds" in 1988.

competitor infiltration on its trade secrets and procedures.

Both arguments must fail.

Clearly, that is not the case here. At his heaviest, petitioner was
only less than 50 pounds over his ideal weight.

Verily, there is no merit to the argument that BFOQ cannot be

First, the Constitution,

59

the Labor Code,

60

and RA No. 7277

61

or

applied if it has no supporting statute. Too, the Labor

the Magna Carta for Disabled Persons62 contain provisions

Arbiter,71 NLRC,72 and CA73 are one in holding that the weight

similar to BFOQ.

standards of PAL are reasonable. A common carrier, from the

143

nature of its business and for reasons of public policy, is bound

aircraft when an emergency occurs. Passenger safety goes to

to reconfigure the aircraft in order to widen the aisles and exit

to observe extraordinary diligence for the safety of the

the core of the job of a cabin attendant. Truly, airlines need

doors just to accommodate overweight cabin attendants like

passengers it transports.74 It is bound to carry its passengers

cabin attendants who have the necessary strength to open

petitioner.

safely as far as human care and foresight can provide, using the

emergency doors, the agility to attend to passengers in

utmost diligence of very cautious persons, with due regard for

cramped working conditions, and the stamina to withstand

The biggest problem with an overweight cabin attendant is the

grueling flight schedules.

possibility of impeding passengers from evacuating the aircraft,

all the circumstances.

75

should the occasion call for it. The job of a cabin attendant
The law leaves no room for mistake or oversight on the part of a

On board an aircraft, the body weight and size of a cabin

during emergencies is to speedily get the passengers out of the

common carrier. Thus, it is only logical to hold that the weight

attendant are important factors to consider in case of

aircraft safely. Being overweight necessarily impedes mobility.

standards of PAL show its effort to comply with the exacting

emergency. Aircrafts have constricted cabin space, and narrow

Indeed, in an emergency situation, seconds are what cabin

obligations imposed upon it by law by virtue of being a common

aisles and exit doors. Thus, the arguments of respondent that

attendants are dealing with, not minutes. Three lost seconds

carrier.

"[w]hether the airlines flight attendants are overweight or not

can translate into three lost lives. Evacuation might slow down

has no direct relation to its mission of transporting passengers

just because a wide-bodied cabin attendant is blocking the

The business of PAL is air transportation. As such, it has

to their destination"; and that the weight standards "has

narrow aisles. These possibilities are not remote.

committed itself to safely transport its passengers. In order to

nothing to do with airworthiness of respondents airlines," must

achieve this, it must necessarily rely on its employees, most

fail.

Petitioner is also in estoppel. He does not dispute that the

particularly the cabin flight deck crew who are on board the

weight standards of PAL were made known to him prior to his

76

aircraft. The weight standards of PAL should be viewed as

The rationale in Western Air Lines v. Criswell

relied upon by

employment. He is presumed to know the weight limit that he

imposing strict norms of discipline upon its employees.

petitioner cannot apply to his case. What was involved there

must maintain at all times.78 In fact, never did he question the

were two (2) airline pilots who were denied reassignment as

authority of PAL when he was repeatedly asked to trim down his

In other words, the primary objective of PAL in the imposition of

flight engineers upon reaching the age of 60, and a flight

weight. Bona fides exigit ut quod convenit fiat. Good faith

the weight standards for cabin crew is flight safety. It cannot be

engineer who was forced to retire at age 60. They sued the

demands that what is agreed upon shall be done. Kung ang

gainsaid that cabin attendants must maintain agility at all times

airline company, alleging that the age-60 retirement for flight

tao ay tapat kanyang tutuparin ang napagkasunduan.

in order to inspire passenger confidence on their ability to care

engineers violated the Age Discrimination in Employment Act of

for the passengers when something goes wrong. It is not

1967. Age-based BFOQ and being overweight are not the same.

Too, the weight standards of PAL provide for separate weight

farfetched to say that airline companies, just like all common

The case of overweight cabin attendants is another matter.

limitations based on height and body frame for both male and

carriers, thrive due to public confidence on their safety records.

Given the cramped cabin space and narrow aisles and

female cabin attendants. A progressive discipline is imposed to

People, especially the riding public, expect no less than that

emergency exit doors of the airplane, any overweight cabin

allow non-compliant cabin attendants sufficient opportunity to

airline companies transport their passengers to their respective

attendant would certainly have difficulty navigating the

meet the weight standards. Thus, the clear-cut rules obviate

destinations safely and soundly. A lesser performance is

cramped cabin area.

any possibility for the commission of abuse or arbitrary action

unacceptable.

on the part of PAL.

In short, there is no need to individually evaluate their ability to

The task of a cabin crew or flight attendant is not limited to

perform their task. That an obese cabin attendant occupies

III. Petitioner failed to substantiate his claim that he was

serving meals or attending to the whims and caprices of the

more space than a slim one is an unquestionable fact which

discriminated against by PAL.

passengers. The most important activity of the cabin crew is to

courts can judicially recognize without introduction of

care for the safety of passengers and the evacuation of the

evidence.77 It would also be absurd to require airline companies

144

Petitioner next claims that PAL is using passenger safety as a

79

agencies are experts in matters within their specific and

84

In any event, the decision of the Labor Arbiter reinstating a

convenient excuse to discriminate against him. We are

specialized jurisdiction.

constrained, however, to hold otherwise. We agree with the CA

rule. It only applies if the findings of facts are duly supported by

aspect is concerned, shall immediately be executory, even

that "[t]he element of discrimination came into play in this case

substantial evidence. If it can be shown that administrative

pending appeal. The employee shall either be admitted back to

as a secondary position for the private respondent in order to

bodies grossly misappreciated evidence of such nature so as to

work under the same terms and conditions prevailing prior to

escape the consequence of dismissal that being overweight

compel a conclusion to the contrary, their findings of facts must

his dismissal or separation or, at the option of the employer,

entailed. It is a confession-and-avoidance position that impliedly

necessarily be reversed. Factual findings of administrative

merely reinstated in the payroll. The posting of a bond by the

admitted the cause of dismissal, including the reasonableness

agencies do not have infallibility and must be set aside when

employer shall not stay the execution for reinstatement

of the applicable standard and the private respondents failure

they fail the test of arbitrariness.85

provided herein.

Here, the Labor Arbiter and the NLRC inexplicably

The law is very clear. Although an award or order of

misappreciated evidence. We thus annul their findings.

reinstatement is self-executory and does not require a writ of

to comply."

80

But the principle is not a hard and fast

dismissed or separated employee, insofar as the reinstatement

It is a basic rule in evidence that each party must

prove his affirmative allegation.81

execution,93 the option to exercise actual reinstatement or

Since the burden of evidence lies with the party who asserts an
affirmative allegation, petitioner has to prove his allegation with

To make his claim more believable, petitioner invokes the equal

payroll reinstatement belongs to the employer. It does not

particularity. There is nothing on the records which could

protection clause guaranty86 of the Constitution. However, in the

belong to the employee, to the labor tribunals, or even to the

support the finding of discriminatory treatment. Petitioner

absence of governmental interference, the liberties guaranteed

courts.

cannot establish discrimination by simply naming the supposed

by the Constitution cannot be invoked.87 Put differently, the Bill

cabin attendants who are allegedly similarly situated with him.

of Rights is not meant to be invoked against acts of private

Contrary to the allegation of petitioner that PAL "did everything

Substantial proof must be shown as to how and why they are

individuals.88 Indeed, the United States Supreme Court, in

under the sun" to frustrate his "immediate return to his previous

89

position,"94 there is evidence that PAL opted to physically

similarly situated and the differential treatment petitioner got

interpreting the Fourteenth Amendment,

from PAL despite the similarity of his situation with other

of our equal protection guarantee, is consistent in saying that

reinstate him to a substantially equivalent position in

employees.

the equal protection erects no shield against private conduct,

accordance with the order of the Labor Arbiter.95 In fact,

however discriminatory or wrongful.

Indeed, except for pointing out the names of the supposed

90

which is the source

Private actions, no matter

how egregious, cannot violate the equal protection guarantee.

91

petitioner duly received the return to work notice on February

23, 2001, as shown by his signature.96

overweight cabin attendants, petitioner miserably failed to

indicate their respective ideal weights; weights over their ideal

IV. The claims of petitioner for reinstatement and wages

Petitioner cannot take refuge in the pronouncements of the

weights; the periods they were allowed to fly despite their being

are moot.

Court in a case97 that "[t]he unjustified refusal of the employer

overweight; the particular flights assigned to them; the

to reinstate the dismissed employee entitles him to payment of

discriminating treatment they got from PAL; and other relevant

As his last contention, petitioner avers that his claims for

his salaries effective from the time the employer failed to

data that could have adequately established a case of

reinstatement and wages have not been mooted. He is entitled

reinstate him despite the issuance of a writ of execution" 98 and

to reinstatement and his full backwages, "from the time he was

""even if the order of reinstatement of the Labor Arbiter is

illegally dismissed" up to the time that the NLRC was reversed

reversed on appeal, it is obligatory on the part of the employer

by the CA.92

to reinstate and pay the wages of the employee during the

discriminatory treatment by PAL. In the words of the CA, "PAL

really had no substantial case of discrimination to meet."

82

period of appeal until reversal by the higher court."99 He failed

We are not unmindful that findings of facts of administrative

agencies, like the Labor Arbiter and the NLRC, are accorded
respect, even finality.

83

The reason is simple: administrative

At this point, Article 223 of the Labor Code finds relevance:

to prove that he complied with the return to work order of PAL.

Neither does it appear on record that he actually rendered

145

services for PAL from the moment he was dismissed, in order to

moral character. We also recognize that his employment with

insist on the payment of his full backwages.

PAL lasted for more or less a decade.

The Antecedents
The facts are laid out in the assailed CA Decision and are

In insisting that he be reinstated to his actual position despite

WHEREFORE, the appealed Decision of the Court of Appeals

being overweight, petitioner in effect wants to render the issues

is AFFIRMED but MODIFIED in that petitioner Armando G.

in the present case moot. He asks PAL to comply with the

Yrasuegui is entitled to separation pay in an amount equivalent

The GSIS Multi-Purpose Cooperative (GMPC) is an entity

impossible. Time and again, the Court ruled that the law does

to one-half (1/2) months pay for every year of service, which

organized by the employees of the Government Service

should include his regular allowances. SO ORDERED.

Insurance System (GSIS). Incidental to its purpose, GMPC

not exact compliance with the impossible.

100

summarized below.

wanted to operate a canteen in the new GSIS Building, but had

V. Petitioner is entitled to separation pay.

28

no capability and expertise in this area. Thus, it engaged the

services of the petitioner S.I.P. Food House (SIP), owned by the
Republic of the Philippines

Be that as it may, all is not lost for petitioner.

SUPREME COURT
Manila

Normally, a legally dismissed employee is not entitled to

spouses Alejandro and Esther Pablo, as concessionaire. The

respondents Restituto Batolina and nine (9) others (the
respondents) worked as waiters and waitresses in the canteen.

separation pay. This may be deduced from the language of

THIRD DIVISION

Article 279 of the Labor Code that "[a]n employee who

is unjustly dismissed from work shall be entitled to

In February 2004, GMPC terminated SIPs "contract as GMPC

concessionaire," because of GMPCs decision "to take direct

G.R. No. 192473

reinstatement without loss of seniority rights and other

October 11, 2010

privileges and to his full backwages, inclusive of allowances,

investment in and management of the GMPC canteen;" SIPs

continued refusal to heed GMPCs directives for service

and to his other benefits or their monetary equivalent

S.I.P. FOOD HOUSE and MR. and MRS. ALEJANDRO

improvement; and the alleged interference of the Pablos two

computed from the time his compensation was withheld from

PABLO, Petitioners,

sons with the operation of the canteen.5 The termination of the

him up to the time of his actual reinstatement." Luckily for

vs.

concession contract caused the termination of the respondents

petitioner, this is not an ironclad rule.

RESTITUTO BATOLINA, ALMER CALUMPISAN, ARIES

employment, prompting them to file a complaint for illegal

MALGAPO, ARMANDO MALGAPO, FLORDELIZA MATIAS,

dismissal, with money claims, against SIP and the spouses

PERCIVAL MATIAS, ARWIN MIRANDA, LOPE MATIAS,

Pablo.

Exceptionally, separation pay is granted to a legally dismissed

employee as an act "social justice,"

101

or based on "equity."

102

In

RAMIL MATIAS, ALLAN STA. INES,Respondents.

both instances, it is required that the dismissal (1) was not for

The Compulsory Arbitration Proceedings

DECISION

serious misconduct; and (2) does not reflect on the moral

character of the employee.103

The Parties Positions

BRION, J.:

Here, We grant petitioner separation pay equivalent to one-half

(1/2) months pay for every year of service.

104

It should include

regular allowances which he might have been receiving. 105 We

are not blind to the fact that he was not dismissed for any
serious misconduct or to any act which would reflect on his

The respondents alleged before the labor arbiter that they were
We resolve the present petition for review on certiorari1 which

SIP employees, who were illegally dismissed sometime in

seeks to nullify the decision2 and resolution3 of the Court of

February and March 2004. SIP did not implement Wage Order

Appeals (CA), promulgated on November 27, 2009 and May 31,

2010, respectively, in CA-G.R. SP No. 101651. 4

Nos. 5 to 11 for the years 1997 to 2004. They did not receive
overtime pay although they worked from 6:30 in the morning
until 5:30 in the afternoon, or other employee benefits such as

146

service incentive leave, and maternity benefit (for their co-

were the respondents entitled to overtime pay as it was highly

respondents employer who is liable for their money claims

employee Flordeliza Matias). Their employee contributions were

improbable that they regularly worked beyond eight (8) hours

despite its being a labor-only contractor of GMPC.

also not remitted to the Social Security System.

every day for a canteen that closes after 5:30 p.m.

To avoid liability, SIP argued that it operated the canteen in

The respondents brought their case, on appeal, to the National

behalf of GMPC since it had no authority by itself to do so. The

Labor Relations Commission (NLRC).

The CA Decision

respondents were not its employees, but GMPCs, as shown by

their identification cards. It claimed that GMPC terminated its

In its Decision promulgated on November 27, 2009,10 the CA

granted the petition in part. While it affirmed the award, it

The NLRC Ruling

found merit in SIPs objection to the NLRC computation and

concession and prevented it from having access to the canteen

assumption that a month had twenty-six (26) working days,

7

premises as GSIS personnel locked the place; GMPC then

In its Decision of August 30, 2007, the NLRC found that SIP was

instead of twenty (20) working days. The CA recognized that in

operated the canteen on its own, absorbing the respondents for

the respondents employer, but it sustained the labor arbiters

a government agency such as the GSIS, there are only 20

the purpose and assigning them to the same positions they held

ruling that the employees were not illegally dismissed as the

official business days in a month. It noted that the respondents

with SIP. It maintained that the respondents were not dismissed,

termination of SIPs concession to operate the canteen

presented no evidence that the employees worked even outside

but were merely prevented by GMPC from performing their

constituted an authorized cause for the severance of employer-

official business days and hours. It accordingly remanded the

functions. For this reason, SIP posited that the legal obligations

employee relations. Furthermore, the respondents admission

case for a recomputation of the award.

that would arise under the circumstances have to be shouldered

that they applied with GMPC when it terminated SIPs

by GMPC.

concession is an indication that they were employees of SIP and

Finding substantial evidence in the records supporting the NLRC

that they were terminating their employment relationship with

conclusions, the CA brushed aside SIPs argument that it could

it. As the labor arbiter did, the NLRC regarded the closure of

not have been the employer of the respondents because it was

SIPs canteen operations involuntary, thus, negating the

a mere labor-only contractor of GMPC. It sustained the NLRCs

employees entitlement to separation pay. 8

findings that SIP was the respondents employer.

that the respondents were GMPCs employees, and not SIPs, as

For failure of SIP to present proof of compliance with the law on

SIP moved for reconsideration, but the CA denied the motion on

there existed a labor-only contracting relationship between the

the minimum wage, 13th month pay, and service incentive

May 31, 2010.11 Hence, the present petition.

two entities. The labor arbiter, however, opined that even if

leave, the NLRC awarded the respondents a total

respondents were considered as SIPs employees, their

of P952,865.53 in salary and 13th month pay differentials and

dismissal would still not be illegal because the termination of its

service incentive leave pay.9 The NLRC, however, denied the

contract to operate the canteen came as a surprise and was

employees claim for overtime pay, holding that the

SIP seeks a reversal of the appellate courts ruling that it was

against its will, rendering the canteens closure involuntary.

respondents failed to present evidence that they rendered two

the employer of the respondents, claiming that it was merely a

hours overtime work every day of their employment with SIP.

labor-only contractor of GMPC.

ruled that SIP is not liable for unpaid salaries because it had

SIP moved for, but failed to secure, a reconsideration of the

It insists that it could not be the respondents employer as it

complied with the minimum statutory requirement and had

NLRC decision. It then elevated the case to the CA through a

was not allowed to operate a canteen in the GSIS building. It

extended better benefits than GMPC; although they were paid

petition for certiorari charging the NLRC with grave abuse of

was the GMPC who had the authority to undertake the

only P160.00 to PP220.00 daily, the employees were provided

discretion in rendering the assailed decision. Essentially, SIP

operation. GMPC only engaged SIPs services because GMPC

with free board and lodging seven (7) days a week. Neither

argued that the NLRC erred in declaring that it was the

had no capability or competence in the area. SIP points out that

The Labor Arbiters Decision

Labor Arbiter Francisco A. Robles rendered a Decision on June
6

30, 2005 dismissing the complaint for lack of merit. He found

The Petition

Arbiter Robles likewise denied the employees money claims. He

147

GMPC assumed responsibility for its acts in operating the

and the CA, on the other.14 We, therefore, hold the respondents

That complainants were employees of respondents is further

canteen; all businesses it transacted were under GMPCs name,

position on this point unmeritorious.

bolstered by the fact that respondents do not deny that they

as well as the business registration and other permits of the

canteen, sales receipts and vouchers for food purchased from

were the ones who paid complainants salary. When

We now consider the merits of the case.

the canteen; the employees were issued individual ID cards by

GMPC. In sum, SIP contends that its arrangement with GMPC

complainants charged them of underpayment, respondents

even interposed the defense of file (sic) board and lodging

The employer-employee relationship issue

given to complainants.

the Labor Code. Lastly, it submits that it was not registered with

We affirm the CA ruling that SIP was the respondents employer.

Furthermore, these IDs issued to complainants bear the

the Department of Labor and Employment as an independent

The NLRC decision, which the CA affirmed, states:

signature of respondent Alejandro C. Pablo (Annexes "J", "K",

was one of contractor/subcontractor governed by Article 106 of

contractor and, therefore, it is presumed to be a labor-only

contractor.
The Respondents Comment

"M" to "M-2" of complainants Reply. . ., Records, pp. 285 to

Respondents have been the concessionaire of GMPC canteen for

290). Likewise, the memoranda issued to complainants

nine (9) years (Annex "A" of Complainants Sur-Rejoinder.,

regarding their absences without leave were signed by

Records, 302). During this period, complainants were employed

respondent Alejandro C. Pablo (Annexes A, C, E, & G, Ibid.,

at the said canteen (Sinumpaang Salaysay of complainants,

Records, pp. 274, 276, 279, 282). All these pieces of evidence

Without being required by the Court, the respondents

Records, p. 156). On February 29, 2004, respondents

clearly show that respondents are the employer of

filed their comment to SIPs petition on August 3,

concession with GMPC was terminated (Annex "C" of

complainants. (Rollo, pp. 87-88.)

2010.12 They question the propriety of the petition for review

Respondents Answer and Position Paper, Records, p. 77). When

on certiorari raising only questions of fact and not of law as

respondents were prevented from entering the premises as a

required by Rule 45 of the Rules of Court. This notwithstanding,

result of the termination of their concession, they sent a protest

they submit that the CA committed no error in upholding the

letter dated April 14, 2004 to GMPC thru their counsel. Pertinent

The CA ruled out SIPs claim that it was a labor-only contractor

NLRCs findings of facts which established that SIP was the real

portion of the letter:

or a mere agent of GMPC. We agree with the CA; SIP and its

employer of Batolina and the other complainants. Thus, SIP was

xxxx

proprietors could not be considered as mere agents of GMPC

liable to them for their statutory benefits, although it was not

We write this letter in behalf of our client Mr. & Mrs. Alejandro C.

because they exercised the essential elements of an

made to answer for their lost employment due to the

Pablo, the concessionaires who used to occupy and/or rent the

employment relationship with the respondents such as hiring,

involuntary nature of the canteens closure.

area for a cafeteria/canteen at the 2nd Floor of the GSIS

payment of wages and the power of control, not to mention that

Building for the past several years.

SIP operated the canteen on its own account as it paid a fee for

The respondents pray that the petition be dismissed for lack of

merit.

the use of the building and for the privilege of running the
Last March 12, 2004, without any court writ or order, and with

canteen. The fact that the respondents applied with GMPC in

the aid of your armed agents, you physically barredour clients &

February 2004 when it terminated its contract with SIP, is

their employees/helpers from entering the said premises and

another clear indication that the two entities were separate and

from performing their usual duties of serving the food

distinct from each other. We thus see no reason to disturb

requirements of GSIS personnel and others.

the CAs findings.

findings of the CA, we deem it proper to depart from the rule

Clearly, no less than respondents, thru their counsel, admitted

The respondentss money claims

and examine the facts of the case in view of the conflicting

that complainants herein were their employees.

The Courts Ruling

We first resolve the alleged impropriety of the petition.

13

While it

is the general rule that the Court may not review factual

factual findings of the labor arbiter, on one hand, and the NLRC

148

We likewise affirm the CA ruling on the monetary award to

Republic of the Philippines

Batolina and the other complainants.1avvp++i1 The free board

SUPREME COURT

and lodging SIP furnished the employees cannot operate as a

Manila

set-off for the underpayment of their wages. We held in Mabeza

were hired by petitioner Lagon as apprentice or trainee

cable/lineman. The three were paid the full minimum wage and
other benefits but since they were only trainees, they did not

v. National Labor Relations Commission15 that the employer

SECOND DIVISION

cannot simply deduct from the employees wages the value of

the board and lodging without satisfying the following

brevity), and Edgardo Zuiga (Zuiga for brevity) respectively,

report for work regularly but came in as substitutes to the

regular workers or in undertakings that needed extra workers to

G.R. No. 172161

March 2, 2011

requirements: (1) proof that such facilities are customarily

expedite completion of work. After their training, Zuiga,

Caete and Lopez were engaged as project employees by the

furnished by the trade; (2) voluntary acceptance in writing by

SLL INTERNATIONAL CABLES SPECIALIST and SONNY L.

petitioners in their Islacom project in Bohol. Private respondents

the employees of the deductible facilities; and (3) proof of the

LAGON, Petitioners,

started on March 15, 1997 until December 1997. Upon the

fair and reasonable value of the facilities charged. As the CA

vs.

completion of their project, their employment was also

aptly noted, it is clear from the records that SIP failed to comply

NATIONAL LABOR RELATIONS COMMISSION, 4th

terminated. Private respondents received the amount

with these requirements.

DIVISION, ROLDAN LOPEZ, EDGARDO ZUIGA and

of P145.00, the minimum prescribed daily wage for Region VII.

DANILO CAETE, Respondents.

In July 1997, the amount of P145 was increased to P150.00 by

On the collateral issue of the proper computation of the

the Regional Wage Board (RWB) and in October of the same

monetary award, we also find the CA ruling to be in order.

DECISION

Indeed, in the absence of evidence that the employees worked

for 26 days a month, no need exists to recompute the award for

year, the latter was increased to P155.00. Sometime in March

1998, Zuiga and Caete were engaged again by Lagon as

MENDOZA, J.:

project employees for its PLDT Antipolo, Rizal project, which

the respondents who were "explicitly claiming for their salaries

ended sometime in (sic) the late September 1998. As a

and benefits for the services rendered from Monday to Friday or

Assailed in this petition for review on certiorari are the January

consequence, Zuiga and Caetes employment was

5 days a week or a total of 20 days a month."16

11, 2006 Decision1 and the March 31, 2006 Resolution2 of the

terminated. For this project, Zuiga and Caete received only

Court of Appeals (CA), in CA-G.R. SP No. 00598 which affirmed

the wage of P145.00 daily. The minimum prescribed wage for

with modification the March 31, 2004 Decision3 and December

Rizal at that time was P160.00.

In light of the foregoing, we find no merit in the petition.

15, 2004 Resolution of the National Labor Relations

WHEREFORE, premises considered, we hereby DISMISS the

Commission (NLRC). The NLRC Decision found the petitioners,

Sometime in late November 1998, private respondents re-

petition for lack of merit. The assailed decision and resolution of

SLL International Cables Specialist (SLL) and its manager, Sonny

applied in the Racitelcom project of Lagon in Bulacan. Zuiga

the Court of Appeals in CA-G.R. SP No. 101651, are AFFIRMED.

L. Lagon(petitioners), not liable for the illegal dismissal of

and Caete were re-employed. Lopez was also hired for the said

Roldan Lopez, Danilo Caete and Edgardo Zuiga (private

specific project. For this, private respondents received the wage

respondents) but held them jointly and severally liable for

of P145.00. Again, after the completion of their project in March

payment of certain monetary claims to said respondents.

1999, private respondents went home to Cebu City.

A chronicle of the factual antecedents has been succinctly

On May 21, 1999, private respondents for the 4th time worked

summarized by the CA as follows:

with Lagons project in Camarin, Caloocan City with Furukawa

SO ORDERED.

Corporation as the general contractor. Their contract would

29

Sometime in 1996, and January 1997, private respondents

expire on February 28, 2000, the period of completion of the

Roldan Lopez (Lopez for brevity) and Danilo Caete (Caete for

project. From May 21, 1997-December 1999, private

149

respondents received the wage ofP145.00. At this time, the

complaint for lack of jurisdiction and utter lack of merit.

denied9 the motion for reconsideration10 subsequently filed by

minimum prescribed rate for Manila was P198.00. In January to

(Citations omitted.)

petitioners.

On January 18, 2001, Labor Arbiter Reynoso

When the matter was elevated to the CA on a petition for

Belarmino (LA) rendered his decision5 declaring that his office

certiorari, it affirmed the findings that the private respondents

For reasons of delay on the delivery of imported materials from

had jurisdiction to hear and decide the complaint filed by

were regular employees. It considered the fact that they

Furukawa Corporation, the Camarin project was not completed

private respondents. Referring to Rule IV, Sec. 1 (a) of the NLRC

performed functions which were the regular and usual business

February 28, the three received the wage of P165.00. The

existing rate at that time was P213.00.

on the scheduled date of completion. Face[d] with economic

Rules of Procedure prevailing at that time, the LA ruled that it

of petitioners. According to the CA, they were clearly members

problem[s], Lagon was constrained to cut down the overtime

had jurisdiction because the "workplace," as defined in the said

of a work pool from which petitioners drew their project

work of its worker[s][,] including private respondents. Thus,

rule, included the place where the employee was supposed to

employees.

when requested by private respondents on February 28, 2000 to

report back after a temporary detail, assignment or travel,

work overtime, Lagon refused and told private respondents that

which in this case was Cebu.

The CA also stated that the failure of petitioners to comply with

if they insist, they would have to go home at their own expense

the simple but compulsory requirement to submit a report of

and that they would not be given anymore time nor allowed to

As to the status of their employment, the LA opined that private

termination to the nearest Public Employment Office every time

stay in the quarters. This prompted private respondents to

respondents were regular employees because they were

private respondents employment was terminated was proof

leave their work and went home to Cebu. On March 3, 2000,

repeatedly hired by petitioners and they performed activities

that the latter were not project employees but regular

private respondents filed a complaint for illegal dismissal, non-

which were usual, necessary and desirable in the business or

employees.

payment of wages, holiday pay, 13th month pay for 1997 and

trade of the employer.

1998 and service incentive leave pay as well as damages and

attorneys fees.

The CA likewise found that the private respondents were

With regard to the underpayment of wages, the LA found that

underpaid. It ruled that the board and lodging, electricity,

private respondents were underpaid. It ruled that the free board

water, and food enjoyed by the private respondents could not

In their answers, petitioners admit employment of private

and lodging, electricity, water, and food enjoyed by them could

be included in the computation of their wages because these

respondents but claimed that the latter were only project

not be included in the computation of their wages because

were given without their written consent. The CA added that the

employees[,] for their services were merely engaged for a

these were given without their written consent.

private respondents were entitled to 13th month pay.

contracts duly signed by private respondents. Petitioners further

The LA, however, found that petitioners were not liable for

The CA also agreed with the NLRC that there was no illegal

alleged that the food allowance ofP63.00 per day as well as

illegal dismissal. The LA viewed private respondents act of

dismissal. The CA opined that it was the petitioners prerogative

private respondents allowance for lodging house,

going home as an act of indifference when petitioners decided

to grant or deny any request for overtime work and that the

transportation, electricity, water and snacks allowance should

to prohibit overtime work.7

private respondents act of leaving the workplace after their

specific project or undertaking and the same were covered by

be added to their basic pay. With these, petitioners claimed that

request was denied was an act of abandonment.

private respondents received higher wage rate than that

In its March 31, 2004 Decision, the NLRC affirmed the findings

prescribed in Rizal and Manila.

of the LA. In addition, the NLRC noted that not a single report of

In modifying the decision of the labor tribunal, however, the CA

project completion was filed with the nearest Public

noted that respondent Roldan Lopez did not work in the Antipolo

Lastly, petitioners alleged that since the workplaces of private

Employment Office as required

project and, thus, was not entitled to wage differentials. Also, in

respondents were all in Manila, the complaint should be filed

by the Department of Labor and Employment (DOLE)

there. Thus, petitioners prayed for the dismissal of the

Department Order No. 19, Series of 1993. The NLRC later

computing the differentials for the period January and February

2000, the CA disagreed in the award of differentials based on

150

the minimum daily wage of P223.00, as the prevailing minimum

On November 29, 2006, the Court resolved to issue a Temporary

payslips, to support their defense of payment. Thus, petitioners

daily wage then was only P213.00. Petitioners sought

Restraining Order (TRO) enjoining the public respondent from

utterly failed to discharge the onus probandi.

reconsideration but the CA denied it in its March 31, 2006

enforcing the NLRC and CA decisions until further orders from

Resolution.11

the Court.

Private respondents, on the other hand, are entitled to be paid

the minimum wage, whether they are regular or non-regular

In this petition for review on certiorari,

12

petitioners seek the

reversal and setting aside of the CA decision anchored on this

After a thorough review of the records, however, the Court finds

employees.

no merit in the petition.

lone:

Section 3, Rule VII of the Rules to Implement the Labor

GROUND/ASSIGNMENT OF ERROR

This petition generally involves factual issues, such as, whether

Code19 specifically enumerates those who are not covered by

or not there is evidence on record to support the findings of the

the payment of minimum wage. Project employees are not

LA, the NLRC and the CA that private respondents were project

among them.

THE PUBLIC RESPONDENT NLRC COMMITTED A SERIOUS ERROR

or regular employees and that their salary differentials had

IN LAW IN AWARDING WAGE DIFFERENTIALS TO THE PRIVATE

been paid. This calls for a re-examination of the evidence, which

On whether the value of the facilities should be included in the

COMPLAINANTS ON THE BASES OF MERE TECHNICALITIES, THAT

the Court cannot entertain. Settled is the rule that factual

computation of the "wages" received by private respondents,

IS, FOR LACK OF WRITTEN CONFORMITY x x x AND LACK OF

findings of labor officials, who are deemed to have acquired

Section 1 of DOLE Memorandum Circular No. 2 provides that an

NOTICE TO THE DEPARTMENT OF LABOR AND EMPLOYMENT

expertise in matters within their respective jurisdiction, are

employer may provide subsidized meals and snacks to his

(DOLE)[,] AND THUS, THE COURT OF APPEALS GRAVELY ERRED

generally accorded not only respect but even finality, and bind

employees provided that the subsidy shall not be less that 30%

IN AFFIRMING WITH MODIFICATION THE NLRC DECISION IN THE

the Court when supported by substantial evidence. It is not the

of the fair and reasonable value of such facilities. In such cases,

LIGHT OF THE RULING IN THE CASE OF JENNY M. AGABON and

Courts function to assess and evaluate the evidence

the employer may deduct from the wages of the employees not

VIRGILIO AGABON vs, NLRC, ET AL., GR NO. 158963, NOVEMBER

17, 2004, 442 SCRA 573, [AND SUBSEQUENTLY IN THE CASE
OF GLAXO WELLCOME PHILIPPINES, INC. VS.NAGAKAKAISANG

more than 70% of the value of the meals and snacks enjoyed by
all over again, particularly where the findings of both the Labor
tribunals and the CA concur.

16

the latter, provided that such deduction is with the written

authorization of the employees concerned.

EMPLEYADO NG WELLCOME-DFA (NEW DFA), ET AL., GR NO.

149349, 11 MARCH 2005], WHICH FINDS APPLICATION IN THE

As a general rule, on payment of wages, a party who alleges

Moreover, before the value of facilities can be deducted from

INSTANT CASE BY ANALOGY.13

payment as a defense has the burden of proving it. 17Specifically

the employees wages, the following requisites must all be

with respect to labor cases, the burden of proving payment of

attendant: first, proof must be shown that such facilities are

Petitioners reiterated their position that the value of the

monetary claims rests on the employer, the rationale being that

customarily furnished by the trade; second, the provision of

facilities that the private respondents enjoyed should be

the pertinent personnel files, payrolls, records, remittances and

deductible facilities must be voluntarily accepted in writing by

included in the computation of the "wages" received by them.

other similar documents which will show that overtime,

the employee; and finally, facilities must be charged at

They argued that the rulings in Agabon v. NLRC and Glaxo

differentials, service incentive leave and other claims of workers

reasonable value.20 Mere availment is not sufficient to allow

Wellcome Philippines, Inc. v. Nagkakaisang Empleyado Ng

have been paid are not in the possession of the worker but in

deductions from employees wages.21

Wellcome-DFA15 should be applied by analogy, in the sense that

the custody and absolute control of the employer.18

14

the lack of written acceptance of the employees of the facilities

These requirements, however, have not been met in this case.

enjoyed by them should not mean that the value of the facilities

In this case, petitioners, aside from bare allegations that private

SLL failed to present any company policy or guideline showing

could not be included in the computation of the private

respondents received wages higher than the prescribed

that provisions for meals and lodging were part of the

respondents "wages."

minimum, failed to present any evidence, such as payroll or

employees salaries. It also failed to provide proof of the

151

employees written authorization, much less show how they

the failure of the petitioners to comply with the payment of the

arrived at their valuations. At any rate, it is not even clear

prescribed minimum wage.

whether private respondents actually enjoyed said facilities.

The Court sustains the deletion of the award of differentials with
The Court, at this point, makes a distinction between "facilities"

respect to respondent Roldan Lopez. As correctly pointed out by

and "supplements." It is of the view that the food and lodging,

the CA, he did not work for the project in Antipolo.

or the electricity and water allegedly consumed by private

respondents in this case were not facilities but supplements. In

WHEREFORE, the petition is DENIED. The temporary

the case of Atok-Big Wedge Assn. v. Atok-Big Wedge Co.,22 the

restraining order issued by the Court on November 29, 2006 is

two terms were distinguished from one another in this wise:

deemed, as it is hereby ordered, DISSOLVED.

"Supplements," therefore, constitute extra remuneration or

SO ORDERED.

special privileges or benefits given to or received by the

laborers over and above their ordinary earnings or wages.
"Facilities," on the other hand, are items of expense necessary
for the laborer's and his family's existence and subsistence so
that by express provision of law (Sec. 2[g]), they form part of
the wage and when furnished by the employer are deductible
therefrom, since if they are not so furnished, the laborer would
spend and pay for them just the same.
In short, the benefit or privilege given to the employee which
constitutes an extra remuneration above and over his basic or
ordinary earning or wage is supplement; and when said benefit
or privilege is part of the laborers' basic wages, it is a facility.
The distinction lies not so much in the kind of benefit or item
(food, lodging, bonus or sick leave) given, but in the purpose for
which it is given.23 In the case at bench, the items provided
were given freely by SLL for the purpose of maintaining the
efficiency and health of its workers while they were working at
their respective projects.1avvphi1
For said reason, the cases of Agabon and Glaxo are inapplicable
in this case. At any rate, these were cases of dismissal with just
and authorized causes. The present case involves the matter of

152

as follows: Basic Monthly Salary + Monthly Average

Performance Incentive (which is the total performance incentive
30

earned during the year immediately preceding 12 months)

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 176985

April 1, 2013

RICARDO E. VERGARA, JR., Petitioner,

vs.
COCA-COLA BOTTLERS PHILIPPINES, INC., Respondent.
DECISION
PERALTA, J.:
Before Us is a petition for review on certiorari under Rule 45 of
the Rules of Civil Procedure assailing the January 9, 2007
Decision1 and March 6, 2007 Resolution2 of the Court of Appeals
(CA) in CA .. G.R. SP No. 94622, which affirmed the January 31,
2006 Decision3 and March 8, 2006 Resolution4 of the National
Labor Relations Commission (NLRC) modifying the September
30, 2003 Decision5 of the Labor Arbiter (LA) by deleting the
sales management incentives in the computation of petitioner's
retirement benefits.
Petitioner Ricardo E. Vergara, Jr. was an employee of respondent
Coca-Cola Bottlers Philippines, Inc. from May 1968 until he
retired on January 31, 2002 as a District Sales Supervisor (DSS)
for Las Pias City, Metro Manila. As stipulated in respondents
existing Retirement Plan Rules and Regulations at the time, the
Annual Performance Incentive Pay of RSMs, DSSs, and SSSs

No. of Years in Service.6

Claiming his entitlement to an additional PhP474,600.00 as
Sales Management Incentives (SMI)7 and to the amount of
PhP496,016.67 which respondent allegedly deducted illegally,
representing the unpaid accounts of two dealers within his
jurisdiction, petitioner filed a complaint before the NLRC on June
11, 2002 for the payment of his "Full Retirement Benefits, Merit
Increase, Commission/Incentives, Length of Service, Actual,
Moral and Exemplary Damages, and Attorneys Fees." 8
After a series of mandatory conference, both parties partially
settled with regard the issue of merit increase and length of
service.9 Subsequently, they filed their respective Position Paper
and Reply thereto dealing on the two remaining issues of SMI
entitlement and illegal deduction.
On September 30, 2003, the LA rendered a Decision 10 in favor of
petitioner, directing respondent to reimburse the amount
illegally deducted from petitioners retirement package and to
integrate therein his SMI privilege. Upon appeal of respondent,
however, the NLRC modified the award and deleted the
payment of SMI.
Petitioner then moved to partially execute the reimbursement of
illegal deduction, which the LA granted despite respondents
opposition.11 Later, without prejudice to the pendency of
petitioners petition for certiorari before the CA, the parties
executed a Compromise Agreement12 on October 4, 2006,
whereby petitioner acknowledged full payment by respondent
of the amount of PhP496,016.67 covering the amount illegally
deducted.

shall be considered in the computation of retirement benefits,

153

The CA dismissed petitioners case on January 9, 2007 and

the employer.15 The principle of non-diminution of benefits is

regardless of whether or not they qualify to the same had

denied his motion for reconsideration two months thereafter.

actually founded on the Constitutional mandate to protect the

ripened into company practice. Despite more than sufficient

Hence, this present petition to resolve the singular issue of

rights of workers, to promote their welfare, and to afford them

opportunity given him while his case was pending before the

16

whether the SMI should be included in the computation of

full protection.

petitioners retirement benefits on the ground of consistent

the Labor Code which states that "all doubts in the

adduce proof to establish his allegation that SMI has been

company practice. Petitioner insistently avers that many DSSs

implementation and interpretation of this Code, including its

consistently, deliberately and voluntarily granted to all retired

who retired without achieving the sales and collection targets

implementing rules and regulations, shall be rendered in favor

DSSs without any qualification or conditions whatsoever. The

were given the average SMI in their retirement package.

of labor."

In turn, said mandate is the basis of Article 4 of

17

NLRC, the CA, and even to this Court, petitioner utterly failed to

only two pieces of evidence that he stubbornly presented

throughout the entirety of this case are the sworn statements of

We deny.

There is diminution of benefits when the following requisites are

Renato C. Hidalgo (Hidalgo) and Ramon V. Velazquez

present: (1) the grant or benefit is founded on a policy or has

(Velasquez), former DSSs of respondent who retired in 2000 and

This case does not fall within any of the recognized exceptions

ripened into a practice over a long period of time; (2) the

1998, respectively. They claimed that the SMI was included in

to the rule that only questions of law are proper in a petition for

practice is consistent and deliberate; (3) the practice is not due

their retirement package even if they did not meet the sales

review on certiorari under Rule 45 of the Rules of Court. Settled

to error in the construction or application of a doubtful or

and collection qualifiers.24 However, juxtaposing these with the

is the rule that factual findings of labor officials, who are

difficult question of law; and (4) the diminution or

evidence presented by respondent would reveal the frailty of

deemed to have acquired expertise in matters within their

discontinuance is done unilaterally by the employer.

18

their statements.

respective jurisdiction, are generally accorded not only respect

but even finality, and bind us when supported by substantial

To be considered as a regular company practice, the employee

The declarations of Hidalgo and Velazquez were sufficiently

evidence.13Certainly, it is not Our function to assess and

must prove by substantial evidence that the giving of the

countered by respondent through the affidavits executed by

evaluate the evidence all over again, particularly where the

benefit is done over a long period of time, and that it has been

Norman R. Biola (Biola), Moises D. Escasura (Escasura), and Ma.

findings of both the CA and the NLRC coincide.

made consistently and deliberately.19Jurisprudence has not laid

Vanessa R. Balles (Balles).25 Biola pointed out the various stop-

down any hard-and-fast rule as to the length of time that

gap measures undertaken by respondent beginning 1999 in

company practice should have been exercised in order to

order to arrest the deterioration of its accounts receivables

In any event, even if this Court would evaluate petitioner's

20

arguments on its supposed merits, We still find no reason to

constitute voluntary employer practice.

disturb the CA ruling that affirmed the NLRC. The findings and

denominator in previously decided cases appears to be the

and to the change in the management structure of respondent

conclusions of the CA show that the evidence and the

regularity and deliberateness of the grant of benefits over a

upon its re-acquisition by San Miguel Corporation. Escasura

arguments of the parties had all been carefully considered and

significant period of time.21 It requires an indubitable showing

represented that he has personal knowledge of the

passed upon. There are no relevant and compelling facts to

that the employer agreed to continue giving the benefit

circumstances behind the retirement of Hidalgo and Velazquez.

justify a different resolution which the CA failed to consider as

knowing fully well that the employees are not covered by any

He attested that contrary to petitioners claim, Hidalgo was in

well as no factual conflict between the CA and the NLRC

provision of the law or agreement requiring payment

fact qualified for the SMI. As for Velazquez, Escasura asserted

decisions.

thereof.22 In sum, the benefit must be characterized by

that even if he (Velazquez) did not qualify for the SMI,

regularity, voluntary and deliberate intent of the employer to

respondents General Manager in its Calamba plant still granted

grant the benefit over a considerable period of time.23

his (Velazquez) request, along with other numerous

Generally, employees have a vested right over existing benefits

The common

14

voluntarily granted to them by their employer. Thus, any

balance, two of which relate to the policies on the grant of SMI

concessions, to achieve industrial peace in the plant which was

benefit and supplement being enjoyed by the employees

Upon review of the entire case records, We find no substantial

then experiencing labor relations problems. Lastly, Balles

cannot be reduced, diminished, discontinued or eliminated by

evidence to prove that the grant of SMI to all retired DSSs

confirmed that petitioner failed to meet the trade receivable

154

qualifiers of the SMI. She also cited the cases of Ed Valencia

large amount of uncollected overdue accounts. For the year

(Valencia) and Emmanuel Gutierrez (Gutierrez), both DSSs of

2001, his percentage collection efficiency for current issuance

respondent who retired on January 31, 2002 and December 30,

was at an average of 13.5% a month as against the required

2002, respectively. She noted that, unlike Valencia, Gutierrez

70%. For the same, petitioners collection efficiency was at an

also did not receive the SMI as part of his retirement pay, since

average of 60.25% per month for receivables aged 1-30 days,

he failed to qualify under the policy guidelines. The verity of all

which is again, way below the required 90%. For receivables

these statements and representations stands and holds true to

aged 31-60 days during said year, petitioners collection

Us, considering that petitioner did not present any iota of proof

efficiency was at an average of 56.17% per month, which is

to debunk the same.1wphi1

approximately half of the required 100%. Worse, for receivables

over 60 days old, petitioners average collection efficiency per

Therefore, respondent's isolated act of including the SMI in the

month was a reprehensively low 14.10% as against the required

retirement package of Velazquez could hardly be classified as a

100%.29

company practice that may be considered an enforceable

obligation. To repeat, the principle against diminution of

The above data was repeatedly raised by respondent in its

benefits is applicable only if the grant or benefit is founded on

Rejoinder (To Complainants Reply) before the

an express policy or has ripened into a practice over a long

LA,30Memorandum of Appeal31 and Opposition (To Complainant-

period of time which is consistent and deliberate; it

Appellees Motion for Reconsideration)32 before the NLRC, and

presupposes that a company practice, policy and tradition

Comment (On the Petition),33 Memorandum (For the Private

favorable to the employees has been clearly established; and

Respondent),34 and Comment (On the Motion for

that the payments made by the company pursuant to it have

Reconsideration)35 before the CA. Instead of frontally rebutting

ripened into benefits enjoyed by them.

26

Certainly, a practice or

the data, petitioner treated them with deafening silence; thus,

custom is, as a general rule, not a source of a legally

reasonably and logically implying lack of evidence to support

demandable or enforceable right.27 Company practice, just like

the contrary.

any other fact, habits, customs, usage or patterns of conduct,

must be proven by the offering party who must allege and

WHEREFORE, the petition is DENIED. The January 9, 2007

establish specific, repetitive conduct that might constitute

Decision and March 6, 2007 Resolution of the Court of Appeals

evidence of habit or company practice.28

in CA-G.R. SP No. 94622, which affirmed the January 31, 2006

Decision and March 8, 2006 Resolution of the NLRC deleting the

To close, We rule that petitioner could have salvaged his case

LA's inclusion of sales management incentives in the

had he step up to disprove respondents contention that he

computation of petitioner's retirement benefits, is hereby

miserably failed to meet the collection qualifiers of the SMI.

AFFIRMED.

Respondent argues that

SO ORDERED.
An examination of the Companys aged trial balance reveals
that petitioner did not meet the trade receivable qualifier. On
the contrary, the said trial balance reveals that petitioner had a

155

CA-G.R. SP No. 05200, entitled Coca-Cola Bottlers Philippines,

hours of work, the bottling operators are given a 30-minute

Inc.-Cebu Plant v. Royal Plant Workers Union, which nullified and

break and this goes on until the shift ends. In September 2008

set aside the June 11, 2010 Decision3 of the Voluntary

and up to the present, the rotation has changed and bottling

Arbitration Panel (Arbitration Committee) in a case involving the

operators are now given a 30-minute break after one and one

removal of chairs in the bottling plant of Coca-Cola Bottlers

half (1 ) hours of work.

Philippines, Inc. (CCBPI).

In 1974, the bottling operators of then Bottling Line 2 were
The Factual and Procedural

provided with chairs upon their request. In 1988, the bottling

operators of then Bottling Line 1 followed suit and asked to be

Antecedents

provided also with chairs. Their request was likewise granted.

Sometime in September 2008, the chairs provided for the

The factual and procedural antecedents have been accurately

operators were removed pursuant to a national directive of

recited in the May 24, 2011 CA decision as follows:

petitioner. This directive is in line with the "I Operate, I Maintain,

I Clean" program of petitioner for bottling operators, wherein

Petitioner Coca-Cola Bottlers Philippines, Inc. (CCBPI) is a

every bottling operator is given the responsibility to keep the

domestic corporation engaged in the manufacture, sale and

machinery and equipment assigned to him clean and safe. The

distribution of softdrink products. It has several bottling plants

program reinforces the task of bottling operators to constantly

Republic of the Philippines

all over the country, one of which is located in Cebu City. Under

move about in the performance of their duties and

SUPREME COURT

the employ of each bottling plant are bottling operators. In the

responsibilities.

Baguio City

case of the plant in Cebu City, there are 20 bottling operators

31

THIRD DIVISION
G.R. No. 198783

April 15, 2013

who work for its Bottling Line 1 while there are 12-14 bottling

With this task of moving constantly to check on the machinery

operators who man its Bottling Line 2. All of them are male and

and equipment assigned to him, a bottling operator does not

they are members of herein respondent Royal Plant Workers

need a chair anymore, hence, petitioners directive to remove

Union (ROPWU).

them. Furthermore, CCBPI rationalized that the removal of the

chairs is implemented so that the bottling operators will avoid

ROYAL PLANT WORKERS UNION, Petitioner,

The bottling operators work in two shifts. The first shift is from 8

sleeping, thus, prevent injuries to their persons. As bottling

vs.

a.m. to 5 p.m. and the second shift is from 5 p.m. up to the time

operators are working with machines which consist of moving

COCA-COLA BOTTLERS PHILIPPINES, INC.-CEBU

production operations is finished. Thus, the second shift varies

parts, it is imperative that they should not fall asleep as to do

PLANT, Respondent.

and may end beyond eight (8) hours. However, the bottling

so would expose them to hazards and injuries. In addition,

operators are compensated with overtime pay if the shift

sleeping will hamper the efficient flow of operations as the

extends beyond eight (8) hours. For Bottling Line 1, 10 bottling

bottling operators would be unable to perform their duties

operators work for each shift while 6 to 7 bottling operators

competently.

DECISION

work for each shift for Bottling Line 2.

MENDOZA, J.:

The bottling operators took issue with the removal of the chairs.
1

Assailed in this petition is the May 24, 2011 Decision and the
2

September 2, 2011 Resolution of the Court of Appeals (CA) in

Each shift has rotations of work time and break time. Prior to

Through the representation of herein respondent, they initiated

September 2008, the rotation is this: after two and a half (2 )

the grievance machinery of the Collective Bargaining

156

Agreement (CBA) in November 2008. Even after exhausting the

workers to just and humane conditions of work as stated in

happened, and what actions were taken. There was no evidence

remedies contained in the grievance machinery, the parties

Article 3 of the Labor Code and the Global Workplace Rights

either of any accident or injury in the many years that the

were still at a deadlock with petitioner still insisting on the

Policy.

bottling operators used chairs. To the Arbitration Committee, it

removal of the chairs and respondent still against such

measure. As such, respondent sent a Notice to Arbitrate, dated

was puzzling why it took 34 and 20 years for CCBPI to be so

Ruling of the Arbtration Committee

16 July 2009, to petitioner stating its position to submit the

solicitous of the bottling operators safety that it removed their

chairs so that they would not fall asleep and injure themselves.

issue on the removal of the chairs for arbitration. Nevertheless,

On June 11, 2010, the Arbitration Committee rendered a

before submitting to arbitration the issue, both parties availed

decision in favor of the Royal Plant Workers Union (the Union)

Finally, the Arbitration Committee was of the view that, contrary

of the conciliation/mediation proceedings before the National

and against CCBPI, the dispositive portion of which reads, as

to CCBPIs position, line efficiency was the result of many

Conciliation and Mediation Board (NCMB) Regional Branch No.

follows:

factors and it could not be attributed solely to one such as the

VII. They failed to arrive at an amicable settlement.

removal of the chairs.

Wherefore, the undersigned rules in favor of ROPWU declaring

Thus, the process of arbitration continued and the parties

that the removal of the operators chairs is not valid. CCBPI is

Not contented with the Arbitration Committees decision, CCBPI

appointed the chairperson and members of the Arbitration

hereby ordered to restore the same for the use of the operators

filed a petition for review under Rule 43 before the CA.

Committee as outlined in the CBA. Petitioner and respondent

as before their removal in 2008.4

respectively appointed as members to the Arbitration

Ruling of the CA

Committee Mr. Raul A. Kapuno, Jr. and Mr. Luis Ruiz while they

The Arbitration Committee ruled, among others, that the use of

both chose Atty. Alice Morada as chairperson thereof. They then

chairs by the operators had been a company practice for 34

On May 24, 2011, the CA rendered a contrasting decision which

executed a Submission Agreement which was accepted by the

years in Bottling Line 2, from 1974 to 2008, and 20 years in

nullified and set aside the decision of the Arbitration

Arbitration Committee on 01 October 2009. As contained in the

Bottling Line 1, from 1988 to 2008; that the use of the chairs by

Committee. The dispositive portion of the CA decision reads:

Submission Agreement, the sole issue for arbitration is whether

the operators constituted a company practice favorable to the

the removal of chairs of the operators assigned at the

Union; that it ripened into a benefit after it had been enjoyed by

WHEREFORE, premises considered, the petition is hereby

production/manufacturing line while performing their duties and

it; that any benefit being enjoyed by the employees could not

GRANTED and the Decision, dated 11 June 2010, of the

responsibilities is valid or not.

be reduced, diminished, discontinued, or eliminated by the

Arbitration Committee in AC389-VII-09-10-2009D is NULLIFIED

employer in accordance with Article 100 of the Labor Code,

and SET ASIDE. A new one is entered in its stead SUSTAINING

Both parties submitted their position papers and other

which prohibited the diminution or elimination by the employer

the removal of the chairs of the bottling operators from the

subsequent pleadings in amplification of their respective

of the employees benefit; and that jurisprudence had not laid

manufacturing/production line.5

stands. Petitioner argued that the removal of the chairs is valid

down any rule requiring a specific minimum number of years

as it is a legitimate exercise of management prerogative, it does

before a benefit would constitute a voluntary company practice

The CA held, among others, that the removal of the chairs from

not violate the Labor Code and it does not violate the CBA it

which could not be unilaterally withdrawn by the employer.

the manufacturing/production lines by CCBPI is within the

contracted with respondent. On the other hand, respondent

province of management prerogatives; that it was part of its

espoused the contrary view. It contended that the bottling

The Arbitration Committee further stated that, although the

inherent right to control and manage its enterprise effectively;

operators have been performing their assigned duties

removal of the chairs was done in good faith, CCBPI failed to

and that since it was the employers discretion to constantly

satisfactorily with the presence of the chairs; the removal of the

present evidence regarding instances of sleeping while on duty.

develop measures or means to optimize the efficiency of its

chairs constitutes a violation of the Occupational Health and

There were no specific details as to the number of incidents of

employees and to keep its machineries and equipment in the

Safety Standards, the policy of the State to assure the right of

sleeping on duty, who were involved, when these incidents

157

best of conditions, it was only appropriate that it should be

a benefit because such matter was dependent upon the

petition for review under Rule 43 resorted to by CCBPI should

given wide latitude in exercising it.

exigencies of the work of the bottling operators. As such, CCBPI

have been dismissed for being an improper remedy. The Union

could withdraw this provision if it was not necessary in the

points out that the parties agreed to submit the unresolved

The CA stated that CCBPI complied with the conditions of a valid

exigencies of the work, if it was not contributing to the

grievance involving the removal of chairs to voluntary

exercise of a management prerogative when it decided to

efficiency of the bottling operators or if it would expose them to

arbitration pursuant to the provisions of Article V of the existing

remove the chairs used by the bottling operators in the

some hazards. Lastly, the CA explained that the provision of

CBA. Hence, the assailed decision of the Arbitration Committee

manufacturing/production lines. The removal of the chairs was

chairs to the bottling operators cannot be covered by Article

is a judgment or final order issued under the Labor Code of the

solely motivated by the best intentions for both the Union and

100 of the Labor Code on elimination or diminution of benefits

Philippines. Section 2, Rule 43 of the 1997 Rules of Civil

CCBPI, in line with the "I Operate, I Maintain, I Clean" program

because the employees benefits referred to therein mainly

Procedure, expressly states that the said rule does not cover

for bottling operators, wherein every bottling operator was

involved monetary considerations or privileges converted to

cases under the Labor Code of the Philippines. The judgments

given the responsibility to keep the machinery and equipment

their monetary equivalent.

or final orders of the Voluntary Arbitrator or Panel of Voluntary

assigned to him clean and safe. The program would reinforce

Arbitrators are governed by the provisions of Articles 260, 261,

the task of bottling operators to constantly move about in the

Disgruntled with the adverse CA decision, the Union has come

performance of their duties and responsibilities. Without the

to this Court praying for its reversal on the following GROUNDS

chairs, the bottling operators could efficiently supervise these

machineries operations and maintenance. It would also be

262, 262-A, and 262-B of the Labor Code of the Philippines.

On the substantive aspect, the Union argues that there is no

beneficial for them because the working time before the break

connection between CCBPIs "I Operate, I Maintain, I Clean"

program and the removal of the chairs because the

in each rotation for each shift was substantially reduced from

THAT WITH DUE RESPECT, THE COURT OF APPEALS COMMITTED

implementation of the program was in 2006 and the removal of

two and a half hours (2 ) to one and a half hours (1 ) before

REVERSIBLE ERROR IN HOLDING THAT A PETITION FOR REVIEW

the chairs was done in 2008. The 30-minute break is part of an

the 30-minute break. This scheme was clearly advantageous to

UNDER RULE 43 OF THE RULES OF COURT IS THE PROPER

operators working hours and does not make any difference.

the bottling operators as the number of resting periods was

REMEDY OF CHALLENGING BEFORE SAID COURT THE DECISION

The frequency of the break period is not advantageous to the

increased. CCBPI had the best intentions in removing the chairs

OF THE VOLUNTARY ARBITRATOR OR PANEL OF VOLUNTARY

operators because it cannot compensate for the time they are

because some bottling operators had the propensity to fall

ARBITRATORS UNDER THE LABOR CODE.

made to stand throughout their working time. The bottling

asleep while on the job and sleeping on the job ran the risk of

operators get tired and exhausted after their tour of duty even

injury exposure and removing them reduced the risk.

II

with chairs around. How much more if the chairs are removed?

The CA added that the decision of CCBPI to remove the chairs

THAT WITH DUE RESPECT, THE COURT OF APPEALS GRAVELY

The Union further claims that management prerogatives are not

was not done for the purpose of defeating or circumventing the

ABUSED ITS DISCRETION IN NULLIFYING AND SETTING ASIDE

absolute but subject to certain limitations found in law, a

rights of its employees under the special laws, the Collective

THE DECISION OF THE PANEL OF VOLUNTARY ARBITRATORS

collective bargaining agreement, or general principles of fair

Bargaining Agreement (CBA) or the general principles of justice

WHICH DECLARED AS NOT VALID THE REMOVAL OF THE CHAIRS

play and justice. The operators have been performing their

and fair play. It opined that the principles of justice and fair play

OF THE OPERATORS IN THE MANUFACTURING AND/OR

assigned duties and responsibilities satisfactorily for thirty (30)

were not violated because, when the chairs were removed,

PRODUCTION LINE.

years using chairs. There is no record of poor performance

there was a commensurate reduction of the working time for

because the operators are sitting all the time. There is no single

each rotation in each shift. The provision of chairs for the

In advocacy of its positions, the Union argues that the proper

incident when the attention of an operator was called for failure

bottling operators was never part of the CBAs contracted

remedy in challenging the decision of the Arbitration Committee

to carry out his assigned tasks. CCBPI has not submitted any

between the Union and CCBPI. The chairs were not provided as

before the CA is a petition for certiorari under Rule 65. The

evidence to prove that the performance of the operators was

158

poor before the removal of the chairs and that it has improved

The Courts Ruling

after the chairs were removed. The presence of chairs for more

case of Samahan Ng Mga Manggagawa Sa Hyatt (SAMASAHNUWHRAIN) v. Hon. Voluntary Arbitrator Buenaventura C.

than 30 years made the operators awake and alert as they

The decision in this case rests on the resolution of two basic

Magsalin and Hotel Enterprises of the Philippines6 reiterated the

could relax from time to time. There are sanctions for those

questions. First, is an appeal to the CA via a petition for review

well-settled doctrine on this issue, to wit:

caught sleeping while on duty. Before the removal of the chairs,

under Rule 43 of the 1997 Rules of Civil Procedure a proper

the efficiency of the operators was much better and there was

remedy to question the decision of the Arbitration Committee?

In the case of Samahan ng mga Manggagawa sa Hyatt-

no recorded accident. After the removal of the chairs, the

Second, was the removal of the bottling operators chairs from

NUWHRAIN-APL v. Bacungan,7 we repeated the well-settled rule

efficiency of the operators diminished considerably, resulting in

CCBPIs production/manufacturing lines a valid exercise of a

that a decision or award of a voluntary arbitrator is appealable

the drastic decline of line efficiency.

management prerogative?

to the CA via petition for review under Rule 43. We held that:

Finally, the Union asserts that the removal of the chairs

The Court sustains the ruling of the CA on both issues.

"The question on the proper recourse to assail a decision of a

constitutes violation of the Occupational Health and Safety

voluntary arbitrator has already been settled in Luzon

Standards, which provide that every company shall keep and

Regarding the first issue, the Union insists that the CA erred in

Development Bank v. Association of Luzon Development Bank

maintain its workplace free from hazards that are likely to cause

ruling that the recourse taken by CCBPI in appealing the

Employees, where the Court held that the decision or award of

physical harm to the workers or damage to property. The

decision of the Arbitration Committee was proper. It argues that

the voluntary arbitrator or panel of arbitrators should likewise

removal of the chairs constitutes a violation of the State policy

the proper remedy in challenging the decision of the Voluntary

be appealable to the Court of Appeals, in line with the

to assure the right of workers to a just and humane condition of

Arbitrator before the CA is by filing a petition for certiorari under

procedure outlined in Revised Administrative Circular No. 1-95

work pursuant to Article 3 of the Labor Code and of CCBPIs

Rule 65 of the Rules of Court, not a petition for review under

(now embodied in Rule 43 of the 1997 Rules of Civil Procedure),

Global Workplace Rights Policy. Hence, the unilateral

Rule 43.

just like those of the quasi-judicial agencies, boards and

withdrawal, elimination or removal of the chairs, which have

commissions enumerated therein, and consistent with the

been in existence for more than 30 years, constitutes a violation

CCBPI counters that the CA was correct in ruling that the

original purpose to provide a uniform procedure for the

of existing practice.

recourse it took in appealing the decision of the Arbitration

appellate review of adjudications of all quasi-judicial entities.

Committee to the CA via a petition for review under Rule 43 of

The respondents position

the Rules of Court was proper and in conformity with the rules

Subsequently, in Alcantara, Jr. v. Court of Appeals, and Nippon

and prevailing jurisprudence.

Paint Employees Union-Olalia v. Court of Appeals, the Court

CCBPI reiterates the ruling of the CA that a petition for review

under Rule 43 of the Rules of Court was the proper remedy to

reiterated the aforequoted ruling. In Alcantara, the Court held

A Petition for Review

question the decision of the Arbitration Committee. It likewise

echoes the ruling of the CA that the removal of the chairs was a

Development Bank still stands. The Court explained, thus:

under Rule 43 is the

legitimate exercise of management prerogative; that it was

done not to harm the bottling operators but for the purpose of

that notwithstanding Section 2 of Rule 43, the ruling in Luzon

The provisions may be new to the Rules of Court but it is far

proper remedy

optimizing their efficiency and CCBPIs machineries and

from being a new law. Section 2, Rules 42 of the 1997 Rules of

Civil Procedure, as presently worded, is nothing more but a

equipment; and that the exercise of its management

CCBPI is correct. This procedural issue being debated upon is

reiteration of the exception to the exclusive appellate

prerogative was done in good faith and not for the purpose of

not novel. The Court has already ruled in a number of cases

jurisdiction of the Court of Appeals, as provided for in Section 9,

circumventing the rights of the employees under the special

that a decision or award of a voluntary arbitrator is appealable

Batas Pambansa Blg. 129, as amended by Republic Act No.

laws, the CBA or the general principles of justice and fair play.

to the CA via a petition for review under Rule 43. The recent

7902:

159

(3) Exclusive appellate jurisdiction over all final judgments,

SEC. 4. Period of appeal. - The appeal shall be taken within

decisions, resolutions, orders or awards of Regional Trial Courts

fifteen (15) days from notice of the award, judgment, final order

and quasi-judicial agencies, instrumentalities, boards or

or resolution, or from the date of its last publication, if

commissions, including the Securities and Exchange

publication is required by law for its effectivity, or of the denial

Commission, the Employees Compensation Commission and

of petitioners motion for new trial or reconsideration duly filed

the Civil Service Commission, except those falling within the

in accordance with the governing law of the court or agency a

appellate jurisdiction of the Supreme Court in accordance with

quo. x x x. (Emphasis supplied.)

Again, the Court agrees with CCBPI on the matter.

A Valid Exercise of
Management Prerogative
The Court has held that management is free to regulate,

the Constitution, the Labor Code of the Philippines under

according to its own discretion and judgment, all aspects of

Presidential Decree No. 442, as amended, the provisions of this

Hence, upon receipt on May 26, 2003 of the Voluntary

employment, including hiring, work assignments, working

Act and of subparagraph (1) of the third paragraph and

Arbitrators Resolution denying petitioners motion for

methods, time, place, and manner of work, processes to be

subparagraph (4) of the fourth paragraph of Section 17 of the

reconsideration, petitioner should have filed with the CA, within

followed, supervision of workers, working regulations, transfer

Judiciary Act of 1948.

the fifteen (15)-day reglementary period, a petition for review,

of employees, work supervision, lay-off of workers, and

not a petition for certiorari.

discipline, dismissal and recall of workers. The exercise of

The Court took into account this exception in Luzon

management prerogative, however, is not absolute as it must

Development Bank but, nevertheless, held that the decisions of

On the second issue, the Union basically claims that the CCBPIs

be exercised in good faith and with due regard to the rights of

voluntary arbitrators issued pursuant to the Labor Code do not

decision to unilaterally remove the operators chairs from the

labor.10

come within its ambit x x x."

production/manufacturing lines of its bottling plants is not valid

because it violates some fundamental labor policies. According

In the present controversy, it cannot be denied that CCBPI

Furthermore, Sections 1, 3 and 4, Rule 43 of the 1997 Rules of

to the Union, such removal constitutes a violation of the 1)

removed the operators chairs pursuant to a national directive

Civil Procedure, as amended, provide:

Occupational Health and Safety Standards which provide that

and in line with its "I Operate, I Maintain, I Clean" program,

every worker is entitled to be provided by the employer with

launched to enable the Union to perform their duties and

"SECTION 1. Scope. - This Rule shall apply to appeals from

appropriate seats, among others; 2) policy of the State to

responsibilities more efficiently. The chairs were not removed

judgments or final orders of the Court of Tax Appeals and from

assure the right of workers to a just and humane condition of

indiscriminately. They were carefully studied with due regard to

awards, judgments, final orders or resolutions of or authorized

work as provided for in Article 3 of the Labor Code; 3) Global

the welfare of the members of the Union. The removal of the

by any quasi-judicial agency in the exercise of its quasi-judicial

Workplace Rights Policy of CCBPI which provides for a safe and

chairs was compensated by: a) a reduction of the operating

functions. Among these agencies are the x x x, and voluntary

healthy workplace by maintaining a productive workplace and

hours of the bottling operators from a two-and-one-half (2 )-

arbitrators authorized by law.

by minimizing the risk of accident, injury and exposure to health

hour rotation period to a one-and-a-half (1 ) hour rotation

risks; and 4) diminution of benefits provided in Article 100 of

period; and b) an increase of the break period from 15 to 30

xxxx

the Labor Code.9

minutes between rotations.

SEC. 3. Where to appeal. - An appeal under this Rule may be

Opposing the Unions argument, CCBPI mainly contends that

Apparently, the decision to remove the chairs was done with

taken to the Court of Appeals within the period and in the

the removal of the subject chairs is a valid exercise of

good intentions as CCBPI wanted to avoid instances of

manner therein provided, whether the appeal involves

management prerogative. The management decision to remove

operators sleeping on the job while in the performance of their

questions of fact, of law, or mixed questions of fact and law.

the subject chairs was made in good faith and did not intend to

duties and responsibilities and because of the fact that the

defeat or circumvent the rights of the Union under the special

chairs were not necessary considering that the operators

laws, the CBA and the general principles of justice and fair play.

constantly move about while working. In short, the removal of

160

the chairs was designed to increase work efficiency. Hence,

CCBPIs exercise of its management prerogative was made in

those who meet, or exceed, national 13 activity guidelines." In

another report,

14

it was written:

good faith without doing any harm to the workers rights.

the harm caused by daily inactivity such as prolonged sitting.

Associate professor David Dunstan leads a team at the Baker
IDI in Melbourne which is specifically researching sitting and

Workers needing to spend long periods in a seated position on

physical activity. He has found that people who spend long

The fact that there is no proof of any operator sleeping on the

the job such as taxi drivers, call centre and office workers, are

periods of time seated (more than four hours per day) were at

job is of no moment. There is no guarantee that such incident

at risk for injury and a variety of adverse health effects.

risk of:

the operators constantly move about while doing their job. The

The most common injuries occur in the muscles, bones, tendons

higher blood levels of sugar and fats,

ultimate purpose is to promote work efficiency.

and ligaments, affecting the neck and lower back regions.

would never happen as sitting on a chair is relaxing. Besides,

Prolonged sitting:

larger waistlines, and

reduces body movement making muscles more likely to pull,

higher risk of metabolic syndrome

No Violation of Labor Laws

The rights of the Union under any labor law were not violated.

cramp or strain when stretched suddenly, causes fatigue in the

There is no law that requires employers to provide chairs for

back and neck muscles by slowing the blood supply and puts

regardless of how much moderate to vigorous exercise they

bottling operators. The CA correctly ruled that the Labor Code,

high tension on the spine, especially in the low back or neck,

had.

specifically Article 132

11

thereof, only requires employers to

and

provide seats for women. No similar requirement is mandated

In addition, people who interrupted their sitting time more often

for men or male workers. It must be stressed that all concerned

causes a steady compression on the spinal discs that hinders

just by standing or with light activities such as housework,

bottling operators in this case are men.

their nutrition and can contribute to their premature

shopping, and moving about the office had healthier blood

degeneration.

sugar and fat levels, and smaller waistlines than those whose

There was no violation either of the Health, Safety and Social

sitting time was not broken up.

Welfare Benefit provisions under Book IV of the Labor Code of

Sedentary employees may also face a gradual deterioration in

the Philippines. As shown in the foregoing, the removal of the

health if they do not exercise or do not lead an otherwise

Of course, in this case, if the chairs would be returned, no risks

chairs was compensated by the reduction of the working hours

physically active life. The most common health problems that

would be involved because of the shorter period of working

and increase in the rest period. The directive did not expose the

these employees experience are disorders in blood circulation

time. The study was cited just to show that there is a health risk

bottling operators to safety and health hazards.

and injuries affecting their ability to move. Deep Vein

in prolonged sitting.

Thrombosis (DVT), where a clot forms in a large vein after

The Union should not complain too much about standing and

prolonged sitting (eg after a long flight) has also been shown to

moving about for one and one-half (1 ) hours because studies

be a risk.
The CBA15 between the Union and CCBPI contains no provision

show that sitting in workplaces for a long time is hazardous to

ones health. The report of VicHealth, Australia,

12

disclosed that

No Violation of the CBA

Workers who spend most of their working time seated may also

whatsoever requiring the management to provide chairs for the

"prolonged workplace sitting is an emerging public health and

experience other, less specific adverse health effects. Common

operators in the production/manufacturing line while performing

occupational health issue with serious implications for the

effects include decreased fitness, reduced heart and lung

their duties and responsibilities. On the contrary, Section 2 of

health of our working population. Importantly, prolonged sitting

efficiency, and digestive problems. Recent research has

Article 1 of the CBA expressly provides as follows:

is a risk factor for poor health and early death, even among

identified too much sitting as an important part of the physical

activity and health equation, and suggests we should focus on

Article I

161

SCOPE

No Violation of the general principles

Tarlac v. Central Azucarera De Tarlac Labor UnionNLU,18 regarding the 13th month pay, legal/special holiday pay,

SECTION 2. Scope of the Agreement. All the terms and

of justice and fair play

night premium pay and vacation and sick leaves; TSPIC Corp. v.
TSPIC Employees Union,19 regarding salary wage increases; and

conditions of employment of employees and workers within the

appropriate bargaining unit (as defined in Section 1 hereof) are

The Court completely agrees with the CA ruling that the

American Wire and Cable Daily Employees Union vs. American

embodied in this Agreement and the same shall govern the

removal of the chairs did not violate the general principles of

Wire and Cable Company, Inc.,20 involving service awards with

relationship between the COMPANY and such employees and/or

justice and fair play because the bottling operators working

cash incentives, premium pay, Christmas party with incidental

workers. On the other hand, all such benefits and/or privileges

time was considerably reduced from two and a half (2 ) hours

benefits and promotional increase.

as are not expressly provided for in this Agreement but which

to just one and a half (1 ) hours and the break period, when

are now being accorded, may in the future be accorded, or

they could sit down, was increased to 30 minutes between

In this regard, the Court agrees with the CA when it resolved the

might have previously been accorded, to the employees and/or

rotations. The bottling operators new work schedule is certainly

matter and wrote:

workers, shall be deemed as purely voluntary acts on the part

advantageous to them because it greatly increases their rest

of the COMPANY in each case, and the continuance and

period and significantly decreases their working time. A break

Let it be stressed that the aforequoted article speaks of non-

repetition thereof now or in the future, no matter how long or

time of thirty (30) minutes after working for only one and a half

diminution of supplements and other employee benefits.

how often, shall not be construed as establishing an obligation

(1 ) hours is a just and fair work schedule.

Supplements arc privileges given to an employee which

on the part of the COMPANY. It is however understood that any

benefits that are agreed upon by and between the COMPANY

constitute as extra remuneration besides his or her basic

No Violation of Article 100

and the UNION in the Labor-Management Committee Meetings

regarding the terms and conditions of employment outside the

ordinary earnings and wages. From this definition, We can only

deduce that the other employee benefits spoken of by Article

of the Labor Code

CBA that have general application to employees who are

100 pertain only to those which are susceptible of monetary

considerations. Indeed, this could only be the most plausible

similarly situated in a Department or in the Plant shall be

The operators chairs cannot be considered as one of the

conclusion because the cases tackling Article 100 involve

implemented. [emphasis and underscoring supplied]

employee benefits covered in Article 10016 of the Labor Code.

mainly with monetary considerations or privileges converted to

In the Courts view, the term "benefits" mentioned in the non-

their monetary equivalents.

As can be gleaned from the aforecited provision, the CBA

diminution rule refers to monetary benefits or privileges given

expressly provides that benefits and/or privileges, not expressly

to the employee with monetary equivalents.

xxxx

company and enjoyed by the employees, shall be considered as

Such benefits or privileges form part of the employees wage,

Without a doubt, equating the provision of chairs to the bottling

purely voluntary acts by the management and that the

salary or compensation making them enforceable obligations.

operators Ds something within the ambit of "benefits'' in the

given therein but which are presently being granted by the

continuance of such benefits and/or privileges, no matter how

context of Article 100 of the Labor Code is unduly stretching the

long or how often, shall not be understood as establishing an

This Court has already decided several cases regarding the non-

coverage of the law. The interpretations of Article 100 of the

obligation on the companys part. Since the matter of the chairs

diminution rule where the benefits or privileges involved in

Labor Code do not show even with the slightest hint that such

is not expressly stated in the CBA, it is understood that it was a

those cases mainly concern monetary considerations or

provision of chairs for the bottling operators may be sheltered

purely voluntary act on the part of CCBPI and the long practice

privileges with monetary equivalents. Some of these cases are:

under its mantle.21

did not convert it into an obligation or a vested right in favor of

Eastern Telecommunication Phils. Inc. v. Eastern Telecoms

the Union.

Employees Union,17 where the case involves the payment of

Jurisprudence recognizes the exercise of management

14th, 15th and 16th month bonuses; Central Azucarera De

prerogatives. Labor Jaws also discourage interference with an

162

employer's judgment in the conduct of its business. For this

registered owner of a 17,175square meter property situated in

Barangay Sta. Monica, Municipality of San Simon, Province of
Pampanga and covered by Transfer Certificate of Title (TCT) No.
271813R.5

reason, the Court often declines to interfere in legitimate

business decisions of employers. The law must protect not only
the welfare of the employees, but also the right of the

On March 1, 2002, the Republic of the Philippines (petitioner)

through the Toll Regulatory Board (TRB) instituted expropriation
proceedings against the respondent over a portion of their
property. The affected area, consisting of 2,024 square meters,
shall be traversed by the expansion of the San Simon
Interchange, an integral component of the construction,
rehabilitation and expansion of the North Luzon Expressway
(NLEX Project). Subsequently, petitioner filed an urgent ex
parte motion for issuance of writ of possession, stating that it
deposited with the Land Bank of the Philippines (LBP) the
amount of P607,200.00 (100% of the value of the property
based on current zonal valuation of the Bureau of Internal
Revenue [BIR]) in accordance with Section 4(a) of Republic Act
No. 89746 (R.A. 8794), and hence the court has the ministerial
duty to place petitioner in possession pursuant to Section 2,
Rule 67 of the Rules of Civil Procedure.7

employers.22
WHEREFORE, the petition is DENIED.
SO ORDERED.

32

On March 19, 2002, the trial court issued an order granting

petitioners motion and directing the Register of Deeds of
Pampanga to cause the annotation of the writ of possession on
TCT No. 271813R.8

FIRST DIVISION
G.R. No. 192100, March 12, 2014
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS
(DPWH)1, Petitioner, v. ASIA PACIFIC INTEGRATED STEEL
CORPORATION,Respondent.
DECISION
VILLARAMA, JR., J.:
Before this Court is a petition for review on certiorari under Rule
45 of the 1997 Rules of Civil Procedure, as amended, assailing
the July 21, 2009 Decision2 of the Court of Appeals (CA) in CA
G.R. CV No. 90539. The CA partially affirmed the September 21,
2007 Decision3 of the Regional Trial Court (RTC), Branch 54, of
Macabebe, Pampanga, and reduced the annual legal interest
awarded from 12% to 6% per annum. Also assailed is the
appellate courts April 28, 2010 Resolution4 denying petitioners
motion for reconsideration.
As culled from the records, the following are the pertinent
facts:chanRoblesvirtualLawlibrary
Asia Pacific Integrated Steel Corporation (respondent) is the

In its Answer with Opposition to the Motion for Issuance of Writ

of Possession,9 respondent questioned the TRBs authority to
expropriate the subject property and objected to petitioners
offered compensation which respondent deems unjust because
the basis thereof the BIR zonal valuation was an unofficial
valuation, being merely based on an internal memorandum
issued by BIR Revenue District No. 21, not by the Asset
Valuation Department of the BIR National Office. Respondent
asserted that just compensation should be at P3,036,000.00 or
at P1,500.00 per square meter plus consequential damages,
considering the fair market value and the industrial
classification of the subject property.
During the pretrial conference, the parties agreed on TRBs
authority to expropriate the subject property but disagreed as
to the amount of just compensation. Petitioner offered to pay
P607,200.00 for the portion taken but respondent made a
counteroffer of P1,821,600.00. The parties eventually agreed
to submit the issue of just compensation to three
Commissioners composed of the Municipal Assessor of San
Simon as Chairman, and the RTC Branch Clerk of Court and the
Register of Deeds for the Province of Pampanga as Members.10
On June 1, 2004, the trial court granted respondents motion to
withdraw the P607,200.00 deposited by petitioner with the LBP
as partial payment for just compensation.11

163

On June 9, 2004, the Commissioners submitted their Report

with the following findings and
recommendation:chanRoblesvirtualLawlibrary

1. There is an existing toll plaza on the right lane of the

expressway facing the direction of Manila with blue colored
roofing.

The affected lot is within the area wherein the land use are
residential, commercial, and industrial (mixed land use), as per
Vicinity Map hereto attached as Annex B. The area is along
MacArthur Highway, Quezon Road, Municipal and Barangay
Roads[.]

2. Comprised in the aforesaid toll plaza are three toll booths.

The third booth located on the extreme right facing Manila
occupies a portion of the expropriated portion of defendants
property.

In the absence of bonafide sales transaction in the area, the

Assessors Office being aware of the actual conditions of subject
property decided to use opinion values in the determination of
the current and fair market value for the purpose of payment of
just compensation.
OPINION VALUES
A. Real Estate Brokers/Independent Appraisers/Owners, etc.
1. Residential ranging from P2,000.00 to P2,500.00 per
square meter
2. Commercial ranging from P2,500.00 to P3,000.00 per
square meter
3. Industrial ranging from P1,000.00 above per square meter
B. Banks and Financial Institutions
1. Residential ranging from P1,000.00 to P2,000.00 per
square meter
2. Commercial ranging from P2,000.00 to P3,000.00 per
square meter
3. Residential ranging from P1,000.00 to P1,500.00 per
square meter
Appraisal conducted by the Assessor of San Simon, Pampanga
for various properties within the area, recommended an amount
ranging from P1,000.00 to P1,500.00, Philippine currency, per
square meter, depending on their proximity to the national
roads, municipal roads, and barangay roads, and the
improvement/development put in place. The amount of
P1,000.00 to P1,500.00 was arrived at by the undersigned
commissioners due to the conversion of the subject property
from agricultural to industrial use as evidenced by the Order of
Conversion dated July 8, 1991, issued by Renato B. Padilla,
Undersecretary, Department of Agrarian Reform, a xerox copy
of which is hereto attached [as] Annex C.12
On September 23, 2004, an ocular inspection was conducted in
the presence of the parties representatives and their respective
counsels, during which the trial court noted the
following:chanRoblesvirtualLawlibrary

3. The expropriated portion which is shown in a sketch which

was marked as Exhibit H is indicated by its color: green. It has
an area of 2,021 square meters. The remaining unexpropriated
portion of defendants land has an area of 15,151 square
meters.
4. The unexpropriated portion of the land of defendant is
presently very much below the level of the expressway because
the expressway was upgraded. It is immediately adjacent to
the existing expressway, located as it is, on its right side facing
Manila. It is swampy with little water.13
In its Decision, the trial court ruled as
follows:chanRoblesvirtualLawlibrary
x x x Although there was no documentary evidence attached to
substantiate the opinions of the banks and the realtors
indicated in the Commissioners Report, the Court finds the
commissioners recommendation of the valuation of industrial
lands at P1,000.00 to P1,500.00 to be fair, absent any showing
that the valuation is exorbitant or otherwise unjustified. There
was no fraud or prejudice that tainted the report.
The Court finds the valuation of the Republic of the Philippines
which was pegged at Php300.00 per square meter to be very
low. The zonal valuation of the Bureau of Internal Revenue
(Exhibits A and B with submarkings) is merely a gauge or is
necessary in the assessment of correct transfer taxes by the
said office. Furthermore the Department Order No. 2398 took
effect only last February 2, 1998 which was four (4) years prior
to the filing of the complaint. The same is true with Ordinance
No. 17, Series of 1994 issued by the Sangguniang Panlalawigan
of Pampanga (Exhibit E) which was issued eight (8) years also
prior to the filing of the complaint.
Concerning the Deed of Absolute Sale (Exhibit C) notarized on
July 19, 2002, the same was undated and pertains only to a
right of way. An easement of right of way transmits no rights
except the easement itself. Hence, the just compensation
pertaining to easement of right of way should be lower than
that in the Deed of Absolute Sale. x x x
xxxx

Using the recommendation of the three (3) commissioners as

guide, the Court finds the amount of ONE THOUSAND THREE
HUNDRED PESOS (Php1,300.00) per square meter as just
compensation for the property subject of expropriation.
WHEREFORE, premises considered, judgment is
rendered:chanRoblesvirtualLawlibrary
1) Ordering the plaintiff to pay the defendant in the amount of
TWO MILLION TWENTY FOUR THOUSAND PESOS
(Php2,024,000.00) representing the net amount of just
compensation after deducting the partial payment of
P607,200.00 based on the valuation of Php1,300.00 per square
meter on the expropriated portion of the parcel of land [Lot
329A of the subdivision, plan (LRC) Psd246403, being a
portion of lot 329, San Simon, LRC. Cad Rec. No. 1316] with an
area of 2,024 square meters situated in Sta. Monica, San Simon,
Pampanga covered by Transfer Certificate of Title No. 271813R
plus legal interest of 12% per annum from the time of taking
(March 21, 2002) until fully paid less taxes due on the land.
2) Ordering the plaintiff to pay the costs and/or expenses in
relation to the transfer of ownership of the property in its favor
from defendant Asia Pacific Integrated Steel Corporation.
3) Condemning the property subject of expropriation free from
all liens and encumbrances for the construction, rehabilitation
and expansion of the North Luzon Expressway.
SO ORDERED.14
Petitioner appealed to the CA, arguing that the just
compensation should not be more than P300.00 per square
meter and that the correct rate of interest is 6% per annum.
The CA upheld the trial courts ruling, reiterating the principle
that the determination of just compensation is an inherently
judicial function. It stressed that any valuation for just
compensation laid down in statutes merely serve as guides or
factors and may not substitute the courts own judgment as to
what amount should be awarded and how to arrive at such
amount.15
Further, the CA noted that petitioner itself admitted that the BIR
zonal valuation is only for the purpose of determining the
correct amount of transfer taxes. It held that while BIR zonal
valuation may be a factor in determining just compensation, the
same is not a competent basis thereof. Citing R.A. 8974, the CA
pointed out the distinction between provisional value as a
precondition for the issuance of a writ of possession and the
payment of just compensation for the expropriated property.
While the provisional value is based on the zonal value as may
be determined by the BIR, just compensation is based on the
prevailing fair market value of the property. Necessarily, the

164

zonal valuation of properties is not equivalent to their fair

market value.16
After examining the records, the CA found no reversible error in
the trial courts determination of just compensation and held
that the valuation of P1,500.00 per square meter is more in
consonance with the concept of just compensation based upon
due consideration of all evidence.
Thus:chanRoblesvirtualLawlibrary
It is equally settled that the valuation of a property in tax
declarations cannot be a substitute to just compensation.
Elsewise stated, the market value reflected in the tax
declaration of the condemned property is no longer conclusive.
Accordingly, we cannot appreciate the herein tax declaration in
favor of the Republic.
Further, it is uncontested that the deed of sale dated July 19,
2002 between San Simon Realty, Inc. and the Republic
pertained only to a right of way, hence, the value thereof should
be considerably lower. Ordinance No. 17, as correctly found by
the RTC, was issued on June 22, 1994 or eight (8) years prior to
the institution of the herein complaint. Certainly, the valuation
of properties therein can by no means be reflective of the
current, prevailing and fair value of the subject property. The
Republic failed to present evidence to controvert he RTCs
finding on the matter. Neither has it shown that the property
sold thereunder shares the same features as the herein subject
property as to warrant a similar valuation. We cannot, thus,
yield to the Republics submission that its evidence are the
proper basis in determining just compensation for Asia Pacifics
property.17

the market value of P1,300.00 per square meter adjudged by

the trial and appellate courts. Petitioner claims that such huge
sum for only 2,024square meter portion of respondents
17,175square meter property, is unbelievably 433.4% more
than the 1998 BIR zonal value for an underdeveloped industrial
land at the time of its taking.
On the other hand, respondent contends that no reversible error
was committed by the CA in affirming the trial courts decision
after considering all the arguments raised by petitioner and the
evidence on record. It asserts that the main issue of just
compensation and the findings thereon by the trial court as
affirmed by the CA is a question of fact which should not be
disturbed by this Court. Moreover, respondent asserts that the
determination by the trial court is entitled to the highest respect
considering that the judge has personal knowledge of the
condition of the subject property, having conducted an ocular
inspection on September 23, 2004.
We grant the petition.
As a rule, a petition for review under Rule 45 of the Rules of
Court covers only questions of law. Questions of fact are not
reviewable and cannot be passed upon by this Court in the
exercise of its power to review. The distinction between
questions of law and questions of fact is established. Aquestion
of law exists when the doubt or difference centers on what the
law is on a certain state of facts. A question of fact, on the
other hand, exists if the doubt centers on the truth or falsity of
the alleged facts.18 This being so, the findings of fact of the CA
are final and conclusive and this Court will not review them on
appeal.19

On April 28, 2010, the CA denied petitioners motion for

reconsideration, stating that the argument on valuation by
petitioner was merely a rehash of what the CA had already
passed upon.

For a question to be one of law, the same must not involve an

examination of the probative value of the evidence presented
by the litigants or any of them. The resolution of the issue must
rest solely on what the law provides on the given set of
circumstances.20 In this case, the only legal issue raised by
petitioner is whether the trial court based its determination of
just compensation on the factors provided under existing laws
and jurisprudence.

Hence, this petition assailing the CAs affirmance of the trial

courts award of just compensation, the legal basis of which is
allegedly insufficient.

Section 5 of R.A. 8974 enumerates the standards for assessing

the value of expropriated land taken for national government
infrastructure projects, thus:chanRoblesvirtualLawlibrary

Petitioner argues that the evidence for determining the amount

of just compensation in expropriation cases should be on those
factors provided in Section 5 of R.A. 8974. Considering such
factors and the evidence submitted by the parties before the
trial court, petitioner maintains that just compensation for the
subject property should be no more than the zonal valuation
(P300.00 per square meter), and in no case should it amount to

SECTION 5. Standards for the Assessment of the Value of the

Land Subject of Expropriation Proceedings or Negotiated Sale.
In order to facilitate the determination of just compensation, the
court may consider, among other wellestablished factors, the
following relevant standards:chanRoblesvirtualLawlibrary

However, the CA modified the rate of interest imposed on the

amount due as just compensation from 12% to 6% in conformity
with prevailing jurisprudence.

(a) The classification and use for which the property is suited;

(b) The developmental costs for improving the land;

(c) The value declared by the owners;
(d) The current selling price of similar lands in the vicinity;
(e) The reasonable disturbance compensation for the removal
and/or demolition of certain improvements on the land and for
the value of the improvements thereon;
(f) The size, shape or location, tax declaration and zonal
valuation of the land;
(g) The price of the land as manifested in the ocular findings,
oral as well as documentary evidence presented; and
(h) Such facts and events as to enable the affected property
owners to have sufficient funds to acquire similarlysituated
lands of approximate areas as those required from them by the
government, and thereby rehabilitate themselves as early as
possible.
In this case, the trial court considered only (a) and (d): (1) the
classification of the subject property which is located in an area
with mixed land use (commercial, residential and industrial) and
the propertys conversion from agricultural to industrial land,
and (2) the current selling price of similar lands in the vicinity
the only factors which the commissioners included in their
Report. It also found the commissioners recommended
valuation of P1,000.00 to P1,500.00 per square to be fair and
just despite the absence of documentary substantiation as said
prices were based merely on the opinions of bankers and
realtors.
In National Power Corporation v. Manubay AgroIndustrial
Development Corporation,21 the recommended price of the city
assessor was rejected by this Court. The opinions of the banks
and the realtors as reflected in the computation of the market
value of the property and in the Commissioners Report, were
not substantiated by any documentary evidence.
Similarly, in National Power Corporation v. DiatoBernal,22 this
Court rejected the valuation recommended by courtappointed
commissioners whose conclusions were devoid of any actual
and reliable basis. The market values of the subject propertys
neighboring lots were found to be mere estimates and
unsupported by any corroborative documents, such as sworn
declarations of realtors in the area concerned, tax declarations
or zonal valuation from the BIR for the contiguous residential
dwellings and commercial establishments. Thus, we ruled that a
commissioners report of land prices which is not based on any
documentary evidence is manifestly hearsay and should be
disregarded by the court.
We find that the trial court did not judiciously determine the fair
market value of the subject property as it failed to consider
other relevant factors such as the zonal valuation, tax
declarations and current selling price supported by
documentary evidence. Indeed, just compensation must not be
arrived at arbitrarily, but determined after an evaluation of

165

different factors.23
Just compensation is defined as the full and fair equivalent of
the property taken from its owner by the expropriator. The
measure is not the takers gain, but the owners loss. The word
just is used to intensify the meaning of the word
compensation and to convey thereby the idea that the
equivalent to be rendered for the property to be taken shall
be real, substantial, full, and ample. Such justness of the
compensation can only be attained by using reliable and actual
data as bases in fixing the value of the condemned
property.24 Trial courts are required to be more circumspect in its
evaluation of just compensation due the property owner,
considering that eminent domain cases involve the expenditure
of public funds.25
We agree with the trial court that it was not bound by the
assessment report of the commissioners and that it had the
discretion to reject the same and substitute its own judgment
on its value as gathered from the record, or it may accept the
report/recommendation of the commissioners in totoand base
its judgment thereon. However, the decision of the court must
be based on all established rules, upon correct legal principles
and competent evidence.26 The court is proscribed from basing
its judgment on speculations and surmises.
Nonetheless, we cannot subscribe to petitioners argument that
just compensation for the subject property should not exceed
the zonal valuation (P300.00 per square meter).
In Republic v. Court of Appeals,27 we held that
The constitutional limitation of just compensation is
considered to be the sum equivalent to the market value of the
property, broadly described to be the price fixed by the seller in
open market in the usual and ordinary course of legal action
and competition or the fair value of the property as between
one who receives, and one who desires to sell, it fixed at the
time of the actual taking by the government. x x x
Zonal valuation is just one of the indices of the fair market
value of real estate. By itself, this index cannot be the sole
basis of just compensation in expropriation cases. 28 As this
Court ruled in Leca Realty Corporation v. Rep. of the
Phils.29:chanRoblesvirtualLawlibrary
The Republic is incorrect, however, in alleging that the values
were exorbitant, merely because they exceeded the maximum
zonal value of real properties in the same location where the
subject properties were located. The zonal value may be
one, but not necessarily the sole, index of the value of a
realty. National Power Corporation v. Manubay Agro
Industrial held thus:

x x x [Market value] is not limited to the assessed value of the

property or to the schedule of market values determined by the
provincial or city appraisal committee. However, these values
may serve as factors to be considered in the judicial valuation
of the property.
The above ruling finds support in EPZA v. Dulay in this wise:
Various factors can come into play in the valuation of specific
properties singled out for expropriation. The values given by
provincial assessors are usually uniform for very wide areas
covering several barrios or even an entire town with the
exception of the poblacion. Individual differences are never
taken into account. The value of land is based on such
generalities as its possible cultivation for rice, corn, coconuts or
other crops. Very often land described as cogonal has been
cultivated for generations. Buildings are described in terms of
only two or three classes of building materials and estimates of
areas are more often inaccurate than correct. Tax values can
serve as guides but cannot be absolute substitutes for just
compensation. (Emphasis supplied.)
Among the factors to be considered in arriving at the fair
market value of the property are the cost of acquisition, the
current value of like properties, its actual or potential uses, and
in the particular case of lands, their size, shape, location, and
the tax declarations thereon. The measure is not the takers
gain but the owners loss.30 To be just, the compensation must
be fair not only to the owner but also to the taker. 31
It is settled that the final conclusions on the proper amount of
just compensation can only be made after due ascertainment of
the requirements set forth under R.A. 8974 and not merely
based on the declarations of the parties.32 Since these
requirements were not satisfactorily complied with, and in the
absence of reliable and actual data as bases in fixing the value
of the condemned property, remand of this case to the trial
court is in order.
WHEREFORE, the petition for review
on certiorari is GRANTED. The Decision dated July 21, 2009
and Resolution dated April 28, 2010 of the Court of Appeals in
CAG.R. CV No. 90539 are hereby SET ASIDE.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 195466

July 2, 2014

ARIEL L. DAVID, doing business under the name and

style "YIELS HOG DEALER," Petitioner,
vs.
JOHN G. MACASIO, Respondent.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari1 the challenge
to the November 22, 2010 decision2 and the January 31, 2011
resolution3 of the Court of Appeals (CA) in CA-G.R. SP No.
116003. The CA decision annulled and set aside the May 26,
2010 decision4 of the National Labor Relations Commission
(NLRC)5 which, in turn, affirmed the April 30, 2009 Decision 6 of
the Labor Arbiter (LA). The LA's decision dismissed respondent
John G. Macasio's monetary claims.
The Factual Antecedents

This case is remanded to the trial court for the proper

determination of just compensation, in conformity with this
Decision.

In January 2009, Macasio filed before the LA a

SO ORDERED.

of overtime pay, holiday pay and 13th month pay. He also

complaint7 against petitioner Ariel L. David, doing business

under the name and style "Yiels Hog Dealer," for non-payment
claimed payment for moral and exemplary damages and

33

attorneys fees. Macasio also claimed payment for service

incentive leave (SIL).8

166

Macasio alleged9 before the LA that he had been working as a

Refuting Macasios submissions,13 David claims that Macasio

by result and not in terms of the time that he spent in the

butcher for David since January 6, 1995. Macasio claimed that

was not his employee as he hired the latter on "pakyaw" or task

workplace, Macasio is not covered by the Labor Standards laws

David exercised effective control and supervision over his work,

basis. He also claimed that he issued the Certificate of

on overtime, SIL and holiday pay, and 13th month pay under

pointing out that David: (1) set the work day, reporting time and

Employment, upon Macasios request, only for overseas

the Rules and Regulations Implementing the 13th month pay

hogs to be chopped, as well as the manner by which he was to

employment purposes. He pointed to the "Pinagsamang

law.18

perform his work; (2) daily paid his salary of P700.00, which was

Sinumpaang Salaysay,"14 executed by Presbitero Solano and

increased from P600.00 in 2007, P500.00 in 2006 and P400.00

Christopher (Antonio Macasios co-butchers), to corroborate his

Macasio moved for reconsideration19 but the NLRC denied his

in 2005; and (3) approved and disapproved his leaves. Macasio

claims.

motion in its August 11, 2010 resolution,20 prompting Macasio to

elevate his case to the CA via a petition for certiorari.21

added that David owned the hogs delivered for chopping, as

well as the work tools and implements; the latter also rented

In the April 30, 2009 decision,15 the LA dismissed Macasios

the workplace. Macasio further claimed that David employs

complaint for lack of merit. The LA gave credence to Davids

about twenty-five (25) butchers and delivery drivers.

claim that he engaged Macasio on "pakyaw" or task basis. The

The CAs Ruling

LA noted the following facts to support this finding: (1) Macasio

In its November 22, 2010 decision,22 the CA partly granted

In his defense,10 David claimed that he started his hog dealer

received the fixed amount of P700.00 for every work done,

Macasios certiorari petition and reversed the NLRCs ruling for

business in 2005 and that he only has ten employees. He

regardless of the number of hours that he spent in completing

having been rendered with grave abuse of discretion.

alleged that he hired Macasio as a butcher or chopper on

the task and of the volume or number of hogs that he had to

"pakyaw" or task basis who is, therefore, not entitled to

chop per engagement; (2) Macasio usually worked for only four

While the CA agreed with the LAand the NLRC that Macasio was

overtime pay, holiday pay and 13th month pay pursuant to the

hours, beginning from 10:00 p.m. up to 2:00 a.m. of the

a task basis employee, it nevertheless found Macasio entitled to

provisions of the Implementing Rules and Regulations (IRR) of

following day; and (3) the P700.00 fixed wage far exceeds the

his monetary claims following the doctrine laid down in Serrano

the Labor Code. David pointed out that Macasio: (1) usually

then prevailing daily minimum wage of P382.00. The LA added

v. Severino Santos Transit.23The CA explained that as a task

starts his work at 10:00 p.m. and ends at 2:00 a.m. of the

that the nature of Davids business as hog dealer supports this

basis employee, Macasio is excluded from the coverage of

following day or earlier, depending on the volume of the

"pakyaw" or task basis arrangement.

holiday, SIL and 13th month pay only if he is likewise a "field

delivered hogs; (2) received the fixed amount of P700.00 per

personnel." As defined by the Labor Code, a "field personnel" is

engagement, regardless of the actual number of hours that he

The LA concluded that as Macasio was engaged on "pakyaw" or

one who performs the work away from the office or place of

spent chopping the delivered hogs; and (3) was not engaged to

task basis, he is not entitled to overtime, holiday, SIL and 13th

work and whose regular work hours cannot be determined with

report for work and, accordingly, did not receive any fee when

month pay.

reasonable certainty. In Macasios case, the elements that

no hogs were delivered.

characterize a "field personnel" are evidently lacking as he had

The NLRCs Ruling

Macasio disputed Davids allegations.11 He argued that, first,

been working as a butcher at Davids "Yiels Hog Dealer"

business in Sta. Mesa, Manila under Davids supervision and

16

David did not start his business only in 2005. He pointed to the

In its May 26, 2010 decision,

Certificate of Employment12 that David issued in his favor which

ruling.17 The NLRC observed that David did not require Macasio

the NLRC affirmed the LA

control, and for a fixed working schedule that starts at 10:00

placed the date of his employment, albeit erroneously, in

to observe an eight hour work schedule to earn the

January 2000. Second, he reported for work every day which the

fixed P700.00 wage; and that Macasio had been performing a

Accordingly, the CA awarded Macasios claim for holiday, SIL

payroll or time record could have easily proved had David

non-time work, pointing out that Macasio was paid a fixed

and 13th month pay for three years, with 10% attorneys fees

submitted them in evidence.

amount for the completion of the assigned task, irrespective of

on the total monetary award. The CA, however, denied

p.m.

the time consumed in its performance. Since Macasio was paid

167

Macasios claim for moral and exemplary damages for lack of

basis.

Macasio counters that he was not a task basis employee or a

"field personnel" as David would have this Court believe.

28

The issue revolves around the proper application and

He

interpretation of the labor law provisions on holiday, SIL and

reiterates his arguments before the lower tribunals and adds

13th month pay to a worker engaged on "pakyaw" or task basis.

David filed the present petition after the CA denied his motion

that, contrary to Davids position, theP700.00 fee that he was

In the context of the Rule 65 petition before the CA, the issue is

for reconsideration24 in the CAs January 31, 2011 resolution.25

paid for each day that he reported for work does not indicate a

whether the CA correctly found the NLRC in grave abuse of

"pakyaw" or task basis employment as this amount was paid

discretion in ruling that Macasio is entitled to these labor

daily, regardless of the number or pieces of hogs that he had to

standards benefits.

The Petition

chop. Rather, it indicates a daily-wage method of payment and

In this petition,26 David maintains that Macasios engagement

affirms his regular employment status. He points out that David

was on a "pakyaw" or task basis. Hence, the latter is excluded

did not allege or present any evidence as regards the quota or

from the coverage of holiday, SIL and 13th month pay. David

number of hogs that he had to chop as basis for the "pakyaw"

reiterates his submissions before the lower tribunals

27

and adds

The Courts Ruling

We partially grant the petition.

or task basis payment; neither did David present the time

that he never had any control over the manner by which

record or payroll to prove that he worked for less than eight

Preliminary considerations: the Montoya ruling and the factual-

Macasio performed his work and he simply looked on to the

hours each day. Moreover, David did not present any contract to

issue-bar rule

"end-result." He also contends that he never compelled Macasio

prove that his employment was on task basis. As David failed to

to report for work and that under their arrangement, Macasio

prove the alleged task basis or "pakyawan" agreement, Macasio

In this Rule 45 petition for review on certiorari of the CAs

was at liberty to choose whether to report for work or not as

concludes that he was Davids employee. Procedurally, Macasio

decision rendered under a Rule 65 proceeding, this Courts

other butchers could carry out his tasks. He points out that

points out that Davids submissions in the present petition raise

power of review is limited to resolving matters pertaining to any

Solano and Antonio had, in fact, attested to their (David and

purely factual issues that are not proper for a petition for review

perceived legal errors that the CA may have committed in

Macasios) established "pakyawan" arrangement that rendered

on certiorari. These issues whether he (Macasio) was paid by

issuing the assailed decision. This is in contrast with the review

a written contract unnecessary. In as much as Macasio is a task

result or on "pakyaw" basis; whether he was a "field personnel";

for jurisdictional errors, which we undertake in an original

basis employee who is paid the fixed amount of P700.00 per

whether an employer-employee relationship existed between

certiorari action. In reviewing the legal correctness of the CA

engagement regardless of the time consumed in the

him and David; and whether David exercised control and

decision, we examine the CA decision based on how it

performance David argues that Macasio is not entitled to the

supervision over his work are all factual in nature and are,

determined the presence or absence of grave abuse of

benefits he claims. Also, he posits that because he engaged

therefore, proscribed in a Rule 45 petition. He argues that the

discretion in the NLRC decision before it and not on the basis of

Macasio on "pakyaw" or task basis then no employer-employee

CAs factual findings bind this Court, absent a showing that such

whether the NLRC decision on the merits of the case was

relationship exists between them.

findings are not supported by the evidence or the CAs

correct.32 In other words, we have to be keenly aware that the

judgment was based on a misapprehension of facts. He adds

CA undertook a Rule 65 review, not a review on appeal, of the

Finally, David argues that factual findings of the LA, when

that the issue of whether an employer-employee relationship

NLRC decision challenged before it.33

affirmed by the NLRC, attain finality especially when, as in this

existed between him and David had already been settled by the

case, they are supported by substantial evidence. Hence, David

LA29 and the NLRC30 (as well as by the CA per Macasios

Moreover, the Courts power in a Rule 45 petition limits us to a

31

posits that the CA erred in reversing the labor tribunals findings

manifestation before this Court dated November 15, 2012),

and granting the prayed monetary claims.

his favor, in the separate illegal case that he filed against David.

The Case for the Respondent

The Issue

in

review of questions of law raised against the assailed CA

decision.34
In this petition, David essentially asks the question whether
Macasio is entitled to holiday, SIL and 13th month pay. This one

168

is a question of law. The determination of this question of law

appellate review of the entire case to determine the presence or

indicators comprise the so-called "four-fold" test of employment

however is intertwined with the largely factual issue of whether

existence of that relationship. This approach however is not

relationship. Macasios relationship with David satisfies this test.

Macasio falls within the rule on entitlement to these claims or

authorized under a Rule 45 petition for review of the CA

within the exception. In either case, the resolution of this factual

decision rendered under a Rule 65 proceeding.

issue presupposes another factual matter, that is, the presence

First, David engaged the services of Macasio, thus satisfying the

element of "selection and engagement of the employee." David

of an employer-employee relationship between David and

First, the LA and the NLRC denied Macasios claim not because

categorically confirmed this fact when, in his "Sinumpaang

Macasio.

of the absence of an employer-employee but because of its

Salaysay," he stated that "nag apply po siya sa akin at kinuha

finding that since Macasio is paid on pakyaw or task basis, then

ko siya na chopper[.]"39 Also, Solano and Antonio stated in their

In insisting before this Court that Macasio was not his

he is not entitled to SIL, holiday and 13th month pay. Second,

"Pinagsamang Sinumpaang Salaysay" 40 that "[k]ami po ay

employee, David argues that he engaged the latter on "pakyaw"

we consider it crucial, that in the separate illegal dismissal case

nagtratrabaho sa Yiels xxx na pag-aari ni Ariel David bilang

or task basis. Very noticeably, David confuses engagement on

Macasio filed with the LA, the LA, the NLRC and the CA

butcher" and "kilalanamin si xxx Macasio na isa ring butcher

"pakyaw" or task basis with the lack of employment

uniformly found the existence of an employer-employee

xxx ni xxx David at kasama namin siya sa aming trabaho."

relationship. Impliedly, David asserts that their "pakyawan" or

relationship.37

task basis arrangement negates the existence of employment

relationship.

Second, David paid Macasios wages.Both David and Macasio

In other words, aside from being factual in nature, the existence

categorically stated in their respective pleadings before the

of an employer-employee relationship is in fact a non-issue in

lower tribunals and even before this Court that the former had

At the outset, we reject this assertion of the petitioner.

this case. To reiterate, in deciding a Rule 45 petition for review

been paying the latter P700.00 each day after the latter had

Engagement on "pakyaw" or task basis does not characterize

of a labor decision rendered by the CA under 65, the narrow

finished the days task. Solano and Antonio also confirmed this

the relationship that may exist between the parties, i.e.,

scope of inquiry is whether the CA correctly determined the

fact of wage payment in their "Pinagsamang Sinumpaang

whether one of employment or independent contractorship.

presence or absence of grave abuse of discretion on the part of

Salaysay."41 This satisfies the element of "payment of wages."

Article 97(6) of the Labor Code defines wages as "xxx the

the NLRC. In concrete question form, "did the NLRC gravely

remuneration or earnings, however designated, capable of

abuse its discretion in denying Macasios claims simply because

Third, David had been setting the day and time when Macasio

being expressed in terms of money, whether fixed or

he is paid on a non-time basis?"

should report for work. This power to determine the work

ascertained on a time, task, piece, or commission basis, or

schedule obviously implies power of control. By having the

other method of calculating the same, which is payable by an

At any rate, even if we indulge the petitioner, we find his claim

power to control Macasios work schedule, David could regulate

employer to an employee under a written or unwritten contract

that no employer-employee relationship exists baseless.

Macasios work and could even refuse to give him any

of employment for work done or to be done, or for services

Employing the control test,38 we find that such a relationship

assignment, thereby effectively dismissing him.

rendered or to be rendered[.]"

35

In relation to Article 97(6),

exist in the present case.

Article 10136 of the Labor Code speaks of workers paid by

results or those whose pay is calculated in terms of the quantity

And fourth, David had the right and power to control and
Even a factual review shows that Macasio is Davids employee

or quality of their work output which includes "pakyaw" work

and other non-time work.

supervise Macasios work as to the means and methods of

performing it. In addition to setting the day and time when

To determine the existence of an employer-employee

Macasio should report for work, the established facts show that

relationship, four elements generally need to be considered,

David rents the place where Macasio had been performing his

More importantly, by implicitly arguing that his engagement of

namely: (1) the selection and engagement of the employee; (2)

tasks. Moreover, Macasio would leave the workplace only after

Macasio on "pakyaw" or task basis negates employer-employee

the payment of wages; (3) the power of dismissal; and (4) the

he had finished chopping all of the hog meats given to him for

relationship, David would want the Court to engage on a factual

power to control the employees conduct. These elements or

the days task. Also, David would still engage Macasios services

169

and have him report for work even during the days when only

a fixed amount as wage, without regard to the standard

In reversing the labor tribunals rulings, the CA similarly relied

few hogs were delivered for butchering.

measurements of time generally used in pay computation.

on these provisions, as well as on Section 1, Rule V of the IRR of

the Labor Code and the Courts ruling in Serrano v. Severino

Under this overall setup, all those working for David, including

In Macasios case, the established facts show that he would

Santos Transit.46 These labor law provisions, when read together

Macasio, could naturally be expected to observe certain rules

usually start his work at 10:00 p.m. Thereafter, regardless of

with the Serrano ruling, exempt those engaged on "pakyaw" or

and requirements and David would necessarily exercise some

the total hours that he spent at the workplace or of the total

task basis only if they qualify as "field personnel."

degree of control as the chopping of the hog meats would be

number of the hogs assigned to him for chopping, Macasio

subject to his specifications. Also, since Macasio performed his

would receive the fixed amount of P700.00 once he had

In other words, what we have before us is largely a question of

tasks at Davids workplace, David could easily exercise control

completed his task. Clearly, these circumstances show a

law regarding the correct interpretation of these labor code

and supervision over the former. Accordingly, whether or not

"pakyaw" or task basis engagement that all three tribunals

provisions and the implementing rules; although, to conclude

David actually exercised this right or power to control is beside

uniformly found.

that the worker is exempted or covered depends on the facts

the point as the law simply requires the existence of this power
to control

4243

or, as in this case, the existence of the right and

and in this sense, is a question of fact: first, whether Macasio is

In sum, the existence of employment relationship between the

a "field personnel"; and second, whether those engaged on

parties is determined by applying the "four-fold" test;

"pakyaw" or task basis, but who are not "field personnel," are

engagement on "pakyaw" or task basis does not determine the

exempted from the coverage of holiday, SIL and 13th month

In sum, the totality of the surrounding circumstances of the

parties relationship as it is simply a method of pay

pay.

present case sufficiently points to an employer-employee

computation. Accordingly, Macasio is Davids employee, albeit

relationship existing between David and Macasio.

engaged on "pakyaw" or task basis.

opportunity to control and supervise Macasio.

44

To put our discussion within the perspective of a Rule 45

petition for review of a CA decision rendered under Rule 65 and

Macasio is engaged on "pakyaw" or task basis

At this point, we note that all three tribunals the LA, the NLRC

As an employee of David paid on pakyaw or task basis, we now

framed in question form, the legal question is whether the CA

go to the core issue of whether Macasio is entitled to holiday,

correctly ruled that it was grave abuse of discretion on the part

13th month, and SIL pay.

of the NLRC to deny Macasios monetary claims simply because

and the CA found that Macasio was engaged or paid on

he is paid on a non-time basis without determining whether he

"pakyaw" or task basis. This factual finding binds the Court

On the issue of Macasios entitlement to holiday, SIL and 13th

under the rule that factual findings of labor tribunals when

month pay

supported by the established facts and in accord with the laws,

especially when affirmed by the CA, is binding on this Court.

is a field personnel or not.

To resolve these issues, we need tore-visit the provisions

The LA dismissed Macasios claims pursuant to Article 94 of the

involved.

Labor Code in relation to Section 1, Rule IV of the IRR of the

A distinguishing characteristic of "pakyaw" or task basis

Labor Code, and Article 95 of the Labor Code, as well as

engagement, as opposed to straight-hour wage payment, is the

Presidential Decree (PD) No. 851. The NLRC, on the other hand,

non-consideration of the time spent in working. In a task-basis

relied on Article 82 of the Labor Code and the Rules and

Article 82 of the Labor Code provides the exclusions from the

work, the emphasis is on the task itself, in the sense that

Regulations Implementing PD No. 851. Uniformly, these

coverage of Title I, Book III of the Labor Code - provisions

payment is reckoned in terms of completion of the work, not in

provisions exempt workers paid on "pakyaw" or task basis from

governing working conditions and rest periods.

terms of the number of time spent in the completion of

the coverage of holiday, SIL and 13th month pay.

work.45 Once the work or task is completed, the worker receives

Provisions governing SIL and holiday pay

Art. 82. Coverage. The provisions of [Title I] shall apply to

employees in all establishments and undertakings whether for

170

profit or not, but not to government employees, managerial

SECTION 1. Coverage. This Rule shall apply to all employees

(e) Field personnel and other employees whose performance is

employees, field personnel, members of the family of the

except:

unsupervised by the employer including those who are engaged

employer who are dependent on him for support, domestic

on task or contract basis, purely commission basis, or those

helpers, persons in the personal service of another, and workers

xxxx

who are paid a fixed amount for performing work irrespective of

who are paid by results as determined by the Secretary of Labor

in appropriate regulations.

the time consumed in the performance thereof. [emphasis ours]

(e)Field personnel and other employees whose time and
performance is unsupervised by the employer including those

Under these provisions, the general rule is that holiday and SIL

who are engaged on task or contract basis, purely commission

pay provisions cover all employees. To be excluded from their

basis, or those who are paid a fixed amount for performing work

coverage, an employee must be one of those that these

"Field personnel" shall refer to non-agricultural employees who

irrespective of the time consumed in the performance thereof.

provisions expressly exempt, strictly in accordance with the

regularly perform their duties away from the principal place of

[emphases ours]

exemption. Under the IRR, exemption from the coverage of

xxxx

business or branch office of the employer and whose actual

hours of work in the field cannot be determined with reasonable
certainty. [emphases and underscores ours]

holiday and SIL pay refer to "field personnel and other

On the other hand, Article 95 of the Labor Code and its
corresponding provision in the IRR

48

pertinently provides:

employees whose time and performance is unsupervised by the

employer including those who are engaged on task or contract
basis[.]" Note that unlike Article 82 of the Labor Code, the IRR

Among the Title I provisions are the provisions on holiday pay

Art. 95. Right to service incentive. (a) Every employee who has

on holiday and SIL pay do not exclude employees "engaged on

(under Article 94 of the Labor Code) and SIL pay (under Article

rendered at least one year of service shall be entitled to a

task basis" as a separate and distinct category from employees

95 of the Labor Code). Under Article 82,"field personnel" on one

yearly service incentive leave of five days with pay.

classified as "field personnel." Rather, these employees are

hand and "workers who are paid by results" on the other hand,

altogether merged into one classification of exempted

are not covered by the Title I provisions. The wordings of

(b) This provision shall not apply to those who are already

Article82 of the Labor Code additionally categorize workers

enjoying the benefit herein provided, those enjoying vacation

employees.

"paid by results" and "field personnel" as separate and distinct

leave with pay of at least five days and those employed in

Because of this difference, it may be argued that the Labor

types of employees who are exempted from the Title I

establishments regularly employing less than ten employees or

Code may be interpreted to mean that those who are engaged

provisions of the Labor Code.

in establishments exempted from granting this benefit by the

on task basis, per se, are excluded from the SIL and holiday

Secretary of Labor and Employment after considering the

payment since this is what the Labor Code provisions, in

The pertinent portion of Article 94 of the Labor Code and its

viability or financial condition of such establishment. [emphases

contrast with the IRR, strongly suggest. The arguable

corresponding provision in the IRR47 reads:

ours]

interpretation of this rule may be conceded to be within the

discretion granted to the LA and NLRC as the quasi-judicial

Art. 94. Right to holiday pay. (a) Every worker shall be paid his

xxxx

bodies with expertise on labor matters.

regular daily wage during regular holidays, except in retail and

service establishments regularly employing less than (10)

Section 1. Coverage. This rule shall apply to all employees

However, as early as 1987 in the case of Cebu Institute of

workers[.] [emphasis ours]

except:

Technology v. Ople49 the phrase "those who are engaged on task

or contract basis" in the rule has already been interpreted to

xxxx

xxxx

mean as follows:

171

[the phrase] should however, be related with "field personnel"

be understood as a separate classification of employees to

IRR as exempting an employee from the coverage of Title I of

applying the rule on ejusdem generis that general and unlimited

which service incentive leave shall not be granted. Rather, it

the Labor Code based simply and solely on the mode of

terms are restrained and limited by the particular terms that

serves as an amplification of the interpretation of the definition

payment of an employee. The NLRCs utter disregard of this

they follow xxx Clearly, petitioner's teaching personnel cannot

of field personnel under the Labor Code as those "whose actual

consistent jurisprudential ruling is a clear act of grave abuse of

be deemed field personnel which refers "to non-agricultural

hours of work in the field cannot be determined with reasonable

discretion.52 In other words, by dismissing Macasios complaint

employees who regularly perform their duties away from the

certainty."

without considering whether Macasio was a "field personnel" or

principal place of business or branch office of the employer and

not, the NLRC proceeded based on a significantly incomplete

whose actual hours of work in the field cannot be determined

The same is true with respect to the phrase "those who are

consideration of the case. This action clearly smacks of grave

with reasonable certainty. [Par. 3, Article 82, Labor Code of the

engaged on task or contract basis, purely commission basis."

abuse of discretion.

Philippines]. Petitioner's claim that private respondents are not

Said phrase should be related with "field personnel," applying

entitled to the service incentive leave benefit cannot therefore

the rule on ejusdem generis that general and unlimited terms

be sustained.

are restrained and limited by the particular terms that they

follow.

Entitlement to holiday pay

Evidently, the Serrano ruling speaks only of SIL pay. However, if

In short, the payment of an employee on task or pakyaw basis

the LA and the NLRC had only taken counsel from Serrano and

alone is insufficient to exclude one from the coverage of SIL and

The Autobus ruling was in turn the basis of Serrano v. Santos

earlier cases, they would have correctly reached a similar

holiday pay. They are exempted from the coverage of Title I

Transit which the CA cited in support of granting Macasios

conclusion regarding the payment of holiday pay since the rule

(including the holiday and SIL pay) only if they qualify as "field

petition.

exempting "field personnel" from the grant of holiday pay is

personnel." The IRR therefore validly qualifies and limits the

general exclusion of "workers paid by results" found in Article

identically worded with the rule exempting "field personnel"

In Serrano, the Court, applying the rule on ejusdem
50

declared that "employees engaged on task or contract

from the grant of SIL pay. To be clear, the phrase "employees

82 from the coverage of holiday and SIL pay. This is the only

generis

reasonable interpretation since the determination of excluded

basis xxx are not automatically exempted from the grant of

engaged on task or contract basis "found in the IRR on both SIL

pay and holiday pay should be read together with the

workers who are paid by results from the coverage of Title I is

service incentive leave, unless, they fall under the classification

exemption of "field personnel."

"determined by the Secretary of Labor in appropriate

of field personnel."51 The Court explained that the phrase

regulations."

"including those who are engaged on task or contract basis,

In short, in determining whether workers engaged on "pakyaw"

purely commission basis" found in Section 1(d), Rule V of Book

or task basis" is entitled to holiday and SIL pay, the presence (or

The Cebu Institute Technology ruling was reiterated in 2005 in

III of the IRR should not be understood as a separate

absence) of employer supervision as regards the workers time

Auto Bus Transport Systems, Inc., v. Bautista:

classification of employees to which SIL shall not be granted.

and performance is the key: if the worker is simply engaged on

Rather, as with its preceding phrase - "other employees whose

pakyaw or task basis, then the general rule is that he is entitled

A careful perusal of said provisions of law will result in the

performance is unsupervised by the employer" - the phrase

to a holiday pay and SIL pay unless exempted from the

conclusion that the grant of service incentive leave has been

"including those who are engaged on task or contract basis"

exceptions specifically provided under Article 94 (holiday pay)

delimited by the Implementing Rules and Regulations of the

serves to amplify the interpretation of the Labor Code definition

and Article95 (SIL pay) of the Labor Code. However, if the

Labor Code to apply only to those employees not explicitly

of "field personnel" as those "whose actual hours of work in the

worker engaged on pakyaw or task basis also falls within the

excluded by Section 1 of Rule V. According to the Implementing

field cannot be determined with reasonable certainty."

meaning of "field personnel" under the law, then he is not

Rules, Service Incentive Leave shall not apply to employees

entitled to these monetary benefits.

classified as "field personnel." The phrase "other employees

In contrast and in clear departure from settled case law, the LA

whose performance is unsupervised by the employer" must not

and the NLRC still interpreted the Labor Code provisions and the

172

Macasio does not fall under the classification of "field

performing a specific work, irrespective of the time consumed in

personnel"

the performance thereof"55 are exempted.

Based on the definition of field personnel under Article 82, we

Note that unlike the IRR of the Labor Code on holiday and SIL

agree with the CA that Macasio does not fall under the definition

pay, Section 3(e) of the Rules and Regulations Implementing PD

of "field personnel." The CAs finding in this regard is supported

No. 851 exempts employees "paid on task basis" without any

by the established facts of this case: first, Macasio regularly

reference to "field personnel." This could only mean that insofar

performed his duties at Davids principal place of business;

as payment of the 13th month pay is concerned, the law did not

second, his actual hours of work could be determined with

intend to qualify the exemption from its coverage with the

reasonable certainty; and, third, David supervised his time and

requirement that the task worker be a "field personnel" at the

performance of duties. Since Macasio cannot be considered a

same time.

"field personnel," then he is not exempted from the grant of

holiday, SIL pay even as he was engaged on "pakyaw" or task

WHEREFORE, in light of these considerations, we hereby

basis.

PARTIALLY GRANT the petition insofar as the payment of 13th

month pay to respondent is concerned. In all other aspects, we

Not being a "field personnel," we find the CA to be legally

AFFIRM the decision dated November 22, 2010 and the

correct when it reversed the NLRCs ruling dismissing Macasios

resolution dated January 31, 2011 of the Court of Appeals in CA-

complaint for holiday and SIL pay for having been rendered with

G.R. SP No. 116003.

grave abuse of discretion.

SO ORDERED.
Entitlement to 13th month pay
With respect to the payment of 13th month pay however, we
find that the CA legally erred in finding that the NLRC gravely
abused its discretion in denying this benefit to Macasio.1wphi1
The governing law on 13th month pay is PD No. 851.53
As with holiday and SIL pay, 13th month pay benefits generally
cover all employees; an employee must be one of those
expressly enumerated to be exempted. Section 3 of the Rules
and Regulations Implementing P.D. No. 85154enumerates the
exemptions from the coverage of 13th month pay benefits.
Under Section 3(e), "employers of those who are paid on xxx

34

task basis, and those who are paid a fixed amount for

173

Republic of the Philippines

SUPREME COURT
Manila

Alexander
R. Canlas

2005

5 years

2007-2010- Quezon
City

P312.0
0

Our Haus also rejected the respondents other monetary claims

for lack of proof that they were entitled to it. 12

SECOND DIVISION

Jerry Q.
Sabulao

August
1999

10
years

2008- Quezon City

2009- Antipolo
2010- Quezon City

P342.0
0

Bernardo
N.
Tenedero

1994

16
years

2007-2010- Quezon
City

P383.5
0

On the other hand, the respondents argued that the value of

their meals should not be considered in determining their
wages total amount since the requirements set under Section
413 of DOLE14 Memorandum Circular No. 215were not complied
with.

G.R. No. 204651

August 6, 2014

OUR HAUS REALTY DEVELOPMENT

CORPORATION, Petitioner,
vs.
ALEXANDER PARIAN, JAY C. ERINCO, ALEXANDER
CANLAS, BERNARD TENEDERO and JERRY
SABULAO, Respondents.

Sometime in May 2010, Our Haus experienced financial

distress. To alleviate its condition, Our Haus suspended some of
its construction projects and asked the affected workers,
including the respondents, to take vacation leaves. 8

DECISION
BRION, J.:
We resolve in this petition for review on certiorari1 the challenge
to the May 7, 2012 decision2 and the November 27, 2012
resolution3 (assailed CA rulings) of the Court of Appeals (CA) in
CA-G.R. SP No. 123273. These assailed CA rulings affirmed the
July 20, 2011 decision4 and the December 2, 2011
resolution5 (NLRC rulings) of the National Labor Relations
Commission (NLRC) in NLRC LAC No. 02-000489-11 (NLRC NCR
Case No. 06-08544-10). The NLRC rulings in turn reversed and
set aside the December 10, 2010 decision6 of the labor arbiter
(LA).
Factual Antecedents
Respondents Alexander Parian, Jay Erinco, Alexander Canlas,
Jerry Sabulao and Bernardo Tenederowere all laborers working
for petitioner Our Haus Realty Development Corporation (Our
Haus), a company engaged in the construction business.The
respondents respective employment records and daily wage
rates from 2007 to 2010 are summarized in the table7 below:

Name

Date
Hired

Years of
Service

Year and Place of

Assignment

Daily
Rate

Alexander
M. Parian

October
1999

10
years

2007-2010- Quezon
City

P353.5
0

Jay C.
Erinco

January
2000

10
years

2008- Quezon City

2009- Antipolo
2010- Quezon City

P342.0
0

Eventually, the respondents were asked to report back to work

but instead of doing so, they filed with the LA a complaint for
underpayment of their daily wages. They claimed that except
for respondent Bernardo N. Tenedero, their wages were below
the minimum rates prescribed in the following wage orders from
2007 to 2010:
1. Wage Order No. NCR-13, which provides for a daily
minimum wage rate of P362.00for the non-agriculture
sector (effective from August 28, 2007 until June 13,
2008); and
2. Wage Order No. NCR-14, which provides for a daily
minimum wage rate of P382.00for the non-agriculture
sector (effective from June 14, 2008 until June 30,
2010).
The respondents also alleged thatOur Haus failed to pay them
their holiday, service incentive leave (SIL), 13th month and
overtime pays.9
The Labor Arbitration Rulings
Before the LA, Our Haus primarily argued that the respondents
wages complied with the laws minimum requirement. Aside
from paying the monetary amount of the respondents wages,
Our Haus also subsidized their meals (3 times a day), and gave
them free lodging near the construction project they were
assigned to.10 In determining the total amount of the
respondents daily wages, the value of these benefits should be
considered, in line with Article 97(f)11 of the Labor Code.

The respondents pointed out that Our Haus never presented

any proof that they agreed in writing to the inclusion of their
meals value in their wages.16 Also, Our Haus failed to prove
that the value of the facilities it furnished was fair and
reasonable.17 Finally, instead of deducting the maximum
amount of 70% of the value of the meals, Our Haus actually
withheld its full value (which was Php290.00 per week for each
employee).18
The LA ruled in favor of Our Haus. He held that if the reasonable
values of the board and lodging would be taken into account,
the respondents daily wages would meet the minimum wage
rate.19 As to the other benefits, the LA found that the
respondents were not able to substantiate their claims for it. 20
The respondents appealed the LAs decision to the NLRC, which
in turn, reversed it. Citing the case of Mayon Hotel & Restaurant
v. Adana,21 the NLRC noted that the respondents did not
authorize Our Haus in writing to charge the values of their
board and lodging to their wages. Thus, the samecannot be
credited.
The NLRC also ruled that the respondents are entitled to their
respective proportionate 13th month payments for the year
2010 and SIL payments for at least three years,immediately
preceding May 31, 2010, the date when the respondents leftOur
Haus. However, the NLRC sustained the LAs ruling that the
respondents were not entitled to overtime pay since the exact
dates and times when they rendered overtime work had not
been proven.22
Our Haus moved for the reconsideration23 of the NLRCs decision
and submitted new evidence (the five kasunduans) to show that
the respondents authorized Our Haus in writing to charge the
values of their meals and lodging to their wages.
The NLRC denied Our Haus motion, thus it filed a Rule 65
petition24 with the CA. In its petition, Our Haus propounded a
new theory. It made a distinction between deduction and
charging. A written authorization is only necessary if the
facilitys value will be deducted and will not be needed if it will

174

merely be charged or included in the computation of

wages.25 Our Haus claimed that it did not actually deduct the
values of the meals and housing benefits. It only considered
these in computing the total amount of wages paid to the
respondents for purposes of compliance with the minimum
wage law. Hence, the written authorization requirement should
not apply.
Our Haus also asserted that the respondents claim for SIL pay
should be denied as this was not included in their pro
formacomplaint. Lastly, it questioned the
respondentsentitlement to attorneys fees because they were
not represented by a private lawyer but by the Public Attorneys
Office (PAO).
The CAs Ruling
The CA dismissed Our Haus certiorari petition and affirmed the
NLRC rulings in toto. It found no real distinction between
deduction and charging,26 and ruled that the legal requirements
before any deduction or charging can be made, apply to both.
Our Haus, however, failed to prove that it complied with any of
the requirements laid down in Mabeza v. National Labor
Relations Commission.27 Accordingly, it cannot consider the
values of its meal and housing facilities in the computation of
the respondents total wages.
Also, the CA ruled that since the respondents were able to
allege non-payment of SIL in their position paper, and Our Haus,
in fact, opposed it in its various pleadings,28 then the NLRC
properly considered it as part of the respondents causes of
action. Lastly, the CA affirmed the respondents entitlement to
attorneys fees.29
Our Haus filed a motion for reconsideration but the CA denied
its motion, prompting it to file the present petition for review on
certiorari under Rule 45.

a separate expense that Our Haus did not withhold from the
respondents wages.30 This disproves the respondentsclaim that
it deducted the full amount of the meals value.

in the present case is: did the CA correctly determine that the
NLRC did not commit grave abuse of discretion in ruling on the
case?38 We rule that the CA correctly did.

Lastly, the CA erred in ruling that the claim for SIL pay may still
be granted though not raised in the complaint; and that the
respondents are entitled to an award of attorneys fees. 31

No substantial distinction between deducting and charging a

facilitys value from the employees wage; the legal
requirements for creditability apply to both

The Case for the Respondents

To justify its non-compliance with the requirements for the

deductibility of a facility, Our Haus asks us to believe that there
is a substantial distinction between the deduction and the
charging of a facilitys value to the wages. Our Haus explains
that in deduction, the amount of the wage (which may already
be below the minimum) would still be lessened by the facilitys
value, thus needing the employees consent. On the other hand,
in charging, there is no reduction of the employees wage since
the facilitys value will just be theoretically added to the wage
for purposes of complying with the minimum wage
requirement.39

The respondents prayed for the denial of the petition.32 They

maintained that the CA did not err inruling that the values of
the board and lodging cannot be deducted from their wages for
failure to comply with the requirements set by law. 33 And though
the claim for SIL pay was not included in their pro forma
complaint, they raised their claims in their position paper and
Our Haus had the opportunity to contradict it in its pleadings.34
Finally, under the PAO law, the availment of the PAOs legal
services does not exempt its clients from an award of attorneys
fees.35
The Courts Ruling
We resolve to DENYthe petition.
The nature of a Rule 45 petition only questions of law
Basic is the rule that only questions of lawmay be raised in a
Rule 45 petition.36 However, in this case, weare confronted with
mixed questions of fact and law that are subsumed under the
issue of whether Our Haus complied with the legal requirements
on the deductibility of the value of facilities. Strictly, factual
issues cannot be considered under Rule 45 except in the course
of resolving if the CA correctly determined whether or not the
NLRC committed grave abuse of discretion in considering and
appreciating the factual issues before it.37

The Petition
Our Haus submits that the CA erred in ruling that the legal
requirements apply without distinction whether the facilitys
value will be deducted or merely included in the computation of
the wages. At any rate, it complied with the requirements for
deductibility of the value of the facilities. First, the five
kasunduans executed by the respondents constitute the written
authorization for the inclusion of the board and lodgings values
to their wages. Second, Our Haus only withheld the amount
of P290.00 which represents the foods raw value; the weekly
cooking cost (cooks wage, LPG, water) at P239.40 per person is

In ruling for legal correctness, we have to view the CA decision

in the same context that the petition for certiorariit ruled upon
was presented to it; we have to examine the CA decision from
the prism of whether it correctly determined the presence or
absence of grave abuse of discretion in the NLRC decision
before it, not on the basis of whether the NLRC decision, on the
merits of the case, was correct. In other words, we have to be
keenly aware that the CA undertook a Rule 65 review, not a
review on appeal, of the NLRC decision challenged before it.
This is the approach that should bebasic in a Rule 45 review of a
CA ruling in a labor case. In question form, the question to ask

Our Haus argument is a vain attempt to circumvent the

minimum wage law by trying to create a distinction where none
exists.
In reality, deduction and charging both operate to lessen the
actual take-home pay of an employee; they are two sides of the
same coin. In both, the employee receives a lessened amount
because supposedly, the facilitys value, which is part of his
wage, had already been paid to him in kind. As there is no
substantial distinction between the two, the requirements set
by law must apply to both.
As the CA correctly ruled, these requirements, as summarized in
Mabeza, are the following:
a. proof must be shown thatsuch facilities are
customarily furnished by the trade;
b. the provision of deductiblefacilities must be
voluntarily accepted in writingby the employee; and
c. The facilities must be charged at fair and reasonable
value.40
We examine Our Haus compliance with each of these
requirements in seriatim.
a. The facility must be customarily furnished by the trade

175

In a string of cases, we have concluded that one of the badges

to show that a facility is customarily furnished by the trade is
the existence of a company policy or guideline showing that
provisions for a facility were designated as part of the
employees salaries.41 To comply with this, Our Haus presented
in its motion for reconsideration with the NLRC the joint
sinumpaang salaysayof four of its alleged employees. These
employees averred that they were recipients of free lodging,
electricity and water, as well as subsidized meals from Our
Haus.42
We agree with the NLRCs finding that the sinumpaang salaysay
statements submitted by Our Haus are self-serving.1wphi1 For
one, Our Haus only produced the documents when the NLRC
had already earlier determined that Our Haus failed to prove
that it was traditionally giving the respondents their board and
lodging. This document did not state whether these benefits
had been consistently enjoyed by the rest of Our Haus
employees. Moreover, the records reveal that the board and
lodging were given on a per project basis. Our Haus did not
show if these benefits were also provided inits other
construction projects, thus negating its claimed customary
nature. Even assuming the sinumpaang salaysay to be true, this
document would still work against Our Haus case. If Our Haus
really had the practice of freely giving lodging, electricity and
water provisions to its employees, then Our Haus should not
deduct its values from the respondents wages. Otherwise, this
will run contrary to the affiants claim that these benefits were
traditionally given free of charge.
Apart from company policy, the employer may also prove
compliance with the first requirement by showing the existence
of an industry-wide practice of furnishingthe benefits in
question among enterprises engaged in the same line of
business. If it were customary among construction companies to
provide board and lodging to their workers and treat their
values as part of their wages, we would have more reason to
conclude that these benefits were really facilities.
However, Our Haus could not really be expected to prove
compliance with the first requirement since the living
accommodation of workers in the construction industry is not
simply a matter of business practice. Peculiar to the
construction business are the occupational safety and health
(OSH) services which the law itself mandates employers to
provide to their workers. This isto ensure the humane working
conditions of construction employees despite their constant
exposure to hazardous working environments. Under Section 16
of DOLE Department Order (DO) No. 13, series of
1998,43 employers engaged in the construction business are
required to providethe following welfare amenities:

16.1 Adequate supply of safe drinking water

16.2 Adequate sanitaryand washing facilities
16.3 Suitable living accommodation for workers, and
as may be applicable, for their families
16.4 Separate sanitary, washing and sleeping
facilitiesfor men and women workers. [emphasis ours]
Moreover, DOLE DO No. 56, series of 2005, which sets out the
guidelines for the implementation ofDOLE DO No. 13, mandates
that the cost of the implementation of the requirements for the
construction safety and health of workers, shall be integrated to
the overall project cost.44 The rationale behind this isto ensure
that the living accommodation of the workers is not
substandard and is strictly compliant with the DOLEs OSH
criteria.
As part of the project cost that construction companies already
charge to their clients, the value of the housing of their workers
cannot be charged again to their employees salaries. Our Haus
cannot pass the burden of the OSH costs of its construction
projects to its employees by deducting it as facilities. This is Our
Haus obligation under the law.
Lastly, even if a benefit is customarily provided by the trade, it
must still pass the purpose testset by jurisprudence. Under this
test, if a benefit or privilege granted to the employee is clearly
for the employers convenience, it will not be considered as a
facility but a supplement.45 Here, careful consideration is given
to the nature of the employers business in relation to the work
performed by the employee. This test is used to address
inequitable situations wherein employers consider a benefit
deductible from the wages even if the factual circumstances
show that it clearly redounds to the employers greater
advantage.
While the rules serve as the initial test in characterizing a
benefit as a facility, the purpose test additionally recognizes
that the employer and the employee do not stand at the same
bargaining positions on benefits that must or must not formpart
of an employees wage. In the ultimate analysis, the purpose
test seeks to prevent a circumvention of the minimum wage
law.
a1. The purpose test in jurisprudence

Under the law,46 only the value of the facilities may be deducted
from the employees wages but not the value of supplements.
Facilities include articles or services for the benefit of the
employee or his family but exclude tools of the trade or articles
or services primarily for the benefit of the employer or
necessary to the conduct of the employers business. 47
The law also prescribes that the computation of wages shall
exclude whatever benefits, supplementsor allowances given to
employees. Supplements are paid to employees on top of their
basic pay and are free of charge.48 Since it does not form part of
the wage, a supplements value may not be includedin the
determination of whether an employer complied with the
prescribed minimum wage rates.
In the present case, the board and lodging provided by Our
Haus cannot be categorized asfacilities but as supplements. In
SLL International Cables Specialist v. National Labor Relations
Commission,49 this Court was confronted with the issue on the
proper characterization of the free board and lodging provided
by the employer. We explained:
The Court, at this point, makes a distinction between "facilities"
and "supplements". It is of the view that the food and lodging,
or the electricity and water allegedly consumed by private
respondents in this case were not facilities but supplements. In
the case of Atok-Big Wedge Assn. v. Atok-Big Wedge Co., the
two terms were distinguished from one another in this wise:
"Supplements", therefore, constitute extra remuneration or
special privileges or benefits given to or received by the
laborers overand above their ordinary earnings or wages.
"Facilities", on the other hand, are items of expense necessary
for the laborer's and his family's existence and subsistence so
thatby express provision of law (Sec. 2[g]), they form part of the
wage and when furnished by the employer are deductible
therefrom, since if they are not so furnished, the laborer would
spend and pay for them just the same.
In short, the benefit or privilege given to the employee which
constitutes an extra remuneration above and over his basic or
ordinary earning or wage is supplement; and when said benefit
or privilege is part of the laborers' basic wages, it is a facility.
The distinction lies not so much in the kind of benefit or item
(food, lodging, bonus or sick leave) given, but in the purpose for
which it is given.In the case at bench, the items provided were
given freely by SLLfor the purpose of maintaining the efficiency
and health of its workers while they were working attheir
respective projects.50

176

Ultimately, the real difference lies not on the kind of the benefit
but on the purpose why it was given by the employer. If it is
primarily for the employees gain, then the benefit is a facility; if
its provision is mainly for the employers advantage, then it is a
supplement. Again, this is to ensure that employees are
protected in circumstances where the employer designates a
benefit as deductible from the wages even though it clearly
works to the employers greater convenience or advantage.
Under the purpose test, substantial consideration must be given
to the nature of the employers business inrelation to the
character or type of work performed by the employees
involved.
Our Haus is engaged in the construction business, a
laborintensive enterprise. The success of its projects is largely a
function of the physical strength, vitality and efficiency of its
laborers. Its business will be jeopardized if its workers are weak,
sickly, and lack the required energy to perform strenuous
physical activities. Thus, by ensuring that the workers are
adequately and well fed, the employer is actually investing on
its business.
Unlike in office enterprises where the work is focused on desk
jobs, the construction industry relies heavily and directly on the
physical capacity and endurance of its workers. This is not to
say that desk jobs do not require muscle strength; wesimply
emphasize that in the construction business, bulk of the work
performed are strenuous physical activities.
Moreover, in the construction business, contractors are usually
faced with the problem ofmeeting target deadlines. More often
than not, work is performed continuously, day and night, in
order to finish the project on the designated turn-over date.
Thus, it will be more convenient to the employer if itsworkers
are housed near the construction site to ensure their ready
availability during urgent or emergency circumstances. Also,
productivity issues like tardiness and unexpected absences
would be minimized. This observation strongly bears in the
present case since three of the respondents are not residents of
the National Capital Region. The board and lodging provision
might have been a substantial consideration in their acceptance
of employment in a place distant from their provincial
residences.
Based on these considerations, we conclude that even under
the purpose test, the subsidized meals and free lodging
provided by Our Haus are actually supplements. Although they
also work to benefit the respondents, an analysis of the nature
of these benefits in relation to Our Haus business shows that
they were given primarily for Our Haus greater convenience

and advantage. If weighed on a scale, the balance tilts more

towards Our Haus side. Accordingly, their values cannot be
considered in computing the total amount of the respondents
wages. Under the circumstances, the dailywages paid to the
respondents are clearly below the prescribed minimum wage
rates in the years 2007-2010.
b. The provision of deductible facilities must be voluntarily
accepted in writing by the employee
In Mayon Hotel, we reiterated that a facility may only be
deducted from the wage if the employer was authorized in
writingby the concerned employee.51 As it diminishes the takehome pay of an employee, the deduction must be with his
express consent.
Again, in the motion for reconsideration with the NLRC, Our
Haus belatedly submitted five kasunduans, supposedly
executed by the respondents, containing their conformity to the
inclusion of the values of the meals and housing to their total
wages. Oddly, Our Haus only offered these documents when the
NLRC had already ruled that respondents did not accomplish
any written authorization, to allow deduction from their wages.
These five kasunduans were also undated, making us wonder if
they had reallybeen executed when respondents first assumed
their jobs.
Moreover, in the earlier sinumpaang salaysay by Our Haus four
employees, it was not mentioned that they also executed a
kasunduanfor their board and lodging benefits. Because of
these surrounding circumstances and the suspicious timing
when the five kasunduanswere submitted as evidence, we
agree withthe CA that the NLRC committed no grave abuse of
discretion in disregarding these documents for being self
serving.
c. The facility must be charged at a fair and reasonable value
Our Haus admitted that it deducted the amount of P290.00 per
week from each of the respondents for their meals. But it now
submits that it did not actually withhold the entire amount as it
did not figure in the computation the money it expended for the
salary of the cook, the water, and the LPG used for cooking,
which amounts to P249.40 per week per person. From these, it
appears that the total meal expense per week for each person
isP529.40,making Our Haus P290.00 deduction within the 70%
ceiling prescribed by the rules.

However, Our Haus valuation cannotbe plucked out of thin air.

The valuation of a facility must besupported by relevant
documents such as receipts and company records for it to be
considered as fair and reasonable. In Mabeza, we noted:
Curiously, in the case at bench, the only valuations relied upon
by the labor arbiter in his decision were figures furnished by the
private respondent's own accountant, without corroborative
evidence.On the pretext that records prior to the July 16, 1990
earthquake were lost or destroyed, respondent failed to produce
payroll records, receipts and other relevant documents, where
he could have, as has been pointedout in the Solicitor General's
manifestation, "secured certified copies thereof from the
nearest regional office of the Department of Labor, the SSS or
the BIR".52 [emphasis ours]
In the present case, Our Haus never explained how it came up
with the valuesit assigned for the benefits it provided; it merely
listed its supposed expenses without any supporting document.
Since Our Haus is using these additional expenses (cooks
salary, water and LPG) to support its claim that it did not
withhold the full amount of the meals value, Our Haus is
burdened to present evidence to corroborate its claim. The
records however, are bereft of any evidence to support Our
Haus meal expense computation. Eventhe value it assigned for
the respondents living accommodations was not supported by
any documentary evidence. Without any corroborative
evidence, it cannot be said that Our Haus complied withthis
third requisite.
A claim not raised in the pro forma complaint may still beraised
in the position paper.
Our Haus questions the respondents entitlement to SIL pay by
pointing out that this claim was not included in the pro forma
complaint filed with the NLRC. However, we agree with the CA
that such omission does not bar the labor tribunals from
touching upon this cause of action since this was raised and
discussed inthe respondents position paper. In Samar-Med
Distribution v. National Labor Relations Commission, 53 we held:
Firstly, petitioners contention that the validity of Gutangs
dismissal should not be determined because it had not been
included in his complaint before the NLRC is bereft of merit. The
complaint of Gutang was a mere checklist of possible causes of
action that he might have against Roleda. Such manner of
preparing the complaint was obviously designed to facilitate the
filing of complaints by employees and laborers who are thereby
enabled to expediently set forth their grievances in a general
manner. But the non-inclusion in the complaint of the issue on
the dismissal did not necessarily mean that the validity of the

177

dismissal could not be an issue.The rules of the NLRC require

the submission of verified position papers by the parties should
they fail to agree upon an amicable settlement, and bar the
inclusion of any cause of action not mentioned in the complaint
or position paper from the time of their submission by the
parties. In view of this, Gutangs cause of action should be
ascertained not from a reading of his complaint alone but also
from a consideration and evaluation of both his complaint and
position paper.54
The respondents entitlement to the other monetary benefits
Generally a party who alleges payment as a defense has the
burden of proving it.Particularly in labor cases, the burden of
proving payment of monetary claims rests on the employeron
the reasoning that the pertinent personnel files, payrolls,
records, remittances and other similar documents which will
show that overtime, differentials, service incentive leave and
other claims of workers have been paid are not in the
possession of the worker but in the custody and absolute
control of the employer.55

Thus, the respondents are still entitled to attorney's fees. The

attorney's fees awarded to them shall be paid to the PAO. It
serves as a token recompense to the PAO for its provision of
free legal services to litigants who have no means of hiring a
private lawyer.
WHEREFORE, in light of these considerations, we conclude that
the Court of Appeals correctly found that the National Labor
Relations Commission did not abuse its discretion in its decision
of July 20, 2011 and Resolution of December 2,
2011.1wphi1 Consequently we DENY the petition and AFFIRM
the Court of Appeals' decision dated May 7, 2012 and resolution
dated November 27, 2012 in CA-G.R. SP No. 123273. No costs.
SO ORDERED.

Unfortunately, records will disclose the absence of any credible

document which will show that respondents had been paid their
13th month pay, holiday and SIL pays. Our Haus merely
presented a handwritten certification from its administrative
officer that its employees automatically become entitled to five
days of service incentive leave as soon as they pass probation.
This certification was not even subscribed under oath. Our Haus
could have at least submitted its payroll or copies of the pay
slips of respondents to show payment of these benefits.
However, it failed to do so.
Respondents are entitled to attorneys fees.
Finally, we affirm that respondents are entitled to attorneys
fees. Our Haus asserts that respondents availment of free
legal services from the PAO disqualifies them from such award.
We find this untenable.
It is settled that in actions for recovery of wages or where an
employee was forced to litigate and, thus, incur expenses to
protect his rights and interest, the award of attorney's fees is
legally and morally justifiable.56Moreover, under the PAO Law or
Republic Act No. 9406, the costs of the suit, attorney's fees and
contingent fees imposed upon the adversary of the PAO clients
after a successful litigation shall be deposited in the National
Treasury as trust fund and shall be disbursed for special
allowances of authorized officials and lawyers of the PAO.57

178

Republic of the Philippines

SUPREME COURT
Manila

due to serious business losses in the memorandum of

agreement dated September 1, 2003.6 The memorandum of
agreement provided for Solid Mills grant of separation pay less
accountabilities, accrued sick leave benefits, vacation leave

SECOND DIVISION

benefits, and 13th month pay to the employees.7 Pertinent

portions of the agreement provide:

G.R. No. 202961

February 4, 2015
WHEREAS, the COMPANYhas incurred substantial financial

EMER MILAN, RANDY MASANGKAY, WILFREDO JAVIER,

losses and is currently experiencing further severe financial

RONALDO DAVID, BONIFACIO MATUNDAN, NORA

losses;

MENDOZA, et al., Petitioners,

vs.

WHEREAS, in view of such irreversible financial losses, the

NATIONAL LABOR RELATIONS COMMISSION, SOLID

COMPANY will cease its operations on October 10, 2003;

MILLS, INC., and/or PHILIP ANG, Respondents.

WHEREAS, all employees of the COMPANY on account of
DECISION

irreversible financial losses, will bedismissed from employment

effective October 10, 2003;

LEONEN, J.:
In view thereof, the parties agree as follows:
An employer is allowed to withhold terminal pay and benefits
pending the employee's return of its properties.

1. That UNION acknowledges that the COMPANY is

experiencing severe financial losses and as a

Petitioners are respondent Solid Mills, Inc.' s (Solid Mills)

1

employees. They are represented by the National Federation of

consequence of which, management is constrained to

cease the companys operations.

Labor Unions (NAFLU), their collective bargaining agent. 2

2. The UNION acknowledges that under Article 283 of
As Solid Mills employees, petitionersand their families were

the Labor Code, separation pay is granted to

allowed to occupy SMI Village, a property owned by Solid

employees who are dismissed due to closures or

Mills.3 According to Solid Mills, this was "[o]ut of liberality and

cessation of operations NOT DUE to serious business

for the convenience of its employees . . . [and] on the condition

losses.

that the employees . . . would vacate the premises anytime the

Company deems fit."4
35

3. The UNION acknowledges that in view of the serious

business losses the Company has been experiencing

In September 2003, petitioners were informed that effective

as seen in their audited financial statements,

October 10, 2003, Solid Mills would cease its operations due to

employees ARE NOT granted separation benefits under

serious business losses. NAFLU recognized Solid Mills closure

the law.

179

4. The COMPANY, by way of goodwill and in the spirit of

Later, Solid Mills, through Alfredo Jingco, sent to petitioners

to them.24 Petitioners possession should not be construed as

generosity agrees to grant financial assistance less

individual notices to vacate SMI Village.10

petitioners "accountabilities" that must be cleared first before

the release of benefits.25 Their possession "is not by virtue of

accountabilities to members of the Union based on

length of service to be computed as follows: (Italics in

Petitioners were no longer allowed to report for work by October

11

this paragraph supplied)

10, 2003.

any employer-employee relationship." 26 It is a civil issue, which

isoutside the jurisdiction of the Labor Arbiter.27

They were required to sign a memorandum of

agreement with release and quitclaim before their vacation and

Number of days - 12.625 for every year of service

sick leave benefits, 13th month pay, and separation pay would
be released.

12

The dispositive portion of the Labor Arbiters decision reads:

Employees who signed the memorandum of

5. In view of the above, the members of the UNION will

agreement were considered to have agreed to vacate SMI

WHEREFORE, premises considered, judgment is entered

receive such financial assistance on an equal monthly

Village, and to the demolition of the constructed houses inside

ORDERING respondents SOLID MILLS, INC. and/or PHILIP ANG

installments basis based on the following schedule:

as condition for the release of their termination benefits and

(President), in solido to pay the remaining 21 complainants:

separation pay.
First Check due on January 5, 2004 and every 5th of

13

Petitioners refused to sign the documents and

demanded to be paid their benefits and separation pay. 14

1) 19 of which, namely EMER MILAN, RAMON

the month thereafter until December 5, 2004.

MASANGKAY, ALFREDO JAVIER, RONALDO DAVID,

Hence, petitioners filed complaintsbefore the Labor Arbiter for

BONIFACIO MATUNDAN, NORA MENDOZA, MYRNA

6. The COMPANY commits to pay any accrued benefits

alleged non-payment of separation pay, accrued sick and

IGCAS, RAUL DE LAS ALAS, RENATO ESTOLANO, REX S.

the Union members are entitled to, specifically those

vacation leaves, and 13th month pay.15 They argued that their

DIMAFELIX, MAURA MILAN, JESSICA BAYBAYON,

arising from sick and vacation leave benefits and 13th

accrued benefits and separation pay should not be withheld

ALFREDO MENDOZA, ROBERTO IGCAS, ISMAEL MATA,

month pay, less accountabilities based on the following

becausetheir payment is based on company policy and

CARLITO DAMIAN, TEODORA MAHILOM, MARILOU

schedule:

practice.

16

Moreover, the 13th month pay is based on law,

LINGA, RENATO LINGA their separation pay of 12.625

specifically, Presidential Decree No. 851.17 Their possession of

days pay per year of service, pro-rated 13th month

One Time Cash Payment to bedistributed anywhere

Solid Mills property is not an accountability that is subject to

pay for 2003 and accrued vacation and sick leaves,

from. . . .

clearance procedures.18 They had already turned over to

plus 12% interest p.a. from date of filing of the

SolidMills their uniforms and equipment when Solid Mills ceased

leadcase/judicial demand on 12/08/03 until actual

operations.19

payment and/or finality;

....
8. The foregoing agreement is entered into with full
knowledge by the parties of their rights under the law

On the other hand, Solid Mills argued that petitioners complaint

was premature because they had not vacated its property.

20

and they hereby bind themselves not to conduct any

The Labor Arbiter ruled in favor of petitioners.

grant of financial assistance as discussed above will be

Labor Arbiter, Solid Mills illegallywithheld petitioners benefits

withheld. (Emphasis in the original)

ZACARIAS, as she already received on 12/19/03 her

accrued 13th month pay for 2003, accrued VL/SL total

21

concerted action of whatsoever kind, otherwise the

8

2) the remaining 2 of which, complainants CLEOPATRA

and separation pay.

22

According to the

Petitioners right to the payment of their

benefits and separation pay was vestedby law and

23

The memorandum of agreement dated September 1,

amount of P15,435.16, likewise, complainant Jerry L.

Sesma as he already received his accrued 13th month
pay for 2003, SL/VL in the total amount ofP10,974.97,
shall be paid only their separation pay of 12.625 days

Solid Mills filed its Department of Labor and Employment

contract.

termination report on September 2, 2003.9

2003 stated no condition to the effect that petitioners must

pay per year of service but also with 12% interest p.a.
from date of filing of the lead case/judicial demand on

vacate SolidMills property before their benefits could be given

12/08/03 until actual payment and/or finality, which

180

WHEREFORE, the petition is hereby ordered DISMISSED. 44

computation as of date, amount to as shown in the

monetary claims in the form of separation pay, accrued 13th

attached computation sheet.

month pay for 2003, accrued vacation and sick leave pays are
held in abeyance pending compliance of their accountabilities

The Court of Appeals ruled thatSolid Mills act of allowing its

3) Nine (9) individual complaintsviz., of Maria Agojo,

to respondent company by turning over the subject lots they

employees to make temporary dwellingsin its property was a

Joey Suarez, Ronaldo Vergara, Ronnie Vergara, Antonio

respectively occupy at SMI Village Sucat

liberality on its part. It may be revoked any time at its

discretion.45 As a consequence of Solid Mills closure and the

R. Dulo, Sr., Bryan D. Durano, Silverio P. Durano, Sr.,

Elizabeth Duarte and Purificacion Malabanan are

Muntinlupa City, Metro Manila to herein respondent company.

31

DISMISSED WITH PREJUDICE due to amicable

resulting termination of petitioners, the employer-employee

relationship between them ceased to exist. There was no more

settlement, whereas, that of [RONIE ARANAS],

The National Labor Relations Commission noted that

reason for them to stay in Solid Mills property. 46 Moreover, the

[EMILITO NAVARRO], [NONILON PASCO], [GENOVEVA

complainants Marilou Linga, Renato Linga, IsmaelMata, and

memorandum of agreement between Solid Mills and the union

PASCO], [OLIMPIO A. PASCO] are DISMISSED WITHOUT

Carlito Damian were already paid their respective separation

representing petitioners provided that Solid Mills payment of

PREJUDICE, for lack of interest and/or failure to

prosecute.

pays and benefits.

32

employees benefits should be "less accountabilities." 47

Meanwhile, Teodora Mahilom already

retired longbefore Solid Mills closure.

her retirement benefits.

33

She was already given

34

On petitioners claim that there was no evidence that Teodora

The Computation and Examination unit is directed to cause the

28

Mahilom already received her retirement pay, the Court of

computation of the award in Pars. 2 and 3 above. (Emphasis in

The National Labor Relations Commission ruled that because of

Appeals ruled that her complaint filed before the Labor Arbiter

the original)

petitioners failure to vacate Solid Mills property, Solid Mills was

did not include a claim for retirement pay. The issue was also

justified in withholding their benefits and separation pay.

Solid Mills appealed to the National Labor Relations
Commission.

29

It prayed for, among others, the dismissal of the

complaints against it and the reversal of the Labor Arbiters

30

decision.

35

Solid

Mills granted the petitioners the privilege to occupy its property

on accountof petitioners employment.
toterminate such privilege.

37

36

It had the prerogative

paragraphs 1 and 2. Thus:

case, she already retired before Solid Mills ceased its

operations.49

The termination of Solid Mills and

petitioners employer-employee relationship made it incumbent

The Court of Appeals agreed with the National Labor Relations

upon petitioners to turn over the property to Solid Mills.38

Commissions deletion of interest since it found that Solid Mills

The National Labor Relations Commission affirmed paragraph 3

of the Labor Arbiters dispositive portion, but reversed

raised for the first time on appeal, which is not allowed. 48 In any

act of withholding payment of benefits and separation pay was

Petitioners filed a motion for partial reconsideration on October
39

18, 2010,

resolution.

but this was denied in the November 30, 2010

proper. Petitioners terminal benefits and pay were withheld

because of petitioners failure to vacate Solid Mills property. 50

40

WHEREFORE, the Decision of Labor Arbiter Renaldo O.

Finally, the Court of Appeals noted that Carlito Damian already

Hernandez dated 10/17/05 is AFFIRMED in so far as par. 3

Petitioners, thus, filed a petition for certiorari41 before the Court

received his separation pay and benefits.51 Hence, he should no

thereof is concerned but modified in that paragraphs 1 and 2

of Appeals to assail the National LaborRelations Commission

longer be awarded these claims.52

thereof are REVERSED and SET ASIDE. Accordingly, the

decision of August 31, 2010 and resolution of November 30,

following complainants, namely: Emir Milan, Ramon Masangkay,

2010.42

In the resolution promulgated on July 16, 2012, the Court of

Appeals denied petitioners motion for reconsideration.53

Alfredo Javier, Ronaldo David, Bonifacio Matundan, Nora

Mendoza, Myrna Igcas, Raul De Las Alas, Renato Estolano, Rex

On January 31, 2012, the Court of Appeals issued a decision

S. Dimaf[e]lix, Maura Milan, Jessica Baybayon, Alfredo Mendoza,

dismissing petitioners petition,43 thus:

Petitioners raise in this petition the following errors:

Roberto Igcas, Cleopatra Zacarias and Jerry L. Sesmas

181

Petitioners argue that respondent Solid Mills and NAFLUs

term "accountability" should be given its natural and ordinary

memorandum of agreement has no provision stating that

meaning.66 Thus, it should be interpreted as "a state of being

WHETHER OR NOT THE HONORABLE COURT OF

benefits shall be paid only upon return of the possession of

liable or responsible," or "obligation."67 Petitioners

APPEALS COMMITTED REVERSIBLE ERROR WHEN IT

respondent Solid Mills property.55 It only provides that the

differentiation between accountabilities incurred while

RULED THAT PAYMENT OF THE MONETARY CLAIMS OF

benefits shall be "less accountabilities," which should not be

performing jobs at the worksite and accountabilities incurred

56

PETITIONERS SHOULD BE HELD IN ABEYANCE PENDING

interpreted to include such possession.

COMPLIANCE OF THEIR ACCOUNTABILITIES TO

of NAFLUs members were not occupants of respondent Solid

RESPONDENT SOLID MILLS BY TURNING OVER THE

Mills property is evidence that possession of the property was

SUBJECT LOTS THEY RESPECTIVELY OCCUPY AT SMI

not contemplated in the agreement.57 "Accountabilities" should

On the removal of the award of 12% interest per annum,

VILLAGE, SUCAT, MUNTINLUPA CITY.

be interpreted to refer only to accountabilities that wereincurred

respondents argue that such removal was proper since

by petitioners while they were performing their duties

respondent Solid Mills was justified in withholding the monetary

II

asemployees at the worksite.

58

The fact that majority

outside the worksite is baseless because the agreement with

NAFLUmerely stated "accountabilities," without qualification.68

claims.69 Respondents argue that Teodora Mahilom had no more

Moreover, applicable laws,

company practice, or policies do not provide that 13th month

cause of action for retirement benefits claim.70 She had already

WHETHER OR NOT THE HONORABLE COURT OF

pay, and sick and vacation leave pay benefits, may be withheld

retired more than a decade before Solid Mills closure. She also

APPEALS COMMITTED REVERSIBLE ERROR WHEN IT

pending satisfaction of liabilities by the employee.59

already received her retirement benefits in 1991.71 Teodora

UPHELD THE RULING OF THE NLRC DELETING THE

Mahiloms claim was also not included in the complaint filed

INTEREST OF 12% PER ANNUM IMPOSED BY THE

Petitioners also point out thatthe National Labor Relations

before the Labor Arbiter.It was improper to raise this claim for

HONORABLE LABOR ARBITER HERNANDEZ ON THE

Commission and the Court of Appeals have no jurisdiction to

the first time on appeal. In any case, Teodora Mahiloms claim

AMOUNTDUE FROM THE DATE OF FILING OF THE LEAD

declare that petitioners act of withholding possession of

was asserted long after the three-year prescriptive period

CASE/JUDICIAL DEMAND ON DECEMBER 8, 2003 UNTIL

ACTUAL PAYMENT AND/OR FINALITY.

60

respondent Solid Mills property is illegal. The regular courts

have jurisdiction over this issue.

61

provided in Article 291 of the Labor Code.72

It is independent from the

issue of payment of petitioners monetary benefits. 62

Lastly, according to respondents, it would be unjust if Carlito

III

Damian would be allowed to receive monetary benefits again,

For these reasons, and because, according to petitioners, the

WHETHER OR NOT THE HONORABLE COURT OF

amount of monetary award is no longer in question, petitioners

APPEALS COMMITTED REVERSIBLE ERROR WHEN IT

are entitled to 12% interest per annum.63

which he, admittedly, already received from Solid Mills. 73

I

UPHELD THE RULING OF THE NLRC DENYING THE

CLAIM OF TEODORA MAHILOM FOR PAYMENT OF

Petitioners also argue that Teodora Mahilom and Carlito Damian

The National Labor Relations Commission may preliminarily

RETIREMENT BENEFITS DESPITE LACK OF ANY

are entitled to their claims. They insistthat Teodora Mahilom did

determine issues related to rights arising from an employer-

EVIDENCE THAT SHE RECEIVED THE SAME.

not receive her retirement benefits and that Carlito Damian did

employee relationship

not receive his separation benefits.64

IV

The National Labor Relations Commission has jurisdiction to

Respondents Solid Mills and Philip Ang,in their joint comment,

determine, preliminarily, the partiesrights over a property,

WHETHER OR NOT PETITIONER CARLITO DAMIAN IS

argue that petitioners failure to turn over respondentSolid Mills

when it is necessary to determine an issue related to rights or

ENTITLED TO HIS MONETARY BENEFITS FROM

property "constituted an unsatisfied accountability" for which

claims arising from an employer-employee relationship.

RESPONDENT SOLID MILLS.

54

reason "petitioners benefits could rightfully be withheld."

65

The

182

Article 217 provides that the Labor Arbiter, in his or her original

pesos (P5,000.00), regardless of whether accompanied

the employer and arose from the employer-employee

jurisdiction, and the National Labor Relations Commission, in its

with a claim for reinstatement.

relationship of the parties, the employers claim fell within the

LaborArbiters jurisdiction.78

appellate jurisdiction, may determine issues involving claims

arising from employeremployee relations. Thus:

(2) The Commission shall have exclusive appellate jurisdiction

over all cases decided by Labor Arbiters. (Emphasis supplied)

ART. 217. JURISDICTION OF LABOR ARBITERS AND THE

As a general rule, therefore, a claim only needs to be

sufficiently connected to the labor issue raisedand must arise

COMMISSION. (1) Except as otherwise provided under this

Petitioners claim that they have the right to the immediate

from an employeremployee relationship for the labortribunals to

Code, the Labor Arbiters shall have original and exclusive

release of their benefits as employees separated from

have jurisdiction.

jurisdiction to hear and decide within thirty (30) calendar days

respondent Solid Mills is a question arising from the employer-

after the submission of the case by the parties for decision

employee relationship between the parties.

without extension, even in the absence of stenographic notes,

In this case, respondent Solid Mills claims that its properties are
in petitioners possession by virtue of their status as its

the following cases involving workers, whether agricultural or

Claims arising from an employer-employee relationship are not

employees. Respondent Solid Mills allowed petitioners to use its

non-agricultural:

limited to claims by an employee. Employers may also have

property as an act of liberality. Put in other words, it would not

claims against the employee, which arise from the same

have allowed petitioners to use its property had they not been

relationship. In Baez v. Valdevilla,74 this court ruled that Article

its employees. The return of its properties in petitioners

217 of the Labor Code also applies to employers claim for

possession by virtue of their status as employees is an issue

damages, which arises from or is connected with the labor

that must be resolved to determine whether benefits can be

1. Unfair labor practice cases;

2. Termination disputes;

issue. Thus: Whereas this Court in a number of occasions had

released immediately. The issue raised by the employer is,

3. If accompanied with a claim for reinstatement, those

applied the jurisdictional provisions of Article 217 to claims for

therefore, connected to petitioners claim for benefits and is

cases that workers may file involving wages, rates of

damages filed by employees, we hold that by the designating

sufficiently intertwined with the parties employeremployee

pay, hours of work and other terms and conditions of

clause "arising from the employer-employee relations" Article

relationship. Thus, it is properly within the labor tribunals

employment;

217 should apply with equal force to the claim of an employer

jurisdiction.

for actual damages against its dismissed employee, where the

4. Claims for actual, moral, exemplary and other forms

basis for the claim arises from or is necessarily connected with

of damages arising from the employer-employee

the factof termination, and should be entered as a counterclaim

II

relations;

in the illegal dismissal case.75

Institution of clearance procedures has legal bases

5. Cases arising from any violation of Article 264 of this

Baez was cited in Domondon v. National Labor Relations

Requiring clearance before the release of last payments to the

Code, including questions involving the legality of

Commission.76 One of the issues in Domondonis whether the

employee is a standard procedure among employers, whether

strikes and lockouts; and

Labor Arbiter has jurisdiction to decide an issue on the transfer

public or private. Clearance procedures are instituted to ensure

of ownership of a vehicle assigned to the employee. It was

that the properties, real or personal, belonging to the employer

6. Except claims for Employees Compensation, Social

argued that only regular courts have jurisdiction to decide the

but are in the possession of the separated employee, are

Security, Medicare and maternity benefits, all other

issue.77

returned tothe employer before the employees departure.

including those of persons in domestic or household

This court ruled that since the transfer of ownership of the

As a general rule, employers are prohibited from withholding

service, involving an amount exceeding five thousand

vehicle to the employee was connected to his separation from

wages from employees. The Labor Code provides:

claims, arising from employer-employee relations

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Art. 116. Withholding of wages and kickbacks prohibited.It shall

3. In cases where the employer is authorized by law or

Accountabilities of employees are personal. They need not be

be unlawful for any person, directly or indirectly, to withhold

regulations issued by the Secretary of Labor and

uniform among all employees in order to be included in

any amount from the wages of a worker or induce him to give

Employment. (Emphasis supplied)

accountabilities incurred by virtue of an employer-employee

up any part of his wages by force, stealth, intimidation, threat

relationship. Petitioners do not categorically deny respondent

or by any other means whatsoever without the workers

The Civil Code provides that the employer is authorized to

Solid Mills ownership of the property, and they do not claim

consent.

withhold wages for debts due:

superior right to it. What can be gathered from the findings

ofthe Labor Arbiter, National Labor Relations Commission, and

The Labor Code also prohibits the elimination or diminution of

Article 1706. Withholding of the wages, except for a debt due,

the Court ofAppeals is that respondent Solid Mills allowed the

benefits. Thus:

shall not be made by the employer.

use of its property for the benefit of petitioners as its

Art. 100. Prohibition against elimination or diminution of

"Debt" in this case refers to any obligation due from the

it out of respondent Solid Mills liberality. The employer may,

benefits. Nothing in this Book shall be construed to eliminate or

employee to the employer. It includes any accountability that

therefore, demand the property at will.79

in any way diminish supplements, or other employee benefits

the employee may have to the employer. There is no reason to

being enjoyed at the time of promulgation of this Code.

limit its scope to uniforms and equipment, as petitioners would

The return of the propertys possession became an obligation or

argue.

liability on the part of the employees when the employer-

employees. Petitioners were merely allowed to possess and use

However, our law supports the employers institution of

employee relationship ceased. Thus, respondent Solid Mills has

clearance procedures before the release of wages. As an

More importantly, respondent Solid Mills and NAFLU, the union

the right to withhold petitioners wages and benefitsbecause of

exception to the general rule that wages may not be withheld

representing petitioners, agreed that the release of petitioners

this existing debt or liability. In Solas v. Power and Telephone

and benefits may not be diminished, the Labor Code provides:

benefits shall be "less accountabilities."

Supply Phils., Inc., et al., this court recognized this right of the

Art. 113. Wage deduction.No employer, in his own behalf or in

"Accountability," in its ordinary sense, means obligation or debt.

behalf of any person, shall make any deduction from the wages

The ordinary meaning of the term "accountability" does not

of his employees, except:

limit the definition of accountability to those incurred in the

There was valid reason for respondents withholding of

employer when it ruled that the employee in that case was not
constructively dismissed.80 Thus:

worksite. As long as the debt or obligation was incurred by

petitioners salary for the month of February 2000. Petitioner

1. In cases where the worker is insured with his

virtue of the employer-employee relationship, generally, it shall

does not deny that he is indebted to his employer in the amount

consent by the employer, and the deduction is to

be included in the employees accountabilities that are subject

of around 95,000.00. Respondents explained that petitioners

recompense the employer for the amount paid by him

to clearance procedures.

salary for the period of February 1-15, 2000 was applied as

as premium on the insurance;

partial payment for his debt and for withholding taxes on his
It may be true that not all employees enjoyed the privilege of

income; while for the period of February 15-28, 2000, petitioner

2. For union dues, in cases where the right of the

staying in respondent Solid Mills property. However, this alone

was already on absence without leave, hence, was not entitled

worker or his union to check-off has been recognized

does not imply that this privilege when enjoyed was not a result

to any pay.81

by the employer or authorized in writing by the

of the employer-employee relationship. Those who did avail of

individual worker concerned; and

the privilege were employees of respondent Solid Mills.

The law does not sanction a situation where employees who do

Petitioners possession should, therefore, be included in the

not even assert any claim over the employers property are

term "accountability."

allowed to take all the benefits out of their employment while

they simultaneously withhold possession of their employers

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property for no rightful reason. Withholding of payment by the

this finding. This court is not a trier of facts. Findings of the

standards and protection of law. In cases such as these, the

employer does not mean that the employer may renege on its

National Labor Relations Commission, especially when affirmed

collective bargaining unit of workers are able to get more

obligation to pay employees their wages, termination

by the Court of Appeals, are binding upon this court. 83

benefits and in exchange, the owners are able to continue with

payments, and due benefits. The employees benefits are also

the program of cutting their losses or wind down their

not being reduced. It is only subjectedto the condition that the

Moreover, Teodora Mahiloms claim for retirement benefits was

operations due to serious business losses. The company in this

employees return properties properly belonging to the

not included in her complaint filed before the Labor Arbiter.

case did all that was required by law.

employer. This is only consistent with the equitable principle

Hence, it may not be raised in the appeal.

that "no one shall be unjustly enriched or benefited at the

expense of another."82

The preferential treatment given by our law to labor, however,

Similarly, the National Labor Relations Commission and the

is not a license for abuse.84 It is not a signal to commit acts of

Court of Appeals found that Carlito Damian already received his

unfairness that will unreasonably infringe on the property rights

For these reasons, we cannot hold that petitioners are entitled

terminal benefits. Hence, he may no longer claim terminal

of the company. Both labor and employer have social utility, and

to interest of their withheldseparation benefits. These benefits

benefits. The fact that respondent Solid Mills has not yet

the law is not so biased that it does not find a middle ground to

were properly withheld by respondent Solid Mills because of

demolished Carlito Damians house in SMI Village is not

give each their due.

their refusal to return its property.

evidence that he did not receive his benefits. Both the National

III

Labor Relations Commission and the Court of Appeals found

Clearly, in this case, it is for the workers to return their housing

that he executed an affidavit stating that he already received

in exchange for the release of their benefits.1wphi1 This is

the benefits.

what they agreed upon. It is what is fair in the premises.

A bsent any showing that the National Labor Relations

WHEREFORE, the petition is DENIED. The Court of Appeals'

Commission and the Court of Appeals misconstrued these facts,

decision is AFFIRMED.

Mahilom and Damian are not entitled to the benefits claimed

Teodora Mahilom is not entitled to separation benefits.

we will not reverse these findings.

Both the National Labor Relations Commission and the Court of
Appeals found that Teodora Mahilom already retired long before

Our laws provide for a clear preference for labor. This is in

respondent Solid Mills closure. They found that she already

recognition of the asymmetrical power of those with capital

received her retirement benefits. We have no reason to disturb

when they are left to negotiate with their workers without the

185