FIRST DIVISION Thereafter, Kasei Corporation reduced her salary by P2,500.

00 a month beginning January up

to September 2001 for a total reduction of P22,500.00 as of September 2001. Petitioner was not paid
her mid-year bonus allegedly because the company was not earning well. On October 2001, petitioner
ANGELINA FRANCISCO, G.R. No. 170087 did not receive her salary from the company. She made repeated follow-ups with the company cashier
Petitioner, but she was advised that the company was not earning well.[10]
Present:
Panganiban, C.J. (Chairperson), On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers
- versus - Ynares-Santiago, but she was informed that she is no longer connected with the company.[11]
Austria-Martinez,
Callejo, Sr., and Since she was no longer paid her salary, petitioner did not report for work and filed an action
Chico-Nazario, JJ. for constructive dismissal before the labor arbiter.
NATIONAL LABOR RELATIONS
COMMISSION, KASEI CORPORATION, Private respondents averred that petitioner is not an employee of Kasei Corporation. They
SEIICHIRO TAKAHASHI, TIMOTEO alleged that petitioner was hired in 1995 as one of its technical consultants on accounting matters
ACEDO, DELFIN LIZA, IRENE and act concurrently as Corporate Secretary. As technical consultant, petitioner performed her work
BALLESTEROS, TRINIDAD LIZA Promulgated: at her own discretion without control and supervision of Kasei Corporation. Petitioner had no daily
and RAMON ESCUETA, time record and she came to the office any time she wanted. The company never interfered with her
Respondents. work except that from time to time, the management would ask her opinion on matters relating to
August 31, 2006 her profession. Petitioner did not go through the usual procedure of selection of employees, but her
x ---------------------------------------------------------------------------------------- x services were engaged through a Board Resolution designating her as technical consultant. The
money received by petitioner from the corporation was her professional fee subject to the 10%
DECISION expanded withholding tax on professionals, and that she was not one of those reported to the BIR or
SSS as one of the companys employees.[12]

YNARES-SANTIAGO, J.: Petitioners designation as technical consultant depended solely upon the will of
management. As such, her consultancy may be terminated any time considering that her services
were only temporary in nature and dependent on the needs of the corporation.
This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set aside
the Decision and Resolution of the Court of Appeals dated October 29, 2004[1] and October 7, To prove that petitioner was not an employee of the corporation, private respondents
2005,[2] respectively, in CA-G.R. SP No. 78515 dismissing the complaint for constructive dismissal filed submitted a list of employees for the years 1999 and 2000 duly received by the BIR showing that
by herein petitioner Angelina Francisco. The appellate court reversed and set aside the Decision of petitioner was not among the employees reported to the BIR, as well as a list of payees subject to
the National Labor Relations Commission (NLRC) dated April 15, 2003,[3] in NLRC NCR CA No. 032766- expanded withholding tax which included petitioner. SSS records were also submitted showing that
02 which affirmed with modification the decision of the Labor Arbiter dated July 31, 2002,[4] in NLRC- petitioners latest employer was Seiji Corporation.[13]
NCR Case No. 30-10-0-489-01, finding that private respondents were liable for constructive dismissal.
The Labor Arbiter found that petitioner was illegally dismissed, thus:
In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated
as Accountant and Corporate Secretary and was assigned to handle all the accounting needs of the WHEREFORE, premises considered, judgment is hereby rendered as follows:
company. She was also designated as Liaison Officer to the City of Makati to secure business permits,
construction permits and other licenses for the initial operation of the company.[5] 1. finding complainant an employee of respondent corporation;
2. declaring complainants dismissal as illegal;
Although she was designated as Corporate Secretary, she was not entrusted with the 3. ordering respondents to reinstate complainant to her former position
corporate documents; neither did she attend any board meeting nor required to do so. She never without loss of seniority rights and jointly and severally pay complainant her money
prepared any legal document and never represented the company as its Corporate claims in accordance with the following computation:
Secretary. However, on some occasions, she was prevailed upon to sign documentation for the
company.[6] a. Backwages 10/2001 07/2002 275,000.00
(27,500 x 10 mos.)
In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as b. Salary Differentials (01/2001 09/2001) 22,500.00
accountant in lieu of petitioner. As Acting Manager, petitioner was assigned to handle recruitment of c. Housing Allowance (01/2001 07/2002) 57,000.00
all employees and perform management administration functions; represent the company in all d. Midyear Bonus 2001 27,500.00
dealings with government agencies, especially with the Bureau of Internal Revenue (BIR), Social e. 13th Month Pay 27,500.00
Security System (SSS) and in the city government of Makati; and to administer all other matters f. 10% share in the profits of Kasei
pertaining to the operation of Kasei Restaurant which is owned and operated by Kasei Corporation.[7] Corp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 h. 10% Attorneys fees 87,076.50
her salary was P27,500.00 plus P3,000.00 housing allowance and a 10% share in the profit of Kasei P957,742.50
Corporation.[8]
If reinstatement is no longer feasible, respondents are ordered to pay complainant
In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged separation pay with additional backwages that would accrue up to actual payment of
that she was required to sign a prepared resolution for her replacement but she was assured that she separation pay.
would still be connected with Kasei Corporation. Timoteo Acedo, the designated Treasurer, convened
a meeting of all employees of Kasei Corporation and announced that nothing had changed and that SO ORDERED.[14]
petitioner was still connected with Kasei Corporation as Technical Assistant to Seiji Kamura and in
charge of all BIR matters.[9] On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter, the
dispositive portion of which reads:
 PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as
follows:
1) Respondents are directed to pay complainant separation pay computed at
one month per year of service in addition to full backwages from October 2001 to July
31, 2002;
2) The awards representing moral and exemplary damages and 10% share in
profit in the respective accounts of P100,000.00 and P361,175.00 are deleted;
3) The award of 10% attorneys fees shall be based on salary differential award
only;
4) The awards representing salary differentials, housing allowance, mid year
bonus and 13th month pay are AFFIRMED.
SO ORDERED.[15]
On appeal, the Court of Appeals reversed the NLRC decision, thus:
WHEREFORE, the instant petition is hereby GRANTED. The decision of the National
Labor Relations Commissions dated April 15, 2003 is hereby REVERSED and SET ASIDE
and a new one is hereby rendered dismissing the complaint filed by private
respondent against Kasei Corporation, et al. for constructive dismissal.
SO ORDERED.[16]
The appellate court denied petitioners motion for reconsideration, hence, the present recourse.
The core issues to be resolved in this case are (1) whether there was an employer-employee
relationship between petitioner and private respondent Kasei Corporation; and if in the affirmative,
(2) whether petitioner was illegally dismissed.
Considering the conflicting findings by the Labor Arbiter and the National Labor Relations
Commission on one hand, and the Court of Appeals on the other, there is a need to reexamine the
records to determine which of the propositions espoused by the contending parties is supported by
substantial evidence.[17]
We held in Sevilla v. Court of Appeals[18] that in this jurisdiction, there has been no uniform
test to determine the existence of an employer-employee relation. Generally, courts have relied on
the so-called right of control test where the person for whom the services are performed reserves a
right to control not only the end to be achieved but also the means to be used in reaching such end. In
addition to the standard of right-of-control, the existing economic conditions prevailing between the
parties, like the inclusion of the employee in the payrolls, can help in determining the existence of an
employer-employee relationship.
However, in certain cases the control test is not sufficient to give a complete picture of the
relationship between the parties, owing to the complexity of such a relationship where several
positions have been held by the worker. There are instances when, aside from the employers power
to control the employee with respect to the means and methods by which the work is to be
accomplished, economic realities of the employment relations help provide a comprehensive analysis
of the true classification of the individual, whether as employee, independent contractor, corporate
officer or some other capacity.
The better approach would therefore be to adopt a two-tiered test involving: (1) the putative
employers power to control the employee with respect to the means and methods by which the work
is to be accomplished; and (2) the underlying economic realities of the activity or relationship.
This two-tiered test would provide us with a framework of analysis, which would take into
consideration the totality of circumstances surrounding the true nature of the relationship between
the parties. This is especially appropriate in this case where there is no written agreement or terms of
reference to base the relationship on; and due to the complexity of the relationship based on the
various positions and responsibilities given to the worker over the period of the latters employment.
The control test initially found application in the case of Viaa v. Al-Lagadan and Piga,[19] and
lately in Leonardo v. Court of Appeals,[20] where we held that there is an employer-employee
relationship when the person for whom the services are performed reserves the right to control not
only the end achieved but also the manner and means used to achieve that end.
In Sevilla v. Court of Appeals,[21] we observed the need to consider the existing economic
conditions prevailing between the parties, in addition to the standard of right-of-control like the
inclusion of the employee in the payrolls, to give a clearer picture in determining the existence of an
employer-employee relationship based on an analysis of the totality of economic circumstances of
the worker.
Thus, the determination of the relationship between employer and employee depends upon
the circumstances of the whole economic activity,[22] such as: (1) the extent to which the services
performed are an integral part of the employers business; (2) the extent of the workers investment in
equipment and facilities; (3) the nature and degree of control exercised by the employer; (4) the
workers opportunity for profit and loss; (5) the amount of initiative, skill, judgment or foresight
required for the success of the claimed independent enterprise; (6) the permanency and duration of
the relationship between the worker and the employer; and (7) the degree of dependency of the
worker upon the employer for his continued employment in that line of business.[23]
The proper standard of economic dependence is whether the worker is dependent on the
alleged employer for his continued employment in that line of business.[24] In the United States, the
touchstone of economic reality in analyzing possible employment relationships for purposes of the
Federal Labor Standards Act is dependency.[25] By analogy, the benchmark of economic reality in
analyzing possible employment relationships for purposes of the Labor Code ought to be the
economic dependence of the worker on his employer.
By applying the control test, there is no doubt that petitioner is an employee of Kasei
Corporation because she was under the direct control and supervision of Seiji Kamura, the
corporations Technical Consultant. She reported for work regularly and served in various capacities
as Accountant, Liaison Officer, Technical Consultant, Acting Manager and Corporate Secretary, with
substantially the same job functions, that is, rendering accounting and tax services to the company
and performing functions necessary and desirable for the proper operation of the corporation such
as securing business permits and other licenses over an indefinite period of engagement.
Under the broader economic reality test, the petitioner can likewise be said to be an employee
of respondent corporation because she had served the company for six years before her dismissal,
receiving check vouchers indicating her salaries/wages, benefits, 13th month pay, bonuses and
allowances, as well as deductions and Social Security contributions from August 1, 1999 to December
18, 2000.[26] When petitioner was designated General Manager, respondent corporation made a
report to the SSS signed by Irene Ballesteros. Petitioners membership in the SSS as manifested by a
copy of the SSS specimen signature card which was signed by the President of Kasei Corporation and
the inclusion of her name in the on-line inquiry system of the SSS evinces the existence of an
employer-employee relationship between petitioner and respondent corporation.[27]
It is therefore apparent that petitioner is economically dependent on respondent corporation
for her continued employment in the latters line of business.
In Domasig v. National Labor Relations Commission,[28] we held that in a business
establishment, an identification card is provided not only as a security measure but mainly to identify
the holder thereof as a bona fide employee of the firm that issues it. Together with the cash vouchers
covering petitioners salaries for the months stated therein, these matters constitute substantial
evidence adequate to support a conclusion that petitioner was an employee of private respondent.
We likewise ruled in Flores v. Nuestro[29] that a corporation who registers its workers with the
SSS is proof that the latter were the formers employees. The coverage of Social Security Law is
predicated on the existence of an employer-employee relationship.
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established
that petitioner never acted as Corporate Secretary and that her designation as such was only for
convenience. The actual nature of petitioners job was as Kamuras direct assistant with the duty of
acting as Liaison Officer in representing the company to secure construction permits, license to
operate and other requirements imposed by government agencies. Petitioner was never entrusted
with corporate documents of the company, nor required to attend the meeting of the
corporation. She was never privy to the preparation of any document for the corporation, although
once in a while she was required to sign prepared documentation for the company.[30] WE CONCUR:

The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001
affidavit has been allegedly withdrawn by Kamura himself from the records of the case.[31] Regardless
of this fact, we are convinced that the allegations in the first affidavit are sufficient to establish that ARTEMIO V. PANGANIBAN
petitioner is an employee of Kasei Corporation. Chief Justice
Chairperson
Granting arguendo, that the second affidavit validly repudiated the first one, courts do not
generally look with favor on any retraction or recanted testimony, for it could have been secured by
considerations other than to tell the truth and would make solemn trials a mockery and place the MA. ALICIA AUSTRIA-MARTINEZ ROMEO J. CALLEJO, SR.
investigation of the truth at the mercy of unscrupulous witnesses.[32] A recantation does not Associate Justice Associate Justice
necessarily cancel an earlier declaration, but like any other testimony the same is subject to the test
of credibility and should be received with caution.[33]

Based on the foregoing, there can be no other conclusion that petitioner is an employee of MINITA V. CHICO-NAZARIO
respondent Kasei Corporation. She was selected and engaged by the company for compensation, and Associate Justice
is economically dependent upon respondent for her continued employment in that line of
business. Her main job function involved accounting and tax services rendered to respondent
corporation on a regular basis over an indefinite period of engagement. Respondent corporation hired
and engaged petitioner for compensation, with the power to dismiss her for cause. More importantly,
respondent corporation had the power to control petitioner with the means and methods by which CERTIFICATION
the work is to be accomplished.

The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the
month from January to September 2001. This amounts to an illegal termination of employment, above Decision were reached in consultation before the case was assigned to the writer of the opinion
where the petitioner is entitled to full backwages. Since the position of petitioner as accountant is one of the Courts Division.
of trust and confidence, and under the principle of strained relations, petitioner is further entitled to
separation pay, in lieu of reinstatement.[34]
A diminution of pay is prejudicial to the employee and amounts to constructive
dismissal. Constructive dismissal is an involuntary resignation resulting in cessation of work resorted ARTEMIO V. PANGANIBAN
to when continued employment becomes impossible, unreasonable or unlikely; when there is a Chief Justice
demotion in rank or a diminution in pay; or when a clear discrimination, insensibility or disdain by an
employer becomes unbearable to an employee.[35] In Globe Telecom, Inc. v. Florendo-Flores,[36] we
ruled that where an employee ceases to work due to a demotion of rank or a diminution of pay, an
unreasonable situation arises which creates an adverse working environment rendering it impossible
for such employee to continue working for her employer. Hence, her severance from the company
was not of her own making and therefore amounted to an illegal termination of employment.

In affording full protection to labor, this Court must ensure equal work opportunities
regardless of sex, race or creed. Even as we, in every case, attempt to carefully balance the fragile
relationship between employees and employers, we are mindful of the fact that the policy of the law
is to apply the Labor Code to a greater number of employees. This would enable employees to avail
of the benefits accorded to them by law, in line with the constitutional mandate giving maximum aid
and protection to labor, promoting their welfare and reaffirming it as a primary social economic force
in furtherance of social justice and national development.

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

SO ORDERED.

CONSUELO YNARES-SANTIAGO
Associate Justice
 FIRST DIVISION
[G.R. No. 138051. June 10, 2004]
JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING CORPORATION, respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari[1] assailing the 26 March 1999 Decision[2] of
the Court of Appeals in CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza
(SONZA). The Court of Appeals affirmed the findings of the National Labor Relations Commission
(NLRC), which affirmed the Labor Arbiters dismissal of the case for lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation (ABS-CBN) signed an Agreement
(Agreement) with the Mel and Jay Management and Development Corporation (MJMDC). ABS-CBN
was represented by its corporate officers while MJMDC was represented by SONZA, as President and
General Manager, and Carmela Tiangco (TIANGCO), as EVP and Treasurer. Referred to in the
Agreement as AGENT, MJMDC agreed to provide SONZAs services exclusively to ABS-CBN as talent for
radio and television. The Agreement listed the services SONZA would render to ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.[3]
ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first year
and P317,000 for the second and third year of the Agreement. ABS-CBN would pay the talent fees on
the 10th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III, which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994 entered into by your
goodself on behalf of ABS-CBN with our company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his
programs and career. We consider these acts of the station violative of the Agreement and the
station as in breach thereof. In this connection, we hereby serve notice of rescission of said
Agreement at our instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount
stipulated in paragraph 7 of the Agreement but reserves the right to seek recovery of the other
benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager[4]
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and
Employment, National Capital Region in Quezon City. SONZA complained that ABS-CBN did not pay
his salaries, separation pay, service incentive leave pay, 13th month pay, signing bonus, travel
allowance and amounts due under the Employees Stock Option Plan (ESOP).
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee
relationship existed between the parties. SONZA filed an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his account at
PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account with the
same bank where ABS-CBN deposited SONZAs talent fees and other payments due him under the
Agreement.
In his Order dated 2 December 1996, the Labor Arbiter[5] denied the motion to dismiss and
directed the parties to file their respective position papers. The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an employee of respondent
company until April 15, 1996 and that he was not paid certain claims, it is sufficient enough as to
confer jurisdiction over the instant case in this Office. And as to whether or not such claim would
entitle complainant to recover upon the causes of action asserted is a matter to be resolved only
after and as a result of a hearing. Thus, the respondents plea of lack of employer-employee
relationship may be pleaded only as a matter of defense. It behooves upon it the duty to prove that
there really is no employer-employee relationship between it and the complainant.
The Labor Arbiter then considered the case submitted for resolution. The parties submitted their
position papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion to Expunge
Respondents Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBNs
witnesses Soccoro Vidanes and Rolando V. Cruz. These witnesses stated in their affidavits that the
prevailing practice in the television and broadcast industry is to treat talents like SONZA as
independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of
jurisdiction.[6] The pertinent parts of the decision read as follows:
xxx
While Philippine jurisprudence has not yet, with certainty, touched on the true nature of the
contract of a talent, it stands to reason that a talent as above-described cannot be considered as an
employee by reason of the peculiar circumstances surrounding the engagement of his services.
It must be noted that complainant was engaged by respondent by reason of his peculiar skills and
talent as a TV host and a radio broadcaster. Unlike an ordinary employee, he was free to perform
the services he undertook to render in accordance with his own style. The benefits conferred to
complainant under the May 1994 Agreement are certainly very much higher than those generally
given to employees. For one, complainant Sonzas monthly talent fees amount to a
staggering P317,000. Moreover, his engagement as a talent was covered by a specific
contract. Likewise, he was not bound to render eight (8) hours of work per day as he worked only for
such number of hours as may be necessary.
The fact that per the May 1994 Agreement complainant was accorded some benefits normally given
to an employee is inconsequential. Whatever benefits complainant enjoyed arose from specific
agreement by the parties and not by reason of employer-employee relationship. As correctly put
by the respondent, All these benefits are merely talent fees and other contractual benefits and
should not be deemed as salaries, wages and/or other remuneration accorded to an employee,
notwithstanding the nomenclature appended to these benefits. Apropos to this is the rule that the
term or nomenclature given to a stipulated benefit is not controlling, but the intent of the parties to
the Agreement conferring such benefit.
The fact that complainant was made subject to respondents Rules and Regulations, likewise, does
not detract from the absence of employer-employee relationship. As held by the Supreme Court,
The line should be drawn between rules that merely serve as guidelines towards the achievement of
the mutually desired result without dictating the means or methods to be employed in attaining it,
and those that control or fix the methodology and bind or restrict the party hired to the use of such
means. The first, which aim only to promote the result, create no employer-employee relationship
unlike the second, which address both the result and the means to achieve it. (Insular Life Assurance
Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15, 1989).
x x x (Emphasis supplied)[7]
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the
Labor Arbiters decision. SONZA filed a motion for reconsideration, which the NLRC denied in its
Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals
assailing the decision and resolution of the NLRC. On 26 March 1999, the Court of Appeals rendered
a Decision dismissing the case.[8]
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRCs finding that no employer-employee relationship existed
between SONZA and ABS-CBN. Adopting the NLRCs decision, the appellate court quoted the following
findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an
agent of complainant Sonza, the principal. By all indication and as the law puts it, the act of the
agent is the act of the principal itself. This fact is made particularly true in this case, as admittedly
MJMDC is a management company devoted exclusively to managing the careers of Mr. Sonza and
his broadcast partner, Mrs. Carmela C. Tiangco. (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC,
and not between ABS-CBN and MJMDC. This is clear from the provisions of the May 1994
Agreement which specifically referred to MJMDC as the AGENT. As a matter of fact, when
complainant herein unilaterally rescinded said May 1994 Agreement, it was MJMDC which issued
the notice of rescission in behalf of Mr. Sonza, who himself signed the same in his capacity as
President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the
parties to the said agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994
Agreement, which is the latest Agreement executed between ABS-CBN and Mr. Sonza, that MJMDC
figured in the said Agreement as the agent of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-CBN such that
there exist[s] employer-employee relationship between the latter and Mr. Sonza. On the contrary,
We find it indubitable, that MJMDC is an agent, not of ABS-CBN, but of the talent/contractor Mr.
Sonza, as expressly admitted by the latter and MJMDC in the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the
regular courts, the same being in the nature of an action for alleged breach of contractual obligation
on the part of respondent-appellee. As squarely apparent from complainant-appellants Position
Paper, his claims for compensation for services, 13th month pay, signing bonus and travel allowance
against respondent-appellee are not based on the Labor Code but rather on the provisions of the
May 1994 Agreement, while his claims for proceeds under Stock Purchase Agreement are based on
the latter. A portion of the Position Paper of complainant-appellant bears perusal:
Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound itself to
pay complainant a signing bonus consisting of shares of stockswith FIVE HUNDRED THOUSAND
PESOS (P500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower than
the amount he was receiving prior to effectivity of (the) Agreement.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel
benefit amounting to at least One Hundred Fifty Thousand Pesos (P150,000.00) per year.
Thus, it is precisely because of complainant-appellants own recognition of the fact that his
contractual relations with ABS-CBN are founded on the New Civil Code, rather than the Labor Code,
that instead of merely resigning from ABS-CBN, complainant-appellant served upon the latter a
notice of rescission of Agreement with the station, per his letter dated April 1, 1996, which asserted
that instead of referring to unpaid employee benefits, he is waiving and renouncing recovery of the
remaining amount stipulated in paragraph 7 of the Agreement but reserves the right to such
recovery of the other benefits under said Agreement. (Annex 3 of the respondent ABS-CBNs Motion
to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the
Stock Purchase Agreement by respondent-appellee that complainant-appellant filed his
complaint.Complainant-appellants claims being anchored on the alleged breach of contract on the
part of respondent-appellee, the same can be resolved by reference to civil law and not to labor
law. Consequently, they are within the realm of civil law and, thus, lie with the regular courts. As
held in the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 November
1994, an action for breach of contractual obligation is intrinsically a civil dispute.[9] (Emphasis
supplied)
The Court of Appeals ruled that the existence of an employer-employee relationship between
SONZA and ABS-CBN is a factual question that is within the jurisdiction of the NLRC to resolve.[10] A
special civil action for certiorari extends only to issues of want or excess of jurisdiction of the
NLRC.[11] Such action cannot cover an inquiry into the correctness of the evaluation of the evidence
which served as basis of the NLRCs conclusion.[12] The Court of Appeals added that it could not re-
examine the parties evidence and substitute the factual findings of the NLRC with its own.[13]
The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND REFUSING TO
FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN,
DESPITE THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A
FINDING.[14]
The Courts Ruling
We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming
the NLRC ruling which upheld the Labor Arbiters dismissal of the case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and
jurisprudence define clearly the elements of an employer-employee relationship, this is the first time
that the Court will resolve the nature of the relationship between a television and radio station and
one of its talents. There is no case law stating that a radio and television program host is an employee
of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose Jay Sonza, a known
television and radio personality, and ABS-CBN, one of the biggest television and radio networks in the
country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an
employee of ABS-CBN. On the other hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction
because SONZA was an independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a question of fact. Appellate courts accord
the factual findings of the Labor Arbiter and the NLRC not only respect but also finality when
supported by substantial evidence.[15] Substantial evidence means such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion.[16] A party cannot prove the
absence of substantial evidence by simply pointing out that there is contrary evidence on record,
direct or circumstantial. The Court does not substitute its own judgment for that of the tribunal in
determining where the weight of evidence lies or what evidence is credible.[17]
SONZA maintains that all essential elements of an employer-employee relationship are present
in this case. Case law has consistently held that the elements of an employer-employee relationship
are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employers power to control the employee on the means and methods by which
the work is accomplished.[18] The last element, the so-called control test, is the most important
element.[19]
A. Selection and Engagement of Employee
ABS-CBN engaged SONZAs services to co-host its television and radio programs because of
SONZAs peculiar skills, talent and celebrity status. SONZA contends that the discretion used by
respondent in specifically selecting and hiring complainant over other broadcasters of possibly similar
experience and qualification as complainant belies respondents claim of independent contractorship.
Independent contractors often present themselves to possess unique skills, expertise or talent
to distinguish them from ordinary employees. The specific selection and hiring of SONZA, because of
his unique skills, talent and celebrity status not possessed by ordinary employees, is a circumstance
indicative, but not conclusive, of an independent contractual relationship. If SONZA did not possess
such unique skills, talent and celebrity status, ABS-CBN would not have entered into the Agreement
with SONZA but would have hired him through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his
status. We must consider all the circumstances of the relationship, with the control test being the
most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC.
SONZA asserts that this mode of fee payment shows that he was an employee of ABS-CBN. SONZA
also points out that ABS-CBN granted him benefits and privileges which he would not have enjoyed if
he were truly the subject of a valid job contract.
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the
Agreement. If SONZA were ABS-CBNs employee, there would be no need for the parties to stipulate
on benefits such as SSS, Medicare, x x x and 13th month pay[20] which the law automatically
incorporates into every employer-employee contract.[21] Whatever benefits SONZA enjoyed arose
from contract and not because of an employer-employee relationship.[22]
SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge
and out of the ordinary that they indicate more an independent contractual relationship rather than
an employer-employee relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely
because of SONZAs unique skills, talent and celebrity status not possessed by ordinary employees.
Obviously, SONZA acting alone possessed enough bargaining power to demand and receive such huge
talent fees for his services. The power to bargain talent fees way above the salary scales of ordinary
employees is a circumstance indicative, but not conclusive, of an independent contractual
relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of
SONZA as an independent contractor. The parties expressly agreed on such mode of payment. Under
the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have to turn over any talent
fee accruing under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their
relationship. SONZA failed to show that ABS-CBN could terminate his services on grounds other than
breach of contract, such as retrenchment to prevent losses as provided under labor laws.[23]
During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long as AGENT
and Jay Sonza shall faithfully and completely perform each condition of this Agreement.[24] Even if it
suffered severe business losses, ABS-CBN could not retrench SONZA because ABS-CBN remained
obligated to pay SONZAs talent fees during the life of the Agreement. This circumstance indicates an
independent contractual relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him
his talent fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement to continue paying
SONZAs talent fees during the remaining life of the Agreement even if ABS-CBN cancelled SONZAs
programs through no fault of SONZA.[25]
SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement as an
admission that he is not an employee of ABS-CBN. The Labor Arbiter stated that if it were true that
complainant was really an employee, he would merely resign, instead. SONZA did actually resign from
ABS-CBN but he also, as president of MJMDC, rescinded the Agreement.SONZAs letter clearly bears
this out.[26] However, the manner by which SONZA terminated his relationship with ABS-CBN is
immaterial. Whether SONZA rescinded the Agreement or resigned from work does not determine his
status as employee or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and television program host is an employee
or an independent contractor, we refer to foreign case law in analyzing the present case. The United
States Court of Appeals, First Circuit, recently held in Alberty-Vlez v. Corporacin De Puerto Rico Para
La Difusin Pblica (WIPR)[27] that a television program host is an independent contractor. We quote
the following findings of the U.S. court:
Several factors favor classifying Alberty as an independent contractor. First, a television actress is a
skilled position requiring talent and training not available on-the-job. x x x In this regard, Alberty
possesses a masters degree in public communications and journalism; is trained in dance, singing,
and modeling; taught with the drama department at the University of Puerto Rico; and acted in
several theater and television productions prior to her affiliation with Desde Mi Pueblo. Second,
Alberty provided the tools and instrumentalities necessary for her to perform. Specifically, she
provided, or obtained sponsors to provide, the costumes, jewelry, and other image-related supplies
and services necessary for her appearance. Alberty disputes that this factor favors independent
contractor status because WIPR provided the equipment necessary to tape the show. Albertys
argument is misplaced. The equipment necessary for Alberty to conduct her job as host of Desde Mi
Pueblo related to her appearance on the show.Others provided equipment for filming and
producing the show, but these were not the primary tools that Alberty used to perform her
particular function. If we accepted this argument, independent contractors could never work on
collaborative projects because other individuals often provide the equipment required for different
aspects of the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming Desde Mi Pueblo. Albertys
contracts with WIPR specifically provided that WIPR hired her professional services as Hostess for
the Program Desde Mi Pueblo. There is no evidence that WIPR assigned Alberty tasks in addition to
work related to these tapings. x x x[28] (Emphasis supplied)
Applying the control test to the present case, we find that SONZA is not an employee but an
independent contractor. The control test is the most important test our courts apply in distinguishing
an employee from an independent contractor.[29] This test is based on the extent of control the hirer
exercises over a worker. The greater the supervision and control the hirer exercises, the more likely
the worker is deemed an employee. The converse holds true as well the less control the hirer
exercises, the more likely the worker is considered an independent contractor.[30]
First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to co-host the
Mel & Jay programs. ABS-CBN did not assign any other work to SONZA. To perform his work, SONZA
only needed his skills and talent. How SONZA delivered his lines, appeared on television, and sounded
on radio were outside ABS-CBNs control. SONZA did not have to render eight hours of work per
day. The Agreement required SONZA to attend only rehearsals and tapings of the shows, as well as
pre- and post-production staff meetings.[31] ABS-CBN could not dictate the contents of SONZAs
script. However, the Agreement prohibited SONZA from criticizing in his shows ABS-CBN or its
interests.[32] The clear implication is that SONZA had a free hand on what to say or discuss in his shows
provided he did not attack ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual performance that produced the finished
product of SONZAs work.[33] ABS-CBN did not instruct SONZA how to perform his job.ABS-CBN merely
reserved the right to modify the program format and airtime schedule for more effective
programming.[34] ABS-CBNs sole concern was the quality of the shows and their standing in the
ratings. Clearly, ABS-CBN did not exercise control over the means and methods of performance of
SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power over the
means and methods of the performance of his work. Although ABS-CBN did have the option not to
broadcast SONZAs show, ABS-CBN was still obligated to pay SONZAs talent fees. Thus, even if ABS-
CBN was completely dissatisfied with the means and methods of SONZAs performance of his work, or
even with the quality or product of his work, ABS-CBN could not dismiss or even discipline SONZA. All
that ABS-CBN could do is not to broadcast SONZAs show but ABS-CBN must still pay his talent fees in
full.[35]
Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the obligation to
continue paying in full SONZAs talent fees, did not amount to control over the means and methods of
the performance of SONZAs work. ABS-CBN could not terminate or discipline SONZA even if the means
and methods of performance of his work - how he delivered his lines and appeared on television - did
not meet ABS-CBNs approval. This proves that ABS-CBNs control was limited only to the result of
SONZAs work, whether to broadcast the final product or not. In either case, ABS-CBN must still pay
SONZAs talent fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al.,[36] the United States Circuit Court of Appeals ruled that
vaudeville performers were independent contractors although the management reserved the right to
delete objectionable features in their shows. Since the management did not have control over the
manner of performance of the skills of the artists, it could only control the result of the work by
deleting objectionable features.[37]
SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment
and crew. No doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the Mel
& Jay programs. However, the equipment, crew and airtime are not the tools and instrumentalities
SONZA needed to perform his job. What SONZA principally needed were his talent or skills and the
costumes necessary for his appearance. [38] Even though ABS-CBN provided SONZA with the place of
work and the necessary equipment, SONZA was still an independent contractor since ABS-CBN did not
supervise and control his work. ABS-CBNs sole concern was for SONZA to display his talent during the
airing of the programs.[39]
A radio broadcast specialist who works under minimal supervision is an independent
contractor.[40] SONZAs work as television and radio program host required special skills and talent,
which SONZA admittedly possesses. The records do not show that ABS-CBN exercised any supervision
and control over how SONZA utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN subjected him
to its rules and standards of performance. SONZA claims that this indicates ABS-CBNs control not only
[over] his manner of work but also the quality of his work.
The Agreement stipulates that SONZA shall abide with the rules and standards of
performance covering talents[41] of ABS-CBN. The Agreement does not require SONZA to comply with
the rules and standards of performance prescribed for employees of ABS-CBN. The code of conduct
imposed on SONZA under the Agreement refers to the Television and Radio Code of the Kapisanan ng
mga Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN) as its Code
of Ethics.[42] The KBP code applies to broadcasters, not to employees of radio and television
stations. Broadcasters are not necessarily employees of radio and television stations. Clearly, the rules
and standards of performance referred to in the Agreement are those applicable to talents and not
to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that the latter
is an employee of the former.[43] In this case, SONZA failed to show that these rules controlled his
performance. We find that these general rules are merely guidelines towards the achievement of the
mutually desired result, which are top-rating television and radio programs that comply with
standards of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct of the other
party in relation to the services being rendered may be accorded the effect of establishing an
employer-employee relationship. The facts of this case fall squarely with the case of Insular Life
Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be employed
in attaining it, and those that control or fix the methodology and bind or restrict the party hired to
the use of such means. The first, which aim only to promote the result, create no employer-
employee relationship unlike the second, which address both the result and the means used to
achieve it.[44]
The Vaughan case also held that one could still be an independent contractor although the hirer
reserved certain supervision to insure the attainment of the desired result. The hirer, however, must
not deprive the one hired from performing his services according to his own initiative.[45]
Lastly, SONZA insists that the exclusivity clause in the Agreement is the most extreme form of
control which ABS-CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an
employee of ABS-CBN. Even an independent contractor can validly provide his services exclusively to
the hiring party. In the broadcast industry, exclusivity is not necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in the entertainment
industry.[46] This practice is not designed to control the means and methods of work of the talent, but
simply to protect the investment of the broadcast station. The broadcast station normally spends
substantial amounts of money, time and effort in building up its talents as well as the programs they
appear in and thus expects that said talents remain exclusive with the station for a commensurate
period of time.[47] Normally, a much higher fee is paid to talents who agree to work exclusively for a
particular radio or television station. In short, the huge talent fees partially compensates for
exclusivity, as in the present case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which contracted out his
services to ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of
ABS-CBN. SONZA insists that MJMDC is a labor-only contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the labor-only contractor; (2) the
employee who is ostensibly under the employ of the labor-only contractor; and (3) the principal who
is deemed the real employer. Under this scheme, the labor-only contractor is the agent of the
principal. The law makes the principal responsible to the employees of the labor-only contractor as if
the principal itself directly hired or employed the employees.[48] These circumstances are not present
in this case.
There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-
CBN. MJMDC merely acted as SONZAs agent. The Agreement expressly states that MJMDC acted as
the AGENT of SONZA. The records do not show that MJMDC acted as ABS-CBNs agent. MJMDC, which
stands for Mel and Jay Management and Development Corporation, is a corporation organized and
owned by SONZA and TIANGCO. The President and General Manager of MJMDC is SONZA himself. It
is absurd to hold that MJMDC, which is owned, controlled, headed and managed by SONZA, acted as
agent of ABS-CBN in entering into the Agreement with SONZA, who himself is represented by
MJMDC. That would make MJMDC the agent of both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to managing the
careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not engaged in any other business,
not even job contracting. MJMDC does not have any other function apart from acting as agent of
SONZA or TIANGCO to promote their careers in the broadcast and television industry.[49]
Policy Instruction No. 40
 SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8 individual, possessed with special skills, expertise and talent, of his right to contract as an independent
January 1979 finally settled the status of workers in the broadcast industry. Under this policy, the contractor. An individual like an artist or talent has a right to render his services without any one
types of employees in the broadcast industry are the station and program employees. controlling the means and methods by which he performs his art or craft. This Court will not interpret
the right of labor to security of tenure to compel artists and talents to render their services only as
Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect
employees. If radio and television program hosts can render their services only as employees, the
of law. There is no legal presumption that Policy Instruction No. 40 determines SONZAs status. A mere
station owners and managers can dictate to the radio and television hosts what they say in their
executive issuance cannot exclude independent contractors from the class of service providers to the
shows. This is not conducive to freedom of the press.
broadcast industry. The classification of workers in the broadcast industry into only two groups under
Policy Instruction No. 40 is not binding on this Court, especially when the classification has no basis
either in law or in fact.
Different Tax Treatment of Talents and Broadcasters

Affidavits of ABS-CBNs Witnesses The National Internal Revenue Code (NIRC)[54] in relation to Republic Act No. 7716,[55] as
amended by Republic Act No. 8241,[56] treats talents, television and radio broadcasters differently.
Under the NIRC, these professionals are subject to the 10% value-added tax (VAT) on services they
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando
render. Exempted from the VAT are those under an employer-employee relationship.[57] This different
Cruz without giving his counsel the opportunity to cross-examine these witnesses.SONZA brands these
tax treatment accorded to talents and broadcasters bolters our conclusion that they are independent
witnesses as incompetent to attest on the prevailing practice in the radio and television
contractors, provided all the basic elements of a contractual relationship are present as in this case.
industry. SONZA views the affidavits of these witnesses as misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was never prevented from denying
or refuting the allegations in the affidavits. The Labor Arbiter has the discretion whether to conduct a Nature of SONZAs Claims
formal (trial-type) hearing after the submission of the position papers of the parties, thus:

Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims and causes of action raised in the
complaint excluding those that may have been amicably settled, and shall be accompanied by all
supporting documents including the affidavits of their respective witnesses which shall take the
place of the latters direct testimony. x x x
Section 4. Determination of Necessity of Hearing. Immediately after the submission of the parties of
their position papers/memorandum, the Labor Arbiter shall motu propio determine whether there is
need for a formal trial or hearing. At this stage, he may, at his discretion and for the purpose of
making such determination, ask clarificatory questions to further elicit facts or information,
including but not limited to the subpoena of relevant documentary evidence, if any from any party
or witness.[50]
SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service
incentive leave, signing bonus, travel allowance, and amounts due under the Employee Stock Option
Plan. We agree with the findings of the Labor Arbiter and the Court of Appeals that SONZAs claims
are all based on the May 1994 Agreement and stock option plan, and not on the Labor Code. Clearly,
the present case does not call for an application of the Labor Code provisions but an interpretation
and implementation of the May 1994 Agreement. In effect, SONZAs cause of action is for breach of
contract which is intrinsically a civil dispute cognizable by the regular courts.[58]
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26
March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.

The Labor Arbiter can decide a case based solely on the position papers and the supporting
documents without a formal trial.[51] The holding of a formal hearing or trial is something that the
parties cannot demand as a matter of right.[52] If the Labor Arbiter is confident that he can rely on the
documents before him, he cannot be faulted for not conducting a formal trial, unless under the
particular circumstances of the case, the documents alone are insufficient. The proceedings before a
Labor Arbiter are non-litigious in nature. Subject to the requirements of due process, the technicalities
of law and the rules obtaining in the courts of law do not strictly apply in proceedings before a Labor
Arbiter.

Talents as Independent Contractors

ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment
industries to treat talents like SONZA as independent contractors. SONZA argues that if such practice
exists, it is void for violating the right of labor to security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution[53] arises only if there is
an employer-employee relationship under labor laws. Not every performance of services for a fee
creates an employer-employee relationship. To hold that every person who renders services to
another for a fee is an employee - to give meaning to the security of tenure clause - will lead to absurd
results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their services as
independent contractors. The right to life and livelihood guarantees this freedom to contract as
independent contractors. The right of labor to security of tenure cannot operate to deprive an
 to Ong and convince him to spare her father from trouble but he refused to accede; that thereafter,
Republic of the Philippines Javier was terminated from his employment without notice; and that he was neither given the
Supreme Court opportunity to refute the cause/s of his dismissal from work.
Manila

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

For its part, Fly Ace averred that it was engaged in the business of importation and sales of
groceries. Sometime in December 2007, Javier was contracted by its employee, Mr. Ong, as extra
helper on a pakyaw basis at an agreed rate of ₱300.00 per trip, which was later increased to ₱325.00
in January 2008. Mr. Ong contracted Javier roughly 5 to 6 times only in a month whenever the vehicle
BITOY JAVIER G.R. No. 192558 of its contracted hauler, Milmar Hauling Services, was not available. On April 30, 2008, Fly Ace no
(DANILO P. JAVIER), longer needed the services of Javier. Denying that he was their employee, Fly Ace insisted that there
Petitioner, Present: was no illegal dismissal.[8] Fly Ace submitted a copy of its agreement with Milmar Hauling Services and
copies of acknowledgment receipts evidencing payment to Javier for his contracted services bearing
CARPIO,* J., the words, daily manpower (pakyaw/piece rate pay) and the latters signatures/initials.
PERALTA,** Acting Chairperson,
ABAD,
- versus - PEREZ,*** and Ruling of the Labor Arbiter
MENDOZA, JJ.

On November 28, 2008, the LA dismissed the complaint for lack of merit on the ground that
Javier failed to present proof that he was a regular employee of Fly Ace. He wrote:
FLY ACE CORPORATION/ Promulgated:
FLORDELYN CASTILLO,
Respondents. February 15, 2012

Complainant has no employee ID showing his employment with the

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

MENDOZA, J.:
This is a petition under Rule 45 of the Rules of Civil Procedure assailing the March 18, 2010
Decision[1] of the Court of Appeals (CA) and its June 7, 2010 Resolution,[2]in CA-G.R. SP No. 109975,
which reversed the May 28, 2009 Decision[3] of the National Labor Relations Commission (NLRC) in the
case entitled Bitoy Javier v. Fly Ace/Flordelyn Castillo,[4] holding that petitioner Bitoy
Javier (Javier) was illegally dismissed from employment and ordering Fly Ace Corporation (Fly Ace) to
pay backwages and separation pay in lieu of reinstatement.
Antecedent Facts
Ruling of the NLRC
Respondent Fly Ace is not engaged in trucking business but in the importation
and sales of groceries. Since there is a regular hauler to deliver its products, we give
credence to Respondents claim that complainant was contracted on pakiao basis.
As to the claim for underpayment of salaries, the payroll presented by the
Respondents showing salaries of workers on pakiao basis has evidentiary weight
because although the signature of the complainant appearing thereon are not
uniform, they appeared to be his true signature.
xxxx
Hence, as complainant received the rightful salary as shown by the above
described payrolls, Respondents are not liable for salary differentials. [9]

On May 23, 2008, Javier filed a complaint before the NLRC for underpayment of salaries and
other labor standard benefits. He alleged that he was an employee of Fly Ace since September 2007,
On appeal with the NLRC, Javier was favored. It ruled that the LA skirted the argument of
performing various tasks at the respondents warehouse such as cleaning and arranging the canned
Javier and immediately concluded that he was not a regular employee simply because he failed to
items before their delivery to certain locations, except in instances when he would be ordered to
present proof. It was of the view that a pakyaw-basis arrangement did not preclude the existence of
accompany the companys delivery vehicles, as pahinante; that he reported for work from Monday to
employer-employee relationship. Payment by result x x x is a method of compensation and does not
Saturday from 7:00 oclock in the morning to 5:00 oclock in the afternoon; that during his employment,
define the essence of the relation. It is a mere method of computing compensation, not a basis for
he was not issued an identification card and payslips by the company; that on May 6, 2008, he
determining the existence or absence of an employer-employee relationship.[10] The NLRC further
reported for work but he was no longer allowed to enter the company premises by the security guard
averred that it did not follow that a worker was a job contractor and not an employee, just because
upon the instruction of Ruben Ong (Mr. Ong), his superior;[5] that after several minutes of begging to
the work he was doing was not directly related to the employers trade or business or the work may
the guard to allow him to enter, he saw Ong whom he approached and asked why he was being barred
be considered as extra helper as in this case; and that the relationship of an employer and an
from entering the premises; that Ong replied by saying, Tanungin mo anak mo; [6] that he then went
employee was determined by law and the same would prevail whatever the parties may call it. In this
home and discussed the matter with his family; that he discovered that Ong had been courting his
case, the NLRC held that substantial evidence was sufficient basis for judgment on the existence of
daughter Annalyn after the two met at a fiesta celebration in Malabon City; that Annalyn tried to talk
the employer-employee relationship. Javier was a regular employee of Fly Ace because there was
reasonable connection between the particular activity performed by the employee (as a pahinante) in
relation to the usual business or trade of the employer (importation, sales and delivery of groceries).
He may not be considered as an independent contractor because he could not exercise any judgment
in the delivery of company products. He was only engaged as a helper.
Finding Javier to be a regular employee, the NLRC ruled that he was entitled to a security of
tenure. For failing to present proof of a valid cause for his termination, Fly Ace was found to be liable
for illegal dismissal of Javier who was likewise entitled to backwages and separation pay in lieu of
reinstatement. The NLRC thus ordered:
WHEREFORE, premises considered, complainants appeal is partially
GRANTED. The assailed Decision of the labor arbiter is VACATED and a new one is
hereby entered holding respondent FLY ACE CORPORATION guilty of illegal dismissal
and non-payment of 13th month pay. Consequently, it is hereby ordered to pay
complainant DANILO Bitoy JAVIER the following:
1. Backwages -₱45,770.83
2. Separation pay, in lieu of reinstatement - 8,450.00
3. Unpaid 13th month pay (proportionate) - 5,633.33
TOTAL -₱59,854.16
All other claims are dismissed for lack of merit.
SO ORDERED.[11]
Ruling of the Court of Appeals
On March 18, 2010, the CA annulled the NLRC findings that Javier was indeed a former
employee of Fly Ace and reinstated the dismissal of Javiers complaint as ordered by the LA. The CA
exercised its authority to make its own factual determination anent the issue of the existence of an
employer-employee relationship between the parties.According to the CA:
xxx
In an illegal dismissal case the onus probandi rests on the employer to prove
that its dismissal was for a valid cause. However, before a case for illegal dismissal
can prosper, an employer-employee relationship must first be established. x x x it is
incumbent upon private respondent to prove the employee-employer relationship
by substantial evidence.
xxx
It is incumbent upon private respondent to prove, by substantial evidence,
that he is an employee of petitioners, but he failed to discharge his burden. The non-
issuance of a company-issued identification card to private respondent supports
petitioners contention that private respondent was not its employee.[12]
The CA likewise added that Javiers failure to present salary vouchers, payslips, or other pieces of
evidence to bolster his contention, pointed to the inescapable conclusion that he was not an
employee of Fly Ace. Further, it found that Javiers work was not necessary and desirable to the
business or trade of the company, as it was only when there were scheduled deliveries, which a
regular hauling service could not deliver, that Fly Ace would contract the services of Javier as an extra
helper. Lastly, the CA declared that the facts alleged by Javier did not pass the control test.
He contracted work outside the company premises; he was not required to observe definite hours of
work; he was not required to report daily; and he was free to accept other work elsewhere as there
was no exclusivity of his contracted service to the company, the same being co-terminous with the
trip only.[13] Since no substantial evidence was presented to establish an employer-employee
relationship, the case for illegal dismissal could not prosper.
The petitioners moved for reconsideration, but to no avail.
Hence, this appeal anchored on the following grounds:
I.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE
PETITIONER WAS NOT A REGULAR EMPLOYEE OF FLY ACE.
II.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE
PETITIONER IS NOT ENTITLED TO HIS MONETARY CLAIMS.[14]
The petitioner contends that other than its bare allegations and self-serving affidavits of the
other employees, Fly Ace has nothing to substantiate its claim that Javier was engaged on
a pakyaw basis. Assuming that Javier was indeed hired on a pakyaw basis, it does not preclude his
regular employment with the company. Even the acknowledgment receipts bearing his signature and
the confirming receipt of his salaries will not show the true nature of his employment as they do not
reflect the necessary details of the commissioned task. Besides, Javiers tasks as pahinante are related,
necessary and desirable to the line of business by Fly Ace which is engaged in the importation and sale
of grocery items. On days when there were no scheduled deliveries, he worked in petitioners
warehouse, arranging and cleaning the stored cans for delivery to clients.[15] More importantly, Javier
was subject to the control and supervision of the company, as he was made to report to the office
from Monday to Saturday, from 7:00 oclock in the morning until 5:00 oclock in the afternoon. The list
of deliverable goods, together with the corresponding clients and their respective purchases and
addresses, would necessarily have been prepared by Fly Ace. Clearly, he was subjected to compliance
with company rules and regulations as regards working hours, delivery schedule and output, and his
other duties in the warehouse.[16]
The petitioner chiefly relied on Chavez v. NLRC,[17] where the Court ruled that payment to a
worker on a per trip basis is not significant because this is merely a method of computing
compensation and not a basis for determining the existence of employer-employee relationship.
Javier likewise invokes the rule that, in controversies between a laborer and his master, x x x doubts
reasonably arising from the evidence should be resolved in the formers favour. The policy is reflected
is no less than the Constitution, Labor Code and Civil Code.[18]
Claiming to be an employee of Fly Ace, petitioner asserts that he was illegally dismissed by
the latters failure to observe substantive and procedural due process. Since his dismissal was not
based on any of the causes recognized by law, and was implemented without notice, Javier is entitled
to separation pay and backwages.
In its Comment,[19] Fly Ace insists that there was no substantial evidence to prove employer-
employee relationship. Having a service contract with Milmar Hauling Services for the purpose of
transporting and delivering company products to customers, Fly Ace contracted Javier as an extra
helper or pahinante on a mere per trip basis. Javier, who was actually a loiterer in the area, only
accompanied and assisted the company driver when Milmar could not deliver or when the exigency
of extra deliveries arises for roughly five to six times a month. Before making a delivery, Fly Ace would
turn over to the driver and Javier the delivery vehicle with its loaded company products. With the
vehicle and products in their custody, the driver and Javier would leave the company premises using
their own means, method, best judgment and discretion on how to deliver, time to deliver, where and
[when] to start, and manner of delivering the products.[20]
Fly Ace dismisses Javiers claims of employment as baseless assertions. Aside from his bare
allegations, he presented nothing to substantiate his status as an employee. It is a basic rule of
evidence that each party must prove his affirmative allegation. If he claims a right granted by law, he
must prove his claim by competent evidence, relying on the strength of his own evidence and not
upon the weakness of his opponent.[21] Invoking the case of Lopez v. Bodega City,[22] Fly Ace insists
that in an illegal dismissal case, the burden of proof is upon the complainant who claims to be an
employee. It is essential that an employer-employee relationship be proved by substantial evidence.
Thus, it cites:
In an illegal dismissal case, the onus probandi rests on the employer to prove
that its dismissal of an employee was for a valid cause. However, before a case for
illegal dismissal can prosper, an employer-employee relationship must first be
established.
Fly Ace points out that Javier merely offers factual assertions that he was an employee of Fly
Ace, which are unfortunately not supported by proof, documentary or otherwise.[23] Javier simply
assumed that he was an employee of Fly Ace, absent any competent or relevant evidence to support
it. He performed his contracted work outside the premises of the respondent; he was not even
required to report to work at regular hours; he was not made to register his time in and time out every
time he was contracted to work; he was not subjected to any disciplinary sanction imposed to other
employees for company violations; he was not issued a company I.D.; he was not accorded the same
benefits given to other employees; he was not registered with the Social Security System (SSS) as
petitioners employee; and, he was free to leave, accept and engage in other means of livelihood as
there is no exclusivity of his contracted services with the petitioner, his services being co-terminus
with the trip only. All these lead to the conclusion that petitioner is not an employee of the
respondents.[24]
Moreover, Fly Ace claims that it had no right to control the result, means, manner and
methods by which Javier would perform his work or by which the same is to be accomplished.[25] In
other words, Javier and the company driver were given a free hand as to how they would perform
their contracted services and neither were they subjected to definite hours or condition of work.
Fly Ace likewise claims that Javiers function as a pahinante was not directly related or
necessary to its principal business of importation and sales of groceries. Even without Javier, the
business could operate its usual course as it did not involve the business of inland transportation.
Lastly, the acknowledgment receipts bearing Javiers signature and words pakiao rate, referring to his
earned salaries on a per trip basis, have evidentiary weight that the LA correctly considered in arriving
at the conclusion that Javier was not an employee of the company.
The Court affirms the assailed CA decision.
It must be noted that the issue of Javiers alleged illegal dismissal is anchored on the existence
of an employer-employee relationship between him and Fly Ace. This is essentially a question of fact.
Generally, the Court does not review errors that raise factual questions. However, when there is
conflict among the factual findings of the antecedent deciding bodies like the LA, the NLRC and the
CA, it is proper, in the exercise of Our equity jurisdiction, to review and re-evaluate the factual issues
and to look into the records of the case and re-examine the questioned findings.[26] In dealing with
factual issues in labor cases, substantial evidence that amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion is sufficient.[27]
As the records bear out, the LA and the CA found Javiers claim of employment with Fly Ace as
wanting and deficient. The Court is constrained to agree. Although Section 10, Rule VII of the New
Rules of Procedure of the NLRC[28] allows a relaxation of the rules of procedure and evidence in labor
cases, this rule of liberality does not mean a complete dispensation of proof. Labor officials are
enjoined to use reasonable means to ascertain the facts speedily and objectively with little regard to
technicalities or formalities but nowhere in the rules are they provided a license to completely
discount evidence, or the lack of it. The quantum of proof required, however, must still be satisfied.
Hence, when confronted with conflicting versions on factual matters, it is for them in the exercise of
discretion to determine which party deserves credence on the basis of evidence received, subject only
to the requirement that their decision must be supported by substantial evidence.[29] Accordingly, the
petitioner needs to show by substantial evidence that he was indeed an employee of the company
against which he claims illegal dismissal.
Expectedly, opposing parties would stand poles apart and proffer allegations as different as
chalk and cheese. It is, therefore, incumbent upon the Court to determine whether the party on whom
the burden to prove lies was able to hurdle the same. No particular form of evidence is required to
prove the existence of such employer-employee relationship. Any competent and relevant evidence
to prove the relationship may be admitted. Hence, while no particular form of evidence is required, a
finding that such relationship exists must still rest on some substantial evidence. Moreover, the
substantiality of the evidence depends on its quantitative as well as its qualitative aspects.[30]Although
substantial evidence is not a function of quantity but rather of quality, the x x x circumstances of the
instant case demand that something more should have been proffered. Had there been other proofs
of employment, such as x x x inclusion in petitioners payroll, or a clear exercise of control, the Court
would have affirmed the finding of employer-employee relationship.[31]
In sum, the rule of thumb remains: the onus probandi falls on petitioner to establish or
substantiate such claim by the requisite quantum of evidence.[32] Whoever claims entitlement to the
benefits provided by law should establish his or her right thereto x x x.[33] Sadly, Javier failed to adduce
substantial evidence as basis for the grant of relief.
In this case, the LA and the CA both concluded that Javier failed to establish his employment
with Fly Ace. By way of evidence on this point, all that Javier presented were his self-serving
statements purportedly showing his activities as an employee of Fly Ace. Clearly, Javier failed to pass
the substantiality requirement to support his claim. Hence, the Court sees no reason to depart from
the findings of the CA.
While Javier remains firm in his position that as an employed stevedore of Fly Ace, he was
made to work in the company premises during weekdays arranging and cleaning grocery items for
delivery to clients, no other proof was submitted to fortify his claim. The lone affidavit executed by
one Bengie Valenzuela was unsuccessful in strengthening Javiers cause. In said document, all
Valenzuela attested to was that he would frequently see Javier at the workplace where the latter was
also hired as stevedore.[34]Certainly, in gauging the evidence presented by Javier, the Court cannot
ignore the inescapable conclusion that his mere presence at the workplace falls short in proving
employment therein. The supporting affidavit could have, to an extent, bolstered Javiers claim of
being tasked to clean grocery items when there were no scheduled delivery trips, but no information
was offered in this subject simply because the witness had no personal knowledge of Javiers
employment status in the company. Verily, the Court cannot accept Javiers statements, hook, line and
sinker.
The Court is of the considerable view that on Javier lies the burden to pass the well-settled
tests to determine the existence of an employer-employee relationship, viz: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power
to control the employees conduct. Of these elements, the most important criterion is whether the
employer controls or has reserved the right to control the employee not only as to the result of the
work but also as to the means and methods by which the result is to be accomplished.[35]
In this case, Javier was not able to persuade the Court that the above elements exist in his
case. He could not submit competent proof that Fly Ace engaged his services as a regular employee;
that Fly Ace paid his wages as an employee, or that Fly Ace could dictate what his conduct should be
while at work. In other words, Javiers allegations did not establish that his relationship with Fly Ace
had the attributes of an employer-employee relationship on the basis of the above-mentioned four-
fold test. Worse, Javier was not able to refute Fly Aces assertion that it had an agreement with a
hauling company to undertake the delivery of its goods. It was also baffling to realize that Javier did
not dispute Fly Aces denial of his services exclusivity to the company. In short, all that Javier laid down
were bare allegations without corroborative proof.
Fly Ace does not dispute having contracted Javier and paid him on a per trip rate as a
stevedore, albeit on a pakyaw basis. The Court cannot fail to note that Fly Ace presented documentary
proof that Javier was indeed paid on a pakyaw basis per the acknowledgment receipts admitted as
competent evidence by the LA. Unfortunately for Javier, his mere denial of the signatures affixed
therein cannot automatically sway us to ignore the documents because forgery cannot be presumed
and must be proved by clear, positive and convincing evidence and the burden of proof lies on the
party alleging forgery.[36]

Considering the above findings, the Court does not see the necessity to resolve the second
issue presented.

One final note. The Courts decision does not contradict the settled rule that payment by the
piece is just a method of compensation and does not define the essence of the relation.[37] Payment
on a piece-rate basis does not negate regular employment. The term wage is broadly defined in Article
97 of the Labor Code as remuneration or earnings, capable of being expressed in terms of money
whether fixed or ascertained on a time, task, piece or commission basis. Payment by the piece is just
a method of compensation and does not define the essence of the relations. Nor does the fact that
the petitioner is not covered by the SSS affect the employer-employee relationship. However, in
determining whether the relationship is that of employer and employee or one of an independent
contractor, each case must be determined on its own facts and all the features of the relationship are
to be considered.[38] Unfortunately for Javier, the attendant facts and circumstances of the instant
case do not provide the Court with sufficient reason to uphold his claimed status as employee of Fly
Ace.

While the Constitution is committed to the policy of social justice and the protection of the
working class, it should not be supposed that every labor dispute will be automatically decided in
favor of labor. Management also has its rights which are entitled to respect and enforcement in the
interest of simple fair play. Out of its concern for the less privileged in life, the Court has inclined,
more often than not, toward the worker and upheld his cause in his conflicts with the employer. Such
favoritism, however, has not blinded the Court to the rule that justice is in every case for the
deserving, to be dispensed in the light of the established facts and the applicable law and doctrine.[39]

WHEREFORE, the petition is DENIED. The March 18, 2010 Decision of the Court of Appeals
and its June 7, 2010 Resolution, in CA-G.R. SP No. 109975, are hereby AFFIRMED.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 87700 June 13, 1990
SAN MIGUEL CORPORATION EMPLOYEES UNION-PTGWO, DANIEL S.L. BORBON II, HERMINIA
REYES, MARCELA PURIFICACION, ET AL., petitioners,
vs.
HON. JESUS G. BERSAMIRA, IN HIS CAPACITY AS PRESIDING JUDGE OF BRANCH 166, RTC, PASIG,
and SAN MIGUEL CORPORATION, respondents.
Romeo C. Lagman for petitioners.
Jardeleza, Sobrevinas, Diaz, Mayudini & Bodegon for respondents.
MELENCIO-HERRERA, J.:
Respondent Judge of the Regional Trial Court of Pasig, Branch 166, is taken to task by petitioners in
this special civil action for certiorari and Prohibition for having issued the challenged Writ of
Preliminary Injunction on 29 March 1989 in Civil Case No. 57055 of his Court entitled "San Miguel
Corporation vs. SMCEU-PTGWO, et als."
Petitioners' plea is that said Writ was issued without or in excess of jurisdiction and with grave abuse
of discretion, a labor dispute being involved. Private respondent San Miguel Corporation (SanMig.
for short), for its part, defends the Writ on the ground of absence of any employer-employee
relationship between it and the contractual workers employed by the companies Lipercon Services,
Inc. (Lipercon) and D'Rite Service Enterprises (D'Rite), besides the fact that the Union is bereft of
personality to represent said workers for purposes of collective bargaining. The Solicitor General
agrees with the position of SanMig.
The antecedents of the controversy reveal that:
Sometime in 1983 and 1984, SanMig entered into contracts for merchandising services with
Lipercon and D'Rite (Annexes K and I, SanMig's Comment, respectively). These companies are
independent contractors duly licensed by the Department of Labor and Employment (DOLE). SanMig
entered into those contracts to maintain its competitive position and in keeping with the
imperatives of efficiency, business expansion and diversity of its operation. In said contracts, it was
expressly understood and agreed that the workers employed by the contractors were to be paid by
the latter and that none of them were to be deemed employees or agents of SanMig. There was to
be no employer-employee relation between the contractors and/or its workers, on the one hand,
and SanMig on the other.
Petitioner San Miguel Corporation Employees Union-PTWGO (the Union, for brevity) is the duly
authorized representative of the monthly paid rank-and-file employees of SanMig with whom the
latter executed a Collective Bargaining Agreement (CBA) effective 1 July 1986 to 30 June 1989
(Annex A, SanMig's Comment). Section 1 of their CBA specifically provides that "temporary,
probationary, or contract employees and workers are excluded from the bargaining unit and,
therefore, outside the scope of this Agreement."
In a letter, dated 20 November 1988 (Annex C, Petition), the Union advised SanMig that some
Lipercon and D'Rite workers had signed up for union membership and sought the regularization of
their employment with SMC. The Union alleged that this group of employees, while appearing to be
contractual workers supposedly independent contractors, have been continuously working for
SanMig for a period ranging from six (6) months to fifteen (15) years and that their work is neither
casual nor seasonal as they are performing work or activities necessary or desirable in the usual
business or trade of SanMig. Thus, it was contended that there exists a "labor-only" contracting
situation. It was then demanded that the employment status of these workers be regularized.
On 12 January 1989 on the ground that it had failed to receive any favorable response from SanMig,
the Union filed a notice of strike for unfair labor practice, CBA violations, and union busting (Annex
D, Petition).
On 30 January 1989, the Union again filed a second notice of strike for unfair labor practice (Annex
F, Petition).
As in the first notice of strike. Conciliatory meetings were held on the second notice. Subsequently,
the two (2) notices of strike were consolidated and several conciliation conferences were held to
settle the dispute before the National Conciliation and Mediation Board (NCMB) of DOLE (Annex G,
Petition).
Beginning 14 February 1989 until 2 March 1989, series of pickets were staged by Lipercon and D'Rite
workers in various SMC plants and offices.
On 6 March 1989, SMC filed a verified Complaint for Injunction and Damages before respondent
Court to enjoin the Union from:
a. representing and/or acting for and in behalf of the employees of LIPERCON
and/or D'RITE for the purposes of collective bargaining;
b. calling for and holding a strike vote, to compel plaintiff to hire the employees or
workers of LIPERCON and D'RITE;
c. inciting, instigating and/or inducing the employees or workers of LIPERCON and
D'RITE to demonstrate and/or picket at the plants and offices of plaintiff within the
bargaining unit referred to in the CBA,...;
d. staging a strike to compel plaintiff to hire the employees or workers of LIPERCON
and D'RITE;
e. using the employees or workers of LIPERCON AND D'RITE to man the strike area
and/or picket lines and/or barricades which the defendants may set up at the plants
and offices of plaintiff within the bargaining unit referred to in the CBA ...;
f. intimidating, threatening with bodily harm and/or molesting the other employees
and/or contract workers of plaintiff, as well as those persons lawfully transacting
business with plaintiff at the work places within the bargaining unit referred to in
the CBA, ..., to compel plaintiff to hire the employees or workers of LIPERCON and
D'RITE;
g. blocking, preventing, prohibiting, obstructing and/or impeding the free ingress to,
and egress from, the work places within the bargaining unit referred to in the CBA ..,
to compel plaintiff to hire the employees or workers of LIPERCON and D'RITE;
h. preventing and/or disrupting the peaceful and normal operation of plaintiff at the
work places within the bargaining unit referred to in the CBA, Annex 'C' hereof, to
compel plaintiff to hire the employees or workers of LIPERCON and D'RITE. (Annex
H, Petition)
Respondent Court found the Complaint sufficient in form and substance and issued a Temporary
Restraining Order for the purpose of maintaining the status quo, and set the application for
Injunction for hearing.
In the meantime, on 13 March 1989, the Union filed a Motion to Dismiss SanMig's Complaint on the
ground of lack of jurisdiction over the case/nature of the action, which motion was opposed by
SanMig. That Motion was denied by respondent Judge in an Order dated 11 April 1989.
After several hearings on SanMig's application for injunctive relief, where the parties presented both
testimonial and documentary evidence on 25 March 1989, respondent Court issued the questioned
Order (Annex A, Petition) granting the application and enjoining the Union from Committing the acts
complained of, supra. Accordingly, on 29 March 1989, respondent Court issued the corresponding
Writ of Preliminary Injunction after SanMig had posted the required bond of P100,000.00 to answer
for whatever damages petitioners may sustain by reason thereof.
In issuing the Injunction, respondent Court rationalized:
The absence of employer-employee relationship negates the existence of labor
dispute. Verily, this court has jurisdiction to take cognizance of plaintiff's grievance.
The evidence so far presented indicates that plaintiff has contracts for services with
Lipercon and D'Rite. The application and contract for employment of the
defendants' witnesses are either with Lipercon or D'Rite. What could be discerned is
that there is no employer-employee relationship between plaintiff and the
contractual workers employed by Lipercon and D'Rite. This, however, does not
mean that a final determination regarding the question of the existence of
employer-employee relationship has already been made. To finally resolve this
dispute, the court must extensively consider and delve into the manner of selection
and engagement of the putative employee; the mode of payment of wages; the
presence or absence of a power of dismissal; and the Presence or absence of a
power to control the putative employee's conduct. This necessitates a full-blown
trial. If the acts complained of are not restrained, plaintiff would, undoubtedly,
suffer irreparable damages. Upon the other hand, a writ of injunction does not
necessarily expose defendants to irreparable damages.
Evidently, plaintiff has established its right to the relief demanded. (p. 21, Rollo)
Anchored on grave abuse of discretion, petitioners are now before us seeking nullification of the
challenged Writ. On 24 April 1989, we issued a Temporary Restraining Order enjoining the
implementation of the Injunction issued by respondent Court. The Union construed this to mean
that "we can now strike," which it superimposed on the Order and widely circulated to entice the
Union membership to go on strike. Upon being apprised thereof, in a Resolution of 24 May 1989, we
required the parties to "RESTORE the status quo ante declaration of strike" (p. 2,62 Rollo).
In the meantime, however, or on 2 May 1989, the Union went on strike. Apparently, some of the
contractual workers of Lipercon and D'Rite had been laid off. The strike adversely affected thirteen
(13) of the latter's plants and offices.
On 3 May 1989, the National Conciliation and Mediation Board (NCMB) called the parties to
conciliation. The Union stated that it would lift the strike if the thirty (30) Lipercon and D'Rite
employees were recalled, and discussion on their other demands, such as wage distortion and
appointment of coordinators, were made. Effected eventually was a Memorandum of Agreement
between SanMig and the Union that "without prejudice to the outcome of G.R. No. 87700 (this case)
and Civil Case No. 57055 (the case below), the laid-off individuals ... shall be recalled effective 8 May
1989 to their former jobs or equivalent positions under the same terms and conditions prior to "lay-
off" (Annex 15, SanMig Comment). In turn, the Union would immediately lift the pickets and return
to work.
After an exchange of pleadings, this Court, on 12 October 1989, gave due course to the Petition and
required the parties to submit their memoranda simultaneously, the last of which was filed on 9
January 1990.
The focal issue for determination is whether or not respondent Court correctly assumed jurisdiction
over the present controversy and properly issued the Writ of Preliminary Injunction to the
resolution of that question, is the matter of whether, or not the case at bar involves, or is in
connection with, or relates to a labor dispute. An affirmative answer would bring the case within the
original and exclusive jurisdiction of labor tribunals to the exclusion of the regular Courts.
Petitioners take the position that 'it is beyond dispute that the controversy in the court a
quo involves or arose out of a labor dispute and is directly connected or interwoven with the cases
pending with the NCMB-DOLE, and is thus beyond the ambit of the public respondent's jurisdiction.
That the acts complained of (i.e., the mass concerted action of picketing and the reliefs prayed for
by the private respondent) are within the competence of labor tribunals, is beyond question" (pp. 6-
7, Petitioners' Memo).
On the other hand, SanMig denies the existence of any employer-employee relationship and
consequently of any labor dispute between itself and the Union. SanMig submits, in particular, that
"respondent Court is vested with jurisdiction and judicial competence to enjoin the specific type of
strike staged by petitioner union and its officers herein complained of," for the reasons that:
A. The exclusive bargaining representative of an employer unit cannot strike to
compel the employer to hire and thereby create an employment relationship with
contractual workers, especially were the contractual workers were recognized by
the union, under the governing collective bargaining agreement, as excluded from,
and therefore strangers to, the bargaining unit.
B. A strike is a coercive economic weapon granted the bargaining representative
only in the event of a deadlock in a labor dispute over 'wages, hours of work and all
other and of the employment' of the employees in the unit. The union leaders
cannot instigate a strike to compel the employer, especially on the eve of
certification elections, to hire strangers or workers outside the unit, in the hope the
latter will help re-elect them.
C. Civil courts have the jurisdiction to enjoin the above because this specie of strike
does not arise out of a labor dispute, is an abuse of right, and violates the
employer's constitutional liberty to hire or not to hire. (SanMig's Memorandum, pp.
475-476, Rollo).
We find the Petition of a meritorious character.
A "labor dispute" as defined in Article 212 (1) of the Labor Code includes "any controversy or matter
concerning terms and conditions of employment or the association or representation of persons in
negotiating, fixing, maintaining, changing, or arranging the terms and conditions of employment,
regardless of whether the disputants stand in the proximate relation of employer and employee."
While it is SanMig's submission that no employer-employee relationship exists between itself, on
the one hand, and the contractual workers of Lipercon and D'Rite on the other, a labor dispute can
nevertheless exist "regardless of whether the disputants stand in the proximate relationship of
employer and employee" (Article 212 [1], Labor Code, supra) provided the controversy concerns,
among others, the terms and conditions of employment or a "change" or "arrangement" thereof
(ibid). Put differently, and as defined by law, the existence of a labor dispute is not negative by the
fact that the plaintiffs and defendants do not stand in the proximate relation of employer and
employee.
That a labor dispute, as defined by the law, does exist herein is evident. At bottom, what the Union
seeks is to regularize the status of the employees contracted by Lipercon and D'Rite in effect, that
they be absorbed into the working unit of SanMig. This matter definitely dwells on the working
relationship between said employees vis-a-vis SanMig. Terms, tenure and conditions of their
employment and the arrangement of those terms are thus involved bringing the matter within the
purview of a labor dispute. Further, the Union also seeks to represent those workers, who have
signed up for Union membership, for the purpose of collective bargaining. SanMig, for its part,
resists that Union demand on the ground that there is no employer-employee relationship between
it and those workers and because the demand violates the terms of their CBA. Obvious then is that
representation and association, for the purpose of negotiating the conditions of employment are
also involved. In fact, the injunction sought by SanMig was precisely also to prevent such
representation. Again, the matter of representation falls within the scope of a labor dispute. Neither
can it be denied that the controversy below is directly connected with the labor dispute already
taken cognizance of by the NCMB-DOLE (NCMB-NCR- NS-01- 021-89; NCMB NCR NS-01-093-83).
Whether or not the Union demands are valid; whether or not SanMig's contracts with Lipercon and
D'Rite constitute "labor-only" contracting and, therefore, a regular employer-employee relationship
may, in fact, be said to exist; whether or not the Union can lawfully represent the workers of
Lipercon and D'Rite in their demands against SanMig in the light of the existing CBA; whether or not
the notice of strike was valid and the strike itself legal when it was allegedly instigated to compel the
employer to hire strangers outside the working unit; — those are issues the resolution of which call
for the application of labor laws, and SanMig's cause's of action in the Court below are inextricably
linked with those issues.
The precedent in Layno vs. de la Cruz (G.R. No. L-29636, 30 April 1965, 13 SCRA 738) relied upon by
SanMig is not controlling as in that case there was no controversy over terms, tenure or conditions,
of employment or the representation of employees that called for the application of labor laws. In
that case, what the petitioning union demanded was not a change in working terms and conditions,
or the representation of the employees, but that its members be hired as stevedores in the place of
the members of a rival union, which petitioners wanted discharged notwithstanding the existing
contract of the arrastre company with the latter union. Hence, the ruling therein, on the basis of
those facts unique to that case, that such a demand could hardly be considered a labor dispute.

As the case is indisputably linked with a labor dispute, jurisdiction belongs to the labor tribunals. As
explicitly provided for in Article 217 of the Labor Code, prior to its amendment by R.A. No. 6715 on
21 March 1989, since the suit below was instituted on 6 March 1989, Labor Arbiters have original
and exclusive jurisdiction to hear and decide the following cases involving all workers including "1.
unfair labor practice cases; 2. those that workers may file involving wages, hours of work and other
terms and conditions of employment; ... and 5. cases arising from any violation of Article 265 of this
Code, including questions involving the legality of striker and lockouts. ..." Article 217 lays down the
plain command of the law.

The claim of SanMig that the action below is for damages under Articles 19, 20 and 21 of the Civil
Code would not suffice to keep the case within the jurisdictional boundaries of regular Courts. That
claim for damages is interwoven with a labor dispute existing between the parties and would have
to be ventilated before the administrative machinery established for the expeditious settlement of
those disputes. To allow the action filed below to prosper would bring about "split jurisdiction"
which is obnoxious to the orderly administration of justice (Philippine Communications, Electronics
and Electricity Workers Federation vs. Hon. Nolasco, L-24984, 29 July 1968, 24 SCRA 321).

We recognize the proprietary right of SanMig to exercise an inherent management prerogative and
its best business judgment to determine whether it should contract out the performance of some of
its work to independent contractors. However, the rights of all workers to self-organization,
collective bargaining and negotiations, and peaceful concerted activities, including the right to strike
in accordance with law (Section 3, Article XIII, 1987 Constitution) equally call for recognition and
protection. Those contending interests must be placed in proper perspective and equilibrium.

WHEREFORE, the Writ of certiorari is GRANTED and the Orders of respondent Judge of 25 March
1989 and 29 March 1989 are SET ASIDE. The Writ of Prohibition is GRANTED and respondent Judge is
enjoined from taking any further action in Civil Case No. 57055 except for the purpose of dismissing
it. The status quo ante declaration of strike ordered by the Court on 24 May 1989 shall be observed
pending the proceedings in the National Conciliation Mediation Board-Department of Labor and
Employment, docketed as NCMB-NCR-NS-01-02189 and NCMB-NCR-NS-01-093-83. No costs.

SO ORDERED.
 THIRD DIVISION
RAUL G. LOCSIN and G.R. No. 185251
EDDIE B. TOMAQUIN,
Petitioners,
Present:
YNARES-SANTIAGO, J.,
Chairperson,
- versus - CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.
PHILIPPINE LONG DISTANCE Promulgated:
TELEPHONE COMPANY,
Respondent. October 2, 2009
x-----------------------------------------------------------------------------------------x
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari under Rule 45 seeks the reversal of the May 6, 2008
Decision[1] and November 4, 2008 Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 97398,
entitled Philippine Long Distance Telephone Company v. National Labor Relations Commission, Raul
G. Locsin and Eddie B. Tomaquin. The assailed decision set aside the Resolutions of the National Labor
Relations Commission (NLRC) dated October 28, 2005 and August 28, 2006 which in turn affirmed the
Decision dated February 13, 2004 of the Labor Arbiter. The assailed resolution, on the other hand,
denied petitioners motion for reconsideration of the assailed decision.
The Facts
On November 1, 1990, respondent Philippine Long Distance Telephone Company (PLDT) and the
Security and Safety Corporation of the Philippines (SSCP) entered into a Security Services
Agreement[3] (Agreement) whereby SSCP would provide armed security guards to PLDT to be assigned
to its various offices.
Pursuant to such agreement, petitioners Raul Locsin and Eddie Tomaquin, among other security
guards, were posted at a PLDT office.
On August 30, 2001, respondent issued a Letter dated August 30, 2001 terminating the Agreement
effective October 1, 2001.[4]
Despite the termination of the Agreement, however, petitioners continued to secure the premises of
their assigned office. They were allegedly directed to remain at their post by representatives of
respondent. In support of their contention, petitioners provided the Labor Arbiter with copies of
petitioner Locsins pay slips for the period of January to September 2002.[5]
Then, on September 30, 2002, petitioners services were terminated.
Thus, petitioners filed a complaint before the Labor Arbiter for illegal dismissal and recovery of money
claims such as overtime pay, holiday pay, premium pay for holiday and rest day, service incentive
leave pay, Emergency Cost of Living Allowance, and moral and exemplary damages against PLDT.
The Labor Arbiter rendered a Decision finding PLDT liable for illegal dismissal. It was explained in the
Decision that petitioners were found to be employees of PLDT and not of SSCP. Such conclusion was
arrived at with the factual finding that petitioners continued to serve as guards of PLDTs offices. As
such employees, petitioners were entitled to substantive and procedural due process before
termination of employment. The Labor Arbiter held that respondent failed to observe such due
process requirements. The dispositive portion of the Labor Arbiters Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering
respondent Philippine Long Distance and Telephone Company (PLDT) to pay
complainants Raul E. Locsin and Eddie Tomaquin their separation pay and back wages
computed as follows:
NAME SEPARATION PAY BACKWAGES
1. Raul E. Locsin P127,500.00 P240,954.67
2. Eddie B. Tomaquin P127,500.00 P240,954.67
P736,909.34
All other claims are DISMISSED for want of factual basis.
Let the computation made by the Computation and Examination Unit form
part of this decision.
SO ORDERED.
PLDT appealed the above Decision to the NLRC which rendered a Resolution affirming in toto the
Arbiters Decision.
Thus, PDLT filed a Motion for Reconsideration of the NLRCs Resolution which was also denied.
Consequently, PLDT filed a Petition for Certiorari with the CA asking for the nullification of the
Resolution issued by the NLRC as well as the Labor Arbiters Decision. The CA rendered the assailed
decision granting PLDTs petition and dismissing petitioners complaint. The dispositive portion of the
CA Decision provides:
WHEREFORE, the instant Petition for Certiorari is GRANTED. The Resolutions
dated October 28, 2005 and August 28, 2006 of the National Labor Relations
Commission are ANNULLED and SET ASIDE. Private respondents complaint against
Philippine Long Distance Telephone Company is DISMISSED.
SO ORDERED.
The CA applied the four-fold test in order to determine the existence of an employer-
employee relationship between the parties but did not find such relationship. It determined that SSCP
was not a labor-only contractor and was an independent contractor having substantial capital to
operate and conduct its own business. The CA further bolstered its decision by citing the Agreement
whereby it was stipulated that there shall be no employer-employee relationship between the
security guards and PLDT.
Anent the pay slips that were presented by petitioners, the CA noted that those were issued
by SSCP and not PLDT; hence, SSCP continued to pay the salaries of petitioners after the Agreement.
This fact allegedly proved that petitioners continued to be employees of SSCP albeit performing their
work at PLDTs premises.
From such assailed decision, petitioners filed a motion for reconsideration which was denied
in the assailed resolution.
Hence, we have this petition.
The Issues
1. Whether or not; complainants extended services to the respondent for one (1)
year from October 1, 2001, the effectivity of the termination of the contract of
complainants agency SSCP, up to September 30, 2002, without a renewed
contract, constitutes an employer-employee relationship between respondent
and the complainants.
2. Whether or not; in accordance to the provision of the Article 280 of the Labor
Code, complainants extended services to the respondent for another one (1) year
without a contract be considered as contractual employment.
 3. Whether or not; in accordance to the provision of the Article 280 of the Labor
Code, does complainants thirteen (13) years of service to the respondent with
manifestation to the respondent thirteen (13) years renewal of its security
contract with the complainant agency SSCP, can be considered only as seasonal
in nature or fixed as [specific projects] or undertakings and its completion or
termination can be dictated as [controlled] by the respondent anytime they
wanted to.
4. Whether or not; complainants from being an alleged contractual employees of
the respondent for thirteen (13) years as they were then covered by a contract,
becomes regular employees of the respondent as the one (1) year extended
services of the complainants were not covered by a contract, and can be
considered as direct employment pursuant to the provision of the Article 280 of
the Labor Code.
5. Whether or not; the Court of Appeals committed grave abuse of discretion when
it set aside and [annulled] the labor [arbiters] decision and of the NLRCs
resolution declaring the dismissal of the complainant as illegal.[6]
The Courts Ruling
This petition is hereby granted.
An Employer-Employee
Relationship Existed Between the Parties
It is beyond cavil that there was no employer-employee relationship between the parties from
the time of petitioners first assignment to respondent by SSCP in 1988 until the alleged termination
of the Agreement between respondent and SSCP. In fact, this was the conclusion that was reached by
this Court in Abella v. Philippine Long Distance Telephone Company,[7] where we ruled that petitioners
therein, including herein petitioners, cannot be considered as employees of PLDT. It bears pointing
out that petitioners were among those declared to be employees of their respective security agencies
and not of PLDT.
The only issue in this case is whether petitioners became employees of respondent after the
Agreement between SSCP and respondent was terminated.
This must be answered in the affirmative.
Notably, respondent does not deny the fact that petitioners remained in the premises of their
offices even after the Agreement was terminated. And it is this fact that must be explained.
To recapitulate, the CA, in rendering a decision in favor of respondent, found that: (1)
petitioners failed to prove that SSCP was a labor-only contractor; and (2) petitioners are employees
of SSCP and not of PLDT.
In arriving at such conclusions, the CA relied on the provisions of the Agreement, wherein
SSCP undertook to supply PLDT with the required security guards, while furnishing PLDT with a
performance bond in the amount of PhP 707,000. Moreover, the CA gave weight to the provision in
the Agreement that SSCP warranted that it carry on an independent business and has substantial
capital or investment in the form of equipment, work premises, and other materials which are
necessary in the conduct of its business.
Further, in determining that no employer-employee relationship existed between the parties,
the CA quoted the express provision of the Agreement, stating that no employer-employee
relationship existed between the parties herein. The CA disregarded the pay slips of Locsin considering
that they were in fact issued by SSCP and not by PLDT.
From the foregoing explanation of the CA, the fact remains that petitioners remained at their
post after the termination of the Agreement. Notably, in its Comment dated March 10,
2009,[8] respondent never denied that petitioners remained at their post until September 30, 2002.
While respondent denies the alleged circumstances stated by petitioners, that they were told to
remain at their post by respondents Security Department and that they were informed by SSCP
Operations Officer Eduardo Juliano that their salaries would be coursed through SSCP as per
arrangement with PLDT, it does not state why they were not made to vacate their posts. Respondent
said that it did not know why petitioners remained at their posts.
Rule 131, Section 3(y) of the Rules of Court provides:
SEC. 3. Disputable presumptions.The following presumptions are satisfactory
if uncontradicted, but may be contradicted and overcome by other evidence:
xxxx
(y) That things have happened according to the ordinary course of nature and
the ordinary habits of life.
In the ordinary course of things, responsible business owners or managers would not allow
security guards of an agency with whom the owners or managers have severed ties with to continue
to stay within the business premises. This is because upon the termination of the owners or managers
agreement with the security agency, the agencys undertaking of liability for any damage that the
security guard would cause has already been terminated. Thus, in the event of an accident or
otherwise damage caused by such security guards, it would be the business owners and/or managers
who would be liable and not the agency. The business owners or managers would, therefore, be
opening themselves up to liability for acts of security guards over whom the owners or managers
allegedly have no control.
At the very least, responsible business owners or managers would inquire or learn why such
security guards were remaining at their posts, and would have a clear understanding of the
circumstances of the guards stay. It is but logical that responsible business owners or managers would
be aware of the situation in their premises.
We point out that with respondents hypothesis, it would seem that SSCP was paying
petitioners salaries while securing respondents premises despite the termination of their Agreement.
Obviously, it would only be respondent that would benefit from such a situation. And it is seriously
doubtful that a security agency that was established for profit would allow its security guards to secure
respondents premises when the Agreement was already terminated.
From the foregoing circumstances, reason dictates that we conclude that petitioners
remained at their post under the instructions of respondent. We can further conclude that respondent
dictated upon petitioners that the latter perform their regular duties to secure the premises during
operating hours. This, to our mind and under the circumstances, is sufficient to establish the existence
of an employer-employee relationship. Certainly, the facts as narrated by petitioners are more
believable than the irrational denials made by respondent. Thus, we ruled in Lee Eng Hong v. Court of
Appeals:[9]
Evidence, to be believed, must not only proceed from the mouth of a credible witness,
but it must be credible in itself such as the common experience and observation of
mankind can approve as probable under the circumstances. We have no test of the
truth of human testimony, except its conformity to our knowledge, observation and
experience. Whatever is repugnant to these belongs to the miraculous and is outside
judicial cognizance (Castaares v. Court of Appeals, 92 SCRA 568 [1979]).
To reiterate, while respondent and SSCP no longer had any legal relationship with the
termination of the Agreement, petitioners remained at their post securing the premises of respondent
while receiving their salaries, allegedly from SSCP. Clearly, such a situation makes no sense, and the
denials proffered by respondent do not shed any light to the situation. It is but reasonable to conclude
that, with the behest and, presumably, directive of respondent, petitioners continued with their
services. Evidently, such are indicia of control that respondent exercised over petitioners.
Such power of control has been explained as the right to control not only the end to be
achieved but also the means to be used in reaching such end.[10] With the conclusion that respondent
directed petitioners to remain at their posts and continue with their duties, it is clear that respondent
exercised the power of control over them; thus, the existence of an employer-employee relationship.
In Tongko v. The Manufacturers Life Insurance Co. (Phils.) Inc.,[11] we reiterated the oft
repeated rule that control is the most important element in the determination of the existence of an
employer-employee relationship:
 In the determination of whether an employer-employee relationship exists
between two parties, this Court applies the four-fold test to determine the existence
of the elements of such relationship. In Pacific Consultants International Asia, Inc. v.
Schonfeld, the Court set out the elements of an employer-employee relationship,
thus:
Jurisprudence is firmly settled that whenever the existence of an
employment relationship is in dispute, four elements constitute the reliable
yardstick: (a) the selection and engagement of the employee; (b) the payment
of wages; (c) the power of dismissal; and (d) the employers power to control
the employees conduct. It is the so-called control test which constitutes the
most important index of the existence of the employer-employee
relationship that is, whether the employer controls or has reserved the right
to control the employee not only as to the result of the work to be done but
also as to the means and methods by which the same is to be accomplished.
Stated otherwise, an employer-employee relationship exists where the
person for whom the services are performed reserves the right to control not
only the end to be achieved but also the means to be used in reaching such
end.
Furthermore, Article 106 of the Labor Code contains a provision on contractors, to wit:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a
contract with another person for the performance of the formers work, the
employees of the contractor and of the latters subcontractor, if any, shall be paid in
accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his
employees in accordance with this Code, the employer shall be jointly and severally
liable with his contractor or subcontractor to such employees to the extent of the
work performed under the contract, in the same manner and extent that he is liable
to employees directly employed by him.
The Secretary of Labor and Employment may, by appropriate regulations,
restrict or prohibit the contracting-out of labor to protect the rights of workers
established under this Code. In so prohibiting or restricting, he may make
appropriate distinctions between 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 latter were directly employed by
him. (Emphasis supplied.)
Thus, the Secretary of Labor issued Department Order No. 18-2002, Series of 2002,
implementing Art. 106 as follows:
Section 5. Prohibition against labor-only contracting.Labor-only contracting is
hereby declared prohibited. For this purpose, labor-only contracting shall refer to an
arrangement where the contractor or subcontractor merely recruits, supplies or
places workers to perform a job, work or service for a principal, and any of the
following elements are present:
(i) The contractor or subcontractor does not have substantial capital
or investment which relates to the job, work or service to be performed and
the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the main
business of the principal; or
(ii) the contractor does not exercise the right to control over the
performance of the work of the contractual employee.
The foregoing provisions shall be without prejudice to the application of
Article 248 (C) of the Labor Code, as amended.
Substantial capital or investment refers to capital stocks and subscribed
capitalization in the case of corporations, tools, equipment, implements, machineries
and work premises, actually and directly used by the contractor or subcontractor in
the performance or completion of the job, work or service contracted out.
The right to control shall refer to the right reserved to the person for whom
the services of the contractual workers are performed, to determine not only the end
to be achieved, but also the manner and means to be used in reaching that end.
On the other hand, Sec. 7 of the department order contains the consequence of such labor-
only contracting:
Section 7. Existence of an employer-employee relationship.The contractor or
subcontractor shall be considered the employer of the contractual employee for
purposes of enforcing the provisions of the Labor Code and other social legislation.
The principal, however, shall be solidarily liable with the contractor in the event of
any violation of any provision of the Labor Code, including the failure to pay wages.
The principal shall be deemed the employer of the contractual employee in
any of the following cases as declared by a competent authority:
(a) where there is labor-only contracting; or
(b) where the contracting arrangement falls within the prohibitions provided
in Section 6 (Prohibitions) hereof. (Emphasis supplied.)
Evidently, respondent having the power of control over petitioners must be considered as
petitioners employerfrom the termination of the Agreement onwardsas this was the only time that
any evidence of control was exhibited by respondent over petitioners and in light of our ruling
in Abella.[12] Thus, as aptly declared by the NLRC, petitioners were entitled to the rights and benefits
of employees of respondent, including due process requirements in the termination of their services.
Both the Labor Arbiter and NLRC found that respondent did not observe such due process
requirements. Having failed to do so, respondent is guilty of illegal dismissal.
WHEREFORE, we SET ASIDE the CAs May 6, 2008 Decision and November 4, 2008 Resolution
in CA-G.R. SP No. 97398. We hereby REINSTATE the Labor Arbiters Decision dated February 13,
2004 and the NLRCs Resolutions dated October 28, 2005 and August 28, 2006.
No costs.
SO ORDERED.
PRESBITERO J. VELASCO, JR.
Associate Justice
 Republic of the Philippines 2004 and 27 February 2004, respectively, are ANNULLED. The complaint against
SUPREME COURT petitioner is DISMISSED.[4]
Manila The Court found that there was no employer-employee relationship between petitioner and
private respondent. It was held that while the DOLE may make a determination of the existence of an
EN BANC employer-employee relationship, this function could not be co-extensive with the visitorial and
enforcement power provided in Art. 128(b) of the Labor Code, as amended by RA 7730. The National
Labor Relations Commission (NLRC) was held to be the primary agency in determining the existence
PEOPLES BROADCASTING SERVICE G.R. No. 179652 of an employer-employee relationship. This was the interpretation of the Court of the clause in cases
(BOMBO RADYO PHILS., INC.), where the relationship of employer-employee still exists in Art. 128(b).[5]
Petitioner, Present:
From this Decision, the Public Attorneys Office (PAO) filed a Motion for Clarification of
CORONA, C.J., Decision (with Leave of Court). The PAO sought to clarify as to when the visitorial and enforcement
CARPIO, power of the DOLE be not considered as co-extensive with the power to determine the existence of
- versus - VELASCO, JR., an employer-employee relationship.[6] In its Comment,[7] the DOLE sought clarification as well, as to
LEONARDO-DE CASTRO, the extent of its visitorial and enforcement power under the Labor Code, as amended.
BRION,
PERALTA, The Court treated the Motion for Clarification as a second motion for reconsideration,
THE SECRETARY OF THE DEPARTMENT OF BERSAMIN, granting said motion and reinstating the petition.[8] It is apparent that there is a need to delineate the
LABOR AND EMPLOYMENT, THE REGIONAL DEL CASTILLO,* jurisdiction of the DOLE Secretary vis--vis that of the NLRC.
DIRECTOR, DOLE REGION VII, and ABAD,
JANDELEON JUEZAN, VILLARAMA, JR., Under Art. 129 of the Labor Code, the power of the DOLE and its duly authorized hearing
Respondents. PEREZ, officers to hear and decide any matter involving the recovery of wages and other monetary claims
MENDOZA, and benefits was qualified by the proviso that the complaint not include a claim for reinstatement, or
SERENO, that the aggregate money claims not exceed PhP 5,000. RA 7730, or an Act Further Strengthening the
REYES, and Visitorial and Enforcement Powers of the Secretary of Labor, did away with the PhP 5,000 limitation,
PERLAS-BERNABE, JJ. allowing the DOLE Secretary to exercise its visitorial and enforcement power for claims beyond PhP
5,000. The only qualification to this expanded power of the DOLE was only that there still be an
Promulgated: existing employer-employee relationship.
March 6, 2012
x-----------------------------------------------------------------------------------------x It is conceded that if there is no employer-employee relationship, whether it has been
terminated or it has not existed from the start, the DOLE has no jurisdiction. Under Art. 128(b) of the
Labor Code, as amended by RA 7730, the first sentence reads, Notwithstanding the provisions of
RESOLUTION Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of employer-
employee still exists, the Secretary of Labor and Employment or his duly authorized representatives
VELASCO, JR., J.: shall have the power to issue compliance orders to give effect to the labor standards provisions of this
Code and other labor legislation based on the findings of labor employment and enforcement officers
In a Petition for Certiorari under Rule 65, petitioner Peoples Broadcasting Service, Inc. (Bombo Radyo or industrial safety engineers made in the course of inspection. It is clear and beyond debate that an
Phils., Inc.) questioned the Decision and Resolution of the Court of Appeals (CA) dated October 26, employer-employee relationship must exist for the exercise of the visitorial and enforcement power
2006 and June 26, 2007, respectively, in C.A. G.R. CEB-SP No. 00855. of the DOLE. The question now arises, may the DOLE make a determination of whether or not an
employer-employee relationship exists, and if so, to what extent?
Private respondent Jandeleon Juezan filed a complaint against petitioner with the
Department of Labor and Employment (DOLE) Regional Office No. VII, Cebu City, for illegal deduction, The first portion of the question must be answered in the affirmative.
nonpayment of service incentive leave, 13th month pay, premium pay for holiday and rest day and
illegal diminution of benefits, delayed payment of wages and noncoverage of SSS, PAG-IBIG and The prior decision of this Court in the present case accepts such answer, but places a limitation
Philhealth.[1] After the conduct of summary investigations, and after the parties submitted their upon the power of the DOLE, that is, the determination of the existence of an employer-employee
position papers, the DOLE Regional Director found that private respondent was an employee of relationship cannot be co-extensive with the visitorial and enforcement power of the DOLE. But even
petitioner, and was entitled to his money claims.[2] Petitioner sought reconsideration of the Directors in conceding the power of the DOLE to determine the existence of an employer-employee
Order, but failed. The Acting DOLE Secretary dismissed petitioners appeal on the ground that relationship, the Court held that the determination of the existence of an employer-employee
petitioner submitted a Deed of Assignment of Bank Deposit instead of posting a cash or surety relationship is still primarily within the power of the NLRC, that any finding by the DOLE is merely
bond.When the matter was brought before the CA, where petitioner claimed that it had been denied preliminary.
due process, it was held that petitioner was accorded due process as it had been given the opportunity This conclusion must be revisited.
to be heard, and that the DOLE Secretary had jurisdiction over the matter, as the jurisdictional
limitation imposed by Article 129 of the Labor Code on the power of the DOLE Secretary under Art. No limitation in the law was placed upon the power of the DOLE to determine the existence
128(b) of the Code had been repealed by Republic Act No. (RA) 7730.[3] of an employer-employee relationship. No procedure was laid down where the DOLE would only make
a preliminary finding, that the power was primarily held by the NLRC. The law did not say that the
In the Decision of this Court, the CA Decision was reversed and set aside, and the complaint against DOLE would first seek the NLRCs determination of the existence of an employer-employee
petitioner was dismissed. The dispositive portion of the Decision reads as follows: relationship, or that should the existence of the employer-employee relationship be disputed, the
DOLE would refer the matter to the NLRC. The DOLE must have the power to determine whether or
WHEREFORE, the petition is GRANTED. The Decision dated 26 October 2006 not an employer-employee relationship exists, and from there to decide whether or not to issue
and the Resolution dated 26 June 2007 of the Court of Appeals in C.A. G.R. CEB-SP No. compliance orders in accordance with Art. 128(b) of the Labor Code, as amended by RA 7730.
00855 are REVERSED and SET ASIDE. The Order of the then Acting Secretary of the
Department of Labor and Employment dated 27 January 2005 denying petitioners The DOLE, in determining the existence of an employer-employee relationship, has a ready
appeal, and the Orders of the Director, DOLE Regional Office No. VII, dated 24 May set of guidelines to follow, the same guide the courts themselves use. The elements to determine the
existence of an employment relationship are: (1) the selection and engagement of the employee; (2)
the payment of wages; (3) the power of dismissal; (4) the employers power to control the employees
conduct.[9] The use of this test is not solely limited to the NLRC. The DOLE Secretary, or his or her
representatives, can utilize the same test, even in the course of inspection, making use of the same
evidence that would have been presented before the NLRC.
The determination of the existence of an employer-employee relationship by the DOLE must
be respected. The expanded visitorial and enforcement power of the DOLE granted by RA 7730 would
be rendered nugatory if the alleged employer could, by the simple expedient of disputing the
employer-employee relationship, force the referral of the matter to the NLRC. The Court issued the
declaration that at least a prima facie showing of the absence of an employer-employee relationship
be made to oust the DOLE of jurisdiction. But it is precisely the DOLE that will be faced with that
evidence, and it is the DOLE that will weigh it, to see if the same does successfully refute the existence
of an employer-employee relationship.
If the DOLE makes a finding that there is an existing employer-employee relationship, it takes
cognizance of the matter, to the exclusion of the NLRC. The DOLE would have no jurisdiction only if
the employer-employee relationship has already been terminated, or it appears, upon review, that no
employer-employee relationship existed in the first place.
In the present case, the finding of the DOLE Regional Director that there was an employer-
employee relationship has been subjected to review by this Court, with the finding being that there
was no employer-employee relationship between petitioner and private respondent, based on the
evidence presented. Private respondent presented self-serving allegations as well as self-defeating
evidence.[10] The findings of the Regional Director were not based on substantial evidence, and private
respondent failed to prove the existence of an employer-employee relationship. The DOLE had no
jurisdiction over the case, as there was no employer-employee relationship present. Thus, the
dismissal of the complaint against petitioner is proper.
WHEREFORE, the Decision of this Court in G.R. No. 179652 is hereby AFFIRMED, with
the MODIFICATION that in the exercise of the DOLEs visitorial and enforcement power, the Labor
Secretary or the latters authorized representative shall have the power to determine the existence of
an employer-employee relationship, to the exclusion of the NLRC.
SO ORDERED.

The Court, in limiting the power of the DOLE, gave the rationale that such limitation would PRESBITERO J. VELASCO, JR.
eliminate the prospect of competing conclusions between the DOLE and the NLRC. The prospect of Associate Justice
competing conclusions could just as well have been eliminated by according respect to the DOLE
findings, to the exclusion of the NLRC, and this We believe is the more prudent course of action to
take. WE CONCUR:

This is not to say that the determination by the DOLE is beyond question or review. Suffice it
to say, there are judicial remedies such as a petition for certiorari under Rule 65 that may be availed
of, should a party wish to dispute the findings of the DOLE.

It must also be remembered that the power of the DOLE to determine the existence of an
employer-employee relationship need not necessarily result in an affirmative finding. The DOLE may
well make the determination that no employer-employee relationship exists, thus divesting itself of
jurisdiction over the case. It must not be precluded from being able to reach its own conclusions, not
by the parties, and certainly not by this Court.

Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully empowered
to make a determination as to the existence of an employer-employee relationship in the exercise of
its visitorial and enforcement power, subject to judicial review, not review by the NLRC.

There is a view that despite Art. 128(b) of the Labor Code, as amended by RA 7730, there is
still a threshold amount set by Arts. 129 and 217 of the Labor Code when money claims are involved,
i.e., that if it is for PhP 5,000 and below, the jurisdiction is with the regional director of the DOLE,
under Art. 129, and if the amount involved exceeds PhP 5,000, the jurisdiction is with the labor arbiter,
under Art. 217. The view states that despite the wording of Art. 128(b), this would only apply in the
course of regular inspections undertaken by the DOLE, as differentiated from cases under Arts. 129
and 217, which originate from complaints. There are several cases, however, where the Court has
ruled that Art. 128(b) has been amended to expand the powers of the DOLE Secretary and his duly
authorized representatives by RA 7730. In these cases, the Court resolved that the DOLE had the
jurisdiction, despite the amount of the money claims involved. Furthermore, in these cases, the
inspection held by the DOLE regional director was prompted specifically by a complaint. Therefore,
the initiation of a case through a complaint does not divest the DOLE Secretary or his duly authorized
representative of jurisdiction under Art. 128(b).

To recapitulate, if a complaint is brought before the DOLE to give effect to the labor standards
provisions of the Labor Code or other labor legislation, and there is a finding by the DOLE that there
is an existing employer-employee relationship, the DOLE exercises jurisdiction to the exclusion of the
NLRC. If the DOLE finds that there is no employer-employee relationship, the jurisdiction is properly
with the NLRC. If a complaint is filed with the DOLE, and it is accompanied by a claim for reinstatement,
the jurisdiction is properly with the Labor Arbiter, under Art. 217(3) of the Labor Code, which provides
that the Labor Arbiter has original and exclusive jurisdiction over those cases involving wages, rates
of pay, hours of work, and other terms and conditions of employment, if accompanied by a claim for
reinstatement. If a complaint is filed with the NLRC, and there is still an existing employer-employee
relationship, the jurisdiction is properly with the DOLE. The findings of the DOLE, however, may still
be questioned through a petition for certiorari under Rule 65 of the Rules of Court.
 FIRST DIVISION x x x x[3] [Emphasis and underscoring supplied.]

ERNESTO G. YMBONG, G.R. No. 184885

Because of the impending May 1998 elections and based on his immediate recollection of the policy
Petitioner, at that time, Dante Luzon, Assistant Station Manager of DYAB issued the following memorandum:
Present: TO : ALL CONCERNED
FROM : DANTE LUZON
CORONA, C.J., DATE : MARCH 25, 1998
Chairperson, SUBJECT : AS STATED
- versus - LEONARDO-DE CASTRO,
Please be informed that per company policy, any employee/talent who wants to run
BERSAMIN, for any position in the coming election will have to file a leave of absence the
moment he/she files his/her certificate of candidacy.
VILLARAMA, JR., and
PERLAS-BERNABE,* JJ. The services rendered by the concerned employee/talent to this company will then
be temporarily suspended for the entire campaign/election period.

For strict compliance.[4] [Emphasis and underscoring supplied.]

ABS-CBN BROADCASTING CORPORATION, Promulgated:
VENERANDA SY AND DANTE LUZON,
Luzon, however, admitted that upon double-checking of the exact text of the policy and subsequent
Respondents.
March 7, 2012 confirmation with the ABS-CBN Head Office, he saw that the policy actually required suspension for
those who intend to campaign for a political party or candidate and resignation for those who will
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x actually run in the elections.[5]

DECISION After the issuance of the March 25, 1998 Memorandum, Ymbong got in touch
with Luzon. Luzon claims that Ymbong approached him and told him that he would leave radio for a
VILLARAMA, JR., J.: couple of months because he will campaign for the administration ticket. It was only after the
elections that they found out that Ymbong actually ran for public office himself at the eleventh
Before us is a Rule 45 Petition seeking to set aside the August 22, 2007 Decision[1] and September 18, hour. Ymbong, on the other hand, claims that in accordance with the March 25, 1998 Memorandum,
2008 Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 86206 declaring petitioner to have he informed Luzon through a letter that he would take a few months leave of absence from March 8,
resigned from work and not illegally dismissed. 1998 to May 18, 1998 since he was running for councilor of Lapu-Lapu City.

The antecedent facts follow:
Petitioner Ernesto G. Ymbong started working for ABS-CBN Broadcasting Corporation (ABS-CBN) in
1993 at its regional station in Cebu as a television talent, co-anchoringHoy Gising and TV Patrol Cebu.
His stint in ABS-CBN later extended to radio when ABS-CBN Cebu launched its AM station DYAB in
1995 where he worked as drama and voice talent, spinner, scriptwriter and public affairs program
anchor.
Like Ymbong, Leandro Patalinghug also worked for ABS-CBN Cebu. Starting 1995, he worked as talent,
director and scriptwriter for various radio programs aired over DYAB.
On January 1, 1996, the ABS-CBN Head Office in Manila issued Policy No. HR-ER-016 or the Policy on
Employees Seeking Public Office. The pertinent portions read:
1. Any employee who intends to run for any public office position, must file
his/her letter of resignation, at least thirty (30) days prior to the official filing
of the certificate of candidacy either for national or local election.
As regards Patalinghug, Patalinghug approached Luzon and advised him that he will run as councilor
for Naga, Cebu. According to Luzon, he clarified to Patalinghug that he will be considered resigned
and not just on leave once he files a certificate of candidacy. Thus, Patalinghug wrote Luzon the
following letter on April 13, 1998:
Dear Mr. Luzon,
Im submitting to you my letter of resignation as your Drama Production Chief and
Talent due to your companys policy that every person connected to ABS-CBN that
should seek an elected position in the government will be forced to resigned (sic) from
his position. So herewith Im submitting my resignation with a hard heart. But Im still
hoping to be connected again with your prestigious company after the election[s]
should you feel that Im still an asset to your drama production department. Im
looking forward to that day and Im very happy and proud that I have served for two
and a half years the most stable and the most prestigious Radio and TV Network in
the Philippines.
As a friend[,] wish me luck and Pray for me. Thank you.

xxxx
Very Truly Yours,
3. Further, any employee who intends to join a political group/party or even with
no political affiliation but who intends to openly and aggressively campaign
for a candidate or group of candidates (e.g. publicly speaking/endorsing (Sgd.)
candidate, recruiting campaign workers, etc.) must file a request for leave of
Leandro Boy Patalinghug[6]
absence subject to managements approval. For this particular reason, the
employee should file the leave request at least thirty (30) days prior to the
start of the planned leave period. Unfortunately, both Ymbong and Patalinghug lost in the May 1998 elections.
Later, Ymbong and Patalinghug both tried to come back to ABS-CBN Cebu. According to Luzon, he
informed them that they cannot work there anymore because of company policy. This was stressed
even in subsequent meetings and they were told that the company was not allowing any
exceptions. ABS-CBN, however, agreed out of pure liberality to give them a chance to wind up their
participation in the radio drama, Nagbabagang Langit, since it was rating well and to avoid an abrupt
ending. The agreed winding-up, however, dragged on for so long prompting Luzon to issue to Ymbong
the following memorandum dated September 14, 1998:
TO : NESTOR YMBONG
FROM : DANTE LUZON
SUBJECT : AS STATED
DATE : 14 SEPT. 1998
Please be reminded that your services as drama talent had already been automatically
terminated when you ran for a local government position last election.
The Management however gave you more than enough time to end your drama
participation and other involvement with the drama department.
It has been decided therefore that all your drama participation shall be terminated
effective immediately. However, your involvement as drama spinner/narrator of the
drama NAGBA[BA]GANG LANGIT continues until its writer/director Mr. Leandro
Patalinghug wraps it up one week upon receipt of a separate memo issued to him.[7]
Ymbong in contrast contended that after the expiration of his leave of absence, he reported back to
work as a regular talent and in fact continued to receive his salary. On September 14, 1998, he
received a memorandum stating that his services are being terminated immediately, much to his
surprise. Thus, he filed an illegal dismissal complaint[8]against ABS-CBN, Luzon and DYAB Station
Manager Veneranda Sy. He argued that the ground cited by ABS-CBN for his dismissal was not among
those enumerated in the Labor Code, as amended. And even granting without admitting the existence
of the company policy supposed to have been violated, Ymbong averred that it was necessary that
the company policy meet certain requirements before willful disobedience of the policy may
constitute a just cause for termination. Ymbong further argued that the company policy violates his
constitutional right to suffrage.[9]
Patalinghug likewise filed an illegal dismissal complaint[10] against ABS-CBN.
ABS-CBN prayed for the dismissal of the complaints arguing that there is no employer-employee
relationship between the company and Ymbong and Patalinghug. ABS-CBN contended that they are
not employees but talents as evidenced by their talent contracts. However, notwithstanding their
status, ABS-CBN has a standing policy on persons connected with the company whenever they will
run for public office.[11]
On July 14, 1999, the Labor Arbiter rendered a decision[12] finding the dismissal of Ymbong and
Patalinghug illegal, thus:
WHEREFORE, in the light of the foregoing, judgment is rendered finding the dismissal
of the two complainants illegal. An order is issued directing respondent ABS[-]CBN to
immediately reinstate complainants to their former positions without loss of seniority
rights plus the payment of backwages in the amount of P200,000.00 to each
complainant.
All other claims are dismissed.
SO ORDERED.[13]
The Labor Arbiter found that there exists an employer-employee relationship between ABS-CBN and
Ymbong and Patalinghug considering the stipulations in their appointment letters/talent
contracts. The Labor Arbiter noted particularly that the appointment letters/talent contracts imposed
conditions in the performance of their work, specifically on attendance and punctuality, which
effectively placed them under the control of ABS-CBN. The Labor Arbiter likewise ruled that although
the subject company policy is reasonable and not contrary to law, the same was not made known to
Ymbong and Patalinghug and in fact was superseded by another one embodied in the March 25, 1998
Memorandum issued by Luzon. Thus, there is no valid or authorized cause in terminating Ymbong and
Patalinghug from their employment.
In its memorandum of appeal[14] before the National Labor Relations Commission (NLRC), ABS-CBN
contended that the Labor Arbiter has no jurisdiction over the case because there is no employer-
employee relationship between the company and Ymbong and Patalinghug, and that Sy and Luzon
mistakenly assumed that Ymbong and Patalinghug could just file a leave of absence since they are
only talents and not employees. In its Supplemental Appeal,[15] ABS-CBN insisted that Ymbong and
Patalinghug were engaged as radio talents for DYAB dramas and personality programs and their
contract is one between a self-employed contractor and the hiring party which is a standard practice
in the broadcasting industry. It also argued that the Labor Arbiter should not have made much of the
provisions on Ymbongs attendance and punctuality since such requirement is a dictate of the
programming of the station, the slating of shows at regular time slots, and availability of recording
studios not an attempt to exercise control over the manner of his performance of the contracted
anchor work within his scheduled spot on air. As for the pronouncement that the company policy has
already been superseded by the March 25, 1998 Memorandum issued by Luzon, the latter already
clarified that it was the very policy he sought to enforce. This matter was relayed by Luzon to
Patalinghug when the latter disclosed his plans to join the 1998 elections while Ymbong only informed
the company that he was campaigning for the administration ticket and the company had no inkling
that he will actually run until the issue was already moot and academic. ABS-CBN further contended
that Ymbong and Patalinghugs reinstatement is legally and physically impossible as the talent
positions they vacated no longer exist. Neither is there basis for the award of back wages since they
were not earning a monthly salary but paid talent fees on a per production/per script basis. Attached
to the Supplemental Appeal is a Sworn Statement[16] of Luzon.
On March 8, 2004, the NLRC rendered a decision[17] modifying the labor arbiters decision. The fallo of
the NLRC decision reads:
WHEREFORE, premises considered, the decision of Labor Arbiter Nicasio C.
Aninon dated 14 July 1999 is MODIFIED, to wit:
Ordering respondent ABS-CBN to reinstate complainant Ernesto G. Ymbong
and to pay his full backwages computed from 15 September 1998 up to the time of
his actual reinstatement.
SO ORDERED.[18]
The NLRC dismissed ABS-CBNs Supplemental Appeal for being filed out of time. The NLRC
ruled that to entertain the same would be to allow the parties to submit their appeal on piecemeal
basis, which is contrary to the agencys duty to facilitate speedy disposition of cases. The NLRC also
held that ABS-CBN wielded the power of control over Ymbong and Patalinghug, thereby proving the
existence of an employer-employee relationship between them.
As to the issue of whether they were illegally dismissed, the NLRC treated their cases
differently. In the case of Patalinghug, it found that he voluntarily resigned from employment on April
21, 1998 when he submitted his resignation letter. The NLRC noted that although the tenor of the
resignation letter is somewhat involuntary, he knew that it is the policy of the company that every
person connected therewith should resign from his employment if he seeks an elected position in the
government. As to Ymbong, however, the NLRC ruled otherwise. It ruled that the March 25, 1998
Memorandum merely states that an employee who seeks any elected position in the government will
only merit the temporary suspension of his services. It held that under the principle of social justice,
the March 25, 1998 Memorandum shall prevail and ABS-CBN is estopped from enforcing the
September 14, 1998 memorandum issued to Ymbong stating that his services had been automatically
terminated when he ran for an elective position.
ABS-CBN moved to reconsider the NLRC decision, but the same was denied in a Resolution dated June
21, 2004.[19]
Imputing grave abuse of discretion on the NLRC, ABS-CBN filed a petition for certiorari[20] before the
CA alleging that:
I.
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AND SERIOUSLY
MISAPPRECIATED THE FACTS IN NOT HOLDING THAT RESPONDENT YMBONG IS A
FREELANCE RADIO TALENT AND MEDIA PRACTITIONERNOT A REGULAR EMPLOYEE OF
PETITIONERTO WHOM CERTAIN PRODUCTION WORK HAD BEEN OUTSOURCED BY
ABS-CBN CEBU UNDER AN INDEPENDENT CONTRACTORSHIP SITUATION, THUS
RENDERING THE LABOR COURTS WITHOUT JURISDICTION OVER THE CASE IN THE
ABSENCE OF EMPLOYMENT RELATIONS BETWEEN THE PARTIES.
II.
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION IN DECLARING
RESPONDENT YMBONG TO BE A REGULAR EMPLOYEE OF PETITIONER AS TO CREATE
A CONTRACTUAL EMPLOYMENT RELATION BETWEEN THEM WHEN NONE EXISTS OR
HAD BEEN AGREED UPON OR OTHERWISE INTENDED BY THE PARTIES.
III.
EVEN ASSUMING THE ALLEGED EMPLOYMENT RELATION TO EXIST FOR THE SAKE OF
ARGUMENT, RESPONDENT NLRC IN ANY CASE COMMITTED A GRAVE ABUSE OF
DISCRETION IN NOT SIMILARLY UPHOLDING AND APPLYING COMPANY POLICY NO.
HR-ER-016 IN THE CASE OF RESPONDENT YMBONG AND DEEMING HIM AS RESIGNED
AND DISQUALIFIED FROM FURTHER ENGAGEMENT AS A RADIO TALENT IN ABS-CBN
CEBU AS A CONSEQUENCE OF HIS CANDIDACY IN THE 1998 ELECTIONS, AS
RESPONDENT NLRC HAD DONE IN THE CASE OF PATALINGHUG.
IV.
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AND DENIED DUE
PROCESS TO PETITIONER IN REFUSING TO CONSIDER ITS SUPPLEMENTAL APPEAL,
DATED OCTOBER 18, 1999, FOR BEING FILED OUT OF TIME CONSIDERING THAT THE
FILING OF SUCH A PLEADING IS NOT IN ANY CASE PROSCRIBED AND RESPONDENT
NLRC IS AUTHORIZED TO CONSIDER ADDITIONAL EVIDENCE ON APPEAL; MOREOVER,
TECHNICAL RULES OF EVIDENCE DO NOT APPLY IN LABOR CASES.
V.
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION IN GRANTING THE
RELIEF OF REINSTATEMENT AND BACKWAGES TO RESPONDENT YMBONG SINCE HE
NEVER OCCUPIED ANY REGULAR POSITION IN PETITIONER FROM WHICH HE COULD
HAVE BEEN ILLEGALLY DISMISSED, NOR ARE ANY OF THE RADIO PRODUCTIONS IN
WHICH HE HAD DONE TALENT WORK FOR PETITIONER STILL EXISTING. INDEED, THERE
IS NO BASIS WHATSOEVER FOR THE AWARD OF BACKWAGES TO RESPONDENT
YMBONG IN THE AMOUNT OF P200,000.00 CONSIDERING THAT, AS SHOWN BY THE
UNCONTROVERTED EVIDENCE, HE WAS NOT EARNING A MONTHLY SALARY OF
P20,000.00, AS HE FALSELY CLAIMS, BUT WAS PAID TALENT FEES ON A PER
PRODUCTION/PER SCRIPT BASIS WHICH AVERAGED LESS THAN P10,000.00 PER
MONTH IN TALENT FEES ALL IN ALL.[21]
On August 22, 2007, the CA rendered the assailed decision reversing and setting aside the March 8,
2004 Decision and June 21, 2004 Resolution of the NLRC. The CA declared Ymbong resigned from
employment and not to have been illegally dismissed. The award of full back wages in his favor was
deleted accordingly.
The CA ruled that ABS-CBN is estopped from claiming that Ymbong was not its employee after applying
the provisions of Policy No. HR-ER-016 to him. It noted that said policy is entitled Policy on Employees
Seeking Public Office and the guidelines contained therein specifically pertain to employees and did
not even mention talents or independent contractors. It held that it is a complete turnaround on ABS-
CBNs part to later argue that Ymbong is only a radio talent or independent contractor and not its
employee. By applying the subject company policy on Ymbong, ABS-CBN had explicitly recognized him
to be an employee and not merely an independent contractor.
The CA likewise held that the subject company policy is the controlling guideline and therefore,
Ymbong should be considered resigned from ABS-CBN. While Luzon has policy-making power as
assistant radio manager, he had no authority to issue a memorandum that had the effect of repealing
or superseding a subsisting policy. Contrary to the findings of the Labor Arbiter, the subject company
policy was effective at that time and continues to be valid and subsisting up to the present. The CA
cited Patalinghugs resignation letter to buttress this conclusion, noting that Patalinghug openly
admitted in his letter that his resignation was in line with the said company policy. Since ABS-CBN
applied Policy No. HR-ER-016 to Patalinghug, there is no reason not to apply the same regulation to
Ymbong who was on a similar situation as the former. Thus, the CA found that the NLRC overstepped
its area of discretion to a point of grave abuse in declaring Ymbong to have been illegally
terminated. The CA concluded that there is no illegal dismissal to speak of in the instant case as
Ymbong is considered resigned when he ran for an elective post pursuant to the subject company
policy.
Hence, this petition.
Petitioner argues that the CA gravely erred: (1) in upholding Policy No. HR-ER-016; (2) in upholding
the validity of the termination of Ymbongs services; and (3) when it reversed the decision of the NLRC
4th Division of Cebu City which affirmed the decision of Labor Arbiter Nicasio C. Anion.[22]
Ymbong argues that the subject company policy is a clear interference and a gross violation of an
employees right to suffrage. He is surprised why it was easy for the CA to rule that Luzons
memorandum ran counter to an existing policy while on the other end, it did not see that it was in
conflict with the constitutional right to suffrage. He also points out that the issuance of the March 25,
1998 Memorandum was precisely an exercise of the management power to which an employee like
him must respect; otherwise, he will be sanctioned for disobedience or worse, even terminated. He
was not in a position to know which between the two issuances was correct and as far as he is
concerned, the March 25, 1998 Memorandum superseded the subject company policy. Moreover,
ABS-CBN cannot disown acts of its officers most especially since it prejudiced his property rights.[23]
As to the validity of his dismissal, Ymbong contends that the ground relied upon by ABS-CBN is not
among the just and authorized causes provided in the Labor Code, as amended. And even assuming
the subject company policy passes the test of validity under the pretext of the right of the
management to discipline and terminate its employees, the exercise of such right is not without
bounds. Ymbong avers that his automatic termination was a blatant disregard of his right to due
process. He was never asked to explain why he did not tender his resignation before he ran for public
office as mandated by the subject company policy.[24]
Ymbong likewise asseverates that both the Labor Arbiter and the NLRC were consistent in their
findings that he was illegally dismissed. It is settled that factual findings of labor administrative
officials, if supported by substantial evidence, are accorded not only great respect but even finality.[25]
ABS-CBN, for its part, counters that the validity of policies such as Policy No. HR-ER-016 has long been
upheld by this Court which has ruled that a media company has a right to impose a policy providing
that employees who file their certificates of candidacy in any election shall be considered
resigned.[26] Moreover, case law has upheld the validity of the exercise of management prerogatives
even if they appear to limit the rights of employees as long as there is no showing that management
prerogatives were exercised in a manner contrary to law.[27] ABS-CBN contends that being the largest
media and entertainment company in the country, its reputation stems not only from its ability to
deliver quality entertainment programs but also because of neutrality and impartiality in delivering
news.[28]
ABS-CBN further argues that nothing in the company policy prohibits its employees from either
accepting a public appointive position or from running for public office. Thus, it cannot be considered
as violative of the constitutional right of suffrage. Moreover, the Supreme Court has recognized the
employers right to enforce occupational qualifications as long as the employer is able to show the
existence of a reasonable business necessity in imposing the questioned policy. Here, Policy No. HR-
ER-016 itself states that it was issued to protect the company from any public misconceptions and [t]o
preserve its objectivity, neutrality and credibility. Thus, it cannot be denied that it is reasonable under
the circumstances.[29]
ABS-CBN likewise opposes Ymbongs claim that he was terminated. ABS-CBN argues that on the
contrary, Ymbongs unilateral act of filing his certificate of candidacy is an overt act tantamount to
voluntary resignation on his part by virtue of the clear mandate found in Policy No. HR-ER-016.
Ymbong, however, failed to file his resignation and in fact misled his superiors by making them believe
that he was going on leave to campaign for the administration candidates but in fact, he actually ran
for councilor. He also claims to have fully apprised Luzon through a letter of his intention to run for
public office, but he failed to adduce a copy of the same.[30]
As to Ymbongs argument that the CA should not have reversed the findings of the Labor Arbiter and
the NLRC, ABS-CBN asseverates that the CA is not precluded from making its own findings most
especially if upon its own review of the case, it has been revealed that the NLRC, in affirming the
findings of the Labor Arbiter, committed grave abuse of discretion amounting to lack or excess of
jurisdiction when it failed to apply the subject company policy in Ymbongs case when it readily applied
the same to Patalinghug.[31]
Essentially, the issues to be resolved in the instant petition are: (1) whether Policy No. HR-ER-016 is
valid; (2) whether the March 25, 1998 Memorandum issued by Luzonsuperseded Policy No. HR-ER-
016; and (3) whether Ymbong, by seeking an elective post, is deemed to have resigned and not
dismissed by ABS-CBN.
Policy No. HR-ER-016 is valid.
This is not the first time that this Court has dealt with a policy similar to Policy No. HR-ER-016. In the
case of Manila Broadcasting Company v. NLRC,[32] this Court ruled:
What is involved in this case is an unwritten company policy considering any
employee who files a certificate of candidacy for any elective or local office as
resigned from the company. Although 11(b) of R.A. No. 6646 does not require mass
media commentators and announcers such as private respondent to resign from their
radio or TV stations but only to go on leave for the duration of the campaign period,
we think that the company may nevertheless validly require them to resign as a
matter of policy. In this case, the policy is justified on the following grounds:
Working for the government and the company at the same time is
clearly disadvantageous and prejudicial to the rights and interest not
only of the company but the public as well. In the event an employee
wins in an election, he cannot fully serve, as he is expected to do, the
interest of his employer. The employee has to serve two (2)
employers, obviously detrimental to the interest of both the
government and the private employer.
In the event the employee loses in the election, the
impartiality and cold neutrality of an employee as broadcast
personality is suspect, thus readily eroding and adversely affecting
the confidence and trust of the listening public to employers
station.[33]
ABS-CBN, like Manila Broadcasting Company, also had a valid justification for Policy No. HR-ER-016. Its
rationale is embodied in the policy itself, to wit:
Rationale:
ABS-CBN BROADCASTING CORPORATION strongly believes that it is to the best
interest of the company to continuously remain apolitical. While it encourages and
supports its employees to have greater political awareness and for them to exercise
their right to suffrage, the company, however, prefers to remain politically
independent and unattached to any political individual or entity.
Therefore, employees who [intend] to run for public office or accept political
appointment should resign from their positions, in order to protect the company
from any public misconceptions. To preserve its objectivity, neutrality and
credibility, the company reiterates the following policy guidelines for strict
implementation.
x x x x[34] [Emphasis supplied.]
We have consistently held that so long as a companys management prerogatives are
exercised in good faith for the advancement of the employers interest and not for the purpose of
defeating or circumventing the rights of the employees under special laws or under valid agreements,
this Court will uphold them.[35] In the instant case, ABS-CBN validly justified the implementation of
Policy No. HR-ER-016. It is well within its rights to ensure that it maintains its objectivity and credibility
and freeing itself from any appearance of impartiality so that the confidence of the viewing and
listening public in it will not be in any way eroded. Even as the law is solicitous of the welfare of the
employees, it must also protect the right of an employer to exercise what are clearly management
prerogatives. The free will of management to conduct its own business affairs to achieve its purpose
cannot be denied.[36]
It is worth noting that such exercise of management prerogative has earned a stamp of approval from
no less than our Congress itself when on February 12, 2001, it enacted Republic Act No. 9006,
otherwise known as the Fair Election Act. Section 6.6 thereof reads:
6.6. Any mass media columnist, commentator, announcer, reporter, on-air
correspondent or personality who is a candidate for any elective public office or is
a campaign volunteer for or employed or retained in any capacity by any candidate
or political party shall be deemed resigned, if so required by their employer, or shall
take a leave of absence from his/her work as such during the campaign
period: Provided, That any media practitioner who is an official of a political party or
a member of the campaign staff of a candidate or political party shall not use his/her
time or space to favor any candidate or political party. [Emphasis and underscoring
supplied.]
Policy No. HR-ER-016 was not superseded by the
March 25, 1998 Memorandum
The CA correctly ruled that though Luzon, as Assistant Station Manager for Radio of ABS-CBN, has
policy-making powers in relation to his principal task of administering the networks radio station in
the Cebu region, the exercise of such power should be in accord with the general rules and regulations
imposed by the ABS-CBN Head Office to its employees. Clearly, the March 25, 1998 Memorandum
issued by Luzon which only requires employees to go on leave if they intend to run for any elective
position is in absolute contradiction with Policy No. HR-ER-016 issued by the ABS-CBN Head Office in
Manila which requires the resignation, not only the filing of a leave of absence, of any employee who
intends to run for public office. Having been issued beyond the scope of his authority, the March 25,
1998 Memorandum is therefore void and did not supersede Policy No. HR-ER-016.
Also worth noting is that Luzon in his Sworn Statement admitted the inaccuracy of his
recollection of the company policy when he issued the March 25, 1998 Memorandum and stated
therein that upon double-checking of the exact text of the policy statement and subsequent
confirmation with the ABS-CBN Head Office in Manila, he learned that the policy required resignation
for those who will actually run in elections because the company wanted to maintain its
independence. Since the officer who himself issued the subject memorandum acknowledged that it
is not in harmony with the Policy issued by the upper management, there is no reason for it to be a
source of right for Ymbong.
Ymbong is deemed resigned when he ran for
councilor.
As Policy No. HR-ER-016 is the subsisting company policy and not Luzons March 25, 1998
Memorandum, Ymbong is deemed resigned when he ran for councilor.

We find no merit in Ymbongs argument that [his] automatic termination x x x was a blatant [disregard]
of [his] right to due process as he was never asked to explain why he did not tender his resignation
before he ran for public office as mandated by [the subject company policy].[37] Ymbongs overt act of
running for councilor of Lapu-Lapu City is tantamount to resignation on his part. He was separated
from ABS-CBN not because he was dismissed but because he resigned. Since there was no termination
to speak of, the requirement of due process in dismissal cases cannot be applied to Ymbong. Thus,
ABS-CBN is not duty-bound to ask him to explain why he did not tender his resignation before he ran
for public office as mandated by the subject company policy.

In addition, we do not subscribe to Ymbongs claim that he was not in a position to know which of the
two issuances was correct. Ymbong most likely than not, is fully aware that the subsisting policy is
Policy No. HR-ER-016 and not the March 25, 1998 Memorandum and it was for this reason that, as
stated by Luzon in his Sworn Statement, he only told the latter that he will only campaign for the
administration ticket and not actually run for an elective post. Ymbong claims he had fully
apprised Luzon by letter of his plan to run and even filed a leave of absence but records are bereft of
any proof of said claim. Ymbong claims that the letter stating his intention to go on leave to run in the
election is attached to his Position Paper as Annex A, a perusal of said pleading attached to his petition
before this Court, however, show that Annex A was not his letter to Luzon but the September 14, 1998
Memorandum informing Ymbong that his services had been automatically terminated when he ran
for a local government position.

Moreover, as pointed out by ABS-CBN, had Ymbong been truthful to his superiors, they would have
been able to clarify to him the prevailing company policy and inform him of the consequences of his
decision in case he decides to run, as Luzon did in Patalinghugs case.

WHEREFORE, the petition for review on certiorari is DENIED for lack of merit.

With costs against petitioner.

SO ORDERED.
 FIRST DIVISION
RESOLUTION

SANDOVAL-GUTIERREZ, J.:
PROFESSIONAL SERVICES, INC., G.R. No. 126297
Petitioner,
As the hospital industry changes, so must the laws and jurisprudence governing hospital liability. The
immunity from medical malpractice traditionally accorded to hospitals has to be eroded if we are to
- versus - balance the interest of the patients and hospitals under the present setting.

THE COURT OF APPEALS and NATIVIDAD and Before this Court is a motion for reconsideration filed by Professional Services, Inc. (PSI), petitioner in
ENRIQUE AGANA, G.R. No. 126297, assailing the Courts First Division Decision dated January 31, 2007, finding PSI and
Dr. Miguel Ampil, petitioner in G.R. No. 127590, jointly and severally liable for medical negligence.
Respondents,
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - x
G.R. No. 126467 A brief revisit of the antecedent facts is imperative.
NATIVIDAD (Substituted by her children
MARCELINO AGANA III, ENRIQUE AGANA, JR.,
EMMA AGANA ANDAYA, JESUS AGANA, and
RAYMUND AGANA) and ENRIQUE AGANA, On April 4, 1984, Natividad Agana was admitted at the Medical City General Hospital (Medical City)
because of difficulty of bowel movement and bloody anal discharge. Dr. Ampil diagnosed her to be
Petitioners, suffering from cancer of the sigmoid. Thus, on April 11, 1984, Dr. Ampil, assisted by the medical
staff[1] of Medical City, performed an anterior resection surgery upon her. During the surgery, he
found that the malignancy in her sigmoid area had spread to her left ovary, necessitating the removal
- versus - of certain portions of it.Thus, Dr. Ampil obtained the consent of Atty. Enrique Agana, Natividads
husband, to permit Dr. Juan Fuentes, respondent in G.R. No. 126467, to perform hysterectomy upon
Natividad.
THE COURT OF APPEALS and JUANFUENTES,
Respondents, Dr. Fuentes performed and completed the hysterectomy. Afterwards, Dr. Ampil took over, completed
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - x the operation and closed the incision. However, the operation appeared to be flawed. In the
corresponding Record of Operation dated April 11, 1984, the attending nurses entered these remarks:
MIGUEL AMPIL,
Petitioner,
sponge count lacking 2
announced to surgeon searched done (sic) but to no avail continue for
closure.
- versus - G.R. No. 127590

After a couple of days, Natividad complained of excruciating pain in her anal region. She consulted
Present: both Dr. Ampil and Dr. Fuentes about it. They told her that the pain was the natural consequence of
the surgical operation performed upon her. Dr. Ampil recommended that Natividad consult an
THE COURT OF APPEALS and oncologist to treat the cancerous nodes which were not removed during the operation.
NATIVIDAD AGANA and ENRIQUEAGANA, PUNO, C.J.,

Respondents. SANDOVAL-GUTIERREZ,
CORONA, On May 9, 1984, Natividad, accompanied by her husband, went to the United States to seek further
treatment. After four (4) months of consultations and laboratory examinations, Natividad was told
AZCUNA, and that she was free of cancer. Hence, she was advised to return to the Philippines.
LEONARDO-DE CASTRO, JJ.

On August 31, 1984, Natividad flew back to the Philippines, still suffering from pains. Two (2) weeks
Promulgated: thereafter, her daughter found a piece of gauze protruding from her vagina.Dr. Ampil was
immediately informed. He proceeded to Natividads house where he managed to extract by hand a
February 11, 2008 piece of gauze measuring 1.5 inches in width. Dr. Ampil then assured Natividad that the pains would
x---------------------------------------------------------x soon vanish.

Despite Dr. Ampils assurance, the pains intensified, prompting Natividad to seek treatment at
the Polymedic General Hospital. While confined thereat, Dr. Ramon Gutierrez detected the presence
of a foreign object in her vagina -- a foul-smelling gauze measuring 1.5 inches in width. The gauze had
badly infected her vaginal vault. A recto-vaginal fistula had formed in her reproductive organ which
forced stool to excrete through the vagina. Another surgical operation was needed to remedy the
situation. Thus, in October 1984, Natividad underwent another surgery.
On November 12, 1984, Natividad and her husband filed with the Regional Trial Court, Branch
96, Quezon City a complaint for damages against PSI (owner of Medical City), Dr. Ampil and Dr.
Fuentes.
On February 16, 1986, pending the outcome of the above case, Natividad died. She was duly
substituted by her above-named children (the Aganas).
On March 17, 1993, the trial court rendered judgment in favor of spouses Agana finding PSI,
Dr. Ampil and Dr. Fuentes jointly and severally liable. On appeal, the Court of Appeals, in its Decision
dated September 6, 1996, affirmed the assailed judgment with modification in the sense that the
complaint against Dr. Fuentes was dismissed.
PSI, Dr. Ampil and the Aganas filed with this Court separate petitions for review
on certiorari. On January 31, 2007, the Court, through its First Division, rendered a Decision holding
that PSI is jointly and severally liable with Dr. Ampil for the following reasons: first, there is an
employer-employee relationship between Medical City and Dr. Ampil.The Court relied on Ramos v.
Court of Appeals,[2] holding that for the purpose of apportioning responsibility in medical negligence
cases, an employer-employee relationship in effect exists between hospitals and their attending and
visiting physicians; second, PSIs act of publicly displaying in the lobby of the Medical City the names
and specializations of its accredited physicians, including Dr. Ampil, estopped it from denying the
existence of an employer-employee relationship between them under the doctrine of ostensible
agency or agency by estoppel; and third, PSIs failure to supervise Dr. Ampil and its resident physicians
and nurses and to take an active step in order to remedy their negligence rendered it directly liable
under the doctrine of corporate negligence.
In its motion for reconsideration, PSI contends that the Court erred in finding it liable under
Article 2180 of the Civil Code, there being no employer-employee relationship between it and its
consultant, Dr. Ampil. PSI stressed that the Courts Decision in Ramos holding that an employer-
employee relationship in effect exists between hospitals and their attending and visiting physicians
for the purpose of apportioning responsibility had been reversed in a subsequent
Resolution.[3] Further, PSI argues that the doctrine of ostensible agency or agency by estoppel cannot
apply because spouses Agana failed to establish one requisite of the doctrine, i.e., that Natividad
relied on the representation of the hospital in engaging the services of Dr. Ampil. And lastly, PSI
maintains that the doctrine of corporate negligence is misplaced because the proximate cause of
Natividads injury was Dr. Ampils negligence.
The motion lacks merit.
As earlier mentioned, the First Division, in its assailed Decision, ruled that an employer-
employee relationship in effect exists between the Medical City and Dr. Ampil.Consequently, both
are jointly and severally liable to the Aganas. This ruling proceeds from the following ratiocination
in Ramos:
We now discuss the responsibility of the hospital in this particular
incident. The unique practice (among private hospitals) of filling up specialist staff
with attending and visiting consultants, who are allegedly not hospital employees,
presents problems in apportioning responsibility for negligence in medical
malpractice cases. However, the difficulty is only more apparent than real.
In the first place, hospitals exercise significant control in the hiring and
firing of consultants and in the conduct of their work within the hospital
premises. Doctors who apply for consultant slots, visiting or attending, are required
to submit proof of completion of residency, their educational qualifications;
generally, evidence of accreditation by the appropriate board (diplomate), evidence
of fellowship in most cases, and references. These requirements are carefully
scrutinized by members of the hospital administration or by a review committee set
up by the hospital who either accept or reject the application. This is particularly true
with respondent hospital.
After a physician is accepted, either as a visiting or attending consultant,
he is normally required to attend 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 physicians performance as a
specialist is generally evaluated by a peer review committee on the basis of
mortality and morbidity statistics, and feedback from patients, nurses, interns and
residents. A consultant remiss in his duties, or a consultant who regularly falls
short of the minimum standards acceptable to the hospital or its peer review
committee, is normally politely terminated.
In other words, private hospitals hire, fire and exercise real control over their
attending and visiting consultant staff. While consultants are not, technically
employees, a point which respondent hospital asserts in denying all responsibility
for the patients condition, the control exercised, the hiring, and the right to
terminate consultants all fulfill the important hallmarks of an 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 petitioners condition.
The basis for holding an employer solidarily responsible for the negligence
of its employee is found in Article 2180 of the Civil Code which considers a person
accountable not only for his own acts but also for those of others based on the
formers responsibility under a relationship of partia ptetas.
Clearly, in Ramos, the Court considered the peculiar relationship between a hospital and its
consultants on the bases of certain factors. One such factor is the control test wherein the hospital
exercises control in the hiring and firing of consultants, like Dr. Ampil, and in the conduct of their work.
Actually, contrary to PSIs contention, the Court did not reverse its ruling in Ramos. What it
clarified was that the De Los Santos Medical Clinic did not exercise control over its consultant, hence,
there is no employer-employee relationship between them. Thus, despite the granting of the said
hospitals motion for reconsideration, the doctrine inRamos stays, i.e., for the purpose of allocating
responsibility in medical negligence cases, an employer-employee relationship exists between
hospitals and their consultants.
In the instant cases, PSI merely offered a general denial of responsibility, maintaining that
consultants, like Dr. Ampil, are independent contractors, not employees of the hospital. Even
assuming that Dr. Ampil is not an employee of Medical City, but an independent contractor, still the
said hospital is liable to the Aganas.
In Nograles, et al. v. Capitol Medical Center, et al.,[4] through Mr. Justice Antonio T. Carpio,
the Court held:
 The question now is whether CMC is automatically exempt from liability
considering that Dr. Estrada is an independent contractor-physician.
In general, a hospital is not liable for the negligence of an independent
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. (Jones v. Philpott,
702 F. Supp. 1210 [1988]) This exception is also known as the doctrine of apparent
authority. (Sometimes referred to as the apparent or ostensible agency theory. [King
v. Mitchell, 31 A.D.3rd 958, 819 N.Y. S.2d 169 (2006)].
xxx
The doctrine of apparent authority essentially involves two factors to
determine the liability of an independent contractor-physician.
The first factor focuses on the hospitals manifestations and is sometimes
described as an inquiry whether the hospital acted in a manner which would lead a
reasonable person to conclude that the individual who was alleged to be negligent
was an employee or agent of the hospital. (Diggs v. Novant Health, Inc., 628 S.E.2d
851 (2006) citing Hylton v. Koontz, 138 N.C. App. 629 (2000). In this regard, the
hospital need not make express representations to the patient that the treating
physician is an employee of the hospital; rather a representation may be general
and implied. (Id.)
The doctrine of apparent authority is a specie of the doctrine of estoppel.
Article 1431 of the Civil Code provides that [t]hrough estoppel, an admission or
representation is rendered conclusive upon the person making it, and cannot be
denied or disproved as against the person relying thereon. Estoppel rests on this rule:
Whether a party has, by his own declaration, act, or omission, intentionally and
deliberately led another to believe a particular thing true, and to act upon such belief,
he cannot, in any litigation arising out of such declaration, act or omission, be
permitted to falsify it. (De Castro v. Ginete, 137 Phil. 453 [1969], citing Sec. 3, par. A,
Rule 131 of the Rules of Court. See also King v. Mitchell, 31 A.D.3rd 958, 819 N.Y.S.2d
169 [2006]).
xxx
The second factor focuses on the patients reliance. It is sometimes
characterized as an inquiry on whether the plaintiff acted in reliance upon the
conduct of the hospital or its agent, consistent with ordinary care and prudence.
(Diggs v. Novant Health, Inc.)
PSI argues that the doctrine of apparent authority cannot apply to these cases because
spouses Agana failed to establish proof of their reliance on the representation of Medical City that
Dr. Ampil is its employee.
The argument lacks merit.
Atty. Agana categorically testified that one of the reasons why he chose Dr. Ampil was that he
knew him to be a staff member of Medical City, a prominent and known hospital.
Q Will you tell us what transpired in your visit to Dr. Ampil?
A Well, I saw Dr. Ampil at the Medical City, I know him to be a staff member there,
and I told him about the case of my wife and he asked me to bring my wife
over so she could be examined. Prior to that, I have known Dr. Ampil, first,
he was staying in front of our house, he was a neighbor, second, my
daughter was his student in the University of the East School of Medicine at
Ramon Magsaysay; and when my daughter opted to establish a hospital or
a clinic, Dr. Ampil was one of our consultants on how to establish that
hospital. And from there, I have known that he was a specialist when it
comes to that illness.
Atty. Agcaoili
On that particular occasion, April 2, 1984, what was your reason for choosing to
contact Dr. Ampil in connection with your wifes illness?
A First, before that, I have known him to be a specialist on that part of the body as a
surgeon; second, I have known him to be a staff member of the Medical
City which is a prominent and known hospital. And third, because he is a
neighbor, I expect more than the usual medical service to be given to us,
than his ordinary patients.[5]
Clearly, PSI is estopped from passing the blame solely to Dr. Ampil. Its act of displaying his
name and those of the other physicians in the public directory at the lobby of the hospital amounts
to holding out to the public that it offers quality medical service through the listed physicians. This
justifies Atty. Aganas belief that Dr. Ampil was a member of the hospitals staff. It must be stressed
that under the doctrine of apparent authority, the question in every case is whether the principal
has by his voluntary act placed the agent in such a situation that a person of ordinary prudence,
conversant with business usages and the nature of the particular business, is justified in presuming
that such agent has authority to perform the particular act in question.[6] In these cases, the
circumstances yield a positive answer to the question.
The challenged Decision also anchors its ruling on the doctrine of corporate
responsibility.[7] The duty of providing quality medical service is no longer the sole prerogative and
responsibility of the physician. This is because the modern hospital now tends to organize a highly-
professional medical staff whose competence and performance need also to be monitored by the
hospital commensurate with its inherent responsibility to provide quality medical care.[8] Such
responsibility includes the proper supervision of the members of its medical staff. Accordingly,
the hospital has the duty to make a reasonable effort to monitor and oversee the treatment
prescribed and administered by the physicians practicing in its premises.
Unfortunately, PSI had been remiss in its duty. It did not conduct an immediate
investigation on the reported missing gauzes to the great prejudice and agony of its patient. Dr.
Jocson, a member of PSIs medical staff, who testified on whether the hospital conducted an
investigation, was evasive, thus:
Q We go back to the operative technique, this was signed by Dr. Puruganan, was
this submitted to the hospital?
A Yes, sir, this was submitted to the hospital with the record of the patient.
Q Was the hospital immediately informed about the missing sponges?
A That is the duty of the surgeon, sir.
Q As a witness to an untoward incident in the operating room, was it not your
obligation, Dr., to also report to the hospital because you are under the
control and direction of the hospital?
 A The hospital already had the record of the two OS missing, sir. Q You said you relied on the promise of Dr. Ampil and despite the promise you were
not able to obtain the said record. Did you go back to the record custodian?
A I did not because I was talking to Dr. Ampil. He promised me.
Q If you place yourself in the position of the hospital, how will you recover.
Q After your talk to Dr. Ampil, you went to the record custodian?
A You do not answer my question with another question.
A I went to the record custodian to get the clinical record of my wife, and I was
given a portion of the records consisting of the findings, among them, the
Q Did the hospital do anything about the missing gauzes? entries of the dates, but not the operating procedure and operative
report.[10]
A The hospital left it up to the surgeon who was doing the operation, sir.

Q Did the hospital investigate the surgeon who did the operation?
A I am not in the position to answer that, sir.
In sum, we find no merit in the motion for reconsideration.

Q You never did hear the hospital investigating the doctors involved in this case of
those missing sponges, or did you hear something? WHEREFORE, we DENY PSIs motion for reconsideration with finality.

xxxxxx SO ORDERED.

A I think we already made a report by just saying that two sponges were missing,
it is up to the hospital to make the move.

Atty. Agana

Precisely, I am asking you if the hospital did a move, if the hospital did a move.
A I cannot answer that.

Court
By that answer, would you mean to tell the Court that you were aware if there was
such a move done by the hospital?
A I cannot answer that, your honor, because I did not have any more follow-up of
the case that happened until now.[9]

The above testimony obviously shows Dr. Jocsons lack of concern for the patients. Such
conduct is reflective of the hospitals manner of supervision. Not only did PSI breach its duty to
oversee or supervise all persons who practice medicine within its walls, it also failed to take an
active step in fixing the negligence committed.This renders PSI, not only vicariously liable for the
negligence of Dr. Ampil under Article 2180 of the Civil Code, but also directly liable for its own
negligence under Article 2176.

Moreover, there is merit in the trial courts finding that the failure of PSI to conduct an
investigation established PSIs part in the dark conspiracy of silence and concealment about the
gauzes. The following testimony of Atty. Agana supports such findings, thus:
 Republic of the Philippines WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent South
SUPREME COURT East (Int’l.) Rattan, Inc. to pay complainant Jesus J. Coming the following:
Manila
1. Separation pay ₱114,400.00
FIRST DIVISION
2. Backwages P 30,400.00
G.R. No. 186621 March 12, 2014
3. Wage differential P 15,015.00
1
SOUTH EAST INTERNATIONAL RATTAN, INC. and/or ESTANISLAO AGBAY, Petitioners, 4. 13th month pay P 5,958.00
vs.
JESUS J. COMING, Respondent. 5. Holiday pay P 4,000.00

DECISION 6. Service incentive leave pay P 2,000.00

VILLARAMA, JR., J.: Total award ₱171,773.00

Before the Court is a petition for review on certiorari under Rule 45 to reverse and set aside the
Decision2 dated February 21, 2008 and Resolution3 dated February 9, 2009 of the Court of Appeals
(CA) in CA-GR. CEB-SP No. 02113. The other claims and the case against respondent Estanislao Agbay are dismissed for lack of merit.

Petitioner South East International Rattan, Inc. (SEIRI) is a domestic corporation engaged in the
business of manufacturing and exporting furniture to various countries with principal place of
business at Paknaan, Mandaue City, while petitioner Estanislao Agbay, as per records, is the
President and General Manager of SEIRI.4
On November 3, 2003, respondent Jesus J. Coming filed a complaint5 for illegal dismissal,
underpayment of wages, non-payment of holiday pay, 13th month pay and service incentive leave
pay, with prayer for reinstatement, back wages, damages and attorney’s fees.
Respondent alleged that he was hired by petitioners as Sizing Machine Operator on March 17, 1984.
His work schedule is from 8:00 a.m. to 5:00 p.m. Initially, his compensation was on "pakiao" basis
but sometime in June 1984, it was fixed at ₱150.00 per day which was paid weekly. In 1990, without
any apparent reason, his employment was interrupted as he was told by petitioners to resume work
in two months time. Being an uneducated person, respondent was persuaded by the management
as well as his brother not to complain, as otherwise petitioners might decide not to call him back for
work. Fearing such consequence, respondent accepted his fate. Nonetheless, after two months he
reported back to work upon order of management.6
Despite being an employee for many years with his work performance never questioned by
petitioners, respondent was dismissed on January 1, 2002 without lawful cause. He was told that he
will be terminated because the company is not doing well financially and that he would be called
back to work only if they need his services again. Respondent waited for almost a year but
petitioners did not call him back to work. When he finally filed the complaint before the regional
arbitration branch, his brother Vicente was used by management to persuade him to withdraw the
case.7
On their part, petitioners denied having hired respondent asserting that SEIRI was incorporated only
in 1986, and that respondent actually worked for SEIRI’s furniture suppliers because when the
company started in 1987 it was engaged purely in buying and exporting furniture and its business
operations were suspended from the last quarter of 1989 to August 1992. They stressed that
respondent was not included in the list of employees submitted to the Social Security System (SSS).
Moreover, respondent’s brother, Vicente Coming, executed an affidavit8 in support of petitioners’
position while Allan Mayol and Faustino Apondar issued notarized certifications9 that respondent
worked for them instead.10
SO ORDERED.13
Petitioners appealed to the National Labor Relations Commission (NLRC)-Cebu City where they
submitted the following additional evidence: (1) copies of SEIRI’s payrolls and individual pay records
of employees;14 (2) affidavit15of SEIRI’s Treasurer, Angelina Agbay; and (3) second affidavit16 of
Vicente Coming.
On July 28, 2005, the NLRC’s Fourth Division rendered its Decision,17 the dispositive portion of which
states:
WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby SET ASIDE and
VACATED and a new one entered DISMISSING the complaint.
SO ORDERED.18
The NLRC likewise denied respondent’s motion for reconsideration.19
Respondent elevated the case to the CA via a petition for certiorari under Rule 65.
By Decision dated February 21, 2008, the CA reversed the NLRC and ruled that there existed an
employer-employee relationship between petitioners and respondent who was dismissed without
just and valid cause.
The CA thus decreed:
WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The assailed Decision dated
July 28, 2005 issued by the National Labor Relations Commission (NLRC), Fourth Division, Cebu City
in NLRC Case No. V-000625-2004 is REVERSED and SET ASIDE. The Decision of the Labor Arbiter
dated April 30, 2004 is REINSTATED with MODIFICATION on the computation of backwages which
should be computed from the time of illegal termination until the finality of this decision.
Further, the Labor Arbiter is directed to make the proper adjustment in the computation of the
award of separation pay as well as the monetary awards of wage differential, 13th month pay,
holiday pay and service incentive leave pay.

With the denial of petitioners that respondent was their employee, the latter submitted an SO ORDERED.20
affidavit11 signed by five former co-workers stating that respondent was one of the pioneer
employees who worked in SEIRI for almost twenty years. Petitioners filed a motion for reconsideration but the CA denied it under Resolution dated February
9, 2009.
In his Decision12 dated April 30, 2004, Labor Arbiter Ernesto F. Carreon ruled that respondent is a
regular employee of SEIRI and that the termination of his employment was illegal. The dispositive Hence, this petition raising the following issues:
portion of the decision reads:
6.1
WHETHER UNDER THE FACTS AND EVIDENCE ON RECORD, THE FINDING OF THE HONORABLE COURT
OF APPEALS THAT THERE EXISTS EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN PETITIONERS AND
RESPONDENT IS IN ACCORD WITH LAW AND APPLICABLE DECISIONS OF THIS HONORABLE COURT.
6.2
WHETHER THE HONORABLE COURT OF APPEALS CORRECTLY APPRECIATED IN ACCORDANCE WITH
APPLICABLE LAW AND JURISPRUDENCE THE EVIDENCE PRESENTED BY BOTH PARTIES.
6.3
WHETHER UNDER THE FACTS AND EVIDENCE PRESENTED, THE FINDING OF THE HONORABLE COURT
OF APPEALS THAT PETITIONERS ARE LIABLE FOR ILLEGAL DISMISSAL OF RESPONDENT IS IN ACCORD
WITH APPLICABLE LAW AND JURISPRUDENCE.
6.4
WHETHER UNDER THE FACTS PRESENTED, THE RULING OF THE HONORABLE COURT OF APPEALS
THAT THE BACKWAGES DUE THE RESPONDENT SHOULD BE COMPUTED FROM THE TIME OF ILLEGAL
TERMINATION UNTIL THE FINALITY OF THE DECISION IS SUPPORTED BY PREVAILING
JURISPRUDENCE.21
Resolution of the first issue is paramount in view of petitioners’ denial of the existence of employer-
employee relationship.
The issue of whether or not an employer-employee relationship exists in a given case is essentially a
question of fact. As a rule, this Court is not a trier of facts and this applies with greater force in labor
cases.22 Only errors of law are generally reviewed by this Court.23 This rule is not absolute, however,
and admits of exceptions. For one, the Court may look into factual issues in labor cases when the
factual findings of the Labor Arbiter, the NLRC, and the CA are conflicting.24 Here, the findings of the
NLRC differed from those of the Labor Arbiter and the CA, which compels the Court’s exercise of its
authority to review and pass upon the evidence presented and to draw its own conclusions
therefrom.25
To ascertain the existence of an employer-employee relationship jurisprudence has invariably
adhered to the four-fold test, to wit: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power to control the employee’s conduct,
or the so-called "control test."26 In resolving the issue of whether such relationship exists in a given
case, substantial evidence – that amount of relevant evidence which a reasonable mind might
accept as adequate to justify a conclusion – is sufficient. Although no particular form of evidence is
required to prove the existence of the relationship, and any competent and relevant evidence to
prove the relationship may be admitted, a finding that the relationship exists must nonetheless rest
on substantial evidence.27
In support of their claim that respondent was not their employee, petitioners presented
Employment Reports to the SSS from 1987 to 2002, the Certifications issued by Mayol and Apondar,
two affidavits of Vicente Coming, payroll sheets (1999-2000), individual pay envelopes and
employee earnings records (1999-2000) and affidavit of Angelina Agbay (Treasurer and Human
Resources Officer). The payroll and pay records did not include the name of respondent. The
affidavit of Ms. Agbay stated that after SEIRI started its business in 1986 purely on export trading, it
ceased operations in 1989 as evidenced by Certification dated January 18, 1994 from the Securities
and Exchange Commission (SEC); that when business resumed in 1992, SEIRI undertook only a little
of manufacturing; that the company never hired any workers for varnishing and pole sizing because
it bought the same from various suppliers, including Faustino Apondar; respondent was never hired
by SEIRI; and while it is true that Mr. Estanislao Agbay is the company President, he never dispensed
the salaries of workers.28
In his first affidavit, Vicente Coming averred that:
6. [Jesus Coming] is a furniture factory worker. In 1982 to 1986, he was working with Ben
Mayol as round core maker/splitter.
7. Thereafter, we joined Okay Okay Yard owned by Amelito Montececillo. This is a rattan
trader with business address near Cebu Rattan Factory on a "Pakiao" basis.
8. However, Jesus and I did not stay long at Okay Okay Yard and instead we joined Eleuterio
Agbay in Labogon, Cebu in 1989. In 1991, we went back to Okay Okay located near the
residence of Atty. Vicente de la Serna in Mandaue City. We were on a "pakiao" basis. We
stayed put until 1993 when we resigned and joined Dodoy Luna in Labogon, Mandaue City
as classifier until 1995. In 1996[,] Jesus rested. It was only in 1997 that he worked back. He
replaced me, as a classifier in Rattan Traders owned by Allan Mayol. But then, towards the
end of the year, he left the factory and relaxed in our place of birth, in Sogod, Cebu.
9. It was only towards the end of 1999 that Jesus was taken back by Allan Mayol as sizing
machine operator. However, the work was off and on basis. Not regular in nature, he was
harping a side line job with me knowing that I am now working with Faustino Apondar that
supplies rattan furniture’s [sic] to South East (Int’l) Rattan, Inc. As a brother, I allowed Jesus
to work with me and collect the proceeds of his services as part of my collectibles from
Faustino Apondar since I was on a "pakiao" basis. He was working at his pleasure. Which
means, he works if he likes to? That will be until 10:00 o’clock in the evening.
x x x x29
The Certification dated January 20, 2004 of Allan Mayol reads:
This is to certify that I personally know Jesus Coming, the brother of Vicente Coming. Jesus is a
rattan factory worker and he was working with me as rattan pole sizing/classifier of my business
from 1997 up to part of 1998 when he left my factory at will. I took him back towards the end of
1999, this time as a sizing machine operator. In all these years, his services are not regular. He works
only if he likes to.30
Faustino Apondar likewise issued a Certification which states:
This is to certify that I am a maker/supplier of finished Rattan Furniture. As such, I have several
rattan furniture workers under me, one of whom is Vicente Coming, the brother of Jesus Coming.
That sometime in 1999, Vicente pleaded to me for a side line job of his brother, Jesus who was
already connected with Allan Mayol. Having vouched for the integrity of his brother and knowing
that the job is temporary in character, I allowed Jesus to work with his brother Vicente. However,
the proceeds will be collected together with his brother Vicente since it was the latter who was
working with me. He renders services to his brother work only after the regular working hours but
off and on basis.31
On the other hand, respondent submitted the affidavit executed by Eleoterio Brigoli, Pedro Brigoli,
Napoleon Coming, Efren Coming and Gil Coming who all attested that respondent was their co-
worker at SEIRI.
Their affidavit reads:
We, the undersigned, all of legal ages, Filipino, and resident[s] of Cebu, after having been duly sworn
to in accordance with law, depose and say:
That we are former employees of SOUTH EAST RATTAN which is owned by Estan Eslao Agbay;
That we personally know JESUS COMING considering that we worked together in one company
SOUTH EAST RATTANT [sic];
That we together with JESUS COMING are all under the employ of ESTAN ESLAO AGBAY considering
that the latter is the one directly paying us and holds the absolute control of all aspects of our
employment;
That it is not true that JESUS COMING is under the employ of one person other than ESTAN ESLAO
AGBAY OF SOUTH EAST RATTAN;
That Jesus Coming is one of the pioneer employees of SOUTH EAST RATTAN and had been employed
therein for almost twenty years;
That we executed this affidavit to attest to the truth of the foregoing facts and to deny any contrary
allegation made by the company against his employment with SOUTH EAST RATTAN.32
In his decision, Labor Arbiter Carreon found that respondent’s work as sizing machine operator is
usually necessary and desirable to the rattan furniture business of petitioners and their failure to
include respondent in the employment report to SSS is not conclusive proof that respondent is not
their employee. As to the affidavit of Vicente Coming, Labor Arbiter Carreon did not give weight to
his statement that respondent is not petitioners’ employee but that of one Faustino Apondar. Labor
Arbiter Carreon was not convinced that Faustino Apondar is an independent contractor who has a
contractual relationship with petitioners.
In reversing the Labor Arbiter, the NLRC reasoned as follows:
First complainant alleged that he worked continuously from March 17, 1984 up to January 21,
2002.1âwphi1 Records reveal however that South East (Int’l.) Rattan, Inc. was incorporated only last
July 18, 1986 (p. 55 records)[.] Moreover, when they started to actually operate in 1987, the
company was engaged purely on "buying and exporting rattan furniture" hence no manufacturing
employees were hired. Furthermore, from the last quarter of 1989 up to August of 1992, the
company suspended operations due to economic reverses as per Certification issued by the
Securities and Exchange Commission (p. 56 records)[.]
Second, for all his insistence that he was a regular employee, complainant failed to present a single
payslip, voucher or a copy of a company payroll showing that he rendered service during the period
indicated therein. x x x
From the above established facts we are inclined to give weight and credence to the Certifications of
Allan Mayol and Faustino Apondar, both suppliers of finished Rattan Furniture (pp. 442-43, records).
It appears that complainant first worked with Allan Mayol and later with Faustino Apondar upon the
proddings of his brother Vicente. Vicente’s affidavit as to complainant’s employment history was
more detailed and forthright. x x x
xxxx
In the case at bar, there is likewise substantial evidence to support our findings that complainant
was not an employee of respondents. Thus:
1. Complainant’s name does not appear in the list of employees reported to the SSS.
2. His name does not also appear in the sample payrolls of respondents’ employees.
3. The certification of Allan Mayol and Fasutino Apondar[,] supplier of finished rattan
products[,] that complainant had at one time or another worked with them.
4. The Affidavit of Vicente Coming, complainant’s full brother[,] attesting that complainant
had never been an employee of respondent. The only connection was that their employer
Faustino Apondar supplies finished rattan products to respondents.33
On the other hand, the CA gave more credence to the declarations of the five former employees of
petitioners that respondent was their co-worker in SEIRI. One of said affiants is Vicente Coming’s
own son, Gil Coming. Vicente averred in his second affidavit that when he confronted his son, the
latter explained that he was merely told by their Pastor to sign the affidavit as it will put an end to
the controversy. Vicente insisted that his son did not know the contents and implications of the
document he signed. As to the absence of respondent’s name in the payroll and SSS employment
report, the CA observed that the payrolls submitted were only from January 1, 1999 to December
29, 2000 and not the entire period of eighteen years when respondent claimed he worked for SEIRI.
It further noted that the names of the five affiants, whom petitioners admitted to be their former
employees, likewise do not appear in the aforesaid documents. According to the CA, it is apparent
that petitioners maintained a separate payroll for certain employees or willfully retained a portion
of the payroll.
x x x As to the "control test", the following facts indubitably reveal that respondents wielded control
over the work performance of petitioner, to wit: (1) they required him to work within the company
premises; (2) they obliged petitioner to report every day of the week and tasked him to usually
perform the same job; (3) they enforced the observance of definite hours of work from 8 o’clock in
the morning to 5 o’clock in the afternoon; (4) the mode of payment of petitioner’s salary was under
their discretion, at first paying him on pakiao basis and thereafter, on daily basis; (5) they
implemented company rules and regulations; (6) [Estanislao] Agbay directly paid petitioner’s salaries
and controlled all aspects of his employment and (7) petitioner rendered work necessary and
desirable in the business of the respondent company.34
We affirm the CA.
In Tan v. Lagrama,35 the Court held that the fact that a worker was not reported as an employee to
the SSS is not conclusive proof of the absence of employer-employee relationship. Otherwise, an
employer would be rewarded for his failure or even neglect to perform his obligation.36
Nor does the fact that respondent’s name does not appear in the payrolls and pay envelope records
submitted by petitioners negate the existence of employer-employee relationship. For a payroll to
be utilized to disprove the employment of a person, it must contain a true and complete list of the
employee.37 In this case, the exhibits offered by petitioners before the NLRC consisting of copies of
payrolls and pay earnings records are only for the years 1999 and 2000; they do not cover the entire
18-year period during which respondent supposedly worked for SEIRI.
In their comment to the petition filed by respondent in the CA, petitioners emphasized that in the
certifications issued by Mayol and Apondar, it was shown that respondent was employed and
working for them in those years he claimed to be working for SEIRI. However, a reading of the
certification by Mayol would show that while the latter claims to have respondent under his employ
in 1997, 1998 and 1999, respondent’s services were not regular and that he works only if he wants
to. Apondar’s certification likewise stated that respondent worked for him since 1999 through his
brother Vicente as "sideline" but only after regular working hours and "off and on" basis. Even
assuming the truth of the foregoing statements, these do not foreclose respondent’s regular or full-
time employment with SEIRI. In effect, petitioners suggest that respondent was employed by SEIRI’s
suppliers, Mayol and Apondar but no competent proof was presented as to the latter’s status as
independent contractors.
In the same comment, petitioners further admitted that the five affiants who attested to
respondent’s employment with SEIRI are its former workers whom they describe as "disgruntled
workers of SEIRI" with an axe to grind against petitioners, and that their execution of affidavit in
support of respondent’s claim is "their very way of hitting back the management of SEIRI after
disciplinary measures were meted against them."38 This allegation though was not substantiated by
petitioners. Instead, after the CA rendered its decision reversing the NLRC’s ruling, petitioners
subsequently changed their theory by denying the employment relationship with the five affiants in
their motion for reconsideration, thus:
x x x Since the five workers were occupying and working on a leased premises of the private
respondent, they were called workers of SEIRI (private respondent). Such admission however, does
not connote employment. For the truth of the matter, all of the five employees of the supplier
assigned at the leased premises of the private respondent. Because of the recommendation of the
private respondent with regards to the disciplinary measures meted on the five workers, they
wanted to hit back against the private respondent. Their motive to implicate private respondent was
to vindicate. Definitely, they have an axe to grind against the private respondent. Mention has to be
made that despite the dismissal of these five (5) witnesses from their service, none of them ever
went to the National Labor [Relations] Commission and invoked their rights, if any, against their
employer or at the very least against the respondent. The reason is obvious, since they knew pretty
well that they were not employees of SEIRI but rather under the employ of Allan Mayol and Faustino
Apondar, working on a leased premise of respondent. x x x39
Petitioners’ admission that the five affiants were their former employees is binding upon them.
While they claim that respondent was the employee of their suppliers Mayol and Apondar, they did
not submit proof that the latter were indeed independent contractors; clearly, petitioners failed to
discharge their burden of proving their own affirmative allegation.40 There is thus no showing that
the five former employees of SEIRI were motivated by malice, bad faith or any ill-motive in executing
their affidavit supporting the claims of respondent.
In any controversy between a laborer and his master, doubts reasonably arising from the evidence
are resolved in favor of the laborer.41

As a regular employee, respondent enjoys the right to security of tenure under Article 27942 of the
Labor Code and may only be dismissed for a just43 or authorized44 cause, otherwise the dismissal
becomes illegal.

Respondent, whose employment was terminated without valid cause by petitioners, is entitled to
reinstatement without loss of seniority rights and other privileges and to his full back wages,
inclusive of allowances and other benefits or their monetary equivalent, computed from the time his
compensation was withheld from him up to the time of his actual reinstatement. Where
reinstatement is no longer viable as an option, back wages shall be computed from the time of the
illegal termination up to the finality of the decision. Separation pay equivalent to one month salary
for every year of service should likewise be awarded as an alternative in case reinstatement in not
possible.45

WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated February 21, 2008
and Resolution dated February 9, 2009 of the Court of Appeals in CA-G.R. No. CEB-SP No. 02113 are
hereby AFFIRMED and UPHELD.

Petitioners to pay the costs of suit.

SO ORDERED.

MARTIN S. VILLARAMA, JR.

Associate Justice

WE CONCUR:
 Republic of the Philippines
SUPREME COURT
Baguio City
FIRST DIVISION
G.R. No. 192998 April 2, 2014
BERNARD A. TENAZAS, JAIME M. FRANCISCO and ISIDRO G. ENDRACA, Petitioners,
vs.
R. VILLEGAS TAXI TRANSPORT and ROMUALDO VILLEGAS, Respondents.
DECISION
REYES, J.:
This is a petition for review on certiorari1 filed under Rule 45 of the Rules of Court, assailing the
Decision2 dated March 11, 2010 and Resolution3 dated June 28, 2010 of the Court of Appeals (CA) in
CA-G.R. SP No. 111150, which affirmed with modification the Decision4 dated June 23, 2009 of the
National Labor Relations Commission (NLRC) in NLRC LAC Case No. 07-002648-08.
The Antecedent Facts
On July 4, 2007, Bernard A. Tenazas (Tenazas) and Jaime M. Francisco (Francisco) filed a complaint
for illegal dismissal against R. Villegas Taxi Transport and/or Romualdo Villegas (Romualdo) and
Andy Villegas (Andy) (respondents). At that time, a similar case had already been filed by Isidro G.
Endraca (Endraca) against the same respondents. The two (2) cases were subsequently
consolidated.5
In their position paper,6 Tenazas, Francisco and Endraca (petitioners) alleged that they were hired
and dismissed by the respondents on the following dates:
Name Date of Hiring Date of Dismissal Salary
Bernard A. Tenazas 10/1997 07/03/07 Boundary System
Jaime M. Francisco 04/10/04 06/04/07 Boundary System
Isidro G. Endraca 04/2000 03/06/06 Boundary System7
Relaying the circumstances of his dismissal, Tenazas alleged that on July 1, 2007, the taxi unit
assigned to him was sideswiped by another vehicle, causing a dent on the left fender near the driver
seat. The cost of repair for the damage was estimated at ₱500.00. Upon reporting the incident to
the company, he was scolded by respondents Romualdo and Andy and was told to leave the garage
for he is already fired. He was even threatened with physical harm should he ever be seen in the
company’s premises again. Despite the warning, Tenazas reported for work on the following day but
was told that he can no longer drive any of the company’s units as he is already fired.8
Francisco, on the other hand, averred that his dismissal was brought about by the company’s
unfounded suspicion that he was organizing a labor union. He was instantaneously terminated,
without the benefit of procedural due process, on June 4, 2007.9
Endraca, for his part, alleged that his dismissal was instigated by an occasion when he fell short of
the required boundary for his taxi unit. He related that before he was dismissed, he brought his taxi
unit to an auto shop for an urgent repair. He was charged the amount of ₱700.00 for the repair
services and the replacement parts. As a result, he was not able to meet his boundary for the day.
Upon returning to the company garage and informing the management of the incident, his driver’s
license was confiscated and was told to settle the deficiency in his boundary first before his license
will be returned to him. He was no longer allowed to drive a taxi unit despite his persistent pleas.10
For their part, the respondents admitted that Tenazas and Endraca were employees of the company,
the former being a regular driver and the latter a spare driver. The respondents, however, denied
that Francisco was an employee of the company or that he was able to drive one of the company’s
units at any point in time.11
The respondents further alleged that Tenazas was never terminated by the company. They claimed
that on July 3, 2007, Tenazas went to the company garage to get his taxi unit but was informed that
it is due for overhaul because of some mechanical defects reported by the other driver who takes
turns with him in using the same. He was thus advised to wait for further notice from the company if
his unit has already been fixed. On July 8, 2007, however, upon being informed that his unit is ready
for release, Tenazas failed to report back to work for no apparent reason.12
As regards Endraca, the respondents alleged that they hired him as a spare driver in February 2001.
They allow him to drive a taxi unit whenever their regular driver will not be able to report for work.
In July 2003, however, Endraca stopped reporting for work without informing the company of his
reason. Subsequently, the respondents learned that a complaint for illegal dismissal was filed by
Endraca against them. They strongly maintained, however, that they could never have terminated
Endraca in March 2006 since he already stopped reporting for work as early as July 2003. Even then,
they expressed willingness to accommodate Endraca should he wish to work as a spare driver for
the company again since he was never really dismissed from employment anyway.13
On May 29, 2008, the petitioners, by registered mail, filed a Motion to Admit Additional
Evidence.14 They alleged that after diligent efforts, they were able to discover new pieces of
evidence that will substantiate the allegations in their position paper. Attached with the motion are
the following: (a) Joint Affidavit of the petitioners;15 (2) Affidavit of Good Faith of Aloney Rivera, a
co-driver;16 (3) pictures of the petitioners wearing company shirts;17 and (4) Tenazas’
Certification/Record of Social Security System (SSS) contributions.18
The Ruling of the Labor Arbiter
On May 30, 2008, the Labor Arbiter (LA) rendered a Decision,19 which pertinently states, thus:
In the case of complainant Jaime Francisco, respondents categorically denied the existence of an
employer-employee relationship. In this situation, the burden of proof shifts to the complainant to
prove the existence of a regular employment. Complainant Francisco failed to present evidence of
regular employment available to all regular employees, such as an employment contract, company
ID, SSS, withholding tax certificates, SSS membership and the like.
In the case of complainant Isidro Endraca, respondents claim that he was only an extra driver who
stopped reporting to queue for available taxi units which he could drive. In fact, respondents offered
him in their Position Paper on record, immediate reinstatement as extra taxi driver which offer he
refused.
In case of Bernard Tenazas, he was told to wait while his taxi was under repair but he did not report
for work after the taxi was repaired. Respondents[,] in their Position Paper, on record likewise,
offered him immediate reinstatement, which offer he refused.
We must bear in mind that the complaint herein is one of actual dismissal. But there was no formal
investigations, no show cause memos, suspension memos or termination memos were never issued.
Otherwise stated, there is no proof of overt act of dismissal committed by herein respondents.
We are therefore constrained to rule that there was no illegal dismissal in the case at bar.
The situations contemplated by law for entitlement to separation pay does [sic] not apply.
WHEREFORE, premises considered, instant consolidated complaints are hereby dismissed for lack of
merit.
SO ORDERED.20
The Ruling of the NLRC
Unyielding, the petitioners appealed the decision of the LA to the NLRC. Subsequently, on June 23,
2009, the NLRC rendered a Decision,21 reversing the appealed decision of the LA, holding that the
additional pieces of evidence belatedly submitted by the petitioners sufficed to establish the
existence of employer-employee relationship and their illegal dismissal. It held, thus:
In the challenged decision, the Labor Arbiter found that it cannot be said that the complainants
were illegally dismissed, there being no showing, in the first place, that the respondent [sic]
terminated their services. A portion thereof reads:
"We must bear in mind that the complaint herein is one of actual dismissal. But there were no
formal investigations, no show cause memos, suspension memos or termination memos were never
issued. Otherwise stated, there is no proof of overt act of dismissal committed by herein
respondents.
We are therefore constrained to rule that there was no illegal dismissal in the case at bar."
Issue: [W]hether or not the complainants were illegally dismissed from employment.
It is possible that the complainants’ Motion to Admit Additional Evidence did not reach the Labor
Arbiter’s attention because he had drafted the challenged decision even before they submitted it,
and thereafter, his staff attended only to clerical matters, and failed to bring the motion in question
to his attention. It is now up to this Commission to consider the complainants’ additional evidence.
Anyway, if this Commission must consider evidence submitted for the first time on appeal (Andaya
vs. NLRC, G.R. No. 157371, July 15, 2005), much more so must it consider evidence that was simply
overlooked by the Labor Arbiter.
Among the additional pieces of evidence submitted by the complainants are the following: (1) joint
affidavit (records, p. 51-52) of the three (3) complainants; (2) affidavit (records, p. 53) of Aloney
Rivera y Aldo; and (3) three (3) pictures (records, p. 54) referred to by the complainant in their joint
affidavit showing them wearing t-shirts bearing the name and logo of the respondent’s company.
xxxx
WHEREFORE, the decision appealed from is hereby REVERSED. Respondent Rom[u]aldo Villegas
doing business under the name and style Villegas Taxi Transport is hereby ordered to pay the
complainants the following (1) full backwages from the date of their dismissal (July 3, 2007 for
Tena[z]as, June 4, 2004 for Francisco, and March 6, 2006 for Endraca[)] up to the date of the finality
of this decision[;] (2) separation pay equivalent to one month for every year of service; and (3)
attorney’s fees equivalent to ten percent (10%) of the total judgment awards.
22
SO ORDERED.
On July 24, 2009, the respondents filed a motion for reconsideration but the NLRC denied the same
in its Resolution23 dated September 23, 2009.
The Ruling of the CA
Unperturbed, the respondents filed a petition for certiorari with the CA. On March 11, 2010, the CA
rendered a Decision,24 affirming with modification the Decision dated June 23, 2009 of the NLRC.
The CA agreed with the NLRC’s finding that Tenazas and Endraca were employees of the company,
but ruled otherwise in the case of Francisco for failing to establish his relationship with the
company. It also deleted the award of separation pay and ordered for reinstatement of Tenazas and
Endraca. The pertinent portions of the decision read as follows:
At the outset, We declare that respondent Francisco failed to prove that an employer-employee
relationship exists between him and R. Transport. If there is no employer-employee relationship in
the first place, the duty of R. Transport to adhere to the labor standards provisions of the Labor
Code with respect to Francisco is questionable.
xxxx
Although substantial evidence is not a function of quantity but rather of quality, the peculiar
environmental circumstances of the instant case demand that something more should have been
proffered. Had there been other proofs of employment, such as Francisco’s inclusion in R.R.
Transport’s payroll, this Court would have affirmed the finding of employer-employee
relationship.1âwphi1 The NLRC, therefore, committed grievous error in ordering R. Transport to
answer for Francisco’s claims.
We now tackle R. Transport’s petition with respect to Tenazas and Endraca, who are both admitted
to be R. Transport’s employees. In its petition, R. Transport puts forth the theory that it did not
terminate the services of respondents but that the latter deliberately abandoned their work. We
cannot subscribe to this theory.
xxxx
Considering that the complaints for illegal dismissal were filed soon after the alleged dates of
dismissal, it cannot be inferred that respondents Tenazas and Endraca intended to abandon their
employment. The complainants for dismissal are, in themselves, pleas for the continuance of
employment. They are incompatible with the allegation of abandonment. x x x.
For R. Transport’s failure to discharge the burden of proving that the dismissal of respondents
Tenazas and Endraca was for a just cause, We are constrained to uphold the NLRC’s conclusion that
their dismissal was not justified and that they are entitled to back wages. Because they were illegally
dismissed, private respondents Tenazas and Endraca are entitled to reinstatement and back wages x
x x.
xxxx
However, R. Transport is correct in its contention that separation pay should not be awarded
because reinstatement is still possible and has been offered. It is well[-]settled that separation pay is
granted only in instances where reinstatement is no longer feasible or appropriate, which is not the
case here.
xxxx
WHEREFORE, the Decision of the National Labor Relations Commission dated 23 June 2009, in NLRC
LAC Case No. 07-002648-08, and its Resolution dated 23 September 2009 denying reconsideration
thereof are AFFIRMED with MODIFICATION in that the award of Jaime Francisco’s claims is DELETED.
The separation pay granted in favor of Bernard Tenazas and Isidro Endraca is, likewise, DELETED and
their reinstatement is ordered instead.
SO ORDERED.25 (Citations omitted)
On March 19, 2010, the petitioners filed a motion for reconsideration but the same was denied by
the CA in its Resolution26 dated June 28, 2010.
Undeterred, the petitioners filed the instant petition for review on certiorari before this Court on
July 15, 2010.
The Ruling of this Court
The petition lacks merit.
Pivotal to the resolution of the instant case is the determination of the existence of employer-
employee relationship and whether there was an illegal dismissal. Remarkably, the LA, NLRC and the
CA had varying assessment on the matters at hand. The LA believed that, with the admission of the
respondents, there is no longer any question regarding the status of both Tenazas and Endraca
being employees of the company. However, he ruled that the same conclusion does not hold with
respect to Francisco whom the respondents denied to have ever employed or known. With the
respondents’ denial, the burden of proof shifts to Francisco to establish his regular employment.
Unfortunately, the LA found that Francisco failed to present sufficient evidence to prove regular
employment such as company ID, SSS membership, withholding tax certificates or similar articles.
Thus, he was not considered an employee of the company. Even then, the LA held that Tenazas and
Endraca could not have been illegally dismissed since there was no overt act of dismissal committed
by the respondents.27
On appeal, the NLRC reversed the ruling of the LA and ruled that the petitioners were all employees
of the company. The NLRC premised its conclusion on the additional pieces of evidence belatedly
submitted by the petitioners, which it supposed, have been overlooked by the LA owing to the time
when it was received by the said office. It opined that the said pieces of evidence are sufficient to
establish the circumstances of their illegal termination. In particular, it noted that in the affidavit of
the petitioners, there were allegations about the company’s practice of not issuing employment
records and this was not rebutted by the respondents. It underscored that in a situation where
doubt exists between evidence presented by the employer and the employee, the scales of justice
must be tilted in favor of the employee. It awarded the petitioners with: (1) full backwages from the
date of their dismissal up to the finality of the decision; (2) separation pay equivalent to one month
of salary for every year of service; and (3) attorney’s fees.
On petition for certiorari, the CA affirmed with modification the decision of the NLRC, holding that
there was indeed an illegal dismissal on the part of Tenazas and Endraca but not with respect to
Francisco who failed to present substantial evidence, proving that he was an employee of the
respondents. The CA likewise dismissed the respondents’ claim that Tenazas and Endraca
abandoned their work, asseverating that immediate filing of a complaint for illegal dismissal and
persistent pleas for continuance of employment are incompatible with abandonment. It also deleted
the NLRC’s award of separation pay and instead ordered that Tenazas and Endraca be reinstated.28
"Well-settled is the rule that the jurisdiction of this Court in a petition for review on certiorari under
Rule 45 of the Revised Rules of Court is limited to reviewing only errors of law, not of fact, unless the
factual findings complained of are completely devoid of support from the evidence on record, or the
assailed judgment is based on a gross misapprehension of facts."29 The Court finds that none of the
mentioned circumstances is present in this case.
In reviewing the decision of the NLRC, the CA found that no substantial evidence was presented to
support the conclusion that Francisco was an employee of the respondents and accordingly
modified the NLRC decision. It stressed that with the respondents’ denial of employer-employee
relationship, it behooved Francisco to present substantial evidence to prove that he is an employee
before any question on the legality of his supposed dismissal becomes appropriate for discussion.
Francisco, however, did not offer evidence to substantiate his claim of employment with the
respondents. Short of the required quantum of proof, the CA correctly ruled that the NLRC’s finding
of illegal dismissal and the monetary awards which necessarily follow such ruling lacked factual and
legal basis and must therefore be deleted.
The action of the CA finds support in Anonas Construction and Industrial Supply Corp., et al. v. NLRC,
et al.,30where the Court reiterated:
[J]udicial review of decisions of the NLRC via petition for certiorari under Rule 65, as a general rule,
is confined only to issues of lack or excess of jurisdiction and grave abuse of discretion on the part of
the NLRC. The CA does not assess and weigh the sufficiency of evidence upon which the LA and the
NLRC based their conclusions. The issue is limited to the determination of whether or not the NLRC
acted without or in excess of its jurisdiction, or with grave abuse of discretion in rendering the
resolution, except if the findings of the NLRC are not supported by substantial evidence.31 (Citation
omitted and emphasis ours)
It is an oft-repeated rule that in labor cases, as in other administrative and quasi-judicial
proceedings, "the quantum of proof necessary is substantial evidence, or such amount of relevant
evidence which a reasonable mind might accept as adequate to justify a conclusion."32 "[T]he
burden of proof rests upon the party who asserts the affirmative of an issue."33 Corollarily, as
Francisco was claiming to be an employee of the respondents, it is incumbent upon him to proffer
evidence to prove the existence of said relationship.
"[I]n determining the presence or absence of an employer-employee relationship, the Court has
consistently looked for the following incidents, to wit: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to
control the employee on the means and methods by which the work is accomplished. The last
element, the so-called control test, is the most important element."34
There is no hard and fast rule designed to establish the aforesaid elements. Any competent and
relevant evidence to prove the relationship may be admitted. Identification cards, cash vouchers,
social security registration, appointment letters or employment contracts, payrolls, organization
charts, and personnel lists, serve as evidence of employee status.35
In this case, however, Francisco failed to present any proof substantial enough to establish his
relationship with the respondents. He failed to present documentary evidence like attendance
logbook, payroll, SSS record or any personnel file that could somehow depict his status as an
employee. Anent his claim that he was not issued with employment records, he could have, at least,
produced his social security records which state his contributions, name and address of his
employer, as his co-petitioner Tenazas did. He could have also presented testimonial evidence
showing the respondents’ exercise of control over the means and methods by which he undertakes
his work. This is imperative in light of the respondents’ denial of his employment and the claim of
another taxi operator, Emmanuel Villegas (Emmanuel), that he was his employer. Specifically, in his
Affidavit,36 Emmanuel alleged that Francisco was employed as a spare driver in his taxi garage from
January 2006 to December 2006, a fact that the latter failed to deny or question in any of the
pleadings attached to the records of this case. The utter lack of evidence is fatal to Francisco’s case
especially in cases like his present predicament when the law has been very lenient in not requiring
any particular form of evidence or manner of proving the presence of employer-employee
relationship.
In Opulencia Ice Plant and Storage v. NLRC,37 this Court emphasized, thus:
No particular form of evidence is required to prove the existence of an employer-employee
relationship. Any competent and relevant evidence to prove the relationship may be admitted. For,
if only documentary evidence would be required to show that relationship, no scheming employer
would ever be brought before the bar of justice, as no employer would wish to come out with any
trace of the illegality he has authored considering that it should take much weightier proof to
invalidate a written instrument.38
Here, Francisco simply relied on his allegation that he was an employee of the company without any
other evidence supporting his claim. Unfortunately for him, a mere allegation in the position paper
is not tantamount to evidence.39Bereft of any evidence, the CA correctly ruled that Francisco could
not be considered an employee of the respondents.
The CA’s order of reinstatement of Tenazas and Endraca, instead of the payment of separation pay,
is also well in accordance with prevailing jurisprudence. In Macasero v. Southern Industrial Gases
Philippines,40 the Court reiterated, thus:
[A]n illegally dismissed employee is entitled to two reliefs: backwages and
reinstatement.1âwphi1 The two reliefs provided are separate and distinct. In instances where
reinstatement is no longer feasible because of strained relations between the employee and the
employer, separation pay is granted. In effect, an illegally dismissed employee is entitled to either
reinstatement, if viable, or separation pay if reinstatement is no longer viable, and backwages.
The normal consequences of respondents’ illegal dismissal, then, are reinstatement without loss of
seniority rights, and payment of backwages computed from the time compensation was withheld up
to the date of actual reinstatement. Where reinstatement is no longer viable as an option,
separation pay equivalent to one (1) month salary for every year of service should be awarded as an
alternative. The payment of separation pay is in addition to payment of backwages.41 (Emphasis
supplied)
Clearly, it is only when reinstatement is no longer feasible that the payment of separation pay is
ordered in lieu thereof. For instance, if reinstatement would only exacerbate the tension and
strained relations between the parties, or where the relationship between the employer and the
employee has been unduly strained by reason of their irreconcilable differences, it would be more
prudent to order payment of separation pay instead of reinstatement.42
This doctrine of strained relations, however, should not be used recklessly or applied loosely43 nor
be based on impression alone. "It bears to stress that reinstatement is the rule and, for the
exception of strained relations to apply, it should be proved that it is likely that if reinstated, an
atmosphere of antipathy and antagonism would be generated as to adversely affect the efficiency
and productivity of the employee concerned."44
Moreover, the existence of strained relations, it must be emphasized, is a question of fact. In Golden
Ace Builders v. Talde,45 the Court underscored:
Strained relations must be demonstrated as a fact, however, to be adequately supported by
evidence—substantial evidence to show that the relationship between the employer and the
employee is indeed strained as a necessary consequence of the judicial controversy.46 (Citations
omitted and emphasis ours)

After a perusal of the NLRC decision, this Court failed to find the factual basis of the award of
separation pay to the petitioners. The NLRC decision did not state the facts which demonstrate that
reinstatement is no longer a feasible option that could have justified the alternative relief of
granting separation pay instead.

The petitioners themselves likewise overlooked to allege circumstances which may have rendered
their reinstatement unlikely or unwise and even prayed for reinstatement alongside the payment of
separation pay in their position paper.47 A bare claim of strained relations by reason of termination
is insufficient to warrant the granting of separation pay. Likewise, the filing of the complaint by the
petitioners does not necessarily translate to strained relations between the parties. As a rule, no
strained relations should arise from a valid and legal act asserting one’s right.48 Although litigation
may also engender a certain degree of hostility, the understandable strain in the parties’ relation
would not necessarily rule out reinstatement which would, otherwise, become the rule rather the
exception in illegal dismissal cases.49 Thus, it was a prudent call for the CA to delete the award of
separation pay and order for reinstatement instead, in accordance with the general rule stated in
Article 27950 of the Labor Code.

Finally, the Court finds the computation of the petitioners' backwages at the rate of ₱800.00 daily
reasonable and just under the circumstances. The said rate is consistent with the ruling of this Court
in Hyatt Taxi Services, Inc. v. Catinoy,51 which dealt with the same matter.

WHEREFORE, in view of the foregoing disquisition, the petition for review on certiorari is DENIED.
The Decision dated March 11, 2010 and Resolution dated June 28, 2010 of the Court of Appeals in
CA-G.R. SP No. 111150 are AFFIRMED.

SO ORDERED.

BIENVENIDO L. REYES
Associate Justice
 Republic of the Philippines consisting of commissions, persistency income, and management overrides, may be summarized as
SUPREME COURT follows:
Manila
January to December 10, 2002 - P 865,096.07
SECOND DIVISION
2001 - 6,214,737.11
G.R. No. 167622 November 7, 2008
2000 - 8,003,180.38
GREGORIO V. TONGKO, petitioner
vs. 1999 - 6,797,814.05
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A. VERGEL DE
1998 - 4,805,166.34
DIOS, respondents.
1997 - 2,822,620.003
DECISION
The problem started sometime in 2001, when Manulife instituted manpower development
VELASCO, JR., J.:
programs in the regional sales management level. Relative thereto, De Dios addressed a letter dated
November 6, 20014 to Tongko regarding an October 18, 2001 Metro North Sales Managers Meeting.
The Case
In the letter, De Dios stated:
This Petition for Review on Certiorari under Rule 45 seeks the reversal of the March 29, 2005
The first step to transforming Manulife into a big league player has been very clear - to
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 88253, entitled The Manufacturers Life
increase the number of agents to at least 1,000 strong for a start. This may seem
Insurance Co. (Phils.), Inc. v. National Labor Relations Commission and Gregorio V. Tongko. The
diametrically opposed to the way Manulife was run when you first joined the organization.
assailed decision set aside the Decision dated September 27, 2004 and Resolution dated December
Since then, however, substantial changes have taken place in the organization, as these
16, 2004 rendered by the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 040220-
have been influenced by developments both from within and without the company.
04.
xxxx
The Facts
The issues around agent recruiting are central to the intended objectives hence the need for
Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) is a domestic corporation engaged in life
a Senior Managers' meeting earlier last month when Kevin O'Connor, SVP - Agency, took to
insurance business. Renato A. Vergel De Dios was, during the period material, its President and Chief
the floor to determine from our senior agency leaders what more could be done to bolster
Executive Officer. Gregorio V. Tongko started his professional relationship with Manulife on July 1,
manpower development. At earlier meetings, Kevin had presented information where
1977 by virtue of a Career Agent's Agreement2 (Agreement) he executed with Manulife.
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.
In the Agreement, it is provided that:
While discussions, in general, were positive other than for certain comments from your end
It is understood and agreed that the Agent is an independent contractor and nothing
which were perceived to be uncalled for, it became clear that a one-on-one meeting with
contained herein shall be construed or interpreted as creating an employer-employee
you was necessary to ensure that you and management, were on the same plane. As
relationship between the Company and the Agent.
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.
xxxx
Kevin held subsequent series of meetings with you as a result, one of which I joined briefly.
a) The Agent shall canvass for applications for Life Insurance, Annuities, Group policies and
In those subsequent meetings you reiterated certain views, the validity of which we
other products offered by the Company, and collect, in exchange for provisional receipts
challenged and subsequently found as having no basis.
issued by the Agent, money due or to become due to the Company in respect of applications
or policies obtained by or through the Agent or from policyholders allotted by the Company
With such views coming from you, I was a bit concerned that the rest of the Metro North
to the Agent for servicing, subject to subsequent confirmation of receipt of payment by the
Managers may be a bit confused as to the directions the company was taking. For this
Company as evidenced by an Official Receipt issued by the Company directly to the
reason, I sought a meeting with everyone in your management team, including you, to clear
policyholder.
the air, so to speak.
xxxx
This note is intended to confirm the items that were discussed at the said Metro North
Region's Sales Managers meeting held at the 7/F Conference room last 18 October.
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
xxxx
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
Issue # 2: "Some Managers are unhappy with their earnings and would want to revert to the
construed for any previous failure to exercise its right under any provision of this
position of agents."
Agreement.
This is an often repeated issue you have raised with me and with Kevin. For this reason, I
Either of the parties hereto may likewise terminate his Agreement at any time without
placed the issue on the table before the rest of your Region's Sales Managers to verify its
cause, by giving to the other party fifteen (15) days notice in writing. x x x
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
In 1983, Tongko was named as a Unit Manager in Manulife's Sales Agency Organization. In 1990, he
allegation that Malou herself denied at our meeting and in your very presence.
became a Branch Manager. As the CA found, Tongko's gross earnings from his work at Manulife,
 This only confirms, Greg, that those prior comments have no solid basis at all. I now believe
what I had thought all along, that these allegations were simply meant to muddle the issues
surrounding the inability of your Region to meet its agency development objectives!
Issue # 3: "Sales Managers are doing what the company asks them to do but, in the process,
they earn less."
xxxx
All the above notwithstanding, we had your own records checked and we found that you
made a lot more money in the Year 2000 versus 1999. In addition, you also volunteered the
information to Kevin when you said that you probably will make more money in the Year
2001 compared to Year 2000. Obviously, your above statement about making "less money"
did not refer to you but the way you argued this point had us almost believing that you were
spouting the gospel of truth when you were not. x x x
xxxx
All of a sudden, Greg, I have become much more worried about your ability to lead this
group towards the new direction that we have been discussing these past few weeks, i.e.,
Manulife's goal to become a major agency-led distribution company in the Philippines.
While as you claim, you have not stopped anyone from recruiting, I have never heard you
proactively push for greater agency recruiting. You have not been proactive all these years
when it comes to agency growth.
xxxx
I cannot afford to see a major region fail to deliver on its developmental goals next year and
so, we are making the following changes in the interim:
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
I have decided to make this change so as to reduce your span of control and allow
you to concentrate more fully on overseeing the remaining groups under Metro
North, your Central Unit and the rest of the Sales Managers in Metro North. I will
hold you solely responsible for meeting the objectives of these remaining groups.
xxxx
The above changes can end at this point and they need not go any further. This, however, is
entirely dependent upon you. But you have to understand that meeting corporate
objectives by everyone is primary and will not be compromised. We are meeting tough
challenges next year and I would want everybody on board. Any resistance or holding back
by anyone will be dealt with accordingly.
Subsequently, De Dios wrote Tongko another letter dated December 18, 2001,5 terminating
Tongko's services, thus:
It would appear, however, that despite the series of meetings and communications, both
one-on-one meetings between yourself and SVP Kevin O'Connor, some of them with me, as
well as group meetings with your Sales Managers, all these efforts have failed in helping you
align your directions with Management's avowed agency growth policy.
xxxx
On account thereof, Management is exercising its prerogative under Section 14 of your
Agents Contract as we are now issuing this notice of termination of your Agency Agreement
with us effective fifteen days from the date of this letter.
Therefrom, Tongko filed a Complaint dated November 25, 2002 with the NLRC against Manulife for
illegal dismissal. The case, docketed as NLRC NCR Case No. 11-10330-02, was raffled to Labor Arbiter
Marita V. Padolina.
In the Complaint, Tongko, in a bid to establish an employer-employee relationship, alleged that De
Dios gave him specific directives on how to manage his area of responsibility in the latter's letter
dated November 6, 2001. He further claimed that Manulife exercised control over him as follows:
Such control was certainly exercised by respondents over the herein complainant. It was
Manulife who hired, promoted and gave various assignments to him. It was the company
who set objectives as regards productions, recruitment, training programs and all activities
pertaining to its business. Manulife prescribed a Code of Conduct which would govern in
minute detail all aspects of the work to be undertaken by employees, including the sales
process, the underwriting process, signatures, handling of money, policyholder service,
confidentiality, legal and regulatory requirements and grounds for termination of
employment. The letter of Mr. De Dios dated 06 November 2001 left no doubt as to who
was in control. The subsequent termination letter dated 18 December 2001 again
established in no uncertain terms the authority of the herein respondents to control the
employees of Manulife. Plainly, the respondents wielded control not only as to the ends to
be achieved but the ways and means of attaining such ends.6
Tongko bolstered his argument by citing Insular Life Assurance Co., Ltd. v. NLRC
(4th Division)7 and Great Pacific Life Assurance Corporation v. NLRC,8 which Tongko claimed to be
similar to the instant case.
Tongko further claimed that his dismissal was without basis and that he was not afforded due
process. He also cited the Manulife Code of Conduct by which his actions were controlled by the
company.
Manulife then filed a Position Paper with Motion to Dismiss dated February 27, 2003,9 in which it
alleged that Tongko is not its employee, and that it did not exercise "control" over him. Thus,
Manulife claimed that the NLRC has no jurisdiction over the case.
In a Decision dated April 15, 2004, Labor Arbiter Marita V. Padolina dismissed the complaint for lack
of an employer-employee relationship. Padolina found that applying the four-fold test in
determining the existence of an employer-employee relationship, none was found in the instant
case. The dispositive portion thereof states:
WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the instant
complaint for lack of jurisdiction, there being no employer-employee relationship between
the parties.
SO ORDERED.
Tongko appealed the arbiter's Decision to the NLRC which reversed the same and rendered a
Decision dated September 27, 2004 finding Tongko to have been illegally dismissed.
The NLRC's First Division, while finding an employer-employee relationship between Manulife and
Tongko applying the four-fold test, held Manulife liable for illegal dismissal. It further stated that
Manulife exercised control over Tongko as evidenced by the letter dated November 6, 2001 of De
Dios and wrote:
The above-mentioned letter shows the extent to which respondents controlled
complainant's manner and means of doing his work and achieving the goals set by
respondents. The letter shows how respondents concerned themselves with the manner
complainant managed the Metro North Region as Regional Sales Manager, to the point that
respondents even had a say on how complainant interacted with other individuals in the
 Metro North Region. The letter is in fact replete with comments and criticisms on how
complainant carried out his functions as Regional Sales Manager.
More importantly, the letter contains an abundance of directives or orders that are
intended to directly affect complainant's authority and manner of carrying out his functions
as Regional Sales Manager.10 x x x
Additionally, the First Division also ruled that:
Further evidence of [respondents'] control over complainant can be found in the records of
the case. [These] are the different codes of conduct such as the Agent Code of Conduct, the
Manulife Financial Code of Conduct, and the Manulife Financial Code of Conduct
Agreement, which serve as the foundations of the power of control wielded by respondents
over complainant that is further manifested in the different administrative and other tasks
that he is required to perform. These codes of conduct corroborate and reinforce the display
of respondents' power of control in their 06 November 2001 Letter to complainant.11
The fallo of the September 27, 2004 Decision reads:
WHEREFORE, premises considered, the appealed Decision is hereby reversed and set aside.
We find complainant to be a regular employee of respondent Manulife and that he was
illegally dismissed from employment by respondents.
In lieu of reinstatement, respondent Manulife is hereby ordered to pay complainant
separation pay as above set forth. Respondent Manulife is further ordered to pay
complainant backwages from the time he was dismissed on 02 January 2002 up to the
finality of this decision also as indicated above.
xxxx
All other claims are hereby dismissed for utter lack of merit.
From this Decision, Manulife filed a motion for reconsideration which was denied by the NLRC First
Division in a Resolution dated December 16, 2004.12
Thus, Manulife filed an appeal with the CA docketed as CA-G.R. SP No. 88253. Thereafter, the CA
issued the assailed Decision dated March 29, 2005, finding the absence of an employer-employee
relationship between the parties and deeming the NLRC with no jurisdiction over the case. The CA
arrived at this conclusion while again applying the four-fold test. The CA found that Manulife did not
exercise control over Tongko that would render the latter an employee of Manulife. The dispositive
portion reads:
WHEREFORE, premises considered, the present petition is hereby GRANTED and the writ
prayed for accordingly GRANTED. The assailed Decision dated September 27, 2004 and
Resolution dated December 16, 2004 of the National Labor Relations Commission in NLRC
NCR Case No. 00-11-10330-2002 (NLRC NCR CA No. 040220-04) are hereby ANNULLED and
SET ASIDE. The Decision dated April 15, 2004 of Labor Arbiter Marita V. Padolina is hereby
REINSTATED.
Hence, Tongko filed this petition and presented the following issues:
A xxxx
The Court of Appeals committed grave abuse of discretion in granting respondents' petition
for certiorari.
B North Star Branch (NSB) in autonomous fashion x x x.
The Court of Appeals committed grave abuse of discretion in annulling and setting aside the
Decision dated September 27, 2004 and Resolution dated December 16, 2004 in finding that
there is no employer-employee relationship between petitioner and respondent.
C Central Unit and the rest of the Sales Managers in Metro North. x x x
The Court of Appeals committed grave abuse of discretion in annulling and setting aside the
Decision dated September 27, 2004 and Resolution dated December 16, 2004 which found
petitioner to have been illegally dismissed and ordered his reinstatement with payment of
backwages.13
Restated, the issues are: (1) Was there an employer-employee relationship between Manulife and
Tongko? and (2) If yes, was Manulife guilty of illegal dismissal?
The Court's Ruling
This petition is meritorious.
Tongko Was An Employee of Manulife
The basic issue of whether or not the NLRC has jurisdiction over the case resolves itself into the
question of whether an employer-employee relationship existed between Manulife and Tongko. If
no employer-employee relationship existed between the two parties, then jurisdiction over the case
properly lies with the Regional Trial Court.
In the determination of whether an employer-employee relationship exists between two parties,
this Court applies the four-fold test to determine the existence of the elements of such relationship.
In Pacific Consultants International Asia, Inc. v. Schonfeld, the Court set out the elements of an
employer-employee relationship, thus:
Jurisprudence is firmly settled that whenever the existence of an employment relationship is
in dispute, four elements constitute the reliable yardstick: (a) the selection and engagement
of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employer's power to control the employee's conduct. It is the so-called "control test" which
constitutes the most important index of the existence of the employer-employee
relationship that is, whether the employer controls or has reserved the right to control the
employee not only as to the result of the work to be done but also as to the means and
methods by which the same is to be accomplished. Stated otherwise, an employer-
employee relationship exists where the person for whom the services are performed
reserves the right to control not only the end to be achieved but also the means to be used
in reaching such end.14
The NLRC, for its part, applied the four-fold test and found the existence of all the elements and
declared Tongko an employee of Manulife. The CA, on the other hand, found that the element of
control as an indicator of the existence of an employer-employee relationship was lacking in this
case. The NLRC and the CA based their rulings on the same findings of fact but differed in their
interpretations.
The NLRC arrived at its conclusion, first, on the basis of the letter dated November 6, 2001
addressed by De Dios to Tongko. According to the NLRC, the letter contained "an abundance of
directives or orders that are intended to directly affect complainant's authority and manner of
carrying out his functions as Regional Sales Manager." It enumerated these "directives" or "orders"
as follows:
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. x x x
This assistant should be hired immediately.
2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the
xxxx
I have decided to make this change so as to reduce your span of control and allow you to
concentrate more fully on overseeing the remaining groups under Metro North, your
 3. Any resistance or holding back by anyone will be dealt with accordingly.
4. I have been straightforward in this my letter and I know that we can continue to work
together… but it will have to be on my terms. Anything else is unacceptable!
The NLRC further ruled that the different codes of conduct that were applicable to Tongko served as
the foundations of the power of control wielded by Manulife over Tongko that is further manifested
in the different administrative and other tasks that he was required to perform.
The NLRC also found that Tongko was required to render exclusive service to Manulife, further
bolstering the existence of an employer-employee relationship.
Finally, the NLRC ruled that Tongko was integrated into a management structure over which
Manulife exercised control, including the actions of its officers. The NLRC held that such integration
added to the fact that Tongko did not have his own agency belied Manulife's claim that Tongko was
an independent contractor.
The CA, however, considered the finding of the existence of an employer-employee relationship by
the NLRC as far too sweeping having as its only basis the letter dated November 6, 2001 of De Dios.
The CA did not concur with the NLRC's ruling that the elements of control as pointed out by the
NLRC are "sufficient indicia of control that negates independent contractorship and conclusively
establish an employer-employee relationship between"15 Tongko and Manulife. The CA ruled that
there is no employer-employee relationship between Tongko and Manulife.
An impasse appears to have been reached between the CA and the NLRC on the sole issue of control
over an employee's conduct. It bears clarifying that such control not only applies to the work or goal
to be done but also to the means and methods to accomplish it.16 In Sonza v. ABS-CBN Broadcasting
Corporation, we explained that not all forms of control would establish an employer-employee
relationship, to wit:
Further, not every form of control that a party reserves to himself over the conduct of the
other party in relation to the services being rendered may be accorded the effect of
establishing an employer-employee relationship. The facts of this case fall squarely with the
case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the
means or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The
first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means used
to achieve it.17 (Emphasis supplied.)
We ruled in Insular Life Assurance Co., Ltd. v. NLRC (Insular) that:
It is, therefore, usual and expected for an insurance company to promulgate a set of rules to
guide its commission agents in selling its policies that they may not run afoul of the law and
what it requires or prohibits. Of such a character are the rules which prescribe the
qualifications of persons who may be insured, subject insurance applications to processing
and approval by the Company, and also reserve to the Company the determination of the
premiums to be paid and the schedules of payment. None of these really invades the agent's
contractual prerogative to adopt his own selling methods or to sell insurance at his own
time and convenience, hence cannot justifiably be said to establish an employer-employee
relationship between him and the company.18
Hence, we ruled in Insular that no employer-employee relationship existed therein. However, such
ruling was tempered with the qualification that had there been evidence that the company
promulgated rules or regulations that effectively controlled or restricted an insurance agent's choice
of methods or the methods themselves in selling insurance, an employer-employee relationship
would have existed. In other words, the Court in Insular in no way definitively held that insurance
agents are not employees of insurance companies, but rather made the same a case-to-case basis.
We held:
The respondents limit themselves to pointing out that Basiao's contract with the Company
bound him to observe and conform to such rules and regulations as the latter might from
time to time prescribe. No showing has been made that any such rules or regulations were
in fact promulgated, much less that any rules existed or were issued which effectively
controlled or restricted his choice of methods or the methods themselves of selling
insurance. Absent such showing, the Court will not speculate that any exceptions or
qualifications were imposed on the express provision of the contract leaving Basiao "...
free to exercise his own judgment as to the time, place and means of soliciting
insurance."19 (Emphasis supplied.)
There is no conflict between our rulings in Insular and in Great Pacific Life Assurance Corporation.
We said in the latter case:
[I]t cannot be gain said that Grepalife had control over private respondents' performance as
well as the result of their efforts. A cursory reading of their respective functions as
enumerated in their contracts reveals that the company practically dictates the manner by
which their jobs are to be carried out. For instance, the District Manager must properly
account, record and document the company's funds spot-check and audit the work of the
zone supervisors, conserve the company's business in the district through ‘reinstatements',
follow up the submission of weekly remittance reports of the debit agents and zone
supervisors, preserve company property in good condition, train understudies for the
position of district manager, and maintain his quota of sales (the failure of which is a ground
for termination). On the other hand, a zone supervisor must direct and supervise the sales
activities of the debit agents under him, conserve company property through
"reinstatements", undertake and discharge the functions of absentee debit agents, spot-
check the records of debit agents, and insure proper documentation of sales and collections
by the debit agents.20 (Emphasis supplied.)
Based on the foregoing cases, if the specific rules and regulations that are enforced against
insurance agents or managers are such that would directly affect the means and methods by which
such agents or managers would achieve the objectives set by the insurance company, they are
employees of the insurance company.
In the instant case, Manulife had the power of control over Tongko that would make him its
employee. Several factors contribute to this conclusion.
In the Agreement dated July 1, 1977 executed between Tongko and Manulife, it is provided that:
The Agent hereby agrees to comply with all regulations and requirements of the Company
as herein provided as well as maintain a standard of knowledge and competency in the sale
of the Company's products which satisfies those set by the Company and sufficiently meets
the volume of new business required of Production Club membership.21
Under this provision, an agent of Manulife must comply with three (3) requirements: (1) compliance
with the regulations and requirements of the company; (2) maintenance of a level of knowledge of
the company's products that is satisfactory to the company; and (3) compliance with a quota of new
businesses.
Among the company regulations of Manulife are the different codes of conduct such as the Agent
Code of Conduct, Manulife Financial Code of Conduct, and Manulife Financial Code of Conduct
Agreement, which demonstrate the power of control exercised by the company over Tongko. The
fact that Tongko was obliged to obey and comply with the codes of conduct was not disowned by
respondents.
Thus, with the company regulations and requirements alone, the fact that Tongko was an employee
of Manulife may already be established. Certainly, these requirements controlled the means and
methods by which Tongko was to achieve the company's goals.
More importantly, Manulife's evidence establishes the fact that Tongko was tasked to perform
administrative duties that establishes his employment with Manulife.
In its Comment (Re: Petition for Review dated 15 April 2005) dated August 5, 2005, Manulife
attached affidavits of its agents purportedly to support its claim that Tongko, as a Regional Sales
Manager, did not perform any administrative functions. An examination of these affidavits would,
however, prove the opposite.
In an Affidavit dated April 28, 2003,22 John D. Chua, a Regional Sales Manager of Manulife, stated:
4. On September 1, 1996, my services were engaged by Manulife as an Agency Regional
Sales Manager ("RSM") for Metro South Region pursuant to an Agency Contract. As such
RSM, I have the following functions:
1. Refer and recommend prospective agents to Manulife
2. Coach agents to become productive
3. Regularly meet with, and coordinate activities of agents affiliated to my region.
While Amada Toledo, a Branch Manager of Manulife, stated in her Affidavit dated April 29,
200323that:
3. In January 1997, I was assigned as a Branch Manager ("BM") of Manulife for the Metro
North Sector;
4. As such BM, I render the following services:
a. Refer and recommend prospective agents to Manulife;
b. Train and coordinate activities of other commission agents;
c. Coordinate activities of Agency Managers who, in turn, train and coordinate
activites of other commission agents;
d. Achieve agreed production objectives in terms of Net Annualized Commissions
and Case Count and recruitment goals; and
e. Sell the various products of Manulife to my personal clients.
While Ma. Lourdes Samson, a Unit Manager of Manulife, stated in her Affidavit dated April 28,
200324that:
3. In 1977, I was assigned as a Unit Manager ("UM") of North Peaks Unit, North Star Branch,
Metro North Region;
4. As such UM, I render the following services:
a. To render or recommend prospective agents to be licensed, trained and
contracted to sell Manulife products and who will be part of my Unit;
b. To coordinate activities of the agents under my Unit in their daily, weekly and
monthly selling activities, making sure that their respective sales targets are met;
c. To conduct periodic training sessions for my agents to further enhance their sales
skills.
d. To assist my agents with their sales activities by way of joint fieldwork,
consultations and one-on- one evaluation and analysis of particular accounts.
e. To provide opportunities to motivate my agents to succeed like conducting
promos to increase sales activities and encouraging them to be involved in company
and industry activities.
f. To provide opportunities for professional growth to my agents by encouraging
them to be a member of the LUCAP (Life Underwriters Association of the
Philippines).
A comparison of the above functions and those contained in the Agreement with those cited
in Great Pacific Life Assurance Corporation25 reveals a striking similarity that would more than
support a similar finding as in that case. Thus, there was an employer-employee relationship
between the parties.
Additionally, it must be pointed out that the fact that Tongko was tasked with recruiting a certain
number of agents, in addition to his other administrative functions, leads to no other conclusion that
he was an employee of Manulife.
In his letter dated November 6, 2001, De Dios harped on the direction of Manulife of becoming a
major agency-led distribution company whereby greater agency recruitment is required of the
managers, including Tongko. De Dios made it clear that agent recruitment has become the primary
means by which Manulife intends to sell more policies. More importantly, it is Tongko's alleged
failure to follow this principle of recruitment that led to the termination of his employment with
Manulife. With this, it is inescapable that Tongko was an employee of Manulife.
Tongko Was Illegally Dismissed
In its Petition for Certiorari dated January 7, 200526 filed before the CA, Manulife argued that even if
Tongko is considered as its employee, his employment was validly terminated on the ground of
gross and habitual neglect of duties, inefficiency, as well as willful disobedience of the lawful orders
of Manulife. Manulife stated:
In the instant case, private respondent, despite the written reminder from Mr. De Dios
refused to shape up and altogether disregarded the latter's advice resulting in his laggard
performance clearly indicative of his willful disobedience of the lawful orders of his superior.
xxx
xxxx
As private respondent has patently failed to perform a very fundamental duty, and that is to
yield obedience to all reasonable rules, orders and instructions of the Company, as well as
gross failure to reach at least minimum quota, the termination of his engagement from
Manulife is highly warranted and therefore, there is no illegal dismissal to speak of.
It is readily evident from the above-quoted portions of Manulife's petition that it failed to cite a
single iota of evidence to support its claims. Manulife did not even point out which order or rule that
Tongko disobeyed. More importantly, Manulife did not point out the specific acts that Tongko was
guilty of that would constitute gross and habitual neglect of duty or disobedience. Manulife merely
cited Tongko's alleged "laggard performance," without substantiating such claim, and equated the
same to disobedience and neglect of duty.
We cannot, therefore, accept Manulife's position.
In Quebec, Sr. v. National Labor Relations Commission, we ruled that:
When there is no showing of a clear, valid and legal cause for the termination of
employment, the law considers the matter a case of illegal dismissal and the burden is on
the employer to prove that the termination was for a valid or authorized cause. This burden
of proof appropriately lies on the shoulders of the employer and not on the employee
because a worker's job has some of the characteristics of property rights and is therefore
within the constitutional mantle of protection. No person shall be deprived of life, liberty or
property without due process of law, nor shall any person be denied the equal protection of
the laws.
Apropos thereto, Art. 277, par. (b), of the Labor Code mandates in explicit terms that the
burden of proving the validity of the termination of employment rests on the employer.
Failure to discharge this evidential burden would necessarily mean that the dismissal was
not justified, and, therefore, illegal.27
We again ruled in Times Transportation Co., Inc. v. National Labor Relations Commission that:
 The law mandates that the burden of proving the validity of the termination of employment
rests with the employer. Failure to discharge this evidentiary burden would necessarily
mean that the dismissal was not justified, and, therefore, illegal. Unsubstantiated suspicions,
accusations and conclusions of employers do not provide for legal justification for dismissing
employees. In case of doubt, such cases should be resolved in favor of labor, pursuant to the
social justice policy of our labor laws and Constitution.28
This burden of proof was clarified in Community Rural Bank of San Isidro (N.E.), Inc. v. Paez to mean
substantial evidence, to wit:
The Labor Code provides that an employer may terminate the services of an employee for
just cause and this must be supported by substantial evidence. The settled rule in
administrative and quasi-judicial proceedings is that proof beyond reasonable doubt is not
required in determining the legality of an employer's dismissal of an employee, and not
even a preponderance of evidence is necessary as substantial evidence is considered
sufficient. Substantial evidence is more than a mere scintilla of evidence or relevant
evidence as a reasonable mind might accept as adequate to support a conclusion, even if
other minds, equally reasonable, might conceivably opine otherwise.29
Here, Manulife failed to overcome such burden of proof. It must be reiterated that Manulife even
failed to identify the specific acts by which Tongko's employment was terminated much less support
the same with substantial evidence. To repeat, mere conjectures cannot work to deprive employees
of their means of livelihood. Thus, it must be concluded that Tongko was illegally dismissed.
Moreover, as to Manulife's failure to comply with the twin notice rule, it reasons that Tongko not
being its employee is not entitled to such notices. Since we have ruled that Tongko is its employee,
however, Manulife clearly failed to afford Tongko said notices. Thus, on this ground too, Manulife is
guilty of illegal dismissal. In Quebec, Sr., we also stated:
Furthermore, not only does our legal system dictate that the reasons for dismissing a worker
must be pertinently substantiated, it also mandates that the manner of dismissal must be
properly done, otherwise, the termination itself is gravely defective and may be declared
unlawful.30
separation pay is granted where reinstatement is no longer feasible because of strained
relations between the employee and the employer. In effect, an illegally dismissed
employee is entitled to either reinstatement, if viable, or separation pay if reinstatement is
no longer viable and backwages.33
Taking into consideration the cases of Songco and Triad, we find correct the computation of the
NLRC that the monthly gross wage of Tongko in 2001 was PhP 518,144.76. For having been illegally
dismissed, Tongko is entitled to reinstatement with full backwages under Art. 279 of the Labor Code.
Due to the strained relationship between Manulife and Tongko, reinstatement, however, is no
longer advisable. Thus, Tongko will be entitled to backwages from January 2, 2002 (date of
dismissal) up to the finality of this decision. Moreover, Manulife will pay Tongko separation pay of
one (1) month salary for every year of service that is from 1977 to 2001 amounting to PhP
12,435,474.24, considering that reinstatement is not feasible. Tongko shall also be entitled to an
award of attorney's fees in the amount of ten percent (10%) of the aggregate amount of the above
awards.
WHEREFORE, the petition is hereby GRANTED. The assailed March 29, 2005 Decision of the CA in
CA-G.R. SP No. 88253 is REVERSED and SET ASIDE. The Decision dated September 27, 2004 of the
NLRC is REINSTATED with the following modifications:
Manulife shall pay Tongko the following:
(1) Full backwages, inclusive of allowances and other benefits or their monetary equivalent
from January 2, 2002 up to the finality of this Decision;
(2) Separation pay of one (1) month salary for every year of service from 1977 up to 2001
amounting to PhP 12,435,474.24;
(3) Nominal damages of PhP 30,000 as indemnity for violation of the due process
requirements; and
(4) Attorney's fees equivalent to ten percent (10%) of the aforementioned backwages and
separation pay.

For breach of the due process requirements, Manulife is liable to Tongko in the amount of PhP Costs against respondent Manulife.
30,000 as indemnity in the form of nominal damages.31
SO ORDERED.
Finally, Manulife raises the issue of the correctness of the computation of the award to Tongko
made by the NLRC by claiming that Songco v. National Labor Relations Commission32 is inapplicable
to the instant case, considering that Songco was dismissed on the ground of retrenchment.

An examination of Songco reveals that it may be applied to the present case. In that case, Jose
Songco was a salesman of F.E. Zuellig (M), Inc. which terminated the services of Songco on the
ground of retrenchment due to financial losses. The issue raised to the Court, however, was whether
commissions are considered as part of wages in order to determine separation pay. Thus, the fact
that Songco was dismissed due to retrenchment does not hamper the application thereof to the
instant case. What is pivotal is that we ruled in Songco that commissions are part of wages for the
determination of separation pay.

Article 279 of the Labor Code on security of tenure pertinently provides that:

In cases of regular employment the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority
rights and other privileges and to his full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement.

In Triad Security & Allied Services, Inc. v. Ortega, Jr. (Triad), we thus stated that an illegally dismissed
employee shall be entitled to backwages and separation pay, if reinstatement is no longer viable:

As the law now stands, an illegally dismissed employee is entitled to two reliefs, namely:
backwages and reinstatement. These are separate and distinct from each other. However,
 SECOND DIVISION
TELEVISION AND PRODUCTION G.R. No. 167648
EXPONENTS, INC. and/or ANTONIO
P. TUVIERA, Present:
Petitioners,
QUISUMBING, J.,
Chairperson,
CARPIO,
- versus - CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
ROBERTO C. SERVAA,
Respondent. Promulgated:
January 28, 2008
x----------------------------------------------------------------------------x
DECISION
TINGA, J.:
This petition for review under Rule 45 assails the 21 December 2004 Decision[1] and 8 April
2005 Resolution[2] of the Court of Appeals declaring Roberto Servaa (respondent) a regular employee
of petitioner Television and Production Exponents, Inc. (TAPE). The appellate court likewise ordered
TAPE to pay nominal damages for its failure to observe statutory due process in the termination of
respondents employment for authorized cause.
TAPE is a domestic corporation engaged in the production of television programs, such as the
long-running variety program, Eat Bulaga!. Its president is Antonio P. Tuviera (Tuviera). Respondent
Roberto C. Servaa had served as a security guard for TAPE from March 1987 until he was terminated
on 3 March 2000.
Respondent filed a complaint for illegal dismissal and nonpayment of benefits against TAPE. He
alleged that he was first connected with Agro-Commercial Security Agency but was later on absorbed
by TAPE as a regular company guard. He was detailed at Broadway Centrum in Quezon City where Eat
Bulaga! regularly staged its productions. On 2 March 2000, respondent received a memorandum
informing him of his impending dismissal on account of TAPEs decision to contract the services of a
professional security agency. At the time of his termination, respondent was receiving a monthly
salary of P6,000.00. He claimed that the holiday pay, unpaid vacation and sick leave benefits and other
monetary considerations were withheld from him. He further contended that his dismissal was
undertaken without due process and violative of existing labor laws, aggravated by nonpayment of
separation pay.[3]
In a motion to dismiss which was treated as its position paper, TAPE countered that the labor arbiter
had no jurisdiction over the case in the absence of an employer-employee relationship between the
parties. TAPE made the following assertions: (1) that respondent was initially employed as a security
guard for Radio Philippines Network (RPN-9); (2) that he was tasked to assist TAPE during its live
productions, specifically, to control the crowd; (3) that when RPN-9 severed its relationship with the
security agency, TAPE engaged respondents services, as part of the support group and thus a talent,
to provide security service to production staff, stars and guests of Eat Bulaga! as well as to control the
audience during the one-and-a-half hour noontime program; (4) that it was agreed that complainant
would render his services until such time that respondent company shall have engaged the services
of a professional security agency; (5) that in 1995, when his contract with RPN-9 expired, respondent
was retained as a talent and a member of the support group, until such time that TAPE shall have
engaged the services of a professional security agency; (6) that respondent was not prevented from
seeking other employment, whether or not related to security services, before or after attending to
his Eat Bulaga! functions; (7) that sometime in late 1999, TAPE started negotiations for the
engagement of a professional security agency, the Sun Shield Security Agency; and (8) that on 2 March
2000, TAPE issued memoranda to all talents, whose functions would be rendered redundant by the
engagement of the security agency, informing them of the managements decision to terminate their
services.[4]
TAPE averred that respondent was an independent contractor falling under the talent group
category and was working under a special arrangement which is recognized in the industry.[5]
Respondent for his part insisted that he was a regular employee having been engaged to perform an
activity that is necessary and desirable to TAPEs business for thirteen (13) years.[6]
On 29 June 2001, Labor Arbiter Daisy G. Cauton-Barcelona declared respondent to be a regular
employee of TAPE. The Labor Arbiter relied on the nature of the work of respondent, which is securing
and maintaining order in the studio, as necessary and desirable in the usual business activity of TAPE.
The Labor Arbiter also ruled that the termination was valid on the ground of redundancy, and ordered
the payment of respondents separation pay equivalent to one (1)-month pay for every year of
service. The dispositive portion of the decision reads:
WHEREFORE, complainants position is hereby declared redundant. Accordingly,
respondents are hereby ordered to pay complainant his separation pay computed at
the rate of one (1) month pay for every year of service or in the total amount
of P78,000.00.[7]
On appeal, the National Labor Relations Commission (NLRC) in a Decision[8] dated 22 April
2002 reversed the Labor Arbiter and considered respondent a mere program employee, thus:
We have scoured the records of this case and we find nothing to support the Labor
Arbiters conclusion that complainant was a regular employee.
xxxx
The primary standard to determine regularity of employment is the reasonable
connection between the particular activity performed by the employee in relation to
the usual business or trade of the employer. This connection can be determined by
considering the nature and work performed and its relation to the scheme of the
particular business or trade in its entirety. x x x Respondent company is engaged in
 the business of production of television shows. The records of this case also show
that complainant was employed by respondent company beginning 1995 after
respondent company transferred from RPN-9 to GMA-7, a fact which complainant
does not dispute. His last salary was P5,444.44 per month. In such industry, security
services may not be deemed necessary and desirable in the usual business of the
employer. Even without the performance of such services on a regular basis,
respondents companys business will not grind to a halt.
xxxx
Complainant was indubitably a program employee of respondent company. Unlike
[a] regular employee, he did not observe working hours x x x. He worked for other
companies, such as M-Zet TV Production, Inc. at the same time that he was working
for respondent company. The foregoing indubitably shows that complainant-
appellee was a program employee. Otherwise, he would have two (2) employers at
the same time.[9]
Respondent filed a motion for reconsideration but it was denied in a Resolution[10] dated 28 June
2002.
Respondent filed a petition for certiorari with the Court of Appeals contending that the NLRC acted
with grave abuse of discretion amounting to lack or excess of jurisdiction when it reversed the decision
of the Labor Arbiter. Respondent asserted that he was a regular employee considering the nature and
length of service rendered.[11]
Reversing the decision of the NLRC, the Court of Appeals found respondent to be a regular
employee. We quote the dispositive portion of the decision:
IN LIGHT OF THE FOREGOING, the petition is hereby GRANTED. The Decision dated
22 April 2002 of the public respondent NLRC reversing the Decision of the Labor
Arbiter and its Resolution dated 28 June 2002 denying petitioners motion for
reconsideration are REVERSED and SET ASIDE. The Decision dated 29 June 2001 of
the Labor Arbiter is REINSTATED with MODIFICATION in that private respondents
are ordered to pay jointly and severally petitioner the amount of P10,000.00 as
nominal damages for non-compliance with the statutory due process.
SO ORDERED.[12]
Finding TAPEs motion for reconsideration without merit, the Court of Appeals issued a
Resolution[13] dated 8 April 2005 denying said motion.
TAPE filed the instant petition for review raising substantially the same grounds as those in its petition
for certiorari before the Court of Appeals. These matters may be summed up into one main issue:
whether an employer-employee relationship exists between TAPE and respondent.
On 27 September 2006, the Court gave due course to the petition and considered the case
submitted for decision.[14]
At the outset, it bears emphasis that the existence of employer-employee relationship is ultimately a
question of fact. Generally, only questions of law are entertained in appeals by certiorari to the
Supreme Court. This rule, however, is not absolute. Among the several recognized exceptions is when
the findings of the Court of Appeals and Labor Arbiters, on one hand, and that of the NLRC, on the
other, are conflicting,[15] as obtaining in the case at bar.
Jurisprudence is abound with cases that recite the factors to be considered in determining the
existence of employer-employee relationship, namely: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to
control the employee with respect to the means and method by which the work is to be
accomplished.[16] The most important factor involves the control test. Under the control test, there is
an employer-employee relationship when the person for whom the services are performed reserves
the right to control not only the end achieved but also the manner and means used to achieve that
end.[17]
In concluding that respondent was an employee of TAPE, the Court of Appeals applied the
four-fold test in this wise:
First. The selection and hiring of petitioner was done by private
respondents. In fact, private respondents themselves admitted having engaged the
services of petitioner only in 1995 after TAPE severed its relations with RPN Channel
9.
By informing petitioner through the Memorandum dated 2 March 2000, that
his services will be terminated as soon as the services of the newly hired security
agency begins, private respondents in effect acknowledged petitioner to be their
employee. For the right to hire and fire is another important element of the employer-
employee relationship.
Second. Payment of wages is one of the four factors to be considered in
determining the existence of employer-employee relation. . . Payment as admitted by
private respondents was given by them on a monthly basis at a rate of P5,444.44.
Third. Of the four elements of the employer-employee relationship, the
control test is the most important. x x x
The bundy cards representing the time petitioner had reported for work are
evident proofs of private respondents control over petitioner more particularly with
the time he is required to report for work during the noontime program of Eat
Bulaga! If it were not so, petitioner would be free to report for work anytime even not
during the noontime program of Eat Bulaga! from 11:30 a.m. to 1:00 p.m. and still
gets his compensation for being a talent. Precisely, he is being paid for being the
security of Eat Bulaga! during the above-mentioned period. The daily time cards of
petitioner are not just for mere record purposes as claimed by private respondents. It
is a form of control by the management of private respondent TAPE.[18]
TAPE asseverates that the Court of Appeals erred in applying the four-fold test in determining the
existence of employer-employee relationship between it and respondent. With respect to the
elements of selection, wages and dismissal, TAPE proffers the following arguments: that it never hired
respondent, instead it was the latter who offered his services as a talent to TAPE; that the
Memorandum dated 2 March 2000 served on respondent was for the discontinuance of the contract
for security services and not a termination letter; and that the talent fees given to respondent were
the pre-agreed consideration for the services rendered and should not be construed as wages. Anent
the element of control, TAPE insists that it had no control over respondent in that he was free to
employ means and methods by which he is to control and manage the live audiences, as well as the
safety of TAPEs stars and guests.[19]
The position of TAPE is untenable. Respondent was first connected with Agro-Commercial Security
Agency, which assigned him to assist TAPE in its live productions. When the security agencys contract
with RPN-9 expired in 1995, respondent was absorbed by TAPE or, in the latters language, retained as
talent.[20] Clearly, respondent was hired by TAPE. Respondent presented his identification card[21] to
prove that he is indeed an employee of TAPE. It has been in held that in a business establishment, an
identification card is usually provided not just as a security measure but to mainly identify the holder
thereof as a bona fide employee of the firm who issues it.[22]
Respondent claims to have been receiving P5,444.44 as his monthly salary while TAPE prefers to
designate such amount as talent fees. Wages, as defined in the Labor Code, are remuneration or
earnings, however designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece or commission basis, or other method of calculating the same, which
is payable by an employer to an employee under a written or unwritten contract of employment for
work done or to be done, or for service rendered or to be rendered. It is beyond dispute that
respondent received a fixed amount as monthly compensation for the services he rendered to TAPE.
The Memorandum informing respondent of the discontinuance of his service proves that TAPE had
the power to dismiss respondent.
Control is manifested in the bundy cards submitted by respondent in evidence. He was required to
report daily and observe definite work hours. To negate the element of control, TAPE presented a
certification from M-Zet Productions to prove that respondent also worked as a studio security guard
for said company. Notably, the said certificate categorically stated that respondent reported for work
on Thursdays from 1992 to 1995. It can be recalled that during said period, respondent was still
working for RPN-9. As admitted by TAPE, it absorbed respondent in late 1995.[23]
TAPE further denies exercising control over respondent and maintains that the latter is an
independent contractor.[24] Aside from possessing substantial capital or investment, a legitimate job
contractor or subcontractor carries on a distinct and independent business and undertakes to perform
the job, work or service on its own account and under its own responsibility according to its own
manner and method, and free from the control and direction of the principal in all matters connected
with the performance of the work except as to the results thereof.[25] TAPE failed to establish that
respondent is an independent contractor. As found by the Court of Appeals:
We find the annexes submitted by the private respondents insufficient to
prove that herein petitioner is indeed an independent contractor. None of the above
conditions exist in the case at bar. Private respondents failed to show that petitioner
has substantial capital or investment to be qualified as an independent
contractor. They likewise failed to present a written contract which specifies the
performance of a specified piece of work, the nature and extent of the work and the
term and duration of the relationship between herein petitioner and private
respondent TAPE.[26]
TAPE relies on Policy Instruction No. 40, issued by the Department of Labor, in classifying
respondent as a program employee and equating him to be an independent contractor.
Policy Instruction No. 40 defines program employees as
x x x those whose skills, talents or services are engaged by the station for a
particular or specific program or undertaking and who are not required to observe
normal working hours such that on some days they work for less than eight (8) hours
and on other days beyond the normal work hours observed by station employees and
are allowed to enter into employment contracts with other persons, stations,
advertising agencies or sponsoring companies. The engagement of program
employees, including those hired by advertising or sponsoring companies, shall be
under a written contract specifying, among other things, the nature of the work to be
performed, rates of pay and the programs in which they will work. The contract shall
be duly registered by the station with the Broadcast Media Council within three (3)
days from its consummation.[27]
TAPE failed to adduce any evidence to prove that it complied with the requirements laid down
in the policy instruction. It did not even present its contract with respondent.Neither did it comply
with the contract-registration requirement.
Even granting arguendo that respondent is a program employee, stills, classifying him as an
independent contractor is misplaced. The Court of Appeals had this to say:
We cannot subscribe to private respondents conflicting theories. The theory
of private respondents that petitioner is an independent contractor runs counter to
their very own allegation that petitioner is a talent or a program employee. An
independent contractor is not an employee of the employer, while a talent or
program employee is an employee. The only difference between a talent or program
employee and a regular employee is the fact that a regular employee is entitled to all
the benefits that are being prayed for. This is the reason why private respondents try
to seek refuge under the concept of an independent contractor theory. For if
petitioner were indeed an independent contractor, private respondents will not be
liable to pay the benefits prayed for in petitioners complaint.[28]
More importantly, respondent had been continuously under the employ of TAPE from 1995
until his termination in March 2000, or for a span of 5 years. Regardless of whether or not respondent
had been performing work that is necessary or desirable to the usual business of TAPE, respondent is
still considered a regular employee under Article 280 of the Labor Code which provides:
 Art. 280. Regular and Casual Employment.The provisions of written
agreement to the contrary notwithstanding and regardless of the oral agreement of
the parties, an employment shall be deemed to be regular where the employee has
been engaged to perform activities which are usually necessary or desirable in the
usual business or trade of the employer, except where the employment has been
fixed for a specific project or undertaking the completion or termination of which has
been determined at the time of engagement of the employee or where the work or
service to be performed is seasonal in nature and employment is for the duration of
the season.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph. Provided, that, any employee who has rendered at least one
year of service, whether such service is continuous or broken, shall be considered a
regular employee with respect to the activity in which he is employed and his
employment shall continue while such activity exists.
xxxx
Under recent jurisprudence, the Supreme Court fixed the amount
of P30,000.00 as nominal damages. The basis of the violation of petitioners right to
statutory due process by the private respondents warrants the payment of indemnity
in the form of nominal damages. The amount of such damages is addressed to the
sound discretion of the court, taking into account the relevant circumstances. We
believe this form of damages would serve to deter employer from future violations
of the statutory due process rights of the employees. At the very least, it provides a
vindication or recognition of this fundamental right granted to the latter under the
Labor Code and its Implementing Rules. Considering the circumstances in the case at
bench, we deem it proper to fix it at P10,000.00.[30]

As a regular employee, respondent cannot be terminated except for just cause or when
authorized by law.[29] It is clear from the tenor of the 2 March 2000 Memorandum that respondents
termination was due to redundancy. Thus, the Court of Appeals correctly disposed of this issue, viz:

Article 283 of the Labor Code provides that the employer may also terminate
the employment of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation
of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the workers
and the Ministry of Labor and Employment at least one (1) month before the intended
date thereof. In case of termination due to the installation of labor saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay
equivalent to at least his one (1) month pay or to at least one (1) month pay for every
year or service, whichever is higher.
xxxx
In sum, we find no reversible error committed by the Court of Appeals in its assailed decision.
However, with respect to the liability of petitioner Tuviera, president of TAPE, absent any
showing that he acted with malice or bad faith in terminating respondent, he cannot be held solidarily
liable with TAPE.[31] Thus, the Court of Appeals ruling on this point has to be modified.
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are AFFIRMED with
MODIFICATION in that only petitioner Television and Production Exponents, Inc. is liable to pay
respondent the amount of P10,000.00 as nominal damages for non-compliance with the statutory
due process and petitioner Antonio P. Tuviera is accordingly absolved from liability.

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

Under prevailing jurisprudence the termination for an authorized cause

requires payment of separation pay. Procedurally, if the dismissal is based on
authorized causes under Articles 283 and 284, the employer must give the employee
and the Deparment of Labor and Employment written notice 30 days prior to the
effectivity of his separation. Where the dismissal is for an authorized cause but due
process was not observed, the dismissal should be upheld. While the procedural
infirmity cannot be cured, it should not invalidate the dismissal. However, the
employer should be liable for non-compliance with procedural requirements of due
process.
 SECOND DIVISION
[G.R. No. 87098. November 4, 1996]
ENCYCLOPAEDIA BRITANNICA (PHILIPPINES), INC., petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION, HON. LABOR ARBITER TEODORICO L. DOGELIO and BENJAMIN
LIMJOCO, respondents.
DECISION
TORRES, JR., J.:
Encyclopaedia Britannica (Philippines), Inc. filed this petition for certiorari to annul and set aside
the resolution of the National Labor Relations Commission, Third Division, in NLRC Case No. RB IV-
5158-76, dated December 28, 1988, the dispositive portion of which reads:
WHEREFORE, in view of all the foregoing, the decision dated December 7, 1982 of then Labor Arbiter
Teodorico L. Dogelio is hereby AFFIRMED, and the instant appeal is hereby DISMISSED for lack of
merit.
SO ORDERED.[1]
Private respondent Benjamin Limjoco was a Sales Division Manager of petitioner Encyclopaedia
Britannica and was in charge of selling petitioners products through some sales representatives. As
compensation, private respondent received commissions from the products sold by his agents. He
was also allowed to use petitioners name, goodwill and logo. It was, however, agreed upon that office
expenses would be deducted from private respondents commissions. Petitioner would also be
informed about appointments, promotions, and transfers of employees in private respondents
district.
On June 14, 1974, private respondent Limjoco resigned from office to pursue his private business.
Then on October 30, 1975, he filed a complaint against petitioner Encyclopaedia Britannica with the
Department of Labor and Employment, claiming for non-payment of separation pay and other
benefits, and also illegal deduction from his sales commissions.
Petitioner Encyclopaedia Britannica alleged that complainant Benjamin Limjoco (Limjoco, for
brevity) was not its employee but an independent dealer authorized to promote and sell its products
and in return, received commissions therefrom. Limjoco did not have any salary and his income from
the petitioner company was dependent on the volume of sales accomplished.He also had his own
separate office, financed the business expenses, and maintained his own workforce. The salaries of
his secretary, utility man, and sales representatives were chargeable to his commissions. Thus,
petitioner argued that it had no control and supervision over the complainant as to the manner and
means he conducted his business operations. The latter did not even report to the office of the
petitioner and did not observe fixed office hours. Consequently, there was no employer-employee
relationship.
Limjoco maintained otherwise. He alleged that he was hired by the petitioner in July 1970, was
assigned in the sales department, and was earning an average of P4,000.00 monthly as his sales
commission. He was under the supervision of the petitioners officials who issued to him and his other
personnel, memoranda, guidelines on company policies, instructions and other orders. He was,
however, dismissed by the petitioner when the Laurel-Langley Agreement expired. As a result thereof,
Limjoco asserts that in accordance with the established company practice and the provisions of the
collective bargaining agreement, he was entitled to termination pay equivalent to one month salary,
the unpaid benefits (Christmas bonus, midyear bonus, clothing allowance, vacation leave, and sick
leave), and the amounts illegally deducted from his commissions which were then used for the
payments of office supplies, office space, and overhead expenses.
On December 7, 1982, Labor Arbiter Teodorico Dogelio, in a decision ruled that Limjoco was an
employee of the petitioner company. Petitioner had control over Limjoco since the latter was required
to make periodic reports of his sales activities to the company. All transactions were subject to the
final approval of the petitioner, an evidence that petitioner company had active control on the sales
activities. There was therefore, an employer-employee relationship and necessarily, Limjoco was
entitled to his claims. The decision also ordered petitioner company to pay the following:
1. To pay complainant his separation pay in the total amount of P16,000.00;
2. To pay complainant his unpaid Christmas bonus for three years or the amount of P12,000.00;
3. To pay complainant his unpaid mid-year bonus equivalent to one-half month pay or the total
amount of P6,000.00;
4. To pay complainant his accrued vacation leave equivalent to 15 days per year of service, or the
total amount of P6,000.00;
5. To pay complainant his unpaid clothing allowance in the total amount of P600.00; and
6. To pay complainant his accrued sick leave equivalent to 15 days per year of service or the total
amount of P6,000.00.[2]
On appeal, the Third Division of the National Labor Relations Commission affirmed the assailed
decision. The Commission opined that there was no evidence supporting the allegation that Limjoco
was an independent contractor or dealer. The petitioner still exercised control over Limjoco through
its memoranda and guidelines and even prohibitions on the sale of products other than those
authorized by it. In short, the petitioner company dictated how and where to sell its products. Aside
from that fact, Limjoco passed the costs to the petitioner chargeable against his future
commissions. Such practice proved that he was not an independent dealer or contractor for it is
required by law that an independent contractor should have substantial capital or investment.
Dissatisfied with the outcome of the case, petitioner Encyclopaedia Britannica now comes to us
in this petition for certiorari and injunction with prayer for preliminary injunction. On April 3, 1989,
this Court issued a temporary restraining order enjoining the enforcement of the decision dated
December 7, 1982.
The following are the arguments raised by the petitioner:
I
The respondent NLRC gravely abused its discretion in holding that appellants contention that
appellee was an independent contractor is not supported by evidence on record.
II
Respondent NLRC committed grave abuse of discretion in not passing upon the validity of the
pronouncement of the respondent Labor Arbiter granting private respondents claim for payment of
Christmas bonus, Mid-year bonus, clothing allowance and the money equivalent of accrued and
unused vacation and sick leave.
The NLRC ruled that there existed an employer-employee relationship and petitioner failed to
disprove this finding. We do not agree.
In determining the existence of an employer-employee relationship the following elements must
be present: 1) selection and engagement of the employee; 2) payment of wages; 3) power of
dismissal; and 4) the power to control the employees conduct. Of the above, control of employees
conduct is commonly regarded as the most crucial and determinative indicator of the presence or
absence of an employer-employee relationship.[3] Under the control test, an employer-employee
relationship exists where the person for whom the services are performed reserves the right to control
not only the end to be achieved, but also the manner and means to be used in reaching that end.[4]
The fact that petitioner issued memoranda to private respondents and to other division sales
managers did not prove that petitioner had actual control over them. The different memoranda were
merely guidelines on company policies which the sales managers follow and impose on their
respective agents. It should be noted that in petitioners business of selling encyclopedias and books,
the marketing of these products was done through dealership agreements. The sales operations were
primarily conducted by independent authorized agents who did not receive regular compensations
but only commissions based on the sales of the products. These independent agents hired their own
sales representatives, financed their own office expenses, and maintained their own staff. Thus, there
was a need for the petitioner to issue memoranda to private respondent so that the latter would be
apprised of the company policies and procedures. Nevertheless, private respondent Limjoco and the
other agents were free to conduct and promote their sales operations. The periodic reports to the
petitioner by the agents were but necessary to update the company of the latters performance and Evidently, Limjoco was aware of conflict with other interests which xxx have increasingly required
business income. my personal attention (p. 118, Records). At the very least, it would indicate that petitioner has no
effective control over the personal activities of Limjoco, who as admitted by the latter had other
Private respondent was not an employee of the petitioner company. While it was true that the
conflict of interest requiring his personal attention.
petitioner had fixed the prices of the products for reason of uniformity and private respondent could
not alter them, the latter, nevertheless, had free rein in the means and methods for conducting the In ascertaining whether the relationship is that of employer-employee or one of independent
marketing operations. He selected his own personnel and the only reason why he had to notify the contractor, each case must be determined by its own facts and all features of the relationship are to
petitioner about such appointments was for purpose of deducting the employees salaries from his be considered.[6] The records of the case at bar showed that there was no such employer-employee
commissions. This he admitted in his testimonies, thus: relationship.
Q. Yes, in other words you were on what is known as P&L basis or profit and loss basis? As stated earlier, the element of control is absent; where a person who works for another does
so more or less at his own pleasure and is not subject to definite hours or conditions of work, and in
A. That is right.
turn is compensated according to the result of his efforts and not the amount thereof, we should not
Q. If for an instance, just example your sales representative in any period did not produce find that the relationship of employer and employee exists.[7] In fine, there is nothing in the records
any sales, you would not get any money from Britannica, would you? to show or would indicate that complainant was under the control of the petitioner in respect of the
means and methods[8] in the performance of complainants work.
A. No, sir.
Consequently, private respondent is not entitled to the benefits prayed for.
Q. In fact, Britannica by doing the accounting for you as division manager was merely making
it easy for you to concentrate all your effort in selling and you dont worry about In view of the foregoing premises, the petition is hereby GRANTED, and the decision of the NLRC
accounting, isnt that so? is hereby REVERSED AND SET ASIDE.
A. Yes, sir. SO ORDERED.
Q. In fact whenever you hire a secretary or trainer you merely hire that person and notify
Britannica so that Encyclopaedia Britannica will give the salaries and deduct it from
your earnings, isnt that so?
A. In certain cases I just hired people previously employed by Encyclopaedia Britannica.
xxx
Q. In this Exhibit 2 you were informing Encyclopaedia Britannica that you have hired a
certain person and you were telling Britannica how her salary was going to be taken
cared of, is it not?
A. Yes, sir.
Q. You said here, please be informed that we have appointed Miss Luz Villan as division
trainer effective May 1, 1971 at P550.00 per month her salary will be chargeable to the
Katipunan and Bayanihan Districts, signed by yourself. What is the Katipunan and
Bayanihan District?
A. Those were districts under my division.
Q. In effect you were telling Britannica that you have hired this person and you should
charge her salary to me, is that right?
A. Yes, sir.[5]
Private respondent was merely an agent or an independent dealer of the petitioner. He was free
to conduct his work and he was free to engage in other means of livelihood. At the time he was
connected with the petitioner company, private respondent was also a director and later the
president of the Farmers Rural Bank. Had he been an employee of the company, he could not be
employed elsewhere and he would be required to devote full time for petitioner. If private respondent
was indeed an employee, it was rather unusual for him to wait for more than a year from his
separation from work before he decided to file his claims. Significantly, when Limjoco tendered his
resignation to petitioner on June 14, 1974, he stated, thus:

"Re: Resignation

I am resigning as manager of the EB Capitol Division effective 16 June 1974.

This decision was brought about by conflict with other interests which lately have increasingly
required my personal attention. I feel that in fairness to the company and to the people under my
supervision I should relinquish the position to someone who can devote full-time to the Division.

I wish to thank you for all the encouragement and assistance you have extended to me and to my
group during my long association with Britannica.
 Republic of the Philippines
Supreme Court
Manila
THIRD DIVISION
ATOK BIG WEDGE COMPANY, INC., G.R. No. 169510
Petitioner,
Present:
CARPIO,* J.,
- versus - VELASCO, JR., J., Chairperson,
BRION,**
PERALTA, and
SERENO,*** JJ.
Promulgated:
JESUS P. GISON,
Respondent. August 8, 2011
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
PERALTA, J.:
This is a petition for review on certiorari seeking to reverse and set aside the
Decision[1] dated May 31, 2005 of the Court of Appeals (CA) in CA-G.R. SP No. 87846, and the
Resolution[2] dated August 23, 2005 denying petitioners motion for reconsideration.
The procedural and factual antecedents are as follows:
Sometime in February 1992, respondent Jesus P. Gison was engaged as part-time consultant
on retainer basis by petitioner Atok Big Wedge Company, Inc. through its then Asst. Vice-President
and Acting Resident Manager, Rutillo A. Torres. As a consultant on retainer basis, respondent assisted
petitioner's retained legal counsel with matters pertaining to the prosecution of cases against illegal
surface occupants within the area covered by the company's mineral claims. Respondent was likewise
tasked to perform liaison work with several government agencies, which he said was his expertise.
Petitioner did not require respondent to report to its office on a regular basis, except when
occasionally requested by the management to discuss matters needing his expertise as a
consultant. As payment for his services, respondent received a retainer fee of P3,000.00 a
month,[3] which was delivered to him either at his residence or in a local restaurant. The parties
executed a retainer agreement, but such agreement was misplaced and can no longer be found.
The said arrangement continued for the next eleven years.
Sometime thereafter, since respondent was getting old, he requested that petitioner cause
his registration with the Social Security System (SSS), but petitioner did not accede to his request. He
later reiterated his request but it was ignored by respondent considering that he was only a
retainer/consultant. On February 4, 2003, respondent filed a Complaint[4] with the SSS against
petitioner for the latter's refusal to cause his registration with the SSS.
On the same date, Mario D. Cera, in his capacity as resident manager of petitioner, issued a
Memorandum[5] advising respondent that within 30 days from receipt thereof, petitioner is
terminating his retainer contract with the company since his services are no longer necessary.
On February 21, 2003, respondent filed a Complaint[6] for illegal dismissal, unfair labor
practice, underpayment of wages, non-payment of 13th month pay, vacation pay, and sick leave pay
with the National Labor Relations Commission (NLRC), Regional Arbitration Branch (RAB), Cordillera
Administrative Region, against petitioner, Mario D. Cera, and Teofilo R. Asuncion, Jr. The case was
docketed as NLRC Case No. RAB-CAR-02-0098-03.
Respondent alleged that:
x x x [S]ometime in January 1992, Rutillo A. Torres, then the resident manager of
respondent Atok Big Wedge Co., Inc., or Atok for brevity, approached him and asked
him if he can help the companys problem involving the 700 million pesos crop damage
claims of the residents living at the minesite of Atok. He participated in a series of
dialogues conducted with the residents. Mr. Torres offered to pay him P3,000.00 per
month plus representation expenses. It was also agreed upon by him and Torres that
his participation in resolving the problem was temporary and there will be no
employer-employee relationship between him and Atok. It was also agreed upon that
his compensation, allowances and other expenses will be paid through disbursement
vouchers.
On February 1, 1992 he joined Atok. One week thereafter, the aggrieved crop
damage claimants barricaded the only passage to and from the minesite. In the early
morning of February 1, 1992, a dialogue was made by Atok and the crop damage
claimants. Unfortunately, Atoks representatives, including him, were virtually held
hostage by the irate claimants who demanded on the spot payment of their claims.
He was able to convince the claimants to release the company representatives
pending referral of the issue to higher management.
A case was filed in court for the lifting of the barricades and the court ordered
the lifting of the barricade. While Atok was prosecuting its case with the claimants,
another case erupted involving its partner, Benguet Corporation. After Atok parted
ways with Benguet Corporation, some properties acquired by the partnership and
some receivables by Benguet Corporation was the problem. He was again entangled
with documentation, conferences, meetings, planning, execution and clerical works.
After two years, the controversy was resolved and Atok received its share of the
properties of the partnership, which is about 5 million pesos worth of equipment and
condonation of Atoks accountabilities with Benguet Corporation in the amount
of P900,000.00.
In the meantime, crop damage claimants lost interest in pursuing their claims
against Atok and Atok was relieved of the burden of paying 700 million pesos. In
between attending the problems of the crop damage issue, he was also assigned to
do liaison works with the SEC, Bureau of Mines, municipal government of Itogon,
Benguet, the Courts and other government offices.
After the crop damage claims and the controversy were resolved, he was
permanently assigned by Atok to take charge of some liaison matters and public
relations in Baguio and Benguet Province, and to report regularly to Atoks office
in Manila to attend meetings and so he had to stay in Manila at least one week a
month.
Because of his length of service, he invited the attention of the top officers of
the company that he is already entitled to the benefits due an employee under the
law, but management ignored his requests. However, he continued to avail of his
representation expenses and reimbursement of company-related expenses. He also
enjoyed the privilege of securing interest free salary loans payable in one year
through salary deduction.
In the succeeding years of his employment, he was designated as liaison
officer, public relation officer and legal assistant, and to assist in the ejection of illegal
occupants in the mining claims of Atok.
Since he was getting older, being already 56 years old, he reiterated his
request to the company to cause his registration with the SSS. His request was again
ignored and so he filed a complaint with the SSS. After filing his complaint with the
SSS, respondents terminated his services.[7]
On September 26, 2003, after the parties have submitted their respective pleadings, Labor
Arbiter Rolando D. Gambito rendered a Decision[8] ruling in favor of the petitioner. Finding no
employer-employee relationship between petitioner and respondent, the Labor Arbiter dismissed the
complaint for lack of merit.
Respondent then appealed the decision to the NLRC.
On July 30, 2004, the NLRC, Second Division, issued a Resolution[9] affirming the decision of
the Labor Arbiter. Respondent filed a Motion for Reconsideration, but it was denied in the
Resolution[10] dated September 30, 2004.
Aggrieved, respondent filed a petition for review under Rule 65 of the Rules of Court before the CA
questioning the decision and resolution of the NLRC, which was later docketed as CA-G.R. SP No.
87846. In support of his petition, respondent raised the following issues:
a) Whether or not the Decision of the Honorable Labor Arbiter and the subsequent
Resolutions of the Honorable Public Respondent affirming the same, are in
harmony with the law and the facts of the case;
b) Whether or not the Honorable Labor Arbiter Committed a Grave Abuse of
Discretion in Dismissing the Complaint of Petitioner and whether or not the
Honorable Public Respondent Committed a Grave Abuse of Discretion when it
affirmed the said Decision.[11]
On May 31, 2005, the CA rendered the assailed Decision annulling and setting aside the
decision of the NLRC, the decretal portion of which reads:
WHEREFORE, the petition is GRANTED. The assailed Resolution of the
National Labor Relations Commission dismissing petitioner's complaint for illegal
dismissal is ANNULLED and SET ASIDE. Private respondent Atok Big Wedge Company
Incorporated is ORDERED to reinstate petitioner Jesus P. Gison to his former or
equivalent position without loss of seniority rights and to pay him full backwages,
inclusive of allowances and other benefits or their monetary equivalent computed
from the time these were withheld from him up to the time of his actual and effective
reinstatement. This case is ordered REMANDED to the Labor Arbiter for the proper
computation of backwages, allowances and other benefits due to petitioner.Costs
against private respondent Atok Big Wedge Company Incorporated.
[12]
SO ORDERED.
In ruling in favor of the respondent, the CA opined, among other things, that both the Labor
Arbiter and the NLRC may have overlooked Article 280 of the Labor Code,[13] or the provision which
distinguishes between two kinds of employees, i.e., regular and casual employees. Applying the
provision to the respondent's case, he is deemed a regular employee of the petitioner after the lapse
of one year from his employment. Considering also that respondent had been performing services for
the petitioner for eleven years, respondent is entitled to the rights and privileges of a regular
employee.
The CA added that although there was an agreement between the parties that respondent's
employment would only be temporary, it clearly appears that petitioner disregarded the same by
repeatedly giving petitioner several tasks to perform. Moreover, although respondent may have
waived his right to attain a regular status of employment when he agreed to perform these tasks on
a temporary employment status, still, it was the law that recognized and considered him a regular
employee after his first year of rendering service to petitioner. As such, the waiver was ineffective.
Hence, the petition assigning the following errors:
I. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF
SUBSTANCE CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE
COURT WHEN IT GAVE DUE COURSE TO THE PETITION FOR CERTIORARI DESPITE THE
FACT THAT THERE WAS NO SHOWING THAT THE NATIONAL LABOR RELATIONS
COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION.
II. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF
SUBSTANCE CONTRARY TO THE LAW AND APPLICABLE RULINGS OF THIS HONORABLE
COURT WHEN IT BASED ITS FINDING THAT RESPONDENT IS ENTITLED TO REGULAR
EMPLOYMENT ON A PROVISION OF LAW THAT THIS HONORABLE COURT HAS
DECLARED TO BE INAPPLICABLE IN CASE THE EXISTENCE OF AN EMPLOYER-EMPLOYEE
RELATIONSHIP IS IN DISPUTE OR IS THE FACT IN ISSUE.
III. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF
SUBSTANCE CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE
COURT WHEN IT ERRONEOUSLY FOUND THAT RESPONDENT IS A REGULAR EMPLOYEE
OF THE COMPANY.
IV. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE
CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT
ERRONEOUSLY DIRECTED RESPONDENT'S REINSTATEMENT DESPITE THE FACT THAT
THE NATURE OF THE SERVICES HE PROVIDED TO THE COMPANY WAS SENSITIVE AND
CONFIDENTIAL.[14]
Petitioner argues that since the petition filed by the respondent before the CA was a petition
for certiorari under Rule 65 of the Rules of Court, the CA should have limited the issue on whether or
not there was grave abuse of discretion on the part of the NLRC in rendering the resolution affirming
the decision of the Labor Arbiter.
Petitioner also posits that the CA erred in applying Article 280 of the Labor Code in
determining whether there was an employer-employee relationship between the petitioner and the
respondent. Petitioner contends that where the existence of an employer-employee relationship is in
dispute, Article 280 of the Labor Code is inapplicable. The said article only set the distinction between
a casual employee from a regular employee for purposes of determining the rights of an employee to
be entitled to certain benefits.
Petitioner insists that respondent is not a regular employee and not entitled to reinstatement.
On his part, respondent maintains that he is an employee of the petitioner and that the CA
did not err in ruling in his favor.
The petition is meritorious.
At the outset, respondent's recourse to the CA was the proper remedy to question the
resolution of the NLRC. It bears stressing that there is no appeal from the decision or resolution of the
NLRC. As this Court enunciated in the case of St. Martin Funeral Home v. NLRC,[15] the special civil
action of certiorari under Rule 65 of the Rules of Civil Procedure, which is filed before the CA, is the
proper vehicle for judicial review of decisions of the NLRC. The petition should be initially filed before
the Court of Appeals in strict observance of the doctrine on hierarchy of courts as the appropriate
forum for the relief desired.[16] This Court not being a trier of facts, the resolution of unclear or
ambiguous factual findings should be left to the CA as it is procedurally equipped for that
purpose. From the decision of the Court of Appeals, an ordinary appeal under Rule 45 of the Rules of
Civil Procedure before the Supreme Court may be resorted to by the parties. Hence, respondent's
resort to the CA was appropriate under the circumstances.
Anent the primordial issue of whether or not an employer-employee relationship exists
between petitioner and respondent.
Well-entrenched is the doctrine that the existence of an employer-employee relationship is
ultimately a question of fact and that the findings thereon by the Labor Arbiter and the NLRC shall be
accorded not only respect but even finality when supported by substantial evidence.[17] Being a
question of fact, the determination whether such a relationship exists between petitioner and
respondent was well within the province of the Labor Arbiter and the NLRC. Being supported by
substantial evidence, such determination should have been accorded great weight by the CA in
resolving the issue.
To ascertain the existence of an employer-employee relationship jurisprudence has invariably
adhered to the four-fold test, to wit: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power to control the employee's conduct,
or the so-called "control test."[18] Of these four, the last one is the most important.[19] The so-called
control test is commonly regarded as the most crucial and determinative indicator of the presence or
absence of an employer-employee relationship. Under the control test, an employer-employee dated July 30, 2004 and September 30, 2004 of the National Labor Relations Commission
relationship exists where the person for whom the services are performed reserves the right to control are REINSTATED.
not only the end achieved, but also the manner and means to be used in reaching that end.[20]
SO ORDERED.
Applying the aforementioned test, an employer-employee relationship is apparently absent
in the case at bar. Among other things, respondent was not required to report everyday during regular
office hours of petitioner. Respondent's monthly retainer fees were paid to him either at his residence
or a local restaurant. More importantly, petitioner did not prescribe the manner in which respondent
would accomplish any of the tasks in which his expertise as a liaison officer was needed; respondent
was left alone and given the freedom to accomplish the tasks using his own means and
method. Respondent was assigned tasks to perform, but petitioner did not control the manner and
methods by which respondent performed these tasks. Verily, the absence of the element of control
on the part of the petitioner engenders a conclusion that he is not an employee of the petitioner.

Moreover, the absence of the parties' retainership agreement notwithstanding, respondent

clearly admitted that petitioner hired him in a limited capacity only and that there will be no employer-
employee relationship between them. As averred in respondent's Position Paper:[21]

2. For the participation of complainant regarding this particular problem of Atok, Mr.
Torres offered him a pay in the amount of Php3,000.00 per month plus
representation expenses. It was also agreed by Mr. Torres and the complainant
that his participation on this particular problem of Atok will be temporary since the
problem was then contemplated to be limited in nature, hence, there will be no
employer-employee relationship between him and Atok. Complainant agreed on
this arrangement. It was also agreed that complainant's compensations,
allowances, representation expenses and reimbursement of company- related
expenses will be processed and paid through disbursement vouchers;[22]

Respondent was well aware of the agreement that he was hired merely as a liaison or
consultant of the petitioner and he agreed to perform tasks for the petitioner on a temporary
employment status only. However, respondent anchors his claim that he became a regular employee
of the petitioner based on his contention that the temporary aspect of his job and its limited nature
could not have lasted for eleven years unless some time during that period, he became a regular
employee of the petitioner by continually performing services for the company.

Contrary to the conclusion of the CA, respondent is not an employee, much more a regular
employee of petitioner. The appellate court's premise that regular employees are those who perform
activities which are desirable and necessary for the business of the employer is not determinative in
this case. In fact, any agreement may provide that one party shall render services for and in behalf of
another, no matter how necessary for the latter's business, even without being hired as an
employee.[23] Hence, respondent's length of service and petitioner's repeated act of assigning
respondent some tasks to be performed did not result to respondent's entitlement to the rights and
privileges of a regular employee.

Furthermore, despite the fact that petitioner made use of the services of respondent for
eleven years, he still cannot be considered as a regular employee of petitioner.Article 280 of the Labor
Code, in which the lower court used to buttress its findings that respondent became a regular
employee of the petitioner, is not applicable in the case at bar. Indeed, the Court has ruled that said
provision is not the yardstick for determining the existence of an employment relationship because it
merely distinguishes between two kinds of employees, i.e., regular employees and casual employees,
for purposes of determining the right of an employee to certain benefits, to join or form a union, or
to security of tenure; it does not apply where the existence of an employment relationship is in
dispute.[24] It is, therefore, erroneous on the part of the Court of Appeals to rely on Article 280 in
determining whether an employer-employee relationship exists between respondent and the
petitioner

Considering that there is no employer-employee relationship between the parties, the

termination of respondent's services by the petitioner after due notice did not constitute illegal
dismissal warranting his reinstatement and the payment of full backwages, allowances and other
benefits.

WHEREFORE, premises considered, the petition is GRANTED. The Decision and the Resolution
of the Court of Appeals in CA-G.R. SP No. 87846, are REVERSED and SET ASIDE. The Resolutions
 SECOND DIVISION
THELMA DUMPIT-MURILLO, G.R. No. 164652
Petitioner,
Present:
QUISUMBING, J.,* Chairperson,
- versus - CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
COURT OF APPEALS, ASSOCIATED Promulgated:
BROADCASTING COMPANY, JOSE JAVIER AND
EDWARD TAN,
Respondents. June 8, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
QUISUMBING, J.:
This petition seeks to reverse and set aside both the Decision dated January 30, 2004 of the
Court of Appeals in CA-G.R. SP No. 63125 and its Resolution[2] dated June 23, 2004 denying the motion
for reconsideration. The Court of Appeals had overturned the Resolution[3] dated August 30, 2000 of
the National Labor Relations Commission (NLRC) ruling that petitioner was illegally dismissed.
The facts of the case are as follows:
On October 2, 1995, under Talent Contract No. NT95-1805,[4] private respondent Associated
Broadcasting Company (ABC) hired petitioner Thelma Dumpit-Murillo as a newscaster and co-anchor
for Balitang-Balita, an early evening news program. The contract was for a period of three months. It
was renewed under Talent Contracts Nos. NT95-1915, NT96-3002, NT98-4984 and NT99-5649.[5] In
addition, petitioners services were engaged for the program Live on Five. On September 30, 1999,
after four years of repeated renewals, petitioners talent contract expired. Two weeks after the
expiration of the last contract, petitioner sent a letter to Mr. Jose Javier, Vice President for News and
Public Affairs of ABC, informing the latter that she was still interested in renewing her contract subject
to a salary increase. Thereafter, petitioner stopped reporting for work. On November 5, 1999, she
wrote Mr. Javier another letter,[6] which we quote verbatim:
xxxx
Dear Mr. Javier:
On October 20, 1999, I wrote you a letter in answer to your query by way of a marginal
note what terms and conditions in response to my first letter dated October 13, 1999.
To date, or for more than fifteen (15) days since then, I have not received any formal
written reply. xxx
In view hereof, should I not receive any formal response from you until Monday,
November 8, 1999, I will deem it as a constructive dismissal of my services.
xxxx
A month later, petitioner sent a demand letter[7] to ABC, demanding: (a) reinstatement to her
former position; (b) payment of unpaid wages for services rendered from September 1 to October 20,
1999 and full backwages; (c) payment of 13th month pay, vacation/sick/service incentive leaves and
other monetary benefits due to a regular employee starting March 31, 1996. ABC replied that a check
covering petitioners talent fees for September 16 to October 20, 1999 had been processed and
prepared, but that the other claims of petitioner had no basis in fact or in law.
On December 20, 1999, petitioner filed a complaint[8] against ABC, Mr. Javier and Mr. Edward
Tan, for illegal constructive dismissal, nonpayment of salaries, overtime pay, premium pay, separation
pay, holiday pay, service incentive leave pay, vacation/sick leaves and 13th month pay in NLRC-NCR Case
No. 30-12-00985-99. She likewise demanded payment for moral, exemplary and actual damages, as well
as for attorneys fees.
The parties agreed to submit the case for resolution after settlement failed during the
mandatory conference/conciliation. On March 29, 2000, the Labor Arbiter dismissed the complaint.[9]
On appeal, the NLRC reversed the Labor Arbiter in a Resolution dated August 30, 2000. The NLRC
held that an employer-employee relationship existed between petitioner and ABC; that the subject talent
contract was void; that the petitioner was a regular employee illegally dismissed; and that she was entitled
to reinstatement and backwages or separation pay, aside from 13th month pay and service incentive leave
pay, moral and exemplary damages and attorneys fees. It held as follows:
WHEREFORE, the Decision of the Arbiter dated 29 March 2000 is
hereby REVERSED/SET ASIDE and a NEW ONE promulgated:
1) declaring respondents to have illegally dismissed complainant from her
regular work therein and thus, ordering them to reinstate her in her former position
without loss of seniority right[s] and other privileges and to pay her full backwages,
inclusive of allowances and other benefits, including 13th month pay based on her said
latest rate of P28,000.00/mo. from the date of her illegal dismissal on 21 October
1999 up to finality hereof, or at complainants option, to pay her separation pay of one
(1) month pay per year of service based on said latest monthly rate, reckoned from
date of hire on 30 September 1995 until finality hereof;
2) to pay complainants accrued SILP [Service Incentive Leave Pay] of 5 days
[1] pay per year and 13th month pay for the years 1999, 1998 and 1997 of P19,236.00
and P84,000.00, respectively and her accrued salary from 16 September 1999 to 20
October 1999 of P32,760.00 plus legal interest at 12% from date of judicial demand
on 20 December 1999 until finality hereof;
3) to pay complainant moral damages of P500,000.00, exemplary damages
of P350,000.00 and 10% of the total of the adjudged monetary awards as attorneys
fees.
Other monetary claims of complainant are dismissed for lack of merit.
SO ORDERED.[10]
After its motion for reconsideration was denied, ABC elevated the case to the Court of Appeals
in a petition for certiorari under Rule 65. The petition was first dismissed for failure to attach particular
documents,[11] but was reinstated on grounds of the higher interest of justice.[12]
Thereafter, the appellate court ruled that the NLRC committed grave abuse of discretion, and
reversed the decision of the NLRC.[13] The appellate court reasoned that petitioner should not be
allowed to renege from the stipulations she had voluntarily and knowingly executed by invoking the
security of tenure under the Labor Code. According to the appellate court, petitioner was a fixed-term
employee and not a regular employee within the ambit of Article 280[14] of the Labor Code because
her job, as anticipated and agreed upon, was only for a specified time.[15]
Aggrieved, petitioner now comes to this Court on a petition for review, raising issues as
follows:
I.
THIS HONORABLE COURT CAN REVIEW THE FINDINGS OF THE HONORABLE COURT OF
APPEALS, THE DECISION OF WHICH IS NOT IN ACCORD WITH LAW OR WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT[;]
II.
THE PRO-FORMA TALENT CONTRACTS, AS CORRECTLY FOUND BY THE NLRC FIRST
DIVISION, ARE ANTI-REGULARIZATION DEVICES WHICH MUST BE STRUCK DOWN FOR
REASONS OF PUBLIC POLICY[;]
III.
BY REASON OF THE CONTINUOUS AND SUCCESSIVE RENEWALS OF THE THREE-
MONTH TALENT CONTRACTS, AN EMPLOYER-EMPLOYEE RELATIONSHIP WAS
CREATED AS PROVIDED FOR UNDER ARTICLE 280 OF THE LABOR CODE[;]
IV.
 BY THE CONSTRUCTIVE DISMISSAL OF HEREIN PETITIONER, AS A REGULAR EMPLOYEE,
THERE WAS A DENIAL OF PETITIONERS RIGHT TO DUE PROCESS THUS ENTITLING HER
TO THE MONEY CLAIMS AS STATED IN THE COMPLAINT[.][16]
The issues for our disposition are: (1) whether or not this Court can review the findings of the
Court of Appeals; and (2) whether or not under Rule 45 of the Rules of Court the Court of Appeals
committed a reversible error in its Decision.
On the first issue, private respondents contend that the issues raised in the instant petition
are mainly factual and that there is no showing that the said issues have been resolved arbitrarily and
without basis. They add that the findings of the Court of Appeals are supported by overwhelming
wealth of evidence on record as well as prevailing jurisprudence on the matter.[17]
Petitioner however contends that this Court can review the findings of the Court of Appeals,
since the appellate court erred in deciding a question of substance in a way which is not in accord with
law or with applicable decisions of this Court.[18]
We agree with petitioner. Decisions, final orders or resolutions of the Court of Appeals in any
case regardless of the nature of the action or proceeding involved may be appealed to this Court
through a petition for review. This remedy is a continuation of the appellate process over the original
case,[19] and considering there is no congruence in the findings of the NLRC and the Court of Appeals
regarding the status of employment of petitioner, an exception to the general rule that this Court is
bound by the findings of facts of the appellate court,[20] we can review such findings.
On the second issue, private respondents contend that the Court of Appeals did not err when
it upheld the validity of the talent contracts voluntarily entered into by petitioner. It further stated
that prevailing jurisprudence has recognized and sustained the absence of employer-employee
relationship between a talent and the media entity which engaged the talents services on a per talent
contract basis, citing the case of Sonza v. ABS-CBN Broadcasting Corporation.[21]
Petitioner avers however that an employer-employee relationship was created when the
private respondents started to merely renew the contracts repeatedly fifteen times or for four
consecutive years.[22]
Again, we agree with petitioner. The Court of Appeals committed reversible error when it held
that petitioner was a fixed-term employee. Petitioner was a regular employee under contemplation of
law. The practice of having fixed-term contracts in the industry does not automatically make all talent
contracts valid and compliant with labor law. The assertion that a talent contract exists does not
necessarily prevent a regular employment status.[23]
Further, the Sonza case is not applicable. In Sonza, the television station did not instruct Sonza
how to perform his job. How Sonza delivered his lines, appeared on television, and sounded on radio
were outside the television stations control. Sonza had a free hand on what to say or discuss in his
shows provided he did not attack the television station or its interests. Clearly, the television station
did not exercise control over the means and methods of the performance of Sonzas work.[24] In the
case at bar, ABC had control over the performance of petitioners work. Noteworthy too, is the
comparatively low P28,000 monthly pay of petitioner[25] vis the P300,000 a month salary of
Sonza,[26]that all the more bolsters the conclusion that petitioner was not in the same situation as
Sonza.
The contract of employment of petitioner with ABC had the following stipulations:
xxxx
1. SCOPE OF SERVICES TALENT agrees to devote his/her talent, time, attention
and best efforts in the performance of his/her duties and responsibilities as
Anchor/Program Host/Newscaster of the Program, in accordance with the direction of
ABC and/or its authorized representatives.
1.1. DUTIES AND RESPONSIBILITIES TALENT shall:
a. Render his/her services as a newscaster on the Program;
b. Be involved in news-gathering operations by conducting interviews on-
and off-the-air;
c. Participate in live remote coverages when called upon;
d. Be available for any other news assignment, such as writing, research or
camera work;
e. Attend production meetings;
f. On assigned days, be at the studios at least one (1) hour before the live
telecasts;
g. Be present promptly at the studios and/or other place of assignment at
the time designated by ABC;
h. Keep abreast of the news;
i. Give his/her full cooperation to ABC and its duly authorized
representatives in the production and promotion of the Program; and
j. Perform such other functions as may be assigned to him/her from time
to time.
xxxx
1.3 COMPLIANCE WITH STANDARDS, INSTRUCTIONS AND OTHER RULES AND
REGULATIONS TALENT agrees that he/she will promptly and faithfully comply
with the requests and instructions, as well as the program standards, policies,
rules and regulations of ABC, the KBP and the government or any of its
agencies and instrumentalities.[27]
xxxx
In Manila Water Company, Inc. v. Pena,[28] we said that the elements to determine the existence of an
employment relationship are: (a) the selection and engagement of the employee, (b) the payment of
wages, (c) the power of dismissal, and (d) the employers power to control. The most important element is
the employers control of the employees conduct, not only as to the result of the work to be done, but also
as to the means and methods to accomplish it.[29]
The duties of petitioner as enumerated in her employment contract indicate that ABC had
control over the work of petitioner. Aside from control, ABC also dictated the work assignments and
payment of petitioners wages. ABC also had power to dismiss her. All these being present, clearly,
there existed an employment relationship between petitioner and ABC.
Concerning regular employment, the law provides for two kinds of employees, namely: (1)
those who are engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer; and (2) those who have rendered at least one year of service,
whether continuous or broken, with respect to the activity in which they are employed.[30] In other
words, regular status arises from either the nature of work of the employee or the duration of his
employment.[31] In Benares v. Pancho,[32] we very succinctly said:
[T]he primary standard for determining regular employment is the reasonable
connection between the particular activity performed by the employee vis--vis the
usual trade or business of the employer. This connection can be determined by
considering the nature of the work performed and its relation to the scheme of the
particular business or trade in its entirety. If the employee has been performing the
job for at least a year, even if the performance is not continuous and merely
intermittent, the law deems repeated and continuing need for its performance as
sufficient evidence of the necessity if not indispensability of that activity to the
business. Hence, the employment is considered regular, but only with respect to such
activity and while such activity exists.[33]
In our view, the requisites for regularity of employment have been met in the instant
case. Gleaned from the description of the scope of services aforementioned, petitioners work
was necessary or desirable in the usual business or trade of the employer which includes, as a pre-
condition for its enfranchisement, its participation in the governments news and public information
dissemination. In addition, her work was continuous for a period of four years. This repeated
engagement under contract of hire is indicative of the necessity and desirability of the petitioners
work in private respondent ABCs business.[34]
The contention of the appellate court that the contract was characterized by a valid fixed-period
employment is untenable. For such contract to be valid, it should be shown that the fixed period was
knowingly and voluntarily agreed upon by the parties. There should have been no force, duress or
improper pressure brought to bear upon the employee; neither should there be any other circumstance
that vitiates the employees consent.[35] It should satisfactorily appear that the employer and the employee
dealt with each other on more or less equal terms with no moral dominance being exercised by the
employer over the employee.[36] Moreover, fixed-term employment will not be considered valid where,
from the circumstances, it is apparent that periods have been imposed to preclude acquisition of tenurial
security by the employee.[37]

In the case at bar, it does not appear that the employer and employee dealt with each other on equal
terms. Understandably, the petitioner could not object to the terms of her employment contract because
she did not want to lose the job that she loved and the workplace that she had grown accustomed
to,[38] which is exactly what happened when she finally manifested her intention to negotiate. Being one of
the numerous newscasters/broadcasters of ABC and desiring to keep her job as a broadcasting practitioner,
petitioner was left with no choice but to affix her signature of conformity on each renewal of her contract as
already prepared by private respondents; otherwise, private respondents would have simply refused to
renew her contract. Patently, the petitioner occupied a position of weakness vis--vis the
employer. Moreover, private respondents practice of repeatedly extending petitioners 3-month contract for
four years is a circumvention of the acquisition of regular status. Hence, there was no valid fixed-term
employment between petitioner and private respondents.

While this Court has recognized the validity of fixed-term employment contracts in a number
of cases, it has consistently emphasized that when the circumstances of a case show that the periods
were imposed to block the acquisition of security of tenure, they should be struck down for being
contrary to law, morals, good customs, public order or public policy.[39]

As a regular employee, petitioner is entitled to security of tenure and can be dismissed only for just
cause and after due compliance with procedural due process. Since private respondents did not observe due
process in constructively dismissing the petitioner, we hold that there was an illegal dismissal.

WHEREFORE, the challenged Decision dated January 30, 2004 and Resolution dated June 23,
2004 of the Court of Appeals in CA-G.R. SP No. 63125, which held that the petitioner was a fixed-term
employee, are REVERSED and SET ASIDE. The NLRC decision is AFFIRMED.

Costs against private respondents.

SO ORDERED.
 SECOND DIVISION 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
JOSE MEL BERNARTE, G.R. No. 192084 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.
Petitioner,

Complainant Bernarte, for instance, was not made to sign a contract during the first
Present: 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.

- versus - CARPIO, J., Chairperson,

BRION, 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
DEL CASTILLO,* 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
PEREZ, and Ernie De Leon.

SERENO, JJ.

PHILIPPINE BASKETBALL 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
ASSOCIATION (PBA), JOSE 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
EMMANUEL M. EALA, and Promulgated: on the assignment of referees officiating out-of-town games. Beginning February 2004, he
was no longer made to sign a contract.
PERRY MARTINEZ,

Respondents. September 14, 2011

Respondents aver, on the other hand, that complainants entered into two contracts of
x-----------------------------------------------------------------------------------------x retainer with the PBA in the year 2003. The first contract was for the period January 1, 2003
to July 15, 2003; and the second was for September 1 to December 2003. After the lapse of
the latter period, PBA decided not to renew their contracts.

DECISION

CARPIO, J.:

The Case

This is a petition for review1 of the 17 December 2009 Decision2 and 5 April 2010 Resolution3 of the Complainants were not illegally dismissed because they were not employees of the PBA.
Court of Appeals in CA-G.R. SP No. 105406. The Court of Appeals set aside the decision of the Their respective contracts of retainer were simply not renewed. PBA had the prerogative of
National Labor Relations Commission (NLRC), which affirmed the decision of the Labor Arbiter, and whether or not to renew their contracts, which they knew were fixed.4
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.
In her 31 March 2005 Decision,5 the Labor Arbiter6 declared petitioner an employee whose dismissal
by respondents was illegal. Accordingly, the Labor Arbiter ordered the reinstatement of petitioner
and the payment of backwages, moral and exemplary damages and attorneys fees, to wit:
The Facts
 WHEREFORE, premises considered all respondents who are here found to have illegally WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated January 28, 2008
dismissed complainants are hereby ordered to (a) reinstate complainants within thirty (30) and Resolution dated August 26, 2008 of the National Labor Relations Commission
days from the date of receipt of this decision and to solidarily pay complainants: are ANNULLED and SET ASIDE. Private respondents complaint before the Labor Arbiter
is DISMISSED.

JOSE MEL RENATO GUEVARRA

BERNARTE SO ORDERED.10

1. backwages from January 1,

2004 up to the finality of this
Decision, which to date is P211,250.00
P536,250.00

100,000.00 The Court of Appeals Ruling

2. moral damages 100,000.00
50,000.00

3. exemplary damages 50,000.00

4. 10% attorneys fees 68,625.00 36,125.00 The Court of Appeals found petitioner an independent contractor since respondents did not exercise
any form of control over the means and methods by which petitioner performed his work as a
basketball referee. The Court of Appeals held:

TOTAL P754,875.00 P397,375.00

While the NLRC agreed that the PBA has no control over the referees acts of blowing the
whistle and making calls during basketball games, it, nevertheless, theorized that the said
or a total of P1,152,250.00 acts refer to the means and methods employed by the referees in officiating basketball
games for the illogical reason that said acts refer only to the referees skills. How could a
skilled referee perform his job without blowing a whistle and making calls? Worse, how can
the PBA control the performance of work of a referee without controlling his acts of blowing
The rest of the claims are hereby dismissed for lack of merit or basis. the whistle and making calls?

SO ORDERED.7 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.

In its 28 January 2008 Decision,8 the NLRC affirmed the Labor Arbiters judgment. The dispositive
portion of the NLRCs decision reads: xxxx

WHEREFORE, the appeal is hereby DISMISSED. The Decision of Labor

Arbiter Teresita D. Castillon-Lora dated March 31, 2005 is AFFIRMED.
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

SO ORDERED.9

Respondents filed a petition for certiorari with the Court of Appeals, which overturned the decisions The Issues
of the NLRC and Labor Arbiter. The dispositive portion of the Court of Appeals decision reads:
The main issue in this case is whether petitioner is an employee of respondents, which in turn
determines whether petitioner was illegally dismissed.
Petitioner raises the procedural issue of whether the Labor Arbiters decision has become final
and executory for failure of respondents to appeal with the NLRC within the reglementaryperiod.
The Ruling of the Court
The petition is bereft of merit.
The Court shall first resolve the procedural issue posed by petitioner.
Petitioner contends that the Labor Arbiters Decision of 31 March 2005 became final
and executory for failure of respondents to appeal with the NLRC within the prescribed period.
Petitioner claims that the Labor Arbiters decision was constructively served on respondents as early
as August 2005 while respondents appealed the Arbiters decision only on 31 March 2006, way
beyond the reglementary period to appeal. Petitioner points out that service of an unclaimed
registered mail is deemed complete five days from the date of first notice of the post master. In this
case three notices were issued by the post office, the last being on 1 August 2005. The unclaimed
registered mail was consequently returned to sender. Petitioner presents the Postmasters
Certification to prove constructive service of the Labor Arbiters decision on respondents. The
Postmaster certified:
xxx
That upon receipt of said registered mail matter, our registry in charge, Vicente Asis, Jr.,
immediately issued the first registry notice to claim on July 12, 2005 by the addressee. The
second and third notices were issued on July 21 and August 1, 2005, respectively.
That the subject registered letter was returned to the sender (RTS) because the addressee
failed to claim it after our one month retention period elapsed. Said registered letter was
dispatched from this office to Manila CPO (RTS) under bill #6, line 7, page1, column 1, on
September 8, 2005.12
Section 10, Rule 13 of the Rules of Court provides:
SEC. 10. Completeness of service. Personal service is complete upon actual delivery. Service
by ordinary mail is complete upon the expiration of ten (10) days after mailing, unless the
court otherwise provides. Service by registered mail is complete upon actual receipt by the
addressee, or after five (5) days from the date he received the first notice of the postmaster,
whichever date is earlier.
The rule on service by registered mail contemplates two situations: (1) actual service the
completeness of which is determined upon receipt by the addressee of the registered mail; and (2)
constructive service the completeness of which is determined upon expiration of five days from the
date the addressee received the first notice of the postmaster.13
Insofar as constructive service is concerned, there must be conclusive proof that a first notice was
duly sent by the postmaster to the addressee.14 Not only is it required that notice of the registered
mail be issued but that it should also be delivered to and received by the addressee.15 Notably, the
presumption that official duty has been regularly performed is not applicable in this situation. It is
incumbent upon a party who relies on constructive service to prove that the notice was sent to, and
received by, the addressee.16
The best evidence to prove that notice was sent would be a certification from the postmaster, who
should certify not only that the notice was issued or sent but also as to how, when and to whom the
delivery and receipt was made. The mailman may also testify that the notice was actually
delivered.17
In this case, petitioner failed to present any concrete proof as to how, when and to whom the
delivery and receipt of the three notices issued by the post office was made. There is no conclusive
evidence showing that the post office notices were actually received by respondents, negating
petitioners claim of constructive service of the Labor Arbiters decision on respondents. The
Postmasters Certification does not sufficiently prove that the three notices were delivered to and
received by respondents; it only indicates that the post office issued the three notices. Simply put,
the issuance of the notices by the post office is not equivalent to delivery to and receipt by the
addressee of the registered mail. Thus, there is no proof of completed constructive service of the
Labor Arbiters decision on respondents.
At any rate, the NLRC declared the issue on the finality of the Labor Arbiters decision moot as
respondents appeal was considered in the interest of substantial justice. We agree with the NLRC.
The ends of justice will be better served if we resolve the instant case on the merits rather than
allowing the substantial issue of whether petitioner is an independent contractor or an employee
linger and remain unsettled due to procedural technicalities.
The existence of an 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 top-rating television and radio programs that comply with
standards of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct of the
other party in relation to the services being rendered may be accorded the effect of
establishing an employer-employee relationship. The facts of this case fall squarely with the
case of Insular Life Assurance Co., Ltd. v. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines towards
the achievement of the mutually desired result without dictating the means or methods to
be employed in attaining it, and those that control or fix the methodology and bind or
restrict the party hired to the use of such means. The first, which aim only to promote the
result, create no employer-employee relationship unlike the second, which address both the
result and the means used to achieve it.22
We agree with respondents that once in the playing court, the referees exercise their own
independent judgment, based on the rules of the game, as to when and how a call or decision is to
be made. The referees decide whether an infraction was committed, and the PBA cannot overrule
them once the decision is made on the playing court. The referees are the only, absolute, and final
authority on the playing court. Respondents or any of the PBA officers cannot and do not determine
which calls to make or not to make and cannot control the referee when he blows the whistle
because such authority exclusively belongs to the referees. The very nature of petitioners job
of officiating a professional basketball game undoubtedly calls for freedom of control by
respondents.
Moreover, the following circumstances indicate that petitioner is an independent contractor: (1) the
referees are required to report for work only when PBA games are scheduled, which is three times a
week spread over an average of only 105 playing days a year, and they officiate games at an average
of two hours per game; and (2) the only deductions from the fees received by the referees are
withholding taxes.
In other words, unlike regular employees who ordinarily report for work eight hours per day for five
days a week, petitioner is required to report for work only when PBA games are scheduled or three
times a week at two hours per game. In addition, there are no deductions for contributions to the
Social Security System, Philhealth or Pag-Ibig, which are the usual deductions from employees
salaries. These undisputed circumstances buttress the fact that petitioner is an independent
contractor, and not an employee of respondents.
Furthermore, the applicable foreign case law declares that a referee is an independent contractor,
whose special skills and independent judgment are required specifically for such position and cannot
possibly be controlled by the hiring party.
In Yonan v. United States Soccer Federation, Inc.,23 the United States District Court of Illinois held
that plaintiff, a soccer referee, is an independent contractor, and not an employee of defendant
which is the statutory body that governs soccer in the United States. As such, plaintiff was not
entitled to protection by the Age Discrimination in Employment Act. The U.S. District Court ruled:
Generally, if an employer has the right to control and direct the work of an individual, not
only as to the result to be achieved, but also as to details by which the result is achieved, an
employer/employee relationship is likely to exist. The Court must be careful to distinguish
between control[ling] the conduct of another party contracting party by setting out in detail
his obligations consistent with the freedom of contract, on the one hand, and the
discretionary control an employer daily exercises over its employees conduct on the other.
Yonan asserts that the Federation closely supervised his performance at each soccer game
he officiated by giving him an assessor, discussing his performance, and controlling what
clothes he wore while on the field and traveling. Putting aside that the Federation did not,
 for the most part, control what clothes he wore, the Federation did not supervise Yonan, but
rather evaluated his performance after matches. That the Federation evaluated Yonan as a
referee does not mean that he was an employee. There is no question that parties retaining
independent contractors may judge the performance of those contractors to determine if
the contractual relationship should continue. x x x

It is undisputed that the Federation did not control the way Yonan refereed his games. He
had full discretion and authority, under the Laws of the Game, to call the game as he saw fit.
x x x In a similar vein, subjecting Yonan to qualification standards and procedures like the
Federations registration and training requirements does not create an employer/employee
relationship. x x x

A position that requires special skills and independent judgment weights in favor of
independent contractor status. x x x Unskilled work, on the other hand, suggests an
employment relationship. x x xHere, it is undisputed that soccer refereeing, especially at the
professional and international level, requires a great deal of skill and natural
ability. Yonan asserts that it was the Federations training that made him a top referee, and
that suggests he was an employee. Though substantial training supports an employment
inference, that inference is dulled significantly or negated when the putative employers
activity is the result of a statutory requirement, not the employers choice. x x x

In McInturff v. Battle Ground Academy of Franklin,24 it was held that the umpire was not an agent
of the Tennessee Secondary School Athletic Association (TSSAA), so the players vicarious liability
claim against the association should be dismissed. In finding that the umpire is an independent
contractor, the Court of Appeals of Tennesse ruled:

The TSSAA deals with umpires to achieve a result-uniform rules for all baseball games played
between TSSAA member schools. The TSSAA does not supervise regular season games. It
does not tell an official how to conduct the game beyond the framework established by the
rules. The TSSAA does not, in the vernacular of the case law, control the means and method
by which the umpires work.

In addition, the fact that PBA repeatedly hired petitioner does not by itself prove that petitioner is
an employee of the former. For a hired party to be considered an employee, the hiring party must
have control over the means and methods by which the hired party is to perform his work, which is
absent in this case. The continuous rehiring by PBA of petitioner simply signifies the renewal of the
contract between PBA and petitioner, and highlights the satisfactory services rendered by petitioner
warranting such contract renewal. Conversely, if PBA decides to discontinue petitioners services at
the end of the term fixed in the contract, whether for unsatisfactory services, or violation of the
terms and conditions of the contract, or for whatever other reason, the same merely results in the
non-renewal of the contract, as in the present case. The non-renewal of the contract between the
parties does not constitute illegal dismissal of petitioner by respondents.

WHEREFORE, we DENY the petition and AFFIRM the assailed decision of the Court of Appeals.

SO ORDERED.
 SECOND DIVISION
[G.R. No. 119268. February 23, 2000]
ANGEL JARDIN, DEMETRIO CALAGOS, URBANO MARCOS, ROSENDO MARCOS, LUIS DE LOS
ANGELES, JOEL ORDENIZA and AMADO CENTENO, petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION (NLRC) and GOODMAN TAXI (PHILJAMA INTERNATIONAL, INC.), respondents.
DECISION
QUISUMBING, J.:
This special civil action for certiorari seeks to annul the decision[1] of public respondent promulgated
on October 28, 1994, in NLRC NCR CA No. 003883-92, and its resolution[2] dated December 13, 1994
which denied petitioners motion for reconsideration.
Petitioners were drivers of private respondent, Philjama International Inc., a domestic corporation
engaged in the operation of "Goodman Taxi." Petitioners used to drive private respondents taxicabs
every other day on a 24-hour work schedule under the boundary system. Under this arrangement,
the petitioners earned an average of P400.00 daily. Nevertheless, private respondent admittedly
regularly deducts from petitioners daily earnings the amount of P30.00 supposedly for the washing
of the taxi units. Believing that the deduction is illegal, petitioners decided to form a labor union to
protect their rights and interests.
Upon learning about the plan of petitioners, private respondent refused to let petitioners drive their
taxicabs when they reported for work on August 6, 1991, and on succeeding days. Petitioners
suspected that they were singled out because they were the leaders and active members of the
proposed union. Aggrieved, petitioners filed with the labor arbiter a complaint against private
respondent for unfair labor practice, illegal dismissal and illegal deduction of washing fees. In a
decision[3] dated August 31, 1992, the labor arbiter dismissed said complaint for lack of merit.
On appeal, the NLRC (public respondent herein), in a decision dated April 28, 1994, reversed and set
aside the judgment of the labor arbiter. The labor tribunal declared that petitioners are employees
of private respondent, and, as such, their dismissal must be for just cause and after due process. It
disposed of the case as follows:
"WHEREFORE, in view of all the foregoing considerations, the decision of the Labor
Arbiter appealed from is hereby SET ASIDE and another one entered:
1. Declaring the respondent company guilty of illegal dismissal and accordingly it is
directed to reinstate the complainants, namely, Alberto A. Gonzales, Joel T. Morato,
Gavino Panahon, Demetrio L. Calagos, Sonny M. Lustado, Romeo Q. Clariza, Luis de
los Angeles, Amado Centino, Angel Jardin, Rosendo Marcos, Urbano Marcos, Jr., and
Joel Ordeniza, to their former positions without loss of seniority and other privileges
appertaining thereto; to pay the complainants full backwages and other benefits,
less earnings elsewhere, and to reimburse the drivers the amount paid as washing
charges; and
2. Dismissing the charge of unfair [labor] practice for insufficiency of evidence.
SO ORDERED."[4]
Private respondents first motion for reconsideration was denied. Remaining hopeful, private
respondent filed another motion for reconsideration. This time, public respondent, in its
decision[5] dated October 28, 1994, granted aforesaid second motion for reconsideration. It ruled
that it lacks jurisdiction over the case as petitioners and private respondent have no employer-
employee relationship. It held that the relationship of the parties is leasehold which is covered by
the Civil Code rather than the Labor Code, and disposed of the case as follows:
"VIEWED IN THE LIGHT OF ALL THE FOREGOING, the Motion under reconsideration
is hereby given due course.
Accordingly, the Resolution of August 10, 1994, and the Decision of April 28, 1994
are hereby SET ASIDE. The Decision of the Labor Arbiter subject of the appeal is
likewise SET ASIDE and a NEW ONE ENTERED dismissing the complaint for lack of
jurisdiction.
No costs.
SO ORDERED."[6]
Expectedly, petitioners sought reconsideration of the labor tribunals latest decision which was
denied. Hence, the instant petition.
In this recourse, petitioners allege that public respondent acted without or in excess of jurisdiction,
or with grave abuse of discretion in rendering the assailed decision, arguing that:
"I
THE NLRC HAS NO JURISDICTION TO ENTERTAIN RESPONDENTS SECOND MOTION
FOR RECONSIDERATION WHICH IS ADMITTEDLY A PLEADING PROHIBITED UNDER
THE NLRC RULES, AND TO GRANT THE SAME ON GROUNDS NOT EVEN INVOKED
THEREIN.
II
THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES
IS ALREADY A SETTLED ISSUE CONSTITUTING RES JUDICATA, WHICH THE NLRC HAS
NO MORE JURISDICTION TO REVERSE, ALTER OR MODIFY.
III
IN ANY CASE, EXISTING JURISPRUDENCE ON THE MATTER SUPPORTS THE VIEW
THAT PETITIONERS-TAXI DRIVERS ARE EMPLOYEES OF RESPONDENT TAXI
COMPANY."[7]
The petition is impressed with merit.
The phrase "grave abuse of discretion amounting to lack or excess of jurisdiction" has settled
meaning in the jurisprudence of procedure. It means such capricious and whimsical exercise of
judgment by the tribunal exercising judicial or quasi-judicial power as to amount to lack of
power.[8] In labor cases, this Court has declared in several instances that disregarding rules it is
bound to observe constitutes grave abuse of discretion on the part of labor tribunal.
In Garcia vs. NLRC,[9] private respondent therein, after receiving a copy of the labor arbiters decision,
wrote the labor arbiter who rendered the decision and expressed dismay over the judgment.
Neither notice of appeal was filed nor cash or surety bond was posted by private respondent.
Nevertheless, the labor tribunal took cognizance of the letter from private respondent and treated
said letter as private respondents appeal. In a certiorari action before this Court, we ruled that the
labor tribunal acted with grave abuse of discretion in treating a mere letter from private respondent
as private respondents appeal in clear violation of the rules on appeal prescribed under Section 3(a),
Rule VI of the New Rules of Procedure of NLRC.
In Philippine Airlines Inc. vs. NLRC,[10] we held that the labor arbiter committed grave abuse of
discretion when he failed to resolve immediately by written order a motion to dismiss on the ground
of lack of jurisdiction and the supplemental motion to dismiss as mandated by Section 15 of Rule V
of the New Rules of Procedure of the NLRC.
In Unicane Workers Union-CLUP vs. NLRC,[11] we held that the NLRC gravely abused its discretion by
allowing and deciding an appeal without an appeal bond having been filed as required under Article
223 of the Labor Code.
In Maebo vs. NLRC,[12] we declared that the labor arbiter gravely abused its discretion in disregarding
the rule governing position papers. In this case, the parties have already filed their position papers
and even agreed to consider the case submitted for decision, yet the labor arbiter still admitted a
supplemental position paper and memorandum, and by taking into consideration, as basis for his
decision, the alleged facts adduced therein and the documents attached thereto.
In Gesulgon vs. NLRC,[13] we held that public respondent gravely abused its discretion in treating the
motion to set aside judgment and writ of execution as a petition for relief of judgment. In doing so,
public respondent had, without sufficient basis, extended the reglementary period for filing petition
for relief from judgment contrary to prevailing rule and case law.
In this case before us, private respondent exhausted administrative remedy available to it by seeking
reconsideration of public respondents decision dated April 28, 1994, which public respondent
denied. With this motion for reconsideration, the labor tribunal had ample opportunity to rectify
errors or mistakes it may have committed before resort to courts of justice can be had.[14] Thus,
when private respondent filed a second motion for reconsideration, public respondent should have
forthwith denied it in accordance with Rule 7, Section 14 of its New Rules of Procedure which allows
only one motion for reconsideration from the same party, thus:
"SEC. 14. Motions for Reconsideration. --- Motions for reconsideration of any order,
resolution or decision of the Commission shall not be entertained except when
based on palpable or patent errors, provided that the motion is under oath and filed
within ten (10) calendar days from receipt of the order, resolution or decision with
proof of service that a copy of the same has been furnished within the reglementary
period the adverse party and provided further, that only one such motion from the
same party shall be entertained." [Emphasis supplied]
The rationale for allowing only one motion for reconsideration from the same party is to assist the
parties in obtaining an expeditious and inexpensive settlement of labor cases. For obvious reasons,
delays cannot be countenanced in the resolution of labor disputes. The dispute may involve no less
than the livelihood of an employee and that of his loved ones who are dependent upon him for
food, shelter, clothing, medicine, and education. It may as well involve the survival of a business or
an industry.[15]
As correctly pointed out by petitioner, the second motion for reconsideration filed by private
respondent is indubitably a prohibited pleading[16] which should have not been entertained at all.
Public respondent cannot just disregard its own rules on the pretext of "satisfying the ends of
justice",[17] especially when its disposition of a legal controversy ran afoul with a clear and long
standing jurisprudence in this jurisdiction as elucidated in the subsequent discussion. Clearly,
disregarding a settled legal doctrine enunciated by this Court is not a way of rectifying an error or
mistake. In our view, public respondent gravely abused its discretion in taking cognizance and
granting private respondents second motion for reconsideration as it wrecks the orderly procedure
in seeking reliefs in labor cases.
But, there is another compelling reason why we cannot leave untouched the flip-flopping decisions
of the public respondent. As mentioned earlier, its October 28, 1994 judgment is not in accord with
the applicable decisions of this Court. The labor tribunal reasoned out as follows:
"On the issue of whether or not employer-employee relationship exists, admitted is
the fact that complainants are taxi drivers purely on the boundary system. Under
this system the driver takes out his unit and pays the owner/operator a fee
commonly called boundary for the use of the unit. Now, in the determination the
existence of employer-employee relationship, the Supreme Court in the case of
Sara, et al., vs. Agarrado, et al. (G.R. No. 73199, 26 October 1988) has applied the
following four-fold test: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power of control the
employees conduct.
Among the four (4) requisites, the Supreme Court stresses that control is deemed
the most important that the other requisites may even be disregarded. Under the
control test, an employer-employee relationship exists if the employer has reserved
the right to control the employee not only as to the result of the work done but also
as to the means and methods by which the same is to be accomplished. Otherwise,
no such relationship exists. (Ibid.)
Applying the foregoing parameters to the case herein obtaining, it is clear that the
respondent does not pay the drivers, the complainants herein, their wages. Instead,
the drivers pay a certain fee for the use of the vehicle. On the matter of control, the
drivers, once they are out plying their trade, are free to choose whatever manner
they conduct their trade and are beyond the physical control of the
owner/operator; they themselves determine the amount of revenue they would
want to earn in a days driving; and, more significantly aside from the fact that they
pay for the gasoline they consume, they likewise shoulder the cost of repairs on
damages sustained by the vehicles they are driving.
Verily, all the foregoing attributes signify that the relationship of the parties is more
of a leasehold or one that is covered by a charter agreement under the Civil Code
rather than the Labor Code."[18]
The foregoing ratiocination goes against prevailing jurisprudence.
In a number of cases decided by this Court,[19] we ruled that the relationship between jeepney
owners/operators on one hand and jeepney drivers on the other under the boundary system is that
of employer-employee and not of lessor-lessee. We explained that in the lease of chattels, the lessor
loses complete control over the chattel leased although the lessee cannot be reckless in the use
thereof, otherwise he would be responsible for the damages to the lessor. In the case of jeepney
owners/operators and jeepney drivers, the former exercise supervision and control over the latter.
The management of the business is in the owners hands. The owner as holder of the certificate of
public convenience must see to it that the driver follows the route prescribed by the franchising
authority and the rules promulgated as regards its operation. Now, the fact that the drivers do not
receive fixed wages but get only that in excess of the so-called "boundary" they pay to the
owner/operator is not sufficient to withdraw the relationship between them from that of employer
and employee. We have applied by analogy the abovestated doctrine to the relationships between
bus owner/operator and bus conductor,[20] auto-calesa owner/operator and driver,[21] and recently
between taxi owners/operators and taxi drivers.[22] Hence, petitioners are undoubtedly employees
of private respondent because as taxi drivers they perform activities which are usually necessary or
desirable in the usual business or trade of their employer.
As consistently held by this Court, termination of employment must be effected in accordance with
law. The just and authorized causes for termination of employment are enumerated under Articles
282, 283 and 284 of the Labor Code. The requirement of notice and hearing is set-out in Article 277
(b) of the said Code. Hence, petitioners, being employees of private respondent, can be dismissed
only for just and authorized cause, and after affording them notice and hearing prior to termination.
In the instant case, private respondent had no valid cause to terminate the employment of
petitioners. Neither were there two (2) written notices sent by private respondent informing each of
the petitioners that they had been dismissed from work. These lack of valid cause and failure on the
part of private respondent to comply with the twin-notice requirement underscored the illegality
surrounding petitioners dismissal.
Under the law, an employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual reinstatement.[23] It must be
emphasized, though, that recent judicial pronouncements[24] distinguish between employees illegally
dismissed prior to the effectivity of Republic Act No. 6715 on March 21, 1989, and those whose
illegal dismissals were effected after such date. Thus, employees illegally dismissed prior to March
21, 1989, are entitled to backwages up to three (3) years without deduction or qualification, while
those illegally dismissed after that date are granted full backwages inclusive of allowances and other
benefits or their monetary equivalent from the time their actual compensation was withheld from
them up to the time of their actual reinstatement. The legislative policy behind Republic Act No.
6715 points to "full backwages" as meaning exactly that, i.e., without deducting from backwages the
earnings derived elsewhere by the concerned employee during the period of his illegal dismissal.
Considering that petitioners were terminated from work on August 1, 1991, they are entitled to full
backwages on the basis of their last daily earnings.
With regard to the amount deducted daily by private respondent from petitioners for washing of the
taxi units, we view the same as not illegal in the context of the law. We note that after a tour of
duty, it is incumbent upon the driver to restore the unit he has driven to the same clean condition
when he took it out. Car washing after a tour of duty is indeed a practice in the taxi industry and is in
fact dictated by fair play.[25] Hence, the drivers are not entitled to reimbursement of washing
charges.

WHEREFORE, the instant petition is GRANTED. The assailed DECISION of public respondent dated
October 28, 1994, is hereby SET ASIDE. The DECISION of public respondent dated April 28, 1994, and
its RESOLUTION dated December 13, 1994, are hereby REINSTATED subject to MODIFICATION.
Private respondent is directed to reinstate petitioners to their positions held at the time of the
complained dismissal. Private respondent is likewise ordered to pay petitioners their full backwages,
to be computed from the date of dismissal until their actual reinstatement. However, the order of
public respondent that petitioners be reimbursed the amount paid as washing charges is deleted.
Costs against private respondents.

SO ORDERED.
 SECOND DIVISION
[G.R. No. 146530. January 17, 2005]
PEDRO CHAVEZ, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, SUPREME PACKAGING,
INC. and ALVIN LEE, Plant Manager, respondents.
DECISION
CALLEJO, SR., J.:
Before the Court is the petition for review on certiorari of the Resolution[1] dated December 15,
2000 of the Court of Appeals (CA) reversing its Decision dated April 28, 2000 in CA-G.R. SP No. 52485.
The assailed resolution reinstated the Decision dated July 10, 1998 of the National Labor Relations
Commission (NLRC), dismissing the complaint for illegal dismissal filed by herein petitioner Pedro
Chavez. The said NLRC decision similarly reversed its earlier Decision dated January 27, 1998 which,
affirming that of the Labor Arbiter, ruled that the petitioner had been illegally dismissed by
respondents Supreme Packaging, Inc. and Mr. Alvin Lee.
The case stemmed from the following facts:
The respondent company, Supreme Packaging, Inc., is in the business of manufacturing cartons
and other packaging materials for export and distribution. It engaged the services of the petitioner,
Pedro Chavez, as truck driver on October 25, 1984. As such, the petitioner was tasked to deliver the
respondent companys products from its factory in Mariveles, Bataan, to its various customers, mostly
in Metro Manila. The respondent company furnished the petitioner with a truck. Most of the
petitioners delivery trips were made at nighttime, commencing at 6:00 p.m. from Mariveles, and
returning thereto in the afternoon two or three days after. The deliveries were made in accordance
with the routing slips issued by respondent company indicating the order, time and urgency of
delivery. Initially, the petitioner was paid the sum of P350.00 per trip. This was later adjusted
to P480.00 per trip and, at the time of his alleged dismissal, the petitioner was receiving P900.00 per
trip.
Sometime in 1992, the petitioner expressed to respondent Alvin Lee, respondent companys plant
manager, his (the petitioners) desire to avail himself of the benefits that the regular employees were
receiving such as overtime pay, nightshift differential pay, and 13th month pay, among others.
Although he promised to extend these benefits to the petitioner, respondent Lee failed to actually do
so.
On February 20, 1995, the petitioner filed a complaint for regularization with the Regional
Arbitration Branch No. III of the NLRC in San Fernando, Pampanga. Before the case could be heard,
respondent company terminated the services of the petitioner. Consequently, on May 25, 1995, the
petitioner filed an amended complaint against the respondents for illegal dismissal, unfair labor
practice and non-payment of overtime pay, nightshift differential pay, 13th month pay, among others.
The case was docketed as NLRC Case No. RAB-III-02-6181-95.
The respondents, for their part, denied the existence of an employer-employee relationship
between the respondent company and the petitioner. They averred that the petitioner was an
independent contractor as evidenced by the contract of service which he and the respondent
company entered into. The said contract provided as follows:
That the Principal [referring to Supreme Packaging, Inc.], by these presents, agrees to hire and the
Contractor [referring to Pedro Chavez], by nature of their specialized line or service jobs, accepts the
services to be rendered to the Principal, under the following terms and covenants heretofore
mentioned:
1. That the inland transport delivery/hauling activities to be performed by the contractor to
the principal, shall only cover travel route from Mariveles to Metro Manila. Otherwise,
any change to this travel route shall be subject to further agreement by the parties
concerned.
2. That the payment to be made by the Principal for any hauling or delivery transport
services fully rendered by the Contractor shall be on a per trip basis depending on the
size or classification of the truck being used in the transport service, to wit:
a) If the hauling or delivery service shall require a truck of six wheeler, the payment on a
per trip basis from Mariveles to Metro Manila shall be THREE HUNDRED PESOS
(P300.00) and EFFECTIVE December 15, 1984.
b) If the hauling or delivery service require a truck of ten wheeler, the payment on a per
trip basis, following the same route mentioned, shall be THREE HUNDRED FIFTY
(P350.00) Pesos and Effective December 15, 1984.
3. That for the amount involved, the Contractor will be to [sic] provide for [sic] at least two
(2) helpers;
4. The Contractor shall exercise direct control and shall be responsible to the Principal for
the cost of any damage to, loss of any goods, cargoes, finished products or the like, while
the same are in transit, or due to reckless [sic] of its men utilized for the purpose above
mentioned;
5. That the Contractor shall have absolute control and disciplinary power over its men
working for him subject to this agreement, and that the Contractor shall hold the
Principal free and harmless from any liability or claim that may arise by virtue of the
Contractors non-compliance to the existing provisions of the Minimum Wage Law, the
Employees Compensation Act, the Social Security System Act, or any other such law or
decree that may hereafter be enacted, it being clearly understood that any truck drivers,
helpers or men working with and for the Contractor, are not employees who will be
indemnified by the Principal for any such claim, including damages incurred in
connection therewith;
6. This contract shall take effect immediately upon the signing by the parties, subject to
renewal on a year-to-year basis.[2]
This contract of service was dated December 12, 1984. It was subsequently renewed twice, on
July 10, 1989 and September 28, 1992. Except for the rates to be paid to the petitioner, the terms of
the contracts were substantially the same. The relationship of the respondent company and the
petitioner was allegedly governed by this contract of service.
The respondents insisted that the petitioner had the sole control over the means and methods
by which his work was accomplished. He paid the wages of his helpers and exercised control over
them. As such, the petitioner was not entitled to regularization because he was not an employee of
the respondent company. The respondents, likewise, maintained that they did not dismiss the
petitioner. Rather, the severance of his contractual relation with the respondent company was due to
his violation of the terms and conditions of their contract. The petitioner allegedly failed to observe
the minimum degree of diligence in the proper maintenance of the truck he was using, thereby
exposing respondent company to unnecessary significant expenses of overhauling the said truck.
After the parties had filed their respective pleadings, the Labor Arbiter rendered the Decision
dated February 3, 1997, finding the respondents guilty of illegal dismissal. The Labor Arbiter declared
that the petitioner was a regular employee of the respondent company as he was performing a service
that was necessary and desirable to the latters business. Moreover, it was noted that the petitioner
had discharged his duties as truck driver for the respondent company for a continuous and
uninterrupted period of more than ten years.
The contract of service invoked by the respondents was declared null and void as it constituted
a circumvention of the constitutional provision affording full protection to labor and security of
tenure. The Labor Arbiter found that the petitioners dismissal was anchored on his insistent demand
to be regularized. Hence, for lack of a valid and just cause therefor and for their failure to observe the
due process requirements, the respondents were found guilty of illegal dismissal. The dispositive
portion of the Labor Arbiters decision states:
WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring respondent
SUPREME PACKAGING, INC. and/or MR. ALVIN LEE, Plant Manager, with business address at BEPZ,
Mariveles, Bataan guilty of illegal dismissal, ordering said respondent to pay complainant his
separation pay equivalent to one (1) month pay per year of service based on the average monthly
pay of P10,800.00 in lieu of reinstatement as his reinstatement back to work will not do any good
between the parties as the employment relationship has already become strained and full
backwages from the time his compensation was withheld on February 23, 1995 up to January 31,
1997 (cut-off date) until compliance, otherwise, his backwages shall continue to run. Also to pay
complainant his 13th month pay, night shift differential pay and service incentive leave pay
hereunder computed as follows:
a) Backwages .. P248,400.00
b) Separation Pay .... P140,400.00
c) 13th month pay .P 10,800.00
d) Service Incentive Leave Pay .. 2,040.00
TOTAL P401,640.00
Respondent is also ordered to pay ten (10%) of the amount due the complainant as attorneys fees.
SO ORDERED.[3]
The respondents seasonably interposed an appeal with the NLRC. However, the appeal was
dismissed by the NLRC in its Decision[4] dated January 27, 1998, as it affirmed in toto the decision of
the Labor Arbiter. In the said decision, the NLRC characterized the contract of service between the
respondent company and the petitioner as a scheme that was resorted to by the respondents who,
taking advantage of the petitioners unfamiliarity with the English language and/or legal niceties,
wanted to evade the effects and implications of his becoming a regularized employee.[5]
The respondents sought reconsideration of the January 27, 1998 Decision of the NLRC. Acting
thereon, the NLRC rendered another Decision[6] dated July 10, 1998, reversing its earlier decision and,
this time, holding that no employer-employee relationship existed between the respondent company
and the petitioner. In reconsidering its earlier decision, the NLRC stated that the respondents did not
exercise control over the means and methods by which the petitioner accomplished his delivery
services. It upheld the validity of the contract of service as it pointed out that said contract was silent
as to the time by which the petitioner was to make the deliveries and that the petitioner could hire
his own helpers whose wages would be paid from his own account. These factors indicated that the
petitioner was an independent contractor, not an employee of the respondent company.
The NLRC ruled that the contract of service was not intended to circumvent Article 280 of the
Labor Code on the regularization of employees. Said contract, including the fixed period of
employment contained therein, having been knowingly and voluntarily entered into by the parties
thereto was declared valid citing Brent School, Inc. v. Zamora.[7] The NLRC, thus, dismissed the
petitioners complaint for illegal dismissal.
The petitioner sought reconsideration of the July 10, 1998 Decision but it was denied by the NLRC
in its Resolution dated September 7, 1998. He then filed with this Court a petition for certiorari, which
was referred to the CA following the ruling in St. Martin Funeral Home v. NLRC.[8]
The appellate court rendered the Decision dated April 28, 2000, reversing the July 10, 1998
Decision of the NLRC and reinstating the decision of the Labor Arbiter. In the said decision, the CA
ruled that the petitioner was a regular employee of the respondent company because as its truck
driver, he performed a service that was indispensable to the latters business. Further, he had been
the respondent companys truck driver for ten continuous years. The CA also reasoned that the
petitioner could not be considered an independent contractor since he had no substantial capital in
the form of tools and machinery. In fact, the truck that he drove belonged to the respondent company.
The CA also observed that the routing slips that the respondent company issued to the petitioner
showed that it exercised control over the latter. The routing slips indicated the chronological order
and priority of delivery, the urgency of certain deliveries and the time when the goods were to be
delivered to the customers.
The CA, likewise, disbelieved the respondents claim that the petitioner abandoned his job noting
that he just filed a complaint for regularization. This actuation of the petitioner negated the
respondents allegation that he abandoned his job. The CA held that the respondents failed to
discharge their burden to show that the petitioners dismissal was for a valid and just cause.
Accordingly, the respondents were declared guilty of illegal dismissal and the decision of the Labor
Arbiter was reinstated.
In its April 28, 2000 Decision, the CA denounced the contract of service between the respondent
company and the petitioner in this wise:
In summation, we rule that with the proliferation of contracts seeking to prevent workers from
attaining the status of regular employment, it is but necessary for the courts to scrutinize with
extreme caution their legality and justness. Where from the circumstances it is apparent that a
contract has been entered into to preclude acquisition of tenurial security by the employee, they
should be struck down and disregarded as contrary to public policy and morals. In this case, the
contract of service is just another attempt to exploit the unwitting employee and deprive him of the
protection of the Labor Code by making it appear that the stipulations of the parties were governed
by the Civil Code as in ordinary transactions.[9]
However, on motion for reconsideration by the respondents, the CA made a complete turn
around as it rendered the assailed Resolution dated December 15, 2000 upholding the contract of
service between the petitioner and the respondent company. In reconsidering its decision, the CA
explained that the extent of control exercised by the respondents over the petitioner was only with
respect to the result but not to the means and methods used by him. The CA cited the following
circumstances: (1) the respondents had no say on how the goods were to be delivered to the
customers; (2) the petitioner had the right to employ workers who would be under his direct control;
and (3) the petitioner had no working time.
The fact that the petitioner had been with the respondent company for more than ten years was,
according to the CA, of no moment because his status was determined not by the length of service
but by the contract of service. This contract, not being contrary to morals, good customs, public order
or public policy, should be given the force and effect of law as between the respondent company and
the petitioner. Consequently, the CA reinstated the July 10, 1998 Decision of the NLRC dismissing the
petitioners complaint for illegal dismissal.
Hence, the recourse to this Court by the petitioner. He assails the December 15, 2000 Resolution
of the appellate court alleging that:
(A)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS
OF JURISDICTION IN GIVING MORE CONSIDERATION TO THE CONTRACT OF SERVICE ENTERED
INTO BY PETITIONER AND PRIVATE RESPONDENT THAN ARTICLE 280 OF THE LABOR CODE OF THE
PHILIPPINES WHICH CATEGORICALLY DEFINES A REGULAR EMPLOYMENT NOTWITHSTANDING
ANY WRITTEN AGREEMENT TO THE CONTRARY AND REGARDLESS OF THE ORAL AGREEMENT OF
THE PARTIES;
(B)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS
OF JURISDICTION IN REVERSING ITS OWN FINDINGS THAT PETITIONER IS A REGULAR EMPLOYEE
AND IN HOLDING THAT THERE EXISTED NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN
PRIVATE RESPONDENT AND PETITIONER IN AS MUCH AS THE CONTROL TEST WHICH IS
CONSIDERED THE MOST ESSENTIAL CRITERION IN DETERMINING THE EXISTENCE OF SAID
RELATIONSHIP IS NOT PRESENT.[10]
The threshold issue that needs to be resolved is whether there existed an employer-employee
relationship between the respondent company and the petitioner. We rule in the affirmative.
The elements to determine the existence of an employment relationship are: (1) the selection
and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
employers power to control the employees conduct.[11] The most important element is the employers
control of the employees conduct, not only as to the result of the work to be done, but also as to the
means and methods to accomplish it.[12] All the four elements are present in this case.
First. Undeniably, it was the respondents who engaged the services of the petitioner without the
intervention of a third party.
Second. Wages are defined as remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task, piece or commission basis,
or other method of calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for service rendered or
to be rendered.[13] That the petitioner was paid on a per trip basis is not significant. This is merely a
method of computing compensation and not a basis for determining the existence or absence of
employer-employee relationship. One may be paid on the basis of results or time expended on the
work, and may or may not acquire an employment status, depending on whether the elements of an
employer-employee relationship are present or not.[14] In this case, it cannot be gainsaid that the
petitioner received compensation from the respondent company for the services that he rendered to
the latter.
 Moreover, under the Rules Implementing the Labor Code, every employer is required to pay his
employees by means of payroll.[15] The payroll should show, among other things, the employees rate
of pay, deductions made, and the amount actually paid to the employee. Interestingly, the
respondents did not present the payroll to support their claim that the petitioner was not their
employee, raising speculations whether this omission proves that its presentation would be adverse
to their case.[16]
Third. The respondents power to dismiss the petitioner was inherent in the fact that they
engaged the services of the petitioner as truck driver. They exercised this power by terminating the
petitioners services albeit in the guise of severance of contractual relation due allegedly to the latters
breach of his contractual obligation.
Fourth. As earlier opined, of the four elements of the employer-employee relationship, the
control test is the most important. Compared to an employee, an independent contractor is one who
carries on a distinct and independent business and undertakes to perform the job, work, or service on
its own account and under its own responsibility according to its own manner and method, free from
the control and direction of the principal in all matters connected with the performance of the work
except as to the results thereof.[17] Hence, while an independent contractor enjoys independence and
freedom from the control and supervision of his principal, an employee is subject to the employers
power to control the means and methods by which the employees work is to be performed and
accomplished.[18]
Although the respondents denied that they exercised control over the manner and methods by
which the petitioner accomplished his work, a careful review of the records shows that the latter
performed his work as truck driver under the respondents supervision and control. Their right of
control was manifested by the following attendant circumstances:
1. The truck driven by the petitioner belonged to respondent company;
2. There was an express instruction from the respondents that the truck shall be used exclusively to
deliver respondent companys goods; [19]
3. Respondents directed the petitioner, after completion of each delivery, to park the truck in either
of two specific places only, to wit: at its office in Metro Manila at 2320 Osmea Street, Makati City or
at BEPZ, Mariveles, Bataan;[20] and
4. Respondents determined how, where and when the petitioner would perform his task by issuing
to him gate passes and routing slips. [21]
a. The routing slips indicated on the column REMARKS, the chronological order and priority of
delivery such as 1st drop, 2nd drop, 3rd drop, etc. This meant that the petitioner had to deliver the
same according to the order of priority indicated therein.
b. The routing slips, likewise, showed whether the goods were to be delivered urgently or not by the
word RUSH printed thereon.
c. The routing slips also indicated the exact time as to when the goods were to be delivered to the
customers as, for example, the words tomorrow morning was written on slip no. 2776.
These circumstances, to the Courts mind, prove that the respondents exercised control over the
means and methods by which the petitioner accomplished his work as truck driver of the respondent
company. On the other hand, the Court is hard put to believe the respondents allegation that the
petitioner was an independent contractor engaged in providing delivery or hauling services when he
did not even own the truck used for such services. Evidently, he did not possess substantial
capitalization or investment in the form of tools, machinery and work premises. Moreover, the
petitioner performed the delivery services exclusively for the respondent company for a continuous
and uninterrupted period of ten years.
The contract of service to the contrary notwithstanding, the factual circumstances earlier
discussed indubitably establish the existence of an employer-employee relationship between the
respondent company and the petitioner. It bears stressing that the existence of an employer-
employee relationship cannot be negated by expressly repudiating it in a contract and providing
therein that the employee is an independent contractor when, as in this case, the facts clearly show
otherwise. Indeed, the employment status of a person is defined and prescribed by law and not by
what the parties say it should be.[22]
Having established that there existed an employer-employee relationship between the
respondent company and the petitioner, the Court shall now determine whether the respondents
validly dismissed the petitioner.
As a rule, the employer bears the burden to prove that the dismissal was for a valid and just
cause.[23] In this case, the respondents failed to prove any such cause for the petitioners dismissal.
They insinuated that the petitioner abandoned his job. To constitute abandonment, these two factors
must concur: (1) the failure to report for work or absence without valid or justifiable reason; and (2)
a clear intention to sever employer-employee relationship.[24] Obviously, the petitioner did not intend
to sever his relationship with the respondent company for at the time that he allegedly abandoned
his job, the petitioner just filed a complaint for regularization, which was forthwith amended to one
for illegal dismissal. A charge of abandonment is totally inconsistent with the immediate filing of a
complaint for illegal dismissal, more so when it includes a prayer for reinstatement.[25]
Neither can the respondents claim that the petitioner was guilty of gross negligence in the proper
maintenance of the truck constitute a valid and just cause for his dismissal. Gross negligence implies
a want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It
evinces a thoughtless disregard of consequences without exerting any effort to avoid them.[26] The
negligence, to warrant removal from service, should not merely be gross but also habitual.[27] The
single and isolated act of the petitioners negligence in the proper maintenance of the truck alleged by
the respondents does not amount to gross and habitual neglect warranting his dismissal.
The Court agrees with the following findings and conclusion of the Labor Arbiter:
As against the gratuitous allegation of the respondent that complainant was not dismissed from the
service but due to complainants breach of their contractual relation, i.e., his violation of the terms
and conditions of the contract, we are very much inclined to believe complainants story that his
dismissal from the service was anchored on his insistent demand that he be considered a regular
employee. Because complainant in his right senses will not just abandon for that reason alone his
work especially so that it is only his job where he depends chiefly his existence and support for his
family if he was not aggrieved by the respondent when he was told that his services as driver will be
terminated on February 23, 1995.[28]
Thus, the lack of a valid and just cause in terminating the services of the petitioner renders his
dismissal illegal. Under Article 279 of the Labor Code, an employee who is unjustly dismissed is entitled
to reinstatement, without loss of seniority rights and other privileges, and to the payment of full
backwages, inclusive of allowances, and other benefits or their monetary equivalent, computed from
the time his compensation was withheld from him up to the time of his actual
reinstatement.[29] However, as found by the Labor Arbiter, the circumstances obtaining in this case do
not warrant the petitioners reinstatement. A more equitable disposition, as held by the Labor Arbiter,
would be an award of separation pay equivalent to one month for every year of service from the time
of his illegal dismissal up to the finality of this judgment in addition to his full backwages, allowances
and other benefits.
WHEREFORE, the instant petition is GRANTED. The Resolution dated December 15, 2000 of the
Court of Appeals reversing its Decision dated April 28, 2000 in CA-G.R. SP No. 52485 is REVERSED and
SET ASIDE. The Decision dated February 3, 1997 of the Labor Arbiter in NLRC Case No. RAB-III-02-6181-
5, finding the respondents guilty of illegally terminating the employment of petitioner Pedro Chavez,
is REINSTATED.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 146881 February 5, 2007
COCA COLA BOTTLERS (PHILS.), INC./ERIC MONTINOLA, Manager, Petitioners,
vs.
DR. DEAN N. CLIMACO, Respondent.
DECISION
AZCUNA, J.:
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 petitioner’s motion for
reconsideration. The Court of Appeals ruled that an employer-employee relationship exists between
respondent Dr. Dean N. Climaco and petitioner Coca-Cola Bottlers Phils., Inc. (Coca-Cola), and that
respondent was illegally dismissed.
Respondent Dr. Dean N. Climaco is a medical doctor who was hired by petitioner Coca-Cola Bottlers
Phils., Inc. by virtue of a Retainer Agreement that stated:
WHEREAS, the COMPANY desires to engage on a retainer basis the services of a physician and the
said DOCTOR is accepting such engagement upon terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual agreement hereinafter
contained, the parties agree as follows:
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.
2. The compensation to be paid by the company for the services of the DOCTOR is hereby
fixed at PESOS: Three Thousand Eight Hundred (₱3,800.00) per month. The DOCTOR may
charge professional fee for hospital services rendered in line with his specialization. All
payments in connection with the Retainer Agreement shall be subject to a withholding tax
of ten percent (10%) to be withheld by the COMPANY under the Expanded Withholding Tax
System. In the event the withholding tax rate shall be increased or decreased by appropriate
laws, then the rate herein stipulated shall accordingly be increased or decreased pursuant to
such laws.
3. That in consideration of the above mentioned retainer’s fee, the DOCTOR agrees to
perform the duties and obligations enumerated in the COMPREHENSIVE MEDICAL PLAN,
hereto attached as Annex "A" and made an integral part of this Retainer Agreement.
4. That the applicable provisions in the Occupational Safety and Health Standards, Ministry
of Labor and Employment shall be followed.
5. That the DOCTOR shall be directly responsible to the employee concerned and their
dependents for any injury inflicted on, harm done against or damage caused upon the
employee of the COMPANY or their dependents during the course of his examination,
treatment or consultation, if such injury, harm or damage was committed through
professional negligence or incompetence or due to the other valid causes for action.
6. That the DOCTOR shall observe clinic hours at the COMPANY’S premises from Monday to
Saturday of a minimum of two (2) hours each day or a maximum of TWO (2) hours each day
or treatment from 7:30 a.m. to 8:30 a.m. and 3:00 p.m. to 4:00 p.m., respectively unless
such schedule is otherwise changed by the COMPANY as [the] situation so warrants, subject
to the Labor Code provisions on Occupational Safety and Health Standards as the COMPANY
may determine. It is understood that the DOCTOR shall stay at least two (2) hours a day in
the COMPANY clinic and that such two (2) hours be devoted to the workshift with the most
number of employees. It is further understood that the DOCTOR shall be on call at all times
during the other workshifts to attend to emergency case[s];
7. That no employee-employer relationship shall exist between the COMPANY and the
DOCTOR whilst this contract is in effect, and in case of its termination, the DOCTOR shall be
entitled only to such retainer fee as may be due him at the time of termination.2
The Comprehensive Medical Plan,3 which contains the duties and responsibilities of respondent,
adverted to in the Retainer Agreement, provided:
A. OBJECTIVE
These objectives have been set to give full consideration to [the] employees’ and dependents’
health:
1. Prompt and adequate treatment of occupational and non-occupational injuries and
diseases.
2. To protect employees from any occupational health hazard by evaluating health factors
related to working conditions.
3. To encourage employees [to] maintain good personal health by setting up employee
orientation and education on health, hygiene and sanitation, nutrition, physical fitness, first
aid training, accident prevention and personnel safety.
4. To evaluate other matters relating to health such as absenteeism, leaves and termination.
5. To give family planning motivations.
B. COVERAGE
1. All employees and their dependents are embraced by this program.
2. The health program shall cover pre-employment and annual p.e., hygiene and sanitation,
immunizations, family planning, physical fitness and athletic programs and other activities
such as group health education program, safety and first aid classes, organization of health
and safety committees.
3. Periodically, this program will be reviewed and adjusted based on employees’ needs.
C. ACTIVITIES
1. Annual Physical Examination.
2. Consultations, diagnosis and treatment of occupational and non-occupational illnesses
and injuries.
3. Immunizations necessary for job conditions.
4. Periodic inspections for food services and rest rooms.
5. Conduct health education programs and present education materials.
6. Coordinate with Safety Committee in developing specific studies and program to minimize
environmental health hazards.
7. Give family planning motivations.
8. Coordinate with Personnel Department regarding physical fitness and athletic programs.
9. Visiting and follow-up treatment of Company employees and their dependents confined
in the hospital.
The Retainer Agreement, which began on January 1, 1988, was renewed annually. The last one
expired on December 31, 1993. Despite the non-renewal of the Retainer Agreement, respondent
continued to perform his functions as company doctor to Coca-Cola until he received a letter4 dated
March 9, 1995 from petitioner company concluding their retainership agreement effective 30 days
from receipt thereof.
It is noted that as early as September 1992, petitioner was already making inquiries regarding his
status with petitioner company. First, he wrote a letter addressed to Dr. Willie Sy, the Acting
President and Chairperson of the Committee on Membership, Philippine College of Occupational
Medicine. In response, Dr. Sy wrote a letter5 to the Personnel Officer of Coca-Cola Bottlers Phils.,
Bacolod City, stating that respondent should be considered as a regular part-time physician, having
served the company continuously for four (4) years. He likewise stated that respondent must receive
all the benefits and privileges of an employee under Article 157 (b)6 of the Labor Code.
Petitioner company, however, did not take any action. Hence, respondent made another inquiry
directed to the Assistant Regional Director, Bacolod City District Office of the Department of Labor
and Employment (DOLE), who referred the inquiry to the Legal Service of the DOLE, Manila. In his
letter7 dated May 18, 1993, Director Dennis P. Ancheta, Legal Service, DOLE, stated that he believed
that an employer-employee relationship existed between petitioner and respondent based on the
Retainer Agreement and the Comprehensive Medical Plan, and the application of the "four-fold"
test. However, Director Ancheta emphasized that the existence of employer-employee relationship
is a question of fact. Hence, termination disputes or money claims arising from employer-employee
relations exceeding ₱5,000 may be filed with the National Labor Relations Commission (NLRC). He
stated that their opinion is strictly advisory.
An inquiry was likewise addressed to the Social Security System (SSS). Thereafter, Mr. Romeo R.
Tupas, OIC-FID of SSS-Bacolod City, wrote a letter8 to the Personnel Officer of Coca-Cola Bottlers
Phils., Inc. informing the latter that the legal staff of his office was of the opinion that the services of
respondent partake of the nature of work of a regular company doctor and that he was, therefore,
subject to social security coverage.
Respondent inquired from the management of petitioner company whether it was agreeable to
recognizing him as a regular employee. The management refused to do so.
On February 24, 1994, respondent filed a Complaint9 before the NLRC, Bacolod City, seeking
recognition as a regular employee of petitioner company and prayed for the payment of all benefits
of a regular employee, including 13th Month Pay, Cost of Living Allowance, Holiday Pay, Service
Incentive Leave Pay, and Christmas Bonus. The case was docketed as RAB Case No. 06-02-10138-94.
While the complaint was pending before the Labor Arbiter, respondent received a letter dated
March 9, 1995 from petitioner company concluding their retainership agreement effective thirty
(30) days from receipt thereof. This prompted respondent to file a complaint for illegal dismissal
against petitioner company with the NLRC, Bacolod City. The case was docketed as RAB Case No. 06-
04-10177-95.
In a Decision10 dated November 28, 1996, Labor Arbiter Jesus N. Rodriguez, Jr. found that petitioner
company lacked the power of control over respondent’s performance of his duties, and recognized
as valid the Retainer Agreement between the parties. Thus, the Labor Arbiter dismissed
respondent’s complaint in the first case, RAB Case No. 06-02-10138-94. The dispositive portion of
the Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered dismissing the instant complaint
seeking recognition as a regular employee.
SO ORDERED.11
In a Decision12 dated February 24, 1997, Labor Arbiter Benjamin Pelaez dismissed the case for illegal
dismissal (RAB Case No. 06-04-10177-95) in view of the previous finding of Labor Arbiter Jesus N.
Rodriguez, Jr. in RAB Case No. 06-02-10138-94 that complainant therein, Dr. Dean Climaco, is not an
employee of Coca-Cola Bottlers Phils., Inc.
Respondent appealed both decisions to the NLRC, Fourth Division, Cebu City.
In a Decision13 promulgated on November 28, 1997, the NLRC dismissed the appeal in both cases for
lack of merit. It declared that no employer-employee relationship existed between petitioner
company and respondent based on the provisions of the Retainer Agreement which contract
governed respondent’s employment.
Respondent’s motion for reconsideration was denied by the NLRC in a Resolution14 promulgated on
August 7, 1998.
Respondent filed a petition for review with the Court of Appeals.
In a Decision promulgated on July 7, 2000, the Court of Appeals ruled that an employer-employee
relationship existed between petitioner company and respondent after applying the four-fold test:
(1) the power to hire the employee; (2) the payment of wages; (3) the power of dismissal; and (4)
the employer’s power to control the employee with respect to the means and methods by which the
work is to be accomplished.
The Court of Appeals held:
The Retainer Agreement executed by and between the parties, when read together with the
Comprehensive Medical Plan which was made an integral part of the retainer agreements, coupled
with the actual services rendered by the petitioner, would show that all the elements of the above
test are present.
First, the agreements provide that "the COMPANY desires to engage on a retainer basis the services
of a physician and the said DOCTOR is accepting such engagement x x x" (Rollo, page 25). This clearly
shows that Coca-Cola exercised its power to hire the services of petitioner.
Secondly, paragraph (2) of the agreements showed that petitioner would be entitled to a final
compensation of Three Thousand Eight Hundred Pesos per month, which amount was later raised to
Seven Thousand Five Hundred on the latest contract. This would represent the element of payment
of wages.
Thirdly, it was provided in paragraph (1) of the agreements that the same shall be valid for a period
of one year. "The said term notwithstanding, either party may terminate the contract upon giving a
thirty (30) day written notice to the other." (Rollo, page 25). This would show that Coca-Cola had
the power of dismissing the petitioner, as it later on did, and this could be done for no particular
reason, the sole requirement being the former’s compliance with the 30-day notice requirement.
Lastly, paragraphs (3) and (6) of the agreements reveal that Coca-Cola exercised the most important
element of all, that is, control, over the conduct of petitioner in the latter’s performance of his
duties as a doctor for the company.
It was stated in paragraph (3) that the doctor agrees to perform the duties and obligations
enumerated in the Comprehensive Medical Plan referred to above. In paragraph (6), the fixed and
definite hours during which the petitioner must render service to the company is laid down.
We say that there exists Coca-Cola’s power to control petitioner because the particular objectives
and activities to be observed and accomplished by the latter are fixed and set under the
Comprehensive Medical Plan which was made an integral part of the retainer agreement. Moreover,
the times for accomplishing these objectives and activities are likewise controlled and determined
by the company. Petitioner is subject to definite hours of work, and due to this, he performs his
duties to Coca-Cola not at his own pleasure but according to the schedule dictated by the company.
In addition, petitioner was designated by Coca-Cola to be a member of its Bacolod Plant’s Safety
Committee. The minutes of the meeting of the said committee dated February 16, 1994 included the
name of petitioner, as plant physician, as among those comprising the committee.
It was averred by Coca-Cola in its comment that they exercised no control over petitioner for the
reason that the latter was not directed as to the procedure and manner of performing his assigned
tasks. It went as far as saying that "petitioner was not told how to immunize, inject, treat or
diagnose the employees of the respondent (Rollo, page 228). We believe that if the "control test"
would be interpreted this strictly, it would result in an absurd and ridiculous situation wherein we
could declare that an entity exercises control over another’s activities only in instances where the
latter is directed by the former on each and every stage of performance of the particular activity.
Anything less than that would be tantamount to no control at all.
To our minds, it is sufficient if the task or activity, as well as the means of accomplishing it, is
dictated, as in this case where the objectives and activities were laid out, and the specific time for
performing them was fixed by the controlling party.15
Moreover, the Court of Appeals declared that respondent should be classified as a regular employee
having rendered six years of service as plant physician by virtue of several renewed retainer
agreements. It underscored the provision in Article 28016 of the Labor Code stating that "any
employee who has rendered at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the activity in which he is employed,
and his employment shall continue while such activity exists." Further, it held that the termination
of respondent’s services without any just or authorized cause constituted illegal dismissal.
In addition, the Court of Appeals found that respondent’s dismissal was an act oppressive to labor
and was effected in a wanton, oppressive or malevolent manner which entitled respondent to moral
and exemplary damages.
The dispositive portion of the Decision reads:
WHEREFORE, in view of the foregoing, the Decision of the National Labor Relations Commission
dated November 28, 1997 and its Resolution dated August 7, 1998 are found to have been issued
with grave abuse of discretion in applying the law to the established facts, and are hereby REVERSED
and SET ASIDE, and private respondent Coca-Cola Bottlers, Phils.. Inc. is hereby ordered to:
1. Reinstate the petitioner with full backwages without loss of seniority rights from the time
his compensation was withheld up to the time he is actually reinstated; however, if
reinstatement is no longer possible, to pay the petitioner separation pay equivalent to one
(1) month’s salary for every year of service rendered, computed at the rate of his salary at
the time he was dismissed, plus backwages.
2. Pay petitioner moral damages in the amount of ₱50,000.00.
3. Pay petitioner exemplary damages in the amount of ₱50,000.00.
4. Give to petitioner all other benefits to which a regular employee of Coca-Cola is entitled
from the time petitioner became a regular employee (one year from effectivity date of
employment) until the time of actual payment.
SO ORDERED.17
Petitioner company filed a motion for reconsideration of the Decision of the Court of Appeals.
In a Resolution promulgated on January 30, 2001, the Court of Appeals stated that petitioner
company noted that its Decision failed to mention whether respondent was a full-time or part-time
regular employee. It also questioned how the benefits under their Collective Bargaining Agreement
which the Court awarded to respondent could be given to him considering that such benefits were
given only to regular employees who render a full day’s work of not less that eight hours. It was
admitted that respondent is only required to work for two hours per day.
The Court of Appeals clarified that respondent was a "regular part-time employee and should be
accorded all the proportionate benefits due to this category of employees of [petitioner]
Corporation under the CBA." It sustained its decision on all other matters sought to be reconsidered.
Hence, this petition filed by Coca-Cola Bottlers Phils., Inc.
The issues are:
1. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS
AND THE NATIONAL LABOR RELATIONS COMMISSION, CONTRARY TO THE DECISIONS OF
THE HONORABLE SUPREME COURT ON THE MATTER.
2. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS
AND THE NATIONAL LABOR RELATIONS COMMISSION, AND HOLDING INSTEAD THAT THE
WORK OF A PHYSICIAN IS NECESSARY AND DESIRABLE TO THE BUSINESS OF SOFTDRINKS
MANUFACTURING, CONTRARY TO THE RULINGS OF THE SUPREME COURT IN ANALOGOUS
CASES.
3. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS
AND THE NATIONAL LABOR RELATIONS COMMISSION, AND HOLDING INSTEAD THAT THE
PETITIONERS EXERCISED CONTROL OVER THE WORK OF THE RESPONDENT.
4. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS
AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THERE IS
EMPLOYER-EMPLOYEE RELATIONSHIP PURSUANT TO ARTICLE 280 OF THE LABOR CODE.
5. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS
AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THERE EXISTED
ILLEGAL DISMISSAL WHEN THE EMPLOYENT OF THE RESPONDENT WAS TERMINATED
WITHOUT JUST CAUSE.
6. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS
AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THE
RESPONDENT IS A REGULAR PART TIME EMPLOYEE WHO IS ENTITLED TO PROPORTIONATE
BENEFITS AS A REGULAR PART TIME EMPLOYEE ACCORDING TO THE PETITIONERS’ CBA.
7. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS
AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THE
RESPONDENT IS ENTITLED TO MORAL AND EXEMPLARY DAMAGES.
The main issue in this case is whether or not there exists an employer-employee relationship
between the parties. The resolution of the main issue will determine whether the termination of
respondent’s employment is illegal.
The Court, in determining the existence of an employer-employee relationship, has invariably
adhered to the four-fold test: (1) the selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power to control the employee’s conduct, or the so-
called "control test," considered to be the most important element.18
The Court agrees with the finding of the Labor Arbiter and the NLRC that the circumstances of this
case show that no employer-employee relationship exists between the parties. The Labor Arbiter
and the NLRC correctly found that petitioner company lacked the power of control over the
performance by respondent of his duties. The Labor Arbiter reasoned that the Comprehensive
Medical Plan, which contains the respondent’s objectives, duties and obligations, does not tell
respondent "how to conduct his physical examination, how to immunize, or how to diagnose and
treat his patients, employees of [petitioner] company, in each case." He likened this case to that
of Neri v. National Labor Relations Commission,19 which held:
In the case of petitioner Neri, it is admitted that FEBTC issued a job description which detailed her
functions as a radio/telex operator. However, a cursory reading of the job description shows that
what was sought to be controlled by FEBTC was actually the end result of the task, e.g., that the
daily incoming and outgoing telegraphic transfer of funds received and relayed by her, respectively,
tallies with that of the register. The guidelines were laid down merely to ensure that the desired end
result was achieved. It did not, however, tell Neri how the radio/telex machine should be operated.
In effect, the Labor Arbiter held that petitioner company, through the Comprehensive Medical Plan,
provided guidelines merely to ensure that the end result was achieved, but did not control the
means and methods by which respondent performed his assigned tasks.
The NLRC affirmed the findings of the Labor Arbiter and stated that it is precisely because the
company lacks the power of control that the contract provides that respondent shall be directly
responsible to the employee concerned and their dependents for any injury, harm or damage
caused through professional negligence, incompetence or other valid causes of action.

The Labor Arbiter also correctly found that the provision in the Retainer Agreement that respondent
was on call during emergency cases did not make him a regular employee. He explained, thus:

Likewise, the allegation of complainant that since he is on call at anytime of the day and night makes
him a regular employee is off-tangent. Complainant does not dispute the fact that outside of the
two (2) hours that he is required to be at respondent company’s premises, he is not at all further
required to just sit around in the premises and wait for an emergency to occur so as to enable him
from using such hours for his own benefit and advantage. In fact, complainant maintains his own
private clinic attending to his private practice in the city, where he services his patients, bills them
accordingly -- and if it is an employee of respondent company who is attended to by him for special
treatment that needs hospitalization or operation, this is subject to a special billing. More often than
not, an employee is required to stay in the employer’s workplace or proximately close thereto that
he cannot utilize his time effectively and gainfully for his own purpose. Such is not the prevailing
situation here.1awphi1.net

In addition, the Court finds that the schedule of work and the requirement to be on call for
emergency cases do not amount to such control, but are necessary incidents to the Retainership
Agreement.

The Court also notes that the Retainership Agreement granted to both parties the power to
terminate their relationship upon giving a 30-day notice. Hence, petitioner company did not wield
the sole power of dismissal or termination.

The Court agrees with the Labor Arbiter and the NLRC that there is nothing wrong with the
employment of respondent as a retained physician of petitioner company and upholds the validity
of the Retainership Agreement which clearly stated that no employer-employee relationship existed
between the parties. The Agreement also stated that it was only for a period of 1 year beginning
January 1, 1988 to December 31, 1998, but it was renewed on a yearly basis.

Considering that there is no employer-employee relationship between the parties, the termination
of the Retainership Agreement, which is in accordance with the provisions of the Agreement, does
not constitute illegal dismissal of respondent. Consequently, there is no basis for the moral and
exemplary damages granted by the Court of Appeals to respondent due to his alleged illegal
dismissal.

WHEREFORE, the petition is GRANTED and the Decision and Resolution of the Court of Appeals are
REVERSED and SET ASIDE. The Decision and Resolution dated November 28, 1997 and August 7,
1998, respectively, of the National Labor Relations Commission are REINSTATED.

No costs.

SO ORDERED.
 FIRST DIVISION
MELENCIO GABRIEL, G.R. No. 146989
represented by surviving spouse,
FLORDELIZA V. GABRIEL,
Petitioner, Present:
PUNO, C.J., Chairperson,
- versus - SANDOVAL-GUTIERREZ,
CORONA,
AZCUNA, and
GARCIA, JJ.
NELSON BILON, ANGEL BRAZIL
AND ERNESTO PAGAYGAY,
Respondents. Promulgated:
February 7, 2007
x ---------------------------------------------------------------------------------------- x
DECISION
AZCUNA, J.:
This is a petition for review on certiorari[1] assailing the Decision and Resolution of the Court
of Appeals, respectively dated August 4, 2000 and February 7, 2001, in CA-G.R. SP No. 52001 entitled
Nelson Bilon, et al. v. National Labor Relations Commission, et al.
The challenged decision reversed and set aside the decision[2] of the National Labor Relations
Commission (NLRC) dismissing respondents complaint for illegal dismissal and illegal deductions, and
reinstating the decision of the Labor Arbiter finding petitioner guilty of illegal dismissal but not of
illegal deductions subject to the modification that respondents be immediately reinstated to their
former positions without loss of seniority rights and privileges instead of being paid separation pay.
Petitioner, represented by his surviving spouse, Flordeliza V. Gabriel, was the owner-operator
of a public transport business, Gabriel Jeepney, with a fleet of 54 jeepneysplying the Baclaran-
Divisoria-Tondo route. Petitioner had a pool of drivers, which included respondents, operating under
a boundary system of P400 per day.
The facts[3] are as follows:
On November 15, 1995, respondents filed their separate complaints for illegal dismissal, illegal
deductions, and separation pay against petitioner with the National Labor Relations Commission
(NLRC). These were consolidated and docketed as NLRC-NCR Case No. 00-11-07420-95.[4]
On December 15, 1995, the complaint was amended, impleading as party respondent
the Bacoor Transport Service Cooperative, Inc., as both parties are members of the cooperative.
Respondents alleged the following:
1) That they were regular drivers of Gabriel Jeepney, driving their respective
units bearing Plate Nos. PHW 553, NXU 155, and NWW 557, under a boundary system
of P400 per day, plying Baclaran to Divisoria via Tondo, and vice versa, since
December 1990, November 1984 and November 1991, respectively, up to April 30,
1995,[5] driving five
days a week, with average daily earnings of P400;
2) That they were required/forced to pay additional P55.00 per day for the
following: a) P20.00 police protection; b) P20.00 washing; c) P10.00 deposit; and
[d)] P5.00 garage fees;
3) That there is no law providing the operator to require the drivers to pay
police protection, deposit, washing, and garage fees.
4) That on April 30, 1995, petitioner told them not to drive anymore, and
when they went to the garage to report for work the next day, they were not given a
unit to drive; and
5) That the boundary drivers of passenger jeepneys are considered
regular employees of the jeepney operators. Being such, they are entitled to security
of tenure. Petitioner, however, dismissed them without factual and legal basis, and
without due process.
On his part, petitioner contended that:
1) He does not remember if the respondents were ever under his employ as
drivers of his passenger jeepneys. Certain, however, is the fact that neither the
respondents nor other drivers who worked for him were ever dismissed by him. As a
matter of fact, some of his former drivers just stopped reporting for work, either
because they found some other employment or drove for other operators, and like
the respondents, the next time he heard from them was when they started fabricating
unfounded complaints against him;
2) He made sure that none of the jeepneys would stay idle even for a day so
he could collect his earnings; hence, it had been his practice to establish a pool of
drivers. Had respondents manifested their desire to drive his units, it would have
been immaterial whether they were his former drivers or not. As long as they
obtained the necessary licenses and references, they would have been
accommodated and placed on schedule;
3) While he was penalized or made to pay a certain amount in connection
with similar complaints by other drivers in a previous case before this, it was not
because his culpability was established, but due to technicalities involving oversight
and negligence on his part by not participating in any stage of the investigation
thereof; and
4) Respondents claim that certain amounts, as enumerated in the
complaint, were deducted from their days earnings is preposterous. Indeed, there
were times when deductions were made from the days earnings of some drivers, but
such were installment payments for the amount previously advanced to them. Most
drivers, when they got involved in accidents or violations of traffic regulations,
managed to settle them, and in the process they had to spend some money, but most
of the time they did not have the needed amount so they secured cash advances
from him, with the understanding that the same should be paid back by installments
through deductions from their daily earnings or boundary.
On the other hand, Bacoor Transport Service Cooperative, Inc. (BTSCI) declared that it should
not be made a party to the case because: 1) [I]t has nothing to do with the employment of its member-
drivers. The matter is between the member-operator and their respective member-drivers. The
member-drivers tenure of employment, compensation, work conditions, and other aspects of
employment are matters of arrangement between them and the member-operators concerned, and
the BTSCI has nothing to do with it, as can be inferred from the Management Agreement between
BTSCI and the member-operators; and 2) [T]he amount allegedly deducted from respondents and the
purpose for which they were applied were matters that the cooperative was not aware of, and much
less imposed on them.
On September 17, 1996, respondents filed a motion to re-raffle the case for the reason that the Labor
Arbiter (Hon. Roberto I. Santos) failed to render his decision within thirty (30) calendar days, without
extension, after the submission of the case for decision.
On September 18, 1996, said Labor Arbiter inhibited himself from further handling the case due to
personal reasons.

On November 8, 1996, Labor Arbiter Ricardo C. Nora, to whom the case was re-raffled,
ordered the parties to file their respective memoranda within ten days, after which the case was
deemed submitted for resolution.
On March 17, 1997, the Labor Arbiter (Hon. Ricardo C. Nora) handed down his decision,
the dispositive portion of which is worded as follows:
WHEREFORE, premises considered, judgment is hereby rendered declaring the
illegality of [respondents] dismissal and ordering [petitioner] Melencio Gabriel to pay
the [respondents] the total amount of ONE MILLION THIRTY FOUR THOUSAND PESOS
[P1,034,000,] representing [respondents] backwages and separation pay as follows:
1. Nelson Bilon
Backwages P 284,800
Separation Pay 26,400 P 321,200
2. Angel Brazil
Backwages P 294,800
Separation Pay 96,800 391,600
3. Ernesto Pagaygay
Backwages P 294,800
Separation Pay 26,400 321,200
P 1,034,000
[Petitioner] Melencio Gabriel is likewise ordered to pay attorneys fees equivalent to
five percent (5%) of the judgment award or the amount of P51,700 within ten (10)
days from receipt of this Decision.
All other issues are dismissed for lack of merit.
SO ORDERED.[6]
Incidentally, on April 4, 1997, petitioner passed away. On April 18, 1997, a copy of the above decision
was delivered personally to petitioners house. According to respondents, petitioners surviving
spouse, Flordeliza Gabriel, and their daughter, after reading the contents of the decision and after
they had spoken to their counsel, refused to receive the same. Nevertheless, Bailiff Alfredo
V. Estonactoc left a copy of the decision with petitioners wife and her daughter but they both refused
to sign and acknowledge receipt of the decision.[7]
The labor arbiters decision was subsequently served by registered mail at petitioners
residence and the same was received on May 28, 1997.
On May 16, 1997, counsel for petitioner filed an entry of appearance with motion to dismiss the case
for the reason that petitioner passed away last April 4, 1997.
On June 5, 1997, petitioner appealed the labor arbiters decision to the National Labor
Relations Commission, First Division, contending that the labor arbiter erred:
1. In holding that [petitioner] Gabriel dismissed the complainants, Arb. Nora
committed a serious error in the findings of fact which, if not corrected, would
cause grave or irreparable damage or injury to [petitioner] Gabriel;
2. In holding that strained relations already exist between the parties, justifying an
award of separation pay in lieu of reinstatement, Arb. Nora not only
committed a serious error in the findings of fact, but he also abused his
discretion;
3. In computing the amount of backwages allegedly due [respondents] from 30 April
1995 to 15 March 1997, Arb. Nora abused his discretion, considering that the
case had been submitted for decision as early as 1 March 1996 and that the
same should have been decided as early as 31 March 1996;
4. In using P400.00 and 22 days as factors in computing the amount
of backwages allegedly due [respondents], Arb. Nora abused his discretion
and committed a serious error in the findings of fact, considering that there
was no factual or evidentiary basis therefor;
5. In using 33.5 months as factor in the computation of the amount
of backwages allegedly due [respondents], Arb. Nora committed a serious
error in the findings of fact[,] because even if it is assumed
that backwages are due from 30 April 1995 to 15 March 1997, the period
between the two dates is only 22 months, and not 33 months as stated in the
appealed decision; and
6. In not dismissing the case[,] despite notice of the death of [petitioner]
Gabriel before final judgment, Arb. Nora abused his discretion and
committed a serious error of law.[8]
On July 3, 1997, respondents filed a motion to dismiss petitioners appeal on the ground that the surety
bond is defective and the appeal was filed out of time, which move was opposed by petitioner.
Subsequently, on April 28, 1998, the NLRC promulgated its first decision, the dispositive portion of
which reads:
WHEREFORE, premises considered, the appealed decision is hereby reversed and set
aside. The above-entitled case is hereby dismissed for lack of employer-employee
relationship.
SO ORDERED.[9]
Respondents filed a motion for reconsideration. They claimed that the decision did not discuss the
issue of the timeliness of the appeal. The lack of employer-employee relationship was mentioned in
the dispositive portion, which issue was not raised before the labor arbiter or discussed in the body
of the questioned decision. In view of the issues raised by respondents in their motion, the NLRC
rendered its second decision on October 29, 1998. The pertinent portions are hereby quoted thus:
In the case at bar, [petitioner] Melencio Gabriel was not represented by counsel
during the pendency of the case. A decision was rendered by the Labor Arbiter a
quo on March 17, 1997 while Mr. Gabriel passed away on April 4, 1997 without
having received a copy thereof during his lifetime. The decision was only served
on April 18, 1997 when he was no longer around to receive the same. His surviving
spouse and daughter cannot automatically substitute themselves as party
respondents. Thus, when the bailiff tendered a copy of the decision to them, they
were not in a position to receive them. The requirement of leaving a copy at the partys
residence is not applicable in the instant case because this presupposes that the party
is still living and is just not available to receive the decision.
The preceding considered, the decision of the labor arbiter has not become final
because there was no proper service of copy thereof to [petitioner] .
Undoubtedly, this case is for recovery of money which does not survive, and
considering that the decision has not become final, the case should have been
dismissed and the appeal no longer entertained.
WHEREFORE, in view of the foregoing, the Decision of April 28, 1998 is set aside and
vacated. Furthermore, the instant case is dismissed and complainants are directed to
pursue their claim against the proceedings for the settlement of the estate of the
deceased Melencio Gabriel.
SO ORDERED.[10]
Aggrieved by the decision of the NLRC, respondents elevated the case to the Court of Appeals (CA) by
way of a petition for certiorari. On August 4, 2000, the CA reversed the decisions of the NLRC:
 Article 223 of the Labor Code categorically mandates that an appeal by the
employer may be perfected only upon the posting of a cash bond or surety bond x x x.
It is beyond peradventure then that the non-compliance with the above conditio sine
qua non, plus the fact that the appeal was filed beyond the reglementary period,
should have been enough reasons to dismiss the appeal.
In any event, even conceding ex gratia that such procedural infirmity [were]
inexistent, this petition would still be tenable based on substantive aspects.
The public respondents decision, dated April 28, 1998, is egregiously wrong insofar as
it was anchored on the absence of an employer-employee relationship. Well-settled
is the rule that the boundary system used in jeepney and (taxi) operations
presupposes an employer-employee relationship (National Labor Union v. Dinglasan,
98 Phil. 649) .
The NLRC ostensibly tried to redeem itself by vacating the decision April 28, 1998. By
so doing, however, it did not actually resolve the matter definitively. It merely relieved
itself of such burden by suggesting that the petitioners pursue their claim against the
proceedings for the settlement of the estate of the deceased Melencio Gabriel.
In the instant case, the decision (dated March 17, 1997) of the Labor Arbiter became
final and executory on account of the failure of the private respondent to perfect his
appeal on time.
Thus, we disagree with the ratiocination of the NLRC that the death of the private
respondent on April 4, 1997 ipso facto negates recovery of the money claim against
the successors-in-interest . Rather, this situation comes within the aegis of Section 3,
Rule III of the NLRC Manual on Execution of Judgment, which provides:
SECTION 3. Execution in Case of Death of Party. Where a
party dies after the finality of the decision/entry of judgment of
order, execution thereon may issue or one already issued may be
enforced in the following cases:
a) x x x ;
b) In case of death of the losing party, against his successor-
in-interest, executor or administrator;
c) In case of death of the losing party after execution is
actually levied upon any of his property, the same may be
sold for the satisfaction thereof, and the sheriff making the
sale shall account to his successor-in-interest, executor or
administrator for any surplus in his hands.
Notwithstanding the foregoing disquisition though, We are not entirely in
accord with the labor arbiters decision awarding separation pay in favor of the
petitioners. In this regard, it [is] worth mentioning that in Kiamco v.
NLRC,[11] citing Globe-Mackay Cable and Radio Corp. v. NLRC,[12] the Supreme Court
qualified the application of the strained relations principle when it held --
If in the wisdom of the Court, there may be a ground or
grounds for the non-application of the above-cited provision (Art.
279, Labor Code) this should be by way of exception, such as when
the reinstatement may be inadmissible due to ensuing strained
relations between the employer and employee.
In such cases, it should be proved that the employee
concerned occupies a position where he enjoys the trust and
confidence of his employer, and that it is likely that if reinstated, an
atmosphere of antipathy and antagonism may be generated as to
adversely affect the efficiency and productivity of the employee
concerned x x x Obviously, the principle of strained relations cannot
be applied indiscriminately. Otherwise, reinstatement can never be
possible simply because some hostility is invariably engendered
between the parties as a result of litigation. That is human nature.
Besides, no strained relations should arise from a valid legal
act of asserting ones right; otherwise[,] an employee who shall assert
his right could be easily separated from the service by merely paying
his separation pay on the pretext that his relationship with his
employer had already become strained.
Anent the award of backwages, the Labor Arbiter erred in computing the same from
the date the petitioners were illegally dismissed (i.e. April 30, 1995) up to March 15,
1997, that is two (2) days prior to the rendition of his decision (i.e. March 17, 1997).
WHEREFORE, premises considered, the petition is GRANTED, hereby REVERSING and
SETTING ASIDE the assailed decisions of the National Labor Relations Commission,
dated April 28, 1998 ans October 29, 1998. Consequently, the decision of the Labor
Arbiter, dated March 17, 1997, is hereby REINSTATED, subject to the MODIFICATION
that the private respondent is ORDERED to immediately REINSTATE petitioners
Nelson Bilon, Angel Brazil and Ernesto Pagaygay to their former position without loss
of seniority rights and privileges, with full backwages from the date of their dismissal
until their actual reinstatement. Costs against private respondent.
SO ORDERED.[13]
Petitioner filed a motion for reconsideration but the same was denied by the CA in a resolution
dated February 7, 2001.
Hence, this petition raising the following issues:[14]
I
THE COURT OF APPEALS ERRED IN FINDING THAT PETITIONERS APPEAL TO THE
NATIONAL LABOR RELATIONS COMMISSION WAS FILED OUT OF TIME.
II
THE COURT OF APPEALS ERRED IN HOLDING THAT THE ALLEGED DEFECTS IN
PETITIONERS APPEAL BOND WERE OF SUCH GRAVITY AS TO PREVENT THE APPEAL
FROM BEING PERFECTED.
III
THE COURT OF APPEALS ERRED IN GRANTING RESPONDENTS PETITION FOR
CERTIORARI DESPITE THE FACT THAT THE SAME ASSAILED A DECISION WHICH HAD
BEEN VACATED IN FAVOR OF A NEW ONE WHICH, IN TURN, HAS SOLID LEGAL BASIS.
IV
THE COURT OF APPEALS ERRED IN APPLYING SECTION 3, RULE III, OF THE MANUAL
ON EXECUTION OF JUDGMENT OF THE NATIONAL LABOR RELATIONS COMMISSION
WHICH, BY ITS OWN EXPRESS TERMS, IS NOT APPLICABLE.
A resolution of the case requires a brief discussion of two issues which touch upon the
procedural and substantial aspects of the case thus: a) whether petitioners appeal was filed out of
time; and b) whether the claim survives.
As regards the first issue, the Court considers the service of copy of the decision of the labor
arbiter to have been validly made on May 28, 1997 when it was received through registered mail. As
correctly pointed out by petitioners wife, service of a copy of the decision could not have been
validly effected on April 18, 1997 because petitioner passed away on April 4, 1997.
Section 4, Rule III of the New Rules of Procedure of the NLRC provides:
SEC. 4. Service of Notices and Resolutions. (a) Notices or summons and
copies of orders, resolutions or decisions shall be served on the parties to the case
personally by the bailiff or authorized public officer within three (3) days from receipt
thereof or by registered mail; Provided, That where a party is represented by counsel
or authorized representative, service shall be made on such counsel or authorized
 representative; Provided further, That in cases of decision and final awards, copies
thereof shall be served on both parties and their counsel .
For the purpose of computing the period of appeal, the same shall be counted
from receipt of such decisions, awards or orders by the counsel of record.
(b) The bailiff or officer personally serving the notice, order, resolution or
decision shall submit his return within two (2) days from date of service thereof,
stating legibly in his return, his name, the names of the persons served and the date
of receipt which return shall be immediately attached and shall form part of the
records of the case. If no service was effected, the serving officer shall state the
reason therefore in the return.
Section 6, Rule 13 of the Rules of Court which is suppletory to the NLRC Rules of Procedure states
that: [s]ervice of the papers may be made by delivering personally a copy to the party or his counsel,
or by leaving it in his office with his clerk or with a person having charge thereof. If no person is found
in his office, or his office is not known, or he has no office, then by leaving the copy, between the
hours of eight in the morning and six in the evening, at the partys or counsels residence, if known,
with a person of sufficient age and discretion then residing therein.
The foregoing provisions contemplate a situation wherein the party to the action is alive upon the
delivery of a copy of the tribunals decision. In the present case, however, petitioner died before a
copy of the labor arbiters decision was served upon him. Hence, the above provisions do not apply.
As aptly stated by the NLRC:
In the case at bar, respondent Melencio Gabriel was not represented by counsel
during the pendency of the case. A decision was rendered by the Labor Arbiter a
quo on March 17, 1997 while Mr. Gabriel passed away on April 4, 1997, without
having received a copy thereof during his lifetime. The decision was only served
on April 18, 1997 when he was no longer around to receive the same. His surviving
spouse and daughter cannot automatically substitute themselves as party
respondents. Thus, when the bailiff tendered a copy of the decision to them, they
were not in a position to receive them. The requirement of leaving a copy at the partys
residence is not applicable in the instant case because this presupposes that the party
is still living and is not just available to receive the decision.
The preceding considered, the decision of the Labor Arbiter has not become
final because there was no proper service of copy thereof to party respondent.[15]
Thus, the appeal filed on behalf of petitioner on June 5, 1997 after receipt of a copy of the
decision via registered mail on May 28, 1997 was within the ten-day reglementaryperiod prescribed
under Section 223 of the Labor Code.
On the question whether petitioners surety bond was defective, Section 6, Rule VI of the New
Rules of Procedure of the NLRC provides:
SEC. 6. Bond. In case the decision of a Labor Arbiter involves monetary award,
an appeal by the employer shall be perfected only upon the posting of a cash or surety
bond issued by a reputable bonding company duly accredited by the Commission or
the Supreme Court in an amount equivalent to the monetary award, exclusive of
moral and exemplary damages and attorneys fees.
The employer as well as counsel shall submit a joint declaration under oath
attesting that the surety bond posted is genuine and that it shall be in effect until final
disposition of the case.
The Commission may, in meritorious cases and upon Motion of the Appellant,
reduce the amount of the bond. (As amended on Nov. 5, 1993).
The Court believes that petitioner was able to comply substantially with the requirements of the
above Rule. As correctly pointed out by the NLRC:
While we agree with complainants-appellees that the posting of the surety bond is
jurisdictional, We do not believe that the defects imputed to the surety bond posted
for and in behalf of respondent-appellant Gabriel are of such character as to affect
the jurisdiction of this Commission to entertain the instant appeal.
It matters not that, by the terms of the bond posted, the Liability of the surety herein
shall expire on June 5, 1998 and this bond shall be automatically cancelled ten (10)
days after the expiration. After all, the bond is accompanied by the joint declaration
under oath of respondent-appellants surviving spouse and counsel attesting that the
surety bond is genuine and shall be in effect until the final disposition of the case.
Anent complainants-appellees contention that the surety bond posted is defective for
being in the name of BTSCI which did not appeal and for having been entered into by
Mrs. Gabriel without BTSCIs authority, the same has been rendered moot and
academic by the certification issued by Gil CJ. San Juan, Vice-President of the bonding
company to the effect that Eastern Assurance and Surety Corporation Bond No. 2749
was posted for and on behalf appellant Melencio Gabriel and/or his heirs and that
(T)he name Bacoor Transport Service Cooperative, Inc. was indicated in said bond due
merely in (sic) advertence.
At any rate, the Supreme Court has time and again ruled that while Article 223 of the
Labor Code, as amended requiring a cash or surety bond in the amount equivalent to
the monetary award in the judgment appealed from for the appeal to be perfected,
may be considered a jurisdictional requirement, nevertheless, adhering to the
principle that substantial justice is better served by allowing the appeal on the merits
threshed out by this Honorable Commission, the foregoing requirement of the law
should be given a liberal interpretation (Pantranco North Express, Inc. v. Sison, 149
SCRA 238; C.W. Tan Mfg. v. NLRC, 170 SCRA 240; YBL v. NLRC, 190 SCRA 160; Rada v.
NLRC, 205 SCRA 69; Star Angel Handicraft v. NLRC, 236 SCRA 580).[16]
On the other hand, with regard to the substantive aspect of the case, the Court agrees with the CA
that an employer-employee relationship existed between petitioner and respondents. In Martinez v.
National Labor Relations Commission,[17] citing National Labor Union v. Dinglasan,[18] the Court ruled
that:
[T]he relationship between jeepney owners/operators and jeepney drivers
under the boundary system is that of employer-employee and not of lessor-lessee
because in the lease of chattels the lessor loses complete control over the chattel
leased although the lessee cannot be reckless in the use thereof, otherwise he would
be responsible for the damages to the lessor. In the case
of jeepney owners/operators and jeepney drivers, the former exercises supervision
and control over the latter. The fact that the drivers do not receive fixed wages but
get only that in excess of the so-called boundary [that] they pay to the
owner/operator is not sufficient to withdraw the relationship between them from
that of employer and employee. Thus, private respondents were employees because
they had been engaged to perform activities which were usually necessary or
desirable in the usual business or trade of the employer.[19]
The same principle was reiterated in the case of Paguio Transport Corporation v. NLRC.[20]
The Court also agrees with the labor arbiter and the CA that respondents were illegally dismissed by
petitioner. Respondents were not accorded due process.[21] Moreover, petitioner failed to show that
the cause for termination falls under any of the grounds enumerated in Article 282
(then Article 283)[22] of the Labor Code.[23] Consequently, respondents are entitled to reinstatement
without loss of seniority rights and other privileges and to their full backwages computed from the
date of dismissal up to the time of their actual reinstatement in accordance with Article 279 of the
Labor Code.
Reinstatement is obtainable in this case because it has not been shown that there is an ensuing
strained relations between petitioner and respondents. This is pursuant to the principle laid down
in Globe-Mackay Cable and Radio Corporation v. NLRC[24] as quoted earlier in the CA decision.
With regard to respondents monetary claim, the same shall be governed by Section 20 (then Section
21), Rule 3 of the Rules of Court which provides:

SEC. 20. Action on contractual money claims. When the action is for recovery of
money arising from contract, express or implied, and the defendant dies before entry
of final judgment in the court in which the action was pending at the time of such
death, it shall not be dismissed but shall instead be allowed to continue until entry of
final judgment. A favorable judgment obtained by the plaintiff therein shall be
enforced in the manner provided in these Rules for prosecuting claims against the
estate of a deceased person. (21a)

In relation to this, Section 5, Rule 86 of the Rules of Court states:

SEC. 5. Claims which must be filed under the notice. If not filed, barred ; exceptions.
All claims for money against the decedent arising from contract, express or implied,
whether the same be due, not due, or contingent, ... and judgment for money against
the decedent, must be filed within the time limited in the notice; otherwise they are
barred forever, except that they may be setforth as counterclaims in any action that
the executor or administrator may bring against the claimants.

Thus, in accordance with the above Rules, the money claims of respondents must be filed against the
estate of petitioner Melencio Gabriel.[25]
WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals
dated August 4, 2000 and February 7, 2001, respectively, in CA-G.R. SP No. 52001 are AFFIRMED but
with the MODIFICATION that the money claims of respondents should be filed against the estate
of Melencio Gabriel, within such reasonable time from the finality of this Decision as the estate court
may fix.

No costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 109704 January 17, 1995
ALFREDO B. FELIX, petitioner,
vs.
DR. BRIGIDA BUENASEDA, in her capacity as Director, and ISABELO BAÑEZ, JR., in his capacity as
Administrator, both of the National Center for Mental Health, and the CIVIL SERVICE
COMMISSION, respondents.
KAPUNAN, J.:
Taking advantage of this Court's decisions involving the removal of various civil servants pursuant to
the general reorganization of the government after the EDSA Revolution, petitioner assails his
dismissal as Medical Specialist I of the National Center for Mental Health (formerly the National
Mental Hospital) as illegal and violative of the constitutional provision on security of tenure allegedly
because his removal was made pursuant to an invalid reorganization.
In Mendoza vs. Quisumbing1 and the consolidated cases involving the reorganization of various
government departments and agencies we held:
We are constrained to set aside the reorganizations embodied in these consolidated
petitions because the heads of departments and agencies concerned have chosen to
rely on their own concepts of unlimited discretion and "progressive" ideas on
reorganization instead of showing that they have faithfully complied with the clear
letter and spirit of the two Constitutions and the statutes affecting reorganization.2
In De Guzman vs. CSC3 , we upheld the principle, laid down by Justice J.B.L. Reyes in Cruz vs.
Primicias4 that a valid abolition of an office neither results in a separation or removal, likewise
upholding the corollary principle that "if the abolition is void, the incumbent is deemed never to
have ceased to hold office," in sustaining therein petitioner's right to the position she held prior to
the reorganization.
The instant petition on its face turns on similar facts and issues, which is, that petitioner's removal
from a permanent position in the National Center for Mental Health as a result of the reorganization
of the Department of Health was void.
However, a closer look at the facts surrounding the instant petition leads us to a different
conclusion.
After passing the Physician's Licensure Examinations given by the Professional Regulation
Commission in June of 1979, petitioner, Dr. Alfredo B. Felix, joined the National Center for Mental
Health (then the National Mental Hospital) on May 26, 1980 as a Resident Physician with an annual
salary of P15,264.00.5 In August of 1983, he was promoted to the position of Senior Resident
Physician6 a position he held until the Ministry of Health reorganized the National Center for Mental
Health (NCMH) in January of 1988, pursuant to Executive Order No. 119.
Under the reorganization, petitioner was appointed to the position of Senior Resident Physician in a
temporary capacity immediately after he and other employees of the NCMH allegedly tendered
their courtesy resignations to the Secretary of Health.7 In August of 1988, petitioner was promoted
to the position of Medical Specialist I (Temporary Status), which position was renewed the following
year.8
In 1988, the Department of Health issued Department Order No. 347 which required board
certification as a prerequisite for renewal of specialist positions in various medical centers, hospitals
and agencies of the said department. Specifically, Department Order No. 347 provided that
specialists working in various hospitals and branches of the Department of Health be recognized as
"Fellows" of their respective specialty societies and/or "Diplomates" of their specialty boards or
both. The Order was issued for the purpose of upgrading the quality of specialties in DOH hospitals
by requiring them to pass rigorous theoretical and clinical (bedside) examinations given by
recognized specialty boards, in keeping up with international standards of medical practice.
Upon representation of the Chiefs of Hospitals of various government hospitals and medical centers,
(then) Secretary of Health Alfredo Bengzon issued Department Order No. 347 providing for an
extension of appointments of Medical Specialist positions in cases where the termination of medical
specialist who failed to meet the requirement for board certification might result in the disruption of
hospital services. Department Order No. 478 issued the following guidelines:
1. As a general policy, the provision of Department Order No. 347, Sec. 4 shall apply
unless the Chief of Hospital requests for exemption, certifies that its application will
result in the disruption of the delivery service together with the steps taken to
implement Section 4, and submit a plan of action, lasting no more than 3-years, for
the eventual phase out of non-Board certified medical specialties.
2. Medical specialist recommended for extension of appointment shall meet the
following minimum criteria:
a. DOH medical specialist certified
b. Has been in the service of the Department at least three (3) years
prior to December 1988.
c. Has applied or taken the specialty board examination.
3. Each recommendation for extension of appointment must be individually justified
to show not only the qualification of the recommendee, but also what steps he has
taken to be board certified.
4. Recommendation for extension of appointment shall be evaluated on a case to
case basis.
5. As amended, the other provisions of Department Order No. 34/s. 1988 stands.
Petitioner was one of the hundreds of government medical specialist who would have been
adversely affected by Department Order No. 347 since he was no yet accredited by the Psychiatry
Specialty Board. Under Department Order No. 478, extension of his appointment remained subject
to the guidelines set by the said department order. On August 20, 1991, after reviewing petitioner's
service record and performance, the Medical Credentials Committee of the National Center for
Mental Health recommended non-renewal of his appointment as Medical Specialist I, informing him
of its decision on August 22, 1991. He was, however, allowed to continue in the service, and receive
his salary, allowances and other benefits even after being informed of the termination of his
appointment.
On November 25, 1991, an emergency meeting of the Chiefs of Service was held to discuss, among
other matters, the petitioner's case. In the said meeting Dr. Vismindo de Grecia, petitioner's
immediate supervisor, pointed out petitioner's poor performance, frequent tardiness and
inflexibility as among the factors responsible for the recommendation not to renew his
appointment.9 With one exception, other department heads present in the meeting expressed the
same opinion, 10 and the overwhelming concensus was for non-renewal. The matter was thereafter
referred to the Civil Service Commission, which on February 28, 1992 ruled that "the temporary
appointment (of petitioner) as Medical Specialist I can be terminated at any time . . ." and that
"[a]ny renewal of such appointment is within the discretion of the appointing
authority." 11 Consequently, in a memorandum dated March 25, 1992 petitioner was advised by
hospital authorities to vacate his cottage since he was no longer with said memorandum petitioner
filed a petition with the Merit System Protection Board (MSPB) complaining about the alleged
harassment by respondents and questioning the non-renewal of his appointment. In a Decision
rendered on July 29, 1992, the (MSPB) dismissed petitioner's complaint for lack of merit, finding
that:
 As an apparent incident of the power to appoint, the renewal of a temporary
appointment upon or after its expiration is a matter largely addressed to the sound
discretion of the appointing authority. In this case, there is no dispute that
Complainant was a temporary employee and his appointment expired on August 22,
1991. This being the case, his re-appointment to his former position or the renewal
of his temporary appointment would be determined solely by the proper appointing
authority who is the Secretary, Department of Health upon the favorable
recommendation of the Chief of Hospital III, NCMH. The Supreme Court in the case
of Central Bank vs. Civil Service Commission G.R. Nos. 80455-56 dated April 10, 1989,
held as follows:
The power of appointment is essentially a political question involving considerations
of wisdom which only the appointing authority can decide.
In this light, Complainant therefore, has no basis in law to assail the non-renewal of
his expired temporary appointment much less invoke the aid of this Board cannot
substitute its judgment to that of the appointing authority nor direct the latter to
issue an appointment in the complainant's favor.
Regarding the alleged Department Order secured by the complainant from the
Department of Health (DOH), the Board finds the same inconsequential. Said
Department Order merely allowed the extension of tenure of Medical Specialist I for
a certain period but does not mandate the renewal of the expired appointment.
The Board likewise finds as baseless complainant's allegation of harassment. It should be noted that
the subsistence, quarters and laundry benefits provided to the Complainant were in connection with
his employment with the NCMH. Now that his employment ties with the said agency are severed, he
eventually loses his right to the said benefits. Hence, the Hospital Management has the right to take
steps to prevent him from the continuous enjoyment thereof, including the occupancy of the said
cottage, after his cessation form office.
In sum, the actuations of Dr. Buenaseda and Lt. Col. Balez are not shown to have been tainted with
any legal infirmity, thus rendering as baseless, this instant complaint.
Said decision was appealed to the Civil Service Commission which dismissed the same in its
Resolution dated December 1, 1992. Motion for Reconsideration was denied in CSC Resolution No.
93-677 dated February 3, 1993, hence this appeal, in which petitioner interposes the following
assignments of errors:
I it certain professional responsibilities including the responsibility of keeping up with the minimum
THE PUBLIC RESPONDENT CIVIL SERVICE COMMISSION ERRED IN HOLDING THAT BY
SUBMITTING HIS COURTESY RESIGNATION AND ACCEPTING HIS TEMPORARY
APPOINTMENT PETITIONER HAD EFFECTIVELY DIVESTED HIMSELF OF HIS SECURITY
OF TENURE, CONSIDERING THE CIRCUMSTANCES OF SUCH COURTESY RESIGNATION
AND ACCEPTANCE OF APPOINTMENT.
II
THE RESPONDENT COMMISSION IN NOT DECLARING THAT THE CONVERSION OF
THE PERMANENT APPOINTMENT OF PETITIONER TO TEMPORARY WAS DONE IN
BAD FAITH IN THE GUISE OF REORGANIZATION AND THUS INVALID, BEING
VIOLATIVE OF THE PETITIONER'S RIGHT OF SECURITY OF TENURE.
Responding to the instant petition, 12 the Solicitor General contends that 1) the petitioner's
temporary appointment after the reorganization pursuant to E.O. No. 119 were valid and did not
violate his constitutional right of security of tenure; 13 2) petitioner is guilty of estoppel or laches,
having acquiesced to such temporary appointments from 1988 to 1991; 14 and 3) the respondent
Commission did not act with grave abuse of discretion in affirming the petitioner's non-renewal of
his appointment at the National Center for Mental Hospital.15
We agree.
The patent absurdity of petitioner's posture is readily obvious. A residency or resident
physician position in a medical specialty is never a permanent one. Residency connotes training and
temporary status. It is the step taken by a physician right after post-graduate internship (and after
hurdling the Medical Licensure Examinations) prior to his recognition as a specialist or sub-specialist
in a given field.
A physician who desires to specialize in Cardiology takes a required three-year accredited residency
in Internal Medicine (four years in DOH hospitals) and moves on to a two or three-year fellowship or
residency in Cardiology before he is allowed to take the specialty examinations given by the
appropriate accrediting college. In a similar manner, the accredited Psychiatrist goes through the
same stepladder process which culminates in his recognition as a fellow or diplomate (or both) of
the Psychiatry Specialty Board. 16 This upward movement from residency to specialist rank,
institutionalized in the residency training process, guarantees minimum standards and skills and
ensures that the physician claiming to be a specialist will not be set loose on the community without
the basic knowledge and skills of his specialty. Because acceptance and promotion requirements are
stringent, competitive, and based on merit. acceptance to a first year residency program is no
guaranty that the physician will complete the program. Attribution rates are high. Some programs
are pyramidal. Promotion to the next post-graduate year is based on merit and performance
determined by periodic evaluations and examinations of knowledge, skills and bedside
manner. 17 Under this system, residents, specialty those in university teaching hospitals 18 enjoy their
right to security of tenure only to the extent that they periodically make the grade, making the
situation quite unique as far as physicians undergoing post-graduate residencies and fellowships are
concerned. While physicians (or consultants) of specialist rank are not subject to the same stringent
evaluation procedures, 19 specialty societies require continuing education as a requirement for
accreditation for good standing, in addition to peer review processes based on performance,
mortality and morbidity audits, feedback from residents, interns and medical students and research
output. The nature of the contracts of resident physicians meet traditional tests for determining
employer-employee relationships, but because the focus of residency is training, they are neither
here nor there. Moreover, stringent standards and requirements for renewal of specialist-rank
positions or for promotion to the next post-graduate residency year are necessary because lives are
ultimately at stake.
Petitioner's insistence on being reverted back to the status quo prior to the reorganizations made
pursuant to Executive Order No. 119 would therefore be akin to a college student asking to be sent
back to high school and staying there. From the position of senior resident physician, which he held
at the time of the government reorganization, the next logical step in the stepladder process was
obviously his promotion to the rank of Medical Specialist I, a position which he apparently accepted
not only because of the increase in salary and rank but because of the prestige and status which the
promotion conferred upon him in the medical community. Such status, however, clearly carried with
requirements of specialty rank, the responsibility of keeping abreast with current knowledge in his
specialty rank, the responsibility of completing board certification requirements within a reasonable
period of time. The evaluation made by the petitioner's peers and superiors clearly showed that he
was deficient in a lot of areas, in addition to the fact that at the time of his non-renewal, he was not
even board-certified.
It bears emphasis that at the time of petitioner's promotion to the position of Medical Specialist I
(temporary) in August of 1988, no objection was raised by him about the change of position or the
temporary nature of designation. The pretense of objecting to the promotion to specialist rank
apparently came only as an afterthought, three years later, following the non-renewal of his position
by the Department of Health.
We lay stress to the fact that petitioner made no attempt to oppose earlier renewals of his
temporary Specialist I contracts in 1989 and 1990, clearly demonstrating his acquiescence to — if
not his unqualified acceptance of the promotion (albeit of a temporary nature) made in 1988.
Whatever objections petitioner had against the earlier change from the status of permanent senior
resident physician to temporary senior physician were neither pursued nor mentioned at or after his
designation as Medical Specialist I (Temporary). He is therefore estopped from insisting upon a right
or claim which he had plainly abandoned when he, from all indications, enthusiastically accepted the
promotion. His negligence to assert his claim within a reasonable time, coupled with his failure to
repudiate his promotion to a temporary position, warrants a presumption, in the words of this Court
in Tijam vs. Sibonghanoy, 20that he "either abandoned (his claim) or declined to assert it."
There are weighty reasons of public policy and convenience which demand that any claim to any
position in the civil service, permanent, temporary of otherwise, or any claim to a violation of the
constitutional provision on security of tenure be made within a reasonable period of time. An
assurance of some degree of stability in the civil service is necessary in order to avoid needless
disruptions in the conduct of public business. Delays in the statement of a right to any position are
strongly discouraged. 21 In the same token, the failure to assert a claim or the voluntary acceptance
of another position in government, obviously without reservation, leads to a presumption that the
civil servant has either given up his claim of has already settled into the new position. This is the
essence of laches which is the failure or neglect, for an unreasonable and unexplained length of time
to do that which, by exercising due diligence, could or should have been done earlier; it is the
negligence or omission to assert a right within a reasonable time, warranting a presumption that the
party entitled to assert it either has abandoned it or declined to assert it. 22

In fine, this petition, on its surface, seems to be an ordinary challenge against the validity of the
conversion of petitioner's position from permanent resident physician status to that of a temporary
resident physician pursuant to the government reorganization after the EDSA Revolution. What is
unique to petitioner's averments is the fact that he hardly attempts to question the validity of his
removal from his position of Medical Specialist I (Temporary) of the National Center for Mental
Health, which is plainly the pertinent issue in the case at bench. The reason for this is at once
apparent, for there is a deliberate and dishonest attempt to a skirt the fundamental issue first, by
falsely claiming that petitioner was forced to submit his courtesy resignation in 1987 when he
actually did not; and second, by insisting on a right of claim clearly abandoned by his acceptance of
the position of Medical Specialist I (Temporary), which is hence barred by laches.

The validity of the government reorganization of the Ministry of Health pursuant to E.O. 119 not
being the real issue in the case at bench, we decline to make any further pronouncements relating
to petitioner's contentions relating to the effect on him of the reorganization except to say that in
the specific case of the change in designation from permanent resident physician
to temporary resident physician, a change was necessary, overall, to rectify a ludicrous situation
whereby some government resident physicians were erroneously being classified as permanent
resident physicians in spite of the inherently temporary nature of the designation. The attempts by
the Department of Health not only to streamline these positions but to make them conform to
current standards of specialty practice is a step in a positive direction. The patient who consults with
a physician of specialist rank should at least be safe in the assumption that the government
physician of specialist rank: 1.) has completed all necessary requirements at least assure the public
at large that those in government centers who claim to be specialists in specific areas of Medicine
possess the minimum knowledge and skills required to fulfill that first and foremost maxim,
embodied in the Hippocratic Oath, that they do their patients no harm. Primium non nocere.

Finally, it is crystal clear, from the facts of the case at bench, that the petitioner accepted a
temporary appointment (Medical Specialist I). As respondent Civil Service Commission has correctly
pointed out 23, the appointment was for a definite and renewable period which, when it was not
renewed, did not involve a dismissal but an expiration of the petitioner's term.

ACCORDINGLY, the petition is hereby DISMISSED, for lack of merit.

 SECOND DIVISION
[G.R. No. 156367. May 16, 2005]
AUTO BUS TRANSPORT SYSTEMS, INC., petitioner, vs. ANTONIO BAUTISTA, respondent.
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari assailing the Decision[1] and Resolution[2] of the
Court of Appeals affirming the Decision[3] of the National Labor Relations Commission (NLRC). The
NLRC ruling modified the Decision of the Labor Arbiter (finding respondent entitled to the award of
13th month pay and service incentive leave pay) by deleting the award of 13th month pay to
respondent.
THE FACTS
Since 24 May 1995, respondent Antonio Bautista has been employed by petitioner Auto Bus
Transport Systems, Inc. (Autobus), as driver-conductor with travel routes Manila-Tuguegarao via
Baguio, Baguio- Tuguegarao via Manila and Manila-Tabuk via Baguio. Respondent was paid on
commission basis, seven percent (7%) of the total gross income per travel, on a twice a month basis.
On 03 January 2000, while respondent was driving Autobus No. 114 along Sta. Fe, Nueva Vizcaya,
the bus he was driving accidentally bumped the rear portion of Autobus No. 124, as the latter vehicle
suddenly stopped at a sharp curve without giving any warning.
Respondent averred that the accident happened because he was compelled by the management
to go back to Roxas, Isabela, although he had not slept for almost twenty-four (24) hours, as he had
just arrived in Manila from Roxas, Isabela. Respondent further alleged that he was not allowed to
work until he fully paid the amount of P75,551.50, representing thirty percent (30%) of the cost of
repair of the damaged buses and that despite respondents pleas for reconsideration, the same was
ignored by management. After a month, management sent him a letter of termination.
Thus, on 02 February 2000, respondent instituted a Complaint for Illegal Dismissal with Money
Claims for nonpayment of 13th month pay and service incentive leave pay against Autobus.
Petitioner, on the other hand, maintained that respondents employment was replete with
offenses involving reckless imprudence, gross negligence, and dishonesty. To support its claim,
petitioner presented copies of letters, memos, irregularity reports, and warrants of arrest pertaining
to several incidents wherein respondent was involved.
Furthermore, petitioner avers that in the exercise of its management prerogative, respondents
employment was terminated only after the latter was provided with an opportunity to explain his side
regarding the accident on 03 January 2000.
On 29 September 2000, based on the pleadings and supporting evidence presented by the
parties, Labor Arbiter Monroe C. Tabingan promulgated a Decision,[4] the dispositive portion of which
reads:
WHEREFORE, all premises considered, it is hereby found that the complaint for Illegal Dismissal has
no leg to stand on. It is hereby ordered DISMISSED, as it is hereby DISMISSED.
However, still based on the above-discussed premises, the respondent must pay to the complainant
the following:
a. his 13th month pay from the date of his hiring to the date of his dismissal, presently
computed at P78,117.87;
b. his service incentive leave pay for all the years he had been in service with the
respondent, presently computed at P13,788.05.
All other claims of both complainant and respondent are hereby dismissed for lack of merit.[5]
Not satisfied with the decision of the Labor Arbiter, petitioner appealed the decision to the NLRC
which rendered its decision on 28 September 2001, the decretal portion of which reads:
[T]he Rules and Regulations Implementing Presidential Decree No. 851, particularly Sec. 3 provides:
Section 3. Employers covered. The Decree shall apply to all employers except to:
xxx xxx xxx
e) employers of those who are paid on purely commission, boundary, or task basis, performing a
specific work, irrespective of the time consumed in the performance thereof. xxx.
Records show that complainant, in his position paper, admitted that he was paid on a commission
basis.
In view of the foregoing, we deem it just and equitable to modify the assailed Decision by deleting
the award of 13th month pay to the complainant.
WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by deleting the award of
13th month pay. The other findings are AFFIRMED.[6]
In other words, the award of service incentive leave pay was maintained. Petitioner thus sought
a reconsideration of this aspect, which was subsequently denied in a Resolution by the NLRC dated 31
October 2001.
Displeased with only the partial grant of its appeal to the NLRC, petitioner sought the review of
said decision with the Court of Appeals which was subsequently denied by the appellate court in a
Decision dated 06 May 2002, the dispositive portion of which reads:
WHEREFORE, premises considered, the Petition is DISMISSED for lack of merit; and the
assailed Decision of respondent Commission in NLRC NCR CA No. 026584-2000 is hereby
AFFIRMED in toto. No costs.[7]
Hence, the instant petition.
ISSUES
1. Whether or not respondent is entitled to service incentive leave;
2. Whether or not the three (3)-year prescriptive period provided under Article 291 of the Labor
Code, as amended, is applicable to respondents claim of service incentive leave pay.
RULING OF THE COURT
The disposition of the first issue revolves around the proper interpretation of Article 95 of the
Labor Code vis--vis Section 1(D), Rule V, Book III of the Implementing Rules and Regulations of the
Labor Code which provides:
Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE
(a) Every employee who has rendered at least one year of service shall be entitled to a
yearly service incentive leave of five days with pay.
Book III, Rule V: SERVICE INCENTIVE LEAVE
SECTION 1. Coverage. This rule shall apply to all employees except:
(d) Field personnel and other employees whose performance is unsupervised by the
employer including those who are engaged on task or contract basis, purely
 commission basis, or those who are paid in a fixed amount for performing work
irrespective of the time consumed in the performance thereof; . . .
A careful perusal of said provisions of law will result in the conclusion that the grant of service
incentive leave has been delimited by the Implementing Rules and Regulations of the Labor Code to
apply only to those employees not explicitly excluded by Section 1 of Rule V. According to the
Implementing Rules, Service Incentive Leave shall not apply to employees classified as field personnel.
The phrase other employees whose performance is unsupervised by the employer must not be
understood as a separate classification of employees to which service incentive leave shall not be
granted. Rather, it serves as an amplification of the interpretation of the definition of field personnel
under the Labor Code as those whose actual hours of work in the field cannot be determined with
reasonable certainty.[8]
The same is true with respect to the phrase those who are engaged on task or contract basis,
purely commission basis. Said phrase should be related with field personnel, applying the rule
on ejusdem generis that general and unlimited terms are restrained and limited by the particular
terms that they follow.[9] Hence, employees engaged on task or contract basis or paid on purely
commission basis are not automatically exempted from the grant of service incentive leave, unless,
they fall under the classification of field personnel.
Therefore, petitioners contention that respondent is not entitled to the grant of service incentive
leave just because he was paid on purely commission basis is misplaced. What must be ascertained in
order to resolve the issue of propriety of the grant of service incentive leave to respondent is whether
or not he is a field personnel.
According to Article 82 of the Labor Code, field personnel shall refer to non-agricultural
employees who regularly perform their duties away from the principal place of business or branch
office of the employer and whose actual hours of work in the field cannot be determined with
reasonable certainty. This definition is further elaborated in the Bureau of Working Conditions (BWC),
Advisory Opinion to Philippine Technical-Clerical Commercial Employees Association[10] which states
that:
As a general rule, [field personnel] are those whose performance of their job/service is not
supervised by the employer or his representative, the workplace being away from the principal
office and whose hours and days of work cannot be determined with reasonable certainty; hence,
they are paid specific amount for rendering specific service or performing specific work. If required
to be at specific places at specific times, employees including drivers cannot be said to be field
personnel despite the fact that they are performing work away from the principal office of the
employee. [Emphasis ours]
To this discussion by the BWC, the petitioner differs and postulates that under said advisory
opinion, no employee would ever be considered a field personnel because every employer, in one
way or another, exercises control over his employees. Petitioner further argues that the only criterion
that should be considered is the nature of work of the employee in that, if the employees job requires
that he works away from the principal office like that of a messenger or a bus driver, then he is
inevitably a field personnel.
We are not persuaded. At this point, it is necessary to stress that the definition of a field
personnel is not merely concerned with the location where the employee regularly performs his
duties but also with the fact that the employees performance is unsupervised by the employer. As
discussed above, field personnel are those who regularly perform their duties away from the principal
place of business of the employer and whose actual hours of work in the field cannot be determined
with reasonable certainty. Thus, in order to conclude whether an employee is a field employee, it is
also necessary to ascertain if actual hours of work in the field can be determined with reasonable
certainty by the employer. In so doing, an inquiry must be made as to whether or not the employees
time and performance are constantly supervised by the employer.
As observed by the Labor Arbiter and concurred in by the Court of Appeals:
It is of judicial notice that along the routes that are plied by these bus companies, there are its
inspectors assigned at strategic places who board the bus and inspect the passengers, the punched
tickets, and the conductors reports. There is also the mandatory once-a-week car barn or shop day,
where the bus is regularly checked as to its mechanical, electrical, and hydraulic aspects, whether or
not there are problems thereon as reported by the driver and/or conductor. They too, must be at
specific place as [sic] specified time, as they generally observe prompt departure and arrival from
their point of origin to their point of destination. In each and every depot, there is always the
Dispatcher whose function is precisely to see to it that the bus and its crew leave the premises at
specific times and arrive at the estimated proper time. These, are present in the case at bar. The
driver, the complainant herein, was therefore under constant supervision while in the performance
of this work. He cannot be considered a field personnel.[11]
We agree in the above disquisition. Therefore, as correctly concluded by the appellate court,
respondent is not a field personnel but a regular employee who performs tasks usually necessary and
desirable to the usual trade of petitioners business. Accordingly, respondent is entitled to the grant
of service incentive leave.
The question now that must be addressed is up to what amount of service incentive leave pay
respondent is entitled to.
The response to this query inevitably leads us to the correlative issue of whether or not the three
(3)-year prescriptive period under Article 291 of the Labor Code is applicable to respondents claim of
service incentive leave pay.
Article 291 of the Labor Code states that all money claims arising from employer-employee
relationship shall be filed within three (3) years from the time the cause of action accrued; otherwise,
they shall be forever barred.
In the application of this section of the Labor Code, the pivotal question to be answered is when
does the cause of action for money claims accrue in order to determine the reckoning date of the
three-year prescriptive period.
It is settled jurisprudence that a cause of action has three elements, to wit, (1) a right in favor of
the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on
the part of the named defendant to respect or not to violate such right; and (3) an act or omission on
the part of such defendant violative of the right of the plaintiff or constituting a breach of the
obligation of the defendant to the plaintiff.[12]
To properly construe Article 291 of the Labor Code, it is essential to ascertain the time when the
third element of a cause of action transpired. Stated differently, in the computation of the three-year
prescriptive period, a determination must be made as to the period when the act constituting a
violation of the workers right to the benefits being claimed was committed. For if the cause of action
accrued more than three (3) years before the filing of the money claim, said cause of action has
already prescribed in accordance with Article 291.[13]
Consequently, in cases of nonpayment of allowances and other monetary benefits, if it is
established that the benefits being claimed have been withheld from the employee for a period longer
than three (3) years, the amount pertaining to the period beyond the three-year prescriptive period
is therefore barred by prescription. The amount that can only be demanded by the aggrieved
employee shall be limited to the amount of the benefits withheld within three (3) years before the
filing of the complaint.[14]
It is essential at this point, however, to recognize that the service incentive leave is a curious
animal in relation to other benefits granted by the law to every employee. In the case of service
incentive leave, the employee may choose to either use his leave credits or commute it to its monetary
equivalent if not exhausted at the end of the year.[15] Furthermore, if the employee entitled to service
incentive leave does not use or commute the same, he is entitled upon his resignation or separation
from work to the commutation of his accrued service incentive leave. As enunciated by the Court
in Fernandez v. NLRC:[16]
The clear policy of the Labor Code is to grant service incentive leave pay to workers in all
establishments, subject to a few exceptions. Section 2, Rule V, Book III of the Implementing Rules
and Regulations provides that [e]very employee who has rendered at least one year of service shall
be entitled to a yearly service incentive leave of five days with pay. Service incentive leave is a right
which accrues to every employee who has served within 12 months, whether continuous or broken
reckoned from the date the employee started working, including authorized absences and paid
regular holidays unless the working days in the establishment as a matter of practice or policy, or
that provided in the employment contracts, is less than 12 months, in which case said period shall
be considered as one year. It is also commutable to its money equivalent if not used or exhausted at
the end of the year. In other words, an employee who has served for one year is entitled to it. He may
use it as leave days or he may collect its monetary value. To limit the award to three years, as the
solicitor general recommends, is to unduly restrict such right.[17] [Italics supplied]
 Correspondingly, it can be conscientiously deduced that the cause of action of an entitled
employee to claim his service incentive leave pay accrues from the moment the employer refuses to
remunerate its monetary equivalent if the employee did not make use of said leave credits but instead
chose to avail of its commutation. Accordingly, if the employee wishes to accumulate his leave credits
and opts for its commutation upon his resignation or separation from employment, his cause of action
to claim the whole amount of his accumulated service incentive leave shall arise when the employer
fails to pay such amount at the time of his resignation or separation from employment.
Applying Article 291 of the Labor Code in light of this peculiarity of the service incentive leave,
we can conclude that the three (3)-year prescriptive period commences, not at the end of the year
when the employee becomes entitled to the commutation of his service incentive leave, but from the
time when the employer refuses to pay its monetary equivalent after demand of commutation or
upon termination of the employees services, as the case may be.
The above construal of Art. 291, vis--vis the rules on service incentive leave, is in keeping with
the rudimentary principle that in the implementation and interpretation of the provisions of the Labor
Code and its implementing regulations, the workingmans welfare should be the primordial and
paramount consideration.[18] The policy is to extend the applicability of the decree to a greater
number of employees who can avail of the benefits under the law, which is in consonance with the
avowed policy of the State to give maximum aid and protection to labor.[19]
In the case at bar, respondent had not made use of his service incentive leave nor demanded for
its commutation until his employment was terminated by petitioner. Neither did petitioner
compensate his accumulated service incentive leave pay at the time of his dismissal. It was only upon
his filing of a complaint for illegal dismissal, one month from the time of his dismissal, that respondent
demanded from his former employer commutation of his accumulated leave credits. His cause of
action to claim the payment of his accumulated service incentive leave thus accrued from the time
when his employer dismissed him and failed to pay his accumulated leave credits.
Therefore, the prescriptive period with respect to his claim for service incentive leave pay only
commenced from the time the employer failed to compensate his accumulated service incentive leave
pay at the time of his dismissal. Since respondent had filed his money claim after only one month from
the time of his dismissal, necessarily, his money claim was filed within the prescriptive period provided
for by Article 291 of the Labor Code.
WHEREFORE, premises considered, the instant petition is hereby DENIED. The assailed Decision
of the Court of Appeals in CA-G.R. SP. No. 68395 is hereby AFFIRMED. No Costs.
SO ORDERED.
 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 Decision6 of the Labor
Arbiter (LA). The LA's decision dismissed respondent John G. Macasio's monetary claims.
The Factual Antecedents
In January 2009, Macasio filed before the LA a complaint7 against petitioner Ariel L. David, doing
business under the name and style "Yiels Hog Dealer," for non-payment of overtime pay, holiday pay
and 13th month pay. He also claimed payment for moral and exemplary damages and attorney’s
fees. Macasio also claimed payment for service incentive leave (SIL).8
Macasio alleged9 before the LA that he had been working as a butcher for David since January 6,
1995. Macasio claimed that David exercised effective control and supervision over his work, pointing
out that David: (1) set the work day, reporting time and hogs to be chopped, as well as the manner
by which he was to perform his work; (2) daily paid his salary of ₱700.00, which was increased from
₱600.00 in 2007, ₱500.00 in 2006 and ₱400.00 in 2005; and (3) approved and disapproved his
leaves. Macasio added that David owned the hogs delivered for chopping, as well as the work tools
and implements; the latter also rented the workplace. Macasio further claimed that David employs
about twenty-five (25) butchers and delivery drivers.
In his defense,10 David claimed that he started his hog dealer business in 2005 and that he only has
ten employees. He alleged that he hired Macasio as a butcher or chopper on "pakyaw" or task basis
who is, therefore, not entitled to overtime pay, holiday pay and 13th month pay pursuant to the
provisions of the Implementing Rules and Regulations (IRR) of the Labor Code. David pointed out
that Macasio: (1) usually starts his work at 10:00 p.m. and ends at 2:00 a.m. of the following day or
earlier, depending on the volume of the delivered hogs; (2) received the fixed amount of ₱700.00
per engagement, regardless of the actual number of hours that he spent chopping the delivered
hogs; and (3) was not engaged to report for work and, accordingly, did not receive any fee when no
hogs were delivered.
Macasio disputed David’s allegations.11 He argued that, first, David did not start his business only in
2005. He pointed to the Certificate of Employment12 that David issued in his favor which placed the
date of his employment, albeit erroneously, in January 2000. Second, he reported for work every
day which the payroll or time record could have easily proved had David submitted them in
evidence.
Refuting Macasio’s submissions,13 David claims that Macasio was not his employee as he hired the
latter on "pakyaw" or task basis. He also claimed that he issued the Certificate of Employment, upon
Macasio’s request, only for overseas employment purposes. He pointed to the "Pinagsamang
Sinumpaang Salaysay,"14 executed by Presbitero Solano and Christopher (Antonio Macasio’s co-
butchers), to corroborate his claims.
In the April 30, 2009 decision,15 the LA dismissed Macasio’s complaint for lack of merit. The LA gave
credence to David’s claim that he engaged Macasio on "pakyaw" or task basis. The LA noted the
following facts to support this finding: (1) Macasio received the fixed amount of ₱700.00 for every
work done, regardless of the number of hours that he spent in completing the task and of the
volume or number of hogs that he had to chop per engagement; (2) Macasio usually worked for only
four hours, beginning from 10:00 p.m. up to 2:00 a.m. of the following day; and (3) the ₱700.00
fixed wage far exceeds the then prevailing daily minimum wage of ₱382.00. The LA added that the
nature of David’s business as hog dealer supports this "pakyaw" or task basis arrangement.
The LA concluded that as Macasio was engaged on "pakyaw" or task basis, he is not entitled to
overtime, holiday, SIL and 13th month pay.
The NLRC’s Ruling
In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling.17 The NLRC observed that David did
not require Macasio to observe an eight hour work schedule to earn the fixed ₱700.00 wage; and
that Macasio had been performing a non-time work, pointing out that Macasio was paid a fixed
amount for the completion of the assigned task, irrespective of the time consumed in its
performance. Since Macasio was paid by result and not in terms of the time that he spent in the
workplace, Macasio is not covered by the Labor Standards laws on overtime, SIL and holiday pay,
and 13th month pay under the Rules and Regulations Implementing the 13th month pay law.18
Macasio moved for reconsideration19 but the NLRC denied his motion in its August 11, 2010
resolution,20 prompting Macasio to elevate his case to the CA via a petition for certiorari.21
The CA’s Ruling
In its November 22, 2010 decision,22 the CA partly granted Macasio’s certiorari petition and reversed
the NLRC’s ruling for having been rendered with grave abuse of discretion.
While the CA agreed with the LAand the NLRC that Macasio was a task basis employee, it
nevertheless found Macasio entitled to his monetary claims following the doctrine laid down in
Serrano v. Severino Santos Transit.23 The CA explained that as a task basis employee, Macasio is
excluded from the coverage of holiday, SIL and 13th month pay only if he is likewise a "field
personnel." As defined by the Labor Code, a "field personnel" is one who performs the work away
from the office or place of work and whose regular work hours cannot be determined with
reasonable certainty. In Macasio’s case, the elements that characterize a "field personnel" are
evidently lacking as he had been working as a butcher at David’s "Yiels Hog Dealer" business in Sta.
Mesa, Manila under David’s supervision and control, and for a fixed working schedule that starts at
10:00 p.m.
Accordingly, the CA awarded Macasio’s claim for holiday, SIL and 13th month pay for three years,
with 10% attorney’s fees on the total monetary award. The CA, however, denied Macasio’s claim for
moral and exemplary damages for lack of basis.
David filed the present petition after the CA denied his motion for reconsideration24 in the CA’s
January 31, 2011 resolution.25
The Petition
In this petition,26 David maintains that Macasio’s engagement was on a "pakyaw" or task basis.
Hence, the latter is excluded from the coverage of holiday, SIL and 13th month pay. David reiterates
his submissions before the lower tribunals27 and adds that he never had any control over the
manner by which Macasio performed his work and he simply looked on to the "end-result." He also
contends that he never compelled Macasio to report for work and that under their arrangement,
Macasio was at liberty to choose whether to report for work or not as other butchers could carry
out his tasks. He points out that Solano and Antonio had, in fact, attested to their (David and
Macasio’s) established "pakyawan" arrangement that rendered a written contract unnecessary. In as
much as Macasio is a task basis employee – who is paid the fixed amount of ₱700.00 per
engagement regardless of the time consumed in the performance – David argues that Macasio is not
entitled to the benefits he claims. Also, he posits that because he engaged Macasio on "pakyaw" or
task basis then no employer-employee relationship exists between them.
Finally, David argues that factual findings of the LA, when affirmed by the NLRC, attain finality
especially when, as in this case, they are supported by substantial evidence. Hence, David posits that
the CA erred in reversing the labor tribunals’ findings and granting the prayed monetary claims.
The Case for the Respondent
Macasio counters that he was not a task basis employee or a "field personnel" as David would have
this Court believe.28 He reiterates his arguments before the lower tribunals and adds that, contrary
to David’s position, the ₱700.00 fee that he was paid for each day that he reported for work does
not indicate a "pakyaw" or task basis employment as this amount was paid daily, regardless of the
number or pieces of hogs that he had to chop. Rather, it indicates a daily-wage method of payment
and affirms his regular employment status. He points out that David did not allege or present any
evidence as regards the quota or number of hogs that he had to chop as basis for the "pakyaw" or
task basis payment; neither did David present the time record or payroll to prove that he worked for
less than eight hours each day. Moreover, David did not present any contract to prove that his
employment was on task basis. As David failed to prove the alleged task basis or "pakyawan"
agreement, Macasio concludes that he was David’s employee. Procedurally, Macasio points out that
David’s submissions in the present petition raise purely factual issues that are not proper for a
petition for review on certiorari. These issues – whether he (Macasio) was paid by result or on
"pakyaw" basis; whether he was a "field personnel"; whether an employer-employee relationship
existed between him and David; and whether David exercised control and supervision over his work
– are all factual in nature and are, therefore, proscribed in a Rule 45 petition. He argues that the
CA’s factual findings bind this Court, absent a showing that such findings are not supported by the
evidence or the CA’s judgment was based on a misapprehension of facts. He adds that the issue of
whether an employer-employee relationship existed between him and David had already been
settled by the LA29 and the NLRC30 (as well as by the CA per Macasio’s manifestation before this
Court dated November 15, 2012),31 in his favor, in the separate illegal case that he filed against
David.
The Issue
The issue revolves around the proper application and interpretation of the labor law provisions on
holiday, SIL and 13th month pay to a worker engaged on "pakyaw" or task basis. In the context of
the Rule 65 petition before the CA, the issue is whether the CA correctly found the NLRC in grave
abuse of discretion in ruling that Macasio is entitled to these labor standards benefits.
The Court’s Ruling
We partially grant the petition.
Preliminary considerations: the Montoya ruling and the factual-issue-bar rule
In this Rule 45 petition for review on certiorari of the CA’s decision rendered under a Rule 65
proceeding, this Court’s power of review is limited to resolving matters pertaining to any perceived
legal errors that the CA may have committed in issuing the assailed decision. This is in contrast with
the review for jurisdictional errors, which we undertake in an original certiorari action. In reviewing
the legal correctness of the CA decision, we examine the CA decision based on how it determined
the presence or absence of grave abuse of discretion in the NLRC decision before it and not on the
basis of whether the NLRC decision on the merits of the case was correct.32 In other words, we have
to be keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC
decision challenged before it.33
Moreover, the Court’s power in a Rule 45 petition limits us to a review of questions of law raised
against the assailed CA decision.34
In this petition, David essentially asks the question – whether Macasio is entitled to holiday, SIL and
13th month pay. This one is a question of law. The determination of this question of law however is
intertwined with the largely factual issue of whether Macasio falls within the rule on entitlement to
these claims or within the exception. In either case, the resolution of this factual issue presupposes
another factual matter, that is, the presence of an employer-employee relationship between David
and Macasio.
In insisting before this Court that Macasio was not his employee, David argues that he engaged the
latter on "pakyaw" or task basis. Very noticeably, David confuses engagement on "pakyaw" or task
basis with the lack of employment relationship. Impliedly, David asserts that their "pakyawan" or
task basis arrangement negates the existence of employment relationship.
At the outset, we reject this assertion of the petitioner. Engagement on "pakyaw" or task basis does
not characterize the relationship that may exist between the parties, i.e., whether one of
employment or independent contractorship. Article 97(6) of the Labor Code defines wages as "xxx
the remuneration or earnings, however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece, or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services rendered or to be
rendered[.]"35 In relation to Article 97(6), Article 10136 of the Labor Code speaks of workers paid by
results or those whose pay is calculated in terms of the quantity or quality of their work output
which includes "pakyaw" work and other non-time work.
More importantly, by implicitly arguing that his engagement of Macasio on "pakyaw" or task basis
negates employer-employee relationship, David would want the Court to engage on a factual
appellate review of the entire case to determine the presence or existence of that relationship. This
approach however is not authorized under a Rule 45 petition for review of the CA decision rendered
under a Rule 65 proceeding.
First, the LA and the NLRC denied Macasio’s claim not because of the absence of an employer-
employee but because of its finding that since Macasio is paid on pakyaw or task basis, then he is
not entitled to SIL, holiday and 13th month pay. Second, we consider it crucial, that in the separate
illegal dismissal case Macasio filed with the LA, the LA, the NLRC and the CA uniformly found the
existence of an employer-employee relationship.37
In other words, aside from being factual in nature, the existence of an employer-employee
relationship is in fact a non-issue in this case. To reiterate, in deciding a Rule 45 petition for review
of a labor decision rendered by the CA under 65, the narrow scope of inquiry is whether the CA
correctly determined the presence or absence of grave abuse of discretion on the part of the NLRC.
In concrete question form, "did the NLRC gravely abuse its discretion in denying Macasio’s claims
simply because he is paid on a non-time basis?"
At any rate, even if we indulge the petitioner, we find his claim that no employer-employee
relationship exists baseless. Employing the control test,38 we find that such a relationship exist in the
present case.
Even a factual review shows that Macasio is David’s employee
To determine the existence of an employer-employee relationship, four elements generally need to
be considered, namely: (1) the selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power to control the employee’s conduct. These
elements or indicators comprise the so-called "four-fold" test of employment relationship.
Macasio’s relationship with David satisfies this test.
First, David engaged the services of Macasio, thus satisfying the element of "selection and
engagement of the employee." David categorically confirmed this fact when, in his "Sinumpaang
Salaysay," he stated that "nag apply po siya sa akin at kinuha ko siya na chopper[.]"39 Also, Solano
and Antonio stated in their "Pinagsamang Sinumpaang Salaysay"40 that "[k]ami po ay nagtratrabaho
sa Yiels xxx na pag-aari ni Ariel David bilang butcher" and "kilalanamin si xxx Macasio na isa ring
butcher xxx ni xxx David at kasama namin siya sa aming trabaho."
Second, David paid Macasio’s wages.Both David and Macasio categorically stated in their respective
pleadings before the lower tribunals and even before this Court that the former had been paying the
latter ₱700.00 each day after the latter had finished the day’s task. Solano and Antonio also
confirmed this fact of wage payment in their "Pinagsamang Sinumpaang Salaysay."41 This satisfies
the element of "payment of wages."
Third, David had been setting the day and time when Macasio should report for work. This power to
determine the work schedule obviously implies power of control. By having the power to control
Macasio’s work schedule, David could regulate Macasio’s work and could even refuse to give him
any assignment, thereby effectively dismissing him.
And fourth, David had the right and power to control and supervise Macasio’s work as to the means
and methods of performing it. In addition to setting the day and time when Macasio should report
for work, the established facts show that David rents the place where Macasio had been performing
his tasks. Moreover, Macasio would leave the workplace only after he had finished chopping all of
the hog meats given to him for the day’s task. Also, David would still engage Macasio’s services and
have him report for work even during the days when only few hogs were delivered for butchering.
Under this overall setup, all those working for David, including Macasio, could naturally be expected
to observe certain rules and requirements and David would necessarily exercise some degree of
control as the chopping of the hog meats would be subject to his specifications. Also, since Macasio
performed his tasks at David’s workplace, David could easily exercise control and supervision over
the former. Accordingly, whether or not David actually exercised this right or power to control is
beside the point as the law simply requires the existence of this power to control 4243 or, as in this
case, the existence of the right and opportunity to control and supervise Macasio.44
In sum, the totality of the surrounding circumstances of the present case sufficiently points to an
employer-employee relationship existing between David and Macasio.
Macasio is engaged on "pakyaw" or task basis
At this point, we note that all three tribunals – the LA, the NLRC and the CA – found that Macasio
was engaged or paid on "pakyaw" or task basis. This factual finding binds the Court under the rule
that factual findings of labor tribunals when supported by the established facts and in accord with
the laws, especially when affirmed by the CA, is binding on this Court.
A distinguishing characteristic of "pakyaw" or task basis engagement, as opposed to straight-hour
wage payment, is the non-consideration of the time spent in working. In a task-basis work, the
emphasis is on the task itself, in the sense that payment is reckoned in terms of completion of the
work, not in terms of the number of time spent in the completion of work.45 Once the work or task is
completed, the worker receives a fixed amount as wage, without regard to the standard
measurements of time generally used in pay computation.
In Macasio’s case, the established facts show that he would usually start his work at 10:00 p.m.
Thereafter, regardless of the total hours that he spent at the workplace or of the total number of
the hogs assigned to him for chopping, Macasio would receive the fixed amount of ₱700.00 once he
had completed his task. Clearly, these circumstances show a "pakyaw" or task basis engagement
that all three tribunals uniformly found.
In sum, the existence of employment relationship between the parties is determined by applying the
"four-fold" test; engagement on "pakyaw" or task basis does not determine the parties’ relationship
as it is simply a method of pay computation. Accordingly, Macasio is David’s employee, albeit
engaged on "pakyaw" or task basis.
As an employee of David paid on pakyaw or task basis, we now go to the core issue of whether
Macasio is entitled to holiday, 13th month, and SIL pay.
On the issue of Macasio’s entitlement to holiday, SIL and 13th month pay
The LA dismissed Macasio’s claims pursuant to Article 94 of the Labor Code in relation to Section 1,
Rule IV of the IRR of the Labor Code, and Article 95 of the Labor Code, as well as Presidential Decree
(PD) No. 851. The NLRC, on the other hand, relied on Article 82 of the Labor Code and the Rules and
Regulations Implementing PD No. 851. Uniformly, these provisions exempt workers paid on
"pakyaw" or task basis from the coverage of holiday, SIL and 13th month pay.
In reversing the labor tribunals’ rulings, the CA similarly relied on these provisions, as well as on
Section 1, Rule V of the IRR of the Labor Code and the Court’s ruling in Serrano v. Severino Santos
Transit.46 These labor law provisions, when read together with the Serrano ruling, exempt those
engaged on "pakyaw" or task basis only if they qualify as "field personnel."
In other words, what we have before us is largely a question of law regarding the correct
interpretation of these labor code provisions and the implementing rules; although, to conclude that
the worker is exempted or covered depends on the facts and in this sense, is a question of fact: first,
whether Macasio is a "field personnel"; and second, whether those engaged on "pakyaw" or task
basis, but who are not "field personnel," are exempted from the coverage of holiday, SIL and 13th
month pay.
To put our discussion within the perspective of a Rule 45 petition for review of a CA decision
rendered under Rule 65 and framed in question form, the legal question is whether the CA correctly
ruled that it was grave abuse of discretion on the part of the NLRC to deny Macasio’s monetary
claims simply because he is paid on a non-time basis without determining whether he is a field
personnel or not.
To resolve these issues, we need tore-visit the provisions involved.
Provisions governing SIL and holiday pay
Article 82 of the Labor Code provides the exclusions from the coverage of Title I, Book III of the
Labor Code - provisions governing working conditions and rest periods.
Art. 82. Coverage.— The provisions of [Title I] shall apply to employees in all establishments and
undertakings whether for profit or not, but not to government employees, managerial employees,
field personnel, members of the family of the employer who are dependent on him for support,
domestic helpers, persons in the personal service of another, and workers who are paid by results as
determined by the Secretary of Labor in appropriate regulations.
xxxx
"Field personnel" shall refer to non-agricultural employees who regularly perform their duties away
from the principal place of business or branch office of the employer and whose actual hours of
work in the field cannot be determined with reasonable certainty. [emphases and underscores ours]
Among the Title I provisions are the provisions on holiday pay (under Article 94 of the Labor Code)
and SIL pay (under Article 95 of the Labor Code). Under Article 82,"field personnel" on one hand and
"workers who are paid by results" on the other hand, are not covered by the Title I provisions. The
wordings of Article82 of the Labor Code additionally categorize workers "paid by results" and "field
personnel" as separate and distinct types of employees who are exempted from the Title I
provisions of the Labor Code.
The pertinent portion of Article 94 of the Labor Code and its corresponding provision in the
IRR47 reads:
Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage during regular
holidays, except in retail and service establishments regularly employing less than (10) workers[.]
[emphasis ours]
xxxx
SECTION 1. Coverage. – This Rule shall apply to all employees except:
xxxx
(e)Field personnel and other employees whose time and performance is unsupervised by the
employer including those who are engaged on task or contract basis, purely commission basis, or
those who are paid a fixed amount for performing work irrespective of the time consumed in the
performance thereof. [emphases ours]
On the other hand, Article 95 of the Labor Code and its corresponding provision in the
IRR48 pertinently provides:
Art. 95. Right to service incentive. (a) Every employee who has rendered at least one year of service
shall be entitled to a yearly service incentive leave of five days with pay.
(b) This provision shall not apply to those who are already enjoying the benefit herein provided,
those enjoying vacation leave with pay of at least five days and those employed in establishments
regularly employing less than ten employees or in establishments exempted from granting this
benefit by the Secretary of Labor and Employment after considering the viability or financial
condition of such establishment. [emphases ours]
xxxx
Section 1. Coverage. – This rule shall apply to all employees except:
xxxx
(e) Field personnel and other employees whose performance is unsupervised by the employer
including those who are engaged on task or contract basis, purely commission basis, or those who
are paid a fixed amount for performing work irrespective of the time consumed in the performance
thereof. [emphasis ours]
Under these provisions, the general rule is that holiday and SIL pay provisions cover all employees.
To be excluded from their coverage, an employee must be one of those that these provisions
expressly exempt, strictly in accordance with the exemption. Under the IRR, exemption from the
coverage of holiday and SIL pay refer to "field personnel and other employees whose time and
performance is unsupervised by the employer including those who are engaged on task or contract
basis[.]" Note that unlike Article 82 of the Labor Code, the IRR on holiday and SIL pay do not exclude
employees "engaged on task basis" as a separate and distinct category from employees classified as
"field personnel." Rather, these employees are altogether merged into one classification of
exempted employees.
Because of this difference, it may be argued that the Labor Code may be interpreted to mean that
those who are engaged on task basis, per se, are excluded from the SIL and holiday payment since
this is what the Labor Code provisions, in contrast with the IRR, strongly suggest. The arguable
interpretation of this rule may be conceded to be within the discretion granted to the LA and NLRC
as the quasi-judicial bodies with expertise on labor matters.
49
However, as early as 1987 in the case of Cebu Institute of Technology v. Ople the phrase "those
who are engaged on task or contract basis" in the rule has already been interpreted to mean as
follows:
[the phrase] should however, be related with "field personnel" applying the rule on ejusdem generis
that general and unlimited terms are restrained and limited by the particular terms that they follow
xxx Clearly, petitioner's teaching personnel cannot be deemed field personnel which refers "to non-
agricultural employees who regularly perform their duties away from the principal place of business
or branch office of the employer and whose actual hours of work in the field cannot be determined
with reasonable certainty. [Par. 3, Article 82, Labor Code of the Philippines]. Petitioner's claim that
private respondents are not entitled to the service incentive leave benefit cannot therefore be
sustained.
In short, the payment of an employee on task or pakyaw basis alone is insufficient to exclude one
from the coverage of SIL and holiday pay. They are exempted from the coverage of Title I (including
the holiday and SIL pay) only if they qualify as "field personnel." The IRR therefore validly qualifies
and limits the general exclusion of "workers paid by results" found in Article 82 from the coverage of
holiday and SIL pay. This is the only reasonable interpretation since the determination of excluded
workers who are paid by results from the coverage of Title I is "determined by the Secretary of Labor
in appropriate regulations."
The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport Systems, Inc., v.
Bautista:
A careful perusal of said provisions of law will result in the conclusion that the grant of service
incentive leave has been delimited by the Implementing Rules and Regulations of the Labor Code to
apply only to those employees not explicitly excluded by Section 1 of Rule V. According to the
Implementing Rules, Service Incentive Leave shall not apply to employees classified as "field
personnel." The phrase "other employees whose performance is unsupervised by the employer"
must not be understood as a separate classification of employees to which service incentive leave
shall not be granted. Rather, it serves as an amplification of the interpretation of the definition of
field personnel under the Labor Code as those "whose actual hours of work in the field cannot be
determined with reasonable certainty."
The same is true with respect to the phrase "those who are engaged on task or contract basis,
purely commission basis." Said phrase should be related with "field personnel," applying the rule on
ejusdem generis that general and unlimited terms are restrained and limited by the particular terms
that they follow.
The Autobus ruling was in turn the basis of Serrano v. Santos Transit which the CA cited in support of
granting Macasio’s petition.
In Serrano, the Court, applying the rule on ejusdem generis50 declared that "employees engaged on
task or contract basis xxx are not automatically exempted from the grant of service incentive leave,
unless, they fall under the classification of field personnel."51 The Court explained that the phrase
"including those who are engaged on task or contract basis, purely commission basis" found in
Section 1(d), Rule V of Book III of the IRR should not be understood as a separate classification of
employees to which SIL shall not be granted. Rather, as with its preceding phrase - "other employees
whose performance is unsupervised by the employer" - the phrase "including those who are
engaged on task or contract basis" serves to amplify the interpretation of the Labor Code definition
of "field personnel" as those "whose actual hours of work in the field cannot be determined with
reasonable certainty."
In contrast and in clear departure from settled case law, the LA and the NLRC still interpreted the
Labor Code provisions and the IRR as exempting an employee from the coverage of Title I of the
Labor Code based simply and solely on the mode of payment of an employee. The NLRC’s utter
disregard of this consistent jurisprudential ruling is a clear act of grave abuse of discretion.52 In other
words, by dismissing Macasio’s complaint without considering whether Macasio was a "field
personnel" or not, the NLRC proceeded based on a significantly incomplete consideration of the
case. This action clearly smacks of grave abuse of discretion.
Entitlement to holiday pay
Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA and the NLRC had only taken
counsel from Serrano and earlier cases, they would have correctly reached a similar conclusion
regarding the payment of holiday pay since the rule exempting "field personnel" from the grant of
holiday pay is identically worded with the rule exempting "field personnel" from the grant of SIL pay.
To be clear, the phrase "employees engaged on task or contract basis "found in the IRR on both SIL
pay and holiday pay should be read together with the exemption of "field personnel."
In short, in determining whether workers engaged on "pakyaw" or task basis" is entitled to holiday
and SIL pay, the presence (or absence) of employer supervision as regards the worker’s time and
performance is the key: if the worker is simply engaged on pakyaw or task basis, then the general
rule is that he is entitled to a holiday pay and SIL pay unless exempted from the exceptions
specifically provided under Article 94 (holiday pay) and Article95 (SIL pay) of the Labor Code.
However, if the worker engaged on pakyaw or task basis also falls within the meaning of "field
personnel" under the law, then he is not entitled to these monetary benefits.
Macasio does not fall under the classification of "field personnel"
Based on the definition of field personnel under Article 82, we agree with the CA that Macasio does
not fall under the definition of "field personnel." The CA’s finding in this regard is supported by the
established facts of this case: first, Macasio regularly performed his duties at David’s principal place
of business; second, his actual hours of work could be determined with reasonable certainty; and,
third, David supervised his time and performance of duties. Since Macasio cannot be considered a
"field personnel," then he is not exempted from the grant of holiday, SIL pay even as he was
engaged on "pakyaw" or task basis.
Not being a "field personnel," we find the CA to be legally correct when it reversed the NLRC’s ruling
dismissing Macasio’s complaint for holiday and SIL pay for having been rendered with grave abuse of
discretion.
Entitlement to 13th month pay
With respect to the payment of 13th month pay however, we find that the CA legally erred in finding
that the NLRC gravely abused its discretion in denying this benefit to Macasio.1âwphi1
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 task basis, and those who are
paid a fixed amount for performing a specific work, irrespective of the time consumed in the
performance thereof"55 are exempted.

Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the Rules and
Regulations Implementing PD No. 851 exempts employees "paid on task basis" without any
reference to "field personnel." This could only mean that insofar as payment of the 13th month pay
is concerned, the law did not intend to qualify the exemption from its coverage with the
requirement that the task worker be a "field personnel" at the same time.

WHEREFORE, in light of these considerations, we hereby PARTIALLY GRANT the petition insofar as
the payment of 13th month pay to respondent is concerned. In all other aspects, we AFFIRM the
decision dated November 22, 2010 and the resolution dated January 31, 2011 of the Court of
Appeals in CA-G.R. SP No. 116003.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
January 13, 2016
G.R. Nos. 173254-55 & 173263
DIAMOND FARMS, INC., Petitioner,
vs.
SOUTHERN PHILIPPINES FEDERATION OF LABOR (SPFL)-WORKERS SOLIDARITY OF
DARBMUPCO/DIAMOND-SPFL, DIAMOND FARMS AGRARIAN REFORM BENEFICIARIES MULTI-
PURPOSE COOPERATIVE (DARBMUPCO), VOLTER LOPEZ, RUEL ROMERO, PATRICIO CAPRECHO,
REY DIMACALI, ELESIO EMANEL, VICTOR SINGSON, NILDA DIMACALI, PREMITIVO* DIAZ, RUDY
VISTAL, ROGER MONTERO, JOSISIMO GOMEZ and MANUEL MOSQUERA, Respondents.
DECISION
JARDELEZA, J.:
We resolve in this Petition for Review1 under Rule 45 of the Rules of Court, the issue of who among
Diamond Farms, Inc. ("DFI"), Diamond Farms Agrarian Reform Beneficiaries Multi-Purpose
Cooperative ("DARBMUPCO") and the individual contractors2 ("respondent-contractors") is the
employer of the 400 employees ("respondent-workers").
DFI challenges the March 31, 2006 Decision3 and May 30, 2006 Resolution4 of the Court Appeals,
Special Twenty-Second Division, Cagayan De Oro City for being contrary to law and jurisprudence.
The Decision dismissed DFI’s Petition for Certiorari in C.A.-G.R. SP Nos. 53806 and 61607 and
granted DARBMUPCO’s Petition for Certiorari in C.A.-G.R. SP No. 59958. It declared DFI as the
statutory employer of the respondent-workers.
The Facts
DFI owns an 800-hectare banana plantation ("original plantation") in Alejal, Carmen,
Davao.5 Pursuant to Republic Act No. 6657 or the Comprehensive Agrarian Reform Law of 1988
("CARL"), commercial farms shall be subject to compulsory acquisition and distribution,6 thus the
original plantation was covered by the law. However, the Department of Agrarian Reform ("DAR")
granted DFI a deferment privilege to continue agricultural operations until 1998.7 Due to adverse
marketing problems and observance of the so-called "lay-follow" or the resting of a parcel of land
for a certain period of time after exhaustive utilization, DFI closed some areas of operation in the
original plantation and laid off its employees.8 These employees petitioned the DAR for the
cancellation of DFI’s deferment privilege alleging that DFI already abandoned its area of
operations.9 The DAR Regional Director recalled DFI’s deferment privilege resulting in the original
plantation’s automatic compulsory acquisition and distribution under the CARL.10 DFI filed a motion
for reconsideration which was denied. It then appealed to the DAR Secretary.11
In the meantime, to minimize losses, DFI offered to give up its rights and interest over the original
plantation in favor of the government by way of a Voluntary Offer to Sell.12 The DAR accepted DFI’s
offer to sell the original plantation. However, out of the total 800 hectares, the DAR only approved
the disposition of 689.88 hectares. Hence, the original plantation was split into two: 689.88 hectares
were sold to the government ("awarded plantation") and the remaining 200 hectares, more or less,
were retained by DFI ("managed area").13 The managed area is subject to the outcome of the appeal
on the cancellation of the deferment privilege before the DAR Secretary.
On January 1, 1996, the awarded plantation was turned over to qualified agrarian reform
beneficiaries ("ARBs") under the CARL. These ARBs are the same farmers who were working in the
original plantation. They subsequently organized themselves into a multi-purpose cooperative
named "DARBMUPCO," which is one of the respondents in this case.14
On March 27, 1996, DARBMUPCO entered into a Banana Production and Purchase Agreement
("BPPA")15 with DFI.16 Under the BPPA, DARBMUPCO and its members as owners of the awarded
plantation, agreed to grow and cultivate only high grade quality exportable bananas to be sold
exclusively to DFI.17 The BPPA is effective for 10 years.18
On April 20, 1996, DARBMUPCO and DFI executed a "Supplemental to Memorandum Agreement"
("SMA").19 The SMA stated that DFI shall take care of the labor cost arising from the packaging
operation, cable maintenance, irrigation pump and irrigation maintenance that the workers of
DARBMUPCO shall conduct for DFI’s account under the BPPA.20
From the start, DARBMUPCO was hampered by lack of manpower to undertake the agricultural
operation under the BPPA because some of its members were not willing to work.21 Hence, to assist
DARBMUPCO in meeting its production obligations under the BPPA, DFI engaged the services of the
respondent-contractors, who in turn recruited the respondent-workers.22
The engagement of the respondent-workers, as will be seen below, started a series of labor disputes
among DARBMUPCO, DFI and the respondent-contractors.
C.A. G.R. SP No. 53806
On February 10, 1997, respondent Southern Philippines Federation of Labor ("SPFL")—a legitimate
labor organization with a local chapter in the awarded plantation—filed a petition for certification
election in the Office of the Med-Arbiter in Davao City.23 SPFL filed the petition on behalf of some
400 workers (the respondent-workers in this petition) "jointly employed by DFI and DARBMUPCO"
working in the awarded plantation.
DARBMUPCO and DFI denied that they are the employers of the respondent-workers. They claimed,
instead, that the respondent-workers are the employees of the respondent-contractors.24
In an Order dated May 14, 1997,25 the Med-Arbiter granted the petition for certification election. It
directed the conduct of certification election and declared that DARBMUPCO was the employer of
the respondent-workers. The Order stated that "whether the said workers/employees were hired by
independent contractors is of no moment. What is material is that they were hired purposely to
work on the 689.88 hectares banana plantation [the awarded plantation] now owned and operated
by DARBMUPCO."26
DARBMUPCO appealed to the Secretary of Labor and Employment ("SOLE"). In a Resolution dated
February 18, 1999,27 the SOLE modified the decision of the Med-Arbiter. The SOLE held that DFI,
through its manager and personnel, supervised and directed the performance of the work of the
respondentcontractors. The SOLE thus declared DFI as the employer of the respondent-workers.28
DFI filed a motion for reconsideration which the SOLE denied in a Resolution dated May 4, 1999.29
On June 11, 1999, DFI elevated the case to the Court of Appeals ("CA") via a Petition
for Certiorari30 under Rule 65 of the Rules of Court. The case was raffled to the CA’s former Twelfth
Division and was docketed as C.A.-G.R. SP No. 53806.
C.A.-G.R. SP. No. 59958
Meanwhile, on June 20, 199731 and September 15, 1997,32 SPFL, together with more than 300
workers, filed a case for underpayment of wages, non-payment of 13th month pay and service
incentive leave pay and attorney’s fees against DFI, DARBMUPCO and the respondent-contractors
before the National Labor Relations Commission ("NLRC") in Davao City. DARBMUPCO averred that
it is not the employer of respondent-workers; neither is DFI. It asserted that the money claims
should be directed against the true employer—the respondent-contractors.33
In a Decision dated January 22, 1999,34 the Labor Arbiter ("LA") held that the respondent-
contractors are "labor-only contractors." The LA gave credence to the affidavits of the other
contractors35 of DFI (who are not party-respondents in this petition) asserting that DFI engaged their
services, and supervised and paid their laborers. The affidavits also stated that the contractors had
no dealings with DARBMUPCO, except that their work is done in the awarded plantation.36
The LA held that, under the law, DFI is deemed as the statutory employer of all the respondent-
workers.37 The LA dismissed the case against DARBMUPCO and the respondent-contractors.38
DFI appealed to the NLRC. In a Resolution dated May 24, 1999,39 the NLRC Fifth Division modified
the Decision of the LA and declared that DARBMUPCO and DFI are the statutory employers of the
workers rendering services in the awarded plantation and the managed area, respectively.40 It
adjudged DFI and DARBMUPCO as solidarily liable with the respondent-contractors for the monetary
claims of the workers, in proportion to their net planted area.41
DARBMUPCO filed a motion for reconsideration which was denied.42 It filed a second motion for
reconsideration in the NLRC, which was also denied for lack of merit and for being barred under the
NLRC Rules of Procedure.43Hence, DARBMUPCO elevated the case to the CA by way of a Petition
for Certiorari.44 The case was docketed as C.A.-G.R. SP. No. 59958.
The former Eleventh Division of the CA consolidated C.A. G.R. SP. No. 59958 and C.A.-G.R. SP No.
53806 in a Resolution dated January 27, 2001.45
C.A.-G.R. SP No. 61607
Pursuant to the May 4, 1999 Resolution of the SOLE approving the conduct of certification election,
the Department of Labor and Employment ("DOLE") conducted a certification election on October 1,
1999.46 On even date, DFI filed an election protest47 before the Med-Arbiter arguing that the
certification election was premature due to the pendency of a petition for certiorari before the CA
assailing the February 18, 1999 and May 4, 1999 Resolutions of the SOLE (previously discussed in
C.A.-G.R. SP No. 53806).
In an Order dated December 15, 1999,48 the Med-Arbiter denied DFI’s election protest, and certified
SPFL-Workers Solidarity of DARBMUPCO/DIAMOND-SPFL ("WSD-SPFL") as the exclusive bargaining
representative of the respondent-workers. DFI filed a Motion for Reconsideration49 which the Med-
Arbiter treated as an appeal, and which the latter elevated to the SOLE.
In a Resolution dated July 18, 2000,50 the SOLE dismissed the appeal. The Resolution stated that the
May 4, 1999 Resolution directing the conduct of certification election is already final and executory
on June 4, 1999. It pointed out that the filing of the petition for certiorari before the CA assailing the
February 18, 1999 and May 4, 1999 Resolutions does not stay the conduct of the certification
election because the CA did not issue a restraining order.51DFI filed a Motion for Reconsideration but
the motion was denied.52
On October 27, 2000, DFI filed a Petition for Certiorari53 before the CA, docketed as C.A.-G.R. SP No.
61607.
In a Resolution dated August 2, 2005,54 the CA Twenty-Third Division consolidated C.A.-G.R. SP No.
61607 with C.A.-G.R. SP. No. 59958 and C.A. G.R. SP No. 53806.
The Assailed CA Decision and Resolution
The CA was confronted with two issues:55
(1) "Whether DFI or DARBMUPCO is the statutory employer of the [respondent-workers] in
these petitions; and
(2) Whether or not a certification election may be conducted pending the resolution of the
petition for certiorari filed before this Court, the main issue of which is the identity of the
employer of the [respondent-workers] in these petitions."
On the first issue, the CA agreed with the ruling of the SOLE56 that DFI is the statutory employer of
the respondent-workers. It noted that the DFI hired the respondent-contractors, who in turn
procured their own men to work in the land owned by DARBMUPCO. Further, DFI admitted that the
respondent-contractors worked under the direction and supervision of DFI’s managers and
personnel. DFI also paid for the respondent-contractors’ services.57 The CA said that the fact that the
respondent-workers worked in the land owned by DARBMUPCO is immaterial. "Ownership of the
land is not one of the four (4) elements generally considered to establish employer-employee
relationship."58
The CA also ruled that DFI is the true employer of the respondent-workers because the respondent-
contractors are not independent contractors.59 The CA stressed that in its pleadings before the Med-
Arbiter, the SOLE, and the CA, DFI revealed that DARBMUPCO lacks manpower to fulfill the
production requirements under the BPPA. This impelled DFI to hire contractors to supply labor
enabling DARBMUPCO to meet its quota. The CA observed that while the various agencies involved
in the consolidated petitions sometimes differ as to who the statutory employer of the respondent-
workers is, they are uniform in finding that the respondent-contractors are labor-only contractors.60
On the second issue, the CA reiterated the ruling of the SOLE61 that absent an injunction from the
CA, the pendency of a petition for certiorari does not stay the holding of the certification
election.62 The challenged Resolution of the SOLE is already final and executory as evidenced by an
Entry of Judgment dated July 14, 1999; hence, the merits of the case can no longer be reviewed.63
The CA thus held in its Decision dated March 31, 2006:
WHEREFORE, premises considered, this Court hereby ORDERS:
(1) the DISMISSAL of the petitions in C.A.-G.R. SP No. 53806 and C.A.-G.R. SP No. 61607; and
(2) the GRANTING of the petition in C.A.-G.R. SP No. 59958 and the SETTING ASIDE of the
assailed resolutions of the NLRC dated 24 May 1999, 30 July 1999 and 26 June 2000,
respectively.
SO ORDERED.64
DFI filed a Motion for Reconsideration of the CA Decision which was denied in a Resolution dated
May 30, 2006.65
DFI is now before us by way of Petition for Review on Certiorari praying that DARBMUPCO be
declared the true employer of the respondent-workers.
DARBMUPCO filed a Comment66 maintaining that under the control test, DFI is the true employer of
the respondent-workers.
Respondent-contractors filed a Verified Explanation and Memorandum67 asserting that they were
labor-only contractors; hence, they are merely agents of the true employer of the respondent-
workers.
SPFL did not file any comment or memorandum on behalf of the respondent-workers.68
The Issue
The issue before this Court is who among DFI, DARBMUPCO and the respondent-contractors is the
employer of the respondent-workers.
Our Ruling
We deny the petition.
This case involves job contracting, a labor arrangement expressly allowed by law. Contracting or
subcontracting is an arrangement whereby a principal (or employer) agrees to put out or farm out
with a contractor or subcontractor 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 or outside the premises of the principal.69 It involves a trilateral
relationship among the principal or employer, the contractor or subcontractor, and the workers
engaged by the contractor or subcontractor.70
Article 106 of the Labor Code of the Philippines71 (Labor Code) explains the relations which may arise
between an employer, a contractor, and the contractor’s employees,72 thus:
ART. 106. Contractor or subcontracting. − 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 latter’s subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work performed under the contract, in the
same manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the
contracting out of labor to protect the rights of workers established under this Code. In so
prohibiting or restricting, he may make appropriate distinctions between 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 latter were directly employed by him.
The Omnibus Rules Implementing the Labor Code73 distinguishes between permissible job
contracting (or independent contractorship) and labor-only contracting. Job contracting is
permissible under the Code if the following conditions are met:
(a) The contractor carries on an independent business and undertakes the contract work on
his own account under his own responsibility according to his own manner and method, free
from the control and direction of his employer or principal in all matters connected with the
performance of the work except as to the results thereof; and
(b) The contractor has substantial capital or investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary in the conduct of his
business.74
In contrast, job contracting shall be deemed as labor-only contracting, an arrangement prohibited by
law, if a person who undertakes to supply workers to an employer:
(1) Does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials; and
(2) The workers recruited and placed by such person are performing activities which are
directly related to the principal business or operations of the employer in which workers are
habitually employed.75
As a general rule, a contractor is presumed to be a labor-only contractor, unless such contractor
overcomes the burden of proving that it has the substantial capital, investment, tools and the like.76
Based on the conditions for permissible job contracting, we rule that respondent-contractors are
labor-only contractors.
There is no evidence showing that respondent-contractors are independent contractors. The
respondent-contractors, DFI, and DARBMUPCO did not offer any proof that respondent-contractors
were not engaged in labor-only contracting. In this regard, we cite our ruling in Caro v.
Rilloraza,77 thus:
"In regard to the first assignment of error, the defendant company pretends to show through
Venancio Nasol's own testimony that he was an independent contractor who undertook to
construct a railway line between Maropadlusan and Mantalisay, but as far as the record
shows, Nasol did not testify that the defendant company had no control over him as to the manner
or methods he employed in pursuing his work. On the contrary, he stated that he was not bonded,
and that he only depended upon the Manila Railroad for money to be paid to his laborers. As stated
by counsel for the plaintiffs, the word ‘independent contractor’ means 'one who exercises
independent employment and contracts to do a piece of work according to his own methods and
without being subject to control of his employer except as to result of the work.' Furthermore, if the
employer claims that the workmen is an independent contractor, for whose acts he is not
responsible, the burden is on him to show his independence.
Tested by these definitions and by the fact that the defendant has presented practically no
evidence to determine whether Venancio Nasol was in reality an independent contractor or not,
we are inclined to think that he is nothing but an intermediary between the defendant and certain
laborers. It is indeed difficult to find that Nasol is an independent contractor; a person
who possesses no capital or money of his own to pay his obligations to them, who files no bond to
answer for any fulfillment of his contract with his employer and specially subject to the control and
supervision of his employer, falls short of the requisites or conditions necessary for the common and
independent contractor."78 (Citations omitted; emphasis supplied.)
To support its argument that respondent-contractors are the employers of respondent-workers, and
not merely labor-only contractors, DFI should have presented proof showing that respondent-
contractors carry on an independent business and have sufficient capitalization. The record,
however, is bereft of showing of even an attempt on the part of DFI to substantiate its argument.
DFI cannot cite the May 24, 1999 Resolution of the NLRC as basis that respondent-contractors are
independent contractors. Nowhere in the NLRC Resolution does it say that the respondent-
contractors are independent contractors. On the contrary, the NLRC declared that "it was not clearly
established on record that said [respondent-]contractors are independent, xxx."79
Further, respondent-contractors admit, and even insist that they are engaged in labor-only
contracting. As will be seen below, respondent-contractors made the admissions and declarations
on two occasions: first was in their Formal Appearance of Counsel and Motion for Exclusion of
Individual Party-Respondents filed before the LA; and second was in their Verified Explanation and
Memorandum filed before this Court.
Before the LA, respondent-contractors categorically stated that they are "labor-only" contractors
who have been engaged by DFI and DARBMUPCO.80 They admitted that they do not have substantial
capital or investment in the form of tools, equipment, machineries, work premises and other
materials, and they recruited workers to perform activities directly related to the principal
operations of their employer.81
Before this Court, respondents-contractors again admitted that they are labor-only contractors.
They narrated that:
1. Herein respondents, Voltaire Lopez, Jr., et al., were commissioned and contracted by
petitioner, Diamond Farms, Inc. (DFI) to recruit farm workers, who are the complaining
[respondent-workers] (as represented by Southern Philippines Federation of Labor (SPFL)
in this appeal by certiorari), in order to perform specific farm activities, such as pruning,
deleafing, fertilizer application, bud inject, stem spray, drainage, bagging, etc., on banana
plantation lands awarded to private respondent, Diamond Farms Agrarian Reform
Beneficiaries Multi-Purpose Cooperative (DARBMUPCO) and on banana planted lands
owned and managed by petitioner, DFI.
2. All farm tools, implements and equipment necessary to performance of such farm
activities were supplied by petitioner DFI to respondents Voltaire Lopez, Jr., et. al. as well as
to respondents-SPFL, et. al. Herein respondents Voltaire Lopez, Jr. et. al. had no adequate
capital to acquire or purchase such tools, implements, equipment, etc.
3. Herein respondents Voltaire Lopez, Jr., et. al. As well as respondents-SPFL, et. al. were
being directly supervised, controlled and managed by petitioner DFI farm managers and
supervisors, specifically on work assignments and performance targets. DFI managers and
supervisors, at their sole discretion and prerogative, could directly hire and terminate any or
all of the respondents-SPFL, et. al., including any or all of the herein respondents Voltaire
Lopez, Jr., et. al.
4. Attendance/Time sheets of respondents-SPFL, et. al. were being prepared by herein
respondents Voltaire Lopez, Jr., et. al., and correspondingly submitted to petitioner DFI.
Payment of wages to respondents-SPFL, et. al. were being paid for by petitioner DFI thru
herein respondents Voltaire Lopez, [Jr.], et. al. The latter were also receiving their
 wages/salaries from petitioner DFI for monitoring/leading/recruiting the respondents-SPFL,
et. al.
5. No monies were being paid directly by private respondent DARBMUPCO to respondents-
SPFL, et al., nor to herein respondents Voltaire Lopez, [Jr.], et. al. Nor did respondent
DARBMUPCO directly intervene much less supervise any or all of [the] respondents-SPFL, et.
al. including herein respondents Voltaire Lopez, Jr., et. al.82 (Emphasis supplied.)
The foregoing admissions are legally binding on respondent-contractors.83 Judicial admissions made
by parties in the pleadings, or in the course of the trial or other proceedings in the same case are
conclusive and so does not require further evidence to prove them.84 Here, the respondent-
contractors voluntarily pleaded that they are labor-only contractors; hence, these admissions bind
them.
A finding that a contractor is a labor-only contractor is equivalent to a declaration that there is an
employer-employee relationship between the principal, and the workers of the labor-only
contractor; the labor-only contractor is deemed only as the agent of the principal.85 Thus, in this
case, respondent-contractors are the labor-only contractors and either DFI or DARBMUPCO is their
principal.
We hold that DFI is the principal.
Under Article 106 of the Labor Code, a principal or employer refers to the person who enters into an
agreement with a job contractor, either for the performance of a specified work or for the supply of
manpower.86 In this regard, we quote with approval the findings of the CA, to wit:
The records show that it is DFI which hired the individual [respondent-contractors] who in turn
hired their own men to work in the 689.88 hectares land of DARBMUPCO as well as in the
managed area of the plantation. DFI admits [that] these [respondent-contractors] worked under
the direction and supervision of the DFI managers and personnel. DFI paid the [respondent-
contractors] for the services rendered in the plantation and the [respondent-contractors] in turn pay
their workers after they [respondent-contractors] received payment from DFI. xxx DARBMUPCO did
not have anything to do with the hiring, supervision and payment of the wages of the workers-
respondents thru the contractors-respondents. xxx87 (Emphasis supplied.)
DFI does not deny that it engaged the services of the respondent-contractors. It does not dispute
the claims of respondent-contractors that they sent their billing to DFI for payment; and that DFI’s
managers and personnel are in close consultation with the respondent-contractors.88
DFI cannot argue that DARBMUPCO is the principal of the respondent-contractors because it
(DARBMUPCO) owns the awarded plantation where respondent-contractors and respondent-
workers were working;89 and therefore DARBMUPCO is the ultimate beneficiary of the employment
of the respondent-workers.90
That DARBMUPCO owns the awarded plantation where the respondent-contractors and
respondent-workers were working is immaterial. This does not change the situation of the parties.
As correctly found by the CA, DFI, as the principal, hired the respondent-contractors and the latter,
in turn, engaged the services of the respondent-workers.91This was also the unanimous finding of
the SOLE,92 the LA,93 and the NLRC.94 Factual findings of the NLRC, when they coincide with the LA
and affirmed by the CA are accorded with great weight and respect and even finality by this Court.95
Alilin v. Petron Corporation96 is applicable. In that case, this Court ruled that the presence of the
power of control on the part of the principal over the workers of the contractor, under the facts,
prove the employer-employee relationship between the former and the latter, thus:
[A] finding that a contractor is a ‘labor-only’ contractor is equivalent to declaring that there is an
employer-employee relationship between the principal and the employees of the supposed
contractor." In this case, the employer-employee relationship between Petron and petitioners
becomes all the more apparent due to the presence of the power of control on the part of the
former over the latter.
It was held in Orozco v. The Fifth Division of the Hon. Court of Appeals that:
This Court has constantly adhered to the "four-fold test" to determine whether there exists an
employer-employee relationship between the parties.1âwphi1 The four elements of an employment
relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c)
the power of dismissal; and (d) the power to control the employee’s conduct.
Of these four elements, it is the power to control which is the most crucial and most
determinative factor, so important, in fact, that, the other elements may even be disregarded.
Hence, the facts that petitioners were hired by Romeo or his father and that their salaries were paid
by them do not detract from the conclusion that there exists an employer-employee relationship
between the parties due to Petron’s power of control over the petitioners. One manifestation of the
power of control is the power to transfer employees from one work assignment to another. Here,
Petron could order petitioners to do work outside of their regular "maintenance/utility" job. Also,
petitioners were required to report for work everyday at the bulk plant, observe an 8:00 a.m. to 5:00
p.m. daily work schedule, and wear proper uniform and safety helmets as prescribed by the safety
and security measures being implemented within the bulk plant. All these imply control. In an
industry where safety is of paramount concern, control and supervision over sensitive operations,
such as those performed by the petitioners, are inevitable if not at all necessary. Indeed, Petron
deals with commodities that are highly volatile and flammable which, if mishandled or not properly
attended to, may cause serious injuries and damage to property and the environment. Naturally,
supervision by Petron is essential in every aspect of its product handling in order not to compromise
the integrity, quality and safety of the products that it distributes to the consuming
public.97 (Citations omitted; emphasis supplied)
That DFI is the employer of the respondent-workers is bolstered by the CA’s finding that DFI
exercises control over the respondent-workers.98 DFI, through its manager and supervisors provides
for the work assignments and performance targets of the respondent-workers. The managers and
supervisors also have the power to directly hire and terminate the respondent-workers.99 Evidently,
DFI wields control over the respondent-workers.
Neither can DFI argue that it is only the purchaser of the bananas produced in the awarded
plantation under the BPPA,100 and that under the terms of the BPPA, no employer-employee
relationship exists between DFI and the respondent-workers,101 to wit:
UNDERTAKING OF THE FIRST PARTY
xxx
3. THE FIRST PARTY [DARBMUPCO] shall be responsible for the proper conduct, safety, benefits and
general welfare of its members working in the plantation and specifically render free and harmless
the SECOND PARTY [DFI] of any expense, liability or claims arising therefrom. It is clearly recognized
by the FIRST PARTY that its members and other personnel utilized in the performance of its
function under this agreement are not employees of the SECOND PARTY.102 (Emphasis supplied)
In labor-only contracting, it is the law which creates an employer-employee relationship between
the principal and the workers of the labor-only contractor.103
Inasmuch as it is the law that forms the employment ties, the stipulation in the BPPA that
respondent-workers are not employees of DFI is not controlling, as the proven facts show otherwise.
The law prevails over the stipulations of the parties. Thus, in Tabas v. California Manufacturing Co.,
Inc.,104 we held that:
The existence of an employer-employees relation is a question of law and being such, it cannot be
made the subject of agreement.1âwphi1 Hence, the fact that the manpower supply agreement
between Livi and California had specifically designated the former as the petitioners' employer and
had absolved the latter from any liability as an employer, will not erase either party's obligations as
an employer, if an employer-employee relation otherwise exists between the workers and either
firm. xxx105 (Emphasis supplied.)
Clearly, DFI is the true employer of the respondent-workers; respondent-contractors are only agents
of DFI. Under Article 106 of the Labor Code, DFI shall be solidarily liable with the respondent-
contractors for the rightful claims of the respondent-workers, to the same manner and extent as if
the latter are directly employed by DFI.106
WHEREFORE, the petition is DENIED for lack of merit. The March 31, 2006 Decision and the May 30,
2006 Resolution of the Court of Appeals in C.A.-G.R. SP Nos. 53806, 61607 and 59958 are
hereby AFFIRMED.

SO ORDERED.