[G.R. No. 119268. February 23, 2000] 1.
Declaring the respondent company guilty of illegal dismissal and
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:
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:
1
 "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
2
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.
3
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.

4
[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
5
 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
6
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
7
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]
8
 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]
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.
Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.

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

9
 [G.R. No. 151228. August 15, 2002]
ROLANDO Y. TAN, petitioner, vs. LEOVIGILDO LAGRAMA and THE HONORABLE
COURT OF APPEALS, respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision, [1] dated May 31, 2001,
and the resolution,[2] dated November 27, 2001, of the Court of Appeals in C.A.-G.R.
SP. No. 63160, annulling the resolutions of the National Labor Relations Commission
(NLRC) and reinstating the ruling of the Labor Arbiter which found petitioner Rolando
Tan guilty of illegally dismissing private respondent Leovigildo Lagrama and ordering
him to pay the latter the amount of P136,849.99 by way of separation pay, backwages,
and damages.
The following are the facts.
Petitioner Rolando Tan is the president of Supreme Theater Corporation and the
general manager of Crown and Empire Theaters in Butuan City. Private respondent
Leovigildo Lagrama is a painter, making ad billboards and murals for the motion
pictures shown at the Empress, Supreme, and Crown Theaters for more than 10 years,
from September 1, 1988 to October 17, 1998.
On October 17, 1998, private respondent Lagrama was summoned by Tan and
upbraided: Nangihi na naman ka sulod sa imong drawinganan. (You again urinated
inside your work area.) When Lagrama asked what Tan was saying, Tan told him, Ayaw
daghang estorya. Dili ko gusto nga mo-drawing ka pa. Guikan karon, wala nay drawing.
Gawas. (Dont say anything further. I dont want you to draw anymore. From now on, no
more drawing. Get out.)
Lagrama denied the charge against him. He claimed that he was not the only one
who entered the drawing area and that, even if the charge was true, it was a minor
infraction to warrant his dismissal. However, everytime he spoke, Tan
shouted Gawas (Get out), leaving him with no other choice but to leave the premises.
Lagrama filed a complaint with the Sub-Regional Arbitration Branch No. X of the
National Labor Relations Commission (NLRC) in Butuan City. He alleged that he had
been illegally dismissed and sought reinvestigation and payment of 13th month pay,
service incentive leave pay, salary differential, and damages.
Petitioner Tan denied that Lagrama was his employee. He asserted that Lagrama
was an independent contractor who did his work according to his methods, while he
(petitioner) was only interested in the result thereof. He cited the admission of Lagrama
during the conferences before the Labor Arbiter that he was paid on a fixed piece-work
basis, i.e., that he was paid for every painting turned out as ad billboard or mural for
the pictures shown in the three theaters, on the basis of a no mural/billboard drawn, no
pay policy. He submitted the affidavits of other cinema owners, an amusement park
owner, and those supervising the construction of a church to prove that the services of
Lagrama were contracted by them. He denied having dismissed Lagrama and alleged
that it was the latter who refused to paint for him after he was scolded for his habits.
As no amicable settlement had been reached, Labor Arbiter Rogelio P. Legaspi
directed the parties to file their position papers. On June 17, 1999, he rendered a
decision, the dispositive portion of which reads:
WHEREFORE, premises considered judgment is hereby ordered:
1. Declaring complainants [Lagramas] dismissal illegal and
2. Ordering respondents [Tan] to pay complainant the following:
A. Separation Pay - P 59,000.00
B. Backwages - 47,200.00
(from 17 October 1998 to 17 June 1999)
C. 13th month pay (3 years) - 17,700.00
D. Service Incentive Leave
Pay (3 years) - 2, 949.99
E. Damages - 10,000.00
TOTAL [P136,849.99]
Complainants other claims are dismissed for lack of merit. [3]
Petitioner Rolando Tan appealed to the NLRC Fifth Division, Cagayan de Oro
City, which, on June 30, 2000, rendered a decision [4] finding Lagrama to be an
independent contractor, and for this reason reversing the decision of the Labor Arbiter.
Respondent Lagrama filed a motion for reconsideration, but it was denied for lack
of merit by the NLRC in a resolution of September 29, 2000. He then filed a petition for
certiorari under Rule 65 before the Court of Appeals.
The Court of Appeals found that petitioner exercised control over Lagramas work
by dictating the time when Lagrama should submit his billboards and murals and setting
rules on the use of the work area and rest room. Although it found that Lagrama did
work for other cinema owners, the appeals court held it to be a mere sideline insufficient
to prove that he was not an employee of Tan. The appeals court also found no evidence
of any intention on the part of Lagrama to leave his job or sever his employment
relationship with Tan. Accordingly, on May 31, 2001, the Court of Appeals rendered a
decision, the dispositive portion of which reads:
10
IN THE LIGHT OF ALL THE FOREGOING, the Petition is hereby GRANTED. The
Resolutions of the Public Respondent issued on June 30, 2000 and September 29,
2000 are ANNULLED. The Decision of the Honorable Labor Arbiter Rogelio P.
Legaspi on June 17, 1999 is hereby REINSTATED.
Petitioner moved for a reconsideration, but the Court of Appeals found no reason
to reverse its decision and so denied his motion for lack of merit. [5] Hence, this petition
for review on certiorari based on the following assignments of errors:
I. With all due respect, the decision of respondent Court of Appeals in CA-G.R. SP
NO. 63160 is bereft of any finding that Public Respondent NLRC, 5th Division, had no
jurisdiction or exceeded it or otherwise gravely abused its discretion in its Resolution
of 30 June 2000 in NLRC CA-NO. M-004950-99.
II. With all due respect, respondent Court of Appeals, absent any positive finding on
its part that the Resolution of 30 June 2000 of the NLRC is not supported by
substantial evidence, is without authority to substitute its conclusion for that of said
NLRC.
III. With all due respect, respondent Court of Appeals discourse on freelance artists
and painters in the decision in question is misplaced or has no factual or legal basis in
the record.
IV. With all due respect, respondent Court of Appeals opening statement in its
decision as to employment, monthly salary of P1,475.00 and work schedule from
Monday to Saturday, from 8:00 oclock in the morning up to 5:00 oclock in the
afternoon as facts is not supported by the evidence on record.
V. With all due respect, the case of Lambo, et al., v. NLRC, et al., 317 SCRA 420
[G.R. No. 111042 October 26, 1999] relied upon by respondent Court of Appeals is
not applicable to the peculiar circumstances of this case. [6]
The issues raised boil down to whether or not an employer-employee relationship
existed between petitioner and private respondent, and whether petitioner is guilty of
illegally dismissing private respondent. We find the answers to these issues to be in the
affirmative.
I.
In determining whether there is an employer-employee relationship, we have
applied a four-fold test, to wit: (1) whether the alleged employer has the power of
selection and engagement of employees; (2) whether he has control of the employee
with respect to the means and methods by which work is to be accomplished; (3)
whether he has the power to dismiss; and (4) whether the employee was paid
wages.[7] These elements of the employer-employee relationship are present in this
case.
First. The existence in this case of the first element is undisputed. It was petitioner
who engaged the services of Lagrama without the intervention of a third party. It is the
existence of the second element, the power of control, that requires discussion here.
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. [8] 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.
In the case at bar, albeit petitioner Tan claims that private respondent Lagrama
was an independent contractor and never his employee, the evidence shows that the
latter performed his work as painter under the supervision and control of petitioner.
Lagrama worked in a designated work area inside the Crown Theater of petitioner, for
the use of which petitioner prescribed rules. The rules included the observance of
cleanliness and hygiene and a prohibition against urinating in the work area and any
place other than the toilet or the rest rooms.[9] Petitioners control over Lagramas
work extended not only to the use of the work area, but also to the result of Lagramas
work, and the manner and means by which the work was to be accomplished.
Moreover, it would appear that petitioner not only provided the workplace, but
supplied as well the materials used for the paintings, because he admitted that he paid
Lagrama only for the latters services.[10]
Private respondent Lagrama claimed that he worked daily, from 8 oclock in the
morning to 5 oclock in the afternoon. Petitioner disputed this allegation and maintained
that he paid Lagrama P1,475.00 per week for the murals for the three theaters which
the latter usually finished in 3 to 4 days in one week. [11] Even assuming this to be true,
the fact that Lagrama worked for at least 3 to 4 days a week proves regularity in his
employment by petitioner.
Second. That petitioner had the right to hire and fire was admitted by him in his
position paper submitted to the NLRC, the pertinent portions of which stated:
Complainant did not know how to use the available comfort rooms or toilets in and
about his work premises. He was urinating right at the place where he was
working when it was so easy for him, as everybody else did and had he only wanted
to, to go to the comfort rooms. But no, the complainant had to make a virtual urinal
11
out of his work place! The place then stunk to high heavens, naturally, to the
consternation of respondents and everyone who could smell the malodor.
...
Given such circumstances, the respondents had every right, nay all the compelling
reason, to fire him from his painting job upon discovery and his admission of such
acts. Nonetheless, though thoroughly scolded, he was not fired. It was he who
stopped to paint for respondents.[12]
By stating that he had the right to fire Lagrama, petitioner in effect acknowledged
Lagrama to be his employee. For the right to hire and fire is another important element
of the employer-employee relationship.[13] Indeed, the fact that, as petitioner himself
said, he waited for Lagrama to report for work but the latter simply stopped reporting
for work reinforces the conviction that Lagrama was indeed an employee of petitioner.
For only an employee can nurture such an expectancy, the frustration of which, unless
satisfactorily explained, can bring about some disciplinary action on the part of the
employer.
Third. Payment of wages is one of the four factors to be considered in determining
the existence of employer-employee relation. 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 services
rendered or to be rendered.[14] That Lagrama worked for Tan on a fixed piece-work
basis is of no moment. Payment by result is a method of compensation and does not
define the essence of the relation.[15] It is a method of computing compensation, 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.[16]
The Rules Implementing the Labor Code require every employer to pay his
employees by means of payroll.[17] The payroll should show among other things, the
employees rate of pay, deductions made, and the amount actually paid to the
employee. In the case at bar, petitioner did not present the payroll to support his claim
that Lagrama was not his employee, raising speculations whether his failure to do so
proves that its presentation would be adverse to his case. [18]
The primary standard for determining regular employment is the reasonable
connection between the particular activity performed by the employee in relation to the
usual trade or business of the employer.[19] In this case, there is such a connection
between the job of Lagrama painting billboards and murals and the business of
petitioner. To let the people know what movie was to be shown in a movie theater
requires billboards. Petitioner in fact admits that the billboards are important to his
business.[20]
The fact that Lagrama was not reported as an employee to the SSS is not
conclusive on the question of whether he was an employee of petitioner. [21] Otherwise,
an employer would be rewarded for his failure or even neglect to perform his
obligation.[22]
Neither does the fact that Lagrama painted for other persons affect or alter his
employment relationship with petitioner. That he did so only during weekends has not
been denied by petitioner. On the other hand, Samuel Villalba, for whom Lagrama had
rendered service, admitted in a sworn statement that he was told by Lagrama that the
latter worked for petitioner.[23]
Lagrama had been employed by petitioner since 1988. Under the law, therefore,
he is deemed a regular employee and is thus entitled to security of tenure, as provided
in Art. 279 of Labor Code:
ART. 279. Security of Tenure. In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by
this Title. An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the
time of his actual reinstatement.
This Court has held that if the employee has been performing the job for at least
one year, even if not continuously but intermittently, the repeated and continuing need
for its performance is sufficient evidence of the necessity, if not indispensability, of that
activity to the business of his employer. Hence, the employment is also considered
regular, although with respect only to such activity, and while such activity exists. [24]
It is claimed that Lagrama abandoned his work. There is no evidence to show
this. Abandonment requires two elements: (1) the failure to report for work or absence
without valid or justifiable reason, and (2) a clear intention to sever the employer-
employee relationship, with the second element as the more determinative factor and
being manifested by some overt acts.[25] Mere absence is not sufficient. What is more,
the burden is on the employer to show a deliberate and unjustified refusal on the part
of the employee to resume his employment without any intention of returning. [26] In the
case at bar, the Court of Appeals correctly ruled:
Neither do we agree that Petitioner abandoned his job. In order for abandonment to
be a just and valid ground for dismissal, the employer must show, by clear proof, the
intention of the employee to abandon his job. . . .
12
In the present recourse, the Private Respondent has not established clear proof of the involves an element of control and supervision over the manner the work is to be
intention of the Petitioner to abandon his job or to sever the employment relationship performed, while the second does not. If a piece worker is supervised, there is an
between him and the Private Respondent. On the contrary, it was Private Respondent employer-employee relationship, as in this case. However, such an employee is not
who told Petitioner that he did not want the latter to draw for him and thereafter entitled to service incentive leave pay since, as pointed out in Makati Haberdashery v.
refused to give him work to do or any mural or billboard to paint or draw on. NLRC[33] and Mark Roche International v. NLRC,[34] he is paid a fixed amount for work
done, regardless of the time he spent in accomplishing such work.
More, after the repeated refusal of the Private Respondent to give Petitioner murals
WHEREFORE, based on the foregoing, the petition is DENIED for lack of showing
or billboards to work on, the Petitioner filed, with the Sub-Regional Arbitration Branch
that the Court of Appeals committed any reversible error. The decision of the Court of
No. X of the National Labor Relations Commission, a Complaint for Illegal
Appeals, reversing the decision of the National Labor Relations Commission and
Dismissal and Money Claims. Such act has, as the Supreme Court declared, negate
reinstating the decision of the Labor Arbiter, is AFFIRMED with the MODIFICATION
any intention to sever employment relationship. . . .[27]
that the backwages and other benefits awarded to private respondent Leovigildo
Lagrama should be computed from the time of his dismissal up to the time of the finality
II. of this decision, without any deduction and qualification. However, the service incentive
The second issue is whether private respondent Lagrama was illegally dismissed. leave pay awarded to him is DELETED.
To begin, the employer has the burden of proving the lawfulness of his employees SO ORDERED.
dismissal.[28] The validity of the charge must be clearly established in a manner
consistent with due process. The Implementing Rules of the Labor Code[29] provide that Bellosillo, (Chairman), Quisumbing, and Corona, JJ., concur.
no worker shall be dismissed except for a just or authorized cause provided by law and
after due process. This provision has two aspects: (1) the legality of the act of dismissal,
that is, dismissal under the grounds provided for under Article 282 of the Labor Code
and (2) the legality in the manner of dismissal. The illegality of the act of dismissal
constitutes discharge without just cause, while illegality in the manner of dismissal is
dismissal without due process.[30]

In this case, by his refusal to give Lagrama work to do and ordering Lagrama to
get out of his sight as the latter tried to explain his side, petitioner made it plain that
Lagrama was dismissed. Urinating in a work place other than the one designated for
the purpose by the employer constitutes violation of reasonable regulations intended
to promote a healthy environment under Art. 282(1) of the Labor Code for purposes of
terminating employment, but the same must be shown by evidence. Here there is no
evidence that Lagrama did urinate in a place other than a rest room in the premises of
his work.

Instead of ordering his reinstatement as provided in Art. 279 of the Labor Code,
the Labor Arbiter found that the relationship between the employer and the employee
has been so strained that the latters reinstatement would no longer serve any purpose.
The parties do not dispute this finding. Hence, the grant of separation pay in lieu of
reinstatement is appropriate. This is of course in addition to the payment of backwages
which, in accordance with the ruling in Bustamante v. NLRC,[31] should be computed
from the time of Lagramas dismissal up to the time of the finality of this decision, without
any deduction or qualification.

The Bureau of Working Conditions[32] classifies workers paid by results into two
groups, namely; (1) those whose time and performance is supervised by the employer,
and (2) those whose time and performance is unsupervised by the employer. The first
13
 [G.R. No. 120969. January 22, 1998]
ALEJANDRO MARAGUINOT, JR. and PAULINO ENERO, petitioners,
vs. NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION)
composed of Presiding Commissioner RAUL T. AQUINO, Commissioner
ROGELIO I. RAYALA and Commissioner VICTORIANO R. CALAYCAY
(Ponente), VIC DEL ROSARIO and VIVA FILMS, respondents.
DECISION
DAVIDE, JR., J.:
By way of this special civil action for certiorari under Rule 65 of the Rules of Court,
petitioners seek to annul the 10 February 1995 Decision [1] of the National Labor
Relations Commission (hereafter NLRC), and its 6 April 1995 Resolution [2] denying the
motion to reconsider the former in NLRC-NCR-CA No. 006195-94. The decision
reversed that of the Labor Arbiter in NLRC-NCR-Case No. 00-07-03994-92.
The parties present conflicting sets of facts.
Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by private
respondents on 18 July 1989 as part of the filming crew with a salary of P375.00 per
week. About four months later, he was designated Assistant Electrician with a weekly
salary of P400.00, which was increased to P450.00 in May 1990. In June 1991, he was
promoted to the rank of Electrician with a weekly salary of P475.00, which was
increased to P593.00 in September 1991.
Petitioner Paulino Enero, on his part, claims that private respondents employed
him in June 1990 as a member of the shooting crew with a weekly salary of P375.00,
which was increased to P425.00 in May 1991, then to P475.00 on 21 December 1991.[3]
Petitioners tasks consisted of loading, unloading and arranging movie equipment
in the shooting area as instructed by the cameraman, returning the equipment to Viva
Films warehouse, assisting in the fixing of the lighting system, and performing other
tasks that the cameraman and/or director may assign.[4]
Sometime in May 1992, petitioners sought the assistance of their supervisor, Mrs.
Alejandria Cesario, to facilitate their request that private respondents adjust their salary
in accordance with the minimum wage law. In June 1992, Mrs. Cesario informed
petitioners that Mr. Vic del Rosario would agree to increase their salary only if they
signed a blank employment contract.As petitioners refused to sign, private respondents
forced Enero to go on leave in June 1992, then refused to take him back when he
reported for work on 20 July 1992. Meanwhile, Maraguinot was dropped from the
company payroll from 8 to 21 June 1992, but was returned on 22 June 1992. He was
again asked to sign a blank employment contract, and when he still refused, private
respondents terminated his services on 20 July 1992.[5] Petitioners thus sued for illegal
dismissal[6] before the Labor Arbiter.
On the other hand, private respondents claim that Viva Films (hereafter VIVA) is
the trade name of Viva Productions, Inc., and that it is primarily engaged in the
distribution and exhibition of movies -- but not in the business of making movies; in the
same vein, private respondent Vic del Rosario is merely an executive producer, i.e.,
the financier who invests a certain sum of money for the production of movies
distributed and exhibited by VIVA.[7]
Private respondents assert that they contract persons called producers -- also
referred to as associate producers[8] -- to produce or make movies for private
respondents; and contend that petitioners are project employees of the associate
producers who, in turn, act as independent contractors. As such, there is no employer-
employee relationship between petitioners and private respondents.
Private respondents further contend that it was the associate producer of the
film Mahirap Maging Pogi, who hired petitioner Maraguinot. The movie shot from 2 July
up to 22 July 1992, and it was only then that Maraguinot was released upon payment
of his last salary, as his services were no longer needed. Anent petitioner Enero, he
was hired for the movie entitled Sigaw ng Puso, later re-titled Narito ang Puso. He went
on vacation on 8 June 1992, and by the time he reported for work on 20 July 1992,
shooting for the movie had already been completed. [9]
After considering both versions of the facts, the Labor Arbiter found as follows:
On the first issue, this Office rules that complainants are the employees of the
respondents. The producer cannot be considered as an independent contractor but
should be considered only as a labor-only contractor and as such, acts as a mere
agent of the real employer, the herein respondents. Respondents even failed to name
and specify who are the producers. Also, it is an admitted fact that the complainants
received their salaries from the respondents. The case cited by the respondents,
Rosario Brothers, Inc. vs. Ople, 131 SCRA 72 does not apply in this case.
It is very clear also that complainants are doing activities which are necessary and
essential to the business of the respondents, that of movie-making. Complainant
Maraguinot worked as an electrician while complainant Enero worked as a crew
[member].[10]
Hence, the Labor Arbiter, in his decision of 20 December 1993, decreed as
follows:
WHEREFORE, judgment is hereby rendered declaring that complainants were
illegally dismissed.
14
Respondents are hereby ordered to reinstate complainants to their former positions
without loss [of] seniority rights and pay their backwages starting July 21, 1992 to
December 31, 1993 temporarily computed in the amount of P38,000.00 for
complainant Paulino Enero and P46,000.00 for complainant Alejandro Maraguinot, Jr.
and thereafter until actually reinstated.
Respondents are ordered to pay also attorneys fees equivalent to ten (10%)
and/or P8,400.00 on top of the award.[11]
Private respondents appealed to the NLRC (docketed as NLRC NCR-CA No.
006195-94). In its decision[12] of 10 February 1995, the NLRC found the following
circumstances of petitioners work clearly established:
1. Complainants [petitioners herein] were hired for specific movie projects and their
employment was co-terminus with each movie project the completion/termination of
which are pre-determined, such fact being made known to complainants at the time of
their engagement.
xxx
2. Each shooting unit works on one movie project at a time. And the work of the
shooting units, which work independently from each other, are not continuous in
nature but depends on the availability of movie projects.
3. As a consequence of the non-continuous work of the shooting units, the total
working hours logged by complainants in a month show extreme variations... For
instance, complainant Maraguinot worked for only 1.45 hours in June 1991 but logged
a total of 183.25 hours in January 1992. Complainant Enero logged a total of
only 31.57 hours in September 1991 but worked for 183.35 hours the next month,
October 1991.
4. Further shown by respondents is the irregular work schedule of complainants on a
daily basis. Complainant Maraguinot was supposed to report on 05 August 1991 but
reported only on 30 August 1991, or a gap of 25 days. Complainant Enero worked on
10 September 1991 and his next scheduled working day was 28 September 1991, a
gap of 18 days.
5. The extremely irregular working days and hours of complainants work explain the
lump sum payment for complainants services for each movie project. Hence,
complainants were paid a standard weekly salary regardless of the number of
working days and hours they logged in. Otherwise, if the principle of no work no pay
was strictly applied, complainants earnings for certain weeks would be very
negligible.
6. Respondents also alleged that complainants were not prohibited from working with
such movie companies like Regal, Seiko and FPJ Productions whenever they are not
working for the independent movie producers engaged by respondents... This
allegation was never rebutted by complainants and should be deemed admitted.
The NLRC, in reversing the Labor Arbiter, then concluded that these
circumstances, taken together, indicated that complainants (herein petitioners) were
project employees.
After their motion for reconsideration was denied by the NLRC in its
Resolution[13] of 6 April 1995, petitioners filed the instant petition, claiming that the
NLRC committed grave abuse of discretion amounting to lack or excess of jurisdiction
in: (1) finding that petitioners were project employees; (2) ruling that petitioners were
not illegally dismissed; and (3) reversing the decision of the Labor Arbiter.
To support their claim that they were regular (and not project) employees of
private respondents, petitioners cited their performance of activities that were
necessary or desirable in the usual trade or business of private respondents and added
that their work was continuous, i.e., after one project was completed they were
assigned to another project. Petitioners thus considered themselves part of a work pool
from which private respondents drew workers for assignment to different
projects. Petitioners lamented that there was no basis for the NLRCs conclusion that
they were project employees, while the associate producers were independent
contractors; and thus reasoned that as regular employees, their dismissal was illegal
since the same was premised on a false cause, namely, the completion of a project,
which was not among the causes for dismissal allowed by the Labor Code.
Private respondents reiterate their version of the facts and stress that their
evidence supports the view that petitioners are project employees; point to petitioners
irregular work load and work schedule; emphasize the NLRCs finding that petitioners
never controverted the allegation that they were not prohibited from working with other
movie companies; and ask that the facts be viewed in the context of the peculiar
characteristics of the movie industry.
The Office of the Solicitor General (OSG) is convinced that this petition is
improper since petitioners raise questions of fact, particularly, the NLRCs finding that
petitioners were project employees, a finding supported by substantial evidence; and
submits that petitioners reliance on Article 280 of the Labor Code to support their
contention that they should be deemed regular employees is misplaced, as said section
merely distinguishes between two types of employees, i.e., regular employees and
casual employees, for purposes of determining the right of an employee to certain
benefits.
The OSG likewise rejects petitioners contention that since they were hired not for
one project, but for a series of projects, they should be deemed regular
employees. Citing Mamansag v. NLRC,[14] the OSG asserts that what matters is that
15
there was a time-frame for each movie project made known to petitioners at the time of
their hiring. In closing, the OSG disagrees with petitioners claim that the NLRCs
classification of the movie producers as independent contractors had no basis in fact
and in law, since, on the contrary, the NLRC took pains in explaining its basis for its
decision.
As regards the propriety of this action, which the Office of the Solicitor General
takes issue with, we rule that a special civil action for certiorari under Rule 65 of the
Rules of Court is the proper remedy for one who complains that the NLRC acted in total
disregard of evidence material to or decisive of the controversy. [15] In the instant case,
petitioners allege that the NLRCs conclusions have no basis in fact and in law, hence
the petition may not be dismissed on procedural or jurisdictional grounds.
The judicious resolution of this case hinges upon, first, the determination of
whether an employer-employee relationship existed between petitioners and private
respondents or any one of private respondents. If there was none, then this petition has
no merit; conversely, if the relationship existed, then petitioners could have been
unjustly dismissed.
A related question is whether private respondents are engaged in the business of
making motion pictures. Del Rosario is necessarily engaged in such business as he
finances the production of movies. VIVA, on the other hand, alleges that it does not
make movies, but merely distributes and exhibits motion pictures. There being no
further proof to this effect, we cannot rely on this self-serving denial. At any rate, and
as will be discussed below, private respondents evidence even supports the view that
VIVA is engaged in the business of making movies.
We now turn to the critical issues. Private respondents insist that petitioners are
project employees of associate producers who, in turn, act as independent
contractors. It is settled that the contracting out of labor is allowed only in case of job
contracting. Section 8, Rule VIII, Book III of the Omnibus Rules Implementing the Labor
Code describes permissible job contracting in this wise:
Sec. 8. Job contracting. -- There is job contracting permissible under the Code if the
following conditions are met:
(1) The contractor carries on an independent business and undertakes the
contract work on his own account under his own responsibility
according to his own manner and method, free from the control and
direction of his employer or principal in all matters connected with
the performance of the work except as to the results thereof; and
(2) The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which
are necessary in the conduct of his business.
Assuming that the associate producers are job contractors, they must then be
engaged in the business of making motion pictures. As such, and to be a job contractor
under the preceding description, associate producers must have tools, equipment,
machinery, work premises, and other materials necessary to make motion
pictures. However, the associate producers here have none of these. Private
respondents evidence reveals that the movie-making equipment are supplied to the
producers and owned by VIVA. These include generators,[16]cables and wooden
platforms,[17] cameras and shooting equipment;[18] in fact, VIVA likewise owns the trucks
used to transport the equipment.[19] It is thus clear that the associate producer merely
leases the equipment from VIVA.[20] Indeed, private respondents Formal Offer of
Documentary Evidence stated one of the purposes of Exhibit 148 as:
To prove further that the independent Producers rented Shooting Unit No. 2 from Viva
to finish their films.[21]
While the purpose of Exhibits 149, 149-A and 149-B was:
[T]o prove that the movies of Viva Films were contracted out to the different
independent Producers who rented Shooting Unit No. 3 with a fixed budget and time-
frame of at least 30 shooting days or 45 days whichever comes first. [22]
Private respondents further narrated that VIVAs generators broke down during
petitioners last movie project, which forced the associate producer concerned to rent
generators, equipment and crew from another company. [23] This only shows that the
associate producer did not have substantial capital nor investment in the form of tools,
equipment and other materials necessary for making a movie. Private respondents in
effect admit that their producers, especially petitioners last producer, are not engaged
in permissible job contracting.
If private respondents insist that their associate producers are labor contractors,
then these producers can only be labor-only contractors, defined by the Labor Code as
follows:
Art. 106. Contractor or subcontractor.-- x x x
There is labor-only contracting where the person supplying workers to an employer
does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by
such persons are performing activities which are directly related to the principal
business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by him.
16
 A more detailed description is provided by Section 9, Rule VIII, Book III of the
Omnibus Rules Implementing the Labor Code:
Sec. 9. Labor-only contracting. -- (a) Any person who undertakes to supply workers to
an employer shall be deemed to be engaged in labor-only contracting where such
person:
(1) Does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials; and
(2) The workers recruited and placed by such person are performing activities
which are directly related to the principal business or operations of the
employer in which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the
person acting as contractor shall be considered merely as an agent
or intermediary of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly
employed by him.
(c) For cases not falling under this Article, the Secretary of Labor shall
determine through appropriate orders whether or not the
contracting out of labor is permissible in the light of the
circumstances of each case and after considering the operating
needs of the employer and the rights of the workers involved. In
such case, he may prescribe conditions and restrictions to insure
the protection and welfare of the workers.
As labor-only contracting is prohibited, the law considers the person or entity
engaged in the same a mere agent or intermediary of the direct employer. But even by
the preceding standards, the associate producers of VIVA cannot be considered labor-
only contractors as they did not supply, recruit nor hire the workers. In the instant case,
it was Juanita Cesario, Shooting Unit Supervisor and an employee of VIVA, who
recruited crew members from an available group of free-lance workers which includes
the complainants Maraguinot and Enero.[24]And in their Memorandum, private
respondents declared that the associate producer hires the services of... 6) camera
crew which includes (a) cameraman; (b) the utility crew; (c) the technical staff; (d)
generator man and electrician; (e) clapper; etc.... [25] This clearly showed that the
associate producers did not supply the workers required by the movie project.
The relationship between VIVA and its producers or associate producers seems
to be that of agency,[26] as the latter make movies on behalf of VIVA, whose business
is to make movies.As such, the employment relationship between petitioners and
producers is actually one between petitioners and VIVA, with the latter being the direct
employer.
The employer-employee relationship between petitioners and VIVA can further be
established by the control test. While four elements are usually considered in
determining the existence of an employment relationship, namely: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal;
and (d) the employers power to control the employees conduct, the most important
element is the employers control of the employees conduct, not only as to the result of
the work to be done but also as to the means and methods to accomplish the
same.[27] These four elements are present here. In their position paper submitted to the
Labor Arbiter, private respondents narrated the following circumstances:
[T]he PRODUCER has to work within the limits of the budget he is given by the
company, for as long as the ultimate finish[ed] product is acceptable to the
company...
To ensure that quality films are produced by the PRODUCER who is an independent
contractor, the company likewise employs a Supervising PRODUCER, a Project
accountant and a Shooting unit supervisor. The Companys Supervising PRODUCER
is Mr. Eric Cuatico, the Project accountant varies from time to time, and the Shooting
Unit Supervisor is Ms. Alejandria Cesario.
The Supervising PRODUCER acts as the eyes and ears of the company and of the
Executive Producer to monitor the progress of the PRODUCERs work
accomplishment. He is there usually in the field doing the rounds of inspection to see
if there is any problem that the PRODUCER is encountering and to assist in threshing
out the same so that the film project will be finished on schedule. He supervises about
3 to 7 movie projects simultaneously [at] any given time by coordinating with each film
PRODUCER. The Project Accountant on the other hand assists the PRODUCER in
monitoring the actual expenses incurred because the company wants to insure that
any additional budget requested by the PRODUCER is really justified and warranted
especially when there is a change of original plans to suit the tast[e] of the company
on how a certain scene must be presented to make the film more interesting and
more commercially viable. (emphasis ours)
VIVAs control is evident in its mandate that the end result must be a quality film
acceptable to the company. The means and methods to accomplish the result are
likewise controlled by VIVA, viz., the movie project must be finished within schedule
without exceeding the budget, and additional expenses must be justified; certain
scenes are subject to change to suit the taste of the company; and the Supervising
Producer, the eyes and ears of VIVA and del Rosario, intervenes in the movie-making
process by assisting the associate producer in solving problems encountered in making
the film.
17
 It may not be validly argued then that petitioners are actually subject to the movie
directors control, and not VIVAs direction. The director merely instructs petitioners on
how to better comply with VIVAs requirements to ensure that a quality film is completed
within schedule and without exceeding the budget. At bottom, the director is akin to a
supervisor who merely oversees the activities of rank-and-file employees with control
ultimately resting on the employer.
Moreover, appointment slips [28] issued to all crew members state:
During the term of this appointment you shall comply with the duties and
responsibilities of your position as well as observe the rules and regulations
promulgated by your superiors and by Top Management.
The words superiors and Top Management can only refer to the superiors and
Top Management of VIVA. By commanding crew members to observe the rules and
regulations promulgated by VIVA, the appointment slips only emphasize VIVAs control
over petitioners.
Aside from control, the element of selection and engagement is likewise present
in the instant case and exercised by VIVA. A sample appointment slip offered by private
respondents to prove that members of the shooting crew except the driver are project
employees of the Independent Producers[29] reads as follows:
VIVA PRODUCTIONS, INC.
16 Sct. Albano St.
Diliman, Quezon City
PEDRO NICOLAS Date: June 15, 1992
__________________
APPOINTMENT SLIP
You are hereby appointed as SOUNDMAN for the film project entitled
MANAMBIT. This appointment shall be effective upon the commencement of the said
project and shall continue to be effective until the completion of the same.
For your services you shall receive the daily/weekly/monthly compensation
of P812.50.
During the term of this appointment you shall comply with the duties and
responsibilities of your position as well as observe the rules and regulations
promulgated by your superiors and by Top Management.
Very truly yours,
(an illegible signature)
CONFORME:
___________________
Name of appointee
Signed in the presence of:
_____________________
Notably, nowhere in the appointment slip does it appear that it was the producer
or associate producer who hired the crew members; moreover, it is VIVAs corporate
name which appears on the heading of the appointment slip. What likewise tells against
VIVA is that it paid petitioners salaries as evidenced by vouchers, containing VIVAs
letterhead, for that purpose.[30]
All the circumstances indicate an employment relationship between petitioners
and VIVA alone, thus the inevitable conclusion is that petitioners are employees only
of VIVA.
The next issue is whether petitioners were illegally dismissed. Private
respondents contend that petitioners were project employees whose employment was
automatically terminated with the completion of their respective projects. Petitioners
assert that they were regular employees who were illegally dismissed.
It may not be ignored, however, that private respondents expressly admitted that
petitioners were part of a work pool;[31] and, while petitioners were initially hired possibly
as project employees, they had attained the status of regular employees in view of
VIVAs conduct.
A project employee or a member of a work pool may acquire the status of a regular
employee when the following concur:
1) There is a continuous rehiring of project employees even after cessation of a
project;[32] and
18
2) The tasks performed by the alleged project employee are vital, necessary and
indispensable to the usual business or trade of the employer.[33]
However, the length of time during which the employee was continuously re-hired
is not controlling, but merely serves as a badge of regular employment. [34]
In the instant case, the evidence on record shows that petitioner Enero was
employed for a total of two (2) years and engaged in at least eighteen (18) projects,
while petitioner Maraguinot was employed for some three (3) years and worked on at
least twenty-three (23) projects.[35] Moreover, as petitioners tasks involved, among
other chores, the loading, unloading and arranging of movie equipment in the shooting
area as instructed by the cameramen, returning the equipment to the Viva Films
warehouse, and assisting in the fixing of the lighting system, it may not be gainsaid that
these tasks were vital, necessary and indispensable to the usual business or trade of
the employer. As regards the underscored phrase, it has been held that this is
ascertained by considering the nature of the work performed and its relation to the
scheme of the particular business or trade in its entirety.[36]
A recent pronouncement of this Court anent project or work pool employees who
had attained the status of regular employees proves most instructive:
The denial by petitioners of the existence of a work pool in the company because
their projects were not continuous is amply belied by petitioners themselves who
admit that: xxx
A work pool may exist although the workers in the pool do not receive salaries and
are free to seek other employment during temporary breaks in the business, provided
that the worker shall be available when called to report for a project. Although
primarily applicable to regular seasonal workers, this set-up can likewise be applied to
project workers insofar as the effect of temporary cessation of work is
concerned. This is beneficial to both the employer and employee for it prevents the
unjust situation of coddling labor at the expense of capital and at the same time
enables the workers to attain the status of regular employees. Clearly, the continuous
rehiring of the same set of employees within the framework of the Lao Group of
Companies is strongly indicative that private respondents were an integral part of a
work pool from which petitioners drew its workers for its various projects.
In a final attempt to convince the Court that private respondents were indeed project
employees, petitioners point out that the workers were not regularly maintained in the
payroll and were free to offer their services to other companies when there were no
on-going projects. This argument however cannot defeat the workers status of
regularity. We apply by analogy the case of Industrial-Commercial-Agricultural
Workers Organization v. CIR [16 SCRA 562, 567-68 (1966)] which deals with regular
seasonal employees. There we held: xxx
Truly, the cessation of construction activities at the end of every project is a
foreseeable suspension of work. Of course, no compensation can be demanded from
the employer because the stoppage of operations at the end of a project and before
the start of a new one is regular and expected by both parties to the labor
relations. Similar to the case of regular seasonal employees, the employment relation
is not severed by merely being suspended. [citing Manila Hotel Co. v. CIR, 9 SCRA
186 (1963)] The employees are, strictly speaking, not separated from services but
merely on leave of absence without pay until they are reemployed. Thus we cannot
affirm the argument that non-payment of salary or non-inclusion in the payroll and the
opportunity to seek other employment denote project employment.[37] (underscoring
supplied)
While Lao admittedly involved the construction industry, to which Policy
Instruction No. 20/Department Order No. 19[38] regarding work pools specifically
applies, there seems to be no impediment to applying the underlying principles to
industries other than the construction industry. [39] Neither may it be argued that a
substantial distinction exists between the projects undertaken in the construction
industry and the motion picture industry. On the contrary, the raison d' etre of both
industries concern projects with a foreseeable suspension of work.
At this time, we wish to allay any fears that this decision unduly burdens an
employer by imposing a duty to re-hire a project employee even after completion of the
project for which he was hired. The import of this decision is not to impose a positive
and sweeping obligation upon the employer to re-hire project employees. What this
decision merely accomplishes is a judicial recognition of the employment status of a
project or work pool employee in accordance with what is fait accompli, i.e., the
continuous re-hiring by the employer of project or work pool employees who perform
tasks necessary or desirable to the employers usual business or trade. Let it not be
said that this decision coddles labor, for as Lao has ruled, project or work pool
employees who have gained the status of regular employees are subject to the no
work-no pay principle, to repeat:
A work pool may exist although the workers in the pool do not receive salaries and
are free to seek other employment during temporary breaks in the business, provided
that the worker shall be available when called to report for a project. Although
primarily applicable to regular seasonal workers, this set-up can likewise be applied to
project workers insofar as the effect of temporary cessation of work is
concerned. This is beneficial to both the employer and employee for it prevents the
unjust situation of coddling labor at the expense of capital and at the same time
enables the workers to attain the status of regular employees.
The Courts ruling here is meant precisely to give life to the constitutional policy of
strengthening the labor sector,[40] but, we stress, not at the expense of
management. Lest it be misunderstood, this ruling does not mean that simply because
19
an employee is a project or work pool employee even outside the construction industry,
he is deemed, ipso jure, a regular employee. All that we hold today is that once a project
or work pool employee has been: (1) continuously, as opposed to intermittently, re-
hired by the same employer for the same tasks or nature of tasks; and (2) these tasks
are vital, necessary and indispensable to the usual business or trade of the employer,
then the employee must be deemed a regular employee, pursuant to Article 280 of the
Labor Code and jurisprudence. To rule otherwise would allow circumvention of labor
laws in industries not falling within the ambit of Policy Instruction No. 20/Department
Order No. 19, hence allowing the prevention of acquisition of tenurial security by project
or work pool employees who have already gained the status of regular employees by
the employers conduct.

In closing then, as petitioners had already gained the status of regular employees,
their dismissal was unwarranted, for the cause invoked by private respondents for
petitioners dismissal, viz., completion of project, was not, as to them, a valid cause for
dismissal under Article 282 of the Labor Code. As such, petitioners are now entitled to
back wages and reinstatement, without loss of seniority rights and other benefits that
may have accrued.[41] Nevertheless, following the principles of suspension of work and
no pay between the end of one project and the start of a new one, in computing
petitioners back wages, the amounts corresponding to what could have been earned
during the periods from the date petitioners were dismissed until their reinstatement
when petitioners respective Shooting Units were not undertaking any movie projects,
should be deducted.

Petitioners were dismissed on 20 July 1992, at a time when Republic Act No.
6715 was already in effect. Pursuant to Section 34 thereof which amended Section 279
of the Labor Code of the Philippines and Bustamante v. NLRC,[42] petitioners are
entitled to receive full back wages from the date of their dismissal up to the time of their
reinstatement, without deducting whatever earnings derived elsewhere during the
period of illegal dismissal, subject, however, to the above observations.

WHEREFORE, the instant petition is GRANTED. The assailed decision of the

National Labor Relations Commission in NLRC NCR CA No. 006195-94 dated 10
February 1995, as well as its Resolution dated 6 April 1995, are hereby ANNULLED
and SET ASIDE for having been rendered with grave abuse of discretion, and the
decision of the Labor Arbiter in NLRC NCR Case No. 00-07-03994-92 is REINSTATED,
subject, however, to the modification above mentioned in the computation of back
wages.

No pronouncement as to costs.

SO ORDERED.

Bellosillo, Vitug, and Kapunan, JJ., concur.

20
G.R. No. 111870 June 30, 1994
AIR MATERIAL WING SAVINGS AND LOAN ASSOCIATION, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, et al., respondents.
Jerry D. Banares for petitioner.
Perdrelito Q. Aquino for private respondent.
CRUZ, J.:
Private respondent Luis S. Salas was appointed "notarial and legal counsel" for
petitioner Air Material Wings Savings and Loan Association (AMWSLAI) in 1980. The
appointment was renewed for three years in an implementing order dated January 23,
1987, reading as follows:
SUBJECT: Implementing Order on the Reappointment of the Legal
Officer
TO: ATTY. LUIS S. SALAS
Per approval of the Board en banc in a regular meeting held on
January 21, 1987, you are hereby reappointed as Notarial and
Legal Counsel of this association for a term of three (3) years
effective March 1, 1987, unless sooner terminated from office for
cause or as may be deemed necessary by the Board for the
interest and protection of the association.
Aside from notarization of loan & other legal documents, your
duties and responsibilities are hereby enumerated in the attached
sheet, per Articles IX, Section 1-d of the by-laws and those
approved by the Board en banc.
Your monthly compensation/retainer's fee remains the same.
This shall form part of your 201 file.
BY
AUTHORITY
OF THE
BOARD:
VIN S. MANAY
President & Chief of the Board
On January 9, 1990, the petitioner issued another order reminding Salas of the
approaching termination of his legal services under their contract. This prompted
Salas to lodge a complaint against AMWSLAI for separation pay, vacation and sick
leave benefits, cost of living allowances, refund of SSS premiums, moral and
exemplary damages, payment of notarial services rendered from February 1, 1980 to
March 2, 1990, and attorney's fees.
Instead of filing an answer, AMWSLAI moved to dismiss for lack of jurisdiction. It
averred that there was no employer-employee relationship between it and Salas and
that his monetary claims properly fell within the jurisdiction of the regular courts. Salas
opposed the motion and presented documentary evidence to show that he was
indeed an employee of AMWSLAI.
The motion was denied and both parties were required to submit their position
papers. AMWSLAI filed a motion for reconsideration ad cautelam, which was also
denied. The parties were again ordered to submit their position papers but AMWSLAI
did not comply. Nevertheless, most of Salas' claims were dismissed by the labor
arbiter in his decision dated November 21, 1991. 1
It was there held that Salas was not illegally dismissed and so not entitled to collect
separation benefits. His claims for vacation leave, sick leave, medical and dental
allowances and refund of SSS premiums were rejected on the ground that he was a
managerial employee. He was also denied moral and exemplary damages for lack of
evidence of bad faith on the part of AMWSLAI. Neither was he allowed to collect his
notarial fees from 1980 up to 1986 because the claim therefor had already
prescribed. However, the petitioner was ordered to pay Salas his notarial fees from
1987 up to March 2, 1990, and attorney's fee equivalent to 10% of the judgment
award.
On appeal, the decision was affirmed in toto by the respondent Commission,
prompting the petitioner to seek relief in this Court. 2
The threshold issue in this case is whether or not Salas can be considered an
employee of the petitioner company.
We have held in a long line of decisions that the elements of an employer-employee
relationship are: (1) selection and engagement of the employee; (2) payment of
21
wages; (3) power of dismissal; and (4) employer's own power to control employee's
conduct.3
The existence of such a relationship is essentially a factual question. The findings of
the NLRC on this matter are accorded great respect and even finality when the same
are supported by substantial evidence. 4
The terms and conditions set out in the letter-contract entered into by the parties on
January 23, 1987, clearly show that Salas was an employee of the petitioner. His
selection as the company counsel was done by the board of directors in one of its
regular meetings. The petitioner paid him a monthly compensation/retainer's fee for
his services. Though his appointment was for a fixed term of three years, the
petitioner reserved its power of dismissal for cause or as it might deem necessary for
its interest and protection. No less importantly, AMWSLAI also exercised its power of
control over Salas by defining his duties and functions as its legal counsel, to wit:
1. To act on all legal matters pertinent to his Office.
2. To seek remedies to effect collection of overdue accounts of
members without prejudice to initiating court action to protect the
interest of the association.
3. To defend by all means all suit against the interest of the
Association. 5
In the earlier case of Hydro Resources Contractors Corp. v.
Pagalilauan, 6 this Court observed that:
A lawyer, like any other professional, may very well be an
employee of a private corporation or even of the government. It is
not unusual for a big corporation to hire a staff of lawyers as its in-
house counsel, pay them regular salaries, rank them in its table of
organization, and otherwise treat them like its other officers and
employees. At the same time, it may also contract with a law firm to
act as outside counsel on a retainer basis. The two classes of
lawyers often work closely together but one group is made up of
employees while the other is not. A similar arrangement may exist
as to doctors, nurses, dentists, public relations practitioners and
other professionals.
We hold, therefore, that the public respondent committed no grave abuse of
discretion in ruling that an employer-employee relationship existed between the
petitioner and the private respondent.
We must disagree with the NLRC, however, on Salas' claims for notarial fees.
The petitioner contends that the public respondents are not empowered to adjudicate
claims for notarial fees. On the other hand, the Solicitor General believes that the
NLRC acted correctly when it took cognizance of the claim because it arose out of
Salas' employment contract with the petitioner which assigned him the duty to
notarize loan agreements and other legal documents. Moreover, Section 9 of Rule
141 of the Rules of Court does not restrict or prevent the labor arbiter and the NLRC
from determining claims for notarial fees.
Labor arbiters have the original and exclusive jurisdiction over money claims of
workers when such claims have some reasonable connection with the employer-
employee relationship. The money claims of workers referred to in paragraph 3 of
Article 217 of the Labor Code are those arising out of or in connection with the
employer-employee relationship or some aspect or incident of such relationship.
Salas' claim for notarial fees is based on his employment as a notarial officer of the
petitioner and thus comes under the jurisdiction of the labor arbiter.
The public respondents agreed that Salas was entitled to collect notarial fees from
1987 to 1990 by virtue of his having been assigned as notarial officer. We feel,
however, that there is no substantial evidence to support this finding.
The letter-contract of January 23, 1987, does not contain any stipulation for the
separate payment of notarial fees to Salas in addition to his basic salary. On the
contrary, it would appear that his notarial services were part of his regular functions
and were thus already covered by his monthly compensation. It is true that the
notarial fees were paid by members-borrowers of the petitioner for its own account
and not of Salas. However, this is not a sufficient basis for his claim to such fees in
the absence of any agreement to that effect.
ACCORDINGLY, the appealed judgment of the NLRC is AFFIRMED, with the
modification that the award of notarial fees and attorney's fees is disallowed. It is so
ordered.
Davide, Jr., Bellosillo, Quiason and Kapunan, JJ., concur.
22
G.R. Nos. 97320-27 July 30, 1993
VALLUM SECURITY SERVICES and BAGUIO LEISURE CORPORATION (HYATT
TERRACES BAGUIO), petitioners,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, RUBEN ABELLERA,
MANUEL GANANCIAL, SAMSON ALEJERA, ROMEO BAUTISTA, CARLOS
BANIAGO, GABRIEL CABASAL, ARTEMIO CARIÑO, BENJAMIN LARON,
SANTIAGO PACULAN, FRANCISCO OBEDOZA, CEFERINO GARCIA, ARNOLD
PAMINLAN, ROMAN PALIMA, JOSEFINO LOZANO, PEDRO DULAY, JR.,
CLAUDIO PANGANIBAN, RONNIE BALDERAS, AVELINO PINTO, BEN ENRIQUE
ESTOCAPIO, ESABELITO ANGARA, ROBERT AGUIMBAG, WILSON
ESTAVILLO, FELIXBERTO NARVASA, PABLITO ROSARIO, EDGAR PALISOC,
DONIE PERALTA, WILLY QUESADA, MARIO URBANO, EDWIN JACOB, JOSE
VIRGILIO LUSTERIO, MA. NESTOR LABADOR, ROMEO LOPEZ, MANOLO
MAGAT, MARIANO MARCENA, WILSON MUNAR. ROSEMARIE DUMLAO,
FLORENTINO CASTAÑEDA, RUBEN PANTERIA, JOHNNY VILLANUEVA, DELIA
ROSARIO, GARY JAVATE, DEAN PASAMIC, VALERIE BRIONES, NEMENCIO
CUTCHON, PHILIP MORIS, VINCENT NOEL CABRERA and JAIME
GIMENO, respondents.
Sanidad Law Offices for petitioners.
Cabato Law Office for respondents.
FELICIANO, J.:
On 1 September 1986, petitioner Baguio Leisure Corporation (Hyatt Terraces Baguio)
("Hyatt Baguio") and petitioner Vallum Security Services ("Vallum") entered into a
contract for security services under the terms of which Vallum agreed to protect the
properties and premises of Hyatt Baguio by providing fifty (50) security guards, on a
24-hour basis, a day.
On 1 June 1988, Heinrich L. Maulbecker, Hyatt Baguio's General Manager, wrote to
Domingo A. Inocentes, President of Vallum advising that effective 1 July 1988, the
contract of security services would be terminated.
Vallum informed Mr. Maulbecker, on 22 June 1988, that it was agreeable to the
termination of the contract.
On 30 June 1988, private respondents, who were security guards provided by Vallum
to Hyatt Baguio, were informed by Vallum's Personnel Officer that the contract
between the two (2) had already expired. Private respondents were directed to report
to Vallum's head office at Sucat Road, in Muntinlupa, Metropolitan Manila, not later
than 15 July 1988 for re-assignment. They were also told that failure to report at
Sucat would be taken to mean that they were no longer interested in being re-
assigned to some other client of Vallum.
None of the private respondents reported at Sucat for re-assignment. Instead,
between July and September 1988, private respondents filed several complaints
against petitioners in the National Labor Relations Commission's Office ("NLRC") in
Baguio City for illegal dismissal and unfair labor practices; for violation of labor
standards relating to underpayment of wages, premium holiday and restday pay,
uniform allowances and meal allowances. They prayed for reinstatement with full
backwages. The several cases were consolidated together.
On 19 May 1989, the Labor Arbiter rendered a decision dismissing the complaints. He
found Vallum to be an independent contractor and, consequently, declined to hold
Hyatt Baguio liable for dismissal of private respondents. He also held that the
termination of services of private respondents by Vallum did not constitute an unfair
labor practice, considering that such termination had been brought about by lack of
work. Furthermore, the Labor Arbiter held that private respondents were not entitled
to backwages or separation pay, in line with the "no work, no pay" principle. Lastly, he
found no violation of the labor standard provisions on payment of wages and other
employee benefits.1
Private respondents appealed the Labor Arbiter's decision to the NLRC. On 31 July
1990, the NLRC promulgated a resolution reversing the Labor Arbiter's decision, the
dispositive portion of which resolution reads as follows:
WHEREFORE, the decision appealed from is hereby REVERSED
and set aside and a new one entered ordering the respondent Hyatt
Terraces Baguio to reinstate the complainants to their former
positions with full backwages limited to one (1) year. In view of
supervening event which makes the reinstatement imposible,
respondents Hyatt Terraces Baguio and Vallum Security Services
Corporation, are directed, jointly and severally to pay complainants,
in lieu of reinstatement, separation pay equal to one (1) month per
year of service. Service of six month shall be considered a year for
the purpose of the same.2
Petitioners moved for reconsideration, without success.
23
Vallum and Hyatt Baguio are hence before this Court on certiorari seeking to: (a)
reverse and annul the Resolutions of the NLRC of 31 July 1990 and 31 January 1991;
and (b) reinstate the decision of the Labor Arbiter dated 19 May 1989. Petitioners
assert that the NLRC's finding that an employer-employee relationship had existed
between Hyatt Baguio and private respondents, is tainted with arbitrariness.
The main issue here presented and addressed below is whether or not private
respondent security guards are indeed employees of petitioner Hyatt Baguio.
In determining whether a given set of circumstances constitute or exhibit an
employer-employee relationship, the accepted rule is that the elements or
circumstances relating to the following matters shall be examined and considered:
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.3
Of the above, control of the employees' conduct is commonly regarded as the most
crucial and determinative indicator of the presence or absence of an employer-
employee relationship.4 We examine below the circumstances of the relationship
between petitioners and private respondents under the above four (4) rubrics.
In respect of the selection and engagement of the employees, the records here show
that private respondents filled up Hyatt employment application forms and submitted
the executed forms directly to the Security Department of Hyatt Baguio.5 It appears
that these executed application forms were returned to the respective
applicants;6nonetheless, however, a few days after the applications to Hyatt Baguio
were submitted, Vallum sent letters of acceptance to private respondents. Petitioners
do not deny that private respondent had applied for employment at Hyatt's Security
Department and that Security Department was used to process the applications.
Petitioners argue that because the premises to be secured were located in Baguio,
Vallum found it more advantageous to recruit security guards from the Baguio area. It
would have been most inconvenient for applicants from the Baguio area to have gone
all the way to Sucat in Makati to file and follow-up their applications; accordingly,
Vallum was provided with its own office at Hyatt Baguio and there the applications,
with the assistance of Hyatt Baguio's Security Department, were
processed.7 Petitioners' argument here, while understandable, does not negate the
fact that the process of selection and engagement of private respondents had been
carried out in Hyatt Baguio and subject to the scrutiny of officers and employees of
Hyatt Baguio.
In respect of the mode or manner of payment of wages, private respondents
submitted in evidence four hundred twenty-three (423) pay slips (Exhibits "A" for
complainants-private respondents), which bore Hyatt Baguio's logo.8These pay slips
show that it was Hyatt Baguio which paid their wages directly and that Hyatt Baguio
deducted therefrom the necessary amounts for SSS premiums, internal revenue
withholding taxes, and medicare contributions. The Labor Arbiter had found that a
separate payroll was maintained for Vallum by Hyatt Baguio; the NLRC, however,
held that this finding had no factual basis, and we are compelled to agree with this
finding. It is true that a subsequent agreement (10 September 1986) between Vallum
and Hyatt Baguio had provided:
1. That for the purposes of facilitating and prevention of delays in
the distribution of payroll to all Security guards assigned at the
premises of the company and as embraced in the contract of
Security services, the [vallum] shall herewith authorize the [Hyatt
Baguio] to undertake the distribution of the payroll directly to the
guards as mentioned herein. (Emphasis supplied)
2. That for purposes of the payroll distribution as stated above, the
company shall devise ways to ensure the efficient and prompt
distribution to the guards of their respective salaries.9 (Emphasis
supplied)
The fact that this agreement had stipulated for direct payment by Hyatt Baguio of
private respondents' wages did not, of course, dissolve the relevance of such direct
payment as an indicator of an employer-employee relationship between Hyatt Baguio
and private respondents. Vallum did not even provide Hyatt Baguio with Vallum's own
pay slips or payroll vouchers for such direct payments. What clearly emerges is that
Hyatt Baguio discharged a function which was properly a function of the employer.
Turning to the matter of location of the power of dismissal, we note that the contract
provided that upon loss of confidence on the part of Hyatt Baguio vis-a-vis any
security guard furnished by Vallum, such security guard "may be changed
immediately upon the request to [Vallum] by [Hyatt Baguio]." Notwithstanding the
terms of the formal contract between petitioners, the NLRC found that, in operative
fact, it was Hyatt Baguio's Chief Security Officer
who exercised the power of enforcing disciplinary measures over the security
guards. 10 In the matter of termination of services of particular security guards, Hyatt
Baguio had merely used Vallum as a channel to implement its decisions, much as it
had done in the process of selection and recruitment of the guards.
Coming then to the location of the power of control over the activities of the security
guards, the following factors lead us to the conclusion that power was effectively
located in Hyatt Baguio rather than in Vallum:
24
 (a) the assignments of particular security guards was subject to the
approval of Hyatt Baguio's Chief Security Officer; 11
(b) promotions of the security guards from casual to regular
employees were approved or ratified by the Chief Security Officer
of Hyatt Baguio; 12
(c) Hyatt Baguio's Chief Security Officer decided who among the
various security guards should be an duty or on call, as well as
who, in cases of disciplinary matters, should be suspended or
dismissed; 13
(d) the petitioners themselves admitted that Hyatt Baguio, through
its Chief Security Officer, awarded citations to individual security
guards for meritorious services. 14
Petitioners contend that what existed between Vallum and Hyatt Baguio was simply
close coordination and dove-tailing of operations, rather than control and supervision
by one over the operations of the other, and that Hyatt Baguio's Chief Security Officer
had acted as the conduit between Hyatt Baguio and Vallum in respect of the
implementation of the contract of security services. That is not, however, the
characterization given by the NLRC to the details of the factual relationships between
Hyatt Baguio (acting through its Chief Security Officer) and Vallum and private
respondent security guards and it is clear to the Court that the characterization
reached by the NLRC is not without the support of substantial evidence of record. We
agree with the NLRC's characterization.
One final circumstance seems worthy of note: orders received by private respondent
security guards were set forth on paper bearing the letterheads of both Hyatt Baguio
and Vallum. 15 It appears to us, therefore, that Hyatt Baguio explicitly purported, at the
very least, to share with Vallum the exercise of the power of control and supervision
with Vallum over the security guards, if indeed Vallum was not functioning merely as
an alter ego of Hyatt Baguio in respect of the operations of the security guards. In the
ordinary course of business, security guard agencies are engaged because of their
specialized capabilities in the matter of physical security. It is a security agency's
business to know the most efficacious manner of protecting and securing a particular
place at a particular time. In the case at bar, the functions performed by Hyatt
Baguio's Chief Security Officer were precisely the duties which the head or senior
officer of a legitimate security agency would be exercising over its own employees.
Finally, we note that the contract for security services between Vallum and Hyatt
Baguio contained the following provisions:
xxx xxx xxx
3. The AGENCY shall exercise discipline, supervision, control and
administration over the security guard so assigned to the premises
of the COMPANY in accordance with the Rules and Regulations of
the PCSUSIA, the Local Police Departments, the AGENCY and the
COMPANY.
4. The AGENCY shall provide at its own expense all necessary,
proper and duly licensed firearms, ammunitions, nightsticks, and
other paraphernalia for security purposes, to the guards it assigns
to the COMPANY and shall shoulder all taxes and licenses relating
to the Security Services referred to in this agreement.
5. It is expressly understood and mutually agreed by the parties
hereto that the AGENCY shall be held solely liable for any claim for
security guards' wages and/or damages arising out of personal
injury including death caused, either by the AGENCY's guard upon
a third party or by the AGENCY'S guard or third party upon a guard
assigned by the AGENCY to the COMPANY, and should the
COMPANY be held liable therefore, the AGENCY shall reimburse
the COMPANY for any and all amounts that it may have been
called upon to pay.
xxx xxx xxx
7. The AGENCY shall always detail within the hours the period
provided for and in the paragraph 1 of this contract, an authorized
representative who shall handle for the AGENCY all matters
regarding security and enforcement which the COMPANY may
wish to implement.
The thrust of the foregoing discussion, however, is that the relationship between
Vallum and Hyatt Baguio as actually conducted departed significantly from the formal
written terms of their agreement. It is to us self-evident that the characterization in law
of such relationship cannot conclusively be made in terms alone of the written
agreement — which constitutes but one factor out of many that the Court must take
into account — but must rest upon an examination of the detailed facts of such
relationship in the world of time and space.
We find no basis for overturning the conclusions reached by the NLRC that Vallum, in
the specific circumstances of this case, was not an independent contractor but was,
rather, a "labor-only" contracor. Section 9 of Rule VII of Book III entitled "Conditions of
25
Employment" of the Omnibus Rules Implementing the Labor Code provides as
follows:
Sec. 9. Labor-only contracting. (a) Any person who undertakes to
supply workers to an employer shall be deemed to be engaged in
labor-only contracting where such person:
was the reason too why Vallum had stipulated that Hyatt Baguio was to distribute the
salaries of the security guards directly to them and that Hyatt had used its own
corporate forms and pay slips in doing so. The security guards were clearly
performing activities directly related to the business operations of Hyatt Baguio, since
the undertaking to safeguard the person and belongings of hotel guests is one of the
obligations of a hotel vis-a-visits guests and the general public.

(1) Does not have substantial capital or
investment in the form of tools, equipment,
machineries, work premises and other materials;
and
(2) The workers recruited and placed by such
person are performing activities which are directly
related to the principal business or operations of
the employer in which workers are habitually
employed.
(b) Labor-only contracting as defined herein is hereby prohibited
and the person acting as contractor shall be considered merely as
an agent or intermediary of the employer who shall be responsible
to the workers in the same manner and extent as if the latter were
directly employed by him.
xxx xxx xxx
Where labor-only contracting exists in a given case, the law itself implies or
establishes an employer-employee relationship between the employer (the owner of
the project or establishment) (here, Hyatt Baguio) and the employees of the labor-
only contractor (here, Vallum) to prevent any violation or circumvention of provisions
of the Labor Code. 16
The issue of illegal dismissal need not detain us for long. It has not been alleged by
petitioners that a just or authorized cause for terminating private respondents'
services had existed. And even if such lawful cause existed, it is not alleged that
private respondents' rights to procedural due process in that connection had been
appropriately observed.
We conclude that petitioners have not shown any grave abuse of discretion or any act
without or any in excess of jurisdiction on the part of the National Labor Relations
Commission in rendering its Resolutions dated 31 July 1990 and 31 January 1991.
WHEREFORE, premises considered, the Petition for Certiorari is hereby DISMISSED
for lack of merit. Costs against petitioners.

Sec. 8. Job contracting. — There is job contracting permissible Bidin, Romero, Melo and Vitug, JJ., concur.
under the Code if the following conditions are met:

(1) The contractor carries on an independent business and

undertakes the contract work on his own account under his own
responsibility according 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 results
thereof; and

(2) The contractor has substantial capital or investment in the form

of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of his business.

In the case at bar, we noted that Vallum did not have a branch office in Baguio City
and that Hyatt Baguio provided Vallum with offices at Hyatt's own premises and
allowed Vallum to use its Security Department in the processing of applications. That
26
G.R. No. 86693 July 2, 1990
COSMOPOLITAN FUNERAL HOMES, INC., petitioner,
vs.
NOLI MAALAT and NATIONAL LABOR RELATIONS COMMISSION, respondents.
Castro, Enriquez, Carpio, Guillen & Associates for petitioner.
Castro B. Dorado for private respondent.
GUTIERREZ, JR., J.:
The nature of the work of a "funeraria" supervisor, whether employee or commission
agent, is the issue raised in this petition.
Sometime in 1962, petitioner Cosmopolitan Funeral Homes, Inc. engaged the
services of private respondent Noli Maalat as a "supervisor" to handle the solicitation
of mortuary arrangements, sales and collections. The funeral services which he sold
refer to the taking of the corpse, embalming, casketing, viewing and delivery. The
private respondent was paid on a commission basis of 3.5% of the amounts actually
collected and remitted.
On January 15, 1987, respondent Maalat was dismissed by the petitioner for
commission of the following violations despite previous warnings:
(a) Understatement of the reported contract price against the actual
contract price charged to and paid by the customers;
(b) Misappropriation of funds or collections by non-remittance of
collections and non-issuance of Official Receipt;
(c) Charging customers additional amount and pocketing the same
for the cost of medicines, linen, and security services without
issuing Official Receipt;
(d) Non-reporting of some embalming and re-embalming charges
and pocketing the same and non-issuance of Official Receipt;
(e) Engaging in tomb making and inclusion of the price of the tomb
in the package price without prior knowledge of the customers and
the company. (At p. 16, Records)
Maalat filed a complaint for illegal dismissal and non-payment of commissions.
On the basis of the parties' position papers, Labor Arbiter Newton R. Sancho
rendered a decision declaring Maalat's dismissal illegal and ordering the petitioner to
pay separation pay, commission, interests and attorney's fee in the total amount of
P205,571.52.
In an appeal from the decision, the National Labor Relations Commission (NLRC), on
May 31, 1988, reversed the Arbiter's action and rendered a new decision, the
dispositive portion of which reads:
WHEREFORE, premises considered, the decision dated November
27, 1987, is hereby SET ASIDE and VACATED and a New
One ENTERED, ordering as follows:
1. Judgment is hereby rendered declaring the dismissal of
complainant Noli Maalat by respondent-appellant as justified and
with lawful cause. By way of equitable relief and in the interest of
social and compassionate justice, We hereby order and direct
respondent Cosmopolitan Funeral Homes, Inc. to pay complainant
Maalat his separation pay equivalent to one-half (1/2%) month
average income for every year of service to appellant, computed on
his last year of service immediately preceding his separation from
respondent, subject to allowable set-offs and deductions of the
counter-claims of respondent company, after due notice and
hearing.
2. The claims for accrued commissions by complainant may be
admitted, subject to proofs thereof, and allowable set-offs and
deductions credited to the account of respondent-appellant by way
of counterclaims, after due notice and hearing.
3. All the evidence adduced by the parties are hereby admitted,
subject to rebuttal and/or controvertion by either party during the
hearing and the hearings hereafter.
4. The Attorney's fee in favor of complainant's counsel is hereby
fixed at two (2%) percent, assessable over whatever final money
27
 award complainant may be entitled on the aggregate sums thereof,
after proper hearing on the same.
All other claims and counter-claims are hereby dismissed for lack of
merit, except those specified above.
Finally, this case is remanded to the Regional Arbitration Branch of
origin for further proceedings in accordance with the above
judgment. No findings as to costs. (At pp. 66-67, Rollo)
The petitioner's motion for reconsideration was denied, hence, this petition for review
before this Court.
The issues raised in this petition are:
I. Whether or not the NLRC erred in ruling that an employment relationship existed
between the parties; and
II. Whether or not there was equitable basis for the award of 1/2 month separation
pay for every year of service.
I
In determining whether a person who performs work for another is the latter's
employee or an independent contractor, the prevailing test is the "right of control" test.
Under this 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.
The petitioner argues that Maalat was never its employee for he was only a
commission agent whose work was not subject to its control. Citing Investment
Planning Corporation of the Philippines v. Social Security System (21 SCRA 924
[1967]), the petitioner states that the work of its agents approximates that of an
independent contractor since the agent is not under control by the latter with respect
to the means and methods employed in the performance of the work, but only as to
the results.
The NLRC, after its perusal of the facts and evidence on record, stated that there
exists an employment relationship between the parties. The petitioner has failed to
overcome this factual finding.
The fact that the petitioner imposed and applied its rule prohibiting superiors from
engaging in other funeral business which it considered inimical to company interests
proves that it had the right of control and actually exercised its control over the private
respondent. In other words, Maalat worked exclusively for the petitioner.
Moreover, the private respondent was prohibited from engaging in part-time
embalming business outside of the company and a violation thereof was cause for
dismissal. Incurring absences without leave was likewise subject to disciplinary
action: a reprimand for the first offense, one week suspension for the second offense,
and dismissal for the third offense.
The petitioner admits that these prohibitive rules bound the private respondent but
states that these rules have no bearing on the means and methods ordinarily required
of a supervisor. The overall picture is one of employment. The petitioner failed to
prove that the contract with private respondent was but a mere agency, which
indicates that a "supervisor" is free to accomplish his work on his own terms and may
engage in other means of livelihood.
In Investment Planning Corporation, supra, cited by the petitioner, the majority of the
"commission agents" are regularly employed elsewhere. Such a circumstance is
absent in Maalat's case. Moreover, the private respondent's job description states
that ". . . he attends to the needs of the clientele and arranges the kind of casket and
funeral services the customers would like to avail themselves of" and indicates that he
must always be on the job or at least most of time.
Likewise, the private respondent was not allowed to issue his own receipts, nor was
he allowed to directly deduct his commission as truly independent salesmen practice.
Worthy of note too are two other company rules which provide that "negotiation and
making of contract with customers shall be done inside the office" and "signing of
contract should be made immediately before the cadaver or deceased is place in the
casket." (Annex 10-B, Petitioner's Position Paper, Records) Said rules belie the
petitioner's stand that it does not have control over the means and methods by which
the work is accomplished. The control test has been satisfied. (Social Security
System v. Court of Appeals, 156 SCRA 383 [1987])
The finding by the public respondent that the petitioner has reported private
respondent to the Social Security System as a covered employee adds strength to
the conclusion that Maalat is an employee.
There is no reversible error in the findings of facts by the NLRC which are supported
by substantial evidence and which we, therefore, do not disturb on appeal.
The payment of compensation by way of commission does not militate against the
conclusion that private respondent was an employee. Under Article 97 of the Labor
28
Code, "wage" shall mean "the renumeration of earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a
time, task, pace or commission basis . . .".
The non-observance of regular office hours does not sufficiently show that Maalat is a
"supervisor on commission basis" nor does the same indicate that he is an
independent salesman. As a supervisor, although compensated on commission
basis, he is exempt from the observance of normal hours of work for his
compensation is measured by the number of sales he makes. He may not have had
the usual fixed time for starting and ending his work as in other types of employment
but he had to spend most of his working hours at his job. People die at all times of the
day or night.
All considered, we rule that private respondent is an employee of petitioner
corporation.
II
The petitioner impugns the award of separation pay equivalent to one-half (1/2)
month average income for every year of service to private respondent. The NLRC
ruled that:
However, mindful of the fact the complainant Noli Maalat has
served respondent company for the last twenty four (24) years,
more or less, it is but proper to afford him some equitable relief,
consistent with the recent rulings of the Supreme Court, due to his
past services with no known previous record, and the ends of social
and compassionate justice will thus be served if he is paid a portion
of his separation pay, equivalent to one-half (1/2) month every year
of his service to said company. (See Soco v. Mercantile
Corporation, G.R. No. 53364-65, March 16, 1987; and Firestone, et
al, v. Lariosa et al., G.R. No. 70479, February 27, 1987). We are
not inclined to grant complainant his full month termination pay for
every year of his service because, unlike in the former Soco case,
the misconduct of the employee merely involves infraction of
company rules while in the latter Firestone case it involves
misconduct of a rank-and-file employee, although similarly involving
acts of dishonesty. (At pp. 65-66, Rollo)
This Court will not disturb the finding by the NLRC that private respondent Maalat was
dishonest in the discharge of his functions. The finding is sufficiently supported by the
evidence on record.
Additionally, the private respondent did not appeal from the NLRC decision, thereby
impliedly accepting the validity of his dismissal.
We take exception, therefore, to the grant of separation pay to private respondent.
In Philippine Long Distance Telephone Company (PLDT) v. NLRC, (164 SCRA 671
[1988]), this Court re-examined, the doctrine in the
aforecited Firestone and Soco cases and other previous cases that employees
dismissed for cause are nevertheless entitled to separation pay on the ground of
social and compassionate justice. In abandoning this doctrine, the Court held, and we
quote:
. . . We hold that henceforth separation pay shall be allowed as a
measure of social justice only in those instances where the
employee is validly dismissed for causes other than serious
misconduct or those reflecting on his moral character. Where the
reason for the valid dismissal is, for example, habitual intoxication
or an offense involving moral turpitude, like theft or illicit sexual
relations with a fellow worker, the employer may not be required to
give the dismissed employee separation pay, or financial
assistance, or whatever other name it is called, on the ground of
social justice.
A contrary rule would, as the petitioner correctly argues, have the
effect of rewarding rather than punishing the erring employee for
his offense. . . .
The policy of social justice is not intended to countenance
wrongdoing simply because it is committed by the underprivileged.
At best it may mitigate the penalty but it certainly will not condone
the offense. Compassion for the poor is an imperative of every
humane society but only when the recipient is not a rascal claiming
an undeserved privilege. . . .
Subsequent decisions have abided by this pronouncement. (See Philippine National
Construction Corporation v. National Labor Relations Commission, 170 SCRA 207
[1989]; Eastern Paper Mills, Inc. v. National Labor Relations Commission, 170 SCRA
597 [1989]; Osias Academy v. National Labor Relations Commission, G.R. No.
83234, April 18, 1989; and Nasipit Lumber Co., Inc. v. National Labor Relations
Commission, G.R. No. 54424, August 31, 1989.)
29
Conformably with the above cited PLDT ruling, this Court pronounces that the grant of
separation pay to private respondent Maalat, who was validly terminated for
dishonesty, is not justified.

Parenthetically, it may be mentioned that the Labor Arbiter, apparently unaware of the
petition for review pending before this Court, conducted further proceedings to
compute private respondent's separation pay, unclaimed commission and 2%
attorney's fees, in compliance with the NLRC decision of May 31, 1988. After hearing,
the Labor Arbiter rendered a decision on May 10, 1989, the pertinent portion of which
reads:

In sum, the sustainable claims of complainant are as follows:

(1) Separation Pay : P 76,064.40

(2) Unpaid Commissions : 39,344.80
——————
Sub-total : P 115,409.20
(3) 2% Attorney's Fees : 2,308.18
——————
P 117, 717.38

WHEREFORE, judgment is hereby rendered ordering respondent

Cosmopolitan Funeral Homes, Inc., to pay complainant Noli Maalat
his claims above set forth in the total amount of P117,717.38 only.

Neither party appealed from said decision.

For being in conflict with our holding that the private respondent is not entitled to
separation pay, this Court sets aside the Labor Arbiter's computation of separation
pay. However, we uphold his computation of unclaimed commissions amounting to
P39,344.80. The amount of attorney's fee should consequently be recomputed at 2%
of P39,344.80 or P786.89.

WHEREFORE, the judgment of the National Labor Relations Commission is

AFFIRMED except for the grant of separation pay which is hereby disallowed. Private
respondent Maalat is entitled to unclaimed commissions of P39,344.80 and 2%
attorney's fees of P786.89, said amounts being considered final.

SO ORDERED.

30
 [G.R. No. 145443. March 18, 2005]
RAQUEL P. CONSULTA, petitioner, vs. COURT OF APPEALS, PAMANA
PHILIPPINES, INC., RAZUL Z. REQUESTO, and ALETA
TOLENTINO, respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review[1] assailing the Decision of 28 April 2000 and
Resolution of 9 October 2000 promulgated by the Court of Appeals (appellate court) [2] in
CA-G.R. SP No. 50462. The appellate court reversed the Resolution of the National
Labor Relations Commission (NLRC) which in turn affirmed the Labor Arbiters
Decision.
The Antecedent Facts
Pamana Philippines, Inc. (Pamana) is engaged in health care business. Raquel
P. Consulta (Consulta) was a Managing Associate of Pamana. Consultas appointment
dated 1 December 1987 states:
We are pleased to formally confirm your appointment and confer upon you the
authority as MANAGING ASSOCIATE (MA) effective on December 1, 1987 up to
January 2, 1988. Your area of operation shall be within Metro Manila.
In this capacity, your principal responsibility is to organize, develop, manage, and
maintain a sales division and a full complement of agencies and Health Consultants
(HealthCons) and to submit such number of enrollments and revenue attainments as
may be required of your position in accordance with pertinent Company policies and
guidelines. In pursuit of this objective, you are hereby tasked with the responsibilities
of recruiting, training and directing your Supervising Associates (SAs) and the Health
Consultants under their respective agencies, for the purpose of promoting our
corporate Love Mission.
In the performance of such duties, you are expected to uphold and promote the
Companys interests and good image and to abide by its principles and established
norms of conduct necessary and appropriate in the discharge of your functions. The
authority as MA likewise vests upon you command responsibility for the actions of
your SAs and HealthCons; the Company therefore reserves the right to debit your
account for any accountabilities/financial obligations arising therefrom.
By your acceptance of this appointment, it is understood that you must represent the
Company on an exclusive basis, and must not engage directly or indirectly in
activities, nor become affiliated in official or unofficial capacity with companies or
organizations which compete or have the same business as Pamana. It is further
understood that his [sic] self-inhibition shall be effective for a period of one year from
date of official termination with the Company arising from any cause whatsoever.
In consideration of your undertaking the assignment and the accompanying duties
and responsibilities, you shall be entitled to compensation computed as follows:
On Initial Membership Fee Entrance Fee 5%
Medical Fee 6%
On Subsequent Membership Fee 6%
You are likewise entitled to participate in sales contests and such other incentives
that may be implemented by the Company.
This appointment is on a non-employer-employee relationship basis, and shall be in
accordance with the Company Guidelines on Appointment, Reclassification and
Transfer of Sales Associates.[3]
Sometime in 1987, Consulta negotiated with the Federation of Filipino Civilian
Employees Association (FFCEA) working at the United States Subic Naval Base for a
Health Care Plan for the FFCEA members. Pamana issued Consulta a
Certification[4] dated 23 November 1987, as follows:
This certifies that the Emerald Group under Ms. Raquel P. Consulta, as Managing
Consultant, is duly authorized to negotiate for and in behalf of PAMANA with the
Federation of Filipino Civilian Employees Association covering all U.S. facilities in the
Philippines, the coverage of FFCEA members under the Pamana Golden Care Health
Plans.
Upon such negotiation and eventual execution of the contract agreements,
entitlements of all benefits due the Emerald Group in its [sic] entirely including its [sic]
31
Supervising Consultants and Health Consultants, by of commissions, over-rides and
other package of benefits is hereby affirmed, obligated and confirmed as long as the
contracts negotiated and executed are in full force and effect, including any and all
renewals made. And provided further that the herein authorized consultants remain in
active status with the Pamana Golden Care sales group. [5]
On 4 March 1988, Pamana and the U.S. Naval Supply Depot signed the FFCEA
account. Consulta, claiming that Pamana did not pay her commission for the FFCEA
account, filed a complaint for unpaid wages or commission against Pamana, its
President Razul Z. Requesto (Requesto), and its Executive Vice-President Aleta
Tolentino (Tolentino).
The Rulings of the Labor Arbiter and the NLRC
In a Decision promulgated on 23 June 1993, Labor Arbiter Alex Arcadio Lopez
ruled, as follows:
ACCORDINGLY, respondent is hereby ordered to pay complainant her unpaid
commission to be computed as against actual transactions between respondent
PAMANA and the contracting Department of U.S. Naval Supply Depot upon
presentation of pertinent document.
Respondent is further ordered to pay ten (10%) percent attorneys fees.
SO ORDERED.[6]
Pamana, Requesto and Tolentino (Pamana et al.) appealed the Decision of the
Labor Arbiter.
In a Resolution[7] promulgated on 22 July 1994, the NLRC dismissed the appeal
and affirmed the Decision of the Labor Arbiter. In its Order promulgated on 3 October
1994, the NLRC denied the motion for reconsideration of Pamana et al.
Pamana et al. filed a petition for certiorari before this Court. In compliance with
this Courts resolution dated 6 February 1995, the Office of the Solicitor General
submitted a Manifestation in Lieu of Comment praying to grant the petition on the
ground that Consulta was not an employee of Pamana. On 23 November 1998, this
Court referred the case to the appellate court pursuant to St. Martin Funeral Home v.
NLRC.[8]
The Decision of the Appellate Court
In its Decision promulgated on 28 April 2000, the appellate court reversed the
NLRC Decision. The appellate court ruled that Consulta was a commission agent, not
an employee of Pamana. The appellate court also ruled that Consulta should have
litigated her claim for unpaid commission in an ordinary civil action.
Hence, Consultas recourse to this Court.
The Issues
The issues are:
1. Whether Consulta was an employee of Pamana.
2. Whether the Labor Arbiter had jurisdiction over Consultas claim for unpaid
commission.
The Ruling of the Court
We affirm the Decision of the appellate court. Consulta was an independent agent
and not an employee of Pamana.
The Four-Fold Test
In Viaa v. Al-Lagadan,[9] the Court first laid down the four-fold test to determine
the existence of an employer-employee relationship. The four elements of an employer-
employee relationship, which have since been adopted in subsequent
jurisprudence,[10] are (1) the power to hire; (2) the payment of wages; (3) the power to
dismiss; and (4) the power to control. The power to control is the most important of the
four elements.
In Insular Life Assurance Co., Ltd. v. NLRC,[11] the Court explained the scope
of the power to control, thus:
x x x It should, however, be obvious that not every form of control that the hiring party
reserves to himself over the conduct of the party hired in relation to the services
rendered may be accorded the effect of establishing an employer-employee
relationship between them in the legal or technical sense of the term. A line must be
drawn somewhere, if the recognized distinction between an employee and an
individual contractor is not to vanish altogether. Realistically, it would be a rare
32
contract of service that gives untrammelled freedom to the party hired and eschews
any intervention whatsoever in his performance of the engagement.
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.
In the present case, the power to control is missing. Pamana tasked Consulta to
organize, develop, manage, and maintain a sales division, submit a number of
enrollments and revenue attainments in accordance with company policies and
guidelines, and to recruit, train and direct her Supervising Associates and Health
Consultants.[12] However, the manner in which Consulta was to pursue these activities
was not subject to the control of Pamana. Consulta failed to show that she had to report
for work at definite hours. The amount of time she devoted to soliciting clients was left
entirely to her discretion. The means and methods of recruiting and training her sales
associates, as well as the development, management and maintenance of her sales
division, were left to her sound judgment.
Consulta claims that the documents she submitted show that Pamana had control
on the conduct of her work and the means and methods to accomplish the work.
However, the documents only prove the absence of the power to control. The Minutes
of the meeting on 31 May 1988 of the Managing Associates with Fely Whitfield, Vice-
President for Sales of Pamana, reflect the following:
At this point Mrs. Whitfield gave some pointers on recruitment and selling
techniques and reminded the group that the success of an agency is still people. The
more recruits you have the better is your chance to achieve your quota.
She also announced June be made a recruitment month, and told the MAs to remind
their associates that if you cannot sell to a prospect then recruit him or her.
She also discussed extensively the survey method of selling and recruitment and that
the sales associates should be more aggressive in their day to day sales activity. She
reminded the MAs to fill up their recruitment requirements to be able to
participate in the monthly and quarterly contest.
xxx
4. Recruitment Campaign
In connection with the Recruitment Campaign for June, Mr. R. Canon[13] requested for
Management support. He suggested that a recruitment Advertisement be placed in a
leading Metropolitan daily Newspaper. The cost of which was unanimously
suggested by MAs that Management should share at least 50%.
5. MAs agreed to pay in advance their share for the salary of the MAs
Secretary.[14] (Emphasis supplied)
The Minutes of the 7 June 1988 meeting reflect the following:
III. PRODUCTION & RECRUITMENT INCENTIVES
To help the MAs in their recruitment drive Mrs. Whitfield suggested some incentives
to be undertaken by the MAs like (1) cash incentives for associates that bring in a
recruit, (2) cash incentives based on production brought in by these new recruits.
She said that MAs, as businessm[e]n should invest time, effort & money to their work,
because it will redown [sic] to their own good anyway, that the success of their
agency should not depend solely on what management could give as incentives but
also on incentives of MAs within their agencies. It should be a concerted effort.
After a thorough discussion on the pros & cons of the suggestions it was agreed that
a P10.00 per recruit be given to the associate that will recruit and an additional cash
prize based on production of these new recruits.[15]
Clearly, the Managing Associates only received suggestions from Pamana on
how to go about their recruitment and sales activities. They could adopt the suggestions
but the suggestions were not binding on them. They could adopt other methods that
they deemed more effective.
Further, the Managing Associates had to ask the Management of Pamana to
shoulder half of the advertisement cost for their recruitment campaign. They shelled
out their own resources to bolster their recruitment. They shared in the payment of the
salaries of their secretaries. They gave cash incentives to their sales associates from
their own pocket. These circumstances show that the Managing Associates were
independent contractors, not employees, of Pamana.
Finally, Pamana paid Consulta not for labor she performed but only for the results
of her labor.[16] Without results, Consultas labor was her own burden and loss. Her right
to compensation, or to commission, depended on the tangible results of her work [17] -
whether she brought in paying recruits. Consultas appointment paper provides:
In consideration of your undertaking the assignment and the accompanying duties
and responsibilities, you shall be entitled to compensation computed as follows:
33
On Initial Membership Fee Entrance Fee 5% she was only entitled to commissions, bonuses and other benefits, which depended
solely on her sales and on the sales of her group.
Medical Fee 6%

On Subsequent Membership Fee 6% The Exclusivity Provision

You are likewise entitled to participation in sales contests and such other incentives
that may be implemented by the Company.[18] Consultas appointment had an exclusivity provision. The appointment provided
that Consulta must represent Pamana on an exclusive basis. She must not engage
directly or indirectly in activities of other companies that compete with the business of
The Guidelines on Appointment of Associates show that a Managing Associate
Pamana. However, the fact that the appointment required Consulta to solicit business
received the following commissions and bonuses:
exclusively for Pamana did not mean that Pamana exercised control over the means
and methods of Consultas work as the term control is understood in labor
3. Compensation Package of Regular MAs jurisprudence.[20] Neither did it make Consulta an employee of Pamana. Pamana did
not prohibit Consulta from engaging in any other business, or from being connected
Regular MAs shall be entitled to the following compensation and benefits: with any other company, for as long as the business or company did not compete with
Pamanas business.
3.1 Compensation
The prohibition applied for one year after the termination of the contract with
Pamana. In one of their meetings, one of the Managing Associates reported that he
a) Personal Production
was transferring his sales force and account from another company to Pamana.[21] The
exclusivity provision was a reasonable restriction designed to prevent similar acts
Individual/Family Institutional Acct. prejudicial to Pamanas business interest. Article 1306 of the Civil Code provides that
[t]he contracting parties may establish such stipulations, clauses, terms and conditions
commission 30% 30% as they may deem convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy.
bonus 40% -

b) Group Production Jurisdiction over Claim for Unpaid Commission

overriding commission 6% 6%
There being no employer-employee relationship between Pamana and Consulta,
the Labor Arbiter and the NLRC had no jurisdiction to entertain and rule on Consultas
bonus 5% -
money claim.

3.2 Benefits Article 217 of the Labor Code provides:

Participation in all sales contests corresponding to the MA position plus
any such other benefits as may be provided for the MA on regular
status.[19]
Aside from commissions, bonuses and other benefits that depended solely on
actual sales, Pamana did not pay Consulta any compensation for managing her sales
division, or for recruiting and training her sales consultants. As a Managing Associate,
ART. 217. Jurisdiction of Labor Arbiters and the Commission. - (a) Except as
otherwise provided under this Code the Labor Arbiters shall have original and
exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the
submission of the case by the parties for decision without extension, even in the
absence of stenographic notes, the following cases involving all workers, whether
agricultural or non-agricultural:
1. Unfair labor practice cases;
34
 2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers

may file involving wages, rates of pay, hours of work and other terms
and conditions of employment;

4. Claims for actual, moral, exemplary and other forms of damages arising
from the employer-employee relations;

5. Cases arising from any violation of Article 264 of this Code, including
questions involving the legality of strikes and lockouts; and

6. Except claims for Employees Compensation, Social Security, Medicare

and maternity benefits, all other claims, arising from employer-employee
relations, including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (P5,000.00)
regardless of whether accompanied with a claim for reinstatement.

(b) The Commission shall have exclusive appellate jurisdiction over all
cases decided by Labor Arbiters.

(c) Cases arising from the interpretation or implementation of collective

bargaining agreements and those arising from the interpretation or
enforcement of company personnel policies shall be disposed of by
the Labor Arbiter by referring the same to the grievance machinery
and voluntary arbitration as may be provided in said agreements.

Consulta filed her action under Article 217(a)(6) of the Labor Code. However,
since there was no employer-employee relationship between Pamana and Consulta,
the Labor Arbiter should have dismissed Consultas claim for unpaid commission.
Consultas remedy is to file an ordinary civil action to litigate her claim.

WHEREFORE, the petition is DISMISSED and the Decision of the Court of

Appeals in CA-G.R. SP No. 50462 is AFFIRMED in toto.

SO ORDERED.

35
G.R. No. 84484 November 15, 1989
INSULAR LIFE ASSURANCE CO., LTD., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO,
respondents.
Tirol & Tirol for petitioner.
Enojas, Defensor & Teodosio Cabado Law Offices for private respondent.
NARVASA, J.:
On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the
Company) and Melecio T. Basiao entered into a contract 1 by which:
1. Basiao was "authorized to solicit within the Philippines
applications for insurance policies and annuities in accordance with
the existing rules and regulations" of the Company;
2. he would receive "compensation, in the form of commissions ...
as provided in the Schedule of Commissions" of the contract to
"constitute a part of the consideration of ... (said) agreement;" and
3. the "rules in ... (the Company's) Rate Book and its Agent's
Manual, as well as all its circulars ... and those which may from
time to time be promulgated by it, ..." were made part of said
contract.
The contract also contained, among others, provisions governing the relations of the
parties, the duties of the Agent, the acts prohibited to him, and the modes of
termination of the agreement, viz.:
RELATION WITH THE COMPANY. The Agent shall be free to
exercise his own judgment as to time, place and means of soliciting
insurance. Nothing herein contained shall therefore be construed to
create the relationship of employee and employer between the
Agent and the Company. However, the Agent shall observe and
conform to all rules and regulations which the Company may from
time to time prescribe.
ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited
from giving, directly or indirectly, rebates in any form, or from
making any misrepresentation or over-selling, and, in general, from
doing or committing acts prohibited in the Agent's Manual and in
circulars of the Office of the Insurance Commissioner.
TERMINATION. The Company may terminate the contract at will,
without any previous notice to the Agent, for or on account of ...
(explicitly specified causes). ...
Either party may terminate this contract by giving to the other notice
in writing to that effect. It shall become ipso facto cancelled if the
Insurance Commissioner should revoke a Certificate of Authority
previously issued or should the Agent fail to renew his existing
Certificate of Authority upon its expiration. The Agent shall not have
any right to any commission on renewal of premiums that may be
paid after the termination of this agreement for any cause
whatsoever, except when the termination is due to disability or
death in line of service. As to commission corresponding to any
balance of the first year's premiums remaining unpaid at the
termination of this agreement, the Agent shall be entitled to it if the
balance of the first year premium is paid, less actual cost of
collection, unless the termination is due to a violation of this
contract, involving criminal liability or breach of trust.
ASSIGNMENT. No Assignment of the Agency herein created or of
commissions or other compensations shall be valid without the prior
consent in writing of the Company. ...
Some four years later, in April 1972, the parties entered into another contract — an
Agency Manager's Contract — and to implement his end of it Basiao organized an
agency or office to which he gave the name M. Basiao and Associates, while
concurrently fulfilling his commitments under the first contract with the Company. 2
In May, 1979, the Company terminated the Agency Manager's Contract. After vainly
seeking a reconsideration, Basiao sued the Company in a civil action and this, he was
later to claim, prompted the latter to terminate also his engagement under the first
contract and to stop payment of his commissions starting April 1, 1980. 3
Basiao thereafter filed with the then Ministry of Labor a complaint 4 against the
Company and its president. Without contesting the termination of the first contract,
the complaint sought to recover commissions allegedly unpaid thereunder, plus
attorney's fees. The respondents disputed the Ministry's jurisdiction over Basiao's
claim, asserting that he was not the Company's employee, but an independent
36
contractor and that the Company had no obligation to him for unpaid commissions
under the terms and conditions of his contract. 5
The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the
underwriting agreement had established an employer-employee relationship between
him and the Company, and this conferred jurisdiction on the Ministry of Labor to
adjudicate his claim. Said official's decision directed payment of his unpaid
commissions "... equivalent to the balance of the first year's premium remaining
unpaid, at the time of his termination, of all the insurance policies solicited by ... (him)
in favor of the respondent company ..." plus 10% attorney's fees. 6
This decision was, on appeal by the Company, affirmed by the National Labor
Relations Commission. 7 Hence, the present petition for certiorari and prohibition.
The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had
become the Company's employee by virtue of the contract invoked by him, thereby
placing his claim for unpaid commissions within the original and exclusive jurisdiction
of the Labor Arbiter under the provisions of Section 217 of the Labor Code, 8 or,
contrarily, as the Company would have it, that under said contract Basiao's status
was that of an independent contractor whose claim was thus cognizable, not by the
Labor Arbiter in a labor case, but by the regular courts in an ordinary civil action.
The Company's thesis, that no employer-employee relation in the legal and generally
accepted sense existed between it and Basiao, is drawn from the terms of the
contract they had entered into, which, either expressly or by necessary implication,
made Basiao the master of his own time and selling methods, left to his judgment the
time, place and means of soliciting insurance, set no accomplishment quotas and
compensated him on the basis of results obtained. He was not bound to observe any
schedule of working hours or report to any regular station; he could seek and work on
his prospects anywhere and at anytime he chose to, and was free to adopt the selling
methods he deemed most effective.
Without denying that the above were indeed the expressed implicit conditions of
Basiao's contract with the Company, the respondents contend that they do not
constitute the decisive determinant of the nature of his engagement, invoking
precedents to the effect that the critical feature distinguishing the status of an
employee from that of an independent contractor is control, that is, whether or not the
party who engages the services of another has the power to control the latter's
conduct in rendering such services. Pursuing the argument, the respondents draw
attention to the provisions of Basiao's contract obliging him to "... observe and
conform to all rules and regulations which the Company may from time to time
prescribe ...," as well as to the fact that the Company prescribed the qualifications of
applicants for insurance, processed their applications and determined the amounts of
insurance cover to be issued as indicative of the control, which made Basiao, in legal
contemplation, an employee of the Company. 9
It is true that the "control test" expressed in the following pronouncement of the Court
in the 1956 case of Viana vs. Alejo Al-Lagadan10
... In determining the existence of employer-employee relationship,
the following elements are generally considered, namely: (1) the
selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power to control the
employees' conduct — although the latter is the most important
element (35 Am. Jur. 445). ...
has been followed and applied in later cases, some fairly recent. 11 Indeed, it is
without question a valid test of the character of a contract or agreement to render
service. It should, however, be obvious that not every form of control that the hiring
party reserves to himself over the conduct of the party hired in relation to the services
rendered may be accorded the effect of establishing an employer-employee
relationship between them in the legal or technical sense of the term. A line must be
drawn somewhere, if the recognized distinction between an employee and an
individual contractor is not to vanish altogether. Realistically, it would be a rare
contract of service that gives untrammelled freedom to the party hired and eschews
any intervention whatsoever in his performance of the engagement.
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. The distinction
acquires particular relevance in the case of an enterprise affected with public interest,
as is the business of insurance, and is on that account subject to regulation by the
State with respect, not only to the relations between insurer and insured but also to
the internal affairs of the insurance company. 12 Rules and regulations governing the
conduct of the business are provided for in the Insurance Code and enforced by the
Insurance Commissioner. 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
37
own time and convenience, hence cannot justifiably be said to establish an employer-
employee relationship between him and the company.
There is no dearth of authority holding persons similarly placed as respondent Basiao
to be independent contractors, instead of employees of the parties for whom they
worked. In Mafinco Trading Corporation vs. Ople, 13the Court ruled that a person
engaged to sell soft drinks for another, using a truck supplied by the latter, but with
the right to employ his own workers, sell according to his own methods subject only to
prearranged routes, observing no working hours fixed by the other party and obliged
to secure his own licenses and defray his own selling expenses, all in consideration of
a peddler's discount given by the other party for at least 250 cases of soft drinks sold
daily, was not an employee but an independent contractor.
The Labor Arbiter's decision makes reference to Basiao's claim of having been
connected with the Company for twenty-five years. Whatever this is meant to imply,
the obvious reply would be that what is germane here is Basiao's status under the
contract of July 2, 1968, not the length of his relationship with the Company.
The Court, therefore, rules that under the contract invoked by him, Basiao was not an
employee of the petitioner, but a commission agent, an independent contractor whose
claim for unpaid commissions should have been litigated in an ordinary civil action.
The Labor Arbiter erred in taking cognizance of, and adjudicating, said claim, being
without jurisdiction to do so, as did the respondent NLRC in affirming the Arbiter's
decision. This conclusion renders it unnecessary and premature to consider Basiao's
claim for commissions on its merits.

In Investment Planning Corporation of the Philippines us. Social Security System 14 a WHEREFORE, the appealed Resolution of the National Labor Relations Commission
case almost on all fours with the present one, this Court held that there was no is set aside, and that complaint of private respondent Melecio T. Basiao in RAB Case
employer-employee relationship between a commission agent and an investment No. VI-0010-83 is dismissed. No pronouncement as to costs.
company, but that the former was an independent contractor where said agent and
others similarly placed were: (a) paid compensation in the form of commissions based SO ORDERED.
on percentages of their sales, any balance of commissions earned being payable to
their legal representatives in the event of death or registration; (b) required to put up
performance bonds; (c) subject to a set of rules and regulations governing the
performance of their duties under the agreement with the company and termination of
their services for certain causes; (d) not required to report for work at any time, nor to
devote their time exclusively to working for the company nor to submit a record of
their activities, and who, finally, shouldered their own selling and transportation
expenses.

More recently, in Sara vs. NLRC, 15 it was held that one who had been engaged by a
rice miller to buy and sell rice and palay without compensation except a certain
percentage of what he was able to buy or sell, did work at his own pleasure without
any supervision or control on the part of his principal and relied on his own resources
in the performance of his work, was a plain commission agent, an independent
contractor and not an employee.

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."

38
G.R. No. 167622 June 29, 2010
GREGORIO V. TONGKO, Petitioner,
vs.
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A.
VERGEL DE DIOS,Respondents.
RESOLUTION
BRION, J.:
This resolves the Motion for Reconsideration1 dated December 3, 2008 filed by
respondent The Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) to set aside
our Decision of November 7, 2008. In the assailed decision, we found that an
employer-employee relationship existed between Manulife and petitioner Gregorio
Tongko and ordered Manulife to pay Tongko backwages and separation pay for
illegal dismissal.
The following facts have been stated in our Decision of November 7, 2008, now under
reconsideration, but are repeated, simply for purposes of clarity.
The contractual relationship between Tongko and Manulife had two basic phases.
The first or initial phase began on July 1, 1977, under a Career Agent’s Agreement
(Agreement) that provided:
It is understood and agreed that the Agent is an independent contractor and nothing
contained herein shall be construed or interpreted as creating an employer-employee
relationship between the Company and the Agent.
xxxx
a) The Agent shall canvass for applications for Life Insurance, Annuities, Group
policies and other products offered by the Company, and collect, in exchange for
provisional receipts issued by the Agent, money due to or become due to the
Company in respect of applications or policies obtained by or through the Agent or
from policyholders allotted by the Company to the Agent for servicing, subject to
subsequent confirmation of receipt of payment by the Company as evidenced by an
Official Receipt issued by the Company directly to the policyholder.
xxxx
The Company may terminate this Agreement for any breach or violation of any of the
provisions hereof by the Agent by giving written notice to the Agent within fifteen (15)
days from the time of the discovery of the breach. No waiver, extinguishment,
abandonment, withdrawal or cancellation of the right to terminate this Agreement by
the Company shall be construed for any previous failure to exercise its right under
any provision of this Agreement.
Either of the parties hereto may likewise terminate his Agreement at any time without
cause, by giving to the other party fifteen (15) days notice in writing.2
Tongko additionally agreed (1) to comply with all regulations and requirements of
Manulife, and (2) to maintain a standard of knowledge and competency in the sale of
Manulife’s products, satisfactory to Manulife and sufficient to meet the volume of the
new business, required by his Production Club membership. 3
The second phase started in 1983 when Tongko was named Unit Manager in
Manulife’s Sales Agency Organization. In 1990, he became a Branch Manager. Six
years later (or in 1996), Tongko became a Regional Sales Manager.4
Tongko’s gross earnings consisted of commissions, persistency income, and
management overrides. Since the beginning, Tongko consistently declared himself
self-employed in his income tax returns. Thus, under oath, he declared his gross
business income and deducted his business expenses to arrive at his taxable
business income. Manulife withheld the corresponding 10% tax on Tongko’s
earnings.5
In 2001, Manulife instituted manpower development programs at the regional sales
management level. Respondent Renato Vergel de Dios wrote Tongko a letter dated
November 6, 2001 on concerns that were brought up during the October 18, 2001
Metro North Sales Managers Meeting. De Dios wrote:
The first step to transforming Manulife into a big league player has been very clear –
to increase the number of agents to at least 1,000 strong for a start. This may seem
diametrically opposed to the way Manulife was run when you first joined the
organization. Since then, however, substantial changes have taken place in the
organization, as these have been influenced by developments both from within and
without the company.
xxxx
The issues around agent recruiting are central to the intended objectives hence the
need for a Senior Managers’ meeting earlier last month when Kevin O’Connor, SVP-
Agency, took to the floor to determine from our senior agency leaders what more
could be done to bolster manpower development. At earlier meetings, Kevin had
presented information where evidently, your Region was the lowest performer (on a
39
per Manager basis) in terms of recruiting in 2000 and, as of today, continues to
remain one of the laggards in this area.
While discussions, in general, were positive other than for certain comments from
your end which were perceived to be uncalled for, it became clear that a one-on-one
meeting with you was necessary to ensure that you and management, were on the
same plane. As gleaned from some of your previous comments in prior meetings
(both in group and one-on-one), it was not clear that we were proceeding in the same
direction.
Kevin held subsequent series of meetings with you as a result, one of which I joined
briefly. In those subsequent meetings you reiterated certain views, the validity of
which we challenged and subsequently found as having no basis.
With such views coming from you, I was a bit concerned that the rest of the Metro
North Managers may be a bit confused as to the directions the company was taking.
For this reason, I sought a meeting with everyone in your management team,
including you, to clear the air, so to speak.
This note is intended to confirm the items that were discussed at the said Metro North
Region’s Sales Managers meeting held at the 7/F Conference room last 18 October.
xxxx
Issue # 2: "Some Managers are unhappy with their earnings and would want to revert
to the position of agents."
This is an often repeated issue you have raised with me and with Kevin. For this
reason, I placed the issue on the table before the rest of your Region’s Sales
Managers to verify its validity. As you must have noted, no Sales Manager came
forward on their own to confirm your statement and it took you to name Malou
Samson as a source of the same, an allegation that Malou herself denied at our
meeting and in your very presence.
This only confirms, Greg, that those prior comments have no solid basis at all. I now
believe what I had thought all along, that these allegations were simply meant to
muddle the issues surrounding the inability of your Region to meet its agency
development objectives!
Issue # 3: "Sales Managers are doing what the company asks them to do but, in the
process, they earn less."
xxxx
All the above notwithstanding, we had your own records checked and we found that
you made a lot more money in the Year 2000 versus 1999. In addition, you also
volunteered the information to Kevin when you said that you probably will make more
money in the Year 2001 compared to Year 2000. Obviously, your above statement
about making "less money" did not refer to you but the way you argued this point had
us almost believing that you were spouting the gospel of truth when you were not. x x
x
xxxx
All of a sudden, Greg, I have become much more worried about your ability to lead
this group towards the new direction that we have been discussing these past few
weeks, i.e., Manulife’s goal to become a major agency-led distribution company in the
Philippines. While as you claim, you have not stopped anyone from recruiting, I have
never heard you proactively push for greater agency recruiting. You have not been
proactive all these years when it comes to agency growth.
xxxx
I cannot afford to see a major region fail to deliver on its developmental goals next
year and so, we are making the following changes in the interim:
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
40
The above changes can end at this point and they need not go any further. This,
however, is entirely dependent upon you. But you have to understand that meeting
corporate objectives by everyone is primary and will not be compromised. We are
meeting tough challenges next year, and I would want everybody on board. Any
resistance or holding back by anyone will be dealt with accordingly. 6
Subsequently, de Dios wrote Tongko another letter, dated December 18, 2001,
terminating Tongko’s services:
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.7
Tongko responded by filing an illegal dismissal complaint with the National Labor
Relations Commission (NLRC) Arbitration Branch. He essentially alleged – despite
the clear terms of the letter terminating his Agency Agreement – that he was
Manulife’s employee before he was illegally dismissed. 8
Thus, the threshold issue is the existence of an employment relationship. A finding
that none exists renders the question of illegal dismissal moot; a finding that an
employment relationship exists, on the other hand, necessarily leads to the need to
determine the validity of the termination of the relationship.
A. Tongko’s Case for Employment Relationship
Tongko asserted that as Unit Manager, he was paid an annual over-rider not
exceeding ₱50,000.00, regardless of production levels attained and exclusive of
commissions and bonuses. He also claimed that as Regional Sales Manager, he was
given a travel and entertainment allowance of ₱36,000.00 per year in addition to his
overriding commissions; he was tasked with numerous administrative functions and
supervisory authority over Manulife’s employees, aside from merely selling policies
and recruiting agents for Manulife; and he recommended and recruited insurance
agents subject to vetting and approval by Manulife. He further alleges that he was
assigned a definite place in the Manulife offices when he was not in the field – at the
3rd Floor, Manulife Center, 108 Tordesillas corner Gallardo Sts., Salcedo Village,
Makati City – for which he never paid any rental. Manulife provided the office
equipment he used, including tables, chairs, computers and printers (and even office
stationery), and paid for the electricity, water and telephone bills. As Regional Sales
Manager, Tongko additionally asserts that he was required to follow at least three
codes of conduct.9
B. Manulife’s Case – Agency Relationship with Tongko
Manulife argues that Tongko had no fixed wage or salary. Under the Agreement,
Tongko was paid commissions of varying amounts, computed based on the premium
paid in full and actually received by Manulife on policies obtained through an agent.
As sales manager, Tongko was paid overriding sales commission derived from sales
made by agents under his unit/structure/branch/region. Manulife also points out that it
deducted and withheld a 10% tax from all commissions Tongko received; Tongko
even declared himself to be self-employed and consistently paid taxes as such—i.e.,
he availed of tax deductions such as ordinary and necessary trade, business and
professional expenses to which a business is entitled.
Manulife asserts that the labor tribunals have no jurisdiction over Tongko’s claim as
he was not its employee as characterized in the four-fold test and our ruling
in Carungcong v. National Labor Relations Commission.10
The Conflicting Rulings of the Lower Tribunals
The labor arbiter decreed that no employer-employee relationship existed between
the parties. However, the NLRC reversed the labor arbiter’s decision on appeal; it
found the existence of an employer-employee relationship and concluded that Tongko
had been illegally dismissed. In the petition for certiorari with the Court of Appeals
(CA), the appellate court found that the NLRC gravely abused its discretion in its
ruling and reverted to the labor arbiter’s decision that no employer-employee
relationship existed between Tongko and Manulife.
Our Decision of November 7, 2008
In our Decision of November 7, 2008, we reversed the CA ruling and found that an
employment relationship existed between Tongko and Manulife. We concluded that
Tongko is Manulife’s employee for the following reasons:
1. Our ruling in the first Insular11 case did not foreclose the possibility of an
insurance agent becoming an employee of an insurance company; if
evidence exists showing that the company promulgated rules or regulations
that effectively controlled or restricted an insurance agent’s choice of
methods or the methods themselves in selling insurance, an employer-
41
 employee relationship would be present. The determination of the existence
of an employer-employee relationship is thus on a case-to-case basis
depending on the evidence on record.
2. Manulife had the power of control over Tongko, sufficient to characterize
him as an employee, as shown by the following indicators:
2.1 Tongko undertook to comply with Manulife’s rules, regulations
and other requirements, i.e., the different codes of conduct such as
the Agent Code of Conduct, the Manulife Financial Code of
Conduct, and the Financial Code of Conduct Agreement;
2.2 The various affidavits of Manulife’s insurance agents and
managers, who occupied similar positions as Tongko, showed that
they performed administrative duties that established employment
with Manulife;12 and
2.3 Tongko was tasked to recruit some agents in addition to his
other administrative functions. De Dios’ letter harped on the
direction Manulife intended to take, viz., greater agency recruitment
as the primary means to sell more policies; Tongko’s alleged failure
to follow this directive led to the termination of his employment with
Manulife.
The Motion for Reconsideration
Manulife disagreed with our Decision and filed the present motion for reconsideration
on the following GROUNDS:
1. The November 7[, 2008] Decision violates Manulife’s right to due process
by: (a) confining the review only to the issue of "control" and utterly
disregarding all the other issues that had been joined in this case; (b)
mischaracterizing the divergence of conclusions between the CA and the
NLRC decisions as confined only to that on "control"; (c) grossly failing to
consider the findings and conclusions of the CA on the majority of the
material evidence, especially [Tongko’s] declaration in his income tax returns
that he was a "business person" or "self-employed"; and (d) allowing
[Tongko] to repudiate his sworn statement in a public document.
2. The November 7[, 2008] Decision contravenes settled rules in contract
law and agency, distorts not only the legal relationships of agencies to sell
but also distributorship and franchising, and ignores the constitutional and
policy context of contract law vis-à-vis labor law.
3. The November 7[, 2008] Decision ignores the findings of the CA on the
three elements of the four-fold test other than the "control" test, reverses
well-settled doctrines of law on employer-employee relationships, and
grossly misapplies the "control test," by selecting, without basis, a few items
of evidence to the exclusion of more material evidence to support its
conclusion that there is "control."
4. The November 7[, 2008] Decision is judicial legislation, beyond the scope
authorized by Articles 8 and 9 of the Civil Code, beyond the powers granted
to this Court under Article VIII, Section 1 of the Constitution and contravenes
through judicial legislation, the constitutional prohibition against impairment
of contracts under Article III, Section 10 of the Constitution.
5. For all the above reasons, the November 7[, 2008] Decision made
unsustainable and reversible errors, which should be corrected, in
concluding that Respondent Manulife and Petitioner had an employer-
employee relationship, that Respondent Manulife illegally dismissed
Petitioner, and for consequently ordering Respondent Manulife to pay
Petitioner backwages, separation pay, nominal damages and attorney’s
fees.13
THE COURT’S RULING
A. The Insurance and the Civil Codes;
the Parties’ Intent and Established
Industry Practices
We cannot consider the present case purely from a labor law perspective, oblivious
that the factual antecedents were set in the insurance industry so that the Insurance
Code primarily governs. Chapter IV, Title 1 of this Code is wholly devoted to
"Insurance Agents and Brokers" and specifically defines the agents and brokers
relationship with the insurance company and how they are governed by the Code and
regulated by the Insurance Commission.
The Insurance Code, of course, does not wholly regulate the "agency" that it speaks
of, as agency is a civil law matter governed by the Civil Code. Thus, at the very least,
three sets of laws – namely, the Insurance Code, the Labor Code and the Civil Code
– have to be considered in looking at the present case. Not to be forgotten, too, is the
Agreement (partly reproduced on page 2 of this Dissent and which no one disputes)
that the parties adopted to govern their relationship for purposes of selling the
insurance the company offers. To forget these other laws is to take a myopic view of
the present case and to add to the uncertainties that now exist in considering the
legal relationship between the insurance company and its "agents."
42
The main issue of whether an agency or an employment relationship exists depends
on the incidents of the relationship. The Labor Code concept of "control" has to be
compared and distinguished with the "control" that must necessarily exist in a
principal-agent relationship. The principal cannot but also have his or her say in
directing the course of the principal-agent relationship, especially in cases where the
company-representative relationship in the insurance industry is an agency.
a. The laws on insurance and agency
The business of insurance is a highly regulated commercial activity in the country, in
terms particularly of who can be in the insurance business, who can act for and in
behalf of an insurer, and how these parties shall conduct themselves in the insurance
business. Section 186 of the Insurance Code provides that "No person, partnership,
or association of persons shall transact any insurance business in the Philippines
except as agent of a person or corporation authorized to do the business of insurance
in the Philippines." Sections 299 and 300 of the Insurance Code on Insurance Agents
and Brokers, among other provisions, provide:
Section 299. No insurance company doing business in the Philippines, nor any agent
thereof, shall pay any commission or other compensation to any person for services
in obtaining insurance, unless such person shall have first procured from the
Commissioner a license to act as an insurance agent of such company or as an
insurance broker as hereinafter provided.
No person shall act as an insurance agent or as an insurance broker in the solicitation
or procurement of applications for insurance, or receive for services in obtaining
insurance, any commission or other compensation from any insurance company
doing business in the Philippines or any agent thereof, without first procuring a
license so to act from the Commissioner x x x The Commissioner shall satisfy himself
as to the competence and trustworthiness of the applicant and shall have the right to
refuse to issue or renew and to suspend or revoke any such license in his
discretion.1avvphi1.net
Section 300. Any person who for compensation solicits or obtains insurance on behalf
of any insurance company or transmits for a person other than himself an application
for a policy or contract of insurance to or from such company or offers or assumes to
act in the negotiating of such insurance shall be an insurance agent within the intent
of this section and shall thereby become liable to all the duties, requirements,
liabilities and penalties to which an insurance agent is subject.
The application for an insurance agent’s license requires a written examination, and
the applicant must be of good moral character and must not have been convicted of a
crime involving moral turpitude.14 The insurance agent who collects premiums from
an insured person for remittance to the insurance company does so in a fiduciary
capacity, and an insurance company which delivers an insurance policy or contract to
an authorized agent is deemed to have authorized the agent to receive payment on
the company’s behalf.15 Section 361 further prohibits the offer, negotiation, or
collection of any amount other than that specified in the policy and this covers any
rebate from the premium or any special favor or advantage in the dividends or benefit
accruing from the policy.
Thus, under the Insurance Code, the agent must, as a matter of qualification, be
licensed and must also act within the parameters of the authority granted under the
license and under the contract with the principal. Other than the need for a license,
the agent is limited in the way he offers and negotiates for the sale of the company’s
insurance products, in his collection activities, and in the delivery of the insurance
contract or policy. Rules regarding the desired results (e.g., the required volume to
continue to qualify as a company agent, rules to check on the parameters on the
authority given to the agent, and rules to ensure that industry, legal and ethical rules
are followed) are built-in elements of control specific to an insurance agency and
should not and cannot be read as elements of control that attend an employment
relationship governed by the Labor Code.
On the other hand, the Civil Code defines an agent as a "person [who] binds himself
to render some service or to do something in representation or on behalf of another,
with the consent or authority of the latter."16 While this is a very broad definition that
on its face may even encompass an employment relationship, the distinctions
between agency and employment are sufficiently established by law and
jurisprudence.
Generally, the determinative element is the control exercised over the one rendering
service. The employer controls the employee both in the results and in the means and
manner of achieving this result. The principal in an agency relationship, on the other
hand, also has the prerogative to exercise control over the agent in undertaking the
assigned task based on the parameters outlined in the pertinent laws.
Under the general law on agency as applied to insurance, an agency must be
express in light of the need for a license and for the designation by the insurance
company. In the present case, the Agreement fully serves as grant of authority to
Tongko as Manulife’s insurance agent.17 This agreement is supplemented by the
company’s agency practices and usages, duly accepted by the agent in carrying out
the agency.18 By authority of the Insurance Code, an insurance agency is for
compensation,19 a matter the Civil Code Rules on Agency presumes in the absence
of proof to the contrary.20 Other than the compensation, the principal is bound to
advance to, or to reimburse, the agent the agreed sums necessary for the execution
of the agency.21 By implication at least under Article 1994 of the Civil Code, the
principal can appoint two or more agents to carry out the same assigned
tasks,22 based necessarily on the specific instructions and directives given to them.
43
With particular relevance to the present case is the provision that "In the execution of
the agency, the agent shall act in accordance with the instructions of the
principal."23 This provision is pertinent for purposes of the necessary control that the
principal exercises over the agent in undertaking the assigned task, and is an area
where the instructions can intrude into the labor law concept of control so that minute
consideration of the facts is necessary. A related article is Article 1891 of the Civil
Code which binds the agent to render an account of his transactions to the principal.
B. The Cited Case
The Decision of November 7, 2008 refers to the first Insular and Grepalife cases to
establish that the company rules and regulations that an agent has to comply with are
indicative of an employer-employee relationship.24 The Dissenting Opinions of Justice
Presbitero Velasco, Jr. and Justice Conchita Carpio Morales also cite Insular Life
Assurance Co. v. National Labor Relations Commission (second Insular case) 25 to
support the view that Tongko is Manulife’s employee. On the other hand, Manulife
cites the Carungcong case and AFP Mutual Benefit Association, Inc. v. National
Labor Relations Commission (AFPMBAI case)26 to support its allegation that Tongko
was not its employee.
A caveat has been given above with respect to the use of the rulings in the cited
cases because none of them is on all fours with the present case; the uniqueness of
the factual situation of the present case prevents it from being directly and readily
cast in the mold of the cited cases. These cited cases are themselves different from
one another; this difference underscores the need to read and quote them in the
context of their own factual situations.
The present case at first glance appears aligned with the facts in the Carungcong, the
Grepalife, and the second Insular Life cases. A critical difference, however, exists as
these cited cases dealt with the proper legal characterization of a subsequent
management contract that superseded the original agency contract between the
insurance company and its agent. Carungcong dealt with a subsequent Agreement
making Carungcong a New Business Manager that clearly superseded the
Agreement designating Carungcong as an agent empowered to solicit applications for
insurance. The Grepalife case, on the other hand, dealt with the proper legal
characterization of the appointment of the Ruiz brothers to positions higher than their
original position as insurance agents. Thus, after analyzing the duties and functions of
the Ruiz brothers, as these were enumerated in their contracts, we concluded that the
company practically dictated the manner by which the Ruiz brothers were to carry out
their jobs. Finally, the second Insular Life case dealt with the implications of de los
Reyes’ appointment as acting unit manager which, like the subsequent contracts in
the Carungcong and the Grepalife cases, was clearly defined under a subsequent
contract. In all these cited cases, a determination of the presence of the Labor Code
element of control was made on the basis of the stipulations of the subsequent
contracts.
In stark contrast with the Carungcong, the Grepalife, and the second Insular Life
cases, the only contract or document extant and submitted as evidence in the present
case is the Agreement – a pure agency agreement in the Civil Code context similar to
the original contract in the first Insular Life case and the contract in the AFPMBAI
case. And while Tongko was later on designated unit manager in 1983, Branch
Manager in 1990, and Regional Sales Manager in 1996, no formal contract regarding
these undertakings appears in the records of the case. Any such contract or
agreement, had there been any, could have at the very least provided the bases for
properly ascertaining the juridical relationship established between the parties.
These critical differences, particularly between the present case and the Grepalife
and the second Insular Life cases, should therefore immediately drive us to be more
prudent and cautious in applying the rulings in these cases.
C. Analysis of the Evidence
c.1. The Agreement
The primary evidence in the present case is the July 1, 1977 Agreement that
governed and defined the parties’ relations until the Agreement’s termination in 2001.
This Agreement stood for more than two decades and, based on the records of the
case, was never modified or novated. It assumes primacy because it directly dealt
with the nature of the parties’ relationship up to the very end; moreover, both parties
never disputed its authenticity or the accuracy of its terms.
By the Agreement’s express terms, Tongko served as an "insurance agent" for
Manulife, not as an employee. To be sure, the Agreement’s legal characterization of
the nature of the relationship cannot be conclusive and binding on the courts; as the
dissent clearly stated, the characterization of the juridical relationship the Agreement
embodied is a matter of law that is for the courts to determine. At the same time,
though, the characterization the parties gave to their relationship in the Agreement
cannot simply be brushed aside because it embodies their intent at the time they
entered the Agreement, and they were governed by this understanding throughout
their relationship. At the very least, the provision on the absence of employer-
employee relationship between the parties can be an aid in considering the
Agreement and its implementation, and in appreciating the other evidence on record.
The parties’ legal characterization of their intent, although not conclusive, is critical in
this case because this intent is not illegal or outside the contemplation of law,
particularly of the Insurance and the Civil Codes. From this perspective, the
44
provisions of the Insurance Code cannot be disregarded as this Code (as heretofore
already noted) expressly envisions a principal-agent relationship between the
insurance company and the insurance agent in the sale of insurance to the
public.1awph!1 For this reason, we can take judicial notice that as a matter of
Insurance Code-based business practice, an agency relationship prevails in the
insurance industry for the purpose of selling insurance. The Agreement, by its
express terms, is in accordance with the Insurance Code model when it provided for a
principal-agent relationship, and thus cannot lightly be set aside nor simply be
considered as an agreement that does not reflect the parties’ true intent. This intent,
incidentally, is reinforced by the system of compensation the Agreement provides,
which likewise is in accordance with the production-based sales commissions the
Insurance Code provides.
Significantly, evidence shows that Tongko’s role as an insurance agent never
changed during his relationship with Manulife. If changes occurred at all, the changes
did not appear to be in the nature of their core relationship. Tongko essentially
remained an agent, but moved up in this role through Manulife’s recognition that he
could use other agents approved by Manulife, but operating under his guidance and
in whose commissions he had a share. For want of a better term, Tongko perhaps
could be labeled as a "lead agent" who guided under his wing other Manulife agents
similarly tasked with the selling of Manulife insurance.
Like Tongko, the evidence suggests that these other agents operated under their own
agency agreements. Thus, if Tongko’s compensation scheme changed at all during
his relationship with Manulife, the change was solely for purposes of crediting him
with his share in the commissions the agents under his wing generated. As an agent
who was recruiting and guiding other insurance agents, Tongko likewise moved up in
terms of the reimbursement of expenses he incurred in the course of his lead agency,
a prerogative he enjoyed pursuant to Article 1912 of the Civil Code. Thus, Tongko
received greater reimbursements for his expenses and was even allowed to use
Manulife facilities in his interactions with the agents, all of whom were, in the strict
sense, Manulife agents approved and certified as such by Manulife with the Insurance
Commission.
That Tongko assumed a leadership role but nevertheless wholly remained an agent is
the inevitable conclusion that results from the reading of the Agreement (the only
agreement on record in this case) and his continuing role thereunder as sales agent,
from the perspective of the Insurance and the Civil Codes and in light of what Tongko
himself attested to as his role as Regional Sales Manager. To be sure, this
interpretation could have been contradicted if other agreements had been submitted
as evidence of the relationship between Manulife and Tongko on the latter’s
expanded undertakings. In the absence of any such evidence, however, this reading
– based on the available evidence and the applicable insurance and civil law
provisions – must stand, subject only to objective and evidentiary Labor Code tests
on the existence of an employer-employee relationship.
In applying such Labor Code tests, however, the enforcement of the Agreement
during the course of the parties’ relationship should be noted. From 1977 until the
termination of the Agreement, Tongko’s occupation was to sell Manulife’s insurance
policies and products. Both parties acquiesced with the terms and conditions of the
Agreement. Tongko, for his part, accepted all the benefits flowing from the
Agreement, particularly the generous commissions.
Evidence indicates that Tongko consistently clung to the view that he was an
independent agent selling Manulife insurance products since he invariably declared
himself a business or self-employed person in his income tax returns. This
consistency with, and action made pursuant to the Agreement were pieces of
evidence that were never mentioned nor considered in our Decision of
November 7, 2008. Had they been considered, they could, at the very least, serve as
Tongko’s admissions against his interest. Strictly speaking, Tongko’s tax returns
cannot but be legally significant because he certified under oath the amount he
earned as gross business income, claimed business deductions, leading to his net
taxable income. This should be evidence of the first order that cannot be brushed
aside by a mere denial. Even on a layman’s view that is devoid of legal
considerations, the extent of his annual income alone renders his claimed
employment status doubtful.27
Hand in hand with the concept of admission against interest in considering the tax
returns, the concept of estoppel – a legal and equitable concept28 – necessarily must
come into play. Tongko’s previous admissions in several years of tax returns as an
independent agent, as against his belated claim that he was all along an employee,
are too diametrically opposed to be simply dismissed or ignored. Interestingly, Justice
Velasco’s dissenting opinion states that Tongko was forced to declare himself a
business or self-employed person by Manulife’s persistent refusal to recognize him as
its employee.29 Regrettably, the dissent has shown no basis for this conclusion,
an understandable omission since no evidence in fact exists on this point in
the records of the case. In fact, what the evidence shows is Tongko’s full conformity
with, and action as, an independent agent until his relationship with Manulife took a
bad turn.
Another interesting point the dissent raised with respect to the Agreement is its
conclusion that the Agreement negated any employment relationship between
Tongko and Manulife so that the commissions he earned as a sales agent should not
be considered in the determination of the backwages and separation pay that should
be given to him. This part of the dissent is correct although it went on to twist this
conclusion by asserting that Tongko had dual roles in his relationship with Manulife;
he was an agent, not an employee, in so far as he sold insurance for Manulife, but
45
was an employee in his capacity as a manager. Thus, the dissent concluded that
Tongko’s backwages should only be with respect to his role as Manulife’s manager.
The conclusion with respect to Tongko’s employment as a manager is, of course,
unacceptable for the legal, factual and practical reasons discussed in this Resolution.
In brief, the factual reason is grounded on the lack of evidentiary support of the
conclusion that Manulife exercised control over Tongko in the sense understood in
the Labor Code. The legal reason, partly based on the lack of factual basis, is the
erroneous legal conclusion that Manulife controlled Tongko and was thus its
employee. The practical reason, on the other hand, is the havoc that the dissent’s
unwarranted conclusion would cause the insurance industry that, by the law’s own
design, operated along the lines of principal-agent relationship in the sale of
insurance.
c.2. Other Evidence of Alleged Control
A glaring evidentiary gap for Tongko in this case is the lack of evidence on record
showing that Manulife ever exercised means-and-manner control, even to a limited
extent, over Tongko during his ascent in Manulife’s sales ladder. In 1983, Tongko
was appointed unit manager. Inexplicably, Tongko never bothered to present any
evidence at all on what this designation meant. This also holds true for Tongko’s
appointment as branch manager in 1990, and as Regional Sales Manager in 1996.
The best evidence of control – the agreement or directive relating to Tongko’s duties
and responsibilities – was never introduced as part of the records of the case. The
reality is, prior to de Dios’ letter, Manulife had practically left Tongko alone not only in
doing the business of selling insurance, but also in guiding the agents under his wing.
As discussed below, the alleged directives covered by de Dios’ letter, heretofore
quoted in full, were policy directions and targeted results that the company wanted
Tongko and the other sales groups to realign with in their own selling activities. This is
the reality that the parties’ presented evidence consistently tells us.
What, to Tongko, serve as evidence of labor law control are the codes of conduct that
Manulife imposes on its agents in the sale of insurance. The mere presentation of
codes or of rules and regulations, however, is not per se indicative of labor law control
as the law and jurisprudence teach us.
As already recited above, the Insurance Code imposes obligations on both the
insurance company and its agents in the performance of their respective obligations
under the Code, particularly on licenses and their renewals, on the representations to
be made to potential customers, the collection of premiums, on the delivery of
insurance policies, on the matter of compensation, and on measures to ensure ethical
business practice in the industry.
The general law on agency, on the other hand, expressly allows the principal an
element of control over the agent in a manner consistent with an agency relationship.
In this sense, these control measures cannot be read as indicative of labor law
control. Foremost among these are the directives that the principal may impose on
the agent to achieve the assigned tasks, to the extent that they do not involve the
means and manner of undertaking these tasks. The law likewise obligates the agent
to render an account; in this sense, the principal may impose on the agent specific
instructions on how an account shall be made, particularly on the matter of expenses
and reimbursements. To these extents, control can be imposed through rules and
regulations without intruding into the labor law concept of control for purposes of
employment.
From jurisprudence, an important lesson that the first Insular Life case teaches us is
that a commitment to abide by the rules and regulations of an insurance company
does not ipso facto make the insurance agent an employee. Neither do guidelines
somehow restrictive of the insurance agent’s conduct necessarily indicate "control" as
this term is defined in jurisprudence. Guidelines indicative of labor law "control,"
as the first Insular Life case tells us, should not merely relate to the mutually
desirable result intended by the contractual relationship; they must have the
nature of dictating the means or methods to be employed in attaining the result, or
of fixing the methodology and of binding or restricting the party hired to the use of
these means. In fact, results-wise, the principal can impose production quotas and
can determine how many agents, with specific territories, ought to be employed to
achieve the company’s objectives. These are management policy decisions that the
labor law element of control cannot reach. Our ruling in these respects in the first
Insular Life case was practically reiterated in Carungcong. Thus, as will be shown
more fully below, Manulife’s codes of conduct, 30 all of which do not intrude into the
insurance agents’ means and manner of conducting their sales and only control them
as to the desired results and Insurance Code norms, cannot be used as basis for a
finding that the labor law concept of control existed between Manulife and Tongko.
The dissent considers the imposition of administrative and managerial functions on
Tongko as indicative of labor law control; thus, Tongko as manager, but not as
insurance agent, became Manulife’s employee. It drew this conclusion from what the
other Manulife managers disclosed in their affidavits (i.e., their enumerated
administrative and managerial functions) and after comparing these statements with
the managers in Grepalife. The dissent compared the control exercised by Manulife
over its managers in the present case with the control the managers in the Grepalife
case exercised over their employees by presenting the following matrix: 31
Duties of Manulife’s Duties of Grepalife’s Managers/Supervisors
Manager
46
 - to render or recommend
prospective agents to be
licensed, trained and
contracted to sell Manulife
products and who will be
part of my Unit
- to coordinate activities of
the agents under [the
managers’] Unit in [the
agents’] daily, weekly and
monthly selling activities,
making sure that their
respective sales targets are
met;
- to conduct periodic training
sessions for [the] agents to
further enhance their sales
skill; and
- train understudies for the position of
district manager
- properly account, record and document
the company’s funds, spot-check and audit
the work of the zone supervisors, x x x
follow up the submission of weekly
remittance reports of the debit agents and
zone supervisors
- direct and supervise the sales activities of
the debit agents under him, x x x undertake
and discharge the functions of absentee
debit agents, spot-check the record of debit
agents, and insure proper documentation of
sales and collections of debit agents.
The dissent apparently did not also properly analyze and appreciate the great
qualitative difference that exists between:
 the Manulife managers’ role is to coordinate activities of the agents under
the managers’ Unit in the agents’ daily, weekly, and monthly selling
activities, making sure that their respective sales targets are met.
 the District Manager’s duty in Grepalife is to 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 managers, and
maintain his quota of sales (the failure of which is a ground for termination).
 the Zone Supervisor’s (also in Grepalife) has the duty to 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.

- to assist [the] agents with
their sales activities by way
of joint fieldwork,
consultations and one-on-
one evaluation and analysis
of particular accounts
Aside from these affidavits however, no other evidence exists regarding the effects of
Tongko’s additional roles in Manulife’s sales operations on the contractual
relationship between them.
To the dissent, Tongko’s administrative functions as recruiter, trainer, or supervisor of
other sales agents constituted a substantive alteration of Manulife’s authority over
Tongko and the performance of his end of the relationship with Manulife. We could
not deny though that Tongko remained, first and foremost, an insurance agent, and
that his additional role as Branch Manager did not lessen his main and dominant role
as insurance agent; this role continued to dominate the relations between Tongko and
Manulife even after Tongko assumed his leadership role among agents. This
conclusion cannot be denied because it proceeds from the undisputed fact that
Tongko and Manulife never altered their July 1, 1977 Agreement, a distinction the
present case has with the contractual changes made in the second Insular Life case.
Tongko’s results-based commissions, too, attest to the primacy he gave to his role as
insurance sales agent.
These job contents are worlds apart in terms of "control." In Grepalife, the details of
how to do the job are specified and pre-determined; in the present case, the operative
words are the "sales target," the methodology being left undefined except to the
extent of being "coordinative." To be sure, a "coordinative" standard for a manager
cannot be indicative of control; the standard only essentially describes what a Branch
Manager is – the person in the lead who orchestrates activities within the group. To
"coordinate," and thereby to lead and to orchestrate, is not so much a matter of
control by Manulife; it is simply a statement of a branch manager’s role in relation with
his agents from the point of view of Manulife whose business Tongko’s sales group
carries.
A disturbing note, with respect to the presented affidavits and Tongko’s alleged
administrative functions, is the selective citation of the portions supportive of an
employment relationship and the consequent omission of portions leading to the
contrary conclusion. For example, the following portions of the affidavit of Regional
Sales Manager John Chua, with counterparts in the other affidavits, were not brought
out in the Decision of November 7, 2008, while the other portions suggesting labor
law control were highlighted. Specifically, the following portions of the affidavits were
not brought out:32
1.a. I have no fixed wages or salary since my services are compensated by
way of commissions based on the computed premiums paid in full on the
policies obtained thereat;
47
 1.b. I have no fixed working hours and employ my own method in soliticing
insurance at a time and place I see fit;
1.c. I have my own assistant and messenger who handle my daily work load;
1.d. I use my own facilities, tools, materials and supplies in carrying out my
business of selling insurance;
xxxx
6. I have my own staff that handles the day to day operations of my office;
7. My staff are my own employees and received salaries from me;
xxxx
9. My commission and incentives are all reported to the Bureau of Internal
Revenue (BIR) as income by a self-employed individual or professional with
a ten (10) percent creditable withholding tax. I also remit monthly for
professionals.
These statements, read with the above comparative analysis of the Manulife and
the Grepalife cases, would have readily yielded the conclusion that no employer-
employee relationship existed between Manulife and Tongko.
Even de Dios’ letter is not determinative of control as it indicates the least amount of
intrusion into Tongko’s exercise of his role as manager in guiding the sales agents.
Strictly viewed, de Dios’ directives are merely operational guidelines on how Tongko
could align his operations with Manulife’s re-directed goal of being a "big league
player." The method is to expand coverage through the use of more agents. This
requirement for the recruitment of more agents is not a means-and-method control as
it relates, more than anything else, and is directly relevant, to Manulife’s objective of
expanded business operations through the use of a bigger sales force whose
members are all on a principal-agent relationship. An important point to note here is
that Tongko was not supervising regular full-time employees of Manulife engaged in
the running of the insurance business; Tongko was effectively guiding his corps of
sales agents, who are bound to Manulife through the same Agreement that he had
with Manulife, all the while sharing in these agents’ commissions through his
overrides. This is the lead agent concept mentioned above for want of a more
appropriate term, since the title of Branch Manager used by the parties is really a
misnomer given that what is involved is not a specific regular branch of the company
but a corps of non-employed agents, defined in terms of covered territory, through
which the company sells insurance. Still another point to consider is that Tongko was
not even setting policies in the way a regular company manager does; company aims
and objectives were simply relayed to him with suggestions on how these objectives
can be reached through the expansion of a non-employee sales force.
Interestingly, a large part of de Dios’ letter focused on income, which Manulife
demonstrated, in Tongko’s case, to be unaffected by the new goal and direction the
company had set. Income in insurance agency, of course, is dependent on results,
not on the means and manner of selling – a matter for Tongko and his agents to
determine and an area into which Manulife had not waded. Undeniably, de Dios’ letter
contained a directive to secure a competent assistant at Tongko’s own expense.
While couched in terms of a directive, it cannot strictly be understood as an intrusion
into Tongko’s method of operating and supervising the group of agents within his
delineated territory. More than anything else, the "directive" was a signal to Tongko
that his results were unsatisfactory, and was a suggestion on how Tongko’s
perceived weakness in delivering results could be remedied. It was a solution, with an
eye on results, for a consistently underperforming group; its obvious intent was to
save Tongko from the result that he then failed to grasp – that he could lose even his
own status as an agent, as he in fact eventually did.
The present case must be distinguished from the second Insular Life case that
showed the hallmarks of an employer-employee relationship in the management
system established. These were: exclusivity of service, control of assignments and
removal of agents under the private respondent’s unit, and furnishing of company
facilities and materials as well as capital described as Unit Development Fund. All
these are obviously absent in the present case. If there is a commonality in these
cases, it is in the collection of premiums which is a basic authority that can be
delegated to agents under the Insurance Code.
As previously discussed, what simply happened in Tongko’s case was the grant of an
expanded sales agency role that recognized him as leader amongst agents in an area
that Manulife defined. Whether this consequently resulted in the establishment of
an employment relationship can be answered by concrete evidence that
corresponds to the following questions:
 as lead agent, what were Tongko’s specific functions and the terms of his
additional engagement;
 was he paid additional compensation as a so-called Area Sales Manager,
apart from the commissions he received from the insurance sales he
generated;
 what can be Manulife’s basis to terminate his status as lead agent;
 can Manulife terminate his role as lead agent separately from his agency
contract; and
48
  to what extent does Manulife control the means and methods of Tongko’s
role as lead agent?
The answers to these questions may, to some extent, be deduced from the evidence
at hand, as partly discussed above. But strictly speaking, the questions cannot
definitively and concretely be answered through the evidence on record. The concrete
evidence required to settle these questions is simply not there, since only the
Agreement and the anecdotal affidavits have been marked and submitted as
evidence.
Given this anemic state of the evidence, particularly on the requisite confluence of the
factors determinative of the existence of employer-employee relationship, the Court
cannot conclusively find that the relationship exists in the present case, even if such
relationship only refers to Tongko’s additional functions. While a rough deduction can
be made, the answer will not be fully supported by the substantial evidence needed.
Under this legal situation, the only conclusion that can be made is that the absence of
evidence showing Manulife’s control over Tongko’s contractual duties points to the
absence of any employer-employee relationship between Tongko and Manulife. In the
context of the established evidence, Tongko remained an agent all along; although
his subsequent duties made him a lead agent with leadership role, he was
nevertheless only an agent whose basic contract yields no evidence of means-and-
manner control.
This conclusion renders unnecessary any further discussion of the question of
whether an agent may simultaneously assume conflicting dual personalities. But to
set the record straight, the concept of a single person having the dual role of agent
and employee while doing the same task is a novel one in our jurisprudence, which
must be viewed with caution especially when it is devoid of any jurisprudential support
or precedent. The quoted portions in Justice Carpio-Morales’ dissent,33 borrowed
from both the Grepalife and the second Insular Life cases, to support the duality
approach of the Decision of November 7, 2008, are regrettably far removed from their
context – i.e., the cases’ factual situations, the issues they decided and the totality of
the rulings in these cases – and cannot yield the conclusions that the dissenting
opinions drew.
The Grepalife case dealt with the sole issue of whether the Ruiz brothers’
appointment as zone supervisor and district manager made them employees
of Grepalife. Indeed, because of the presence of the element of control in their
contract of engagements, they were considered Grepalife’s employees. This did not
mean, however, that they were simultaneously considered agents as well as
employees of Grepalife; the Court’s ruling never implied that this situation existed
insofar as the Ruiz brothers were concerned. The Court’s statement – the Insurance
Code may govern the licensing requirements and other particular duties of insurance
agents, but it does not bar the application of the Labor Code with regard to labor
standards and labor relations – simply means that when an insurance company has
exercised control over its agents so as to make them their employees, the
relationship between the parties, which was otherwise one for agency governed by
the Civil Code and the Insurance Code, will now be governed by the Labor Code. The
reason for this is simple – the contract of agency has been transformed into an
employer-employee relationship.
The second Insular Life case, on the other hand, involved the issue of whether the
labor bodies have jurisdiction over an illegal termination dispute involving parties who
had two contracts – first, an original contract (agency contract), which was
undoubtedly one for agency, and another subsequent contract that in turn designated
the agent acting unit manager (a management contract). Both the Insular Life and the
labor arbiter were one in the position that both were agency contracts. The Court
disagreed with this conclusion and held that insofar as the management contract is
concerned, the labor arbiter has jurisdiction. It is in this light that we remanded the
case to the labor arbiter for further proceedings. We never said in this case though
that the insurance agent had effectively assumed dual personalities for the simple
reason that the agency contract has been effectively superseded by the management
contract. The management contract provided that if the appointment was terminated
for any reason other than for cause, the acting unit manager would be reverted to
agent status and assigned to any unit.
The dissent pointed out, as an argument to support its employment relationship
conclusion, that any doubt in the existence of an employer-employee relationship
should be resolved in favor of the existence of the relationship.34This observation,
apparently drawn from Article 4 of the Labor Code, is misplaced, as Article 4 applies
only when a doubt exists in the "implementation and application" of the Labor Code
and its implementing rules; it does not apply where no doubt exists as in a situation
where the claimant clearly failed to substantiate his claim of employment relationship
by the quantum of evidence the Labor Code requires.
On the dissent’s last point regarding the lack of jurisprudential value of our November
7, 2008 Decision, suffice it to state that, as discussed above, the Decision was not
supported by the evidence adduced and was not in accordance with controlling
jurisprudence. It should, therefore, be reconsidered and abandoned, but not in the
manner the dissent suggests as the dissenting opinions are as factually and as legally
erroneous as the Decision under reconsideration.
In light of these conclusions, the sufficiency of Tongko’s failure to comply with the
guidelines of de Dios’ letter, as a ground for termination of Tongko’s agency, is a
matter that the labor tribunals cannot rule upon in the absence of an employer-
employee relationship. Jurisdiction over the matter belongs to the courts applying the
laws of insurance, agency and contracts.
49
WHEREFORE, considering the foregoing discussion, we REVERSE our Decision of
November 7, 2008, GRANTManulife’s motion for reconsideration and,
accordingly, DISMISS Tongko’s petition. No costs.

SO ORDERED.

50
 [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.
51
 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
52
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 13 th 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
53
 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.
54
 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
55
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]
56
 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 January 1979 finally settled the status of workers in the broadcast
industry. Under this policy, the types of employees in the broadcast industry are the
station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the
force and effect of law. There is no legal presumption that Policy Instruction No. 40
determines SONZAs status. A mere executive issuance cannot exclude independent
contractors from the class of service providers to the broadcast industry. The
classification of workers in the broadcast industry into only two groups under Policy
Instruction No. 40 is not binding on this Court, especially when the classification has no
basis either in law or in fact.
Affidavits of ABS-CBNs Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes
and Rolando Cruz without giving his counsel the opportunity to cross-examine these
witnesses.SONZA brands these witnesses as incompetent to attest on the prevailing
practice in the radio and television industry. SONZA views the affidavits of these
witnesses as misleading and irrelevant.
While SONZA failed to 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 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
57
shall be accompanied by all supporting documents including the affidavits of their employees, the station owners and managers can dictate to the radio and television
respective witnesses which shall take the place of the latters direct testimony. x x x hosts what they say in their shows. This is not conducive to freedom of the press.

Section 4. Determination of Necessity of Hearing. Immediately after the submission of

the parties of their position papers/memorandum, the Labor Arbiter shall motu propio
determine whether there is need for a formal trial or hearing. At this stage, he may, at
his discretion and for the purpose of making such determination, ask clarificatory
questions to further elicit facts or information, including but not limited to the
subpoena of relevant documentary evidence, if any from any party or witness. [50]
The Labor Arbiter can decide a case based solely on the position papers and the
supporting documents without a formal trial.[51] The holding of a formal hearing or trial
is something that the parties cannot demand as a matter of right.[52] If the Labor Arbiter
is confident that he can rely on the documents before him, he cannot be faulted for not
conducting a formal trial, unless under the particular circumstances of the case, the
documents alone are insufficient. The proceedings before a Labor Arbiter are 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.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code (NIRC)[54] in relation to Republic Act No.
7716,[55] as amended by Republic Act No. 8241,[56] treats talents, television and radio
broadcasters differently. Under the NIRC, these professionals are subject to the 10%
value-added tax (VAT) on services they render. Exempted from the VAT are those
under an employer-employee relationship.[57] This different tax treatment accorded to
talents and broadcasters bolters our conclusion that they are independent contractors,
provided all the basic elements of a contractual relationship are present as in this case.
Nature of SONZAs Claims
SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay,
separation pay, service incentive leave, signing bonus, travel allowance, and amounts
due under the Employee Stock Option Plan. We agree with the findings of the Labor
Arbiter and the Court of Appeals that SONZAs claims are all based on the May 1994
Agreement and stock option plan, and not on the Labor Code. Clearly, the present
case does not call for an application of the Labor Code provisions but an interpretation
and implementation of the May 1994 Agreement. In effect, SONZAs cause of action is
for breach of contract which is intrinsically a civil dispute cognizable by the regular
courts.[58]

The right of labor to security of tenure as guaranteed in the Constitution[53] arises WHEREFORE, we DENY the petition. The assailed Decision of the Court of
only if there is an employer-employee relationship under labor laws. Not every Appeals dated 26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against
performance of services for a fee creates an employer-employee relationship. To hold petitioner.
that every person who renders services to another for a fee is an employee - to give
SO ORDERED.
meaning to the security of tenure clause - will lead to absurd results.

Individuals with special skills, expertise or talent enjoy the freedom to offer their
services as independent contractors. The right to life and livelihood guarantees this
freedom to contract as independent contractors. The right of labor to security of tenure
cannot operate to deprive an individual, possessed with special skills, expertise and
talent, of his right to contract as an independent contractor. An individual like an artist
or talent has a right to render his services without any one controlling the means and
methods by which he performs his art or craft. This Court will not interpret the right of
labor to security of tenure to compel artists and talents to render their services only as
employees. If radio and television program hosts can render their services only as

58
 THELMA DUMPIT-MURILLO, G.R. No. 164652 On October 20, 1999, I wrote you a letter in answer to your query by
Petitioner, way of a marginal note what terms and conditions in response to my
Present: 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.
QUISUMBING, J.,* Chairperson, xxx
- versus - CARPIO,
CARPIO MORALES, In view hereof, should I not receive any formal response from you
TINGA, and until Monday, November 8, 1999, I will deem it as a constructive
VELASCO, JR., JJ. dismissal of my services.

COURT OF APPEALS, ASSOCIATED Promulgated: xxxx

BROADCASTING COMPANY, JOSE
JAVIER AND EDWARD TAN, A month later, petitioner sent a demand letter[7] to ABC, demanding: (a)
Respondents. June 8, 2007 reinstatement to her former position; (b) payment of unpaid wages for services
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x 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
DECISION 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
QUISUMBING, J.: prepared, but that the other claims of petitioner had no basis in fact or in law.

This petition seeks to reverse and set aside both the Decision[1] 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.
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 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
NT95-1805,[4]
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

59
 to reinstate her in her former position without loss of seniority right[s] II.
and other privileges and to pay her full backwages, inclusive of
THE PRO-FORMA TALENT CONTRACTS, AS CORRECTLY
allowances and other benefits, including 13th month pay based on
FOUND BY THE NLRC FIRST DIVISION, ARE ANTI-
her said latest rate of P28,000.00/mo. from the date of her illegal
REGULARIZATION DEVICES WHICH MUST BE STRUCK DOWN
dismissal on 21 October 1999 up to finality hereof, or at complainants
FOR REASONS OF PUBLIC POLICY[;]
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;
III.
2) to pay complainants accrued SILP [Service Incentive
BY REASON OF THE CONTINUOUS AND SUCCESSIVE
Leave Pay] of 5 days pay per year and 13 th month pay for the years
RENEWALS OF THE THREE-MONTH TALENT CONTRACTS, AN
1999, 1998 and 1997 of P19,236.00 and P84,000.00, respectively
EMPLOYER-EMPLOYEE RELATIONSHIP WAS CREATED AS
and her accrued salary from 16 September 1999 to 20 October 1999
PROVIDED FOR UNDER ARTICLE 280 OF THE LABOR CODE[;]
of P32,760.00 plus legal interest at 12% from date of judicial demand
on 20 December 1999 until finality hereof;
IV.
3) to pay complainant moral damages of P500,000.00,
BY THE CONSTRUCTIVE DISMISSAL OF HEREIN PETITIONER,
exemplary damages of P350,000.00 and 10% of the total of the
AS A REGULAR EMPLOYEE, THERE WAS A DENIAL OF
adjudged monetary awards as attorneys fees.
PETITIONERS RIGHT TO DUE PROCESS THUS ENTITLING HER
Other monetary claims of complainant are dismissed for lack of merit. TO THE MONEY CLAIMS AS STATED IN THE COMPLAINT[.][16]
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]
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]

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[;]
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.

60
 On the second issue, private respondents contend that the Court of Appeals b. Be involved in news-gathering operations by
did not err when it upheld the validity of the talent contracts voluntarily entered into by conducting interviews on- and off-the-air;
petitioner. It further stated that prevailing jurisprudence has recognized and sustained c. Participate in live remote coverages when called upon;
the absence of employer-employee relationship between a talent and the media entity d. Be available for any other news assignment, such as
which engaged the talents services on a per talent contract basis, citing the case writing, research or camera work;
of Sonza v. ABS-CBN Broadcasting Corporation.[21] e. Attend production meetings;
f. On assigned days, be at the studios at least one (1)
Petitioner avers however that an employer-employee relationship was created hour before the live telecasts;
when the private respondents started to merely renew the contracts repeatedly fifteen g. Be present promptly at the studios and/or other place
times or for four consecutive years.[22] 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
Again, we agree with petitioner. The Court of Appeals committed reversible error
authorized representatives in the production and
when it held that petitioner was a fixed-term employee. Petitioner was a regular employee
promotion of the Program; and
under contemplation of law. The practice of having fixed-term contracts in the industry
j. Perform such other functions as may be assigned to
does not automatically make all talent contracts valid and compliant with labor law. The
him/her from time to time.
assertion that a talent contract exists does not necessarily prevent a regular employment
status.[23] xxxx

1.3 COMPLIANCE WITH STANDARDS, INSTRUCTIONS

Further, the Sonza case is not applicable. In Sonza, the television station did
AND OTHER RULES AND REGULATIONS TALENT
not instruct Sonza how to perform his job. How Sonza delivered his lines, appeared on
agrees that he/she will promptly and faithfully comply with
television, and sounded on radio were outside the television stations control. Sonza
the requests and instructions, as well as the program
had a free hand on what to say or discuss in his shows provided he did not attack the
standards, policies, rules and regulations of ABC, the KBP
television station or its interests. Clearly, the television station did not exercise control
and the government or any of its agencies and
over the means and methods of the performance of Sonzas work. [24] In the case at bar,
instrumentalities.[27]
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 xxxx
salary of Sonza,[26]that all the more bolsters the conclusion that petitioner was not in
the same situation as Sonza.
In Manila Water Company, Inc. v. Pena,[28] we said that the elements to determine the
The contract of employment of petitioner with ABC had the following existence of an employment relationship are: (a) the selection and engagement of the
stipulations: 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
xxxx 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]
1. SCOPE OF SERVICES TALENT agrees to devote his/her
talent, time, attention and best efforts in the performance of his/her
The duties of petitioner as enumerated in her employment contract indicate
duties and responsibilities as Anchor/Program Host/Newscaster of the
that ABC had control over the work of petitioner. Aside from control, ABC also dictated
Program, in accordance with the direction of ABC and/or its authorized
the work assignments and payment of petitioners wages. ABC also had power to
representatives.
dismiss her. All these being present, clearly, there existed an employment relationship
between petitioner and ABC.
1.1. DUTIES AND RESPONSIBILITIES TALENT shall:
Concerning regular employment, the law provides for two kinds of employees,
a. Render his/her services as a newscaster on the
namely: (1) those who are engaged to perform activities which are usually necessary
Program;
or desirable in the usual business or trade of the employer; and (2) those who have

61
rendered at least one year of service, whether continuous or broken, with respect to her contract as already prepared by private respondents; otherwise, private respondents
the activity in which they are employed.[30] In other words, regular status arises from would have simply refused to renew her contract. Patently, the petitioner occupied a position
either the nature of work of the employee or the duration of his of weakness vis--vis the employer. Moreover, private respondents practice of repeatedly
employment.[31] In Benares v. Pancho,[32] we very succinctly said: 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
[T]he primary standard for determining regular employment is the
private respondents.
reasonable connection between the particular activity performed by
the employee vis--vis the usual trade or business of the
While this Court has recognized the validity of fixed-term employment
employer. This connection can be determined by considering the
contracts in a number of cases, it has consistently emphasized that when the
nature of the work performed and its relation to the scheme of the
circumstances of a case show that the periods were imposed to block the acquisition
particular business or trade in its entirety. If the employee has been
of security of tenure, they should be struck down for being contrary to law, morals, good
performing the job for at least a year, even if the performance is not
customs, public order or public policy.[39]
continuous and merely intermittent, the law deems repeated and
continuing need for its performance as sufficient evidence of the
As a regular employee, petitioner is entitled to security of tenure and can be
necessity if not indispensability of that activity to the
dismissed only for just cause and after due compliance with procedural due process. Since
business. Hence, the employment is considered regular, but only
private respondents did not observe due process in constructively dismissing the petitioner,
with respect to such activity and while such activity exists.[33]
we hold that there was an illegal dismissal.

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]
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.

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
62
G.R. No. 204944-45 December 3, 2014
FUJI TELEVISION NETWORK, INC., Petitioner,
vs.
ARLENE S. ESPIRITU, Respondent.
DECISION
LEONEN, J.:
It is the burden of the employer to prove that a person whose services it pays for is an
independent contractor rather than a regular employee with or without a fixed term.
That a person has a disease does not per se entitle the employer to terminate his or
her services. Termination is the last resort. At the very least, a competent public
health authority must certify that the disease cannot be cured within six ( 6) months,
even with appropriate treatment.
We decide this petition forreview1 on certiorari filed by Fuji Television Network, Inc.,
seeking the reversal of the Court of Appeals’ Decision 2 dated June 25, 2012, affirming
with modification the decision3 of the National Labor Relations Commission.
In 2005, Arlene S. Espiritu ("Arlene") was engaged by Fuji Television Network, Inc.
("Fuji") asa news correspondent/producer4 "tasked to report Philippine news to Fuji
through its Manila Bureau field office."5 Arlene’s employment contract initially
provided for a term of one (1) year but was successively renewed on a yearly basis
with salary adjustment upon every renewal.6 Sometime in January 2009, Arlenewas
diagnosed with lung cancer.7She informed Fuji about her condition. In turn, the Chief
of News Agency of Fuji, Yoshiki Aoki, informed Arlene "that the company will have a
problem renewing her contract"8 since it would be difficult for her to perform her
job.9 She "insisted that she was still fit to work as certified by her attending
physician."10
After several verbal and written communications,11 Arlene and Fuji signed a non-
renewal contract on May 5, 2009 where it was stipulated that her contract would no
longer be renewed after its expiration on May 31, 2009. The contract also provided
that the parties release each other from liabilities and responsibilities under the
employment contract.12
In consideration of the non-renewal contract, Arlene "acknowledged receipt of the
total amount of US$18,050.00 representing her monthly salary from March 2009 to
May 2009, year-end bonus, mid-year bonus, and separation pay."13 However, Arlene
affixed her signature on the nonrenewal contract with the initials "U.P." for "under
protest."14
On May 6, 2009, the day after Arlene signed the non-renewal contract, she filed a
complaint for illegal dismissal and attorney’s fees with the National Capital Region
Arbitration Branch of the National Labor Relations Commission. She alleged that she
was forced to sign the nonrenewal contract when Fuji came to know of her illness and
that Fuji withheld her salaries and other benefits for March and April 2009 when she
refused to sign.15
Arlene claimed that she was left with no other recourse but to sign the non-renewal
contract, and it was only upon signing that she was given her salaries and bonuses,
in addition to separation pay equivalent to four (4) years. 16
In the decision17 dated September 10, 2009, Labor Arbiter Corazon C. Borbolla
dismissed Arlene’s complaint.18Citing Sonza v. ABS-CBN19 and applying the four-fold
test, the Labor Arbiter held that Arlene was not Fuji’s employee but an independent
contractor.20
Arlene appealed before the National Labor Relations Commission. In its decision
dated March 5, 2010, the National Labor Relations Commission reversed the Labor
Arbiter’s decision.21 It held that Arlene was a regular employee with respect to the
activities for which she was employed since she continuously rendered services that
were deemednecessary and desirable to Fuji’s business.22 The National Labor
Relations Commission ordered Fuji to pay Arlene backwages, computed from the
date of her illegal dismissal.23 The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered GRANTING the
instant appeal. The Decision of the Labor Arbiter dated 19 September 2009 is hereby
REVERSED and SET ASIDE, and a new one is issued ordering respondents-
appellees to pay complainant-appellant backwages computed from the date of her
illegal dismissal until finality of this Decision.
SO ORDERED.24
Arlene and Fuji filed separat emotions for reconsideration.25 Both motions were
denied by the National Labor Relations Commission for lack of merit in the resolution
dated April 26, 2010.26 From the decision of the National Labor Relations
Commission, both parties filed separate petitions for certiorari 27 before the Court of
Appeals. The Court of Appeals consolidated the petitions and considered the
following issues for resolution:
1) Whether or not Espirituis a regular employee or a fixed-term contractual
employee;
2) Whether or not Espiritu was illegally dismissed; and
63
 3) Whether or not Espirituis entitled to damages and attorney’s fees.28
In the assailed decision, the Court of Appeals affirmed the National Labor
Relations Commission with the modification that Fuji immediately reinstate
Arlene to her position as News Producer without loss of seniority rights, and
pay her backwages, 13th-month pay, mid-year and year-end bonuses, sick
leave and vacation leave with pay until reinstated, moral damages,
exemplary damages, attorney’sfees, and legal interest of 12% per annum of
the total monetary awards.29 The Court of Appeals ruled that:
WHEREFORE, for lack of merit, the petition of Fuji Television Network, Inc. and
Yoshiki Aoki is DENIED and the petition of Arlene S. Espiritu is GRANTED.
Accordingly, the Decision dated March 5, 2010 of the National Labor Relations
Commission, 6th Division in NLRC NCR Case No. 05-06811-09 and its subsequent
Resolution dated April 26, 2010 are hereby AFFIRMED with MODIFICATIONS, as
follows:
Fuji Television, Inc. is hereby ORDERED to immediately REINSTATE Arlene S.
Espiritu to her position as News Producer without loss of seniority rights and
privileges and to pay her the following:
1. Backwages at the rate of $1,900.00 per month computed from May 5,
2009 (the date of dismissal), until reinstated;
2. 13th Month Pay at the rate of $1,900.00 per annum from the date of
dismissal, until reinstated;
3. One and a half (1 1/2) months pay or $2,850.00 as midyear bonus per
year from the date of dismissal, until reinstated;
4. One and a half (1 1/2) months pay or $2,850.00 as year-end bonus per
year from the date of dismissal, until reinstated;
5. Sick leave of 30 days with pay or $1,900.00 per year from the date of
dismissal, until reinstated; and
6. Vacation leave with pay equivalent to 14 days or $1,425.00 per annum
from date of dismissal, until reinstated.
7. The amount of ₱100,000.00 as moral damages;
8. The amount of ₱50,000.00 as exemplary damages;
9. Attorney’s fees equivalent to 10% of the total monetary awards herein
stated; and
10. Legal interest of twelve percent (12%) per annum of the total monetary
awards computed from May 5, 2009, until their full satisfaction.
The Labor Arbiter is hereby DIRECTED to make another recomputation of the above
monetary awards consistent with the above directives.
SO ORDERED.30
In arriving at the decision, the Court of Appeals held that Arlene was a regular
employee because she was engaged to perform work that was necessary or
desirable in the business of Fuji,31 and the successive renewals of her fixed-term
contract resulted in regular employment.32
According to the Court of Appeals, Sonzadoes not apply in order to establish that
Arlene was an independent contractor because she was not contracted on account of
any peculiar ability, special talent, or skill.33 The fact that everything used by Arlene in
her work was owned by Fuji negated the idea of job contracting. 34
The Court of Appeals also held that Arlene was illegally dismissed because Fuji failed
to comply with the requirements of substantive and procedural due process
necessary for her dismissal since she was a regular employee. 35
The Court of Appeals found that Arlene did not sign the non-renewal contract
voluntarily and that the contract was a mere subterfuge by Fuji to secure its position
that it was her choice not to renew her contract. She was left with no choice since Fuji
was decided on severing her employment.36
Fuji filed a motion for reconsideration that was denied in the resolution 37 dated
December 7, 2012 for failure to raise new matters.38
Aggrieved, Fuji filed this petition for review and argued that the Court of Appeals
erred in affirming with modification the National Labor Relations Commission’s
decision, holding that Arlene was a regular employee and that she was illegally
dismissed. Fuji also questioned the award of monetary claims, benefits, and
damages.39
Fuji points out that Arlene was hired as a stringer, and it informed her that she would
remain one.40 She was hired as an independent contractor as defined in Sonza. 41 Fuji
had no control over her work.42 The employment contracts were executed and
renewed annually upon Arlene’s insistence to which Fuji relented because she had
64
skills that distinguished her from ordinary employees.43 Arlene and Fuji dealt on equal
terms when they negotiated and entered into the employment contracts.44 There was
no illegal dismissal because she freely agreed not to renew her fixed-term contract as
evidenced by her e-mail correspondences with Yoshiki Aoki.45 In fact, the signing of
the non-renewal contract was not necessary to terminate her employment since "such
employment terminated upon expiration of her contract."46 Finally, Fuji had dealt with
Arlene in good faith, thus, she should not have been awarded damages. 47
Fuji alleges that it did not need a permanent reporter since the news reported by
Arlene could easily be secured from other entities or from the internet. 48 Fuji "never
controlled the manner by which she performed her functions." 49It was Arlene who
insisted that Fuji execute yearly fixed-term contracts so that she could negotiate for
annual increases in her pay.50
Fuji points out that Arlene reported for work for only five (5) days in February 2009,
three (3) days in March 2009, and one (1) day in April 2009. 51 Despite the provision in
her employment contract that sick leaves in excess of 30 days shall not be paid, Fuji
paid Arlene her entire salary for the months of March, April, and May; four(4) months
of separation pay; and a bonus for two and a half months for a total of
US$18,050.00.52 Despite having received the amount of US$18,050.00, Arlene still
filed a case for illegal dismissal.53
Fuji further argues that the circumstances would show that Arlene was not illegally
dismissed. The decision tonot renew her contract was mutually agreed upon by the
parties as indicated in Arlene’s e-mail54 dated March 11, 2009 where she consented
to the non-renewal of her contract but refused to sign anything. 55 Aoki informed
Arlene in an e-mail56 dated March 12, 2009 that she did not need to sign a resignation
letter and that Fuji would pay Arlene’s salary and bonus until May 2009 as well as
separation pay.57
Arlene sent an e-mail dated March 18, 2009 with her version of the non-renewal
agreement that she agreed to sign this time.58 This attached version contained a
provision that Fuji shall re-hire her if she was still interested to work for Fuji.59 For Fuji,
Arlene’s e-mail showed that she had the power to bargain. 60
Fuji then posits that the Court of Appeals erred when it held that the elements of an
employer-employee relationship are present, particularly that of control; 61 that
Arlene’s separation from employment upon the expiration of her contract constitutes
illegal dismissal;62 that Arlene is entitled to reinstatement;63 and that Fuji is liable to
Arlene for damages and attorney’s fees.64
This petition for review on certiorari under Rule 45 was filed on February 8,
2013.65 On February 27, 2013, Arlene filed a manifestation66 stating that this court
may not take jurisdiction over the case since Fuji failed to authorize Corazon E.
Acerden to sign the verification.67 Fuji filed a comment on the manifestation68 on
March 9, 2013.
Based on the arguments of the parties, there are procedural and substantive issues
for resolution:
I. Whether the petition for review should be dismissed as Corazon E.
Acerden, the signatory of the verification and certification of non forum
shopping of the petition, had no authority to sign the verification and
certification on behalf of Fuji;
II. Whether the Court of Appeals correctly determined that no grave abuse of
discretion was committed by the National Labor Relations Commission when
it ruled that Arlene was a regular employee, not an independent contractor,
and that she was illegally dismissed; and
III. Whether the Court of Appeals properly modified the National Labor
Relations Commission’s decision by awarding reinstatement, damages, and
attorney’s fees.
The petition should be dismissed.
I
Validity of the verification and certification against forum shopping
In its comment on Arlene’s manifestation, Fuji alleges that Corazon was authorized to
sign the verification and certification of non-forum shopping because Mr. Shuji Yano
was empowered under the secretary’s certificate to delegate his authority to sign the
necessary pleadings, including the verification and certification against forum
shopping.69
On the other hand, Arlene points outthat the authority given to Mr. Shuji Yano and Mr.
Jin Eto in the secretary’s certificate is only for the petition for certiorari before the
Court of Appeals.70 Fuji did not attach any board resolution authorizing Corazon orany
other person tofile a petition for review on certiorari with this court.71 Shuji Yano and
Jin Eto could not re-delegate the power thatwas delegated to them.72 In addition, the
special power of attorney executed by Shuji Yano in favor of Corazon indicated that
she was empowered to sign on behalf of Shuji Yano, and not on behalf of Fuji. 73
The Rules of Court requires the
submission of verification and
certification against forum shopping
65
Rule 7, Section 4 of the 1997 Rules of Civil Procedure provides the requirement of
verification, while Section 5 of the same rule provides the requirement of certification
against forum shopping. These sections state:
SEC. 4. Ver if ica tio n. — Except when otherwise specifically required by law or rule,
pleadings need not be under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that the
allegations therein are true and correct of his knowledge and belief.
A pleading required to be verifiedwhich containsa verification based on "information
and belief," or upon "knowledge, information and belief," or lacks a proper verification,
shall be treated as an unsigned pleading.
SEC. 5. Certification against forum shopping.— The plaintiff or principal party shall
certify under oath in the complaint orother initiatory pleading asserting a claim for
relief or in a sworn certification annexed thereto and simultaneously filed therewith:
(a) that he has not theretofore commenced any action or filed any claim involving the
same issues in any court, tribunal or quasi-judicial agency and, to the best of his
knowledge, no such other action or claim is pending therein; (b) if there is such other
pending action or claim, a complete statement of the present status thereof; and (c) if
he should thereafter learn that the same or similar action or claim has been filed or is
pending, he shall report that fact within five (5) days therefrom to the court wherein
his aforesaid complaint or initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere
amendment of the complaint or other initiatory pleading but shall be cause for the
dismissal of the case without prejudice, unless otherwise provided, upon motion and
after hearing. The submission of a false certification or non-compliance with any of
the undertakings therein shall constitute indirect contempt ofcourt, without prejudice
to the corresponding administrative and criminalactions. If the acts of the party or his
counsel clearly constitute willful and deliberate forum shopping, the same shall be
ground for summary dismissal with prejudice and shall constitute direct contempt, as
well as a cause for administrative sanctions.
Section 4(e) of Rule 4574 requires that petitions for review should "contain a sworn
certification against forum shopping as provided in the last paragraph of section 2,
Rule 42." Section 5 of the same rule provides that failure to comply with any
requirement in Section 4 is sufficient ground to dismiss the petition.
Effects of non-compliance
Uy v. Landbank75 discussed the effect of non-compliance with regard to verification
and stated that:
[t]he requirement regarding verification of a pleading is formal, not jurisdictional. Such
requirement is simply a condition affecting the form of pleading, the non-compliance
of which does not necessarily render the pleading fatally defective. Verification is
simply intended to secure an assurance that the allegations in the pleading are true
and correct and not the product of the imagination or a matter of speculation, and that
the pleading is filed in good faith. The court may order the correction of the pleading if
the verification is lacking or act on the pleading although it is not verified, if the
attending circumstances are such that strict compliance with the rules may be
dispensed with inorder that the ends of justice may thereby be served.76 (Citations
omitted)
Shipside Incorporated v. Court of Appeals77 cited the discussion in Uy and
differentiated its effect from non-compliance with the requirement of certification
against forum shopping:
On the other hand, the lack of certification against forum shopping is generally not
curable by the submission thereof after the filing of the petition. Section 5, Rule 45 of
the 1997 Rules of Civil Procedure provides that the failure of the petitioner tosubmit
the required documents that should accompany the petition, including the certification
against forum shopping, shall be sufficient ground for the dismissal thereof. The same
rule applies to certifications against forum shopping signed by a person on behalf of a
corporation which are unaccompanied by proof that said signatory is authorized to file
a petition on behalf of the corporation.78 (Emphasis supplied) Effects of substantial
compliance with the requirement of verification and certification against forum
shopping
Although the general rule is that failure to attach a verification and certification against
forum shopping isa ground for dismissal, there are cases where this court allowed
substantial compliance.
In Loyola v. Court of Appeals,79 petitioner Alan Loyola submitted the required
certification one day after filing his electoral protest. 80 This court considered the
subsequent filing as substantial compliance since the purpose of filing the certification
is to curtail forum shopping.81
In LDP Marketing, Inc. v. Monter,82 Ma. Lourdes Dela Peña signed the verification
and certification against forum shopping but failed to attach the board resolution
indicating her authority to sign.83 In a motion for reconsideration, LDP Marketing
attached the secretary’s certificate quoting the board resolution that authorized Dela
Peña.84 Citing Shipside, this court deemed the belated submission as substantial
compliance since LDP Marketing complied with the requirement; what it failed to do
66
was to attach proof of Dela Peña’s authority to sign.85 Havtor Management Phils., Inc.
v. National Labor Relations Commission86 and General Milling Corporation v. National
Labor Relations Commission87 involved petitions that were dismissed for failure to
attach any document showing that the signatory on the verification and certification
against forum-shopping was authorized.88 In both cases, the secretary’s certificate
was attached to the motion for reconsideration.89 This court considered the
subsequent submission of proof indicating authority to sign as substantial
compliance.90 Altres v. Empleo91 summarized the rules on verification and certification
against forum shopping in this manner:
For the guidance of the bench and bar, the Court restates in capsule form the
jurisprudential pronouncements . . . respecting non-compliance with the requirement
on, or submission of defective, verification and certification against forum shopping:
1) A distinction must be made between non-compliance with the requirement
on or submission of defective verification, and noncompliance with the
requirement on or submission of defective certification against forum
shopping.
2) As to verification, non-compliance therewith or a defect therein does not
necessarily render the pleading fatally defective. The court may order its
submission or correction or act on the pleading if the attending
circumstances are such that strict compliance with the Rule may be
dispensed with in order that the ends of justice may be served thereby.
3) Verification is deemed substantially complied with when one who has
ample knowledge to swear to the truth of the allegations in the complaint or
petition signs the verification, and when matters alleged in the petition have
been made in good faith or are true and correct.
4) As to certification against forum shopping, non-compliance therewith or a
defect therein, unlike in verification, is generally not curable by its
subsequent submission or correction thereof, unless there is a need to relax
the Rule on the ground of "substantial compliance" or presence of "special
circumstances or compelling reasons."
5) The certification against forum shopping must be signed by all the
plaintiffs or petitioners in a case; otherwise, those who did not sign will be
dropped as parties to the case. Under reasonable or justifiable
circumstances, however, as when all the plaintiffs or petitioners share a
common interest and invoke a common cause of action or defense, the
signature of only one of them inthe certification against forum shopping
substantially complies with the Rule.
6) Finally, the certification against forum shopping must be executed by the
party-pleader, not by his counsel. If, however, for reasonable or justifiable
reasons, the party-pleader is unable to sign, he must execute a Special
Power of Attorney designating his counsel of record to sign on his behalf. 92
There was substantial compliance
by Fuji Television Network, Inc.
Being a corporation, Fuji exercises its power to sue and be sued through its board of
directors or duly authorized officers and agents. Thus, the physical act of signing the
verification and certification against forum shopping can only be done by natural
persons duly authorized either by the corporate by-laws or a board resolution.93
In its petition for review on certiorari, Fuji attached Hideaki Ota’s secretary’s
certificate,94 authorizing Shuji Yano and Jin Eto to represent and sign for and on
behalf of Fuji.95 The secretary’s certificate was duly authenticated96 by Sulpicio
Confiado, Consul-General of the Philippines in Japan. Likewise attached to the
petition is the special power of attorney executed by Shuji Yano, authorizing Corazon
to sign on his behalf.97 The verification and certification against forum shopping was
signed by Corazon.98
Arlene filed the manifestation dated February 27, 2013, arguing that the petition for
review should be dismissed because Corazon was not duly authorized to sign the
verification and certification against forum shopping.
Fuji filed a comment on Arlene’s manifestation, stating that Corazon was properly
authorized to sign. On the basis of the secretary’s certificate, Shuji Yano was
empowered to delegate his authority.
Quoting the board resolution dated May 13, 2010, the secretary's certificate states:
(a) The Corporation shall file a Petition for Certiorari with the Court of
Appeals, against Philippines’ National Labor Relations Commission
("NLRC") and Arlene S. Espiritu, pertaining to NLRC-NCR Case No. LAC
00-002697-09, RAB No. 05-06811-00 and entitled "Arlene S. Espiritu v. Fuji
Television Network, Inc./Yoshiki Aoki", and participate in any other
subsequent proceeding that may necessarily arise therefrom, including but
not limited to the filing of appeals in the appropriate venue;
(b) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby
authorized, to verify and execute the certification against nonforum shopping
which may be necessary or required to be attached to any pleading to [sic]
submitted to the Court of Appeals; and the authority to so verify and certify
67
 for the Corporation in favor of the said persons shall subsist and remain
effective until the termination of the said case;
....
(d) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby
authorized, to represent and appear on behalf the [sic] Corporation in all
stages of the [sic] this case and in any other proceeding that may
necessarily arise thereform [sic], and to act in the Corporation’s name, place
and stead to determine, propose, agree, decide, do, and perform any and all
of the following:
1. The possibility of amicable settlement or of submission to
alternative mode of dispute resolution;
2. The simplification of the issue;
3. The necessity or desirability of amendments to the pleadings;
4. The possibility of obtaining stipulation or admission of facts and
documents; and
5. Such other matters as may aid in the prompt disposition of the
action.99 (Emphasis in the original; Italics omitted)
Shuji Yano executed a special power of attorney appointing Ms. Ma. Corazon E.
Acerden and Mr. Moises A. Rollera as his attorneys-in-fact.100 The special power of
attorney states:
That I, SHUJI YANO, of legal age, Japanese national, with office address at 2-4-8
Daiba, Minato-Ku, Tokyo, 137-8088 Japan, and being the representative of Fuji TV,
INc., [sic] (evidenced by the attached Secretary’s Certificate) one of the respondents
in NLRC-NCR Case No. 05-06811-00 entitled "Arlene S. Espiritu v. Fuji Television
Network, Inc./Yoshiki Aoki", and subsequently docketed before the Court of Appeals
asC.A. G.R. S.P. No. 114867 (Consolidated with SP No. 114889) do hereby make,
constitute and appoint Ms. Ma. Corazon E. Acerden and Mr. Moises A. Rolleraas my
true and lawful attorneys-infact for me and my name, place and stead to act and
represent me in the above-mentioned case, with special power to make admission/s
and stipulations and/or to make and submit as well as to accept and approve
compromise proposals upon such terms and conditions and under such covenants as
my attorney-in-fact may deem fit, and to engage the services of Villa Judan and Cruz
Law Officesas the legal counsel to represent the Company in the Supreme Court;
The said Attorneys-in-Fact are hereby further authorized to make, sign, execute and
deliver such papers ordocuments as may be necessary in furtherance of the power
thus granted, particularly to sign and execute the verification and certification of non-
forum shopping needed to be filed.101 (Emphasis in the original)
In its comment102 on Arlene’s manifestation, Fuji argues that Shuji Yano could further
delegate his authority because the board resolution empowered him to "act in the
Corporation’s name, place and stead to determine, propose, agree, decided [sic], do
and perform any and all of the following: . . . such other matters as may aid in the
prompt disposition of the action."103 To clarify, Fuji attached a verification and
certification against forum shopping, but Arlene questions Corazon’s authority to sign.
Arlene argues that the secretary’s certificate empowered Shuji Yano to file a petition
for certiorari before the Court of Appeals, and not a petition for review before this
court, and that since Shuji Yano’s authority was delegated to him, he could not further
delegate such power. Moreover, Corazon was representing Shuji Yano in his
personal capacity, and not in his capacity as representative of Fuji.
A review of the board resolution quoted in the secretary’s certificate shows that Fuji
shall "file a Petition for Certiorari with the Court of Appeals"104 and "participate in any
other subsequent proceeding that may necessarily arise therefrom, including but not
limited to the filing of appeals in the appropriate venue,"105 and that Shuji Yano and
Jin Eto are authorized to represent Fuji "in any other proceeding that may necessarily
arise thereform [sic]."106 As pointed out by Fuji, Shuji Yano and Jin Eto were also
authorized to "act in the Corporation’s name, place and stead to determine, propose,
agree, decide, do, and perform anyand all of the following: . . . 5. Such other matters
as may aid in the prompt disposition of the action." 107
Considering that the subsequent proceeding that may arise from the petition for
certiorari with the Court of Appeals is the filing of a petition for review with this court,
Fuji substantially complied with the procedural requirement.
On the issue of whether Shuji Yano validly delegated his authority to Corazon, Article
1892 of the Civil Code of the Philippines states:
ART. 1892. The agent may appoint a substitute if the principal has not prohibited him
from doing so; but he shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without designating the person, and
the person appointed was notoriously incompetent or insolvent. All acts of
the substitute appointed against the prohibition of the principal shall be void.
68
The secretary’s certificate does not state that Shuji Yano is prohibited from appointing
a substitute. In fact, heis empowered to do acts that will aid in the resolution of this
case.
This court has recognized that there are instances when officials or employees of a
corporation can sign the verification and certification against forum shopping without a
board resolution. In Cagayan Valley Drug Corporation v. CIR, 108 it was held that:
In sum, we have held that the following officials or employees of the company can
sign the verification and certification without need of a board resolution: (1) the
Chairperson of the Board of Directors, (2) the President of a corporation, (3) the
General Manager or Acting General Manager, (4) Personnel Officer, and (5) an
Employment Specialist in a labor case.
While the above cases109 do not provide a complete listing of authorized signatories
to the verification and certification required by the rules, the determination of the
sufficiency of the authority was done on a case to case basis. The rationale applied in
the foregoing cases is to justify the authority of corporate officers or representatives of
the corporation to sign the verification or certificate against forum shopping, being ‘in
a position to verify the truthfulness and correctness of the allegations in the
petition.’110
Corazon’s affidavit111 states that she is the "office manager and resident interpreter of
the Manila Bureau of Fuji Television Network, Inc." 112 and that she has "held the
position for the last twenty-three years."113
As the office manager for 23 years,Corazon can be considered as having knowledge
of all matters in Fuji’s Manila Bureau Office and is in a position to verify "the
truthfulness and the correctness of the allegations in the Petition." 114
Thus, Fuji substantially complied with the requirements of verification and certification
against forum shopping.
Before resolving the substantive issues in this case, this court will discuss the
procedural parameters of a Rule 45 petition for review in labor cases.
II
Procedural parameters of petitions for review in labor cases
Article 223 of the Labor Code115 does not provide any mode of appeal for decisions of
the National Labor Relations Commission. It merely states that "[t]he decision of the
Commission shall be final and executory after ten (10) calendar days from receipt
thereof by the parties." Being final, it is no longer appealable. However, the finality of
the National Labor Relations Commission’s decisions does not mean that there is no
more recourse for the parties.
In St. Martin Funeral Home v. National Labor Relations Commission, 116 this court
cited several cases117 and rejected the notion that this court had no jurisdiction to
review decisions of the National Labor Relations Commission. It stated that this court
had the power to review the acts of the National Labor Relations Commission to see if
it kept within its jurisdiction in deciding cases and alsoas a form of check and
balance.118 This court then clarified that judicial review of National Labor Relations
Commission decisions shall be by way of a petition for certiorari under Rule 65. Citing
the doctrine of hierarchy of courts, it further ruled that such petitions shall be filed
before the Court of Appeals. From the Court of Appeals, an aggrieved party may file a
petition for review on certiorari under Rule 45.
A petition for certiorari under Rule 65 is an original action where the issue is limited to
grave abuse of discretion. As an original action, it cannot be considered as a
continuation of the proceedings of the labor tribunals.
On the other hand, a petition for review on certiorari under Rule 45 is a mode of
appeal where the issue is limited to questions of law. In labor cases, a Rule 45
petition is limited toreviewing whether the Court of Appeals correctly determined the
presence or absence of grave abuse of discretion and deciding other jurisdictional
errors of the National Labor Relations Commission.119
In Odango v. National Labor Relations Commission, 120 this court explained that a
petition for certiorari is an extraordinary remedy that is "available only and restrictively
in truly exceptional cases"121 and that its sole office "is the correction of errors of
jurisdiction including commission of grave abuse of discretion amounting to lack or
excess of jurisdiction."122 A petition for certiorari does not include a review of findings
of fact since the findings of the National Labor Relations Commission are accorded
finality.123 In cases where the aggrieved party assails the National Labor Relations
Commission’s findings, he or she must be able to show that the Commission "acted
capriciously and whimsically or in total disregard of evidence material to the
controversy."124
When a decision of the Court of Appeals under a Rule 65 petition is brought to this
court by way of a petition for review under Rule 45, only questions of law may be
decided upon. As held in Meralco Industrial v. National Labor Relations
Commission:125
This Court is not a trier of facts. Well-settled is the rule that the jurisdiction of this
Court ina petition for review on certiorari under Rule 45 of the Revised Rules of Court
is limited to reviewing only errors of law, not of fact, unless the factual findings
69
complained of are completely devoid of support from the evidence on record, or the
assailed judgment is based on a gross misapprehension of facts. Besides, factual
findings of quasi-judicial agencies like the NLRC, when affirmed by the Court of
Appeals, are conclusive upon the parties and binding on this Court.126
Career Philippines v. Serna,127 citing Montoya v. Transmed,128 is instructive on the
parameters of judicial review under Rule 45:
As a rule, only questions of law may be raised in a Rule 45 petition. In one case, we
discussed the particular parameters of a Rule 45 appeal from the CA’s Rule 65
decision on a labor case, as follows:
In a Rule 45 review, we consider the correctness of the assailed CA decision, in
contrast with the review for jurisdictional error that we undertake under Rule 65.
Furthermore, Rule 45 limits us to the review of questions of law raised against the
assailed CA decision. In ruling for legal correctness, we have to view the CA decision
in the same context that the petition for certiorari it ruled upon was presented to it; we
have to examine the CA decision from the prism of whether it correctly determined
the presence or absence of grave abuse of discretion in the NLRC decision before it,
not on the basis of whether the NLRC decision on the merits of the case was correct.
In other words, we have to be keenly aware that the CA undertook a Rule 65 review,
not a review on appeal, of the NLRC decision challenged before it.129 (Emphasis in
the original)
Justice Brion’s dissenting opinion in Abott Laboratories, PhiIippines v.
Aicaraz130 discussed that in petitions for review under Rule 45, "the Court simply
determines whether the legal correctness of the CA’s finding that the NLRC ruling . . .
had basis in fact and in Iaw."131 In this kind of petition, the proper question to be
raised is, "Did the CA correctly determine whether the NLRC committed grave abuse
of discretion in ruling on the case?"132
Justice Brion’s dissenting opinion also laid down the following guidelines:
If the NLRC ruling has basis in the evidence and the applicable law and
jurisprudence, then no grave abuse of discretion exists and the CA should so declare
and, accordingly, dismiss the petition. If grave abuse of discretion exists, then the CA
must grant the petition and nullify the NLRC ruling, entering at the same time the
ruling that isjustified under the evidence and the governing law, rules and
jurisprudence. In our Rule 45 review, this Court must denythe petition if it finds that
the CA correctly acted.133 (Emphasis in the original)
These parameters shall be used in resolving the substantive issues in this petition.
III
Determination of employment status; burden of proof
In this case, there is no question thatArlene rendered services to Fuji. However, Fuji
alleges that Arlene was an independent contractor, while Arlene alleges that she was
a regular employee. To resolve this issue, we ascertain whether an employer-
employee relationship existed between Fuji and Arlene.
This court has often used the four-fold test to determine the existence of an employer-
employee relationship. Under the four-fold test, the "control test" is the most
important.134 As to how the elements in the four-fold test are proven, this court has
discussed that:
[t]here is no hard and fast rule designed to establish the aforesaid elements. Any
competent and relevant evidence to prove the relationship may be admitted.
Identification cards, cash vouchers, social security registration, appointment letters or
employment contracts, payrolls, organization charts, and personnel lists, serve as
evidence of employee status.135
If the facts of this case vis-à-vis the four-fold test show that an employer-employee
relationship existed, we then determine the status of Arlene’s employment, i.e.,
whether she was a regular employee. Relative to this, we shall analyze Arlene’s fixed-
term contract and determine whether it supports her argument that she was a regular
employee, or the argument of Fuji that she was an independent contractor. We shall
scrutinize whether the nature of Arlene’s work was necessary and desirable to Fuji’s
business or whether Fuji only needed the output of her work. If the circumstances
show that Arlene’s work was necessary and desirable to Fuji, then she is presumed to
be a regular employee. The burden of proving that she was an independent
contractor lies with Fuji.
In labor cases, the quantum of proof required is substantial evidence.136 "Substantial
evidence" has been defined as "such amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion." 137
If Arlene was a regular employee, we then determine whether she was illegally
dismissed. In complaints for illegal dismissal, the burden of proof is on the employee
to prove the fact of dismissal.138 Once the employee establishes the fact of dismissal,
supported by substantial evidence, the burden of proof shifts tothe employer to show
that there was a just or authorized cause for the dismissal and that due process was
observed.139
IV
70
 Whether the Court of Appeals correctly affirmed the National Labor
Relations Commission’s finding that Arlene was a regular employee
Fuji alleges that Arlene was anindependent contractor, citing Sonza v. ABS-CBN and
relying on the following facts: (1) she was hired because of her skills; (2) her salary
was US$1,900.00, which is higher than the normal rate; (3) she had the power to
bargain with her employer; and (4) her contract was for a fixed term. According to
Fuji, the Court of Appeals erred when it ruled that Arlene was forcedto sign the non-
renewal agreement, considering that she sent an email with another version of the
non-renewal agreement.140 Further, she is not entitled tomoral damages and
attorney’s fees because she acted in bad faith when she filed a labor complaint
against Fuji after receiving US$18,050.00 representing her salary and other
benefits.141 Arlene argues that she was a regular employee because Fuji had control
and supervision over her work. The news events that she covered were all based on
the instructions of Fuji.142 She maintains that the successive renewal of her
employment contracts for four (4) years indicates that her work was necessary and
desirable.143 In addition, Fuji’s payment of separation pay equivalent to one (1)
month’s pay per year of service indicates that she was a regular employee. 144 To
further support her argument that she was not an independent contractor, she states
that Fuji owns the laptop computer and mini-camera that she used for work.145 Arlene
also argues that Sonza is not applicable because she was a plain reporter for Fuji,
unlike Jay Sonza who was a news anchor, talk show host, and who enjoyed a
celebrity status.146 On her illness, Arlene points outthat it was not a ground for her
dismissal because her attending physician certified that she was fit to work.147
Arlene admits that she signed the non-renewal agreement with quitclaim, not because
she agreed to itsterms, but because she was not in a position to reject the non-
renewal agreement. Further, she badly needed the salary withheld for her sustenance
and medication.148 She posits that her acceptance of separation pay does not bar
filing of a complaint for illegal dismissal.149
Article 280 of the Labor Code provides that:
Art. 280. Regular and casual employment.The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or
trade of the employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been determined at
the time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph; Provided, That, any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which heis employed and his employment
shall continue while such activity exist.
This provision classifies employees into regular, project, seasonal, and casual. It
further classifies regular employees into two kinds: (1) those "engaged to perform
activities which are usually necessary or desirable in the usual business or trade of
the employer"; and (2) casual employees who have "rendered at least one year of
service, whether such service is continuous or broken."
Another classification of employees, i.e., employees with fixed-term contracts, was
recognized in Brent School, Inc. v. Zamora150 where this court discussed that:
Logically, the decisive determinant in the term employment should not be the
activities that the employee is called upon to perform, but the day certain agreed upon
by the parties for the commencement and termination of their employment
relationship, a day certainbeing understood to be "that which must necessarily come,
although it may not be known when."151 (Emphasis in the original)
This court further discussed that there are employment contracts where "a fixed term
is an essential and natural appurtenance"152 such as overseas employment contracts
and officers in educational institutions.153
Distinctions among fixed-term
employees, independent contractors,
and regular employees
GMA Network, Inc. v. Pabriga154 expounded the doctrine on fixed term contracts laid
down in Brentin the following manner:
Cognizant of the possibility of abuse in the utilization of fixed term employment
contracts, we emphasized in Brentthat where from the circumstances it is apparent
that the periods have been imposed to preclude acquisition of tenurial security by the
employee, they should be struck down as contrary to public policy or morals. We thus
laid down indications or criteria under which "term employment" cannot be said to be
in circumvention of the law on security of tenure, namely:
1) The fixed period of employment was knowingly and voluntarily agreed upon by the
parties without any force, duress, or improper pressure being brought to bear upon
the employee and absent any other circumstances vitiating his consent; or
71
2) It satisfactorily appears that the employer and the employee dealt with each other
on more or less equal terms with no moral dominance exercised by the former or the
latter.
These indications, which must be read together, make the Brent doctrine applicable
only in a few special cases wherein the employer and employee are on more or less
in equal footing in entering into the contract. The reason for this is evident: whena
prospective employee, on account of special skills or market forces, is in a position to
make demands upon the prospective employer, such prospective employee needs
less protection than the ordinary worker. Lesser limitations on the parties’ freedom of
contract are thus required for the protection of the employee.155(Citations omitted)
For as long as the guidelines laid down in Brentare satisfied, this court will recognize
the validity of the fixed-term contract.
In Labayog v. M.Y. San Biscuits, Inc.,156 this court upheld the fixedterm employment
of petitioners because from the time they were hired, they were informed that their
engagement was for a specific period. This court stated that:
[s]imply put, petitioners were notregular employees. While their employment as
mixers, packers and machine operators was necessary and desirable in the usual
business ofrespondent company, they were employed temporarily only, during
periods when there was heightened demand for production. Consequently, there
could have been no illegal dismissal when their services were terminated on
expiration of their contracts. There was even no need for notice of termination
because they knew exactly when their contracts would end. Contracts of employment
for a fixed period terminate on their own at the end of such period.
Contracts of employment for a fixed period are not unlawful. What is objectionable is
the practice of some scrupulous employers who try to circumvent the law protecting
workers from the capricious termination of employment.157 (Citation omitted)
Caparoso v. Court of Appeals158 upheld the validity of the fixed-term contract of
employment. Caparoso and Quindipan were hired as delivery men for three (3)
months. At the end of the third month, they were hired on a monthly basis. In total,
they were hired for five (5) months. They filed a complaint for illegal dismissal. 159 This
court ruled that there was no evidence indicating that they were pressured into
signing the fixed-term contracts. There was likewise no proof that their employer was
engaged in hiring workers for five (5) months onlyto prevent regularization. In the
absence of these facts, the fixed-term contracts were upheld as valid.160 On the other
hand, an independent contractor is defined as:
. . . one who carries on a distinct and independent business and undertakes to
perform the job, work, or service on its own account and under one’s own
responsibility according to one’s own manner and method, free from the control and
direction of the principal in all matters connected with the performance of the work
except as to the results thereof.161
In view of the "distinct and independent business" of independent contractors, no
employer-employee relationship exists between independent contractors and their
principals. Independent contractors are recognized under Article 106 of the Labor
Code:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract
with another person for the performance of the former’s 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.
....
The Secretary of Labor and Employment may, by appropriate regulations, restrict or
prohibit the contracting-out of labor to protect the rights of workers established under
this Code. In so prohibiting or restricting, he may make appropriate distinctions
between labor-only contracting and job contracting as well as differentiations within
these types of contracting and determine who among the parties involved shall be
considered the employer for purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer
does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to the principal
business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latterwere directly employed by him.
In Department Order No. 18-A, Seriesof 2011, of the Department of Labor and
Employment, a contractor is defined as having:
Section 3. . . .
....
(c) . . . an arrangement whereby a principal agrees to put out or farm out with a
contractor the performance or completion of a specific job, work or service within a
72
definite or predetermined period, regardless of whether such job, work or service is to
be performed or completed within oroutside the premises of the principal.
This department order also states that there is a trilateral relationship in legitimate job
contracting and subcontracting arrangements among the principal, contractor, and
employees of the contractor. There is no employer-employee relationship between
the contractor and principal who engages the contractor’s services, but there is an
employer-employee relationship between the contractor and workers hired to
accomplish the work for the principal.162
Jurisprudence has recognized another kind of independent contractor: individuals
with unique skills and talents that set them apart from ordinary employees. There is
no trilateral relationship in this case because the independent contractor himself or
herself performs the work for the principal. In other words, the relationship is bilateral.
In Orozco v. Court of Appeals,163 Wilhelmina Orozco was a columnist for the
Philippine Daily Inquirer. This court ruled that she was an independent contractor
because of her "talent, skill, experience, and her unique viewpoint as a feminist
advocate."164 In addition, the Philippine Daily Inquirer did not have the power of
control over Orozco, and she worked at her own pleasure. 165
Semblante v. Court of Appeals166 involved a masiador167 and a sentenciador.168 This
court ruled that "petitioners performed their functions as masiadorand sentenciador
free from the direction and control of respondents"169 and that the masiador and
sentenciador "relied mainly on their ‘expertise that is characteristic of the cockfight
gambling.’"170 Hence, no employer-employee relationship existed.
Bernarte v. Philippine Basketball Association171 involved a basketball referee. This
court ruled that "a referee is an independent contractor, whose special skills and
independent judgment are required specifically for such position and cannot possibly
be controlled by the hiring party."172
In these cases, the workers were found to be independent contractors because of
their unique skills and talents and the lack of control over the means and methods in
the performance of their work.
In other words, there are different kinds of independent contractors: those engaged in
legitimate job contracting and those who have unique skills and talents that set them
apart from ordinary employees.
Since no employer-employee relationship exists between independent contractors
and their principals, their contracts are governed by the Civil Code provisions on
contracts and other applicable laws.173
A contract is defined as "a meeting of minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some
service."174 Parties are free to stipulate on terms and conditions in contracts as long
as these "are not contrary to law, morals, good customs, public order, or public
policy."175 This presupposes that the parties to a contract are on equal footing.
Theycan bargain on terms and conditions until they are able to reach an agreement.
On the other hand, contracts of employment are different and have a higher level of
regulation because they are impressed with public interest. Article XIII, Section 3 of
the 1987 Constitution provides full protection to labor:
ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS
....
LABOR
Section 3. The State shall afford full protection to labor, local and overseas, organized
and unorganized, and promote full employment and equality of employment
opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining
and negotiations, and peaceful concerted activities, including the right to strike in
accordance with law. They shall be entitled to security of tenure, humane conditions
of work, and a living wage. They shall also participate in policy and decision-making
processes affecting their rights and benefits as may be provided by law.
The State shall promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes, including
conciliation, and shall enforce their mutual compliance therewith to foster industrial
peace.
The State shall regulate the relations between workers and employers, recognizing
the right of labor to its just share in the fruits of production and the right of enterprises
to reasonable returns on investments, and to expansion and growth.
Apart from the constitutional guarantee of protection to labor, Article 1700 of the Civil
Code states:
ART. 1700. The relations between capital and labor are not merely contractual. They
are so impressed with public interest that labor contracts must yield to the common
good. Therefore, such contracts are subject to the special laws on labor unions,
73
collective bargaining, strikes and lockouts, closed shop, wages, working conditions,
hours of labor and similar subjects.
In contracts of employment, the employer and the employee are not on equal footing.
Thus, it is subject to regulatory review by the labor tribunals and courts of law. The
law serves to equalize the unequal. The labor force is a special class that is
constitutionally protected because of the inequality between capital and labor. 176 This
presupposes that the labor force is weak. However, the level of protection to labor
should vary from case to case; otherwise, the state might appear to be too
paternalistic in affording protection to labor. As stated in GMA Network, Inc. v.
Pabriga, the ruling in Brent applies in cases where it appears that the employer and
employee are on equal footing.177 This recognizes the fact that not all workers are
weak. To reiterate the discussion in GMA Network v. Pabriga:
The reason for this is evident: when a prospective employee, on account of special
skills or market forces, is in a position to make demands upon the prospective
employer, such prospective employee needs less protection than the ordinary worker.
Lesser limitations on the parties’ freedom of contract are thus required for the
protection of the employee.178
The level of protection to labor mustbe determined on the basis of the nature of the
work, qualifications of the employee, and other relevant circumstances.
For example, a prospective employee with a bachelor’s degree cannot be said to be
on equal footing witha grocery bagger with a high school diploma. Employees who
qualify for jobs requiring special qualifications such as "[having] a Master’s degree" or
"[having] passed the licensure exam" are different from employees who qualify for
jobs that require "[being a] high school graduate; withpleasing personality." In these
situations, it is clear that those with special qualifications can bargain with the
employer on equal footing. Thus, the level of protection afforded to these employees
should be different.
Fuji’s argument that Arlene was an independent contractor under a fixed-term
contract is contradictory. Employees under fixed-term contracts cannot be
independent contractors because in fixed-term contracts, an employer-employee
relationship exists. The test in this kind of contract is not the necessity and desirability
of the employee’s activities, "but the day certain agreed upon by the parties for the
commencement and termination of the employment relationship." 179 For regular
employees, the necessity and desirability of their work in the usual course of the
employer’s business are the determining factors. On the other hand, independent
contractors do not have employer-employee relationships with their principals. Hence,
before the status of employment can be determined, the existence of an employer-
employee relationship must be established.
The four-fold test180 can be used in determining whether an employeremployee
relationship exists. The elements of the four-fold test are the following: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power
of dismissal; and (4) the power of control, which is the most important element. 181
The "power of control" was explained by this court in Corporal, Sr. v. National Labor
Relations Commission:182
The power to control refers to the existence of the power and not necessarily to the
actual exercise thereof, nor is it essential for the employer to actually supervise the
performance of duties of the employee. It is enough that the employer has the right to
wield that power.183 (Citation omitted)
Orozco v. Court of Appeals further elucidated the meaning of "power of control" and
stated the following:
Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the means or
methods to be employed in attaining it, and those that control or fix the methodology
and bind or restrict the party hired to the use of such means. The first, which aim only
to promote the result, create no employer-employee relationship unlike the second,
which address both the result and the means used to achieve it. . . . 184 (Citation
omitted)
In Locsin, et al. v. Philippine Long Distance Telephone Company,185 the "power of
control" was defined as "[the] right to control not only the end to be achieved but also
the means to be used in reaching such end."186
Here, the Court of Appeals applied Sonza v. ABS-CBN and Dumpit Murillo v. Court of
Appeals187 in determining whether Arlene was an independent contractor or a regular
employee.
In deciding Sonza and Dumpit-Murillo, this court used the four-fold test. Both cases
involved newscasters and anchors. However, Sonza was held to be an independent
contractor, while Dumpit-Murillo was held to be a regular employee.
Comparison of the Sonza and
Dumpit-Murillo cases using
the four-fold test
Sonza was engaged by ABS-CBN in view of his "unique skills, talent and celebrity
status not possessed by ordinary employees."188 His work was for radio and television
programs.189 On the other hand, Dumpit-Murillo was hired by ABC as a newscaster
74
and co-anchor.190 Sonza’s talent fee amounted to ₱317,000.00 per month, which this
court found to be a substantial amount that indicatedhe was an independent
contractor rather than a regular employee.191Meanwhile, Dumpit-Murillo’s monthly
salary was ₱28,000.00, a very low amount compared to what Sonza received. 192
Sonza was unable to prove that ABS-CBN could terminate his services apart from
breach of contract. There was no indication that he could be terminated based on just
or authorized causes under the Labor Code. In addition, ABS-CBN continued to pay
his talent fee under their agreement, even though his programs were no longer
broadcasted.193 Dumpit-Murillo was found to have beenillegally dismissed by her
employer when they did not renew her contract on her fourth year with ABC.194
In Sonza, this court ruled that ABS-CBN did not control how Sonza delivered his
lines, how he appeared on television, or how he sounded on radio.195 All that Sonza
needed was his talent.196 Further, "ABS-CBN could not terminate or discipline SONZA
even if the means and methods of performance of his work . . . did not meet ABS-
CBN’s approval."197 In Dumpit-Murillo, the duties and responsibilities enumerated in
her contract was a clear indication that ABC had control over her work. 198
Application of the four-fold test
The Court of Appeals did not err when it relied on the ruling in Dumpit-Murillo and
affirmed the ruling of the National Labor Relations Commission finding that Arlene
was a regular employee. Arlene was hired by Fuji as a news producer, but there was
no showing that she was hired because of unique skills that would distinguish her
from ordinary employees. Neither was there any showing that she had a celebrity
status. Her monthly salary amounting to US$1,900.00 appears tobe a substantial
sum, especially if compared to her salary whenshe was still connected with
GMA.199 Indeed, wages may indicate whether oneis an independent contractor.
Wages may also indicate that an employee is able to bargain with the employer for
better pay. However, wages should not be the conclusive factor in determining
whether one is an employee or an independent contractor.
Fuji had the power to dismiss Arlene, as provided for in paragraph 5 of her
professional employment contract.200 Her contract also indicated that Fuji had control
over her work because she was required to work for eight (8) hours from Monday to
Friday, although on flexible time.201 Sonza was not required to work for eight (8)
hours, while Dumpit-Murillo had to be in ABC to do both on-air and off-air tasks.
On the power to control, Arlene alleged that Fuji gave her instructions on what to
report.202 Even the mode of transportation in carrying out her functions was controlled
by Fuji. Paragraph 6 of her contract states:
6. During the travel to carry out work, if there is change of place or change of place of
work, the train, bus, or public transport shall be used for the trip. If the Employee uses
the private car during the work and there is an accident the Employer shall not be
responsible for the damage, which may be caused to the Employee. 203
Thus, the Court of Appeals did not err when it upheld the findings of the National
Labor Relations Commission that Arlene was not an independent contractor.
Having established that an employer-employee relationship existed between Fuji and
Arlene, the next questions for resolution are the following: Did the Court of Appeals
correctly affirm the National Labor Relations Commission that Arlene had become a
regular employee? Was the nature of Arlene’s work necessary and desirable for Fuji’s
usual course of business?
Arlene was a regular employee
with a fixed-term contract
The test for determining regular employment is whether there is a reasonable
connection between the employee’s activities and the usual business of the employer.
Article 280 provides that the nature of work must be "necessary or desirable in the
usual business or trade of the employer" as the test for determining regular
employment. As stated in ABS-CBN Broadcasting Corporation v. Nazareno:204
In determining whether an employment should be considered regular or non-regular,
the applicable test is the reasonable connection between the particular activity
performed by the employee in relation to the usual business or trade of the employer.
The standard, supplied by the law itself, is whether the work undertaken is necessary
or desirable in the usual business or trade of the employer, a fact that can be
assessed by looking into the nature of the services rendered and its relation to the
general scheme under which the business or trade is pursued in the usual course. It
is distinguished from a specific undertaking that is divorced from the normal activities
required incarrying on the particular business or trade.205
However, there may be a situation where an employee’s work is necessary but is not
always desirable inthe usual course of business of the employer. In this situation,
there is no regular employment.
In San Miguel Corporation v. National Labor Relations Commission, 206 Francisco de
Guzman was hired to repair furnaces at San Miguel Corporation’s Manila glass plant.
He had a separate contract for every furnace that he repaired. He filed a complaint for
illegal dismissal three (3) years after the end of his last contract.207 In ruling that de
Guzman did not attain the status of a regular employee, this court explained:
75
Note that the plant where private respondent was employed for only seven months is
engaged in the manufacture of glass, an integral component of the packaging and
manufacturing business of petitioner. The process of manufacturing glass requires a
furnace, which has a limited operating life. Petitioner resorted to hiring project or fixed
term employees in having said furnaces repaired since said activity is not regularly
performed. Said furnaces are to be repaired or overhauled only in case of need and
after being used continuously for a varying period of five (5) to ten (10) years. In
1990, one of the furnaces of petitioner required repair and upgrading. This was an
undertaking distinct and separate from petitioner's business of manufacturing glass.
For this purpose, petitioner must hire workers to undertake the said repair and
upgrading. . . .
....
Clearly, private respondent was hired for a specific project that was not within the
regular business of the corporation. For petitioner is not engaged in the business of
repairing furnaces. Although the activity was necessary to enable petitioner to
continue manufacturing glass, the necessity therefor arose only when a particular
furnace reached the end of its life or operating cycle. Or, as in the second
undertaking, when a particular furnace required an emergency repair. In other words,
the undertakings where private respondent was hired primarily as helper/bricklayer
have specified goals and purposes which are fulfilled once the designated work was
completed. Moreover, such undertakings were also identifiably separate and distinct
from the usual, ordinary or regular business operations of petitioner, which is glass
manufacturing. These undertakings, the duration and scope of which had been
determined and made known to private respondent at the time of his employment,
clearly indicated the nature of his employment as a project employee. 208
Fuji is engaged in the business of broadcasting,209 including news programming.210 It
is based in Japan211 and has overseas offices to cover international news.212
Based on the record, Fuji’s Manila Bureau Office is a small unit 213 and has a few
employees.214 As such, Arlene had to do all activities related to news gathering.
Although Fuji insists that Arlene was a stringer, it alleges that her designation was
"News Talent/Reporter/Producer."215
A news producer "plans and supervises newscast . . . [and] work[s] with reporters in
the field planning and gathering information. . . ." 216 Arlene’s tasks included
"[m]onitoring and [g]etting [n]ews [s]tories, [r]eporting interviewing subjects in front of
a video camera,"217 "the timely submission of news and current events reports
pertaining to the Philippines[,] and traveling [sic] to [Fuji’s] regional office in
Thailand."218 She also had to report for work in Fuji’s office in Manila from Mondays to
Fridays, eight (8) hours per day.219 She had no equipment and had to use the
facilities of Fuji to accomplish her tasks.
The Court of Appeals affirmed the finding of the National Labor Relations
Commission that the successive renewals of Arlene’s contract indicated the necessity
and desirability of her work in the usual course of Fuji’s business. Because of this,
Arlene had become a regular employee with the right to security of tenure. 220 The
Court of Appeals ruled that:
Here, Espiritu was engaged by Fuji as a stinger [sic] or news producer for its Manila
Bureau. She was hired for the primary purpose of news gathering and reporting to the
television network’s headquarters. Espiritu was not contracted on account of any
peculiar ability or special talent and skill that she may possess which the network
desires to make use of. Parenthetically, ifit were true that Espiritu is an independent
contractor, as claimed by Fuji, the factthat everything that she uses to perform her job
is owned by the company including the laptop computer and mini camera discounts
the idea of job contracting.221
Moreover, the Court of Appeals explained that Fuji’s argument that no employer-
employee relationship existed in view of the fixed-term contract does not persuade
because fixed-term contracts of employment are strictly construed.222 Further, the
pieces of equipment Arlene used were all owned by Fuji, showing that she was a
regular employee and not an independent contractor. 223
The Court of Appeals likewise cited Dumpit-Murillo, which involved fixed-term
contracts that were successively renewed for four (4) years. 224 This court held that
"[t]his repeated engagement under contract of hire is indicative of the necessity and
desirability of the petitioner’s work in private respondent ABC’s business." 225
With regard to Fuji’s argument that Arlene’s contract was for a fixed term, the Court of
Appeals cited Philips Semiconductors, Inc. v. Fadriquela 226 and held that where an
employee’s contract "had been continuously extended or renewed to the same
position, with the same duties and remained in the employ without any
interruption,"227 then such employee is a regular employee. The continuous renewal is
a scheme to prevent regularization. On this basis, the Court of Appeals ruled in favor
of Arlene.
As stated in Price, et al. v. Innodata Corp., et al.: 228
The employment status of a person is defined and prescribed by law and not by what
the parties say it should be. Equally important to consider is that a contract of
employment is impressed with public interest such that labor contracts must yield to
the common good. Thus, provisions of applicable statutes are deemed written into the
contract, and the parties are not at liberty to insulate themselves and their
relationships from the impact of labor laws and regulations by simply contracting with
each other.229 (Citations omitted)
76
Arlene’s contract indicating a fixed term did not automatically mean that she could
never be a regular employee. This is precisely what Article 280 seeks to avoid. The
ruling in Brent remains as the exception rather than the general rule.
Further, an employee can be a regular employee with a fixed-term contract. The law
does not preclude the possibility that a regular employee may opt to have a fixed-term
contract for valid reasons. This was recognized in Brent: For as long as it was the
employee who requested, or bargained, that the contract have a "definite date of
termination," or that the fixed-term contract be freely entered into by the employer and
the employee, then the validity of the fixed-term contract will be upheld.230
V states the following:
Whether the Court of Appeals correctly affirmed
the National Labor Relations Commission’s finding of illegal dismissal
Fuji argues that the Court of Appeals erred when it held that Arlene was illegally
dismissed, in view of the non-renewal contract voluntarily executed by the parties.
Fuji also argues that Arlene’s contract merely expired; hence, she was not illegally
dismissed.231
Arlene alleges that she had no choice but to sign the non-renewal contract because
Fuji withheldher salary and benefits.
With regard to this issue, the Court of Appeals held:
We cannot subscribe to Fuji’s assertion that Espiritu’s contract merely expired and
that she voluntarily agreed not to renew the same. Even a cursory perusal of the
subject Non-Renewal Contract readily shows that the same was signed by Espiritu
under protest. What is apparent is that the Non-Renewal Contract was crafted merely
as a subterfuge to secure Fuji’s position that it was Espiritu’s choice not to renew her
contract.232
As a regular employee, Arlene was entitled to security of tenure and could be
dismissed only for just or authorized causes and after the observance of due process.
The right to security of tenureis guaranteed under Article XIII, Section 3 of the 1987
Constitution: ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS
....
LABOR
....
It shall guarantee the rights of all workers to self-organization, collective bargaining
and negotiations, and peaceful concerted activities, including the right to strike in
accordance with law. They shall be entitled to security of tenure, humane conditions
of work, and a living wage. They shall also participate in policy and decision-making
processes affecting their rights and benefits as may be provided by law.
Article 279 of the Labor Code also provides for the right to security of tenure and
Art. 279. Security of tenure.In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause of when authorized by
this Title. An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the
time of his actual reinstatement.
Thus, on the right to security of tenure, no employee shall be dismissed, unless there
are just orauthorized causes and only after compliance with procedural and
substantive due process is conducted.
Even probationary employees are entitled to the right to security of tenure. This was
explained in Philippine Daily Inquirer, Inc. v. Magtibay, Jr.:233
Within the limited legal six-month probationary period, probationary employees are
still entitled to security of tenure. It is expressly provided in the afore-quoted Article
281 that a probationary employee may be terminated only on two grounds: (a) for just
cause, or (b) when he fails to qualify as a regular employee in accordance with
reasonable standards made known by the employer to the employee at the time of his
engagement.234 (Citation omitted)
The expiration of Arlene’s contract does not negate the finding of illegal dismissal by
Fuji. The manner by which Fuji informed Arlene that her contract would no longer be
renewed is tantamount to constructive dismissal. To make matters worse, Arlene was
asked to sign a letter of resignation prepared by Fuji. 235 The existence of a fixed-term
contract should not mean that there can be no illegal dismissal. Due process must still
be observed in the pre-termination of fixed-term contracts of employment.
77
In addition, the Court of Appeals and the National Labor Relations Commission found
that Arlene was dismissed because of her health condition. In the non-renewal
agreement executed by Fuji and Arlene, it is stated that:
WHEREAS, the SECOND PARTY is undergoing chemotherapy which prevents her
from continuing to effectively perform her functions under the said Contract such as
the timely submission of news and current events reports pertaining to the Philippines
and travelling [sic] to the FIRST PARTY’s regional office in Thailand. 236 (Emphasis
supplied)
Disease as a ground for termination is recognized under Article 284 of the Labor
Code:
Art. 284. Disease as ground for termination. An employer may terminate the services
of an employee who has been found to be suffering from any disease and whose
continued employment is prohibited by law or is prejudicial to his health as well as to
the health of his co-employees: Provided, That he is paid separation pay equivalent to
at least one (1) month salary or to one-half (1/2) month salary for every year of
service, whichever is greater, a fraction of at least six (6) months being considered as
one (1) whole year.
Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the Labor Code
provides:
Sec. 8. Disease as a ground for dismissal.– Where the employee suffers from a
disease and his continued employment is prohibited by law or prejudicial to his
healthor to the health of his coemployees, the employer shall not terminate his
employment unless there is a certification by a competent public health authority that
the disease is of such nature or at such a stage that it cannot be cured within a period
of six (6) months even with proper medical treatment. If the disease or ailment can be
cured within the period, the employer shall not terminate the employee but shall ask
the employee to take a leave. The employer shall reinstate such employee to his
former position immediately upon the restoration of his normal health.
For dismissal under Article 284 to bevalid, two requirements must be complied with:
(1) the employee’s disease cannot be cured within six (6) months and his "continued
employment is prohibited by law or prejudicial to his health as well as to the health of
his co-employees"; and (2) certification issued by a competent public health authority
that even with proper medical treatment, the disease cannot be cured within six (6)
months.237 The burden of proving compliance with these requisites is on the
employer.238 Noncompliance leads to the conclusion that the dismissal was illegal. 239
There is no evidence showing that Arlene was accorded due process. After informing
her employer of her lung cancer, she was not given the chance to present medical
certificates. Fuji immediately concluded that Arlene could no longer perform her
duties because of chemotherapy. It did not ask her how her condition would affect her
work. Neither did it suggest for her to take a leave, even though she was entitled to
sick leaves. Worse, it did not present any certificate from a competent public health
authority. What Fuji did was to inform her thather contract would no longer be
renewed, and when she did not agree, her salary was withheld. Thus, the Court of
Appeals correctly upheld the finding of the National Labor Relations Commission that
for failure of Fuji to comply with due process, Arlene was illegally dismissed. 240
VI
Whether the Court of Appeals properly modified
the National Labor Relations Commission’s decision
when it awarded reinstatement, damages, and attorney’s fees
The National Labor Relations Commission awarded separation pay in lieu of
reinstatement, on the ground that the filing of the complaint for illegal dismissal may
have seriously strained relations between the parties. Backwages were also awarded,
to be computed from date of dismissal until the finality of the National Labor Relations
Commission’s decision. However, only backwages were included in the dispositive
portion because the National Labor Relations Commission recognized that Arlene
had received separation pay in the amount of US$7,600.00. The Court of Appeals
affirmed the National Labor Relations Commission’s decision but modified it by
awarding moral and exemplary damages and attorney’s fees, and all other benefits
Arlene was entitled to under her contract with Fuji. The Court of Appeals also ordered
reinstatement, reasoning that the grounds when separation pay was awarded in lieu
of reinstatement were not proven.241
Article 279 of the Labor Code provides:
Art. 279. Security of tenure. In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by
this Title. An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the
time of his actual reinstatement. (Emphasis supplied)
The Court of Appeals’ modification of the National Labor Relations Commission’s
decision was proper because the law itself provides that illegally dismissed
employees are entitled to reinstatement, backwages including allowances, and all
other benefits.
78
On reinstatement, the National Labor Relations Commission ordered payment of
separation pay in lieu of reinstatement, reasoning "that the filing of the instant suit
may have seriously abraded the relationship of the parties so as to render
reinstatement impractical."242 The Court of Appeals reversed this and ordered
reinstatement on the ground that separation pay in lieu of reinstatement is allowed
only in several instances such as (1) when the employer has ceased operations; (2)
when the employee’s position is no longer available; (3) strained relations; and (4) a
substantial period has lapsed from date of filing to date of finality. 243
On this matter, Quijano v. Mercury Drug Corp.244 is instructive:
Well-entrenched is the rule that an illegally dismissed employee is entitled to
reinstatement as a matter of right. . . .
To protect labor’s security of tenure, we emphasize that the doctrine of "strained
relations" should be strictly applied so as not to deprive an illegally dismissed
employee of his right to reinstatement. Every labor dispute almost always results in
"strained relations" and the phrase cannot be given an overarching interpretation,
otherwise, an unjustly dismissed employee can never be reinstated. 245 (Citations
omitted)
The Court of Appeals reasoned that strained relations are a question of fact that must
be supported by evidence.246No evidence was presented by Fuji to prove that
reinstatement was no longer feasible. Fuji did not allege that it ceased operations or
that Arlene’s position was no longer available. Nothing in the records shows that
Arlene’s reinstatement would cause an atmosphere of antagonism in the workplace.
Arlene filed her complaint in 2009. Five (5) years are not yet a substantial period 247 to
bar reinstatement.
On the award of damages, Fuji argues that Arlene is notentitled to the award of
damages and attorney’s fees because the non-renewal agreement contained a
quitclaim, which Arlene signed. Quitclaims in labor cases do not bar illegally
dismissed employees from filing labor complaints and money claim. As explained by
Arlene, she signed the non-renewal agreement out of necessity. In Land and Housing
Development Corporation v. Esquillo,248 this court explained: We have heretofore
explained that the reason why quitclaims are commonly frowned upon as contrary to
public policy, and why they are held to be ineffective to bar claims for the full measure
of the workers’ legal rights, is the fact that the employer and the employee obviously
do not stand on the same footing. The employer drove the employee to the wall. The
latter must have to get holdof money. Because, out of a job, he had to face the harsh
necessities of life. He thus found himself in no position to resist money proffered. His,
then, is a case of adherence, not of choice.249
With regard to the Court of Appeals’ award of moral and exemplary damages and
attorney’s fees, this court has recognized in several cases that moral damages are
awarded "when the dismissal is attended by bad faith or fraud or constitutes an act
oppressive to labor, or is done in a manner contrary to good morals, good customs or
public policy."250 On the other hand, exemplary damages may be awarded when the
dismissal was effected "in a wanton, oppressive or malevolent manner." 251
The Court of Appeals and National Labor Relations Commission found that after
Arlene had informed Fuji of her cancer, she was informed that there would be
problems in renewing her contract on account of her condition. This information
caused Arlene mental anguish, serious anxiety, and wounded feelings that can be
gleaned from the tenor of her email dated March 11, 2009. A portion of her email
reads:
I WAS SO SURPRISED . . . that at a time when I am at my lowest, being sick and
very weak, you suddenly came to deliver to me the NEWS that you will no longer
renew my contract.1awp++i1 I knew this will come but I never thought that you will be
so ‘heartless’ and insensitive to deliver that news just a month after I informed you
that I am sick. I was asking for patience and understanding and your response was
not to RENEW my contract.252
Apart from Arlene’s illegal dismissal, the manner of her dismissal was effected in an
oppressive approach withher salary and other benefits being withheld until May 5,
2009, when she had no other choice but to sign the non-renewal contract. Thus, there
was legal basis for the Court of Appeals to modify the National Labor Relations
Commission’s decision.
However, Arlene receivedher salary for May 2009.253 Considering that the date of her
illegal dismissal was May 5, 2009,254 this amount may be subtracted from the total
monetary award. With regard to the award of attorney’s fees, Article 111 of the Labor
Code states that "[i]n cases of unlawful withholding of wages, the culpable party may
be assessed attorney’s fees equivalent to ten percent of the amount of wages
recovered." Likewise, this court has recognized that "in actions for recovery of wages
or where an employee was forced to litigate and, thus, incur expenses to protect his
rights and interest, the award of attorney’s fees is legallyand morally
justifiable."255 Due to her illegal dismissal, Arlene was forced to litigate.
In the dispositive portion of its decision, the Court of Appeals awarded legal interest at
the rate of 12% per annum.256 In view of this court’s ruling in Nacar v. Gallery
Frames,257 the legal interest shall be reducd to a rate of 6% per annum from July 1,
2013 until full satisfaction.
WHEREFORE, the petition is DENIED. The assailed Court of Appeals decision dated
June 25, 2012 is AFFIRMED with the modification that backwages shall be computed
79
from June 2009. Legal interest shall be computed at the rate of 6% per annum of the
total monetary award from date of finality of this decision until full satisfaction.

SO ORDERED.

80
JOSE MEL BERNARTE, G.R. No. 192084

Petitioner, Complainant Bernarte, for instance, was not made to sign a contract during
the first conference of the All-Filipino Cup which was from February 23, 2003
- versus 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,
PHILIPPINE BASKETBALL 2003.

ASSOCIATION (PBA), JOSE On January 15, 2004, Bernarte received a letter from the Office of the
Commissioner advising him that his contract would not be renewed citing his
unsatisfactory performance on and off the court. It was a total shock
EMMANUEL M. EALA, and Promulgated:
for Bernarte who was awarded Referee of the year in 2003. He felt that the
dismissal was caused by his refusal to fix a game upon order of Ernie De
PERRY MARTINEZ, Leon.

Respondents. September 14, 2011 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
x-----------------------------------------------------------------------------------------x contract as trainee. Beginning 2002, he signed a yearly contract as Regular
Class C referee. On May 6, 2003, respondent Martinez issued a
DECISION memorandum to Guevarra expressing dissatisfaction over his questioning on
the assignment of referees officiating out-of-town games. Beginning
CARPIO, J.: February 2004, he was no longer made to sign a contract.

The Case

This is a petition for review1 of the 17 December 2009 Decision2 and 5 April 2010
Resolution3 of the Court of Appeals in CA-G.R. SP No. 105406. The Court of Appeals
set aside the decision of the National Labor Relations Commission (NLRC), which
affirmed the decision of the Labor Arbiter, and held that petitioner Jose
Mel Bernarte is an independent contractor, and not an employee of respondents
Philippine Basketball Association (PBA), Jose Emmanuel M. Eala, and Perry
Martinez. The Court of Appeals denied the motion for reconsideration.
Respondents aver, on the other hand, that complainants entered into two
contracts of retainer with the PBA in the year 2003. The first contract was for
the period January 1, 2003 to July 15, 2003; and the second was for
September 1 to December 2003. After the lapse of the latter period, PBA
decided not to renew their contracts.

The Fact Complainants were not illegally dismissed because they were not employees
of the PBA. Their respective contracts of retainer were simply not renewed.
The facts, as summarized by the NLRC and quoted by the Court of Appeals, are as PBA had the prerogative of whether or not to renew their contracts, which
follows: they knew were fixed.4

Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they were
invited to join the PBA as referees. During the leadership of Commissioner
Emilio Bernardino, they were made to sign contracts on a year-to-year basis. In her 31 March 2005 Decision,5 the Labor Arbiter6 declared petitioner an employee
During the term of Commissioner Eala, however, changes were made on the whose dismissal by respondents was illegal. Accordingly, the Labor Arbiter ordered
terms of their employment.
81
the reinstatement of petitioner and the payment of backwages, moral and exemplary
damages and attorneys fees, to wit:
SO ORDERED.7

WHEREFORE, premises considered all respondents who are here found to

have illegally dismissed complainants are hereby ordered to (a) reinstate In its 28 January 2008 Decision,8 the NLRC affirmed the Labor Arbiters judgment.
complainants within thirty (30) days from the date of receipt of this decision The dispositive portion of the NLRCs decision reads:
and to solidarily pay complainants:

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

JOSE MEL RENATO Arbiter Teresita D. Castillon-Lora dated March 31, 2005 is AFFIRMED.
BERNARTE GUEVARRA

1. backwages from January 1, SO ORDERED.9

2004 up to the finality of this
Decision, which to date is
P536,250.00 P211,250.00
Respondents filed a petition for certiorari with the Court of Appeals, which overturned
100,000.00 the decisions of the NLRC and Labor Arbiter. The dispositive portion of the Court of
2. moral damages Appeals decision reads:
50,000.00 100,000.00

3. exemplary damages WHEREFORE, the petition is hereby GRANTED. The

50,000.00 assailed Decision dated January 28, 2008 and Resolution dated August 26,
4. 10% attorneys fees 68,625.00 36,125.00 2008 of the National Labor Relations Commission are ANNULLED and SET
ASIDE. Private respondents complaint before the Labor Arbiter
is DISMISSED.

TOTAL P754,875.00 P397,375.00

SO ORDERED.10

or a total of P1,152,250.00

The rest of the claims are hereby dismissed for lack of merit or basis.

82
 The Court of Appeals Ruling
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:
While the NLRC agreed that the PBA has no control over the referees acts
of blowing the whistle and making calls during basketball games, it,
nevertheless, theorized that the said acts refer to the means and methods
employed by the referees in officiating basketball games for the illogical
reason that said acts refer only to the referees skills. How could a skilled
referee perform his job without blowing a whistle and making calls? Worse,
how can the PBA control the performance of work of a referee without
controlling his acts of blowing the whistle and making calls?
Moreover, this Court disagrees with the Labor Arbiters finding (as affirmed
by the NLRC) that the Contracts of Retainer show that petitioners have
control over private respondents.
xxxx
Neither do We agree with the NLRCs affirmance of the Labor Arbiters
conclusion that private respondents repeated hiring made them regular
employees by operation of law.11
The Issues
The main issue in this case is whether petitioner is an employee of respondents,
which in turn determines whether petitioner was illegally dismissed.
Petitioner raises the procedural issue of whether the Labor Arbiters decision has
become final and executory for failure of respondents to appeal with the NLRC within
the reglementaryperiod.
The Ruling of the Court
The petition is bereft of merit.
The Court shall first resolve the procedural issue posed by petitioner.
Petitioner contends that the Labor Arbiters Decision of 31 March 2005 became final
and executory for failure of respondents to appeal with the NLRC within the
prescribed period. Petitioner claims that the Labor Arbiters decision was
constructively served on respondents as early as August 2005 while respondents
appealed the Arbiters decision only on 31 March 2006, way beyond
the reglementary period to appeal. Petitioner points out that service of an unclaimed
registered mail is deemed complete five days from the date of first notice of the post
master. In this case three notices were issued by the post office, the last being on 1
August 2005. The unclaimed registered mail was consequently returned to sender.
Petitioner presents the Postmasters Certification to prove constructive service of the
Labor Arbiters decision on respondents. The Postmaster certified:
xxx
That upon receipt of said registered mail matter, our registry in charge,
Vicente Asis, Jr., immediately issued the first registry notice to claim on July
12, 2005 by the addressee. The second and third notices were issued on
July 21 and August 1, 2005, respectively.
That the subject registered letter was returned to the sender (RTS) because
the addressee failed to claim it after our one month retention period elapsed.
83
 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.
84
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-
85
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.
xxx
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
86
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.

87
G.R. No. 155207 August 13, 2008
WILHELMINA S. OROZCO, petitioner,
vs.
THE FIFTH DIVISION OF THE HONORABLE COURT OF APPEALS, PHILIPPINE
DAILY INQUIRER, and LETICIA JIMENEZ MAGSANOC, respondents.
DECISION
NACHURA, J.:
The case before this Court raises a novel question never before decided in our
jurisdiction – whether a newspaper columnist is an employee of the newspaper which
publishes the column.
In this Petition for Review under Rule 45 of the Revised Rules on Civil Procedure,
petitioner Wilhelmina S. Orozco assails the Decision1 of the Court of Appeals (CA) in
CA-G.R. SP No. 50970 dated June 11, 2002 and its Resolution 2 dated September 11,
2002 denying her Motion for Reconsideration. The CA reversed and set aside the
Decision3 of the National Labor Relations Commission (NLRC), which in turn had
affirmed the Decision4 of the Labor Arbiter finding that Orozco was an employee of
private respondent Philippine Daily Inquirer (PDI) and was illegally dismissed as
columnist of said newspaper.
In March 1990, PDI engaged the services of petitioner to write a weekly column for its
Lifestyle section. She religiously submitted her articles every week, except for a six-
month stint in New York City when she, nonetheless, sent several articles through
mail. She received compensation of P250.00 – later increased to P300.00 – for every
column published.5
On November 7, 1992, petitioner’s column appeared in the PDI for the last time.
Petitioner claims that her then editor, Ms. Lita T. Logarta, 6 told her that respondent
Leticia Jimenez Magsanoc, PDI Editor in Chief, wanted to stop publishing her column
for no reason at all and advised petitioner to talk to Magsanoc herself. Petitioner
narrates that when she talked to Magsanoc, the latter informed her that it was PDI
Chairperson Eugenia Apostol who had asked to stop publication of her column, but
that in a telephone conversation with Apostol, the latter said that Magsanoc informed
her (Apostol) that the Lifestyle section already had many columnists.7
On the other hand, PDI claims that in June 1991, Magsanoc met with the Lifestyle
section editor to discuss how to improve said section. They agreed to cut down the
number of columnists by keeping only those whose columns were well-written, with
regular feedback and following. In their judgment, petitioner’s column failed to
improve, continued to be superficially and poorly written, and failed to meet the high
standards of the newspaper. Hence, they decided to terminate petitioner’s column.8
Aggrieved by the newspaper’s action, petitioner filed a complaint for illegal dismissal,
backwages, moral and exemplary damages, and other money claims before the
NLRC.
On October 29, 1993, Labor Arbiter Arthur Amansec rendered a Decision in
favor of petitioner, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered, finding complainant to be an
employee of respondent company; ordering respondent company to
reinstate her to her former or equivalent position, with backwages.
Respondent company is also ordered to pay her 13 th month pay and service
incentive leave pay.
Other claims are hereby dismissed for lack of merit.
SO ORDERED.9
The Labor Arbiter found that:
[R]espondent company exercised full and complete control over the means
and method by which complainant’s work – that of a regular columnist – had
to be accomplished. This control might not be found in an instruction, verbal
or oral, given to complainant defining the means and method she should
write her column. Rather, this control is manifested and certained (sic) in
respondents’ admitted prerogative to reject any article submitted by
complainant for publication.
By virtue of this power, complainant was helplessly constrained to adopt her
subjects and style of writing to suit the editorial taste of her editor.
Otherwise, off to the trash can went her articles.
Moreover, this control is already manifested in column title, "Feminist
Reflection" allotted complainant. Under this title, complainant’s writing was
controlled and limited to a woman’s perspective on matters of feminine
interests. That respondent had no control over the subject matter written by
complainant is strongly belied by this observation. Even the length of
complainant’s articles were set by respondents.
88
 Inevitably, respondents would have no control over when or where
complainant wrote her articles as she was a columnist who could produce an
article in thirty (3) (sic) months or three (3) days, depending on her mood or
the amount of research required for an article but her actions were controlled
by her obligation to produce an article a week. If complainant did not have to
report for work eight (8) hours a day, six (6) days a week, it is because her
task was mainly mental. Lastly, the fact that her articles were (sic) published
weekly for three (3) years show that she was respondents’ regular
employee, not a once-in-a-blue-moon contributor who was not under any
pressure or obligation to produce regular articles and who wrote at his own
whim and leisure.10
PDI appealed the Decision to the NLRC. In a Decision dated August 23, 1994, the
NLRC Second Division dismissed the appeal thereby affirming the Labor Arbiter’s
Decision. The NLRC initially noted that PDI failed to perfect its appeal, under Article
223 of the Labor Code, due to non-filing of a cash or surety bond. The NLRC said that
the reason proffered by PDI for not filing the bond – that it was difficult or impossible
to determine the amount of the bond since the Labor Arbiter did not specify the
amount of the judgment award – was not persuasive. It said that all PDI had to do
was compute based on the amount it was paying petitioner, counting the number of
weeks from November 7, 1992 up to promulgation of the Labor Arbiter’s decision.11
The NLRC also resolved the appeal on its merits. It found no error in the Labor
Arbiter’s findings of fact and law. It sustained the Labor Arbiter’s reasoning that
respondent PDI exercised control over petitioner’s work.
PDI then filed a Petition for Review12 before this Court seeking the reversal of the
NLRC Decision. However, in a Resolution13 dated December 2, 1998, this Court
referred the case to the Court of Appeals, pursuant to our ruling in St. Martin Funeral
Homes v. National Labor Relations Commission.14
The CA rendered its assailed Decision on June 11, 2002. It set aside the NLRC
Decision and dismissed petitioner’s Complaint. It held that the NLRC misappreciated
the facts and rendered a ruling wanting in substantial evidence. The CA said:
The Court does not agree with public respondent NLRC’s conclusion. First,
private respondent admitted that she was and [had] never been considered
by petitioner PDI as its employee. Second, it is not disputed that private
respondent had no employment contract with petitioner PDI. In fact, her
engagement to contribute articles for publication was based on a verbal
agreement between her and the petitioner’s Lifestyle Section Editor.
Moreover, it was evident that private respondent was not required to report
to the office eight (8) hours a day. Further, it is not disputed that she stayed
in New York for six (6) months without petitioner’s permission as to her leave
of absence nor was she given any disciplinary action for the same. These
undisputed facts negate private respondent’s claim that she is an employee
of petitioner.
Moreover, with regards (sic) to the control test, the public respondent
NLRC’s ruling that the guidelines given by petitioner PDI for private
respondent to follow, e.g. in terms of space allocation and length of article, is
not the form of control envisioned by the guidelines set by the Supreme
Court. The length of the article is obviously limited so that all the articles to
be featured in the paper can be accommodated. As to the topic of the article
to be published, it is but logical that private respondent should not write
morbid topics such as death because she is contributing to the lifestyle
section. Other than said given limitations, if the same could be considered
limitations, the topics of the articles submitted by private respondent were all
her choices. Thus, the petitioner PDI in deciding to publish private
respondent’s articles only controls the result of the work and not the means
by which said articles were written.
As such, the above facts failed to measure up to the control test necessary
for an employer-employee relationship to exist.15
Petitioner’s Motion for Reconsideration was denied in a Resolution dated September
11, 2002. She then filed the present Petition for Review.
In a Resolution dated April 29, 2005, the Court, without giving due course to the
petition, ordered the Labor Arbiter to clarify the amount of the award due petitioner
and, thereafter, ordered PDI to post the requisite bond. Upon compliance therewith,
the petition would be given due course. Labor Arbiter Amansec clarified that the
award under the Decision amounted to P15,350.00. Thus, PDI posted the requisite
bond on January 25, 2007.16
We shall initially dispose of the procedural issue raised in the Petition.
Petitioner argues that the CA erred in not dismissing outright PDI’s Petition
for Certiorari for PDI’s failure to post a cash or surety bond in violation of Article 223
of the Labor Code.
This issue was settled by this Court in its Resolution dated April 29, 2005.17 There,
the Court held:
But while the posting of a cash or surety bond is jurisdictional and is a
condition sine qua non to the perfection of an appeal, there is a plethora of
89
jurisprudence recognizing exceptional instances wherein the Court relaxed
the bond requirement as a condition for posting the appeal.
xxxx
In the case of Taberrah v. NLRC, the Court made note of the fact that the
assailed decision of the Labor Arbiter concerned did not contain a
computation of the monetary award due the employees, a circumstance
which is likewise present in this case. In said case, the Court stated,
As a rule, compliance with the requirements for the perfection of an
appeal within the reglamentary (sic) period is mandatory and
jurisdictional. However, in National Federation of Labor Unions v.
Ladrido as well as in several other cases, this Court relaxed the
requirement of the posting of an appeal bond within the
reglementary period as a condition for perfecting the appeal. This is
in line with the principle that substantial justice is better served by
allowing the appeal to be resolved on the merits rather than
dismissing it based on a technicality.
The judgment of the Labor Arbiter in this case merely stated that petitioner
was entitled to backwages, 13th month pay and service incentive leave pay
without however including a computation of the alleged amounts.
xxxx
In the case of NFLU v. Ladrido III, this Court postulated that "private
respondents cannot be expected to post such appeal bond equivalent to the
amount of the monetary award when the amount thereof was not included in
the decision of the labor arbiter." The computation of the amount awarded to
petitioner not having been clearly stated in the decision of the labor arbiter,
private respondents had no basis for determining the amount of the bond to
be posted.
Thus, while the requirements for perfecting an appeal must be strictly
followed as they are considered indispensable interdictions against needless
delays and for orderly discharge of judicial business, the law does admit of
exceptions when warranted by the circumstances. Technicality should not be
allowed to stand in the way of equitably and completely resolving the rights
and obligations of the parties. But while this Court may relax the observance
of reglementary periods and technical rules to achieve substantial justice, it
is not prepared to give due course to this petition and make a
pronouncement on the weighty issue obtaining in this case until the law has
been duly complied with and the requisite appeal bond duly paid by private
respondents.18
Records show that PDI has complied with the Court’s directive for the posting of the
bond;19 thus, that issue has been laid to rest.
We now proceed to rule on the merits of this case.
The main issue we must resolve is whether petitioner is an employee of PDI, and if
the answer be in the affirmative, whether she was illegally dismissed.
We rule for the respondents.
The existence of an employer-employee relationship is essentially a question of
fact.20 Factual findings of quasi-judicial agencies like the NLRC are generally
accorded respect and finality if supported by substantial evidence. 21
Considering, however, that the CA’s findings are in direct conflict with those of the
Labor Arbiter and NLRC, this Court must now make its own examination and
evaluation of the facts of this case.
It is true that petitioner herself admitted that she "was not, and [had] never been
considered respondent’s employee because the terms of works were arbitrarily
decided upon by the respondent."22 However, the employment status of a person is
defined and prescribed by law and not by what the parties say it should be. 23
This Court has constantly adhered to the "four-fold test" to determine whether there
exists an employer-employee relationship between parties.24 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 employer’s power to
control the employee’s conduct.25
Of these four elements, it is the power of control which is the most crucial26 and most
determinative factor,27 so important, in fact, that the other elements may even be
disregarded.28 As this Court has previously held:
the significant factor in determining the relationship of the parties is the
presence or absence of supervisory authority to control the method and the
details of performance of the service being rendered, and the degree to
which the principal may intervene to exercise such control. 29
90
In other words, the test is whether the employer controls or has reserved the right to
control the employee, not only as to the work done, but also as to the means and
methods by which the same is accomplished.30
Petitioner argues that several factors exist to prove that respondents exercised
control over her and her work, namely:
a. As to the Contents of her Column – The PETITIONER had to insure that
the contents of her column hewed closely to the objectives of its Lifestyle
Section and the over-all principles that the newspaper projects itself to stand
for. As admitted, she wanted to write about death in relation to All Souls Day
but was advised not to.
b. As to Time Control – The PETITIONER, as a columnist, had to observe
the deadlines of the newspaper for her articles to be published. These
deadlines were usually that time period when the Section Editor has to
"close the pages" of the Lifestyle Section where the column in located. "To
close the pages" means to prepare them for printing and publication.
As a columnist, the PETITIONER’s writings had a definite day on which it
was going to appear. So she submitted her articles two days before the
designated day on which the column would come out.
This is the usual routine of newspaper work. Deadlines are set to fulfill the
newspapers’ obligations to the readers with regard to timeliness and
freshness of ideas.
c. As to Control of Space – The PETITIONER was told to submit only two or
three pages of article for the column, (sic) "Feminist Reflections" per week.
To go beyond that, the Lifestyle editor would already chop off the article and
publish the rest for the next week. This shows that PRIVATE
RESPONDENTS had control over the space that the PETITIONER was
assigned to fill.
d. As to Discipline – Over time, the newspaper readers’ eyes are trained or
habituated to look for and read the works of their favorite regular writers and
columnists. They are conditioned, based on their daily purchase of the
newspaper, to look for specific spaces in the newspapers for their favorite
write-ups/or opinions on matters relevant and significant issues aside from
not being late or amiss in the responsibility of timely submission of their
articles.
The PETITIONER was disciplined to submit her articles on highly relevant
and significant issues on time by the PRIVATE RESPONDENTS who have a
say on whether the topics belong to those considered as highly relevant and
significant, through the Lifestyle Section Editor. The PETITIONER had to
discuss the topics first and submit the articles two days before publication
date to keep her column in the newspaper space regularly as expected or
without miss by its readers.31
Given this discussion by petitioner, we then ask the question: Is this the form of
control that our labor laws contemplate such as to establish an employer-employee
relationship between petitioner and respondent PDI?
It is not.
Petitioner has misconstrued the "control test," as did the Labor Arbiter and the NLRC.
Not all rules imposed by the hiring party on the hired party indicate that the latter is an
employee of the former. Rules which serve as general guidelines towards the
achievement of the mutually desired result are not indicative of the power of
control.32 Thus, this Court has explained:
It should, however, be obvious that not every form of control that the hiring
party reserves to himself over the conduct of the party hired in relation to the
services rendered may be accorded the effect of establishing an employer-
employee relationship between them in the legal or technical sense of the
term. A line must be drawn somewhere, if the recognized distinction
between an employee and an individual contractor is not to vanish
altogether. Realistically, it would be a rare contract of service that gives
untrammelled freedom to the party hired and eschews any intervention
whatsoever in his performance of the engagement.
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. x x x.33
The main determinant therefore is whether the rules set by the employer are meant to
control not just the results of the work but also the means and method to be used by
the hired party in order to achieve such results. Thus, in this case, we are to examine
91
the factors enumerated by petitioner to see if these are merely guidelines or if they
indeed fulfill the requirements of the control test.
Petitioner believes that respondents’ acts are meant to control how she executes her
work. We do not agree. A careful examination reveals that the factors enumerated by
the petitioner are inherent conditions in running a newspaper. In other words, the so-
called control as to time, space, and discipline are dictated by the very nature of the
newspaper business itself.
We agree with the observations of the Office of the Solicitor General that:
The Inquirer is the publisher of a newspaper of general circulation which is
widely read throughout the country. As such, public interest dictates that
every article appearing in the newspaper should subscribe to the standards
set by the Inquirer, with its thousands of readers in mind. It is not, therefore,
unusual for the Inquirer to control what would be published in the
newspaper. What is important is the fact that such control pertains only to
the end result, i.e., the submitted articles. The Inquirer has no control over
[petitioner] as to the means or method used by her in the preparation of her
articles. The articles are done by [petitioner] herself without any intervention
from the Inquirer.34
Petitioner has not shown that PDI, acting through its editors, dictated how she was to
write or produce her articles each week. Aside from the constraints presented by the
space allocation of her column, there were no restraints on her creativity; petitioner
was free to write her column in the manner and style she was accustomed to and to
use whatever research method she deemed suitable for her purpose. The apparent
limitation that she had to write only on subjects that befitted the Lifestyle section did
not translate to control, but was simply a logical consequence of the fact that her
column appeared in that section and therefore had to cater to the preference of the
readers of that section.
The perceived constraint on petitioner’s column was dictated by her own choice of her
column’s perspective. The column title "Feminist Reflections" was of her own
choosing, as she herself admitted, since she had been known as a feminist
writer.35Thus, respondent PDI, as well as her readers, could reasonably expect her
columns to speak from such perspective.
Contrary to petitioner’s protestations, it does not appear that there was any actual
restraint or limitation on the subject matter – within the Lifestyle section – that she
could write about. Respondent PDI did not dictate how she wrote or what she wrote in
her column. Neither did PDI’s guidelines dictate the kind of research, time, and effort
she put into each column. In fact, petitioner herself said that she received "no
comments on her articles…except for her to shorten them to fit into the box allotted to
her column." Therefore, the control that PDI exercised over petitioner was only as to
the finished product of her efforts, i.e., the column itself, by way of either shortening or
outright rejection of the column.
The newspaper’s power to approve or reject publication of any specific article she
wrote for her column cannot be the control contemplated in the "control test," as it is
but logical that one who commissions another to do a piece of work should have the
right to accept or reject the product. The important factor to consider in the "control
test" is still the element of control over how the work itself is done, not just the end
result thereof.
In contrast, a regular reporter is not as independent in doing his or her work for the
newspaper. We note the common practice in the newspaper business of assigning its
regular reporters to cover specific subjects, geographical locations, government
agencies, or areas of concern, more commonly referred to as "beats." A reporter must
produce stories within his or her particular beat and cannot switch to another beat
without permission from the editor. In most newspapers also, a reporter must inform
the editor about the story that he or she is working on for the day. The story or article
must also be submitted to the editor at a specified time. Moreover, the editor can
easily pull out a reporter from one beat and ask him or her to cover another beat, if
the need arises.
This is not the case for petitioner. Although petitioner had a weekly deadline to meet,
she was not precluded from submitting her column ahead of time or from submitting
columns to be published at a later time. More importantly, respondents did not dictate
upon petitioner the subject matter of her columns, but only imposed the general
guideline that the article should conform to the standards of the newspaper and the
general tone of the particular section.
Where a person who works for another performs his job more or less at his own
pleasure, in the manner he sees fit, not subject to definite hours or conditions of work,
and is compensated according to the result of his efforts and not the amount thereof,
no employer-employee relationship exists.36
Aside from the control test, this Court has also used the economic reality test. The
economic realities prevailing within the activity or between the parties are examined,
taking into consideration the totality of circumstances surrounding the true nature of
the relationship between the parties.37 This is especially appropriate when, as in this
case, there is no written agreement or contract on which to base the relationship. In
our jurisdiction, the benchmark of economic reality in analyzing possible employment
relationships for purposes of applying the Labor Code ought to be the economic
dependence of the worker on his employer.38
92
Petitioner’s main occupation is not as a columnist for respondent but as a women’s
rights advocate working in various women’s organizations.39 Likewise, she herself
admits that she also contributes articles to other publications.40 Thus, it cannot be
said that petitioner was dependent on respondent PDI for her continued employment
in respondent’s line of business.41
The inevitable conclusion is that petitioner was not respondent PDI’s employee but an
independent contractor, engaged to do independent work.
There is no inflexible rule to determine if a person is an employee or an independent
contractor; thus, the characterization of the relationship must be made based on the
particular circumstances of each case.42 There are several factors43 that may be
considered by the courts, but as we already said, the right to control is the dominant
factor in determining whether one is an employee or an independent contractor.44
In our jurisdiction, the Court has held that an independent contractor is one who
carries on a distinct and independent business and undertakes to perform the job,
work, or service on one’s own account and under one’s own responsibility according
to one’s 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.45
On this point, Sonza v. ABS-CBN Broadcasting Corporation46 is enlightening. In that
case, the Court found, using the four-fold test, that petitioner, Jose Y. Sonza, was not
an employee of ABS-CBN, but an independent contractor. Sonza was hired by ABS-
CBN due to his "unique skills, talent and celebrity status not possessed by ordinary
employees," a circumstance that, the Court said, was indicative, though not
conclusive, of an independent contractual relationship. Independent contractors often
present themselves to possess unique skills, expertise or talent to distinguish them
from ordinary employees.47 The Court also found that, as to payment of wages,
Sonza’s talent fees were the result of negotiations between him and ABS-CBN.48 As
to the power of dismissal, the Court found that the terms of Sonza’s engagement
were dictated by the contract he entered into with ABS-CBN, and the same contract
provided that either party may terminate the contract in case of breach by the other of
the terms thereof.49 However, the Court held that the foregoing are not determinative
of an employer-employee relationship. Instead, it is still the power of control that is
most important.
On the power of control, the Court found that in performing his work, Sonza only
needed his skills and talent – how he delivered his lines, appeared on television, and
sounded on radio were outside ABS-CBN’s control.50 Thus:
We find that ABS-CBN was not involved in the actual performance that
produced the finished product of SONZA’s work. 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." ABS-CBN’s 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 SONZA’s work.
SONZA claims that ABS-CBN’s power not to broadcast his shows proves
ABS-CBN’s power over the means and methods of the performance of his
work. Although ABS-CBN did have the option not to broadcast SONZA’s
show, ABS-CBN was still obligated to pay SONZA’s talent fees... Thus, even
if ABS-CBN was completely dissatisfied with the means and methods of
SONZA’s 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 SONZA’s show but ABS-CBN must still
pay his talent fees in full.
Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it
was by the obligation to continue paying in full SONZA’s talent fees, did not
amount to control over the means and methods of the performance of
SONZA’s 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-CBN’s approval. This
proves that ABS-CBN’s control was limited only to the result of SONZA’s
work, whether to broadcast the final product or not. In either case, ABS-CBN
must still pay SONZA’s talent fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al., 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.
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. 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-
CBN’s sole concern was for SONZA to display his talent during the airing of
the programs.
93
 A radio broadcast specialist who works under minimal supervision is an
independent contractor. SONZA’s 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. 51

The instant case presents a parallel to Sonza. Petitioner was engaged as a columnist
for her talent, skill, experience, and her unique viewpoint as a feminist advocate. How
she utilized all these in writing her column was not subject to dictation by respondent.
As in Sonza, respondent PDI was not involved in the actual performance that
produced the finished product. It only reserved the right to shorten petitioner’s articles
based on the newspaper’s capacity to accommodate the same. This fact, we note,
was not unique to petitioner’s column. It is a reality in the newspaper business that
space constraints often dictate the length of articles and columns, even those that
regularly appear therein.

Furthermore, respondent PDI did not supply petitioner with the tools and
instrumentalities she needed to perform her work. Petitioner only needed her talent
and skill to come up with a column every week. As such, she had all the tools she
needed to perform her work.

Considering that respondent PDI was not petitioner’s employer, it cannot be held
guilty of illegal dismissal.

WHEREFORE, the foregoing premises considered, the Petition is DISMISSED. The

Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 50970 are
hereby AFFIRMED.

SO ORDERED.

94
 [G.R. No. 103606. October 13, 1999]
RELIGIOUS OF THE VIRGIN MARY, petitioner, vs. THE NATIONAL LABOR
RELATIONS COMMISSION, COLEGIO DE SAN PASCUAL BAYLON (Girls
Department), AUREA EVANGELISTA, CLARITA ALEJO, JOCELYN
ANSELMO, BENITA APOLONIO, JULITA BERNARDO, JOSEFINA
CASTRO, ELENITA CONTRERAS, NARCELITA DELA CRUZ, PATRICIA
ESPINA, VERONICA ESPINOSA, MARIZA FAUSTINO, ERLINDA MALAY,
CONSOLACION MANALAYSAY, NENISCA RAYMUNDO, PRIMA
SABALBERINO, MERCEDITA SANCHEZ, AURORA SAN DIEGO, NILDA
TALAG, ERLINDA VALERA, GLENDORA VICTORIO, LOURDES
CRISOSTOMO, SUSAN DEL MUNDO, SOCORRO FERNANDEZ, CYNTHIA
GARCIA, CELERINA IGNACIO, TERESITA LIWANAG, DIOSA MAGAT,
EMILINO MAKISIG, WINEFREDA MARTIN, ANGELITA MILAD, TERESITA
SAN ANTONIO, ISMAEL SANTIAGO III, CIPRIANA SIGUA, MARTINIANO
VENTURA, TEODORA SIOSON, MA. CLARA BIGCAS, JUDILYN
ESPIRITU, LOLITA MERCADO, ROSALINA MANALAYSAY, PERLITA
SANTOS, ESPERANZA TERMULO, LINDA WONG, GERONIMO FORNAL,
FELIX LABAY, JOSE LATORZA, and VIRGINIA MARTIN, respondents.
DECISION
MENDOZA, J.:
This is a petition for certiorari of the decision,[1] dated November 18, 1991, of the
National Labor Relations Commission, affirming the decision of then Labor Arbiter
Ireneo B. Bernardo, dated April 28, 1989, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of complainants, directing
respondents R.V.M. and CDSPB to pay jointly and severally to complainants their
unpaid salaries and wages due them for the month of May 1987, amounting
to P67,139.84, plus 10% thereof or P6,713.98 as attorneys fees for the complainants
counsel of record.
The facts are as follows:
Private respondent Colegio de San Pascual Baylon (CDSPB)[2] is a religious
educational institution owned by the Diocese of Malolos, Bulacan, which operates two
high school departments (the Boys and the Girls departments) in Obando,
Meycauayan, Bulacan.
On July 18, 1983, CDSPB, represented by the Bishop of Malolos, entered into an
Agreement[3] with petitioner Religious of the Virgin Mary (RVM), a religious
congregation, whereby the latter was designated to run, administer and operate the
[CDSPB] Girls Department. The Agreement was for a term of 10 years, commencing
in the school year 1983-1984. The Agreement provided:
AGREEMENT
KNOW ALL MEN BY THESE PRESENTS
This instrument is made and entered into by and between --
THE ROMAN CATHOLIC BISHOP OF MALOLOS, INC., a corporation sole duly
registered and existing under and by virtue of the laws of the Philippines with principal
office of Malolos, Bulacan, represented by His Excellency, the MOST REVEREND
CIRILO R. ALMARIO, JR., D.D., Bishop of Malolos, herein-after referred to as the
BISHOP,
- and -
THE RELIGIOUS OF THE VIRGIN MARY, a religious corporation duly organized and
existing under the laws of the Philippines, with address at 214 N. Domingo St.,
Quezon City, represented by REV. M. MARIA JOSEFINA C. YAMZON, R.V.M.,
Superior General, hereinafter referred to as the CONGREGATION,
W I T N E S S E T H : THAT -
WHEREAS, the Parish of Obando, Bulacan, under and within the jurisdiction of the
BISHOP, has and owns a parochial school called ST. PASCUAL INSTITUTION, with
a Boys and Girls Department occupying separate quarters and premises;
WHEREAS, the Girls Department of ST. PASCUAL INSTITUTION is situated at and
occupies a parcel of land in Obando, Bulacan, owned by the BISHOP and more
particularly described as follows:
Parcel 357 - part of lot No. 11, situated in the Municipality of Obando, Province of
Bulacan, containing an area of FOUR THOUSAND ONE HUNDRED EIGHTY SIX
(4,186) SQUARE METERS, more or less, (Full technical Description of which in
Original Certificate of Title No. 361 of the Register of Deeds for the Province of
Bulacan, which is hereby made an integral part thereof, by way of reference)
including the building connected to the Parish Church of Obando, and the Home
Economics Building.
WHEREAS, the CONGREGATION is competent to run, administer and operate an
educational institution, and the CONGREGATION has the BISHOPs permission to
95
reside in Obando, Bulacan, where the CONGREGATION is engaged in educational
work;
NOW, THEREFORE, for and in consideration of the foregoing premises and the
covenants and stipulations, terms and conditions hereunder set forth, the parties have
agreed, as they hereby agree as follows:
1. The BISHOP has appointed and designated, as he hereby appoints and
designates, and the CONGREGATION has accepted, as it hereby
accepts, the aforesaid appointment and designation, to run, administer
and operate the Girls Department of ST. PASCUAL INSTITUTION;
PROVIDED, however, that during the entire period of this Agreement,
the parish Priest of Obando, Bulacan, shall remain as and be the
DIRECTOR of the ST. PASCUAL INSTITUTION, including the Girls
Department;
2. By virtue of, in connection with and in furtherance of the purposes of the
aforesaid appointment and designation of the CONGREGATION, by the
BISHOP, to run, administer and operate the Girls Department of the ST.
PASCUAL INSTITUTION, the BISHOP does hereby entrust and cede
into the CONGREGATION, and the CONGREGATION does hereby
accept, the use and care of the parcel of land mentioned in the Second
WHEREAS above, including the buildings mentioned therein;
3. The CONGREGATION undertakes as its sole responsibility and expense
the administration, management and operation of the Girls Department
of ST. PASCUAL INSTITUTION, (Hereinafter, the word School shall
refer to the Girls Department of St. Pascual Institution);
4. The CONGREGATION shall provide the school with Sisters qualified to
handle the direction and the teaching of the different courses and
classes of the school, and if necessary, employ other qualified teachers;
5. The expenses of operating and maintaining the school including, but not
limited to, the upkeep of equipment, buildings and other property located
in the school; salaries, allowances and other benefits due to teachers
and other personnel of the school; repairs and improvements of the
school; and all expenses relative to the school shall be for the exclusive
account and responsibility of the CONGREGATION;
6. The school shall be operated at all times with a view to serving the needs
of the ordinary children of the parish and its vicinity and for that reason,
the tuition and other school fees should be as moderate as possible;
7. The CONGREGATION shall at its sole expenses, comply with all laws,
ordinances, regulations or circulars of the government, whether national,
provincial or municipal, and instrumentalities thereof, relating to the land,
school and its building and improvements;
8. Whatever net profit that may result from the operation of the school, after
deducting the expenses of management, administration and
supervision, as above-mentioned shall belong exclusively to the
CONGREGATION, except as herein under provided; and any loss shall
be borne by the CONGREGATION exclusively;
9. Upon failure of the CONGREGATION to comply with the provisions of this
Agreement, the BISHOP may declare this contract terminated;
10. Unless otherwise earlier terminated under the provisions of paragraph 8
above, this Agreement shall be valid and effective for a period of ten (10)
school years, commencing with the school year 1983-1984;
11. Upon the termination or expiration of this contract, or of its renewal, it is
agreed:
a. The CONGREGATION shall deliver the land herein above
mentioned, together with all the buildings and improvements
existing thereat, to the BISHOP;
b. The BISHOP shall indemnify the CONGREGATION for any
constructions or improvements introduced by the
CONGREGATION other than the buildings and improvements
belonging to the BISHOP according to their value, taking into
consideration the depreciation of such constructions or
improvements, at the time of departure of the CONGREGATION;
c. Should the CONGREGATION not agree to the appraisal of the
BISHOP, both parties shall appoint their respective experts to
make a re-appraisal. The decision of those experts may be
appealed to the competent Sacred Congregation in Rome, and
the decision of the latter shall be final and unappealable;
d. The amount to be indemnified by the BISHOP to the
CONGREGATION shall be payable in five (5) equal and
successive yearly installments.
Pursuant to the terms of the above agreement, petitioner hired teachers and
administrative personnel for the Girls Department under pro forma appointment
papers, viz.:
COLEGIO DE SAN PASCUAL BAYLON
Girls Department
96
 Obando, Bulacan 5. To follow faithfully the provisions of the Faculty Handbook.

As likewise provided in the Agreement, petitioner received all the income from the
July 14, 1986
Girls Department, in the form of tuition fees and other charges, and paid all the
expenses for the operation of the department.[4]
APPOINTMENT
On April 10, 1987, the Bishop of Malolos pre-terminated the Agreement. As a
MRS. SUSAN V. DEL MUNDO result, petitioner moved out of the school premises, and CDSPB, through the Bishop of
Malolos and his representatives, took over the administration of the Girls
Department.[5] Apparently, the teaching and non-teaching personnel hired by petitioner
Malanday, Val. Metro Mla.
for school year 1986-1987 continued to render services even after the Agreement was
terminated, but they were not paid their salaries for the month of May 1987. Hence,
Dear Mrs. Del Mundo, they filed a complaint[6] for unpaid salaries with the NLRC-Regional Arbitration Branch
III, naming CDSPB and petitioner as respondents. After the parties had submitted their
You are hereby appointed classroom teacher in the Colegio de San Pascual respective position papers, Labor Arbiter Cresencio J. Ramos rendered a
Baylon at the rate of Eighteen thousand five hundred forty eight and forty centavos decision,[7] dated October 20, 1987, in favor of the complainant-teachers and ordered
(P18,548.40) per annum. CDSPB to pay them their claim for salaries. Petitioner was absolved from any
liability. The dispositive portion of the decision reads:
This appointment shall be deemed in full force and subsisting unless expressly
terminated by either party for a valid cause or causes and after due process, and WHEREFORE, judgment is hereby rendered in favor of the complainants, ordering
approved by the Regional Director. respondent Colegio de San Pascual Baylon to pay the sum of P67,139.84, to the
complainants plus ten per cent (10%) attorneys fees in the amount of P6,713.98 [in]
(Sgd.) Mila Loredo, RVM favor of Atty. Liberato C. Taneza, counsel of the complainants.

(Signature of Principal) CDSPB appealed the decision to the NLRC on the ground that it was denied due
process since it was not notified of the hearings set by the labor arbiter. [8]
CONFORME:
On May 31, 1988, the NLRC set aside the decision of the Labor Arbiter and
remanded the case for further proceedings.
(Sgd). Susan V. Del Mundo
The case was subsequently assigned to then Labor Arbiter Ireneo B.
For Permanent employment only. Bernardo. When called to a hearing for the reception of further evidence, the parties
asked to be allowed instead to file supplemental memoranda. Their request was
granted. After the parties had submitted their memoranda, Labor Arbiter Bernardo
Other conditions: I hereby voluntarily and willingly conform to the following
rendered a decision[9] on April 28, 1989, holding CDSPB and petitioner jointly and
conditions:
severally liable to complainants for the payment of their salaries for May 1987. He
1. To carry out the objectives of the school and my department in my area(s) explained:
of responsibility.
From the standpoint of this Office, respondent RVM, may, in the wider spectrum of
2. To fulfill and carry out my rules and functions as specified in the Faculty
labor relations, be considered an independent contractor. It exercised greater degree
Handbook.
of autonomy and independence in running the affairs of respondent CDSPB, with
3. To attend all official school functions such as meetings, seminars, whose real owner/operator it had an Agreement. The hiring and paying of salaries of
conferences, programs, etc. the complainants primarily rest on it and eventually, the substantial attributes of a
direct employer were exercised by it. The respondent CDSPB had actually exercised
4. To be regular and punctual in the admission of requirements. minimal supervision although it could exercise substantial supervision and control
over respondent RVM, as it did when the former preterminated the Agreement it had
97
with the latter. Thus, respondent CDSPB may be considered the statutory or indirect
employer of the complainants, insofar as the operation of that institution of learning is
concerned. As indirect employer, CDSPB shall be jointly and severally liable with its
contractor, the respondent RVM, for the unpaid wages and salaries of the latters
employees, the herein complainants. It is for this reason that the indirect employer is
allowed to require the contractor or sub-contractor to post/furnish a bond at least
equal to the cost of labor under contract on condition that the bond will answer for the
wages due the employees should the contractor or sub-contractor fail to pay the
same.[10]
On appeal, the NLRC adopted the findings of the labor arbiter and affirmed his
decision. Hence, this petition. Petitioner assigns the following errors:
1. THE COMPLAINT A QUO BEING A REMANDED CASE ON THE
GROUND THAT THE OTHER RESPONDENT BELOW COLEGIO DE
SAN PASCUAL BAYLON WAS DENIED DUE PROCESS OF LAW AND
THE PARTIES HAVE NOT PRESENTED ANY NEW EVIDENCE
BEFORE SECOND LABOR ARBITER IRENEO B. BERNARDO, IT
WAS GRAVE ERROR ON THE PART OF THE NLRC TO AFFIRM THE
DECISION OF ARBITER BERNARDO WHICH DISREGARDED THE
EARLIER DECISION OF THIS CASE RENDERED BY FIRST LABOR
ARBITER CRESENCIO J. RAMOS DATED OCTOBER 20, 1987.
2. THE OTHER RESPONDENT BELOW COLEGIO DE SAN PASCUAL
BAYLON IS THE EMPLOYER OF THE PRIVATE RESPONDENTS
HEREIN AND NOT THE PETITIONER HEREIN RVM
CONGREGATION WHICH WAS MERELY THE ADMINISTRATOR OR
MANAGER OF THE GIRLS DEPARTMENT OF THE SCHOOL DULY
APPOINTED BY THE BISHOP OF MALOLOS AS OWNER OF THE
SCHOOL.
3. THE RVM CONGREGATIONS APPOINTMENT AS ADMINISTRATOR
OR MANAGER FOR THE GIRLS DEPARTMENT OF THE SCHOOL
WAS REVOKED OR TERMINATED ON APRIL 10, 1987 AND SO, IT
HAD NO MORE ACCESS TO THE INCOME OF THE GIRLS
DEPARTMENT FOR THE MONTHS OF APRIL AND MAY 1987 WITH
WHICH TO PAY THE MAY 1987 SALARIES OF THE HEREIN PRIVATE
RESPONDENTS.
4. THE RVM CONGREGATION IS NOT AN INDEPENDENT
CONTRACTOR.
CDSPB likewise questions the decision of the NLRC. It argues:[11]
1. RESPONDENT CDSPB ALSO ASSAILS THE DECISION DATED 18
NOVEMBER 1991 OF THE THIRD DIVISION OF THE NLRC.
2. PETITIONER RVM CONGREGATION, BEING THE EMPLOYER OF
THE COMPLAINANTS, IS SOLELY RESPONSIBLE FOR THE
LATTERS PAY FOR MAY 1987.
3. PETITIONER RVM CONGREGATION, NONETHELESS, RECOGNIZES
ITS LEGAL AND MORAL OBLIGATIONS TO PAY THE
COMPLAINANTS SALARIES FOR MAY 1987
4. TO HOLD RESPONDENT CDSPB JOINTLY AND SEVERALLY LIABLE
WITH PETITIONER RVM CONGREGATION IS CLEARLY UNJUST
AND PREJUDICIAL TO THE FORMER.
The parties agree that private respondents have not been paid their salaries for
the month of May 1987 and that they are entitled to the payment thereof. The only
question in this case is the liability of either or both of them for payment of private
respondents salaries. It is thus necessary to determine the relationship between
petitioner and CDSPB under the Agreement.
Petitioner contends that CDSPB is the employer of complainants. It maintains that
it is not an independent contractor but merely the manager or administrator of the Girls
Department, and that after the Agreement was terminated on April 10, 1987, it no longer
had any access to the income of the school to entitle and enable it to pay the salaries
of complainants.[12]
CDSPB, on the other hand, contends that petitioner is not an independent
contractor but the sole employer of private respondents-complainants. It further argues
that the payment of salaries for the month of May 1987 should come from the fees
collected by petitioner during the school year 1986-1987.[13]
For its part, the Solicitor General, representing the NLRC, contends that, as
regards private respondents-complainants, petitioner and CDSPB are employer and
contractor, respectively, under Article 106 of the Labor Code. They should, therefore,
be held solidarily liable for payment of private respondents salaries under Article 109
of the Code.[14]
We find petitioners arguments to be meritorious and the position of CDSPB and
the ruling of the NLRC untenable.
The Agreement shows that petitioner entered into the same not as an
independent contractor but, as it claims, a manager or administrator of the school. It is
true that under the Agreement, petitioner had the sole responsibility and expense [over]
the administration, management and operation of the Girls Department, as well as the
authority to employ teachers needed by the school, impose and collect tuition fees, and
pay the expenses of operations. However, control and supervision over the schools
operations remained in the hands of the Diocese of Malolos, owner of CDSPB,
represented by the Parish Priest of Obando, Bulacan, who acted as school
director. The extent of his authority over the management and operations of the school
98
is clearly shown in a memorandum,[15] dated September 30, 1986, issued by the Bishop
of Malolos, which reads:
COLEGIO DE SAN PASCUAL BAYLON
Pag-Asa, Obando, Bulacan
THE DIRECTOR
1. He shall have general control and supervision over all academic and
administrative matters.
2. All officers, faculty members and employees of the institution shall be
responsible to and shall be under the direction of the Director.
3. He shall determine and prepare the agenda of all meetings of the Board
without prejudice to the right of any member of the Board to have any
matter included therein.
4. He shall preside at commencement exercises and other functions of the
Colegio.
5. All letters, appeal, complaints, etc. by the dean, principals, faculty
members, employees, and students of the Colegio shall be coursed
through him, otherwise they shall not be recognized by the Board;
provided, however, that the Director may not withhold from the Board
any communication addressed to it.
6. Upon consultation with the dean and principals concerned as the case
may be, he shall appoint qualified persons to fill vacancies.
7. More specifically, as academic and administrative head, the Director shall
exercise the following powers, subject to confirmation by the Board of
Trustees.
a. To accept the resignation of faculty members and employees;
b. To grant or deny leaves of absence with or without pay and/or
extend such leaves;
c. To recommend to the Board of Trustees the retirement of the
members of the faculty and employees;
d. To make interim appointments;
e. To renew appointments for not more than one year if the budget
permits and the services are necessary.
f. To supervise and control, through the Coordinator of Student
Affairs, all extra-curricular activities of the students and to
promulgate rules for the organization and operation of student
organization and for the election and qualifications of the officers
thereof.
The Director shall inform the Board of Trustees of all actions taken by him
in accordance with these functions.
8. He shall hold officers, faculty members, and employees, to the full
discharge of their duties; if in his judgment the necessity arises, he shall,
after consultation with the dean or principal concerned, in proper cases,
initiate the necessary proceedings, for the separation from service of any
of them.
9. He shall submit through the Board, an annual report of the operation of
the Colegio at the close of the school year, and make recommendations
thereto, said report to be given to MECS.
10. He shall submit to the Board of Trustees the annual budget of the
Colegio with estimates of income and expenses as prepared by the
dean, the principals and the treasurer.
11. He shall make, sign, deliver, and execute contracts, agreements and
other documents wherein the Colegio is a party in the name and in behalf
of the school.
12. He shall sign all checks, negotiable instruments, and other evidence of
payments in the name of the school.
13. He shall have the power to authorize expenses from the miscellaneous
items in the budget for maintenance and repairs or remodeling and
modification of buildings and grounds and equipment without prior action
by the Board of Trustees, provided the total amount does not exceed
____________ pesos (P _______)
14. As the academic leader of the Colegio, he shall represent it in meetings,
conferences, conventions in which the Colegio may be interested and
speak when occasion arises.
15. Within the limits of the law and proper decorum, he shall try to secure
for the Colegio, aside from the parish appropriation, additional funds
and/or property in the form of prizes, scholarships, donations, and
endowments and land grants to enable the Colegio to accomplish better
the purpose of its establishment.
16. For the proper conduct of the business of the Colegio, for the
implementation of all resolutions of the Board, for the maintenance of the
highest possible standard of instruction in the Colegio, for the promotion
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 of peace and order, for the development of cordial relations among the
three components of the Colegio - Administration, Faculty and Student
Body - the Director shall have such other powers as specially authorized
by the Board of Trustees and such as are inherent in or usually
pertaining to the Office of the Director of a Colegio. He is also authorized
to delegate in writing any of his specific functions to any office under his
control and supervision, provided that he shall, at all times, be
responsible for the acts of his delegates to the Board of Trustees.
This memorandum leaves no room for doubt that CDSPB, as represented by the
director, exercised absolute control and supervision over the schools
administration. Under it, the authority to hire, discipline and terminate the employment
of personnel is vested in the director, as academic and administrative head of the
school.
CDSPB contends, however, that
...[T]he designation of the parish priest as director was not unilateral but by mutual
agreement between the diocese of Malolos and [petitioner]. This being the case, the
parish priests designation as such director merely makes him, in effect, a member of
the school administration which is under the actual and direct control and supervision
of the congregation.[16]
The argument has no merit. As this Court has consistently ruled, the power of
control is the most decisive factor[17] in determining the existence of an employer-
employee relationship. In Encyclopedia Britannica (Phils.), Inc. v. NLRC,[18] we held:
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. 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.
In this case, CDSPB reserved the right to control and supervise the operations of
the Girls Department. As noted by the labor arbiter himself and affirmed by the NLRC,
although CDSPB actually exercised minimal supervision over petitioner, [it] could
exercise substantial supervision and control as it did when [it] preterminated the
Agreement. There was, therefore, no basis in finding that petitioner had a greater
degree of autonomy and independence in running the affairs of the school. The
presence of the school director, whose vast powers have already been noted, negates
any suggestion or semblance of autonomy.
Nor is there any merit in the claim that actual and effective control was exercised
by petitioner since the designation of the parish priest as director was a mere formality,
as he did perform functions which are purely ministerial and figurative in nature. [19] Time
and again we have held that the control test only requires the existence of the right to
control the manner of doing the work not necessarily the actual exercise of the power
by him, which he can delegate.[20] Indeed, although the letters of appointment were
signed by the principal/representative of petitioner, they bore the name/letterhead of
CDSPB and clearly indicated therein that the employees were hired as
teachers/personnel by CDSPB, and not by RVM. Moreover, CDSPB itself admits that
its name not petitioners appears in the employees payroll ledger cards.[21]
One other crucial fact to consider is that private respondents-complainants
continued to render services beyond April 10, 1987, the termination date of the
Agreement. If they were employees of petitioner and not of CDSPB, their services
should have been terminated the moment the Agreement was no longer in
effect. Instead, CDSPB continued to honor their respective employment
contracts/appointment papers and avail of their services even after petitioner turned
over the schools administration to CDSPB. Indeed, it does not appear that there was a
break or change in the employment status of private respondents-complainants, neither
are they claiming separation pay from petitioner, unlike in cases where there is a
supposed change in employers.[22]
Based on the Agreement and other evidence on record, it thus appears that
petitioner was merely the agent or administrator of CDSPB, and that private
respondents are its employees. In Ponce v. NLRC,[23] this Court held:
Under Section 8, Rule VIII, Book III, of the Omnibus Rules Implementing the Labor
Code, an independent contractor is one who undertakes job contracting, i.e., a person
who (a) 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)
has substantial capital or investment in the form of tools, equipment, machineries,
work premises, and other materials which are necessary in the conduct of the
business. Jurisprudential holdings are to the effect that in determining the existence
of an independent contractor relationship, several factors might be considered such
as, but not necessarily confined to, whether or not the contractor is carrying on an
independent business; the nature and extent of the work; the skill required; the term
and duration of the relationship; the right to assign the performance of specified
pieces of work, the control and supervision of the work to another; the employers
power with respect to the hiring, firing and payment of the contractors workers; the
control of the premises; the duty to supply premises, tools, appliances, materials and
labor; and the mode, manner and terms of payment.
100
 As above stated, petitioner was subject to the control and supervision of CDSPB
in running the Girls Department. Petitioner has not been shown to have substantial
capital or investment necessary in the conduct of the business. Under the Agreement,
the ownership of the parcel of land and the building thereon remained with
CDSPB. Tested by the standards announced in Ponce, petitioner cannot be considered
an independent contractor.

CDSPB nonetheless argues that petitioner should be made liable to pay the
salaries for the month of May 1987 since petitioner collected the revenues for school
year 1986-1987 from which said salaries should be sourced.[24] Petitioner, on the other
hand, claims that it has been its uniform and traditional practice in its administration of
various schools throughout the Philippines to fix the school budget from May 1 to April
30.[25]

It is unnecessary to pass upon this claim. The fact that CDSPB is the direct and
only employer of private respondents makes it solely liable to pay the salaries for the
month of May 1987 to the concerned employees. Whether or not said salaries should
come from the fees collected by its agent (petitioner) for the previous year is a matter
to be litigated between CDSPB and RVM. Here, the only issue is who is the employer
of private respondents.

WHEREFORE, the petition is hereby GRANTED and the decision, dated

November 18, 1991, of the National Labor Relations Commission is SET
ASIDE. Colegio de San Pascual Baylon is ORDERED to pay private respondents their
salaries for the month of May 1987, in the amount of P67,139.84, and P6,713.98 as
attorneys fees.

SO ORDERED.

Quisumbing, Buena, and De Leon, Jr., JJ., concur.

Bellosillo, (Chairman), J., on leave on official business.

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