FIRST DIVISION

[G.R. No. L-31341. March 31, 1976.]

PHILIPPINE AIR LINES EMPLOYEES ASSOCIATION (PALEA) and PHILIPPINE AIR LINES
SUPERVISORS' ASSOCIATION (PALSA), petitioners, vs. PHILIPPINE AIR LINES, INC.,
respondent.

[G.R. No. L-31343. March 31, 1976.]

PHILIPPINE AIR LINES, INC., petitioner, vs. PHILIPPINE AIR LINES EMPLOYEES
ASSOCIATION, PHILIPPINE AIR LINES SUPERVISORS ASSOCIATION and the COURT OF
INDUSTRIAL RELATIONS, respondents.

Mariano V. Ampil, Jr., Vicente T. Ocampo and Casiano P. Laguidon and Edwin G.
Lagayada for petitioners in L-31341.

Siguion Reyna, Montecillo, Belo & Ongsiako for respondent in L-31341.

Siguion Reyna, Montecillo, Belo & Ongsiako for petitioner in L-31343.

Mariano V. Ampil, Jr. and Vicente T. Ocampo for respondent Philippine Air Lines
Employees Association PALSA, ACAP and PALEA.

Casiano P. Laguidon and Edwin G. Lagayada for respondent PALSA.

SYNOPSIS

In the dispute between PAL and its two unions, the PALEA and the PALSA over the
method of computing the basic and hourly rate of monthly-salaried employees the
Industrial Court declared PAL's formula legal and proper. The unions moved for
reconsideration, attributing error to PAL's wage formula, particularly in the use of
365 days as divisor for this would necessarily include off-days which, under the
terms of the collective bargaining agreements entered into between the parties,
were not paid days. A reversal of the decision was obtained but the industrial court
ordered computation of pay differentials effective only July 1, 1957. From this
resolution, both parties appealed, PAL contending that respondent court erred in
holding that its formula for determining the basic daily or hourly rate of its monthly-
salaried employees was not correct; that the unions, by their long period of consent
and inaction, are estopped and barred from questioning the long-adopted formula;
and that in the recovery of the pay differential, the three-year prescriptive period
provided in the Eight-Hour Labor Law should apply. The unions appealed from that
portion of the respondent court's resolution making the payment of the adjudicated
differentials only from July 1, 1957, contending that because their claim is based on
written contracts, i. e., the collective bargaining agreements, the differentials
should be effective ten years from the filing of their original complaint, or from
February 14, 1953.
The Supreme Court held that the divisor in computing an employee's basic daily
rate should be the actual working days in a year; that the long silence of the PAL
employees relative to the adopted formula of their employer was innocent silence
which cannot place them in estopped and that since the union members' claim
anchored on the written contracts between the litigants, the ten-year prescriptive
period provided by Article 1144 (1) of the New Civil Code should govern.

Resolution affirmed with modification.

SYLLABUS

1. LABOR RELATIONS; COMPENSATION; OFF-DAYS ARE NOT PAID DAYS. — There

should hardly be any doubt that off-days are not paid days. Precisely, off-days are
rest days for the worker. He is not required to work on such days. This finds support
not only in the principle in labor that the basis of remuneration or compensation is
actual service rendered, but in the ever pervading labor spirit aimed at humanizing
the conditions of the working man. Since during his off-days an employee is not
compelled to work, he cannot, conversely, demand for his corresponding pay. If,
however, a worker works on his off-day, our welfare laws duly reward him with a
premium higher than what he would receive when he works on his regular working
day.

2. ID.; ID.; ID.; METHOD OF COMPUTING EMPLOYEE'S BASIC DAILY RATE. — The
divisor in computing an employee's basic daily rate should be that actual working
days in a year. The number of off-days are not to be counted precisely because on
such off-days, an employee is not required to work.

3. ID.; ID.; ID.; RULING IN NAWASA VS. NWSA CONSOLIDATED UNIONS, ET AL.,
APPLICABLE TO INSTANT CASE. — PAL maintains that the NAWASA doctrine
(enunciated in G.R. No. L-18938, August 31, 1964) should not apply to a public
utility like PAL which, from the nature of its operations, requires a whole-year-round,
uninterrupted work by personnel. What PAL apparently forgets is that just like it,
NAWASA is also a public utility which likewise requires its workers to work the whole
year round. NAWASA is a government-owned corporation to which PAL is akin, it
being a government-controlled corporations. PAL inked with the represented unions
of the employees collective bargaining agreements wherein it bound itself to duly
compensate employees working on their off-days. The same situation obtained in
the NAWASA case, hence, the settled doctrine should not be disturbed.

4. ID.; ID.; ACQUIESCENCE TO METHOD OF COMPUTATION OF DAILY RATE WILL

NOT RESULT IN ESTOPPEL. — PAL's formula of determining daily and hourly rate of
pay has been decided and adopted by it unilaterally without the knowledge and
express consent of the employees. It was only later on that the employees came to
know of the formula's irregularity and its being violative of the collective bargaining
agreements previously executed by PAL and the unions. PALSA immediately
proposed that PAL use the correct method of competition, which proposal PAL chose
to ignore. Clearly, therefore, the long-standing silence by the PAL employees is in
truth and in fact innocent silence, which cannot place a party in estoppel. The
rationale for this is not difficult to see. The doctrines of estoppel had its origin in
equity. As such, its applicability depends, to a large extent, on the circumstance
surrounding a particular case. Where, therefore, the neglect or omission alleged to
have placed a party in estopped is actually fraught with badges of innocence,
estoppel cannot be invoked. In another count, the unilateral adoption by PAL of an
irregular wage formula being an act against public policy the doctrine of estoppel
cannot give validity to the same.

5. ID.; ID.; CLAIM FOR PAY DIFFERENTIALS; APPLICABLE LAW. — Where the claim
involves the strict compliance with the provisions on wage computations embodied
in the collective bargaining agreements inked between the litigants, the Civil Code
provisions on the prescriptive period in the filing of action based on written
contracts should apply. Where the claim for differentials is solely based on the
Eight-Hour Labor Law, the three-year prescriptive period fixed therein will apply.

6. ID.; ID.; ID.; CONSTRUCTION IN FAVOR OF LABOR. — Where there is doubt as

to what labor legislation to apply to the grievances of the employees, that
legislation which would enhance the right of the workers should be followed,
consonant with the express pronouncement of the New Civil Code that: "In case of
doubt, all labor legislation and labor contracts should be construed in favor of the
safety and decent living of he laborer."

DECISION

MAKASIAR, J p:

Before US are consolidated petitions to review the Court of Industrial Relations en

banc resolution dated October 9, 1969 in CIR Case No 43-IPA.

In G.R. No L-31341 (PALEA vs. PAL), petitioners question the date of effectivity of
the adjudicated pay differentials due to the monthly-salaried employees of
Philippine Air Lines, Inc.

In G.R. No. L-31343 (PAL vs. PALEA), petitioner assails the reversal by the Court of
Industrial Relations of its earlier resolution on the method employed by the
Philippine Air Lines in computing the basic daily and hourly rate of its monthly-
salaried employees.

On February 14, 1963, the Philippine Air Lines Employees' Association (PALEA) and
the Philippine Air Lines Supervisors' Association (PALSA) — petitioners in G.R. No. L-
31341 and respondents in G.R. No. 31343 — commenced an action against the
Philippine Air Lines (PAL) in the Court of Industrial Relations, praying that PAL be
ordered to revise its method of computing the basic daily and hourly rate of its
monthly-salaried employees, and necessarily, to pay them their accrued salary
differentials.

Sought to be revised is PAL's formula in computing wages of its employees:

Monthly salary x 12

———————— = x (Basic daily rate)

365 (No. of calendar

days in a year)

——— = Basic hourly rate

The unions would like PAL to modify the above formula in this wise:

Monthly salary x 12

———————— = x (Basic daily rate)

No. of actual working

days

——— = Basic hourly rate

On May 23, 1964, the Court of Industrial Relations, through Presiding Judge Jose S.
Bautista, issued an order denying the unions' prayer for a modified wage formula.
Pertinent portion of the order reads:

"On the issue of rate of pay, PALSA and PALEA seek to change the long standing
method in PAL of computing the basic daily and hourly rate of monthly salaried
employees for the purpose of determining overtime pay, Sunday and legal holiday
premium pay, night differential pay, vacation and sick leave pay, to wit, the monthly
salary multiplied by 12 and dividing the product thereof by 365 and then the
quotient by 8. PALEA and PALSA claim that the method of computing the basic daily
and hourly rate of monthly salaried employees of PAL prior to the implementation of
the 40-hour week schedule in PAL should be by dividing the monthly salary by 26
working days, and after the 40-hour week schedule, by dividing the monthly salary
by 20 working days, and then dividing the quotient thereof in each case by 8. From
the records, however, it appears that for many years since 1952, and even
previously, PAL has been consistently and regularly determining the basic and
hourly rates of monthly salaried employees by multiplying the monthly salary by 12
months and dividing the product by 365 days to arrive at the basic daily rate, and
dividing the quotient by 8 to compute the basic hourly rate. There has been no
attempt to revise this formula notwithstanding the various negotiations PAL had
with the unions ever since its operations, and it was only on July 18, 1962, when
PALSA, for the first time, proposed that it be changed in accordance with what is
now alleged in the petition. This, however, was a mere proposal by PALSA for the
adoption of a new formula; it was not a demand for the application of a formula
claimed to be correct under the law. Under this circumstance, PALSA and PALEA are
estopped from questioning the correctness and propriety of PAL's method of
determining the basic hourly and daily rate of pay of its monthly salaried personnel,
and considering the long period of time that elapsed before they brought their
petition, are barred from insisting or demanding a different rate of pay formula.

"xxx xxx xxx

"Upon the foregoing, the Court, therefore, declares PAL's method of computing the
basic daily and hourly rate of its monthly salaried employees as legal and proper,
and denies the petition of PALSA and PALEA.

"xxx xxx xxx"

(pp. 47-48, 49, rec. G.R. No. L-31343).

On May 30, 1964, complaining unions promptly moved for the reconsideration of
the above-said order (p. 51, rec. G.R. No. L-31343).

On June 9, 1964, the unions filed their memorandum in support of their motion for
reconsideration alleging that the questioned order is (a) contrary to law, and (b)
contrary to evidence adduced during the trial (p. 53, rec., G.R. No. L-31343).

The unions attributed error to PAL's wage formula, particularly in the use of 365
days as divisor. The unions contended that the use of 365 days as divisor would
necessarily include off-days which, under the terms of the collective bargaining
agreements entered into between the parties, were not paid days. This is so since
for work done on an off-day, an employee was paid 100% plus 25% or 100% plus 37
1/2% of his regular working hour rate.

On the issue of prescription, the unions pointed out:

"With respect to the period of prescription, it is clear that since the claim arises
from the written contracts or collective bargaining agreements between the
petitioner unions and the PAL, the action thereon prescribes in ten years from the
time the right of action accrues, in accordance with Article 1144 of the New Civil
Code. . . ." (p. 68, rec., G.R. No. L-31343).
On June 26, 1964, the Philippine Air Lines answered point by point the unions'
memorandum, in a prompt reply.

On October 9, 1969, the Court of Industrial Relations, through Presiding Judge

Arsenio I. Martinez, ordered the reversal of its decision dated May 23, 1964 and
sustained the unions' method of wage computation.

The industrial court, however, ordered the computation of pay differentials in

accordance with the sustained method of computation effective only July 1, 1957.

Said the Court of Industrial Relations in this regard:

". . . In this connection, however, it will be noted as previously stated, that this case
was considered as an incident of Case No. 39-IPA, in which the issues involved were
related to the application to the respondent PAL of the 40-Hour Week Law (Rep. Act
1880) from the date of its effectivity July 1, 1957 . . .

"This Court therefore believes that in justice and equity and substantial merits of
the case, the aforesaid pay differentials due to the employees involved herein by
the application of the correct method of computation of the rate of pay should be
paid by the respondent also beginning July 1, 1957" (p. 117, rec., G.R. No. L-31343).

From the above resolution, both parties appealed to this COURT. The Philippine Air
Lines filed its appeal petition on December 13, 1969, while PALEA filed its petition
for review on certiorari on January 3, 1970.

For easy comprehension, WE start with the Philippine Air Lines, Inc. versus
Philippine Air Lines Employees Association, Philippine Air Lines Supervisors
Association, and the Court of Industrial Relations, G.R. No. L-31343.

In this appeal, PAL emphasizes three assignments of error, to wit:

1. RESPONDENT CIR ERRED AND COMMITTED GRAVE ABUSE OF DISCRETION IN

HOLDING THAT THE METHOD OF COMPUTATION USED BY PAL IN DETERMINING THE
BASIC DAILY OR HOURLY RATE OF ITS MONTHLY SALARIED EMPLOYEES WHICH IS:

MONTHLY SALARY x 12

———————— = x (BASIC DAILY RATE)

365 (NO. OF CALENDAR

DAYS IN A YEAR)

——— = BASIC HOURLY RATE

 8

IS NOT CORRECT, CONSIDERING THAT PAL, A PUBLIC UTILITY WHERE THERE IS

WORK EVERYDAY OF THE WEEK FOR MANY YEARS EVEN BEFORE REPUBLIC ACT 602
AND WITH THE CONSENT AND APPROVAL OF THE EMPLOYEES, CONSISTENT WITH
SECTION 19 OF REPUBLIC ACT 602 PROHIBITING REDUCTION OF WAGES FOR OFF
DAYS — WHICH WAS SUSTAINED BY THIS HONORABLE COURT IN AUTOMOTIVE
PARTS & EQUIPMENT CO., INC. VS. JOSE B. LINGAD, G.R. NO. L-26406, OCTOBER 31,
1969 — HAS BEEN TREATING OFF-DAYS, SUCH AS SATURDAYS, SUNDAYS, COMPANY
OBSERVED HOLIDAYS OR ANY OTHER DESIGNATED HOLIDAYS AS PAID DAYS.

2. RESPONDENT CIR ERRED AND COMMITTED GRAVE ABUSE OF DISCRETION IN

NOT FINDING THAT RESPONDENT UNIONS, BY THEIR LONG PERIOD OF CONSENT,
ACQUIESCENCE, INACTION AND ACCEPTANCE OF BENEFITS THEREUNDER, ARE
ESTOPPED AND BARRED FROM CLAIMING THAT PAL'S FORMULA FOR DETERMINING
THE BASIC DAILY AND HOURLY RATE OF PAY IS INCORRECT.

3. RESPONDENT CIR ERRED AND ACTED IN EXCESS OF ITS JURISDICTION IN

SENTENCING PAL TO PAY DIFFERENTIALS FOR OVERTIME WORK, NIGHTWORK,
HOLIDAY AND SUNDAY PAY FROM JULY 1, 1957 CONSIDERING THAT UNDER THE
THREE-YEAR PRESCRIPTIVE PERIOD PROVIDED IN SECTION 7-a OF COMMONWEALTH
ACT NO. 444, AS AMENDED, THE EIGHT-HOUR LABOR LAW, RESPONDENT UNIONS,
ASSUMING THEY HAD ANY CAUSE OF ACTION, COULD RECOVER ONLY FROM
FEBRUARY 14, 1960 UP TO THE PRESENT SINCE RESPONDENT UNIONS FILED THEIR
ACTION ONLY ON FEBRUARY 14, 1963.

A.

PAL's maiden argument has a strong tendency to mislead. In an effort to emphasize

that off-days are paid days and therefore should be reckoned with in determining
the divisor for computing daily and hourly rate, PAL leans heavily on what it
considers as additional payment of 125% or 137 1/2%, as the case may be, of an
employee's basic hourly rate, given to a worker who worked on his off-day. PAL
would like us to believe that the word "additional" all but accentuates the existence
of a regular basic rate; otherwise, the 125% or 137 1/2% shall be in addition to
what?

The industrial court, however, had this to say:

"Moreover, it will be noted that before September 4, 1961, a monthly salaried

employee of PAL had to work 304 days only in a year, and after said date, he had to
work only 258 days in a year, to be entitled to his equivalent yearly salary. When he
worked on his off-day, he was paid accordingly (125% or 137%), indicating that his
off-days were not with pay. It seems illogical for said employee to be paid 125% or
137 1/2% of his basic daily rate, if such off-days are already with pay, as indicated
by the company" (p. 107, rec., G.R. No. L-31343, emphasis supplied).
WE agree.

There should hardly be any doubt that off-days are not paid days. Precisely, off-days
are rest days for the worker. He is not required to work on such days. This finds
support not only in the basic principle in labor that the basis of remuneration or
compensation is actual service rendered, but in the ever-pervading labor spirit
aimed at humanizing the conditions of the working man.

Since during his off-days an employee is not compelled to work, he cannot,

conversely, demand for his corresponding pay. If, however, a worker works on his
off-day, our welfare laws duly reward him with a premium higher than what he
would receive when he works on his regular working day.

Such being the case, the divisor in computing an employee's basic daily rate should
be the actual working days in a year. The number of off-days are not to be counted
precisely because on such off-days, an employee is not required to work.

Simple common sense dictates that should an employee opt not to work — which he
can legally do — on an off-day, and for such he gets no pay, he would be unduly
robbed of a portion of his legitimate pay if and when in computing his basic daily
and hourly rate, such off-day is deemed subsumed by the divisor. For it is
elementary in the fundamental process of division that with a constant dividend, the
bigger your divisor is, the smaller your quotient will be.

It bears emphasis that OUR view above constitutes the rationale behind the
landmark ruling, surprisingly, by the same trial Judge Jose S. Bautista of the Court of
Industrial Relations, in National Waterworks and Sewerage Authority vs. NWSA
Consolidated Unions, et al., (G.R. No. L-18938, August 31, 1964, 11 SCRA 766, 783-
784), to which decision WE gave OUR affirmance.

PAL maintains that the NAWASA doctrine should not apply to a public utility like PAL
which, from the nature of its operations, requires a whole-year-round, uninterrupted
work by personnel. What PAL apparently forgets is that just like it, NAWASA is also a
public utility which likewise requires its workers to work the whole year round.
Moreover, the NAWASA is a government-owned corporation — to which PAL is akin,
it being a government-controlled corporation.

As will later be stated herein, PAL inked with the representative unions of the
employees collective bargaining agreements wherein it bound itself on duly
compensate employees working on their off-days. The same situation obtained in
the NAWASA case, wherein WE held:

"And in the collective bargaining agreement entered into between the NAWASA and
respondent unions it was agreed that all existing benefits enjoyed by the employees
and laborers prior to its effectivity shall remain in force and shall form part of the
agreement, among which certainly is the 25% additional compensation for work on
Sundays and legal holidays theretofore enjoyed by said laborers and employees. It
may, therefore, be said that while under Commonwealth Act No. 444 a public utility
is not required to pay additional compensation to its employees and workers for
work done on Sundays and legal holidays, there is, however, no prohibition for it to
pay such additional compensation if it voluntarily agrees to do so. The NAWASA
committed itself to pay this additional compensation. It must pay not because of
compulsion of law but because of contractual obligation." (11 SCRA 766, 776).

The settled NAWASA doctrine should not be disturbed.

B.

PAL also vigorously argues that the unions' long standing silence with respect, and
acquiescence, to PAL's method of computation has placed them in estoppel to
impugn the correctness of the questioned wage formula. PAL furthermore contends
that laches has likewise set in precisely because of such long-standing inaction.

Our jurisprudence on estoppel is, however, to the effect that:

". . . (I)t is meet to recall that 'mere innocent silence will not work estoppel. There
must also be some element of turpitude or negligence connected with the silence
by which another is misled to his injury' (Civil Code of the Philippines by Tolentino,
Vol. IV, p. 600) . . ." [Beronilla vs. GSIS, G.R. No. L-21723, Nov. 26, 1970, 36 SCRA
44, 46, 55, emphasis supplied].

In the cases before US, it is not denied that PAL's formula of determining daily and
hourly rate of pay has been decided and adopted by it unilaterally without the
knowledge and express consent of the employees. It was only later on that the
employees came to know of the formula's irregularity and its being violative of the
collective bargaining agreements previously executed by PAL and the unions.
Precisely, PALSA immediately proposed that PAL use the correct method of
computation, which proposal PAL chose to ignore.

Clearly, therefore, the alleged long-standing silence by the PAL employees is in

truth and in fact innocent silence, which cannot place a party in estoppel.

The rationale for this is not difficult to see. The doctrine of estoppel had its origin in
equity. As such, its applicability depends, to a large extent, on the circumstances
surrounding a particular case. Where, therefore, the neglect or omission alleged to
have placed a part in estoppel is actually fraught with badges of innocence,
estoppel cannot be invoked. This was the essence of OUR ruling in the case of
Mirasol vs. Municipality of Tabaco (43 Phil. 610, 614). And this, in quintessence, was
the compelling reason why in Lodovica vs. Court of Appeals (L-29678, July 18 1975,
65 SCRA, 154, 158), WE held that a party who had no knowledge of or gave no
consent to a transaction may not be estopped by it.
Furthermore, jurisprudence likewise fortifies the position that in the interest of
public policy, estoppel and laches cannot arrest recovery of overtime compensation.
The case of Manila Terminal Co. vs. CIR (G.R. No. L-9265, April 29, 1957, 91 Phil.
625), is squarely in point. In this case WE intoned:

"The principle of estoppel and laches cannot well be invoked against the
Association. In the first place, it would be contrary to the spirit of the Eight-Hour
Labor Law, under which, as already seen, the laborers cannot waive their right to
extra compensation. In the second place, the law principally obligates the employer
to observe it, so much so that it punishes the employer for its violation and leaves
the employee or laborer free and blameless. In the third place, the employee or
laborer is in such a disadvantageous position as to be naturally reluctant or even
apprehensive in asserting any claim which may cause the employer to devise a way
for exercising his right to terminate the employment.

"If the principle of estoppel and laches is to be applied, it may bring about a
situation, whereby the employee or laborer, who cannot expressly renounce their
right to extra compensation under the Eight-Hour Labor Law, may be compelled to
accomplish the same thing by mere silence or lapse of time, thereby frustrating the
purpose of the law by indirection" (91 Phil. 625, 633, emphasis supplied).

In another count, the unilateral adoption by PAL of an irregular wage formula being
an act against public policy, the doctrine of estoppel cannot give validity to the
same (Auyong Hian vs. Court of Tax Appeals, 59 SCRA 110, 112).

II

G.R. No. L-31341 is an appeal from that portion of the en banc resolution of the
Court of Industrial Relations dated October 9, 1969 in case 43-IPA making the
payment of the adjudicated pay differentials effective only from July 1, 1957.

In their lone assignment of error, the unions argue that pay differentials should be
effective February 14, 1953, or ten (10) years from the date of the filing of their
original complaint; because the claim for pay differentials is based on written
contracts — i.e., the collective bargaining agreements between PAL and the
employees' representative unions — and under Article 1144(1) of the Civil Code,
actions based on written contracts prescribe in ten ( 10) years.

PAL, on the other hand, maintains that the employees' claim for pay differentials is
"an action to enforce a cause of action under the Eight-Hour Labor Law (CA No. 444,
as amended)" (p. 592, rec., G.R. No. L-31341). As such, the applicable provision is
Section 7-a of CA No. 444, which reads:

"Sec. 7-a. Any action to enforce any cause of action under this Act shall be
commenced within three years after the cause of action accrued, otherwise such
action shall be forever barred; provided, however, that actions already commenced
before the effective date of this Act shall not be affected by the period herein
prescribed" (As amended by Rep. Act No. 1993, approved June 22, 1957, emphasis
supplied).

Moreover, PAL argues that even assuming that the issue calls for the application of
Article 1144(1) of the New Civil Code, a general law, still in case of conflict,
Commonwealth Act No. 444, as amended, should prevail because the latter is a
special law.

WE believe that the present case calls for the application of the Civil Code
provisions on the prescriptive period in the filing of actions based on written
contracts. The reason should be fairly obvious. Petitioners' claim fundamentally
involves the strict compliance by PAL of the provisions on wage computation
embodied in the collective bargaining agreements inked between it and the
employees' representative unions. These collective bargaining agreements were:
the PAL-PALEA collective bargaining agreement of 1952-53; the PAL-PALEA
collective bargaining agreement of 1956-59; the PAL-PALEA collective bargaining
agreement of 1959-61 (with Article VI as supplement); the PAL-PALEA agreement of
September 4, 1961; the PAL-ACAP collective bargaining agreement of 1952-54; the
PAL-ACAP collective bargaining agreement of September 6, 1955; the PAL-ACAP
collective bargaining agreement of 1959-61; the PAL-PALSA collective bargaining
agreement of 1959-62; and the supplementary PAL-PALSA collective bargaining
agreement (pp. 54-55, rec., G.R. No. L-31343).

The three-year prescriptive period fixed in the Eight-Hour Labor Law (CA No. 444, as
amended) will apply, if the claim for differentials for overtime work is solely based
on said law, and not on a collective bargaining agreement or any other contract. In
the instant cases, the claim for overtime compensation is not so much because of
Commonwealth Act No. 444, as amended, but because the claim is a demandable
right of the employees, by reason of the above-mentioned collective bargaining
agreements. That is precisely why petitioners did not make any reference as to the
computation for overtime work under the Eight-Hour Labor Law (Secs. 3 and 4, CA
No. 444), and instead insisted that work computation provided in the collective
bargaining agreements between the parties be observed. Since the claim for pay
differentials is principally anchored on the written contracts between the litigants,
the ten-year prescriptive period provided by Art. 1144(1) of the New Civil Code
should govern. (General Insurance and Surety Corp. vs. Republic, L-13873, January
31, 1963, 7 SCRA 4; Heirs of the Deceased Juan Sindiong vs. Committee on Burnt
Areas and Improvements of Cebu, L-15975, April 30, 1964, 10 SCRA 715; Conde vs.
Cuenca and Malaga, L-9405, July 31, 1956; Veluz vs. Veluz, L-23261, July 31, 1968,
24 SCRA 559).

Finally, granting arguendo that there is doubt as to what labor legislation to apply to
the grievances of the employees in the cases at bar, it is OUR view that legislation
which would enhance the plight of the workers should be followed, consonant with
the express pronouncement of the New Civil Code that:

"In case of doubt, all labor legislation and labor contracts should be construed in
favor of the safety and decent living of the laborer" (Article 1702).

WHEREFORE, THE APPEALED RESOLUTION IS HEREBY AFFIRMED, WITH THE

MODIFICATION THAT PAY DIFFERENTIALS BE PAID EFFECTIVE FEBRUARY 14, 1953.
WITH COSTS AGAINST PHILIPPINE AIR LINES, INC. IN BOTH CASES.

Teehankee, (Chairman), Esguerra, Muñoz Palma and Martin, JJ., concur.

SECOND DIVISION
G.R. No. L-63578 July 11, 1985
PHlLIPPINE AIRLINES EMPLOYEES ASSOCIATION (PALEA) CECILIO
V. BAUTISTA, PANTALEON ARAYATA, CATALINO BAÑEZ LUCIO
CANTILLO, ROBERTO ESPINELI, JASMIN A. ILANO, ALFONSO JOSE,
ROMULO NERY, ET AL., petitioners,
-versus-
NATIONAL LABOR RELATIONS COMMISSION (NLRC), PHILIPPINE
AIRLINES, INC. (PAL), BENIGNO TODA JR. and GOVERNMENT SERVICE
INSURANCE SYSTEM (GSIS), respondents.
Siguion Reyna, Montecillo & Ongsiako Law Office for respondent B. Toda, Jr.

MAKASIAR, J.:
This petition for certiorari with preliminary injunction seeks to annul the resolution
dated May 31, 1977 of respondent National Labor Relations Commission, the
dispositive portion of which reads as follows:
WHEREFORE, the Commission has resolved, as it hereby resolves, to
recall and declare inoperative the Partial Writ of Execution dated
December 6, 1976, and affirm the Order dated March 4, 1977 with
modification that only pay differentials beginning February 14, 1953 up
to September 8, 1963 be ordered paid.
SO ORDERED.
It appears that on March 31, 1976 this Court promulgated a decision in L-31341
(Philippine Air Lines Employees Association (PALEA) et al. vs. Philippine Air Lines
Inc.) and L-31-343 (Philippine Air Lines Inc. vs. Philippine Air Lines Employees
Association, et al.) affirming the resolution of the defunct Court of Industrial
Relations sustaining PALEA's method of computing the basic daily and hourly rate of
PAL's monthly salaried employees. to wit:
Monthly Salary x 12 = x (Basic daily rate)
No. of Actual Working Days
x = Basic hourly rate
8
with modification that the pay differentials be paid effective February 14, 1953
instead of July 1, 1957.
Both parties filed their respective motions for reconsideration. PAL insisted that the
method of computation of the basic daily rate of pay should be—to divide the yearly
salary by 365 days, to wit:
Monthly Salary x 12 = x (Basic daily wage)
365 days (No. of calendar
days in a year)
x = Basic hourly rate
8
PALEA, on the other hand, prayed that the pay differentials to be paid to the
employees involved should bear interest to be fixed by the Court from the date of the
filing of the complaint on February 14,1963.
This Court denied both motions for lack of merit and declared the denial as final in the
resolution of August 20, 1976. Entry of judgment was made on August 29, 1976.
On September 27, 1976 PALEA filed with the NLRC a "motion for immediate
execution and payments of benefits under the award and motion for immediate
verification, examination and computation and payment of back differentials."
After hearing, Labor Arbiter Francisco delos Reyes issued a partial writ of execution
dated December 6, 1976 directing the Deputy Sheriff of the NLRC to implement,
beginning October 1, 1976, the CIR resolution as affirmed with modification by the
Supreme Court.
On March 4, 1977, Labor Arbiter delos Reyes granted the second portion of the
motion which was filed on September 27, 1976 "for immediate verification,
examination and computation and payment of back differential," and ordered the
computation of differential from February 14, 1953 up to September 30, 1976.
On March 28,1977 PAL filed with the NLRC an appeal with prayer to quash the order
of March 4, 1977, and a motion to stay execution of the partial writ of execution and
the aforesaid order of March 4, 1977.
On May 31, 1977, the NLRC issued the questioned resolution, The NLRC reasoned
out that the application of the adjudged correct method or formula as adopted in the
Supreme Court's decision was based on the specific provisions of the collective
bargaining agreement still existing from 1952 until its expiry on September 8, 1963;
and that beginning September 9, 1963 the aforesaid formula ceased to be effective.
On March 29, 1983 or after a lapse of about six (6) years, the present petition for
certiorari was filed before this Court assailing the said resolution.
Petitioners maintain that this Court in its decision of March 1976 had already settled
the correct method or formula of computation of the basic daily rate of pay of PAL's
monthly salaried employees in determining their overtime pay, night differential pay,
holiday premium pay, vacation and sick leave pay effective from February 14, 1953.
Thus, when the NLRC declared that the said method or formula ceased to be effective
on September 8, 1963, the consequence would be to revert to The use of what had
been adjudged by this Court as an erroneous method of computation of the basic daily
rate of pay, by dividing the yearly salary by 365 days.
The petition should be dismissed.
Under the terms of the collective bargaining agreements entered into between the
parties from 1952 up to September 8, 1963, which were the subject matter of L-31341
and L-31343, off-days were not paid days. Hence, the unions contested the PAL's
wage formula of computing the basic daily rate of the latter's monthly- salaried
employees by using 365 days as divisor thus including even the off-days, In Our
decision of March 31, 1976 in said cases, We categorically ruled that "off-days are not
paid days. Such being the case, the divisor in computing an employee's basic daily
rate should be the actual working days in a year. The number of off- days are not to be
counted precisely because on such off-days, an employee is not required to work." It
should be made clear, however, that such pronouncement was based on the provisions
of the collective bargaining agreements existing from 1952 until September 8, 1963.
As alleged by the respondents and found out by the respondent Commission and
which was not disputed by petitioners, after September 8, 1963, there was a change of
collective bargaining agreement. And the parties incorporated in the subsequent
collective bargaining agreements provisions considering such "off-days" as already
"paid". Hence, the method of computing the basic and hourly rate of respondent
PAL's monthly-salaried employees which We decreed in G.R. No. L-31341 and No.
L-31343 is no longer applicable after September 8, 1963.
WE agree with the respondent Commission in limiting the application of Our decision
of March 31, 1976 from February 14, 1953 to September 8, 1963. The respondent
Commission ruled in this wise:
To our mind, the change of the CBA provisions interpreted by the Court
can lead to no other conclusion than that the Decision is coterminous
with the last CBA containing the interpreted provision. This must be so.
For, the set of facts which justified the assumption that holidays and off
 days were not paid, no longer obtains. The facts which form the basis of
the CIR en bancs disposition is clear in pages 9 and 10 of the Resolution
itself.
xxx xxx xxx
What is more, the Supreme Court final decision in this proceeding,
affirming the Resolution of the CIR sitting en banc, in adopting the
correct formula for determining the basic daily and hourly rate of
monthly rate of monthly salaried PAL employees pursuant to specific
provisions of the successive CBA's from 1952 up to that which expired
on September 8, 1963, specifically anchored on the assumption that 'off
days' are not yet paid, could not possibly have intended to unreasonably
extend the effects of the same Decision to subsequent period of time
covered by subsequent CBA's wherein the parties, obviously to prevent
repetition of the same troubles arising from their different
interpretations leading to the present dispute, precisely incorporated
provisions clearly considering such 'off days' as already paid
In other words, by any stretch of valid argumentation, logic communes
with reason to support the conclusion that the coverage of the CIR en
banc resolution as affirmed by the Supreme Court is Limited to the
period from February 14, 1953 to September 8, 196,3. Clearly then,
beginning September 9, 1963, the adjudged formula in computing the
daily and hourly rate of monthly salaried PAL employees ceased to be
effective. A fortiori, there exist no valid rationale for the questioned
Partial Writ of Execution (emphasis supplied: pp. 123-127, rec.).
Finally, petitioners' cause of action questioning respondent Commission's resolution
of May 31, 1977 is almost six (6) years late as the present petition for certiorari was
filed only on March 29, 1983. The questioned resolution having long become final
and executory, this Court has no jurisdiction to entertain the present petition.
WHEREFORE, THE PETITION FOR certiorari IS HEREBY DISMISSED FOR
LACK OF MERIT. NO COSTS.
SO ORDERED.
Aquino, Concepcion, Jr., Escolin and Cuevas, JJ., concur.
Abad Santos, J., took no part.

SECOND DIVISION
[G.R. No. 146667. January 23, 2007.]

JOHN F. McLEOD, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (First

Division), FILIPINAS SYNTHETIC FIBER CORPORATION (FILSYN), FAR EASTERN
TEXTILE MILLS, INC., STA. ROSA TEXTILES, INC., (PEGGY MILLS, INC.), PATRICIO
L. LIM, and ERIC HU, respondents.

DECISION

CARPIO, J p:

The Case

This is a petition for review 1 to set aside the Decision 2 dated 15 June 2000 and the Resolution
3 dated 27 December 2000 of the Court of Appeals in CA-G.R. SP No. 55130. The Court of
Appeals affirmed with modification the 29 December 1998 Decision 4 of the National Labor
Relations Commission (NLRC) in NLRC NCR 02-00949-95.

The Facts

The facts, as summarized by the Labor Arbiter and adopted by the NLRC and the Court of
Appeals, are as follows:

On February 2, 1995, John F. McLeod filed a complaint for retirement benefits, vacation and
sick leave benefits, non-payment of unused airline tickets, holiday pay, underpayment of salary
and 13th month pay, moral and exemplary damages, attorney's fees plus interest against Filipinas
Synthetic Corporation (Filsyn), Far Eastern Textile Mills, Inc., Sta. Rosa Textiles, Inc., Patricio
Lim and Eric Hu.

In his Position Paper, complainant alleged that he is an expert in textile manufacturing process;
that as early as 1956 he was hired as the Assistant Spinning Manager of Universal Textiles, Inc.
(UTEX); that he was promoted to Senior Manager and worked for UTEX till 1980 under its
President, respondent Patricio Lim; that in 1978 Patricio Lim formed Peggy Mills, Inc. with
respondent Filsyn having controlling interest; that complainant was absorbed by Peggy Mills as
its Vice President and Plant Manager of the plant at Sta. Rosa, Laguna; that at the time of his
retirement complainant was receiving P60,000.00 monthly with vacation and sick leave benefits;
13th month pay, holiday pay and two round trip business class tickets on a Manila-London-
Manila itinerary every three years which is convertible to cas[h] if unused; that in January 1986,
respondents failed to pay vacation and leave credits and requested complainant to wait as it was
short of funds but the same remain unpaid at present; that complainant is entitled to such benefit
as per CBA provision (Annex "A"); that respondents likewise failed to pay complainant's holiday
pay up to the present; that complainant is entitled to such benefits as per CBA provision (Annex
"B"); that in 1989 the plant union staged a strike and in 1993 was found guilty of staging an
illegal strike; that from 1989 to 1992 complainant was entitled to 4 round trip business class
plane tickets on a Manila-London-Manila itinerary but this benefit not (sic) its monetary
equivalent was not given; that on August 1990 the respondents reduced complainant's monthly
salary of P60,000.00 by P9,900.00 till November 1993 or a period of 39 months; that in 1991
Filsyn sold Peggy Mills, Inc. to Far Eastern Textile Mills, Inc. as per agreement (Annex "D") and
this was renamed as Sta. Rosa Textile with Patricio Lim as Chairman and President; that
complainant worked for Sta. Rosa until November 30 that from time to time the owners of Far
Eastern consulted with complainant on technical aspects of reoperation of the plant as per
correspondence (Annexes "D-1" and "D-2"); that when complainant reached and applied
retirement age at the end of 1993, he was only given a reduced 13th month pay of P44,183.63,
leaving a balance of P15,816.87; that thereafter the owners of Far Eastern Textiles decided for
cessation of operations of Sta. Rosa Textiles; that on two occasions, complainant wrote letters
(Annexes "E-1" to "E-2") to Patricio Lim requesting for his retirement and other benefits; that in
the last quarter of 1994 respondents offered complainant compromise settlement of only
P300,000.00 which complainant rejected; that again complainant wrote a letter (Annex "F")
reiterating his demand for full payment of all benefits and to no avail, hence this complaint; and
that he is entitled to all his money claims pursuant to law.

On the other hand, respondents in their Position Paper alleged that complainant was the former
Vice-President and Plant Manager of Peggy Mills, Inc.; that he was hired in June 1980 and
Peggy Mills closed operations due to irreversible losses at the end of July 1992 but the
corporation still exists at present; that its assets were acquired by Sta. Rosa Textile Corporation
which was established in April 1992 but still remains non-operational at present; that
complainant was hired as consultant by Sta. Rosa Textile in November 1992 but he resigned on
November 30, 1993; that Filsyn and Far Eastern Textiles are separate legal entities and have no
employer relationship with complainant; that respondent Patricio Lim is the President and Board
Chairman of Sta. Rosa Textile Corporation; that respondent Eric Hu is a Taiwanese and is
Director of Sta. Rosa Textiles, Inc.; that complainant has no cause of action against Filsyn, Far
Eastern Textile Ltd., Sta. Rosa Textile Corporation and Eric Hu; that Sta. Rosa only acquired the
assets and not the liabilities of Peggy Mills, Inc.; that Patricio Lim was only impleaded as Board
Chairman of Sta. Rosa Textile and not as private individual; that while complainant was Vice
President and Plant Manager of Peggy Mills, the union staged a strike up to July 1992 resulting
in closure of operations due to irreversible losses as per Notice (Annex "1"); that complainant
was relied upon to settle the labor problem but due to his lack of attention and absence the strike
continued resulting in closure of the company; and losses to Sta. Rosa which acquired its assets
as per their financial statements (Annexes "2" and "3"); that the attendance records of
complainant from April 1992 to November 1993 (Annexes "4" and "5") show that he was either
absent or worked at most two hours a day; that Sta. Rosa and Peggy Mills are interposing
counterclaims for damages in the total amount of P36,757.00 against complainant; that
complainant's monthly salary at Peggy Mills was P50,495.00 and not P60,000.00; that Peggy
Mills, does not have a retirement program; that whatever amount complainant is entitled should
be offset with the counterclaims; that complainant worked only for 12 years from 1980 to 1992;
that complainant was only hired as a consultant and not an employee by Sta. Rosa Textile; that
complainant's attendance record of absence and two hours daily work during the period of the
strike wipes out any vacation/sick leave he may have accumulated; that there is no basis for
complainant's claim of two (2) business class airline tickets; that complainant's pay already
included the holiday pay; that he is entitled to holiday pay as consultant by Sta. Rosa; that he has
waived this benefit in his 12 years of work with Peggy Mills; that he is not entitled to 13th month
pay as consultant; and that he is not entitled to moral and exemplary damages and attorney's
fees.

In his Reply, complainant alleged that all respondents being one and the same entities are
solidarily liable for all salaries and benefits and complainant is entitled to; that all respondents
have the same address at 12/F B.A. Lepanto Building, Makati City; that their counsel holds
office in the same address; that all respondents have the same offices and key personnel such as
Patricio Lim and Eric Hu; that respondents' Position Paper is verified by Marialen C. Corpuz
who knows all the corporate officers of all respondents; that the veil of corporate fiction may be
pierced if it is used as a shield to perpetuate fraud and confuse legitimate issues; that complainant
never accepted the change in his position from Vice-President and Plant Manager to consultant
and it is incumbent upon respondents to prove that he was only a consultant; that the Deed of
Dation in Payment with Lease (Annex "C") proves that Sta. Rosa took over the assets of Peggy
Mills as early as June 15, 1992 and not 1995 as alleged by respondents; that complainant never
resigned from his job but applied for retirement as per letters (Annexes "E-1", "E-2" and "F");
that documents "G", "H" and "I" show that Eric Hu is a top official of Peggy Mills that the
closure of Peggy Mills cannot be the fault of complainant; that the strike was staged on the issue
of CBA negotiations which is not part of the usual duties and responsibilities as Plant Manager;
that complainant is a British national and is prohibited by law in engaging in union activities;
that as per Resolution (Annex "3") of the NLRC in the proper case, complainant testified in favor
of management; that the alleged attendance record of complainant was lifted from the logbook of
a security agency and is hearsay evidence; that in the other attendance record it shows that
complainant was reporting daily and even on Saturdays; that his limited hours was due to the
strike and cessation of operations; that as plant manager complainant was on call 24 hours a day;
that respondents must pay complainant the unpaid portion of his salaries and his retirement
benefits that cash voucher No. 17015 (Annex "K") shows that complainant drew the monthly
salary of P60,000.00 which was reduced to P50,495.00 in August 1990 and therefore without the
consent of complainant; that complainant was assured that he will be paid the deduction as soon
as the company improved its financial standing but this assurance was never fulfilled; that
Patricio Lim promised complainant his retirement pay as per the latter's letters (Annexes "E-1",
"E-2" and "F"); that the law itself provides for retirement benefits; that Patricio Lim by way of
Memorandum (Annex "M") approved vacation and sick leave benefits of 22 days per year
effective 1986; that Peggy Mills required monthly paid employees to sign an acknowledgement
that their monthly compensation includes holiday pay; that complainant was not made to sign
this undertaking precisely because he is entitled to holiday pay over and above his monthly pay;
that the company paid for complainant's two (2) round trip tickets to London in 1983 and 1986 as
reflected in the complainant's passport (Annex "N"); that respondents claim that complainant is
not entitled to 13th month pay but paid in 1993 and all the past 13 years; that complainant is
entitled to moral and exemplary damages and attorney's fees; that all doubts must be resolved in
favor of complainant; and that complainant reserved the right to file perjury cases against those
concerned.

In their Reply, respondents alleged that except for Peggy Mills, the other respondents are not
proper persons in interest due to the lack of employer-employee relationship between them and
complainant; that undersigned counsel does not represent Peggy Mills, Inc.

In a separate Position Paper, respondent Peggy Mills alleged that complainant was hired on
February 10, 1991 as per Board Minutes (Annex "A"); that on August 19, 1987, the workers
staged an illegal strike causing cessation of operations on July 21, 1992; that respondent filed a
Notice of Closure with the DOLE (Annex "B"); that all employees were given separation pay
except for complainant whose task was extended to December 31, 1992 to wind up the affairs of
the company as per vouchers (Annexes "C" and "C-1"); that respondent offered complainant his
retirement benefits under RA 7641 but complainant refused; that the regular salaries of
complainant from closure up to December 31, 1992 have offset whatever vacation and sick
leaves he accumulated; that his claim for unused plane tickets from 1989 to 1992 has no policy
basis, the company's formula of employees monthly rate x 314 days over 12 months already
included holiday pay; that complainant's unpaid portion of the 13th month pay in 1993 has no
basis because he was only an employee up to December 31, 1992; that the 13th month pay was
based on his last salary; and that complainant is not entitled to damages. 5

On 3 April 1998, the Labor Arbiter rendered his decision with the following dispositive portion:

WHEREFORE, premises considered, We hold all respondents as jointly and solidarily liable for
complainant's money claims as adjudicated above and computed below as follows:

Retirement Benefits (one month salary

for every year of service)

6/80-11/30/93 = 14 years

P60,000 x 14.0 mos. P840,000.00

Vacation and Sick Leave (3 yrs.)

P2,000.00 x 22 days x 3 yrs. 132,000.00

Underpayment of Salaries (3 yrs.)

P60,000-P50,495 = P9,505

P9,505 x 36.0 mos. 342,180.00

Holiday Pay (3 yrs.)

P2,000 x 30 days 60,000.00

Underpayment of 13th month pay (1993) 15,816.87

Moral Damages 3,000,000.00

Exemplary Damages 1,000,000.00

10% Attorney's Fees 138,999.68

TOTAL P5,528,996.55

Unused Airline Tickets (3 yrs.)

(To be converted in Peso upon payment)

$2,450.00 x 3.0 [yrs.] $7,350.00

SO ORDERED. 6
Filipinas Synthetic Fiber Corporation (Filsyn), Far Eastern Textile Mills, Inc. (FETMI), Sta.
Rosa Textiles, Inc. (SRTI), Patricio L. Lim (Patricio), and Eric Hu appealed to the NLRC. The
NLRC rendered its decision on 29 December 1998, thus:

WHEREFORE, the Decision dated 3 April 1998 is hereby REVERSED and SET ASIDE and a
new one is entered ORDERING respondent Peggy Mills, Inc. to pay complainant his retirement
pay equivalent to 22.5 days for every year of service for his twelve (12) years of service from
1980 to 1992 based on a salary rate of P50,495.00 a month.

All other claims are DISMISSED for lack of merit.

SO ORDERED. 7

John F. McLeod (McLeod) filed a motion for reconsideration which the NLRC denied in its
Resolution of 30 June 1999. 8 McLeod thus filed a petition for certiorari before the Court of
Appeals assailing the decision and resolution of the NLRC. 9

The Ruling of the Court of Appeals

On 15 June 2000, the Court of Appeals rendered judgment as follows:

WHEREFORE, the decision dated December 29, 1998 of the NLRC is hereby AFFIRMED with
the MODIFICATION that respondent Patricio Lim is jointly and solidarily liable with Peggy
Mills, Inc., to pay the following amounts to petitioner John F. McLeod:

1. retirement pay equivalent to 22.5 days for every year of service for his twelve (12) years
of service from 1980 to 1992 based on a salary rate of P50,495, a month;

2. moral damages in the amount of one hundred thousand (P100,000.00) Pesos;

3. exemplary damages in the amount of fifty thousand (P50,000.00) Pesos; and

4. attorney's fees equivalent to 10% of the total award.

No costs is awarded.

SO ORDERED. 10

The Court of Appeals rejected McLeod's theory that all respondent corporations are the same
corporate entity which should be held solidarily liable for the payment of his monetary claims.

The Court of Appeals ruled that the fact that (1) all respondent corporations have the same
address; (2) all were represented by the same counsel, Atty. Isidro S. Escano; (3) Atty. Escano
holds office at respondent corporations' address; and (4) all respondent corporations have
common officers and key personnel, would not justify the application of the doctrine of piercing
the veil of corporate fiction.

The Court of Appeals held that there should be clear and convincing evidence that SRTI,
FETMI, and Filsyn were being used as alter ego, adjunct or business conduit for the sole benefit
of Peggy Mills, Inc. (PMI), otherwise, said corporations should be treated as distinct and separate
from each other.

The Court of Appeals pointed out that the Articles of Incorporation of PMI show that it has six
incorporators, namely, Patricio, Jose Yulo, Jr., Carlos Palanca, Jr., Cesar R. Concio, Jr., E. A.
Picasso, and Walter Euyang. On the other hand, the Articles of Incorporation of Filsyn show that
it has 10 incorporators, namely, Jesus Y. Yujuico, Carlos Palanca, Jr., Patricio, Ang Beng Uh,
Ramon A. Yulo, Honorio Poblador, Jr., Cipriano Azada, Manuel Tomacruz, Ismael Maningas,
and Benigno Zialcita, Jr.

The Court of Appeals pointed out that PMI and Filsyn have only two interlocking incorporators
and directors, namely, Patricio and Carlos Palanca, Jr.

Reiterating the ruling of this Court in Laguio v. NLRC, 11 the Court of Appeals held that mere
substantial identity of the incorporators of two corporations does not necessarily imply fraud, nor
warrant the piercing of the veil of corporate fiction.

The Court of Appeals also pointed out that when SRTI and PMI executed the Dation in Payment
with Lease, it was clear that SRTI did not assume the liabilities PMI incurred before the
execution of the contract.

The Court of Appeals held that McLeod failed to substantiate his claim that all respondent
corporations should be treated as one corporate entity. The Court of Appeals thus upheld the
NLRC's finding that no employer-employee relationship existed between McLeod and
respondent corporations except PMI.

The Court of Appeals ruled that Eric Hu, as an officer of PMI, should be exonerated from any
liability, there being no proof of malice or bad faith on his part. The Court of Appeals, however,
ruled that McLeod was entitled to recover from PMI and Patricio, the company's Chairman and
President.

The Court of Appeals pointed out that Patricio deliberately and maliciously evaded PMI's
financial obligation to McLeod. The Court of Appeals stated that, on several occasions, despite
his approval, Patricio refused and ignored to pay McLeod's retirement benefits. The Court of
Appeals stated that the delay lasted for one year prompting McLeod to initiate legal action. The
Court of Appeals stated that although PMI offered to pay McLeod his retirement benefits, this
offer for P300,000 was still below the "floor limits" provided by law. The Court of Appeals held
that an employee could demand payment of retirement benefits as a matter of right.

The Court of Appeals stated that considering that PMI was no longer in operation, its "officer
should be held liable for acting on behalf of the corporation."

The Court of Appeals also ruled that since PMI did not have a retirement program providing for
retirement benefits of its employees, Article 287 of the Labor Code must be followed. The Court
of Appeals thus upheld the NLRC's finding that McLeod was entitled to retirement pay
equivalent to 22.5 days for every year of service from 1980 to 1992 based on a salary rate of
P50,495 a month.
The Court of Appeals held that McLeod was not entitled to payment of vacation, sick leave and
holiday pay because as Vice President and Plant Manager, McLeod is a managerial employee
who, under Article 82 of the Labor Code, is not entitled to these benefits.

The Court of Appeals stated that for McLeod to be entitled to payment of service incentive leave
and holidays, there must be an agreement to that effect between him and his employer.

Moreover, the Court of Appeals rejected McLeod's argument that since PMI paid for his two
round-trip tickets Manila-London in 1983 and 1986, he was also "entitled to unused airline
tickets." The Court of Appeals stated that the fact that PMI granted McLeod "free transport to
and from Manila and London for the year 1983 and 1986 does not ipso facto characterize it as
regular that would establish a prevailing company policy."

The Court of Appeals also denied McLeod's claims for underpayment of salaries and his 13th
month pay for the year 1994. The Court of Appeals upheld the NLRC's ruling that it could be
deduced from McLeod's own narration of facts that he agreed to the reduction of his
compensation from P60,000 to P50,495 in August 1990 to November 1993.

The Court of Appeals found the award of moral damages for P50,000 in order because of the
"stubborn refusal" of PMI and Patricio to respect McLeod's valid claims.

The Court of Appeals also ruled that attorney's fees equivalent to 10% of the total award should
be given to McLeod under Article 2208, paragraph 2 of the Civil Code. 12

Hence, this petition.

The Issues

McLeod submits the following issues for our consideration:

1. Whether the challenged Decision and Resolution of the 14th Division of the Court of
Appeals promulgated on 15 June 2000 and 27 December 2000, respectively, in CA-G.R. SP No.
55130 are in accord with law and jurisprudence;

2. Whether an employer-employee relationship exists between the private respondents and

the petitioner for purposes of determining employer liability to the petitioner;

3. Whether the private respondents may avoid their financial obligations to the petitioner by
invoking the veil of corporate fiction;

4. Whether petitioner is entitled to the relief he seeks against the private respondents;

5. Whether the ruling of [this] Court in Special Police and Watchman Association (PLUM)
Federation v. National Labor Relations Commission cited by the Office of the Solicitor General
is applicable to the case of petitioner; and

6. Whether the appeal taken by the private respondents from the Decision of the labor
arbiter meets the mandatory requirements recited in the Labor Code of the Philippines, as
amended. 13
The Court's Ruling

The petition must fail.

McLeod asserts that the Court of Appeals should not have upheld the NLRC's findings that he
was a managerial employee of PMI from 20 June 1980 to 31 December 1992, and then a
consultant of SRTI up to 30 November 1993. McLeod asserts that if only for this "brazen
assumption," the Court of Appeals should not have sustained the NLRC's ruling that his cause of
action was only against PMI.

These assertions do not deserve serious consideration.

Records disclose that McLeod was an employee only of PMI. 14 PMI hired McLeod as its acting
Vice President and General Manager on 20 June 1980. 15 PMI confirmed McLeod's appointment
as Vice President/Plant Manager in the Special Meeting of its Board of Directors on 10 February
1981. 16 McLeod himself testified during the hearing before the Labor Arbiter that his "regular
employment" was with PMI. 17

When PMI's rank-and-file employees staged a strike on 19 August 1989 to July 1992, PMI
incurred serious business losses. 18 This prompted PMI to stop permanently plant operations and
to send a notice of closure to the Department of Labor and Employment on 21 July 1992. 19

PMI informed its employees, including McLeod, of the closure. 20 PMI paid its employees,
including managerial employees, except McLeod, their unpaid wages, sick leave, vacation leave,
prorated 13th month pay, and separation pay. Under the compromise agreement between PMI
and its employees, the employer-employee relationship between them ended on 25 November
1992. 21

Records also disclose that PMI extended McLeod's service up to 31 December 1992 "to wind up
some affairs" of the company. 22 McLeod testified on cross-examination that he received his
last salary from PMI in December 1992. 23

It is thus clear that McLeod was a managerial employee of PMI from 20 June 1980 to 31
December 1992.

However, McLeod claims that after FETMI purchased PMI in January 1993, he "continued to
work at the same plant with the same responsibilities" until 30 November 1993. McLeod claims
that FETMI merely renamed PMI as SRTI. McLeod asserts that it was for this reason that when
he reached the retirement age in 1993, he asked all the respondents for the payment of his
benefits. 24

These assertions deserve scant consideration.

What took place between PMI and SRTI was dation in payment with lease. Pertinent portions of
the contract that PMI and SRTI executed on 15 June 1992 read:

WHEREAS, PMI is indebted to the Development Bank of the Philippines ("DBP") and as
security for such debts (the "Obligations") has mortgaged its real properties covered by TCT
Nos. T-38647, T-37136, and T-37135, together with all machineries and improvements found
thereat, a complete listing of which is hereto attached as Annex "A" (the "Assets");

WHEREAS, by virtue of an inter-governmental agency arrangement, DBP transferred the

Obligations, including the Assets, to the Asset Privatization Trust ("APT") and the latter has
received payment for the Obligations from PMI, under APT's Direct Debt Buy-Out ("DDBO")
program thereby causing APT to completely discharge and cancel the mortgage in the Assets and
to release the titles of the Assets back to PMI;

WHEREAS, PMI obtained cash advances from SRTC in the total amount of TWO HUNDRED
TEN MILLION PESOS (P210,000,000.00) (the "Advances") to enable PMI to consummate the
DDBO with APT, with SRTC subrogating APT as PMI's creditor thereby;

WHEREAS, in payment to SRTC for PMI's liability, PMI has agreed to transfer all its rights,
title and interests in the Assets by way of a dation in payment to SRTC, provided that
simultaneous with the dation in payment, SRTC shall grant unto PMI the right to lease the Assets
under terms and conditions stated hereunder;

xxx xxx xxx

NOW THEREFORE, for and in consideration of the foregoing premises, and of the terms and
conditions hereinafter set forth, the parties hereby agree as follows:

1. CESSION. In consideration of the amount of TWO HUNDRED TEN MILLION PESOS

(P210,000,000.00), PMI hereby cedes, conveys and transfers to SRTC all of its rights, title and
interest in and to the Assets by way of a dation in payment. 25 (Emphasis supplied)

As a rule, a corporation that purchases the assets of another will not be liable for the debts of the
selling corporation, provided the former acted in good faith and paid adequate consideration for
such assets, except when any of the following circumstances is present: (1) where the purchaser
expressly or impliedly agrees to assume the debts, (2) where the transaction amounts to a
consolidation or merger of the corporations, (3) where the purchasing corporation is merely a
continuation of the selling corporation, and (4) where the selling corporation fraudulently enters
into the transaction to escape liability for those debts. 26

None of the foregoing exceptions is present in this case.

Here, PMI transferred its assets to SRTI to settle its obligation to SRTI in the sum of
P210,000,000. We are not convinced that PMI fraudulently transferred these assets to escape its
liability for any of its debts. PMI had already paid its employees, except McLeod, their money
claims.

There was also no merger or consolidation of PMI and SRTI.

Consolidation is the union of two or more existing corporations to form a new corporation called
the consolidated corporation. It is a combination by agreement between two or more corporations
by which their rights, franchises, and property are united and become those of a single, new
corporation, composed generally, although not necessarily, of the stockholders of the original
corporations.
Merger, on the other hand, is a union whereby one corporation absorbs one or more existing
corporations, and the absorbing corporation survives and continues the combined business.

The parties to a merger or consolidation are called constituent corporations. In consolidation, all
the constituents are dissolved and absorbed by the new consolidated enterprise. In merger, all
constituents, except the surviving corporation, are dissolved. In both cases, however, there is no
liquidation of the assets of the dissolved corporations, and the surviving or consolidated
corporation acquires all their properties, rights and franchises and their stockholders usually
become its stockholders.

The surviving or consolidated corporation assumes automatically the liabilities of the dissolved
corporations, regardless of whether the creditors have consented or not to such merger or
consolidation. 27

In the present case, there is no showing that the subject dation in payment involved any corporate
merger or consolidation. Neither is there any showing of those indicative factors that SRTI is a
mere instrumentality of PMI.

Moreover, SRTI did not expressly or impliedly agree to assume any of PMI's debts. Pertinent
portions of the subject Deed of Dation in Payment with Lease provide, thus:

2. WARRANTIES AND REPRESENTATIONS. PMI hereby warrants and represents the

following:

xxx xxx xxx

(e) PMI shall warrant that it will hold SRTC or its assigns, free and harmless from any
liability for claims of PMI's creditors, laborers, and workers and for physical injury or injury to
property arising from PMI's custody, possession, care, repairs, maintenance, use or operation of
the Assets except ordinary wear and tear; 28 (Emphasis supplied)

Also, McLeod did not present any evidence to show the alleged renaming of "Peggy Mills, Inc."
to "Sta. Rosa Textiles, Inc."

Hence, it is not correct for McLeod to treat PMI and SRTI as the same entity.

Respondent corporations assert that SRTI hired McLeod as consultant after PMI stopped
operations. 29 On the other hand, McLeod asserts that he was respondent corporations' employee
from 1980 to 30 November 1993. 30 However, McLeod failed to present any proof of employer-
employee relationship between him and Filsyn, SRTI, or FETMI. McLeod testified, thus:

ATTY. ESCANO:

Do you have any employment contract with Far Eastern Textile?

WITNESS:

It is my belief up the present time.

ATTY. AVECILLA:
 May I request that the witness be allowed to go through his Annexes, Your Honor.

ATTY. ESCANO:

Yes, but I want a precise answer to that question. If he has an employment contract with
Far Eastern Textile?

WITNESS:

Can I answer it this way, sir? There is not a valid contract but I was under the impression
taking into consideration that the closeness that I had at Far Eastern Textile is enough during that
period of time of the development of Peggy Mills to reorganize a staff. I was under the basic
impression that they might still retain my status as Vice President and Plant Manager of the
company.

ATTY. ESCANO:

But the answer is still, there is no employment contract in your possession appointing you
in any capacity by Far Eastern?

WITNESS:

There was no written contract, sir.

xxx xxx xxx

ATTY. ESCANO:

So, there is proof that you were in fact really employed by Peggy Mills?

WITNESS:

Yes, sir.

ATTY. ESCANO:

Of course, my interest now is to whether or not there is a similar document to present that
you were employed by the other respondents like Filsyn Corporation?

WITNESS:

I have no document, sir.

ATTY. ESCANO:

What about Far Eastern Textile Mills?

WITNESS:

I have no document, sir.

ATTY. ESCANO:

And Sta. Rosa Textile Mills?

WITNESS:

There is no document, sir. 31

xxx xxx xxx

ATTY. ESCANO:

Q Yes. Let me be more specific, Mr. McLeod. Do you have a contract of employment from
Far Eastern Textiles, Inc.?

A No, sir.

Q What about Sta. Rosa Textile Mills, do you have an employment contract from this
company?

A No, sir.

xxx xxx xxx

Q And what about respondent Eric Hu. Have you had any contract of employment from Mr.
Eric Hu?

A Not a direct contract but I was taken in and I told to take over this from Mr. Eric Hu.
Automatically, it confirms that Mr. Eric Hu, in other words, was under the control of Mr.
Patricio Lim at that period of time.

Q No documents to show, Mr. McLeod?

A No. No documents, sir. 32

McLeod could have presented evidence to support his allegation of employer-employee

relationship between him and any of Filsyn, SRTI, and FETMI, but he did not. Appointment
letters or employment contracts, payrolls, organization charts, SSS registration, personnel list, as
well as testimony of co-employees, may serve as evidence of employee status. 33

It is a basic rule in evidence that parties must prove their affirmative allegations. While technical
rules are not strictly followed in the NLRC, this does not mean that the rules on proving
allegations are entirely ignored. Bare allegations are not enough. They must be supported by
substantial evidence at the very least. 34

However, McLeod claims that "for purposes of determining employer liability, all private
respondents are one and the same employer" because: (1) they have the same address; (2) they
are all engaged in the same business; and (3) they have interlocking directors and officers. 35

This assertion is untenable.

A corporation is an artificial being invested by law with a personality separate and distinct from
that of its stockholders and from that of other corporations to which it may be connected. 36

While a corporation may exist for any lawful purpose, the law will regard it as an association of
persons or, in case of two corporations, merge them into one, when its corporate legal entity is
used as a cloak for fraud or illegality. This is the doctrine of piercing the veil of corporate fiction.
The doctrine applies only when such corporate fiction is used to defeat public convenience,
justify wrong, protect fraud, or defend crime, 37 or when it is made as a shield to confuse the
legitimate issues, or where a corporation is the mere alter ego or business conduit of a person, or
where the corporation is so organized and controlled and its affairs are so conducted as to make
it merely an instrumentality, agency, conduit or adjunct of another corporation. 38

To disregard the separate juridical personality of a corporation, the wrongdoing must be

established clearly and convincingly. It cannot be presumed. 39

Here, we do not find any of the evils sought to be prevented by the doctrine of piercing the
corporate veil.

Respondent corporations may be engaged in the same business as that of PMI, but this fact alone
is not enough reason to pierce the veil of corporate fiction. 40

In Indophil Textile Mill Workers Union v. Calica, 41 the Court ruled, thus:

In the case at bar, petitioner seeks to pierce the veil of corporate entity of Acrylic, alleging that
the creation of the corporation is a devise to evade the application of the CBA between petitioner
Union and private respondent Company. While we do not discount the possibility of the
similarities of the businesses of private respondent and Acrylic, neither are we inclined to apply
the doctrine invoked by petitioner in granting the relief sought. The fact that the businesses of
private respondent and Acrylic are related, that some of the employees of the private respondent
are the same persons manning and providing for auxiliary services to the units of Acrylic, and
that the physical plants, offices and facilities are situated in the same compound, it is our
considered opinion that these facts are not sufficient to justify the piercing of the corporate veil
of Acrylic. 42 (Emphasis supplied)

Also, the fact that SRTI and PMI shared the same address, i.e., 11/F BA-Lepanto Bldg., Paseo de
Roxas, Makati City, 43 can be explained by the two companies' stipulation in their Deed of
Dation in Payment with Lease that "simultaneous with the dation in payment, SRTC shall grant
unto PMI the right to lease the Assets under terms and conditions stated hereunder." 44

As for the addresses of Filsyn and FETMI, Filsyn held office at 12th Floor, BA-Lepanto Bldg.,
Paseo de Roxas, Makati City, 45 while FETMI held office at 18F, Tun Nan Commercial
Building, 333 Tun Hwa South Road, Sec. 2, Taipei, Taiwan, R.O.C. 46 Hence, they did not have
the same address as that of PMI.

That respondent corporations have interlocking incorporators, directors, and officers is of no

moment.
The only interlocking incorporators of PMI and Filsyn were Patricio and Carlos Palanca, Jr. 47
While Patricio was Director and Board Chairman of Filsyn, SRTI, and PMI, 48 he was never an
officer of FETMI.

Eric Hu, on the other hand, was Director of Filsyn and SRTI. 49 He was never an officer of PMI.

Marialen C. Corpuz, Filsyn's Finance Officer, 50 testified on cross-examination that (1) among
all of Filsyn's officers, only she was the one involved in the management of PMI; (2) only she
and Patricio were the common officers between Filsyn and PMI; and (3) Filsyn and PMI are
"two separate companies." 51

Apolinario L. Posio, PMI's Chief Accountant, testified that "SRTI is a different corporation from
PMI." 52

At any rate, the existence of interlocking incorporators, directors, and officers is not enough
justification to pierce the veil of corporate fiction, in the absence of fraud or other public policy
considerations. 53

In Del Rosario v. NLRC, 54 the Court ruled that substantial identity of the incorporators of
corporations does not necessarily imply fraud.

In light of the foregoing, and there being no proof of employer-employee relationship between
McLeod and respondent corporations and Eric Hu, McLeod's cause of action is only against his
former employer, PMI.

On Patricio's personal liability, it is settled that in the absence of malice, bad faith, or specific
provision of law, a stockholder or an officer of a corporation cannot be made personally liable
for corporate liabilities. 55

To reiterate, a corporation is a juridical entity with legal personality separate and distinct from
those acting for and in its behalf and, in general, from the people comprising it. The rule is that
obligations incurred by the corporation, acting through its directors, officers, and employees, are
its sole liabilities. 56

Personal liability of corporate directors, trustees or officers attaches only when (1) they assent to
a patently unlawful act of the corporation, or when they are guilty of bad faith or gross
negligence in directing its affairs, or when there is a conflict of interest resulting in damages to
the corporation, its stockholders or other persons; (2) they consent to the issuance of watered
down stocks or when, having knowledge of such issuance, do not forthwith file with the
corporate secretary their written objection; (3) they agree to hold themselves personally and
solidarily liable with the corporation; or (4) they are made by specific provision of law
personally answerable for their corporate action. 57

Considering that McLeod failed to prove any of the foregoing exceptions in the present case,
McLeod cannot hold Patricio solidarily liable with PMI.

The records are bereft of any evidence that Patricio acted with malice or bad faith. Bad faith is a
question of fact and is evidentiary. Bad faith does not connote bad judgment or negligence. It
imports a dishonest purpose or some moral obliquity and conscious wrongdoing. It means breach
of a known duty through some ill motive or interest. It partakes of the nature of fraud. 58

In the present case, there is nothing substantial on record to show that Patricio acted in bad faith
in terminating McLeod's services to warrant Patricio's personal liability. PMI had no other
choice but to stop plant operations. The work stoppage therefore was by necessity. The
company could no longer continue with its plant operations because of the serious business
losses that it had suffered. The mere fact that Patricio was president and director of PMI is not a
ground to conclude that he should be held solidarily liable with PMI for McLeod's money
claims.

The ruling in A.C. Ransom Labor Union-CCLU v. NLRC, 59 which the Court of Appeals cited,
does not apply to this case. We quote pertinent portions of the ruling, thus:

(a) Article 265 of the Labor Code, in part, expressly provides:

"Any worker whose employment has been terminated as a consequence of an unlawful lockout
shall be entitled to reinstatement with full backwages."

Article 273 of the Code provides that:

"Any person violating any of the provisions of Article 265 of this Code shall be punished by a
fine of not exceeding five hundred pesos and/or imprisonment for not less than one (1) day nor
more than six (6) months."

(b) How can the foregoing provisions be implemented when the employer is a corporation?
The answer is found in Article 212 (c) of the Labor Code which provides:

"(c) 'Employer' includes any person acting in the interest of an employer, directly or
indirectly. The term shall not include any labor organization or any of its officers or agents
except when acting as employer."

The foregoing was culled from Section 2 of RA 602, the Minimum Wage Law. Since RANSOM
is an artificial person, it must have an officer who can be presumed to be the employer, being the
"person acting in the interest of (the) employer" RANSOM. The corporation, only in the
technical sense, is the employer.

The responsible officer of an employer corporation can be held personally, not to say even
criminally, liable for non-payment of back wages. That is the policy of the law.

xxx xxx xxx

(c) If the policy of the law were otherwise, the corporation employer can have devious ways
for evading payment of back wages. In the instant case, it would appear that RANSOM, in 1969,
foreseeing the possibility or probability of payment of back wages to the 22 strikers, organized
ROSARIO to replace RANSOM, with the latter to be eventually phased out if the 22 strikers win
their case. RANSOM actually ceased operations on May 1, 1973, after the December 19, 1972
Decision of the Court of Industrial Relations was promulgated against RANSOM. 60 (Emphasis
supplied)
Clearly, in A.C. Ransom, RANSOM, through its President, organized ROSARIO to evade
payment of backwages to the 22 strikers. This situation, or anything similar showing malice or
bad faith on the part of Patricio, does not obtain in the present case. In Santos v. NLRC, 61 the
Court held, thus:

It is true, there were various cases when corporate officers were themselves held by the Court to
be personally accountable for the payment of wages and money claims to its employees. In A.C.
Ransom Labor Union-CCLU vs. NLRC, for instance, the Court ruled that under the Minimum
Wage Law, the responsible officer of an employer corporation could be held personally liable for
nonpayment of backwages for "(i)f the policy of the law were otherwise, the corporation
employer (would) have devious ways for evading payment of backwages." In the absence of a
clear identification of the officer directly responsible for failure to pay the backwages, the Court
considered the President of the corporation as such officer. The case was cited in Chua vs. NLRC
in holding personally liable the vice-president of the company, being the highest and most
ranking official of the corporation next to the President who was dismissed for the latter's claim
for unpaid wages.

A review of the above exceptional cases would readily disclose the attendance of facts and
circumstances that could rightly sanction personal liability on the part of the company officer. In
A.C. Ransom, the corporate entity was a family corporation and execution against it could not be
implemented because of the disposition posthaste of its leviable assets evidently in order to
evade its just and due obligations. The doctrine of "piercing the veil of corporate fiction" was
thus clearly appropriate. Chua likewise involved another family corporation, and this time the
conflict was between two brothers occupying the highest ranking positions in the company.
There were incontrovertible facts which pointed to extreme personal animosity that resulted,
evidently in bad faith, in the easing out from the company of one of the brothers by the other.

The basic rule is still that which can be deduced from the Court's pronouncement in Sunio vs.
National Labor Relations Commission; thus:

We come now to the personal liability of petitioner, Sunio, who was made jointly and severally
responsible with petitioner company and CIPI for the payment of the backwages of private
respondents. This is reversible error. The Assistant Regional Director's Decision failed to
disclose the reason why he was made personally liable. Respondents, however, alleged as
grounds thereof, his being the owner of one-half (1/2) interest of said corporation, and his
alleged arbitrary dismissal of private respondents.

Petitioner Sunio was impleaded in the Complaint in his capacity as General Manager of
petitioner corporation. There appears to be no evidence on record that he acted maliciously or in
bad faith in terminating the services of private respondents. His act, therefore, was within the
scope of his authority and was a corporate act.

It is basic that a corporation is invested by law with a personality separate and distinct from those
of the persons composing it as well as from that of any other legal entity to which it may be
related. Mere ownership by a single stockholder or by another corporation of all or nearly all of
the capital stock of a corporation is not of itself sufficient ground for disregarding the separate
corporate personality. Petitioner Sunio, therefore, should not have been made personally
answerable for the payment of private respondents' back salaries. 62 (Emphasis supplied)
Thus, the rule is still that the doctrine of piercing the corporate veil applies only when the
corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend
crime. In the absence of malice, bad faith, or a specific provision of law making a corporate
officer liable, such corporate officer cannot be made personally liable for corporate liabilities.
Neither Article 212 (c) nor Article 273 (now 272) of the Labor Code expressly makes any
corporate officer personally liable for the debts of the corporation. As this Court ruled in H.L.
Carlos Construction, Inc. v. Marina Properties Corporation: 63

We concur with the CA that these two respondents are not liable. Section 31 of the Corporation
Code (Batas Pambansa Blg. 68) provides:

"Section 31. Liability of directors, trustees or officers. — Directors or trustees who willfully
and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of
gross negligence or bad faith . . . shall be liable jointly and severally for all damages resulting
therefrom suffered by the corporation, its stockholders and other persons."

The personal liability of corporate officers validly attaches only when (a) they assent to a
patently unlawful act of the corporation; or (b) they are guilty of bad faith or gross negligence in
directing its affairs; or (c) they incur conflict of interest, resulting in damages to the corporation,
its stockholders or other persons.

The records are bereft of any evidence that Typoco acted in bad faith with gross or inexcusable
negligence, or that he acted outside the scope of his authority as company president. The
unilateral termination of the Contract during the existence of the TRO was indeed contemptible
— for which MPC should have merely been cited for contempt of court at the most — and a
preliminary injunction would have then stopped work by the second contractor. Besides, there is
no showing that the unilateral termination of the Contract was null and void. 64

McLeod is not entitled to payment of vacation leave and sick leave as well as to holiday pay.
Article 82, Title I, Book Three of the Labor Code, on Working Conditions and Rest Periods,
provides:

Coverage. — The provisions of this title shall apply to employees in all establishments and
undertakings whether for profit or not, but not to government employees, managerial employees,
field personnel, members of the family of the employer who are dependent on him for support,
domestic helpers, persons in the personal service of another, and workers who are paid by results
as determined by the Secretary of Labor in appropriate regulations.

As used herein, "managerial employees" refer to those whose primary duty consists of the
management of the establishment in which they are employed or of a department or subdivision
thereof, and to other officers or members of the managerial staff. (Emphasis supplied)

As Vice President/Plant Manager, McLeod is a managerial employee who is excluded from the
coverage of Title I, Book Three of the Labor Code. McLeod is entitled to payment of vacation
leave and sick leave only if he and PMI had agreed on it. The payment of vacation leave and sick
leave depends on the policy of the employer or the agreement between the employer and
employee. 65 In the present case, there is no showing that McLeod and PMI had an agreement
concerning payment of these benefits.
McLeod's assertion of underpayment of his 13th month pay in December 1993 is unavailing. 66
As already stated, PMI stopped plant operations in 1992. McLeod himself testified that he
received his last salary from PMI in December 1992. After the termination of the employer-
employee relationship between McLeod and PMI, SRTI hired McLeod as consultant and not as
employee. Since McLeod was no longer an employee, he was not entitled to the 13th month pay.
67 Besides, there is no evidence on record that McLeod indeed received his alleged "reduced
13th month pay of P44,183.63" in December 1993. 68

Also unavailing is McLeod's claim that he was entitled to the "unpaid monetary equivalent of
unused plane tickets for the period covering 1989 to 1992 in the amount of P279,300.00." 69
PMI has no company policy granting its officers and employees expenses for trips abroad. 70
That at one time PMI reimbursed McLeod for his and his wife's plane tickets in a vacation to
London 71 could not be deemed as an established practice considering that it happened only
once. To be considered a "regular practice," the giving of the benefits should have been done
over a long period, and must be shown to have been consistent and deliberate. 72

In American Wire and Cable Daily Rated Employees Union v. American Wire and Cable Co.,
Inc., 73 the Court held that for a bonus to be enforceable, the employer must have promised it,
and the parties must have expressly agreed upon it, or it must have had a fixed amount and had
been a long and regular practice on the part of the employer.

In the present case, there is no showing that PMI ever promised McLeod that it would continue
to grant him the benefit in question. Neither is there any proof that PMI and McLeod had
expressly agreed upon the giving of that benefit.

McLeod's reliance on Annex M 74 can hardly carry the day for him. Annex M, which is
McLeod's letter addressed to "Philip Lim, VP Administration," merely contains McLeod's
proposals for the grant of some benefits to supervisory and confidential employees. Contrary to
McLeod's allegation, Patricio did not sign the letter. Hence, the letter does not embody any
agreement between McLeod and the management that would entitle McLeod to his money
claims.

Neither can McLeod's assertions find support in Annex U. 75 Annex U is the Agreement which
McLeod and Universal Textile Mills, Inc. executed in 1959. The Agreement merely contains the
renewal of the service agreement which the parties signed in 1956.

McLeod cannot successfully pretend that his monthly salary of P60,000 was reduced without his
consent.

McLeod testified that in 1990, Philip Lim explained to him why his salary would have to be
reduced. McLeod said that Philip told him that "they were short in finances; that it would be
repaid." 76 Were McLeod not amenable to that reduction in salary, he could have immediately
resigned from his work in PMI.

McLeod knew that PMI was then suffering from serious business losses. In fact, McLeod
testified that PMI was not able to operate from August 1989 to 1992 because of the strike. Even
before 1989, as Vice President of PMI, McLeod was aware that the company had incurred "huge
loans from DBP." 77 As it happened, McLeod continued to work with PMI. We find it pertinent
to quote some portions of Apolinario Posio's testimony, to wit:
Q You also stated that before the period of the strike as shown by annex "K" of the reply
filed by the complainant which was I think a voucher, the salary of Mr. McLeod was roughly
P60,000.00 a month?

A Yes, sir.

Q And as shown by their annex "L" to their reply, that this was reduced to roughly
P50,000.00 a month?

A Yes, sir.

Q You stated that this was indeed upon the instruction by the Vice-President of Peggy Mills
at that time and that was Mr. Philip Lim, would you not?

A Yes, sir.

Q Of your own personal knowledge, can you say if this was, in fact, by agreement between
Mr. Philip Lim or any other officers of Peggy Mills and Mr. McLeod?

A If I recall it correctly, I assume it was an agreement, verbal agreement with, between Mr.
Philip Lim and Mr. McLeod, because the voucher that we prepared was actually acknowledged
by Mr. McLeod, the reduced amount was acknowledged by Mr. McLeod thru the voucher that
we prepared.

Q In other words, Mr. Witness, you mean to tell us that Mr. McLeod continuously received
the reduced amount of P50,000.00 by signing the voucher and receiving the amount in question?

A Yes, sir.

Q As far as you remember, Mr. Posio, was there any complaint by Mr. McLeod because of
this reduced amount of his salary at that time?

A I don't have any personal knowledge of any complaint, sir.

Q At least, that is in so far as you were concerned, he said nothing when he signed the
voucher in question?

A Yes, sir.

Q Now, you also stated that the reason for what appears to be an agreement between Peggy
Mills and Mr. McLeod in so far as the reduction of his salary from P60,000.00 to P50,000.00 a
month was because he would have a reduced number of working days in view of the strike at
Peggy Mills, is that right?

A Yes, sir.

Q And that this was so because on account of the strike, there was no work to be done in the
company?

A Yes, sir. 78
xxx xxx xxx

Q Now, you also stated if you remember during the first time that you testified that in the
beginning, the monthly salary of the complainant was P60,000.00, is that correct?

A Yes, sir.

Q And because of the long period of the strike, when there was no work to be done, by
agreement with the complainant, his monthly salary was adjusted to only P50,495 because he
would not have to report for work on Saturday. Do you remember having made that explanation?

A Yes, sir.

Q You also stated that the complainant continuously received his monthly salary in the
adjusted amount of P50,495.00 monthly signing the necessary vouchers or pay slips for that
without complaining, is that not right, Mr. Posio?

A Yes, sir. 79

Since the last salary that McLeod received from PMI was P50,495, that amount should be the
basis in computing his retirement benefits. McLeod must be credited only with his service to
PMI as it had a juridical personality separate and distinct from that of the other respondent
corporations.

Since PMI has no retirement plan, 80 we apply Section 5, Rule II of the Rules Implementing the
New Retirement Law which provides:

5.1 In the absence of an applicable agreement or retirement plan, an employee who retires
pursuant to the Act shall be entitled to retirement pay equivalent to at least one-half (1/2) month
salary for every year of service, a fraction of at least six (6) months being considered as one
whole year.

5.2 Components of One-half (1/2) Month Salary. — For the purpose of determining the
minimum retirement pay due an employee under this Rule, the term "one-half month salary"
shall include all of the following:

(a) Fifteen (15) days salary of the employee based on his latest salary rate. . . .

With McLeod having worked with PMI for 12 years, from 1980 to 1992, he is entitled to a
retirement pay equivalent to 1/2 month salary for every year of service based on his latest salary
rate of P50,495 a month.

There is no basis for the award of moral damages.

Moral damages are recoverable only if the defendant has acted fraudulently or in bad faith, or is
guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual
obligations. The breach must be wanton, reckless, malicious, or in bad faith, oppressive or
abusive. 81 From the records of the case, the Court finds no ultimate facts to support a
conclusion of bad faith on the part of PMI.
Records disclose that PMI had long offered to pay McLeod his money claims. In their Comment,
respondents assert that they offered to pay McLeod the sum of P840,000, as "separation benefits,
and not P300,000, if only to buy peace and to forestall any complaint" that McLeod may initiate
before the NLRC. McLeod admitted at the hearing before the Labor Arbiter that PMI has made
this offer —

ATTY. ESCANO:

. . . According to your own statement in your Position Paper and I am referring to page 8,
your unpaid retirement benefit for fourteen (14) years of service at P60,000.00 per year is
P840,000.00, is that correct?

WITNESS:

That is correct, sir.

ATTY. ESCANO:

And this amount is correct P840,000.00, according to your Position Paper?

WITNESS:

That is correct, sir.

ATTY. ESCANO:

The question I want to ask is, are you aware that this amount was offered to you
sometime last year through your own lawyer, my good friend, Atty. Avecilla, who is right here
with us?

WITNESS:

I was aware, sir.

ATTY. ESCANO:

So this was offered to you, is that correct?

WITNESS:

I was told that a fixed sum of P840,000.00 was offered.

ATTY. ESCANO:

And, of course, the reason, if I may assume, that you declined this offer was that,
according to you, there are other claims which you would like to raise against the Respondents
which, by your impression, they were not willing to pay in addition to this particular amount?

WITNESS:
 Yes, sir.

ATTY. ESCANO:

The question now is, if the same amount is offered to you by way of retirement which is
exactly what you stated in your own Position Paper, would you accept it or not?

WITNESS:

Not on the concept without all the basic benefits due me, I will refuse. 82

xxx xxx xxx

ATTY. ROXAS:

Q You mentioned in the cross-examination of Atty. Escano that you were offered the
separation pay in 1994, is that correct, Mr. Witness?

WITNESS:

A I was offered a settlement of P300,000.00 for complete settlement and that was I think in
January or February 1994, sir.

ATTY. ESCANO:

No. What was mentioned was the amount of P840,000.00.

WITNESS:

What did you say, Atty. Escano?

ATTY. ESCANO:

The amount that I mentioned was P840,000.00 corresponding to the . . .

WITNESS:

May I ask that the question be clarified, your Honor?

ATTY. ROXAS:

Q You mentioned that you were offered for the settlement of your claims in 1994 for
P840,000.00, is that right, Mr. Witness?

A During that period in time, while the petition in this case was ongoing, we already filed a
case at that period of time, sir. There was a discussion. To the best of my knowledge, they are
willing to settle for P840,000.00 and based on what the Attorney told me, I refused to accept
because I believe that my position was not in anyway due to a compromise situation to the
benefits I am entitled to. 83
Hence, the awards for exemplary damages and attorney's fees are not proper in the present case.
84

That respondent corporations, in their appeal to the NLRC, did not serve a copy of their
memorandum of appeal upon PMI is of no moment. Section 3 (a), Rule VI of the NLRC New
Rules of Procedure provides:

Requisites for Perfection of Appeal. — (a) The appeal shall be filed within the reglementary
period as provided in Section 1 of this Rule; shall be under oath with proof of payment of the
required appeal fee and the posting of a cash or surety bond as provided in Section 5 of this Rule;
shall be accompanied by a memorandum of appeal . . . and proof of service on the other party of
such appeal. (Emphasis supplied)

The "other party" mentioned in the Rule obviously refers to the adverse party, in this case,
McLeod. Besides, Section 3, Rule VI of the Rules which requires, among others, proof of service
of the memorandum of appeal on the other party, is merely a rundown of the contents of the
required memorandum of appeal to be submitted by the appellant. These are not jurisdictional
requirements. 85

WHEREFORE, we DENY the petition and AFFIRM the Decision of the Court of Appeals in
CA-G.R. SP No. 55130, with the following MODIFICATIONS: (a) the retirement pay of John F.
McLeod should be computed at 1/2 month salary for every year of service for 12 years based on
his salary rate of P50,495 a month; (b) Patricio L. Lim is absolved from personal liability; and
(c) the awards for moral and exemplary damages and attorney's fees are deleted. No
pronouncement as to costs.

SO ORDERED.

Quisumbing, Tinga and Velasco, Jr., JJ., concur.

Carpio-Morales, J., took no part, concurred in assailed decision.

PACIFIC CONSULTANTS INTERNATIONAL ASIA, INC., ET AL. vs. KLAUS K.
SCHONFELD
THIRD DIVISION
[G.R. No. 166920. February 19, 2007.]
PACIFIC CONSULTANTS INTERNATIONAL ASIA, INC. and JENS PETER
HENRICHSEN, petitioners, vs. KLAUS K. SCHONFELD, respondent.
DECISION
CALLEJO, SR., J p:
Before us is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court of
the Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No. 76563. The CA decision
reversed the Resolution of the National Labor Relations Commission (NLRC) in NLRC NCR
CA No. 029319-01, which, in turn, affirmed the Decision of the Labor Arbiter in NLRC NCR
Case No. 30-12-04787-00 dismissing the complaint of respondent Klaus K. Schonfeld. ISAcHD
The antecedent facts are as follows:
Respondent is a Canadian citizen and was a resident of New Westminster, British Columbia,
Canada. He had been a consultant in the field of environmental engineering and water supply and
sanitation. Pacicon Philippines, Inc. (PPI) is a corporation duly established and incorporated in
accordance with the laws of the Philippines. The primary purpose of PPI was to engage in the
business of providing specialty and technical services both in and out of the Philippines. 2 It is a
subsidiary of Pacific Consultants International of Japan (PCIJ). The president of PPI, Jens Peter
Henrichsen, who was also the director of PCIJ, was based in Tokyo, Japan. Henrichsen
commuted from Japan to Manila and vice versa, as well as in other countries where PCIJ had
business.
In 1997, PCIJ decided to engage in consultancy services for water and sanitation in the
Philippines. In October 1997, respondent was employed by PCIJ, through Henrichsen, as Sector
Manager of PPI in its Water and Sanitation Department. However, PCIJ assigned him as PPI
sector manager in the Philippines. His salary was to be paid partly by PPI and PCIJ.
On January 7, 1998, Henrichsen transmitted a letter of employment to respondent in Canada,
requesting him to accept the same and affix his conformity thereto. Respondent made some
revisions in the letter of employment and signed the contract. 3 He then sent a copy to
Henrichsen. The letter of employment reads:
Mr. Klaus K. Schonfeld
II-365 Ginger Drive
New Westminster, B.C.
Canada V3L 5L5
Tokyo 7 January 1998
Dear Mr. Schonfeld,
Letter of Employment
This Letter of Employment with the attached General Conditions of Employment constitutes the
agreement under which you will be engaged by our Company on the terms and conditions
defined hereunder. In case of any discrepancies or contradictions between this Letter of
Employment and the General Conditions of Employment, this Letter of Employment will
prevail. THDIaC
You will, from the date of commencement, be ["seconded"] to our subsidiary Pacicon
Philippines, Inc. in Manila, hereinafter referred as Pacicon. Pacicon will provide you with a
separate contract, which will define that part of the present terms and conditions for which
Pacicon is responsible. In case of any discrepancies or contradictions between the present Letter
of Employment and the contract with Pacicon Philippines, Inc. or in the case that Pacicon should
not live up to its obligations, this Letter of Employment will prevail.
1. Project Country: The Philippines with possible short-term
assignments in other countries.
2. Duty Station: Manila, the Philippines.
3. Family Status: Married.
4. Position: Sector Manager, Water and Sanitation.
5. Commencement: 1st October 1997.
6. Remuneration:US$7,000.00 per month. The amount will be
paid partly as a local salary (US$2,100.00
per month) by Pacicon and partly as an
offshore salary (US$4,900.00) by PCI to bank
accounts to be nominated by you.
A performance related component
corresponding to 17.6% of the total annual
remuneration, subject to satisfactory
performance against agreed tasks and targets,
paid offshore.
7. Accommodation: The company will provide partly furnished
 accommodation to a rent including association
fees, taxes and VAT not exceeding the Pesos
equivalent of US$2,900.00 per month.
8. Transportation: Included for in the remuneration.
9. Leave Travels:You are entitled to two leave travels per year.
10. Shipment of Personal
Effects: The maximum allowance is US$4,000.00.
11. Mobilization
Travel: Mobilization travel will be from New
Westminster, B.C., Canada.
This letter is send (sic) to you in duplicate; we kindly request you to sign and return one copy to
us. EcHAaS
Yours sincerely,
Pacific Consultants International
Jens Peter Henrichsen
Above terms and conditions accepted
Date: 2 March 1998
(Sgd.)
Klaus Schonfeld
as annotated and initialed 4
Section 21 of the General Conditions of Employment appended to the letter of employment
reads:
21 Arbitration
Any question of interpretation, understanding or fulfillment of the conditions of employment, as
well as any question arising between the Employee and the Company which is in consequence of
or connected with his employment with the Company and which can not be settled amicably, is
to be finally settled, binding to both parties through written submissions, by the Court of
Arbitration in London. 5
Respondent arrived in the Philippines and assumed his position as PPI Sector Manager. He was
accorded the status of a resident alien.
As required by Rule XIV (Employment of Aliens) of the Omnibus Rules Implementing the
Labor Code, PPI applied for an Alien Employment Permit (Permit) for respondent before the
Department of Labor and Employment (DOLE). It appended respondent's contract of
employment to the application. IHAcCS
On February 26, 1999, the DOLE granted the application and issued the Permit to respondent. It
reads:
Republic of the Philippines
Department of Labor & Employment
National Capital Region
ALIEN EMPLOYMENT PERMIT
ISSUED TO: SCHONFELD, KLAUS KURT
DATE OF BIRTH: January 11, 1942 NATIONALITY: Canadian
POSITION: VP — WATER & SANITATION
EMPLOYER: PACICON PHILIPPINES, INC.
ADDRESS: 27/F Rufino Pacific Towers Bldg.,
Ayala Ave., Makati City
PERMIT
ISSUED ON: February 26, 1999 SIGNATURE OF BEARER:
VALID UNTIL: January 7, 2000 (Sgd.)
APPROVED: BIENVENIDO S. LAGUESMA
By: MAXIMO B. ANITO
REGIONAL DIRECTOR
(Emphasis supplied) 6
Respondent received his compensation from PPI for the following periods: February to June
1998, November to December 1998, and January to August 1999. He was also reimbursed by
PPI for the expenses he incurred in connection with his work as sector manager. He reported for
work in Manila except for occasional assignments abroad, and received instructions from
Henrichsen. 7
On May 5, 1999, respondent received a letter from Henrichsen informing him that his
employment had been terminated effective August 4, 1999 for the reason that PCIJ and PPI had
not been successful in the water and sanitation sector in the Philippines. 8 However, on July 24,
1999, Henrichsen, by electronic mail, 9 requested respondent to stay put in his job after August
5, 1999, until such time that he would be able to report on certain projects and discuss all the
opportunities he had developed. 10 Respondent continued his work with PPI until the end of
business hours on October 1, 1999. HcDATC
Respondent filed with PPI several money claims, including unpaid salary, leave pay, air fare
from Manila to Canada, and cost of shipment of goods to Canada. PPI partially settled some of
his claims (US$5,635.99), but refused to pay the rest.
On December 5, 2000, respondent filed a Complaint 11 for Illegal Dismissal against petitioners
PPI and Henrichsen with the Labor Arbiter. It was docketed as NLRC-NCR Case No. 30-12-
04787-00.
In his Complaint, respondent alleged that he was illegally dismissed; PPI had not notified the
DOLE of its decision to close one of its departments, which resulted in his dismissal; and they
failed to notify him that his employment was terminated after August 4, 1999. Respondent also
claimed for separation pay and other unpaid benefits. He alleged that the company acted in bad
faith and disregarded his rights. He prayed for the following reliefs:
1. Judgment be rendered in his favor ordering the respondents to reinstate complainant to
his former position without loss of seniority and other privileges and benefits, and to pay his full
backwages from the time compensation was with held (sic) from him up to the time of his actual
reinstatement. In the alternative, if reinstatement is no longer feasible, respondents must pay the
complainant full backwages, and separation pay equivalent to one month pay for every year of
service, or in the amount of US$16,400.00 as separation pay;
2. Judgment be rendered ordering the respondents to pay the outstanding monetary
obligation to complainant in the amount of US$10,131.76 representing the balance of unpaid
salaries, leave pay, cost of his air travel and shipment of goods from Manila to Canada; and
SHCaEA
3. Judgment be rendered ordering the respondent company to pay the complainant damages
in the amount of no less than US $10,000.00 and to pay 10% of the total monetary award as
attorney's fees, and costs.
Other reliefs just and equitable under the premises are, likewise, prayed for. 12
Petitioners filed a Motion to Dismiss the complaint on the following grounds: (1) the Labor
Arbiter had no jurisdiction over the subject matter; and (2) venue was improperly laid. It averred
that respondent was a Canadian citizen, a transient expatriate who had left the Philippines. He
was employed and dismissed by PCIJ, a foreign corporation with principal office in Tokyo,
Japan. Since respondent's cause of action was based on his letter of employment executed in
Tokyo, Japan dated January 7, 1998, under the principle of lex loci contractus, the complaint
should have been filed in Tokyo, Japan. Petitioners claimed that respondent did not offer any
justification for filing his complaint against PPI before the NLRC in the Philippines. Moreover,
under Section 12 of the General Conditions of Employment appended to the letter of
employment dated January 7, 1998, complainant and PCIJ had agreed that any employment-
related dispute should be brought before the London Court of Arbitration. Since even the
Supreme Court had already ruled that such an agreement on venue is valid, Philippine courts
have no jurisdiction. 13
Respondent opposed the Motion, contending that he was employed by PPI to work in the
Philippines under contract separate from his January 7, 1998 contract of employment with PCIJ.
He insisted that his employer was PPI, a Philippine-registered corporation; it is inconsequential
that PPI is a wholly-owned subsidiary of PCIJ because the two corporations have separate and
distinct personalities; and he received orders and instructions from Henrichsen who was the
president of PPI. He further insisted that the principles of forum non conveniens and lex loci
contractus do not apply, and that although he is a Canadian citizen, Philippine Labor Laws apply
in this case. IaTSED
Respondent adduced in evidence the following contract of employment dated January 9, 1998
which he had entered into with Henrichsen:
Mr. Klaus K. Schonfeld
II-365 Ginger Drive
New Westminster, B.C.
Canada V3L 5L5
Manila 9 January, 1998
Dear Mr. Schonfeld,
Letter of Employment
This Letter of Employment with the attached General Conditions of Employment constitutes the
agreement, under which you will be engaged by Pacicon Philippines, Inc. on the terms and
conditions defined hereunder.
1. Project Country: The Philippines with possible
assignments in other countries.
2. Duty Station: Manila, the Philippines.
3. Family Status: Married.
4. Position: Sector Manager — Water and Sanitation
Sector.
5. Commencement: 1 January, 1998.
6. Remuneration:US$3,100.00 per month payable to a bank
account to be nominated by you.
7. Accommodation: The company will provide partly
furnished accommodation to a rent
including association fees, taxes and
VAT not exceeding the Pesos equivalent
of US$2300.00 per month. TcDIEH
8. Transportation: Included for in the remuneration.
9. Shipment of Personal The maximum allowance is US$2500.00
Effects: in connection with initial shipment of
personal effects from Canada.
10. Mobilization Travel: Mobilization travel will be from New
Westminster, B.C., Canada.
This letter is send (sic) to you in duplicate; we kindly request you to sign and return one copy to
us.
Yours sincerely,
Pacicon Philippines, Inc.
Jens Peter Henrichsen
President 14
According to respondent, the material allegations of the complaint, not petitioners' defenses,
determine which quasi-judicial body has jurisdiction. Section 21 of the Arbitration Clause in the
General Conditions of Employment does not provide for an exclusive venue where the complaint
against PPI for violation of the Philippine Labor Laws may be filed. Respondent pointed out that
PPI had adopted two inconsistent positions: it was first alleged that he should have filed his
complaint in Tokyo, Japan; and it later insisted that the complaint should have been filed in the
London Court of Arbitration. 15
In their reply, petitioners claimed that respondent's employer was PCIJ, which had exercised
supervision and control over him, and not PPI. Respondent was dismissed by PPI via a letter of
Henrichsen under the letterhead of PCIJ in Japan. 16 The letter of employment dated January 9,
1998 which respondent relies upon did not bear his (respondent's) signature nor that of
Henrichsen. HEcSDa
On August 2, 2001, the Labor Arbiter rendered a decision granting petitioners' Motion to
Dismiss. The dispositive portion reads:
WHEREFORE, finding merit in respondents' Motion to Dismiss, the same is hereby granted.
The instant complaint filed by the complainant is dismissed for lack of merit.
SO ORDERED. 17
The Labor Arbiter found, among others, that the January 7, 1998 contract of employment
between respondent and PCIJ was controlling; the Philippines was only the "duty station" where
Schonfeld was required to work under the General Conditions of Employment. PCIJ remained
respondent's employer despite his having been sent to the Philippines. Since the parties had
agreed that any differences regarding employer-employee relationship should be submitted to the
jurisdiction of the court of arbitration in London, this agreement is controlling.
On appeal, the NLRC agreed with the disquisitions of the Labor Arbiter and affirmed the latter's
decision in toto. 18
Respondent then filed a petition for certiorari under Rule 65 with the CA where he raised the
following arguments:
I
WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS
COMMISSION GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION WHEN IT AFFIRMED THE LABOR ARBITER'S DECISION
CONSIDERING THAT:
A. PETITIONER'S TRUE EMPLOYER IS NOT PACIFIC CONSULTANTS
INTERNATIONAL OF JAPAN BUT RESPONDENT COMPANY, AND THEREFORE, THE
LABOR ARBITER HAS JURISDICTION OVER THE INSTANT CASE; AND cHCIEA
B. THE PROPER VENUE FOR THE PRESENT COMPLAINT IS THE ARBITRATION
BRANCH OF THE NLRC AND NOT THE COURT OF ARBITRATION IN LONDON.
II
WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS
COMMISSION GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION WHEN IT AFFIRMED THE DISMISSAL OF THE
COMPLAINT CONSIDERING THAT PETITIONER'S TERMINATION FROM
EMPLOYMENT IS ILLEGAL:
A. THE CLOSURE OF RESPONDENT COMPANY'S WATER AND SANITATION
SECTOR WAS NOT BONA FIDE.
B. ASSUMING ARGUENDO THAT THE CLOSURE OF RESPONDENT COMPANY'S
WATER AND SANITATION SECTOR WAS JUSTIFIABLE, PETITIONER'S DISMISSAL
WAS INEFFECTUAL AS THE DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE)
AND PETITIONER WAS NOT NOTIFIED THIRTY (30) DAYS BEFORE THE ALLEGED
CLOSURE. 19
Respondent averred that the absence or existence of a written contract of employment is not
decisive of whether he is an employee of PPI. He maintained that PPI, through its president
Henrichsen, directed his work/duties as Sector Manager of PPI; proof of this was his letter-
proposal to the Development Bank of the Philippines for PPI to provide consultancy services for
the Construction Supervision of the Water Supply and Sanitation component of the World Bank-
Assisted LGU Urban Water and Sanitation Project. 20 He emphasized that as gleaned from Alien
Employment Permit (AEP) No. M-029908-5017 issued to him by DOLE on February 26, 1999,
he is an employee of PPI. It was PPI president Henrichsen who terminated his employment; PPI
also paid his salary and reimbursed his expenses related to transactions abroad. That PPI is a
wholly-owned subsidiary of PCIJ is of no moment because the two corporations have separate
and distinct personalities. ECSHID
The CA found the petition meritorious. Applying the four-fold test 21 of determining an
employer-employee relationship, the CA declared that respondent was an employee of PPI. On
the issue of venue, the appellate court declared that, even under the January 7, 1998 contract of
employment, the parties were not precluded from bringing a case related thereto in other venues.
While there was, indeed, an agreement that issues between the parties were to be resolved in the
London Court of Arbitration, the venue is not exclusive, since there is no stipulation that the
complaint cannot be filed in any other forum other than in the Philippines.
On November 25, 2004, the CA rendered its decision granting the petition, the decretal portion
of which reads:
WHEREFORE, the petition is GRANTED in that the assailed Resolutions of the NLRC are
hereby REVERSED and SET ASIDE. Let this case be REMANDED to the Labor Arbiter a quo
for disposition of the case on the merits.
SO ORDERED. 22
A motion for the reconsideration of the above decision was filed by PPI and Henrichsen, which
the appellate court denied for lack of merit. 23
In the present recourse, PPI and Henrichsen, as petitioners, raise the following issues:
I
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT AN EMPLOYMENT
RELATIONSHIP EXISTED BETWEEN PETITIONERS AND RESPONDENT DESPITE THE
UNDISPUTED FACT THAT RESPONDENT, A FOREIGN NATIONAL, WAS HIRED
ABROAD BY A FOREIGN CORPORATION, EXECUTED HIS EMPLOYMENT
CONTRACT ABROAD, AND WAS MERELY "SECONDED" TO PETITIONERS SINCE HIS
WORK ASSIGNMENT WAS IN MANILA. AScTaD
II
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE LABOR ARBITER
A QUO HAS JURISDICTION OVER RESPONDENT'S CLAIM DESPITE THE
UNDISPUTED FACT THAT RESPONDENT, A FOREIGN NATIONAL, WAS HIRED
ABROAD BY A FOREIGN CORPORATION, EXECUTED HIS EMPLOYMENT
CONTRACT ABROAD, AND HAD AGREED THAT ANY DISPUTE BETWEEN THEM
"SHALL BE FINALLY SETTLED BY THE COURT OF ARBITRATION IN LONDON." 24
Petitioners fault the CA for reversing the findings of the Labor Arbiter and the NLRC.
Petitioners aver that the findings of the Labor Arbiter, as affirmed by the NLRC, are conclusive
on the CA. They maintain that it is not within the province of the appellate court in a petition for
certiorari to review the facts and evidence on record since there was no conflict in the factual
findings and conclusions of the lower tribunals. Petitioners assert that such findings and
conclusions, having been made by agencies with expertise on the subject matter, should be
deemed binding and conclusive. They contend that it was the PCIJ which employed respondent
as an employee; it merely seconded him to petitioner PPI in the Philippines, and assigned him to
work in Manila as Sector Manager. Petitioner PPI, being a wholly-owned subsidiary of PCIJ,
was never the employer of respondent.
Petitioners assert that the January 9, 1998 letter of employment which respondent presented to
prove his employment with petitioner PPI is of doubtful authenticity since it was unsigned by the
purported parties. They insist that PCIJ paid respondent's salaries and only coursed the same
through petitioner PPI. PPI, being its subsidiary, had supervision and control over respondent's
work, and had the responsibilities of monitoring the "daily administration" of respondent.
Respondent cannot rely on the pay slips, expenses claim forms, and reimbursement memoranda
to prove that he was an employee of petitioner PPI because these documents are of doubtful
authenticity. DTaAHS
Petitioners further contend that, although Henrichsen was both a director of PCIJ and president
of PPI, it was he who signed the termination letter of respondent upon instructions of PCIJ. This
is buttressed by the fact that PCIJ's letterhead was used to inform him that his employment was
terminated. Petitioners further assert that all work instructions came from PCIJ and that
petitioner PPI only served as a "conduit." Respondent's Alien Employment Permit stating that
petitioner PPI was his employer is but a necessary consequence of his being "seconded" thereto.
It is not sufficient proof that petitioner PPI is respondent's employer. The entry was only made to
comply with the DOLE requirements.
There being no evidence that petitioner PPI is the employer of respondent, the Labor Arbiter has
no jurisdiction over respondent's complaint.
Petitioners aver that since respondent is a Canadian citizen, the CA erred in ignoring their claim
that the principles of forum non conveniens and lex loci contractus are applicable. They also
point out that the principal office, officers and staff of PCIJ are stationed in Tokyo, Japan; and
the contract of employment of respondent was executed in Tokyo, Japan.
Moreover, under Section 21 of the General Conditions for Employment incorporated in
respondent's January 7, 1998 letter of employment, the dispute between respondent and PCIJ
should be settled by the court of arbitration of London. Petitioners claim that the words used
therein are sufficient to show the exclusive and restrictive nature of the stipulation on venue.
Petitioners insist that the U.S. Labor-Management Act applies only to U.S. workers and
employers, while the Labor Code of the Philippines applies only to Filipino employers and
Philippine-based employers and their employees, not to PCIJ. In fine, the jurisdictions of the
NLRC and Labor Arbiter do not extend to foreign workers who executed employment
agreements with foreign employers abroad, although "seconded" to the Philippines. 25
In his Comment, 26 respondent maintains that petitioners raised factual issues in their petition
which are proscribed under Section 1, Rule 45 of the Rules of Court. The finding of the CA that
he had been an employee of petitioner PPI and not of PCIJ is buttressed by his documentary
evidence which both the Labor Arbiter and the NLRC ignored; they erroneously opted to dismiss
his complaint on the basis of the letter of employment and Section 21 of the General Conditions
of Employment. In contrast, the CA took into account the evidence on record and applied case
law correctly. SETAcC
The petition is denied for lack of merit.
It must be stressed that in resolving a petition for certiorari, the CA is not proscribed from
reviewing the evidence on record. Under Section 9 of Batas Pambansa Blg. 129, as amended by
R.A. No. 7902, the CA is empowered to pass upon the evidence, if and when necessary, to
resolve factual issues. 27 If it appears that the Labor Arbiter and the NLRC misappreciated the
evidence to such an extent as to compel a contrary conclusion if such evidence had been properly
appreciated, the factual findings of such tribunals cannot be given great respect and finality. 28
Inexplicably, the Labor Arbiter and the NLRC ignored the documentary evidence which
respondent appended to his pleadings showing that he was an employee of petitioner PPI; they
merely focused on the January 7, 1998 letter of employment and Section 21 of the General
Conditions of Employment.
Petitioner PPI applied for the issuance of an AEP to respondent before the DOLE. In said
application, PPI averred that respondent is its employee. To show that this was the case, PPI
appended a copy of respondent's employment contract. The DOLE then granted the application
of PPI and issued the permit. SaHTCE
It bears stressing that under the Omnibus Rules Implementing the Labor Code, one of the
requirements for the issuance of an employment permit is the employment contract. Section 5,
Rule XIV (Employment of Aliens) of the Omnibus Rules provides:
SECTION 1. Coverage. — This rule shall apply to all aliens employed or seeking employment in
the Philippines and the present or prospective employers.
SECTION 2. Submission of list. — All employers employing foreign nationals, whether resident
or non-resident, shall submit a list of nationals to the Bureau indicating their names, citizenship,
foreign and local address, nature of employment and status of stay in the Philippines.
SECTION 3. Registration of resident aliens. — All employed resident aliens shall register with
the Bureau under such guidelines as may be issued by it.
SECTION 4. Employment permit required for entry. — No alien seeking employment, whether
as a resident or non-resident, may enter the Philippines without first securing an employment
permit from the Ministry. If an alien enters the country under a non-working visa and wishes to
be employed thereafter, he may only be allowed to be employed upon presentation of a duly
approved employment permit.
SECTION 5. Requirements for employment permit applicants. — The application for an
employment permit shall be accompanied by the following:
(a) Curriculum vitae duly signed by the applicant indicating his educational background, his
work experience and other data showing that he possesses technical skills in his trade or
profession.
(b) Contract of employment between the employer and the principal which shall embody the
following, among others:
1. That the non-resident alien worker shall comply with all applicable laws and rules and
regulations of the Philippines;
2. That the non-resident alien worker and the employer shall bind themselves to train at
least two (2) Filipino understudies for a period to be determined by the Minister; and
3. That he shall not engage in any gainful employment other than that for which he was
issued a permit. IcAaSD
(c) A designation by the employer of at least two (2) understudies for every alien worker.
Such understudies must be the most ranking regular employees in the section or department for
which the expatriates are being hired to insure the actual transfer of technology.
Under Section 6 of the Rule, the DOLE may issue an alien employment permit based only on the
following:
(a) Compliance by the applicant and his employer with the requirements of Section 2 hereof;
(b) Report of the Bureau Director as to the availability or non-availability of any person in
the Philippines who is competent and willing to do the job for which the services of the applicant
are desired;
(c) His assessment as to whether or not the employment of the applicant will redound to the
national interest;
(d) Admissibility of the alien as certified by the Commission on Immigration and
Deportation;
(e) The recommendation of the Board of Investments or other appropriate government
agencies if the applicant will be employed in preferred areas of investments or in accordance
with the imperative of economic development. DHITCc
Thus, as claimed by respondent, he had an employment contract with petitioner PPI; otherwise,
petitioner PPI would not have filed an application for a Permit with the DOLE. Petitioners are
thus estopped from alleging that the PCIJ, not petitioner PPI, had been the employer of
respondent all along.
We agree with the conclusion of the CA that there was an employer-employee relationship
between petitioner PPI and respondent using the four-fold test. Jurisprudence is firmly settled
that whenever the existence of an employment relationship is in dispute, four elements constitute
the reliable yardstick: (a) the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employer's power to control the employee's
conduct. It is the so-called "control test" which constitutes the most important index of the
existence of the employer-employee relationship — that is, whether the employer controls or has
reserved the right to control the employee not only as to the result of the work to be done but also
as to the means and methods by which the same is to be accomplished. Stated otherwise, an
employer-employee relationship exists where the person for whom the services are performed
reserves the right to control not only the end to be achieved but also the means to be used in
reaching such end. 29 We quote with approval the following ruling of the CA:
[T]here is, indeed, substantial evidence on record which would erase any doubt that the
respondent company is the true employer of petitioner. In the case at bar, the power to control
and supervise petitioner's work performance devolved upon the respondent company. Likewise,
the power to terminate the employment relationship was exercised by the President of the
respondent company. It is not the letterhead used by the company in the termination letter which
controls, but the person who exercised the power to terminate the employee. It is also
inconsequential if the second letter of employment executed in the Philippines was not signed by
the petitioner. An employer-employee relationship may indeed exist even in the absence of a
written contract, so long as the four elements mentioned in the Mafinco case are all present. 30
The settled rule on stipulations regarding venue, as held by this Court in the vintage case of
Philippine Banking Corporation v. Tensuan, 31 is that while they are considered valid and
enforceable, venue stipulations in a contract do not, as a rule, supersede the general rule set forth
in Rule 4 of the Revised Rules of Court in the absence of qualifying or restrictive words. They
should be considered merely as an agreement or additional forum, not as limiting venue to the
specified place. They are not exclusive but, rather permissive. If the intention of the parties were
to restrict venue, there must be accompanying language clearly and categorically expressing their
purpose and design that actions between them be litigated only at the place named by them. 32
In the instant case, no restrictive words like "only," "solely," "exclusively in this court," "in no
other court save —," "particularly," "nowhere else but/except —," or words of equal import were
stated in the contract. 33 It cannot be said that the court of arbitration in London is an exclusive
venue to bring forth any complaint arising out of the employment contract. aITDAE
Petitioners contend that respondent should have filed his Complaint in his place of permanent
residence, or where the PCIJ holds its principal office, at the place where the contract of
employment was signed, in London as stated in their contract. By enumerating possible venues
where respondent could have filed his complaint, however, petitioners themselves admitted that
the provision on venue in the employment contract is indeed merely permissive.
Petitioners' insistence on the application of the principle of forum non conveniens must be
rejected. The bare fact that respondent is a Canadian citizen and was a repatriate does not
warrant the application of the principle for the following reasons:
First. The Labor Code of the Philippines does not include forum non conveniens as a ground for
the dismissal of the complaint. 34
Second. The propriety of dismissing a case based on this principle requires a factual
determination; hence, it is properly considered as defense. 35
Third. In Bank of America, NT&SA, Bank of America International, Ltd. v. Court of Appeals,
36 this Court held that:
. . . [a] Philippine Court may assume jurisdiction over the case if it chooses to do so; provided,
that the following requisites are met: (1) that the Philippine Court is one to which the parties may
conveniently resort to; (2) that the Philippine Court is in a position to make an intelligent
decision as to the law and the facts; and, (3) that the Philippine Court has or is likely to have
power to enforce its decision. . . .
Admittedly, all the foregoing requisites are present in this case. aCIHAD
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP
No. 76563 is AFFIRMED. This case is REMANDED to the Labor Arbiter for disposition of the
case on the merits. Cost against petitioners.
SO ORDERED.

COCA COLA BOTTLERS (PHILS.), INC., ET AL. vs. DEAN N. CLIMACO

FIRST DIVISION
[G.R. No. 146881. February 5, 2007.]
COCA COLA BOTTLERS (PHILS.), INC./ERIC MONTINOLA, Manager, petitioners, vs. DR.
DEAN N. CLIMACO, respondent.
DECISION
AZCUNA, J p:
This is a petition for review on certiorari of the Decision of the Court of Appeals 1 promulgated
on July 7, 2000, and its Resolution promulgated on January 30, 2001, denying petitioner's
motion for reconsideration. The Court of Appeals ruled that an employer-employee relationship
exists between respondent Dr. Dean N. Climaco and petitioner Coca-Cola Bottlers Phils., Inc.
(Coca-Cola), and that respondent was illegally dismissed. IcSHTA
Respondent Dr. Dean N. Climaco is a medical doctor who was hired by petitioner Coca-Cola
Bottlers Phils., Inc. by virtue of a Retainer Agreement that stated:
WHEREAS, the COMPANY desires to engage on a retainer basis the services of a physician and
the said DOCTOR is accepting such engagement upon terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual agreement hereinafter
contained, the parties agree as follows:
1. This Agreement shall only be for a period of one (1) year beginning January 1, 1988 up
to December 31, 1988. The said term notwithstanding, either party may terminate the contract
upon giving a thirty (30)-day written notice to the other. HIACac
2. The compensation to be paid by the company for the services of the DOCTOR is hereby
fixed at PESOS: Three Thousand Eight Hundred (P3,800.00) per month. The DOCTOR may
charge professional fee for hospital services rendered in line with his specialization. All
payments in connection with the Retainer Agreement shall be subject to a withholding tax of ten
percent (10%) to be withheld by the COMPANY under the Expanded Withholding Tax System.
In the event the withholding tax rate shall be increased or decreased by appropriate laws, then the
rate herein stipulated shall accordingly be increased or decreased pursuant to such laws.
3. That in consideration of the above mentioned retainer's fee, the DOCTOR agrees to
perform the duties and obligations enumerated in the COMPREHENSIVE MEDICAL PLAN,
hereto attached as Annex "A" and made an integral part of this Retainer Agreement.
4. That the applicable provisions in the Occupational Safety and Health Standards, Ministry
of Labor and Employment shall be followed.
5. That the DOCTOR shall be directly responsible to the employee concerned and their
dependents for any injury inflicted on, harm done against or damage caused upon the employee
of the COMPANY or their dependents during the course of his examination, treatment or
consultation, if such injury, harm or damage was committed through professional negligence or
incompetence or due to the other valid causes for action.
6. That the DOCTOR shall observe clinic hours at the COMPANY'S premises from
Monday to Saturday of a minimum of two (2) hours each day or a maximum of TWO (2) hours
each day or treatment from 7:30 a.m. to 8:30 a.m. and 3:00 p.m. to 4:00 p.m., respectively unless
such schedule is otherwise changed by the COMPANY as [the] situation so warrants, subject to
the Labor Code provisions on Occupational Safety and Health Standards as the COMPANY may
determine. It is understood that the DOCTOR shall stay at least two (2) hours a day in the
COMPANY clinic and that such two (2) hours be devoted to the workshifts with the most
number of employees. It is further understood that the DOCTOR shall be on call at all times
during the other workshifts to attend to emergency case[s];
7. That no employee-employer relationship shall exist between the COMPANY and the
DOCTOR whilst this contract is in effect, and in case of its termination, the DOCTOR shall be
entitled only to such retainer fee as may be due him at the time of termination. 2
The Comprehensive Medical Plan, 3 which contains the duties and responsibilities of respondent,
adverted to in the Retainer Agreement, provided:
A. OBJECTIVE
These objectives have been set to give full consideration to [the] employees' and dependents'
health:
1. Prompt and adequate treatment of occupational and non-occupational injuries and
diseases. SEDIaH
2. To protect employees from any occupational health hazard by evaluating health factors
related to working conditions.
3. To encourage employees [to] maintain good personal health by setting up employee
orientation and education on health, hygiene and sanitation, nutrition, physical fitness, first aid
training, accident prevention and personnel safety.
4. To evaluate other matters relating to health such as absenteeism, leaves and termination.
5. To give family planning motivations.
B. COVERAGE
1. All employees and their dependents are embraced by this program.
2. The health program shall cover pre-employment and annual p.e., hygiene and sanitation,
immunizations, family planning, physical fitness and athletic programs and other activities such
as group health education program, safety and first aid classes, organization of health and safety
committees.
3. Periodically, this program will be reviewed and adjusted based on employees' needs.
ECHSDc
C. ACTIVITIES
1. Annual Physical Examination.
2. Consultations, diagnosis and treatment of occupational and non-occupational illnesses
and injuries.
3. Immunizations necessary for job conditions.
4. Periodic inspections for food services and rest rooms.
5. Conduct health education programs and present education materials.
6. Coordinate with Safety Committee in developing specific studies and program to
minimize environmental health hazards.
7. Give family planning motivations.
8. Coordinate with Personnel Department regarding physical fitness and athletic programs.
9. Visiting and follow-up treatment of Company employees and their dependents confined
in the hospital.
The Retainer Agreement, which began on January 1, 1988, was renewed annually. The last one
expired on December 31, 1993. Despite the non-renewal of the Retainer Agreement, respondent
continued to perform his functions as company doctor to Coca-Cola until he received a letter 4
dated March 9, 1995 from petitioner company concluding their retainership agreement effective
30 days from receipt thereof.
It is noted that as early as September 1992, petitioner was already making inquiries regarding his
status with petitioner company. First, he wrote a letter addressed to Dr. Willie Sy, the Acting
President and Chairperson of the Committee on Membership, Philippine College of Occupational
Medicine. In response, Dr. Sy wrote a letter 5 to the Personnel Officer of Coca-Cola Bottlers
Phils., Bacolod City, stating that respondent should be considered as a regular part-time
physician, having served the company continuously for four (4) years. He likewise stated that
respondent must receive all the benefits and privileges of an employee under Article 157 (b) 6 of
the Labor Code. ScAHTI
Petitioner company, however, did not take any action. Hence, respondent made another inquiry
directed to the Assistant Regional Director, Bacolod City District Office of the Department of
Labor and Employment (DOLE), who referred the inquiry to the Legal Service of the DOLE,
Manila. In his letter 7 dated May 18, 1993, Director Dennis P. Ancheta, Legal Service, DOLE,
stated that he believed that an employer-employee relationship existed between petitioner and
respondent based on the Retainer Agreement and the Comprehensive Medical Plan, and the
application of the "four-fold" test. However, Director Ancheta emphasized that the existence of
employer-employee relationship is a question of fact. Hence, termination disputes or money
claims arising from employer-employee relations exceeding P5,000 may be filed with the
National Labor Relations Commission (NLRC). He stated that their opinion is strictly advisory.
An inquiry was likewise addressed to the Social Security System (SSS). Thereafter, Mr. Romeo
R. Tupas, OIC-FID of SSS-Bacolod City, wrote a letter 8 to the Personnel Officer of Coca-Cola
Bottlers Phils., Inc. informing the latter that the legal staff of his office was of the opinion that
the services of respondent partake of the nature of work of a regular company doctor and that he
was, therefore, subject to social security coverage.
Respondent inquired from the management of petitioner company whether it was agreeable to
recognizing him as a regular employee. The management refused to do so.
On February 24, 1994, respondent filed a Complaint 9 before the NLRC, Bacolod City, seeking
recognition as a regular employee of petitioner company and prayed for the payment of all
benefits of a regular employee, including 13th Month Pay, Cost of Living Allowance, Holiday
Pay, Service Incentive Leave Pay, and Christmas Bonus. The case was docketed as RAB Case
No. 06-02-10138-94. DSHcTC
While the complaint was pending before the Labor Arbiter, respondent received a letter dated
March 9, 1995 from petitioner company concluding their retainership agreement effective thirty
(30) days from receipt thereof. This prompted respondent to file a complaint for illegal dismissal
against petitioner company with the NLRC, Bacolod City. The case was docketed as RAB Case
No. 06-04-10177-95.
In a Decision 10 dated November 28, 1996, Labor Arbiter Jesus N. Rodriguez, Jr. found that
petitioner company lacked the power of control over respondent's performance of his duties, and
recognized as valid the Retainer Agreement between the parties. Thus, the Labor Arbiter
dismissed respondent's complaint in the first case, RAB Case No. 06-02-10138-94. The
dispositive portion of the Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered dismissing the instant
complaint seeking recognition as a regular employee.
SO ORDERED. 11
In a Decision 12 dated February 24, 1997, Labor Arbiter Benjamin Pelaez dismissed the case for
illegal dismissal (RAB Case No. 06-04-10177-95) in view of the previous finding of Labor
Arbiter Jesus N. Rodriguez, Jr. in RAB Case No. 06-02-10138-94 that complainant therein, Dr.
Dean Climaco, is not an employee of Coca-Cola Bottlers Phils., Inc.
Respondent appealed both decisions to the NLRC, Fourth Division, Cebu City.
In a Decision 13 promulgated on November 28, 1997, the NLRC dismissed the appeal in both
cases for lack of merit. It declared that no employer-employee relationship existed between
petitioner company and respondent based on the provisions of the Retainer Agreement which
contract governed respondent's employment. HCacDE
Respondent's motion for reconsideration was denied by the NLRC in a Resolution 14
promulgated on August 7, 1998.
Respondent filed a petition for review with the Court of Appeals.
In a Decision promulgated on July 7, 2000, the Court of Appeals ruled that an employer-
employee relationship existed between petitioner company and respondent after applying the
four-fold test: (1) the power to hire the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the employer's power to control the employee with respect to the means and
methods by which the work is to be accomplished.
The Court of Appeals held:
The Retainer Agreement executed by and between the parties, when read together with the
Comprehensive Medical Plan which was made an integral part of the retainer agreements,
coupled with the actual services rendered by the petitioner, would show that all the elements of
the above test are present.
First, the agreements provide that "the COMPANY desires to engage on a retainer basis the
services of a physician and the said DOCTOR is accepting such engagement . . ." (Rollo, page
25). This clearly shows that Coca-Cola exercised its power to hire the services of petitioner.
Secondly, paragraph (2) of the agreements showed that petitioner would be entitled to a final
compensation of Three Thousand Eight Hundred Pesos per month, which amount was later
raised to Seven Thousand Five Hundred on the latest contract. This would represent the element
of payment of wages. SEACTH
Thirdly, it was provided in paragraph (1) of the agreements that the same shall be valid for a
period of one year. "The said term notwithstanding, either party may terminate the contract upon
giving a thirty (30) day written notice to the other." (Rollo, page 25). This would show that
Coca-Cola had the power of dismissing the petitioner, as it later on did, and this could be done
for no particular reason, the sole requirement being the former's compliance with the 30-day
notice requirement.
Lastly, paragraphs (3) and (6) of the agreements reveal that Coca-Cola exercised the most
important element of all, that is, control, over the conduct of petitioner in the latter's performance
of his duties as a doctor for the company.
It was stated in paragraph (3) that the doctor agrees to perform the duties and obligations
enumerated in the Comprehensive Medical Plan referred to above. In paragraph (6), the fixed
and definite hours during which the petitioner must render service to the company is laid down.
We say that there exists Coca-Cola's power to control petitioner because the particular objectives
and activities to be observed and accomplished by the latter are fixed and set under the
Comprehensive Medical Plan which was made an integral part of the retainer agreement.
Moreover, the times for accomplishing these objectives and activities are likewise controlled and
determined by the company. Petitioner is subject to definite hours of work, and due to this, he
performs his duties to Coca-Cola not at his own pleasure but according to the schedule dictated
by the company.
In addition, petitioner was designated by Coca-Cola to be a member of its Bacolod Plant's Safety
Committee. The minutes of the meeting of the said committee dated February 16, 1994 included
the name of petitioner, as plant physician, as among those comprising the committee. DcaCSE
It was averred by Coca-Cola in its comment that they exercised no control over petitioner for the
reason that the latter was not directed as to the procedure and manner of performing his assigned
tasks. It went as far as saying that "petitioner was not told how to immunize, inject, treat or
diagnose the employees of the respondent (Rollo, page 228). We believe that if the "control test"
would be interpreted this strictly, it would result in an absurd and ridiculous situation wherein we
could declare that an entity exercises control over another's activities only in instances where the
latter is directed by the former on each and every stage of performance of the particular activity.
Anything less than that would be tantamount to no control at all.
To our minds, it is sufficient if the task or activity, as well as the means of accomplishing it, is
dictated, as in this case where the objectives and activities were laid out, and the specific time for
performing them was fixed by the controlling party. 15
Moreover, the Court of Appeals declared that respondent should be classified as a regular
employee having rendered six years of service as plant physician by virtue of several renewed
retainer agreements. It underscored the provision in Article 280 16 of the Labor Code stating that
"any employee who has rendered at least one year of service, whether such service is continuous
or broken, shall be considered a regular employee with respect to the activity in which he is
employed, and his employment shall continue while such activity exists." Further, it held that the
termination of respondent's services without any just or authorized cause constituted illegal
dismissal.
In addition, the Court of Appeals found that respondent's dismissal was an act oppressive to
labor and was effected in a wanton, oppressive or malevolent manner which entitled respondent
to moral and exemplary damages. AEITDH
The dispositive portion of the Decision reads:
WHEREFORE, in view of the foregoing, the Decision of the National Labor Relations
Commission dated November 28, 1997 and its Resolution dated August 7, 1998 are found to
have been issued with grave abuse of discretion in applying the law to the established facts, and
are hereby REVERSED and SET ASIDE, and private respondent Coca-Cola Bottlers, Phils., Inc.
is hereby ordered to:
1. Reinstate the petitioner with full backwages without loss of seniority rights from the time
his compensation was withheld up to the time he is actually reinstated; however, if reinstatement
is no longer possible, to pay the petitioner separation pay equivalent to one (1) month's salary for
every year of service rendered, computed at the rate of his salary at the time he was dismissed,
plus backwages.
2. Pay petitioner moral damages in the amount of P50,000.00.
3. Pay petitioner exemplary damages in the amount of P50,000.00.
4. Give to petitioner all other benefits to which a regular employee of Coca-Cola is entitled
from the time petitioner became a regular employee (one year from effectivity date of
employment) until the time of actual payment.
SO ORDERED. 17
Petitioner company filed a motion for reconsideration of the Decision of the Court of Appeals.
In a Resolution promulgated on January 30, 2001, the Court of Appeals stated that petitioner
company noted that its Decision failed to mention whether respondent was a full-time or part-
time regular employee. It also questioned how the benefits under their Collective Bargaining
Agreement which the Court awarded to respondent could be given to him considering that such
benefits were given only to regular employees who render a full day's work of not less than eight
hours. It was admitted that respondent is only required to work for two hours per day. HDATCc
The Court of Appeals clarified that respondent was a "regular part-time employee and should be
accorded all the proportionate benefits due to this category of employees of [petitioner]
Corporation under the CBA." It sustained its decision on all other matters sought to be
reconsidered.
Hence, this petition filed by Coca-Cola Bottlers Phils., Inc.
The issues are:
1. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, CONTRARY TO THE DECISIONS OF THE HONORABLE SUPREME
COURT ON THE MATTER.
2. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND HOLDING INSTEAD THAT THE WORK OF A PHYSICIAN IS
NECESSARY AND DESIRABLE TO THE BUSINESS OF SOFTDRINKS
MANUFACTURING, CONTRARY TO THE RULINGS OF THE SUPREME COURT IN
ANALOGOUS CASES. IHCacT
3. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND HOLDING INSTEAD THAT THE PETITIONERS EXERCISED
CONTROL OVER THE WORK OF THE RESPONDENT.
4. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND FINDING THAT THERE IS EMPLOYER-EMPLOYEE
RELATIONSHIP PURSUANT TO ARTICLE 280 OF THE LABOR CODE.
5. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND FINDING THAT THERE EXISTED ILLEGAL DISMISSAL WHEN
THE EMPLOYMENT OF THE RESPONDENT WAS TERMINATED WITHOUT JUST
CAUSE.
6. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND FINDING THAT THE RESPONDENT IS A REGULAR PART TIME
EMPLOYEE WHO IS ENTITLED TO PROPORTIONATE BENEFITS AS A REGULAR
PART TIME EMPLOYEE ACCORDING TO THE PETITIONERS' CBA. CAIaDT
7. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND FINDING THAT THE RESPONDENT IS ENTITLED TO MORAL
AND EXEMPLARY DAMAGES.
The main issue in this case is whether or not there exists an employer-employee relationship
between the parties. The resolution of the main issue will determine whether the termination of
respondent's employment is illegal.
The Court, in determining the existence of an employer-employee relationship, has invariably
adhered to the four-fold test: (1) the selection and engagement of the employee; (2) the payment
of wages; (3) the power of dismissal; and (4) the power to control the employee's conduct, or the
so-called "control test," considered to be the most important element. 18
The Court agrees with the finding of the Labor Arbiter and the NLRC that the circumstances of
this case show that no employer-employee relationship exists between the parties. The Labor
Arbiter and the NLRC correctly found that petitioner company lacked the power of control over
the performance by respondent of his duties. The Labor Arbiter reasoned that the Comprehensive
Medical Plan, which contains the respondent's objectives, duties and obligations, does not tell
respondent "how to conduct his physical examination, how to immunize, or how to diagnose and
treat his patients, employees of [petitioner] company, in each case." He likened this case to that
of Neri v. National Labor Relations Commission, 19 which held:
In the case of petitioner Neri, it is admitted that FEBTC issued a job description which detailed
her functions as a radio/telex operator. However, a cursory reading of the job description shows
that what was sought to be controlled by FEBTC was actually the end result of the task, e.g., that
the daily incoming and outgoing telegraphic transfer of funds received and relayed by her,
respectively, tallies with that of the register. The guidelines were laid down merely to ensure that
the desired end result was achieved. It did not, however, tell Neri how the radio/telex machine
should be operated. STADIH
In effect, the Labor Arbiter held that petitioner company, through the Comprehensive Medical
Plan, provided guidelines merely to ensure that the end result was achieved, but did not control
the means and methods by which respondent performed his assigned tasks.
The NLRC affirmed the findings of the Labor Arbiter and stated that it is precisely because the
company lacks the power of control that the contract provides that respondent shall be directly
responsible to the employee concerned and their dependents for any injury, harm or damage
caused through professional negligence, incompetence or other valid causes of action.
The Labor Arbiter also correctly found that the provision in the Retainer Agreement that
respondent was on call during emergency cases did not make him a regular employee. He
explained, thus:
Likewise, the allegation of complainant that since he is on call at anytime of the day and night
makes him a regular employee is off-tangent. Complainant does not dispute the fact that outside
of the two (2) hours that he is required to be at respondent company's premises, he is not at all
further required to just sit around in the premises and wait for an emergency to occur so as to
enable him from using such hours for his own benefit and advantage. In fact, complainant
maintains his own private clinic attending to his private practice in the city, where he services his
patients, bills them accordingly — and if it is an employee of respondent company who is
attended to by him for special treatment that needs hospitalization or operation, this is subject to
a special billing. More often than not, an employee is required to stay in the employer's
workplace or proximately close thereto that he cannot utilize his time effectively and gainfully
for his own purpose. Such is not the prevailing situation here. acHETI
In addition, the Court finds that the schedule of work and the requirement to be on call for
emergency cases do not amount to such control, but are necessary incidents to the Retainership
Agreement.
The Court also notes that the Retainership Agreement granted to both parties the power to
terminate their relationship upon giving a 30-day notice. Hence, petitioner company did not
wield the sole power of dismissal or termination.
The Court agrees with the Labor Arbiter and the NLRC that there is nothing wrong with the
employment of respondent as a retained physician of petitioner company and upholds the
validity of the Retainership Agreement which clearly stated that no employer-employee
relationship existed between the parties. The Agreement also stated that it was only for a period
of 1 year beginning January 1, 1988 to December 31, 1998, but it was renewed on a yearly basis.
Considering that there is no employer-employee relationship between the parties, the termination
of the Retainership Agreement, which is in accordance with the provisions of the Agreement,
does not constitute illegal dismissal of respondent. Consequently, there is no basis for the moral
and exemplary damages granted by the Court of Appeals to respondent due to his alleged illegal
dismissal.
WHEREFORE, the petition is GRANTED and the Decision and Resolution of the Court of
Appeals are REVERSED and SET ASIDE. The Decision and Resolution dated November 28,
1997 and August 7, 1998, respectively, of the National Labor Relations Commission are
REINSTATED. ICcDaA
No costs.
SO ORDERED.

G.R. No. 164652: THELMA DUMPIT-MURILLO vs COURT OF APPEALS,

ASSOCIATED BROADCASTING COMPANY, JOSE JAVIER AND EDWARD TAN
8 June 2007 l Labor Standards
Fixed-Term Employee vs Regular Employee
Dumpit was hired by ABC as a newscaster in 1995. Her contract with the TV station was
repeatedly renewed until 1999. She then wrote Jose Javier (VP for News and Public Affairs of
ABC) advising him of her intention to renew the contract.

Javier did not respond.

Dumpit then demanded reinstatement as well as her backwages, service incentive leave pays and
other monetary benefits.

ABC said they could only pay her backwages but her other claims had no basis as she was not
entitled thereto because she is considered as a talent and not a regular employee.

Dumpit sued ABC. The Labor Arbiter ruled against Dumpit. The National Labor Relations
Commission reversed the LA. The Court of Appeals reversed the NLRC and ruled that as per the
contract between ABC and Dumpit, Dumpit is a fixed term employee.

ISSUE: Whether or not Dumpit is a regular employee.

HELD: Yes. Dumpit was a regular employee under contemplation of law. The practice of
having fixed-term contracts in the industry does not automatically make all talent contracts valid
and compliant with labor law. The assertion that a talent contract exists does not necessarily
prevent a regular employment status.

The duties of Dumpit as enumerated in her employment contract indicate that ABC had control
over the work of Dumpit. Aside from control, ABC also dictated the work assignments and
payment of petitioner’s wages. ABC also had power to dismiss her. All these being present,
clearly, there existed an employment relationship between Dumpit and ABC.

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 Dumpit’s work in ABC’s
business.

SECOND DIVISION

THELMA DUMPIT-MURILLO, G.R. No. 164652

Petitioner,
Present:
 QUISUMBING, J.,*
- versus - Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.

COURT OF APPEALS, Promulgated:

ASSOCIATED BROADCASTING
COMPANY, JOSE JAVIER AND
EDWARD TAN,
Respondents. June 8, 2007

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

DECISION
QUISUMBING, J.:

This petition seeks to reverse and set aside both the Decision dated January
30, 2004 of the Court of Appeals in CA-G.R. SP No. 63125 and its Resolution
dated June 23, 2004 denying the motion for reconsideration. The Court of Appeals
had overturned the Resolution dated August 30, 2000 of the National Labor
Relations Commission (NLRC) ruling that petitioner was illegally dismissed.

The facts of the case are as follows:

On October 2, 1995, under Talent Contract No. NT95-1805, 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. In addition, petitioner’s services were engaged for the program “Live
on Five.” On September 30, 1999, after four years of repeated renewals,
petitioner’s 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, which we
quote verbatim:
xxxx
Dear Mr. Javier:
On October 20, 1999, I wrote you a letter in answer to your query by way of a
marginal note “what terms and conditions” in response to my first letter dated
October 13, 1999. To date, or for more than fifteen (15) days since then, I have
not received any formal written reply. xxx
In view hereof, should I not receive any formal response from you until Monday,
November 8, 1999, I will deem it as a constructive dismissal of my services.
xxxx

A month later, petitioner sent a demand letter to ABC, demanding: (a)

reinstatement to her former position; (b) payment of unpaid wages for services
rendered from September 1 to October 20, 1999 and full backwages; (c) payment
of 13th month pay, vacation/sick/service incentive leaves and other monetary
benefits due to a regular employee starting March 31, 1996. ABC replied that a
check covering petitioner’s talent fees for September 16 to October 20, 1999 had
been processed and prepared, but that the other claims of petitioner had no basis in
fact or in law.

On December 20, 1999, petitioner filed a complaint 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 attorney’s fees.

The parties agreed to submit the case for resolution after settlement failed
during the mandatory conference/conciliation. On March 29, 2000, the Labor
Arbiter dismissed the complaint.

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 attorney’s fees. It held as follows:

WHEREFORE, the Decision of the Arbiter dated 29 March 2000 is

hereby REVERSED/SET ASIDE and a NEW ONE promulgated:
1) declaring respondents to have illegally dismissed complainant from
her regular work therein and thus, ordering them to reinstate her in her former
position without loss of seniority right[s] and other privileges and to pay her full
backwages, inclusive of allowances and other benefits, including 13th month pay
based on her said latest rate of P28,000.00/mo. from the date of her illegal
dismissal on 21 October 1999 up to finality hereof, or at complainant’s option, to
pay her separation pay of one (1) month pay per year of service based on said
latest monthly rate, reckoned from date of hire on 30 September 1995 until
finality hereof;
2) to pay complainant’s accrued SILP [Service Incentive Leave Pay] of 5
days pay per year and 13th month pay for the years 1999, 1998 and 1997 of
P19,236.00 and P84,000.00, respectively and her accrued salary from 16
September 1999 to 20 October 1999 of P32,760.00 plus legal interest at 12% from
date of judicial demand on 20 December 1999 until finality hereof;
3) to pay complainant moral damages of P500,000.00, exemplary
damages of P350,000.00 and 10% of the total of the adjudged monetary awards as
attorney’s fees.
Other monetary claims of complainant are dismissed for lack of merit.
SO ORDERED.
 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, but was reinstated on
grounds of the higher interest of justice.

Thereafter, the appellate court ruled that the NLRC committed grave abuse
of discretion, and reversed the decision of the NLRC. 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 of the Labor
Code because her job, as anticipated and agreed upon, was only for a specified
time.

Aggrieved, petitioner now comes to this Court on a petition for review,

raising issues as follows:
I.
THIS HONORABLE COURT CAN REVIEW THE FINDINGS OF THE
HONORABLE COURT OF APPEALS, THE DECISION OF WHICH IS NOT
IN ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF
THE SUPREME COURT[;]

II.
THE PRO-FORMA TALENT CONTRACTS, AS CORRECTLY FOUND BY
THE NLRC – FIRST DIVISION, ARE “ANTI-REGULARIZATION DEVICES”
WHICH MUST BE STRUCK DOWN FOR REASONS OF PUBLIC POLICY[;]
 III.
BY REASON OF THE CONTINUOUS AND SUCCESSIVE RENEWALS OF
THE THREE-MONTH TALENT CONTRACTS, AN EMPLOYER-
EMPLOYEE RELATIONSHIP WAS CREATED AS PROVIDED FOR UNDER
ARTICLE 280 OF THE LABOR CODE[;]

IV.
BY THE CONSTRUCTIVE DISMISSAL OF HEREIN PETITIONER, AS A
REGULAR EMPLOYEE, THERE WAS A DENIAL OF PETITIONER’S
RIGHT TO DUE PROCESS THUS ENTITLING HER TO THE MONEY
CLAIMS AS STATED IN THE COMPLAINT[.]

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.

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.

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, 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,
we can review such findings.

On the second issue, private respondents contend that the Court of Appeals
did not err when it upheld the validity of the talent contracts voluntarily entered
into by petitioner. It further stated that prevailing jurisprudence has recognized and
sustained the absence of employer-employee relationship between a talent and the
media entity which engaged the talent’s services on a per talent contract basis,
citing the case of Sonza v. ABS-CBN Broadcasting Corporation.

Petitioner avers however that an employer-employee relationship was

created when the private respondents started to merely renew the contracts
repeatedly fifteen times or for four consecutive years.

Again, we agree with petitioner. The Court of Appeals committed reversible

error when it held that petitioner was a fixed-term employee. Petitioner was a
regular employee under contemplation of law. The practice of having fixed-term
contracts in the industry does not automatically make all talent contracts valid and
compliant with labor law. The assertion that a talent contract exists does not
necessarily prevent a regular employment status.

Further, the Sonza case is not applicable. In Sonza, the television station did
not instruct Sonza how to perform his job. How Sonza delivered his lines, appeared
on television, and sounded on radio were outside the television station’s control.
Sonza had a free hand on what to say or discuss in his shows provided he did not
attack the television station or its interests. Clearly, the television station did not
exercise control over the means and methods of the performance of Sonza’s work.
In the case at bar, ABC had control over the performance of petitioner’s work.
Noteworthy too, is the comparatively low P28,000 monthly pay of petitioner vis
the P300,000 a month salary of Sonza, that all the more bolsters the conclusion that
petitioner was not in the same situation as Sonza.

The contract of employment of petitioner with ABC had the following

stipulations:
xxxx
1. SCOPE OF SERVICES – TALENT agrees to devote his/her talent, time,
attention and best efforts in the performance of his/her duties and responsibilities as
Anchor/Program Host/Newscaster of the Program, in accordance with the direction
of ABC and/or its authorized representatives.
1.1. DUTIES AND RESPONSIBILITIES – TALENT shall:
a. Render his/her services as a newscaster on the Program;
b. Be involved in news-gathering operations by conducting interviews
on- and off-the-air;
c. Participate in live remote coverages when called upon;
d. Be available for any other news assignment, such as writing, research
or camera work;
e. Attend production meetings;
f. On assigned days, be at the studios at least one (1) hour before the live
telecasts;
g. Be present promptly at the studios and/or other place of assignment at
the time designated by ABC;
h. Keep abreast of the news;
i. Give his/her full cooperation to ABC and its duly authorized
representatives in the production and promotion of the Program; and
j. Perform such other functions as may be assigned to him/her from time
to time.
xxxx
1.3 COMPLIANCE WITH STANDARDS, INSTRUCTIONS
AND OTHER RULES AND REGULATIONS – TALENT agrees that
he/she will promptly and faithfully comply with the requests and
instructions, as well as the program standards, policies, rules and
regulations of ABC, the KBP and the government or any of its agencies
and instrumentalities.
xxxx

In Manila Water Company, Inc. v. Pena, we said that the elements to determine
the existence of an employment relationship are: (a) the selection and engagement of
the employee, (b) the payment of wages, (c) the power of dismissal, and (d) the
employer’s power to control. The most important element is the employer’s control of
the employee’s conduct, not only as to the result of the work to be done, but also as to
the means and methods to accomplish it.

The duties of petitioner as enumerated in her employment contract indicate

that ABC had control over the work of petitioner. Aside from control, ABC also
dictated the work assignments and payment of petitioner’s wages. ABC also had
power to dismiss her. All these being present, clearly, there existed an
employment relationship between petitioner and ABC.

Concerning regular employment, the law provides for two kinds of

employees, namely: (1) those who are engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the employer; and
(2) those who have rendered at least one year of service, whether continuous or
broken, with respect to the activity in which they are employed. In other words,
regular status arises from either the nature of work of the employee or the duration
of his employment. In Benares v. Pancho, we very succinctly said:
…[T]he primary standard for determining regular employment is the reasonable
connection between the particular activity performed by the employee vis-à-vis
the usual trade or business of the employer. This connection can be determined
by considering the nature of the work performed and its relation to the scheme of
the particular business or trade in its entirety. If the employee has been
performing the job for at least a year, even if the performance is not continuous
and merely intermittent, the law deems repeated and continuing need for its
performance as sufficient evidence of the necessity if not indispensability of that
activity to the business. Hence, the employment is considered regular, but only
with respect to such activity and while such activity exists.

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, petitioner’s 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 government’s 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 petitioner’s work in private respondent ABC’s business.

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
employee’s consent. 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. 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.

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

As a regular employee, petitioner is entitled to security of tenure and can be

dismissed only for just cause and after due compliance with procedural due process.
Since private respondents did not observe due process in constructively dismissing the
petitioner, we hold that there was an illegal dismissal.

WHEREFORE, the challenged Decision dated January 30, 2004 and

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

Costs against private respondents.

SO ORDERED.

LEONARDO A. QUISUMBING
Acting Chief Justice

WE CONCUR:
 ANTONIO T. CARPIO
Associate Justice

CONCHITA CARPIO MORALES DANTE O. TINGA

Associate Justice Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the
conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.`

LEONARDO A. QUISUMBING
Acting Chief Justice

* Acting Chief Justice.

Rollo, pp. 207-220. Penned by Associate Justice Edgardo F. Sundiam, with Associate
Justices Eubulo G. Verzola and Remedios Salazar-Fernando concurring.
Id. at 246. Penned by Associate Justice Edgardo F. Sundiam, with Associate Justices
Remedios Salazar-Fernando and Mariano C. Del Castillo concurring.
Id. at 90-125.
 CA rollo, pp. 105-107.
Id. at 108-112.
Id. at 121.
Id. at 123.
Id. at 213-214.
Id. at 155-169.
Id. at 124-125.
Rollo, p. 180.
Id. at 195.
Id. at 220.
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 he is employed and his employment shall continue while such
activity exists.
Rollo, p. 217.
Id. at 382.
Id. at 335.
Id. at 387.
Pagoda Philippines, Inc. v. Universal Canning, Inc., G.R. No. 160966, October 11, 2005, 472
SCRA 355, 359.
Cirelos v. Hernandez, G.R. No. 146523, June 15, 2006, 490 SCRA 625, 635.
G.R. No. 138051, June 10, 2004, 431 SCRA 583.
Rollo, pp. 420-421.
See ABS-CBN Broadcasting Corporation v. Marquez, G.R. No. 167638, June 22, 2005, pp. 5-6 (Unsigned
Resolution), where the Court held what petitioner ABS-CBN called “talents” as regular employees. The Court
declared: “It may be so that respondents were assigned to a particular tele-series. However, petitioner can and did
immediately reassign them to a new production upon completion of a previous one. Hence, they were continuously
employed, the tele-series being a regular feature in petitioner’s network programs. Petitioner’s continuous
engagement of respondents from one production after another, for more than five years, made the latter part of
petitioner’s workpool who cannot be separated from the service without cause as they are considered regular. A
project employee or a member of a workpool may acquire the status of a regular employee when the following
concur: there is continuous rehiring of project employees even after the cessation of the project and the tasks
performed by the alleged “project employee” are vital, necessary, and indispensable to the usual business or trade
of his employer. It cannot be denied that the services of respondents as members of a crew in the production of a
 tele-series are undoubtedly connected with the business of the petitioner. This Court has held that the primary
standard in determining regular employment is the reasonable connection between the particular activity
performed by the employee in relation to the business or trade of his employer. Here, the activity performed by
respondents is, without doubt, vital to petitioner’s trade or business.”
See Sonza v. ABS-CBN Broadcasting Corporation, supra note 21, at 599, which also held that
in the United States, aside from the right of control test, there are the “economic reality” test
and the “multi-factor test.” The tests are drawn from statutes, regulations, rules, policies,
rulings, case law and the like. The “right of control” test applies under the Federal Internal
Revenue Code (“IRC”). The “economic reality” test applies to the Federal Fair Labor
Standards Act (“FLSA”). The California Division of Labor Standards Enforcement
(“DLSE”) uses a hybrid of these two tests often referred to as the “multi-factor test” in
determining who an employee is.
Rollo, p. 95.
Supra note 21, at 596.
CA rollo, p. 113.
G.R. No. 158255, July 8, 2004, 434 SCRA 53.
Id. at 61, 62.
Philippine Fruit & Vegetable Industries, Inc. v. NLRC, G.R. No. 122122, July 20, 1999, 310
SCRA 673, 681.
Bernardo v. National Labor Relations Commission, G.R. No. 122917, July 12, 1999, 310 SCRA
186, 204-205.
G.R. No. 151827, April 29, 2005, 457 SCRA 652.
Id. at 660.
Samson v. National Labor Relations Commission, G.R. No. 113166, February 1, 1996, 253 SCRA
112, 123.
Brent School, Inc. v. Zamora, G.R. No. 48494, February 5, 1990, 181 SCRA 702, 716 cited in
Pangilinan v. General Milling Corporation, G.R. No. 149329, July 12, 2004, 434 SCRA 159,
170.
Pangilinan v. General Milling Corporation, id.
Integrated Contractor and Plumbing Works, Inc. v. National Labor Relations Commission,
G.R. No. 152427, August 9, 2005, 466 SCRA 265, 273.
Rollo, p. 425.
Innodata Philippines, Inc. v. Quejada-Lopez, G.R. No. 162839, October 12, 2006, 504 SCRA
253, 258-259.

G.R. No. 162833 June 15, 2007

LIKHA-PMPB vs. BURLINGAME CORP.

SECOND DIVISION

[G.R. No. 162833. June 15, 2007.]

LAKAS SA INDUSTRIYA NG KAPATIRANG HALIGI NG ALYANSA-PINAGBUKLOD NG

MANGGAGAWANG PROMO NG BURLINGAME, petitioner, vs. BURLINGAME
CORPORATION, respondent.

DECISION

QUISUMBING, J p:

This is an appeal to reverse and set aside both the Decision 1 dated August 29,
2003 of the Court of Appeals and its Resolution 2 dated March 15, 2004 in CA-G.R.
SP No. 69639. The appellate court had reversed the decision 3 dated December 29,
2000 of the Secretary of Labor and Employment which ordered the holding of a
certification election among the rank-and-file promo employees of respondent
Burlingame Corporation. ACaTIc

The facts are undisputed.

On January 17, 2000, the petitioner Lakas sa Industriya ng Kapatirang Haligi ng

Alyansa-Pinagbuklod ng Manggagawang Promo ng Burlingame (LIKHA-PMPB) filed a
petition for certification election before the Department of Labor and Employment
(DOLE). LIKHA-PMPB sought to represent all rank-and-file promo employees of
respondent numbering about 70 in all. The petitioner claimed that there was no
existing union in the aforementioned establishment representing the regular rank-
and-file promo employees. It prayed that it be voluntarily recognized by the
respondent to be the collective bargaining agent, or, in the alternative, that a
certification/consent election be held among said regular rank-and-file promo
employees.

The respondent filed a motion to dismiss the petition. It argued that there exists no
employer-employee relationship between it and the petitioner's members. It further
alleged that the petitioner's members are actually employees of F. Garil Manpower
Services (F. Garil), a duly licensed local employment agency. To prove such
contention, respondent presented a copy of its contract for manpower services with
F. Garil.

On June 29, 2000, Med-Arbiter Renato D. Parungo dismissed 4 the petition for lack
of employer-employee relationship, prompting the petitioner to file an appeal 5
before the Secretary of Labor and Employment.

On December 29, 2000, the Secretary of Labor and Employment ordered the
immediate conduct of a certification election. 6
A motion for reconsideration of the said decision was filed by the respondent on
January 19, 2001, but the same was denied in the Resolution 7 of February 19, 2002
of the Secretary of Labor and Employment.

Respondent then filed a complaint with the Court of Appeals, which then reversed 8
the decision of the Secretary. The petitioner then filed a motion for reconsideration,
9 which the Court of Appeals denied 10 on March 15, 2004.

Hence the instant petition for review on certiorari.

The issue raised in the petition is:

WHETHER THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN DECLARING

THAT THERE IS NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN PETITIONER'S
MEMBERS AND BURLINGAME BECAUSE F. GARIL MANPOWER SERVICES IS AN
INDEPENDENT CONTRACTOR. 11 TaCEHA

Respondent contends that there is no employer-employee relationship between the

parties. 12 Petitioner, on the other hand, insists that there is. 13

The resolution of this issue boils down to a determination of the true status of F.
Garil, i.e., whether it is an independent contractor or a labor-only contractor.

The case of De Los Santos v. NLRC 14 succinctly enunciates the statutory criteria:

Job contracting is permissible only 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 the business. 15

According to Section 5 of DOLE Department Order No. 18-02, Series of 2002: 16

Section 5. Prohibition against labor-only contracting. — Labor-only contracting is

hereby declared prohibited. For this purpose, labor-only contracting shall refer to an
arrangement where the contractor or subcontractor merely recruits, supplies or
places workers to perform a job, work or service for a principal, and any of the
following elements are [is] present:

i) The contractor or sub-contractor does not have substantial capital or

investment which relates to the job, work or service to be performed and the
employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal;
or
ii) The contractor does not exercise the right to control over the performance of
the work of the contractual employee.

The foregoing provisions shall be without prejudice to the application of Article

248(C) of the Labor Code, as amended.

"Substantial capital or investment" refers to capital stocks and subscribed

capitalization in the case of corporations, tools, equipment, implements,
machineries and work premises, actually and directly used by the contractor or
subcontractor in the performance or completion of the job, work or service
contracted out. EcTaSC

The "right to control" shall refer to the right reserved to the person for whom the
services of the contractual workers are performed, to determine not only the end to
be achieved, but also the manner and means to be used in reaching that end.

Given the above criteria, we agree with the Secretary that F. Garil is not an
independent contractor.

First, F. Garil does not have substantial capitalization or investment in the form of
tools, equipment, machineries, work premises, and other materials, to qualify as an
independent contractor. No proof was adduced to show F. Garil's capitalization.

Second, the work of the promo-girls was directly related to the principal business or
operation of Burlingame. Marketing and selling of products is an essential activity to
the main business of the principal.

Lastly, F. Garil did not carry on an independent business or undertake the

performance of its service contract according to its own manner and method, free
from the control and supervision of its principal, Burlingame.

The "four-fold test" will show that respondent is the employer of petitioner's
members. The elements to determine the existence of an employment relationship
are: (a) the selection and engagement of the employee; (b) the payment of wages;
(c) the power of dismissal; and (d) the employer's power to control the employee's
conduct. The most important element is the employer's control of the employee's
conduct, not only as to the result of the work to be done, but also as to the means
and methods to accomplish it. 17

A perusal of the contractual stipulations between Burlingame and F. Garil shows the
following:

1. The AGENCY shall provide Burlingame Corporation or the CLIENT, with

sufficient number of screened, tested and pre-selected personnel (professionals,
highly-skilled, skilled, semi-skilled and unskilled) who will be deployed in
establishment selling products manufactured by the CLIENT.
2. The AGENCY shall be responsible in paying its workers under this contract in
accordance with the new minimum wage including the daily living allowances and
shall pay them overtime or remuneration that which is authorized by law. DAEcIS

3. It is expressly understood and agreed that the worker(s) supplied shall be

considered or treated as employee(s) of the AGENCY. Consequently, there shall be
no employer-employee relationship between the worker(s) and the CLIENT and as
such, the AGENCY shall be responsible to the benefits mandated by law.

4. For and in consideration of the service to be rendered by the AGENCY to the

CLIENT, the latter shall during the terms of agreement pay to the AGENCY the sum
of Seven Thousand Five Hundred Pesos Only (P7,500.00) per month per worker on
the basis of Eight (8) hours work payable up-to-date, semi-monthly, every 15th and
30th of each calendar month. However, these rates may be subject to change
proportionately in the event that there will be revisions in the Minimum Wage Law
or any law related to salaries and wages.

5. The CLIENT shall report to the AGENCY any of its personnel assigned to it if
those personnel are found to be inefficient, troublesome, uncooperative and not
observing the rules and regulations set forth by the CLIENT. It is understood and
agreed that the CLIENT may request any time the immediate replacement of any
personnel(s) assigned to them. 18

It is patent that the involvement of F. Garil in the hiring process was only with
respect to the recruitment aspect, i.e. the screening, testing and pre-selection of
the personnel it provided to Burlingame. The actual hiring itself was done through
the deployment of personnel to establishments by Burlingame.

The contract states that Burlingame would pay the workers through F. Garil,
stipulating that Burlingame shall pay F. Garil a certain sum per worker on the basis
of eight-hour work every 15th and 30th of each calendar month. This evinces the
fact that F. Garil merely served as conduit in the payment of wages to the deployed
personnel. The interpretation would have been different if the payment was for the
job, project, or services rendered during the month and not on a per worker basis.
In Vinoya v. National Labor Relations Commission, 19 we held:

The Court takes judicial notice of the practice of employers who, in order to evade
the liabilities under the Labor Code, do not issue payslips directly to their
employees. Under the current practice, a third person, usually the purported
contractor (service or manpower placement agency), assumes the act of paying the
wage. For this reason, the lowly worker is unable to show proof that it was directly
paid by the true employer. Nevertheless, for the workers, it is enough that they
actually receive their pay, oblivious of the need for payslips, unaware of its legal
implications. Applying this principle to the case at bar, even though the wages were
coursed through PMCI, we note that the funds actually came from the pockets of
RFC. Thus, in the end, RFC is still the one who paid the wages of petitioner albeit
indirectly. 20

The contract also provides that "any personnel found to be inefficient, troublesome,
uncooperative and not observing the rules and regulations set forth by Burlingame
shall be reported to F. Garil and may be replaced upon request." Corollary to this
circumstance would be the exercise of control and supervision by Burlingame over
workers supplied by F. Garil in order to establish the inefficient, troublesome, and
uncooperative nature of undesirable personnel. Also implied in the provision on
replacement of personnel carried upon request by Burlingame is the power to fire
personnel. DTcACa

These are indications that F. Garil was not left alone in the supervision and control
of its alleged employees. Consequently, it can be concluded that F. Garil was not an
independent contractor since it did not carry a distinct business free from the
control and supervision of Burlingame.

It goes without saying that the contractual stipulation on the nonexistence of an

employer-employee relationship between Burlingame and the personnel provided
by F. Garil has no legal effect. While the parties may freely stipulate terms and
conditions of a contract, such contractual stipulations should not be contrary to law,
morals, good customs, public order or public policy. A contractual stipulation to the
contrary cannot override factual circumstances firmly establishing the legal
existence of an employer-employee relationship.

Under this circumstance, there is no doubt that F. Garil was engaged in labor-only
contracting, and as such, is considered merely an agent of Burlingame. In labor-only
contracting, the law creates an employer-employee relationship to prevent a
circumvention of labor laws. The contractor is considered merely an agent of the
principal employer and the latter is responsible to the employees of the labor-only
contractor as if such employees had been directly employed by the principal
employer. 21 Since F. Garil is a labor-only contractor, the workers it supplied should
be considered as employees of Burlingame in the eyes of the law.

WHEREFORE, the challenged Decision of the Court of Appeals dated August 29,
2003 and the Resolution dated March 15, 2004 denying the motion for
reconsideration are REVERSED and SET ASIDE. The decision of the Secretary of
Labor and Employment ordering the holding of a certification election among the
rank-and-file promo employees of Burlingame is reinstated.

Costs against respondent. aSTcCE

SO ORDERED.

FAR EAST AGRICULTURAL SUPPLY, INC., ET AL. vs. JIMMY LEBATIQUE, ET AL.

SECOND DIVISION
[G.R. No. 162813. February 12, 2007.]

FAR EAST AGRICULTURAL SUPPLY, INC. and/or ALEXANDER UY, petitioners, vs.
JIMMY LEBATIQUE and THE HONORABLE COURT OF APPEALS, respondents.

DECISION

QUISUMBING, J p:

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

September 30, 2003 of the Court of Appeals in CA-G.R. SP No. 76196 and its
Resolution 2 dated March 15, 2004 denying the motion for reconsideration. The
appellate court had reversed the Decision 3 dated October 15, 2002 of the National
Labor Relations Commission (NLRC) setting aside the Decision 4 dated June 27,
2001 of the Labor Arbiter. IADaSE

Petitioner Far East Agricultural Supply, Inc. (Far East) hired on March 4, 1996 private
respondent Jimmy Lebatique as truck driver with a daily wage of P223.50. He
delivered animal feeds to the company's clients.

On January 24, 2000, Lebatique complained of nonpayment of overtime work

particularly on January 22, 2000, when he was required to make a second delivery
in Novaliches, Quezon City. That same day, Manuel Uy, brother of Far East's General
Manager and petitioner Alexander Uy, suspended Lebatique apparently for illegal
use of company vehicle. Even so, Lebatique reported for work the next day but he
was prohibited from entering the company premises.

On January 26, 2000, Lebatique sought the assistance of the Department of Labor
and Employment (DOLE) Public Assistance and Complaints Unit concerning the
nonpayment of his overtime pay. According to Lebatique, two days later, he
received a telegram from petitioners requiring him to report for work. When he did
the next day, January 29, 2000, Alexander asked him why he was claiming overtime
pay. Lebatique explained that he had never been paid for overtime work since he
started working for the company. He also told Alexander that Manuel had fired him.
After talking to Manuel, Alexander terminated Lebatique and told him to look for
another job. HCETDS

On March 20, 2000, Lebatique filed a complaint for illegal dismissal and
nonpayment of overtime pay. The Labor Arbiter found that Lebatique was illegally
dismissed, and ordered his reinstatement and the payment of his full back wages,
13th month pay, service incentive leave pay, and overtime pay. The dispositive
portion of the decision is quoted herein in full, as follows:

WHEREFORE, we find the termination of complainant illegal. He should thus be

ordered reinstated with full backwages. He is likewise ordered paid his 13th month
pay, service incentive leave pay and overtime pay as computed by the Computation
and Examination Unit as follows:
a) Backwages:

01/25/00 - 10/31/00 = 9.23 mos.

P223.50 x 26 x 9.23 = P53,635.53

11/01/00 - 06/26/01 = 7.86 mos.

P250.00 x 26 x 7.86 = 51,090.00 P104,725.53

13th Month Pay: 1/12 of P104,725.53 = 8,727.13

Service Incentive Leave Pay

01/25/00 - 10/31/00 = 9.23 mos.

P223.50 x 5/12 x 9.23 = P859.54

11/01/00 - 06/26/01 = 7.86 mos.

P250.00 x 5/12 x 7.86 = [818.75] 1,678.29 115,130.95

b) Overtime Pay: (3 hours/day)

03/20/97 - 4/30/97 = 1.36 mos.

P180/8 x 1.25 x 3 x 26 x 1.36 = P2,983.50

05/01/97 - 02/05/98 = 9.16 mos.

P185/8 x 1.25 x 3 x 26 x 9.16 = 20,652.94

02/06/98 - 10/30/99 = 20.83 mos.

P198/8 x 1.25 x 3 x 26 x [20.83] = 50,265.39

10/31/99 - 01/24/00 = 2.80 mos.

P223.50/8 x 1.25 x 3 x 26 x 2.80 = 7,626.94 81,528.77

TOTAL AWARD P196,659.72

SO ORDERED. 5

On appeal, the NLRC reversed the Labor Arbiter and dismissed the complaint for
lack of merit. The NLRC held that there was no dismissal to speak of since Lebatique
was merely suspended. Further, it found that Lebatique was a field personnel,
hence, not entitled to overtime pay and service incentive leave pay. Lebatique
sought reconsideration but was denied. ASTIED

Aggrieved, Lebatique filed a petition for certiorari with the Court of Appeals.
The Court of Appeals, in reversing the NLRC decision, reasoned that Lebatique was
suspended on January 24, 2000 but was illegally dismissed on January 29, 2000
when Alexander told him to look for another job. It also found that Lebatique was
not a field personnel and therefore entitled to payment of overtime pay, service
incentive leave pay, and 13th month pay.

It reinstated the decision of the Labor Arbiter as follows:

WHEREFORE, premises considered, the decision of the NLRC dated 27 December

2002 is hereby REVERSED and the Labor Arbiter's decision dated 27 June 2001
REINSTATED.

SO ORDERED. 6

Petitioners moved for reconsideration but it was denied.

Hence, the instant petition wherein petitioners assign the following errors:

THE COURT OF APPEALS . . . ERRED IN REVERSING THE DECISION OF THE NATIONAL

LABOR RELATIONS COMMISSION DATED 15 OCTOBER 2002 AND IN RULING THAT
THE PRIVATE RESPONDENT WAS ILLEGALLY DISMISSED.

THE COURT OF APPEALS . . . ERRED IN REVERSING THE DECISION OF THE NATIONAL

LABOR RELATIONS COMMISSION DATED 15 OCTOBER 2002 AND IN RULING THAT
PRIVATE RESPONDENT IS NOT A FIELD PERSONNEL AND THER[E]FORE ENTITLED TO
OVERTIME PAY AND SERVICE INCENTIVE LEAVE PAY.

THE COURT OF APPEALS . . . ERRED IN NOT DISMISSING THE PETITION FOR

CERTIORARI FOR FAILURE OF PRIVATE RESPONDENT TO ATTACH CERTIFIED TRUE
COPIES OF THE QUESTIONED DECISION AND RESOLUTION OF THE PUBLIC
RESPONDENT. 7

Simply stated, the principal issues in this case are: (1) whether Lebatique was
illegally dismissed; and (2) whether Lebatique was a field personnel, not entitled to
overtime pay.

Petitioners contend that, (1) Lebatique was not dismissed from service but merely
suspended for a day due to violation of company rules; (2) Lebatique was not
barred from entering the company premises since he never reported back to work;
and (3) Lebatique is estopped from claiming that he was illegally dismissed since
his complaint before the DOLE was only on the nonpayment of his overtime pay.

Also, petitioners maintain that Lebatique, as a driver, is not entitled to overtime pay
since he is a field personnel whose time outside the company premises cannot be
determined with reasonable certainty. According to petitioners, the drivers do not
observe regular working hours unlike the other office employees. The drivers may
report early in the morning to make their deliveries or in the afternoon, depending
on the production of animal feeds and the traffic conditions. Petitioners also aver
that Lebatique worked for less than eight hours a day. 8

Lebatique for his part insists that he was illegally dismissed and was not merely
suspended. He argues that he neither refused to work nor abandoned his job. He
further contends that abandonment of work is inconsistent with the filing of a
complaint for illegal dismissal. He also claims that he is not a field personnel, thus,
he is entitled to overtime pay and service incentive leave pay.

After consideration of the submission of the parties, we find that the petition lacks
merit. We are in agreement with the decision of the Court of Appeals sustaining that
of the Labor Arbiter.

It is well settled that in cases of illegal dismissal, the burden is on the employer to
prove that the termination was for a valid cause. 9 In this case, petitioners failed to
discharge such burden. Petitioners aver that Lebatique was merely suspended for
one day but he abandoned his work thereafter. To constitute abandonment as a just
cause for dismissal, there must be: (a) absence without justifiable reason; and (b) a
clear intention, as manifested by some overt act, to sever the employer-employee
relationship. 10

The records show that petitioners failed to prove that Lebatique abandoned his job.
Nor was there a showing of a clear intention on the part of Lebatique to sever the
employer-employee relationship. When Lebatique was verbally told by Alexander
Uy, the company's General Manager, to look for another job, Lebatique was in effect
dismissed. Even assuming earlier he was merely suspended for illegal use of
company vehicle, the records do not show that he was afforded the opportunity to
explain his side. It is clear also from the sequence of the events leading to
Lebatique's dismissal that it was Lebatique's complaint for nonpayment of his
overtime pay that provoked the management to dismiss him, on the erroneous
premise that a truck driver is a field personnel not entitled to overtime pay.
DaEcTC

An employee who takes steps to protest his layoff cannot by any stretch of
imagination be said to have abandoned his work and the filing of the complaint is
proof enough of his desire to return to work, thus negating any suggestion of
abandonment. 11 A contrary notion would not only be illogical but also absurd.

It is immaterial that Lebatique had filed a complaint for nonpayment of overtime

pay the day he was suspended by management's unilateral act. What matters is
that he filed the complaint for illegal dismissal on March 20, 2000, after he was told
not to report for work, and his filing was well within the prescriptive period allowed
under the law.

On the second issue, Article 82 of the Labor Code is decisive on the question of who
are referred to by the term "field personnel." It provides, as follows:
ART. 82. Coverage. — The provisions of this title [Working Conditions and Rest
Periods] shall apply to employees in all establishments and undertakings whether
for profit or not, but not to government employees, managerial employees, field
personnel, members of the family of the employer who are dependent on him for
support, domestic helpers, persons in the personal service of another, and workers
who are paid by results as determined by the Secretary of Labor in appropriate
regulations.

xxx xxx xxx

"Field personnel" shall refer to non-agricultural employees who regularly perform

their duties away from the principal place of business or branch office of the
employer and whose actual hours of work in the field cannot be determined with
reasonable certainty.

In Auto Bus Transport Systems, Inc. v. Bautista, 12 this Court emphasized that the
definition of a "field personnel" is not merely concerned with the location where the
employee regularly performs his duties but also with the fact that the employee's
performance is unsupervised by the employer. We held that field personnel are
those who regularly perform their duties away from the principal place of business
of the employer and whose actual hours of work in the field cannot be determined
with reasonable certainty. Thus, in order to determine whether an employee is a
field employee, it is also necessary to ascertain if actual hours of work in the field
can be determined with reasonable certainty by the employer. In so doing, an
inquiry must be made as to whether or not the employee's time and performance
are constantly supervised by the employer. 13

As correctly found by the Court of Appeals, Lebatique is not a field personnel as

defined above for the following reasons: (1) company drivers, including Lebatique,
are directed to deliver the goods at a specified time and place; (2) they are not
given the discretion to solicit, select and contact prospective clients; and (3) Far
East issued a directive that company drivers should stay at the client's premises
during truck-ban hours which is from 5:00 to 9:00 a.m. and 5:00 to 9:00 p.m. 14
Even petitioners admit that the drivers can report early in the morning, to make
their deliveries, or in the afternoon, depending on the production of animal feeds.
15 Drivers, like Lebatique, are under the control and supervision of management
officers. Lebatique, therefore, is a regular employee whose tasks are usually
necessary and desirable to the usual trade and business of the company. Thus, he
is entitled to the benefits accorded to regular employees of Far East, including
overtime pay and service incentive leave pay.

Note that all money claims arising from an employer-employee relationship shall be
filed within three years from the time the cause of action accrued; otherwise, they
shall be forever barred. 16 Further, if it is established that the benefits being
claimed have been withheld from the employee for a period longer than three
years, the amount pertaining to the period beyond the three-year prescriptive
period is therefore barred by prescription. The amount that can only be demanded
by the aggrieved employee shall be limited to the amount of the benefits withheld
within three years before the filing of the complaint. 17

Lebatique timely filed his claim for service incentive leave pay, considering that in
this situation, the prescriptive period commences at the time he was terminated. 18
On the other hand, his claim regarding nonpayment of overtime pay since he was
hired in March 1996 is a different matter. In the case of overtime pay, he can only
demand for the overtime pay withheld for the period within three years preceding
the filing of the complaint on March 20, 2000. However, we find insufficient the
selected time records presented by petitioners to compute properly his overtime
pay. The Labor Arbiter should have required petitioners to present the daily time
records, payroll, or other documents in management's control to determine the
correct overtime pay due Lebatique.

WHEREFORE, the petition is DENIED for lack of merit. The Decision dated September
30, 2003 of the Court of Appeals in CA-G.R. SP No. 76196 and its Resolution dated
March 15, 2004 are AFFIRMED with MODIFICATION to the effect that the case is
hereby REMANDED to the Labor Arbiter for further proceedings to determine the
exact amount of overtime pay and other monetary benefits due Jimmy Lebatique
which herein petitioners should pay without further delay. EAaHTI

Costs against petitioners.

SO ORDERED.

ROWELL INDUSTRIAL CORPORATION, petitioner, vs. HON. COURT OF APPEALS and

JOEL TARIPE, respondents.

DECISION

CHICO-NAZARIO, J p:

This case is a Petition for Review under Rule 45 of the 1997 Revised Rules of Civil
Procedure seeking to set aside the Decision 1 and Resolution 2 of the Court of
Appeals in CA-G.R. SP No. 74104, entitled, Rowell Industrial Corp., and/or Edwin
Tang vs. National Labor Relations Commission and Joel Taripe, dated 30 September
2004 and 1 April 2005, respectively, which affirmed the Resolutions 3 of the
National Labor Relations Commission (NLRC) dated 7 June 2002 and 20 August
2002, finding herein respondent Joel Taripe (Taripe) as a regular employee who had
been illegally dismissed from employment by herein petitioner Rowell Industrial
Corp. (RIC), thereby ordering petitioner RIC to reinstate respondent Taripe with full
backwages, subject to the modification of exonerating Edwin Tang, the RIC General
Manager and Vice President, from liability and computing the backwages of herein
respondent Taripe based on the prevailing salary rate at the time of his dismissal.
The NLRC Resolutions reversed the Decision 4 of the Labor Arbiter dated 29
September 2000, which dismissed respondent Taripe's complaint. aIAEcD

Petitioner RIC is a corporation engaged in manufacturing tin cans for use in

packaging of consumer products, e.g., foods, paints, among other things.
Respondent Taripe was employed by petitioner RIC on 8 November 1999 as a
"rectangular power press machine operator" with a salary of P223.50 per day, until
he was allegedly dismissed from his employment by the petitioner on 6 April 2000.

The controversy of the present case arose from the following facts, as summarized
by the NLRC and the Court of Appeals:

On [17 February 2000], [herein respondent Taripe] filed a [C]omplaint against

[herein petitioner RIC] for regularization and payment of holiday pay, as well as
indemnity for severed finger, which was amended on [7 April 2000] to include illegal
dismissal. [Respondent Taripe] alleges that [petitioner RIC] employed him starting
[8 November 1999] as power press machine operator, such position of which was
occupied by [petitioner RIC's] regular employees and the functions of which were
necessary to the latter's business. [Respondent Taripe] adds that upon
employment, he was made to sign a document, which was not explained to him but
which was made a condition for him to be taken in and for which he was not
furnished a copy. [Respondent Taripe] states that he was not extended full benefits
granted under the law and the [Collective Bargaining Agreement] and that on [6
April 2000], while the case for regularization was pending, he was summarily
dismissed from his job although he never violated any of the [petitioner RIC's]
company rules and regulations.

[Petitioner RIC], for [its] part, claim[s] that [respondent Taripe] was a contractual
employee, whose services were required due to the increase in the demand in
packaging requirement of [its] clients for Christmas season and to build up stock
levels during the early part of the following year; that on [6 March 2000],
[respondent Taripe's] employment contract expired. [Petitioner RIC] avers that the
information update for union members, which was allegedly filled up by [respondent
Taripe] and submitted by the Union to [petitioner] company, it is stated therein that
in the six (6) companies where [respondent Taripe] purportedly worked, the latter's
reason for leaving was "finished contract," hence, [respondent Taripe] has
knowledge about being employed by contract contrary to his allegation that the
document he was signing was not explained to him. [Petitioner RIC] manifest[s] that
all benefits, including those under the [Social Security System], were given to him
on [12 May 2000]. 5

On 29 September 2000, the Labor Arbiter rendered a Decision dismissing

respondent Taripe's Complaint based on a finding that he was a contractual
employee whose contract merely expired. The dispositive portion of the said
Decision reads, thus:
WHEREFORE, premises considered, judgment is hereby rendered declaring this
complaint of [herein respondent Taripe] against [herein petitioner RIC] and Mr.
Edwin Tang for illegal dismissal DISMISSED for lack of merit. However, on ground of
compassionate justice, [petitioner RIC and Mr. Edwin Tang] are hereby ordered to
pay [respondent Taripe] the sum of PHP5,811.00 or one month's salary as financial
assistance and holiday pay in the sum of PHP894.00, as well as attorney's fees of
10% based on holiday pay (Article 110, Labor Code). 6

Aggrieved, respondent Taripe appealed before the NLRC. In a Resolution dated 7

June 2002, the NLRC granted the appeal filed by respondent Taripe and declared
that his employment with the petitioner was regular in status; hence, his dismissal
was illegal. The decretal portion of the said Resolution reads as follows:

WHEREFORE, premises considered, [herein respondent Taripe's] appeal is

GRANTED. The Labor Arbiter's [D]ecision in the above-entitled case is hereby
REVERSED. It is hereby declared that [respondent Taripe's] employment with
[herein petitioner RIC and Mr. Edwin Tang] is regular in status and that he was
illegally dismissed therefrom. STHAID

[Petitioner RIC and Mr. Edwin Tang] are hereby ordered to reinstate [respondent
Taripe] and to jointly and severally pay him full backwages from the time he was
illegally dismissed up to the date of his actual reinstatement, less the amount of
P1,427.67. The award of P894.00 for holiday pay is AFFIRMED but the award of
P5,811.00 for financial assistance is deleted. The award for attorney's fees is hereby
adjusted to ten percent (10%) of [respondent Taripe's] total monetary award. 7

Dissatisfied, petitioner RIC moved for the reconsideration of the aforesaid

Resolution but it was denied in the Resolution of the NLRC dated 20 August 2002.

Consequently, petitioner filed a Petition for Certiorari under Rule 65 of the 1997
Revised Rules of Civil Procedure before the Court of Appeals with the following
assignment of errors:

I. THE [NLRC] GRAVELY ABUSED ITS DISCRETION AND IS IN EXCESS OF ITS

JURISDICTION WHEN IT MISINTERPRETED ARTICLE 280 OF THE LABOR CODE AND
IGNORED JURISPRUDENCE WHEN IT DECIDED THAT [RESPONDENT TARIPE] IS A
REGULAR EMPLOYEE AND THUS, ILLEGALLY DISMISSED.

II. THE [NLRC] GRAVELY ABUSED ITS DISCRETION AND IS IN EXCESS OF ITS
JURISDICTION WHEN IT ORDERED [EDWIN TANG] TO (sic) JOINTLY AND SEVERALLY
LIABLE FOR MONETARY CLAIMS OF [RESPONDENT TARIPE].

III. THE [NLRC] GRAVELY ABUSED ITS DISCRETION AND IS IN EXCESS OF ITS
JURISDICTION WHEN IT ORDERED PAYMENT OF MONETARY CLAIMS COMPUTED ON
AN ERRONEOUS WAGE RATE. 8
The Court of Appeals rendered the assailed Decision on 30 September 2004,
affirming the Resolution of the NLRC dated 7 June 2002, with modifications. Thus, it
disposed —

WHEREFORE, the Resolutions dated [7 June 2002] and [20 August 2002] of [the
NLRC] are affirmed, subject to the modification that [Edwin Tang] is exonerated
from liability and the computation of backwages of [respondent Taripe] shall be
based on P223.50, the last salary he received. 9

A Motion for Reconsideration of the aforesaid Decision was filed by petitioner RIC,
but the same was denied for lack of merit in a Resolution 10 of the Court of Appeals
dated 1 April 2005. acCTSE

Hence, this Petition.

Petitioner RIC comes before this Court with the lone issue of whether the Court of
Appeals misinterpreted Article 280 of the Labor Code, as amended, and ignored
jurisprudence when it affirmed that respondent Taripe was a regular employee and
was illegally dismissed.

Petitioner RIC, in its Memorandum, 11 argues that the Court of Appeals had
narrowly interpreted Article 280 of the Labor Code, as amended, and disregarded a
contract voluntarily entered into by the parties.

Petitioner RIC emphasizes that while an employee's status of employment is vested

by law pursuant to Article 280 of the Labor Code, as amended, said provision of law
admits of two exceptions, to wit: (1) those employments which have 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 employment; and (2) when the
work or services to be performed are seasonal; hence, the employment is for the
duration of the season. Thus, there are certain forms of employment which entail
the performance of usual and desirable functions and which exceed one year but do
not necessarily qualify as regular employment under Article 280 of the Labor Code,
as amended.

The Petition is unmeritorious.

A closer examination of Article 280 of the Labor Code, as amended, is imperative to

resolve the issue raised in the present case.

In declaring that respondent Taripe was a regular employee of the petitioner and,
thus, his dismissal was illegal, the Court of Appeals ratiocinated in this manner:

In determining the employment status of [herein respondent Taripe], reference

must be made to Article 280 of the Labor Code, which provides:

xxx xxx xxx

Thus, there are two kinds of regular employees, namely: (1) those who are engaged
to perform activities which are usually necessary or desirable in the usual business
or trade of the employer; and (2) those who have rendered at least one year of
service, whether continuous or broken, with respect to the activity in which they are
employed. [Respondent Taripe] belonged to the first category of regular employees.
DTESIA

The purported contract of employment providing that [respondent Taripe] was hired
as contractual employee for five (5) months only, cannot prevail over the
undisputed fact that [respondent Taripe] was hired to perform the function of power
press operator, a function necessary or desirable in [petitioner's] business of
manufacturing tin cans. [Herein petitioner RIC's] contention that the four (4) months
length of service of [respondent Taripe] did not grant him a regular status is
inconsequential, considering that length of service assumes importance only when
the activity in which the employee has been engaged to perform is not necessary or
desirable to the usual business or trade of the employer.

As aptly ruled by [the NLRC]:

"In the instant case, there is no doubt that [respondent Taripe], as power press
operator, has been engaged to perform activities which are usually necessary or
desirable in [petitioner RIC's] usual business or trade of manufacturing of tin cans
for use in packaging of food, paint and others. We also find that [respondent Taripe]
does not fall under any of the abovementioned exceptions. Other that (sic)
[petitioner RIC's] bare allegation thereof, [it] failed to present any evidence to prove
that he was employed for a fixed or specific project or undertaking the completion
of which has been determined at the time of his engagement or that [respondent
Taripe's] services are seasonal in nature and that his employment was for the
duration of the season." 12

Article 280 of the Labor Code, as amended, provides:

ART. 280. REGULAR AND CASUAL EMPLOYMENT. — The provisions of written

agreement to the contrary notwithstanding and regardless of the oral agreement of
the parties, an employment shall be deemed to be regular where the employee has
been engaged to perform activities which are usually necessary or desirable in the
usual business or trade of the employer, except where the employment has been
fixed for a specific project or undertaking the completion or termination of which
has been determined at the time of 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. IDTSaC

An employment shall be deemed to be casual if it is not covered by the preceding

paragraph: Provided, That, any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his employment
shall continue while such activity exists. [Emphasis supplied]

The aforesaid Article 280 of the Labor Code, as amended, classifies employees into
three categories, namely: (1) regular employees or those whose work is necessary
or desirable to the usual business of the employer; (2) project employees or those
whose employment has been fixed for a specific project or undertaking, the
completion or termination of which has been determined at the time of the
engagement of the employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the season; and (3)
casual employees or those who are neither regular nor project employees. 13

Regular employees are further classified into: (1) regular employees by nature of
work; and (2) regular employees by years of service. 14 The former refers to those
employees who perform a particular activity which is necessary or desirable in the
usual business or trade of the employer, regardless of their length of service; while
the latter refers to those employees who have been performing the job, regardless
of the nature thereof, for at least a year. 15

The aforesaid Article 280 of the Labor Code, as amended, however, does not
proscribe or prohibit an employment contract with a fixed period. It does not
necessarily follow that where the duties of the employee consist of activities usually
necessary or desirable in the usual business of the employer, the parties are
forbidden from agreeing on a period of time for the performance of such activities.
There is nothing essentially contradictory between a definite period of employment
and the nature of the employee's duties. 16 What Article 280 of the Labor Code, as
amended, seeks to prevent is the practice of some unscrupulous and covetous
employers who wish to circumvent the law that protects lowly workers from
capricious dismissal from their employment. The aforesaid provision, however,
should not be interpreted in such a way as to deprive employers of the right and
prerogative to choose their own workers if they have sufficient basis to refuse an
employee a regular status. Management has rights which should also be protected.
17

In the case at bar, respondent Taripe signed a contract of employment prior to his
admission into the petitioner's company. Said contract of employment provides,
among other things:

4. That my employment shall be contractual for the period of five (5) months
which means that the end of the said period, I can (sic) discharged unless this
contract is renewed by mutual consent or terminated for cause. 18

Based on the said contract, respondent Taripe's employment with the petitioner is
good only for a period of five months unless the said contract is renewed by mutual
consent. And as claimed by petitioner RIC, respondent Taripe, along with its other
contractual employees, was hired only to meet the increase in demand for
packaging materials during the Christmas season and also to build up stock levels
during the early part of the year. SaDICE

Although Article 280 of the Labor Code, as amended, does not forbid fixed term
employment, it must, nevertheless, meet any of the following guidelines in order
that it cannot be said to circumvent security of tenure: (1) that the fixed period of
employment was knowingly and voluntarily agreed upon by the parties, without any
force, duress or improper pressure being brought to bear upon the employee and
absent any other circumstances vitiating his consent; or (2) it satisfactorily appears
that the employer and employee dealt with each other on more or less equal terms
with no moral dominance whatever being exercised by the former on the latter. 19

In the present case, it cannot be denied that the employment contract signed by
respondent Taripe did not mention that he was hired only for a specific undertaking,
the completion of which had been determined at the time of his engagement. The
said employment contract neither mentioned that respondent Taripe's services
were seasonal in nature and that his employment was only for the duration of the
Christmas season as purposely claimed by petitioner RIC. What was stipulated in
the said contract was that respondent Taripe's employment was contractual for the
period of five months.

Likewise, as the NLRC mentioned in its Resolution, to which the Court of Appeals
agreed, other than the bare allegations of petitioner RIC that respondent Taripe was
hired only because of the increase in the demand for packaging materials during
the Christmas season, petitioner RIC failed to substantiate such claim with any
other evidence. Petitioner RIC did not present any evidence which might prove that
respondent Taripe was employed for a fixed or specific project or that his services
were seasonal in nature.

Also, petitioner RIC failed to controvert the claim of respondent Taripe that he was
made to sign the contract of employment, prepared by petitioner RIC, as a condition
for his hiring. Such contract in which the terms are prepared by only one party and
the other party merely affixes his signature signifying his adhesion thereto is called
contract of adhesion. 20 It is an agreement in which the parties bargaining are not
on equal footing, the weaker party's participation being reduced to the alternative
"to take it or leave it." 21 In the present case, respondent Taripe, in need of a job,
was compelled to agree to the contract, including the five-month period of
employment, just so he could be hired. Hence, it cannot be argued that respondent
Taripe signed the employment contract with a fixed term of five months willingly
and with full knowledge of the impact thereof. aDSTIC

With regard to the second guideline, this Court agrees with the Court of Appeals
that petitioner RIC and respondent Taripe cannot be said to have dealt with each
other on more or less equal terms with no moral dominance exercised by the former
over the latter. As a power press operator, a rank and file employee, he can hardly
be on equal terms with petitioner RIC. As the Court of Appeals said, "almost always,
employees agree to any terms of an employment contract just to get employed
considering that it is difficult to find work given their ordinary qualifications." 22

Therefore, for failure of petitioner RIC to comply with the necessary guidelines for a
valid fixed term employment contract, it can be safely stated that the aforesaid
contract signed by respondent Taripe for a period of five months was a mere
subterfuge to deny to the latter a regular status of employment.

Settled is the rule that the primary standard of determining regular employment is
the reasonable connection between the particular activity performed by the
employee in relation to the casual business or trade of the employer. The
connection can be determined by considering the nature of the work performed and
its relation to the scheme of the particular business or trade in its entirety. 23

Given the foregoing, this Court agrees in the findings of the Court of Appeals and
the NLRC that, indeed, respondent Taripe, as a rectangular power press machine
operator, in charge of manufacturing covers for "four liters rectangular tin cans,"
was holding a position which is necessary and desirable in the usual business or
trade of petitioner RIC, which was the manufacture of tin cans. Therefore,
respondent Taripe was a regular employee of petitioner RIC by the nature of work
he performed in the company.

Respondent Taripe does not fall under the exceptions mentioned in Article 280 of
the Labor Code, as amended, because it was not proven by petitioner RIC that he
was employed only for a specific project or undertaking or his employment was
merely seasonal. Similarly, the position and function of power press operator cannot
be said to be merely seasonal. Such position cannot be considered as only needed
for a specific project or undertaking because of the very nature of the business of
petitioner RIC. Indeed, respondent Taripe is a regular employee of petitioner RIC
and as such, he cannot be dismissed from his employment unless there is just or
authorized cause for his dismissal. CTAIHc

Well-established is the rule that regular employees enjoy security of tenure and
they can only be dismissed for just cause and with due process, notice and hearing.
24 And in case of employees' dismissal, the burden is on the employer to prove that
the dismissal was legal. Thus, respondent Taripe's summary dismissal, not being
based on any of the just or authorized causes enumerated under Articles 282, 25
283, 26 and 284 27 of the Labor Code, as amended, is illegal.

Before concluding, we once more underscore the settled precept that factual
findings of the NLRC, having deemed to acquire expertise in matters within its
jurisdiction, are generally accorded not only respect but finality especially when
such factual findings are affirmed by the Court of Appeals; 28 hence, such factual
findings are binding on this Court.
WHEREFORE, premises considered, the instant Petition is hereby DENIED. The
Decision and Resolution of the Court of Appeals dated 30 September 2004 and 1
April 2005, respectively, which affirmed with modification the Resolutions of the
NLRC dated 7 June 2002 and 20 August 2002, respectively, finding herein
respondent Taripe as a regular employee who had been illegally dismissed from
employment by petitioner RIC, are hereby AFFIRMED. Costs against petitioner RIC.

PNOC-ENERGY DEV'T. CORP. vs. NLRC, ET AL.

THIRD DIVISION

[G.R. No. 169353. April 13, 2007.]

PNOC-ENERGY DEVELOPMENT CORPORATION, Southern Negros Geothermal Project,

petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, Fourth Division, Cebu
City, and PNOC-EDC, SNGPEU-ASSOCIATED LABOR UNIONS-TUCP, LEONORA A.
TORRES, ALEJANDRO B. TABAÑERA, JR., ARNEL T. AMOR, ROSELA S. CALIMPONG,
WILSON D. NUAY, and ROBERTO S. RENZAL, respondents.

DECISION

CALLEJO, SR., J p:

Before the Court is a Petition for Review on Certiorari of the Decision 1 of the Court
of Appeals (CA) in CA-G.R. SP No. 77584 as well as its Resolution 2 dated August 11,
2005. HCIaDT

The antecedents are as follows:

Petitioner PNOC-Energy Development Corporation is a government-owned and

controlled corporation engaged in the exploration, development, and utilization of
energy. It undertakes several projects in areas where geothermal energy has been
discovered. Each geothermal project undergoes the stages of exploration,
development, and utilization or production. For each stage, several activities are
undertaken such as drilling, construction, civil works, structural works, mechanical
works, and electrical works until the project is finally completed. Aside from its
projects in Negros Oriental, petitioner also had geothermal projects in Negros
Occidental, Leyte, Albay, Sorsogon, and North Cotabato. aEACcS

Petitioner's Southern Negros Geothermal Production Field in Negros Oriental is

divided into two phases: Palinpinon I (PAL I) and Palinpinon II (PAL II). To augment
its manpower requirement occasioned by the increased activities in the
development of PAL II, petitioner hired the following employees in the
Administration and Maintenance Section: DAaHET

Name Date Hired Position Date Separated

1) Leonora Torres July 3, 1995 Clerk/Typist June 30, 1998

2) Rosela Calimpong July 1, 1997 Clerk/Typist June 30, 1998

3) Arnel Amor May 24, 1995 Helper Mechanic June 30, 1998

4) Wilson Nuay May 16, 1995 Service Driver June 30, 1998

5) Roberto Renzal January 25, 1995 Pipe Fitter June 30, 1998

6) Alejandro Tabañera February 27, 1996 Mechanic June 30, 1998

The termination/expiration of their respective employment were specified in their

initial employment contracts, which, however, were renewed and extended on their
respective expiry dates.

On May 29, 1998, petitioner submitted reports 3 to the Department of Labor and
Employment (DOLE) Regional Sub-Branch No. VII in Dumaguete City, stating that six
of its employees were being terminated. CSIDEc

Petitioner thereafter furnished the employees uniformly worded notices of

termination, stating that they were being terminated from employment effective
June 30, 1998 due to the substantial completion of the civil works phase of PAL II.

On October 29, 1998, the six employees, herein respondents, filed before the
National Labor Relations Commission (NLRC) a complaint for illegal dismissal
against petitioner. Aside from reinstatement, respondents sought the payment of
backwages, salary differential, collective bargaining agreement benefits, damages
and attorney's fees. cETDIA

In their Position Paper, respondents averred that they had rendered continuous and
satisfactory services from the dates of their respective employment until illegally
dismissed on June 30, 1998:

NAMES MONTHS and YEARS OF

SERVICE

1) Arnel Amor 3 years and 1 month

2) Rosela Calimpong 2 years and 11 months

3) Wilson Nuay 3 years and 1 month

4) Roberto Renzal 3 years and 5 months

5) Alejandro Tabañera 2 years and 4 months

6) Leonora Torres 2 years and 11 months

Respondents further contended that their dismissal from employment was a clear
case of union busting for they had previously sought union membership and
actually filed a notice of strike. aEIADT

For its part, petitioner asseverated that respondents were contractual employees;
as such, they cannot claim to have been illegally dismissed because upon the
expiration of the term of the contract or the completion of the project, their
employer-employee relationship also ended. cDIHES

After evaluating the evidence presented, the Labor Arbiter rendered judgment
dismissing the complaint for lack of legal and factual basis. 4 The Labor Arbiter
ruled that respondents were not dismissed from work; the employer-employee
relationship between the parties was severed upon the expiration of the respective
contracts of respondents and the completion of the projects concerned. ASTIED

Not satisfied, respondents interposed an appeal to the NLRC which rendered

judgment reversing the decision of the Labor Arbiter. The dispositive portion reads:

WHEREFORE, the decision of the Labor Arbiter dated May 31, 1999 is SET ASIDE and
a new one is rendered ORDERING the respondent the following: SEHACI

(1) to immediately reinstate the following complainants to their respective

positions without loss of seniority rights and other privileges:

a) LEONORA TORRES

b) ARNEL AMOR

c) WILSON NUAY

d) ROBERTO RENZAL, and

e) ALEJANDRO TABAÑERA;

(2) to pay each of the complainants his/her backwages from July 1, 1998 until
actual reinstatement at the rate of P116.00 per day plus his/her 13th month pay
and service incentive leave pay for the same period. acCDSH

(3) to pay attorney's fees equivalent to ten percent (10%) of the total award.

The claim of Rosela Calimpong is dismissed for lack of merit.

SO ORDERED. 5

The NLRC ratiocinated that respondents were regular non-project employees for
having worked for more than one year in positions that required them to perform
activities necessary and desirable in the normal business or trade of petitioner. The
NLRC further ruled that the employment contracts of respondents were not for a
specific project or for a fixed period. According to the NLRC, the dismissals made on
June 30, 1998 under the pretext of project completion were illegal, being founded
on an invalid, unjust, and unauthorized cause. DAaIEc

Respondents filed a motion for reconsideration, which the NLRC denied with
modification in a Resolution 6 dated March 19, 2003. Only respondent Rosela
Calimpong was granted relief. ICDSca

Aggrieved, petitioner filed a petition for certiorari before the CA seeking to have the
NLRC decision reversed. It claimed that respondents were engaged for one definite
phase of petitioner's geothermal project, the execution and implementation of the
civil works portion of the Fluid Collection and Disposal System (FCDS) and
Associated Work Projects. Petitioner averred that at the time of respondents'
termination, the projects had already been substantially if not fully completed.
cDCSTA

On August 31, 2004, the CA dismissed the petition. The fallo of the decision reads:

WHEREFORE, premises considered, the petition is hereby DENIED. The assailed May
23, 2001 Decision and March 19, 2003 Resolution of the National Labor Relations
Commission, Fourth Division of Cebu City are AFFIRMED. aCcEHS

SO ORDERED. 7

The CA ruled that respondents were performing activities necessary and desirable
in the normal operations of the business of petitioner. The appellate court explained
that the repeated re-hiring and the continuing need for the services of the project
employees over a span of time had made them regular employees. The motion for
reconsideration filed by petitioner was denied by the CA in its Resolution 8 dated
August 11, 2005. HDIaST

Petitioner sought relief from this Court via petition for review on certiorari.

The pivotal questions involved in this case for our resolution are: (a) whether
respondents were project employees or regular employees; and (b) whether or not
they were illegally dismissed from employment. cDaEAS

Petitioner argues that respondents are project employees because as gleaned from
their standard contracts of employment, they were hired for a specific project or
undertaking, the completion or termination of which had been determined at the
time of their engagement. Their contracts clearly indicated the completion or
termination of the specific project or of the specific phase thereof at the time they
were engaged.

For their part, respondents posit that they were undeniably performing activities
which are necessary or desirable in the usual trade or business of petitioner. They
aver that the completion of their individual employment was not determined at the
time of their engagement due to the fact that their contracts were renewed and
extended over and over again. They claim that had the periods of their employment
been determined, then their work with petitioner would not have lasted beyond the
three-month period provided in their respective initial employment contracts. They
likewise theorized that the contracts they signed were short-term contracts
covering a long period of the same activity, not for a specific project or undertaking.
CAaSHI

The contentions of petitioner have no merit.

Customarily, the findings made by the NLRC are afforded great respect and are
even clothed with finality and considered binding on this Court, except that when
such findings are contrary to those of the Labor Arbiter, this Court may elect to re-
examine the same, as we shall do in this case now.

Article 280 of the Labor Code of the Philippines states —

Article 280. REGULAR AND CASUAL EMPLOYEES. — 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. cDACST

An employment shall be deemed to be casual if it is not covered by the preceding

paragraph. Provided, That, any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his employment
shall continue while such activity exists. SEACTH

Thus, the applicable formula to ascertain whether an employment should be

considered regular or non-regular is the reasonable connection between the
particular activity performed by the employee in relation to the usual business or
trade of the employer. 9 As we held in Grandspan Development Corporation v.
Bernardo: 10

The principal test for determining whether particular employees are properly
characterized as "project employees," as distinguished from "regular employees," is
whether or not the project employees were assigned to carry out a "specific project
or undertaking," the duration and scope of which were specified at the time the
employees were engaged for that project. 11 cSEaDA

As defined, project employees are those workers hired (1) for a specific project or
undertaking, and (2) the completion or termination of such project or undertaking
has been determined at the time of the engagement of the employee. 12 However,
petitioner failed to substantiate its claim that respondents were hired merely as
project employees. A perusal of the records of the case reveals that the supposed
specific project or undertaking of petitioner was not satisfactorily identified in the
contracts of respondents. To illustrate, the following is a list of the names of
respondents and the projects written in their employment contracts:

NAMES PROJECT NAME

Leonora A. Torres Additional Manpower cover additional workloads of PAL

II transferred to PAL I Operations, 13 PAL II Transfer to

PAL I Operations 14

Arnel T. Amor EDC-Drilling, 15 Maintenance of Drilling Materials, 16

Assist in Repair Maintenance of Vehicles/Equipments at

Equipment Maintenance Section 17

Wilson D. Nuay EDC Drilling Activities, 18 Rig #3 Operation on

OK-3RWOBL-2DWO, 19 Maintenance of Drilling Materials, 20

LG4D Drilling Operation, 21 SNGP FCDS Project, 22

Fabrication Personal Driver for CD Turned-Over Projects 23

Roberto S. Renzal PAL II FCDS Nasuji-NJA RI Line and Associated Works, 24

PAL II FCDS PN33/PN25 Branchline/Nasuji-NJA-Sogongon, 25

SNGP FCDS Project, 26 Cawayan Restoration Works, 27

SNGP FCDS Project PAL I/PAL II Refurbishments, 28

Support Workload increase in Fabrication/Equipment

Maintenance Section 29

Alejandro B. Tabañera, Jr. Temporary Increase in Workload of Maintenance and

Repair Activities of Light and Heavy Equipment, 30

Troubleshooting/Repair of All Equipments 31

Rosela S. Calimpong PAL II Transfer to PAL I Operations Clerical Workloads, 32

Additional Manpower to cover additional workloads of PAL

 II transferred to PAL I Operations 33

Unmistakably, the alleged projects stated in the employment contracts were either
too vague or imprecise to be considered as the "specific undertaking" contemplated
by law. Petitioner's act of repeatedly and continuously hiring respondents to do the
same kind of work belies its contention that respondents were hired for a specific
project or undertaking. The absence of a definite duration for the project/s has led
the Court to conclude that respondents are, in fact, regular employees. CHDAaS

Another cogent factor which militates against petitioner's insistence that the
services of respondents were terminated because the projects for which they were
hired had been completed is the fact that respondents' contracts of employment
were extended a number of times for different or new projects. It must be stressed
that a contract that misuses a purported fixed-term employment to block the
acquisition of tenure by employees deserves to be struck down for being contrary to
law, morals, good customs, public order and public policy. 34 HaTISE

In Filipinas Pre-Fabricated Building Systems (Filsystems), Inc. v. Puente, 35 the

Court ruled that "the length of service of a project employee is not the controlling
test of employment tenure but whether or not 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." 36 Indeed, while
length of time may not be the controlling test for project employment, it is vital in
determining if the employee was hired for a specific undertaking or tasked to
perform functions vital, necessary and indispensable to the usual business or trade
of the employer. Here, respondents had been project employees several times over.
Their employment ceased to be coterminous with specific projects when they were
repeatedly re-hired by petitioner. 37 Where the employment of project employees is
extended long after the supposed project has been finished, the employees are
removed from the scope of project employees and are considered regular
employees. 38

As regular workers, respondents are entitled to security of tenure under Article 279
of the Labor Code and can only be dismissed for a just or authorized cause. Article
279 of the Labor Code provides:

Article. 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. cAEaSC

In termination cases, it is incumbent upon the employer to prove by the quantum of

evidence required by law that the dismissal of an employee is not illegal; otherwise
the dismissal would be unjustified. 39 In the case at bar, petitioner failed to
discharge the burden.

The notices of termination indicated that respondents' services were terminated

due to the completion of the project. However, this allegation is contrary to the
statement of petitioner in some of its pleadings that the project was merely
"substantially completed." There is likewise no proof that the project, or the phase
of work to which respondents had been assigned, was already completed at the
time of their dismissal. TEcAHI

Since respondents were illegally dismissed from work, they are entitled to
reinstatement without loss of seniority rights, full backwages, inclusive of
allowances and other benefits or their monetary equivalent computed from the time
their compensation was withheld from them up to the time of their actual
reinstatement, pursuant to Article 279 of the Labor Code. 40

WHEREFORE, in the light of the foregoing, the petition is DENIED. The Decision of
the Court of Appeals in CA-G.R. SP No. 77584 and the Resolution are AFFIRMED. No
costs. STIHaE

SO ORDERED.

THIRD DIVISION

[G.R. No. 156146. June 21, 2007.]

OLONGAPO MAINTENANCE SERVICES, INC., petitioner, vs. EDGARDO B.

CHANTENGCO, SALVACION S. ANIGAN, POLICARPIO S. ANIGAN, NOEL C. MENDOZA,
DANIEL VALENTIN, MANUEL T. MARIANO, CARLOS PALABYAB, BETTY B. OLA, SALICIO
R. MAGNO, MICHAEL SALAZAR, LOPE R. MAGNO, GERARDO G. AQUINO, EDWIN Q.
DAYANDANTE, JOSE P. PRIEL, ROMEO O. CLETE, ERNESTO O. CLETE, SAMUEL P.
MIRALPES, PATERNO R. BERZUELA, ANTONIO C. VALDEZ, RICARDO L. LOPEZ,
MANUEL C. ABADIEZ, RUTH S. DOMENS, ALVIN P. MANGASIL, TIRSO T. TISADO,
EDMUNDO C. SANTOS, FRANCISCO M. ZAMORA, EFREN E. ERGINA, DANIEL
CASIMIRO, CHARLIE GALVEZ, EDGARDO REYES, CELSO M. DEL MUNDO, EUGENIA
ILAGAN, RAFAEL CABAIS, DEODERICO GARCIA, VENANCIO MAGHANOY, ZOSIMO
DIMACULANGAN, DULLAS PACOMIO, MARLON MAGDURULAN, GAUDIOSO BORREL,
FORTUNATO ANZANO, WILFREDO HERNANDEZ, ROLANDO MUCHILLAS, NOMER
MAGNO, NOEL MAGNO, JEREMIAH CONEL, REMIGIO PAREÑO, CRISANTO LIVINA,
ROGELIO CASIL, VICENTE INOFINADA, RICKY BETONIO, ERNESTO MARASIGAN, ELSA
MARTINEZ, ROBERTO MERCANO, ARNEL BAYRON, ALEXANDER REGANION,
RODERICO NEYRA, WILFRED BATACAN, SALVADOR CRISOL, JR., EDISON GEMALAYA,
ARNOLD CAMERGA, RAMON BELMONTE, ERNESTO IGNACIO, DOMINGO GUADEZ,
ROMEO TAÑADA, FAUSTO GARCIA, JUANITO DUMAGAT, RODOLFO PIMENTE, ANDRES
SAHURDA, CACAOJ RAMILITO, ARCON MOLINA, ALEX LIBROJO, respondents.
DECISION

NACHURA, J p:

This Petition for Review on Certiorari assails the July 29, 2002 Decision 1 of the
Court of Appeals and its Resolution 2 dated November 14, 2002 in CA-G.R. SP No.
67474, which, respectively, denied the petition for certiorari and the motion for
reconsideration filed by Olongapo Maintenance Services, Inc. (OMSI). cCSTHA

OMSI is a corporation engaged in the business of providing janitorial and

maintenance services to various clients, including government-owned and
controlled corporations. On various dates beginning 1986, OMSI hired the
respondents as janitors, grass cutters, and degreasers, and assigned them at the
Ninoy Aquino International Airport (NAIA). On January 14, 1999, OMSI terminated
respondents' employment.

Claiming termination without just cause and non-payment of labor standard

benefits, respondents filed a complaint for illegal dismissal, underpayment of
wages, and non-payment of holiday and service incentive leave pays, with prayer
for payment of separation pay, against OMSI.

For its part, OMSI denied the allegations in the complaint. It averred that when
Manila International Airport Authority (MIAA) awarded to OMSI the service contracts
for the airport, OMSI hired respondents as janitors, cleaners, and degreasers to do
the services under the contracts. OMSI informed the respondents that they were
hired for the MIAA project and their employments were coterminous with the
contracts. As project employees, they were not dismissed from work but their
employments ceased when the MIAA contracts were not renewed upon their
expiration. The termination of respondents' employment cannot, thus, be
considered illegal. EcHaAC

In a Decision 3 dated November 19, 1999, the Labor Arbiter dismissed the
complaint, viz.:

WHEREFORE, premises considered, judgment is hereby rendered DISMISSING for

lack of merit the claims for separation pay, wage differentials and holiday pay
except that respondent is hereby ordered to pay the seventy one (71) complainants
listed in pages three and four of the latter's position paper their service incentive
leave pay.

SO ORDERED. 4

On appeal by the respondents, the NLRC modified the Labor Arbiter's ruling. It held
that respondents were regular and not project employees. Hence, they are entitled
to separation pay:
WHEREFORE, the decision appealed from is hereby modified by granting in addition
to the grant of service incentive leave pay, payment of separation pay equivalent to
half-month pay per [every] year of service or one month pay, whichever is higher.

SO ORDERED. 5

OMSI sought reconsideration of the ruling, but the NLRC denied the motion on July
30, 2001. TDESCa

Petitioner went up to the Court of Appeals via a petition for certiorari, imputing
grave abuse of discretion to the NLRC for reversing the factual findings and the
decision of the Labor Arbiter. However, the Court of Appeals dismissed the petition.
The appellate court agreed with the NLRC that the continuous rehiring of
respondents, who performed tasks necessary and desirable in the usual business of
OMSI, was a clear indication that they were regular, not project employees. The
court added that OMSI failed to establish that respondents' employment had been
fixed for a specific project or undertaking, the completion or termination of which
had been determined at the time of their engagement or hiring. Neither had it
shown that respondents were informed of the duration and scope of their work
when they were hired. Furthermore, OMSI did not submit to the Department of
Labor and Employment (DOLE) reports of termination of the respondents, thereby
bolstering respondents' claim of regular employment. OMSI filed a motion for
reconsideration, but the Court of Appeals denied it on November 14, 2002. IcHTCS

Aggrieved by the resolutions of the Court of Appeals, OMSI comes to this Court
theorizing that:

THE COURT OF APPEALS COMMITTED GRAVE ERROR AND GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN SUSTAINING THE
NLRC'S RULING THAT RESPONDENTS ARE NOT PROJECT EMPLOYEES. CONCOMITANT
THERETO, THERE IS NEITHER FACTUAL NOR LEGAL BASIS FOR THE AWARD OF
SEPARATION PAY. 6

OMSI insists that respondents were project employees. Respondents, on the other
hand, maintain that they were OMSI's regular employees.

Article 280 of the Labor Code provides:

ART. 280. Regular and Casual Employment. — The provisions of written

agreement to the contrary notwithstanding and regardless of the oral agreement of
the parties, an employment shall be deemed to be regular where the employee has
been engaged to perform activities which are usually necessary or desirable in the
usual business or trade of the employer, except where the employment has been
fixed for a specific project or undertaking the completion or termination of which
has been determined at the time of 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 . . . (Italics supplied.) cSEAHa

Without question, respondents, as janitors, grass cutters, and degreasers,

performed work "necessary or desirable" in the janitorial and maintenance service
business of OMSI.

OMSI, however, argues that the respondents' performance of activities necessary

and desirable to its business does not necessarily and conclusively mean that
respondents were regular employees. OMSI asserts that respondents were project
employees and their employment was coterminous with OMSI's service contracts
with the MIAA. Thus, when the service contracts were terminated and the
respondents were not re-assigned to another project, OMSI cannot be held liable for
illegal dismissal.

The argument does not persuade.

The principal test in determining whether an employee is a project employee is

whether he/she is assigned to carry out a "specific project or undertaking," the
duration and scope of which are specified at the time the employee is engaged in
the project, 7 or where the work or service to be performed is seasonal in nature
and the employment is for the duration of the season. 8 A true project employee
should be assigned to a project which begins and ends at determined or
determinable times, and be informed thereof at the time of hiring. 9

In the instant case, the record is bereft of proof that the respondents' engagement
as project employees has been predetermined, as required by law. We agree with
the Court of Appeals that OMSI did not provide convincing evidence that
respondents were informed that they were to be assigned to a "specific project or
undertaking" when OMSI hired them. Notably, the employment contracts for the
specific project signed by the respondents were never presented. All that OMSI
submitted in the proceedings a quo are the service contracts between OMSI and the
MIAA. Clearly, OMSI utterly failed to establish by substantial evidence that, indeed,
respondents were project employees and their employment was coterminous with
the MIAA contract. HcDSaT

Evidently cognizant of such neglect, OMSI attempted to correct the situation by

attaching copies of the application forms 10 of the respondents to its motion for
reconsideration of the Court of Appeals' Decision. Such practice cannot be tolerated.
This practice of submitting evidence late is properly rejected as it defeats the
speedy administration of justice involving poor workers. It is also unfair. 11

OMSI's reliance on Mamansag v. National Labor Relations Commission, 12

Cartagenas v. Romago Electric Company, Inc., 13 and Sandoval Shipyards, Inc. v.
National Labor Relations Commission 14 is misplaced. Said cases are not on all
fours with the case at bench.
In Mamansag, Consumer Pulse Inc. duly presented the contract of employment
showing that Mamansag was hired for a specific project and the completion or
termination of said project was determined at the start of the employment. In
Cartagenas, documentary exhibits were offered showing that the employee had
been issued appointments from project to project and was issued a notice of
temporary lay-off when the project was suspended due to lack of funds. Finally, in
the case of Sandoval Shipyards, the termination of the project employees was duly
reported to the then Ministry of Labor and Employment. These circumstances are
not true in OMSI's case. As mentioned, no convincing evidence was offered to prove
that respondents were informed that they were to be assigned to a "specific project
or undertaking." Also, OMSI never reported respondents' termination to the then
Department of Labor and Employment (DOLE). In Philippine Long Distance
Telephone Co. v. Ylagan, 15 we held that the failure of the employee to file
termination reports was an indication that an employee was not a project but a
regular employee. DAETHc

In termination cases, the burden of proof rests on the employer to show that the
dismissal is for a just cause. Thus, employers who hire project employees are
mandated to state and, once its veracity is challenged, to prove the actual basis for
the latter's dismissal. 16 Unfortunately for OMSI, it failed to discharge the burden.
All that we have is OMSI's self-serving assertion that the respondents were hired as
project employees.

Having been illegally dismissed, the NLRC cannot be considered to have acted
whimsically in granting respondents separation pay in lieu of their reinstatement.
Accordingly, the Court of Appeals committed no reversible error nor grave abuse of
discretion in denying OMSI's petition for certiorari.

WHEREFORE, the petition for review is DENIED and the assailed Decision and
Resolution of the Court of Appeals are AFFIRMED.

SO ORDERED.

f dismissal up to the actual date of reinstatement which, as of this date, amounts to

P93,155.36, as above computed.

SO ORDERED. 4

The Labor Arbiter ruled that by the very nature of respondents' business and the
nature of petitioners' services, there is no doubt as to the employment status of
petitioners. aADSIc

Respondents appealed to the National Labor Relations Commission (NLRC). In its 9

May 2001 Decision, 5 the NLRC set aside the Labor Arbiter's Decision and dismissed
petitioners' complaint for illegal dismissal. The NLRC ruled that the mere fact that
the employees' duties are necessary or desirable in the business or trade of the
employer does not mean that they are forbidden from stipulating the period of
employment. The NLRC held that petitioners' contracts of employment are valid and
binding between the contracting parties and shall be considered as the law between
them. The NLRC ruled that petitioners are bound by their employment contracts.

Petitioners filed a motion for reconsideration. The NLRC denied the motion in its 9
August 2001 Resolution. 6

Petitioners filed a petition for certiorari before the Court of Appeals.

The Ruling of the Court of Appeals

In its 27 June 2002 Decision, the Court of Appeals dismissed the petition and
affirmed the NLRC's 9 May 2001 Decision and 9 August 2001 Resolution.

The Court of Appeals held that respondents' manpower requirement varies from
month to month depending on the demand from their clients for their products.
Respondents' manpower requirement determines the period of their employees'
services. Respondents employed petitioners for the purpose of addressing a
temporary manpower shortage.

Petitioners filed a motion for reconsideration. In its 30 September 2002 Resolution,

the Court of Appeals denied the motion for reconsideration.

Hence, the petition before this Court. CHIEDS

The Issues

The petition raises these issues:

1. Whether petitioners are regular employees of respondents; and

2. Whether respondents are guilty of illegal dismissal.

The Ruling of this Court

The petition has no merit.

Petitioners are Not Regular Employees

Article 280 of the Labor Code provides:

Art. 280. Regular and Casual Employment. — The provisions of written

agreement to the contrary notwithstanding and regardless of the oral agreement of
the parties, an employment shall be deemed to be regular where the employee has
been engaged to perform activities which are usually necessary or desirable in the
usual business or trade of the employer, except where the employment has been
fixed for a specific project or undertaking the completion or termination of which
has been determined at the time of 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 he is employed and his employment
shall continue while such activity exists. DSITEH

Under Article 280 of the Labor Code, a regular employee is (1) one who is engaged
to perform activities that are necessary or desirable in the usual trade or business
of the employer, or (2) a casual employee who has rendered at least one year of
service, whether continuous or broken, with respect to the activity in which he is
employed. 7

However, even if an employee is engaged to perform activities that are necessary

or desirable in the usual trade or business of the employer, it does not preclude the
fixing of employment for a definite period.

In Brent School, Inc. v. Zamora, 8 this Court ruled that the contract, which was
entered into before the effectivity of the Labor Code on 1 November 1974, was valid
under Republic Act No. 1052 or the Termination Pay Law, as amended. Although the
contract was entered into before the effectivity of the Labor Code, the Court traced
how the present Article 280 of the Labor Code, which deleted employment with
fixed or definite period, evolved. In sustaining the validity of fixed-term
employment, the Court explained in Brent:

Accordingly, and since the entire purpose behind the development of legislation
culminating in the present Article 280 of the Labor Code clearly appears to have
been, as already observed, to prevent circumvention of the employee's right to be
secure in his tenure, the clause in said article indiscriminately and completely ruling
out all written or oral agreements conflicting with the concept of regular
employment as defined therein should be construed to refer to the substantive evil
that the Code itself has singled out: agreements entered into precisely to
circumvent security of tenure. It should have no application to instances where a
fixed period of employment was agreed upon knowingly and voluntarily 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 where it
satisfactorily appears that the employer and employee dealt with each other on
more or less equal terms with no moral dominance whatever being exercised by the
former over the latter. Unless thus limited in its purview, the law would be made to
apply to purposes other than those explicitly stated by its framers; it thus become
pointless and arbitrary, unjust in its effects and apt to lead to absurd and
unintended consequences. 9
The Court thus laid down the criteria under which fixed-term employment could not
be said to be in circumvention of the law on security of tenure, thus:

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 HEDSCc

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. 10

We agree with the Court of Appeals that in this case, the fixed period of
employment was knowingly and voluntarily agreed upon by the parties. The Court
of Appeals noted that there was no indication of force, duress, or improper pressure
exerted on petitioners when they signed the contracts. Further, there was no proof
that respondents were regularly engaged in hiring workers for work for a minimum
period of five months to prevent the regularization of their employees.

Petitioners' Employment is akin to Probationary Employment

At most, petitioners' employment for less than six months can be considered
probationary. Article 281 of the Labor Code provides:

Art. 281. Probationary Employment. — Probationary employment shall not

exceed six (6) months from the date the employee started working, unless it is
covered by an apprenticeship agreement stipulating a longer period. The services of
an employee who has been engaged on a probationary basis may be terminated for
a just cause or 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. An employee who is allowed to work after a probationary period
shall be considered a regular employee. acTDCI

Petitioners were hired on 11 May 1999, initially for three months. After the
expiration of their contracts, petitioners were hired on a month-to-month basis.
Their contracts of employment ended on 8 October 1999. Hence, they were
employed for a total of five months. Their employment did not even exceed six
months to entitle them to become regular employees.

We cannot accept petitioners' bare allegations that Caparoso was hired on 8

November 1998 while Quindipan was hired on intermittent basis since 1997.
Petitioners failed to substantiate their allegations. The payslips submitted by
petitioners to prove their prior employment with respondents are handwritten and
indicate only the date and amount of pay. They do not even indicate the name of
the employer. The printed payslips during the period of the contracts indicate not
only the name of the employer but also the breakdown of petitioners' net pay.
Petitioners were not Illegally Dismissed from Employment

Petitioners' terms of employment are governed by their fixed-term contracts.

Petitioners' fixed-term employment contracts had expired. They were not illegally
dismissed from employment.

This Court has ruled that "if from the circumstances it is apparent that periods have
been imposed to preclude acquisition of tenurial security by the employee, they
should be disregarded for being contrary to public policy." 11 In this case, it was not
established that respondents intended to deny petitioners their right to security of
tenure. Besides, petitioners' employment did not exceed six months. Thus, the
Court of Appeals did not err in sustaining petitioners' dismissal from employment.

WHEREFORE, we DENY the petition. We AFFIRM the 27 June 2002 Decision and 30
September 2002 Resolution in CA-G.R. SP No. 67156. aEcADH

SO ORDERED.

[G.R. No. 167622. November 7, 2008.]

GREGORIO V. TONGKO, petitioner, vs. THE MANUFACTURERS LIFE INSURANCE CO.

(PHILS.), INC. and RENATO A. VERGEL DE DIOS, respondents.

DECISION

VELASCO, JR., J p:

The Case

This Petition for Review on Certiorari under Rule 45 seeks the reversal of the March
29, 2005 Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No. 88253, entitled
The Manufacturers Life Insurance Co. (Phils.), Inc. v. National Labor Relations
Commission and Gregorio V. Tongko. The assailed decision set aside the Decision
dated September 27, 2004 and Resolution dated December 16, 2004 rendered by
the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 040220-04.
EIAaDC

The Facts

Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) is a domestic corporation

engaged in life insurance business. Renato A. Vergel De Dios was, during the period
material, its President and Chief Executive Officer. Gregorio V. Tongko started his
professional relationship with Manulife on July 1, 1977 by virtue of a Career Agent's
Agreement 2 (Agreement) he executed with Manulife.

In the Agreement, it is provided that:

It is understood and agreed that the Agent is an independent contractor and
nothing contained herein shall be construed or interpreted as creating an employer-
employee relationship between the Company and the Agent. CDcaSA

xxx xxx xxx

a) The Agent shall canvass for applications for Life Insurance, Annuities, Group
policies and other products offered by the Company, and collect, in exchange for
provisional receipts issued by the Agent, money due or to become due to the
Company in respect of applications or policies obtained by or through the Agent or
from policyholders allotted by the Company to the Agent for servicing, subject to
subsequent confirmation of receipt of payment by the Company as evidenced by an
Official Receipt issued by the Company directly to the policyholder.

xxx xxx xxx

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. cACEHI

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. . . .

In 1983, Tongko was named as a Unit Manager in Manulife's Sales Agency

Organization. In 1990, he became a Branch Manager. As the CA found, Tongko's
gross earnings from his work at Manulife, consisting of commissions, persistency
income, and management overrides, may be summarized as follows:

January to December 10, 2002 - P865,096.07

2001 - 6,214,737.11

2000 - 8,003,180.38

1999 - 6,797,814.05

1998 - 4,805,166.34

1997 - 2,822,620.00 3

The problem started sometime in 2001, when Manulife instituted manpower

development programs in the regional sales management level. Relative thereto,
De Dios addressed a letter dated November 6, 2001 4 to Tongko regarding an
October 18, 2001 Metro North Sales Managers Meeting. In the letter, De Dios
stated: ScaHDT
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.

xxx xxx xxx

The issues around agent recruiting are central to the intended objectives hence the
need for a Senior Managers' meeting earlier last month when Kevin O'Connor, SVP-
Agency, took to the floor to determine from our senior agency leaders what more
could be done to bolster manpower development. At earlier meetings, Kevin had
presented information where evidently, your Region was the lowest performer (on a
per Manager basis) in terms of recruiting in 2000 and, as of today, continues to
remain one of the laggards in this area. TIAEac

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. ESITcH

xxx xxx xxx

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." SAcaDE

xxx xxx xxx

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. . . .

xxx xxx xxx

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. SaCIDT

xxx xxx xxx

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.

xxx xxx xxx

2. Effective immediately, Kevin and the rest of the Agency Operations will deal
with the North Star Branch (NSB) in autonomous fashion. . . .
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.
cHESAD

xxx xxx xxx

The above changes can end at this point and they need not go any further. This,
however, is entirely dependent upon you. But you have to understand that meeting
corporate objectives by everyone is primary and will not be compromised. We are
meeting tough challenges next year and I would want everybody on board. Any
resistance or holding back by anyone will be dealt with accordingly.

Subsequently, De Dios wrote Tongko another letter dated December 18, 2001, 5
terminating Tongko's services, thus:

It would appear, however, that despite the series of meetings and communications,
both one-on-one meetings between yourself and SVP Kevin O'Connor, some of them
with me, as well as group meetings with your Sales Managers, all these efforts have
failed in helping you align your directions with Management's avowed agency
growth policy. cIDHSC

xxx xxx xxx

On account thereof, Management is exercising its prerogative under Section 14 of

your Agents Contract as we are now issuing this notice of termination of your
Agency Agreement with us effective fifteen days from the date of this letter.

Therefrom, Tongko filed a Complaint dated November 25, 2002 with the NLRC
against Manulife for illegal dismissal. The case, docketed as NLRC NCR Case No. 11-
10330-02, was raffled to Labor Arbiter Marita V. Padolina.

In the Complaint, Tongko, in a bid to establish an employer-employee relationship,

alleged that De Dios gave him specific directives on how to manage his area of
responsibility in the latter's letter dated November 6, 2001. He further claimed that
Manulife exercised control over him as follows:

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

Tongko bolstered his argument by citing Insular Life Assurance Co., Ltd. v. NLRC
(4th Division) 7 and Great Pacific Life Assurance Corporation v. NLRC, 8 which
Tongko claimed to be similar to the instant case.

Tongko further claimed that his dismissal was without basis and that he was not
afforded due process. He also cited the Manulife Code of Conduct by which his
actions were controlled by the company.

Manulife then filed a Position Paper with Motion to Dismiss dated February 27, 2003,
9 in which it alleged that Tongko is not its employee, and that it did not exercise
"control" over him. Thus, Manulife claimed that the NLRC has no jurisdiction over
the case. aIHSEc

In a Decision dated April 15, 2004, Labor Arbiter Marita V. Padolina dismissed the
complaint for lack of an employer-employee relationship. Padolina found that
applying the four-fold test in determining the existence of an employer-employee
relationship, none was found in the instant case. The dispositive portion thereof
states:

WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the

instant complaint for lack of jurisdiction, there being no employer-employee
relationship between the parties.

SO ORDERED.

Tongko appealed the arbiter's Decision to the NLRC which reversed the same and
rendered a Decision dated September 27, 2004 finding Tongko to have been
illegally dismissed. TcADCI

The NLRC's First Division, while finding an employer-employee relationship between

Manulife and Tongko applying the four-fold test, held Manulife liable for illegal
dismissal. It further stated that Manulife exercised control over Tongko as
evidenced by the letter dated November 6, 2001 of De Dios and wrote:

The above-mentioned letter shows the extent to which respondents controlled

complainant's manner and means of doing his work and achieving the goals set by
respondents. The letter shows how respondents concerned themselves with the
manner complainant managed the Metro North Region as Regional Sales Manager,
to the point that respondents even had a say on how complainant interacted with
other individuals in the Metro North Region. The letter is in fact replete with
comments and criticisms on how complainant carried out his functions as Regional
Sales Manager.
More importantly, the letter contains an abundance of directives or orders that are
intended to directly affect complainant's authority and manner of carrying out his
functions as Regional Sales Manager. 10 . . .

Additionally, the First Division also ruled that:

Further evidence of [respondents'] control over complainant can be found in the

records of the case. [These] are the different codes of conduct such as the Agent
Code of Conduct, the Manulife Financial Code of Conduct, and the Manulife Financial
Code of Conduct Agreement, which serve as the foundations of the power of control
wielded by respondents over complainant that is further manifested in the different
administrative and other tasks that he is required to perform. These codes of
conduct corroborate and reinforce the display of respondents' power of control in
their 06 November 2001 Letter to complainant. 11 caITAC

The fallo of the September 27, 2004 Decision reads:

WHEREFORE, premises considered, the appealed Decision is hereby reversed and

set aside. We find complainant to be a regular employee of respondent Manulife
and that he was illegally dismissed from employment by respondents.

In lieu of reinstatement, respondent Manulife is hereby ordered to pay complainant

separation pay as above set forth. Respondent Manulife is further ordered to pay
complainant backwages from the time he was dismissed on 02 January 2002 up to
the finality of this decision also as indicated above.

xxx xxx xxx

All other claims are hereby dismissed for utter lack of merit.

From this Decision, Manulife filed a motion for reconsideration which was denied by
the NLRC First Division in a Resolution dated December 16, 2004. 12 aATEDS

Thus, Manulife filed an appeal with the CA docketed as CA-G.R. SP No. 88253.
Thereafter, the CA issued the assailed Decision dated March 29, 2005, finding the
absence of an employer-employee relationship between the parties and deeming
the NLRC with no jurisdiction over the case. The CA arrived at this conclusion while
again applying the four-fold test. The CA found that Manulife did not exercise
control over Tongko that would render the latter an employee of Manulife. The
dispositive portion reads:

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

The Court of Appeals committed grave abuse of discretion in granting respondents'

petition for certiorari.

The Court of Appeals committed grave abuse of discretion in annulling and setting
aside the Decision dated September 27, 2004 and Resolution dated December 16,
2004 in finding that there is no employer-employee relationship between petitioner
and respondent.

The Court of Appeals committed grave abuse of discretion in annulling and setting
aside the Decision dated September 27, 2004 and Resolution dated December 16,
2004 which found petitioner to have been illegally dismissed and ordered his
reinstatement with payment of backwages. 13 EATcHD

Restated, the issues are: (1) Was there an employer-employee relationship between
Manulife and Tongko? and (2) If yes, was Manulife guilty of illegal dismissal?

The Court's Ruling

This petition is meritorious.

Tongko Was An Employee of Manulife

The basic issue of whether or not the NLRC has jurisdiction over the case resolves
itself into the question of whether an employer-employee relationship existed
between Manulife and Tongko. If no employer-employee relationship existed
between the two parties, then jurisdiction over the case properly lies with the
Regional Trial Court. AEDCHc

In the determination of whether an employer-employee relationship exists between

two parties, this Court applies the four-fold test to determine the existence of the
elements of such relationship. In Pacific Consultants International Asia, Inc. v.
Schonfeld, the Court set out the elements of an employer-employee relationship,
thus:

Jurisprudence is firmly settled that whenever the existence of an employment

relationship is in dispute, four elements constitute the reliable yardstick: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power to control the employee's
conduct. It is the so-called "control test" which constitutes the most important index
of the existence of the employer-employee relationship that is, whether the
employer controls or has reserved the right to control the employee not only as to
the result of the work to be done but also as to the means and methods by which
the same is to be accomplished. Stated otherwise, an employer-employee
relationship exists where the person for whom the services are performed reserves
the right to control not only the end to be achieved but also the means to be used in
reaching such end. 14 DSITEH

The NLRC, for its part, applied the four-fold test and found the existence of all the
elements and declared Tongko an employee of Manulife. The CA, on the other hand,
found that the element of control as an indicator of the existence of an employer-
employee relationship was lacking in this case. The NLRC and the CA based their
rulings on the same findings of fact but differed in their interpretations.

The NLRC arrived at its conclusion, first, on the basis of the letter dated November
6, 2001 addressed by De Dios to Tongko. According to the NLRC, the letter
contained "an abundance of directives or orders that are intended to directly affect
complainant's authority and manner of carrying out his functions as Regional Sales
Manager." It enumerated these "directives" or "orders" as follows:

1. You will hire at your expense a competent assistant who can unload you of
much of the routine tasks which can be easily delegated. . . . DaEcTC

xxx xxx xxx

This assistant should be hired immediately.

2. Effective immediately, Kevin and the rest of the Agency Operations will deal
with the North Star Branch (NSB) in autonomous fashion . . . .

xxx xxx xxx

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. . . .

3. Any resistance or holding back by anyone will be dealt with accordingly.

4. I have been straightforward in this my letter and I know that we can continue
to work together. . . but it will have to be on my terms. Anything else is
unacceptable! SaICcT

The NLRC further ruled that the different codes of conduct that were applicable to
Tongko served as the foundations of the power of control wielded by Manulife over
Tongko that is further manifested in the different administrative and other tasks
that he was required to perform.

The NLRC also found that Tongko was required to render exclusive service to
Manulife, further bolstering the existence of an employer-employee relationship.
Finally, the NLRC ruled that Tongko was integrated into a management structure
over which Manulife exercised control, including the actions of its officers. The NLRC
held that such integration added to the fact that Tongko did not have his own
agency belied Manulife's claim that Tongko was an independent contractor.

The CA, however, considered the finding of the existence of an employer-employee

relationship by the NLRC as far too sweeping having as its only basis the letter
dated November 6, 2001 of De Dios. The CA did not concur with the NLRC's ruling
that the elements of control as pointed out by the NLRC are "sufficient indicia of
control that negates independent contractorship and conclusively establish an
employer-employee relationship between" 15 Tongko and Manulife. The CA ruled
that there is no employer-employee relationship between Tongko and Manulife.
TaDCEc

An impasse appears to have been reached between the CA and the NLRC on the
sole issue of control over an employee's conduct. It bears clarifying that such
control not only applies to the work or goal to be done but also to the means and
methods to accomplish it. 16 In Sonza v. ABS-CBN Broadcasting Corporation, we
explained that not all forms of control would establish an employer-employee
relationship, to wit:

Further, not every form of control that a party reserves to himself over the conduct
of the other party in relation to the services being rendered may be accorded the
effect of establishing an employer-employee relationship. The facts of this case fall
squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we
held that:

Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the means
or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employer-employee relationship
unlike the second, which address both the result and the means used to achieve it.
17 (Emphasis supplied.) TcSaHC

We ruled in Insular Life Assurance Co., Ltd. v. NLRC (Insular) that:

It is, therefore, usual and expected for an insurance company to promulgate a set of
rules to guide its commission agents in selling its policies that they may not run
afoul of the law and what it requires or prohibits. Of such a character are the rules
which prescribe the qualifications of persons who may be insured, subject insurance
applications to processing and approval by the Company, and also reserve to the
Company the determination of the premiums to be paid and the schedules of
payment. None of these really invades the agent's contractual prerogative to adopt
his own selling methods or to sell insurance at his own time and convenience, hence
cannot justifiably be said to establish an employer-employee relationship between
him and the company. 18 caEIDA

Hence, we ruled in Insular that no employer-employee relationship existed therein.

However, such ruling was tempered with the qualification that had there been
evidence that the company promulgated rules or regulations that effectively
controlled or restricted an insurance agent's choice of methods or the methods
themselves in selling insurance, an employer-employee relationship would have
existed. In other words, the Court in Insular in no way definitively held that
insurance agents are not employees of insurance companies, but rather made the
same a case-to-case basis. We held:

The respondents limit themselves to pointing out that Basiao's contract with the
Company bound him to observe and conform to such rules and regulations as the
latter might from time to time prescribe. No showing has been made that any such
rules or regulations were in fact promulgated, much less that any rules existed or
were issued which effectively controlled or restricted his choice of methods or the
methods themselves of selling insurance. Absent such showing, the Court will not
speculate that any exceptions or qualifications were imposed on the express
provision of the contract leaving Basiao ". . . free to exercise his own judgment as to
the time, place and means of soliciting insurance." 19 (Emphasis supplied.)
HECTaA

There is no conflict between our rulings in Insular and in Great Pacific Life Assurance
Corporation. We said in the latter case:

[I]t cannot be gainsaid that Grepalife had control over private respondents'
performance as well as the result of their efforts. A cursory reading of their
respective functions as enumerated in their contracts reveals that the company
practically dictates the manner by which their jobs are to be carried out. For
instance, the District Manager must properly account, record and document the
company's funds spot-check and audit the work of the zone supervisors, conserve
the company's business in the district through 'reinstatements', follow up the
submission of weekly remittance reports of the debit agents and zone supervisors,
preserve company property in good condition, train understudies for the position of
district manager, and maintain his quota of sales (the failure of which is a ground
for termination). On the other hand, a zone supervisor must direct and supervise
the sales activities of the debit agents under him, conserve company property
through "reinstatements", undertake and discharge the functions of absentee debit
agents, spot-check the records of debit agents, and insure proper documentation of
sales and collections by the debit agents. 20 (Emphasis supplied.) IcHTED

Based on the foregoing cases, if the specific rules and regulations that are enforced
against insurance agents or managers are such that would directly affect the means
and methods by which such agents or managers would achieve the objectives set
by the insurance company, they are employees of the insurance company.

In the instant case, Manulife had the power of control over Tongko that would make
him its employee. Several factors contribute to this conclusion.

In the Agreement dated July 1, 1977 executed between Tongko and Manulife, it is
provided that:

The Agent hereby agrees to comply with all regulations and requirements of the
Company as herein provided as well as maintain a standard of knowledge and
competency in the sale of the Company's products which satisfies those set by the
Company and sufficiently meets the volume of new business required of Production
Club membership. 21

Under this provision, an agent of Manulife must comply with three (3) requirements:
(1) compliance with the regulations and requirements of the company; (2)
maintenance of a level of knowledge of the company's products that is satisfactory
to the company; and (3) compliance with a quota of new businesses. cETDIA

Among the company regulations of Manulife are the different codes of conduct such
as the Agent Code of Conduct, Manulife Financial Code of Conduct, and Manulife
Financial Code of Conduct Agreement, which demonstrate the power of control
exercised by the company over Tongko. The fact that Tongko was obliged to obey
and comply with the codes of conduct was not disowned by respondents.

Thus, with the company regulations and requirements alone, the fact that Tongko
was an employee of Manulife may already be established. Certainly, these
requirements controlled the means and methods by which Tongko was to achieve
the company's goals.

More importantly, Manulife's evidence establishes the fact that Tongko was tasked
to perform administrative duties that establishes his employment with Manulife.
DICcTa

In its Comment (Re: Petition for Review dated 15 April 2005) dated August 5, 2005,
Manulife attached affidavits of its agents purportedly to support its claim that
Tongko, as a Regional Sales Manager, did not perform any administrative functions.
An examination of these affidavits would, however, prove the opposite.

In an Affidavit dated April 28, 2003, 22 John D. Chua, a Regional Sales Manager of
Manulife, stated:

4. On September 1, 1996, my services were engaged by Manulife as an Agency

Regional Sales Manager ("RSM") for Metro South Region pursuant to an Agency
Contract. As such RSM, I have the following functions:
1. Refer and recommend prospective agents to Manulife

2. Coach agents to become productive

3. Regularly meet with, and coordinate activities of agents affiliated to my

region. IcDCaT

While Amada Toledo, a Branch Manager of Manulife, stated in her Affidavit dated
April 29, 2003 23 that:

3. In January 1997, I was assigned as a Branch Manager ("BM") of Manulife for

the Metro North Sector;

4. As such BM, I render the following services:

a. Refer and recommend prospective agents to Manulife;

b. Train and coordinate activities of other commission agents;

c. Coordinate activities of Agency Managers who, in turn, train and coordinate

activities of other commission agents;

d. Achieve agreed production objectives in terms of Net Annualized

Commissions and Case Count and recruitment goals; and EcATDH

e. Sell the various products of Manulife to my personal clients.

While Ma. Lourdes Samson, a Unit Manager of Manulife, stated in her Affidavit dated
April 28, 2003 24 that:

3. In 1977, I was assigned as a Unit Manager ("UM") of North Peaks Unit, North
Star Branch, Metro North Region;

4. As such UM, I render the following services:

a. To render or recommend prospective agents to be licensed, trained and

contracted to sell Manulife products and who will be part of my Unit;

b. To coordinate activities of the agents under my Unit in their daily, weekly and
monthly selling activities, making sure that their respective sales targets are met;

c. To conduct periodic training sessions for my agents to further enhance their

sales skills. aDTSHc

d. To assist my agents with their sales activities by way of joint fieldwork,

consultations and one-on-one evaluation and analysis of particular accounts.
e. To provide opportunities to motivate my agents to succeed like conducting
promos to increase sales activities and encouraging them to be involved in
company and industry activities.

f. To provide opportunities for professional growth to my agents by encouraging

them to be a member of the LUCAP (Life Underwriters Association of the
Philippines).

A comparison of the above functions and those contained in the Agreement with
those cited in Great Pacific Life Assurance Corporation 25 reveals a striking
similarity that would more than support a similar finding as in that case. Thus, there
was an employer-employee relationship between the parties. TADIHE

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

In his letter dated November 6, 2001, De Dios harped on the direction of Manulife of
becoming a major agency-led distribution company whereby greater agency
recruitment is required of the managers, including Tongko. De Dios made it clear
that agent recruitment has become the primary means by which Manulife intends to
sell more policies. More importantly, it is Tongko's alleged failure to follow this
principle of recruitment that led to the termination of his employment with Manulife.
With this, it is inescapable that Tongko was an employee of Manulife.

Tongko Was Illegally Dismissed

In its Petition for Certiorari dated January 7, 2005 26 filed before the CA, Manulife
argued that even if Tongko is considered as its employee, his employment was
validly terminated on the ground of gross and habitual neglect of duties,
inefficiency, as well as willful disobedience of the lawful orders of Manulife. Manulife
stated: DHETIS

In the instant case, private respondent, despite the written reminder from Mr. De
Dios refused to shape up and altogether disregarded the latter's advice resulting in
his laggard performance clearly indicative of his willful disobedience of the lawful
orders of his superior. . . .

xxx xxx xxx

As private respondent has patently failed to perform a very fundamental duty, and
that is to yield obedience to all reasonable rules, orders and instructions of the
Company, as well as gross failure to reach at least minimum quota, the termination
of his engagement from Manulife is highly warranted and therefore, there is no
illegal dismissal to speak of.
It is readily evident from the above-quoted portions of Manulife's petition that it
failed to cite a single iota of evidence to support its claims. Manulife did not even
point out which order or rule that Tongko disobeyed. More importantly, Manulife did
not point out the specific acts that Tongko was guilty of that would constitute gross
and habitual neglect of duty or disobedience. Manulife merely cited Tongko's
alleged "laggard performance", without substantiating such claim, and equated the
same to disobedience and neglect of duty. DHTCaI

We cannot, therefore, accept Manulife's position.

In Quebec, Sr. v. National Labor Relations Commission, we ruled that:

When there is no showing of a clear, valid and legal cause for the termination of
employment, the law considers the matter a case of illegal dismissal and the burden
is on the employer to prove that the termination was for a valid or authorized cause.
This burden of proof appropriately lies on the shoulders of the employer and not on
the employee because a worker's job has some of the characteristics of property
rights and is therefore within the constitutional mantle of protection. No person
shall be deprived of life, liberty or property without due process of law, nor shall any
person be denied the equal protection of the laws.

Apropos thereto, Art. 277, par. (b), of the Labor Code mandates in explicit terms
that the burden of proving the validity of the termination of employment rests on
the employer. Failure to discharge this evidential burden would necessarily mean
that the dismissal was not justified, and, therefore, illegal. 27 IcTEaC

We again ruled in Times Transportation Co., Inc. v. National Labor Relations

Commission that:

The law mandates that the burden of proving the validity of the termination of
employment rests with the employer. Failure to discharge this evidentiary burden
would necessarily mean that the dismissal was not justified, and, therefore, illegal.
Unsubstantiated suspicions, accusations and conclusions of employers do not
provide for legal justification for dismissing employees. In case of doubt, such cases
should be resolved in favor of labor, pursuant to the social justice policy of our labor
laws and Constitution. 28

This burden of proof was clarified in Community Rural Bank of San Isidro (N.E.), Inc.
v. Paez to mean substantial evidence, to wit:

The Labor Code provides that an employer may terminate the services of an
employee for just cause and this must be supported by substantial evidence. The
settled rule in administrative and quasi-judicial proceedings is that proof beyond
reasonable doubt is not required in determining the legality of an employer's
dismissal of an employee, and not even a preponderance of evidence is necessary
as substantial evidence is considered sufficient. Substantial evidence is more than a
mere scintilla of evidence or relevant evidence as a reasonable mind might accept
as adequate to support a conclusion, even if other minds, equally reasonable, might
conceivably opine otherwise. 29 CDHaET

Here, Manulife failed to overcome such burden of proof. It must be reiterated that
Manulife even failed to identify the specific acts by which Tongko's employment was
terminated much less support the same with substantial evidence. To repeat, mere
conjectures cannot work to deprive employees of their means of livelihood. Thus, it
must be concluded that Tongko was illegally dismissed.

Moreover, as to Manulife's failure to comply with the twin notice rule, it reasons that
Tongko not being its employee is not entitled to such notices. Since we have ruled
that Tongko is its employee, however, Manulife clearly failed to afford Tongko said
notices. Thus, on this ground too, Manulife is guilty of illegal dismissal. In Quebec,
Sr., we also stated:

Furthermore, not only does our legal system dictate that the reasons for dismissing
a worker must be pertinently substantiated, it also mandates that the manner of
dismissal must be properly done, otherwise, the termination itself is gravely
defective and may be declared unlawful. 30 ITECSH

For breach of the due process requirements, Manulife is liable to Tongko in the
amount of PhP30,000 as indemnity in the form of nominal damages. 31

Finally, Manulife raises the issue of the correctness of the computation of the award
to Tongko made by the NLRC by claiming that Songco v. National Labor Relations
Commission 32 is inapplicable to the instant case, considering that Songco was
dismissed on the ground of retrenchment.

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

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

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

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

As the law now stands, an illegally dismissed employee is entitled to two reliefs,
namely: backwages and reinstatement. These are separate and distinct from each
other. However, separation pay is granted where reinstatement is no longer feasible
because of strained relations between the employee and the employer. In effect, an
illegally dismissed employee is entitled to either reinstatement, if viable, or
separation pay if reinstatement is no longer viable and backwages. 33

Taking into consideration the cases of Songco and Triad, we find correct the
computation of the NLRC that the monthly gross wage of Tongko in 2001 was
PhP518,144.76. For having been illegally dismissed, Tongko is entitled to
reinstatement with full backwages under Art. 279 of the Labor Code. Due to the
strained relationship between Manulife and Tongko, reinstatement, however, is no
longer advisable. Thus, Tongko will be entitled to backwages from January 2, 2002
(date of dismissal) up to the finality of this decision. Moreover, Manulife will pay
Tongko separation pay of one (1) month salary for every year of service that is from
1977 to 2001 amounting to PhP12,435,474.24, considering that reinstatement is not
feasible. Tongko shall also be entitled to an award of attorney's fees in the amount
of ten percent (10%) of the aggregate amount of the above awards. EAaHTI

WHEREFORE, the petition is hereby GRANTED. The assailed March 29, 2005
Decision of the CA in CA-G.R. SP No. 88253 is REVERSED and SET ASIDE. The
Decision dated September 27, 2004 of the NLRC is REINSTATED with the following
modifications:

Manulife shall pay Tongko the following:

(1) Full backwages, inclusive of allowances and other benefits or their monetary
equivalent from January 2, 2002 up to the finality of this Decision;

(2) Separation pay of one (1) month salary for every year of service from 1977
up to 2001 amounting to PhP12,435,474.24;

(3) Nominal damages of PhP30,000 as indemnity for violation of the due process
requirements; and

(4) Attorney's fees equivalent to ten percent (10%) of the aforementioned

backwages and separation pay. HSIDTE

Costs against respondent Manulife.

SO ORDERED.

G.R. No. 155207 August 13, 2008

WILHELMINA S. OROZCO vs. COURT OF APPEALS, ET AL.

THIRD DIVISION

[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 p:

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. AHCaES

In this Petition for Review under Rule 45 of the Revised Rules on Civil Procedure,
petitioner Wilhelmina S. Orozco assails the Decision 1 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
Decision 3 of the National Labor Relations Commission (NLRC), which in turn had
affirmed the Decision 4 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
SCaTAc
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. ADHaTC

Respondent company is also ordered to pay her 13th 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. aIcHSC

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.

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 ICaDHT

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 Review 12 before this Court seeking the reversal of the
NLRC Decision. However, in a Resolution 13 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. cIaHDA
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 ACaTIc

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 jurisprudence
recognizing exceptional instances wherein the Court relaxed the bond requirement
as a condition for posting the appeal. ASIETa

xxx xxx xxx

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. IEaATD

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.

xxx xxx xxx

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 aSIHcT

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. cCEAHT

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 crucial 26 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 DCHaTc

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. TAcCDI

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. DTSaHI

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. CASaEc

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 untrammeled freedom to the party hired and eschews
any intervention whatsoever in his performance of the engagement. IASEca
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. .
. . . 33 ISDCaT

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 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 DIECTc

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. HTCSDE

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.
35 Thus, 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. cSaCDT

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. aHECST

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 IEDHAT

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 factors 43
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 aHESCT

On this point, Sonza v. ABS-CBN Broadcasting Corporation 46 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. HDAaIS
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.
SHacCD

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. TAacIE

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. cCAIDS

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.

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 aSCHcA

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. SICDAa

SO ORDERED.

SECOND DIVISION

[G.R. No. 157680. October 8, 2008.]

EQUIPMENT TECHNICAL SERVICES or JOSEPH JAMES DEQUITO, petitioners, vs.

COURT OF APPEALS, ALEX ALBINO, REY ALBINO, JULIUS ABANES, MIGUEL ALINAB,
CHRISTOPHER BIOL, NELSON CATONG, RENATO DULOT, FLORO PACUNDO,
MARCELITO GAMAS, REYNALDO LIMA, SAMMY MESAGAL, ERNESTO PADILLA, and
CONRADO SULIBAGA, respondents.

DECISION
VELASCO, JR., J p:

This petition for review under Rule 45 assails and seeks the reversal of the
Amended Decision and Resolution dated March 3, 2003 and March 24, 2003,
respectively, of the Court of Appeals (CA) in CA-G.R. SP No. 67568. The assailed
amended decision and resolution effectively set aside and reversed the
consolidated resolutions dated July 30, 2001 and September 24, 2001 rendered by
the National Labor Relations Commission (NLRC) and reinstated the July 24, 2000
Decision of Labor Arbiter Ermita T. Abrasaldo-Cuyuca in NLRC NCR Case Nos. 00-01-
00571-99, 00-02-01429-99, and 00-02-01615-99. aHATDI

Petitioner Equipment Technical Services (ETS) is primarily engaged in the business

of sub-contracting plumbing works of on-going building construction. Among its
clients was Uniwide Sales, Inc. (Uniwide). Petitioner Joseph James Dequito was,
during the period material, occupying the position of manager of ETS, 1 albeit the
CA referred to him as ETS' president. On various occasions involving different
projects, ETS hired the services of private respondents as pipe fitters, plumbers, or
threaders.

In December 1998, ETS experienced financial difficulties when Uniwide, its client at
the time, failed to pay for the plumbing work being done at its Coastal Mall. As a
result, ETS was only able to pay its employees 13th month pay equivalent to two
weeks' salary.

Unhappy over what they thought was ETS' failure to release the balance of their
13th month pay, private respondents brought their case before the Arbitration
Branch of the NLRC, docketed as NLRC NCR Case No. 00-01-00571-99 and entitled
as Alex Albino, Renato Dulot, Miguel Alinab, Marcelito Gamas, Julius Abanes,
Christopher Biol, Sammy Mesagal, Conrado Sulibaga, Floro Pacundo v. Equipment
Technical Services or Joseph James Dequito. ASEIDH

Later, two other cases were filed against ETS for illegal dismissal and payment of
money claims when the complainants thereat were refused work in another ETS
project, i.e., Richville project, allegedly because they refused to sign individual
employment contracts with ETS. These two other cases were Nelson Catong, Roger
Lamayon, Christopher Lamayon v. Equipment Technical Services or Joseph James
Dequito, docketed as NLRC NCR Case No. 00-02-01429-99; and Rey Albino, Ernesto
Padilla, Reynaldo Lima v. Equipment Technical Services or Joseph James Dequito,
docketed as NLRC NCR Case No. 00-02-01615-99.

The three cases were consolidated before the labor arbiter. Following failed
conciliation efforts, all concerned, except Roger and Christopher Lamayon,
submitted, as the labor arbiter directed, their respective position papers.

Private respondents' position 2 is summed up as follows: (1) they are regular

employees of ETS; (2) ETS dismissed them without cause and without due process
after they filed cases for money claims against ETS in the arbitration branch of the
NLRC; (3) ETS has not paid them their salaries, 13th month pay, service incentive
leave pay, overtime pay, and premium pay for holidays and rest days; and (4) they
are entitled to reinstatement to their former positions with paid backwages in
addition to their money claims and payment of attorney's fees. caCSDT

ETS' position 3 may be summed up as follows: (1) private respondents were its
contractual/project employees engaged for different projects of the company; (2)
they were not illegally dismissed, having been hired on a per project basis; (3) ETS
was unable to fully release private respondents' 13th month pay because Uniwide
failed to pay for its contracted plumbing project; (4) ETS was forced to abandon the
Uniwide project and undertake another project, the Richville project, because the
chances of being paid by Uniwide were dim; (5) ETS asked private respondents to
sign employment contracts to formalize their previous agreement but said private
respondents refused; and (6) as a result, ETS was constrained to deny employment
to private respondents as it considered the execution of employment contracts part
of management prerogative before employment commences.

On July 24, 2000, Labor Arbiter Abrasaldo-Cuyuca issued a Decision, holding that
private respondents were ETS' regular, not merely project, employees. Accordingly,
ETS was adjudged liable for illegal dismissal and directed to pay private
respondents their money claims plus 10% of the total award as attorney's fees. The
fallo of the subject decision reads as follows: TCSEcI

WHEREFORE, judgment is hereby rendered declaring the dismissal of the

complainants illegal.

Further, respondents are further ordered to pay the complainants their backwages,
proportionate 13th month pay, [holiday] and service incentive leave pay.

Ten percent of the total award as attorney's fees.

Other claims are dismissed for lack of merit.

The complaints of Roger and Christopher all surnamed Lamayon are dismissed
without prejudice.

The computation prepared by the Computation Unit, NCR, this Commission is

attached [sic] forming part of this decision.

SO ORDERED. 4

ETS appealed from the above labor arbiter's decision. On July 30, 2001, the NLRC
rendered a resolution which, while reversing the labor arbiter's holding with respect
to the nature of private respondents' employment and the illegality of their
dismissal, nevertheless upheld the validity of the monetary award extended by the
labor arbiter, part of which included the award of backwages. The pertinent portion
of the modificatory resolution reads as follows: HcISTE

ACCORDINGLY, premises considered, the decision appealed from is hereby

MODIFIED in that the findings of regularity of employment and illegal dismissal are
hereby VACATED. However, respondents are ordered to give complainants priority
in hiring for present and future projects. All other dispositions are hereby AFFIRMED
in toto.

SO ORDERED.

Following the denial on September 24, 2001 of ETS' motion for reconsideration, ETS
elevated its case to the CA via a petition for certiorari under Rule 65, the recourse
docketed as CA-G.R. SP No. 67568. As its principal contention, ETS ascribed on the
NLRC the commission of grave abuse of discretion in affirming the monetary award
in favor of private respondents, despite its finding that there was no illegal dismissal
in this case.

On January 23, 2002, the CA rendered judgment disposing as follows:

WHEREFORE, premises considered, the assailed resolutions of the National Labor

Relations Commission dated July 30, 2001 and September 24, 2001 are hereby
ANNULLED and SET ASIDE and a new one rendered ORDERING petitioner Equipment
Technical Services to pay private respondents their holiday pay and service
incentive leave pay for the year 1998 and the balance of their 13th month pay for
the year 1999. aACHDS

The case is hereby REMANDED to Labor Arbiter Ermita T. Abrasaldo-Cuyuca for the
computation of the same.

The complaint against petitioner Joseph James Dequito is hereby DISMISSED, for
lack of merit.

No pronouncement as to costs.

SO ORDERED.

Upon motion of private respondents for reconsideration, the CA issued an Amended

Decision 5 dated March 3, 2003 vacating its earlier January 23, 2002 decision. The
CA, in main support of its present disposition, stated that the NLRC's determination
that private respondents are "project workers" is "utterly unsupported by the
evidence on record and is patently erroneous" and, therefore, is tainted with grave
abuse of discretion. 6 The fallo of the Amended Decision reads:

WHEREFORE, premises considered, the present motion for reconsideration is hereby

GRANTED. The petition is hereby DENIED DUE COURSE and accordingly DISMISSED,
for lack of merit. Our Decision dated January 23, 2002 is hereby RECONSIDERED
and SET ASIDE and a new one is hereby entered REVERSING and SETTING ASIDE the
assailed Resolutions dated July 30, 2001 and September 24, 2001 of public
respondent NLRC in NLRC NCR Case No. 00-01-00571-99 (NLRC CA No. 027203-
2001), NLRC NCR Case No. 00-02-01429-99 and NLRC NCR Case No. 00-02-01615-
99. The Decision dated July 24, 2000 rendered by Labor Arbiter Ermita T. Abrasaldo-
Cuyuca is hereby REINSTATED and AFFIRMED in all respects, including the
computation of the monetary awards in favor of private respondents forming part of
and attached to the same. SCIcTD

With costs against the petitioners.

SO ORDERED.

Hence, this petition on the submission that, contrary to the findings of the CA, but
conformably with the determination of the NLRC, private respondents are seasonal
or project workers; the duration of their employment is not permanent but
coterminus with the project to which they are assigned and from whose payroll they
are paid. As project employees, private respondents cannot, according to
petitioners, validly maintain an action for illegal dismissal with prayer for
reinstatement and payment of backwages, both reliefs being usually accorded
following a finding of illegal dismissal.

The petition is without merit. As we see it, as did the CA and the NLRC, the primary
question to be resolved and to which all others must yield is whether or not private
respondents are project employees. The CA, siding with the labor arbiter, as
indicated earlier, answered the poser in the affirmative, while the NLRC resolved it
in the negative.

As the Court has consistently held, the service of project employees are coterminus
with the project and may be terminated upon the end or completion of that project
or project phase for which they were hired. Regular employees, in contrast, enjoy
security of tenure and are entitled to hold on to their work or position until their
services are terminated by any of the modes recognized under the Labor Code. 7
ITSaHC

The principal test for determining whether an employee is properly characterized as

"project employee", as distinguished from "regular employee", is whether or not
"the project employee" was assigned to carry out "a specific project or
undertaking", the duration and scope of which were specified at the time the
employees were engaged for that project. 8 And as Article 280 of the Labor Code,
defining a regular employee vis-à-vis a project employee, would have it:

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 . . . .

It bears to stress at the outset that ETS admits hiring or employing private
respondents to perform plumbing works for various projects. Given this postulate,
regular employment may reasonably be presumed and it behooves ETS to prove
otherwise, that is, that the employment in question was contractual in nature
ending upon the expiration of the term fixed in the contract or for a specific project
or undertaking. But the categorical finding of the CA, confirmatory for the most part
of that of the labor arbiter, is that not a single written contract of employment fixing
the terms of employment for the duration of the Uniwide project, or any other
project, was submitted by ETS despite the latter's allegations that private
respondents were merely contractual employees. Records of payroll and other
pertinent documents, such as job contracts secured by ETS showing that private
respondents were hired for specific projects, were also not submitted by ETS. 9
CDEaAI

Moreover, if private respondents were indeed employed as project employees,

petitioners should have had submitted a report of termination every time their
employment was terminated owing to the completion of each plumbing project. As
correctly held by the CA in its Amended Decision, citing Tomas Lao Construction v.
NLRC, 10 ETS' failure to report the employment termination and file the necessary
papers after every project completion tends to support the claim of private
respondents about their not being project employees. 11 Under Policy Instruction
No. 20, Series of 1977, 12 the report must be made to the nearest public office
employment. 13 The decision in Violeta v. NLRC is also apropos, particularly when it
held:

[The employer] should have filed as many reports of termination as there were
construction projects actually finished if petitioners [employees] were indeed
project employees, considering that petitioners were hired and again [hired] for
various projects or phases of work therein. Its failure to submit reports of
termination cannot but sufficiently convince us further that petitioners are truly
regular employees. Just as important, the fact that petitioners had rendered more
than one year of service at the time of their dismissal overturns private
respondent's allegations that petitioners were hired for a specific or fixed
undertaking for a limited period of time. 14 aHTDAc

The Court can allow that, in the instant case, private respondents may have initially
been hired for specific projects or undertaking of petitioner ETS and, hence, may be
classified as project employees. Their repeated rehiring to perform tasks necessary
to the usual trade or business of ETS changed the legal situation altogether, for in
the later instance, their continuous rehiring took them out from the scope of
workers coterminus with specific projects and had made them regular employees.
We said as much in Phesco, Inc. v. NLRC that "where the employment of project
employees is extended long after the supposed project had been finished, the
employees are removed from the scope of project employees and they shall be
considered regular employees." 15

Parenthetically, petitioners' assertion that there can be no illegal dismissal of

project employees inasmuch as they are not entitled to security of tenure is
inaccurate. The constitutionally-protected right of labor to security of tenure covers
both regular and project workers. 16 Their termination must be for lawful cause and
must be done in a way which affords them proper notice and hearing. 17

In termination disputes, the burden of proving that an employee had been

dismissed for a lawful cause or that the exacting procedural requirements under the
Labor Code had been complied with lies with the employer. 18 Where there is no
showing of a clear, valid, and legal cause for termination of employment, the law
considers the case a matter of illegal dismissal. 19 CcAHEI

Based on the foregoing criteria, the factual findings of the labor arbiter on the
regular nature of private respondents' employment, juxtaposed with ETS' failure to
support its "project-workers theory", impel us to dismiss the instant petition. This is
as it should be for, to paraphrase Asuncion v. NLRC, if doubt exists between the
evidence of the employers and the employees, the scales of justice must be tilted in
favor of the latter — the employers must adequately show rationally adequate
evidence that their case is preponderantly superior. 20

As did the CA, the Court holds that private respondents are regular employees
whose services were terminated without lawful cause and effected without the
requisite notice and hearing.

In view of the illegality of the dismissal, the fallo of the Decision of Labor Arbiter
Abrasaldo-Cuyuca, as reinstated by the CA in its assailed Amended Decision, has to
be modified in the sense that private respondents are entitled to reinstatement to
their previous positions as pipe fitters or threaders, as the case may be, without loss
of rank and seniority rights and with full backwages.

At this juncture, the Court wishes to state that it is taking judicial notice of the fact
that no corporation is registered with the Securities and Exchange Commission
under the name "Equipment Technical Services". It is thus but fair that both
petitioners' liability under this Decision be joint and several. IAcTaC

WHEREFORE, the Amended Decision dated March 3, 2003 of the CA in CA-G.R. SP

No. 67568, reinstating the July 24, 2000 Decision of Labor Arbiter Abrasaldo-Cuyuca,
is AFFIRMED with the MODIFICATION that petitioners are jointly and severally
ordered to reinstate private respondents to their former positions, without loss of
rank and seniority rights, with backwages from the date of dismissal until
reinstated. As modified, the fallo of the labor arbiter's Decision shall read:
WHEREFORE, judgment is hereby rendered declaring the dismissal of private
respondents illegal.

Petitioners ETS and Joseph James Dequito are ordered jointly and severally to
reinstate private respondents ALEX ALBINO, REY ALBINO, JULIUS ABANES, MIGUEL
ALINAB, CHRISTOPHER BIOL, NELSON CATONG, RENATO DULOT, FLORO PACUNDO,
MARCELITO GAMAS, REYNALDO LIMA, SAMMY MESAGAL, ERNESTO PADILLA, and
CONRADO SULIBAGA to their respective positions without loss of rank and seniority
rights with full backwages from the date of dismissal up to the date of actual
reinstatement. Petitioners are likewise jointly and severally liable to private
respondents for proportionate 13th month pay, holiday pay, and service incentive
leave pay. SHIcDT

Ten percent of the total award shall be paid to the counsel of private respondents
as attorney's fees.

Other claims are dismissed for lack of merit.

The complaints of Roger and Christopher, both surnamed Lamayon, are dismissed
without prejudice.

Costs against petitioners.

SO ORDERED.