THE LABOR CODE OF THE PHILIPPINES PRESIDENTIAL DECREE NO. 442,
(As amended by
AS AMENDED
A DECREE INSTITUTING A LABOR CODE THEREBY REVISING AND
CONSOLIDATING LABOR AND SOCIAL LAWS TO AFFORD PROTECTION TO
LABOR, PROMOTE EMPLOYMENT AND HUMAN RESOURCES DEVELOPMENT
AND INSURE INDUSTRIAL PEACE BASED ON SOCIAL JUSTICE
PRELIMINARY TITLE
Chapter I
GENERAL PROVISIONS
ARTICLE 1. Name of Decree. - This Decree shall be known as the "Labor
Code of the Philippines".
ART. 2. Date of effectivity. - This Code shall take effect six (6) months
after its promulgation.
ART. 3. Declaration of basic policy. - The State shall afford protection to
labor, promote full employment, ensure equal work opportunities regardless
of sex, race or creed and regulate the relations between workers and
employers. The State shall assure the rights of workers to self-organization,
collective bargaining, security of tenure, and just and humane conditions of
work.
ART. 4. Construction in favor of labor. - All doubts in the implementation
and interpretation of the provisions of this Code, including its implementing
rules and regulations, shall be resolved in favor of labor.
ART. 5. Rules and regulations. - The Department of Labor and other
government agencies charged with the administration and enforcement of
this Code or any of its parts shall promulgate the necessary implementing
rules and regulations. Such rules and regulations shall become effective
fifteen (15) days after announcement of their adoption in newspapers of
general circulation.
ART. 6. Applicability. - All rights and benefits granted to workers under this
Code shall, except as may otherwise be provided herein, apply alike to all
workers, whether agricultural or non-agricultural.
Presidential Decree No. 570-A, November 1, 1974).
Chapter II
EMANCIPATION OF TENANTS
ART. 8. Transfer of lands to tenant-workers. - Being a vital part of the
labor force, tenant-farmers on private agricultural lands primarily devoted
to rice and corn under a system of share crop or lease tenancy whether
classified as landed estate or not shall be deemed owner of a portion
constituting a family-size farm of five (5) hectares, if not irrigated and three
(3) hectares, if irrigated.
In all cases, the land owner may retain a n area of not more than seven
(7) hectares if such landowner is cultivating such area or will now cultivate
it.
ART. 9. Determination of land value. - For the purpose of determining the
cost of the land to be transferred to the tenant-farmer, the value of the
land shall be equivalent to two and one-half (2-1/2) times the average
harvest of three (3) normal crop years immediately preceding the
promulgation of Presidential Decree No. 27 on October 21, 1972.
The total cost of the land, including interest at the rate of six percent (6%)
per annum, shall be paid by the tenant in fifteen (15) years of fifteen (15)
equal annual amortizations.
In case of default, the amortization due shall be paid by the farmers
cooperative in which the defaulting tenant-farmer is a member, with the
cooperative having a right of recourse against him.
The government shall guarantee such amortizations with shares of stock in
government-owned and government-controlled corporations.
ART. 10. Conditions of ownership. - No title to the land acquired by the
tenant-farmer under Presidential Decree No. 27 shall be actually issued to
him unless and until he has become a full-fledged member of a duly
recognized farmers cooperative.
Title to the land acquired pursuant to Presidential Decree No. 27 or the
Land Reform Program of the Government shall not be transferable except
by hereditary succession or to the Government in accordance with the
provisions of Presidential Decree No. 27, the Code of Agrarian Reforms and
other existing laws and regulations.
ART. 11. Implementing agency. - The Department of Agrarian Reform shall
promulgate the necessary rules and regulations to implement the provisions
of this Chapter.
BOOK ONE
PRE-EMPLOYMENT
ART. 12. Statement of objectives. - It is the policy of the State:
a) To promote and maintain a state of full employment through improved
manpower training, allocation and utilization; chanroblesvirtuallawlibrary
b) To protect every citizen desiring to work locally or overseas by securing
for him the best possible terms and conditions of employment;
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c) To facilitate a free choice of available employment by persons seeking
work in conformity with the national interest;
d) To facilitate and regulate the movement of workers in conformity with
the national interest;
e) To regulate the employment of aliens, including the establishment of a
registration and/or work permit system;
f) To strengthen the network of public employment offices and rationalize
the participation of the private sector in the recruitment and placement of
workers, locally and overseas, to serve national development objectives;
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g) To insure careful selection of Filipino workers for overseas employment
in order to protect the good name of the Philippines abroad.
Title I
RECRUITMENT AND PLACEMENT OF WORKERS
Chapter I
GENERAL PROVISIONS
ART. 13. Definitions. - (a) "Worker" means any member of the labor force,
whether employed or unemployed.
(b) "Recruitment and placement" refers to any act of canvassing, enlisting,
contracting, transporting, utilizing, hiring or procuring workers, and includes
referrals, contract services, promising or advertising for employment, locally
or abroad, whether for profit or not: Provided, That any person or entity
which, in any manner, offers or promises for a fee, employment to two or
more persons shall be deemed engaged in recruitment and placement.
(c) "Private fee-charging employment agency" means any person or entity
engaged in recruitment and placement of workers for a fee which is
charged, directly or indirectly, from the workers or employers or both.
(d) "License" means a document issued by the Department of Labor
authorizing a person or entity to operate a private employment agency.
(e) "Private recruitment entity" means any person or association engaged in
the recruitment and placement of workers, locally or overseas, without
charging, directly or indirectly, any fee from the workers or employers.
(f) "Authority" means a document issued by the Department of Labor
authorizing a person or association to engage in recruitment and placement
activities as a private recruitment entity.
(g) "Seaman" means any person employed in a vessel engaged in maritime
navigation.
(h) "Overseas employment" means employment of a worker outside the
Philippines. chanroblesvirtuallawlibrary
(i) "Emigrant" means any person, worker or otherwise, who emigrates to a
foreign country by virtue of an immigrant visa or resident permit or its
equivalent in the country of destination.
 ART. 14. Employment promotion. - The Secretary of Labor shall have the
power and authority:
(a) To organize and establish new employment offices in addition to the
existing employment offices under the Department of Labor as the need
arises;
(b) To organize and establish a nationwide job clearance and information
system to inform applicants registering with a particular employment office
of job opportunities in other parts of the country as well as job
opportunities abroad;
(c) To develop and organize a program that will facilitate occupational,
industrial and geographical mobility of labor and provide assistance in the
relocation of workers from one area to another; and
(d) To require any person, establishment, organization or institution to
submit such employment information as may be prescribed by the
Secretary of Labor.
ART. 15. Bureau of Employment Services. - (a) The Bureau of Employment
Services shall be primarily responsible for developing and monitoring a
comprehensive employment program. It shall have the power and duty:
1. To formulate and develop plans and programs to implement the
employment promotion objectives of this Title;
2. To establish and maintain a registration and/or licensing system to
regulate private sector participation in the recruitment and placement of
workers, locally and overseas, and to secure the best possible terms and
conditions of employment for Filipino contract workers and compliance
therewith under such rules and regulations as may be issued by the
Minister of Labor;
3. To formulate and develop employment programs designed to benefit
disadvantaged groups and communities; chanroblesvirtuallawlibrary
4. To establish and maintain a registration and/or work permit system to
regulate the employment of aliens;
5. To develop a labor market information system in aid of proper manpower
and development planning;
6. To develop a responsive vocational guidance and testing system in aid of
proper human resources allocation; and
7. To maintain a central registry of skills, except seamen.
(b) The regional offices of the Ministry of Labor shall have the original and
exclusive jurisdiction over all matters or cases involving employer-employee
relations including money claims, arising out of or by virtue of any law or
contracts involving Filipino workers for overseas employment except
seamen: Provided, That the Bureau of Employment Services may, in the
case of the National Capital Region, exercise such power, whenever the
Minister of Labor deems it appropriate. The decisions of the regional offices
of the Bureau of Employment Services, if so authorized by the Minister of
Labor as provided in this Article, shall be appealable to the National Labor
Relations Commission upon the same grounds provided in Article 223
hereof. The decisions of the National Labor Relations Commission shall be
final and inappealable. (Superseded by Exec. Order 797, May 1, 1982).
(c) The Minister of Labor shall have the power to impose and collect fees
based on rates recommended by the Bureau of Employment Services. Such
fees shall be deposited in the National Treasury as a special account of the
General Fund, for the promotion of the objectives of the Bureau of
Employment Services, subject to the provisions of Section 40 of Presidential
Decree No. 1177.
ART. 16. Private recruitment. - Except as provided in Chapter II of this
Title, no person or entity other than the public employment offices, shall
engage in the recruitment and placement of workers.
ART. 17. Overseas Employment Development Board. - An Overseas
Employment Development Board is hereby created to undertake, in
cooperation with relevant entities and agencies, a systematic program for
overseas employment of Filipino workers in excess of domestic needs and
to protect their rights to fair and equitable employment practices. It shall
have the power and duty:
1. To promote the overseas employment of Filipino workers through a
comprehensive market promotion and development program;
2. To secure the best possible terms and conditions of employment of
Filipino contract workers on a government-to-government basis and to
ensure compliance therewith;
3. To recruit and place workers for overseas employment on a government-
to-government arrangement and in such other sectors as policy may
dictate; and chanroblesvirtuallawlibrary
4. To act as secretariat for the Board of Trustees of the Welfare and
Training Fund for Overseas Workers.
ART. 18. Ban on direct-hiring. - No employer may hire a Filipino worker for
overseas employment except through the Boards and entities authorized by
the Secretary of Labor. Direct-hiring by members of the diplomatic corps,
international organizations and such other employers as may be allowed by
the Secretary of Labor is exempted from this provision.
ART. 19. Office of Emigrant Affairs. - (a) Pursuant to the national policy to
maintain close ties with Filipino migrant communities and promote their
welfare as well as establish a data bank in aid of national manpower policy
formulation, an Office of Emigrant Affairs is hereby created in the
Department of Labor. The Office shall be a unit at the Office of the
Secretary and shall initially be manned and operated by such personnel and
through such funding as are available within the Department and its
attached agencies. Thereafter, its appropriation shall be made part of the
regular General Appropriations Decree.
(b) The office shall, among others, promote the well-being of emigrants
and maintain their close link to the homeland by:
1) serving as a liaison with migrant communities;
2) provision of welfare and cultural services;
3) promote and facilitate re-integration of migrants into the national
mainstream;
4) promote economic; political and cultural ties with the communities; and
5) generally to undertake such activities as may be appropriate to enhance
such cooperative links.
ART. 20. National Seamen Board. - (a) A National Seamen Board is hereby
created which shall develop and maintain a comprehensive program for
Filipino seamen employed overseas. It shall have the power and duty:
1. To provide free placement services for seamen;
2. To regulate and supervise the activities of agents or representatives of
shipping companies in the hiring of seamen for overseas employment and
secure the best possible terms of employment for contract seamen workers
and secure compliance therewith;
3. To maintain a complete registry of all Filipino seamen.
(b) The Board shall have original and exclusive jurisdiction over all matters
or cases including money claims, involving employer-employee relations,
arising out of or by virtue of any law or contracts involving Filipino seamen
for overseas employment. The decisions of the Board shall be appealable to
the National Labor Relations Commission upon the same grounds provided
in Article 223 hereof. The decisions of the National Labor Relations
Commission shall be final and inappealable.
ART. 21. Foreign service role and participation. - To provide ample
protection to Filipino workers abroad, the labor attaches, the labor reporting
officers duly designated by the Secretary of Labor and the Philippine
diplomatic or consular officials concerned shall, even without prior
instruction or advice from the home office, exercise the power and duty:
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(a) To provide all Filipino workers within their jurisdiction assistance on all
matters arising out of employment;
(b) To insure that Filipino workers are not exploited or discriminated
against;
(c) To verify and certify as requisite to authentication that the terms and
conditions of employment in contracts involving Filipino workers are in
accordance with the Labor Code and rules and regulations of the Overseas
Employment Development Board and National Seamen Board;
(d) To make continuing studies or researches and recommendations on the
various aspects of the employment market within their jurisdiction;
(e) To gather and analyze information on the employment situation and its
probable trends, and to make such information available; and
(f) To perform such other duties as may be required of them from time to
time.
ART. 22. Mandatory remittance of foreign exchange earnings. - It shall be
mandatory for all Filipino workers abroad to remit a portion of their foreign
exchange earnings to their families, dependents, and/or beneficiaries in the
country in accordance with rules and regulations prescribed by the
Secretary of Labor.
ART. 23. Composition of the Boards. - (a) The OEDB shall be composed of
the Secretary of Labor and Employment as Chairman, the Undersecretary of
Labor as Vice-Chairman, and a representative each of the Department of
Foreign Affairs, the Department of National Defense, the Central Bank, the
Department of Education, Culture and Sports, the National Manpower and
Youth Council, the Bureau of Employment Services, a workers organization
and an employers organization and the Executive Director of the OEDB as
members.
(b) The National Seamen Board shall be composed of the Secretary of
Labor and Employment as Chairman, the Undersecretary of Labor as Vice-
Chairman, the Commandant of the Philippine Coast Guard, and a
representative each of the Department of Foreign Affairs, the Department
of Education, Culture and Sports, the Central Bank, the Maritime Industry
Authority, the Bureau of Employment Services, a national shipping
association and the Executive Director of the NSB as members.
The members of the Boards shall receive allowances to be determined by
the Board which shall not be more than P2,000.00 per month.
(c) The Boards shall be attached to the Department of Labor for policy and
program coordination. They shall each be assisted by a Secretariat headed
by an Executive Director who shall be a Filipino citizen with sufficient
experience in manpower administration, including overseas employment
activities. The Executive Director shall be appointed by the President of the
Philippines upon the recommendation of the Secretary of Labor and shall
receive an annual salary as fixed by law. The Secretary of Labor shall
appoint the other members of the Secretariat.
(d) The Auditor General shall appoint his representative to the Boards to
audit their respective accounts in accordance with auditing laws and
pertinent rules and regulations. chanroblesvirtuallawlibrary
ART. 24. Boards to issue rules and collect fees. - The Boards shall issue
appropriate rules and regulations to carry out their functions. They shall
have the power to impose and collect fees from employers concerned,
which shall be deposited in the respective accounts of said Boards and be
used by them exclusively to promote their objectives.
Chapter II
REGULATION OF RECRUITMENT AND PLACEMENT ACTIVITIES
ART. 25. Private sector participation in the recruitment and placement of
workers. - Pursuant to national development objectives and in order to
harness and maximize the use of private sector resources and initiative in
the development and implementation of a comprehensive employment
program, the private employment sector shall participate in the recruitment
and placement of workers, locally and overseas, under such guidelines,
rules and regulations as may be issued by the Secretary of Labor.
ART. 26. Travel agencies prohibited to recruit. - Travel agencies and sales
agencies of airline companies are prohibited from engaging in the business
of recruitment and placement of workers for overseas employment whether
for profit or not.
ART. 27. Citizenship requirement. - Only Filipino citizens or corporations,
partnerships or entities at least seventy-five percent (75%) of the
authorized and voting capital stock of which is owned and controlled by
Filipino citizens shall be permitted to participate in the recruitment and
placement of workers, locally or overseas.
ART. 28. Capitalization. - All applicants for authority to hire or renewal of
license to recruit are required to have such substantial capitalization as
determined by the Secretary of Labor.
ART. 29. Non-transferability of license or authority. - No license or authority
shall be used directly or indirectly by any person other than the one in
whose favor it was issued or at any place other than that stated in the
license or authority be transferred, conveyed or assigned to any other
person or entity. Any transfer of business address, appointment or
designation of any agent or representative including the establishment of
additional offices anywhere shall be subject to the prior approval of the
Department of Labor.
ART. 30. Registration fees. - The Secretary of Labor shall promulgate a
schedule of fees for the registration of all applicants for license or authority.
ART. 31. Bonds. - All applicants for license or authority shall post such cash
and surety bonds as determined by the Secretary of Labor to guarantee
compliance with prescribed recruitment procedures, rules and regulations,
and terms and conditions of employment as may be appropriate.
ART. 32. Fees to be paid by workers. - Any person applying with a private
fee-charging employment agency for employment assistance shall not be
charged any fee until he has obtained employment through its efforts or
has actually commenced employment. Such fee shall be always covered
with the appropriate receipt clearly showing the amount paid. The
Secretary of Labor shall promulgate a schedule of allowable fees.
ART. 33. Reports on employment status. - Whenever the public interest
requires, the Secretary of Labor may direct all persons or entities within the
coverage of this Title to submit a report on the status of employment,
including job vacancies, details of job requisitions, separation from jobs,
wages, other terms and conditions and other employment data.
ART. 34. Prohibited practices. - It shall be unlawful for any individual,
entity, licensee, or holder of authority:
(a) To charge or accept, directly or indirectly, any amount greater than that
specified in the schedule of allowable fees prescribed by the Secretary of
Labor, or to make a worker pay any amount greater than that actually
received by him as a loan or advance;
(b) To furnish or publish any false notice or information or document in
relation to recruitment or employment;
(c) To give any false notice, testimony, information or document or commit
any act of misrepresentation for the purpose of securing a license or
authority under this Code.
(d) To induce or attempt to induce a worker already employed to quit his
employment in order to offer him to another unless the transfer is designed
to liberate the worker from oppressive terms and conditions of
employment;
(e) To influence or to attempt to influence any person or entity not to
employ any worker who has not applied for employment through his
agency;
(f) To engage in the recruitment or placement of workers in jobs harmful to
public health or morality or to the dignity of the Republic of the Philippines;
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(g) To obstruct or attempt to obstruct inspection by the Secretary of Labor
or by his duly authorized representatives;
(h) To fail to file reports on the status of employment, placement
vacancies, remittance of foreign exchange earnings, separation from jobs,
departures and such other matters or information as may be required by
the Secretary of Labor.
(i) To substitute or alter employment contracts approved and verified by
the Department of Labor from the time of actual signing thereof by the
parties up to and including the periods of expiration of the same without
the approval of the Secretary of Labor;
(j) To become an officer or member of the Board of any corporation
engaged in travel agency or to be engaged directly or indirectly in the
management of a travel agency; and
(k) To withhold or deny travel documents from applicant workers before
departure for monetary or financial considerations other than those
authorized under this Code and its implementing rules and regulations.
ART. 35. Suspension and/or cancellation of license or authority. - The
Minister of Labor shall have the power to suspend or cancel any license or
authority to recruit employees for overseas employment for violation of
rules and regulations issued by the Ministry of Labor, the Overseas
Employment Development Board, or for violation of the provisions of this
and other applicable laws, General Orders and Letters of Instructions.
Chapter III
MISCELLANEOUS PROVISIONS
ART. 36. Regulatory power. - The Secretary of Labor shall have the power
to restrict and regulate the recruitment and placement activities of all
agencies within the coverage of this Title and is hereby authorized to issue
orders and promulgate rules and regulations to carry out the objectives and
implement the provisions of this Title.
ART. 37. Visitorial Power. - The Secretary of Labor or his duly authorized
representatives may, at any time, inspect the premises, books of accounts
and records of any person or entity covered by this Title, require it to
submit reports regularly on prescribed forms, and act on violation of any
provisions of this Title.
ART. 38. Illegal recruitment. - (a) Any recruitment activities, including the
prohibited practices enumerated under Article 34 of this Code, to be
undertaken by non-licensees or non-holders of authority, shall be deemed
illegal and punishable under Article 39 of this Code. The Department of
Labor and Employment or any law enforcement officer may initiate
complaints under this Article.
(b) Illegal recruitment when committed by a syndicate or in large scale shall
be considered an offense involving economic sabotage and shall be
penalized in accordance with Article 39 hereof.
Illegal recruitment is deemed committed by a syndicate if carried out by a
group of three (3) or more persons conspiring and/or confederating with
one another in carrying out any unlawful or illegal transaction, enterprise or
scheme defined under the first paragraph hereof. Illegal recruitment is
deemed committed in large scale if committed against three (3) or more
persons individually or as a group.
(c) The Secretary of Labor and Employment or his duly authorized
representatives shall have the power to cause the arrest and detention of
such non-licensee or non-holder of authority if after investigation it is
determined that his activities constitute a danger to national security and
public order or will lead to further exploitation of job-seekers. The Secretary
shall order the search of the office or premises and seizure of documents,
paraphernalia, properties and other implements used in illegal recruitment
activities and the closure of companies, establishments and entities found
to be engaged in the recruitment of workers for overseas employment,
without having been licensed or authorized to do so.
ART. 39. Penalties. - (a) The penalty of life imprisonment and a fine of One
Hundred Thousand Pesos (P1000,000.00) shall be imposed if illegal
recruitment constitutes economic sabotage as defined herein;
(b) Any licensee or holder of authority found violating or causing another to
violate any provision of this Title or its implementing rules and regulations
shall, upon conviction thereof, suffer the penalty of imprisonment of not
less than two years nor more than five years or a fine of not less than
P10,000 nor more than P50,000, or both such imprisonment and fine, at
the discretion of the court;
(c) Any person who is neither a licensee nor a holder of authority under this
Title found violating any provision thereof or its implementing rules and
regulations shall, upon conviction thereof, suffer the penalty of
imprisonment of not less than four years nor more than eight years or a
fine of not less than P20,000 nor more than P100,000 or both such
imprisonment and fine, at the discretion of the court;
(d) If the offender is a corporation, partnership, association or entity, the
penalty shall be imposed upon the officer or officers of the corporation,
partnership, association or entity responsible for violation; and if such
officer is an alien, he shall, in addition to the penalties herein prescribed, be
deported without further proceedings;
(e) In every case, conviction shall cause and carry the automatic revocation
of the license or authority and all the permits and privileges granted to such
person or entity under this Title, and the forfeiture of the cash and surety
bonds in favor of the Overseas Employment Development Board or the
National Seamen Board, as the case may be, both of which are authorized
to use the same exclusively to promote their objectives.
Title II
EMPLOYMENT OF NON-RESIDENT
ALIENS
ART. 40. Employment permit of non-resident aliens. - Any alien seeking
admission to the Philippines for employment purposes and any domestic or
foreign employer who desires to engage an alien for employment in the
Philippines shall obtain an employment permit from the Department of
Labor.
The employment permit may be issued to a non-resident alien or to the
applicant employer after a determination of the non-availability of a person
in the Philippines who is competent, able and willing at the time of
application to perform the services for which the alien is desired.
For an enterprise registered in preferred areas of investments, said
employment permit may be issued upon recommendation of the
government agency charged with the supervision of said registered
enterprise.
ART. 41. Prohibition against transfer of employment. - (a) After the
issuance of an employment permit, the alien shall not transfer to another
job or change his employer without prior approval of the Secretary of
Labor.
(b) Any non-resident alien who shall take up employment in violation of the
provision of this Title and its implementing rules and regulations shall be
punished in accordance with the provisions of Articles 289 and 290 of the
Labor Code.
In addition, the alien worker shall be subject to deportation after service of
his sentence.
ART. 42. Submission of list. - Any employer employing non-resident foreign
nationals on the effective date of this Code shall submit a list of such
nationals to the Secretary of Labor within thirty (30) days after such date
indicating their names, citizenship, foreign and local addresses, nature of
employment and status of stay in the country. The Secretary of Labor shall
then determine if they are entitled to an employment permit.
BOOK TWO
HUMAN RESOURCES DEVELOPMENT PROGRAM
Title I
NATIONAL MANPOWER DEVELOPMENT PROGRAM
Chapter I
NATIONAL POLICIES AND ADMINISTRATIVE MACHINERY
FOR THEIR IMPLEMENTATION
ART. 43. Statement of objective. - It is the objective of this Title to develop
human resources, establish training institutions, and formulate such plans
and programs as will ensure efficient allocation, development and utilization
of the nations manpower and thereby promote employment and accelerate
economic and social growth.
ART. 44. Definitions. - As used in this Title:
(a) "Manpower" shall mean that portion of the nations population which
has actual or potential capability to contribute directly to the production of
goods and services.
(b) "Entrepreneurship" shall mean training for self-employment or assisting
individual or small industries within the purview of this Title.
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ART. 45. National Manpower and Youth Council; Composition. - To carry
out the objectives of this Title, the National Manpower and Youth Council,
which is attached to the Department of Labor for policy and program
coordination and hereinafter referred to as the Council, shall be composed
of the Secretary of Labor as ex-officio chairman, the Secretary of Education
and Culture as ex-officio vice-chairman, and as ex-officio members, the
Secretary of Economic Planning, the Secretary of Natural Resources, the
Chairman of the Civil Service Commission, the Secretary of Social Welfare,
the Secretary of Local Government, the Secretary of Science and
Technology, the Secretary of Trade and Industry and the Director-General
of the Council. The Director General shall have no vote.
In addition, the President shall appoint the following members from the
private sector: two (2) representatives of national organizations of
employers; two (2) representatives of national workers organizations; and
one representative of national family and youth organizations, each for a
term of three (3) years.
ART. 46. National Manpower Plan. - The Council shall formulate a long-term
national manpower plan for the optimum allocation, development and
utilization of manpower for employment, entrepreneurship and economic
and social growth. This manpower plan shall, after adoption by the Council,
be updated annually and submitted to the President for his approval.
Thereafter, it shall be the controlling plan for the development of
manpower resources for the entire country in accordance with the national
development plan. The Council shall call upon any agency of the
Government or the private sector to assist in this effort.
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ART. 47. National Manpower Skills Center. - The Council shall establish a
National Manpower Skills Center and regional and local training centers for
the purpose of promoting the development of skills. The centers shall be
administered and operated under such rules and regulations as may be
established by the Council. chanroblesvirtuallawlibrary
ART. 48. Establishment and formulation of skills standards. - There shall be
national skills standards for industry trades to be established by the Council
in consultation with employers and workers organizations and appropriate
government authorities. The Council shall thereafter administer the national
skills standards.
ART. 49. Administration of training programs. - The Council shall provide,
through the Secretariat, instructor training, entrepreneurship development,
training in vocations, trades and other fields of employment, and assist any
employer or organization in training schemes designed to attain its
objectives under rules and regulations which the Council shall establish for
this purpose.
The Council shall exercise, through the Secretariat, authority and
jurisdiction over, and administer, on-going technical assistance programs
and/or grants-in-aid for manpower and youth development including those
which may be entered into between the Government of the Philippines and
international and foreign organizations and nations, as well as persons and
organizations in the Philippines.
In order to integrate the national manpower development efforts, all
manpower training schemes as provided for in this Code shall be
coordinated with the Council, particularly those having to do with the
setting of skills standards. For this purpose, existing manpower training
programs in the government and in the private sector shall be reported to
the Council which may regulate such programs to make them conform with
national development programs.
This Article shall not include apprentices, learners and handicapped workers
as governed by appropriate provisions of this Code.
ART. 50. Industry boards. - The Council shall establish industry boards to
assist in the establishment of manpower development schemes, trades and
skills standards and such other functions as will provide direct participation
of employers and workers in the fulfillment of the Councils objectives, in
accordance with guidelines to be established by the Council and in
consultation with the National Economic and Development Authority.
The maintenance and operations of the industry boards shall be financed
through a funding scheme under such rates of fees and manners of
collection and disbursements as may be determined by the Council.
ART. 51. Employment service training functions. - The Council shall utilize
the employment service of the Department of Labor for the placement of its
graduates. The Bureau of Employment Services shall render assistance to
the Council in the measurement of unemployment and underemployment,
conduct of local manpower resource surveys and occupational studies
including an inventory of the labor force, establishment and maintenance
without charge of a national register of technicians who have successfully
completed a training program under this Act, and skilled manpower
including its publication, maintenance of an adequate and up-to-date
system of employment information. chanroblesvirtuallawlibrary
ART. 52. Incentive Scheme. - An additional deduction from taxable income
of one-half (1/2) of the value of labor training expenses incurred for
development programs shall be granted to the person or enterprise
concerned provided that such development programs, other than
apprenticeship, are approved by the Council and the deduction does not
exceed ten percent (10%) of the direct labor wage.
There shall be a review of the said scheme two years after its
implementation.
ART. 53. Council Secretariat. - The Council shall have a Secretariat headed
by a Director-General who shall be assisted by a Deputy Director-General,
both of whom shall be career administrators appointed by the President of
the Philippines on recommendation of the Secretary of Labor. The
Secretariat shall be under the administrative supervision of the Secretary of
Labor and shall have an Office of Manpower Planning and Development, an
Office of Vocational Preparation, a National Manpower Skills Center,
regional manpower development offices and such other offices as may be
necessary.
The Director-General shall have the rank and emoluments of an
undersecretary and shall serve for a term of ten (10) years. The Executive-
Directors of the Office of Manpower Planning and Development, the Office
of Vocational Preparation and the National Manpower Skills Center shall
have the rank and emoluments of a bureau director and shall be subject to
Civil Service Law, rules and regulations. The Director-General, Deputy
Director-General and Executive Directors shall be natural-born citizens,
between thirty and fifty years of age at the time of appointment, with a
masters degree or its equivalent, and experience in national planning and
development of human resources. The Executive Director of the National
Manpower Skills Center shall, in addition to the foregoing qualifications,
have undergone training in center management. Executive Directors shall
be appointed by the President on the recommendations of the Secretary of
Labor and Employment.
The Director-General shall appoint such personnel necessary to carry out
the objectives, policies and functions of the Council subject to Civil Service
rules. The regular professional and technical personnel shall be exempt
from WAPCO rules and regulations.
The Secretariat shall have the following functions and responsibilities:
(a) To prepare and recommend the manpower plan for approval by the
Council;
(b) To recommend allocation of resources for the implementation of the
manpower plan as approved by the Council;
(c) To carry out the manpower plan as the implementing arm of the
Council;
(d) To effect the efficient performance of the functions of the Council and
the achievement of the objectives of this Title;
(e) To determine specific allocation of resources for the projects to be
undertaken pursuant to approved manpower plans;
(f) To submit to the Council periodic reports on progress and
accomplishment of work programs; chanroblesvirtuallawlibrary
(g) To prepare for approval by the Council an annual report to the President
on plans, programs and projects on manpower and out-of-school youth
development;
(h) To enter into agreements to implement approved plans and programs
and perform any and all such acts as will fulfill the objectives of this Code
as well as ensure the efficient performance of the functions of the Council;
and
(i) To perform such other functions as may be authorized by the Council.
ART. 54. Regional manpower development offices. - The Council shall
create regional manpower development offices which shall determine the
manpower needs of the industry, agriculture and other sectors of the
economy within their respective jurisdictions; provide the Councils central
planners with the data for updating the national manpower plan;
recommend programs for the regional level agencies engaged in manpower
and youth development within the policies formulated by the Council; and
administer and supervise Secretariat training programs within the region
and perform such other functions as may be authorized by the Council.
ART. 55. Consultants and technical assistance, publication and research. -
In pursuing its objectives, the Council is authorized to set aside a portion of
its appropriation for the hiring of the services of qualified consultants,
and/or private organizations for research work and publication. It shall avail
itself of the services of the Government as may be required.
ART. 56. Rules and regulations. - The Council shall define its broad
functions and issue appropriate rules and regulations necessary to
implement the provision of this Code.
Title II
TRAINING AND EMPLOYMENT OF SPECIAL WORKERS
Chapter I
APPRENTICES
ART. 57. Statement of objectives. - This Title aims:
(1) To help meet the demand of the economy for trained manpower;
(2) To establish a national apprenticeship program through the participation
of employers, workers and government and non-government agencies; and
(3) To establish apprenticeship standards for the protection of apprentices.
ART. 58. Definition of Terms. - As used in this Title:
(a) "Apprenticeship" means practical training on the job supplemented by
related theoretical instruction.
(b) An "apprentice" is a worker who is covered by a written apprenticeship
agreement with an individual employer or any of the entities recognized
under this Chapter.
(c) An "apprenticeable occupation" means any trade, form of employment
or occupation which requires more than three (3) months of practical
training on the job supplemented by related theoretical instruction.
(d) "Apprenticeship agreement" is an employment contract wherein the
employer binds himself to train the apprentice and the apprentice in turn
accepts the terms of training.
ART. 59. Qualifications of apprentice. - To qualify as an apprentice, a
person shall:
(a) Be at least fourteen (14) years of age;
(b) Possess vocational aptitude and capacity for appropriate tests; and
(c) Possess the ability to comprehend and follow oral and written
instructions.
Trade and industry associations may recommend to the Secretary of Labor
appropriate educational requirements for different occupations.
ART. 60. Employment of apprentices. - Only employers in the highly
technical industries may employ apprentices and only in apprenticeable
occupations approved by the Secretary of Labor and Employment. (As
amended by Section 1, Executive Order No. 111, December 24, 1986).
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ART. 61. Contents of apprenticeship agreements. - Apprenticeship
agreements, including the wage rates of apprentices, shall conform to the
rules issued by the Secretary of Labor and Employment. The period of
apprenticeship shall not exceed six months. Apprenticeship agreements
providing for wage rates below the legal minimum wage, which in no case
shall start below 75 percent of the applicable minimum wage, may be
entered into only in accordance with apprenticeship programs duly
approved by the Secretary of Labor and Employment. The Department shall
develop standard model programs of apprenticeship. (As amended by
Section 1, Executive Order No. 111, December 24, 1986).
ART. 62. Signing of apprenticeship agreement. -Every apprenticeship
agreement shall be signed by the employer or his agent, or by an
authorized representative of any of the recognized organizations,
associations or groups and by the apprentice.
An apprenticeship agreement with a minor shall be signed in his behalf by
his parent or guardian, if the latter is not available, by an authorized
representative of the Department of Labor, and the same shall be binding
during its lifetime.
Every apprenticeship agreement entered into under this Title shall be
ratified by the appropriate apprenticeship committees, if any, and a copy
thereof shall be furnished both the employer and the apprentice.
ART. 63. Venue of apprenticeship programs. - Any firm, employer, group or
association, industry organization or civic group wishing to organize an
apprenticeship program may choose from any of the following
apprenticeship schemes as the training venue for apprentice:
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(a) Apprenticeship conducted entirely by and within the sponsoring firm,
establishment or entity;
(b) Apprenticeship entirely within a Department of Labor and Employment
training center or other public training institution; or
(c) Initial training in trade fundamentals in a training center or other
institution with subsequent actual work participation within the sponsoring
firm or entity during the final stage of training.
ART. 64. Sponsoring of apprenticeship program. - Any of the apprenticeship
schemes recognized herein may be undertaken or sponsored by a single
employer or firm or by a group or association thereof or by a civic
organization. Actual training of apprentices may be undertaken:
(a) In the premises of the sponsoring employer in the case of individual
apprenticeship programs;
(b) In the premises of one or several designated firms in the case of
programs sponsored by a group or association of employers or by a civic
organization; or
(c) In a Department of Labor and Employment training center or other
public training institution.
ART. 65. Investigation of violation of apprenticeship agreement. - Upon
complaint of any interested person or upon its own initiative, the
appropriate agency of the Department of Labor and Employment or its
authorized representative shall investigate any violation of an
apprenticeship agreement pursuant to such rules and regulations as may be
prescribed by the Secretary of Labor and Employment.
ART. 66. Appeal to the Secretary of Labor and Employment. - The decision
of the authorized agency of the Department of Labor and Employment may
be appealed by any aggrieved person to the Secretary of Labor and
Employment within five (5) days from receipt of the decision. The decision
of the Secretary of Labor and Employment shall be final and executory.
ART. 67. Exhaustion of administrative remedies. - No person shall institute
any action for the enforcement of any apprenticeship agreement or
damages for breach of any such agreement, unless he has exhausted all
available administrative remedies.
ART. 68. Aptitude testing of applicants. - Consonant with the minimum
qualifications of apprentice-applicants required under this Chapter,
employers or entities with duly recognized apprenticeship programs shall
have primary responsibility for providing appropriate aptitude tests in the
selection of apprentices. If they do not have adequate facilities for the
purpose, the Department of Labor and Employment shall perform the
service free of charge.
ART. 69. Responsibility for theoretical instruction. - Supplementary
theoretical instruction to apprentices in cases where the program is
undertaken in the plant may be done by the employer. If the latter is not
prepared to assume the responsibility, the same may be delegated to an
appropriate government agency. chanroblesvirtuallawlibrary
ART. 70. Voluntary organization of apprenticeship programs; exemptions. -
(a) The organization of apprenticeship program shall be primarily a
voluntary undertaking by employers;
(b) When national security or particular requirements of economic
development so demand, the President of the Philippines may require
compulsory training of apprentices in certain trades, occupations, jobs or
employment levels where shortage of trained manpower is deemed critical
as determined by the Secretary of Labor and Employment. Appropriate
rules in this connection shall be promulgated by the Secretary of Labor and
Employment as the need arises; and
(c) Where services of foreign technicians are utilized by private companies
in apprenticeable trades, said companies are required to set up appropriate
apprenticeship programs.
ART. 71. Deductibility of training costs. - An additional deduction from
taxable income of one-half (1/2) of the value of labor training expenses
incurred for developing the productivity and efficiency of apprentices shall
be granted to the person or enterprise organizing an apprenticeship
program: Provided, That such program is duly recognized by the
Department of Labor and Employment: Provided, further, That such
deduction shall not exceed ten (10%) percent of direct labor wage: and
Provided, finally, That the person or enterprise who wishes to avail himself
or itself of this incentive should pay his apprentices the minimum wage.
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ART. 72. Apprentices without compensation. - The Secretary of Labor and
Employment may authorize the hiring of apprentices without compensation
whose training on the job is required by the school or training program
curriculum or as requisite for graduation or board examination.
Chapter II
LEARNERS
ART. 73. Learners defined. - Learners are persons hired as trainees in semi-
skilled and other industrial occupations which are non-apprenticeable and
which may be learned through practical training on the job in a relatively
short period of time which shall not exceed three (3) months.
ART. 74. When learners may be hired. - Learners may be employed when
no experienced workers are available, the employment of learners is
necessary to prevent curtailment of employment opportunities, and the
employment does not create unfair competition in terms of labor costs or
impair or lower working standards.
ART. 75. Learnership agreement. - Any employer desiring to employ
learners shall enter into a learnership agreement with them, which
agreement shall include:
(a) The names and addresses of the learners;
(b) The duration of the learnership period, which shall not exceed three (3)
months;
(c) The wages or salary rates of the learners which shall begin at not less
than seventy-five percent (75%) of the applicable minimum wage; and
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(d) A commitment to employ the learners if they so desire, as regular
employees upon completion of the learnership. All learners who have been
allowed or suffered to work during the first two (2) months shall be deemed
regular employees if training is terminated by the employer before the end
of the stipulated period through no fault of the learners.
The learnership agreement shall be subject to inspection by the Secretary
of Labor and Employment or his duly authorized representative.
ART. 76. Learners in piecework. - Learners employed in piece or incentive-
rate jobs during the training period shall be paid in full for the work done.
ART. 77. Penalty clause. - Any violation of this Chapter or its implementing
rules and regulations shall be subject to the general penalty clause provided
for in this Code.
Chapter III
HANDICAPPED WORKERS
ART. 78. Definition. - Handicapped workers are those whose earning
capacity is impaired by age or physical or mental deficiency or injury.
ART. 79. When employable. - Handicapped workers may be employed when
their employment is necessary to prevent curtailment of employment
opportunities and when it does not create unfair competition in labor costs
or impair or lower working standards.
ART. 80. Employment agreement. - Any employer who employs
handicapped workers shall enter into an employment agreement with them,
which agreement shall include:
a. The names and addresses of the handicapped workers to be employed;
b. The rate to be paid the handicapped workers which shall not be less than
seventy five (75%) percent of the applicable legal minimum wage;
c. The duration of employment period; and
d. The work to be performed by handicapped workers.
The employment agreement shall be subject to inspection by the Secretary
of Labor or his duly authorized representative.
ART. 81. Eligibility for apprenticeship. - Subject to the appropriate
provisions of this Code, handicapped workers may be hired as apprentices
or learners if their handicap is not such as to effectively impede the
performance of job operations in the particular occupations for which they
are hired.
BOOK SIX
POST EMPLOYMENT
Title I
TERMINATION OF EMPLOYMENT
 ART. 278. Coverage. - The provisions of this Title shall apply to all
establishments or undertakings, whether for profit or not.
ART. 279. Security of tenure. - In cases of regular employment, the
employer shall not terminate the services of an employee except for a just
cause or when authorized by this Title. An employee who is unjustly
dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to the
time of his actual reinstatement. (As amended by Section 34, Republic Act
No. 6715, March 21, 1989).
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 service 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.
BOOK THREE
CONDITIONS OF EMPLOYMENT
Title I
WORKING CONDITIONS
AND REST PERIODS
Chapter I
HOURS OF WORK
ART. 82. 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.
"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.
ART. 83. Normal hours of work. - The normal hours of work of any
employee shall not exceed eight (8) hours a day.
Health personnel in cities and municipalities with a population of at least
one million (1,000,000) or in hospitals and clinics with a bed capacity of at
least one hundred (100) shall hold regular office hours for eight (8) hours a
day, for five (5) days a week, exclusive of time for meals, except where the
exigencies of the service require that such personnel work for six (6) days
or forty-eight (48) hours, in which case, they shall be entitled to an
additional compensation of at least thirty percent (30%) of their regular
wage for work on the sixth day. For purposes of this Article, "health
personnel" shall include resident physicians, nurses, nutritionists, dietitians,
pharmacists, social workers, laboratory technicians, paramedical
technicians, psychologists, midwives, attendants and all other hospital or
clinic personnel. chanroblesvirtuallawlibrary
ART. 84. Hours worked. - Hours worked shall include (a) all time during
which an employee is required to be on duty or to be at a prescribed
workplace; and (b) all time during which an employee is suffered or
permitted to work.
Rest periods of short duration during working hours shall be counted as
hours worked.
ART. 85. Meal periods. - Subject to such regulations as the Secretary of
Labor may prescribe, it shall be the duty of every employer to give his
employees not less than sixty (60) minutes time-off for their regular meals.
ART. 86. Night shift differential. - Every employee shall be paid a night shift
differential of not less than ten percent (10%) of his regular wage for each
hour of work performed between ten oclock in the evening and six oclock
in the morning.
ART. 87. Overtime work. - Work may be performed beyond eight (8) hours
a day provided that the employee is paid for the overtime work, an
additional compensation equivalent to his regular wage plus at least
twenty-five percent (25%) thereof. Work performed beyond eight hours on
a holiday or rest day shall be paid an additional compensation equivalent to
the rate of the first eight hours on a holiday or rest day plus at least thirty
percent (30%) thereof.
ART. 88. Undertime not offset by overtime. - Undertime work on any
particular day shall not be offset by overtime work on any other day.
Permission given to the employee to go on leave on some other day of the
week shall not exempt the employer from paying the additional
compensation required in this Chapter.
ART. 89. Emergency overtime work. - Any employee may be required by
the employer to perform overtime work in any of the following cases:chan
robles virtual law library
(a) When the country is at war or when any other national or local
emergency has been declared by the National Assembly or the Chief
Executive;
(b) When it is necessary to prevent loss of life or property or in case of
imminent danger to public safety due to an actual or impending emergency
in the locality caused by serious accidents, fire, flood, typhoon, earthquake,
epidemic, or other disaster or calamity;
(c) When there is urgent work to be performed on machines, installations,
or equipment, in order to avoid serious loss or damage to the employer or
some other cause of similar nature;
(d) When the work is necessary to prevent loss or damage to perishable
goods; and
(e) Where the completion or continuation of the work started before the
eighth hour is necessary to prevent serious obstruction or prejudice to the
business or operations of the employer.
Any employee required to render overtime work under this Article shall be
paid the additional compensation required in this Chapter.
ART. 90. Computation of additional compensation. - For purposes of
computing overtime and other additional remuneration as required by this
Chapter, the "regular wage" of an employee shall include the cash wage
only, without deduction on account of facilities provided by the employer.
Chapter II
WEEKLY REST PERIODS
ART. 91. Right to weekly rest day. - (a) It shall be the duty of every
employer, whether operating for profit or not, to provide each of his
employees a rest period of not less than twenty-four (24) consecutive hours
after every six (6) consecutive normal work days.
(b) The employer shall determine and schedule the weekly rest day of his
employees subject to collective bargaining agreement and to such rules and
regulations as the Secretary of Labor and Employment may provide.
However, the employer shall respect the preference of employees as to
their weekly rest day when such preference is based on religious grounds.
ART. 92. When employer may require work on a rest day. - The employer
may require his employees to work on any day:
(a) In case of actual or impending emergencies caused by serious accident,
fire, flood, typhoon, earthquake, epidemic or other disaster or calamity to
prevent loss of life and property, or imminent danger to public safety;
(b) In cases of urgent work to be performed on the machinery, equipment,
or installation, to avoid serious loss which the employer would otherwise
suffer;
(c) In the event of abnormal pressure of work due to special circumstances,
where the employer cannot ordinarily be expected to resort to other
measures;
(d) To prevent loss or damage to perishable goods;
(e) Where the nature of the work requires continuous operations and the
stoppage of work may result in irreparable injury or loss to the employer;
and
(f) Under other circumstances analogous or similar to the foregoing as
determined by the Secretary of Labor and Employment.
ART. 93. Compensation for rest day, Sunday or holiday work. - (a) Where
an employee is made or permitted to work on his scheduled rest day, he
shall be paid an additional compensation of at least thirty percent (30%) of
his regular wage. An employee shall be entitled to such additional
compensation for work performed on Sunday only when it is his established
rest day.chan robles virtual law library
(b) When the nature of the work of the employee is such that he has no
regular workdays and no regular rest days can be scheduled, he shall be
paid an additional compensation of at least thirty percent (30%) of his
regular wage for work performed on Sundays and holidays.
(c) Work performed on any special holiday shall be paid an additional
compensation of at least thirty percent (30%) of the regular wage of the
employee. Where such holiday work falls on the employees scheduled rest
day, he shall be entitled to an additional compensation of at least fifty per
cent (50%) of his regular wage.
(d) Where the collective bargaining agreement or other applicable
employment contract stipulates the payment of a higher premium pay than
that prescribed under this Article, the employer shall pay such higher rate.
Chapter III
HOLIDAYS, SERVICE INCENTIVE LEAVES
AND SERVICE CHARGES
ART. 94. Right to holiday pay. - (a) Every worker shall be paid his regular
daily wage during regular holidays, except in retail and service
establishments regularly employing less than ten (10) workers;
(b) The employer may require an employee to work on any holiday but
such employee shall be paid a compensation equivalent to twice his regular
rate; and
(c) As used in this Article, "holiday" includes: New Years Day, Maundy
Thursday, Good Friday, the ninth of April, the first of May, the twelfth of
June, the fourth of July, the thirtieth of November, the twenty-fifth and
thirtieth of December and the day designated by law for holding a general
election.
ART. 95. Right to service incentive leave. - (a) Every employee who has
rendered at least one year of service shall be entitled to a yearly service
incentive leave of five days with pay.
(b) This provision shall not apply to those who are already enjoying the
benefit herein provided, those enjoying vacation leave with pay of at least
five days and those employed in establishments regularly employing less
than ten employees or in establishments exempted from granting this
benefit by the Secretary of Labor and Employment after considering the
viability or financial condition of such establishment.
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(c) The grant of benefit in excess of that provided herein shall not be made
a subject of arbitration or any court or administrative action.
ART. 96. Service charges. - All service charges collected by hotels,
restaurants and similar establishments shall be distributed at the rate of
eighty-five percent (85%) for all covered employees and fifteen percent
(15%) for management. The share of the employees shall be equally
distributed among them. In case the service charge is abolished, the share
of the covered employees shall be considered integrated in their wages.
Title II
WAGES
Chapter I
PRELIMINARY MATTERS
ART. 97. Definitions. - As used in this Title:
(a) "Person" means an individual, partnership, association, corporation,
business trust, legal representatives, or any organized group of persons.
(b) "Employer" includes any person acting directly or indirectly in the
interest of an employer in relation to an employee and shall include the
government and all its branches, subdivisions and instrumentalities, all
government-owned or controlled corporations and institutions, as well as
non-profit private institutions, or organizations.
(c) "Employee" includes any individual employed by an employer.
(d) "Agriculture" includes farming in all its branches and, among other
things, includes cultivation and tillage of soil, dairying, the production,
cultivation, growing and harvesting of any agricultural and horticultural
commodities, the raising of livestock or poultry, and any practices
performed by a farmer on a farm as an incident to or in conjunction with
such farming operations, but does not include the manufacturing or
processing of sugar, coconuts, abaca, tobacco, pineapples or other farm
products.
(e) "Employ" includes to suffer or permit to work.
(f) "Wage" paid to any employee shall mean the remuneration or earnings,
however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece, or commission basis, or
other method of calculating the same, which is payable by an employer to
an employee under a written or unwritten contract of employment for work
done or to be done, or for services rendered or to be rendered and includes
the fair and reasonable value, as determined by the Secretary of Labor and
Employment, of board, lodging, or other facilities customarily furnished by
the employer to the employee. "Fair and reasonable value" shall not include
any profit to the employer, or to any person affiliated with the employer.
ART. 98. Application of Title. - This Title shall not apply to farm tenancy or
leasehold, domestic service and persons working in their respective homes
in needle work or in any cottage industry duly registered in accordance with
law.
Chapter II
MINIMUM WAGE RATES
ART. 99. Regional minimum wages. - The minimum wage rates for
agricultural and non-agricultural employees and workers in each and every
region of the country shall be those prescribed by the Regional Tripartite
Wages and Productivity Boards. (As amended by Section 3, Republic Act
No. 6727, June 9, 1989).
ART. 100. Prohibition against elimination or diminution of benefits. -
Nothing in this Book shall be construed to eliminate or in any way diminish
supplements, or other employee benefits being enjoyed at the time of
promulgation of this Code.chan robles virtual law library
ART. 101. Payment by results. - (a) The Secretary of Labor and
Employment shall regulate the payment of wages by results, including
pakyao, piecework, and other non-time work, in order to ensure the
payment of fair and reasonable wage rates, preferably through time and
motion studies or in consultation with representatives of workers and
employers organizations.
Chapter III
PAYMENT OF WAGES
ART. 102. Forms of payment. - No employer shall pay the wages of an
employee by means of promissory notes, vouchers, coupons, tokens,
tickets, chits, or any object other than legal tender, even when expressly
requested by the employee.
Payment of wages by check or money order shall be allowed when such
manner of payment is customary on the date of effectivity of this Code, or
is necessary because of special circumstances as specified in appropriate
regulations to be issued by the Secretary of Labor and Employment or as
stipulated in a collective bargaining agreement.
ART. 103. Time of payment. - Wages shall be paid at least once every two
(2) weeks or twice a month at intervals not exceeding sixteen (16) days. If
on account of force majeure or circumstances beyond the employers
control, payment of wages on or within the time herein provided cannot be
made, the employer shall pay the wages immediately after such force
majeure or circumstances have ceased. No employer shall make payment
with less frequency than once a month.
The payment of wages of employees engaged to perform a task which
cannot be completed in two (2) weeks shall be subject to the following
conditions, in the absence of a collective bargaining agreement or
arbitration award:
(1) That payments are made at intervals not exceeding sixteen (16) days,
in proportion to the amount of work completed;
(2) That final settlement is made upon completion of the work.
ART. 104. Place of payment. - Payment of wages shall be made at or near
the place of undertaking, except as otherwise provided by such regulations
as the Secretary of Labor and Employment may prescribe under conditions
to ensure greater protection of wages. chanroblesvirtuallawlibrary
ART. 105. Direct payment of wages. - Wages shall be paid directly to the
workers to whom they are due, except:
(a) In cases of force majeure rendering such payment impossible or under
other special circumstances to be determined by the Secretary of Labor and
Employment in appropriate regulations, in which case, the worker may be
paid through another person under written authority given by the worker
for the purpose; or
(b) Where the worker has died, in which case, the employer may pay the
wages of the deceased worker to the heirs of the latter without the
necessity of intestate proceedings. The claimants, if they are all of age,
shall execute an affidavit attesting to their relationship to the deceased and
the fact that they are his heirs, to the exclusion of all other persons. If any
of the heirs is a minor, the affidavit shall be executed on his behalf by his
natural guardian or next-of-kin. The affidavit shall be presented to the
employer who shall make payment through the Secretary of Labor and
Employment or his representative. The representative of the Secretary of
Labor and Employment shall act as referee in dividing the amount paid
among the heirs. The payment of wages under this Article shall absolve the
employer of any further liability with respect to the amount paid.
ART. 106. Contractor or subcontractor. - Whenever an employer enters into
a contract with another person for the performance of the formers work,
the employees of the contractor and of the latters subcontractor, if any,
shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of
his employees in accordance with this Code, the employer shall be jointly
and severally liable with his contractor or subcontractor to such employees
to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by him.
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The Secretary of Labor and Employment may, by appropriate regulations,
restrict or prohibit the contracting-out of labor to protect the rights of
workers established under this Code. In so prohibiting or restricting, he may
make appropriate distinctions between labor-only contracting and job
contracting as well as differentiations within these types of contracting and
determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the
workers recruited and placed by such person are performing activities
which are directly related to the principal business of such employer. In
such cases, the person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
ART. 107. Indirect employer. - The provisions of the immediately preceding
article shall likewise apply to any person, partnership, association or
corporation which, not being an employer, contracts with an independent
contractor for the performance of any work, task, job or project.
ART. 108. Posting of bond. - An employer or indirect employer may require
the contractor or subcontractor to furnish a bond equal to the cost of labor
under contract, on condition that the bond will answer for the wages due
the employees should the contractor or subcontractor, as the case may be,
fail to pay the same.
ART. 109. Solidary liability. - The provisions of existing laws to the contrary
notwithstanding, every employer or indirect employer shall be held
responsible with his contractor or subcontractor for any violation of any
provision of this Code. For purposes of determining the extent of their civil
liability under this Chapter, they shall be considered as direct employers.
ART. 110. Worker preference in case of bankruptcy. - In the event of
bankruptcy or liquidation of an employers business, his workers shall enjoy
first preference as regards their wages and other monetary claims, any
provisions of law to the contrary notwithstanding. Such unpaid wages and
monetary claims shall be paid in full before claims of the government and
other creditors may be paid. (As amended by Section 1, Republic Act No.
6715, March 21, 1989).
ART. 111. Attorneys fees. - (a) In cases of unlawful withholding of wages,
the culpable party may be assessed attorneys fees equivalent to ten
percent of the amount of wages recovered.
(b) It shall be unlawful for any person to demand or accept, in any judicial
or administrative proceedings for the recovery of wages, attorneys fees
which exceed ten percent of the amount of wages recovered.
Chapter IV
PROHIBITIONS REGARDING WAGES
ART. 112. Non-interference in disposal of wages. - No employer shall limit
or otherwise interfere with the freedom of any employee to dispose of his
wages. He shall not in any manner force, compel, or oblige his employees
to purchase merchandise, commodities or other property from any other
person, or otherwise make use of any store or services of such employer or
any other person.
ART. 113. Wage deduction. - No employer, in his own behalf or in behalf of
any person, shall make any deduction from the wages of his employees,
except: chanroblesvirtuallawlibrary
(a) In cases where the worker is insured with his consent by the employer,
and the deduction is to recompense the employer for the amount paid by
him as premium on the insurance;
(b) For union dues, in cases where the right of the worker or his union to
check-off has been recognized by the employer or authorized in writing by
the individual worker concerned; and
(c) In cases where the employer is authorized by law or regulations issued
by the Secretary of Labor and Employment.
ART. 114. Deposits for loss or damage. - No employer shall require his
worker to make deposits from which deductions shall be made for the
reimbursement of loss of or damage to tools, materials, or equipment
supplied by the employer, except when the employer is engaged in such
trades, occupations or business where the practice of making deductions or
requiring deposits is a recognized one, or is necessary or desirable as
determined by the Secretary of Labor and Employment in appropriate rules
and regulations.
ART. 115. Limitations. - No deduction from the deposits of an employee for
the actual amount of the loss or damage shall be made unless the
employee has been heard thereon, and his responsibility has been clearly
shown.
ART. 116. Withholding of wages and kickbacks prohibited. - It shall be
unlawful for any person, directly or indirectly, to withhold any amount from
the wages of a worker or induce him to give up any part of his wages by
force, stealth, intimidation, threat or by any other means whatsoever
without the workers consent.
ART. 117. Deduction to ensure employment. - It shall be unlawful to make
any deduction from the wages of any employee for the benefit of the
employer or his representative or intermediary as consideration of a
promise of employment or retention in employment.
ART. 118. Retaliatory measures. - It shall be unlawful for an employer to
refuse to pay or reduce the wages and benefits, discharge or in any manner
discriminate against any employee who has filed any complaint or instituted
any proceeding under this Title or has testified or is about to testify in such
proceedings.
ART. 119. False reporting. - It shall be unlawful for any person to make any
statement, report, or record filed or kept pursuant to the provisions of this
Code knowing such statement, report or record to be false in any material
respect.
Chapter V
WAGE STUDIES, WAGE AGREEMENTS AND WAGE DETERMINATION
ART. 120. Creation of National Wages and Productivity Commission. - There
is hereby created a National Wages and Productivity Commission,
hereinafter referred to as the Commission, which shall be attached to the
Department of Labor and Employment (DOLE) for policy and program
coordination. (As amended by Republic Act No. 6727, June 9, 1989).
ART. 121. Powers and functions of the Commission. - The Commission shall
have the following powers and functions:
(a) To act as the national consultative and advisory body to the President of
the Philippines and Congress on matters relating to wages, incomes and
productivity;
(b) To formulate policies and guidelines on wages, incomes and productivity
improvement at the enterprise, industry and national levels;
(c) To prescribe rules and guidelines for the determination of appropriate
minimum wage and productivity measures at the regional, provincial, or
industry levels;
(d) To review regional wage levels set by the Regional Tripartite Wages and
Productivity Boards to determine if these are in accordance with prescribed
guidelines and national development plans;
(e) To undertake studies, researches and surveys necessary for the
attainment of its functions and objectives, and to collect and compile data
and periodically disseminate information on wages and productivity and
other related information, including, but not limited to, employment, cost-
of-living, labor costs, investments and returns;
(f) To review plans and programs of the Regional Tripartite Wages and
Productivity Boards to determine whether these are consistent with national
development plans;
(g) To exercise technical and administrative supervision over the Regional
Tripartite Wages and Productivity Boards;chan robles virtual law library
(h) To call, from time to time, a national tripartite conference of
representatives of government, workers and employers for the
consideration of measures to promote wage rationalization and
productivity; and
(i) To exercise such powers and functions as may be necessary to
implement this Act.
The Commission shall be composed of the Secretary of Labor and
Employment as ex-officio chairman, the Director-General of the National
Economic and Development Authority (NEDA) as ex-officio vice-chairman,
and two (2) members each from workers and employers sectors who shall
be appointed by the President of the Philippines upon recommendation of
the Secretary of Labor and Employment to be made on the basis of the list
of nominees submitted by the workers and employers sectors,
respectively, and who shall serve for a term of five (5) years. The Executive
Director of the Commission shall also be a member of the Commission.
The Commission shall be assisted by a Secretariat to be headed by an
Executive Director and two (2) Deputy Directors, who shall be appointed by
the President of the Philippines, upon the recommendation of the Secretary
of Labor and Employment.
The Executive Director shall have the same rank, salary, benefits and other
emoluments as that of a Department Assistant Secretary, while the Deputy
Directors shall have the same rank, salary, benefits and other emoluments
as that of a Bureau Director. The members of the Commission representing
labor and management shall have the same rank, emoluments, allowances
and other benefits as those prescribed by law for labor and management
representatives in the Employees Compensation Commission. (As amended
by Republic Act No. 6727, June 9, 1989).
ART. 122. Creation of Regional Tripartite Wages and Productivity Boards. -
There is hereby created Regional Tripartite Wages and Productivity Boards,
hereinafter referred to as Regional Boards, in all regions, including
autonomous regions as may be established by law. The Commission shall
determine the offices/headquarters of the respective Regional Boards.
The Regional Boards shall have the following powers and functions in their
respective territorial jurisdictions:
(a) To develop plans, programs and projects relative to wages, incomes and
productivity improvement for their respective regions;
(b) To determine and fix minimum wage rates applicable in their regions,
provinces or industries therein and to issue the corresponding wage orders,
subject to guidelines issued by the Commission;
(c) To undertake studies, researches, and surveys necessary for the
attainment of their functions, objectives and programs, and to collect and
compile data on wages, incomes, productivity and other related information
and periodically disseminate the same;
(d) To coordinate with the other Regional Boards as may be necessary to
attain the policy and intention of this Code;
(e) To receive, process and act on applications for exemption from
prescribed wage rates as may be provided by law or any Wage Order; and
(f) To exercise such other powers and functions as may be necessary to
carry out their mandate under this Code.
Implementation of the plans, programs, and projects of the Regional
Boards referred to in the second paragraph, letter (a) of this Article, shall
be through the respective regional offices of the Department of Labor and
Employment within their territorial jurisdiction; Provided, however, That the
Regional Boards shall have technical supervision over the regional office of
the Department of Labor and Employment with respect to the
implementation of said plans, programs and projects.
Each Regional Board shall be composed of the Regional Director of the
Department of Labor and Employment as chairman, the Regional Directors
of the National Economic and Development Authority and the Department
of Trade and Industry as vice-chairmen and two (2) members each from
workers and employers sectors who shall be appointed by the President of
the Philippines, upon the recommendation of the Secretary of Labor and
Employment, to be made on the basis of the list of nominees submitted by
the workers and employers sectors, respectively, and who shall serve for a
term of five (5) years.
Each Regional Board to be headed by its chairman shall be assisted by a
Secretariat. (As amended by Republic Act No. 6727, June 9, 1989).
ART. 123. Wage Order. - Whenever conditions in the region so warrant, the
Regional Board shall investigate and study all pertinent facts; and based on
the standards and criteria herein prescribed, shall proceed to determine
whether a Wage Order should be issued. Any such Wage Order shall take
effect after fifteen (15) days from its complete publication in at least one
(1) newspaper of general circulation in the region.
In the performance of its wage-determining functions, the Regional Board
shall conduct public hearings/consultations, giving notices to employees
and employers groups, provincial, city and municipal officials and other
interested parties.
Any party aggrieved by the Wage Order issued by the Regional Board may
appeal such order to the Commission within ten (10) calendar days from
the publication of such order. It shall be mandatory for the Commission to
decide such appeal within sixty (60) calendar days from the filing thereof.
The filing of the appeal does not stay the order unless the person appealing
such order shall file with the Commission, an undertaking with a surety or
sureties satisfactory to the Commission for the payment to the employees
affected by the order of the corresponding increase, in the event such order
is affirmed. (As amended by Republic Act No. 6727, June 9, 1989).
ART. 124. Standards/Criteria for minimum wage fixing. - The regional
minimum wages to be established by the Regional Board shall be as nearly
adequate as is economically feasible to maintain the minimum standards of
living necessary for the health, efficiency and general well-being of the
employees within the framework of the national economic and social
development program. In the determination of such regional minimum
wages, the Regional Board shall, among other relevant factors, consider the
following:
(a) The demand for living wages;
(b) Wage adjustment vis--vis the consumer price index;
(c) The cost of living and changes or increases therein;
(d) The needs of workers and their families;
(e) The need to induce industries to invest in the countryside;
(f) Improvements in standards of living;
(g) The prevailing wage levels;
(h) Fair return of the capital invested and capacity to pay of employers;
(i) Effects on employment generation and family income; and
(j) The equitable distribution of income and wealth along the imperatives of
economic and social development.
The wages prescribed in accordance with the provisions of this Title shall
be the standard prevailing minimum wages in every region. These wages
shall include wages varying with industries, provinces or localities if in the
judgment of the Regional Board, conditions make such local differentiation
proper and necessary to effectuate the purpose of this Title.
Any person, company, corporation, partnership or any other entity engaged
in business shall file and register annually with the appropriate Regional
Board, Commission and the National Statistics Office, an itemized listing of
their labor component, specifying the names of their workers and
employees below the managerial level, including learners, apprentices and
disabled/handicapped workers who were hired under the terms prescribed
in the employment contracts, and their corresponding salaries and wages.
chanroblesvirtuallawlibrary
Where the application of any prescribed wage increase by virtue of a law or
wage order issued by any Regional Board results in distortions of the wage
structure within an establishment, the employer and the union shall
negotiate to correct the distortions. Any dispute arising from wage
distortions shall be resolved through the grievance procedure under their
collective bargaining agreement and, if it remains unresolved, through
voluntary arbitration. Unless otherwise agreed by the parties in writing,
such dispute shall be decided by the voluntary arbitrators within ten (10)
calendar days from the time said dispute was referred to voluntary
arbitration.
In cases where there are no collective agreements or recognized labor
unions, the employers and workers shall endeavor to correct such
distortions. Any dispute arising therefrom shall be settled through the
National Conciliation and Mediation Board and, if it remains unresolved after
ten (10) calendar days of conciliation, shall be referred to the appropriate
branch of the National Labor Relations Commission (NLRC). It shall be
mandatory for the NLRC to conduct continuous hearings and decide the
dispute within twenty (20) calendar days from the time said dispute is
submitted for compulsory arbitration.
The pendency of a dispute arising from a wage distortion shall not in any
way delay the applicability of any increase in prescribed wage rates
pursuant to the provisions of law or wage order.
As used herein, a wage distortion shall mean a situation where an increase
in prescribed wage rates results in the elimination or severe contraction of
intentional quantitative differences in wage or salary rates between and
among employee groups in an establishment as to effectively obliterate the
distinctions embodied in such wage structure based on skills, length of
service, or other logical bases of differentiation. chanroblesvirtuallawlibrary
All workers paid by result, including those who are paid on piecework,
takay, pakyaw or task basis, shall receive not less than the prescribed wage
rates per eight (8) hours of work a day, or a proportion thereof for working
less than eight (8) hours.
All recognized learnership and apprenticeship agreements shall be
considered automatically modified insofar as their wage clauses are
concerned to reflect the prescribed wage rates. (As amended by Republic
Act No. 6727, June 9, 1989).
ART. 125. Freedom to bargain. - No wage order shall be construed to
prevent workers in particular firms or enterprises or industries from
bargaining for higher wages with their respective employers. (As amended
by Republic Act No. 6727, June 9, 1989).
ART. 126. Prohibition against injunction. No preliminary or permanent
injunction or temporary restraining order may be issued by any court,
tribunal or other entity against any proceedings before the Commission or
the Regional Boards. (As amended by Republic Act No. 6727, June 9,
1989).
ART. 127. Non-diminution of benefits. - No wage order issued by any
regional board shall provide for wage rates lower than the statutory
minimum wage rates prescribed by Congress. (As amended by Republic Act
No. 6727, June 9, 1989).
Chapter VI
ADMINISTRATION AND ENFORCEMENT
ART. 128. Visitorial and enforcement power. - (a) The Secretary of Labor
and Employment or his duly authorized representatives, including labor
regulation officers, shall have access to employers records and premises at
any time of the day or night whenever work is being undertaken therein,
and the right to copy therefrom, to question any employee and investigate
any fact, condition or matter which may be necessary to determine
violations or which may aid in the enforcement of this Code and of any
labor law, wage order or rules and regulations issued pursuant thereto.
(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to
the contrary, and in cases where the relationship of employer-employee still
exists, the Secretary of Labor and Employment or his duly authorized
representatives shall have the power to issue compliance orders to give
effect to the labor standards provisions of this Code and other labor
legislation based on the findings of labor employment and enforcement
officers or industrial safety engineers made in the course of inspection. The
Secretary or his duly authorized representatives shall issue writs of
execution to the appropriate authority for the enforcement of their orders,
except in cases where the employer contests the findings of the labor
employment and enforcement officer and raises issues supported by
documentary proofs which were not considered in the course of inspection.
(As amended by Republic Act No. 7730, June 2, 1994).
An order issued by the duly authorized representative of the Secretary of
Labor and Employment under this Article may be appealed to the latter. In
case said order involves a monetary award, an appeal by the employer may
be perfected only upon the posting of a cash or surety bond issued by a
reputable bonding company duly accredited by the Secretary of Labor and
Employment in the amount equivalent to the monetary award in the order
appealed from. (As amended by Republic Act No. 7730, June 2, 1994).
chanroblesvirtuallawlibrary
(c) The Secretary of Labor and Employment may likewise order stoppage of
work or suspension of operations of any unit or department of an
establishment when non-compliance with the law or implementing rules and
regulations poses grave and imminent danger to the health and safety of
workers in the workplace. Within twenty-four hours, a hearing shall be
conducted to determine whether an order for the stoppage of work or
suspension of operations shall be lifted or not. In case the violation is
attributable to the fault of the employer, he shall pay the employees
concerned their salaries or wages during the period of such stoppage of
work or suspension of operation.
(d) It shall be unlawful for any person or entity to obstruct, impede, delay
or otherwise render ineffective the orders of the Secretary of Labor and
Employment or his duly authorized representatives issued pursuant to the
authority granted under this Article, and no inferior court or entity shall
issue temporary or permanent injunction or restraining order or otherwise
assume jurisdiction over any case involving the enforcement orders issued
in accordance with this Article.
(e) Any government employee found guilty of violation of, or abuse of
authority, under this Article shall, after appropriate administrative
investigation, be subject to summary dismissal from the service.
(f) The Secretary of Labor and Employment may, by appropriate
regulations, require employers to keep and maintain such employment
records as may be necessary in aid of his visitorial and enforcement powers
under this Code.
ART. 129. Recovery of wages, simple money claims and other benefits. -
Upon complaint of any interested party, the Regional Director of the
Department of Labor and Employment or any of the duly authorized
hearing officers of the Department is empowered, through summary
proceeding and after due notice, to hear and decide any matter involving
the recovery of wages and other monetary claims and benefits, including
legal interest, owing to an employee or person employed in domestic or
household service or househelper under this Code, arising from employer-
employee relations: Provided, That such complaint does not include a claim
for reinstatement: Provided further, That the aggregate money claims of
each employee or househelper does not exceed Five thousand pesos
(P5,000.00). The Regional Director or hearing officer shall decide or resolve
the complaint within thirty (30) calendar days from the date of the filing of
the same. Any sum thus recovered on behalf of any employee or
househelper pursuant to this Article shall be held in a special deposit
account by, and shall be paid on order of, the Secretary of Labor and
Employment or the Regional Director directly to the employee or
househelper concerned. Any such sum not paid to the employee or
househelper because he cannot be located after diligent and reasonable
effort to locate him within a period of three (3) years, shall be held as a
special fund of the Department of Labor and Employment to be used
exclusively for the amelioration and benefit of workers.
Any decision or resolution of the Regional Director or hearing officer
pursuant to this provision may be appealed on the same grounds provided
in Article 223 of this Code, within five (5) calendar days from receipt of a
copy of said decision or resolution, to the National Labor Relations
Commission which shall resolve the appeal within ten (10) calendar days
from the submission of the last pleading required or allowed under its
rules.chan robles virtual law library
The Secretary of Labor and Employment or his duly authorized
representative may supervise the payment of unpaid wages and other
monetary claims and benefits, including legal interest, found owing to any
employee or househelper under this Code. (As amended by Section 2,
Republic Act No. 6715, March 21, 1989).
Title III
WORKING CONDITIONS FOR SPECIAL GROUPS OF EMPLOYEES
Chapter I
EMPLOYMENT OF WOMEN
ART. 130. Nightwork prohibition. - No woman, regardless of age, shall be
employed or permitted or suffered to work, with or without compensation:
(a) In any industrial undertaking or branch thereof between ten oclock at
night and six oclock in the morning of the following day; or
(b) In any commercial or non-industrial undertaking or branch thereof,
other than agricultural, between midnight and six oclock in the morning of
the following day; or
(c) In any agricultural undertaking at nighttime unless she is given a period
of rest of not less than nine (9) consecutive hours.
ART. 131. Exceptions. - The prohibitions prescribed by the preceding Article
shall not apply in any of the following cases:
(a) In cases of actual or impending emergencies caused by serious
accident, fire, flood, typhoon, earthquake, epidemic or other disasters or
calamity, to prevent loss of life or property, or in cases of force majeure or
imminent danger to public safety;
(b) In case of urgent work to be performed on machineries, equipment or
installation, to avoid serious loss which the employer would otherwise
suffer;
(c) Where the work is necessary to prevent serious loss of perishable
goods;
(d) Where the woman employee holds a responsible position of managerial
or technical nature, or where the woman employee has been engaged to
provide health and welfare services;
(e) Where the nature of the work requires the manual skill and dexterity of
women workers and the same cannot be performed with equal efficiency by
male workers;
(f) Where the women employees are immediate members of the family
operating the establishment or undertaking; and
(g) Under other analogous cases exempted by the Secretary of Labor and
Employment in appropriate regulations.
ART. 132. Facilities for women. - The Secretary of Labor and Employment
shall establish standards that will ensure the safety and health of women
employees. In appropriate cases, he shall, by regulations, require any
employer to:
(a) Provide seats proper for women and permit them to use such seats
when they are free from work and during working hours, provided they can
perform their duties in this position without detriment to efficiency;
(b) To establish separate toilet rooms and lavatories for men and women
and provide at least a dressing room for women;
(c) To establish a nursery in a workplace for the benefit of the women
employees therein; and
(d) To determine appropriate minimum age and other standards for
retirement or termination in special occupations such as those of flight
attendants and the like.
ART. 133. Maternity leave benefits. - (a) Every employer shall grant to any
pregnant woman employee who has rendered an aggregate service of at
least six (6) months for the last twelve (12) months, maternity leave of at
least two (2) weeks prior to the expected date of delivery and another four
(4) weeks after normal delivery or abortion with full pay based on her
regular or average weekly wages. The employer may require from any
woman employee applying for maternity leave the production of a medical
certificate stating that delivery will probably take place within two weeks.
(b) The maternity leave shall be extended without pay on account of illness
medically certified to arise out of the pregnancy, delivery, abortion or
miscarriage, which renders the woman unfit for work, unless she has
earned unused leave credits from which such extended leave may be
charged.
(c) The maternity leave provided in this Article shall be paid by the
employer only for the first four (4) deliveries by a woman employee after
the effectivity of this Code.
Article 134. Family Planning Services; Incentives for Family Planning. - (a)
Establishments which are required by law to maintain a clinic or infirmary
shall provide free family planning services to their employees which shall
include, but not be limited to, the application or use of contraceptive pills
and intrauterine devices.
(b) In coordination with other agencies of the government engaged in the
promotion of family planning, the Department of Labor and Employment
shall develop and prescribe incentive bonus schemes to encourage family
planning among female workers in any establishment or enterprise.
Article 135. Discrimination Prohibited. It shall be unlawful for any
employer to discriminate against any woman employee with respect to
terms and conditions of employment solely on account of her sex.
The following are acts of discrimination:
(a) Payment of a lesser compensation, including wage, salary or other form
of remuneration and fringe benefits, to a female employee as against a
male employee, for work of equal value; and
(b) Favoring a male employee over a female employee with respect to
promotion, training opportunities, study and scholarship grants solely on
account of their sexes.
Criminal liability for the willful commission of any unlawful act as provided
in this Article or any violation of the rules and regulations issued pursuant
to Section 2 hereof shall be penalized as provided in Articles 288 and 289 of
this Code: Provided, That the institution of any criminal action under this
provision shall not bar the aggrieved employee from filing an entirely
separate and distinct action for money claims, which may include claims for
damages and other affirmative reliefs. The actions hereby authorized shall
proceed independently of each other. (As amended by Republic Act No.
6725, May 12, 1989).
Article 137. Prohibited Acts. (a) It shall be unlawful for any employer:
(1) To deny any woman employee the benefits provided for in this Chapter
or to discharge any woman employed by him for the purpose of preventing
her from enjoying any of the benefits provided under this Code;
(2) To discharge such woman on account of her pregnancy, or while on
leave or in confinement due to her pregnancy;
(3) To discharge or refuse the admission of such woman upon returning to
her work for fear that she may again be pregnant.
Article 138. Classification of Certain Women Workers. Any woman who is
permitted or suffered to work, with or without compensation, in any night
club, cocktail lounge, massage clinic, bar or similar establishments under
the effective control or supervision of the employer for a substantial period
of time as determined by the Secretary of Labor and Employment, shall be
considered as an employee of such establishment for purposes of labor and
social legislation.
Chapter II
EMPLOYMENT OF MINORS
Article 139. Minimum Employable Age. - (a) No child below fifteen (15)
years of age shall be employed, except when he works directly under the
sole responsibility of his parents or guardian, and his employment does not
in any way interfere with his schooling.
(b) Any person between fifteen (15) and eighteen (18) years of age may
be employed for such number of hours and such periods of the day as
determined by the Secretary of Labor and Employment in appropriate
regulations.
(c) The foregoing provisions shall in no case allow the employment of a
person below eighteen (18) years of age in an undertaking which is
hazardous or deleterious in nature as determined by the Secretary of Labor
and Employment.
Article 140. Prohibition Against Child Discrimination. - No employer shall
discriminate against any person in respect to terms and conditions of
employment on account of his age.
Chapter III
EMPLOYMENT OF HOUSEHELPERS
Article 141. Coverage. - This Chapter shall apply to all persons rendering
services in households for compensation.
Domestic or household service shall mean service in the employers home be assigned to work in a commercial, industrial or agricultural enterprise at
which is usually necessary or desirable for the maintenance and enjoyment
thereof and includes ministering to the personal comfort and convenience
of the members of the employers household, including services of family
drivers.
Article 142. Contract of Domestic Service. The original contract of
domestic service shall not last for more than two (2) years but it may be
renewed for such periods as may be agreed upon by the parties.
Article 143. Minimum Wage. (a) Househelpers shall be paid the following
minimum wage rates:
(1) Eight hundred pesos (P800.00) a month for househelpers in Manila,
Quezon, Pasay, and Caloocan cities and municipalities of Makati, San Juan,
Mandaluyong, Muntinlupa, Navotas, Malabon, Paranaque, Las Pias, Pasig,
Marikina, Valenzuela, Taguig and Pateros in Metro Manila and in highly
urbanized cities;
(2) Six hundred fifty pesos (P650.00) a month for those in other chartered
cities and first-class municipalities; and
(3) Five hundred fifty pesos (P550.00) a month for those in other
municipalities.
Provided, That the employers shall review the employment contracts of
their househelpers every three (3) years with the end in view of improving
the terms and conditions thereof.
Provided, further, That those househelpers who are receiving at least One
thousand pesos (P1,000.00) shall be covered by the Social Security System
(SSS) and be entitled to all the benefits provided thereunder. (As amended
by Republic Act No. 7655, August 19, 1993).
Article 144. Minimum Cash Wage. The minimum wage rates prescribed
under this Chapter shall be the basic cash wages which shall be paid to the
househelpers in addition to lodging, food and medical attendance.
Article 145. Assignment to Non-Household Work. No househelper shall
a wage or salary rate lower than that provided for agricultural or non-
agricultural workers as prescribed herein.
Article 146. Opportunity for Education. If the househelper is under the
age of eighteen (18) years, the employer shall give him or her an
opportunity for at least elementary education. The cost of education shall
be part of the househelpers compensation, unless there is a stipulation to
the contrary.
Article 147. Treatment of Househelpers. The employer shall treat the
househelper in a just and humane manner. In no case shall physical
violence be used upon the househelper.
 Article 148. Board, Lodging, and Medical Attendance. The employer shall
furnish the househelper, free of charge, suitable and sanitary living quarters
as well as adequate food and medical attendance.
Article 149. Indemnity for Unjust Termination of Services. If the period of
household service is fixed, neither the employer nor the househelper may
terminate the contract before the expiration of the term, except for a just
cause. If the househelper is unjustly dismissed, he or she shall be paid the
compensation already earned plus that for fifteen (15) days by way of
indemnity.
If the househelper leaves without justifiable reason, he or she shall forfeit
any unpaid salary due him or her not exceeding fifteen (15) days.
Article 150. Service of Termination Notice. If the duration of the
household service is not determined either in stipulation or by the nature of
the service, the employer or the househelper may give notice to put an end
to the relationship five (5) days before the intended termination of the
service.
Article 151. Employment Certification. Upon the severance of the
household service relation, the employer shall give the househelper a
written statement of the nature and duration of the service and his or her
efficiency and conduct as househelper.
Article 152. Employment Record. The employer may keep such records
as he may deem necessary to reflect the actual terms and conditions of
employment of his househelper, which the latter shall authenticate by
signature or thumbmark upon request of the employer.
Chapter IV
EMPLOYMENT OF HOMEWORKERS
Article 153. Regulation of Industrial Homeworkers. - The employment of
industrial homeworkers and field personnel shall be regulated by the
government through the appropriate regulations issued by the Secretary of
Labor and Employment to ensure the general welfare and protection of
homeworkers and field personnel and the industries employing them.
Article 154. Regulations of Secretary of Labor. The regulations or orders
to be issued pursuant to this Chapter shall be designed to assure the
minimum terms and conditions of employment applicable to the industrial
homeworkers or field personnel involved.
Article 155. Distribution of Homework. For purposes of this Chapter, the
employer of homeworkers includes any person, natural or artificial who,
for his account or benefit, or on behalf of any person residing outside the
country, directly or indirectly, or through an employee, agent contractor,
sub-contractor or any other person:
(1) Delivers, or causes to be delivered, any goods, articles or materials to
be processed or fabricated in or about a home and thereafter to be
returned or to be disposed of or distributed in accordance with his
directions; or
(2) Sells any goods, articles or materials to be processed or fabricated in or
about a home and then rebuys them after such processing or fabrication,
either by himself or through some other person.
BOOK FOUR
HEALTH, SAFETY AND SOCIAL WELFARE BENEFITS
Title I
MEDICAL, DENTAL AND OCCUPATIONAL SAFETY
Chapter I
MEDICAL AND DENTAL SERVICES
Article 156. First-Aid Treatment. Every employer shall keep in his
establishment such first-aid medicines and equipment as the nature and
conditions of work may require, in accordance with such regulations as the
Department of Labor and Employment shall prescribe.
The employer shall take steps for the training of a sufficient number of
employees in first-aid treatment.
Article 157. Emergency Medical and Dental Services. It shall be the duty
of every employer to furnish his employees in any locality with free medical
and dental attendance and facilities consisting of:
 (a) The services of a full-time registered nurse when the number of
employees exceeds fifty (50) but not more than two hundred (200) except
when the employer does not maintain hazardous workplaces, in which case,
the services of a graduate first-aider shall be provided for the protection of
workers, where no registered nurse is available. The Secretary of Labor and
Employment shall provide by appropriate regulations, the services that shall
be required where the number of employees does not exceed fifty (50) and
shall determine by appropriate order, hazardous workplaces for purposes of
this Article;
(b) The services of a full-time registered nurse, a part-time physician and
dentist, and an emergency clinic, when the number of employees exceeds
two hundred (200) but not more than three hundred (300); and
(c) The services of a full-time physician, dentist and a full-time registered
nurse as well as a dental clinic and an infirmary or emergency hospital with
one bed capacity for every one hundred (100) employees when the number
of employees exceeds three hundred (300).
In cases of hazardous workplaces, no employer shall engage the services
of a physician or a dentist who cannot stay in the premises of the
establishment for at least two (2) hours, in the case of those engaged on
part-time basis, and not less than eight (8) hours, in the case of those
employed on full-time basis. Where the undertaking is non-hazardous in
nature, the physician and dentist may be engaged on retainer basis, subject
to such regulations as the Secretary of Labor and Employment may
prescribe to insure immediate availability of medical and dental treatment
and attendance in case of emergency. (As amended by Section 26,
Presidential Decree No. 570-A, November 1, 1974).
Article 158. When Emergency Hospital Not Required. The requirement
for an emergency hospital or dental clinic shall not be applicable in case
there is a hospital or dental clinic which is accessible from the employers
establishment and he makes arrangement for the reservation therein of the
necessary beds and dental facilities for the use of his employees.
Article 159. Health Program. The physician engaged by an employer
shall, in addition to his duties under this Chapter, develop and implement a
comprehensive occupational health program for the benefit of the
employees of his employer.
Article 160. Qualifications of Health Personnel. The physicians, dentists
and nurses employed by employers pursuant to this Chapter shall have the
necessary training in industrial medicine and occupational safety and
health. The Secretary of Labor and Employment, in consultation with
industrial, medical, and occupational safety and health associations, shall
establish the qualifications, criteria and conditions of employment of such
health personnel.
ART. 161. Assistance of employer. - It shall be the duty of any employer to
provide all the necessary assistance to ensure the adequate and immediate
medical and dental attendance and treatment to an injured or sick
employee in case of emergency.
Chapter II
OCCUPATIONAL HEALTH AND SAFETY
ART. 162. Safety and health standards. - The Secretary of Labor and
Employment shall, by appropriate orders, set and enforce mandatory
occupational safety and health standards to eliminate or reduce
occupational safety and health hazards in all workplaces and institute new,
and update existing, programs to ensure safe and healthful working
conditions in all places of employment.
ART. 163. Research. - It shall be the responsibility of the Department of
Labor and Employment to conduct continuing studies and research to
develop innovative methods, techniques and approaches for dealing with
occupational safety and health problems; to discover latent diseases by
establishing causal connections between diseases and work in
environmental conditions; and to develop medical criteria which will assure
insofar as practicable that no employee will suffer impairment or diminution
in health, functional capacity, or life expectancy as a result of his work and
working conditions.
ART. 164. Training programs. - The Department of Labor and Employment
shall develop and implement training programs to increase the number and
competence of personnel in the field of occupational safety and industrial
health.
ART. 165. Administration of safety and health laws. - (a) The Department
of Labor and Employment shall be solely responsible for the administration
and enforcement of occupational safety and health laws, regulations and
standards in all establishments and workplaces wherever they may be
located; however, chartered cities may be allowed to conduct industrial
safety inspections of establishments within their respective jurisdictions
where they have adequate facilities and competent personnel for the
purpose as determined by the Department of Labor and Employment and
subject to national standards established by the latter.
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(b) The Secretary of Labor and Employment may, through appropriate
regulations, collect reasonable fees for the inspection of steam boilers,
pressure vessels and pipings and electrical installations, the test and
approval for safe use of materials, equipment and other safety devices and
the approval of plans for such materials, equipment and devices. The fee so
collected shall be deposited in the national treasury to the credit of the
occupational safety and health fund and shall be expended exclusively for
the administration and enforcement of safety and other labor laws
administered by the Department of Labor and Employment.
Title II
EMPLOYEES COMPENSATION AND STATE INSURANCE FUND
Chapter I
POLICY AND DEFINITIONS
ART. 166. Policy. - The State shall promote and develop a tax-exempt
employees compensation program whereby employees and their
dependents, in the event of work-connected disability or death, may
promptly secure adequate income benefit and medical related benefits.
ART. 167. Definition of terms. - As used in this Title, unless the context
indicates otherwise:
(a) "Code" means the Labor Code of the Philippines instituted under
Presidential Decree Numbered four hundred forty-two, as amended.
(b) "Commission" means the Employees Compensation Commission created
under this Title.
(c) "SSS" means the Social Security System created under Republic Act
Numbered Eleven hundred sixty-one, as amended.
(d) "GSIS" means the Government Service Insurance System created under
Commonwealth Act Numbered One hundred eighty-six, as amended.
(e) "System" means the SSS or GSIS, as the case may be.
(f) "Employer" means any person, natural or juridical, employing the
services of the employee.
(g) "Employee" means any person compulsorily covered by the GSIS under
Commonwealth Act Numbered One hundred eighty-six, as amended,
including the members of the Armed Forces of the Philippines, and any
person employed as casual, emergency, temporary, substitute or
contractual, or any person compulsorily covered by the SSS under Republic
Act Numbered Eleven hundred sixty-one, as amended.
(h) "Person" means any individual, partnership, firm, association, trust,
corporation or legal representative thereof.
(i) "Dependent" means the legitimate, legitimated or legally adopted or
acknowledged natural child who is unmarried, not gainfully employed, and
not over twenty-one (21) years of age or over twenty-one (21) years of age
provided he is incapacitated and incapable of self-support due to a physical
or mental defect which is congenital or acquired during minority; the
legitimate spouse living with the employee and the parents of said
employee wholly dependent upon him for regular support.
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(j) "Beneficiaries" means the dependent spouse until he/she remarries and
dependent children, who are the primary beneficiaries. In their absence,
the dependent parents and subject to the restrictions imposed on
dependent children, the illegitimate children and legitimate descendants,
who are the secondary beneficiaries: Provided, That the dependent
acknowledged natural child shall be considered as a primary beneficiary
when there are no other dependent children who are qualified and eligible
for monthly income benefit.
(k) "Injury" means any harmful change in the human organism from any
accident arising out of and in the course of the employment.
(l) "Sickness" means any illness definitely accepted as an occupational
disease listed by the Commission, or any illness caused by employment
subject to proof that the risk of contracting the same is increased by
working conditions. For this purpose, the Commission is empowered to
determine and approve occupational diseases and work-related illnesses
that may be considered compensable based on peculiar hazards of
employment.
(m) "Death" means loss of life resulting from injury or sickness.
(n) "Disability" means loss or impairment of a physical or mental function
resulting from injury or sickness.
(o) "Compensation" means all payments made under this Title for income
benefits and medical or related benefits.
(p) "Income benefit" means all payments made under this Title to the
providers of medical care, rehabilitation services and hospital care.
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(q) "Medical benefit" means all payments made under this Title to the
providers of medical care, rehabilitation services and hospital care.
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(r) "Related benefit" means all payments made under this Title for
appliances and supplies.
(s) "Appliances" means crutches, artificial aids and other similar devices.
(t) "Supplies" means medicine and other medical, dental or surgical items.
(u) "Hospital" means any medical facility, government or private, authorized
by law, an active member in good standing of the Philippine Hospital
Association and accredited by the Commission.
(v) "Physician" means any doctor of medicine duly licensed to practice in
the Philippines, an active member in good standing of the Philippine Medical
Association and accredited by the Commission.
(w) "Wages" or "Salary", insofar as they refer to the computation of
benefits defined in Republic Act No. 1161, as amended, for SSS and
Presidential Decree No. 1146, as amended, for GSIS, respectively, except
that part in excess of Three Thousand Pesos.
(x) "Monthly salary credit" means the wage or salary base for contributions
as provided in Republic Act Numbered Eleven hundred sixty-one, as
amended, or the wages or salary.
(y) "Average monthly salary credit" in the case of the SSS means the result
obtained by dividing the sum of the monthly salary credits in the sixty-
month period immediately following the semester of death or permanent
disability by sixty (60), except where the month of death or permanent
disability falls within eighteen (18) calendar months from the month of
coverage, in which case, it is the result obtained by dividing the sum of all
monthly salary credits paid prior to the month of contingency by the total
number of calendar months of coverage in the same period.
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(z) "Average daily salary credit" in the case of the SSS means the result
obtained by dividing the sum of the six (6) highest monthly salary credits in
the twelve-month period immediately preceding the semester of sickness or
injury by one hundred eighty (180), except where the month of injury falls
within twelve (12) calendar months from the first month of coverage, in
which case it is the result obtained by dividing the sum of all monthly salary
credits by thirty (30) times the number of calendar months of coverage in
the period.
In the case of the GSIS, the average daily salary credit shall be the actual
daily salary or wage, or the monthly salary or wage divided by the actual
number of working days of the month of contingency.
(aa) "Quarter" means a period of three (3) consecutive months ending on
the last days of March, June, September and December.
(bb) "Semester" means a period of two consecutive quarters ending in the
quarter of death, permanent disability, injury or sickness.
(cc) "Replacement ratio" - The sum of twenty percent and the quotient
obtained by dividing three hundred by the sum of three hundred forty and
the average monthly salary credit.
(dd) "Credited years of service" - For a member covered prior to January,
1975, nineteen hundred seventy-five minus the calendar year of coverage,
plus the number of calendar years in which six or more contributions have
been paid from January, 1975 up to the calendar year containing the
semester prior to the contingency. For a member covered on or after
January, 1975, the number of calendar years in which six or more
contributions have been paid from the year of coverage up to the calendar
year containing the semester prior to the contingency.
(ee) "Monthly income benefit" means the amount equivalent to one
hundred fifteen percent of the sum of the average monthly salary credit
multiplied by the replacement ratio, and one and a half percent of the
average monthly salary credit for each credited year of service in excess of
ten years: Provided, That the monthly income benefit shall in no case be
less than two hundred fifty pesos.
Chapter II
COVERAGE AND LIABILITY
ART. 168. Compulsory coverage. - Coverage in the State Insurance Fund
shall be compulsory upon all employers and their employees not over sixty
(60) years of age: Provided, That an employee who is over (60) years of
age and paying contributions to qualify for the retirement or life insurance
benefit administered by the System shall be subject to compulsory
coverage.
ART. 169. Foreign employment. - The Commission shall ensure adequate
coverage of Filipino employees employed abroad, subject to regulations as
it may prescribe.
ART. 170. Effective date of coverage. - Compulsory coverage of the
employer during the effectivity of this Title shall take effect on the first day
of his operation, and that of the employee, on the date of his employment.
ART. 171. Registration. - Each employer and his employees shall register
with the System in accordance with its regulations.
ART. 172. Limitation of liability. - The State Insurance Fund shall be liable
for compensation to the employee or his dependents, except when the
disability or death was occasioned by the employees intoxication, willful
intention to injure or kill himself or another, notorious negligence, or
otherwise provided under this Title.
ART. 173. Extent of liability. - Unless otherwise provided, the liability of the
State Insurance Fund under this Title shall be exclusive and in place of all
other liabilities of the employer to the employee, his dependents or anyone
otherwise entitled to receive damages on behalf of the employee or his
dependents. The payment of compensation under this Title shall not bar the
recovery of benefits as provided for in Section 699 of the Revised
Administrative Code, Republic Act Numbered Eleven hundred sixty-one, as
amended, Republic Act Numbered Forty-eight hundred sixty-four as
amended, and other laws whose benefits are administered by the System
or by other agencies of the government. (As amended by Presidential
Decree No. 1921).
ART. 174. Liability of third party/ies. - (a) When the disability or death is
caused by circumstances creating a legal liability against a third party, the
disabled employee or the dependents, in case of his death, shall be paid by
the System under this Title. In case benefit is paid under this Title, the
System shall be subrogated to the rights of the disabled employee or the
dependents, in case of his death, in accordance with the general law.
(b) Where the System recovers from such third party damages in excess of
those paid or allowed under this Title, such excess shall be delivered to the
disabled employee or other persons entitled thereto, after deducting the
cost of proceedings and expenses of the System.
ART. 175. Deprivation of the benefits. - Except as otherwise provided under
this Title, no contract, regulation or device whatsoever shall operate to
deprive the employee or his dependents of any part of the income benefits
and medical or related services granted under this Title. Existing medical
services being provided by the employer shall be maintained and continued
to be enjoyed by their employees.
Chapter III
ADMINISTRATION
ART. 176. Employees Compensation Commission. - (a) To initiate,
rationalize, and coordinate the policies of the employees compensation
program, the Employees Compensation Commission is hereby created to
be composed of five ex-officio members, namely: the Secretary of Labor
and Employment as Chairman, the GSIS General Manager, the SSS
Administrator, the Chairman of the Philippine Medical Care Commission, and
the Executive Director of the ECC Secretariat, and two appointive members,
one of whom shall represent the employees and the other, the employers,
to be appointed by the President of the Philippines for a term of six years.
The appointive member shall have at least five years experience in
workmens compensation or social security programs. All vacancies shall be
filled for the unexpired term only. (As amended by Section 19 [c], Executive
Order No. 126).
(b) The Vice Chairman of the Commission shall be alternated each year
between the GSIS General Manager and the SSS Administrator. The
presence of four members shall constitute a quorum. Each member shall
receive a per diem of two hundred pesos for every meeting that is actually
attended by him, exclusive of actual, ordinary and necessary travel and
representation expenses. In his absence, any member may designate an
official of the institution he serves on full-time basis as his representative to
act in his behalf. (As amended by Section 2, Presidential Decree No. 1368).
(c) The general conduct of the operations and management functions of
the GSIS or SSS under this Title shall be vested in its respective chief
executive officers, who shall be immediately responsible for carrying out the
policies of the Commission.
(d) The Commission shall have the status and category of a government
corporation, and it is hereby deemed attached to the Department of Labor
and Employment for policy coordination and guidance. (As amended by
Section 2, Presidential Decree No. 1368).
ART. 177. Powers and duties. - The Commission shall have the following
powers and duties:
(a) To assess and fix a rate of contribution from all employers;
(b) To determine the rate of contribution payable by an employer whose
records show a high frequency of work accidents or occupational diseases
due to failure by the said employer to observe adequate safety measures;
(c) To approve rules and regulations governing the processing of claims
and the settlement of disputes arising therefrom as prescribed by the
System;
(d) To initiate policies and programs toward adequate occupational health
and safety and accident prevention in the working environment,
rehabilitation other than those provided for under Article 190 hereof, and
other related programs and activities, and to appropriate funds therefor;
(As amended by Section 3, Presidential Decree No. 1368).
(e) To make the necessary actuarial studies and calculations concerning the
grant of constant help and income benefits for permanent disability or
death and the rationalization of the benefits for permanent disability and
death under the Title with benefits payable by the System for similar
contingencies: Provided, That the Commission may upgrade benefits and
add new ones subject to approval of the President: and Provided, further,
That the actuarial stability of the State Insurance Fund shall be guaranteed:
Provided, finally, That such increases in benefits shall not require any
increases in contribution, except as provided for in paragraph (b) hereof;
(As amended by Section 3, Presidential Decree No. 1641).
(f) To appoint the personnel of its staff, subject to civil service law and
rules, but exempt from WAPCO law and regulations;
(g) To adopt annually a budget of expenditures of the Commission and its
staff chargeable against the State Insurance Fund: Provided, That the SSS
and GSIS shall advance on a quarterly basis, the remittances of allotment of
the loading fund for the Commissions operational expenses based on its
annual budget as duly approved by the Department of Budget and
Management; (As amended by Section 3, Presidential Decree No. 1921).
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(h) To have the power to administer oath and affirmation, and to issue
subpoena and subpoena duces tecum in connection with any question or
issue arising from appealed cases under this Title;
(i) To sue and be sued in court;
(j) To acquire property, real or personal, which may be necessary or
expedient for the attainment of the purposes of this Title;
(k) To enter into agreements or contracts for such services and as may be
needed for the proper, efficient and stable administration of the program;
(l) To perform such other acts as it may deem appropriate for the
attainment of the purposes of the Commission and proper enforcement of
the provisions of this Title. (As amended by Section 18, Presidential Decree
No. 850).
ART. 178. Management of funds. - All revenues collected by the System
under this Title shall be deposited, invested, administered and disbursed in
the same manner and under the same conditions, requirements and
safeguards as provided by Republic Act Numbered eleven hundred sixty-
one, as amended, with regard to such other funds as are thereunder being
paid to or collected by the SSS and GSIS, respectively: Provided, That the
Commission, SSS and GSIS may disburse each year not more than twelve
percent of the contribution and investment earnings collected for
operational expenses, including occupational health and safety programs,
incidental to the carrying out of this Title.
ART. 179. Investment of funds. - Provisions of existing laws to the contrary
notwithstanding, all revenues as are not needed to meet current
operational expenses under this Title shall be accumulated in a fund to be
known as the State Insurance Fund, which shall be used exclusively for
payment of the benefits under this Title, and no amount thereof shall be
used for any other purpose. All amounts accruing to the State Insurance
Fund, which is hereby established in the SSS and GSIS, respectively, shall
be deposited with any authorized depository bank approved by the
Commission, or invested with due and prudent regard for the liquidity
needs of the System. (As amended by Section 4, Presidential Decree No.
1368).
ART. 180. Settlement of claims. - The System shall have original and
exclusive jurisdiction to settle any dispute arising from this Title with
respect to coverage, entitlement to benefits, collection and payment of
contributions and penalties thereon, or any other matter related thereto,
subject to appeal to the Commission, which shall decide appealed cases
within twenty (20) working days from the submission of the evidence.
ART. 181. Review. - Decisions, orders or resolutions of the Commission may
be reviewed on certiorari by the Supreme Court on question of law upon
petition of an aggrieved party within ten (10) days from notice thereof.
ART. 182. Enforcement of decisions. - (a) Any decision, order or resolution
of the Commission shall become final and executory if no appeal is taken
therefrom within ten (10) days from notice thereof. All awards granted by
the Commission in cases appealed from decisions of the System shall be
effected within fifteen days from receipt of notice.
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(b) In all other cases, decisions, orders and resolutions of the Commission
which have become final and executory shall be enforced and executed in
the same manner as decisions of the Court of First Instance, and the
Commission shall have the power to issue to the city or provincial sheriff or
to the sheriff whom it may appoint, such writs of execution as may be
necessary for the enforcement of such decisions, orders or resolutions, and
any person who shall fail or refuse to comply therewith shall, upon
application by the Commission, be punished by the proper court for
contempt.
Chapter IV
CONTRIBUTIONS
ART. 183. Employers contributions. - (a) Under such regulations as the
System may prescribe, beginning as of the last day of the month when an
employees compulsory coverage takes effect and every month thereafter
during his employment, his employer shall prepare to remit to the System a
contribution equivalent to one percent of his monthly salary credit.
(b) The rate of contribution shall be reviewed periodically and subject to the
limitations herein provided, may be revised as the experience in risk, cost of
administration and actual or anticipated as well as unexpected losses, may
require.
(c) Contributions under this Title shall be paid in their entirety by the
employer and any contract or device for the deductions of any portion
thereof from the wages or salaries of the employees shall be null and void.
(d) When a covered employee dies, becomes disabled or is separated from
employment, his employers obligation to pay the monthly contribution
arising from that employment shall cease at the end of the month of
contingency and during such months that he is not receiving wages or
salary.
ART. 184. Government guarantee. - The Republic of the Philippines
guarantees the benefits prescribed under this Title, and accepts general
responsibility for the solvency of the State Insurance Fund. In case of any
deficiency, the same shall be covered by supplemental appropriations from
the national government.
Chapter V
MEDICAL BENEFITS
ART. 185. Medical services. - Immediately after an employee contracts
sickness or sustains an injury, he shall be provided by the System during
the subsequent period of his disability with such medical services and
appliances as the nature of his sickness or injury and progress of his
recovery may require, subject to the expense limitation prescribed by the
Commission.
ART. 186. Liability. - The System shall have the authority to choose or order
a change of physician, hospital or rehabilitation facility for the employee,
and shall not be liable for compensation for any aggravation of the
employees injury or sickness resulting from unauthorized changes by the
employee of medical services, appliances, supplies, hospitals, rehabilitation
facilities or physicians.
ART. 187. Attending physician. - Any physician attending an injured or sick
employee shall comply with all the regulations of the System and submit
reports in prescribed forms at such time as may be required concerning his
condition or treatment. All medical information relevant to the particular
injury or sickness shall, on demand, be made available to the employee or
the System. No information developed in connection with treatment or
examination for which compensation is sought shall be considered as
privileged communication.
ART. 188. Refusal of examination or treatment. - If the employee
unreasonably refuses to submit to medical examination or treatment, the
System shall stop the payment of further compensation during such time as
such refusal continues. What constitutes an unreasonable refusal shall be
determined by the System which may, on its own initiative, determine the
necessity, character and sufficiency of any medical services furnished or to
be furnished.
ART. 189. Fees and other charges. - All fees and other charges for hospital
services, medical care and appliances, including professional fees, shall not
be higher than those prevailing in wards of hospitals for similar services to
injured or sick persons in general and shall be subject to the regulations of
the Commission. Professional fees shall only be appreciably higher than
those prescribed under Republic Act Numbered sixty-one hundred eleven,
as amended, otherwise known as the Philippine Medical Care Act of 1969.
ART. 190. Rehabilitation services. - (a) The System shall, as soon as
practicable, establish a continuing program, for the rehabilitation of injured
and handicapped employees who shall be entitled to rehabilitation services,
which shall consist of medical, surgical or hospital treatment, including
appliances if they have been handicapped by the injury, to help them
become physically independent.
(b) As soon as practicable, the System shall establish centers equipped and
staffed to provide a balanced program of remedial treatment, vocational
assessment and preparation designed to meet the individual needs of each
handicapped employee to restore him to suitable employment, including
assistance as may be within its resources, to help each rehabilitee to
develop his mental, vocational or social potential.
Chapter VI
DISABILITY BENEFITS
ART. 191. Temporary total disability. - (a) Under such regulations as the
Commission may approve, any employee under this Title who sustains an
injury or contracts sickness resulting in temporary total disability shall, for
each day of such a disability or fraction thereof, be paid by the System an
income benefit equivalent to ninety percent of his average daily salary
credit, subject to the following conditions: the daily income benefit shall not
be less than Ten Pesos nor more than Ninety Pesos, nor paid for a
continuous period longer than one hundred twenty days, except as
otherwise provided for in the Rules, and the System shall be notified of the
injury or sickness. (As amended by Section 2, Executive Order No. 179).
(b) The payment of such income benefit shall be in accordance with the
regulations of the Commission. (As amended by Section 19, Presidential
Decree No. 850).
ART. 192. Permanent total disability. - (a) Under such regulations as the
Commission may approve, any employee under this Title who contracts
sickness or sustains an injury resulting in his permanent total disability
shall, for each month until his death, be paid by the System during such a
disability, an amount equivalent to the monthly income benefit, plus ten
percent thereof for each dependent child, but not exceeding five, beginning
with the youngest and without substitution: Provided, That the monthly
income benefit shall be the new amount of the monthly benefit for all
covered pensioners, effective upon approval of this Decree.
(b) The monthly income benefit shall be guaranteed for five years, and shall
be suspended if the employee is gainfully employed, or recovers from his One thumb - 10
permanent total disability, or fails to present himself for examination at
least once a year upon notice by the System, except as otherwise provided One index finger - 8
for in other laws, decrees, orders or Letters of Instructions. (As amended
by Section 5, Presidential Decree No. 1641). One middle finger - 6

(c) The following disabilities shall be deemed total and permanent: One ring finger - 5

(1) Temporary total disability lasting continuously for more than one One little finger - 3
hundred twenty days, except as otherwise provided for in the Rules;
One big toe - 6
(2) Complete loss of sight of both eyes;
One toe - 3
(3) Loss of two limbs at or above the ankle or wrist;
One arm - 50
(4) Permanent complete paralysis of two limbs;
One hand - 39
(5) Brain injury resulting in incurable imbecility or insanity; and
One foot - 31
(6) Such cases as determined by the Medical Director of the System and
approved by the Commission.
One leg - 46

(d) The number of months of paid coverage shall be defined and

One ear - 10
approximated by a formula to be approved by the Commission.
Both ears - 20
ART. 193. Permanent partial disability. - (a) Under such regulations as the
Commission may approve, any employee under this Title who contracts
sickness or sustains an injury resulting in permanent partial disability shall, Hearing of one ear - 10
for each month not exceeding the period designated herein, be paid by the
System during such a disability an income benefit for permanent total Hearing of both ears - 50
disability.
Sight of one eye - 25
(b) The benefit shall be paid for not more than the period designated in the
following schedules: (c) A loss of a wrist shall be considered as a loss of the hand, and a loss
of an elbow shall be considered as a loss of the arm. A loss of an ankle
Complete and permanent No. of Months shall be considered as loss of a foot, and a loss of a knee shall be
considered as a loss of the leg. A loss of more than one joint shall be
loss of the use of considered as a loss of one-half of the whole finger or toe: Provided, That
such a loss shall be either the functional loss of the use or physical loss of
the member. (As amended by Section 7, Presidential Decree No. 1368).
(d) In case of permanent partial disability less than the total loss of the
member specified in the preceding paragraph, the same monthly income
benefit shall be paid for a portion of the period established for the total loss
of the member in accordance with the proportion that the partial loss bears
to the total loss. If the result is a decimal fraction, the same shall be
rounded off to the next higher integer.
(e) In cases of simultaneous loss of more than one member or a part
thereof as specified in this Article, the same monthly income benefit shall
be paid for a period equivalent to the sum of the periods established for the
loss of the member or the part thereof. If the result is a decimal fraction,
the same shall be rounded off to the next higher integer.
(f) In cases of injuries or illnesses resulting in a permanent partial disability
not listed in the preceding schedule, the benefit shall be an income benefit
equivalent to the percentage of the permanent loss of the capacity to work.
(As added by Section 7, Presidential Decree No. 1368).
chanroblesvirtuallawlibrary
(g) Under such regulations as the Commission may approve, the income
benefit payable in case of permanent partial disability may be paid in
monthly pension or in lump sum if the period covered does not exceed one
year. (As added by Section 7, Presidential Decree No. 1368).
Chapter VII
DEATH BENEFITS
ART. 194. Death. - (a) Under such regulations as the Commission may
approve, the System shall pay to the primary beneficiaries upon the death
of the covered employee under this Title, an amount equivalent to his
monthly income benefit, plus ten percent thereof for each dependent child,
but not exceeding five, beginning with the youngest and without
substitution, except as provided for in paragraph (j) of Article 167 hereof:
Provided, however, That the monthly income benefit shall be guaranteed
for five years: Provided, further, That if he has no primary beneficiary, the
System shall pay to his secondary beneficiaries the monthly income benefit
but not to exceed sixty months: Provided, finally, That the minimum death
benefit shall not be less than fifteen thousand pesos. (As amended by
Section 4, Presidential Decree No. 1921).
(b) Under such regulations as the Commission may approve, the System
shall pay to the primary beneficiaries upon the death of a covered
employee who is under permanent total disability under this Title, eighty
percent of the monthly income benefit and his dependents to the
dependents pension: Provided, That the marriage must have been validly
subsisting at the time of disability: Provided, further, That if he has no
primary beneficiary, the System shall pay to his secondary beneficiaries the
monthly pension excluding the dependents pension, of the remaining
balance of the five-year guaranteed period: Provided, finally, That the
minimum death benefit shall not be less than fifteen thousand pesos. (As
amended by Section 4, Presidential Decree No. 1921).
(c) The monthly income benefit provided herein shall be the new amount of
the monthly income benefit for the surviving beneficiaries upon the
approval of this decree. (As amended by Section 8, Presidential Decree No.
1368).
(d) Funeral benefit. - A funeral benefit of Three thousand pesos
(P3,000.00) shall be paid upon the death of a covered employee or
permanently totally disabled pensioner. (As amended by Section 3,
Executive Order No. 179).
Chapter VIII
PROVISIONS COMMON TO INCOME BENEFITS
ART. 195. Relationship and dependency. - All questions of relationship and
dependency shall be determined as of the time of death.
ART. 196. Delinquent contributions. - (a) An employer who is delinquent in
his contributions shall be liable to the System for the benefits which may
have been paid by the System to his employees or their dependents, and
any benefit and expenses to which such employer is liable shall constitute a
lien on all his property, real or personal, which is hereby declared to be
preferred to any credit, except taxes. The payment by the employer of the
lump sum equivalent of such liability shall absolve him from the payment of
the delinquent contribution and penalty thereon with respect to the
employee concerned. chanroblesvirtuallawlibrary
(b) Failure or refusal of the employer to pay or remit the contribution herein
prescribed shall not prejudice the right of the employee or his dependents
to the benefits under this Title. If the sickness, injury, disability or death
occurs before the System receives any report of the name of his employee,
the employer shall be liable to the System for the lump sum equivalent to
the benefits to which such employee or his dependents may be entitled.
ART. 197. Second injuries. - If any employee under permanent partial
disability suffers another injury which results in a compensable disability
greater than the previous injury, the State Insurance Fund shall be liable for
the income benefit of the new disability: Provided, That if the new disability
is related to the previous disability, the System shall be liable only for the
difference in income benefits.
ART. 198. Assignment of benefits. - No claim for compensation under this
Title is transferable or liable to tax, attachment, garnishment, levy or
seizure by or under any legal process whatsoever, either before or after
receipt by the person or persons entitled thereto, except to pay any debt of
the employee to the System.
ART. 199. Earned benefits. - Income benefits shall, with respect to any
period of disability, be payable in accordance with this Title to an employee
who is entitled to receive wages, salaries or allowances for holidays,
vacation or sick leaves and any other award of benefit under a collective
bargaining or other agreement.
ART. 200. Safety devices. - In case the employees injury or death was due
to the failure of the employer to comply with any law or to install and
maintain safety devices or to take other precautions for the prevention of
injury, said employer shall pay the State Insurance Fund a penalty of
twenty-five percent (25%) of the lump sum equivalent of the income
benefit payable by the System to the employee. All employers, specially
those who should have been paying a rate of contribution higher than
required of them under this Title, are enjoined to undertake and strengthen
measures for the occupational health and safety of their employees.
ART. 201. Prescriptive period. - No claim for compensation shall be given
due course unless said claim is filed with the System within three (3) years
from the time the cause of action accrued. (As amended by Section 5,
Presidential Decree No. 1921).
ART. 202. Erroneous payment. - (a) If the System in good faith pays
income benefit to a dependent who is inferior in right to another dependent
or with whom another dependent is entitled to share, such payments shall
discharge the System from liability, unless and until such other dependent
notifies the System of his claim prior to the payments.
(b) In case of doubt as to the respective rights of rival claimants, the
System is hereby empowered to determine as to whom payments should be
made in accordance with such regulations as the Commission may approve.
If the money is payable to a minor or incompetent, payment shall be made
by the System to such person or persons as it may consider to be best
qualified to take care and dispose of the minors or incompetents property
for his benefit.
ART. 203. Prohibition. - No agent, attorney or other person pursuing or in
charge of the preparation or filing of any claim for benefit under this Title
shall demand or charge for his services any fee, and any stipulation to the
contrary shall be null and void. The retention or deduction of any amount
from any benefit granted under this Title for the payment of fees for such
services is prohibited. Violation of any provision of this Article shall be
punished by a fine of not less than five hundred pesos nor more than five
thousand pesos, or imprisonment for not less than six months nor more
than one year, or both, at the discretion of the court.
ART. 204. Exemption from levy, tax, etc. - All laws to the contrary
notwithstanding, the State Insurance Fund and all its assets shall be
exempt from any tax, fee, charge, levy, or customs or import duty and no
law hereafter enacted shall apply to the State Insurance Fund unless it is
provided therein that the same is applicable by expressly stating its name.
Chapter IX
RECORDS, REPORTS AND PENAL PROVISIONS
ART. 205. Record of death or disability. - (a) All employers shall keep a
logbook to record chronologically the sickness, injury or death of their
employees, setting forth therein their names, dates and places of the
contingency, nature of the contingency and absences. Entries in the
logbook shall be made within five days from notice or knowledge of the
occurrence of the contingency. Within five days after entry in the logbook,
the employer shall report to the System only those contingencies he deems
to be work-connected.
(b) All entries in the employers logbook shall be made by the employer or
any of his authorized official after verification of the contingencies or the
employees absences for a period of a day or more. Upon request by the
System, the employer shall furnish the necessary certificate regarding
information about any contingency appearing in the logbook, citing the
entry number, page number and date. Such logbook shall be made
available for inspection to the duly authorized representative of the System.
(c) Should any employer fail to record in the logbook an actual sickness,
injury or death of any of his employees within the period prescribed herein,
give false information or withhold material information already in his
possession, he shall be held liable for fifty percent of the lump sum
equivalent of the income benefit to which the employee may be found to be
entitled, the payment of which shall accrue to the State Insurance Fund.
(d) In case of payment of benefits for any claim which is later determined
to be fraudulent and the employer is found to be a party to the fraud, such
employer shall reimburse the System the full amount of the compensation
paid.
ART. 206. Notice of sickness, injury or death. - Notice of sickness, injury or
death shall be given to the employer by the employee or by his dependents
or anybody on his behalf within five days from the occurrence of the
contingency. No notice to the employer shall be required if the contingency
is known to the employer or his agents or representatives.
ART. 207. Penal provisions. - (a) The penal provisions of Republic Act
Numbered Eleven Hundred Sixty-One, as amended, and Commonwealth Act
Numbered One Hundred Eighty-Six, as amended, with regard to the funds
as are thereunder being paid to, collected or disbursed by the System, shall
be applicable to the collection, administration and disbursement of the
Funds under this Title. The penal provisions on coverage shall also be
applicable.
(b) Any person who, for the purpose of securing entitlement to any benefit
or payment under this Title, or the issuance of any certificate or document
for any purpose connected with this Title, whether for him or for some
other person, commits fraud, collusion, falsification, misrepresentation of
facts or any other kind of anomaly, shall be punished with a fine of not less
than five hundred pesos nor more than five thousand pesos and an
imprisonment for not less than six months nor more than one year, at the
discretion of the court.
(c) If the act penalized by this Article is committed by any person who has
been or is employed by the Commission or System, or a recidivist, the
imprisonment shall not be less than one year; if committed by a lawyer,
physician or other professional, he shall, in addition to the penalty
prescribed herein, be disqualified from the practice of his profession; and if
committed by any official, employee or personnel of the Commission,
System or any government agency, he shall, in addition to the penalty
prescribed herein, be dismissed with prejudice to re-employment in the
government service.
ART. 208. Applicability. - This Title shall apply only to injury, sickness,
disability or death occurring on or after January 1, 1975.
ART. 208-A. Repeal. - All existing laws, Presidential Decrees and Letters of
Instructions which are inconsistent with or contrary to this Decree, are
hereby repealed: Provided, That in the case of the GSIS, conditions for
entitlement to benefits shall be governed by the Labor Code, as amended:
Provided, however, That the formulas for computation of benefits, as well
as the contribution base, shall be those provided under Commonwealth Act
Numbered One Hundred Eighty-Six, as amended by Presidential Decree No.
1146, plus twenty percent thereof. (As added by Section 9, Presidential
Decree No. 1368 [May 1, 1978] and subsequently amended by Section 7,
Presidential Decree No. 1641).
Title III
MEDICARE
ART. 209. Medical care. - The Philippine Medical Care Plan shall be
implemented as provided under Republic Act Numbered Sixty-One Hundred
Eleven, as amended.
Title IV
ADULT EDUCATION
ART. 210. Adult education. - Every employer shall render assistance in the
establishment and operation of adult education programs for their workers
and employees as prescribed by regulations jointly approved by the
Department of Labor and Employment and the Department of Education,
Culture and Sports.
BOOK FIVE
LABOR RELATIONS
Title I
POLICY AND DEFINITIONS
Chapter I
POLICY
ART. 211. Declaration of Policy. - A. It is the policy of the State:
(a) To promote and emphasize the primacy of free collective bargaining and
negotiations, including voluntary arbitration, mediation and conciliation, as
modes of settling labor or industrial disputes;
(b) To promote free trade unionism as an instrument for the enhancement
of democracy and the promotion of social justice and development;
(c) To foster the free and voluntary organization of a strong and united
labor movement;
(d) To promote the enlightenment of workers concerning their rights and
obligations as union members and as employees;
(e) To provide an adequate administrative machinery for the expeditious
settlement of labor or industrial disputes;
(f) To ensure a stable but dynamic and just industrial peace; and
(g) To ensure the participation of workers in decision and policy-making
processes affecting their rights, duties and welfare.
B. To encourage a truly democratic method of regulating the relations
between the employers and employees by means of agreements freely
entered into through collective bargaining, no court or administrative
agency or official shall have the power to set or fix wages, rates of pay,
hours of work or other terms and conditions of employment, except as
otherwise provided under this Code. (As amended by Section 3, Republic
Act No. 6715, March 21, 1989).
Chapter II
DEFINITIONS
ART. 212. Definitions. - (a) "Commission" means the National Labor
Relations Commission or any of its divisions, as the case may be, as
provided under this Code.
(b) "Bureau" means the Bureau of Labor Relations and/or the Labor
Relations Divisions in the regional offices established under Presidential
Decree No. 1, in the Department of Labor.
(c) "Board" means the National Conciliation and Mediation Board
established under Executive Order No. 126.
(d) "Council" means the Tripartite Voluntary Arbitration Advisory Council
established under Executive Order No. 126, as amended.
(e) "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.
(f) "Employee" includes any person in the employ of an employer. The term
shall not be limited to the employees of a particular employer, unless the
Code so explicitly states. It shall include any individual whose work has
ceased as a result of or in connection with any current labor dispute or
because of any unfair labor practice if he has not obtained any other
substantially equivalent and regular employment.
(g) "Labor organization" means any union or association of employees
which exists in whole or in part for the purpose of collective bargaining or
of dealing with employers concerning terms and conditions of employment.
(h) "Legitimate labor organization" means any labor organization duly
registered with the Department of Labor and Employment, and includes any
branch or local thereof.
(i) "Company union" means any labor organization whose formation,
function or administration has been assisted by any act defined as unfair
labor practice by this Code.
(j) "Bargaining representative" means a legitimate labor organization
whether or not employed by the employer.
(k) "Unfair labor practice" means any unfair labor practice as expressly
defined by the Code.
(l) "Labor dispute" includes any controversy or matter concerning terms and
conditions of employment or the association or representation of persons in
negotiating, fixing, maintaining, changing or arranging the terms and
conditions of employment, regardless of whether the disputants stand in
the proximate relation of employer and employee.
(m) "Managerial employee" is one who is vested with the powers or
prerogatives to lay down and execute management policies and/or to hire,
transfer, suspend, lay-off, recall, discharge, assign or discipline employees.
Supervisory employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the exercise of such
authority is not merely routinary or clerical in nature but requires the use of
independent judgment. All employees not falling within any of the above
definitions are considered rank-and-file employees for purposes of this
Book.
(n) "Voluntary Arbitrator" means any person accredited by the Board as
such or any person named or designated in the Collective Bargaining
Agreement by the parties to act as their Voluntary Arbitrator, or one chosen
with or without the assistance of the National Conciliation and Mediation
Board, pursuant to a selection procedure agreed upon in the Collective
Bargaining Agreement, or any official that may be authorized by the
Secretary of Labor and Employment to act as Voluntary Arbitrator upon the
written request and agreement of the parties to a labor dispute.
(o) "Strike" means any temporary stoppage of work by the concerted action
of employees as a result of an industrial or labor dispute.
(p) "Lockout" means any temporary refusal of an employer to furnish work
as a result of an industrial or labor dispute.
(q) "Internal union dispute" includes all disputes or grievances arising from
any violation of or disagreement over any provision of the constitution and
by laws of a union, including any violation of the rights and conditions of
union membership provided for in this Code.
(r) "Strike-breaker" means any person who obstructs, impedes, or
interferes with by force, violence, coercion, threats, or intimidation any
peaceful picketing affecting wages, hours or conditions of work or in the
exercise of the right of self-organization or collective bargaining.
(s) "Strike area" means the establishment, warehouses, depots, plants or
offices, including the sites or premises used as runaway shops, of the
employer struck against, as well as the immediate vicinity actually used by
picketing strikers in moving to and fro before all points of entrance to and
exit from said establishment. (As amended by Section 4, Republic Act No.
6715, March 21, 1989).
Title II
NATIONAL LABOR RELATIONS COMMISSION
Chapter I
CREATION AND COMPOSITION
Article 213. National Labor Relations Commission. - There shall be a
National Labor Relations Commission which shall be attached to the
Department of Labor and Employment solely for program and policy
coordination only, composed of a Chairman and twenty-three (23)
Members.
Eight (8) members each shall be chosen only from among the nominees of
the workers and employers organizations, respectively. The Chairman and
the seven (7) remaining members shall come from the public sector, with
the latter to be chosen preferably from among the incumbent Labor
Arbiters.
Upon assumption into office, the members nominated by the workers and
employers organizations shall divest themselves of any affiliation with or
interest in the federation or association to which they belong.
The Commission may sit en banc or in eight (8) divisions, each composed
of three (3) members. The Commission shall sit en banc only for purposes
of promulgating rules and regulations governing the hearing and disposition
of cases before any of its divisions and regional branches and formulating
policies affecting its administration and operations. The Commission shall
exercise its adjudicatory and all other powers, functions, and duties through
its divisions. Of the eight (8) divisions, the first, second, third, fourth, fifth
and sixth divisions shall handle cases coming from the National Capital
Region and other parts of Luzon; and the seventh and eighth divisions,
cases from the Visayas and Mindanao, respectively: Provided, That the
Commission sitting en banc may, on temporary or emergency basis, allow
cases within the jurisdiction of any division to be heard and decided by any
other division whose docket allows the additional workload and such
transfer will not expose litigants to unnecessary additional expenses. The
divisions of the Commission shall have exclusive appellate jurisdiction over
cases within their respective territorial jurisdiction.
The concurrence of two (2) Commissioners of a division shall be necessary
for the pronouncement of a judgment or resolution. Whenever the required
membership in a division is not complete and the concurrence of two (2)
Commissioners to arrive at a judgment or resolution cannot be obtained,
the Chairman shall designate such number of additional Commissioners
from the other divisions as may be necessary.
The conclusions of a division on any case submitted to it for decision shall
be reached in consultation before the case is assigned to a member for the
writing of the opinion. It shall be mandatory for the division to meet for
purposes of the consultation ordained therein. A certification to this effect
signed by the Presiding Commissioner of the division shall be issued, and a
copy thereof attached to the record of the case and served upon the
parties.
The Chairman shall be the Presiding Commissioner of the first division, and
the seven (7) other members from the public sector shall be the Presiding
Commissioners of the second, third, fourth, fifth, sixth, seventh and eight
divisions, respectively. In case of the effective absence or incapacity of the
Chairman, the Presiding Commissioner of the second division shall be the
Acting Chairman.
The Chairman, aided by the Executive Clerk of the Commission, shall have
administrative supervision over the Commission and its regional branches
and all its personnel, including the Labor Arbiters.
The Commission, when sitting en banc, shall be assisted by the same
Executive Clerk, and, when acting thru its Divisions, by said Executive Clerk
for its first division and seven (7) other Deputy Executive Clerks for the
second, third, fourth fifth, sixth, seventh and eighth divisions, respectively,
in the performance of such similar or equivalent functions and duties as are
discharged by the Clerk of Court and Deputy Clerks of Court of the Court of
Appeals.
The Commission and its eight (8) divisions shall be assisted by the
Commission Attorneys in its appellate and adjudicatory functions whose
term shall be coterminous with the Commissioners with whom they are
assigned. The Commission Attorneys shall be members of the Philippine Bar
with at least one (1) year experience or exposure in the field of labor-
management relations. They shall receive annual salaries and shall be
entitled to the same allowances and benefits as those falling under Salary
Grade twenty-six (SG 26). There shall be as many Commission Attorneys as
may be necessary for the effective and efficient operations of the
Commission but in no case more than three (3) assigned to the Office of
the Chairman and each Commissioner.
No Labor Arbiter shall be assigned to perform the functions of the
Commission Attorney nor detailed to the office of any Commissioner. (As
amended by Section 1, Republic Act No. 9347 [July 27, 2006] and as
previously amended by Republic Act No. 7700 and Section 5, Republic Act
No. 6715).
Article 214. Headquarters, Branches and Provincial Extension Units. - The
Commission and its first, second, third, fourth, fifth and sixth divisions shall
have their main offices in Metropolitan Manila, and the seventh and eighth
divisions in the cities of Cebu and Cagayan de Oro, respectively. The
Commission shall establish as many regional branches as there are regional
offices of the Department of Labor and Employment, sub-regional branches
or provincial extension units. There shall be as many Labor Arbiters as may
be necessary for the effective and efficient operation of the Commission.
(As amended by Section 2, Republic Act No. 9347 [July 27, 2006] and
previously amended by Section 6, Republic Act No. 6715 [March 21, 1989]).
Article 215. Appointment and Qualifications. The Chairman and other
Commissioners shall be members of the Philippine Bar and must have been
engaged in the practice of law in the Philippines for at least fifteen (15)
years, with at least five (5) years experience or exposure in the field of
labor-management relations, and shall preferably be residents of the region
where they shall hold office. The Labor Arbiters shall likewise be members
of the Philippine Bar and must have been engaged in the practice of law in
the Philippines for at least ten (10) years, with at least five (5) years
experience or exposure in the field of labor-management relations.
The Chairman and the other Commissioners and the Labor Arbiters shall
hold office during good behavior until they reach the age of sixty-five (65)
years, unless sooner removed for cause as provided by law or become
incapacitated to discharge the duties of their office; Provided, however,
That the President of the Republic of the Philippines may extend the
services of the Commissioners and Labor Arbiters up to the maximum age
of seventy (70) years upon the recommendation of the Commission en
banc.
The Chairman, the Division Presiding Commissioners and other
Commissioners shall all be appointed by the President. Appointment to any
vacancy in a specific division shall come only from the nominees of the
sector which nominated the predecessor. The Labor Arbiters shall also be
appointed by the President, upon recommendation of the Commission en
banc to a specific arbitration branch, preferably in the region where they
are residents, and shall be subject to the Civil Service Law, rules and
regulations: Provided, that the Labor Arbiters who are presently holding
office in the region where they are residents shall be deemed appointed
thereat.
The Chairman and the Commission, shall appoint the staff and employees
of the Commission, and its regional branches as the needs of the service
may require, subject to the Civil Service Law, rules and regulations, and
upgrade their current salaries, benefits and other emoluments in
accordance with law. (As amended by Section 3, Republic Act No. 9347
[July 27, 2006] and as previously amended by Section 7, Republic Act No.
6715 [March 21, 1989]).
Article 216. Salaries, benefits and other emoluments. The Chairman and
members of the Commission shall have the same rank, receive an annual
salary equivalent to, and be entitled to the same allowances, retirement
and benefits as, those of the Presiding Justice and Associate Justices of the
Court of Appeals, respectively. Labor Arbiters shall have the same rank,
receive an annual salary equivalent to and be entitled to the same
allowances, retirement and other benefits and privileges as those of the
judges of the regional trial courts. In no case, however, shall the provision
of this Article result in the diminution of the existing salaries, allowances
and benefits of the aforementioned officials. (As amended by Section 4,
Republic Act No. 9347 [July 27, 2006] and as previously amended by
Section 8, Republic Act No. 6715 [March 21, 1989]).
Chapter II
POWERS AND DUTIES
ART. 217. Jurisdiction of the Labor Arbiters and the Commission. - (a)
Except as otherwise provided under this Code, the Labor Arbiters shall have
original and exclusive jurisdiction to hear and decide, within thirty (30)
calendar days after the submission of the case by the parties for decision
without extension, even in the absence of stenographic notes, the following
cases involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers
may file involving wages, rates of pay, hours of work and other terms and
conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising
from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including
questions involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare
and maternity benefits, all other claims arising from employer-employee
relations, including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (P5,000.00) regardless
of whether accompanied with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all cases
decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of collective
bargaining agreements and those arising from the interpretation or
enforcement of company personnel policies shall be disposed of by the
Labor Arbiter by referring the same to the grievance machinery and
voluntary arbitration as may be provided in said agreements. (As amended
by Section 9, Republic Act No. 6715, March 21, 1989).
ART. 218. Powers of the Commission. - The Commission shall have the
power and authority:
(a) To promulgate rules and regulations governing the hearing and
disposition of cases before it and its regional branches, as well as those
pertaining to its internal functions and such rules and regulations as may be
necessary to carry out the purposes of this Code; (As amended by Section
10, Republic Act No. 6715, March 21, 1989).
(b) To administer oaths, summon the parties to a controversy, issue
subpoenas requiring the attendance and testimony of witnesses or the
production of such books, papers, contracts, records, statement of
accounts, agreements, and others as may be material to a just
determination of the matter under investigation, and to testify in any
investigation or hearing conducted in pursuance of this Code;chan robles
virtual law library
(c) To conduct investigation for the determination of a question, matter or
controversy within its jurisdiction, proceed to hear and determine the
disputes in the absence of any party thereto who has been summoned or
served with notice to appear, conduct its proceedings or any part thereof in
public or in private, adjourn its hearings to any time and place, refer
technical matters or accounts to an expert and to accept his report as
evidence after hearing of the parties upon due notice, direct parties to be
joined in or excluded from the proceedings, correct, amend, or waive any
error, defect or irregularity whether in substance or in form, give all such
directions as it may deem necessary or expedient in the determination of
the dispute before it, and dismiss any matter or refrain from further hearing
or from determining the dispute or part thereof, where it is trivial or where
further proceedings by the Commission are not necessary or desirable; and
(d) To hold any person in contempt directly or indirectly and impose
appropriate penalties therefor in accordance with law.
A person guilty of misbehavior in the presence of or so near the Chairman
or any member of the Commission or any Labor Arbiter as to obstruct or
interrupt the proceedings before the same, including disrespect toward said
officials, offensive personalities toward others, or refusal to be sworn, or to
answer as a witness or to subscribe an affidavit or deposition when lawfully
required to do so, may be summarily adjudged in direct contempt by said
officials and punished by fine not exceeding five hundred pesos (P500) or
imprisonment not exceeding five (5) days, or both, if it be the Commission,
or a member thereof, or by a fine not exceeding one hundred pesos (P100)
or imprisonment not exceeding one (1) day, or both, if it be a Labor Arbiter.
The person adjudged in direct contempt by a Labor Arbiter may appeal to
the Commission and the execution of the judgment shall be suspended
pending the resolution of the appeal upon the filing by such person of a
bond on condition that he will abide by and perform the judgment of the
Commission should the appeal be decided against him. Judgment of the
Commission on direct contempt is immediately executory and unappealable.
Indirect contempt shall be dealt with by the Commission or Labor Arbiter in
the manner prescribed under Rule 71 of the Revised Rules of Court; and
(As amended by Section 10, Republic Act No. 6715, March 21, 1989).
(e) To enjoin or restrain any actual or threatened commission of any or all
prohibited or unlawful acts or to require the performance of a particular act
in any labor dispute which, if not restrained or performed forthwith, may
cause grave or irreparable damage to any party or render ineffectual any
decision in favor of such party: Provided, That no temporary or permanent
injunction in any case involving or growing out of a labor dispute as defined
in this Code shall be issued except after hearing the testimony of witnesses,
with opportunity for cross-examination, in support of the allegations of a
complaint made under oath, and testimony in opposition thereto, if offered,
and only after a finding of fact by the Commission, to the effect:
(1) That prohibited or unlawful acts have been threatened and will be
committed and will be continued unless restrained, but no injunction or
temporary restraining order shall be issued on account of any threat,
prohibited or unlawful act, except against the person or persons,
association or organization making the threat or committing the prohibited
or unlawful act or actually authorizing or ratifying the same after actual
knowledge thereof;
(2) That substantial and irreparable injury to complainants property will
follow;
(3) That as to each item of relief to be granted, greater injury will be
inflicted upon complainant by the denial of relief than will be inflicted upon
defendants by the granting of relief;
(4) That complainant has no adequate remedy at law; and
(5) That the public officers charged with the duty to protect complainants
property are unable or unwilling to furnish adequate protection.
Such hearing shall be held after due and personal notice thereof has been
served, in such manner as the Commission shall direct, to all known
persons against whom relief is sought, and also to the Chief Executive and
other public officials of the province or city within which the unlawful acts
have been threatened or committed, charged with the duty to protect
complainants property: Provided, however, that if a complainant shall also
allege that, unless a temporary restraining order shall be issued without
notice, a substantial and irreparable injury to complainants property will be
unavoidable, such a temporary restraining order may be issued upon
testimony under oath, sufficient, if sustained, to justify the Commission in
issuing a temporary injunction upon hearing after notice. Such a temporary
restraining order shall be effective for no longer than twenty (20) days and
shall become void at the expiration of said twenty (20) days. No such
temporary restraining order or temporary injunction shall be issued except
on condition that complainant shall first file an undertaking with adequate
security in an amount to be fixed by the Commission sufficient to
recompense those enjoined for any loss, expense or damage caused by the
improvident or erroneous issuance of such order or injunction, including all
reasonable costs, together with a reasonable attorneys fee, and expense of
defense against the order or against the granting of any injunctive relief
sought in the same proceeding and subsequently denied by the
Commission.
The undertaking herein mentioned shall be understood to constitute an
agreement entered into by the complainant and the surety upon which an
order may be rendered in the same suit or proceeding against said
complainant and surety, upon a hearing to assess damages, of which
hearing, complainant and surety shall have reasonable notice, the said
complainant and surety submitting themselves to the jurisdiction of the
Commission for that purpose. But nothing herein contained shall deprive
any party having a claim or cause of action under or upon such undertaking
from electing to pursue his ordinary remedy by suit at law or in equity:
Provided, further, That the reception of evidence for the application of a
writ of injunction may be delegated by the Commission to any of its Labor
Arbiters who shall conduct such hearings in such places as he may
determine to be accessible to the parties and their witnesses and shall
submit thereafter his recommendation to the Commission. (As amended by
Section 10, Republic Act No. 6715, March 21, 1989).
ART. 219. Ocular inspection. - The Chairman, any Commissioner, Labor
Arbiter or their duly authorized representatives, may, at any time during
working hours, conduct an ocular inspection on any establishment, building,
ship or vessel, place or premises, including any work, material, implement,
machinery, appliance or any object therein, and ask any employee, laborer,
or any person, as the case may be, for any information or data concerning
any matter or question relative to the object of the investigation.
[ART. 220. Compulsory arbitration. - The Commission or any Labor Arbiter
shall have the power to ask the assistance of other government officials
and qualified private citizens to act as compulsory arbitrators on cases
referred to them and to fix and assess the fees of such compulsory
arbitrators, taking into account the nature of the case, the time consumed
in hearing the case, the professional standing of the arbitrators, the
financial capacity of the parties, and the fees provided in the Rules of
Court.] (Repealed by Section 16, Batas Pambansa Bilang 130, August 21,
1981).
ART. 221. Technical rules not binding and prior resort to amicable
settlement. - In any proceeding before the Commission or any of the Labor
Arbiters, the rules of evidence prevailing in courts of law or equity shall not
be controlling and it is the spirit and intention of this Code that the
Commission and its members and the Labor Arbiters shall use every and all
reasonable means to ascertain the facts in each case speedily and
objectively and without regard to technicalities of law or procedure, all in
the interest of due process. In any proceeding before the Commission or
any Labor Arbiter, the parties may be represented by legal counsel but it
shall be the duty of the Chairman, any Presiding Commissioner or
Commissioner or any Labor Arbiter to exercise complete control of the
proceedings at all stages.
Any provision of law to the contrary notwithstanding, the Labor Arbiter shall
exert all efforts towards the amicable settlement of a labor dispute within
his jurisdiction on or before the first hearing. The same rule shall apply to
the Commission in the exercise of its original jurisdiction. (As amended by
Section 11, Republic Act No. 6715, March 21, 1989).
ART. 222. Appearances and Fees. - (a) Non-lawyers may appear before the
Commission or any Labor Arbiter only:
1. If they represent themselves; or 2. If they represent their organization or
members thereof.
(b) No attorneys fees, negotiation fees or similar charges of any kind
arising from any collective bargaining agreement shall be imposed on any
individual member of the contracting union: Provided, However, that
attorneys fees may be charged against union funds in an amount to be
agreed upon by the parties. Any contract, agreement or arrangement of
any sort to the contrary shall be null and void. (As amended by Presidential
Decree No. 1691, May 1, 1980).
Chapter III
APPEAL
ART. 223. Appeal. - Decisions, awards, or orders of the Labor Arbiter are
final and executory unless appealed to the Commission by any or both
parties within ten (10) calendar days from receipt of such decisions,
awards, or orders. Such appeal may be entertained only on any of the
following grounds:
(a) If there is prima facie evidence of abuse of discretion on the part of the
Labor Arbiter;
(b) If the decision, order or award was secured through fraud or coercion,
including graft and corruption;
(c) If made purely on questions of law; and
(d) If serious errors in the findings of facts are raised which would cause
grave or irreparable damage or injury to the appellant.
In case of a judgment involving a monetary award, an appeal by the
employer may be perfected only upon the posting of a cash or surety bond
issued by a reputable bonding company duly accredited by the Commission
in the amount equivalent to the monetary award in the judgment appealed
from.
In any event, the decision of the Labor Arbiter reinstating a dismissed or
separated employee, insofar as the reinstatement aspect is concerned, shall
immediately be executory, even pending appeal. The employee shall either
be admitted back to work under the same terms and conditions prevailing
prior to his dismissal or separation or, at the option of the employer, merely
reinstated in the payroll. The posting of a bond by the employer shall not
stay the execution for reinstatement provided herein.
To discourage frivolous or dilatory appeals, the Commission or the Labor
Arbiter shall impose reasonable penalty, including fines or censures, upon
the erring parties.
In all cases, the appellant shall furnish a copy of the memorandum of
appeal to the other party who shall file an answer not later than ten (10)
calendar days from receipt thereof.
The Commission shall decide all cases within twenty (20) calendar days
from receipt of the answer of the appellee. The decision of the Commission
shall be final and executory after ten (10) calendar days from receipt
thereof by the parties.
Any law enforcement agency may be deputized by the Secretary of Labor
and Employment or the Commission in the enforcement of decisions,
awards or orders. (As amended by Section 12, Republic Act No. 6715,
March 21, 1989).
ART. 224. Execution of decisions, orders or awards. - (a) The Secretary of
Labor and Employment or any Regional Director, the Commission or any
Labor Arbiter, or Med-Arbiter or Voluntary Arbitrator may, motu proprio or
on motion of any interested party, issue a writ of execution on a judgment
within five (5) years from the date it becomes final and executory, requiring
a sheriff or a duly deputized officer to execute or enforce final decisions,
orders or awards of the Secretary of Labor and Employment or regional
director, the Commission, the Labor Arbiter or med-arbiter, or voluntary
arbitrators. In any case, it shall be the duty of the responsible officer to
separately furnish immediately the counsels of record and the parties with
copies of said decisions, orders or awards. Failure to comply with the duty
prescribed herein shall subject such responsible officer to appropriate
administrative sanctions. chanroblesvirtuallawlibrary
(b) The Secretary of Labor and Employment, and the Chairman of the
Commission may designate special sheriffs and take any measure under
existing laws to ensure compliance with their decisions, orders or awards
and those of the Labor Arbiters and voluntary arbitrators, including the
imposition of administrative fines which shall not be less than P500.00 nor
more than P10,000.00. (As amended by Section 13, Republic Act No. 6715,
March 21, 1989).
ART. 225. Contempt powers of the Secretary of Labor. - In the exercise of
his powers under this Code, the Secretary of Labor may hold any person in
direct or indirect contempt and impose the appropriate penalties therefor.
Title III
BUREAU OF LABOR RELATIONS
ART. 226. Bureau of Labor Relations. - The Bureau of Labor Relations and
the Labor Relations Divisions in the regional offices of the Department of
Labor, shall have original and exclusive authority to act, at their own
initiative or upon request of either or both parties, on all inter-union and
intra-union conflicts, and all disputes, grievances or problems arising from
or affecting labor-management relations in all workplaces, whether
agricultural or non-agricultural, except those arising from the
implementation or interpretation of collective bargaining agreements which
shall be the subject of grievance procedure and/or voluntary arbitration.
The Bureau shall have fifteen (15) working days to act on labor cases
before it, subject to extension by agreement of the parties. (As amended by
Section 14, Republic Act No. 6715, March 21, 1989).
ART. 227. Compromise agreements. - Any compromise settlement,
including those involving labor standard laws, voluntarily agreed upon by
the parties with the assistance of the Bureau or the regional office of the
Department of Labor, shall be final and binding upon the parties. The
National Labor Relations Commission or any court, shall not assume
jurisdiction over issues involved therein except in case of non-compliance
thereof or if there is prima facie evidence that the settlement was obtained
through fraud, misrepresentation, or coercion.
[ART. 228. Indorsement of cases to Labor Arbiters. - (a) Except as provided
in paragraph (b) of this Article, the Labor Arbiter shall entertain only cases
endorsed to him for compulsory arbitration by the Bureau or by the
Regional Director with a written notice of such indorsement or non-
indorsement. The indorsement or non-indorsement of the Regional Director
may be appealed to the Bureau within ten (10) working days from receipt
of the notice.
(b) The parties may, at any time, by mutual agreement, withdraw a case
from the Conciliation Section and jointly submit it to a Labor Arbiter, except
deadlocks in collective bargaining.] (Repealed by Section 16, Batas
Pambansa Bilang 130, August 21, 1981).
ART. 229. Issuance of subpoenas. - The Bureau shall have the power to
require the appearance of any person or the production of any paper,
document or matter relevant to a labor dispute under its jurisdiction, either
at the request of any interested party or at its own initiative.
ART. 230. Appointment of bureau personnel. - The Secretary of Labor and
Employment may appoint, in addition to the present personnel of the
Bureau and the Industrial Relations Divisions, such number of examiners
and other assistants as may be necessary to carry out the purpose of the
Code. [As amended by Section 15, Republic Act No. 6715, March 21, 1989].
ART. 231. Registry of unions and file of collective bargaining agreements. -
The Bureau shall keep a registry of legitimate labor organizations. The
Bureau shall also maintain a file of all collective bargaining agreements and
other related agreements and records of settlement of labor disputes and
copies of orders and decisions of voluntary arbitrators. The file shall be
open and accessible to interested parties under conditions prescribed by the
Secretary of Labor and Employment, provided that no specific information
submitted in confidence shall be disclosed unless authorized by the
Secretary, or when it is at issue in any judicial litigation, or when public
interest or national security so requires.
Within thirty (30) days from the execution of a Collective Bargaining
Agreement, the parties shall submit copies of the same directly to the
Bureau or the Regional Offices of the Department of Labor and Employment
for registration, accompanied with verified proofs of its posting in two
conspicuous places in the place of work and ratification by the majority of
all the workers in the bargaining unit. The Bureau or Regional Offices shall
act upon the application for registration of such Collective Bargaining
Agreement within five (5) calendar days from receipt thereof. The Regional
Offices shall furnish the Bureau with a copy of the Collective Bargaining
Agreement within five (5) days from its submission.
The Bureau or Regional Office shall assess the employer for every Collective
Bargaining Agreement a registration fee of not less than one thousand
pesos (P1,000.00) or in any other amount as may be deemed appropriate
and necessary by the Secretary of Labor and Employment for the effective
and efficient administration of the Voluntary Arbitration Program. Any
amount collected under this provision shall accrue to the Special Voluntary
Arbitration Fund.
The Bureau shall also maintain a file and shall undertake or assist in the
publication of all final decisions, orders and awards of the Secretary of
Labor and Employment, Regional Directors and the Commission. (As
amended by Section 15, Republic Act No. 6715, March 21, 1989).
ART. 232. Prohibition on certification election. - The Bureau shall not
entertain any petition for certification election or any other action which
may disturb the administration of duly registered existing collective
bargaining agreements affecting the parties except under Articles 253, 253-
A and 256 of this Code. (As amended by Section 15, Republic Act No. 6715,
March 21, 1989).
ART. 233. Privileged communication. - Information and statements made at
conciliation proceedings shall be treated as privileged communication and
shall not be used as evidence in the Commission. Conciliators and similar
officials shall not testify in any court or body regarding any matters taken
up at conciliation proceedings conducted by them.
Title IV
LABOR ORGANIZATIONS
Chapter I
REGISTRATION AND CANCELLATION
ART. 234. Requirements of registration. - Any applicant labor organization,
association or group of unions or workers shall acquire legal personality and
shall be entitled to the rights and privileges granted by law to legitimate
labor organizations upon issuance of the certificate of registration based on
the following requirements.
(a) Fifty pesos (P50.00) registration fee;
(b) The names of its officers, their addresses, the principal address of the
labor organization, the minutes of the organizational meetings and the list
of the workers who participated in such meetings;
(c) The names of all its members comprising at least twenty percent (20%)
of all the employees in the bargaining unit where it seeks to operate; (As
amended by Executive Order No. 111, December 24, 1986).
(d) If the applicant union has been in existence for one or more years,
copies of its annual financial reports; and
(e) Four (4) copies of the constitution and by-laws of the applicant union,
minutes of its adoption or ratification, and the list of the members who
participated in it. (As amended by Batas Pambansa Bilang 130, August 21,
1981). chanroblesvirtuallawlibrary
ART. 235. Action on application. - The Bureau shall act on all applications
for registration within thirty (30) days from filing.
All requisite documents and papers shall be certified under oath by the
secretary or the treasurer of the organization, as the case may be, and
attested to by its president.
ART. 236. Denial of registration; appeal. - The decision of the Labor
Relations Division in the regional office denying registration may be
appealed by the applicant union to the Bureau within ten (10) days from
receipt of notice thereof.
ART. 237. Additional requirements for federations or national unions. -
Subject to Article 238, if the applicant for registration is a federation or a
national union, it shall, in addition to the requirements of the preceding
Articles, submit the following:
(a) Proof of the affiliation of at least ten (10) locals or chapters, each of
which must be a duly recognized collective bargaining agent in the
establishment or industry in which it operates, supporting the registration of
such applicant federation or national union; and
(b) The names and addresses of the companies where the locals or
chapters operate and the list of all the members in each company involved.
[ART. 238. Conditions for registration of federations or national unions. - No
federation or national union shall be registered to engage in any
organization activity in more than one industry in any area or region, and
no federation or national union shall be registered to engage in any
organizational activity in more than one industry all over the country.
The federation or national union which meets the requirements and
conditions herein prescribed may organize and affiliate locals and chapters
without registering such locals or chapters with the Bureau.
Locals or chapters shall have the same rights and privileges as if they were
registered in the Bureau, provided that such federation or national union
organizes such locals or chapters within its assigned organizational field of
activity as may be prescribed by the Secretary of Labor.
The Bureau shall see to it that federations and national unions shall only
organize locals and chapters within a specific industry or union.] (Repealed
by Executive Order No. 111, December 24, 1986).
ART. 238. Cancellation of registration; appeal. - The certificate of
registration of any legitimate labor organization, whether national or local,
shall be cancelled by the Bureau if it has reason to believe, after due
hearing, that the said labor organization no longer meets one or more of
the requirements herein prescribed.
[The Bureau upon approval of this Code shall immediately institute
cancellation proceedings and take such other steps as may be necessary to
restructure all existing registered labor organizations in accordance with the
objective envisioned above.] (Repealed by Executive Order No. 111,
December 24, 1986).
ART. 239. Grounds for cancellation of union registration. - The following
shall constitute grounds for cancellation of union registration:
(a) Misrepresentation, false statement or fraud in connection with the
adoption or ratification of the constitution and by-laws or amendments
thereto, the minutes of ratification and the list of members who took part in
the ratification;
(b) Failure to submit the documents mentioned in the preceding paragraph
within thirty (30) days from adoption or ratification of the constitution and
by-laws or amendments thereto;
(c) Misrepresentation, false statements or fraud in connection with the
election of officers, minutes of the election of officers, the list of voters, or
failure to submit these documents together with the list of the newly
elected/appointed officers and their postal addresses within thirty (30) days
from election;chan robles virtual law library
(d) Failure to submit the annual financial report to the Bureau within thirty
(30) days after the closing of every fiscal year and misrepresentation, false
entries or fraud in the preparation of the financial report itself;
(e) Acting as a labor contractor or engaging in the "cabo" system, or
otherwise engaging in any activity prohibited by law;
(f) Entering into collective bargaining agreements which provide terms and
conditions of employment below minimum standards established by law;
(g) Asking for or accepting attorneys fees or negotiation fees from
employers;
(h) Other than for mandatory activities under this Code, checking off special
assessments or any other fees without duly signed individual written
authorizations of the members;
(i) Failure to submit list of individual members to the Bureau once a year or
whenever required by the Bureau; and
(j) Failure to comply with requirements under Articles 237 and 238.
ART. 240. Equity of the incumbent. - All existing federations and national
unions which meet the qualifications of a legitimate labor organization and
none of the grounds for cancellation shall continue to maintain their
existing affiliates regardless of the nature of the industry and the location of
the affiliates.
Chapter II
RIGHTS AND CONDITIONS
OF MEMBERSHIP
ART. 241. Rights and conditions of membership in a labor organization. -
The following are the rights and conditions of membership in a labor
organization:
(a) No arbitrary or excessive initiation fees shall be required of the
members of a legitimate labor organization nor shall arbitrary, excessive or
oppressive fine and forfeiture be imposed;
(b) The members shall be entitled to full and detailed reports from their
officers and representatives of all financial transactions as provided for in
the constitution and by-laws of the organization;
(c) The members shall directly elect their officers, including those of the
national union or federation, to which they or their union is affiliated, by
secret ballot at intervals of five (5) years. No qualification requirements for
candidacy to any position shall be imposed other than membership in good
standing in subject labor organization. The secretary or any other
responsible union officer shall furnish the Secretary of Labor and
Employment with a list of the newly-elected officers, together with the
appointive officers or agents who are entrusted with the handling of funds,
within thirty (30) calendar days after the election of officers or from the
occurrence of any change in the list of officers of the labor organization;
(As amended by Section 16, Republic Act No. 6715, March 21, 1989).
(d) The members shall determine by secret ballot, after due deliberation,
any question of major policy affecting the entire membership of the
organization, unless the nature of the organization or force majeure renders
such secret ballot impractical, in which case, the board of directors of the
organization may make the decision in behalf of the general membership;
(e) No labor organization shall knowingly admit as members or continue in
membership any individual who belongs to a subversive organization or
who is engaged directly or indirectly in any subversive activity;
(f) No person who has been convicted of a crime involving moral turpitude
shall be eligible for election as a union officer or for appointment to any
position in the union;
(g) No officer, agent or member of a labor organization shall collect any
fees, dues, or other contributions in its behalf or make any disbursement of
its money or funds unless he is duly authorized pursuant to its constitution
and by-laws;
(h) Every payment of fees, dues or other contributions by a member shall
be evidenced by a receipt signed by the officer or agent making the
collection and entered into the record of the organization to be kept and
maintained for the purpose;
(i) The funds of the organization shall not be applied for any purpose or
object other than those expressly provided by its constitution and by-laws
or those expressly authorized by written resolution adopted by the majority
of the members at a general meeting duly called for the purpose;
(j) Every income or revenue of the organization shall be evidenced by a
record showing its source, and every expenditure of its funds shall be
evidenced by a receipt from the person to whom the payment is made,
which shall state the date, place and purpose of such payment. Such record
or receipt shall form part of the financial records of the organization.
chanroblesvirtuallawlibrary
Any action involving the funds of the organization shall prescribe after three
(3) years from the date of submission of the annual financial report to the
Department of Labor and Employment or from the date the same should
have been submitted as required by law, whichever comes earlier:
Provided, That this provision shall apply only to a legitimate labor
organization which has submitted the financial report requirements under
this Code: Provided, further, that failure of any labor organization to comply
with the periodic financial reports required by law and such rules and
regulations promulgated thereunder six (6) months after the effectivity of
this Act shall automatically result in the cancellation of union registration of
such labor organization; (As amended by Section 16, Republic Act No.
6715, March 21, 1989).
(k) The officers of any labor organization shall not be paid any
compensation other than the salaries and expenses due to their positions as
specifically provided for in its constitution and by-laws, or in a written
resolution duly authorized by a majority of all the members at a general
membership meeting duly called for the purpose. The minutes of the
meeting and the list of participants and ballots cast shall be subject to
inspection by the Secretary of Labor or his duly authorized representatives.
Any irregularities in the approval of the resolutions shall be a ground for
impeachment or expulsion from the organization;
(l) The treasurer of any labor organization and every officer thereof who is
responsible for the account of such organization or for the collection,
management, disbursement, custody or control of the funds, moneys and
other properties of the organization, shall render to the organization and to
its members a true and correct account of all moneys received and paid by
him since he assumed office or since the last day on which he rendered
such account, and of all bonds, securities and other properties of the
organization entrusted to his custody or under his control. The rendering of
such account shall be made:
(1) At least once a year within thirty (30) days after the close of its fiscal
year;
(2) At such other times as may be required by a resolution of the majority
of the members of the organization; and
(3) Upon vacating his office.
The account shall be duly audited and verified by affidavit and a copy
thereof shall be furnished the Secretary of Labor.
(m) The books of accounts and other records of the financial activities of
any labor organization shall be open to inspection by any officer or member
thereof during office hours;
(n) No special assessment or other extraordinary fees may be levied upon
the members of a labor organization unless authorized by a written
resolution of a majority of all the members in a general membership
meeting duly called for the purpose. The secretary of the organization shall
record the minutes of the meeting including the list of all members present,
the votes cast, the purpose of the special assessment or fees and the
recipient of such assessment or fees. The record shall be attested to by the
president.
(o) Other than for mandatory activities under the Code, no special
assessments, attorneys fees, negotiation fees or any other extraordinary
fees may be checked off from any amount due to an employee without an
individual written authorization duly signed by the employee. The
authorization should specifically state the amount, purpose and beneficiary
of the deduction; and
(p) It shall be the duty of any labor organization and its officers to inform
its members on the provisions of its constitution and by-laws, collective
bargaining agreement, the prevailing labor relations system and all their
rights and obligations under existing labor laws.
For this purpose, registered labor organizations may assess reasonable
dues to finance labor relations seminars and other labor education
activities.
Any violation of the above rights and conditions of membership shall be a
ground for cancellation of union registration or expulsion of officers from
office, whichever is appropriate. At least thirty percent (30%) of the
members of a union or any member or members specially concerned may
report such violation to the Bureau. The Bureau shall have the power to
hear and decide any reported violation to mete the appropriate penalty.
Criminal and civil liabilities arising from violations of above rights and
conditions of membership shall continue to be under the jurisdiction of
ordinary courts.
Chapter III
RIGHTS OF LEGITIMATE
LABOR ORGANIZATIONS
ART. 242. Rights of legitimate labor organizations. - A legitimate labor
organization shall have the right:
(a) To act as the representative of its members for the purpose of collective
bargaining;
(b) To be certified as the exclusive representative of all the employees in an
appropriate bargaining unit for purposes of collective bargaining;
(c) To be furnished by the employer, upon written request, with its annual
audited financial statements, including the balance sheet and the profit and
loss statement, within thirty (30) calendar days from the date of receipt of
the request, after the union has been duly recognized by the employer or
certified as the sole and exclusive bargaining representative of the
employees in the bargaining unit, or within sixty (60) calendar days before
the expiration of the existing collective bargaining agreement, or during the
collective bargaining negotiation;
(d) To own property, real or personal, for the use and benefit of the labor
organization and its members;
(e) To sue and be sued in its registered name; and
(f) To undertake all other activities designed to benefit the organization and
its members, including cooperative, housing, welfare and other projects not
contrary to law.
Notwithstanding any provision of a general or special law to the contrary,
the income and the properties of legitimate labor organizations, including
grants, endowments, gifts, donations and contributions they may receive
from fraternal and similar organizations, local or foreign, which are actually,
directly and exclusively used for their lawful purposes, shall be free from
taxes, duties and other assessments. The exemptions provided herein may
be withdrawn only by a special law expressly repealing this provision. (As
amended by Section 17, Republic Act No. 6715, March 21, 1989).
Title V
COVERAGE
ART. 243. Coverage and employees right to self-organization. - All persons
employed in commercial, industrial and agricultural enterprises and in
religious, charitable, medical, or educational institutions, whether operating
for profit or not, shall have the right to self-organization and to form, join,
or assist labor organizations of their own choosing for purposes of collective
bargaining. Ambulant, intermittent and itinerant workers, self-employed
people, rural workers and those without any definite employers may form
labor organizations for their mutual aid and protection. (As amended by
Batas Pambansa Bilang 70, May 1, 1980).
ART. 244. Right of employees in the public service. - Employees of
government corporations established under the Corporation Code shall have
the right to organize and to bargain collectively with their respective
employers. All other employees in the civil service shall have the right to
form associations for purposes not contrary to law. (As amended by
Executive Order No. 111, December 24, 1986).
ART. 245. Ineligibility of managerial employees to join any labor
organization; right of supervisory employees. - Managerial employees are
not eligible to join, assist or form any labor organization. Supervisory
employees shall not be eligible for membership in a labor organization of
the rank-and-file employees but may join, assist or form separate labor
organizations of their own. (As amended by Section 18, Republic Act No.
6715, March 21, 1989). chanroblesvirtuallawlibrary
ART. 246. Non-abridgment of right to self-organization. - It shall be
unlawful for any person to restrain, coerce, discriminate against or unduly
interfere with employees and workers in their exercise of the right to self-
organization. Such right shall include the right to form, join, or assist labor
organizations for the purpose of collective bargaining through
representatives of their own choosing and to engage in lawful concerted
activities for the same purpose for their mutual aid and protection, subject
to the provisions of Article 264 of this Code. (As amended by Batas
Pambansa Bilang 70, May 1, 1980).
Title VI
UNFAIR LABOR PRACTICES
Chapter I
CONCEPT
ART. 247. Concept of unfair labor practice and procedure for prosecution
thereof. - Unfair labor practices violate the constitutional right of workers
and employees to self-organization, are inimical to the legitimate interests
of both labor and management, including their right to bargain collectively
and otherwise deal with each other in an atmosphere of freedom and
mutual respect, disrupt industrial peace and hinder the promotion of
healthy and stable labor-management relations.
Consequently, unfair labor practices are not only violations of the civil rights
of both labor and management but are also criminal offenses against the
State which shall be subject to prosecution and punishment as herein
provided.
Subject to the exercise by the President or by the Secretary of Labor and
Employment of the powers vested in them by Articles 263 and 264 of this
Code, the civil aspects of all cases involving unfair labor practices, which
may include claims for actual, moral, exemplary and other forms of
damages, attorneys fees and other affirmative relief, shall be under the
jurisdiction of the Labor Arbiters. The Labor Arbiters shall give utmost
priority to the hearing and resolution of all cases involving unfair labor
practices. They shall resolve such cases within thirty (30) calendar days
from the time they are submitted for decision.
Recovery of civil liability in the administrative proceedings shall bar recovery
under the Civil Code.
No criminal prosecution under this Title may be instituted without a final
judgment finding that an unfair labor practice was committed, having been
first obtained in the preceding paragraph. During the pendency of such
administrative proceeding, the running of the period of prescription of the
criminal offense herein penalized shall be considered interrupted: Provided,
however, that the final judgment in the administrative proceedings shall not
be binding in the criminal case nor be considered as evidence of guilt but
merely as proof of compliance of the requirements therein set forth. (As
amended by Batas Pambansa Bilang 70, May 1, 1980 and later further
amended by Section 19, Republic Act No. 6715, March 21, 1989).
Chapter II
UNFAIR LABOR PRACTICES OF EMPLOYERS
ART. 248. Unfair labor practices of employers. - It shall be unlawful for an
employer to commit any of the following unfair labor practice:
(a) To interfere with, restrain or coerce employees in the exercise of their
right to self-organization;
(b) To require as a condition of employment that a person or an employee
shall not join a labor organization or shall withdraw from one to which he
belongs;
(c) To contract out services or functions being performed by union
members when such will interfere with, restrain or coerce employees in the
exercise of their rights to self-organization;
(d) To initiate, dominate, assist or otherwise interfere with the formation or
administration of any labor organization, including the giving of financial or
other support to it or its organizers or supporters;
(e) To discriminate in regard to wages, hours of work and other terms and
conditions of employment in order to encourage or discourage membership
in any labor organization. Nothing in this Code or in any other law shall stop
the parties from requiring membership in a recognized collective bargaining
agent as a condition for employment, except those employees who are
already members of another union at the time of the signing of the
collective bargaining agreement. Employees of an appropriate bargaining
unit who are not members of the recognized collective bargaining agent
may be assessed a reasonable fee equivalent to the dues and other fees
paid by members of the recognized collective bargaining agent, if such non-
union members accept the benefits under the collective bargaining
agreement: Provided, that the individual authorization required under
Article 242, paragraph (o) of this Code shall not apply to the non-members
of the recognized collective bargaining agent; chanroblesvirtuallawlibrary
(f) To dismiss, discharge or otherwise prejudice or discriminate against an
employee for having given or being about to give testimony under this
Code;
(g) To violate the duty to bargain collectively as prescribed by this Code;
(h) To pay negotiation or attorneys fees to the union or its officers or
agents as part of the settlement of any issue in collective bargaining or any
other dispute; or
(i) To violate a collective bargaining agreement.
The provisions of the preceding paragraph notwithstanding, only the
officers and agents of corporations, associations or partnerships who have
actually participated in, authorized or ratified unfair labor practices shall be
held criminally liable. (As amended by Batas Pambansa Bilang 130, August
21, 1981).
Chapter III
UNFAIR LABOR PRACTICES OF LABOR ORGANIZATIONS
ART. 249. Unfair labor practices of labor organizations. - It shall be unfair
labor practice for a labor organization, its officers, agents or
representatives:
(a) To restrain or coerce employees in the exercise of their right to self-
organization. However, a labor organization shall have the right to prescribe
its own rules with respect to the acquisition or retention of membership;
chanroblesvirtuallawlibrary
(b) To cause or attempt to cause an employer to discriminate against an
employee, including discrimination against an employee with respect to
whom membership in such organization has been denied or to terminate an
employee on any ground other than the usual terms and conditions under
which membership or continuation of membership is made available to
other members;
(c) To violate the duty, or refuse to bargain collectively with the employer,
provided it is the representative of the employees;
(d) To cause or attempt to cause an employer to pay or deliver or agree to
pay or deliver any money or other things of value, in the nature of an
exaction, for services which are not performed or not to be performed,
including the demand for fee for union negotiations;
(e) To ask for or accept negotiation or attorneys fees from employers as
part of the settlement of any issue in collective bargaining or any other
dispute; or
(f) To violate a collective bargaining agreement.
The provisions of the preceding paragraph notwithstanding, only the
officers, members of governing boards, representatives or agents or
members of labor associations or organizations who have actually
participated in, authorized or ratified unfair labor practices shall be held
criminally liable. (As amended by Batas Pambansa Bilang 130, August 21,
1981).
Title VII
COLLECTIVE BARGAINING AND ADMINISTRATION OF AGREEMENTS
ART. 250. Procedure in collective bargaining. - The following procedures
shall be observed in collective bargaining:
(a) When a party desires to negotiate an agreement, it shall serve a written
notice upon the other party with a statement of its proposals. The other
party shall make a reply thereto not later than ten (10) calendar days from
receipt of such notice;
(b) Should differences arise on the basis of such notice and reply, either
party may request for a conference which shall begin not later than ten
(10) calendar days from the date of request.
(c) If the dispute is not settled, the Board shall intervene upon request of
either or both parties or at its own initiative and immediately call the parties
to conciliation meetings. The Board shall have the power to issue
subpoenas requiring the attendance of the parties to such meetings. It shall
be the duty of the parties to participate fully and promptly in the
conciliation meetings the Board may call;
(d) During the conciliation proceedings in the Board, the parties are
prohibited from doing any act which may disrupt or impede the early
settlement of the disputes; and
(e) The Board shall exert all efforts to settle disputes amicably and
encourage the parties to submit their case to a voluntary arbitrator. (As
amended by Section 20, Republic Act No. 6715, March 21, 1989).
ART. 251. Duty to bargain collectively in the absence of collective
bargaining agreements. - In the absence of an agreement or other
voluntary arrangement providing for a more expeditious manner of
collective bargaining, it shall be the duty of employer and the
representatives of the employees to bargain collectively in accordance with
the provisions of this Code. chanroblesvirtuallawlibrary
ART. 252. Meaning of duty to bargain collectively. - The duty to bargain
collectively means the performance of a mutual obligation to meet and
convene promptly and expeditiously in good faith for the purpose of
negotiating an agreement with respect to wages, hours of work and all
other terms and conditions of employment including proposals for adjusting
any grievances or questions arising under such agreement and executing a
contract incorporating such agreements if requested by either party but
such duty does not compel any party to agree to a proposal or to make any
concession.
ART. 253. Duty to bargain collectively when there exists a collective
bargaining agreement. - When there is a collective bargaining agreement,
the duty to bargain collectively shall also mean that neither party shall
terminate nor modify such agreement during its lifetime. However, either
party can serve a written notice to terminate or modify the agreement at
least sixty (60) days prior to its expiration date. It shall be the duty of both
parties to keep the status quo and to continue in full force and effect the
terms and conditions of the existing agreement during the 60-day period
and/or until a new agreement is reached by the parties.
ART. 253-A. Terms of a collective bargaining agreement. - Any Collective
Bargaining Agreement that the parties may enter into shall, insofar as the
representation aspect is concerned, be for a term of five (5) years. No
petition questioning the majority status of the incumbent bargaining agent
shall be entertained and no certification election shall be conducted by the
Department of Labor and Employment outside of the sixty-day period
immediately before the date of expiry of such five-year term of the
Collective Bargaining Agreement. All other provisions of the Collective
Bargaining Agreement shall be renegotiated not later than three (3) years
after its execution. Any agreement on such other provisions of the
Collective Bargaining Agreement entered into within six (6) months from
the date of expiry of the term of such other provisions as fixed in such
Collective Bargaining Agreement, shall retroact to the day immediately
following such date. If any such agreement is entered into beyond six
months, the parties shall agree on the duration of retroactivity thereof. In
case of a deadlock in the renegotiation of the Collective Bargaining
Agreement, the parties may exercise their rights under this Code. (As
amended by Section 21, Republic Act No. 6715, March 21, 1989).
ART. 254. Injunction prohibited. - No temporary or permanent injunction or
restraining order in any case involving or growing out of labor disputes shall
be issued by any court or other entity, except as otherwise provided in
Articles 218 and 264 of this Code. (As amended by Batas Pambansa Bilang
227, June 1, 1982).
ART. 255. Exclusive bargaining representation and workers participation in
policy and decision-making. - The labor organization designated or selected
by the majority of the employees in an appropriate collective bargaining
unit shall be the exclusive representative of the employees in such unit for
the purpose of collective bargaining. However, an individual employee or
group of employees shall have the right at any time to present grievances
to their employer.
Any provision of law to the contrary notwithstanding, workers shall have
the right, subject to such rules and regulations as the Secretary of Labor
and Employment may promulgate, to participate in policy and decision-
making processes of the establishment where they are employed insofar as
said processes will directly affect their rights, benefits and welfare. For this
purpose, workers and employers may form labor-management councils:
Provided, That the representatives of the workers in such labor-
management councils shall be elected by at least the majority of all
employees in said establishment. (As amended by Section 22, Republic Act
No. 6715, March 21, 1989).
ART. 256. Representation issue in organized establishments. - In organized
establishments, when a verified petition questioning the majority status of
the incumbent bargaining agent is filed before the Department of Labor and
Employment within the sixty-day period before the expiration of the
collective bargaining agreement, the Med-Arbiter shall automatically order
an election by secret ballot when the verified petition is supported by the
written consent of at least twenty-five percent (25%) of all the employees
in the bargaining unit to ascertain the will of the employees in the
appropriate bargaining unit. To have a valid election, at least a majority of
all eligible voters in the unit must have cast their votes. The labor union
receiving the majority of the valid votes cast shall be certified as the
exclusive bargaining agent of all the workers in the unit. When an election
which provides for three or more choices results in no choice receiving a
majority of the valid votes cast, a run-off election shall be conducted
between the labor unions receiving the two highest number of votes:
Provided, that the total number of votes for all contending unions is at least
fifty percent (50%) of the number of votes cast.chan robles virtual law
library
At the expiration of the freedom period, the employer shall continue to
recognize the majority status of the incumbent bargaining agent where no
petition for certification election is filed. (As amended by Section 23,
Republic Act No. 6715, March 21, 1989).
ART. 257. Petitions in unorganized establishments. - In any establishment
where there is no certified bargaining agent, a certification election shall
automatically be conducted by the Med-Arbiter upon the filing of a petition
by a legitimate labor organization. (As amended by Section 24, Republic Act
No. 6715, March 21, 1989).
ART. 258. When an employer may file petition. - When requested to
bargain collectively, an employer may petition the Bureau for an election. If
there is no existing certified collective bargaining agreement in the unit, the
Bureau shall, after hearing, order a certification election.
All certification cases shall be decided within twenty (20) working days.
The Bureau shall conduct a certification election within twenty (20) days in
accordance with the rules and regulations prescribed by the Secretary of
Labor.
ART. 259. Appeal from certification election orders. - Any party to an
election may appeal the order or results of the election as determined by
the Med-Arbiter directly to the Secretary of Labor and Employment on the
ground that the rules and regulations or parts thereof established by the
Secretary of Labor and Employment for the conduct of the election have
been violated. Such appeal shall be decided within fifteen (15) calendar
days. (As amended by Section 25, Republic Act No. 6715, March 21, 1989).
Title VII-A
GRIEVANCE MACHINERY AND VOLUNTARY ARBITRATION
ART. 260. Grievance machinery and voluntary arbitration. - The parties to
a Collective Bargaining Agreement shall include therein provisions that will
ensure the mutual observance of its terms and conditions. They shall
establish a machinery for the adjustment and resolution of grievances
arising from the interpretation or implementation of their Collective
Bargaining Agreement and those arising from the interpretation or
enforcement of company personnel policies.
All grievances submitted to the grievance machinery which are not settled
within seven (7) calendar days from the date of its submission shall
automatically be referred to voluntary arbitration prescribed in the
Collective Bargaining Agreement.
For this purpose, parties to a Collective Bargaining Agreement shall name
and designate in advance a Voluntary Arbitrator or panel of Voluntary
Arbitrators, or include in the agreement a procedure for the selection of
such Voluntary Arbitrator or panel of Voluntary Arbitrators, preferably from
the listing of qualified Voluntary Arbitrators duly accredited by the Board. In
case the parties fail to select a Voluntary Arbitrator or panel of Voluntary
Arbitrators, the Board shall designate the Voluntary Arbitrator or panel of
Voluntary Arbitrators, as may be necessary, pursuant to the selection
procedure agreed upon in the Collective Bargaining Agreement, which shall
act with the same force and effect as if the Arbitrator or panel of Arbitrators
has been selected by the parties as described above.
ART. 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary
Arbitrators. - The Voluntary Arbitrator or panel of Voluntary Arbitrators shall
have original and exclusive jurisdiction to hear and decide all unresolved
grievances arising from the interpretation or implementation of the
Collective Bargaining Agreement and those arising from the interpretation
or enforcement of company personnel policies referred to in the
immediately preceding article. Accordingly, violations of a Collective
Bargaining Agreement, except those which are gross in character, shall no
longer be treated as unfair labor practice and shall be resolved as
grievances under the Collective Bargaining Agreement. For purposes of this
article, gross violations of Collective Bargaining Agreement shall mean
flagrant and/or malicious refusal to comply with the economic provisions of
such agreement.
The Commission, its Regional Offices and the Regional Directors of the
Department of Labor and Employment shall not entertain disputes,
grievances or matters under the exclusive and original jurisdiction of the
Voluntary Arbitrator or panel of Voluntary Arbitrators and shall immediately
dispose and refer the same to the Grievance Machinery or Voluntary
Arbitration provided in the Collective Bargaining Agreement.
ART. 262. Jurisdiction over other labor disputes. - The Voluntary Arbitrator
or panel of Voluntary Arbitrators, upon agreement of the parties, shall also
hear and decide all other labor disputes including unfair labor practices and
bargaining deadlocks.
ART. 262-A. Procedures. - The Voluntary Arbitrator or panel of Voluntary
Arbitrators shall have the power to hold hearings, receive evidences and
take whatever action is necessary to resolve the issue or issues subject of
the dispute, including efforts to effect a voluntary settlement between
parties.
All parties to the dispute shall be entitled to attend the arbitration
proceedings. The attendance of any third party or the exclusion of any
witness from the proceedings shall be determined by the Voluntary
Arbitrator or panel of Voluntary Arbitrators. Hearing may be adjourned for
cause or upon agreement by the parties.
Unless the parties agree otherwise, it shall be mandatory for the Voluntary
Arbitrator or panel of Voluntary Arbitrators to render an award or decision
within twenty (20) calendar days from the date of submission of the dispute
to voluntary arbitration.
The award or decision of the Voluntary Arbitrator or panel of Voluntary
Arbitrators shall contain the facts and the law on which it is based. It shall
be final and executory after ten (10) calendar days from receipt of the copy
of the award or decision by the parties.
Upon motion of any interested party, the Voluntary Arbitrator or panel of
Voluntary Arbitrators or the Labor Arbiter in the region where the movant
resides, in case of the absence or incapacity of the Voluntary Arbitrator or
panel of Voluntary Arbitrators, for any reason, may issue a writ of execution
requiring either the sheriff of the Commission or regular courts or any
public official whom the parties may designate in the submission agreement
to execute the final decision, order or award.
ART. 262-B. Cost of voluntary arbitration and Voluntary Arbitrators fee. -
The parties to a Collective Bargaining Agreement shall provide therein a
proportionate sharing scheme on the cost of voluntary arbitration including
the Voluntary Arbitrators fee. The fixing of fee of Voluntary Arbitrators,
whether shouldered wholly by the parties or subsidized by the Special
Voluntary Arbitration Fund, shall take into account the following factors:
(a) Nature of the case;
(b) Time consumed in hearing the case;
(c) Professional standing of the Voluntary Arbitrator;
(d) Capacity to pay of the parties; and
(e) Fees provided for in the Revised Rules of Court.
Title VIII
STRIKES AND LOCKOUTS
AND FOREIGN INVOLVEMENT
IN TRADE UNION ACTIVITIES
Chapter I
STRIKES AND LOCKOUTS
ART. 263. Strikes, picketing and lockouts. - (a) It is the policy of the State
to encourage free trade unionism and free collective bargaining.
(b) Workers shall have the right to engage in concerted activities for
purposes of collective bargaining or for their mutual benefit and protection.
The right of legitimate labor organizations to strike and picket and of
employers to lockout, consistent with the national interest, shall continue to
be recognized and respected. However, no labor union may strike and no
employer may declare a lockout on grounds involving inter-union and intra-
union disputes.
(c) In case of bargaining deadlocks, the duly certified or recognized
bargaining agent may file a notice of strike or the employer may file a
notice of lockout with the Ministry at least 30 day before the intended date
thereof. In cases of unfair labor practice, the period of notice shall be 15
days and in the absence of a duly certified or recognized bargaining agent,
the notice of strike may be filed by any legitimate labor organization in
behalf of its members. However, in case of dismissal from employment of
union officers duly elected in accordance with the union constitution and
by-laws, which may constitute union busting, where the existence of the
union is threatened, the 15-day cooling-off period shall not apply and the
union may take action immediately. (As amended by Executive Order No.
111, December 24, 1986).
(d) The notice must be in accordance with such implementing rules and
regulations as the Minister of Labor and Employment may promulgate.
(e) During the cooling-off period, it shall be the duty of the Ministry to exert
all efforts at mediation and conciliation to effect a voluntary settlement.
Should the dispute remain unsettled until the lapse of the requisite number
of days from the mandatory filing of the notice, the labor union may strike
or the employer may declare a lockout.
(f) A decision to declare a strike must be approved by a majority of the
total union membership in the bargaining unit concerned, obtained by
secret ballot in meetings or referenda called for that purpose. A decision to
declare a lockout must be approved by a majority of the board of directors
of the corporation or association or of the partners in a partnership,
obtained by secret ballot in a meeting called for that purpose. The decision
shall be valid for the duration of the dispute based on substantially the
same grounds considered when the strike or lockout vote was taken. The
Ministry may, at its own initiative or upon the request of any affected party,
supervise the conduct of the secret balloting. In every case, the union or
the employer shall furnish the Ministry the results of the voting at least
seven days before the intended strike or lockout, subject to the cooling-off
period herein provided. (As amended by Batas Pambansa Bilang 130,
August 21, 1981 and further amended by Executive Order No. 111,
December 24, 1986).
(g) When, in his opinion, there exists a labor dispute causing or likely to
cause a strike or lockout in an industry indispensable to the national
interest, the Secretary of Labor and Employment may assume jurisdiction
over the dispute and decide it or certify the same to the Commission for
compulsory arbitration. Such assumption or certification shall have the
effect of automatically enjoining the intended or impending strike or lockout
as specified in the assumption or certification order. If one has already
taken place at the time of assumption or certification, all striking or locked
out employees shall immediately return-to-work and the employer shall
immediately resume operations and readmit all workers under the same
terms and conditions prevailing before the strike or lockout. The Secretary
of Labor and Employment or the Commission may seek the assistance of
law enforcement agencies to ensure compliance with this provision as well
as with such orders as he may issue to enforce the same.
In line with the national concern for and the highest respect accorded to
the right of patients to life and health, strikes and lockouts in hospitals,
clinics and similar medical institutions shall, to every extent possible, be
avoided, and all serious efforts, not only by labor and management but
government as well, be exhausted to substantially minimize, if not prevent,
their adverse effects on such life and health, through the exercise, however
legitimate, by labor of its right to strike and by management to lockout. In
labor disputes adversely affecting the continued operation of such hospitals,
clinics or medical institutions, it shall be the duty of the striking union or
locking-out employer to provide and maintain an effective skeletal
workforce of medical and other health personnel, whose movement and
services shall be unhampered and unrestricted, as are necessary to insure
the proper and adequate protection of the life and health of its patients,
most especially emergency cases, for the duration of the strike or lockout.
In such cases, therefore, the Secretary of Labor and Employment may
immediately assume, within twenty four (24) hours from knowledge of the
occurrence of such a strike or lockout, jurisdiction over the same or certify
it to the Commission for compulsory arbitration. For this purpose, the
contending parties are strictly enjoined to comply with such orders,
prohibitions and/or injunctions as are issued by the Secretary of Labor and
Employment or the Commission, under pain of immediate disciplinary
action, including dismissal or loss of employment status or payment by the
locking-out employer of backwages, damages and other affirmative relief,
even criminal prosecution against either or both of them.
The foregoing notwithstanding, the President of the Philippines shall not be
precluded from determining the industries that, in his opinion, are
indispensable to the national interest, and from intervening at any time and
assuming jurisdiction over any such labor dispute in order to settle or
terminate the same.
(h) Before or at any stage of the compulsory arbitration process, the parties
may opt to submit their dispute to voluntary arbitration.
(i) The Secretary of Labor and Employment, the Commission or the
voluntary arbitrator shall decide or resolve the dispute, as the case may be.
The decision of the President, the Secretary of Labor and Employment, the
Commission or the voluntary arbitrator shall be final and executory ten (10)
calendar days after receipt thereof by the parties. (As amended by Section
27, Republic Act No. 6715, March 21, 1989).
ART. 264. Prohibited activities. - (a) No labor organization or employer shall
declare a strike or lockout without first having bargained collectively in
accordance with Title VII of this Book or without first having filed the notice
required in the preceding Article or without the necessary strike or lockout
vote first having been obtained and reported to the Ministry.chan robles
virtual law library
No strike or lockout shall be declared after assumption of jurisdiction by the
President or the Minister or after certification or submission of the dispute
to compulsory or voluntary arbitration or during the pendency of cases
involving the same grounds for the strike or lockout.
Any worker whose employment has been terminated as a consequence of
any unlawful lockout shall be entitled to reinstatement with full backwages.
Any union officer who knowingly participates in an illegal strike and any
worker or union officer who knowingly participates in the commission of
illegal acts during a strike may be declared to have lost his employment
status: Provided, That mere participation of a worker in a lawful strike shall
not constitute sufficient ground for termination of his employment, even if a
replacement had been hired by the employer during such lawful strike.
(b) No person shall obstruct, impede, or interfere with, by force, violence,
coercion, threats or intimidation, any peaceful picketing by employees
during any labor controversy or in the exercise of the right to self-
organization or collective bargaining, or shall aid or abet such obstruction or
interference.
(c) No employer shall use or employ any strike-breaker, nor shall any
person be employed as a strike-breaker.
(d) No public official or employee, including officers and personnel of the
New Armed Forces of the Philippines or the Integrated National Police, or
armed person, shall bring in, introduce or escort in any manner, any
individual who seeks to replace strikers in entering or leaving the premises
of a strike area, or work in place of the strikers. The police force shall keep
out of the picket lines unless actual violence or other criminal acts occur
therein: Provided, That nothing herein shall be interpreted to prevent any
public officer from taking any measure necessary to maintain peace and
order, protect life and property, and/or enforce the law and legal order. (As
amended by Executive Order No. 111, December 24, 1986).
(e) No person engaged in picketing shall commit any act of violence,
coercion or intimidation or obstruct the free ingress to or egress from the
employers premises for lawful purposes, or obstruct public thoroughfares.
(As amended by Batas Pambansa Bilang 227, June 1, 1982).
ART. 265. Improved offer balloting. - In an effort to settle a strike, the
Department of Labor and Employment shall conduct a referendum by secret
ballot on the improved offer of the employer on or before the 30th day of
the strike. When at least a majority of the union members vote to accept
the improved offer the striking workers shall immediately return to work
and the employer shall thereupon readmit them upon the signing of the
agreement.
In case of a lockout, the Department of Labor and Employment shall also
conduct a referendum by secret balloting on the reduced offer of the union
on or before the 30th day of the lockout. When at least a majority of the
board of directors or trustees or the partners holding the controlling interest
in the case of a partnership vote to accept the reduced offer, the workers
shall immediately return to work and the employer shall thereupon readmit
them upon the signing of the agreement. (Incorporated by Section 28,
Republic Act No. 6715, March 21, 1989).
ART. 266. Requirement for arrest and detention. - Except on grounds of
national security and public peace or in case of commission of a crime, no
union members or union organizers may be arrested or detained for union
activities without previous consultations with the Secretary of Labor.
Chapter II
ASSISTANCE TO LABOR ORGANIZATIONS
ART. 267. Assistance by the Department of Labor. - The Department of
Labor, at the initiative of the Secretary of Labor, shall extend special
assistance to the organization, for purposes of collective bargaining, of the
most underprivileged workers who, for reasons of occupation,
organizational structure or insufficient incomes, are not normally covered by
major labor organizations or federations.
ART. 268. Assistance by the Institute of Labor and Manpower Studies. - The
Institute of Labor and Manpower Studies shall render technical and other
forms of assistance to labor organizations and employer organizations in
the field of labor education, especially pertaining to collective bargaining,
arbitration, labor standards and the Labor Code of the Philippines in
general.
Chapter III
FOREIGN ACTIVITIES
ART. 269. Prohibition against aliens; exceptions. - All aliens, natural or
juridical, as well as foreign organizations are strictly prohibited from
engaging directly or indirectly in all forms of trade union activities without
prejudice to normal contacts between Philippine labor unions and
recognized international labor centers: Provided, however, That aliens
working in the country with valid permits issued by the Department of
Labor and Employment, may exercise the right to self-organization and join
or assist labor organizations of their own choosing for purposes of collective
bargaining: Provided, further, That said aliens are nationals of a country
which grants the same or similar rights to Filipino workers. (As amended by
Section 29, Republic Act No. 6715, March 21, 1989).
ART. 270. Regulation of foreign assistance. - (a) No foreign individual,
organization or entity may give any donations, grants or other forms of
assistance, in cash or in kind, directly or indirectly, to any labor
organization, group of workers or any auxiliary thereof, such as
cooperatives, credit unions and institutions engaged in research, education
or communication, in relation to trade union activities, without prior
permission by the Secretary of Labor.
"Trade union activities" shall mean:
(1) organization, formation and administration of labor organization;
(2) negotiation and administration of collective bargaining agreements;
(3) all forms of concerted union action;
(4) organizing, managing, or assisting union conventions, meetings, rallies,
referenda, teach-ins, seminars, conferences and institutes;
(5) any form of participation or involvement in representation proceedings,
representation elections, consent elections, union elections; and
(6) other activities or actions analogous to the foregoing.
(b) This prohibition shall equally apply to foreign donations, grants or other
forms of assistance, in cash or in kind, given directly or indirectly to any
employer or employers organization to support any activity or activities
affecting trade unions.
(c) The Secretary of Labor shall promulgate rules and regulations to
regulate and control the giving and receiving of such donations, grants, or
other forms of assistance, including the mandatory reporting of the
amounts of the donations or grants, the specific recipients thereof, the
projects or activities proposed to be supported, and their duration.
ART. 271. Applicability to farm tenants and rural workers. - The provisions
of this Title pertaining to foreign organizations and activities shall be
deemed applicable likewise to all organizations of farm tenants, rural
workers, and the like: Provided, That in appropriate cases, the Secretary of
Agrarian Reform shall exercise the powers and responsibilities vested by
this Title in the Secretary of Labor.
Chapter IV
PENALTIES FOR VIOLATION
ART. 272. Penalties. - (a) Any person violating any of the provisions of
Article 264 of this Code shall be punished by a fine of not less than one
thousand pesos (P1,000.00) nor more than ten thousand pesos
(P10,000.00) and/or imprisonment for not less than three months nor more
than three (3) years, or both such fine and imprisonment, at the discretion
of the court. Prosecution under this provision shall preclude prosecution for
the same act under the Revised Penal Code, and vice versa.
(b) Upon the recommendation of the Minister of Labor and Employment
and the Minister of National Defense, foreigners who violate the provisions
of this Title shall be subject to immediate and summary deportation by the
Commission on Immigration and Deportation and shall be permanently
barred from re-entering the country without the special permission of the
President of the Philippines. (As amended by Section 16, Batas Pambansa
Bilang 130 and Section 7, Batas Pambansa Bilang 227).
Title IX
SPECIAL PROVISIONS
ART. 273. Study of labor-management relations. - The Secretary of Labor
shall have the power and it shall be his duty to inquire into:
(a) the existing relations between employers and employees in the
Philippines;
(b) the growth of associations of employees and the effect of such
associations upon employer-employee relations;
(c) the extent and results of the methods of collective bargaining in the
determination of terms and conditions of employment;
(d) the methods which have been tried by employers and associations of
employees for maintaining mutually satisfactory relations;
(e) desirable industrial practices which have been developed through
collective bargaining and other voluntary arrangements;
(f) the possible ways of increasing the usefulness and efficiency of
collective bargaining for settling differences;
(g) the possibilities for the adoption of practical and effective methods of
labor-management cooperation;
(h) any other aspects of employer-employee relations concerning the
promotion of harmony and understanding between the parties; andchan
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(i) the relevance of labor laws and labor relations to national development.
The Secretary of Labor shall also inquire into the causes of industrial unrest
and take all the necessary steps within his power as may be prescribed by
law to alleviate the same, and shall from time to time recommend the
enactment of such remedial legislation as in his judgment may be desirable
for the maintenance and promotion of industrial peace.
ART. 274. Visitorial power. - The Secretary of Labor and Employment or his
duly authorized representative is hereby empowered to inquire into the
financial activities of legitimate labor organizations upon the filing of a
complaint under oath and duly supported by the written consent of at least
twenty percent (20%) of the total membership of the labor organization
concerned and to examine their books of accounts and other records to
determine compliance or non-compliance with the law and to prosecute any
violations of the law and the union constitution and by-laws: Provided, That
such inquiry or examination shall not be conducted during the sixty (60)-
day freedom period nor within the thirty (30) days immediately preceding
the date of election of union officials. (As amended by Section 31, Republic
Act No. 6715, March 21, 1989).
ART. 275. Tripartism and tripartite conferences. - (a) Tripartism in labor
relations is hereby declared a State policy. Towards this end, workers and
employers shall, as far as practicable, be represented in decision and policy-
making bodies of the government.
(b) The Secretary of Labor and Employment or his duly authorized
representatives may, from time to time, call a national, regional, or
industrial tripartite conference of representatives of government, workers
and employers for the consideration and adoption of voluntary codes of
principles designed to promote industrial peace based on social justice or to
align labor movement relations with established priorities in economic and
social development. In calling such conference, the Secretary of Labor and
Employment may consult with accredited representatives of workers and
employers. (As amended by Section 32, Republic Act No. 6715, March 21,
1989).
ART. 276. Government employees. - The terms and conditions of
employment of all government employees, including employees of
government-owned and controlled corporations, shall be governed by the
Civil Service Law, rules and regulations. Their salaries shall be standardized
by the National Assembly as provided for in the New Constitution. However,
there shall be no reduction of existing wages, benefits and other terms and
conditions of employment being enjoyed by them at the time of the
adoption of this Code.
ART. 277. Miscellaneous provisions. - (a) All unions are authorized to collect
reasonable membership fees, union dues, assessments and fines and other
contributions for labor education and research, mutual death and
hospitalization benefits, welfare fund, strike fund and credit and cooperative
undertakings. (As amended by Section 33, Republic Act No. 6715, March
21, 1989).
(b) Subject to the constitutional right of workers to security of tenure and
their right to be protected against dismissal except for a just and authorized
cause and without prejudice to the requirement of notice under Article 283
of this Code, the employer shall furnish the worker whose employment is
sought to be terminated a written notice containing a statement of the
causes for termination and shall afford the latter ample opportunity to be
heard and to defend himself with the assistance of his representative if he
so desires in accordance with company rules and regulations promulgated
pursuant to guidelines set by the Department of Labor and Employment.
Any decision taken by the employer shall be without prejudice to the right
of the worker to contest the validity or legality of his dismissal by filing a
complaint with the regional branch of the National Labor Relations
Commission. The burden of proving that the termination was for a valid or
authorized cause shall rest on the employer. The Secretary of the
Department of Labor and Employment may suspend the effects of the
termination pending resolution of the dispute in the event of a prima facie
finding by the appropriate official of the Department of Labor and
Employment before whom such dispute is pending that the termination may
cause a serious labor dispute or is in implementation of a mass lay-off. (As
amended by Section 33, Republic Act No. 6715, March 21, 1989).
(c) Any employee, whether employed for a definite period or not, shall,
beginning on his first day of service, be considered as an employee for
purposes of membership in any labor union. (As amended by Section 33,
Republic Act No. 6715).
(d) No docket fee shall be assessed in labor standards disputes. In all other
disputes, docket fees may be assessed against the filing party, provided
that in bargaining deadlock, such fees shall be shared equally by the
negotiating parties.
(e) The Minister of Labor and Employment and the Minister of the Budget
shall cause to be created or reclassified in accordance with law such
positions as may be necessary to carry out the objectives of this Code and
cause the upgrading of the salaries of the personnel involved in the Labor
Relations System of the Ministry. Funds needed for this purpose shall be
provided out of the Special Activities Fund appropriated by Batas Pambansa
Blg. 80 and from annual appropriations thereafter. (Incorporated by Batas
Pambansa Bilang 130, August 21, 1981).
(f) A special Voluntary Arbitration Fund is hereby established in the Board
to subsidize the cost of voluntary arbitration in cases involving the
interpretation and implementation of the Collective Bargaining Agreement,
including the Arbitrators fees, and for such other related purposes to
promote and develop voluntary arbitration. The Board shall administer the
Special Voluntary Arbitration Fund in accordance with the guidelines it may
adopt upon the recommendation of the Council, which guidelines shall be
subject to the approval of the Secretary of Labor and Employment.
Continuing funds needed for this purpose in the initial yearly amount of
fifteen million pesos (P15,000,000.00) shall be provided in the 1989 annual
general appropriations acts. chan robles virtual law library
The amount of subsidy in appropriate cases shall be determined by the
Board in accordance with established guidelines issued by it upon the
recommendation of the Council.
The Fund shall also be utilized for the operation of the Council, the training
and education of Voluntary Arbitrators, and the Voluntary Arbitration
Program. (As amended by Section 33, Republic Act No. 6715, March 21,
1989).
(g) The Ministry shall help promote and gradually develop, with the
agreement of labor organizations and employers, labor-management
cooperation programs at appropriate levels of the enterprise based on the
shared responsibility and mutual respect in order to ensure industrial peace
and improvement in productivity, working conditions and the quality of
working life. (Incorporated by Batas Pambansa Bilang 130, August 21,
1981).
(h) In establishments where no legitimate labor organization exists, labor-
management committees may be formed voluntarily by workers and
employers for the purpose of promoting industrial peace. The Department
of Labor and Employment shall endeavor to enlighten and educate the
workers and employers on their rights and responsibilities through labor
education with emphasis on the policy thrusts of this Code. (As amended by
Section 33, Republic Act No. 6715, March 21, 1989).
(i) To ensure speedy labor justice, the periods provided in this Code within
which decisions or resolutions of labor relations cases or matters should be
rendered shall be mandatory. For this purpose, a case or matter shall be
deemed submitted for decision or resolution upon the filing of the last
pleading or memorandum required by the rules of the Commission or by
the Commission itself, or the Labor Arbiter, or the Director of the Bureau of
Labor Relations or Med-Arbiter, or the Regional Director.
Upon expiration of the corresponding period, a certification stating why a
decision or resolution has not been rendered within the said period shall be
issued forthwith by the Chairman of the Commission, the Executive Labor
Arbiter, or the Director of the Bureau of Labor Relations or Med-Arbiter, or
the Regional Director, as the case may be, and a copy thereof served upon
the parties.
Despite the expiration of the applicable mandatory period, the aforesaid
officials shall, without prejudice to any liability which may have been
incurred as a consequence thereof, see to it that the case or matter shall be
decided or resolved without any further delay. (Incorporated by Section 33,
Republic Act No. 6715, March 21, 1989).
BOOK FIVE
LABOR RELATIONS
Title I
POLICY AND DEFINITIONS
Chapter I
POLICY
ART. 211. Declaration of Policy. - A. It is the policy of the State:
(a) To promote and emphasize the primacy of free collective bargaining and
negotiations, including voluntary arbitration, mediation and conciliation, as
modes of settling labor or industrial disputes;
(b) To promote free trade unionism as an instrument for the enhancement
of democracy and the promotion of social justice and development;
(c) To foster the free and voluntary organization of a strong and united
labor movement;
(d) To promote the enlightenment of workers concerning their rights and
obligations as union members and as employees;
(e) To provide an adequate administrative machinery for the expeditious
settlement of labor or industrial disputes;
(f) To ensure a stable but dynamic and just industrial peace; and
(g) To ensure the participation of workers in decision and policy-making
processes affecting their rights, duties and welfare.
B. To encourage a truly democratic method of regulating the relations
between the employers and employees by means of agreements freely
entered into through collective bargaining, no court or administrative
agency or official shall have the power to set or fix wages, rates of pay,
hours of work or other terms and conditions of employment, except as
otherwise provided under this Code. (As amended by Section 3, Republic
Act No. 6715, March 21, 1989).
Chapter II
DEFINITIONS
ART. 212. Definitions. - (a) "Commission" means the National Labor
Relations Commission or any of its divisions, as the case may be, as
provided under this Code.
(b) "Bureau" means the Bureau of Labor Relations and/or the Labor
Relations Divisions in the regional offices established under Presidential
Decree No. 1, in the Department of Labor.
(c) "Board" means the National Conciliation and Mediation Board
established under Executive Order No. 126.
(d) "Council" means the Tripartite Voluntary Arbitration Advisory Council
established under Executive Order No. 126, as amended.
(e) "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.
(f) "Employee" includes any person in the employ of an employer. The term
shall not be limited to the employees of a particular employer, unless the
Code so explicitly states. It shall include any individual whose work has
ceased as a result of or in connection with any current labor dispute or
because of any unfair labor practice if he has not obtained any other
substantially equivalent and regular employment.
(g) "Labor organization" means any union or association of employees
which exists in whole or in part for the purpose of collective bargaining or
of dealing with employers concerning terms and conditions of employment.
(h) "Legitimate labor organization" means any labor organization duly
registered with the Department of Labor and Employment, and includes any
branch or local thereof.
(i) "Company union" means any labor organization whose formation,
function or administration has been assisted by any act defined as unfair
labor practice by this Code.
(j) "Bargaining representative" means a legitimate labor organization
whether or not employed by the employer.
(k) "Unfair labor practice" means any unfair labor practice as expressly
defined by the Code.
(l) "Labor dispute" includes any controversy or matter concerning terms and
conditions of employment or the association or representation of persons in
negotiating, fixing, maintaining, changing or arranging the terms and
conditions of employment, regardless of whether the disputants stand in
the proximate relation of employer and employee.
(m) "Managerial employee" is one who is vested with the powers or
prerogatives to lay down and execute management policies and/or to hire,
transfer, suspend, lay-off, recall, discharge, assign or discipline employees.
Supervisory employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the exercise of such
authority is not merely routinary or clerical in nature but requires the use of
independent judgment. All employees not falling within any of the above
definitions are considered rank-and-file employees for purposes of this
Book.
(n) "Voluntary Arbitrator" means any person accredited by the Board as
such or any person named or designated in the Collective Bargaining
Agreement by the parties to act as their Voluntary Arbitrator, or one chosen
with or without the assistance of the National Conciliation and Mediation
Board, pursuant to a selection procedure agreed upon in the Collective
Bargaining Agreement, or any official that may be authorized by the
Secretary of Labor and Employment to act as Voluntary Arbitrator upon the
written request and agreement of the parties to a labor dispute.
(o) "Strike" means any temporary stoppage of work by the concerted action
of employees as a result of an industrial or labor dispute.
(p) "Lockout" means any temporary refusal of an employer to furnish work
as a result of an industrial or labor dispute.
(q) "Internal union dispute" includes all disputes or grievances arising from
any violation of or disagreement over any provision of the constitution and
by laws of a union, including any violation of the rights and conditions of
union membership provided for in this Code.
(r) "Strike-breaker" means any person who obstructs, impedes, or
interferes with by force, violence, coercion, threats, or intimidation any
peaceful picketing affecting wages, hours or conditions of work or in the
exercise of the right of self-organization or collective bargaining.
(s) "Strike area" means the establishment, warehouses, depots, plants or
offices, including the sites or premises used as runaway shops, of the
employer struck against, as well as the immediate vicinity actually used by
picketing strikers in moving to and fro before all points of entrance to and
exit from said establishment. (As amended by Section 4, Republic Act No.
6715, March 21, 1989).
Title II
NATIONAL LABOR RELATIONS COMMISSION
Chapter I
CREATION AND COMPOSITION
Article 213. National Labor Relations Commission. - There shall be a
National Labor Relations Commission which shall be attached to the
Department of Labor and Employment solely for program and policy
coordination only, composed of a Chairman and twenty-three (23)
Members.
Eight (8) members each shall be chosen only from among the nominees of
the workers and employers organizations, respectively. The Chairman and
the seven (7) remaining members shall come from the public sector, with
the latter to be chosen preferably from among the incumbent Labor
Arbiters.
Upon assumption into office, the members nominated by the workers and
employers organizations shall divest themselves of any affiliation with or
interest in the federation or association to which they belong.
The Commission may sit en banc or in eight (8) divisions, each composed
of three (3) members. The Commission shall sit en banc only for purposes
of promulgating rules and regulations governing the hearing and disposition
of cases before any of its divisions and regional branches and formulating
policies affecting its administration and operations. The Commission shall
exercise its adjudicatory and all other powers, functions, and duties through
its divisions. Of the eight (8) divisions, the first, second, third, fourth, fifth
and sixth divisions shall handle cases coming from the National Capital
Region and other parts of Luzon; and the seventh and eighth divisions,
cases from the Visayas and Mindanao, respectively: Provided, That the
Commission sitting en banc may, on temporary or emergency basis, allow
cases within the jurisdiction of any division to be heard and decided by any
other division whose docket allows the additional workload and such
transfer will not expose litigants to unnecessary additional expenses. The
divisions of the Commission shall have exclusive appellate jurisdiction over
cases within their respective territorial jurisdiction.
The concurrence of two (2) Commissioners of a division shall be necessary
for the pronouncement of a judgment or resolution. Whenever the required
membership in a division is not complete and the concurrence of two (2)
Commissioners to arrive at a judgment or resolution cannot be obtained,
the Chairman shall designate such number of additional Commissioners
from the other divisions as may be necessary.
The conclusions of a division on any case submitted to it for decision shall
be reached in consultation before the case is assigned to a member for the
writing of the opinion. It shall be mandatory for the division to meet for
purposes of the consultation ordained therein. A certification to this effect
signed by the Presiding Commissioner of the division shall be issued, and a
copy thereof attached to the record of the case and served upon the
parties.
The Chairman shall be the Presiding Commissioner of the first division, and
the seven (7) other members from the public sector shall be the Presiding
Commissioners of the second, third, fourth, fifth, sixth, seventh and eight
divisions, respectively. In case of the effective absence or incapacity of the
Chairman, the Presiding Commissioner of the second division shall be the
Acting Chairman.
The Chairman, aided by the Executive Clerk of the Commission, shall have
administrative supervision over the Commission and its regional branches
and all its personnel, including the Labor Arbiters.
The Commission, when sitting en banc, shall be assisted by the same
Executive Clerk, and, when acting thru its Divisions, by said Executive Clerk
for its first division and seven (7) other Deputy Executive Clerks for the
second, third, fourth fifth, sixth, seventh and eighth divisions, respectively,
in the performance of such similar or equivalent functions and duties as are
discharged by the Clerk of Court and Deputy Clerks of Court of the Court of
Appeals.
The Commission and its eight (8) divisions shall be assisted by the
Commission Attorneys in its appellate and adjudicatory functions whose
term shall be coterminous with the Commissioners with whom they are
assigned. The Commission Attorneys shall be members of the Philippine Bar
with at least one (1) year experience or exposure in the field of labor-
management relations. They shall receive annual salaries and shall be
entitled to the same allowances and benefits as those falling under Salary
Grade twenty-six (SG 26). There shall be as many Commission Attorneys as
may be necessary for the effective and efficient operations of the
Commission but in no case more than three (3) assigned to the Office of
the Chairman and each Commissioner.
No Labor Arbiter shall be assigned to perform the functions of the
Commission Attorney nor detailed to the office of any Commissioner. (As
amended by Section 1, Republic Act No. 9347 [July 27, 2006] and as
previously amended by Republic Act No. 7700 and Section 5, Republic Act
No. 6715).
Article 214. Headquarters, Branches and Provincial Extension Units. - The
Commission and its first, second, third, fourth, fifth and sixth divisions shall
have their main offices in Metropolitan Manila, and the seventh and eighth
divisions in the cities of Cebu and Cagayan de Oro, respectively. The
Commission shall establish as many regional branches as there are regional
offices of the Department of Labor and Employment, sub-regional branches
or provincial extension units. There shall be as many Labor Arbiters as may
be necessary for the effective and efficient operation of the Commission.
(As amended by Section 2, Republic Act No. 9347 [July 27, 2006] and
previously amended by Section 6, Republic Act No. 6715 [March 21, 1989]).
Article 215. Appointment and Qualifications. The Chairman and other
Commissioners shall be members of the Philippine Bar and must have been
engaged in the practice of law in the Philippines for at least fifteen (15)
years, with at least five (5) years experience or exposure in the field of
labor-management relations, and shall preferably be residents of the region
where they shall hold office. The Labor Arbiters shall likewise be members
of the Philippine Bar and must have been engaged in the practice of law in
the Philippines for at least ten (10) years, with at least five (5) years
experience or exposure in the field of labor-management relations.
The Chairman and the other Commissioners and the Labor Arbiters shall
hold office during good behavior until they reach the age of sixty-five (65)
years, unless sooner removed for cause as provided by law or become
incapacitated to discharge the duties of their office; Provided, however,
That the President of the Republic of the Philippines may extend the
services of the Commissioners and Labor Arbiters up to the maximum age
of seventy (70) years upon the recommendation of the Commission en
banc.
The Chairman, the Division Presiding Commissioners and other
Commissioners shall all be appointed by the President. Appointment to any
vacancy in a specific division shall come only from the nominees of the
sector which nominated the predecessor. The Labor Arbiters shall also be
appointed by the President, upon recommendation of the Commission en
banc to a specific arbitration branch, preferably in the region where they
are residents, and shall be subject to the Civil Service Law, rules and
regulations: Provided, that the Labor Arbiters who are presently holding
office in the region where they are residents shall be deemed appointed
thereat.
The Chairman and the Commission, shall appoint the staff and employees
of the Commission, and its regional branches as the needs of the service
may require, subject to the Civil Service Law, rules and regulations, and
upgrade their current salaries, benefits and other emoluments in
accordance with law. (As amended by Section 3, Republic Act No. 9347
[July 27, 2006] and as previously amended by Section 7, Republic Act No.
6715 [March 21, 1989]).
Article 216. Salaries, benefits and other emoluments. The Chairman and
members of the Commission shall have the same rank, receive an annual
salary equivalent to, and be entitled to the same allowances, retirement
and benefits as, those of the Presiding Justice and Associate Justices of the
Court of Appeals, respectively. Labor Arbiters shall have the same rank,
receive an annual salary equivalent to and be entitled to the same
allowances, retirement and other benefits and privileges as those of the
judges of the regional trial courts. In no case, however, shall the provision
of this Article result in the diminution of the existing salaries, allowances
and benefits of the aforementioned officials. (As amended by Section 4,
Republic Act No. 9347 [July 27, 2006] and as previously amended by
Section 8, Republic Act No. 6715 [March 21, 1989]).
Chapter II
POWERS AND DUTIES
ART. 217. Jurisdiction of the Labor Arbiters and the Commission. - (a)
Except as otherwise provided under this Code, the Labor Arbiters shall have
original and exclusive jurisdiction to hear and decide, within thirty (30)
calendar days after the submission of the case by the parties for decision
without extension, even in the absence of stenographic notes, the following
cases involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers
may file involving wages, rates of pay, hours of work and other terms and
conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising
from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including
questions involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare
and maternity benefits, all other claims arising from employer-employee
relations, including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (P5,000.00) regardless
of whether accompanied with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all cases
decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of collective
bargaining agreements and those arising from the interpretation or
enforcement of company personnel policies shall be disposed of by the
Labor Arbiter by referring the same to the grievance machinery and
voluntary arbitration as may be provided in said agreements. (As amended
by Section 9, Republic Act No. 6715, March 21, 1989).
ART. 218. Powers of the Commission. - The Commission shall have the
power and authority:
(a) To promulgate rules and regulations governing the hearing and
disposition of cases before it and its regional branches, as well as those
pertaining to its internal functions and such rules and regulations as may be
necessary to carry out the purposes of this Code; (As amended by Section
10, Republic Act No. 6715, March 21, 1989).
(b) To administer oaths, summon the parties to a controversy, issue
subpoenas requiring the attendance and testimony of witnesses or the
production of such books, papers, contracts, records, statement of
accounts, agreements, and others as may be material to a just
determination of the matter under investigation, and to testify in any
investigation or hearing conducted in pursuance of this Code;chan robles
virtual law library
(c) To conduct investigation for the determination of a question, matter or
controversy within its jurisdiction, proceed to hear and determine the
disputes in the absence of any party thereto who has been summoned or
served with notice to appear, conduct its proceedings or any part thereof in
public or in private, adjourn its hearings to any time and place, refer
technical matters or accounts to an expert and to accept his report as
evidence after hearing of the parties upon due notice, direct parties to be
joined in or excluded from the proceedings, correct, amend, or waive any
error, defect or irregularity whether in substance or in form, give all such
directions as it may deem necessary or expedient in the determination of
the dispute before it, and dismiss any matter or refrain from further hearing
or from determining the dispute or part thereof, where it is trivial or where
further proceedings by the Commission are not necessary or desirable; and
(d) To hold any person in contempt directly or indirectly and impose
appropriate penalties therefor in accordance with law.
A person guilty of misbehavior in the presence of or so near the Chairman
or any member of the Commission or any Labor Arbiter as to obstruct or
interrupt the proceedings before the same, including disrespect toward said
officials, offensive personalities toward others, or refusal to be sworn, or to
answer as a witness or to subscribe an affidavit or deposition when lawfully
required to do so, may be summarily adjudged in direct contempt by said
officials and punished by fine not exceeding five hundred pesos (P500) or
imprisonment not exceeding five (5) days, or both, if it be the Commission,
or a member thereof, or by a fine not exceeding one hundred pesos (P100)
or imprisonment not exceeding one (1) day, or both, if it be a Labor Arbiter.
The person adjudged in direct contempt by a Labor Arbiter may appeal to
the Commission and the execution of the judgment shall be suspended
pending the resolution of the appeal upon the filing by such person of a
bond on condition that he will abide by and perform the judgment of the
Commission should the appeal be decided against him. Judgment of the
Commission on direct contempt is immediately executory and unappealable.
Indirect contempt shall be dealt with by the Commission or Labor Arbiter in
the manner prescribed under Rule 71 of the Revised Rules of Court; and
(As amended by Section 10, Republic Act No. 6715, March 21, 1989).
(e) To enjoin or restrain any actual or threatened commission of any or all
prohibited or unlawful acts or to require the performance of a particular act
in any labor dispute which, if not restrained or performed forthwith, may
cause grave or irreparable damage to any party or render ineffectual any
decision in favor of such party: Provided, That no temporary or permanent
injunction in any case involving or growing out of a labor dispute as defined
in this Code shall be issued except after hearing the testimony of witnesses,
with opportunity for cross-examination, in support of the allegations of a
complaint made under oath, and testimony in opposition thereto, if offered,
and only after a finding of fact by the Commission, to the effect:
(1) That prohibited or unlawful acts have been threatened and will be
committed and will be continued unless restrained, but no injunction or
temporary restraining order shall be issued on account of any threat,
prohibited or unlawful act, except against the person or persons,
association or organization making the threat or committing the prohibited
or unlawful act or actually authorizing or ratifying the same after actual
knowledge thereof;
(2) That substantial and irreparable injury to complainants property will
follow;
(3) That as to each item of relief to be granted, greater injury will be
inflicted upon complainant by the denial of relief than will be inflicted upon
defendants by the granting of relief;
(4) That complainant has no adequate remedy at law; and
(5) That the public officers charged with the duty to protect complainants
property are unable or unwilling to furnish adequate protection.
Such hearing shall be held after due and personal notice thereof has been
served, in such manner as the Commission shall direct, to all known
persons against whom relief is sought, and also to the Chief Executive and
other public officials of the province or city within which the unlawful acts
have been threatened or committed, charged with the duty to protect
complainants property: Provided, however, that if a complainant shall also
allege that, unless a temporary restraining order shall be issued without
notice, a substantial and irreparable injury to complainants property will be
unavoidable, such a temporary restraining order may be issued upon
testimony under oath, sufficient, if sustained, to justify the Commission in
issuing a temporary injunction upon hearing after notice. Such a temporary
restraining order shall be effective for no longer than twenty (20) days and
shall become void at the expiration of said twenty (20) days. No such
temporary restraining order or temporary injunction shall be issued except
on condition that complainant shall first file an undertaking with adequate
security in an amount to be fixed by the Commission sufficient to
recompense those enjoined for any loss, expense or damage caused by the
improvident or erroneous issuance of such order or injunction, including all
reasonable costs, together with a reasonable attorneys fee, and expense of
defense against the order or against the granting of any injunctive relief
sought in the same proceeding and subsequently denied by the
Commission.
The undertaking herein mentioned shall be understood to constitute an
agreement entered into by the complainant and the surety upon which an
order may be rendered in the same suit or proceeding against said
complainant and surety, upon a hearing to assess damages, of which
hearing, complainant and surety shall have reasonable notice, the said
complainant and surety submitting themselves to the jurisdiction of the
Commission for that purpose. But nothing herein contained shall deprive
any party having a claim or cause of action under or upon such undertaking
from electing to pursue his ordinary remedy by suit at law or in equity:
Provided, further, That the reception of evidence for the application of a
writ of injunction may be delegated by the Commission to any of its Labor
Arbiters who shall conduct such hearings in such places as he may
determine to be accessible to the parties and their witnesses and shall
submit thereafter his recommendation to the Commission. (As amended by
Section 10, Republic Act No. 6715, March 21, 1989).
ART. 219. Ocular inspection. - The Chairman, any Commissioner, Labor
Arbiter or their duly authorized representatives, may, at any time during
working hours, conduct an ocular inspection on any establishment, building,
ship or vessel, place or premises, including any work, material, implement,
machinery, appliance or any object therein, and ask any employee, laborer,
or any person, as the case may be, for any information or data concerning
any matter or question relative to the object of the investigation.
[ART. 220. Compulsory arbitration. - The Commission or any Labor Arbiter
shall have the power to ask the assistance of other government officials
and qualified private citizens to act as compulsory arbitrators on cases
referred to them and to fix and assess the fees of such compulsory
arbitrators, taking into account the nature of the case, the time consumed
in hearing the case, the professional standing of the arbitrators, the
financial capacity of the parties, and the fees provided in the Rules of
Court.] (Repealed by Section 16, Batas Pambansa Bilang 130, August 21,
1981).
ART. 221. Technical rules not binding and prior resort to amicable
settlement. - In any proceeding before the Commission or any of the Labor
Arbiters, the rules of evidence prevailing in courts of law or equity shall not
be controlling and it is the spirit and intention of this Code that the
Commission and its members and the Labor Arbiters shall use every and all
reasonable means to ascertain the facts in each case speedily and
objectively and without regard to technicalities of law or procedure, all in
the interest of due process. In any proceeding before the Commission or
any Labor Arbiter, the parties may be represented by legal counsel but it
shall be the duty of the Chairman, any Presiding Commissioner or
Commissioner or any Labor Arbiter to exercise complete control of the
proceedings at all stages.
Any provision of law to the contrary notwithstanding, the Labor Arbiter shall
exert all efforts towards the amicable settlement of a labor dispute within
his jurisdiction on or before the first hearing. The same rule shall apply to
the Commission in the exercise of its original jurisdiction. (As amended by
Section 11, Republic Act No. 6715, March 21, 1989).
ART. 222. Appearances and Fees. - (a) Non-lawyers may appear before the
Commission or any Labor Arbiter only:
1. If they represent themselves; or 2. If they represent their organization or
members thereof.
(b) No attorneys fees, negotiation fees or similar charges of any kind
arising from any collective bargaining agreement shall be imposed on any
individual member of the contracting union: Provided, However, that
attorneys fees may be charged against union funds in an amount to be
agreed upon by the parties. Any contract, agreement or arrangement of
any sort to the contrary shall be null and void. (As amended by Presidential
Decree No. 1691, May 1, 1980).
Chapter III
APPEAL
ART. 223. Appeal. - Decisions, awards, or orders of the Labor Arbiter are
final and executory unless appealed to the Commission by any or both
parties within ten (10) calendar days from receipt of such decisions,
awards, or orders. Such appeal may be entertained only on any of the
following grounds:
(a) If there is prima facie evidence of abuse of discretion on the part of the
Labor Arbiter;
(b) If the decision, order or award was secured through fraud or coercion,
including graft and corruption;
(c) If made purely on questions of law; and
(d) If serious errors in the findings of facts are raised which would cause
grave or irreparable damage or injury to the appellant.
In case of a judgment involving a monetary award, an appeal by the
employer may be perfected only upon the posting of a cash or surety bond
issued by a reputable bonding company duly accredited by the Commission
in the amount equivalent to the monetary award in the judgment appealed
from.
In any event, the decision of the Labor Arbiter reinstating a dismissed or
separated employee, insofar as the reinstatement aspect is concerned, shall
immediately be executory, even pending appeal. The employee shall either
be admitted back to work under the same terms and conditions prevailing
prior to his dismissal or separation or, at the option of the employer, merely
reinstated in the payroll. The posting of a bond by the employer shall not
stay the execution for reinstatement provided herein.
To discourage frivolous or dilatory appeals, the Commission or the Labor
Arbiter shall impose reasonable penalty, including fines or censures, upon
the erring parties.
In all cases, the appellant shall furnish a copy of the memorandum of
appeal to the other party who shall file an answer not later than ten (10)
calendar days from receipt thereof.
The Commission shall decide all cases within twenty (20) calendar days
from receipt of the answer of the appellee. The decision of the Commission
shall be final and executory after ten (10) calendar days from receipt
thereof by the parties.
Any law enforcement agency may be deputized by the Secretary of Labor
and Employment or the Commission in the enforcement of decisions,
awards or orders. (As amended by Section 12, Republic Act No. 6715,
March 21, 1989).
ART. 224. Execution of decisions, orders or awards. - (a) The Secretary of
Labor and Employment or any Regional Director, the Commission or any
Labor Arbiter, or Med-Arbiter or Voluntary Arbitrator may, motu proprio or
on motion of any interested party, issue a writ of execution on a judgment
within five (5) years from the date it becomes final and executory, requiring
a sheriff or a duly deputized officer to execute or enforce final decisions,
orders or awards of the Secretary of Labor and Employment or regional
director, the Commission, the Labor Arbiter or med-arbiter, or voluntary
arbitrators. In any case, it shall be the duty of the responsible officer to
separately furnish immediately the counsels of record and the parties with
copies of said decisions, orders or awards. Failure to comply with the duty
prescribed herein shall subject such responsible officer to appropriate
administrative sanctions. chanroblesvirtuallawlibrary
(b) The Secretary of Labor and Employment, and the Chairman of the
Commission may designate special sheriffs and take any measure under
existing laws to ensure compliance with their decisions, orders or awards
and those of the Labor Arbiters and voluntary arbitrators, including the
imposition of administrative fines which shall not be less than P500.00 nor
more than P10,000.00. (As amended by Section 13, Republic Act No. 6715,
March 21, 1989).
ART. 225. Contempt powers of the Secretary of Labor. - In the exercise of
his powers under this Code, the Secretary of Labor may hold any person in
direct or indirect contempt and impose the appropriate penalties therefor.
Title III
BUREAU OF LABOR RELATIONS
ART. 226. Bureau of Labor Relations. - The Bureau of Labor Relations and
the Labor Relations Divisions in the regional offices of the Department of
Labor, shall have original and exclusive authority to act, at their own
initiative or upon request of either or both parties, on all inter-union and
intra-union conflicts, and all disputes, grievances or problems arising from
or affecting labor-management relations in all workplaces, whether
agricultural or non-agricultural, except those arising from the
implementation or interpretation of collective bargaining agreements which
shall be the subject of grievance procedure and/or voluntary arbitration.
The Bureau shall have fifteen (15) working days to act on labor cases
before it, subject to extension by agreement of the parties. (As amended by
Section 14, Republic Act No. 6715, March 21, 1989).
ART. 227. Compromise agreements. - Any compromise settlement,
including those involving labor standard laws, voluntarily agreed upon by
the parties with the assistance of the Bureau or the regional office of the
Department of Labor, shall be final and binding upon the parties. The
National Labor Relations Commission or any court, shall not assume
jurisdiction over issues involved therein except in case of non-compliance
thereof or if there is prima facie evidence that the settlement was obtained
through fraud, misrepresentation, or coercion.
[ART. 228. Indorsement of cases to Labor Arbiters. - (a) Except as provided
in paragraph (b) of this Article, the Labor Arbiter shall entertain only cases
endorsed to him for compulsory arbitration by the Bureau or by the
Regional Director with a written notice of such indorsement or non-
indorsement. The indorsement or non-indorsement of the Regional Director
may be appealed to the Bureau within ten (10) working days from receipt
of the notice.
(b) The parties may, at any time, by mutual agreement, withdraw a case
from the Conciliation Section and jointly submit it to a Labor Arbiter, except
deadlocks in collective bargaining.] (Repealed by Section 16, Batas
Pambansa Bilang 130, August 21, 1981).
ART. 229. Issuance of subpoenas. - The Bureau shall have the power to
require the appearance of any person or the production of any paper,
document or matter relevant to a labor dispute under its jurisdiction, either
at the request of any interested party or at its own initiative.
ART. 230. Appointment of bureau personnel. - The Secretary of Labor and
Employment may appoint, in addition to the present personnel of the
Bureau and the Industrial Relations Divisions, such number of examiners
and other assistants as may be necessary to carry out the purpose of the
Code. [As amended by Section 15, Republic Act No. 6715, March 21, 1989].
ART. 231. Registry of unions and file of collective bargaining agreements. -
The Bureau shall keep a registry of legitimate labor organizations. The
Bureau shall also maintain a file of all collective bargaining agreements and
other related agreements and records of settlement of labor disputes and
copies of orders and decisions of voluntary arbitrators. The file shall be
open and accessible to interested parties under conditions prescribed by the
Secretary of Labor and Employment, provided that no specific information
submitted in confidence shall be disclosed unless authorized by the
Secretary, or when it is at issue in any judicial litigation, or when public
interest or national security so requires.
Within thirty (30) days from the execution of a Collective Bargaining
Agreement, the parties shall submit copies of the same directly to the
Bureau or the Regional Offices of the Department of Labor and Employment
for registration, accompanied with verified proofs of its posting in two
conspicuous places in the place of work and ratification by the majority of
all the workers in the bargaining unit. The Bureau or Regional Offices shall
act upon the application for registration of such Collective Bargaining
Agreement within five (5) calendar days from receipt thereof. The Regional
Offices shall furnish the Bureau with a copy of the Collective Bargaining
Agreement within five (5) days from its submission.
The Bureau or Regional Office shall assess the employer for every Collective
Bargaining Agreement a registration fee of not less than one thousand
pesos (P1,000.00) or in any other amount as may be deemed appropriate
and necessary by the Secretary of Labor and Employment for the effective
and efficient administration of the Voluntary Arbitration Program. Any
amount collected under this provision shall accrue to the Special Voluntary
Arbitration Fund.
The Bureau shall also maintain a file and shall undertake or assist in the
publication of all final decisions, orders and awards of the Secretary of
Labor and Employment, Regional Directors and the Commission. (As
amended by Section 15, Republic Act No. 6715, March 21, 1989).
ART. 232. Prohibition on certification election. - The Bureau shall not
entertain any petition for certification election or any other action which
may disturb the administration of duly registered existing collective
bargaining agreements affecting the parties except under Articles 253, 253-
A and 256 of this Code. (As amended by Section 15, Republic Act No. 6715,
March 21, 1989).
ART. 233. Privileged communication. - Information and statements made at
conciliation proceedings shall be treated as privileged communication and
shall not be used as evidence in the Commission. Conciliators and similar
officials shall not testify in any court or body regarding any matters taken
up at conciliation proceedings conducted by them.
Title IV
LABOR ORGANIZATIONS
Chapter I
REGISTRATION AND CANCELLATION
ART. 234. Requirements of registration. - Any applicant labor organization,
association or group of unions or workers shall acquire legal personality and
shall be entitled to the rights and privileges granted by law to legitimate
labor organizations upon issuance of the certificate of registration based on
the following requirements.
(a) Fifty pesos (P50.00) registration fee;
(b) The names of its officers, their addresses, the principal address of the
labor organization, the minutes of the organizational meetings and the list
of the workers who participated in such meetings;
(c) The names of all its members comprising at least twenty percent (20%)
of all the employees in the bargaining unit where it seeks to operate; (As
amended by Executive Order No. 111, December 24, 1986).
(d) If the applicant union has been in existence for one or more years,
copies of its annual financial reports; and
(e) Four (4) copies of the constitution and by-laws of the applicant union,
minutes of its adoption or ratification, and the list of the members who
participated in it. (As amended by Batas Pambansa Bilang 130, August 21,
1981). chanroblesvirtuallawlibrary
ART. 235. Action on application. - The Bureau shall act on all applications
for registration within thirty (30) days from filing.
All requisite documents and papers shall be certified under oath by the
secretary or the treasurer of the organization, as the case may be, and
attested to by its president.
ART. 236. Denial of registration; appeal. - The decision of the Labor
Relations Division in the regional office denying registration may be
appealed by the applicant union to the Bureau within ten (10) days from
receipt of notice thereof.
ART. 237. Additional requirements for federations or national unions. -
Subject to Article 238, if the applicant for registration is a federation or a
national union, it shall, in addition to the requirements of the preceding
Articles, submit the following:
(a) Proof of the affiliation of at least ten (10) locals or chapters, each of
which must be a duly recognized collective bargaining agent in the
establishment or industry in which it operates, supporting the registration of
such applicant federation or national union; and
(b) The names and addresses of the companies where the locals or
chapters operate and the list of all the members in each company involved.
[ART. 238. Conditions for registration of federations or national unions. - No
federation or national union shall be registered to engage in any
organization activity in more than one industry in any area or region, and
no federation or national union shall be registered to engage in any
organizational activity in more than one industry all over the country.
The federation or national union which meets the requirements and
conditions herein prescribed may organize and affiliate locals and chapters
without registering such locals or chapters with the Bureau.
Locals or chapters shall have the same rights and privileges as if they were
registered in the Bureau, provided that such federation or national union
organizes such locals or chapters within its assigned organizational field of
activity as may be prescribed by the Secretary of Labor.
The Bureau shall see to it that federations and national unions shall only
organize locals and chapters within a specific industry or union.] (Repealed
by Executive Order No. 111, December 24, 1986).
ART. 238. Cancellation of registration; appeal. - The certificate of
registration of any legitimate labor organization, whether national or local,
shall be cancelled by the Bureau if it has reason to believe, after due
hearing, that the said labor organization no longer meets one or more of
the requirements herein prescribed.
[The Bureau upon approval of this Code shall immediately institute
cancellation proceedings and take such other steps as may be necessary to
restructure all existing registered labor organizations in accordance with the
objective envisioned above.] (Repealed by Executive Order No. 111,
December 24, 1986).
ART. 239. Grounds for cancellation of union registration. - The following
shall constitute grounds for cancellation of union registration:
(a) Misrepresentation, false statement or fraud in connection with the
adoption or ratification of the constitution and by-laws or amendments
thereto, the minutes of ratification and the list of members who took part in
the ratification;
(b) Failure to submit the documents mentioned in the preceding paragraph
within thirty (30) days from adoption or ratification of the constitution and
by-laws or amendments thereto;
(c) Misrepresentation, false statements or fraud in connection with the
election of officers, minutes of the election of officers, the list of voters, or
failure to submit these documents together with the list of the newly
elected/appointed officers and their postal addresses within thirty (30) days
from election;chan robles virtual law library
(d) Failure to submit the annual financial report to the Bureau within thirty
(30) days after the closing of every fiscal year and misrepresentation, false
entries or fraud in the preparation of the financial report itself;
(e) Acting as a labor contractor or engaging in the "cabo" system, or
otherwise engaging in any activity prohibited by law;
(f) Entering into collective bargaining agreements which provide terms and
conditions of employment below minimum standards established by law;
(g) Asking for or accepting attorneys fees or negotiation fees from
employers;
(h) Other than for mandatory activities under this Code, checking off special
assessments or any other fees without duly signed individual written
authorizations of the members;
(i) Failure to submit list of individual members to the Bureau once a year or
whenever required by the Bureau; and
(j) Failure to comply with requirements under Articles 237 and 238.
ART. 240. Equity of the incumbent. - All existing federations and national
unions which meet the qualifications of a legitimate labor organization and
none of the grounds for cancellation shall continue to maintain their
existing affiliates regardless of the nature of the industry and the location of
the affiliates.
Chapter II
RIGHTS AND CONDITIONS
OF MEMBERSHIP
ART. 241. Rights and conditions of membership in a labor organization. -
The following are the rights and conditions of membership in a labor
organization:
(a) No arbitrary or excessive initiation fees shall be required of the
members of a legitimate labor organization nor shall arbitrary, excessive or
oppressive fine and forfeiture be imposed;
(b) The members shall be entitled to full and detailed reports from their
officers and representatives of all financial transactions as provided for in
the constitution and by-laws of the organization;
(c) The members shall directly elect their officers, including those of the
national union or federation, to which they or their union is affiliated, by
secret ballot at intervals of five (5) years. No qualification requirements for
candidacy to any position shall be imposed other than membership in good
standing in subject labor organization. The secretary or any other
responsible union officer shall furnish the Secretary of Labor and
Employment with a list of the newly-elected officers, together with the
appointive officers or agents who are entrusted with the handling of funds,
within thirty (30) calendar days after the election of officers or from the
occurrence of any change in the list of officers of the labor organization;
(As amended by Section 16, Republic Act No. 6715, March 21, 1989).
(d) The members shall determine by secret ballot, after due deliberation,
any question of major policy affecting the entire membership of the
organization, unless the nature of the organization or force majeure renders
such secret ballot impractical, in which case, the board of directors of the
organization may make the decision in behalf of the general membership;
(e) No labor organization shall knowingly admit as members or continue in
membership any individual who belongs to a subversive organization or
who is engaged directly or indirectly in any subversive activity;
(f) No person who has been convicted of a crime involving moral turpitude
shall be eligible for election as a union officer or for appointment to any
position in the union;
(g) No officer, agent or member of a labor organization shall collect any
fees, dues, or other contributions in its behalf or make any disbursement of
its money or funds unless he is duly authorized pursuant to its constitution
and by-laws;
(h) Every payment of fees, dues or other contributions by a member shall
be evidenced by a receipt signed by the officer or agent making the
collection and entered into the record of the organization to be kept and
maintained for the purpose;
(i) The funds of the organization shall not be applied for any purpose or
object other than those expressly provided by its constitution and by-laws
or those expressly authorized by written resolution adopted by the majority
of the members at a general meeting duly called for the purpose;
(j) Every income or revenue of the organization shall be evidenced by a
record showing its source, and every expenditure of its funds shall be
evidenced by a receipt from the person to whom the payment is made,
which shall state the date, place and purpose of such payment. Such record
or receipt shall form part of the financial records of the organization.
chanroblesvirtuallawlibrary
Any action involving the funds of the organization shall prescribe after three
(3) years from the date of submission of the annual financial report to the
Department of Labor and Employment or from the date the same should
have been submitted as required by law, whichever comes earlier:
Provided, That this provision shall apply only to a legitimate labor
organization which has submitted the financial report requirements under
this Code: Provided, further, that failure of any labor organization to comply
with the periodic financial reports required by law and such rules and
regulations promulgated thereunder six (6) months after the effectivity of
this Act shall automatically result in the cancellation of union registration of
such labor organization; (As amended by Section 16, Republic Act No.
6715, March 21, 1989).
(k) The officers of any labor organization shall not be paid any
compensation other than the salaries and expenses due to their positions as
specifically provided for in its constitution and by-laws, or in a written
resolution duly authorized by a majority of all the members at a general
membership meeting duly called for the purpose. The minutes of the
meeting and the list of participants and ballots cast shall be subject to
inspection by the Secretary of Labor or his duly authorized representatives.
Any irregularities in the approval of the resolutions shall be a ground for
impeachment or expulsion from the organization;
(l) The treasurer of any labor organization and every officer thereof who is
responsible for the account of such organization or for the collection,
management, disbursement, custody or control of the funds, moneys and
other properties of the organization, shall render to the organization and to
its members a true and correct account of all moneys received and paid by
him since he assumed office or since the last day on which he rendered
such account, and of all bonds, securities and other properties of the
organization entrusted to his custody or under his control. The rendering of
such account shall be made:
(1) At least once a year within thirty (30) days after the close of its fiscal
year;
(2) At such other times as may be required by a resolution of the majority
of the members of the organization; and
(3) Upon vacating his office.
The account shall be duly audited and verified by affidavit and a copy
thereof shall be furnished the Secretary of Labor.
(m) The books of accounts and other records of the financial activities of
any labor organization shall be open to inspection by any officer or member
thereof during office hours;
(n) No special assessment or other extraordinary fees may be levied upon
the members of a labor organization unless authorized by a written
resolution of a majority of all the members in a general membership
meeting duly called for the purpose. The secretary of the organization shall
record the minutes of the meeting including the list of all members present,
the votes cast, the purpose of the special assessment or fees and the
recipient of such assessment or fees. The record shall be attested to by the
president.
(o) Other than for mandatory activities under the Code, no special
assessments, attorneys fees, negotiation fees or any other extraordinary
fees may be checked off from any amount due to an employee without an
individual written authorization duly signed by the employee. The
authorization should specifically state the amount, purpose and beneficiary
of the deduction; and
(p) It shall be the duty of any labor organization and its officers to inform
its members on the provisions of its constitution and by-laws, collective
bargaining agreement, the prevailing labor relations system and all their
rights and obligations under existing labor laws.
For this purpose, registered labor organizations may assess reasonable
dues to finance labor relations seminars and other labor education
activities.
Any violation of the above rights and conditions of membership shall be a
ground for cancellation of union registration or expulsion of officers from
office, whichever is appropriate. At least thirty percent (30%) of the
members of a union or any member or members specially concerned may
report such violation to the Bureau. The Bureau shall have the power to
hear and decide any reported violation to mete the appropriate penalty.
Criminal and civil liabilities arising from violations of above rights and
conditions of membership shall continue to be under the jurisdiction of
ordinary courts.
Chapter III
RIGHTS OF LEGITIMATE LABOR ORGANIZATIONS
ART. 242. Rights of legitimate labor organizations. - A legitimate labor
organization shall have the right:
(a) To act as the representative of its members for the purpose of collective
bargaining;
(b) To be certified as the exclusive representative of all the employees in an
appropriate bargaining unit for purposes of collective bargaining;
(c) To be furnished by the employer, upon written request, with its annual
audited financial statements, including the balance sheet and the profit and
loss statement, within thirty (30) calendar days from the date of receipt of
the request, after the union has been duly recognized by the employer or
certified as the sole and exclusive bargaining representative of the
employees in the bargaining unit, or within sixty (60) calendar days before
the expiration of the existing collective bargaining agreement, or during the
collective bargaining negotiation;
(d) To own property, real or personal, for the use and benefit of the labor
organization and its members;
(e) To sue and be sued in its registered name; and
(f) To undertake all other activities designed to benefit the organization and
its members, including cooperative, housing, welfare and other projects not
contrary to law.
Notwithstanding any provision of a general or special law to the contrary,
the income and the properties of legitimate labor organizations, including
grants, endowments, gifts, donations and contributions they may receive
from fraternal and similar organizations, local or foreign, which are actually,
directly and exclusively used for their lawful purposes, shall be free from
taxes, duties and other assessments. The exemptions provided herein may
be withdrawn only by a special law expressly repealing this provision. (As
amended by Section 17, Republic Act No. 6715, March 21, 1989).
Title V
COVERAGE
ART. 243. Coverage and employees right to self-organization. - All persons
employed in commercial, industrial and agricultural enterprises and in
religious, charitable, medical, or educational institutions, whether operating
for profit or not, shall have the right to self-organization and to form, join,
or assist labor organizations of their own choosing for purposes of collective
bargaining. Ambulant, intermittent and itinerant workers, self-employed
people, rural workers and those without any definite employers may form
labor organizations for their mutual aid and protection. (As amended by
Batas Pambansa Bilang 70, May 1, 1980).
ART. 244. Right of employees in the public service. - Employees of
government corporations established under the Corporation Code shall have
the right to organize and to bargain collectively with their respective
employers. All other employees in the civil service shall have the right to
form associations for purposes not contrary to law. (As amended by
Executive Order No. 111, December 24, 1986).
ART. 245. Ineligibility of managerial employees to join any labor
organization; right of supervisory employees. - Managerial employees are
not eligible to join, assist or form any labor organization. Supervisory
employees shall not be eligible for membership in a labor organization of
the rank-and-file employees but may join, assist or form separate labor
organizations of their own. (As amended by Section 18, Republic Act No.
6715, March 21, 1989). chanroblesvirtuallawlibrary
ART. 246. Non-abridgment of right to self-organization. - It shall be
unlawful for any person to restrain, coerce, discriminate against or unduly
interfere with employees and workers in their exercise of the right to self-
organization. Such right shall include the right to form, join, or assist labor
organizations for the purpose of collective bargaining through
representatives of their own choosing and to engage in lawful concerted
activities for the same purpose for their mutual aid and protection, subject
to the provisions of Article 264 of this Code. (As amended by Batas
Pambansa Bilang 70, May 1, 1980).
Title VI
UNFAIR LABOR PRACTICES
Chapter I
CONCEPT
ART. 247. Concept of unfair labor practice and procedure for prosecution
thereof. - Unfair labor practices violate the constitutional right of workers
and employees to self-organization, are inimical to the legitimate interests
of both labor and management, including their right to bargain collectively
and otherwise deal with each other in an atmosphere of freedom and
mutual respect, disrupt industrial peace and hinder the promotion of
healthy and stable labor-management relations.
Consequently, unfair labor practices are not only violations of the civil rights
of both labor and management but are also criminal offenses against the
State which shall be subject to prosecution and punishment as herein
provided.
Subject to the exercise by the President or by the Secretary of Labor and
Employment of the powers vested in them by Articles 263 and 264 of this
Code, the civil aspects of all cases involving unfair labor practices, which
may include claims for actual, moral, exemplary and other forms of
damages, attorneys fees and other affirmative relief, shall be under the
jurisdiction of the Labor Arbiters. The Labor Arbiters shall give utmost
priority to the hearing and resolution of all cases involving unfair labor
practices. They shall resolve such cases within thirty (30) calendar days
from the time they are submitted for decision.
Recovery of civil liability in the administrative proceedings shall bar recovery
under the Civil Code.
No criminal prosecution under this Title may be instituted without a final
judgment finding that an unfair labor practice was committed, having been
first obtained in the preceding paragraph. During the pendency of such
administrative proceeding, the running of the period of prescription of the
criminal offense herein penalized shall be considered interrupted: Provided,
however, that the final judgment in the administrative proceedings shall not
be binding in the criminal case nor be considered as evidence of guilt but
merely as proof of compliance of the requirements therein set forth. (As
amended by Batas Pambansa Bilang 70, May 1, 1980 and later further
amended by Section 19, Republic Act No. 6715, March 21, 1989).
Chapter II
UNFAIR LABOR PRACTICES OF EMPLOYERS
ART. 248. Unfair labor practices of employers. - It shall be unlawful for an
employer to commit any of the following unfair labor practice:
(a) To interfere with, restrain or coerce employees in the exercise of their
right to self-organization;
(b) To require as a condition of employment that a person or an employee
shall not join a labor organization or shall withdraw from one to which he
belongs;
(c) To contract out services or functions being performed by union
members when such will interfere with, restrain or coerce employees in the
exercise of their rights to self-organization;
(d) To initiate, dominate, assist or otherwise interfere with the formation or
administration of any labor organization, including the giving of financial or
other support to it or its organizers or supporters;
(e) To discriminate in regard to wages, hours of work and other terms and
conditions of employment in order to encourage or discourage membership
in any labor organization. Nothing in this Code or in any other law shall stop
the parties from requiring membership in a recognized collective bargaining
agent as a condition for employment, except those employees who are
already members of another union at the time of the signing of the
collective bargaining agreement. Employees of an appropriate bargaining
unit who are not members of the recognized collective bargaining agent
may be assessed a reasonable fee equivalent to the dues and other fees
paid by members of the recognized collective bargaining agent, if such non-
union members accept the benefits under the collective bargaining
agreement: Provided, that the individual authorization required under
Article 242, paragraph (o) of this Code shall not apply to the non-members
of the recognized collective bargaining agent; chanroblesvirtuallawlibrary
(f) To dismiss, discharge or otherwise prejudice or discriminate against an
employee for having given or being about to give testimony under this
Code;
(g) To violate the duty to bargain collectively as prescribed by this Code;
(h) To pay negotiation or attorneys fees to the union or its officers or
agents as part of the settlement of any issue in collective bargaining or any
other dispute; or
(i) To violate a collective bargaining agreement.
The provisions of the preceding paragraph notwithstanding, only the
officers and agents of corporations, associations or partnerships who have
actually participated in, authorized or ratified unfair labor practices shall be
held criminally liable. (As amended by Batas Pambansa Bilang 130, August
21, 1981).
Chapter III
UNFAIR LABOR PRACTICES OF LABOR ORGANIZATIONS
ART. 249. Unfair labor practices of labor organizations. - It shall be unfair
labor practice for a labor organization, its officers, agents or
representatives:
(a) To restrain or coerce employees in the exercise of their right to self-
organization. However, a labor organization shall have the right to prescribe
its own rules with respect to the acquisition or retention of membership;
chanroblesvirtuallawlibrary
(b) To cause or attempt to cause an employer to discriminate against an
employee, including discrimination against an employee with respect to
whom membership in such organization has been denied or to terminate an
employee on any ground other than the usual terms and conditions under
which membership or continuation of membership is made available to
other members;
(c) To violate the duty, or refuse to bargain collectively with the employer,
provided it is the representative of the employees;
(d) To cause or attempt to cause an employer to pay or deliver or agree to
pay or deliver any money or other things of value, in the nature of an
exaction, for services which are not performed or not to be performed,
including the demand for fee for union negotiations;
(e) To ask for or accept negotiation or attorneys fees from employers as
part of the settlement of any issue in collective bargaining or any other
dispute; or
(f) To violate a collective bargaining agreement.
The provisions of the preceding paragraph notwithstanding, only the
officers, members of governing boards, representatives or agents or
members of labor associations or organizations who have actually
participated in, authorized or ratified unfair labor practices shall be held
criminally liable. (As amended by Batas Pambansa Bilang 130, August 21,
1981).
Title VII
COLLECTIVE BARGAINING AND ADMINISTRATION OF AGREEMENTS
ART. 250. Procedure in collective bargaining. - The following procedures
shall be observed in collective bargaining:
(a) When a party desires to negotiate an agreement, it shall serve a written
notice upon the other party with a statement of its proposals. The other
party shall make a reply thereto not later than ten (10) calendar days from
receipt of such notice;
(b) Should differences arise on the basis of such notice and reply, either
party may request for a conference which shall begin not later than ten
(10) calendar days from the date of request.
(c) If the dispute is not settled, the Board shall intervene upon request of
either or both parties or at its own initiative and immediately call the parties
to conciliation meetings. The Board shall have the power to issue
subpoenas requiring the attendance of the parties to such meetings. It shall
be the duty of the parties to participate fully and promptly in the
conciliation meetings the Board may call;
(d) During the conciliation proceedings in the Board, the parties are
prohibited from doing any act which may disrupt or impede the early
settlement of the disputes; and
(e) The Board shall exert all efforts to settle disputes amicably and
encourage the parties to submit their case to a voluntary arbitrator. (As
amended by Section 20, Republic Act No. 6715, March 21, 1989).
ART. 251. Duty to bargain collectively in the absence of collective
bargaining agreements. - In the absence of an agreement or other
voluntary arrangement providing for a more expeditious manner of
collective bargaining, it shall be the duty of employer and the
representatives of the employees to bargain collectively in accordance with
the provisions of this Code. chanroblesvirtuallawlibrary
ART. 252. Meaning of duty to bargain collectively. - The duty to bargain
collectively means the performance of a mutual obligation to meet and
convene promptly and expeditiously in good faith for the purpose of
negotiating an agreement with respect to wages, hours of work and all
other terms and conditions of employment including proposals for adjusting
any grievances or questions arising under such agreement and executing a
contract incorporating such agreements if requested by either party but
such duty does not compel any party to agree to a proposal or to make any
concession.
ART. 253. Duty to bargain collectively when there exists a collective
bargaining agreement. - When there is a collective bargaining agreement,
the duty to bargain collectively shall also mean that neither party shall
terminate nor modify such agreement during its lifetime. However, either
party can serve a written notice to terminate or modify the agreement at
least sixty (60) days prior to its expiration date. It shall be the duty of both
parties to keep the status quo and to continue in full force and effect the
terms and conditions of the existing agreement during the 60-day period
and/or until a new agreement is reached by the parties.
ART. 253-A. Terms of a collective bargaining agreement. - Any Collective
Bargaining Agreement that the parties may enter into shall, insofar as the
representation aspect is concerned, be for a term of five (5) years. No
petition questioning the majority status of the incumbent bargaining agent
shall be entertained and no certification election shall be conducted by the
Department of Labor and Employment outside of the sixty-day period
immediately before the date of expiry of such five-year term of the
Collective Bargaining Agreement. All other provisions of the Collective
Bargaining Agreement shall be renegotiated not later than three (3) years
after its execution. Any agreement on such other provisions of the
Collective Bargaining Agreement entered into within six (6) months from
the date of expiry of the term of such other provisions as fixed in such
Collective Bargaining Agreement, shall retroact to the day immediately
following such date. If any such agreement is entered into beyond six
months, the parties shall agree on the duration of retroactivity thereof. In
case of a deadlock in the renegotiation of the Collective Bargaining
Agreement, the parties may exercise their rights under this Code. (As
amended by Section 21, Republic Act No. 6715, March 21, 1989).
ART. 254. Injunction prohibited. - No temporary or permanent injunction or
restraining order in any case involving or growing out of labor disputes shall
be issued by any court or other entity, except as otherwise provided in
Articles 218 and 264 of this Code. (As amended by Batas Pambansa Bilang
227, June 1, 1982).
ART. 255. Exclusive bargaining representation and workers participation in
policy and decision-making. - The labor organization designated or selected
by the majority of the employees in an appropriate collective bargaining
unit shall be the exclusive representative of the employees in such unit for
the purpose of collective bargaining. However, an individual employee or
group of employees shall have the right at any time to present grievances
to their employer.
Any provision of law to the contrary notwithstanding, workers shall have
the right, subject to such rules and regulations as the Secretary of Labor
and Employment may promulgate, to participate in policy and decision-
making processes of the establishment where they are employed insofar as
said processes will directly affect their rights, benefits and welfare. For this
purpose, workers and employers may form labor-management councils:
Provided, That the representatives of the workers in such labor-
management councils shall be elected by at least the majority of all
employees in said establishment. (As amended by Section 22, Republic Act
No. 6715, March 21, 1989).
ART. 256. Representation issue in organized establishments. - In organized
establishments, when a verified petition questioning the majority status of
the incumbent bargaining agent is filed before the Department of Labor and
Employment within the sixty-day period before the expiration of the
collective bargaining agreement, the Med-Arbiter shall automatically order
an election by secret ballot when the verified petition is supported by the
written consent of at least twenty-five percent (25%) of all the employees
in the bargaining unit to ascertain the will of the employees in the
appropriate bargaining unit. To have a valid election, at least a majority of
all eligible voters in the unit must have cast their votes. The labor union
receiving the majority of the valid votes cast shall be certified as the
exclusive bargaining agent of all the workers in the unit. When an election
which provides for three or more choices results in no choice receiving a
majority of the valid votes cast, a run-off election shall be conducted
between the labor unions receiving the two highest number of votes:
Provided, that the total number of votes for all contending unions is at least
fifty percent (50%) of the number of votes cast.chan robles virtual law
library
At the expiration of the freedom period, the employer shall continue to
recognize the majority status of the incumbent bargaining agent where no
petition for certification election is filed. (As amended by Section 23,
Republic Act No. 6715, March 21, 1989).
ART. 257. Petitions in unorganized establishments. - In any establishment
where there is no certified bargaining agent, a certification election shall
automatically be conducted by the Med-Arbiter upon the filing of a petition
by a legitimate labor organization. (As amended by Section 24, Republic Act
No. 6715, March 21, 1989).
ART. 258. When an employer may file petition. - When requested to
bargain collectively, an employer may petition the Bureau for an election. If
there is no existing certified collective bargaining agreement in the unit, the
Bureau shall, after hearing, order a certification election.
All certification cases shall be decided within twenty (20) working days.
The Bureau shall conduct a certification election within twenty (20) days in
accordance with the rules and regulations prescribed by the Secretary of
Labor.
ART. 259. Appeal from certification election orders. - Any party to an
election may appeal the order or results of the election as determined by
the Med-Arbiter directly to the Secretary of Labor and Employment on the
ground that the rules and regulations or parts thereof established by the
Secretary of Labor and Employment for the conduct of the election have
been violated. Such appeal shall be decided within fifteen (15) calendar
days. (As amended by Section 25, Republic Act No. 6715, March 21, 1989).
Title VII-A
GRIEVANCE MACHINERY AND VOLUNTARY ARBITRATION
ART. 260. Grievance machinery and voluntary arbitration. - The parties to a
Collective Bargaining Agreement shall include therein provisions that will
ensure the mutual observance of its terms and conditions. They shall
establish a machinery for the adjustment and resolution of grievances
arising from the interpretation or implementation of their Collective
Bargaining Agreement and those arising from the interpretation or
enforcement of company personnel policies.
All grievances submitted to the grievance machinery which are not settled
within seven (7) calendar days from the date of its submission shall
automatically be referred to voluntary arbitration prescribed in the
Collective Bargaining Agreement.
For this purpose, parties to a Collective Bargaining Agreement shall name
and designate in advance a Voluntary Arbitrator or panel of Voluntary
Arbitrators, or include in the agreement a procedure for the selection of
such Voluntary Arbitrator or panel of Voluntary Arbitrators, preferably from
the listing of qualified Voluntary Arbitrators duly accredited by the Board. In
case the parties fail to select a Voluntary Arbitrator or panel of Voluntary
Arbitrators, the Board shall designate the Voluntary Arbitrator or panel of
Voluntary Arbitrators, as may be necessary, pursuant to the selection
procedure agreed upon in the Collective Bargaining Agreement, which shall
act with the same force and effect as if the Arbitrator or panel of Arbitrators
has been selected by the parties as described above.
ART. 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary
Arbitrators. - The Voluntary Arbitrator or panel of Voluntary Arbitrators shall
have original and exclusive jurisdiction to hear and decide all unresolved
grievances arising from the interpretation or implementation of the
Collective Bargaining Agreement and those arising from the interpretation
or enforcement of company personnel policies referred to in the
immediately preceding article. Accordingly, violations of a Collective
Bargaining Agreement, except those which are gross in character, shall no
longer be treated as unfair labor practice and shall be resolved as
grievances under the Collective Bargaining Agreement. For purposes of this
article, gross violations of Collective Bargaining Agreement shall mean
flagrant and/or malicious refusal to comply with the economic provisions of
such agreement.
The Commission, its Regional Offices and the Regional Directors of the
Department of Labor and Employment shall not entertain disputes,
grievances or matters under the exclusive and original jurisdiction of the
Voluntary Arbitrator or panel of Voluntary Arbitrators and shall immediately
dispose and refer the same to the Grievance Machinery or Voluntary
Arbitration provided in the Collective Bargaining Agreement.
ART. 262. Jurisdiction over other labor disputes. - The Voluntary Arbitrator
or panel of Voluntary Arbitrators, upon agreement of the parties, shall also
hear and decide all other labor disputes including unfair labor practices and
bargaining deadlocks.
ART. 262-A. Procedures. - The Voluntary Arbitrator or panel of Voluntary
Arbitrators shall have the power to hold hearings, receive evidences and
take whatever action is necessary to resolve the issue or issues subject of
the dispute, including efforts to effect a voluntary settlement between
parties.
All parties to the dispute shall be entitled to attend the arbitration
proceedings. The attendance of any third party or the exclusion of any
witness from the proceedings shall be determined by the Voluntary
Arbitrator or panel of Voluntary Arbitrators. Hearing may be adjourned for
cause or upon agreement by the parties.
Unless the parties agree otherwise, it shall be mandatory for the Voluntary
Arbitrator or panel of Voluntary Arbitrators to render an award or decision
within twenty (20) calendar days from the date of submission of the dispute
to voluntary arbitration.
The award or decision of the Voluntary Arbitrator or panel of Voluntary
Arbitrators shall contain the facts and the law on which it is based. It shall
be final and executory after ten (10) calendar days from receipt of the copy
of the award or decision by the parties.
Upon motion of any interested party, the Voluntary Arbitrator or panel of
Voluntary Arbitrators or the Labor Arbiter in the region where the movant
resides, in case of the absence or incapacity of the Voluntary Arbitrator or
panel of Voluntary Arbitrators, for any reason, may issue a writ of execution
requiring either the sheriff of the Commission or regular courts or any
public official whom the parties may designate in the submission agreement
to execute the final decision, order or award.
ART. 262-B. Cost of voluntary arbitration and Voluntary Arbitrators fee. -
The parties to a Collective Bargaining Agreement shall provide therein a
proportionate sharing scheme on the cost of voluntary arbitration including
the Voluntary Arbitrators fee. The fixing of fee of Voluntary Arbitrators,
whether shouldered wholly by the parties or subsidized by the Special
Voluntary Arbitration Fund, shall take into account the following factors:
(a) Nature of the case;
(b) Time consumed in hearing the case;
(c) Professional standing of the Voluntary Arbitrator;
(d) Capacity to pay of the parties; and
(e) Fees provided for in the Revised Rules of Court.
Title VIII
STRIKES AND LOCKOUTS
AND FOREIGN INVOLVEMENT
IN TRADE UNION ACTIVITIES
Chapter I
STRIKES AND LOCKOUTS
ART. 263. Strikes, picketing and lockouts. - (a) It is the policy of the State
to encourage free trade unionism and free collective bargaining.
(b) Workers shall have the right to engage in concerted activities for
purposes of collective bargaining or for their mutual benefit and protection.
The right of legitimate labor organizations to strike and picket and of
employers to lockout, consistent with the national interest, shall continue to
be recognized and respected. However, no labor union may strike and no
employer may declare a lockout on grounds involving inter-union and intra-
union disputes.
(c) In case of bargaining deadlocks, the duly certified or recognized
bargaining agent may file a notice of strike or the employer may file a
notice of lockout with the Ministry at least 30 day before the intended date
thereof. In cases of unfair labor practice, the period of notice shall be 15
days and in the absence of a duly certified or recognized bargaining agent,
the notice of strike may be filed by any legitimate labor organization in
behalf of its members. However, in case of dismissal from employment of
union officers duly elected in accordance with the union constitution and
by-laws, which may constitute union busting, where the existence of the
union is threatened, the 15-day cooling-off period shall not apply and the
union may take action immediately. (As amended by Executive Order No.
111, December 24, 1986).
(d) The notice must be in accordance with such implementing rules and
regulations as the Minister of Labor and Employment may promulgate.
(e) During the cooling-off period, it shall be the duty of the Ministry to exert
all efforts at mediation and conciliation to effect a voluntary settlement.
Should the dispute remain unsettled until the lapse of the requisite number
of days from the mandatory filing of the notice, the labor union may strike
or the employer may declare a lockout.
(f) A decision to declare a strike must be approved by a majority of the
total union membership in the bargaining unit concerned, obtained by
secret ballot in meetings or referenda called for that purpose. A decision to
declare a lockout must be approved by a majority of the board of directors
of the corporation or association or of the partners in a partnership,
obtained by secret ballot in a meeting called for that purpose. The decision
shall be valid for the duration of the dispute based on substantially the
same grounds considered when the strike or lockout vote was taken. The
Ministry may, at its own initiative or upon the request of any affected party,
supervise the conduct of the secret balloting. In every case, the union or
the employer shall furnish the Ministry the results of the voting at least
seven days before the intended strike or lockout, subject to the cooling-off
period herein provided. (As amended by Batas Pambansa Bilang 130,
August 21, 1981 and further amended by Executive Order No. 111,
December 24, 1986).
(g) When, in his opinion, there exists a labor dispute causing or likely to
cause a strike or lockout in an industry indispensable to the national
interest, the Secretary of Labor and Employment may assume jurisdiction
over the dispute and decide it or certify the same to the Commission for
compulsory arbitration. Such assumption or certification shall have the
effect of automatically enjoining the intended or impending strike or lockout
as specified in the assumption or certification order. If one has already
taken place at the time of assumption or certification, all striking or locked
out employees shall immediately return-to-work and the employer shall
immediately resume operations and readmit all workers under the same
terms and conditions prevailing before the strike or lockout. The Secretary
of Labor and Employment or the Commission may seek the assistance of
law enforcement agencies to ensure compliance with this provision as well
as with such orders as he may issue to enforce the same.
In line with the national concern for and the highest respect accorded to
the right of patients to life and health, strikes and lockouts in hospitals,
clinics and similar medical institutions shall, to every extent possible, be
avoided, and all serious efforts, not only by labor and management but
government as well, be exhausted to substantially minimize, if not prevent,
their adverse effects on such life and health, through the exercise, however
legitimate, by labor of its right to strike and by management to lockout. In
labor disputes adversely affecting the continued operation of such hospitals,
clinics or medical institutions, it shall be the duty of the striking union or
locking-out employer to provide and maintain an effective skeletal
workforce of medical and other health personnel, whose movement and
services shall be unhampered and unrestricted, as are necessary to insure
the proper and adequate protection of the life and health of its patients,
most especially emergency cases, for the duration of the strike or lockout.
In such cases, therefore, the Secretary of Labor and Employment may
immediately assume, within twenty four (24) hours from knowledge of the
occurrence of such a strike or lockout, jurisdiction over the same or certify
it to the Commission for compulsory arbitration. For this purpose, the
contending parties are strictly enjoined to comply with such orders,
prohibitions and/or injunctions as are issued by the Secretary of Labor and
Employment or the Commission, under pain of immediate disciplinary
action, including dismissal or loss of employment status or payment by the
locking-out employer of backwages, damages and other affirmative relief,
even criminal prosecution against either or both of them.
The foregoing notwithstanding, the President of the Philippines shall not be
precluded from determining the industries that, in his opinion, are
indispensable to the national interest, and from intervening at any time and
assuming jurisdiction over any such labor dispute in order to settle or
terminate the same.
(h) Before or at any stage of the compulsory arbitration process, the parties
may opt to submit their dispute to voluntary arbitration.
(i) The Secretary of Labor and Employment, the Commission or the
voluntary arbitrator shall decide or resolve the dispute, as the case may be.
The decision of the President, the Secretary of Labor and Employment, the
Commission or the voluntary arbitrator shall be final and executory ten (10)
calendar days after receipt thereof by the parties. (As amended by Section
27, Republic Act No. 6715, March 21, 1989).
ART. 264. Prohibited activities. - (a) No labor organization or employer shall
declare a strike or lockout without first having bargained collectively in
accordance with Title VII of this Book or without first having filed the notice
required in the preceding Article or without the necessary strike or lockout
vote first having been obtained and reported to the Ministry.chan robles
virtual law library
No strike or lockout shall be declared after assumption of jurisdiction by the
President or the Minister or after certification or submission of the dispute
to compulsory or voluntary arbitration or during the pendency of cases
involving the same grounds for the strike or lockout.
Any worker whose employment has been terminated as a consequence of
any unlawful lockout shall be entitled to reinstatement with full backwages.
Any union officer who knowingly participates in an illegal strike and any
worker or union officer who knowingly participates in the commission of
illegal acts during a strike may be declared to have lost his employment
status: Provided, That mere participation of a worker in a lawful strike shall
not constitute sufficient ground for termination of his employment, even if a
replacement had been hired by the employer during such lawful strike.
(b) No person shall obstruct, impede, or interfere with, by force, violence,
coercion, threats or intimidation, any peaceful picketing by employees
during any labor controversy or in the exercise of the right to self-
organization or collective bargaining, or shall aid or abet such obstruction or
interference.
(c) No employer shall use or employ any strike-breaker, nor shall any
person be employed as a strike-breaker.
(d) No public official or employee, including officers and personnel of the
New Armed Forces of the Philippines or the Integrated National Police, or
armed person, shall bring in, introduce or escort in any manner, any
individual who seeks to replace strikers in entering or leaving the premises
of a strike area, or work in place of the strikers. The police force shall keep
out of the picket lines unless actual violence or other criminal acts occur
therein: Provided, That nothing herein shall be interpreted to prevent any
public officer from taking any measure necessary to maintain peace and
order, protect life and property, and/or enforce the law and legal order. (As
amended by Executive Order No. 111, December 24, 1986).
(e) No person engaged in picketing shall commit any act of violence,
coercion or intimidation or obstruct the free ingress to or egress from the
employers premises for lawful purposes, or obstruct public thoroughfares.
(As amended by Batas Pambansa Bilang 227, June 1, 1982).
ART. 265. Improved offer balloting. - In an effort to settle a strike, the
Department of Labor and Employment shall conduct a referendum by secret
ballot on the improved offer of the employer on or before the 30th day of
the strike. When at least a majority of the union members vote to accept
the improved offer the striking workers shall immediately return to work
and the employer shall thereupon readmit them upon the signing of the
agreement.
In case of a lockout, the Department of Labor and Employment shall also
conduct a referendum by secret balloting on the reduced offer of the union
on or before the 30th day of the lockout. When at least a majority of the
board of directors or trustees or the partners holding the controlling interest
in the case of a partnership vote to accept the reduced offer, the workers
shall immediately return to work and the employer shall thereupon readmit
them upon the signing of the agreement. (Incorporated by Section 28,
Republic Act No. 6715, March 21, 1989).
ART. 266. Requirement for arrest and detention. - Except on grounds of
national security and public peace or in case of commission of a crime, no
union members or union organizers may be arrested or detained for union
activities without previous consultations with the Secretary of Labor.
Chapter II
ASSISTANCE TO LABOR ORGANIZATIONS
ART. 267. Assistance by the Department of Labor. - The Department of
Labor, at the initiative of the Secretary of Labor, shall extend special
assistance to the organization, for purposes of collective bargaining, of the
most underprivileged workers who, for reasons of occupation,
organizational structure or insufficient incomes, are not normally covered by
major labor organizations or federations.
ART. 268. Assistance by the Institute of Labor and Manpower Studies. - The
Institute of Labor and Manpower Studies shall render technical and other
forms of assistance to labor organizations and employer organizations in
the field of labor education, especially pertaining to collective bargaining,
arbitration, labor standards and the Labor Code of the Philippines in
general.
Chapter III
FOREIGN ACTIVITIES
ART. 269. Prohibition against aliens; exceptions. - All aliens, natural or
juridical, as well as foreign organizations are strictly prohibited from
engaging directly or indirectly in all forms of trade union activities without
prejudice to normal contacts between Philippine labor unions and
recognized international labor centers: Provided, however, That aliens
working in the country with valid permits issued by the Department of
Labor and Employment, may exercise the right to self-organization and join
or assist labor organizations of their own choosing for purposes of collective
bargaining: Provided, further, That said aliens are nationals of a country
which grants the same or similar rights to Filipino workers. (As amended by
Section 29, Republic Act No. 6715, March 21, 1989).
ART. 270. Regulation of foreign assistance. - (a) No foreign individual,
organization or entity may give any donations, grants or other forms of
assistance, in cash or in kind, directly or indirectly, to any labor
organization, group of workers or any auxiliary thereof, such as
cooperatives, credit unions and institutions engaged in research, education
or communication, in relation to trade union activities, without prior
permission by the Secretary of Labor.
"Trade union activities" shall mean:
(1) organization, formation and administration of labor organization;
(2) negotiation and administration of collective bargaining agreements;
(3) all forms of concerted union action;
(4) organizing, managing, or assisting union conventions, meetings, rallies,
referenda, teach-ins, seminars, conferences and institutes;
(5) any form of participation or involvement in representation proceedings,
representation elections, consent elections, union elections; and
(6) other activities or actions analogous to the foregoing.
(b) This prohibition shall equally apply to foreign donations, grants or other
forms of assistance, in cash or in kind, given directly or indirectly to any
employer or employers organization to support any activity or activities
affecting trade unions.
(c) The Secretary of Labor shall promulgate rules and regulations to
regulate and control the giving and receiving of such donations, grants, or
other forms of assistance, including the mandatory reporting of the
amounts of the donations or grants, the specific recipients thereof, the
projects or activities proposed to be supported, and their duration.
ART. 271. Applicability to farm tenants and rural workers. - The provisions
of this Title pertaining to foreign organizations and activities shall be
deemed applicable likewise to all organizations of farm tenants, rural
workers, and the like: Provided, That in appropriate cases, the Secretary of
Agrarian Reform shall exercise the powers and responsibilities vested by
this Title in the Secretary of Labor.
Chapter IV
PENALTIES FOR VIOLATION
ART. 272. Penalties. - (a) Any person violating any of the provisions of
Article 264 of this Code shall be punished by a fine of not less than one
thousand pesos (P1,000.00) nor more than ten thousand pesos
(P10,000.00) and/or imprisonment for not less than three months nor more
than three (3) years, or both such fine and imprisonment, at the discretion
of the court. Prosecution under this provision shall preclude prosecution for
the same act under the Revised Penal Code, and vice versa.
(b) Upon the recommendation of the Minister of Labor and Employment
and the Minister of National Defense, foreigners who violate the provisions
of this Title shall be subject to immediate and summary deportation by the
Commission on Immigration and Deportation and shall be permanently
barred from re-entering the country without the special permission of the
President of the Philippines. (As amended by Section 16, Batas Pambansa
Bilang 130 and Section 7, Batas Pambansa Bilang 227).
Title IX
SPECIAL PROVISIONS
ART. 273. Study of labor-management relations. - The Secretary of Labor
shall have the power and it shall be his duty to inquire into:
(a) the existing relations between employers and employees in the
Philippines;
(b) the growth of associations of employees and the effect of such
associations upon employer-employee relations;
(c) the extent and results of the methods of collective bargaining in the
determination of terms and conditions of employment;
(d) the methods which have been tried by employers and associations of
employees for maintaining mutually satisfactory relations;
(e) desirable industrial practices which have been developed through
collective bargaining and other voluntary arrangements;
(f) the possible ways of increasing the usefulness and efficiency of
collective bargaining for settling differences;
(g) the possibilities for the adoption of practical and effective methods of
labor-management cooperation;
(h) any other aspects of employer-employee relations concerning the
promotion of harmony and understanding between the parties; andchan
robles virtual law library
(i) the relevance of labor laws and labor relations to national development.
The Secretary of Labor shall also inquire into the causes of industrial unrest
and take all the necessary steps within his power as may be prescribed by
law to alleviate the same, and shall from time to time recommend the
enactment of such remedial legislation as in his judgment may be desirable
for the maintenance and promotion of industrial peace.
ART. 274. Visitorial power. - The Secretary of Labor and Employment or his
duly authorized representative is hereby empowered to inquire into the
financial activities of legitimate labor organizations upon the filing of a
complaint under oath and duly supported by the written consent of at least
twenty percent (20%) of the total membership of the labor organization
concerned and to examine their books of accounts and other records to
determine compliance or non-compliance with the law and to prosecute any
violations of the law and the union constitution and by-laws: Provided, That
such inquiry or examination shall not be conducted during the sixty (60)-
day freedom period nor within the thirty (30) days immediately preceding
the date of election of union officials. (As amended by Section 31, Republic
Act No. 6715, March 21, 1989).
ART. 275. Tripartism and tripartite conferences. - (a) Tripartism in labor
relations is hereby declared a State policy. Towards this end, workers and
employers shall, as far as practicable, be represented in decision and policy-
making bodies of the government.
(b) The Secretary of Labor and Employment or his duly authorized
representatives may, from time to time, call a national, regional, or
industrial tripartite conference of representatives of government, workers
and employers for the consideration and adoption of voluntary codes of
principles designed to promote industrial peace based on social justice or to
align labor movement relations with established priorities in economic and
social development. In calling such conference, the Secretary of Labor and
Employment may consult with accredited representatives of workers and
employers. (As amended by Section 32, Republic Act No. 6715, March 21,
1989).
ART. 276. Government employees. - The terms and conditions of
employment of all government employees, including employees of
government-owned and controlled corporations, shall be governed by the
Civil Service Law, rules and regulations. Their salaries shall be standardized
by the National Assembly as provided for in the New Constitution. However,
there shall be no reduction of existing wages, benefits and other terms and
conditions of employment being enjoyed by them at the time of the
adoption of this Code.
ART. 277. Miscellaneous provisions. - (a) All unions are authorized to collect
reasonable membership fees, union dues, assessments and fines and other
contributions for labor education and research, mutual death and
hospitalization benefits, welfare fund, strike fund and credit and cooperative
undertakings. (As amended by Section 33, Republic Act No. 6715, March
21, 1989).
(b) Subject to the constitutional right of workers to security of tenure and
their right to be protected against dismissal except for a just and authorized
cause and without prejudice to the requirement of notice under Article 283
of this Code, the employer shall furnish the worker whose employment is
sought to be terminated a written notice containing a statement of the
causes for termination and shall afford the latter ample opportunity to be
heard and to defend himself with the assistance of his representative if he
so desires in accordance with company rules and regulations promulgated
pursuant to guidelines set by the Department of Labor and Employment.
Any decision taken by the employer shall be without prejudice to the right
of the worker to contest the validity or legality of his dismissal by filing a
complaint with the regional branch of the National Labor Relations
Commission. The burden of proving that the termination was for a valid or
authorized cause shall rest on the employer. The Secretary of the
Department of Labor and Employment may suspend the effects of the
termination pending resolution of the dispute in the event of a prima facie
finding by the appropriate official of the Department of Labor and
Employment before whom such dispute is pending that the termination may
cause a serious labor dispute or is in implementation of a mass lay-off. (As
amended by Section 33, Republic Act No. 6715, March 21, 1989).
(c) Any employee, whether employed for a definite period or not, shall,
beginning on his first day of service, be considered as an employee for
purposes of membership in any labor union. (As amended by Section 33,
Republic Act No. 6715).
(d) No docket fee shall be assessed in labor standards disputes. In all other
disputes, docket fees may be assessed against the filing party, provided
that in bargaining deadlock, such fees shall be shared equally by the
negotiating parties.
(e) The Minister of Labor and Employment and the Minister of the Budget
shall cause to be created or reclassified in accordance with law such
positions as may be necessary to carry out the objectives of this Code and
cause the upgrading of the salaries of the personnel involved in the Labor
Relations System of the Ministry. Funds needed for this purpose shall be
provided out of the Special Activities Fund appropriated by Batas Pambansa
Blg. 80 and from annual appropriations thereafter. (Incorporated by Batas
Pambansa Bilang 130, August 21, 1981).
(f) A special Voluntary Arbitration Fund is hereby established in the Board
to subsidize the cost of voluntary arbitration in cases involving the
interpretation and implementation of the Collective Bargaining Agreement,
including the Arbitrators fees, and for such other related purposes to
promote and develop voluntary arbitration. The Board shall administer the
Special Voluntary Arbitration Fund in accordance with the guidelines it may
adopt upon the recommendation of the Council, which guidelines shall be
subject to the approval of the Secretary of Labor and Employment.
Continuing funds needed for this purpose in the initial yearly amount of
fifteen million pesos (P15,000,000.00) shall be provided in the 1989 annual
general appropriations acts. chan robles virtual law library
The amount of subsidy in appropriate cases shall be determined by the
Board in accordance with established guidelines issued by it upon the
recommendation of the Council.
The Fund shall also be utilized for the operation of the Council, the training
and education of Voluntary Arbitrators, and the Voluntary Arbitration
Program. (As amended by Section 33, Republic Act No. 6715, March 21,
1989).
(g) The Ministry shall help promote and gradually develop, with the
agreement of labor organizations and employers, labor-management
cooperation programs at appropriate levels of the enterprise based on the
shared responsibility and mutual respect in order to ensure industrial peace
and improvement in productivity, working conditions and the quality of
working life. (Incorporated by Batas Pambansa Bilang 130, August 21,
1981).
(h) In establishments where no legitimate labor organization exists, labor-
management committees may be formed voluntarily by workers and
employers for the purpose of promoting industrial peace. The Department
of Labor and Employment shall endeavor to enlighten and educate the
workers and employers on their rights and responsibilities through labor
education with emphasis on the policy thrusts of this Code. (As amended by
Section 33, Republic Act No. 6715, March 21, 1989).
(i) To ensure speedy labor justice, the periods provided in this Code within
which decisions or resolutions of labor relations cases or matters should be
rendered shall be mandatory. For this purpose, a case or matter shall be
deemed submitted for decision or resolution upon the filing of the last
pleading or memorandum required by the rules of the Commission or by
the Commission itself, or the Labor Arbiter, or the Director of the Bureau of
Labor Relations or Med-Arbiter, or the Regional Director.
Upon expiration of the corresponding period, a certification stating why a
decision or resolution has not been rendered within the said period shall be
issued forthwith by the Chairman of the Commission, the Executive Labor
Arbiter, or the Director of the Bureau of Labor Relations or Med-Arbiter, or
the Regional Director, as the case may be, and a copy thereof served upon
the parties.
Despite the expiration of the applicable mandatory period, the aforesaid
officials shall, without prejudice to any liability which may have been
incurred as a consequence thereof, see to it that the case or matter shall be
decided or resolved without any further delay. (Incorporated by Section 33,
Republic Act No. 6715, March 21, 1989).
BOOK SIX
POST EMPLOYMENT
Title I
TERMINATION OF EMPLOYMENT
ART. 278. Coverage. - The provisions of this Title shall apply to all
establishments or undertakings, whether for profit or not.
ART. 279. Security of tenure. - In cases of regular employment, the
employer shall not terminate the services of an employee except for a just
cause or when authorized by this Title. An employee who is unjustly
dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to the
time of his actual reinstatement. (As amended by Section 34, Republic Act
No. 6715, March 21, 1989).
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 service 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.
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.
ART. 282. Termination by employer. - An employer may terminate an
employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful
orders of his employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by
his employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the person
of his employer or any immediate member of his family or his duly
authorized representatives; and
(e) Other causes analogous to the foregoing.
ART. 283. Closure of establishment and reduction of personnel. - The
employer may also terminate the employment of any employee due to the
installation of labor-saving devices, redundancy, retrenchment to prevent
losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month before the
intended date thereof. In case of termination due to the installation of
labor-saving devices or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least his one (1) month pay or
to at least one (1) month pay for every year of service, whichever is higher.
In case of retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to serious
business losses or financial reverses, the separation pay shall be equivalent
to one (1) month pay or at least one-half (1/2) month pay for every year of
service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year.
ART. 284. Disease as ground for termination. - An employer may terminate
the services of an employee who has been found to be suffering from any
disease and whose continued employment is prohibited by law or is
prejudicial to his health as well as to the health of his co-employees:
Provided, That he is paid separation pay equivalent to at least one (1)
month salary or to one-half (1/2) month salary for every year of service,
whichever is greater, a fraction of at least six (6) months being considered
as one (1) whole year.
ART. 285. Termination by employee. - (a) An employee may terminate
without just cause the employee-employer relationship by serving a written
notice on the employer at least one (1) month in advance. The employer
upon whom no such notice was served may hold the employee liable for
damages.
(b) An employee may put an end to the relationship without serving any
notice on the employer for any of the following just causes:
1. Serious insult by the employer or his representative on the honor and
person of the employee;
2. Inhuman and unbearable treatment accorded the employee by the
employer or his representative;
3. Commission of a crime or offense by the employer or his representative
against the person of the employee or any of the immediate members of
his family; and
4. Other causes analogous to any of the foregoing.
ART. 286. When employment not deemed terminated. - The bona-fide
suspension of the operation of a business or undertaking for a period not
exceeding six (6) months, or the fulfillment by the employee of a military or
civic duty shall not terminate employment. In all such cases, the employer
shall reinstate the employee to his former position without loss of seniority
rights if he indicates his desire to resume his work not later than one (1)
month from the resumption of operations of his employer or from his relief
from the military or civic duty.
Title II
RETIREMENT FROM THE SERVICE
ART. 287. Retirement. - Any employee may be retired upon reaching the
retirement age established in the collective bargaining agreement or other
applicable employment contract.
In case of retirement, the employee shall be entitled to receive such
retirement benefits as he may have earned under existing laws and any
collective bargaining agreement and other agreements: Provided, however,
That an employees retirement benefits under any collective bargaining and
other agreements shall not be less than those provided therein.
chanroblesvirtuallawlibrary
In the absence of a retirement plan or agreement providing for retirement
benefits of employees in the establishment, an employee upon reaching the
age of sixty (60) years or more, but not beyond sixty-five (65) years which
is hereby declared the compulsory retirement age, who has served at least
five (5) years in the said establishment, may retire and 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. chanroblesvirtuallawlibrary
Unless the parties provide for broader inclusions, the term one-half (1/2)
month salary shall mean fifteen (15) days plus one-twelfth (1/12) of the
13th month pay and the cash equivalent of not more than five (5) days of
service incentive leaves.
Retail, service and agricultural establishments or operations employing not
more than ten (10) employees or workers are exempted from the coverage
of this provision.
Violation of this provision is hereby declared unlawful and subject to the
penal provisions under Article 288 of this Code.
BOOK SEVEN
TRANSITORY AND FINAL PROVISIONS
Title I
PENAL PROVISIONS AND LIABILITIES
ART. 288. Penalties. - Except as otherwise provided in this Code, or unless
the acts complained of hinge on a question of interpretation or
implementation of ambiguous provisions of an existing collective bargaining
agreement, any violation of the provisions of this Code declared to be
unlawful or penal in nature shall be punished with a fine of not less than
One Thousand Pesos (P1,000.00) nor more than Ten Thousand Pesos
(P10,000.00) or imprisonment of not less than three months nor more than
three years, or both such fine and imprisonment at the discretion of the
court.
In addition to such penalty, any alien found guilty shall be summarily
deported upon completion of service of sentence.
chanroblesvirtuallawlibrary
Any provision of law to the contrary notwithstanding, any criminal offense
punished in this Code, shall be under the concurrent jurisdiction of the
Municipal or City Courts and the Courts of First Instance. (As amended by
Section 3, Batas Pambansa Bilang 70).
ART. 289. Who are liable when committed by other than natural person. - If
the offense is committed by a corporation, trust, firm, partnership,
association or any other entity, the penalty shall be imposed upon the guilty
officer or officers of such corporation, trust, firm, partnership, association or
entity.
Title II
PRESCRIPTION OF OFFENSES AND CLAIMS
ART. 290. Offenses. - Offenses penalized under this Code and the rules
and regulations issued pursuant thereto shall prescribe in three (3) years.
All unfair labor practice arising from Book V shall be filed with the
appropriate agency within one (1) year from accrual of such unfair labor
practice; otherwise, they shall be forever barred.
ART. 291. Money claims. - All money claims arising from employer-
employee relations accruing during the effectivity of this Code shall be filed
within three (3) years from the time the cause of action accrued; otherwise
they shall be forever barred.
All money claims accruing prior to the effectivity of this Code shall be filed
with the appropriate entities established under this Code within one (1)
year from the date of effectivity, and shall be processed or determined in
accordance with the implementing rules and regulations of the Code;
otherwise, they shall be forever barred.
Workmens compensation claims accruing prior to the effectivity of this
Code and during the period from November 1, 1974 up to December 31,
1974, shall be filed with the appropriate regional offices of the Department
of Labor not later than March 31, 1975; otherwise, they shall forever be
barred. The claims shall be processed and adjudicated in accordance with
the law and rules at the time their causes of action accrued.
ART. 292. Institution of money claims. - Money claims specified in the
immediately preceding Article shall be filed before the appropriate entity
independently of the criminal action that may be instituted in the proper
courts.
Pending the final determination of the merits of money claims filed with the
appropriate entity, no civil action arising from the same cause of action
shall be filed with any court. This provision shall not apply to employees
compensation case which shall be processed and determined strictly in
accordance with the pertinent provisions of this Code.
Title III
TRANSITORY AND FINAL PROVISIONS
ART. 293. Application of law enacted prior to this Code. - All actions or
claims accruing prior to the effectivity of this Code shall be determined in
accordance with the laws in force at the time of their accrual.
ART. 294. Secretary of Labor to initiate integration of maternity leave
benefits. - Within six (6) months after this Code takes effect, the Secretary
of Labor shall initiate such measures as may be necessary for the
integration of maternity leave benefits into the Social Security System, in
the case of private employment, and the Government Service Insurance
System, in the case of public employment.
ART. 295. Funding of the Overseas Employment Development Board and
the National Seamens Board referred to in Articles 17 and 20, respectively,
of this Code shall initially be funded out of the unprogrammed fund of the
Department of Labor and the National Manpower and Youth Council.
ART. 296. Termination of the workmens compensation program. - The
Bureau of Workmens Compensation, Workmens Compensation
Commission, and Workmens Compensation Units in the regional offices of
the Department of Labor shall continue to exercise the functions and the
respective jurisdictions over workmens compensation cases vested upon
them by Act No. 3428, as amended, otherwise known as the Workmens
Compensation Act until March 31, 1976. Likewise, the term of office of
incumbent members of the Workmens Compensation Commission,
including its Chairman and any commissioner deemed retired as of
December 31, 1975, as well as the present employees and officials of the
Bureau of Workmens Compensation, Workmens Compensation
Commission and the Workmens Compensation Units shall continue up to
that date. Thereafter, said offices shall be considered abolished and all
officials and personnel thereof shall be transferred to and mandatorily
absorbed by the Department of Labor, subject to Presidential Decree No. 6,
Letters of Instructions Nos. 14 and 14-A and the Civil Service Law and
rules. chanroblesvirtuallawlibrary
Such amount as may be necessary to cover the operational expenses of the
Bureau of Workmens Compensation and the Workmens Compensation
Units, including the salaries of incumbent personnel for the period up to
March 31, 1976 shall be appropriated from the unprogrammed funds of the
Department of Labor.
ART. 297. Continuation of insurance policies and indemnity bonds. - All
workmens compensation insurance policies and indemnity bonds for self-
insured employers existing upon the effectivity of this Code shall remain in
force and effect until the expiration dates of such policies or the lapse of
the period of such bonds, as the case may be, but in no case beyond
December 31, 1974. Claims may be filed against the insurance carriers
and/or self-insured employers for causes of action which accrued during the
existence of said policies or authority to self-insure.
ART. 298. Abolition of the Court of Industrial Relations and the National
Labor Relations Commission. - The Court of Industrial Relations and the
National Labor Relations Commission established under Presidential Decree
No. 21 are hereby abolished. All unexpended funds, properties, equipment
and records of the Court of Industrial Relations, and such of its personnel
as may be necessary, are hereby transferred to the Commission and to its
regional branches. All unexpended funds, properties and equipment of the
National Labor Relations Commission established under Presidential Decree
No. 21 are transferred to the Bureau of Labor Relations. Personnel not
absorbed by or transferred to the Commission shall enjoy benefits granted
under existing laws.
ART. 299. Disposition of pending cases. - All cases pending before the
Court of Industrial Relations and the National Labor Relations Commission
established under Presidential Decree No. 21 on the date of effectivity of
this Code shall be transferred to and processed by the corresponding labor
relations divisions or the National Labor Relations Commission created
under this Code having cognizance of the same in accordance with the
procedure laid down herein and its implementing rules and regulations.
Cases on labor relations on appeal with the Secretary of Labor or the Office
of the President of the Philippines as of the date of effectivity of this Code
shall remain under their respective jurisdictions and shall be decided in
accordance with the rules and regulations in force at the time of appeal.
All workmens compensation cases pending before the Workmens
Compensation Units in the regional offices of the Department of Labor and
those pending before the Workmens Compensation Commission as of
March 31, 1975, shall be processed and adjudicated in accordance with the
law, rules and procedure existing prior to the effectivity of the Employees
Compensation and State Insurance Fund. chanroblesvirtuallawlibrary
ART. 300. Personnel whose services are terminated. - Personnel of agencies
or any of their subordinate units whose services are terminated as a result
of the implementation of this Code shall enjoy the rights and protection
provided in Sections 5 and 6 of Republic Act numbered fifty-four hundred
and thirty five and such other pertinent laws, rules and regulations. In any
case, no lay-off shall be effected until funds to cover the gratuity and/or
retirement benefits of those laid off are duly certified as available.
ART. 301. Separability provisions. - If any provision or part of this Code, or
the application thereof to any person or circumstance, is held invalid, the
remainder of this code, or the application of such provision or part to other
persons or circumstances, shall not be affected thereby.
ART. 302. Repealing clause. - All labor laws not adopted as part of this
Code either directly or by reference are hereby repealed. All provisions of
existing laws, orders, decrees, rules and regulations inconsistent herewith
are likewise repealed. chanroblesvirtuallawlibrary
Done in the City of Manila, this 1st day of May in the year of our Lord,
nineteen hundred and seventy four.
(Sgd.) FERDINAND E. MARCOS
President, Republic of the Philippines
AFP MUTUAL BENEFIT ASSOCIATION, INC., petitioner vs. NATIONAL
LABOR RELATIONS COMMISSION and EUTIQUIO BUSTAMANTE,
respondents.1997 Jan 283rd DivisionG.R. No. 102199D E C I S I O N
The determination of the proper forum is crucial because the filing of the
petition or complaint in the wrong court or tribunal is fatal, even for a
patently meritorious claim. More specifically, labor arbiters and the National
Labor Relations Commission have no jurisdiction to entertain and rule on
money claims where no employer-employee relations is involved. Thus, any
such award rendered without jurisdiction is a nullity.
This petition for certiorari under Rule 65, Rules of Court seeks to annul the
Resolution 1 of the National Labor Relations Commission, promulgated
September 27, 1991, in NLRC-NCR Case No. 00-02-01196-90, entitled
"Eutiquio Bustamante vs. AFP Mutual Benefit Association, Inc.," affirming
the decision of the labor arbiter which ordered payment of the amount of
P319,796.00 as insurance commissions to private respondent.
The Antecedent Facts
The facts are simple. Private respondent Eutiquio Bustamante had been an
insurance underwriter of petitioner AFP Mutual Benefit Association, Inc.
since 1975. The Sales Agent's Agreement between them provided: 2
B. Duties and Obligations:
1. During the lifetime of this Agreement, the SALES AGENT (private
respondent) shall solicit exclusively for AFPMBAI (petitioner), and shall be
bound by the latter's policies, memo circulars, rules and regulations which it
may from time to time, revise, modify or cancel to serve its business
interests.
2. The SALES AGENT shall confine his business activities for AFPMBAI
while inside any military camp, installation or residence of military
personnel. He is free to solicit in the area for which he/she is licensed and
as authoriied, provided however, that AFPMBAI may from time to time,
assign him a specific area of responsibility and a production quota on a
case to case basis.
Xxx xxx xxx
C. Commission
1. The SALES AGENT shall be entitled to the commission due for all
premiums actually due and received by AFPMBAI out of life insurance
policies solicited and obtained by the SALES AGENT at the rates set forth in
the applicant's commission schedules hereto attached.
Xxx xxx xxx
D. General Provisions
1. There shall be no employer-employee relationship between the parties,
the SALES AGENT being hereby deemed an independent contractor.
As compensation, he received commissions based on the following
percentages of the premiums paid: 3
"30% of premium paid within the first year;10% of premium paid with the
second year;5% of the premium paid during the third year;3% of the
premium paid during the fourth year; and1% of the premium paid during
the fifth year up tothe tenth year.
On July 5, 1989, petitioner dismissed private respondent for
misrepresentation and for simultaneously selling insurance for another life
insurance company in violation of said agreement.
At the time of his dismissal, private respondent was entitled to accrued
commissions equivalent to twenty four (24) months per the Sales Agent
Agreement and as stated in the account summary dated July 5, 1989,
approved by Retired Brig. Gen. Rosalino Alquiza, president of petitioner-
company. Said summary showed that private respondent had a total
commission receivable of P438,835.00, of which only P78,039.89 had been
paid to him.
Private respondent wrote petitioner seeking the release of his commissions
for said 24 months. Petitioner, through Marketing Manager Juan
Concepcion, replied that he was entitled to only P75,000.00 to P100,000.00.
Hence, believing Concepcion's computations, private respondent signed a
quitclaim in favor of petitioner.
Sometime in October 1989, private respondent was informed that his check
was ready for release. In collecting his check, he discovered from a
document (account summary) attached to said check that his total
commissions for the 24 months actually amounted to P354,796.09. Said
document stated: 4
6. The total receivable for Mr. Bustamante out of the renewals and old
business generated since 1983 grosses P438,835.00 less his outstanding
obligation in the amount of P78,039.89 as of June 30, 1989, total expected
commission would amount to P354,796.09. From that figure at a 15%
compromise settlement this would mean P53,219.41 due him to settle his
claim.
Private respondent, however, was paid only the amount of P35,000.00.
On November 23, 1989, private respondent filed a complaint with the Office
of the Insurance Commissioner praying for the payment of the correct
amount of his commission. Atty. German C. Alejandria, Chief of the Public
Assistance and Information Division, Office of the Insurance Commissioner,
advised private respondent that it was the Department of Labor and
Employment that had jurisdiction over his complaint.
On February 26, 1990, private respondent filed his complaint with the
Department of Labor claiming: (1) commission for 2 years from termination
of employment equivalent to 30% of premiums remitted during
employment; (2) P354,796.00 as commission earned from renewals and old
business generated since 1983; (3) P100,000.00 as moral damages; and
(4) P100,000.00 as exemplary damages.
After submission of position papers, Labor Arbiter Jose G. de Vera rendered
his decision, dated August 24, 1990, the dispositive portion of which reads:
5
WHEREFORE, all the foregoing premises being considered, judgment is
hereby rendered declaring the dismissal of the complainant as just and
valid, and consequently, his claim for separation pay is denied. On his
money claim, the respondent company is hereby ordered to pay
complainant the sum of P319,796.00 plus attorney's fees in the amount of
P31,976.60.
All other claims of the complainant are dismissed for want of merit.
The labor arbiter relied on the Sales Agent's Agreement proviso that
petitioner could assign private respondent a specific area of responsibility
and a production quota, and read it as signalling the existence of employer-
employee relationship between petitioner and private respondent.
On appeal, the Second Division 6 of the respondent Commission affirmed
the decision of the Labor Arbiter. In the assailed Resolution, respondent
Commission found no reason to disturb said ruling of the labor arbiter and
ruled: 7
WHEREFORE, in view of the foregoing considerations, the subject appeal
should be as it is hereby, denied and the decision appealed from affirmed
SO ORDERED.
Hence, this petition.
The Issue
Petitioner contends that respondent Commission committed grave abuse of
discretion in ruling that the labor arbiter had jurisdiction over this case. At
the heart of the controversy is the issue of whether there existed an
employer-employee relationship between petitioner and private respondent.
Petitioner argues that, despite provisions B(1) and (2) of the Sales Agent's
Agreement, there is no employer-employee relationship between private
respondent and itself. Hence, respondent commission gravely abused its
discretion when it held that the labor arbiter had jurisdiction over the case.
The Court's Ruling
The petition is meritorious.
First Issue: Not All That Glitters Is Control
Well-settled is the doctrine that the existence of an employer-employee
relationship is ultimately a question of fact and that the findings thereon by
the labor arbiter and the National Labor Relations Commission shall be
accorded not only respect but even finality when supported by substantial
evidence. 8 The determinative factor in such finality is the presence of
substantial evidence to support said finding, otherwise, such factual
findings cannot bind this Court.
Respondent Commission concurred with the labor arbiter's findings that: 9
x x x The complainant's job as sales insurance agent is usually necessary
and desirable in the usual business of the respondent company. Under the
Sales Agents Agreement, the complainant was required to solicit exclusively
for the respondent company, and he was bound by the company policies,
memo circulars, rules and regulations which were issued from time to time.
By such requirement to follow strictly management policies, orders,
circulars, rules and regulations, it only shows that the respondent had
control or reserved the right to control the complainant's work as solicitor.
Complainant was not an independent contractor as he did not carry on an
independent business other than that of the company's . . .
To this, respondent Commission added that the Sales Agent's Agreement
specifically provided that petitioner may assign private respondent a specific
area of responsibility and a production quota. From there, it concluded that
apparently there is that exercise of control by the employer which is the
most important element in determining employer- employee relationship.
10
We hold, however, that respondent Commission misappreciated the facts of
the case. Time and again, the Court has applied the "four-fold" test in
determining the existence of employer-employee relationship. This test
considers the following elements: (1) the power to hire; (2) the payment of
wages; (3) the power to dismiss; and (4) the power to control, the last
being the most important element. 11
The difficulty lies in correctly assessing if certain factors or elements
properly indicate the presence of control. Anent the issue of exclusivity in
the case at bar, the fact that private respondent was required to solicit
business exclusively for petitioner could hardly be considered as control in
labor jurisprudence. Under Memo Circulars No. 2-81 12 and 2-85, dated
December 17, 1981 and August 7, 1985, respectively, issued by the
Insurance Commissioner, insurance agents are barred from serving more
than one insurance company, in order to protect the public and to enable
insurance companies to exercise exclusive supervision over their agents in
their solicitation work. Thus, the exclusivity restriction clearly springs from a
regulation issued by the Insurance Commission, and not from an intention
by petitioner to establish control over the method and manner by which
private respondent shall accomplish his work. This feature is not meant to
change the nature of the relationship between the parties, nor does it
necessarily imbue such relationship with the quality of control envisioned by
the law.
So too, the fact that private respondent was bound by company policies,
memo/circulars, rules and regulations issued from time to time is also not
indicative of control. In its Reply to Complainant's Position Paper, 13
petitioner alleges that the policies, memo/circulars, and rules and
regulations referred to in provision B(1) of the Sales Agent's Agreement are
only those pertaining to payment of agents' accountabilities, availment by
sales agents of cash advances for sorties, circulars on incentives and
awards to be given based on production, and other matters concerning the
selling of insurance, in accordance with the rules promulgated by the
Insurance Commission. According to the petitioner, insurance solicitors are
never affected or covered by the rules and regulations concerning
employee conduct and penalties for violations thereof, work standards,
performance appraisals, merit increases, promotions,
absenteeism/attendance, leaves of absence, management-union matters,
employee benefits and the like. Since private respondent failed to rebut
these allegations, the same are deemed admitted, or at least proven,
thereby leaving nothing to support the respondent Commission's conclusion
that the foregoing elements signified an employment relationship between
the parties.
In regard to the territorial assignments given to sales agents, this too
cannot be held as indicative of the exercise of control over an employee.
First of all, the place of work in the business of soliciting insurance does not
figure prominently in the equation. And more significantly, private
respondent failed to rebut petitioner's allegation that it had never issued
him any territorial assignment at all. Obviously, this Court cannot draw the
same inference from this feature as did the respondent Commission.
To restate, 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.
The presence of such power of control is indicative of an employment
relationship, while absence thereof is indicative of independent
contractorship. In other words, the test to determine the existence of
independent contractorship is whether one claiming to be an independent
contractor has contracted to do the work according to his own methods and
without being subject to the control of the employer except only as to the
result of the work. 14 Such is exactly the nature of the relationship between
petitioner and private respondent.
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. The distinction acquires
particular relevance in the case of an enterprise affected with public
interest, as is the business of insurance, and is on that account subject to
regulation by the State with respect, not only to the relations between
insurer and insured but also to the internal affairs of the insurance
company. Rules and regulations governing the conduct of the business are
provided for in the Insurance Code and enforced by the Insurance
Commissioner. It is, therefore, usual and expected for an insurande
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. . . . 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. 15
Private respondent's contention that he was petitioner's employee is belied
by the fact that he was free to sell insurance at any time as he was not
subject to definite hours or conditions of work and in turn was
compensated according to the result of his efforts. By the nature of the
business of soliciting insurance, agents are normally left free to devise ways
and means of persuading people to take out insurance. There is no
prohibition, as contended by petitioner, for private respondent to work for
as long as he does not violate the Insurance Code. As petitioner explains:
(Private respondent) was free to solicit life insurance anywhere he wanted
and he had free and unfettered time to pursue his business. He did not
have to punch in and punch out the bundy clock as he was not required to
report to the (petitioner's) office regularly. He was not covered by any
employee policies or regulations and not subject to the disciplinary action of
management on the basis of the Employee Code of Conduct. He could go
out and sell insurance at his own chosen time. He was entirely left to his
own choices of areas or territories, with no definite, much less supervised,
time schedule.
(Private respondent) had complete control over his occupation and jurisdiction over a cause of action. 20 Moreover, in the proceedings below,
(petitioner) did not exercise any right of Control and Supervision over his petitioner consistently challenged the jurisdiction of the labor arbiter 21 and
performance except as to the payment of commission the amount of which respondent Commission. 22
entirely depends on the sole efforts of (private respondent). He was free to
engage in other occupation or practice other profession for as long as he It remains a basic fact in law that the choice of the proper forum is crucial
did not commit any violation of the ethical standards prescribed in the Sales as the decision of a court or tribunal without jurisdiction is a total nullity. 23
Agent's Agreement. 16 A void judgment for want of jurisdiction is no judgment at all. It cannot be
the source of any right nor the creator of any obligation. All acts performed
Although petitioner could have, theoretically, disapproved any of private pursuant to it and all claims emanating from it have no legal effect. Hence,
respondent's transactions, what could be disapproved was only the result of it can never become final. ". . . (I)t may be said to be a lawless thing which
the work, and not the means by which it was accomplished. can be treated as an outlaw and slain at sight, or ignored wherever and
whenever it exhibits its head." 24
The "control" which the above factors indicate did not sum up to the power
to control private respondent's conduct in and mode of soliciting insurance. The way things stand, it becomes unnecessary to consider the merits of
On the contrary, they clearly indicate that the juridical element of control private respondent's claim for unpaid commission. Be that as it may, this
had been absent in this situation. Thus, the Court is constrained to rule that ruling is without prejudice to private respondent's right to file a suit for
no employment relationship had ever existed between the parties. collection of unpaid commissions against petitioner with the proper forum
and within the proper period.
Second Issue: Jurisdiction of RespondentCommission & Labor Arbiter
WHEREFORE, the petition is hereby GRANTED, and the assailed Resolution
Under the contract invoked, private respondent had never been petitioner's is hereby SET ASIDE.
employee, but only its commission agent. As an independent contractor, his
claim for unpaid commission should have been litigated in an ordinary civil SO ORDERED.
action. 17
Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur.
The jurisdiction of labor arbiters and respondent Commission is set forth in
Article 217 of the Labor Code. 18 The unifying element running through
paragraphs (1) (6) of said provision is the consistent reference to cases or
disputes arising out of or in connection with an employer-employee
relationship. Prior to its amendment by Batas Pambansa Blg. 227 on June 1,
1982, this point was clear as the article included "all other cases arising
from employer-employee relation unless expressly excluded by this Code."
19 Without this critical element of employment relationship, the labor
arbiter and respondent Commission can never acquire jurisdiction over a
dispute. As in the case at bar. It was serious error on the part of the labor
arbiter to have assumed jurisdiction and adjudicated the claim. Likewise,
the respondent Commission's affirmance thereof.

Such lack of jurisdiction of a court or tribunal may be raised at any stage of

the proceedings, even on appeal. The doctrine of estoppel cannot be
properly invoked by respondent Commission to cure this fatal defect as it
cannot confer jurisdiction upon a tribunal that to begin with, was bereft of

DANILO B. TABAS, EDUARDO A. BONDOC, RAMON M. BRIONES, EDUARDO
R. ERISPE, JOEL MADRIAGA, ARTHUR M. ESPINO, AMARO BONA,
FERDINAND CRUZ, FEDERICO A. BELITA, ROBERTO P. ISLES, ELMER
ARMADA, EDUARDO UDOG, PETER TIANSING, MIGUELITA QUIAMBAO,
NOMER MATAGA, VIOLY ESTEBAN and LYDIA ORTEGA, petitioners, vs.
CALIFORNIA MANUFACTURING COMPANY, INC., LILY VICTORIA A.
AZARCON, NATIONAL LABOR RELATIONS COMMISSION, and HON.
EMERSON C. TUMANON, respondents.1989 Jan 262nd DivisionG.R. No.
80680
DECISION
On July 21, 1986, July 23, 1986, and July 28, 1986, the petitioners
petitioned the National Labor Relations Commission for reinstatement and
payment of various benefits, including minimum wage, overtime pay,
holiday pay, thirteen-month pay, and emergency cost of living allowance
pay, against the respondent, the California Manufacturing Company. 1
On October 7, 1986, after the cases had been consolidated, the California
Manufacturing Company (California) filed a motion to dismiss as well as a
position paper denying the existence of an employer-employee relation
between the petitioners and the company and, consequently, any liability
for payment of money claims. 2 On motion of the petitioners, Livi
Manpower Services, Inc. was impleaded as a party-respondent.
It appears that the petitioners were, prior to their stint with California,
employees of Livi Manpower Services, Inc. (Livi), which subsequently
assigned them to work as "promotional merchandisers" 3 for the former
firm pursuant to a manpower supply agreement. Among other things, the
agreement provided that California "has no control or supervisions
whatsoever over [Livi's] workers with respect to how they accomplish their
work or perform [California's] obligation"; 4 the Livi "is an independent
contractor and nothing herein contained shall be construed as creating
between [California] and [Livi] . . . the relationship of principal[-]agent or
employer[-] employee"; 5 that "it is hereby agreed that it is the sole
responsibility of [Livi] to comply with all existing as well as future laws,
rules and regulations pertinent to employment of labor"; 6 and that
"[California] is free and harmless from any liability arising from such laws or
from any accident that may befall workers and employees of [Livi] while in
the performance of their duties for [California]." 7
It was further expressly stipulated that the assignment of workers to
California shall be on a "seasonal and contractual basis"; that "[c]ost of
living allowance and the 10 legal holidays will be charged directly to
[California] at cost'; and that "[p]ayroll for the preceeding [sic] week [shall]
be delivered by [Livi] at [California's] premises." 8
The petitioners were then made to sign employment contracts with
durations of six months, upon the expiration of which they signed new
agreements with the same period, and so on. Unlike regular California
employees, who received not less than P2,823.00 a month in addition to a
host of fringe benefits and bonuses, they received P38.56 plus P15.00 in
allowance daily.
The petitioners now allege that they had become regular California
employees and demand, as a consequence whereof, similar benefits. They
likewise claim that pending further proceedings below, they were notified
by California that they would not be rehired. As a result, they filed an
amended complaint charging California with illegal dismissal.
California admits having refused to accept the petitioners back to work but
deny liability therefor for the reason that it is not, to begin with, the
petitioners' employer and that the "retrenchment" had been forced by
business losses as well as expiration of contracts. 9 It appears that
thereafter, Livi reabsorbed them into its labor pool on a "wait-in or standby"
status. 10
Amid these factual antecedents, the Court finds the single most important
issue to be: Whether the petitioners are California's or Livi's employees.
The labor arbiter's decision, 11 a decision affirmed on appeal, 12 ruled
against the existence of any employer-employee relation between the
petitioners and California ostensibly in the light of the manpower supply
contract, supra, and consequently, against the latter's liability as and for the
money claims demanded. In the same breath, however, the labor arbiter
absolved Livi from any obligation because the "retrenchment" in question
was allegedly "beyond its control." 13 He assessed against the firm,
nevertheless, separation pay and attorney's fees.
We reverse.
The existence of an employer-employees relation is a question of law and
being such, it cannot be made the subject of agreement. Hence, the fact
that the manpower supply agreement between Livi and California had
specifically designated the former as the petitioners' employer and had
absolved the latter from any liability as an employer, will not erase either
party's obligations as an employer, if an employer-employee relation
otherwise exists between the workers and either firm. At any rate, since the
agreement was between Livi and California, they alone are bound by it, and
the petitioners cannot be made to suffer from its adverse consequences.
This Court has consistently ruled that the determination of whether or not
there is an employer-employee relation depends upon four standards: (1)
the manner of selection and engagement of the putative employee; (2) the
mode of payment of wages; (3) the presence or absence of a power of
dismissal; and (4) the presence or absence of a power to control the
putative employee's conduct. 14 Of the four, the right-of-control test has
been held to be the decisive factor. 15
On the other hand, we have likewise held, based on Article 106 of the
Labor Code, hereinbelow reproduced:
ART. 106. Contractor or subcontractor. Whenever an employee enters
into a contract with another person for the performance of the former's
work, the employees of the contractor and of the latter's subcontractor, if
any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay wages of his
employees in accordance with this Code, the employer shall be jointly and
severally liable with his contractor or subcontractor to such employees to
the extent of the work performed under the contract, in the same manner
and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit
the contracting out of labor to protect the rights of workers established
under this Code. In so prohibiting or restricting, he may make appropriate
distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among
the parties involved shall be considered the employer for purposes of this
Code, to prevent any violation or circumvention of any provisions of this
Code.
There is "labor-only" contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the
workers recruited and placed by such person are performing activities
which are directly related to the principal business of such employer. In
such cases, the person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
that notwithstanding the absence of a direct employer-employee
relationship between the employer in whose favor work had been
contracted out by a "labor-only" contractor, and the employees, the former
has the responsibility, together with the "labor-only" contractor, for any
valid labor claims, 16 by operation of law. The reason, so we held, is that
the "labor-only" contractor is considered "merely an agent of the
employer," 17 and liability must be shouldered by either one or shared by
both. 18
There is no doubt that in the case at bar, Livi performs "manpower
services," 19 meaning to say, it contracts out labor in favor of clients. We
hold that it is one notwithstanding its vehement claims to the contrary, and
notwithstanding the provision of the contract that it is "an independent
contractor." 20 The nature of one's business is not determined by self-
serving appellations one attaches thereto but by the tests provided by
statute and prevailing case law. 21 The bare fact that Livi maintains a
separate line of business does not extinguish the equal fact that it has
provided California with workers to pursue the latter's own business. In this
connection, we do not agree that the petitioners had been made to perform
activities "which are not directly related to the general business of
manufacturing," 22 California's purported "principal operation activity." 23
The petitioner's had been charged with "merchandizing [sic] promotion or
sale of the products of [California] in the different sales outlets in Metro
Manila including task and occational [sic] price tagging," 24 an activity that
is doubtless, an integral part of the manufacturing business. It is not, then,
as if Livi had served as its (California's) promotions or sales arm or agent,
or otherwise, rendered a piece of work it (California) could not have itself
done; Livi, as a placement agency, had simply supplied it with the
manpower necessary to carry out its (California's) merchandising activities,
using its (California's) premises and equipment. 25
Neither Livi nor California can therefore escape liability, that is, assuming
one exists.
The fact that the petitioners have allegedly admitted being Livi's "direct
employees" 26 in their complaints is nothing conclusive. For one thing, the
fact that the petitioners were (are), will not absolve California since liability
has been imposed by legal operation. For another, and as we indicated, the
relations of parties must be judged from case to case and the decree of
law, and not by declarations of parties.
The fact that the petitioners have been hired on a "temporary or seasonal"
basis merely is no argument either. As we held in Philippine Bank of
Communications v. NLRC, 27 a temporary or casual employee, under Article
218 of the Labor Code, becomes regular after service of one year, unless he
has been contracted for a specific project. And we cannot say that
merchandising is a specific project for the obvious reason that it is an
activity related to the day-to-day operations of California.
It would have been different, we believe, had Livi been discretely a
promotions firm, and that California had hired it to perform the latter's
merchandising activities. For then, Livi would have been truly the employer
of its employees, and California, its client. The client, in that case, would
have been a mere patron, and not an employer. The employees would not
in that event be unlike waiters, who, although at the service of customers,
are not the latter's employees, but of the restaurant. As we pointed out in
the Philippine Bank of Communications case:
xxx xxx xxx
. . . The undertaking given by CESI in favor of the bank was not the
performance of a specific job ---- for instance, the carriage and delivery of
documents and parcels to the addresses thereof. There appear to be many
companies today which perform this discrete service, companies with their
own personnel who pick up documents and packages from the offices of a
client or customer, and who deliver such materials utilizing their own
delivery vans or motorcycles to the addressees. In the present case, the
undertaking of CESI was to provide its client the bank with a certain
number of persons able to carry out the work of messengers. Such
undertaking of CESI was complied with when the requisite number of
persons were assigned or seconded to the petitioner bank. Orpiada utilized
the premises and office equipment of the bank and not those of CESI.
Messengerial work ---- the delivery of documents to designated persons
whether within or without the bank premises ---- is of course directly
related to the day-to-day operations of the bank. Section 9(2) quoted above
does not require for its applicability that the petitioner must be engaged in
the delivery of items as a distinct and separate line of business.
Succinctly put, CESI is not a parcel delivery company: as its name indicates,
it is a recruitment and placement corporation placing bodies, as it were, in
different client companies for longer or shorter periods of time, . . . 28
In the case at bar, Livi is admittedly an "independent contractor providing
temporary services of manpower to its client." 29 When it thus provided
California with manpower, it supplied California with personnel, as if such
personnel had been directly hired by California. Hence, Article 106 of the
Code applies.
The Court need not therefore consider whether it is Livi or California which
exercises control over the petitioner vis-a-vis the four barometers referred
to earlier, since by fiction of law, either or both shoulder responsibility.
It is not that by dismissing the terms and conditions of the manpower
supply agreement, we have, hence, considered it illegal. Under the Labor
Code, genuine job contracts are permissible, provided they are genuine job
contracts. But, as we held in Philippine Bank of Communications, supra,
when such arrangements are resorted to "in anticipation of, and for the
very purpose of making possible, the secondment 30 of the employees from
the true employer, the Court will be justified in expressing its concern. For
then that would compromise the rights of the workers, especially their right
to security of tenure.
This brings us to the question: What is the liability of either Livi or
California?
The records show that the petitioners had been given an initial six-month
contract, renewed for another six months. Accordingly, under Article 281 of
the Code, they had become regular employees ---- of California ---- and had
acquired a secure tenure. Hence, they cannot be separated without due
process of law.
California resists reinstatement on the ground, first, and as we said, that
the petitioners are not its employees, and second, by reason of financial
distress brought about by "unfavorable political and economic atmosphere,"
31 "coupled by the February Revolution." 32 As to the first objection, we
reiterate that the petitioners are its employees and who, by virtue of the
required one-year length-of-service, have acquired a regular status. As to
the second, we are not convinced that California has shown enough
evidence, other than its bare say-so, that it had in fact suffered serious
business reverses as a result alone of the prevailing political and economic
climate. We further find the attribution to the February Revolution as a
cause for its alleged losses to be gratuitous and without basis in fact.
California should be warned that retrenchment of workers, unless clearly
warranted, has serious consequences not only on the State's initiatives to
maintain a stable employment record for the country, but more so, on the
workingman himself, amid an environment that is desperately scarce in
jobs. And, the National Labor Relations Commission should have known
better than to fall for such unwarranted excuses and nebulous claims.
WHEREFORE, the petition is GRANTED. Judgment is hereby RENDERED: (1)
SETTING ASIDE the decision, dated March 20, 1987, and the resolution,
dated August 19, 1987; (2) ORDERING the respondent, the California
Manufacturing Company, to REINSTATE the petitioners with full status and
rights of regular employees; and (3) ORDERING the respondent, the
California Manufacturing Company, and the respondents, Livi Manpower
Service, Inc. and/or Lily-Victoria A. Azarcon, to PAY, jointly and severally,
unto the petitioners: (a) backwages and differential pays effective as and
from the time they had acquired a regular status under the second
paragraph, of Section 281, of the Labor Code, but not to exceed three (3)
years, and (b) all such other and further benefits as may be provided by
existing collective bargaining agreement(s) or other relations, or by law,
beginning such time; and (4) ORDERING the private respondents to PAY
unto the petitioners attorney's fees equivalent to ten (10%) percent of all
money claims hereby awarded, in addition to those money claims.
The private respondents are likewise ORDERED to PAY the costs of this
suit.
IT IS SO ORDERED.
Melencio Herrera (Chairman), Paras, Padilla and Regalado, JJ., concur.

PHILIPPINE AIR LINES, INC., petitioner, vs. PHILIPPINE AIR LINES
EMPLOYEES ASSOCIATION and COURT OF INDUSTRIAL RELATIONS,
respondents.1967 Feb 28En BancG.R. No. L-21120D E C I S I O N
Appeal by certiorari, taken by the Philippine Air Lines, Inc. hereinafter
referred to as the PAL from an order of the Court of Industrial Relations
hereinafter referred to as the CIR the dispositive part of which reads:
"WHEREFORE, the Philippine Air Lines is hereby ordered to pay the four
claimants, Messrs. Fortunato Biangco, Hernando Guevarra, Bernardino
Abarrientos and Onofre Grio the Christmas bonus due them for the year
1950 to 1958; to credit in favor of Fortunato Biangco and Hernando
Guevarra 140 days each, sick leave which the two may use or enjoy
according to existing company rules and regulations regarding this
privilege, and to allow the four claimants the enjoyment of their earned and
accumulated free trip passes both here and abroad subject to the above-
mentioned plan the company may adopt. In order to effect early payment
of the Christmas bonus, the Chief Examiner of the Court or his duly
authorized representatives is hereby directed to examine pertinent records
of the company, to compute and determine the Christmas bonus due each
of the four claimants and to submit a report thereof immediately upon
completion of the same."
It appears that on May 4, 1950, PAL dismissed its above named four (4)
employees, who are members of the Philippine Air Lines Employees
Association hereinafter referred to as PALEA and that on July 13,
1954, the CIR en banc passed a resolution, in Case No. 465-V thereof,
directing the reinstatement of said employees "to their former or equivalent
positions in the company, with back wages from the date of their dismissal
to the date of their reinstatement, and without prejudice to their seniority
or other rights and privileges." This resolution was affirmed by the Supreme
Court, in G. R. No. L- 8197, on October 31, 1958.
On January 14, 1959, said employees were reinstated, and subsequently
their back wages, computed at the rate of their compensation at the time of
the aforementioned dismissal, less the wages and salaries earned by them
elsewhere during the lay-off period, were paid to them. The employees
objected to this deduction and the CIR sustained them, in a Resolution
dated May 22, 1960, which was reversed by the Supreme Court, on July 26,
1960, in G. R. No. L- 15544. Soon later, or on November 10, 1960, the
PALEA moved for the execution of the CIR resolution of July 13, 1954, as
regards the "other rights and privileges" therein mentioned, referring, more
specifically to: (1) Christmas bonus from 1950 to 1958; (2) accumulated
sick leave; (3) transportation allowance during the layoff period; and (4)
accumulated free trip passes, both domestic and international. By an order
dated October 8, 1962, the CIR granted this motion, except as regards the
sick leave of Onofre Grio and Bernardino Abarrientos, and the
transportation allowance, which were denied. Hence, this appeal.
PAL maintains that the CIR has erred in acting as it did, because: (1) the
aforementioned privileges were not specifically mentioned in the CIR
resolution of July 13, 1954; (2) the order of the CIR dated October 31,
1962, had, allegedly, the effect of amending said resolution; and (3) the
clause therein "without prejudice to their seniority or other rights and
privileges" should be construed prospectively, not retroactively.
Insofar as the Christmas bonus, the accumulated sick leave privileges and
the transportation allowance during the lay-off period, the PAL's contention
is clearly devoid of merit. The aforementioned clause must be considered in
the light of the entire context of the resolution of July 13, 1954 and of its
dispositive part. In ordering therein the "reinstatement" of said employees
with "back wages from the date of their dismissal to the date of their
reinstatement, and without prejudice to their seniority or other rights and
privileges", it is obvious that the resolution intended to restore the
employees to their status immediately prior to their dismissal.
Hence, it directed, not only their reinstatement, but, also, the payment of
their back wages during the period of their lay-off thus referring
necessarily to a period of time preceding their reinstatement and the
retention of "their seniority or other rights and privileges". Rights and
privileges at what time? Certainly, not after their reinstatement, but at the
time of their aforementioned dismissal. In other words, the reinstatement
was with back wages for the lay-off period, coupled with the "seniority or
other rights and privileges", attached to the status of the employees when
they were dismissed. To put it differently, the CIR treated said employees
as if they had not been absent from work and had been uninterruptedly
working during the lay-off period.
period, for said bonus, having been paid regularly, has become part of the
compensation of the employees. 1 Said employees are, likewise, entitled to
transportation allowance and the corresponding sick leave privileges. These
sick leave privileges are subject, however, to the following qualifications,
namely: (1) that the accumulated sick leave cannot exceed 140 days,
pursuant to the collective bargaining agreement between the PAL and the
PALEA, effective in 1959; and (2) that, pursuant to the same agreement,
which denies sick leave privileges to retired employees, Onofre Grio and
Bernardino Abarrientos, who have retired, are not entitled to said privileges.
The PAL'S appeal as regards the free trip passes is, however, well taken, for
the employees had no absolute right thereto, even if they had actually
rendered services during the lay-off period. The free trip passes were given,
neither automatically, nor indiscriminately. The employees had to apply
therefor and their applications were subject to PAL'S approval.
Wherefore, except as to the free trip passes for the layoff period, which
should not be deemed included in the "rights and privileges" awarded in the
resolution of July 13, 1954, and subject to the qualification that the
accumulated sick leave privileges cannot exceed 140 days, the appealed
resolution of October 8, 1962, is hereby affirmed in all other respects,
without special pronouncement as to costs. It is so ordered.
Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar, Sanchez
and Ruiz Castro, JJ., concur.

Thus, in Republic Steel Corporation vs. NLRB (114 F. 2d. 820), it was held
that, under a decree of the Circuit Court of Appeals and Order of the
National Labor Relations Board directing the employer to reinstate the
striking employees without prejudice to their seniority or other rights or
privileges, it was the intention of the Board and Court to provide that, upon
reinstatement the employees were to be treated in matters involving
seniority and continuity of employment as though they had not been absent
from work, and hence the reinstated employees were entitled to the
benefits of the employer's vacation plan for the year in which they were
reinstated and subsequent years upon the basis of continuity of service
computed as though they had been actually at work during the entire
period from the date of strike to the date of reinstatement.

As a consequence, the employees involved in the case at bar are entitled to

the Christmas bonus that PAL had given to all of its employees during said
 avoid the bringing about of an employer-employee relationship in their
enterprises because that judicial relation spawns obligations connected with
workmen's compensation, social security, medicare, minimum wage,
termination pay, and unionism. 1 In light of this observation, it behooves
this Court to be ever vigilant in Checking the unscrupulous efforts of some
of our entrepreneurs, primarily aimed at maximizing their return on
investments at the expense of the lowly workingman.

This petition for certiorari seeks the reversal of the Resolution 2 of public
respondent National Labor Relations Commission dated March 16, 1994
affirming with modification the decision of the Labor Arbiter, dated May 25,
1992, finding petitioners liable to pay private respondent the total amount
of P195,624.00 as separation pay and attorney's fees.

The relevant antecedents:

Private respondent Honorio Dagui was hired by Doa Aurora Suntay

Tanjangco in 1953 to take charge of the maintenance and repair of the
Tanjangco apartments and residential buildings. He was to perform
carpentry, plumbing, electrical and masonry work. Upon the death of Doa
Aurora Tanjangco in 1982, her daughter, petitioner Teresita Tanjangco
Quazon, took over the administration of all the Tanjangco properties. On
June 8, 1991, private respondent Dagui received the shock of his life when
Mrs. Quazon suddenly told him: "Wala ka nang trabaho mula ngayon," 3 on
the alleged ground that his work was unsatisfactory. On August 29, 1991,
private respondent, who was then already sixty-two (62) years old, filed a
complaint for illegal dismissal with the Labor Arbiter.

On May 25, 1992, Labor Arbiter Ricardo C. Nora rendered judgment, the
decretal portion of which reads:

AURORA LAND PROJECTS CORP. Doing business under the name "AURORA
PLAZA" and TERESITA T. QUAZON, petitioners, vs.
IN VIEW OF ALL THE FOREGOING, respondents Aurora Plaza and/or
Teresita Tanjangco Quazon are hereby ordered to pay the complainant the
NATIONAL LABOR RELATIONS COMMISSION and HONORIO DAGUI,
total amount of ONE HUNDRED NINETY FIVE THOUSAND SIX HUNDRED
respondents.1997 Jan 21st DivisionG.R. No. 114733D E C I S I O N
TWENTY FOUR PESOS (P195,624.00) representing complainant's separation
pay and the ten (10%) percent attorney's fees within ten (10) days from
The question as to whether an employer-employee relationship exists in a receipt of this Decision.
certain situation continues to bedevil the courts. Some businessmen try to
All other issues are dismissed for lack of merit. 4
Aggrieved, petitioners Aurora Land Projects Corporation and Teresita T.
Quazon appealed to the National Labor Relations Commission. The
Commission affirmed, with modification, the Labor Arbiter's decision in a
Resolution promulgated on March 16, 1994, in the following manner:
WHEREFORE, in view of the above considerations, let the appealed decision
be as it is hereby AFFIRMED with (the) MODIFICATION that complainant
must be paid separation pay in the amount of P88,920.00 instead of
P177,840.00. The award of attorney's fees is hereby deleted. 5
As a last recourse, petitioners filed the instant petition based on grounds
not otherwise succinctly and distinctly ascribed, viz:
I Since the establishment of Aurora Plaza, Dagui served therein only as a job
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN AFFIRMING THE
LABOR ARBITER'S DECISION SOLELY ON THE BASIS OF ITS STATEMENT
THAT "WE FAIL TO FIND ANY REASON OR JUSTIFICATION TO DISAGREE
WITH THE LABOR ARBITER IN HIS FINDING THAT HONORIO DAGUI WAS
DISMISSED BY THE RESPONDENT" (p. 7, RESOLUTION), DESPITE AND
WITHOUT EVEN BOTHERING TO CONSIDER THE GROUNDS STATED IN
PETITIONERS' APPEAL MEMORANDUM WHICH ARE PLAINLY
MERITORIOUS.
II
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN FINDING THAT
COMPLAINANT WAS EMPLOYED BY THE RESPONDENTS MORE SO "FROM
1953 TO 1991" (p. 3, RESOLUTION).
III
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN AWARDING
SEPARATION PAY IN FAVOR OF PRIVATE RESPONDENT MORE SO FOR THE
EQUIVALENT OF 38 YEARS OF ALLEGED SERVICE.
IV
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN HOLDING BOTH
PETITIONERS LIABLE FOR SEPARATION PAY. 6
It is our impression that the crux of this petition rests on two elemental
issues: (1) Whether or not private respondent Honorio Dagui was an
employee of petitioners; and (2) If he were, whether or not he was illegally
dismissed.
Petitioners insist that private respondent had never been their employee.
contractor. Dagui had control and supervision of whoever he would take to
perform a contracted job. On occasion, Dagui was hired only as a "tubero"
or plumber as the need arises in order to unclog sewerage pipes. Every
time his services were needed, he was paid accordingly. It was understood
that his job was limited to the specific undertaking of unclogging the pipes.
In effect, petitioners would like us to believe that private respondent Dagui
was an independent contractor, particularly a job contractor, and not an
employee of Aurora Plaza.
We are not persuaded.
Section 8, Rule VIII, Book III of the Implementing Rules and Regulations of
the Labor Code provides in part:
There is job contracting permissible under the Code if the following
conditions are met:
xxx xxx xxx
(2) The contractor has substantial capital or investment in the form of
tools, equipment, machineries, work premises, and other materials which
are necessary in the conduct of his business.
Honorio Dagui earns a measly sum of P180.00 a day (latest salary). 7
Ostensibly, and by no stretch of the imagination can Dagui qualify as a job
contractor. No proof was adduced by the petitioners to show that Dagui
was merely a job contractor, and it is absurd to expect that private
respondent, with such humble resources, would have substantial capital or
investment in the form of tools, equipment, and machineries, with which to
conduct the business of supplying Aurora Plaza with manpower and
services for the exclusive purpose of maintaining the apartment houses
owned by the petitioners herein.
The bare allegation of petitioners, without more, that private respondent
Dagui is a job contractor has been disbelieved by the Labor Arbiter and the
public respondent NLRC. Dagui, by the findings of both tribunals, was an
employee of the petitioners. We are not inclined to set aside these findings.
The issue whether or not an employer-employee relationship exists in a
given case is essentially a question of fact. 8 As a rule, repetitious though it
has become to state, this Court does not review supposed errors in the
decision of the NLRC which raise factual issues, because factual findings of
agencies exercising quasi-judicial functions [like public respondent NLRC]
are accorded not only respect but even finality, aside from the
consideration that this Court is essentially not a trier of facts. 9
However, we deem it wise to discuss this issue full-length if only to bolster
the conclusions reached by the labor tribunals, to which we fully concur.
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. 10 It is the so-called "control
test," and 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, 11 which constitute the most important index of the
existence of the employer-employee relationship. 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. 12
All these elements are present in the case at bar. Private respondent was
hired in 1953 by Doa Aurora Suntay Tanjangco (mother of Teresita
Tanjangco-Quazon), who was then the one in charge of the administration
of the Tanjangco's various apartments and other properties. He was
employed as a stay-in worker performing carpentry, plumbing, electrical
and necessary work (sic) needed in the repairs of Tanjangco's properties.
13 Upon the demise of Doa Aurora in 1982, petitioner Teresita Tanjangco-
Quazon took over the administration of these properties and continued to
employ the private respondent, until his unceremonious dismissal on June
8, 1991. 14
Dagui was not compensated in terms of profits for his labor or services like
an independent contractor. Rather, he was paid on a daily wage basis at
the rate of P180.00. 15 Employees are those who are compensated for their
labor or services by wages rather than by profits. 16 Clearly, Dagui fits
under this classification.
Doa Aurora and later her daughter petitioner Teresita Quazon evidently
had the power of dismissal for cause over the private respondent. 17
Finally, the records unmistakably show that the most important requisite of
control is likewise extant in this case. It should be borne in mind that the
power of control refers merely to the existence of the power and not to the
actual exercise thereof. It is not essential for the employer to actually
supervise the performance of duties of the employee; it is enough that the
former has a right to wield the power. 18 The establishment of petitioners
is engaged in the leasing of residential and apartment buildings. Naturally,
private respondent's work therein as a maintenance man had to be
performed within the premises of herein petitioners. In fact, petitioners do
not dispute the fact that Dagui reports for work from 7:00 o'clock in the
morning until 4:00 o'clock in the afternoon. It is not far-fetched to expect,
therefore, that Dagui had to observe the instructions and specifications
given by then Doa Aurora and later by Mrs. Teresita Quazon as to how his
work had to be performed. Parenthetically, since the job of a maintenance
crew is necessarily done within company premises, it can be inferred that
both Doa Aurora and Mrs. Quazon could easily exercise control on private
respondent whenever they please.
The employment relationship established, the next question would have to
be: What kind of an employee is the private respondent regular, casual or
probationary?
We find private respondent to be a regular employee, for Article 280 of the
Labor Code provides:
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 actually
exists.
As can be gleaned from this provision, 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. 19
Whichever standard is applied, private respondent qualifies as a regular
employee. As aptly ruled by the Labor Arbiter:
. . . As owner of many residential and apartment buildings in Metro Manila,
the necessity of maintaining and employing a permanent stay-in worker to
perform carpentry, plumbing, electrical and necessary work needed in the
repairs of Tanjangco's properties is readily apparent and is in fact needed.
So much so that upon the demise of Doa Aurora Tanjangco, respondent's
daughter Teresita Tanjangco-Quazon apparently took over the
administration of the properties and continued to employ complainant until
his outright dismissal on June 8, 1991. . . . 20
The jobs assigned to private respondent as maintenance man, carpenter,
plumber, electrician and mason were directly related to the business of
petitioners as lessors of residential and apartment buildings. Moreover, such
a continuing need for his services by herein petitioners is sufficient evidence
of the necessity and indispensability of his services to petitioners' business
or trade.
Private respondent Dagui should likewise be considered a regular employee
by the mere fact that he rendered service for the Tanjangcos for more than
one year, that is, beginning 1953 until 1982, under Doa Aurora; and then
from 1982 up to June 8, 1991 under the petitioners, for a total of twenty-
nine (29) and nine (9) years respectively. Owing to private respondent's
length of service, he became a regular employee, by operation of law, one
year after he was employed in 1953 and subsequently in 1982. In Baguio
Country Club Corp., v. NLRC, 21 we decided that it is more in consonance
with the intent and spirit of the law to rule that the status of regular
employment attaches to the casual employee on the day immediately after
the end of his first year of service. To rule otherwise is to impose a burden
on the employee which is not sanctioned by law. Thus, the law does not
provide the qualification that the employee must first be issued a regular
appointment or must first be formally declared as such before he can
acquire a regular status.
Petitioners argue, however, that even assuming arguendo that private
respondent can be considered an employee, he cannot be classified as a
regular employee. He was merely a project employee whose services were
hired only with respect to a specific job and only while the same exists, 22
thus falling under the exception of Article 280, paragraph 1 of the Labor
Code. Hence, it is claimed that he is not entitled to the benefits prayed for
and subsequently awarded by the Labor Arbiter as modified by public
respondent NLRC.
The circumstances of this case in light of settled case law do not, at all,
support this averment. Consonant with a string of cases beginning with
Ochoco v. NLRC, 23 followed by Philippine National Construction
Corporation v. NLRC, 24 Magante v. NLRC, 25 and Capitol Industrial
Construction Corporation v. NLRC, 26 if truly, private respondent was
employed as a "project employee," petitioners should have submitted a
report of termination to the nearest public employment office everytime his
employment is terminated due to completion of each project, as required by
Policy Instruction No. 20, which provides:
Project employees are not entitled to termination pay if they are terminated
as a result of the completion of the project or any phase thereof in which
they are employed, regardless of the number of project in which they have
been employed by a particular construction company. Moreover, the
company is not required to obtain a clearance from the Secretary of Labor
in connection with such termination. What is required of the company is a
report to the nearest Public Employment Office for statistical purposes.
Throughout the duration of private respondent's employment as
maintenance man, there should have been filed as many reports of
termination as there were projects actually finished, if it were true that
private respondent was only a project worker. Failure of the petitioners to
comply with this simple, but nonetheless compulsory, requirement is proof
that Dagui is not a project employee. 27
Coming now to the second issue as to whether or not private respondent
Dagui was illegally dismissed, we rule in the affirmative.
Jurisprudence abound as to the rule that the twin requirements of due
process, substantive and procedural, must be complied with, before a valid
dismissal exists. 28 Without which the dismissal becomes void. 29
The twin requirements of notice and hearing constitute the essential
elements of due process.
This simply means that the employer shall afford the worker ample
opportunity to be beard and to defend himself with the assistance of his
representative, if he so desires. 30 As held in the case of Pepsi Cola Bottling
Co. v. NLRC: 31
The law requires that the employer must furnish the worker sought to be
dismissed with two written notices before termination of employee can be
legally effected: (1) notice which apprises the employee of the particular
acts or omissions for which his dismissal is sought; and (2) the subsequent
notice which informs the employee of the employer's decision to dismiss
him (Section 13, BP 130; Sections, 2-6, Rule XIV, Book V Rules and
Regulations Implementing the Labor Code as amended), Failure to comply
with the requirements taints the dismissal with illegality. This procedure is
mandatory; in the absence of which, any judgment reached by
management is void and inexistent. (Tingson, Jr. v. NLRC, 185 SCRA 498
[1990]; National Service Corporation v. NLRC, 168 SCRA 122 [1988]; Ruffy
v. NLRC, 182 SCRA 365 [1990].
These mandatory requirements were undeniably absent in the case at bar.
Petitioner Quazon dismissed private respondent on June 8, 1991, without
giving him any written notice informing the worker herein of the cause for
his termination. Neither was there any hearing conducted in order to give
Dagui the opportunity to be heard and defend himself. He was simply told:
"Wala ka nang trabaho mula ngayon," allegedly because of poor
workmanship on a previous job. 32 The undignified manner by which
private respondent's services were terminated smacks of absolute denial of
the employee's right to due process and betrays petitioner Quazon's utter
lack of respect for labor. Such an attitude indeed deserves condemnation.
The Court, however, is bewildered why only an award for separation pay in
lieu of reinstatement was made by both the Labor Arbiter and the NLRC. No
backwages were awarded. It must be remembered that backwages and
reinstatement are two reliefs that should be given to an illegally dismissed
employee. They are separate and distinct from each other. In the event
that reinstatement is no longer possible, as in this case, 33 separation pay
is awarded to the employee. The award of separation pay is in lieu of
reinstatement and not of backwages. In other words, an illegally dismissed
employee is entitled to (1) either reinstatement, if viable, or separation pay
if reinstatement is no longer viable, and (2) backwages. 34 Payment of
backwages is specifically designed to restore an employee's income that
was lost because of his unjust dismissal. 35 On the other hand, payment of
separation pay is intended to provide the employee money during the
period in which he will be looking for another employment. 36
Considering, however, that the termination of private respondent Dagui was
made on June 8, 1991 or after the effectivity of the amendatory provision
of Republic Act No. 6715 on March 21, 1989, private respondent's
backwages should be computed on the basis of said law.
It is true that private respondent did not appeal the award of the Labor
Arbiter awarding separation pay sans backwages. While as a general rule, a
party who has not appealed is not entitled to affirmative relief other than
the ones granted in the decision of the court below, 37 law and
jurisprudence authorize a tribunal to consider errors, although unassigned,
if they involve (1) errors affecting the lower court's jurisdiction over the
subject matter, (2) plain errors not specified, and (3) clerical errors. 38 In
this case, the failure of the Labor Arbiter and the public respondent NLRC to
award backwages to the private respondent, who is legally entitled thereto
having been illegally dismissed, amounts to a "plain error" which we may
rectify in this petition, although private respondent Dagui did not bring any
appeal regarding the matter, in the interest of substantial justice. The
Supreme Court is clothed with ample authority to review matters, even if
they are not assigned as errors on appeal, if it finds that their consideration
is necessary in arriving at a just decision of the case. 39 Rules of procedure
are mere tools designed to facilitate the attainment of justice. Their strict
and rigid application, which would result in technicalities that tend to
frustrate rather than promote substantial justice, must always be avoided.
40 Thus, substantive rights like the award of backwages resulting from
illegal dismissal must not be prejudiced by a rigid and technical application
of the rules. 41
Petitioner Quazon argues that, granting the petitioner corporation should be
held liable for the claims of private respondent, she cannot be made jointly
and severally liable with the corporation, notwithstanding the fact that she
is the highest ranking officer of the company, since Aurora Plaza has a
separate juridical personality.
We disagree.
In the cases of Maglutac v. National Labor Relations Commission, 42 Chua
v. National Labor Relations Commission, 43 and A.C. Ransom Labor Union-
CCLU v. National Labor Relations Commission 44 we were consistent in
holding that the highest and most ranking officer of the corporation, which
in this case is petitioner Teresita Quazon as manager of Aurora Land
Projects Corporation, can be held jointly and severally liable with the
corporation for the payment of the unpaid money claims of its employees
who were illegally dismissed. In this case, not only was Teresita Quazon the
most ranking officer of Aurora Plaza at the time of the termination of the
private respondent, but worse, she had a direct hand in the private
respondent's illegal dismissal. A corporate officer is not personally liable for
the money claims of discharged corporate employees unless he acted with
evident malice and bad faith in terminating their employment. 45 Here, the
failure of petitioner Quazon to observe the mandatory requirements of due
process in terminating the services of Dagui evinced malice and bad faith
on her part, thus making her liable.
Finally, we must address one last point. Petitioners aver that, assuming that
private respondent can be considered an employee of Aurora Plaza,
petitioners cannot be held liable for separation pay for the duration of his
employment with Doa Aurora Tanjangco from 1953 up to 1982. If
petitioners should be held liable as employers, their liability for separation
pay should only be counted from the time Dagui was rehired by the
petitioners in 1982 as a maintenance man.
We agree.
Petitioners' liability for separation pay ought to be reckoned from 1982
when petitioner Teresita Quazon, as manager of Aurora Plaza, continued to
employ private respondent. From 1953 up to the death of Doa Aurora
sometime in 1982, private respondent's claim for separation pay should
have been filed in the testate or intestate proceedings of Doa Aurora. This
is because the demand for separation pay covered by the years 1953-1982
is actually a money claim against the estate of Doa Aurora, which claim
did not survive the death of the old woman. Thus, it must be filed against
her estate in accordance with Section 5, Rule 86 of the Revised Rules of
Court, to wit:
Sec. 5. Claims which must be filed under tire notice. If not filed, barred;
exceptions. All claims for money against the decedent, arising from
contract, express or implied, whether the same be due, not due, or
contingent, all claims for funeral expenses for the last sickness of the
decedent, and judgment for money against the decedent, must be filed
within the time limited in the notice; otherwise they are barred forever,
except that they may be set forth as counterclaims in any action that the
executor or administrator may bring against the claimants. . . .
WHEREFORE, the instant petition is partly GRANTED and the Resolution of
the public respondent National Labor Relations Commission dated March
16, 1994 is hereby MODIFIED in that the award of separation pay against
the petitioners shall be reckoned from the date private respondent was re-
employed by the petitioners in 1982, until June 8, 1991. In addition to
separation pay, full backwages are likewise awarded to private respondent,
inclusive of allowances, and other benefits or their monetary equivalent
pursuant to Article 279 46 of the Labor Code, as amended by Section 34 of
Republic Act No. 6715, computed from the time he was dismissed on June
8, 1991 up to the finality of this decision, without deducting therefrom the
earnings derived by private respondent elsewhere during the period of his
illegal dismissal, pursuant to our ruling in Osmalik Bustamante, et al. v.
National Labor Relations Commission. 47
No costs.
SO ORDERED.
Padilla, Bellosillo, Vitug and Kapunan, JJ., concur.

WILLIAM L. TIU, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and HERMES DELA CRUZ,
respondents.1996 Feb 21 2nd Division G.R. No. 95845
On February 18, 1986, private respondent filed a complaint, for illegal
dismissal, violation of the Minimum Wage Law and non-payment of the cost
of living allowances, legal holiday pay, service incentive pay and separation
pay, against petitioner. Petitioner denied that private respondent was his
employee. But after consideration of the parties' evidence, the Labor Arbiter
found that private respondent was an employee of petitioner and that he
had been illegally dismissed. The Labor Arbiter ordered petitioner to pay
private respondent the sum of P25,076.96, corresponding to the latter's
differentials, 13th month pay and separation pay. On appeal, the Labor
Arbiter's decision was affirmed in toto by the NLRC. Hence this petition for
certiorari. Petitioner alleges that the NLRC's decision was made in "reckless
disregard" of the applicable facts and law and that it amounts to a grave
abuse of discretion of the NLRC. 1
Petitioner, as operator of the D'Rough Riders Transportation, is engaged in
the transportation of passengers from Cebu City to the northern towns of
Cebu. Private respondent worked in petitioner's bus terminals as a
"dispatcher," assisting and guiding passengers and carrying their bags. The
Labor Arbiter and the NLRC found, and petitioner had admitted in his
position paper below, that private respondent was paid a regular daily wage
of P20.00.
Petitioner denies that private respondent was his employee. He alleges that
he did not have the power of selection and dismissal nor the power of
control over private respondent. According to petitioner, private
respondent, together with so-called "standbys," hung around his bus
terminals, assisting passengers with their baggages as "dispatchers."
Petitioner claims that, in league with "bad elements" in the locality who
threatened to cause damage to his passenger buses and scare passengers
away if petitioner and other bus operators did not let them, private
respondent and other "standbys" forced passengers to hire them as
baggage boys. Petitioner alleges that he had no choice but to allow private
respondent and other "standbys" to carry on their activities within the
premises of his bus terminals. 2 He also claims he allowed them to do so
even if their services as so-called "dispatchers" were not needed in his
business. Petitioner insists that as "dispatcher," private respondent worked
in his own way, without supervision by him.
The Labor Arbiter and the NLRC found private respondent to be an employment as such was in consideration of a chief dispatcher's exercise of
employee of petitioner, applying the Four-fold test, namely (a) who has the his duties to supervise and control subordinate dispatchers. Along this line,
power of selection and engagement of the employees; (b) who pays the Regino dela Cruz's testimony that D'Rough Riders does not exercise control
wages; (c) who has the power of dismissal, and (d) and who has the power over the complainant cannot preponderate over Exhibit "D."
to control the employees' conduct. The Labor Arbiter stated in his decision:
In fine, this Office finds that complainant was an employee of respondent.
Respondents would want this office to believe that the sum of P20.00 that
they pay complainant is ex gratia; hence, not compensation for services Affirming the Labor Arbiter decision, the NLRC held:
rendered. This is however belied by respondents' own allegation in their
position paper that, "for purposes of preservation of his transportation We perused at length the record of the instant case, analyzing in the
business, agreed to give each 'standby' a fixed daily rate; and in exchange, process, the grounds and supporting arguments advanced in the appeal
they would canvass, assist and help passengers of respondents' passenger and the reply thereto and we found no merit in the appeal.
trucks. This privilege or arrangement was made possible due to the efforts
and representation of complainant's father, Mr. Regino dela Cruz, who is
. . . A reading of the affidavit of Regino dela Cruz, a witness for the
close and known to the standbys and/or dispatchers." The impression that
respondent who is the Chief Dispatcher and father of the complainant
this office gets from said allegation is that the P20.00 received by
would reveal that it was he who included the complainant as one of the
complainant represents the value that respondents attach to complainant's
dispatchers of the respondents. Considering that Regino dela Cruz is the
services; hence, it is remuneration for services rendered. Respondent's
Chief Dispatcher, the selection and engagement of the complainant as a
admission of regular payment of such an amount, already establishes the
dispatcher of the respondents was made thru him and with the
existence of one of the factors that indicate employment relationship.
acquiescence of the management.

The right to hire and fire, on the other hand, has been indubitably
Also, it is admitted by the respondents, as borne out by the records,
established by complainant's Exhibit A (rebuttal) which remains untraversed
including the affidavit of Regino dela Cruz, that complainant was receiving a
and unrefuted, a translation of its contents of which are hereunder quoted
fixed daily rate from the respondent. The Labor Arbiter is therefore correct
for quick and easy reference:
when she ruled that what complainant received from the respondents is a
remuneration for services rendered.
Since there was an agreement for your return that when you are caught
that you are inside the terminal you are to be dismissed outright and you
The power of dismissal which respondents exercised over the person of the
agreed to this condition so that last Tuesday you were caught taking a bath
complainant is clearly established by complainants' Exhibit "A" (rebuttal).
inside the terminal so that from now on you are no longer with the
This exhibit refers to a disciplinary memorandum to the complainant
company "you are dismissed" because you broke the agreement.
written in Visayan dialect. This exhibit was not refuted by the respondents.

Evident therefrom is management's unequivocal language as regards its

Also, we agree with the observation of the Labor Arbiter that respondent's
exercise of the prerogative to dismiss.
Chief Dispatcher is exercising his supervision and control over the
complainant who is a dispatcher as clearly manifested in Exhibit "D"
Complainant's Exhibit "D" rebuttal, respondent's official document, (rebuttal) for the complainant.
reflecting the designation of respondent's witness, (Regino) dela Cruz as
Chief Dispatcher, likewise buttresses complainant's claim of employment,
A close scrutiny of the same exhibit would reveal that complainant was
for the reason that the office of Chief (Dispatcher) presupposes the
indeed signing a daily time record of their hours of work.
existence of subordinates over whom said chief exercises supervisory
control. If a chief dispatcher works with the company, uses and signs
official documents as is reflected in Exhibit "D," it follows that his The evidences [sic] submitted by the complainant have proven that
complainant is really an employee of the respondents.
The question whether an employer-employee relationship exists is a
question of fact. As long as the findings of the labor agencies on this
question are supported by substantial evidence, the findings will not be
disturbed on review in this Court. Review in this Court concerning factual
findings in labor cases is confined to determining allegations of lack of
jurisdiction or grave abuse of discretion. 3
We agree with the finding that an employer-employee relationship existed
between petitioner and private respondent, such finding being supported by
substantial evidence. Petitioner has failed to refute the evidence presented
by private respondent. He points to his Chief Dispatcher, Regino de la Cruz,
as the one who exercised the powers of an employer over the
"dispatchers." Petitioner argues that under an agreement with Regino de la
Cruz, it is the latter who selects and engages the "dispatchers," dictates
their time, supervises the performance of their work, and pays their wages.
He further argues that the "disciplinary memorandum" issued by him was
not addressed to private respondent but to Regino de la Cruz, as employer
of private respondent, to remind him regarding the discipline of the
"dispatchers."
Petitioner's contention is without merit. In determining whether there is an
employer-employee relationship between the parties the following
questions must be considered: (a) who has the power of selection and
engagement of the employee? (b) who pays the wages of employee? (c)
who has the power of dismissal? and; (d) who has the power to control the
employee's conduct? 4 Of these powers the power of control over the
employees' conduct is generally regarded as determinative of the existence
of the relationship. 5 The "control test," under which the person for whom
the services are rendered reserves the right to direct not only the end to be
achieved but also the means for reaching such end, is generally relied on by
the courts. 6
Petitioner would have us believe that Chief Dispatcher Regino de la Cruz
exercised these powers on his own and independently of petitioner. This is
untenable. Petitioner admits that Regino de la Cruz was merely assigned to
do dispatch work. While Regino dela Cruz took charge of the hiring of men
and paid their wages, he did so as he was told by petitioner. The payment
of salaries and wages came from petitioner. Regino de la Cruz filled up and
signed daily time records for dispatchers and took disciplinary action against
erring employees in accordance with instructions given to him by petitioner.
In sum, it cannot be said that Regino de la Cruz was the employer of the
"dispatchers" or that he was an independent contractor. He was himself
only an employee of petitioner.
Indeed the "control test" only requires the existence of the right to control
the manner of doing the work in a person, not necessarily the actual
exercise of the power by him, which he can delegate. 7 Consequently, in
the case at bar, the power is exercised by Regino de la Cruz but it is power
which is only delegated to him so that in truth the power inherently and
primarily is possessed by petitioner. De la Cruz is a mere supervisor, while
petitioner is the real employer.
Petitioner does not claim that Regino de la Cruz and his dispatchers were
independent contractors. Even if this be his contention, however, the
argument would still be without merit. 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 his business. 8 In the absence of
these requisites, what exists is a "labor-only" contract under which the
person acting as contractor is considered merely an agent or intermediary
of the employer who is responsible to the workers in the same manner and
to the same extent as if they had been directly employed by him. 9 As held
in Broadway Motors, Inc. v. NLRC, 10 citing Philippine Bank of
Communications v. NLRC, 11 the "labor-only" contractor is a mere agent of
the employer who is responsible to the employees of the "labor-only"
contractor as if such employees had been employed by him directly. In such
a case the statute establishes an employer-employee relationship between
the employer and the employees of the "labor-only" contractor to prevent
any violation or circumvention of the provisions of the Labor Code, by
holding both the employer and the "labor-only" contractor responsible to
the employees.
For this reason, we hold that Regino de la Cruz can, at most, be considered
a "labor-only" contractor and, therefore, a mere agent of petitioner. As he
is acting in behalf of petitioner, private respondent Hermes de la Cruz is
actually the employee of petitioner.
WHEREFORE, the petition is DENIED for lack of merit.
SO ORDERED.
Regalado, Romero and Puno, JJ., concur.
AIR MATERIAL WING SAVINGS AND LOAN ASSOCIATION, INC., petitioner,
vs. NATIONAL LABOR RELATIONS COMMISSION, et al., respondents.1994
Jun 30FIRST DIVISIONG.R. No. 111870DECISION
Private respondent Luis S. Salas was appointed "notarial and legal counsel"
for petitioner Air Material Wings Savings and Loan Association (AMWSLAI)
in 1980. The appointment was renewed for three years in an implementing
order dated January 23, 1987, reading as follows:
SUBJECT: Implementing Order on the Reappointment of the Legal Officer
TO: ATTY. LUIS S. SALAS
Per approval of the Board en banc in a regular meeting held on January 21,
1987, you are hereby reappointed as Notarial and Legal Counsel of this
association for a term of three (3) years effective March 1, 1987, unless
sooner terminated from office for cause or as may be deemed necessary by
the Board for the interest and protection of the association.
Aside from notarization of loan & other legal documents, your duties and
responsibilities are hereby enumerated in the attached sheet, per Articles
IX, Section 1-d of the by-laws and those approved by the Board en banc.
Your monthly compensation/retainer's fee remains the same.
This shall form part of your 201 file.
BY AUTHORITY OF THE BOARD:
LUVIN S. MANAY
President & Chief of the Board
On January 9, 1990, the petitioner issued another order reminding Salas of
the approaching termination of his legal services under their contract. This
prompted Salas to lodge a complaint against AMWSLAI for separation pay,
vacation and sick leave benefits, cost of living allowances, refund of SSS
premiums, moral and exemplary damages, payment of notarial services
rendered from February 1, 1980 to March 2, 1990, and attorney's fees.
Instead of filing an answer, AMWSLAI moved to dismiss for lack of
jurisdiction. It averred that there was no employer-employee relationship
between it and Salas and that his monetary claims properly fell within the
jurisdiction of the regular courts. Salas opposed the motion and presented
documentary evidence to show that he was indeed an employee of
AMWSLAI.
The motion was denied and both parties were required to submit their
position papers. AMWSLAI filed a motion for reconsideration ad cautelam,
which was also denied. The parties were again ordered to submit their
position papers but AMWSLAI did not comply. Nevertheless, most of Salas'
claims were dismissed by the labor arbiter in his decision dated November
21, 1991. 1
It was there held that Salas was not illegally dismissed and so not entitled
to collect separation benefits. His claims for vacation leave, sick leave,
medical and dental allowances and refund of SSS premiums were rejected
on the ground that he was a managerial employee. He was also denied
moral and exemplary damages for lack of evidence of bad faith on the part
of AMWSLAI. Neither was he allowed to collect his notarial fees from 1980
up to 1986 because the claim therefor had already prescribed. However,
the petitioner was ordered to pay Salas his notarial fees from 1987 up to
March 2, 1990, and attorney's fee equivalent to 10% of the judgment
award.
On appeal, the decision was affirmed in toto by the respondent
Commission, prompting the petitioner to seek relief in this Court. 2
The threshold issue in this case is whether or not Salas can be considered
an employee of the petitioner company.
We have held in a long line of decisions that the elements of an employer-
employee relationship are: (1) selection and engagement of the employee;
(2) payment of wages; (3) power of dismissal; and (4) employer's own
power to control employee's conduct. 3
The existence of such a relationship is essentially a factual question. The
findings of the NLRC on this matter are accorded great respect and even
finality when the same are supported by substantial evidence. 4
The terms and conditions set out in the letter-contract entered into by the
parties on January 23, 1987, clearly show that Salas was an employee of
the petitioner. His selection as the company counsel was done by the board
of directors in one of its regular meetings. The petitioner paid him a
monthly compensation/retainer's fee for his services. Though his
appointment was for a fixed term of three years, the petitioner reserved its
power of dismissal for cause or as it might deem necessary for its interest
and protection. No less importantly, AMWSLAI also exercised its power of
control over Salas by defining his duties and functions as its legal counsel,
to wit:
1. To act on all legal matters pertinent to his Office.
2. To seek remedies to effect collection of overdue accounts of members
without prejudice to initiating court action to protect the interest of the
association.
3. To defend by all means all suit against the interest of the Association. 5
In the earlier case of Hydro Resources Contractors Corp. v.
Pagalilauan, 6 this Court observed that:
A lawyer, like any other professional, may very well be an employee of a
private corporation or even of the government. It is not unusual for a big
corporation to hire a staff of lawyers as its in-house counsel, pay them
regular salaries, rank them in its table of organization, and otherwise treat
them like its other officers and employees. At the same time, it may also
contract with a law firm to act as outside counsel on a retainer basis. The
two classes of lawyers often work closely together but one group is made
up of employees while the other is not. A similar arrangement may exist as
to doctors, nurses, dentists, public relations practitioners and other
professionals.
We hold, therefore, that the public respondent committed no grave abuse
of discretion in ruling that an employer-employee relationship existed
between the petitioner and the private respondent.
We must disagree with the NLRC, however, on Salas' claims for notarial
fees.
The petitioner contends that the public respondents are not empowered to
adjudicate claims for notarial fees. On the other hand, the Solicitor General
believes that the NLRC acted correctly when it took cognizance of the claim
because it arose out of Salas' employment contract with the petitioner
which assigned him the duty to notarize loan agreements and other legal
documents. Moreover, Section 9 of Rule 141 of the Rules of Court does not
restrict or prevent the labor arbiter and the NLRC from determining claims
for notarial fees.
Labor arbiters have the original and exclusive jurisdiction over money
claims of workers when such claims have some reasonable connection with
the employer-employee relationship. The money claims of workers referred
to in paragraph 3 of Article 217 of the Labor Code are those arising out of
or in connection with the employer-employee relationship or some aspect or
incident of such relationship.
Salas' claim for notarial fees is based on his employment as a notarial
officer of the petitioner and thus comes under the jurisdiction of the labor
arbiter.
The public respondents agreed that Salas was entitled to collect notarial
fees from 1987 to 1990 by virtue of his having been assigned as notarial
officer. We feel, however, that there is no substantial evidence to support
this finding.
The letter-contract of January 23, 1987, does not contain any stipulation for
the separate payment of notarial fees to Salas in addition to his basic
salary. On the contrary, it would appear that his notarial services were part
of his regular functions and were thus already covered by his monthly
compensation. It is true that the notarial fees were paid by members-
borrowers of the petitioner for its own account and not of Salas. However,
this is not a sufficient basis for his claim to such fees in the absence of any
agreement to that effect.
ACCORDINGLY, the appealed judgment of the NLRC is AFFIRMED, with the
modification that the award of notarial fees and attorney's fees is
disallowed. It is so ordered.
Davide, Jr., Bellosillo, Quiason and Kapunan, JJ., concur.
ELIAS VILLUGA, RENATO ABISTADO, JILL MENDOZA, ANDRES ABAD,
BENJAMIN BRIZUELA, NORLITO LADIA, MARCELO AGUILAN, DAVID ORO,
NELIA BRIZUELA, FLORA ESCOBIDO, JUSTILITA CABANIG, and DOMINGO
SAGUIT, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION
(THIRD DIVISION) and BROAD STREET TAILORING and/or RODOLFO
ZAPANTA, respondents.1993 Aug 232nd Division G.R. No. 75038
DECISION
A basic factor underlying the exercise of rights and the filing of claims for
benefits under the Labor Code and other presidential issuances or labor
legislations is the status and nature of one's employment. Whether an
employer-employee relationship exists and whether such employment is
managerial in character or that of a rank and file employee are primordial
considerations before extending labor benefits. Thus, the petitioners in this
case seek a definitive ruling on the status and nature of their employment
with Broad Street Tailoring and pray for the nullification of the resolution
dated May 12, 1986 of the National Labor Relations Commission in NLRC
Case No. RB-IV-21558-78-T affirming the decision of Labor Arbiter Ernilo V.
Pealosa dated May 28, 1979, which held eleven of them as independent
contractors and the remaining one as an employee but of managerial rank.
The facts of the case show that petitioner Elias Villuga was employed as
cutter in the tailoring shop owned by private respondent Rodolfo Zapanta
and known as Broad Street Tailoring located at Shaw Boulevard,
Mandaluyong, Metro Manila. As cutter, he was paid a fixed monthly salary
of P840.00 and a monthly transportation allowance of P40.00. In addition
to his work as cutter, Villuga was assigned the chore of distributing work to
the shop's tailors or sewers when both the shop's manager and assistant
manager would be absent. He saw to it that their work conformed with the
pattern he had prepared and if not, he had them redone, repaired or
resewn.
The other petitioners were either ironers, repairmen and sewers. They were
paid a fixed amount for every item ironed, repaired or sewn, regardless of
the time consumed in accomplishing the task. Petitioners did not fill up any
time record since they did not observe regular or fixed hours of work. They
were allowed to perform their work at home especially when the volume of
work, which depended on the number of job orders, could no longer be
coped up with.
From February 17 to 22, 1978, petitioner Villuga failed to report for work On appeal, the National Labor Relations Commission affirmed the
allegedly due to illness. For not properly notifying his employer, he was questioned decision in a resolution dated May 12, 1986, the dispositive
considered to have abandoned his work. portion of which states as follows:

In a complaint dated March 27, 1978, filed with the Regional Office of the "WHEREFORE, premises considered, the decision appealed from is, as it is
Department of Labor, Villuga claimed that he was refused admittance when hereby AFFIRMED, and the appeal dismissed." 2
he reported for work after his absence, allegedly due to his active
participation in the union organized by private respondent's tailors. He Presiding Commissioner Guillermo C. Medina merely concurred in the result
further claimed that he was not paid overtime pay, holiday pay, premium while Commissioner Gabriel M. Gatchalian rendered a dissenting opinion
pay for work done on rest days and holidays, service incentive leave pay which states as follows:
and 13th month pay.
"I am for upholding employer-employee relationship as argued by the
Petitioners Renato Abistado, Jill Mendoza, Benjamin Brizuela and David Oro complainants before the Labor Arbiter and on appeal. The further fact that
also claimed that they were dismissed from their employment because they the proposed decision recognizes complainants' status as piece-rate worker
joined the Philippine Social Security Labor Union (PSSLU). Petitioners all the more crystallizes employer-employee relationship the benefits prayed
Andres Abad, Norlito Ladia, Marcelo Aguilan, Nelia Brizuela, Flora Escobido, for must therefore be granted." 3
Justilita Cabaneg and Domingo Saguit claimed that they stopped working
because private respondents gave them few pieces of work to do after Hence, petitioners filed this instant certiorari case on the following grounds:
learning of their membership with PSSLU. All the petitioners laid claims
under the different labor standard laws which private respondent allegedly
"1. That the respondent National Labor Relations Commission abused its
violated.
discretion when it ruled that petitioner/complainant, Elias Villuga falls within
the category of a managerial employee;
On May 28, 1979, Labor Arbiter Ernilo V. Pealosa rendered a decision
ordering the dismissal of the complaint for unfair labor practices, illegal
"2. . . . when it ruled that the herein petitioners were not dismissed by
dismissal and other money claims except petitioner Villuga's claim for 13th
reason of their union activities;
month pay for the years 1976, 1977 and 1980. The dispositive portion of
the decision states as follows:
"3. . . . when it ruled that petitioners Andres Abad, Benjamin Brizuela,
Norlito Ladia, Marcelo Aguilan, David Oro, Nelia Brizuela, Flora Escobido,
"WHEREFORE, premises considered, the respondent Broad Street Tailoring
Justilita Cabaneg and Domingo Saguit were not employees of private
and/or Rodolfo Zapanta are hereby ordered to pay complainant Elias Villuga
respondents but were contractors.
the sum of ONE THOUSAND TWO HUNDRED FORTY-EIGHT PESOS AND
SIXTY-SIX CENTAVOS (P1,248.66) representing his 13th month pay for the
years 1976, 1977 and 1978. His other claims in this case are hereby denied "4. . . . when it ruled that petitioner Elias Villuga is not entitled to overtime
for lack of merit. pay and services for Sundays and Legal Holidays; and

"The complaint insofar as the other eleven (11) complainants are concerned "5. . . . when it failed to grant petitioners their respective claims under the
should be, as it is hereby dismissed for want of jurisdiction." 1 provisions of P.D. Nos. 925, 1123 and 851." 4

Under Rule I, Section 2(c), Book III of the Implementing Rules of the Labor
Code, to be a member of a managerial staff, the following elements must
concur or co-exist, to wit: (1) that his primary duty consists of the
performance of work directly related to management policies; (2) that he
customarily and regularly exercises discretion and independent judgment in
the performance of his functions; (3) that he regularly and directly assists in
the management of the establishment; and (4) that he does not devote
twenty per cent of his time to work other than those described above.
Applying the above criteria to petitioner Elias Villuga's case, it is undisputed
that his primary work or duty is to cut or prepare patterns for items to be
sewn, not to lay down or implement any of the management policies, as
there is a manager and an assistant manager who perform said functions.
It is true that in the absence of the manager and assistant manager, he
distributes and assigns work to employees but such duty, though involving
discretion, is occasional and not regular or customary. He had also the
authority to order the repair or resewing of defective items but such
authority is part and parcel of his function as cutter to see to it that the
items cut are sewn correctly lest the defective nature of the workmanship
be attributed to his "poor cutting." Elias Villuga does not participate in
policy-making. Rather, the functions of his position involve execution of
approved and established policies. In Franklin Baker Company of the
Philippines v. Trajano, 5 it was held that employees who do not participate
in policy-making but are given ready policies to execute and standard
practices to observe are not managerial employees. The test of "supervisory
or managerial status" depends on whether a person possesses authority
that is not merely routinary or clerical in nature but one that requires use of
independent judgment. In other words, the functions of the position are not
managerial in nature if they only execute approved and established policies
leaving little or no discretion at all whether to implement said policies or
not. 6
Consequently, the exclusion of Villuga from the benefits claimed under
Article 87 (overtime pay and premium pay for holiday and rest day work),
Article 94, (holiday pay), and Article 95 (service incentive leave pay) of the
Labor Code, on the ground that he is a managerial employee is
unwarranted. He is definitely a rank and file employee hired to perform the
work of a cutter and not hired to perform supervisory or managerial
functions. The fact that he is uniformly paid by the month does not exclude
him from the benefits of holiday pay as held in the case of Insular Bank of
America Employees Union v. Inciong 7 . He should therefore be paid in
addition to the 13th month pay, his overtime pay, holiday pay, premium
pay for holiday and rest day, and service incentive leave pay.
As to the dismissal of the charge for unfair labor practices of private
respondent consisting of termination of employment of petitioners and acts
of discrimination against members of the labor union, the respondent
Commission correctly held the absence of evidence that Mr. Zapanta was
aware of petitioner's alleged union membership on February 22, 1978 as
the notice of union existence in the establishment with proposal for
recognition and collective bargaining negotiation was received by
management only on March 3, 1978. Indeed, self-serving allegations
without concrete proof that the private respondent knew of their
membership in the union and accordingly reacted against their membership
do not suffice.
Nor is private respondent's claim that petitioner Villuga abandoned his work
acceptable. For abandonment to constitute a valid cause for dismissal,
there must be a deliberate and unjustified refusal of the employee to
resume his employment. Mere absence is not sufficient; it must be
accompanied by overt acts unerringly pointing to the fact that the employee
simply does not want to work anymore. 8 At any rate, dismissal of an
employee due to his prolonged absence without leave by reason of illness
duly established by the presentation of a medical certificate is not justified.
9 In the case at bar, however, considering that petitioner Villuga absented
himself for four (4) days without leave and without submitting a medical
certificate to support his claim of illness, the imposition of a sanction is
justified, but surely, not dismissal, in the light of the fact that this is
petitioner's first offense. In lieu of reinstatement, petitioner Villuga should
be paid separation pay where reinstatement can no longer be effected in
view of the long passage of time or because of the realities of the situation.
10 But petitioner should not be granted backwages in addition to
reinstatement as the same is not just and equitable under the
circumstances considering that he was not entirely free from blame. 11
As to the other eleven petitioners, there is no clear showing that they were
dismissed because the circumstances surrounding their dismissal were not
even alleged. However, we disagree with the finding of respondent
Commission that the eleven petitioners are independent contractors.
For an employer-employee relationship to exist, the following elements are
generally considered: "(1) the selection and engagement of the employee;
(2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employee's conduct." 12
Noting that the herein petitioners were oftentimes allowed to perform their
work at home and were paid wages on a piece-rate basis, the respondent
Commission apparently found the second and fourth elements lacking and
ruled that "there is no employer-employee relationship, for it is clear that
respondents are interested only in the result and not in the means and
manner and how the result is obtained."
WHEREFORE, in view of the foregoing reasons, the assailed decision of
Respondent Commission is in error. The mere fact that petitioners were respondent National Labor Relations Commission is hereby MODIFIED by
paid on a piece-rate basis is no argument that herein petitioners were not awarding --
employees. The term "wage" has been broadly defined in Article 97 of the
Labor Code as remuneration or earnings, capable of being expressed in (a) in favor of petitioner Villuga, overtime pay, holiday pay, premium pay
terms of money whether fixed or ascertained on a time, task, piece or for holiday and rest day, service incentive leave pay and separation pay, in
commission basis . . ." The facts of this case indicate that payment by the addition to his 13th month pay; and
piece is just a method of compensation and does not define the essence of
the relations. 13 That petitioners were allowed to perform their work at (b) in favor of the rest of the petitioners, their respective 13th month pay.
home does not likewise imply absence of control and supervision. The
control test calls merely for the existence of a right to control the manner of
The case is hereby REMANDED to the National Labor Relations Commission
doing the work, not the actual exercise of the right. 14
for the computation of the claims herein-above mentioned.

In determining whether the relationship is that of employer and employee

SO ORDERED.
or one of an independent contractor, "each case must be determined on its
own facts and all the features of the relationship are to be considered." 15
Considering that petitioners who are either sewers, repairmen or ironer, Narvasa (C.J., Chairman), Padilla, Regalado and Puno, JJ., concur.
have been in the employ of private respondent as early as 1972 or at the
latest in 1976, faithfully rendering services which are desirable or necessary
for the business of private respondent, and observing management's
approved standards set for their respective lines of work as well as the
customers' specifications, petitioners should be considered employees, not
independent contractors.

Independent contractors are those who exercise independent employment,

contracting to do a piece of work according to their own methods and
without being subjected to control of their employer except as to the result
of their work. By the nature of the different phases of work in a tailoring
shop where the customers' specifications must be followed to the letter, it is
inconceivable that the workers therein would not be subjected to control.

In Rosario Brothers, Inc. v. Ople, 16 this Court ruled that tailors and similar
workers hired in the tailoring department, although paid weekly wages on
piece-work basis, are employees not independent contractors. Accordingly,
as regular employees, paid on a piece-rate basis, petitioners are not
entitled to overtime pay, holiday pay, premium pay for holiday/rest day and
service incentive leave pay. Their claim for separation pay should also be
denied for lack of evidence that they were in fact dismissed by private
respondent. They should be paid, however, their 13th month pay under
P.D. 851, since they are employees not independent contractors.
GREAT PACIFIC LIFE ASSURANCE CORPORATION, petitioner, vs.
HONORATO JUDICO and NATIONAL LABOR RELATIONS COMMISSION,
respondents.1989 Dec 212nd DivisionG.R. No. 73887D E C I S I O N

Before Us is a Petition for Certiorari to review the decision of the National

Labor Relations Commission (NLRC, for brevity) dated September 9, 1985
reversing the decision of Labor Arbiter Vito J. Minoria, dated June 9, 1983,
by 1) ordering petitioner insurance company, Great Pacific Life Assurance
Corporation (Grepalife, for brevity) to recognize private respondent
Honorato Judico, an its regular employee as defined under Art. 281 of the
Labor Code and 2) remanding the case to its origin for the determination of
private respondent Judico's money claims.

The records of the case show that Honorato Judico filed a complaint for
illegal dismissal against Grepalife, a duly organized insurance firm, before
the NLRC Regional Arbitration Branch No. VII, Cebu City on August 27,
1982. Said complaint prayed for award of money claims consisting of
separation pay, unpaid salary and 13th month pay, refund of cash bond,
moral and exemplary damages and attorney's fees.

Both parties appealed to the NLRC when a decision was rendered by the
Labor Arbiter dismissing the complaint on the ground that the employer-
employee relations did not exist between the parties but ordered Grepalife
to pay complainant the sum of P1,000.00 by reason of Christian Charity.

On appeal, said decision was reversed by the NLRC ruling that complainant
is a regular employee as defined under Art. 281 of the Labor Code and
declaring the appeal of Grepalife questioning the legality of the payment of
P1,000.00 to complainant moot and academic. Nevertheless, for the
purpose of revoking the supersedes bond of said company it ruled that the
Labor Arbiter erred in awarding P1,000.00 to complainant in the absence of
any legal or factual basis to support its payment.

Petitioner company moved to reconsider, which was denied, hence this

petition for review raising four legal issues to wit:

I. Whether the relationship between insurance agents and their principal,

the insurance company, is that of agent and principal to be governed by the
Insurance Code and the Civil Code provisions on agency, or one of
employer-employee, to be governed by the Labor Code.
 II. Whether insurance agents are entitled to the employee benefits
prescribed by the Labor Code.
III. Whether the public respondent NLRC has jurisdiction to take
cognizance of a controversy between insurance agent and the insurance
company, arising from their agency relations.
IV. Whether the public respondent acted correctly in setting aside the
decision of Labor Arbiter Vito J. Minoria and in ordering the case remanded
to said Labor Arbiter for further proceedings. (p. 159, Rollo).
The crux of these issues boil down to the question of whether or not
employer-employee relationship existed between petitioner and private
respondent.
Petitioner admits that on June 9, 1976, private respondent Judico entered
into an agreement of agency with petitioner Grepalife to become a debit
agent attached to the industrial life agency in Cebu City. Petitioner defines a
debit agent as "an insurance agent selling/servicing industrial life plans and
policy holders. Industrial life plans are those whose premiums are payable
either daily, weekly or monthly and which are collectible by the debit agents
at the home or any place designated by the policy holder" (p. 156, Rollo).
Such admission is in line with the findings of public respondent that as such
debit agent, private respondent Judico had definite work assignments
including but not limited to collection of premiums from policy holders and
selling insurance to prospective clients. Public respondent NLRC also found
out that complainant was initially paid P200.00 as allowance for thirteen
(13) weeks regardless of production and later a certain percentage
denominated as sales reserve of his total collections but not lesser than
P200.00. Sometime in September 1981, complainant was promoted to the
position of Zone Supervisor and was given additional (supervisor's)
allowance fixed at P110.00 per week. During the third week of November
1981, he was reverted to his former position as debit agent but, for
unknown reasons, not paid so-called weekly sales reserve of at least
P200.00. Finally on June 28, 1982, complainant was dismissed by way of
termination of his agency contract.
Petitioner assails the findings of the NLRC that private respondent is an
employee of the former. Petitioner argues that Judico's compensation was
not based on any fixed number of hours he was required to devote to the
service of petitioner company but rather it was the production or result of
his efforts or his work that was being compensated and that the so-called
allowance for the first thirteen weeks that Judico worked as debit agent,
cannot be construed as salary but as a subsidy or a way of assistance for
transportation and meal expenses of a new debit agent during the initial
period of his training which was fixed for thirteen (13) weeks. Stated
otherwise, petitioner contends that Judico's compensation, in the form of
commissions and bonuses, was based on actual production, (insurance
plans sold and premium collections).
Said contentions of petitioner are strongly rejected by private respondent.
He maintains that he received a definite amount as his wage known as
"sales reserve" the failure to maintain the same would bring him back to a
beginner's employment with a fixed weekly wage of P200.00 regardless of
production. He was assigned a definite place in the office to work on when
he is not in the field; and in addition to canvassing and making regular
reports, he was burdened with the job of collection and to make regular
weekly report thereto for which an anemic performance would mean
dismissal. He earned out of his faithful and productive service, a promotion
to Zone Supervisor with additional supervisor's allowance, (a definite or
fixed amount of P110.00) that he was dismissed primarily because of
anemic performance and not because of the termination of the contract of
agency substantiate the fact that he was indeed an employee of the
petitioner and not an insurance agent in the ordinary meaning of the term.
That private respondent Judico was an agent of the petitioner is
unquestionable. But, as We have held in Investment Planning Corp. vs.
SSS, 21 SCRA 294, an insurance company may have two classes of agents
who sell its insurance policies: (1) salaried employees who keep definite
hours and work under the control and supervision of the company; and (2)
registered representatives who work on commission basis. The agents who
belong to the second category are not required to report for work at
anytime, they do not have to devote their time exclusively to or work solely
for the company since the time and the effort they spend in their work
depend entirely upon their own will and initiative; they are not required to
account for their time nor submit a report of their activities; they shoulder
their own selling expenses as well as transportation; and they are paid their
commission based on a certain percentage of their sales. One salient point
in the determination of employer-employee relationship which cannot be
easily ignored is the fact that the compensation that these agents on
commission received is not paid by the insurance company but by the
investor (or the person insured). After determining the commission earned
by an agent on his sales the agent directly deducts it from the amount he
received from the investor or the person insured and turns over to the
insurance company the amount invested after such deduction is made. The
test therefore 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.
Applying the aforementioned test to the case at bar, We can readily see
that the element of control by the petitioner on Judico was very much
present. The record shows that petitioner Judico received a definite
minimum amount per week as his wage known as "sales reserve" wherein
the failure to maintain the same would bring him back to a beginner's
employment with a fixed weekly wage of P200.00 for thirteen weeks
regardless of production. He was assigned a definite place in the office to
work on when he is not in the field; and in addition to his canvassing work
he was burdened with the job of collection. In both cases he was required
to make regular report to the company regarding these duties, and for
which an anemic performance would mean a dismissal. Conversely faithful
and productive service earned him a promotion to Zone Supervisor with
additional supervisor's allowance, a definite amount of P110.00 aside from
the regular P200.00 weekly "allowance". Furthermore, his contract of
services with petitioner is not for a piece of work nor for a definite period.
On the other hand, an ordinary commission insurance agent works at his
own volition or at his own leisure without fear of dismissal from the
company and short of committing acts detrimental to the business interest
of the company or against the latter, whether he produces or not is of no
moment as his salary is based on his production, his anemic performance or
even dead result does not become a ground for dismissal. Whereas, in
private-respondent's case, the undisputed facts show that he was controlled
by petitioner insurance company not only as to the kind of work; the
amount of results, the kind of performance but also the power of dismissal.
Undoubtedly, private respondent, by nature of his position and work, had
been a regular employee of petitioner and is therefore entitled to the
protection of the law and could not just be terminated without valid and
justifiable cause.
Premises considered, the appealed the decision is hereby AFFIRMED in
toto.
SO ORDERED.
Melencio-Herrera (Chairman), Padilla, Sarmiento and Regalado, JJ., concur.
INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION and MELECIO BASIAO, respondents.1989 Nov
151st DivisionG.R. No. 84484D E C I S I O N
On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called
the Company) and Melecio T. Basiao entered into a contract 1 by which:
1. Basiao was "authorized to solicit within the Philippines applications for
insurance policies and annuities in accordance with the existing rules and
regulations" of the Company;
2. he would receive "compensation, in the form of commissions . . . as
provided in the Schedule of Commissions" of the contract to "constitute a
part of the consideration of . . . (said) agreement;" and
3. the "rules in . . . (the Company's) Rate Book and its Agent's Manual,
as well as all its circulars . . . and those which may from time to time be
promulgated by it, . . ." were made part of said contract.
The contract also contained, among others, provisions governing the
relations of the parties, the duties of the Agent, the acts prohibited to him,
and the modes of termination of the agreement, viz.:
"RELATION WITH THE COMPANY. The Agent shall be free to exercise his
own judgment as to time, place and means of soliciting insurance. Nothing
herein contained shall therefore be construed to create the relationship of
employee and employer between the Agent and the Company. However,
the Agent shall observe and conform to all rules and regulations which the
Company may from time to time prescribe.
"ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from
giving, directly or indirectly, rebates in any form, or from making any
misrepresentation or over-selling, and, in general, from doing or committing
acts prohibited in the Agent's Manual and in circulars of the Office of the
Insurance Commissioner.
"TERMINATION. The Company may terminate the contract at will, without
any previous notice to the Agent, for or on account of . . . (explicitly
specified causes) . . .
Either party may terminate this contract by giving to the other notice in
writing to that effect. It shall become ipso facto cancelled if the Insurance
Commissioner should revoke a Certificate of Authority previously issued or
should the Agent fail to renew his existing Certificate of Authority upon its
expiration. The Agent shall not have any right to any commission on
renewal of premiums that may be paid after the termination of this
agreement for any cause whatsoever, except when the termination is due
to disability or death in line of service. As to commission corresponding to
any balance of the first year's premiums remaining unpaid at the
termination of this agreement, the Agent shall be entitled to it if the
balance of the first year premium is paid, less actual cost of collection,
unless the termination is due to a violation of this contract, involving
criminal liability or breach of trust.
"ASSIGNMENT. No Assignment of the Agency herein created or of
commissions or other compensations shall be valid without the prior
consent in writing of the Company . . ."
Some four years later, in April 1972, the parties entered into another
contract - an Agency Manager's Contract ---- and to implement his end of it
Basiao organized an agency or office to which he gave the name M. Basiao
and Associates, while concurrently fulfilling his commitments under the first
contract with the Company. 2
In May, 1979, the Company terminated the Agency Manager's Contract.
After vainly seeking a reconsideration, Basiao sued the Company in a civil
action and this, he was later to claim, prompted the latter to terminate also
his engagement under the first contract and to stop payment of his
commissions starting April 1, 1980. 3
Basiao thereafter filed with the then Ministry of Labor a complaint 4 against
the Company and its president. Without contesting the termination of the
first contract, the complaint sought to recover commissions allegedly unpaid
thereunder, plus attorney's fees. The respondents disputed the Ministry's
jurisdiction over Basiao's claim, asserting that he was not the Company's
employee, but an independent contractor and that the Company had no
obligation to him for unpaid commissions under the terms and conditions of
his contract. 5
The Labor Arbiter to whom the case was assigned found for Basiao. He
ruled that the underwriting agreement had established an employer-
employee relationship between him and the Company, and this conferred
jurisdiction on the Ministry of Labor to adjudicate his claim. Said official's
decision directed payment of his unpaid commissions ". . . equivalent to the
balance of the first year's premium remaining unpaid, at the time of his
termination, of all the insurance policies solicited by . . . (him) in favor of
the respondent company . . ." plus 10% attorney's fees. 6
This decision was, on appeal by the Company, affirmed by the National
Labor Relations Commission. 7 Hence, the present petition for certiorari and
prohibition.
The chief issue here is one of jurisdiction: whether, as Basiao asserts, he
had become the Company's employee by virtue of the contract invoked by
him, thereby placing his claim for unpaid commissions within the original
and exclusive jurisdiction of the Labor Arbiter under the provisions of
Section 217 of the Labor Code, 8 or, contrarily, as the Company would have
it, that under said contract Basiao's status was that of an independent
contractor whose claim was thus cognizable, not by the Labor Arbiter in a
labor case, but by the regular courts in an ordinary civil action.
The Company's thesis, that no employer-employee relation in the legal and
generally accepted sense existed between it and Basiao, is drawn from the
terms of the contract they had entered into, which, either expressly or by
necessary implication, made Basiao the master of his own time and selling
methods, left to his judgment the time, place and means of soliciting
insurance, set no accomplishment quotas and compensated him on the
basis of results obtained. He was not bound to observe any schedule of
working hours or report to any regular station; he could seek and work on
his prospects anywhere and at anytime he chose to, and was free to adopt
the selling methods he deemed most effective.
Without denying that the above were indeed the expressed or implicit
conditions of Basiao's contract with the Company, the respondents contend
that they do not constitute the decisive determinant of the nature of his
engagement, invoking precedents to the effect that the critical feature
distinguishing the status of an employee from that of an independent
contractor is control, that is, whether or not the party who engages the
services of another has the power to control the latter's conduct in
rendering such services. Pursuing the argument, the respondents draw
attention to the provisions of Basiao's contract obliging him to ". . . observe
and conform to all rules and regulations which the Company may from time
to time prescribe . . .," as well as to the fact that the Company prescribed
the qualifications of applicants for insurance, processed their applications
and determined the amounts of insurance cover to be issued as indicative
of the control, which made Basiao, in legal contemplation, an employee of
the Company. 9
It is true that the "control test" expressed in the following pronouncement
of the Court in the 1956 case of Viana vs. Alejo Al-Lagadan: 10
". . . In determining the existence of employer-employee relationship, the
following elements are generally considered, namely: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employees' conduct - although
the latter is the most important element (35 Am. Jur. 445). . . ,"
has been followed and applied in later cases, some fairly recent. 11 Indeed,
it is without question a valid test of the character of a contract or
agreement to render service. It should, however, be obvious that not every
form of control that the hiring party reserves to himself over the conduct of
the party hired in relation to the services rendered may be accorded the
effect of establishing an employer-employee relationship between them in
the legal or technical sense of the term. A line must be drawn somewhere,
if the recognized distinction between an employee and an individual
contractor is not to vanish altogether. Realistically, it would be a rare
contract of service that gives untrammelled freedom to the party hired and
eschews any intervention whatsoever in his performance of the
engagement.
Logically, the line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those
that control or fix the methodology and bind or restrict the party hired to
the use of such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second, which address
both the result and the means used to achieve it. The distinction acquires
particular relevance in the case of an enterprise affected with public
interest, as is the business of insurance, and is on that account subject to
regulation by the State with respect, not only to the relations between
insurer and insured but also to the internal affairs of the insurance
company. 12 Rules and regulations governing the conduct of the business
are provided for in the Insurance Code and enforced by the Insurance
Commissioner. It is, therefore, usual and expected for an insurance
company to promulgate a set of rules to guide its commission agents in
selling its policies that they may not run afoul of the law and what it
requires or prohibits. Of such a character are the rules which prescribe the
qualifications of persons who may be insured, subject insurance
applications to processing and approval by the Company, and also reserve
to the Company the determination of the premiums to be paid and the
schedules of payment. None of these really invades the agent's contractual
prerogative to adopt his own selling methods or to sell insurance at his own
time and convenience, hence cannot justifiably be said to establish an
employer-employee relationship between him and the company.
There is no dearth of authority holding persons similarly placed as
respondent Basiao to be independent contractors, instead of employees of
the parties for whom they worked. In Mafinco Trading Corporation vs. Ople,
13 the Court ruled that a person engaged to sell soft drinks for another,
using a truck supplied by the latter, but with the right to employ his own
workers, sell according to his own methods subject only to prearranged
routes, observing no working hours fixed by the other party and obliged to
secure his own licenses and defray his own selling expenses, all in
consideration of a peddler's discount given by the other party for at least
250 cases of soft drinks sold daily, was not an employee but an
independent contractor.
In Investment Planning Corporation of the Philippines vs. Social Security
System, 14 a case almost on all fours with the present one, this Court held
that there was no employer-employee relationship between a commission
agent and an investment company, but that the former was an independent
contractor where said agent and others similarly placed were: (a) paid
compensation in the form of commissions based on percentages of their
sales, any balance of commissions earned being payable to their legal
representatives in the event of death or registration; (b) required to put up
performance bonds; (c) subject to a set of rules and regulations governing
the performance of their duties under the agreement with the company and
termination of their services for certain causes; (d) not required to report
for work at any time, nor to devote their time exclusively to working for the
company nor to submit a record of their activities, and who, finally,
shouldered their own selling and transportation expenses.
More recently, in Sara vs. NLRC, 15 it was held that one who had been
engaged by a rice miller to buy and sell rice and palay without
compensation except a certain percentage of what he was able to buy or
sell, did work at his own pleasure without any supervision or control on the
part of his principal and relied on his own resources in the performance of
his work, was a plain commission agent, an independent contractor and not
an employee.
The respondents limit themselves to pointing out that Basiao's contract with
the Company bound him to observe and conform to such rules and
regulations as the latter might from time to time prescribe. No showing has
been made that any such rules or regulations were in fact promulgated,
much less that any rules existed or were issued which effectively controlled
or restricted his choice of methods - or the methods themselves of selling
insurance. Absent such showing, the Court will not speculate that any
exceptions or qualifications were imposed on the express provision of the
contract leaving Basiao ". . . free to exercise his own judgment as to the
time, place and means of soliciting insurance."
The Labor Arbiter's decision makes reference to Basiao's claim of having
been connected with the Company for twenty-five years. Whatever this is
meant to imply, the obvious reply would be that what is germane here is
Basiao's status under the contract of July 2, 1968, not the length of his
relationship with the Company.
The Court, therefore, rules that under the contract invoked by him, Basiao
was not an employee of the petitioner, but a commission agent, an
independent contractor whose claim for unpaid commissions should have
been litigated in an ordinary civil action. The Labor Arbiter erred in taking
cognizance of, and adjudicating, said claim, being without jurisdiction to do
so, as did the respondent NLRC in affirming the Arbiter's decision. This
conclusion renders it unnecessary and premature to consider Basiao's claim
for commissions on its merits.
WHEREFORE, the appealed Resolution of the National Labor Relations
Commission is set aside, and that complaint of private respondent Melecio
T. Basiao in RAB Case No. VI-0010-83 is dismissed. No pronouncement as
to costs.
SO ORDERED.
Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.
INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION and MELECIO BASIAO, respondents.1989 Nov
151st DivisionG.R. No. 84484D E C I S I O N
On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called
the Company) and Melecio T. Basiao entered into a contract 1 by which:
1. Basiao was "authorized to solicit within the Philippines applications for
insurance policies and annuities in accordance with the existing rules and
regulations" of the Company;
2. he would receive "compensation, in the form of commissions . . . as
provided in the Schedule of Commissions" of the contract to "constitute a
part of the consideration of . . . (said) agreement;" and
3. the "rules in . . . (the Company's) Rate Book and its Agent's Manual,
as well as all its circulars . . . and those which may from time to time be
promulgated by it, . . ." were made part of said contract.
The contract also contained, among others, provisions governing the
relations of the parties, the duties of the Agent, the acts prohibited to him,
and the modes of termination of the agreement, viz.:
"RELATION WITH THE COMPANY. The Agent shall be free to exercise his
own judgment as to time, place and means of soliciting insurance. Nothing
herein contained shall therefore be construed to create the relationship of
employee and employer between the Agent and the Company. However,
the Agent shall observe and conform to all rules and regulations which the
Company may from time to time prescribe.
"ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from
giving, directly or indirectly, rebates in any form, or from making any
misrepresentation or over-selling, and, in general, from doing or committing
acts prohibited in the Agent's Manual and in circulars of the Office of the
Insurance Commissioner.
"TERMINATION. The Company may terminate the contract at will, without
any previous notice to the Agent, for or on account of . . . (explicitly
specified causes) . . .
Either party may terminate this contract by giving to the other notice in
writing to that effect. It shall become ipso facto cancelled if the Insurance
Commissioner should revoke a Certificate of Authority previously issued or
should the Agent fail to renew his existing Certificate of Authority upon its
expiration. The Agent shall not have any right to any commission on
renewal of premiums that may be paid after the termination of this
agreement for any cause whatsoever, except when the termination is due
to disability or death in line of service. As to commission corresponding to
any balance of the first year's premiums remaining unpaid at the
termination of this agreement, the Agent shall be entitled to it if the
balance of the first year premium is paid, less actual cost of collection,
unless the termination is due to a violation of this contract, involving
criminal liability or breach of trust.
"ASSIGNMENT. No Assignment of the Agency herein created or of
commissions or other compensations shall be valid without the prior
consent in writing of the Company . . ."
Some four years later, in April 1972, the parties entered into another
contract - an Agency Manager's Contract ---- and to implement his end of it
Basiao organized an agency or office to which he gave the name M. Basiao
and Associates, while concurrently fulfilling his commitments under the first
contract with the Company. 2
In May, 1979, the Company terminated the Agency Manager's Contract.
After vainly seeking a reconsideration, Basiao sued the Company in a civil
action and this, he was later to claim, prompted the latter to terminate also
his engagement under the first contract and to stop payment of his
commissions starting April 1, 1980. 3
Basiao thereafter filed with the then Ministry of Labor a complaint 4 against
the Company and its president. Without contesting the termination of the
first contract, the complaint sought to recover commissions allegedly unpaid
thereunder, plus attorney's fees. The respondents disputed the Ministry's
jurisdiction over Basiao's claim, asserting that he was not the Company's
employee, but an independent contractor and that the Company had no
obligation to him for unpaid commissions under the terms and conditions of
his contract. 5
The Labor Arbiter to whom the case was assigned found for Basiao. He
ruled that the underwriting agreement had established an employer-
employee relationship between him and the Company, and this conferred
jurisdiction on the Ministry of Labor to adjudicate his claim. Said official's
decision directed payment of his unpaid commissions ". . . equivalent to the
balance of the first year's premium remaining unpaid, at the time of his
termination, of all the insurance policies solicited by . . . (him) in favor of
the respondent company . . ." plus 10% attorney's fees. 6
This decision was, on appeal by the Company, affirmed by the National
Labor Relations Commission. 7 Hence, the present petition for certiorari and
prohibition.
The chief issue here is one of jurisdiction: whether, as Basiao asserts, he
had become the Company's employee by virtue of the contract invoked by
him, thereby placing his claim for unpaid commissions within the original
and exclusive jurisdiction of the Labor Arbiter under the provisions of
Section 217 of the Labor Code, 8 or, contrarily, as the Company would have
it, that under said contract Basiao's status was that of an independent
contractor whose claim was thus cognizable, not by the Labor Arbiter in a
labor case, but by the regular courts in an ordinary civil action.
The Company's thesis, that no employer-employee relation in the legal and
generally accepted sense existed between it and Basiao, is drawn from the
terms of the contract they had entered into, which, either expressly or by
necessary implication, made Basiao the master of his own time and selling
methods, left to his judgment the time, place and means of soliciting
insurance, set no accomplishment quotas and compensated him on the
basis of results obtained. He was not bound to observe any schedule of
working hours or report to any regular station; he could seek and work on
his prospects anywhere and at anytime he chose to, and was free to adopt
the selling methods he deemed most effective.
Without denying that the above were indeed the expressed or implicit
conditions of Basiao's contract with the Company, the respondents contend
that they do not constitute the decisive determinant of the nature of his
engagement, invoking precedents to the effect that the critical feature
distinguishing the status of an employee from that of an independent
contractor is control, that is, whether or not the party who engages the
services of another has the power to control the latter's conduct in
rendering such services. Pursuing the argument, the respondents draw
attention to the provisions of Basiao's contract obliging him to ". . . observe
and conform to all rules and regulations which the Company may from time
to time prescribe . . .," as well as to the fact that the Company prescribed
the qualifications of applicants for insurance, processed their applications
and determined the amounts of insurance cover to be issued as indicative
of the control, which made Basiao, in legal contemplation, an employee of
the Company. 9
It is true that the "control test" expressed in the following pronouncement
of the Court in the 1956 case of Viana vs. Alejo Al-Lagadan: 10
". . . In determining the existence of employer-employee relationship, the
following elements are generally considered, namely: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employees' conduct - although
the latter is the most important element (35 Am. Jur. 445). . . ,"
has been followed and applied in later cases, some fairly recent. 11 Indeed,
it is without question a valid test of the character of a contract or
agreement to render service. It should, however, be obvious that not every
form of control that the hiring party reserves to himself over the conduct of
the party hired in relation to the services rendered may be accorded the
effect of establishing an employer-employee relationship between them in
the legal or technical sense of the term. A line must be drawn somewhere,
if the recognized distinction between an employee and an individual
contractor is not to vanish altogether. Realistically, it would be a rare
contract of service that gives untrammelled freedom to the party hired and
eschews any intervention whatsoever in his performance of the
engagement.
Logically, the line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those
that control or fix the methodology and bind or restrict the party hired to
the use of such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second, which address
both the result and the means used to achieve it. The distinction acquires
particular relevance in the case of an enterprise affected with public
interest, as is the business of insurance, and is on that account subject to
regulation by the State with respect, not only to the relations between
insurer and insured but also to the internal affairs of the insurance
company. 12 Rules and regulations governing the conduct of the business
are provided for in the Insurance Code and enforced by the Insurance
Commissioner. It is, therefore, usual and expected for an insurance
company to promulgate a set of rules to guide its commission agents in
selling its policies that they may not run afoul of the law and what it
requires or prohibits. Of such a character are the rules which prescribe the
qualifications of persons who may be insured, subject insurance
applications to processing and approval by the Company, and also reserve
to the Company the determination of the premiums to be paid and the
schedules of payment. None of these really invades the agent's contractual
prerogative to adopt his own selling methods or to sell insurance at his own
time and convenience, hence cannot justifiably be said to establish an
employer-employee relationship between him and the company.
There is no dearth of authority holding persons similarly placed as
respondent Basiao to be independent contractors, instead of employees of
the parties for whom they worked. In Mafinco Trading Corporation vs. Ople,
13 the Court ruled that a person engaged to sell soft drinks for another,
using a truck supplied by the latter, but with the right to employ his own
workers, sell according to his own methods subject only to prearranged
routes, observing no working hours fixed by the other party and obliged to
secure his own licenses and defray his own selling expenses, all in
consideration of a peddler's discount given by the other party for at least
250 cases of soft drinks sold daily, was not an employee but an
independent contractor.
In Investment Planning Corporation of the Philippines vs. Social Security
System, 14 a case almost on all fours with the present one, this Court held
that there was no employer-employee relationship between a commission
agent and an investment company, but that the former was an independent
contractor where said agent and others similarly placed were: (a) paid
compensation in the form of commissions based on percentages of their
sales, any balance of commissions earned being payable to their legal
representatives in the event of death or registration; (b) required to put up
performance bonds; (c) subject to a set of rules and regulations governing
the performance of their duties under the agreement with the company and
termination of their services for certain causes; (d) not required to report
for work at any time, nor to devote their time exclusively to working for the
company nor to submit a record of their activities, and who, finally,
shouldered their own selling and transportation expenses.
More recently, in Sara vs. NLRC, 15 it was held that one who had been
engaged by a rice miller to buy and sell rice and palay without
compensation except a certain percentage of what he was able to buy or
sell, did work at his own pleasure without any supervision or control on the
part of his principal and relied on his own resources in the performance of
his work, was a plain commission agent, an independent contractor and not
an employee.
The respondents limit themselves to pointing out that Basiao's contract with
the Company bound him to observe and conform to such rules and
regulations as the latter might from time to time prescribe. No showing has
been made that any such rules or regulations were in fact promulgated,
much less that any rules existed or were issued which effectively controlled
or restricted his choice of methods - or the methods themselves of selling
insurance. Absent such showing, the Court will not speculate that any
exceptions or qualifications were imposed on the express provision of the
contract leaving Basiao ". . . free to exercise his own judgment as to the
time, place and means of soliciting insurance."
The Labor Arbiter's decision makes reference to Basiao's claim of having
been connected with the Company for twenty-five years. Whatever this is
meant to imply, the obvious reply would be that what is germane here is
Basiao's status under the contract of July 2, 1968, not the length of his
relationship with the Company.
The Court, therefore, rules that under the contract invoked by him, Basiao
was not an employee of the petitioner, but a commission agent, an
independent contractor whose claim for unpaid commissions should have
been litigated in an ordinary civil action. The Labor Arbiter erred in taking
cognizance of, and adjudicating, said claim, being without jurisdiction to do
so, as did the respondent NLRC in affirming the Arbiter's decision. This
conclusion renders it unnecessary and premature to consider Basiao's claim
for commissions on its merits.
WHEREFORE, the appealed Resolution of the National Labor Relations
Commission is set aside, and that complaint of private respondent Melecio
T. Basiao in RAB Case No. VI-0010-83 is dismissed. No pronouncement as
to costs.
SO ORDERED.
Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.
COSMOPOLITAN FUNERAL HOMES, INC., petitioner, vs. NOLI MAALAT and
NATIONAL LABOR RELATIONS COMMISSION, respondents.1990 Jul 23rd
Division G.R. No. 86693
DECISION
The nature of the work of a "funeraria" supervisor, whether employee or
commission agent, is the issue raised in this petition.
Sometime in 1962, petitioner Cosmopolitan Funeral Homes, Inc. engaged
the services of private respondent Noli Maalat as "supervisor" to handle the
solicitation of mortuary arrangements, sales and collections. The funeral
services which he sold refer to the taking of the corpse, embalming,
casketing, viewing and delivery. The private respondent was paid on a
commission basis of 3.5% of the amounts actually collected and remitted.
On January 15, 1987, respondent Maalat was dismissed by the petitioner
for commission of the following violations despite previous warnings:
"(a) Understatement of the reported contract price against the actual
contract price charged to and paid by the customers;
(b) Misappropriation of funds or collections by non-remittance of
collections and non-issuance of Official Receipt;
(c) Charging customers additional amount and pocketing the same for
the cost of medicines, linen, and security services without issuing Official
Receipt;
(d) Non-reporting of some embalming and re-embalming charges and
pocketing the same and non-issuance of Official Receipt;
(e) Engaging in tomb making and inclusion of the price of the tomb in
the package price without prior knowledge of the customers and the
company." (At p. 16, Records).
Maalat filed a complaint for illegal dismissal and non-payment of
commissions.
On the basis of the parties' position papers, Labor Arbiter Newton R.
Sancho rendered a decision declaring Maalat's dismissal illegal and ordering
the petitioner to pay separation pay, commission, interests and attorney's
fee in the total amount of P205,571.52.
In an appeal from the decision, the National Labor Relations Commission
(NLRC), on May 31, 1988, reversed the Arbiter's action and rendered a new
decision, the dispositive portion of which reads:
"WHEREFORE, premises considered, the decision dated November 27,
1987, is hereby SET ASIDE and VACATED and a New One ENTERED,
ordering as follows:
1. Judgment is hereby rendered declaring the dismissal of complainant
Noli Maalat by respondent-appellant as justified and with lawful cause. By
way of equitable relief and in the interest of social and compassionate
justice, We hereby order and direct respondent Cosmopolitan Funeral
Homes, Inc. to pay complainant Maalat his separation pay equivalent to
one-half (1/2%) month average income for every year of service to
appellant, computed on his last year of service immediately preceding his
separation from respondent, subject to allowable set-offs and deductions of
the counter-claims of respondent company, after due notice and hearing.
2. The claims for accrued commissions by complainant may be admitted,
subject to proofs thereof, and allowable set-offs and deductions credited to
the account of respondent-appellant by way of counterclaims, after due
notice and hearing.
3. All the evidence adduced by the parties are hereby admitted, subject
to rebuttal and/or controvertion by either party during the hearing and the
hearings hereafter.
4. The Attorney's fee in favor of complainant's counsel is hereby fixed at
two (2%) percent, assessable over whatever final money award
complainant may be entitled on the aggregate sums thereof, after proper
hearing on the same.
All other claims and counter-claims are hereby dismissed for lack of merit,
except those specified above.
Finally, this case is remanded to the Regional Arbitration Branch of origin
for further proceedings in accordance with the above judgment. No findings
as to costs." (At pp. 66-67, Rollo).
The petitioner's motion for reconsideration was denied, hence, this petition
for review before this Court.
The issues raised in this petition are:
I. Whether or not the NLRC erred in ruling that an employment relationship
existed between the parties; and
II. Whether or not there was equitable basis for the award of 1/2 month
separation pay for every year of service.
I
In determining whether a person who performs work for another is the
latter's employee or an independent contractor, the prevailing test is the
"right of control" test. Under this test, an employer-employee relationship
exists where the person for whom the services are performed reserves the
right to control not only the end to be achieved, but also the manner and
means to be used in reaching that end.
The petitioner argues that Maalat was never its employee for he was only a
commission agent whose work was not subject to its control. Citing
Investment Planning Corporation of the Philippines v. Social Security
System (21 SCRA 924 [1967]), the petitioner states that the work of its
agents approximates that of an independent contractor since the agent is
not under control by the latter with respect to the means and methods
employed in the performance of the work, but only as to the results.
The NLRC, after its perusal of the facts and evidence on record, stated that
there exists an employment relationship between the parties. The petitioner
has failed to overcome this factual finding.
The fact that the petitioner imposed and applied its rule prohibiting
superiors from engaging in other funeral business which it considered
inimical to company interests proves that it had the right of control and
actually exercised its control over the private respondent. In other words,
Maalat worked exclusively for the petitioner.
Moreover, the private respondent was prohibited from engaging in part-
time embalming business outside of the company and a violation thereof
was cause for dismissal. Incurring absences without leave was likewise
subject to disciplinary action: a reprimand for the first offense, one week
suspension for the second offense, and dismissal for the third offense.
The petitioner admits that these prohibitive rules bound the private
respondent but states that these rules have no bearing on the means and
methods ordinarily required of a supervisor. The overall picture is one of
employment. The petitioner failed to prove that the contract with private
respondent was but a mere agency, which indicates that a "supervisor" is
free to accomplish his work on his own terms and may engage in other
means of livelihood.
In Investment Planning Corporation, supra, cited by the petitioner, the
majority of the "commission agents" are regularly employed elsewhere.
Such a circumstance is absent in Maalat's case. Moreover, the private
respondent's job description states that ". . . he attends to the needs of the
clientele and arranges the kind of casket and funeral services the customers
would like to avail themselves of" and indicates that he must always be on
the job or at least most of time.
Likewise, the private respondent was not allowed to issue his own receipts,
nor was he allowed to directly deduct his commission as truly independent
salesmen practice.
Worthy of note too are two other company rules which provide that
"negotiation and making of contract with customers shall be done inside the
office" and "signing of contract should be made immediately before the
cadaver or deceased is placed in the casket." (Annex 10-B, Petitioner's
Position Paper, Records) Said rules belie the petitioner's stand that it does
not have control over the means and methods by which the work is
accomplished.
The control test has been satisfied. (Social Security System v. Court of
Appeals, 156 SCRA 383 [1987]).
The finding by the public respondent that the petitioner has reported
private respondent to the Social Security System as a covered employee
adds strength to the conclusion that Maalat is an employee.
There is no reversible error in the findings of facts by the NLRC which are
supported by substantial evidence and which we, therefore, do not disturb
on appeal.
The payment of compensation by way of commission does not militate
against the conclusion that private respondent was an employee. Under
Article 97 of the Labor Code, "wage" shall mean "the renumeration of
earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, price or commission
basis . . ."
The non-observance of regular office hours does not sufficiently show that
Maalat is a "supervisor on commission basis" nor does the same indicate
that he is an independent salesman. As a supervisor, although
compensated on commission basis, he is exempt from the observance of
normal hours of work for his compensation is measured by the number of
sales he makes. He may not have had the usual fixed time for starting and
ending his work as in other types of employment but he had to spend most
of his working hours at his job. People die at all times of the day or night.
All considered, we rule that private respondent is an employee of petitioner
corporation.
II
The petitioner impugns the award of separation pay equivalent to one-half
(1/2) month average income for every year of service to private
respondent.
The NLRC ruled that:
"However, mindful of the fact the complainant Noli Maalat has served
respondent company for the last twenty four (24) years, more or less, it is
but proper to afford him some equitable relief, consistent with the recent
rulings of the Supreme Court, due to his past services with no known
previous record, and the ends of social and compassionate justice will thus
be served if he is paid a portion of his separation pay, equivalent to one-
half (1/2) month every year of his service to said company. (See Soco v.
Mercantile Corporation, G.R. No. 53364-65, March 16, 1987; and Firestone,
et al, v. Lariosa, et al., G.R. No. 70479, February 27, 1987). We are not
inclined to grant complainant his full month termination pay for every year
of his service because, unlike in the former Soco case, the misconduct of
the employee merely involves infraction of company rules while in the latter
Firestone case it involves misconduct of a rank-and-file employee, although
similarly involving acts of dishonesty." (At pp. 65-66, Rollo)
This Court will not disturb the finding by the NLRC that private respondent
Maalat was dishonest in the discharge of his functions. The finding is
sufficiently supported by the evidence on record.
Additionally, the private respondent did not appeal from the NLRC decision,
thereby impliedly accepting the validity of his dismissal.
We take exception, therefore, to the grant of separation pay to private
respondent.
In Philippine Long Distance Telephone Company (PLDT) v. NLRC, (164
SCRA 671 [1988]), this Court reexamined, the doctrine in the aforecited
Firestone and Soco cases and other previous cases that employees
dismissed for cause are nevertheless entitled to separation pay on the
ground of social and compassionate justice. In abandoning this doctrine,
the Court held, and we quote:
". . . We hold that henceforth separation pay shall be allowed as a measure
of social justice only in those instances where the employee is validly
dismissed for causes other than serious misconduct or those reflecting on
his moral character. Where the reason for the valid dismissal is, for
example, habitual intoxication or an offense involving moral turpitude, like
theft or illicit sexual relations with a fellow worker, the employer may not
be required to give the dismissed employee separation pay, or financial
assistance, or whatever other name it is called, on the ground of social
justice.
"A contrary rule would, as the petitioner correctly argues, have the effect of
rewarding rather than punishing the erring employee for his offense . . .
"The policy of social justice is not intended to countenance wrongdoing
simply because it is committed by the underprivileged. At best it may
mitigate the penalty but it certainly will not condone the offense.
Compassion for the poor is an imperative of every humane society but only
when the recipient is not a rascal claiming an undeserved privilege . . ."
Subsequent decisions have abided by this pronouncement. (See Philippine
National Construction Corporation v. National Labor Relations Commission,
170 SCRA 207 [1989]; Eastern Paper Mills, Inc. v. National Labor Relations
Commission, 170 SCRA 597 [1989]; Osias Academy v. National Labor
Relations Commission, G.R. No. 83234, April 18, 1989; and Nasipit Lumber
Co., Inc. v. National Labor Relations Commission, G.R. No. 54424, August
31, 1989.).
Conformably with the above cited PLDT ruling, this Court pronounces that
the grant of separation pay to private respondent Maalat, who was validly
terminated for dishonesty, is not justified.
Parenthetically, it may be mentioned that the Labor Arbiter, apparently
unaware of the petition for review pending before this Court, conducted
further proceedings to compute private respondent's separation pay,
unclaimed commission and 2% attorney's fees, in compliance with the
NLRC decision of May 31, 1988. After hearing, the Labor Arbiter rendered a
decision on May 10, 1989, the pertinent portion of which reads:
"In sum, the sustainable claims of complainant are as follows:
(1) Separation Pay : P76,064.40
(2) Unpaid Commissions : 39,344.80
Sub-total : P115,409.20
(3) 2% Attorney's Fees : 2,308.18
P117,717.38
"WHEREFORE, judgment is hereby rendered ordering respondent
Cosmopolitan Funeral Homes, Inc., to pay complainant Noli Maalat his
claims above set forth in the total amount of P117,717.38 only."
Neither party appealed from said decision.
For being in conflict with our holding that the private respondent is not
entitled to separation pay, this Court sets aside the Labor Arbiter's
computation of separation pay. However, we uphold his computation of
unclaimed commissions amounting to P39,344.80. The amount of attorney's
fee should consequently be recomputed at 2% of P39,344.80 or P786.89.
WHEREFORE, the judgment of the National Labor Relations Commission is
AFFIRMED except for the grant of separation pay which is hereby
disallowed. Private respondent Maalat is entitled to unclaimed commissions
of P39,344.80 and 2% attorney's fees of P786.89, said amounts being
considered final.
SO ORDERED.
Feliciano, Bidin and Cortes, JJ., concur.
Fernan (C.J., Chairman), is on leave.
DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants, vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S.
CANILAO, and SEGUNDINA NOGUERA, respondents-appellees.1988 Apr
152nd DivisionG.R. Nos. L-41182-3
DECISION
The petitioners invoke the provisions on human relations of the Civil Code
in this appeal by certiorari. The facts are beyond dispute:
xxx xxx xxx
On the strength of a contract (Exhibit A for the appellants Exhibit 2 for the
appellees) entered into on Oct. 19, 1960 by and between Mrs. Segundina
Noguera, party of the first part; the Tourist World Service, Inc., represented
by Mr. Eliseo Canilao as party of the second part, and hereinafter referred
to as appellants, the Tourist World Service, Inc. leased the premises
belonging to the party of the first part at Mabini St., Manila for the former's
use as a branch office. In the said contract the party of the third part held
herself solidarily liable with the party of the second part for the prompt
payment of the monthly rental agreed on. When the branch office was
opened, the same was run by the herein appellant Lina O. Sevilla payable
to Tourist World Service Inc. by any airline for any fare brought in on the
efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was to be
withheld by the Tourist World Service, Inc.
On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc.
appears to have been informed that Lina Sevilla was connected with a rival
firm, the Philippine Travel Bureau, and, since the branch office was anyhow
losing, the Tourist World Service considered closing down its office. This
was firmed up by two resolutions of the board of directors of Tourist World
Service, Inc. dated Dec. 2, 1961 (Exhibits 12 and 13), the first abolishing
the office of the manager and vice-president of the Tourist World Service,
Inc., Ermita Branch, and the second, authorizing the corporate secretary to
receive the properties of the Tourist World Service then located at the said
branch office. It further appears that on Jan. 3, 1962, the contract with the
appellees for the use of the Branch Office premises was terminated and
while the effectivity thereof was Jan. 31, 1962, the appellees no longer
used it. As a matter of fact appellants used it since Nov. 1961. Because of
this, and to comply with the mandate of the Tourist World Service, the
corporate secretary Gabino Canilao went over to the branch office, and,
finding the premises locked, and, being unable to contact Lina Sevilla, he
padlocked the premises on June 4, 1962 to protect the interests of the
Tourist World Service. When neither the appellant Lina Sevilla nor any of
her employees could enter the locked premises, a complaint was filed by
the herein appellants against the appellees with a prayer for the issuance of
mandatory preliminary injunction. Both appellees answered with
counterclaims. For apparent lack of interest of the parties therein, the trial
court ordered the dismissal of the case without prejudice.
The appellee Segundina Noguera sought reconsideration of the order
dismissing her counterclaim which the court a quo, in an order dated June
8, 1963, granted permitting her to present evidence in support of her
counterclaim.
On June 17, 1963, appellant Lina Sevilla refiled her case against the herein
appellees and after the issues were joined, the reinstated counterclaim of
Segundina Noguera and the new complaint of appellant Lina Sevilla were
jointly heard following which the court a quo ordered both cases dismissed
for lack of merit, on the basis of which was elevated the instant appeal on
the following assignment of errors:
"I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE OF
PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA'S COMPLAINT.
"II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS. LINA
O. SEVILLA'S ARRANGEMENT (WITH APPELLEE TOURIST WORLD SERVICE,
INC.) WAS ONE MERELY OF EMPLOYER-EMPLOYEE RELATION AND IN
FAILING TO HOLD THAT THE SAID ARRANGEMENT WAS ONE OF JOINT
BUSINESS VENTURE.
"III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLANT
MRS. LINA O. SEVILLA IS ESTOPPED FROM DENYING THAT SHE WAS A
MERE EMPLOYEE OF DEFENDANT-APPELLEE TOURIST WORLD SERVICE,
INC. EVEN AS AGAINST THE LATTER.
"IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES HAD
NO RIGHT TO EVICT APPELLANT MRS. LINA O. SEVILLA FROM THE A.
MABINI OFFICE BY TAKING THE LAW INTO THEIR OWN HANDS.
"V. THE LOWER COURT ERRED IN NOT CONSIDERING AT ALL APPELLEE
NOGUERA'S RESPONSIBILITY FOR APPELLANT MRS. LINA O. SEVILLA'S
FORCIBLE DISPOSSESSION OF THE A. MABINI PREMISES.
"VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT MRS. LINA
O. SEVILLA SIGNED MERELY AS GUARANTOR FOR RENTALS."
On the foregoing facts and in the light of the errors assigned the issues to
be resolved are:
1. Whether the appellee Tourist World Service unilaterally disconnected
the telephone line at the branch office on Ermita;
2. Whether or not the padlocking of the office by the Tourist World
Service was actionable or not; and
3. Whether or not the lessee to the office premises belonging to the
appellee Noguera was appellee TWS or TWS and the appellant.
In this appeal, appellant Lina Sevilla claims that a joint business venture
was entered into by and between her and appellee TWS with offices at the
Ermita branch office and that she was not an employee of the TWS to the
end that her relationship with TWS was one of a joint business venture
appellant made declarations showing:
"1. Appellant Mrs. Lina O. Sevilla, a prominent social figure and wife of
an eminent eye, ear and nose specialist as well as a society columnist, had
been in the travel business prior to the establishment of the joint business
venture with appellee Tourist World Service, Inc. and appellee Eliseo
Canilao, her compadre, she being the godmother of one of his children,
with her own clientele, coming mostly from her own social circle (pp. 3-6
tsn. February 16, 1965).
"2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19
October 1960 (Exh. "A") covering the premises at A. Mabini St., she
expressly warranting and holding [sic] herself 'solidarily' liable with appellee
Tourist World Service, Inc. for the prompt payment of the monthly rentals
thereof to other appellee Mrs. Noguera (pp. 14-15, tsn. Jan. 18, 1964).
"3. Appellant Mrs. Sevilla did not receive any salary from appellee Tourist
World Service, Inc., which had its own separate office located at the Trade
& Commerce Building; nor was she an employee thereof, having no
participation in nor connection with said business at the Trade & Commerce
Building (pp. 16-18 tsn. id.).
 "4. Appellant Mrs. Sevilla earned commissions for her own passengers,
her own bookings, her own business (and not for any of the business of
appellee Tourist World Service, Inc.) obtained from the airline companies.
She shared the 7% commissions given by the airline companies, giving
appellee Tourist World Service, Inc. 3% thereof and retaining 4% for
herself (pp. 18 tsn. id.)
"5. Appellant Mrs. Sevilla likewise shared in the expenses of maintaining
the A. Mabini St. office, paying for the salary of an office secretary, Miss
Obieta, and other sundry expenses, aside from designing the office
furniture and supplying some office furnishings (pp. 15, 18 tsn. April 6,
1965), appellee Tourist World Service, Inc. shouldering the rental and other
expenses in consideration for the 3% split in the commissions procured by
appellant Mrs. Sevilla (p. 35 tsn. Feb. 16, 1965).
"6. It was the understanding between them that appellant Mrs. Sevilla
would be given the title of branch manager for appearance's sake only (p.
31 tsn. id.), appellee Eliseo Canilao admitting that it was just a title for
dignity (p. 36 tsn June 18, 1965 - testimony of appellee Eliseo Canilao; pp.
38-39 tsn. April 6, 1966 - testimony of corporate secretary Gabino
Canilao)." (pp. 2-5, Appellants' Reply Brief)
Upon the other hand, appellee TWS contend that the appellant was an
employee of the appellee Tourist World Service, Inc. and as such was
designated manager." 1
xxx xxx xxx
The trial court 2 held for the private respondents on the premise that the
private respondent, Tourist World Service, Inc., being the true lessee, it
was within its prerogative to terminate the lease and padlock the premises.
3 It likewise found the petitioner, Lina Sevilla, to be a mere employee of
said Tourist World Service, Inc. and as such, she was bound by the acts of
her employer. 4 The respondent Court of Appeals 5 rendered an
affirmance.
The petitioners now claim that the respondent Court, in sustaining the
lower court, erred. Specifically, they state:
I. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND
GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT "THE PADLOCKING
OF THE PREMISES BY TOURIST WORLD SERVICE INC. WITHOUT THE
KNOWLEDGE AND CONSENT OF THE APPELLANT LINA SEVILLA . . .
WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR ANY OF HER EMPLOYEES
AND WITHOUT INFORMING COUNSEL FOR THE APPELLANT (SEVILLA),
WHO IMMEDIATELY BEFORE THE PADLOCKING INCIDENT, WAS IN
CONFERENCE WITH THE CORPORATE SECRETARY OF TOURIST WORLD
SERVICE (ADMITTEDLY THE PERSON WHO PADLOCKED THE SAID
OFFICE), IN THEIR ATTEMPT TO AMICABLY SETTLE THE CONTROVERSY
BETWEEN THE APPELLANT (SEVILLA) AND THE TOURIST WORLD SERVICE
. . . (DID NOT) ENTITLE THE LATTER TO THE RELIEF OF DAMAGES"
(ANNEX "A" PP. 7, 8 AND ANNEX "B" P. 2) - A DECISION AGAINST DUE
PROCESS WHICH ADHERES TO THE RULE OF LAW.
II. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND
GRAVELY ABUSED ITS DISCRETION IN DENYING APPELLANT SEVILLA
RELIEF BECAUSE SHE HAD "OFFERED TO WITHDRAW HER COMPLAINT
PROVIDED THAT ALL CLAIMS AND COUNTERCLAIMS LODGED BY BOTH
APPELLEES WERE WITHDRAWN." (ANNEX "A" P. 8)
III. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND
GRAVELY ABUSED ITS DISCRETION IN DENYING - IN FACT NOT PASSING
AND RESOLVING - APPELLANT SEVILLA'S CAUSE OF ACTION FOUNDED ON
ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ON HUMAN RELATIONS.
IV. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND
GRAVELY ABUSED ITS DISCRETION IN DENYING APPELLANT SEVILLA
RELIEF YET NOT RESOLVING HER CLAIM THAT SHE WAS IN JOINT
VENTURE WITH TOURIST WORLD SERVICE INC. OR AT LEAST ITS AGENT
COUPLED WITH AN INTEREST WHICH COULD NOT BE TERMINATED OR
REVOKED UNILATERALLY BY TOURIST WORLD SERVICE INC. 6
As a preliminary inquiry, the Court is asked to declare the true nature of the
relation between Lina Sevilla and Tourist World Service, Inc. The
respondent Court of Appeals did not see fit to rule on the question, the
crucial issue, in its opinion being "whether or not the padlocking of the
premises by the Tourist World Service, Inc. without the knowledge and
consent of the appellant Lina Sevilla entitled the latter to the relief of
damages prayed for and whether or not the evidence for the said appellant
supports the contention that the appellee Tourist World Service, Inc.
unilaterally and without the consent of the appellant disconnected the
telephone lines of the Ermita branch office of the appellee Tourist World
Service, Inc." 7 Tourist World Service, Inc., insists, on the other hand, that
Lina Sevilla was a mere employee, being "branch manager" of its Ermita
"branch" office and that inferentially, she had no say on the lease executed
with the private respondent, Segundina Noguera. The petitioners contend,
however, that relation between the parties was one of joint venture, but
concede that "whatever might have been the true relationship between
Sevilla and Tourist World Service," the Rule of Law enjoined Tourist World
Service and Canilao from taking the law into their own hands," 8 in
reference to the padlocking now questioned.
The Court finds the resolution of the issue material, for if, as the private
respondent, Tourist World Service, Inc., maintains, that the relation
between the parties was in the character of employer and employee, the
courts would have been without jurisdiction to try the case, labor disputes
being the exclusive domain of the Court of Industrial Relations, later, the
Bureau of Labor Relations, pursuant to statutes then in force. 9
In this jurisdiction, there has been no uniform test to determine the
existence of an employer-employee relation. In general, we have relied on
the so-called right of control test, "where the person for whom the services
are performed reserves a right to control not only the end to be achieved
but also the means to be used in reaching such end." 10 Subsequently,
however, we have considered, in addition to the standard of right-of-
control, the existing economic conditions prevailing between the parties,
like the inclusion of the employee in the payrolls, in determining the
existence of an employer-employee relationship. 11
The records will show that the petitioner, Lina Sevilla, was not subject to
control by the private respondent Tourist World Service, Inc., either as to
the result of the enterprise or as to the means used in connection
therewith. In the first place, under the contract of lease covering the
Tourist World's Ermita office, she had bound herself in solidum as and for
rental payments, an arrangement that would belie claims of a master-
servant relationship. True, the respondent Court would later minimize her
participation in the lease as one of mere guaranty, 12 that does not make
her an employee of Tourist World, since in any case, a true employee
cannot be made to part with his own money in pursuance of his employer's
business, or otherwise, assume any liability thereof. In that event, the
parties must be bound by some other relation, but certainly not
employment.
In the second place, and as found by the Appellate Court, "[w]hen the
branch office was opened, the same was run by the herein appellant Lina
O. Sevilla payable to Tourist World Service, Inc. by any airline for any fare
brought in on the effort of Mrs. Lina Sevilla." 13 Under these circumstances,
it cannot be said that Sevilla was under the control of Tourist World Service,
Inc. "as to the means used." Sevilla in pursuing the business, obviously
relied on her own gifts and capabilities.
It is further admitted that Sevilla was not in the company's payroll. For her
efforts, she retained 4% in commissions from airline bookings, the
remaining 3% going to Tourist World. Unlike an employee then, who earns
a fixed salary usually, she earned compensation in fluctuating amounts
depending on her booking successes.
The fact that Sevilla had been designated "branch manager" does not make
her, ergo, Tourist World's employee. As we said, employment is determined
by the right-of-control test and certain economic parameters. But titles are
weak indicators.
In rejecting Tourist World Service, Inc.'s arguments however, we are not,
as a consequence, accepting Lina Sevilla's own, that is, that the parties had
embarked on a joint venture or otherwise, a partnership. And apparently,
Sevilla herself did not recognize the existence of such a relation. In her
letter of November 28, 1961, she expressly "concedes your [Tourist World
Service, Inc.'s] right to stop the operation of your branch office," 14 in
effect, accepting Tourist World Service, Inc.'s control over the manner in
which the business was run. A joint venture, including a partnership,
presupposes generally a parity of standing between the joint co-venturers
or partners, in which each party has an equal proprietary interest in the
capital or property contributed 15 and where each party exercises equal
rights in the conduct of the business. 16 Furthermore, the parties did not
hold themselves out as partners, and the building itself was embellished
with the electric sign "Tourist World Service, Inc.," 17 in lieu of a distinct
partnership name.
It is the Court's considered opinion, that when the petitioner, Lina Sevilla,
agreed to (wo)man the private respondent, Tourist World Service, Inc.'s
Ermita office, she must have done so pursuant to a contract of agency. It is
the essence of this contract that the agent renders services "in
representation or on behalf of another." 18 In the case at bar, Sevilla
solicited airline fares, but she did so for and on behalf of her principal,
Tourist World Service, Inc. As compensation, she received 4% of the
proceeds in the concept of commissions. And as we said, Sevilla herself,
based on her letter of November 28, 1961, presumed her principal's
authority as owner of the business undertaking. We are convinced,
considering the circumstances and from the respondent Court's recital of
facts, that the parties had contemplated a principal-agent relationship,
rather than a joint management or a partnership.
But unlike simple grants of a power of attorney, the agency that we hereby
declare to be compatible with the intent of the parties, cannot be revoked
at will. The reason is that it is one coupled with an interest, the agency
having been created for the mutual interest of the agent and the principal.
19 It appears that Lina Sevilla is a bona fide travel agent herself, and as
such, she had acquired an interest in the business entrusted to her.
Moreover, she had assumed a personal obligation for the operation thereof,
holding herself solidarily liable for the payment of rentals. She continued
the business, using her own name, after Tourist World had stopped further
operations. Her interest, obviously, is not limited to the commissions she
earned as a result of her business transactions, but one that extends to the
very subject matter of the power of management delegated to her. It is an
agency that, as we said, cannot be revoked at the pleasure of the principal.
Accordingly, the revocation complained of should entitle the petitioner, Lina
Sevilla, to damages.
As we have stated, the respondent Court avoided this issue, confining itself
to the telephone disconnection and padlocking incidents. Anent the
disconnection issue, it is the holding of the Court of Appeals that there is
"no evidence showing that the Tourist World Service, Inc. disconnected the
telephone lines at the branch office." 20 Yet, what cannot be denied is the
fact that Tourist World Service, Inc. did not take pains to have them
reconnected. Assuming, therefore, that it had no hand in the disconnection
now complained of, it had clearly condoned it, and as owner of the
telephone lines, it must shoulder responsibility therefor.
The Court of Appeals must likewise be held to be in error with respect to
the padlocking incident. For the fact that Tourist World Service, Inc. was
the lessee named in the lease contract did not accord it any authority to
terminate that contract without notice to its actual occupant, and to padlock
the premises in such blitzkrieg fashion. As this Court has ruled, the
petitioner, Lina Sevilla, had acquired a personal stake in the business itself,
and necessarily, in the equipment pertaining thereto. Furthermore, Sevilla
was not a stranger to that contract having been explicitly named therein as
a third party in charge of rental payments (solidarily with Tourist World,
Inc.). She could not be ousted from possession as summarily as one would
eject an interloper.
The Court is satisfied that from the chronicle of events, there was indeed
some malevolent design to put the petitioner, Lina Sevilla, in a bad light
following disclosures that she had worked for a rival firm. To be sure, the
respondent court speaks of alleged business losses to justify the closure, 21
but there is no clear showing that Tourist World Ermita Branch had in fact
sustained such reverses, let alone, the fact that Sevilla had moonlit for
another company. What the evidence discloses, on the other hand, is that
following such an information (that Sevilla was working for another
company), Tourist World's board of directors adopted two resolutions
abolishing the office of "manager" and authorizing the corporate secretary,
the respondent Eliseo Canilao, to effect the takeover of its branch office
properties. On January 3, 1962, the private respondents ended the lease
over the branch office premises, incidentally, without notice to her.
It was only on June 4, 1962, and after office hours significantly, that the
Ermita office was padlocked, personally by the respondent Canilao, on the
pretext that it was necessary "to protect the interests of the Tourist World
Service." 22 It is strange indeed that Tourist World Service, Inc. did not find
such a need when it cancelled the lease five months earlier. While Tourist
World Service, Inc. would not pretend that it sought to locate Sevilla to
inform her of the closure, but surely, it was aware that after office hours,
she could not have been anywhere near the premises. Capping these series
of "offensives," it cut the office's telephone lines, paralyzing completely its
business operations, and in the process, depriving Sevilla of her
participation therein.
This conduct on the part of Tourist World Service, Inc. betrays a sinister
effort to punish Sevilla for what it had perceived to be disloyalty on her
part. It is offensive, in any event, to elementary norms of justice and fair
play.
We rule, therefore, that for its unwarranted revocation of the contract of
agency, the private respondent, Tourist World Service, Inc., should be
sentenced to pay damages. Under the Civil Code, moral damages may be
awarded for "breaches of contract where the defendant acted . . . in bad
faith." 23
We likewise condemn Tourist World Service, Inc. to pay further damages
for the moral injury done to Lina Sevilla arising from its brazen conduct
subsequent to the cancellation of the power of attorney granted to her on
the authority of Article 21 of the Civil Code, in relation to Article 2219 (10)
thereof:
ART. 21. Any person who wilfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage.
ART. 2219. Moral damages may be recovered in the following and
analogous cases:
xxx xxx xxx
(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34,
and 35.
The respondent, Eliseo Canilao, as a joint tortfeasor, is likewise hereby
ordered to respond for the same damages in a solidary capacity.
Insofar, however, as the private respondent, Segundina Noguera is
concerned, no evidence has been shown that she had connived with Tourist
World Service, Inc. in the disconnection and padlocking incidents. She
cannot therefore be held liable as a co-tortfeasor.
The Court considers the sums of P25,000.00 as and for moral damages, 24
P10,000.00 as exemplary damages, 25 and P5,000.00 as nominal 26 and/or
temperate 27 damages, to be just, fair, and reasonable under the
circumstances.
WHEREFORE, the Decision promulgated on January 23, 1975 as well as the
Resolution issued on July 31, 1975, by the respondent Court of Appeals is
hereby REVERSED and SET ASIDE. The private respondent, Tourist World
Service, Inc., and Eliseo Canilao, are ORDERED jointly and severally to
indemnify the petitioner, Lina Sevilla, the sum of P25,000.00 as and for
moral damages, the sum of P10,000.00, as and for exemplary damages,
and the sum of P5,000.00, as and for nominal and/or temperate damages.
Costs against said private respondents.
SO ORDERED.
CONTINENTAL MARBLE CORP. and FELIPE DAVID, petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC); ARBITRATOR JOSE
T. COLLADO and RODITO NASAYAO, respondents.1988 May 92nd Division
G.R. No. L-43825
DECISION
In this petition for mandamus, prohibition and certiorari with preliminary
injunction, petitioners seek to annul and set aside the decision rendered by
the respondent Arbitrator Jose T. Collado, dated 29 December 1975, in
NLRC Case No. LR-6151, entitled: "Rodito Nasayao, complainant, versus
Continental Marble Corp. and Felipe David, respondents," and the resolution
issued by the respondent Commission, dated 7 May 1976, which dismissed
herein petitioners' appeal from said decision.
In his complaint before the NLRC, herein private respondent Rodito
Nasayao claimed that sometime in May 1974, he vas appointed plant
manager of the petitioner corporation, with an alleged compensation of
P3,000.00, s month, or 25% of the monthly net income of the company,
whichever is greater, and when the company failed to pay his salary for the
months of May, June, and July 1974, Rodito Nasayao filed a complaint with
the National Labor Relations Commission, Branch IV, for the recovery of
said unpaid salaries. The case was docketed therein as NLRC Case No. LR-
6151.
Answering, the herein petitioners denied that Rodito Nasayao was
employed in the company as plant manager with a fixed monthly salary of
P3,000.00. They claimed that the undertaking agreed upon by the parties
was a joint venture, a sort of partnership, wherein Rodito Nasayao was to
keep the machinery in good working condition and, in return, he would get
the contracts from end-users for the installation of marble products, in
which the company would not interfere. In addition, private respondent
Nasayao was to receive an amount equivalent to 25% of the net profits
that the petitioner corporation would realize, should there be any.
Petitioners alleged that since there had been no profits during said period,
private respondent was not entitled to any amount.
The case was submitted for voluntary arbitration and the parties selected
the herein respondent Jose T. Collado as voluntary arbitrator. In the course
of the proceedings, however, the herein petitioners challenged the
arbitrator's capacity to try and decide the case fairly and judiciously and
asked him to desist from further hearing the case. But, the respondent
arbitrator refused. In due time, or on 29 December 1975, he rendered
judgment in favor of the complainant, ordering the herein petitioners to pay
Rodito Nasayao the amount of P9,000.00, within 10 days from notice. 1
Upon receipt of the decision, the herein petitioners appealed to the National
Labor Relations Commission on grounds that the labor arbiter gravely
abused his discretion in persisting to hear and decide the case
notwithstanding petitioners' request for him to desist therefrom: and that
the appealed decision is not supported by evidence. 2
On 18 March 1976, Rodito Nasayao filed a motion to dismiss the appeal on
the ground that the decision of the voluntary arbitrator is final,
unappealable, and immediately executory; 3 and, on 23 March 1976, he
filed a motion for the issuance of a writ of execution. 4
Acting on the motions, the respondent Commission, in a resolution dated 7
May 1976, dismissed the appeal on the ground that the decision appealed
from is final, unappealable and immediately executory, and ordered the
herein petitioners to comply with the decision of the voluntary arbitrator
within 10 days from receipt of the resolution. 5
The petitioners are before the Court in the present recourse. As prayed for,
the Court issued a temporary restraining order, restraining herein
respondents from enforcing and/or carrying out the questioned decision
and resolution. 6
The issue for resolution is whether or not the private respondent Rodito
Nasayao was employed as plant manager of petitioner Continental Marble
Corporation with a monthly salary of P3,000.00 or 25% of its monthly
income, whichever is greater, as claimed by said respondent, or entitled to
receive only an amount equivalent to 25% of net profits, if any, that the
company would realize, as contended by the petitioners.
The respondent arbitrator found that the agreement between the parties
was for the petitioner company to pay the private respondent, Rodito
Nasayao, a monthly salary of P3,000.00, and, consequently, ordered the
company to pay Rodito Nasayao the amount of P9,000.00 covering a period
of three (3) months, that is, May, June and July 1974.
The respondent Rodito Nasayao now contends that the judgment or award
of the voluntary arbitrator is final, unappealable and immediately executory,
and may not be reviewed by the Court. His contention is based upon the
provisions of Art. 262 of the Labor Code, as amended.
The petitioners, upon the other hand, maintain that "where there is patent
and manifest abuse of discretion, the rule on unappealability of awards of a
voluntary arbitrator becomes flexible and it is the inherent power of the
Courts to maintain the people's faith in the administration of justice."
The question of the finality and unappealability of a decision and/or award
of a voluntary arbitrator had been laid to rest in Oceanic Bic Division (FFW)
vs. Romero, 7 and reiterated in Mantrade/FMMC Division Employees and
Workers Union vs. Bacungan. 8 The Court therein ruled that it can review
the decisions of voluntary arbitrators, thus
"We agree with the petitioner that the decisions of voluntary arbitrators
must be given the highest respect and as a general rule must be accorded
a certain measure of finality. This is especially true where the arbitrator
chosen by the parties enjoys the first rate credentials of Professor Flerida
Ruth Pineda Romero, Director of the U.P. Law Center and an academician
of unquestioned expertise in the field of Labor Law. It is not correct,
however, that this respect precludes the exercise of judicial review over
their decisions. Article 262 of the Labor Code making voluntary arbitration
awards final, inappealable, and executory except where the money claims
exceed P100,000.00 or 40% of paid-up capital of the employer or where
there is abuse of discretion or gross incompetence refers to appeals to the
National Labor Relations Commission and not to judicial review.
"Inspite of statutory provisions making 'final' the decisions of certain
administrative agencies, we have taken cognizance of petitions questioning
these decisions where want of jurisdiction, grave abuse of discretion,
violation of due process, denial of substantial justice, or erroneous
interpretation of the law were brought to our attention. There is no
provision for appeal in the statute creating the Sandiganbayan but this has
not precluded us from examining decisions of this special court brought to
us in proper petitions. . . ."
The Court further said:
"A voluntary arbitrator by the nature of her functions acts in a quasi-judicial
capacity. There is no reason why her decisions involving interpretation of
law should be beyond this Court's review. Administrative officials are
presumed to act in accordance with law and yet we do not hesitate to pass
upon their work where a question of law is involved or where a showing of
abuse of authority or discretion in their official acts is properly raised in
petitions for certiorari."
The foregoing pronouncements find support in Section 29 of Republic Act
No. 876, otherwise known as the Arbitration Law, which provides:
"Sec. 29. Appeals. An appeal may be taken from an order made in a
proceeding under this Act, or from a judgment entered upon an award
through certiorari proceedings, but such appeals shall be limited to
questions of law. The proceedings upon such an appeal, including the
judgment thereon shall be governed by the Rules of Court in so far as they
are applicable."
The private respondent, Rodito Nasayao, in his Answer to the petition, 9
also claims that the case is premature for non-exhaustion of administrative
remedies. He contends that the decision of the respondent Commission
should have been first appealed by petitioners to the Secretary of Labor,
and, if they are not satisfied with his decision, to appeal to the President of
the Philippines, before resort is made to the Court.
The contention is without merit. The doctrine of exhaustion of
administrative remedies cannot be invoked in this case, as contended. In
the recent case of John Clement Consultants, Inc. versus National Labor
Relations Commission, 10 the Court said:
"As is well known, no law provides for an appeal from decisions of the
National Labor Relations Commission; hence, there can be no review and
reversal on appeal by higher authority of its factual or legal conclusions.
When, however, it decides a case without or in excess of its jurisdiction, or
with grave abuse of discretion, the party thereby adversely affected may
obtain a review and nullification of that decision by this Court through the
extraordinary writ of certiorari. Since, in this case, it appears that the
Commission has indeed acted without jurisdiction and with grave abuse of
discretion in taking cognizance of a belated appeal sought to be taken from
a decision of Labor Arbiter and thereafter reversing it, the writ of certiorari
will issue to undo those acts, and do justice to the aggrieved party."
We also find no merit in the contention of Rodito Nasayao that only
questions of law, and not findings of fact of a voluntary arbitrator may be
reviewed by the Court, since the findings of fact of the voluntary arbitrator
are conclusive upon the Court.
While the Court has accorded great respect for, and finality to, findings of
fact of a voluntary arbitrator 11 and administrative agencies which have
acquired expertise in their respective fields, like the Labor Department and
the National Labor Relations Commission, 12 their findings of fact and the
conclusions drawn therefrom have to be supported by substantial evidence.
In that instant case, the finding of the voluntary arbitrator that Rodito
Nasayao was an employee of the petitioner corporation is not supported by
the evidence or by the law.
On the other hand, we find the version of the petitioners to be more
plausible and in accord with human nature and the ordinary course of
things. As pointed out by the petitioners, it was illogical for them to hire the
private respondent Rodito Nasayao as plant manager with a monthly salary
of P3,000.00, an amount which they could ill-afford to pay, considering that
the business was losing, at the time he was hired, and that they were about
to close shop in a few months' time.
Besides, there is nothing in the record which would support the claim of
Rodito Nasayao that he was an employee of the petitioner corporation. He
was not included in the company payroll, nor in the list of company
employees furnished the Social Security System.
Most of all, the element of control is lacking. In Brotherhood Labor Unity
Movement in the Philippines vs. Zamora, 13 the Court enumerated the
factors in determining whether or not an employer-employee relationship
exists, to wit:
"In determining the existence of an employer-employee relationship, the
elements that are generally considered are the following: (a) the selection
and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power to control the employee
with respect to the means and methods by which the work is to be
accomplished. It is the so-called 'control test' that is the most important
element (Investment Planning Corp. of the Phils. vs. The Social Security
System, 21 SCRA 924; Mafinco Trading Corp. v. Ople, supra, and Rosario
Brothers, Inc. v. Ople, 131 SCRA 72)."
In the instant case, it appears that the petitioners had no control over the
conduct of Rodito Nasayao in the performance of his work. He decided for
himself on what was to be done and worked at his own pleasure. He was
not subject to definite hours or conditions of work and, in turn, was
compensated according to the results of his own effort. He had a free hand
in running the company and its business, so much so, that the petitioner
Felipe David did not know, until very much later, that Rodito Nasayao had
collected old accounts receivables, not covered by their agreement, which
he converted to his own personal use. It was only after Rodito Nasayao had
abandoned the plant following discovery of his wrong-doings, that Felipe
David assumed management of the plant.
Absent the power to control the employee with respect to the means and
methods by which his work was to be accomplished, there was no
employer-employee relationship between the parties. Hence, there is no
basis for an award of unpaid salaries or wages to Rodito Nasayao.
WHEREFORE, the decision rendered by the respondent Jose T. Collado in
NLRC Case No. LR-6151, entitled: "Rodito Nasayao, complainant, versus
Continental Marble Corp. and Felipe David, respondents," on 29 December
1975, and the resolution issued by the respondent National Labor Relations
Commission in said case on 7 May 1976, are REVERSED and SET ASIDE
and another one entered DISMISSING private respondent's complaint. The
temporary restraining order heretofore issued by the Court is made
permanent. Without costs.
SO ORDERED.
Yap (C.J.), Melencio-Herrera, Paras and Sarmiento, JJ., concur.
ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON, LAURENTE BAUTU,
JAIME BARBIN, NICANOR FRANCISCO, PHILIP CERVANTES and ELEUTERIO
BARBIN, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and
DE GUZMAN FISHING ENTERPRISES and/or ARSENIO DE GUZMAN,
respondents. J.C. Espinas & Associates for petitioners. Tomas A. Reyes for
private respondent.1990 Jan 223rd DivisionG.R. Nos. 72654-61
DECISION
The issue to be resolved in the instant case is whether or not the
fishermen-crew members of the trawl fishing vessel 7/B Sandyman II are
employees of its owner-operator, De Guzman Fishing Enterprises, and if so,
whether or not they were illegally dismissed from their employment.
Records show that the petitioners were the fishermen-crew members of 7/B
Sandyman II, one of several fishing vessels owned and operated by private
respondent De Guzman Fishing Enterprises which is primarily engaged in
the fishing business with port and office at Camaligan, Camarines Sur.
Petitioners rendered service aboard said fishing vessel in various capacities,
as follows: Alipio Ruga and Jose Parma, patron/pilot; Eladio Calderon, chief
engineer; Laurente Bautu, second engineer; Jaime Barbin, master
fisherman; Nicanor Francisco, second fisherman; Philip Cervantes and
Eleuterio Barbin, fishermen.
For services rendered in the conduct of private respondent's regular
business of "trawl" fishing, petitioners were paid on percentage commission
basis in cash by one Mrs. Pilar de Guzman, cashier of private respondent.
As agreed upon, they received thirteen percent (13%) of the proceeds of
the sale of the fish-catch if the total proceeds exceeded the cost of crude oil
consumed during the fishing trip, otherwise, they received ten percent
(10%) of the total proceeds of the sale. The patron/pilot, chief engineer
and master fisherman received a minimum income of P350.00 per week
while the assistant engineer, second fisherman, and fisherman-winchman
received a minimum income of P260.00 per week. 1
On September 11, 1983 upon arrival at the fishing port, petitioners were
told by Jorge de Guzman, president of private respondent, to proceed to
the police station at Camaligan, Camarines Sur, for investigation on the
report that they sold some of their fish-catch at midsea to the prejudice of
private respondent. Petitioners denied the charge claiming that the same
was a countermove to their having formed a labor union and becoming
members of Defender of Industrial Agricultural Labor Organizations and
General Workers Union (DIALOGWU) on September 3, 1983.
During the investigation, no witnesses were presented to prove the charge
against petitioners, and no criminal charges were formally filed against
them. Notwithstanding, private respondent refused to allow petitioners to
return to the fishing vessel to resume their work on the same day,
September 11, 1983.
On September 22, 1983, petitioners individually filed their complaints for
illegal dismissal and non-payment of 13th month pay, emergency cost of
living allowance and service incentive pay, with the then Ministry (now
Department) of Labor and Employment, Regional Arbitration Branch No. V,
Legaspi City, Albay, docketed as Cases Nos. 1449-83 to 1456-83. 2 They
uniformly contended that they were arbitrarily dismissed without being
given ample time to look for a new job.
On October 24, 1983, private respondent, thru its operations manager,
Conrado S. de Guzman, submitted its position paper denying the employer-
employee relationship between private respondent and petitioners on the
theory that private respondent and petitioners were engaged in a joint
venture. 3
After the parties failed to reach an amicable settlement, the Labor Arbiter
scheduled the case for joint hearing furnishing the parties with notice and
summons. On December 27,1983, after two (2) previously scheduled joint
hearings were postponed due to the absence of private respondent, one of
the petitioners herein, Alipio Ruga, the pilot/captain of the 7/B Sandyman
II, testified, among others, on the manner the fishing operations were
conducted, mode of payment of compensation for services rendered by the
fishermen-crew members, and the circumstances leading to their dismissal.
4 exists between private respondent and petitioners, petitioners claim that
On March 31, 1984, after the case was submitted for resolution, Labor
Arbiter Asisclo S. Coralde rendered a joint decision 5 dismissing all the
complaints of petitioners on a finding that a "joint fishing venture" and not
one of employer-employee relationship existed between private respondent
and petitioners.
From the adverse decision against them, petitioners appealed to the
National Labor Relations Commission.
On May 30, 1985, the National Labor Relations Commission promulgated its
resolution 6 affirming the decision of the labor arbiter that a "joint fishing
venture" relationship existed between private respondent and petitioners.
Hence, the instant petition.
Petitioners assail the ruling of the public respondent NLRC that what exists
between private respondent and petitioners is a joint venture arrangement
and not an employer-employee relationship. To stress that there is an
employer-employee relationship between them and private respondent,
petitioners invite attention to the following: that they were directly hired by
private respondent through its general manager, Arsenio de Guzman, and
its operations manager, Conrado de Guzman; that, except for Laurente
Bautu, they had been employed by private respondent from 8 to 15 years
in various capacities; that private respondent, through its operations
manager, supervised and controlled the conduct of their fishing operations
as to the fixing of the schedule of the fishing trips, the direction of the
fishing vessel, the volume or number of tubes of the fish-catch, the time to
return to the fishing port, which were communicated to the patron/pilot by
radio (single side band) that they were not allowed to join other outfits
even the other vessels owned by private respondent without the permission
of the operations manager; that they were compensated on percentage
commission basis of the gross sales of the fish-catch which were delivered
to them in cash by private respondent's cashier, Mrs. Pilar de Guzman; and
that they have to follow company policies, rules and regulations imposed on
them by private respondent.
Disputing the finding of public respondent that a "joint fishing venture"
public respondent exceeded its jurisdiction and/or abused its discretion
when it added facts not contained in the records when it stated that the
pilot-crew members do not receive compensation from the boat-owners
except their share in the catch produced by their own efforts; that public
respondent ignored the evidence of petitioners that private respondent
controlled the fishing operations; that public respondent did not take into
account established jurisprudence that the relationship between the fishing
boat operators and their crew is one of direct employer and employee.
Aside from seeking the dismissal of the petition on the ground that the
decision of the labor arbiter is now final and executory for failure of
petitioners to file their appeal with the NLRC within 10 calendar days from
receipt of said decision pursuant to the doctrine laid down in Vir-Jen
Shipping and Marine Services, Inc. vs. NLRC, 115 SCRA 347 (1982), the
Solicitor General claims that the ruling of public respondent that a "joint
fishing venture" exists between private respondent and petitioners rests on
the resolution of the Social Security System (SSS) in a 1968 case, Case No.
708 (De Guzman Fishing Enterprises vs. SSS), exempting De Guzman
Fishing Enterprises, private respondent herein, from compulsory coverage
of the SSS on the ground that there is no employer-employee relations
between the boat-owner and the fishermen-crew members following the
doctrine laid down in Pajarillo vs. SSS, 17 SCRA 1014 (1966). In applying to
the case at bar the doctrine in Pajarillo vs. SSS, supra, that there is no
employer-employee relationship between the boat-owner and the pilot and
crew members when the boat-owner supplies the boat and equipment
while the pilot and crew members contribute the corresponding labor and
the parties get specific shares in the catch for their respective contribution
to the venture, the Solicitor General pointed out that the boat-owners in the
Pajarillo case, as in the case at bar, did not control the conduct of the
fishing operations and the pilot and crew members shared in the catch.
We rule in favor of petitioners.
Fundamental considerations of substantial justice persuade Us to decide the
instant case on the merits rather than to dismiss it on a mere technicality.
In so doing, we exercise the prerogative accorded to this Court enunciated
in Firestone Filipinas Employees Association, et al. vs. Firestone Tire and
Rubber Co. of the Philippines, Inc., 61 SCRA 340 (1974), thus "the well-
settled doctrine is that in labor cases before this Tribunal, no undue
sympathy is to be accorded to any claim of a procedural misstep, the idea
being that its power be exercised according to justice and equity and
substantial merits of the controversy."
Circumstances peculiar to some extent to fishermen-crew members of a
fishing vessel regularly engaged in trawl fishing, as in the case of
petitioners herein, who spend one (1) whole week or more 7 in the open
sea performing their job to earn a living to support their families, convince
Us to adopt a more liberal attitude in applying to petitioners the 10-
calendar day rule in the filing of appeals with the NLRC from the decision of
the labor arbiter.
Records reveal that petitioners were informed of the labor arbiter's decision
of March 31, 1984 only on July 3, 1984 by their non-lawyer representative
during the arbitration proceedings, Jose Dialogo, who received the decision
eight (8) days earlier, or on June 25, 1984. As adverted to earlier, the
circumstances peculiar to petitioners' occupation as fishermen-crew
members, who during the pendency of the case understandably have to
earn a living by seeking employment elsewhere, impress upon Us that in
the ordinary course of events, the information as to the adverse decision
against them would not reach them within such time frame as would allow
them to faithfully abide by the 10-calendar day appeal period. This peculiar
circumstance and the fact that their representative is a non-lawyer provide
equitable justification to conclude that there is substantial compliance with
the ten-calendar day rule of filing of appeals with the NLRC when
petitioners filed on July 10, 1984, or seven (7) days after receipt of the
decision, their appeal with the NLRC through registered mail.
We have consistently ruled that in determining the existence of an
employer-employee relationship, the elements that are generally considered
are the following (a) the selection and engagement of the employee; (b)
the payment of wages; (c) the power of dismissal; and (d) the employer's
power to control the employee with respect to the means and methods by
which the work is to be accomplished. 8 The employment relation arises
from contract of hire, express or implied. 9 In the absence of hiring, no
actual employer-employee relation could exist.
From the four (4) elements mentioned, We have generally relied on the so-
called right-of-control test 10 where the person for whom the services are
performed reserves a right to control not only the end to be achieved but
also the means to be used in reaching such end. The test calls merely for
the existence of the right to control the manner of doing the work, not the
actual exercise of the right 11
The case of Pajarillo vs. SSS, supra, invoked by the public respondent as
authority for the ruling that a "joint fishing venture" existed between
private respondent and petitioners is not applicable in the instant case.
There is neither right of control nor actual exercise of such right on the part
of the boat-owners in the Pajarillo case, where the Court found that the
pilots therein are not under the order of the boat-owners as regards their
employment; that they go out to sea not upon directions of the boat-
owners, but upon their own volition as to when, how long and where to go
fishing; that the boat-owners do not in any way control the crew-members
with whom the former have no relationship whatsoever; that they simply
join every trip for which the pilots allow them, without any reference to the
owners of the vessel; and that they only share in their own catch produced
by their own efforts.
The aforementioned circumstances obtaining in Pajarillo case do not exist in
the instant case. The conduct of the fishing operations was undisputably
shown by the testimony of Alipio Ruga, the patron/pilot of 7/B Sandyman
II, to be under the control and supervision of private respondent's
operations manager. Matters dealing on the fixing of the schedule of the
fishing trip and the time to return to the fishing port were shown to be the
prerogative of private respondent. 12 While performing the fishing
operations, petitioners received instructions via a single-side band radio
from private respondent's operations manager who called the patron/pilot
in the morning. They are told to report their activities, their position, and
the number of tubes of fish-catch in one day. 13 Clearly thus, the conduct
of the fishing operations was monitored by private respondent thru the
patron/pilot of 7/B Sandyman II who is responsible for disseminating the
instructions to the crew members.
The conclusion of public respondent that there had been no change in the
situation of the parties since 1968 when De Guzman Fishing Enterprises,
private respondent herein, obtained a favorable judgment in Case No. 708
exempting it from compulsory coverage of the SSS law is not supported by
evidence on record. It was erroneous for public respondent to apply the
factual situation of the parties in the 1968 case to the instant case in the
light of the changes in the conditions of employment agreed upon by the
private respondent and petitioners as discussed earlier.
Records show that in the instant case, as distinguished from the Pajarillo
case where the crew members are under no obligation to remain in the
outfit for any definite period as one can be the crew member of an outfit
for one day and be the member of the crew of another vessel the next day,
the herein petitioners, on the other hand, were directly hired by private
respondent, through its general manager, Arsenio de Guzman, and its
operations manager, Conrado de Guzman and have been under the employ
of private respondent for a period of 8-15 years in various capacities,
except for Laurente Bautu who was hired on August 3, 1983 as assistant
engineer. Petitioner Alipio Ruga was hired on September 29, 1974 as
patron/captain of the fishing vessel; Eladio Calderon started as a mechanic
on April 16,1968 until he was promoted as chief engineer of the fishing
vessel; Jose Parma was employed on September 29, 1974 as assistant
engineer; Jaime Barbin started as a pilot of the motor boat until he was
transferred as a master fisherman to the fishing vessel 7/B Sandyman II;
Philip Cervantes was hired as winchman on August 1, 1972 while Eleuterio
Barbin was hired as winchman on April 15, 1976.
While tenure or length of employment is not considered as the test of
employment, nevertheless the hiring of petitioners to perform work which is
necessary or desirable in the usual business or trade of private respondent
for a period of 8-15 years since 1968 qualify them as regular employees
within the meaning of Article 281 of the Labor Code as they were indeed
engaged to perform activities usually necessary or desirable in the usual
fishing business or occupation of private respondent. 14
Aside from performing activities usually necessary and desirable in the
business of private respondent, it must be noted that petitioners received
compensation on a percentage commission based on the gross sale of the
fish-catch, i.e. 13% of the proceeds of the sale if the total proceeds
exceeded the cost of the crude oil consumed during the fishing trip,
otherwise only 10% of the proceeds of the sale. Such compensation falls
within the scope and meaning of the term "wage" as defined under Article
97(f) of the Labor Code, thus:
"(f) 'Wage' paid to any employee shall mean the remuneration or earnings,
however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece or commission basis, or
other method of calculating the same, which is payable by an employer to
an employee under a written or unwritten contract of employment for work
done or to be done, or for services rendered or to be rendered, and
included the fair and reasonable value, as determined by the Secretary of
Labor, of board, lodging, or other facilities customarily furnished by the
employer to the employee. . . . "
The claim of private respondent, which was given credence by public
respondent, that petitioners get paid in the form of share in the fish-catch
which the patron/pilot as head of the team distributes to his crew members
in accordance with their own understanding 15 is not supported by
recorded evidence. Except that such claim appears as an allegation in
private respondent's position paper, there is nothing in the records showing
such a sharing scheme as proffered by private respondent.
Furthermore, the fact that on mere suspicion based on the reports that
petitioners allegedly sold their fish-catch at midsea without the knowledge
and consent of private respondent, petitioners were unjustifiably not
allowed to board the fishing vessel on September 11, 1983 to resume their
activities without giving them the opportunity to air their side on the worked for and in the interest of the business of the boat-owner but also
accusation against them unmistakably reveals the disciplinary power because they were subject to the control, supervision and dismissal of the
exercised by private respondent over them and the corresponding sanction boat-owner, thru its agent, Simplicio Panganiban, the alleged "partner" of
imposed in case of violation of any of its rules and regulations. The virtual Dr. Abong; that while these fishermen crew members were paid in kind, or
dismissal of petitioners from their employment was characterized by undue by "pakiao basis" still that fact did not alter the character of their
haste when less extreme measures consistent with the requirements of due relationship with Dr. Abong as employees of the latter.
process should have been first exhausted. In that sense, the dismissal of
petitioners was tainted with illegality. In Philippine Fishing Boat Officers and Engineers Union vs. Court of
Industrial Relations, 112 SCRA 159 (1982), we held that the employer-
Even on the assumption that petitioners indeed sold the fish-catch at mid- employee relationship between the crew members and the owners of the
sea, the act of private respondent virtually resulting in their dismissal fishing vessels engaged in deepsea fishing is merely suspended during the
evidently contradicts private respondent's theory of "joint fishing venture" time the vessels are drydocked or undergoing repairs or being loaded with
between the parties herein. A joint venture, including partnership, the necessary provisions for the next fishing trip. The said ruling is
presupposes generally a parity of standing between the joint co-venturers premised on the principle that all these activities i.e., drydock, repairs,
or partners, in which each party has an equal proprietary interest in the loading of necessary provisions, form part of the regular operation of the
capital or property contributed 16 and where each party exercises equal company fishing business.
rights in the conduct of the business.17 It would be inconsistent with the
principle of parity of standing between the joint co-venturers as regards the WHEREFORE, in view of the foregoing, the petition is GRANTED. The
conduct of business, if private respondent would outrightly exclude questioned resolution of the National Labor Relations Commission dated
petitioners from the conduct of the business without first resorting to other May 30, 1985 is hereby REVERSED and SET ASIDE. Private respondent is
measures consistent with the nature of a joint venture undertaking. Instead ordered to reinstate petitioners to their former positions or any equivalent
of arbitrary unilateral action, private respondent should have discussed with positions with 3-year backwages and other monetary benefits under the
an open mind the advantages and disadvantages of petitioners' action with law. No pronouncement as to costs.
its joint co-venturers if indeed there is a "joint fishing venture" between the
parties. But this was not done in the instant case. Petitioners were SO ORDERED.
arbitrarily dismissed notwithstanding that no criminal complaints were filed
against them. The lame excuse of private respondent that the non-filing of
Gutierrez, Jr., Bidin and Cortes, JJ., concur.
the criminal complaints against petitioners was for humanitarian reasons
will not help its cause either.
Feliciano, J., In the result.
We have examined the jurisprudence on the matter and find the same to
be supportive of petitioners' stand. In Negre vs. WCC, 135 SCRA 653
(1985), we held that fishermen crew members who were recruited by one
master fisherman locally known as "maestro" in charge of recruiting others
to complete the crew members are considered employees, not industrial
partners, of the boat-owners. In an earlier case of Abong vs. WCC, 54 SCRA
379 (1973) where petitioner therein, Dr. Agustin Abong, owner of the
fishing boat, claimed that he was not the employer of the fishermen crew
members because of an alleged partnership agreement between him, as
financier, and Simplicio Panganiban, as his teamleader in charge of
recruiting said fishermen to work for him, we affirmed the finding of the
WCC that there existed an employer-employee relationship between the
boat-owner and the fishermen crew members not only because they
MANILA GOLF & COUNTRY CLUB, INC., petitioner, vs. INTERMEDIATE
APPELLATE COURT and FERMIN LLAMAR, respondents.1994 Sep 271st
DivisionG.R. No. 64948D E C I S I O N

The question before the Court here is whether or not persons rendering
caddying services for members of golf clubs and their guests in said clubs'
courses or premises are the employees of such clubs and therefore within
the compulsory coverage of the Social Security System (SSS).

That question appears to have been involved, either directly or peripherally,

in three separate proceedings, all initiated by or on behalf of herein private
respondent and his fellow caddies. That which gave rise to the present
petition for review was originally filed with the Social Security Commission
(SSC) via petition of seventeen (17) persons who styled themselves
"Caddies of Manila Golf and Country Club-PTCCEA" for coverage and
availment of benefits under the Social Security Act as amended, "PTCCEA"
being the acronym of a labor organization, the "Philippine Technical,
Clerical, Commercial Employees Association," with which the petitioners
claimed to be affiliated. The petition, docketed as SSC Case No. 5443,
alleged in essence that although the petitioners were employees of the
Manila Golf and Country Club, a domestic corporation, the latter had not
registered them as such with the SSS.

At about the same time, two other proceedings bearing on the same
question were filed or were pending; these were:

(1) a certification election case filed with the Labor Relations Division of
the Ministry of Labor by the PTCCEA on behalf of the same caddies of the
Manila Golf and Country Club, the case being titled "Philippine Technical,
Clerical, Commercial Association vs. Manila Golf and Country Club" and
docketed as Case No. R4-LRDX-M-10-504-78; it appears to have been
resolved in favor of the petitioners therein by Med-Arbiter Orlando S. Rojo,
who was thereafter upheld by Director Carmelo S. Noriel, denying the
Club's motion for reconsideration; 1

(2) a compulsory arbitration case initiated before the Arbitration Branch of

the Ministry of Labor by the same labor organization, titled "Philippine
Technical, Clerical, Commercial Employes Association (PTCCEA), Fermin
Lamar and Raymundo Jomok vs. Manila Golf and Country Club, Inc., Miguel
Celdran, Henry Lim and Geronimo Alejo;" it was dismissed for lack of merit
by Labor Arbiter Cornelio T. Linsangan, a decision later affirmed on appeal
by the National Labor Relations Commission on the ground that there was
no employer-employee relationship between the petitioning caddies and the
respondent Club. 2
In the case before the SSC, the respondent Club filed answer praying for
the dismissal of the petition, alleging in substance that the petitioners,
caddies by occupation, were allowed into the Club premises to render
services as such to the individual members and guests playing the Club's
golf course and who themselves paid for such services; that as such
caddies, the petitioners were not subject to the direction and control of the
Club as regards the manner in which they performed their work; and
hence, they were not the Club's employees.
Subsequently, all but two of the seventeen petitioners of their own accord
withdrew their claim for social security coverage, avowedly coming to
realize that indeed there was no employment relationship between them
and the Club. The case continued, and was eventually adjudicated by the
SSC after protracted proceedings only as regards the two holdouts, Fermin
Llamar and Raymundo Jomok. The Commission dismissed the petition for
lack of merit, 3 ruling:
". . . that the caddy's fees were paid by the golf players themselves and not
by respondent club. For instance, petitioner Raymundo Jomok averred that
for their services as caddies a caddy's Claim Stub (Exh. '1-A') is issued by a
player who will in turn hand over to management the other portion of the
stub know as Caddy Ticket (Exh. '1') so that by this arrangement
management will know how much a caddy will be paid (TSN, p. 80, July 23,
1980). Likewise, petitioner Fermin Llamar admitted that caddy works on his
own in accordance with the rules and regulations (TSN, p. 24, February 26,
1980) but petitioner Jomok could not state any policy of respondent that
directs the manner of caddying (TSN, pp. 76-77, July 23, 1980). While
respondent club promulgates rules and regulations on the assignment,
deportment and conduct of caddies (Exh. 'C') the same are designed to
impose personal discipline among the caddies but not to direct or conduct
their actual work. In fact, a golf player is at liberty to choose a caddy of his
preference regardless of the respondent club's group rotation system and
has the discretion on whether or not to pay a caddy. As testified to by
petitioner Llamar that their income depends on the number of players
engaging their services and liberality of the latter (TSN, pp. 10-11, Feb. 26,
1980). This lends credence to respondent's assertion that the caddies are
never their employees in the absence of two elements, namely, (1)
payment of wages and (2) control or supervision over them. In this
connection, our Supreme Court ruled that in the determination of the
existence of an employer-employee relationship, the 'control test' shall be
considered decisive (Philippine Manufacturing Co. vs. Geronimo and Garcia,
96 Phi. 276; Mansal vs. P.P. Cocheco Lumber Co., 96 Phil. 941; Viana vs.
Al-lagadan, et al., 99 Phil. 408; Vda. de Ang, et al. vs. The Manila Hotel Co.,
101 Phil. 358, LVN Pictures Inc. vs. Phil. Musicians Guild, et al., L-12582,
January 28, 1961, 1 SCRA 132. . . . (reference being made also to
Investment Planning Corporation Phil. vs. SSS 21 SCRA 925).
Records show that respondent club had reported SS coverage Graciano
Awit and Daniel Quijano, as bat unloader and helper, respectively, including
their ground men, house and administrative personnel, a situation indicative
of the latter's concern with the rights and welfare of its employees under
the SS law, as amended. The unrebutted testimony of Col. Generoso A.
Alejo (Ret.) that the ID cards issued to the caddies were merely intended to
identify the holders as accredited caddies of the club and privilege(d) to ply
their trade or occupation within its premises which could be withdrawn
anytime for loss of confidence. This gives us a reasonable ground to state
that the defense posture of respondent that petitioners were never its
employees is well taken." 4
From this Resolution appeal was taken to the Intermediate Appellate Court
by the union representing Llamar and Jomok. After the appeal was
docketed 5 and some months before decision thereon was reached and
promulgated, Raymundo Jomok's appeal was dismissed at his instance,
leaving Fermin Llamar the lone appellant. 6
The appeal ascribed two errors to the SSC:
(1) refusing to suspend the proceedings to await judgment by the Labor
Relations Division of National Capital Regional Office in the certification
election case (R-4-LRD-M-10-504-78) supra, on the precise issue of the
existence of employer-employee relationship between the respondent club
and the appellants, it being contended that said issue was "a function of
the proper labor office"; and
(2) adjudging that self same issue in a manner contrary to the ruling of
the Director of the Bureau of Labor Relations, which "has not only become
finaly but (has been) executed or (become) res adjudicata." 7
The Intermediate Appellate Court gave short shrift to the first assigned
error, dismissing it as of the least importance. Nor, it would appear, did it
find any greater merit in the second alleged error. Although said Court
reversed the appealed SSC decision and declared Fermin Llamar an
employee of the Manila Golf and Country Club, ordering that he be reported
as such for social security coverage and paid any corresponding benefits, 8
it conspicuously ignored the issue of res adjudicata raised in said second
assignment. Instead, it drew basis for the reversal from this Court's ruling
in Investment Planning Corporation of the Philippines vs. Social Security
System, supra 9 and declared that upon the evidence, he questioned
employer-employee relationship between the Club and Fermin Llamar
passed the so-called "control test," established in that case ---- i.e.,
"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," ---- the
Club's control over the caddies encompassing:
(a) the promulgation of no less than twenty four (24) rules and
regulations just about every aspect of the conduct that the caddy must
observe, or avoid, when serving as such, any violation of any of which
could subject him to disciplinary action, which may include suspending or
cutting off his access to the club premises;
(b) the devising and enforcement of a group rotation system whereby a
caddy is assigned a number which designates his turn to serve a player;
(c ) the Club's "suggesting" the rate of fees payable to the caddies.
Deemed of little or no moment by the Appellate Court was the fact that the
caddies were paid by the players, not by the Club, that they observed no
definite working hours and earned no fixed income. It quoted with approval
from an American decision 10 to the effect that: "whether the club paid the
caddies and afterward collected from the players or the players themselves
paid the caddies in the first instance, the caddies were still employees of
the club." This, no matter that the case which produced this ruling had a
slightly different factual cast, apparently having involved a claim for
workmen's compensation made by a caddy who, about to leave the
premises of the club where he worked, was hit and injured by an
automobile then negotiating the club's private driveway.
That same issue of res adjudicata, ignored by the IAC beyond bare mention
thereof, as already pointed out, is now among the mainstays of the private
respondent's defense to the petition for review. Considered in the
perspective of the incidents just recounted, it illustrates as well as anything
can, why the practice of forum-shopping justly merits censure and punitive
sanction. Because the same question of employer-employee relationship
has been dragged into three different for a, willy-nilly and in quick
succession, it has birthed controversy as to which of the resulting
adjudications must now be recognized as decisive. On the one hand, there
is the certification case (R4-LRDX-M-10-504-78), where the decision of the
Med-Arbiter found for the existence of employer-employee relationship
between the parties, was affirmed by Director Carmelo S. Noriel, who
ordered a certification election held, a disposition never thereafter appealed
according to the private respondent; on the other, the compulsory
arbitration case (NCR Case No. AB-4-1771-79), instituted by or for the same
respondent at about the same time, which was dismissed for lack of merit
by the Labor Arbiter, which was afterwards affirmed by the NLRC itself on
the ground that there existed no such relationship between the Club and
the private respondent. And, as if matters were not already complicated
enough, the same respondent, with the support and assistance of the
PTCCEA, saw fit, also contemporaneously, to initiate still a third proceeding
for compulsory social security coverage with the Social Security Commission
(SSC Case No. 5443), with the result already mentioned.
Before this Court, the petitioner Club now contends that the decision of the
Med-Arbiter in the certification case had never become final, being in fact
the subject of three pending and unresolved motions for reconsideration, as
well as of a later motion for early resolution. 11 Unfortunately, none of
these motions is incorporated or reproduced in the record before the Court.
And, for his part, the private respondent contends, not only that said
decision had been appealed to and been affirmed by the Director of the
BLR, but that a certification election had in fact been held, which resulted in
the PTCCEA being recognized as the sole bargaining agent of the caddies of
the Manila Golf and Country Club with respect to wages, hours of work,
terms of employment, etc. 12 Whatever the truth about these opposing
contentions, which the record before the Court does not adequately
disclose, the more controlling consideration would seem to be that,
however final it may become, the decision in a certification case, by the
very nature of that proceeding, is not such as to foreclose all further
dispute between the parties as to the existence, or non-existence, of
employer-employee relationship between them.
It is well settled that for res adjudicata, or the principle of bar by prior
judgment, to apply, the following essential requisites must concur: (1) there
must be a final judgment or order; (2) said judgment or order must be on
the merits; (3) the court rendering the same must have jurisdiction over the
subject matter and the parties; and (4) there must be between the two
cases identity of parties, identity of subject matter and identity of cause of
action. 13
Clearly implicit in these requisites is that the action or proceedings in which
is issued the "prior Judgment" that would operate in bar of a subsequent
action between the same parties for the same cause, be adversarial, or
contentious, "one having opposing parties; (is) contested, as distinguished
from an ex parte hearing or proceeding . . . of which the party seeking
relief has given legal notice to the other party and afforded the latter an
opportunity to contest it." 14 and a certification case is not such a
proceeding, as this Court has already ruled:
"A certification proceeding is not a 'litigation' in the sense in which this term
is commonly understood, but a mere investigation of a non-adversary, fact-
finding character, in which the investigating agency plays the part of a
disinterested investigator seeking merely to ascertain the desires of the
employees as to the matter of their representation. The court enjoys a wide
discretion in determining the procedure necessary to insure the fair and
free choice of bargaining representatives by the employees." 15
Indeed, if any ruling or judgment can be said to operate as res adjudicata
on the contested issue of employer-employee relationship between present
petitioner and the private respondent, it would logically be that rendered in
the compulsory arbitration case (NCR Case No. AB-4-771-79, supra),
petitioner having asserted, without dispute from the private respondent,
that said issue was there squarely raised and litigated, resulting in a ruling
of the Arbitration Branch (of the same Ministry of Labor) that such
relationship did not exist, and which ruling was thereafter affirmed by the
National Labor Relations Commission in an appeal taken by said
respondent. 16
In any case, this Court is not inclined to allow private respondent the
benefit of any doubt as to which of the conflicting rulings just adverted to
should be accorded primacy, given the fact that it was he who actively
sought them simultaneously, as it were, from separate fora, and even if the
graver sanctions more lately imposed by the Court for forum-shopping may
not be applied to him retroactively.
Accordingly, the IAC is not to be faulted for ignoring private respondent's
invocation of res adjudicata; on the contrary, it acted correctly in doing so.
Said Court's holding that upon the facts, there exists (or existed) a
relationship of employer and employee between petitioner and private
respondent is, however, another matter. The Court does not agree that said
facts necessarily or logically point to such a relationship, and to the
exclusion of any form of arrangements, other than of employment, that
would make the respondent's services available to the members and guests
of the petitioner.
As long as it is, the list made in the appealed decision detailing the various
matters of conduct, dress, language, etc. covered by the petitioner's
regulations, does not, in the mind of the Court, so circumscribe the actions
or judgment of the caddies concerned as to leave them little or no freedom
of choice whatsoever in the manner of carrying out their services. In the
very nature of things, caddies must submit to some supervision of their
conduct while enjoying the privilege of pursuing their occupation within the
premises and grounds of whatever club they do their work in. For all that is
made to appear, they work for the club to which they attach themselves on
sufferance but, on the other hand, also without having to observe any
working hours, free to leave anytime they please, to stay away for as long
as they like. It is not pretended that if found remiss in the observance of
said rules, any discipline may be meted them beyond barring them from the
premises which, it may be supposed, the Club may do in any case even
absent any breach of the rules, and without violating any right to work on
their part. All these considerations clash frontally with the concept of
employment.
The IAC would point to the fact that the Club suggests the rate of fees
payable by the players to the caddies as still another indication of the
latter's status as employees. It seems to the Court, however, that the
intendment of such fact is to the contrary, showing that the Club has not
the measure of control over the incidents of the caddies' work and
compensation that an employer would possess.
The Court agrees with petitioner that the group rotation system so-called, is
less a measure of employee control than an assurance that the work is
fairly distributed, a caddy who is absent when his turn number is called
simply losing his turn to serve and being assigned instead the last number
for the day. 17
By and large, there appears nothing in the record to refute the petitioner's
claim that:
"(Petitioner) has no means of compelling the presence of a caddy. A caddy
is not required to exercise his occupation only in the premises of petitioner.
He may work with any other golf club or he may seek employment as a
caddy or otherwise with any entity or individual without restriction by
petitioner. . . .
. . . In the final analysis, petitioner has no way of compelling the presence
of the caddies as they are not required to render a definite number of hours
of work on a single day. Even the group rotation of caddies is not absolute
because a player is at liberty to choose a caddy of his preference regardless
of the caddy's order in the rotation.
It can happen that a caddy who has rendered services to a player on one
day may still find sufficient time to work elsewhere. Under such
circumstances, he may then leave the premises of petitioner and go to such
other place of work that he wishes (sic). Or a caddy who is on call for a
particular day may deliberately absent himself if he has more profitable
caddying, or another, engagement in some other place. These are things
beyond petitioner's control and for which it imposes no direct sanctions on
the caddies. . . 18
WHEREFORE, the Decision of the Intermediate Appellate Court, review of
which is sought, is reversed and set aside, it being hereby declared that the
private respondent, Fermin Llamar, is not an employee of petitioner Manila
Golf and Country Club and that petitioner is under no obligation to report
him for compulsory coverage to the Social Security System. No
pronouncement as to costs.
SO ORDERED.
Regalado and Puno, JJ., concur.
Mendoza, J., took no part.
Padilla, J., is on leave.
ALFREDO B. FELIX, petitioner, vs. DR. BRIGIDA BUENASEDA, in her
capacity as Director, and ISABELO BAEZ, JR., in his capacity as
Administrator, both of the National Center for Mental Health, and the CIVIL
SERVICE COMMISSION, respondents.1995 Jan 17En BancG.R. No. 109704
DECISION
Taking advantage of this Court's decisions involving the removal of various
civil servants pursuant to the general reorganization of the government
after the EDSA Revolution, petitioner assails his dismissal as Medical
Specialist I of the National Center for Mental Health (formerly the National
Mental Hospital) as illegal and violative of the constitutional provision on
security of tenure allegedly because his removal was made pursuant to an
invalid reorganization.
In Mendoza vs. Quisumbing 1 and the consolidated cases involving the
reorganization of various government departments and agencies we held:
We are constrained to set aside the reorganizations embodied in these
consolidated petitions because the heads of departments and agencies
concerned have chosen to rely on their own concepts of unlimited
discretion and "progressive" ideas on reorganization instead of showing that
they have faithfully complied with the clear letter and spirit of the two
Constitutions and the statutes affecting reorganization. 2
In De Guzman vs. CSC, 3 we upheld the principle, laid down by Justice
J.B.L. Reyes in Cruz vs. Primicias 4 that a valid abolition of an office
neither results in a separation or removal, likewise upholding the corollary
principle that "if the abolition is void, the incumbent is deemed never to
have ceased to hold office," in sustaining therein petitioner's right to the
position she held prior to the reorganization.
The instant petition on its face turns on similar facts and issues, which is,
that petitioner's removal from a permanent position in the National Center
for Mental Health as a result of the reorganization of the Department of
Health was void.
However, a closer look at the facts surrounding the instant petition leads us
to a different conclusion.
After passing the Physician's Licensure Examinations given by the
Professional Regulation Commission in June of 1979, petitioner, Dr. Alfredo
B. Felix, joined the National Center for Mental Health (then the National
Mental Hospital) on May 26, 1980 as a Resident Physician with an annual
salary of P15,264.00. 5 In August of 1983, he was promoted to the
position of Senior Resident Physician 6 a position he held until the Ministry
of Health reorganized the National Center for Mental Health (NCMH) in
January of 1988, pursuant to Executive Order No. 119.
Under the reorganization, petitioner was appointed to the position of Senior
Resident Physician in a temporary capacity immediately after he and other
employees of the NCMH allegedly tendered their courtesy resignations to
the Secretary of Health. 7 In August of 1988, petitioner was promoted to
the position of Medical Specialist I (Temporary Status), which position was
renewed the following year. 8
In 1988, the Department of Health issued Department Order No. 347 which
required board certification as a prerequisite for renewal of specialist
positions in various medical centers, hospitals and agencies of the said
department. Specifically, Department Order No. 347 provided that
specialists working in various hospitals and branches of the Department of
Health be recognized as "Fellows" of their respective specialty societies
and/or "Diplomates" of their specialty boards or both. The Order was issued
for the purpose of upgrading the quality of specialists in DOH hospitals by
requiring them to pass rigorous theoretical and clinical (bedside)
examinations given by recognized specialty boards, in keeping up with
international standards of medical practice.
Upon representation of the Chiefs of Hospitals of various government
hospitals and medical centers, (then) Secretary of Health Alfredo Bengzon
issued Department Order 478, series of 1991 amending Sec. 4 of
Department Order No. 347 providing for an extension of appointments of
Medical Specialist positions in cases where the termination of medical
specialists who failed to meet the requirement for board certification might
result in the disruption of hospital services. Department Order No. 478
issued the following guidelines:
1. As a general policy, the provision of Department Order No. 347, Sec. 4
shall apply unless the Chief of Hospital requests for exemption, certifies that
its application will result in the disruption of the delivery service together
with the steps taken to implement Section 4, and submit a plan of action,
lasting no more than 3-years, for the eventual phase out of non-Board
certified medical specialists.
2. Medical specialists recommended for extension of appointment shall
meet the following minimum criteria:
a. DOH medical specialist certified
b. Has been in the service of the Department at least three (3) years
prior to December 1988
c. Has applied or taken the specialty board examination
3. Each recommendation for extension of appointment must be individually
justified to show not only the qualification of the recommendee, but also
what steps he has taken to be board certified.
4. Recommendation for extension of appointment shall be evaluated on a
case to case basis.
5. As amended, the other provisions of Department Order No. 34/s. 1988
stands.
Petitioner was one of the hundreds of government medical specialists who
would have been adversely affected by Department Order No. 347 since he
was no yet accredited by the Psychiatry Specialty Board. Under Department
Order No. 478, extension of his appointment remained subject to the
guidelines set by the said department order. On August 20, 1991, after
reviewing petitioner's service record and performance, the Medical
Credentials Committee of the National Center for Mental Health
recommended non-renewal of his appointment as Medical Specialist I,
informing him of its decision on August 22, 1991. He was, however, allowed
to continue in the service, and receive his salary, allowances and other
benefits even after being informed of the termination of his appointment.
On November 25, 1991, an emergency meeting of the Chiefs of Service was
held to discuss, among other matters, the petitioner's case. In the said
meeting Dr. Vismindo de Grecia, petitioner's immediate supervisor, pointed
out petitioner's poor performance, frequent tardiness and inflexibility as
among the factors responsible for the recommendation not to renew his
appointment. 9 With one exception, other department heads present in
the meeting expressed the same opinion, 10 and the overwhelming
concensus was for non-renewal. The matter was thereafter referred to the
Civil Service Commission, which on February 28, 1992 ruled that "the
temporary appointment (of petitioner) as Medical Specialist I can be
terminated at any time . . ." and that "[a]ny renewal of such appointment is
within the discretion of the appointing authority." 11 Consequently, in a
memorandum dated March 25, 1992 petitioner was advised by hospital
authorities to vacate his cottage since he was no longer entitled to
accomodation. Refusing to comply with said memorandum petitioner filed a
petition with the Merit System Protection Board (MSPB) complaining about
the alleged harassment by respondents and questioning the non-renewal of
his appointment. In a Decision rendered on July 29, 1992, the (MSPB)
dismissed petitioner's complaint for lack of merit, finding that:
As an apparent incident of the power to appoint, the renewal of a
temporary appointment upon or after its expiration is a matter largely
addressed to the sound discretion of the appointing authority. In this case,
there is no dispute that Complainant was a temporary employee and his
appointment expired on August 22, 1991. This being the case, his re-
appointment to his former position or the renewal of his temporary
appointment would be determined solely by the proper appointing authority
who is the Secretary, Department of Health upon the favorable
recommendation of the Chief of Hospital III, NCMH. The Supreme Court in
the case of Central Bank vs. Civil Service Commission G.R. Nos. 80455-56
dated April 10, 1989, held as follows:
The power of appointment is essentially a political question involving
considerations of wisdom which only the appointing authority can decide.
In this light, Complainant therefore, has no basis in law to assail the non-
renewal of his expired temporary appointment much less invoke the aid of
this board for that purpose since this Board cannot substitute its judgment
to that of the appointing authority nor direct the latter to issue an
appointment in the complainant's favor.
Regarding the alleged Department Order secured by the complainant from
the Department of Health (DOH), the Board finds the same inconsequential.
Said Department Order merely allowed the extension of tenure of Medical
Specialist I for a certain period but does not mandate the renewal of the
expired appointment.
The Board likewise finds as baseless complainant's allegation of
harassment. It should be noted that the subsistence, quarters and laundry
benefits provided to the Complainant were in connection with his
employment with the NCMH. Now that his employment ties with the said
agency are severed, he eventually loses his right to the said benefits.
Hence, the Hospital Management has the right to take steps to prevent him
from the continuous enjoyment thereof, including the occupancy of the said
cottage, after his cessation from office.
In sum, the actuations of Dr. Buenaseda and Lt. Col. Balez are not shown
to have been tainted with any legal infirmity, thus rendering as baseless,
this instant complaint.
Said decision was appealed to the Civil Service Commission which dismissed
the same in its Resolution dated December 1, 1992. Motion for
Reconsideration was denied in CSC Resolution No. 93-677 dated February
3, 1993, hence this appeal, in which petitioner interposes the following
assignments of errors:
I
THE PUBLIC RESPONDENT CIVIL SERVICE COMMISSION ERRED IN
HOLDING THAT BY SUBMITTING HIS COURTESY RESIGNATION AND
ACCEPTING HIS TEMPORARY APPOINTMENT PETITIONER HAD
EFFECTIVELY DIVESTED HIMSELF OF HIS SECURITY OF TENURE,
CONSIDERING THE CIRCUMSTANCES OF SUCH COURTESY RESIGNATION
AND ACCEPTANCE OF APPOINTMENT.
II
THE RESPONDENT COMMISSION ERRED IN NOT DECLARING THAT THE
CONVERSION OF THE PERMANENT APPOINTMENT OF PETITIONER TO
TEMPORARY WAS DONE IN BAD FAITH IN THE GUISE OF
REORGANIZATION AND THUS INVALID, BEING VIOLATIVE OF THE
PETITIONER'S RIGHT OF SECURITY OF TENURE.
Responding to the instant petition, 12 the Solicitor General contends that
1) the petitioner's temporary appointments after the reorganization
pursuant to E.O. No. 119 were valid and did not violate his constitutional
right to security of tenure; 13 2) petitioner is guilty of estoppel or laches,
having acquiesced to such temporary appointments from 1988 to 1991;
14 and 3) the respondent Commission did not act with grave abuse of
discretion in affirming the petitioner's non-renewal of his appointment at
the National Center for Mental Health. 15
We agree.
The patent absurdity of petitioner's posture is readily obvious. A residency
or resident physician position in a medical specialty is never a permanent
one. Residency connotes training and temporary status. It is the step taken
by a physician right after post-graduate internship (and after hurdling the
Medical Licensure Examinations) prior to his recognition as a specialist or
sub-specialist in a given field.
A physician who desires to specialize in Cardiology takes a required three-
year accredited residency in Internal Medicine (four years in DOH hospitals)
and moves on to a two or three-year fellowship or residency in Cardiology
before he is allowed to take the specialty examinations given by the
appropriate accrediting college. In a similar manner, the accredited
Psychiatrist goes through the same stepladder process which culminates in
his recognition as a fellow or diplomate (or both) of the Psychiatry Specialty
Board. 16 This upward movement from residency to specialist rank,
institutionalized in the residency training process, guarantees minimum
standards and skills and ensures that the physician claiming to be a
specialist will not be set loose on the community without the basic
knowledge and skills of his specialty. Because acceptance and promotion
requirements are stringent, competitive, and based on merit, acceptance to
a first year residency program is no guaranty that the physician will
complete the program. Attrition rates are high. Some programs are
pyramidal. Promotion to the next post-graduate year is based on merit and
performance determined by periodic evaluations and examinations of
knowledge, skills and bedside manner. 17 Under this system, residents,
specially those in university teaching hospitals 18 enjoy their right to
security of tenure only to the extent that they periodically make the grade,
making the situation quite unique as far as physicians undergoing post-
graduate residencies and fellowships are concerned. While physicians (or
consultants) of specialist rank are not subject to the same stringent
evaluation procedures, 19 specialty societies require continuing education
as a requirement for accreditation in good standing, in addition to peer
review processes based on performance, mortality and morbidity audits,
feedback from residents, interns and medical students and research output.
The nature of the contracts of resident physicians meet traditional tests for
determining employer-employee relationships, but because the focus of
residency is training, they are neither here nor there. Moreover, stringent
standards and requirements for renewal of specialist-rank positions or for
promotion to the next post-graduate residency year are necessary because
lives are ultimately at stake.
Petitioner's insistence on being reverted back to the status quo prior to the
reorganizations made pursuant to Executive Order No. 119 would therefore
be akin to a college student asking to be sent back to high school and
staying there. From the position of senior resident physician, which he held
at the time of the government reorganization, the next logical step in the
stepladder process was obviously his promotion to the rank of Medical
Specialist I, a position which he apparently accepted not only because of
the increase in salary and rank but because of the prestige and status
which the promotion conferred upon him in the medical community. Such
status, however, clearly carried with it certain professional responsibilities
including the responsibility of keeping up with the minimum requirements
of specialty rank, the responsibility of keeping abreast with current
knowledge in his specialty and in Medicine in general, and the responsibility
of completing board certification requirements within a reasonable period of
time. The evaluation made by the petitioner's peers and superiors clearly
showed that he was deficient in a lot of areas, in addition to the fact that at
the time of his non-renewal, he was not even board-certified.
It bears emphasis that at the time of petitioner's promotion to the position
of Medical Specialist I (temporary) in August of 1988, no objection was
raised by him about the change of position or the temporary nature of the
designation. The pretense of objecting to the promotion to specialist rank
apparently came only as an afterthought, three years later, following the
non-renewal of his position by the Department of Health.
We lay stress to the fact that petitioner made no attempt to oppose earlier
renewals of his temporary Specialist I contracts in 1989 and 1990, clearly
demonstrating his acquiescence to - if not his unqualified acceptance of the
promotion (albeit of a temporary nature) made in 1988. Whatever
objections petitioner had against the earlier change from the status of
permanent senior resident physician to temporary senior resident physician
were neither pursued nor mentioned at or after his designation as Medical
Specialist I (Temporary). He is therefore estopped from insisting upon a
right or claim which he had plainly abandoned when he, from all
indications, enthusiastically accepted the promotion. His negligence to
assert his claim within a reasonable time, coupled with his failure to
repudiate his promotion to a temporary position, warrants a presumption,
in the words of this Court in Tijam vs. Sibonghanoy, 20 that he "either
abandoned (his claim) or declined to assert it."
There are weighty reasons of public policy and convenience which demand
that any claim to any position in the civil service, permanent, temporary of
otherwise, or any claim to a violation of the constitutional provision on
security of tenure be made within a reasonable period of time. An
assurance of some degree of stability in the civil service is necessary in
order to avoid needless disruptions in the conduct of public business.
Delays in the statement of a right to any position are strongly discouraged.
21 In the same token, the failure to assert a claim or the voluntary
acceptance of another position in government, obviously without
reservation, leads to a presumption that the civil servant has either given
up his claim or has already settled into the new position. This is the essence
of laches which is the failure or neglect, for an unreasonable and
unexplained length of time to do that which, by exercising due diligence,
could or should have been done earlier; it is the negligence or omission to
assert a right within a reasonable time, warranting a presumption that the
party entitled to assert it either has abandoned it or declined to assert it.
22
In fine, this petition, on its surface, seems to be an ordinary challenge
against the validity of the conversion of petitioner's position from
permanent resident physician status to that of a temporary resident
physician pursuant to the government reorganization after the EDSA
Revolution. What is unique to petitioner's averments is the fact that he
hardly attempts to question the validity of his removal from his position of
Medical Specialist I (Temporary) of the National Center for Mental Health,
which is plainly the pertinent issue in the case at bench. The reason for this
is at once apparent, for there is a deliberate and dishonest attempt to a
skirt the fundamental issue first, by falsely claiming that petitioner was
forced to submit his courtesy resignation in 1987 when he actually did not;
and second, by insisting on a right of claim clearly abandoned by his
acceptance of the position of Medical Specialist I (Temporary), which is
hence barred by laches.
The validity of the government reorganization of the Ministry of Health
pursuant to E.O. 119 not being the real issue in the case at bench, we
decline to make any further pronouncements relating to petitioner's
contentions relating to the effect on him of the reorganization except to say
that in the specific case of the change in designation from permanent
resident physician to temporary resident physician, a change was
necessary, overall, to rectify a ludicrous situation whereby some
government resident physicians were erroneously being classified as
permanent resident physicians in spite of the inherently temporary nature
of the designation. The attempts by the Department of Health not only to
streamline these positions but to make them conform to current standards
of specialty practice is a step in a positive direction. The patient who
consults with a physician of specialist rank should at least be safe in the
assumption that the government physician of specialist rank: 1.) has
completed all necessary requirements of specialist training in his field; and
2.) has been board certified. These fundamental requirements at least
assure the public at large that those in government centers who claim to be
specialists in specific areas of Medicine possess the minimum knowledge
and skills required to fulfill that first and foremost maxim, embodied in the
Hippocratic Oath, that they do their patients no harm. Primium non nocere.
Finally, it is crystal clear, from the facts of the case at bench, that the
petitioner accepted a temporary appointment (Medical Specialist I). As
respondent Civil Service Commission has correctly pointed out 23 , the
appointment was for a definite and renewable period which, when it was
not renewed, did not involve a dismissal but an expiration of the petitioner's
term.
ACCORDINGLY, the petition is hereby DISMISSED, for lack of merit.
SO ORDERED.
FILAMER CHRISTIAN INSTITUTE, petitioner, vs. HON. INTERMEDIATE
APPELLATE COURT, HON. ENRIQUE P. SUPLICO, in his capacity as Judge of
the Court of Appeals, Branch XIV, Roxas City and POTENCIANO KAPUNAN
SR., respondents.1992 Aug 173rd DivisionG.R. No. 75112D E C I S I O N

The private respondents, heirs of the late Potenciano Kapunan, seek

reconsideration of the decision rendered by this Court on October 16, 1990
(Filamer Christian Institute v. Court Appeals, 190 SCRA 477) reviewing the
appellate court's conclusion that there exists an employer-employee
relationship between the petitioner and its co-defendant Funtecha. The
Court ruled that the petitioner is not liable for the injuries caused by
Funtecha on the grounds that the latter was not an authorized driver for
whose acts the petitioner shall be directly and primarily answerable, and
that Funtecha was merely a working scholar who, under Section 14, Rule X,
Book III of the Rules and Regulations Implementing the Labor Code is not
considered an employee of the petitioner.

The private respondents assert that the circumstances obtaining in the

present case call for the application of Article 2180 of the Civil Code since
Funtecha is no doubt an employee of the petitioner. The private
respondents maintain that under Article 2180 an injured party shall have
recourse against the servant as well as the petitioner for whom, at the time
of the incident, the servant was performing an act in furtherance of the
interest and for the benefit of the petitioner. Funtecha allegedly did not
steal the school jeep nor use it for a joy ride without the knowledge of the
school authorities.

After a re-examination of the laws relevant to the facts found by the trial
court and the appellate court, the Court reconsiders its decision. We
reinstate the Court of Appeals' decision penned by the late Justice Desiderio
Jurado and concurred in by Justices Jose G. Campos, Jr. and Serafin E.
Camilon Applying Civil Code provisions, the appellate court affirmed the trial
court decision which ordered the payment of the P20,000.00 liability in the
Zenith Insurance Corporation policy, P10,000.00 moral damages, P4,000.00
litigation and actual expenses, and P3,000.00 attorney's fees.

It is undisputed that Funtecha was a working student, being a part-time

Janitor and a scholar of petitioner Filamer. He was, in relation to the school,
an employee even if he was assigned to clean the school premises for only
two (2) hours in the morning of each school day.
Having a student driver's license, Funtecha requested the driver, Allan
Masa, and was allowed, to take over the vehicle while the latter was on his
way home one late afternoon. It is significant to note that the place where
Allan lives is also the house of his father, the school president, Agustin
Masa. Moreover, it is also the house where Funtecha was allowed free
board while he was a student of Filamer Christian Institute.
Allan Masa turned over the vehicle to Funtecha only after driving down a
road, negotiating a sharp dangerous curb, and viewing that the road was
clear. (TSN, April 4, 1983, pp. 78-79) According to Allan's testimony, a fast
moving truck with glaring lights nearly hit them so that they had to swerve
to the right to avoid a collision. Upon swerving, they heard a sound as if
something had bumped against the vehicle, but they did not stop to check.
Actually, the Pinoy jeep swerved towards the pedestrian, Potenciano
Kapunan who was walking in his lane in the direction against vehicular
traffic, and hit him. Allan affirmed that Funtecha followed his advise to
swerve to the right. (Ibid., p. 79) At the time of the incident (6:30 P.M.) in
Roxas City, the jeep had only one functioning headlight.
Allan testified that he was the driver and at the same time a security guard
of the petitioner-school. He further said that there was no specific time for
him to be off-duty and that after driving the students home at 5:00 in the
afternoon, he still had to go back to school and then drive home using the
same vehicle.
Driving the vehicle to and from the house of the school president where
both Allan and Funtecha reside is an act in furtherance of the interest of the
petitioner-school. Allan's job demands that he drive home the school jeep
so he can use it to fetch students in the morning of the next school day.
It is indubitable under the circumstances that the school president had
knowledge that the jeep was routinely driven home for the said purpose.
Moreover, it is not improbable that the school president also had knowledge
of Funtecha's possession of a student driver's license and his desire to
undergo driving lessons during the time that he was not in his classrooms.
In learning how to drive while taking the vehicle home in the direction of
Allan's house, Funtecha definitely was not, having a joy ride Funtecha was
not driving for the purpose of his enjoyment or for a "frolic of his own" but
ultimately, for the service for which the jeep was intended by the petitioner
school. (See L. Battistoni v. Thomas, Can SC 144, 1 D.L.R. 577, 80 ALR 722
[1932]; See also Association of Baptists for World Evangelism, Inc. v.
Fieldmen's Insurance Co., Inc. 124 SCRA 618 [1983]). Therefore, the Court
is constrained to conclude that the act of Funtecha in taking over the
steering wheel was one done for and in behalf of his employer for which act
the petitioner-school cannot deny any responsibility by arguing that it was
done beyond the scope of his janitorial duties. The clause "within the scope
of their assigned tasks" for purposes of raising the presumption of liability
of an employer, includes any act done by an employee, in furtherance of
the interests of the employer or for the account of the employer at the time
of the infliction of the injury or damage. (Manuel Casada, 190 Va 906, 59
SE 2d 47 [1950]) Even if somehow, the employee driving the vehicle
derived some benefit from the act, the existence of a presumptive liability
of the employer is determined by answering the question of whether or not
the servant was at the time of the accident performing any act in
furtherance of his master's business. (Kohlman v. Hyland, 210 NW 643, 50
ALR 1437 [1926]; Jameson v. Gavett, 71 P 2d 937 [1937])
Section 14, Rule X, Book III of the Rules implementing the Labor Code, on
which the petitioner anchors its defense, has promulgated by the Secretary
of Labor and Employment only for the purpose of administering and
enforcing the provisions of the Labor Code on conditions of employment.
Particularly, Rule X of Book III provides guidelines on the manner by which
the powers of the Labor Secretary shall be exercised; on what records
should be kept, maintained and preserved; on payroll; and on the exclusion
of working scholars from, and inclusion of resident physicians in the
employment coverage as far as compliance with the substantive labor
provisions on working conditions, rest periods, and wages, is concerned.
In other words, Rule X is merely a guide to the enforcement of the
substantive law on labor. The Court, thus, makes the distinction and so
holds that Section 14, Rule X, Book III of the Rules is not the decisive law
in a civil suit for damages instituted by an injured person during a vehicular
accident against a working student of a school and against the school itself.
The present case does not deal with a labor dispute on conditions of
employment between an alleged employee and an alleged employer. It
invokes a claim brought by one for damages for injury caused by the
patently negligent acts of a person, against both doer-employee and his
employer. Hence, the reliance on the implementing rule on labor to
disregard the primary liability of an employer under Article 2180 of the Civil
Code is misplaced. An implementing rule on labor cannot be used by an
employer as a shield to void liability under the substantive provisions of the
Civil Code.
There is evidence to show that there exists in the present case an extra-
contractual obligation arising from the negligence or reckless imprudence of
a person "whose acts or omissions are imputable, by a legal fiction, to
other(s) who are in a position to exercise an absolute or limited control over
(him)." (Bahia v. Litonjua and Leynes, 30 Phil. 624 [1915])
Funtecha is an employee of petitioner Filamer. He need not have an official
appointment for a driver's position in order that the petitioner may be held
responsible for his grossly negligent act, it being sufficient that the act of
driving at the time of the incident was for the benefit of the petitioner.
Hence, the fact that Funtecha was not the school driver or was not acting
with the scope of his janitorial duties does not relieve the petitioner of the
burden of rebutting the presumption juris tantum that there was negligence
on its part either in the selection of a servant or employee, or in the
supervision over him. The petitioner has failed to show proof of its having
exercised the required diligence of a good father of a family over its
employees Funtecha and Allan.
The Court reiterates that supervision includes the formulation of suitable
rules and regulation for the guidance of its employees and the issuance of
proper instructions intended for the protection of the public and persons
with whom the employer has relations through his employees. (Bahia v.
Litonjua and Leynes, supra, at p. 628; Phoenix Construction, Inc. v.
Intermediate Appellate Court, 148 SCRA 353 [1987])
An employer is expected to impose upon its employees the necessary
discipline called for in the performance of any act indispensable to the
business and beneficial to their employer.
In the present case, the petitioner has not shown that it has set forth such
rules and guidelines as would prohibit any one of its employees from taking
control over its vehicles if one is not the official driver or prohibiting the
driver and son of the Filamer president from authorizing another employee
to drive the school vehicle. Furthermore, the petitioner has failed to prove
that it had imposed sanctions or warned its employees against the use of its
vehicles by persons other than the driver.
The petitioner, thus, has an obligation to pay damages for injury arising
from the unskilled manner by which Funtecha drove the vehicle. (Cangco v.
Manila Railroad Co. 38 Phil. 760, 772 [1918]) In the absence of evidence
that the petitioner had exercised the diligence of a good father of a family
in the supervision of its employees, the law imposes upon it the vicarious
liability for acts or omissions of its employees. (Umali v. Bacani, 69 SCRA
263 [1976l; Poblete v. Fabros, 93 SCRA 200 [1979]; Kapalaran Bus Liner v.
Coronado, 176 SCRA 792 [1989]; Franco v. Intermediate Appellate Court,
178 SCRA 331 [1989]; Pantranco North Express, Inc. v. Baesa, 179 SCRA
384 (1989]) The liability of the employer is, under Article 2180, primary and
solidary. However, the employer shall have recourse against the negligent
employee for whatever damages are paid to the heirs of the plaintiff.
It is an admitted fact that the actual driver of the school jeep, Allan Masa,
was not made a party defendant in the civil case for damages. This is quite
understandable considering that as far as the injured pedestrian, plaintiff
Potenciano Kapunan, was concerned, it was Funtecha who was the one
driving the vehicle and presumably was one authorized by the school to
drive. The plaintiff and his heirs should not now be left to suffer without
simultaneous recourse against the petitioner for the consequent injury
caused by a janitor doing a driving chore for the petitioner even for a short
while. For the purpose of recovering damages under the prevailing
circumstances, it is enough that the plaintiff and the private respondent
heirs were able to establish the existence of employer-employee
relationship between Funtecha and petitioner Filamer and the fact that
Funtecha was engaged in an act not for an independent purpose of his own
but in furtherance of the business of his employer. A position of
responsibility on the part of the petitioner has thus been satisfactorily
demonstrated.
WHEREFORE, the motion for reconsideration of the decision dated October
16, 1990 is hereby GRANTED. The decision of the respondent appellate
court affirming the trial court decision is REINSTATED.
SO ORDERED.
Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.
CABALAN PASTULAN NEGRITO LABOR ASSOCIATION (CAPANELA) and
JOSE ALVIZ, SR., petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION and FERNANDO SANCHEZ, respondents.1995 Feb 232nd
DivisionG.R. No. 106108

DECISION

A man said to the Universe,

Behold, I am born!

However, replied the Universe,

The fact does not create in me

A sense of obligation.

To most, these familiar verses express the article of faith for self-reliance.
To the racist in some countries, however, they can mean that the world
does not owe the Negroid or other colored people equal solicitude. The
neo-colonial in the Philippines would hold the Negrito or a member of
indigenous cultural communities to the same social bondage. But our
constitution and our laws were precisely formulated under a sense of
obligation to the marginalized and the underpriviledged. Under such
mandates, this Court has always accoirded them scrupulous and
compassionate attention. In now resolving their predicament in the case at
bar, it calls once again on the old Castilian tenet: A el que la vida ha dado
menos, desele mas por la ley. 1

In this petition for certiorari, the resoliution of the National Labor Relations
Commission (hereafter, NLRC) dated February 28, 1992 2 which dismissed
the appeal of herein petitioners from the decision of the labor arbiter 3 for
failure to file a supersedeas bond, as well as its resolution dated April 30,
1992 4 denying their motion for reconsideration, are assailed for having
rendered with grave abuse of discretion.

The antecedents of the present recourse, as culled from the records, are
that herein private respondent, Fernando Sanchez, filed a complaint for
illegal dismissal, non-payment of back wages and other benefits on January
3, 1991 with Regional Office No. III 01-1931-91. The complaint, naming
Cabalan Pastulan Negrito Labor Association (CAPANELA, for brevity) and its
president, Jose Alviz, Sr., as respondents, alleged that the former was
employed by CAPANELA as a foreman with a monthly salary of P3,245.70
from March, 1977 until he was illegally dismissed on January 1, 1990. 5
Said complaint was later amended on February 22, 1991 to introduce the
correction that private respondent was illegally dismissed on March 27,
1990 (instead of January 1, 1990), and to further pray for reinstatement
without loss of seniority rights and payment of full back wages and moral
exemplary damages. 6 As no amicable settlement was arrived at during
the mandatory pre-conference despite efforts exerted by the labor arbiter,
the parties were required to simultaneously submit their respective position
papers and/or affidavits. 7 The case was submitted for resolution on
March 11, 1991 on the bases of said position papers and other evidence,
but the parties were further allowed to submit their respective memoranda,
8 after which the case was deemed submitted for decision on May 29,
1991. 9
A decision was rendered on June 24, 1991 in favor of herein private
respondent, declaring his dismissal illegal, and ordering herein petitioners,
jointly and severally -
"1. To pay the backwages of complainant from March 24, 1990 until
June 24, 1990 and for 15 months at P3,245.70 a month equals P48,685.80
"2. To immediately reinstate complainant to his former or equivalent
position without loss of seniority rigths and other privileges, and for his
purpose, respondents are hereby ordered to submit proof of the physical or
payroll reinstatement of the complainant within five (5) working days from
receipt hereof, provided further that should reinstatement (be) not feasible
due to any supervening event event, respondents are further ordered to
pay the separation pay of complainant equivalent to one month salary for
every year of service, a fraction of at least six (6) months service
considered as one (1) whole year, in addition to his backwages; . . .."
but dismissing the claim for moral and exemplary damages for want of
substantial evidence. 10
The records further reveal that privatye respondent subsequently filed a
motion for the issuance of a writ of execution on July 15, 1991 11 This
was opposed by CAPANELA 12 through its new counsel, Atty. Isagani M.
Jungco, who at the same time filed a memorandum of appeal 13 in its
behalf, although admittedly without posting a supersedeas bond because of
want funds of either CAPANELA's memorandum of appeal 14 and reply to
opposition to motion for execution, 15 was unconvinced and adamantly
insisted insiasted on the dismissal of the appeal due to non-perfection
thereof for failure to comply with the legal requirement of posting a cash or
surety bond as a requisite for the perfection of an appeal.
A partial writ of execution 16 was issued by Labor Arbiter Saludares on
August 15, 1991, ordering the physical or payroll reinstatement of private
respondent. The sheriff's return of November 4, 1991, signed by Numeriano
Reyes, Sheriff II of the NLRC Regional Arbitration Branch No. III, stated
that the writ expired without any indication of private respondent having
been reinstated. 17
As stated at the outset, the NLRC dismissed the appeal on February 28,
1992 for failure of petitioners to post the supersedeas bond required by
law, stating that "(r)espondents' contention that it cannot post bond
because it is insolvent by proof there(of)," and denied petitioner's motion
for reconsideration.
The present controversy raises as principal issues for resolution by the
Court whether or not (1) the dismissal of private respondent Sanchez by
petitioner CAPANELA, it is evidently necessary to ascertain the existence of
an employer-employee relationship between them.
Petitioners asseverate that CAPANELA is an association composed of
Negritos who worked inside the American Naval Base in Subic Bay
(hereinafter referred to as the Base). They iniatially received a daily wage
of P100.00 and thus earned, on the average, less than P3,000.00 per
month. Said association organized the system of employment of members
of this cultural community who were accorded special treatment concededly
because of the occupancy of their ancestral lands as part of the operational
area and military facility used by the Base authorities.
CAPANELA, through its officers, saw to it that its members reported for
work, recorded their attendance, and distributed the workers' salaries paid
by the base at the end of the specific pay period, without gaining any
amount from such undertakings. Petitioner Alviz, Sr., for his part and as
president of CAPANELA nor its rather, it was the United States Government
acting through the military base authorities. 18
Contrarily, private respondent maintains that there existed an employer-
employee relationship, as allegedly supported by the evidence on record,
and that petitioners CAPANELA and Alviz, Sr. exercised control over the
means and methods by which the work was accomplished. He further
argues that since the determination of the existence of an employer-
employee relationship is a factual question, the findings of the labor officials
thereon should be considered oconclusive and binding upon and respected
by the appellate courts. 19
It is hence clearly apparent that the judgment of the labor arbiter, as
affirmed lby respondent commission, declaring the dismissal of private
respondent illegal and ordering the payment of back wages to him together
with his payroll or physical reinstatement, was premised on the finding that
there was an existing employer-employee relationship.
Indeed, findings of fact and conclusions of the labor arbiter, 20 as well as
those of the NLRC, 21 or, for that matter, any other adjudicative body
which can be considered as a trier of facts on specific matters within its
filed of expertise, 22 should be considered as binding and conclusive upon
the appellate courts. This is in addition to the fact that they were in a better
position to assess and evaluate the credibility of the contending parties and
the validity of their respective evidence. 23 However, these doctrinal
strictures hold true only when such findings and conclusions are supported
by substantial evidence. 24
In the case at bar, we are hard put to find sufficient evidential support for
public respondent's conclusion on the putantive existence of an employer-
employee relationship between petitioners and private respondent. We are
accordingly persuaded that there is ample justification to disturb the
findings of respondent NLRC and to hold that a reconsideration of its
challenged resolutions is in order.
A careful reevaluation of the documentary evidence of record belies the
finding that CAPENALA, through its president and co-petitioner, Jose Alviz,
Sr., wielded control as an employer over private respondent. It will be
noted that in his affidavit dated March 4, 1995, 25 private respondent
himself declared that through the intervention of CAPANELA, by way of its
June 13, 1989 letter 26 to Lt. Mark S. Kistner, he was cleared of the
charge of larceny of U.S. government property. Thereafter, in an
endorsement dated July 11, 1989 from the Director of Security, U.S. Navy
Public Works Center, the recommendation for his reinstatement and the
release of his gate pass to the Base was adressed to the Director,
Investigation Section, U.S. Facility Security Department via the Director of
the Courts Administration Division. 27
This is only goes to show that CAPANELA had in fact no control over the
continued employment of its members working in the U.S. naval base. For,
after conducting its own investigation, CAPANELA could only intervene in
behalf of its members facing charges through a recommendatory action or
request for favorable consideration. It could not, on its own authority,
exonerate such members from the charges, much less effect their
reinstatement without the approval of the Base authorities. Interestingly, in
order to comply with the labor arbiter's decision of June 24, 1991,
CAPANELA even had to write to the Resident Officer-in-Charge of the
Facility Support Contracts at Subic Bay recommending the reinstatement of
private respondent to his former position. 28
Under their arrangement, CAPANELA, through its officers, could only
impose disciplinary sanctions upon its members for infractions of its own
rules and regulations, to the extent of ousting a member from the
association when called for under the circumstances. Nonetheless, such
termination of membership in the associationj, which could result in
curtailment of the privilege of working at the Base inasmuch as
employment therein was conditioned upon membership in CAPANELA, is
not equivalent to the illegal dismissal from employment contemplated in our
labor laws. Petitioners, not being the employer, obviously could not
arrogate unto themselves an employer's prerogatives of hiring and firing
workers.
As succintly pointed out by the Solicitor General:
"True, there was a stipulation to the effect that Fernando Sanchez was
employed by petitioner CAPANELA, but the real employer was the United
States government and petitioner was just a 'labor-only contractor.'
Annexes 'G' and 'H' of CAPANELA's Memorandum on Appeal show that the
award or contract of work was between CAPANELA and the United States
government through the U.S. Navy. The same contract likewise clearly
stipulated that CAPANELA was to 'provide labor and material to perform
trash sorting services in the Base period for all work specified in Section C.'
Annex 'A' of complainant Fernando Sanchez' Answer to petitioner's
Memorandum on Appeal itself proves that the negotiation was between
CAPANELA an the U.S. Navy, with the former supplying the labor and the
U.S. government paying the wages. Since CAPANELA merely provided the
labor force, it cannot deduced therefrom that CAPANELA should also
compensate the laborers; it is a case of non equitur. In other words, the
actual mechanical act of making payments was done by CAPANELA, but the
monies therefor were provided and disbursements made by the disbursing
officer of the U.S. Naval Supply Depot, Subic Bay (see Annexes'G' and 'H').

"Moreover, ingress and egress in the work premises were controlled not by
CAPANELA but by the U.S. Base authorities who could even reject entry of
CAPANELA members then duly employed as part of the project, and impose
disciplinary sanctions against them. Annex '1' of petitioners' Position Paper
as respondent in the NLRC Case No. RAB-III-01-193 1-91, which was the
letter of Lt. M. E. Kistner of the U.S. Navy, clearly proves this." 29
Prevailing case law enumerates the essential elements of an employer-
employee relationship as: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d)
the power of control with regard to the means and methods by which the
work is to be accomplished, with the power of control being the most
determinative factor. 30
The Solicitor General pertinently illustrates the galring absence of these
elements in the present case:
". . ., as aforeshown, CAPANELA had no control of the premises as it was
the U. S. naval authorities who had the power to issue passes or deny their
assurance. In fact, CAPANELA did not have absolute control on the
disciplinary measures to be imposed on its members employed in the Base.
Annex '1' of CAPANELA's Position Paper submitted before the NLRC
Regional Arbitration Branch established the U.S. Navy's right to impose
disciplinary measures for violations or infractions of its rules and regulations
as well as the right to recommend suspensions or dismissals of the workers.
Moreover, it was not shown that CAPELANA had control of the means and
methods or manner by which the workers were to go about their work.
These are indeed strong indicia of the U.S. Navy's right of control over the
workers as direct employer.
"Third, these is evidence to prove that payment of wages was merely done
through CAPANELA, but the source of payment was actually the U.S.
government paying workers according to the volume of work accomplished
on rates agreed upon between CAPANELA and the U.S. government. . . ."
31
It would, therefore, be inutile to discuss the matter of the legality or
illegality of the dismissal of private respondent. Considering that petitioners
cannot legally be considered as the employer of herein private respondent,
it follows that it cannot be made liable as such nor be required to bear the
responsibility for the logal consequences of the charge of illegal dismissal.
Granting arguendo that private respondent was illegally dismissed, the
action should properly be directed against the U.S. government which,
through the Base authorities, was the true employer in this case.
Neither can petitioners be deemed to have been engaged in permissible job
contracting under the law, for failure to satisfy the following prescribed
conditions:
'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 performance of the work
except as to the results thereof; and
2. The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials which are
necessary in the conduct of his business. 32
In the present case, the setup was that CAPANELA was merely tasked with
organizing the Negritos to facilitate the orderly administration of work made
availabel to them at the base facilities, that is, sorting scraps for recycling.
CAPANELA recorded the attendance of its members and submitted the
same to the Base authorities for the determination of wages due them and
the preparation of the payroll. Payment of wages was coursed through
CAPANELA but the funds therefor came from the offers of the Base. Once
inside the Base, control over the means and methods of work was exercised
by the Base authorities. Accordingly, CAPANELA functioned as just an
administrator of its Negrito members employed at the Base.
From the legal standpoint, CAPANELA's activities may at most be
considered akin to that of labor-only contracting, albeit of a special or
peculiar type, wherein CAPANELA, operating like a contractor, merely acted
as an agent or intermediatery of the employer. 33
The Solicitor General remifies this aspect:
". . ., petitioner CAPANELA could not be classified as an 'independent
contractor' because it was not shown that it has substantial capital or
investments to qualify as such under the law. On the other hand, it was
apparent that the premises, tools, equipment, and other paraphernalia used
by the workers were all supplied by the U.S. government through the U.S.
Navy. What CAPANELA supplied was only the local labor force, complainant
Fernando Sanchez among them. It is therefore clear that CAPANELA had
no capital outlay involved in the business or in the maintenance thereof."
34
While it is not denied that an association or a labor organization or union
can at times be an employer insofar as people hired by it to dispose of its
business are concerned, 35 the situation in this case is altogether
different. A proper and necessary distinction should be made between the
emlpoyees of CAPANELA who actually attended to its myriad functions as
an association and its members who were employed in the jobsite inside
the Base vis-a-vis CAPANELA's relative position as the employer of the
former and a mere administrator with respect to the latter.
On the matter of the perfection of an appeal from the decision of the NLRC,
petitioners plead for a more considerate and humane application of the law
as would allow their appeal to prosper despite non-posting of a
supersedeas bond on account of their insolvency. To dismiss the appeal for
failure to post said bond, petitioners aver, is tantamount to denial of the
constitutionally guaranteed right of access to courts by reason of poverty.
36 Private respondent, on the other hand, argues that perfection of an
appeal within the reglementary period and in compliance with all
requirements of the law therefor is jurisdictional. That petitioners do not
have the funds for the premiums for posting a supersedeas bond or for a
cash deposit, disdainfully says private respondent, "is not in the least our
problem." 37
We have no quarrel with the provision of Article 223 of the Labor Code
which, in part and among others, requires that in case of a judgment
involving a monetary award, an appeal by the employer may be perfected
only upon posting of a cash or surety bond issued by a reputable bonding
company duly accredited by the commission in the amount equivalent to
the monetary award in the judgment appealed from. Perfection of an
appeal within the period and in the manner prescribed by law is
jurisdictional 38 and non-compliance with such legal requirements is fatal
and has the effect of rendering the judgment final and executory. 39
However, in a number of recent cases, 40 the Court has eased the
rrequirement of posting a bond, as a condition for perfection of appeals in
labor cases, when to do so would bring about the immediate and
appropriate resolution of controversies on the merits without over-
indulgence in technicalities, 41 ever mindful of the underlying spirit and
intention of the Labor Code to ascertain the facts of each case speedily and
objectively without regard to technical rules of law and procedure, all in the
interest of due process. 42 Punctilious adherence to stringent technical
rules may be relaxed in the interest of the working man, 43 and should
not defeat the complete and equitable resolution of the rights and
obligations of the parties. 44 Moreover, it is the duty of labor officials to
consider their decisions and inquire into the correctness of execution, as
supervening events may affect such execution. 45
The Solicitor General realistically assesses the situation, thus:
". . . As aforestated, above the technical consideration on whether failure to
post a supersedeas bond was fatal to petitioners' appeal is the importance
of first resolving whether there was indeed an employer-employee
relationship in this case so as not to render the execution of the NLRC's
resolution unenforceable or impossible to implement. . . . Besides, it is of
public notice that the U.S. Navy had withdrawn from the Subic Base in view
of the termination of the Bases Treaty. Even if CAPANELA were ordered to
reinstate complainant Fernando Sanchez, this is obviously an impossible
thing to perform as there is no longer any work to be done inside the Base.
Nor is petitioner CAPANELA in a position to pay Sanchez's back wages
considering that it was the U.S. Navy that paid his wages. . . ." 46
In light of the circumstances of this case, the Solicitor General further
suggests two ways of writing finis to this dispute, i.e., to reconsider public
respondent's resolution of February 28, 1992 and April 30, 1992 and
reinstate petitioner's appeal to give the latter a chance to prove
CAPANELA's insolvency or poverty, or to reverse the decision of the labor
arbiter on the ground that there was no employer-employee relationship
between petitioner CAPANELA and private respondent Sanchez.
Harmonizing our evaluation of the facts of this case with the greater
interests of social justice, and considering that the parties involved are
those upon whose socio-economic status we prefaced this opinion, we opt
for the latter.
While this Court, when it finds that a lower court or quasi-judicial body is in
error, may simply and conveniently nullify the challenged decision,
resolution or order and remand the case thereto for further appropriate
action, it is well within the conscientious exercise of its broad review powers
to refrain from doing so and instead choose to render judgment on the
merits when all material facts have been duly laid before it as would
buttress its ultimate conclusion, in the public interest and for the
expeditious adminstration of justice, such as where the ends of justice
would not be subserved by the remand of the case. 47
IN VIEW OF ALL THE FOREGOING PREMISES, the resolutions of February
28, 1992 and April 30, 1992 of respondent National Labor Relations
Commission are accordingly ANNULLED, and the adjudgment of Labor
Arbiter Dominador B. Saludares in NLRC Case No. RAB III 01-1931-91 is
hereby REVERSED and SET ASIDE.
SO ORDERED.
Narvasa, C.J., Bidin, Puno and Mendoza, JJ., concur.
---------------
ZANOTTE SHOES/LEONARDO LORENZO, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION, HON. BENIGNO C. VILLARENTE, JR., JOSEPH
LLUZ, LOLITO LLUZ, NOEL ADARAYAN, ROGELIO SIRA, VIRGINIA
HERESANO, GENELITO HERESANO and CARMELITA DE DIOS,
respondents.1995 Feb 133rd DivisionG.R. No. 100665D E C I S I O N
This petition for certiorari assails the 24th April 1991 resolution of
respondent National Labor Relations Commission ("NLRC"), as well as its
resolution of 30 May 1991 denying a motion for reconsideration, which has
dismissed herein petitioners' appeal of the 16th October 1989 decision of
Labor Arbiter Benigno C. Villarente, Jr.
Private respondents filed a complaint for illegal dismissal and for various
monetary claims, including the recovery of damages and attorney's fees,
against petitioners. In their supplemental position paper, the complainants
subsequently confined themselves to the illegal dismissal charge and
abandoned the monetary claims. One of the original eight complainants,
Virgilio Alcunaba, decided to resume his work with petitioners, thus leaving
the rest to pursue the case. Private respondents averred that they started
to work for petitioners on, respectively, the following dates:
"NAME DATE
"1. Joseph Lluz March, 1985
"2. Noel Adrayan Feb. 17, 1980
"3. Rogelio Sira January, 1982
"4. Lolito Lluz March, 1982
"5. Virginia Heresano May, 1987
"6. Genelito Heresano Oct. 20, 1987
"7. Carmelita de Dios January, 1975" 1
that they worked for a minimum of twelve hours daily, including Sundays
and holidays when needed; that they were paid on piece-work basis; that it
"angered" petitioner Lorenzo when they requested to be made members of
the Social Security System ("SSS"); and that, when they demanded an
increase in their pay rates, they were prevented (starting 24 October 1988)
from entering the work premises.
Petitioners, in turn, that their business operations were only seasonal,
normally twice a year, one in June (coinciding with the opening of school
classes) and another in December (during the Christmas holidays), when
heavy job orders would come in. Private respondents, according to
petitioners, were engaged on purely contractual basis and paid the rates
conformably with their respective agreements.
"Respondents are also hereby directed to pay complainants' counsel the
amount of P5,950.00 which is equivalent to 10% of the above total awards
as attorney's fees.
"SO ORDERED." 3
An appeal was interposed by petitioners. The NLRC, on 24 April 1991,
sustained the findings of the Labor Arbiter and dismissed the appeal. On 30
May 1991, the NLRC denied petitioners' motion for reconsideration.

On 16 October 1989, Labor Arbiter Benigno C. Villarente, Jr., rendered
judgment in favor of the complaints, thus:
"WHEREFORE, judgment is hereby rendered declaring that there was an
employer-employee relationship between complainants and respondents
and that the former were regular employees of the latter. Accordingly
respondents are hereby directed to pay all complainants their respective
separation pay based on their one-half month's earnings per year of
service, a fraction of at least six months to be considered one whole year,
or the following amounts:
Hence, the instant petition.
In his comment, dated 14 October 1991, the Solicitor General moved for
the modification of NLRC's resolution of 24 April 1991. While conceding that
an employer-employee relationship existed between petitioners and private
respondents, the Solicitor General, nevertheless, expressed strong
reservations on the award of separation pay in view of the findings by both
the Labor Arbiter and the NLRC that there was neither dismissal nor
abandonment in the case at bench. The NLRC submitted its own comment
on 11 February 1992.

"1. Joseph Lluz 7,488.00 (3 yrs. & 7 mos.) Well-settled is the rule that factual findings of the NLRC, particularly when
they coincide with that of the Labor Arbiter, are accorded respect, if not
"2. Noel Adarayan 12,636.00 (8 yrs. & 8 mos.) finality, and will not be disturbed absent any showing that substantial
evidence which might otherwise affect the result of the case has been
"3. Rogelio Sira 8,828.00 (6 yrs. & 9 mos.) discarded. We see no reason, in this case at bench, for disturbing the
findings of the Labor Arbiter and the NLRC on the existence of an
"4. Lolito Lluz 8,828.00 (6 yrs. & 7 mos.) employer-employee relationship between herein private parties. The work
of private respondents is clearly related to, and in the pursuit of, the
principal business activity of petitioners. The indicia used for determining
"5. Genelito Heresano 1,404.00 (1 year)
the existence of an employer-employee relationship, all extant in the case
at bench, include (a) the selection and engagement of the employee; (b)
"6. Virginia Heresano 665.00 (1 yr. & 5 mos.) the payment of wages; (c) the power of dismissal; and the (d) the
employer's power to control the employee with respect to the result of the
"7. Carmelita de Dios 19,656.00 (13 yrs. & 9 mos.) work to be done and to the means and methods by which the work is to be
accomplished. The last requirement, so herein posed as an issue, refers to
"Total 59,515.00 2 the existence of the right to control and not necessarily to the actual
exercise of the right. In Dy Keh Beng vs. International Labor and Marine
Union of the Philippines, et al., 4 the Court has held:

"While this Court upholds the control test under which an employer-
employee relationship exists 'where the person for whom the services are
performed reserves a right to control not only the end to be achieved but
also the means to be used in reaching such end,' it finds no merit with
petitioner's arguments as stated above. It should be borne in mind that the
control test calls merely for the existence of the right to control the manner
of doing the work, not the actual exercise of the right. Considering the
finding by the Hearing Examiner that the establishment of Dy Keh Beng is
'engaged in the manufacture of baskets known as kaing', it is natural to
expect that those working under Dy would have to observe, among others,
Dy's requirements of size and quality of the kaing. Some control would
necessarily be exercised by Dy as the making of the kaing would be subject
to Dy's specifications. Parenthetically, since the work on the baskets is done
at Dy's establishments, it can be inferred that the proprietor Dy could easily
exercise control on the men he employed."
We find the above disquisition of the NLRC too speculative and conjectural
to be sustained. The fact of the matter is that petitioners have repeatedly
indicated their willingness to accept private respondents but the latter have
steadfastly refused the offer. For being without any clear legal basis, the
award separation pay must thus be set aside. 5 There is nothing,
however, that prevents petitioners from voluntarily giving private
respondents some amounts on ex gratia basis.
WHEREFORE, the questioned findings and resolutions of respondents Labor
Arbiter and NLRC are MODIFIED by deleting the award of separation pay
and the corresponding attorney's fees. No costs.

We share the opinion of the Solicitor General that the award of separation SO ORDERED.
pay to private respondents appears, nonetheless, to be unwarranted.
Feliciano, Romero, Melo and Francisco, JJ., concur.
The Labor Arbiter, sustained by the NLRC, concluded that there was neither
dismissal nor abandonment. The Labor Arbiter said -
---------------

". . . At any rate, records show that even during the conciliation stage,
respondents had repeatedly indicated that they were willing to accept back
all complainants aside from denying complainants' allegation. Hence, it is
clear that there was no dismissal to talk about in the first place which would
have to be determined whether legal or not. We also take particular note of
complainants' desire to be given separation pay instead of being ordered
back to work. Considering all these factors, we hereby rule that there was
neither dismissal nor abandonment but complainants are simply out of job
for reasons not attributable to either party." (Rollo, pp. 30-31.)

The NLRC, in nonetheless agreeing with the Labor Arbiter on the latter's
award of separation pay, ventured to say:

". . . It is difficult to see the rationale behind the Labor Arbiter's disposition
- he saw in respondents' offer of reinstatement the commanding advantage
it had to later force (by whatever unlawful means they may resort to) the
complainants out of job, just as the Labor Arbiter saw that fear on the part
of complainants to enter into a trap being laid before them for indeed, it is
peculiar for an employer who wants to get rid of its employees, to insist on
reinstatement rather than a separation pay scheme which the law allows
them so they may be able to better manage their business." (Rollo, p. 39.)
MAM REALTY DEVELOPMENT CORPORATION and MANUEL CENTENO,
petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and CELSO B.
BALBASTRO, respondents.1995 Jun 23rd DivisionG.R. No. 114787

DECISION

A prime focus in the instant petition is the question of when to hold a

director or officer of a corporation solidarily obligated with the latter for a
corporate liability.

The cases originated from a complaint filed with the Labor Arbiter by
private respondent Celso B. Balbastro against herein petitioners, MAM
Realty Development Corporation ("MAM") and its Vice President Manuel P.
Centeno, for wage differentials, "ECOLA," overtime pay, incentive leave
pay, 13th month pay (for the years 1988 and 1989), holiday pay and rest
day pay. Balbastro alleged that he was employed by MAM as a pump
operator in 1982 and had since performed such work at its Rancho Estate,
Marikina, Metro manila. He earned a basic monthly salary of P1,590.00 for
seven days of work a week that started from 6:00 a.m. to up until 6:00
p.m. daily.

MAM countered that Balbastro had previously been employed by Francisco

Cacho and co., Inc., the developer of Rancho Estates. Some time in May
1982, his services were contracted by MAM for the operation of the Rancho
Estates' water pump. He was engaged, however, not as an employee, but
as a service contractor, at an agreed fee of P1,590.00 a month. Similar
arrangements were likewise entered into by MAM with one Rodolfo Mercado
and with a security guard of Rancho Estates III Homeowners' Association.
Under the agreement, Balbastro was merely made to open and close on a
daily basis the water supply system of the different phases of the
subdivision in accordance with its water rationing scheme. He worked for
only a maximum period of three hours a day, and he made use of his free
time by offering plumbing services to the residents of the subdivision. He
was not at all subject to the control or supervision of MAM for, in fact, his
work could so also be done either by Mercado or by the security guard. On
23 May 1990, prior to the filing of the complaint, MAM executed a Deed of
Transfer, 1 effective 01 July 1990, in favor of the Rancho Estates Phase
III Homeowners Association, Inc., conveying to the latter all its rights and
interests over the water system in the subdivision.
In a decision, dated 23 December 1991, the Labor Arbiter dismissed the
complaint for lack of merit.
On appeal to it, respondent National Labor Relations Commission ("NLRC")
rendered judgment (a) setting aside the questioned decision of the Labor
Arbiter and (b) referring the case, pursuant to Article 218(c) of the Labor
Code, to Arbiter Cristeta D. Tamayo for further hearing and submission of a
report within 20 days from receipt of the Order. 2 On 21 March 1994,
respondent Commissioner, after considering the report of Labor Arbiter
Tamayo, ordered:
"WHEREFORE, the respondents are hereby directed to pay jointly and
severally complaint the sum of P86,641.05 as above-computed." 3
The instant petition asseverates that respondents NLRC gravely abused its
discretion, amounting to lack or excess of jurisdiction, (1) in finding that an
employer-employee relationship existed between petitioners and private
respondents and (2) in holding petitioners jointly and severally liable for the
money claims awarded to private respondent.
Once again, the matter of ascertaining the existence of an employer-
employee relationship is raised. Repeatedly, we have said that this factual
issue is determined by:
(a) the selection and engagement of the employee;
(b) the payment of wages;
(c ) the power of dismissal; and
(d) the employer's power to control the employee with respect to the
result of the work to be done and to the means and methods by which the
work is to be accomplished.
We see no grave abuse of discretion on the part of NLCR in finding a full
satisfaction, in the case at beach, of the criteria to establish that employer-
employee relationship and, here, a point of controversy, refers merely to
the existence of the power and not to the actual exercise thereof. It is not
essential for the employer to actually supervise the performance of duties
of the employee; it is enough that the former has a right to wield the
power. 4 It is hard to accede to the contention of petitioners that private
respondent should be considered totally free from such control merely
because the work could equally and easily be done either by Mercado or by
the subdivision's security guard. Not without any significance is that private
respondent's employment with MAM has been registered by petitioners with
the Social Security System. 5
It would seem that the money claims awarded to private respondent were
computed from 06 March 1988 to 06 march 1991, 6 the latter being the
date of the filing of the complaint. The NLRC might have missed the
transfer by MAM of the water system to the Homeowners Association on 01
July 1990, a matter that would appear not to be in dispute. accordingly, the
period for the computation of the money claims should only be for the
period from 06 march 1988 to 01 July 1990 (when petitioner corporation
could be deemed to have ceased from the activity for which private
respondents was employed), and petitioner corporation should, instead, be
made liable for the employee's separation pay equivalent to one-half (1/2)
month pay for every year of service. 7 While the transfer was allegedly
due to MAM's financial constraints, unfortunately for petitioner corporation,
however, it failed to sufficiently establish that its business losses or financial
reverse were serious enough that possibly can warrant an exemption under
the law. 8
We agree with petitioners, however, that the NLRC erred in holding
Centeno jointly and severally liable with MAM. A corporation, being a
juridical entity, may act only through its directors, officers and employees.
Obligations incurred by them, acting as such corporate agents, are not
theirs but the direct accountabilities of the corporation they represent.
True, solidarily liabilities may at times be incured but only when exceptional
circumstances warrant such as, generally, in the following cases: 9
1. When directors and trustees or, in appropriate cases, the officers of a
corporation -
(a) vote for or assent to patently unlawful acts of the corporation;
(b) act in bad faith or with gross negligence in directing the corporate
affairs;
(c ) are guilty of conflict of interest to the prejudice of the corporation,
its stockholders or members, and other persons. 10
2. When a director or officer has consented to the issuance of waterered
stocks or who, having knowledge thereof, did not forthwith file with the
corporate secretary his written objection thereto. 11
3. When the director , trustee or officer has contractually agreed or
stipulated to hold himself personally and solidarily liable with the
Corporation. 12
4. When a director, trustee or officer is made, by specific provision of law,
personally liable for his corporate action. 13
In labor cases, for instance, the Court has held corporate directors and
officers solidarily liable with the corporation for the termination of
employment of employees done with malice or in bad faith. 14
In the case at bench, there is nothing substantial on record that can justify,
prescinding from the foregoing, petitioner Centeno's solidary liability with
the corporation.
An extra note. Private respondents avers that the questioned decision,
having already become final and executory, could no longer be reviewed by
this Court. The petition before us has been filed under Rule 65 of the Rules
of Court, there being no appeal, or any other plain, speedy and adequate
remedy in the ordinary course of law from decisions of the National Labor
Relations Commission; it is a relief that is open so long as it is availed of
within a reasonable time.
WHEREFORE, the order of 21 march 1994 is MODIFIED. the case is
REMANDED to the NLRC for a re-computation of private respondent's
monetary awards, which, conformably with this opinion, shall be paid solely
by petitioner MAM Realty Development Corporation. No special
pronouncement on costs.
SO ORDERED.
Feliciano, Romero, Melo and Francisco, JJ., concur.
---------------
INVESTMENT PLANNING CORPORATION OF THE PHILIPPINES, petitioner-
appellant, vs. SOCIAL SECURITY SYSTEM, respondent-appellee.1967 Nov
18En BancG.R. No. L-19124D E C I S I O N
Petitioner is a domestic corporation engaged in business management and
the sale of securities. It has two classes of agents who sell its investment
plans: (1) salaried employees who keep definite hours and work under the
control and supervision of the company; and (2) registered representatives
who work on commission basis.
On August 27, 1960 petitioner, through counsel, applied to respondent
Social Security Commission for exemption of its so-called registered
representatives from the compulsory coverage of the Social Security Act.
The application was denied in a letter signed by the Secretary to the
Commission on January 16, 1961. A motion to reconsider was filed and also
denied, after hearing, by the Commission itself in its resolution dated
September 8, 1961. The matter was thereafter elevated to this Court for
review.
The issue submitted for decision here is whether petitioner's registered
representatives are employees within the meaning of the Social Security Act
(R.A. No. 1161 as amended). Section 8 (d) thereof defines the term
"employee" for purposes of the Act as "any person who performs
services for an 'employer' in which either or both mental and physical
efforts are used and who receives compensation for such services, where
there is an employer-employee relationship." (As amended by Sec. 4, R. A.
No. 2658) These representatives are in reality commission agents. The
uncontradicted testimony of petitioner's lone witness, who was its assistant
sales director, is that these agents are recruited and trained by him
particularly for the job of selling "Filipinas Mutual Fund" shares, made to
undergo a test after such training and, if successful, are given license to
practice by the Securities and Exchange Commission. They then execute an
agreement with petitioner with respect to the sale of FMF shares to the
general public. Among the features of said agreement which respondent
Commission considered pertinent to the issue are: (a) an agent is paid
compensation for services in the form of commission; (b) in the event of
death or resignation he or his legal representative shall be paid the balance
of the commission corresponding to him; (c) he is subject to a set of rules
and regulations governing the performance of his duties under the
agreement; (d) he is required to put up a performance bond; and (e) his
services may be terminated for certain causes. At the same time the
Commission found from the evidence and so stated in its resolution that the
agents "are not required to report (for work) at any time; they do not have
to devote their time exclusively to or work solely for petitioner; the time
and the effort they spend in their work depend entirely upon their own will
and initiative; they are not required to account for their time nor submit a
record of their activities; they shoulder their own selling expenses as well as
transportation; and they are paid their commission based on a certain
percentage of their sales." The record also reveals that the commission
earned by an agent on his sales is directly deducted by him from the
amount he receives from the investor and turns over to the company the
amount invested after such deduction is made. The majority of the agents
are regularly employed elsewhere either in the government or in private
enterprises.
Of the three requirements under Section 8 (d) of the Social Security Act it is
admitted that the first is present in respect of the agents whose status is in
question. They exert both mental and physical efforts in the performance of
their services. The compensation they receive, however, is not necessarily
for those efforts but rather for the results thereof, that is, for actual sales
that they make. This point is relevant in the determination of whether or
not the third requisite is also present, namely, the existence of employer-
employee relationship. Petitioner points out that in effect such
compensation is paid not by it but by the investor, as shown by the basis
on which the amount of the commission is fixed and the manner in which it
is collected.
Petitioner submits that its commission agents, engaged under the terms
and conditions already enumerated, are not employees but independent
contractors, as defined in Article 1713 of the Civil Code, which provides:
"ART. 1713. By the contract for a piece of work the contractor binds
himself to execute a piece of work for the employer, in consideration of a
certain price or compensation. The contractor may either employ only his
labor or skill, or also furnish the material."
We are convinced from the facts that the work of petitioner's agents or
registered representatives more nearly approximates that of an
independent contractor than that of an employee. The latter is paid for the
labor he performs, that is, for the acts of which such labor consists; the
former is paid for the result thereof. This Court has recognized the
distinction in Chartered Bank: et al, vs. Constantino, 56 Phil. 717, where it
said:
"On this point, the distinguished commentator Manresa in referring to
Article 1588 of the (Spanish) Civil Code has the following to say . . .
"'The code does not begin by giving a general idea of the subject matter,
but by fixing its two distinguishing characteristics.
"'But such an idea was not absolutely necessary because the difference
between the lease of work by contract or for a fixed price and the lease of
services of hired servants or laborers is sufficiently clear. In the latter, the
direct object of the contract is the lessor's labor; the acts in which such
labor consists, performed for the benefit of the lessee, are taken into
account immediately. In work done by contract or for a fixed price, the
lessor's labor is indeed an important, a most important factor, but it is not
the direct object of the contract, nor is it immediately taken into account.
The object which the parties consider, which they bear in mind in order to
determine the cause of the contract, and upon which they really give their
consent, is not the labor but its result, the complete and finished work, the
aggregate of the lessor's acts embodied in something material, which is the
useful object of the contract . . .' (Manresa Commentarios al Codigo Civil,
Vol. X, 3d ed., pp. 774-775.)"
Even if an agent of petitioner should devote all of his time and effort trying
to sell its investment plans he would not necessarily be entitled to
compensation therefor. His right to compensation depends upon and is
measured by the tangible results he produces.
The specific question of when there is "employer-employee relationship" for
purposes of the Social Security Act has not yet been settled in this
jurisdiction by any decision of this Court. But in other connections wherein
the term is used the test that has been generally applied is the so-called
control test, that is, whether the "employer" controls or has reserved the
right to control the "employee" not only as to the result of the work to be
done but also as to the means and methods by which the same is to be
accomplished.
Thus in Philippine Manufacturing Company vs. Geronimo et al., L-6968,
November 29, 1954, involving the Workmen's Compensation Act, we read:
". . .Garcia, a painting contractor, had a contract undertaken to paint a
water tank belonging to the Company 'in accordance with specifications and
price stipulated,' and with 'the actual supervision of the work (being) taken
care of by' himself. Clearly, this made Garcia an independent contractor, for
while the company prescribed what should be done, the doing of it and the
supervision thereof was left entirely to him, all of which meant that he was
free to do the job according to his own method without being subject to the
control of the company except as to the result."
Cruz et al. vs. The Manila Hotel Company, L-9110, April 30, 1957,
presented the issue of who were to be considered employees of the
defendant firm for purposes of separation gratuity. LVN Pictures, Inc. vs.
Phil. Musicians Guild et al., L-12582, January 28, 1961, involved the status
of certain musicians for purposes of determining the appropriate bargaining
representative of the employees. In both instances the "control" test was
followed. (See also Mansal vs. P.P. Gocheco Lumber Co., L-8017, April 30,
1955; and Viana vs. Allagadan, et al., L-8967, May 31, 1956.)
In the United States, the Federal Social Security Act of 1935 set forth no
definition of the term 'employee' other than that 'it includes an officer of a
corporation.' Under the Act the U.S. Supreme Court adopted for a time and
in several cases the so-called "economic- reality" test instead of the
"control" test. (U.S. vs. Silk and Harrison, 91 Law Ed. 1757; Bartels vs.
Birmingham Ibid, 1947, both decided in June 1947). In the Bartels case the
Court said:
"In United States v. Silk, No. 312, 331 US 704, ante, 1957, 67 S CT 1463,
supra, we held that the relationship of employer-employee, which
determines the liability for employment taxes under the Social Security Act
was not to be determined solely by the idea of control which an alleged
employer may or could exercise over the details of the service rendered to
his business by the worker or workers. Obviously control is characteristically
associated with the employer-employee relationship, but in the application
of social legislation employees are those who as a matter of economic
reality are dependent upon the business to which they render service. In
Silk, we pointed out that permanency of the relation, the skill required, the
investment in the facilities for work and opportunities for profit or less from
the activities were also factors that should enter into judicial determination
as to the coverage of the Social Security Act. It is the total situation that
controls. These standards are as important in the entertainment field as we
have just said, in Silk, that they were in that of distribution and
transportation." (91 Law, Ed. 1947, 1953;)
However, the "economic-reality" test was subsequently abandoned as not
reflective of the intention of congress in the enactment of the original
Security Act of 1935. The change was accomplished by means of an
amendatory Act passed in 1948, which was construed and applied in later
cases. In Benson vs. Social Security Board, 172 F. 2d. 682, the U.S.
Supreme Court said:
"After the decision by the Supreme Court in the Silk case, the Treasury
Department revamped its Regulation, 12 Fed. Reg. 7966, using the test set
out in the silk case for determining the existence of an employer-employee
relationship. Apparently this was not the concept of such a relationship that
Congress had in mind in the passage of such remedial acts as the one
involved here because thereafter on June 14, 1948, Congress enacted
Public Law 642, 42 U.S. C.A. Sec. 1301(a) (6). Section 1101(a) (6) of the
Social Security Act was amended to read as follows:
"'The term 'employee' includes an officer of a corporation, but such term
does not include (1) any individual who, under the usual common-law rules
applicable in determining the employer-employee relationship, has the
status of an independent contractor or (2) any individual (except an officer
of a corporation) who is not am employee under such common law rules.'
"While it is not necessary to explore the full effect of this enactment in the
determination of the existence of employer-employee relationships arising
in the future, we think it can fairly be said that the intent of Congress was
to say that in determining in a given case whether under the Social Security
Act such a relationship exists, the common-law elements of such a
relationship, as recognized and applied by the courts generally at the time
of the passage of the Act, were the standard to be used . . ."
The common-law principles expressly adopted by the United States
Congress are summarized in Corpus Juris Secundum as follows:
"Under the common-law principles as to tests of the independent contractor
relationship, discussed in Master and Servant, and applicable in determining
coverage under the Social Security Act and related taxing provisions, the
significant factor in determining the relationship of the parties is the
presence or absence of a supervisory power to control the method and
detail of performance of the service, and the degree to which the principal
may intervene to exercise such control, the presence of such power of
control being indicative of an employment relationship and the absence of
such power being indicative of the relationship of independent contractor.
In other words, the test of existence of the relationship of independent
contractor, which relationship is not taxable under the Social Security Act
and related provisions, is whether the one who is claimed to be an
independent contractor has contracted to do the work according to his own
methods and without being subject to the control of the employer except as
to the result of the work." (81 C.J.S, Sec, 5, pp. 24-25;) See also Millard's
Inc. vs. United States, 146 F. Supp. 385; Schmidt vs. Ewing, 108 F. Supp.
505; Rambin vs. Ewing, 106 F. Supp. 268.
In the case last cited (Rambin v. Ewing) the question presented was
whether the plaintiff there, who was a sales representative of a cosmetics
firm working on a commission basis, was to be considered an employee.
Said the Court:
"Plaintiff's only remuneration was her commission of 40% plus $5 extra for
every $250 of sales, Plaintiff was not guaranteed any minimum
compensation and she was not allowed a drawing account or advance of
any kind against unearned commissions. Plaintiff paid all of her traveling
expenses and she even had to pay the postage for sending orders to Avon.
"The only office which Avon maintained in Shreveport was an office for the
city manager. Plaintiff worked from her own home and she was never
furnished any leads. The relationship between plaintiff and Avon was
terminable at will . . .
work, and in turn is compensated according to the result of his efforts and
not the amount thereof, we should not find that the relationship of
employer and employee exists.
We have examined the contract form between petitioner and its registered
representatives and found nothing therein which would indicate that the
latter are under the control of the former in respect of the means and
methods they employ in the performance of their work. The fact that for
certain specified causes the relationship may be terminated (e.g. failure to
meet the annual quota of sales, inability to make any sales production
during a six-month period, conduct detrimental to petitioner, etc.) does not
mean, that such control exists, for the causes of termination thus specified
have no relation to the means and methods of work that are ordinarily
required of or imposed upon employees.
In view of the foregoing considerations, the resolution of respondent Social
Security Commission subject of this appeal is reversed and set aside,
without pronouncement as to costs.
Reyes, J.B.L., Dizon, Bengzon, J.P., Zaldivar, Sanchez, Castro, Angeles and
Fernando, JJ., concur.
Concepcion, C.J., did not take part.

xxx xxx xxx

". . . A long line of decisions holds that commissions sales representatives

are not employees within the coverage of the Social Security Act, The
underlying circumstances of the relationship between the sales
representatives and company often vary widely from case to case, but
commission sales representatives have uniformly been held to be outside
the Social Security Act."

Considering the similarity between the definition of "employee" in the

Federal Social Security Act (U.S.) as amended and its definitions in our own
Social Security Act, and considering further that the local statute is
admittedly patterned after that of the United States, the decisions of
American courts on the matter before us may well be accorded persuasive
force. The logic of the situation indeed dictates that where the element of
control is absent; where a person who works for another does so more or
less at his own pleasure and is not subject to definite hours or conditions of
ILOILO CHINESE COMMERCIAL SCHOOL, petitioner, vs. LEONORA
FABRIGAR and THE WORKMEN'S COMPENSATION COMMISSION,
respondents.1961 Dec 27En BancG.R. No. L-16600

DECISION

As a result of the death of Santiago Fabrigar, on June 28, 1956, his heirs in
the person of Leonora Fabrigar (common-law wife) and their children, filed
a claim for compensation with the Workmen's Compensation Commission,
Case No. 1085, W.C.C,, entitled "Leonora Fabrigar, et al., Claimants vs.
Iloilo Chinese Commercial School, Respondents". In this claim, it was
alleged that the cause of death was "pulmonary tuberculosis contracted
during and as a result of his employment as janitor." The Hearing Officer of
the WWC denied the claim and dismissed the case, finding that the
claimant failed to prove the casual effect of employment and death; nothing
was shown that the disease was contracted in line of duty; that whatever
evidence claimant presented about the cause of death was only a mere
suggestion that progressively developed from tuberculosis with heart
trouble to a sudden fatal turn, ending up for the cause of "beriberi adult" at
the time of death, as per certification of Sanitary Inspector Dr. P. E.
Labitoria, of Dao, Capiz (Exhibits C & 4).

The heirs of Santiago Fabrigar appealed the decision with the Workmen's
Compensation Commission which, on November 12, 1959, rendered
judgment reversing the decision of its Hearing Officer, making the following
findings of facts:

That Santiago Fabrigar had been employed from 1947 to March 12, 1956,
as a janitor-messenger of the respondent Iloilo Chinese Commercial School,
his work consisting of sweeping and scrubbing the floors, cleaning the
classrooms and the school premises, and other janitorial chores; that on
March 11, 1956, preparatory to graduation day, he carried desks and chairs
from the class-rooms to the auditorium, set the curtains and worked harder
and faster than usual; that although he felt shortness of breath and did not
feel very well that day he continued working at the request of the overseer
of respondent; that on the following day he reported for work, but on
March 13, he spat blood and stopped working; that from April 29, 1956 to
May 15, 1956, he was under treatment by Dr. Quirico Villareal "for far
advanced pulmonary tuberculosis and for heart disease"; and that previous
to said treatment, he was attended by Dr. Jaranilla for pulmonary
tuberculosis. The Commission concluded that the short period of
intervention between his last day of work (March 13, 1956) when he spat
blood and his death on June 28, 1956, due to pulmonary tuberculosis,
indicated that he had been suffering from such disease even during the
time he was employed by the respondent and considering the strenuous
work he performed, his employment as janitor aggravated his pre-existing
illness; that although there is a discrepancy between the cause of death
"beriberi adult", as appearing in the Death Certificate and the testimony of
Dr. Villareal, the latter deserves more credence, because the information
(cause of death) was given by the Sanitary inspector who did not, in any
way, examine the deceased before or after his death. The Commission,
therefore, ordered the respondent Chinese Commercial School, Inc., in said
case
"1. To pay to the claimant, for and in behalf of her minor children by
the deceased, namely Carlito, Gloria, Rosita and Ernesto, all surnamed
Fabrigar, the amount of Two thousand four hundred ninety six and 00/100
Pesos (P2,496.00) as death benefits; and
"2. To pay to the Commission the amount of P25.00 as fees pursuant
to Section 55 of Act 3428, as amended."
The above decision is now before Us for review on a Writ of Certiorari, after
the motion for reconsideration had been denied, petitioner alleging that the
Commission erred:
1. In disregarding completely the evidentiary value of the death
certificate of the attending physician which was presented as evidence by
both claimants and respondent (Exhibits C & 4) to prove the cause of
death;
2. In finding that the cause of death of said Santiago Fabrigar was
tuberculosis and was contracted during and as a result of the nature of his
employment;
3. In holding that the herein petitioner was the employer of the
deceased Santiago Fabrigar; and
4. In not holding that the herein petitioner is exempt from the scope
of the Workmen's Compensation Law.
Petitioner contends that the preponderance of evidence on the matters
involved in this case, militates in its favor. Considering the doctrine that the
Commission, like the Court of Industrial Relations, is bound not by the rule
of preponderance of evidence as in ordinary civil cases, but by the rule of
substantial evidence (Ang Tibay vs. CIR, 69 Phil., 635; Phil. Newspaper
Guild vs. Evening News, 47 Off. Gaz. No. 12, p. 6188; Secs. 43 & 46 Rep.
Act No. 772 W.C. Act), petitioner's pretension is without merit. Substantial
evidence supports the decision of the Commission. While seemingly there
exists an inconsistency in the cause of death, as appearing in the death
certificate by Dr. Labitoria and in Dr. Villareal's diagnosis, it is a fact found
by the Commission, that the Sanitary Inspector did not examine the
deceased before and after his death. "Undoubtedly", says the Commission,
"the information that he died of beriberi adult, as appearing in the death
certificate was given because it appears that the deceased had also edema
of the extremities (swollen legs)". The evidence of record sustains the
following findings of the Commission, as Fabrigar's cause of death, to wit
"The short period of time intervening between his last day of work (March
13, 1956) when he spat blood and his death on June 28, 1956 due to
pulmonary tuberculosis indicates that he had been suffering from the
disease even during the time that he was employed by the respondent.
Considering the strenuous work that he performed while in the service of
the respondent and the unusually long hours of work he rendered (6:00
p.m. to 1:30 p.m. and from 2:00 p.m. to 6:00 p.m. or 7:00 p.m.) beyond
the normal and legal working hours, we find that his employment
aggravated his pre-existing illness and brought about his death. Moreover,
our conclusion finds support in the fact that immediately preceding his last
day of work with the respondent, he had an usually hard day lifting desks
and other furnitures and assisting in the preparations for the graduation
exercises of the school. Considering also his complaints during that day
(March 11), among which was 'shortness of breath', we may also say that
his work affected in already existing heart ailment."
We find no plausible reason for altering or disturbing the above factual
findings of the Commission, in the present appeal by certiorari.
It is claimed that actually the deceased was not an employee of the
petitioner, but by the Iloilo Chinese Chamber of Commerce which was the
one that furnished the janitor service in the premises of its buildings,
including the part thereof occupied by the petitioner; that the Chamber of
Commerce paid the salaries of janitors, including the deceased; that the
petitioner could not afford to pay rentals of its premises and janitor due to
limited finances which depended largely on funds raised among its Board of
Directors, the Chinese Chamber of Commerce and Chinese nationals who
helped the school. In other words, it is pretended that the deceased was
not an employee of the school but of the Chinese Chamber of Commerce
which should be the one responsible for the compensation of the deceased.
On one hand, according to the Commission, there is substantial proof to the
effect that Fabrigar was employed by and rendered service for the
petitioner and was an employee within the purview of the Workmen's
Compensation Law. On the other hand, the most important test of
employer-employee relation is the power to control the employee's conduct.
The records disclose that the person in charge (encargado) of the
respondent school supervised the deceased in his work and had control
over the manner he performed the same.
It is finally contended that petitioner is an institution devoted solely for
learning and is not an industry within the meaning of the Workmen's
Compensation Law. Consequently, it is argued, it is exempt from the scope
of the same law. Considering that this factual question has not been
properly put in issue before the Commission, it may not now be entertained
in this appeal for the first time (Atlantic Gulf, etc. vs. CIR, et al. L-16992,
Dec. 23, 1961, citing International Oil Factory Union v. Hon. Martinez, et
al., L-15560, Dec. 31, 1960). The decision of the Commission does not
show that the matter was taken up. We are at a loss to state whether the
issue was raised in the motion for reconsideration filed with the
Commission, because the said motion is not found in the record before us.
And the resolution to the motion for reconsideration does not touch this
question.
IN VIEW HEREOF, the appeal interposed by the petitioner is dismissed, and
the decision appealed from is affirmed, with costs against the herein
petitioner.
Bengzon, C.J. Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L.,
Barrera, Dizon, and De Leon, JJ., concur.
FAR EASTERN UNIVERSITY, petitioner, vs. THE COURT OF INDUSTRIAL
RELATIONS, ET AL., respondents.1962 Aug 31En BancG.R. No. L-17620
DECISION
Appeal by certiorari, taken by the Far Eastern University, hereafter referred
to as the University, from a resolution of the Court of Industrial Relations
sitting en banc, modifying a decision of one of the Judges of said Court.
The main facts are set forth in said decision, from which we quote:
"From the evidence on record, it appears that Tomas N. Aguirre became a
faculty member of the respondent in 1948. He was first employed at the
rate of P6.00 per hour and than was contracted to teach in the Boy's High
School Department in the same university at the rate of P30.00 per class,
earning an average of P500.00 to P600.00 a month. Aguirre joined the
PACUP, a Legitimate labor organization, in June, 1953. In July or August,
1953, upon orders of the president of the PACUP, Jose M. Fernandez,
Aguirre began to campaign and recruit members for the PACUP. As a result
of his efforts in campaigning for membership, he was able to influence
seven members from the faculty of the university (Exhibits 'B', 'B-1' to 'B-6',
inclusive). In his campaign for membership, he approached practically all of
the faculty members of the respondent's Institute of Education and some
from the Arts and Sciences, Business Administration and Finance, but most
of them were afraid to join the union. They were afraid of any retaliation
that the respondent may make because of their joining the union.
"In the year 1953 respondent formed a committee to classify all faculty
members and determine the rates of their back pay and assignments.
Ninety-six of the-more than four hundred faculty members were classified
as full time instructors. Aguirre was one of those who was classified by the
said committee as full time instructor in the respondent's Institute of
Education, with a fixed compensation of P450.00 a month, effective
September 1, 1953.
"During the months of December, 1953 up to May, 1954, for teaching in the
Far Eastern University, respondent herein, Aguirre was paid ,the following
December, 1953 P210.00; January, 1954 P302.40; February, 1954
P313.20; March, 1954 P249.00. In June, 1954, respondent stopped
giving him teaching assignments.
"Aguirre claims that in June, 1954, he was no longer given an assignment
because of his union activities while respondent claims that Aguirre was not
given assignment because of decreased enrollment in the university. He
further avers that after recruiting some members, his classification as full
time instructor was changed to reserved full time instructor and his
teaching load was decreased to two hours a day. Hence, his reduced
earnings from December, 1953 to May, 1954, as previously mentioned. His
salary as a full time instructor was P5,400.00 per annum or P450.00 per
month, irrespective of his teaching load. Respondent, thru its witness, the
dean in the Institute of Education where Aguirre was teaching, testified and
admitted that the reason for Aguirre's not receiving any teaching
assignment in June, 1954 was because enrollment in the Institute of
Education was going down steadily in the Filipino Language class where
Aguirre was teaching. Among the other Filipino Language instructors are
Baldomero de Jesus, Teodoro Gener, Rosario Bernardo, Dolores Gupit,
Iigo Regalado, and Flordelisa Mendoza who are older members of the
faculty than Aguirre except Regalado, Bernardo and Mendoza. The dean of
the Institute of Education, Luz A. Zafra, admitted also that in the
assignment of subjects to faculty members, length of service, experience,
preparation and professional growth as well as student- faculty relation
were taken into consideration. Hence, if these above-mentioned factors,
particularly length of service and experience, were really taken into
consideration. Aguirre, a full time professor should have been given the
assignment instead of Regalado and Mendoza who were only part time
professors and who started teaching after him. The other Tagalog
instructors (professors under the classification) who were given
assignments when Aguirre was not, are not members of the PACUP. It
should also be noted that since before the last war, Aguirre had been
teaching in the University of the Philippines.
"It is true that there were charges brought by respondent against Aguirre
but the same had been investigated and found to be groundless. On the
other hand, Aguirre brought charges against the respondent before the
Department of Education when his teaching load was reduced and the
Director of Private Schools, in his decision of November 5, 1954, directed
the respondent to pay the salary differential which Aguirre failed to earn
from December 1, 1953 to 1954 and to give Aguirre assignment in the
college department during the first semester of that current school year
under the same condition before his teaching load was reduced. The
Secretary of Education, in his decision, dated June 22, 1955, affirmed the
decision of the Director of Private Schools and on December 8, 1956, the
Executive Secretary, by authority of the President of the Philippines,
affirmed the decision of the Director of Private Schools as well as the
Secretary of Education's decisions previously mentioned. Of course, those
proceedings, in no could be considered as controlling or affecting the case
at bar. At best, they may serve as a grim reminder of the actions of the
governmental entity that could be something to bolster the relationship
between the university and the faculty members. The allegation of
respondent to the effect that it suffered reduced enrollment in 1953-1954,
hence necessitating the laying off the Aguirre, cannot be taken into
consideration after a careful examination of the balance sheet submitted by
the respondent in relation to its motion to dismiss. Said balance sheet
shows that in the 1952-1953 fiscal year, respondent made a net profit of
P153,035.25 and in 1953-1954, P258,619.98, while in 1954-1955, a net
profit of P707,003.70 and in 1955-1956, P999,766.88. These figures show
that respondent from 1952 to 1956, has been steadily increasing its income
until in 1958-1959 when it made a net income of P1,511,293.42. And even
on the assumption that enrollment in the department where Aguirre was
teaching was reduced, still the Court cannot validly reconcile the fact that
Aguirre who was a full time professor receiving a fixed monthly salary could
not any further be given assignment the part time professors and whose
length of service in the university cannot compare with that of Aguirre were
given assignments and suffered no reduction in salary. Undoubtedly, this
Court cannot but conclude that when the respondent changed the status of
Aguirre from a full time professor at P450.00 a month to that of a reserved
full time professor with a teaching load of two hours and finally got no
assignments in June, 1954, it was motivated other than decreased
enrollment, especially in the case of the evidence that Aguirre campaigned
for union membership among the professors, instructors and teachers of
the respondent and the further fact, that other full time instructors similarly
situated but are not union members did not suffer the same facts of abrupt
reduction in their teaching load and salary. As indicated Aguirre was later
deprived of any teaching load in the Institute of Education. Even part time
professors as Panganiban, Mendoza and Regalado had assignments to the
exclusion of Aguirre who was a full time professor. This eventuality, was
apparently, the fear of most of the faculty members who refused to join the
PACUP when Aguirre asked them to become members.
"Ordinarily back wages are granted whenever there is a finding of a
commission of unfair labor practices. However, in this particular case this
testimony of Aguirre, himself as well as the documentary evidence on the
record show that since June, 1955, Aguirre began teaching at the Philippine
College of Commerce with an income of P100.00 a month and on
November 17, 1955, he began working as a permanent employee in the
Central Bank of the Philippines with a compensation of P3,000.00 per
annum. On September 5, 1956, his salary was raised to P3,060.00 per
annum. The permanent employment obtained by Aguirre in the Central
Bank of the Philippines as well as in the Philippine College of Commerce is
substantial and under the concept of the Industrial Peace Act, his
employment elsewhere in a permanent capacity is sufficient to bar his
reinstatement to his former position in the respondent. While it may be true
that his earnings with the Central Bank may be less than that he was
receiving from the Far Fastern University, yet his status with the Central
Bank, is permanent and he could teach as a sideline in any school, as in
fact he is connected with the Philippine College of Commerce, a fact that
could not happen if he were still connected with the Far Fastern University."
At the instance of the Philippine Association of Colleges and University
Professors, hereafter referred to as the PACUP, and/or Tomas N. Aguirre,
on September 28, 1954, an Acting Prosecutor of the Court of Industrial
Relations filed a complaint for unfair labor practice against the University,
which later moved on November 17, 1954, to dismiss the complaint.
Subsequently, or on February 4, 1955, the complainant and/or the offended
party, Tomas N. Aguirre, filed a motion to withdraw said complaint upon
the ground that there was a decision of the Director of Private Schools
ordering his reinstatement and the payment of back wages, as well as wage
differential, and that, the University was "using the pendency" of the case
"as a ground for not complying with the said decision". Acting upon this
latter motion, on March 29, 1955, the Court dismissed said complaint.
However, on August 30, 1955, the order of dismissal was, on motion of the
complainant, dated April 22, 1955, set aside for the reason that the
expected amicable settlement of the case had not materialized. On October
10, 1955, the University filed a "supplemental pleading" to its motion to
dismiss of November 17, 1954, both of which were denied by the Court on
June 23, 1956. Later on the University filed its answer and, the issues
having been joined, the case was tried, after which Judge Arsenio I.
Martinez of said Court rendered the aforementioned decision finding the
University guilty of unfair labor practice and sentencing said institution to
pay to Aguirre the salary differential due him from December 1, 1953 to
May 31, 1954, based on Aguirre's salary of P450.00 a month, as well as
back wages at the same rate, from June 1, 1954, to November 17, 1955,
after deducting therefrom the compensation paid to him by the Philippine
College of Commerce from June 1, 1955 to November 17, 1955, as well as
to cease and desist from further committing unfair labor practices.
However, said Judge did not order the reinstatement of Aguirre in the
University, upon the ground that his employment in the Central Bank of the
Philippines is, within the purview of the Industrial Peace Act, a substantial
equivalent of his position as full time instructor in said University.
On motion for reconsideration filed by the complainant, a majority of the
judges of said Court sitting en banc, affirmed the decision of Judge
Martinez, insofar as the commission of unfair labor practice charged and the
payment of the salary differential and back wages are concerned, but held
that Aguirre's employment in the Central Bank and the Philippine College of
Commerce are not the substantial equivalent of his aforementioned position
as full time instructor in the University, and, accordingly, modified said
decision by, likewise, sentencing the University to reinstate Tomas N.
Aguirre, in addition to paying him the aforementioned wage differential and
back wages, plus "other emoluments". Hence, this appeal by certiorari
taken by the University. The Court of Industrial Relations, as one of the
appellees herein, has filed a motion, which we consider as its answer, to
dismiss the appeal for lack of merit, upon the ground that appellant raises
no question of law.
Appellant's contention is that the employment of Aguirre in the Central
Bank and his teaching load in the Philippine College of Commerce are
substantially equivalent to his former position in the University. Upon the
other hand, the resolution appealed reached the opposite conclusion for the
following reasons:
"(a) Aguirre's work in the respondent university is that of a professor,
while his work in the Central Bank is clerical in nature;
"(b) As professor, Aguirre's maximum teaching period is five (5) hours
daily, while in the bank, he works eight (8) hours a day;
"(c) Although his work in the bank allows him to teach part time in the
Philippine College of Commerce for one hour, he could also do the same
work even if he were employed in the university; and
"(d) Aguirre was receiving from the respondent university P5,400.00 a
year, while he receives from the Central Bank P3,000.00 a year only. This
one fact decides the issue, namely, that Aguirre's position in the Central
Bank is not substantially equivalent to his position in the Far Eastern
University. 'Any employment at lower wage rate is not substantially
equivalent employment' [Willard, Inc. (1937 2 NLRB 1094, Moorseville
Cotton Mills vs. NLRB (CCA-4, 1940), 2, Labor Cases, 18,576; 110 fed. (2d)
79; Puleski Veneer Corp. (1938) 10 NLRB 136; Quidnick Dye Works, Inc.
(1937) 2 NLRB 963]."
Although Mr. Aguirre was, not a professor, but a full time instructor in the
University, we agree with the opinion of the lower court, siting en banc. In
addition to the circumstances relied upon by the latter, one important
factor, not mentioned in the resolution appealed from, is decisively in favor
of the conclusion therein reached, and that is that Mr. Aguirre is an
instructor in Tagalog, and that, as such, his position as researcher in the
Central Bank has no future for him. The situation would perhaps have been
different had his line been economics. Inasmuch, however, as Mr. Aguirre
has specialized in the Tagalog dialect, his work as a researcher in the
Central Bank is inferior to his job as full time instructor in the University, not
so much because his salary in the latter is substantially bigger, even if we
add thereto his emoluments in the Philippine College of Commerce, but,
specially, because of the future his position as instructor in the University
offers him as a career, which is non-existent in the Central Bank.
WHEREFORE, the resolution appealed from is hereby affirmed, with costs
against petitioner. It is so ordered.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera,
Paredes, Dizon, Regala and Makalintal, JJ., concur.
DY KEH BENG, petitioner, vs. INTERNATIONAL LABOR and MARINE UNION
OF THE PHILIPPINES, ET. AL., respondents.1979 May 251st DivisionG.R.
No. L-32245
DECISION
Petitioner Dy Keh Beng seeks a review by certiorari of the decision of the
Court of Industrial Relations dated March 23, 1970 in Case No. 3019-ULP
and the Court's Resolution en banc of June 10, 1970 affirming said decision.
The Court of Industrial Relations in that case found Dy Keh Beng guilty of
the unfair labor practice acts alleged and order him to.
"reinstate Carlos Solano and Ricardo Tudla to their former jobs with
backwages from their respective dates of dismissal until fully reinstated
without loss to their right of seniority and of such other rights already
acquired by them and/or allowed by law." 1
Now, Dy Keh Beng assigns the following errors 2 as having been
committed by the Court of Industrial Relations:
RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO
AND TUDLA WERE EMPLOYEES OF PETITIONERS.
II
RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO
AND TUDLA WERE DISMISSED FROM THEIR EMPLOYMENT BY
PETITIONER.
III
RESPONDENT COURT ERRED IN FINDING THAT THE TESTIMONIES
ADDUCED BY COMPLAINANT ARE CONVINCING AND DISCLOSES (SIC) A
PATTERN OF DISCRIMINATION BY THE PETITIONER HEREIN.
IV
RESPONDENT COURT ERRED IN DECLARING PETITIONER GUILTY OF
UNFAIR LABOR PRACTICE ACTS AS ALLEGED AND DESCRIBED IN THE
COMPLAINT.
V following reasons:
RESPONDENT COURT ERRED IN ORDERING PETITIONER TO REINSTATE
RESPONDENTS TO THEIR FORMER JOBS WITH BACKWAGES FROM THEIR
RESPECTIVE DATES OF DISMISSALS UNTIL FINALLY REINSTATED
WITHOUT LOSS TO THEIR RIGHT OF SENIORITY AND OF SUCH OTHER
RIGHTS ALREADY ACQUIRED BY THEM AND/OR ALLOWED BY LAW.
The facts as found by the Hearing Examiner are as follows:
A charge of unfair labor practice was filed against Dy Keh Beng, proprietor
of a basket factory, for discriminatory acts within the meaning of Section
4(a), sub-paragraph (1) and (4), Republic Act No. 875, 3 by dismissing on
September 28 and 29, 1960, respectively, Carlos N. Solano and Ricardo
Tudla for their union activities. After preliminary investigation was
conducted, a case was filed in the Court of Industrial Relations for in behalf
of the International Labor and Marine Union of the Philippines and two of
its members, Solano and Tudla. In his answer, Dy Keh Beng contended that
he did not know Tudla and that Solano was not his employee because the
latter came to the establishment only when there was work which he did on
pakiaw basis, each piece of work being done under a separate contract.
Moreover, Dy Keh Beng countered with a special defense of simple
extortion committed by the head of the labor union, Bienvenido Onayan.
After trial, the Hearing Examiner prepared a report which was subsequently
adopted in toto by the Court of Industrial Relations. An employee-employer
relationship was found to have existed between Dy Keh Beng and
complainants Tudla and Solano, although Solano was admitted to have
worked on piece basis. 4 The issue therefore centered on whether there
existed an employee employer relation between petitioner Dy Keh Beng and
the respondents Solano and Tudla.
According to the Hearing Examiner, the evidence for the complainant Union
tended to show that Solano and Tudla became employees of Dy Keh Beng
from May 2, 1953 and July 15, 1955, 5 respectively, and that except in the
event of illness, their work with the establishment was continuous although
their services were compensated on piece basis. Evidence likewise showed
that at times the establishment had eight (8) workers and never less than
five(5); including the complainants, and that complainants used to receive
P5.00 a day, sometimes less. 6
According to Dy Keh Beng, however, Solano was not his employee for the
(1)Solano never stayed long enough at Dy's establishment;
(2)Solano had to leave as soon as he was through with the order given him
by Dy;
(3)When there were no orders needing his services there was nothing for
him to do;
(4)When orders came to the shop that his regular workers could not fill, it
was then that Dy went to his address in Caloocan and fetched him for these
orders; and
(5)Solano's work with Dy's establishment was not continuous." 7
According to petitioner, these facts show that respondents Solano and
Tudla are only piece workers, not employees under Republic Act 875, where
an employee 8 is referred to as
"shall include any employee and shall not be limited to the employee of a
particular employer unless the Act explicitly states otherwise and shall
include any individual whose work has ceased as a consequence of, or in
connection with any current labor dispute or because of any unfair labor
practice and who has not obtained any other substantially equivalent and
regular employment."
while an employer 9
"includes any person acting in the interest of an employer, directly or
indirectly but shall not include any labor organization (otherwise than when
acting as an employer) or anyone acting in the capacity of officer or agent
of such labor organization."
Petitioner really anchors his contention of the non-existence of employee-
employer relationship on the control test. He points to the case of Madrigal
Shipping Co., Inc. v. Nieves Baens del Rosario, et al., L-13130, October 31,
1959, where the Court ruled that:
"The test . . . of the existence of employee and employer relationship is
whether there is an understanding between the parties that one is to
render personal services to or for the benefit of the other and recognition
by them of the right of one to order and control the other in the
performance of the work and to direct the manner and method of its
performance."
Petitioner contends that the private respondents "did not meet the control
test in the light of the . . . definition of the terms employer and employee,
because there was no evidence to show that petitioner had the right to
direct the manner and method of respondent's work." 10 Moreover, it is
argued that petitioner's evidence showed that "Solano worked on a pakiaw
basis" and that he stayed in the establishment only when there was work.
While this Court upholds the control test 11 under which an employer-
employee relationship exists "where the person for whom the services are
performed reserves a right to control not only the end to be achieved but
also the means to be used in reaching such end," it finds no merit with
petitioner's arguments as stated above. It should be borne in mind that the
control test calls merely for the existence of the right to control the manner
of doing the work, not the actual exercise of the right. 12 Considering the
finding by the Hearing Examiner that the establishment of Dy Keh Beng is
"engaged in the manufacture of baskets known as kaing, 13 it is natural to
expect that those working under Dy would have to observe, among others,
Dy's requirements of size and quality of the kaing. Some control would
necessarily be exercised by Dy as the making of the kaing would be subject
to Dy's specifications. Parenthetically, since the work on the baskets is done
at Dy's establishments, it can be inferred that the proprietor Dy could easily
exercise control on the men he employed.
As to the contention that Solano was not an employee because he worked
on piece basis, this Court agrees with the Hearing Examiner that
"circumstances must be construed to determine indeed if payment by the
piece is just a method of compensation and does not define the essence of
the relation. Units of time . . . and units of work are in establishments like
respondent (sic) just yardsticks whereby to determine rate of
compensation, to be applied whenever agreed upon. We cannot construe
payment by the piece where work is done in such an establishment so as to
put the worker completely at liberty to turn him out and take in another at
pleasure."
At this juncture, it is worthy to note that Justice Perfecto, concurring with
Chief Justice Ricardo Paras who penned the decision in "Sunripe Coconut
Products Co. v. Court of Industrial Relations" (83 Phil. 518, 523), opined
that
"judicial notice of the fact that the so-called 'pakyaw' system mentioned in
this case as generally practiced in our country, is, in fact, a labor contract
between employers and employees, between capitalists and laborers."
Insofar as the other assignments of errors are concerned, there is no
showing that the Court of Industrial Relations abused its discretion when it
concluded that the findings of fact made by the Hearing Examiner were
supported by evidence on the record. Section 6, Republic Act 875 provides
that in unfair labor practice cases, the factual findings of the Court of
Industrial Relations are conclusive on the Supreme Court, if supported by
substantial evidence. This provision has been put into effect in a long line of
decisions where the Supreme Court did not reverse the findings of fact of
the Court of Industrial Relations when they were supported by substantial
evidence. 14
Nevertheless, considering that about eighteen (18) years have already
elapsed from the time the complainants were dismissed, 15 and that the
decision being appealed ordered the payment of backwages to the
employees from their respective dates of dismissal until finally reinstated, it
is fitting to apply in this connection the formula for backwages worked out
by Justice Claudio Teehankee in "cases not terminated sooner." 16 The
formula calls for fixing the award of backwages without qualification and
deduction to three years, "subject to deduction where there are mitigating
circumstances in favor of the employer but subject to increase by way of
exemplary damages where there are aggravating circumstances." 17
Considering there are no such circumstances in this case, there is no reason
why the Court should not apply the abovementioned formula in this
instance.
WHEREFORE; the award of backwages granted by the Court of Industrial
Relations is herein modified to an award of backwages for three years
without qualification and deduction at the respective rates of compensation
the employees concerned were receiving at the time of dismissal. The
execution of this award is entrusted to the National Labor Relations ISABELO DOCE, petitioner, vs. WORKMEN'S COMPENSATION COMMISSION
Commission. Costs against petitioner. and DADO JADAO, respondents.1958 Dec 22En BancG.R. No. L-9417

SO ORDERED. Dado Jadao filed with the Workmen's Compensation Commission a claim for
compensation against Isabelo Doce for injuries he suffered in an accident
Teehankee, Makasiar, Guerrero and Melencio Herrera, JJ., concur. that occurred on June 11, 1953 in the City of Manila while working as a
conductor of a bus belonging to the latter under a boundary system. Doce
Fernandez, J., Did not take part. interposed the defense that there was no employer-employee relationship
between him and Jadao and hence the Commission has no jurisdiction to
act on the claim.

The claim was assigned to a referee for hearing who, after receiving the
evidence, rendered decision holding that a conductor who works under the
boundary system in the operation of the bus of another is considered an
employee of the latter within the meaning of the law and as such Doce is
responsible to pay to Jadao the compensation prescribed in the Workmen's
Compensation Act. Consequently, the referee ordered Doce to pay Jadao a
compensation of P757.43, plus the cost of the medical and surgical
expenses incurred by the latter, and to pay the Commission the amount of
P8.00 as fees in accordance with the law. This decision was affirmed by the
Commission on July 2, 1955. Doce interposed the present petition for
review.

The facts as found by the Commission are: Dado Jadao was a conductor of
Bus No. 9 of the B-Twelve Liner owned and operated by Isabelo Doce who
was paid under the boundary system. His average daily earnings as
conductor was P4.00, working five days a week. On June 11, 1953, while
acting as such conductor, Jadao was pinned by two buses on Quezon
Boulevard, Manila, suffering injuries on the right leg, head and left ear. He
was treated in the North General Hospital and in the National Orthopedic
Hospital, and as a result he suffered temporary total disability from June
11, 1953 to May 10, 1954 and a partial loss of the use of his right leg.

It was also proven that under the boundary system adopted by petitioner
and respondent, the driver and conductor of the bus gave to the owner a
fixed amount out of the daily earnings derived from its operation. In this
case, the conductor and the driver used to give to respondent P15.00 daily.
The owner supplied the gasoline at the beginning but its cost is later
reimbursed out of the earnings of the day. After deducting the cost of the The contention of petitioner that the relation that existed between him and
gasoline and the rental of P15.00, the remainder is divided between the the respondent is only one of lessor and lessee cannot therefore be
conductor and the driver. sustained.

The issue to be determined is whether the employer-employee relationship Wherefore, the decision appealed from is affirmed, with costs against
existed between the owner of the bus and the conductor considering that petitioner.
the latter worked under a boundary system as explained above and is not
paid directly by the former. VISAYAN STEVEDORE TRANSPORTATION COMPANY (VISTRANCO) and
RAFAEL XAUDARO, petitioners, vs. COURT OF INDUSTRIAL RELATIONS,
This case falls squarely within our ruling in National Labor Union vs. UNITED WORKERS' & FARMERS' ASSOCIATION (UWFA), VENANCIO
Dinglasan, 52 Off. Gaz., No. 4,1933, wherein this Court held that a driver of DANOOG, BUENAVENTURA AGARCIO and 137 OTHERS, respondents.1967
a jeep who operates the same under the boundary system is considered an Feb 25En BancG.R. No. L-21696
employee within the meaning of the law and as such the case comes under
the jurisdiction of the Court of Industrial Relations. In that case, Benedicto DECISION
Dinglasan was the owner and operator of TPU jeepneys which were driven
by petitioners under verbal contracts that they will pay P7.50 for 10 hours Appeal by certiorari, taken by the Visayan Stevedoring Transportation Co.
use under the so- called "boundary system." The drivers did not receive hereinafter referred to as the Company and Rafael Xaudaro from an
salaries or wages from the owner. Their day's earnings were the excess order of the Court of Industrial Relations, the dispositive part of which
over the P7.50 they paid for the use of the jeepneys. In the event that they reads:
did not earn more, the owner did not have to pay them anything. In
holding that the employer-employee relationship existed between the
"The Court, finding respondents guilty of unfair labor practice as charged,
owner of the jeepneys and the drivers even if the latter worked under the
directs them to cease and desist from such unfair labor practice and to
boundary system, this Court said:
reinstate the complainants, with back wages from the date they were laid
off until reinstated."
"The only features that would make the relationship of lessor and lessee
between the respondent, owner of the jeeps, and the drivers, members of
The Company is engaged in the loading and unloading of vessels, with a
the petitioner union, are the fact that he does not pay them any fixed wage
branch office in Hinigaran, Negros Occidental under the management of
but their compensation is the excess of the total amount of fares earned or
said Rafael Xaudaro. Its workers are supplied by the United Workers and
collected by them over and above the amount of P7.50 which they agreed
Farmers Association, a labor organization hereinafter referred to as
to pay to the respondent, and the fact that the gasoline burned by the
UWFA whose men (affiliated to various labor unions) have regularly
jeeps is for the account of the drivers. These two features are not,
worked as laborers of the Company during every milling season since
however, sufficient to withdraw the relationship between them from that of
immediately after World War II up to the milling season immediately
employer-employee, because the estimated earnings for fares must be over
preceding November 11, 1955, when the Company refused to engage the
and above the amount they agreed to pay to the respondent for a ten-hour
services of Venancio Dano-og, Buenaventura Agarcio and 137 other persons
shift or ten-hour a day operation of the jeeps. Not having any interest in
named in the complaint filed in case No. 62-ULP-Cebu of the Court of
the business because they did not invest anything in the acquisition of the
Industrial Relations and hereinafter referred to as the Complainants
jeeps and did not participate in the management thereof, their service as
owing, they claim, to their union activities. At the behest of the UWFA and
drivers of the jeeps being their only contribution to the business, the
the Complainants, a complaint for unfair labor practice was, accordingly,
relationship of lessor and lessee cannot be sustained."
filed against the Company and Xaudaro with the Court of Industrial
Relations hereinafter referred to as the CIR in which it was docketed
as Case No. 62-ULP-Cebu. In due course, its Presiding Judge issued the
order appealed from, which was affirmed by the CIR sitting en banc. Hence
this petition for review by certiorari.
The issues raised in this appeal, are (1) whether there is employer-
employee relationship between the Company and the Complainants; (2)
whether the Company has been guilty of unfair labor practice; and (3)
whether the order of reinstatement of Complainants, with backpay, is a
reversible error.
With respect to the first question, the Company maintains that it had never
had an employer-employee relationship with the Complainants, the latter's
services having allegedly been engaged by the UWFA, not by the Company,
and that, in any event, whatever contractual relation there may have been
between the Company and the Complainants had ceased at the end of each
milling season, so that the Company can not be guilty of unfair labor
practice in refusing to renew said relation at the beginning of the milling
season in November, 1955.
This pretense is untenable. Although Complainants, through the labor union
to which they belong, form part of UWFA, there was no independent
contract between the latter, as an organization, and the Company. After the
first milling season subsequently to the liberation of the Philippines,
Complainants merely reported for work, at the beginning of each
succeeding milling season, and their services were invariably availed of by
the Company, although an officer of the UWFA or union concerned
determined the laborers who would work at a given time, following a
rotation system arranged therefor.
milling season, it is, likewise, settled that the workers concerned are
considered, not separated from the service, but, merely on leave of
absence, without pay, during the off-season, their employer-employee
relationship being merely deemed suspended, not severed, in the
meanwhile. 4
Referring to the unfair labor practice charge against the Company, we find,
with the CIR, that said charge is substantially borne out by the evidence of
record, it appearing that the workers not admitted to work beginning from
November, 1955, were precisely those belonging to the UWFA, and that
Xaudaro, the Company branch Manager, had told them point bank that
severance of their connection with the UWFA was the remedy, if they
wanted to continue working with the Company.
As to the payment of back wages, the law 5 explicitly vests in the CIR
discretion to order the reinstatement with back pay of laborers dismissed
due to union activities, and the record does not disclose any cogent reason
to warrant interference with the action taken by said Court. 6 Wherefore,
the order and resolution appealed from are hereby affirmed, with costs
against petitioners herein. It is so ordered.
Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar, Sanchez
and Ruiz Castro JJ. concur.

In the performance of their duties, Complainants worked, however, under

the direction and control of the officers of the Company, whose paymaster,
or disbursing officer paid the corresponding compensation directly to said
Complainants, who, in turn, acknowledged receipt in payrolls of the
company. We have already held that laborers working under these
conditions are employees of the Company, 1 in the same manner as
watchmen or security guards furnished, under similar circumstances, by
watchmen or security agencies, 2 inasmuch as the agencies and/or labor
organizations involved therein merely performed the role of a
representative or agent of the employer in the recruitment of men needed
for the operation of the latter's business. 3

As regards the alleged termination of employer-employee relationship

between the Company and the Complainants at the conclusion of each
MAFINCO TRADING CORPORATION, petitioner, vs. THE HON. BLAS F.
OPLE, in his capacity as Secretary of Labor, The NATIONAL LABOR
RELATIONS COMMISSION, RODRIGO REPOMANTA and REY MORALDE,
respondents.1976 Mar 252nd DivisionG.R. No. L-37790

DECISION

Mafinco Trading Corporation (Mafinco for short) filed these special civil
actions of certiorari and prohibition in order to annul the decision of the
Secretary of Labor dated April 16, 1973. In that decision the Secretary
reversed an order of the old National Labor Relations Commission (NLRC)
and held that the NLRC had jurisdiction over the complaint lodged by the
Federacion Obrera de la Industria Tabaquera y Otros Trabajadores de
Filipinas (FOITAF) against Mafinco for having dismissed Rodrigo Repomanta
and Rey Moralde (NLRC Case No. LR-086). The voluminous record reveals
the following facts:

Peddling contracts and their termination. On April 30, 1968 Cosmos

Aerated Water Factory, Inc., hereinafter called Cosmos, a firm based at
Malabon, Rizal, appointed Mafinco as its sole distributor of Cosmos soft
drinks in Manila. On May 31, 1972 Rodrigo Repomanta and Mafinco
executed a peddling contract whereby Repomanta agreed to "buy and sell"
Cosmos soft drinks. Rey Moralde entered into a similar contract. The
contracts were to remain in force for one year unless sooner terminated by
either party upon five days' notice to the other. 1 The contract with
Repomanta reads as follows:

"PEDDLING CONTRACT

"KNOW ALL MEN BY THESE PRESENTS:

"This CONTRACT, entered into by and between:

"The MAFINCO TRADING CORPORATION, a domestic corporation duly
organized and existing under the laws of the Philippines, doing business at
Rm. 715 Equitable Bank Bldg., Juan Luna St., Manila, under the style
MAFINCO represented in this act by its General Manager, SALVADOR C.
PICA, duly authorized for the purpose and hereinafter referred to as
MAFINCO, and RODRIGO REPOMANTA, married/single, of legal age, and a
resident of 70-D Bo. Potrero, MacArthur Highway, Malabon, Rizal
hereinafter referred to as PEDDLER, WITNESSETH:
"WHEREAS, MAFINCO has been appointed as the exclusive distributor of
'COSMOS' Soft Drink Products for and within the City of Manila; .
"WHEREAS, the PEDDLER is desirous of buying and selling in Manila the
'COSMOS' Soft Drink Products handled by MAFINCO; .
"NOW THEREFORE, for and in consideration of the foregoing premises and
the covenants and conditions hereinafter set forth, the parties hereto has
agreed as follows:
"1.That in consideration of the competence of the PEDDLER and his ability
to promote mutual benefits for the parties hereto, MAFINCO shall provide
the PEDDLER with a delivery truck with which the latter shall exclusively
peddle the soft drinks of the former, under the terms set forth herein;
"2.The PEDDLER himself shall, carefully and in strict observance to traffic
regulations, drive the truck furnished him by MAFINCO or should he employ
a driver or helpers such driver or helpers shall be his employees under his
direction and responsibility and not that of MAFINCO, and their
compensation including salaries, wages, overtime pay, separation pay,
bonus or other remuneration and privileges shall be for the PEDDLER'S own
account; The PEDDLER shall likewise bind himself to comply with the
provisions of the Social Security Act and all the applicable labor laws in
relation to his employees;
"3.The PEDDLER shall be responsible for any damage to property, death or
injuries to persons or damage to the truck used by him caused by his own
acts or omission or that of his driver and helpers;
"4.MAFINCO shall furnish the gasoline and oil to run the said truck in
business trips, bear the cost of maintenance and repairs of the said truck
arising from ordinary wear and tear;
"5.The PEDDLER shall secure at his own expense all necessary licenses and
permits required by law or ordinance and shall bear any and all expenses
which may be incurred by him in the sales of the soft drink products
covered by the contract;
"6.All purchases by the PEDDLER shall be charged to him at a price of
P2.52 per case of 24 bottles, ex-warehouse; PROVIDED, However, that if
the PEDDLER purchases a total of not less than 250 cases a day, he shall
be entitled further to a Peddler's Discount of P11.00;
"7.Upon the execution of this contract, the PEDDLER shall give a cash bond
in the amount of P1,500.00 against which MAFINCO shall charge the
PEDDLER with any unpaid account at the end of each day or with any
damage to the truck or other account which is properly chargeable to the
PEDDLER; within 30 days after the termination of this contract, the cash
bond, after deducting proper charges, shall be returned to the PEDDLER;
"8.The PEDDLER shall liquidate and pay all his accounts to MAFINCO'S
authorized representative at the end of each day, and his failure to do so
shall subject his cash bond at once to answer for any unliquidated
account/s;
"9.This contract shall be effective only up to May 31, 1973 and supersedes
any
or all other previous contracts, if any, that may have been entered into
between the parties; However, either of the parties may terminate the
same upon five (5) days prior notice to the other;
"10.Upon the termination of this contract, unless the same is renewed, the
delivery truck and such other equipment furnished by MAFINCO to the
PEDDLER shall be returned by the latter in good order and workable
condition, ordinary wear and tear excepted, and shall promptly settle his
outstanding account if any, with MAFINCO;
"11.To assure performance by the PEDDLER of his obligation to his
employees under the Social Security Act, the applicable labor laws and for
damages suffered by third persons, PEDDLER shall furnish a performance
bond of P1,000.00 in favor of MAFINCO from a SURETY COMPANY
acceptable to MAFINCO.
"IN WITNESS WHEREOF, the parties hereto have signed this instrument at
the City of Manila, Philippines, this May 31, 1972.
MAFINCO TRADING CORPORATION
By:
(Sgd,) RODRIGO REPOMANTA(Sgd.) SALVADOR C. PICA
PeddlerGeneral Manager"
(Witnesses and notarial acknowledgment are omitted).
On December 7, 1972 Mafinco, pursuant to section 9 of the contract,
terminated the same. The notice to Repomanta reads as follows:
"Dear Mr. Repomanta:
This has reference to the Peddling Contract you executed with the Mafinco
Trading Corporation on May 31, 1972. Please be informed that in
accordance with the provisions of paragraph 9 of the said peddling
contract, we are hereby serving notice of termination thereof effective on
December 12, 1972.
Yours truly,
(Sgd.) SALVADOR C. PICA
General Manager"
Complaints of Repomanta and Moralde and NLRC's dismissal thereof. Four
days later or on December 11, 1972 Repomanta and Moralde, through their
union, the FOITAF, filed a complaint with the NLRC, charging the general
manager of Mafinco with having violated Presidential Decree No. 21, issued
on October 14, 1972, which created the NLRC and which was intended "to
promote industrial peace, maximize productivity and secure social justice
for all". The brief complaint reads as follows:
"Hon. Amado Gat Inciong, Chairman
National Labor Relations Commission
Phoenix Bldg., Intramuros,
Manila
"Sir:
Pursuant to the Presidential Decree No. 21, Section 2 and 11, the FOITAF
files a complaint against SALVADOR C. PICA, General Manager of MAFINCO
TRADING CORP. located at Room 715, Equitable Bank Bldg., Juan Luna,
Manila, for terminating union officials (sic), Mr. Rodrigo Refumanta and Mr.
Rey Moralde, which is a violation of the above mentioned decree.
"Notice of termination is herewith attach (sic).
"We anticipate your due attention and assistance.
Respectfully yours,
(Signed by National Secretary of FOITAF)"
Mafinco filed a motion to dismiss the complaint on the ground that the
NLRC had no jurisdiction because Repomanta and Moralde were not its
employees but were independent contractors. It stressed that there was
termination of the contract, not a dismissal of an employee. In Repomanta's
case, it pointed out that he was registered with the Social Security System
as an employer who, as a peddler, paid premiums for his employees; that
he secured the mayor's permit to do business and the corresponding
peddler's license and paid the privilege tax and that he obtained workmen's
compensation insurance for his own employees or helpers. It alleged that
Moralde was in the same situation as Repomanta.
Mafinco further alleged that the Bureau of Labor Relations denied the
application of peddlers for registration as a labor union because they were
not employees but employers in their own right of delivery helpers
(Decision dated January 4, 1966 by the Registrar of Labor Organizations in
Registration Proceeding No. 4, In the Matter of Cosmos Supervisors
Association-PTGWO); that the Court of Industrial Relations in Case No.
4399-ULP, Cosmos Supervisors' Association-PTG WO vs. Manila Cosmos
Aerated Water Factory, Inc., held in its decision dated July 17, 1967 that
the peddlers were not employees of Cosmos, and that the Court of Appeals
held in Rapajon vs. Fong Kui and Figueras vs. Asierto, CA-G.R. No. 19477-R
and 21397-R, March 18, 1958 that the delivery helpers of the peddlers were
not employees of Cosmos, a ruling which this Court refused to review (L-
14072-74, Rapajon vs. Fong Kui, Resolution dated July 16, 1958).
The complaint was referred to a factfinder who in a lengthy report dated
January 22, 1973 found, after "exhaustively and impartially" considering the
contentions of the parties, that the peddlers were employers or
"independent businessmen", as held by the Court of Industrial Relations
and the Court of Appeals, and that that holding has the force of res
judicata. The factfinder recommended the dismissal of the complaint.
The old NLRC, composed of Amado G. Inciong, Diego P. Atienza and
Ricardo O. Castro, adopted that recommendation in its order dated
February 2, 1973. That order, which analyzes the peddling contract and
reviews the court rulings on the matter, is quoted below:
"The question of whether peddling contracts of the kind entered into
between the parties give rise to an employer-employee relationship is not
new. Nor are the contracts themselves of recent vintage.
"For at least twenty years respondent MAFINCO and its predecessor and/or
principal, the Manila-Cosmos Aerated Water Factory, have entered into
contracts with peddlers, under the terms of which the latter buy from the
former at a special price, and sell in Manila, the former's soft drink
products. The distributor provides the peddler with a delivery truck with the
distributor answering for the cost of fuel and maintenance. If a peddler
buys a certain number of cases or more a day, he is entitled to a fixed
amount of peddler's discount.
"The peddler himself drives the truck but if he engages a driver or helpers,
the latter are his employees and he assumes all the responsibilities of an
employer in relation to them. He also obtains at his own expense all
licenses and permits required by law of salesmen.
"The peddler clears his accounts with the distributor at the end of each day,
and unpaid accounts are charged against the cash deposit or bond which
he gives the distributor upon the execution of the peddling contract. He
answers for damages caused by him or his employees to third persons.
"Ruling upon this type of contracts, and the practices and relationships that
attended its implementation, the Court of Appeals, in CA-G.R. No. 19477-R,
said that it did not create a relationship of employer and employee; that the
peddlers under such contract were not employees of the manufacturer or
distributor, and accordingly dismissed the complaints in the said case. (The
peddler-complainants in that case were claiming overtime pay and
damages, among others.) Elevated to the Supreme Court on review (G. R.
Nos. L-14072 to L-14074, 2 August 1958), the decision of the Court of
Appeals was in effect affirmed, for the petition for review was dismissed by
the Supreme Court 'for being factual and for lack of merit.
"The Court of Industrial Relations is of the same persuasion. After inquiring
extensively into substantially the same terms and conditions of peddling
contracts and the practices and relationships that went into their
implementation, the Court said in Case No. 4399-ULP that the peddlers of
the Manila-Cosmos Aerated Water Factory were not employees of the latter.
"These precedents apply squarely to the case at hand. The complainants
here have not shown that their peddling contracts with the respondent
differ in any substantial degree from those that were at issue in the Court
of Industrial Relations, the Court of Appeals and the Supreme Court in the
cases cited above. Indeed, a comparison between the contracts involved in
those cases and those in the instant litigation do not show any difference
that would warrant a different conclusion than that reached by those
courts. If at all, the additional stipulations in the present contracts
strengthen the position that the complainant peddler are independent
contractors or businessman, not employees of the respondent.
"Nor has there been shown any substantial change in the old practices of
peddlers vis-a-vis the distributor or manufacturer. The points raised by the
complainants in their pleadings regarding these practices were extensively
discussed by the CIR in the ULP case above referred to. "We are not
prepared to depart from this rule of long standing. It is the law of the case.
"We therefore hold that the complainants in this case were not employees
of MAFINCO and Presidential Decree No. 21 does not apply to them."
Complainants' appeal and the Labor Secretary's decision that they were
employees of Mafinco. Complainants Repomanta and Moralde appealed to
the Secretary of Labor. They argued that the NLRC erred (1) in holding that
they were independent contractors and not employees; (2) in relying on the
peddler's contract to determine the existence of employer-employee
relationship; (3) in anchoring its decisions on precedents which have only
persuasive force and which did not rule squarely on the issue of employer-
employee relationship, and (4) in dismissing their complaint.
As stated at the outset, the Secretary in his decision reversed the NLRC
order. He ruled that Repomanta and Moralde were employees of Mafinco
and that, consequently, the NLRC had jurisdiction over their complaint. The
Secretary directed the NLRC to hear the case on the merits. .
The Secretary found that the complainants "were driver-salesmen of the
company, driving the trucks and distributing the products of the company"
and that they were not independent contractors because they had no
capital of their own. That finding was based on the following
considerations:
"(1)That the contracts are identical: (2) that the complainants were
originally 'plant drivers' of the company; (3) that the complainants had no
capital of their own; (4) that their delivery trucks were provided by the
company; (5) that the use of the trucks were 'exclusively' for peddling the
products of the company; (6) that they were required to observe
regulations; (7) that they were required to drive the trucks; (8) that the
company furnished the gasoline and oil to run the said trucks in business
trips; (9) that the company shouldered the cost of maintenance and repair
of the said trucks arising from ordinary wear and tear; (10) that the
company required them to secure the necessary licenses and permits; (11)
that the company prohibited them from selling the company's products
higher than the fixed price of the company; and (12) that they and their
helpers were paid on commission basis."
The Secretary relied on this Court's ruling that a person who possesses no
capital or money of his own to pay his obligations to his workers but relies
entirely upon the contract price to be paid by the company, falls short of
the requisites or conditions necessary for an independent contractor
(Mansal vs. Gocheco Lumber Co., 96 Phil. 941).
He observed that "behind the peddling cloak there was in fact employee-
employer relationship". He said:
"While, generally, written employment contracts are held sufficient in
determining the nature of employment, such contracts, however, cannot be
always held conclusive where the actual circumstances of employment
indicate otherwise. For example, some employers, in order to avoid or
evade coverage of the Workmen's Compensation Act, enter into pseudo
contracts with their employees who are named as 'employers' or
'independent contractors'. Such 'written contracts as distinguished from oral
agreements, purporting to make persons independent contractors, no
matter how 'adroitly framed', can be carefully scanned and the real
relationship ascertained' (Glielmi vs. Netherlands Dairy Co., 254 N.Y. 60
(1930), Morabe & Inton, Workmen's Compensation Act, p. 69).
"If the Peddling Contract were carefully scanned, the conclusion may be
drawn that the contract is but a device and subterfuge to evade coverage
under the labor laws. There is more than meets the eye in item 2 of the
Peddling Contract which required the peddlers to do that which the law
intends the employer to have done.
"In fact, such contracts, as the one in question, exempting or tending to
exempt the employers from their legal obligations to their workers are null
and void under Sec. 7 of the Workmen's Compensation Act, as amended,
which states:
'Any contract, regulation or device of any sort intended to exempt the
employer from all or part of the liability created by this Act shall be null and
void.'
"To rule otherwise would be to open the floodgate to employers in this
territory to evade liabilities to their workers by simply letting contracts for
the doing of their business. 'Such construction could not only narrow the
provisions of the Act, but would defeat its intent and purposes in their
entirety.' (Andoyo vs. Manila Railroad Co., supra)."
The motion for the reconsideration of the decision was denied by the
Secretary in his order of July 16, 1973.
The Committee's report that the peddlers are independent contractors. On
July 25, 1973 Mafinco moved for the clarification of the decision by
inquiring whether the question of employee-employer relationship would be
included in the hearing on the merits.
Action on the said motion was deferred until the receipt of the report of the
committee created to study the status of peddlers of Cosmos products. On
September 3, 1973 the Secretary directed the committee composed of
Ernesto Valencia, Vicente R. Guzman and Eleo Cayapas to conduct an in-
depth study of the actual relationship existing between the Cosmos Bottling
Co. and its peddlers.
The committee in its report dated September 17, 1973 arrived at the
conclusion that the relationship actually existing between Cosmos and
Mafinco, on one hand, and the peddlers of Cosmos products, on the other,
is not one of employer and employee and "that the peddlers are
independent contractors".
The committee after a perusal of the record of NLRC Case No. LR-086
interviewed twenty peddlers, an officer of Cosmos and an officer of
Mafinco. In the conduct of the interviews it "observed judicious adherence
to impartiality and open-mindedness but with a modicum of friendliness and
much of informality". The report reads in part as follows:
"(1)Implications of the 'Agreement to Peddle Soft
Drinks' Of vital importance to the mind of your Committee is the fact that
this Agreement entered into between Cosmos and the Peddlers has, as its
prefatory statement but before the enumeration of its terms and conditions,
the following:
'That the Peddler has agreed to buy and sell the products of the
MANUFACTURER under the following conditions:'
Similarly, the 'Peddling Contract' entered into between Mafinco and the
Peddlers, contains peculiarly identical wordings, viz:
'WHEREAS, the PEDDLER is desirious of buying and selling in Manila the
'COSMOS' Soft Drink Products handled by MAFINCO:'
"It is immediately clear from the beginning that the relationship that the
parties would want to establish between them is one of buyer and seller of
the Cosmos Products. Moreover, this type of Agreement or Contract has its
roots since some twenty (20) years earlier, with modifications only with
respect to the factory price, the amount of over prices or what the peddlers
refer to as commission, and the amount pertaining to the dealer's discount,
which appear to vary depending upon the market demands. .
"We are, however, tempted to argue, as did the Peddlers, that this
Agreement or Contract might have been contrived as a device to evade
responsibilities imposed upon Cosmos or Mafinco under our labor laws as
well as under other national or municipal laws. Nevertheless, a close
reading thereof will show a flaw in this line of insistence, when we consider
that this type of Agreement or Contract has been substantially the same
since the beginning of this relationship. More than this, it has withstood the
test of time by pronouncements of the CIR in ULP Case No. 4399, 'Cosmos
Supervisors Association vs. Manila Cosmos Aerated Water Factory, Inc.' July
17, 1967; by judicial review of the Court of Appeals in CA-G.R. Nos. 19477-
R, 19478-R and 21397-R, 'Eustaquio Repajon, et al. vs. Manila Cosmos
Aerated Water Factory, Inc.', promulgated on March 18, 1958; and
impliedly by resolution of the Supreme Court in G.R. Nos. L-14072 to L-
14074 when the Court of Appeals cases were appealed to that Tribunal.
"But the more basic and indeed forceful ratiocination in favor of the validity
of the Agreement or Contract which covenants that the relationship
between the Peddlers and Cosmos or Mafinco is one of buyer and seller of
the Cosmos Products on the part of the Peddlers, and, therefore, one of an
independent contractorship, finds substantive support in our Civil Code
which provides: (here arts. 1370 and 1374 of the Civil Code regarding
interpretation of contracts are quoted).
"For its adjective interpretation, our Rules of Court specifically provides:
(Here parol evidence rule in sec. 7, Rule 130, Rules of Court is quoted).
"It must be restated at this point for purposes of emphasis that the validity
of the aforesaid Agreement or Contract has not been seriously assailed by
the parties. In fact, their rallying cause was the Agreement or Contract
itself. To strengthen these provisions of the Civil Code and the Rules of
Court, stabilized jurisprudence have held that it is elementary rule of
contract that the laws in force at the time the contract was made must
govern its interpretation and application; that the terms of the contract,
where unambiguous, are conclusive, in the absence of averment and proof
of mistake, the question being, not what intention existed in the minds of
the parties, but what intention is expressed by the language used; that
interpretation of an agreement does not include its modifications or the
creation of a new or different one; that Courts cannot make for the parties
better agreements than they themselves have been satisfied to make, or
rewrite contracts because they operate harshly or inequitably as to one of
the parties; and that there is no right to interpret an agreement as meaning
something different from what the parties intended as expressed by the
language they saw fit to employ.
xxx xxx xxx
"(1)The selection and engagement of the employees. Nothing in the
Agreement to Peddle Soft Drinks in the case of Cosmos and in the Peddling
Contract in the case of Mafinco, will reveal and we cannot logically infer
therefrom, that the Peddlers were engaged as employees of Cosmos or
Mafinco. The selection of the Peddlers who will buy and sell Cosmos
products is left entirely between the parties; it is not the sole prerogative of
either one of the parties. There must be meeting of the minds in order to
consummate the Agreement or Contract and no evidence of coercion or
imposition of the will of one over the other is evident or apparent from the
Peddlers' or Managements' interviews had by the members of your
Committee. This test, therefore, cannot be invoked by the Peddlers in their
attempt at presenting arguments to the effect that they are employees of
Cosmos or Mafinco. Upon the other hand, the Agreement or Contract itself
provides that the Peddlers can hire helpers and drivers under their direction
and responsibility, and to whom they shall be liable for payment of 'salaries,
wages, overtime pay, separation pay, bonus and other remuneration and
privileges.' As a matter of fact, drivers were employed by Mrs. Victoria Ariz
and M. Fong Kui, who are peddlers in their own right. This evidently shows
the discretion granted the peddlers to hire employees of their own.
"(2)The payment of wages. On the basis of the clear terms of the
Agreement or Contract, no mention is made of the wages of the Peddlers;
neither can an inference be made that any salary or wage is given to
Peddlers. In the interviews, however, with the Peddlers, they vehemently
take the position that the 'dealer's discount' which was given to them at the
rate of P11.50 in excess of 200 cases of Cosmos products they sell a day,
constitutes their 'wages'. The term 'wages' as defined in Section 2 of the
Minimum Wage Law (Rep. Act No. 602, as amended) is as follows:
'(g)'Wage' paid to any employee shall mean the remuneration or earnings,
however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece, commission basis, or
other method of calculating the same, which is payable by an employer to
an employee under a written or unwritten contract of employment for work
done or to be done or for services rendered or to be rendered, and includes
the fair and reasonable value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily furnished by the employer to
the employee. . ..'
Section 10 (k) of the same law provides as follows:
'(k)Notification of wage conditions. It shall be the duty of every employer
to notify his employees at the time of hiring of the wage conditions under
which they are employed, which shall include the following particulars:
'(1)The rate of wages payable;
'(2)The method of calculation of wages;
'(3)The periodicity of wage payment; the day, the hour and place of
payment; and
'(4)Any change with respect to any of the foregoing items.'
"To the Committee's mind, all these requirements have not been shown to
exist in the relationship between the Peddlers and the Cosmos or Mafinco.
If it were true that the Peddlers' 'dealer's discount' is in the nature of
wages, then they must be notified fully of the wage conditions. Moreover,
such 'wages' must be paid to them periodically at least once every two
weeks or twice a month. (See Par. (h) of Sec. 10 or Act No. 602, as
amended). The absence of such notification to the Peddlers and the lack of
periodicity of such payment in the manner and procedure contemplated in
the Minimum Wage Law destroy, quite evidently, their allegation that the
'dealer's discount' was their 'wage'. Take note that the 'dealer's discount'
was given only about a week after the end of the month, and from the
evidence submitted by Cosmos, it appears clearly that the 'dealer's
discount' varies from month to month. Thus, the earnings of Mr. Salvador
Abonales, who is a Peddler, from January to August, 1973, amounted to
P12,520.70, while that of Mr. Alberto S. Garcia, for the same period,
amounted to P13,633.42, and their earnings every month vary decisively.
This factor defeats factually the insistence of the Peddlers that they are
employees of Cosmos or Mafinco.
"Upon the other hand, the Peddlers' declarations reveal that the wages of
their helpers are taken from the overprice or what is ordinarily termed as
'commission' of ten centavos (P0.10) per case that they get a factor which
indicates that they are themselves employers of their helpers. In addition,
the Peddlers are reported as Employers of these helpers with the Social
Security System, and that they also purchase workmen's compensation
policies in their names as Employers of their own helpers for purposes of
workmen's compensation insurance of their liabilities, which are all in
accordance with the terms and conditions of the Agreement or Contract and
indicative of an attribute of one who is an independent merchant.
"(3)The power of dismissal. In the case of 'Rodrigo Repomanta and Rey
Moralde vs. Mafinco Trading Corp.,' NLRC Case No. LR-086, which served
as one of our bases for this study, the complainants therein appear to have
complained before the National Labor Relations Commission for being
allegedly illegally dismissed or that their services were terminated without
cause. A search of the alleged dismissal however shows that the identical
letters both dated December 7, 1972 addressed to the said complainants
were not actually what complainants pictured them to be, but the
termination of the peddling contract in accordance with paragraph 9 of said
Contract.
xxx xxx xxx
"Thus, Complainants' services were not terminated, only their Peddling
Contracts with Mafinco were The power of dismissal is not lodged with
either Mafinco or Cosmos, for based on the Agreement or Contract none
whatsoever exists. Certainly, to attribute a power of dismissal to Cosmos or
Mafinco where none exists is careless imprudence and a height of
inaccuracy. This power of dismissal by Cosmos or Mafinco is not
countenanced in the Agreement or Contract.
"There is, however, an allegation by the Peddlers that the hiring and firing
of the helpers ultimately rest on Cosmos or Mafinco. This allegation
nevertheless, is controverted by Cosmos and Mafinco. Nonetheless, we
checked the basic document the Agreement or Contract and we find that
the hiring and, impliedly firing, we believe, is a prerogative of the Peddlers
and not of Cosmos or Mafinco.
"(4)The power to control the employee's conduct From the interviews had
by your Committee with both the Peddlers and the representatives of
Cosmos and Mafinco, we gather that the following findings on the 'power of
control' are substantially correct:
"(a)That the delivery trucks assigned to the Peddlers are available to them
early in the morning and are free to get them, which they usually do
between 5:30 A.M. to 6:30 A.M. There was no compulsion on the part of
the Peddlers to report for work at that time, as in fact, they did not sign
any time record. The practice of getting the delivery trucks early in the
morning is more beneficial to the Peddlers than to Cosmos or Mafinco since
they can finish the peddling of Cosmos products much earlier and spend
the rest of the day at their own pleasure. The signing of the 'logbooks' is
both pertinent and necessary since the trucks used in the delivery of
Cosmos products are owned by Cosmos or Mafinco and are simply utilized
by Peddlers as a measure of convenience and for advertising purposes. But
peddlers are not precluded from getting trucks of their own should they so
desire.
"(b)That liaison officers (supervisors) are assigned by Cosmos or Mafinco in
definite areas, routes or zones, not so much of supervision over Peddlers,
since their areas, routes or zones were already agreed upon or pre-
arranged among them through the Cosmos Peddlers Association, Inc. of
which all Peddlers are members, as principally for market analysis since soft
drinks selling is a highly competitive business, and also to inquire or check
on sales, and the result of which, report is made direct to the Office of
Cosmos or Mafinco.
"(c)That the use of the uniform does not seem to be an imposition by
management of Cosmos or Mafinco upon the Peddlers, but a voluntary
arrangement among the Peddlers themselves. For, from the documents
submitted to this Committee, it appears that the Cosmos Peddlers
Association, in a meeting held on August 5, 1967, adopted a resolution to
'always wear their uniform while in the performance of their sales work,'
and in their meeting on January 25, 1969, it adopted another resolution
penalizing Peddlers who failed to wear their uniform in the amount of P2.00
per violation. Certainly, the resolutions of the Cosmos Peddlers Association,
an independent association of Peddlers and duly registered with the
Securities and Exchange Commission, and possessing an entirely distinct
existence, cannot be taken as impositions from Cosmos or Mafinco.
"(d)That the matter of turning in of sales of collection which, if found short,
is charged against the Peddler's cash bond, is to the mind of the
Committee, giving effect to the valid terms and conditions of the Agreement
or Contract, and also an ordinary business practice which necessarily
requires liquidation of the day's accounts. We do not see any evidence of
control on the part of Cosmos or Mafinco over the activities, including the
sales, of the Cosmos products by the Peddlers themselves who are,
apparently, left to their own choices of routes, areas or zones as pre-
arranged, with no definite, much less supervised, time schedule.
"(e)That in the matter of reprimand or discipline which the peddlers
attempt to project when they failed to report for work, your Committee
found no substantial evidence on this point. The evidence shows that the
peddlers are free to choose their time. Obviously, any absence that they
may incur means so much reduction from their earnings. Thus, if their
attention is incidentally called on this matter it is for the observance of their
agreements which is present in any contractual relations.
"As to the aspect of employer-employee relation, therefore, between
Cosmos or Mafinco and the Peddlers, your Committee does not have
sufficient basis to reasonably sustain the stand of the Peddlers that there is
such relationship.
"(c)Attributes of an independent contractor. As a counter-check, as it were,
to the issue of employer-employee relationship, your Committee has taken
the task of testing such relationship against the attributes of an
independent contractor which, from the interviews and documents
submitted by the parties, appear to exist on the part of the Peddlers. The
earlier case of Andoyo vs. Manila Railroad Co., G.R. No. 34722,
promulgated on March 28, 1932, furnishes us the definition of an
'independent contractor.' Our Supreme Court of prewar composition, ruled:
'An independent contractor is one who exercises independent employment
and contracts to do a piece of work according to his own methods and
without being subject to control of his employer except as to the result of
the work. A person who has no capital or money of his own to pay his
laborers or to comply with his obligations to them, who files no bond to
answer for the fulfillment of his contract with his employer, falls short of the
requisites or conditions necessary to classify him an independent
contractor.'
These requisites and conditions were reiterated in the post war cases of
Philippine Manufacturing Co., Inc. vs. Geronimo, G.R. No. L-6968,
promulgated on November 29, 1954, and Koppel (Phil.), Inc. vs. Darlucio,
et al., G.R. No. L-14903, promulgated on August 29, 1960. Analyzing the
definition of 'independent contractor', the following may be gathered from
the relationship between the Peddlers, on the one hand, and Cosmos or
Mafinco, on the other:
"(1)Peddlers contract to sell and buy Cosmos products from Cosmos or
Mafinco, the latter furnishing the delivery truck, but the former sell Cosmos
products according to their own methods, subject to the pre-arranged
routes, areas and zones, and go back to the Company compound to return
the delivery truck and to make accounting of the day's sales collection at
any time in the morning or in the afternoon. Essentially, control, if at all,
extends only as to observance of traffic regulations which is inherent in
ownership of the delivery truck by Cosmos or Mafinco and the end result
which is the liquidation of the sales collection. Control over the details of
the Peddlers' sales activities seems to be farfetched in this case.
"(2)Capital or money of the Peddlers to pay their own helpers is evidently
within their prerogative, although it appears that the wages of helpers are
uniform at P6.00 per trip. But can we safely say that the cash bond of
P1,500.00 by the Peddlers constitute their capital? For big-time
businessmen, this small amount may not be considered capital, but when it
is taken as a 'deposit on consignment' since the same answers for any
deficiencies that the Peddlers may incur during the day's sales collection,
then it can be taken to mean 'capital' within its signification that it allocates
to every day business dealing. The amount of capital, to us, is immaterial; it
is the purpose for which the same is deposited that is most significant.
"(3)The Peddlers are required under the Agreement to Peddle Soft Drinks
and Peddling Contract to put up not only the cash bond of P1,500.00, but
also a performance bond of P1,000.00 as embodied in said Agreement to
Peddle Soft Drinks as follows:
'10.To assure performance by the PEDDLER of his obligation to his
employees under the Social Security Act, the applicable labor laws, and for
damages suffered by third persons, PEDDLER shall furnish a performance
bond of P1,000.00 in favor of the MANUFACTURER from a surety Company
acceptable to the MANUFACTURER. And, in case Performance Bond within
30 days from the date of signing of this Contract, such failure shall be
sufficient ground for the MANUFACTURER to suspend the business
relationship with the Peddler until the Peddler complies with this provision.'
"Again, to the mind of your Committee, the amount of the Performance
Bond is not so relevant and material as to the purpose for which the same
is executed which is to assure performance of the Peddlers' obligations as
employer of his helpers. This is an attribute of an independent contractor to
which the Peddlers are bound under the Agreement or Contract.
"(4)Peddlers are doing business for themselves since they took out licenses
in the City of Manila, and have paid their corresponding professional or
occupation tax to the Bureau of Internal Revenue. This fact strengthens the
Committee findings that the peddlers are carrying on a business as
independent merchants."
The Secretary in his resolution of October 18, 1973 ignored the committee's
conclusion. He clarified that the NLRC should determine whether the two
complainants were illegally dismissed and that the jurisdictional issue
should not be taken up anymore.
The instant petition; the issue and the ruling thereon. Mafinco filed the
instant actions on November 14, 1973. It prayed for a declaration that the
Secretary of Labor and the NLRC had no jurisdiction to entertain the
complaints of Repomanta and Moralde: that the Secretary's decision should
be set aside, and that the NLRC and the Secretary be enjoined from further
proceeding in NLRC Case No. LR-086.
Parenthetically, it should be noted that under section 5 of Presidential
Decree No. 21 the Secretary's decision "is appealable" to the President of
the Philippines (Nation Multi Service Labor Union vs. Agcaoili, L-39741, May
30, 1975, 64 SCRA 274). However, under section 22 of the old NLRC
regulations, an appeal to the President should be made only "in national
interest cases".
On the other hand, judicial review of the decision of an administrative
agency or official exercising quasi-judicial functions is proper in cases of
lack of jurisdiction, error of law, grave abuse of discretion, fraud or
collusion or in case the administrative action or resolution is "corrupt,
arbitrary or capricious" (San Miguel Corporation vs. Secretary of Labor, L-
39195, May 16, 1975, 64 SCRA 56; Commissioner of Customs vs. Valencia,
100 Phil. 165;
After the parties had submitted their illuminating memoranda, Mafinco filed
a motion in this Court for the dismissal of the complaint in the defunct
NLRC on three grounds, to wit: (1) that the NLRC had no jurisdiction over
the case because Repomanta and Moralde had not sought reinstatement or
backwages; (2) that the employer's failure to secure written clearance from
the Secretary of Labor before dismissing an employee might constitute a
crime punishable under article 327 of the Labor Code and not mere
contempt, as contemplated in section 10 of Presidential Decree No. 21, and
(3) that the contempt provisions of that decree were abrogated by the
Labor Code.
Mafinco in support of its motion for dismissal cited Quisaba vs. Sta. Ines-
Melale Veneer & Plywood, Inc., L-38088, August 30, 1974, 58 SCRA 771,
where it was held that the regular court, not the NLRC, has jurisdiction over
an employee's action for damages against his employer's act of demoting
him.
Respondent Repomanta and Moralde opposed that motion to dismiss. They
pointed out that, inasmuch as their complaint is pending in the new NLRC,
this Court cannot dismiss it. They also observed that article 327 was
eliminated from the Labor Code which, as amended by Presidential Decrees
Nos. 570-A, 626 and 643, contains only 292 articles. Article 327 was
superseded by article 278 of the amended Code.
The truth is that Mafinco's motion merely adduced additional grounds to
support its stand that the Secretary of Labor had no jurisdiction over the
complaint of Repomanta and Moralde.
This case was not rendered moot by the Labor Code. Although the Code
abolished the old NLRC (Art. 289), it created a new NLRC (Art. 213) and
provided that cases pending before the old NLRC should be transferred to,
and processed by, the corresponding labor relations division or the new
NLRC and should be decided in accordance with Presidential Decree No. 21
and the rules and regulations adopted thereunder (Art. 290. See Sec. 5,
P.D. No. 626).
The issue is whether the dismissal of Repomanta and Moralde was within
the jurisdiction of the old NLRC. If, as held by the old NLRC, it had no
jurisdiction over their complaint because they were not employees of
Mafinco but independent contractors, then the Secretary of Labor had no
jurisdiction to remand the case to the NLRC for a hearing on the merits of
the complaint.
Hence, the crucial issue is whether Repomanta and Moralde were
employees of Mafinco under the peddling contract already quoted. Is the
contract an employment contract or a contract to sell or distribute Cosmos
products?
The question of whether an employer-employee relationship exists in a
certain situation has bedevilled the courts. Businessmen, with the aid of
lawyers, have tried to avoid the bringing about of an employer-employee
relationship in some of their enterprises because the juridical relation
spawns obligations connected with workmen's compensation, social
security, medicare, minimum wage, termination pay and unionism.
Presidential Decree No. 21 provides:
"SEC. 2.The Commission shall have original and exclusive jurisdiction over
the following:
"1)All matters involving employee-employer relations including all disputes
and grievances which may otherwise lead to strikes and lockouts under
Republic Act No. 875;
xxx xxx xxx
"SEC. 10.The President of the Philippines, on recommendation of the
Commission and the Secretary of Labor, may order the arrest and detention
of any person held in contempt by the Commission for non-compliance and
defiance of any subpoena, order or decision duly issued by the Commission
in accordance with this Decree and its implementing rules and regulations
and for any violation of the provisions of this Decree.
"SEC. 11.No employer may shut down his establishment or dismiss or
terminate the services of regular employees with at least one year of
service without the written clearance of the Secretary of Labor."
The Solicitor General, as counsel for the old NLRC and the Secretary of
Labor, argues that the question of whether Repomanta and Moralde are
independent contractors or employees is factual in character and cannot be
resolved by merely construing the peddling contracts; that other relevants
facts aliunde or dehors the said contracts should be taken into account, and
that the contracts were a part of an "intricate network of devices (of
Mafinco and Cosmos) developed and perfected through the years to
conceal the true nature of their relationship to their sales agents".
Repomanta and Moralde contend that their peddling contracts were
terminated because of their activities in organizing a union among the
peddlers. Annexed to their memorandum is a joint affidavit of sixty-three
sales agents of Cosmos products who described therein the nature of their
work, the organization of their union and the dismissal of Repomanta and
Moralde. Annexed to their answer is Resolution No. 921 of the Social
Security Commission dated November 16, 1972 in SSS Case No. 602
wherein it was held that peddlers and their helpers were employees of
Cosmos.
Like the Solicitor General, Repomanta and Moralde harp on the argument
that the peddling contracts were a scheme to camouflage an employer-
employee relationship and thus evade the coverage of labor laws.
The parties in their pleadings and memoranda injected conflicting factual
allegations to support their diametrically opposite contentions. From the
factual angle, the case has become highly controversial.
In a certiorari and prohibition case, like the instant case, only legal issues
affecting the jurisdiction of the tribunal, board or officer involved may be
resolved on the basis of undisputed facts. Sections 1, 2 and 3, Rule 65 of
the Rules of Court require that in the verified petition for certiorari,
mandamus and prohibition the petitioner should allege "facts with
certainty".
In this case the facts have become uncertain. Controversial evidentiary
facts have been alleged. What is certain and indubitable is that a notarized
peddling contract was executed.
This Court is not a trier of facts. It would be difficult, if not anomalous, to
decide the jurisdictional issue on the basis of the parties' contradictory
factual submissions. The record has become voluminous because of their
efforts to persuade this Court to accept their discordant factual statements.
Pro hac vice the issue of whether Repomanta and Moralde were employees
of Mafinco or were independent contractors should be resolved mainly in
the light of their peddling contracts. A different approach would lead this
Court astray into the field of factual controversy where its legal
pronouncements would not rest on solid grounds.
A restatement of the provisions of the peddling contract is necessary in
order to find out whether under that instrument Repomanta and Moralde
were independent contractors or mere employees of Mafinco.
Under the peddling contract, Mafinco would provide the peddlers with a
delivery truck to be used in the distribution of Cosmos soft drinks (Par. 1).
Should the peddler employ a driver and helpers, he would be responsible
for their compensation and social security contributions and he should
comply with applicable labor laws "in-relation to his employees" (Par. 2).
The peddler would be responsible for any damage to persons or property or
to the truck caused by his own acts or omissions or those of his driver and
helpers (Par. 3). Mafinco would bear the cost of gasoline and maintenance
of the truck (Par. 4). The peddler would secure at his own expense the
necessary licenses and permits and bear the expenses to be incurred in the
sale of Cosmos products (Par. 5).
The soft drinks would be charged to the peddler at P2.52 per case of 24
bottles, ex-warehouse. Should he purchase at least 250 cases a day, he
would be entitled to a peddler's discount of eleven pesos (Par. 6). The
peddler would post a cash bond in the sum of P1,500 to answer for his
obligations to Mafinco (Par. 7) and another cash bond of P1,000 to answer
for his obligations to his employees (Par. 11). He should liquidate his
accounts at the end of each day (Par. 8). The contract would be effective
up to May 31, 1973. Either party might terminate it upon five days' prior
notice to the other (Par. 9).
We hold that under their peddling contracts Repomanta and Moralde were
not employees of Mafinco but were independent contractors as found by
the NLRC and its factfinder and by the committee appointed by the
Secretary of Labor to look into the status of Cosmos and Mafinco peddlers.
They were distributors of Cosmos soft drinks with their own capital and
employees. Ordinarily, an employee or a mere peddler does not execute a
formal contract of employment. He is simply hired and he works under the
direction and control of the employer.
Repomanta and Moralde voluntarily executed with Mafinco formal peddling
contracts which indicate the manner in which they would sell Cosmos soft
drinks. That circumstance signifies that they were acting as independent
businessmen. They were free to sign or not to sign that contract. If they did
not want to sell Cosmos products under the conditions defined in that
contract, they were free to reject it.
But having signed it, they were bound by its stipulations and the
consequences thereof under existing labor laws. One such stipulation is the
right of the parties to terminate the contract upon five days' prior notice
(Par. 9). Whether the termination in this case was an unwarranted dismissal
of an employee, as contended by Repomanta and Moralde, is a point that
cannot be resolved without submission of evidence. Using the contract itself
as the sole criterion, the termination should perforce be characterized as
simply the exercise of a right freely stipulated upon by the parties.
"In determining the existence of employer-employee relationship, the
following elements are generally considered, namely: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employees' conduct although
the latter is the most important element" (Viaa vs. Al-Lagadan and Piga,
99 Phil. 408, 411, citing 35 Am. Jur. 445).
On the other hand, an independent contractor is "one who exercises
independent employment and contracts to do a piece of work according to
his own methods and without being subject to control of his employer
except as to the result of the work" (Mansal vs. P. P. Gocheco Lumber Co.,
supra).
"Among the factors to be considered are whether the contractor is carrying
on an independent business; whether the work is part of the employer's
general business; the nature and extent of the work; the skill required; the
term and duration of the relationship; the right to assign the performance
of the work to another; the power to terminate the relationship; the
existence of a contract for the performance of a specified piece of work; the
control and supervision of the work; the employer's powers and duties with
respect to the hiring, firing, and payment of the contractor's servants; the
control of the premises; the duty to supply the premises, tools, appliances,
material and labor; and the mode, manner, and terms of payment." (56
C.J.S. 46).
Those tests to determine the existence of an employer-employee
relationship or whether the person doing a particular work for another is an
independent contractor cannot be satisfactorily applied in the instant case.
It should be obvious by now that the instant case is a penumbral, sui
generis case lying on the shadowy borderline that separates an employee
from an independent contractor.
In determining whether the relationship is that of employer and employee
or whether one is an independent contractor, "each case must be
determined on its own facts and all the features of the relationship are to
be considered" (56 C.J.S. 45). We are convinced that on the basis of the
peddling contract, no employer-employee relationship was created. Hence,
the old NLRC had no jurisdiction over the termination of the peddling
contract.
However, this ruling is without prejudice to the right of Repomanta and
Moralde and the other peddlers to sue in the proper Court of First Instance
and to ask for a reformation of the instrument evidencing the contract or
for its annulment or to secure a declaration that, disregarding the peddling
contract, the actual juridical relationship between them and Mafinco or
Cosmos is that of employer and employee. In that action a full-dress trial
may be held and the parties may introduce the evidence necessary to
sustain their respective contentions.
Paraphrasing the dictum in the Quisaba case, supra, if Mafinco and Cosmos
had acted oppressively towards their peddlers, as contemplated in article
1701 of the Civil Code, then they should file the proper action for damages
in the regular courts. Where there is a right, there is a remedy (Ubi jus, ibi
remedium).
WHEREFORE, the decision, order and resolution of the Secretary of Labor in
NLRC Case No. LR-086 dated April 16, July 16 and October 18, 1973,
respectively, are set aside and the order of the NLRC dated February 2,
1973, dismissing the case for lack of jurisdiction, is affirmed. No costs. So
ordered.
Barredo, (Acting Chairman), Antonio, Concepcion, Jr. and Martin, JJ.,
concur.
Fernando, J., is on leave.
Martin, J., was designated to sit in the Second Division.
Footnotes
1.For comparison. the provisions of the peddling contract involved in
Rapajon vs. Fong Kui and Figueras vs. Asierto, CA-G.R. No. 19477-8, March
18, 1958 are quoted below:
"1.That in consideration of the competence of the PEDDLER and his ability
to promote mutual benefits for parties hereto, the MANUFACTURER shall
provide the PEDDLER with a delivery truck with which the latter shall peddle
the soft drinks of the former, under the terms and conditions of this
agreement;
"2.That the MANUFACTURER shall furnish the gasoline and oil to run the
said truck in business trips, bear the cost of maintenance and repairs of
said truck arising from ordinary wear and tear, but damages to said vehicle
caused by the negligence and carelessness of the PEDDLER or his driver
shall be for the latter's own responsibility and account;
"3.That the PEDDLER shall provide himself with, and pay on his own
account, all the necessary licenses and permits required by law and
ordinances, as well as bear any and all such expenses as may be incurred
by him in connection with the business of selling, such contributions tips,
etc.
"4.That the PEDDLER shall assume the responsibility of driving the truck, or
should he employ a driver and helpers, their compensation (salaries,
wages, bonus or others) shall be paid by him at his own expense and not
chargeable to the MANUFACTURER, and the former shall be liable to the
latter for any injury or damage to the MANUFACTURER, caused by any act
or acts of the driver or helpers so employed;
"5.That any agreement or contract of employment entered into by the
PEDDLER with others shall not bind in any manner the MANUFACTURER
unless confirmed in writing by the latter;
"6.That the PEDDLER shall maintain a cash deposit with the
MANUFACTURER in the sum of not less than Two HUNDRED PESOS
(P200.00) against which the MANUFACTURER may issue soft drinks to the
PEDDLER at the price of P1.55 ex-warehouse less four percent (4%)
discount per case of 24 bottles, for resale by the PEDDLER;
"7.That the PEDDLER shall clear every day his account with the
MANUFACTURER, and failure to do so shall subject the cash deposit, or so
much thereof as may be necessary, to such set offs and payments as shall
be proper against the account in question;
8.That this agreement shall remain in force for a period of ONE (1) year
from the date hereof."
The Court of Appeals, through Justice Makalintal and with the concurrence
of Justice Fred Ruiz Castro and Dionisio de Leon, held that the truck or
delivery helpers of peddlers, who acted as sales agents of Manila Cosmos
Aerated Water Factory, were not employees of Cosmos and could not claim
wage differentials from it. The helpers were employees of the peddlers.
This court in its resolution of July 14, 1958 in L-14072, Rapajon vs. Fong
Kui, denied the petition for the review of the said ruling. Villegas vs. Auditor
General, L-21352, November 29, 1966, 18 SCRA 877, 891).
CEBU METAL CORPORATION, Petitioner, versus GREGORIO ROBERT
SALILING, ELIAS BOLIDO, MANUEL ALQUIZA, and BENJIE AMPARADO,
Respondents.2006 Sep 51st DivisionG.R. No. 154463

DECISION

The Case

This is a petition for review on certiorari under Rule 45 of the Rules of Court
seeking the reversal of the Decision[1] dated 18 February 2002, and the
Resolution[2] dated 27 June 2002, rendered by the Court of Appeals in CA-
G.R. SP No. 66480, which annulled and set aside the decision[3] dated 9
October 2000, and resolution[4] dated 2 July 2001, of the National Labor
Relations Commission (NLRC) in NLRC Case No.V-000840-99. In its
decision, the NLRC reversed and set aside the decision[5] dated 27 May
1999 of Labor Arbiter Jesus N. Rodriguez, Jr. in favor of complainant
employees, herein respondents Gregorio Saliling, Elias Bolido, Manuel
Alquiza and Benjie Amparado, RAB Case No. 06-01-10019-97.

The Facts

Parties herein are somewhat at variance with respect to the basic facts of
the case at bar.

The facts of the case as recounted[6] by petitioner Cebu Metal Corporation

are as follows:
Respondent (Cebu Metal Corporation) is a corporation engage (sic) in
buying and selling of scrap iron x x x. In the Bacolod Branch, it has three
regular (3) employees holding such positions as Officer-in-Charge, a scaler
and a yardman, x x x whose salaries are paid directly by its main office in
Cebu while others are undertaking pakiao work in the unloading of scrap
iron for stockpiling.
Among those workers who presented for work in the unloading of scrap
iron in the area are the unemployed persons or trisicad drivers standing by
in the vicinity some of whom are the herein complainants x x x Gregorio
Robert Saliling, Elias Bolido, Manuel Alquiza, Benjie Amparado and non-
complainants Arnel Allera, Eliseo Torralba or any other persons who wanted
to augment their income aside from their regular jobs. Robert Gregorio
Saliling started working in 1996, Elias Bolido on (sic) October 1995 while
Manuel Alquiza and Benjie Amparado, on (sic) February 1996.
As compensation for their services, these workers including the herein
complainants are paid at the rate of P15.00 per ton for which each person
can unload at least two (2) to three (3) tons per hour or can earn at least
P240.00 to P360.00 in eight (8) hours if work is only available which
payment necessarily includes cost of living allowance (COLA) and 13th-
month pay.
xxxx
Petitioner company further elaborated[7] on the nature of its business and
the circumstances surrounding the employment of respondent
complainants, to wit:
The Bacolod buying station is mainly a stockyard where scrap metal
delivered by its suppliers are stockpiled.
The supply of scrap metal is not steady as it depends upon many factors,
such as availability of supplies, price, competition and demand among
others. There are therefore (sic) instances when in a single week , one or
two trucks of scrap metal are delivered while there are weeks when not a
single truck of scrap metal are delivered although there may also be weeks
when quite a number of trucks are delivered to the stockyard x x x. The
arrivals of these trucks and the deliveries of scrap metal are not regular and
the schedules of deliveries x x x to the stockyard x x x are not known
before hand by the respondent (petitioner company).
x x x [t]he trucks used in the delivery of scrap metal are owned and/or
rented by the different suppliers of scrap metal. These trucks have their
own driver and truck boys employed by these different suppliers.
Sometimes, these trucks do not have any truck boys, and in these
instances, the respondent hires the services of people for the purpose of
unloading the scrap metal from these trucks.
It is for this reason that the unloaders hired by the respondent to unload
the scrap metal from these trucks are basically seasonal workers. They are
hired only whenever there are trucks of suppliers of scrap metal that deliver
scrap metal to the yard of the respondent and these trucks happen not to
have any accompanying truck boys. Whoever are available and whoever are
willing to help unload x x x on a particular occasion are hired to unload x x
x.
Usually, there is a leader for a particular group who is tasked to unload the
scrap metal from a particular truck. It is this leader who distributes the
individual take of each member of the particular group unloading the scrap
metal from a particular truck.
In contrast, respondent complainants, Gregorio Saliling, Elias Bolido,
Manuel Alquiza and Benjie Amparado, in their position paper[8] submitted
to the Labor Arbiter, narrate:
1. That complainants Gregorio Saliling was employed by defendant
Corporation x x x in 1988, complainant Elias Bolido was hired in 1992 and
complainant Benjie Amparado was hired by respondent in 1994; x x x.
2. The aforesaid complainants, from the time they were employed by
respondent, they received their salary on (sic) the following rate:
GREGORIO ROBERT SALILING ------- P5.00/hour in 1988
5.00/hour in 1989
6.00/hour in 1990
7.00/hour in 1991
 7.00/hour in 1992 5. When these complainants demanded from respondent for the
increase of their salary, respondent through Marlon got irritated and
7.00/hour in 1993 instructed complainants to stop working, thus, complainants, effective
December 1996 were precluded from entering respondent loading and
7.00/hour in 1994 unloading compound x x x.

7.50/hour in 1995 On 10 January 1997, respondent complainants filed a Complaint[9] before

the Regional Arbitration Branch No VI, Bacolod City for underpayment of
wages and non-payment of the following benefits: 1) 13th month pay; 2)
8.75/hour in 1996
holiday pay; and 3) service incentive leave pay.
ELIAS BOLIDO ------- P100.00/day in 1992
On 6 March 1998, respondent complainants manifested[10] that they were
including in their complaint against petitioner company, the claim for illegal
7.00/hour in 1993 dismissal. Such belated filing was alleged to have been due to the fact that
they were only dismissed after the filing of their complaint.
7.00/hour in 1994
On 27 May 1999, the Labor Arbiter rendered a decision[11] the dispositive
7.50/hour in 1995 of which reads:

8.75/hour in 1996

BENJIE AMPARADO ------- P7.00/hour in 1994 CONFORMABLY TO THE FOREGOING, respondent Cebu Metal Corporation,
through its manager, MARLON RADEN, is hereby ordered to REINSTATE
7.50/hour in 1995 complainants to their former positions with backwages limited to one (1)
year and 13th month pay, ERA and COLA as follows:
8.75/hour in 1996
NAME OF COMPLAINANTS:
3. That the aforesaid complainants never received any other benefits
from the respondent, except the amount indicated above; (sic) They 1. Gregorio Robert Saliling
received the sum of P10.93 per hour in case of overtime work, but they
never received additional benefits in case, (sic) they worked on Saturdays, A) Backwages ----- P42,238.30
Sundays, and Holidays;
B) 13th Month Pay ----- 7,912.34
Complainants likewise never received 13th month pay, holiday pay,
incentive leave pay, bonuses and other labor benefits; C) ERA ----- 1,139.83

4. Complainants were required to work from 8:00 A.M. to 12:00 noon D) COLA ----- 12,961.91
and from 1:00 P.M. to 5:00 P.M. or for eight hours a day; seven days a
week and thirty days a month;
TOTAL ----- P64,252.38

2. Elias Bolido
 A) Backwages ----- P42,238.30 Attorneys fees of five percent (5%) of the total judgment award of the
amount of Twelve Thousand Eight Hundred fifty Pesos and Forty-Eight
B) 13th Month Pay ----- 7,912.34 Centavos (P12,850.48) is also awarded.

C) ERA ----- 1,139.83 In ordering the reinstatement of respondent complainants, the Labor
Arbiter found them to have been illegally dismissed from their employment
D) COLA ----- 12,961.91 with petitioner company. The decision explained that:

TOTAL ----- P64,252.38 Regarding the second issue which is illegal dismissal, we find the same
meritorious. Under Article 280 of the Labor Code, complainants are regular
employees since they are engaged to perform activities which are
3. Manuel Alquiza
necessary and desirable in the usual business or trade of the employer,
(sic) x x x. Complainants job of loading, unloading and stockpiling scrap
A) Backwages ----- P42,238.30 iron is necessary and part of the business of respondent. Since
complainants were dismissed without cause and due process of law, they
B) 13th Month Pay ----- 7,912.34 are entitled to reinstatement with backwages limited to one (1) year.

C) ERA ----- 1,139.83 Aggrieved, petitioner company appealed the foregoing decision to the
NLRC.
D) COLA ----- 12,961.91
In a Decision[12] promulgated on 9 October 2000, the Fourth Division of
TOTAL ----- P64,252.38 the NLRC reversed and set aside the ruling of the Labor Arbiter. Instead,
the Commission held that respondent complainants were not regular
4. Benjie Amparado employees of petitioner company, thus, they could not have been illegally
dismissed. The order of reversal was based on the Commissions finding
A) Backwages ----- P42,238.30 that the petty cash vouchers[13] submitted by petitioner company
confirmed the fact that unloaders were paid on pakiao or task basis at
P15.00 per metric ton. The Commission further rationalized that with the
B) 13th Month Pay ----- 7,912.34
irregular nature of the work involved, the stoppage and resumption of
which depended solely on the availability or supply of scrap metal, it
C) ERA ----- 1,139.83
necessarily follows that after the job of unloading was completed and
unloaders were paid the contract price, the latters working relationship
D) COLA ----- 12,961.91 with petitioner company legally ended. They were then free to offer their
services to others.
TOTAL ----- P64,252.38
As an aside, the Commission observed that it was erroneous for the Labor
GRAND TOTAL -------- P257,009.52 Arbiter to rule on the question of whether or not respondent complainants
were illegally dismissed since the complaint filed on 10 January 1997 failed
In case reinstatement is no longer feasible, complainants are to be given to include such matter. To be sure, the complaint merely imputed the
separation pay equivalent to fifteen (15) days to be given for every year of following causes of action: 1) underpayment of wages; and 2) non-payment
service. of a) 13th month pay; b) holiday pay; and c) service incentive leave pay.
Nowhere was the matter of illegal dismissal written on the same. The issue
was formally brought up only on 6 March 1998, via a Manifestation, long
after the filing of the parties respective position papers.
In view of the above, the Commission declared that respondent
complainants invalidly raised the issue of illegal dismissal in the position
paper they filed before the Labor Arbiter.
Dissatisfied by the above, it was the turn of respondent complainants to
challenge the same but this time before the Court of Appeals.
In a Decision dated 18 February 2002, the Court of Appeals annulled and
set aside the assailed decision of the NLRC. Said Decision was grounded
exclusively on the argument that the Commission committed grave abuse of
discretion in reversing and setting aside the Decision of the Labor Arbiter
since petitioner company did not make an issue out of the Labor Arbiters
action in ruling on a cause of action, i.e., illegal dismissal, not specifically
stated in the complaint. Stated differently, the NLRC gravely abused its
discretion in ruling on an issue that was allegedly not raised on appeal
before it.
The Court of Appeals decision ended in this wise:
WHEREFORE, foregoing premises considered, the PETITION HAVING
MERIT is hereby GIVEN DUE COURSE. RESULTANTLY, the challenged
decision of Public Respondent National Labor Relations Commission is
hereby ANNULLED AND SET ASIDE AND THE JUDGMENT OF THE LABOR
ARBITER IN RAB-CASE No. 06-01-10019-97 REINSTATED. No costs.
SO ORDERED.
The Issues
Its Motion for Reconsideration having been denied[14], petitioner company
now comes to this Court imputing the following errors on the Court of
Appeals:
I.
THE COURT OF APPEALS ERRED IN HOLDING THAT THE NATIONAL LABOR
RELATIONS COMMISSION FOURTH DIVISION, CEBU CITY HAD NO
AUTHORITY TO DISMISS PRIVATE RESPONDENTS CLAIMS FOR ILLEGAL
DISMISSAL AND OTHER MONEY CLAIMS;
II.
THE COURT OF APPEALS ERRED IN HOLDING THAT THE NATIONAL LABOR
RELATIONS COMMISSION FOURTH DIVISION, CEBU CITY HAD NO
AUTHORITY TO REVERSE THE LABOR ARBITERS DECISION; and
III.
THE COURT OF APPEALS ERRED IN GRANTING THE PETITION FOR
CERTIORARI IN CA G.R. SP. NO. 66480 AND IN ANNULING (sic) THE
DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION.
In essence, the issue for resolution in the case at bar is whether or not the
Court of Appeals committed reversible error in ruling that the NLRC had no
authority to adjudicate on an issue not properly raised in petitioner
companys Memorandum on Appeal.
Petitioner company posits that contrary to the argument of the appellate
court, the main or primary reason for the reversal of the Labor Arbiters
decision was the finding that respondent complainants could not be
regarded, based on the facts of the case and the evidence presented, as
regular employees of petitioner company.
Conversely, respondent complainants allege that an appellate court has no
power to resolve an unassigned error that does not affect the courts
jurisdiction or is an error that is neither plain nor clerical. Likewise, they
contend that there is nothing to show that petitioner company made an
issue of the Labor Arbiters action in ruling on a cause of action not
specifically stated in the complaint.
The Courts Ruling
We find merit in the petition.
It was plain error for the Court of Appeals to annul and set aside the
decision of the NLRC on the lone reason that the latter dismissed
Petitioners appeal on the basis of an issue not raised by Private
Respondent in its appeal x x x.[15] A painstaking review of the decision of
the NLRC will readily reveal that the Commissions finding that respondent
complainants were not regular employees was the raison d'tre for the
subsequent turnaround of the state of affairs.
What the NLRC made use of to reverse the Labor Arbiters decision was
precisely the conclusion of the latter that respondent complainants were
regular employees of petitioner company. According to the Commission,
such conclusion was predicated merely on the consideration that
respondent complainants were performing activities necessary and
desirable to the business or trade of their employer. Based on the facts of
the case and the evidence presented by the parties to the case at bar,
however, the NLRC arrived at a divergent conclusion, which we fully agree
in. We quote with approval its disquisition:
It is interesting to note that the Labor Arbiter had given credence and
probative value to the Petty Cash Vouchers submitted by the respondents.
Thus he said:
The petty cash vouchers (Annexes 1 to1-A-62, respondents position accompanied by its own unloader. And whenever required, respondent
paper) show that complainants are not paid on hourly or daily basis as they
would like this office to believe but on pakiao or task basis at P15.00 per
metric ton. There is no basis then for complainants to claim that they are
underpaid since there is no minimum wage in this type of work.
Complainants earnings depend upon their own diligence and speed in
unloading and stockpiling scrap iron. More importantly, it depends upon the
availability of scrap iron to be unloaded and stockpiled.
The above findings validate respondents position as to the nature of
complainants work. Their services are needed only when scrap metals are
delivered which occurs only one or twice a week or sometimes no delivery
at all in a given week. The irregular nature of work, stoppage of work and
then work again depending on the supply of scrap metal has not been
denied by complainants. On the contrary they even admitted the same in
their Reply to respondents Appeal. x x x. Indeed, it would be unjust to
require respondent to maintain complainants in the payroll even if there is
no more work to be done. To do so would make complainants privileged
retainers who collect payment from their employer for work not done. This
is extremely unfair and amount to cuddling of labor at the expense of
management.[16]
It should be remembered that The Philippine Constitution, while inexorably
committed towards the protection of the working class from exploitation
and unfair treatment, nevertheless mandates the policy of social justice so
as to strike a balance between an avowed predilection for labor, on the one
hand, and the maintenance of the legal rights of capital, the proverbial hen
that lays the golden egg, on the other. Indeed, we should not be unmindful
of the legal norm that justice is in every case for the deserving, to be
dispensed with in the light of established facts, the applicable law, and
existing jurisprudence.[17]
Under the circumstances abovestated:
x x x there can be no illegal dismissal to speak of. Besides, complainants
cannot claim regularity in the hiring every time a truck comes loaded with
scrap metal. This is confirmed in the Petty cash Vouchers which are in the
names of different leaders who apportion the amount earned among his
members.[18]
And, quite telling is the fact that not every truck delivery of scrap metal
requires the services of respondent complainants when a particular truck is
complainants were not always the ones contracted to undertake the
unloading of the trucks since the work was offered to whomever were
available at a given time.
Finally, the judgment of the Commission that the Labor Arbiter acted
incorrectly in ruling on a cause of action, i.e., illegal dismissal, not
specifically stated in the complaint, did not constitute grave abuse of
discretion on its part.
It is well settled that an act of a court or tribunal may only be considered to
have been done in grave abuse of discretion when the same was performed
in a capricious or whimsical exercise of judgment which is equivalent to lack
of jurisdiction.[19] The abuse of discretion must be so patent and gross as
to amount to an evasion of positive duty or to a virtual refusal to perform a
duty enjoined or to a ct at all in contemplation of law, as where the power
is exercised in an arbitrary power and despotic manner by reason of
passion or personal hostility.[20]
In the case at bar, from the preceding definition, it is quite apparent that
no grave abuse of discretion can be attributed to the NLRC. Its decision
simply expressed an observation, to wit:
Moreover, We note that in the complaint filed last January 10, 1997, the
issue of illegal dismissal was not raised as a cause of action although it was
later discussed in their position paper filed on January 12, 1998. x x x.
[ mphasis supplied.]

The use of the word moreover clearly expresses NLRCs position in

treating the matter of the non-inclusion of the issue of illegal dismissal in
the complaint merely as an add-on, adjunct or a supplement to its finding
that respondent complainants were not regular employees of petitioner
company.

At any rate, the Court is clothed with authority to review matters, even if
they are not assigned as errors in their appeal, if it finds that their
consideration is necessary in arriving at a just decision of the case.[21]

WHEREFORE, in view of the foregoing, the instant petition is GRANTED.

The Decision dated 18 February 2002, and the Resolution dated 27 June
2002, both rendered by the Court of Appeals in CA-G.R. SP No. 66480, are
hereby REVERSED and SET ASIDE. Accordingly, the Decision of the NLRC
dated 9 October 2000 is REINSTATED. Costs against respondent
complainants.
ANGELINA FRANCISCO, Petitioner, versus NATIONAL LABOR RELATIONS
SO ORDERED. COMMISSION, KASEI CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO
ACEDO, DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and RAMON
ESCUETA, Respondents.2006 Aug 311st DivisionG.R. No. 170087

DECISION

This petition for review on certiorari under Rule 45 of the Rules of Court
seeks to annul and set aside the Decision and Resolution of the Court of
Appeals dated October 29, 2004[1] and October 7, 2005,[2] respectively, in
CA-G.R. SP No. 78515 dismissing the complaint for constructive dismissal
filed by herein petitioner Angelina Francisco. The appellate court reversed
and set aside the Decision of the National Labor Relations Commission
(NLRC) dated April 15, 2003,[3] in NLRC NCR CA No. 032766-02 which
affirmed with modification the decision of the Labor Arbiter dated July 31,
2002,[4] in NLRC-NCR Case No. 30-10-0-489-01, finding that private
respondents were liable for constructive dismissal.

In 1995, petitioner was hired by Kasei Corporation during its incorporation

stage. She was designated as Accountant and Corporate Secretary and
was assigned to handle all the accounting needs of the company. She was
also designated as Liaison Officer to the City of Makati to secure business
permits, construction permits and other licenses for the initial operation of
the company.[5]
Although she was designated as Corporate Secretary, she was not
entrusted with the corporate documents; neither did she attend any board
meeting nor required to do so. She never prepared any legal document
and never represented the company as its Corporate Secretary. However,
on some occasions, she was prevailed upon to sign documentation for the
company.[6]
In 1996, petitioner was designated Acting Manager. The corporation also
hired Gerry Nino as accountant in lieu of petitioner. As Acting Manager,
petitioner was assigned to handle recruitment of all employees and perform
management administration functions; represent the company in all
dealings with government agencies, especially with the Bureau of Internal
Revenue (BIR), Social Security System (SSS) and in the city government of
Makati; and to administer all other matters pertaining to the operation of
Kasei Restaurant which is owned and operated by Kasei Corporation.[7]
For five years, petitioner performed the duties of Acting Manager. As of
December 31, 2000 her salary was P27,500.00 plus P3,000.00 housing
allowance and a 10% share in the profit of Kasei Corporation.[8]
In January 2001, petitioner was replaced by Liza R. Fuentes as Manager.
Petitioner alleged that she was required to sign a prepared resolution for
her replacement but she was assured that she would still be connected with
Kasei Corporation. Timoteo Acedo, the designated Treasurer, convened a
meeting of all employees of Kasei Corporation and announced that nothing
had changed and that petitioner was still connected with Kasei Corporation
as Technical Assistant to Seiji Kamura and in charge of all BIR matters.[9]
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month
beginning January up to September 2001 for a total reduction of
P22,500.00 as of September 2001. Petitioner was not paid her mid-year
bonus allegedly because the company was not earning well. On October
2001, petitioner did not receive her salary from the company. She made
repeated follow-ups with the company cashier but she was advised that the
company was not earning well.[10]
On October 15, 2001, petitioner asked for her salary from Acedo and the
rest of the officers but she was informed that she is no longer connected
with the company.[11]
Since she was no longer paid her salary, petitioner did not report for work
and filed an action for constructive dismissal before the labor arbiter.
Private respondents averred that petitioner is not an employee of Kasei
Corporation. They alleged that petitioner was hired in 1995 as one of its
technical consultants on accounting matters and act concurrently as
Corporate Secretary. As technical consultant, petitioner performed her
work at her own discretion without control and supervision of Kasei
Corporation. Petitioner had no daily time record and she came to the office
any time she wanted. The company never interfered with her work except
that from time to time, the management would ask her opinion on matters
relating to her profession. Petitioner did not go through the usual
procedure of selection of employees, but her services were engaged
through a Board Resolution designating her as technical consultant. The
money received by petitioner from the corporation was her professional fee
subject to the 10% expanded withholding tax on professionals, and that
she was not one of those reported to the BIR or SSS as one of the
companys employees.[12]
Petitioners designation as technical consultant depended solely upon the
will of management. As such, her consultancy may be terminated any time
considering that her services were only temporary in nature and dependent
on the needs of the corporation.
To prove that petitioner was not an employee of the corporation, private
respondents submitted a list of employees for the years 1999 and 2000
duly received by the BIR showing that petitioner was not among the
employees reported to the BIR, as well as a list of payees subject to
expanded withholding tax which included petitioner. SSS records were also
submitted showing that petitioners latest employer was Seiji Corporation.
[13]
The Labor Arbiter found that petitioner was illegally dismissed, thus:
WHEREFORE, premises considered, judgment is hereby rendered as
follows:
1. finding complainant an employee of respondent corporation;
2. declaring complainants dismissal as illegal;
3. ordering respondents to reinstate complainant to her former position
without loss of seniority rights and jointly and severally pay complainant her
money claims in accordance with the following computation:
a. Backwages 10/2001 07/2002 275,000.00
1) Respondents are directed to pay complainant separation pay
computed at one month per year of service in addition to full backwages
from October 2001 to July 31, 2002;
2) The awards representing moral and exemplary damages and 10%
share in profit in the respective accounts of P100,000.00 and P361,175.00
are deleted;

(27,500 x 10 mos.)
b. Salary Differentials (01/2001 09/2001)
c. Housing Allowance (01/2001 07/2002)
3) The award of 10% attorneys fees shall be based on salary
differential award only;
22,500.00
4) The awards representing salary differentials, housing allowance, mid
57,000.00 year bonus and 13th month pay are AFFIRMED.

d. Midyear Bonus 2001 27,500.00 SO ORDERED.[15]

e. 13th Month Pay 27,500.00 On appeal, the Court of Appeals reversed the NLRC decision, thus:

f. 10% share in the profits of Kasei WHEREFORE, the instant petition is hereby GRANTED. The decision of the
National Labor Relations Commissions dated April 15, 2003 is hereby
REVERSED and SET ASIDE and a new one is hereby rendered dismissing
Corp. from 1996-2001 361,175.00
the complaint filed by private respondent against Kasei Corporation, et al.
for constructive dismissal.
g. Moral and exemplary damages 100,000.00
SO ORDERED.[16]
h. 10% Attorneys fees 87,076.50
The appellate court denied petitioners motion for reconsideration, hence,
P957,742.50 the present recourse.

If reinstatement is no longer feasible, respondents are ordered to pay
complainant separation pay with additional backwages that would accrue
up to actual payment of separation pay.
SO ORDERED.[14]
On April 15, 2003, the NLRC affirmed with modification the Decision of the
Labor Arbiter, the dispositive portion of which reads:
PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED
as follows:
The core issues to be resolved in this case are (1) whether there was an
employer-employee relationship between petitioner and private respondent
Kasei Corporation; and if in the affirmative, (2) whether petitioner was
illegally dismissed.
Considering the conflicting findings by the Labor Arbiter and the National
Labor Relations Commission on one hand, and the Court of Appeals on the
other, there is a need to reexamine the records to determine which of the
propositions espoused by the contending parties is supported by substantial
evidence.[17]
We held in Sevilla v. Court of Appeals[18] that in this jurisdiction, there has
been no uniform test to determine the existence of an employer-employee
relation. Generally, courts have relied on the so-called right of control test
where the person for whom the services are performed reserves a right to
control not only the end to be achieved but also the means to be used in
reaching such end. In addition to the standard of right-of-control, the
existing economic conditions prevailing between the parties, like the
inclusion of the employee in the payrolls, can help in determining the
existence of an employer-employee relationship.
However, in certain cases the control test is not sufficient to give a
complete picture of the relationship between the parties, owing to the
complexity of such a relationship where several positions have been held by
the worker. There are instances when, aside from the employers power to
control the employee with respect to the means and methods by which the
work is to be accomplished, economic realities of the employment relations
help provide a comprehensive analysis of the true classification of the
individual, whether as employee, independent contractor, corporate officer
or some other capacity.
The better approach would therefore be to adopt a two-tiered test
involving: (1) the putative employers power to control the employee with
respect to the means and methods by which the work is to be
accomplished; and (2) the underlying economic realities of the activity or
relationship.
This two-tiered test would provide us with a framework of analysis, which
would take into consideration the totality of circumstances surrounding the
true nature of the relationship between the parties. This is especially
appropriate in this case where there is no written agreement or terms of
reference to base the relationship on; and due to the complexity of the
relationship based on the various positions and responsibilities given to the
worker over the period of the latters employment.
The control test initially found application in the case of Viaa v. Al-Lagadan
and Piga,[19] and lately in Leonardo v. Court of Appeals,[20] where we
held that there is an employer-employee relationship when the person for
whom the services are performed reserves the right to control not only the
end achieved but also the manner and means used to achieve that end.
In Sevilla v. Court of Appeals,[21] we observed the need to consider the
existing economic conditions prevailing between the parties, in addition to
the standard of right-of-control like the inclusion of the employee in the
payrolls, to give a clearer picture in determining the existence of an
employer-employee relationship based on an analysis of the totality of
economic circumstances of the worker.
Thus, the determination of the relationship between employer and
employee depends upon the circumstances of the whole economic activity,
[22] such as: (1) the extent to which the services performed are an integral
part of the employers business; (2) the extent of the workers investment
in equipment and facilities; (3) the nature and degree of control exercised
by the employer; (4) the workers opportunity for profit and loss; (5) the
amount of initiative, skill, judgment or foresight required for the success of
the claimed independent enterprise; (6) the permanency and duration of
the relationship between the worker and the employer; and (7) the degree
of dependency of the worker upon the employer for his continued
employment in that line of business.[23]
The proper standard of economic dependence is whether the worker is
dependent on the alleged employer for his continued employment in that
line of business.[24] In the United States, the touchstone of economic
reality in analyzing possible employment relationships for purposes of the
Federal Labor Standards Act is dependency.[25] By analogy, the
benchmark of economic reality in analyzing possible employment
relationships for purposes of the Labor Code ought to be the economic
dependence of the worker on his employer.
By applying the control test, there is no doubt that petitioner is an
employee of Kasei Corporation because she was under the direct control
and supervision of Seiji Kamura, the corporations Technical Consultant.
She reported for work regularly and served in various capacities as
Accountant, Liaison Officer, Technical Consultant, Acting Manager and
Corporate Secretary, with substantially the same job functions, that is,
rendering accounting and tax services to the company and performing
functions necessary and desirable for the proper operation of the
corporation such as securing business permits and other licenses over an
indefinite period of engagement.
Under the broader economic reality test, the petitioner can likewise be said
to be an employee of respondent corporation because she had served the
company for six years before her dismissal, receiving check vouchers
indicating her salaries/wages, benefits, 13th month pay, bonuses and
allowances, as well as deductions and Social Security contributions from
August 1, 1999 to December 18, 2000.[26] When petitioner was
designated General Manager, respondent corporation made a report to the
SSS signed by Irene Ballesteros. Petitioners membership in the SSS as
manifested by a copy of the SSS specimen signature card which was signed
by the President of Kasei Corporation and the inclusion of her name in the
on-line inquiry system of the SSS evinces the existence of an employer-
employee relationship between petitioner and respondent corporation.[27]
It is therefore apparent that petitioner is economically dependent on
respondent corporation for her continued employment in the latters line of
business.
In Domasig v. National Labor Relations Commission,[28] we held that in a
business establishment, an identification card is provided not only as a
security measure but mainly to identify the holder thereof as a bona fide
employee of the firm that issues it. Together with the cash vouchers
covering petitioners salaries for the months stated therein, these matters
constitute substantial evidence adequate to support a conclusion that
petitioner was an employee of private respondent.
We likewise ruled in Flores v. Nuestro[29] that a corporation who registers
its workers with the SSS is proof that the latter were the formers
employees. The coverage of Social Security Law is predicated on the
existence of an employer-employee relationship.
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has
clearly established that petitioner never acted as Corporate Secretary and
that her designation as such was only for convenience. The actual nature
of petitioners job was as Kamuras direct assistant with the duty of acting
as Liaison Officer in representing the company to secure construction
permits, license to operate and other requirements imposed by government
agencies. Petitioner was never entrusted with corporate documents of the
company, nor required to attend the meeting of the corporation. She was
never privy to the preparation of any document for the corporation,
although once in a while she was required to sign prepared documentation
for the company.[30]
The second affidavit of Kamura dated March 7, 2002 which repudiated the
December 5, 2001 affidavit has been allegedly withdrawn by Kamura
himself from the records of the case.[31] Regardless of this fact, we are
convinced that the allegations in the first affidavit are sufficient to establish
that petitioner is an employee of Kasei Corporation.
Granting arguendo, that the second affidavit validly repudiated the first
one, courts do not generally look with favor on any retraction or recanted
testimony, for it could have been secured by considerations other than to
tell the truth and would make solemn trials a mockery and place the
investigation of the truth at the mercy of unscrupulous witnesses.[32] A
recantation does not necessarily cancel an earlier declaration, but like any
other testimony the same is subject to the test of credibility and should be
received with caution.[33]
Based on the foregoing, there can be no other conclusion that petitioner is
an employee of respondent Kasei Corporation. She was selected and
engaged by the company for compensation, and is economically dependent
upon respondent for her continued employment in that line of business.
Her main job function involved accounting and tax services rendered to
respondent corporation on a regular basis over an indefinite period of
engagement. Respondent corporation hired and engaged petitioner for
compensation, with the power to dismiss her for cause. More importantly,
respondent corporation had the power to control petitioner with the means
and methods by which the work is to be accomplished.
The corporation constructively dismissed petitioner when it reduced her
salary by P2,500 a month from January to September 2001. This amounts
to an illegal termination of employment, where the petitioner is entitled to
full backwages. Since the position of petitioner as accountant is one of
trust and confidence, and under the principle of strained relations,
petitioner is further entitled to separation pay, in lieu of reinstatement.[34]
A diminution of pay is prejudicial to the employee and amounts to
constructive dismissal. Constructive dismissal is an involuntary resignation
resulting in cessation of work resorted to when continued employment
becomes impossible, unreasonable or unlikely; when there is a demotion in
rank or a diminution in pay; or when a clear discrimination, insensibility or
disdain by an employer becomes unbearable to an employee.[35] In Globe
Telecom, Inc. v. Florendo-Flores,[36] we ruled that where an employee
ceases to work due to a demotion of rank or a diminution of pay, an
unreasonable situation arises which creates an adverse working
environment rendering it impossible for such employee to continue working
for her employer. Hence, her severance from the company was not of her
own making and therefore amounted to an illegal termination of
employment.

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

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the

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

SO ORDERED.

EN BANC [G.R. No. 112546. March 13, 1996]

NORTH DAVAO MINING CORPORATION and ASSET PRIVATIZATION

TRUST, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION,
LABOR ARBITER ANTONIO M. VILLANUEVA and WILFREDO GUILLEMA,
respondents.

DECISION

Is a company which is forced by huge business losses to close its business,

legally required to pay separation benefits to its employees at the time of
its closure in an amount equivalent to the separation pay paid to those who
were separated when the company was still a going concern? This is the
main question brought before this Court in this petition for certiorari under
Rule 65 of the Revised Rules of Court, which seeks to reverse and set aside
the Resolutions dated July 29, 1993 and September 27, 1993 of the
National Labor Relations Commision (NLRC) in NLRC-CA No. M-001395-93.
The Resolution dated July 29, 1993 affirmed in tow the decision of the
Labor Arbiter in RAB-1 1-08-00672-92 and RAB- 11-08-00713-92 ordering
petitioners to pay the complainants therein certain monetary claims.
The Resolution dated September 27, 1993 denied the motion for
reconsideration of the said July 29, 1993 Resolution.
The Facts
Petitioner North Davao Mining Corporation (North Davao) was incorporated
in 1974 as a 100% privately-owned company. Later, the Philippine National
Bank (PNB) became part owner thereof as a result of a conversion into
equity of a portion of loans obtained by North Davao from said bank. On
June 30, 1986, PNB transferred all its loans to and equity in North Davao in
favor of the national government which, by virtue of Proclamation No. 50
dated December 8, 1986, later turned them over to petitioner Asset
Privatization Trust (APT). As of December 31, 1990 the national
government held 81.8% of the common stock and 100% of the preferred
stock of said company.
Respondent Wilfredo Guillema is one among several employees of North
Davao who were separated by reason of the companys closure on May 31,
1992, and who were the complainants in the cases before the respondent
labor arbiter.
On May 31, 1992, petitioner North Davao completely ceased operations due
to serious business reverses. From 1988 until its closure in 1992, North
Davao suffered net losses averaging three billion pesos
(P3,000,000,000.00) per year, for each of the five years prior to its closure.
All told, as of December 31, 1991, or five months prior to its closure, its
total liabilities had exceeded its assets by 20.392 billion pesos, as shown by
its financial statements audited by the Commission on Audit. When it
ceased operations, its remaining employees were separated and given the
equivalent of 12.5 days pay for every year of service, computed on their
basic monthly pay, in addition to the commutation to cash of their unused
vacation and sick leaves. However, it appears that, during the life of the
petitioner corporation, from the beginning of its operations in 1981 until its
closure in 1992, it had been giving separation pay equivalent to thirty (30)
days pay for every year of service. Moreover, inasmuch as the region
where North Davao operated was plagued by insurgency and other peace
and order problems, the employees had to collect their salaries at a bank in
Tagum, Davao del Norte, some 58 kilometers from their workplace and
about 2 hours travel time by public transportation; this arrangement
lasted from 1981 up to 1990.
Subsequently, a complaint was filed with respondent labor arbiter by
respondent Wilfredo Guillema and 271 other seperated employees for: (1)
additional separation pay of 17.5 days for every year of service; (2) back
wages equivalent to two days a month; (3) transportation allowance; (4)
hazard pay; (5) housing allowance; (6) food allowance; (7) post-
employment medical clearance; and (8) future medical allowance, all of
which amounted to P58,022,878.31 as computed by private respondent.
On May 6, 1993, respondent Labor Arbiter rendered a decision ordering
petitioner North Davao to pay the complainants the following:
(a) Additional separation pay of 17.5 days for every year of service;
(b) Backwages equivalent to two (2) days a month times the number of
years of service but not to exceed three (3) years;
(c) Transportation allowance at P80 a month times the number of years of
service but not to exceed three (3) years.
The benefits awarded by respondent Labor Arbiter amounted to
P10,240,517.75. Attorneys fees equivalent to ten percent (10%) thereof
were also granted.
On appeal, respondent NLRC affirmed the decision in toto. Petitioner North
Davaos motion for reconsideration was likewise denied. Hence, this
petition.
The Parties Submissions and the Issues
In affirming the Labor Arbiters decision, respondent NLRC ruled that since
(North Davao) has been paying its employees separation pay equivalent to
thirty (30) days pay for every year of service, knowing fully well that the
law provides for a lesser separation pay, then such company policy has
ripened into an obligation, and therefore, depriving now the herein private
respondent and others similarly situated of the same benefits would be
discriminatory. Quoting from Businessday Information Systems and
Services. Inc. (BISSI) vs. NLRC. it said that petitioners may not pay
separation benefits unequally for such discrimination breeds resentment
and ill-will among those who have been treated less generously than
others. It also cited Abella vs. NLRC, as authority for saying that Art. 283
of the Labor Code protects workers in case of the closure of the
establishment.
To justify the award of two days a month in backwages and P80 per month
of transportation allowance, respondent Commission ruled:
As to the appellants claim that complainants-appeallees time spent in
collecting their wages at Tagum, Davao is not compensable allegedly
because it was on official time can not be given credence. No iota of
evidence has been presented to back up said contention. The same is true
with appellants assertion that the claim for transportation expenses is
without basis since they were incurred by the complainants. Appellants
should have submitted the payrolls to prove that complainants-appellees
were not the ones who personally collected their wages and/or the bus/jeep
trip tickets or vouchers to show that the complainants-appellees were
provided with free transportation as claimed.
Petitioner, through the Government Corporate Counsel, raised the following
grounds for the allowance of the petition:
1. The NLRC acted with grave abuse of discretion in affirming without legal
basis the award of additional separation pay to private respondents who
were separated due to serious business losses on the part of petitioner.
2. The NLRC acted with grave abuse of discretion in affirming without
sufficient factual basis the award of backwages and transportation
expenses to private respondents.
3. There is no appeal, nor any plain, speedy and adequate remedy in the
ordinary course of the law.
and the following issues:
1. Whether or not an employer whose business operations ceased due to
serious business losses or financial reverses is obliged to pay separation pay
to its employees separated by reason of such closure.
2. Whether or not time spent in collecting wages in a place other than the
place of employment is compensable notwithstanding that the same is done
during official time.
3. Whether or not private respondents are entitled to transportation
expenses in the absence of evidence that these expenses were incurred.
The First Issue: Separation Pay
To resolve this issue, it is necessary to revisit the provision of law adverted
to by the parties in their submissions, namely Art. 283 of the Labor Code,
which reads as follows:
Art. 283. Closure of establishment and reduction of personnel. - The
employer may also terminate the employment of any employee due to the
installation of labor saving devices, redundancy, retrenchment to prevent
losses or the closing or cessation of operation of the establishment or
under-taking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month before the
intended date thereof. In case of termination due to the installation of labor
saving devices or redundancy, the worker affected thereby shall be entitled
to a separation pay equivalent to at least his one (1) month pay or to at
least one (1) month pay for every year of service, whichever is higher. In
case of retrenchment to prevent losses and in cases of closures or cessation
of operations of establishment or undertaking not due to serious business
losses or financial reverses, the separation pay shall be equivalent to one
(1) month pay or at least one-half () month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year. (italics supplied)
The underscored portion of Art. 283 governs the grant of seperation
benefits in case of closures or cessation of operation of business
establishments NOT due to serious business losses or financial reverses x x
x. Where, however, the closure was due to business losses - as in the
instant case, in which the aggregate losses amounted to over P20 billion -
the Labor Code does not impose any obligation upon the employer to pay
separation benefits, for obvious reasons. There is no need to belabor this
point. Even the public respondents, in their Comment filed by the Solicitor
General, impliedly concede this point.
However, respondents tenaciously insist on the award of separation pay,
anchoring their claim solely on petitioner North Davaos long-standing policy
of giving separation pay benefits equivalent to 30- days pay, which policy
had been in force in the years prior to its closure. Respondents contend
that, by denying the same separation benefits to private respondent and
the others similarly situated, petitioners discriminated against them. They
rely on this Courts ruling in Businessday Information Systems and Services,
Inc. (BISSI) vs. NLRC, (supra). In said case, petitioner BISSI, after
experiencing financial reverses, decided as a retrenchment measure to
lay-off some employees on May 16, 1988 and gave them separation pay
equivalent to one-half () month pay for every year of service. BISSI
retained some employees in an attempt to rehabilitate its business as a
trading company. However, barely two and a half months later, these
remaining employees were likewise discharged because the company
decided to cease business operations altogether. Unlike the earlier
terminated employees, the second batch received separation pay equivalent
to a full months salary for every year of service, plus a mid-year bonus.
This Court ruled that there was impermissible discrimination against the
private respondents in the payment of their separation benefits. The law
requires an employer to extend equal treatment to its employees. It may
not, in the guise of exercising management prerogatives, grant greater
benefits to some and less to others. x x x
In resolving the present case, it bears keeping in mind at the outset that
the factual circumstances of BISSI are quite different from the current
case. The Court noted that BISSI continued to suffer losses even after the
retrenchment of the first batch of employees; clearly, business did not
improve despite such drastic measure. That notwithstanding, when BISSI
finally shut down, it could well afford to (and actually did) pay off its
remaining employees with MORE separation benefits as compared with
those earlier laid off; obviously, then, there was no reason for BISSI to
skimp on separation pay for the first batch of discharged employees. That
it was able to pay one-month separation benefit for employees at the time
of closure of its business meant that it must have been also in a position to
pay the same amount to those who were separated prior to closure. That it
did not do so was a wrongful exercise of management prerogatives. That
is why the Court correctly faulted it with impermissible discrimination.
Clearly, it exercised its management prerogatives contrary to general
principles of fair play and justice.
In the instant case however, the companys practice of giving one months
pay for every year of service could no longer be continued precisely
because the company could not afford it anymore. It was forced to close
down on account of accumulated losses of over P20 billion. This could not
be said of BISSI. In the case of North Davao, it gave 30-days separation
pay to its employees when it was still a going concern even if it was already
losing heavily. As a going concern, its cash flow could still have sustained
the payment of such separation benefits. But when a business enterprise
completely ceases operations, i.e., upon its death as a going business
concern, its vital lifeblood -its cashflow - literally dries up. Therefore, the
fact that less separation benefits were granted when the company finally
met its business death cannot be characterized as discrimination. Such
action was dictated not by a discriminatory management option but by its
complete inability to continue its business life due to accumulated losses.
Indeed, one cannot squeeze blood out of a dry stone. Nor water out of
parched land.
As already stated, Art. 283 of the Labor Code does not obligate an
employer to pay separation benefits when the closure is due to losses. In
the case before us, the basis for the claim of the additional separation
benefit of 17.5 days is alleged discrimination, i.e., unequal treatment of
employees, which is proscribed as an unfair labor practice by Art. 248 (e) of
said Code. Under the facts and circumstances of the present case, the
grant of a lesser amount of separation pay to private respondent was done,
not by reason of discrimination, but rather, out of sheer financial
bankruptcy - a fact that is not controlled by management prerogatives.
Stated differently, the total cessation of operation due to mind-boggling
losses was a supervening fact that prevented the company from continuing
to grant the more generous amount of separation pay. The fact that North
Davao at the point of its forced closure voluntarily paid any separation
benefits at all - although not required by law - and 12.5-days worth at that,
should have elicited admiration instead of condemnation. But to require it
to continue being generous when it is no longer in a position to do so would
certainly be unduly oppressive, unfair and most revolting to the
conscience. As this Court held in Manila Trading & Supply Co. vs. Zulueta,
and reiterated in San Miguel Corporation vs. NLRC and later, in Allied
Banking Corporation vs. Castro, (t)he law, in protecting the rights of the
laborer, authorizes neither oppression nor self-destruction of the employer.
At this juncture, we note that the Solicitor General in his Comment
challenges the petitioners assertion that North Davao, having closed down,
no longer has the means to pay for the benefits. The Solicitor General
stresses that North Davao was among the assets transferred by PNB to the
national government, and that by virtue of Proclamation No. 50 dated
December 8, 1986, the APT was constituted trustee of this government
asset. He then concludes that (i)t would, therefore, be incongruous to
declare that the National Government, which should always be presumed to
be solvent, could not pay now private respondents money claims. Such
argumentation is completely misplaced. Even if the national government
owned or controlled 81.8% of the common stock and 100% of the
preferred stock of North Davao, it remains only a stockholder thereof, and
under existing laws and prevailing jurisprudence, a stockholder as a rule is
not directly, individually and/or personally liable for the indebtedness of the
corporation. The obligation of North Davao cannot be considered the
obligation of the national government, hence, whether the latter be solvent
or not is not material to the instant case. The respondents have not shown
that this case constitutes one of the instances where the corporate veil may
be pierced. From another angle, the national government is not the
employer of private respondent and his co-complainants, so there is no
reason to expect any kind of bailout by the national government under
existing law and jurisprudence.
Section 4. Place of payment. - (a) As a general rule, the place of payment
shall be at or near the place of undertaking. Payment in a place other than
the workplace shall be permissible only under the following circumstances:
(1) When payment cannot be effected at or near the place of work by
reason of the deterioration of peace and order conditions, or by reason of
actual or impending emergencies caused by fire, flood, epidemic or other
calamity rendering payment thereat impossible;
(2) When the employer provides free transportation to the employees
back and forth; and
(3) Under any analogous circumstances; provided that the time spent by
the employees in collecting their wages shall be considered as compensable
hours worked.

The Second and Third Issues:

(b) xxx xxx xxx.

Back Wages and Transportation Allowance

(Italics supplied)

Anent the award of back wages and transportation allowance, the issues
Accordingly, in his Order dated April 14, 1992 (p. 109, Vol. 1, Record), the
raised in connection therewith are factual, the determination of which is
Regional Director, Regional Office No. XI, Department of Labor and
best left to the respondent NLRC. It is well settled that this Court is bound
Employment, Davao City, ordered petitioner NDMC, among others, as
by the findings of fact of the NLRC, so long as said findings are supported
follows:
by substantial evidence.
WHEREFORE, x x x. Respondent is further ordered to pay its workers
As the Solicitor General pointed out in his comment:
salaries at the plantsite at Amacan, New Leyte, Maco, Davao del Norte or
whenever not possible, through the bank in Tagum, Davao del Norte as
It is undisputed that because of security reasons, from the time of its already been practiced subject, however to the provisions of Section 4 of
operations, petitioner NDMC maintained its policy of paying its workers at a Rule VIII, Book III of the rules implementing the Labor Code as amended.
bank in Tagum, Davao del Norte, which usually took the workers about two
and a half (2 1/2) hours of travel from the place of work and such travel
Thus, public respondent Labor Arbiter Antonio M. Villanueva correctly held
time is not official.
that:

Records also show that on February 12,1992, when an inspection was

From the evidence on record, we find that the hours spent by complainants
conducted by the Department of Labor and Employment at the premises of
in collecting salaries at a bank in Tagum, Davao del Norte shall be
petitioner NDMC at Amacan, Maco, Davao del Norte, it was found out that
considered compensable hours worked. Considering further the distance
petitioners had violated labor standards law, one of which is the place of
between Amacan, Maco to Tagum which is 2 hours by travel and the
payment of wages (p.109, Vol. 1, Record).
risks in commuting all the time in collecting complainants salaries, would
justify the granting of backwages equivalent to two (2) days in a month as
Section 4, Rule VIII, Book III of the Omnibus Rules Implementing the Labor prayed for.
Code provides that:
Corollary to the above findings, and for equitable reasons, we likewise hold Rollo, p.98.
respondents liable for the transportation expenses incurred by complainants
at P40.00 round trip fare during pay days. Rollo, pp. 33-34.

(p. 10, Decision; p. 207, Vol. 1, Record) Rollo, p.42.

On the contrary, it will be petitioners burden or duty to present evidence of
compliance of the law on labor standards, rather than for private
respondents to prove that they were not paid/provided by petitioners of
their backwages and transportation expenses.
Other than the bare denials of petitioners, the above findings stands
uncontradicted. Indeed we are not at liberty to set aside findings of facts of
the NLRC, absent any capriciousness, arbitrariness, or abuse or complete
lack of basis. In Maya Farms Employees Organizations vs. NLRC, we held:
This Court has consistently ruled that findings of fact of administrative
agencies and quasi-judicial bodies which have acquired expertise because
their jurisdiction is confined to specific matters are generally accorded not
only respect but even finality and are binding upon this Court unless there
is a showing of grave abuse of discretion, or where it is clearly shown that
they were arrived at arbitrarily or in disregard of the evidence on record.
WHEREFORE, judgment is hereby rendered MODIFYING the assailed
Resolution by SETTING ASIDE and deleting the award for additional
separation pay of 17.5 days for every year of service, and AFFIRMING it in
all other aspects. No costs.
SO ORDERED.
Narvasa, C.J., Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno,
Vitug, Kapunan, Mendoza, Francisco, and Hermosisima, JJ., concur.
Rollo, pp. 33-45.
Rollo, pp. 51-52.
Fifth Division, Cagayan de Oro City, composed of Comm. Oscar N. AbelIa,
ponente, Pres. Comm. Musib M. Buat and Comm. Leon G. Gonzaga, Jr.
221 SCRA 9, 12(April 5, 1993).
152 SCRA 141, 145 (July 20,1987).
Rollo, pp. 96-1 18.
69 Phil. 485,486-487 (Jan. 30, 1940).
115 SCRA 329 (July 20, 1982).
156 SCRA 789, 800 (December 22, 1987).
This Court has pierced the veil of corporate fiction in numerous cases where
it was used, among others, to avoid a judgment credit (Sibagat Timber
Corp. vs. Garcia, 216 SCRA 470 [December 11, 1992]; Tan Boon Bee & Co.,
Inc. vs. Jarencio, 163 SCRA 205 [June 30, 1988]); to avoid inclusion of
corporate assets as part of the estate of a decedent (Cease vs. CA, 93
SCRA 483 [October 18, 1979]); to avoid liability arising from debt (Arcilla
vs. CA, 215 SCRA 120 [October 23, 1992]; Philippine Bank of
Communication vs. CA, 195 SCRA 567 [March 22, 1991]); or when made
use of as a shield to perpetrate fraud and/or confuse legitimate issues
(Jacinto vs. CA, 198 SCRA 211 [June 6, 1991]); or to promote unfair
objectives or otherwise to shield them ( Villanueva vs. Adre, 172 SCRA 876
[April 27, 1989]).
Wyeth-Suaco Laboratories, Inc. vs. National Labor Relations Commission,
219 SCRA 356 (March 2, 1993).
239 SCRA 508,512 (December 28, 1994).
Republic of the Philippines
SUPREME COURT
Manila

Rollo. pp. 35. 70 and 100. THIRD DIVISION

G.R. No. 73199 October 26, 1988
DR. RENATO SARA and/or ROMEO ARANA petitioners,
vs.
CERILA AGARRADO and the NATIONAL LABOR RELATIONS COMMISSION,
respondents.
Amparo & Barcelona Law Offices for petitioners.
The Solicitor General for public respondent. Nicanor A. Magno for private
respondent.
Challenged in this petition for certiorari is the jurisdiction of the Labor
Tribunal over Case No. LRD-ROXII-006-82, a claim for unpaid commissions
and reimbursement of certain sums of money filed by herein private
respondent Cerila Agarrado against herein petitioners Dr. Renato Sara and
Romeo Arabia.
Private respondent Cerila Agarrado was an attendant in the clinic of
petitioner Dr. Renato Sara She quit her job in 1973. Four years later,
petitioners Dr. Sara and Romeo Arabia, being owners of a rice mill and
having begun to engage in the buy and sell of palay and rice, entered into a
verbal agreement with private respondent Agarrado whereby it was agreed
that the latter would be paid P2.00 commission per sack of milled rice sold
as well as a commission of 10% per kilo of palay purchased. It was further
agreed that private respondent would spend her own money for the
undertaking, but to enable her to carry out the agreement more effectively,
she was authorized to borrow money from other persons, as in fact she did,
subject to reimbursement by petitioners. 1
In 1982, private respondent filed with the National Labor Relations
Commission (NLRC) Regional Arbitration Branch No. XI, Cotabato City, a
complaint against petitioners for unpaid commission of P4,598.00 on milled
rice sold, P2,982.80 on palay sold, reimbursement of P17,500.00 which she
had borrowed from various persons and Pl,749.00 of her own money which
petitioners allegedly had not reimbursed (LRD-ROXII-006- 82).
By way of defense, petitioners raised the issue of lack of jurisdiction on the
part of the Labor Arbiter to take cognizance of the case, there being no
employer-employee relationship between the parties. They averred that the
claim for alleged unpaid commission and certain sums of money is
governed by the law on agency under the Civil Code and hence a purely
civil obligation cognizable by the regular courts.
On January 17, 1973, Labor Arbiter Magno C. Cruz rendered a decision in
favor of private respondent ordering petitioners to pay all the claims
amounting to P26,397.80. 2
Petitioner appealed the decision to the NLRC, which in a resolution dated
June 25, 1986 affirmed the Labor Arbiter's decision and dismissed the
appeal. 3
Their motion for reconsideration having been denied, petitioners took the
present recourse, maintaining lack of jurisdiction on the part of the Labor
Tribunal as well as grave abuse of discretion on its part in finding them
liable to private respondent.
In his comment, the Solicitor General agreed with petitioners that there was
no employer-employee relationship between the parties and that by reason
thereof the Labor Arbiter had no jurisdiction over the case. The Solicitor
General's comment was accompanied by a manifestation and motion stating
that he was filing the comment on his own behalf and that the public
respondent NLRC had been informed about his contrary stand. 4
The primordial issue in this case is whether an employer-employee
relationship exists between petitioners and private respondent as to warrant
cognizance by the Labor Arbiter of LRD-ROXII-006-82.
To determine the existence of an employer-employee relationship, this
Court in a long line of decisions 5 has invariably applied the following four-
fold test: [1] the selection and engagement of the employee; [2] the
payment of wages; [3] the power of dismissal; and [4] the power to control
the employee's conduct.
In the case at bar, we find that although there was a selection and
engagement of private respondent in 1977, the verbal agreement between
the parties negated the existence of the other requisites.
As to the payment of wages, the verbal agreement entered into by the
parties stipulated that private respondent would be paid a commission of
P2.00 per sack of milled rice sold as well as a 10% commission on palay
purchase. The arrangement thus was explicitly on a commission basis
dependent on the volume of sale or purchase. Private respondent was not
guaranteed any minimum compensation nor was she allowed any drawing
account or advance of any kind against unearned commissions. Her right to
compensation depended upon and was measured by the tangible results
she produced the quantity of rice sold and the quantity of palay purchased.
The power to terminate the relationship was mutually vested upon the
parties. Either may terminate the business arrangement at will, with or
without cause.
Finally, noticeably absent from the agreement between the parties is the
element of control. Among the four (4) requisites, control is deemed the
most important that the other requisites may even be disregarded. 6 Under
the control test, an employer-employee relationship exists if the "employer"
has reserved the right to control the "employee" not only as to the result of
the work done but also as to the means and methods by which the same is
to be accomplished. 7 Otherwise, no such relationship exists.
We observe that the means and methods of purchasing and selling rice or
palay by private respondent were totally independent of petitioners' control.
As established by the NLRC:
... Sometime in June 1977, respondent re-engaged the services of herein
complainant to sell milled rice to the customers of the former, as well as to
buy palay for and in behalf of Dr. Renato Sara, with the verbal agreement
that to carry out effectively the said task, complainant was duly authorized
by respondent, Dr. Sara to spend her own money, if necessary but subject
to reimbursment and if that would not be sufficient, to borrow money from
other sources with further understanding that Dr. Sala will repay the ill thru
the complainant; ... ([Emphasis supplied], p. 21, Rollo)
Note that private respondent was never given capital by his supposed
employer but relied on her own resources and if insufficient, she borrowed
money from others. Petitioners did not supply private respondent with tools
and appliances needed to enable her to carry her undertaking, except to
authorize her to borrow money from others, subject to reimbursement.
The absence of control is made more evident by the fact that private
respondent was not even obliged to sell the palay she purchased to
petitioners. She was at liberty to sell the palay to any trader offering higher
buying rates. She was thus free to sell it to anybody whom she pleased.
Moreover, private respondent worked for petitioners at her own pleasure
and was not subject to definite hours or conditions of work. She could even
delegate the task of buying and selling to others, if she so desired, or
simultaneously engaged in other means of livelihood while selling and
purchasing rice or palay.
Under the conditions set forth in their agreement, private respondent was
an independent contractor, who exercising independent employment,
contracted to do a piece of work according to her own method and without
being subject to the control of her employer except as to the result of her
work. She was paid for the result of her labor, unlike an employee who is
paid for the labor he performs. 8
The verbal agreement devoid as it was of any stipulations indicative of
control leaves no doubt that private respondent was not an employee of
petitioners but was rather an independent contractor.
The Labor Tribunal's jurisdiction being primarily predicated upon the
existence of an employer-employee relationship between the parties, the
absence of such element, as in the case at bar, removes the controversy
from the scope of its limited jurisdiction.
WHEREFORE, the instant petition for certiorari is granted. Case No. LRD-
ROXII-006-82 of the National Labor Relations Commission is hereby
ordered DISMISSED for lack of jurisdiction.
SO ORDERED. Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC G.R. No. L-12582 January 28, 1961
LVN PICTURES, INC., petitioner-appellant,
vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL
RELATIONS, respondents-appellees.
x---------------------------------------------------------x
G.R. No. L-12598 January 28, 1961
SAMPAGUITA PICTURES, INC., petitioner-appellant,
vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL
RELATIONS, respondents-appellees.
Nicanor S. Sison for petitioner-appellant.
Jaime E. Ilagan for respondent-appellee Court of Agrarian Relations.
Gerardo P. Cabo Chan for respondent-appellee Philippine Musicians Guild.
Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc. seek a
review by certiorari of an order of the Court of Industrial Relations in Case
No. 306-MC thereof, certifying the Philippine Musicians Guild (FFW),
petitioner therein and respondent herein, as the sole and exclusive
bargaining agency of all musicians working with said companies, as well as
with the Premiere Productions, Inc., which has not appealed. The appeal of
LVN Pictures, Inc., has been docketed as G.R. No. L-12582, whereas G.R.
No. L-12598 is the appeal of Sampaguita Pictures, Inc. Involving as they do
the same order, the two cases have been jointly heard in this Court, and
will similarly be disposed of.
In its petition in the lower court, the Philippine Musicians Guild (FFW),
hereafter referred to as the Guild, averred that it is a duly registered
legitimate labor organization; that LVN Pictures, Inc., Sampaguita Pictures,
Inc., and Premiere Productions, Inc. are corporations, duly organized under
the Philippine laws, engaged in the making of motion pictures and in the
processing and distribution thereof; that said companies employ musicians
for the purpose of making music recordings for title music, background
music, musical numbers, finale music and other incidental music, without
which a motion picture is incomplete; that ninety-five (95%) percent of all
the musicians playing for the musical recordings of said companies are
members of the Guild; and that the same has no knowledge of the
existence of any other legitimate labor organization representing musicians
in said companies. Premised upon these allegations, the Guild prayed that it
be certified as the sole and exclusive bargaining agency for all musicians
working in the aforementioned companies. In their respective answers, the
latter denied that they have any musicians as employees, and alleged that
the musical numbers in the filing of the companies are furnished by
independent contractors. The lower court, however, rejected this pretense
and sustained the theory of the Guild, with the result already adverted to. A
reconsideration of the order complained of having been denied by the Court
en banc, LVN Pictures, inc., and Sampaguita Pictures, Inc., filed these
petitions for review for certiorari.
Apart from impugning the conclusion of the lower court on the status of the
Guild members as alleged employees of the film companies, the LVN
Pictures, Inc., maintains that a petition for certification cannot be
entertained when the existence of employer-employee relationship between
the parties is contested. However, this claim is neither borne out by any
legal provision nor supported by any authority. So long as, after due
hearing, the parties are found to bear said relationship, as in the case at
bar, it is proper to pass upon the merits of the petition for certification.
It is next urged that a certification is improper in the present case, because,
"(a) the petition does not allege and no evidence was presented that the
alleged musicians-employees of the respondents constitute a proper
bargaining unit, and (b) said alleged musicians-employees represent a
majority of the other numerous employees of the film companies
constituting a proper bargaining unit under section 12 (a) of Republic Act
No. 875."
The absence of an express allegation that the members of the Guild
constitute a proper bargaining unit is fatal proceeding, for the same is not a
"litigation" in the sense in which this term is commonly understood, but a
mere investigation of a non-adversary, fact finding character, in which the
investigating agency plays the part of a disinterested investigator seeking
merely to ascertain the desires of employees as to the matter of their
representation. In connection therewith, the court enjoys a wide discretion
in determining the procedure necessary to insure the fair and free choice of
bargaining representatives by employees.1 Moreover, it is alleged in the
petition that the Guild it a duly registered legitimate labor organization and
that ninety-five (95%) percent of the musicians playing for all the musical
recordings of the film companies involved in these cases are members of
the Guild. Although, in its answer, the LVN Pictures, Inc. denied both
allegations, it appears that, at the hearing in the lower court it was merely
the status of the musicians as its employees that the film companies really
contested. Besides, the substantial difference between the work performed
by said musicians and that of other persons who participate in the
production of a film, and the peculiar circumstances under which the
services of that former are engaged and rendered, suffice to show that they
constitute a proper bargaining unit. At this juncture, it should be noted that
the action of the lower court in deciding upon an appropriate unit for
collective bargaining purposes is discretionary (N.L.R.B. v. May Dept. Store
Co., 66 Sup. Ct. 468. 90 L. ed. 145) and that its judgment in this respect is
entitled to almost complete finality, unless its action is arbitrary or
capricious (Marshall Field & Co. v. N.L.R.B. [C.C.A. 19431, 135 F. 2d. 891),
which is far from being so in the cases at bar.
Again, the Guild seeks to be, and was, certified as the sole and exclusive
bargaining agency for the musicians working in the aforesaid film
companies. It does not intend to represent the other employees therein.
Hence, it was not necessary for the Guild to allege that its members
constitute a majority of all the employees of said film companies, including
those who are not musicians. The real issue in these cases, is whether or
not the musicians in question are employees of the film companies. In this
connection the lower court had the following to say:
As a normal and usual course of procedure employed by the companies
when a picture is to be made, the producer invariably chooses, from the
musical directors, one who will furnish the musical background for a film. A
price is agreed upon verbally between the producer and musical director for
the cost of furnishing such musical background. Thus, the musical director
may compose his own music specially written for or adapted to the picture.
He engages his own men and pays the corresponding compensation of the
musicians under him.
When the music is ready for recording, the musicians are summoned
through 'call slips' in the name of the film company (Exh 'D'), which show
the name of the musician, his musical instrument, and the date, time and
place where he will be picked up by the truck of the film company. The film
company provides the studio for the use of the musicians for that particular
recording. The musicians are also provided transportation to and from the
studio by the company. Similarly, the company furnishes them meals at
dinner time.
During the recording sessions, the motion picture director, who is an
employee of the company, supervises the recording of the musicians and
tells what to do in every detail. He solely directs the performance of the
musicians before the camera as director, he supervises the performance of
all the action, including the musicians who appear in the scenes so that in
the actual performance to be shown on the screen, the musical director's
intervention has stopped.
And even in the recording sessions and during the actual shooting of a
scene, the technicians, soundmen and other employees of the company
assist in the operation. Hence, the work of the musicians is an integral part
of the entire motion picture since they not only furnish the music but are
also called upon to appear in the finished picture.
The question to be determined next is what legal relationship exits between
the musicians and the company in the light of the foregoing facts.
We are thus called upon to apply R.A. Act 875. which is substantially the
same as and patterned after the Wagner Act substantially the same as a
Act and the Taft-Hartley Law of the United States. Hence, reference to
decisions of American Courts on these laws on the point-at-issue is called
for.
Statutes are to be construed in the light of purposes achieved and the evils
sought to be remedied. (U.S. vs. American Tracking Association, 310 U.S.
534, 84 L. ed. 1345.) .
In the case of National Labor Relations Board vs. Hearts Publication, 322
U.S. 111, the United States Supreme Court said the Wagner Act was
designed to avert the 'substantial obstruction to the free flow of commerce
which results from strikes and other forms of industrial unrest by
eliminating the causes of the unrest. Strikes and industrial unrest result
from the refusal of employers' to bargain collectively and the inability of
workers to bargain successfully for improvement in their working
conditions. Hence, the purposes of the Act are to encourage collective
bargaining and to remedy the workers' inability to bargaining power, by
protecting the exercise of full freedom of association and designation of
representatives of their own choosing, for the purpose of negotiating the
terms and conditions of their employment.'
The mischief at which the Act is aimed and the remedies it offers are not
confined exclusively to 'employees' within the traditional legal distinctions,
separating them from 'independent contractor'. Myriad forms of service
relationship, with infinite and subtle variations in the term of employment,
blanket the nation's economy. Some are within this Act, others beyond its
coverage. Large numbers will fall clearly on one side or on the other, by
whatever test may be applied. Inequality of bargaining power in
controversies of their wages, hours and working conditions may
characterize the status of one group as of the other. The former, when
acting alone may be as helpless in dealing with the employer as dependent
on his daily wage and as unable to resist arbitrary and unfair treatment as
the latter.'
To eliminate the causes of labor dispute and industrial strike, Congress
thought it necessary to create a balance of forces in certain types of
economic relationship. Congress recognized those economic relationships
cannot be fitted neatly into the containers designated as 'employee' and
'employer'. Employers and employees not in proximate relationship may be
drawn into common controversies by economic forces and that the very
dispute sought to be avoided might involve 'employees' who are at times
brought into an economic relationship with 'employers', who are not their
'employers'. In this light, the language of the Act's definition of 'employee'
or 'employer' should be determined broadly in doubtful situations, by
underlying economic facts rather than technically and exclusively
established legal classifications. (NLRB vs. Blount, 131 F [2d] 585.)
In other words, the scope of the term 'employee' must be understood with
reference to the purposes of the Act and the facts involved in the economic
relationship. Where all the conditions of relation require protection,
protection ought to be given .
By declaring a worker an employee of the person for whom he works and
by recognizing and protecting his rights as such, we eliminate the cause of
industrial unrest and consequently we promote industrial peace, because
we enable him to negotiate an agreement which will settle disputes
regarding conditions of employment, through the process of collective
bargaining.
The statutory definition of the word 'employee' is of wide scope. As used in
the Act, the term embraces 'any employee' that is all employees in the
conventional as well in the legal sense expect those excluded by express
provision. (Connor Lumber Co., 11 NLRB 776.).
It is the purpose of the policy of Republic Act 875; (a) To eliminate the
causes of industrial unrest by protecting the exercise of their right to self-
organization for the purpose of collective bargaining. (b) To promote sound
stable industrial peace and the advancement of the general welfare, and
the best interests of employers and employees by the settlement of issues
respecting terms and conditions of employment through the process of
collective bargaining between employers and representatives of their
employees.
The primary consideration is whether the declared policy and purpose of
the Act can be effectuated by securing for the individual worker the rights
and protection guaranteed by the Act. The matter is not conclusively
determined by a contract which purports to establish the status of the
worker, not as an employee.
The work of the musical director and musicians is a functional and integral
part of the enterprise performed at the same studio substantially under the
direction and control of the company.
In other words, to determine whether a person who performs work for
another is the latter's employee or an independent contractor, the National
Labor Relations relies on 'the right to control' test. Under this test an
employer-employee relationship exist where the person for whom the
services are performed reserves the right to control not only the end to be
achieved, but also the manner and means to be used in reaching the end.
(United Insurance Company, 108, NLRB No. 115.).
Thus, in said similar case of Connor Lumber Company, the Supreme Court
said:.
'We find that the independent contractors and persons working under them
are employees' within the meaning of Section 2 (3) of its Act. However, we
are of the opinion that the independent contractors have sufficient authority
over the persons working under their immediate supervision to warrant
their exclusion from the unit. We shall include in the unit the employees
working under the supervision of the independent contractors, but exclude
the contractors.'
'Notwithstanding that the employees are called independent contractors',
the Board will hold them to be employees under the Act where the extent
of the employer's control over them indicates that the relationship is in
reality one of employment. (John Hancock Insurance Co., 2375-D, 1940,
Teller, Labor Dispute Collective Bargaining, Vol.).
The right of control of the film company over the musicians is shown (1) by
calling the musicians through 'call slips' in 'the name of the company; (2) by
arranging schedules in its studio for recording sessions; (3) by furnishing
transportation and meals to musicians; and (4) by supervising and directing
in detail, through the motion picture director, the performance of the
musicians before the camera, in order to suit the music they are playing to
the picture which is being flashed on the screen.
Thus, in the application of Philippine statutes and pertinent decisions of the
United States Courts on the matter to the facts established in this case, we
cannot but conclude that to effectuate the policies of the Act and by virtue
of the 'right of control' test, the members of the Philippine Musicians Guild
are employees of the three film companies and, therefore, entitled to right
of collective bargaining under Republic Act No. 875.
In view of the fact that the three (3) film companies did not question the
union's majority, the Philippine Musicians Guild is hereby declared as the
sole collective bargaining representative for all the musicians employed by
the film companies."
We are fully in agreement with the foregoing conclusion and the reasons
given in support thereof. Both are substantially in line with the spirit of our
decision in Maligaya Ship Watchmen Agency vs. Associated Watchmen and
Security Union, L-12214-17 (May 28, 1958). In fact, the contention of the
employers in the Maligaya cases, to the effect that they had dealt with
independent contractors, was stronger than that of the film companies in
these cases. The third parties with whom the management and the workers
contracted in the Maligaya cases were agencies registered with the Bureau
of Commerce and duly licensed by the City of Manila to engage in the
business of supplying watchmen to steamship companies, with permits to
engage in said business issued by the City Mayor and the Collector of
Customs. In the cases at bar, the musical directors with whom the film
companies claim to have dealt with had nothing comparable to the business
standing of said watchmen agencies. In this respect, the status of said
musical directors is analogous to that of the alleged independent contractor
in Caro vs. Rilloraza, L-9569 (September 30, 1957), with the particularity
that the Caro case involved the enforcement of the liability of an employer
under the Workmen's Compensation Act, whereas the cases before us are
merely concerned with the right of the Guild to represent the musicians as
a collective bargaining unit. Hence, there is less reason to be legalistic and
technical in these cases, than in the Caro case.
Herein, petitioners-appellants cite, in support of their appeal, the cases of
Sunripe Coconut Product Co., Inc vs. CIR (46 Off. Gaz., 5506, 5509),
Philippine Manufacturing Co. vs. Santos Vda. de Geronimo, L-6968
(November 29, 1954), Viana vs. Al-Lagadan, L-8967 (May 31, 1956), and
Josefa Vda. de Cruz vs. The Manila Hotel Co. (53 Off. Gaz., 8540). Instead
of favoring the theory of said petitioners-appellants, the case of the Sunripe
Coconut Product Co., Inc. is authority for herein respondents-appellees. It
was held that, although engaged as piece-workers, under the "pakiao"
system, the "parers" and "shellers" in the case were, not independent
contractor, but employees of said company, because "the requirement
imposed on the 'parers' to the effect that 'the nuts are pared whole or that
there is not much meat wasted,' in effect limits or controls the means or
details by which said workers are to accomplish their services" as in the
cases before us.
The nature of the relation between the parties was not settled in the Viana
case, the same having been remanded to the Workmen's Compensation
Commission for further evidence.
The case of the Philippine Manufacturing Co. involved a contract between
said company and Eliano Garcia, who undertook to paint a tank of the
former. Garcia, in turn engaged the services of Arcadio Geronimo, a
laborer, who fell while painting the tank and died in consequence of the
injuries thus sustained by him. Inasmuch as the company was engaged in
the manufacture of soap, vegetable lard, cooking oil and margarine, it was
held that the connection between its business and the painting
aforementioned was purely casual; that Eliano Garcia was an independent
contractor; that Geronimo was not an employee of the company; and that
the latter was not bound, therefore, to pay the compensation provided in
the Workmen's Compensation Act. Unlike the Philippine Manufacturing case,
the relation between the business of herein petitioners-appellants and the
work of the musicians is not casual. As held in the order appealed from
which, in this respect, is not contested by herein petitioners-appellants
"the work of the musicians is an integral part of the entire motion picture."
Indeed, one can hardly find modern films without music therein. Hence, in
the Caro case (supra), the owner and operator of buildings for rent was
held bound to pay the indemnity prescribed in the Workmen's
Compensation Act for the injury suffered by a carpenter while working as
such in one of said buildings even though his services had been allegedly
engaged by a third party who had directly contracted with said owner. In
other words, the repair work had not merely a casual connection with the
business of said owner. It was a necessary incident thereof, just as music is
in the production of motion pictures.
The case of Josefa Vda. de Cruz vs. The Manila Hotel Co., L-9110 (April 30,
1957) differs materially from the present cases. It involved the
interpretation of Republic Act No. 660, which amends the law creating and
establishing the Government Service Insurance System. No labor law was
sought to be construed in that case. In act, the same was originally heard
in the Court of First Instance of Manila, the decision of which was, on
appeal, affirmed by the Supreme Court. The meaning or scope if the term
"employee," as used in the Industrial Peace Act (Republic Act No. 875), was
not touched therein. Moreover, the subject matter of said case was a
contract between the management of the Manila Hotel, on the one hand,
and Tirso Cruz, on the other, whereby the latter greed to furnish the former
the services of his orchestra, consisting of 15 musicians, including Tirso
Cruz, "from 7:30 p.m. to closing time daily." In the language of this court in
that case, "what pieces the orchestra shall play, and how the music shall be
arranged or directed, the intervals and other details such are left to the
leader's discretion."
used" in reading the desired end is possessed and exercised by the film
companies over the musicians in the cases before us.
WHEREFORE, the order appealed from is hereby affirmed, with costs
against petitioners herein. It is so ordered.

This is not situation obtaining in the case at bar. The musical directors
above referred to have no such control over the musicians involved in the
present case. Said musical directors control neither the music to be played,
nor the musicians playing it. The film companies summon the musicians to
work, through the musical directors. The film companies, through the
musical directors, fix the date, the time and the place of work. The film
companies, not the musical directors, provide the transportation to and
from the studio. The film companies furnish meal at dinner time.

What is more in the language of the order appealed from "during the
recording sessions, the motion picture director who is an employee of the
company" not the musical director "supervises the recording of the
musicians and tells them what to do in every detail". The motion picture
director not the musical director "solely directs and performance of
the musicians before the camera". The motion picture director "supervises
the performance of all the actors, including the musicians who appear in
the scenes, so that in the actual performance to be shown in the screen,
the musical director's intervention has stopped." Or, as testified to in the
lower court, "the movie director tells the musical director what to do; tells
the music to be cut or tells additional music in this part or he eliminates the
entire music he does not (want) or he may want more drums or move violin
or piano, as the case may be". The movie director "directly controls the
activities of the musicians." He "says he wants more drums and the
drummer plays more" or "if he wants more violin or he does not like that.". EN BANC G.R. No. L-21278 December 27, 1966

It is well settled that "an employer-employee relationship exists . . .where FEATI UNIVERSITY, petitioner,
the person for whom the services are performed reserves a right to control vs.
not only the end to be achieved but also the means to be used in reaching HON. JOSE S. BAUTISTA, Presiding Judge of the Court of Industrial
such end . . . ." (Alabama Highway Express Co., Express Co., v. Local 612, Relations and FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondents.
108S. 2d. 350.) The decisive nature of said control over the "means to be
used", is illustrated in the case of Gilchrist Timber Co., et al., Local No. ----------------------------------------
2530 (73 NLRB No. 210, pp. 1197, 1199-1201), in which, by reason of said
control, the employer-employee relationship was held to exist between the G.R. No. L-21462 December 27, 1966
management and the workers, notwithstanding the intervention of an
alleged independent contractor, who had, and exercise, the power to hire
and fire said workers. The aforementioned control over the means to be
FEATI UNIVERSITY, petitioner-appellant,
vs.
FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondent-appellee.
----------------------------------------
G.R. No. L-21500 December 27, 1966
FEATI UNIVERSITY, petitioner-appellant,
vs.
FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondent-appellee.
Rafael Dinglasan for petitioner.
Cipriano Cid and Associates for respondents.
This Court, by resolution, ordered that these three cases be considered
together, and the parties were allowed to file only one brief for the three
cases.
On January 14, 1963, the President of the respondent Feati University
Faculty Club-PAFLU hereinafter referred to as Faculty Club wrote a
letter to Mrs. Victoria L. Araneta, President of petitioner Feati University
hereinafter referred to as University informing her of the organization of
the Faculty Club into a registered labor union. The Faculty Club is
composed of members who are professors and/or instructors of the
University. On January 22, 1963, the President of the Faculty Club sent
another letter containing twenty-six demands that have connection with the
employment of the members of the Faculty Club by the University, and
requesting an answer within ten days from receipt thereof. The President of
the University answered the two letters, requesting that she be given at
least thirty days to study thoroughly the different phases of the demands.
Meanwhile counsel for the University, to whom the demands were referred,
wrote a letter to the President of the Faculty Club demanding proof of its
majority status and designation as a bargaining representative. On
February 1, 1963, the President of the Faculty Club again wrote the
President of the University rejecting the latter's request for extension of
time, and on the same day he filed a notice of strike with the Bureau of
Labor alleging as reason therefor the refusal of the University to bargain
collectively. The parties were called to conferences at the Conciliation
Division of the Bureau of Labor but efforts to conciliate them failed. On
February 18, 1963, the members of the Faculty Club declared a strike and
established picket lines in the premises of the University, resulting in the
disruption of classes in the University. Despite further efforts of the officials
from the Department of Labor to effect a settlement of the differences
between the management of the University and the striking faculty
members no satisfactory agreement was arrived at. On March 21, 1963, the
President of the Philippines certified to the Court of Industrial Relations the
dispute between the management of the University and the Faculty Club
pursuant to the provisions of Section 10 of Republic Act No. 875.
In connection with the dispute between the University and the Faculty Club
and certain incidents related to said dispute, various cases were filed with
the Court of Industrial Relations hereinafter referred to as CIR. The three
cases now before this Court stemmed from those cases that were filed with
the CIR.
CASE NO. G.R. NO. L-21278
On May 10, 1963, the University filed before this Court a "petition for
certiorari and prohibition with writ of preliminary injunction", docketed as
G.R. No. L-21278, praying: (1) for the issuance of the writ of preliminary
injunction enjoining respondent Judge Jose S. Bautista of the CIR to desist
from proceeding in CIR Cases Nos. 41-IPA, 1183-MC, and V-30; (2) that the
proceedings in Cases Nos. 41-IPA and 1183-MC be annulled; (3) that the
orders dated March 30, 1963 and April 6, 1963 in Case No. 41-IPA, the
order dated April 6, 1963 in Case No. 1183-MC, and the order dated April
29, 1963 in Case No. V-30, all be annulled; and (4) that the respondent
Judge be ordered to dismiss said cases Nos. 41-IPA, 1183-MC and V-30 of
the CIR.
On May 10, 1963, this Court issued a writ of preliminary injunction, upon
the University's filing a bond of P1,000.00, ordering respondent Judge Jose
S. Bautista as Presiding Judge of the CIR, until further order from this
Court, "to desist and refrain from further proceeding in the premises (Cases
Nos. 41-IPA, 1183-MC and V-30 of the Court of Industrial Relations)." 1 On
December 4, 1963, this Court ordered the injunction bond increased to
P100,000.00; but on January 23, 1964, upon a motion for reconsideration
by the University, this Court reduced the bond to P50,000.00.
A brief statement of the three cases CIR Cases 41-IPA, 1183-MC and V-
30 involved in the Case G.R. No. L-21278, is here necessary.
CIR Case No. 41-IPA, relates to the case in connection with the strike
staged by the members of the Faculty Club. As we have stated, the dispute
between the University and the Faculty Club was certified on March 21,
1963 by the President of the Philippines to the CIR. On the strength of the
presidential certification, respondent Judge Bautista set the case for hearing
on March 23, 1963. During the hearing, the Judge endeavored to reconcile
the part and it was agreed upon that the striking faculty members would
return to work and the University would readmit them under a status quo
arrangement. On that very same day, however, the University, thru counsel
filed a motion to dismiss the case upon the ground that the CIR has no
jurisdiction over the case, because (1) the Industrial Peace Act is not
applicable to the University, it being an educational institution, nor to the
members of the Faculty Club, they being independent contractors; and (2)
the presidential certification is violative of Section 10 of the Industrial Peace
Act, as the University is not an industrial establishment and there was no
industrial dispute which could be certified to the CIR. On March 30, 1963
the respondent Judge issued an order denying the motion to dismiss and
declaring that the Industrial Peace Act is applicable to both parties in the
case and that the CIR had acquired jurisdiction over the case by virtue of
the presidential certification. In the same order, the respondent Judge,
believing that the dispute could not be decided promptly, ordered the
strikers to return immediately to work and the University to take them back
under the last terms and conditions existing before the dispute arose, as
per agreement had during the hearing on March 23, 1963; and likewise
enjoined the University, pending adjudication of the case, from dismissing
any employee or laborer without previous authorization from the CIR. The
University filed on April 1, 1963 a motion for reconsideration of the order of
March 30, 1963 by the CIR en banc, and at the same time asking that the
motion for reconsideration be first heard by the CIR en banc. Without the
motion for reconsideration having been acted upon by the CIR en banc,
respondent Judge set the case for hearing on the merits for May 8, 1963.
The University moved for the cancellation of said hearing upon the ground
that the court en banc should first hear the motion for reconsideration and
resolve the issues raised therein before the case is heard on the merits.
This motion for cancellation of the hearing was denied. The respondent
Judge, however, cancelled the scheduled hearing when counsel for the
University manifested that he would take up before the Supreme Court, by
a petition for certiorari, the matter regarding the actuations of the
respondent Judge and the issues raised in the motion for reconsideration,
specially the issue relating to the jurisdiction of the CIR. The order of March
30, 1963 in Case 41-IPA is one of the orders sought to be annulled in the
case, G.R. No. L-21278.
Before the above-mentioned order of March 30, 1963 was issued by
respondent Judge, the University had employed professors and/or
instructors to take the places of those professors and/or instructors who
had struck. On April 1, 1963, the Faculty Club filed with the CIR in Case 41-
IPA a petition to declare in contempt of court certain parties, alleging that
the University refused to accept back to work the returning strikers, in
violation of the return-to-work order of March 30, 1963. The University
filed, on April 5,1963, its opposition to the petition for contempt, denying
the allegations of the Faculty Club and alleging by way of special defense
that there was still the motion for reconsideration of the order of March 30,
1963 which had not yet been acted upon by the CIR en banc. On April 6,
1963, the respondent Judge issued an order stating that "said replacements
are hereby warned and cautioned, for the time being, not to disturb nor in
any manner commit any act tending to disrupt the effectivity of the order of
March 30,1963, pending the final resolution of the same."2 On April 8, 1963,
there placing professors and/or instructors concerned filed, thru counsel, a
motion for reconsideration by the CIR en banc of the order of respondent
Judge of April 6, 1963. This order of April 6, 1963 is one of the orders that
are sought to be annulled in case G.R. No. L-21278.
CIR Case No. 1183-MC relates to a petition for certification election filed by
the Faculty Club on March 8, 1963 before the CIR, praying that it be
certified as the sole and exclusive bargaining representative of all the
employees of the University. The University filed an opposition to the
petition for certification election and at the same time a motion to dismiss
said petition, raising the very same issues raised in Case No. 41-IPA,
claiming that the petition did not comply with the rules promulgated by the
CIR; that the Faculty Club is not a legitimate labor union; that the members
of the Faculty Club cannot unionize for collective bargaining purposes; that
the terms of the individual contracts of the professors, instructors, and
teachers, who are members of the Faculty Club, would expire on March 25
or 31, 1963; and that the CIR has no jurisdiction to take cognizance of the
petition because the Industrial Peace Act is not applicable to the members
of the Faculty Club nor to the University. This case was assigned to Judge
Baltazar Villanueva of the CIR. Before Judge Villanueva could act on the
motion to dismiss, however, the Faculty Club filed on April 3, 1963 a motion
to withdraw the petition on the ground that the labor dispute (Case No. 41-
IPA) had already been certified by the President to the CIR and the issues
raised in Case No. 1183-MC were absorbed by Case No. 41-IPA. The
University opposed the withdrawal, alleging that the issues raised in Case
No. 1183-MC were separate and distinct from the issues raised in Case No.
41-IPA; that the questions of recognition and majority status in Case No.
1183-MC were not absorbed by Case No. 41-IPA; and that the CIR could
not exercise its power of compulsory arbitration unless the legal issue
regarding the existence of employer-employee relationship was first
resolved. The University prayed that the motion of the Faculty Club to
withdraw the petition for certification election be denied, and that its
motion to dismiss the petition be heard. Judge Baltazar Villanueva, finding
that the reasons stated by the Faculty Club in the motion to withdraw were
well taken, on April 6, 1963, issued an order granting the withdrawal. The
University filed, on April 24, 1963, a motion for reconsideration of that
order of April 6, 1963 by the CIR en banc. This order of April 6, 1963 in
Case No. 1183-MC is one of the orders sought to be annulled in the case,
G.R. No. L-21278, now before Us.
CIR Case No. V-30 relates to a complaint for indirect contempt of court filed
against the administrative officials of the University. The Faculty Club,
through the Acting Chief Prosecutor of the CIR, filed with the CIR a
complaint docketed as Case No. V-30, charging President Victoria L.
Araneta, Dean Daniel Salcedo, Executive Vice-President Rodolfo Maslog,
and Assistant to the President Jose Segovia, as officials of the University,
with indirect contempt of court, reiterating the same charges filed in Case
No. 41-IPA for alleged violation of the order dated March 30, 1963. Based
on the complaint thus filed by the Acting Chief Prosecutor of the CIR,
respondent Judge Bautista issued on April 29, 1963 an order commanding
any officer of the law to arrest the above named officials of the University
so that they may be dealt with in accordance with law, and the same time
fixed the bond for their release at P500.00 each. This order of April 29,
1963 is also one of the orders sought to be annulled in the case, G.R. No.
L-2l278.
The principal allegation of the University in its petition for certiorari and
prohibition with preliminary injunction in Case G.R. No. L-21278, now
before Us, is that respondent Judge Jose S. Bautista acted without, or in
excess of, jurisdiction, or with grave abuse of discretion, in taking
cognizance of, and in issuing the questioned orders in, CIR Cases Nos. 41-
IPA 1183-MC and V-30. Let it be noted that when the petition for certiorari
and prohibition with preliminary injunction was filed on May 10, 1963 in this
case, the questioned order in CIR Cases Nos. 41-IPA, 1183-MC and V-30
were still pending action by the CIR en banc upon motions for
reconsideration filed by the University.
On June 10, 1963, the Faculty Club filed its answer to the petition for
certiorari and prohibition with preliminary injunction, admitting some
allegations contained in the petition and denying others, and alleging
special defenses which boil down to the contentions that (1) the CIR had
acquired jurisdiction to take cognizance of Case No. 41-IPA by virtue of the
presidential certification, so that it had jurisdiction to issue the questioned
orders in said Case No. 41-IPA; (2) that the Industrial Peace Act (Republic
Act 875) is applicable to the University as an employer and to the members
of the Faculty Club as employees who are affiliated with a duly registered
labor union, so that the Court of Industrial Relations had jurisdiction to take
cognizance of Cases Nos. 1183-MC and V-30 and to issue the questioned
orders in those two cases; and (3) that the petition for certiorari and
prohibition with preliminary injunction was prematurely filed because the
orders of the CIR sought to be annulled were still the subjects of pending
motions for reconsideration before the CIR en banc when said petition for
certiorari and prohibition with preliminary injunction was filed before this
Court.
CASE G.R. NO. L-21462
This case, G.R. No. L-21462, involves also CIR Case No. 1183-MC. As
already stated Case No. 1183-MC relates to a petition for certification
election filed by the Faculty Club as a labor union, praying that it be
certified as the sole and exclusive bargaining representative of all
employees of the University. This petition was opposed by the University,
and at the same time it filed a motion to dismiss said petition. But before
Judge Baltazar Villanueva could act on the petition for certification election
and the motion to dismiss the same, Faculty Club filed a motion to
withdraw said petition upon the ground that the issue raised in Case No.
1183-MC were absorbed by Case No. 41-IPA which was certified by the
President of the Philippines. Judge Baltazar Villanueva, by order April 6,
1963, granted the motion to withdraw. The University filed a motion for
reconsideration of that order of April 6, 1963 by the CIR en banc. That
motion for reconsideration was pending action by the CIR en banc when
the petition for certiorari and prohibition with preliminary injunction in Case
G.R. no. L-21278 was filed on May 10, 1963. As earlier stated this Court, in
Case G.R. No. L-21278, issued a writ of preliminary injunction on May 10,
1963, ordering respondent Judge Bautista, until further order from this
Court, to desist and refrain from further proceeding in the premises (Cases
Nos. 41-IPA, 1183-MC and V-30 of the Court of Industrial Relations).
On June 5, 1963, that is, after this Court has issued the writ of preliminary
injunction in Case G.R. No. L-21278, the CIR en banc issued a resolution
denying the motion for reconsideration of the order of April 6, 1963 in Case
No. 1183-MC.
On July 8, 1963, the University filed before this Court a petition for
certiorari, by way of an appeal from the resolution of the CIR en banc,
dated June 5, 1963, denying the motion for reconsideration of the order of
April 6, 1963 in Case No. 1183-MC. This petition was docketed as G.R. No.
L-21462. In its petition for certiorari, the University alleges (1) that the
resolution of the Court of Industrial Relations of June 5, 1963 was null and
void because it was issued in violation of the writ of preliminary injunction
issued in Case G.R. No. L-21278; (2) that the issues of employer-employee
relationship, the alleged status as a labor union, majority representation
and designation as bargaining representative in an appropriate unit of the
Faculty Club should have been resolved first in Case No. 1183-MC prior to
the determination of the issues in Case No. 41-IPA and therefore the
motion to withdraw the petition for certification election should not have
been granted upon the ground that the issues in the first case have been
absorbed in the second case; and (3) the lower court acted without or in
excess of jurisdiction in taking cognizance of the petition for certification
election and that the same should have been dismissed instead of having
been ordered withdrawn. The University prayed that the proceedings in
Case No. 1183-MC and the order of April 6, 1963 and the resolution of June
5, 1963 issued therein be annulled, and that the CIR be ordered to dismiss
Case No. 1183-MC on the ground of lack of jurisdiction.
The Faculty Club filed its answer, admitting some, and denying other,
allegations in the petition for certiorari; and specially alleging that the lower
court's order granting the withdrawal of the petition for certification election
was in accordance with law, and that the resolution of the court en banc on
June 5, 1963 was not a violation of the writ of preliminary injunction issued
in Case G.R. No. L-21278 because said writ of injunction was issued against
Judge Jose S. Bautista and not against the Court of Industrial Relations,
much less against Judge Baltazar Villanueva who was the trial judge of
Case No. 1183-MC.
CASE G.R. NO. L-21500
This case, G.R. No. L-21500, involves also CIR Case No. 41-IPA. As earlier
stated, Case No. 41-IPA relates to the strike staged by the members of the
Faculty Club and the dispute was certified by the President of the
Philippines to the CIR. The University filed a motion to dismiss that case
upon the ground that the CIR has no jurisdiction over the case, and on
March 30, 1963 Judge Jose S. Bautista issued an order denying the motion
to dismiss and declaring that the Industrial Peace Act is applicable to both
parties in the case and that the CIR had acquired jurisdiction over the case
by virtue of the presidential certification; and in that same order Judge
Bautista ordered the strikers to return to work and the University to take
them back under the last terms and conditions existing before the dispute
arose; and enjoined the University from dismissing any employee or laborer
without previous authority from the court. On April 1, 1963, the University
filed a motion for reconsideration of the order of March 30, 1963 by the CIR
en banc. That motion for reconsideration was pending action by the CIR en
banc when the petition for certiorari and prohibition with preliminary
injunction in Case G.R. No. L-21278 was filed on May 10, 1963. As we have
already stated, this Court in said case G.R. No. L-21278, issued a writ of
preliminary injunction on May 10, 1963 ordering respondent Judge Jose S.
Bautista, until further order from this Court, to desist and refrain from
further proceeding in the premises (Cases Nos. 41-IPA, 1183-MC and V-30
of the Court of Industrial Relations).
On July 2, 1963, the University received a copy of the resolution of the CIR
en banc, dated May 7, 1963 but actually received and stamped at the Office
of the Clerk of the CIR on June 28, 1963, denying the motion for
reconsideration of the order dated March 30, 1963 in Case No. 41-IPA.
On July 23, 1963, the University filed before this Court a petition for
certiorari, by way of an appeal from the resolution of the Court of Industrial
Relations en banc dated May 7, 1963 (but actually received by said
petitioner on July 2, 1963) denying the motion for reconsideration of the
order of March 30, 1963 in Case No. 41-IPA. This petition was docketed as
G.R. No. L-21500. In its petition for certiorari the University alleges (1) that
the resolution of the CIR en banc, dated May 7, 1963 but filed with the
Clerk of the CIR on June 28, 1963, in Case No. 41-IPA, is null and void
because it was issued in violation of the writ of preliminary injunction issued
by this Court in G.R. No. L-21278; (2) that the CIR, through its Presiding
Judge, had no jurisdiction to take cognizance of Case No. 41-IPA and the
order of March 30, 1963 and the resolution dated May 7, 1963 issued
therein are null and void; (3) that the certification made by the President of
the Philippines is not authorized by Section 10 of Republic Act 875, but is
violative thereof; (4) that the Faculty Club has no right to unionize or
organize as a labor union for collective bargaining purposes and to be
certified as a collective bargaining agent within the purview of the Industrial
Peace Act, and consequently it has no right to strike and picket on the
ground of petitioner's alleged refusal to bargain collectively where such
duty does not exist in law and is not enforceable against an educational
institution; and (5) that the return-to-work order of March 30, 1963 is
improper and illegal. The petition prayed that the proceedings in Case No.
41-IPA be annulled, that the order dated March 30, 1963 and the resolution
dated May 7, 1963 be revoked, and that the lower court be ordered to
dismiss Case 41-IPA on the ground of lack of jurisdiction.
On September 10, 1963, the Faculty Club, through counsel, filed a motion
to dismiss the petition for certiorari on the ground that the petition being
filed by way of an appeal from the orders of the Court of Industrial
Relations denying the motion to dismiss in Case No. 41-IPA, the petition for
certiorari is not proper because the orders appealed from are interlocutory
in nature.
This Court, by resolution of September 26, 1963, ordered that these three
cases (G.R. Nos. L-21278, L-21462 and L-21500) be considered together
and the motion to dismiss in Case G.R. No. L-21500 be taken up when the
cases are decided on the merits after the hearing.
Brushing aside certain technical questions raised by the parties in their
pleadings, We proceed to decide these three cases on the merits of the
issues raised.
The University has raised several issues in the present cases, the pivotal
one being its claim that the Court of Industrial Relations has no jurisdiction
over the parties and the subject matter in CIR Cases 41-IPA, 1183-MC and
V-30, brought before it, upon the ground that Republic Act No. 875 is not
applicable to the University because it is an educational institution and not
an industrial establishment and hence not an "employer" in contemplation
of said Act; and neither is Republic Act No. 875 applicable to the members
of the Faculty Club because the latter are independent contractors and,
therefore, not employees within the purview of the said Act.
In support of the contention that being an educational institution it is
beyond the scope of Republic Act No. 875, the University cites cases
decided by this Court: Boy Scouts of the Philippines vs. Juliana Araos, L-
10091, Jan. 29, 1958; University of San Agustin vs. CIR, et al., L-12222,
May 28, 1958; Cebu Chinese High School vs. Philippine Land-Air-Sea Labor
Union, PLASLU, L-12015, April 22, 1959; La Consolacion College, et al. vs.
CIR, et al., L-13282, April 22, 1960; University of the Philippines, et al. vs.
CIR, et al., L-15416, April 8, 1960; Far Eastern University vs. CIR, L-17620,
August 31, 1962. We have reviewed these cases, and also related cases
subsequent thereto, and We find that they do not sustain the contention of
the University. It is true that this Court has ruled that certain educational
institutions, like the University of Santo Tomas, University of San Agustin,
La Consolacion College, and other juridical entities, like the Boy Scouts of
the Philippines and Manila Sanitarium, are beyond the purview of Republic
Act No. 875 in the sense that the Court of Industrial Relations has no
jurisdiction to take cognizance of charges of unfair labor practice filed
against them, but it is nonetheless true that the principal reason of this
Court in ruling in those cases that those institutions are excluded from the
operation of Republic Act 875 is that those entities are not organized,
maintained and operated for profit and do not declare dividends to
stockholders. The decision in the case of University of San Agustin vs. Court
of Industrial Relations, G.R. No. L-12222, May 28, 1958, is very pertinent.
We quote a portion of the decision:
It appears that the University of San Agustin, petitioner herein, is an
educational institution conducted and managed by a "religious non-stock
corporation duly organized and existing under the laws of the Philippines."
It was organized not for profit or gain or division of the dividends among its
stockholders, but solely for religious and educational purposes. It likewise
appears that the Philippine Association of College and University Professors,
respondent herein, is a non-stock association composed of professors and
teachers in different colleges and universities and that since its organization
two years ago, the university has adopted a hostile attitude to its formation
and has tried to discriminate, harass and intimidate its members for which
reason the association and the members affected filed the unfair labor
practice complaint which initiated this proceeding. To the complaint of
unfair labor practice, petitioner filed an answer wherein it disputed the
jurisdiction of the Court of Industrial Relations over the controversy on the
following grounds:
"(a) That complainants therein being college and/or university professors
were not "industrial" laborers or employees, and the Philippine Association
of College and University Professors being composed of persons engaged in
the teaching profession, is not and cannot be a legitimate labor
organization within the meaning of the laws creating the Court of Industrial
Relations and defining its powers and functions;
"(b) That the University of San Agustin, respondent therein, is not an
institution established for the purpose of gain or division of profits, and
consequently, it is not an "industrial" enterprise and the members of its
teaching staff are not engaged in "industrial" employment (U.S.T. Hospital
Employees Association vs. Sto. Tomas University Hospital, G.R. No. L-6988,
24 May 1954; and San Beda College vs. Court of Industrial Relations and
National Labor Union, G.R. No. L-7649, 29 October 1955; 51 O.G. (Nov.
1955) 5636-5640);
"(c) That, as a necessary consequence, alleged controversy between
therein complainants and respondent is not an "industrial" dispute, and the
Court of Industrial Relations has no jurisdiction, not only on the parties but
also over the subject matter of the complaint."
The issue now before us is: Since the University of San Agustin is not an
institution established for profit or gain, nor an industrial enterprise, but
one established exclusively for educational purposes, can it be said that its
relation with its professors is one of employer and employee that comes
under the jurisdiction of the Court of Industrial Relations? In other words,
do the provisions of the Magna Carta on unfair labor practice apply to the
relation between petitioner and members of respondent association?
The issue is not new. Thus, in the case of Boy Scouts of the Philippines v.
Juliana V. Araos, G.R. No. L-10091, promulgated on January 29, 1958, this
Court, speaking thru Mr. Justice Montemayor, answered the query in the
negative in the following wise:
"The main issue involved in the present case is whether or not a charitable
institution or one organized not for profit but for more elevated purposes,
charitable, humanitarian, etc., like the Boy Scouts of the Philippines, is
included in the definition of "employer" contained in Republic Act 875, and
whether the employees of said institution fall under the definition of
"employee" also contained in the same Republic Act. If they are included,
then any act which may be considered unfair labor practice, within the
meaning of said Republic Act, would come under the jurisdiction of the
Court of Industrial Relations; but if they do not fall within the scope of said
Republic Act, particularly, its definitions of employer and employee, then
the Industrial Court would have no jurisdiction at all.
xxx xxx xxx
"On the basis of the foregoing considerations, there is every reason to
believe that our labor legislation from Commonwealth Act No. 103, creating
the Court of Industrial Relations, down through the Eight-Hour Labor Law,
to the Industrial Peace Act, was intended by the Legislature to apply only to
industrial employment and to govern the relations between employers
engaged in industry and occupations for purposes of profit and gain, and
their industrial employees, but not to organizations and entities which are
organized, operated and maintained not for profit or gain, but for elevated
and lofty purposes, such as, charity, social service, education and
instruction, hospital and medical service, the encouragement and promotion
of character, patriotism and kindred virtues in youth of the nation, etc.
"In conclusion, we find and hold that Republic Act No. 875, particularly, that
portion thereof regarding labor disputes and unfair labor practice, does not
apply to the Boy Scouts of the Philippines, and consequently, the Court of
Industrial Relations had no jurisdiction to entertain and decide the action or
petition filed by respondent Araos. Wherefore, the appealed decision and
resolution of the CIR are hereby set aside, with costs against respondent."
There being a close analogy between the relation and facts involved in the
two cases, we cannot but conclude that the Court of Industrial Relations
has no jurisdiction to entertain the complaint for unfair labor practice
lodged by respondent association against petitioner and, therefore, we
hereby set aside the order and resolution subject to the present petition,
with costs against respondent association.
The same doctrine was confirmed in the case of University of Santo Tomas
v. Hon. Baltazar Villanueva, et al., G.R. No. L-13748, October 30, 1959,
where this Court ruled that:
In the present case, the record reveals that the petitioner University of
Santo Tomas is not an industry organized for profit but an institution of
learning devoted exclusively to the education of the youth. The Court of
First Instance of Manila in its decision in Civil Case No. 28870, which has
long become final and consequently the settled law in the case, found as
established by the evidence adduced by the parties therein (herein
petitioner and respondent labor union) that while the University collects
fees from its students, all its income is used for the improvement and
enlargement of the institution. The University declares no dividend, and the
members of the corporation who founded it, as ordained in its articles of
incorporation, receive no material compensation for the time and sacrifice
they render to the University and its students. The respondent union itself
in a case before the Industrial Court (Case No. 314-MC) has averred that
"the University of Santo Tomas, like the San Beda College, is an educational
institution operated not for profit but for the sole purpose of educating
young men." (See Annex "B" to petitioner's motion to dismiss.). It is
apparent, therefore, that on the face of the record the University of Santo
Tomas is not a corporation created for profit but an educational institution
and therefore not an industrial or business organization.
In the case of La Consolacion College, et al. vs. CIR, et al., G.R. No. L-
13282, April 22, 1960, this Court repeated the same ruling when it said:
The main issue in this appeal by petitioner is that the industry trial court
committed an error in holding that it has jurisdiction to act in this case even
if it involves unfair labor practice considering that the La Consolacion
College is not a business enterprise but an educational institution not
organized for profit.
If the claim that petitioner is an educational institution not operated for
profit is true, which apparently is the case, because the very court a quo
found that it has no stockholder, nor capital . . . then we are of the opinion
that the same does not come under the jurisdiction of the Court of
Industrial Relations in view of the ruling in the case of Boy Scouts of the
Philippines v. Juliana V. Araos, G.R. No. L-10091, decided on January 29,
1958.
It is noteworthy that the cases of the University of San Agustin, the
University of Santo Tomas, and La Consolacion College, cited above, all
involve charges of unfair labor practice under Republic Act No. 875, and the
uniform rulings of this Court are that the Court of Industrial Relations has
no jurisdiction over the charges because said Act does not apply to
educational institutions that are not operated or maintained for profit and
do not declare dividends. On the other hand, in the cases of Far Eastern
University v. CIR, et al., G.R. No. L-17620, August 31, 1962, this Court
upheld the decision of the Court of Industrial Relations finding the Far
Eastern University, also an educational institution, guilty of unfair labor
practice. Among the findings of fact in said case was that the Far Eastern
University made profits from the school year 1952-1953 to 1958-1959. In
affirming the decision of the lower court, this Court had thereby ratified the
ruling of the Court of Industrial Relations which applied the Industrial Peace
Act to educational institutions that are organized, operated and maintained
for profit.
It is also noteworthy that in the decisions in the cases of the Boy Scouts of
the Philippines, the University of San Agustin, the University of Sto. Tomas,
and La Consolacion College, this Court was not unanimous in the view that
the Industrial Peace Act (Republic Act No. 875) is not applicable to
charitable, eleemosynary or non-profit organizations which include
educational institutions not operated for profit. There are members of this
Court who hold the view that the Industrial Peace Act would apply also to
non-profit organizations or entities the only exception being the
Government, including any political subdivision or instrumentality thereof, in
so far as governmental functions are concerned. However, in the Far
Eastern University case this Court is unanimous in supporting the view that
an educational institution that is operated for profit comes within the scope
of the Industrial Peace Act. We consider it a settled doctrine of this Court,
therefore, that the Industrial Peace Act is applicable to any organization or
entity whatever may be its purpose when it was created that is
operated for profit or gain.
Does the University operate as an educational institution for profit? Does it
declare dividends for its stockholders? If it does not, it must be declared
beyond the purview of Republic Act No. 875; but if it does, Republic Act No.
875 must apply to it. The University itself admits that it has declared
dividends.3 The CIR in its order dated March 30, 1963 in CIR Case No. 41-
IPA which order was issued after evidence was heard also found that
the University is not for strictly educational purposes and that "It realizes
profits and parts of such earning is distributed as dividends to private
stockholders or individuals (Exh. A and also 1 to 1-F, 2-x 3-x and 4-x)" 4
Under this circumstance, and in consonance with the rulings in the
decisions of this Court, above cited, it is obvious that Republic Act No. 875
is applicable to herein petitioner Feati University.
But the University claims that it is not an employer within the contemplation
of Republic Act No. 875, because it is not an industrial establishment. At
most, it says, it is only a lessee of the services of its professors and/or
instructors pursuant to a contract of services entered into between them.
We find no merit in this claim. Let us clarify who is an "employer" under the
Act. Section 2(c) of said Act provides:
Sec. 2. Definitions.As used in this Act
(c) The term employer include any person acting in the interest of an
employer, directly or indirectly, but shall not include any labor organization
(otherwise than when acting as an employer) or any one acting in the
capacity or agent of such labor organization.
It will be noted that in defining the term "employer" the Act uses the word
"includes", which it also used in defining "employee". [Sec. 2 (d)], and
"representative" [Sec. 2(h)]; and not the word "means" which the Act uses
in defining the terms "court" [Sec. 2(a)], "labor organization" [Sec. 2(e)],
"legitimate labor organization [Sec. 2(f)], "company union" [Sec. 2(g)],
"unfair labor practice" [Sec. 2(i)], "supervisor" [Sec. 2(k)], "strike" [Sec.
2(l)] and "lock-out" [Sec. 2(m)]. A methodical variation in terminology is
manifest. This variation and distinction in terminology and phraseology
cannot be presumed to have been the inconsequential product of an
oversight; rather, it must have been the result of a deliberate and
purposeful act, more so when we consider that as legislative records show,
Republic Act No. 875 had been meticulously and painstakingly drafted and
deliberated upon. In using the word "includes" and not "means", Congress
did not intend to give a complete definition of "employer", but rather that
such definition should be complementary to what is commonly understood
as employer. Congress intended the term to be understood in a broad
meaning because, firstly, the statutory definition includes not only "a
principal employer but also a person acting in the interest of the employer";
and, secondly, the Act itself specifically enumerated those who are not
included in the term "employer", namely: (1) a labor organization
(otherwise than when acting as an employer), (2) anyone acting in the
capacity of officer or agent of such labor organization [Sec. 2(c)], and (3)
the Government and any political subdivision or instrumentality thereof
insofar as the right to strike for the purpose of securing changes or
modifications in the terms and conditions of employment is concerned
(Section 11). Among these statutory exemptions, educational institutions
are not included; hence, they can be included in the term "employer". This
Court, however, has ruled that those educational institutions that are not
operated for profit are not within the purview of Republic Act No. 875. 5
As stated above, Republic Act No. 875 does not give a comprehensive but
only a complementary definition of the term "employer". The term
encompasses those that are in ordinary parlance "employers." What is
commonly meant by "employer"? The term "employer" has been given
several acceptations. The lexical definition is "one who employs; one who
uses; one who engages or keeps in service;" and "to employ" is "to provide
work and pay for; to engage one's service; to hire." (Webster's New
Twentieth Century Dictionary, 2nd ed., 1960, p. 595). The Workmen's
Compensation Act defines employer as including "every person or
association of persons, incorporated or not, public or private, and the legal
representative of the deceased employer" and "includes the owner or lessee
of a factory or establishment or place of work or any other person who is
virtually the owner or manager of the business carried on in the
establishment or place of work but who, for reason that there is an
independent contractor in the same, or for any other reason, is not the
direct employer of laborers employed there." [Sec. 39(a) of Act No. 3428.]
The Minimum Wage Law states that "employer includes any person acting
directly or indirectly in the interest of the employer in relation to an
employee and shall include the Government and the government
corporations". [Rep. Act No. 602, Sec. 2(b)]. The Social Security Act defines
employer as "any person, natural or juridical, domestic or foreign, who
carries in the Philippines any trade, business, industry, undertaking, or
activity of any kind and uses the services of another person who is under
his orders as regards the employment, except the Government and any of
its political subdivisions, branches or instrumentalities, including
corporations owned or controlled by the Government." (Rep. Act No. 1161,
Sec. 8[c]).
This Court, in the cases of the The Angat River Irrigation System, et al. vs.
Angat River Workers' Union (PLUM), et al., G.R. Nos. L-10934 and L-10944,
December 28, 1957, which cases involve unfair labor practices and hence
within the purview of Republic Act No. 875, defined the term employer as
follows:
An employer is one who employs the services of others; one for whom
employees work and who pays their wages or salaries (Black Law
Dictionary, 4th ed., p. 618).
An employer includes any person acting in the interest of an employer,
directly or indirectly (Sec. 2-c, Rep. Act 875).
Under none of the above definitions may the University be excluded,
especially so if it is considered that every professor, instructor or teacher in
the teaching staff of the University, as per allegation of the University itself,
has a contract with the latter for teaching services, albeit for one semester
only. The University engaged the services of the professors, provided them
work, and paid them compensation or salary for their services. Even if the
University may be considered as a lessee of services under a contract
between it and the members of its Faculty, still it is included in the term
"employer". "Running through the word `employ' is the thought that there
has been an agreement on the part of one person to perform a certain
service in return for compensation to be paid by an employer. When you
ask how a man is employed, or what is his employment, the thought that
he is under agreement to perform some service or services for another is
predominant and paramount." (Ballentine Law Dictionary, Philippine ed., p.
430, citing Pinkerton National Detective Agency v. Walker, 157 Ga. 548, 35
A. L. R. 557, 560, 122 S.E. Rep. 202).
To bolster its claim of exception from the application of Republic Act No.
875, the University contends that it is not state that the employers included
in the definition of 2 (c) of the Act. This contention can not be sustained. In
the first place, Sec. 2 (c) of Republic Act No. 875 does not state that the
employers included in the definition of the term "employer" are only and
exclusively "industrial establishments"; on the contrary, as stated above,
the term "employer" encompasses all employers except those specifically
excluded by the Act. In the second place, even the Act itself does not refer
exclusively to industrial establishments and does not confine its application
thereto. This is patent inasmuch as several provisions of the Act are
applicable to non-industrial workers, such as Sec. 3, which deals with
"employees' right to self-organization"; Sections 4 and 5 which enumerate
unfair labor practices; Section 8 which nullifies private contracts
contravening employee's rights; Section 9 which relates to injunctions in
any case involving a labor dispute; Section 11 which prohibits strikes in the
government; Section 12 which provides for the exclusive collective
bargaining representation for labor organizations; Section 14 which deals
with the procedure for collective bargaining; Section 17 which treats of the
rights and conditions of membership in labor organizations; Sections 18, 19,
20 and 21 which provide respectively for the establishment of conciliation
service, compilation of collective bargaining contracts, advisory labor-
management relations; Section 22 which empowers the Secretary of Labor
to make a study of labor relations; and Section 24 which enumerates the
rights of labor organizations. (See Dissenting Opinion of Justice Concepcion
in Boy Scouts of the Philippines v. Juliana Araos, G.R. No. L-10091, January
29, 1958.)
This Court, in the case of Boy Scouts of the Philippines v. Araos, supra, had
occasion to state that the Industrial Peace Act "refers only to organizations
and entities created and operated for profits, engaged in a profitable trade,
occupation or industry". It cannot be denied that running a university
engages time and attention; that it is an occupation or a business from
which the one engaged in it may derive profit or gain. The University is not
an industrial establishment in the sense that an industrial establishment is
one that is engaged in manufacture or trade where raw materials are
changed or fashioned into finished products for use. But for the purposes of
the Industrial Peace Act the University is an industrial establishment
because it is operated for profit and it employs persons who work to earn a
living. The term "industry", for the purposes of the application of our labor
laws should be given a broad meaning so as to cover all enterprises which
are operated for profit and which engage the services of persons who work
to earn a living.
The word "industry" within State Labor Relations Act controlling labor
relations in industry, cover labor conditions in any field of employment
where the objective is earning a livelihood on the one side and gaining of a
profit on the other. Labor Law Sec. 700 et seq. State Labor Relations Board
vs. McChesney, 27 N.Y.S. 2d 866, 868." (Words and Phrases, Permanent
Edition, Vol. 21, 1960 edition p. 510).
The University urges that even if it were an employer, still there would be
no employer-employee relationship between it and the striking members of
the Faculty Club because the latter are not employees within the purview of
Sec. 2(d) of Republic Act No. 875 but are independent contractors. This
claim is untenable.
Section 2 (d) of Republic Act No. 875 provides:
(d) The term "employee" shall include any employee and shall not be
limited to the employee of a particular employer unless the act explicitly
states otherwise and shall include any individual whose work has ceased as
a consequence of, or in connection with, any current labor dispute or
because of any unfair labor practice and who has not obtained any other
substantially equivalent and regular employment.
This definition is again, like the definition of the term "employer" [Sec.
2(c)], by the use of the term "include", complementary. It embraces not
only those who are usually and ordinarily considered employees, but also
those who have ceased as employees as a consequence of a labor dispute.
The term "employee", furthermore, is not limited to those of a particular
employer. As already stated, this Court in the cases of The Angat River
Irrigation System, et al. v. Angat River Workers' Union (PLUM), et al.,
supra, has defined the term "employer" as "one who employs the services
of others; one for whom employees work and who pays their wages or
salaries. "Correlatively, an employee must be one who is engaged in the
service of another; who performs services for another; who works for salary
or wages. It is admitted by the University that the striking professors
and/or instructors are under contract to teach particular courses and that
they are paid for their services. They are, therefore, employees of the
University.
In support of its claim that the members of the Faculty Club are not
employees of the University, the latter cites as authority Francisco's Labor
Laws, 2nd ed., p. 3, which states:
While the term "workers" as used in a particular statute, has been regarded
as limited to those performing physical labor, it has been held to embrace
stenographers and bookkeepers. Teachers are not included, however.
It is evident from the above-quoted authority that "teachers" are not to be
included among those who perform "physical labor", but it does not mean
that they are not employees. We have checked the source of the authority,
which is 31 Am. Jur., Sec. 3, p. 835, and the latter cites Huntworth v.
Tanner, 87 Wash 670, 152 P. 523, Ann Cas 1917 D 676. A reading of the
last case confirms Our view.
That teachers are "employees' has been held in a number of cases (Aebli v.
Board of Education of City and County of San Francisco, 145 P. 2d 601, 62
Col. App 2.d 706; Lowe & Campbell Sporting Goods Co. v. Tangipahoa
Parish School Board, La. App., 15 So. 2d 98, 100; Sister Odelia v. Church of
St. Andrew, 263 N. W. 111, 112, 195 Minn. 357, cited in Words and
Phrases, Permanent ed., Vol. 14, pp. 806-807). This Court in the Far
Eastern University case, supra, considered university instructors as
employees and declared Republic Act No. 875 applicable to them in their
employment relations with their school. The professors and/or instructors of
the University neither ceased to be employees when they struck, for Section
2 of Rep. Act 875 includes among employees any individual whose work
has ceased as consequence of, or in connection with a current labor
dispute. Striking employees maintain their status as employees of the
employer. (Western Cartridge Co. v. NLRB, C.C.A. 7, 139 F2d 855, 858).
The contention of the University that the professors and/or instructors are
independent contractors, because the University does not exercise control
over their work, is likewise untenable. This Court takes judicial notice that a
university controls the work of the members of its faculty; that a university
prescribes the courses or subjects that professors teach, and when and
where to teach; that the professors' work is characterized by regularity and
continuity for a fixed duration; that professors are compensated for their
services by wages and salaries, rather than by profits; that the professors
and/or instructors cannot substitute others to do their work without the
consent of the university; and that the professors can be laid off if their
work is found not satisfactory. All these indicate that the university has
control over their work; and professors are, therefore, employees and not
independent contractors. There are authorities in support of this view.
The principal consideration in determining whether a workman is an
employee or an independent contractor is the right to control the manner of
doing the work, and it is not the actual exercise of the right by interfering
with the work, but the right to control, which constitutes the test.
(Amalgamated Roofing Co. v. Travelers' Ins. Co., 133 N.E. 259, 261, 300 Ill.
487, quoted in Words and Phrases, Permanent ed., Vol. 14, p. 576).
Where, under Employers' Liability Act, A was instructed when and where to
work . . . he is an employee, and not a contractor, though paid specified
sum per square. (Heine v. Hill, Harris & Co., 2 La. App. 384, 390, in Words
and Phrases, loc, cit.) .
Employees are those who are compensated for their labor or services by
wages rather than by profits. (People vs. Distributors Division, Smoked Fish
Workers Union Local No. 20377, Sup. 7 N. Y. S. 2d 185, 187 in Words and
Phrases, loc, cit.)
Services of employee or servant, as distinguished from those of a
contractor, are usually characterized by regularity and continuity of work for
a fixed period or one of indefinite duration, as contrasted with employment
to do a single act or a series of isolated acts; by compensation on a fixed
salary rather than one regulated by value or amount of work; . . .
(Underwood v. Commissioner of Internal Revenue, C.C.A., 56 F. 2d 67, 71
in Words and Phrases, op. cit., p. 579.)
Independent contractors can employ others to work and accomplish
contemplated result without consent of contractee, while "employee"
cannot substitute another in his place without consent of his employer.
(Luker Sand & Gravel Co. v. Industrial Commission, 23 P. 2d 225, 82 Utah,
188, in Words and Phrases, Vol. 14, p. 576).
Moreover, even if university professors are considered independent
contractors, still they would be covered by Rep. Act No. 875. In the case of
the Boy Scouts of the Philippines v. Juliana Araos, supra, this Court
observed that Republic Act No. 875 was modelled after the Wagner Act, or
the National Labor Relations Act, of the United States, and this Act did not
exclude "independent contractors" from the orbit of "employees". It was in
the subsequent legislation the Labor Management Relation Act (Taft-
Harley
Act) that "independent contractors" together with agricultural laborers,
individuals in domestic service of the home, supervisors, and others were
excluded. (See Rothenberg on Labor Relations, 1949, pp. 330-331).
It having been shown that the members of the Faculty Club are employees,
it follows that they have a right to unionize in accordance with the
provisions of Section 3 of the Magna Carta of Labor (Republic Act No. 875)
which provides as follows:
Sec. 3. Employees' right to self-organization.Employees shall have the
right to self-organization and to form, join or assist labor organizations of
their own choosing for the purpose of collective bargaining through
representatives of their own choosing and to engage in concerted activities
for the purpose of collective bargaining and other mutual aid or
protection. . . .
We agree with the statement of the lower court, in its order of March 30,
1963 which is sought to be set aside in the instant case, that the right of
employees to self-organization is guaranteed by the Constitution, that said
right would exist even if Republic Act No. 875 is repealed, and that
regardless of whether their employers are engaged in commerce or not.
Indeed, it is Our considered view that the members of the faculty or
teaching staff of private universities, colleges, and schools in the
Philippines, regardless of whether the university, college or school is run for
profit or not, are included in the term "employees" as contemplated in
Republic Act No. 875 and as such they may organize themselves pursuant
to the above-quoted provision of Section 3 of said Act. Certainly,
professors, instructors or teachers of private educational institutions who
teach to earn a living are entitled to the protection of our labor laws and
one such law is Republic Act No. 875.
The contention of the University in the instant case that the members of
the Faculty Club can not unionize and the Faculty Club can not exist as a
valid labor organization is, therefore, without merit. The record shows that
the Faculty Club is a duly registered labor organization and this fact is
admitted by counsel for the University.5a
The other issue raised by the University is the validity of the Presidential
certification. The University contends that under Section 10 of Republic Act
No. 875 the power of the President of the Philippines to certify is subject to
the following conditions, namely: (1) that here is a labor dispute, and (2)
that said labor dispute exists in an industry that is vital to the national
interest. The University maintains that those conditions do not obtain in the
instant case. This contention has also no merit.
We have previously stated that the University is an establishment or
enterprise that is included in the term "industry" and is covered by the
provisions of Republic Act No. 875. Now, was there a labor dispute between
the University and the Faculty Club?
Republic Act No. 875 defines a labor dispute as follows:
The term "labor dispute" includes any controversy concerning terms, tenure
or conditions of employment, or concerning the association or
representation of persons in negotiating, fixing, maintaining, changing, or
seeking to arrange terms or conditions of employment regardless of
whether the disputants stand in proximate relation of employer and
employees.
The test of whether a controversy comes within the definition of "labor
dispute" depends on whether the controversy involves or concerns "terms,
tenure or condition of employment" or "representation." It is admitted by
the University, in the instant case, that on January 14, 1963 the President
of the Faculty Club wrote to the President of the University a letter
informing the latter of the organization of the Faculty Club as a labor union,
duly registered with the Bureau of Labor Relations; that again on January
22, 1963 another letter was sent, to which was attached a list of demands
consisting of 26 items, and asking the President of the University to answer
within ten days from date of receipt thereof; that the University questioned
the right of the Faculty Club to be the exclusive representative of the
majority of the employees and asked proof that the Faculty Club had been
designated or selected as exclusive representative by the vote of the
majority of said employees; that on February 1, 1963 the Faculty Club filed
with the Bureau of Labor Relations a notice of strike alleging as reason
therefor the refusal of the University to bargain collectively with the
representative of the faculty members; that on February 18, 1963 the
members of the Faculty Club went on strike and established picket lines in
the premises of the University, thereby disrupting the schedule of classes;
that on March 1, 1963 the Faculty Club filed Case No. 3666-ULP for unfair
labor practice against the University, but which was later dismissed (on
April 2, 1963 after Case 41-IPA was certified to the CIR); and that on March
7, 1963 a petition for certification election, Case No. 1183-MC, was filed by
the Faculty Club in the CIR.6 All these admitted facts show that the
controversy between the University and the Faculty Club involved terms
and conditions of employment, and the question of representation. Hence,
there was a labor dispute between the University and the Faculty Club, as
contemplated by Republic Act No. 875. It having been shown that the
University is an institution operated for profit, that is an employer, and that
there is an employer-employee relationship, between the University and the
members of the Faculty Club, and it having been shown that a labor dispute
existed between the University and the Faculty Club, the contention of the
University, that the certification made by the President is not only not
authorized by Section 10 of Republic Act 875 but is violative thereof, is
groundless.
Section 10 of Republic Act No. 875 provides:
When in the opinion of the President of the Philippines there exists a labor
dispute in an industry indispensable to the national interest and when such
labor dispute is certified by the President to the Court of Industrial
Relations, said Court may cause to be issued a restraining order forbidding
the employees to strike or the employer to lockout the employees, and if no
other solution to the dispute is found, the Court may issue an order fixing
the terms and conditions of employment.
This Court had occasion to rule on the application of the above-quoted
provision of Section 10 of Republic Act No. 875. In the case of Pampanga
Sugar Development Co. v. CIR, et al., G.R. No. L-13178, March 24, 1961, it
was held:
It thus appears that when in the opinion of the President a labor dispute
exists in an industry indispensable to national interest and he certifies it to
the Court of Industrial Relations the latter acquires jurisdiction to act
thereon in the manner provided by law. Thus the court may take either of
the following courses: it may issue an order forbidding the employees to
strike or the employer to lockout its employees, or, failing in this, it may
issue an order fixing the terms and conditions of employment. It has no
other alternative. It can not throw the case out in the assumption that the
certification was erroneous.
xxx xxx xxx
. . . The fact, however, is that because of the strike declared by the
members of the minority union which threatens a major industry the
President deemed it wise to certify the controversy to the Court of
Industrial Relations for adjudication. This is the power that the law gives to
the President the propriety of its exercise being a matter that only devolves
upon him. The same is not the concern of the industrial court. What
matters is that by virtue of the certification made by the President the case
was placed under the jurisdiction of said court. (Emphasis supplied)
To certify a labor dispute to the CIR is the prerogative of the President
under the law, and this Court will not interfere in, much less curtail, the
exercise of that prerogative. The jurisdiction of the CIR in a certified case is
exclusive (Rizal Cement Co., Inc. v. Rizal Cement Workers Union (FFW), et
al., G.R. No. L-12747, July 30, 1960). Once the jurisdiction is acquired
pursuant to the presidential certification, the CIR may exercise its broad
powers as provided in Commonwealth Act 103. All phases of the labor
dispute and the employer-employee relationship may be threshed out
before the CIR, and the CIR may issue such order or orders as may be
necessary to make effective the exercise of its jurisdiction. The parties
involved in the case may appeal to the Supreme Court from the order or
orders thus issued by the CIR.
And so, in the instant case, when the President took into consideration that
the University "has some 18,000 students and employed approximately 500
faculty members", that `the continued disruption in the operation of the
University will necessarily prejudice the thousand of students", and that
"the dispute affects the national interest",7 and certified the dispute to the
CIR, it is not for the CIR nor this Court to pass upon the correctness of the
reasons of the President in certifying the labor dispute to the CIR.
The third issue raised by the University refers to the question of the legality
of the return-to-work order (of March 30, 1963 in Case 41-IPA) and the
order implementing the same (of April 6, 1963). It alleges that the orders
are illegal upon the grounds: (1) that Republic Act No. 875, supplementing
Commonwealth Act No. 103, has withdrawn from the CIR the power to
issue a return-to-work order; (2) that the only power granted by Section 10
of Republic Act No. 875 to the CIR is to issue an order forbidding the
employees to strike or forbidding the employer to lockout the employees,
as the case may be, before either contingency had become a fait accompli;
(3) that the taking in by the University of replacement professors was valid,
and the return-to-work order of March 30, 1963 constituted impairment of
the obligation of contracts; and (4) the CIR could not issue said order
without having previously determined the legality or illegality of the strike.
The contention of the University that Republic Act No. 875 has withdrawn
the power of the Court of Industrial Relations to issue a return-to-work
order exercised by it under Commonwealth Act No. 103 can not be
sustained. When a case is certified by the President to the Court of
Industrial Relations, the case thereby comes under the operation of
Commonwealth Act No. 103, and the Court may exercise the broad powers
and jurisdiction granted to it by said Act. Section 10 of Republic Act No. 875
empowers the Court of Industrial Relations to issue an order "fixing the
terms of employment." This clause is broad enough to authorize the Court
to order the strikers to return to work and the employer to readmit them.
This Court, in the cases of the Philippine Marine Officers Association vs. The
Court of Industrial Relations, Compania Maritima, et al.; and Compaia
Martima, et al. vs. Philippine Marine Radio Officers Association and CIR, et
al., G.R. Nos. L-10095 and L-10115, October 31, 1957, declared:
We cannot subscribe to the above contention. We agree with counsel for
the Philippine Radio Officers' Association that upon certification by the
President under Section 10 of Republic Act 875, the case comes under the
operation of Commonwealth Act 103, which enforces compulsory arbitration
in cases of labor disputes in industries indispensable to the national interest
when the President certifies the case to the Court of Industrial Relations.
The evident intention of the law is to empower the Court of Industrial
Relations to act in such cases, not only in the manner prescribed under
Commonwealth Act 103, but with the same broad powers and jurisdiction
granted by that act. If the Court of Industrial Relations is granted authority
to find a solution to an industrial dispute and such solution consists in the
ordering of employees to return back to work, it cannot be contended that
the Court of Industrial Relations does not have the power or jurisdiction to
carry that solution into effect. And of what use is its power of conciliation
and arbitration if it does not have the power and jurisdiction to carry into
effect the solution it has adopted? Lastly, if the said court has the power to
fix the terms and conditions of employment, it certainly can order the
return of the workers with or without backpay as a term or condition of
employment.
The foregoing ruling was reiterated by this Court in the case of Hind Sugar
Co. v. CIR, et al., G.R. No. L-13364, July 26, 1960.
When a case is certified to the CIR by the President of the Philippines
pursuant to Section 10 of Republic Act No. 875, the CIR is granted authority
to find a solution to the industrial dispute; and the solution which the CIR
has found under the authority of the presidential certification and
conformable thereto cannot be questioned (Radio Operators Association of
the Philippines vs. Philippine Marine Radio Officers Association, et al., L-
10112, Nov. 29, 1957, 54 O.G. 3218).
Untenable also is the claim of the University that the CIR cannot issue a
return-to-work order after strike has been declared, it being contended that
under Section 10 of Republic Act No. 875 the CIR can only prevent a strike
or a lockout when either of this situation had not yet occurred. But in the
case of Bisaya Land Transportation Co., Inc. vs. Court of Industrial
Relations, et al., No. L-10114, Nov. 26, 1957, 50 O.G. 2518, this Court
declared:
There is no reason or ground for the contention that Presidential
certification of labor dispute to the CIR is limited to the prevention of strikes
and lockouts. Even after a strike has been declared where the President
believes that public interest demands arbitration and conciliation, the
President may certify the ease for that purpose. The practice has been for
the Court of Industrial Relations to order the strikers to work, pending the
determination of the union demands that impelled the strike. There is
nothing in the law to indicate that this practice is abolished." (Emphasis
supplied)
Likewise untenable is the contention of the University that the taking in by
it of replacements was valid and the return-to-work order would be an
impairment of its contract with the replacements. As stated by the CIR in its
order of March 30, 1963, it was agreed before the hearing of Case 41-IPA
on March 23, 1963 that the strikers would return to work under the status
quo arrangement and the University would readmit them, and the return-
to-work order was a confirmation of that agreement. This is a declaration of
fact by the CIR which we cannot disregard. The faculty members, by
striking, have not abandoned their employment but, rather, they have only
ceased from their labor (Keith Theatre v. Vachon et al., 187 A. 692). The
striking faculty members have not lost their right to go back to their
positions, because the declaration of a strike is not a renunciation of their
employment and their employee relationship with the University (Rex
Taxicab Co. vs. CIR, et al., 40 O.G., No. 13, 138). The employment of
replacements was not authorized by the CIR. At most, that was a
temporary expedient resorted to by the University, which was subject to the
power of the CIR to allow to continue or not. The employment of
replacements by the University prior to the issuance of the order of March
30, 1963 did not vest in the replacements a permanent right to the
positions they held. Neither could such temporary employment bind the
University to retain permanently the replacements.
Striking employees maintained their status as employees of the employer
(Western Castridge Co. v. National Labor Relations Board, C.C.A. 139 F. 2d
855, 858) ; that employees who took the place of strikers do not displace
them as `employees." ' (National Labor Relations Board v. A. Sartorius &
Co., C.C.A. 2, 140 F. 2d 203, 206, 207.)
It is clear from what has been said that the return-to-work order cannot be
considered as an impairment of the contract entered into by petitioner with
the replacements. Besides, labor contracts must yield to the common good
and such contracts are subject to the special laws on labor unions,
collective bargaining, strikes and similar subjects (Article 1700, Civil Code).
Likewise unsustainable is the contention of the University that the Court of
Industrial Relations could not issue the return-to-work order without having
resolved previously the issue of the legality or illegality of the strike, citing
as authority therefor the case of Philippine Can Company v. Court of
Industrial Relations, G.R. No. L-3021, July 13, 1950. The ruling in said case
is not applicable to the case at bar, the facts and circumstances being very
different. The Philippine Can Company case, unlike the instant case, did not
involve the national interest and it was not certified by the President. In
that case the company no longer needed the services of the strikers, nor
did it need substitutes for the strikers, because the company was losing,
and it was imperative that it lay off such laborers as were not necessary for
its operation in order to save the company from bankruptcy. This was the
reason of this Court in ruling, in that case, that the legality or illegality of
the strike should have been decided first before the issuance of the return-
to-work order. The University, in the case before Us, does not claim that it
no longer needs the services of professors and/or instructors; neither does
it claim that it was imperative for it to lay off the striking professors and
instructors because of impending bankruptcy. On the contrary, it was
imperative for the University to hire replacements for the strikers.
Therefore, the ruling in the Philippine Can case that the legality of the strike
should be decided first before the issuance of the return-to-work order does
not apply to the case at bar. Besides, as We have adverted to, the return-
to-work order of March 30, 1963, now in question, was a confirmation of an
agreement between the University and the Faculty Club during a prehearing
conference on March 23, 1963.
The University also maintains that there was no more basis for the claim of
the members of the Faculty Club to return to their work, as their individual
contracts for teaching had expired on March 25 or 31, 1963, as the case
may be, and consequently, there was also no basis for the return-to-work
order of the CIR because the contractual relationships having ceased there
were no positions to which the members of the Faculty Club could return
to. This contention is not well taken. This argument loses sight of the fact
that when the professors and instructors struck on February 18, 1963, they
continued to be employees of the University for the purposes of the labor
controversy notwithstanding the subsequent termination of their teaching
contracts, for Section 2(d) of the Industrial Peace Act includes among
employees "any individual whose work has ceased a consequence of, or in
connection with, any current labor dispute or of any unfair labor practice
and who has not obtained any other substantially equivalent and regular
employment."
The question raised by the University was resolved in a similar case in the
United States. In the case of Rapid Roller Co. v. NLRB 126 F. 2d 452, we
read:
On May 9, 1939 the striking employees, eighty-four in number, offered to
the company to return to their employment. The company believing it had
not committed any unfair labor practice, refused the employees' offer and
claimed the right to employ others to take the place of the strikers, as it
might see fit. This constituted discrimination in the hiring and tenure of the
striking employees. When the employees went out on a strike because of
the unfair labor practice of the company, their status as employees for the
purpose of any controversy growing out of that unfair labor practice was
fixed. Sec. 2 (3) of the Act. Phelps Dodge Corp. v. National Labor Relations
Board, 313 U.S. 177, 61 S. Ct. 845, 85. L. ed. 1271, 133 A.L.R. 1217.
For the purpose of such controversy they remained employees of the
company. The company contended that they could not be their employees
in any event since the "contract of their employment expired by its own
terms on April 23, 1939."
In this we think the company is mistaken for the reason we have just
pointed out, that the status of the employees on strike became fixed under
Sec. 2 (3) of the Act because of the unfair labor practice of the company
which caused the strike.
The University, furthermore, claims that the information for indirect
contempt filed against the officers of the University (Case No. V-30) as well
as the order of April 29, 1963 for their arrest were improper, irregular and
illegal because (1) the officers of the University had complied in good faith
with the return-to-work order and in those cases that they did not, it was
due to circumstance beyond their control; (2) the return-to-work order and
the order implementing the same were illegal; and (3) even assuming that
the order was legal, the same was not Yet final because there was a motion
to reconsider it.
Again We find no merit in this claim of Petitioner. We have already ruled
that the CIR had jurisdiction to issue the order of March 30, 1963 in CIR
Case 41-IPA, and the return-to-work provision of that order is valid and
legal. Necessarily the order of April 6, 1963 implementing that order of
March 30, 1963 was also valid and legal.
Section 6 of Commonwealth Act No. 103 empowers the Court of Industrial
Relations of any Judge thereof to punish direct and indirect contempts as
provided in Rule 64 (now Rule 71) of the Rules of Court, under the same
procedure and penalties provided therein. Section 3 of Rule 71 enumerates
the acts which would constitute indirect contempt, among which is
"disobedience or resistance to lawful writ, process, order, judgment, or
command of a court," and the person guilty thereof can be punished after a
written charge has been filed and the accused has been given an
opportunity to be heard. The last paragraph of said section provides:
But nothing in this section shall be so construed as to prevent the court
from issuing process to bring the accused party into court, or from holding
him in custody pending such proceedings.
The provision authorizes the judge to order the arrest of an alleged
contemner (Francisco, et al. v. Enriquez, L-7058, March 20, 1954, 94 Phil.,
603) and this, apparently, is the provision upon which respondent Judge
Bautista relied when he issued the questioned order of arrest.
The contention of petitioner that the order of arrest is illegal is
unwarranted. The return-to-work order allegedly violated was within the
court's jurisdiction to issue.
Section 14 of Commonwealth Act No. 103 provides that in cases brought
before the Court of Industrial Relations under Section 4 of the Act (referring
to strikes and lockouts) the appeal to the Supreme Court from any award,
order or decision shall not stay the execution of said award, order or
decision sought to be reviewed unless for special reason the court shall
order that execution be stayed. Any award, order or decision that is
appealed is necessarily not final. Yet under Section 14 of Commonwealth
Act No. 103 that award, order or decision, even if not yet final, is
executory, and the stay of execution is discretionary with the Court of
Industrial Relations. In other words, the Court of Industrial Relations, in
cases involving strikes and lockouts, may compel compliance or obedience
of its award, order or decision even if the award, order or decision is not
yet final because it is appealed, and it follows that any disobedience or non-
compliance of the award, order or decision would constitute contempt
against the Court of Industrial Relations which the court may punish as
provided in the Rules of Court. This power of the Court of Industrial
Relations to punish for contempt an act of non-compliance or disobedience
of an award, order or decision, even if not yet final, is a special one and is
exercised only in cases involving strikes and lockouts. And there is reason
for this special power of the industrial court because in the exercise of its
jurisdiction over cases involving strikes and lockouts the court has to issue
orders or make decisions that are necessary to effect a prompt solution of
the labor dispute that caused the strike or the lockout, or to effect the
prompt creation of a situation that would be most beneficial to the
management and the employees, and also to the public even if the
solution may be temporary, pending the final determination of the case.
Otherwise, if the effectiveness of any order, award, or decision of the
industrial court in cases involving strikes and lockouts would be suspended
pending appeal then it can happen that the coercive powers of the
industrial court in the settlement of the labor disputes in those cases would
be rendered useless and nugatory.
The University points to Section 6 of Commonwealth Act No. 103 which
provides that "Any violation of any order, award, or decision of the Court of
Industrial Relations shall after such order, award or decision has become
final, conclusive and executory constitute contempt of court," and contends
that only the disobedience of orders that are final (meaning one that is not
appealed) may be the subject of contempt proceedings. We believe that
there is no inconsistency between the above-quoted provision of Section 6
and the provision of Section 14 of Commonwealth Act No. 103. It will be
noted that Section 6 speaks of order, award or decision that is executory.
By the provision of Section 14 an order, award or decision of the Court of
Industrial Relations in cases involving strikes and lockouts are immediately
executory, so that a violation of that order would constitute an indirect
contempt of court.
We believe that the action of the CIR in issuing the order of arrest of April
29, 1963 is also authorized under Section 19 of Commonwealth Act No. 103
which provides as follows:
SEC. 19. Implied condition in every contract of employment.In every
contract of employment whether verbal or written, it is an implied condition
that when any dispute between the employer and the employee or laborer
has been submitted to the Court of Industrial Relations for settlement or
arbitration pursuant to the provisions of this Act . . . and pending award, or
decision by the Court of such dispute . . . the employee or laborer shall not
strike or walk out of his employment when so enjoined by the Court after
hearing and when public interest so requires, and if he has already done so,
that he shall forthwith return to it, upon order of the Court, which shall be
issued only after hearing when public interest so requires or when the
dispute cannot, in its opinion, be promptly decided or settled; and if the
employees or laborers fail to return to work, the Court may authorize the
employer to accept other employees or laborers. A condition shall further
be implied that while such dispute . . . is pending, the employer shall refrain
from accepting other employees or laborers, unless with the express
authority of the Court, and shall permit the continuation in the service of his
employees or laborers under the last terms and conditions existing before
the dispute arose. . . . A violation by the employer or by the employee or
laborer of such an order or the implied contractual condition set forth in this
section shall constitute contempt of the Court of Industrial Relations and
shall be punished by the Court itself in the same manner with the same
penalties as in the case of contempt of a Court of First Instance. . . .
We hold that the CIR acted within its jurisdiction when it ordered the arrest
of the officers of the University upon a complaint for indirect contempt filed
by the Acting Special Prosecutor of the CIR in CIR Case V-30, and that
order was valid. Besides those ordered arrested were not yet being
punished for contempt; but, having been charged, they were simply
ordered arrested to be brought before the Judge to be dealt with according
to law. Whether they are guilty of the charge or not is yet to be determined
in a proper hearing.
Let it be noted that the order of arrest dated April 29, 1963 in CIR Case V-
30 is being questioned in Case G.R. No. L-21278 before this Court in a
special civil action for certiorari. The University did not appeal from that
order. In other words, the only question to be resolved in connection with
that order in CIR Case V-30 is whether the CIR had jurisdiction, or had
abused its discretion, in issuing that order. We hold that the CIR had
jurisdiction to issue that order, and neither did it abuse its discretion when
it issued that order.
In Case G.R. No. L-21462 the University appealed from the order of Judge
Villanueva of the CIR in Case No. 1183-MC, dated April 6, 1963, granting
the motion of the Faculty Club to withdraw its petition for certification
election, and from the resolution of the CIR en banc, dated June 5, 1963,
denying the motion to reconsider said order of April 6, 1963. The ground of
the Faculty Club in asking for the withdrawal of that petition for certification
election was because the issues involved in that petition were absorbed by
the issues in Case 41-IPA. The University opposed the petition for
withdrawal, but at the same time it moved for the dismissal of the petition
for certification election.
It is contended by the University before this Court, in G.R. L-21462, that
the issues of employer-employee relationship between the University and
the Faculty Club, the alleged status of the Faculty Club as a labor union, its
majority representation and designation as bargaining representative in an
appropriate unit of the Faculty Club should have been resolved first in Case
No. 1183-MC prior to the determination of the issues in Case No. 41-IPA,
and, therefore, the motion to withdraw the petition for certification election
should not have been granted upon the ground that the issues in the first
case were absorbed in the second case.
We believe that these contentions of the University in Case G.R. No. L-
21462 have been sufficiently covered by the discussion in this decision of
the main issues raised in the principal case, which is Case G.R. No. L-
21278. After all, the University wanted CIR Case 1183-MC dismissed, and
the withdrawal of the petition for certification election had in a way
produced the situation desired by the University. After considering the
arguments adduced by the University in support of its petition for certiorari
by way of appeal in Case G.R. No. L-21278, We hold that the CIR did not
commit any error when it granted the withdrawal of the petition for
certification election in Case No. 1183-MC. The principal case before the
CIR is Case No. 41-IPA and all the questions relating to the labor disputes
between the University and the Faculty Club may be threshed out, and
decided, in that case.
In Case G.R. No. L-21500 the University appealed from the order of the CIR
of March 30, 1963, issued by Judge Bautista, and from the resolution of the
CIR en banc promulgated on June 28, 1963, denying the motion for the
reconsideration of that order of March 30, 1963, in CIR Case No. 41-IPA.
We have already ruled that the CIR has jurisdiction to issue that order of
March 30, 1963, and that order is valid, and We, therefore, hold that the
CIR did not err in issuing that order of March 30, 1963 and in issuing the
resolution promulgated on June 28, 1963 (although dated May 7, 1963)
denying the motion to reconsider that order of March 30, 1963.
IN VIEW OF THE FOREGOING, the petition for certiorari and prohibition
with preliminary injunction in Case G.R. No. L-21278 is dismissed and the
writs prayed for therein are denied. The writ of preliminary injunction
issued in Case G.R. No. L-21278 is dissolved. The orders and resolutions
appealed from, in Cases Nos. L-21462 and L-21500, are affirmed, with
costs in these three cases against the petitioner-appellant Feati University.
It is so ordered.
Concepcion, C.J., Dizon, Regala, Makalintal, Bengzon, J.P., Sanchez and
Castro, JJ., concur.
Reyes, J.B.L., J., concurs but reserves his vote on the teacher's right to
strike.

FIRST DIVISION G.R. No. 118101 September 16, 1996

EDDIE DOMASIG, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION), CATA
GARMENTS CORPORATION and/or OTTO ONG and CATALINA CO.,
respondents.

This petition for certiorari under Rule 65 of the Rules of Court seeks to
nullify and set aside the Resolution 1 of respondent National Labor Relations
Commission (NLRC) rendered on 20 September 1994 remanding the
records of the case to the arbitration branch of origin for further
proceedings.
The antecedent facts as narrated by public respondent in the assailed
resolution are as follows:
The complaint was instituted by Eddie Domasig against respondent Cata
Garments Corporation, a company engaged in garments business and its
owner/manager Otto Ong and Catalina Co for illegal dismissal, unpaid
commission and other monetary claim[s]. Complainant alleged that he
started working with the respondent on July 6, 1986 as Salesman when the
company was still named Cato Garments Corporation; that three (3) years
ago, because of a complaint against respondent by its workers, its changed
its name to Cata Garments Corporation; and that on August 29, 1992, he
was dismissed when respondent learned that he was being pirated by a
rival corporation which offer he refused. Prior to his dismissal, complainant
alleged that he was receiving a salary of P1,500.00 a month plus
commission. On September 3, 1992 he filed the instant complaint.
Respondent denied complainant's claim that he is a regular employee
contending that he is a mere commission agent who receives a commission
of P5.00 per piece of article sold at regular price and P2.50 per piece sold in
[sic] bargain price; that in addition to commission, complainant received a
fixed allowance of P1,500.00 a month; that he had no regular time
schedule; and that the company come [sic] into existence only on
September 17, 1991. In support of its claim that complainant is a
commission agent, respondent submitted as Annexes "B" and "B-1" the List
of Sales Collections, Computation of Commission due, expenses incurred,
cash advances received for the month of January and March 1992 (Rollo, p.
22-27). Respondent further contends that complainant failed to turn over to
the respondent his collection from two (2) buyers as per affidavit executed
by these buyers (Rollo p. 28-29) and for which, according to respondent it
initiated criminal proceedings against the complainant.
The Labor Arbiter held that complainant was illegally dismissed and entitled
to reinstatement and backwages as well as underpayment of salary; 13th
month pay; service incentive leave and legal holiday. The Arbiter also
awarded complainant his claim for unpaid commission in the amount of
P143,955.00. 2
Private respondents appealed the decision of the labor arbiter to public
respondent. As aforesaid, the NLRC resolved to remand the case to the
labor arbiter for further proceeding. It declared as follows:
We find the decision of the Labor Arbiter not supported by evidence on
record. The issue of whether or not complainant was a commission agent
was not fully resolved in the assailed decision. It appears that the Labor
Arbiter failed to appreciate the evidences submitted by respondent as
Annexes "B" and "B-1" (Rollo p. 22-27) in support of its allegation as
regard[s] the nature of complainant's employment. Neither is there a
showing that the parties were required to adduce further to support their
respective claim. The resolution of the nature of complainant's employment
is vital to the case at bar considering that it would be determinative to his
entitlement of monetary benefits. The same is similarly true as regard the
claim [sic] for unpaid commission. The amount being claim [sic] for unpaid
commission as big as it is requires substantial proof to establish the
entitlement of the complainant proof to establish the entitlement of the
complainant to the same. We take not of the respondent's claim that "while
they admit that complainant has an unpaid commission due him, the same
is only for his additional sale of 4,027 pieces at regular price and 1,047
pieces at bargain price for a total sum of (P20,135.00 + 2,655.00) or
P22,820.00 as appearing in the list of Sales and unpaid commission" (Annex
"C" and "C-1" Appeal, Rollo p. 100-102). Said amount according to
respondent is being withheld by them pending the accounting of money
collected by complainant from his two (2) buyers which was not remitted to
them. Considering the conflicting version of the parties regarding the issues
on hand, it was incumbent on the Labor Arbiter to conduct further
proceedings thereon. The ends of justice would better be served if both
partied are given the opportunity to ventilate further their positions. 3
In their comment on the petition at bar, private respondents agree with the
finding of the NLRC that the nature of petitioner's employment with private
respondents is vital to the case as it will determine the monetary benefits to
which he is entitled. They further aver that the evidence presented upon
which the labor arbiter based her decision is insufficient, so that the NLRC
did not commit grave abuse of discretion in remanding the case to the
arbitration branch of origin for further proceedings.
The comment of the Solicitor General is substantially the same as that of
private respondents, i.e., there is no sufficient evidence to prove employer-
employee relationship between the parties. Furthermore, he avers that the
order of the NLRC to the labor arbiter for further proceedings does not
automatically translate to a protracted trial on the merits for such can be
faithfully complied with through the submission of additional documents or
pleadings only.
The only issue to be resolved in this petition is whether or not the NLRC
gravely abused its discretion in vacating and setting aside the decision of
the labor arbiter and remanding the case to the arbitration branch of origin
for further proceedings.
In essence, respondent NLRC was not convinced that the evidence
presented by the petitioner, consisting of the identification card issued to
him by private respondent corporation and the cash vouchers reflecting his
monthly salaries covering the months stated therein, settled the issue of
employer-employee relationship between private respondents and
petitioner.
It has long been established that in administrative and quasi-judicial
proceedings, substantial evidence is sufficient as a basis for judgment on
the existence of employer-employee relationship. No particular form of
evidence is required is required to prove the existence of such employer-
employee relationship. Any competent and relevant evidence to prove the
relationship may be admitted. 4
Substantial evidence has been defined to be such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion, and its
absence is not shown by stressing that there is contrary evidence on
record, direct or circumstantial, for the appellate court cannot substitute its
own judgment or criterion for that of the trial court in determining wherein
lies the weight of evidence or what evidence is entitled to belief. 5
In a business establishment, an identification card is usually provided not
only as a security measure but mainly to identify the holder thereof as a
bona fide employee of the firm that issues it. Together with the cash
vouchers covering petitioner's salaries for the months stated therein, we
agree with the labor arbiter that these matters constitute substantial
evidence adequate to support a conclusion that petitioner was indeed an
employee of private respondent.
Section 4, Rule V of the Rules of Procedure of the National Labor Relations
Commission provides thus:
Sec. 4. Determination of Necessity of Hearing. Immediately after the
submission of the parties of their position papers/memoranda, the Labor
Arbiter shall motu propio determine whether there is need for a formal trial
or hearing. At this stage, he may, at his discretion and for the purpose of
making such determination, ask clarificatory questions to further elicit facts
or information, including but not limited to the subpoena of relevant
documentary evidence, if any, from any party or witness.
It is clear from the law that it is the arbiters who are authorized to
determine whether or not there is a necessity for conducting formal
hearings in cases brought before them for adjudication. Such determination
is entitled to great respect in the absence of arbitrariness. 6
In the case at bar, we do not believe that the labor arbiter acted arbitrarily.
Contrary to the finding of the NLRC, her decision at least on the existence
of an employer-employee relationship between private respondents and
petitioner, is supported by substantial evidence on record.
The list of sales collection including computation of commissions due,
expenses incurred and cash advances received (Exhibits "B" and "B-1")
which, according to public respondent, the labor arbiter failed to appreciate
in support of private respondents" allegation as regards the nature of
petitioner's employment as a commission agent, cannot overcome the
evidence of the ID card and salary vouchers presented petitioner which
private respondents have not denied. The list presented by private
respondents would even support petitioner's allegations that, aside from a
monthly salary of P1,500.00, he also received commissions for his work as
a salesman of private respondents.
Having been in the employ of private respondents continuously for more
than one year, under the law, petitioner is considered a regular employee.
Proof beyond reasonable doubt is not required as a basis for judgment on
the legality of an employer's dismissal of an employee, nor even
preponderance of evidence for that matter, substantial evidence being
sufficient. 7 Petitioner's contention that private respondents terminated his
employment due to their suspicion that he was being enticed by another
firm to work for it was not refuted by private respondents. The labor
arbiter's conclusion that petitioner's dismissal is therefore illegal, is not
necessarily arbitrary or erroneous. It is entitled to great weight and respect.
It was error and grave abuse of discretion for the NLRC to remand the case
for further proceedings to determine whether or not petitioner was private
respondents' employee. This would only prolong the final disposition of the
complaint. It is stressed that, in labor cases, simplification of procedures,
without regard to technicalities and without sacrificing the fundamental
requisites of due process, is mandated to ensure the speedy administration
of justice. 8

After all, Article 218 of the Labor Code grants the Commission and the labor
arbiter broad powers, including issuance of subpoena, requiring the
attendance and testimony of witnesses or the production of such
documentary evidence as may be material to a just determination of the
matter under investigation.

Additionally, the National Labor Relations Commission and the labor arbiter
have authority under the Labor Code to decide a case based on the position
papers and documents submitted without resorting to the technical rules of
evidence. 9

However, in view of the need for further and correct computation of the
petitioner's commissions in the light of the exhibits presented and the
dismissal of the criminal cases filed against petitioner, the labor arbiter is
required to undertake a new computation of the commissions to which
petitioner may be entitled, within thirty (30) days from the submission by
the partied of all necessary documents.

WHEREFORE, the resolutions of the public respondent dated 20 September

1994 and 9 November 1994 are SET ASIDE. The decision of the labor
arbiter dated 19 may 1993 us REINSTATED and AFFIRMED subject to the
modification above-stated as regards a re-computation by the labor arbiter
of the commissions to which petitioner maybe actually entitled.

SO ORDERED.

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

FIRST DIVISION G.R. No. 76452 July 26, 1994

PHILIPPINE AMERICAN LIFE INSURANCE COMPANY and RODRIGO DE LOS

REYES, petitioners,
vs.
HON. ARMANDO ANSALDO, in his capacity as Insurance Commissioner, and
RAMON MONTILLA PATERNO, JR., respondents.

Ponce Enrile, Cayetano, Reyes and Manalastas for petitioners.

Oscar Z. Benares for private respondent.
This is a petition for certiorari and prohibition under Rule 65 of the Revised
Rules of Court, with preliminary injunction or temporary restraining order,
to annul and set aside the Order dated November 6, 1986 of the Insurance
Commissioner and the entire proceedings taken in I.C. Special Case No. 1-
86.
We grant the petition.
The instant case arose from a letter-complaint of private respondent Ramon
M. Paterno, Jr. dated April 17, 1986, to respondent Commissioner, alleging
certain problems encountered by agents, supervisors, managers and public
consumers of the Philippine American Life Insurance Company (Philamlife)
as a result of certain practices by said company.
In a letter dated April 23, 1986, respondent Commissioner requested
petitioner Rodrigo de los Reyes, in his capacity as Philamlife's president, to
comment on respondent Paterno's letter.
In a letter dated April 29, 1986 to respondent Commissioner, petitioner De
los Reyes suggested that private respondent "submit some sort of a 'bill of
particulars' listing and citing actual cases, facts, dates, figures, provisions of
law, rules and regulations, and all other pertinent data which are necessary
to enable him to prepare an intelligent reply" (Rollo, p. 37). A copy of this
letter was sent by the Insurance Commissioner to private respondent for his
comments thereon.
On May 16, 1986, respondent Commissioner received a letter from private
respondent maintaining that his letter-complaint of April 17, 1986 was
sufficient in form and substance, and requested that a hearing thereon be
conducted.
Petitioner De los Reyes, in his letter to respondent Commissioner dated
June 6, 1986, reiterated his claim that private respondent's letter of May
16, 1986 did not supply the information he needed to enable him to answer
the letter-complaint.
On July 14, a hearing on the letter-complaint was held by respondent
Commissioner on the validity of the Contract of Agency complained of by
private respondent.
In said hearing, private respondent was required by respondent
Commissioner to specify the provisions of the agency contract which he
claimed to be illegal.
On August 4, private respondent submitted a letter of specification to
respondent Commissioner dated July 31, 1986, reiterating his letter of April
17, 1986 and praying that the provisions on charges and fees stated in the
Contract of Agency executed between Philamlife and its agents, as well as
the implementing provisions as published in the agents' handbook, agency
bulletins and circulars, be declared as null and void. He also asked that the
amounts of such charges and fees already deducted and collected by
Philamlife in connection therewith be reimbursed to the agents, with
interest at the prevailing rate reckoned from the date when they were
deducted.
Respondent Commissioner furnished petitioner De los Reyes with a copy of
private respondent's letter of July 31, 1986, and requested his answer
thereto.
Petitioner De los Reyes submitted an Answer dated September 8, 1986,
stating inter alia that:
(1) Private respondent's letter of August 11, 1986 does not contain any of
the particular information which Philamlife was seeking from him and which
he promised to submit.
(2) That since the Commission's quasi-judicial power was being invoked
with regard to the complaint, private respondent must file a verified formal
complaint before any further proceedings.
In his letter dated September 9, 1986, private respondent asked for the
resumption of the hearings on his complaint.
On October 1, private respondent executed an affidavit, verifying his letters
of April 17, 1986, and July 31, 1986.
In a letter dated October 14, 1986, Manuel Ortega, Philamlife's Senior
Assistant Vice-President and Executive Assistant to the President, asked
that respondent Commission first rule on the questions of the jurisdiction of
the Insurance Commissioner over the subject matter of the letters-
complaint and the legal standing of private respondent.
On October 27, respondent Commissioner notified both parties of the
hearing of the case on November 5, 1986.
On November 3, Manuel Ortega filed a Motion to Quash Subpoena/Notice
on the following grounds;
1. The Subpoena/Notice has no legal basis and is premature because:
(1) No complaint sufficient in form and contents has been filed;
(2) No summons has been issued nor received by the respondent De los
Reyes, and hence, no jurisdiction has been acquired over his person;
(3) No answer has been filed, and hence, the hearing scheduled on
November 5, 1986 in the Subpoena/Notice, and wherein the respondent is
required to appear, is premature and lacks legal basis.
II. The Insurance Commission has no jurisdiction over;
(1) the subject matter or nature of the action; and
(2) over the parties involved (Rollo, p. 102).
In the Order dated November 6, 1986, respondent Commissioner denied
the Motion to Quash. The dispositive portion of said Order reads:
NOW, THEREFORE, finding the position of complainant thru counsel tenable
and considering the fact that the instant case is an informal administrative
litigation falling outside the operation of the aforecited memorandum
circular but cognizable by this Commission, the hearing officer, in open
session ruled as it is hereby ruled to deny the Motion to Quash
Subpoena/Notice for lack of merit (Rollo, p. 109).
Hence, this petition.
II
The main issue to be resolved is whether or not the resolution of the
legality of the Contract of Agency falls within the jurisdiction of the
Insurance Commissioner.
Private respondent contends that the Insurance Commissioner has
jurisdiction to take cognizance of the complaint in the exercise of its quasi-
judicial powers. The Solicitor General, upholding the jurisdiction of the
Insurance Commissioner, claims that under Sections 414 and 415 of the
Insurance Code, the Commissioner has authority to nullify the alleged illegal
provisions of the Contract of Agency.
III
The general regulatory authority of the Insurance Commissioner is
described in Section 414 of the Insurance Code, to wit:
The Insurance Commissioner shall have the duty to see that all laws
relating to insurance, insurance companies and other insurance matters,
mutual benefit associations and trusts for charitable uses are faithfully
executed and to perform the duties imposed upon him by this Code, . . .
On the other hand, Section 415 provides:
In addition to the administrative sanctions provided elsewhere in this Code,
the Insurance Commissioner is hereby authorized, at his discretion, to
impose upon insurance companies, their directors and/or officers and/or
agents, for any willful failure or refusal to comply with, or violation of any
provision of this Code, or any order, instruction, regulation or ruling of the
Insurance Commissioner, or any commission of irregularities, and/or
conducting business in an unsafe and unsound manner as may be
determined by the the Insurance Commissioner, the following:
(a) fines not in excess of five hundred pesos a day; and
(b) suspension, or after due hearing, removal of directors and/or officers
and/or agents.
A plain reading of the above-quoted provisions show that the Insurance
Commissioner has the authority to regulate the business of insurance,
which is defined as follows:
(2) The term "doing an insurance business" or "transacting an insurance
business," within the meaning of this Code, shall include
(a) making or proposing to make, as insurer, any insurance contract;
(b) making, or proposing to make, as surety, any contract of suretyship as
a vocation and not as merely incidental to any other legitimate business or
activity of the surety; (c) doing any kind of business, including a
reinsurance business, specifically recognized as constituting the doing of an
insurance business within the meaning of this Code; (d) doing or proposing
to do any business in substance equivalent to any of the foregoing in a
manner designed to evade the provisions of this Code. (Insurance Code,
Sec. 2[2]; Emphasis supplied).
Since the contract of agency entered into between Philamlife and its agents
is not included within the meaning of an insurance business, Section 2 of
the Insurance Code cannot be invoked to give jurisdiction over the same to
the Insurance Commissioner. Expressio unius est exclusio alterius.
With regard to private respondent's contention that the quasi-judicial power
of the Insurance Commissioner under Section 416 of the Insurance Code
applies in his case, we likewise rule in the negative. Section 416 of the
Code in pertinent part, provides:
The Commissioner shall have the power to adjudicate claims and
complaints involving any loss, damage or liability for which an insurer may
be answerable under any kind of policy or contract of insurance, or for
which such insurer may be liable under a contract of suretyship, or for
which a reinsurer may be used under any contract or reinsurance it may
have entered into, or for which a mutual benefit association may be held
liable under the membership certificates it has issued to its members,
where the amount of any such loss, damage or liability, excluding interest,
costs and attorney's fees, being claimed or sued upon any kind of
insurance, bond, reinsurance contract, or membership certificate does not
exceed in any single claim one hundred thousand pesos.
A reading of the said section shows that the quasi-judicial power of the
Insurance Commissioner is limited by law "to claims and complaints
involving any loss, damage or liability for which an insurer may be
answerable under any kind of policy or contract of insurance, . . ." Hence,
this power does not cover the relationship affecting the insurance company
and its agents but is limited to adjudicating claims and complaints filed by
the insured against the insurance company.
While the subject of Insurance Agents and Brokers is discussed under
Chapter IV, Title I of the Insurance Code, the provisions of said Chapter
speak only of the licensing requirements and limitations imposed on
insurance agents and brokers.
The Insurance Code does not have provisions governing the relations
between insurance companies and their agents. It follows that the
Insurance Commissioner cannot, in the exercise of its quasi-judicial powers,
assume jurisdiction over controversies between the insurance companies
and their agents.
We have held in the cases of Great Pacific Life Assurance Corporation v.
Judico, 180 SCRA 445 (1989), and Investment Planning Corporation of the
Philippines v. Social Security Commission, 21 SCRA 904 (1962), that an
insurance company may have two classes of agents who sell its insurance
policies: (1) salaried employees who keep definite hours and work under
the control and supervision of the company; and (2) registered
representatives, who work on commission basis.
Under the first category, the relationship between the insurance company
and its agents is governed by the Contract of Employment and the
provisions of the Labor Code, while under the second category, the same is
governed by the Contract of Agency and the provisions of the Civil Code on
the Agency. Disputes involving the latter are cognizable by the regular
courts.
WHEREFORE, the petition is GRANTED. The Order dated November 6, 1986
of the Insurance Commission is SET ASIDE.
SO ORDERED.
Cruz, Davide, Jr. and Kapunan, JJ., concur.
Bellosillo, J,. is on leave.
MAM REALTY DEVELOPMENT CORPORATION and MANUEL CENTENO,
petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and CELSO B. BALBASTRO
respondents.
A prime focus in the instant petition is the question of when to hold a
director or officer of a corporation solidarily obligated with the latter for a
corporate liability.
The case originated from a complaint filed with the Labor Arbiter by private
respondent Celso B. Balbastro against herein petitioners, MAM Realty
Development Corporation ("MAM") and its Vice President Manuel P.
Centeno, for wage differentials, "ECOLA," overtime pay, incentive leave
pay, 13th month pay (for the years 1988 and 1989), holiday pay and rest
day pay. Balbastro alleged that he was employed by MAM as a pump
operator in 1982 and had since performed such work at its Rancho Estate,
Marikina, Metro Manila. He earned a basic monthly salary of P1,590.00 for
seven days of work a week that started from 6:00 a.m. to up until 6:00
p.m. daily.
MAM countered that Balbastro had previously been employed by Francisco
Cacho and Co., Inc., the developer of Rancho Estates. Sometime in May
1982, his services were contracted by MAM for the operation of the Rancho
Estates' water pump. He was engaged, however, not as an employee, but
as a service contractor, at an agreed fee of P1,590.00 a month. Similar
arrangements were likewise entered into by MAM with one Rodolfo Mercado
and with a security guard of Rancho Estates III Homeowners' Association.
Under the agreement, Balbastro was merely made to open and close on a
daily basis the water supply system of the different phases of the
subdivision in accordance with its water rationing scheme. He worked for
only a maximum period of three hours a day, and he made use of his free
time by offering plumbing services to the residents of the subdivision. He
was not at all subject to the control or supervision of MAM for, in fact, his
work could so also be done either by Mercado or by the security guard. On
23 May 1990, prior to the filing of the complaint, MAM executed a Deed of
Transfer, 1 effective 01 July 1990, in favor of the Rancho Estates Phase III
Homeowners Association, Inc., conveying to the latter all its rights and
interests over the water system in the subdivision.
In a decision, dated 23 December 1991, the Labor Arbiter dismissed the
complaint for lack of merit.
On appeal to it, respondent National Labor Relations Commission ("NLRC")
rendered judgment (a) setting aside the questioned decision of the Labor
Arbiter and (b) referring the case, pursuant to Article 218(c) of the Labor
Code, to Arbiter Cristeta D. Tamayo for further hearing and submission of a
report within 20 days from receipt of the Order. 2 On 21 March 1994,
respondent Commissioner, after considering the report of Labor Arbiter
Tamayo, ordered:
WHEREFORE, the respondents are hereby directed to pay jointly and
severally complainant the sum of P86,641.05 as above-computed. 3
The instant petition asseverates that respondent NLRC gravely abused its
discretion, amounting to lack or excess of jurisdiction, (1) in finding that an
employer-employee relationship existed between petitioners and private
respondent and (2) in holding petitioners jointly and severally liable for the
money claims awarded to private respondent.
Once again, the matter of ascertaining the existence of an employer-
employee relationship is raised. Repeatedly, we have said that this factual
issue is determined by:
(a) the selection and engagement of the employee;
(b) the payment of wages;
(c) the power of dismissal; and
(d) the employer's power to control the employee with respect to the result
of the work to be done and to the means and methods by which the work is
to be accomplished.
We see no grave abuse of discretion on the part of NLRC in finding a full
satisfaction, in the case at bench, of the criteria to establish that employer-
employee relationship. The power of control, the most important feature of
that relationship and, here, a point of controversy, refers merely to the
existence of the power and not to the actual exercise thereof. It is not
essential for the employer to actually supervise the performance of duties
of the employee; it is enough that the former has a right to wield the
power. 4 It is hard to accede to the contention of petitioners that private
respondent should be considered totally free from such control merely
because the work could equally and easily be done either by Mercado or by
the subdivision's security guard. Not without any significance is that private
respondent's employment with MAM has been registered by petitioners with
the Social Security System. 5
It would seem that the money claims awarded to private respondent were
computed from 06 March 1988 to 06 March 1991, 6 the latter being the date
of the filing of the complaint. The NLRC might have missed the transfer by
MAM of the water system to the Homeowners Association on 01 July 1990,
a matter that would appear not to be in dispute. Accordingly, the period for
the computation of the money claims should only be for the period from 06
March 1988 to 01 July 1990 (when petitioner corporation could be deemed
to have ceased from the activity for which private respondent was
employed), and petitioner corporation should, instead, be made liable for
the employee's separation pay equivalent to one-half (1/2) month pay for
every year of
service. 7 While the transfer was allegedly due to MAM's financial
constraints, unfortunately for petitioner corporation, however, it failed to
sufficiently establish that its business losses or financial reverses were
serious enough that possibly can warrant an exemption under the law. 8
We agree with petitioners, however, that the NLRC erred in holding
Centeno jointly and severally liable with MAM. A corporation, being a
juridical entity, may act only through its directors, officers and employees.
Obligations incurred by them, acting as such corporate agents, are not
theirs but the direct accountabilities of the corporation they represent.
True, solidary liabilities may at times be incurred but only when exceptional
circumstances warrant such as, generally, in the following cases: 9
1. When directors and trustees or, in appropriate cases, the officers of a
corporation
(a) vote for or assent to patently unlawful acts of the corporation;
(b) act in bad faith or with gross negligence in directing the corporate
affairs;
(c) are guilty of conflict of interest to the prejudice of the corporation, its
stockholders or members, and other persons. 10
2. When a director or officer has consented to the issuance of watered
stocks or who, having knowledge thereof, did not forthwith file with the
corporate secretary his written objection thereto. 11
3. When a director, trustee or officer has contractually agreed or stipulated
to hold himself personally and solidarily liable with the Corporation. 12
4 When a director, trustee or officer is made, by specific provision of law,
personally liable for his corporate action. 13
In labor cases, for instance, the Court has held corporate directors and
officers solidarily liable with the corporation for the termination of
employment of employees done with malice or in bad faith. 14
In the case at Bench, there is nothing substantial on record that can justify,
prescinding from the foregoing, petitioner Centeno's solidary liability with
the corporation.
An extra note. Private respondent avers that the questioned decision,
having already become final and executory, could no longer be reviewed by
this Court. The petition before us has been filed under Rule 65 of the Rules
of Court, there being no appeal, or any other plain, speedy and adequate
remedy in the ordinary course of law from decisions of the National Labor
Relations Commission; it is a relief that is open so long as it is availed of
within a reasonable time.
WHEREFORE, the order of 21 March 1994 is MODIFIED. The case is
REMANDED to the NLRC for a re-computation of private respondent's
monetary awards, which, conformably with this opinion, shall be paid solely
by petitioner MAM Realty Development Corporation. No special
pronouncement on costs.
SO ORDERED.
MAKATI HABERDASHERY, INC., JORGE LEDESMA and CECILIO G.
INOCENCIO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, CEFERINA J. DIOSANA
(Labor Arbiter, Department of Labor and Employment, National Capital
Region), SANDIGAN NG MANGGAGAWANG PILIPINO (SANDIGAN)-TUCP
and its members, JACINTO GARCIANO, ALFREDO C. BASCO, VICTORIO Y.
LAURETO, ESTER NARVAEZ, EUGENIO L. ROBLES, BELEN N. VISTA,
ALEJANDRO A. ESTRABO, VEVENCIO TIRO, CASIMIRO ZAPATA, GLORIA
ESTRABO, LEONORA MENDOZA, MACARIA G. DIMPAS, MERILYN A. VIRAY,
LILY OPINA, JANET SANGDANG, JOSEFINA ALCOCEBA and MARIA
ANGELES, respondents.
Ledesma, Saludo & Associates for petitioners.
Pablo S. Bernardo for private respondents.
This petition for certiorari involving two separate cases filed by private
respondents against herein petitioners assails the decision of respondent
National Labor Relations Commission in NLRC CASE No. 7-2603-84 entitled
"Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al. v.
Makati Haberdashery and/or Toppers Makati, et al." and NLRC CASE No. 2-
428-85 entitled "Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP
etc., et al. v. Toppers Makati, et al.", affirming the decision of the Labor
Arbiter who jointly heard and decided aforesaid cases, finding: (a)
petitioners guilty of illegal dismissal and ordering them to reinstate the
dismissed workers and (b) the existence of employer-employee relationship
and granting respondent workers by reason thereof their various monetary
claims.
The undisputed facts are as follows:
Individual complainants, private respondents herein, have been working for
petitioner Makati Haberdashery, Inc. as tailors, seamstress, sewers, basters
(manlililip) and "plantsadoras". They are paid on a piece-rate basis except
Maria Angeles and Leonila Serafina who are paid on a monthly basis. In
addition to their piece-rate, they are given a daily allowance of three (P
3.00) pesos provided they report for work before 9:30 a.m. everyday.
Private respondents are required to work from or before 9:30 a.m. up to
6:00 or 7:00 p.m. from Monday to Saturday and during peak periods even
on Sundays and holidays.
On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor
organization of the respondent workers, filed a complaint docketed as NLRC
NCR Case No. 7-2603-84 for (a) underpayment of the basic wage; (b)
underpayment of living allowance; (c) non-payment of overtime work; (d)
non-payment of holiday pay; (e) non-payment of service incentive pay; (f)
13th month pay; and (g) benefits provided for under Wage Orders Nos. 1,
2, 3, 4 and 5. 1
During the pendency of NLRC NCR Case No. 7-2603-84, private respondent
Dioscoro Pelobello left with Salvador Rivera, a salesman of petitioner
Haberdashery, an open package which was discovered to contain a "jusi"
barong tagalog. When confronted, Pelobello replied that the same was
ordered by respondent Casimiro Zapata for his customer. Zapata allegedly
admitted that he copied the design of petitioner Haberdashery. But in the
afternoon, when again questioned about said barong, Pelobello and Zapata
denied ownership of the same. Consequently a memorandum was issued to
each of them to explain on or before February 4, 1985 why no action
should be taken against them for accepting a job order which is prejudicial
and in direct competition with the business of the company. 2 Both
respondents allegedly did not submit their explanation and did not report
for work. 3 Hence, they were dismissed by petitioners on February 4, 1985.
They countered by filing a complaint for illegal dismissal docketed as NLRC
NCR Case No. 2-428-85 on February 5, 1985. 4
On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered judgment,
the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in NLRC NCR Case No. 2-428-
85 finding respondents guilty of illegal dismissal and ordering them to
reinstate Dioscoro Pelobello and Casimiro Zapata to their respective or
similar positions without loss of seniority rights, with full backwages from
July 4, 1985 up to actual reinstatement. The charge of unfair labor practice
is dismissed for lack of merit.
In NLRC NCR Case No. 7-26030-84, the complainants' claims for
underpayment re violation of the minimum wage law is hereby ordered
dismissed for lack of merit.
Respondents are hereby found to have violated the decrees on the cost of
living allowance, service incentive leave pay and the 13th Month Pay. In
view thereof, the economic analyst of the Commission is directed to
compute the monetary awards due each complainant based on the
available records of the respondents retroactive as of three years prior to
the filing of the instant case.
SO ORDERED. 5
From the foregoing decision, petitioners appealed to the NLRC. The latter
on March 30, 1988 affirmed said decision but limited the backwages
awarded the Dioscoro Pelobello and Casimiro Zapata to only one (1) year.
After their motion for reconsideration was denied, petitioners filed the
instant petition raising the following issues:
I 4. Effective immediately, new procedures shall be followed:
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT AN
EMPLOYER-EMPLOYEE RELATIONSHIP EXISTS BETWEEN PETITIONER
HABERDASHERY AND RESPONDENTS WORKERS.
II
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT
RESPONDENTS WORKERS ARE ENTITLED TO MONETARY CLAIMS DESPITE
THE FINDING THAT THEY ARE NOT ENTITLED TO MINIMUM WAGE.
III
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT
RESPONDENTS PELOBELLO AND ZAPATA WERE ILLEGALLY DISMISSED.
The first issue which is the pivotal issue in this case is resolved in favor of
private respondents. We have repeatedly held in countless decisions that
the test of employer-employee relationship is four-fold: (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. It
is the so called "control test" that is the most important element. 8 This
simply means the determination of whether the employer controls or has
reserved the right to control the employee not only as to the result of the
work but also as to the means and method by which the same is to be
accomplished. 9
The facts at bar indubitably reveal that the most important requisite of
control is present. As gleaned from the operations of petitioner, when a
customer enters into a contract with the haberdashery or its proprietor, the
latter directs an employee who may be a tailor, pattern maker, sewer or
"plantsadora" to take the customer's measurements, and to sew the pants,
coat or shirt as specified by the customer. Supervision is actively
manifested in all these aspects the manner and quality of cutting, sewing
and ironing.
6
Furthermore, the presence of control is immediately evident in this
memorandum issued by Assistant Manager Cecilio B. Inocencio, Jr. dated
May 30, 1981 addressed to Topper's Makati Tailors which reads in part:
A. To follow instruction and orders from the undersigned Roger Valderama,
Ruben Delos Reyes and Ofel Bautista. Other than this person (sic) must ask
permission to the above mentioned before giving orders or instructions to
the tailors.
B. Before accepting the job orders tailors must check the materials, job
orders, due dates and other things to maximize the efficiency of our
production. The materials should be checked (sic) if it is matched (sic) with
the sample, together with the number of the job order.
C. Effective immediately all job orders must be finished one day before the
due date. This can be done by proper scheduling of job order and if you will
cooperate with your supervisors. If you have many due dates for certain
7 day, advise Ruben or Ofel at once so that they can make necessary
adjustment on due dates.
D. Alteration-Before accepting alteration person attending on customs (sic)
must ask first or must advise the tailors regarding the due dates so that we
can eliminate what we call 'Bitin'.
E. If there is any problem regarding supervisors or co-tailor inside our shop,
consult with me at once settle the problem. Fighting inside the shop is
strictly prohibited. Any tailor violating this memorandum will be subject to
disciplinary action.
For strict compliance. 10
From this memorandum alone, it is evident that petitioner has reserved the
right to control its employees not only as to the result but also the means
and methods by which the same are to be accomplished. That private
respondents are regular employees is further proven by the fact that they
have to report for work regularly from 9:30 a.m. to 6:00 or 7:00 p.m. and
are paid an additional allowance of P 3.00 daily if they report for work
before 9:30 a.m. and which is forfeited when they arrive at or after 9:30
a.m. 11
Since private respondents are regular employees, necessarily the argument
that they are independent contractors must fail. As established in the
preceding paragraphs, private respondents did not exercise independence
in their own methods, but on the contrary were subject to the control of
petitioners from the beginning of their tasks to their completion. Unlike
independent contractors who generally rely on their own resources, the
equipment, tools, accessories, and paraphernalia used by private
respondents are supplied and owned by petitioners. Private respondents
are totally dependent on petitioners in all these aspects.
Coming now to the second issue, there is no dispute that private
respondents are entitled to the Minimum Wage as mandated by Section
2(g) of Letter of Instruction No. 829, Rules Implementing Presidential
Decree No. 1614 and reiterated in Section 3(f), Rules Implementing
Presidential Decree 1713 which explicitly states that, "All employees paid by
the result shall receive not less than the applicable new minimum wage
rates for eight (8) hours work a day, except where a payment by result rate
has been established by the Secretary of Labor. ..." 12 No such rate has
been established in this case.
But all these notwithstanding, the question as to whether or not there is in
fact an underpayment of minimum wages to private respondents has
already been resolved in the decision of the Labor Arbiter where he stated:
"Hence, for lack of sufficient evidence to support the claims of the
complainants for alleged violation of the minimum wage, their claims for
underpayment re violation of the Minimum Wage Law under Wage Orders
Nos. 1, 2, 3, 4, and 5 must perforce fall." 13
The records show that private respondents did not appeal the above ruling
of the Labor Arbiter to the NLRC; neither did they file any petition raising
that issue in the Supreme Court. Accordingly, insofar as this case is
concerned, that issue has been laid to rest. As to private respondents, the
judgment may be said to have attained finality. For it is a well-settled rule
in this jurisdiction that "an appellee who has not himself appealed cannot
obtain from the appellate court-, any affirmative relief other than the ones
granted in the decision of the court below. " 14
As a consequence of their status as regular employees of the petitioners,
they can claim cost of living allowance. This is apparent from the provision
defining the employees entitled to said allowance, thus: "... All workers in
the private sector, regardless of their position, designation or status, and
irrespective of the method by which their wages are paid. " 15
Private respondents are also entitled to claim their 13th Month Pay under
Section 3(e) of the Rules and Regulations Implementing P.D. No. 851 which
provides:
Section 3. Employers covered. The Decree shall apply to all employers
except to:
xxx xxx xxx
(e) Employers of those who are paid on purely commission, boundary, or
task basis, and those who are paid a fixed amount for performing a specific
work, irrespective of the time consumed in the performance thereof, except
where the workers are paid on piece-rate basis in which case the employer
shall be covered by this issuance insofar as such workers are concerned.
(Emphasis supplied.)
On the other hand, while private respondents are entitled to Minimum
Wage, COLA and 13th Month Pay, they are not entitled to service incentive
leave pay because as piece-rate workers being paid at a fixed amount for
performing work irrespective of time consumed in the performance thereof,
they fall under one of the exceptions stated in Section 1(d), Rule V,
Implementing Regulations, Book III, Labor Code. For the same reason
private respondents cannot also claim holiday pay (Section 1(e), Rule IV,
Implementing Regulations, Book III, Labor Code).
With respect to the last issue, it is apparent that public respondents have
misread the evidence, for it does show that a violation of the employer's
rules has been committed and the evidence of such transgression, the
copied barong tagalog, was in the possession of Pelobello who pointed to
Zapata as the owner. When required by their employer to explain in a
memorandum issued to each of them, they not only failed to do so but
instead went on AWOL (absence without official leave), waited for the
period to explain to expire and for petitioner to dismiss them. They
thereafter filed an action for illegal dismissal on the far-fetched ground that
they were dismissed because of union activities. Assuming that such acts
do not constitute abandonment of their jobs as insisted by private
respondents, their blatant disregard of their employer's memorandum is
undoubtedly an open defiance to the lawful orders of the latter, a justifiable
ground for termination of employment by the employer expressly provided
for in Article 283(a) of the Labor Code as well as a clear indication of guilt
for the commission of acts inimical to the interests of the employer, another
justifiable ground for dismissal under the same Article of the Labor Code,
paragraph (c). Well established in our jurisprudence is the right of an
employer to dismiss an employee whose continuance in the service is
inimical to the employer's interest. 16
In fact the Labor Arbiter himself to whom the explanation of private
respondents was submitted gave no credence to their version and found
their excuses that said barong tagalog was the one they got from the
embroiderer for the Assistant Manager who was investigating them,
unbelievable.
Under the circumstances, it is evident that there is no illegal dismissal of
said employees. Thus, We have ruled that:
No employer may rationally be expected to continue in employment a
person whose lack of morals, respect and loyalty to his employer, regard for
his employer's rules, and appreciation of the dignity and responsibility of his
office, has so plainly and completely been bared.
There is no evidence that the employer violated said norms. On the
contrary, private respondents who vigorously insist on the existence of
employer-employee relationship, because of the supervision and control of
their employer over them, were the very ones who exhibited their lack of
respect and regard for their employer's rules.
Under the foregoing facts, it is evident that petitioner Haberdashery had
valid grounds to terminate the services of private respondents.
WHEREFORE, the decision of the National Labor Relations Commission
dated March 30, 1988 and that of the Labor Arbiter dated June 10, 1986
are hereby modified. The complaint filed by Pelobello and Zapata for illegal
dismissal docketed as NLRC NCR Case No. 2-428-85 is dismissed for lack of
factual and legal bases. Award of service incentive leave pay to private
respondents is deleted.
SO ORDERED.

That there should be concern, sympathy, and solicitude for the rights and
welfare of the working class, is meet and proper. That in controversies
between a laborer and his master, doubts reasonably arising from the
evidence, or in the interpretation of agreements and writings should be
resolved in the former's favor, is not an unreasonable or unfair rule. But
that disregard of the employer's own rights and interests can be justified by
that concern and solicitude is unjust and unacceptable. (Stanford
Microsystems, Inc. v. NLRC, 157 SCRA 414-415 [1988] ).

The law is protecting the rights of the laborer authorizes neither oppression
nor self-destruction of the employer. 17 More importantly, while the
Constitution is committed to the policy of social justice and the protection of
the working class, it should not be supposed that every labor dispute will
automatically be decided in favor of labor. 18

Finally, it has been established that the right to dismiss or otherwise impose CONDITIONS OF EMPLOYMENT
discriplinary sanctions upon an employee for just and valid cause, pertains
in the first place to the employer, as well as the authority to determine the
existence of said cause in accordance with the norms of due process. 19