San Miguel Corporation vs. Aballa

392
SUPREMECOURTREPORTSANNOTATED
SanMiguelCorporationvs.Aballa
*
G.R.No.149011.June28,2005.
SAN MIGUEL CORPORATION, petitioner, vs. PROSPERO A.

ABALLA,BONNYJ.ABARING,EDWINM.ADLAON,ALVIN
C. ALCALDE, CELANIO D. ARROLLADO, EDDIE A.
ARROLLADO, REYNALDO T. ASONG, RENE A. ASPERA,
JOELD.BALATERIA,JOSEPHD.BALATERIA,JOSEJOLLEN
BALLADOS, WILFREDO B. BASAS, EDWIN E. BEATINGO,
SONNY V. BERONDO, CHRISTOPHER D. BRIONES,
MARLON D. BRIONES, JOEL C. BOOC, ENRIQUE
CABALIDA, DIOSCORO R. CAHINOD, ERNESTO P.
CAHINOD, RENANTE S. CAHINOD, RUDERICK R.
CALIXTON,RONILOC.CALVEZ,PANCHOCAETE,JUNNY
CASTEL, JUDY S. CELESTE, ROMEO CHUA, DANILO
COBRA, ARMANDO C. DEDOYCO, JOEY R. DELA CRUZ,
JOHND.DELFIN,RENELITOP.DEON,ARNELC.DEPEDRO,
ORLANDODERDER,CLIFFORDA.DESPI,RAMIEA.DESPI,
SR., VICTOR A. DESPI, ROLANDO L. DINGLE, ANTONIO D.
DOLORFINO, LARRY DUMAOP, NOEL DUMOL, CHITO L.
DUNGOG, RODERICK C. DUQUEZA, ROMMEL ESTREBOR,
RIC E. GALPO, MANSUETO GILLE, MAXIMO L. HILAUS,
GERARDOJ.JIMENEZ,ROBERTLYY.HOFILEA,ROBERTO
HOFILEA,VICENTEINDENCIO,JONATHANT.INVENTOR,
PETER PAUL T. INVENTOR, JOEBERT G. LAGARTO,
RENATO LAMINA, ALVIN LAS POBRES, ALBERT LAS
POBRES, LEONARD LEMONCHITO, JERRY LIM, JOSE
COLLY S. LUCERO, ROBERTO E. MARTIL, HERNANDO
MATILLANO, VICENTE M. MATILLANO, TANNY C.
MENDOZA,WILLIAMP.NAVARRO,WILSONP.NAVARRO,
LEO A. OLVIDO, ROBERTO G. OTERO, BIENVENIDO C.
PAROCHILIN, REYNALDO C. PAROCHILIN, RICKY
PALANOG, BERNIE O. PILLO, ALBERTO O. PILLO, JOE
MARIES.PUGNA,EDWING.RIBON,RAUL
_______________
*THIRDDIVISION.
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VOL.461,JUNE28,2005
393
A. RUBIO, HENRY S. SAMILLANO, EDGAR SANTIAGO,

ROLAND B. SANTILLANA, ROLDAN V. SAYAM, JOSEPH S.
SAYSON,RENESUARNABA,ELMARTABLIGAN,JERRYD.
TALITE, OSCAR TALITE, WINIFREDO TALITE, CAMILO N.
TEMPOROSA, JOSE TEMPOROSA, RANDY TINGALA,
TRISTAN A. TINGSON, ROGELIO TOMESA, DIONISE A.
TORMIS,ADELINOC.UNTAL,FELIXT.UNTAL,RONILOE.
VISTA, JOAN C. VIYO and JOSE JOFER C. VIYO and the
COURTOFAPPEALS,respondents.
ActionsPleadingsandPracticeCertificate of NonForum Shopping
ProceduralRulesandTechnicalitiesThegeneralruleisthatthecertificate
ofnonforumshoppingmustbesignedbyalltheplaintiffsorpetitionersina
caseandthesignatureofonlyoneofthemisinsufficientStrictcompliance
with the provisions regarding the certificate of nonforum shopping merely
underscores its mandatory nature in that the certification cannot be
altogether dispensed with or its requirements completely disregarded but it
does not thereby interdict substantial compliance with its provisions under
justifiable circumstances.While the general rule is that the certificate of
nonforum shopping must be signed by all the plaintiffs or petitioners in a
case and the signature of only one of them is insufficient, this Court has
stressed that the rules on forum shopping, which were designed to promote
andfacilitatetheorderlyadministrationofjustice,shouldnotbeinterpreted
with such absolute literalness as to subvert its own ultimate and legitimate
objective. Strict compliance with the provisions regarding the certificate of
nonforum shopping merely underscores its mandatory nature in that the
certification cannot be altogether dispensed with or its requirements
completely disregarded. It does not, however, thereby interdict substantial
compliancewithitsprovisionsunderjustifiablecircumstances.
Same Same Same Same Given the collective nature of the petition
filedbeforetheappellatecourtbyninetysevenpersons,raisingonecommon
causeofactionagainstacorporation,theexecutionbyonlythreeofthemin
behalf of the others of the certificate of nonforum shopping constitutes
substantialcompliancewiththeRulesThemeritsofthesubstantiveaspects
of the case may also be deemed as special circumstance or compelling

reasontotakecognizanceof
394
394
a petition although the certification against forum shopping was not

executedandsignedbyallofthepetitioners.Giventhecollectivenatureof
the petition filed before the appellate court by herein private respondents,
raising one common cause of action against SMC, the execution by private
respondentsWinifredoTalite,RenelitoDeonandJoseTemporosainbehalf
ofalltheotherprivaterespondentsofthecertificateofnonforumshopping
constitutes substantial compliance with the Rules. That the three indeed
represented their copetitioners before the appellate court is, as it correctly
found, subsequently proven to be true as shown by the signatures of the
majorityofthepetitionersappearingintheirmemorandumfiledbeforeUs.
Additionally, the merits of the substantive aspects of the case may also be
deemedasspecialcircumstanceorcompellingreasontotakecognizance
of a petition although the certification against forum shopping was not
executedandsignedbyallofthepetitioners.
Same Same Same Same It is the appellate court which ultimately
determines if the supporting documents are sufficient to make out a prima
faciecase.SMC goes on to argue that the petition filed before the CA is
fatally defective as it was not accompanied by copies of all pleadings and
documentsrelevantandpertinenttheretoincontraventionofSection1,Rule
65 of the Rules of Court. This Court is not persuaded. The records show
that private respondents appended the following documents to their petition
before the appellate court: the September 23, 1997 Decision of the Labor
Arbiter,theirNoticeofAppealwithAppealMemorandumdatedOctober16,
1997filedbeforetheNLRC,theDecember29,1998NLRCDecision,their
MotionforReconsiderationdatedMarch26,1999filedwiththeNLRCand
theSeptember10,1999NLRCResolution.Itbearsstressingatanyratethat
it is the appellate court which ultimately determines if the supporting
documentsaresufficienttomakeoutaprimafaciecase.Itdiscernswhether
on the basis of what have been submitted it could already judiciously
determinethemeritsofthepetition.Inthecaseatbar,theCAfoundthatthe
petitionwasadequatelysupportedbyrelevantandpertinentdocuments.
SameSameSameSameInstances Where a Liberal Construction of
the Rule on the Accomplishment of a Certificate of NonForum Shopping
Allowed Rules of procedure should indeed be viewed as mere tools
designedtofacilitatetheattainmentofjusticetheirstrict
395
VOL.461,JUNE28,2005
395
and rigid application, which would result in technicalities that tend to

frustrateratherthanpromotesubstantialjustice,mustalwaysbeeschewed.
At all events, this Court has allowed a liberal construction of the rule on
the accomplishment of a certificate of nonforum shopping in the following
cases: (1) where a rigid application will result in manifest failure or
miscarriage of justice (2) where the interest of substantial justice will be
served (3) where the resolution of the motion is addressed solely to the
soundandjudiciousdiscretionofthecourtand(4)wheretheinjusticetothe
adversepartyisnotcommensuratewiththedegreeofhisthoughtlessnessin
not complying with the procedure prescribed. Rules of procedure should
indeed be viewed as mere tools designed to facilitate the attainment of
justice.Theirstrictandrigidapplication,whichwouldresultintechnicalities
thattendtofrustrateratherthanpromotesubstantialjustice,mustalwaysbe
eschewed.
AdministrativeLawWhenthefindingsoffactofthelaborarbiterand
theNLRCarenotsupportedbysubstantialevidenceortheirjudgmentwas
based on a misapprehension of facts, the appellate court may make an
independentevaluationofthefactsofthecase.Thegeneralrule,nodoubt,
is that findings of facts of an administrative agency which has acquired
expertiseintheparticularfieldofitsendeavorareaccordedgreatweighton
appeal. The rule is not absolute and admits of certain wellrecognized
exceptions,however.Thus,whenthefindingsoffactofthelaborarbiterand
the NLRC are not supported by substantial evidence or their judgment was
based on a misapprehension of facts, the appellate court may make an
independentevaluationofthefactsofthecase.
LaborLawPleadingsandPracticeVerificationThattheverification
where it is manifested that the one signing is one of the complainants and
wascausingthepreparationofthecomplaintwiththeauthorityofmyco
complainants indubitably shows that he was representing the rest of his
cocomplainants in signing the verification in accordance with Section 7,
RuleIIIofthe1990NRLCRules,nowSection8,Rule3ofthe1997NLRC
Rules.Aperusalofthecomplaintshowsthattheninetysevencomplainants
werebeingrepresentedbytheircounselofchoice.Thusthefirstsentenceof
their complaint alleges: x x x complainants, by counsel and unto this
HonorableOfficerespectfullystatexxx.Andthecomplaintwassignedby
Atty.JoseMaxS.Ortizascounselforthecomplainants.
396
396
FollowingSection6,RuleIIIofthe1990RulesofProcedureoftheNLRC,
nowSection7,RuleIIIofthe1999NLRCRules,Atty.Ortizispresumedto
be properly authorized by private respondents in filing the complaint. That
the verification wherein it is manifested that private respondent Talite was
one of the complainants and was causing the preparation of the complaint
with the authority of my cocomplainants indubitably shows that Talite
wasrepresentingtherestofhiscocomplainantsinsigningtheverificationin
accordance with Section 7, Rule III of the 1990 NLRC Rules, now Section
8, Rule 3 of the 1999 NLRC Rules, which states: Section 7. Authority to
bind party.Attorneys and other representatives of parties shall have
authority to bind their clients in all matters of procedure but they cannot,
without a special power of attorney or express consent, enter into a
compromiseagreementwiththeopposingpartyinfullorpartialdischargeof
aclientsclaim.
SameLabor Only Contracting Independent Contractors The test to
determine the existence of independent contractorship is whether one
claiming to be an independent contractor has contracted to do the work
accordingtohisownmethodsandwithoutbeingsubjecttothecontrolofthe
employer, except only as to the results of the work In laboronly
contracting, the statute creates an employeremployee relationship for a
comprehensive purposeto prevent a circumvention of labor laws.The
testtodeterminetheexistenceofindependentcontractorshipiswhetherone
claiming to be an independent contractor has contracted to do the work
accordingtohisownmethodsandwithoutbeingsubjecttothecontrolof
theemployer,exceptonlyastotheresultsofthework.Inlegitimatelabor
contracting,thelawcreatesanemployeremployeerelationshipforalimited
purpose, i.e., to ensure that the employees are paid their wages. The
principal employer becomes jointly and severally liable with the job
contractor, only for the payment of the employees wages whenever the
contractor fails to pay the same. Other than that, the principal employer is
not responsible for any claim made by the employees. In laboronly
contracting, the statute creates an employeremployee relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The
contractor is considered merely an agent of the principal employer and the
latterisresponsibletotheemployeesofthelaboronlycontractorasifsuch
employeeshadbeendirectlyemployedbytheprincipalemployer.
397
VOL.461,JUNE28,2005
397
SameSameSameThelanguageofacontractisnotdeterminativeof
the parties relationshipit is the totality of the facts and surrounding
circumstances of the case.The Contract of Services between SMC and
Sunflower shows that the parties clearly disavowed the existence of an
employeremployeerelationshipbetweenSMCandprivaterespondents.The
language of a contract is not, however, determinative of the parties
relationship rather it is the totality of the facts and surrounding
circumstancesofthecase.Apartycannotdictate,bythemereexpedientofa
unilateraldeclarationinacontract,thecharacterofitsbusiness,i.e.,whether
as laboronly contractor or job contractor, it being crucial that its character
bemeasuredintermsofanddeterminedbythecriteriasetbystatute.
Same Same Same Where it is shown that the workers daily time
records were signed by the principal and control of the premises in which
theyworkedwasbytheprincipal,thesetendtodisprovetheindependenceof
the contractor who engaged the services of the workers.Sunflower did
not carry on an independent business or undertake the performance of its
service contract according to its own manner and method, free from the
controlandsupervisionofitsprincipal,SMC,itsapparentrolehavingbeen
merely to recruit persons to work for SMC. Thus, it is gathered from the
evidence adduced by private respondents before the labor arbiter that their
dailytimerecordsweresignedbySMCsupervisorsIkePuentebella,Joemel
Haro, Joemari Raca, Erwin Tumonong, Edison Arguello, and Stephen
Palabrica, which fact shows that SMC exercised the power of control and
supervisionoveritsemployees.Andcontrolofthepremisesinwhichprivate
respondentsworkedwasbySMC.Thesetendtodisprovetheindependence
ofthecontractor.
Same Same Same The circumstance that the contractors workers
hadbeenworkingalongsideregularemployeesoftheprincipal,performing
identical jobs under the same supervisors, is another indicium of the
existence of laboronly contractorship.Private respondents had been
working in the aqua processing plant inside the SMC compound alongside
regularSMCshrimpprocessingworkersperformingidenticaljobsunderthe
same SMC supervisors. This circumstance is another indicium of the
existenceofalaboronlycontractorship.
398
398
SameTwo Kinds of Regular EmployeesWorkers who were engaged

in janitorial and messengerial tasks fall under the category of regular
employees who have rendered at least one year of service, whether
continuous or broken, with respect to the activity in which they are
employed,andareentitledtodifferentialpayandbenefitsextendedtoother
regular employees from the day immediately following their first year of
service.The law of course provides for two kinds of regular employees,
namely: (1) those who are engaged to perform activities which are usually
necessaryordesirableintheusualbusinessortradeoftheemployerand(2)
thosewhohaverenderedatleastoneyearofservice,whethercontinuousor
broken,withrespecttotheactivityinwhichtheyareemployed.Asforthose
of private respondents who were engaged in janitorial and messengerial
tasks,theyfallunderthesecondcategoryandarethusentitledtodifferential
pay and benefits extended to other SMC regular employees from the day
immediatelyfollowingtheirfirstyearofservice.
Same Retrenchment Words and Phrases Where a particular
departmentunderacorporategroupofcompanieswasclosedallegedlydue
to serious business reverses, this constitutes retrenchment by, and not
closure of, the enterprise or the company.In the case at bar, a particular
departmentundertheSMCgroupofcompanieswasclosedallegedlydueto
seriousbusinessreverses.Thisconstitutesretrenchmentby,andnotclosure
of, the enterprise or the company itself as SMC has not totally ceased
operations but is still very much an ongoing and highly viable business
concern.
Same Same Requisites.Retrenchment is a management prerogative
consistentlyrecognizedandaffirmedbythisCourt.Itis,however,subjectto
faithful compliance with the substantive and procedural requirements laid
downbylawandjurisprudence.Forretrenchmenttobeconsideredvalidthe
following substantial requirements must be met: (a) the losses expected
shouldbesubstantialandnotmerelydeminimisinextent(b)thesubstantial
losses apprehended must be reasonably imminent such as can be perceived
objectivelyandingoodfaithbytheemployer(c)theretrenchmentmustbe
reasonably necessary and likely to effectively prevent the expected losses
and (d) the alleged losses, if already incurred, and the expected imminent
lossessoughttobeforestalled,mustbeprovedbysufficientandconvincing
evidence.
399
VOL.461,JUNE28,2005
399
SameSameThefinancialstatementsmustbepreparedandsignedby
independent auditors failing which they can be assailed as selfserving
documents.Inthedischargeoftheserequirements,itistheemployerwho
has the onus, being in the nature of an affirmative defense. Normally, the
condition of business losses is shown by audited financial documents like
yearly balance sheets, profit and loss statements and annual income tax
returns. The financial statements must be prepared and signed by
independent auditors failing which they can be assailed as selfserving
documents.
SameSameDamagesWherethedismissalisbasedonanauthorized
causeunderArticle283oftheLaborCodebuttheemployerfailedtocomply
with the notice requirement, the sanction should be stiff as the dismissal
process was initiated by the employers exercise of his management
prerogative, as opposed to dismissal based on a just cause under Article
282.Where the dismissal is based on an authorized cause under Article
283 of the Labor Code but the employer failed to comply with the notice
requirement, the sanction should be stiff as the dismissal process was
initiated by the employers exercise of his management prerogative, as
opposedtoadismissalbasedonajustcauseunderArticle282withthesame
procedural infirmity where the sanction to be imposed upon the employer
should be tempered as the dismissal process was, in effect, initiated by an
act imputable to the employee. In light of the factual circumstances of the
case at bar, this Court awards P50,000.00 to each private respondent as
nominaldamages.
SameAttorneysFeesAlthoughanexpressfindingoffactsandlawis
stillnecessarytoprovethemeritoftheawardofattorneysfees,thereneed
notbeanyshowingthattheemployeractedmaliciouslyorinbadfaithwhen
it withheld the wagesthere need only be a showing that the lawful wages
were not paid accordingly.With respect to attorneys fees, in actions for
recovery of wages or where an employee was forced to litigate and thus
incurred expenses to protect his rights and interests, a maximum of ten
percent (10%) of the total monetary award by way of attorneys fees is
justifiableunderArticle111oftheLaborCode,Section8,RuleVIII,Book
III of its Implementing Rules, and paragraph 7, Article 2208 of the Civil
Code. Although an express finding of facts and law is still necessary to
prove the merit of the award, there need not be any showing that the
employeractedmaliciouslyorinbadfaithwhenitwithheldthe
400
400
wages. There need only be a showing that the lawful wages were not paid
accordingly,asinthiscase.
PETITIONforreviewoncertiorariofthedecisionandresolutionof
theCourtofAppeals.
ThefactsarestatedintheopinionoftheCourt.
DeLimaBohol&MeezLawOfficesforpetitioner.
JoseMaxS.Ortizforprivaterespondents.
Filomeno B. Tan for Purok Sunflower MultiPurpose
Cooperative.
CARPIOMORALES,J.:
Petitioner San Miguel Corporation (SMC), represented by its
AssistantVicePresidentandVisayasAreaManagerforAquaculture
Operations Leopoldo S. Titular, and Sunflower MultiPurpose
Cooperative(Sunflower),representedbytheChairmanofitsBoard
of Directors
Roy G. Asong, entered into a oneyear Contract of
1
Services commencing on January 1, 1993, to be renewed on a
monthtomonthbasisuntilterminatedbyeitherparty.Thepertinent
provisionsofthecontractread:
1. The cooperative agrees and undertakes to perform and/or
provide for the company, on a nonexclusive basis for a
period of one year the following services for the Bacolod
ShrimpProcessingPlant:
A. Messengerial/Janitorial
B. ShrimpHarvesting/Receiving
2
C. Sanitation/Washing/ColdStorage
_______________
1Rolloatpp.278286.
2AnnexedtotheServiceContractisadetailedlistingofthescopeoftheservices
tobeprovidedtoSMC:
A. ShrimpReceiving/Harvesting
Assistinthecrushingandloadingofice
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VOL.461,JUNE28,2005
401
2. To carry out the undertaking specified in the immediately

preceding paragraph, the cooperative shall employ the
necessary personnel and provide adequate equipment,
materials,toolsand
_______________
Receivetherawmaterialsandputthemintothechillingtanks
Sorttheshrimpaccordingtostandardqualityspecifications
Packtherawmaterialsintostyroporboxes/containersandassist
onthedeliveryoftheharvestedrawmaterialstotheprocessing
plant
Prepareharvestmaterialsandequipmentandcleanthemafteruse
and
Performotherdutiesthatthecompanymayassignfromtimeto
time.
B. JanitorialandMessengerialServices
1. Maintain,sanitizeandcleanthefollowing:
Streetscementedandotherwise
Canalsandfloorarea
Administrationbuildingofficesandcomfortrooms
Logistics/materials/warehousebuilding
Clinicandcomfortroom
Plantgrounds/lawn
2. MaintainandWatertheplantsandtrees
3. Haulanddisposegarbagedailyfromdesignatedwastecontainerswithinthe
compoundtoanareaoutsideandfarfromthecompound.
4. Perform messengerial activities within Bacolod City and other duties that
maybeassignedduringofficehours.
C. Sanitation/WashingServices
1. Washandsanitizeboxes,chillingtanks,traysandotherharvestingmaterials.
2. Storeharvestingmaterialsinthedesignatedareaafterwashing.
3. Loadandunloadboxes,trays,chillingtanksandotherharvestingmaterialsto
beusedduringharvestschedule.
402
402
apparatus, to efficiently, fully and speedily accomplish the work and

servicesundertakenbythecooperative.xxx
3. In consideration of the above undertaking the company

expresslyagreestopaythecooperativethefollowingrates
peractivity:
A. Messengerial/Janitorial Monthly Fixed Service Charge of:
NineteenThousandFiveHundredPesosOnly(P19,500.00)
B. Harvesting/Shrimp Receiving.Piece rate of P0.34/kg. Or
P100.00minimumperperson/activitywhicheverishigher,
withprovisionsasfollows:
P25.00FixedFeeperperson
AdditionalmealallowanceP15.00everymealtimein
caseharvestdurationexceedsonemeal.
Thiswillbepreseteveryharvestbasedonharvest
planapprovedbytheSeniorBuyer.
C. Sanitation/WashingandColdStorageP125.00/personfor3
shifts.
Onehalf of the payment for all services rendered shall be
payable on the fifteenth and the other half, on the end of
eachmonth.Thecooperativeshallpaytaxes,fees,duesand
other impositions that shall become due as a result of this
contract.
The cooperative shall have the entire charge, control and
supervisionoftheworkandserviceshereinagreedupon.x
xx
4. There is no employeremployee relationship between the
companyandthecooperative,orthecooperativeandanyof
its members, or the company and any members of the
cooperative. The cooperative is an association of self
employed members, an independent contractor, and an
entrepreneur.Itissubjecttothecontrolanddirectionofthe
company only as to the result to be accomplished by the
work or services herein specified, and not as to the work
herein contracted. The cooperative and its members
recognize that it is taking a business risk in accepting a

fixedservicefeetoprovidetheservicescontractedforand
its realization of profit or loss from its undertaking, in
relation to all its other undertakings, will depend on how
efficientlyitdeploysandfieldsitsmembersandhowthey
performtheworkandmanageitsoperations.
403
VOL.461,JUNE28,2005
403
5. The cooperative shall, whenever possible, maintain and

keep under its control the premises where the work under
thiscontractshallbeperformed.
6. The cooperative shall have exclusive discretion in the
selection,engagementanddischargeofitsmemberworkers
or otherwise in the direction and control thereof. The
determination of the wages, salaries and compensation of
the memberworkers of the cooperative shall be within its
fullcontrol.Itisfurtherunderstoodthatthecooperativeis
an independent contractor, and as such, the cooperative
agrees to comply with all the requirements of all pertinent
laws and ordinances, rules and regulations. Although it is
understood and agreed between the parties hereto that the
cooperative,intheperformanceofitsobligations,issubject
tothecontrolordirectionofthecompanymerelyasa(sic)
result to be accomplished by the work or services herein
specified, and not as to the means and methods of
accomplishingsuchresult,thecooperativeherebywarrants
thatitwillperformsuchworkorservicesinsuchmanneras
willbeconsistentwiththeachievementoftheresultherein
contractedfor.
xxx
8. Thecooperativeundertakestopaythewagesorsalariesof
itsmemberworkers, as well as all benefits, premiums and
protection in accordance with the provisions of the labor
code, cooperative code and other applicable laws and
decrees and the rules and regulations promulgated by
competentauthorities,assumingallresponsibilitytherefor.
The cooperative further undertakes to submit to the
company within the first ten (10) days of every month, a
statementmade,signedandsworntobyitsdulyauthorized
representative before a notary public or other officer
authorizedbylawtoadministeroaths,totheeffectthatthe
cooperative has paid all wages or salaries due to its
employees or personnel for services rendered by them
during the month immediately preceding, including
overtime, if any, and that such payments were all in
accordancewiththerequirementsoflaw.
xxx
12. Unless sooner terminated for the reasons stated in
paragraph 9 this contract shall be for a period of one (1)
year commencing on January 1, 1993. Thereafter, this
Contract will be deemed renewed on a monthtomonth
basisuntilterminatedbyeitherparty
404
404
bysendingawrittennoticetotheotheratleastthirty(30)dayspriortothe
intendeddateoftermination.
3
xxx (Underscoringsupplied)
Pursuanttothecontract,Sunflowerengagedprivaterespondentsto,
as they did, render services at SMCs Bacolod Shrimp Processing
PlantatSta.Fe,BacolodCity.Thecontractwasdeemedrenewedby
thepartieseverymonthafteritsexpirationonJanuary1,1994and
privaterespondentscontinuedtoperformtheirtasksuntilSeptember
11,1995.
In July 1995, private respondents filed a complaint before the
NLRC,RegionalArbitrationBranchNo.VI,BacolodCity,praying
to be declared as regular employees of SMC, with claims for
recoveryofallbenefitsandprivilegesenjoyedbySMCrankandfile
employees.
PrivaterespondentssubsequentlyfiledonSeptember25,1995an
4
AmendedComplaint toincludeillegaldismissalasadditionalcause
ofactionfollowingSMCsclosureofitsBacolodShrimpProcessing
5
Plant on September 15, 1995 which resulted in the termination of
theirservices.
SMC filed
a Motion for Leave to File Attached Third Party
6
Complaint datedNovember27,1995toimpleadSunflowerasThird
7
Party Defendant which was, by Order of December 11, 1995,
grantedbyLaborArbiterRayAlanT.Drilon.
In the meantime, on September 30, 1996, SMC filed before the
Regional Office at Iloilo City of the Department of Labor and
Employment (DOLE) a Notice of Closure of its aquaculture

operationseffectiveonevendate,citingseriousbusinesslosses.
_______________
3Rolloatpp.279283.
4Id.,atpp.114117.
5Id.,atp.502.
6Id.,atpp.118120.
7Id.,atp.121.
8Id.,atp.340.
405
VOL.461,JUNE28,2005
405
ByDecisionofSeptember23,1997,LaborArbiterDrilondismissed
private respondents complaint for lack of merit, ratiocinating as
follows:
WesustainthestandoftherespondentSMCthatitcouldproperlyexercise
itsmanagement prerogative to contract out the preparation and processing
aspectsofitsaquacultureoperations.Judicialnoticehasalreadybeentaken
regardingthegeneralpracticeadoptedingovernmentandprivateinstitutions
andindustriesofhiringindependentcontractorstoperformspecialservices.
xxx
xxx
Indeed, the law allows job contracting. Job contracting is permissible
undertheLaborCodeunderspecificconditionsandwedonotseehowthis
activity could not be legally undertaken by an independent service
cooperativelikethethirdpartyrespondentherein.
There is no basis to the demand for regularization simply on the theory
that complainants performed activities which are necessary and desirable in
the business of respondent. It has been held that the definition of regular
employees as those who perform activities which are necessary and
desirable for the business of the employer is not always determinative
becauseanyagreementmayprovideforone(1)partytorenderservicesfor
and in behalf of another for a consideration even without being hired as an
employee.
The charge of the complainants that thirdparty respondent is a mere
laboronly contractor is a sweeping generalization and completely
unsubstantiated. x x x In the absence of clear and convincing evidence
showingthatthirdpartyrespondentactedmerelyasalaboronlycontractor,
we are firmly convinced of the legitimacy and the integrity of its service
contractwithrespondentSMC.
In the same vein, the closure of the Bacolod Shrimp Processing Plant
wasamanagementdecisionpurelydictatedbyeconomicfactors which was
(sic) mainly serious business losses. The law recognizes the right of the
employertoclosehisbusinessorceasehisoperationsforbonafidereasons,
as much as it recognizes the right of the employer to terminate the
employment of any employee due to closure or cessation of business
operations, unless the closing is for the purpose of circumventing the
provisionsofthelawonsecurityoftenure.ThedecisionofrespondentSMC
tocloseitsBacolodShrimpProcessingPlant,duetoseriousbusinesslosses
whichhas(sic)
406
406
clearlybeenestablished,isamanagementprerogativewhichcouldhardlybe
interferedwith.
x x x The closure did affect the regular employees and workers of the
Bacolod Processing Plant, who were accordingly terminated following the
legal requisites prescribed by law. The closure, however, in so far as the
complainants are concerned, resulted
in the termination of SMCs service
9
contractwiththeircooperativexxx (Italicssupplied)
PrivaterespondentsappealedtotheNLRC.
By Decision of December 29, 1998, the NLRC dismissed the
appeal for lack of merit, it finding that third party respondent
Sunflowerwasanindependentcontractorinlightofitsobservation
that [i]n all the activities of private respondents, they were under
the actual direction, control and supervision of third party
respondentSunflower,aswellasthepaymentofwages,andpower
10
ofdismissal.
11
Private respondents Motion for Reconsideration having been
deniedbytheNLRCforlackofmeritbyResolutionofSeptember
12
10, 1999, they filed a petition for certiorari before the Court of
Appeals(CA).
13
Before the CA, SMC filed a Motion to Dismiss private
respondents petition for noncompliance with the Rules on Civil
Procedureandfailuretoshowgraveabuseofdiscretiononthepart
oftheNLRC.
14
SMCsubsequentlyfileditsComment tothepetitiononMarch
30,2000.
By Decision of February 7, 2001, the appellate court reversed
the NLRC decision and accordingly found for private respondents,
disposingasfollows:
_______________
9Id.,atpp.504507.
10Id.,atpp.553557.
11Id.,atpp.559563.
12Id.,atpp.574587.
13CARolloatpp.7482.
14Id.,atpp.108142.
407
VOL.461,JUNE28,2005
407
WHEREFORE, the petition is GRANTED. Accordingly, judgment is
hereby RENDERED: (1) REVERSING and SETTING ASIDE both the 29
December 1998 decision and 10 September 1999 resolution of the National
Labor Relations Commission (NLRC), Fourth Division, Cebu City in
NLRC Case No. V036197 as well as the 23 September 1997 decision of
the labor arbiter in RAB Case No. 06071031695 (2) ORDERING the
respondent,SanMiguelCorporation,toGRANTpetitioners:(a)separation
payinaccordancewiththecomputationgiventotheregularSMCemployees
working at its Bacolod Shrimp Processing Plant with full backwages,
inclusive of allowances and other benefits or their monetary equivalent,
from 11 September 1995, the time their actual compensation was withheld
from them, up to the time of the finality of this decision (b) differentials
pays (sic) effective as of and from the time petitioners acquired regular
employment status pursuant to the disquisition mentioned above, and all
such other and further benefits as provided by applicable collective
bargainingagreement(s)orotherrelations,orbylaw,beginningsuchtime
up to their termination from employment on 11 September 1995 and
ORDERINGprivaterespondentSMCtoPAYuntothepetitionersattorneys
feesequivalenttoten(10%)percentofthetotalaward.
Nopronouncementastocosts.
15
SOORDERED. (Italicssupplied)
Justifying its reversal of the findings of the labor arbiter and the
NLRC,theappellatecourtreasoned:
Although the terms of the nonexclusive contract of service between SMC
and [Sunflower] showed a clear intent to abstain from establishing an
employeremployee relationship between SMC and [Sunflower] or the
latters members, the extent to which the parties successfully realized this
intent in the light of the applicable law is the controlling factor in

determiningtherealandactualrelationshipbetweenoramongtheparties.
xxx
Withrespecttothepowertocontrolpetitionersconduct,itappearsthat
petitioners were under the direct control and supervision of SMC
supervisorsbothastothemannertheyperformedtheir
_______________
15Rolloatp.22.
408
408
functions and as to the end results thereof. It was only after petitioners
lodged a complaint to have their status declared as regular employees of
SMCthatcertainmembersof[Sunflower]begantocountersignpetitioners
daily time records to make it appear that they (petitioners) were under the
controlandsupervisionof[Sunflower]teamleaders(rollo,pp.523527).xx
x
Even without these instances indicative of control by SMC over the
petitioners, it is safe to assume that SMC would never have allowed the
petitioners to work within its premises, using its own facilities, equipment
and tools, alongside SMC employees discharging similar or identical
activitiesunlessitexercisedasubstantialdegreeofcontrolandsupervision
overthepetitionersnotonlyastothemannertheyperformedtheirfunctions
butalsoastotheendresultsofsuchfunctions.
xxx
x x x it becomes apparent that [Sunflower] and the petitioners do not
qualify as independent contractors. [Sunflower] and the petitioners did not
have substantial capital or investment in the form of tools, equipment,
implements, work premises, et cetera necessary to actually perform the
serviceundertheirownaccount,responsibility,andmethod.Theonlywork
premisesmaintainedby[Sunflower]wasasmallofficewithintheconfines
of a small carinderia or refreshment parlor owned by the mother of its
chair,RoyAsongtheonlyequipmentitownedwasatypewriter(rollo,pp.
525525)and,the only assets it provided SMC were the bare bodies of its
members,thepetitionersherein(rollo,p.523).
Inaddition,asshownearlier,petitioners,whoworkedinsidethepremises
of SMC, were under the control and supervision of SMC both as to the
manner and method in discharging their functions and as to the results
thereof.
Besides,itshouldbetakenintoaccountthattheactivitiesundertakenby
the petitioners as cleaners, janitors, messengers and shrimp harvesters,

packers and handlers were directly related to the aquaculture business of
SMC (See Guarin vs. NLRC,198 SCRA 267, 273). This is confirmed by
therenewaloftheservicecontractfromJanuary1993toSeptember1995,a
periodofclosetothree(3)years.
Moreover,thepetitionersherenumberingninetyseven(97),byitself,isa
considerable workforce and raises the suspicion that the nonexclusive
servicecontractbetweenSMCand[Sunflower]wasdesignedtoevadethe
obligationsinherentinanemployeremployee
409
VOL.461,JUNE28,2005
409
relationship (See RhonePoulenc Agrochemicals Philippines, Inc. vs.

NLRC,217SCRA249,259).
Equallysuspiciousisthefactthatthenotarypublicwhosignedtheby
laws of [Sunflower] and its [Sunflower] retained counsel are both
partnersofthelocalcounselofSMC(rollo,p.9).
xxx
With these observations, no other logical conclusion can be reached
exceptthat[Sunflower]actedasanagentofSMC,facilitatingthemanpower
requirements of the latter, the real employer of the petitioners. We simply
cannot allow these two entities through the convenience of a nonexclusive
servicecontracttostipulateontheexistenceofemployeremployeerelation.
Such existence is a question of law which cannot be made the subject of
agreement to the detriment of the petitioners (Tabas vs. California
Manufacturing,Inc.,169SCRA497,500).
xxx
There being a finding of laboronly contracting, liability must be
shoulderedeitherbySMCor[Sunflower]orsharedbyboth(SeeTabasvs.
California Manufacturing, Inc., supra, p. 502). SMC however should be
heldsolelyliable for [Sunflower] becamenonexistent with the closure of
theaquaculturebusinessofSMC.
Furthermore, since the closure of the aquaculture operations of SMC
appears to be valid, reinstatement is no longer feasible. Consistent with the
pronouncement in Bustamante, et al. vs. NLRC, G.R. No. 111651, 28
November 1996, petitioners are thus entitled to separation pay (in the
computationsimilartothosegiventoregularSMCemployeesatitsBacolod
ShrimpProcessingPlant)withfullbackwages,inclusiveofallowancesand
other benefits or their monetary equivalent, from the time their actual
compensationwaswithheldfromthemuptothetimeofthefinalityofthis
decision.Thisiswithoutprejudicetodifferentialspays(sic)effectiveasof
andfromthetimepetitionersacquiredregularemploymentstatuspursuantto
the discussion mentioned above, and all such other and further benefits as
providedbyapplicablecollectivebargainingagreement(s)orotherrelations,
orbylaw,beginningsuchtimeuptotheirtermi
410
410
16
nation from employment on 11 September 1995. (Emphasis and italics

supplied)
17
SMCsMotionforReconsideration havingbeendeniedforlackof
meritbyResolutionofJuly11,2001,itcomesbeforethisCourtvia
thepresentpetitionforreviewoncertiorariassigningtotheCAthe
followingerrors:
I
THE COURT OF APPEALS GRAVELY ERRED IN GIVING DUE
COURSE AND GRANTING RESPONDENTS PATENTLY DEFECTIVE
PETITION FOR CERTIORARI. IN DOING SO, THE COURT OF
APPEALS DEPARTED FROM THE ACCEPTED AND USUAL
COURSEOFJUDICIALPROCEEDINGS.
II
THE COURT OF APPEALS GRAVELY ERRED IN RECOGNIZING
ALLTHERESPONDENTSASCOMPLAINANTSINTHECASEBEFORE
THE LABOR ARBITER. IN DOING SO, THE COURT OF APPEALS
DECIDEDTHISCASEINAMANNERNOTINACCORDWITHLAW
OR WITH THE APPLICABLE DECISIONS OF THE SUPREME
COURT.
III
THECOURTOFAPPEALSGRAVELYERREDIN FINDING THAT
RESPONDENTSAREEMPLOYEESOFSMC.
IV
THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDNG
(sic) THAT RESPONDENTS ARE NOT ENTITLED TO ANY RELIEF.
THE CLOSURE OF THE BACOLOD SHRIMP
PROCESSING PLANT
18
WASDUETOSERIOUSBUSINESSLOSSES. (Italicssupplied)
_______________
16Id.,atpp.1521a.
17Id.,atpp.623637.
18Id.,atpp.5758.
411
VOL.461,JUNE28,2005
411
SMCbewailsthefailureoftheappellatecourttooutrightlydismiss
thepetitionforcertiorariasonlythreeoutoftheninetysevennamed
petitioners signed the verification and certification against forum
shopping.
While the general rule is that the certificate of nonforum
shoppingmustbesignedbyalltheplaintiffsorpetitionersinacase
19
andthesignatureofonlyoneofthemisinsufficient, thisCourthas
stressed that the rules on forum shopping, which were designed to
promote and facilitate the orderly administration of justice, should
notbeinterpretedwithsuchabsoluteliteralnessastosubvertitsown
20
ultimate and legitimate objective. Strict compliance with the
provisions regarding the certificate of nonforum shopping merely
underscores its mandatory nature in that the certification cannot be
altogether 21dispensed with or its requirements completely
disregarded. It does not, however, thereby interdict substantial
22
compliancewithitsprovisionsunderjustifiablecircumstances.
Thus in the recent case of HLC Construction and Development
Corporation23 v. Emily Homes Subdivision Homeowners
Association, thisCourtheld:
Respondents (who were plaintiffs in the trial court) filed the complaint
againstpetitionersasagroup,representedbytheirhomeownersassociation
president who was likewise one of the plaintiffs, Mr. Samaon M. Buat.
Respondentsraisedonecauseofactionwhichwasthebreachofcontractual
obligationsandpaymentofdamages.Theysharedacommoninterestinthe
subjectmatterofthecase,
_______________
19Docenav.Lapesura,355SCRA658,667(2001).
20Cavilev.HeirsofClaritaCavile,400SCRA255,261262(2003)(citationsomitted).
21
HLC Construction and Development Corporation v. Emily Homes Subdivision
HomeownersAssociation,411SCRA504,508(2003).
22Cavilev.HeirsofClaritaCavile,400SCRA255,262(2003)(citationomitted).
23411SCRA504(2003).
412
412
beingtheaggrievedresidentsofthepoorlyconstructedanddevelopedEmily
Homes Subdivision. Due to the collective nature of the case, there was no
doubt that Mr. Samaon M. Buat could validly sign the certificate of non
forumshoppinginbehalfofallhiscoplaintiffs.Incasesthereforewhereit
is highly impractical to require all the plaintiffs to sign the certificate of
nonforum shopping, it is sufficient, in order not to defeat the ends of
justice, for one of the plaintiffs, acting as representative, to sign the
certificate provided that xxx the plaintiffs share a common interest in the
subjectmatterofthecase or filed the case
as a collective, raising only
24
onecommoncauseofactionordefense. (Emphasisanditalicssupplied)
Giventhecollectivenatureofthepetitionfiledbeforetheappellate
court by herein private respondents, raising one common cause of
actionagainstSMC,theexecutionbyprivaterespondentsWinifredo
Talite,RenelitoDeonandJoseTemporosainbehalfofalltheother
private respondents of the certificate of nonforum
shopping
25
constitutes substantial compliance with the Rules. That the three
indeedrepresentedtheircopetitionersbeforetheappellatecourtis,
asitcorrectlyfound,subsequentlyproventobetrueasshownby
_______________
24Id.,atpp.509510.
25Vide:Cavilev.HeirsofClaritaCavile,400SCRA255(2003)wherethisCourt
found:
WefindthattheexecutionbyThomasGeorgeCavile,Sr.inbehalfofalltheotherpetitioners
ofthecertificateofnonforumshoppingconstitutessubstantialcompliancewiththeRules.All
the petitioners, being relatives and coowners of the properties in dispute, share a common
interestthereon.Theyalsoshareacommondefenseinthecomplaintforpartitionfiledbythe
respondents.Thus,whentheyfiledtheinstantpetition,theyfileditasacollective,raisingonly
one argument to defend their rights over the properties in question. There is sufficient basis,
therefore, for Thomas George Cavili, Sr. to speak for and in behalf of his copetitioners that
theyhavenotfiledanyactionorclaiminvolvingthesameissuesinanothercourtortribunal,
nor is there other pending action or claim in another court or tribunal involving the same
issues.
413
VOL.461,JUNE28,2005
413
the signatures of the majority26of the petitioners appearing in their

memorandumfiledbeforeUs.
Additionally, the merits of the substantive aspects of the case
may also be deemed as special circumstance or compelling
reason to take cognizance of a petition although the certification
against forum
shopping was not executed and signed by all of the
27
petitioners.
SMC goes on to argue that the petition filed before the CA is
fatally defective as it was not accompanied by copies of all
pleadings and documents relevant and pertinent thereto
in
28
contraventionofSection1,Rule65oftheRulesofCourt.
This Court is not persuaded. The records show that private
respondents appended the following documents to their petition
before the appellate
court: the September 23, 1997 Decisionofthe
29
Labor Arbiter, their Notice of Appeal with Appeal
Memorandum
30
datedOctober16,1997filedbeforetheNLRC,
_______________
26Rolloatp.28.
27Torresv.SpecializedPackagingDevelopmentCorporation,433SCRA455,467
(2004) Cavile v. Heirs of Clarita Cavile, 400 SCRA 255, 262 (2003) (citation
omitted).
28
SECTION 1. Petition for Certiorari.When any tribunal, board or officer
exercisingjudicialorquasijudicialfunctionshasactedwithoutorinexcessofitsor
his jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction,andthereisnoappeal,oranyplain,speedy,andadequateremedyinthe
ordinarycourseoflaw,apersonaggrievedtherebymayfileaverifiedpetitioninthe
propercourt,allegingthefactswithcertaintyandprayingthatjudgmentberendered
annullingormodifyingtheproceedingsofsuchtribunal,boardorofficer,andgranting
suchincidentalreliefsaslawandjusticemayrequire.
Thepetitionshallbeaccompaniedbyacertifiedtruecopyofthejudgment,order
or resolution subject thereof, copies of all pleadings and documents relevant and
pertinentthereto,andasworncertificationofnonforumshoppingasprovidedinthe
thirdparagraphofsection3,Rule46.
29CARolloatpp.1631.
30Id.,atpp.3347.
414
414
31
the December 29, 1998 NLRC Decision, their Motion

for
32
Reconsideration dated March 26, 1999 filed
with the NLRC and
33
theSeptember10,1999NLRCResolution.
It bears stressing at any rate that it is the appellate court which
ultimately determines if the supporting
documents are sufficient to
34
make out a prima facie case. It discerns whether on the basis of
whathavebeensubmitteditcouldalreadyjudiciouslydeterminethe
35
merits of the petition. In the case at bar, the CA found that the
petition was adequately supported by relevant and pertinent
documents.
Atallevents,thisCourthasallowedaliberalconstructionofthe
rule on the accomplishment of a certificate of nonforum shopping
in the following cases: (1) where a rigid application will result in
manifest failure or miscarriage of justice (2) where the interest of
substantial justice will be served (3) where the resolution of the
motionisaddressed solely tothesoundandjudicious discretion of
the court and (4) where the injustice to the adverse party is not
commensurate with the degree of his
thoughtlessness in not
36
complyingwiththeprocedureprescribed.
Rules of procedure should indeed be viewed as mere tools
designedtofacilitatetheattainmentofjustice.Theirstrictandrigid
application,whichwouldresultintechnicalitiesthattendtofrustrate
37
ratherthanpromotesubstantialjustice,mustalwaysbeeschewed.
SMC further argues that the appellate court exceeded its
jurisdictioninreversingthedecisionsofthelaborarbiterand
_______________
31Id.,atpp.4861.
32Id.,atpp.6367.
33Id.,atpp.6869.
34Atillov.Bombay,351SCRA361,369(2001).
35Ibid.
36
Manila Hotel Corporation v. Court of Appeals, 384 SCRA 520, 524 (2002)
(citationomitted).
37Serranov.GalantMaritimeServices,Inc.,408SCRA523,528(2003)(citations
omitted).
415
VOL.461,JUNE28,2005
415
the NLRC as findings of facts of quasijudicial bodies like the
NLRC are accorded great respect and finality, and that this
principleacquiresgreaterweightandapplicationinthecaseatbaras
thelaborarbiterandtheNLRChavethesamefactualfindings.
The general rule, no doubt, is that findings of facts of an
administrativeagencywhichhasacquiredexpertiseintheparticular
38
fieldofitsendeavorareaccordedgreatweightonappeal. Therule
is not absolute and admits of certain wellrecognized exceptions,
however.Thus,whenthefindingsoffactofthelaborarbiterandthe
NLRC are not supported by substantial evidence or their judgment
was based on a misapprehension of facts, the appellate
court may
39
makeanindependentevaluationofthefactsofthecase.
SMC further faults the appellate court in giving due course to
privaterespondentspetitiondespitethefactthatthecomplaintfiled
before the labor arbiter was signed and verified only by private
respondent
Winifredo Talite that 41private respondents position
40
paper was verified by only six out42 of the ninety seven
complainants
and that their JointAffidavit was executed only by
43
twelve ofthecomplainants.
_______________
38 PepsiCola Distributors of the Philippines, Inc. v. National Labor Relations
Commission,272SCRA267,276(1997)Trendline Employees AssociationSouthern

PhilippinesFederationofLaborv.NationalLaborRelationsCommission,272SCRA
172,179(1997)(citationomitted).
39
EMCO Plywood Corporation v. Abelgas, 427 SCRA 496, 515516 (2004)
(citationsomitted)Villarv.NationalLaborRelationsCommission,331 SCRA 686,

692(2000)(citationomitted).
40Rolloatpp.124136.
41WinifredoTalite,CamiloTemporosa,ArnelDePedro,JonathanInventor,Ramie
DespiandRoderickDuquesa.
42Rolloatpp.483489.
43
Winifredo Talite, Jerry Talite, Clifford Despi, Joey de la Cruz, Jonathan
Inventor, Ramie Despi, Arnel De Pedro, Leonardo Lemoncito, Camilo Temporosa,

RenelitoDeon,JoseTemporosaandVictorDespi.
416
416
Specifically with respect to the JointAffidavit of private

respondents,SMCassertsthatitshouldnothavebeenconsideredby
the appellate court in establishing the claims of those who did not
sign the same, citing this Courts ruling in Southern Cotabato
44
DevelopmentandConstruction,Inc.v.NLRC.
SMCspositiondoesnotlie.
A perusal of the complaint shows that the ninety seven
complainants were being represented by their counsel of choice.
Thus the first sentence of their complaint alleges: xxx
complainants, by counsel and unto this Honorable Office
respectfullystatexxx.AndthecomplaintwassignedbyAtty.Jose
MaxS.Ortizascounselforthecomplainants.FollowingSection
6, Rule III of the 1990 Rules of Procedure of the NLRC, now
Section7,RuleIIIofthe1999NLRCRules,Atty.Ortizispresumed
to be properly authorized by private respondents in filing the
complaint.
That the verification wherein it is manifested that private
respondentTalitewasoneofthecomplainantsandwascausingthe
preparation of the complaint with the authority of my co
complainants indubitably shows that Talite was representing the
restofhiscocomplainantsinsigningtheverificationinaccordance
with Section 7, Rule III of the 1990 NLRC Rules, now Section 8,
Rule3ofthe1999NLRCRules,whichstates:
Section7.Authoritytobindparty.Attorneys and other representatives of
partiesshallhaveauthoritytobindtheirclientsinallmattersofprocedure
buttheycannot,withoutaspecialpowerofattorneyorexpressconsent,enter
into a compromise agreement with the opposing party in full or partial
dischargeofaclientsclaim.(Italicssupplied)
As regards private respondents position paper which bore the

signaturesofonlysixofthem,appendedtoitwasanAu
_______________
44280SCRA853(1997).
417
VOL.461,JUNE28,2005
417
45
thority/ConfirmationofAuthority signed by the ninety one others

conferringauthoritytotheircounseltofileRABCaseNo.0607
1031695, entitled Winifredo Talite, et al. v. San Miguel
CorporationpresentlypendingbeforethesalaofLaborArbiterRay
Alan Drilon at the NLRC Regional Arbitration Branch No. VI in
Bacolod City and appointing him as their retained counsel to
representtheminthesaidcase.
Thattherehasbeensubstantialcompliancewiththerequirement
on verification of position papers
under Section 3, Rule V of the
46
1990 NLRC Rules of Procedure is not difficult to appreciate in
lightoftheprovisionofSection7,RuleVofthe1990NLRCRules,
nowSection9,RuleVofthe1999NLRCRuleswhichreads:
Section7.NatureofProceedings.TheproceedingsbeforeaLaborArbiter
shall be nonlitigious in nature. Subject to the requirements of due process,
thetechnicalitiesoflawandprocedure
_______________
45Rolloatpp.133135.
46Section3.SubmissionofPositionPapers/Memorandum.Shouldthepartiesfailtoagree
upon an amicable settlement, either in whole or in part, during the conferences, the Labor
Arbiter shall issue an order stating therein the matters taken up and agreed upon during the
conferences and directing the parties to simultaneously file their respective verified position
papers.
Theseverifiedpositionpapersshallcoveronlythoseclaimsandcausesofactionraisedin
thecomplaintexcludingthosethatmayhavebeenamicablysettled,andshallbeaccompanied
by all supporting documents including the affidavits of their respective witnesses which shall
take the place of the latters direct testimony. The parties shall thereafter not be allowed to
allege facts, or present evidence to prove facts, not referred to and any cause or causes of
actionnotincludedinthecomplaintorpositionpapers,affidavitsandotherdocuments.Unless
otherwise requested in writing by both parties, the Labor Arbiter shall direct both parties to
submitsimultaneouslytheirpositionpapers/memorandumwiththesupportingdocumentsand
affidavitswithinfifteen(15)calendardaysfromthedateofthelastconference,withproofof
havingfurnishedeachotherwithcopiesthereof.
418
418
andtherulesobtaininginthecourtsoflawshallnotstrictlyapplythereto.
TheLaborArbitermayavailhimselfofallreasonablemeanstoascertainthe
facts of the controversy speedily, including ocular inspection and
examinationofwellinformedpersons.(italicssupplied)
As regards private respondents JointAffidavit which is being

assailed in view of the failure of some complainants to affix their
signatures thereon, this Court quotes with approval the appellate
courtsratiocinations:
A perusal of the Southern Cotabato Development Case would reveal that
movant did not quote the whole text of paragraph 5 on page 865 of 280
SCRA.Thewholeparagraphreads:
Clearlythen,astothosewhooptedtomoveforthedismissaloftheircomplaints,or
did not submit their affidavits nor appear during trial and in whose favor no other
independentevidencewasadduced,noawardforbackwagescouldhavebeenvalidly
andproperlymadeforwantoffactualbasis.Thereisnoshowingatallthatanyofthe
affidavitsofthethirtyfour(34)complainantswereofferedasevidenceforthosewho
did not submit their affidavits, or that such affidavits had any bearing at all on the
rightsandinterestofthelatter.Inthesamevein,privaterespondentspositionpaper
wasnotofanyhelptothesedelinquentcomplainants.
The implication is that as long as the affidavits of the complainants

were offered as evidence for those who did not submit theirs, or the
affidavits were material and relevant to the rights and interest of the
latter,suchaffidavitsmaybesufficienttoestablishtheclaimsofthose
whodidnotgivetheiraffidavits.
Here,areadingofthejointaffidavitsignedbytwelve(12)oftheninety
seven (97) complainants (petitioners herein) would readily reveal that the
affidavitwasofferedasevidencenotonlyforthesignatoriesthereinbutfor
all of the complainants. (These ninetyseven (97) individuals were
previously identified during the mandatory conference as the only
complainants in the proceedings before the labor arbiter) Moreover, the
affidavit touched on the common interest of all of the complainants as it
supportedtheirclaimoftheexistenceofanemployeremployeerelationship
betweenthemand
419
VOL.461,JUNE28,2005
419
respondentSMC.Thus,thesaidaffidavitwasenoughtoprovetheclaimsof
47
therestofthecomplainants. (Emphasissupplied,italicsintheoriginal)
Inanyevent,SMCisremindedthattherulesofevidenceprevailing
in courts of law or equity do not control proceedings before the
LaborArbiter.SoArticle221oftheLaborCodeenjoins:
ART. 221. Technical rules not binding and prior resort to amicable
settlement.In any proceeding before the Commission or any of the Labor
Arbiters,therulesofevidenceprevailingincourtsoflaworequityshallnot
be controlling and it is the spirit and intention of this Code that the
CommissionanditsmembersandtheLaborArbitersshalluseeveryandall
reasonablemeanstoascertainthefactsineachcasespeedilyandobjectively
andwithoutregardtotechnicalitiesoflaworprocedure,allintheinterestof
dueprocess.xxx
As such, their application

may be relaxed to serve the demands of
48
substantialjustice.
Onthemerits,thepetitionjustthesamefails.
SMC insists that private respondents are the employees of
Sunflower, an independent contractor. On the other hand, private
respondentsassertthatSunflowerisalaboronlycontractor.
Article106oftheLaborCodeprovides:
ART. 106. Contractor or subcontracting.Whenever an employer enters
into a contract with another person for the performance of the formers
work, the employees of the contractor and of the latters subcontractor, if
anyshallbepaidinaccordancewiththeprovisionsofthisCode.
_______________
47Rolloatp.26.
48Havtor Management Phils., Inc. v. National Labor Relations Commission, 372
SCRA 271, 274 (2001) (citation omitted) Samahan ng Manggagawa sa Moldex

Products, Inc. v. National Labor Relations Commission,324 SCRA 237, 252 (2000)
(citationomitted).
420
420
Intheeventthatthecontractororsubcontractorfailstopaythewagesofhis
employees in accordance with this Code, the employer shall be jointly and
severallyliablewithhiscontractororsubcontractortosuchemployeestothe
extent of the work performed under the contract, in the same manner and
extentthatheisliabletoemployeesdirectlyemployedbyhim.
The Secretary of Labor may, by appropriate regulations, restrict or
prohibit the contracting out of labor to protect the rights of workers
established under the Code. In so prohibiting or restricting, he may make
appropriate distinctions between laboronly 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
provisionofthisCode.
Thereislaboronlycontractingwherethepersonsupplyingworkersto
an employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the
workersrecruitedandplacedbysuchpersonareperformingactivitieswhich
aredirectlyrelatedtotheprincipalbusinessofsuchemployer.Insuchcases,
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
extentasifthelatterweredirectlyemployedbyhim.
Rule VIIIA, Book III of the Omnibus Rules Implementing the

LaborCode,asamendedbyDepartmentOrderNo.18,distinguishes
betweenlegitimateandlaboronlycontracting:
Section 3. Trilateral Relationship in Contracting Arrangements.In
legitimatecontracting,thereexistsatrilateralrelationshipunderwhichthere
isacontractforaspecificjob,workorservicebetweentheprincipalandthe
contractor or subcontractor, and a contract of employment between the
contractor or subcontractor and its workers. Hence, there are three parties
involvedinthesearrangements,theprincipalwhichdecidestofarmoutajob
or service to a contractor or subcontractor, the contractor or subcontractor
which has the capacity to independently undertake the performance of the
job, work or service, and the contractual workers engaged by the contractor
orsubcontractortoaccomplishthejob,workorservice.
421
VOL.461,JUNE28,2005
421
Section 5. Prohibition against laboronly contracting.Laboronly
contracting is hereby declared prohibited. For this purpose, laboronly
contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a job,
work or service for a principal, and any of the following elements are
present:
i) Thecontractororsubcontractordoesnothavesubstantialcapitalor
investmentwhichrelatestothejob,workorservicetobeperformed
and the employees recruited, supplied or placed by such contractor
orsubcontractorareperformingactivitieswhicharedirectlyrelated
tothemainbusinessoftheprincipal,or
ii) The contractor does not exercise the right to control over the
performanceoftheworkofthecontractualemployee.
Theforegoingprovisionsshallbewithoutprejudicetotheapplicationof
Article248(c)oftheLaborCode,asamended.
Substantialcapitalorinvestmentreferstocapitalstocksandsubscribed
capitalization in the case of corporations, tools, equipment, implements,
machineriesandworkpremises,actuallyanddirectlyusedbythecontractor
or subcontractor in the performance or completion of the job, work or
servicecontractedout.
The right to control shall refer to the right reserved to the person for
whom the services of the contractual workers are performed, to determine
notonlytheendtobeachieved,butalsothemannerandmeanstobeusedin
reachingthatend.
Thetesttodeterminetheexistenceofindependentcontractorshipis
whether one claiming to be an independent contractor has
contracted to do the work according to his own methods and
withoutbeingsubjecttothecontroloftheemployer,exceptonlyas
49
totheresultsofthework.
_______________
49NewGoldenCityBuilders&DevelopmentCorporationv.CourtofAppeals,418
SCRA411,417(2003)Vinoyav.NationalLaborRelationsCommission,324 SCRA
469, 487 (2000) (citation omitted) Philippine Airlines, Inc. v. National Labor
RelationsCommission,298SCRA430,444(1998)(citationomitted).
422
422
In legitimate labor contracting, the law creates an employer

employee relationship for a limited purpose, i.e., to ensure that the
employees are paid their wages. The principal employer becomes
jointly and severally liable with the job contractor, only for the
payment of the employees wages whenever the contractor fails to
pay the same. Other than that, the principal50 employer is not
responsibleforanyclaimmadebytheemployees.
In laboronly contracting, the statute creates an employer
employee relationship for a comprehensive purpose: to prevent a
circumventionoflaborlaws.Thecontractorisconsideredmerelyan
agent of the principal employer and the latter is responsible to the
employees of the laboronly contractor as if such
employees had
51
beendirectlyemployedbytheprincipalemployer.
The Contract of Services between SMC and Sunflower shows
that the parties clearly disavowed the existence of an employer
employee relationship between SMC and private respondents. The
languageofacontractisnot,however,determinativeoftheparties
relationshipratheritisthetotality
_______________
50NewGoldenCityBuilders&DevelopmentCorporationv.CourtofAppeals,418
SCRA 411, 419 (2003) (citation omitted) San Miguel Corporation v. MAERC
IntegratedServices,Inc.,405SCRA579,596(2003)(citationomitted).
51
Manila Water Company, Inc. v. Pea, 434 SCRA 53, 61 (2004) (citation
omitted)San Miguel Corporation v. MAERC Integrated Services, Inc., 405 SCRA

579, 596 (2003) Philippine Airlines, Inc. v. National Labor Relations Commission,
298 SCRA 430, 447 (1998) (citation omitted) Ponce v. National Labor Relations
Commission, 293 SCRA 366, 375376, (1998) (citations omitted) Tiu v. National
Labor Relations Commission, 254 SCRA 1, 9 (1996) (citations omitted) Ecal v.
NationalLaborRelationsCommission,195SCRA224,231(1991)(citationomitted)
Philippine Bank of Communications v. National Labor Relations Commission, 146
SCRA347,356(1986).
423
VOL.461,JUNE28,2005
423
52
of the facts and surrounding circumstances of the case. A party

cannotdictate,bythemereexpedientofaunilateraldeclarationina
contract, the character of its business, i.e., whether as laboronly
contractor or job contractor, it being crucial that its character53be
measuredintermsofanddeterminedbythecriteriasetbystatute.
SMC argues that Sunflower could not have been issued a
certificate
of registration as a cooperative if it had no substantial
54
capital.
While indeed
Sunflower was issued Certificate of Registration
55
No. IL0875 on February 10, 1992 by the Cooperative
Development Authority, this merely shows that it had at least
P2,000.0056in paidup share capital as mandated by Section 5 of
Article 14 of Republic Act No. 6938, otherwise known as the
Cooperative Code, which amount cannot be considered substantial
capitalization.
What appears is that Sunflower does not have substantial
capitalization or investment in the form of tools, equipment,
machineries, work premises and other materials to qualify it as an
independentcontractor.
_______________
52SanMiguelCorporationv.MAERCIntegratedServices,Inc,405SCRA579,589
(2003) (citation omitted), Bernardo v. National Labor Relations Commission, 310

SCRA186,205(1999)(citationomitted).
53 De los Santos v. National Labor Relations Commission, 372 SCRA 723,
(2001).
54Rolloatp.76.
734
55Id.,atp.287.
56
(5) No cooperative shall be registered unless the articles of cooperation is
accompaniedwiththebondsoftheaccountableofficersandaswornstatementofthe
treasurer elected by the subscribers showing that at least twentyfive per centum
(25%)oftheauthorizedsharecapitalhasbeensubscribedandatleasttwentyfiveper
centum(25%)ofthetotalsubscriptionhasbeenpaid:Provided,Thatinnocaseshall
thepaidupsharecapitalshallbelessthanTwothousandpesos(P2,000.00).
424
424
Ontheotherhand,itisgatheredthatthelot,building,machineries
and all other working tools utilized by private respondents in
carryingouttheirtaskswereownedandprovidedbySMC.Consider
the following uncontroverted allegations of private respondents in
theJointAffidavit:
[Sunflower], during the existence of its service contract with respondent
SMC, did not own a single machinery, equipment, or working tool used in
the processing plant. Everything was owned and provided by respondent
SMC.Thelot,thebuilding,andworkingfacilitiesareownedbyrespondent
SMC. The machineries and equipments (sic) like washer machine, oven or
cooking machine, sizer machine, freezer, storage, and chilling tanks, push
carts, hydrolic (sic) jack, tables, and chairs were all owned by respondent
SMC. All the boxes, trays, molding pan used in the processing are also
ownedbyrespondentSMC.Theglovesandbootsusedbythecomplainants
werealsoownedbyrespondentSMC.Eventhemops,electricfloorcleaners,
brush,hoose(sic),soaps,floorwaxes,chlorine,liquidstainremovers,lysol
and the like used by the complainants assigned as cleaners were all owned
andprovidedbyrespondentSMC.
Simplystated,thirdpartyrespondentdidnotownevenasmallcapitalin
theformoftools,machineries,orfacilitiesusedinsaidprawnprocessing
xxx
Theallegedofficeof[Sunflower]isfoundwithintheconfinesofasmall
carinderiaorrefreshment(sic)ownedbythemotheroftheCooperative
ChairmanRoyAsong.
x x x In said . . . office,
the only equipment used and owned by
57
[Sunflower]wasatypewriter.
And from the job description provided by SMC itself, the work
assigned to private respondents was directly related to the
aquacultureoperationsofSMC.Undoubtedly,thenatureofthework
performed by private respondents in shrimp harvesting, receiving
andpackingformedanintegralpartofthe
_______________
57Rolloatpp.483486.
425
VOL.461,JUNE28,2005
425
shrimp processing operations of SMC. As for janitorial and

messengerialservices,thattheyareconsidereddirectlyrelatedtothe
58
principal business of the employer has been jurisprudentially
recognized.
Furthermore,Sunflowerdidnotcarryonanindependentbusiness
orundertaketheperformanceofitsservicecontractaccordingtoits
ownmannerandmethod,freefromthecontrolandsupervisionofits
principal, SMC, its apparent role having been merely to recruit
personstoworkforSMC.
Thus, it is gathered from the evidence adduced by private
respondents before the labor arbiter that their daily time records
were signed by SMC supervisors Ike Puentebella, Joemel Haro,
Joemari Raca, Erwin Tumonong, Edison Arguello, and Stephen
Palabrica, which fact shows that SMC exercised
the power of
59
control and supervision over its employees. And control of the
premisesinwhichprivaterespondentsworkedwasbySMC.These
60
tendtodisprovetheindependenceofthecontractor.
More. Private respondents had been working in the aqua
processingplantinsidetheSMCcompoundalongsideregularSMC
shrimpprocessingworkersperformingidenticaljobsunderthesame
61
SMC supervisors. This circumstance62is another indicium of the
existenceofalaboronlycontractorship.
_______________
58Coca Cola Bottlers Phils., Inc. v. National Labor Relations Commission, 307
SCRA 131, 137 (1999) (citation omitted) Neri v. National Labor Relations
Commission,224SCRA717,722(1993)(citationomitted)Guarinv.NationalLabor
RelationsCommission,178SCRA267,273(1989)(citationomitted).
59 De los Santos v. National Labor Relations Commission, 372 SCRA 723,
732
(2001).
60San Miguel Corporation v. MAERC Integrated Services, Inc.,405 SCRA 579,
61Rolloatp.485.
62
Vide: Philippine Bank of Communications v. National Labor Relations
Commission(146SCRA347,354)wherethisCourtfound:
426
426
AndasprivaterespondentsallegedintheirJointAffidavitwhichdid
not escape the observation of the CA, no showing to the contrary
having been proffered
by SMC, Sunflower did not cater to clients
63
otherthanSMC, and with the closure of SMCs Bacolod Shrimp
Processing Plant, Sunflower likewise ceased to exist. This Courts
ruling
in San Miguel Corporation v. MAERC Integrated Services,
64
Inc. isthusinstructive.
xxxNordowebelieveMAERCtohaveanindependentbusiness.Notonly
wasitsetuptospecificallymeetthepressingneedsofSMCwhichwasthen
having labor problems in its segregation division, none of its workers was
alsoeverassignedtoanyotherestablishment,thusconvincingusthatitwas
createdsolelytoservicetheneedsofSMC.Naturally,withtheseveranceof
relationship between MAERC and SMC followed MAERCs cessation of
operations, the loss of jobs for the whole
MAERC workforce and the
65
resultingactionsinstitutedbytheworkers. (Italicssupplied)
All the foregoing considerations affirm by more than substantial

evidence the existence of an employeremployee relationship
betweenSMCandprivaterespondents.
_______________
TurningtothepowertocontrolOrpiadasconduct,itshouldbenotedimmediately
thatOrpiadaperformedhisfunctionswithinthebankspremises,andnotwithinthe
officepremisesofCESI.Assuch,Orpiadamusthavebeensubjecttoatleastthesame
controlandsupervisionthatthebankexercisesoveranyotherpersonphysicallywithin
itspremisesandrenderingservicestoorforthebank,inotherwords,anyemployeeor
staffmemberofthebank.Itseemsunreasonabletosupposethatthebankwouldhave
allowedOrpiadaandtheotherpersonsassignedtothebankbyCESItoremainwithin
thebankspremisesandthererenderservicestothebank,withoutsubjectingthemtoa
substantialmeasureofcontrolandsupervisionxxx
63Vide:CocaColaBottlersPhils.,Inc.v.NationalLaborRelationsCommission,
307SCRA131,140(1999).
64405SCRA579(2003).
65Id.,atpp.595596.
427
VOL.461,JUNE28,2005
427
Since private respondents who were engaged in shrimp processing

performed tasks usually necessary or desirable in the aquaculture
businessofSMC,theyshouldbedeemedregularemployeesofthe
66
latter and as such are entitled 67to all the benefits and rights
appurtenanttoregularemployment. They should thus be awarded
differential pay corresponding to the difference between the wages
and benefits given them and those accorded SMCs other regular
employees.
Respecting the private respondents who were tasked with
janitorial and messengerial duties, this Court quotes with approval
theappellatecourtsrulingthereon:
Those performing janitorial and messengerial services however acquired
regularstatusonlyafterrenderingoneyearservicepursuanttoArticle280
of the Labor Code. Although janitorial and messengerial services are
considered directly related to the aquaculture business of SMC, they are
deemed unnecessary in the conduct of its principal business hence, the
distinction(SeeCoca Cola Bottlers Phils., Inc. v. NLRC,307 SCRA 131,
68
136137andPhilippineBankofCommunicationsv.NLRC,supra,p.359).
The law of course provides for 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,whethercontinuousorbroken,withrespecttotheactivityin
69
whichtheyareemployed.
As for those of private respondents who were engaged in
janitorialandmessengerialtasks,theyfallunderthesecondcategory
andarethusentitledtodifferentialpayandbenefits
_______________
66ManilaWaterCompany,Inc.v.Pea,434SCRA53,62(2004).
67
Ecal v. National Labor Relations Commission, 195 SCRA 224, 234 (1991)
(citationsomitted).
68Rolloatp.21.
69KimberlyIndependentUnionv.Drilon,185SCRA190,203(1990).
428
428
extendedtootherSMCregularemployeesfromthedayimmediately
70
followingtheirfirstyearofservice.
Regarding the closure of SMCs aquaculture operations and the
consequent termination of private respondents, Article 283 of the
LaborCodeprovides:
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
provisionsofthisTitle,byservingawrittennoticeontheworkersandthe
Department of Labor and Employment at least one (1) month before the
intendeddatethereof. In case of termination due to the installation of labor
savingdevicesorredundancy,theworkeraffectedtherebyshallbeentitledto
aseparationpayequivalenttoatleasthisone(1)monthpayortoatleastone
(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
operationsofestablishmentorundertakingnotduetoseriousbusinesslosses
orfinancialreverses,theseparationpayshallbeequivalenttoone(1)month
pay or to at least onehalf (1/2) month pay for every year of service,
whicheverishigher.Afractionofatleastsix(6)monthsshallbeconsidered
one(1)wholeyear.(Italicssupplied)
Inthecaseatbar,aparticulardepartmentundertheSMCgroupof
companies was closed allegedly due to serious business reverses.
This constitutes retrenchment by, and not closure of, the enterprise
orthecompanyitselfasSMChasnottotallyceasedoperationsbutis
71
stillverymuchanongoingandhighlyviablebusinessconcern.
_______________
70Id.,atp.205.
71 Catatista v. National Labor Relations Commission, 247 SCRA 46, 51 (1995)
Construction & Development Corporation of the Philippines v. Leogardo, Jr., 125

SCRA863,867(1983).
429
VOL.461,JUNE28,2005
429
Retrenchmentisamanagementprerogativeconsistentlyrecognized
and affirmed by this Court. It is, however, subject to faithful

compliance with the substantive
and procedural requirements laid
72
downbylawandjurisprudence.
Forretrenchmenttobeconsideredvalidthefollowingsubstantial
requirements must be met: (a) the losses expected should be
substantialandnotmerelydeminimis in extent (b) the substantial
losses apprehended must be reasonably imminent such as can be
perceived objectively and in good faith by the employer (c) the
retrenchmentmustbereasonablynecessaryandlikelytoeffectively
prevent the expected losses and (d) the alleged losses, if already
incurred,andtheexpectedimminentlossessoughttobeforestalled,
73
mustbeprovedbysufficientandconvincingevidence.
Inthedischargeoftheserequirements,itistheemployerwhohas
74
theonus,beinginthenatureofanaffirmativedefense.
_______________
72EMCO Plywood Corporation v. Abelgas,427 SCRA 496, 511 (2004) (citation
omitted).
omitted)PhilippineTobaccoFlueCuring&RedryingCorporationv.NationalLabor
Relations Commission, 300 SCRA 37, 5556 (1998) (citation omitted) Somerville
StainlessSteelCorporationv.NationalLaborRelationsCommission,287SCRA420,
430 (1998) (citation omitted) Edge Apparel, Inc. v. National Labor Relations
Commission, 286 SCRA 302, 313 (1998) (citation omitted) San Miguel Jeepney
Servicev.NationalLaborRelationsCommission,265 SCRA 35, 44 (1996) (citation
omitted)Catatistav.NationalLaborRelationsCommission,247SCRA46,52(1995)
(citationomitted).
74SomervilleStainlessSteelCorporationv.NationalLaborRelationsCommission,
287SCRA420,432(1998)(citationomitted)SanMiguelJeepneyServicev.National
LaborRelationsCommission,265SCRA35,45(1996)(citationomitted)Guerrerov.
NationalLaborRelationsCommission,261SCRA301,306(1996)(citationomitted).
430
430
Normally, the condition of business losses is shown by audited

financial documents like yearly balance sheets, profit and loss
statements and annual income tax returns. The financial statements
mustbepreparedandsignedbyindependentauditorsfailingwhich
75
theycanbeassailedasselfservingdocuments.
In the case at bar, company losses were duly established by
financial documents audited by Joaquin Cunanan & Co. showing
that the aquaculture operations of SMCs Agribusiness Division

accumulatedlossesamountingtoP145,848,172.00in1992resulting
in the closure of its Calatrava Aquaculture Center in Negros
Occidental, P11,393,071.00 in 1993 and P80,325,608.00 in 1994
which led to the closure of its San Fernando Shrimp Processing
Plant in Pampanga and the Bacolod Shrimp Processing Plant in
1995.
SMC has thus proven substantial business reverses justifying
retrenchmentofitsemployees.
Forterminationduetoretrenchmenttobevalid,however,thelaw
requiresthatwrittennoticesoftheintendedretrenchmentbeserved
by the employer on the worker and on the DOLE
at least one (1)
76
monthbeforetheactualdateoftheretrenchment, inordertogive
employeessometimetopreparefortheeventuallossoftheirjobs,
as well as to give DOLE the opportunity
to ascertain the verity of
77
theallegedcauseoftermination.
_______________
75AsianAlcoholCorporationv.NationalLaborRelationsCommission,305SCRA
417(1999)(citationsomitted).
76
EMCO Plywood Corporation v. Abelgas, 427 SCRA 496, 511512 (2004)
(citationomitted)SanMiguelCorporationv.MAERCIntegratedServices,Inc.,405
SCRA 579, 596 (2003) (citations omitted) Guerrero v. National Labor Relations
Commission,261SCRA301,307(1996).
omitted) Sebuguero v. National Labor Relations Commission, 248 SCRA 532, 545
(1995).
431
VOL.461,JUNE28,2005
431
Private respondents, however, were merely verbally informed on

September10,1995bySMCPrawnManagerPoncianoCapaythat
effectivethefollowingdayoronSeptember11,1995,theywereno
78
longertoreportforworkasSMCwouldbeclosingitsoperations.
Where the dismissal is based on an authorized cause under
Article 283 of the Labor Code but the employer failed to comply
with the notice requirement, the sanction should be stiff as the
dismissal process was initiated by the employers exercise of his
managementprerogative,asopposedtoadismissalbasedonajust
cause under Article 282 with the same procedural infirmity where
thesanctiontobeimposedupontheemployershouldbetemperedas
thedismissalprocesswas,ineffect,initiatedbyanactimputableto
79
theemployee.
Inlightofthefactualcircumstancesofthecaseatbar,thisCourt
awardsP50,000.00toeachprivaterespondentasnominaldamages.
The grant of separation pay as an incidence of termination of
employment due to retrenchment to prevent losses is a statutory
obligationonthepartoftheemployerandademandablerightonthe
part of the employee. Private respondents should thus be awarded
separationpayequivalenttoatleastone(1)monthpayortoatleast
onehalfmonthpayforeveryyearofservice,whicheverishigher,as
mandated by Article 283 of the Labor Code or the separation pay
awarded by SMC to other regular SMC employees that were
terminated as a result of the retrenchment, depending on which is
mostbeneficialtoprivaterespondents.
Considering that private respondents were not illegally
dismissed, however, no backwages need be awarded. It is well
settledthatbackwagesmaybegrantedonlywhenthereisa
_______________
78Rolloat126.
79JAKAFoodProcessingCorporationv.Pacot,G.R.No.151378,March28,2005,
454SCRA119.
432
432
80
finding of illegal dismissal. The appellate court thus erred in

awarding backwages81to private respondents upon the authority of
Bustamantev.NLRC, whatwasinvolvedinthatcasebeingoneof
illegaldismissal.
Withrespecttoattorneysfees,inactionsforrecoveryofwages
or where an employee was forced to litigate
and thus incurred
82
expenses to protect his rights and interests,
a maximum of ten
83
percent (10%) of the total monetary award by way of
attorneys
84
feesisjustifiableunderArticle111oftheLaborCode,
Section8,
85
Rule VIII, Book III of its Implementing
Rules, and paragraph 7,
86
Article 2208 of the Civil Code. Although an express finding of
factsandlawisstillnecessarytoprovethemeritoftheaward,there
neednotbeanyshowingthattheemployeractedmaliciouslyorin
badfaithwhen
_______________
80J.A.T.GeneralServicesv.NationalLaborRelationsCommission,421SCRA78,
81265SCRA61,71(1996).
82
Manila Water v. Pea , 434 SCRA 53, 6465 (2004) (citation omitted)
Rasonable v. National Labor Relations Commission, 253 SCRA 815, 819 (1996)
(citationsomitted).
83
Reyes v. Court of Appeals, 409 SCRA 267, 284 (2003) (citations omitted)
MarsamanManningAgency,Inc.v.NationalLaborRelationsCommission,313SCRA
88,99(1999).
84ART.111.Attorneysfees.(a)Incasesofunlawfulwithholdingofwagesthe
culpablepartymaybeassessedattorneysfeesequivalenttotenpercentoftheamount
ofwagesrecovered.(b)Itshallbeunlawfulforanypersontodemandoraccept,inany
judicialoradministrativeproceedingsfortherecoveryofthewages,attorneysfees
whichexceedtenpercentoftheamountofwagesrecovered.
85
SEC. 8. Attorneys fees.Attorneys fees in any judicial or administrative
proceedingsfortherecoveryofwagesshallnotexceed10%oftheamountawarded.
Thefeesmaybedeductedfromthetotalamountduethewinningparty.
86
ART. 2208. In the absence of stipulation, attorneys fees and expenses of
litigation,otherthanjudicialcosts,cannotberecovered,except:xxx(7)Inactions
fortherecoveryofwagesofhouseholdhelpers,laborersandskilledworkers.
433
VOL.461,JUNE28,2005
433
itwithheldthewages.Thereneedonlybeashowingthatthelawful
87
wageswerenotpaidaccordingly,asinthiscase.
AbsentanyevidenceshowingthatSunflowerhasbeendissolved
88
inaccordancewithlaw,pursuanttoRuleVIIIA,Section19 ofthe
Omnibus Rules Implementing the Labor Code, Sunflower is held
solidarily liable with SMC for all the rightful claims of private
respondents.
WHEREFORE, the petition is DENIED. The assailed Decision
dated February 7, 2001 and Resolution dated July 11, 2001 of the
CourtofAppealsareAFFIRMEDwithMODIFICATION.
Petitioner San Miguel Corporation and Sunflower MultiPurpose
CooperativeareherebyORDEREDtojointlyandseverallypayeach
private respondent differential pay from the time they became
regularemployeesuptothedateoftheirterminationseparationpay
equivalenttoatleastone(1)monthpayortoatleastonehalfmonth
payforeveryyearofservice,whicheverishigher,asmandatedby
Article 283 of the Labor Code or the separation pay awarded by
SMC to other regular SMC employees that were terminated as a

resultoftheretrenchment,dependingonwhichismostbeneficialto
privaterespondentsandtenpercent(10%)attorneysfeesbasedon
thehereinmodifiedaward.
_______________
87Reyesv.CourtofAppeals,409SCRA267,283(2003)(citationsomitted).
88
SEC. 19. Solidary Liability.The principal shall be deemed as the direct
employer of the contractual employees and therefore, solidarily liable with the
contractororsubcontractorforwhatevermonetaryclaimsthecontractualemployees
may have against the former in the case of violations as provided for in Sections 5
(LaborOnly contracting), 6 (Prohibitions), 8 (Rights of Contractual Employees) and
16(Delisting)oftheseRules.Inaddition,theprincipalshallalsobesolidarilyliable
in case the contract between the principal and contractor or subcontractor is
preterminatedforreasonsnotattributedtothefaultofthecontractororsubcontractor.
434
434
PetitionerSanMiguelCorporationisfurtherORDEREDtopayeach
privaterespondenttheamountofP50,000.00,representingnominal
damagesfornoncompliancewithstatutorydueprocess.
TheawardofbackwagesisDELETED.
SOORDERED.
Panganiban(Chairman),SandovalGutierrez, Corona and
Garcia,JJ.,concur.
Petition denied, assailed decision and resolution affirmed with
modification.
Notes.The President of a corporation who actively manages
the business falls within the meaning of an employer as
contemplated by the Labor Code and may be held jointly and
severallyliablefortheobligationsofthecorporationtoitsdismissed
employees.(Naguiatvs.NationalLaborRelationsCommission,269
SCRA564[1997])
The principal test for determining whether an employee is a
projectemployeeoraregularemployeeiswhetherornottheproject
employee was assigned to carry out a specific project or
undertaking, theduration andscopeofwhichwere specified atthe
time the employee was engaged for that project. (Nagusara vs.
NationalLaborRelationsCommission,290SCRA249[1998])
o0o
435
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392

SAN MIGUEL CORPORATION, petitioner, vs. PROSPERO A.

A. RUBIO, HENRY S. SAMILLANO, EDGAR SANTIAGO,

of the case may also be deemed as special circumstance or compelling

a petition although the certification against forum shopping was not

and rigid application, which would result in technicalities that tend to

SameTwo Kinds of Regular EmployeesWorkers who were engaged

2. To carry out the undertaking specified in the immediately

apparatus, to efficiently, fully and speedily accomplish the work and

3. In consideration of the above undertaking the company

recognize that it is taking a business risk in accepting a

5. The cooperative shall, whenever possible, maintain and

Employment (DOLE) a Notice of Closure of its aquaculture

intent in the light of the applicable law is the controlling factor in

the petitioners as cleaners, janitors, messengers and shrimp harvesters,

relationship (See RhonePoulenc Agrochemicals Philippines, Inc. vs.

nation from employment on 11 September 1995. (Emphasis and italics

HLC Construction and Development Corporation v. Emily Homes Subdivision

the signatures of the majority26of the petitioners appearing in their

SECTION 1. Petition for Certiorari.When any tribunal, board or officer

the December 29, 1998 NLRC Decision, their Motion

the NLRC as findings of facts of quasijudicial bodies like the

Commission,272SCRA267,276(1997)Trendline Employees AssociationSouthern

EMCO Plywood Corporation v. Abelgas, 427 SCRA 496, 515516 (2004)

(citationsomitted)Villarv.NationalLaborRelationsCommission,331 SCRA 686,

Winifredo Talite, Jerry Talite, Clifford Despi, Joey de la Cruz, Jonathan

Inventor, Ramie Despi, Arnel De Pedro, Leonardo Lemoncito, Camilo Temporosa,

Specifically with respect to the JointAffidavit of private

As regards private respondents position paper which bore the

thority/ConfirmationofAuthority signed by the ninety one others

As regards private respondents JointAffidavit which is being

The implication is that as long as the affidavits of the complainants

As such, their application

SCRA 271, 274 (2001) (citation omitted) Samahan ng Manggagawa sa Moldex

Rule VIIIA, Book III of the Omnibus Rules Implementing the

In legitimate labor contracting, the law creates an employer

omitted)San Miguel Corporation v. MAERC Integrated Services, Inc., 405 SCRA

of the facts and surrounding circumstances of the case. A party

(2003) (citation omitted), Bernardo v. National Labor Relations Commission, 310

(5) No cooperative shall be registered unless the articles of cooperation is

shrimp processing operations of SMC. As for janitorial and

Vide: Philippine Bank of Communications v. National Labor Relations

All the foregoing considerations affirm by more than substantial

Since private respondents who were engaged in shrimp processing

The law of course provides for two kinds of regular employees,

Construction & Development Corporation of the Philippines v. Leogardo, Jr., 125

and affirmed by this Court. It is, however, subject to faithful

Normally, the condition of business losses is shown by audited

that the aquaculture operations of SMCs Agribusiness Division

EMCO Plywood Corporation v. Abelgas, 427 SCRA 496, 511512 (2004)

Private respondents, however, were merely verbally informed on

finding of illegal dismissal. The appellate court thus erred in

SEC. 8. Attorneys fees.Attorneys fees in any judicial or administrative

ART. 2208. In the absence of stipulation, attorneys fees and expenses of

SMC to other regular SMC employees that were terminated as a

SEC. 19. Solidary Liability.The principal shall be deemed as the direct

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