THIRD DIVISION

RAUL G. LOCSIN and G.R. No. 185251

EDDIE B. TOMAQUIN,
Petitioners,
Present:
YNARES-SANTIAGO, J.,
Chairperson,
- versus - CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.
PHILIPPINE LONG DISTANCE Promulgated:
TELEPHONE COMPANY,
Respondent. October 2, 2009
x-----------------------------------------------------------------------------------------x

DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari under Rule 45 seeks the reversal of the May 6, 2008 Decision [1] and November 4, 2008
Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 97398, entitled Philippine Long Distance Telephone Company v.
National Labor Relations Commission, Raul G. Locsin and Eddie B. Tomaquin. The assailed decision set aside the Resolutions of the
National Labor Relations Commission (NLRC) dated October 28, 2005 and August 28, 2006 which in turn affirmed the Decision
datedFebruary 13, 2004 of the Labor Arbiter. The assailed resolution, on the other hand, denied petitioners motion for reconsideration
of the assailed decision.
The Facts
On November 1, 1990, respondent Philippine Long Distance Telephone Company (PLDT) and the Security and Safety Corporation of
the Philippines (SSCP) entered into a Security Services Agreement [3] (Agreement) whereby SSCP would provide armed security
guards to PLDT to be assigned to its various offices.
Pursuant to such agreement, petitioners Raul Locsin and Eddie Tomaquin, among other security guards, were posted at a PLDT office.
On August 30, 2001, respondent issued a Letter dated August 30, 2001 terminating the Agreement effective October 1, 2001.[4]
Despite the termination of the Agreement, however, petitioners continued to secure the premises of their assigned office. They were
allegedly directed to remain at their post by representatives of respondent. In support of their contention, petitioners provided the
Labor Arbiter with copies of petitioner Locsins pay slips for the period of January to September 2002.[5]
Then, on September 30, 2002, petitioners services were terminated.
Thus, petitioners filed a complaint before the Labor Arbiter for illegal dismissal and recovery of money claims such as overtime pay,
holiday pay, premium pay for holiday and rest day, service incentive leave pay, Emergency Cost of Living Allowance, and moral and
exemplary damages against PLDT.
The Labor Arbiter rendered a Decision finding PLDT liable for illegal dismissal. It was explained in the Decision that petitioners were
found to be employees of PLDT and not of SSCP. Such conclusion was arrived at with the factual finding that petitioners continued to
serve as guards of PLDTs offices. As such employees, petitioners were entitled to substantive and procedural due process before
termination of employment. The Labor Arbiter held that respondent failed to observe such due process requirements. The dispositive
portion of the Labor Arbiters Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering respondent Philippine Long Distance
and Telephone Company (PLDT) to pay complainants Raul E. Locsin and Eddie Tomaquin their separation pay and
back wages computed as follows:

1.
2.

NAME SEPARATION PAY BACKWAGES

Raul E. Locsin P127,500.00 P240,954.67
Eddie B. Tomaquin P127,500.00 P240,954.67
P736,909.34

All other claims are DISMISSED for want of factual basis.

Let the computation made by the Computation and Examination Unit form part of this decision.
SO ORDERED.
PLDT appealed the above Decision to the NLRC which rendered a Resolution affirming in toto the Arbiters Decision.
Thus, PDLT filed a Motion for Reconsideration of the NLRCs Resolution which was also denied.
Consequently, PLDT filed a Petition for Certiorari with the CA asking for the nullification of the Resolution issued by the NLRC as
well as the Labor Arbiters Decision. The CA rendered the assailed decision granting PLDTs petition and dismissing petitioners
complaint. The dispositive portion of the CA Decision provides:
WHEREFORE, the instant Petition for Certiorari is GRANTED. The Resolutions dated October 28,
2005 and August 28, 2006 of the National Labor Relations Commission are ANNULLED and SET ASIDE. Private
respondents complaint against Philippine Long Distance Telephone Company is DISMISSED.
SO ORDERED.
The CA applied the four-fold test in order to determine the existence of an employer-employee relationship between the
parties but did not find such relationship. It determined that SSCP was not a labor-only contractor and was an independent contractor
having substantial capital to operate and conduct its own business. The CA further bolstered its decision by citing the Agreement
whereby it was stipulated that there shall be no employer-employee relationship between the security guards and PLDT.
Anent the pay slips that were presented by petitioners, the CA noted that those were issued by SSCP and not PLDT; hence,
SSCP continued to pay the salaries of petitioners after the Agreement. This fact allegedly proved that petitioners continued to be
employees of SSCP albeit performing their work at PLDTs premises.
From such assailed decision, petitioners filed a motion for reconsideration which was denied in the assailed resolution.
Hence, we have this petition.
The Issues
1.

Whether or not; complainants extended services to the respondent for one (1) year from October 1, 2001, the
effectivity of the termination of the contract of complainants agency SSCP, up to September 30, 2002, without a
renewed contract, constitutes an employer-employee relationship between respondent and the complainants.

2.

Whether or not; in accordance to the provision of the Article 280 of the Labor Code, complainants extended
services to the respondent for another one (1) year without a contract be considered as contractual employment.

3.

Whether or not; in accordance to the provision of the Article 280 of the Labor Code, does complainants
thirteen (13) years of service to the respondent with manifestation to the respondent thirteen (13) years renewal
of its security contract with the complainant agency SSCP, can be considered only as seasonal in nature or fixed
as [specific projects] or undertakings and its completion or termination can be dictated as [controlled] by the
respondent anytime they wanted to.

4.

Whether or not; complainants from being an alleged contractual employees of the respondent for thirteen (13)
years as they were then covered by a contract, becomes regular employees of the respondent as the one (1) year
extended services of the complainants were not covered by a contract, and can be considered as direct
employment pursuant to the provision of the Article 280 of the Labor Code.

5.

Whether or not; the Court of Appeals committed grave abuse of discretion when it set aside and [annulled] the
labor [arbiters] decision and of the NLRCs resolution declaring the dismissal of the complainant as illegal. [6]
The Courts Ruling

This petition is hereby granted.

An Employer-Employee
Relationship Existed Between the Parties
It is beyond cavil that there was no employer-employee relationship between the parties from the time of petitioners first
assignment to respondent by SSCP in 1988 until the alleged termination of the Agreement between respondent and SSCP. In fact, this
was the conclusion that was reached by this Court in Abella v. Philippine Long Distance Telephone Company,[7] where we ruled that
petitioners therein, including herein petitioners, cannot be considered as employees of PLDT. It bears pointing out that petitioners
were among those declared to be employees of their respective security agencies and not of PLDT.
The only issue in this case is whether petitioners became employees of respondent after the Agreement between SSCP and
respondent was terminated.
This must be answered in the affirmative.
Notably, respondent does not deny the fact that petitioners remained in the premises of their offices even after the Agreement
was terminated. And it is this fact that must be explained.
To recapitulate, the CA, in rendering a decision in favor of respondent, found that: (1) petitioners failed to prove that SSCP
was a labor-only contractor; and (2) petitioners are employees of SSCP and not of PLDT.
In arriving at such conclusions, the CA relied on the provisions of the Agreement, wherein SSCP undertook to supply PLDT
with the required security guards, while furnishing PLDT with a performance bond in the amount of PhP 707,000. Moreover, the CA
gave weight to the provision in the Agreement that SSCP warranted that it carry on an independent business and has substantial capital
or investment in the form of equipment, work premises, and other materials which are necessary in the conduct of its business.
Further, in determining that no employer-employee relationship existed between the parties, the CA quoted the express
provision of the Agreement, stating that no employer-employee relationship existed between the parties herein. The CA disregarded
the pay slips of Locsin considering that they were in fact issued by SSCP and not by PLDT.
From the foregoing explanation of the CA, the fact remains that petitioners remained at their post after the termination of the
Agreement. Notably, in its Comment datedMarch 10, 2009, [8] respondent never denied that petitioners remained at their post
until September 30, 2002. While respondent denies the alleged circumstances stated by petitioners, that they were told to remain at
their post by respondents Security Department and that they were informed by SSCP Operations Officer Eduardo Juliano that their
salaries would be coursed through SSCP as per arrangement with PLDT, it does not state why they were not made to vacate their
posts. Respondent said that it did not know why petitioners remained at their posts.
Rule 131, Section 3(y) of the Rules of Court provides:
SEC. 3. Disputable presumptions.The following presumptions are satisfactory if uncontradicted, but may
be contradicted and overcome by other evidence:
xxxx
(y) That things have happened according to the ordinary course of nature and the ordinary habits of life.
In the ordinary course of things, responsible business owners or managers would not allow security guards of an agency with
whom the owners or managers have severed ties with to continue to stay within the business premises. This is because upon the
termination of the owners or managers agreement with the security agency, the agencys undertaking of liability for any damage that
the security guard would cause has already been terminated. Thus, in the event of an accident or otherwise damage caused by such
security guards, it would be the business owners and/or managers who would be liable and not the agency. The business owners or
managers would, therefore, be opening themselves up to liability for acts of security guards over whom the owners or managers
allegedly have no control.
At the very least, responsible business owners or managers would inquire or learn why such security guards were remaining
at their posts, and would have a clear understanding of the circumstances of the guards stay. It is but logical that responsible business
owners or managers would be aware of the situation in their premises.

We point out that with respondents hypothesis, it would seem that SSCP was paying petitioners salaries while securing
respondents premises despite the termination of their Agreement. Obviously, it would only be respondent that would benefit from such
a situation. And it is seriously doubtful that a security agency that was established for profit would allow its security guards to secure
respondents premises when the Agreement was already terminated.
From the foregoing circumstances, reason dictates that we conclude that petitioners remained at their post under the
instructions of respondent. We can further conclude that respondent dictated upon petitioners that the latter perform their regular
duties to secure the premises during operating hours. This, to our mind and under the circumstances, is sufficient to establish the
existence of an employer-employee relationship. Certainly, the facts as narrated by petitioners are more believable than the irrational
denials made by respondent. Thus, we ruled in Lee Eng Hong v. Court of Appeals:[9]
Evidence, to be believed, must not only proceed from the mouth of a credible witness, but it must be credible in
itself such as the common experience and observation of mankind can approve as probable under the circumstances.
We have no test of the truth of human testimony, except its conformity to our knowledge, observation and
experience. Whatever is repugnant to these belongs to the miraculous and is outside judicial cognizance (Castaares
v. Court of Appeals, 92 SCRA 568 [1979]).
To reiterate, while respondent and SSCP no longer had any legal relationship with the termination of the Agreement,
petitioners remained at their post securing the premises of respondent while receiving their salaries, allegedly from SSCP. Clearly,
such a situation makes no sense, and the denials proffered by respondent do not shed any light to the situation. It is but reasonable to
conclude that, with the behest and, presumably, directive of respondent, petitioners continued with their services. Evidently, such
areindicia of control that respondent exercised over petitioners.
Such power of control has been explained as the right to control not only the end to be achieved but also the means to be used
in reaching such end.[10] With the conclusion that respondent directed petitioners to remain at their posts and continue with their
duties, it is clear that respondent exercised the power of control over them; thus, the existence of an employer-employee relationship.
In Tongko v. The Manufacturers Life Insurance Co. (Phils.) Inc.,[11] we reiterated the oft repeated rule that control is the most
important element in the determination of the existence of an employer-employee relationship:
In the determination of whether an employer-employee relationship exists between two parties, this Court
applies the four-fold test to determine the existence of the elements of such relationship. In Pacific Consultants
International Asia, Inc. v. Schonfeld, the Court set out the elements of an employer-employee relationship, thus:
Jurisprudence is firmly settled that whenever the existence of an employment relationship is in
dispute, four elements constitute the reliable yardstick: (a) the selection and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control the
employees conduct. It is the so-called control test which constitutes the most important index of the
existence of the employer-employee relationship that is, whether the employer controls or has reserved the
right to control the employee not only as to the result of the work to be done but also as to the means and
methods by which the same is to be accomplished. Stated otherwise, an employer-employee relationship
exists where the person for whom the services are performed reserves the right to control not only the end
to be achieved but also the means to be used in reaching such end.
Furthermore, Article 106 of the Labor Code contains a provision on contractors, to wit:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for
the performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall
be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with
this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees
to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees
directly employed by him.
The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the
contracting-out of labor to protect the rights of workers established under this Code. In so prohibiting or
restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well
as differentiations within these types of contracting and determine who among the parties involved shall be
considered the employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.

There is labor-only contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the
workers recruited and placed by such person are performing activities which are directly related to the principal
business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and extent as if the latter were directly
employed by him. (Emphasis supplied.)
Thus, the Secretary of Labor issued Department Order No. 18-2002, Series of 2002, implementing Art. 106 as follows:
Section 5. Prohibition against labor-only contracting.Labor-only contracting is hereby declared prohibited.
For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or service for a principal, and any of the following
elements are present:
(i) The contractor or subcontractor does not have substantial capital or investment which relates to
the job, work or service to be performed and the employees recruited, supplied or placed by such contractor
or subcontractor are performing activities which are directly related to the main business of the principal; or
(ii) the contractor does not exercise the right to control over the performance of the work of
the contractual employee.
The foregoing provisions shall be without prejudice to the application of Article 248 (C) of the Labor Code,
as amended.
Substantial capital or investment refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the
contractor or subcontractor in the performance or completion of the job, work or service contracted out.
The right to control shall refer to the right reserved to the person for whom the services of the contractual
workers are performed, to determine not only the end to be achieved, but also the manner and means to be used in
reaching that end.
On the other hand, Sec. 7 of the department order contains the consequence of such labor-only contracting:
Section 7. Existence of an employer-employee relationship.The contractor or subcontractor shall be
considered the employer of the contractual employee for purposes of enforcing the provisions of the Labor Code and
other social legislation. The principal, however, shall be solidarily liable with the contractor in the event of any
violation of any provision of the Labor Code, including the failure to pay wages.
The principal shall be deemed the employer of the contractual employee in any of the following cases as
declared by a competent authority:
(a) where there is labor-only contracting; or
(b) where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions)
hereof. (Emphasis supplied.)
Evidently, respondent having the power of control over petitioners must be considered as petitioners employerfrom the
termination of the Agreement onwardsas this was the only time that any evidence of control was exhibited by respondent over
petitioners and in light of our ruling in Abella.[12] Thus, as aptly declared by the NLRC, petitioners were entitled to the rights and
benefits of employees of respondent, including due process requirements in the termination of their services.
Both the Labor Arbiter and NLRC found that respondent did not observe such due process requirements. Having failed to do
so, respondent is guilty of illegal dismissal.
WHEREFORE, we SET ASIDE the CAs May 6, 2008 Decision and November 4, 2008 Resolution in CA-G.R. SP No.
97398. We hereby REINSTATE the Labor Arbiters Decision dated February 13, 2004 and the NLRCs Resolutions dated October 28,
2005 and August 28, 2006.
No costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

PEOPLES BROADCASTING SERVICE

(BOMBO RADYO PHILS., INC.),
Petitioner,

- versus -

THE SECRETARY OF THE

DEPARTMENT OF LABOR AND
EMPLOYMENT, THE REGIONAL
DIRECTOR, DOLE REGION VII, and
JANDELEON JUEZAN,
Respondents.

G.R. No. 179652

Present:
CORONA, C.J.,
CARPIO,
VELASCO, JR.,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,*
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA,
SERENO,
REYES, and
PERLAS-BERNABE, JJ.

Promulgated:
March 6, 2012
x-----------------------------------------------------------------------------------------x

RESOLUTION
VELASCO, JR., J.:
In a Petition for Certiorari under Rule 65, petitioner Peoples Broadcasting Service, Inc. (Bombo Radyo Phils., Inc.) questioned the
Decision and Resolution of the Court of Appeals (CA) dated October 26, 2006 and June 26, 2007, respectively, in C.A. G.R. CEB-SP
No. 00855.
Private respondent Jandeleon Juezan filed a complaint against petitioner with the Department of Labor and Employment
(DOLE) Regional Office No. VII, Cebu City, for illegal deduction, nonpayment of service incentive leave, 13th month pay, premium
pay for holiday and rest day and illegal diminution of benefits, delayed payment of wages and noncoverage of SSS, PAG-IBIG and
Philhealth.[1] After the conduct of summary investigations, and after the parties submitted their position papers, the DOLE Regional
Director found that private respondent was an employee of petitioner, and was entitled to his money claims. [2] Petitioner sought
reconsideration of the Directors Order, but failed. The Acting DOLE Secretary dismissed petitioners appeal on the ground that
petitioner submitted a Deed of Assignment of Bank Deposit instead of posting a cash or surety bond. When the matter was brought
before the CA, where petitioner claimed that it had been denied due process, it was held that petitioner was accorded due process as it
had been given the opportunity to be heard, and that the DOLE Secretary had jurisdiction over the matter, as the jurisdictional
limitation imposed by Article 129 of the Labor Code on the power of the DOLE Secretary under Art. 128(b) of the Code had been
repealed by Republic Act No. (RA) 7730.[3]
In the Decision of this Court, the CA Decision was reversed and set aside, and the complaint against petitioner was dismissed. The
dispositive portion of the Decision reads as follows:
WHEREFORE, the petition is GRANTED. The Decision dated 26 October 2006 and the Resolution
dated 26 June 2007 of the Court of Appeals in C.A. G.R. CEB-SP No. 00855 areREVERSED and SET
ASIDE. The Order of the then Acting Secretary of the Department of Labor and Employment dated 27 January
2005 denying petitioners appeal, and the Orders of the Director, DOLE Regional Office No. VII, dated 24 May 2004
and 27 February 2004, respectively, are ANNULLED. The complaint against petitioner is DISMISSED.[4]
The Court found that there was no employer-employee relationship between petitioner and private respondent. It was held
that while the DOLE may make a determination of the existence of an employer-employee relationship, this function could not be co-

extensive with the visitorial and enforcement power provided in Art. 128(b) of the Labor Code, as amended by RA 7730. The National
Labor Relations Commission (NLRC) was held to be the primary agency in determining the existence of an employer-employee
relationship. This was the interpretation of the Court of the clause in cases where the relationship of employer-employee still exists in
Art. 128(b).[5]
From this Decision, the Public Attorneys Office (PAO) filed a Motion for Clarification of Decision (with Leave of
Court). The PAO sought to clarify as to when the visitorial and enforcement power of the DOLE be not considered as co-extensive
with the power to determine the existence of an employer-employee relationship.[6] In its Comment,[7] the DOLE sought clarification
as well, as to the extent of its visitorial and enforcement power under the Labor Code, as amended.
The Court treated the Motion for Clarification as a second motion for reconsideration, granting said motion and reinstating
the petition.[8] It is apparent that there is a need to delineate the jurisdiction of the DOLE Secretary vis--vis that of the NLRC.
Under Art. 129 of the Labor Code, the power of the DOLE and its duly authorized hearing officers to hear and decide any
matter involving the recovery of wages and other monetary claims and benefits was qualified by the proviso that the complaint not
include a claim for reinstatement, or that the aggregate money claims not exceed PhP 5,000. RA 7730, or an Act Further
Strengthening the Visitorial and Enforcement Powers of the Secretary of Labor, did away with the PhP 5,000 limitation, allowing the
DOLE Secretary to exercise its visitorial and enforcement power for claims beyond PhP 5,000. The only qualification to this expanded
power of the DOLE was only that there still be an existing employer-employee relationship.
It is conceded that if there is no employer-employee relationship, whether it has been terminated or it has not existed from the
start, the DOLE has no jurisdiction. Under Art. 128(b) of the Labor Code, as amended by RA 7730, the first sentence reads,
Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of employeremployee 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. It is clear and beyond
debate that an employer-employee relationship must exist for the exercise of the visitorial and enforcement power of the DOLE. The
question now arises, may the DOLE make a determination of whether or not an employer-employee relationship exists, and if so, to
what extent?
The first portion of the question must be answered in the affirmative.
The prior decision of this Court in the present case accepts such answer, but places a limitation upon the power of the DOLE,
that is, the determination of the existence of an employer-employee relationship cannot be co-extensive with the visitorial and
enforcement power of the DOLE. But even in conceding the power of the DOLE to determine the existence of an employer-employee
relationship, the Court held that the determination of the existence of an employer-employee relationship is still primarily within the
power of the NLRC, that any finding by the DOLE is merely preliminary.
This conclusion must be revisited.
No limitation in the law was placed upon the power of the DOLE to determine the existence of an employer-employee
relationship. No procedure was laid down where the DOLE would only make a preliminary finding, that the power was primarily held
by the NLRC. The law did not say that the DOLE would first seek the NLRCs determination of the existence of an employeremployee relationship, or that should the existence of the employer-employee relationship be disputed, the DOLE would refer the
matter to the NLRC. The DOLE must have the power to determine whether or not an employer-employee relationship exists, and from
there to decide whether or not to issue compliance orders in accordance with Art. 128(b) of the Labor Code, as amended by RA 7730.
The DOLE, in determining the existence of an employer-employee relationship, has a ready set of guidelines to follow, the
same guide the courts themselves use. The elements to determine the existence of an employment relationship are: (1) the selection
and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; (4) the employers power to control the
employees conduct.[9] The use of this test is not solely limited to the NLRC. The DOLE Secretary, or his or her representatives, can
utilize the same test, even in the course of inspection, making use of the same evidence that would have been presented before the
NLRC.
The determination of the existence of an employer-employee relationship by the DOLE must be respected. The expanded
visitorial and enforcement power of the DOLE granted by RA 7730 would be rendered nugatory if the alleged employer could, by the
simple expedient of disputing the employer-employee relationship, force the referral of the matter to the NLRC. The Court issued the
declaration that at least a prima facie showing of the absence of an employer-employee relationship be made to oust the DOLE of
jurisdiction. But it is precisely the DOLE that will be faced with that evidence, and it is the DOLE that will weigh it, to see if the same
does successfully refute the existence of an employer-employee relationship.
If the DOLE makes a finding that there is an existing employer-employee relationship, it takes cognizance of the matter, to
the exclusion of the NLRC. The DOLE would have no jurisdiction only if the employer-employee relationship has already been
terminated, or it appears, upon review, that no employer-employee relationship existed in the first place.

The Court, in limiting the power of the DOLE, gave the rationale that such limitation would eliminate the prospect of
competing conclusions between the DOLE and the NLRC. The prospect of competing conclusions could just as well have been
eliminated by according respect to the DOLE findings, to the exclusion of the NLRC, and this We believe is the more prudent course
of action to take.
This is not to say that the determination by the DOLE is beyond question or review. Suffice it to say, there are judicial
remedies such as a petition for certiorari under Rule 65 that may be availed of, should a party wish to dispute the findings of the
DOLE.
It must also be remembered that the power of the DOLE to determine the existence of an employer-employee relationship
need not necessarily result in an affirmative finding. The DOLE may well make the determination that no employer-employee
relationship exists, thus divesting itself of jurisdiction over the case. It must not be precluded from being able to reach its own
conclusions, not by the parties, and certainly not by this Court.
Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully empowered to make a determination as to
the existence of an employer-employee relationship in the exercise of its visitorial and enforcement power, subject to judicial review,
not review by the NLRC.
There is a view that despite Art. 128(b) of the Labor Code, as amended by RA 7730, there is still a threshold amount set by
Arts. 129 and 217 of the Labor Code when money claims are involved, i.e., that if it is for PhP 5,000 and below, the jurisdiction is
with the regional director of the DOLE, under Art. 129, and if the amount involved exceeds PhP 5,000, the jurisdiction is with the
labor arbiter, under Art. 217. The view states that despite the wording of Art. 128(b), this would only apply in the course of regular
inspections undertaken by the DOLE, as differentiated from cases under Arts. 129 and 217, which originate from complaints. There
are several cases, however, where the Court has ruled that Art. 128(b) has been amended to expand the powers of the DOLE Secretary
and his duly authorized representatives by RA 7730. In these cases, the Court resolved that the DOLE had the jurisdiction, despite the
amount of the money claims involved. Furthermore, in these cases, the inspection held by the DOLE regional director was prompted
specifically by a complaint. Therefore, the initiation of a case through a complaint does not divest the DOLE Secretary or his duly
authorized representative of jurisdiction under Art. 128(b).
To recapitulate, if a complaint is brought before the DOLE to give effect to the labor standards provisions of the Labor Code
or other labor legislation, and there is a finding by the DOLE that there is an existing employer-employee relationship, the DOLE
exercises jurisdiction to the exclusion of the NLRC. If the DOLE finds that there is no employer-employee relationship, the
jurisdiction is properly with the NLRC. If a complaint is filed with the DOLE, and it is accompanied by a claim for reinstatement, the
jurisdiction is properly with the Labor Arbiter, under Art. 217(3) of the Labor Code, which provides that the Labor Arbiter has
original and exclusive jurisdiction over those cases involving wages, rates of pay, hours of work, and other terms and conditions of
employment, if accompanied by a claim for reinstatement. If a complaint is filed with the NLRC, and there is still an existing
employer-employee relationship, the jurisdiction is properly with the DOLE. The findings of the DOLE, however, may still be
questioned through a petition for certiorari under Rule 65 of the Rules of Court.
In the present case, the finding of the DOLE Regional Director that there was an employer-employee relationship has been
subjected to review by this Court, with the finding being that there was no employer-employee relationship between petitioner and
private respondent, based on the evidence presented. Private respondent presented self-serving allegations as well as self-defeating
evidence.[10] The findings of the Regional Director were not based on substantial evidence, and private respondent failed to prove the
existence of an employer-employee relationship. The DOLE had no jurisdiction over the case, as there was no employer-employee
relationship present. Thus, the dismissal of the complaint against petitioner is proper.
WHEREFORE, the Decision of this Court in G.R. No. 179652 is hereby AFFIRMED, with the MODIFICATION that in
the exercise of the DOLEs visitorial and enforcement power, the Labor Secretary or the latters authorized representative shall have the
power to determine the existence of an employer-employee relationship, to the exclusion of the NLRC.
SO ORDERED.

FIRST DIVISION
G.R. No. 184885

ERNESTO G. YMBONG,
Petitioner,

Present:

CORONA, C.J.,
- versus -

Chairperson,
LEONARDO-DE CASTRO,
BERSAMIN,
VILLARAMA, JR., and
PERLAS-BERNABE,* JJ.

Promulgated:

ABS-CBN BROADCASTING CORPORATION, VENERANDA

SY AND DANTE LUZON,
Respondents.

March 7, 2012
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
VILLARAMA, JR., J.:
Before us is a Rule 45 Petition seeking to set aside the August 22, 2007 Decision[1] and September 18, 2008 Resolution[2] of the Court
of Appeals (CA) in CA-G.R. SP No. 86206 declaring petitioner to have resigned from work and not illegally dismissed.
The antecedent facts follow:
Petitioner Ernesto G. Ymbong started working for ABS-CBN Broadcasting Corporation (ABS-CBN) in 1993 at its regional station
in Cebu as a television talent, co-anchoringHoy Gising and TV Patrol Cebu. His stint in ABS-CBN later extended to radio when ABSCBN Cebu launched its AM station DYAB in 1995 where he worked as drama and voice talent, spinner, scriptwriter and public affairs
program anchor.
Like Ymbong, Leandro Patalinghug also worked for ABS-CBN Cebu. Starting 1995, he worked as talent, director and scriptwriter for
various radio programs aired over DYAB.
On January 1, 1996, the ABS-CBN Head Office in Manila issued Policy No. HR-ER-016 or the Policy on Employees Seeking Public
Office. The pertinent portions read:
1.

Any employee who intends to run for any public office position, must file his/her letter of resignation, at
least thirty (30) days prior to the official filing of the certificate of candidacy either for national or local
election.

xxxx
3. Further, any employee who intends to join a political group/party or even with no political affiliation but
who intends to openly and aggressively campaign for a candidate or group of candidates (e.g. publicly

speaking/endorsing candidate, recruiting campaign workers, etc.) must file a request for leave of absence
subject to managements approval. For this particular reason, the employee should file the leave request at
least thirty (30) days prior to the start of the planned leave period.
x x x x[3] [Emphasis and underscoring supplied.]

Because of the impending May 1998 elections and based on his immediate recollection of the policy at that time, Dante Luzon,
Assistant Station Manager of DYAB issued the following memorandum:
TO : ALL CONCERNED
FROM : DANTE LUZON
DATE : MARCH 25, 1998
SUBJECT : AS STATED
Please be informed that per company policy, any employee/talent who wants to run for any position in the
coming election will have to file a leave of absence the moment he/she files his/her certificate of candidacy.
The services rendered by the concerned employee/talent to this company will then be temporarily suspended for the
entire campaign/election period.
For strict compliance.[4] [Emphasis and underscoring supplied.]

Luzon, however, admitted that upon double-checking of the exact text of the policy and subsequent confirmation with the ABS-CBN
Head Office, he saw that the policy actually required suspension for those who intend to campaign for a political party or candidate
and resignation for those who will actually run in the elections. [5]
After the issuance of the March 25, 1998 Memorandum, Ymbong got in touch with Luzon. Luzon claims that Ymbong approached
him and told him that he would leave radio for a couple of months because he will campaign for the administration ticket. It was only
after the elections that they found out that Ymbong actually ran for public office himself at the eleventh hour. Ymbong, on the other
hand, claims that in accordance with the March 25, 1998 Memorandum, he informed Luzon through a letter that he would take a few
months leave of absence from March 8, 1998 to May 18, 1998 since he was running for councilor of Lapu-Lapu City.
As regards Patalinghug, Patalinghug approached Luzon and advised him that he will run as councilor for Naga, Cebu. According to
Luzon, he clarified to Patalinghug that he will be considered resigned and not just on leave once he files a certificate of
candidacy. Thus, Patalinghug wrote Luzon the following letter on April 13, 1998:
Dear Mr. Luzon,
Im submitting to you my letter of resignation as your Drama Production Chief and Talent due to your companys
policy that every person connected to ABS-CBN that should seek an elected position in the government will be
forced to resigned (sic) from his position. So herewith Im submitting my resignation with a hard heart. But Im still
hoping to be connected again with your prestigious company after the election[s] should you feel that Im still an
asset to your drama production department. Im looking forward to that day and Im very happy and proud that I have
served for two and a half years the most stable and the most prestigious Radio and TV Network in the Philippines.
As a friend[,] wish me luck and Pray for me. Thank you.

Very Truly Yours,

(Sgd.)
Leandro Boy Patalinghug[6]

Unfortunately, both Ymbong and Patalinghug lost in the May 1998 elections.
Later, Ymbong and Patalinghug both tried to come back to ABS-CBN Cebu. According to Luzon, he informed them that they cannot
work there anymore because of company policy. This was stressed even in subsequent meetings and they were told that the company
was not allowing any exceptions. ABS-CBN, however, agreed out of pure liberality to give them a chance to wind up their
participation in the radio drama, Nagbabagang Langit, since it was rating well and to avoid an abrupt ending. The agreed winding-up,
however, dragged on for so long prompting Luzon to issue to Ymbong the following memorandum dated September 14, 1998:
TO : NESTOR YMBONG
FROM : DANTE LUZON
SUBJECT : AS STATED
DATE : 14 SEPT. 1998
Please be reminded that your services as drama talent had already been automatically terminated when you ran for a
local government position last election.
The Management however gave you more than enough time to end your drama participation and other involvement
with the drama department.
It has been decided therefore that all your drama participation shall be terminated effective immediately. However,
your involvement as drama spinner/narrator of the drama NAGBA[BA]GANG LANGIT continues until its
writer/director Mr. Leandro Patalinghug wraps it up one week upon receipt of a separate memo issued to him. [7]

Ymbong in contrast contended that after the expiration of his leave of absence, he reported back to work as a regular talent and in fact
continued to receive his salary. OnSeptember 14, 1998, he received a memorandum stating that his services are being terminated
immediately, much to his surprise. Thus, he filed an illegal dismissal complaint[8]against ABS-CBN, Luzon and DYAB Station
Manager Veneranda Sy. He argued that the ground cited by ABS-CBN for his dismissal was not among those enumerated in theLabor
Code, as amended. And even granting without admitting the existence of the company policy supposed to have been violated,
Ymbong averred that it was necessary that the company policy meet certain requirements before willful disobedience of the policy
may constitute a just cause for termination. Ymbong further argued that the company policy violates his constitutional right to
suffrage.[9]
Patalinghug likewise filed an illegal dismissal complaint[10] against ABS-CBN.
ABS-CBN prayed for the dismissal of the complaints arguing that there is no employer-employee relationship between the company
and Ymbong and Patalinghug. ABS-CBN contended that they are not employees but talents as evidenced by their talent
contracts. However, notwithstanding their status, ABS-CBN has a standing policy on persons connected with the company whenever
they will run for public office. [11]
On July 14, 1999, the Labor Arbiter rendered a decision[12] finding the dismissal of Ymbong and Patalinghug illegal, thus:
WHEREFORE, in the light of the foregoing, judgment is rendered finding the dismissal of the two complainants
illegal. An order is issued directing respondent ABS[-]CBN to immediately reinstate complainants to their former
positions without loss of seniority rights plus the payment of backwages in the amount of P200,000.00 to each
complainant.
All other claims are dismissed.
SO ORDERED.[13]

The Labor Arbiter found that there exists an employer-employee relationship between ABS-CBN and Ymbong and Patalinghug
considering the stipulations in their appointment letters/talent contracts. The Labor Arbiter noted particularly that the appointment
letters/talent contracts imposed conditions in the performance of their work, specifically on attendance and punctuality, which
effectively placed them under the control of ABS-CBN. The Labor Arbiter likewise ruled that although the subject company policy is
reasonable and not contrary to law, the same was not made known to Ymbong and Patalinghug and in fact was superseded by another

one embodied in the March 25, 1998 Memorandum issued by Luzon. Thus, there is no valid or authorized cause in terminating
Ymbong and Patalinghug from their employment.
In its memorandum of appeal[14] before the National Labor Relations Commission (NLRC), ABS-CBN contended that the Labor
Arbiter has no jurisdiction over the case because there is no employer-employee relationship between the company
and Ymbong and Patalinghug, and that Sy and Luzon mistakenly assumed that Ymbong and Patalinghug could just file a leave of
absence since they are only talents and not employees. In its Supplemental Appeal,[15] ABS-CBN insisted that Ymbong and
Patalinghug were engaged as radio talents for DYAB dramas and personality programs and their contract is one between a selfemployed contractor and the hiring party which is a standard practice in the broadcasting industry. It also argued that the Labor
Arbiter should not have made much of the provisions on Ymbongs attendance and punctuality since such requirement is a dictate of
the programming of the station, the slating of shows at regular time slots, and availability of recording studios not an attempt to
exercise control over the manner of his performance of the contracted anchor work within his scheduled spot on air. As for the
pronouncement that the company policy has already been superseded by the March 25, 1998 Memorandum issued by Luzon, the latter
already clarified that it was the very policy he sought to enforce. This matter was relayed by Luzon to Patalinghug when the latter
disclosed his plans to join the 1998 elections while Ymbong only informed the company that he was campaigning for the
administration ticket and the company had no inkling that he will actually run until the issue was already moot and academic. ABSCBN further contended that Ymbong and Patalinghugs reinstatement is legally and physically impossible as the talent positions they
vacated no longer exist. Neither is there basis for the award of back wages since they were not earning a monthly salary but paid talent
fees on a per production/per script basis. Attached to the Supplemental Appeal is a Sworn Statement[16] of Luzon.
On March 8, 2004, the NLRC rendered a decision[17] modifying the labor arbiters decision. The fallo of the NLRC decision reads:
WHEREFORE, premises considered, the decision of Labor Arbiter Nicasio C. Aninon dated 14 July
1999 is MODIFIED, to wit:
Ordering respondent ABS-CBN to reinstate complainant Ernesto G. Ymbong and to pay his full backwages
computed from 15 September 1998 up to the time of his actual reinstatement.
SO ORDERED.[18]

The NLRC dismissed ABS-CBNs Supplemental Appeal for being filed out of time. The NLRC ruled that to entertain the
same would be to allow the parties to submit their appeal on piecemeal basis, which is contrary to the agencys duty to facilitate speedy
disposition of cases. The NLRC also held that ABS-CBN wielded the power of control over Ymbong and Patalinghug, thereby
proving the existence of an employer-employee relationship between them.
As to the issue of whether they were illegally dismissed, the NLRC treated their cases differently. In the case of Patalinghug,
it found that he voluntarily resigned from employment on April 21, 1998 when he submitted his resignation letter. The NLRC noted
that although the tenor of the resignation letter is somewhat involuntary, he knew that it is the policy of the company that every person
connected therewith should resign from his employment if he seeks an elected position in the government. As to Ymbong, however,
the NLRC ruled otherwise. It ruled that the March 25, 1998 Memorandum merely states that an employee who seeks any elected
position in the government will only merit the temporary suspension of his services. It held that under the principle of social justice,
the March 25, 1998 Memorandum shall prevail and ABS-CBN is estopped from enforcing the September 14, 1998 memorandum
issued to Ymbong stating that his services had been automatically terminated when he ran for an elective position.
ABS-CBN moved to reconsider the NLRC decision, but the same was denied in a Resolution dated June 21, 2004.[19]
Imputing grave abuse of discretion on the NLRC, ABS-CBN filed a petition for certiorari[20] before the CA alleging that:
I.
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AND SERIOUSLY
MISAPPRECIATED THE FACTS IN NOT HOLDING THAT RESPONDENT YMBONG IS A FREELANCE
RADIO TALENT AND MEDIA PRACTITIONERNOT A REGULAR EMPLOYEE OF PETITIONERTO WHOM
CERTAIN PRODUCTION WORK HAD BEEN OUTSOURCED BY ABS-CBN CEBU UNDER AN
INDEPENDENT CONTRACTORSHIP SITUATION, THUS RENDERING THE LABOR COURTS WITHOUT
JURISDICTION OVER THE CASE IN THE ABSENCE OF EMPLOYMENT RELATIONS BETWEEN THE
PARTIES.

II.
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION IN DECLARING RESPONDENT
YMBONG TO BE A REGULAR EMPLOYEE OF PETITIONER AS TO CREATE A CONTRACTUAL
EMPLOYMENT RELATION BETWEEN THEM WHEN NONE EXISTS OR HAD BEEN AGREED UPON OR
OTHERWISE INTENDED BY THE PARTIES.

III.
EVEN ASSUMING THE ALLEGED EMPLOYMENT RELATION TO EXIST FOR THE SAKE OF
ARGUMENT, RESPONDENT NLRC IN ANY CASE COMMITTED A GRAVE ABUSE OF DISCRETION IN
NOT SIMILARLY UPHOLDING AND APPLYING COMPANY POLICY NO. HR-ER-016 IN THE CASE OF
RESPONDENT YMBONG AND DEEMING HIM AS RESIGNED AND DISQUALIFIED FROM FURTHER
ENGAGEMENT AS A RADIO TALENT IN ABS-CBN CEBU AS A CONSEQUENCE OF HIS CANDIDACY
IN THE 1998 ELECTIONS, AS RESPONDENT NLRC HAD DONE IN THE CASE OF PATALINGHUG.

IV.
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AND DENIED DUE PROCESS TO
PETITIONER IN REFUSING TO CONSIDER ITS SUPPLEMENTAL APPEAL, DATED OCTOBER 18, 1999,
FOR BEING FILED OUT OF TIME CONSIDERING THAT THE FILING OF SUCH A PLEADING IS NOT IN
ANY CASE PROSCRIBED AND RESPONDENT NLRC IS AUTHORIZED TO CONSIDER ADDITIONAL
EVIDENCE ON APPEAL; MOREOVER, TECHNICAL RULES OF EVIDENCE DO NOT APPLY IN LABOR
CASES.

V.
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION IN GRANTING THE RELIEF OF
REINSTATEMENT AND BACKWAGES TO RESPONDENT YMBONG SINCE HE NEVER OCCUPIED ANY
REGULAR POSITION IN PETITIONER FROM WHICH HE COULD HAVE BEEN ILLEGALLY DISMISSED,
NOR ARE ANY OF THE RADIO PRODUCTIONS IN WHICH HE HAD DONE TALENT WORK FOR
PETITIONER STILL EXISTING. INDEED, THERE IS NO BASIS WHATSOEVER FOR THE AWARD OF
BACKWAGES TO RESPONDENT YMBONG IN THE AMOUNT OF P200,000.00 CONSIDERING THAT, AS
SHOWN BY THE UNCONTROVERTED EVIDENCE, HE WAS NOT EARNING A MONTHLY SALARY OF
P20,000.00, AS HE FALSELY CLAIMS, BUT WAS PAID TALENT FEES ON A PER PRODUCTION/PER
SCRIPT BASIS WHICH AVERAGED LESS THAN P10,000.00 PER MONTH IN TALENT FEES ALL IN
ALL.[21]
On August 22, 2007, the CA rendered the assailed decision reversing and setting aside the March 8, 2004 Decision and June 21,
2004 Resolution of the NLRC. The CA declared Ymbong resigned from employment and not to have been illegally dismissed. The
award of full back wages in his favor was deleted accordingly.
The CA ruled that ABS-CBN is estopped from claiming that Ymbong was not its employee after applying the provisions of Policy No.
HR-ER-016 to him. It noted that said policy is entitled Policy on Employees Seeking Public Office and the guidelines contained
therein specifically pertain to employees and did not even mention talents or independent contractors. It held that it is a complete
turnaround on ABS-CBNs part to later argue that Ymbong is only a radio talent or independent contractor and not its employee. By
applying the subject company policy on Ymbong, ABS-CBN had explicitly recognized him to be an employee and not merely an
independent contractor.
The CA likewise held that the subject company policy is the controlling guideline and therefore, Ymbong should be considered
resigned from ABS-CBN. While Luzon has policy-making power as assistant radio manager, he had no authority to issue a
memorandum that had the effect of repealing or superseding a subsisting policy. Contrary to the findings of the Labor Arbiter, the
subject company policy was effective at that time and continues to be valid and subsisting up to the present. The CA cited
Patalinghugs resignation letter to buttress this conclusion, noting that Patalinghug openly admitted in his letter that his resignation was

in line with the said company policy. Since ABS-CBN applied Policy No. HR-ER-016 to Patalinghug, there is no reason not to apply
the same regulation to Ymbong who was on a similar situation as the former. Thus, the CA found that the NLRC overstepped its area
of discretion to a point of grave abuse in declaring Ymbong to have been illegally terminated. The CA concluded that there is no
illegal dismissal to speak of in the instant case as Ymbong is considered resigned when he ran for an elective post pursuant to the
subject company policy.
Hence, this petition.
Petitioner argues that the CA gravely erred: (1) in upholding Policy No. HR-ER-016; (2) in upholding the validity of the termination
of Ymbongs services; and (3) when it reversed the decision of the NLRC 4 th Division of Cebu City which affirmed the decision of
Labor Arbiter Nicasio C. Anion.[22]
Ymbong argues that the subject company policy is a clear interference and a gross violation of an employees right to suffrage. He is
surprised why it was easy for the CA to rule that Luzons memorandum ran counter to an existing policy while on the other end, it did
not see that it was in conflict with the constitutional right to suffrage. He also points out that the issuance of the March 25, 1998
Memorandum was precisely an exercise of the management power to which an employee like him must respect; otherwise, he will be
sanctioned for disobedience or worse, even terminated. He was not in a position to know which between the two issuances was correct
and as far as he is concerned, the March 25, 1998 Memorandum superseded the subject company policy. Moreover, ABS-CBN cannot
disown acts of its officers most especially since it prejudiced his property rights. [23]
As to the validity of his dismissal, Ymbong contends that the ground relied upon by ABS-CBN is not among the just and authorized
causes provided in the Labor Code, as amended. And even assuming the subject company policy passes the test of validity under the
pretext of the right of the management to discipline and terminate its employees, the exercise of such right is not without
bounds. Ymbong avers that his automatic termination was a blatant disregard of his right to due process. He was never asked to
explain why he did not tender his resignation before he ran for public office as mandated by the subject company policy. [24]
Ymbong likewise asseverates that both the Labor Arbiter and the NLRC were consistent in their findings that he was illegally
dismissed. It is settled that factual findings of labor administrative officials, if supported by substantial evidence, are accorded not only
great respect but even finality.[25]
ABS-CBN, for its part, counters that the validity of policies such as Policy No. HR-ER-016 has long been upheld by this Court which
has ruled that a media company has a right to impose a policy providing that employees who file their certificates of candidacy in any
election shall be considered resigned.[26] Moreover, case law has upheld the validity of the exercise of management prerogatives even
if they appear to limit the rights of employees as long as there is no showing that management prerogatives were exercised in a
manner contrary to law.[27] ABS-CBN contends that being the largest media and entertainment company in the country, its reputation
stems not only from its ability to deliver quality entertainment programs but also because of neutrality and impartiality in delivering
news.[28]
ABS-CBN further argues that nothing in the company policy prohibits its employees from either accepting a public appointive
position or from running for public office. Thus, it cannot be considered as violative of the constitutional right of suffrage. Moreover,
the Supreme Court has recognized the employers right to enforce occupational qualifications as long as the employer is able to show
the existence of a reasonable business necessity in imposing the questioned policy. Here, Policy No. HR-ER-016 itself states that it
was issued to protect the company from any public misconceptions and [t]o preserve its objectivity, neutrality and credibility. Thus, it
cannot be denied that it is reasonable under the circumstances.[29]
ABS-CBN likewise opposes Ymbongs claim that he was terminated. ABS-CBN argues that on the contrary, Ymbongs unilateral act of
filing his certificate of candidacy is an overt act tantamount to voluntary resignation on his part by virtue of the clear mandate found in
Policy No. HR-ER-016. Ymbong, however, failed to file his resignation and in fact misled his superiors by making them believe that
he was going on leave to campaign for the administration candidates but in fact, he actually ran for councilor. He also claims to have
fully apprised Luzon through a letter of his intention to run for public office, but he failed to adduce a copy of the same. [30]
As to Ymbongs argument that the CA should not have reversed the findings of the Labor Arbiter and the NLRC, ABS-CBN
asseverates that the CA is not precluded from making its own findings most especially if upon its own review of the case, it has been
revealed that the NLRC, in affirming the findings of the Labor Arbiter, committed grave abuse of discretion amounting to lack or
excess of jurisdiction when it failed to apply the subject company policy in Ymbongs case when it readily applied the same to
Patalinghug.[31]

Essentially, the issues to be resolved in the instant petition are: (1) whether Policy No. HR-ER-016 is valid; (2) whether the March 25,
1998 Memorandum issued by Luzonsuperseded Policy No. HR-ER-016; and (3) whether Ymbong, by seeking an elective post, is
deemed to have resigned and not dismissed by ABS-CBN.

Policy No. HR-ER-016 is valid.

This is not the first time that this Court has dealt with a policy similar to Policy No. HR-ER-016. In the case of Manila Broadcasting
Company v. NLRC,[32] this Court ruled:
What is involved in this case is an unwritten company policy considering any employee who files a
certificate of candidacy for any elective or local office as resigned from the company.Although 11(b) of R.A. No.
6646 does not require mass media commentators and announcers such as private respondent to resign from their
radio or TV stations but only to go on leave for the duration of the campaign period, we think that the company may
nevertheless validly require them to resign as a matter of policy. In this case, the policy is justified on the following
grounds:
Working for the government and the company at the same time is clearly disadvantageous and
prejudicial to the rights and interest not only of the company but the public as well. In the event an
employee wins in an election, he cannot fully serve, as he is expected to do, the interest of his
employer. The employee has to serve two (2) employers, obviously detrimental to the interest of
both the government and the private employer.
In the event the employee loses in the election, the impartiality and cold neutrality of an
employee as broadcast personality is suspect, thus readily eroding and adversely affecting the
confidence and trust of the listening public to employers station. [33]

ABS-CBN, like Manila Broadcasting Company, also had a valid justification for Policy No. HR-ER-016. Its rationale is embodied in
the policy itself, to wit:
Rationale:
ABS-CBN BROADCASTING CORPORATION strongly believes that it is to the best interest of the company to
continuously remain apolitical. While it encourages and supports its employees to have greater political
awareness and for them to exercise their right to suffrage, the company, however, prefers to remain
politically independent and unattached to any political individual or entity.
Therefore, employees who [intend] to run for public office or accept political appointment should resign from
their positions, in order to protect the company from any public misconceptions. To preserve its objectivity,
neutrality and credibility, the company reiterates the following policy guidelines for strict implementation.
x x x x[34] [Emphasis supplied.]

We have consistently held that so long as a companys management prerogatives are exercised in good faith for the
advancement of the employers interest and not for the purpose of defeating or circumventing the rights of the employees under special
laws or under valid agreements, this Court will uphold them. [35] In the instant case, ABS-CBN validly justified the implementation of
Policy No. HR-ER-016. It is well within its rights to ensure that it maintains its objectivity and credibility and freeing itself from any
appearance of impartiality so that the confidence of the viewing and listening public in it will not be in any way eroded. Even as the
law is solicitous of the welfare of the employees, it must also protect the right of an employer to exercise what are clearly management
prerogatives. The free will of management to conduct its own business affairs to achieve its purpose cannot be denied.[36]
It is worth noting that such exercise of management prerogative has earned a stamp of approval from no less than our Congress itself
when on February 12, 2001, it enacted Republic Act No. 9006, otherwise known as the Fair Election Act. Section 6.6 thereof reads:
6.6. Any mass media columnist, commentator, announcer, reporter, on-air correspondent or personality who
is a candidate for any elective public office or is a campaign volunteer for or employed or retained in any
capacity by any candidate or political party shall be deemed resigned, if so required by their employer, or
shall take a leave of absence from his/her work as such during the campaign period: Provided, That any media

practitioner who is an official of a political party or a member of the campaign staff of a candidate or political party
shall not use his/her time or space to favor any candidate or political party. [Emphasis and underscoring supplied.]

Policy No. HR-ER-016 was not superseded by the March 25, 1998
Memorandum

The CA correctly ruled that though Luzon, as Assistant Station Manager for Radio of ABS-CBN, has policy-making powers in
relation to his principal task of administering the networks radio station in the Cebu region, the exercise of such power should be in
accord with the general rules and regulations imposed by the ABS-CBN Head Office to its employees. Clearly, the March 25,
1998 Memorandum issued by Luzon which only requires employees to go on leave if they intend to run for any elective position is in
absolute contradiction with Policy No. HR-ER-016 issued by the ABS-CBN Head Office in Manila which requires the resignation, not
only the filing of a leave of absence, of any employee who intends to run for public office. Having been issued beyond the scope of his
authority, the March 25, 1998 Memorandum is therefore void and did not supersede Policy No. HR-ER-016.
Also worth noting is that Luzon in his Sworn Statement admitted the inaccuracy of his recollection of the company policy
when he issued the March 25, 1998 Memorandum and stated therein that upon double-checking of the exact text of the policy
statement and subsequent confirmation with the ABS-CBN Head Office in Manila, he learned that the policy required resignation for
those who will actually run in elections because the company wanted to maintain its independence. Since the officer who himself
issued the subject memorandum acknowledged that it is not in harmony with the Policy issued by the upper management, there is no
reason for it to be a source of right for Ymbong.

Ymbong is deemed resigned when he ran for councilor.

As Policy No. HR-ER-016 is the subsisting company policy and not Luzons March 25, 1998 Memorandum, Ymbong is deemed
resigned when he ran for councilor.
We find no merit in Ymbongs argument that [his] automatic termination x x x was a blatant [disregard] of [his] right to due process as
he was never asked to explain why he did not tender his resignation before he ran for public office as mandated by [the subject
company policy].[37] Ymbongs overt act of running for councilor of Lapu-Lapu City is tantamount to resignation on his part. He was
separated from ABS-CBN not because he was dismissed but because he resigned. Since there was no termination to speak of, the
requirement of due process in dismissal cases cannot be applied to Ymbong. Thus, ABS-CBN is not duty-bound to ask him to explain
why he did not tender his resignation before he ran for public office as mandated by the subject company policy.
In addition, we do not subscribe to Ymbongs claim that he was not in a position to know which of the two issuances was
correct. Ymbong most likely than not, is fully aware that the subsisting policy is Policy No. HR-ER-016 and not the March 25, 1998
Memorandum and it was for this reason that, as stated by Luzon in his Sworn Statement, he only told the latter that he will only
campaign for the administration ticket and not actually run for an elective post. Ymbong claims he had fully apprised Luzon by letter
of his plan to run and even filed a leave of absence but records are bereft of any proof of said claim. Ymbong claims that the letter
stating his intention to go on leave to run in the election is attached to his Position Paper as Annex A, a perusal of said pleading
attached to his petition before this Court, however, show that Annex A was not his letter to Luzon but the September 14, 1998
Memorandum informing Ymbong that his services had been automatically terminated when he ran for a local government position.
Moreover, as pointed out by ABS-CBN, had Ymbong been truthful to his superiors, they would have been able to clarify to him the
prevailing company policy and inform him of the consequences of his decision in case he decides to run, as Luzon did in Patalinghugs
case.
WHEREFORE, the petition for review on certiorari is DENIED for lack of merit.
With costs against petitioner.
SO ORDERED.

PROFESSIONAL SERVICES INC. VS. THE COURT OF APPEALS AND NATIVIDAD AND ENRIQUE AGANA

RESOLUTION
SANDOVAL-GUTIERREZ, J.:
As the hospital industry changes, so must the laws and jurisprudence governing hospital liability. The immunity from medical
malpractice traditionally accorded to hospitals has to be eroded if we are to balance the interest of the patients and hospitals under the
present setting.

Before this Court is a motion for reconsideration filed by Professional Services, Inc. (PSI), petitioner in G.R. No. 126297, assailing the
Courts First Division Decision datedJanuary 31, 2007, finding PSI and Dr. Miguel Ampil, petitioner in G.R. No. 127590, jointly and
severally liable for medical negligence.

A brief revisit of the antecedent facts is imperative.

On April 4, 1984, Natividad Agana was admitted at the Medical City General Hospital (Medical City) because of difficulty of bowel
movement and bloody anal discharge. Dr. Ampil diagnosed her to be suffering from cancer of the sigmoid. Thus, on April 11, 1984,
Dr. Ampil, assisted by the medical staff[1] of Medical City, performed an anterior resection surgery upon her. During the surgery, he
found that the malignancy in her sigmoid area had spread to her left ovary, necessitating the removal of certain portions of it.Thus, Dr.
Ampil obtained the consent of Atty. Enrique Agana, Natividads husband, to permit Dr. Juan Fuentes, respondent in G.R. No. 126467,
to perform hysterectomy upon Natividad.

Dr. Fuentes performed and completed the hysterectomy. Afterwards, Dr. Ampil took over, completed the operation and closed the
incision. However, the operation appeared to be flawed. In the corresponding Record of Operation dated April 11, 1984, the attending
nurses entered these remarks:

sponge count lacking 2

announced to surgeon searched done (sic) but to no avail continue for closure.

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

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

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

Despite Dr. Ampils assurance, the pains intensified, prompting Natividad to seek treatment at the Polymedic General Hospital. While
confined thereat, Dr. Ramon Gutierrez detected the presence of a foreign object in her vagina -- a foul-smelling gauze measuring 1.5
inches in width. The gauze had badly infected her vaginal vault. A recto-vaginal fistula had formed in her reproductive organ which
forced stool to excrete through the vagina. Another surgical operation was needed to remedy the situation. Thus, in October 1984,
Natividad underwent another surgery.

On November 12, 1984, Natividad and her husband filed with the Regional Trial Court, Branch 96, Quezon City a complaint for
damages against PSI (owner of Medical City), Dr. Ampil and Dr. Fuentes.

On February 16, 1986, pending the outcome of the above case, Natividad died. She was duly substituted by her above-named
children (the Aganas).

On March 17, 1993, the trial court rendered judgment in favor of spouses Agana finding PSI, Dr. Ampil and Dr. Fuentes
jointly and severally liable. On appeal, the Court of Appeals, in its Decision dated September 6, 1996, affirmed the assailed judgment
with modification in the sense that the complaint against Dr. Fuentes was dismissed.

PSI, Dr. Ampil and the Aganas filed with this Court separate petitions for review on certiorari. On January 31, 2007, the Court,
through its First Division, rendered a Decision holding that PSI is jointly and severally liable with Dr. Ampil for the following
reasons: first, there is an employer-employee relationship between Medical City and Dr. Ampil.The Court relied on Ramos v. Court of
Appeals,[2] holding that for the purpose of apportioning responsibility in medical negligence cases, an employer-employee
relationship in effect exists between hospitals and their attending and visiting physicians; second, PSIs act of publicly displaying in
the lobby of the Medical City the names and specializations of its accredited physicians, including Dr. Ampil, estopped it from
denying the existence of an employer-employee relationship between them under the doctrine of ostensible agency or agency by
estoppel; and third, PSIs failure to supervise Dr. Ampil and its resident physicians and nurses and to take an active step in order to
remedy their negligence rendered it directly liable under the doctrine of corporate negligence.

In its motion for reconsideration, PSI contends that the Court erred in finding it liable under Article 2180 of the Civil Code,
there being no employer-employee relationship between it and its consultant, Dr. Ampil. PSI stressed that the Courts Decision
in Ramos holding that an employer-employee relationship in effect exists between hospitals and their attending and visiting physicians
for the purpose of apportioning responsibility had been reversed in a subsequent Resolution. [3] Further, PSI argues that the doctrine of
ostensible agency or agency by estoppel cannot apply because spouses Agana failed to establish one requisite of the doctrine, i.e.,
that Natividad relied on the representation of the hospital in engaging the services of Dr. Ampil. And lastly, PSI maintains that
the doctrine of corporate negligence is misplaced because the proximate cause of Natividads injury was Dr. Ampils negligence.

The motion lacks merit.

As earlier mentioned, the First Division, in its assailed Decision, ruled that an employer-employee relationship in
effect exists between the Medical City and Dr. Ampil.Consequently, both are jointly and severally liable to the Aganas. This ruling
proceeds from the following ratiocination in Ramos:

We now discuss the responsibility of the hospital in this particular incident. The unique practice (among
private hospitals) of filling up specialist staff with attending and visiting consultants, who are allegedly not hospital
employees, presents problems in apportioning responsibility for negligence in medical malpractice
cases. However, the difficulty is only more apparent than real.
In the first place, hospitals exercise significant control in the hiring and firing of consultants and in
the conduct of their work within the hospital premises. Doctors who apply for consultant slots, visiting or
attending, are required to submit proof of completion of residency, their educational qualifications; generally,
evidence of accreditation by the appropriate board (diplomate), evidence of fellowship in most cases, and

references. These requirements are carefully scrutinized by members of the hospital administration or by a review
committee set up by the hospital who either accept or reject the application. This is particularly true with
respondent hospital.
After a physician is accepted, either as a visiting or attending consultant, he is normally required to
attend clinico-pathological conferences, conduct bedside rounds for clerks, interns and residents, moderate
grand rounds and patient audits and perform other tasks and responsibilities, for the privilege of being able
to maintain a clinic in the hospital, and/or for the privilege of admitting patients into the hospital. In addition
to these, the physicians performance as a specialist is generally evaluated by a peer review committee on the
basis of mortality and morbidity statistics, and feedback from patients, nurses, interns and residents. A
consultant remiss in his duties, or a consultant who regularly falls short of the minimum standards
acceptable to the hospital or its peer review committee, is normally politely terminated.
In other words, private hospitals hire, fire and exercise real control over their attending and visiting
consultant staff. While consultants are not, technically employees, a point which respondent hospital asserts
in denying all responsibility for the patients condition, the control exercised, the hiring, and the right to
terminate consultants all fulfill the important hallmarks of an employer-employee relationship, with the
exception of the payment of wages. In assessing whether such a relationship in fact exists, the control test is
determining.Accordingly, on the basis of the foregoing, we rule that for the purpose of allocating
responsibility in medical negligence cases, an employer-employee relationship in effect exists between
hospitals and their attending and visiting physicians. This being the case, the question now arises as to whether
or not respondent hospital is solidarily liable with respondent doctors for petitioners condition.
The basis for holding an employer solidarily responsible for the negligence of its employee is found in
Article 2180 of the Civil Code which considers a person accountable not only for his own acts but also for those of
others based on the formers responsibility under a relationship of partia ptetas.

Clearly, in Ramos, the Court considered the peculiar relationship between a hospital and its consultants on the bases of
certain factors. One such factor is the control test wherein the hospital exercises control in the hiring and firing of consultants, like Dr.
Ampil, and in the conduct of their work.

Actually, contrary to PSIs contention, the Court did not reverse its ruling in Ramos. What it clarified was that the De Los
Santos Medical Clinic did not exercise control over its consultant, hence, there is no employer-employee relationship between
them. Thus, despite the granting of the said hospitals motion for reconsideration, the doctrine inRamos stays, i.e., for the purpose of
allocating responsibility in medical negligence cases, an employer-employee relationship exists between hospitals and their
consultants.

In the instant cases, PSI merely offered a general denial of responsibility, maintaining that consultants, like Dr. Ampil, are
independent contractors, not employees of the hospital. Even assuming that Dr. Ampil is not an employee of Medical City, but an
independent contractor, still the said hospital is liable to the Aganas.

In Nograles, et al. v. Capitol Medical Center, et al.,[4] through Mr. Justice Antonio T. Carpio, the Court held:

The question now is whether CMC is automatically exempt from liability considering that Dr. Estrada is an
independent contractor-physician.
In general, a hospital is not liable for the negligence of an independent contractor-physician. There is,
however, an exception to this principle. The hospital may be liable if the physician is the ostensible agent of the
hospital. (Jones v. Philpott, 702 F. Supp. 1210 [1988]) This exception is also known as the doctrine of apparent
authority. (Sometimes referred to as the apparent or ostensible agency theory. [King v. Mitchell, 31 A.D.3rd 958, 819
N.Y. S.2d 169 (2006)].
xxx

The doctrine of apparent authority essentially involves two factors to determine the liability of an
independent contractor-physician.
The first factor focuses on the hospitals manifestations and is sometimes described as an inquiry whether
the hospital acted in a manner which would lead a reasonable person to conclude that the individual who was alleged
to be negligent was an employee or agent of the hospital. (Diggs v. Novant Health, Inc., 628 S.E.2d 851 (2006)
citing Hylton v. Koontz, 138 N.C. App. 629 (2000). In this regard, the hospital need not make express
representations to the patient that the treating physician is an employee of the hospital; rather a
representation may be general and implied. (Id.)
The doctrine of apparent authority is a specie of the doctrine of estoppel. Article 1431 of the Civil Code
provides that [t]hrough estoppel, an admission or representation is rendered conclusive upon the person making it,
and cannot be denied or disproved as against the person relying thereon. Estoppel rests on this rule: Whether a party
has, by his own declaration, act, or omission, intentionally and deliberately led another to believe a particular thing
true, and to act upon such belief, he cannot, in any litigation arising out of such declaration, act or omission, be
permitted to falsify it. (De Castro v. Ginete, 137 Phil. 453 [1969], citing Sec. 3, par. A, Rule 131 of the Rules of
Court. See also King v. Mitchell, 31 A.D.3rd 958, 819 N.Y.S.2d 169 [2006]).
xxx
The second factor focuses on the patients reliance. It is sometimes characterized as an inquiry on whether
the plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent with ordinary care and
prudence. (Diggs v. Novant Health, Inc.)

PSI argues that the doctrine of apparent authority cannot apply to these cases because spouses Agana failed to establish
proof of their reliance on the representation ofMedical City that Dr. Ampil is its employee.

The argument lacks merit.

Atty. Agana categorically testified that one of the reasons why he chose Dr. Ampil was that he knew him to be a staff
member of Medical City, a prominent and known hospital.

Q Will you tell us what transpired in your visit to Dr. Ampil?

A Well, I saw Dr. Ampil at the Medical City, I know him to be a staff member there, and I told him about the
case of my wife and he asked me to bring my wife over so she could be examined. Prior to that, I have
known Dr. Ampil, first, he was staying in front of our house, he was a neighbor, second, my daughter was
his student in the University of the East School of Medicine at Ramon Magsaysay; and when my daughter
opted to establish a hospital or a clinic, Dr. Ampil was one of our consultants on how to establish that
hospital. And from there, I have known that he was a specialist when it comes to that illness.

Atty. Agcaoili

On that particular occasion, April 2, 1984, what was your reason for choosing to contact Dr. Ampil in connection
with your wifes illness?

A First, before that, I have known him to be a specialist on that part of the body as a surgeon; second, I have
known him to be a staff member of the Medical City which is a prominent and known hospital. And
third, because he is a neighbor, I expect more than the usual medical service to be given to us, than his
ordinary patients.[5]

Clearly, PSI is estopped from passing the blame solely to Dr. Ampil. Its act of displaying his name and those of the other
physicians in the public directory at the lobby of the hospital amounts to holding out to the public that it offers quality medical service
through the listed physicians. This justifies Atty. Aganas belief that Dr. Ampil was a member of the hospitals staff. It must be
stressed that under the doctrine of apparent authority, the question in every case is whether the principal has by his voluntary
act placed the agent in such a situation that a person of ordinary prudence, conversant with business usages and the nature of
the particular business, is justified in presuming that such agent has authority to perform the particular act in question.[6] In
these cases, the circumstances yield a positive answer to the question.

The challenged Decision also anchors its ruling on the doctrine of corporate responsibility.[7] The duty of providing quality
medical service is no longer the sole prerogative and responsibility of the physician. This is because the modern hospital now tends to
organize a highly-professional medical staff whose competence and performance need also to be monitored by the hospital
commensurate with its inherent responsibility to provide quality medical care. [8] Such responsibility includes the proper
supervision of the members of its medical staff. Accordingly, the hospital has the duty to make a reasonable effort to monitor
and oversee the treatment prescribed and administered by the physicians practicing in its premises.

Unfortunately, PSI had been remiss in its duty. It did not conduct an immediate investigation on the reported missing gauzes
to the great prejudice and agony of its patient. Dr. Jocson, a member of PSIs medical staff, who testified on whether the hospital
conducted an investigation, was evasive, thus:

Q We go back to the operative technique, this was signed by Dr. Puruganan, was this submitted to the
hospital?
A Yes, sir, this was submitted to the hospital with the record of the patient.

Q Was the hospital immediately informed about the missing sponges?

A That is the duty of the surgeon, sir.

Q As a witness to an untoward incident in the operating room, was it not your obligation, Dr., to also report
to the hospital because you are under the control and direction of the hospital?
A The hospital already had the record of the two OS missing, sir.

Q If you place yourself in the position of the hospital, how will you recover.
A You do not answer my question with another question.

Q Did the hospital do anything about the missing gauzes?

A The hospital left it up to the surgeon who was doing the operation, sir.

Q Did the hospital investigate the surgeon who did the operation?
A I am not in the position to answer that, sir.

Q You never did hear the hospital investigating the doctors involved in this case of those missing sponges, or
did you hear something?

xxxxxx

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

Atty. Agana

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

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

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

Moreover, there is merit in the trial courts finding that the failure of PSI to conduct an investigation established PSIs part
in the dark conspiracy of silence and concealment about the gauzes. The following testimony of Atty. Agana supports such
findings, thus:

Q You said you relied on the promise of Dr. Ampil and despite the promise you were not able to obtain the said
record. Did you go back to the record custodian?
A I did not because I was talking to Dr. Ampil. He promised me.
Q After your talk to Dr. Ampil, you went to the record custodian?
A I went to the record custodian to get the clinical record of my wife, and I was given a portion of the
records consisting of the findings, among them, the entries of the dates, but not the operating
procedure and operative report.[10]

In sum, we find no merit in the motion for reconsideration.

WHEREFORE, we DENY PSIs motion for reconsideration with finality.

SO ORDERED.