G.R. No.

211145, October 14, 2015

SAMAHAN NG MANGGAGAWA SA HANJIN SHIPYARD REP. BY ITS PRESIDENT, ALFIE
ALIPIO,Petitioner, v. BUREAU OF LABOR RELATIONS, HANJIN HEAVY INDUSTRIES AND
CONSTRUCTION CO., LTD. (HHIC-PHIL.), Respondents.
DECISION
MENDOZA, J.:
The right to self-organization is not limited to unionism. Workers may also form or join an association
for mutual aid and protection and for other legitimate purposes.
This is a petition for review on certiorari seeking to reverse and set aside the July 4, 2013
Decision1and the January 28, 2014 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 123397,
which reversed the November 28, 2011 Resolution3 of the Bureau of Labor Relations (BLR) and
reinstated the April 20, 2010 Decision4 of the Department of Labor and Employment (DOLE) Regional
Director, cancelling the registration of Samahan ng Manggagawa sa Hanjin Shipyard (Samahan) as a
worker's association under Article 243 (now Article 249) of the Labor Code.
The Facts
On February 16, 2010, Samahan, through its authorized representative, Alfie F. Alipio, filed an
application for registration5 of its name "Samahan ng Mga Manggagawa sa Hanjin Shipyard" with the
DOLE. Attached to the application were the list of names of the association's officers and members,
signatures of the attendees of the February 7, 2010 meeting, copies of their Constitution and By-laws.
The application stated that the association had a total of 120 members.
On February 26, 2010, the DOLE Regional Office No. 3, City of San Fernando, Pampanga (DOLEPampanga), issued the corresponding certificate of registration 6 in favor of Samahan.
On March 15, 2010, respondent Hanjin Heavy Industries and Construction Co., Ltd. Philippines
(Hanjin), with offices at Greenbeach 1, Renondo Peninsula, Sitio Agustin, Barangay Cawag, Subic Bay
Freeport Zone, filed a petition7 with DOLE-Pampanga praying for the cancellation of registration of
Samahan's association on the ground that its members did not fall under any of the types of workers
enumerated in the second sentence of Article 243 (now 249).
Hanjin opined that only ambulant, intermittent, itinerant, rural workers, self-employed, and those
without definite employers may form a workers' association. It further posited that one third (1/3) of
the members of the association had definite employers and the continued existence and registration of
the association would prejudice the company's goodwill.
On March 18, 2010, Hanjin filed a supplemental petition, 8 adding the alternative ground that Samahan
committed a misrepresentation in connection with the list of members and/or voters who took part in
the ratification of their constitution and by-laws in its application for registration. Hanjin claimed that
Samahan made it appear that its members were all qualified to become members of the workers'
association.
On March 26, 2010, DOLE-Pampanga called for a conference, wherein Samahan requested for a 10day period to file a responsive pleading. No pleading, however, was submitted. Instead, Samahan filed
a motion to dismiss on April 14, 2010.9
The Ruling of the DOLE Regional Director
On April 20, 2010, DOLE Regional Director Ernesto Bihis ruled in favor of Hanjin. He found that the

preamble, as stated in the Constitution and By-Laws of Samahan, was an admission on its part that all
of its members were employees of Hanjin, to wit:
KAMI, ang mga Manggagawa sa HANJIN Shipyard (SAMAHAN) ay naglalayong na isulong ang
pagpapabuti ng kondisyon sa paggawa at katiyakan sa hanapbuhay sa pamamagitan ng patuloy na
pagpapaunlad ng kasanayan ng para sa mga kasapi nito. Naniniwala na sa pamamagitan ng aming
mga angking lakas, kaalaman at kasanayan ay anting maitataguyod at makapag-aambag sa
kaunlaran ng isang lipunan. Na mararating at makakamit ang antas ng pagkilala, pagdakila at
pagpapahalaga sa mga tulad naming mga manggagawa.
x x x10
The same claim was made by Samahan in its motion to dismiss, but it failed to adduce evidence that
the remaining 63 members were also employees of Hanjin. Its admission bolstered Hanjin's claim that
Samahan committed misrepresentation in its application for registration as it made an express
representation that all of its members were employees of the former. Having a definite employer,
these 57 members should have formed a labor union for collective bargaining. 11 The dispositive portion
of the decision of the Dole Regional Director, reads:
WHEREFORE, premises considered, the petition is hereby GRANTED. Consequently, the Certificate of
Registration as Legitimate Workers Association (LWA) issued to the SAMAHAN NG MGA MANGGAGAWA
SA HANJIN SHIPYARD (SAMAHAN) with Registration Numbers R0300-1002-WA-009 dated February
26, 2010 is hereby CANCELLED, and said association is dropped from the roster of labor organizations
of this Office.
SO DECIDED.12
The Ruling of the Bureau of Labor Relations
Aggrieved, Samahan filed an appeal13 before the BLR, arguing that Hanjin had no right to petition for
the cancellation of its registration. Samahan pointed out that the words "Hanjin Shipyard," as used in
its application for registration, referred to a workplace and not as employer or company. It explained
that when a shipyard was put up in Subic, Zambales, it became known as Hanjin Shipyard. Further,
the remaining 63 members signed the Sama-Samang Pagpapatunay which stated that they were
either working or had worked at Hanjin. Thus, the alleged misrepresentation committed by Samahan
had no leg to stand on.14
In its Comment to the Appeal,15 Hanjin averred that it was a party-in-interest. It reiterated that
Samahan committed misrepresentation in its application for registration before DOLE Pampanga. While
Samahan insisted that the remaining 63 members were either working, or had at least worked in
Hanjin, only 10 attested to such fact, thus, leaving its 53 members without any workplace to claim.
On September 6, 2010, the BLR granted Samahan's appeal and reversed the ruling of the Regional
Director. It stated that the law clearly afforded the right to self-organization to all workers including
those without definite employers.16 As an expression of the right to self-organization, industrial,
commercial and self-employed workers could form a workers' association if they so desired but subject
to the limitation that it was only for mutual aid and protection. 17 Nowhere could it be found that to
form a workers' association was prohibited or that the exercise of a workers' right to self-organization
was limited to collective bargaining.18
The BLR was of the opinion that there was no misrepresentation on the part of Samahan. The phrase,
"KAMI, ang mga Manggagawa sa Hanjin Shipyard" if translated, would be: "We, the workers at Hanjin
Shipyard." The use of the preposition "at" instead of "of " would indicate that "Hanjin Shipyard" was
intended to describe a place.19 Should Hanjin feel that the use of its name had affected the goodwill of
the company, the remedy was not to seek the cancellation of the association's registration. At most,
the use by Samahan of the name "Hanjin Shipyard" would only warrant a change in the name of the
association.20 Thus, the dispositive portion of the BLR decision reads:
WHEREFORE, the appeal is hereby GRANTED. The Order of DOLE Region III Director Ernesto C. Bihis
dated 20 April 2010 is REVERSED and SET ASIDE.
Accordingly, Samahan ng mga Manggagawa sa Hanjin Shipyard shall remain in the roster of legitimate
workers' association.21

On October 14, 2010, Hanjin filed its motion for reconsideration. 22

In its Resolution,23 dated November 28, 2011, the BLR affirmed its September 6, 2010 Decision, but
directed Samahan to remove the words "Hanjin Shipyard" from its name. The BLR explained that the
Labor Code had no provision on the use of trade or business name in the naming of a worker's
association, such matters being governed by the Corporation Code. According to the BLR, the most
equitable relief that would strike a balance between the contending interests of Samahan and Hanjin
was to direct Samahan to drop the name "Hanjin Shipyard" without delisting it from the roster of
legitimate labor organizations. The fallo reads:
WHEREFORE, premises considered, our Decision dated 6 September 2010 is hereby AFFIRMED with a
DIRECTIVE for SAMAHAN to remove "HANJIN SHIPYARD" from its name.
SO RESOLVED.24
Unsatisfied, Samahan filed a petition for certiorari25 under Rule 65 before the CA, docketed as CA-G.R.
SP No. 123397.
In its March 21, 2012 Resolution,26 the CA dismissed the petition because of Samahan's failure to file a
motion for reconsideration of the assailed November 28, 2011 Resolution.
On April 17, 2012, Samahan filed its motion for reconsideration 27 and on July 18, 2012, Hanjin filed its
comment28 to oppose the same. On October 22, 2012, the CA issued a resolution granting Samahan's
motion for reconsideration and reinstating the petition. Hanjin was directed to file a comment five (5)
days from receipt of notice.29
On December 12, 2012, Hanjin filed its comment on the petition, 30 arguing that to require Samahan to
change its name was not tantamount to interfering with the workers' right to self-organization. 31Thus,
it prayed, among others, for the dismissal of the petition for Samahan's failure to file the required
motion for reconsideration.32
On January 17, 2013, Samahan filed its reply.33
On March 22, 2013, Hanjin filed its memorandum.34
The Ruling of the Court of Appeals
On July 4, 2013, the CA rendered its decision, holding that the registration of Samahan as a legitimate
workers' association was contrary to the provisions of Article 243 of the Labor Code. 35 It stressed that
only 57 out of the 120 members were actually working in Hanjin while the phrase in the preamble of
Samahan's Constitution and By-laws, "KAMI, ang mga Manggagawa sa Hanjin Shipyard" created an
impression that all its members were employees of HHIC. Such unqualified manifestation which was
used in its application for registration, was a clear proof of misrepresentation which warranted the
cancellation of Samahan's registration.
It also stated that the members of Samahan could not register it as a legitimate worker's association
because the place where Hanjin's industry was located was not a rural area. Neither was there any
evidence to show that the members of the association were ambulant, intermittent or itinerant
workers.36
At any rate, the CA was of the view that dropping the words "Hanjin Shipyard" from the association
name would not prejudice or impair its right to self-organization because it could adopt other
appropriate names. The dispositive portion reads:
WHEREFORE, the petition is DISMISSED and the BLR's directive, ordering that the words "Hanjin
Shipyard" be removed from petitioner association's name, is AFFIRMED. The Decision dated April 20,
2010 of the DOLE Regional Director in Case No. R0300-1003-CP-001, which ordered the cancellation
of petitioner association's registration is REINSTATED.
SO ORDERED.37
Hence, this petition, raising the following

ISSUES

I. THE COURT OF APPEALS SERIOUSLY ERRED IN FINDING THAT SAMAHAN CANNOT FORM
A WORKERS' ASSOCIATION OF EMPLOYEES IN HANJIN AND INSTEAD SHOULD HAVE
FORMED A UNION, HENCE THEIR REGISTRATION AS A WORKERS' ASSOCIATION SHOULD BE
CANCELLED.
II. THE COURT OF APPEALS SERIOUSLY ERRED IN ORDERING THE REMOVAL/DELETION OF
THE WORD "HANJIN" IN THE NAME OF THE UNION BY REASON OF THE COMPANY'S
PROPERTY RIGHT OVER THE COMPANY NAME "HANJIN."38
Samahan argues that the right to form a workers' association is not exclusive to intermittent,
ambulant and itinerant workers. While the Labor Code allows the workers "to form, join or assist labor
organizations of their own choosing" for the purpose of collective bargaining, it does not prohibit them
from forming a labor organization simply for purposes of mutual aid and protection. All members of
Samahan have one common place of work, Hanjin Shipyard. Thus, there is no reason why they cannot
use "Hanjin Shipyard" in their name.39
Hanjin counters that Samahan failed to adduce sufficient basis that all its members were employees of
Hanjin or its legitimate contractors, and that the use of the name "Hanjin Shipyard" would create an
impression that all its members were employess of HHIC. 40
Samahan reiterates its stand that workers with a definite employer can organize any association for
purposes of mutual aid and protection. Inherent in the workers' right to self-organization is its right to
name its own organization. Samahan referred "Hanjin Shipyard" as their common place of work.
Therefore, they may adopt the same in their association's name. 41
The Court's Ruling
The petition is partly meritorious.
Right to self-organization includes right to form a union, workers' association and labor management
councils
More often than not, the right to self-organization connotes unionism. Workers, however, can also
form and join a workers' association as well as labor-management councils (LMC). Expressed in the
highest law of the land is the right of all workers to self-organization. Section 3, Article XIII of the
1987 Constitution states:
Section 3. The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment opportunities for all. It shall
guarantee the rights of all workers to self-organization,
collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in
accordance with law. xxx
[Emphasis Supplied]
And Section 8, Article III of the 1987 Constitution also states:
Section 8. The right of the people, including those employed in the public and private sectors, to form
unions, associations, or societies for purposes not contrary to law shall not be abridged.
In relation thereto, Article 3 of the Labor Code provides:
Article 3. Declaration of basic policy. The State shall afford protection to labor, promote full
employment, ensure equal work opportunities regardless of sex, race or creed and regulate the
relations between workers and employers. The State shall assure the rights of workers to selforganization, collective bargaining, security of tenure, and just and humane conditions of
work.
[Emphasis Supplied]
As Article 246 (now 252) of the Labor Code provides, the right to self-organization includes the right
to form, join or assist labor organizations for the purpose of collective bargaining through
representatives of their own choosing and to engage in lawful concerted activities for the same

purpose for their mutual aid and protection. This is in line with the policy of the State to foster the free
and voluntary organization of a strong and united labor movement as well as to make sure that
workers participate in policy and decision-making processes affecting their rights, duties and welfare. 42
The right to form a union or association or to self-organization comprehends two notions, to wit: (a)
the liberty or freedom, that is, the absence of restraint which guarantees that the employee may act
for himself without being prevented by law; and (b) the power, by virtue of which an employee may,
as he pleases, join or refrain from joining an association. 43
In view of the revered right of every worker to self-organization, the law expressly allows and even
encourages the formation of labor organizations. A labor organization is defined as "any union or
association of employees which exists in whole or in part for the purpose of collective bargaining or of
dealing with employers concerning terms and conditions of employment." 44 A labor organization has
two broad rights: (1) to bargain collectively and (2) to deal with the employer concerning terms and
conditions of employment. To bargain collectively is a right given to a union once it registers itself with
the DOLE. Dealing with the employer, on the other hand, is a generic description of interaction
between employer and employees concerning grievances, wages, work hours and other terms and
conditions of employment, even if the employees' group is not registered with the DOLE. 45
A union refers to any labor organization in the private sector organized for collective bargaining and
for other legitimate purpose,46 while a workers' association is an organization of workers formed for
the mutual aid and protection of its members or for any legitimate purpose other than collective
bargaining.47
Many associations or groups of employees, or even combinations of only several persons, may qualify
as a labor organization yet fall short of constituting a labor union. While every labor union is a labor
organization, not every labor organization is a labor union. The difference is one of organization,
composition and operation.48
Collective bargaining is just one of the forms of employee participation. Despite so much interest in
and the promotion of collective bargaining, it is incorrect to say that it is the device and no other,
which secures industrial democracy. It is equally misleading to say that collective bargaining is the
end-goal of employee representation. Rather, the real aim is employee participation in whatever
form it may appear, bargaining or no bargaining, union or no union. 49 Any labor organization which
may or may not be a union may deal with the employer. This explains why a workers' association or
organization does not always have to be a labor union and why employer-employee collective
interactions are not always collective bargaining.50
To further strengthen employee participation, Article 255 (now 261) 51 of the Labor Code mandates that
workers shall have the right to participate in policy and decision-making processes of the
establishment where they are employed insofar as said processes will directly affect their rights,
benefits and welfare. For this purpose, workers and employers may form LMCs.
A cursory reading of the law demonstrates that a common element between unionism and the
formation of LMCs is the existence of an employer-employee relationship. Where neither party is an
employer nor an employee of the other, no duty to bargain collectively would exist. 52 In the same
manner, expressed in Article 255 (now 261) is the requirement that such workers be employed in the
establishment before they can participate in policy and decision making processes.
In contrast, the existence of employer-employee relationship is not mandatory in the formation of
workers' association. What the law simply requires is that the members of the workers' association, at
the very least, share the same interest. The very definition of a workers' association speaks of "mutual
aid and protection."
Right to choose whether to form or join a union or workers' association belongs to workers themselves
In the case at bench, the Court cannot sanction the opinion of the CA that Samahan should have
formed a union for purposes of collective bargaining instead of a workers' association because the
choice belonged to it. The right to form or join a labor organization necessarily includes the right to

refuse or refrain from exercising the said right. It is self-evident that just as no one should be denied
the exercise of a right granted by law, so also, no one should be compelled to exercise such a
conferred right.53 Also inherent in the right to self-organization is the right to choose whether to form
a union for purposes of collective bargaining or a workers' association for purposes of providing mutual
aid and protection.
The right to self-organization, however, is subject to certain limitations as provided by law. For
instance, the Labor Code specifically disallows managerial employees from joining, assisting or forming
any labor union. Meanwhile, supervisory employees, while eligible for membership in labor
organizations, are proscribed from joining the collective bargaining unit of the rank and file
employees.54 Even government employees have the right to self-organization. It is not, however,
regarded as existing or available for purposes of collective bargaining, but simply for the furtherance
and protection of their interests. 55
Hanjin posits that the members of Samahan have definite employers, hence, they should have formed
a union instead of a workers' association. The Court disagrees. There is no provision in the Labor Code
that states that employees with definite employers may form, join or assist unions only.
The Court cannot subscribe either to Hanjin's position that Samahan's members cannot form the
association because they are not covered by the second sentence of Article 243 (now 249), to wit:
Article 243. Coverage and employees' right to self-organization. All persons employed in commercial,
industrial and agricultural enterprises and in religious, charitable, medical, or educational institutions,
whether operating for profit or not, shall have the right to self-organization and to form, join, or assist
labor organizations of their own choosing for purposes of collective bargaining. Ambulant,
intermittent and itinerant workers, self-employed people, rural workers and those without
any definite employers may form labor organizations for their mutual aid and
protection. (As amended by Batas Pambansa Bilang 70, May 1, 1980)
[Emphasis Supplied]
Further, Article 243 should be read together with Rule 2 of Department Order (D.O.) No. 40-03, Series
of 2003, which provides:
RULE II
COVERAGE OF THE RIGHT TO SELF-ORGANIZATION
Section 1. Policy. - It is the policy of the State to promote the free and responsible exercise of the
right to self-organization through the establishment of a simplified mechanism for the speedy
registration of labor unions and workers associations, determination of representation status and
resolution of inter/intra-union and other related labor relations disputes. Only legitimate or registered
labor unions shall have the right to represent their members for collective bargaining and other
purposes. Workers' associations shall have the right to represent their members for purposes other
than collective bargaining.
Section 2. Who may join labor unions and workers' associations. - All persons employed in
commercial, industrial and agricultural enterprises, including employees of government owned or
controlled corporations without original charters established under the Corporation Code, as well as
employees of religious, charitable, medical or educational institutions whether operating for profit or
not, shall have the right to self-organization and to form, join or assist labor unions for purposes of
collective bargaining: provided, however, that supervisory employees shall not be eligible for
membership in a labor union of the rank-and-file employees but may form, join or assist separate
labor unions of their own. Managerial employees shall not be eligible to form, join or assist any labor
unions for purposes of collective bargaining. Alien employees with valid working permits issued by the
Department may exercise the right to self-organization and join or assist labor unions for purposes of
collective bargaining if they are nationals of a country which grants the same or similar rights to
Filipino workers, as certified by the Department of Foreign Affairs.
For purposes of this section, any employee, whether employed for a definite period or not, shall
beginning on the first day of his/her service, be eligible for membership in any labor organization.

All other workers, including ambulant, intermittent and other workers, the self-employed, rural
workers and those without any definite employers may form labor organizations for their mutual aid
and protection and other legitimate purposes except collective bargaining.
[Emphases Supplied]
Clearly, there is nothing in the foregoing implementing rules which provides that workers, with definite
employers, cannot form or join a workers' association for mutual aid and protection. Section 2 thereof
even broadens the coverage of workers who can form or join a workers' association. Thus, the Court
agrees with Samahan's argument that the right to form a workers' association is not exclusive to
ambulant, intermittent and itinerant workers. The option to form or join a union or a workers'
association lies with the workers themselves, and whether they have definite employers or not.
No misrepresentation on the part of Samahan to warrant cancellation of registration
In this case, Samahan's registration was cancelled not because its members were prohibited from
forming a workers' association but because they allegedly committed misrepresentation for using the
phrase, "KAMI, ang mga Manggagawa sa HAN JIN Shipyard."
Misrepresentation, as a ground for the cancellation of registration of a labor organization, is committed
"in connection with the adoption, or ratification of the constitution and by-laws or amendments
thereto, the minutes of ratification, the list of members who took part in the ratification of the
constitution and by-laws or amendments thereto, and those in connection with the election of officers,
minutes of the election of officers, and the list of voters, xxx." 56
In Takata Corporation v. Bureau of Relations,57 the DOLE Regional Director granted the petition for the
cancellation of certificate of registration of Samahang Lakas Manggagawa sa Takata (Salamat) after
finding that the employees who attended the organizational meeting fell short of the 20% union
registration requirement. The BLR, however, reversed the ruling of the DOLE Regional Director, stating
that petitioner Takata Corporation (Takata) failed to prove deliberate and malicious misrepresentation
on the part of respondent Salamat. Although Takata claimed that in the list of members, there was an
employee whose name appeared twice and another was merely a project employee, such facts were
not considered misrepresentations in the absence of showing that the respondent deliberately did so
for the purpose of increasing their union membership. The Court ruled in favor of Salamat.
In S.S. Ventures International v. S.S. Ventures Labor Union,58 the petition for cancellation of certificate
of registration was denied. The Court wrote:
If the union's application is infected by falsification and like serious irregularities, especially
those appearing on the face of the application and its attachments, a union should be denied
recognition as a legitimate labor organization. Prescinding from these considerations, the
issuance to the Union of Certificate of Registration No. RO300-00-02-UR-0003 necessarily implies that
its application for registration and the supporting documents thereof are prima facie free from any
vitiating irregularities. Another factor which militates against the veracity of the allegations in
the Sinumpaang Petisyon is the lack of particularities on how, when and where respondent
union perpetrated the alleged fraud on each member. Such details are crucial for in the
proceedings for cancellation of union registration on the ground of fraud or
misrepresentation, what needs to be established is that the specific act or omission of the union
deprived the complaining employees-members of their right to choose.
[Emphases Supplied]
Based on the foregoing, the Court concludes that misrepresentation, to be a ground for the
cancellation of the certificate of registration, must be done maliciously and deliberately. Further, the
mistakes appearing in the application or attachments must be grave or refer to significant matters.
The details as to how the alleged fraud was committed must also be indubitably shown.
The records of this case reveal no deliberate or malicious intent to commit misrepresentation on the
part of Samahan. The use of such words "KAMI, ang mga Manggagawa sa HANJIN Shipyard" in the
preamble of the constitution and by-laws did not constitute misrepresentation so as to warrant the
cancellation of Samahan's certificate of registration. Hanjin failed to indicate how this phrase

constitutes a malicious and deliberate misrepresentation. Neither was there any showing that the
alleged misrepresentation was serious in character. Misrepresentation is a devious charge that cannot
simply be entertained by mere surmises and conjectures.
Even granting arguendo that Samahan's members misrepresented themselves as employees or
workers of Hanjin, said misrepresentation does not relate to the adoption or ratification of its
constitution and by-laws or to the election of its officers.
Removal of the word "Hanjin Shipyard" from the association's name, however, does not infringe on
Samahan's right to self-organization
Nevertheless, the Court agrees with the BLR that "Hanjin Shipyard" must be removed in the name of
the association. A legitimate workers' association refers to an association of workers organized for
mutual aid and protection of its members or for any legitimate purpose other than collective
bargaining registered with the DOLE.59 Having been granted a certificate of registration, Samahan's
association is now recognized by law as a legitimate workers' association.
According to Samahan, inherent in the workers' right to self-organization is its right to name its own
organization. It seems to equate the dropping of words "Hanjin Shipyard" from its name as a restraint
in its exercise of the right to self-organization. Hanjin, on the other hand, invokes that "Hanjin
Shipyard" is a registered trade name and, thus, it is within their right to prohibit its use.
As there is no provision under our labor laws which speak of the use of name by a workers'
association, the Court refers to the Corporation Code, which governs the names of juridical persons.
Section 18 thereof provides:
No corporate name may be allowed by the Securities and Exchange Commission if the proposed name
is identical or deceptively or confusingly similar to that of any existing corporation or to any other
name already protected by law or is patently deceptive, confusing or contrary to existing laws. When a
change in the corporate name is approved, the Commission shall issue an amended certificate of
incorporation under the amended name.
[Emphases Supplied]
The policy underlying the prohibition in Section 18 against the registration of a corporate name which
is "identical or deceptively or confusingly similar" to that of any existing corporation or which is
"patently deceptive" or "patently confusing" or "contrary to existing laws," is the avoidance of fraud
upon the public which would have occasion to deal with the entity concerned, the evasion of legal
obligations and duties, and the reduction of difficulties of administration and supervision over
corporations.60
For the same reason, it would be misleading for the members of Samahan to use "Hanjin Shipyard" in
its name as it could give the wrong impression that all of its members are employed by Hanjin.
Further, Section 9, Rule IV of D.O. No. 40-03, Series of 2003 explicitly states:
The change of name of a labor organization shall not affect its legal personality. All the rights and
obligations of a labor organization under its old name shall continue to be exercised by the labor
organization under its new name.
Thus, in the directive of the BLR removing the words "Hanjin Shipyard," no abridgement of Samahan's
right to self-organization was committed.
WHEREFORE, the petition is PARTIALLY GRANTED. The July 4, 2013 Decision and the January 28,
2014 Resolution of the Court of Appeals are hereby REVERSED and SET ASIDE. The September 6,
2010 Resolution of the Bureau of Labor Relations, as modified by its November 28, 2011 Resolution,
is REINSTATED.
SO ORDERED.

chanroble svirtuallawlibrary

G.R. No. 189255, June 17, 2015

JESUS G. REYES, Petitioner, v. GLAUCOMA RESEARCH FOUNDATION, INC., EYE REFERRAL
CENTER AND MANUEL B. AGULTO, Respondent.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari seeking to reverse and set aside the Decision1and
Resolution2 of the Court of Appeals (CA), dated April 20, 2009 and August 25, 2009, respectively, in
CA-G.R. SP No. 104261. The assailed CA Decision annulled the Decision of the National Labor
Relations Commission (NLRC) in NLRC NCR Case No. 05-0441-05 and reinstated the Decision of the
Labor Arbiter (LA) in the same case, while the CA Resolution denied petitioner's motion for
reconsideration.
The instant petition arose from a complaint for illegal dismissal filed by petitioner against respondents
with the NLRC, National Capital Region, Quezon City. Petitioner alleged that: on August 1, 2003, he
was hired by respondent corporation as administrator of the latter's Eye Referral Center (ERC); he
performed his duties as administrator and continuously received his monthly salary of P20,000.00 until
the end of January 2005; beginning February 2005, respondent withheld petitioner's salary without
notice but he still continued to report for work; on April 11, 2005, petitioner wrote a letter to
respondent Manuel Agulto (Agulto), who is the Executive Director of respondent corporation, informing
the latter that he has not been receiving his salaries since February 2005 as well as his 14 th month pay
for 2004; petitioner did not receive any response from Agulto; on April 21, 2005, petitioner was
informed by the Assistant to the Executive Director as well as the Assistant Administrative Officer, that
he is no longer the Administrator of the ERC; subsequently, petitioner's office was padlocked and
closed without notice; he still continued to report for work but on April 29, 2005 he was no longer
allowed by the security guard on duty to enter the premises of the ERC.
On their part, respondents contended that: upon petitioner's representation that he is an expert in
corporate organizational structure and management affairs, they engaged his services as a consultant
or adviser in the formulation of an updated organizational set-up and employees' manual which is
compatible with their present condition; based on his claim that there is a need for an administrator
for the ERC, he later designated himself as such on a trial basis; there is no employer-employee
relationship between them because respondents had no control over petitioner in terms of working
hours as he reports for work at anytime of the day and leaves as he pleases; respondents also had no
control as to the manner in which he performs his alleged duties as consultant; he became
overbearing and his relationship with the employees and officers of the company soured leading to the
filing of three complaints against him; petitioner was not dismissed as he was the one who voluntarily
severed his relations with respondents.
On January 20, 2006, the LA assigned to the case rendered a Decision 3 dismissing petitioner's
complaint. The LA held, among others, that petitioner failed to establish that the elements of an
employer-employee relationship existed between him and respondents because he was unable to show
that he was, in fact, appointed as administrator of the ERC and received salaries as such; he also
failed to deny that during his stint with respondents, he was, at the same time, a consultant of various
government agencies such as the Manila International Airport Authority, Manila Intercontinental Port
Authority, Anti-Terrorist Task Force for Aviation and Air Transportation Sector; his actions were neither
supervised nor controlled by the management of the ERC; petitioner, likewise, did not observe working
hours by reporting for work and leaving therefrom as he pleased; and, he was receiving allowances,
not salaries, as a consultant.

On appeal, the NLRC reversed and set aside the Decision of the LA. The NLRC declared petitioner as
respondents' employee, that he was illegally dismissed and ordered respondents to reinstate him to
his former position without loss of seniority rights and privileges with full backwages. The NLRC held
that the basis upon which the conclusion of the LA was drawn lacked support; that it was incumbent
for respondents to discharge the burden of proving that petitioner's dismissal was for cause and
effected after due process was observed; and, that respondents failed to discharge this burden. 4
Respondents filed a motion for reconsideration, but it was denied by the NLRC in its Resolution 5 dated
May 30, 2008.
Respondents then filed a Petition for Certiorari6 with the CA.
In its assailed Decision, the CA annulled and set aside the judgment of the NLRC and reinstated the
Decision of the LA. The CA held that the LA was correct in ruling that, under the control test and the
economic reality test, no employer-employee relationship existed between respondents and petitioner.
Petitioner filed a motion for reconsideration, but the CA denied it in its Resolution dated August 25,
2009.
Hence, the present petition for review on certiorari based on the following grounds:
I

chanroble svirtuallawlibrary

THE HONORABLE COURT OF APPEALS ERRED AND ABUSED ITS DISCRETION IN NOT DISMISSING
RESPONDENTS' PETITION FOR CERTIORARI ON THE GROUND THAT RESPONDENTS SUBMITTED A
VERIFICATION THAT FAILS TO COMPLY WITH THE 2004 RULES ON NOTARIAL PRACTICE.
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II
THE HONORABLE COURT OF APPEALS ERRED AND ABUSED ITS DISCRETION IN RULING THAT NO
EMPLOYER-EMPLOYEE RELATIONSHIP EXISTS BETWEEN RESPONDENTS AND PETITIONER. 7
As to the first ground, petitioner contends that respondents' petition for certiorari filed with the CA
should have been dismissed on the ground that it was improperly verified because the jurat portion of
the verification states only the community tax certificate number of the affiant as evidence of her
identity. Petitioner argues that under the 2004 Rules on Notarial Practice, as amended by a
Resolution8 of this Court, dated February 19, 2008, a community tax certificate is not among those
considered as competent evidence of identity.
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The Court does not agree.

This Court has already ruled that competent evidence of identity is not required in cases where the
affiant is personally known to the notary public. 9
Thus, in Jandoquile v. Revilla, Jr.,10 this Court held that:
If the notary public knows the affiants personally, he need not require them to show their
valid identification cards. This rule is supported by the definition of a "jurat" under Section 6, Rule
II of the 2004 Rules on Notarial Practice. A "jurat" refers to an act in which an individual on a single
occasion: (a) appears in person before the notary public and presents an instrument or document;
(b) is personally known to the notary public or identified by the notary public through competent
evidence of identity; (c) signs the instrument or document in the presence of the notary; and (d)
takes an oath or affirmation before the notary public as to such instrument or document. 11
Also, Section 2(b), Rule IV of the 2004 Rules on Notarial Practice provides as follows:
SEC. 2. Prohibitions chanroble svirtuallawlibrary

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(a) x x x
(b) A person shall not perform a notarial act if the person involved as signatory to the instrument or
document (1) is not in the notary's presence personally at the time of the notarization; and

(2) is not personally known to the notary public or otherwise identified by the notary public through
competent evidence of identity as defined by these Rules.
Moreover, Rule II, Section 6 of the same Rules states that:
SEC 6. Jurat. - "Jurat" refers to an act in which an individual on a single occasion:
(a) appears in person before the notary public and presents an instrument or document;
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(b) is personally known to the notary public or identified by the notary public through competent
evidence of identity as defined by these Rules;
(c) signs the instrument or document in the presence of the notary; and
(d) takes an oath or affirmation before the notary public as to such instrument or document.
In legal hermeneutics, "or" is a disjunctive that expresses an alternative or gives a choice of one
among two or more things.12 The word signifies disassociation and independence of one thing from
another thing in an enumeration.13
Thus, as earlier stated, if the affiant is personally known to the notary public, the latter need not
require the former to show evidence of identity as required under the 2004 Rules on Notarial Practice,
as amended.
Applying the above rule to the instant case, it is undisputed that the attorney-in-fact of respondents
who executed the verification and certificate against forum shopping, which was attached to
respondents' petition filed with the CA, is personally known to the notary public before whom the
documents were acknowledged. Both attorney-in-fact and the notary public hold office at respondents'
place of business and the latter is also the legal counsel of respondents.
In any event, this Court's disquisition in the fairly recent case of Heirs of Amada Zaulda v. Isaac
Zaulda14 regarding the import of procedural rules vis-a-vis the substantive rights of the parties, is
instructive, to wit:
[G]ranting, arguendo, that there was non-compliance with the verification requirement, the rule is that
courts should not be so strict about procedural lapses which do not really impair the proper
administration of justice. After all, the higher objective of procedural rule is to ensure that the
substantive rights of the parties are protected. Litigations should, as much as possible, be decided on
the merits and not on technicalities. Every party-litigant must be afforded ample opportunity for the
proper and just determination of his case, free from the unacceptable plea of technicalities.
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In Coca-Cola Bottlers v. De la Cruz, where the verification was marred only by a glitch in the evidence
of the identity of the affiant, the Court was of the considered view that, in the interest of justice, the
minor defect can be overlooked and should not defeat the petition.
The reduction in the number of pending cases is laudable, but if it would be attained by precipitate, if
not preposterous, application of technicalities, justice would not be served. The law abhors
technicalities that impede the cause of justice. The court's primary duty is to render or dispense
justice. "It is a more prudent course of action for the court to excuse a technical lapse and afford the
parties a review of the case on appeal rather than dispose of the case on technicality and cause a
grave injustice to the parties, giving a false impression of speedy disposal of cases while actually
resulting in more delay, if not miscarriage of justice."
What should guide judicial action is the principle that a party-litigant should be given the fullest
opportunity to establish the merits of his complaint or defense rather than for him to lose life, liberty,
honor, or property on technicalities. The rules of procedure should be viewed as mere tools designed
to facilitate the attainment of justice. Their strict and rigid application, which would result in
technicalities that tend to frustrate rather than promote substantial justice, must always be eschewed.
At this juncture, the Court reminds all members of the bench and bar of the admonition in the oftencited case of Alonso v. Villamor:
Lawsuits, unlike duels, are not to be won by a rapier's thrust. Technicality, when it deserts its proper
office as an aid to justice and becomes its great hindrance and chief enemy, deserves scant
consideration from courts. There should be no vested rights in technicalities. 15
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Anent the second ground, petitioner insists that, based on evidence on record, an employer-employee
relationship exists between him and respondents.
The Court is not persuaded.
It is a basic rule of evidence that each party must prove his affirmative allegation. 16 If he claims a
right granted by law, he must prove his claim by competent evidence, relying on the strength of his
own evidence and not upon the weakness of that of his opponent. 17 The test for determining on whom
the burden of proof lies is found in the result of an inquiry as to which party would be successful if no
evidence of such matters were given.18 In an illegal dismissal case, the onus probandi rests on the
employer to prove that its dismissal of an employee was for a valid cause. 19However, before a case for
illegal dismissal can prosper, an employer-employee relationship must first be established. 20 Thus, in
filing a complaint before the LA for illegal dismissal, based on the premise that he was an employee of
respondents, it is incumbent upon petitioner to prove the employer-employee relationship by
substantial evidence.21
In regard to the above discussion, the issue of whether or not an employer-employee relationship
existed between petitioner and respondents is essentially a question of fact. 22 The factors that
determine the issue include who has the power to select the employee, who pays the employee's
wages, who has the power to dismiss the employee, and who exercises control of the methods and
results by which the work of the employee is accomplished. 23 Although no particular form of evidence
is required to prove the existence of the relationship, and any competent and relevant evidence to
prove the relationship may be admitted, a finding that the relationship exists must nonetheless rest on
substantial evidence, which is that amount of relevant evidence that a reasonable mind might accept
as adequate to justify a conclusion.24
Generally, the Court does not review factual questions, primarily because the Court is not a trier of
facts.25 However, where, like here, there is a conflict between the factual findings of the LA and the
CA, on one hand, and those of the NLRC, on the other, it becomes proper for the Court, in the exercise
of its equity jurisdiction, to review and re-evaluate the factual issues and to look into the records of
the case and re-examine the questioned findings. 26
Etched in an unending stream of cases are four standards in determining the existence of an
employer-employee relationship, namely: (a) the manner of selection and engagement of the putative
employee; (b) the mode of payment of wages; (c) the presence or absence of power of dismissal;
and, (d) the presence or absence of control of the putative employee's conduct. Most determinative
among these factors is the so-called "control test." 27
Indeed, the power of the employer to control the work of the employee is considered the most
significant determinant of the existence of an employer-employee relationship.28 This test is premised
on whether the person for whom the services are performed reserves the right to control both the end
achieved and the manner and means used to achieve that end. 29
In the present case, petitioner contends that, as evidence of respondents' supposed control over him,
the organizational plans he has drawn were subject to the approval of respondent corporation's Board
of Trustees. However, the Court agrees with the disquisition of the CA on this matter, to wit:
[Respondents'] power to approve or reject the organizational plans drawn by [petitioner] cannot be
the control contemplated in the "control test." It is but logical that one who commissions another to do
a piece of work should have the right to accept or reject the product. The important factor to consider
in the "control test" is still the element of control over how the work itself is done, not just the end
result thereof.
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Well settled is the rule that where a person who works for another performs his job more or less at his
own pleasure, in the manner he sees fit, not subject to definite hours or conditions of work, and is
compensated according to the result of his efforts and not the amount thereof, no employer-employee
relationship exists.30
What was glaring in the present case is the undisputed fact that petitioner was never subject to
definite working hours. He never denied that he goes to work and leaves therefrom as he pleases. 31In
fact, on December 1-31, 2004, he went on leave without seeking approval from the officers of
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respondent company. On the contrary, his letter 32 simply informed respondents that he will be away
for a month and even advised them that they have the option of appointing his replacement during his
absence. This Court has held that there is no employer-employee relationship where the supposed
employee is not subject to a set of rules and regulations governing the performance of his duties
under the agreement with the company and is not required to report for work at any time, nor to
devote his time exclusively to working for the company.33
In this regard, this Court also agrees with the ruling of the CA that:
Aside from the control test, the Supreme Court has also used the economic reality test in determining
whether an employer-employee relationship exists between the parties. Under this test, the economic
realities prevailing within the activity or between the parties are examined, taking into consideration
the totality of circumstances surrounding the true nature of the relationship between the parties. This
is especially appropriate when, as in this case, there is no written agreement or contract on which to
base the relationship. In our jurisdiction, the benchmark of economic reality in analyzing possible
employment relationships for purposes of applying the Labor Code ought to be the economic
dependence of the worker on his employer.
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In the instant case, as shown by the resume of [petitioner], he concurrently held consultancy positions
with the Manila International Airport Authority (from 04 March 2001 to September 2003 and from 01
November 2004 up to the present) and the Anti-Terrorist Task Force for Aviation and Air Transportation
Sector (from 16 April 2004 to 30 June 2004) during his stint with the Eye Referral Center (from 01
August 2003 to 29 April 2005). Accordingly, it cannot be said that the [petitioner] was wholly
dependent on [respondent] company.34
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In bolstering his contention that there was an employer-employee relationship, petitioner draws
attention to the pay slips he supposedly received from respondent corporation. However, he does not
dispute the findings of the CA that there are no deductions for SSS and withholding tax from his
compensation, which are the usual deductions from employees' salaries. Thus, the alleged pay slips
may not be treated as competent evidence of petitioner's claim that he is respondents' employee.
In addition, the designation of the payments to petitioner as salaries, is not determinative of the
existence of an employer-employee relationship.35 Salary is a general term defined as a remuneration
for services given.36 Evidence of this fact, in the instant case, was the cash voucher issued in favor of
petitioner where it was stated therein that the amount of P20,000.00 was given as petitioner's
allowance for the month of December 2004, although it appears from the pay slip that the said
amount was his salary for the same period.
Additional evidence of the fact that petitioner was hired as a consultant and not as an employee of
respondent corporation are affidavits to this effect which were executed by Roy Oliveres 37 and Aurea
Luz Esteva,38 who are Medical Records Custodian and Administrative Officer, respectively, of
respondent corporation. Petitioner insists in its objection of the use of these affidavits on the ground
that they are, essentially, hearsay. However, this Court has ruled that although the affiants had not
been presented to affirm the contents of their affidavits and be cross-examined, their affidavits may
be given evidentiary value; the argument that such affidavits were hearsay was not
persuasive.39Likewise, this Court ruled that it was not necessary for the affiants to appear and testify
and be cross-examined by counsel for the adverse party.40 To require otherwise would be to negate
the rationale and purpose of the summary nature of the proceedings mandated by the Rules and to
make mandatory the application of the technical rules of evidence. 41
These affidavits are corroborated by evidence, as discussed above, showing that petitioner has no
definite working hours and is not subject to the control of respondents.
Lastly, the Court does not agree with petitioner's insistence that his being hired as respondent
corporation's administrator and his designation as such in intra-company correspondence proves that
he is an employee of the corporation. The fact alone that petitioner was designated as an
administrator does not necessarily mean that he is an employee of respondents. Mere title or
designation in a corporation will not, by itself, determine the existence of an employer-employee
relationship.42 In this regard, even the identification card which was issued to petitioner is not an

adequate proof of petitioner's claim that he is respondents' employee. In addition, petitioner's

designation as an administrator neither disproves respondents' contention that he was engaged only
as a consultant.
As a final point, it bears to reiterate that while the Constitution is committed to the policy of social
justice and the protection of the working class, it should not be supposed that every labor dispute will
be automatically decided in favor of labor.43 Management also has its rights which are entitled to
respect and enforcement in the interest of simple fair play.44 Out of its concern for the less privileged
in life, the Court has inclined, more often than not, toward the worker and upheld his cause in his
conflicts with the employer.45 Such favoritism, however, has not blinded the Court to the rule that
justice is in every case for the deserving, to be dispensed in the light of the established facts and the
applicable law and doctrine.46
WHEREFORE, the instant petition is DENIED. The Decision and Resolution of the Court of Appeals,
dated April 20, 2009 and August 25, 2009, respectively, in CA-G.R. SPNo. 104261, are AFFIRMED.
SO ORDERED

G.R. No. 192998

April 2, 2014

BERNARD A. TENAZAS, JAIME M. FRANCISCO and ISIDRO G. ENDRACA, Petitioners,

vs.
R. VILLEGAS TAXI TRANSPORT and ROMUALDO VILLEGAS, Respondents.
DECISION
REYES, J.:
This is a petition for review on certiorari filed under Rule 45 of the Rules of Court, assailing
the Decision dated March 11, 2010 and Resolution dated June 28, 2010 of the Court of
Appeals (CA) in CA-G.R. SP No. 111150, which affirmed with modification the
Decision dated June 23, 2009 of the National Labor Relations Commission (NLRC) in
NLRC LAC Case No. 07-002648-08.
1

The Antecedent Facts

On July 4, 2007, Bernard A. Tenazas (Tenazas) and Jaime M. Francisco (Francisco) filed a
complaint for illegal dismissal against R. Villegas Taxi Transport and/or Romualdo Villegas
(Romualdo) and Andy Villegas (Andy) (respondents). At that time, a similar case had
already been filed by Isidro G. Endraca (Endraca) against the same respondents. The two
(2) cases were subsequently consolidated.
5

In their position paper, Tenazas, Francisco and Endraca (petitioners) alleged that they were
hired and dismissed by the respondents on the following dates:
6

Name

Date of Hiring

Date of Dismissal

Salary

Bernard A. Tenazas

10/1997

07/03/07

Boundary System

Jaime M. Francisco

04/10/04

06/04/07

Boundary System

Isidro G. Endraca

04/2000

03/06/06

Boundary System

Relaying the circumstances of his dismissal, Tenazas alleged that on July 1, 2007, the taxi
unit assigned to him was sideswiped by another vehicle, causing a dent on the left fender
near the driver seat. The cost of repair for the damage was estimated at P500.00. Upon
reporting the incident to the company, he was scolded by respondents Romualdo and Andy
and was told to leave the garage for he is already fired. He was even threatened with
physical harm should he ever be seen in the companys premises again. Despite the
warning, Tenazas reported for work on the following day but was told that he can no longer
drive any of the companys units as he is already fired.
8

Francisco, on the other hand, averred that his dismissal was brought about by the
companys unfounded suspicion that he was organizing a labor union. He was
instantaneously terminated, without the benefit of procedural due process, on June 4, 2007.
Endraca, for his part, alleged that his dismissal was instigated by an occasion when he fell
short of the required boundary for his taxi unit. He related that before he was dismissed, he
brought his taxi unit to an auto shop for an urgent repair. He was charged the amount
of P700.00 for the repair services and the replacement parts. As a result, he was not able to
meet his boundary for the day. Upon returning to the company garage and informing the
management of the incident, his drivers license was confiscated and was told to settle the
deficiency in his boundary first before his license will be returned to him. He was no longer
allowed to drive a taxi unit despite his persistent pleas.
10

For their part, the respondents admitted that Tenazas and Endraca were employees of the
company, the former being a regular driver and the latter a spare driver. The respondents,
however, denied that Francisco was an employee of the company or that he was able to
drive one of the companys units at any point in time.
11

The respondents further alleged that Tenazas was never terminated by the company. They
claimed that on July 3, 2007, Tenazas went to the company garage to get his taxi unit but
was informed that it is due for overhaul because of some mechanical defects reported by
the other driver who takes turns with him in using the same. He was thus advised to wait for
further notice from the company if his unit has already been fixed. On July 8, 2007,
however, upon being informed that his unit is ready for release, Tenazas failed to report
back to work for no apparent reason.
12

As regards Endraca, the respondents alleged that they hired him as a spare driver in
February 2001. They allow him to drive a taxi unit whenever their regular driver will not be
able to report for work. In July 2003, however, Endraca stopped reporting for work without
informing the company of his reason. Subsequently, the respondents learned that a
complaint for illegal dismissal was filed by Endraca against them. They strongly maintained,
however, that they could never have terminated Endraca in March 2006 since he already
stopped reporting for work as early as July 2003. Even then, they expressed willingness to
accommodate Endraca should he wish to work as a spare driver for the company again
since he was never really dismissed from employment anyway.
13

On May 29, 2008, the petitioners, by registered mail, filed a Motion to Admit Additional
Evidence. They alleged that after diligent efforts, they were able to discover new pieces of
evidence that will substantiate the allegations in their position paper. Attached with the
motion are the following: (a) Joint Affidavit of the petitioners; (2) Affidavit of Good Faith of
Aloney Rivera, a co-driver; (3) pictures of the petitioners wearing company shirts; and (4)
Tenazas Certification/Record of Social Security System (SSS) contributions.
14

15

16

17

18

The Ruling of the Labor Arbiter

On May 30, 2008, the Labor Arbiter (LA) rendered a Decision, which pertinently states,
thus:
19

In the case of complainant Jaime Francisco, respondents categorically denied the existence
of an employer-employee relationship. In this situation, the burden of proof shifts to the
complainant to prove the existence of a regular employment. Complainant Francisco failed
to present evidence of regular employment available to all regular employees, such as an
employment contract, company ID, SSS, withholding tax certificates, SSS membership and
the like.
In the case of complainant Isidro Endraca, respondents claim that he was only an extra
driver who stopped reporting to queue for available taxi units which he could drive. In fact,
respondents offered him in their Position Paper on record, immediate reinstatement as extra
taxi driver which offer he refused.
In case of Bernard Tenazas, he was told to wait while his taxi was under repair but he did
not report for work after the taxi was repaired. Respondents[,] in their Position Paper, on
record likewise, offered him immediate reinstatement, which offer he refused.
We must bear in mind that the complaint herein is one of actual dismissal. But there was no
formal investigations, no show cause memos, suspension memos or termination memos
were never issued. Otherwise stated, there is no proof of overt act of dismissal committed
by herein respondents.
We are therefore constrained to rule that there was no illegal dismissal in the case at bar.
The situations contemplated by law for entitlement to separation pay does [sic] not apply.
WHEREFORE, premises considered, instant consolidated complaints are hereby dismissed
for lack of merit.
SO ORDERED.

20

The Ruling of the NLRC

Unyielding, the petitioners appealed the decision of the LA to the NLRC. Subsequently, on
June 23, 2009, the NLRC rendered a Decision, reversing the appealed decision of the LA,
holding that the additional pieces of evidence belatedly submitted by the petitioners sufficed
to establish the existence of employer-employee relationship and their illegal dismissal. It
held, thus:
21

In the challenged decision, the Labor Arbiter found that it cannot be said that the
complainants were illegally dismissed, there being no showing, in the first place, that the
respondent [sic] terminated their services. A portion thereof reads:
"We must bear in mind that the complaint herein is one of actual dismissal. But there were
no formal investigations, no show cause memos, suspension memos or termination memos
were never issued. Otherwise stated, there is no proof of overt act of dismissal committed
by herein respondents.
We are therefore constrained to rule that there was no illegal dismissal in the case at bar."

Issue: [W]hether or not the complainants were illegally dismissed from employment.
It is possible that the complainants Motion to Admit Additional Evidence did not reach the
Labor Arbiters attention because he had drafted the challenged decision even before they
submitted it, and thereafter, his staff attended only to clerical matters, and failed to bring the
motion in question to his attention. It is now up to this Commission to consider the
complainants additional evidence. Anyway, if this Commission must consider evidence
submitted for the first time on appeal (Andaya vs. NLRC, G.R. No. 157371, July 15, 2005),
much more so must it consider evidence that was simply overlooked by the Labor Arbiter.
Among the additional pieces of evidence submitted by the complainants are the following:
(1) joint affidavit (records, p. 51-52) of the three (3) complainants; (2) affidavit (records, p.
53) of Aloney Rivera y Aldo; and (3) three (3) pictures (records, p. 54) referred to by the
complainant in their joint affidavit showing them wearing t-shirts bearing the name and logo
of the respondents company.
xxxx
WHEREFORE, the decision appealed from is hereby REVERSED. Respondent Rom[u]aldo
Villegas doing business under the name and style Villegas Taxi Transport is hereby ordered
to pay the complainants the following (1) full backwages from the date of their dismissal
(July 3, 2007 for Tena[z]as, June 4, 2004 for Francisco, and March 6, 2006 for Endraca[)]
up to the date of the finality of this decision[;] (2) separation pay equivalent to one month for
every year of service; and (3) attorneys fees equivalent to ten percent (10%) of the total
judgment awards.
SO ORDERED.

22

On July 24, 2009, the respondents filed a motion for reconsideration but the NLRC denied
the same in its Resolution dated September 23, 2009.
23

The Ruling of the CA

Unperturbed, the respondents filed a petition for certiorari with the CA. On March 11, 2010,
the CA rendered a Decision, affirming with modification the Decision dated June 23, 2009
of the NLRC. The CA agreed with the NLRCs finding that Tenazas and Endraca were
employees of the company, but ruled otherwise in the case of Francisco for failing to
establish his relationship with the company. It also deleted the award of separation pay and
ordered for reinstatement of Tenazas and Endraca. The pertinent portions of the decision
read as follows:
24

At the outset, We declare that respondent Francisco failed to prove that an employeremployee relationship exists between him and R. Transport. If there is no employeremployee relationship in the first place, the duty of R. Transport to adhere to the labor
standards provisions of the Labor Code with respect to Francisco is questionable.
xxxx

Although substantial evidence is not a function of quantity but rather of quality, the peculiar
environmental circumstances of the instant case demand that something more should have
been proffered. Had there been other proofs of employment, such as Franciscos inclusion
in R.R.
Transports payroll, this Court would have affirmed the finding of employer-employee
relationship. The NLRC, therefore, committed grievous error in ordering R. Transport to
answer for Franciscos claims.
1wphi1

We now tackle R. Transports petition with respect to Tenazas and Endraca, who are both
admitted to be R. Transports employees. In its petition, R. Transport puts forth the theory
that it did not terminate the services of respondents but that the latter deliberately
abandoned their work. We cannot subscribe to this theory.
xxxx
Considering that the complaints for illegal dismissal were filed soon after the alleged dates
of dismissal, it cannot be inferred that respondents Tenazas and Endraca intended to
abandon their employment. The complainants for dismissal are, in themselves, pleas for the
continuance of employment. They are incompatible with the allegation of abandonment. x x
x.
For R. Transports failure to discharge the burden of proving that the dismissal of
respondents Tenazas and Endraca was for a just cause, We are constrained to uphold the
NLRCs conclusion that their dismissal was not justified and that they are entitled to back
wages. Because they were illegally dismissed, private respondents Tenazas and Endraca
are entitled to reinstatement and back wages x x x.
xxxx
However, R. Transport is correct in its contention that separation pay should not be awarded
because reinstatement is still possible and has been offered. It is well[-]settled that
separation pay is granted only in instances where reinstatement is no longer feasible or
appropriate, which is not the case here.
xxxx
WHEREFORE, the Decision of the National Labor Relations Commission dated 23 June
2009, in NLRC LAC Case No. 07-002648-08, and its Resolution dated 23 September 2009
denying reconsideration thereof are AFFIRMED with MODIFICATION in that the award of
Jaime Franciscos claims is DELETED. The separation pay granted in favor of Bernard
Tenazas and Isidro Endraca is, likewise, DELETED and their reinstatement is ordered
instead.
SO ORDERED. (Citations omitted)
25

On March 19, 2010, the petitioners filed a motion for reconsideration but the same was
denied by the CA in its Resolution dated June 28, 2010.
26

Undeterred, the petitioners filed the instant petition for review on certiorari before this Court
on July 15, 2010.
The Ruling of this Court
The petition lacks merit.
Pivotal to the resolution of the instant case is the determination of the existence of
employer-employee relationship and whether there was an illegal dismissal. Remarkably,
the LA, NLRC and the CA had varying assessment on the matters at hand. The LA believed
that, with the admission of the respondents, there is no longer any question regarding the
status of both Tenazas and Endraca being employees of the company. However, he ruled
that the same conclusion does not hold with respect to Francisco whom the respondents
denied to have ever employed or known. With the respondents denial, the burden of proof
shifts to Francisco to establish his regular employment. Unfortunately, the LA found that
Francisco failed to present sufficient evidence to prove regular employment such as
company ID, SSS membership, withholding tax certificates or similar articles. Thus, he was
not considered an employee of the company. Even then, the LA held that Tenazas and
Endraca could not have been illegally dismissed since there was no overt act of dismissal
committed by the respondents.
27

On appeal, the NLRC reversed the ruling of the LA and ruled that the petitioners were all
employees of the company. The NLRC premised its conclusion on the additional pieces of
evidence belatedly submitted by the petitioners, which it supposed, have been overlooked
by the LA owing to the time when it was received by the said office. It opined that the said
pieces of evidence are sufficient to establish the circumstances of their illegal termination. In
particular, it noted that in the affidavit of the petitioners, there were allegations about the
companys practice of not issuing employment records and this was not rebutted by the
respondents. It underscored that in a situation where doubt exists between evidence
presented by the employer and the employee, the scales of justice must be tilted in favor of
the employee. It awarded the petitioners with: (1) full backwages from the date of their
dismissal up to the finality of the decision; (2) separation pay equivalent to one month of
salary for every year of service; and (3) attorneys fees.
On petition for certiorari, the CA affirmed with modification the decision of the NLRC,
holding that there was indeed an illegal dismissal on the part of Tenazas and Endraca but
not with respect to Francisco who failed to present substantial evidence, proving that he
was an employee of the respondents. The CA likewise dismissed the respondents claim
that Tenazas and Endraca abandoned their work, asseverating that immediate filing of a
complaint for illegal dismissal and persistent pleas for continuance of employment are
incompatible with abandonment. It also deleted the NLRCs award of separation pay and
instead ordered that Tenazas and Endraca be reinstated.
28

"Well-settled is the rule that the jurisdiction of this Court in a petition for review on certiorari
under Rule 45 of the Revised Rules of Court is limited to reviewing only errors of law, not of
fact, unless the factual findings complained of are completely devoid of support from the
evidence on record, or the assailed judgment is based on a gross misapprehension of
facts." The Court finds that none of the mentioned circumstances is present in this case.
29

In reviewing the decision of the NLRC, the CA found that no substantial evidence was
presented to support the conclusion that Francisco was an employee of the respondents
and accordingly modified the NLRC decision. It stressed that with the respondents denial of
employer-employee relationship, it behooved Francisco to present substantial evidence to
prove that he is an employee before any question on the legality of his supposed dismissal
becomes appropriate for discussion. Francisco, however, did not offer evidence to
substantiate his claim of employment with the respondents. Short of the required quantum
of proof, the CA correctly ruled that the NLRCs finding of illegal dismissal and the monetary
awards which necessarily follow such ruling lacked factual and legal basis and must
therefore be deleted.
The action of the CA finds support in Anonas Construction and Industrial Supply Corp., et al.
v. NLRC, et al., where the Court reiterated:
30

[J]udicial review of decisions of the NLRC via petition for certiorari under Rule 65, as a
general rule, is confined only to issues of lack or excess of jurisdiction and grave abuse of
discretion on the part of the NLRC. The CA does not assess and weigh the sufficiency of
evidence upon which the LA and the NLRC based their conclusions. The issue is limited to
the determination of whether or not the NLRC acted without or in excess of its jurisdiction,
or with grave abuse of discretion in rendering the resolution, except if the findings of the
NLRC are not supported by substantial evidence. (Citation omitted and emphasis ours)
31

It is an oft-repeated rule that in labor cases, as in other administrative and quasi-judicial

proceedings, "the quantum of proof necessary is substantial evidence, or such amount of
relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion." "[T]he burden of proof rests upon the party who asserts the affirmative of an
issue." Corollarily, as Francisco was claiming to be an employee of the respondents, it is
incumbent upon him to proffer evidence to prove the existence of said relationship.
32

33

"[I]n determining the presence or absence of an employer-employee relationship, the Court

has consistently looked for the following incidents, to wit: (a) the selection and engagement
of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employers power to control the employee on the means and methods by which the work is
accomplished. The last element, the so-called control test, is the most important element."

34

There is no hard and fast rule designed to establish the aforesaid elements. Any competent
and relevant evidence to prove the relationship may be admitted. Identification cards, cash
vouchers, social security registration, appointment letters or employment contracts, payrolls,
organization charts, and personnel lists, serve as evidence of employee status.
35

In this case, however, Francisco failed to present any proof substantial enough to establish
his relationship with the respondents. He failed to present documentary evidence like
attendance logbook, payroll, SSS record or any personnel file that could somehow depict
his status as an employee. Anent his claim that he was not issued with employment
records, he could have, at least, produced his social security records which state his
contributions, name and address of his employer, as his co-petitioner Tenazas did. He could
have also presented testimonial evidence showing the respondents exercise of control over
the means and methods by which he undertakes his work. This is imperative in light of the

respondents denial of his employment and the claim of another taxi operator, Emmanuel
Villegas (Emmanuel), that he was his employer. Specifically, in his Affidavit, Emmanuel
alleged that Francisco was employed as a spare driver in his taxi garage from January 2006
to December 2006, a fact that the latter failed to deny or question in any of the pleadings
attached to the records of this case. The utter lack of evidence is fatal to Franciscos case
especially in cases like his present predicament when the law has been very lenient in not
requiring any particular form of evidence or manner of proving the presence of employeremployee relationship.
36

In Opulencia Ice Plant and Storage v. NLRC, this Court emphasized, thus:
37

No particular form of evidence is required to prove the existence of an employer-employee

relationship. Any competent and relevant evidence to prove the relationship may be
admitted. For, if only documentary evidence would be required to show that relationship, no
scheming employer would ever be brought before the bar of justice, as no employer would
wish to come out with any trace of the illegality he has authored considering that it should
take much weightier proof to invalidate a written instrument.
38

Here, Francisco simply relied on his allegation that he was an employee of the company
without any other evidence supporting his claim. Unfortunately for him, a mere allegation in
the position paper is not tantamount to evidence. Bereft of any evidence, the CA correctly
ruled that Francisco could not be considered an employee of the respondents.
39

The CAs order of reinstatement of Tenazas and Endraca, instead of the payment of
separation pay, is also well in accordance with prevailing jurisprudence. In Macasero v.
Southern Industrial Gases Philippines, the Court reiterated, thus:
40

[A]n illegally dismissed employee is entitled to two reliefs: backwages and

reinstatement. The two reliefs provided are separate and distinct. In instances where
reinstatement is no longer feasible because of strained relations between the employee and
the employer, separation pay is granted. In effect, an illegally dismissed employee is entitled
to either reinstatement, if viable, or separation pay if reinstatement is no longer viable, and
backwages.
1wphi1

The normal consequences of respondents illegal dismissal, then, are reinstatement without
loss of seniority rights, and payment of backwages computed from the time compensation
was withheld up to the date of actual reinstatement. Where reinstatement is no longer viable
as an option, separation pay equivalent to one (1) month salary for every year of service
should be awarded as an alternative. The payment of separation pay is in addition to
payment of backwages. (Emphasis supplied)
41

Clearly, it is only when reinstatement is no longer feasible that the payment of separation
pay is ordered in lieu thereof. For instance, if reinstatement would only exacerbate the
tension and strained relations between the parties, or where the relationship between the
employer and the employee has been unduly strained by reason of their irreconcilable
differences, it would be more prudent to order payment of separation pay instead of
reinstatement.
42

This doctrine of strained relations, however, should not be used recklessly or applied
loosely nor be based on impression alone. "It bears to stress that reinstatement is the rule
and, for the exception of strained relations to apply, it should be proved that it is likely that if
reinstated, an atmosphere of antipathy and antagonism would be generated as to adversely
affect the efficiency and productivity of the employee concerned."
43

44

Moreover, the existence of strained relations, it must be emphasized, is a question of fact.

In Golden Ace Builders v. Talde, the Court underscored:
45

Strained relations must be demonstrated as a fact, however, to be adequately supported by

evidencesubstantial evidence to show that the relationship between the employer and the
employee is indeed strained as a necessary consequence of the judicial
controversy. (Citations omitted and emphasis ours)
46

After a perusal of the NLRC decision, this Court failed to find the factual basis of the award
of separation pay to the petitioners. The NLRC decision did not state the facts which
demonstrate that reinstatement is no longer a feasible option that could have justified the
alternative relief of granting separation pay instead.
The petitioners themselves likewise overlooked to allege circumstances which may have
rendered their reinstatement unlikely or unwise and even prayed for reinstatement
alongside the payment of separation pay in their position paper. A bare claim of strained
relations by reason of termination is insufficient to warrant the granting of separation pay.
Likewise, the filing of the complaint by the petitioners does not necessarily translate to
strained relations between the parties. As a rule, no strained relations should arise from a
valid and legal act asserting ones right. Although litigation may also engender a certain
degree of hostility, the understandable strain in the parties relation would not necessarily
rule out reinstatement which would, otherwise, become the rule rather the exception in
illegal dismissal cases. Thus, it was a prudent call for the CA to delete the award of
separation pay and order for reinstatement instead, in accordance with the general rule
stated in Article 279 of the Labor Code.
47

48

49

50

Finally, the Court finds the computation of the petitioners' backwages at the rate of P800.00
daily reasonable and just under the circumstances. The said rate is consistent with the
ruling of this Court in Hyatt Taxi Services, Inc. v. Catinoy, which dealt with the same matter.
51

WHEREFORE, in view of the foregoing disquisition, the petition for review on certiorari is
DENIED. The Decision dated March 11, 2010 and Resolution dated June 28, 2010 of the
Court of Appeals in CA-G.R. SP No. 111150 are AFFIRMED.
SO ORDERED.

G.R. No. 186621

March 12, 2014

SOUTH EAST INTERNATIONAL RATTAN, INC. and/or

ESTANISLAO AGBAY, Petitioners,
vs.
JESUS J. COMING, Respondent.
1

DECISION
VILLARAMA, JR., J.:
Before the Court is a petition for review on certiorari under Rule 45 to reverse and set aside
the Decision dated February 21, 2008 and Resolution dated February 9, 2009 of the Court
of Appeals (CA) in CA-GR. CEB-SP No. 02113.
2

Petitioner South East International Rattan, Inc. (SEIRI) is a domestic corporation engaged
in the business of manufacturing and exporting furniture to various countries with principal
place of business at Paknaan, Mandaue City, while petitioner Estanislao Agbay, as per
records, is the President and General Manager of SEIRI.
4

On November 3, 2003, respondent Jesus J. Coming filed a complaint for illegal dismissal,
underpayment of wages, non-payment of holiday pay, 13th month pay and service incentive
leave pay, with prayer for reinstatement, back wages, damages and attorneys fees.
5

Respondent alleged that he was hired by petitioners as Sizing Machine Operator on March
17, 1984. His work schedule is from 8:00 a.m. to 5:00 p.m. Initially, his compensation was
on "pakiao" basis but sometime in June 1984, it was fixed at P150.00 per day which was
paid weekly. In 1990, without any apparent reason, his employment was interrupted as he
was told by petitioners to resume work in two months time. Being an uneducated person,
respondent was persuaded by the management as well as his brother not to complain, as
otherwise petitioners might decide not to call him back for work. Fearing such consequence,
respondent accepted his fate. Nonetheless, after two months he reported back to work upon
order of management.
6

Despite being an employee for many years with his work performance never questioned by
petitioners, respondent was dismissed on January 1, 2002 without lawful cause. He was
told that he will be terminated because the company is not doing well financially and that he
would be called back to work only if they need his services again. Respondent waited for
almost a year but petitioners did not call him back to work. When he finally filed the
complaint before the regional arbitration branch, his brother Vicente was used by
management to persuade him to withdraw the case.
7

On their part, petitioners denied having hired respondent asserting that SEIRI was
incorporated only in 1986, and that respondent actually worked for SEIRIs furniture
suppliers because when the company started in 1987 it was engaged purely in buying and
exporting furniture and its business operations were suspended from the last quarter of
1989 to August 1992. They stressed that respondent was not included in the list of
employees submitted to the Social Security System (SSS). Moreover, respondents brother,

Vicente Coming, executed an affidavit in support of petitioners position while Allan Mayol
and Faustino Apondar issued notarized certifications that respondent worked for them
instead.
8

10

With the denial of petitioners that respondent was their employee, the latter submitted an
affidavit signed by five former co-workers stating that respondent was one of the pioneer
employees who worked in SEIRI for almost twenty years.
11

In his Decision dated April 30, 2004, Labor Arbiter Ernesto F. Carreon ruled that
respondent is a regular employee of SEIRI and that the termination of his employment was
illegal. The dispositive portion of the decision reads:
12

WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent

South East (Intl.) Rattan, Inc. to pay complainant Jesus J. Coming the following:
1. Separation pay

P114,400.00

2. Backwages

P 30,400.00

3. Wage differential

P 15,015.00

4. 13th month pay

P 5,958.00

5. Holiday pay

P 4,000.00

6. Service incentive leave pay

P 2,000.00

Total award

P171,773.00

The other claims and the case against respondent Estanislao Agbay are dismissed for lack
of merit.
SO ORDERED.

13

Petitioners appealed to the National Labor Relations Commission (NLRC)-Cebu City where
they submitted the following additional evidence: (1) copies of SEIRIs payrolls and
individual pay records of employees; (2) affidavit of SEIRIs Treasurer, Angelina Agbay;
and (3) second affidavit of Vicente Coming.
14

15

16

On July 28, 2005, the NLRCs Fourth Division rendered its Decision, the dispositive portion
of which states:
17

WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby SET
ASIDE and VACATED and a new one entered DISMISSING the complaint.
SO ORDERED.

18

The NLRC likewise denied respondents motion for reconsideration.

19

Respondent elevated the case to the CA via a petition for certiorari under Rule 65.
By Decision dated February 21, 2008, the CA reversed the NLRC and ruled that there
existed an employer-employee relationship between petitioners and respondent who was
dismissed without just and valid cause.
The CA thus decreed:
WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The assailed
Decision dated July 28, 2005 issued by the National Labor Relations Commission (NLRC),
Fourth Division, Cebu City in NLRC Case No. V-000625-2004 is REVERSED and SET
ASIDE. The Decision of the Labor Arbiter dated April 30, 2004 is REINSTATED with
MODIFICATION on the computation of backwages which should be computed from the time
of illegal termination until the finality of this decision.
Further, the Labor Arbiter is directed to make the proper adjustment in the computation of
the award of separation pay as well as the monetary awards of wage differential, 13th
month pay, holiday pay and service incentive leave pay.
SO ORDERED.

20

Petitioners filed a motion for reconsideration but the CA denied it under Resolution dated
February 9, 2009.
Hence, this petition raising the following issues:
6.1
WHETHER UNDER THE FACTS AND EVIDENCE ON RECORD, THE FINDING OF THE
HONORABLE COURT OF APPEALS THAT THERE EXISTS EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN PETITIONERS AND RESPONDENT IS IN ACCORD WITH
LAW AND APPLICABLE DECISIONS OF THIS HONORABLE COURT.
6.2
WHETHER THE HONORABLE COURT OF APPEALS CORRECTLY APPRECIATED IN
ACCORDANCE WITH APPLICABLE LAW AND JURISPRUDENCE THE EVIDENCE
PRESENTED BY BOTH PARTIES.
6.3
WHETHER UNDER THE FACTS AND EVIDENCE PRESENTED, THE FINDING OF THE
HONORABLE COURT OF APPEALS THAT PETITIONERS ARE LIABLE FOR ILLEGAL
DISMISSAL OF RESPONDENT IS IN ACCORD WITH APPLICABLE LAW AND
JURISPRUDENCE.
6.4

WHETHER UNDER THE FACTS PRESENTED, THE RULING OF THE HONORABLE

COURT OF APPEALS THAT THE BACKWAGES DUE THE RESPONDENT SHOULD BE
COMPUTED FROM THE TIME OF ILLEGAL TERMINATION UNTIL THE FINALITY OF
THE DECISION IS SUPPORTED BY PREVAILING JURISPRUDENCE.
21

Resolution of the first issue is paramount in view of petitioners denial of the existence of
employer-employee relationship.
The issue of whether or not an employer-employee relationship exists in a given case is
essentially a question of fact. As a rule, this Court is not a trier of facts and this applies with
greater force in labor cases. Only errors of law are generally reviewed by this Court. This
rule is not absolute, however, and admits of exceptions. For one, the Court may look into
factual issues in labor cases when the factual findings of the Labor Arbiter, the NLRC, and
the CA are conflicting. Here, the findings of the NLRC differed from those of the Labor
Arbiter and the CA, which compels the Courts exercise of its authority to review and pass
upon the evidence presented and to draw its own conclusions therefrom.
22

23

24

25

To ascertain the existence of an employer-employee relationship jurisprudence has

invariably adhered to the four-fold test, to wit: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employees conduct, or the so-called "control test." In resolving the issue of
whether such relationship exists in a given case, substantial evidence that amount of
relevant evidence which a reasonable mind might accept as adequate to justify a conclusion
is sufficient. Although no particular form of evidence is required to prove the existence of
the relationship, and any competent and relevant evidence to prove the relationship may be
admitted, a finding that the relationship exists must nonetheless rest on substantial
evidence.
26

27

In support of their claim that respondent was not their employee, petitioners presented
Employment Reports to the SSS from 1987 to 2002, the Certifications issued by Mayol and
Apondar, two affidavits of Vicente Coming, payroll sheets (1999-2000), individual pay
envelopes and employee earnings records (1999-2000) and affidavit of Angelina Agbay
(Treasurer and Human Resources Officer). The payroll and pay records did not include the
name of respondent. The affidavit of Ms. Agbay stated that after SEIRI started its business
in 1986 purely on export trading, it ceased operations in 1989 as evidenced by Certification
dated January 18, 1994 from the Securities and Exchange Commission (SEC); that when
business resumed in 1992, SEIRI undertook only a little of manufacturing; that the company
never hired any workers for varnishing and pole sizing because it bought the same from
various suppliers, including Faustino Apondar; respondent was never hired by SEIRI; and
while it is true that Mr. Estanislao Agbay is the company President, he never dispensed the
salaries of workers.
28

In his first affidavit, Vicente Coming averred that:

6. [Jesus Coming] is a furniture factory worker. In 1982 to 1986, he was working with
Ben Mayol as round core maker/splitter.

7. Thereafter, we joined Okay Okay Yard owned by Amelito Montececillo. This is a

rattan trader with business address near Cebu Rattan Factory on a "Pakiao" basis.
8. However, Jesus and I did not stay long at Okay Okay Yard and instead we joined
Eleuterio Agbay in Labogon, Cebu in 1989. In 1991, we went back to Okay Okay
located near the residence of Atty. Vicente de la Serna in Mandaue City. We were on
a "pakiao" basis. We stayed put until 1993 when we resigned and joined Dodoy Luna
in Labogon, Mandaue City as classifier until 1995. In 1996[,] Jesus rested. It was
only in 1997 that he worked back. He replaced me, as a classifier in Rattan Traders
owned by Allan Mayol. But then, towards the end of the year, he left the factory and
relaxed in our place of birth, in Sogod, Cebu.
9. It was only towards the end of 1999 that Jesus was taken back by Allan Mayol as
sizing machine operator. However, the work was off and on basis. Not regular in
nature, he was harping a side line job with me knowing that I am now working with
Faustino Apondar that supplies rattan furnitures [sic] to South East (Intl) Rattan, Inc.
As a brother, I allowed Jesus to work with me and collect the proceeds of his
services as part of my collectibles from Faustino Apondar since I was on a "pakiao"
basis. He was working at his pleasure. Which means, he works if he likes to? That
will be until 10:00 oclock in the evening.
xxxx

29

The Certification dated January 20, 2004 of Allan Mayol reads:

This is to certify that I personally know Jesus Coming, the brother of Vicente Coming. Jesus
is a rattan factory worker and he was working with me as rattan pole sizing/classifier of my
business from 1997 up to part of 1998 when he left my factory at will. I took him back
towards the end of 1999, this time as a sizing machine operator. In all these years, his
services are not regular. He works only if he likes to.
30

Faustino Apondar likewise issued a Certification which states:

This is to certify that I am a maker/supplier of finished Rattan Furniture. As such, I have
several rattan furniture workers under me, one of whom is Vicente Coming, the brother of
Jesus Coming.
That sometime in 1999, Vicente pleaded to me for a side line job of his brother, Jesus who
was already connected with Allan Mayol. Having vouched for the integrity of his brother and
knowing that the job is temporary in character, I allowed Jesus to work with his brother
Vicente. However, the proceeds will be collected together with his brother Vicente since it
was the latter who was working with me. He renders services to his brother work only after
the regular working hours but off and on basis.
31

On the other hand, respondent submitted the affidavit executed by Eleoterio Brigoli, Pedro
Brigoli, Napoleon Coming, Efren Coming and Gil Coming who all attested that respondent
was their co-worker at SEIRI.

Their affidavit reads:

We, the undersigned, all of legal ages, Filipino, and resident[s] of Cebu, after having been
duly sworn to in accordance with law, depose and say:
That we are former employees of SOUTH EAST RATTAN which is owned by Estan Eslao
Agbay;
That we personally know JESUS COMING considering that we worked together in one
company SOUTH EAST RATTANT [sic];
That we together with JESUS COMING are all under the employ of ESTAN ESLAO AGBAY
considering that the latter is the one directly paying us and holds the absolute control of all
aspects of our employment;
That it is not true that JESUS COMING is under the employ of one person other than
ESTAN ESLAO AGBAY OF SOUTH EAST RATTAN;
That Jesus Coming is one of the pioneer employees of SOUTH EAST RATTAN and had
been employed therein for almost twenty years;
That we executed this affidavit to attest to the truth of the foregoing facts and to deny any
contrary allegation made by the company against his employment with SOUTH EAST
RATTAN.
32

In his decision, Labor Arbiter Carreon found that respondents work as sizing machine
operator is usually necessary and desirable to the rattan furniture business of petitioners
and their failure to include respondent in the employment report to SSS is not conclusive
proof that respondent is not their employee. As to the affidavit of Vicente Coming, Labor
Arbiter Carreon did not give weight to his statement that respondent is not petitioners
employee but that of one Faustino Apondar. Labor Arbiter Carreon was not convinced that
Faustino Apondar is an independent contractor who has a contractual relationship with
petitioners.
In reversing the Labor Arbiter, the NLRC reasoned as follows:
First complainant alleged that he worked continuously from March 17, 1984 up to January
21, 2002. Records reveal however that South East (Intl.) Rattan, Inc. was incorporated
only last July 18, 1986 (p. 55 records)[.] Moreover, when they started to actually operate in
1987, the company was engaged purely on "buying and exporting rattan furniture" hence no
manufacturing employees were hired. Furthermore, from the last quarter of 1989 up to
August of 1992, the company suspended operations due to economic reverses as per
Certification issued by the Securities and Exchange Commission (p. 56 records)[.]
1wphi1

Second, for all his insistence that he was a regular employee, complainant failed to present
a single payslip, voucher or a copy of a company payroll showing that he rendered service
during the period indicated therein. x x x

From the above established facts we are inclined to give weight and credence to the
Certifications of Allan Mayol and Faustino Apondar, both suppliers of finished Rattan
Furniture (pp. 442-43, records). It appears that complainant first worked with Allan Mayol
and later with Faustino Apondar upon the proddings of his brother Vicente. Vicentes
affidavit as to complainants employment history was more detailed and forthright. x x x
xxxx
In the case at bar, there is likewise substantial evidence to support our findings that
complainant was not an employee of respondents. Thus:
1. Complainants name does not appear in the list of employees reported to the SSS.
2. His name does not also appear in the sample payrolls of respondents employees.
3. The certification of Allan Mayol and Fasutino Apondar[,] supplier of finished rattan
products[,] that complainant had at one time or another worked with them.
4. The Affidavit of Vicente Coming, complainants full brother[,] attesting that
complainant had never been an employee of respondent. The only connection was
that their employer Faustino Apondar supplies finished rattan products to
respondents.
33

On the other hand, the CA gave more credence to the declarations of the five former
employees of petitioners that respondent was their co-worker in SEIRI. One of said affiants
is Vicente Comings own son, Gil Coming. Vicente averred in his second affidavit that when
he confronted his son, the latter explained that he was merely told by their Pastor to sign
the affidavit as it will put an end to the controversy. Vicente insisted that his son did not
know the contents and implications of the document he signed. As to the absence of
respondents name in the payroll and SSS employment report, the CA observed that the
payrolls submitted were only from January 1, 1999 to December 29, 2000 and not the entire
period of eighteen years when respondent claimed he worked for SEIRI. It further noted that
the names of the five affiants, whom petitioners admitted to be their former employees,
likewise do not appear in the aforesaid documents. According to the CA, it is apparent that
petitioners maintained a separate payroll for certain employees or willfully retained a portion
of the payroll.
x x x As to the "control test", the following facts indubitably reveal that respondents wielded
control over the work performance of petitioner, to wit: (1) they required him to work within
the company premises; (2) they obliged petitioner to report every day of the week and
tasked him to usually perform the same job; (3) they enforced the observance of definite
hours of work from 8 oclock in the morning to 5 oclock in the afternoon; (4) the mode of
payment of petitioners salary was under their discretion, at first paying him on pakiao basis
and thereafter, on daily basis; (5) they implemented company rules and regulations; (6)
[Estanislao] Agbay directly paid petitioners salaries and controlled all aspects of his
employment and (7) petitioner rendered work necessary and desirable in the business of
the respondent company.
34

We affirm the CA.

In Tan v. Lagrama, the Court held that the fact that a worker was not reported as an
employee to the SSS is not conclusive proof of the absence of employer-employee
relationship. Otherwise, an employer would be rewarded for his failure or even neglect to
perform his obligation.
35

36

Nor does the fact that respondents name does not appear in the payrolls and pay envelope
records submitted by petitioners negate the existence of employer-employee relationship.
For a payroll to be utilized to disprove the employment of a person, it must contain a true
and complete list of the employee. In this case, the exhibits offered by petitioners before
the NLRC consisting of copies of payrolls and pay earnings records are only for the years
1999 and 2000; they do not cover the entire 18-year period during which respondent
supposedly worked for SEIRI.
37

In their comment to the petition filed by respondent in the CA, petitioners emphasized that in
the certifications issued by Mayol and Apondar, it was shown that respondent was
employed and working for them in those years he claimed to be working for SEIRI.
However, a reading of the certification by Mayol would show that while the latter claims to
have respondent under his employ in 1997, 1998 and 1999, respondents services were not
regular and that he works only if he wants to. Apondars certification likewise stated that
respondent worked for him since 1999 through his brother Vicente as "sideline" but only
after regular working hours and "off and on" basis. Even assuming the truth of the foregoing
statements, these do not foreclose respondents regular or full-time employment with SEIRI.
In effect, petitioners suggest that respondent was employed by SEIRIs suppliers, Mayol
and Apondar but no competent proof was presented as to the latters status as independent
contractors.
In the same comment, petitioners further admitted that the five affiants who attested to
respondents employment with SEIRI are its former workers whom they describe as
"disgruntled workers of SEIRI" with an axe to grind against petitioners, and that their
execution of affidavit in support of respondents claim is "their very way of hitting back the
management of SEIRI after disciplinary measures were meted against them." This
allegation though was not substantiated by petitioners. Instead, after the CA rendered its
decision reversing the NLRCs ruling, petitioners subsequently changed their theory by
denying the employment relationship with the five affiants in their motion for
reconsideration, thus:
38

x x x Since the five workers were occupying and working on a leased premises of the
private respondent, they were called workers of SEIRI (private respondent). Such admission
however, does not connote employment. For the truth of the matter, all of the five
employees of the supplier assigned at the leased premises of the private respondent.
Because of the recommendation of the private respondent with regards to the disciplinary
measures meted on the five workers, they wanted to hit back against the private
respondent. Their motive to implicate private respondent was to vindicate. Definitely, they
have an axe to grind against the private respondent. Mention has to be made that despite
the dismissal of these five (5) witnesses from their service, none of them ever went to the
National Labor [Relations] Commission and invoked their rights, if any, against their

employer or at the very least against the respondent. The reason is obvious, since they
knew pretty well that they were not employees of SEIRI but rather under the employ of Allan
Mayol and Faustino Apondar, working on a leased premise of respondent. x x x
39

Petitioners admission that the five affiants were their former employees is binding upon
them. While they claim that respondent was the employee of their suppliers Mayol and
Apondar, they did not submit proof that the latter were indeed independent contractors;
clearly, petitioners failed to discharge their burden of proving their own affirmative
allegation. There is thus no showing that the five former employees of SEIRI were
motivated by malice, bad faith or any ill-motive in executing their affidavit supporting the
claims of respondent.
40

In any controversy between a laborer and his master, doubts reasonably arising from the
evidence are resolved in favor of the laborer.
41

As a regular employee, respondent enjoys the right to security of tenure under Article
279 of the Labor Code and may only be dismissed for a just or authorized cause,
otherwise the dismissal becomes illegal.
42

43

44

Respondent, whose employment was terminated without valid cause by petitioners, is

entitled to reinstatement without loss of seniority rights and other privileges and to his full
back wages, inclusive of allowances and other benefits or their monetary equivalent,
computed from the time his compensation was withheld from him up to the time of his actual
reinstatement. Where reinstatement is no longer viable as an option, back wages shall be
computed from the time of the illegal termination up to the finality of the decision.
Separation pay equivalent to one month salary for every year of service should likewise be
awarded as an alternative in case reinstatement in not possible.
45

WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated February
21, 2008 and Resolution dated February 9, 2009 of the Court of Appeals in CA-G.R. No.
CEB-SP No. 02113 are hereby AFFIRMED and UPHELD.
Petitioners to pay the costs of suit.
SO ORDERED.

G.R. No. 195190, July 28, 2014

ROYALE HOMES MARKETING CORPORATION, Petitioner, v. FIDEL P. ALCANTARA [DECEASED],

SUBSTITUTED BY HIS HEIRS, Respondent.
DECISION
DEL CASTILLO, J.:
Not every form of control that a hiring party imposes on the hired party is indicative of employeeemployer relationship. Rules and regulations that merely serve as guidelines towards the achievement
of a mutually desired result without dictating the means and methods of accomplishing it do not
establish employer-employee relationship.1
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This Petition for Review on Certiorari2 assails the June 23, 2010 Decision3 of the Court of Appeals (CA)
in CA-G.R. SP No. 109998 which (i) reversed and set aside the February 23, 2009 Decision 4 of the
National Labor Relations Commission (NLRC), (ii) ordered petitioner Royale Homes Marketing
Corporation (Royale Homes) to pay respondent Fidel P. Alcantara (Alcantara) backwages and
separation pay, and (iii) remanded the case to the Labor Arbiter for the proper determination and
computation of said monetary awards.
Also assailed in this Petition is the January 18, 2011 Resolution 5 of the CA denying Royale Homes
Motion for Reconsideration,6 as well as its Supplemental7 thereto.
Factual Antecedents
In 1994, Royale Homes, a corporation engaged in marketing real estates, appointed Alcantara as its
Marketing Director for a fixed period of one year. His work consisted mainly of marketing Royale
Homes real estate inventories on an exclusive basis. Royale Homes reappointed him for several
consecutive years, the last of which covered the period January 1 to December 31, 2003 where he
held the position of Division 5 Vice-President-Sales. 8
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Proceedings before the Labor Arbiter

On December 17, 2003, Alcantara filed a Complaint for Illegal Dismissal 9 against Royale Homes and its
President Matilde Robles, Executive Vice-President for Administration and Finance Ma. Melinda
Bernardino, and Executive Vice- President for Sales Carmina Sotto. Alcantara alleged that he is a
regular employee of Royale Homes since he is performing tasks that are necessary and desirable to its
business; that in 2003 the company gave him P1.2 million for the services he rendered to it; that in
the first week of November 2003, however, the executive officers of Royale Homes told him that they
were wondering why he still had the gall to come to office and sit at his table; 10 and that the acts of
the executive officers of Royale Homes amounted to his dismissal from work without any valid or just
cause and in gross disregard of the proper procedure for dismissing employees. Thus, he also
impleaded the corporate officers who, he averred, effected his dismissal in bad faith and in an
oppressive manner.
Alcantara prayed to be reinstated to his former position without loss of seniority rights and other
privileges, as well as to be paid backwages, moral and exemplary damages, and attorneys fees. He
further sought that the ownership of the Mitsubishi Adventure with Plate No. WHD-945 be transferred
to his name.
Royale Homes, on the other hand, vehemently denied that Alcantara is its employee. It argued that
the appointment paper of Alcantara is clear that it engaged his services as an independent sales
contractor for a fixed term of one year only. He never received any salary, 13th month pay, overtime
pay or holiday pay from Royale Homes as he was paid purely on commission basis. In addition, Royale
Homes had no control on how Alcantara would accomplish his tasks and responsibilities as he was free
to solicit sales at any time and by any manner which he may deem appropriate and necessary. He is
even free to recruit his own sales personnel to assist him in pursuance of his sales target.
According to Royale Homes, Alcantara decided to leave the company after his wife, who was once

connected with it as a sales agent, had formed a brokerage company that directly competed with its
business, and even recruited some of its sales agents. Although this was against the exclusivity clause
of the contract, Royale Homes still offered to accept Alcantaras wife back so she could continue to
engage in real estate brokerage, albeit exclusively for Royale Homes. In a special management
committee meeting on October 8, 2003, however, Alcantara announced publicly and openly that he
would leave the company by the end of October 2003 and that he would no longer finish the unexpired
term of his contract. He has decided to join his wife and pursue their own brokerage business. Royale
Homes accepted Alcantaras decision. It then threw a despedida party in his honor and, subsequently,
appointed a new independent contractor.
Two months after he relinquished his post, however, Alcantara appeared in Royale Homes and
submitted a letter claiming that he was illegally dismissed.
Ruling of the Labor Arbiter
On September 7, 2005, the Labor Arbiter rendered a Decision 11 holding that Alcantara is an employee
of Royale Homes with a fixed-term employment period from January 1 to December 31, 2003 and that
the pre-termination of his contract was against the law. Hence, Alcantara is entitled to an amount
which he may have earned on the average for the unexpired portion of the contract. With regard to
the impleaded corporate officers, the Labor Arbiter absolved them from any liability.
The dispositive portion of the Labor Arbiters Decision reads:

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WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Royale
Homes Marketing Corp. to pay the complainant the total amount of TWO HUNDRED SEVENTY SEVEN
THOUSAND PESOS (P277,000.00) representing his compensation/commission for the unexpired term
of his contract.
All other claims are dismissed for lack of merit.
SO ORDERED.12

chanrobleslaw

Both parties appealed the Labor Arbiters Decision to the NLRC. Royale Homes claimed that the Labor
Arbiter grievously erred in ruling that there exists an employer-employee relationship between the
parties. It insisted that the contract between them expressly states that Alcantara is an independent
contractor and not an ordinary employee. It had no control over the means and methods by which he
performed his work. Royale Homes likewise assailed the award of P277,000.00 for lack of basis as it
did not pre-terminate the contract. It was Alcantara who chose not to finish the contract.
Alcantara, for his part, argued that the Labor Arbiter erred in ruling that his employment was for a
fixed-term and that he is not entitled to backwages, reinstatement, unpaid commissions, and
damages.
Ruling of the National Labor Relations Commission
On February 23, 2009, the NLRC rendered its Decision, 13 ruling that Alcantara is not an employee but
a mere independent contractor of Royale Homes. It based its ruling mainly on the contract which does
not require Alcantara to observe regular working hours. He was also free to adopt the selling methods
he deemed most effective and can even recruit sales agents to assist him in marketing the inventories
of Royale Homes. The NLRC also considered the fact that Alcantara was not receiving monthly salary,
but was being paid on commission basis as stipulated in the contract. Being an independent
contractor, the NLRC concluded that Alcantaras Complaint is cognizable by the regular courts.
The fallo of the NLRC Decision reads:

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WHEREFORE, premises considered, the Decision of Labor Arbiter Dolores Peralta-Beley dated
September 5, 2005 is REVERSED and SET ASIDE and a NEW ONE rendered dismissing the complaint
for lack of jurisdiction.

SO ORDERED.14
Alcantara moved for reconsideration.15 In a Resolution16 dated May 29, 2009, however, the NLRC
denied his motion.
Alcantara thus filed a Petition for Certiorari17 with the CA imputing grave abuse of discretion on the
part of the NLRC in ruling that he is not an employee of Royale Homes and that it is the regular courts
which have jurisdiction over the issue of whether the pre-termination of the contract is valid.
Ruling of the Court of Appeals
On June 23, 2010, the CA promulgated its Decision18 granting Alcantaras Petition and reversing the
NLRCs Decision. Applying the four-fold and economic reality tests, it held that Alcantara is an
employee of Royale Homes. Royale Homes exercised some degree of control over Alcantara since his
job, as observed by the CA, is subject to company rules, regulations, and periodic evaluations. He
was also bound by the company code of ethics. Moreover, the exclusivity clause of the contract has
made Alcantara economically dependent on Royale Homes, supporting the theory that he is an
employee of said company.
The CA further held that Alcantaras termination from employment was without any valid or just cause,
and it was carried out in violation of his right to procedural due process. Thus, the CA ruled that he is
entitled to backwages and separation pay, in lieu of reinstatement. Considering, however, that the CA
was not satisfied with the proof adduced to establish the amount of Alcantaras annual salary, it
remanded the case to the Labor Arbiter to determine the same and the monetary award he is entitled
to. With regard to the corporate officers, the CA absolved them from any liability for want of clear
proof that they assented to the patently unlawful acts or that they are guilty of bad faith or gross
negligence. Thus:
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WHEREFORE, in view of the foregoing, the instant PETITION is GRANTED. The assailed decision of the
National Labor Relations Commission in NLRC NCR CASE NO. 00-12-14311-03 NLRC CA NO. 04610405 dated February 23, 2009 as well as the Resolution dated May 29, 2009 are hereby SET ASIDE and
a new one is entered ordering the respondent company to pay petitioner backwages which shall be
computed from the time of his illegal termination in October 2003 up to the finality of this decision,
plus separation pay equivalent to one month salary for every year of service. This case is REMANDED
to the Labor Arbiter for the proper determination and computation of back wages, separation pay and
other monetary benefits that petitioner is entitled to.
SO ORDERED.19

chanrobleslaw

Royale Homes filed a Motion for Reconsideration20 and a Supplemental Motion for Reconsideration.21
In a Resolution22 dated January 18, 2011, however, the CA denied said motions.
Issues
Hence, this Petition where Royale Homes submits before this Court the following issues for
resolution:
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A.
WHETHER THE COURT OF APPEALS HAS DECIDED THE INSTANT CASE NOT IN ACCORD WITH LAW
AND APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT REVERSED THE RULING OF THE
NLRC DISMISSING THE COMPLAINT OF RESPONDENT FOR LACK OF JURISDICTION AND
CONSEQUENTLY, IN FINDING THAT RESPONDENT WAS ILLEGALLY DISMISSED[.]
B.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN DISREGARDING THE

EN BANC RULING OF THIS HONORABLE COURT IN THE CASE OF TONGKO VS. MANULIFE, AND IN
BRUSHING ASIDE THE APPLICABLE RULINGS OF SONZA VS. ABS CBN AND CONSULTA V. CA[.]
C.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN DENYING THE MOTION
FOR RECONSIDERATION OF PETITIONER AND IN REFUSING TO CORRECT ITSELF[.] 23
Royale Homes contends that its contract with Alcantara is clear and unambiguous - it engaged his
services as an independent contractor. This can be readily seen from the contract stating that no
employer-employee relationship exists between the parties; that Alcantara was free to solicit sales at
any time and by any manner he may deem appropriate; that he may recruit sales personnel to assist
him in marketing Royale Homes inventories; and, that his remunerations are dependent on his sales
performance.
Royale Homes likewise argues that the CA grievously erred in ruling that it exercised control over
Alcantara based on a shallow ground that his performance is subject to company rules and
regulations, code of ethics, periodic evaluation, and exclusivity clause of contract. Royale Homes
maintains that it is expected to exercise some degree of control over its independent contractors, but
that does not automatically result in the existence of employer-employee relationship. For control to
be considered as a proof tending to establish employer-employee relationship, the same must pertain
to the means and method of performing the work; not on the relationship of the independent
contractors among themselves or their persons or their source of living.
Royale Homes further asserts that it neither hired nor wielded the power to dismiss Alcantara. It was
Alcantara who openly and publicly declared that he was pre-terminating his fixed-term contract.
The pivotal issue to be resolved in this case is whether Alcantara was an independent contractor or an
employee of Royale Homes.
Our Ruling
The Petition is impressed with merit.
The determination of whether a party who renders services to another is an employee or an
independent contractor involves an evaluation of factual matters which, ordinarily, is not within the
province of this Court. In view of the conflicting findings of the tribunals below, however, this Court is
constrained to go over the factual matters involved in this case. 24
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The juridical relationship of the parties

based on their written contract
The primary evidence of the nature of the parties relationship in this case is the written contract that
they signed and executed in pursuance of their mutual agreement. While the existence of employeremployee relationship is a matter of law, the characterization made by the parties in their contract as
to the nature of their juridical relationship cannot be simply ignored, particularly in this case where the
parties written contract unequivocally states their intention at the time they entered into it. InTongko
v. The Manufacturers Life Insurance Co. (Phils.), Inc., 25 it was held that:
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To be sure, the Agreements legal characterization of the nature of the relationship cannot be
conclusive and binding on the courts; x x x the characterization of the juridical relationship the
Agreement embodied is a matter of law that is for the courts to determine. At the same time, though,
the characterization the parties gave to their relationship in the Agreement cannot simply be brushed
aside because it embodies their intent at the time they entered the Agreement, and they were
governed by this understanding throughout their relationship. At the very least, the provision on the
absence of employer-employee relationship between the parties can be an aid in considering the
Agreement and its implementation, and in appreciating the other evidence on record. 26

In this case, the contract,27 duly signed and not disputed by the parties, conspicuously provides that
no employer-employee relationship exists between Royale Homes and Alcantara, as well as his sales
agents. It is clear that they did not want to be bound by employer-employee relationship at the time
of the signing of the contract. Thus:
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January 24, 2003

MR. FIDEL P. ALCANTARA
13 Rancho I
Marikina City
Dear Mr. Alcantara,
This will confirm your appointment as Division 5 VICE[-]PRESIDENT-SALES of ROYALE HOMES
MARKETING CORPORATION effective January 1, 2003 to December 31, 2003.
Your appointment entails marketing our real estate inventories on an EXCLUSIVE BASIS under such
price, terms and condition to be provided to you from time to time.
As such, you can solicit sales at any time and by any manner which you deem appropriate and
necessary to market our real estate inventories subject to rules, regulations and code of ethics
promulgated by the company. Further, you are free to recruit sales personnel/agents to assist you in
marketing of our inventories provided that your personnel/agents shall first attend the required
seminars and briefing to be conducted by us from time to time for the purpose of familiarizing them of
terms and conditions of sale, the nature of property sold, etc., attendance of which shall be a condition
precedent for their accreditation by us.
That as such Division 5 VICE[-]PRESIDENT-SALES you shall be entitled to:

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1. Commission override of 0.5% for all option sales beginning January 1, 2003 booked by your sales
agents.
2. Budget allocation depending on your divisions sale performance as per our budget guidelines.
3. Sales incentive and other forms of company support which may be granted from time to time.
It is understood, however, that no employer-employee relationship exists between us, that
of your sales personnel/agents, and that you shall hold our company x x x, its officers and
directors, free and harmless from any and all claims of liability and damages arising from and/or
incident to the marketing of our real estate inventories.
We reserve, however, our right to terminate this agreement in case of violation of any company rules
and regulations, policies and code of ethics upon notice for justifiable reason.
Your performance shall be subject to periodic evaluation based on factors which shall be determined
by the management.
If you are amenable to the foregoing terms and conditions, please indicate your conformity by signing
on the space provided below and return [to] us a duplicate copy of this letter, duly accomplished, to
constitute as our agreement on the matter. (Emphasis ours)
Since the terms of the contract are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulations should control.28 No construction is even needed as
they already expressly state their intention. Also, this Court adopts the observation of the NLRC that
it is rather strange on the part of Alcantara, an educated man and a veteran sales broker who claimed
to be receiving P1.2 million as his annual salary, not to have contested the portion of the contract
expressly indicating that he is not an employee of Royale Homes if their true intention were otherwise.

The juridical relationship of the

parties based on Control Test
In determining the existence of an employer-employee relationship, this Court has generally relied on
the four-fold test, to wit: (1) the selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the employers power to control the employee with respect
to the means and methods by which the work is to be accomplished. 29 Among the four, the most
determinative factor in ascertaining the existence of employer-employee relationship is the right of
control test.30 It is deemed to be such an important factor that the other requisites may even be
disregarded.31 This holds true where the issues to be resolved is whether a person who performs
work for another is the latters employee or is an independent contractor,32 as in this case. For 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 by which such end is reached, employer-employee relationship is
deemed to exist.33
cralawre d

In concluding that Alcantara is an employee of Royale Homes, the CA ratiocinated that since the
performance of his tasks is subject to company rules, regulations, code of ethics, and periodic
evaluation, the element of control is present.
The Court disagrees.
Not every form of control is indicative of employer-employee relationship. A person who performs
work for another and is subjected to its rules, regulations, and code of ethics does not necessarily
become an employee.34 As long as the level of control does not interfere with the means and methods
of accomplishing the assigned tasks, the rules imposed by the hiring party on the hired party do not
amount to the labor law concept of control that is indicative of employer-employee relationship.
In Insular Life Assurance Co., Ltd. v. National Labor Relations Commission 35 it was pronounced
that:
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Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be employed in
attaining it, and those that control or fix the methodology and bind or restrict the party hired to the
use of such means. The first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means used to achieve it. x x x 36
In this case, the Court agrees with Royale Homes that the rules, regulations, code of ethics, and
periodic evaluation alluded to by Alcantara do not involve control over the means and methods by
which he was to perform his job. Understandably, Royale Homes has to fix the price, impose
requirements on prospective buyers, and lay down the terms and conditions of the sale, including the
mode of payment, which the independent contractors must follow. It is also necessary for Royale
Homes to allocate its inventories among its independent contractors, determine who has priority in
selling the same, grant commission or allowance based on predetermined criteria, and regularly
monitor the result of their marketing and sales efforts. But to the mind of this Court, these do not
pertain to the means and methods of how Alcantara was to perform and accomplish his task of
soliciting sales. They do not dictate upon him the details of how he would solicit sales or the manner
as to how he would transact business with prospective clients. In Tongko, this Court held that
guidelines or rules and regulations that do not pertain to the means or methods to be employed in
attaining the result are not indicative of control as understood in labor law. Thus:
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From jurisprudence, an important lesson that the first Insular Life case teaches us is that a
commitment to abide by the rules and regulations of an insurance company does not ipso facto make
the insurance agent an employee. Neither do guidelines somehow restrictive of the insurance agents
conduct necessarily indicate control as this term is defined in jurisprudence. Guidelines indicative
of labor law control, as the first Insular Life case tells us, should not merely relate to the
mutually desirable result intended by the contractual relationship; they must have the
nature of dictating the means or methods to be employed in attaining the result, or of fixing
the methodology and of binding or restricting the party hired to the use of these means. In

fact, results-wise, the principal can impose production quotas and can determine how many agents,
with specific territories, ought to be employed to achieve the companys objectives. These are
management policy decisions that the labor law element of control cannot reach. Our ruling in these
respects in the first Insular Life case was practically reiterated in Carungcong. Thus, as will be shown
more fully below, Manulifes codes of conduct, all of which do not intrude into the insurance agents
means and manner of conducting their sales and only control them as to the desired results and
Insurance Code norms, cannot be used as basis for a finding that the labor law concept of control
existed between Manulife and Tongko.37 (Emphases in the original)
As the party claiming the existence of employer-employee relationship, it behoved upon Alcantara to
prove the elements thereof, particularly Royale Homes power of control over the means and methods
of accomplishing the work.38 He, however, failed to cite specific rules, regulations or codes of ethics
that supposedly imposed control on his means and methods of soliciting sales and dealing with
prospective clients. On the other hand, this case is replete with instances that negate the element of
control and the existence of employer-employee relationship. Notably, Alcantara was not required to
observe definite working hours.39 Except for soliciting sales, Royale Homes did not assign other tasks
to him. He had full control over the means and methods of accomplishing his tasks as he can solicit
sales at any time and by any manner which [he may] deem appropriate and necessary. He
performed his tasks on his own account free from the control and direction of Royale Homes in all
matters connected therewith, except as to the results thereof.40
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Neither does the repeated hiring of Alcantara prove the existence of employer-employee
relationship.41 As discussed above, the absence of control over the means and methods disproves
employer-employee relationship. The continuous rehiring of Alcantara simply signifies the renewal of
his contract with Royale Homes, and highlights his satisfactory services warranting the renewal of such
contract. Nor does the exclusivity clause of contract establish the existence of the labor law concept
of control. In Consulta v. Court of Appeals,42 it was held that exclusivity of contract does not
necessarily result in employer-employee relationship, viz:
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x x x However, the fact that the appointment required Consulta to solicit business exclusively for
Pamana did not mean that Pamana exercised control over the means and methods of Consultas work
as the term control is understood in labor jurisprudence. Neither did it make Consulta an employee of
Pamana. Pamana did not prohibit Consulta from engaging in any other business, or from being
connected with any other company, for as long as the business [of the] company did not compete with
Pamanas business.43
The same scenario obtains in this case. Alcantara was not prohibited from engaging in any other
business as long as he does not sell projects of Royale Homes competitors. He can engage in selling
various other products or engage in unrelated businesses.
Payment of Wages
The element of payment of wages is also absent in this case. As provided in the contract, Alcantaras
remunerations consist only of commission override of 0.5%, budget allocation, sales incentive and
other forms of company support. There is no proof that he received fixed monthly salary. No payslip
or payroll was ever presented and there is no proof that Royale Homes deducted from his supposed
salary withholding tax or that it registered him with the Social Security System, Philippine Health
Insurance Corporation, or Pag-Ibig Fund. In fact, his Complaint merely states a ballpark figure of his
alleged salary of P100,000.00, more or less. All of these indicate an independent contractual
relationship.44 Besides, if Alcantara indeed considered himself an employee of Royale Homes, then he,
an experienced and professional broker, would have complained that he was being denied statutorily
mandated benefits. But for nine consecutive years, he kept mum about it, signifying that he has
agreed, consented, and accepted the fact that he is not entitled to those employee benefits because
he is an independent contractor.
This Court is, therefore, convinced that Alcantara is not an employee of Royale Homes, but a mere
independent contractor. The NLRC is, therefore, correct in concluding that the Labor Arbiter has no
jurisdiction over the case and that the same is cognizable by the regular courts.

WHEREFORE, the instant Petition is hereby GRANTED. The June 23, 2010 Decision of the Court of
Appeals in CA-G.R. SP No. 109998 is REVERSED and SET ASIDE. The February 23, 2009 Decision of
the National Labor Relations Commission is REINSTATED and AFFIRMED.
SO ORDERED.

G.R. No. 177592, June 09, 2014

AVELINO S. ALILIN, TEODORO CALESA, CHARLIE HINDANG, EUTIQUIO GINDANG, ALLAN

SUNGAHID, MAXIMO LEE, CARPIO, CHAIRPERSON, JOSE G. MORATO, REX GABILAN, AND
EUGEMA L. LAURENTE, Petitioners, v. PETRON CORPORATION, Respondent.
DECISION
DEL CASTILLO, J.:
A contractor is presumed to be a labor-only contractor, unless it proves that it has the substantial
capital, investment, tools and the like. However, where the principal is the one claiming that the
contractor is a legitimate contractor, the burden of proving the supposed status of the contractor rests
on the principal.1
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This Petition for Review on Certiorari2 assails the Decision3 dated May 10, 2006 of the Court of Appeals
(CA) in CA-G.R. SP No. 01291 which granted the Petition for Certiorari filed therewith, reversed and
set aside the February 18, 2005 Decision4 and August 24, 2005 Resolution5 of the National Labor
Relations Commission (NLRC) in NLRC Case No. V-000481-2003 and dismissed the Complaint for
illegal dismissal filed by petitioners Avelino Alilin (Alilin), Teodoro Calesa (Calesa), Charlie Hindang
(Hindang), Eutiquio Gindang (Gindang), Allan Sungahid (Sungahid), Maximo Lee (Lee), Jose G. Morato
(Morato), Rex Gabilan (Gabilan) and Eugema L. Laurente (Laurente) against respondent Petron
Corporation (Petron). Also assailed in this Petition is the CA Resolution6 dated March 30, 2007 which
denied petitioners Motion for Reconsideration7 and Supplemental Motion for Reconsideration.8
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Factual Antecedents
Petron is a domestic corporation engaged in the oil business. It owns several bulk plants in the
country for receiving, storing and distributing its petroleum products.
In 1968, Romualdo D. Gindang Contractor, which was owned and operated by Romualdo D. Gindang
(Romualdo), started recruiting laborers for fielding to Petrons Mandaue Bulk Plant. When Romualdo
died in 1989, his son Romeo D. Gindang (Romeo), through Romeo D. Gindang Services (RDG), took
over the business and continued to provide manpower services to Petron. Petitioners were among
those recruited by Romualdo D. Gindang Contractor and RDG to work in the premises of the said bulk
plant, with the corresponding dates of hiring and work duties, to wit:
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Employees
Eutiquio Gindang
Eugema L. Laurente
Teodoro Calesa
Rex Gabilan
Charlie T. Hindang
Allan P. Sungahid
Maximo S. Lee
Avelino S. Alilin
Jose Gerry M. Morato

Date of Hiring
1968

Duties
utility/tanker receiver/barge
loader/warehouseman/mixer
June 1979
telephone operator/order
taker
August 1, 1981
utility/tanker receiver/barge
loader/sounder/gauger
July 1, 1987
warehouseman/forklift
driver/tanker receiver/barge
loader
September 18, 1990 utility/tanker receiver/barge
loader/sounder/gauger
September 18, 1990 filler/sealer/painter/tanker
receiver/utility
September 18, 1990 gasul filler/painter/utility
July 16, 1992
carpenter/driver
March 16, 1993
cylinder checker/tanker

receiver/ grass
cutter/janitor/utility
On June 1, 2000, Petron and RDG entered into a Contract for Services 9 for the period from June 1,
2000 to May 31, 2002, whereby RDG undertook to provide Petron with janitorial, maintenance, tanker
receiving, packaging and other utility services in its Mandaue Bulk Plant. This contract was extended
on July 31, 2002 and further extended until September 30, 2002. Upon expiration thereof, no further
renewal of the service contract was done.
Proceedings before the Labor Arbiter
Alleging that they were barred from continuing their services on October 16, 2002, petitioners Alilin,
Calesa, Hindang, Gindang, Sungahid, Lee, Morato and Gabilan filed a Complaint 10 for illegal dismissal,
underpayment of wages, damages and attorneys fees against Petron and RDG on November 12,
2002. Petitioner Laurente filed another Complaint11 for illegal dismissal, underpayment of wages, nonpayment of overtime pay, holiday pay, premium pay for holiday, rest day, 13th month pay, service
incentive leave pay, allowances, separation pay, retirement benefits, damages and attorneys fees
against Petron and RDG. The said complaints were later consolidated.
Petitioners did not deny that RDG hired them and paid their salaries. They, however, claimed that the
latter is a labor-only contractor, which merely acted as an agent of Petron, their true employer. They
asseverated that their jobs, which are directly related to Petrons business, entailed them to work
inside the premises of Petron using the required equipment and tools furnished by it and that they
were subject to Petrons supervision. Claiming to be regular employees, petitioners thus asserted that
their dismissal allegedly in view of the expiration of the service contract between Petron and RDG is
illegal.
RDG corroborated petitioners claim that they are regular employees of Petron. It alleged that Petron
directly supervised their activities; they performed jobs necessary and desirable to Petrons business;
Petron provided petitioners with supplies, tools and equipment used in their jobs; and that petitioners
workplace since the start of their employment was at Petrons bulk plant in Mandaue City. RDG denied
liability over petitioners claim of illegal dismissal and further argued that Petron cannot capitalize on
the service contract to escape liability.
Petron, on the other hand, maintained that RDG is an independent contractor and the real employer of
the petitioners. It was RDG which hired and selected petitioners, paid their salaries and wages, and
directly supervised their work. Attesting to these were two former employees of RDG and Petrons
Mandaue Terminal Superintendent whose joint affidavit 12 and affidavit,13 respectively, were submitted
by Petron. Anent its allegation that RDG is an independent contractor, Petron presented the following
documents: (1) RDGs Certificate of Registration issued by the Department of Labor and Employment
(DOLE) on December 27, 2000;14 (2) RDGs Certificate of Registration of Business Name issued by the
Department of Trade and Industry (DTI) on August 18, 2000; 15 (3) Contractors Pre-Qualification
Statement;16 (4) Conflict of Interest Statement signed by Romeo Gindang as manager of RDG; 17 (5)
RDGs Audited Financial Statements for the years 199818 199919 and 2000;20 (6) RDGs Mayors Permit
for the years 200021 and 2001;22 (7) RDGs Certificate of Accreditation issued by DTI in October
1991;23 (8) performance bond24 and insurance policy25 posted to insure against liabilities; (9) Social
Security System (SSS) Online Inquiry System Employee Contributions and Employee Static
Information;26 and, (10) Romeos affidavit27 stating that he had paid the salaries of his employees
assigned to Petron for the period of November 4, 2001 to December 31, 2001. Petron argued that
with the expiration of the service contract it entered with RDG, petitioners term of employment has
concomitantly ended. And not being the employer, Petron cannot be held liable for petitioners claim
of illegal dismissal.
In a Decision28 dated June 12, 2003, the Labor Arbiter ruled that petitioners are regular employees of
Petron. It found that their jobs were directly related to Petrons business operations; they worked
under the supervision of Petrons foreman and supervisor; and they were using Petrons tools and
equipment in the performance of their works. The Labor Arbiter also found that Petron merely utilized
RDG in its attempt to hide the existence of employee-employer relationship between it and petitioners

and avoid liability under labor laws. And there being no showing that petitioners dismissal was for
just or authorized cause, the Labor Arbiter declared them to have been illegally dismissed. Petron was
thus held solidarily liable with Romeo for the payment of petitioners separation pay (in lieu of
reinstatement due to strained relations with Petron) fixed at one month pay for every year of service
and backwages computed on the basis of the last salary rate at the time of dismissal. The dispositive
portion of the Decision reads:
ChanRoblesVirtualawlibrary

WHEREFORE, premises considered, judgment is hereby rendered ordering the respondents Petron
Corporation and Romeo Gindang to pay the complainants as follows:
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1.
2.
3.
4.
5.
6.
7.
8.
9.

Teodoro Calesa
Eutiquio Gindang
Charlie T. Gindang
Allan P. Sungahid
Jose Gerry Morato
Avelino A. Alilin
Rex S. Gabilan
Maximo S. Lee
Eugema Minao Laurente
Total award

P 136,890.00
P 202,800.00
P 91,260.00
P 91,260.00
P 76,050.00
P 95,680.00
P 106,470.00
P 91,260.00
P 150,800.00
P1,042,470.00

The other claims are dismissed for lack of merit.

SO ORDERED.29
Proceedings before the National Labor Relations Commission
Petron continued to insist that there is no employer-employee relationship between it and petitioners.
The NLRC, however, was not convinced. In its Decision30 of February 18, 2005, the NLRC ruled that
petitioners are Petrons regular employees because they are performing job assignments which are
germane to its main business. Thus:
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WHEREFORE, premises considered, the Decision of the Labor Arbiter is hereby affirmed. It is
understood that the grant of backwages shall be until finality of the Decision.
The appeal of respondent Petron Corporation is hereby DISMISSED for lack of merit.
SO ORDERED.31
The NLRC also denied Petrons Motion for Reconsideration in its Resolution 32 of August 24, 2005.
Proceedings before the Court of Appeals
Petron filed a Petition for Certiorari with prayer for the issuance of a temporary restraining order or
writ of injunction before the CA. The said court resolved to grant the injunction. 33 Hence, a Writ of
Preliminary Injunction34 to restrain the implementation of the February 18, 2005 Decision and August
24, 2005 Resolution of the NLRC was issued on March 3, 2006.
In a Decision35 dated May 10, 2006, the CA found no employer-employee relationship between the
parties. According to it, the records of the case do not show that petitioners were directly hired,
selected or employed by Petron; that their wages and other wage related benefits were paid by the
said company; and that Petron controlled the manner by which they carried out their tasks. On the
other hand, RDG was shown to be responsible for paying petitioners wages. In fact, SSS records
show that RDG is their employer and actually the one remitting their contributions thereto. Also, two
former employees of RDG who were likewise assigned in the Mandaue Bulk Plant confirmed by way of
a joint affidavit that it was Romeo and his brother Alejandre Gindang who supervised their work, not

Petrons foreman or supervisor. This was even corroborated by the Terminal Superintendent of the
Mandaue Bulk Plant.
The CA also found RDG to be an independent labor contractor with sufficient capitalization and
investment as shown by its financial statement for year-end 2000. In addition, the works for which
RDG was contracted to provide were menial which were neither directly related nor sensitive and
critical to Petrons principal business. The CA disposed of the case as follows:
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WHEREFORE, the Petition is GRANTED. The February 18, 2005 Decision and the August 24, 2005
Resolution of the Fourth Division of the National Labor Relations Commission in NLRC Case No. V000481-2003, entitled Teodoro Calesa et al. vs. Petron Corporation and R.D. Gindang Services,
having been rendered with grave abuse of discretion amounting to excess of jurisdiction, are hereby
REVERSED and SET ASIDE and a NEW ONE is entered DISMISSING private respondents complaint
against petitioner. It is so ordered.36
Petitioners filed a Motion for Reconsideration37 insisting that Petron illegally dismissed them; that RDG
is a labor-only contractor; and that they performed jobs which are sensitive to Petrons business
operations. To support these, they attached to their Supplemental Motion for
Reconsideration38Affidavits39 of former employees of Petron attesting to the fact that their jobs were
critical to Petrons business operations and that they were carried out under the control of a Petron
employee.
Petitioners motions were, however, denied by the CA in a Resolution 40 dated March 30, 2007.
Hence, this Petition.
Issue
The primary issue to be resolved in this case is whether RDG is a legitimate job contractor. Upon such
finding hinges the determination of whether an employer-employee relationship exists between the
parties as to make Petron liable for petitioners dismissal.
Our Ruling
The Petition is impressed with merit.
The conflicting findings of the Labor
Arbiter and the NLRC on one hand,
and of the CA on the other, constrains
the Court to review the factual issues
involved in this case.
As a general rule, the Court does not review errors that raise factual questions. 41 Nonetheless, while it
is true that the determination of whether an employer-employee relationship existed between the
parties basically involves a question of fact, the conflicting findings of the Labor Arbiter and the NLRC
on one hand, and of the CA on the other, constrains the Court to review and re-evaluate such factual
findings.42
cralawre d

Labor-only contracting, distinguished

from permissible job contracting.
The prevailing rule on labor-only contracting at the time Petron and RDG entered into the Contract for
Services in June 2000 is DOLE Department Order No. 10, series of 1997, 43 the pertinent provision of
which reads:
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Section 4. x x x
xxxx

(f) Labor-only contracting prohibited under this Rule is an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
principal and the following elements are present:
(i) The contractor or subcontractor does not have substantial capital or investment to actually perform
the job, work or service under its own account and responsibility; and
(ii) 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.
xxxx
Section 6. Permissible contracting or subcontracting. - Subject to the conditions set forth in Section 3
(d) and (e) and Section 5 hereof, the principal may engage the services of a contractor or
subcontractor for the performance of any of the following:
(a) Works or services temporarily or occasionally needed to meet abnormal increase in the demand of
products or services, provided that the normal production capacity or regular workforce of the
principal cannot reasonably cope with such demands;
(b) Works or services temporarily or occasionally needed by the principal for undertakings requiring
expert or highly technical personnel to improve the management or operations of an enterprise;
(c) Services temporarily needed for the introduction or promotion of new products, only for the
duration of the introductory or promotional period;
(d) Works or services not directly related or not integral to the main business or operation of the
principal, including casual work, janitorial, security, landscaping, and messengerial services, and work
not related to manufacturing processes in manufacturing establishments;
(e) Services involving the public display of manufacturers products which do not involve the act of
selling or issuance of receipts or invoices;
(f) Specialized works involving the use of some particular, unusual or peculiar skills, expertise, tools or
equipment the performance of which is beyond the competence of the regular workforce or production
capacity of the principal; and
(g) Unless a reliever system is in place among the regular workforce, substitute services for absent
regular employees, provided that the period of service shall be coextensive with the period of absence
and the same is made clear to the substitute employee at the time of engagement. The phrase
absent regular employees includes those who are serving suspensions or other disciplinary measures
not amounting to termination of employment meted out by the principal, but excludes those on strike
where all the formal requisites for the legality of the strike have been prima faciecomplied with based
on the records filed with the National Conciliation and Mediation Board.
Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to
farm out with a contractor or subcontractor the performance of a specific job, work, or service within a
definite or predetermined period, regardless of whether such job, work or, service is to be performed
or completed within or outside the premises of the principal. Under this arrangement, the following
conditions must be met: (a) the contractor carries on a distinct and independent business and
undertakes the contract work on his account under his own responsibility according to his own manner
and method, free from the control and direction of his employer or principal in all matters connected
with the performance of his work except as to the results thereof; (b) the contractor has substantial
capital or investment; and (c) the agreement between the principal and contractor or subcontractor
assures the contractual employees entitlement to all labor and occupational safety and health
standards, free exercise of the right to self-organization, security of tenure, and social welfare
benefits.44 Labor-only contracting, on the other hand, is a prohibited act, defined as supplying
workers to an employer who 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.45 [I]n distinguishing between prohibited labor-only contracting and permissible job
contracting, the totality of the facts and the surrounding circumstances of the case shall be
considered.46
cralawre d

Generally, the contractor is presumed to be a labor-only contractor, unless such contractor overcomes
the burden of proving that it has the substantial capital, investment, tools and the like. However,
where the principal is the one claiming that the contractor is a legitimate contractor, as in the present
case, said principal has the burden of proving that supposed status. 47 It is thus incumbent upon
Petron, and not upon petitioners as Petron insists, 48 to prove that RDG is an independent contractor.
Petron failed to discharge the burden
of proving that RDG is a legitimate
contractor. Hence, the presumption
that RDG is a labor-only contractor
stands.
Here, the audited financial statements and other financial documents of RDG for the years 1999 to
2001 establish that it does have sufficient working capital to meet the requirements of its service
contract. In fact, the financial evaluation conducted by Petron of RDGs financial statements for years
1998-2000 showed RDG to have a maximum financial capability of Php4.807 Million as of December
1998,49 and Php1.611 Million as of December 2000. 50 Petron was able to establish RDGs sufficient
capitalization when it entered into the service contract in 2000. The Court stresses though that this
determination of RDGs status as an independent contractor is only with respect to its financial
capability for the period covered by the financial and other documents presented. In other words, the
evidence adduced merely proves that RDG was financially qualified as a legitimate contractor but only
with respect to its last service contract with Petron in the year 2000.
As may be recalled, petitioners have rendered work for Petron for a long period of time even before
the service contract was executed in 2000. The respective dates on which petitioners claim to have
started working for Petron, as well as the fact that they have rendered continuous service to it until
October 16, 2002, when they were prevented from entering the premises of Petrons Mandaue Bulk
Plant, were not at all disputed by Petron. In fact, Petron even recognized that some of the petitioners
were initially fielded by Romualdo Gindang, the father of Romeo, through RDGs precursor, Romualdo
D. Gindang Contractor, while the others were provided by Romeo himself when he took over the
business of his father in 1989. Hence, while Petron was able to establish that RDG was financially
capable as a legitimate contractor at the time of the execution of the service contract in 2000, it
nevertheless failed to establish the financial capability of RDG at the time when petitioners actually
started to work for Petron in 1968, 1979, 1981, 1987, 1990, 1992 and 1993.
Sections 8 and 9, Rule VIII, Book III51 of the implementing rules of the Labor Code, in force since
1976 and prior to DOLE Department Order No. 10, series of 1997, 52 provide that for job contracting to
be permissible, one of the conditions that has to be met is that the contractor must have substantial
capital or investment. Petron having failed to show that this condition was met by RDG, it can be
concluded, on this score alone, that RDG is a mere labor-only contractor. Otherwise stated, the
presumption that RDG is a labor-only contractor stands due to the failure of Petron to discharge the
burden of proving the contrary.
The Court also finds, as will be discussed below, that the works performed by petitioners were directly
related to Petrons business, another factor which negates Petrons claim that RDG is an independent
contractor.
Petrons power of control over
petitioners exists in this case.
[A] finding that a contractor is a labor-only contractor is equivalent to declaring that there is an
employer-employee relationship between the principal and the employees of the supposed
contractor.53 In this case, the employer-employee relationship between Petron and petitioners

becomes all the more apparent due to the presence of the power of control on the part of the former
over the latter.
It was held in Orozco v. The Fifth Division of the Hon. Court of Appeals 54 that:

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This Court has constantly adhered to the four-fold test to determine whether there exists an
employer-employee relationship between the parties. The four elements of an employment
relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c)
the power of dismissal; and (d) the power to control the employees conduct.
Of these four elements, it is the power to control which is the most crucial and most
determinative factor, so important, in fact, that, the other elements may even be
disregarded. (Emphasis supplied)
Hence, the facts that petitioners were hired by Romeo or his father and that their salaries were paid
by them do not detract from the conclusion that there exists an employer-employee relationship
between the parties due to Petrons power of control over the petitioners.
One manifestation of the power of control is the power to transfer employees from one work
assignment to another.55 Here, Petron could order petitioners to do work outside of their regular
maintenance/utility job. Also, petitioners were required to report for work everyday at the bulk
plant, observe an 8:00 a.m. to 5:00 p.m. daily work schedule, and wear proper uniform and safety
helmets as prescribed by the safety and security measures being implemented within the bulk plant.
All these imply control. In an industry where safety is of paramount concern, control and supervision
over sensitive operations, such as those performed by the petitioners, are inevitable if not at all
necessary. Indeed, Petron deals with commodities that are highly volatile and flammable which, if
mishandled or not properly attended to, may cause serious injuries and damage to property and the
environment. Naturally, supervision by Petron is essential in every aspect of its product handling in
order not to compromise the integrity, quality and safety of the products that it distributes to the
consuming public.
Petitioners already attained regular
status as employees of Petron.
Petitioners were given various work assignments such as tanker receiving, barge loading, sounding,
gauging, warehousing, mixing, painting, carpentry, driving, gasul filling and other utility works. Petron
refers to these work assignments as menial works which could be performed by any able-bodied
individual. The Court finds, however, that while the jobs performed by petitioners may be menial and
mechanical, they are nevertheless necessary and related to Petrons business operations. If not for
these tasks, Petrons products will not reach the consumers in their proper state. Indeed, petitioners
roles were vital inasmuch as they involve the preparation of the products that Petron will distribute to
its consumers.
Furthermore, while it may be true that any able-bodied individual can perform the tasks assigned to
petitioners, the Court notes the undisputed fact that for many years, it was the same able-bodied
individuals (petitioners) who performed the tasks for Petron. The engagement of petitioners for the
same works for a long period of time is a strong indication that such works were indeed necessary to
Petrons business. In view of these, and considering further that petitioners length of service entitles
them to become regular employees under the Labor Code, petitioners are deemed by law to have
already attained the status as Petrons regular employees. As such, Petron could not terminate their
services on the pretext that the service contract it entered with RDG has already lapsed. For one, and
as previously discussed, such regular status had already attached to them even before the execution
of the service contract in 2000. For another, the same does not constitute a just or authorized cause
for a valid dismissal of regular employees.
In sum, the Court finds that RDG is a labor-only contractor. As such, it is considered merely as an
agent of Petron. Consequently, the employer-employee relationship which the Court finds to exist in
this case is between petitioners as employees and Petron as their employer. Petron therefore, being
the principal employer and RDG, being the labor-only contractor, are solidarily liable for petitioners

illegal dismissal and monetary claims.56

cralawred

WHEREFORE, the Petition is GRANTED. The May 10, 2006 Decision and March 30, 2007 Resolution
of the Court of Appeals in CA-G.R. SP No. 01291 are REVERSED and SET ASIDE. The February 18,
2005 Decision and August 24, 2005 Resolution of the National Labor Relations Commission in NLRC
Case No. V-000481-2003 are hereby REINSTATED and AFFIRMED.
SO ORDERED.

G.R. No. 201494, July 29, 2015

MARITES R. CUSAP, Petitioner, v. ADIDAS PHILIPPINES, INC., (ADIDAS), PROMOTION

RESOURCES & INTER-MARKETING EXPONENTS, INC. (PRIME) AND JC ATHLETES, INC.
(JCA),Respondents.
DECISION
BRION, J.:
We resolve petitioner Marites R. Cusap's appeal1 from the September 21, 2011 decision2 and
February 20, 2012 resolution3 of the Court of Appeals in CA-G.R. SP No. 104725.
The Antecedents
On January 21, 2003, the petitioner and 27 other employees (complainants) filed a complaint for
illegal dismissal4 against the respondents Adidas Philippines Inc. (Adidas) and Promotion Resources
Inter-Marketing Exponents, Inc. (PRIME). The complainants later amended the complaint to include JC
Athletes, Inc. (JCA), as a respondent.5 They prayed for reinstatement with back wages, separation pay
(should reinstatement be no longer feasible), 13th month pay, service incentive leave pay, and
damages.
Through their "Magkasanib na Sinumpaang Salaysay,"6 the complainants alleged that they were
regular employees of Adidas after having worked as promo girls and stockmen at the company's
various rented outlets for years, ranging from one year to seven years; the earliest employed (June 1,
1995) was Nova Toque while the latest was Aquilino Banaag (September 21, 2000). The petitioner was
hired on October 28, 1995.7
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The record shows that Adidas is engaged in the manufacture and marketing of different lines of shoes
and other sporting goods and apparel in the Philippines. 8 After its contract with its former distributor,
World Sports, Inc. (WOSI) allegedly expired, it contracted9 JCA to be its exclusive distributor
nationwide for one year or from January 1, 2002 to December 31, 2002. In turn, JCA entered into a
Promotional Contract10 with PRIME to meet the promotional requirements in the distribution of Adidas
products. PRIME supposedly assigned the complainants to JCA for the purpose.
The complainants claimed that they were dismissed from employment on December 9, 2002, when
the service contract between PRIME and JCA was terminated. This notwithstanding, they argued that
Adidas was their real employer, not PRIME which, they believed, was merely a recruitment agency
supplying Adidas with manpower. PRIME was being used, they further claimed, to conceal the actual
employment relationship between them and Adidas.
They pointed out that for the years that they were employed, they worked for Adidas, under the
supervision and control of Adidas and JCA personnel. They stressed that their work was related to and
in pursuit of Adidas' principal business activity (the marketing of its products), thereby making them
regular employees of the company. This was their reason for demanding their regularization by Adidas.
Further, the complainants maintained that JCA was a mere alter ego of Adidas and was being used to
further muddle the employment relationship between them and Adidas. JCA's actual role as a dummy
(together with PRIME) for Adidas, the complainants explained, was evidenced by the fact that JCA and
Adidas occupied the same office. JCA took the place of WOSI as distributor of Adidas products.
Elaborating on their "muddled" employment status in relation with Adidas, the complainants bewailed
that JCA was erroneously identified as "distributor" of Adidas products as no evidence showed that JCA
purchased the Adidas products they were selling. 11 Under their supposed Distribution Agreement, the
"Distributor shall purchase the Products only from Adidas or any other sources expressly designated
by Adidas and sell the Products in its own name and for its own account x x x."12
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The complainants asserted that the products they were selling at various outlets remained the
property and under the control of Adidas - it was Adidas that provided the warehouse where the
products were stored, that leased the outlets from department stores, and that provided regular

training to them.13 Also, the proceeds of the sales were directly deposited to the bank account of
Adidas. Moreover, their salaries and other monetary benefits supposedly paid by PRIME were charged
to the account of Adidas, as indicated in their payslips. 14 They argued that if JCA purchased the
products being sold and were already its property, there was no point to still charge complainants'
wages and benefits to the Adidas' account.
These circumstances, complainants stressed, confirmed their position that JCA and PRIME were only
intermediaries of Adidas and were used to conceal Adidas' identity as their real employer.
To substantiate their assertion that PRIME was just an intermediary of Adidas, they submitted
documentary proof that it was not even a registered corporation, labor recruiter, or agency when it
supposedly entered into a contract with JCA; neither with the Securities and Exchange
Commission15nor with the Department of Trade and Industry.16 It was registered as a "job
contractor/subcontractor" only on May 20, 2002. 17 They thus maintained that PRIME was just a laboronly contractor at the time it claimed it had employed them for its supposed undertaking with JCA.
In defense, Adidas argued that in 2002, it amended its Articles of Incorporation18 to enable
it to engage in the retail business without the need to contract the services of distributors
such as JCA, following the approval by the Board of Investments of the application of its mother
company, Adidas Solomon AG, to operate as a foreign retailer in the country. As a consequence, it no
longer renewed its Distribution Agreement with JCA when it expired on December 31, 2002.
Necessarily, it maintained, the Promotion Contract between JCA and PRIME was also terminated,
resulting in the complainants' dismissal. However, for purposes of proper inventory, accounting and
turnover of products, it agreed with JCA for a hold-over period of three months ending March 31,
2003.
Also, Adidas turned down the complainants' demand for regularization as they were employees of
PRIME. It claimed it was PRIME who exercised control over their work; at most, the supervision it
exercised over the complainants was only to provide them guidelines in aid of their marketing work. It
added that neither could it satisfy their money claims because they were legally dismissed when their
contracts with PRIME expired.
For its part, JCA prayed for the dismissal of the complaint as far as it was concerned in view of what it
claimed - its valid job contract with PRIME, the complainants' employer. It averred that it was PRIME
who exercised the power to select, engage, and dismiss the complainants, and who assumed the
obligation to pay their wages. To bolster its position, JCA presented quitclaim and release papers
executed by some employees in favor ofPRIME.19
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JCA added that whatever liability it had with the complainants was limited to satisfying their unpaid
wages to the extent of the work performed under its Promotion Contract with PRIME. However,
PRIME'S payment of its monetary obligations to the complainants extinguished its liability towards
them.
As its co-respondents did, PRIME denied liability, contending that it hired the complainants as
contractual employees for its project with JCA to promote Adidas products. It maintained that their
employment was terminated when its contract with JCA expired and was not renewed. Thus, the
petitioner and the other complainants were not illegally dismissed and were not therefore entitled to
reinstatement and back wages. On the issue of its legal personality as an independent contractor, it
submitted certificates of registration from the DTI, 20 DOLE,21 and SEC22 to establish that it had been in
operation earlier than May 20, 2002.
The Rulings on Compulsory Arbitration
In a decision23 dated February 23, 2004, Labor Arbiter (LA) Elias H. Salinas dismissed the complaint
for lack of merit, holding that PRIME was the complainants' employer as it was PRIME who hired them
to work under its Promotions Contract with JCA. LA Salinas found the complainants' dismissal valid in
view of the termination and nonrenewal of the contract.

LA Salinas denied the complainants' money claims, finding that PRIME had shown that it paid their
13th month pay and service incentive leave pay. However, for reasons of equity and humanitarian
considerations, LA Salinas awarded the petitioner and the complainants financial assistance of one-half
month's salary for every year of service.
The petitioner and 15 of the other complainants appealed. The 15 however moved to withdraw their
appeal, which the National Labor Relations Commission (NLRC) granted in its decision24 of January 23,
2008, leaving only the petitioner to pursue the case. Eventually, NLRC denied the appeal. It also
denied the petitioner's motion for reconsideration, prompting her to seek recourse from the CA
through a petition for certiorari. She charged the NLRC with grave abuse of discretion in rejecting her
appeal and motion for reconsideration; as it was, she lamented, contrary to law and jurisprudence.
The CA Decision
Before the CA, the petitioner reiterated her position in compulsory arbitration that Adidas was her
employer, not JCA or PRIME, since the two entities were mere dummies/intermediaries or were laboronly contractors of Adidas. She insisted that JCA and PRIME carried out - under their respective
contracts - Adidas' merchandising activities using Adidas' premises and equipment with PRIME'S
purported employees working under the supervision and control of Adidas' personnel.
The CA 10th Division denied the petition in its September 21, 2011 25 decision and affirmed the
assailed NLRC rulings as they were not rendered with grave abuse of discretion. It held that the
rulings were supported by evidence establishing PRIME to be a "legitimate job contractor" as it
possessed substantial capital to finance its promotions undertaking with JCA. The evidence, the CA
explained, consisted of remittances to Philhealth, SSS and Pag-ibig 26 which showed that PRIME fulfilled
its obligations toward its employees under the government's welfare programs.
Applying the four-fold employer-employee relationship test,27 the CA found PRIME to be the
complainants' and the petitioner's employer as it was PRIME which (1) hired the complainants; 28 (2)
paid their wages;29 (3) dismissed them upon the expiration of the contract for which they were hired;
and (4) exercised control over them with respect to the conduct of the work to be performed. 30
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Consequently, the CA brushed aside the random certificates of attendance in Adidas seminars 31 of
some of the complainants to prove that Adidas was their employer, agreeing with NLRC finding that
the "certificates only establish the fact that complainants attended the seminars for product
knowledge, service quality, and retail service."32
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The petitioner moved for reconsideration of the CA decision, to no avail, as the CA denied the motion
in its February 20, 2012 resolution.33
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The Petition
The petitioner now asks this Court to reverse the CA rulings, contending that the appeals court
seriously erred and gravely abused its discretion when it held that she was an employee of PRIME, not
of Adidas, and was validly dismissed, contrary to law and applicable jurisprudence.
Before the Court, the petitioner reiterates the arguments she presented to the CA, particularly the
following factual narration:
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1.

She applied at Adidas in its former address at Estrata 200, Emerald Avenue, Ortigas Center
City. After the interviews made by Ms. Cornelia Indon (Head Concession, World of Sports Inc.)
and Mr. Enrique Victoria (Adidas Sales Manager), they ordered her to proceed to the office of
PRIME and from there she was given a letter of introduction ("intro letter") addressed to the
outlet where she was assigned.

2.

She was assigned to different Adidas outlets and she, together with her co-employees, were
supervised by Adidas managers and supervisors Cornelia Indon, Sonny Niebres (Managing

Director) and Philip Go (President). It was not PRIME who supervised them; neither was it
JCA.
3.

The sales in the outlets were deposited directly to the bank account of Adidas and not to JCA
or PRIME bank accounts.

4.

The products being sold and the tools she used in the performance of her duty were owned by
Adidas. Adidas was also the one that paid the rents in the stores where it has concessions.

5.

She continued to work in different Adidas outlets for more than seven years.

The petitioner submits that Adidas, JCA and PRIME failed to refute the above narration or to present
any evidence to the contrary. Citing Lakas sa Industriya ng Kapatirang Haligi ng Alyansa-Pinagbuklod
ng Manggawang Promo ng Burlingame v. Burlingame Corporation,34 she argues that as promo girl,
her work is directly related to Adidas' principal business or operations, which makes her a regular
employee of the company.
On the other hand, she points out, JCA and PRIME did not carry on an independent business or
undertook the performance of their service contracts according to their own manner and methods,
free from the control and supervision of the principal Adidas. The two entities, she insists, were mere
labor-only contractors.
It is thus clear, the petitioner submits, that an employer-employee relationship existed between her
and Adidas. Accordingly, she prays that: (1) she be declared a regular employee of Adidas; (2) Adidas
be ordered (a) to reinstate her with full back wages or to pay her back wages and separation pay if
reinstatement is no longer feasible; (b) to grant her moral and exemplary damages, plus attorney's
fees; and (3) JCA and PRIME be declared jointly and solidarity liable with Adidas for all her other
money claims.
The Case for the Respondents
In its Comment35 filed on June 7, 2012, Adidas asks for the dismissal of the petition, arguing
principally that the petitioner failed to present any cogent reason to reverse the CA factual conclusions
upholding the labor tribunals' ruling that the petitioner was an employee of PRIME and was not
illegally dismissed.
To support its position, Adidas submits that the arguments relied upon by the petitioner are
substantially identical with those raised in her certiorari petition with the CA, which do not merit
further consideration as they had already been correctly passed upon by the appellate court.
Adidas bewails the petitioner's repeated reference to her regular employment with it and not with
PRIME, "adducing in evidence only her self-serving Salaysay which simply stated her baseless
claims."36 On the other hand, it was able to present proof, together with JCA and PRIME, showing that
PRIME was the petitioner's employer, it being, like JCA, an independent and distinct business entity.
The respondents JCA and PRIME opted not to comment on the petition, despite being required by the
Court to do so.37
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The Court's Ruling

We find merit in the petition based on the evidence on record.
The evidence relied upon by LA Salinas, the NLRC, and the CA was insufficient to support their
conclusion that the petitioner was an employee of PRIME. On the contrary, the evidence points to
Adidas as the petitioner's and the complainants' real employer.
PRIME is a labor-only contractor; JCA an agent/intermediary of Adidas

One of the criteria the CA cited as a basis of its conclusion that PRIME was a legitimate job contractor
was its possession of "substantial capital to finance its undertakings," 38 yet it was silent on what these
undertakings were. It merely said: "We reached this conclusion based on records which showed PRIME
has fulfilled its obligations towards its employees as regards remittances to Philhealth, the SSS and
Pag-ibig."39 The CA conclusion, to our mind, fell short of establishing that PRIME satisfied the
substantial-capital requirement for legitimate job contractors under the law and the rules.
Article 106 of the Labor Code provides that "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 the employer.In
such cases, the person or intermediary shall be considered merely 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)
Sec. 5. Department Order No. 18-02, s. of 2002, implementing Articles 106 to 109 of the Labor
Code,prohibits labor-only contracting and defines it as "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 is 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 workers
recruited, supplied or placed by such contractor or sub-contractor are performing activities which are
directly related to the principal business of the employer; or (ii) the contractor does not exercise the
right to control over the performance of the work of the contractual employee, x x x'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." (emphasis supplied)
Aside from PRIME'S remittances of employee contributions to Philhealth, SSS, and Pag-ibig and the
payment for the complainants' and the petitioner's wages, we find no indication, except mostly
general statements from Adidas, PRIME and JCA, that PRIME possessed substantial capital or
investment to operate as a legitimate job contractor or subcontractor.
According to Adidas, not only did PRIME have substantial capital or investment to run its own business
operations independent of its clients, it also has sufficient capability to control and supervise its
employees. Yet it offered no proof to substantiate its claim, 40 other than its recognition of PRIME'S
capability to fulfill its obligations towards its employees.
The same thing is true with PRIME. It likewise offered no proof of how or in what manner its purported
substantial capital financed its "promotional and inter-marketing business" 41 with JCA, except to say
that in the pursuit of its business operations, "it has complied with all the requirements of law anent
the rights, privileges and benefits of its employees."42
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For its part, JCA relied principally on its promotional contract with PRIME to avoid liability, saying that
the terms of their service agreement demonstrate the earmarks of an employer under the four-fold
employer-employee relationship test.43 It also presented no proof of how or in what manner PRIME
carried out its undertaking under the contract; although like Adidas, it acknowledged PRIME'S
payment of the petitioners' and the complainants' wages, and remittances to Philhealth, SSS, and Pagibig.
While the payment of wages and workers' benefits is one of the determinants of an employeremployee relationship, we do not find it a reliable basis in this case. In fact, a closer look at the
payslips44 of PRIME'S supposed employees reveals that the complainants' salaries and benefits were
under the account of Adidas,45 giving credence to their claim that their compensation was charged to
Adidas. If indeed JCA and PRIME were an independent contractor and a subcontractor, respectively,
why would the name "ADIDAS" still appear on the payslips of PRIME'S employees.
The answer lies in the fact that Adidas avoided being identified as the complainants' direct employer

so that it would not have to bear the consequences of the complainants' and the petitioner's
regularization. Notably, the records show46 that these complainants and the petitioner were engaged
not only in 2002, but much earlier; some were even hired in 1995, including the petitioner, who
started selling Adidas products on October 28, 1995. In fact, LA Salinas relied on the complainants'
several years of service of selling Adidas products in awarding financial assistance to them.
Under these circumstances, we have reason to believe that PRIME, the supposed JCA subcontractor,
just assumed the act of paying the complainants' wages and benefits on behalf of Adidas, indicating
thereby that it was a mere agent of Adidas or a labor-only contractor.47
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In the light of the complete absence of proof that PRIME applied its "substantial capital or investment"
in performing the promotional job it contracted with JCA, we find credence in the petitioner's
submission that the products she was selling remained to be the property and under the control of
Adidas; that it was Adidas who owned the warehouse where they were stored; that leased the sales
outlets from department stores; and that provided regular training to her and to the other
complainants. The record shows that this particular claim by the petitioner had not been
disputed by either Adidas or JCA.
Moreover, if in fact Adidas entered a distribution agreement with JCA, we wonder why the products the
petitioner and the other supposed "contractual employees" were selling were retained and remained to
be under the control of Adidas, and also, why the proceeds of the sales went into Adidas' bank
account. The answer is because JCA itself is not an independent contractor. It was merely an agent or
intermediary of Adidas, despite the distribution agreement between them which they did not even
honor since, as required under Section 2.2 of the agreement, 48 the distributor shall purchase the
Adidas products and sell them in its own name and for its own account.
Although Adidas claims that by virtue of the agreement, JCA did not purchase but rather had in its
custody and safekeeping different Adidas products, for distribution to different sales outlets in the
country,49 nowhere in the record does it appear that the agreement had been amended to allow such
arrangement. Neither has it been shown how or in what manner the distribution was to be done. It
was not also shown who managed and provided the storage places and the sales outlets for the
products.
Again, in the absence of evidence that JCA had the wherewithal to undertake its distribution
agreement with Adidas, except to enter into a promotions contract with PRIME, we find merit in the
petitioner's contention that Adidas and JCA, at a time, held office in the same address; and that
Adidas provided the storage places and the outlets for the distribution of its products, not PRIME or
JCA. As the petitioner points out, formerly it was WOSI and later JCA which acted as agent of Adidas.
The record bears out her observations.
The petitioner performed activities necessary to the principal business of Adidas
Thus, the petitioner and the complainants (who withdrew from the case) were performing activities
that were necessary to market the products that Adidas itself manufactured. They sold these products
for several years, starting in June 1995 until December 9, 2000. While Adidas explains that it
amended its articles of incorporation in October 2002 to engage in retail, it cannot be denied that in
1995 it was already in the retail business through its agents WOSI and JCA and labor-only contractor
PRIME. Thus, the petitioner had become an Adidas regular employee a long time before she was
supposedly made a "contractual employee" of PRIME.
Adidas exercised control and supervision over the performance of the petitioner's work
In the absence of evidence showing how or in what manner PRIME carried out its promotion work
under its contract with JCA and how it provided the necessary requirements for such undertaking
(such as the maintenance of storage areas and engagement of sales outlets), we likewise find merit in
the petitioner's submission that it was Adidas who exercised control and supervision over the
petitioner's work performance, through its Sales Manager Sonny Niebres, its President Philip Go, and
even Cornelia Indon, head of the WOSI concession.

In sum, we hold that PRIME failed to satisfy the four-fold employer-employee relationship
test,50making it a labor-only contractor under the law and the rules. Like JCA, it was merely an agent
of Adidas, notwithstanding the quitclaims of some of the complainants in its favor. Adidas, therefore, is
petitioner's real employer who shall be responsible to her in the same manner and extent as if she
were directly employed by the company.51 In this light, we find the petitioner to have been
illegally dismissed, there being obviously no valid cause to and absent due process in her
dismissal.
Consequently, the petitioner is entitled under the law 52 to reinstatement, without loss of seniority
rights and other privileges, and with full back wages. Should reinstatement no longer be feasible, she
shall be entitled to full back wages and separation pay at one month's pay for every year of service.
However, her claim for other monetary benefits is denied as she failed to refute LA Salinas' ruling that
she had been paid her 13th month pay and service incentive leave pay.
Further, we find the respondents to have shown bad faith in the petitioner's dismissal as it resulted
from the prohibited labor-only contracting arrangement imposed on her since October 28, 1995. Thus,
the petitioner is also entitled to damages and to attorney's fees as she was compelled to litigate to
protect her rights. Under the circumstances, we deem an award to the petitioner of P50,000.00 each
in moral and exemplary damages, plus ten percent attorney's fees reasonable, to be paid jointly and
solidarity by Adidas, PRIME, and JCA.
WHEREFORE, premises considered, the petition is GRANTED. The assailed decision and resolution of
the Court of Appeals are SET ASIDE. The respondent Adidas Philippines, Inc., is ORDERED to
reinstate the petitioner Marites R. Cusap to her former position without loss of seniority rights and
other privileges, and to pay her back wages from her illegal dismissal on December 9, 2002, up to her
actual reinstatement; and should reinstatement no longer be feasible, to pay her back wages and
separation pay at one month's pay for every year of service.
Adidas Philippines, Inc., Promotion Resources & Inter-Marketing Exponents, Inc., and JC Athletes Inc.,
are ORDERED to pay the petitioner, jointly and solidarity, moral damages of P50,000.00, exemplary
damages of P50,000.00 and 10% of all the sums due under this Decision as attorney's fees.
SO ORDERED

G.R. No. 182255, June 15, 2015

PETRON CORPORATION, Petitioner, v. ARMZ CABERTE, ANTONIO CABERTE, JR., MICHAEL

SERVICIO,* ARIEL DEVELOS, ADOLFO GESTUPA, ARCHIE PONTERAS, ARNOLD BLANCO,
DANTE MARIANO,* VIRGILIO GALOROSA, AND CAMILO TE,* Respondents.
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari1 assails the November 14, 2007 Decision2 of the Court of Appeals
(CA) in CA-G.R. SP No. 82356 which reversed the May 14, 2003 Decision 3 and November 27, 2003
Resolution4 of the National Labor Relations Commission (NLRC) in NLRC Case No. V-000329-2002. The
NLRC affirmed the March 7, 2002 Decision5 of the Labor Arbiter dismissing the Complaints for illegal
dismissal and payment of monetary claims filed by respondents Armz Caberte (Caberte), Antonio
Caberte, Jr. (Caberte Jr.), MichaeServicio (Servicio), Ariel Develos (Develos), Adolfo Gestupa
(Gestupa), Archie Ponteras (Ponteras), Arnold Blanco (Blanco), Dante Mariano (Mariano), Virgilio
Galorosa (Galorosa) and Camilo Te (Te) against petitioner Petron Corporation (Petron), ABC
Contracting Services (ABC), and its owner Antonio B. Caberte, Sr. (Caberte Sr.). Likewise assailed is
the CA Resolution6 dated March 4, 2008 which denied Perron's Motion for Reconsideration.
Factual Antecedents
Petron is a domestic corporation engaged in the manufacture and distribution to the general public of
various petroleum products. In pursuance of its business, Petron owns and operates several bulk
plants in the country for receiving, storing and distributing its products.
On various dates from 1979 to 1998, respondents were hired to work at Petron's Bacolod Bulk Plant in
San Patrick, Bacolod City, Negros Occidental as LPG/Gasul fillers, maintenance crew, warehousemen,
utility workers and tanker receiving crew.
For the periods from March 1, 1996 to February 28, 1999 and November 1, 1996 to June 30, 1999,
Petron and ABC, a labor contracting business owned and operated by Caberte Sr., entered into a
Contract for Services7 and a Contract for LPG Assistance Services.8 Under both service contracts, ABC
undertook to provide utility and maintenance services to Petron in its Bacolod Bulk Plant.
Proceedings before the Labor Arbiter
On July 2, 1999, respondents Caberte, Caberte Jr., Servicio, Develos, Gestupa, Ponteras, Blanco and
Mariano filed before the Labor Arbiter a Complaint 9 for illegal dismissal, underpayment of wages and
non-payment of allowances, 13th month pay, overtime pay, holiday pay, service incentive leave pay,
moral and exemplary damages and attorney's fees against Petron, ABC and Caberte Sr., docketed as
NLRC RAB VI Case No. 06-07-10588-99. Subsequently, respondents Galorosa and Te separately filed
similar Complaints10 docketed as NLRC RAB VI Case No. 06-07-10675-99 and RAB Case No. 06-0910785-99, respectively. The three Complaints were consolidated in an Order 11 dated October 25, 1999
of the Labor Arbiter.
Respondents averred that even before Petron engaged ABC as contractor in 1996, most of them had
already been working for Petron for years. However, every time Petron engages a new contractor, it
would designate such new contractor as their employer. Despite such arrangement, Petron exercised
control and supervision over their work, the performance of which is necessary and desirable in its
usual trade and business. Respondents added that ABC is a mere labor-only contractor which had no
substantial capital and investment, and had no control over the manner and method on how they
accomplished their work. Thus, Petron is their true employer. On July 1, 1999, however, Petron no
longer allowed them to enter and work in the premises of its Bacolod Bulk Plant. Hence, the
complaints for illegal dismissal.
On the other hand, Petron asserted that ABC is an independent contractor which supplied the needed
manpower for the maintenance of its bulk handling premises and offices, as well as for tanker
assistance in the receiving and re-filling of its LPG products; that among the workers supplied by ABC

were respondents, except Caberte Jr., who does not appear to be one of those assigned by ABC to
work for it; that it has no direct control and supervision over respondents who were tasked to perform
work required by the service contracts it entered into with ABC; and, that it cannot allow the
continuous employment of respondents beyond the expiration of the contracts with ABC. To prove the
legitimacy and capacity of ABC as an independent contractor, Petron submitted the following
documents: (1) Contractor's Pre-Qualification Statement; 12 (2) Petron's Conflict of Interest Policy
signed by Caberte Sr., as proprietor of ABC;13 (3) ABC's Certificate of Registration issued by the
Bureau of Internal Revenue (BIR);14 (4) Value-Added Tax Return for the year 1995;15 (5) BIR
Confirmation Receipt;16 (6) Caberte Sr.'s Tax Identification Number (TIN) issued by the BIR;17 (7)
Caberte Sr.'s Individual Income Tax Return for the years 1993 18 and 1994;19 (8) ABC's Audited
Financial Statements for the years 1992,20 199321 and 1994;22 (9) ABC's Mayor's Permit for the year
1995;23 and, (10) ABC's Certificate of Registration of Business Name issued by the Department of
Trade and Industry (DTI).24 In addition, it averred that ABC, as a contractor, had duly posted a
performance bond25 and took out insurance policies26 against liabilities. Petron likewise presented
affidavits27 of two Petron employees stating that respondents do not perform activities related to
Petron's business operation but only tasks which are intermittent and which can be contracted out.
Also submitted were affidavits28 of three former employees of ABC attesting to the fact that during
their stint in Petron, they used materials such as floor polisher, floor wax, broom, dustpan, cleaning
rags and other equipment owned by ABC to accomplish their tasks and that they worked under the
supervision of Caberte Sr., through the latter's designated overall supervisor, respondent Caberte.
Petron further revealed that ABC/Caberte Sr. has the power to hire and fire respondents and was the
one paying their wages.
In a Decision29 dated March 7, 2002, Executive Labor Arbiter Danilo C. Acosta (LA Acosta) held that
ABC is an independent contractor that has substantial capital and that respondents were its
employees. He likewise ruled that ABC's cessation of operation is a force majeure that justifies
respondents' dismissal. Nonetheless, LA Acosta awarded respondents separation pay based on the
applicable minimum wage rate at the time of expiration of the contracts of service. He, however,
denied the claims for overtime pay and night shift differential pay for lack of merit. The dispositive
portion of the Decision reads:
Conformably with the foregoing, respondent ABC is hereby ORDERED TO PAY EACH COMPLAINANT,
namely, complainants Antonio Caberte, Jr., Armz M. Caberte, Michael Servicio, Ariel Develos, Adolfo
Gestupa, Archie Ponteras, Arnold Blanco, Dante Mirano, Virgilio Galorosa and Camilo Te, separation
pay of one month for every year of service.
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All other claims and the claims against respondent PETRON are hereby ORDERED DISMISSED for lack
of merit.
SO ORDERED.30
Proceedings before the National Labor Relations Commission
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Respondents appealed to the NLRC where they insisted that they are regular employees of Petron
since ABC is a labor-only contractor.
In a Decision31 dated May 14, 2003, the NLRC affirmed the ruling of the Labor Arbiter after it found
that ABC is not a mere labor contractor but a legitimate independent contractor. In so ruling, the NLRC
took into account the following: (1) ABC/Caberte Sr. has the power of control over respondents as
Caberte Sr. was the one controlling and supervising respondents in their work. While Petron intervened
at times, the same was limited to safety precautions due to the hazardous nature of the products the
workers were dealing with; (2) ABC possessed sufficient capital and equipment per the various
documents that Petron submitted showing the former's financial capability to maintain its status as an
accredited contractor of the latter. In fact, Caberte Sr. was even able to establish ABC's Bacolod City
Office; and, (3) ABC/Caberte Sr. has the power to hire and dismiss respondents. Hence, the
dispositive portion of the Decision, viz:
WHEREFORE, premises considered, this appeal is DISMISSED and the decision of the Executive Labor
Arbiter is AFFIRMED.
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SO ORDERED.32

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Respondents filed a Motion for Reconsideration which was, however, denied in the NLRC
Resolution33dated November 27, 2003.
Proceedings before the Court of Appeals
Aggrieved, respondents filed a Petition for Certiorari34 before the CA ascribing upon the NLRC grave
abuse of discretion amounting to lack or in excess of jurisdiction in holding that they are not
employees of Petron.
The CA, in a Decision35 dated November 14, 2007, found merit in respondents' Petition. It ruled that
ABC is engaged in labor-only contracting because: first, it did not have substantial capital or
investment in the form of tools, equipment, implements, machineries and work premises, actually and
directly used in the performance or completion of the job it contracted out from Petron; second, the
work assigned to respondents were directly related to Petron's business; and, third, the nature of
Petron's business requires it to exercise control over the performance of respondents' work.
Consequently, the CA declared respondents as Petron's regular employees. And since Petron did not
comply with the requirements under the Labor Code when it terminated their employment,
respondents were illegally dismissed and therefore entitled to reinstatement without loss of seniority
rights and other privileges, with the alternative relief of separation pay in lieu of reinstatement, and to
full backwages, inclusive of allowances, and to other benefits or their monetary equivalent computed
from the time compensation was withheld up to the time of actual reinstatement. The CA, however,
denied respondents' claims for moral and exemplary damages in the absence of bad faith in Petron's
act of dismissing them but awarded respondents 10% attorney's fees for having to litigate to protect
their interests. The dispositive portion of the Decision reads:
WHEREFORE, in view of the foregoing, the decision of the National Labor Relations Commission dated
May 14, 2003, in NLRC Case No. V-000329-2002, affirming the March 7, 2002 Decision of Executive
Labor Arbiter Danilo C. Acosta of the Sub-Regional Arbitration Branch VI, Bacolod City, is hereby
REVERSED.
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Respondent Petron Corporation is ordered to reinstate Armz Caberte, Antonio Caberte, Jr., Michael
Servicio, Ariel Develos, Adolfo Gestupa, Archie Ponteras, Arnold Blanco, Dante Mirano, Virgilio
Galorosa and Camilo Te to their former positions with the same rights and benefits and the same
salary rates as its regular employees.
Respondent Petron Corporation is likewise ordered to pay petitioner's attorney's fees equivalent to ten
percent (10%) of the monetary award.
All other claims are dismissed for lack of merit.
Costs against private respondent Petron.
SO ORDERED.36
Petron's Motion for Reconsideration37 was denied by the CA in its Resolution38 dated March 4, 2008.
Hence, this present recourse.
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Issues
Petron presents the following grounds for review:
XXX THE COURT OF APPEALS SERIOUSLY ERRED AND DECIDED A QUESTION OF SUBSTANCE IN A
MANNER NOT IN ACCORD WITH LAW AND WITH APPLICABLE JURISPRUDENCE IN FINDING THAT ABC
CONTRACTING SERVICES IS A MERE LABOR-ONLY CONTRACTOR AND IN HOLDING THAT
RESPONDENTS ARE THUS REGULAR EMPLOYEES OF THE COMPANY CONSIDERING THAT:
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A. THERE IS A LEGITIMATE SERVICE CONTRACTING AGREEMENT BETWEEN THE COMPANY AND

ABC CONTRACTING SERVICES;
B. THE CONTRACTED SERVICES THAT RESPONDENTS PERFORMED ARE NOT DIRECTLY RELATED
AND NECESSARY OR DESIRABLE TO THE COMPANY'S PRINCIPAL BUSINESS;

C. ABC CONTRACTING SERVICES CARRIES ON AN INDEPENDENT BUSINESS AND POSSESSES

SUBSTANTIAL CAPITAL AND INVESTMENT;
D. RESPONDENTS ARE EMPLOYEES OF ABC CONTRACTING SERVICES.39
Petron asserts that ABC, as an independent contractor, rendered janitorial, utility and LPG assistance
services by virtue of legitimate contracts entered into by and between them. As such, the services
rendered by respondents were purely maintenance and utility works which are not directly related,
necessary and desirable to Petron's main business.
Petron likewise insists that ABC is not a labor-only contractor as it carries on an independent business
and uses its own equipment, tools, materials and supplies in the performance of its contracted
services. Further, it asserts that ABC wielded and exercised the power of selection or engagement,
payment of wages, discipline or dismissal, and of control over respondents.
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Our Ruling
The Petition has no merit.
Labor-only contracting and permissible job contracting, defined; a contractor is presumed by law to be
a labor-only contractor; anyone claiming the supposed status of an independent contractor bears the
burden of proving the same.
As defined under Article 106 of the Labor Code, labor-only contracting, a prohibited act, is an
arrangement where the contractor, who does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, supplies workers to an employer and
the workers recruited are performing activities which are directly related to the principal business of
such employer.
Permissible or legitimate job contracting or subcontracting, on the other hand, "refers to an
arrangement whereby a principal agrees to put out or farm out with the contractor or subcontractor
the performance or completion of a specific job, work, or service within a definite or predetermined
period, regardless of whether such job, work, or service is to be performed or completed within or
outside the premises of the principal. A person is considered engaged in legitimate job contracting or
subcontracting if the following conditions concur: (a) the contractor carries on a distinct and
independent business and partakes the contract work on his account under his own responsibility
according to his own manner and method, free from the control and direction of his employer or
principal in all matters connected with the performance of his work except as to the results thereof;
(b) the contractor has substantial capital or investment; and (c) the agreement between the principal
and the contractor or subcontractor assures the contractual employees' entitlement to all labor and
occupational safety and health standards, free exercise of the right to self-organization, security of
tenure, and social welfare benefits."40
To determine whether a contractor is engaged in labor-only contracting or permissible job contracting,
"the totality of the facts and the surrounding circumstances of the case are to be considered." 41
Petron contends that the CA erred in ruling that ABC is a labor-only contractor since respondents failed
to prove that ABC is not an independent contractor. The contention, however, is incorrect. The law
presumes a contractor to be a labor-only contractor and the employees are not expected to prove the
negative fact that the contractor is a labor-only contractor.42 Thus, it is not respondents but Petron
which bears the burden of establishing that ABC is not a labor-only contractor but a legitimate
independent contractor. As held in Alilin v. Petron Corporation,43 "where the principal is the one
claiming that the contractor is a legitimate contractor, the burden of proving the supposed status of
the contractor rests on the principal."
Petron failed to overcome the presumption that ABC is a labor-only contractor.
Foremost, Petron banks on the contracts of services it entered into with ABC. It contends that the said

contracts were legitimate business transactions and were not only for the purpose of ABC providing
manpower or labor-only to Petron, but rather for specific services pertaining to janitorial, utility and
LPG assistance.
Suffice it to state, however, that Petron cannot place reliance on the contracts it entered into with ABC
since these are not determinative of the true nature of the parties' relationship. As held in Babas v.
Lorenzo Shipping Corporation,44 the character of the business, whether as labor-only contractor or as a
job contractor, should be determined by the criteria set by statute and the parties cannot dictate by
the mere expedience of a unilateral declaration in a contract the character of their business.
Next, Petron endeavours to prove that ABC is a legitimate independent contractor.
To restate, a contractor is deemed to be a labor-only contractor if the following elements are present:
(i) the contractor does not have substantial capital or investment to actually perform the job, work or
service under its own account and responsibility; and (ii) the employees recruited, supplied or placed
by such contractor are performing activities which are directly related to the main business of the
principal.45 Conversely, in proving that ABC is not a labor-only contractor, it is incumbent upon Petron
to show that ABC has substantial capital or investment and that respondents were performing
activities which were not directly related to Petron's principal business.
To show that ABC has substantial capital or investment, Petron submitted, among others, ABC's BIR
Certificate of Registration, VAT Return, BIR Confirmation Receipt, TIN, Individual Income Tax Return,
Mayor's Permit and DTI Certificate of Registration. However, the Court observes that these documents
are not conclusive evidence of ABC's financial capability. At most, they merely show that ABC is
engaged in business and licensed by the appropriate government agencies.
As for the financial statements presented, it appears that only the audited financial statements of ABC
for the years 1992, 1993 and 1994 were submitted. As aptly observed by the CA, these documents
cannot be given much credence considering that the service contracts between Petron and ABC
commenced in 1996 and ended in 1999. However, no audited financial statements for the years
material to this case (1996, 1997, 1998 and 1999) were submitted. Also, as per record, ABC was
obligated to submit to Petron at least once every two years its latest audited financial statements,
among others, as a requirement for the retention of its status as an accredited contractor of
Petron.46 If it is true that ABC continued to possess its financial qualification after 1994, Petron should
have presented ABC's financial statements for the said years which are presumed to be in Petron's
possession considering that they are part of the requirements that it itself set for its accredited
contractors.
Neither does the performance bond taken out by ABC serve as significant evidence of its substantial
capital. As aptly explained by the CA:
The performance bond posted by ABC Contracting Services likewise fails to convince us that the
former has substantial capital or investment inasmuch as it was not shown that the performance bond
in the amount of P596,799.51 was enough to cover not only payrolls, rentals and equipment but also
possible damages to the equipment and to third parties and other contingent liabilities. Moreover, this
Court takes judicial notice that bonds of this nature are issued upon payment of a small percentage as
premium without necessarily requiring any guarantee.
chanroble svirtuallawlibrary

If at all, the bond was a convenient smoke screen to disguise the real nature of ABC's employment as
an agent of Petron.47
Anent substantial investment in the form of equipment, tools, implements, machineries and work
premises, Petron likewise failed to show that ABC possessed the same. Instead, what is evident in the
records was that ABC had been renting a forklift from Petron in order to carry out the job of
respondents.48 This only shows that ABC does not own basic equipment needed in the performance of
respondents' job. Similarly and again as correctly held by the CA, the fact that ABC leased a property
for the establishment of its Bacolod office is immaterial since it was not shown that it was used in the
performance or completion of the job contracted out. "Substantial capital or investment," under
Section 5, Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code (Implementing
Rules), as amended by Department Order No. 18-02,49 does not include those which are not actually
and directly used in the performance of the job contracted out.
cralawlawlibrary

Going now to the activities performed by respondents, Petron avers that the same were not necessary
or desirable to its principal business. In fact, the service contracts it entered into with ABC clearly
referred to respondents' functions as maintenance and utility works only which are remote to its
principal business of manufacturing and distributing petroleum products.
The Court finds otherwise. Gestupa, Ponteras, Develos, Blanco and Mariano were LPG fillers and
maintenance crew; Caberte was an LPG operator supervisor; Te was a warehouseman and utility
worker; and Servicio and Galorosa were tanker receiving crew and utility workers. Undoubtedly, the
work they rendered were directly related to Petron's main business, vital as they are in the
manufacture and distribution of petroleum products. Besides, some of the respondents were already
working for Petron even before it engaged ABC as a contractor in 1996. Albeit it was made to appear
that they were under the different contractors that Petron engaged over the years, respondents have
been regularly performing the same tasks within the premises of Petron. This "the repeated and
continuing need for the performance of the job is sufficient evidence of the necessity, if not
indispensability of the activity to the business."50
What further militates against Perron's claim that ABC, as an alleged independent contractor, is the
true employer of respondents, is the fact that Petron has the power of control over respondents in the
performance of their work. It bears stressing that the power of control merely calls for the existence of
the right to control and not necessarily the exercise thereof.51 Here, Petron admitted in its Position
Paper that the supervision of a Petron employee is required over LPG and tanker assistance jobs for
inventory control and safety checking purposes. It explained that due to the hazardous nature of its
products, constant checking of the procedures in their handling is essential considering the high
possibility of fatal accidents. It also admitted that it was the one supplying the needed materials and
equipment in discharging these functions to better insure the integrity, quality and safety of its
products.
From the foregoing, it is clear that Petron failed to discharge its burden of proving that ABC is not a
labor-only contractor. Consequently, and as warranted by the facts, the Court declares ABC as a mere
labor-only contractor. "A finding that a contractor is a 'labor-only' contractor is equivalent to declaring
that there is an employer-employee relationship between the principal and the employees of the
supposed contractor, and the 'labor-only' contractor is considered as a mere agent of the principal, the
real employer."52 Accordingly in this case, Petron is declared to be the true employer of respondents
who are considered regular employees in view of the fact that they have been regularly performing
activities which are necessary and desirable to the usual business of Petron for a number of years.
Respondents, except Antonio Caberte, Jr., were illegally dismissed.
With respect to respondents' dismissal, Petron claimed that the same sprang from the termination or
conclusion of the service contracts it entered into with ABC. As earlier held, respondents are
considered regular employees. In cases of regular employment, an employer may only terminate the
services of an employee for just or authorized causes under the law.53 As the reason given by Petron
dismissing respondents does not constitute a just or authorized cause for termination, 54 the latter are
declared to have been illegally dismissed. Respondents are thus entitled to all the remedies of an
illegally dismissed employee, i.e., backwages and reinstatement, or if no longer feasible, separation
pay. The CA is thus correct in ruling that respondents are entitled to reinstatement without loss of
seniority rights and other privileges. However, if reinstatement is no longer feasible, respondents are
entitled to receive separation pay equivalent to one month salary for every year of service. In
addition, respondents are entitled to full backwages from the time they were not allowed to work on
July 1, 1999 up to actual reinstatement or finality of this Decision as the case may be.
An exception must be taken, however, with respect to Caberte Jr. From the beginning, Petron disputes
the fact he ever worked for Petron. Therefore, before his case against Petron can prosper, Caberte Jr.
must first establish that an employer-employee relationship existed between them since it is basic that
the issue of illegal dismissal is premised on the existence of such relationship between the
parties.55 Unfortunately, nowhere in the records does it show that he indeed worked for Petron.
Consequently, his complaint should be dismissed.

WHEREFORE, the petition is DENIED. The November 14, 2007 Decision and the March 4, 2008
Resolution of the Court of Appeals in CA-G.R. SP No. 82356 are MODIFIED in that: (1) the Complaint
of respondent Antonio Caberte, Jr. against petitioner Petron Corporation is dismissed; and (2)
petitioner Petron Corporation is ordered to reinstate all of the respondents, except for Antonio
Caberte, Jr., to their former positions with the same rights and benefits and the same salary rates as
its regular employees, or if reinstatement is no longer feasible, to separation pay equivalent to one
month salary for every year of service and to pay them their full backwages from July 1, 1999 until
actual reinstatement or upon finality of this Decision as the case may be, as well as attorney's fees
equivalent to 10% of the monetary award, with costs against Petron Corporation.
SO ORDERED

G.R. No. 204406

February 26, 2014

MACARTHUR MALICDEM and HERMENIGILDO FLORES, Petitioners,

vs.
MARULAS INDUSTRIAL CORPORATION and MIKE MANCILLA, Respondents.
DECISION
MENDOZA, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court filed by Macarthur
Malicdem (Malicdem) and Hermenigildo Flores (Flores) assails the July 18, 2012
Decision and the November 12, 2012 Resolution of the Court of Appeals (CA) in CA-G.R.
SP No. 1244 70, dismissing their petition for certiorari under Rule 65 in an action for illegal
dismissal.
1

The Facts:
A complaint for illegal dismissal, separation pay, money claims, moral and exemplary
damages, and attorney's fees was filed by petitioners Malicdem and Flores against
respondents Marulas Industrial Corporation (Marulas) and Mike Mancilla (Mancilla), who
were engaged in the business of manufacturing sacks intended for local and export
markets.
4

Malicdem and Flores were first hired by Marulas as extruder operators in 2006, as shown
by their employment contracts. They were responsible for the bagging of filament yarn, the
quality of pp yarn package and the cleanliness of the work place area. Their employment
contracts were for a period of one (1) year. Every year thereafter, they would sign a
Resignation/Quitclaim in favor of Marulas a day after their contracts ended, and then sign
another contract for one (1) year. Until one day, on December 16, 2010, Flores was told not
to report for work anymore after being asked to sign a paper by Marulas' HR Head to the
effect that he acknowledged the completion of his contractual status. On February 1, 2011,
Malicdem was also terminated after signing a similar document. Thus, both claimed to have
been illegally dismissed.
Marulas countered that their contracts showed that they were fixed-term employees for a
specific undertaking which was to work on a particular order of a customer for a specific
period. Their severance from employment was due to the expiration of their contracts.
On February 7, 2011, Malicdem and Flores lodged a complaint against Marulas and
Mancilla for illegal dismissal.
On July 13, 2011, the Labor Arbiter (LA) rendered a decision in favor of the respondents,
finding no illegal dismissal. He ruled that Malicdem and Flores were not terminated and that
their employment naturally ceased when their contracts expired. The LA, however, ordered
Marulas to pay Malicdem and Flores their respective wage differentials, to wit:
5

WHEREFORE, the complaints for illegal dismissal are dismissed for lack of merit.
Respondent Marulas Industrial Corporation is, however, ordered to pay complainants wage
differential in the following amounts:

1.

Macarthur Malicdem

P20,111.26

2/2/07 6/13/08 = None

6/14/08 8/27/08 = 2.47 mos.
P377 362 = P15
x 26 days x 2.47 mos. =

963.30

8/28/08 6/30/10 = 22.06 mos.

P382 P362 = P20
x 26 days x 22.06 mos. =

11,471.20

7/1/10 2/2/11 = 7.03 mos.

P404 P362 = P42
x 26 days x 7.03 mos. =

7,676.76
20,111.26

; and
2.

Herminigildo Flores

P18,440.50

2/2/08 6/13/08 = 4.36 mos. None

6/14/08 8/27/08 =

963.30

8/28/08 6/30/10 =

11,471.20

7/1/10 12/16/10 = 5.50 mos.

P404 x P362 = P42
x 26 days x 5.50 mos. =

6,006.00
18,440.50

All other claims are dismissed for lack of merit.

SO ORDERED.

Malicdem and Flores appealed to the NLRC which partially granted their appeal with the
award of payment of 13th month pay, service incentive leave and holiday pay for three (3)
years. The dispositive portion of its December 19, 2011 Decision reads:
7

WHEREFORE, the appeal is GRANTED IN PART. The Decision of Labor Arbiter Raymund
M. Celino, dated July 13, 2011, is MODIFIED. In addition to the award of salary differentials,
complainants should also be awarded 13th month pay, service incentive leave and holiday
pay for three years.
SO ORDERED.

Still, petitioners filed a motion for reconsideration, but it was denied by the NLRC on
February 29, 2011.
Aggrieved, Malicdem and Flores filed a petition for certiorari under Rule 65 with the CA.
On July 18, 2012, the CA denied the petition, finding no grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of the NLRC. It ruled that the issue of
whether or not the petitioners were project employees or regular employees was factual in
nature and, thus, not within the ambit of a petition for certiorari. Moreover, it accorded
respect and due consideration to the factual findings of the NLRC, affirming those of the LA,
as they were supported by substantial evidence.
9

On the substantive issue, the CA explained that "the repeated and successive rehiring of
project employees do not qualify them as regular employees, as length of service is not the
controlling determinant of the employment tenure of a project employee, but whether the
employment has been fixed for a specific project or undertaking, its completion has been
determined at the time of the engagement of the employee."
10

Corollarily, considering that there was no illegal dismissal, the CA ruled that payment of
backwages, separation pay, damages, and attorney's fees had no factual and legal bases.
Hence, they could not be awarded to the petitioners.
Aggrieved, Malicdem and Flores filed a motion for reconsideration, but their pleas were
denied in the CA Resolution, dated November 12, 2012.
The Petition
Malicdem and Flores now come before this Court by way of a petition for review on
certiorari under Rule 45 of the Rules of Court praying for the reversal of the CA decision
anchored on the principal argument that the appellate court erred in affirming the NLRC
decision that there was no illegal dismissal because the petitioners contracts of
employment with the respondents simply expired. They claim that their continuous rehiring
paved the way for their regularization and, for said reason, they could not be terminated
from their jobs without just cause.
In their Comment, the respondents averred that the petitioners failed to show that the CA
erred in affirming the NLRC decision. They posit that the petitioners were contractual
employees and their rehiring did not amount to regularization. The CA cited William Uy
Construction Corp. v. Trinidad, where it was held that the repeated and successive rehiring
of project employees did not qualify them as regular employees, as length of service was
not the controlling determinant of the employment tenure of a project employee, but whether
the employment had been fixed for a specific project or undertaking, its completion had
been determined at the time of the engagement of the employee. The respondents add that
for said reason, the petitioners were not entitled to full backwages, separation pay, moral
and exemplary damages, and attorneys fees.
11

12

Now, the question is whether or not the CA erred in not finding any grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the NLRC.

The Courts Ruling:

The Court grants the petition.
The petitioners have convincingly shown that they should be considered regular employees
and, as such, entitled to full backwages and other entitlements.
A reading of the 2008 employment contracts, denominated as "Project Employment
Agreement," reveals that there was a stipulated probationary period of six (6) months from
its commencement. It was provided therein that in the event that they would be able to
comply with the companys standards and criteria within such period, they shall be
reclassified as project employees with respect to the remaining period of the effectivity of
the contract. Specifically, paragraph 3(b) of the agreement reads:
13

The SECOND PARTY hereby acknowledges, agrees and understands that the nature of
his/her employment is probationary and on a project-basis. The SECOND PARTY further
acknowledges, agrees and understands that within the effectivity of this Contract, his/her
job performance will be evaluated in accordance with the standards and criteria explained
and disclosed to him/her prior to signing of this Contract. In the event that the SECOND
PARTY is able to comply with the said standards and criteria within the probationary period
of six month/s from commencement of this Contract, he/she shall be reclassified as a
project employee of (o)f the FIRST PARTY with respect to the remaining period of the
effectivity of this Contract.
Under Article 281 of the Labor Code, however, "an employee who is allowed to work after a
probationary period shall be considered a regular employee." When an employer renews a
contract of employment after the lapse of the six-month probationary period, the employee
thereby becomes a regular employee. No employer is allowed to determine indefinitely the
fitness of its employees. While length of time is not the controlling test for project
employment, it is vital in determining if the employee was hired for a specific undertaking or
tasked to perform functions vital, necessary and indispensable to the usual business of
trade of the employer. Thus, in the earlier case of Maraguinot, Jr. v. NLRC, it was ruled
that a project or work pool employee, who has been: (1) continuously, as opposed to
intermittently, rehired by the same employer for the same tasks or nature of tasks; and (2)
those tasks are vital, necessary and indispensable to the usual business or trade of the
employer, must be deemed a regular employee. Thus:
14

15

16

x x x. Lest it be misunderstood, this ruling does not mean that simply because an employee
is a project or work pool employee even outside the construction industry, he is deemed,
ipso jure, a regular employee. All that we hold today is that once a project or work pool
employee has been: (1) continuously, as opposed to intermittently, re-hired by the same
employer for the same tasks or nature of tasks; and (2) these tasks are vital, necessary and
indispensable to the usual business or trade of the employer, then the employee must be
deemed a regular employee, pursuant to Article 280 of the Labor Code and jurisprudence.
To rule otherwise would allow circumvention of labor laws in industries not falling within the
ambit of Policy Instruction No. 20/Department Order No. 19, hence allowing the prevention
of acquisition of tenurial security by project or work pool employees who have already
gained the status of regular employees by the employer's conduct.
1wphi1

The test to determine whether employment is regular or not is the reasonable connection
between the particular activity performed by the employee in relation to the usual business
or trade of the employer. If the employee has been performing the job for at least one year,
even if the performance is not continuous or merely intermittent, the law deems the
repeated and continuing need for its performance as sufficient evidence of the necessity, if
not indispensability of that activity to the business.
17

Guided by the foregoing, the Court is of the considered view that there was clearly a
deliberate intent to prevent the regularization of the petitioners.
To begin with, there is no actual project. The only stipulations in the contracts were the
dates of their effectivity, the duties and responsibilities of the petitioners as extruder
operators, the rights and obligations of the parties, and the petitioners compensation and
allowances. As there was no specific project or undertaking to speak of, the respondents
cannot invoke the exception in Article 280 of the Labor Code. This is a clear attempt to
frustrate the regularization of the petitioners and to circumvent the law.
18

Next, granting that they were project employees, the petitioners could only be considered as
regular employees as the two factors enumerated in Maraguinot, Jr., are present in this
case. It is undisputed that the petitioners were continuously rehired by the same employer
for the same position as extruder operators. As such, they were responsible for the
operation of machines that produced the sacks. Hence, their work was vital, necessary and
indispensable to the usual business or trade of the employer.
In D.M. Consunji, Inc. v. Estelito Jamin and Liganza v. RBL Shipyard Corporation, the
Court reiterated the ruling that an employment ceases to be coterminous with specific
projects when the employee is continuously rehired due to the demands of the employers
business and re-engaged for many more projects without interruption.
19

20

The respondents cannot use the alleged expiration of the employment contracts of the
petitioners as a shield of their illegal acts. The project employment contracts that the
petitioners were made to sign every year since the start of their employment were only a
stratagem to violate their security of tenure in the company. As restated in Poseidon Fishing
v. NLRC, "if from the circumstances it is apparent that periods have been imposed to
preclude acquisition of tenurial security by the employee, they should be disregarded for
being contrary to public policy."
21

The respondents invocation of William Uy Construction Corp. v. Trinidad is misplaced

because it is applicable only in cases involving the tenure of project employees in the
construction industry. It is widely known that in the construction industry, a project
employee's work depends on the availability of projects, necessarily the duration of his
employment. It is not permanent but coterminous with the work to which he is assigned. It
would be extremely burdensome for the employer, who depends on the availability of
projects, to carry him as a permanent employee and pay him wages even if there are no
projects for him to work on. The rationale behind this is that once the project is completed it
would be unjust to require the employer to maintain these employees in their payroll. To do
so would make the employee a privileged retainer who collects payment from his employer
22

23

24

25

for work not done. This is extremely unfair to the employers and amounts to labor coddling
at the expense of management. "
26

Now that it has been clearly established that the petitioners were regular employees, their
termination is considered illegal for lack of just or authorized causes. Under Article 279 of
the Labor Code, an employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their monetary equivalent computed
from the time his compensation was withheld from him up to the time of his actual
reinstatement. The law intends the award of backwages and similar benefits to accumulate
past the date of the LA decision until the dismissed employee is actually reinstated.
WHEREFORE, the petition is GRANTED. The assailed July 18, 2012 decision of the Court
of Appeals and its November 12, 2012 Resolution in CA-G.R. SP No. 1244 70, are hereby
ANNULLED and SET ASIDE.
Accordingly, respondent Marulas Industrial Corporation is hereby ordered to reinstate
petitioners Macarthur Malicdem and Hermenigildo Flores to their former positions without
loss of seniority rights and other privileges and to pay their full backwages, inclusive of
allowances and their other benefits or their monetary equivalent computed from the time
their compensations were withheld from them up to the time of their actual reinstatement
plus the wage differentials stated in the July 13, 2011 decision of the Labor Arbiter, as
modified by the December 19, 2011 NLRC decision.
SO ORDERED.

G.R. No. 199554, February 18, 2015

ZENAIDA PAZ, Petitioner, v. NORTHERN TOBACCO REDRYING CO., INC., AND/OR ANGELO
ANG, Respondents.
DECISION
LEONEN, J.:

Zenaida Paz filed this Petition1 praying that the computation of Petitioners Retirement Pay as
determined by the National Labor Relations Commission in its Decision dated 08 December 2008 be
reinstated.2
cralawred

Northern Tobacco Redrying Co., Inc. (NTRCI), a flue-curing and redrying of tobacco leaves
business,3employs approximately 100 employees with seasonal workers tasked to sort, process, store
and transport tobacco leaves during the tobacco season of March to September.4
cralawre d

NTRCI hired Zenaida Paz (Paz) sometime in 1974 as a seasonal sorter, paid P185.00 daily. NTRCI
regularly re-hired her every tobacco season since then. She signed a seasonal job contract at the
start of her employment and a pro-forma application letter prepared by NTRCI in order to qualify for
the next season.5
cralawre d

On May 18, 2003,6 Paz was 63 years old when NTRCI informed her that she was considered retired
under company policy.7 A year later, NTRCI told her she would receive P12,000.00 as retirement
pay.8
cralawred

Paz, with two other complainants, filed a Complaint for illegal dismissal against NTRCI on March 4,
2004.9 She amended her Complaint on April 27, 2004 into a Complaint for payment of retirement
benefits, damages, and attorneys fees10 as P12,000.00 seemed inadequate for her 29 years of
service.11 The Complaint impleaded NTRCIs Plant Manager, Angelo Ang, as respondent. 12 The
Complaint was part of the consolidated Complaints of 17 NTRCI workers. 13
cralawred

NTRCI countered that no Collective Bargaining Agreement (CBA) existed between NTRCI and its
workers. Thus, it computed the retirement pay of its seasonal workers based on Article 287 of the
Labor Code.14
cralawred

NTRCI raised the requirement of at least six months of service a year for that year to be considered in
the retirement pay computation. It claimed that Paz only worked for at least six months in 1995,
1999, and 2000 out of the 29 years she rendered service. Thus, Pazs retirement pay amounted to
P12,487.50 after multiplying her ?185.00 daily salary by 22 working days in a month, for three
years.15
cralawred

The Labor Arbiter in his Decision16 dated July 26, 2005 [c]onfirm[ed] that the correct retirement pay
of Zenaida M. Paz [was] ?12,487.50.17
cralawre d

The National Labor Relations Commission in its Decision18 dated December 8, 2008 modified the Labor
Arbiters Decision. It likewise denied reconsideration. The Decisions dispositive portion reads:
chanRoblesvirtualLa wlibrary

WHEREFORE, premises considered, the decision of the labor arbiter is herebyMODIFIED.

Complainant Appellant Zenaida Paz[s] retirement pay should be computed pursuant to RA 7641 and
that all the months she was engaged to work for respondent for the last twenty eight (28) years
should be added and divide[d] by six (for a fraction of six months is considered as one year) to get the
number of years [for] her retirement pay[.] Complainant Teresa Lopez is hereby entitled to her
separation pay computed at one half month pay for every year of service, a fraction of six months
shall be considered as one year, plus backwages from the time she was illegally dismissed up to the
filing of her complaint.
The rest of the decision stays.
SO ORDERED.19

cralawla wlibrary

The Court of Appeals in its Decision20 dated May 25, 2011 dismissed the Petition and modified the
National Labor Relations Commissions Decision in that financial assistance is awarded to . . . Zenaida
Paz in the amount of P60,356.25:21
cralawre d

WHEREFORE, the Petition is hereby DISMISSED. The Decision dated 8 December 2008
and Resolution dated 16 September 2009 of the National Labor Relations Commission in NLRC CA No.

046642-05(5) are MODIFIED in that (1) financial assistance is awarded to private respondent
Zenaida Paz in the amount of P60,356.25; and (2) the dismissal of private respondent Teresa Lopez is
declared illegal, and thus, she is awarded backwages and separation pay, in accordance with the
foregoing discussion.
SO ORDERED.22

cralawla wlibrary

The Court of Appeals found that while applying the clear text of Article 287 resulted in the amount of
P12,487.50 as retirement pay, this amount [was] so meager that it could hardly support . . . Paz,
now that she is weak and old, unable to find employment.23 It discussed jurisprudence on financial
assistance and deemed it appropriate to apply the formula: One-half-month pay multiplied by 29
years of service divided by two yielded P60,356.25 as Pazs retirement pay.24
cralawre d

Paz comes before this court seeking to reinstate the National Labor Relations Commissions
computation.25 NTRCI filed its Comment,26 and this court deemed waived the filing of a Reply.27

cralawred

Petitioner Paz contends that respondent NTRCI failed to prove the alleged company policy on
compulsory retirement for employees who reached 60 years of age or who rendered 30 years of
service, whichever came first.28 Consequently, Article 287, as amended by Republic Act No.
7641,29applies and entitles her to retirement pay . . . equivalent to [at least] one-half month salary
for every year of service, a fraction of at least six (6) months being considered as one whole year.30
She adds that she was then 63 years old, and while one may opt to retire at 60 years old, the
compulsory retirement age is 65 years old under Article 287, as amended. 31
cralawred

Petitioner Paz then argues respondent NTRCIs misplaced reliance on Philippine Tobacco Flue-Curing &
Redrying Corp. v. National Labor Relations Commission32 as that case involved separation pay
computation.33
cralawred

Lastly, petitioner Paz contends lack of legal basis that an employee should have at least worked for
six (6) months for a particular season for that season to be included in the computation of retirement
pay[.]34 She submits that regular seasonal employees are still considered employees during offseason, and length of service determination should be applied in retirees favor.35
cralawre d

Respondent NTRCI counters that in retirement pay computation this court should consider its ruling
inPhilippine Tobacco on computing separation pay of seasonal employees. It submits that the proviso
a fraction of at least six (6) months being considered as one (1) whole year appears in both Article
287 on retirement pay and Articles 283 and 284 on separation pay.36
cralawre d

Respondent NTRCI argues that unlike regular employees, seasonal workers like petitioner Paz can
offer their services to other employers during off-season. Thus, the six-month rule avoids the
situation where seasonal workers receive retirement pay twice an even more favorable position
compared with regular employees.37
cralawred

Both parties appear to agree on petitioner Pazs entitlement to retirement pay. The issue before this
court involves its proper computation. We also resolve whether there was illegal dismissal.
We affirm the Court of Appeals decision with modification.
Regular seasonal employees
Article 28038 of the Labor Code and jurisprudence identified three types of employees, namely: (1)
regular employees or those who have been engaged to perform activities which are usually necessary
or desirable in the usual business or trade of the employer; (2) project employees or those whose
employment has been fixed for a specific project or undertaking, the completion or termination of
which has been determined at the time of the engagement of the employee or where the work or
service to be performed is seasonal in nature and the employment is for the duration of the season;
and (3) casual employees or those who are neither regular nor project employees.39
cralawred

Jurisprudence also recognizes the status of regular seasonal employees. 40

cralawred

Mercado, Sr. v. National Labor Relations Commission41 did not consider as regular employees the rice
and sugar farmland workers who were paid with daily wages. This was anchored on the Labor
Arbiters findings that petitioners were required to perform phases of agricultural work for a definite
period, after which their services [were] available to any farm owner.42
cralawre d

This court explained that the proviso in the second paragraph of Article 280 in that any employee who
has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee applies only to casual employees and not project and regular
employees in the first paragraph of Article 280.43
cralawred

On the other hand, the workers of La Union Tobacco Redrying Corporation in Abasolo v. National Labor
Relations Commission44 were considered regular seasonal employees since they performed services
necessary and indispensable to the business for over 20 years, even if their work was only during
tobacco season.45 This court applied the test laid down in De Leon v. National Labor Relations
Commission46 for determining regular employment status:
chanRoblesvirtualLa wlibrary

[T]he test of whether or not an employee is a regular employee has been laid down inDe Leon v.
NLRC, in which this Court held:
The primary standard, therefore, of determining regular employment is the reasonable connection
between the particular activity performed by the employee in relation to the usual trade or business of
the employer. The test is whether the former is usually necessary or desirable in the usual business or
trade of the employer. The connection can be determined by considering the nature of the work
performed and its relation to the scheme of the particular business or trade in its entirety. Also if the
employee has been performing the job for at least a year, even if the performance is not continuous
and merely intermittent, the law deems repeated and continuing need for its performance as sufficient
evidence of the necessity if not indispensability of that activity to the business. Hence, the
employment is considered regular, but only with respect to such activity, and while such activity exists.
Thus, the nature of ones employment does not depend solely on the will or word of the employer. Nor
on the procedure for hiring and the manner of designating the employee, but on the nature of the
activities to be performed by the employee, considering the employer's nature of business and the
duration and scope of work to be done.
In the case at bar, while it may appear that the work of petitioners is seasonal, inasmuch as
petitioners have served the company for many years, some for over 20 years, performing
services necessary and indispensable to LUTORCOs business, serve as badges of regular
employment. Moreover, the fact that petitioners do not work continuously for one whole
year but only for the duration of the tobacco season does not detract from considering them
in regular employment since in a litany of cases this Court has already settled that seasonal
workers who are called to work from time to time and are temporarily laid off during off-season are
not separated from service in said period, but are merely considered on leave until re-employed.
Private respondent's reliance on the case of Mercado v. NLRC is misplaced considering that since in
said case of Mercado, although the respondent company therein consistently availed of the services of
the petitioners therein from year to year, it was clear that petitioners therein were not in respondent
company's regular employ. Petitioners therein performed different phases of agricultural work in a
given year. However, during that period, they were free to contract their services to work for other
farm owners, as in fact they did. Thus, the Court ruled in that case that their employment would
naturally end upon the completion of each project or phase of farm work for which they have been
contracted.47 (Emphasis supplied, citations omitted)
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The sugarcane workers in Hacienda Fatima v. National Federation of Sugarcane Workers-Food and
General Trade48 were also considered as regular employees since they performed the same tasks
every season for several years:
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For respondents to be excluded from those classified as regular employees, it is not enough that they
perform work or services that are seasonal in nature. They must have also been employed only for
the duration of one season. . . . Evidently, petitioners employed respondents for more than one

season. Therefore, the general rule of regular employment is applicable.

....
The CA did not err when it ruled that Mercado v. NLRC was not applicable to the case at bar. In the
earlier case, the workers were required to perform phases of agricultural work for a definite period of
time, after which their services would be available to any other farm owner. They were not hired
regularly and repeatedly for the same phase/s of agricultural work, but on and off for any single phase
thereof. On the other hand, herein respondents, having performed the same tasks for
petitioners every season for several years, are considered the latters regular employees for
their respective tasks. Petitioners eventual refusal to use their services even if they were ready,
able and willing to perform their usual duties whenever these were available and hiring of other
workers to perform the tasks originally assigned to respondents amounted to illegal dismissal of the
latter.49 (Emphasis supplied, citation omitted)
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Respondent NTRCI engaged the services of petitioner Paz as a seasonal sorter 50 and had been
regularly rehired from 1974,51 until she was informed in 2003 that she was being retired under
company policy.52
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The services petitioner Paz performed as a sorter were necessary and indispensable to respondent
NTRCIs business of flue-curing and redrying tobacco leaves. She was also regularly rehired as a
sorter during the tobacco seasons for 29 years since 1974. These considerations taken together
allowed the conclusion that petitioner Paz was a regular seasonal employee, entitled to rights under
Article 27953 of the Labor Code:
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Art. 279. Security of Tenure. In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld from him up to the time
of his actual reinstatement.
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Illegal dismissal and backwages

Petitioner Paz initially filed a Complaint for illegal dismissal seeking separation pay, but later amended
her Complaint into one for payment of retirement pay.54 Despite the amendment, she maintained in
her subsequent pleadings that she had been made to retire even before she reached the compulsory
retirement age of 65 under Article 287, as amended. 55
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Petitioner Paz alleged that respondent NTRCI required her to report on March 18, 2003 for the 2003
tobacco season, but she suffered a mild stroke sometime in April. Nevertheless, respondent NTRCI
extended her employment contract until May 18, 2003 when she was informed that she was retired
under company policy.56
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Since petitioner Paz was unlearned and not knowledgeable in law, [she] just accepted such fact and
waited to be paid her separation/retirement benefit as promised by . . . NTRCI.57 Unfortunately, after
a year of waiting, respondent NTRCI only offered her around P12,000.00 for all her services since
1974.58
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The National Labor Relations Commission recognized that like the other complainants against
respondent NTRCI, petitioner Paz was at a loss in what cause of action to take whether illegal
dismissal or payment of retirement pay.59
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Petitioner Pazs amendment of her Complaint was not fatal to her cause of action for illegal dismissal.
First, petitioner Paz never abandoned her argument that she had not reached the compulsory
retirement age of 65 pursuant to Article 287, as amended, when respondent NTRCI made her retire on
May 18, 2003.

Second, the National Labor Relations Commission found that respondent NTRCI failed to prove a valid
company retirement policy, yet it required its workers to retire after they had reached the age of 60. 60
The Court of Appeals also discussed that while respondent NTRCI produced guidelines on its
retirement policy for seasonal employees, it never submitted a copy of its Collective Bargaining
Agreement and even alleged in its Position Paper that none existed. 61
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Petitioner Paz was only 63 years old on May 18, 2003 with two more years remaining before she would
reach the compulsory retirement age of 65.
Retirement is the result of a bilateral act of the parties, a voluntary agreement between the employer
and the employee whereby the latter, after reaching a certain age, agrees to sever his or her
employment with the former.62 Article 287, as amended, allows for optional retirement at the age of
at least 60 years old.
Consequently, if the intent to retire is not clearly established or if the retirement is involuntary, it is to
be treated as a discharge.63
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The National Labor Relations Commission considered petitioner Pazs amendment of her Complaint on
April 27, 2004 akin to an optional retirement when it determined her as illegally dismissed from May
18, 2003 to April 27, 2004, thus being entitled to full backwages from May 19, 2003 until April 26,
2004.64
cralawred

Again, petitioner Paz never abandoned her argument of illegal dismissal despite the amendment of her
Complaint. This implied lack of intent to retire until she reached the compulsory age of 65. Thus, she
should be considered as illegally dismissed from May 18, 2003 until she reached the compulsory
retirement age of 65 in 2005 and should be entitled to full backwages for this period.
An award of full backwages is inclusive of allowances and other benefits or their monetary equivalent,
from the time their actual compensation was withheld. . . .65
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Backwages, considered as actual damages,66 requires proof of the loss suffered. The Court of Appeals
found no positive proof of the total number of months that she actually rendered work.67
Nevertheless, petitioner Pazs daily pay of P185.00 was established. She also alleged that her
employment periods ranged from three to seven months. 68
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Since the exact number of days petitioner Paz would have worked between May 18, 2003 until she
would turn 65 in 2005 could not be determined with specificity, this court thus awards full backwages
in the amount of P22,200.00 computed by multiplying P185.00 by 20 days, then by three months,
then by two years.
Due process and nominal damages
The Labor Code requires employers to comply with both procedural and substantive due process in
dismissing employees. Agabon v. National Labor Relations Commission69 discussed these rules and
enumerated the four possible situations considering these rules:
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Dismissals based on just causes contemplate acts or omissions attributable to the employee while
dismissals based on authorized causes involve grounds under the Labor Code which allow the
employer to terminate employees. A termination for an authorized cause requires payment of
separation pay. When the termination of employment is declared illegal, reinstatement and full
backwages are mandated under Article 279. If reinstatement is no longer possible where the
dismissal was unjust, separation pay may be granted.
Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give
the employee two written notices and a hearing or opportunity to be heard if requested by the
employee before terminating the employment: a notice specifying the grounds for which dismissal is
sought a hearing or an opportunity to be heard and after hearing or opportunity to be heard, a notice
of the decision to dismiss; and (2) if the dismissal is based on authorized causes under Articles 283
and 284, the employer must give the employee and the Department of Labor and Employment written

notices 30 days prior to the effectivity of his separation.

From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just cause
under Article 282 of the Labor Code, for an authorized cause under Article 283, or for health reasons
under Article 284, and due process was observed; (2) the dismissal is without just or authorized cause
but due process was observed; (3) the dismissal is without just or authorized cause and there was no
due process; and (4) the dismissal is for just or authorized cause but due process was not observed.
In the first situation, the dismissal is undoubtedly valid and the employer will not suffer any liability.
In the second and third situations where the dismissals are illegal, Article 279 mandates that the
employee is entitled to reinstatement without loss of seniority rights and other privileges and full
backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from
the time the compensation was not paid up to the time of actual reinstatement.
In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot be
cured, it should not invalidate the dismissal. However, the employer should be held liable for noncompliance with the procedural requirements of due process. 70 (Emphasis in the original)
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Agabon focused on the fourth situation when dismissal was for just or authorized cause, but due
process was not observed.71 Agabon involved a dismissal for just cause, and this court awarded
P30,000.00 as nominal damages for the employers non-compliance with statutory due process. 72 Jaka
Food Processing Corporation v. Pacot73 involved a dismissal for authorized cause, and this court
awarded P50,000.00 as nominal damages for the employers non-compliance with statutory due
process.74 The difference in amounts is based on the difference in dismissal ground. 75 Nevertheless,
this court has sound discretion in determining the amount based on the relevant circumstances. 76
In De Jesus v. Aquino,77 this court awarded P50,000.00 as nominal damages albeit the dismissal was
for just cause.78
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Petitioner Pazs case does not fall under the fourth situation but under the third situation on illegal
dismissal for having no just or authorized cause and violation of due process.
Respondent NTRCI had considered petitioner Paz retired at the age of 63 before she reached the
compulsory age of 65. This does not fall under the just causes for termination in Article 282 of the
Labor Code, the authorized causes for termination in Article 283, or disease as a ground for
termination in Article 284.
As regards due process, the Omnibus Rules Implementing the Labor Code provides:

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Section 2. Standard of due process: requirements of notice. In all cases of termination of

employment, the following standards of due process shall be substantially observed.
I. For termination of employment based on just causes as defined in Article 282 of the Code:
(a) A written notice served on the employee specifying the ground or grounds for termination, and
giving to said employee reasonable opportunity within which to explain his side;
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(b) A hearing or conference during which the employee concerned, with the assistance of counsel if
the employee so desires, is given opportunity to respond to the charge, present his evidence or rebut
the evidence presented against him; and
(c) A written notice [of] termination served on the employee indicating that upon due consideration of
all the circumstance, grounds have been established to justify his termination. . . . 79
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There was no showing that respondent NTRCI complied with these due process requisites. Thus,
consistent with jurisprudence,80 petitioner Paz should be awarded P30,000.00 as nominal damages.
Retirement pay

An employer may provide for retirement benefits in an agreement with its employees such as in a
Collective Bargaining Agreement. Otherwise, Article 287 of the Labor Code, as amended, governs.
Since respondent NTRCI failed to present a copy of a Collective Bargaining Agreement on the alleged
retirement policy,81 we apply Article 287 of the Labor Code, as amended by Republic Act No. 7641.
This provides for the proper computation of retirement benefits in the absence of a retirement plan or
agreement:82
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In the absence of a retirement plan or agreement providing for retirement benefits of employees in
the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond
sixty-five (65) years which is hereby declared the compulsory retirement age, who has served at least
five (5) years in the said establishment, may retire and shall be entitled to retirement pay equivalent
to at least one-half (1/2) month salary for every year of service, a fraction of at least six
(6) months being considered as one whole year.
Unless the parties provide for broader inclusions, the term one-half (1/2) month salary shall mean
fifteen (15) days plus one-twelfth (1/12) of the 13 th month pay and the cash equivalent of not more
than five (5) days of service incentive leaves.83 (Emphasis supplied)
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Respondent NTRCI followed the formula in Article 287 and offered petitioner Paz the amount of
P12,487.5084 as retirement pay based on the three years she worked for at least six months in 1995,
1999, and 2000.85
cralawred

The Labor Arbiter agreed with respondent NTRCIs computation based on these three years and
reached the same amount as petitioner Pazs retirement pay.86
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On appeal, the National Labor Relations Commission found that petitioner Paz became a regular
seasonal employee by virtue of her long years of service and the repetitive hiring of her services by
respondent NTRCI every season.87 It then considered her as having worked for every tobacco season
from 1974 to 2003 or for a total of 29 years.88
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The National Labor Relations Commission discussed that [i]t would be a great injustice if [petitioner
Pazs] services which did not last long for six months be disregarded in computing her retirement pay
especially so that it is upon the sole discretion of the respondent company on how long her services
for a given season was required.89 Thus, it explained that Zenaida Pazs retirement pay should be
computed pursuant to RA 7641 and that all the months she was engaged to work for respondent for
the last twenty eight (28) years should be added and divide[d] by six (for a fraction of six months is
considered as one year) to get the number of years her retirement pay should be computed.90
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The National Labor Relations Commission also discussed that applying the computation of separation
pay in Philippine Tobacco to this case would render nugatory the very purpose of RA 7641, which
seeks to reward employees of their long and dedicated service to their employer, as well as its
humanitarian purpose to provide for the retirees sustenance and hopefully even comfort, when he no
longer has the stamina to continue earning his livelihood.91
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This court in Philippine Tobacco explained its computation of separation pay as follows:

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The amount of separation pay is based on two factors: the amount of monthly salary and the number
of years of service. Although the Labor Code provides different definitions as to what constitutes one
year of service, Book Six does not specifically define one year of service for purposes of computing
separation pay. However, Articles 283 and 284 both state in connection with separation pay that a
fraction of at least six months shall be considered one whole year. Applying this to the case at bar, we
hold that the amount of separation pay which respondent members of the Lubat and Luris groups
should receive is one-half (1/2) their respective average monthly pay during the last season they
worked multiplied by the number of years they actually rendered service, provided that they worked
for at least six months during a given year.
The formula that petitioner proposes, wherein a year of work is equivalent to actual work rendered for

303 days, is both unfair and inapplicable, considering that Articles 283 and 284 provide that in
connection with separation pay, a fraction of at least six months shall be considered one whole year.
Under these provisions, an employee who worked for only six months in a given year which is
certainly less than 303 days is considered to have worked for one whole year.
. . . . Finally, Manila Hotel Company v. CIR did not rule that seasonal workers are considered at work
during off-season with regard to the computation of separation pay. Said case merely held that, in
regard to seasonal workers, the employer-employee relationship is not severed during off-season but
merely suspended.92 (Citations omitted)
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Philippine Tobacco considered Articles 283 and 284 of the Labor Code on separation pay, and these
articles include the proviso a fraction of at least six (6) months shall be considered one (1) whole
year.
While the present case involves retirement pay and not separation pay, Article 287 of the Labor Code
on retirement pay similarly provides that a fraction of at least six (6) months being considered as one
whole year.
Thus, this courts reading of this proviso in the Labor Code in Philippine Tobacco applies in this case.
An employee must have rendered at least six months in a year for said year to be considered in the
computation.
Petitions for review pursuant to Rule 45 of the Rules of Court can raise only questions of law. 93
Generally, this court accords great respect for factual findings by quasi-judicial bodies, even according
such findings with finality when supported by substantial evidence. 94
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The Court of Appeals found no positive proof o[n] the total number of months [petitioner Paz]
actually rendered work [for respondent NTRCI].95 On the other hand, both the Labor Arbiter and the
Court of Appeals established from the records that she rendered at least six months of service for
1995, 1999, and 2000 only.96
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Based on these factual findings, retirement pay pursuant to Article 287 of the Labor Code was
correctly computed at P12,487.50 and was awarded to petitioner Paz.
Financial assistance
In addition, this court agrees with the Court of Appeals award of financial assistance in the amount of
P60,356.2597 by applying the following formula: one-half-month pay98 multiplied by 29 years in service
and then divided by 2.99
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The amount of P12,487.50 is indeed too meager to support petitioner Paz who has become old, weak,
and unable to find employment.100
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Republic Act No. 7641 is a social legislation101 with the purpose of provid[ing] for the retirees
sustenance and hopefully even comfort, when he [or she] no longer has the stamina to continue
earning his [or her] livelihood.102
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The Court of Appeals recognized and emphasized petitioner Pazs three decades of hard work and
service with respondent NTRCI. However, it disagreed with the National Labor Relations Commissions
retirement pay computation for lack of factual basis:
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Private respondent Paz rendered almost three decades of dedicated service to petitioner, and to that,
she gave away the prime of her life. In those long years of hard work, not a single transgression or
malfeasance of any company rule or regulation was ever reported against her. Old age and infirmity
now weaken her chances of employment. Veritably, We can call upon the same social and
compassionate justice allowing financial assistance in special circumstances. These circumstances
indubitably merit equitable concessions, via the principle of compassionate justice for the working
class.

In awarding retirement benefits, the NLRC deemed it proper to add all the months of
service rendered by private respondent Paz, then divide it by six to arrive at the number of
years of service. We cannot, however, subscribe to this computation because there is no
positive proof of the total number of months that she actually rendered work.103 (Emphasis
supplied, citations omitted)
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At most, the Petition alleges that [p]etitioner [was] regularly hired every season by respondents, her
employment periods ranging from three (3) to seven (7) months.104 None of the lower courts, not
even the National Labor Relations Commission that proposed the formula, made a factual
determination on the total number of months petitioner Paz rendered actual service.
In any event, this court has awarded financial assistance as a measure of social justice [in]
exceptional circumstances, and as an equitable concession.105
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In Eastern Shipping Lines, Inc. v. Sedan,106 Sedan was granted equitable assistance equal to one-halfmonth pay for each year of his 23 years of service with no derogatory record. 107 This court discussed
jurisprudence on the grant of financial assistance:
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We are not unmindful of the rule that financial assistance is allowed only in instances where the
employee is validly dismissed for causes other than serious misconduct or those reflecting on his
moral character. Neither are we unmindful of this Courts pronouncements in Arc-Men Food Industries
Corporation v. NLRC, and Lemery Savings and Loan Bank v. NLRC, where the Court ruled that when
there is no dismissal to speak of, an award of financial assistance is not in order.
But we must stress that this Court did allow, in several instances, the grant of financial assistance. In
the words of Justice Sabino de Leon, Jr., now deceased, financial assistance may be allowed as a
measure of social justice and exceptional circumstances, and as an equitable concession. The instant
case equally calls for balancing the interests of the employer with those of the worker, if only to
approximate what Justice Laurel calls justice in its secular sense.
In this instance, our attention has been called to the following circumstances: that private respondent
joined the company when he was a young man of 25 years and stayed on until he was 48 years old;
that he had given to the company the best years of his youth, working on board ship for almost 24
years; that in those years there was not a single report of him transgressing any of the company rules
and regulations; that he applied for optional retirement under the companys non-contributory plan
when his daughter died and for his own health reasons; and that it would appear that he had served
the company well, since even the company said that the reason it refused his application for optional
retirement was that it still needed his services; that he denies receiving the telegram asking him to
report back to work; but that considering his age and health, he preferred to stay home rather than
risk further working in a ship at sea.
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In our view, with these special circumstances, we can call upon the same social and compassionate
justice cited in several cases allowing financial assistance. These circumstances indubitably merit
equitable concessions, via the principle of compassionate justice for the working class. Thus, we
agree with the Court of Appeals to grant financial assistance to private respondent. 108 (Citations
omitted)
We agree with the Court of Appeals that petitioner Pazs circumstances indubitably merit equitable
concessions, via the principle of compassionate justice for the working class.109
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Petitioner Paz worked for respondent NTRCI for close to three decades. She had no record of any
malfeasance or violation of company rules in her long years of service. 110 Her advanced age has
rendered her weak and lessened her employment opportunities.
Eastern Shipping Lines awarded Sedan with financial assistance equal to one-half-month pay for every
year of service. Sedan was hired as a 3rd marine engineer and oiler from 1973 until his last voyage in
1997.111 On the other hand, petitioner Paz was a seasonal employee who worked for periods ranging
from three to seven months a year.112 This court thus finds the following Court of Appeals formula for
financial assistance as equitable: one-half-month pay multiplied by 29 years in service and then

divided by 2.
This court has discussed that labor law determinations are not only secundum rationem but
alsosecundum caritatem.113 The award of P60,356.25 as financial assistance will serve its purpose in
providing petitioner Paz sustenance and comfort after her long years of service.
Finally, legal interest of 6% per annum shall be imposed on the award of full backwages beginning
May 18, 2003 when petitioner Paz was deemed retired, until 2005 when she reached compulsory
retirement age, in the amount of P2,664.00 114 Legal interest of 6% per annum shall also be imposed
on the award of retirement pay beginning 2005 until full satisfaction.
WHEREFORE, the Court of Appeals Decision is AFFIRMED with MODIFICATION in that respondent
Northern Tobacco Redrying Co., Inc. is hereby ordered to pay petitioner Zenaida Paz the following:
(1) P22,200.00 as full backwages;

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(2) P30,000.00 as nominal damages for non-compliance with due process;

(3) P12,487.50 as retirement pay;

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(4) P60,356.25 as financial assistance; and

(5) P2,664.00 as legal interest for the award of full backwages, and legal interest of 6% per annum for
the award of retirement pay beginning 2005 until full satisfaction.
SO ORDERED

FUJI TELEVISION NETWORK, INC., Petitioner, v. ARLENE S. ESPIRITU, Respondent.

DECISION
LEONEN, J.:

It is the burden of the employer to prove that a person whose services it pays for is an independent
contractor rather than a regular employee with or without a fixed term. That a person has a disease
does not per se entitle the employer to terminate his or her services. Termination is the last resort. At
the very least, a competent public health authority must certify that the disease cannot be cured
within six (6) months, even with appropriate treatment.
We decide this petition for review1 on certiorari filed by Fuji Television Network, Inc., seeking the
reversal of the Court of Appeals decision2 dated June 25, 2012, affirming with modification the
decision3 of the National Labor Relations Commission.
In 2005, Arlene S. Espiritu (Arlene) was engaged by Fuji Television Network, Inc. (Fuji) as a news
correspondent/producer4 tasked to report Philippine news to Fuji through its Manila Bureau field
office.5 Arlenes employment contract initially provided for a term of one (1) year but was successively
renewed on a yearly basis with salary adjustment upon every renewal. 6
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Sometime in January 2009, Arlene was diagnosed with lung cancer.7 She informed Fuji about her
condition. In turn, the Chief of News Agency of Fuji, Yoshiki Aoki, informed Arlene that the company
will have a problem renewing her contract 8 since it would be difficult for her to perform her job.9She
insisted that she was still fit to work as certified by her attending physician.10
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After several verbal and written communications,11 Arlene and Fuji signed a non-renewal contract on
May 5, 2009 where it was stipulated that her contract would no longer be renewed after its expiration
on May 31, 2009. The contract also provided that the parties release each other from liabilities and
responsibilities under the employment contract. 12
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In consideration of the non-renewal contract, Arlene acknowledged receipt of the total amount of
US$18,050.00 representing her monthly salary from March 2009 to May 2009, year-end bonus, midyear bonus, and separation pay.13 However, Arlene affixed her signature on the non-renewal contract
with the initials U.P. for under protest.14
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On May 6, 2009, the day after Arlene signed the non-renewal contract, she filed a complaint for illegal
dismissal and attorneys fees with the National Capital Region Arbitration Branch of the National Labor
Relations Commission. She alleged that she was forced to sign the non-renewal contract when Fuji
came to know of her illness and that Fuji withheld her salaries and other benefits for March and April
2009 when she refused to sign. 15
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Arlene claimed that she was left with no other recourse but to sign the non-renewal contract, and it
was only upon signing that she was given her salaries and bonuses, in addition to separation pay
equivalent to four (4) years.16
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In the decision17 dated September 10, 2009, Labor Arbiter Corazon C. Borbolla dismissed Arlenes
complaint.18 Citing Sonza v. ABS-CBN19 and applying the four-fold test, the Labor Arbiter held that
Arlene was not Fujis employee but an independent contractor.20
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Arlene appealed before the National Labor Relations Commission. In its decision dated March 5, 2010,
the National Labor Relations Commission reversed the Labor Arbiters decision. 21 It held that Arlene
was a regular employee with respect to the activities for which she was employed since she
continuously rendered services that were deemed necessary and desirable to Fujis business. 22 The
National Labor Relations Commission ordered Fuji to pay Arlene backwages, computed from the date
of her illegal dismissal.23 The dispositive portion of the decision reads:
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WHEREFORE, premises considered, judgment is hereby rendered GRANTING the instant appeal. The
Decision of the Labor Arbiter dated 19 September 2009 is hereby REVERSED and SET ASIDE, and a
new one is issued ordering respondents-appellees to pay complainant-appellant backwages computed
from the date of her illegal dismissal until finality of this Decision.
SO ORDERED.24
Arlene and Fuji filed separate motions for reconsideration. 25 Both motions were denied by the National

Labor Relations Commission for lack of merit in the resolution dated April 26, 2010. 26

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From the decision of the National Labor Relations Commission, both parties filed separate petitions for
certiorari27 before the Court of Appeals. The Court of Appeals consolidated the petitions and considered
the following issues for resolution:
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1) Whether or not Espiritu is a regular employee or a fixed-term contractual employee;

2) Whether or not Espiritu was illegally dismissed; and
3) Whether or not Espiritu is entitled to damages and attorneys fees. 28
In the assailed decision, the Court of Appeals affirmed the National Labor Relations Commission with
the modification that Fuji immediately reinstate Arlene to her position as News Producer without loss
of seniority rights, and pay her backwages, 13th-month pay, mid-year and year-end bonuses, sick
leave and vacation leave with pay until reinstated, moral damages, exemplary damages, attorneys
fees, and legal interest of 12% per annum of the total monetary awards. 29
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The Court of Appeals ruled that:

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WHEREFORE, for lack of merit, the petition of Fuji Television Network, Inc. and Yoshiki Aoki
is DENIED and the petition of Arlene S. Espiritu is GRANTED. Accordingly, the Decision dated March
5, 2010 of the National Labor Relations Commission, 6th Division in NLRC NCR Case No. 05-06811-09
and its subsequent Resolution dated April 26, 2010 are hereby AFFIRMED with MODIFICATIONS, as
follows:
Fuji Television, Inc. is hereby ORDERED to immediately REINSTATE Arlene S. Espiritu to her position
as News Producer without loss of seniority rights and privileges and to pay her the following:
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1. Backwages at the rate of $1,900.00 per month computed from May 5, 2009 (the date of dismissal),
until reinstated;
2. 13th Month Pay at the rate of $1,900.00 per annum from the date of dismissal, until reinstated;
3. One and a half (1) months pay or $2,850.00 as midyear bonus per year from the date of
dismissal, until reinstated;
4. One and a half (1) months pay or $2,850.00 as year-end bonus per year from the date of
dismissal, until reinstated;
5. Sick leave of 30 days with pay or $1,900.00 per year from the date of dismissal, until reinstated;
and
6. Vacation leave with pay equivalent to 14 days or $1,425.00 per annum from date of dismissal, until
reinstated.
7. The amount of P100,000.00 as moral damages;
8. The amount of P50,000.00 as exemplary damages;
9. Attorneys fees equivalent to 10% of the total monetary awards herein stated; and
10. Legal interest of twelve percent (12%) per annum of the total monetary awards computed from
May 5, 2009, until their full satisfaction.
The Labor Arbiter is hereby DIRECTED to make another re-computation of the above monetary
awards consistent with the above directives.

SO ORDERED.30
In arriving at the decision, the Court of Appeals held that Arlene was a regular employee because she
was engaged to perform work that was necessary or desirable in the business of Fuji, 31 and the
successive renewals of her fixed-term contract resulted in regular employment. 32
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According to the Court of Appeals, Sonza does not apply in order to establish that Arlene was an
independent contractor because she was not contracted on account of any peculiar ability, special
talent, or skill.33 The fact that everything used by Arlene in her work was owned by Fuji negated the
idea of job contracting.34
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The Court of Appeals also held that Arlene was illegally dismissed because Fuji failed to comply with
the requirements of substantive and procedural due process necessary for her dismissal since she was
a regular employee.35
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The Court of Appeals found that Arlene did not sign the non-renewal contract voluntarily and that the
contract was a mere subterfuge by Fuji to secure its position that it was her choice not to renew her
contract. She was left with no choice since Fuji was decided on severing her employment. 36
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Fuji filed a motion for reconsideration that was denied in the resolution 37 dated December 7, 2012 for
failure to raise new matters.38
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Aggrieved, Fuji filed this petition for review and argued that the Court of Appeals erred in affirming
with modification the National Labor Relations Commissions decision, holding that Arlene was a
regular employee and that she was illegally dismissed. Fuji also questioned the award of monetary
claims, benefits, and damages.39
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Fuji points out that Arlene was hired as a stringer, and it informed her that she would remain
one.40She was hired as an independent contractor as defined in Sonza. 41 Fuji had no control over her
work.42 The employment contracts were executed and renewed annually upon Arlenes insistence to
which Fuji relented because she had skills that distinguished her from ordinary employees. 43 Arlene
and Fuji dealt on equal terms when they negotiated and entered into the employment
contracts.44There was no illegal dismissal because she freely agreed not to renew her fixed-term
contract as evidenced by her e-mail correspondences with Yoshiki Aoki. 45 In fact, the signing of the
non-renewal contract was not necessary to terminate her employment since such employment
terminated upon expiration of her contract.46 Finally, Fuji had dealt with Arlene in good faith, thus,
she should not have been awarded damages.47
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Fuji alleges that it did not need a permanent reporter since the news reported by Arlene could easily
be secured from other entities or from the internet. 48 Fuji never controlled the manner by which she
performed her functions.49 It was Arlene who insisted that Fuji execute yearly fixed-term contracts so
that she could negotiate for annual increases in her pay.50
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Fuji points out that Arlene reported for work for only five (5) days in February 2009, three (3) days in
March 2009, and one (1) day in April 2009.51 Despite the provision in her employment contract that
sick leaves in excess of 30 days shall not be paid, Fuji paid Arlene her entire salary for the months of
March, April, and May; four (4) months of separation pay; and a bonus for two and a half months for a
total of US$18,050.00.52 Despite having received the amount of US$18,050.00, Arlene still filed a case
for illegal dismissal.53
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Fuji further argues that the circumstances would show that Arlene was not illegally dismissed. The
decision to not renew her contract was mutually agreed upon by the parties as indicated in Arlenes email54 dated March 11, 2009 where she consented to the non-renewal of her contract but refused to
sign anything.55 Aoki informed Arlene in an e-mail56 dated March 12, 2009 that she did not need to
sign a resignation letter and that Fuji would pay Arlenes salary and bonus until May 2009 as well as
separation pay.57
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Arlene sent an e-mail dated March 18, 2009 with her version of the non-renewal agreement that she

agreed to sign this time.58 This attached version contained a provision that Fuji shall re-hire her if she
was still interested to work for Fuji.59 For Fuji, Arlenes e-mail showed that she had the power to
bargain.60
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Fuji then posits that the Court of Appeals erred when it held that the elements of an employeremployee relationship are present, particularly that of control; 61 that Arlenes separation from
employment upon the expiration of her contract constitutes illegal dismissal; 62 that Arlene is entitled to
reinstatement;63 and that Fuji is liable to Arlene for damages and attorneys fees. 64
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This petition for review on certiorari under Rule 45 was filed on February 8, 2013. 65 On February 27,
2013, Arlene filed a manifestation66 stating that this court may not take jurisdiction over the case since
Fuji failed to authorize Corazon E. Acerden to sign the verification. 67 Fuji filed a comment on the
manifestation68 on March 9, 2013.
Based on the arguments of the parties, there are procedural and substantive issues for resolution:
I.

II.

III.

Whether the petition for review should be dismissed as Corazon E. Acerden, the signatory of
the verification and certification of non-forum shopping of the petition, had no authority to
sign the verification and certification on behalf of Fuji;
Whether the Court of Appeals correctly determined that no grave abuse of discretion was
committed by the National Labor Relations Commission when it ruled that Arlene was a regular
employee, not an independent contractor, and that she was illegally dismissed; and
Whether the Court of Appeals properly modified the National Labor Relations Commissions
decision by awarding reinstatement, damages, and attorneys fees.

The petition should be dismissed.

I
Validity of the verification and certification against forum shopping
In its comment on Arlenes manifestation, Fuji alleges that Corazon was authorized to sign the
verification and certification of non-forum shopping because Mr. Shuji Yano was empowered under the
secretarys certificate to delegate his authority to sign the necessary pleadings, including the
verification and certification against forum shopping. 69
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On the other hand, Arlene points out that the authority given to Mr. Shuji Yano and Mr. Jin Eto in the
secretarys certificate is only for the petition for certiorari before the Court of Appeals. 70 Fuji did not
attach any board resolution authorizing Corazon or any other person to file a petition for review on
certiorari with this court.71 Shuji Yano and Jin Eto could not re-delegate the power that was delegated
to them.72 In addition, the special power of attorney executed by Shuji Yano in favor of Corazon
indicated that she was empowered to sign on behalf of Shuji Yano, and not on behalf of Fuji. 73
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The Rules of Court requires the

submission of verification and
certification against forum shopping
Rule 7, Section 4 of the 1997 Rules of Civil Procedure provides the requirement of verification, while
Section 5 of the same rule provides the requirement of certification against forum shopping. These
sections state:
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SEC. 4. Verification. Except when otherwise specifically required by law or rule, pleadings need
not be under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations

therein are true and correct of his knowledge and belief.

A pleading required to be verified which contains a verification based on information and belief, or
upon knowledge, information and belief, or lacks a proper verification, shall be treated as an
unsigned pleading.
SEC. 5. Certification against forum shopping. The plaintiff or principal party shall certify under
oath in the complaint or other initiatory pleading asserting a claim for relief or in a sworn certification
annexed thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any
action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and,
to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such
other pending action or claim, a complete statement of the present status thereof; and (c) if he should
thereafter learn that the same or similar action or claim has been filed or is pending, he shall report
that fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory
pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere amendment of the
complaint or other initiatory pleading but shall be cause for the dismissal of the case without
prejudice, unless otherwise provided, upon motion and after hearing. The submission of a false
certification or non-compliance with any of the undertakings therein shall constitute indirect contempt
of court, without prejudice to the corresponding administrative and criminal actions. If the acts of the
party or his counsel clearly constitute willful and deliberate forum shopping, the same shall be ground
for summary dismissal with prejudice and shall constitute direct contempt, as well as a cause for
administrative sanctions.
Section 4(e) of Rule 4574 requires that petitions for review should contain a sworn certification against
forum shopping as provided in the last paragraph of section 2, Rule 42. Section 5 of the same rule
provides that failure to comply with any requirement in Section 4 is sufficient ground to dismiss the
petition.
Effects of non-compliance
Uy v. Landbank75 discussed the effect of non-compliance with regard to verification and stated that:

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[t]he requirement regarding verification of a pleading is formal, not jurisdictional. Such requirement is
simply a condition affecting the form of pleading, the non-compliance of which does not necessarily
render the pleading fatally defective. Verification is simply intended to secure an assurance that the
allegations in the pleading are true and correct and not the product of the imagination or a matter of
speculation, and that the pleading is filed in good faith. The court may order the correction of the
pleading if the verification is lacking or act on the pleading although it is not verified, if the attending
circumstances are such that strict compliance with the rules may be dispensed with in order that the
ends of justice may thereby be served.76 (Citations omitted)
Shipside Incorporated v. Court of Appeals77 cited the discussion in Uy and differentiated its effect from
non-compliance with the requirement of certification against forum shopping:
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On the other hand, the lack of certification against forum shopping is generally not curable by the
submission thereof after the filing of the petition. Section 5, Rule 45 of the 1997 Rules of Civil
Procedure provides that the failure of the petitioner to submit the required documents that should
accompany the petition, including the certification against forum shopping, shall be sufficient ground
for the dismissal thereof. The same rule applies to certifications against forum shopping signed by a
person on behalf of a corporation which are unaccompanied by proof that said signatory is authorized
to file a petition on behalf of the corporation. 78 (Emphasis supplied)
Effects of substantial compliance
with the requirement of verification
and certification against forum shopping

Although the general rule is that failure to attach a verification and certification against forum
shopping is a ground for dismissal, there are cases where this court allowed substantial compliance.
In Loyola v. Court of Appeals,79 petitioner Alan Loyola submitted the required certification one day
after filing his electoral protest. 80 This court considered the subsequent filing as substantial compliance
since the purpose of filing the certification is to curtail forum shopping. 81
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In LDP Marketing, Inc. v. Monter,82 Ma. Lourdes Dela Pea signed the verification and certification
against forum shopping but failed to attach the board resolution indicating her authority to sign. 83 In a
motion for reconsideration, LDP Marketing attached the secretarys certificate quoting the board
resolution that authorized Dela Pea.84 Citing Shipside, this court deemed the belated submission as
substantial compliance since LDP Marketing complied with the requirement; what it failed to do was to
attach proof of Dela Peas authority to sign.85
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Havtor Management Phils., Inc. v. National Labor Relations Commission 86 and General Milling
Corporation v. National Labor Relations Commission87 involved petitions that were dismissed for failure
to attach any document showing that the signatory on the verification and certification against forumshopping was authorized.88 In both cases, the secretarys certificate was attached to the motion for
reconsideration.89 This court considered the subsequent submission of proof indicating authority to
sign as substantial compliance.90
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Altres v. Empleo91 summarized the rules on verification and certification against forum shopping in this
manner:
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For the guidance of the bench and bar, the Court restates in capsule form the jurisprudential
pronouncements . . . respecting non-compliance with the requirement on, or submission of defective,
verification and certification against forum shopping:

1)

2)

3)

4)

5)

A distinction must be made between non-compliance with the

requirement on or submission of defective verification, and noncompliance with the requirement on or submission of defective
certification against forum shopping.
As to verification, non-compliance therewith or a defect therein does not
necessarily render the pleading fatally defective. The court may order its
submission or correction or act on the pleading if the attending
circumstances are such that strict compliance with the Rule may be
dispensed with in order that the ends of justice may be served thereby.
Verification is deemed substantially complied with when one who has
ample knowledge to swear to the truth of the allegations in the
complaint or petition signs the verifcation, and when matters alleged in
the petition have been made in good faith or are true and correct.
As to certification against forum shopping, non-compliance therewith or
a defect therein, unlike in verification, is generally not curable by its
subsequent submission or correction thereof, unless there is a need to
relax the Rule on the ground of substantial compliance or presence of
special circumstances or compelling reasons.
The certification against forum shopping must be signed by all the
plaintiffs or petitioners in a case; otherwise, those who did not sign will
be dropped as parties to the case. Under reasonable or justifiable
circumstances, however, as when all the plaintiffs or petitioners share a

common interest and invoke a common cause of action or defense, the

signature of only one of them in the certification against forum shopping
substantially complies with the Rule.
Finally, the certification against forum shopping must be executed by
the party-pleader, not by his counsel. If, however, for reasonable or
justifiable reasons, the party-pleader is unable to sign, he must execute
a Special Power of Attorney designating his counsel of record to sign on
his behalf.92

6)

There was substantial compliance

by Fuji Television Network, Inc.
Being a corporation, Fuji exercises its power to sue and be sued through its board of directors or duly
authorized officers and agents. Thus, the physical act of signing the verification and certification
against forum shopping can only be done by natural persons duly authorized either by the corporate
by-laws or a board resolution.93
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In its petition for review on certiorari, Fuji attached Hideaki Otas secretarys certificate, 94 authorizing
Shuji Yano and Jin Eto to represent and sign for and on behalf of Fuji. 95 The secretarys certificate was
duly authenticated96 by Sulpicio Confiado, Consul-General of the Philippines in Japan. Likewise
attached to the petition is the special power of attorney executed by Shuji Yano, authorizing Corazon
to sign on his behalf.97 The verification and certification against forum shopping was signed by
Corazon.98
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Arlene filed the manifestation dated February 27, 2013, arguing that the petition for review should be
dismissed because Corazon was not duly authorized to sign the verification and certification against
forum shopping.
Fuji filed a comment on Arlenes manifestation, stating that Corazon was properly authorized to sign.
On the basis of the secretarys certificate, Shuji Yano was empowered to delegate his authority.
Quoting the board resolution dated May 13, 2010, the secretary's certificate states:

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(a) The Corporation shall file a Petition for Certiorari with the Court of Appeals, against Philippines
National Labor Relations Commission (NLRC) and Arlene S. Espiritu, pertaining to NLRC-NCR Case
No. LAC 00-002697-09, RAB No. 05-06811-00 and entitled Arlene S. Espiritu v. Fuji
Television Network, Inc./Yoshiki Aoki, and participate in any other subsequent proceeding that
may necessarily arise therefrom, including but not limited to the filing of appeals in the appropriate
venue;
(b) Mr. Shuji Yano and Mr. Jin Eto be authorized, as they are hereby authorized, to verify and
execute the certification against non-forum shopping which may be necessary or required to be
attached to any pleading to [sic] submitted to the Court of Appeals; and the authority to so verify and
certify for the Corporation in favor of the said persons shall subsist and remain effective until the
termination of the said case;
....
(d) Mr. Shuji Yano and Mr. Jin Eto be authorized, as they are hereby authorized, to represent and
appear on behalf the [sic] Corporation in all stages of the [sic] this case and in any other proceeding
that may necessarily arise thereform [sic], and to act in the Corporations name, place and stead to
determine, propose, agree, decide, do, and perform any and all of the following:
1.

The possibility of amicable settlement or of submission to alternative mode of dispute

resolution;

2.

The simplification of the issue;

3.

The necessity or desirability of amendments to the pleadings;

4.

The possibility of obtaining stipulation or admission of facts and documents; and

5.

Such other matters as may aid in the prompt disposition of the action. 99(Emphasis in the
original; Italics omitted)

Shuji Yano executed a special power of attorney appointing Ms. Ma. Corazon E. Acerden and Mr.
Moises A. Rollera as his attorneys-in-fact.100 The special power of attorney states:
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That I, SHUJI YANO, of legal age, Japanese national, with office address at 2-4-8 Daiba, Minato-Ku,
Tokyo, 137-8088 Japan, and being the representative of Fuji TV, INc., [sic] (evidenced by the attached
Secretarys Certificate) one of the respondents inNLRC-NCR Case No. 05-06811-00 entitled
Arlene S. Espiritu v. Fuji Television Network, Inc./Yoshiki Aoki, and subsequently
docketed before the Court of Appeals as C.A. G.R. S.P. No. 114867 (Consolidated with SP
No. 114889) do hereby make, constitute and appoint Ms. Ma. Corazon E. Acerden and Mr.
Moises A. Rollera as my true and lawful attorneys-in-fact for me and my name, place and stead to
act and represent me in the above-mentioned case, with special power to make admission/s and
stipulations and/or to make and submit as well as to accept and approve compromise proposals upon
such terms and conditions and under such covenants as my attorney-in-fact may deem fit, and to
engage the services of Villa Judan and Cruz Law Offices as the legal counsel to represent the
Company in the Supreme Court;
The said Attorneys-in-Fact are hereby further authorized to make, sign, execute and deliver such
papers or documents as may be necessary in furtherance of the power thus granted, particularly to
sign and execute the verification and certification of non-forum shopping needed to be
filed.101 (Emphasis in the original)
In its comment102 on Arlenes manifestation, Fuji argues that Shuji Yano could further delegate his
authority because the board resolution empowered him to act in the Corporations name, place and
stead to determine, propose, agree, decided [sic], do and perform any and all of the following: . . .
such other matters as may aid in the prompt disposition of the action.103
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To clarify, Fuji attached a verification and certification against forum shopping, but Arlene questions
Corazons authority to sign. Arlene argues that the secretarys certificate empowered Shuji Yano to file
a petition for certiorari before the Court of Appeals, and not a petition for review before this court, and
that since Shuji Yanos authority was delegated to him, he could not further delegate such power.
Moreover, Corazon was representing Shuji Yano in his personal capacity, and not in his capacity as
representative of Fuji.
A review of the board resolution quoted in the secretarys certificate shows that Fuji shall file a
Petition for Certiorari with the Court of Appeals104 and participate in any other subsequent
proceeding that may necessarily arise therefrom, including but not limited to the filing of appeals in
the appropriate venue,105 and that Shuji Yano and Jin Eto are authorized to represent Fuji in any
other proceeding that may necessarily arise thereform [sic].106 As pointed out by Fuji, Shuji Yano and
Jin Eto were also authorized to act in the Corporations name, place and stead to determine, propose,
agree, decide, do, and perform any and all of the following: . . . 5. Such other matters as may aid in
the prompt disposition of the action.107
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Considering that the subsequent proceeding that may arise from the petition for certiorari with the
Court of Appeals is the filing of a petition for review with this court, Fuji substantially complied with
the procedural requirement.

On the issue of whether Shuji Yano validly delegated his authority to Corazon, Article 1892 of the Civil
Code of the Philippines states:
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ART. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so;
but he shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without designating the person, and the person appointed was
notoriously incompetent or insolvent.
All acts of the substitute appointed against the prohibition of the principal shall be void.
The secretarys certificate does not state that Shuji Yano is prohibited from appointing a substitute. In
fact, he is empowered to do acts that will aid in the resolution of this case.
This court has recognized that there are instances when officials or employees of a corporation can
sign the verification and certification against forum shopping without a board resolution. In Cagayan
Valley Drug Corporation v. CIR,108 it was held that:
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In sum, we have held that the following officials or employees of the company can sign the verification
and certification without need of a board resolution: (1) the Chairperson of the Board of Directors, (2)
the President of a corporation, (3) the General Manager or Acting General Manager, (4) Personnel
Officer, and (5) an Employment Specialist in a labor case.
While the above cases109 do not provide a complete listing of authorized signatories to the verification
and certification required by the rules, the determination of the sufficiency of the authority was done
on a case to case basis. The rationale applied in the foregoing cases is to justify the authority of
corporate officers or representatives of the corporation to sign the verification or certificate against
forum shopping, being in a position to verify the truthfulness and correctness of the allegations in the
petition.110
Corazons affidavit111 states that she is the office manager and resident interpreter of the Manila
Bureau of Fuji Television Network, Inc.112 and that she has held the position for the last twenty-three
years.113
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As the office manager for 23 years, Corazon can be considered as having knowledge of all matters in
Fujis Manila Bureau Office and is in a position to verify the truthfulness and the correctness of the
allegations in the Petition.114
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Thus, Fuji substantially complied with the requirements of verification and certification against forum
shopping.
Before resolving the substantive issues in this case, this court will discuss the procedural parameters
of a Rule 45 petition for review in labor cases.
II
Procedural parameters of petitions for review in labor cases
Article 223 of the Labor Code115 does not provide any mode of appeal for decisions of the National
Labor Relations Commission. It merely states that [t]he decision of the Commission shall be final and
executory after ten (10) calendar days from receipt thereof by the parties. Being final, it is no longer
appealable. However, the finality of the National Labor Relations Commissions decisions does not
mean that there is no more recourse for the parties.
In St. Martin Funeral Home v. National Labor Relations Commission, 116 this court cited several
cases117 and rejected the notion that this court had no jurisdiction to review decisions of the National
Labor Relations Commission. It stated that this court had the power to review the acts of the National

Labor Relations Commission to see if it kept within its jurisdiction in deciding cases and also as a form
of check and balance.118 This court then clarified that judicial review of National Labor Relations
Commission decisions shall be by way of a petition for certiorari under Rule 65. Citing the doctrine of
hierarchy of courts, it further ruled that such petitions shall be filed before the Court of Appeals. From
the Court of Appeals, an aggrieved party may file a petition for review on certiorari under Rule 45.
A petition for certiorari under Rule 65 is an original action where the issue is limited to grave abuse of
discretion. As an original action, it cannot be considered as a continuation of the proceedings of the
labor tribunals.
On the other hand, a petition for review on certiorari under Rule 45 is a mode of appeal where the
issue is limited to questions of law. In labor cases, a Rule 45 petition is limited to reviewing whether
the Court of Appeals correctly determined the presence or absence of grave abuse of discretion and
deciding other jurisdictional errors of the National Labor Relations Commission. 119
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In Odango v. National Labor Relations Commission,120 this court explained that a petition for certiorari
is an extraordinary remedy that is available only and restrictively in truly exceptional cases 121 and
that its sole office is the correction of errors of jurisdiction including commission of grave abuse of
discretion amounting to lack or excess of jurisdiction.122 A petition for certiorari does not include a
review of findings of fact since the findings of the National Labor Relations Commission are accorded
finality.123 In cases where the aggrieved party assails the National Labor Relations Commissions
findings, he or she must be able to show that the Commission acted capriciously and whimsically or
in total disregard of evidence material to the controversy.124
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When a decision of the Court of Appeals under a Rule 65 petition is brought to this court by way of a
petition for review under Rule 45, only questions of law may be decided upon. As held in Meralco
Industrial v. National Labor Relations Commission:125
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This Court is not a trier of facts. Well-settled is the rule that the jurisdiction of this Court in a petition
for review on certiorari under Rule 45 of the Revised Rules of Court is limited to reviewing only errors
of law, not of fact, unless the factual findings complained of are completely devoid of support from the
evidence on record, or the assailed judgment is based on a gross misapprehension of facts. Besides,
factual findings of quasi-judicial agencies like the NLRC, when affirmed by the Court of Appeals, are
conclusive upon the parties and binding on this Court. 126
Career Philippines v. Serna,127 citing Montoya v. Transmed,128 is instructive on the parameters of
judicial review under Rule 45:
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As a rule, only questions of law may be raised in a Rule 45 petition. In one case, we discussed the
particular parameters of a Rule 45 appeal from the CAs Rule 65 decision on a labor case, as
follows:
In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast with the
review for jurisdictional error that we undertake under Rule 65. Furthermore, Rule 45 limits us to the
review of questions of law raised against the assailed CA decision. In ruling for legal correctness, we
have to view the CA decision in the same context that the petition for certiorari it ruled upon was
presented to it; we have to examine the CA decision from the prism of whether it correctly determined
the presence or absence of grave abuse of discretion in the NLRC decision before it, not on the basis
of whether the NLRC decision on the merits of the case was correct. In other words, we have to be
keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision
challenged before it.129 (Emphasis in the original)
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Justice Brions dissenting opinion in Abott Laboratories, PhiIippines v. AIcaraz130 discussed that in
petitions for review under Rule 45, the Court simply determines whether the legal correctness of the
CAs finding that the NLRC ruling . . . had basis in fact and in Iaw. 131 In this kind of petition, the
proper question to be raised is, Did the CA correctly determine whether the NLRC committed
grave abuse of discretion in ruling on the case? 132
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Justice Brions dissenting opinion also laid down the following guidelines:

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If the NLRC ruling has basis in the evidence and the applicable law and jurisprudence, then no grave
abuse of discretion exists and the CA should so declare and, accordingly,dismiss the petition. If grave
abuse of discretion exists, then the CA must grant the petition and nullify the NLRC ruling, entering at
the same time the ruling that is justified under the evidence and the governing law, rules and
jurisprudence. In our Rule 45 review, this Court must deny the petition if it finds that the CA correctly
acted.133(Emphasis in the original)
These parameters shall be used in resolving the substantive issues in this petition.

cralawre d

III
Determination of employment status; burden of proof
In this case, there is no question that Arlene rendered services to Fuji. However, Fuji alleges that
Arlene was an independent contractor, while Arlene alleges that she was a regular employee. To
resolve this issue, we ascertain whether an employer-employee relationship existed between Fuji and
Arlene.
This court has often used the four-fold test to determine the existence of an employer-employee
relationship. Under the four-fold test, the control test is the most important. 134 As to how the
elements in the four-fold test are proven, this court has discussed that:
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[t]here is no hard and fast rule designed to establish the aforesaid elements. Any competent and
relevant evidence to prove the relationship may be admitted. Identification cards, cash vouchers,
social security registration, appointment letters or employment contracts, payrolls, organization
charts, and personnel lists, serve as evidence of employee status. 135
If the facts of this case vis--vis the four-fold test show that an employer-employee relationship
existed, we then determine the status of Arlenes employment, i.e., whether she was a regular
employee. Relative to this, we shall analyze Arlenes fixed-term contract and determine whether it
supports her argument that she was a regular employee, or the argument of Fuji that she was an
independent contractor. We shall scrutinize whether the nature of Arlenes work was necessary and
desirable to Fujis business or whether Fuji only needed the output of her work. If the circumstances
show that Arlenes work was necessary and desirable to Fuji, then she is presumed to be a regular
employee. The burden of proving that she was an independent contractor lies with Fuji.
In labor cases, the quantum of proof required is substantial evidence. 136 Substantial evidence has
been defined as such amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion.137
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If Arlene was a regular employee, we then determine whether she was illegally dismissed. In
complaints for illegal dismissal, the burden of proof is on the employee to prove the fact of
dismissal.138 Once the employee establishes the fact of dismissal, supported by substantial evidence,
the burden of proof shifts to the employer to show that there was a just or authorized cause for the
dismissal and that due process was observed. 139
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IV
Whether the Court of Appeals correctly affirmed the National Labor Relations Commissions
finding that Arlene was a regular employee
Fuji alleges that Arlene was an independent contractor, citing Sonza v. ABS-CBN and relying on the
following facts: (1) she was hired because of her skills; (2) her salary was US$1,900.00, which is
higher than the normal rate; (3) she had the power to bargain with her employer; and (4) her
contract was for a fixed term. According to Fuji, the Court of Appeals erred when it ruled that Arlene
was forced to sign the non-renewal agreement, considering that she sent an email with another
version of the non-renewal agreement. 140 Further, she is not entitled to moral damages and attorneys
fees because she acted in bad faith when she filed a labor complaint against Fuji after receiving
US$18,050.00 representing her salary and other benefits. 141
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Arlene argues that she was a regular employee because Fuji had control and supervision over her
work. The news events that she covered were all based on the instructions of Fuji. 142 She maintains
that the successive renewal of her employment contracts for four (4) years indicates that her work
was necessary and desirable.143 In addition, Fujis payment of separation pay equivalent to one (1)
months pay per year of service indicates that she was a regular employee. 144 To further support her
argument that she was not an independent contractor, she states that Fuji owns the laptop computer
and mini-camera that she used for work.145
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Arlene also argues that Sonza is not applicable because she was a plain reporter for Fuji, unlike Jay
Sonza who was a news anchor, talk show host, and who enjoyed a celebrity status. 146
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On her illness, Arlene points out that it was not a ground for her dismissal because her attending
physician certified that she was fit to work.147
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Arlene admits that she signed the non-renewal agreement with quitclaim, not because she agreed to
its terms, but because she was not in a position to reject the non-renewal agreement. Further, she
badly needed the salary withheld for her sustenance and medication. 148 She posits that her acceptance
of separation pay does not bar filing of a complaint for illegal dismissal. 149
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Article 280 of the Labor Code provides that:

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Art. 280. Regular and casual employment. The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed
to be regular where the employee has been engaged to perform activities which are usually necessary
or desirable in the usual business or trade of the employer, except where the employment has been
fixed for a specific project or undertaking the completion or termination of which has been determined
at the time of the engagement of the employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph;
Provided, That, any employee who has rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with respect to the activity in which he
is employed and his employment shall continue while such activity exist.
This provision classifies employees into regular, project, seasonal, and casual. It further classifies
regular employees into two kinds: (1) those engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer; and (2) casual employees who
have rendered at least one year of service, whether such service is continuous or broken.
Another classification of employees, i.e., employees with fixed-term contracts, was recognized inBrent
School, Inc. v. Zamora150 where this court discussed that:
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Logically, the decisive determinant in the term employment should not be the activities that the
employee is called upon to perform, but the day certain agreed upon by the parties for the
commencement and termination of their employment relationship, a day certain being understood to
be that which must necessarily come, although it may not be known when.151 (Emphasis in the
original)
This court further discussed that there are employment contracts where a fixed term is an essential
and natural appurtenance152 such as overseas employment contracts and officers in educational
institutions.153
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Distinctions among fixed-term

employees, independent contractors,
and regular employees
GMA Network, Inc. v. Pabriga154 expounded the doctrine on fixed-term contracts laid down in Brent in
the following manner:
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Cognizant of the possibility of abuse in the utilization of fixed-term employment contracts, we

emphasized in Brent that where from the circumstances it is apparent that the periods have been
imposed to preclude acquisition of tenurial security by the employee, they should be struck down as
contrary to public policy or morals. We thus laid down indications or criteria under which term
employment cannot be said to be in circumvention of the law on security of tenure, namely:
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1) The fixed period of employment was knowingly and voluntarily agreed upon by the parties without
any force, duress, or improper pressure being brought to bear upon the employee and absent any
other circumstances vitiating his consent; or
2) It satisfactorily appears that the employer and the employee dealt with each other on more or less
equal terms with no moral dominance exercised by the former or the latter.
These indications, which must be read together, make the Brent doctrine applicable only in a few
special cases wherein the employer and employee are on more or less in equal footing in entering into
the contract. The reason for this is evident: when a prospective employee, on account of special skills
or market forces, is in a position to make demands upon the prospective employer, such prospective
employee needs less protection than the ordinary worker. Lesser limitations on the parties freedom of
contract are thus required for the protection of the employee. 155 (Citations omitted)
For as long as the guidelines laid down in Brent are satisfied, this court will recognize the validity of
the fixed-term contract.
In Labayog v. M.Y. San Biscuits, Inc.,156 this court upheld the fixed-term employment of petitioners
because from the time they were hired, they were informed that their engagement was for a specific
period. This court stated that:
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[s]imply put, petitioners were not regular employees. While their employment as mixers, packers and
machine operators was necessary and desirable in the usual business of respondent company, they
were employed temporarily only, during periods when there was heightened demand for production.
Consequently, there could have been no illegal dismissal when their services were terminated on
expiration of their contracts. There was even no need for notice of termination because they knew
exactly when their contracts would end. Contracts of employment for a fixed period terminate on their
own at the end of such period.
Contracts of employment for a fixed period are not unlawful. What is objectionable is the practice of
some scrupulous employers who try to circumvent the law protecting workers from the capricious
termination of employment.157 (Citation omitted)
Caparoso v. Court of Appeals158 upheld the validity of the fixed-term contract of employment.
Caparoso and Quindipan were hired as delivery men for three (3) months. At the end of the third
month, they were hired on a monthly basis. In total, they were hired for five (5) months. They filed a
complaint for illegal dismissal.159 This court ruled that there was no evidence indicating that they were
pressured into signing the fixed-term contracts. There was likewise no proof that their employer was
engaged in hiring workers for five (5) months only to prevent regularization. In the absence of these
facts, the fixed-term contracts were upheld as valid. 160
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On the other hand, an independent contractor is defined as:

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. . . one who carries on a distinct and independent business and undertakes to perform the job, work,
or service on its own account and under ones own responsibility according to ones own manner and
method, free from the control and direction of the principal in all matters connected with the
performance of the work except as to the results thereof.161
In view of the distinct and independent business of independent contractors, no employer-employee
relationship exists between independent contractors and their principals.
Independent contractors are recognized under Article 106 of the Labor Code:

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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.
....
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.
In Department Order No. 18-A, Series of 2011, of the Department of Labor and Employment, a
contractor is defined as having:
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Section 3. . . .
....
(c) . . . an arrangement whereby a principal agrees to put out or farm out with a contractor the
performance or completion of a specific job, work or service within a definite or predetermined period,
regardless of whether such job, work or service is to be performed or completed within or outside the
premises of the principal.
This department order also states that there is a trilateral relationship in legitimate job contracting and
subcontracting arrangements among the principal, contractor, and employees of the contractor. There
is no employer-employee relationship between the contractor and principal who engages the
contractors services, but there is an employer-employee relationship between the contractor and
workers hired to accomplish the work for the principal. 162
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Jurisprudence has recognized another kind of independent contractor: individuals with unique skills
and talents that set them apart from ordinary employees. There is no trilateral relationship in this case
because the independent contractor himself or herself performs the work for the principal. In other
words, the relationship is bilateral.
In Orozco v. Court of Appeals,163 Wilhelmina Orozco was a columnist for the Philippine Daily Inquirer.
This court ruled that she was an independent contractor because of her talent, skill, experience, and
her unique viewpoint as a feminist advocate.164 In addition, the Philippine Daily Inquirer did not have
the power of control over Orozco, and she worked at her own pleasure. 165
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Semblante v. Court of Appeals166 involved a masiador167 and a sentenciador.168 This court ruled that
petitioners performed their functions as masiador and sentenciador free from the direction and
control of respondents169 and that the masiador and sentenciador relied mainly on their expertise
that is characteristic of the cockfight gambling. 170 Hence, no employer-employee relationship existed.
Bernarte v. Philippine Basketball Association171 involved a basketball referee. This court ruled that a
referee is an independent contractor, whose special skills and independent judgment are required
specifically for such position and cannot possibly be controlled by the hiring party.172
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In these cases, the workers were found to be independent contractors because of their unique skills
and talents and the lack of control over the means and methods in the performance of their work.

In other words, there are different kinds of independent contractors: those engaged in legitimate job
contracting and those who have unique skills and talents that set them apart from ordinary
employees.
Since no employer-employee relationship exists between independent contractors and their principals,
their contracts are governed by the Civil Code provisions on contracts and other applicable laws. 173
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A contract is defined as a meeting of minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some service.174 Parties are free to stipulate on
terms and conditions in contracts as long as these are not contrary to law, morals, good customs,
public order, or public policy.175 This presupposes that the parties to a contract are on equal footing.
They can bargain on terms and conditions until they are able to reach an agreement.
On the other hand, contracts of employment are different and have a higher level of regulation
because they are impressed with public interest. Article XIII, Section 3 of the 1987 Constitution
provides full protection to labor:
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Article XIII. Social Justice and Human Rights

....
Labor
Section 3. The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law. They shall be
entitled to security of tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights and benefits as may be
provided by law.
The State shall promote the principle of shared responsibility between workers and employers and the
preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce their
mutual compliance therewith to foster industrial peace.
The State shall regulate the relations between workers and employers, recognizing the right of labor
to its just share in the fruits of production and the right of enterprises to reasonable returns on
investments, and to expansion and growth.
Apart from the constitutional guarantee of protection to labor, Article 1700 of the Civil Code states:

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ART. 1700. The relations between capital and labor are not merely contractual. They are so impressed
with public interest that labor contracts must yield to the common good. Therefore, such contracts are
subject to the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop,
wages, working conditions, hours of labor and similar subjects.
In contracts of employment, the employer and the employee are not on equal footing. Thus, it is
subject to regulatory review by the labor tribunals and courts of law. The law serves to equalize the
unequal. The labor force is a special class that is constitutionally protected because of the inequality
between capital and labor.176 This presupposes that the labor force is weak.
However, the level of protection to labor should vary from case to case; otherwise, the state might
appear to be too paternalistic in affording protection to labor. As stated in GMA Network, Inc. v.
Pabriga, the ruling in Brent applies in cases where it appears that the employer and employee are on
equal footing.177 This recognizes the fact that not all workers are weak. To reiterate the discussion
inGMA Network v. Pabriga:
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The reason for this is evident: when a prospective employee, on account of special skills or market
forces, is in a position to make demands upon the prospective employer, such prospective employee
needs less protection than the ordinary worker. Lesser limitations on the parties freedom of contract
are thus required for the protection of the employee. 178
The level of protection to labor must be determined on the basis of the nature of the work,
qualifications of the employee, and other relevant circumstances.
For example, a prospective employee with a bachelors degree cannot be said to be on equal footing
with a grocery bagger with a high school diploma. Employees who qualify for jobs requiring special
qualifications such as [having] a Masters degree or [having] passed the licensure exam are
different from employees who qualify for jobs that require [being a] high school graduate; with
pleasing personality. In these situations, it is clear that those with special qualifications can bargain
with the employer on equal footing. Thus, the level of protection afforded to these employees should
be different.
Fujis argument that Arlene was an independent contractor under a fixed-term contract is
contradictory. Employees under fixed-term contracts cannot be independent contractors because in
fixed-term contracts, an employer-employee relationship exists. The test in this kind of contract is not
the necessity and desirability of the employees activities, but the day certain agreed upon by the
parties for the commencement and termination of the employment relationship.179 For regular
employees, the necessity and desirability of their work in the usual course of the employers business
are the determining factors. On the other hand, independent contractors do not have employeremployee relationships with their principals.
Hence, before the status of employment can be determined, the existence of an employer-employee
relationship must be established.
The four-fold test180 can be used in determining whether an employer-employee relationship exists.
The elements of the four-fold test are the following: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power of control, which
is the most important element.181
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The power of control was explained by this court in Corporal, Sr. v. National Labor Relations
Commission:182
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The power to control refers to the existence of the power and not necessarily to the actual exercise
thereof, nor is it essential for the employer to actually supervise the performance of duties of the
employee. It is enough that the employer has the right to wield that power.183 (Citation omitted)
Orozco v. Court of Appeals further elucidated the meaning of power of control and stated the
following:
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Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be employed in
attaining it, and those that control or fix the methodology and bind or restrict the party hired to the
use of such means. The first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means used to achieve it. . . .
184
(Citation omitted)
In Locsin, et al. v. Philippine Long Distance Telephone Company, 185 the power of control was defined
as [the] right to control not only the end to be achieved but also the means to be used in reaching
such end. 186
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Here, the Court of Appeals applied Sonza v. ABS-CBN and Dumpit-Murillo v. Court of Appeals187 in
determining whether Arlene was an independent contractor or a regular employee.
In deciding Sonza and Dumpit-Murillo, this court used the four-fold test. Both cases involved

newscasters and anchors. However, Sonza was held to be an independent contractor, while DumpitMurillo was held to be a regular employee.
Comparison of the Sonza and
Dumpit-Murillo cases using
the four-fold test
Sonza was engaged by ABS-CBN in view of his unique skills, talent and celebrity status not possessed
by ordinary employees.188 His work was for radio and television programs.189 On the other hand,
Dumpit-Murillo was hired by ABC as a newscaster and co-anchor.190
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Sonzas talent fee amounted to P317,000.00 per month, which this court found to be a substantial
amount that indicated he was an independent contractor rather than a regular employee. 191Meanwhile,
Dumpit-Murillos monthly salary was P28,000.00, a very low amount compared to what Sonza
received.192
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Sonza was unable to prove that ABS-CBN could terminate his services apart from breach of contract.
There was no indication that he could be terminated based on just or authorized causes under the
Labor Code. In addition, ABS-CBN continued to pay his talent fee under their agreement, even though
his programs were no longer broadcasted.193 Dumpit-Murillo was found to have been illegally dismissed
by her employer when they did not renew her contract on her fourth year with ABC. 194
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In Sonza, this court ruled that ABS-CBN did not control how Sonza delivered his lines, how he
appeared on television, or how he sounded on radio.195 All that Sonza needed was his talent.196Further,
ABS-CBN could not terminate or discipline SONZA even if the means and methods of performance of
his work . . . did not meet ABS-CBNs approval.197 In Dumpit-Murillo, the duties and responsibilities
enumerated in her contract was a clear indication that ABC had control over her work. 198
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Application of the four-fold test

The Court of Appeals did not err when it relied on the ruling in Dumpit-Murillo and affirmed the ruling
of the National Labor Relations Commission finding that Arlene was a regular employee. Arlene was
hired by Fuji as a news producer, but there was no showing that she was hired because of unique skills
that would distinguish her from ordinary employees. Neither was there any showing that she had a
celebrity status. Her monthly salary amounting to US$1,900.00 appears to be a substantial sum,
especially if compared to her salary when she was still connected with GMA. 199 Indeed, wages may
indicate whether one is an independent contractor. Wages may also indicate that an employee is able
to bargain with the employer for better pay. However, wages should not be the conclusive factor in
determining whether one is an employee or an independent contractor.
Fuji had the power to dismiss Arlene, as provided for in paragraph 5 of her professional employment
contract.200 Her contract also indicated that Fuji had control over her work because she was required
to work for eight (8) hours from Monday to Friday, although on flexible time. 201 Sonza was not
required to work for eight (8) hours, while Dumpit-Murillo had to be in ABC to do both on-air and offair tasks.
On the power to control, Arlene alleged that Fuji gave her instructions on what to report. 202 Even the
mode of transportation in carrying out her functions was controlled by Fuji. Paragraph 6 of her
contract states:
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6.

During the travel to carry out work, if there is change of place or change of place of work, the
train, bus, or public transport shall be used for the trip. If the Employee uses the private car
during the work and there is an accident the Employer shall not be responsible for the
damage, which may be caused to the Employee.203

Thus, the Court of Appeals did not err when it upheld the findings of the National Labor Relations
Commission that Arlene was not an independent contractor.

Having established that an employer-employee relationship existed between Fuji and Arlene, the next
questions for resolution are the following: Did the Court of Appeals correctly affirm the National Labor
Relations Commission that Arlene had become a regular employee? Was the nature of Arlenes work
necessary and desirable for Fujis usual course of business?
Arlene was a regular employee
with a fixed-term contract
The test for determining regular employment is whether there is a reasonable connection between the
employees activities and the usual business of the employer. Article 280 provides that the nature of
work must be necessary or desirable in the usual business or trade of the employer as the test for
determining regular employment. As stated in ABS-CBN Broadcasting Corporation v. Nazareno:204
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In determining whether an employment should be considered regular or non-regular, the applicable

test is the reasonable connection between the particular activity performed by the employee in
relation to the usual business or trade of the employer. The standard, supplied by the law itself, is
whether the work undertaken is necessary or desirable in the usual business or trade of the employer,
a fact that can be assessed by looking into the nature of the services rendered and its relation to the
general scheme under which the business or trade is pursued in the usual course. It is distinguished
from a specific undertaking that is divorced from the normal activities required in carrying on the
particular business or trade.205
However, there may be a situation where an employees work is necessary but is not always desirable
in the usual course of business of the employer. In this situation, there is no regular employment.
In San Miguel Corporation v. National Labor Relations Commission,206 Francisco de Guzman was hired
to repair furnaces at San Miguel Corporations Manila glass plant. He had a separate contract for every
furnace that he repaired. He filed a complaint for illegal dismissal three (3) years after the end of his
last contract.207 In ruling that de Guzman did not attain the status of a regular employee, this court
explained:
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Note that the plant where private respondent was employed for only seven months is engaged in the
manufacture of glass, an integral component of the packaging and manufacturing business of
petitioner. The process of manufacturing glass requires a furnace, which has a limited operating life.
Petitioner resorted to hiring project or fixed term employees in having said furnaces repaired since
said activity is not regularly performed. Said furnaces are to be repaired or overhauled only in case of
need and after being used continuously for a varying period of five (5) to ten (10) years.
In 1990, one of the furnaces of petitioner required repair and upgrading. This was an undertaking
distinct and separate from petitioner's business of manufacturing glass. For this purpose, petitioner
must hire workers to undertake the said repair and upgrading. . . .
....
Clearly, private respondent was hired for a specific project that was not within the regular business of
the corporation. For petitioner is not engaged in the business of repairing furnaces. Although the
activity was necessary to enable petitioner to continue manufacturing glass, the necessity therefor
arose only when a particular furnace reached the end of its life or operating cycle. Or, as in the second
undertaking, when a particular furnace required an emergency repair. In other words, the
undertakings where private respondent was hired primarily as helper/bricklayer have specified goals
and purposes which are fulfilled once the designated work was completed. Moreover, such
undertakings were also identifiably separate and distinct from the usual, ordinary or regular business
operations of petitioner, which is glass manufacturing. These undertakings, the duration and scope of
which had been determined and made known to private respondent at the time of his employment,
clearly indicated the nature of his employment as a project employee. 208
Fuji is engaged in the business of broadcasting, 209 including news programming.210 It is based in

Japan211 and has overseas offices to cover international news. 212

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Based on the record, Fujis Manila Bureau Office is a small unit 213 and has a few employees.214 As such,
Arlene had to do all activities related to news gathering. Although Fuji insists that Arlene was a
stringer, it alleges that her designation was News Talent/Reporter/Producer.215
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A news producer plans and supervises newscast . . . [and] work[s] with reporters in the field planning
and gathering information. . . .216 Arlenes tasks included [m]onitoring and [g]etting [n]ews [s]tories,
[r]eporting interviewing subjects in front of a video camera,217 the timely submission of news and
current events reports pertaining to the Philippines[,] and traveling [sic] to [Fujis] regional office in
Thailand.218 She also had to report for work in Fujis office in Manila from Mondays to Fridays, eight
(8) hours per day.219 She had no equipment and had to use the facilities of Fuji to accomplish her
tasks.
The Court of Appeals affirmed the finding of the National Labor Relations Commission that the
successive renewals of Arlenes contract indicated the necessity and desirability of her work in the
usual course of Fujis business. Because of this, Arlene had become a regular employee with the right
to security of tenure.220 The Court of Appeals ruled that:
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Here, Espiritu was engaged by Fuji as a stinger [sic] or news producer for its Manila Bureau. She was
hired for the primary purpose of news gathering and reporting to the television networks
headquarters. Espiritu was not contracted on account of any peculiar ability or special talent and skill
that she may possess which the network desires to make use of. Parenthetically, if it were true that
Espiritu is an independent contractor, as claimed by Fuji, the fact that everything that she uses to
perform her job is owned by the company including the laptop computer and mini camera discounts
the idea of job contracting.221
Moreover, the Court of Appeals explained that Fujis argument that no employer-employee relationship
existed in view of the fixed-term contract does not persuade because fixed-term contracts of
employment are strictly construed.222 Further, the pieces of equipment Arlene used were all owned by
Fuji, showing that she was a regular employee and not an independent contractor.223
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The Court of Appeals likewise cited Dumpit-Murillo, which involved fixed-term contracts that were
successively renewed for four (4) years.224 This court held that [t]his repeated engagement under
contract of hire is indicative of the necessity and desirability of the petitioners work in private
respondent ABCs business.225
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With regard to Fujis argument that Arlenes contract was for a fixed term, the Court of Appeals
citedPhilips Semiconductors, Inc. v. Fadriquela226 and held that where an employees contract had
been continuously extended or renewed to the same position, with the same duties and remained in
the employ without any interruption,227 then such employee is a regular employee. The continuous
renewal is a scheme to prevent regularization. On this basis, the Court of Appeals ruled in favor of
Arlene.
As stated in Price, et al. v. Innodata Corp., et al.:228

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The employment status of a person is defined and prescribed by law and not by what the parties say it
should be. Equally important to consider is that a contract of employment is impressed with public
interest such that labor contracts must yield to the common good. Thus, provisions of applicable
statutes are deemed written into the contract, and the parties are not at liberty to insulate themselves
and their relationships from the impact of labor laws and regulations by simply contracting with each
other.229(Citations omitted)
Arlenes contract indicating a fixed term did not automatically mean that she could never be a regular
employee. This is precisely what Article 280 seeks to avoid. The ruling in Brent remains as the
exception rather than the general rule.
Further, an employee can be a regular employee with a fixed-term contract. The law does not preclude

the possibility that a regular employee may opt to have a fixed-term contract for valid reasons. This
was recognized in Brent: For as long as it was the employee who requested, or bargained, that the
contract have a definite date of termination, or that the fixed-term contract be freely entered into by
the employer and the employee, then the validity of the fixed-term contract will be upheld. 230
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V
Whether the Court of Appeals correctly affirmed
the National Labor Relations Commissions finding of illegal dismissal
Fuji argues that the Court of Appeals erred when it held that Arlene was illegally dismissed, in view of
the non-renewal contract voluntarily executed by the parties. Fuji also argues that Arlenes contract
merely expired; hence, she was not illegally dismissed. 231
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Arlene alleges that she had no choice but to sign the non-renewal contract because Fuji withheld her
salary and benefits.
With regard to this issue, the Court of Appeals held:

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We cannot subscribe to Fujis assertion that Espiritus contract merely expired and that she voluntarily
agreed not to renew the same. Even a cursory perusal of the subject Non-Renewal Contract readily
shows that the same was signed by Espiritu under protest. What is apparent is that the Non-Renewal
Contract was crafted merely as a subterfuge to secure Fujis position that it was Espiritus choice not to
renew her contract.232
As a regular employee, Arlene was entitled to security of tenure and could be dismissed only for just
or authorized causes and after the observance of due process.
The right to security of tenure is guaranteed under Article XIII, Section 3 of the 1987 Constitution:

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Article XIII. Social Justice and Human Rights

....
Labor
....
It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law. They shall be
entitled to security of tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights and benefits as may be
provided by law.
Article 279 of the Labor Code also provides for the right to security of tenure and states the
following:
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Art. 279. Security of tenure. In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause of when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld from him up to the time
of his actual reinstatement.
Thus, on the right to security of tenure, no employee shall be dismissed, unless there are just or
authorized causes and only after compliance with procedural and substantive due process is
conducted.

Even probationary employees are entitled to the right to security of tenure. This was explained
inPhilippine Daily Inquirer, Inc. v. Magtibay, Jr.:233
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Within the limited legal six-month probationary period, probationary employees are still entitled to
security of tenure. It is expressly provided in the afore-quoted Article 281 that a probationary
employee may be terminated only on two grounds: (a) for just cause, or (b) when he fails to qualify
as a regular employee in accordance with reasonable standards made known by the employer to the
employee at the time of his engagement. 234 (Citation omitted)
The expiration of Arlenes contract does not negate the finding of illegal dismissal by Fuji. The manner
by which Fuji informed Arlene that her contract would no longer be renewed is tantamount to
constructive dismissal. To make matters worse, Arlene was asked to sign a letter of resignation
prepared by Fuji.235 The existence of a fixed-term contract should not mean that there can be no illegal
dismissal. Due process must still be observed in the pre-termination of fixed-term contracts of
employment.
In addition, the Court of Appeals and the National Labor Relations Commission found that Arlene was
dismissed because of her health condition. In the non-renewal agreement executed by Fuji and Arlene,
it is stated that:
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WHEREAS, the SECOND PARTY is undergoing chemotherapy which prevents her from continuing to
effectively perform her functions under the said Contract such as the timely submission of news and
current events reports pertaining to the Philippines and travelling [sic] to the FIRST PARTYs regional
office in Thailand.236 (Emphasis supplied)
Disease as a ground for termination is recognized under Article 284 of the Labor Code:

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Art. 284. Disease as ground for termination. An employer may terminate the services of an
employee who has been found to be suffering from any disease and whose continued employment is
prohibited by law or is prejudicial to his health as well as to the health of his co-employees: Provided,
That he is paid separation pay equivalent to at least one (1) month salary or to one-half (1/2) month
salary for every year of service, whichever is greater, a fraction of at least six (6) months being
considered as one (1) whole year.
Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the Labor Code provides:

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Sec. 8. Disease as a ground for dismissal. Where the employee suffers from a disease and his
continued employment is prohibited by law or prejudicial to his health or to the health of his coemployees, the employer shall not terminate his employment unless there is a certification by a
competent public health authority that the disease is of such nature or at such a stage that it cannot
be cured within a period of six (6) months even with proper medical treatment. If the disease or
ailment can be cured within the period, the employer shall not terminate the employee but shall ask
the employee to take a leave. The employer shall reinstate such employee to his former position
immediately upon the restoration of his normal health.
For dismissal under Article 284 to be valid, two requirements must be complied with: (1) the
employees disease cannot be cured within six (6) months and his continued employment is
prohibited by law or prejudicial to his health as well as to the health of his co-employees; and (2)
certification issued by a competent public health authority that even with proper medical treatment,
the disease cannot be cured within six (6) months. 237 The burden of proving compliance with these
requisites is on the employer.238 Non-compliance leads to the conclusion that the dismissal was
illegal.239
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There is no evidence showing that Arlene was accorded due process. After informing her employer of
her lung cancer, she was not given the chance to present medical certificates. Fuji immediately
concluded that Arlene could no longer perform her duties because of chemotherapy. It did not ask her
how her condition would affect her work. Neither did it suggest for her to take a leave, even though
she was entitled to sick leaves. Worse, it did not present any certificate from a competent public

health authority. What Fuji did was to inform her that her contract would no longer be renewed, and
when she did not agree, her salary was withheld. Thus, the Court of Appeals correctly upheld the
finding of the National Labor Relations Commission that for failure of Fuji to comply with due process,
Arlene was illegally dismissed.240
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VI
Whether the Court of Appeals properly modified
the National Labor Relations Commissions decision
when it awarded reinstatement, damages, and attorneys fees
The National Labor Relations Commission awarded separation pay in lieu of reinstatement, on the
ground that the filing of the complaint for illegal dismissal may have seriously strained relations
between the parties. Backwages were also awarded, to be computed from date of dismissal until the
finality of the National Labor Relations Commissions decision. However, only backwages were included
in the dispositive portion because the National Labor Relations Commission recognized that Arlene had
received separation pay in the amount of US$7,600.00.
The Court of Appeals affirmed the National Labor Relations Commissions decision but modified it by
awarding moral and exemplary damages and attorneys fees, and all other benefits Arlene was entitled
to under her contract with Fuji. The Court of Appeals also ordered reinstatement, reasoning that the
grounds when separation pay was awarded in lieu of reinstatement were not proven. 241
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Article 279 of the Labor Code provides:

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Art. 279. Security of tenure. In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld from him up to the time
of his actual reinstatement. (Emphasis supplied)
The Court of Appeals modification of the National Labor Relations Commissions decision was proper
because the law itself provides that illegally dismissed employees are entitled to reinstatement,
backwages including allowances, and all other benefits.
On reinstatement, the National Labor Relations Commission ordered payment of separation pay in lieu
of reinstatement, reasoning that the filing of the instant suit may have seriously abraded the
relationship of the parties so as to render reinstatement impractical.242 The Court of Appeals reversed
this and ordered reinstatement on the ground that separation pay in lieu of reinstatement is allowed
only in several instances such as (1) when the employer has ceased operations; (2) when the
employees position is no longer available; (3) strained relations; and (4) a substantial period has
lapsed from date of filing to date of finality.243
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On this matter, Quijano v. Mercury Drug Corp.244 is instructive:

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Well-entrenched is the rule that an illegally dismissed employee is entitled to reinstatement as a

matter of right. . . .
To protect labors security of tenure, we emphasize that the doctrine of strained relations should be
strictly applied so as not to deprive an illegally dismissed employee of his right to reinstatement. Every
labor dispute almost always results in strained relations and the phrase cannot be given an
overarching interpretation, otherwise, an unjustly dismissed employee can never be
reinstated.245 (Citations omitted)
The Court of Appeals reasoned that strained relations are a question of fact that must be supported by
evidence.246 No evidence was presented by Fuji to prove that reinstatement was no longer feasible.
Fuji did not allege that it ceased operations or that Arlenes position was no longer available. Nothing
in the records shows that Arlenes reinstatement would cause an atmosphere of antagonism in the

workplace. Arlene filed her complaint in 2009. Five (5) years are not yet a substantial period 247 to bar
reinstatement.
On the award of damages, Fuji argues that Arlene is not entitled to the award of damages and
attorneys fees because the non-renewal agreement contained a quitclaim, which Arlene signed.
Quitclaims in labor cases do not bar illegally dismissed employees from filing labor complaints and
money claim. As explained by Arlene, she signed the non-renewal agreement out of necessity. InLand
and Housing Development Corporation v. Esquillo, 248 this court explained:
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We have heretofore explained that the reason why quitclaims are commonly frowned upon as contrary
to public policy, and why they are held to be ineffective to bar claims for the full measure of the
workers legal rights, is the fact that the employer and the employee obviously do not stand on the
same footing. The employer drove the employee to the wall. The latter must have to get hold of
money. Because, out of a job, he had to face the harsh necessities of life. He thus found himself in no
position to resist money proffered. His, then, is a case of adherence, not of choice. 249
With regard to the Court of Appeals award of moral and exemplary damages and attorneys fees, this
court has recognized in several cases that moral damages are awarded when the dismissal is
attended by bad faith or fraud or constitutes an act oppressive to labor, or is done in a manner
contrary to good morals, good customs or public policy.250 On the other hand, exemplary damages
may be awarded when the dismissal was effected in a wanton, oppressive or malevolent
manner.251
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The Court of Appeals and National Labor Relations Commission found that after Arlene had informed
Fuji of her cancer, she was informed that there would be problems in renewing her contract on account
of her condition. This information caused Arlene mental anguish, serious anxiety, and wounded
feelings that can be gleaned from the tenor of her email dated March 11, 2009. A portion of her email
reads:
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I WAS SO SURPRISED . . . that at a time when I am at my lowest, being sick and very weak, you
suddenly came to deliver to me the NEWS that you will no longer renew my contract. I knew this will
come but I never thought that you will be so heartless and insensitive to deliver that news just a
month after I informed you that I am sick. I was asking for patience and understanding and your
response was not to RENEW my contract.252
Apart from Arlenes illegal dismissal, the manner of her dismissal was effected in an oppressive
approach with her salary and other benefits being withheld until May 5, 2009, when she had no other
choice but to sign the non-renewal contract. Thus, there was legal basis for the Court of Appeals to
modify the National Labor Relations Commissions decision.
However, Arlene received her salary for May 2009. 253 Considering that the date of her illegal dismissal
was May 5, 2009,254 this amount may be subtracted from the total monetary award.
With regard to the award of attorneys fees, Article 111 of the Labor Code states that [i]n cases of
unlawful withholding of wages, the culpable party may be assessed attorneys fees equivalent to ten
percent of the amount of wages recovered. Likewise, this court has recognized that in actions for
recovery of wages or where an employee was forced to litigate and, thus, incur expenses to protect his
rights and interest, the award of attorneys fees is legally and morally justifiable.255 Due to her illegal
dismissal, Arlene was forced to litigate.
In the dispositive portion of its decision, the Court of Appeals awarded legal interest at the rate of
12% per annum.256 In view of this courts ruling in Nacar v. Gallery Frames,257 the legal interest shall
be reducd to a rate of 6% per annum from July 1, 2013 until full satisfaction.
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WHEREFORE, the petition is DENIED. The assailed Court of Appeals decision dated June 25, 2012
isAFFIRMED with the modification that backwages shall be computed from June 2009. Legal interest
shall be computed at the rate of 6% per annum of the total monetary awards from May 5, 2009 until

full satisfaction.
SO ORDERED

G.R. No. 195466

July 2, 2014

ARIEL L. DAVID, doing business under the name and style "YIELS HOG
DEALER," Petitioner,
vs.
JOHN G. MACASIO, Respondent.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari the challenge to the November 22, 2010
decision and the January 31, 2011 resolution of the Court of Appeals (CA) in CA-G.R. SP
No. 116003. The CA decision annulled and set aside the May 26, 2010 decision of the
National Labor Relations Commission (NLRC) which, in turn, affirmed the April 30, 2009
Decision of the Labor Arbiter (LA). The LA's decision dismissed respondent John G.
Macasio's monetary claims.
1

The Factual Antecedents

In January 2009, Macasio filed before the LA a complaint against petitioner Ariel L. David,
doing business under the name and style "Yiels Hog Dealer," for non-payment of overtime
pay, holiday pay and 13th month pay. He also claimed payment for moral and exemplary
damages and attorneys fees. Macasio also claimed payment for service incentive leave
(SIL).
7

Macasio alleged before the LA that he had been working as a butcher for David since
January 6, 1995. Macasio claimed that David exercised effective control and supervision
over his work, pointing out that David: (1) set the work day, reporting time and hogs to be
chopped, as well as the manner by which he was to perform his work; (2) daily paid his
salary of P700.00, which was increased from P600.00 in 2007, P500.00 in 2006
and P400.00 in 2005; and (3) approved and disapproved his leaves. Macasio added that
David owned the hogs delivered for chopping, as well as the work tools and implements; the
latter also rented the workplace. Macasio further claimed that David employs about twentyfive (25) butchers and delivery drivers.
9

In his defense, David claimed that he started his hog dealer business in 2005 and that he
only has ten employees. He alleged that he hired Macasio as a butcher or chopper on
"pakyaw" or task basis who is, therefore, not entitled to overtime pay, holiday pay and 13th
month pay pursuant to the provisions of the Implementing Rules and Regulations (IRR) of
the Labor Code. David pointed out that Macasio: (1) usually starts his work at 10:00 p.m.
and ends at 2:00 a.m. of the following day or earlier, depending on the volume of the
delivered hogs; (2) received the fixed amount of P700.00 per engagement, regardless of the
actual number of hours that he spent chopping the delivered hogs; and (3) was not engaged
to report for work and, accordingly, did not receive any fee when no hogs were delivered.
10

Macasio disputed Davids allegations. He argued that, first, David did not start his business
only in 2005. He pointed to the Certificate of Employment that David issued in his favor
which placed the date of his employment, albeit erroneously, in January 2000. Second, he
reported for work every day which the payroll or time record could have easily proved had
David submitted them in evidence.
11

12

Refuting Macasios submissions, David claims that Macasio was not his employee as he
hired the latter on "pakyaw" or task basis. He also claimed that he issued the Certificate of
Employment, upon Macasios request, only for overseas employment purposes. He pointed
to the "Pinagsamang Sinumpaang Salaysay," executed by Presbitero Solano and
Christopher (Antonio Macasios co-butchers), to corroborate his claims.
13

14

In the April 30, 2009 decision, the LA dismissed Macasios complaint for lack of merit. The
LA gave credence to Davids claim that he engaged Macasio on "pakyaw" or task basis. The
LA noted the following facts to support this finding: (1) Macasio received the fixed amount
of P700.00 for every work done, regardless of the number of hours that he spent in
completing the task and of the volume or number of hogs that he had to chop per
engagement; (2) Macasio usually worked for only four hours, beginning from 10:00 p.m. up
to 2:00 a.m. of the following day; and (3) the P700.00 fixed wage far exceeds the then
prevailing daily minimum wage of P382.00. The LA added that the nature of Davids
business as hog dealer supports this "pakyaw" or task basis arrangement.
15

The LA concluded that as Macasio was engaged on "pakyaw" or task basis, he is not
entitled to overtime, holiday, SIL and 13th month pay.
The NLRCs Ruling
In its May 26, 2010 decision, the NLRC affirmed the LA ruling. The NLRC observed that
David did not require Macasio to observe an eight hour work schedule to earn the
fixed P700.00 wage; and that Macasio had been performing a non-time work, pointing out
that Macasio was paid a fixed amount for the completion of the assigned task, irrespective
of the time consumed in its performance. Since Macasio was paid by result and not in terms
of the time that he spent in the workplace, Macasio is not covered by the Labor Standards
laws on overtime, SIL and holiday pay, and 13th month pay under the Rules and
Regulations Implementing the 13th month pay law.
16

17

18

Macasio moved for reconsideration but the NLRC denied his motion in its August 11, 2010
resolution, prompting Macasio to elevate his case to the CA via a petition for certiorari.
19

20

21

The CAs Ruling

In its November 22, 2010 decision, the CA partly granted Macasios certiorari petition and
reversed the NLRCs ruling for having been rendered with grave abuse of discretion.
22

While the CA agreed with the LAand the NLRC that Macasio was a task basis employee, it
nevertheless found Macasio entitled to his monetary claims following the doctrine laid down
in Serrano v. Severino Santos Transit. The CA explained that as a task basis employee,
Macasio is excluded from the coverage of holiday, SIL and 13th month pay only if he is
likewise a "field personnel." As defined by the Labor Code, a "field personnel" is one who
performs the work away from the office or place of work and whose regular work hours
cannot be determined with reasonable certainty. In Macasios case, the elements that
characterize a "field personnel" are evidently lacking as he had been working as a butcher
at Davids "Yiels Hog Dealer" business in Sta. Mesa, Manila under Davids supervision and
control, and for a fixed working schedule that starts at 10:00 p.m.
23

Accordingly, the CA awarded Macasios claim for holiday, SIL and 13th month pay for three
years, with 10% attorneys fees on the total monetary award. The CA, however, denied
Macasios claim for moral and exemplary damages for lack of basis.
David filed the present petition after the CA denied his motion for reconsideration in the
CAs January 31, 2011 resolution.
24

25

The Petition
In this petition, David maintains that Macasios engagement was on a "pakyaw" or task
basis. Hence, the latter is excluded from the coverage of holiday, SIL and 13th month pay.
David reiterates his submissions before the lower tribunals and adds that he never had any
control over the manner by which Macasio performed his work and he simply looked on to
the "end-result." He also contends that he never compelled Macasio to report for work and
that under their arrangement, Macasio was at liberty to choose whether to report for work or
not as other butchers could carry out his tasks. He points out that Solano and Antonio had,
in fact, attested to their (David and Macasios) established "pakyawan" arrangement that
rendered a written contract unnecessary. In as much as Macasio is a task basis employee
who is paid the fixed amount of P700.00 per engagement regardless of the time consumed
in the performance David argues that Macasio is not entitled to the benefits he claims.
Also, he posits that because he engaged Macasio on "pakyaw" or task basis then no
employer-employee relationship exists between them.
26

27

Finally, David argues that factual findings of the LA, when affirmed by the NLRC, attain
finality especially when, as in this case, they are supported by substantial evidence. Hence,
David posits that the CA erred in reversing the labor tribunals findings and granting the
prayed monetary claims.
The Case for the Respondent
Macasio counters that he was not a task basis employee or a "field personnel" as David
would have this Court believe. He reiterates his arguments before the lower tribunals and
28

adds that, contrary to Davids position, theP700.00 fee that he was paid for each day that he
reported for work does not indicate a "pakyaw" or task basis employment as this amount
was paid daily, regardless of the number or pieces of hogs that he had to chop. Rather, it
indicates a daily-wage method of payment and affirms his regular employment status. He
points out that David did not allege or present any evidence as regards the quota or number
of hogs that he had to chop as basis for the "pakyaw" or task basis payment; neither did
David present the time record or payroll to prove that he worked for less than eight hours
each day. Moreover, David did not present any contract to prove that his employment was
on task basis. As David failed to prove the alleged task basis or "pakyawan" agreement,
Macasio concludes that he was Davids employee. Procedurally, Macasio points out that
Davids submissions in the present petition raise purely factual issues that are not proper for
a petition for review on certiorari. These issues whether he (Macasio) was paid by result
or on "pakyaw" basis; whether he was a "field personnel"; whether an employer-employee
relationship existed between him and David; and whether David exercised control and
supervision over his work are all factual in nature and are, therefore, proscribed in a Rule
45 petition. He argues that the CAs factual findings bind this Court, absent a showing that
such findings are not supported by the evidence or the CAs judgment was based on a
misapprehension of facts. He adds that the issue of whether an employer-employee
relationship existed between him and David had already been settled by the LA and the
NLRC (as well as by the CA per Macasios manifestation before this Court dated
November 15, 2012), in his favor, in the separate illegal case that he filed against David.
29

30

31

The Issue
The issue revolves around the proper application and interpretation of the labor law
provisions on holiday, SIL and 13th month pay to a worker engaged on "pakyaw" or task
basis. In the context of the Rule 65 petition before the CA, the issue is whether the CA
correctly found the NLRC in grave abuse of discretion in ruling that Macasio is entitled to
these labor standards benefits.
The Courts Ruling
We partially grant the petition.
Preliminary considerations: the Montoya ruling and the factual-issue-bar rule
In this Rule 45 petition for review on certiorari of the CAs decision rendered under a Rule
65 proceeding, this Courts power of review is limited to resolving matters pertaining to any
perceived legal errors that the CA may have committed in issuing the assailed decision.
This is in contrast with the review for jurisdictional errors, which we undertake in an original
certiorari action. In reviewing the legal correctness of the CA decision, we examine the CA
decision based on how it determined the presence or absence of grave abuse of discretion
in the NLRC decision before it and not on the basis of whether the NLRC decision on the

merits of the case was correct. In other words, we have to be keenly aware that the CA
undertook a Rule 65 review, not a review on appeal, of the NLRC decision challenged
before it.
32

33

Moreover, the Courts power in a Rule 45 petition limits us to a review of questions of law
raised against the assailed CA decision.
34

In this petition, David essentially asks the question whether Macasio is entitled to holiday,
SIL and 13th month pay. This one is a question of law. The determination of this question of
law however is intertwined with the largely factual issue of whether Macasio falls within the
rule on entitlement to these claims or within the exception. In either case, the resolution of
this factual issue presupposes another factual matter, that is, the presence of an employeremployee relationship between David and Macasio.
In insisting before this Court that Macasio was not his employee, David argues that he
engaged the latter on "pakyaw" or task basis. Very noticeably, David confuses engagement
on "pakyaw" or task basis with the lack of employment relationship. Impliedly, David asserts
that their "pakyawan" or task basis arrangement negates the existence of employment
relationship.
At the outset, we reject this assertion of the petitioner. Engagement on "pakyaw" or task
basis does not characterize the relationship that may exist between the parties, i.e., whether
one of employment or independent contractorship. Article 97(6) of the Labor Code defines
wages as "xxx the remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is payable by an
employer to an employee under a written or unwritten contract of employment for work done
or to be done, or for services rendered or to be rendered[.]" In relation to Article 97(6),
Article 101 of the Labor Code speaks of workers paid by results or those whose pay is
calculated in terms of the quantity or quality of their work output which includes "pakyaw"
work and other non-time work.
35

36

More importantly, by implicitly arguing that his engagement of Macasio on "pakyaw" or task
basis negates employer-employee relationship, David would want the Court to engage on a
factual appellate review of the entire case to determine the presence or existence of that
relationship. This approach however is not authorized under a Rule 45 petition for review of
the CA decision rendered under a Rule 65 proceeding.
First, the LA and the NLRC denied Macasios claim not because of the absence of an
employer-employee but because of its finding that since Macasio is paid on pakyaw or task
basis, then he is not entitled to SIL, holiday and 13th month pay. Second, we consider it
crucial, that in the separate illegal dismissal case Macasio filed with the LA, the LA, the
NLRC and the CA uniformly found the existence of an employer-employee relationship.
37

In other words, aside from being factual in nature, the existence of an employer-employee
relationship is in fact a non-issue in this case. To reiterate, in deciding a Rule 45 petition for
review of a labor decision rendered by the CA under 65, the narrow scope of inquiry is
whether the CA correctly determined the presence or absence of grave abuse of discretion
on the part of the NLRC. In concrete question form, "did the NLRC gravely abuse its
discretion in denying Macasios claims simply because he is paid on a non-time basis?"
At any rate, even if we indulge the petitioner, we find his claim that no employer-employee
relationship exists baseless. Employing the control test, we find that such a relationship
exist in the present case.
38

Even a factual review shows that Macasio is Davids employee

To determine the existence of an employer-employee relationship, four elements generally
need to be considered, namely: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power to control the employees
conduct. These elements or indicators comprise the so-called "four-fold" test of employment
relationship. Macasios relationship with David satisfies this test.
First, David engaged the services of Macasio, thus satisfying the element of "selection and
engagement of the employee." David categorically confirmed this fact when, in his
"Sinumpaang Salaysay," he stated that "nag apply po siya sa akin at kinuha ko siya na
chopper[.]" Also, Solano and Antonio stated in their "Pinagsamang Sinumpaang
Salaysay" that "[k]ami po ay nagtratrabaho sa Yiels xxx na pag-aari ni Ariel David bilang
butcher" and "kilalanamin si xxx Macasio na isa ring butcher xxx ni xxx David at kasama
namin siya sa aming trabaho."
39

40

Second, David paid Macasios wages.Both David and Macasio categorically stated in their
respective pleadings before the lower tribunals and even before this Court that the former
had been paying the latter P700.00 each day after the latter had finished the days task.
Solano and Antonio also confirmed this fact of wage payment in their "Pinagsamang
Sinumpaang Salaysay." This satisfies the element of "payment of wages."
41

Third, David had been setting the day and time when Macasio should report for work. This
power to determine the work schedule obviously implies power of control. By having the
power to control Macasios work schedule, David could regulate Macasios work and could
even refuse to give him any assignment, thereby effectively dismissing him.
And fourth, David had the right and power to control and supervise Macasios work as to the
means and methods of performing it. In addition to setting the day and time when Macasio
should report for work, the established facts show that David rents the place where Macasio
had been performing his tasks. Moreover, Macasio would leave the workplace only after he
had finished chopping all of the hog meats given to him for the days task. Also, David would

still engage Macasios services and have him report for work even during the days when
only few hogs were delivered for butchering.
Under this overall setup, all those working for David, including Macasio, could naturally be
expected to observe certain rules and requirements and David would necessarily exercise
some degree of control as the chopping of the hog meats would be subject to his
specifications. Also, since Macasio performed his tasks at Davids workplace, David could
easily exercise control and supervision over the former. Accordingly, whether or not David
actually exercised this right or power to control is beside the point as the law simply requires
the existence of this power to control or, as in this case, the existence of the right and
opportunity to control and supervise Macasio.
4243

44

In sum, the totality of the surrounding circumstances of the present case sufficiently points
to an employer-employee relationship existing between David and Macasio.
Macasio is engaged on "pakyaw" or task basis
At this point, we note that all three tribunals the LA, the NLRC and the CA found that
Macasio was engaged or paid on "pakyaw" or task basis. This factual finding binds the
Court under the rule that factual findings of labor tribunals when supported by the
established facts and in accord with the laws, especially when affirmed by the CA, is binding
on this Court.
A distinguishing characteristic of "pakyaw" or task basis engagement, as opposed to
straight-hour wage payment, is the non-consideration of the time spent in working. In a taskbasis work, the emphasis is on the task itself, in the sense that payment is reckoned in
terms of completion of the work, not in terms of the number of time spent in the completion
of work. Once the work or task is completed, the worker receives a fixed amount as wage,
without regard to the standard measurements of time generally used in pay computation.
45

In Macasios case, the established facts show that he would usually start his work at 10:00
p.m. Thereafter, regardless of the total hours that he spent at the workplace or of the total
number of the hogs assigned to him for chopping, Macasio would receive the fixed amount
of P700.00 once he had completed his task. Clearly, these circumstances show a "pakyaw"
or task basis engagement that all three tribunals uniformly found.
In sum, the existence of employment relationship between the parties is determined by
applying the "four-fold" test; engagement on "pakyaw" or task basis does not determine the
parties relationship as it is simply a method of pay computation. Accordingly, Macasio is
Davids employee, albeit engaged on "pakyaw" or task basis.
As an employee of David paid on pakyaw or task basis, we now go to the core issue of
whether Macasio is entitled to holiday, 13th month, and SIL pay.

On the issue of Macasios entitlement to holiday, SIL and 13th month pay
The LA dismissed Macasios claims pursuant to Article 94 of the Labor Code in relation to
Section 1, Rule IV of the IRR of the Labor Code, and Article 95 of the Labor Code, as well
as Presidential Decree (PD) No. 851. The NLRC, on the other hand, relied on Article 82 of
the Labor Code and the Rules and Regulations Implementing PD No. 851. Uniformly, these
provisions exempt workers paid on "pakyaw" or task basis from the coverage of holiday, SIL
and 13th month pay.
In reversing the labor tribunals rulings, the CA similarly relied on these provisions, as well
as on Section 1, Rule V of the IRR of the Labor Code and the Courts ruling in Serrano v.
Severino Santos Transit. These labor law provisions, when read together with the Serrano
ruling, exempt those engaged on "pakyaw" or task basis only if they qualify as "field
personnel."
46

In other words, what we have before us is largely a question of law regarding the correct
interpretation of these labor code provisions and the implementing rules; although, to
conclude that the worker is exempted or covered depends on the facts and in this sense, is
a question of fact: first, whether Macasio is a "field personnel"; and second, whether those
engaged on "pakyaw" or task basis, but who are not "field personnel," are exempted from
the coverage of holiday, SIL and 13th month pay.
To put our discussion within the perspective of a Rule 45 petition for review of a CA decision
rendered under Rule 65 and framed in question form, the legal question is whether the CA
correctly ruled that it was grave abuse of discretion on the part of the NLRC to deny
Macasios monetary claims simply because he is paid on a non-time basis without
determining whether he is a field personnel or not.
To resolve these issues, we need tore-visit the provisions involved.
Provisions governing SIL and holiday pay
Article 82 of the Labor Code provides the exclusions from the coverage of Title I, Book III of
the Labor Code - provisions governing working conditions and rest periods.
Art. 82. Coverage. The provisions of [Title I] shall apply to employees in all
establishments and undertakings whether for profit or not, but not to government
employees, managerial employees, field personnel, members of the family of the employer
who are dependent on him for support, domestic helpers, persons in the personal service of
another, and workers who are paid by results as determined by the Secretary of Labor in
appropriate regulations.
xxxx

"Field personnel" shall refer to non-agricultural employees who regularly perform their
duties away from the principal place of business or branch office of the employer and whose
actual hours of work in the field cannot be determined with reasonable certainty. [emphases
and underscores ours]
Among the Title I provisions are the provisions on holiday pay (under Article 94 of the Labor
Code) and SIL pay (under Article 95 of the Labor Code). Under Article 82,"field personnel"
on one hand and "workers who are paid by results" on the other hand, are not covered by
the Title I provisions. The wordings of Article82 of the Labor Code additionally categorize
workers "paid by results" and "field personnel" as separate and distinct types of employees
who are exempted from the Title I provisions of the Labor Code.
The pertinent portion of Article 94 of the Labor Code and its corresponding provision in the
IRR reads:
47

Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage during
regular holidays, except in retail and service establishments regularly employing less than
(10) workers[.] [emphasis ours]
xxxx
SECTION 1. Coverage. This Rule shall apply to all employees except:
xxxx
(e)Field personnel and other employees whose time and performance is unsupervised by
the employer including those who are engaged on task or contract basis, purely commission
basis, or those who are paid a fixed amount for performing work irrespective of the time
consumed in the performance thereof. [emphases ours]
On the other hand, Article 95 of the Labor Code and its corresponding provision in the
IRR pertinently provides:
48

Art. 95. Right to service incentive. (a) Every employee who has rendered at least one year
of service shall be entitled to a yearly service incentive leave of five days with pay.
(b) This provision shall not apply to those who are already enjoying the benefit herein
provided, those enjoying vacation leave with pay of at least five days and those employed in
establishments regularly employing less than ten employees or in establishments exempted
from granting this benefit by the Secretary of Labor and Employment after considering the
viability or financial condition of such establishment. [emphases ours]
xxxx

Section 1. Coverage. This rule shall apply to all employees except:

xxxx
(e) Field personnel and other employees whose performance is unsupervised by the
employer including those who are engaged on task or contract basis, purely commission
basis, or those who are paid a fixed amount for performing work irrespective of the time
consumed in the performance thereof. [emphasis ours]
Under these provisions, the general rule is that holiday and SIL pay provisions cover all
employees. To be excluded from their coverage, an employee must be one of those that
these provisions expressly exempt, strictly in accordance with the exemption. Under the
IRR, exemption from the coverage of holiday and SIL pay refer to "field personnel and other
employees whose time and performance is unsupervised by the employer including those
who are engaged on task or contract basis[.]" Note that unlike Article 82 of the Labor Code,
the IRR on holiday and SIL pay do not exclude employees "engaged on task basis" as a
separate and distinct category from employees classified as "field personnel." Rather, these
employees are altogether merged into one classification of exempted employees.
Because of this difference, it may be argued that the Labor Code may be interpreted to
mean that those who are engaged on task basis, per se, are excluded from the SIL and
holiday payment since this is what the Labor Code provisions, in contrast with the IRR,
strongly suggest. The arguable interpretation of this rule may be conceded to be within the
discretion granted to the LA and NLRC as the quasi-judicial bodies with expertise on labor
matters.
However, as early as 1987 in the case of Cebu Institute of Technology v. Ople the phrase
"those who are engaged on task or contract basis" in the rule has already been interpreted
to mean as follows:
49

[the phrase] should however, be related with "field personnel" applying the rule on ejusdem
generis that general and unlimited terms are restrained and limited by the particular terms
that they follow xxx Clearly, petitioner's teaching personnel cannot be deemed field
personnel which refers "to non-agricultural employees who regularly perform their duties
away from the principal place of business or branch office of the employer and whose actual
hours of work in the field cannot be determined with reasonable certainty. [Par. 3, Article 82,
Labor Code of the Philippines]. Petitioner's claim that private respondents are not entitled to
the service incentive leave benefit cannot therefore be sustained.
In short, the payment of an employee on task or pakyaw basis alone is insufficient to
exclude one from the coverage of SIL and holiday pay. They are exempted from the
coverage of Title I (including the holiday and SIL pay) only if they qualify as "field
personnel." The IRR therefore validly qualifies and limits the general exclusion of "workers

paid by results" found in Article 82 from the coverage of holiday and SIL pay. This is the only
reasonable interpretation since the determination of excluded workers who are paid by
results from the coverage of Title I is "determined by the Secretary of Labor in appropriate
regulations."
The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport Systems,
Inc., v. Bautista:
A careful perusal of said provisions of law will result in the conclusion that the grant of
service incentive leave has been delimited by the Implementing Rules and Regulations of
the Labor Code to apply only to those employees not explicitly excluded by Section 1 of
Rule V. According to the Implementing Rules, Service Incentive Leave shall not apply to
employees classified as "field personnel." The phrase "other employees whose
performance is unsupervised by the employer" must not be understood as a separate
classification of employees to which service incentive leave shall not be granted. Rather, it
serves as an amplification of the interpretation of the definition of field personnel under the
Labor Code as those "whose actual hours of work in the field cannot be determined with
reasonable certainty."
The same is true with respect to the phrase "those who are engaged on task or contract
basis, purely commission basis." Said phrase should be related with "field personnel,"
applying the rule on ejusdem generis that general and unlimited terms are restrained and
limited by the particular terms that they follow.
The Autobus ruling was in turn the basis of Serrano v. Santos Transit which the CA cited in
support of granting Macasios petition.
In Serrano, the Court, applying the rule on ejusdem generis declared that "employees
engaged on task or contract basis xxx are not automatically exempted from the grant of
service incentive leave, unless, they fall under the classification of field personnel." The
Court explained that the phrase "including those who are engaged on task or contract basis,
purely commission basis" found in Section 1(d), Rule V of Book III of the IRR should not be
understood as a separate classification of employees to which SIL shall not be granted.
Rather, as with its preceding phrase - "other employees whose performance is
unsupervised by the employer" - the phrase "including those who are engaged on task or
contract basis" serves to amplify the interpretation of the Labor Code definition of "field
personnel" as those "whose actual hours of work in the field cannot be determined with
reasonable certainty."
50

51

In contrast and in clear departure from settled case law, the LA and the NLRC still
interpreted the Labor Code provisions and the IRR as exempting an employee from the
coverage of Title I of the Labor Code based simply and solely on the mode of payment of an
employee. The NLRCs utter disregard of this consistent jurisprudential ruling is a clear act

of grave abuse of discretion. In other words, by dismissing Macasios complaint without

considering whether Macasio was a "field personnel" or not, the NLRC proceeded based on
a significantly incomplete consideration of the case. This action clearly smacks of grave
abuse of discretion.
52

Entitlement to holiday pay

Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA and the NLRC had
only taken counsel from Serrano and earlier cases, they would have correctly reached a
similar conclusion regarding the payment of holiday pay since the rule exempting "field
personnel" from the grant of holiday pay is identically worded with the rule exempting "field
personnel" from the grant of SIL pay. To be clear, the phrase "employees engaged on task
or contract basis "found in the IRR on both SIL pay and holiday pay should be read together
with the exemption of "field personnel."
In short, in determining whether workers engaged on "pakyaw" or task basis" is entitled to
holiday and SIL pay, the presence (or absence) of employer supervision as regards the
workers time and performance is the key: if the worker is simply engaged on pakyaw or
task basis, then the general rule is that he is entitled to a holiday pay and SIL pay unless
exempted from the exceptions specifically provided under Article 94 (holiday pay) and
Article95 (SIL pay) of the Labor Code. However, if the worker engaged on pakyaw or task
basis also falls within the meaning of "field personnel" under the law, then he is not entitled
to these monetary benefits.
Macasio does not fall under the classification of "field personnel"
Based on the definition of field personnel under Article 82, we agree with the CA that
Macasio does not fall under the definition of "field personnel." The CAs finding in this regard
is supported by the established facts of this case: first, Macasio regularly performed his
duties at Davids principal place of business; second, his actual hours of work could be
determined with reasonable certainty; and, third, David supervised his time and
performance of duties. Since Macasio cannot be considered a "field personnel," then he is
not exempted from the grant of holiday, SIL pay even as he was engaged on "pakyaw" or
task basis.
Not being a "field personnel," we find the CA to be legally correct when it reversed the
NLRCs ruling dismissing Macasios complaint for holiday and SIL pay for having been
rendered with grave abuse of discretion.
Entitlement to 13th month pay
With respect to the payment of 13th month pay however, we find that the CA legally erred in
finding that the NLRC gravely abused its discretion in denying this benefit to Macasio.
1wphi1

The governing law on 13th month pay is PD No. 851.53

As with holiday and SIL pay, 13th month pay benefits generally cover all employees; an
employee must be one of those expressly enumerated to be exempted. Section 3 of the
Rules and Regulations Implementing P.D. No. 851 enumerates the exemptions from the
coverage of 13th month pay benefits. Under Section 3(e), "employers of those who are paid
on xxx task basis, and those who are paid a fixed amount for performing a specific work,
irrespective of the time consumed in the performance thereof" are exempted.
54

55

Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the
Rules and Regulations Implementing PD No. 851 exempts employees "paid on task basis"
without any reference to "field personnel." This could only mean that insofar as payment of
the 13th month pay is concerned, the law did not intend to qualify the exemption from its
coverage with the requirement that the task worker be a "field personnel" at the same time.
WHEREFORE, in light of these considerations, we hereby PARTIALLY GRANT the petition
insofar as the payment of 13th month pay to respondent is concerned. In all other aspects,
we AFFIRM the decision dated November 22, 2010 and the resolution dated January 31,
2011 of the Court of Appeals in CA-G.R. SP No. 116003.
SO ORDERED