,l1.

Applicable Laws
MATERNITY CHILDRENS HOSPITAL v. SECRETARY OF LABOR FACTS:
On May 23, 1986, ten employees of the petitioner hospital employed in different positions filed a complaint
with the Office of the Regional Director of Labor and Employment, Region X, for underpayment of their salaries
and emergency cost of living allowance (ECOLAS). The Regional Director issued an Order dated August 4, 1986,
directing the payment of P723,888.58, representing underpayment of wages and ECOLAs to all the petitioner's
employees. Petitioner appealed from this Order to the Minister of Labor and Employment who rendered a
Decision on September 24, 1986, modifying the said Order in that deficiency wages and ECOLAs should be
computed only from May 23, 1983 to May 23, 1986. The petitioner filed a MR which was denied by the Secretary
of Labor for lack of merit.
ISSUE:
(1) WON the Regional Director has jurisdiction over the case and if so, the extent of coverage of any award
that should be forthcoming, arising from his visitorial and enforcement powers under Article 128 of the Labor
Code and (2) WON the applicability of the award involving salary differentials and ECOLAS covers not only the
employees who signed the complaints, but also those who are not signatories and those who were no longer in
the service of the hospital at the time the complaints were filed.
RULING:
(1) YES. The Regional Director has jurisdiction to resolve uncontested money claims but only in cases
where an employeremployee relationship still exists.
This is a labor standards case, and is governed by Art. 128-b of the Labor Code, as amended by E.O. No.
111. Labor standards refer to the minimum requirements prescribed by existing laws, rules, and regulations
relating to wages, hours of work, cost of living allowance and other monetary and welfare benefits, including
occupational, safety, and health standards. Prior to the promulgation of E.O. No. 111 on December 24, 1986, the
Regional Director's authority over money claims was unclear. The complaint in the present case was filed on May
23, 1986 when E.O. No. 111 was not yet in effect, and the prevailing view was that stated in the case of Antonio
Ong, Sr. vs. Henry M. Parel, et al. which relied on the ruling laid down in Zambales Base Metals Inc. vs. The
Minister of Labor, et al that the "Regional Director was not empowered to share in the original and exclusive
jurisdiction conferred on Labor Arbiters by Article 217."
But the Court believe Regional Directors already had enforcement powers over money claims even in the
absence of E.O. No. 111, through P.D. 850, issued on December 16, 1975, which transferred labor standards cases
from the arbitration system to the enforcement system.
With the promulgation of PD 850, Regional Directors were given enforcement powers, in addition to
visitorial powers. Labor Arbiters, on the other hand, lost jurisdiction over labor standard cases. Thus, under the
present rules, a Regional Director exercises both visitorial and enforcement power over labor standards cases, and
is therefore empowered to adjudicate money claims, provided there still exists an employer-employee
relationship, and the findings of the regional office is notcontestedby the employer concerned. The rationale
behind the transfer of labor standard cases from arbitration to enforcement system is that social justice legislation,
to be truly meaningful and rewarding to our workers, must not be hampered in its application by long-winded
arbitration and litigation. Rights must be asserted and benefits received with the least inconvenience. Labor laws
are meant to promote, not defeat, social justice.
In the present case, petitioner admitted the charge of underpayment of wages to workers still in its employ;
in fact, it pleaded for time to raise funds to satisfy its obligation. There was thus no contest against the findings
of the labor inspectors unlike in the Ong case where the employer disputed the adequacy of the evidentiary
foundation (employees affidavits) of the findings of the labor standards inspectors and in the Zambales case,
wherein the money claims were not discovered in the course of normal inspection.
(2) With regards to the applicability of the award involving salary differentials and ECOLAS, the Regional
Director correctly applied the award with respect to those employees who signed the complaint, as well as those
who did not sign the complaint, but were still connected with the hospital at the time the complaint was filed. The
justification for the award to this group of employees who were not signatories to the complaint is that the
visitorial and enforcement powers given to the Secretary of Labor is relevant to, and exercisable over
establishments, not over the individual members/employees, because what is sought to be achieved by its exercise
is the observance of, and/or compliance by, such firm/establishment with the labor standards regulations.
However, there is no legal justification for the award in favor of those employees who were no longer connected
with the hospital at the time the complaint was filed, having resigned therefrom in 1984.
ACCORDINGLY, this petition should be dismissed, as it is hereby DISMISSED, as regards all persons still
employed in the Hospital at the time of the filing of the complaint but GRANTED as regards those employees no
longer employed at that time.
P.I. MANUFACTURING, INCORPORATED, Petitioner vs. P.I.
MANUFACTURING SUPERVISORS AND FOREMAN ASSOCIATION and the NATIONAL LABOR
UNION,
 Respondents.
FACTS:
On December 10, 1987, the President signed into law Republic Act (R.A.) No. 6640 providing, among
others, an increase of P10.00 per day to those employees and workers in the private sector receiving above the
minimum wage up to P100.00. Thereafter, on December 18, 1987, petitioner and respondent PIMASUFA entered
into a new Collective Bargaining Agreement (1987 CBA) whereby the supervisors were granted an increase of
P625.00 per month and the foremen, P475.00 per month. The increases were made retroactive to May 12, 1987,
or prior to the passage of R.A. No. 6640, and every year thereafter until July 26, 1989.
On January 26, 1989, respondents PIMASUFA and NLU filed a complaint with the Arbitration
Branch of the NLRC, charging petitioner with violation of R.A. No. 6640. The Labor Arbiter rendered his
Decision in favor of respondents ordering petitioner to give the members of respondent wage increases. The Labor
Arbiter held:
It is correctly pointed out by the union that employees cannot waive future benefits, much less those
mandated by law. That is against public policy as it would render meaningless the law. Thus, the waiver in the
CBA does not bar the union from claiming adjustments in pay as a result of distortion of wages brought about by
the implementation of R.A. 6640.
On appeal by petitioner, the NLRC affirmed the Labor Arbiters judgment, which was also affirmed by the
CA, upon petitioners appeal.
ISSUE:
WON wage increase granted under the 1987 CBA corrected whatever wage distortion that may have been
created by R.A. No. 6640. RULING:
YES. The 1987 CBA effectively re-established the gap between wage rates of the supervisors and foremen
brought about by the implementation of R.A. 6640.
A CBA constitutes the law between the parties when freely and voluntarily entered into. The goal of collective
bargaining is the making of agreements that will stabilize business conditions and fix fair standards of working
conditions. The duty to bargain requires that the parties deal with each other with open and fair minds. A
sincere endeavor to overcome obstacles and difficulties that may arise, so that employer-employee relations
may be stabilized and industrial strife eliminated, must be apparent. And also, the provisions of the CBA should
be read in harmony with the wage orders, whose benefits should be given only to those employees covered
thereby.
In the instant case, the 1987 CBA increased the monthly salaries of the supervisors and the foremen. These
increases re-established and broadened the gap, not only between the supervisors and the foremen, but also
between them and the rank-and-file employees. Significantly, the 1987 CBA wage increases almost doubledthat
of the P10.00 increase under R.A. No. 6640. Interestingly, such gap as re-established by virtue of the CBA is
more than a substantial compliance with R.A. No. 6640.
Respondents cannot invoke the beneficial provisions of the 1987 CBA but disregard the concessions
it voluntary extended to petitioner. The goal of collective bargaining is the making of agreements that will stabilize
business conditions and fix fair standards of working conditions. Definitely, respondents posture contravenes
this goal.
In fine, it must be emphasized that in the resolution of labor cases, this Court has always been guided by
the State policy enshrined in the Constitution that the rights of workers and the promotion of their welfare shall
be protected. However, consistent with such policy, the Court cannot favor one party, be it labor or management,
in arriving at a just solution to a controversy if the party concerned has no valid support to its claim, like
respondents here.
WHEREFORE, we GRANT petitioners motion for reconsideration and REINSTATE the petition we
likewise GRANT. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 54379 is REVERSED.
PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS,
INC., petitioner, vs. HON. FRANKLIN M. DRILON as Secretary of Labor and Employment, and TOMAS D.
ACHACOSO, as Administrator of the Philippine Overseas Employment Administration, respondents.
Facts:
The petitioner, Philippine Association of Service Exporters, Inc. (PASEI), a firm "engaged principally in
the recruitment of Filipino workers, male and female, for overseas placement," challenges the Constitutional
validity of Department Order No. 1, Series of 1988, of the Department of Labor and Employment, in the character
of
"GUIDELINES GOVERNING THE TEMPORARY SUSPENSION
OFDEPLOYMENTOF FILIPINODOMESTICAND
HOUSEHOLD WORKERS."
PASEIinvokesSection3, of Article XIII, of the
Constitution, providing for worker participation "in policy and decisionmaking processes affecting their rights
and benefits as may be provided by law." Department Order No. 1, it is contended, was passed in the absence of
prior consultations. It is claimed, finally, to be in violation of the Charter's non-impairment clause, in addition to
the "great and irreparable injury" that PASEI members face should the Order be further enforced.
The Solicitor General, on behalf of the respondents Secretary of Labor and Administrator of the Philippine
Overseas Employment Administration, filed a Comment informing the Court that the respondent Labor Secretary
lifted the deployment ban in the states of Iraq, Jordan, Qatar, Canada, Hongkong, United States, Italy, Norway,
Austria, and Switzerland. In submitting the validity of the challenged "guidelines," the Solicitor General invokes
the police power of the Philippine State.
Issue:
Did the Secretary of Labor violate Section 3, of Article XIII, of the Constitution, which provides for
worker participation "in policy and decision-making processes affecting their rights and benefits?
Held:
No. The petitioners's reliance on the Constitutional guaranty of worker participation "in policy and
decision-making processes affecting their rights and benefits" is not well-taken.
The Constitution declares that:
Sec. 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.
Protection to labor does not signify the promotion of employment alone. What concerns the Constitution
more paramountly is that such an employment be above all, decent, just, and humane. Under these circumstances,
the Government is duty-bound to insure that our toiling expatriates have adequate protection, personally and
economically, while away from home.
In this case, the Government has evidence, an evidence the petitioner cannot seriously dispute, of the lack
or inadequacy of such protection, and as part of its duty, it has precisely ordered an indefinite ban on deployment.
Petition was DISMISSED
MANUEL SOSITO, PETITIONER, VS. AGUINALDO DEVELOPMENT CORPORATION, RESPONDENT
Facts:
Petitioner Manuel Sosito was employed by the private respondent, a logging company, when he went on
indefinite leave with the consent of the company on January 16, 1976. On July 20, 1976, the private respondent,
through its president, announced a retrenchment program and offered separation pay to employees in the active
service as of June 30, 1976, who would tender their resignations not later than July 31, 1976.
The petitioner decided to accept this offer and submitted his resignation on July 29, 1976, "to avail himself
of the gratuity benefits" promised. However, his resignation was not acted upon and he was never given the
separation pay he expected.
Department of Labor ordered the company to pay Sosito the sum of P4,387.50, representing his salary for
six and a half months. On appeal to the National Labor Relations Commission, this decision was reversed and it
was held that the petitioner was not covered by the retrenchment program.
Issue:
Is Manuel Sosito ,who was on an indefinite leave, entitled to separation pay under the retrenchment
program?
Held:
No, separation pay was extended only to those who were in the active service of the company as of June
30, 1976. Being on indefinite leave, he was not in the active service of the private respondent although, if one
were to be technical, he was still in its employ.
Under the law then in force the private respondent could have validly reduced its work force because of
its financial reverses without the obligation to grant separation pay. This was permitted under the original Article
272(a), of the Labor Code, which was in force at the time.
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. Management
also has its own rights which, as such, are entitled to respect and enforcement in the interest of simple fair play.
Out of its concern for those with less privileges in life, this Court has inclined more often than not toward the
worker and unpheld his cause in his conflicts with the employer. Such favoritism, however, has not blinded us 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.
The petition was DISMISSED.
ELMER MENDOZA v. RURAL BANK OF LUCBAN
FACTS.
On April 25, 1999, the Board of Directors of the Rural Bank of Lucban, Inc., issued Board Resolution
Nos. 99-52 and 99-53, that in line with the policy of the bank to familiarize bank employees with the various
phases of bank operations and further strengthen the bank's existing internal control system, all officers and
employees are subject to reshuffle of assignments. This resolution does not preclude the transfer of assignment
of bank officers and employees from the branch office to the head office and vice-versa."
 Petitioner filed a Complaint before the National Labor Relations Commission (NLRC) for illegal
dismissal, underpayment, separation pay and damages. Petitioner argues that he was compelled to file an action
for constructive dismissal, because he had been demoted from appraiser to clerk and not given any work to do,
while his table had been placed near the toilet and eventually removed.
He adds that the reshuffling of employees was done in bad faith, because it was designed primarily to
force him to resign.
NLRC denied his Motion for Reconsideration; the petitioner then brought a Petition for Certiorari
assailing the foregoing Resolution to the CA. CA found no grave abuse of discretion on the part of
NLRC.Hence, this Petition.
ISSUE.
WON the petitioner was constructively dismissed from employment?
HELD.
The Petition has no merit.
Constructive dismissal is defined as an involuntary resignation resorted to when continued employment
is rendered impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution of pay; or
when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee.
Jurisprudence recognizes the exercise of management prerogatives. For this reason, courts often decline to
interfere in legitimate business decisions of employers. Indeed, labor laws discourage interference in employers'
judgments concerning the conduct of their business. The law must protect not only the welfare of employees, but
also the right of employers.
In the pursuit of its legitimate business interest, management has the prerogative to transfer or assign
employees from one office or area of operation to another -- provided there is no demotion in rank or diminution
of salary, benefits, and other privileges; and the action is not motivated by discrimination, made in bad faith, or
effected as a form of punishment or demotion without sufficient cause. This privilege is inherent in the right of
employers to control and manage their enterprise effectively. The right of employees to security of tenure does
not give them vested rights to their positions to the extent of depriving management of its prerogative to change
their assignments or to transfer them.
The law protects both the welfare of employees and the prerogatives of management. Courts will not
interfere with business judgments of employers, provided they do not violate the law, collective bargaining
agreements, and general principles of fair play and justice. The transfer of personnel from one area of operation
to another is inherently a managerial prerogative that shall be upheld if exercised in good faith -- for the purpose
of advancing business interests, not of defeating or circumventing the rights of employees.
"The reshuffling of its employees was done in good faith and cannot be made the basis of a finding of
constructive dismissal.
WHEREFORE, this Petition is DENIED, and the June 14, 2002 Decision and the September 25, 2002
Resolution of the Court of Appeals are AFFIRMED. Costs against petitioner.
CHINA BANKING CORPORATION v. MARIANO
BORROMEO
FACTS.
Respondent Mariano Borromeo was Assistant Vice-President of the Branch Banking Group of China
Banking Corporation for the Mindanao Area.
Without authority from the Executive Committee or Board of Directors of the bank, he approved several
DAUD/BP (Drawn Against Uncollected Deposits/Bills Purhcased) accommodations amounting to P2,441,375 in
favor of MR. Joel Maniwan. Such checks, which are not sufficiently funded by cash, are generally not honored
by banks. Eventually, this incident came to the knowledge of the bank authorities. A memorandum was then
issued to Borromeo seeking clarification regarding the matter. Borromeo responded and accepted full
responsibility for committing an error in judgment and abuse of discretion.
He then resigned from the Bank and apologized for all the troubles I have caused because of the Maniwan
case. The respondent, however, vehemently denied benefitting from the transaction.
He was directed to restitute the amount of P1,507,736.79 representing 90% of the total loss of
P1,675,263.10 incurred by the Bank since his acts constituted a violation of the bank's Code of Ethics. However,
in view of his resignation and considering the years of service in the Bank, the management earmarked only
P836,637.08 from the respondents total separation benefits. The said amount would be released upon recovery
of the sums demanded from Maniwan in a civil case filed against him by the bank with the RTC in Cagayan de
Oro
City.
The respondent made a demand on the bank for the payment of his separation pay and other benefits, but
the bank maintained its position to withhold the sum of P836,637.08. Thus, Borromeo filed with the NLRC a
complaint for payment of separation pay, mid-year bonus, profit share and damages against the bank.
 The Labor Arbiter ruled in favor of the bank. The NLRC affirmed the findings of the Labor Arbiter. The
CA, however, alleging that respondent was denied his right to due process, set aside the NLRC decision and
ordered that the records of the case be remanded to the Labor Arbiter for further hearings on the factual issues
involved.
The bank filed a motion for reconsideration but denied the same. Hence, this petition.
ISSUE.
WON the bank has the prerogative/right to impose on the respondent what it considered the appropriate
penalty under the circumstances pursuant to its company rules and regulations.
HELD.
The petition is meritorious.
The bank was left with no other course but to impose the ancillary penalty of restitution. It was certainly
within the banks prerogative to impose on the respondent what it considered the appropriate penalty under the
circumstances pursuant to its company rules and regulations.
The petitioners bank business is essentially imbued with public interest and owes great fidelity to the
public it deals with. It is expected to exercise the highest degree of diligence in the selection and supervision of
their employees. As a corollary, and like all other business enterprises, its prerogative to discipline its employees
and to impose appropriate penalties on erring workers pursuant to company rules and regulations must be
respected. The law, in protecting the rights of labor, authorized neither oppression nor self-destruction of an
employer company which itself is possessed of rights that must be entitled to recognition and respect.
Significantly, the respondent is not wholly deprived of his separation benefits. As the Labor Arbiter stressed in
his decision, the separation benefits due the complainant were merely withheld. Even the petitioner bank itself
gives the assurance that as soon as the bank has satisfied a judgment in the civil case, the earmarked portion of
his benefits will be released without delay.
WHEREFORE, the petition is granted. The decision of the CA is reversed and set aside. The Resolution
of the NLRC is reinstated.
SSS EMPLOYEES ASSOCIATION v.CA
G.R. NO. 85279, JULY 28, 1989, THIRD DIVISION, (CORTES,
J.)
Facts
The officers and members of Social Security System Employees Association (SSSEA) staged a strike and
barricaded the entrances to the SSS Building that hampered the regular course of business. This was after the SSS
failed to act on the unions demands regarding salaries and benefits. The strike was reported to the Public Sector
Labor-Management Council, which ordered the strikers to return to work but the strikers refused to return to
work.
SSS filed a complaint to the RTC for complaint of damages with a prayer for a writ of preliminary
injunction. The court issued a Temporary restraining Order (TRO) and thereafter issued an injunction after finding
that the strike was illegal. SSEA filed a motion for reconsideration but was denied. Hence, they filed the petition
on certiorari but the case was referred to the CA. But during the pendency of the case in CA, the moved to recall
the decision but was denied. Hence, the instant petition before the SC.
ISSUES:
1) Do the employees of the SSShave the right to strike?
2) Does the RTC have jurisdiction to try the case?
HELD:
NO.
Considering that under the 1987 Constitution "[t]he civil service embraces all branches, subdivisions,
instrumentalities, and agencies of the Government, including government-owned or controlled corporations with
original charters" [Art.IX(B), Sec. 2(1); see also Sec. 1 of E.O. No. 180 where the employees in the civil service
are denominated as "government employees"] and that the SSS is one such government-controlled corporation
with an original charter, having been created under R.A. No. 1161, its employees are part of the civil service
[NASECO v. NLRC, G.R. Nos. 69870 & 70295, November 24, 1988] and are covered by the Civil Service
Commission's memorandum prohibiting strikes. This being the case, the strike staged by the employees of the
SSSwas illegal.
The statement of the Court in AllianceofGovernmentWorkersv. MinisterofLaborandEmployment[G.R.
No. 60403, August 3, 1983, 124 SCRA 1] is relevant as it furnishes the rationale for distinguishing between
workers in the private sector and government employees with regard to the right to strike:
The general rule in the past and up to the present is that "the terms and conditions of employment in the
Government, including any political subdivision or instrumentality thereof are governed by law" (Section 11, the
Industrial Peace Act, R.A. No. 875, as amended and Article 277, the Labor Code, P.D. No. 442, as amended).
Since the terms and conditions of government employment are fixed by law,government workers cannot use the
same weapons employed by workers in the private sector to secure concessions from their employers. The
principle behind labor unionism in private industry is that industrial peace cannot be secured through compulsion
by law. Relations between private employers and their employees rest on an essentially voluntary basis. Subject
to the minimum requirements of wage laws and other labor and welfare legislation, the terms and conditions of
employment in the unionized private sector are settled through the process of collective bargaining. In government
employment, however, it is the legislature and, where properly given delegated power, the administrative heads
of government which fix the terms and conditions of employment. And this is effected through statutes or
administrative circulars, rules, and regulations, not through collective bargaining agreements. [At p. 13;
underscoring supplied.]
Government employees may, therefore, through their unions or associations, either petition the Congress
for the betterment of the terms and conditions of employment which are within the ambit of legislation or negotiate
with the appropriate government agencies for the improvement of those which are not fixed by law. If there be
any unresolved grievances, the dispute may be referred to the Public Sector Labor-Management Council for
appropriate action. But employees in the civil service may not resort to strikes, walkouts and other temporary
work stoppages, like workers in the private sector, to pressure the Government to accede to their demands. As
now provided under Sec. 4, Rule III of the Rules and Regulations to Govern the Exercise of the Right of
Government-Employees to Self-Organization, which took effect after the instant dispute arose, "[t]he terms and
conditions of employment in the government, including any political subdivision or instrumentality thereof and
government-owned and controlled corporations with original charters are governed by law and employees therein
shall not strike for the purpose of securing changes thereof." YES.
The Labor Code itself provides that terms and conditions of employment of government employees shall
be governed by the Civil Service Law, rules and regulations [Art. 276.] More importantly, E.O. No. 180 vests the
Public Sector Labor-Management Council with jurisdiction over unresolved labor disputes involving government
employees [Sec. 16.] Clearly, the NLRC has no jurisdiction over the dispute.
This being the case, the Regional Trial Court was not precluded, in the exercise of its general jurisdiction
under B.P. Blg. 129, as amended, from assuming jurisdiction over the SSSs complaint for damages and issuing
the injunctive writ prayed for therein. Unlike the NLRC, the Public Sector Labor-Management Council has not
been granted by law authority to issue writs of injunction in labor disputes within its jurisdiction. Thus, since it is
the Council, and not the NLRC, that has jurisdiction over the instant labor dispute, resort to the general courts of
law for the issuance of a writ of injunction to enjoin the strike is appropriate.
2. Basic Principles
BROTHERHOOD LABOR UNITY MOVEMENT V. HON.
RONALDO B. ZAMORAET.AL
G.R. No. L-48645, January 07, 1987, SECOND DIVISION,
(GUTIERREZ, JR., J.)
Facts
Petitioners were workers of San Miguel Corporation (SMC) for seven years as cargadoresor pahinantes.
Their work was neither regular nor continuous, depending wholly on the volume of bottles manufactured to be
loaded and unloaded. They were neither paid overtime nor compensation for work on Sundays and holidays when
the business needs it. In January, 1969, the petitioner workers numbering one hundred and forty (140)
organized and affiliated themselves as Brotherhood" Labor Unity Movement of the Philippines (BLUM). They
then aired their grievances to the management for changes in their salaries but SMC did not heed alleging that the
workers are not their employees but are employees of a different contractor. Hence, they filed a notice of strike
to the Bureau of Labor Relations. SMC castigated the strikers and warned that they will be dismissed should they
continue with their union activities. On February 20, 1969, all the petitioners were dismissed from their jobs.
BLUM then charged SMC and 7 of its officers of unfair labor practice under and illegal dismissal before
the defunct Court of
Industrial Relations.
ISSUE:
Did employer-employee relationship exist between members of the "Brotherhood Labor Unit Movement
of the Philippines" (BLUM) and San Miguel Corporation?
HELD:
YES.
In determining the existence of an employer-employee relationship, the elements that are generally
considered are the following: (a) the selection and engagement of the employee; (b) the payment of wages; (c)
the power of dismissal; and (d) the employer's power to control the employee with respect to the means and
methods by which the work is to be accomplished. It is the so-called "control test" that is the most important
element (InvestmentPlanningCorp.ofthe Phils.v.TheSocialSecuritySystem, 21 SCRA 924;
MafincoTradingCorp.v. Ople,supra, and RosarioBrothers,Inc.v.Ople,131 SCRA 72).
 Applying the above criteria, the evidence strongly indicates the existence of an employer-employee
relationship between petitioner workers and respondent San Miguel Corporation. The respondent asserts that the
petitioners are employees of the Guaranteed Labor Contractor, an independent labor contracting firm.
The facts and evidence on record negate respondent SMC's claim.
The existence of an independent contractor relationship is generally established by the following criteria:
"whether or not the contractor is carrying on an independent business; the nature and extent of the work; the skill
required; the term and duration of the relationship; the right to assign the performance of a specified piece of
work; the control and supervision of the work to another; the employer's power with respect to the hiring, firing
and payment of the contractor's workers; the control of the premises; the duty to supply the premises tools,
appliances, materials and labor; and the mode, manner and terms of payment (56 CJS Master and Servant, Sec.
3(2), 46; See also 27 AM. Jur. Independent Contractor, Sec. 5, 485 andAnne., 75 ALR 7260727). None of the
above criteria exists in the case at bar.
Section 8, Rule VIII, Book III of the Implementing Rules of the Labor Code provides:
"Job contracting. There is job contracting permissible under the Code if the following conditions are met:
"(1) The contractor carries on an independent business and undertakes the contract work on his own account under
his own responsibility according to his own manner and method, free from the control and direction of his
employer or principal in all matters connected with the performance of the work except as to the results thereof;
and
"(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in the conduct of his business."
We find that Guaranteed and Reliable Labor contractors have neither substantial capital nor investment to
qualify as an independent contractor under the law. The premises, tools, equipment and paraphernalia used by the
petitioners in their jobs are admittedly all supplied by respondent company. It is only the manpower or labor force
which the alleged contractors supply, suggesting the existence of a "labor-only" contracting scheme prohibited
by law (Article 106, 109 of the Labor Code; Section 9(b), Rule VIII, Book III, Implementing Rules and
Regulations of the Labor Code). In fact, even the alleged contractor's office, which consists of a space at
respondent company's warehouse, table, chair, typewriter and cabinet, are provided for by respondent SMC. It is
therefore clear that the alleged contractors have no capital outlay involved in the conduct of its business, in the
maintenance thereof or in the payment of its workers' salaries.
The petitioners were dismissed allegedly because of the shutdown of the glass manufacturing plant. The
respondent's shutdown was merely temporary, one of its furnaces needing repair. Operations continued after such
repairs, but the petitioners had already been refused entry to the premises and dismissed from respondent's service.
New workers manned their positions. It is apparent that the closure of respondent's warehouse was merely a ploy
to get rid of the petitioners, who were then agitating the respondent company for benefits, reforms and collective
bargaining as a union. There is no showing that petitioners had been remiss in their obligations and inefficient in
their jobs to warrant their separation.
As to the charge of unfair labor practice because of SMC's refusal to bargain with the petitioners, it is
clear that the respondent company had an existing collective bargaining agreement with the IBM union which is
the recognized.
There being a recognized bargaining representative of all employees at the company's glass plant, the
petitioners cannot merely form a union and demand bargaining. The Labor Code provides the proper procedure
for the recognition of unions as sole bargaining representatives. This must be followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED. The San Miguel
Corporation is hereby ordered to REINSTATE petitioners, with three (3) years backwages. However, where
reinstatement is no longer possible, the respondent SMC is ordered to pay the petitioners separation pay equivalent
to one (1) month pay for every year of service.
TABAS, et al., v. CALIFORNIA MANUFACTURING COMPANY, INC. (CMC), et al.,
G.R. No. 80680, January 26, 1989, SECOND DIVISION
(Sarmiento, J.)
Facts
Tabas et al., were employees of Livi Manpower Services, Inc. (Livi), which subsequently assigned them
to work as promotional merchandisers for CMC pursuant to a manpower supply agreement. The agreement
provided that CMC has no control or supervision whatsoever over Livi's workers with respect to how they
accomplish their work or perform CMCs obligation; that Livi "is an independent contractor and nothing herein
contained shall be construed as creating between CMC and Livi the relationship of principal-agent or
employer-employee"; that "it is hereby agreed that it is the sole responsibility of Livi to comply with all existing
as well as future laws, rules and regulations pertinent to employment of labor"; and that "CMC is free and harmless
from any liability arising from such labor laws or from any accident that may befall workers and employees of
Livi while in the performance of their duties for CMC."
 It was further expressly stipulated that the assignment of workers to CMC shall be on a "seasonal and
contractual basis"; that "cost of living allowance and the 10 legal holidays will be charged directly to CMC at
cost"; and that "payroll for the preceeding week shall be delivered by Livi at CMCs premises."
Tabas et al., were then made to sign employment contracts
with durations of six months, upon the expiration of which they signed new agreements with the same period,
and so on. Unlike regular CMC employees, who received not less than P2,823.00 a month in addition to a host of
fringe benefits and bonuses, they received P38.56 plus P15.00 in allowance daily.
Tabas et al., allege that they had become regular CMC employees and demand, as a consequence whereof,
similar benefits. They likewise claim that pending further proceedings below, they were notified by CMC that
they would not be rehired. As a result, they filed an amended complaint charging CMC with illegal dismissal.
CMC admits having refused to accept Tabas et al., back to work but deny liability therefor for the reason
that it is not, to begin with, the petitioners' employer and that the "retrenchment" had been forced by business
losses as well as expiration of contracts. It appears that thereafter, Livi reabsorbed them into its labor pool on a
"wait-in or standby" status.
ISSUE:
Are Tabas, et al. CMCs or Livis employees?
HELD:
The existenceofanemployer-employeerelationis a question of law and being such, it cannot be made the
subject of agreement. Hence, the fact that the manpower supply agreement between Livi and CMC had
specifically designated the former as the petitioners' employer and had absolved the latter from any liability as an
employer, will not erase either party's obligations as an employer, if an employer-employee relation otherwise
exists between the workers and either firm. At any rate, since the agreement was between Livi and CMC, they
alone are bound by it, and the petitioners cannot be made to suffer from its adverse consequences.
The Court has consistently ruled that the determination of whether or not there is an employer-employee
relation depends upon four standards: (1) the manner of selection and engagement of the putative employee; (2)
the mode of payment of wages; (3) the presence or absence of a power of dismissal; and (4) the presence or
absence of a power to control the putative employee's conduct. Of the four, the right-of-control test has been held
to be the decisive factor.
On the other hand, the Court has likewise held, based on
Article106of the Labor Code. There is no doubt that in the case at bar, Livi performs "manpower services",
meaning to say, it contracts out labor in favor of clients. We hold that it is one, notwithstanding its vehement
claims to the contrary, and notwithstanding the provision of the contract that it is "an independent contractor".
The nature of one's business is not determined by self-serving appellations one attaches thereto but by the tests
provided by statute and prevailing case law. The bare fact that Livi maintains a separate line of business does not
extinguish the equal fact that it has provided CMC with workers to pursue the latter's own business. In this
connection, we do not agree that the petitioners had been made to perform activities "which are not directly related
to the general business of manufacturing," CMC's purported "principal operational activity". The petitioner's had
been charged with "merchandising promotion or sale of the products of CMC in the different sales outlets in
Metro Manila including task and occasional price tagging," an activity that is doubtless, an integral part of the
manufacturing business. It is not, then, as if Livi had served as CMCs promotions or sales arm or agent, or
otherwise, rendered a piece of work CMC could not have itself done; Livi, as a placement agency, had simply
supplied it with the manpower necessary to carry out CMCs merchandising activities, using CMCs premises
and equipment.
In the case at bar, Livi is admittedly an "independent contractor providing temporary services of
manpower to its clients." When it thus provided CMC with manpower, it supplied CMC with personnel, as if such
personnel had been directly hired by CMC. Hence, Article 106 of the Code applies.
The Court need not therefore consider whether it is Livi or CMC which exercises control over the
petitioners vis-a-vis the four barometers referred to earlier, since by fiction of law, either or both shoulder
responsibility.
PHILIPPINE FUJI XEROX, etal.,v. NLRC et al.
G.R. No. 111501, March 5, 1996, SECOND DIVISION (Mendoza,
J.)
Facts
Fuji Xerox entered into an agreement under which Skillpower, Inc. supplied workers to operate copier
machines of Fuji
Xerox as part of the latters "Xerox Copier Project" in its sales offices. Pedro Garado was assigned as key operator
at Fuji Xeroxs branch. Garado went on leave and his place was taken over by a substitute. Upon his return, he
discovered that there was a spoilage of over 600 copies. Afraid that he might be blamed for the spoilage, he tried
to talk to a service technician of Fuji Xerox into stopping the meter of the machine. The technician refused
Garados request, but this incident came to the knowledge of Fuji Xerox which reported the matter to Skillpower,
Inc. The next day, Skillpower, Inc. wrote Garado, ordering him to explain. In the meantime, it suspended him
from work. Garado filed a complaint for illegal dismissal.
The Labor Arbiter (LA) found that Garado applied for work to Skillpower, Inc.; he was employed and
made to sign a contract. Although he received his salaries regularly from Fuji Xerox, it was Skillpower, Inc. which
exercised control and supervision over his work; that Skillpower, Inc. had substantial capital and investments in
machinery, equipment, and service vehicles, and assets totalling
P5,008,812.43. The LA held that Garado was an employee of Skillpower, Inc., and that he had merely been
assigned by Skillpower, Inc. to Fuji Xerox. The LA dismissed Garados complaint.
On the other hand, the NLRC found Garado to be in fact an employee of petitioner Fuji Xerox and by it
to have been illegally dismissed. The NLRC found that although Garados request was wrongful, dismissal would
be a disproportionate penalty. The NLRC held that although Skillpower, Inc. had substantial capital assets, the
fact was that the copier machines, which Garado operated, belonged to petitioner Fuji Xerox, and that although it
was Skillpower, Inc. which had suspended Garado, the latter merely acted at the behest of Fuji Xerox. The NLRC
found that Garado worked under the control and supervision of Fuji Xerox, which paid his salaries, and that
Skilipower, Inc. merely acted as paymaster-agent of Fuji Xerox. The NLRC held that Skilipower, Inc. was a
labor-only contractor and Garado should be deemed to have been directly employed by Fuji Xerox, regardless of
the agreement between it and Skillpower, Inc. Hence the present petition. Fuji Xerox argues that Skillpower, Inc.
is an independent contractor and that Garado is its employee.
ISSUE:
Is Pedro Garado an employee of Skillpower, Inc.?
HELD:
Skillpower, Inc. is a "labor-only" contractor and Garado is not its employee.
According to Art. 106 of the Labor Code, there is "laboronly" 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 persons 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.
Fuji Xerox argues that Skillpower, Inc. had typewriters and service vehicles for the conduct of its business
independently of the petitioner. But typewriters and vehicles bear no direct relationship to the job for which
Skillpower, Inc. contracted its service of operating copier machines and offering copying services to the public.
The fact is that Skillpower, Inc. did not have copying machines of its own. What it did was simply to supply
manpower to Fuji Xerox. The phrase "substantial capital and investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary in the conduct of his business," in the
Implementing Rules clearly contemplates tools, equipment, etc., which are directly related to the service it is
being contracted to render. One who does not have an independent business for undertaking the job contracted
for is just an agent of the employer.
Manila Golf & Country Club v. Intermediate Appellate Court and
Fermin Llamar
G.R. No. 64948, September 27, 1994, NARVASA, C.J., Second
Division
Facts
This case involves three separate proceedings all initiated by or on behalf of herein private respondent and
his fellow caddies namely: (1) A case in the Social Security Comission (SSC) via petition of seventeen (17)
persons who styled themselves as "Caddies of Manila Golf and Country Club-PTCCEA (Philippine Technical,
Clerical, Commercial Employees Association) against the petitioner. (2) A
Certification election case filed with the Labor Relations Division of the
Ministry of Labor by the PTCCEA on behalf of the same caddies of the Manila Golf and Country Club which
was resolved in favor of PTCCEA (also upheld after a MR). (3) A compulsory arbitration case initiated before
the Arbitration Branch of the Ministry of Labor by the same labor organization which was decided in favor of
herein petitioner and later on upheld by the NLRC.
In the case before SSC, petitioner asserts that there is no employer-employee relationship between them.
Later on, all but two of the 17 employees withdrew their claim namely the respondent and Ramundo Jomok.
Thereafter, the SSC decided in favor of the Manila Golf on two grounds: (1) caddy's fees were paid by the golf
players themselves and not by respondent club and (2) While respondent club promulgates rules and regulations
on the assignment, deportment and conduct of caddies the same are designed to impose personal discipline among
the caddies but not to direct or conduct their actual work. This lends credence to respondent's assertion that the
caddies are never their employees in the absence of two elements, namely, (1) payment of wages and (2) control
or supervision over them.
 On appeal, Llamar raised the ruling of the Director of the Bureau of Labor Relations (certification election
case), which "has not only become final but (has been) executed or (become) res adjudicata. The IAC then
reversed the decision in favor of the respondent (Jomoks appeal was dismissed) by saying it passed the control
test on the following grounds: (1) Promulgation rules and regulations and any violation of any of which could
subject him to disciplinary action. (2) Enforcement of a group rotation system (3) "suggesting" the rate of fees
payable to the caddies.
Issue
WON persons rendering caddying services for members of golf clubs and their guests in said clubs'
courses or premises are the employees of such clubs and therefore within the compulsory coverage of the Social
Security System (SSS)
Decision
On the issue of Res Judicata, the following essential requisites must concur: (1) there must be a final
judgment or order; (2) said judgment or order must be on the merits; (3) the court rendering the same must have
jurisdiction over the subject matter and the parties; and (4) there must be between the two cases identity of parties,
identity of subject matter and identity of cause of action. Implicit in these requisites is that the "prior Judgment"
that would operate in bar of a subsequent action between the same parties for the same cause, be adversarial, or
contentious, as distinguished from an ex parte hearing or proceeding. *** of which the party seeking relief has
given legal notice to the other party and afforded the latter an opportunity to contest it. With this in mind, "A
certification proceeding is not a litigation in the sense in which this term is commonly understood, but a mere
investigation of a non-adversary, fact-finding character, in which the investigating agency plays the part of a
disinterested investigator seeking merely to ascertain the desires of the employees as to the matter of their
representation. If any ruling that should operate as Res Judicata in this case, it should be the compulsory arbitration
case.
On the matter of an employer - employee relationship, the court resolves that there is none. (1) The
regulations, does not circumscribe the actions or judgment of the caddies concerned as to leave them little or no
freedom of choice whatsoever in the manner of carrying out their services. In the very nature of things, caddies
must submit to some supervision of their conduct while enjoying the privilege of pursuing their occupation within
the premises and grounds of whatever club they do their work in. They do not have to observe any working hours,
free to leave anytime they please, to stay away for as long as they like. (2) group rotation system, is less a measure
of employee control than an assurance that the work is fairly distributed, the club has no way of compelling the
presence of a caddie. (3) On Fees, the Club has no measure of control over the incidents of the caddies' work and
compensation that an employer would possess, as the fact suggests, its a mere suggestion.
PETITION GRANTED, DECISION OF IAC WAS REVERESED AND SET ASIDE.
Dr. Carlos Sevilla and Lina O. Sevilla v. The Court of Appeals,
IST WORLD SERVICE, INC., ELISEO S.CANILAO, and SEGUNDINA NOGUERA,
G.R. No. L-41182-3 April 16, 1988, SARMIENTO , J., SECOND
DIVISION
Facts
On Oct. 19, 1960, Mrs. Noguera leased her property to Tourist World Service (TWS) represented by
Eliseo Canilao in Mabini st., Manila with Lina Sevilla holding herself solidarily liable for the payment of the
monthly rentals agreed on. A branch was opened in said property by TWS, the same was run by the herein
appellant payable to Tourist World Service Inc. by any airline for any fare brought in on the efforts of Mrs. Lina
Sevilla, 4% was to go to Lina Sevilla and 3% was to be withheld by TWS. However on November 24, 1961, the
board of TWS decided to abolish said branch on the ground that it was losing and the alleged connection of Sevilla
with a rival firm, Philippine Travel
Bureau. The board also authorized the corporate secretary (Gabino Canilao) to receive the properties of the Tourist
World Service then located at the said branch office. Later on, the corporate secretary went to the branch and
upon the finding that it was locked and being unable to contact Sevilla, he padlocked the premises of the branch.
When neither the appellant Lina Sevilla nor any of her employees could enter the locked premises, a complaint
was filed by the herein appellants against the appellees with a prayer for the issuance of mandatory preliminary
injunction (with claim for damages invoking the provisions of the NCC on human relations). Both appellees
answered with counterclaims. For apparent lack of interest of the parties therein, the trial court ordered the
dismissal of the case without prejudice. However, on June 17,1963 both parties refiled their respective claims he
court a quo ordered both cases to be dismissed for lack of merit.
On appeal, petitioners claim that there was no employer employee relationship between her and TWS and
what exists was that of one of a joint business venture and that TWS had no right to unilaterally evict Sevilla from
the Mabini Office.
Issues
WON Sevilla is an employee of Tourist World Services rendering the lower court without jurisdiction for such
case is within the ambit of the jurisdiction of the Bureau of Labor Relations.
Decision
Sevilla is not an employee of TWS. The court relied on the Right of Control Test "where the person for
whom the services are performed reserves a right to control not only the end to be achieved but also the means to
be used in reaching such end. In addition to the standard of right-of control, the existing economic conditions
prevailing between the parties, like the inclusion of the employee in the payrolls, in determining the existence of
an employer-employee relationship. The records will show that the petitioner, Lina Sevilla, was not subject to
control by the private respondent Tourist World Service, Inc., either as to the result of the enterprise or as to the
means used in connection therewith for the following reasons:
(1) She bound herself in solidumas (solidary) and for rental payments of the Mabini property although the
lower court reduced such in to a mere guaranty this does not make her an employee of TWS. A true employee
cannot be made to part with his own money in pursuance of his employer's business, or otherwise, assume any
liability thereof.
(2) As found by the Appellate Court, '[w]hen the branch office was opened, the same was run by the herein
appellant Lina O. Sevilla payable to Tourist World Service, Inc. by any airline for any fare brought in on the effort
of Mrs. Lina Sevilla. Under these circumstances, it cannot be said that Sevilla was under the control of Tourist
World Service, Inc. "as to the means used." Sevilla in pursuing the business, obviously relied on her own gifts
and capabilities.
(3) Sevilla was not in the company's payroll. For her efforts, she retained 4% in commissions from airline
bookings, the remaining 3% going to Tourist World.
(4) Contrary to the claims of both parties, what exist between them seems to be that of a contract of agency
since Sevilla had conceded certain rights in favor of TWS (TWS claims it was an employeremployee relationship
while Sevilla claims that it was of a joint venture or partnership). A joint venture presupposes an equal standing
between the joint partners, in which each party has an equal proprietary interest in the capital or property
contributed and where each party exercises equal rights in the conduct of the business. Furthermore, both parties
never held themselves as partners for the branch was embellished with the sign of TWS instead of a distinct
partner name. In a contract of agency, the essence of the contract that the agent renders services "in representation
or on behalf of another In the case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her
principal, Tourist World Service, Inc. But unlike simple grants of a power of attorney, the agency that we hereby
declare to be compatible with the intent of the parties, cannot be revoked at will. The reason is that it is one
coupled with an interest, the agency having been created for mutual interest, of the agent and the principal
*remember that she had a solidary obligation for the payment of rentals.
In this same vein the lower court must likewise be held to be in error with respect to the padlocking
incident. For the fact that Tourist World Service, Inc. was the lessee named in the lease contract did not accord it
any authority to terminate that contract without notice to its actual occupant, and to padlock the premises in such
fashion. As this Court has ruled, the petitioner, Lina Sevilla, had acquired a personal stake in the business itself,
and necessarily, in the equipment pertaining thereto. Furthermore, Sevilla was not a stranger to that contract
having been explicitly named therein as a third party in charge of rental payments (solidarily with Tourist World,
Inc.). She could not be ousted from possession as summarily as one would eject an interloper.
Petition Granted, Respondents, with the exception of Noguera, were ordered to pay jointly and severally sum of
25,00.00 as and for moral damages, the sum of P10,000.00, as and for exemplary damages, and the sum of
P5,000.00, as and for nominal and/or temperate damages.
ENCYCLOPAEDIA BRITANNICA (PHILIPPINES), INC. v. NLRC
G.R. No. 87098, 4 November 1996, SECOND DIVISION, (Torres,
Jr., J.)
Facts
Benjamin Limjoco was a Sales Division Manager of Encyclopaedia Britannica (EB) and was in charge of
selling EBs products through some sales representatives. He received commissions from the products sold by his
agents as compensation. He was also allowed to use EBs name, goodwill and logo. But the office expenses would
be deducted from his commissions. EB would also be informed about appointments, promotions, and transfers of
employees in
Limjocos district.
On 1974, Limjoco resigned from office to pursue his private business. Then on 1975, he filed a complaint
against EB with the DOLE, claiming for non-payment of separation pay and other benefits, and also illegal
deduction from his sales commissions for there was employer-employee relationship. However, EB alleged that
Limjoco was not its employee but an independent dealer authorized to promote and sell its products because
Limjoco did not have any salary and his income from EB was dependent on the volume of sales accomplished.
He also had his own separate office, financed the business expenses, and maintained his own workforce, did not
even report to EBs office nor observe fixed office hours and the salaries of his workforce were chargeable to his
commissions. EB argued that it had no control and supervision over the complainant as to the manner and means
he conducted his business operations, thus, there is no employer-employee relationship.
 Labor Arbiter Teodorico Dogelio ruled that Limjoco was an employee of EB for the company exercised
control over him. The NLRC upheld the LAs decision.
ISSUE:
Is Limjoco considered an employee of EB?
RULING:
NO.
In determining the existence of an employer-employee relationship the following elements must be
present: 1) selection and engagement of the employee; 2) payment of wages; 3) power of dismissal; and 4) the
power to control the employees conduct. Of the above, control of employees conduct is commonly regarded as
the most crucial and determinative indicator of the presence or absence of an employer-employee relationship.
Under the control test, an employer-employee relationship exists where the person for whom the services are
performed reserves the right to control not only the end to be achieved, but also the manner and means to be used
in reaching that end.
The element of control is absent; where a person who works for another does so more or less at his own
pleasure and is not subject to definite hours or conditions of work, and in turn is compensated according to the
result of his efforts and not the amount thereof, we should not find that the relationship of employer and employee
exists.
The different memoranda were merely guidelines on company policies which the sales managers follow
and impose on their respective agents. It should be noted that in EBs business of selling encyclopedias and books,
the marketing of these products was done through dealership agreements. The sales operations were primarily
conducted by independent authorized agents who did not receive regular compensations but only commissions
based on the sales of the products. These independent agents hired their own sales representatives, financed their
own office expenses, and maintained their own staff. Thus, there was a need for EB to issue memoranda to
Limjoco so that the latter would be apprised of the company policies and procedures. Nevertheless, Limjoco and
the other agents were free to conduct and promote their sales operations. The periodic reports to EB by the agents
were but necessary to update the company of the latters performance and business income.
While it was true that EB had fixed the prices of the products for reason of uniformity and Limjoco could
not alter them, the latter, nevertheless, had free rein in the means and methods for conducting the marketing
operations. He selected his own personnel and the only reason why he had to notify EB about such appointments
was for purpose of deducting the employees salaries from his commissions.
Limjoco was merely an agent or an independent dealer of EB. He was free to conduct his work and he
was free to engage in other means of livelihood. At the time he was connected with EB, Limjoco was also a
director and later the president of the Farmers Rural Bank. Had he been an employee of the company, he could
not be employed elsewhere and he would be required to devote full time for EB. If he was indeed an employee,
it was rather unusual for him to wait for more than a year from his separation from work before he decided to file
his claims.
In ascertaining whether the relationship is that of employeremployee or one of independent contractor,
each case must be determined by its own facts and all features of the relationship are to be considered.
INSULAR LIFE ASSURANCE CO., LTD. v.NLRC
G.R. No. 119930, 12 March 1998, FIRST DIVISION, (Bellosillo, J.) Facts
On 1992, Insular Life entered into an agency contract, which it prepared wholly, with Pantaleon de los
Reyes authorizing him to solicit within the Philippines applications for life insurance and annuities for which he
would be paid compensation by commissions. It contained stipulation that no employer-employee relationship
shall be created between the parties and that the agent shall be free to exercise his own judgment as to time, place
and means of soliciting insurance. De los Reyes however was prohibited by Insular Life from working for any
other life insurance company, and violation of which was sufficient ground for termination. He was required to
submit all completed applications for insurance, deliver policies, receive and collect initial premiums and balances
of first year premiums, renewal premiums, deposits on applications, and payments on policy loans. He was also
bound to turn over to the company immediately any and all sums of money collected by him.
On 1993, Insular Life and De los Reyes entered into another contract where De los Reyes was appointed
as Acting Unit Manager in its Cebu office. His duties and responsibilities included the recruitment, training,
organization and development of a sufficient number of qualified, competent and trustworthy underwriters, and
to supervise and coordinate the sales efforts of the underwriters in the active solicitation of new business and in
the furtherance of the agencys assigned goals. The contract stipulated that De los Reyes is considered as an
independent contractor. De los Reyes together with his unit force was granted freedom to exercise judgment as
to time, place and means of soliciting insurance. As acting unit manager, he was given production bonus,
development allowance and financial assistance deemed as an advance against expected commissions only
upon his fulfillment of certain quota requirements. He was also expressly obliged to participate in the companys
conservation program, i.e., preservation and maintenance of existing insurance policies, and to accept moneys
duly receipted on agents receipts provided the same were turned over to the company.
 He was notified on 1993 that his services were terminated. Then he filed a complaint before the Labor
Arbiter for illegal dismissal and non-payment of his salaries and separation pay. The LA dismissed it saying that
there was no employer-employee relationship for the element of control was not established. The NLRC reversed
the LAs decision, saying there was employer-employee relationship, for Insular Life limited the work of De los
Reyes to selling of a certain insurance policy, assigned him to a particular place and table, paid him as Acting
Unit Manager, and promised him of promotion upon meeting of certain requirements and quotas.
ISSUE:
Is De los Reyes an employee of Insular Life even if the management contract stipulated him only as an
independent contractor?
RULING:
YES.
Parenthetically, both Insular Life and NLRC treated the agency contract and the management contract
entered into between Insular Life and De los Reyes as contracts of agency. We however hold otherwise.
Unquestionably there exist major distinctions between the two agreements. While the first has the earmarks of an
agency contract, the second is far removed from the concept of agency in that provided therein are conditionalities
that indicate an employer-employee relationship. The NLRC was correct in finding that De los Reyes was an
employee of Insular Life, but this holds true only insofar as the management contract is concerned.
It is axiomatic that the existence of an employer-employee relationship cannot be negated by expressly
repudiating it in the management contract and providing therein that the employee is an independent contractor
when the terms of agreement clearly show otherwise. For, the employment status of a person is defined and
prescribed by law and not by what the parties say it should be. In determining the status of the management
contract, the fourfold test on employment earlier mentioned has to be applied.
The very designation of the appointment of De los Reyes as acting unit manager obviously implies a
temporary employment status which may be made permanent only upon compliance with company standards
under the management contract.
It cannot be validly claimed that the financial assistance consisting of the free portion of the UDF was
purely dependent on the premium production of the agent. Be that as it may, it is worth considering that the
payment of compensation by way of commission does not militate against the conclusion that De los Reyes was
an employee of Insular Life. Under Art. 97 of the Labor Code, wage shall mean however designated, capable
of being expressed in terms of money, whether fixed or ascertained on a time, task, price or commission basis x
x x x
De los Reyes duty to collect the companys premiums using company receipts under the management
contract is further evidence of Insular Lifes control over De los Reyes.
De los Reyes was appointed ActingUnitManager, not agency manager. There is no evidence that to
implement his obligations under the management contract, De los Reyes had organized an office. Insular Life in
fact has admitted that it provided De los Reyes a place and a table at its office where he reported for and worked
whenever he was not out in the field. Under the managership contract, De los Reyes was obliged to work
exclusively for Insular Life in life insurance solicitation and was imposed premium production quotas. Of course,
the acting unit manager could not underwrite other lines of insurance because his Permanent Certificate of
Authority was for life insurance only and for no other. He was proscribed from accepting a managerial or
supervisory position in any other office including the government without the written consent of Insular Life. As
Acting Unit Manager, De los Reyes performed functions beyond mere solicitation of insurance business for
Insular Life. As found by the NLRC, he exercised administrative functions which were necessary and beneficial
to the business of INSULAR LIFE.
Exclusivity of service, control of assignments and removal of agents under De los Reyess unit, collection
of premiums, furnishing of company facilities and materials as well as capital described as Unit Development
Fund are but hallmarks of the management system in which De los Reyes worked. This obtaining, there is no
escaping the conclusion that de los Reyes was an employee of Insular Life.
ANGELINA FRANCISCO, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION, KASEI
CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO
ACEDO, DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA AND RAMON ESCUETA, RESPONDENTS.
Facts:
In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as
Accountant and Corporate Secretary and was to handle all the accounting needs of the company. She was also
designated as Liaison Officer to the City of Makati to secure business permits, construction permits and other
licenses for the initial operation of the company.
In 1996, petitioner was designated Acting Manager. In January 2001, petitioner was replaced by Liza R. Fuentes
as Manager. Petitioner alleged that she was required to sign a prepared resolution for her replacement but she was
assured that she would still be connected with Kasei Corporation when in fact she wasnt.
Issue:
 Does the employer-employee relationship exist between petitioner and Kasei Corporation?
Held:
Yes. Applying the two-tiered test, the Court ruled that an employeremployee does exist.
(1) the putative employer's power to control the employee with respect to the means and methods by which the work
is to be accomplished; and
(2) the underlying economic realities of the activity or relationship.
By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because
she was under the direct control and supervision of Seiji Kamura, the corporation's Technical Consultant. She
reported for work regularly and served in various capacities as Accountant, Liaison Officer, Technical Consultant,
Acting Manager and Corporate Secretary, with substantially the same job functions, that is, rendering accounting
and tax services to the company and performing functions necessary and desirable for the proper operation of the
corporation such as securing business permits and other licenses over an indefinite period of engagement.
Under the broader economic reality test, the petitioner can likewise be said to be an employee of
respondent corporation because she had served the company for six years before her dismissal, receiving check
vouchers indicating her salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as deductions
and Social Security contributions from August 1, 1999 to December 18, 2000.
Petition is granted.
EFREN P. PAGUIO, PETITIONER, VS. NATIONAL LABOR
RELATIONS COMMISSION, METROMEDIA TIMES
CORPORATION, ROBINA Y. GOKONGWEI, LIBERATO
GOMEZ, JR., YOLANDA E. ARAGON, FREDERICK D. GO AND ALDA IGLESIA, RESPONDENTS.
Facts:
Efren P. Paguio was to solicit advertisements for "The Manila Times," a newspaper of general circulation,
published by respondent company. Petitioner, for his efforts, was to receive compensation consisting of a 15%
commission on direct advertisements less withholding tax and a 10% commission on agency advertisements based
on gross revenues less agency commission and the corresponding withholding tax.
After agreeing in a contract signifying that he is not an employee of the respondent and his services may
be terminated any time provided that a 30 day notice is given, he was unceremoniously terminated without having
given the chance to defend himself.
The labor arbiter found for petitioner and declared his dismissal illegal.
However, the National Labor Relations Commission (NLRC) reversed the ruling of the labor arbiter and
declared the contractual relationship between the parties as being for a fixed-term employment.
Issue:
Is Paguios dismissal legal?
Held:
No. A lawful dismissal must meet both substantive and procedural requirements; in fine, the dismissal
must be for a just or authorized cause and must comply with the rudimentary due process of notice and hearing.
It is not shown that respondent company has fully bothered itself with either of these requirements in terminating
the services of petitioner. The notice of termination recites no valid or just cause for the dismissal of petitioner
nor does it appear that he has been given an opportunity to be heard in his defense.
Petition granted.
GREAT PACIFIC LIFE ASSURANCE CORPORATION,
PETITIONER, VS. HONORATO JUDICO AND NATIONAL LABOR RELATIONS COMMISSION,
RESPONDENTS.
Facts:
Private respondent Judico entered into an agreement of agency with petitioner Grepalife to become a debit
agent attached to the industrial life agency in Cebu City. Sometime in September 1981, complainant was promoted
to the position of Zone Supervisor and was given additional (supervisor's) allowance fixed at P110.00 per week.
During the third week of November 1981, he was reverted to his former position as debit agent but, for unknown
reasons, not paid socalled weekly sales reserve of at least P200.00. Finally on June 28, 1982, complainant was
dismissed by way of termination of his agency contract.
Honorato Judico filed a complaint for illegal dismissal against
Grepalife, a duly organized insurance firm, beforethe NLRC Regional Arbitration Branch No. VII, Cebu City on
August 27, 1982
NLRC ruled that there was no employer-employee relationship but ordered Grepalife to pay the
complainant with P1,000.00 by reason of Christian Charity.
Issue:
Was there an employer-employee relationship between Grepalife and Judico?
Held:
 Yes. We can readily see that the element of control by the petitioner on Judico was very much present.
The record shows that petitioner Judico received a definite minimum amount per week as his wage known as
"sales reserve" wherein the failure to maintain the same would bring him back to a beginner's employment with
a fixed weekly wage of P200.00 for thirteen weeks regardless of production. He was assigned a definite place in
the office to work on when he is not in the field; and in addition to his canvassing work he was burdened with the
job of collection. In both cases he was required to make regular report to the company regarding this duties, and
for which an anemic performance would mean a dismissal. Conversely faithful and productive service earned him
a promotion to Zone Supervisor with additional supervisor's allowance, a definite amount of P110.00 aside from
the regular P200.00 weekly "allowance". Furthermore, his contract of services with petitioner is not for a piece
of work nor for a definite period.
Petition denied.
OSCAR VILLAMARIA, JR. PETITIONER,VS.COURT OF APPEALS AND JERRY V. BUSTAMANTE,
RESPONDENTS. FACTS:
PetitionerVillamariaemployedrespondentdriveron
boundary-basis. Villamaria verbally agreed to sell the jeepney to
Bustamante under the "boundary-hulog scheme. On August 7, 1997, Villamaria executed a contract (Kasunduan)
over the passenger jeepney. The parties agreed that in case Bustamante failed to remit the daily boundary-hulog
for a period of one week, the Kasunduanwould cease to have legal effect and Bustamante would have to return
the vehicle to Villamaria Motors. Other prohibitions and regulations that were to be followed by Bustamante were
stipulated in theKasunduan.
In 1999, Bustamante and other drivers who also had the same arrangement with Villamaria Motors failed
to pay their respective boundary-hulog. This prompted Villamaria to serve a "Paalala," reminding them that under
the Kasunduan, failure to pay the daily boundary-hulog for one week, would mean their respective jeepneys would
be returned to him without any complaints. On July 24, 2000, Villamaria took back the jeepney driven by
Bustamante and barred the latter from driving the vehicle.
Thereafter, Bustamante filed a complaint for Illegal Dismissal against Villamaria with prayer that judgment
be rendered ordering the latter to reinstate the former with backwages and other money claims and equitable
reliefs.
The spouses Villamaria argued that Bustamante was not illegally dismissed since the Kasunduan executed
transformed the employeremployee relationship into that of vendor-vendee.
The Labor Arbiter rendered judgment in favor of Villamaria and subsequently the NLRC dismissed
Bustamantes appeal. On appeal, the CA reversed the NLRCs ruling. Hence this petition.
ISSUE:
WON the Kasunduantransformed the relationship of the herein parties from an employer-employee to a
vendor-vendee.
RULING:
NO. Under the boundary-hulog scheme incorporated in the
Kasunduan, a dual juridical relationship was created between petitioner and respondent: that of employer-
employee and vendor- vendee.
The boundary system is a scheme by an owner/operator engaged in transporting passengers as a common
carrier to primarily govern the compensation of the driver, that is, the latter's daily earnings are remitted to the
owner/operator less the excess of the boundary which represents the driver's compensation. Under this system,
the owner/operator exercises control and supervision over the driver. It is unlike in lease of chattels where the
lessor loses complete control over the chattel leased but the lessee is still ultimately responsible for the
consequences of its use. The management of the business is still in the hands of the owner/operator, who, being
the holder of the certificate of public convenience, must see to it that the driver follows the route prescribed by
the franchising and regulatory authority, and the rules promulgated with regard to the business operations. The
fact that the driver does not receive fixed wages but only the excess of the "boundary" given to the owner/operator
is not sufficient to change the relationship between them. Indubitably, the driver performs activities which are
usually necessary or desirable in the usual business or trade of the owner/operator.
Under the Kasunduan, respondent was required to remit P550.00 daily to petitioner, an amount which
represented the boundary of petitioner as well as respondent's partial payment (hulog) of the purchase price of the
jeepney. Respondent was entitled to keep the excess of his daily earnings as his daily wage. Thus, the daily
remittances also had a dual purpose: that of petitioner's boundary and respondent's partial payment (hulog) for
the vehicle. This dual purpose was expressly stated in the Kasunduan. The well- settled rule is that an obligation
is not novated by an instrument that expressly recognizes the old one, changes only the terms of payment, and
adds other obligations not incompatible with the old provisions or where the new contract merely supplements
the previous one. The two obligations of the respondent to remit to petitioner the boundary-hulog can stand
together.
 The juridical relationship of employer-employee between petitioner and respondent was not negated by the
foregoing stipulation in the Kasunduan, considering that petitioner retained control of respondent's conduct as
driver of the vehicle. As correctly ruled by the CA: The exercise of control by private respondent over petitioner's
conduct in operating the jeepney he was driving is inconsistent with private respondent's claim that he is, or was,
not engaged in the transportation business; that, even if petitioner was allowed to let some other person drive the
unit, it was not shown that he did so; that the existence of an employment relation is not dependent on how the
worker is paid but on the presence or absence of control over the means and method of the work; that the amount
earned in excess of the "boundary hulog" is equivalent to wages; and that the fact that the power of dismissal was
not mentioned in the Kasunduan did not mean that private respondent never exercised such power, or could not
exercise such power.
VICENTE SY ET. AL.v.COURT OF APPEALS
G.R. No. 142293, February 27, 2003, SECOND DIVISION, (QUISUMBING, J.)
Facts
Jaime Sahot started working as a truck helper for familyowned trucking business named Vicente Sy
Trucking. In 1965, it was renamed T. Paulino Trucking Service, later 6Bs Trucking Corporation in 1985, and
thereafter known as SBT Trucking Corporation since 1994. He worked for the company for 36 years. When Sahot
was already 59 years old, he was suffering various ailments causing pain on his left thigh. He inquired to SSS
about his medical and retirement benefits but he discovered that his employer did not remit payments. He had
filed a week long leave from work to be treated and filed an extension of leave for another month. He was
threatened to be terminated if he will not report to work. The threat was carried out and he was terminated.
Sahot filed with the NLRC a complaint for illegal dismissal. He prayed for the recovery of separation pay
and attorneys fees against Vicente Sy et al. The latter argued that Sahot was not an employee before 1994 but
was an industrial partner. They alleged that only in the year of 1994 that he became an employee. The Labor
Arbiter declared that there was no illegal dismissal. On appeal in NLRC, it held that Sahot was an employee since
the start. Sy et al. appealed to the CA. The CA affirmed the NLRCs decision and modified the award that was
based from 29 years to 36 years of service. Hence, this petition.
ISSUE:
1) Did an employer-employee relationship exist between Sy and Sahot?
2) Was Sahot validly terminated?
HELD:
YES.
FIRST. The elements to determine the existence of an employment relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power
to control the employees conduct. The most important element is the employers control of the employees
conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it.
As found by the appellate court, petitioners owned and operated a trucking business since the 1950s and
by their own allegations, they determined private respondents wages and rest day.[20] Records of the case show
that private respondent actually engaged in work as an employee. During the entire course of his employment he
did not have the freedom to determine where he would go, what he would do, and how he would do it. He merely
followed instructions of petitioners and was content to do so, as long as he was paid his wages. Indeed, said the
CA, private respondent had worked as a truck helper and driver of petitioners not for his own pleasure but under
the latters control.
Article 1767 of the Civil Code states that in a contract of partnership two or more persons bind themselves
to contribute money, property or industry to a common fund, with the intention of dividing the profits among
themselves. Not one of these circumstances is present in this case. No written agreement exists to prove the
partnership between the parties. Private respondent did not contribute money, property or industry for the purpose
of engaging in the supposed business. There is no proof that he was receiving a share in the profits as a matter of
course, during the period when the trucking business was under operation. Neither is there any proof that he had
actively participated in the management, administration and adoption of policies of the business. Thus, the NLRC
and the CA did not err in reversing the finding of the Labor Arbiter that private respondent was an industrial
partner from 1958 to 1994.
On this point, we affirm the findings of the appellate court and the NLRC. Private respondent Jaime Sahot
was not an industrial partner but an employee of petitioners from 1958 to 1994. The existence of an employer-
employee relationship is ultimately a question of fact[23] and the findings thereon by the NLRC, as affirmed by
the Court of Appeals, deserve not only respect but finality when supported by substantial evidence. Substantial
evidence is such amount of relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion.
Time and again this Court has said that if doubt exists between the evidence presented by the employer
and the employee, the scales of justice must be tilted in favor of the latter. Here, we entertain no doubt. Private
respondent since the beginning was an employee of, not an industrial partner in, the trucking business.
 SECOND. In termination cases, the burden is upon the employer to show by substantial evidence that the
termination was for lawful cause and validly made. Article 277(b) of the Labor Code puts the burden of proving
that the dismissal of an employee was for a valid or authorized cause on the employer, without distinction whether
the employer admits or does not admit the dismissal.[29] For an employees dismissal to be valid, (a) the dismissal
must be for a valid cause and (b) the employee must be afforded due process.[30] Article 284 of the Labor Code
authorizes an employer to terminate an employee on the ground of disease,viz:
Art. 284. DiseaseasagroundforterminationAn 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
prejudicial to his health as well as the health of his co-employees:
However, in order to validly terminate employment on this ground, Book VI, Rule I, Section 8 of the
Omnibus Implementing Rules of the Labor Code requires:
Sec. 8. Diseaseasagroundfordismissal- 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 co-employees, the
employershallnotterminatehisemploymentunlessthereisa certificationbycompetentpublichealthauthoritythatthe
diseaseisofsuchnatureoratsuchastagethatitcannotbe curedwithinaperiodofsix(6)monthsevenwithproper
medicaltreatment.Ifthediseaseorailmentcanbecured withintheperiod,theemployershallnotterminatethe
employeebutshallasktheemployeetotakealeave.The employershallreinstatesuchemployeetohisformerposition
immediatelyupon therestoration ofhis normalhealth. (Italics supplied).
In the case at bar, the employer clearly did not comply with the medical certificate requirement before
Sahots dismissal was effected.
In addition, we must likewise determine if the procedural aspect of due process had been complied with
by the employer. From the records, it clearly appears that procedural due process was not observed in the
separation of private respondent by the management of the trucking company. The employer is required to furnish
an employee with two written notices before the latter is dismissed: (1) the notice to apprise the employee of the
particular acts or omissions for which his dismissal is sought, which is the equivalent of a charge; and (2) the
notice informing the employee of his dismissal, to be issued after the employee has been given reasonable
opportunity to answer and to be heard on his defense. These, the petitioners failed to do, even only for record
purposes. What management did was to threaten the employee with dismissal, then actually implement the threat
when the occasion presented itself because of private respondents painful left thigh. All told, both the substantive
and procedural aspects of due process were violated. Clearly, therefore, Sahots dismissal is tainted with
invalidity.
WHEREFORE, the petition is DENIED and the decision of the Court of Appeals dated February 29, 2000
is AFFIRMED.
Petitioners must pay private respondent Jaime Sahot his separation pay for 36 years of service at the rate of one-
half monthly pay for every year of service, amounting to P74,880.00, with interest of six per centum (6%) per
annum from finality of this decision until fully paid.
MAKATI HABERDASHERY, INC. etal.v.NLRC, etal.
G.R. Nos. 83380-81, 15 November 1989, THIRD DIVISION,
(Fernan, C.J.)
Facts
The private respondents herein have been working for Makati Haberdashery, Inc. (MHI) as tailors,
seamstress, sewers,basters (manlililip) and "plantsadoras". They are paid on a piece-rate basis except Maria
Angeles and Leonila Serafina who are paid on a monthly basis. They are also given a daily allowance of P3.00
provided they report for work before 9:30 a.m. everyday. They are required to work from or before 9:30 a.m. up
to 6:00 or 7:00 p.m. from Monday to Saturday and during peak periods even on Sundays and holidays.
On 1984, the Sandigan ng Manggagawang Pilipino, a labor organization of the workers, filed a complaint
for (a) underpayment of the basic wage, and living allowance; (b) non-payment of overtime work, holiday pay,
service incentive pay, 13th month pay; and (c) other benefits provided for under some Wage Orders.
During the pendency of the first case, Dioscoro Pelobello left with Salvador Rivera, a salesman of MHI,
an open package, which was discovered to contain a "jusi" barong tagalog. When confronted, Pelobello replied
that the same was ordered by Casimiro Zapata for his customer. Zapata allegedly admitted that he copied the
design of MHI. But in the afternoon, when again questioned about said barong, Pelobello and Zapata denied
ownership of the same. Consequently a memorandum was issued to them to explain why no action should be
taken against them for accepting a job order which is prejudicial and in direct competition with the business of
the company. Both allegedly did not submit their explanation and did not report for work. Hence, they were
dismissed by MHI. They filed a complaint for illegal dismissal.
Labor Arbiter Ceferina J. Diosana found MHI guilty of illegal dismissal, of violating the decrees on the
cost of living allowance, service incentive leave pay and the 13th Month Pay but dismissed the claims for
underpayment re violation of the minimum wage law for lack of merit. The NLRC affirmed the LAs decision.
ISSUE:
Is there employer-employee relationship existing between MHI and the respondent workers?
RULING:
YES.
We have repeatedly held in countless decisions that the test of employer-employee relationship is four-
fold: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal;
and (4) the power to control the employee's conduct. It is the so-called "control test" that is the most important
element.
This simply means the determination of whether the employer controls or has reserved the right to control
the employee not only as to the result of the work but also as to the means and method by which the same is to be
accomplished.
The facts at bar indubitably reveal that the most important requisite of control is present. As gleaned from
the operations of MHI, when a customer enters into a contract with the haberdashery or its proprietor, MHI directs
an employee who may be a tailor, pattern maker, sewer or "plantsadora" to take the customer's measurements,
and to sew the pants, coat or shirt as specified by the customer. Supervision is actively manifested in all these
aspects -- the manner and quality of cutting, sewing and ironing.
From the memorandum alone, it is evident that MHI has reserved the right to control its employees not
only as to the result but also the means and methods by which the same are to be accomplished. That private
respondents are regular employees is further proven by the fact that they have to report for work regularly from
9:30 a.m. to 6:00 or 7:00 p.m. and are paid an additional allowance of P3.00 daily if they report for work before
9:30 a.m. and which is forfeited when they arrive at or after 9:30 a.m.
Since private respondents are regular employees, necessarily the argument that they are independent
contractors must fail. As established in the preceding paragraphs, private respondents did not exercise
independence in their own methods, but on the contrary were subject to the control of petitioners from the
beginning of their tasks to their completion. Unlike independent contractors who generally rely on their own
resources, the equipment, tools, accessories and paraphernalia used by private respondents are supplied and
owned by MHI. Private respondents are totally dependent on petitioners in all these aspects.
Coming now to the second issue, there is no dispute that private respondents are entitled to the Minimum
Wage. But the records show that private respondents did not appeal the above ruling of the Labor Arbiter to the
NLRC; neither did they file any petition raising that issue in the Supreme Court. Accordingly, insofar as this case
is concerned, that issue has been laid to rest.
As a consequence of their status as regular employees of the petitioners, they can claim cost of living
allowance. Private respondents are also entitled to claim their 13th Month Pay under Section 3(e) of the Rules
and Regulations Implementing P.D. No. 851. However, they are not entitled to service incentive leave pay and
holiday pay because as piece-rate workers being paid at a fixed amount for performing work irrespective of time
consumed in the performance thereof.
It shows that a violation of the employer's rules has been committed and the evidence of such
transgression, the copied barong tagalog, was in the possession of Pelobello who pointed to Zapata as the owner.
When required by their employer to explain in a memorandum issued to each of them, they not only failed to do
so but instead went on AWOL, waited for the period to explain to expire and for MHI to dismiss them. They
thereafter filed an action for illegal dismissal on the far-fetched ground that they were dismissed because of union
activities. Assuming that such acts do not constitute, abandonment of their jobs as insisted by private respondents,
their blatant disregard of their employer's memorandum is undoubtedly an open defiance to the lawful orders of
the latter, a justifiable ground for termination of employment by the employer expressly provided for in Article
283(a) of the Labor Code as well as a clear indication of guilt for the commission of acts inimical to the interests
of the employer, another justifiable ground for dismissal under the same Article of the Labor Code, paragraph (c).
Well established in our jurisprudence is the right of an employer to dismiss an employee whose continuance in
the service is inimical to the employer's interest.
Under the circumstances, it is evident that there is no illegal dismissal of said employees. The law in
protecting the rights of the laborer authorizes neither oppression nor self-destruction of the employer. More
importantly, while the Constitution is committed to the policy of social justice and the protection of the working
class, it should not be supposed that every labor dispute will automatically be decided in favor of labor.
It has been established that the right to dismiss or otherwise impose disciplinary sanctions upon an
employee for just and valid cause, pertains in the first place to the employer, as well as the authority to determine
the existence of said cause in accordance with the norms of due process.
Alejandro Maraguinot, Jr. and Paulino Enero v. National Labor Relations Commission (Second Division)
composed of Presiding Commissioner Raul T. Aquino, Commissioner Rogelio Rayala and Comissioner
Victoriano Calaycay, Vic del Rosario and Viva Films
G.R. No. 120969, January 22, 1998, DAVIDE, JR.
Facts
Petitioners Maraguinot and Enero maintains that they were
employed as a members of the filming crew. Their tasks consisted of loading, unloading and arranging movie
equipment in the shooting area as instructed by the cameraman, returning the equipment to Viva Films
warehouse, assisting in the fixing of the lighting system, and performing other tasks that the cameraman and/or
director may assign. In May 1992, petitioners sought the assistance of their supervisor, Mrs. Alejandria Cesario,
to facilitate their request that private respondents adjust their salary in accordance with the minimum wage law.
On June 1992, Mrs. Cesario informed petitioners that Mr. Vic del Rosario would agree to increase their salary
only if they signed a blank employment contract. Both petitioners refused to sign, respondents forced Enero to go
on leave. However, when here ported to work, respondent refused to take him back. Maraguinot was dropped
from the company payroll but when his name was again included in such, he was again asked to sign a blank
employment contract, and when he still refused, respondents terminated his services. Petitioners thus sued for
illegal dismissal.
Private respondents claim that Viva Films is primarily engaged in the distribution and exhibition of movies
-- but not in the business of making movies; in the same vein, private respondent Vic Del Rosario is merely an
executive producer, i.e., the financier who invests a certain sum of money for the production of movies distributed
and exhibited by VIVA. Private respondents assert that they contract persons called producers --also referred
to as associate producers-to produce or make movies for private respondents. Petitioners are project
employees of the associate producers who, in turn, act as independent contractors. As such, there is no employer-
employee relationship. The labor arbiter ruled in favor of the petitioners. On appeal, the NLRC reversed the
decision hence, this appeal.
Issues
WON there is an employer - employee relationship between petitioners and private respondents
Decision
Yes. Petitioners cannot be considered as project employees of associate producers who, in turn, act as
independent contractors. It is settled that the contracting out of labor is allowed only in case of job contracting.
According to Sec. 8 rule 8 book 3 of the Omnibus Rules Implementing the Labor Code such is only permissible
when (1) The contractor carries on an independent business and undertakes the contract work on his own account
under his own responsibility according to his own manner and method free from the control and direction of his
employer or principal in all matters connected with the performance of the work except as to the results thereof
and (2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in the conduct of his business. In the case associate producers
do not have the equipment; in fact, it is VIVA itself who supplies the movie-making equipment. The associate
producers of VIVA cannot be considered labor-only contractors as they did not supply, recruit nor hire the
workers. It was Cesario, the Shooting Supervisor of VIVA, who recruited crew members. Thus, the relationship
between VIVA and its producers or associate producers seems to be that of agency. The latter make movies on
behalf of VIVA, whose business is to make movies. As such, the employment relationship between petitioners
and producers is actually one between petitioners and VIVA, with the latter being the direct employer.
The employer-employee relationship between petitioners and VIVA can further be established by the
control test. While four elements are usually considered in determining the existence of an employment
relationship, namely: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power
of dismissal; and (d) the employers power to control the employees conduct, the most important element is the
employers control of the employees conduct, not only as to the result of the work to be done but also as to the
means and methods to accomplish the same. All of which are present in the case. The movie project must be
finished within schedule without exceeding the budget, and additional expenses must be justified; certain scenes
are subject to change to suit the taste of the company; and the Supervising Producer, the eyes and ears of VIVA
and del Rosario, intervenes in the movie-making process by assisting the associate producer in solving problems
encountered in making the film.
Regarding the Illegal Dismissal, petitioners although admitted that they were hired as project employees,
they had attained the status of regular employees in view of VIVAs conduct. A project employee or a member
of a work pool may acquire the status of a regular employee when the following concur: (1) There is a continuous
rehiring of project employees even after cessation of a project; and (2) The tasks performed by the alleged project
employee are vital, necessary and indispensable to the usual business or trade of the employer.
The evidence on record shows that petitioner Enero was employed for a total of two (2) years and engaged
in at least eighteen
(18) projects, while petitioner Maraguinot was employed for some three (3) years and worked on at least twenty-
three (23) projects. Moreover, as petitioners tasks involved, among other chores, the loading, unloading and
arranging of movie equipment in the shooting area as instructed by the cameramen, returning the equipment to
the Viva Films warehouse, and assisting in the fixing of the lighting system, it may not be gainsaid that these
tasks were vital, necessary and indispensable to the usual business or trade of the employer.
As petitioners had already gained the status of regular employees, their dismissal was unwarranted, for
the cause invoked by private respondents for petitioners dismissal, viz., completion of project, was not, as to
 them, a valid cause for dismissal under Article 282 of the Labor Code. As such, petitioners are now entitled to
back wages and reinstatement, without loss of seniority rights and other benefit s that may have accrued.
PETITION GRANTED NOTE:
A work pool may exist although the workers in the pool do not receive salaries and are free to seek other
employment during temporary breaks in the business, provided that the worker shall be available when called to
report for a project. Although primarily applicable to regular seasonal workers, this set-up can likewise be applied
to project workers insofar as the effect of temporary cessation of work is concerned. This is beneficial to both the
employer and employee for it prevents the unjust situation of coddling labor at the expense of capital and at the
same time enables the workers to attain the status of regular employees.
Truly, the cessation of construction activities at the end of every project is a foreseeable suspension of work. Of
course, no compensation can be demanded from the employer because the stoppage of operations at the end of a
project and before the start of a new one is regular and expected by both parties to the labor relations. Similar to
the case of regular seasonal employees, the employment relation is not severed by merely being suspended. [citing
Manila Hotel Co.
v. CIR, 9 SCRA 186 (1963)] The employees are, strictly speaking, not separated from services but merely on
leave of absence without pay until they are reemployed. Thus we cannot affirm the argument that non-payment
of salary or non-inclusion in the payroll and the opportunity to seek other employment denote project
employment.
ORLANDO FARM GROWERS ASSOCIATION/ GLICERIO AOVER v. NLRC et al.
G.R. No. 129076, November 25, 1998, THIRD DIVISION
(Romero, J.)
Facts
Orlando Farms Growers Association, with co-petitioner Glicerio Aover as its President, is an association
of landowners engaged in the production of export quality bananas, established for the sole purpose of dealing
collectively with Stanfilco on matters concerning technical services, canal maintenance, irrigation and pest
control, among others. Respondents, on the other hand, were hired as farm workers by several member-
landowners but, nonetheless, were made to perform functions as packers and harvesters in the plantation of
Orlando Farm. Respondents were dismissed and several complaints were filed against Orlando Farm for illegal
dismissal and monetary benefits.
Petitioner alleged that the NLRC erred in finding that respondents were its employees and not of the
individual landowners which fact can easily be deduced from the payments made by the latter of respondent's
Social Security System (SSS) contributions. Moreover, it could have never exercised the power of control over
them with regard to the manner and method by which the work was to be accomplished, which authority remain
vested with the landowners despite becoming members thereof.
ISSUE:
Can an unregistered association be an employer independent of the respective members it represents?
HELD:
Yes. The contention that petitioner, being an unregistered association and having been formed solely to
serve as an effective medium for dealing collectively with Stanfilco, does not exist in law and, therefore, cannot
be considered an employer, is misleading.
This assertion can easily be dismissed by reference to Article 212(e) of the Labor Code, as amended,
which defines an employer as any person acting in the interest of an employer, directly or indirectly. Following a
careful scrutiny of the said provision, the Court concludes that the law does not require an employer to be
registered before he may come within the purview of the Labor Code, consistent with the established rule in
statutory construction that when the law does not distinguish, we should not distinguish. To do otherwise would
bring about a situation whereby employees are denied, not only redress of their grievances, but, more importantly,
the protection and benefits accorded to them by law if their employer happens to be an unregistered association.
To reiterate, the following are generally considered in the determination of the existence of an employer-
employee relationship:
(1) the manner of selection and engagement; (2) the payment of wages; (3) the presence or absence of the power
of dismissal; and (4) the presence or absence of the power of control; of these four, the last one being the most
important.
The following circumstances which support the existence of employer-employee relations cannot be
denied. During the subsistence of the association, several circulars and memoranda were issued concerning,
among other things, absences without formal request, loitering in the work area and disciplinary measures with
which every worker is enjoined to comply. Furthermore, the employees were issued identification cards.
However, what makes the relationship explicit is the power of the petitioner to enter into compromise agreements
involving money claims filed by three employees.