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G.R. No.

186621 March 12, 2014


SOUTH EAST INTERNATIONAL RATTAN, INC. and/or ESTANISLAO1 AGBAY, Petitioners, vs.
JESUS J. COMING, Respondent.

Before the Court is a petition for review on certiorari under Rule 45 to reverse and set aside the Decision2 dated February 21,
2008 and Resolution3 dated February 9, 2009 of the Court of Appeals (CA) in CA-GR. CEB-SP No. 02113.

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

On November 3, 2003, respondent Jesus J. Coming filed a complaint5 for illegal dismissal, underpayment of wages,
non-payment of holiday pay, 13th month pay and service incentive leave pay, with prayer for reinstatement, back
wages, damages and attorneys fees.

Respondent alleged that he was hired by petitioners as Sizing Machine Operator on March 17, 1984. His work schedule
is from 8:00 a.m. to 5:00 p.m. Initially, his compensation was on "pakiao" basis but sometime in June 1984, it was
fixed at 150.00 per day which was paid weekly. In 1990, without any apparent reason, his employment was
interrupted as he was told by petitioners to resume work in two months time. Being an uneducated person, respondent
was persuaded by the management as well as his brother not to complain, as otherwise petitioners might decide not to
call him back for work. Fearing such consequence, respondent accepted his fate. Nonetheless, after two months he
reported back to work upon order of management.6

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

On their part, petitioners denied having hired respondent asserting that SEIRI was incorporated only in 1986, and that
respondent actually worked for SEIRIs furniture suppliers because when the company started in 1987 it was engaged purely
in buying and exporting furniture and its business operations were suspended from the last quarter of 1989 to August 1992.
They stressed that respondent was not included in the list of employees submitted to the Social Security System (SSS).
Moreover, respondents brother, Vicente Coming, executed an affidavit8 in support of petitioners position while Allan
Mayol and Faustino Apondar issued notarized certifications9 that respondent worked for them instead.10

With the denial of petitioners that respondent was their employee, the latter submitted an affidavit11 signed by five former
co-workers stating that respondent was one of the pioneer employees who worked in SEIRI for almost twenty years.

In his Decision12 dated April 30, 2004, Labor Arbiter Ernesto F. Carreon ruled that respondent is a regular employee of
SEIRI and that the termination of his employment was illegal. The dispositive portion of the decision reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent South East (Intl.) Rattan,
Inc. to pay complainant Jesus J. Coming the following:

1. Separation pay 114,400.00

2. Backwages P 30,400.00

3. Wage differential P 15,015.00

4. 13th month pay P 5,958.00

5. Holiday pay P 4,000.00

6. Service incentive leave pay P 2,000.00

Total award 171,773.00

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

SO ORDERED.13

Petitioners appealed to the National Labor Relations Commission (NLRC)-Cebu City where they submitted the
following additional evidence: (1) copies of SEIRIs payrolls and individual pay records of employees;14 (2)
affidavit15of SEIRIs Treasurer, Angelina Agbay; and (3) second affidavit16 of Vicente Coming.
On July 28, 2005, the NLRCs Fourth Division rendered its Decision,17 the dispositive portion of which states:

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

SO ORDERED.18

The NLRC likewise denied respondents motion for reconsideration.19

Respondent elevated the case to the CA via a petition for certiorari under Rule 65.

By Decision dated February 21, 2008, the CA reversed the NLRC and ruled that there existed an employer-employee
relationship between petitioners and respondent who was dismissed without just and valid cause.

The CA thus decreed:

WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The assailed Decision dated July 28, 2005
issued by the National Labor Relations Commission (NLRC), Fourth Division, Cebu City in NLRC Case No. V-
000625-2004 is REVERSED and SET ASIDE. The Decision of the Labor Arbiter dated April 30, 2004 is
REINSTATED with MODIFICATION on the computation of backwages which should be computed from the time of
illegal termination until the finality of this decision.

Further, the Labor Arbiter is directed to make the proper adjustment in the computation of the award of separation pay
as well as the monetary awards of wage differential, 13th month pay, holiday pay and service incentive leave pay.

SO ORDERED.20

Petitioners filed a motion for reconsideration but the CA denied it under Resolution dated February 9, 2009.

Hence, this petition raising the following issues:

6.1 WHETHER UNDER THE FACTS AND EVIDENCE ON RECORD, THE FINDING OF THE
HONORABLE COURT OF APPEALS THAT THERE EXISTS EMPLOYER-EMPLOYEE RELATIONSHIP
BETWEEN PETITIONERS AND RESPONDENT IS IN ACCORD WITH LAW AND APPLICABLE DECISIONS
OF THIS HONORABLE COURT.

6.2 WHETHER THE HONORABLE COURT OF APPEALS CORRECTLY APPRECIATED IN


ACCORDANCE WITH APPLICABLE LAW AND JURISPRUDENCE THE EVIDENCE PRESENTED BY BOTH
PARTIES.

6.3 WHETHER UNDER THE FACTS AND EVIDENCE PRESENTED, THE FINDING OF THE
HONORABLE COURT OF APPEALS THAT PETITIONERS ARE LIABLE FOR ILLEGAL DISMISSAL OF
RESPONDENT IS IN ACCORD WITH APPLICABLE LAW AND JURISPRUDENCE.

6.4 WHETHER UNDER THE FACTS PRESENTED, THE RULING OF THE HONORABLE COURT OF
APPEALS THAT THE BACKWAGES DUE THE RESPONDENT SHOULD BE COMPUTED FROM THE TIME
OF ILLEGAL TERMINATION UNTIL THE FINALITY OF THE DECISION IS SUPPORTED BY PREVAILING
JURISPRUDENCE.21

Resolution of the first issue is paramount in view of petitioners denial of the existence of employer-employee
relationship.

The issue of whether or not an employer-employee relationship exists in a given case is essentially a question of fact.
As a rule, this Court is not a trier of facts and this applies with greater force in labor cases. 22 Only errors of law are
generally reviewed by this Court.23 This rule is not absolute, however, and admits of exceptions. For one, the Court
may look into factual issues in labor cases when the factual findings of the Labor Arbiter, the NLRC, and the CA are
conflicting.24 Here, the findings of the NLRC differed from those of the Labor Arbiter and the CA, which compels the
Courts exercise of its authority to review and pass upon the evidence presented and to draw its own conclusions
therefrom.25

To ascertain the existence of an employer-employee relationship jurisprudence has invariably adhered to the four-fold
test, to wit: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal;
and (4) the power to control the employees conduct, or the so-called "control test."26 In resolving the issue of whether
such relationship exists in a given case, substantial evidence that amount of relevant evidence which a reasonable
mind might accept as adequate to justify a conclusion is sufficient. Although no particular form of evidence is
required to prove the existence of the relationship, and any competent and relevant evidence to prove the relationship
may be admitted, a finding that the relationship exists must nonetheless rest on substantial evidence.27
In support of their claim that respondent was not their employee, petitioners presented Employment Reports to the SSS
from 1987 to 2002, the Certifications issued by Mayol and Apondar, two affidavits of Vicente Coming, payroll sheets
(1999-2000), individual pay envelopes and employee earnings records (1999-2000) and affidavit of Angelina Agbay
(Treasurer and Human Resources Officer). The payroll and pay records did not include the name of respondent. The
affidavit of Ms. Agbay stated that after SEIRI started its business in 1986 purely on export trading, it ceased operations
in 1989 as evidenced by Certification dated January 18, 1994 from the Securities and Exchange Commission (SEC);
that when business resumed in 1992, SEIRI undertook only a little of manufacturing; that the company never hired any
workers for varnishing and pole sizing because it bought the same from various suppliers, including Faustino Apondar;
respondent was never hired by SEIRI; and while it is true that Mr. Estanislao Agbay is the company President, he never
dispensed the salaries of workers.28

In his first affidavit, Vicente Coming averred that:

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

7. Thereafter, we joined Okay Okay Yard owned by Amelito Montececillo. This is a rattan trader with business
address near Cebu Rattan Factory on a "Pakiao" basis.

8. However, Jesus and I did not stay long at Okay Okay Yard and instead we joined Eleuterio Agbay in
Labogon, Cebu in 1989. In 1991, we went back to Okay Okay located near the residence of Atty. Vicente de la
Serna in Mandaue City. We were on a "pakiao" basis. We stayed put until 1993 when we resigned and joined
Dodoy Luna in Labogon, Mandaue City as classifier until 1995. In 1996[,] Jesus rested. It was only in 1997
that he worked back. He replaced me, as a classifier in Rattan Traders owned by Allan Mayol. But then,
towards the end of the year, he left the factory and relaxed in our place of birth, in Sogod, Cebu.

9. It was only towards the end of 1999 that Jesus was taken back by Allan Mayol as sizing machine operator.
However, the work was off and on basis. Not regular in nature, he was harping a side line job with me knowing
that I am now working with Faustino Apondar that supplies rattan furnitures [sic] to South East (Intl) Rattan,
Inc. As a brother, I allowed Jesus to work with me and collect the proceeds of his services as part of my
collectibles from Faustino Apondar since I was on a "pakiao" basis. He was working at his pleasure. Which
means, he works if he likes to? That will be until 10:00 oclock in the evening.

x x x x29

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

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

Faustino Apondar likewise issued a Certification which states:

This is to certify that I am a maker/supplier of finished Rattan Furniture. As such, I have several rattan furniture
workers under me, one of whom is Vicente Coming, the brother of Jesus Coming.

That sometime in 1999, Vicente pleaded to me for a side line job of his brother, Jesus who was already connected with
Allan Mayol. Having vouched for the integrity of his brother and knowing that the job is temporary in character, I
allowed Jesus to work with his brother Vicente. However, the proceeds will be collected together with his brother
Vicente since it was the latter who was working with me. He renders services to his brother work only after the regular
working hours but off and on basis.31

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

Their affidavit reads:

We, the undersigned, all of legal ages, Filipino, and resident[s] of Cebu, after having been duly sworn to in accordance
with law, depose and say:

That we are former employees of SOUTH EAST RATTAN which is owned by Estan Eslao Agbay;

That we personally know JESUS COMING considering that we worked together in one company SOUTH EAST
RATTANT [sic];

That we together with JESUS COMING are all under the employ of ESTAN ESLAO AGBAY considering that the
latter is the one directly paying us and holds the absolute control of all aspects of our employment;
That it is not true that JESUS COMING is under the employ of one person other than ESTAN ESLAO AGBAY OF
SOUTH EAST RATTAN;

That Jesus Coming is one of the pioneer employees of SOUTH EAST RATTAN and had been employed therein for
almost twenty years;

That we executed this affidavit to attest to the truth of the foregoing facts and to deny any contrary allegation made by
the company against his employment with SOUTH EAST RATTAN.32

In his decision, Labor Arbiter Carreon found that respondents work as sizing machine operator is usually necessary
and desirable to the rattan furniture business of petitioners and their failure to include respondent in the employment
report to SSS is not conclusive proof that respondent is not their employee. As to the affidavit of Vicente Coming,
Labor Arbiter Carreon did not give weight to his statement that respondent is not petitioners employee but that of one
Faustino Apondar. Labor Arbiter Carreon was not convinced that Faustino Apondar is an independent contractor who
has a contractual relationship with petitioners.

In reversing the Labor Arbiter, the NLRC reasoned as follows:

First complainant alleged that he worked continuously from March 17, 1984 up to January 21, 2002.1wphi1 Records
reveal however that South East (Intl.) Rattan, Inc. was incorporated only last July 18, 1986 (p. 55 records)[.]
Moreover, when they started to actually operate in 1987, the company was engaged purely on "buying and exporting
rattan furniture" hence no manufacturing employees were hired. Furthermore, from the last quarter of 1989 up to
August of 1992, the company suspended operations due to economic reverses as per Certification issued by the
Securities and Exchange Commission (p. 56 records)[.]

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

From the above established facts we are inclined to give weight and credence to the Certifications of Allan Mayol and
Faustino Apondar, both suppliers of finished Rattan Furniture (pp. 442-43, records). It appears that complainant first
worked with Allan Mayol and later with Faustino Apondar upon the proddings of his brother Vicente. Vicentes
affidavit as to complainants employment history was more detailed and forthright. x x x

xxxx

In the case at bar, there is likewise substantial evidence to support our findings that complainant was not an employee
of respondents. Thus:

1. Complainants name does not appear in the list of employees reported to the SSS.

2. His name does not also appear in the sample payrolls of respondents employees.

3. The certification of Allan Mayol and Fasutino Apondar[,] supplier of finished rattan products[,] that
complainant had at one time or another worked with them.

4. The Affidavit of Vicente Coming, complainants full brother[,] attesting that complainant had never been an
employee of respondent. The only connection was that their employer Faustino Apondar supplies finished
rattan products to respondents.33

On the other hand, the CA gave more credence to the declarations of the five former employees of petitioners that
respondent was their co-worker in SEIRI. One of said affiants is Vicente Comings own son, Gil Coming. Vicente
averred in his second affidavit that when he confronted his son, the latter explained that he was merely told by their
Pastor to sign the affidavit as it will put an end to the controversy. Vicente insisted that his son did not know the
contents and implications of the document he signed. As to the absence of respondents name in the payroll and SSS
employment report, the CA observed that the payrolls submitted were only from January 1, 1999 to December 29, 2000
and not the entire period of eighteen years when respondent claimed he worked for SEIRI. It further noted that the
names of the five affiants, whom petitioners admitted to be their former employees, likewise do not appear in the
aforesaid documents. According to the CA, it is apparent that petitioners maintained a separate payroll for certain
employees or willfully retained a portion of the payroll.

x x x As to the "control test", the following facts indubitably reveal that respondents wielded control over the work
performance of petitioner, to wit: (1) they required him to work within the company premises; (2) they obliged
petitioner to report every day of the week and tasked him to usually perform the same job; (3) they enforced the
observance of definite hours of work from 8 oclock in the morning to 5 oclock in the afternoon; (4) the mode of
payment of petitioners salary was under their discretion, at first paying him on pakiao basis and thereafter, on daily
basis; (5) they implemented company rules and regulations; (6) [Estanislao] Agbay directly paid petitioners salaries
and controlled all aspects of his employment and (7) petitioner rendered work necessary and desirable in the business
of the respondent company.34
We affirm the CA.

In Tan v. Lagrama,35 the Court held that the fact that a worker was not reported as an employee to the SSS is not
conclusive proof of the absence of employer-employee relationship. Otherwise, an employer would be rewarded for his
failure or even neglect to perform his obligation.36

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

In their comment to the petition filed by respondent in the CA, petitioners emphasized that in the certifications issued
by Mayol and Apondar, it was shown that respondent was employed and working for them in those years he claimed to
be working for SEIRI. However, a reading of the certification by Mayol would show that while the latter claims to
have respondent under his employ in 1997, 1998 and 1999, respondents services were not regular and that he works
only if he wants to. Apondars certification likewise stated that respondent worked for him since 1999 through his
brother Vicente as "sideline" but only after regular working hours and "off and on" basis. Even assuming the truth of
the foregoing statements, these do not foreclose respondents regular or full-time employment with SEIRI. In effect,
petitioners suggest that respondent was employed by SEIRIs suppliers, Mayol and Apondar but no competent proof
was presented as to the latters status as independent contractors.

In the same comment, petitioners further admitted that the five affiants who attested to respondents employment with
SEIRI are its former workers whom they describe as "disgruntled workers of SEIRI" with an axe to grind against
petitioners, and that their execution of affidavit in support of respondents claim is "their very way of hitting back the
management of SEIRI after disciplinary measures were meted against them." 38 This allegation though was not
substantiated by petitioners. Instead, after the CA rendered its decision reversing the NLRCs ruling, petitioners
subsequently changed their theory by denying the employment relationship with the five affiants in their motion for
reconsideration, thus:

x x x Since the five workers were occupying and working on a leased premises of the private respondent, they were
called workers of SEIRI (private respondent). Such admission however, does not connote employment. For the truth of
the matter, all of the five employees of the supplier assigned at the leased premises of the private respondent. Because
of the recommendation of the private respondent with regards to the disciplinary measures meted on the five workers,
they wanted to hit back against the private respondent. Their motive to implicate private respondent was to vindicate.
Definitely, they have an axe to grind against the private respondent. Mention has to be made that despite the dismissal
of these five (5) witnesses from their service, none of them ever went to the National Labor [Relations] Commission
and invoked their rights, if any, against their employer or at the very least against the respondent. The reason is
obvious, since they knew pretty well that they were not employees of SEIRI but rather under the employ of Allan
Mayol and Faustino Apondar, working on a leased premise of respondent. x x x39

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

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

As a regular employee, respondent enjoys the right to security of tenure under Article 27942 of the Labor Code and may
only be dismissed for a just43 or authorized44 cause, otherwise the dismissal becomes illegal.

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

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

Petitioners to pay the costs of suit.

SO ORDERED.
January 30, 2017
G.R. No. 206390
JACK C. VALENCIA, Petitioner, vs.
CLASSIQUE VINYL PRODUCTS CORPORATION, JOHNNY CHANG (Owner) and/or CANTINGAS
MANPOWER SERVICES, Respondents.

This Petition for Review on Certiorari assails the December 5, 2012 Decision1 and March 18, 2013 Resolution2 of the
Court of Appeals (CA) in CA-G.R. SP No. 120999, which respectively denied the Petition for Certiorari filed
therewith by petitioner Jack C. Valencia (Valencia) and the motion for reconsideration thereto.

Factual Antecedents

On March 24, 2010, Valencia filed with the Labor Arbiter a Complaint 3 for Underpayment of Salary and Overtime
Pay; Non-Payment of Holiday Pay, Service Incentive Leave Pay, 13th Month Pay; Regularization; Moral and
Exemplary Damages; and, Attorney's Fees against respondents Classique Vinyl Products Corporation (Classique
Vinyl) and its owner Johnny Chang (Chang) and/or respondent Cantingas Manpower Services (CMS). When Valencia,
however, asked permission from Chang to attend the hearing in connection the said complaint on April 17, 2010, the
latter allegedly scolded him and told him not to report for work anymore. Hence, Valencia amended his complaint to
include illegal dismissal.4

In his Sinumpaang Salaysay, 5 Valencia alleged that he applied for work with Classique Vinyl but was told by the
latter's personnel office to proceed to CMS, a local manpower agency, and therein submit the requirements for
employment. Upon submission thereof, CMS made him sign a contract of employment 6 but no copy of the same was
given to him. He then proceeded to Classique Vinyl for interview and thereafter started working for the company in
June 2005 as felitizer operator. Valencia claimed that he worked 12 hours a day from Monday to Saturday and was
receiving 187.52 for the first eight hours and an overtime pay of 117.20 for the next four hours, or beyond the then
minimum wage mandated by law. Five months later, he was made to serve as extruder operator but without the
corresponding increase in sa1aiy. He was neither paid his holiday pay, service incentive leave pay, and 13th month pay.
Worse, premiums for Philhealth and Pag-IBIG Fund were not paid and his monthly deductions for Social Security
System (SSS) premiums were not properly remitted. He was also being deducted the amounts of 100.00 and 60.00 a
week for Cash Bond and Agency Fee, respectively. Valencia averred that his salary was paid on a weekly basis but his
pay slips neither bore the name of Classique Vinyl nor of CMS; that all the machineries that he was using/operating in
connection with his work were all owned by Classique Vinyl; and that his work was regularly supervised by Classique
Vinyl. He further averred that he worked for Classique Vinyl for four years until his dismissal. Hence, by operation of
law, he had already attained the status of a regular employee of his true employer, Classique Vinyl, since according to
him, CMS is a mere labor-only contractor. Valencia, therefore, argued that Classique Vinyl should be held guilty of
illegal dismissal for failing to comply with the twin-notice requirement when it dismissed him from the service and be
made to pay for his monetary claims.

Classique Vinyl, for its part, denied having hired Valencia and instead pointed to CMS as the one who actually
selected, engaged, and contracted out Valencia's services. It averred that CMS would only deploy Valencia to
Classique Vinyl whenever there was an urgent specific task or temporary work and these occasions took place
sometime in the years 2005, 2007, 2009 and 2010. It stressed that Valencia's deployment to Classique Vinyl was
intermittent and limited to three to four months only in each specific year. Classique Vinyl further contended that
Valencia's performance was exclusively and directly supervised by CMS and that his wages and other benefits were
also paid by the said agency. It likewise denied dismissing Valencia from work and instead averred that on April 16,
2010, while deployed with Classique Vinyl, Valencia went on a prolonged absence from work for reasons only known
to him. In sum, Classique Vinyl asserted that there was no employer-employee relationship between it and Valencia,
hence, it could not have illegally dismissed the latter nor can it be held liable for Valencia's monetary claims. Even
assuming that Valencia is entitled to monetary benefits, Classique Vinyl averred that it cannot be made to pay the same
since it is an establishment regularly employing less than 10 workers. As such, it is exempted from paying the
prescribed wage orders in its area and other benefits under the Labor Code. At any rate, Classique Vinyl insisted that
Valencia's true employer was CMS, the latter being an independent contractor as shown by the fact that it was duly
incorporated and registered not only with the Securities and Exhange Commission but also with the Department of
Labor and Employment; and, that it has substantial capital or investment in connection with the work performed and
services rendered by its employees to clients.

CMS, on the other hand, denied any employer-employee relationship between it and Valencia. It contended that after it
deployed Valencia to Classique Vinyl, it was already the latter which exercised full control and supervision over him.
Also, Valencia's wages were paid by Classique Vinyl only that it was CMS which physically handed the same to
Valencia.

Ruling of the Labor Arbiter

On September 13, 2010, the Labor Arbiter issued a Decision,7 the pertinent portions of which read:

Is [Valencia] a regular employee of respondent (Classique Vinyl]?


The Certificate of Business Name Registration issued by the Department of Trade and Industry dated 17 August 2007
and the Renewal of PRP A License No. M-08-03-269 for the period 29 August 2008 to 28 August 2010 issued by the
Regional Director of the National Capital Region of the Department of Labor and Employment [on the] 1 st day of
September 2008 are pieces of evidence to prove that respondent [CMS] is a legitimate Private Recruitment and
Placement Agency.

Pursuant to its business objective, respondent CMS entered into several Employment Contracts with complainant
Valencia as Contractual Employee for deployment to respondent [Classique Vinyl], the last of which was signed by
[Valencia] on 06 February 2010.

The foregoing Employment Contract for a definite period supports respondent [Classique Vinyl's] assertion that
[Valencia] was not hired continuously but intermittently ranging from 3 months to 4 months for the years 2005, 2007,
2009 and 2010. Notably, no controverting evidence was offered to dispute respondent [Classique Vinyl's] assertion.

Obviously, [Valencia] was deployed by CMS to [Classique Vinyl] for a fixed period.

In Pangilinan v. General Milling Corporation, G.R. No. 149329, July 12, 2004, the Supreme Court ruled that it does
not necessarily follow that where the duties of the employee consist of activities usually necessary or desirable in the
usual business of the employer, the parties are forbidden from agreeing on a period of time for the performance of such
activities. There is thus nothing essentially contradictory between a definite period of employment and the nature of the
employee's duties.

Thus, even if respondent [Classique Vinyl] exercises full control and supervision over the activities perfom1ed by
[Valencia], the latter's employment cannot be considered as regular.

Likewise, even if [Valencia] is considered the regular employee of respondent CMS, the complaint for illegal dismissal
cannot prosper as [the] employment was not terminated by respondent CMS.

On the other hand, there is no substantial evidence to support

[Valencia's] view that he was actually dismissed from his employment by respondent [Classique Vinyl]. After all, it is
elementary that he who makes an affirmative allegation has the burden of proof. On this score, [Valencia] failed to
establish that he was actually dismissed from his job by respondent [Classique Vinyl], aside from his bare allegation.

With regard to underpayment of salary, respondent CMS admitted that it received from respondent [Classique Vinyl]
the salary for [Valencia's] deployment. Respondent CMS never contested that the amount received was sufficient for
the payment of [Valencia's] salary.

Furthermore, respondent [Classique Vinyl] cannot be obliged to pay [Valencia's] overtime pay, holiday pay, service
incentive leave and 13th month pay as well as the alleged illegal deduction on the following grounds:

a) [Valencia] is not a rank-and-file employee of [Classique Vinyl];

b) No proof was offered to establish that [Valencia] actually rendered overtime services;

c) [Valencia had] not [worked] continuously or even intermittently for [one whole] (1) year[-]period during the specific
year of his deployment with respondent [Classique Vinyl] to be entitled to service incentive leave pay.

d) [Valencia] failed to offer substantial evidence to prove that respondent [Classique Vinyl] illegally deducted from his
sala.7 the alleged agency and cash bond.

Moreover, as against respondent CMS[,] the record is bereft of factual basis for the exact computation of [Valencia's]
money claims as it has remained uncontroverted that [Valencia] was not deployed continuously neither with respondent
[Classique Vinyl] and/or to such other clientele.

WHEREFORE, premises considered, judgment is hereby rendered [d]ismissing the above-entitled case for lack of
merit and/or factual basis

SO ORDERED,8

Ruling of the National Labor Relations Commission

Valencia promptly appealed to the National Labor Relations Commission (NLRC). Applying the four-fold test, the
NLRC, however, declared CMS as Valencia's employer in its Resolution9 dated April 14, 2011, viz.:

In Order to determine the existence of an employer-employee relationship, the following yardstick had been
consistently applied: (l) the selection and engagement; (2) payment of wages; (3) power of dismissal and; (4) the power
to control the employee[']s conduct.
In this case, [Valencia] admitted that he applied for work with respondent [CMS] x x x. Upon the acceptance of his
application, he was made to sign an employment contract x x x. [Valencia] also admitted that he received his wages
from respondent [CMS] x x x. As a matter of fact, respondent [CMS] argued that [Valencia] was given a non-cash
wage in the approximate amount of Php3,000.00 x x x.

Notably, it is explicitly stated in the employment contract of [Valencia] that he is required to observe all the rules and
regulations of the company as well as [the] lawful instructions of the management during his employment. That failure
to do so would cause the termination of his employment contract. The pertinent provision of the contract reads:

2. The employee shall observe all the rules and regulations of the company during the period of employment and [the]
lawful instructions of the management or its representatives. Failure to do so or if performance is below company
standards, management [has] the right to immediatelycancel this contract. x x x

The fact that [Vale1icia] was subjected to such restriction is an evident exercise of the power of control over
[Valencia].

The power of control of respondent [CMS] over Valencia was further bolstered by the declaration of the former that
they will not take against [Valencia] his numerous tardiness and absences at work and[;] his nonobservance of the
company rules, The statement of [CMS] reads:

Needless to say that [Valencia] in the course of his employment has incurred many infractions like tardiness and
absences, non-observance of company rules, but respondent [CMS], in reiteration will not take this up as leverage
against [Valencia]. x x x

Though [Valencia] worked in the premises of Classique Vinyl x x x and that the [equipment] he used in the
performance of his work was provided by the between [Valencia] and Classique Vinyl x x x in view of the foregoing
circumstances earlier reflected. Besides, as articulated by jurisprudence, the power of control does not require actual
exercise of the power but the power to wield that power x x x.

With the foregoing chain of events, it is evident that [Valencia] is an employee of respondent [CMS].

x x x x10

Accordingly, the NLRC held that there is no basis for Valencia to hold Classique Vinyl liable for his alleged illegal
dismissal as well as for his money claims. Hence, the NLRC dismissed Valencia's appeal and affirmed the decision of
the Labor Arbiter.

Valencia's motion for reconsideration thereto was likewise denied for lack of merit in the Resolution11 dated June 8,
2011.

Ruling of the Court of Appeals

When Valencia sought recourse from the CA, the said court rendered a Decision12 dated December 5, 2012 denying his
Petition for Certiorari and affirming the ruling of the NLRC.

Valencia's motion for reconsideration was likewise denied in a Resolution 13 dated March 18, 2013.

Hence, this Petition for Review on Certiorari imputing upon the CA the following errors:

WITH DUE RESPECT, IT IS A SERIOUS ERROR WHICH CONSTITUTE[S] GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION ON THE PART OF THE HONORABLE COURT
OF APPEALS TO HAVE RULED THAT PETITIONER IS AN EMPLOYEE OF CMS AND FURTHER RULED
THAT HE IS NOT ENTITLED TO HIS MONETARY CLAIMS.

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS['] DECISION AND RESOLUTION ARE
CONTRARY TO LAW AND WELL-SETTLED RULE.14

Valencia points out that the CA, in ruling that he was an employee of CMS, relied heavily on the employment contract
which the latter caused him to sign. He argues, however, that the said contract deserves scant consideration since aside
from being improperly filled up (there were many portions without entries), the same was not notarized. Valencia
likewise stresses that ti.11e burden of proving that CMS is a legitimate job contractor lies with respondents. Here,
neither Classique Vinyl nor CMS was able to present proof that the latter has substantial capital to do business as to be
considered a legitimate independent contractor. Hence, CMS is presumed to be a mere labor-only contractor and
Classique Vinyl, as CMS' principal, was Valencia's true employer. As to his alleged dismissal, Valencia argues that
respondents failed to establish just or authorized cause, thus, his dismissal was illegal. Anent his monetary claims,
Valencia invokes the principle that he who pleads payment has the burden of proving it. Since respondents failed to
present even a single piece of evidence that he has been paid his labor standards benefits, he believes that he is entitled
to recover them from respondents who must be held jointly and severally liable for the same. Further, Valencia
contends that respondents should be assessed moral and exemplary damages for circumventing pertinent labor laws by
preventing him from attaining regular employment status. Lastly, for having been compelled to engage the services of
counsel, Valencia claims that he is likewise entitled to attorney's fees.

For their part, respondents Classique Vinyl and Chang point out that the issues raised by Valencia involve questions of
fact which are not within the ambit of a petition for review on certiorari. Besides, findings of facts of the labor
tribunals when affirmed by the CA are generally binding on this Court. At any rate, the said respondents reiterate the
argun1ents they raised before the labor tribunals and the CA.

With respect to respondent CMS, the Court dispensed with the filing of its comment15 when the resolution requiring it
to file one was returned to the Court unserved 16 and after Valencia informed the Court that per Certification 17 of the
Office of the Treasurer of Valenzuela City where CMS's office was located, the latter had already closed down its
business on March 21, 2012.

Our Ruling

There is no merit in the Petition.

The core issue here is whether there exists an employer-employee relationship between Classique Vinyl and Valencia.
Needless to state, it is from the said detennination that the other issues raised, i.e., whether Valencia was illegally
dismissed by Classique Vinyl and whether the latter is liable for his monetary claims, hinge. However, as correctly
pointed out by Classique Vinyl, "[t]he issue of whether or not an employer-employee relationship existed between
[Valencia] and [Classique Vinyl] is essentially a question of fact." 18 "The Court is not a trier of facts and will not
review the factual findings of the lower tribunals as these are generally binding and conclusive."'19 While there are
recognized exceptions,20 none of them applies in this case.

Even if otherwise, the Court is not inclined to depart from the uniform findings of the Labor Arbiter, the NLRC and the
CA.

"It is an oft-repeated rule that in labor cases, as in other administrative and quasi-judicial proceedings, 'the quantum of
proof necessary is substantial evidence, or such amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion. The burden of proof rests upon the party who asserts the affirmative of an
issue."21 Since it is Valencia here who is claiming to be an employee of Classique Vinyl, it is thus incumbent upon
him to proffer evidence to prove the existence of employer-employee relationship between them. He "needs to show by
substantial evidence that he was indeed an employee of the company against which he claims illegal
dismissal."22 Corollary, the burden to prove the elements of an employer-employee relationship, viz.: (1) the selection
and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power of control,
lies upon Valencia.

Indeed, there is no hard and fast rule designed to establish the aforementioned elements of employer-employee
relationship.23 "Any competent and relevant evidence to prove the relationship may be admitted." 24 In this case,
however, Valencia failed to present competent evidence, documentary or otherwise, to support his claimed employer-
employee relationship between him and Classique Vinyl. All he advanced were mere factual assertions unsupported by
proof.

In fact, most of Valencia's allegations even militate against his claim that Classique Vinyl was his true employer. For
one, Valencia stated in his Sinumpaang Salaysay that his application was actually received and processed by CMS
which required him to submit the necessary requirements for employment. Upon submission thereof, it was CMS that
caused him to sign an employment contract, which upon perusal, is actually a contract between him and CMS. It was
only after he was engaged as a contractual employee of CMS that he was deployed to Classique Vinyl. Clearly,
Valencia's selection and engagement was undertaken by CMS and conversely, this negates the existence of such
element insofar as Classique Vinyl is concerned. It bears to state, in addition, that as opposed to Valencia's argument,
the lack of notarization of the said employment contract did not adversely affect its veracity and effectiveness since
significantly, Valencia does not deny having signed the same.25 The CA, therefore, did not err in relying on the said
employment contract in its determination of the merits of this case. For another, Valencia himself acknowledged that
the pay slips26 he submitted do not bear the name of Classique Vinyl. While the Court in Vinoya v. National Labor
Relations Commission27took judicial notice of the practice of employer to course through the purported contractor the
act of paying wages to evade liabilities under the Labor Code, hence, the non-appearance of employer's name in the
pay slip, the Court is not inclined to rule that such is the case here. This is conside1ing that although CMS claimed in
its supplemental Position Paper/Comment that the money it used to pay Valencia's wages came from Classique
Vinyl,28 the same is a mere allegation without proof Moreover, such allegation is inconsistent with CMS's earlier
assertion in its Position Paper29 that Valencia received from it non-cash wages in an approximate amount of 3,000.00.
A clear showing of the element of payment of wages by Classique Vinyl is therefore absent.

Aside from the afore-mentioned inconsistent allegations of Valencia, his claim that his work was supervised by
Classique Vinyl does not hold water. Again, the Court finds the same as a self-serving assertion unworthy of credence.
On the other hand, the employment contract which Valencia signed with CMS categorically states that the latter
possessed not only the power of control but also of dismissal over him, viz.:
xxxx

2. That the employee shall observe all rules and regulations of the company during the period of employment and [the]
lawful instructions of the management or its representatives. Failure to do so or if performance is below company
standards, management [has] the right to immediately cancel this contract.

x x x x30

Clearly, therefore, no error can be attributed on the part of the labor tribunals and the CA in ruling out the existence of
employer-employee relationship between Valencia and Classique Vinyl.

Further, the Court finds untenable Valencia's argument that neither Classique Vinyl nor CMS was able to present proof
that the latter is a legitimate independent contractor and therefore, unable to rebut the presumption that a contractor is
presumed to be a labor-only contractor. "Genera1ly, the presumption is that the contractor is a labor-only [contractor]
unless such contractor overcomes the burden of proving that it has the substantial capital, investment, tools and the
lik.e."31 Here, to prove that CMS was a legitimate contractor, Classique Vinyl presented the former's Certificate of
Registration32 with the Department of Trade and Industry and, License33 as private recruitment and placement agency
from the Department of Labor and Employment. Indeed, these documents are not conclusive evidence of the status of
CMS as a contractor. However, such fact of registration of CMS prevented the legal presumption of it being a mere
labor-only contractor from arising.34 In any event, it must be stressed that "in labor-only contracting, the statute creates
an employer-employee relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The
contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the
labor-only contractor as if such employees had been directly employed by the principal employer. The principal
employer therefore becomes solidarily liable with the labor-only contractor for all the rightful claims of the
employees."35 The facts of this case, however, failed to establish that there is any circumvention of labor laws as to call
for the creation by the statute of an employer-employee relationship between Classique Vinyl and Valencia. In fact,
even as against CMS, Valencia's money claims has been debunked by the labor tribunals and the CA. Again, the Court
is not inclined to disturb the same.

In view of the above disquisition, the Court finds no necessity to dwell on the issue of whether Valencia was illegally
dismissed by Classique Vinyl and whether the latter is liable for Valencia's money claims.

WHEREFORE, the Petition for Review on Certiorari is DENIED. 'The assailed December 5, 2012 Decision and
March 18, 2013 Resolution of the Court of Appeals in CA-G.R. SP No. 120999 are AFFIRMED.

SO ORDERED.
G.R. No. 204944-45 December 3, 2014
FUJI TELEVISION NETWORK, INC., Petitioner, vs. ARLENE S. ESPIRITU, Respondent.

It is the burden of the employer to prove that a person whose services it pays for is an independent contractor rather
than a regular employee with or without a fixed term. That a person has a disease does not per se entitle the employer
to terminate his or her services. Termination is the last resort. At the very least, a competent public health authority
must certify that the disease cannot be cured within six ( 6) months, even with appropriate treatment.

We decide this petition for review1 on certiorari filed by Fuji Television Network, Inc., seeking the reversal of the
Court of Appeals Decision2 dated June 25, 2012, affirming with modification the decision3 of the National Labor
Relations Commission.

In 2005, Arlene S. Espiritu ("Arlene") was engaged by Fuji Television Network, Inc. ("Fuji") asa news
correspondent/producer4 "tasked to report Philippine news to Fuji through its Manila Bureau field office."5 Arlenes
employment contract initially provided for a term of one (1) year but was successively renewed on a yearly basis with
salary adjustment upon every renewal.6 Sometime in January 2009, Arlenewas diagnosed with lung cancer.7She
informed Fuji about her condition. In turn, the Chief of News Agency of Fuji, Yoshiki Aoki, informed Arlene "that the
company will have a problem renewing her contract"8 since it would be difficult for her to perform her job.9 She
"insisted that she was still fit to work as certified by her attending physician."10

After several verbal and written communications,11 Arlene and Fuji signed a non-renewal contract on May 5, 2009
where it was stipulated that her contract would no longer be renewed after its expiration on May 31, 2009. The contract
also provided that the parties release each other from liabilities and responsibilities under the employment contract.12

In consideration of the non-renewal contract, Arlene "acknowledged receipt of the total amount of US$18,050.00
representing her monthly salary from March 2009 to May 2009, year-end bonus, mid-year bonus, and separation
pay."13 However, Arlene affixed her signature on the nonrenewal contract with the initials "U.P." for "under protest." 14

On May 6, 2009, the day after Arlene signed the non-renewal contract, she filed a complaint for illegal dismissal and
attorneys fees with the National Capital Region Arbitration Branch of the National Labor Relations Commission. She
alleged that she was forced to sign the nonrenewal contract when Fuji came to know of her illness and that Fuji
withheld her salaries and other benefits for March and April 2009 when she refused to sign.15

Arlene claimed that she was left with no other recourse but to sign the non-renewal contract, and it was only upon
signing that she was given her salaries and bonuses, in addition to separation pay equivalent to four (4) years.16

In the decision17 dated September 10, 2009, Labor Arbiter Corazon C. Borbolla dismissed Arlenes complaint. 18Citing
Sonza v. ABS-CBN19 and applying the four-fold test, the Labor Arbiter held that Arlene was not Fujis employee but
an independent contractor.20

Arlene appealed before the National Labor Relations Commission. In its decision dated March 5, 2010, the National
Labor Relations Commission reversed the Labor Arbiters decision.21 It held that Arlene was a regular employee with
respect to the activities for which she was employed since she continuously rendered services that were
deemednecessary and desirable to Fujis business.22 The National Labor Relations Commission ordered Fuji to pay
Arlene backwages, computed from the date of her illegal dismissal.23 The dispositive portion of the decision reads:

WHEREFORE, premises considered, judgment is hereby rendered GRANTING the instant appeal. The Decision of the
Labor Arbiter dated 19 September 2009 is hereby REVERSED and SET ASIDE, and a new one is issued ordering
respondents-appellees to pay complainant-appellant backwages computed from the date of her illegal dismissal until
finality of this Decision.

SO ORDERED.24

Arlene and Fuji filed separat emotions for reconsideration.25 Both motions were denied by the National Labor
Relations Commission for lack of merit in the resolution dated April 26, 2010. 26 From the decision of the National
Labor Relations Commission, both parties filed separate petitions for certiorari27 before the Court of Appeals. The
Court of Appeals consolidated the petitions and considered the following issues for resolution:

1) Whether or not Espirituis a regular employee or a fixed-term contractual employee;

2) Whether or not Espiritu was illegally dismissed; and

3) Whether or not Espirituis entitled to damages and attorneys fees.28

In the assailed decision, the Court of Appeals affirmed the National Labor Relations Commission with the
modification that Fuji immediately reinstate Arlene to her position as News Producer without loss of seniority
rights, and pay her backwages, 13th-month pay, mid-year and year-end bonuses, sick leave and vacation leave
with pay until reinstated, moral damages, exemplary damages, attorneysfees, and legal interest of 12% per
annum of the total monetary awards.29 The Court of Appeals ruled that:
WHEREFORE, for lack of merit, the petition of Fuji Television Network, Inc. and Yoshiki Aoki is DENIED and the
petition of Arlene S. Espiritu is GRANTED. Accordingly, the Decision dated March 5, 2010 of the National Labor
Relations Commission, 6th Division in NLRC NCR Case No. 05-06811-09 and its subsequent Resolution dated April
26, 2010 are hereby AFFIRMED with MODIFICATIONS, as follows:

Fuji Television, Inc. is hereby ORDERED to immediately REINSTATE Arlene S. Espiritu to her position as News Producer
without loss of seniority rights and privileges and to pay her the following:
1. Backwages at the rate of $1,900.00 per month computed from May 5, 2009 (the date of dismissal), until reinstated;
2. 13th Month Pay at the rate of $1,900.00 per annum from the date of dismissal, until reinstated;
3. One and a half (1 1/2) months pay or $2,850.00 as midyear bonus per year from the date of dismissal, until reinstated;
4. One and a half (1 1/2) months pay or $2,850.00 as year-end bonus per year from the date of dismissal, until reinstated;
5. Sick leave of 30 days with pay or $1,900.00 per year from the date of dismissal, until reinstated; and
6. Vacation leave with pay equivalent to 14 days or $1,425.00 per annum from date of dismissal, until reinstated.
7. The amount of 100,000.00 as moral damages;
8. The amount of 50,000.00 as exemplary damages;
9. Attorneys fees equivalent to 10% of the total monetary awards herein stated; and
10. Legal interest of twelve percent (12%) per annum of the total monetary awards computed from May 5, 2009, until their
full satisfaction.

The Labor Arbiter is hereby DIRECTED to make another recomputation of the above monetary awards consistent with
the above directives.

SO ORDERED.30

In arriving at the decision, the Court of Appeals held that Arlene was a regular employee because she was engaged to
perform work that was necessary or desirable in the business of Fuji,31 and the successive renewals of her fixed-term
contract resulted in regular employment.32

According to the Court of Appeals, Sonzadoes not apply in order to establish that Arlene was an independent
contractor because she was not contracted on account of any peculiar ability, special talent, or skill. 33 The fact that
everything used by Arlene in her work was owned by Fuji negated the idea of job contracting.34

The Court of Appeals also held that Arlene was illegally dismissed because Fuji failed to comply with the requirements
of substantive and procedural due process necessary for her dismissal since she was a regular employee. 35

The Court of Appeals found that Arlene did not sign the non-renewal contract voluntarily and that the contract was a
mere subterfuge by Fuji to secure its position that it was her choice not to renew her contract. She was left with no
choice since Fuji was decided on severing her employment.36

Fuji filed a motion for reconsideration that was denied in the resolution37 dated December 7, 2012 for failure to raise
new matters.38

Aggrieved, Fuji filed this petition for review and argued that the Court of Appeals erred in affirming with modification
the National Labor Relations Commissions decision, holding that Arlene was a regular employee and that she was
illegally dismissed. Fuji also questioned the award of monetary claims, benefits, and damages.39

Fuji points out that Arlene was hired as a stringer, and it informed her that she would remain one.40 She was hired as an
independent contractor as defined in Sonza.41 Fuji had no control over her work.42 The employment contracts were
executed and renewed annually upon Arlenes insistence to which Fuji relented because she had skills that
distinguished her from ordinary employees.43 Arlene and Fuji dealt on equal terms when they negotiated and entered
into the employment contracts.44 There was no illegal dismissal because she freely agreed not to renew her fixed-term
contract as evidenced by her e-mail correspondences with Yoshiki Aoki.45 In fact, the signing of the non-renewal
contract was not necessary to terminate her employment since "such employment terminated upon expiration of her
contract."46 Finally, Fuji had dealt with Arlene in good faith, thus, she should not have been awarded damages.47

Fuji alleges that it did not need a permanent reporter since the news reported by Arlene could easily be secured from
other entities or from the internet.48 Fuji "never controlled the manner by which she performed her functions." 49It was
Arlene who insisted that Fuji execute yearly fixed-term contracts so that she could negotiate for annual increases in her
pay.50

Fuji points out that Arlene reported for work for only five (5) days in February 2009, three (3) days in March 2009, and
one (1) day in April 2009.51 Despite the provision in her employment contract that sick leaves in excess of 30 days
shall not be paid, Fuji paid Arlene her entire salary for the months of March, April, and May; four(4) months of
separation pay; and a bonus for two and a half months for a total of US$18,050.00.52 Despite having received the
amount of US$18,050.00, Arlene still filed a case for illegal dismissal.53

Fuji further argues that the circumstances would show that Arlene was not illegally dismissed. The decision tonot
renew her contract was mutually agreed upon by the parties as indicated in Arlenes e-mail54 dated March 11, 2009
where she consented to the non-renewal of her contract but refused to sign anything.55 Aoki informed Arlene in an e-
mail56 dated March 12, 2009 that she did not need to sign a resignation letter and that Fuji would pay Arlenes salary
and bonus until May 2009 as well as separation pay.57

Arlene sent an e-mail dated March 18, 2009 with her version of the non-renewal agreement that she agreed to sign this
time.58 This attached version contained a provision that Fuji shall re-hire her if she was still interested to work for
Fuji.59 For Fuji, Arlenes e-mail showed that she had the power to bargain.60

Fuji then posits that the Court of Appeals erred when it held that the elements of an employer-employee relationship
are present, particularly that of control;61 that Arlenes separation from employment upon the expiration of her contract
constitutes illegal dismissal;62 that Arlene is entitled to reinstatement;63 and that Fuji is liable to Arlene for damages
and attorneys fees.64

This petition for review on certiorari under Rule 45 was filed on February 8, 2013. 65 On February 27, 2013, Arlene
filed a manifestation66 stating that this court may not take jurisdiction over the case since Fuji failed to authorize
Corazon E. Acerden to sign the verification.67 Fuji filed a comment on the manifestation68 on March 9, 2013.

Based on the arguments of the parties, there are procedural and substantive issues for resolution:

I. Whether the petition for review should be dismissed as Corazon E. Acerden, the signatory of the verification
and certification of non forum shopping of the petition, had no authority to sign the verification and
certification on behalf of Fuji;

II. Whether the Court of Appeals correctly determined that no grave abuse of discretion was committed by the
National Labor Relations Commission when it ruled that Arlene was a regular employee, not an independent
contractor, and that she was illegally dismissed; and

III. Whether the Court of Appeals properly modified the National Labor Relations Commissions decision by
awarding reinstatement, damages, and attorneys fees.

The petition should be dismissed.

I Validity of the verification and certification against forum shopping

In its comment on Arlenes manifestation, Fuji alleges that Corazon was authorized to sign the verification and certification
of non-forum shopping because Mr. Shuji Yano was empowered under the secretarys certificate to delegate his authority to
sign the necessary pleadings, including the verification and certification against forum shopping.69

On the other hand, Arlene points outthat the authority given to Mr. Shuji Yano and Mr. Jin Eto in the secretarys
certificate is only for the petition for certiorari before the Court of Appeals. 70 Fuji did not attach any board resolution
authorizing Corazon orany other person tofile a petition for review on certiorari with this court. 71 Shuji Yano and Jin
Eto could not re-delegate the power thatwas delegated to them.72 In addition, the special power of attorney executed by
Shuji Yano in favor of Corazon indicated that she was empowered to sign on behalf of Shuji Yano, and not on behalf
of Fuji.73

The Rules of Court requires the submission of verification and certification against forum shopping

Rule 7, Section 4 of the 1997 Rules of Civil Procedure provides the requirement of verification, while Section 5 of the
same rule provides the requirement of certification against forum shopping. These sections state:

SEC. 4. Ver if ica tio n. Except when otherwise specifically required by law or rule, pleadings need not be under
oath, verified or accompanied by affidavit.

A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and
correct of his knowledge and belief.

A pleading required to be verifiedwhich containsa verification based on "information and belief," or upon "knowledge,
information and belief," or lacks a proper verification, shall be treated as an unsigned pleading.

SEC. 5. Certification against forum shopping. The plaintiff or principal party shall certify under oath in the
complaint orother initiatory pleading asserting a claim for relief or in a sworn certification annexed thereto and
simultaneously filed therewith: (a) that he has not theretofore commenced any action or filed any claim involving the
same issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other action or
claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status
thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he
shall report that fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory pleading
has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other
initiatory pleading but shall be cause for the dismissal of the case without prejudice, unless otherwise provided, upon
motion and after hearing. The submission of a false certification or non-compliance with any of the undertakings
therein shall constitute indirect contempt ofcourt, without prejudice to the corresponding administrative and
criminalactions. If the acts of the party or his counsel clearly constitute willful and deliberate forum shopping, the same
shall be ground for summary dismissal with prejudice and shall constitute direct contempt, as well as a cause for
administrative sanctions.

Section 4(e) of Rule 4574 requires that petitions for review should "contain a sworn certification against forum
shopping as provided in the last paragraph of section 2, Rule 42." Section 5 of the same rule provides that failure to
comply with any requirement in Section 4 is sufficient ground to dismiss the petition.

Effects of non-compliance

Uy v. Landbank75 discussed the effect of non-compliance with regard to verification and stated that:

[t]he requirement regarding verification of a pleading is formal, not jurisdictional. Such requirement is simply a
condition affecting the form of pleading, the non-compliance of which does not necessarily render the pleading fatally
defective. Verification is simply intended to secure an assurance that the allegations in the pleading are true and correct
and not the product of the imagination or a matter of speculation, and that the pleading is filed in good faith. The court
may order the correction of the pleading if the verification is lacking or act on the pleading although it is not verified, if
the attending circumstances are such that strict compliance with the rules may be dispensed with inorder that the ends
of justice may thereby be served.76 (Citations omitted)

Shipside Incorporated v. Court of Appeals77 cited the discussion in Uy and differentiated its effect from non-
compliance with the requirement of certification against forum shopping:

On the other hand, the lack of certification against forum shopping is generally not curable by the submission thereof
after the filing of the petition. Section 5, Rule 45 of the 1997 Rules of Civil Procedure provides that the failure of the
petitioner tosubmit the required documents that should accompany the petition, including the certification against
forum shopping, shall be sufficient ground for the dismissal thereof. The same rule applies to certifications against
forum shopping signed by a person on behalf of a corporation which are unaccompanied by proof that said signatory is
authorized to file a petition on behalf of the corporation.78 (Emphasis supplied) Effects of substantial compliance with
the requirement of verification and certification against forum shopping

Although the general rule is that failure to attach a verification and certification against forum shopping isa ground for
dismissal, there are cases where this court allowed substantial compliance.

In Loyola v. Court of Appeals,79 petitioner Alan Loyola submitted the required certification one day after filing his
electoral protest.80 This court considered the subsequent filing as substantial compliance since the purpose of filing the
certification is to curtail forum shopping.81

In LDP Marketing, Inc. v. Monter,82 Ma. Lourdes Dela Pea signed the verification and certification against forum
shopping but failed to attach the board resolution indicating her authority to sign.83 In a motion for reconsideration,
LDP Marketing attached the secretarys certificate quoting the board resolution that authorized Dela Pea.84 Citing
Shipside, this court deemed the belated submission as substantial compliance since LDP Marketing complied with the
requirement; what it failed to do was to attach proof of Dela Peas authority to sign.85 Havtor Management Phils., Inc.
v. National Labor Relations Commission86 and General Milling Corporation v. National Labor Relations
Commission87 involved petitions that were dismissed for failure to attach any document showing that the signatory on
the verification and certification against forum-shopping was authorized.88 In both cases, the secretarys certificate was
attached to the motion for reconsideration.89 This court considered the subsequent submission of proof indicating
authority to sign as substantial compliance.90 Altres v. Empleo91 summarized the rules on verification and certification
against forum shopping in this manner:

For the guidance of the bench and bar, the Court restates in capsule form the jurisprudential pronouncements . . .
respecting non-compliance with the requirement on, or submission of defective, verification and certification against
forum shopping:

1) A distinction must be made between non-compliance with the requirement on or submission of defective verification,
and noncompliance with the requirement on or submission of defective certification against forum shopping.

2) As to verification, non-compliance therewith or a defect therein does not necessarily render the pleading fatally
defective. The court may order its submission or correction or act on the pleading if the attending circumstances are
such that strict compliance with the Rule may be dispensed with in order that the ends of justice may be served thereby.

3) Verification is deemed substantially complied with when one who has ample knowledge to swear to the truth of
the allegations in the complaint or petition signs the verification, and when matters alleged in the petition have
been made in good faith or are true and correct.
4) As to certification against forum shopping, non-compliance therewith or a defect therein, unlike in verification,
is generally not curable by its subsequent submission or correction thereof, unless there is a need to relax the Rule
on the ground of "substantial compliance" or presence of "special circumstances or compelling reasons."

5) The certification against forum shopping must be signed by all the plaintiffs or petitioners in a case; otherwise,
those who did not sign will be dropped as parties to the case. Under reasonable or justifiable circumstances, however, as
when all the plaintiffs or petitioners share a common interest and invoke a common cause of action or defense, the
signature of only one of them inthe certification against forum shopping substantially complies with the Rule.

6) Finally, the certification against forum shopping must be executed by the party-pleader, not by his counsel. If,
however, for reasonable or justifiable reasons, the party-pleader is unable to sign, he must execute a Special Power
of Attorney designating his counsel of record to sign on his behalf.92

There was substantial compliance by Fuji Television Network, Inc.

Being a corporation, Fuji exercises its power to sue and be sued through its board of directors or duly authorized
officers and agents. Thus, the physical act of signing the verification and certification against forum shopping can only
be done by natural persons duly authorized either by the corporate by-laws or a board resolution.93

In its petition for review on certiorari, Fuji attached Hideaki Otas secretarys certificate, 94 authorizing Shuji Yano and
Jin Eto to represent and sign for and on behalf of Fuji.95 The secretarys certificate was duly authenticated96 by Sulpicio
Confiado, Consul-General of the Philippines in Japan. Likewise attached to the petition is the special power of attorney
executed by Shuji Yano, authorizing Corazon to sign on his behalf.97 The verification and certification against forum
shopping was signed by Corazon.98

Arlene filed the manifestation dated February 27, 2013, arguing that the petition for review should be dismissed
because Corazon was not duly authorized to sign the verification and certification against forum shopping.

Fuji filed a comment on Arlenes manifestation, stating that Corazon was properly authorized to sign. On the basis of
the secretarys certificate, Shuji Yano was empowered to delegate his authority.

Quoting the board resolution dated May 13, 2010, the secretary's certificate states:

(a) The Corporation shall file a Petition for Certiorari with the Court of Appeals, against Philippines National
Labor Relations Commission ("NLRC") and Arlene S. Espiritu, pertaining to NLRC-NCR Case No. LAC 00-
002697-09, RAB No. 05-06811-00 and entitled "Arlene S. Espiritu v. Fuji Television Network, Inc./Yoshiki Aoki",
and participate in any other subsequent proceeding that may necessarily arise therefrom, including but not limited to
the filing of appeals in the appropriate venue;

(b) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby authorized, to verify and execute the
certification against nonforum shopping which may be necessary or required to be attached to any pleading to [sic]
submitted to the Court of Appeals; and the authority to so verify and certify for the Corporation in favor of the said
persons shall subsist and remain effective until the termination of the said case;

....

(d) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby authorized, to represent and appear on behalf
the [sic] Corporation in all stages of the [sic] this case and in any other proceeding that may necessarily arise
thereform [sic], and to act in the Corporations name, place and stead to determine, propose, agree, decide, do, and
perform any and all of the following:

1. The possibility of amicable settlement or of submission to alternative mode of dispute resolution;


2. The simplification of the issue;
3. The necessity or desirability of amendments to the pleadings;
4. The possibility of obtaining stipulation or admission of facts and documents; and
5. Such other matters as may aid in the prompt disposition of the action.99

Shuji Yano executed a special power of attorney appointing Ms. Ma. Corazon E. Acerden and Mr. Moises A. Rollera
as his attorneys-in-fact.100 The special power of attorney states:

That I, SHUJI YANO, of legal age, Japanese national, with office address at 2-4-8 Daiba, Minato-Ku, Tokyo, 137-
8088 Japan, and being the representative of Fuji TV, INc., [sic] (evidenced by the attached Secretarys Certificate) one
of the respondents in NLRC-NCR Case No. 05-06811-00 entitled "Arlene S. Espiritu v. Fuji Television Network,
Inc./Yoshiki Aoki", and subsequently docketed before the Court of Appeals asC.A. G.R. S.P. No. 114867
(Consolidated with SP No. 114889) do hereby make, constitute and appoint Ms. Ma. Corazon E. Acerden and Mr.
Moises A. Rolleraas my true and lawful attorneys-infact for me and my name, place and stead to act and represent me
in the above-mentioned case, with special power to make admission/s and stipulations and/or to make and submit as
well as to accept and approve compromise proposals upon such terms and conditions and under such covenants as my
attorney-in-fact may deem fit, and to engage the services of Villa Judan and Cruz Law Officesas the legal counsel to
represent the Company in the Supreme Court;

The said Attorneys-in-Fact are hereby further authorized to make, sign, execute and deliver such papers ordocuments
as may be necessary in furtherance of the power thus granted, particularly to sign and execute the verification and
certification of non-forum shopping needed to be filed.101 (Emphasis in the original)

In its comment102 on Arlenes manifestation, Fuji argues that Shuji Yano could further delegate his authority because
the board resolution empowered him to "act in the Corporations name, place and stead to determine, propose, agree,
decided [sic], do and perform any and all of the following: . . . such other matters as may aid in the prompt disposition
of the action."103 To clarify, Fuji attached a verification and certification against forum shopping, but Arlene questions
Corazons authority to sign. Arlene argues that the secretarys certificate empowered Shuji Yano to file a petition for
certiorari before the Court of Appeals, and not a petition for review before this court, and that since Shuji Yanos
authority was delegated to him, he could not further delegate such power. Moreover, Corazon was representing Shuji
Yano in his personal capacity, and not in his capacity as representative of Fuji.

A review of the board resolution quoted in the secretarys certificate shows that Fuji shall "file a Petition for Certiorari
with the Court of Appeals"104 and "participate in any other subsequent proceeding that may necessarily arise therefrom,
including but not limited to the filing of appeals in the appropriate venue,"105 and that Shuji Yano and Jin Eto are
authorized to represent Fuji "in any other proceeding that may necessarily arise thereform [sic]."106 As pointed out by
Fuji, Shuji Yano and Jin Eto were also authorized to "act in the Corporations name, place and stead to determine,
propose, agree, decide, do, and perform anyand all of the following: . . . 5. Such other matters as may aid in the prompt
disposition of the action."107

Considering that the subsequent proceeding that may arise from the petition for certiorari with the Court of Appeals is
the filing of a petition for review with this court, Fuji substantially complied with the procedural requirement.

On the issue of whether Shuji Yano validly delegated his authority to Corazon, Article 1892 of the Civil Code of the
Philippines states:

ART. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but he shall be
responsible for the acts of the substitute:

(1) When he was not given the power to appoint one;

(2) When he was given such power, but without designating the person, and the person appointed was
notoriously incompetent or insolvent. All acts of the substitute appointed against the prohibition of the
principal shall be void.

The secretarys certificate does not state that Shuji Yano is prohibited from appointing a substitute. In fact, heis
empowered to do acts that will aid in the resolution of this case.

This court has recognized that there are instances when officials or employees of a corporation can sign the verification
and certification against forum shopping without a board resolution. In Cagayan Valley Drug Corporation v. CIR, 108 it
was held that:

In sum, we have held that the following officials or employees of the company can sign the verification and
certification without need of a board resolution: (1) the Chairperson of the Board of Directors, (2) the President of a
corporation, (3) the General Manager or Acting General Manager, (4) Personnel Officer, and (5) an Employment
Specialist in a labor case.

While the above cases109 do not provide a complete listing of authorized signatories to the verification and certification
required by the rules, the determination of the sufficiency of the authority was done on a case to case basis. The
rationale applied in the foregoing cases is to justify the authority of corporate officers or representatives of the
corporation to sign the verification or certificate against forum shopping, being in a position to verify the truthfulness
and correctness of the allegations in the petition.110

Corazons affidavit111 states that she is the "office manager and resident interpreter of the Manila Bureau of Fuji
Television Network, Inc."112 and that she has "held the position for the last twenty-three years."113

As the office manager for 23 years,Corazon can be considered as having knowledge of all matters in Fujis Manila
Bureau Office and is in a position to verify "the truthfulness and the correctness of the allegations in the Petition." 114

Thus, Fuji substantially complied with the requirements of verification and certification against forum shopping.

Before resolving the substantive issues in this case, this court will discuss the procedural parameters of a Rule 45
petition for review in labor cases.
II Procedural parameters of petitions for review in labor cases

Article 223 of the Labor Code115 does not provide any mode of appeal for decisions of the National Labor Relations
Commission. It merely states that "[t]he decision of the Commission shall be final and executory after ten (10) calendar
days from receipt thereof by the parties." Being final, it is no longer appealable. However, the finality of the National
Labor Relations Commissions decisions does not mean that there is no more recourse for the parties.

In St. Martin Funeral Home v. National Labor Relations Commission,116 this court cited several cases117 and rejected
the notion that this court had no jurisdiction to review decisions of the National Labor Relations Commission. It stated
that this court had the power to review the acts of the National Labor Relations Commission to see if it kept within its
jurisdiction in deciding cases and alsoas a form of check and balance. 118 This court then clarified that judicial review of
National Labor Relations Commission decisions shall be by way of a petition for certiorari under Rule 65. Citing the
doctrine of hierarchy of courts, it further ruled that such petitions shall be filed before the Court of Appeals. From the
Court of Appeals, an aggrieved party may file a petition for review on certiorari under Rule 45.

A petition for certiorari under Rule 65 is an original action where the issue is limited to grave abuse of discretion. As
an original action, it cannot be considered as a continuation of the proceedings of the labor tribunals.

On the other hand, a petition for review on certiorari under Rule 45 is a mode of appeal where the issue is limited to
questions of law. In labor cases, a Rule 45 petition is limited toreviewing whether the Court of Appeals correctly
determined the presence or absence of grave abuse of discretion and deciding other jurisdictional errors of the National
Labor Relations Commission.119

In Odango v. National Labor Relations Commission,120 this court explained that a petition for certiorari is an
extraordinary remedy that is "available only and restrictively in truly exceptional cases" 121 and that its sole office "is
the correction of errors of jurisdiction including commission of grave abuse of discretion amounting to lack or excess
of jurisdiction."122 A petition for certiorari does not include a review of findings of fact since the findings of the
National Labor Relations Commission are accorded finality.123 In cases where the aggrieved party assails the National
Labor Relations Commissions findings, he or she must be able to show that the Commission "acted capriciously and
whimsically or in total disregard of evidence material to the controversy."124

When a decision of the Court of Appeals under a Rule 65 petition is brought to this court by way of a petition for
review under Rule 45, only questions of law may be decided upon. As held in Meralco Industrial v. National Labor
Relations Commission:125

This Court is not a trier of facts. Well-settled is the rule that the jurisdiction of this Court ina petition for review on
certiorari under Rule 45 of the Revised Rules of Court is limited to reviewing only errors of law, not of fact, unless the
factual findings complained of are completely devoid of support from the evidence on record, or the assailed judgment
is based on a gross misapprehension of facts. Besides, factual findings of quasi-judicial agencies like the NLRC, when
affirmed by the Court of Appeals, are conclusive upon the parties and binding on this Court.126

Career Philippines v. Serna,127 citing Montoya v. Transmed,128 is instructive on the parameters of judicial review under
Rule 45:

As a rule, only questions of law may be raised in a Rule 45 petition. In one case, we discussed the particular parameters
of a Rule 45 appeal from the CAs Rule 65 decision on a labor case, as follows:

In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast with the review for
jurisdictional error that we undertake under Rule 65. Furthermore, Rule 45 limits us to the review of questions of law
raised against the assailed CA decision. In ruling for legal correctness, we have to view the CA decision in the same
context that the petition for certiorari it ruled upon was presented to it; we have to examine the CA decision from the
prism of whether it correctly determined the presence or absence of grave abuse of discretion in the NLRC decision
before it, not on the basis of whether the NLRC decision on the merits of the case was correct. In other words, we have
to be keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision challenged
before it.129 (Emphasis in the original)

Justice Brions dissenting opinion in Abott Laboratories, PhiIippines v. Aicaraz130 discussed that in petitions for review
under Rule 45, "the Court simply determines whether the legal correctness of the CAs finding that the NLRC ruling . .
. had basis in fact and in Iaw."131 In this kind of petition, the proper question to be raised is, "Did the CA correctly
determine whether the NLRC committed grave abuse of discretion in ruling on the case?" 132

Justice Brions dissenting opinion also laid down the following guidelines:

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

III Determination of employment status; burden of proof

In this case, there is no question thatArlene rendered services to Fuji. However, Fuji alleges that Arlene was an
independent contractor, while Arlene alleges that she was a regular employee. To resolve this issue, we ascertain
whether an employer-employee relationship existed between Fuji and Arlene.

This court has often used the four-fold test to determine the existence of an employer-employee relationship. Under the
four-fold test, the "control test" is the most important.134 As to how the elements in the four-fold test are proven, this
court has discussed that:

[t]here is no hard and fast rule designed to establish the aforesaid elements. Any competent and relevant evidence to
prove the relationship may be admitted. Identification cards, cash vouchers, social security registration, appointment
letters or employment contracts, payrolls, organization charts, and personnel lists, serve as evidence of employee
status.135

If the facts of this case vis--vis the four-fold test show that an employer-employee relationship existed, we then
determine the status of Arlenes employment, i.e., whether she was a regular employee. Relative to this, we shall
analyze Arlenes fixed-term contract and determine whether it supports her argument that she was a regular employee,
or the argument of Fuji that she was an independent contractor. We shall scrutinize whether the nature of Arlenes
work was necessary and desirable to Fujis business or whether Fuji only needed the output of her work. If the
circumstances show that Arlenes work was necessary and desirable to Fuji, then she is presumed to be a regular
employee. The burden of proving that she was an independent contractor lies with Fuji.

In labor cases, the quantum of proof required is substantial evidence.136 "Substantial evidence" has been defined as
"such amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion."137

If Arlene was a regular employee, we then determine whether she was illegally dismissed. In complaints for illegal
dismissal, the burden of proof is on the employee to prove the fact of dismissal.138 Once the employee establishes the
fact of dismissal, supported by substantial evidence, the burden of proof shifts tothe employer to show that there was a
just or authorized cause for the dismissal and that due process was observed.139

IV Whether the Court of Appeals correctly affirmed the National Labor


Relations Commissions finding that Arlene was a regular employee

Fuji alleges that Arlene was anindependent contractor, citing Sonza v. ABS-CBN and relying on the following facts:
(1) she was hired because of her skills; (2) her salary was US$1,900.00, which is higher than the normal rate; (3) she
had the power to bargain with her employer; and (4) her contract was for a fixed term. According to Fuji, the Court of
Appeals erred when it ruled that Arlene was forcedto sign the non-renewal agreement, considering that she sent an
email with another version of the non-renewal agreement.140 Further, she is not entitled tomoral damages and attorneys
fees because she acted in bad faith when she filed a labor complaint against Fuji after receiving US$18,050.00
representing her salary and other benefits.141 Arlene argues that she was a regular employee because Fuji had control
and supervision over her work. The news events that she covered were all based on the instructions of Fuji. 142 She
maintains that the successive renewal of her employment contracts for four (4) years indicates that her work was
necessary and desirable.143 In addition, Fujis payment of separation pay equivalent to one (1) months pay per year of
service indicates that she was a regular employee.144 To further support her argument that she was not an independent
contractor, she states that Fuji owns the laptop computer and mini-camera that she used for work.145 Arlene also argues
that Sonza is not applicable because she was a plain reporter for Fuji, unlike Jay Sonza who was a news anchor, talk
show host, and who enjoyed a celebrity status.146 On her illness, Arlene points outthat it was not a ground for her
dismissal because her attending physician certified that she was fit to work.147

Arlene admits that she signed the non-renewal agreement with quitclaim, not because she agreed to itsterms, but
because she was not in a position to reject the non-renewal agreement. Further, she badly needed the salary withheld
for her sustenance and medication.148 She posits that her acceptance of separation pay does not bar filing of a complaint
for illegal dismissal.149

Article 280 of the Labor Code provides that:

Art. 280. Regular and casual employment.The provisions of written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has
been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the employee or where the work or services
to be performed is seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph; Provided, That, any
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which heis employed and his employment shall continue
while such activity exist.

This provision classifies employees into regular, project, seasonal, and casual. It further classifies regular employees
into two kinds: (1) those "engaged to perform activities which are usually necessary or desirable in the usual business
or trade of the employer"; and (2) casual employees who have "rendered at least one year of service, whether such
service is continuous or broken."

Another classification of employees, i.e., employees with fixed-term contracts, was recognized in Brent School, Inc. v.
Zamora150 where this court discussed that:

Logically, the decisive determinant in the term employment should not be the activities that the employee is called
upon to perform, but the day certain agreed upon by the parties for the commencement and termination of their
employment relationship, a day certainbeing understood to be "that which must necessarily come, although it may not
be known when."151 (Emphasis in the original)

This court further discussed that there are employment contracts where "a fixed term is an essential and natural
appurtenance"152 such as overseas employment contracts and officers in educational institutions.153

Distinctions among fixed-term employees, independent contractors, and regular employees

GMA Network, Inc. v. Pabriga154 expounded the doctrine on fixed term contracts laid down in Brentin the following
manner:

Cognizant of the possibility of abuse in the utilization of fixed term employment contracts, we emphasized in Brentthat
where from the circumstances it is apparent that the periods have been imposed to preclude acquisition of tenurial
security by the employee, they should be struck down as contrary to public policy or morals. We thus laid down
indications or criteria under which "term employment" cannot be said to be in circumvention of the law on security of
tenure, namely:

1) The fixed period of employment was knowingly and voluntarily agreed upon by the parties without any force,
duress, or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his
consent; or

2) It satisfactorily appears that the employer and the employee dealt with each other on more or less equal terms with
no moral dominance exercised by the former or the latter.

These indications, which must be read together, make the Brent doctrine applicable only in a few special cases wherein
the employer and employee are on more or less in equal footing in entering into the contract. The reason for this is
evident: whena prospective employee, on account of special skills or market forces, is in a position to make demands
upon the prospective employer, such prospective employee needs less protection than the ordinary worker. Lesser
limitations on the parties freedom of contract are thus required for the protection of the employee. 155(Citations
omitted)

For as long as the guidelines laid down in Brentare satisfied, this court will recognize the validity of the fixed-term
contract.

In Labayog v. M.Y. San Biscuits, Inc.,156 this court upheld the fixedterm employment of petitioners because from the
time they were hired, they were informed that their engagement was for a specific period. This court stated that:

[s]imply put, petitioners were notregular employees. While their employment as mixers, packers and machine operators
was necessary and desirable in the usual business ofrespondent company, they were employed temporarily only, during
periods when there was heightened demand for production. Consequently, there could have been no illegal dismissal
when their services were terminated on expiration of their contracts. There was even no need for notice of termination
because they knew exactly when their contracts would end. Contracts of employment for a fixed period terminate on
their own at the end of such period.

Contracts of employment for a fixed period are not unlawful. What is objectionable is the practice of some scrupulous
employers who try to circumvent the law protecting workers from the capricious termination of
employment.157 (Citation omitted)

Caparoso v. Court of Appeals158 upheld the validity of the fixed-term contract of employment. Caparoso and Quindipan
were hired as delivery men for three (3) months. At the end of the third month, they were hired on a monthly basis. In
total, they were hired for five (5) months. They filed a complaint for illegal dismissal. 159 This court ruled that there was
no evidence indicating that they were pressured into signing the fixed-term contracts. There was likewise no proof that
their employer was engaged in hiring workers for five (5) months onlyto prevent regularization. In the absence of these
facts, the fixed-term contracts were upheld as valid.160 On the other hand, an independent contractor is defined as:
. . . one who carries on a distinct and independent business and undertakes to perform the job, work, or service on its
own account and under ones own responsibility according to ones own manner and method, free from the control and
direction of the principal in all matters connected with the performance of the work except as to the results thereof.161

In view of the "distinct and independent business" of independent contractors, no employer-employee relationship
exists between independent contractors and their principals. Independent contractors are recognized under Article 106
of the Labor Code:

Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the
performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be
paid in accordance with the provisions of this Code.

....

The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting-out of
labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make
appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these
types of contracting and determine who among the parties involved shall be considered the employer for purposes of
this Code, to prevent any violation or circumvention of any provision of this Code.

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital
or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited
and placed by such person are performing activities which are directly related to the principal business of such
employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall
be responsible to the workers in the same manner and extent as if the latterwere directly employed by him.

In Department Order No. 18-A, Seriesof 2011, of the Department of Labor and Employment, a contractor is defined as
having:

Section 3. . . .

....

(c) . . . an arrangement whereby a principal agrees to put out or farm out with a contractor the performance or
completion of a specific job, work or service within a definite or predetermined period, regardless of whether such job,
work or service is to be performed or completed within oroutside the premises of the principal.

This department order also states that there is a trilateral relationship in legitimate job contracting and subcontracting
arrangements among the principal, contractor, and employees of the contractor. There is no employer-employee
relationship between the contractor and principal who engages the contractors services, but there is an employer-
employee relationship between the contractor and workers hired to accomplish the work for the principal. 162

Jurisprudence has recognized another kind of independent contractor: individuals with unique skills and talents that set
them apart from ordinary employees. There is no trilateral relationship in this case because the independent contractor
himself or herself performs the work for the principal. In other words, the relationship is bilateral.

In Orozco v. Court of Appeals,163 Wilhelmina Orozco was a columnist for the Philippine Daily Inquirer. This court
ruled that she was an independent contractor because of her "talent, skill, experience, and her unique viewpoint as a
feminist advocate."164 In addition, the Philippine Daily Inquirer did not have the power of control over Orozco, and she
worked at her own pleasure.165

Semblante v. Court of Appeals166 involved a masiador167 and a sentenciador.168 This court ruled that "petitioners
performed their functions as masiadorand sentenciador free from the direction and control of respondents" 169 and that
the masiador and sentenciador "relied mainly on their expertise that is characteristic of the cockfight
gambling."170 Hence, no employer-employee relationship existed.

Bernarte v. Philippine Basketball Association171 involved a basketball referee. This court ruled that "a referee is an
independent contractor, whose special skills and independent judgment are required specifically for such position and
cannot possibly be controlled by the hiring party."172

In these cases, the workers were found to be independent contractors because of their unique skills and talents and the
lack of control over the means and methods in the performance of their work.

In other words, there are different kinds of independent contractors: those engaged in legitimate job contracting and
those who have unique skills and talents that set them apart from ordinary employees.

Since no employer-employee relationship exists between independent contractors and their principals, their contracts
are governed by the Civil Code provisions on contracts and other applicable laws.173
A contract is defined as "a meeting of minds between two persons whereby one binds himself, with respect to the other,
to give something or to render some service."174 Parties are free to stipulate on terms and conditions in contracts as long
as these "are not contrary to law, morals, good customs, public order, or public policy."175 This presupposes that the
parties to a contract are on equal footing. Theycan bargain on terms and conditions until they are able to reach an
agreement.

On the other hand, contracts of employment are different and have a higher level of regulation because they are
impressed with public interest. Article XIII, Section 3 of the 1987 Constitution provides full protection to labor:

ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS

....

LABOR

Section 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote
full employment and equality of employment opportunities for all.

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful
concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure,
humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes
affecting their rights and benefits as may be provided by law.

The State shall promote the principle of shared responsibility between workers and employers and the preferential use
of voluntary modes in settling disputes, including conciliation, and shall enforce their mutual compliance therewith to
foster industrial peace.

The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in
the fruits of production and the right of enterprises to reasonable returns on investments, and to expansion and growth.

Apart from the constitutional guarantee of protection to labor, Article 1700 of the Civil Code states:

ART. 1700. The relations between capital and labor are not merely contractual. They are so impressed with public
interest that labor contracts must yield to the common good. Therefore, such contracts are subject to the special laws on
labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and
similar subjects.

In contracts of employment, the employer and the employee are not on equal footing. Thus, it is subject to regulatory
review by the labor tribunals and courts of law. The law serves to equalize the unequal. The labor force is a special
class that is constitutionally protected because of the inequality between capital and labor. 176 This presupposes that the
labor force is weak. However, the level of protection to labor should vary from case to case; otherwise, the state might
appear to be too paternalistic in affording protection to labor. As stated in GMA Network, Inc. v. Pabriga, the ruling in
Brent applies in cases where it appears that the employer and employee are on equal footing. 177 This recognizes the fact
that not all workers are weak. To reiterate the discussion in GMA Network v. Pabriga:

The reason for this is evident: when a prospective employee, on account of special skills or market forces, is in a
position to make demands upon the prospective employer, such prospective employee needs less protection than the
ordinary worker. Lesser limitations on the parties freedom of contract are thus required for the protection of the
employee.178

The level of protection to labor mustbe determined on the basis of the nature of the work, qualifications of the
employee, and other relevant circumstances.

For example, a prospective employee with a bachelors degree cannot be said to be on equal footing witha grocery
bagger with a high school diploma. Employees who qualify for jobs requiring special qualifications such as "[having] a
Masters degree" or "[having] passed the licensure exam" are different from employees who qualify for jobs that
require "[being a] high school graduate; withpleasing personality." In these situations, it is clear that those with special
qualifications can bargain with the employer on equal footing. Thus, the level of protection afforded to these
employees should be different.

Fujis argument that Arlene was an independent contractor under a fixed-term contract is contradictory. Employees
under fixed-term contracts cannot be independent contractors because in fixed-term contracts, an employer-employee
relationship exists. The test in this kind of contract is not the necessity and desirability of the employees activities,
"but the day certain agreed upon by the parties for the commencement and termination of the employment
relationship."179 For regular employees, the necessity and desirability of their work in the usual course of the
employers business are the determining factors. On the other hand, independent contractors do not have employer-
employee relationships with their principals. Hence, before the status of employment can be determined, the existence
of an employer-employee relationship must be established.
The four-fold test180 can be used in determining whether an employeremployee relationship exists. The elements of the
four-fold test are the following: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power of control, which is the most important element.181

The "power of control" was explained by this court in Corporal, Sr. v. National Labor Relations Commission:182

The power to control refers to the existence of the power and not necessarily to the actual exercise thereof, nor is it
essential for the employer to actually supervise the performance of duties of the employee. It is enough that the
employer has the right to wield that power.183 (Citation omitted)

Orozco v. Court of Appeals further elucidated the meaning of "power of control" and stated the following:

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or
fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote
the result, create no employer-employee relationship unlike the second, which address both the result and the means
used to achieve it. . . .184 (Citation omitted)

In Locsin, et al. v. Philippine Long Distance Telephone Company,185 the "power of control" was defined as "[the] right
to control not only the end to be achieved but also the means to be used in reaching such end."186

Here, the Court of Appeals applied Sonza v. ABS-CBN and Dumpit Murillo v. Court of Appeals187 in determining
whether Arlene was an independent contractor or a regular employee.

In deciding Sonza and Dumpit-Murillo, this court used the four-fold test. Both cases involved newscasters and anchors.
However, Sonza was held to be an independent contractor, while Dumpit-Murillo was held to be a regular employee.

Comparison of the Sonza and Dumpit-Murillo cases using the four-fold test

Sonza was engaged by ABS-CBN in view of his "unique skills, talent and celebrity status not possessed by ordinary
employees."188 His work was for radio and television programs.189 On the other hand, Dumpit-Murillo was hired by
ABC as a newscaster and co-anchor.190 Sonzas talent fee amounted to 317,000.00 per month, which this court found
to be a substantial amount that indicatedhe was an independent contractor rather than a regular
employee.191Meanwhile, Dumpit-Murillos monthly salary was 28,000.00, a very low amount compared to what
Sonza received.192

Sonza was unable to prove that ABS-CBN could terminate his services apart from breach of contract. There was no
indication that he could be terminated based on just or authorized causes under the Labor Code. In addition, ABS-CBN
continued to pay his talent fee under their agreement, even though his programs were no longer
broadcasted.193 Dumpit-Murillo was found to have beenillegally dismissed by her employer when they did not renew
her contract on her fourth year with ABC.194

In Sonza, this court ruled that ABS-CBN did not control how Sonza delivered his lines, how he appeared on television,
or how he sounded on radio.195 All that Sonza needed was his talent.196 Further, "ABS-CBN could not terminate or
discipline SONZA even if the means and methods of performance of his work . . . did not meet ABS-CBNs
approval."197 In Dumpit-Murillo, the duties and responsibilities enumerated in her contract was a clear indication that
ABC had control over her work.198

Application of the four-fold test

The Court of Appeals did not err when it relied on the ruling in Dumpit-Murillo and affirmed the ruling of the National
Labor Relations Commission finding that Arlene was a regular employee. Arlene was hired by Fuji as a news producer,
but there was no showing that she was hired because of unique skills that would distinguish her from ordinary
employees. Neither was there any showing that she had a celebrity status. Her monthly salary amounting to
US$1,900.00 appears tobe a substantial sum, especially if compared to her salary whenshe was still connected with
GMA.199 Indeed, wages may indicate whether oneis an independent contractor. Wages may also indicate that an
employee is able to bargain with the employer for better pay. However, wages should not be the conclusive factor in
determining whether one is an employee or an independent contractor.

Fuji had the power to dismiss Arlene, as provided for in paragraph 5 of her professional employment contract. 200 Her
contract also indicated that Fuji had control over her work because she was required to work for eight (8) hours from
Monday to Friday, although on flexible time.201 Sonza was not required to work for eight (8) hours, while Dumpit-
Murillo had to be in ABC to do both on-air and off-air tasks.

On the power to control, Arlene alleged that Fuji gave her instructions on what to report. 202 Even the mode of
transportation in carrying out her functions was controlled by Fuji. Paragraph 6 of her contract states:
6. During the travel to carry out work, if there is change of place or change of place of work, the train, bus, or public
transport shall be used for the trip. If the Employee uses the private car during the work and there is an accident the
Employer shall not be responsible for the damage, which may be caused to the Employee.203

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

Having established that an employer-employee relationship existed between Fuji and Arlene, the next questions for
resolution are the following: Did the Court of Appeals correctly affirm the National Labor Relations Commission that
Arlene had become a regular employee? Was the nature of Arlenes work necessary and desirable for Fujis usual
course of business?

Arlene was a regular employee with a fixed-term contract

The test for determining regular employment is whether there is a reasonable connection between the employees
activities and the usual business of the employer. Article 280 provides that the nature of work must be "necessary or
desirable in the usual business or trade of the employer" as the test for determining regular employment. As stated in
ABS-CBN Broadcasting Corporation v. Nazareno:204

In determining whether an employment should be considered regular or non-regular, the applicable test is the
reasonable connection between the particular activity performed by the employee in relation to the usual business or
trade of the employer. The standard, supplied by the law itself, is whether the work undertaken is necessary or
desirable in the usual business or trade of the employer, a fact that can be assessed by looking into the nature of the
services rendered and its relation to the general scheme under which the business or trade is pursued in the usual
course. It is distinguished from a specific undertaking that is divorced from the normal activities required incarrying on
the particular business or trade.205

However, there may be a situation where an employees work is necessary but is not always desirable inthe usual
course of business of the employer. In this situation, there is no regular employment.

In San Miguel Corporation v. National Labor Relations Commission,206 Francisco de Guzman was hired to repair
furnaces at San Miguel Corporations Manila glass plant. He had a separate contract for every furnace that he repaired.
He filed a complaint for illegal dismissal three (3) years after the end of his last contract. 207 In ruling that de Guzman
did not attain the status of a regular employee, this court explained:

Note that the plant where private respondent was employed for only seven months is engaged in the manufacture of
glass, an integral component of the packaging and manufacturing business of petitioner. The process of manufacturing
glass requires a furnace, which has a limited operating life. Petitioner resorted to hiring project or fixed term employees
in having said furnaces repaired since said activity is not regularly performed. Said furnaces are to be repaired or
overhauled only in case of need and after being used continuously for a varying period of five (5) to ten (10) years. In
1990, one of the furnaces of petitioner required repair and upgrading. This was an undertaking distinct and separate
from petitioner's business of manufacturing glass. For this purpose, petitioner must hire workers to undertake the said
repair and upgrading. . . .

....

Clearly, private respondent was hired for a specific project that was not within the regular business of the corporation.
For petitioner is not engaged in the business of repairing furnaces. Although the activity was necessary to enable
petitioner to continue manufacturing glass, the necessity therefor arose only when a particular furnace reached the end
of its life or operating cycle. Or, as in the second undertaking, when a particular furnace required an emergency repair.
In other words, the undertakings where private respondent was hired primarily as helper/bricklayer have specified
goals and purposes which are fulfilled once the designated work was completed. Moreover, such undertakings were
also identifiably separate and distinct from the usual, ordinary or regular business operations of petitioner, which is
glass manufacturing. These undertakings, the duration and scope of which had been determined and made known to
private respondent at the time of his employment, clearly indicated the nature of his employment as a project
employee.208

Fuji is engaged in the business of broadcasting,209 including news programming.210 It is based in Japan211 and has
overseas offices to cover international news.212

Based on the record, Fujis Manila Bureau Office is a small unit 213 and has a few employees.214 As such, Arlene had to
do all activities related to news gathering. Although Fuji insists that Arlene was a stringer, it alleges that her
designation was "News Talent/Reporter/Producer."215

A news producer "plans and supervises newscast . . . [and] work[s] with reporters in the field planning and gathering
information. . . ."216 Arlenes tasks included "[m]onitoring and [g]etting [n]ews [s]tories, [r]eporting interviewing
subjects in front of a video camera,"217 "the timely submission of news and current events reports pertaining to the
Philippines[,] and traveling [sic] to [Fujis] regional office in Thailand." 218 She also had to report for work in Fujis
office in Manila from Mondays to Fridays, eight (8) hours per day.219 She had no equipment and had to use the
facilities of Fuji to accomplish her tasks.

The Court of Appeals affirmed the finding of the National Labor Relations Commission that the successive renewals of
Arlenes contract indicated the necessity and desirability of her work in the usual course of Fujis business. Because of
this, Arlene had become a regular employee with the right to security of tenure.220 The Court of Appeals ruled that:

Here, Espiritu was engaged by Fuji as a stinger [sic] or news producer for its Manila Bureau. She was hired for the
primary purpose of news gathering and reporting to the television networks headquarters. Espiritu was not contracted
on account of any peculiar ability or special talent and skill that she may possess which the network desires to make
use of. Parenthetically, ifit were true that Espiritu is an independent contractor, as claimed by Fuji, the factthat
everything that she uses to perform her job is owned by the company including the laptop computer and mini camera
discounts the idea of job contracting.221

Moreover, the Court of Appeals explained that Fujis argument that no employer-employee relationship existed in view
of the fixed-term contract does not persuade because fixed-term contracts of employment are strictly
construed.222 Further, the pieces of equipment Arlene used were all owned by Fuji, showing that she was a regular
employee and not an independent contractor.223

The Court of Appeals likewise cited Dumpit-Murillo, which involved fixed-term contracts that were successively
renewed for four (4) years.224 This court held that "[t]his repeated engagement under contract of hire is indicative of the
necessity and desirability of the petitioners work in private respondent ABCs business." 225

With regard to Fujis argument that Arlenes contract was for a fixed term, the Court of Appeals cited Philips
Semiconductors, Inc. v. Fadriquela226 and held that where an employees contract "had been continuously extended or
renewed to the same position, with the same duties and remained in the employ without any interruption," 227 then such
employee is a regular employee. The continuous renewal is a scheme to prevent regularization. On this basis, the Court
of Appeals ruled in favor of Arlene.

As stated in Price, et al. v. Innodata Corp., et al.:228

The employment status of a person is defined and prescribed by law and not by what the parties say it should be.
Equally important to consider is that a contract of employment is impressed with public interest such that labor
contracts must yield to the common good. Thus, provisions of applicable statutes are deemed written into the contract,
and the parties are not at liberty to insulate themselves and their relationships from the impact of labor laws and
regulations by simply contracting with each other.229 (Citations omitted)

Arlenes contract indicating a fixed term did not automatically mean that she could never be a regular employee. This
is precisely what Article 280 seeks to avoid. The ruling in Brent remains as the exception rather than the general rule.

Further, an employee can be a regular employee with a fixed-term contract. The law does not preclude the possibility
that a regular employee may opt to have a fixed-term contract for valid reasons. This was recognized in Brent: For as
long as it was the employee who requested, or bargained, that the contract have a "definite date of termination," or that
the fixed-term contract be freely entered into by the employer and the employee, then the validity of the fixed-term
contract will be upheld.230

V Whether the Court of Appeals correctly affirmed

the National Labor Relations Commissions finding of illegal dismissal

Fuji argues that the Court of Appeals erred when it held that Arlene was illegally dismissed, in view of the non-renewal
contract voluntarily executed by the parties. Fuji also argues that Arlenes contract merely expired; hence, she was not
illegally dismissed.231

Arlene alleges that she had no choice but to sign the non-renewal contract because Fuji withheldher salary and benefits.

With regard to this issue, the Court of Appeals held:

We cannot subscribe to Fujis assertion that Espiritus contract merely expired and that she voluntarily agreed not to
renew the same. Even a cursory perusal of the subject Non-Renewal Contract readily shows that the same was signed
by Espiritu under protest. What is apparent is that the Non-Renewal Contract was crafted merely as a subterfuge to
secure Fujis position that it was Espiritus choice not to renew her contract.232

As a regular employee, Arlene was entitled to security of tenure and could be dismissed only for just or authorized
causes and after the observance of due process.

The right to security of tenureis guaranteed under Article XIII, Section 3 of the 1987 Constitution: ARTICLE XIII.
SOCIAL JUSTICE AND HUMAN RIGHTS
....

LABOR

....

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful
concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure,
humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes
affecting their rights and benefits as may be provided by law.

Article 279 of the Labor Code also provides for the right to security of tenure and states the following:

Art. 279. Security of tenure.In cases of regular employment, the employer shall not terminate the services of an
employee except for a just cause of when authorized by this Title. An employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual reinstatement.

Thus, on the right to security of tenure, no employee shall be dismissed, unless there are just orauthorized causes and
only after compliance with procedural and substantive due process is conducted.

Even probationary employees are entitled to the right to security of tenure. This was explained in Philippine Daily
Inquirer, Inc. v. Magtibay, Jr.:233

Within the limited legal six-month probationary period, probationary employees are still entitled to security of tenure.
It is expressly provided in the afore-quoted Article 281 that a probationary employee may be terminated only on two
grounds: (a) for just cause, or (b) when he fails to qualify as a regular employee in accordance with reasonable
standards made known by the employer to the employee at the time of his engagement.234 (Citation omitted)

The expiration of Arlenes contract does not negate the finding of illegal dismissal by Fuji. The manner by which Fuji
informed Arlene that her contract would no longer be renewed is tantamount to constructive dismissal. To make
matters worse, Arlene was asked to sign a letter of resignation prepared by Fuji.235 The existence of a fixed-term
contract should not mean that there can be no illegal dismissal. Due process must still be observed in the pre-
termination of fixed-term contracts of employment.

In addition, the Court of Appeals and the National Labor Relations Commission found that Arlene was dismissed
because of her health condition. In the non-renewal agreement executed by Fuji and Arlene, it is stated that:

WHEREAS, the SECOND PARTY is undergoing chemotherapy which prevents her from continuing to effectively
perform her functions under the said Contract such as the timely submission of news and current events reports
pertaining to the Philippines and travelling [sic] to the FIRST PARTYs regional office in Thailand. 236 (Emphasis
supplied)

Disease as a ground for termination is recognized under Article 284 of the Labor Code:

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

Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the Labor Code provides:

Sec. 8. Disease as a ground for dismissal. Where the employee suffers from a disease and his continued employment
is prohibited by law or prejudicial to his healthor to the health of his coemployees, the employer shall not terminate his
employment unless there is a certification by a competent public health authority that the disease is of such nature or at
such a stage that it cannot be cured within a period of six (6) months even with proper medical treatment. If the disease
or ailment can be cured within the period, the employer shall not terminate the employee but shall ask the employee to
take a leave. The employer shall reinstate such employee to his former position immediately upon the restoration of his
normal health.

For dismissal under Article 284 to bevalid, two requirements must be complied with: (1) the employees disease cannot
be cured within six (6) months and his "continued employment is prohibited by law or prejudicial to his health as well
as to the health of his co-employees"; and (2) certification issued by a competent public health authority that even with
proper medical treatment, the disease cannot be cured within six (6) months. 237 The burden of proving compliance with
these requisites is on the employer.238 Noncompliance leads to the conclusion that the dismissal was illegal.239
There is no evidence showing that Arlene was accorded due process. After informing her employer of her lung cancer,
she was not given the chance to present medical certificates. Fuji immediately concluded that Arlene could no longer
perform her duties because of chemotherapy. It did not ask her how her condition would affect her work. Neither did it
suggest for her to take a leave, even though she was entitled to sick leaves. Worse, it did not present any certificate
from a competent public health authority. What Fuji did was to inform her thather contract would no longer be
renewed, and when she did not agree, her salary was withheld. Thus, the Court of Appeals correctly upheld the finding
of the National Labor Relations Commission that for failure of Fuji to comply with due process, Arlene was illegally
dismissed.240

VI Whether the Court of Appeals properly modified the National Labor Relations Commissions decision
when it awarded reinstatement, damages, and attorneys fees

The National Labor Relations Commission awarded separation pay in lieu of reinstatement, on the ground that the
filing of the complaint for illegal dismissal may have seriously strained relations between the parties. Backwages were
also awarded, to be computed from date of dismissal until the finality of the National Labor Relations Commissions
decision. However, only backwages were included in the dispositive portion because the National Labor Relations
Commission recognized that Arlene had received separation pay in the amount of US$7,600.00. The Court of Appeals
affirmed the National Labor Relations Commissions decision but modified it by awarding moral and exemplary
damages and attorneys fees, and all other benefits Arlene was entitled to under her contract with Fuji. The Court of
Appeals also ordered reinstatement, reasoning that the grounds when separation pay was awarded in lieu of
reinstatement were not proven.241

Article 279 of the Labor Code provides:

Art. 279. Security of tenure. In cases of regular employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual reinstatement. (Emphasis supplied)

The Court of Appeals modification of the National Labor Relations Commissions decision was proper because the
law itself provides that illegally dismissed employees are entitled to reinstatement, backwages including allowances,
and all other benefits.

On reinstatement, the National Labor Relations Commission ordered payment of separation pay in lieu of
reinstatement, reasoning "that the filing of the instant suit may have seriously abraded the relationship of the parties so
as to render reinstatement impractical."242 The Court of Appeals reversed this and ordered reinstatement on the ground
that separation pay in lieu of reinstatement is allowed only in several instances such as (1) when the employer has
ceased operations; (2) when the employees position is no longer available; (3) strained relations; and (4) a substantial
period has lapsed from date of filing to date of finality.243

On this matter, Quijano v. Mercury Drug Corp.244 is instructive:

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

To protect labors security of tenure, we emphasize that the doctrine of "strained relations" should be strictly applied so
as not to deprive an illegally dismissed employee of his right to reinstatement. Every labor dispute almost always
results in "strained relations" and the phrase cannot be given an overarching interpretation, otherwise, an unjustly
dismissed employee can never be reinstated.245 (Citations omitted)

The Court of Appeals reasoned that strained relations are a question of fact that must be supported by evidence. 246No
evidence was presented by Fuji to prove that reinstatement was no longer feasible. Fuji did not allege that it ceased
operations or that Arlenes position was no longer available. Nothing in the records shows that Arlenes reinstatement
would cause an atmosphere of antagonism in the workplace. Arlene filed her complaint in 2009. Five (5) years are not
yet a substantial period247 to bar reinstatement.

On the award of damages, Fuji argues that Arlene is notentitled to the award of damages and attorneys fees because
the non-renewal agreement contained a quitclaim, which Arlene signed. Quitclaims in labor cases do not bar illegally
dismissed employees from filing labor complaints and money claim. As explained by Arlene, she signed the non-
renewal agreement out of necessity. In Land and Housing Development Corporation v. Esquillo, 248 this court
explained: We have heretofore explained that the reason why quitclaims are commonly frowned upon as contrary to
public policy, and why they are held to be ineffective to bar claims for the full measure of the workers legal rights, is
the fact that the employer and the employee obviously do not stand on the same footing. The employer drove the
employee to the wall. The latter must have to get holdof money. Because, out of a job, he had to face the harsh
necessities of life. He thus found himself in no position to resist money proffered. His, then, is a case of adherence, not
of choice.249

With regard to the Court of Appeals award of moral and exemplary damages and attorneys fees, this court has
recognized in several cases that moral damages are awarded "when the dismissal is attended by bad faith or fraud or
constitutes an act oppressive to labor, or is done in a manner contrary to good morals, good customs or public
policy."250 On the other hand, exemplary damages may be awarded when the dismissal was effected "in a wanton,
oppressive or malevolent manner."251

The Court of Appeals and National Labor Relations Commission found that after Arlene had informed Fuji of her
cancer, she was informed that there would be problems in renewing her contract on account of her condition. This
information caused Arlene mental anguish, serious anxiety, and wounded feelings that can be gleaned from the tenor of
her email dated March 11, 2009. A portion of her email reads:

I WAS SO SURPRISED . . . that at a time when I am at my lowest, being sick and very weak, you suddenly came to
deliver to me the NEWS that you will no longer renew my contract.1awp++i1 I knew this will come but I never
thought that you will be so heartless and insensitive to deliver that news just a month after I informed you that I am
sick. I was asking for patience and understanding and your response was not to RENEW my contract.252

Apart from Arlenes illegal dismissal, the manner of her dismissal was effected in an oppressive approach withher
salary and other benefits being withheld until May 5, 2009, when she had no other choice but to sign the non-renewal
contract. Thus, there was legal basis for the Court of Appeals to modify the National Labor Relations Commissions
decision.

However, Arlene receivedher salary for May 2009.253 Considering that the date of her illegal dismissal was May 5,
2009,254 this amount may be subtracted from the total monetary award. With regard to the award of attorneys fees,
Article 111 of the Labor Code states that "[i]n cases of unlawful withholding of wages, the culpable party may be
assessed attorneys fees equivalent to ten percent of the amount of wages recovered." Likewise, this court has
recognized that "in actions for recovery of wages or where an employee was forced to litigate and, thus, incur expenses
to protect his rights and interest, the award of attorneys fees is legallyand morally justifiable." 255 Due to her illegal
dismissal, Arlene was forced to litigate.

In the dispositive portion of its decision, the Court of Appeals awarded legal interest at the rate of 12% per
annum.256 In view of this courts ruling in Nacar v. Gallery Frames,257 the legal interest shall be reducd to a rate of 6%
per annum from July 1, 2013 until full satisfaction.

WHEREFORE, the petition is DENIED. The assailed Court of Appeals decision dated June 25, 2012 is AFFIRMED
with the modification that backwages shall be computed from June 2009. Legal interest shall be computed at the rate of
6% per annum of the total monetary award from date of finality of this decision until full satisfaction.

SO ORDERED.
G.R. No. 155207 August 13, 2008
WILHELMINA S. OROZCO, petitioner, vs.
THE FIFTH DIVISION OF THE HONORABLE COURT OF APPEALS, PHILIPPINE DAILY INQUIRER, and
LETICIA JIMENEZ MAGSANOC, respondents.

The case before this Court raises a novel question never before decided in our jurisdiction whether a newspaper
columnist is an employee of the newspaper which publishes the column.

In this Petition for Review under Rule 45 of the Revised Rules on Civil Procedure, petitioner Wilhelmina S. Orozco
assails the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 50970 dated June 11, 2002 and its
Resolution2 dated September 11, 2002 denying her Motion for Reconsideration. The CA reversed and set aside the
Decision3 of the National Labor Relations Commission (NLRC), which in turn had affirmed the Decision 4 of the Labor
Arbiter finding that Orozco was an employee of private respondent Philippine Daily Inquirer (PDI) and was illegally
dismissed as columnist of said newspaper.

In March 1990, PDI engaged the services of petitioner to write a weekly column for its Lifestyle section. She
religiously submitted her articles every week, except for a six-month stint in New York City when she, nonetheless,
sent several articles through mail. She received compensation of P250.00 later increased to P300.00 for every
column published.5

On November 7, 1992, petitioners column appeared in the PDI for the last time. Petitioner claims that her then editor,
Ms. Lita T. Logarta,6 told her that respondent Leticia Jimenez Magsanoc, PDI Editor in Chief, wanted to stop
publishing her column for no reason at all and advised petitioner to talk to Magsanoc herself. Petitioner narrates that
when she talked to Magsanoc, the latter informed her that it was PDI Chairperson Eugenia Apostol who had asked to
stop publication of her column, but that in a telephone conversation with Apostol, the latter said that Magsanoc
informed her (Apostol) that the Lifestyle section already had many columnists.7

On the other hand, PDI claims that in June 1991, Magsanoc met with the Lifestyle section editor to discuss how to
improve said section. They agreed to cut down the number of columnists by keeping only those whose columns were
well-written, with regular feedback and following. In their judgment, petitioners column failed to improve, continued
to be superficially and poorly written, and failed to meet the high standards of the newspaper. Hence, they decided to
terminate petitioners column.8

Aggrieved by the newspapers action, petitioner filed a complaint for illegal dismissal, backwages, moral and
exemplary damages, and other money claims before the NLRC.

On October 29, 1993, Labor Arbiter Arthur Amansec rendered a Decision in favor of petitioner, the dispositive
portion of which reads:

WHEREFORE, judgment is hereby rendered, finding complainant to be an employee of respondent company;


ordering respondent company to reinstate her to her former or equivalent position, with backwages.

Respondent company is also ordered to pay her 13th month pay and service incentive leave pay.

Other claims are hereby dismissed for lack of merit.

SO ORDERED.9

The Labor Arbiter found that:

[R]espondent company exercised full and complete control over the means and method by which complainants
work that of a regular columnist had to be accomplished. This control might not be found in an instruction,
verbal or oral, given to complainant defining the means and method she should write her column. Rather, this
control is manifested and certained (sic) in respondents admitted prerogative to reject any article submitted by
complainant for publication.

By virtue of this power, complainant was helplessly constrained to adopt her subjects and style of writing to suit the
editorial taste of her editor. Otherwise, off to the trash can went her articles.

Moreover, this control is already manifested in column title, "Feminist Reflection" allotted complainant. Under this
title, complainants writing was controlled and limited to a womans perspective on matters of feminine interests.
That respondent had no control over the subject matter written by complainant is strongly belied by this
observation. Even the length of complainants articles were set by respondents.

Inevitably, respondents would have no control over when or where complainant wrote her articles as she was a
columnist who could produce an article in thirty (3) (sic) months or three (3) days, depending on her mood or the
amount of research required for an article but her actions were controlled by her obligation to produce an article a
week. If complainant did not have to report for work eight (8) hours a day, six (6) days a week, it is because her task
was mainly mental. Lastly, the fact that her articles were (sic) published weekly for three (3) years show that she
was respondents regular employee, not a once-in-a-blue-moon contributor who was not under any pressure or
obligation to produce regular articles and who wrote at his own whim and leisure.10

PDI appealed the Decision to the NLRC. In a Decision dated August 23, 1994, the NLRC Second Division dismissed
the appeal thereby affirming the Labor Arbiters Decision. The NLRC initially noted that PDI failed to perfect its
appeal, under Article 223 of the Labor Code, due to non-filing of a cash or surety bond. The NLRC said that the reason
proffered by PDI for not filing the bond that it was difficult or impossible to determine the amount of the bond since
the Labor Arbiter did not specify the amount of the judgment award was not persuasive. It said that all PDI had to do
was compute based on the amount it was paying petitioner, counting the number of weeks from November 7, 1992 up
to promulgation of the Labor Arbiters decision.11

The NLRC also resolved the appeal on its merits. It found no error in the Labor Arbiters findings of fact and law. It
sustained the Labor Arbiters reasoning that respondent PDI exercised control over petitioners work.

PDI then filed a Petition for Review12 before this Court seeking the reversal of the NLRC Decision. However, in a
Resolution13 dated December 2, 1998, this Court referred the case to the Court of Appeals, pursuant to our ruling in St.
Martin Funeral Homes v. National Labor Relations Commission.14

The CA rendered its assailed Decision on June 11, 2002. It set aside the NLRC Decision and dismissed petitioners Complaint. It
held that the NLRC misappreciated the facts and rendered a ruling wanting in substantial evidence. The CA said:

The Court does not agree with public respondent NLRCs conclusion. First, private respondent admitted that she
was and [had] never been considered by petitioner PDI as its employee. Second, it is not disputed that private
respondent had no employment contract with petitioner PDI. In fact, her engagement to contribute articles for
publication was based on a verbal agreement between her and the petitioners Lifestyle Section Editor. Moreover, it
was evident that private respondent was not required to report to the office eight (8) hours a day. Further, it is not
disputed that she stayed in New York for six (6) months without petitioners permission as to her leave of absence
nor was she given any disciplinary action for the same. These undisputed facts negate private respondents claim
that she is an employee of petitioner.

Moreover, with regards (sic) to the control test, the public respondent NLRCs ruling that the guidelines given by
petitioner PDI for private respondent to follow, e.g. in terms of space allocation and length of article, is not the form
of control envisioned by the guidelines set by the Supreme Court. The length of the article is obviously limited so
that all the articles to be featured in the paper can be accommodated. As to the topic of the article to be published, it
is but logical that private respondent should not write morbid topics such as death because she is contributing to the
lifestyle section. Other than said given limitations, if the same could be considered limitations, the topics of the
articles submitted by private respondent were all her choices. Thus, the petitioner PDI in deciding to publish private
respondents articles only controls the result of the work and not the means by which said articles were written.

As such, the above facts failed to measure up to the control test necessary for an employer-employee relationship to exist.15

Petitioners Motion for Reconsideration was denied in a Resolution dated September 11, 2002. She then filed the
present Petition for Review.

In a Resolution dated April 29, 2005, the Court, without giving due course to the petition, ordered the Labor Arbiter to
clarify the amount of the award due petitioner and, thereafter, ordered PDI to post the requisite bond. Upon compliance
therewith, the petition would be given due course. Labor Arbiter Amansec clarified that the award under the Decision
amounted to P15,350.00. Thus, PDI posted the requisite bond on January 25, 2007.16

We shall initially dispose of the procedural issue raised in the Petition.

Petitioner argues that the CA erred in not dismissing outright PDIs Petition for Certiorari for PDIs failure to post a
cash or surety bond in violation of Article 223 of the Labor Code.

This issue was settled by this Court in its Resolution dated April 29, 2005.17 There, the Court held:

But while the posting of a cash or surety bond is jurisdictional and is a condition sine qua non to the perfection
of an appeal, there is a plethora of jurisprudence recognizing exceptional instances wherein the Court relaxed
the bond requirement as a condition for posting the appeal.

xxxx

In the case of Taberrah v. NLRC, the Court made note of the fact that the assailed decision of the Labor Arbiter
concerned did not contain a computation of the monetary award due the employees, a circumstance which is
likewise present in this case. In said case, the Court stated,

As a rule, compliance with the requirements for the perfection of an appeal within the reglamentary
(sic) period is mandatory and jurisdictional. However, in National Federation of Labor Unions v.
Ladrido as well as in several other cases, this Court relaxed the requirement of the posting of an appeal
bond within the reglementary period as a condition for perfecting the appeal. This is in line with the
principle that substantial justice is better served by allowing the appeal to be resolved on the merits
rather than dismissing it based on a technicality.

The judgment of the Labor Arbiter in this case merely stated that petitioner was entitled to backwages, 13th month
pay and service incentive leave pay without however including a computation of the alleged amounts.

xxxx

In the case of NFLU v. Ladrido III, this Court postulated that "private respondents cannot be expected to post such
appeal bond equivalent to the amount of the monetary award when the amount thereof was not included in the
decision of the labor arbiter." The computation of the amount awarded to petitioner not having been clearly stated
in the decision of the labor arbiter, private respondents had no basis for determining the amount of the bond to be
posted.

Thus, while the requirements for perfecting an appeal must be strictly followed as they are considered
indispensable interdictions against needless delays and for orderly discharge of judicial business, the law does
admit of exceptions when warranted by the circumstances. Technicality should not be allowed to stand in the way
of equitably and completely resolving the rights and obligations of the parties. But while this Court may relax the
observance of reglementary periods and technical rules to achieve substantial justice, it is not prepared to give due
course to this petition and make a pronouncement on the weighty issue obtaining in this case until the law has
been duly complied with and the requisite appeal bond duly paid by private respondents.18

Records show that PDI has complied with the Courts directive for the posting of the bond;19 thus, that issue has been
laid to rest.

We now proceed to rule on the merits of this case.

The main issue we must resolve is whether petitioner is an employee of PDI, and if the answer be in the affirmative,
whether she was illegally dismissed.

We rule for the respondents.

The existence of an employer-employee relationship is essentially a question of fact.20 Factual findings of quasi-
judicial agencies like the NLRC are generally accorded respect and finality if supported by substantial evidence.21

Considering, however, that the CAs findings are in direct conflict with those of the Labor Arbiter and NLRC, this
Court must now make its own examination and evaluation of the facts of this case.

It is true that petitioner herself admitted that she "was not, and [had] never been considered respondents employee
because the terms of works were arbitrarily decided upon by the respondent." 22 However, the employment status of a
person is defined and prescribed by law and not by what the parties say it should be.23

This Court has constantly adhered to the "four-fold test" to determine whether there exists an employer-employee
relationship between parties.24 The four elements of an employment relationship are: (a) the selection and engagement
of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control the
employees conduct.25

Of these four elements, it is the power of control which is the most crucial 26 and most determinative factor,27 so
important, in fact, that the other elements may even be disregarded.28 As this Court has previously held:

the significant factor in determining the relationship of the parties is the presence or absence of supervisory
authority to control the method and the details of performance of the service being rendered, and the degree to
which the principal may intervene to exercise such control.29

In other words, the test is whether the employer controls or has reserved the right to control the employee, not only as
to the work done, but also as to the means and methods by which the same is accomplished.30

Petitioner argues that several factors exist to prove that respondents exercised control over her and her work, namely:

a. As to the Contents of her Column The PETITIONER had to insure that the contents of her column hewed
closely to the objectives of its Lifestyle Section and the over-all principles that the newspaper projects itself to
stand for. As admitted, she wanted to write about death in relation to All Souls Day but was advised not to.

b. As to Time Control The PETITIONER, as a columnist, had to observe the deadlines of the newspaper for her
articles to be published. These deadlines were usually that time period when the Section Editor has to "close the
pages" of the Lifestyle Section where the column in located. "To close the pages" means to prepare them for
printing and publication.
As a columnist, the PETITIONERs writings had a definite day on which it was going to appear. So she submitted
her articles two days before the designated day on which the column would come out.

This is the usual routine of newspaper work. Deadlines are set to fulfill the newspapers obligations to the readers
with regard to timeliness and freshness of ideas.

c. As to Control of Space The PETITIONER was told to submit only two or three pages of article for the
column, (sic) "Feminist Reflections" per week. To go beyond that, the Lifestyle editor would already chop off the
article and publish the rest for the next week. This shows that PRIVATE RESPONDENTS had control over the
space that the PETITIONER was assigned to fill.

d. As to Discipline Over time, the newspaper readers eyes are trained or habituated to look for and read the works of
their favorite regular writers and columnists. They are conditioned, based on their daily purchase of the newspaper, to
look for specific spaces in the newspapers for their favorite write-ups/or opinions on matters relevant and significant
issues aside from not being late or amiss in the responsibility of timely submission of their articles.

The PETITIONER was disciplined to submit her articles on highly relevant and significant issues on time by the
PRIVATE RESPONDENTS who have a say on whether the topics belong to those considered as highly relevant
and significant, through the Lifestyle Section Editor. The PETITIONER had to discuss the topics first and submit
the articles two days before publication date to keep her column in the newspaper space regularly as expected or
without miss by its readers.31

Given this discussion by petitioner, we then ask the question: Is this the form of control that our labor laws
contemplate such as to establish an employer-employee relationship between petitioner and respondent PDI?

It is not.

Petitioner has misconstrued the "control test," as did the Labor Arbiter and the NLRC.

Not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former. Rules
which serve as general guidelines towards the achievement of the mutually desired result are not indicative of the
power of control.32 Thus, this Court has explained:

It should, however, be obvious that not every form of control that the hiring party reserves to himself over the
conduct of the party hired in relation to the services rendered may be accorded the effect of establishing an
employer-employee relationship between them in the legal or technical sense of the term. A line must be drawn
somewhere, if the recognized distinction between an employee and an individual contractor is not to vanish
altogether. Realistically, it would be a rare contract of service that gives untrammelled freedom to the party hired
and eschews any intervention whatsoever in his performance of the engagement.

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in attaining it, and those that control
or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee relationship unlike the second, which address both the result and
the means used to achieve it. x x x.33

The main determinant therefore is whether the rules set by the employer are meant to control not just the results of the
work but also the means and method to be used by the hired party in order to achieve such results. Thus, in this case,
we are to examine the factors enumerated by petitioner to see if these are merely guidelines or if they indeed fulfill the
requirements of the control test.

Petitioner believes that respondents acts are meant to control how she executes her work. We do not agree. A careful
examination reveals that the factors enumerated by the petitioner are inherent conditions in running a newspaper. In
other words, the so-called control as to time, space, and discipline are dictated by the very nature of the newspaper
business itself.

We agree with the observations of the Office of the Solicitor General that:

The Inquirer is the publisher of a newspaper of general circulation which is widely read throughout the
country. As such, public interest dictates that every article appearing in the newspaper should subscribe to the
standards set by the Inquirer, with its thousands of readers in mind. It is not, therefore, unusual for the Inquirer
to control what would be published in the newspaper. What is important is the fact that such control pertains
only to the end result, i.e., the submitted articles. The Inquirer has no control over [petitioner] as to the means
or method used by her in the preparation of her articles. The articles are done by [petitioner] herself without
any intervention from the Inquirer.34

Petitioner has not shown that PDI, acting through its editors, dictated how she was to write or produce her articles each
week. Aside from the constraints presented by the space allocation of her column, there were no restraints on her
creativity; petitioner was free to write her column in the manner and style she was accustomed to and to use whatever
research method she deemed suitable for her purpose. The apparent limitation that she had to write only on subjects
that befitted the Lifestyle section did not translate to control, but was simply a logical consequence of the fact that her
column appeared in that section and therefore had to cater to the preference of the readers of that section.

The perceived constraint on petitioners column was dictated by her own choice of her columns perspective. The
column title "Feminist Reflections" was of her own choosing, as she herself admitted, since she had been known as a
feminist writer.35 Thus, respondent PDI, as well as her readers, could reasonably expect her columns to speak from
such perspective.

Contrary to petitioners protestations, it does not appear that there was any actual restraint or limitation on the subject
matter within the Lifestyle section that she could write about. Respondent PDI did not dictate how she wrote or
what she wrote in her column. Neither did PDIs guidelines dictate the kind of research, time, and effort she put into each
column. In fact, petitioner herself said that she received "no comments on her articlesexcept for her to shorten them to fit
into the box allotted to her column." Therefore, the control that PDI exercised over petitioner was only as to the finished
product of her efforts, i.e., the column itself, by way of either shortening or outright rejection of the column.

The newspapers power to approve or reject publication of any specific article she wrote for her column cannot be the
control contemplated in the "control test," as it is but logical that one who commissions another to do a piece of work
should have the right to accept or reject the product. The important factor to consider in the "control test" is still the
element of control over how the work itself is done, not just the end result thereof.

In contrast, a regular reporter is not as independent in doing his or her work for the newspaper. We note the common
practice in the newspaper business of assigning its regular reporters to cover specific subjects, geographical locations,
government agencies, or areas of concern, more commonly referred to as "beats." A reporter must produce stories
within his or her particular beat and cannot switch to another beat without permission from the editor. In most
newspapers also, a reporter must inform the editor about the story that he or she is working on for the day. The story or
article must also be submitted to the editor at a specified time. Moreover, the editor can easily pull out a reporter from
one beat and ask him or her to cover another beat, if the need arises.

This is not the case for petitioner. Although petitioner had a weekly deadline to meet, she was not precluded from
submitting her column ahead of time or from submitting columns to be published at a later time. More importantly,
respondents did not dictate upon petitioner the subject matter of her columns, but only imposed the general guideline
that the article should conform to the standards of the newspaper and the general tone of the particular section.

Where a person who works for another performs his job more or less at his own pleasure, in the manner he sees fit, not
subject to definite hours or conditions of work, and is compensated according to the result of his efforts and not the
amount thereof, no employer-employee relationship exists.36

Aside from the control test, this Court has also used the economic reality test. The economic realities prevailing within
the activity or between the parties are examined, taking into consideration the totality of circumstances surrounding the
true nature of the relationship between the parties.37 This is especially appropriate when, as in this case, there is no
written agreement or contract on which to base the relationship. In our jurisdiction, the benchmark of economic reality
in analyzing possible employment relationships for purposes of applying the Labor Code ought to be the economic
dependence of the worker on his employer.38

Petitioners main occupation is not as a columnist for respondent but as a womens rights advocate working in various
womens organizations.39 Likewise, she herself admits that she also contributes articles to other publications. 40 Thus, it
cannot be said that petitioner was dependent on respondent PDI for her continued employment in respondents line of
business.41

The inevitable conclusion is that petitioner was not respondent PDIs employee but an independent contractor, engaged
to do independent work.

There is no inflexible rule to determine if a person is an employee or an independent contractor; thus, the
characterization of the relationship must be made based on the particular circumstances of each case.42 There are
several factors43 that may be considered by the courts, but as we already said, the right to control is the dominant factor
in determining whether one is an employee or an independent contractor.44

In our jurisdiction, the Court has held that an independent contractor is one who carries on a distinct and independent
business and undertakes to perform the job, work, or service on ones own account and under ones own responsibility
according to ones own manner and method, free from the control and direction of the principal in all matters
connected with the performance of the work except as to the results thereof.45

On this point, Sonza v. ABS-CBN Broadcasting Corporation46 is enlightening. In that case, the Court found, using the
four-fold test, that petitioner, Jose Y. Sonza, was not an employee of ABS-CBN, but an independent contractor. Sonza
was hired by ABS-CBN due to his "unique skills, talent and celebrity status not possessed by ordinary employees," a
circumstance that, the Court said, was indicative, though not conclusive, of an independent contractual relationship.
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from
ordinary employees.47 The Court also found that, as to payment of wages, Sonzas talent fees were the result of
negotiations between him and ABS-CBN.48 As to the power of dismissal, the Court found that the terms of Sonzas
engagement were dictated by the contract he entered into with ABS-CBN, and the same contract provided that either
party may terminate the contract in case of breach by the other of the terms thereof. 49 However, the Court held that the
foregoing are not determinative of an employer-employee relationship. Instead, it is still the power of control that is
most important.

On the power of control, the Court found that in performing his work, Sonza only needed his skills and talent how he
delivered his lines, appeared on television, and sounded on radio were outside ABS-CBNs control.50 Thus:

We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZAs
work. ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved the right to modify
the program format and airtime schedule "for more effective programming." ABS-CBNs sole concern was the
quality of the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise control over the means
and methods of performance of SONZAs work.

SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power over the means and
methods of the performance of his work. Although ABS-CBN did have the option not to broadcast SONZAs show,
ABS-CBN was still obligated to pay SONZAs talent fees... Thus, even if ABS-CBN was completely dissatisfied
with the means and methods of SONZAs performance of his work, or even with the quality or product of his work,
ABS-CBN could not dismiss or even discipline SONZA. All that ABS-CBN could do is not to broadcast SONZAs
show but ABS-CBN must still pay his talent fees in full.

Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the obligation to continue paying
in full SONZAs talent fees, did not amount to control over the means and methods of the performance of SONZAs
work. ABS-CBN could not terminate or discipline SONZA even if the means and methods of performance of his
work - how he delivered his lines and appeared on television - did not meet ABS-CBNs approval. This proves that
ABS-CBNs control was limited only to the result of SONZAs work, whether to broadcast the final product or not.
In either case, ABS-CBN must still pay SONZAs talent fees in full until the expiry of the Agreement.

In Vaughan, et al. v. Warner, et al., the United States Circuit Court of Appeals ruled that vaudeville performers
were independent contractors although the management reserved the right to delete objectionable features in their
shows. Since the management did not have control over the manner of performance of the skills of the artists, it
could only control the result of the work by deleting objectionable features.

SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew. No
doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the "Mel & Jay" programs.
However, the equipment, crew and airtime are not the "tools and instrumentalities" SONZA needed to perform his
job. What SONZA principally needed were his talent or skills and the costumes necessary for his appearance. Even
though ABS-CBN provided SONZA with the place of work and the necessary equipment, SONZA was still an
independent contractor since ABS-CBN did not supervise and control his work. ABS-CBNs sole concern was for
SONZA to display his talent during the airing of the programs.

A radio broadcast specialist who works under minimal supervision is an independent contractor. SONZAs work as
television and radio program host required special skills and talent, which SONZA admittedly possesses. The
records do not show that ABS-CBN exercised any supervision and control over how SONZA utilized his skills and
talent in his shows.51

The instant case presents a parallel to Sonza. Petitioner was engaged as a columnist for her talent, skill, experience, and
her unique viewpoint as a feminist advocate. How she utilized all these in writing her column was not subject to
dictation by respondent. As in Sonza, respondent PDI was not involved in the actual performance that produced the
finished product. It only reserved the right to shorten petitioners articles based on the newspapers capacity to
accommodate the same. This fact, we note, was not unique to petitioners column. It is a reality in the newspaper
business that space constraints often dictate the length of articles and columns, even those that regularly appear therein.

Furthermore, respondent PDI did not supply petitioner with the tools and instrumentalities she needed to perform her
work. Petitioner only needed her talent and skill to come up with a column every week. As such, she had all the tools
she needed to perform her work.

Considering that respondent PDI was not petitioners employer, it cannot be held guilty of illegal dismissal.

WHEREFORE, the foregoing premises considered, the Petition is DISMISSED. The Decision and Resolution of the
Court of Appeals in CA-G.R. SP No. 50970 are hereby AFFIRMED.

SO ORDERED.
G.R. No. 164652 June 8, 2007

THELMA DUMPIT-MURILLO, petitioner,


vs.
COURT OF APPEALS, ASSOCIATED BROADCASTING COMPANY, JOSE JAVIER AND EDWARD
TAN,respondents.

DECISION

QUISUMBING, J.:

This petition seeks to reverse and set aside both the Decision1 dated January 30, 2004 of the Court of Appeals in CA-
G.R. SP No. 63125 and its Resolution2 dated June 23, 2004 denying the motion for reconsideration. The Court of
Appeals had overturned the Resolution3 dated August 30, 2000 of the National Labor Relations Commission (NLRC)
ruling that petitioner was illegally dismissed.

The facts of the case are as follows:

On October 2, 1995, under Talent Contract No. NT95-1805,4 private respondent Associated Broadcasting Company
(ABC) hired petitioner Thelma Dumpit-Murillo as a newscaster and co-anchor for Balitang-Balita, an early evening
news program. The contract was for a period of three months. It was renewed under Talent Contracts Nos. NT95-1915,
NT96-3002, NT98-4984 and NT99-5649.5 In addition, petitioners services were engaged for the program "Live on
Five." On September 30, 1999, after four years of repeated renewals, petitioners talent contract expired. Two weeks
after the expiration of the last contract, petitioner sent a letter to Mr. Jose Javier, Vice President for News and Public
Affairs of ABC, informing the latter that she was still interested in renewing her contract subject to a salary increase.
Thereafter, petitioner stopped reporting for work. On November 5, 1999, she wrote Mr. Javier another letter,6 which we
quote verbatim:

xxxx

Dear Mr. Javier:

On October 20, 1999, I wrote you a letter in answer to your query by way of a marginal note "what terms and
conditions" in response to my first letter dated October 13, 1999. To date, or for more than fifteen (15) days since then,
I have not received any formal written reply. xxx

In view hereof, should I not receive any formal response from you until Monday, November 8, 1999, I will deem it as a
constructive dismissal of my services.

xxxx

A month later, petitioner sent a demand letter7 to ABC, demanding: (a) reinstatement to her former position; (b)
payment of unpaid wages for services rendered from September 1 to October 20, 1999 and full backwages; (c) payment
of 13th month pay, vacation/sick/service incentive leaves and other monetary benefits due to a regular employee
starting March 31, 1996. ABC replied that a check covering petitioners talent fees for September 16 to October 20,
1999 had been processed and prepared, but that the other claims of petitioner had no basis in fact or in law.

On December 20, 1999, petitioner filed a complaint8 against ABC, Mr. Javier and Mr. Edward Tan, for illegal
constructive dismissal, nonpayment of salaries, overtime pay, premium pay, separation pay, holiday pay, service
incentive leave pay, vacation/sick leaves and 13th month pay in NLRC-NCR Case No. 30-12-00985-99. She likewise
demanded payment for moral, exemplary and actual damages, as well as for attorneys fees.

The parties agreed to submit the case for resolution after settlement failed during the mandatory
conference/conciliation. On March 29, 2000, the Labor Arbiter dismissed the complaint.9

On appeal, the NLRC reversed the Labor Arbiter in a Resolution dated August 30, 2000. The NLRC held that an
employer-employee relationship existed between petitioner and ABC; that the subject talent contract was void; that the
petitioner was a regular employee illegally dismissed; and that she was entitled to reinstatement and backwages or
separation pay, aside from 13th month pay and service incentive leave pay, moral and exemplary damages and
attorneys fees. It held as follows:

WHEREFORE, the Decision of the Arbiter dated 29 March 2000 is hereby REVERSED/SET ASIDE and a NEW
ONE promulgated:

1) declaring respondents to have illegally dismissed complainant from her regular work therein and thus, ordering them
to reinstate her in her former position without loss of seniority right[s] and other privileges and to pay her full
backwages, inclusive of allowances and other benefits, including 13th month pay based on her said latest rate of
28,000.00/mo. from the date of her illegal dismissal on 21 October 1999 up to finality hereof, or at complainants
option, to pay her separation pay of one (1) month pay per year of service based on said latest monthly rate, reckoned
from date of hire on 30 September 1995 until finality hereof;

2) to pay complainants accrued SILP [Service Incentive Leave Pay] of 5 days pay per year and 13th month pay for the
years 1999, 1998 and 1997 of 19,236.00 and 84,000.00, respectively and her accrued salary from 16 September
1999 to 20 October 1999 of 32,760.00 plus legal interest at 12% from date of judicial demand on 20 December 1999
until finality hereof;

3) to pay complainant moral damages of 500,000.00, exemplary damages of 350,000.00 and 10% of the total of the
adjudged monetary awards as attorneys fees.

Other monetary claims of complainant are dismissed for lack of merit.

SO ORDERED.10

After its motion for reconsideration was denied, ABC elevated the case to the Court of Appeals in a petition for
certiorari under Rule 65. The petition was first dismissed for failure to attach particular documents, 11 but was reinstated
on grounds of the higher interest of justice.12

Thereafter, the appellate court ruled that the NLRC committed grave abuse of discretion, and reversed the decision of
the NLRC.13 The appellate court reasoned that petitioner should not be allowed to renege from the stipulations she had
voluntarily and knowingly executed by invoking the security of tenure under the Labor Code. According to the
appellate court, petitioner was a fixed-term employee and not a regular employee within the ambit of Article 28014 of
the Labor Code because her job, as anticipated and agreed upon, was only for a specified time.15

Aggrieved, petitioner now comes to this Court on a petition for review, raising issues as follows:

I.

THIS HONORABLE COURT CAN REVIEW THE FINDINGS OF THE HONORABLE COURT OF APPEALS,
THE DECISION OF WHICH IS NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF
THE SUPREME COURT[;]

II.

THE PRO-FORMA TALENT CONTRACTS, AS CORRECTLY FOUND BY THE NLRC FIRST DIVISION, ARE
"ANTI-REGULARIZATION DEVICES" WHICH MUST BE STRUCK DOWN FOR REASONS OF PUBLIC
POLICY[;]

III.

BY REASON OF THE CONTINUOUS AND SUCCESSIVE RENEWALS OF THE THREE-MONTH TALENT


CONTRACTS, AN EMPLOYER-EMPLOYEE RELATIONSHIP WAS CREATED AS PROVIDED FOR UNDER
ARTICLE 280 OF THE LABOR CODE[;]

IV.

BY THE CONSTRUCTIVE DISMISSAL OF HEREIN PETITIONER, AS A REGULAR EMPLOYEE, THERE


WAS A DENIAL OF PETITIONERS RIGHT TO DUE PROCESS THUS ENTITLING HER TO THE MONEY
CLAIMS AS STATED IN THE COMPLAINT[.]16

The issues for our disposition are: (1) whether or not this Court can review the findings of the Court of Appeals; and
(2) whether or not under Rule 45 of the Rules of Court the Court of Appeals committed a reversible error in its
Decision.

On the first issue, private respondents contend that the issues raised in the instant petition are mainly factual and that
there is no showing that the said issues have been resolved arbitrarily and without basis. They add that the findings of
the Court of Appeals are supported by overwhelming wealth of evidence on record as well as prevailing jurisprudence
on the matter.17

Petitioner however contends that this Court can review the findings of the Court of Appeals, since the appellate court
erred in deciding a question of substance in a way which is not in accord with law or with applicable decisions of this
Court.18

We agree with petitioner. Decisions, final orders or resolutions of the Court of Appeals in any case regardless of the
nature of the action or proceeding involved may be appealed to this Court through a petition for review. This
remedy is a continuation of the appellate process over the original case,19 and considering there is no congruence in the
findings of the NLRC and the Court of Appeals regarding the status of employment of petitioner, an exception to the
general rule that this Court is bound by the findings of facts of the appellate court,20 we can review such findings.

On the second issue, private respondents contend that the Court of Appeals did not err when it upheld the validity of
the talent contracts voluntarily entered into by petitioner. It further stated that prevailing jurisprudence has recognized
and sustained the absence of employer-employee relationship between a talent and the media entity which engaged the
talents services on a per talent contract basis, citing the case of Sonza v. ABS-CBN Broadcasting Corporation.21

Petitioner avers however that an employer-employee relationship was created when the private respondents started to
merely renew the contracts repeatedly fifteen times or for four consecutive years. 22

Again, we agree with petitioner. The Court of Appeals committed reversible error when it held that petitioner was a
fixed-term employee. Petitioner was a regular employee under contemplation of law. The practice of having fixed-term
contracts in the industry does not automatically make all talent contracts valid and compliant with labor law. The
assertion that a talent contract exists does not necessarily prevent a regular employment status.23

Further, the Sonza case is not applicable. In Sonza, the television station did not instruct Sonza how to perform his job.
How Sonza delivered his lines, appeared on television, and sounded on radio were outside the television stations
control. Sonza had a free hand on what to say or discuss in his shows provided he did not attack the television station
or its interests. Clearly, the television station did not exercise control over the means and methods of the performance
of Sonzas work.24 In the case at bar, ABC had control over the performance of petitioners work. Noteworthy too, is
the comparatively low 28,000 monthly pay of petitioner25 vis the 300,000 a month salary of Sonza,26 that all the
more bolsters the conclusion that petitioner was not in the same situation as Sonza.

The contract of employment of petitioner with ABC had the following stipulations:

xxxx

1. SCOPE OF SERVICES TALENT agrees to devote his/her talent, time, attention and best efforts in the
performance of his/her duties and responsibilities as Anchor/Program Host/Newscaster of the Program, in accordance
with the direction of ABC and/or its authorized representatives.

1.1. DUTIES AND RESPONSIBILITIES TALENT shall:

a. Render his/her services as a newscaster on the Program;

b. Be involved in news-gathering operations by conducting interviews on- and off-the-air;

c. Participate in live remote coverages when called upon;

d. Be available for any other news assignment, such as writing, research or camera work;

e. Attend production meetings;

f. On assigned days, be at the studios at least one (1) hour before the live telecasts;

g. Be present promptly at the studios and/or other place of assignment at the time designated by ABC;

h. Keep abreast of the news;

i. Give his/her full cooperation to ABC and its duly authorized representatives in the production and promotion of the
Program; and

j. Perform such other functions as may be assigned to him/her from time to time.

xxxx

1.3 COMPLIANCE WITH STANDARDS, INSTRUCTIONS AND OTHER RULES AND REGULATIONS
TALENT agrees that he/she will promptly and faithfully comply with the requests and instructions, as well as the
program standards, policies, rules and regulations of ABC, the KBP and the government or any of its agencies and
instrumentalities.27

xxxx

In Manila Water Company, Inc. v. Pena,28 we said that 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 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.29

The duties of petitioner as enumerated in her employment contract indicate that ABC had control over the work of
petitioner. Aside from control, ABC also dictated the work assignments and payment of petitioners wages. ABC also
had power to dismiss her. All these being present, clearly, there existed an employment relationship between petitioner
and ABC.

Concerning regular employment, the law provides for two kinds of employees, namely: (1) those who are engaged to
perform activities which are usually necessary or desirable in the usual business or trade of the employer; and (2) those
who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they
are employed.30 In other words, regular status arises from either the nature of work of the employee or the duration of
his employment.31 In Benares v. Pancho,32 we very succinctly said:

[T]he primary standard for determining regular employment is the reasonable connection between the particular
activity performed by the employee vis--vis the usual trade or business of the employer. This connection can be
determined by considering the nature of the work performed and its relation to the scheme of the particular business or
trade in its entirety. If the employee has been performing the job for at least a year, even if the performance is not
continuous and merely intermittent, the law deems repeated and continuing need for its performance as sufficient
evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is considered
regular, but only with respect to such activity and while such activity exists.33

In our view, the requisites for regularity of employment have been met in the instant case. Gleaned from the description
of the scope of services aforementioned, petitioners work was necessary or desirable in the usual business or trade of
the employer which includes, as a pre-condition for its enfranchisement, its participation in the governments news and
public information dissemination. In addition, her work was continuous for a period of four years. This repeated
engagement under contract of hire is indicative of the necessity and desirability of the petitioners work in private
respondent ABCs business.34

The contention of the appellate court that the contract was characterized by a valid fixed-period employment is
untenable. For such contract to be valid, it should be shown that the fixed period was knowingly and voluntarily agreed
upon by the parties. There should have been no force, duress or improper pressure brought to bear upon the employee;
neither should there be any other circumstance that vitiates the employees consent. 35 It should satisfactorily appear
that the employer and the employee dealt with each other on more or less equal terms with no moral dominance being
exercised by the employer over the employee.36 Moreover, fixed-term employment will not be considered valid where,
from the circumstances, it is apparent that periods have been imposed to preclude acquisition of tenurial security by the
employee.37

In the case at bar, it does not appear that the employer and employee dealt with each other on equal terms.
Understandably, the petitioner could not object to the terms of her employment contract because she did not want to
lose the job that she loved and the workplace that she had grown accustomed to, 38 which is exactly what happened
when she finally manifested her intention to negotiate. Being one of the numerous newscasters/broadcasters of ABC
and desiring to keep her job as a broadcasting practitioner, petitioner was left with no choice but to affix her signature
of conformity on each renewal of her contract as already prepared by private respondents; otherwise, private
respondents would have simply refused to renew her contract. Patently, the petitioner occupied a position of weakness
vis--vis the employer. Moreover, private respondents practice of repeatedly extending petitioners 3-month contract
for four years is a circumvention of the acquisition of regular status. Hence, there was no valid fixed-term employment
between petitioner and private respondents.

While this Court has recognized the validity of fixed-term employment contracts in a number of cases, it has
consistently emphasized that when the circumstances of a case show that the periods were imposed to block the
acquisition of security of tenure, they should be struck down for being contrary to law, morals, good customs, public
order or public policy.39

As a regular employee, petitioner is entitled to security of tenure and can be dismissed only for just cause and after due
compliance with procedural due process. Since private respondents did not observe due process in constructively
dismissing the petitioner, we hold that there was an illegal dismissal.

WHEREFORE, the challenged Decision dated January 30, 2004 and Resolution dated June 23, 2004 of the Court of
Appeals in CA-G.R. SP No. 63125, which held that the petitioner was a fixed-term employee, are REVERSED and
SET ASIDE. The NLRC decision is AFFIRMED.

Costs against private respondents.

SO ORDERED.
G.R. No. 129315 October 2, 2000
OSIAS I. CORPORAL, SR., PEDRO TOLENTINO, MANUEL CAPARAS, ELPIDIO LACAP, SIMPLICIO PEDELOS,
PATRICIA NAS, and TERESITA FLORES, petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION, LAO ENTENG COMPANY, INC. and/or TRINIDAD LAO
ONG, respondents.

This special civil action for certiorari seeks the review of the Resolution dated October 17, 1996 of public respondent
National Labor Relations Commission (First Division),1 in NLRC NCR Case No. 00-04-03163-95, and the Resolution
dated March 5, 1997 denying the motion for reconsideration. The aforecited October 17th Resolution affirmed the
Decision dated September 28, 1996 of Labor Arbiter Potenciano S. Caizares dismissing the petitioners' complaint for illegal
dismissal and declaring that petitioners are not regular employees of private respondent Lao Enteng Company, Inc..

The records of the case show that the five male petitioners, namely, Osias I. Corporal, Sr., Pedro Tolentino, Manuel
Caparas, Elpidio Lacap, and Simplicio Pedelos worked as barbers, while the two female petitioners, Teresita Flores and
Patricia Nas worked as manicurists in New Look Barber Shop located at 651 P. Paterno Street, Quiapo, Manila owned
by private respondent Lao Enteng Co. Inc.. Petitioner Nas alleged that she also worked as watcher and marketer of
private respondent.

Petitioners claim that at the start of their employment with the New Look Barber Shop, it was a single proprietorship
owned and managed by Mr. Vicente Lao. In or about January 1982, the children of Vicente Lao organized a
corporation which was registered with the Securities and Exchange Commission as Lao Enteng Co. Inc. with Trinidad
Ong as President of the said corporation. Upon its incorporation, the respondent company took over the assets,
equipment, and properties of the New Look Barber Shop and continued the business. All the petitioners were allowed
to continue working with the new company until April 15, 1995 when respondent Trinidad Ong informed them that the
building wherein the New Look Barber Shop was located had been sold and that their services were no longer needed.2

On April 28, 1995, petitioners filed with the Arbitration Branch of the NLRC, a complaint for illegal dismissal, illegal
deduction, separation pay, non-payment of 13th month pay, and salary differentials. Only petitioner Nas asked for
payment of salary differentials as she alleged that she was paid a daily wage of P25.00 throughout her period of
employment. The petitioners also sought the refund of the P1.00 that the respondent company collected from each of
them daily as salary of the sweeper of the barber shop.

Private respondent in its position paper averred that the petitioners were joint venture partners and were receiving fifty
percent commission of the amount charged to customers. Thus, there was no employer-employee relationship between
them and petitioners. And assuming arguendo, that there was an employer-employee relationship, still petitioners are
not entitled to separation pay because the cessation of operations of the barber shop was due to serious business losses.

Respondent Trinidad Lao Ong, President of respondent Lao Enteng Co. Inc., specifically stated in her affidavit dated
September 06, 1995 that Lao Enteng Company, Inc. did not take over the management of the New Look Barber Shop,
that after the death Lao Enteng petitioner were verbally informed time and again that the partnership may fold up
anytime because nobody in the family had the time to be at the barber shop to look after their interest; that New Look
Barber Shop had always been a joint venture partnership and the operation and management of the barber shop was left
entirely to petitioners; that her father's contribution to the joint venture included the place of business, payment for
utilities including electricity, water, etc. while petitioners as industrial partners, supplied the labor; and that the barber
shop was allowed to remain open up to April 1995 by the children because they wanted to give the partners a chance at
making it work. Eventually, they were forced to close the barber shop because they continued to lose money while
petitioners earned from it. Trinidad also added that private respondents had no control over petitioners who were free to
come and go as they wished. Admittedly too by petitioners they received fifty percent to sixty percent of the gross paid
by customers. Trinidad explained that some of the petitioners were allowed to register with the Social Security System
as employees of Lao Enteng Company, Inc. only as an act of accommodation. All the SSS contributions were made by
petitioners. Moreover, Osias Corporal, Elpidio Lacap and Teresita Flores were not among those registered with the
Social Security System. Lastly, Trinidad avers that without any employee-employer relationship petitioners claim for
13th month pay and separation pay have no basis in fact and in law.3

In a Decision dated September 28, 1995, Labor Arbiter Potenciano S. Caizares, Jr. ordered the dismissal of the
complaint on the basis of his findings that the complainants and the respondents were engaged in a joint venture and
that there existed no employer-employee relation between them. The Labor Arbiter also found that the barber shop was
closed due to serious business losses or financial reverses and consequently declared that the law does not compel the
establishment to pay separation pay to whoever were its employees.4

On appeal, NLRC affirmed the said findings of the Labor Arbiter and dismissed the complaint for want of merit,
ratiocinating thus:

Indeed, complainants failed to show the existence of employer-employee relationship under the fourway test
established by the Supreme Court. It is a common practice in the Barber Shop industry that barbers supply their own
scissors and razors and they split their earnings with the owner of the barber shop. The only capital of the owner is the
place of work whereas the barbers provide the skill and expertise in servicing customers. The only control exercised by
the owner of the barber shop is to ascertain the number of customers serviced by the barber in order to determine the
sharing of profits. The barbers maybe characterized as independent contractors because they are under the control of
the barber shop owner only with respect to the result of the work, but not with respect to the details or manner of
performance. The barbers are engaged in an independent calling requiring special skills available to the public at large.5

Its motion for reconsideration denied in the Resolution6 dated March 5, 1997, petitioners filed the instant petition
assigning that the NLRC committed grave abuse of discretion in:

I. ARBITRARILY DISREGARDING SUBSTANTIAL EVIDENCE PROVING THAT PETITIONERS WERE


EMPLOYEES OF RESPONDENT COMPANY IN RULING THAT PETITIONERS WERE INDEPENDENT
CONTRACTORS.

II. NOT HOLDING THAT PETITIONERS WERE ILLEGALLY DISMISSED AND IN NOT AWARDING THEIR
MONEY CLAIMS.7

Petitioners principally argue that public respondent NLRC gravely erred in declaring that the petitioners were
independent contractors. They contend that they were employees of the respondent company and cannot be considered
as independent contractors because they did not carry on an independent business. They did not cut hair, manicure, and
do their work in their own manner and method. They insist they were not free from the control and direction of private
respondents in all matters, and their services were engaged by the respondent company to attend to its customers in its barber
shop. Petitioners also stated that, individually or collectively, they do not have substantial capital nor investments in tools,
equipments, work premises and other materials necessary in the conduct of the barber shop. What the barbers owned were
merely combs, scissors, and razors, while the manicurists owned only nail cutters, nail polishes, nippers and cuticle
removers. By no standard can these be considered "substantial capital" necessary to operate a barbers shop.

Finally, petitioners fault the NLRC for arbitrarily disregarding substantial evidence on record showing that petitioners
Pedro Tolentino, Manuel Caparas, Simplicio Pedelos, and Patricia Nas were registered with the Social Security System
as regular employees of the respondent company. The SSS employment records in common show that the employer's
ID No. of Vicente Lao/Barber and Pawn Shop was 03-0606200-1 and that of the respondent company was 03-
8740074-7. All the foregoing entries in the SSS employment records were painstakingly detailed by the petitioners in
their position paper and in their memorandum appeal but were arbitrarily ignored first by the Labor Arbiter and then by
the respondent NLRC which did not even mention said employment records in its questioned decision.

We found petition is impressed with merit.

In our view, this case is an exception to the general rule that findings of facts of the NLRC are to be accorded respect and
finality on appeal. We have long settled that this Court will not uphold erroneous conclusions unsupported by substantial
evidence.8 We must also stress that where the findings of the NLRC contradict those of the labor arbiter, the Court, in the
exercise of its equity jurisdiction, may look into the records of the case and reexamine the questioned findings.9

The issues raised by petitioners boil down to whether or not an employer-employee relationship existed between
petitioners and private respondent Lao Enteng Company, Inc. The Labor Arbiter has concluded that the petitioners and
respondent company were engaged in a joint venture. The NLRC concluded that the petitioners were independent
contractors.

The Labor Arbiter's findings that the parties were engaged in a joint venture is unsupported by any documentary
evidence. It should be noted that aside from the self-serving affidavit of Trinidad Lao Ong, there were no other
evidentiary documents, nor written partnership agreements presented. We have ruled that even the sharing of proceeds
for every job of petitioners in the barber shop does not mean they were not employees of the respondent company.10

Petitioner aver that NLRC was wrong when it concluded that petitioners were independent contractors simply because
they supplied their own working implements, shared in the earnings of the barber shop with the owner and chose the
manner of performing their work. They stressed that as far as the result of their work was concerned the barber shop
owner controlled them.

An independent contractor is one who undertakes "job contracting", i.e., a person who (a) 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 (b) has substantial capital or investment in the form of
tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of the business.11

Juxtaposing this provision vis--vis the facts of this case, we are convinced that petitioners are not "independent
contractors". They did not carry on an independent business. Neither did they undertake cutting hair and manicuring
nails, on their own as their responsibility, and in their own manner and method. The services of the petitioners were
engaged by the respondent company to attend to the needs of its customers in its barber shop. More importantly, the
petitioners, individually or collectively, did not have a substantial capital or investment in the form of tools, equipment,
work premises and other materials which are necessary in the conduct of the business of the respondent company.
What the petitioners owned were only combs, scissors, razors, nail cutters, nail polishes, the nippers - nothing else. By
no standard can these be considered substantial capital necessary to operate a barber shop. From the records, it can be
gleaned that petitioners were not given work assignments in any place other than at the work premises of the New
Look Barber Shop owned by the respondent company. Also, petitioners were required to observe rules and regulations
of the respondent company pertaining, among other things, observance of daily attendance, job performance, and
regularity of job output. The nature of work performed by were clearly directly related to private respondent's business
of operating barber shops. Respondent company did not dispute that it owned and operated three (3) barber shops.
Hence, petitioners were not independent contractors.

Did an employee-employer relationship exist between petitioners and private respondent? The following elements must
be present for an employer-employee relationship to exist: (1) the selection and engagement of the workers; (2) power
of dismissal; (3) the payment of wages by whatever means; and (4) the power to control the worker's conduct, with the
latter assuming primacy in the overall consideration. Records of the case show that the late Vicente Lao engaged the
services of the petitioners to work as barbers and manicurists in the New Look Barber Shop, then a single
proprietorship owned by him; that in January 1982, his children organized a corporation which they registered with the
Securities and Exchange Commission as Lao Enteng Company, Inc.; that upon its incorporation, it took over the assets,
equipment, and properties of the New Look Barber Shop and continued the business; that the respondent company
retained the services of all the petitioners and continuously paid their wages. Clearly, all three elements exist in
petitioners' and private respondent's working arrangements.

Private respondent claims it had no control over petitioners.1wphi1 The power to control refers to the existence of the
power and not necessarily to the actual exercise thereof, nor is it essential for the employer to actually supervise the
performance of duties of the employee. It is enough that the employer has the right to wield that power. 12 As to the
"control test", the following facts indubitably reveal that respondent company wielded control over the work
performance of petitioners, in that: (1) they worked in the barber shop owned and operated by the respondents; (2) they
were required to report daily and observe definite hours of work; (3) they were not free to accept other employment
elsewhere but devoted their full time working in the New Look Barber Shop for all the fifteen (15) years they have
worked until April 15, 1995; (4) that some have worked with respondents as early as in the 1960's; (5) that petitioner
Patricia Nas was instructed by the respondents to watch the other six (6) petitioners in their daily task. Certainly,
respondent company was clothed with the power to dismiss any or all of them for just and valid cause. Petitioners were
unarguably performing work necessary and desirable in the business of the respondent company.

While it is no longer true that membership to SSS is predicated on the existence of an employee-employer relationship
since the policy is now to encourage even the self-employed dressmakers, manicurists and jeepney drivers to become
SSS members, we could not agree with private respondents that petitioners were registered with the Social Security
System as their employees only as an accommodation. As we have earlier mentioned private respondent showed no
proof to their claim that petitioners were the ones who solely paid all SSS contributions. It is unlikely that respondents
would report certain persons as their workers, pay their SSS premium as well as their wages if it were not true that they
were indeed their employees.13

Finally, we agree with the labor arbiter that there was sufficient evidence that the barber shop was closed due to serious
business losses and respondent company closed its barber shop because the building where the barber shop was located
was sold. An employer may adopt policies or changes or adjustments in its operations to insure profit to itself or protect
investment of its stockholders. In the exercise of such management prerogative, the employer may merge or
consolidate its business with another, or sell or dispose all or substantially all of its assets and properties which may
bring about the dismissal or termination of its employees in the process.14

Prescinding from the above, we hold that the seven petitioners are employees of the private respondent company; as
such, they are to be accorded the benefits provided under the Labor Code, specifically Article 283 which mandates the
grant of separation pay in case of closure or cessation of employer's business which is equivalent to one (1) month pay
for every year of service.15 Likewise, they are entitled to the protection of minimum wage statutes. Hence, the
separation pay due them may be computed on the basis of the minimum wage prevailing at the time their services were
terminated by the respondent company. The same is true with respect to the 13th month pay. The Revised Guidelines
on the Implementation of the 13th Month Pay Law states that "all rank and file employees are now entitled to a 13th
month pay regardless of the amount of basic salary that they receive in a month. Such employees are entitled to the
benefit regardless of their designation or employment status, and irrespective of the method by which their wages are
paid, provided that they have worked for at least one (1) month during a calendar year" and so all the seven (7)
petitioners who were not paid their 13th month pay must be paid accordingly.16

Anent the other claims of the petitioners, such as the P10,000.00 as penalty for non-compliance with procedural
process; P10,000.00 as moral damages; refund of P1.00 per day paid to the sweeper; salary differentials for petitioner
Nas; attorney's fees), we find them without basis.

IN VIEW WHEREOF, the petition is GRANTED. The public respondent's Decision dated October 17, 1996 and
Resolution dated March 05, 1997 are SET ASIDE. Private respondents are hereby ordered to pay, severally and jointly,
the seven (7) petitioners their (1) 13th month pay and (2) separation pay equivalent to one month pay for every year of
service, to be computed at the then prevailing minimum wage at the time of their actual termination which was April
15, 1995.

Costs against private respondents.

SO ORDERED.
G.R. No. 169757 November 23, 2011
CESAR C. LIRIO, doing business under the name and style of CELKOR AD SONICMIX, Petitioner,
vs. WILMER D. GENOVIA, Respondent.

This is a petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. SP No. 88899 dated
August 4, 2005 and its Resolution dated September 21, 2005, denying petitioners motion for reconsideration.

The Court of Appeals reversed and set aside the resolution of the NLRC, and reinstated the decision of the Labor
Arbiter with modification, finding that respondent is an employee of petitioner, and that respondent was illegally
dismissed and entitled to the payment of backwages and separation pay in lieu of reinstatement.

The facts are as follows:

On July 9, 2002, respondent Wilmer D. Genovia filed a complaint against petitioner Cesar Lirio and/or Celkor Ad
Sonicmix Recording Studio for illegal dismissal, non-payment of commission and award of moral and exemplary
damages.

In his Position Paper,1 respondent Genovia alleged, among others, that on August 15, 2001, he was hired as studio
manager by petitioner Lirio, owner of Celkor Ad Sonicmix Recording Studio (Celkor). He was employed to manage
and operate Celkor and to promote and sell the recording studio's services to music enthusiasts and other prospective
clients. He received a monthly salary of 7,000.00. They also agreed that he was entitled to an additional commission
of 100.00 per hour as recording technician whenever a client uses the studio for recording, editing or any related
work. He was made to report for work from Monday to Friday from 9:00 a.m. to 6 p.m. On Saturdays, he was required
to work half-day only, but most of the time, he still rendered eight hours of work or more. All the employees of
petitioner, including respondent, rendered overtime work almost everyday, but petitioner never kept a daily time record
to avoid paying the employees overtime pay.

Respondent stated that a few days after he started working as a studio manager, petitioner approached him and told him
about his project to produce an album for his 15-year-old daughter, Celine Mei Lirio, a former talent of ABS-CBN Star
Records. Petitioner asked respondent to compose and arrange songs for Celine and promised that he (Lirio) would draft
a contract to assure respondent of his compensation for such services. As agreed upon, the additional services that
respondent would render included composing and arranging musical scores only, while the technical aspect in
producing the album, such as digital editing, mixing and sound engineering would be performed by respondent in his
capacity as studio manager for which he was paid on a monthly basis. Petitioner instructed respondent that his work on
the album as composer and arranger would only be done during his spare time, since his other work as studio manager
was the priority. Respondent then started working on the album.

Respondent alleged that before the end of September 2001, he reminded petitioner about his compensation as composer
and arranger of the album. Petitioner verbally assured him that he would be duly compensated. By mid-November
2001, respondent finally finished the compositions and musical arrangements of the songs to be included in the album.
Before the month ended, the lead and back-up vocals in the ten (10) songs were finally recorded and completed. From
December 2001 to January 2002, respondent, in his capacity as studio manager, worked on digital editing, mixing and
sound engineering of the vocal and instrumental audio files.

Thereafter, respondent was tasked by petitioner to prepare official correspondence, establish contacts and negotiate
with various radio stations, malls, publishers, record companies and manufacturers, record bars and other outlets in
preparation for the promotion of the said album. By early February 2002, the album was in its manufacturing stage.
ELECTROMAT, manufacturer of CDs and cassette tapes, was tapped to do the job. The carrier single of the album,
which respondent composed and arranged, was finally aired over the radio on February 22, 2002.

On February 26, 2002, respondent again reminded petitioner about the contract on his compensation as composer and
arranger of the album. Petitioner told respondent that since he was practically a nobody and had proven nothing yet in
the music industry, respondent did not deserve a high compensation, and he should be thankful that he was given a job
to feed his family. Petitioner informed respondent that he was entitled only to 20% of the net profit, and not of the
gross sales of the album, and that the salaries he received and would continue to receive as studio manager of Celkor
would be deducted from the said 20% net profit share. Respondent objected and insisted that he be properly
compensated. On March 14, 2002, petitioner verbally terminated respondents services, and he was instructed not to
report for work.

Respondent asserts that he was illegally dismissed as he was terminated without any valid grounds, and no hearing was
conducted before he was terminated, in violation of his constitutional right to due process. Having worked for more
than six months, he was already a regular employee. Although he was a so called "studio manager," he had no
managerial powers, but was merely an ordinary employee.

Respondent prayed for his reinstatement without loss of seniority rights, or, in the alternative, that he be paid separation
pay, backwages and overtime pay; and that he be awarded unpaid commission in the amount of 2,000.00 for services
rendered as a studio technician as well as moral and exemplary damages.
Respondents evidence consisted of the Payroll dated July 31, 2001 to March 15, 2002, which was certified correct by
petitioner,2 and Petty Cash Vouchers3 evidencing receipt of payroll payments by respondent from Celkor.

In defense, petitioner stated in his Position Paper4 that respondent was not hired as studio manager, composer,
technician or as an employee in any other capacity of Celkor. Respondent could not have been hired as a studio
manager, since the recording studio has no personnel except petitioner. Petitioner further claimed that his daughter
Celine Mei Lirio, a former contract artist of ABS-CBN Star Records, failed to come up with an album as the latter
aborted its project to produce one. Thus, he decided to produce an album for his daughter and established a recording
studio, which he named Celkor Ad Sonicmix Recording Studio. He looked for a composer/arranger who would
compose the songs for the said album. In July 2001, Bob Santiago, his son-in-law, introduced him to respondent, who
claimed to be an amateur composer, an arranger with limited experience and musician without any formal musical
training. According to petitioner, respondent had no track record as a composer, and he was not known in the field of
music. Nevertheless, after some discussion, respondent verbally agreed with petitioner to co-produce the album based
on the following terms and conditions: (1) petitioner shall provide all the financing, equipment and recording studio;
(2) Celine Mei Lirio shall sing all the songs; (3) respondent shall act as composer and arranger of all the lyrics and the
music of the five songs he already composed and the revival songs; (4) petitioner shall have exclusive right to market
the album; (5) petitioner was entitled to 60% of the net profit, while respondent and Celine Mei Lirio were each
entitled to 20% of the net profit; and (6) respondent shall be entitled to draw advances of 7,000.00 a month, which
shall be deductible from his share of the net profits and only until such time that the album has been produced.

According to petitioner, they arrived at the foregoing sharing of profits based on the mutual understanding that
respondent was just an amateur composer with no track record whatsoever in the music industry, had no definite source
of income, had limited experience as an arranger, had no knowledge of the use of sound mixers or digital arranger and
that petitioner would help and teach him how to use the studio equipment; that petitioner would shoulder all the
expenses of production and provide the studio and equipment as well as his knowledge in the use thereof; and Celine
Mei Lirio would sing the songs. They embarked on the production of the album on or about the third week of August
2002.

Petitioner asserted that from the aforesaid terms and conditions, his relationship with respondent is one of an informal
partnership under Article 17675 of the New Civil Code, since they agreed to contribute money, property or industry to a
common fund with the intention of dividing the profits among themselves. Petitioner had no control over the time and
manner by which respondent composed or arranged the songs, except on the result thereof. Respondent reported to the
recording studio between 10:00 a.m. and 12:00 noon. Hence, petitioner contended that no employer-employee
relationship existed between him and the respondent, and there was no illegal dismissal to speak of.

On October 31, 2003, Labor Arbiter Renaldo O. Hernandez rendered a decision,6 finding that an employer-employee
relationship existed between petitioner and respondent, and that respondent was illegally dismissed. The dispositive
portion of the decision reads:

WHEREFORE, premises considered, we find that respondents CELKOR AD SONICMIX RECORDING STUDIO
and/ or CESAR C. LIRIO (Owner), have illegally dismissed complainant in his status as regular employee and,
consequently, ORDERING said respondents:

1) To pay him full backwages from date of illegal dismissal on March 14, 2002 until finality of this decision
and, in lieu of reinstatement, to [pay] his separation pay of one (1) month pay per year of service reckoned
from [the] date of hire on August 15, 2001 until finality of this decision, which as of date amounts to full
backwages total of 145,778.6 (basic 7,000.00 x 19.6 mos.=133,000.00 + 1/12 thereof as 13th month pay of
11,083.33 + SILP 7,000/32.62 days=214.59/day x 5=1,072.96 x 1.58 yrs.=1,695.27); separation pay of
22,750.00 (7,000.00 x 3.25 yrs.);

2) To pay complainant's unpaid commission of 2,000.00;

3) To pay him moral and exemplary damages in the combined amount of 75,000.00.

Other monetary claims of complainant are dismissed for lack of merit.7

The Labor Arbiter stated that petitioners denial of the employment relationship cannot overcome respondents positive
assertion and documentary evidence proving that petitioner hired respondent as his employee.8

Petitioner appealed the decision of the Labor Arbiter to the National Labor Relations Commission (NLRC).

In a Resolution7 dated October 14, 2004, the NLRC reversed and set aside the decision of the Labor Arbiter. The
dispositive portion of the Resolution reads:

WHEREFORE, premises considered, the Appeal is GRANTED. Accordingly, the Decision appealed from is
REVERSED and, hence, SET ASIDE and a new one ENTERED dismissing the instant case for lack of merit.9

The NLRC stated that respondent failed to prove his employment tale with substantial evidence. Although the NLRC
agreed that respondent was able to prove that he received gross pay less deduction and net pay, with the corresponding
Certification of Correctness by petitioner, covering the period from July 31, 2001 to March 15, 2002, the NLRC held
that respondent failed to proved with substantial evidence that he was selected and engaged by petitioner, that
petitioner had the power to dismiss him, and that they had the power to control him not only as to the result of his
work, but also as to the means and methods of accomplishing his work.

Respondents motion for reconsideration was denied by the NLRC in a Resolution9 dated December 14, 2004.

Respondent filed a petition for certiorari before the Court of Appeals.

On August 4, 2005, the Court of Appeals rendered a decision10 reversing and setting aside the resolution of the NLRC,
and reinstating the decision of the Labor Arbiter, with modification in regard to the award of commission and damages.
The Court of Appeals deleted the award of commission, and moral and exemplary damages as the same were not
substantiated. The dispositive portion of the Court of Appeals decision reads:

WHEREFORE, the petition is GRANTED and the assailed resolutions dated October 14, 2004 and December 14,
2004 are hereby REVERSED and SET ASIDE. Accordingly, the decision dated October 31, 2003 of the Labor Arbiter
is REINSTATED, with the modification that the awards of commission and damages are deleted.11(Emphasis
supplied.)

Petitioners motion for reconsideration was denied for lack of merit by the Court of Appeals in its Resolution 12 dated
September 21, 2005.

Hence, petitioner Lirio filed this petition.

Petitioner states that respondent appealed to the Court of Appeals via a petition for certiorari under Rule 65, which will
prosper only if there is a showing of grave abuse of discretion or an act without or in excess of jurisdiction on the part
of the NLRC.13 However, petitioner contends that the Court of Appeals decided the case not in accordance with law
and applicable rulings of this Court as petitioner could not find any portion in the Decision of the Court of Appeals
ruling that the NLRC acted without or in excess of jurisdiction or with grave abuse of discretion amounting to lack or
excess of jurisdiction. Petitioner submits that the Court of Appeals could not review an error of judgment by the NLRC
raised before it on a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure. Moreover, petitioner
contends that it was error on the part of the Court of Appeals to review the finding of facts of the NLRC on whether
there exists an employer-employee relationship between the parties.

Petitioners argument lacks merit.

It is noted that respondent correctly sought judicial review of the decision of the NLRC via a petition for certiorari
under Rule 65 of the Rules of Court filed before the Court of Appeals in accordance with the decision of the Court in
St. Martin Funeral Home v. NLRC,14 which held:

Therefore, all references in the amended Section 9 of B.P. No. 129 to supposed appeals from the NLRC to the Supreme
Court are interpreted and hereby declared to mean and refer to petitions for certiorari under Rule 65. Consequently, all
such petitions should henceforth be initially filed in the Court of Appeals in strict observance of the doctrine on the
hierarchy of courts as the appropriate forum for the relief desired.15

The Court of Appeals stated in its decision that the issue it had to resolve was "whether or not the public respondent
[NLRC] committed grave abuse of discretion when it declared that no employer-employee relationship exists between
the petitioner and the private respondents, since the petitioner failed to prove such fact by substantial evidence."16

Errors of judgment, as distinguished from errors of jurisdiction, are not within the province of a special civil action for
certiorari, which is merely confined to issues of jurisdiction or grave abuse of discretion. 17 By grave abuse of discretion
is meant such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, and it must be
shown that the discretion was exercised arbitrarily or despotically.18

The Court of Appeals, therefore, could grant the petition for certiorari if it finds that the NLRC, in its assailed decision
or resolution, committed grave abuse of discretion by capriciously, whimsically, or arbitrarily disregarding evidence
that is material to or decisive of the controversy; and it cannot make this determination without looking into the
evidence of the parties.19 Necessarily, the appellate court can only evaluate the materiality or significance of the
evidence, which is alleged to have been capriciously, whimsically, or arbitrarily disregarded by the NLRC, in relation
to all other evidence on record.20 Thus, contrary to the contention of petitioner, the Court of Appeals can review the
finding of facts of the NLRC and the evidence of the parties to determine whether the NLRC gravely abused its
discretion in finding that no employer-employee relationship existed between petitioner and respondent.21

Respondent raised before the Court of Appeals the following issues:

I. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF


DISCRETION IN SHIFTING THE BURDEN OF PROVING THAT EMPLOYMENT RELATIONS EXISTED
BETWEEN THE PETITIONER AND THE PRIVATE RESPONDENTS TO THE FORMER, IN VIOLATION OF
ESTABLISHED PROVISION OF LAWS AND JURISPRUDENCE.
II. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF
DISCRETION IN HOLDING THAT NO EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN THE
PETITIONER AND THE PRIVATE RESPONDENTS.

III. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF


DISCRETION IN DISREGARDING THE PETITIONER'S PAYROLL AND THE PETTY CASH VOUCHERS AS
AN INDICIA OF EMPLOYMENT RELATIONS BETWEEN PETITIONER AND THE PRIVATE
RESPONDENTS.22

Between the documentary evidence presented by respondent and the mere allegation of petitioner without any proof by
way of any document evincing their alleged partnership agreement, the Court of Appeals agreed with the Labor Arbiter
that petitioner failed to substantiate his claim that he had a partnership with respondent, citing the Labor Arbiters
finding, thus:

In this case, complainant's evidence is substantial enough to prove the employment relationship that on August 14,
2001, he was hired as 'Studio manager' by respondent Lirio to manage and operate the recording studio and to promote
and sell its services to music enthusiasts and clients, proven by his receipt for this purpose from said respondent a fixed
monthly compensation of 7,000.00, with commission of 100.00 per hour when serving as recording technician,
shown by the payroll from July 31, 2001-March 15, 2002. The said evidence points to complainant's hiring as
employee so that the case comes within the purview of our jurisdiction on labor disputes between an employer and an
employee. x x x.

Respondent Lirio's so-called existence of a partnership agreement was not substantiated and his assertion thereto,
in the face of complainant's evidence, constitute but a self-serving assertion, without probative value, a mere
invention to justify the illegal dismissal.

xxxx

Indeed, we find credible that what caused complainant's dismissal on March 14, 2002 was due to his refusal to
respondent's Lirio's insistences on merely giving him 20% based on net profit on sale of the album which he composed
and arranged during his free time and, moreover, that salaries which he received would be deducted therefrom, which
obviously, soured the relations from the point of view of respondent Lirio.23

Hence, based on the finding above and the doctrine 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," 24 the Court of Appeals reversed
the resolution of the NLRC and reinstated the decision of the Labor Arbiter with modification. Even if the Court of
Appeals was remiss in not stating it in definite terms, it is implied that the Court of Appeals found that the NLRC
gravely abused its discretion in finding that no employer-employee relationship existed between petitioner and
respondent based on the evidence on record.

We now proceed to the main issue raised before this Court: Whether or not the decision of the Court of Appeals is in
accordance with law, or whether or not the Court of Appeals erred in reversing and setting aside the decision of the
NLRC, and reinstating the decision of the Labor Arbiter with modification.

In petitions for review, only errors of law are generally reviewed by this Court. This rule, however, is not
ironclad.25Where the issue is shrouded by a conflict of factual perceptions by the lower court or the lower
administrative body, in this case, the NLRC, this Court is constrained to review the factual findings of the Court of
Appeals.26

Before a case for illegal dismissal can prosper, it must first be established that an employer-employee relationship
existed between petitioner and respondent.27

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.28

It is settled that no particular form of evidence is required to prove the existence of an employer-employee
relationship.29 Any competent and relevant evidence to prove the relationship may be admitted.30

In this case, the documentary evidence presented by respondent to prove that he was an employee of petitioner are as
follows: (a) a document denominated as "payroll" (dated July 31, 2001 to March 15, 2002) certified correct by
petitioner,31 which showed that respondent received a monthly salary of 7,000.00 (3,500.00 every 15th of the month
and another 3,500.00 every 30th of the month) with the corresponding deductions due to absences incurred by
respondent; and (2) copies of petty cash vouchers,32 showing the amounts he received and signed for in the payrolls.

The said documents showed that petitioner hired respondent as an employee and he was paid monthly wages of
7,000.00. Petitioner wielded the power to dismiss as respondent stated that he was verbally dismissed by petitioner,
and respondent, thereafter, filed an action for illegal dismissal against petitioner. The power of control refers merely to
the existence of the power.33 It is not essential for the employer to actually supervise the performance of duties of the
employee, as it is sufficient that the former has a right to wield the power. 34Nevertheless, petitioner stated in his
Position Paper that it was agreed that he would help and teach respondent how to use the studio equipment. In such
case, petitioner certainly had the power to check on the progress and work of respondent.

On the other hand, petitioner failed to prove that his relationship with respondent was one of partnership.1wphi1 Such
claim was not supported by any written agreement. The Court notes that in the payroll dated July 31, 2001 to March
15, 2002,35 there were deductions from the wages of respondent for his absence from work, which negates petitioners
claim that the wages paid were advances for respondents work in the partnership. In Nicario v. National Labor
Relations Commission,36 the Court held:

It is a well-settled doctrine, that if doubts exist between the evidence presented by the employer and the employee, the
scales of justice must be tilted in favor of the latter. It is a time-honored rule that in controversies between a laborer and
his master, doubts reasonably arising from the evidence, or in the interpretation of agreements and writing should be
resolved in the formers favor. The policy is to extend the doctrine to a greater number of employees who can avail of
the benefits under the law, which is in consonance with the avowed policy of the State to give maximum aid and
protection of labor. This rule should be applied in the case at bar, especially since the evidence presented by the private
respondent company is not convincing. x x x37

Based on the foregoing, the Court agrees with the Court of Appeals that the evidence presented by the parties showed
that an employer-employee relationship existed between petitioner and respondent.

In termination cases, the burden is upon the employer to show by substantial evidence that the termination was for
lawful cause and validly made.38 Article 277 (b) of the Labor Code39 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.40 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.41 Procedural due process requires the employer 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.42 Petitioner failed to comply with these legal requirements; hence, the Court of Appeals correctly
affirmed the Labor Arbiters finding that respondent was illegally dismissed, and entitled to the payment of backwages,
and separation pay in lieu of reinstatement.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 88899, dated
August 4, 2005, and its Resolution dated September 21, 2005, are AFFIRMED.

No costs.

SO ORDERED.
G.R. No. 220617
NESTLE PHILIPPINES, INC., Petitioner, vs.
BENNY A. PUEDAN, JR., JAYFER D. LIMBO, BRODNEY N. AVILA, ARTHUR C. AQUINO, RYAN A.
MIRANDA, RONALD R. ALAVE, JOHNNY A. DIMAYA, MARLON B. DELOS REYES, ANGELITO R.
CORDOVA, EDGAR S. BARRUGA, CAMILO B. CORDOVA, JR., JEFFRY B. LANGUISAN, EDISON U.
VILLAPANDO, JHEIRNEY S. REMOLIN, MARY LUZ A. MACATALAD,* JENALYN M. GAMUROT, DENNIS
G. BAWAG, RAQUEL A. ABELLERA, and RICANDRO G. GUATNO, JR., Respondents.

Assailed in this petition for review on certiorari1are the Decision2 dated March 26, 2015 and the Resolution3 dated
September 17, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 132686, which affirmed the Decision4 dated
May 30, 2013 and the Resolution5 dated August 30, 2013 of the National Labor Relations Commission (NLRC) in
LAC No. 02-000699-13/ NCR-03-04761-12, declaring petitioner Nestle Philippines, Inc. (NPI), jointly and severally
liable with Ocho de Septiembre, Inc. (ODSI) to respondents Benny A. Puedan, Jr., Jayfer D. Limbo, Brodney N. Avila,
Arthur C. Aquino, Ryan A. Miranda, Ronald R. Alave, Johnny A. Dimaya, Marlon B. Delos Reyes, Angelita R.
Cordova, Edgar S. Barruga, Camilo B. Cordova, Jr., Jeffry B. Languisan, Edison U. Villapando, Jheirney S. Remolin,
Mary Luz A. Macatalad, Jenalyn M. Gamurot, Dennis G. Bawag, Raquel A. Abellera, and Ricandro G. Guatno, Jr.
(respondents) for separation pay, nominal damages, and attorney's fees.

The Facts

The instant case arose from an amended6 complaint7 dated July 6, 2012 for illegal dismissal, damages, and attorney's
fees filed by respondents against, inter alia, ODSI and NPI. Respondents alleged that on various dates, ODSI and NPI
hired them to sell various NPI products in the assigned covered area. After some time, respondents demanded that they
be considered regular employees of NPI, but they were directed to sign contracts of employment with ODSI instead.
When respondents refused to comply with such directives, NPI and ODSI terminated them from their position. 8 Thus,
they were constrained to file the complaint, claiming that: (a) ODSI is a labor-only contractor and, thus, they should be
deemed regular employees of NPI; and (b) there was no just or authorized cause for their dismissal.9

For its part, ODSI averred that it is a company engaged in the business of buying, selling, distributing, and marketing
of goods and commodities of every kind and it enters into all kinds of contracts for the acquisition thereof. ODSI
admitted that on various dates, it hired respondents as its employees and assigned them to execute the Distributorship
Agreement10 it entered with NPI, 11 the relevant portions of which state:

3.1 DISTRIBUTOR (ODSI) shall assign a sales force in his/her regular employ, dedicated solely to the handling of
NPI Grocery Retail Products under this Agreement, and who shall exclusively cover assigned areas/channels of
distribution.

3.2 DISTRIBUTOR shall service the outlets within the Territory by reselling Products obtained exclusively from
Nestle Philippines, Inc. and not from any other source.

3.3 DISTRIBUTOR shall utilize booking and distribution salesmen to

undertake territory development. Booking done by DISTRIBUTOR shall be delivered by its personnel. Collection of
accounts shall be taken cared (sic) of by DISTRIBUTOR, without prejudice to the provisions of Clause 13 hereof.

3.4 DISTRIBUTOR's route salesmen shall exclusively cover assigned ex-truck areas/channels of distribution.

3.5 DISTRIBUTOR shall also provide training to its staff or personnel where necessary, to improve operations in
servicing the requirements of DISTRIBUTOR's customers. From time to time, NESTLE shall offer to DISTRIBUTOR
suggestions and recommendations to improve sales and to further develop the market.

3.6 DISTRIBUTOR shall meet the sales, reach and distribution targets agreed upon by NESTLE and DISTRIBUTOR.
For purposes of this clause, reach targets refer to the number of stores, dealers and/or outlets which DISTRIBUTOR
should cover or service within a particular period. Distribution targets refer to the number of stock keeping units and/or
product lines covered by this Agreement.

In the event of DISTRIBUTOR's failure to meet NESTLE's sales targets, NESTLE has the sole discretion of assigning
another distributor of the Products and/or reducing the Territory covered by DISTRIBUTOR.

3.7 DISTRIBUTOR agrees to provide at its own cost and expense facilities and other resources necessary for the
distribution and sale of the Products.

3.8 NESTLE's sales personnel may get orders for the Products distributed by DISTRIBUTOR and pass on the said
orders to DISTRIBUTOR.

3.9 NESTLE shall provide the necessary promotional and marketing support for the Products through promotional
materials, product information literature, participation in trade fairs, and other market development activities.
3.10 Should NESTLE manufacture and/or distribute other products not subject of this Agreement, which, in NESTLE's
opinion, should likewise be extended to DISTRIBUTOR's outlets, such additional products shall be included among
those listed in Annex "A" hereof.

NESTLE shall deliver the Products to DISTRIBUTOR's warehouse(s) at its own expenses. Immediately upon receipt
of the Products, DISTRIBUTOR shall carry out a visual inspection thereof. In the event any quantity of the Products is
found to be defective upon such visual inspection, NESTLE shall replace such quantity of the Products at no cost to
DISTRIBUTOR.

3.11 All costs for transportation and/or shipment of the Products from DISTRIBUTOR's warehouse(s) to its
outlets/customers shall be the account of the DISTRIBUTOR. 12

However, the business relationship between NPI and ODSI turned sour when the former' s sales department badgered
the latter regarding the sales targets. Eventually, NPI downsized its marketing and promotional support from ODSI
which resulted to business reverses and in the latter's filing of a petition for corporate rehabilitation and, subsequently,
the closure of its Nestle unit due to the termination of the Distributorship Agreement and the failure of rehabilitation.
Under the foregoing circumstances, ODSI argued that respondents were not dismissed but merely put in floating
status. 13

On the other hand, NPI did not file any position paper or appear in the scheduled conferences. 14

The Labor Arbiter Ruling

In a Decision15 dated December 28, 2012, the Labor Arbiter (LA) dismissed the complaint for lack of merit, but
nevertheless, ordered, inter alia, ODSI and NPI to pay respondents nominal damages in the aggregate amount of
235,728.00 plus attorney's fees amounting to ten percent (10%) of the total monetary awards. 16 The LA found that:
(a) respondents were unable to prove that they were NPI employees; and (b) respondents were not illegally dismissed
as ODSI had indeed closed down its operations due to business losses. 17 As to the issue on the failure to give
respondents a thirty (30)-day notice prior to such closure, the LA concluded that all the impleaded respondents
therein (i.e., including NPI) should be held liable for the payment of nominal damages plus attorney's
fees. 18 Aggrieved, respondents appealed to the NLRC.19

The NLRC Ruling

In a Decision20 dated May 30, 2013, the NLRC reversed and set aside the LA ruling and, accordingly, ordered ODSI
and NPI to pay each of the respondents: (a) separation pay amounting to Yi month pay for every year of service
reckoned from the time they were employed until the finality of the Decision; and (b) nominal damages in the amount
of 30,000.00. The NLRC likewise ordered NPI and ODSI to pay respondents attorney's fees amounting to ten percent
(10%) of the monetary awards.21

Contrary to the LA's findings, the NLRC found that while ODSI indeed shut down its operations, it failed to prove that
such closure was due to serious business losses as it did not present evidence, e.g., financial statements, to corroborate
its claims. As such, it ruled that respondents are entitled to separation pay. In this relation, the NLRC also found that
since ODSI failed to notify respondents of such closure, the latter are likewise entitled to nominal damages.22

Further, the NLRC found ODSI to be a labor-only contractor of NPI, considering that: (a) ODSI had no substantial
capitalization or investment; (b) respondents performed activities directly related to NPI's principal business;
and (c) the fact that respondents' employment depended on the continuous supply of NPI products shows that ODSI
had not been carrying an independent business according to its own manner and method.23

Consequently, the NLRC deemed NPI to be respondents' true employer, and thus, ordered it jointly and severally liable
with ODSI to pay the monetary claims of respondents. 24

Respondents moved for a partial reconsideration, 25 arguing that since it was only ODSI that closed down operations
and not NPI and, considering the finding that the latter was deemed to be their true employer, NPI should reinstate
them, or if not practicable, to pay them separation pay equivalent to one (1) month pay for every year of service. NPI
also moved for reconsideration,26 contending that: (a) it was deprived of its right to participate in the proceedings
before the LA and the NLRC; and (b) it had no employer-employee relationship with respondents as ODSI was never
its contractor, whether independent or labor-only.27 However, the NLRC denied both motions in a Resolution28dated
August 30, 2013, holding that: (a) respondents' termination was due to the closure of ODSI's Nestle unit, an authorized
cause and, thus, the monetary awards in their favor were proper; (b) NPI was not deprived of its right to participate in
the proceedings as it was duly served with copies of the parties' respective pleadings, as well as the rulings of both the
LA and the NLRC; (c) assuming arguendo that NPI was indeed deprived of due process, its subsequent filing of a
motion for reconsideration before the NLRC cured the defect as it was able to argue its position in the said motion;
and (d) the circumstances surrounding the Distributorship Agreement between ODSI and NPI showed that the former
is indeed a labor-only contractor of the latter. 29
Dissatisfied, NPI filed a petition for certiorari30before the CA, essentially insisting that: (a) it was deprived of due
process before the tribunals a quo; and (b) there was no employer-employee relationship between NPI and
respondents. 31 Records reveal that no other party elevated the matter before the CA.

The CA Ruling

In a Decision32 dated March 26, 2015, the CA affirmed the NLRC ruling. Anent the issue on due process, the CA held
that NPI was not deprived of its opportunity to be heard as it was able to receive a copy of the complaint and other
pleadings, albeit it failed to respond thereto. 33 As regards the substantive issue, the CA ruled that despite ODSI and
NPI's contract being denominated as a "Distributorship Agreement," it contained provisions demonstrating a labor-only
contracting arrangement between them, as well as NPI' s exercise of control over the business of ODSI. Moreover, the
CA pointed out that: (a) there was nothing in the records which showed that ODSI had substantial capital to undertake
an independent business; and (b) respondents performed tasks essential to NPI's business.34Undaunted, NPI moved for
reconsideration, 35 which was, however, denied in a Resolution36 dated September 17, 2015; hence, this petition.

The Issues Before the Court

The essential issues for the Court's resolution are whether or not the CA correctly ruled that: (a) NPI was accorded due
process by the tribunals a quo; and (b) ODSI is a labor-only contractor of NPI, and consequently, NPI is respondents'
true employer and, thus, deemed jointly and severally liable with ODSI for respondents' monetary claims.

The Court's Ruling

To justify the grant of the extraordinary remedy of certiorari, the petitioner must satisfactorily show that the court or
quasi-judicial authority gravely abused the discretion conferred upon it. Grave abuse of discretion connotes a
capricious and whimsical exercise of judgment, done in a despotic manner by reason of passion or personal hostility,
the character of which being so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to
perform the duty enjoined by or to act at all in contemplation of law. 37

In labor disputes, grave abuse of discretion may be ascribed to the NLRC when, inter alia, its findings and conclusions
are not supported by substantial evidence, or that amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion. 38

Guided by the foregoing considerations, the Court finds that the CA was correct in ruling that the labor tribunals a
quo gave NPI an opportunity to be heard. However, it erred in not ascribing grave abuse of discretion on the NLRC's
finding that ODSI is a labor-only contractor of NPI and, thus, the latter is the respondents' true employer, and jointly
and severally liable with ODSI for respondents' monetary claims. As will be explained hereunder, such finding by the
NLRC is not supported by substantial evidence.

I. The observance of fairness in the conduct of any investigation is at the very heart of procedural due process.
The essence of due process is to be heard, and, as applied to administrative proceedings, this means a fair and
reasonable opportunity to explain one's side, or an opportunity to seek a reconsideration of the action or ruling
complained of. Administrative due process cannot be fully equated with due process in its strict judicial sense, for in
the former a formal or trial-type hearing is not always necessary, and technical rules of procedure are not strictly
applied.39 The Court's disquisition in Ledesma v. CA40is instructive on this matter, to wit:

Due process, as a constitutional precept, does not always and in all situations require a trial-type proceeding. Due
process is satisfied when a person is notified of the charge against him and given an opportunity to explain or defend
himself. In administrative proceedings, the filing of charges and giving reasonable opportunity for the person so
charged to answer the accusations against him constitute the minimum requirements of due process. The essence of
due process is simply to be heard, or as applied to administrative proceedings, an opportunity to explain ones
side, or an opportunity to seek a reconsideration of the action or ruling complained of.41(Emphasis and
underscoring supplied)

In this case, NPI essentially claims that it was deprived of its right to due process when it was not notified of the
proceedings before the LA and did not receive copies and issuances from the other parties and the LA,
respectively.42 However, as correctly pointed out by the CA, NPI was furnished via courier of a copy of the amended
complaint filed by the respondents against it as shown by LBC Receipt No. 125158910840. 43 It is also apparent that
NPI was also furnished with the respondents' Position Paper, Reply, and Rejoinder.44 Verily, NPI was indeed accorded
due process, but as the LA mentioned, the former chose not to file any position paper or appear in the scheduled
conferences.45

Assuming arguendo that NPI was somehow deprived of due process

by either of the labor tribunals, such defect was cured by: (a) NPI' s filing of its motion for reconsideration before the
NLRC; (b) the NLRC's subsequent issuance of its Resolution dated August 30, 2013 wherein the tribunal considered
all of NPI's arguments as contained in its motion; and (c) NPI's subsequent elevation of the case to the CA. In Gonzales
v. Civil Service Commission, 46 the Court reiterated the rule that "[a]ny seeming defect in [the] observance [of due
process] is cured by the filing of a motion for reconsideration," and that "denial of due process cannot be successfully
invoked by a party who [was] afforded the opportunity to be heard x x x."47 Similarly, in Autencio v. Maara,48it was
held that defects in procedural due process may be cured when the party has been afforded the opportunity to appeal or
to seek reconsideration of the action or ruling complained of. 49

Evidently, the foregoing shows that NPI was not denied due process of law as it was afforded the fair and reasonable
opportunity to explain its side.

II. In holding NPI jointly and severally liable with ODSI for the monetary awards in favor of respondents, both
the NLRC and the CA held that based on the provisions of the Distributorship Agreement between them, ODSI is
merely a labor-only contractor of NPI. 50 In this regard, the CA opined that the following stipulations of the said
Agreement evinces that NPI had control over the business of ODSI, namely, that: (a) NPI shall offer to ODSI
suggestions and recommendations to improve sales and to further develop the market; (b) NPI prohibits ODSI from
exporting its products (the No-Export provision); (c) NPI provided standard requirements to ODSI for the warehousing
and inventory management of the sold goods; and (d) prohibition imposed on ODSI to sell any other products that
directly compete with those of NPI.51

However, a closer examination of the Distributorship Agreement reveals that the relationship of NPI and ODSI is not
that of a principal and a contractor (regardless of whether labor-only or independent), but that of a seller and a
buyer/re-seller. As stipulated in the Distributorship Agreement, NPI agreed to sell its products to ODSI at discounted
prices,52 which in turn will be re-sold to identified customers, ensuring in the process the integrity and quality of the
said products based on the standards agreed upon by the parties. 53 As aptly explained by NPI, the goods it
manufactures are distributed to the market through various distributors, e.g., ODSI, that in turn, re-sell the same to
designated outlets through its own employees such as the respondents. Therefore, the reselling activities allegedly
performed by the respondents properly pertain to ODSI, whose principal business consists of the "buying, selling,
distributing, and marketing goods and commodities of every kind" and "[entering] into all kinds of contracts for the
acquisition of such goods [and commodities]."54

Thus, contrary to the CA's findings, the aforementioned stipulations in the Distributorship Agreement hardly
demonstrate control on the part of NPI over the means and methods by which ODSI performs its business, nor were
they intended to dictate how ODSI shall conduct its business as a distributor. Otherwise stated, the stipulations in the
Distributorship Agreement do not operate to control or fix the methodology on how ODSI should do its business as a
distributor of NPI products, but merely provide rules of conduct or guidelines towards the achievement of a mutually
desired result55 - which in this case is the sale of NPI products to the end consumer. In Steelcase, Inc. v. Design
International Selections, Inc., 56 the Court held that the imposition of minimum standards concerning sales, marketing,
finance and operations are nothing more than an exercise of sound business practice to increase sales and maximize
profits, to wit:

Finally, both the CA and DISI rely heavily on the Dealer Performance Expectation required by Steelcase of its
distributors to prove that DISI was not functioning independently from Steelcase because the same imposed certain
conditions pertaining to business planning, organizational structure, operational effectiveness and efficiency, and
financial stability. It is actually logical to expect that Steelcase, being one of the major manufacturers of office systems
furniture, would require its dealers to meet several conditions for the grant and continuation of a distributorship
agreement. The imposition of minimum standards concerning sales, marketing, finance and operations is nothing
more than an exercise of sound business practice to increase sales and maximize profits for the benefit of both
Steelcase and its distributors. For as long as these requirements do not impinge on a distributor's independence,
then there is nothing wrong with placing reasonable expectations on them. 57 (Emphasis and underscoring
supplied)

Verily, it was only reasonable for NPI - it being a local arm of one of the largest manufacturers of foods and grocery
products worldwide - to require its distributors, such as ODSI, to meet various conditions for the grant and continuation
of a distributorship agreement for as long as these conditions do not control the means and methods on how ODSI does
its distributorship business, as shown in this case.1wphi1 This is to ensure the integrity and quality of the products
which will ultimately fall into the hands of the end consumer.

Thus, the foregoing circumstances show that ODSI was not a labor-only contractor of NPI; hence, the latter cannot be
deemed the true employer of respondents. As a consequence, NPI cannot be held jointly and severally liable to ODSI's
monetary obligations towards respondents.

WHEREFORE, the petition is GRANTED. The Decision dated March 26, 2015 and the Resolution dated September
17, 2015 of the Court of Appeals in CA-G.R. SP No. 132686 are hereby REVERSED and SET ASIDE. Accordingly,
the Decision dated May 30, 2013 and the Resolution dated August 30, 2013 of the National Labor Relations
Commission in LAC No. 02-000699-13/ NCR-03-04761-12 are MODIFIED, DELETING petitioner Nestle
Philippines, Inc.'s solidary liability with Ocho de Septiembre, Inc. (ODSI) for the latter's monetary obligations to
respondents Benny A. Puedan, Jr., Jayfer D. Limbo, Brodney N. Avila, Arthur C. Aquino, Ryan A. Miranda, Ronald R.
Alave, Johnny A. Dimaya, Marlon B. Delos Reyes, Angelito R. Cordova, Edgar S. Barruga, Camilo B. Cordova, Jr.,
Jeffry B. Languisan, Edison U. Villapando, Jheimey S. Remolin, Mary Luz A. Macatalad, Jenalyn M. Gamurot, Dennis
G. Bawag, Raquel A. Abellera, and Ricandro G. Guatno, Jr.

SO ORDERED.
G.R. No. 177592 June 9, 2014
AVELINO S. ALILIN, TEODORO CALESA, CHARLIE HINDANG, EUTIQUIO GINDANG, ALLAN
SUNGAHID, MAXIMO LEE, JOSE G. MORA TO, REX GABILAN, AND EUGEMA L. LAURENTE, Petitioners,
vs. PETRON CORPORATION, Respondent.

A contractor is presumed to be a labor-only contractor, unless it proves that it has the substantial capital, investment,
tools and the like. However, where the principal is the one claiming that the contractor is a legitimate contractor, the
burden of proving the supposed status of the contractor rests on the principal.1

This Petition for Review on Certiorari2 assails the Decision3 dated May 10, 2006 of the Court of Appeals (CA) in CA-
G.R. SP No. 01291 which granted the Petition for Certiorari filed therewith, reversed and set aside the February 18,
2005 Decision4 and August 24, 2005 Resolution5 of the National Labor Relations Commission (NLRC) in NLRC Case
No. V-000481-2003 and dismissed the Complaint for illegal dismissal filed by petitioners Avelino Alilin (Alilin),
Teodoro Calesa (Calesa), Charlie Hindang (Hindang), Eutiquio Gindang (Gindang), Allan Sungahid (Sungahid),
Maximo Lee (Lee), Jose G. Morato (Morato), Rex Gabilan (Gabilan) and Eugema L. Laurente (Laurente) against
respondent Petron Corporation (Petron). Also assailed in this Petition is the CA Resolution 6 dated March 30, 2007
which denied petitioners Motion for Reconsideration7 and Supplemental Motion for Reconsideration.8

Factual Antecedents

Petron is a domestic corporation engaged in the oil business. It owns several bulk plants in the country for receiving,
storing and distributing its petroleum products.

In 1968, Romualdo D. Gindang Contractor, which was owned and operated by Romualdo D. Gindang (Romualdo),
started recruiting laborers for fielding to Petrons Mandaue Bulk Plant. When Romualdo died in1989, his son Romeo
D. Gindang (Romeo), through Romeo D. Gindang Services(RDG), took over the business and continued to provide
manpower services to Petron. Petitioners were among those recruited by Romualdo D. Gindang Contractor and RDG to
work in the premises of the said bulk plant, with the corresponding dates of hiring and work duties, to wit:

Xxxxx

Xxxxx

Xxxxx

On June 1, 2000, Petron and RDG entered into a Contract for Services 9 for the period from June 1, 2000 to May 31,
2002, whereby RDG undertook to provide Petron with janitorial, maintenance, tanker receiving, packaging and other
utility services in its Mandaue Bulk Plant. This contract was extended on July 31, 2002 and further extended until
September 30, 2002. Upon expiration thereof, no further renewal of the service contract was done.

Proceedings before the Labor Arbiter

Alleging that they were barred fromcontinuing their services on October 16, 2002, petitioners Alilin, Calesa, Hindang,
Gindang, Sungahid, Lee, Morato and Gabilan filed a Complaint10 for illegal dismissal, underpayment of wages,
damages and attorneys fees against Petron and RDG on November 12, 2002. Petitioner Laurente filed another
Complaint11 for illegal dismissal, underpayment of wages, non-payment of overtime pay, holiday pay, premium pay for
holiday, rest day, 13th month pay, service incentive leave pay, allowances, separation pay, retirement benefits,
damages and attorneys fees against Petron and RDG. The said complaints were later consolidated.

Petitioners did not deny that RDG hired them and paid their salaries. They, however, claimed that the latter is a labor-
only contractor, which merely acted as an agent of Petron, their true employer. They asseverated that their jobs, which
are directly related to Petrons business, entailed them to work inside the premises of Petron using the required
equipment and tools furnished by it and that they were subject to Petrons supervision. Claiming to be regular
employees, petitioners thus asserted that their dismissal allegedly in view of the expiration of the service contract
between Petron and RDG is illegal.

RDG corroborated petitioners claim that they are regular employees of Petron. It alleged that Petron directly
supervised their activities; they performed jobs necessary and desirable to Petrons business; Petron provided
petitioners with supplies, tools and equipment used in their jobs; and that petitioners workplace since the start of their
employment was at Petrons bulk plant in Mandaue City. RDG denied liability over petitioners claim of illegal
dismissal and further argued that Petron cannot capitalize on the service contract to escape liability.

Petron, on the other hand, maintained that RDG is an independent contractor and the real employer of the petitioners. It
was RDG which hired and selected petitioners, paid their salaries and wages, and directly supervised their work.
Attesting to these were two former employees of RDG and Petrons Mandaue Terminal Superintendent whose joint
affidavit12 and affidavit,13 respectively, were submitted by Petron. Anent its allegation that RDG is an independent
contractor, Petron presented the following documents: (1) RDGs Certificate of Registration issued by the Department
of Labor and Employment (DOLE) on December 27, 2000;14 (2) RDGs Certificate of Registration of Business Name
issued by the Department of Trade and Industry (DTI) on August 18, 2000; 15 (3) Contractors Pre-Qualification
Statement;16 (4) Conflict of Interest Statement signed by Romeo Gindang as manager of RDG; 17 (5) RDGs Audited
Financial Statements for the years 199818 199919 and 2000;20 (6) RDGs Mayors Permit for the years 200021 and
2001;22 (7) RDGs Certificate of Accreditation issued by DTI in October 1991; 23 (8) performance bond24and insurance
policy25 posted to insure against liabilities; (9) Social Security System (SSS) Online Inquiry System Employee
Contributions and Employee Static Information;26 and, (10) Romeos affidavit27 stating that he had paid the salaries of
his employees assigned to Petron for the period of November 4, 2001 to December 31, 2001. Petron argued that with
the expiration of the service contract it entered with RDG, petitioners term of employment has concomitantly ended.
And not being the employer, Petron cannot be held liable for petitioners claim of illegal dismissal.

In a Decision28 dated June 12, 2003,the Labor Arbiter ruled that petitioners are regular employees of Petron. It found
that their jobs were directly related to Petrons business operations; they worked under the supervision of Petrons
foreman and supervisor; and they were using Petrons tools and equipment in the performance of their works. The
Labor Arbiter also found that Petron merely utilized RDG in its attempt to hide the existence of employee-employer
relationship between it and petitioners and avoid liability under labor laws. And there being no showing that
petitioners dismissal was for just or authorized cause, the Labor Arbiter declared them to have been illegally
dismissed. Petron was thus held solidarily liable with Romeo for the payment of petitioners separation pay (in lieu of
reinstatement due to strained relations with Petron) fixed at one month pay for every year of service and backwages
computed on the basis of the last salary rate at the time of dismissal. The dispositive portion of the Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering the respondents Petron Corporation and
Romeo Gindang to pay the complainants as follows:

Xxxxxxx

Xxxxxx

Xxxxxxx

The other claims are dismissed for lack of merit.

SO ORDERED.29

Proceedings before the National Labor Relations Commission

Petron continued to insist that there is no employer-employee relationship between it and petitioners. The NLRC,
however, was not convinced. In its Decision30 of February 18, 2005, the NLRC ruled that petitioners are Petrons
regular employees because they are performing job assignments which are germane to its main business. Thus:

WHEREFORE, premises considered, the Decision of the Labor Arbiter is hereby affirmed. It is understood that the
grant of backwages shall be until finality of the Decision.

The appeal of respondent Petron Corporation is hereby DISMISSED for lack of merit.

SO ORDERED.31

The NLRC also denied Petrons Motion for Reconsideration in its Resolution32 of August 24, 2005.

Proceedings before the Court of Appeals

Petron filed a Petition for Certiorari with prayer for the issuance of a temporary restraining order or writ of injunction
before the CA. The said court resolved to grant the injunction.33 Hence, a Writ of Preliminary Injunction34 to restrain
the implementation of the February 18, 2005 Decision and August 24, 2005 Resolution of the NLRC was issued on
March 3, 2006.

In a Decision35 dated May 10, 2006, the CA found no employer-employee relationship between the parties. According
to it, the records of the case do not show that petitioners were directly hired, selected or employed by Petron; that their
wages and other wage related benefits were paid by the said company; and that Petron controlled the manner by which
they carried out their tasks. On the other hand, RDG was shown to be responsible for paying petitioners wages. In fact,
SSS records show that RDG is their employer and actually the one remitting their contributions thereto. Also, two
former employees of RDG who were likewise assigned in the Mandaue Bulk Plant confirmed by way of a joint
affidavit that it was Romeo and his brother Alejandre Gindang who supervised their work, not Petrons foreman or
supervisor. This was even corroborated by the Terminal Superintendent of the Mandaue Bulk Plant.

The CA also found RDG to be an independent labor contractor with sufficient capitalization and investment as shown
by its financial statement for year-end 2000. In addition, the works for which RDG was contracted to provide were
menial which were neither directly related nor sensitive and critical to Petrons principal business. The CA disposed of
the case as follows:
WHEREFORE, the Petition is GRANTED. The February 18, 2005 Decision and the August 24, 2005 Resolution of the
Fourth Division of the National Labor Relations Commission in NLRC Case No. V-000481-2003, entitled "Teodoro
Calesa et al. vs. Petron Corporation and R.D. Gindang Services", having been rendered with grave abuse of discretion
amounting to excess of jurisdiction, are hereby REVERSED and SET ASIDE and a NEW ONE is entered
DISMISSING private respondents complaint against petitioner. It is so ordered.36

Petitioners filed a Motion for Reconsideration37 insisting that Petron illegally dismissed them; that RDG is a labor-only
contractor; and that they performed jobs which are sensitive to Petrons business operations. To support these, they
attached to their Supplemental Motion for Reconsideration38 Affidavits39 of former employees of Petron attesting to the
fact that their jobs were critical to Petrons business operations and that they were carried out under the control of a
Petron employee.

Petitioners motions were, however, denied by the CA in a Resolution40 dated March 30, 2007.

Hence, this Petition.

Issue

The primary issue to be resolved in this case is whether RDG is a legitimate job contractor. Upon such finding hinges
the determination of whether an employer-employee relationship exists between the parties as to make Petron liable for
petitioners dismissal.

Our Ruling

The Petition is impressed with merit. The conflicting findings of the Labor Arbiter and the NLRC on one hand, and of
the CA on the other, constrains the Court to review the factual issues involved in this case.

As a general rule, the Court does not review errors that raise factual questions. 41 Nonetheless, while it is true that the
determination of whether an employer-employee relationship existed between the parties basically involves a question
of fact, the conflicting findings of the Labor Arbiter and the NLRC on one hand, and of the CA on the other, constrains
the Court to review and reevaluate such factual findings.42

Labor-only contracting, distinguished

from permissible job contracting.

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

Section 4. x x x

xxxx

(f) "Labor-only contracting" prohibited under this Rule is an arrangement where the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or service for a principal and the following elements are
present:

(i) The contractor or subcontractor does not have substantial capital or investment to actually perform the job,
work or service under its own account and responsibility; and

(ii) The employees recruited, supplied or placed by such contractor or subcontractor are performing activities
which are directly related to the main business of the principal.

xxxx

Section 6. Permissible contracting or subcontracting. - Subject to the conditions set forth in Section 3 (d) and (e) and
Section 5 hereof, the principal may engage the services of a contractor or subcontractor for the performance of any of
the following:

(a) Works or services temporarily or occasionally needed to meet abnormal increase in the demand of products
or services, provided that the normal production capacity or regular workforce of the principal cannot
reasonably cope with such demands;

(b) Works or services temporarily or occasionally needed by the principal for undertakings requiring expert or
highly technical personnel to improve the management or operations of an enterprise;

(c) Services temporarily needed for the introduction or promotion of new products, only for the duration of the
introductory or promotional period;
(d) Works or services not directly related or not integral to the main business or operation of the principal,
including casual work, janitorial, security, landscaping, and messengerial services, and work not related to
manufacturing processes in manufacturing establishments;

(e) Services involving the public display of manufacturers products which do not involve the act of selling or
issuance of receipts or invoices;

(f) Specialized works involving the use of some particular, unusual or peculiar skills, expertise, tools or
equipment the performance of which is beyond the competence of the regular workforce or production capacity
of the principal; and

(g) Unless a reliever system is in place among the regular workforce, substitute services for absent regular
employees, provided that the period of service shall be coextensive with the period of absence and the same is
made clear to the substitute employee at the time of engagement. The phrase "absent regular employees"
includes those who are serving suspensions or other disciplinary measures not amounting to termination of
employment meted out by the principal, but excludes those on strike where all the formal requisites for the
legality of the strike have been prima facie complied with based on the records filed with the National
Conciliation and Mediation Board.

"Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to farm out with a
contractor or subcontractor the performance of a specific job, work, or service within a definite or predetermined
period, regardless of whether such job, work or, service is to be performed or completed within or outside the premises
of the principal. Under this arrangement, the following conditions must be met: (a) the contractor carries on a distinct
and independent business and undertakes the contract work on his account under his own responsibility according to
his own manner and method, free from the control and direction of his employer or principal in all matters connected
with the performance of his work except as to the results thereof; (b) the contractor has substantial capital or
investment; and (c) the agreement between the principal and contractor or subcontractor assures the contractual
employees entitlement to all labor and occupational safety and health standards, free exercise of the right to self-
organization, security of tenure, and social welfare benefits." 44 Labor-only contracting, on the other hand, is a
prohibited act, defined as "supplying workers to an employer who does not have substantial capital or investment in the
form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such
person are performing activities which are directly related to the principal business of such employer." 45 "[I]n
distinguishing between prohibited labor-only contracting and permissible job contracting, the totality of the facts and
the surrounding circumstances of the case shall be considered." 46 Generally, the contractor is presumed to be a labor-
only contractor, unless such contractor overcomes the burden of proving that it has the substantial capital, investment,
tools and the like. However, where the principal is the one claiming that the contractor is a legitimate contractor, as in
the present case, said principal has the burden of proving that supposed status. 47 It is thus incumbent upon Petron, and
not upon petitioners as Petron insists,48 to prove that RDG is an independent contractor.

Petron failed to discharge the burden of proving that RDG is a legitimate contractor. Hence, the presumption
that RDG is a labor-only contractor stands.

Here, the audited financial statements and other financial documents of RDG for the years 1999 to 2001 establish that
it does have sufficient working capital to meet the requirements of its service contract. In fact, the financial evaluation
conducted by Petron of RDGs financial statements for years 1998-2000 showed RDG to have a maximum financial
capability of Php4.807 Million as of December 1998,49 and Php1.611 Million as of December 2000.50 Petron was able
to establish RDGs sufficient capitalization when it entered into the service contract in 2000. The Court stresses though
that this determination of RDGs status as an independent contractor is only with respect to its financial capability for
the period covered by the financial and other documents presented. In other words, the evidence adduced merely
proves that RDG was financially qualified as a legitimate contractor but only with respect to its last service contract
with Petron in the year 2000.

As may be recalled, petitioners have rendered work for Petron for a long period of time even before the service contract
was executed in 2000. The respective dates on which petitioners claim to have started working for Petron, as well as
the fact that they have rendered continuous service to it until October 16, 2002, when they were prevented from
entering the premises of Petrons Mandaue Bulk Plant, were not at all disputed by Petron. In fact, Petron even
recognized that some of the petitioners were initially fielded by Romualdo Gindang, the father of Romeo, through
RDGs precursor, Romualdo D.Gindang Contractor, while the others were provided by Romeo himself when he took
over the business of his father in 1989.1wphi1 Hence, while Petron was able to establish that RDG was financially
capable as a legitimate contractor at the time of the execution of the service contract in 2000, it nevertheless failed to
establish the financial capability of RDG at the time when petitioners actually started to work for Petron in 1968, 1979,
1981, 1987, 1990,1992 and 1993.

Sections 8 and 9,Rule VIII, Book III51 of the implementing rules of the Labor Code, in force since 1976 and prior to
DOLE Department Order No. 10, series of 1997,52 provide that for job contracting to be permissible, one of the
conditions that has to be met is that the contractor must have substantial capital or investment. Petron having failed to
show that this condition was met by RDG, it can be concluded, on this score alone, that RDG is a mere labor-only
contractor. Otherwise stated, the presumption that RDG is a labor-only contractor stands due to the failure of Petron to
discharge the burden of proving the contrary.
The Court also finds, as will be discussed below, that the works performed by petitioners were directly related to
Petrons business, another factor which negates Petrons claim that RDG is an independent contractor.

Petrons power of control over petitioners exists in this case.

"[A] finding that a contractor is a labor-only contractor is equivalent to declaring that there is an employer-employee
relationship between the principal and the employees of the supposed contractor." 53 In this case, the employer
employee relationship between Petron and petitioners becomes all the more apparent due to the presence of the power
of control on the part of the former over the latter.

It was held in Orozco v. The Fifth Division of the Hon. Court of Appeals54 that:

This Court has constantly adhered to the "four-fold test" to determine whether there exists an employer-employee
relationship between the parties. The four elements of an employment relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the power to control the
employees conduct.

Of these four elements, it is the power to control which is the most crucial and most determinative factor, so important,
in fact, that, the other elements may even be disregarded." (Emphasis supplied)

Hence, the facts that petitioners were hired by Romeo or his father and that their salaries were paid by them do not
detract from the conclusion that there exists an employer-employee relationship between the parties due to Petrons
power of control over the petitioners. One manifestation of the power of control is the power to transfer employees
from one work assignment to another.55 Here, Petron could order petitioners to do work outside of their regular
"maintenance/utility" job. Also, petitioners were required to report for work everyday at the bulk plant, observe an 8:00
a.m. to 5:00 p.m. daily work schedule, and wear proper uniform and safety helmets as prescribed by the safety and
security measures being implemented within the bulk plant. All these imply control. In an industry where safety is of
paramount concern, control and supervision over sensitive operations, such as those performed by the petitioners, are
inevitable if not at all necessary. Indeed, Petron deals with commodities that are highly volatile and flammable which,
if mishandled or not properly attended to, may cause serious injuries and damage to property and the environment.
Naturally, supervision by Petron is essential in every aspect of its product handling in order not to compromise the
integrity, quality and safety of the products that it distributes to the consuming public.

Petitioners already attained regular status as employees of Petron.

Petitioners were given various work assignments such as tanker receiving, barge loading, sounding, gauging,
warehousing, mixing, painting, carpentry, driving, gasul filling and other utility works. Petron refers to these work
assignments as menial works which could be performed by any able-bodied individual. The Court finds, however, that
while the jobs performed by petitioners may be menial and mechanical, they are nevertheless necessary and related to
Petrons business operations. If not for these tasks, Petrons products will not reach the consumers in their proper state.
Indeed, petitioners roles were vital inasmuch as they involve the preparation of the products that Petron will distribute
to its consumers.

Furthermore, while it may be true that any able-bodied individual can perform the tasks assigned to petitioners, the
Court notes the undisputed fact that for many years, it was the same able-bodied individuals (petitioners) who
performed the tasks for Petron. The engagement of petitioners for the same works for a long period of time is a strong
indication that such works were indeed necessary to Petrons business. In view of these, and considering further that
petitioners length of service entitles them to become regular employees under the Labor Code, petitioners are deemed
by law to have already attained the status as Petrons regular employees. As such, Petron could not terminate their
services on the pretext that the service contract it entered with RDG has already lapsed. For one, and as previously
discussed, such regular status had already attached to them even before the execution of the service contract in 2000.
For another, the same does not constitute a just or authorized cause for a valid dismissal of regular employees.

In sum, the Court finds that RDG is a labor-only contractor. As such, it is considered merely as an agent of Petron.
Consequently, the employer-employee relationship which the Court finds to exist in this case is between petitioners as
employees and Petron as their employer. Petron therefore, being the principal employer and RDG, being the labor-only
contractor, are solidarily liable for petitioners' illegal dismissal and monetary claims.56

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

SO ORDERED.
January 13, 2016
G.R. Nos. 173254-55 & 173263
DIAMOND FARMS, INC., Petitioner, vs.
SOUTHERN PHILIPPINES FEDERATION OF LABOR (SPFL)-WORKERS SOLIDARITY OF
DARBMUPCO/DIAMOND-SPFL, DIAMOND FARMS AGRARIAN REFORM BENEFICIARIES MULTI-
PURPOSE COOPERATIVE (DARBMUPCO), VOLTER LOPEZ, RUEL ROMERO, PATRICIO CAPRECHO,
REY DIMACALI, ELESIO EMANEL, VICTOR SINGSON, NILDA DIMACALI, PREMITIVO * DIAZ, RUDY
VISTAL, ROGER MONTERO, JOSISIMO GOMEZ and MANUEL MOSQUERA, Respondents.

We resolve in this Petition for Review1 under Rule 45 of the Rules of Court, the issue of who among Diamond Farms,
Inc. ("DFI"), Diamond Farms Agrarian Reform Beneficiaries Multi-Purpose Cooperative ("DARBMUPCO") and the
individual contractors2 ("respondent-contractors") is the employer of the 400 employees ("respondent-workers").

DFI challenges the March 31, 2006 Decision3 and May 30, 2006 Resolution4 of the Court Appeals, Special Twenty-
Second Division, Cagayan De Oro City for being contrary to law and jurisprudence. The Decision dismissed DFIs
Petition for Certiorari in C.A.-G.R. SP Nos. 53806 and 61607 and granted DARBMUPCOs Petition for Certiorari in
C.A.-G.R. SP No. 59958. It declared DFI as the statutory employer of the respondent-workers.

The Facts

DFI owns an 800-hectare banana plantation ("original plantation") in Alejal, Carmen, Davao. 5 Pursuant to Republic
Act No. 6657 or the Comprehensive Agrarian Reform Law of 1988 ("CARL"), commercial farms shall be subject to
compulsory acquisition and distribution,6 thus the original plantation was covered by the law. However, the
Department of Agrarian Reform ("DAR") granted DFI a deferment privilege to continue agricultural operations until
1998.7 Due to adverse marketing problems and observance of the so-called "lay-follow" or the resting of a parcel of
land for a certain period of time after exhaustive utilization, DFI closed some areas of operation in the original
plantation and laid off its employees.8 These employees petitioned the DAR for the cancellation of DFIs deferment
privilege alleging that DFI already abandoned its area of operations. 9 The DAR Regional Director recalled DFIs
deferment privilege resulting in the original plantations automatic compulsory acquisition and distribution under the
CARL.10 DFI filed a motion for reconsideration which was denied. It then appealed to the DAR Secretary.11

In the meantime, to minimize losses, DFI offered to give up its rights and interest over the original plantation in favor
of the government by way of a Voluntary Offer to Sell.12 The DAR accepted DFIs offer to sell the original plantation.
However, out of the total 800 hectares, the DAR only approved the disposition of 689.88 hectares. Hence, the original
plantation was split into two: 689.88 hectares were sold to the government ("awarded plantation") and the remaining
200 hectares, more or less, were retained by DFI ("managed area").13 The managed area is subject to the outcome of the
appeal on the cancellation of the deferment privilege before the DAR Secretary.

On January 1, 1996, the awarded plantation was turned over to qualified agrarian reform beneficiaries ("ARBs") under
the CARL. These ARBs are the same farmers who were working in the original plantation. They subsequently
organized themselves into a multi-purpose cooperative named "DARBMUPCO," which is one of the respondents in
this case.14

On March 27, 1996, DARBMUPCO entered into a Banana Production and Purchase Agreement ("BPPA") 15 with
DFI.16 Under the BPPA, DARBMUPCO and its members as owners of the awarded plantation, agreed to grow and
cultivate only high grade quality exportable bananas to be sold exclusively to DFI. 17 The BPPA is effective for 10
years.18

On April 20, 1996, DARBMUPCO and DFI executed a "Supplemental to Memorandum Agreement" ("SMA"). 19 The
SMA stated that DFI shall take care of the labor cost arising from the packaging operation, cable maintenance,
irrigation pump and irrigation maintenance that the workers of DARBMUPCO shall conduct for DFIs account under
the BPPA.20

From the start, DARBMUPCO was hampered by lack of manpower to undertake the agricultural operation under the
BPPA because some of its members were not willing to work.21 Hence, to assist DARBMUPCO in meeting its
production obligations under the BPPA, DFI engaged the services of the respondent-contractors, who in turn recruited
the respondent-workers.22

The engagement of the respondent-workers, as will be seen below, started a series of labor disputes among
DARBMUPCO, DFI and the respondent-contractors.

C.A. G.R. SP No. 53806

On February 10, 1997, respondent Southern Philippines Federation of Labor ("SPFL")a legitimate labor organization
with a local chapter in the awarded plantationfiled a petition for certification election in the Office of the Med-
Arbiter in Davao City.23 SPFL filed the petition on behalf of some 400 workers (the respondent-workers in this
petition) "jointly employed by DFI and DARBMUPCO" working in the awarded plantation.
DARBMUPCO and DFI denied that they are the employers of the respondent-workers. They claimed, instead, that the
respondent-workers are the employees of the respondent-contractors.24

In an Order dated May 14, 1997,25 the Med-Arbiter granted the petition for certification election. It directed the
conduct of certification election and declared that DARBMUPCO was the employer of the respondent-workers. The
Order stated that "whether the said workers/employees were hired by independent contractors is of no moment. What is
material is that they were hired purposely to work on the 689.88 hectares banana plantation [the awarded plantation]
now owned and operated by DARBMUPCO."26

DARBMUPCO appealed to the Secretary of Labor and Employment ("SOLE"). In a Resolution dated February 18,
1999,27 the SOLE modified the decision of the Med-Arbiter. The SOLE held that DFI, through its manager and
personnel, supervised and directed the performance of the work of the respondentcontractors. The SOLE thus declared
DFI as the employer of the respondent-workers.28

DFI filed a motion for reconsideration which the SOLE denied in a Resolution dated May 4, 1999.29

On June 11, 1999, DFI elevated the case to the Court of Appeals ("CA") via a Petition for Certiorari30 under Rule 65 of
the Rules of Court. The case was raffled to the CAs former Twelfth Division and was docketed as C.A.-G.R. SP No.
53806.

C.A.-G.R. SP. No. 59958

Meanwhile, on June 20, 199731 and September 15, 1997,32 SPFL, together with more than 300 workers, filed a case for
underpayment of wages, non-payment of 13th month pay and service incentive leave pay and attorneys fees against
DFI, DARBMUPCO and the respondent-contractors before the National Labor Relations Commission ("NLRC") in
Davao City. DARBMUPCO averred that it is not the employer of respondent-workers; neither is DFI. It asserted that
the money claims should be directed against the true employerthe respondent-contractors.33

In a Decision dated January 22, 1999,34 the Labor Arbiter ("LA") held that the respondent-contractors are "labor-only
contractors." The LA gave credence to the affidavits of the other contractors35 of DFI (who are not party-respondents in
this petition) asserting that DFI engaged their services, and supervised and paid their laborers. The affidavits also stated
that the contractors had no dealings with DARBMUPCO, except that their work is done in the awarded plantation.36

The LA held that, under the law, DFI is deemed as the statutory employer of all the respondent-workers.37 The LA
dismissed the case against DARBMUPCO and the respondent-contractors.38

DFI appealed to the NLRC. In a Resolution dated May 24, 1999, 39 the NLRC Fifth Division modified the Decision of
the LA and declared that DARBMUPCO and DFI are the statutory employers of the workers rendering services in the
awarded plantation and the managed area, respectively.40 It adjudged DFI and DARBMUPCO as solidarily liable with
the respondent-contractors for the monetary claims of the workers, in proportion to their net planted area.41

DARBMUPCO filed a motion for reconsideration which was denied.42 It filed a second motion for reconsideration in
the NLRC, which was also denied for lack of merit and for being barred under the NLRC Rules of Procedure.43Hence,
DARBMUPCO elevated the case to the CA by way of a Petition for Certiorari.44 The case was docketed as C.A.-G.R.
SP. No. 59958.

The former Eleventh Division of the CA consolidated C.A. G.R. SP. No. 59958 and C.A.-G.R. SP No. 53806 in a
Resolution dated January 27, 2001.45

C.A.-G.R. SP No. 61607

Pursuant to the May 4, 1999 Resolution of the SOLE approving the conduct of certification election, the Department of
Labor and Employment ("DOLE") conducted a certification election on October 1, 1999. 46 On even date, DFI filed an
election protest47 before the Med-Arbiter arguing that the certification election was premature due to the pendency of a
petition for certiorari before the CA assailing the February 18, 1999 and May 4, 1999 Resolutions of the SOLE
(previously discussed in C.A.-G.R. SP No. 53806).

In an Order dated December 15, 1999,48 the Med-Arbiter denied DFIs election protest, and certified SPFL-Workers
Solidarity of DARBMUPCO/DIAMOND-SPFL ("WSD-SPFL") as the exclusive bargaining representative of the
respondent-workers. DFI filed a Motion for Reconsideration49 which the Med-Arbiter treated as an appeal, and which
the latter elevated to the SOLE.

In a Resolution dated July 18, 2000,50 the SOLE dismissed the appeal. The Resolution stated that the May 4, 1999
Resolution directing the conduct of certification election is already final and executory on June 4, 1999. It pointed out
that the filing of the petition for certiorari before the CA assailing the February 18, 1999 and May 4, 1999 Resolutions
does not stay the conduct of the certification election because the CA did not issue a restraining order. 51DFI filed a
Motion for Reconsideration but the motion was denied.52
On October 27, 2000, DFI filed a Petition for Certiorari53 before the CA, docketed as C.A.-G.R. SP No. 61607.

In a Resolution dated August 2, 2005,54 the CA Twenty-Third Division consolidated C.A.-G.R. SP No. 61607 with
C.A.-G.R. SP. No. 59958 and C.A. G.R. SP No. 53806.

The Assailed CA Decision and Resolution

The CA was confronted with two issues:55

(1) "Whether DFI or DARBMUPCO is the statutory employer of the [respondent-workers] in these petitions;
and

(2) Whether or not a certification election may be conducted pending the resolution of the petition
for certiorari filed before this Court, the main issue of which is the identity of the employer of the [respondent-
workers] in these petitions."

On the first issue, the CA agreed with the ruling of the SOLE56 that DFI is the statutory employer of the respondent-
workers. It noted that the DFI hired the respondent-contractors, who in turn procured their own men to work in the land
owned by DARBMUPCO. Further, DFI admitted that the respondent-contractors worked under the direction and
supervision of DFIs managers and personnel. DFI also paid for the respondent-contractors services.57 The CA said
that the fact that the respondent-workers worked in the land owned by DARBMUPCO is immaterial. "Ownership of
the land is not one of the four (4) elements generally considered to establish employer-employee relationship."58

The CA also ruled that DFI is the true employer of the respondent-workers because the respondent-contractors are not
independent contractors.59 The CA stressed that in its pleadings before the Med-Arbiter, the SOLE, and the CA, DFI
revealed that DARBMUPCO lacks manpower to fulfill the production requirements under the BPPA. This impelled
DFI to hire contractors to supply labor enabling DARBMUPCO to meet its quota. The CA observed that while the
various agencies involved in the consolidated petitions sometimes differ as to who the statutory employer of the
respondent-workers is, they are uniform in finding that the respondent-contractors are labor-only contractors.60

On the second issue, the CA reiterated the ruling of the SOLE61 that absent an injunction from the CA, the pendency of
a petition for certiorari does not stay the holding of the certification election.62 The challenged Resolution of the SOLE
is already final and executory as evidenced by an Entry of Judgment dated July 14, 1999; hence, the merits of the case
can no longer be reviewed.63

The CA thus held in its Decision dated March 31, 2006:

WHEREFORE, premises considered, this Court hereby ORDERS:

(1) the DISMISSAL of the petitions in C.A.-G.R. SP No. 53806 and C.A.-G.R. SP No. 61607; and

(2) the GRANTING of the petition in C.A.-G.R. SP No. 59958 and the SETTING ASIDE of the assailed
resolutions of the NLRC dated 24 May 1999, 30 July 1999 and 26 June 2000, respectively.

SO ORDERED.64

DFI filed a Motion for Reconsideration of the CA Decision which was denied in a Resolution dated May 30, 2006.65

DFI is now before us by way of Petition for Review on Certiorari praying that DARBMUPCO be declared the true
employer of the respondent-workers.

DARBMUPCO filed a Comment66 maintaining that under the control test, DFI is the true employer of the respondent-
workers.

Respondent-contractors filed a Verified Explanation and Memorandum67 asserting that they were labor-only
contractors; hence, they are merely agents of the true employer of the respondent-workers.

SPFL did not file any comment or memorandum on behalf of the respondent-workers.68

The Issue

The issue before this Court is who among DFI, DARBMUPCO and the respondent-contractors is the employer of the
respondent-workers.

Our Ruling

We deny the petition.


This case involves job contracting, a labor arrangement expressly allowed by law. Contracting or subcontracting is an
arrangement whereby a principal (or employer) agrees to put out or farm out with a contractor or subcontractor the
performance or completion of a specific job, work or service within a definite or predetermined period, regardless of
whether such job, work or service is to be performed or completed within or outside the premises of the principal.69 It
involves a trilateral relationship among the principal or employer, the contractor or subcontractor, and the workers
engaged by the contractor or subcontractor.70

Article 106 of the Labor Code of the Philippines71 (Labor Code) explains the relations which may arise between an
employer, a contractor, and the contractors employees,72 thus:

ART. 106. Contractor or subcontracting. Whenever an employer enters into a contract with another person for the
performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be paid
in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code,
the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of
the work performed under the contract, in the same manner and extent that he is liable to employees directly employed
by him.

The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting out of
labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make
appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these
types of contracting and determine who among the parties involved shall be considered the employer for purposes of
this Code, to prevent any violation or circumvention of any provision of this Code.

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital
or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited
and placed by such person are performing activities which are directly related to the principal business of such
employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall
be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

The Omnibus Rules Implementing the Labor Code73 distinguishes between permissible job contracting (or independent
contractorship) and labor-only contracting. Job contracting is permissible under the Code if the following conditions
are met:

(a) 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

(b) 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.74

In contrast, job contracting shall be deemed as labor-only contracting, an arrangement prohibited by law, if a person
who undertakes to supply workers to an employer:

(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work
premises and other materials; and

(2) The workers recruited and placed by such person are performing activities which are directly related to the
principal business or operations of the employer in which workers are habitually employed.75

As a general rule, a contractor is presumed to be a labor-only contractor, unless such contractor overcomes the burden
of proving that it has the substantial capital, investment, tools and the like.76

Based on the conditions for permissible job contracting, we rule that respondent-contractors are labor-only
contractors.

There is no evidence showing that respondent-contractors are independent contractors. The respondent-contractors,
DFI, and DARBMUPCO did not offer any proof that respondent-contractors were not engaged in labor-only
contracting. In this regard, we cite our ruling in Caro v. Rilloraza,77 thus:

"In regard to the first assignment of error, the defendant company pretends to show through Venancio Nasol's own
testimony that he was an independent contractor who undertook to construct a railway line between Maropadlusan and
Mantalisay, but as far as the record shows, Nasol did not testify that the defendant company had no control over him as
to the manner or methods he employed in pursuing his work. On the contrary, he stated that he was not bonded, and
that he only depended upon the Manila Railroad for money to be paid to his laborers. As stated by counsel for the
plaintiffs, the word independent contractor means 'one who exercises independent employment and contracts to do a
piece of work according to his own methods and without being subject to control of his employer except as to result of
the work.' Furthermore, if the employer claims that the workmen is an independent contractor, for whose acts he is not
responsible, the burden is on him to show his independence.

Tested by these definitions and by the fact that the defendant has presented practically no evidence to determine
whether Venancio Nasol was in reality an independent contractor or not, we are inclined to think that he is
nothing but an intermediary between the defendant and certain laborers. It is indeed difficult to find that Nasol
is an independent contractor; a person who possesses no capital or money of his own to pay his obligations to
them, who files no bond to answer for any fulfillment of his contract with his employer and specially subject to the
control and supervision of his employer, falls short of the requisites or conditions necessary for the common and
independent contractor."78 (Citations omitted; emphasis supplied.)

To support its argument that respondent-contractors are the employers of respondent-workers, and not merely labor-
only contractors, DFI should have presented proof showing that respondent-contractors carry on an independent
business and have sufficient capitalization. The record, however, is bereft of showing of even an attempt on the part of
DFI to substantiate its argument.

DFI cannot cite the May 24, 1999 Resolution of the NLRC as basis that respondent-contractors are independent
contractors. Nowhere in the NLRC Resolution does it say that the respondent-contractors are independent contractors.
On the contrary, the NLRC declared that "it was not clearly established on record that said [respondent-]contractors are
independent, xxx."79

Further, respondent-contractors admit, and even insist that they are engaged in labor-only contracting. As will be seen
below, respondent-contractors made the admissions and declarations on two occasions: first was in their Formal
Appearance of Counsel and Motion for Exclusion of Individual Party-Respondents filed before the LA;
and second was in their Verified Explanation and Memorandum filed before this Court.

Before the LA, respondent-contractors categorically stated that they are "labor-only" contractors who have been
engaged by DFI and DARBMUPCO.80 They admitted that they do not have substantial capital or investment in the
form of tools, equipment, machineries, work premises and other materials, and they recruited workers to perform
activities directly related to the principal operations of their employer.81

Before this Court, respondents-contractors again admitted that they are labor-only contractors. They narrated that:

1. Herein respondents, Voltaire Lopez, Jr., et al., were commissioned and contracted by petitioner,
Diamond Farms, Inc. (DFI) to recruit farm workers, who are the complaining [respondent-workers] (as
represented by Southern Philippines Federation of Labor (SPFL) in this appeal by certiorari), in order to
perform specific farm activities, such as pruning, deleafing, fertilizer application, bud inject, stem spray,
drainage, bagging, etc., on banana plantation lands awarded to private respondent, Diamond Farms Agrarian
Reform Beneficiaries Multi-Purpose Cooperative (DARBMUPCO) and on banana planted lands owned and
managed by petitioner, DFI.

2. All farm tools, implements and equipment necessary to performance of such farm activities were supplied
by petitioner DFI to respondents Voltaire Lopez, Jr., et. al. as well as to respondents-SPFL, et. al. Herein
respondents Voltaire Lopez, Jr. et. al. had no adequate capital to acquire or purchase such tools,
implements, equipment, etc.

3. Herein respondents Voltaire Lopez, Jr., et. al. As well as respondents-SPFL, et. al. were being directly
supervised, controlled and managed by petitioner DFI farm managers and supervisors, specifically on
work assignments and performance targets. DFI managers and supervisors, at their sole discretion and
prerogative, could directly hire and terminate any or all of the respondents-SPFL, et. al., including any or all of
the herein respondents Voltaire Lopez, Jr., et. al.

4. Attendance/Time sheets of respondents-SPFL, et. al. were being prepared by herein respondents Voltaire
Lopez, Jr., et. al., and correspondingly submitted to petitioner DFI. Payment of wages to respondents-SPFL, et.
al. were being paid for by petitioner DFI thru herein respondents Voltaire Lopez, [Jr.], et. al. The latter were
also receiving their wages/salaries from petitioner DFI for monitoring/leading/recruiting the respondents-
SPFL, et. al.

5. No monies were being paid directly by private respondent DARBMUPCO to respondents-SPFL, et al., nor
to herein respondents Voltaire Lopez, [Jr.], et. al. Nor did respondent DARBMUPCO directly intervene much
less supervise any or all of [the] respondents-SPFL, et. al. including herein respondents Voltaire Lopez, Jr., et.
al.82 (Emphasis supplied.)

The foregoing admissions are legally binding on respondent-contractors.83 Judicial admissions made by parties in the
pleadings, or in the course of the trial or other proceedings in the same case are conclusive and so does not require
further evidence to prove them.84 Here, the respondent-contractors voluntarily pleaded that they are labor-only
contractors; hence, these admissions bind them.
A finding that a contractor is a labor-only contractor is equivalent to a declaration that there is an employer-employee
relationship between the principal, and the workers of the labor-only contractor; the labor-only contractor is deemed
only as the agent of the principal.85 Thus, in this case, respondent-contractors are the labor-only contractors and either
DFI or DARBMUPCO is their principal.

We hold that DFI is the principal.

Under Article 106 of the Labor Code, a principal or employer refers to the person who enters into an agreement with a
job contractor, either for the performance of a specified work or for the supply of manpower. 86 In this regard, we quote
with approval the findings of the CA, to wit:

The records show that it is DFI which hired the individual [respondent-contractors] who in turn hired their own
men to work in the 689.88 hectares land of DARBMUPCO as well as in the managed area of the plantation. DFI
admits [that] these [respondent-contractors] worked under the direction and supervision of the DFI managers and
personnel. DFI paid the [respondent-contractors] for the services rendered in the plantation and the [respondent-
contractors] in turn pay their workers after they [respondent-contractors] received payment from DFI. xxx
DARBMUPCO did not have anything to do with the hiring, supervision and payment of the wages of the workers-
respondents thru the contractors-respondents. xxx87 (Emphasis supplied.)

DFI does not deny that it engaged the services of the respondent-contractors. It does not dispute the claims of
respondent-contractors that they sent their billing to DFI for payment; and that DFIs managers and personnel are in
close consultation with the respondent-contractors.88

DFI cannot argue that DARBMUPCO is the principal of the respondent-contractors because it (DARBMUPCO) owns
the awarded plantation where respondent-contractors and respondent-workers were working;89 and therefore
DARBMUPCO is the ultimate beneficiary of the employment of the respondent-workers.90

That DARBMUPCO owns the awarded plantation where the respondent-contractors and respondent-workers were
working is immaterial. This does not change the situation of the parties. As correctly found by the CA, DFI, as the
principal, hired the respondent-contractors and the latter, in turn, engaged the services of the respondent-workers.91This
was also the unanimous finding of the SOLE,92 the LA,93 and the NLRC.94 Factual findings of the NLRC, when they
coincide with the LA and affirmed by the CA are accorded with great weight and respect and even finality by this
Court.95

Alilin v. Petron Corporation96 is applicable. In that case, this Court ruled that the presence of the power of control on
the part of the principal over the workers of the contractor, under the facts, prove the employer-employee relationship
between the former and the latter, thus:

[A] finding that a contractor is a labor-only contractor is equivalent to declaring that there is an employer-employee
relationship between the principal and the employees of the supposed contractor." In this case, the employer-
employee relationship between Petron and petitioners becomes all the more apparent due to the presence of the
power of control on the part of the former over the latter.

It was held in Orozco v. The Fifth Division of the Hon. Court of Appeals that:

This Court has constantly adhered to the "four-fold test" to determine whether there exists an employer-employee
relationship between the parties.1wphi1 The four elements of an employment relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the power to control the
employees conduct.

Of these four elements, it is the power to control which is the most crucial and most determinative factor, so
important, in fact, that, the other elements may even be disregarded.

Hence, the facts that petitioners were hired by Romeo or his father and that their salaries were paid by them do not
detract from the conclusion that there exists an employer-employee relationship between the parties due to Petrons
power of control over the petitioners. One manifestation of the power of control is the power to transfer employees
from one work assignment to another. Here, Petron could order petitioners to do work outside of their regular
"maintenance/utility" job. Also, petitioners were required to report for work everyday at the bulk plant, observe an 8:00
a.m. to 5:00 p.m. daily work schedule, and wear proper uniform and safety helmets as prescribed by the safety and
security measures being implemented within the bulk plant. All these imply control. In an industry where safety is of
paramount concern, control and supervision over sensitive operations, such as those performed by the petitioners, are
inevitable if not at all necessary. Indeed, Petron deals with commodities that are highly volatile and flammable which,
if mishandled or not properly attended to, may cause serious injuries and damage to property and the environment.
Naturally, supervision by Petron is essential in every aspect of its product handling in order not to compromise the
integrity, quality and safety of the products that it distributes to the consuming public. 97 (Citations omitted; emphasis
supplied)

That DFI is the employer of the respondent-workers is bolstered by the CAs finding that DFI exercises control over
the respondent-workers.98 DFI, through its manager and supervisors provides for the work assignments and
performance targets of the respondent-workers. The managers and supervisors also have the power to directly hire and
terminate the respondent-workers.99 Evidently, DFI wields control over the respondent-workers.

Neither can DFI argue that it is only the purchaser of the bananas produced in the awarded plantation under the
BPPA,100 and that under the terms of the BPPA, no employer-employee relationship exists between DFI and the
respondent-workers,101 to wit:

UNDERTAKING OF THE FIRST PARTY

xxx

3. THE FIRST PARTY [DARBMUPCO] shall be responsible for the proper conduct, safety, benefits and general
welfare of its members working in the plantation and specifically render free and harmless the SECOND PARTY
[DFI] of any expense, liability or claims arising therefrom. It is clearly recognized by the FIRST PARTY that its
members and other personnel utilized in the performance of its function under this agreement are not
employees of the SECOND PARTY.102 (Emphasis supplied)

In labor-only contracting, it is the law which creates an employer-employee relationship between the principal and the
workers of the labor-only contractor.103

Inasmuch as it is the law that forms the employment ties, the stipulation in the BPPA that respondent-workers are not
employees of DFI is not controlling, as the proven facts show otherwise. The law prevails over the stipulations of the
parties. Thus, in Tabas v. California Manufacturing Co., Inc.,104 we held that:

The existence of an employer-employees relation is a question of law and being such, it cannot be made the
subject of agreement.1wphi1 Hence, the fact that the manpower supply agreement between Livi and California had
specifically designated the former as the petitioners' employer and had absolved the latter from any liability as an
employer, will not erase either party's obligations as an employer, if an employer-employee relation otherwise exists
between the workers and either firm. xxx105 (Emphasis supplied.)

Clearly, DFI is the true employer of the respondent-workers; respondent-contractors are only agents of DFI. Under
Article 106 of the Labor Code, DFI shall be solidarily liable with the respondent-contractors for the rightful claims of
the respondent-workers, to the same manner and extent as if the latter are directly employed by DFI.106

WHEREFORE, the petition is DENIED for lack of merit. The March 31, 2006 Decision and the May 30, 2006
Resolution of the Court of Appeals in C.A.-G.R. SP Nos. 53806, 61607 and 59958 are hereby AFFIRMED.

SO ORDERED.
G.R. No. 186091 December 15, 2010
EMMANUEL BABAS, DANILO T. BANAG, ARTURO V. VILLARIN, SR., EDWIN JAVIER, SANDI BERMEO,
REX ALLESA, MAXIMO SORIANO, JR., ARSENIO ESTORQUE, and FELIXBERTO ANAJAO, Petitioners,
vs. LORENZO SHIPPING CORPORATION, Respondent.

Petitioners Emmanuel Babas, Danilo T. Banag, Arturo V. Villarin, Sr., Edwin Javier, Sandi Bermeo, Rex Allesa,
Maximo Soriano, Jr., Arsenio Estorque, and Felixberto Anajao appeal by certiorari under Rule 45 of the Rules of Court
the October 10, 2008 Decision1 of the Court of Appeals (CA) in CA-G.R. SP. No. 103804, and the January 21, 2009
Resolution,2 denying its reconsideration.

Respondent Lorenzo Shipping Corporation (LSC) is a duly organized domestic corporation engaged in the shipping
industry; it owns several equipment necessary for its business. On September 29, 1997, LSC entered into a General
Equipment Maintenance Repair and Management Services Agreement 3 (Agreement) with Best Manpower Services,
Inc. (BMSI). Under the Agreement, BMSI undertook to provide maintenance and repair services to LSCs container
vans, heavy equipment, trailer chassis, and generator sets. BMSI further undertook to provide checkers to inspect all
containers received for loading to and/or unloading from its vessels.

Simultaneous with the execution of the Agreement, LSC leased its equipment, tools, and tractors to BMSI. 4 The period
of lease was coterminous with the Agreement.

BMSI then hired petitioners on various dates to work at LSC as checkers, welders, utility men, clerks, forklift
operators, motor pool and machine shop workers, technicians, trailer drivers, and mechanics. Six years later, or on May
1, 2003, LSC entered into another contract with BMSI, this time, a service contract.5

In September 2003, petitioners filed with the Labor Arbiter (LA) a complaint for regularization against LSC and BMSI.
On October 1, 2003, LSC terminated the Agreement, effective October 31, 2003. Consequently, petitioners lost their
employment.

BMSI asserted that it is an independent contractor. It averred that it was willing to regularize petitioners; however,
some of them lacked the requisite qualifications for the job. BMSI was willing to reassign petitioners who were willing
to accept reassignment. BMSI denied petitioners claim for underpayment of wages and non-payment of 13th month
pay and other benefits.

LSC, on the other hand, averred that petitioners were employees of BMSI and were assigned to LSC by virtue of the
Agreement. BMSI is an independent job contractor with substantial capital or investment in the form of tools,
equipment, and machinery necessary in the conduct of its business. The Agreement between LSC and BMSI
constituted legitimate job contracting. Thus, petitioners were employees of BMSI and not of LSC.

After due proceedings, the LA rendered a decision6 dismissing petitioners complaint. The LA found that petitioners
were employees of BMSI. It was BMSI which hired petitioners, paid their wages, and exercised control over them.

Petitioners appealed to the National Labor Relations Commission (NLRC), arguing that BMSI was engaged in labor-
only contracting. They insisted that their employer was LSC.

On January 16, 2008, the NLRC promulgated its decision.7 Reversing the LA, the NLRC held:

We find from the records of this case that respondent BMSI is not engaged in legitimate job contracting.

First, respondent BMSI has no equipment, no office premises, no capital and no investments as shown in the
Agreement itself which states:

xxxx

VI. RENTAL OF EQUIPMENT

[6.01.] That the CLIENT has several forklifts and truck tractor, and has offered to the CONTRACTOR the use of the
same by way of lease, the monthly rental of which shall be deducted from the total monthly billings of the
CONTRACTOR for the services covered by this Agreement.

6.02. That the CONTRACTOR has agreed to rent the CLIENTs forklifts and truck tractor.

6.03. The parties herein have agreed to execute a Contract of Lease for the forklifts and truck tractor that will be rented
by the CONTRACTOR. (p. 389, Records)

True enough, parties signed a Lease Contract (p. 392, Records) wherein respondent BMSI leased several excess
equipment of LSC to enable it to discharge its obligation under the Agreement. So without the equipment which
respondent BMSI leased from respondent LSC, the former would not be able to perform its commitments in the
Agreement.
In Phil. Fuji Xerox Corp. v. NLRC (254 SCRA 294) the Supreme Court held:

x x x. 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. (underscoring ours)

Second, respondent BMSI has no independent business or activity or job to perform in respondent LSC free from the
control of respondent LSC except as to the results thereof. In view of the absence of such independent business or
activity or job to be performed by respondent BMSI in respondent LSC [petitioners] performed work that was
necessary and desirable to the main business of respondent LSC. Respondents were not able to refute the allegations of
[petitioners] that they performed the same work that the regular workers of LSC performed and they stood side by side
with regular employees of respondent LSC performing the same work. Necessarily, the control on the manner and
method of doing the work was exercised by respondent LSC and not by respondent BMSI since the latter had no
business of its own to perform in respondent LSC.

Lastly, respondent BMSI has no other client but respondent LSC. If respondent BMSI were a going concern, it would
have other clients to which to assign [petitioners] after its Agreement with LSC expired. Since there is only one client,
respondent LSC, it is easy to conclude that respondent BMSI is a mere supplier of labor.

After concluding that respondent BMSI is engaged in prohibited labor-only contracting, respondent LSC became the
employer of [petitioners] pursuant to DO 18-02.

[Petitioners] therefore should be reinstated to their former positions or equivalent positions in respondent LSC as
regular employees with full backwages and other benefits without loss of seniority rights from October 31, 2003, when
they lost their jobs, until actual reinstatement (Vinoya v. NLRC, 324 SCRA 469). If reinstatement is not feasible,
[petitioners] then should be paid separation pay of one month pay for every year of service or a fraction of six months
to be considered as one year, in addition to full backwages.

Concerning [petitioners] prayer to be paid wage differentials and benefits under the CBA, We have no doubt that
[petitioners] would be entitled to them if they are covered by the said CBA. For this purpose, [petitioners] should first
enlist themselves as union members if they so desire, or pay agency fee. Furthermore, only [petitioners] who signed the
appeal memorandum are covered by this Decision. As regards the other complainants who did not sign the appeal, the
Decision of the Labor Arbiter dismissing this case became final and executory.8

The NLRC disposed thus:

WHEREFORE, the appeal of [petitioners] is GRANTED. The Decision of the Labor Arbiter is hereby REVERSED,
and a NEW ONE rendered finding respondent Best Manpower Services, Inc. is engaged in prohibited labor-only-
contracting and finding respondent Lorenzo Shipping Corp. as the employer of the following [petitioners]:

1. Emmanuel B. Babas

2. Danilo Banag

3. Edwin L. Javier

4. Rex Allesa

5. Arturo Villarin, [Sr.]

6. Felixberto C. Anajao

7. Arsenio Estorque

8. Maximo N. Soriano, Jr.

9. Sandi G. Bermeo

Consequently, respondent Lorenzo Shipping Corp. is ordered to reinstate [petitioners] to their former positions as
regular employees and pay their wage differentials and benefits under the CBA.

If reinstatement is not feasible, both respondents Lorenzo Shipping Corp. and Best Manpower Services are adjudged
jointly and solidarily to pay [petitioners] separation pay of one month for every year of service, a fraction of six months
to be considered as one year.

In addition, respondent LSC and BMSI are solidarily liable to pay [petitioners] full backwages from October 31, 2003
until actual reinstatement or, if reinstatement is not feasible, until finality of this Decision.
Respondent LSC and respondent BMSI are likewise adjudged to be solidarily liable for attorneys fees equivalent to
ten (10%) of the total monetary award.

xxxx

SO ORDERED.9

LSC went to the CA via certiorari. On October 10, 2008, the CA rendered the now challenged Decision, 10 reversing the
NLRC. In holding that BMSI was an independent contractor, the CA relied on the provisions of the Agreement,
wherein BMSI warranted that it is an independent contractor, with adequate capital, expertise, knowledge, equipment,
and personnel necessary for the services rendered to LSC. According to the CA, the fact that BMSI entered into a
contract of lease with LSC did not ipso facto make BMSI a labor-only contractor; on the contrary, it proved that BMSI
had substantial capital. The CA was of the view that the law only required substantial capital orinvestment. Since
BMSI had substantial capital, as shown by its ability to pay rents to LSC, then it qualified as an independent contractor.
It added that even under the control test, BMSI would be the real employer of petitioners, since it had assumed the
entire charge and control of petitioners services. The CA further held that BMSIs Certificate of Registration as an
independent contractor was sufficient proof that it was an independent contractor. Hence, the CA absolved LSC from
liability and instead held BMSI as employer of petitioners.

The fallo of the CA Decision reads:

WHEREFORE, premises considered, the instant petition is GRANTED and the assailed decision and resolution of
public respondent NLRC are REVERSED and SET ASIDE. Consequently, the decision of the Labor Arbiter dated
September 29, 2004 is REINSTATED.

SO ORDERED.11

Petitioners filed a motion for reconsideration, but the CA denied it on January 21, 2009.12

Hence, this appeal by petitioners, positing that:

THE HONORABLE COURT OF APPEALS ERRED IN IGNORING THE CLEAR EVIDENCE OF RECORD THAT
RESPONDENT WAS ENGAGED IN LABOR-ONLY CONTRACTING TO DEFEAT PETITIONERS RIGHT TO
SECURITY OF TENURE.13

Before resolving the petition, we note that only seven (7) of the nine petitioners signed the Verification and
Certification.14 Petitioners Maximo Soriano, Jr. (Soriano) and Felixberto Anajao (Anajao) did not sign the Verification
and Certification, because they could no longer be located by their co-petitioners.15

In Toyota Motor Phils. Corp. Workers Association (TMPCWA), et al. v. National Labor Relations
Commission,16citing Loquias v. Office of the Ombudsman,17 we stated that the petition satisfies the formal requirements
only with regard to the petitioner who signed the petition, but not his co-petitioner who did not sign nor authorize the
other petitioner to sign it on his behalf. Thus, the petition can be given due course only as to the parties who signed it.
The other petitioners who did not sign the verification and certificate against forum shopping cannot be recognized as
petitioners and have no legal standing before the Court. The petition should be dismissed outright with respect to the
non-conforming petitioners.

Thus, we dismiss the petition insofar as petitioners Soriano and Anajao are concerned.

Petitioners vigorously insist that they were employees of LSC; and that BMSI is not an independent contractor, but a
labor-only contractor. LSC, on the other hand, maintains that BMSI is an independent contractor, with adequate capital
and investment. LSC capitalizes on the ratiocination made by the CA.

In declaring BMSI as an independent contractor, the CA, in the challenged Decision, heavily relied on the provisions of
the Agreement, wherein BMSI declared that it was an independent contractor, with substantial capital and investment.

De Los Santos v. NLRC18 instructed us that the character of the business, i.e., whether as labor-only contractor or as
job contractor, should

be measured in terms of, and determined by, the criteria set by statute. The parties cannot dictate by the mere
expedience of a unilateral declaration in a contract the character of their business.

In San Miguel Corporation v. Vicente B. Semillano, Nelson Mondejas, Jovito Remada, Alilgilan Multi-Purpose Coop
(AMPCO), and Merlyn N. Policarpio,19 this Court explained:

Despite the fact that the service contracts contain stipulations which are earmarks of independent contractorship, they
do not make it legally so. The language of a contract is neither determinative nor conclusive of the relationship
between the parties. Petitioner SMC and AMPCO cannot dictate, by a declaration in a contract, the character of
AMPCO's business, that is, whether as labor-only contractor, or job contractor. AMPCO's character should be
measured in terms of, and determined by, the criteria set by statute.

Thus, in distinguishing between prohibited labor-only contracting and permissible job contracting, the totality of the
facts and the surrounding circumstances of the case are to be considered.

Labor-only contracting, a prohibited act, is an arrangement where the contractor or subcontractor merely recruits,
supplies, or places workers to perform a job, work, or service for a principal. In labor-only contracting, the following
elements are present: (a) the contractor or subcontractor does not have substantial capital or investment to actually
perform the job, work, or service under its own account and responsibility; and (b) the employees recruited, supplied,
or placed by such contractor or subcontractor perform activities which are directly related to the main business of the
principal.20

On the other hand, permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to
put out or farm out with the contractor or subcontractor the performance or completion of a specific job, work, or
service within a definite or predetermined period, regardless of whether such job, work, or service is to be performed or
completed within or outside the premises of the principal. 21

A person is considered engaged in legitimate job contracting or subcontracting if the following conditions concur:

(a) The contractor carries on a distinct and independent business and undertakes the contract work on his
account under his own responsibility according to his own manner and method, free from the control and
direction of his employer or principal in all matters connected with the performance of his work except as to
the results thereof;

(b) The contractor has substantial capital or investment; and

(c) The agreement between the principal and the contractor or subcontractor assures the contractual employees'
entitlement to all labor and occupational safety and health standards, free exercise of the right to self-
organization, security of tenure, and social welfare benefits.22

Given the above standards, we sustain the petitioners contention that BMSI is engaged in labor-only contracting.

First, petitioners worked at LSCs premises, and nowhere else. Other than the provisions of the Agreement, there was
no showing that it was BMSI which established petitioners working procedure and methods, which supervised
petitioners in their work, or which evaluated the same. There was absolute lack of evidence that BMSI exercised
control over them or their work, except for the fact that petitioners were hired by BMSI.

Second, LSC was unable to present proof that BMSI had substantial capital. The record before us is bereft of any proof
pertaining to the contractors capitalization, nor to its investment in tools, equipment, or implements actually used in
the performance or completion of the job, work, or service that it was contracted to render. What is clear was that the
equipment used by BMSI were owned by, and merely rented from, LSC.

In Mandaue Galleon Trade, Inc. v. Andales,23 we held:

The law casts the burden on the contractor to prove that it has substantial capital, investment, tools, etc. Employees, on
the other hand, need not prove that the contractor does not have substantial capital, investment, and tools to engage in
job-contracting.

Third, petitioners performed activities which were directly related to the main business of LSC. The work of petitioners
as checkers, welders, utility men, drivers, and mechanics could only be characterized as part of, or at least clearly
related to, and in the pursuit of, LSCs business. Logically, when petitioners were assigned by BMSI to LSC, BMSI
acted merely as a labor-only contractor.

Lastly, as found by the NLRC, BMSI had no other client except for LSC, and neither BMSI nor LSC refuted this
finding, thereby bolstering the NLRC finding that BMSI is a labor-only contractor.

The CA erred in considering BMSIs Certificate of Registration as sufficient proof that it is an independent contractor.
In San Miguel Corporation v. Vicente B. Semillano, Nelson Mondejas, Jovito Remada, Alilgilan Multi-Purpose Coop
(AMPCO), and Merlyn N. Policarpio,24 we held that a Certificate of Registration issued by the Department of Labor
and Employment is not conclusive evidence of such status. The fact of registration simply prevents the legal
presumption of being a mere labor-only contractor from arising.251avvphi1

Indubitably, BMSI can only be classified as a labor-only contractor. The CA, therefore, erred when it ruled otherwise.
Consequently, the workers that BMSI supplied to LSC became regular employees of the latter. 26 Having gained regular
status, petitioners were entitled to security of tenure and could only be dismissed for just or authorized causes and after
they had been accorded due process.
Petitioners lost their employment when LSC terminated its Agreement with BMSI. However, the termination of LSCs
Agreement with BMSI cannot be considered a just or an authorized cause for petitioners dismissal. In Almeda v.
Asahi Glass Philippines. Inc. v. Asahi Glass Philippines, Inc.,27 this Court declared:

The sole reason given for the dismissal of petitioners by SSASI was the termination of its service contract with
respondent. But since SSASI was a labor-only contractor, and petitioners were to be deemed the employees of
respondent, then the said reason would not constitute a just or authorized cause for petitioners dismissal. It would then
appear that petitioners were summarily dismissed based on the aforecited reason, without compliance with the
procedural due process for notice and hearing.

Herein petitioners, having been unjustly dismissed from work, are entitled to reinstatement without loss of seniority
rights and other privileges and to full back wages, inclusive of allowances, and to other benefits or their monetary
equivalents computed from the time compensation was withheld up to the time of actual reinstatement. Their earnings
elsewhere during the periods of their illegal dismissal shall not be deducted therefrom.

Accordingly, we hold that the NLRC committed no grave abuse of discretion in its decision. Conversely, the CA
committed a reversible error when it set aside the NLRC ruling.

WHEREFORE, the petition is GRANTED. The Decision and the Resolution of the Court of Appeals in CA-G.R. SP.
No. 103804 are REVERSED and SET ASIDE. Petitioners Emmanuel Babas, Danilo T. Banag, Arturo V. Villarin, Sr.,
Edwin Javier, Sandi Bermeo, Rex Allesa, and Arsenio Estorque are declared regular employees of Lorenzo Shipping
Corporation. Further, LSC is ordered to reinstate the seven petitioners to their former position without loss of seniority
rights and other privileges, and to pay full backwages, inclusive of allowances, and other benefits or their monetary
equivalent, computed from the time compensation was withheld up to the time of actual reinstatement.

No pronouncement as to costs.

SO ORDERED.
G.R. No. 161115 November 30, 2006
DOLE PHILIPPINES, INC., Petitioner, vs. MEDEL ESTEVA, Authorized Representative,Respondents.

Before this Court is a Petition for Review on Certiorari under Rule 45 of the revised Rules of Civil Procedure seeking
the reversal of the Decision,1 dated 20 May 2002, and the Amended Decision,2 dated 27 November 2003, both rendered
by the Court of Appeals in CA-G.R. SP No. 63405, which declared herein petitioner Dole Philippines, Inc. as the
employer of herein respondents, Medel Esteva and 86 others; found petitioner guilty of illegal dismissal; and ordered
petitioner to reinstate respondents to their former positions and to pay the latter backwages.

The antecedent facts of the case are recounted as follows:

Petitioner is a corporation duly organized and existing in accordance with Philippine laws, engaged principally in the
production and processing of pineapple for the export market.3 Its plantation is located in Polomolok, South Cotabato.4

Respondents are members of the Cannery Multi-Purpose Cooperative (CAMPCO). CAMPCO was organized in
accordance with Republic Act No. 6938, otherwise known as the Cooperative Code of the Philippines, and duly-
registered with the Cooperative Development Authority (CDA) on 6 January 1993. 5 Members of CAMPCO live in
communities surrounding petitioners plantation and are relatives of petitioners employees.

On 17 August 1993, petitioner and CAMPCO entered into a Service Contract.6 The Service Contract referred to
petitioner as "the Company," while CAMPCO was "the Contractor." Relevant portions thereof read as follows

1. That the amount of this contract shall be or shall not exceed TWO HUNDRED TWENTY THOUSAND ONLY
(220,000.00) PESOS, terms and conditions of payment shall be on a per job basis as specified in the attached
schedule of rates; the CONTRACTOR shall perform the following services for the COMPANY;

1.1 Assist the COMPANY in its daily operations;

1.2 Perform odd jobs as may be assigned.

2. That both parties shall observe the following terms and conditions as stipulated, to wit:

2.1 CONTRACTOR must carry on an independent legitimate business, and must comply with all the pertinent
laws of the government both local and national;

2.2 CONTRACTOR must provide all hand tools and equipment necessary in the performance of their work.

However, the COMPANY may allow the use of its fixed equipment as a casual facility in the performance of
the contract;

2.3 CONTRACTOR must comply with the attached scope of work, specifications, and GMP and safety
practices of the company;

2.4 CONTRACTOR must undertake the contract work under the following manner:

a. on his own account;

b. under his own responsibility;

c. according to his manner and method, free from the control and direction of the company in all
matters connected with the performance of the work except as to the result thereof;

3. CONTRACTOR must pay the prescribed minimum wage, remit SSS/MEDICARE premiums to proper government
agencies, and submit copies of payroll and proof of SSS/MEDICARE remittances to the COMPANY;

4. This contract shall be for a specific period of Six (6) months from July 1 to December 31, 1993; x x x.

Pursuant to the foregoing Service Contract, CAMPCO members rendered services to petitioner. The number of
CAMPCO members that report for work and the type of service they performed depended on the needs of petitioner at
any given time. Although the Service Contract specifically stated that it shall only be for a period of six months, i.e.,
from 1 July to 31 December 1993, the parties had apparently extended or renewed the same for the succeeding years
without executing another written contract. It was under these circumstances that respondents came to work for
petitioner.

Investigation by DOLE

Concomitantly, the Sangguniang Bayan of Polomolok, South Cotabato, passed Resolution No. 64, on 5 May 1993,
addressed to then Secretary Ma. Nieves R. Confessor of the Department of Labor and Employment (DOLE), calling
her attention to the worsening working conditions of the petitioners workers and the organization of contractual
workers into several cooperatives to replace the individual labor-only contractors that used to supply workers to the
petitioner. Acting on the said Resolution, the DOLE Regional Office No. XI in Davao City organized a Task Force that
conducted an investigation into the alleged labor-only contracting activities of the cooperatives in Polomolok.7

On 24 May 1993, the Senior Legal Officer of petitioner wrote a letter addressed to Director Henry M. Parel of DOLE
Regional Office No. XI, supposedly to correct the misinformation that petitioner was involved in labor-only
contracting, whether with a cooperative or any private contractor. He further stated in the letter that petitioner was not
hiring cooperative members to replace the regular workers who were separated from service due to redundancy; that
the cooperatives were formed by the immediate dependents and relatives of the permanent workers of petitioner; that
these cooperatives were registered with the CDA; and that these cooperatives were authorized by their respective
constitutions and by-laws to engage in the job contracting business.8

The Task Force submitted a report on 3 June 1993 identifying six cooperatives that were engaged in labor-only
contracting, one of which was CAMPCO. The DOLE Regional Office No. XI held a conference on 18 August 1993
wherein the representatives of the cooperatives named by the Task Force were given the opportunity to explain the
nature of their activities in relation to petitioner. Subsequently, the cooperatives were required to submit their position
papers and other supporting documents, which they did on 30 August 1993. Petitioner likewise submitted its position
paper on 15 September 1993.9

On 19 October 1993, Director Parel of DOLE Regional Office No. XI issued an Order 10 in which he made the
following findings

Records submitted to this Office show that the six (6) aforementioned cooperatives are all duly registered with the
Cooperative Development Authority (CDA). These cooperatives were also found engaging in different activities with
DOLE PHILIPPINES, INC. a company engaged in the production of pineapple and export of pineapple products.
Incidentally, some of these cooperatives were also found engaging in activities which are directly related to the
principal business or operations of the company. This is true in the case of the THREE (3) Cooperatives, namely;
Adventurers Multi Purpose Cooperative, Human Resource Multi Purpose Cooperative and Cannery Multi Purpose
Cooperative.

From the foregoing findings and evaluation of the activities of Adventurers Multi Purpose Cooperative, Human
Resource Multi Purpose Cooperative and Cannery Multi Purpose Cooperative, this Office finds and so holds that they
are engaging in Labor Only Contracting Activities as defined under Section 9, Rule VIII, Book III of the rules
implementing the Labor Code of the Philippines, as amended which we quote:

"Section 9 Labor Only Contracting a) Any person who undertakes to supply workers to an employer shall be deemed
to be engaged in labor-only contracting where such person:

1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises
and other materials; and

2) The workers recruited and placed by such person are performing activities which are directly related to the
principal business or operation of the employer to which workers are habitually employed.

b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be
considered merely as an agent or intermediary 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."

WHEREFORE, premises considered, ADVENTURERS MULTI PURPOSE COOPERATIVE, HUMAN


RESOURCE MULTI PURPOSE COOPERATIVE and CANNERY MULTI PURPOSE COOPERATIVE are hereby
declared to be engaged in labor only contracting which is a prohibited activity. The same cooperatives are therefore
ordered to cease and desist from further engaging in such activities.

The three (3) other cooperatives, namely Polomolok Skilled Workers Multi Purpose Cooperative, Unified Engineering
and Manpower Service Multi Purpose Cooperative and Tibud sa Katibawasan Multi Purpose Cooperative whose
activities may not be directly related to the principal business of DOLE Philippines, Inc. are also advised not to engage
in labor only contracting with the company.

All the six cooperatives involved appealed the afore-quoted Order to the Office of the DOLE Secretary, raising the sole
issue that DOLE Regional Director Director Parel committed serious error of law in directing the cooperatives to cease
and desist from engaging in labor-only contracting. On 15 September 1994, DOLE Undersecretary Cresencio B.
Trajano, by the authority of the DOLE Secretary, issued an Order11 dismissing the appeal on the basis of the following
ratiocination

The appeal is devoid of merit.

The Regional Director has jurisdiction to issue a cease and desist order as provided by Art. 106 of the Labor Code, as
amended, to wit:
"Art. 106. Contractor or subcontractor. x x x

xxxx

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the
rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions
between labor only contracting and job contracting as well as differentiations within these types of contracting and
determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any
violation or circumvention of any provision of this Code (Emphasis supplied)

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital
or investment in the forms of tools, equipment, machineries, work premises, among others, and the workers recruited
and placed by such person are performing activities which are directly related to the principal business of the employer.
In such cases, the person or the intermediary shall be considered merely as an agent of the employer who shall be
responsible to the workers in the same manner and extent as if the latter were directly employed by him."

in relation to Article 128(b) of the Labor Code, as amended by Republic Act No. 7730, which reads:

"Art. 128. Visitorial and Enforcement Power.

b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the
relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly authorized
representatives shall have the power to issue compliance orders to give effect to the labor standards provisions of this
Code and other labor legislation based on the findings of labor employment and enforcement officers or industrial
safety engineers made in the course of inspection. The Secretary or his duly authorized representatives shall issue writs
of execution to the appropriate authority for the enforcement of their orders, except in cases where the employer
contests the findings of the labor employment and enforcement officer and raises issues supported by documentary
proof which were not considered in the course of inspection.

An order issued by the duly authorized representative of the Secretary of Labor and Employment under this article may
be appealed to the latter. In case said order involves a monetary award, an appeal by the employer may be perfected
only upon the posting of a cash bond issued by a reputable bonding company duly accredited by the Secretary of Labor
and Employment in the amount equivalent to the monetary award in the order appealed from."

The records reveal that in the course of the inspection of the premises of Dolefil, it was found out that the activities of
the members of the [cooperatives] are necessary and desirable in the principal business of the former; and that they do
not have the necessary investment in the form of tools and equipments. It is worthy to note that the cooperatives did not
deny that they do not have enough capital in the form of tools and equipment. Under the circumstances, it could not be
denied that the [cooperatives] are considered as labor-only contractors in relation to the business operation of
DOLEFIL, INC.

Thus, Section 9, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code, provides that:

"Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an employer shall be deemed to
be engaged in labor-only contracting where such person:

(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work
premises and other materials; and

(2) The workers recruited and placed by such person are performing activities which are directly related to the
principal business or operations of the employer in which workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as a contractor shall be
considered merely as an agent or intermediary 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.

x x x x"

Violation of the afore-quoted provision is considered a labor standards violation and thus, within the visitorial and
enforcement powers of the Secretary of Labor and Employment (Art. 128).

The Regional Directors authority to issue a cease and desist order emanates from Rule I, Section 3 of the Rules on
Disposition of Labor Standard Cases in the Regional Offices, to wit:

"Section 3. Authorized representative of the Secretary of Labor and Employment. The Regional Directors shall be the
duly authorized representatives of the Secretary of Labor and Employment in the administration and enforcement of
the labor standards within their respective territorial jurisdiction."
The power granted under Article 106 of the Labor Code to the Secretary of Labor and Employment to restrict or
prohibit the contracting out of labor to protect the rights of workers established under the Code is delegated to the
Regional Directors by virtue of the above-quoted provision.

The reason why "labor-only" contracting is prohibited under the Labor Code is that it encourages circumvention of the
provisions of the Labor Code on the workers right to security of tenure and to self-organization.

WHEREFORE, the respondents Appeal is hereby DISMISSED for lack of merit. The Order of the Regional Director,
Regional Office No. XI, Davao City, is AFFIRMED.

After the motion for reconsideration of the foregoing Order was denied, no further motion was filed by the parties, and
the Order, dated 15 September 1994, of DOLE Undersecretary Trajano became final and executory. A Writ of
Execution12 was issued by DOLE Regional Office No. XI only on 27 July 1999, years after the issuance of the order
subject of the writ. The DOLE Regional Office No. XI was informed that CAMPCO and two other cooperatives
"continued to operate at DOLE Philippines, Inc. despite the cease and desist Order" it had issued. It therefore
commanded the Sheriff to proceed to the premises of CAMPCO and the two other cooperatives and implement its
Order dated 19 October 1993.

Respondents Complaint before the NLRC

Respondents started working for petitioner at various times in the years 1993 and 1994, by virtue of the Service
Contract executed between CAMPCO and petitioner. All of the respondents had already rendered more than one year
of service to petitioner. While some of the respondents were still working for petitioner, others were put on "stay home
status" on varying dates in the years 1994, 1995, and 1996 and were no longer furnished with work thereafter.
Together, respondents filed a Complaint,13 on 19 December 1996, with the National Labor Relations Commission
(NLRC), for illegal dismissal, regularization, wage differentials, damages and attorneys fees.

In their Position Paper,14 respondents reiterated and expounded on the allegations they previously made in their
Complaint

Sometime in 1993 and 1994, [herein petitioner] Dolefil engaged the services of the [herein respondents] through
Cannery Multi-purpose Cooperative. A cooperative which was organized through the initiative of Dolefil in order to
fill in the vacuum created as a result of the dismissal of the regular employees of Dolefil sometime in 1990 to 1993.

The [respondents] were assigned at the Industrial Department of respondent Dolefil. All tools, implements and
machineries used in performing their task such as: can processing attendant, feeder of canned pineapple at pineapple
processing, nata de coco processing attendant, fruit cocktail processing attendant, and etc. were provided by Dolefil.
The cooperative does not have substantial capital and does not provide the [respondents] with the necessary tools to
effectively perform their assigned task as the same are being provided by Dolefil.

The training and instructions received by the [respondents] were provided by Dolefil. Before any of the [respondents]
will be allowed to work, he has to undergo and pass the training prescribed by Dolefil. As a matter of fact, the trainers
are employees of Dolefil.

The [respondents] perform their assigned task inside the premises of Dolefil. At the job site, they were given specific
task and assignment by Dolefils supervisors assigned to supervise the works and efficiency of the complainants. Just
like the regular employees of Dolefil, [respondents] were subjected to the same rules and regulations observe [sic]
inside company premises and to some extent the rules applied to the [respondents] by the company through its officers
are even stricter.

The functions performed by the [respondents] are the same functions discharged by the regular employees of Dolefil.
In fact, at the job site, the [respondents] were mixed with the regular workers of Dolefil. There is no difference in so far
as the job performed by the regular workers of Dolefil and that of the [respondents].

Some of the [respondents] were deprived of their employment under the scheme of "stay home status" where they were
advised to literally stay home and wait for further instruction to report anew for work. However, they remained in this
condition for more than six months. Hence, they were constructively or illegally dismissed.

Respondents thus argued that they should be considered regular employees of petitioner given that: (1) they were
performing jobs that were usually necessary and desirable in the usual business of petitioner; (2) petitioner exercised
control over respondents, not only as to the results, but also as to the manner by which they performed their assigned
tasks; and (3) CAMPCO, a labor-only contractor, was merely a conduit of petitioner. As regular employees of
petitioner, respondents asserted that they were entitled to security of tenure and those placed on "stay home status" for
more than six months had been constructively and illegally dismissed. Respondents further claimed entitlement to
wage differential, moral damages, and attorneys fees.

In their Supplemental Position Paper,15 respondents presented, in support of their Complaint, the Orders of DOLE
Regional Director Parel, dated 19 October 1993, and DOLE Undersecretary Trajano, dated 15 September 1994, finding
that CAMPCO was a labor-only contractor and directing CAMPCO to cease and desist from any further labor-only
contracting activities.

Petitioner, in its Position Paper16 filed before the NLRC, denied that respondents were its employees.

Petitioner explained that it found the need to engage external services to augment its regular workforce, which was
affected by peaks in operation, work backlogs, absenteeism, and excessive leaves. It used to engage the services of
individual workers for definite periods specified in their employment contracts and never exceeding one year.
However, such an arrangement became the subject of a labor case,17 in which petitioner was accused of preventing the
regularization of such workers. The Labor Arbiter who heard the case, rendered his Decision 18 on 24 June 1994
declaring that these workers fell squarely within the concept of seasonal workers as envisaged by Article 280 of the
Labor Code, as amended, who were hired by petitioner in good faith and in consonance with sound business practice;
and consequently, dismissing the complaint against petitioner. The NLRC, in its Resolution,19 dated 14 March 1995,
affirmed in toto the Labor Arbiters Decision and further found that the workers were validly and legally engaged by
petitioner for "term employment," wherein the parties agreed to a fixed period of employment, knowingly and
voluntarily, without any force, duress or improper pressure being brought to bear upon the employees and absent any
other circumstance vitiating their consent. The said NLRC Resolution became final and executory on 18 June 1996.
Despite the favorable ruling of both the Labor Arbiter and the NLRC, petitioner decided to discontinue such
employment arrangement. Yet, the problem of petitioner as to shortage of workforce due to the peaks in operation,
work backlogs, absenteeism, and excessive leaves, persisted. Petitioner then found a solution in the engagement of
cooperatives such as CAMPCO to provide the necessary additional services.

Petitioner contended that respondents were owners-members of CAMPCO; that CAMPCO was a duly-organized and
registered cooperative which had already grown into a multi-million enterprise; that CAMPCO was engaged in
legitimate job-contracting with its own owners-members rendering the contract work; that under the express terms and
conditions of the Service Contract executed between petitioner (the principal) and CAMPCO (the contractor), the latter
shall undertake the contract work on its own account, under its own responsibility, and according to its own manner
and method free from the control and direction of the petitioner in all matters connected with the performance of the
work, except as to the result thereof; and since CAMPCO held itself out to petitioner as a legitimate job contractor,
respondents, as owners-members of CAMPCO, were estopped from denying or refuting the same.

Petitioner further averred that Department Order No. 10, amending the rules implementing Books III and VI of the
Labor Code, as amended, promulgated by the DOLE on 30 May 1997, explicitly recognized the arrangement between
petitioner and CAMPCO as permissible contracting and subcontracting, to wit

Section 6. Permissible contracting and subcontracting. Subject to the conditions set forth in Section 3(d) and (e) and
Section 5 hereof, the principal may engage the services of a contractor or subcontractor for the performance of any of
the following;

(a) Works or services temporarily or occasionally needed to meet abnormal increase in the demand of products
or services, provided that the normal production capacity or regular workforce of the principal cannot
reasonably cope with such demands;

(b) Works or services temporarily or occasionally needed by the principal for undertakings requiring expert or
highly technical personnel to improve the management or operations of an enterprise;

(c) Services temporarily needed for the introduction or promotion of new products, only for the duration of the
introductory or promotional period;

(d) Works or services not directly related or not integral to the main business or operation of the principal,
including casual work, janitorial, security, landscaping, and messengerial services, and work not related to
manufacturing processes in manufacturing establishments;

(e) Services involving the public display of manufacturers products which does not involve the act of selling
or issuance of receipts or invoices;

(f) Specialized works involving the use of some particular, unusual, or peculiar skills, expertise, tools or
equipment the performance of which is beyond the competence of the regular workforce or production capacity
of the principal; and

(g) Unless a reliever system is in place among the regular workforce, substitute services for absent regular
employees, provided that the period of service shall be coextensive with the period of absence and the same is
made clear to the substitute employee at the time of engagement. The phrase "absent regular employees"
includes those who are serving suspensions or other disciplinary measures not amounting to termination of
employment meted out by the principal, but excludes those on strike where all the formal requisites for the
legality of the strike have been prima facie complied with based on the records filed with the National
Conciliation and Mediation Board.
According to petitioner, the services rendered by CAMPCO constituted permissible job contracting under the afore-
quoted paragraphs (a), (c), and (g), Section 6 of DOLE Department Order No. 10, series of 1997.

After the parties had submitted their respective Position Papers, the Labor Arbiter promulgated its Decision 20 on 11
June 1999, ruling entirely in favor of petitioner, ratiocinating thus

After judicious review of the facts, narrated and supporting documents adduced by both parties, the undersigned finds
[and] holds that CAMPCO is not engaged in labor-only contracting.

Had it not been for the issuance of Department Order No. 10 that took effect on June 22, 1997 which in the
contemplation of Law is much later compared to the Order promulgated by the Undersecretary Cresencio Trajano of
Department of [L]abor and Employment, the undersigned could safely declared [sic] otherwise. However, owing to the
principle observed and followed in legal practice that the later law or jurisprudence controls, the reliance to Secretary
Trajanos order is overturned.

Labor-only contracting as amended by Department [O]rder No. 10 is defined in this wise:

"Labor-only contracting is prohibited under this Rule is an arrangement where the contractor or subcontractor merely
recruits, supplied [sic] or places workers to perform a job, work or service for a principal, and the following elements
are present:

i) The contractor or sub-contractor does not have substantial capital or investment to actually perform the job,
work, or service under its own account & responsibility, and

ii) The employees recruited, supplied or placed by such contractor or subcontractor are performing activities
which are directly related to the main business of the principal."

Verification of the records reveals that per Annexes "J" and "K" of [herein petitioner DolePhils] position paper, which
are the yearly audited Financial Statement and Balance Sheet of CAMPCO shows [sic] that it has more than substantial
capital or investment in order to qualify as a legitimate job contractor.

We likewise recognize the validity of the contract entered into and between CAMPCO and [petitioner] for the former
to assists [sic] the latter in its operations and in the performance of odd jobs such as the augmentation of regular
manning particularly during peaks in operation, work back logs, absenteeism and excessive leave availment of
respondents regular employees. The rule is well-settled that labor laws discourage interference with an employers
judgment in the conduct of his business. Even as the law is solicitors [sic] of the welfare of the employees, it must also
protect the right of an employer to exercise what are clearly management prerogatives. The free will of management to
conduct its own business affairs to achieve its purpose cannot be denied (Yuco Chemical Industries vs. Ministry of
[L]abor, GR No. 75656, May 28, 1990).

CAMPCO being engaged in legitimate contracting, cannot therefore declared [sic] as guilty of labor-only contracting
which [herein respondents] want us to believe.

The second issue is likewise answered in the negative. The reason is plain and simple[,] section 12 of Department
[O]rder No. 10 states:

"Section 12. Employee-employer relationship. Except in cases provided for in Section 13, 14, 15 & 17, the contractor
or subcontractor shall be considered the employer of the contractual employee for purposes of enforcing the provisions
of the Code."

The Resolution of NLRC 5th division, promulgated on March 14, 1 1995 [sic] categorically declares:

"Judging from the very nature of the terms and conditions of their hiring, the Commission finds the complainants to
have been engaged to perform work, although necessary or desirable to the business of respondent company, for a
definite period or what is community called TERM EMPLOYMENT. It is clear from the evidence and record that the
nature of the business and operation of respondent company has its peaks and valleys and therefore, it is not difficult to
discern, inclement weather, or high availment by regular workers of earned leave credits, additional workers
categorized as casuals, or temporary, are needed to meet the exigencies." (Underlining in the original)

The validity of fixed-period employment has been consistently upheld by the Supreme [C]ourt in a long line of cases,
the leading case of which is Brent School, Inc. vs. Zamora & Alegre, GR No. 48494, February 5, 1990. Thus at the end
of the contract the employer-employee relationship is terminated. It behooves upon us to rule that herein complainants
cannot be declared regular rank and file employees of the [petitioner] company.

Anent the third issue, [respondents] dismally failed to provide us the exact figures needed for the computation of their
wage differentials. To simply alleged [sic] that one is underpaid of his wages is not enough. No bill of particulars was
submitted. Moreover, the Order of RTWPB Region XI, Davao City dated February 21, 1996 exempts [petitioner]
company from complying Wage Order No. 04 [sic] in so far as such exemption applies only to workers who are not
covered by the Collective Bargaining Agreement, for the period January 1 to December 31, 1995,. [sic] In so far as
[respondents] were not privies to the CBA, they were the workers referred to by RTWPBs Order. [H]ence,
[respondents] claims for wage differentials are hereby dismissed for lack of factual basis.

We find no further necessity in delving into the issues raised by [respondents] regarding moral damages and attorneys
fees for being moot and academic because of the findings that CAMPCO does not engaged [sic] in labor-only
contracting and that [respondents] cannot be declared as regular employees of [petitioner].

WHEREFORE, premises considered, judgment is hereby rendered in the above-entitled case, dismissing the
complaint for lack of merit.

Respondents appealed the Labor Arbiters Decision to the NLRC, reiterating their position that they should be
recognized as regular employees of the petitioner since CAMPCO was a mere labor-only contractor, as already
declared in the previous Orders of DOLE Regional Director Parel, dated 19 October 1993, and DOLE Undersecretary
Trajano, dated 15 September 1994, which already became final and executory. The NLRC, in its Resolution,21 dated 29
February 2000, dismissed the appeal and affirmed the Labor Arbiters Decision, reasoning as follows

We find no merit in the appeal.

The concept of conclusiveness of judgment under the principle of "res judicata" means that where between the first
case wherein judgment is rendered and the second case wherein such judgment is invoked, there is identity of parties,
but there is no identity of cause of action, the judgment is conclusive in the second case, only as to those matters
actually and directly controverted and determined and not as to matters merely involved therein (Viray, etc. vs.
Marinas, et al., 49 SCRA 44). There is no denying that the order of the Department of Labor and Employment,
Regional Office No. XI in case No. RI100-9310-RI-355, which the complainants perceive to have sealed the status of
CAMPCO as labor-only contractor, proceeded from the visitorial and enforcement power of the Department Secretary
under Article 128 of the Labor Code. Acting on reports that the cooperatives, including CAMPCO, that operated and
offered services at [herein petitioner] company were engaging in labor-only contracting activities, that Office
conducted a routinary inspection over the records of said cooperatives and consequently, found the latter to be
engaging in labor-only contracting activities. This being so, [petitioner] company was not a real party-in-interest in said
case, but the cooperatives concerned. Therefore, there is no identity of parties between said case and the present case
which means that the afore-said ruling of the DOLE is not binding and conclusive upon [petitioner] company.

It is not correct, however, to say, as the Labor Arbiter did, that the afore-said ruling of the Department of Labor and
Employment has been overturned by Department Order No. 10. It is a basic principle that "once a judgment becomes
final it cannot be disturbed, except for clerical errors or when supervening events render its execution impossible or
unjust" (Sampaguita Garmens [sic] Corp. vs. NLRC, G. R. No. 102406, June 7, 1994). Verily, the subsequent
issuance of Department Order No. 10 cannot be construed as supervening event that would render the execution of said
judgment impossible or unjust. Department Order No. 10 refers to the ramification of some provisions of the Rules
Implementing Articles 106 and 109 of the Labor Code, without substantially changing the definition of "labor-only" or
"job contracting.

Well-settled is the rule that to qualify as an independent job contractor, one has either substantial capital "or"
investment in the form of tools, equipment and machineries necessary to carry out his business (see Virginia Neri, et
al. vs. NLRC, et al., G.R. Nos. 97008-89, July 23, 1993). CAMPCO has admittedly a paid-up capital of P4,562,470.25
and this is more than enough to qualify it as an independent job contractor, as aptly held by the Labor Arbiter.

WHEREFORE, the appeal is DISMISSED for lack of merit and the appealed decision is AFFIRMED.

Petition for Certiorari with the Court of Appeals

Refusing to concede defeat, respondents filed with the Court of Appeals a Petition for Certiorari under Rule 65 of the
revised Rules of Civil Procedure, asserting that the NLRC acted without or in excess of its jurisdiction and with grave
abuse of discretion amounting to lack of jurisdiction when, in its Resolution, dated 29 February 2000, it (1) ruled that
CAMPCO was a bona fide independent job contractor with substantial capital, notwithstanding the fact that at the time
of its organization and registration with CDA, it only had a paid-up capital of 6,600.00; and (2) refused to apply the
doctrine of res judicata against petitioner. The Court of Appeals, in its Decision,22 dated 20 May 2002, granted due
course to respondents Petition, and set aside the assailed NLRC Decision. Pertinent portions of the Court of Appeals
Decision are reproduced below

In the case at bench, it was established during the proceedings before the [NLRC] that CAMPCO has a substantial
capital. However, having a substantial capital does not per se qualify CAMPCO as a job contractor. In order to be
considered an independent contractor it is not enough to show substantial capitalization or investment in the form of
tools, equipment, machinery and work premises. The conjunction "and," in defining what a job contractor is, means
that aside from having a substantial capital or investment in the form of tools, equipment, machineries, work premise,
and other materials which are necessary in the conduct of his business, the contractor must be able to prove that it also
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. [Herein petitioner DolePhil] has failed to
prove, except for the substantial capital requirement, that CAMPCO has met the other requirements. It was not
established that CAMPCO is engaged or carries on an independent business. In the performance of the respective tasks
of workers deployed by CAMPCO with [petitioner], it was not established that CAMPCO undertook the contract of
work it entered with [petitioner] under its own account and its own responsibility. It is [petitioner] who provides the
procedures to be followed by the workers in the performance of their assigned work. The workers deployed by
CAMPCO to [petitioner] performed activities which are directly related to the principal business or operations of the
employer in which workers are habitually employed since [petitioner] admitted that these workers were engaged to
perform the job of other regular employees who cannot report for work.

Moreover, [NLRC] likewise gravely erred in not giving weight to the Order dated 19 October 1993 issued by the
Office of the Secretary of the Department of Labor and Employment, through Undersecretary Cresencio Trajano,
which affirmed the findings of the Department of Labor and Employment Regional Office, Region XI, Davao City that
Cannery Multi-Purpose Cooperative is one of the cooperatives engaged in labor-only contracting activities.

In the exercise of the visitorial and enforcement power of the Department of Labor and Employment, an investigation
was conducted among the cooperatives organized and existing in Polomolok, South Cotabato, relative to labor-only
contracting activities. One of the cooperatives investigated was Cannery Multi-Purpose Cooperative. After the
investigation, the Department of Labor and Employment, Regional Office No. XI, Davao City, through its Regional
Director, issued the Order dated 19 October 1993, stating:

"WHEREFORE, premises considered, ADVENTURERS MULTI PURPOSE COOPERATIVE, HUMAN


RESOURCE MULTI PURPOSE SKILLED COOPERATIVE and CANNERY MULTI PURPOSE COOPERATIVE
are hereby declared to be engaged in labor only contracting which is a prohibited activity. The same cooperatives are
therefore ordered to cease and desist from further engaging in such activities.

xxxx

SO ORDERED."

Cannery Multi Purpose Cooperative, together with the other cooperatives declared as engaged in labor-only contracting
activity, appeal the above-findings to the Secretary of the Department of Labor and Employment. Their appeal was
dismissed for lack of merit as follows:: [sic]

xxxx

[NLRC] held that CAMPCO, being not a real party-in interest in the above-case, the said ruling is not binding and
conclusive upon [petitioner]. This Court, however, finds the contrary.

CAMPCO was one of the cooperatives investigated by the Department of Labor and Employment, Regional Office No.
XI, Davao City, pursuant to Article 128 of the Labor Code. It was one of the appellants before the Secretary of the
Department of Labor questioning the decision of the Regional Director of DOLE, Regional Office No. XI, Davao City.
This Court noted that in the proceedings therein, and as mentioned in the decision rendered by Undersecretary
Cresencio B. Trajano of the Department of Labor and Employment, Manila, regarding the cooperatives appeal thereto,
the parties therein, including Cannery Multi-Purpose Cooperative, submitted to the said office their position papers and
Articles of Cooperatives and Certification of Registrations [sic] on 30 August 1993. This is a clear indicia that
CAMPCO participated in the proceedings therein. [NLRC], therefore, committed grave abuse of discretion amounting
to lack or excess of jurisdiction when it held that CAMPCO was never a party to the said case.

[Petitioner] invokes Section 6 of Department Order No. 10, series of 1997, issued by the Department of Labor and
Employment which took effect on 22 June 1997. The said section identified the circumstances which are permissible
job contracting, to wit:

xxxx

[Petitioners] main contention is based on the decisions rendered by the labor arbiter and [NLRC] which are both
anchored on Department Order No. 10 issued by the Department of Labor and Employment. The said department order
provided for several flexible working relations between a principal, a contractor or subcontractor and the workers
recruited by the latter and deployed to the former. In the case at bench, [petitioner] posits that the engagement of
[petitioner] of the workers deployed by CAMPCO was pursuant to D.O. No. 10, Series of 1997.

However, on 8 May 2001, the Department of Labor and Employment issued Department Order No. 3, series of 2001,
revoking Department Order No. 10, series of 1997. The said department order took effect on 29 May 2001.

xxxx

Under Department Order No. 3, series of 2001, some contracting and outsourcing arrangements are no longer
legitimate modes of employment relation. Having revoked Department Order No. 10, series of 1997, [petitioner] can
no longer support its argument by relying on the revoked department order.
Considering that [CAMPCO] is not a job contractor, but one engaged in labor-only contracting, CAMPCO serves only
as an agent of [petitioner] pursuant to par. (b) of Sec. 9, Rule VIII, Book III of the Implementing Rules and Regulations
of the Labor Code, stating,

xxxx

However, the Court cannot declare that [herein respondents] are regular employees of [petitioner]. x x x

xxxx

In the case at bench, although [respondents] were engaged to perform activities which are usually necessary or
desirable in the usual business or trade of private respondent, it is apparent, however, that their services were engaged
by [petitioner] only for a definite period. [Petitioners] nature of business and operation has its peaks. In order to meet
the demands during peak seasons they necessarily have to engage the services of workers to work only for a particular
season. In the case of [respondents], when they were deployed by CAMPCO with [petitioner] and were assigned by the
latter at its cannery department, they were aware that they will be working only for a certain duration, and this was
made known to them at the time they were employed, and they agreed to the same.

xxxx

The non-rehiring of some of the petitioners who were allegedly put on a "floating status is an indication that their
services were no longer needed. They attained their "floating status" only after they have finished their contract of
employment, or after the duration of the season that they were employed. The decision of [petitioner] in not rehiring
them means that their services were no longer needed due to the end of the season for which they were hired. And this
Court reiterates that at the time they were deployed to [petitioners] cannery division, they knew that the services they
have to render or the work they will perform are seasonal in nature and consequently their employment is only for the
duration of the season.

ACCORDINGLY, in view of the foregoing, the instant petition for certiorari is hereby GRANTED DUE COURSE. The
decision dated 29 February 2000 and Resolution dated 19 December 2000 rendered by [NLRC] are hereby SET ASIDE.
In place thereof, it is hereby rendered that:

1. Cannery Multi-Purpose Cooperative is a labor-only contractor as defined under the Labor Code of the
Philippines and its implementing rules and regulations; and that

2. DOLE Philippines Incorporated is merely an agent or intermediary of Cannery Multi-Purpose Cooperative.

All other claims of [respondents] are hereby DENIED for lack of basis.

Both petitioner and respondents filed their respective Motions for Reconsideration of the foregoing Decision, dated 20
May 2002, prompting the Court of Appeals to promulgate an Amended Decision on 27 November 2003, in which it
ruled in this wise:

This court examined again the documentary evidence submitted by the [herein petitioner] and we rule not to disturb our
findings in our Decision dated May 20, 2002. It is our opinion that there was no competent evidence submitted that
would show that CAMPCO is engaged to perform a specific and special job or service which is one of the strong
indicators that an entity is an independent contractor. The articles of cooperation and by-laws of CAMPCO do not
show that it is engaged in performing a specific and special job or service. What is clear is that it is a multi-purpose
cooperative organized under RA No. 6938, nothing more, nothing less.

As can be gleaned from the contract that CAMPCO entered into with the [petitioner], the undertaking of CAMPCO is
to provide [petitioner] with workforce by assisting the company in its daily operations and perform odd jobs as may be
assigned. It is our opinion that CAMPCO merely acted as recruitment agency for [petitioner]. CAMPCO by supplying
manpower only, clearly conducted itself as labor-only" contractor. As can be gleaned from the service contract, the
work performed by the [herein respondents] are directly related to the main business of the [petitioner]. Clearly, the
requisites of "labor-only" contracting are present in the case at bench.

In view of the above ruling, we find it unnecessary to discuss whether the Order of Undersecretary Trajano finding that
CAMPCO is a "labor-only" contractor is a determining factor or constitutes res judicata in the case at bench. Our
findings that CAMPCO is a "labor-only" contractor is based on the evidence presented vis--vis the rulings of the
Supreme Court on the matter.

Since, the argument that the [petitioner] is the real employer of the [respondents], the next question that must be
answered is what is the nature of the employment of the petitioners?

xxxx
The afore-quoted [Article 280 of the Labor Code, as amended] provides for two kinds of employment, namely: (1)
regular (2) casual. In our Decision, we ruled that the [respondents] while performing work necessary and desirable to
the business of the [petitioner] are seasonal employees as their services were engaged by the [petitioner] for a definite
period or only during peak season.

In the most recent case of Hacienda Fatima v. National Federation of Sugarcane Workers Food and General Trade,
the Supreme Court ruled that for employees to be excluded from those classified as regular employees, it is not enough
that they perform work or services that are seasonal in nature. They must have also been employed only for the
duration of one season. It is undisputed that the [respondents] services were engaged by the [petitioner] since 1993 and
1994. The instant complaint was filed in 1996 when the [respondents] were placed on floating status. Evidently,
[petitioner] employed the [respondents] for more than one season. Therefore, the general rule on regular employment is
applicable. The herein petitioners who performed their jobs in the workplace of the [petitioner] every season for several
years, are considered the latters regular employees for having performed works necessary and desirable to the business
of the [petitioner]. The [petitioners] eventual refusal to use their serviceseven if they were ready, able and willing to
perform their usual duties whenever these were availableand hiring other workers to perform the tasks originally
assigned to [respondents] amounted to illegal dismissal of the latter. We thus, correct our earlier ruling that the herein
petitioners are seasonal workers. They are regular employees within the contemplation of Article 280 of the Labor
Code and thus cannot be dismissed except for just or authorized cause. The Labor Code provides that when there is a
finding of illegal dismissal, the effect is that the employee dismissed shall be reinstated to his former position without
loss of seniority rights with backwages from the date of his dismissal up to his actual reinstatement.

This court however, finds no basis for the award of damages and attorneys fees in favor of the petitioners.

WHEREFORE, the Decision dated May 20, 2002 rendered by this Court is hereby AMENDED as follows:

1) [Petitioner] DOLE PHILIPPINES is hereby declared the employer of the [respondents].

2) [Petitioner] DOLE PHILIPPINES is hereby declared guilty of illegal dismissal and ordered to immediately
reinstate the [respondents] to their former position without loss of seniority rights and other benefits, and to
pay each of the [respondents] backwages from the date of the filing of illegal dismissal on December 19, 1996
up to actual reinstatement, the same to be computed by the labor arbiter.

3) The claims for damages and attorneys fees are hereby denied for lack of merit.

No costs.23

The Petition at Bar

Aggrieved by the Decision, dated 20 May 2002, and the Amended Decision, dated 27 November 2003, of the Court of
Appeals, petitioner filed the instant Petition for Review on Certiorari under Rule 45 of the revised Rules of Civil
Procedure, in which it made the following assignment of errors

I. THE COURT OF APPEALS HAS DEPARTED FROM THE USUAL COURSE OF JUDCIAL
PROCEEDINGS WHEN IT MADE ITS OWN FACTUAL FINDINGS AND DISREGARDED THE UNIFORM
AND CONSISTENT FACTUAL FINDINGS OF THE LABOR ARBITER AND THE NLRC, WHICH MUST BE
ACCORDED GREAT WEIGHT, RESPECT AND EVEN FINALITY. IN SO DOING, THE COURT OF
APPEALS EXCEEDED ITS AUTHORITY ON CERTIORARI UNDER RULE 65 OF THE RULES OF COURT.

II. THE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN
ACCORD WITH THE CONSTITUTION, LAW, APPLICABLE RULES AND REGULATIONS AND
DECISIONS OF THE SUPREME COURT IN NOT HOLDING THAT DEPARTMENT ORDER NO. 10, SERIES
OF 1997 IS THE APPLICABLE REGULATION IN THIS CASE. IN GIVING RETROACTIVE APPLICATION
TO DEPARTMENT ORDER NO. 3, SERIES OF 2001, THE COURT OF APPEALS VIOLATED THE
CONSTITUTIONAL PROVISION AGAINST IMPAIRMENT OF CONTRACTS AND DEPRIVED
PETITIONER OF THE DUE PROCESS OF THE LAW.

III. THE COURT OF APPEALS HAS DETERMINED A QUESTION OF SUBSTANCE NOT IN ACCORD
WITH LAW AND JURISPRUDENCE IN GIVING WEIGHT TO THE ORDER DATED 19 OCTOBER 1993
ISSUED BY THE OFFICE OF SECRETARY OF LABOR, WHICH AFFIRMED THE FINDINGS OF THE
DOLE REGIONAL OFFICE (REGION XI, DAVAO CITY) THAT CAMPCO IS ONE OF THE
COOPERATIVES ENGAGED IN LABOR-ONLY CONTRACTING ACTIVITIES.

IV. THE COURT OF APPEALS HAS DETERMINED A QUESTION OF SUBSTANCE NOT IN ACCORD
WITH LAW AND JURISPRUDENCE IN NOT RULING THAT RESPONDENTS, BY ACTIVELY
REPRESENTING THEMSELVES AND WARRANTING THAT THEY ARE ENGAGED IN LEGITIMATE JOB
CONTRACTING, ARE BARRED BY THE EQUITABLE PRINCIPLE OF ESTOPPEL FROM ASSERTING
THAT THEY ARE REGULAR EMPLOYEES OF PETITIONER.
V. THE COURT OF APPEALS HAS DETERMINED A QUESTION OF SUBSTANCE NOT IN ACCORD
WITH LAW AND JURISPRUDENCE IN RULING THAT CAMPCO IS ENGAGED IN THE PROHIBITED
ACT OF "LABOR-ONLY CONTRACTING" DESPITE THERE BEING SUBSTANTIAL EVIDENCE TO THE
CONTRARY.

VI. THE COURT OF APPEALS HAS DETERMINED A QUESTION OF SUBSTANCE NOT IN ACCORD
WITH LAW AND JURISPRUDENCE IN RULING THAT PETITIONER IS THE EMPLOYER OF
RESPONDENTS AND THAT PETITIONER IS GUILTY OF ILLEGAL DISMISSAL.24

This Courts Ruling

I Anent the first assignment of error, petitioner argues that judicial review under Rule 65 of the revised Rules of
Civil Procedure is limited only to issues concerning want or excess or jurisdiction or grave abuse of discretion. The
special civil action for certiorari is a remedy designed to correct errors of jurisdiction and not mere errors of judgment.
It is the contention of petitioner that the NLRC properly assumed jurisdiction over the parties and subject matter of the
instant case. The errors assigned by the respondents in their Petition for Certiorari before the Court of Appeals do not
pertain to the jurisdiction of the NLRC; they are rather errors of judgment supposedly committed by the the NLRC, in
its Resolution, dated 29 February 2000, and are thus not the proper subject of a petition for certiorari. Petitioner also
posits that the Petition for Certiorari filed by respondents with the Court of Appeals raised questions of fact that would
necessitate a review by the appellate court of the evidence presented by the parties before the Labor Arbiter and the
NLRC, and that questions of fact are not a fit subject for a special civil action for certiorari.

It has long been settled in the landmark case of St. Martin Funeral Home v. NLRC,25 that the mode for judicial review
over decisions of the NLRC is by a petition for certiorari under Rule 65 of the revised Rules of Civil Procedure. The
different modes of appeal, namely, writ of error (Rule 41), petition for review (Rules 42 and 43), and petition for
review on certiorari (Rule 45), cannot be availed of because there is no provision on appellate review of NLRC
decisions in the Labor Code, as amended.26 Although the same case recognizes that both the Court of Appeals and the
Supreme Court have original jurisdiction over such petitions, it has chosen to impose the strict observance of the
hierarchy of courts. Hence, a petition for certiorari of a decision or resolution of the NLRC should first be filed with
the Court of Appeals; direct resort to the Supreme Court shall not be allowed unless the redress desired cannot be
obtained in the appropriate courts or where exceptional and compelling circumstances justify an availment of a remedy
within and calling for the exercise by the Supreme Court of its primary jurisdiction.

The extent of judicial review by certiorari of decisions or resolutions of the NLRC, as exercised previously by the
Supreme Court and, now, by the Court of Appeals, is described in Zarate v. Olegario,27 thus

The rule is settled that the original and exclusive jurisdiction of this Court to review a decision of respondent NLRC (or
Executive Labor Arbiter as in this case) in a petition for certiorari under Rule 65 does not normally include an inquiry
into the correctness of its evaluation of the evidence. Errors of judgment, as distinguished from errors of jurisdiction,
are not within the province of a special civil action for certiorari, which is merely confined to issues of jurisdiction or
grave abuse of discretion. It is thus incumbent upon petitioner to satisfactorily establish that respondent Commission or
executive labor arbiter acted capriciously and whimsically in total disregard of evidence material to or even decisive of
the controversy, in order that the extraordinary writ of certiorari will lie. By grave abuse of discretion is meant such
capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, and it must be shown that the
discretion was exercised arbitrarily or despotically. For certiorari to lie, there must be capricious, arbitrary and
whimsical exercise of power, the very antithesis of the judicial prerogative in accordance with centuries of both civil
law and common law traditions.

The Court of Appeals, therefore, can grant the Petition for Certiorari if it finds that the NLRC, in its assailed decision
or resolution, committed grave abuse of discretion by capriciously, whimsically, or arbitrarily disregarding evidence
which is material or decisive of the controversy; and the Court of Appeals can not make this determination without
looking into the evidence presented by the parties. Necessarily, the appellate court can only evaluate the materiality or
significance of the evidence, which is alleged to have been capriciously, whimsically, or arbitrarily disregarded by the
NLRC, in relation to all other evidence on record.

As this Court elucidated in Garcia v. National Labor Relations Commission28 --

[I]n Ong v. People, we ruled that certiorari can be properly resorted to where the factual findings complained of are not
supported by the evidence on record. Earlier, in Gutib v. Court of Appeals, we emphasized thus:

[I]t has been said that a wide breadth of discretion is granted a court of justice in certiorari proceedings. The cases in
which certiorari will issue cannot be defined, because to do so would be to destroy its comprehensiveness and
usefulness. So wide is the discretion of the court that authority is not wanting to show that certiorari is more
discretionary than either prohibition or mandamus. In the exercise of our superintending control over inferior courts,
we are to be guided by all the circumstances of each particular case "as the ends of justice may require." So it is that the
writ will be granted where necessary to prevent a substantial wrong or to do substantial justice.

And in another case of recent vintage, we further held:


In the review of an NLRC decision through a special civil action for certiorari, resolution is confined only to issues of
jurisdiction and grave abuse of discretion on the part of the labor tribunal. Hence, the Court refrains from reviewing
factual assessments of lower courts and agencies exercising adjudicative functions, such as the NLRC. Occasionally,
however, the Court is constrained to delve into factual matters where, as in the instant case, the findings of the NLRC
contradict those of the Labor Arbiter.

In this instance, the Court in the exercise of its equity jurisdiction may look into the records of the case and re-examine
the questioned findings. As a corollary, this Court is clothed with ample authority to review matters, even if they are
not assigned as errors in their appeal, if it finds that their consideration is necessary to arrive at a just decision of the
case. The same principles are now necessarily adhered to and are applied by the Court of Appeals in its expanded
jurisdiction over labor cases elevated through a petition for certiorari; thus, we see no error on its part when it made
anew a factual determination of the matters and on that basis reversed the ruling of the NLRC.

II The second assignment of error delves into the significance and application to the case at bar of the two
department orders issued by DOLE. Department Order No. 10, series of 1997, amended the implementing rules of
Books III and VI of the Labor Code, as amended. Under this particular DOLE department order, the arrangement
between petitioner and CAMPCO would qualify as permissible contracting. Department Order No. 3, series of 2001,
revoked Department Order No. 10, series of 1997, and reiterated the prohibition on labor-only contracting.

Attention is called to the fact that the acts complained of by the respondents occurred well before the issuance of the
two DOLE department orders in 1997 and 2001. The Service Contract between DOLE and CAMPCO was executed on
17 August 1993. Respondents started working for petitioner sometime in 1993 and 1994. While some of them
continued to work for petitioner, at least until the filing of the Complaint, others were put on "stay home status" at
various times in 1994, 1995, and 1996. Respondents filed their Complaint with the NLRC on 19 December 1996.

A basic rule observed in this jurisdiction is that no statute, decree, ordinance, rule or regulation shall be given
retrospective effect unless explicitly stated.29 Since there is no provision at all in the DOLE department orders that
expressly allowed their retroactive application, then the general rule should be followed, and the said orders should be
applied only prospectively.

Which now brings this Court to the question as to what was the prevailing rule on labor-only contracting from 1993 to
1996, the period when the occurrences subject of the Complaint before the NLRC took place.

Article 106 of the Labor Code, as amended, permits legitimate job contracting, but prohibits labor-only contracting.
The said provision reads

ART. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the
performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be
paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code,
the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of
the work performed under the contract, in the same manner and extent that he is liable to employees directly employed
by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the
rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions
between labor-only contracting and job contracting as well as differentiations within these types of contracting and
determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any
violation or circumvention of any provision of this Code.

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital
or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited
and placed by such 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.

To implement the foregoing provision of the Labor Code, as amended, Sections 8 and 9, Rule VIII, Book III of the
implementing rules, in force since 1976 and prior to their amendment by DOLE Department Order No. 10, series of
1997, provided as follows

Sec. 8. 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.

Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an employer shall be deemed to
be engaged in labor-only contracting where such person:

(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work
premises and other materials; and

(2) The workers recruited and placed by such persons are performing activities which are directly related to the
principal business or operations of the employer in which workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor
shall be considered merely as an agent or intermediary 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.

(c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate
orders whether or not the contracting out of labor is permissible in the light of the circumstances of
each case and after considering the operating needs of the employer and the rights of the workers
involved. In such case, he may prescribe conditions and restrictions to insure the protection and
welfare of the workers.

Since these statutory and regulatory provisions were the ones in force during the years in question, then it was in
consideration of the same that DOLE Regional Director Parel and DOLE Undesrsecretary Trajano issued their Orders
on 19 September 1993 and 15 September 1994, respectively, both finding that CAMPCO was engaged in labor-only
contracting. Petitioner, in its third assignment of error, questions the weight that the Court of Appeals gave these orders
in its Decision, dated 20 May 2002, and Amended Decision, dated 27 November 2003.

III The Orders of DOLE Regional Director Parel, dated 19 September 1993, and of DOLE Undersecretary
Trajano, dated 15 September 1994, were issued pursuant to the visitorial and enforcement power conferred by the
Labor Code, as amended, on the DOLE Secretary and his duly authorized representatives, to wit

ART. 128. Visitorial and enforcement power. (a) The Secretary of Labor or his duly authorized representatives,
including labor regulation officers, shall have access to employers records and premises at any time of the day or night
whenever work is being undertaken therein, and the right to copy therefrom, to question any employee and investigate
any fact, condition or matter which may be necessary to determine violations or which may aid in the enforcement of
this Code and of any labor law, wage order or rules and regulations pursuant thereto.

(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the
relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly authorized
representatives shall have the power to issue compliance orders to give effect to the labor standards provisions of this
Code and other labor legislation based on the findings of labor employment and enforcement officers or industrial
safety engineers made in the course of inspection. The Secretary or his duly authorized representatives shall issue writs
of execution to the appropriate authority for the enforcement of their orders, except in cases where the employer
contests the findings of the labor employment and enforcement officer and raises issues supported by documentary
proofs which were not considered in the course of inspection.

An order issued by the duly authorized representative of the Secretary of Labor and Employment under this article may
be appealed to the latter. In case said order involves a monetary award, an appeal by the employer may be perfected
only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Secretary
of Labor and Employment in the amount equivalent to the monetary award in the order appealed from. (Emphasis
supplied.)

Before Regional Director Parel issued his Order, dated 19 September 1993, a Task Force investigated the operations of
cooperatives in Polomolok, South Cotabato, and submitted a report identifying six cooperatives that were engaged in
labor-only contracting, one of which was CAMPCO. In a conference before the DOLE Regional Office, the
cooperatives named by the Task Force were given the opportunity to explain the nature of their activities in relation to
petitioner; and, the cooperatives, as well as petitioner, submitted to the DOLE Regional Office their position papers
and other supporting documents to refute the findings of the Task Force. It was only after these procedural steps did
Regional Director Parel issued his Order finding that three cooperatives, including CAMPCO, were indeed engaged in
labor-only contracting and were directed to cease and desist from further engaging in such activities. On appeal, DOLE
Undersecretary Trajano, by authority of the DOLE Secretary, affirmed Regional Director Parels Order. Upon denial of
the Motion for Reconsideration filed by the cooperatives, and no further appeal taken therefrom, the Order of DOLE
Undersecretary Trajano, dated 15 September 1994, became final and executory.

Petitioner avers that the foregoing Orders of the authorized representatives of the DOLE Secretary do not constitute res
judicata in the case filed before the NLRC. This Court, however, believes otherwise and finds that the final and
executory Orders of the DOLE Secretary or his authorized representatives should bind the NLRC.
It is obvious that the visitorial and enforcement power granted to the DOLE Secretary is in the nature of a quasi-
judicial power. Quasi-judicial power has been described by this Court in the following manner

Quasi-judicial or administrative adjudicatory power on the other hand is the power of the administrative agency to
adjudicate the rights of persons before it. It is the power to hear and determine questions of fact to which the
legislative policy is to apply and to decide in accordance with the standards laid down by the law itself in enforcing
and administering the same law. The administrative body exercises its quasi-judicial power when it performs in a
judicial manner an act which is essentially of an executive or administrative nature, where the power to act in such
manner is incidental to or reasonably necessary for the performance of the executive or administrative duty
entrusted to it. In carrying out their quasi-judicial functions the administrative officers or bodies are required to
investigate facts or ascertain the existence of facts, hold hearings, weigh evidence, and draw conclusions from them
as basis for their official action and exercise of discretion in a judicial nature. Since rights of specific persons are
affected it is elementary that in the proper exercise of quasi-judicial power due process must be observed in the conduct
of the proceedings.30 (Emphasis supplied.)

The DOLE Secretary, under Article 106 of the Labor Code, as amended, exercise quasi-judicial power, at least, to the
extent necessary to determine violations of labor standards provisions of the Code and other labor legislation. He can
issue compliance orders and writs of execution for the enforcement of his orders. As evidence of the importance and
binding effect of the compliance orders of the DOLE Secretary, Article 128 of the Labor Code, as amended, further
provides

ART. 128. Visitorial and enforcement power.

xxxx

(d) It shall be unlawful for any person or entity to obstruct, impede, delay or otherwise render ineffective the orders of
the Secretary of Labor or his duly authorized representatives issued pursuant to the authority granted under this article,
and no inferior court or entity shall issue temporary or permanent injunction or restraining order or otherwise assume
jurisdiction over any case involving the enforcement orders issued in accordance with this article.

The Orders of DOLE Regional Director Parel, dated 19 September 1993, and of DOLE Undersecretary Trajano, dated
15 September 1994, consistently found that CAMPCO was engaging in labor-only contracting. Such finding
constitutes res judicata in the case filed by the respondents with the NLRC.

It is well-established in this jurisdiction that the decisions and orders of administrative agencies, rendered pursuant to
their quasi-judicial authority, have upon their finality, the force and binding effect of a final judgment within the
purview of the doctrine of res judicata. The rule of res judicata, which forbids the reopening of a matter once judicially
determined by competent authority, applies as well to the judicial and quasi-judicial acts of public, executive or
administrative officers and boards acting within their jurisdiction as to the judgments of courts having general judicial
powers. The orderly administration of justice requires that the judgments or resolutions of a court or quasi-judicial
body must reach a point of finality set by the law, rules and regulations, so as to write finis to disputes once and for all.
This is a fundamental principle in the Philippine justice system, without which there would be no end to litigations. 31

Res judicata has dual aspects, "bar by prior judgment" and "conclusiveness of judgment." This Court has previously
clarified the difference between the two

Section 49, Rule 39 of the Revised Rules of Court lays down the dual aspects of res judicata in actions in personam. to
wit:

"Effect of judgment. - The effect of a judgment or final order rendered by a court or judge of the Philippines, having
jurisdiction to pronounce the judgment or order, may be as follows:

xxxx

(b) In other cases the judgment or order is, with respect to the matter directly adjudged or as to any other matter that
could have been raised in relation thereto, conclusive between the parties and their successors in interest by title
subsequent to the commencement of the action or special proceeding, litigating for the same thing and under the same
title and in the same capacity;

(c) In any other litigation between the same parties or their successors in interest, that only is deemed to have been
adjudged in a former judgment which appears upon its face to have been so adjudged, or which was actually and
necessarily included therein or necessary thereto."

Section 49(b) enunciates the first concept of res judicata known as "bar by prior judgment," whereas, Section 49(c) is
referred to as "conclusiveness of judgment."

There is "bar by former judgment" when, between the first case where the judgment was rendered, and the second case
where such judgment is invoked, there is identity of parties, subject matter and cause of action. When the three
identities are present, the judgment on the merits rendered in the first constitutes an absolute bar to the subsequent
action. But where between the first case wherein Judgment is rendered and the second case wherein such judgment is
invoked, there is only identity of parties but there is no identity of cause of action, the judgment is conclusive in the
second case, only as to those matters actually and directly controverted and determined, and not as to matters merely
involved therein. This is what is termed "conclusiveness of judgment."

The second concept of res judicata, conclusiveness of judgment, is the one applicable to the case at bar.

The same parties who participated in the proceedings before the DOLE Regional Office are the same parties involved
in the case filed before the NLRC. CAMPCO, on behalf of its members, attended the conference before the DOLE
Regional Office; submitted its position paper; filed an appeal with the DOLE Secretary of the Order of DOLE Regional
Director Parel; and moved for reconsideration of the subsequent Order of DOLE Undersecretary Trajano. Petitioner,
although not expressly named as a respondent in the DOLE investigation, was a necessary party thereto, considering
that CAMPCO was rendering services to petitioner solely. Moreover, petitioner participated in the proceedings before
the DOLE Regional Office, intervening in the matter through a letter sent by its Senior Legal Officer, dated 24 May
1993, and submitting its own position paper.

While the causes of action in the proceedings before the DOLE and the NLRC differ, they are, in fact, very closely
related. The DOLE Regional Office conducted an investigation to determine whether CAMPCO was violating labor
laws, particularly, those on labor-only contracting. Subsequently, it ruled that CAMPCO was indeed engaging in labor-
only contracting activities, and thereafter ordered to cease and desist from doing so. Respondents came before the
NLRC alleging illegal dismissal by the petitioner of those respondents who were put on "stay home status," and
seeking regularization of respondents who were still working for petitioner. The basis of their claims against petitioner
rests on the argument that CAMPCO was a labor-only contractor and, thus, merely an agent or intermediary of
petitioner, who should be considered as respondents real employer. The matter of whether CAMPCO was a labor-only
contractor was already settled and determined in the DOLE proceedings, which should be conclusive and binding upon
the NLRC. What were left for the determination of the NLRC were the issues on whether there was illegal dismissal
and whether respondents should be regularized.

This Court also notes that CAMPCO and DOLE still continued with their Service Contract despite the explicit cease
and desist orders rendered by authorized DOLE officials. There is no other way to look at it except that CAMPCO and
DOLE acted in complete defiance and disregard of the visitorial and enforcement power of the DOLE Secretary and
his authorized representatives under Article 128 of the Labor Code, as amended. For the NLRC to ignore the findings
of DOLE Regional Director Parel and DOLE Undersecretary Trajano is an unmistakable and serious undermining of
the DOLE officials authority.

IV In petitioners fourth assignment of error, it points out that the Court of Appeals erred in not holding
respondents estopped from asserting that they were regular employees of petitioner since respondents, as owners-
members of CAMPCO, actively represented themselves and warranted that they were engaged in legitimate job
contracting.

This Court cannot sustain petitioners argument.

It is true that CAMPCO is a cooperative composed of its members, including respondents. Nonetheless, it cannot be
denied that a cooperative, as soon as it is registered with the CDA, attains a juridical personality of its own,32separate
and distinct from its members; much in the same way that a corporation has a juridical personality separate and distinct
from its stockholders, known as the doctrine of corporate fiction. The protection afforded by this doctrine is not
absolute, but the exception thereto which necessitates the piercing of the corporate veil can only be made under
specified circumstances. In Traders Royal Bank v. Court of Appeals,33 this Court ruled that

Petitioner cannot put up the excuse of piercing the veil of corporate entity, as this is merely an equitable remedy, and
maybe awarded only in cases when the corporate fiction is used to defeat public convenience, justify wrong, protect
fraud or defend crime or where a corporation is a mere alter ego or business conduit of a person.

Piercing the veil of corporate entity requires the court to see through the protective shroud which exempts its
stockholders from liabilities that ordinarily, they could be subject to, or distinguishes one corporation from a seemingly
separate one, were it not for the existing corporate fiction. But to do this, the court must be sure that the corporate
fiction was misused, to such an extent that injustice, fraud, or crime was committed upon another, disregarding, thus,
his, her, or its rights. It is the corporate entity which the law aims to protect by this doctrine.

Using the above-mentioned guidelines, is petitioner entitled to a piercing of the "cooperative identity" of CAMPCO?
This Court thinks not.

It bears to emphasize that the piercing of the corporate veil is an equitable remedy, and among the maxims of equity
are: (1) he who seeks equity must do equity, and (2) he who comes into equity must come with clean hands. Hence, a
litigant may be denied relief by a court of equity on the ground that his conduct has been inequitable, unfair, dishonest,
fraudulent, or deceitful as to the controversy in issue.34

Petitioner does not come before this Court with clean hands. It is not an innocent party in this controversy.
Petitioner itself admitted that it encouraged and even helped the establishment of CAMPCO and the other cooperatives
in Polomolok, South Cotabato. These cooperatives were established precisely to render services to petitioner. It is
highly implausible that the petitioner was lured into entering into the Service Contract with CAMPCO in 1993 on the
latters misrepresentation and false warranty that it was an independent job contractor. Even if it is conceded that
petitioner was indeed defrauded into believing that CAMPCO was an independent contractor, then the DOLE
proceedings should have placed it on guard. Remember that petitioner participated in the proceedings before the DOLE
Regional Office, it cannot now claim ignorance thereof. Furthermore, even after the issuance of the cease and desist
order on CAMPCO, petitioner still continued with its prohibited service arrangement with the said cooperative. If
petitioner was truly defrauded by CAMPCO and its members into believing that the cooperative was an independent
job contractor, the more logical recourse of petitioner was to have the Service Contract voided in the light of the
explicit findings of the DOLE officials that CAMPCO was engaging in labor-only contracting. Instead, petitioner still
carried on its Service Contract with CAMPCO for several more years thereafter.

V As previously discussed, the finding of the duly authorized representatives of the DOLE Secretary that
CAMPCO was a labor-only contractor is already conclusive. This Court cannot deviate from said finding.

This Court, though, still notes that even an independent review of the evidence on record, in consideration of the proper
labor statutes and regulations, would result in the same conclusion: that CAMPCO was engaged in prohibited activities
of labor-only contracting.

The existence of an independent and permissible 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.35

While there is present in the relationship of petitioner and CAMPCO some factors suggestive of an independent
contractor relationship (i.e., CAMPCO chose who among its members should be sent to work for petitioner; petitioner
paid CAMPCO the wages of the members, plus a percentage thereof as administrative charge; CAMPCO paid the
wages of the members who rendered service to petitioner), many other factors are present which would indicate a
labor-only contracting arrangement between petitioner and CAMPCO.36

First, although petitioner touts the multi-million pesos assets of CAMPCO, it does well to remember that such
were amassed in the years following its establishment. In 1993, when CAMPCO was established and the Service
Contract between petitioner and CAMPCO was entered into, CAMPCO only had 6,600.00 paid-up capital,
which could hardly be considered substantial.37 It only managed to increase its capitalization and assets in the
succeeding years by continually and defiantly engaging in what had been declared by authorized DOLE officials
as labor-only contracting.

Second, CAMPCO did not carry out an independent business from petitioner. It was precisely established to
render services to petitioner to augment its workforce during peak seasons. Petitioner was its only client. Even as
CAMPCO had its own office and office equipment, these were mainly used for administrative purposes; the tools,
machineries, and equipment actually used by CAMPCO members when rendering services to the petitioner
belonged to the latter.

Third, petitioner exercised control over the CAMPCO members, including respondents. Petitioner attempts to
refute control by alleging the presence of a CAMPCO supervisor in the work premises. Yet, the mere presence
within the premises of a supervisor from the cooperative did not necessarily mean that CAMPCO had control over
its members. Section 8(1), Rule VIII, Book III of the implementing rules of the Labor Code, as amended, required
for permissible job contracting that the contractor undertakes the contract work on his account, under his own
responsibility, according to his own manner and method, free from the control and direction of his employer or
principal in all matters connected with the performance of the work except as to the results thereof. As alleged by
the respondents, and unrebutted by petitioner, CAMPCO members, before working for the petitioner, had to
undergo instructions and pass the training provided by petitioners personnel. It was petitioner who determined
and prepared the work assignments of the CAMPCO members. CAMPCO members worked within petitioners
plantation and processing plants alongside regular employees performing identical jobs, a circumstance
recognized as an indicium of a labor-only contractorship.38

Fourth, CAMPCO was not engaged to perform a specific and special job or service. In the Service Contract of
1993, CAMPCO agreed to assist petitioner in its daily operations, and perform odd jobs as may be assigned.
CAMPCO complied with this venture by assigning members to petitioner. Apart from that, no other particular job, work
or service was required from CAMPCO, and it is apparent, with such an arrangement, that CAMPCO merely acted as a
recruitment agency for petitioner. Since the undertaking of CAMPCO did not involve the performance of a specific job,
but rather the supply of manpower only, CAMPCO clearly conducted itself as a labor-only contractor.39

Lastly, CAMPCO members, including respondents, performed activities directly related to the principal business
of petitioner. They worked as can processing attendant, feeder of canned pineapple and pineapple processing, nata
de coco processing attendant, fruit cocktail processing attendant, and etc., functions which were, not only directly
related, but were very vital to petitioners business of production and processing of pineapple products for export.

The findings enumerated in the preceding paragraphs only support what DOLE Regional Director Parel and DOLE
Undersecretary Trajano had long before conclusively established, that CAMPCO was a mere labor-only contractor.

VI The declaration that CAMPCO is indeed engaged in the prohibited activities of labor-only contracting, then
consequently, an employer-employee relationship is deemed to exist between petitioner and respondents, since
CAMPCO shall be considered as a mere agent or intermediary of petitioner.

Since respondents are now recognized as employees of petitioner, this Court is tasked to determine the nature of their
employment. In consideration of all the attendant circumstances in this case, this Court concludes that respondents are
regular employees of petitioner.

Article 280 of the Labor Code, as amended, reads

ART. 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding
and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee
has been engaged to perform activities which are usually necessary and desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of engagement of the employee or where the work or services to
be performed is seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if its is not covered by the preceding paragraph: Provided, That, any
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his employment shall continue
while such activity exists.

This Court expounded on the afore-quoted provision, thus

The primary standard, therefore, of determining a regular employment is the reasonable connection between the
particular activity performed by the employee in relation to the usual business or trade of the employer. The test is
whether the former is usually necessary or desirable in the usual business or trade of the employer. The connection can
be determined by considering the nature of the work performed and its relation to the scheme of the particular business
or trade in its entirety. Also, if the employee has been performing the job for at least one year, even if her performance
is not continuous or merely intermittent, the law deems the repeated and continuing need for its performance as
sufficient evidence of the necessity if not indispensability of the activity to the business. Hence, the employment is also
considered regular, but only with respect to such activity and while such activity exists.40

In the instant Petition, petitioner is engaged in the manufacture and production of pineapple products for
export.1wphi1Respondents rendered services as processing attendant, feeder of canned pineapple and pineapple
processing, nata de coco processing attendant, fruit cocktail processing attendant, and etc., functions they performed
alongside regular employees of the petitioner. There is no doubt that the activities performed by respondents are
necessary or desirable to the usual business of petitioner.

Petitioner likewise want this Court to believe that respondents employment was dependent on the peaks in operation,
work backlogs, absenteeism, and excessive leaves. However, bearing in mind that respondents all claimed to have
worked for petitioner for over a year, a claim which petitioner failed to rebut, then respondents continued employment
clearly demonstrates the continuing necessity and indispensability of respondents employment to the business of
petitioner.

Neither can this Court apply herein the ruling of the NLRC in the previous case involving petitioner and the individual
workers they used to hire before the advent of the cooperatives, to the effect that the employment of these individual
workers were not regular, but rather, were valid "term employments," wherein the employer and employee knowingly
and voluntarily agreed to employment for only a limited or specified period of time. The difference between that case
and the one presently before this Court is that the members of CAMPCO, including respondents, were not informed, at
the time of their engagement, that their employment shall only be for a limited or specified period of time. There is
absence of proof that the respondents were aware and had knowingly and voluntarily agreed to such term employment.
Petitioner did not enter into individual contracts with the CAMPCO members, but executed a Service Contract with
CAMPCO alone. Although the Service Contract of 1993 stated that it shall be for a specific period, from 1 July to 31
December 1993, petitioner and CAMPCO continued the service arrangement beyond 1993. Since there was no written
renewal of the Service Contract,41 there was no further indication that the engagement by petitioner of the services of
CAMPCO members was for another definite or specified period only.

Respondents, as regular employees of petitioner, are entitled to security of tenure. They could only be removed based
on just and authorized causes as provided for in the Labor Code, as amended, and after they are accorded procedural
due process. Therefore, petitioners acts of placing some of the respondents on "stay home status" and not giving them
work assignments for more than six months were already tantamount to constructive and illegal dismissal. 42
In summary, this Court finds that CAMPCO was a labor-only contractor and, thus, petitioner is the real employer of the
respondents, with CAMPCO acting only as the agent or intermediary of petitioner. Due to the nature of their work and
length of their service, respondents should be considered as regular employees of petitioner. Petitioner constructively
dismissed a number of the respondents by placing them on "stay home status" for over six months, and was therefore
guilty of illegal dismissal. Petitioner must accord respondents the status of regular employees, and reinstate the
respondents who it constructively and illegally dismissed, to their previous positions, without loss of seniority rights
and other benefits, and pay these respondents backwages from the date of filing of the Complaint with the NLRC on
19 December 1996 up to actual reinstatement.

WHEREFORE, in view of the foregoing, the instant Petition is DENIED and the Amended Decision, dated 27
November 2003, rendered by the Court of Appeals in CA-G.R. SP No. 63405 is AFFIRMED.

Costs against the petitioner.

SO ORDERED.

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