1 ABS-CBN agreed to pay for SONZA’s services a monthly talent fee July 1996, ABS-CBN opened a new account
NZA’s services a monthly talent fee July 1996, ABS-CBN opened a new account with the same bank where
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 138051 June 10, 2004
JOSE Y. SONZA, petitioner,
vs.
ABS-CBN BROADCASTING CORPORATION, respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari1 assailing the 26
March 1999 Decision2 of the Court of Appeals in CA-G.R. SP No. 49190
dismissing the petition filed by Jose Y. Sonza ("SONZA"). The Court of
Appeals affirmed the findings of the National Labor Relations
Commission ("NLRC"), which affirmed the Labor Arbiter’s dismissal of the
case for lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-
CBN") signed an Agreement ("Agreement") with the Mel and Jay
Management and Development Corporation ("MJMDC"). ABS-CBN was
represented by its corporate officers while MJMDC was represented by
SONZA, as President and General Manager, and Carmela Tiangco
("TIANGCO"), as EVP and Treasurer. Referred to in the Agreement as
"AGENT," MJMDC agreed to provide SONZA’s services exclusively to ABS-
CBN as talent for radio and television. The Agreement listed the services
SONZA would render to ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m.,
Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m.,
Sundays.3
of P310,000 for the first year and P317,000 for the second and third year
of the Agreement. ABS-CBN would pay the talent fees on the 10th and
25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBN’s President, Eugenio
Lopez III, which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated
May 1994 entered into by your goodself on behalf of ABS-CBN
with our company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view
of recent events concerning his programs and career. We
consider these acts of the station violative of the Agreement
and the station as in breach thereof. In this connection, we
hereby serve notice of rescission of said Agreement at our
instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing
recovery of the remaining amount stipulated in paragraph 7 of
the Agreement but reserves the right to seek recovery of the
other benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager4
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the
Department of Labor and Employment, National Capital Region in
Quezon City. SONZA complained that ABS-CBN did not pay his salaries,
separation pay, service incentive leave pay, 13th month pay, signing
bonus, travel allowance and amounts due under the Employees Stock
Option Plan ("ESOP").
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that
no employer-employee relationship existed between the parties. SONZA
filed an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZA’s monthly talent fees
through his account at PCIBank, Quezon Avenue Branch, Quezon City. In
ABS-CBN deposited SONZA’s talent fees and other payments due him
under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter5 denied the
motion to dismiss and directed the parties to file their respective position
papers. The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim
that he was an employee of respondent company until April
15, 1996 and that he was not paid certain claims, it is
sufficient enough as to confer jurisdiction over the instant case
in this Office. And as to whether or not such claim would
entitle complainant to recover upon the causes of action
asserted is a matter to be resolved only after and as a result of
a hearing. Thus, the respondent’s plea of lack of employer-
employee relationship may be pleaded only as a matter of
defense. It behooves upon it the duty to prove that there
really is no employer-employee relationship between it and the
complainant.
The Labor Arbiter then considered the case submitted for resolution. The
parties submitted their position papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondent’s Position Paper
with Motion to Expunge Respondent’s Annex 4 and Annex 5 from the
Records. Annexes 4 and 5 are affidavits of ABS-CBN’s witnesses Soccoro
Vidanes and Rolando V. Cruz. These witnesses stated in their affidavits
that the prevailing practice in the television and broadcast industry is to
treat talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the
complaint for lack of jurisdiction.6 The pertinent parts of the decision
read as follows:
xxx
While Philippine jurisprudence has not yet, with certainty,
touched on the "true nature of the contract of a talent," it
stands to reason that a "talent" as above-described cannot be
considered as an employee by reason of the peculiar
circumstances surrounding the engagement of his services.
It must be noted that complainant was engaged by
respondent by reason of his peculiar skills and talent
as a TV host and a radio broadcaster. Unlike an
ordinary employee, he was free to perform the services
he undertook to render in accordance with his own
1
 style. The benefits conferred to complainant under the May
1994 Agreement are certainly very much higher than those
generally given to employees. For one, complainant Sonza’s
monthly talent fees amount to a staggering P317,000.
Moreover, his engagement as a talent was covered by a
specific contract. Likewise, he was not bound to render eight
(8) hours of work per day as he worked only for such number
of hours as may be necessary.
The fact that per the May 1994 Agreement complainant was
accorded some benefits normally given to an employee is
inconsequential. Whatever benefits complainant enjoyed
arose from specific agreement by the parties and not
by reason of employer-employee relationship. As
correctly put by the respondent, "All these benefits are merely
talent fees and other contractual benefits and should not be
deemed as ‘salaries, wages and/or other remuneration’
accorded to an employee, notwithstanding the nomenclature
appended to these benefits. Apropos to this is the rule that the
term or nomenclature given to a stipulated benefit is not
controlling, but the intent of the parties to the Agreement
conferring such benefit."
The fact that complainant was made subject to
respondent’s Rules and Regulations, likewise, does not
detract from the absence of employer-employee
relationship. As held by the Supreme Court, "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 to achieve it." (Insular
Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484,
November 15, 1989).
x x x (Emphasis supplied)7
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered
a Decision affirming the Labor Arbiter’s decision. SONZA filed a motion
for reconsideration, which the NLRC denied in its Resolution dated 3 July
1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before
the Court of Appeals assailing the decision and resolution of the NLRC.
On 26 March 1999, the Court of Appeals rendered a Decision dismissing
the case.8
Hence, this petition. appellee are not based on the Labor Code but rather on the
provisions of the May 1994 Agreement, while his claims for
proceeds under Stock Purchase Agreement are based on the
The Rulings of the NLRC and Court of Appeals
latter. A portion of the Position Paper of complainant-appellant
bears perusal:
The Court of Appeals affirmed the NLRC’s finding that no employer-
employee relationship existed between SONZA and ABS-CBN. Adopting
‘Under [the May 1994 Agreement] with respondent
the NLRC’s decision, the appellate court quoted the following findings of
ABS-CBN, the latter contractually bound itself to pay
the NLRC:
complainant a signing bonus consisting of shares of
stocks…with FIVE HUNDRED THOUSAND PESOS
x x x the May 1994 Agreement will readily reveal that MJMDC (P500,000.00).
entered into the contract merely as an agent of complainant
Sonza, the principal. By all indication and as the law puts it,
Similarly, complainant is also entitled to be paid 13th
the act of the agent is the act of the principal itself. This fact is
month pay based on an amount not lower than the
made particularly true in this case, as admittedly MJMDC ‘is a
amount he was receiving prior to effectivity of (the)
management company devoted exclusively to managing the
Agreement’.
careers of Mr. Sonza and his broadcast partner, Mrs. Carmela
C. Tiangco.’ (Opposition to Motion to Dismiss)
Under paragraph 9 of (the May 1994 Agreement),
complainant is entitled to a commutable travel
Clearly, the relations of principal and agent only accrues
benefit amounting to at least One Hundred Fifty
between complainant Sonza and MJMDC, and not between
Thousand Pesos (P150,000.00) per year.’
ABS-CBN and MJMDC. This is clear from the provisions of the
May 1994 Agreement which specifically referred to MJMDC as
the ‘AGENT’. As a matter of fact, when complainant herein Thus, it is precisely because of complainant-appellant’s own
unilaterally rescinded said May 1994 Agreement, it was MJMDC recognition of the fact that his contractual relations with ABS-
which issued the notice of rescission in behalf of Mr. Sonza, CBN are founded on the New Civil Code, rather than the Labor
who himself signed the same in his capacity as President. Code, that instead of merely resigning from ABS-CBN,
complainant-appellant served upon the latter a ‘notice of
rescission’ of Agreement with the station, per his letter dated
Moreover, previous contracts between Mr. Sonza and ABS-CBN
April 1, 1996, which asserted that instead of referring to
reveal the fact that historically, the parties to the said
unpaid employee benefits, ‘he is waiving and renouncing
agreements are ABS-CBN and Mr. Sonza. And it is only in the
recovery of the remaining amount stipulated in paragraph 7 of
May 1994 Agreement, which is the latest Agreement executed
the Agreement but reserves the right to such recovery of the
between ABS-CBN and Mr. Sonza, that MJMDC figured in the
other benefits under said Agreement.’ (Annex 3 of the
said Agreement as the agent of Mr. Sonza.
respondent ABS-CBN’s Motion to Dismiss dated July 10, 1996).
We find it erroneous to assert that MJMDC is a mere ‘labor-
Evidently, it is precisely by reason of the alleged violation of
only’ contractor of ABS-CBN such that there exist[s] employer-
the May 1994 Agreement and/or the Stock Purchase
employee relationship between the latter and Mr. Sonza. On
Agreement by respondent-appellee that complainant-appellant
the contrary, We find it indubitable, that MJMDC is an agent,
filed his complaint. Complainant-appellant’s claims being
not of ABS-CBN, but of the talent/contractor Mr. Sonza, as
anchored on the alleged breach of contract on the part of
expressly admitted by the latter and MJMDC in the May 1994
respondent-appellee, the same can be resolved by reference
Agreement.
to civil law and not to labor law. Consequently, they are within
the realm of civil law and, thus, lie with the regular courts. As
It may not be amiss to state that jurisdiction over the instant held in the case of Dai-Chi Electronics Manufacturing vs.
controversy indeed belongs to the regular courts, the same Villarama, 238 SCRA 267, 21 November 1994, an action for
being in the nature of an action for alleged breach of breach of contractual obligation is intrinsically a civil
contractual obligation on the part of respondent-appellee. As dispute.9 (Emphasis supplied)
squarely apparent from complainant-appellant’s Position
Paper, his claims for compensation for services, ‘13th month
pay’, signing bonus and travel allowance against respondent-
2
The Court of Appeals ruled that the existence of an employer-employee
relationship between SONZA and ABS-CBN is a factual question that is
within the jurisdiction of the NLRC to resolve.10 A special civil action for
certiorari extends only to issues of want or excess of jurisdiction of the
NLRC.11 Such action cannot cover an inquiry into the correctness of the
evaluation of the evidence which served as basis of the NLRC’s
conclusion.12 The Court of Appeals added that it could not re-examine
the parties’ evidence and substitute the factual findings of the NLRC with
its own.13
The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE
NLRC’S DECISION AND REFUSING TO FIND THAT AN
EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN
SONZA AND ABS-CBN, DESPITE THE WEIGHT OF
CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO
SUPPORT SUCH A FINDING.14
The existence of an employer-employee relationship is a question of fact. ABS-CBN granted him benefits and privileges "which he would not have
Appellate courts accord the factual findings of the Labor Arbiter and the enjoyed if he were truly the subject of a valid job contract."
NLRC not only respect but also finality when supported by substantial
evidence.15 Substantial evidence means such relevant evidence as a
All the talent fees and benefits paid to SONZA were the result of
reasonable mind might accept as adequate to support a conclusion.16 A
negotiations that led to the Agreement. If SONZA were ABS-CBN’s
party cannot prove the absence of substantial evidence by simply
employee, there would be no need for the parties to stipulate on benefits
pointing out that there is contrary evidence on record, direct or
such as "SSS, Medicare, x x x and 13th month pay"20 which the law
circumstantial. The Court does not substitute its own judgment for that
automatically incorporates into every employer-employee
of the tribunal in determining where the weight of evidence lies or what
contract.21 Whatever benefits SONZA enjoyed arose from contract and
evidence is credible.17
not because of an employer-employee relationship.22
SONZA maintains that all essential elements of an employer-employee
SONZA’s talent fees, amounting to P317,000 monthly in the second and
relationship are present in this case. Case law has consistently held that
third year, are so huge and out of the ordinary that they indicate more
the elements of an employer-employee relationship are: (a) the selection
an independent contractual relationship rather than an employer-
and engagement of the employee; (b) the payment of wages; (c) the
employee relationship. ABS-CBN agreed to pay SONZA such huge talent
power of dismissal; and (d) the employer’s power to control the
fees precisely because of SONZA’s unique skills, talent and celebrity
employee on the means and methods by which the work is
status not possessed by ordinary employees. Obviously, SONZA acting
accomplished.18 The last element, the so-called "control test", is the
alone possessed enough bargaining power to demand and receive such
most important element.19
huge talent fees for his services. The power to bargain talent fees way
above the salary scales of ordinary employees is a circumstance
A. Selection and Engagement of Employee indicative, but not conclusive, of an independent contractual relationship.

The Court’s Ruling

We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the
Court of Appeals affirming the NLRC ruling which upheld the Labor
Arbiter’s dismissal of the case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine
labor laws and jurisprudence define clearly the elements of an employer-
employee relationship, this is the first time that the Court will resolve the
nature of the relationship between a television and radio station and one
of its "talents." There is no case law stating that a radio and television
program host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely
Jose "Jay" Sonza, a known television and radio personality, and ABS-
CBN, one of the biggest television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case
because he was an employee of ABS-CBN. On the other hand, ABS-CBN
insists that the Labor Arbiter has no jurisdiction because SONZA was an
independent contractor.
Employee or Independent Contractor?
ABS-CBN engaged SONZA’s services to co-host its television and radio
programs because of SONZA’s peculiar skills, talent and celebrity status.
SONZA contends that the "discretion used by respondent in specifically
selecting and hiring complainant over other broadcasters of possibly
similar experience and qualification as complainant belies respondent’s
claim of independent contractorship."
Independent contractors often present themselves to possess unique
skills, expertise or talent to distinguish them from ordinary employees.
The specific selection and hiring of SONZA, because of his unique
skills, talent and celebrity status not possessed by ordinary
employees, is a circumstance indicative, but not conclusive, of an
independent contractual relationship. If SONZA did not possess such
unique skills, talent and celebrity status, ABS-CBN would not have
entered into the Agreement with SONZA but would have hired him
through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not
conclusively determine his status. We must consider all the
circumstances of the relationship, with the control test being the most
important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his
fees going to MJMDC. SONZA asserts that this mode of fee payment
shows that he was an employee of ABS-CBN. SONZA also points out that
The payment of talent fees directly to SONZA and not to MJMDC does
not negate the status of SONZA as an independent contractor. The
parties expressly agreed on such mode of payment. Under the
Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would
have to turn over any talent fee accruing under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may
terminate their relationship. SONZA failed to show that ABS-CBN could
terminate his services on grounds other than breach of contract, such as
retrenchment to prevent losses as provided under labor laws.23
During the life of the Agreement, ABS-CBN agreed to pay SONZA’s talent
fees as long as "AGENT and Jay Sonza shall faithfully and completely
perform each condition of this Agreement."24 Even if it suffered severe
business losses, ABS-CBN could not retrench SONZA because ABS-CBN
remained obligated to pay SONZA’s talent fees during the life of the
Agreement. This circumstance indicates an independent contractual
relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his
programs, ABS-CBN still paid him his talent fees. Plainly, ABS-CBN
adhered to its undertaking in the Agreement to continue paying SONZA’s
talent fees during the remaining life of the Agreement even if ABS-CBN
cancelled SONZA’s programs through no fault of SONZA.25
3
SONZA assails the Labor Arbiter’s interpretation of his rescission of the
Agreement as an admission that he is not an employee of ABS-CBN. The
Labor Arbiter stated that "if it were true that complainant was really an
employee, he would merely resign, instead." SONZA did actually resign
from ABS-CBN but he also, as president of MJMDC, rescinded the
Agreement. SONZA’s letter clearly bears this out.26 However, the manner
by which SONZA terminated his relationship with ABS-CBN is immaterial.
Whether SONZA rescinded the Agreement or resigned from work does
not determine his status as employee or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and television
program host is an employee or an independent contractor, we refer to
foreign case law in analyzing the present case. The United States Court
of Appeals, First Circuit, recently held in Alberty-Vélez v. Corporación
De Puerto Rico Para La Difusión Pública ("WIPR")27that a
television program host is an independent contractor. We quote the
following findings of the U.S. court:
Several factors favor classifying Alberty as an independent
contractor. First, a television actress is a skilled position
requiring talent and training not available on-the-job. x
x x In this regard, Alberty possesses a master’s degree in
public communications and journalism; is trained in dance,
singing, and modeling; taught with the drama department at
the University of Puerto Rico; and acted in several theater and
television productions prior to her affiliation with "Desde Mi
Pueblo." Second, Alberty provided the "tools and
instrumentalities" necessary for her to
perform. Specifically, she provided, or obtained sponsors to
provide, the costumes, jewelry, and other image-related
supplies and services necessary for her appearance. Alberty
disputes that this factor favors independent contractor status
because WIPR provided the "equipment necessary to tape the
show." Alberty’s argument is misplaced. The equipment
necessary for Alberty to conduct her job as host of "Desde Mi
Pueblo" related to her appearance on the show. Others
provided equipment for filming and producing the show, but
these were not the primary tools that Alberty used to perform
her particular function. If we accepted this argument,
independent contractors could never work on collaborative
projects because other individuals often provide the equipment
required for different aspects of the collaboration. x x x
Third, WIPR could not assign Alberty work in addition
to filming "Desde Mi Pueblo." Alberty’s contracts with
WIPR specifically provided that WIPR hired her "professional
services as Hostess for the Program Desde Mi Pueblo." There
is no evidence that WIPR assigned Alberty tasks in addition to Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it
work related to these tapings. x x x28 (Emphasis supplied) was by the obligation to continue paying in full SONZA’s talent fees, did
not amount to control over the means and methods of the performance
of SONZA’s work. ABS-CBN could not terminate or discipline SONZA even
Applying the control test to the present case, we find that SONZA is
if the means and methods of performance of his work - how he delivered
not an employee but an independent contractor. The control test is
his lines and appeared on television - did not meet ABS-CBN’s approval.
the most important test our courts apply in distinguishing an employee
This proves that ABS-CBN’s control was limited only to the result of
from an independent contractor.29 This test is based on the extent of
SONZA’s work, whether to broadcast the final product or not. In either
control the hirer exercises over a worker. The greater the supervision
case, ABS-CBN must still pay SONZA’s talent fees in full until the expiry
and control the hirer exercises, the more likely the worker is deemed an
of the Agreement.
employee. The converse holds true as well – the less control the hirer
exercises, the more likely the worker is considered an independent
contractor.30 In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court
of Appeals ruled that vaudeville performers were independent
contractors although the management reserved the right to delete
First, SONZA contends that ABS-CBN exercised control over the means
objectionable features in their shows. Since the management did not
and methods of his work.
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
SONZA’s argument is misplaced. ABS-CBN engaged SONZA’s services features.37
specifically to co-host the "Mel & Jay" programs. ABS-CBN did not assign
any other work to SONZA. To perform his work, SONZA only needed his
SONZA further contends that ABS-CBN exercised control over his work
skills and talent. How SONZA delivered his lines, appeared on television,
by supplying all equipment and crew. No doubt, ABS-CBN supplied the
and sounded on radio were outside ABS-CBN’s control. SONZA did not
equipment, crew and airtime needed to broadcast the "Mel & Jay"
have to render eight hours of work per day. The Agreement required
programs. However, the equipment, crew and airtime are not the "tools
SONZA to attend only rehearsals and tapings of the shows, as well as
and instrumentalities" SONZA needed to perform his job. What SONZA
pre- and post-production staff meetings.31 ABS-CBN could not dictate the
principally needed were his talent or skills and the costumes necessary
contents of SONZA’s script. However, the Agreement prohibited SONZA
for his appearance.38Even though ABS-CBN provided SONZA with the
from criticizing in his shows ABS-CBN or its interests.32 The clear
place of work and the necessary equipment, SONZA was still an
implication is that SONZA had a free hand on what to say or discuss in
independent contractor since ABS-CBN did not supervise and control his
his shows provided he did not attack ABS-CBN or its interests.
work. ABS-CBN’s sole concern was for SONZA to display his talent during
the airing of the programs.39
We find that ABS-CBN was not involved in the actual performance that
produced the finished product of SONZA’s work.33 ABS-CBN did not
A radio broadcast specialist who works under minimal supervision is an
instruct SONZA how to perform his job. ABS-CBN merely reserved the
independent contractor.40 SONZA’s work as television and radio program
right to modify the program format and airtime schedule "for more
host required special skills and talent, which SONZA admittedly
effective programming."34 ABS-CBN’s sole concern was the quality of the
possesses. The records do not show that ABS-CBN exercised any
shows and their standing in the ratings. Clearly, ABS-CBN did not
supervision and control over how SONZA utilized his skills and talent in
exercise control over the means and methods of performance of
his shows.
SONZA’s work.
Second, SONZA urges us to rule that he was ABS-CBN’s employee
SONZA claims that ABS-CBN’s power not to broadcast his shows proves
because ABS-CBN subjected him to its rules and standards of
ABS-CBN’s power over the means and methods of the performance of
performance. SONZA claims that this indicates ABS-CBN’s control "not
his work. Although ABS-CBN did have the option not to broadcast
only [over] his manner of work but also the quality of his work."
SONZA’s show, ABS-CBN was still obligated to pay SONZA’s talent fees...
Thus, even if ABS-CBN was completely dissatisfied with the means and
methods of SONZA’s performance of his work, or even with the quality or The Agreement stipulates that SONZA shall abide with the rules and
product of his work, ABS-CBN could not dismiss or even discipline standards of performance "covering talents"41 of ABS-CBN. The
SONZA. All that ABS-CBN could do is not to broadcast SONZA’s show but Agreement does not require SONZA to comply with the rules and
ABS-CBN must still pay his talent fees in full.35 standards of performance prescribed for employees of ABS-CBN. The
code of conduct imposed on SONZA under the Agreement refers to the
"Television and Radio Code of the Kapisanan ng mga Broadcaster sa
Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN) as
4
its Code of Ethics."42 The KBP code applies to broadcasters, not to
employees of radio and television stations. Broadcasters are not
necessarily employees of radio and television stations. Clearly, the rules
and standards of performance referred to in the Agreement are those
applicable to talents and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party
indicate that the latter is an employee of the former.43 In this case,
SONZA failed to show that these rules controlled his performance. We
find that these general rules are merely guidelines towards the
achievement of the mutually desired result, which are top-rating
television and radio programs that comply with standards of the
industry. We have ruled that:
Further, not every form of control that a party reserves to himself over
the conduct of the other party in relation to the services being rendered
may be accorded the effect of establishing an employer-employee
relationship. The facts of this case fall squarely with the case of Insular
Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
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.44
The Vaughan case also held that one could still be an independent
contractor although the hirer reserved certain supervision to insure the
attainment of the desired result. The hirer, however, must not deprive
the one hired from performing his services according to his own
initiative.45
Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the
most extreme form of control which ABS-CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean
that SONZA is an employee of ABS-CBN. Even an independent contractor
can validly provide his services exclusively to the hiring party. In the
broadcast industry, exclusivity is not necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in
the entertainment industry.46 This practice is not designed to control the
means and methods of work of the talent, but simply to protect the
investment of the broadcast station. The broadcast station normally
spends substantial amounts of money, time and effort "in building up its
talents as well as the programs they appear in and thus expects that
said talents remain exclusive with the station for a commensurate period
of time."47 Normally, a much higher fee is paid to talents who agree to
work exclusively for a particular radio or television station. In short, the
huge talent fees partially compensates for exclusivity, as in the present
case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiter’s finding that he is a talent of MJMDC,
which contracted out his services to ABS-CBN. The Labor Arbiter ruled
that as a talent of MJMDC, SONZA is not an employee of ABS-CBN.
SONZA insists that MJMDC is a "labor-only" contractor and ABS-CBN is
his employer.
In a labor-only contract, there are three parties involved: (1) the "labor-
only" contractor; (2) the employee who is ostensibly under the employ of
the "labor-only" contractor; and (3) the principal who is deemed the real
employer. Under this scheme, the "labor-only" contractor is the
agent of the principal. The law makes the principal responsible to the
employees of the "labor-only contractor" as if the principal itself directly
hired or employed the employees.48 These circumstances are not present
in this case.
There are essentially only two parties involved under the Agreement,
namely, SONZA and ABS-CBN. MJMDC merely acted as SONZA’s agent.
The Agreement expressly states that MJMDC acted as the "AGENT" of
SONZA. The records do not show that MJMDC acted as ABS-CBN’s agent.
MJMDC, which stands for Mel and Jay Management and Development
Corporation, is a corporation organized and owned by SONZA and
TIANGCO. The President and General Manager of MJMDC is SONZA
himself. It is absurd to hold that MJMDC, which is owned, controlled,
headed and managed by SONZA, acted as agent of ABS-CBN in entering
into the Agreement with SONZA, who himself is represented by MJMDC.
That would make MJMDC the agent of both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company
devoted exclusively to managing the careers of SONZA and his
broadcast partner, TIANGCO. MJMDC is not engaged in any other
business, not even job contracting. MJMDC does not have any other
function apart from acting as agent of SONZA or TIANGCO to promote
their careers in the broadcast and television industry.49
Policy Instruction No. 40
SONZA argues that Policy Instruction No. 40 issued by then Minister of
Labor Blas Ople on 8 January 1979 finally settled the status of workers in
the broadcast industry. Under this policy, the types of employees in the
broadcast industry are the station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not
have the force and effect of law. There is no legal presumption that
Policy Instruction No. 40 determines SONZA’s status. A mere executive
issuance cannot exclude independent contractors from the class of
service providers to the broadcast industry. The classification of workers
in the broadcast industry into only two groups under Policy Instruction
No. 40 is not binding on this Court, especially when the classification has
no basis either in law or in fact.
Affidavits of ABS-CBN’s Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of
Socorro Vidanes and Rolando Cruz without giving his counsel the
opportunity to cross-examine these witnesses. SONZA brands these
witnesses as incompetent to attest on the prevailing practice in the radio
and television industry. SONZA views the affidavits of these witnesses as
misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBN’s witnesses, he was never
prevented from denying or refuting the allegations in the affidavits. The
Labor Arbiter has the discretion whether to conduct a formal (trial-type)
hearing after the submission of the position papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims
and causes of action raised in the complaint excluding those
that may have been amicably settled, and shall be
accompanied by all supporting documents including the
affidavits of their respective witnesses which shall take the
place of the latter’s direct testimony. x x x
Section 4. Determination of Necessity of Hearing. –
Immediately after the submission of the parties of their
position papers/memorandum, the Labor Arbiter shall motu
propio determine whether there is need for a formal trial or
hearing. At this stage, he may, at his discretion and for the
purpose of making such determination, ask clarificatory
questions to further elicit facts or information, including but
not limited to the subpoena of relevant documentary evidence,
if any from any party or witness.50
The Labor Arbiter can decide a case based solely on the position papers
and the supporting documents without a formal trial.51 The holding of a
formal hearing or trial is something that the parties cannot demand as a
5
matter of right.52 If the Labor Arbiter is confident that he can rely on the Nature of SONZA’s Claims
documents before him, he cannot be faulted for not conducting a formal
trial, unless under the particular circumstances of the case, the
SONZA seeks the recovery of allegedly unpaid talent fees, 13th month
documents alone are insufficient. The proceedings before a Labor Arbiter
pay, separation pay, service incentive leave, signing bonus, travel
are non-litigious in nature. Subject to the requirements of due process,
allowance, and amounts due under the Employee Stock Option Plan. We
the technicalities of law and the rules obtaining in the courts of law do
agree with the findings of the Labor Arbiter and the Court of Appeals
not strictly apply in proceedings before a Labor Arbiter.
that SONZA’s claims are all based on the May 1994 Agreement and
stock option plan, and not on the Labor Code. Clearly, the present
Talents as Independent Contractors case does not call for an application of the Labor Code provisions but an
interpretation and implementation of the May 1994 Agreement. In effect,
SONZA’s cause of action is for breach of contract which is intrinsically a
ABS-CBN claims that there exists a prevailing practice in the broadcast
civil dispute cognizable by the regular courts.58
and entertainment industries to treat talents like SONZA as independent
contractors. SONZA argues that if such practice exists, it is void for
violating the right of labor to security of tenure. WHEREFORE, we DENY the petition. The assailed Decision of the
Court of Appeals dated 26 March 1999 in CA-G.R. SP No. 49190
is AFFIRMED. Costs against petitioner.
The right of labor to security of tenure as guaranteed in the
Constitution53 arises only if there is an employer-employee relationship
under labor laws. Not every performance of services for a fee creates an SO ORDERED.
employer-employee relationship. To hold that every person who renders
services to another for a fee is an employee - to give meaning to the
security of tenure clause - will lead to absurd results.

Individuals with special skills, expertise or talent enjoy the freedom to

offer their services as independent contractors. The right to life and
livelihood guarantees this freedom to contract as independent
contractors. The right of labor to security of tenure cannot operate to
deprive an individual, possessed with special skills, expertise and talent,
of his right to contract as an independent contractor. An individual like
an artist or talent has a right to render his services without any one
controlling the means and methods by which he performs his art or craft.
This Court will not interpret the right of labor to security of tenure to
compel artists and talents to render their services only as employees. If
radio and television program hosts can render their services only as
employees, the station owners and managers can dictate to the radio
and television hosts what they say in their shows. This is not conducive
to freedom of the press.

Different Tax Treatment of Talents and Broadcasters

The National Internal Revenue Code ("NIRC")54 in relation to Republic

Act No. 7716,55 as amended by Republic Act No. 8241,56 treats talents,
television and radio broadcasters differently. Under the NIRC, these
professionals are subject to the 10% value-added tax ("VAT") on
services they render. Exempted from the VAT are those under an
employer-employee relationship.57 This different tax treatment accorded
to talents and broadcasters bolters our conclusion that they are
independent contractors, provided all the basic elements of a contractual
relationship are present as in this case.

6
2 on commission basis. Lazaro also maintained that Laudato was not
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 138254 July 30, 2004
ANGELITO L. LAZARO, Proprietor of Royal Star
Marketing, petitioner,
vs.
SOCIAL SECURITY COMMISSION, ROSALINA LAUDATO, SOCIAL
SECURITY SYSTEM and THE HONORABLE COURT OF
APPEALS, respondents.
DECISION
TINGA, J.:
Before us is a Petition for Review under Rule 45, assailing
the Decision1 of the Court of Appeals Fifteenth Division2 in CA-G.R. Sp.
No. 40956, promulgated on 20 November 1998, which affirmed two
rulings of the Social Security Commission ("SSC") dated 8 November
1995 and 24 April 1996.
Private respondent Rosalina M. Laudato ("Laudato") filed a petition
before the SSC for social security coverage and remittance of unpaid
monthly social security contributions against her three (3) employers.
Among the respondents was herein petitioner Angelito L. Lazaro
("Lazaro"), proprietor of Royal Star Marketing ("Royal Star"), which is
engaged in the business of selling home appliances.3 Laudato alleged
that despite her employment as sales supervisor of the sales agents for
Royal Star from April of 1979 to March of 1986, Lazaro had failed during
the said period, to report her to the SSC for compulsory coverage or
remit Laudato's social security contributions.4
Lazaro denied that Laudato was a sales supervisor of Royal Star,
averring instead that she was a mere sales agent whom he paid purely
Lazaro's arguments are nothing more but a mere reiteration of
subjected to definite hours and conditions of work. As such, Laudato arguments unsuccessfully posed before two bodies: the SSC and the
could not be deemed an employee of Royal Star.5 Court of Appeals. They likewise put to issue factual questions already
passed upon twice below, rather than questions of law appropriate for
review under a Rule 45 petition. The determination of an employer-
After the parties submitted their respective position papers, the SSC
employee relationship depends heavily on the particular factual
promulgated a Resolution6 dated 8 November 1995 ruling in favor of
circumstances attending the professional interaction of the parties. The
Laudato.7 Applying the "control test," it held that Laudato was an
Court is not a trier of facts15 and accords great weight to the factual
employee of Royal Star, and ordered Royal Star to pay the unremitted
findings of lower courts or agencies whose function is to resolve factual
social security contributions of Laudato in the amount of Five Thousand
matters.16
Seven Pesos and Thirty Five Centavos (P5,007.35), together with the
penalties totaling Twenty Two Thousand Two Hundred Eighteen Pesos
and Fifty Four Centavos (P22,218.54). In addition, Royal Star was made Lazaro's arguments may be dispensed with by applying precedents.
liable to pay damages to the SSC in the amount of Fifteen Thousand Six Suffice it to say, the fact that Laudato was paid by way of commission
Hundred Eighty Pesos and Seven Centavos (P15,680.07) for not does not preclude the establishment of an employer-employee
reporting Laudato for social security coverage, pursuant to Section 24 of relationship. InGrepalife v. Judico,17 the Court upheld the existence of an
the Social Security Law.8 employer-employee relationship between the insurance company and its
agents, despite the fact that the compensation that the agents on
commission received was not paid by the company but by the investor or
After Lazaro's Motion for Reconsideration before the SSC was
the person insured.18 The relevant factor remains, as stated earlier,
denied,9 Lazaro filed a Petition for Review with the Court of Appeals.
whether the "employer" controls or has reserved the right to control the
Lazaro reiterated that Laudato was merely a sales agent who was paid
"employee" not only as to the result of the work to be done but also as
purely on commission basis, not included in the company payroll, and
to the means and methods by which the same is to be accomplished.19
who neither observed regular working hours nor accomplished time
cards.
Neither does it follow that a person who does not observe normal hours
of work cannot be deemed an employee. In Cosmopolitan Funeral
In its assailed Decision, the Court of Appeals noted that Lazaro's
Homes, Inc. v. Maalat,20 the employer similarly denied the existence of
arguments were a reprise of those already presented before the
an employer-employee relationship, as the claimant according to it, was
SSC.10 Moreover, Lazaro had not come forward with particulars and
a "supervisor on commission basis" who did not observe normal hours of
specifics in his petition to show that the Commission's ruling is not
work. This Court declared that there was an employer-employee
supported by substantial evidence.11 Thus, the appellate court affirmed
relationship, noting that "[the] supervisor, although compensated on
the finding that Laudato was an employee of Royal Star, and hence
commission basis, [is] exempt from the observance of normal hours of
entitled to coverage under the Social Security Law.
work for his compensation is measured by the number of sales he
makes."21
Before this Court, Lazaro again insists that Laudato was not qualified for
social security coverage, as she was not an employee of Royal Star, her
It should also be emphasized that the SSC, also as upheld by the Court
income dependent on a generation of sales and based on
of Appeals, found that Laudato was a sales supervisor and not a mere
commissions.12 It is argued that Royal Star had no control over Laudato's
agent.22 As such, Laudato oversaw and supervised the sales agents of
activities, and that under the so-called "control test," Laudato could not
the company, and thus was subject to the control of management as to
be deemed an employee.13
how she implements its policies and its end results. We are disinclined to
reverse this finding, in the absence of countervailing evidence from
It is an accepted doctrine that for the purposes of coverage under the Lazaro and also in light of the fact that Laudato's calling cards from
Social Security Act, the determination of employer-employee relationship Royal Star indicate that she is indeed a sales supervisor.
warrants the application of the "control test," that is, whether the
employer controls or has reserved the right to control the employee, not
The finding of the SSC that Laudato was an employee of Royal Star is
only as to the result of the work done, but also as to the means and
supported by substantial evidence. The SSC examined the cash vouchers
methods by which the same is accomplished.14 The SSC, as sustained by
issued by Royal Star to Laudato,23 calling cards of Royal Star
the Court of Appeals, applying the control test found that Laudato was
denominating Laudato as a "Sales Supervisor" of the company,24 and
an employee of Royal Star. We find no reversible error.
Certificates of Appreciation issued by Royal Star to Laudato in
recognition of her unselfish and loyal efforts in promoting the
company.25 On the other hand, Lazaro has failed to present any
7
convincing contrary evidence, relying instead on his bare assertions. The
Court of Appeals correctly ruled that petitioner has not sufficiently shown
that the SSC's ruling was not supported by substantial evidence.

A piece of documentary evidence appreciated by the SSC is

Memorandum dated 3 May 1980 of Teresita Lazaro, General Manager of
Royal Star, directing that no commissions were to be given on all "main
office" sales from walk-in customers and enjoining salesmen and sales
supervisors to observe this new policy.26 The Memorandum evinces the
fact that, contrary to Lazaro's claim, Royal Star exercised control over its
sales supervisors or agents such as Laudato as to the means and
methods through which these personnel performed their work.

Finally, Lazaro invokes our ruling in the 1987 case of Social Security
System v. Court of Appeals27 that a person who works for another at his
own pleasure, subject to definite hours or conditions of work, and is
compensated according to the result of his effort is not an
employee.28 The citation is odd for Lazaro to rely upon, considering that
in the cited case, the Court affirmed the employee-employer relationship
between a sales agent and the cigarette firm whose products he
sold.29 Perhaps Lazaro meant instead to cite our 1969 ruling in the
similarly-titled case of Social Security System v. Court of Appeals,30 also
cited in the later eponymous ruling, whose disposition is more in accord
with Lazaro's argument.

Yet, the circumstances in the 1969 case are very different from those at
bar. Ruling on the question whether jockeys were considered employees
of the Manila Jockey Club, the Court noted that the jockeys were actually
subjected to the control of the racing steward, whose authority in turn
was defined by the Games and Amusements Board.31 Moreover, the
jockey's choice as to which horse to mount was subject to mutual
agreement between the horse owner and the jockey, and beyond the
control of the race club.32 In the case at bar, there is no showing that
Royal Star was similarly precluded from exerting control or interference
over the manner by which Laudato performed her duties. On the
contrary, substantial evidence as found by the SSC and the Court of
Appeals have established the element of control determinative of an
employer-employee relationship. We affirm without hesitation.

WHEREFORE, the Petition is DENIED and the assailed Decision of the

Court of Appeals dated 20 November 1998 is AFFIRMED. Costs against
petitioner.

SO ORDERED.

8
3 3. Management and treatment of employees that may
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 157214 June 7, 2005
PHILIPPINE GLOBAL COMMUNICATIONS, INC., petitioner,
vs.
RICARDO DE VERA, respondent.
DECISION
GARCIA, J.:
Before us is this appeal by way of a petition for review on certiorari from
the 12 September 2002 Decision1 and the 13 February 2003
Resolution2 of the Court of Appeals in CA-G.R. SP No. 65178, upholding
the finding of illegal dismissal by the National Labor Relations
Commission against petitioner.
As culled from the records, the pertinent facts are:
Petitioner Philippine Global Communications, Inc. (PhilCom), is a
corporation engaged in the business of communication services and
allied activities, while respondent Ricardo De Vera is a physician by
profession whom petitioner enlisted to attend to the medical needs of its
employees. At the crux of the controversy is Dr. De Vera’s status vis a
vis petitioner when the latter terminated his engagement.
It appears that on 15 May 1981, De Vera, via a letter dated 15 May
1981,3 offered his services to the petitioner, therein proposing his plan of
works required of a practitioner in industrial medicine, to include the
following:
1. Application of preventive medicine including periodic check-
up of employees;
2. Holding of clinic hours in the morning and afternoon for a
total of five (5) hours daily for consultation services to
employees;
and that he "was not dismissed but rather his contract with [PHILCOM]
necessitate hospitalization including emergency cases and ended when said contract was not renewed after December 31, 1996".
accidents;
On De Vera’s appeal to the NLRC, the latter, in a decision8 dated 23
4. Conduct pre-employment physical check-up of prospective October 2000, reversed (the word used is "modified") that of the Labor
employees with no additional medical fee; Arbiter, on a finding that De Vera is Philcom’s "regular employee" and
accordingly directed the company to reinstate him to his former position
without loss of seniority rights and privileges and with full backwages
5. Conduct home visits whenever necessary;
from the date of his dismissal until actual reinstatement. We quote the
dispositive portion of the decision:
6. Attend to certain medical administrative function such as
accomplishing medical forms, evaluating conditions of
WHEREFORE, the assailed decision is modified in that respondent is
employees applying for sick leave of absence and
ordered to reinstate complainant to his former position without loss of
subsequently issuing proper certification, and all matters
seniority rights and privileges with full backwages from the date of his
referred which are medical in nature.
dismissal until his actual reinstatement computed as follows:
The parties agreed and formalized respondent’s proposal in a document
denominated as RETAINERSHIP CONTRACT4 which will be for a Backwages:
period of one year subject to renewal, it being made clear therein that
respondent will cover "the retainership the Company previously had with a) Basic Salary
Dr. K. Eulau" and that respondent’s "retainer fee" will be at P4,000.00 a From Dec. 31, 1996 to Apr. 10, 2000 =
month. Said contract was renewed yearly.5 The retainership arrangement 39.33 mos.
went on from 1981 to 1994 with changes in the retainer’s fee. However, P44,400.00 x 39.33 mos. P1,750,185.00
for the years 1995 and 1996, renewal of the contract was only made
verbally. 13th Month Pay:
b) 145,848.75
1/12 of P1,750,185.00
The turning point in the parties’ relationship surfaced in December 1996
Travelling allowance:
when Philcom, thru a letter6 bearing on the subject boldly written as c) 39,330.00
P1,000.00 x 39.33 mos.
"TERMINATION – RETAINERSHIP CONTRACT", informed De Vera of its
decision to discontinue the latter’s "retainer’s contract with the Company
effective at the close of business hours of December 31, 1996" because GRAND TOTAL P1,935,363.75
management has decided that it would be more practical to provide
medical services to its employees through accredited hospitals near the
company premises. The decision stands in other aspects.
On 22 January 1997, De Vera filed a complaint for illegal dismissal SO ORDERED.
before the National Labor Relations Commission (NLRC), alleging that
that he had been actually employed by Philcom as its company physician
since 1981 and was dismissed without due process. He averred that he With its motion for reconsideration having been denied by the NLRC in
was designated as a "company physician on retainer basis" for reasons its order of 27 February 2001,9 Philcom then went to the Court of
allegedly known only to Philcom. He likewise professed that since he was Appeals on a petition for certiorari, thereat docketed as CA-G.R. SP No.
not conversant with labor laws, he did not give much attention to the 65178, imputing grave abuse of discretion amounting to lack or excess
designation as anyway he worked on a full-time basis and was paid a of jurisdiction on the part of the NLRC when it reversed the findings of
basic monthly salary plus fringe benefits, like any other regular the labor arbiter and awarded thirteenth month pay and traveling
employees of Philcom. allowance to De Vera even as such award had no basis in fact and in
law.
On 21 December 1998, Labor Arbiter Ramon Valentin C. Reyes came out
with a decision7 dismissing De Vera’s complaint for lack of merit, on the On 12 September 2002, the Court of Appeals rendered a
rationale that as a "retained physician" under a valid contract mutually decision,10 modifying that of the NLRC by deleting the award of traveling
agreed upon by the parties, De Vera was an "independent contractor"
9
allowance, and ordering payment of separation pay to De Vera in lieu of
reinstatement, thus:
WHEREFORE, premises considered, the assailed judgment of public
respondent, dated 23 October 2000, isMODIFIED. The award of
traveling allowance is deleted as the same is hereby DELETED. Instead
of reinstatement, private respondent shall be paid separation pay
computed at one (1) month salary for every year of service computed
from the time private respondent commenced his employment in 1981
up to the actual payment of the backwages and separation pay. The
awards of backwages and 13th month pay STAND.
SO ORDERED.
In time, Philcom filed a motion for reconsideration but was denied by the
appellate court in its resolution of 13 February 2003.11
Hence, Philcom’s present recourse on its main submission that -
THE COURT OF APPEALS ERRED IN SUSTAINING THE DECISION OF
THE NATIONAL LABOR RELATIONS COMMISSION AND RENDERING THE
QUESTIONED DECISION AND RESOLUTION IN A WAY THAT IS NOT IN
ACCORD WITH THE FACTS AND APPLICABLE LAWS AND
JURISPRUDENCE WHICH DISTINGUISH LEGITIMATE JOB
CONTRACTING AGREEMENTS FROM THE EMPLOYER-EMPLOYEE
RELATIONSHIP.
We GRANT.
Under Rule 45 of the Rules of Court, only questions of law may be
reviewed by this Court in decisions rendered by the Court of Appeals.
There are instances, however, where the Court departs from this rule
and reviews findings of fact so that substantial justice may be served.
The exceptional instances are where:
"xxx xxx xxx (1) the conclusion is a finding grounded entirely on
speculation, surmise and conjecture; (2) the inference made is
manifestly mistaken; (3) there is grave abuse of discretion; (4) the
judgment is based on a misapprehension of facts; (5) the findings of fact
are conflicting; (6) the Court of Appeals went beyond the issues of the
case and its findings are contrary to the admissions of both appellant
and appellees; (7) the findings of fact of the Court of Appeals are
contrary to those of the trial court; (8) said findings of facts are
conclusions without citation of specific evidence on which they are
based; (9) the facts set forth in the petition as well as in the petitioner’s
main and reply briefs are not disputed by the respondents; and (10) the
findings of fact of the Court of Appeals are premised on the supposed
absence of evidence and contradicted by the evidence on record."12
As we see it, the parties’ respective submissions revolve on the
primordial issue of whether an employer-employee relationship exists
between petitioner and respondent, the existence of which is, in itself, a
question of fact13 well within the province of the NLRC. Nonetheless,
given the reality that the NLRC’s findings are at odds with those of the
labor arbiter, the Court, consistent with its ruling in Jimenez vs. National
Labor Relations Commission,14 is constrained to look deeper into the
attendant circumstances obtaining in this case, as appearing on record.
In a long line of decisions,15 the Court, in determining the existence of
an employer-employee relationship, 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 employee’s conduct, or the so-called "control test",
considered to be the most important element.
Applying the four-fold test to this case, we initially find that it was
respondent himself who sets the parameters of what his duties would be
in offering his services to petitioner. This is borne by no less than his 15
May 1981 letter16 which, in full, reads:
"May 15, 1981
Mrs. Adela L. Vicente
Vice President, Industrial Relations
PhilCom, Paseo de Roxas
Makati, Metro Manila
Madam:
I shall have the time and effort for the position of Company physician
with your corporation if you deemed it necessary. I have the necessary
qualifications, training and experience required by such position and I
am confident that I can serve the best interests of your employees,
medically.
My plan of works and targets shall cover the duties and responsibilities
required of a practitioner in industrial medicine which includes the
following:
1. Application of preventive medicine including
periodic check-up of employees;
2. Holding of clinic hours in the morning and
afternoon for a total of five (5) hours daily for
consultation services to employees;
3. Management and treatment of employees that
may necessitate hospitalization including emergency
cases and accidents;
4. Conduct pre-employment physical check-up of
prospective employees with no additional medical
fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative functions
such as accomplishing medical forms, evaluating
conditions of employees applying for sick leave of
absence and subsequently issuing proper
certification, and all matters referred which are
medical in nature.
On the subject of compensation for the services that I propose to render
to the corporation, you may state an offer based on your belief that I
can very well qualify for the job having worked with your organization
for sometime now.
I shall be very grateful for whatever kind attention you may extend on
this matter and hoping that it will merit acceptance, I remain
Very truly yours,
(signed)
RICARDO V. DE VERA, M.D."
Significantly, the foregoing letter was substantially the basis of the labor
arbiter’s finding that there existed no employer-employee relationship
between petitioner and respondent, in addition to the following factual
settings:
The fact that the complainant was not considered an employee was
recognized by the complainant himself in a signed letter to the
respondent dated April 21, 1982 attached as Annex G to the
respondent’s Reply and Rejoinder. Quoting the pertinent portion of said
letter:
‘To carry out your memo effectively and to provide a systematic and
workable time schedule which will serve the best interests of both the
present and absent employee, may I propose an extended two-hour
service (1:00-3:00 P.M.) during which period I can devote ample time to
both groups depending upon the urgency of the situation. I shall
10
readjust my private schedule to be available for the herein proposed
extended hours, should you consider this proposal.
As regards compensation for the additional time and services that I shall
render to the employees, it is dependent on your evaluation of the merit
of my proposal and your confidence on my ability to carry out efficiently
said proposal.’
The tenor of this letter indicates that the complainant was proposing to
extend his time with the respondent and seeking additional
compensation for said extension. This shows that the respondent
PHILCOM did not have control over the schedule of the complainant as it
[is] the complainant who is proposing his own schedule and asking to be
paid for the same. This is proof that the complainant understood that his
relationship with the respondent PHILCOM was a retained physician and
not as an employee. If he were an employee he could not negotiate as
to his hours of work.
The complainant is a Doctor of Medicine, and presumably, a well-
educated person. Yet, the complainant, in his position paper, is claiming
that he is not conversant with the law and did not give much attention to
his job title- on a ‘retainer basis’. But the same complainant admits in his
affidavit that his service for the respondent was covered by a
retainership contract [which] was renewed every year from 1982 to
1994. Upon reading the contract dated September 6, 1982, signed by
the complainant himself (Annex ‘C’ of Respondent’s Position Paper), it
clearly states that is a retainership contract. The retainer fee is indicated
thereon and the duration of the contract for one year is also clearly
indicated in paragraph 5 of the Retainership Contract. The complainant
cannot claim that he was unaware that the ‘contract’ was good only for
one year, as he signed the same without any objections. The
complainant also accepted its renewal every year thereafter until 1994.
As a literate person and educated person, the complainant cannot claim
that he does not know what contract he signed and that it was renewed
on a year to year basis.17
The labor arbiter added the indicia, not disputed by respondent, that
from the time he started to work with petitioner, he never was included
in its payroll; was never deducted any contribution for remittance to the
Social Security System (SSS); and was in fact subjected by petitioner to
the ten (10%) percent withholding tax for his professional fee, in
accordance with the National Internal Revenue Code, matters which are
simply inconsistent with an employer-employee relationship. In the
precise words of the labor arbiter:
"xxx xxx xxx After more than ten years of services to PHILCOM, the
complainant would have noticed that no SSS deductions were made on
his remuneration or that the respondent was deducting the 10% tax for
his fees and he surely would have complained about them if he had
considered himself an employee of PHILCOM. But he never raised those
issues. An ordinary employee would consider the SSS payments
important and thus make sure they would be paid. The complainant
never bothered to ask the respondent to remit his SSS contributions.
This clearly shows that the complainant never considered himself an
employee of PHILCOM and thus, respondent need not remit anything to
the SSS in favor of the complainant."18
Clearly, the elements of an employer-employee relationship are wanting
in this case. We may add that the records are replete with evidence
showing that respondent had to bill petitioner for his monthly
professional fees.19 It simply runs against the grain of common
experience to imagine that an ordinary employee has yet to bill his
employer to receive his salary.
We note, too, that the power to terminate the parties’ relationship was
mutually vested on both. Either may terminate the arrangement at will,
with or without cause.20
Finally, remarkably absent from the parties’ arrangement is the element
of control, whereby the employer has reserved the right to control the
employee not only as to the result of the work done but also as to the
means and methods by which the same is to be accomplished.21
Here, petitioner had no control over the means and methods by which
respondent went about performing his work at the company premises.
He could even embark in the private practice of his profession, not to
mention the fact that respondent’s work hours and the additional
compensation therefor were negotiated upon by the parties.22 In fine,
the parties themselves practically agreed on every terms and conditions
of respondent’s engagement, which thereby negates the element of
control in their relationship. For sure, respondent has never cited even a
single instance when petitioner interfered with his work.
Yet, despite the foregoing, all of which are extant on record, both the
NLRC and the Court of Appeals ruled that respondent is petitioner’s
regular employee at the time of his separation.
Partly says the appellate court in its assailed decision:
Be that as it may, it is admitted that private respondent’s written
‘retainer contract’ was renewed annually from 1981 to 1994 and the
alleged ‘renewal’ for 1995 and 1996, when it was allegedly terminated,
was verbal.
Article 280 of the Labor code (sic) provides:
‘The provisions of written agreement to the contrary notwithstanding
and regardless of the oral agreements of the parties, an
employment shall be deemed to be regular where the employee has
been engaged to perform 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 (1) year of service, whether such is
continuous or broken,shall be considered a regular with respect to
the activity in which he is employed and his employment shall
continue while such activity exists.’
Parenthetically, the position of company physician, in the case of
petitioner, is usually necessary and desirable because the need for
medical attention of employees cannot be foreseen, hence, it is
necessary to have a physician at hand. In fact, the importance and
desirability of a physician in a company premises is recognized by Art.
157 of the Labor Code, which requires the presence of a physician
depending on the number of employees and in the case at bench, in
petitioner’s case, as found by public respondent, petitioner employs
more than 500 employees.
Going back to Art. 280 of the Labor Code, it was made therein clear that
the provisions of a written agreement to the contrary notwithstanding or
the existence of a mere oral agreement, if the employee is engaged in
the usual business or trade of the employer, more so, that he rendered
service for at least one year, such employee shall be considered as
a regular employee. Private respondent herein has been with petitioner
since 1981 and his employment was not for a specific project or
undertaking, the period of which was pre-determined and neither the
work or service of private respondent seasonal. (Emphasis by the CA
itself).
We disagree to the foregoing ratiocination.
The appellate court’s premise that regular employees are those who
perform activities which are desirable and necessary for the business of
the employer is not determinative in this case. For, we take it that any
agreement may provide that one party shall render services for and in
behalf of another, no matter how necessary for the latter’s
business, even without being hired as an employee. This set-up is
precisely true in the case of an independent contractorship as well as in
an agency agreement. Indeed, Article 280 of the Labor Code, quoted by
the appellate court, is not the yardstick for determining the existence of
an employment relationship. As it is, the provision merely distinguishes
between two (2) kinds of employees, i.e., regular and casual. It does not
11
apply where, as here, the very existence of an employment relationship certain establishments depending on the number of their employees, No pronouncement as to costs.
is in dispute.23 nothing is there in the law which says that medical practitioners so
engaged be actually hired as employees,24 adding that the law, as
SO ORDERED.
written, only requires the employer "to retain", not employ, a part-time
Buttressing his contention that he is a regular employee of petitioner,
physician who needed to stay in the premises of the non-hazardous
respondent invokes Article 157 of the Labor Code, and argues that he
workplace for two (2) hours.25
satisfies all the requirements thereunder. The provision relied upon
reads:
Respondent takes no issue on the fact that petitioner’s business of
telecommunications is not hazardous in nature. As such, what applies
ART. 157. Emergency medical and dental services. – It shall be the duty
here is the last paragraph of Article 157 which, to stress, provides that
of every employer to furnish his employees in any locality with free
the employer may engage the services of a physician and dentist "on
medical and dental attendance and facilities consisting of:
retained basis", subject to such regulations as the Secretary of Labor
may prescribe. The successive "retainership" agreements of the parties
(a) The services of a full-time registered nurse when the definitely hue to the very statutory provision relied upon by respondent.
number of employees exceeds fifty (50) but not more than
two hundred (200) except when the employer does not
Deeply embedded in our jurisprudence is the rule that courts may not
maintain hazardous workplaces, in which case the services of a
construe a statute that is free from doubt. Where the law is clear and
graduate first-aider shall be provided for the protection of the
unambiguous, it must be taken to mean exactly what it says, and courts
workers, where no registered nurse is available. The Secretary
have no choice but to see to it that the mandate is obeyed.26 As it is,
of Labor shall provide by appropriate regulations the services
Article 157 of the Labor Code clearly and unequivocally allows employers
that shall be required where the number of employees does
in non-hazardous establishments to engage "on retained basis" the
not exceed fifty (50) and shall determine by appropriate order
service of a dentist or physician. Nowhere does the law provide that the
hazardous workplaces for purposes of this Article;
physician or dentist so engaged thereby becomes a regular employee.
The very phrase that they may be engaged "on retained basis", revolts
(b) The services of a full-time registered nurse, a part-time against the idea that this engagement gives rise to an employer-
physician and dentist, and an emergency clinic, when the employee relationship.
number of employees exceeds two hundred (200) but not
more than three hundred (300); and
With the recognition of the fact that petitioner consistently engaged the
services of respondent on a retainer basis, as shown by their various
(c) The services of a full-time physician, dentist and full-time "retainership contracts", so can petitioner put an end, with or without
registered nurse as well as a dental clinic, and an infirmary or cause, to their retainership agreement as therein provided.27
emergency hospital with one bed capacity for every one
hundred (100) employees when the number of employees
We note, however, that even as the contracts entered into by the parties
exceeds three hundred (300).
invariably provide for a 60-day notice requirement prior to termination,
the same was not complied with by petitioner when it terminated on 17
In cases of hazardous workplaces, no employer shall engage the services December 1996 the verbally-renewed retainership agreement, effective
of a physician or dentist who cannot stay in the premises of the at the close of business hours of 31 December 1996.
establishment for at least two (2) hours, in the case of those engaged on
part-time basis, and not less than eight (8) hours in the case of those
Be that as it may, the record shows, and this is admitted by both
employed on full-time basis. Where the undertaking is nonhazardous in
parties,28 that execution of the NLRC decision had already been made at
nature, the physician and dentist may be engaged on retained basis,
the NLRC despite the pendency of the present recourse. For sure,
subject to such regulations as the Secretary of Labor may prescribe to
accounts of petitioner had already been garnished and released to
insure immediate availability of medical and dental treatment and
respondent despite the previous Status Quo Order29 issued by this Court.
attendance in case of emergency.
To all intents and purposes, therefore, the 60-day notice requirement
has become moot and academic if not waived by the respondent himself.
Had only respondent read carefully the very statutory provision invoked
by him, he would have noticed that in non-hazardous workplaces, the
WHEREFORE, the petition is GRANTED and the challenged decision of
employer may engage the services of a physician "on retained basis." As
the Court of Appeals REVERSED and SET ASIDE. The 21 December 1998
correctly observed by the petitioner, while it is true that the provision
decision of the labor arbiter is REINSTATED.
requires employers to engage the services of medical practitioners in
12
4 a) Prepare, arrange airing of commercial broadcasting based on the daily
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 164156 September 26, 2006
ABS-CBN BROADCASTING CORPORATION, petitioner,
vs.
MARLYN NAZARENO, MERLOU GERZON, JENNIFER DEIPARINE,
and JOSEPHINE LERASAN,respondents.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari of the Decision1 of the
Court of Appeals (CA) in CA-G.R. SP No. 76582 and the Resolution
denying the motion for reconsideration thereof. The CA affirmed the
Decision2 and Resolution3 of the National Labor Relations Commission
(NLRC) in NLRC Case No. V-000762-2001 (RAB Case No. VII-10-1661-
2001) which likewise affirmed, with modification, the decision of the
Labor Arbiter declaring the respondents Marlyn Nazareno, Merlou
Gerzon, Jennifer Deiparine and Josephine Lerasan as regular employees.
The Antecedents
Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in
the broadcasting business and owns a network of television and radio
stations, whose operations revolve around the broadcast, transmission,
and relay of telecommunication signals. It sells and deals in or otherwise
utilizes the airtime it generates from its radio and television operations.
It has a franchise as a broadcasting company, and was likewise issued a
license and authority to operate by the National Telecommunications
Commission.
Petitioner employed respondents Nazareno, Gerzon, Deiparine, and
Lerasan as production assistants (PAs) on different dates. They were
assigned at the news and public affairs, for various radio programs in the
Cebu Broadcasting Station, with a monthly compensation of P4,000.
They were issued ABS-CBN employees’ identification cards and were
required to work for a minimum of eight hours a day, including Sundays
and holidays. They were made to perform the following tasks and duties:
operations log and digicart of respondent ABS-CBN;
b) Coordinate, arrange personalities for air interviews;
c) Coordinate, prepare schedule of reporters for scheduled news
reporting and lead-in or incoming reports;
d) Facilitate, prepare and arrange airtime schedule for public service
announcement and complaints;
e) Assist, anchor program interview, etc; and
f) Record, log clerical reports, man based control radio.4
Their respective working hours were as follows:
Name Time No. of Hours
1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7 ½
8:00 A.M.-12:00 noon
2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7 ½
3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs.
9:00 A.M.-6:00 P.M. (WF) 9 hrs.
4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.5
The PAs were under the control and supervision of Assistant Station
Manager Dante J. Luzon, and News Manager Leo Lastimosa.
On December 19, 1996, petitioner and the ABS-CBN Rank-and-File
Employees executed a Collective Bargaining Agreement (CBA) to be
effective during the period from December 11, 1996 to December 11,
1999. However, since petitioner refused to recognize PAs as part of the
bargaining unit, respondents were not included to the CBA.6
On July 20, 2000, petitioner, through Dante Luzon, issued a
Memorandum informing the PAs that effective August 1, 2000, they
would be assigned to non-drama programs, and that the DYAB studio
operations would be handled by the studio technician. Thus, their
revised schedule and other assignments would be as follows:
Monday – Saturday
4:30 A.M. – 8:00 A.M. – Marlene Nazareno.
Miss Nazareno will then be assigned at the Research Dept.
From 8:00 A.M. to 12:00
4:30 P.M. – 12:00 MN – Jennifer Deiparine
Sunday
5:00 A.M. – 1:00 P.M. – Jennifer Deiparine
1:00 P.M. – 10:00 P.M. – Joy Sanchez
Respondent Gerzon was assigned as the full-time PA of the TV News
Department reporting directly to Leo Lastimosa.
On October 12, 2000, respondents filed a Complaint for Recognition of
Regular Employment Status, Underpayment of Overtime Pay, Holiday
Pay, Premium Pay, Service Incentive Pay, Sick Leave Pay, and 13th
Month Pay with Damages against the petitioner before the NLRC. The
Labor Arbiter directed the parties to submit their respective position
papers. Upon respondents’ failure to file their position papers within the
reglementary period, Labor Arbiter Jose G. Gutierrez issued an Order
dated April 30, 2001, dismissing the complaint without prejudice for lack
of interest to pursue the case. Respondents received a copy of the Order
on May 16, 2001.7Instead of re-filing their complaint with the NLRC
within 10 days from May 16, 2001, they filed, on June 11, 2001, an
Earnest Motion to Refile Complaint with Motion to Admit Position Paper
and Motion to Submit Case For Resolution.8 The Labor Arbiter granted
this motion in an Order dated June 18, 2001, and forthwith admitted the
position paper of the complainants. Respondents made the following
allegations:
1. Complainants were engaged by respondent ABS-CBN as regular and
full-time employees for a continuous period of more than five (5) years
with a monthly salary rate of Four Thousand (P4,000.00) pesos
beginning 1995 up until the filing of this complaint on November 20,
2000.
Machine copies of complainants’ ABS-CBN Employee’s Identification Card
and salary vouchers are hereto attached as follows, thus:
I. Jennifer Deiparine:
13
Exhibit "A" - ABS-CBN Employee’s Identification Card
Exhibit "B", - ABS-CBN Salary Voucher from Nov.
Exhibit "B-1" & 1999 to July 2000 at P4,000.00
Exhibit "B-2"
Date employed: September 15, 1995
Length of service: 5 years & nine (9) months
II. Merlou Gerzon - ABS-CBN Employee’s Identification Card
Exhibit "C"
Exhibit "D"
Exhibit "D-1" &
Exhibit "D-2" - ABS-CBN Salary Voucher from March
1999 to January 2001 at P4,000.00
Date employed: September 1, 1995
Length of service: 5 years & 10 months
III. Marlene Nazareno
Exhibit "E" - ABS-CBN Employee’s Identification Card
Exhibit "E" - ABS-CBN Salary Voucher from Nov.
Exhibit "E-1" & 1999 to December 2000
Exhibit :E-2"
Date employed: April 17, 1996
Length of service: 5 years and one (1) month
IV. Joy Sanchez Lerasan
Exhibit "F" - ABS-CBN Employee’s Identification Card
Exhibit "F-1" - ABS-CBN Salary Voucher from Aug.
Exhibit "F-2" & 2000 to Jan. 2001
Exhibit "F-3"
Exhibit "F-4" - Certification dated July 6, 2000
Acknowledging regular status of
Complainant Joy Sanchez Lerasan
Signed by ABS-CBN Administrative
Officer May Kima Hife
Date employed: April 15, 1998
Length of service: 3 yrs. and one (1) month9
Respondents insisted that they belonged to a "work pool" from which
petitioner chose persons to be given specific assignments at its
discretion, and were thus under its direct supervision and control
regardless of nomenclature. They prayed that judgment be rendered in
their favor, thus:
WHEREFORE, premises considered, this Honorable Arbiter is most
respectfully prayed, to issue an order compelling defendants to pay
complainants the following:
1. One Hundred Thousand Pesos (P100,000.00) each
and by way of moral damages;
2. Minimum wage differential;
3. Thirteenth month pay differential;
4. Unpaid service incentive leave benefits;
5. Sick leave;
6. Holiday pay;
7. Premium pay;
8. Overtime pay;
9. Night shift differential.
Complainants further pray of this Arbiter to declare them regular and
permanent employees of respondent ABS-CBN as a condition precedent
for their admission into the existing union and collective bargaining unit
of respondent company where they may as such acquire or otherwise
perform their obligations thereto or enjoy the benefits due therefrom.
Complainants pray for such other reliefs as are just and equitable under
the premises.10
For its part, petitioner alleged in its position paper that the respondents
were PAs who basically assist in the conduct of a particular program ran
by an anchor or talent. Among their duties include monitoring and
receiving incoming calls from listeners and field reporters and calls of
news sources; generally, they perform leg work for the anchors during a
program or a particular production. They are considered in the industry
as "program employees" in that, as distinguished from regular or station
employees, they are basically engaged by the station for a particular or
specific program broadcasted by the radio station. Petitioner asserted
that as PAs, the complainants were issued talent information sheets
which are updated from time to time, and are thus made the basis to
determine the programs to which they shall later be called on to assist.
The program assignments of complainants were as follows:
a. Complainant Nazareno assists in the programs:
1) Nagbagang Balita (early morning edition)
2) Infor Hayupan
3) Arangkada (morning edition)
4) Nagbagang Balita (mid-day edition)
b. Complainant Deiparine assists in the programs:
1) Unzanith
14
2) Serbisyo de Arevalo (a) Siesta Serenata P48,100.00

3) Arangkada (evening edition) (b) Sunday Chismisan plus ten (10%) percent Attorney’s Fees or a TOTAL aggregate amount of
PESOS: FIFTY TWO THOUSAND NINE HUNDRED TEN (P52,910.00).
4) Balitang K (local version) (c) Timbangan sa Hustisya
Respondent Veneranda C. Sy is absolved from any liability.
5) Abante Subu (d) Sayri ang Lungsod
SO ORDERED.13
6) Pangutana Lang (e) Haranahan 11

However, the Labor Arbiter did not award money benefits as provided in
the CBA on his belief that he had no jurisdiction to interpret and apply
c. Complainant Gerzon assists in the program: Petitioner maintained that PAs, reporters, anchors and talents
the agreement, as the same was within the jurisdiction of the Voluntary
occasionally "sideline" for other programs they produce, such as drama
Arbitrator as provided in Article 261 of the Labor Code.
talents in other productions. As program employees, a PA’s engagement
1) On Mondays and Tuesdays:
is coterminous with the completion of the program, and may be
extended/renewed provided that the program is on-going; a PA may also Respondents’ counsel received a copy of the decision on August 29,
(a) Unzanith be assigned to new programs upon the cancellation of one program and 2001. Respondent Nazareno received her copy on August 27, 2001,
the commencement of another. As such program employees, their while the other respondents received theirs on September 8, 2001.
(b) Serbisyo de Arevalo compensation is computed on a program basis, a fixed amount for Respondents signed and filed their Appeal Memorandum on September
performance services irrespective of the time consumed. At any rate, 18, 2001.
petitioner claimed, as the payroll will show, respondents were paid all
(c) Arangkada (evening edition) salaries and benefits due them under the law.12
For its part, petitioner filed a motion for reconsideration, which the Labor
Arbiter denied and considered as an appeal, conformably with Section 5,
(d) Balitang K (local version) Petitioner also alleged that the Labor Arbiter had no jurisdiction to Rule V, of the NLRC Rules of Procedure. Petitioner forthwith appealed
involve the CBA and interpret the same, especially since respondents the decision to the NLRC, while respondents filed a partial appeal.
(e) Abante Sugbu were not covered by the bargaining unit.
In its appeal, petitioner alleged the following:
(f) Pangutana Lang On July 30, 2001, the Labor Arbiter rendered judgment in favor of the
respondents, and declared that they were regular employees of
1. That the Labor Arbiter erred in reviving or re-opening this case which
petitioner; as such, they were awarded monetary benefits. The fallo of
2) On Thursdays had long been dismissed without prejudice for more than thirty (30)
the decision reads:
calendar days;

Nagbagang Balita WHEREFORE, the foregoing premises considered, judgment is hereby

2. That the Labor Arbiter erred in depriving the respondent of its
rendered declaring the complainants regular employees of the
Constitutional right to due process of law;
3) On Saturdays respondent ABS-CBN Broadcasting Corporation and directing the same
respondent to pay complainants as follows:
3. That the Labor Arbiter erred in denying respondent’s Motion for
(a) Nagbagang Balita Reconsideration on an interlocutory order on the ground that the same is
I - Merlou A. Gerzon P12,025.00
a prohibited pleading;
(b) Info Hayupan
II - Marlyn Nazareno 12,025.00
4. That the Labor Arbiter erred when he ruled that the complainants are
(c) Arangkada (morning edition) regular employees of the respondent;
III - Jennifer Deiparine 12,025.00
(d) Nagbagang Balita (mid-day edition) 5. That the Labor Arbiter erred when he ruled that the complainants are
IV - Josephine Sanchez Lerazan 12,025.00 entitled to 13th month pay, service incentive leave pay and salary
differential; and
4) On Sundays:
_________

15
6. That the Labor Arbiter erred when he ruled that complainants are
entitled to attorney’s fees.14
On November 14, 2002, the NLRC rendered judgment modifying the
decision of the Labor Arbiter. The fallo of the decision reads:
WHEREFORE, premises considered, the decision of Labor Arbiter Jose G.
Gutierrez dated 30 July 2001 is SET ASIDE and VACATED and a new one
is entered ORDERING respondent ABS-CBN Broadcasting Corporation, as
follows:
1. To pay complainants of their wage differentials and other benefits
arising from the CBA as of 30 September 2002 in the aggregate amount
of Two Million Five Hundred, Sixty-One Thousand Nine Hundred Forty-
Eight Pesos and 22/100 (P2,561,948.22), broken down as follows:
a. Deiparine, Jennifer - P 716,113.49
b. Gerzon, Merlou - 716,113.49
c. Nazareno, Marlyn - 716,113.49
d. Lerazan, Josephine Sanchez - 413,607.75
Total - P 2,561,948.22
2. To deliver to the complainants Two Hundred Thirty-Three (233) sacks
of rice as of 30 September 2002 representing their rice subsidy in the
CBA, broken down as follows:
a. Deiparine, Jennifer - 60 Sacks
b. Gerzon, Merlou - 60 Sacks
c. Nazareno, Marlyn - 60 Sacks
d. Lerazan, Josephine Sanchez - 53 Sacks
Total 233 Sacks; and
3. To grant to the complainants all the benefits of the CBA after 30
September 2002.
SO ORDERED.15
The NLRC declared that the Labor Arbiter acted conformably with the
Labor Code when it granted respondents’ motion to refile the complaint
and admit their position paper. Although respondents were not parties to
the CBA between petitioner and the ABS-CBN Rank-and-File Employees
Union, the NLRC nevertheless granted and computed respondents’
monetary benefits based on the 1999 CBA, which was effective until
September 2002. The NLRC also ruled that the Labor Arbiter had
jurisdiction over the complaint of respondents because they acted in
their individual capacities and not as members of the union. Their claim
for monetary benefits was within the context of Article 217(6) of the
Labor Code. The validity of respondents’ claim does not depend upon the
interpretation of the CBA.
The NLRC ruled that respondents were entitled to the benefits under the
CBA because they were regular employees who contributed to the profits
of petitioner through their labor. The NLRC cited the ruling of this Court
in New Pacific Timber & Supply Company v. National Labor Relations
Commission.16
Petitioner filed a motion for reconsideration, which the NLRC denied.
Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of
Court before the CA, raising both procedural and substantive issues, as
follows: (a) whether the NLRC acted without jurisdiction in admitting the
appeal of respondents; (b) whether the NLRC committed palpable error
in scrutinizing the reopening and revival of the complaint of respondents
with the Labor Arbiter upon due notice despite the lapse of 10 days from
their receipt of the July 30, 2001 Order of the Labor Arbiter; (c) whether
respondents were regular employees; (d) whether the NLRC acted
without jurisdiction in entertaining and resolving the claim of the
respondents under the CBA instead of referring the same to the
Voluntary Arbitrators as provided in the CBA; and (e) whether the NLRC
acted with grave abuse of discretion when it awarded monetary benefits
to respondents under the CBA although they are not members of the
appropriate bargaining unit.
On February 10, 2004, the CA rendered judgment dismissing the
petition. It held that the perfection of an appeal shall be upon the
expiration of the last day to appeal by all parties, should there be several
parties to a case. Since respondents received their copies of the decision
on September 8, 2001 (except respondent Nazareno who received her
copy of the decision on August 27, 2001), they had until September 18,
2001 within which to file their Appeal Memorandum. Moreover, the CA
declared that respondents’ failure to submit their position paper on time
is not a ground to strike out the paper from the records, much less
dismiss a complaint.
Anent the substantive issues, the appellate court stated that respondents
are not mere project employees, but regular employees who perform
tasks necessary and desirable in the usual trade and business of
petitioner and not just its project employees. Moreover, the CA added,
the award of benefits accorded to rank-and-file employees under the
1996-1999 CBA is a necessary consequence of the NLRC ruling that
respondents, as PAs, are regular employees.
Finding no merit in petitioner’s motion for reconsideration, the CA denied
the same in a Resolution17 dated June 16, 2004.
Petitioner thus filed the instant petition for review on certiorari and raises
the following assignments of error:
1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT
JURISDICTION AND GRAVELY ERRED IN UPHOLDING THE NATIONAL
LABOR RELATIONS COMMISSION NOTWITHSTANDING THE PATENT
NULLITY OF THE LATTER’S DECISION AND RESOLUTION.
2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
AFFIRMING THE RULING OF THE NLRC FINDING RESPONDENTS
REGULAR EMPLOYEES.
3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
AFFIRMING THE RULING OF THE NLRC AWARDING CBA BENEFITS TO
RESPONDENTS.18
Considering that the assignments of error are interrelated, the Court
shall resolve them simultaneously.
Petitioner asserts that the appellate court committed palpable and
serious error of law when it affirmed the rulings of the NLRC, and
entertained respondents’ appeal from the decision of the Labor Arbiter
despite the admitted lapse of the reglementary period within which to
perfect the same. Petitioner likewise maintains that the 10-day period to
appeal must be reckoned from receipt of a party’s counsel, not from the
time the party learns of the decision, that is, notice to counsel is notice
to party and not the other way around. Finally, petitioner argues that the
reopening of a complaint which the Labor Arbiter has dismissed without
prejudice is a clear violation of Section 1, Rule V of the NLRC Rules; such
order of dismissal had already attained finality and can no longer be set
aside.
Respondents, on the other hand, allege that their late appeal is a non-
issue because it was petitioner’s own timely appeal that empowered the
NLRC to reopen the case. They assert that although the appeal was filed
10 days late, it may still be given due course in the interest of substantial
justice as an exception to the general rule that the negligence of a
counsel binds the client. On the issue of the late filing of their position
paper, they maintain that this is not a ground to strike it out from the
records or dismiss the complaint.
16
We find no merit in the petition.
We agree with petitioner’s contention that the perfection of an appeal
within the statutory or reglementary period is not only mandatory, but
also jurisdictional; failure to do so renders the assailed decision final and
executory and deprives the appellate court or body of the legal authority
to alter the final judgment, much less entertain the appeal. However,
this Court has time and again ruled that in exceptional cases, a belated
appeal may be given due course if greater injustice may occur if an
appeal is not given due course than if the reglementary period to appeal
were strictly followed.19 The Court resorted to this extraordinary measure
even at the expense of sacrificing order and efficiency if only to serve
the greater principles of substantial justice and equity.20
In the case at bar, the NLRC did not commit a grave abuse of its
discretion in giving Article 22321 of the Labor Code a liberal application to
prevent the miscarriage of justice. Technicality should not be allowed to
stand in the way of equitably and completely resolving the rights and
obligations of the parties.22 We have held in a catena of cases that
technical rules are not binding in labor cases and are not to be applied
strictly if the result would be detrimental to the workingman.23
Admittedly, respondents failed to perfect their appeal from the decision
of the Labor Arbiter within the reglementary period therefor. However,
petitioner perfected its appeal within the period, and since petitioner had
filed a timely appeal, the NLRC acquired jurisdiction over the case to give
due course to its appeal and render the decision of November 14, 2002.
Case law is that the party who failed to appeal from the decision of the
Labor Arbiter to the NLRC can still participate in a separate appeal timely
filed by the adverse party as the situation is considered to be of greater
benefit to both parties.24
We find no merit in petitioner’s contention that the Labor Arbiter abused
his discretion when he admitted respondents’ position paper which had
been belatedly filed. It bears stressing that the Labor Arbiter is
mandated by law to use every reasonable means to ascertain the facts in
each case speedily and objectively, without technicalities of law or
procedure, all in the interest of due process.25 Indeed, as stressed by the
appellate court, respondents’ failure to submit a position paper on time is
not a ground for striking out the paper from the records, much less for
dismissing a complaint.26 Likewise, there is simply no truth to petitioner’s
assertion that it was denied due process when the Labor Arbiter
admitted respondents’ position paper without requiring it to file a
comment before admitting said position paper. The essence of due
process in administrative proceedings is simply an opportunity to explain
one’s side or an opportunity to seek reconsideration of the action or
ruling complained of. Obviously, there is nothing in the records that
would suggest that petitioner had absolute lack of opportunity to be
heard.27 Petitioner had the right to file a motion for reconsideration of
the Labor Arbiter’s admission of respondents’ position paper, and even
file a Reply thereto. In fact, petitioner filed its position paper on April 2,
2001. It must be stressed that Article 280 of the Labor Code was
encoded in our statute books to hinder the circumvention by
unscrupulous employers of the employees’ right to security of tenure by
indiscriminately and absolutely ruling out all written and oral agreements
inharmonious with the concept of regular employment defined therein.28
We quote with approval the following pronouncement of the NLRC:
The complainants, on the other hand, contend that respondents assailed
the Labor Arbiter’s order dated 18 June 2001 as violative of the NLRC
Rules of Procedure and as such is violative of their right to procedural
due process. That while suggesting that an Order be instead issued by
the Labor Arbiter for complainants to refile this case, respondents
impliedly submit that there is not any substantial damage or prejudice
upon the refiling, even so, respondents’ suggestion acknowledges
complainants right to prosecute this case, albeit with the burden of
repeating the same procedure, thus, entailing additional time, efforts,
litigation cost and precious time for the Arbiter to repeat the same
process twice. Respondent’s suggestion, betrays its notion of prolonging,
rather than promoting the early resolution of the case.
Although the Labor Arbiter in his Order dated 18 June 2001 which
revived and re-opened the dismissed case without prejudice beyond the
ten (10) day reglementary period had inadvertently failed to follow
Section 16, Rule V, Rules Procedure of the NLRC which states:
"A party may file a motion to revive or re-open a case dismissed without
prejudice within ten (10) calendar days from receipt of notice of the
order dismissing the same; otherwise, his only remedy shall be to re-file
the case in the arbitration branch of origin."
the same is not a serious flaw that had prejudiced the respondents’ right
to due process. The case can still be refiled because it has not yet
prescribed. Anyway, Article 221 of the Labor Code provides:
"In any proceedings before the Commission or any of the Labor Arbiters,
the rules of evidence prevailing in courts of law or equity shall not be
controlling and it is the spirit and intention of this Code that the
Commission and its members and the Labor Arbiters shall use every and
all reasonable means to ascertain the facts in each case speedily and
objectively and without regard to technicalities of law or procedure, all in
the interest of due process."
The admission by the Labor Arbiter of the complainants’ Position Paper
and Supplemental Manifestation which were belatedly filed just only
shows that he acted within his discretion as he is enjoined by law to use
every reasonable means to ascertain the facts in each case speedily and
objectively, without regard to technicalities of law or procedure, all in the
interest of due process. Indeed, the failure to submit a position paper on
time is not a ground for striking out the paper from the records, much
less for dismissing a complaint in the case of the complainant.
(University of Immaculate Conception vs. UIC Teaching and Non-
Teaching Personnel Employees, G.R. No. 144702, July 31, 2001).
"In admitting the respondents’ position paper albeit late, the Labor
Arbiter acted within her discretion. In fact, she is enjoined by law to use
every reasonable means to ascertain the facts in each case speedily and
objectively, without technicalities of law or procedure, all in the interest
of due process". (Panlilio vs. NLRC, 281 SCRA 53).
The respondents were given by the Labor Arbiter the opportunity to
submit position paper. In fact, the respondents had filed their position
paper on 2 April 2001. What is material in the compliance of due process
is the fact that the parties are given the opportunities to submit position
papers.
"Due process requirements are satisfied where the parties are given the
opportunities to submit position papers". (Laurence vs. NLRC, 205 SCRA
737).
Thus, the respondent was not deprived of its Constitutional right to due
process of law.29
We reject, as barren of factual basis, petitioner’s contention that
respondents are considered as its talents, hence, not regular employees
of the broadcasting company. Petitioner’s claim that the functions
performed by the respondents are not at all necessary, desirable, or
even vital to its trade or business is belied by the evidence on record.
Case law is that this Court has always accorded respect and finality to
the findings of fact of the CA, particularly if they coincide with those of
the Labor Arbiter and the National Labor Relations Commission, when
supported by substantial evidence.30 The question of whether
respondents are regular or project employees or independent contractors
is essentially factual in nature; nonetheless, the Court is constrained to
resolve it due to its tremendous effects to the legions of production
assistants working in the Philippine broadcasting industry.
We agree with respondents’ contention that where a person has
rendered at least one year of service, regardless of the nature of the
activity performed, or where the work is continuous or intermittent, the
employment is considered regular as long as the activity exists, the
reason being that a customary appointment is not indispensable before
one may be formally declared as having attained regular status. Article
280 of the Labor Code provides:
17
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.
In Universal Robina Corporation v. Catapang,31 the Court reiterated the
test in determining whether one is a regular employee:
The primary standard, therefore, of determining regular employment is
the reasonable connection between the particular activity performed by
the employee in relation to the usual trade or business of the employer.
The test is whether the former is usually necessary or desirable in the
usual business or trade of the employer. The connection can be
determined by considering the nature of work performed and its relation
to the scheme of the particular business or trade in its entirety. Also, if
the employee has been performing the job for at least a year, even if the
performance is not continuous and merely intermittent, the law deems
repeated and continuing need for its performance as sufficient evidence
of the necessity if not indispensability of that activity to the business.
Hence, the employment is considered regular, but only with respect to
such activity and while such activity exists.32
As elaborated by this Court in Magsalin v. National Organization of
Working Men:33
Even while the language of law might have been more definitive, the
clarity of its spirit and intent, i.e., to ensure a "regular" worker’s security
of tenure, however, can hardly be doubted. In determining whether an
employment should be considered regular or non-regular, the applicable
test is the reasonable connection between the particular activity
performed by the employee in relation to the usual business or trade of
the employer. The standard, supplied by the law itself, is whether the
work undertaken is necessary or desirable in the usual business or trade
of the employer, a fact that can be assessed by looking into the nature
of the services rendered and its relation to the general scheme under
which the business or trade is pursued in the usual course. It is
distinguished from a specific undertaking that is divorced from the
normal activities required in carrying on the particular business or trade.
But, although the work to be performed is only for a specific project or
seasonal, where a person thus engaged has been performing the job for
at least one year, even if the performance is not continuous or is merely
intermittent, the law deems the repeated and continuing need for its
performance as being sufficient to indicate the necessity or desirability of
that activity to the business or trade of the employer. The employment
of such person is also then deemed to be regular with respect to such
activity and while such activity exists.34
Not considered regular employees are "project employees," the
completion or termination of which is more or less determinable at the
time of employment, such as those employed in connection with a
particular construction project, and "seasonal employees" whose
employment by its nature is only desirable for a limited period of time.
Even then, any employee who has rendered at least one year of service,
whether continuous or intermittent, is deemed regular with respect to
the activity performed and while such activity actually exists.
It is of no moment that petitioner hired respondents as "talents." The
fact that respondents received pre-agreed "talent fees" instead of
salaries, that they did not observe the required office hours, and that
they were permitted to join other productions during their free time are
not conclusive of the nature of their employment. Respondents cannot
be considered "talents" because they are not actors or actresses or radio
specialists or mere clerks or utility employees. They are regular
employees who perform several different duties under the control and
direction of ABS-CBN executives and supervisors.
Thus, there are two kinds of regular employees under the law: (1) those
engaged to perform activities which are necessary or desirable in the
usual business or trade of the employer; and (2) those casual employees
who have rendered at least one year of service, whether continuous or
broken, with respect to the activities in which they are employed.35
The law overrides such conditions which are prejudicial to the interest of
the worker whose weak bargaining situation necessitates the succor of
the State. What determines whether a certain employment is regular or
otherwise is not the will or word of the employer, to which the worker
oftentimes acquiesces, much less the procedure of hiring the employee
or the manner of paying the salary or the actual time spent at work. It is
the character of the activities performed in relation to the particular
trade or business taking into account all the circumstances, and in some
cases the length of time of its performance and its continued
existence.36 It is obvious that one year after they were employed by
petitioner, respondents became regular employees by operation of law.37
Additionally, respondents cannot be considered as project or program
employees because no evidence was presented to show that the
duration and scope of the project were determined or specified at the
time of their engagement. Under existing jurisprudence, project could
refer to two distinguishable types of activities. First, a project may refer
to a particular job or undertaking that is within the regular or usual
business of the employer, but which is distinct and separate, and
identifiable as such, from the other undertakings of the company. Such
job or undertaking begins and ends at determined or determinable
times. Second, the term project may also refer to a particular job or
undertaking that is not within the regular business of the employer. Such
a job or undertaking must also be identifiably separate and distinct from
the ordinary or regular business operations of the employer. The job or
undertaking also begins and ends at determined or determinable times.38
The principal test is whether or not the project employees were assigned
to carry out a specific project or undertaking, the duration and scope of
which were specified at the time the employees were engaged for that
project.39
In this case, it is undisputed that respondents had continuously
performed the same activities for an average of five years. Their
assigned tasks are necessary or desirable in the usual business or trade
of the petitioner. The persisting need for their services is sufficient
evidence of the necessity and indispensability of such services to
petitioner’s business or trade.40 While length of time may not be a sole
controlling test for project employment, it can be a strong factor to
determine whether the employee was hired for a specific undertaking or
in fact tasked to perform functions which are vital, necessary and
indispensable to the usual trade or business of the employer.41We note
further that petitioner did not report the termination of respondents’
employment in the particular "project" to the Department of Labor and
Employment Regional Office having jurisdiction over the workplace
within 30 days following the date of their separation from work, using
the prescribed form on employees’ termination/
dismissals/suspensions.42
As gleaned from the records of this case, petitioner itself is not certain
how to categorize respondents. In its earlier pleadings, petitioner
classified respondents as program employees, and in later pleadings,
independent contractors. Program employees, or project employees, are
different from independent contractors because in the case of the latter,
no employer-employee relationship exists.
Petitioner’s reliance on the ruling of this Court in Sonza v. ABS-CBN
Broadcasting Corporation43 is misplaced. In that case, the Court
explained why Jose Sonza, a well-known television and radio personality,
was an independent contractor and not a regular employee:
A. Selection and Engagement of Employee
ABS-CBN engaged SONZA’S services to co-host its television and radio
programs because of SONZA’S peculiar skills, talent and celebrity status.
SONZA contends that the "discretion used by respondent in specifically
selecting and hiring complainant over other broadcasters of possibly
similar experience and qualification as complainant belies respondent’s
claim of independent contractorship."
18
Independent contractors often present themselves to possess unique
skills, expertise or talent to distinguish them from ordinary employees.
The specific selection and hiring of SONZA, because of his unique skills,
talent and celebrity status not possessed by ordinary employees, is a
circumstance indicative, but not conclusive, of an independent
contractual relationship. If SONZA did not possess such unique skills,
talent and celebrity status, ABS-CBN would not have entered into the
Agreement with SONZA but would have hired him through its personnel
department just like any other employee.
In any event, the method of selecting and engaging SONZA does not
conclusively determine his status. We must consider all the
circumstances of the relationship, with the control test being the most
important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his
fees going to MJMDC. SONZA asserts that this mode of fee payment
shows that he was an employee of ABS-CBN. SONZA also points out that
ABS-CBN granted him benefits and privileges "which he would not have
enjoyed if he were truly the subject of a valid job contract."
All the talent fees and benefits paid to SONZA were the result of
negotiations that led to the Agreement. If SONZA were ABS-CBN’s
employee, there would be no need for the parties to stipulate on benefits
such as "SSS, Medicare, x x x and 13th month pay which the law
automatically incorporates into every employer-employee contract.
Whatever benefits SONZA enjoyed arose from contract and not because
of an employer-employee relationship.
SONZA’s talent fees, amounting to P317,000 monthly in the second and
third year, are so huge and out of the ordinary that they indicate more
an independent contractual relationship rather than an employer-
employee relationship. ABS-CBN agreed to pay SONZA such huge talent
fees precisely because of SONZA’S unique skills, talent and celebrity
status not possessed by ordinary employees. Obviously, SONZA acting
alone possessed enough bargaining power to demand and receive such
huge talent fees for his services. The power to bargain talent fees way
above the salary scales of ordinary employees is a circumstance
indicative, but not conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does
not negate the status of SONZA as an independent contractor. The
parties expressly agreed on such mode of payment. Under the
Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would
have to turn over any talent fee accruing under the Agreement.44
In the case at bar, however, the employer-employee relationship As earlier stated, it is not the will or word of the employer which
between petitioner and respondents has been proven. determines the nature of employment of an employee but the nature of
the activities performed by such employee in relation to the particular
business or trade of the employer. Considering that We have clearly
First. In the selection and engagement of respondents, no peculiar or
found that private respondents are regular employees of petitioner, their
unique skill, talent or celebrity status was required from them because
exclusion from the said CBA on the misplaced belief of the parties to the
they were merely hired through petitioner’s personnel department just
said agreement that they are project employees, is therefore not proper.
like any ordinary employee.
Finding said private respondents as regular employees and not as mere
project employees, they must be accorded the benefits due under the
Second. The so-called "talent fees" of respondents correspond to wages said Collective Bargaining Agreement.
given as a result of an employer-employee relationship. Respondents did
not have the power to bargain for huge talent fees, a circumstance
A collective bargaining agreement is a contract entered into by the union
negating independent contractual relationship.
representing the employees and the employer. However, even the non-
member employees are entitled to the benefits of the contract. To
Third. Petitioner could always discharge respondents should it find their accord its benefits only to members of the union without any valid
work unsatisfactory, and respondents are highly dependent on the reason would constitute undue discrimination against non-members. A
petitioner for continued work. collective bargaining agreement is binding on all employees of the
company. Therefore, whatever benefits are given to the other employees
of ABS-CBN must likewise be accorded to private respondents who were
Fourth. The degree of control and supervision exercised by petitioner
regular employees of petitioner.48
over respondents through its supervisors negates the allegation that
respondents are independent contractors.
Besides, only talent-artists were excluded from the CBA and not
The presumption is that when the work done is an integral part of the production assistants who are regular employees of the respondents.
regular business of the employer and when the worker, relative to the Moreover, under Article 1702 of the New Civil Code: "In case of doubt,
all labor legislation and all labor contracts shall be construed in favor of
employer, does not furnish an independent business or professional
the safety and decent living of the laborer."
service, such work is a regular employment of such employee and not an
independent contractor.45 The Court will peruse beyond any such
agreement to examine the facts that typify the parties’ actual IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of
relationship.46 merit. The assailed Decision and Resolution of the Court of Appeals in
CA-G.R. SP No. 76582 are AFFIRMED. Costs against petitioner.
It follows then that respondents are entitled to the benefits provided for
in the existing CBA between petitioner and its rank-and-file employees. SO ORDERED.
As regular employees, respondents are entitled to the benefits granted
to all other regular employees of petitioner under the CBA.47 We quote
with approval the ruling of the appellate court, that the reason why
production assistants were excluded from the CBA is precisely because
they were erroneously classified and treated as project employees by
petitioner:
x x x The award in favor of private respondents of the benefits accorded
to rank-and-file employees of ABS-CBN under the 1996-1999 CBA is a
necessary consequence of public respondent’s ruling that private
respondents as production assistants of petitioner are regular
employees. The monetary award is not considered as claims involving
the interpretation or implementation of the collective bargaining
agreement. The reason why production assistants were excluded from
the said agreement is precisely because they were classified and treated
as project employees by petitioner.
19
5 In 1996, petitioner was designated Acting Manager. The corporation also
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 170087 August 31, 2006
ANGELINA FRANCISCO, Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, KASEI
CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO ACEDO,
DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and
RAMON ESCUETA,Respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court
seeks to annul and set aside the Decision and Resolution of the Court of
Appeals dated October 29, 2004 1 and October 7, 2005, 2 respectively, in
CA-G.R. SP No. 78515 dismissing the complaint for constructive dismissal
filed by herein petitioner Angelina Francisco. The appellate court
reversed and set aside the Decision of the National Labor Relations
Commission (NLRC) dated April 15, 2003, 3 in NLRC NCR CA No. 032766-
02 which affirmed with modification the decision of the Labor Arbiter
dated July 31, 2002, 4 in NLRC-NCR Case No. 30-10-0-489-01, finding
that private respondents were liable for constructive dismissal.
In 1995, petitioner was hired by Kasei Corporation during its
incorporation stage. She was designated as Accountant and Corporate
Secretary and was assigned to handle all the accounting needs of the
company. She was also designated as Liaison Officer to the City of
Makati to secure business permits, construction permits and other
licenses for the initial operation of the company. 5
Although she was designated as Corporate Secretary, she was not
entrusted with the corporate documents; neither did she attend any
board meeting nor required to do so. She never prepared any legal
document and never represented the company as its Corporate
Secretary. However, on some occasions, she was prevailed upon to sign
documentation for the company. 6
engaged through a Board Resolution designating her as technical
hired Gerry Nino as accountant in lieu of petitioner. As Acting Manager, consultant. The money received by petitioner from the corporation was
petitioner was assigned to handle recruitment of all employees and her professional fee subject to the 10% expanded withholding tax on
perform management administration functions; represent the company professionals, and that she was not one of those reported to the BIR or
in all dealings with government agencies, especially with the Bureau of SSS as one of the company’s employees. 12
Internal Revenue (BIR), Social Security System (SSS) and in the city
government of Makati; and to administer all other matters pertaining to
Petitioner’s designation as technical consultant depended solely upon the
the operation of Kasei Restaurant which is owned and operated by Kasei
will of management. As such, her consultancy may be terminated any
Corporation. 7
time considering that her services were only temporary in nature and
dependent on the needs of the corporation.
For five years, petitioner performed the duties of Acting Manager. As of
December 31, 2000 her salary was P27,500.00 plus P3,000.00 housing
To prove that petitioner was not an employee of the corporation, private
allowance and a 10% share in the profit of Kasei Corporation. 8
respondents submitted a list of employees for the years 1999 and 2000
duly received by the BIR showing that petitioner was not among the
In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. employees reported to the BIR, as well as a list of payees subject to
Petitioner alleged that she was required to sign a prepared resolution for expanded withholding tax which included petitioner. SSS records were
her replacement but she was assured that she would still be connected also submitted showing that petitioner’s latest employer was Seiji
with Kasei Corporation. Timoteo Acedo, the designated Treasurer, Corporation. 13
convened a meeting of all employees of Kasei Corporation and
announced that nothing had changed and that petitioner was still
The Labor Arbiter found that petitioner was illegally dismissed, thus:
connected with Kasei Corporation as Technical Assistant to Seiji Kamura
and in charge of all BIR matters. 9
WHEREFORE, premises considered, judgment is hereby rendered as
follows:
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month
beginning January up to September 2001 for a total reduction of
P22,500.00 as of September 2001. Petitioner was not paid her mid-year 1. finding complainant an employee of respondent corporation;
bonus allegedly because the company was not earning well. On October
2001, petitioner did not receive her salary from the company. She made 2. declaring complainant’s dismissal as illegal;
repeated follow-ups with the company cashier but she was advised that
the company was not earning well. 10
3. ordering respondents to reinstate complainant to her former position
without loss of seniority rights and jointly and severally pay complainant
On October 15, 2001, petitioner asked for her salary from Acedo and the her money claims in accordance with the following computation:
rest of the officers but she was informed that she is no longer connected
with the company. 11
a. Backwages 10/2001 – 07/2002 275,000.00
Since she was no longer paid her salary, petitioner did not report for
work and filed an action for constructive dismissal before the labor (27,500 x 10 mos.)
arbiter.
b. Salary Differentials (01/2001 – 09/2001) 22,500.00
Private respondents averred that petitioner is not an employee of Kasei
Corporation. They alleged that petitioner was hired in 1995 as one of its c. Housing Allowance (01/2001 – 07/2002) 57,000.00
technical consultants on accounting matters and act concurrently as
Corporate Secretary. As technical consultant, petitioner performed her
work at her own discretion without control and supervision of Kasei d. Midyear Bonus 2001 27,500.00
Corporation. Petitioner had no daily time record and she came to the
office any time she wanted. The company never interfered with her work e. 13th Month Pay 27,500.00
except that from time to time, the management would ask her opinion
on matters relating to her profession. Petitioner did not go through the
usual procedure of selection of employees, but her services were f. 10% share in the profits of Kasei
20
Corp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
h. 10% Attorney’s fees 87,076.50
P957,742.50
If reinstatement is no longer feasible, respondents are ordered to pay
complainant separation pay with additional backwages that would accrue
up to actual payment of separation pay.
SO ORDERED. 14
On April 15, 2003, the NLRC affirmed with modification the Decision of
the Labor Arbiter, the dispositive portion of which reads:
PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby
MODIFIED as follows:
1) Respondents are directed to pay complainant separation pay
computed at one month per year of service in addition to full backwages
from October 2001 to July 31, 2002;
2) The awards representing moral and exemplary damages and 10%
share in profit in the respective accounts of P100,000.00 and
P361,175.00 are deleted;
3) The award of 10% attorney’s fees shall be based on salary differential
award only;
4) The awards representing salary differentials, housing allowance, mid
year bonus and 13th month pay are AFFIRMED.
SO ORDERED. 15
On appeal, the Court of Appeals reversed the NLRC decision, thus:
WHEREFORE, the instant petition is hereby GRANTED. The decision of
the National Labor Relations Commissions dated April 15, 2003 is hereby
REVERSED and SET ASIDE and a new one is hereby rendered dismissing
the complaint filed by private respondent against Kasei Corporation, et
al. for constructive dismissal.
SO ORDERED. 16
The appellate court denied petitioner’s motion for reconsideration, The control test initially found application in the case of Viaña v. Al-
hence, the present recourse. Lagadan and Piga, 19 and lately in Leonardo v. Court of Appeals, 20 where
we held that there is an employer-employee relationship when the
person for whom the services are performed reserves the right to control
The core issues to be resolved in this case are (1) whether there was an
not only the end achieved but also the manner and means used to
employer-employee relationship between petitioner and private
achieve that end.
respondent Kasei Corporation; and if in the affirmative, (2) whether
petitioner was illegally dismissed.
In Sevilla v. Court of Appeals, 21 we observed the need to consider the
existing economic conditions prevailing between the parties, in addition
Considering the conflicting findings by the Labor Arbiter and the National
to the standard of right-of-control like the inclusion of the employee in
Labor Relations Commission on one hand, and the Court of Appeals on
the payrolls, to give a clearer picture in determining the existence of an
the other, there is a need to reexamine the records to determine which
employer-employee relationship based on an analysis of the totality of
of the propositions espoused by the contending parties is supported by
economic circumstances of the worker.
substantial evidence. 17
Thus, the determination of the relationship between employer and
We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there
employee depends upon the circumstances of the whole economic
has been no uniform test to determine the existence of an employer-
activity, 22 such as: (1) the extent to which the services performed are
employee relation. Generally, courts have relied on the so-called right of
an integral part of the employer’s business; (2) the extent of the
control test where the person for whom the services are performed
worker’s investment in equipment and facilities; (3) the nature and
reserves a right to control not only the end to be achieved but also the
degree of control exercised by the employer; (4) the worker’s
means to be used in reaching such end. In addition to the standard of
opportunity for profit and loss; (5) the amount of initiative, skill,
right-of-control, the existing economic conditions prevailing between the
judgment or foresight required for the success of the claimed
parties, like the inclusion of the employee in the payrolls, can help in
independent enterprise; (6) the permanency and duration of the
determining the existence of an employer-employee relationship.
relationship between the worker and the employer; and (7) the degree
of dependency of the worker upon the employer for his continued
However, in certain cases the control test is not sufficient to give a employment in that line of business. 23
complete picture of the relationship between the parties, owing to the
complexity of such a relationship where several positions have been held
The proper standard of economic dependence is whether the worker is
by the worker. There are instances when, aside from the employer’s
dependent on the alleged employer for his continued employment in that
power to control the employee with respect to the means and methods
line of business. 24 In the United States, the touchstone of economic
by which the work is to be accomplished, economic realities of the
reality in analyzing possible employment relationships for purposes of
employment relations help provide a comprehensive analysis of the true
the Federal Labor Standards Act is dependency. 25By analogy, the
classification of the individual, whether as employee, independent
benchmark of economic reality in analyzing possible employment
contractor, corporate officer or some other capacity.
relationships for purposes of the Labor Code ought to be the economic
dependence of the worker on his employer.
The better approach would therefore be to adopt a two-tiered test
involving: (1) the putative employer’s power to control the employee
By applying the control test, there is no doubt that petitioner is an
with respect to the means and methods by which the work is to be
employee of Kasei Corporation because she was under the direct control
accomplished; and (2) the underlying economic realities of the activity or
and supervision of Seiji Kamura, the corporation’s Technical Consultant.
relationship.
She reported for work regularly and served in various capacities as
Accountant, Liaison Officer, Technical Consultant, Acting Manager and
This two-tiered test would provide us with a framework of analysis, Corporate Secretary, with substantially the same job functions, that is,
which would take into consideration the totality of circumstances rendering accounting and tax services to the company and performing
surrounding the true nature of the relationship between the parties. This functions necessary and desirable for the proper operation of the
is especially appropriate in this case where there is no written agreement corporation such as securing business permits and other licenses over an
or terms of reference to base the relationship on; and due to the indefinite period of engagement.
complexity of the relationship based on the various positions and
responsibilities given to the worker over the period of the latter’s
Under the broader economic reality test, the petitioner can likewise be
employment.
said to be an employee of respondent corporation because she had
served the company for six years before her dismissal, receiving check
21
vouchers indicating her salaries/wages, benefits, 13th month pay,
bonuses and allowances, as well as deductions and Social Security
contributions from August 1, 1999 to December 18, 2000. 26 When
petitioner was designated General Manager, respondent corporation
made a report to the SSS signed by Irene Ballesteros. Petitioner’s
membership in the SSS as manifested by a copy of the SSS specimen
signature card which was signed by the President of Kasei Corporation
and the inclusion of her name in the on-line inquiry system of the SSS
evinces the existence of an employer-employee relationship between
petitioner and respondent corporation. 27
It is therefore apparent that petitioner is economically dependent on
respondent corporation for her continued employment in the latter’s line
of business.
In Domasig v. National Labor Relations Commission, 28 we held that in a
business establishment, an identification card is provided not only as a
security measure but mainly to identify the holder thereof as a bona fide
employee of the firm that issues it. Together with the cash vouchers
covering petitioner’s salaries for the months stated therein, these
matters constitute substantial evidence adequate to support a conclusion
that petitioner was an employee of private respondent.
We likewise ruled in Flores v. Nuestro 29 that a corporation who registers
its workers with the SSS is proof that the latter were the former’s
employees. The coverage of Social Security Law is predicated on the
existence of an employer-employee relationship.
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has
clearly established that petitioner never acted as Corporate Secretary
and that her designation as such was only for convenience. The actual
nature of petitioner’s job was as Kamura’s direct assistant with the duty
of acting as Liaison Officer in representing the company to secure
construction permits, license to operate and other requirements imposed
by government agencies. Petitioner was never entrusted with corporate
documents of the company, nor required to attend the meeting of the
corporation. She was never privy to the preparation of any document for
the corporation, although once in a while she was required to sign
prepared documentation for the company. 30
The second affidavit of Kamura dated March 7, 2002 which repudiated
the December 5, 2001 affidavit has been allegedly withdrawn by Kamura
himself from the records of the case. 31 Regardless of this fact, we are
convinced that the allegations in the first affidavit are sufficient to
establish that petitioner is an employee of Kasei Corporation.
Granting arguendo, that the second affidavit validly repudiated the first
one, courts do not generally look with favor on any retraction or
recanted testimony, for it could have been secured by considerations
other than to tell the truth and would make solemn trials a mockery and WHEREFORE, the petition is GRANTED. The Decision and Resolution
place the investigation of the truth at the mercy of unscrupulous of the Court of Appeals dated October 29, 2004 and October 7, 2005,
witnesses. 32 A recantation does not necessarily cancel an earlier respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE.
declaration, but like any other testimony the same is subject to the test The Decision of the National Labor Relations Commission dated April 15,
of credibility and should be received with caution. 33 2003 in NLRC NCR CA No. 032766-02, isREINSTATED. The case
is REMANDED to the Labor Arbiter for the recomputation of petitioner
Angelina Francisco’s full backwages from the time she was illegally
Based on the foregoing, there can be no other conclusion that petitioner
terminated until the date of finality of this decision, and separation pay
is an employee of respondent Kasei Corporation. She was selected and
representing one-half month pay for every year of service, where a
engaged by the company for compensation, and is economically
fraction of at least six months shall be considered as one whole year.
dependent upon respondent for her continued employment in that line of
business. Her main job function involved accounting and tax services
rendered to respondent corporation on a regular basis over an indefinite SO ORDERED.
period of engagement. Respondent corporation hired and engaged
petitioner for compensation, with the power to dismiss her for cause.
More importantly, respondent corporation had the power to control
petitioner with the means and methods by which the work is to be
accomplished.
The corporation constructively dismissed petitioner when it reduced her
salary by P2,500 a month from January to September 2001. This
amounts to an illegal termination of employment, where the petitioner is
entitled to full backwages. Since the position of petitioner as accountant
is one of trust and confidence, and under the principle of strained
relations, petitioner is further entitled to separation pay, in lieu of
reinstatement. 34
A diminution of pay is prejudicial to the employee and amounts to
constructive dismissal. Constructive dismissal is an involuntary
resignation resulting in cessation of work resorted to when continued
employment becomes impossible, unreasonable or unlikely; when there
is a demotion in rank or a diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes
unbearable to an employee. 35 In Globe Telecom, Inc. v. Florendo-
Flores, 36 we ruled that where an employee ceases to work due to a
demotion of rank or a diminution of pay, an unreasonable situation
arises which creates an adverse working environment rendering it
impossible for such employee to continue working for her employer.
Hence, her severance from the company was not of her own making and
therefore amounted to an illegal termination of employment.
In affording full protection to labor, this Court must ensure equal work
opportunities regardless of sex, race or creed. Even as we, in every case,
attempt to carefully balance the fragile relationship between employees
and employers, we are mindful of the fact that the policy of the law is to
apply the Labor Code to a greater number of employees. This would
enable employees to avail of the benefits accorded to them by law, in
line with the constitutional mandate giving maximum aid and protection
to labor, promoting their welfare and reaffirming it as a primary social
economic force in furtherance of social justice and national development.
22
6 pregnancy, Dr. Estrada noted an increase in her blood pressure and
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 142625 December 19, 2006
ROGELIO P. NOGALES, for himself and on behalf of the minors,
ROGER ANTHONY, ANGELICA, NANCY, and MICHAEL
CHRISTOPHER, all surnamed NOGALES, petitioners,
vs.
CAPITOL MEDICAL CENTER, DR. OSCAR ESTRADA, DR. ELY
VILLAFLOR, DR. ROSA UY, DR. JOEL ENRIQUEZ, DR. PERPETUA
LACSON, DR. NOE ESPINOLA, and NURSE J.
DUMLAO, respondents.
DECISION
CARPIO, J.:
The Case
This petition for review1 assails the 6 February 1998 Decision2 and 21
March 2000 Resolution3 of the Court of Appeals in CA-G.R. CV No.
45641. The Court of Appeals affirmed in toto the 22 November 1993
Decision4 of the Regional Trial Court of Manila, Branch 33, finding Dr.
Oscar Estrada solely liable for damages for the death of his patient,
Corazon Nogales, while absolving the remaining respondents of any
liability. The Court of Appeals denied petitioners' motion for
reconsideration.
The Facts
Pregnant with her fourth child, Corazon Nogales ("Corazon"), who was
then 37 years old, was under the exclusive prenatal care of Dr. Oscar
Estrada ("Dr. Estrada") beginning on her fourth month of pregnancy or
as early as December 1975. While Corazon was on her last trimester of
development of leg edema5 indicating preeclampsia,6 which is a
dangerous complication of pregnancy.7
Around midnight of 25 May 1976, Corazon started to experience mild
labor pains prompting Corazon and Rogelio Nogales ("Spouses Nogales")
to see Dr. Estrada at his home. After examining Corazon, Dr. Estrada
advised her immediate admission to the Capitol Medical Center ("CMC").
On 26 May 1976, Corazon was admitted at 2:30 a.m. at the CMC after
the staff nurse noted the written admission request8 of Dr. Estrada. Upon
Corazon's admission at the CMC, Rogelio Nogales ("Rogelio") executed
and signed the "Consent on Admission and Agreement"9 and "Admission
Agreement."10 Corazon was then brought to the labor room of the CMC.
Dr. Rosa Uy ("Dr. Uy"), who was then a resident physician of CMC,
conducted an internal examination of Corazon. Dr. Uy then called up Dr.
Estrada to notify him of her findings.
Based on the Doctor's Order Sheet,11 around 3:00 a.m., Dr. Estrada
ordered for 10 mg. of valium to be administered immediately by
intramuscular injection. Dr. Estrada later ordered the start of intravenous
administration of syntocinon admixed with dextrose, 5%, in lactated
Ringers' solution, at the rate of eight to ten micro-drops per minute.
According to the Nurse's Observation Notes,12 Dr. Joel Enriquez ("Dr.
Enriquez"), an anesthesiologist at CMC, was notified at 4:15 a.m. of
Corazon's admission. Subsequently, when asked if he needed the
services of an anesthesiologist, Dr. Estrada refused. Despite Dr.
Estrada's refusal, Dr. Enriquez stayed to observe Corazon's condition.
At 6:00 a.m., Corazon was transferred to Delivery Room No. 1 of the
CMC. At 6:10 a.m., Corazon's bag of water ruptured spontaneously. At
6:12 a.m., Corazon's cervix was fully dilated. At 6:13 a.m., Corazon
started to experience convulsions.
At 6:15 a.m., Dr. Estrada ordered the injection of ten grams of
magnesium sulfate. However, Dr. Ely Villaflor ("Dr. Villaflor"), who was
assisting Dr. Estrada, administered only 2.5 grams of magnesium sulfate.
At 6:22 a.m., Dr. Estrada, assisted by Dr. Villaflor, applied low forceps to
extract Corazon's baby. In the process, a 1.0 x 2.5 cm. piece of cervical
tissue was allegedly torn. The baby came out in an apnic, cyanotic, weak
and injured condition. Consequently, the baby had to be intubated and
resuscitated by Dr. Enriquez and Dr. Payumo.
At 6:27 a.m., Corazon began to manifest moderate vaginal bleeding
which rapidly became profuse. Corazon's blood pressure dropped from
130/80 to 60/40 within five minutes. There was continuous profuse
vaginal bleeding. The assisting nurse administered hemacel through a
gauge 19 needle as a side drip to the ongoing intravenous injection of
dextrose.
At 7:45 a.m., Dr. Estrada ordered blood typing and cross matching with
bottled blood. It took approximately 30 minutes for the CMC laboratory,
headed by Dr. Perpetua Lacson ("Dr. Lacson"), to comply with Dr.
Estrada's order and deliver the blood.
At 8:00 a.m., Dr. Noe Espinola ("Dr. Espinola"), head of the Obstetrics-
Gynecology Department of the CMC, was apprised of Corazon's condition
by telephone. Upon being informed that Corazon was bleeding profusely,
Dr. Espinola ordered immediate hysterectomy. Rogelio was made to sign
a "Consent to Operation."13
Due to the inclement weather then, Dr. Espinola, who was fetched from
his residence by an ambulance, arrived at the CMC about an hour later
or at 9:00 a.m. He examined the patient and ordered some resuscitative
measures to be administered. Despite Dr. Espinola's efforts, Corazon
died at 9:15 a.m. The cause of death was "hemorrhage, post partum."14
On 14 May 1980, petitioners filed a complaint for damages15 with the
Regional Trial Court16 of Manila against CMC, Dr. Estrada, Dr. Villaflor,
Dr. Uy, Dr. Enriquez, Dr. Lacson, Dr. Espinola, and a certain Nurse J.
Dumlao for the death of Corazon. Petitioners mainly contended that
defendant physicians and CMC personnel were negligent in the
treatment and management of Corazon's condition. Petitioners charged
CMC with negligence in the selection and supervision of defendant
physicians and hospital staff.
For failing to file their answer to the complaint despite service of
summons, the trial court declared Dr. Estrada, Dr. Enriquez, and Nurse
Dumlao in default.17 CMC, Dr. Villaflor, Dr. Uy, Dr. Espinola, and Dr.
Lacson filed their respective answers denying and opposing the
allegations in the complaint. Subsequently, trial ensued.
After more than 11 years of trial, the trial court rendered judgment on
22 November 1993 finding Dr. Estrada solely liable for damages. The
trial court ruled as follows:
The victim was under his pre-natal care, apparently, his fault
began from his incorrect and inadequate management and
lack of treatment of the pre-eclamptic condition of his patient.
It is not disputed that he misapplied the forceps in causing the
delivery because it resulted in a large cervical tear which had
caused the profuse bleeding which he also failed to control
with the application of inadequate injection of magnesium
sulfate by his assistant Dra. Ely Villaflor. Dr. Estrada even
23
failed to notice the erroneous administration by nurse Dumlao
of hemacel by way of side drip, instead of direct intravenous
injection, and his failure to consult a senior obstetrician at an
early stage of the problem.
On the part however of Dra. Ely Villaflor, Dra. Rosa Uy, Dr.
Joel Enriquez, Dr. Lacson, Dr. Espinola, nurse J. Dumlao and
CMC, the Court finds no legal justification to find them civilly
liable.
On the part of Dra. Ely Villaflor, she was only taking orders
from Dr. Estrada, the principal physician of Corazon Nogales.
She can only make suggestions in the manner the patient
maybe treated but she cannot impose her will as to do so
would be to substitute her good judgment to that of Dr.
Estrada. If she failed to correctly diagnose the true cause of
the bleeding which in this case appears to be a cervical
laceration, it cannot be safely concluded by the Court that Dra.
Villaflor had the correct diagnosis and she failed to inform Dr.
Estrada. No evidence was introduced to show that indeed Dra.
Villaflor had discovered that there was laceration at the
cervical area of the patient's internal organ.
On the part of nurse Dumlao, there is no showing that when
she administered the hemacel as a side drip, she did it on her
own. If the correct procedure was directly thru the veins, it
could only be because this was what was probably the orders
of Dr. Estrada.
While the evidence of the plaintiffs shows that Dr. Noe
Espinola, who was the Chief of the Department of Obstetrics
and Gynecology who attended to the patient Mrs. Nogales, it
was only at 9:00 a.m. That he was able to reach the hospital
because of typhoon Didang (Exhibit 2). While he was able to
give prescription in the manner Corazon Nogales may be
treated, the prescription was based on the information given
to him by phone and he acted on the basis of facts as
presented to him, believing in good faith that such is the
correct remedy. He was not with Dr. Estrada when the patient
was brought to the hospital at 2:30 o'clock a.m. So, whatever
errors that Dr. Estrada committed on the patient before 9:00
o'clock a.m. are certainly the errors of Dr. Estrada and cannot
be the mistake of Dr. Noe Espinola. His failure to come to the
hospital on time was due to fortuitous event.
On the part of Dr. Joel Enriquez, while he was present in the
delivery room, it is not incumbent upon him to call the
attention of Dr. Estrada, Dra. Villaflor and also of Nurse
Dumlao on the alleged errors committed by them. Besides, as
anesthesiologist, he has no authority to control the actuations
of Dr. Estrada and Dra. Villaflor. For the Court to assume that
there were errors being committed in the presence of Dr.
Enriquez would be to dwell on conjectures and speculations.
On the civil liability of Dr. Perpetua Lacson, [s]he is a
hematologist and in-charge of the blood bank of the CMC. The
Court cannot accept the theory of the plaintiffs that there was
delay in delivering the blood needed by the patient. It was
testified, that in order that this blood will be made available, a
laboratory test has to be conducted to determine the type of
blood, cross matching and other matters consistent with
medical science so, the lapse of 30 minutes maybe considered
a reasonable time to do all of these things, and not a delay as
the plaintiffs would want the Court to believe.
Admittedly, Dra. Rosa Uy is a resident physician of the Capitol
Medical Center. She was sued because of her alleged failure to
notice the incompetence and negligence of Dr. Estrada.
However, there is no evidence to support such theory. No
evidence was adduced to show that Dra. Rosa Uy as a resident
physician of Capitol Medical Center, had knowledge of the
mismanagement of the patient Corazon Nogales, and that
notwithstanding such knowledge, she tolerated the same to
happen.
In the pre-trial order, plaintiffs and CMC agreed that defendant
CMC did not have any hand or participation in the selection or
hiring of Dr. Estrada or his assistant Dra. Ely Villaflor as
attending physician[s] of the deceased. In other words, the
two (2) doctors were not employees of the hospital and
therefore the hospital did not have control over their
professional conduct. When Mrs. Nogales was brought to the
hospital, it was an emergency case and defendant CMC had no
choice but to admit her. Such being the case, there is
therefore no legal ground to apply the provisions of Article
2176 and 2180 of the New Civil Code referring to the vicarious
liability of an employer for the negligence of its employees. If
ever in this case there is fault or negligence in the treatment
of the deceased on the part of the attending physicians who
were employed by the family of the deceased, such civil
liability should be borne by the attending physicians under the
principle of "respondeat superior".
WHEREFORE, premises considered, judgment is hereby
rendered finding defendant Dr. Estrada of Number 13 Pitimini
St. San Francisco del Monte, Quezon City civilly liable to pay
plaintiffs: 1) By way of actual damages in the amount
of P105,000.00; 2) By way of moral damages in the amount
of P700,000.00; 3) Attorney's fees in the amount
of P100,000.00 and to pay the costs of suit.
For failure of the plaintiffs to adduce evidence to support its
[sic] allegations against the other defendants, the complaint is
hereby ordered dismissed. While the Court looks with disfavor
the filing of the present complaint against the other
defendants by the herein plaintiffs, as in a way it has caused
them personal inconvenience and slight damage on their name
and reputation, the Court cannot accepts [sic] however, the
theory of the remaining defendants that plaintiffs were
motivated in bad faith in the filing of this complaint. For this
reason defendants' counterclaims are hereby ordered
dismissed.
SO ORDERED.18
Petitioners appealed the trial court's decision. Petitioners claimed that
aside from Dr. Estrada, the remaining respondents should be held
equally liable for negligence. Petitioners pointed out the extent of each
respondent's alleged liability.
On 6 February 1998, the Court of Appeals affirmed the decision of the
trial court.19 Petitioners filed a motion for reconsideration which the
Court of Appeals denied in its Resolution of 21 March 2000.20
Hence, this petition.
Meanwhile, petitioners filed a Manifestation dated 12 April 200221 stating
that respondents Dr. Estrada, Dr. Enriquez, Dr. Villaflor, and Nurse
Dumlao "need no longer be notified of the petition because they are
absolutely not involved in the issue raised before the [Court], regarding
the liability of [CMC]."22 Petitioners stressed that the subject matter of
this petition is the liability of CMC for the negligence of Dr. Estrada.23
The Court issued a Resolution dated 9 September 200224 dispensing with
the requirement to submit the correct and present addresses of
respondents Dr. Estrada, Dr. Enriquez, Dr. Villaflor, and Nurse Dumlao.
The Court stated that with the filing of petitioners' Manifestation, it
should be understood that they are claiming only against respondents
CMC, Dr. Espinola, Dr. Lacson, and Dr. Uy who have filed their respective
comments. Petitioners are foregoing further claims against respondents
Dr. Estrada, Dr. Enriquez, Dr. Villaflor, and Nurse Dumlao.
The Court noted that Dr. Estrada did not appeal the decision of the Court
of Appeals affirming the decision of the Regional Trial Court. Accordingly,
the decision of the Court of Appeals, affirming the trial court's judgment,
is already final as against Dr. Oscar Estrada.
Petitioners filed a motion for reconsideration25 of the Court's 9
September 2002 Resolution claiming that Dr. Enriquez, Dr. Villaflor and
24
Nurse Dumlao were notified of the petition at their counsels' last known
addresses. Petitioners reiterated their imputation of negligence on these
respondents. The Court denied petitioners' Motion for Reconsideration in
its 18 February 2004 Resolution.26
The Court of Appeals' Ruling
In its Decision of 6 February 1998, the Court of Appeals upheld the trial
court's ruling. The Court of Appeals rejected petitioners' view that the
doctrine in Darling v. Charleston Community Memorial Hospital27 applies
to this case. According to the Court of Appeals, the present case differs
from the Darling case since Dr. Estrada is an independent contractor-
physician whereas the Darling case involved a physician and a nurse who
were employees of the hospital.
Citing other American cases, the Court of Appeals further held that the
mere fact that a hospital permitted a physician to practice medicine and
use its facilities is not sufficient to render the hospital liable for the
physician's negligence.28 A hospital is not responsible for the negligence
of a physician who is an independent contractor.29
The Court of Appeals found the cases of Davidson v.
Conole30 and Campbell v. Emma Laing Stevens Hospital31applicable to
this case. Quoting Campbell, the Court of Appeals stated that where
there is no proof that defendant physician was an employee of
defendant hospital or that defendant hospital had reason to know that
any acts of malpractice would take place, defendant hospital could not
be held liable for its failure to intervene in the relationship of physician-
patient between defendant physician and plaintiff.
On the liability of the other respondents, the Court of Appeals applied
the "borrowed servant" doctrine considering that Dr. Estrada was an
independent contractor who was merely exercising hospital privileges.
This doctrine provides that once the surgeon enters the operating room
and takes charge of the proceedings, the acts or omissions of operating
room personnel, and any negligence associated with such acts or
omissions, are imputable to the surgeon.32 While the assisting physicians
and nurses may be employed by the hospital, or engaged by the patient,
they normally become the temporary servants or agents of the surgeon
in charge while the operation is in progress, and liability may be imposed
upon the surgeon for their negligent acts under the doctrine
of respondeat superior.33
The Court of Appeals concluded that since Rogelio engaged Dr. Estrada
as the attending physician of his wife, any liability for malpractice must
be Dr. Estrada's sole responsibility.
While it found the amount of damages fair and reasonable, the Court of
Appeals held that no interest could be imposed on unliquidated claims or
damages.
The Issue
Basically, the issue in this case is whether CMC is vicariously liable for
the negligence of Dr. Estrada. The resolution of this issue rests, on the
other hand, on the ascertainment of the relationship between Dr.
Estrada and CMC. The Court also believes that a determination of the
extent of liability of the other respondents is inevitable to finally and
completely dispose of the present controversy.
The Ruling of the Court
The petition is partly meritorious.
On the Liability of CMC
Dr. Estrada's negligence in handling the treatment and management of
Corazon's condition which ultimately resulted in Corazon's death is no
longer in issue. Dr. Estrada did not appeal the decision of the Court of
Appeals which affirmed the ruling of the trial court finding Dr. Estrada
solely liable for damages. Accordingly, the finding of the trial court on
Dr. Estrada's negligence is already final.
Petitioners maintain that CMC is vicariously liable for Dr. Estrada's
negligence based on Article 2180 in relation to Article 2176 of the Civil
Code. These provisions pertinently state:
Art. 2180. The obligation imposed by article 2176 is
demandable not only for one's own acts or omissions, but also
for those of persons for whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of
their assigned tasks, even though the former are not engaged
in any business or industry.
xxxx
The responsibility treated of in this article shall cease when the
persons herein mentioned prove that they observed all the
diligence of a good father of a family to prevent damage.
Art. 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for
the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this Chapter.
Similarly, in the United States, a hospital which is the employer, master,
or principal of a physician employee, servant, or agent, may be held
liable for the physician's negligence under the doctrine of respondeat
superior.34
In the present case, petitioners maintain that CMC, in allowing Dr.
Estrada to practice and admit patients at CMC, should be liable for Dr.
Estrada's malpractice. Rogelio claims that he knew Dr. Estrada as an
accredited physician of CMC, though he discovered later that Dr. Estrada
was not a salaried employee of the CMC.35 Rogelio further claims that he
was dealing with CMC, whose primary concern was the treatment and
management of his wife's condition. Dr. Estrada just happened to be the
specific person he talked to representing CMC.36 Moreover, the fact that
CMC made Rogelio sign a Consent on Admission and Admission
Agreement37 and a Consent to Operation printed on the letterhead of
CMC indicates that CMC considered Dr. Estrada as a member of its
medical staff.
On the other hand, CMC disclaims liability by asserting that Dr. Estrada
was a mere visiting physician and that it admitted Corazon because her
physical condition then was classified an emergency obstetrics case.38
CMC alleges that Dr. Estrada is an independent contractor "for whose
actuations CMC would be a total stranger." CMC maintains that it had no
control or supervision over Dr. Estrada in the exercise of his medical
profession.
The Court had the occasion to determine the relationship between a
hospital and a consultant or visiting physician and the liability of such
hospital for that physician's negligence in Ramos v. Court of Appeals,39 to
wit:
In the first place, hospitals exercise significant control in the
hiring and firing of consultants and in the conduct of their
work within the hospital premises. Doctors who apply for
"consultant" slots, visiting or attending, are required to submit
proof of completion of residency, their educational
qualifications; generally, evidence of accreditation by the
appropriate board (diplomate), evidence of fellowship in most
cases, and references. These requirements are carefully
scrutinized by members of the hospital administration or by a
review committee set up by the hospital who either accept or
25
 reject the application. This is particularly true with respondent
hospital.
After a physician is accepted, either as a visiting or attending
consultant, he is normally required to attend clinico-
pathological conferences, conduct bedside rounds for clerks,
interns and residents, moderate grand rounds and patient
audits and perform other tasks and responsibilities, for the
privilege of being able to maintain a clinic in the hospital,
and/or for the privilege of admitting patients into the hospital.
In addition to these, the physician's performance as a
specialist is generally evaluated by a peer review committee
on the basis of mortality and morbidity statistics, and feedback
from patients, nurses, interns and residents. A consultant
remiss in his duties, or a consultant who regularly falls short of
the minimum standards acceptable to the hospital or its peer
review committee, is normally politely terminated.
In other words, private hospitals, hire, fire and exercise real
control over their attending and visiting "consultant"
staff. While "consultants" are not, technically
employees, a point which respondent hospital asserts
in denying all responsibility for the patient's condition,
the control exercised, the hiring, and the right to
terminate consultants all fulfill the important
hallmarks of an employer-employee relationship, with
the exception of the payment of wages. In assessing
whether such a relationship in fact exists, the control
test is determining. Accordingly, on the basis of the
foregoing, we rule that for the purpose of allocating
responsibility in medical negligence cases, an
employer-employee relationship in effect exists
between hospitals and their attending and visiting
physicians. This being the case, the question now arises as
to whether or not respondent hospital is solidarily liable with
respondent doctors for petitioner's condition.
The basis for holding an employer solidarily responsible for the
negligence of its employee is found in Article 2180 of the Civil
Code which considers a person accountable not only for his
own acts but also for those of others based on the former's
responsibility under a relationship of patria potestas. x x
x40 (Emphasis supplied)
While the Court in Ramos did not expound on the control test, such test
essentially determines whether an employment relationship exists
between a physician and a hospital based on the exercise of control over
the physician as to details. Specifically, the employer (or the hospital)
must have the right to control both the means and the details of the
process by which the employee (or the physician) is to accomplish his element is satisfied if the hospital holds itself out as a provider
task.41 of emergency room care without informing the patient that the
care is provided by independent contractors.
After a thorough examination of the voluminous records of this case, the
Court finds no single evidence pointing to CMC's exercise of control over The element of justifiable reliance on the part of the plaintiff is
Dr. Estrada's treatment and management of Corazon's condition. It is satisfied if the plaintiff relies upon the hospital to provide
undisputed that throughout Corazon's pregnancy, she was under the complete emergency room care, rather than upon a specific
exclusive prenatal care of Dr. Estrada. At the time of Corazon's physician.
admission at CMC and during her delivery, it was Dr. Estrada, assisted by
Dr. Villaflor, who attended to Corazon. There was no showing that CMC
The doctrine of apparent authority essentially involves two factors to
had a part in diagnosing Corazon's condition. While Dr. Estrada enjoyed
determine the liability of an independent-contractor physician.
staff privileges at CMC, such fact alone did not make him an employee of
CMC.42 CMC merely allowed Dr. Estrada to use its facilities43 when
Corazon was about to give birth, which CMC considered an emergency. The first factor focuses on the hospital's manifestations and is sometimes
Considering these circumstances, Dr. Estrada is not an employee of CMC, described as an inquiry whether the hospital acted in a manner which
but an independent contractor. would lead a reasonable person to conclude that the individual who was
alleged to be negligent was an employee or agent of the hospital.47 In
this regard, the hospital need not make express representations
The question now is whether CMC is automatically exempt from liability
to the patient that the treating physician is an employee of the
considering that Dr. Estrada is an independent contractor-physician.
hospital; rather a representation may be general and implied.48
In general, a hospital is not liable for the negligence of an independent
The doctrine of apparent authority is a species of the doctrine of
contractor-physician. There is, however, an exception to this principle.
estoppel. Article 1431 of the Civil Code provides that "[t]hrough
The hospital may be liable if the physician is the "ostensible" agent of
estoppel, an admission or representation is rendered conclusive upon the
the hospital.44 This exception is also known as the "doctrine of apparent
person making it, and cannot be denied or disproved as against the
authority."45 In Gilbert v. Sycamore Municipal Hospital,46 the Illinois
person relying thereon." Estoppel rests on this rule: "Whenever a party
Supreme Court explained the doctrine of apparent authority in this wise:
has, by his own declaration, act, or omission, intentionally and
deliberately led another to believe a particular thing true, and to act
[U]nder the doctrine of apparent authority a hospital can be upon such belief, he cannot, in any litigation arising out of such
held vicariously liable for the negligent acts of a physician declaration, act or omission, be permitted to falsify it."49
providing care at the hospital, regardless of whether the
physician is an independent contractor, unless the patient
In the instant case, CMC impliedly held out Dr. Estrada as a member of
knows, or should have known, that the physician is an
its medical staff. Through CMC's acts, CMC clothed Dr. Estrada with
independent contractor. The elements of the action have been
apparent authority thereby leading the Spouses Nogales to believe that
set out as follows:
Dr. Estrada was an employee or agent of CMC. CMC cannot now
repudiate such authority.
"For a hospital to be liable under the doctrine of apparent
authority, a plaintiff must show that: (1) the hospital, or its
First, CMC granted staff privileges to Dr. Estrada. CMC extended its
agent, acted in a manner that would lead a reasonable person
medical staff and facilities to Dr. Estrada. Upon Dr. Estrada's request for
to conclude that the individual who was alleged to be
Corazon's admission, CMC, through its personnel, readily accommodated
negligent was an employee or agent of the hospital; (2) where
Corazon and updated Dr. Estrada of her condition.
the acts of the agent create the appearance of authority, the
plaintiff must also prove that the hospital had knowledge of
and acquiesced in them; and (3) the plaintiff acted in reliance Second, CMC made Rogelio sign consent forms printed on CMC
upon the conduct of the hospital or its agent, consistent with letterhead. Prior to Corazon's admission and supposed hysterectomy,
CMC asked Rogelio to sign release forms, the contents of which
ordinary care and prudence."
reinforced Rogelio's belief that Dr. Estrada was a member of CMC's
medical staff.50 The Consent on Admission and Agreement explicitly
The element of "holding out" on the part of the hospital does
provides:
not require an express representation by the hospital that the
person alleged to be negligent is an employee. Rather, the
26
 KNOW ALL MEN BY THESE PRESENTS:
I, Rogelio Nogales, of legal age, a resident of 1974 M. H. Del
Pilar St., Malate Mla., being the
father/mother/brother/sister/spouse/relative/ guardian/or
person in custody of Ma. Corazon, and representing his/her
family, of my own volition and free will, do consent and submit
said Ma. Corazon to Dr. Oscar Estrada (hereinafter referred to
as Physician) for cure, treatment, retreatment, or emergency
measures, that the Physician, personally or by and
through the Capitol Medical Center and/or its staff,
may use, adapt, or employ such means, forms or
methods of cure, treatment, retreatment, or
emergency measures as he may see best and most
expedient; that Ma. Corazon and I will comply with any
and all rules, regulations, directions, and instructions
of the Physician, the Capitol Medical Center and/or its
staff; and, that I will not hold liable or responsible and hereby
waive and forever discharge and hold free the Physician, the
Capitol Medical Center and/or its staff, from any and all claims
of whatever kind of nature, arising from directly or indirectly,
or by reason of said cure, treatment, or retreatment, or
emergency measures or intervention of said physician, the
Capitol Medical Center and/or its staff.
x x x x51 (Emphasis supplied)
While the Consent to Operation pertinently reads, thus:
I, ROGELIO NOGALES, x x x, of my own volition and free will,
do consent and submit said CORAZON NOGALES to
Hysterectomy, by the Surgical Staff and Anesthesiologists
of Capitol Medical Center and/or whatever succeeding
operations, treatment, or emergency measures as may be
necessary and most expedient; and, that I will not hold liable
or responsible and hereby waive and forever discharge and
hold free the Surgeon, his assistants, anesthesiologists, the
Capitol Medical Center and/or its staff, from any and all claims
of whatever kind of nature, arising from directly or indirectly,
or by reason of said operation or operations, treatment, or
emergency measures, or intervention of the Surgeon, his
assistants, anesthesiologists, the Capitol Medical Center and/or
its staff.52 (Emphasis supplied)
Without any indication in these consent forms that Dr. Estrada was an
independent contractor-physician, the Spouses Nogales could not have
known that Dr. Estrada was an independent contractor. Significantly, no
one from CMC informed the Spouses Nogales that Dr. Estrada was an
independent contractor. On the contrary, Dr. Atencio, who was then a
member of CMC Board of Directors, testified that Dr. Estrada was part of
CMC's surgical staff.53
Third, Dr. Estrada's referral of Corazon's profuse vaginal bleeding to Dr.
Espinola, who was then the Head of the Obstetrics and Gynecology
Department of CMC, gave the impression that Dr. Estrada as a member
of CMC's medical staff was collaborating with other CMC-employed
specialists in treating Corazon.
The second factor focuses on the patient's reliance. It is sometimes
characterized as an inquiry on whether the plaintiff acted in reliance
upon the conduct of the hospital or its agent, consistent with ordinary
care and prudence.54
The records show that the Spouses Nogales relied upon a perceived
employment relationship with CMC in accepting Dr. Estrada's services.
Rogelio testified that he and his wife specifically chose Dr. Estrada to
handle Corazon's delivery not only because of their friend's
recommendation, but more importantly because of Dr. Estrada's
"connection with a reputable hospital, the [CMC]."55 In other words, Dr.
Estrada's relationship with CMC played a significant role in the Spouses
Nogales' decision in accepting Dr. Estrada's services as the obstetrician-
gynecologist for Corazon's delivery. Moreover, as earlier stated, there is
no showing that before and during Corazon's confinement at CMC, the
Spouses Nogales knew or should have known that Dr. Estrada was not
an employee of CMC.
Further, the Spouses Nogales looked to CMC to provide the best medical
care and support services for Corazon's delivery. The Court notes that
prior to Corazon's fourth pregnancy, she used to give birth inside a clinic.
Considering Corazon's age then, the Spouses Nogales decided to have
their fourth child delivered at CMC, which Rogelio regarded one of the
best hospitals at the time.56 This is precisely because the Spouses
Nogales feared that Corazon might experience complications during her
delivery which would be better addressed and treated in a modern and
big hospital such as CMC. Moreover, Rogelio's consent in Corazon's
hysterectomy to be performed by a different physician, namely Dr.
Espinola, is a clear indication of Rogelio's confidence in CMC's surgical
staff.
CMC's defense that all it did was "to extend to [Corazon] its facilities" is
untenable. The Court cannot close its eyes to the reality that hospitals,
such as CMC, are in the business of treatment. In this regard, the Court
agrees with the observation made by the Court of Appeals of North
Carolina in Diggs v. Novant Health, Inc.,57 to wit:
"The conception that the hospital does not undertake to treat
the patient, does not undertake to act through its doctors and
nurses, but undertakes instead simply to procure them to act
upon their own responsibility, no longer reflects the
fact. Present day hospitals, as their manner of
operation plainly demonstrates, do far more than
furnish facilities for treatment. They regularly employ
on a salary basis a large staff of physicians, nurses and
internes [sic], as well as administrative and manual
workers, and they charge patients for medical care and
treatment, collecting for such services, if necessary, by
legal action. Certainly, the person who avails himself of
'hospital facilities' expects that the hospital will
attempt to cure him, not that its nurses or other
employees will act on their own responsibility." x x x
(Emphasis supplied)
Likewise unconvincing is CMC's argument that petitioners are estopped
from claiming damages based on the Consent on Admission and Consent
to Operation. Both release forms consist of two parts. The first part gave
CMC permission to administer to Corazon any form of recognized medical
treatment which the CMC medical staff deemed advisable. The second
part of the documents, which may properly be described as the releasing
part, releases CMC and its employees "from any and all claims" arising
from or by reason of the treatment and operation.
The documents do not expressly release CMC from liability for injury to
Corazon due to negligence during her treatment or operation. Neither do
the consent forms expressly exempt CMC from liability for Corazon's
death due to negligence during such treatment or operation. Such
release forms, being in the nature of contracts of adhesion, are
construed strictly against hospitals. Besides, a blanket release in favor of
hospitals "from any and all claims," which includes claims due to bad
faith or gross negligence, would be contrary to public policy and thus
void.
Even simple negligence is not subject to blanket release in favor of
establishments like hospitals but may only mitigate liability depending on
the circumstances.58 When a person needing urgent medical attention
rushes to a hospital, he cannot bargain on equal footing with the hospital
on the terms of admission and operation. Such a person is literally at the
mercy of the hospital. There can be no clearer example of a contract of
adhesion than one arising from such a dire situation. Thus, the release
forms of CMC cannot relieve CMC from liability for the negligent medical
treatment of Corazon.
On the Liability of the Other Respondents
Despite this Court's pronouncement in its 9 September 200259 Resolution
that the filing of petitioners' Manifestation confined petitioners' claim
only against CMC, Dr. Espinola, Dr. Lacson, and Dr. Uy, who have filed
their comments, the Court deems it proper to resolve the individual
27
liability of the remaining respondents to put an end finally to this more
than two-decade old controversy.
a) Dr. Ely Villaflor
Petitioners blame Dr. Ely Villaflor for failing to diagnose the cause of
Corazon's bleeding and to suggest the correct remedy to Dr.
Estrada.60 Petitioners assert that it was Dr. Villaflor's duty to correct the
error of Nurse Dumlao in the administration of hemacel.
The Court is not persuaded. Dr. Villaflor admitted administering a lower
dosage of magnesium sulfate. However, this was after informing Dr.
Estrada that Corazon was no longer in convulsion and that her blood
pressure went down to a dangerous level.61 At that moment, Dr. Estrada
instructed Dr. Villaflor to reduce the dosage of magnesium sulfate from
10 to 2.5 grams. Since petitioners did not dispute Dr. Villaflor's
allegation, Dr. Villaflor's defense remains uncontroverted. Dr. Villaflor's
act of administering a lower dosage of magnesium sulfate was not out of
her own volition or was in contravention of Dr. Estrada's order.
b) Dr. Rosa Uy
Dr. Rosa Uy's alleged negligence consisted of her failure (1) to call the
attention of Dr. Estrada on the incorrect dosage of magnesium sulfate
administered by Dr. Villaflor; (2) to take corrective measures; and (3) to
correct Nurse Dumlao's wrong method of hemacel administration.
The Court believes Dr. Uy's claim that as a second year resident
physician then at CMC, she was merely authorized to take the clinical
history and physical examination of Corazon.62 However, that routine
internal examination did not ipso facto make Dr. Uy liable for the errors
committed by Dr. Estrada. Further, petitioners' imputation of negligence
rests on their baseless assumption that Dr. Uy was present at the
delivery room. Nothing shows that Dr. Uy participated in delivering
Corazon's baby. Further, it is unexpected from Dr. Uy, a mere resident
physician at that time, to call the attention of a more experienced
specialist, if ever she was present at the delivery room.
c) Dr. Joel Enriquez
Petitioners fault Dr. Joel Enriquez also for not calling the attention of Dr.
Estrada, Dr. Villaflor, and Nurse Dumlao about their errors.63 Petitioners
insist that Dr. Enriquez should have taken, or at least suggested,
corrective measures to rectify such errors.
The Court is not convinced. Dr. Enriquez is an anesthesiologist whose
field of expertise is definitely not obstetrics and gynecology. As such, Dr.
Enriquez was not expected to correct Dr. Estrada's errors. Besides, there
was no evidence of Dr. Enriquez's knowledge of any error committed by administration of hemacel proximately caused Corazon's death. No
Dr. Estrada and his failure to act upon such observation. evidence linking Corazon's death and the alleged wrongful hemacel
administration was introduced. Therefore, there is no basis to hold Nurse
Dumlao liable for negligence.
d) Dr. Perpetua Lacson
On the Award of Interest on Damages
Petitioners fault Dr. Perpetua Lacson for her purported delay in the
delivery of blood Corazon needed.64 Petitioners claim that Dr. Lacson was
remiss in her duty of supervising the blood bank staff. The award of interest on damages is proper and allowed under Article
2211 of the Civil Code, which states that in crimes and quasi-delicts,
interest as a part of the damages may, in a proper case, be adjudicated
As found by the trial court, there was no unreasonable delay in the
in the discretion of the court.68
delivery of blood from the time of the request until the transfusion to
Corazon. Dr. Lacson competently explained the procedure before blood
could be given to the patient.65 Taking into account the bleeding time, WHEREFORE, the Court PARTLY GRANTS the petition. The Court
clotting time and cross-matching, Dr. Lacson stated that it would take finds respondent Capitol Medical Center vicariously liable for the
approximately 45-60 minutes before blood could be ready for negligence of Dr. Oscar Estrada. The amounts of P105,000 as actual
transfusion.66 Further, no evidence exists that Dr. Lacson neglected her damages andP700,000 as moral damages should each earn legal interest
duties as head of the blood bank. at the rate of six percent (6%) per annum computed from the date of
the judgment of the trial court. The Court affirms the rest of the Decision
dated 6 February 1998 and Resolution dated 21 March 2000 of the Court
e) Dr. Noe Espinola
of Appeals in CA-G.R. CV No. 45641.
Petitioners argue that Dr. Espinola should not have ordered immediate
SO ORDERED.
hysterectomy without determining the underlying cause of Corazon's
bleeding. Dr. Espinola should have first considered the possibility of
cervical injury, and advised a thorough examination of the cervix, instead
of believing outright Dr. Estrada's diagnosis that the cause of bleeding
was uterine atony.
Dr. Espinola's order to do hysterectomy which was based on the
information he received by phone is not negligence. The Court agrees
with the trial court's observation that Dr. Espinola, upon hearing such
information about Corazon's condition, believed in good faith that
hysterectomy was the correct remedy. At any rate, the hysterectomy did
not push through because upon Dr. Espinola's arrival, it was already too
late. At the time, Corazon was practically dead.
f) Nurse J. Dumlao
In Moore v. Guthrie Hospital Inc.,67 the US Court of Appeals, Fourth
Circuit, held that to recover, a patient complaining of injuries allegedly
resulting when the nurse negligently injected medicine to him
intravenously instead of intramuscularly had to show that (1) an
intravenous injection constituted a lack of reasonable and ordinary care;
(2) the nurse injected medicine intravenously; and (3) such injection was
the proximate cause of his injury.
In the present case, there is no evidence of Nurse Dumlao's alleged
failure to follow Dr. Estrada's specific instructions. Even assuming Nurse
Dumlao defied Dr. Estrada's order, there is no showing that side-drip
28
7 may charge professional fee for hospital services rendered in
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 146881 February 5, 2007
COCA COLA BOTTLERS (PHILS.), INC./ERIC MONTINOLA,
Manager, Petitioners,
vs.
DR. DEAN N. CLIMACO, Respondent.
DECISION
AZCUNA, J.:
This is a petition for review on certiorari of the Decision of the Court of
Appeals1 promulgated on July 7, 2000, and its Resolution promulgated
on January 30, 2001, denying petitioner’s motion for reconsideration.
The Court of Appeals ruled that an employer-employee relationship
exists between respondent Dr. Dean N. Climaco and petitioner Coca-Cola
Bottlers Phils., Inc. (Coca-Cola), and that respondent was illegally
dismissed.
Respondent Dr. Dean N. Climaco is a medical doctor who was hired by
petitioner Coca-Cola Bottlers Phils., Inc. by virtue of a Retainer
Agreement that stated:
WHEREAS, the COMPANY desires to engage on a retainer basis the
services of a physician and the said DOCTOR is accepting such
engagement upon terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
agreement hereinafter contained, the parties agree as follows:
1. This Agreement shall only be for a period of one (1) year
beginning January 1, 1988 up to December 31, 1988. The said
term notwithstanding, either party may terminate the contract
upon giving a thirty (30)-day written notice to the other.
2. The compensation to be paid by the company for the
services of the DOCTOR is hereby fixed at PESOS:Three
Thousand Eight Hundred (P3,800.00) per month. The DOCTOR
line with his specialization. All payments in connection with the
Retainer Agreement shall be subject to a withholding tax of
ten percent (10%) to be withheld by the COMPANY under the
Expanded Withholding Tax System. In the event the
withholding tax rate shall be increased or decreased by
appropriate laws, then the rate herein stipulated shall
accordingly be increased or decreased pursuant to such laws.
3. That in consideration of the above mentioned retainer’s fee,
the DOCTOR agrees to perform the duties and obligations
enumerated in the COMPREHENSIVE MEDICAL PLAN, hereto
attached as Annex "A" and made an integral part of this
Retainer Agreement.
4. That the applicable provisions in the Occupational Safety
and Health Standards, Ministry of Labor and Employment shall
be followed.
5. That the DOCTOR shall be directly responsible to the
employee concerned and their dependents for any injury
inflicted on, harm done against or damage caused upon the
employee of the COMPANY or their dependents during the
course of his examination, treatment or consultation, if such
injury, harm or damage was committed through professional
negligence or incompetence or due to the other valid causes
for action.
6. That the DOCTOR shall observe clinic hours at the
COMPANY’S premises from Monday to Saturday of a minimum
of two (2) hours each day or a maximum of TWO (2) hours
each day or treatment from 7:30 a.m. to8:30 a.m.
and 3:00 p.m. to 4:00 p.m., respectively unless such schedule
is otherwise changed by the COMPANY as [the] situation so
warrants, subject to the Labor Code provisions on
Occupational Safety and Health Standards as the COMPANY
may determine. It is understood that the DOCTOR shall stay at
least two (2) hours a day in the COMPANY clinic and that such
two (2) hours be devoted to the workshift with the most
number of employees. It is further understood that the
DOCTOR shall be on call at all times during the other
workshifts to attend to emergency case[s];
7. That no employee-employer relationship shall exist between
the COMPANY and the DOCTOR whilst this contract is in effect,
and in case of its termination, the DOCTOR shall be entitled
only to such retainer fee as may be due him at the time of
termination.2
The Comprehensive Medical Plan,3 which contains the duties and
responsibilities of respondent, adverted to in the Retainer Agreement,
provided:
A. OBJECTIVE
These objectives have been set to give full consideration to [the]
employees’ and dependents’ health:
1. Prompt and adequate treatment of occupational and non-
occupational injuries and diseases.
2. To protect employees from any occupational health hazard
by evaluating health factors related to working conditions.
3. To encourage employees [to] maintain good personal health
by setting up employee orientation and education on health,
hygiene and sanitation, nutrition, physical fitness, first aid
training, accident prevention and personnel safety.
4. To evaluate other matters relating to health such as
absenteeism, leaves and termination.
5. To give family planning motivations.
B. COVERAGE
1. All employees and their dependents are embraced by this
program.
2. The health program shall cover pre-employment and annual
p.e., hygiene and sanitation, immunizations, family planning,
physical fitness and athletic programs and other activities such
as group health education program, safety and first aid
classes, organization of health and safety committees.
3. Periodically, this program will be reviewed and adjusted
based on employees’ needs.
C. ACTIVITIES
1. Annual Physical Examination.
2. Consultations, diagnosis and treatment of occupational and
non-occupational illnesses and injuries.
29
 3. Immunizations necessary for job conditions.
4. Periodic inspections for food services and rest rooms.
5. Conduct health education programs and present education
materials.
6. Coordinate with Safety Committee in developing specific
studies and program to minimize environmental health
hazards.
7. Give family planning motivations.
8. Coordinate with Personnel Department regarding physical
fitness and athletic programs.
9. Visiting and follow-up treatment of Company employees and
their dependents confined in the hospital.
The Retainer Agreement, which began on January 1, 1988, was renewed
annually. The last one expired on December 31, 1993. Despite the non-
renewal of the Retainer Agreement, respondent continued to perform his
functions as company doctor to Coca-Cola until he received a
letter4 dated March 9, 1995 from petitioner company concluding their
retainership agreement effective 30 days from receipt thereof.
It is noted that as early as September 1992, petitioner was already
making inquiries regarding his status with petitioner company. First, he
wrote a letter addressed to Dr. Willie Sy, the Acting President and
Chairperson of the Committee on Membership, Philippine College of
Occupational Medicine. In response, Dr. Sy wrote a letter5 to the
Personnel Officer of Coca-Cola Bottlers Phils., Bacolod City, stating that
respondent should be considered as a regular part-time physician,
having served the company continuously for four (4) years. He likewise
stated that respondent must receive all the benefits and privileges of an
employee under Article 157 (b)6 of the Labor Code.
Petitioner company, however, did not take any action. Hence,
respondent made another inquiry directed to the Assistant Regional
Director, Bacolod City District Office of the Department of Labor and
Employment (DOLE), who referred the inquiry to the Legal Service of the
DOLE, Manila. In his letter7 dated May 18, 1993, Director Dennis P.
Ancheta, Legal Service, DOLE, stated that he believed that an employer-
employee relationship existed between petitioner and respondent based
on the Retainer Agreement and the Comprehensive Medical Plan, and
the application of the "four-fold" test. However, Director Ancheta
emphasized that the existence of employer-employee relationship is a
question of fact. Hence, termination disputes or money claims arising
from employer-employee relations exceeding P5,000 may be filed with
the National Labor Relations Commission (NLRC). He stated that their
opinion is strictly advisory.
An inquiry was likewise addressed to the Social Security System (SSS).
Thereafter, Mr. Romeo R. Tupas, OIC-FID of SSS-Bacolod City, wrote a
letter8 to the Personnel Officer of Coca-Cola Bottlers Phils., Inc.
informing the latter that the legal staff of his office was of the opinion
that the services of respondent partake of the nature of work of a
regular company doctor and that he was, therefore, subject to social
security coverage.
Respondent inquired from the management of petitioner company
whether it was agreeable to recognizing him as a regular employee. The
management refused to do so.
On February 24, 1994, respondent filed a Complaint before the NLRC,
9
Bacolod City, seeking recognition as a regular employee of petitioner
company and prayed for the payment of all benefits of a regular
employee, including 13th Month Pay, Cost of Living Allowance, Holiday
Pay, Service Incentive Leave Pay, and Christmas Bonus. The case was
docketed as RAB Case No. 06-02-10138-94.
While the complaint was pending before the Labor Arbiter, respondent
received a letter dated March 9, 1995 from petitioner company
concluding their retainership agreement effective thirty (30) days from
receipt thereof. This prompted respondent to file a complaint for illegal
dismissal against petitioner company with the NLRC, Bacolod City. The
case was docketed as RAB Case No. 06-04-10177-95.
In a Decision10 dated November 28, 1996, Labor Arbiter Jesus N.
Rodriguez, Jr. found that petitioner company lacked the power of control
over respondent’s performance of his duties, and recognized as valid the
Retainer Agreement between the parties. Thus, the Labor Arbiter
dismissed respondent’s complaint in the first case, RAB Case No. 06-02-
10138-94. The dispositive portion of the Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered
dismissing the instant complaint seeking recognition as a regular
employee.
SO ORDERED.11
In a Decision dated February 24, 1997, Labor Arbiter Benjamin Pelaez
12
dismissed the case for illegal dismissal (RAB Case No. 06-04-10177-95)
in view of the previous finding of Labor Arbiter Jesus N. Rodriguez, Jr. in
RAB Case No. 06-02-10138-94 that complainant therein, Dr. Dean
Climaco, is not an employee of Coca-Cola Bottlers Phils., Inc.
Respondent appealed both decisions to the NLRC, Fourth Division, Cebu
City.
In a Decision13 promulgated on November 28, 1997, the NLRC dismissed
the appeal in both cases for lack of merit. It declared that no employer-
employee relationship existed between petitioner company and
respondent based on the provisions of the Retainer Agreement which
contract governed respondent’s employment.
Respondent’s motion for reconsideration was denied by the NLRC in a
Resolution14 promulgated on August 7, 1998.
Respondent filed a petition for review with the Court of Appeals.
In a Decision promulgated on July 7, 2000, the Court of Appeals ruled
that an employer-employee relationship existed between petitioner
company and respondent after applying the four-fold test: (1) the power
to hire the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the employer’s power to control the employee with
respect to the means and methods by which the work is to be
accomplished.
The Court of Appeals held:
The Retainer Agreement executed by and between the parties, when
read together with the Comprehensive Medical Plan which was made an
integral part of the retainer agreements, coupled with the actual services
rendered by the petitioner, would show that all the elements of the
above test are present.
First, the agreements provide that "the COMPANY desires to engage on a
retainer basis the services of a physician and the said DOCTOR is
accepting such engagement x x x" (Rollo, page 25). This clearly shows
that Coca-Cola exercised its power to hire the services of petitioner.
Secondly, paragraph (2) of the agreements showed that petitioner would
be entitled to a final compensation of Three Thousand Eight Hundred
Pesos per month, which amount was later raised to Seven Thousand Five
Hundred on the latest contract. This would represent the element of
payment of wages.
Thirdly, it was provided in paragraph (1) of the agreements that the
same shall be valid for a period of one year. "The said term
notwithstanding, either party may terminate the contract upon giving a
thirty (30) day written notice to the other." (Rollo, page 25). This
would show that Coca-Cola had the power of dismissing the petitioner,
as it later on did, and this could be done for no particular reason, the
30
sole requirement being the former’s compliance with the 30-day notice
requirement.
Lastly, paragraphs (3) and (6) of the agreements reveal that Coca-Cola
exercised the most important element of all, that is, control, over the
conduct of petitioner in the latter’s performance of his duties as a doctor
for the company.
It was stated in paragraph (3) that the doctor agrees to perform the
duties and obligations enumerated in the Comprehensive Medical Plan
referred to above. In paragraph (6), the fixed and definite hours during
which the petitioner must render service to the company is laid down.
We say that there exists Coca-Cola’s power to control petitioner because
the particular objectives and activities to be observed and accomplished
by the latter are fixed and set under the Comprehensive Medical Plan
which was made an integral part of the retainer agreement. Moreover,
the times for accomplishing these objectives and activities are likewise
controlled and determined by the company. Petitioner is subject to
definite hours of work, and due to this, he performs his duties to Coca-
Cola not at his own pleasure but according to the schedule dictated by
the company.
In addition, petitioner was designated by Coca-Cola to be a member of
its Bacolod Plant’s Safety Committee. The minutes of the meeting of the
said committee dated February 16, 1994 included the name of petitioner,
as plant physician, as among those comprising the committee.
It was averred by Coca-Cola in its comment that they exercised no
control over petitioner for the reason that the latter was not directed as
to the procedure and manner of performing his assigned tasks. It went
as far as saying that "petitioner was not told how to immunize, inject,
treat or diagnose the employees of the respondent (Rollo, page 228).
We believe that if the "control test" would be interpreted this strictly, it
would result in an absurd and ridiculous situation wherein we could
declare that an entity exercises control over another’s activities only in
instances where the latter is directed by the former on each and every
stage of performance of the particular activity. Anything less than that
would be tantamount to no control at all.
To our minds, it is sufficient if the task or activity, as well as the means
of accomplishing it, is dictated, as in this case where the objectives and
activities were laid out, and the specific time for performing them was
fixed by the controlling party.15
Moreover, the Court of Appeals declared that respondent should be
classified as a regular employee having rendered six years of service as
plant physician by virtue of several renewed retainer agreements. It
underscored the provision in Article 28016 of the Labor Code stating 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." Further, it held
that the termination of respondent’s services without any just or
authorized cause constituted illegal dismissal.
In addition, the Court of Appeals found that respondent’s dismissal was
an act oppressive to labor and was effected in a wanton, oppressive or
malevolent manner which entitled respondent to moral and exemplary
damages.
The dispositive portion of the Decision reads:
WHEREFORE, in view of the foregoing, the Decision of the National
Labor Relations Commission dated November 28, 1997 and its Resolution
dated August 7, 1998 are found to have been issued with grave abuse of
discretion in applying the law to the established facts, and are hereby
REVERSED and SET ASIDE, and private respondent Coca-Cola Bottlers,
Phils.. Inc. is hereby ordered to:
1. Reinstate the petitioner with full backwages without loss of
seniority rights from the time his compensation was withheld
up to the time he is actually reinstated; however, if
reinstatement is no longer possible, to pay the petitioner
separation pay equivalent to one (1) month’s salary for every
year of service rendered, computed at the rate of his salary at
the time he was dismissed, plus backwages.
2. Pay petitioner moral damages in the amount of P50,000.00.
3. Pay petitioner exemplary damages in the amount
of P50,000.00.
4. Give to petitioner all other benefits to which a regular
employee of Coca-Cola is entitled from the time petitioner
became a regular employee (one year from effectivity date of
employment) until the time of actual payment.
SO ORDERED.17
Petitioner company filed a motion for reconsideration of the Decision of
the Court of Appeals.
In a Resolution promulgated on January 30, 2001, the Court of Appeals
stated that petitioner company noted that its Decision failed to mention
whether respondent was a full-time or part-time regular employee. It
also questioned how the benefits under their Collective Bargaining
Agreement which the Court awarded to respondent could be given to
him considering that such benefits were given only to regular employees
who render a full day’s work of not less that eight hours. It was admitted
that respondent is only required to work for two hours per day.
The Court of Appeals clarified that respondent was a "regular part-time
employee and should be accorded all the proportionate benefits due to
this category of employees of [petitioner] Corporation under the CBA." It
sustained its decision on all other matters sought to be reconsidered.
Hence, this petition filed by Coca-Cola Bottlers Phils., Inc.
The issues are:
1. THAT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION
OF LAW, IN REVERSING THE FINDINGS OF THE LABOR
ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, CONTRARY TO THE DECISIONS OF THE
HONORABLE SUPREME COURT ON THE MATTER.
2. THAT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION
OF LAW, IN REVERSING THE FINDINGS OF THE LABOR
ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND HOLDING INSTEAD THAT THE WORK OF
A PHYSICIAN IS NECESSARY AND DESIRABLE TO THE
BUSINESS OF SOFTDRINKS MANUFACTURING, CONTRARY TO
THE RULINGS OF THE SUPREME COURT IN ANALOGOUS
CASES.
3. THAT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION
OF LAW, IN REVERSING THE FINDINGS OF THE LABOR
ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND HOLDING INSTEAD THAT THE
PETITIONERS EXERCISED CONTROL OVER THE WORK OF
THE RESPONDENT.
4. THAT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION
OF LAW, IN REVERSING THE FINDINGS OF THE LABOR
ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND FINDING THAT THERE IS EMPLOYER-
EMPLOYEE RELATIONSHIP PURSUANT TO ARTICLE 280 OF
THE LABOR CODE.
31
 5. THAT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION
OF LAW, IN REVERSING THE FINDINGS OF THE LABOR
ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND FINDING THAT THERE EXISTED ILLEGAL
DISMISSAL WHEN THE EMPLOYENT OF THE RESPONDENT
WAS TERMINATED WITHOUT JUST CAUSE.
6. THAT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION
OF LAW, IN REVERSING THE FINDINGS OF THE LABOR
ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND FINDING THAT THE RESPONDENT IS A
REGULAR PART TIME EMPLOYEE WHO IS ENTITLED TO
PROPORTIONATE BENEFITS AS A REGULAR PART TIME
EMPLOYEE ACCORDING TO THE PETITIONERS’ CBA.
7. THAT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION
OF LAW, IN REVERSING THE FINDINGS OF THE LABOR
ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND FINDING THAT THE RESPONDENT IS
ENTITLED TO MORAL AND EXEMPLARY DAMAGES.
The main issue in this case is whether or not there exists an employer-
employee relationship between the parties. The resolution of the main
issue will determine whether the termination of respondent’s
employment is illegal.
The Court, in determining the existence of an employer-employee
relationship, has invariably adhered to the four-fold test: (1) the
selection and engagement of the employee; (2) the payment of wages;
(3) the power of dismissal; and (4) the power to control the employee’s
conduct, or the so-called "control test," considered to be the most
important element.18
The Court agrees with the finding of the Labor Arbiter and the NLRC that
the circumstances of this case show that no employer-employee
relationship exists between the parties. The Labor Arbiter and the NLRC
correctly found that petitioner company lacked the power of control over
the performance by respondent of his duties. The Labor Arbiter reasoned
that the Comprehensive Medical Plan, which contains the respondent’s
objectives, duties and obligations, does not tell respondent "how to
conduct his physical examination, how to immunize, or how to diagnose
and treat his patients, employees of [petitioner] company, in each case."
He likened this case to that of Neri v. National Labor Relations
Commission,19 which held:
In the case of petitioner Neri, it is admitted that FEBTC issued a job notice. Hence, petitioner company did not wield the sole power of
description which detailed her functions as a radio/telex operator. dismissal or termination.
However, a cursory reading of the job description shows that what was
sought to be controlled by FEBTC was actually the end result of the task,
The Court agrees with the Labor Arbiter and the NLRC that there is
e.g., that the daily incoming and outgoing telegraphic transfer of funds
nothing wrong with the employment of respondent as a retained
received and relayed by her, respectively, tallies with that of the register.
physician of petitioner company and upholds the validity of the
The guidelines were laid down merely to ensure that the desired end
Retainership Agreement which clearly stated that no employer-employee
result was achieved. It did not, however, tell Neri how the radio/telex
relationship existed between the parties. The Agreement also stated that
machine should be operated.
it was only for a period of 1 year beginning January 1, 1988 to
December 31, 1998, but it was renewed on a yearly basis.
In effect, the Labor Arbiter held that petitioner company, through the
Comprehensive Medical Plan, provided guidelines merely to ensure that
Considering that there is no employer-employee relationship between
the end result was achieved, but did not control the means and methods
the parties, the termination of the Retainership Agreement, which is in
by which respondent performed his assigned tasks.
accordance with the provisions of the Agreement, does not constitute
illegal dismissal of respondent. Consequently, there is no basis for the
The NLRC affirmed the findings of the Labor Arbiter and stated that it is moral and exemplary damages granted by the Court of Appeals to
precisely because the company lacks the power of control that the respondent due to his alleged illegal dismissal.
contract provides that respondent shall be directly responsible to the
employee concerned and their dependents for any injury, harm or
WHEREFORE, the petition is GRANTED and the Decision and Resolution
damage caused through professional negligence, incompetence or other
of the Court of Appeals are REVERSED and SET ASIDE. The Decision and
valid causes of action.
Resolution dated November 28, 1997 and August 7, 1998, respectively,
of the National Labor Relations Commission are REINSTATED.
The Labor Arbiter also correctly found that the provision in the Retainer
Agreement that respondent was on call during emergency cases did not
No costs.
make him a regular employee. He explained, thus:
SO ORDERED.
Likewise, the allegation of complainant that since he is on call at anytime
of the day and night makes him a regular employee is off-tangent.
Complainant does not dispute the fact that outside of the two (2) hours
that he is required to be at respondent company’s premises, he is not at
all further required to just sit around in the premises and wait for an
emergency to occur so as to enable him from using such hours for his
own benefit and advantage. In fact, complainant maintains his own
private clinic attending to his private practice in the city, where he
services his patients, bills them accordingly -- and if it is an employee of
respondent company who is attended to by him for special treatment
that needs hospitalization or operation, this is subject to a special billing.
More often than not, an employee is required to stay in the employer’s
workplace or proximately close thereto that he cannot utilize his time
effectively and gainfully for his own purpose. Such is not the prevailing
situation here.1awphi1.net
In addition, the Court finds that the schedule of work and the
requirement to be on call for emergency cases do not amount to such
control, but are necessary incidents to the Retainership Agreement.
The Court also notes that the Retainership Agreement granted to both
parties the power to terminate their relationship upon giving a 30-day
32
8 As a Licensed Resident Physician employed in Calamba
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 176484 November 25, 2008
CALAMBA MEDICAL CENTER, INC., petitioner
vs.
NATIONAL LABOR RELATIONS COMMISSION, RONALDO
LANZANAS AND MERCEDITHA*LANZANAS, respondents.
DECISION
CARPIO MORALES, J.:
The Calamba Medical Center (petitioner), a privately-owned hospital,
engaged the services of medical doctors-spouses Ronaldo Lanzanas (Dr.
Lanzanas) and Merceditha Lanzanas (Dr. Merceditha) in March 1992 and
August 1995, respectively, as part of its team of resident physicians.
Reporting at the hospital twice-a-week on twenty-four-hour shifts,
respondents were paid a monthly "retainer" of P4,800.00 each.1 It
appears that resident physicians were also given a percentage share out
of fees charged for out-patient treatments, operating room assistance
and discharge billings, in addition to their fixed monthly retainer.2
The work schedules of the members of the team of resident physicians
were fixed by petitioner's medical director Dr. Raul Desipeda (Dr.
Desipeda). And they were issued identification cards3 by petitioner and
were enrolled in the Social Security System (SSS).4 Income taxes were
withheld from them.5
On March 7, 1998, Dr. Meluz Trinidad (Dr. Trinidad), also a resident
physician at the hospital, inadvertently overheard a telephone
conversation of respondent Dr. Lanzanas with a fellow employee,
Diosdado Miscala, through an extension telephone line. Apparently, Dr.
Lanzanas and Miscala were discussing the low "census" or admission of
patients to the hospital.6
Dr. Desipeda whose attention was called to the above-said telephone
conversation issued to Dr. Lanzanas a Memorandum of March 7, 1998
reading:
Medical Center since several years ago, the hospital
management has committed upon you utmost confidence in
the performance of duties pursuant thereto. This is the reason
why you were awarded the privilege to practice in the hospital
and were entrusted hospital functions to serve the interest of
both the hospital and our patients using your capability for
independent judgment.
Very recently though and unfortunately, you have
committed acts inimical to the interest of the hospital, the
details of which are contained in the hereto attached affidavit
of witness.
You are therefore given 24 hours to explain why no
disciplinary action should be taken against you.
Pending investigation of your case, you are hereby
placed under 30-days [sic] preventive suspension
effective upon receipt hereof.7 (Emphasis, italics and
underscoring supplied)
Inexplicably, petitioner did not give respondent Dr. Merceditha, who was
not involved in the said incident, any work schedule after sending her
husband Dr. Lanzanas the memorandum,8 nor inform her the reason
therefor, albeit she was later informed by the Human Resource
Department (HRD) officer that that was part of petitioner's cost-cutting
measures.9
Responding to the memorandum, Dr. Lanzanas, by letter of March 9,
1998,10 admitted that he spoke with Miscala over the phone but that
their conversation was taken out of context by Dr. Trinidad.
On March 14, 1998,11 the rank-and-file employees union of petitioner
went on strike due to unresolved grievances over terms and conditions
of employment.12
On March 20, 1998, Dr. Lanzanas filed a complaint for illegal
suspension13 before the National Labor Relations Commission (NLRC)-
Regional Arbitration Board (RAB) IV. Dr. Merceditha subsequently filed a
complaint for illegal dismissal.14
In the meantime, then Sec. Cresenciano Trajano of the Department of
Labor and Employment (DOLE) certified the labor dispute to the NLRC
for compulsory arbitration and issued on April 21, 1998 return-to-work
Order to the striking union officers and employees of petitioner pending
resolution of the labor dispute.15
In a memorandum16 of April 22, 1998, Dr. Desipeda echoed the April 22,
1998 order of the Secretary of Labor directing all union officers and
members to return-to-work "on or April 23, 1998, except those
employees that were already terminated or are serving disciplinary
actions." Dr. Desipeda thus ordered the officers and members of the
union to "report for work as soon as possible" to the hospital's personnel
officer and administrator for "work scheduling, assignments and/or re-
assignments."
Petitioner later sent Dr. Lanzanas a notice of termination which he
received on April 25, 1998, indicating as grounds therefor his failure to
report back to work despite the DOLE order and his supposed role in the
striking union, thus:
On April 23, 1998, you still did not report for work despite
memorandum issued by the CMC Medical Director
implementing the Labor Secretary's ORDER. The same is true
on April 24, 1998 and April 25, 1998,--you still did not report
for work [sic].
You are likewise aware that you were observed (re: signatories
[sic] to the Saligang Batas of BMCMC-UWP) to be unlawfully
participating as member in the rank-and-file union's
concerted activities despite knowledge that your position in the
hospital is managerial in nature (Nurses, Orderlies, and staff of
the Emergency Room carry out your orders using your
independent judgment) which participation is expressly
prohibited by the New Labor Code and which prohibition was
sustained by the Med-Arbiter's ORDER dated February 24,
1998. (Emphasis and italics in the original; underscoring partly
in the original and partly supplied)
For these reasons as grounds for termination, you are
hereby terminated for cause from employment
effective today, April 25, 1998, without prejudice to
further action for revocation of your license before the
Philippine [sic] Regulations [sic] Commission.17 (Emphasis and
underscoring supplied)
Dr. Lanzanas thus amended his original complaint to include illegal
dismissal.18 His and Dr. Merceditha's complaints were consolidated and
docketed as NLRC CASE NO. RAB-IV-3-9879-98-L.
By Decision19 of March 23, 1999, Labor Arbiter Antonio R. Macam
dismissed the spouses' complaints for want of jurisdiction upon a finding
that there was no employer-employee relationship between the parties,
the fourth requisite or the "control test" in the determination of an
employment bond being absent.
33
On appeal, the NLRC, by Decision20 of May 3, 2002, reversed the Labor
Arbiter's findings, disposing as follows:
WHEREFORE, the assailed decision is set aside. The
respondents are ordered to pay the complainants their full
backwages; separation pay of one month salary for every year
of service in lieu of reinstatement; moral damages
of P500,000.00 each; exemplary damages ofP250,000.00 each
plus ten percent (10%) of the total award as attorney's fees.
SO ORDERED.21
Petitioner's motion for reconsideration having been denied, it brought
the case to the Court of Appeals on certiorari.
The appellate court, by June 30, 2004 Decision,22 initially granted
petitioner's petition and set aside the NLRC ruling. However, upon a
subsequent motion for reconsideration filed by respondents, itreinstated
the NLRC decision in an Amended Decision23 dated September 26, 2006
but tempered the award to each of the spouses of moral and exemplary
damages to P100,000.00 and P50,000.00, respectively and omitted the
award of attorney's fees.
In finding the existence of an employer-employee relationship between
the parties, the appellate court held:
x x x. While it may be true that the respondents are given the
discretion to decide on how to treat the petitioner's patients,
the petitioner has not denied nor explained why its Medical
Director still has the direct supervision and control over
the respondents. The fact is the petitioner's Medical Director
still has to approve the schedule of duties of the
respondents. The respondents stressed that the petitioner's
Medical Director also issuesinstructions or orders to the
respondents relating to the means and methods of
performing their duties, i.e. admission of patients, manner
of characterizing cases, treatment of cases, etc., and may
even overrule, review or revise the decisions of the
resident physicians. This was not controverted by the
petitioner. The foregoing factors taken together are sufficient
to constitute the fourth element, i.e. control test, hence, the
existence of the employer-employee relationship. In denying
that it had control over the respondents, the petitioner alleged
that the respondents were free to put up their own clinics or to
accept other retainership agreement with the other hospitals.
But, the petitioner failed to substantiate the allegation with
substantial evidence. (Emphasis and underscoring supplied)24
The appellate court thus declared that respondents were illegally
dismissed.
x x x. The petitioner's ground for dismissing respondent
Ronaldo Lanzanas was based on his alleged participation in
union activities, specifically in joining the strike and failing to
observe the return-to-work order issued by the Secretary of
Labor. Yet, the petitioner did not adduce any piece of evidence
to show that respondent Ronaldo indeed participated in the
strike. x x x.
In the case of respondent Merceditha Lanzanas, the
petitioner's explanation that "her marriage to complainant
Ronaldo has given rise to the presumption that her
sympat[hies] are likewise with her husband" as a ground for
her dismissal is unacceptable. Such is not one of the grounds
to justify the termination of her employment.25 (Underscoring
supplied)
The fallo of the appellate court's decision reads:
WHEREFORE, the instant Motion for
Reconsideration is GRANTED, and the Court's decision dated
June 30, 2004, is SET ASIDE. In lieu thereof, a new judgment
is entered, as follows:
WHEREFORE, the petition is DISMISSED. The
assailed decision dated May 3, 2002 and order dated
September 24, 2002 of the NLRC in NLRC NCR CA
No. 019823-99 are AFFIRMED with the
MODIFICATION that the moral and exemplary
damages are reduced to P100,000.00 each
and P50,000.00 each, respectively.
SO ORDERED.26 (Emphasis and italics in the original;
underscoring supplied)
Preliminarily, the present petition calls for a determination of whether
there exists an employer-employee relationship27 between petitioner and
the spouses-respondents.
Denying the existence of such relationship, petitioner argues that the
appellate court, as well as the NLRC, overlooked its twice-a-week
reporting arrangement with respondents who are free to practice their
profession elsewhere the rest of the week. And it invites attention to the
uncontroverted allegation that respondents, aside from their monthly
retainers, were entitled to one-half of all suturing, admitting,
consultation, medico-legal and operating room assistance fees.28 These
circumstances, it stresses, are clear badges of the absence of any
employment relationship between them.
This Court is unimpressed.
Under the "control test," an employment relationship exists between a
physician and a hospital if the hospital controls both the means and the
details of the process by which the physician is to accomplish his task.29
Where a person who works for another does so more or less at his own
pleasure and is not subject to definite hours or conditions of work, and is
compensated according to the result of his efforts and not the amount
thereof, the element of control is absent.30
As priorly stated, private respondents maintained specific work-
schedules, as determined by petitioner through its medical director,
which consisted of 24-hour shifts totaling forty-eight hours each week
and which were strictly to be observed under pain of administrative
sanctions.
That petitioner exercised control over respondents gains light from the
undisputed fact that in the emergency room, the operating room, or any
department or ward for that matter, respondents' work is monitored
through its nursing supervisors, charge nurses and orderlies. Without the
approval or consent of petitioner or its medical director, no operations
can be undertaken in those areas. For control test to apply, it is not
essential for the employer to actually supervise the performance of
duties of the employee, it being enough that it has the right to wield the
power.31
With respect to respondents' sharing in some hospital fees, this scheme
does not sever the employment tie between them and petitioner as this
merely mirrors additional form or another form of compensation or
incentive similar to what commission-based employees receive as
contemplated in Article 97 (f) of the Labor Code, thus:
"Wage" paid to any employee shall mean the remuneration or
earning, however designated, capable of being expressed in
terms of money, whether fixed or ascertained on a time,
task, piece, or commission basis, or other method of
calculating the same, which is payable by an employer to
an employee under a written or unwritten contract of
employment for work done or to be done, or for services
rendered or to be rendered and includes the fair and
reasonable value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily furnished by the
employer to the employee. x x x (Emphasis and underscoring
supplied),
34
Respondents were in fact made subject to petitioner-hospital's Code of
Ethics,32 the provisions of which cover administrative and disciplinary
measures on negligence of duties, personnel conduct and behavior, and
offenses against persons, property and the hospital's interest.
More importantly, petitioner itself provided incontrovertible proof of the
employment status of respondents, namely, the identification cards it
issued them, the payslips33 and BIR W-2 (now 2316) Forms which reflect
their status as employees, and the classification as "salary" of their
remuneration. Moreover, it enrolled respondents in the SSS and
Medicare (Philhealth) program. It bears noting at this juncture that
mandatory coverage under the SSS Law34 is premised on the existence
of an employer-employee relationship,35 except in cases of compulsory
coverage of the self-employed. It would be preposterous for an employer
to report certain persons as employees and pay their SSS premiums as
well as their wages if they are not its employees.36
And if respondents were not petitioner's employees, how does it account
for its issuance of the earlier-quoted March 7, 1998 memorandum
explicitly stating that respondent is "employed" in it and of the
subsequent termination letter indicating respondent Lanzanas'
employment status.
Finally, under Section 15, Rule X of Book III of the Implementing Rules
of the Labor Code, an employer-employee relationship exists between
the resident physicians and the training hospitals, unless there is a
training agreement between them, and the training program is duly
accredited or approved by the appropriate government agency. In
respondents' case, they were not undergoing any specialization training.
They were considered non-training general practitioners,37 assigned at
the emergency rooms and ward sections.
Turning now to the issue of dismissal, the Court upholds the appellate
court's conclusion that private respondents were illegally dismissed.
Dr. Lanzanas was neither a managerial nor supervisory employee but
part of the rank-and-file. This is the import of the Secretary of Labor's
Resolution of May 22, 1998 in OS A-05-15-98 which reads:
xxxx
In the motion to dismiss it filed before the Med-Arbiter, the
employer (CMC) alleged that 24 members of petitioner are
supervisors, namely x x x Rolando Lanzonas [sic] x x x.
A close scrutiny of the job descriptions of the alleged
supervisors narrated by the employer only proves that except
for the contention that these employees allegedly supervise,
they do not however recommend any managerial action. At
most, their job is merely routinary in nature and consequently,
they cannot be considered supervisory employees.
They are not therefore barred from membership in the
union of rank[-]and[-]file, which the petitioner [the union]
is seeking to represent in the instant case.38 (Emphasis and
underscoring supplied)
xxxx
Admittedly, Dr. Lanzanas was a union member in the hospital, which is
considered indispensable to the national interest. In labor disputes
adversely affecting the continued operation of a hospital, Article 263(g)
of the Labor Code provides:
ART. 263. STRIKES, PICKETING, AND LOCKOUTS.–
xxxx
(g) x x x x
x x x x. In labor disputes adversely affecting the
continued operation of such hospitals, clinics or
medical institutions, it shall be the duty of the striking
union or locking-out employer to provide and maintain an
effective skeletal workforce of medical and other health
personnel, whose movement and services shall be
unhampered and unrestricted, as are necessary to insure the
proper and adequate protection of the life and health of its
patients, most especially emergency cases, for the duration of
the strike or lockout. In such cases, the Secretary of Labor and
Employment is mandated to immediately assume, within
twenty-four hours from knowledge of the occurrence of such
strike or lockout, jurisdiction over the same or certify to the
Commission for compulsory arbitration. For this purpose,
the contending parties are strictly enjoined to comply
with such orders, prohibitions and/or injunctions as
are issued by the Secretary of Labor and Employment
or the Commission, under pain of immediate
disciplinary action, including dismissal or loss of
employment status or payment by the locking-out
employer of backwages, damages and other
affirmative relief, even criminal prosecution against
either or both of them.
x x x x (Emphasis and underscoring supplied)
An assumption or certification order of the DOLE Secretary automatically
results in a return-to-work of all striking workers, whether a
corresponding return-to-work order had been issued.39 The DOLE
Secretary in fact issued a return-to-work Order, failing to comply with
which is punishable by dismissal or loss of employment status.40
Participation in a strike and intransigence to a return-to-work
order must, however, be duly proved in order to justify immediate
dismissal in a "national interest" case. As the appellate court as well as
the NLRC observed, however, there is nothing in the records that would
bear out Dr. Lanzanas' actual participation in the strike. And the medical
director's Memorandum41 of April 22, 1998 contains nothing more than a
general directive to all union officers and members to return-to-
work. Mere membership in a labor union does not ipso facto mean
participation in a strike.
Dr. Lanzanas' claim that, after his 30-day preventive suspension ended
on or before April 9, 1998, he was never given any work schedule42 was
not refuted by petitioner. Petitioner in fact never released any findings of
its supposed investigation into Dr. Lanzanas' alleged "inimical acts."
Petitioner thus failed to observe the two requirements,before dismissal
can be effected ─ notice and hearing ─ which constitute essential
elements of the statutory process; the first to apprise the employee of
the particular acts or omissions for which his dismissal is sought, and the
second to inform the employee of the employer's decision to dismiss
him.43 Non-observance of these requirements runs afoul of the
procedural mandate.44
The termination notice sent to and received by Dr. Lanzanas on April 25,
1998 was the first and only time that he was apprised of the reason for
his dismissal. He was not afforded, however, even the slightest
opportunity to explain his side. His was a "termination upon receipt"
situation. While he was priorly made to explain on his telephone
conversation with Miscala,45 he was not with respect to his supposed
participation in the strike and failure to heed the return-to-work order.
As for the case of Dr. Merceditha, her dismissal was worse, it having
been effected without any just or authorized cause and without
observance of due process. In fact, petitioner never proferred any valid
cause for her dismissal except its view that "her marriage to [Dr.
Lanzanas] has given rise to the presumption that her sympath[y] [is]
with her husband; [and that when [Dr. Lanzanas] declared that he was
going to boycott the scheduling of their workload by the medical doctor,
he was presumed to be speaking for himself [and] for his wife
Merceditha."46
35
Petitioner's contention that Dr. Merceditha was a member of the union or
was a participant in the strike remained just that. Its termination of her
employment on the basis of her conjugal relationship is not analogous to
any of the causes enumerated in Article 28247 of the Labor Code. Mere
suspicion or belief, no matter how strong, cannot substitute for factual
findings carefully established through orderly procedure.48
was not a Board action.51 (Emphasis and underscoring
supplied)
The circulation of such list containing names of alleged union members
intended to prevent employment of workers for union activities similarly
constitutes unfair labor practice, thereby giving a right of action for
damages by the employees prejudiced.52

The Court even notes that after the proceedings at the NLRC, petitioner A word on the appellate court's deletion of the award of attorney's fees.
never even mentioned Dr. Merceditha's case. There is thus no gainsaying There being no basis advanced in deleting it, as exemplary damages
that her dismissal was both substantively and procedurally infirm. were correctly awarded,53 the award of attorney's fees should be
reinstated.
Adding insult to injury was the circulation by petitioner of a "watchlist" or
"watch out list"49 including therein the names of respondents. Consider WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP No.
the following portions of Dr. Merceditha's Memorandum of Appeal: 75871 is AFFIRMED withMODIFICATION in that the award by the
National Labor Relations Commission of 10% of the total judgment
award as attorney's fees is reinstated. In all other aspects, the decision
3. Moreover, to top it all, respondents have circulated a so
of the appellate court is affirmed.
called "Watch List" to other hospitals, one of which [was]
procured from Foothills Hospital in Sto. Tomas, Batangas
[that] contains her name. The object of the said list is SO ORDERED.
precisely to harass Complainant and malign her good name
and reputation. This is not only unprofessional, but runs smack
of oppression as CMC is trying permanently deprived [sic]
Complainant of her livelihood by ensuring that she is barred
from practicing in other hospitals.

4. Other co-professionals and brothers in the profession are

fully aware of these "watch out" lists and as such, her
reputation was not only besmirched, but was damaged, and
she suffered social humiliation as it is of public knowledge that
she was dismissed from work. Complainant came from a
reputable and respected family, her father being a retired full
Colonel in the Army, Col. Romeo A. Vente, and her brothers
and sisters are all professionals, her brothers, Arnold and
Romeo Jr., being engineers. The Complainant has a family
protection [sic] to protect. She likewise has a professional
reputation to protect, being a licensed physician. Both her
personal and professional reputation were damaged as a result
of the unlawful acts of the respondents.50

While petitioner does not deny the existence of such list, it pointed to
the lack of any board action on its part to initiate such listing and to
circulate the same, viz:

20. x x x. The alleged watchlist or "watch out list," as termed

by complainants, were merely lists obtained by one Dr.
Ernesto Naval of PAMANA Hospital. Said list was given by a
stockholder of respondent who was at the same time a
stockholder of PAMAN[A] Hospital. The giving of the list
36
9 In finding petitioners to be regular employees of Shangri-la, the Arbiter
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 178827 March 4, 2009
JEROMIE D. ESCASINAS and EVAN RIGOR SINGCO, Petitioners,
vs.
SHANGRI-LA'S MACTAN ISLAND RESORT and DR. JESSICA J.R.
PEPITO, Respondents.
DECISION
CARPIO MORALES, J.:
Registered nurses Jeromie D. Escasinas and Evan Rigor Singco
(petitioners) were engaged in 1999 and 1996, respectively, by Dr.
Jessica Joyce R. Pepito (respondent doctor) to work in her clinic at
respondent Shangri-la’s Mactan Island Resort (Shangri-la) in Cebu of
which she was a retained physician.
In late 2002, petitioners filed with the National Labor Relations
Commission (NLRC) Regional Arbitration Branch No. VII (NLRC-RAB No.
VII) a complaint1 for regularization, underpayment of wages, non-
payment of holiday pay, night shift differential and 13th month pay
differential against respondents, claiming that they are regular
employees of Shangri-la. The case was docketed as RAB Case No. 07-11-
2089-02.
Shangri-la claimed, however, that petitioners were not its employees but
of respondent doctor whom it retained via Memorandum of Agreement
(MOA)2 pursuant to Article 157 of the Labor Code, as amended.
Respondent doctor for her part claimed that petitioners were already
working for the previous retained physicians of Shangri-la before she
was retained by Shangri-la; and that she maintained petitioners’ services
upon their request.
By Decision of May 6, 2003, Labor Arbiter Ernesto F. Carreon declared
3 Petitioners thereupon brought the case to the Court of Appeals which, by
petitioners to be regular employees of Shangri-la. The Arbiter thus
ordered Shangri-la to grant them the wages and benefits due them as
regular employees from the time their services were engaged.
respondent doctor and since Shangri-la is not principally engaged in the
noted that they usually perform work which is necessary and desirable to business of providing medical or healthcare services, petitioners could
Shangri-la’s business; that they observe clinic hours and render services not be regarded as regular employees of Shangri-la.
only to Shangri-la’s guests and employees; that payment for their
salaries were recommended to Shangri-la’s Human Resource Department
Petitioners’ motion for reconsideration having been denied by
(HRD); that respondent doctor was Shangri-la’s "in-house" physician,
Resolution6 of July 10, 2007, they interposed the present recourse.
hence, also an employee; and that the MOA between Shangri-la and
respondent doctor was an "insidious mechanism in order to circumvent
[the doctor’s] tenurial security and that of the employees under her." Petitioners insist that under Article 157 of the Labor Code, Shangri-la is
required to hire a full-time registered nurse, apart from a physician,
hence, their engagement should be deemed as regular employment, the
Shangri-la and respondent doctor appealed to the NLRC. Petitioners
provisions of the MOA notwithstanding; and that the MOA is contrary to
appealed too, but only with respect to the non-award to them of some of
public policy as it circumvents tenurial security and, therefore, should be
the benefits they were claiming.
struck down as being void ab initio. At most, they argue, the MOA is a
mere job contract.
By Decision4 dated March 31, 2005, the NLRC granted Shangri-la’s and
respondent doctor’s appeal and dismissed petitioners’ complaint for lack
And petitioners maintain that respondent doctor is a labor-only
of merit, it finding that no employer-employee relationship exists
contractor for she has no license or business permit and no business
between petitioner and Shangri-la. In so deciding, the NLRC held that
name registration, which is contrary to the requirements under Sec. 19
the Arbiter erred in interpreting Article 157 in relation to Article 280 of
and 20 of the Implementing Rules and Regulations of the Labor Code on
the Labor Code, as what is required under Article 157 is that the
sub-contracting.
employer should provide the services of medical personnel to its
employees, but nowhere in said article is a provision that nurses are
required to be employed; that contrary to the finding of the Arbiter, even Petitioners add that respondent doctor cannot be a legitimate
if Article 280 states that if a worker performs work usually necessary or independent contractor, lacking as she does in substantial capital, the
desirable in the business of the employer, he cannot be automatically clinic having been set-up and already operational when she took over as
deemed a regular employee; and that the MOA amply shows that retained physician; that respondent doctor has no control over how the
respondent doctor was in fact engaged by Shangri-la on a retainer basis, clinic is being run, as shown by the different orders issued by officers of
under which she could hire her own nurses and other clinic personnel. Shangri-la forbidding her from receiving cash payments and several
purchase orders for medicines and supplies which were coursed thru
Shangri-la’s Purchasing Manager, circumstances indubitably showing that
Brushing aside petitioners’ contention that since their application for
she is not an independent contractor but a mere agent of Shangri-la.
employment was addressed to Shangri-la, it was really Shangri-la which
hired them and not respondent doctor, the NLRC noted that the
applications for employment were made by persons who are not parties In its Comment,7 Shangri-la questions the Special Powers of Attorneys
to the case and were not shown to have been actually hired by Shangri- (SPAs) appended to the petition for being inadequate. On the merits, it
la. prays for the disallowance of the petition, contending that it raises
factual issues, such as the validity of the MOA, which were never raised
during the proceedings before the Arbiter, albeit passed upon by him in
On the issue of payment of wages, the NLRC held that the fact that, for
his Decision; that Article 157 of the Labor Code does not make it
some months, payment of petitioners’ wages were recommended by
mandatory for a covered establishment to employ health personnel; that
Shangri-la’s HRD did not prove that it was Shangri-la which pays their
the services of nurses is not germane nor indispensable to its operations;
wages. It thus credited respondent doctor’s explanation that the
and that respondent doctor is a legitimate individual independent
recommendations for payment were based on the billings she prepared
contractor who has the power to hire, fire and supervise the work of the
for salaries of additional nurses during Shangri-la’s peak months of
nurses under her.
operation, in accordance with the retainership agreement, the guests’
payments for medical services having been paid directly to Shanrgi-la.
The resolution of the case hinges, in the main, on the correct
interpretation of Art. 157 vis a vis Art. 280 and the provisions on
permissible job contracting of the Labor Code, as amended.
Decision5 of May 22, 2007, affirmed the NLRC Decision that no
employer-employee relationship exists between Shangri-la and
petitioners. The appellate court concluded that all aspects of the The Court holds that, contrary to petitioners’ postulation, Art. 157 does
employment of petitioners being under the supervision and control of not require the engagement of full-time nurses as regular
37
employees of a company employing not less than 50 workers.
Thus, the Article provides:
ART. 157. Emergency medical and dental services. – It shall be the duty
of every employer to furnish his employees in any locality with free
medical and dental attendance and facilities consisting of:
(a) The services of a full-time registered nurse when the
number of employees exceeds fifty (50) but not more than
two hundred (200) except when the employer does not
maintain hazardous workplaces, in which case the services of a
graduate first-aider shall be provided for the protection of the
workers, where no registered nurse is available. The Secretary
of Labor shall provide by appropriate regulations the services
that shall be required where the number of employees does
not exceed fifty (50) and shall determine by appropriate order
hazardous workplaces for purposes of this Article;
(b) The services of a full-time registered nurse, a part-time
physician and dentist, and an emergency clinic, when the
number of employees exceeds two hundred (200) but not
more than three hundred (300); and
(c) The services of a full-time physician, dentist and full-time
registered nurse as well as a dental clinic, and an infirmary or
emergency hospital with one bed capacity for every one
hundred (100) employees when the number of employees
exceeds three hundred (300).
In cases of hazardous workplaces, no employer shall engage the services
of a physician or dentist who cannot stay in the premises of the
establishment for at least two (2) hours, in the case of those engaged on
part-time basis, and not less than eight (8) hours in the case of those
employed on full-time basis. Where the undertaking is nonhazardous in
nature, the physician and dentist may be engaged on retained basis,
subject to such regulations as the Secretary of Labor may prescribe to
insure immediate availability of medical and dental treatment and
attendance in case of emergency. (Emphasis and underscoring supplied)
Under the foregoing provision, Shangri-la, which employs more than 200
workers, is mandated to "furnish" its employees with the services of a
full-time registered nurse, a part-time physician and dentist, and an
emergency clinic which means that it should provide or make available
such medical and allied services to its employees, not necessarily to hire
or employ a service provider. As held in Philippine Global
Communications vs. De Vera:8
x x x while it is true that the provision requires employers to engage the
services of medical practitioners in certain establishments depending on
the number of their employees, nothing is there in the law which says Sec. 9. Labor-only contracting. – (a) Any person who undertakes to
that medical practitioners so engaged be actually hired as employees, supply workers to an employer shall be deemed to be engaged in labor-
adding that the law, as written, only requires the employer "to only contracting where such person:
retain", not employ, a part-time physician who needed to stay in the
premises of the non-hazardous workplace for two (2) hours. (Emphasis
(1) Does not have substantial capital or
and underscoring supplied)1avvphi1
investment in the form of tools, equipment,
machineries, work premises and other
The term "full-time" in Art. 157 cannot be construed as referring to the materials; and
type of employment of the person engaged to provide the services, for
Article 157 must not be read alongside Art. 2809 in order to vest
(2) The workers recruited and placed by such
employer-employee relationship on the employer and the person so
persons are performing activities which are
engaged. So De Vera teaches:
directly related to the principal business or
operations of the employer in which workers
x x x For, we take it that any agreement may provide that one party are habitually employed.
shall render services for and in behalf of another, no matter how
necessary for the latter’s business, even without being hired as an
(b) Labor-only contracting as defined herein is hereby
employee. This set-up is precisely true in the case of an independent
prohibited and the person acting as contractor shall be
contractorship as well as in an agency agreement. Indeed, Article 280 of
considered merely as an agent or intermediary of the employer
the Labor Code, quoted by the appellate court, is not the yardstick for
who shall be responsible to the workers in the same manner
determining the existence of an employment relationship. As it is, the
and extent as if the latter were directly employed by him.
provision merely distinguishes between two (2) kinds of employees, i.e.,
regular and casual. x x x10 (Emphasis and underscoring supplied)
(c) For cases not falling under this Article, the Secretary of
Labor shall determine through appropriate orders whether or
The phrase "services of a full-time registered nurse" should thus be
not the contracting out of labor is permissible in the light of
taken to refer to the kind of services that the nurse will render in the
the circumstances of each case and after considering the
company’s premises and to its employees, not the manner of his
operating needs of the employer and the rights of the workers
engagement.
involved. In such case, he may prescribe conditions and
restrictions to insure the protection and welfare of the
As to whether respondent doctor can be considered a legitimate workers. (Emphasis supplied)
independent contractor, the pertinent sections of DOLE Department
Order No. 10, series of 1997, illuminate:
The existence of an independent and permissible contractor relationship
is generally established by considering the following determinants:
Sec. 8. Job contracting. – There is job contracting permissible under the whether the contractor is carrying on an independent business; the
Code if the following conditions are met: 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
(1) The contractor carries on an independent business and
employer's power with respect to the hiring, firing and payment of the
undertakes the contract work on his own account under his
contractor's workers; the control of the premises; the duty to supply the
own responsibility according to his own manner and method,
premises, tools, appliances, materials and labor; and the mode, manner
free from the control and direction of his employer or principal
and terms of payment.11
in all matters connected with the performance of the work
except as to the results thereof; and
On the other hand, existence of an employer- employee relationship is
established by the presence of the following determinants: (1) the
(2) The contractor has substantial capital or investment in the
selection and engagement of the workers; (2) power of dismissal; (3)
form of tools, equipment, machineries, work premises, and
the payment of wages by whatever means; and (4) the power to control
other materials which are necessary in the conduct of his
the worker's conduct, with the latter assuming primacy in the overall
business.
consideration.12
38
Against the above-listed determinants, the Court holds that respondent
doctor is a legitimate independent contractor. That Shangri-la provides
the clinic premises and medical supplies for use of its employees and
guests does not necessarily prove that respondent doctor lacks
substantial capital and investment. Besides, the maintenance of a clinic
and provision of medical services to its employees is required under Art.
157, which are not directly related to Shangri-la’s principal business –
operation of hotels and restaurants.

As to payment of wages, respondent doctor is the one who underwrites

the following: salaries, SSS contributions and other benefits of the
staff13; group life, group personal accident insurance and life/death
insurance14 for the staff with minimum benefit payable at 12 times the
employee’s last drawn salary, as well as value added taxes and
withholding taxes, sourced from her P60,000.00 monthly retainer fee
and 70% share of the service charges from Shangri-la’s guests who avail
of the clinic services. It is unlikely that respondent doctor would report
petitioners as workers, pay their SSS premium as well as their wages if
they were not indeed her employees.15

With respect to the supervision and control of the nurses and clinic staff,
it is not disputed that a document, "Clinic Policies and Employee
Manual"16 claimed to have been prepared by respondent doctor exists, to
which petitioners gave their conformity17 and in which they
acknowledged their co-terminus employment status. It is thus presumed
that said document, and not the employee manual being followed by
Shangri-la’s regular workers, governs how they perform their respective
tasks and responsibilities.

Contrary to petitioners’ contention, the various office directives issued by

Shangri-la’s officers do not imply that it is Shangri-la’s management and
not respondent doctor who exercises control over them or that Shangri-
la has control over how the doctor and the nurses perform their work.
The letter18 addressed to respondent doctor dated February 7, 2003 from
a certain Tata L. Reyes giving instructions regarding the replenishment
of emergency kits is, at most, administrative in nature, related as it is to
safety matters; while the letter19 dated May 17, 2004 from Shangri-la’s
Assistant Financial Controller, Lotlot Dagat, forbidding the clinic from
receiving cash payments from the resort’s guests is a matter of financial
policy in order to ensure proper sharing of the proceeds, considering that
Shangri-la and respondent doctor share in the guests’ payments for
medical services rendered. In fine, as Shangri-la does not control how
the work should be performed by petitioners, it is not petitioners’
employer.

WHEREFORE, the petition is hereby DENIED. The Decision of the Court

of Appeals dated May 22, 2007 and the Resolution dated July 10, 2007
are AFFIRMED.

SO ORDERED.
39
10
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 167622 June 29, 2010
GREGORIO V. TONGKO, Petitioner,
vs.
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and
RENATO A. VERGEL DE DIOS,Respondents.
RESOLUTION
BRION, J.:
This resolves the Motion for Reconsideration1 dated December 3, 2008
filed by respondent The Manufacturers Life Insurance Co. (Phils.), Inc.
(Manulife) to set aside our Decision of November 7, 2008. In the assailed
decision, we found that an employer-employee relationship existed
between Manulife and petitioner Gregorio Tongko and ordered Manulife
to pay Tongko backwages and separation pay for illegal dismissal.
The following facts have been stated in our Decision of November 7,
2008, now under reconsideration, but are repeated, simply for purposes
of clarity.
The contractual relationship between Tongko and Manulife had two basic
phases. The first or initial phase began on July 1, 1977, under a Career
Agent’s Agreement (Agreement) that provided:
It is understood and agreed that the Agent is an independent contractor
and nothing contained herein shall be construed or interpreted as
creating an employer-employee relationship between the Company and
the Agent.
xxxx
a) The Agent shall canvass for applications for Life Insurance, Annuities,
Group policies and other products offered by the Company, and collect,
in exchange for provisional receipts issued by the Agent, money due to
or become due to the Company in respect of applications or policies
obtained by or through the Agent or from policyholders allotted by the
Company to the Agent for servicing, subject to subsequent confirmation
of receipt of payment by the Company as evidenced by an Official
Receipt issued by the Company directly to the policyholder.
xxxx
The Company may terminate this Agreement for any breach or violation
of any of the provisions hereof by the Agent by giving written notice to
the Agent within fifteen (15) days from the time of the discovery of the
breach. No waiver, extinguishment, abandonment, withdrawal or
cancellation of the right to terminate this Agreement by the Company
shall be construed for any previous failure to exercise its right under any
provision of this Agreement.
Either of the parties hereto may likewise terminate his Agreement at any
time without cause, by giving to the other party fifteen (15) days notice
in writing.2
Tongko additionally agreed (1) to comply with all regulations and
requirements of Manulife, and (2) to maintain a standard of knowledge
and competency in the sale of Manulife’s products, satisfactory to
Manulife and sufficient to meet the volume of the new business, required
by his Production Club membership.3
The second phase started in 1983 when Tongko was named Unit
Manager in Manulife’s Sales Agency Organization. In 1990, he became a
Branch Manager. Six years later (or in 1996), Tongko became a Regional
Sales Manager.4
Tongko’s gross earnings consisted of commissions, persistency income,
and management overrides. Since the beginning, Tongko consistently
declared himself self-employed in his income tax returns. Thus, under
oath, he declared his gross business income and deducted his business
expenses to arrive at his taxable business income. Manulife withheld the
corresponding 10% tax on Tongko’s earnings.5
In 2001, Manulife instituted manpower development programs at the
regional sales management level. Respondent Renato Vergel de Dios
wrote Tongko a letter dated November 6, 2001 on concerns that were
brought up during the October 18, 2001 Metro North Sales Managers
Meeting. De Dios wrote:
The first step to transforming Manulife into a big league player has been
very clear – to increase the number of agents to at least 1,000 strong for
a start. This may seem diametrically opposed to the way Manulife was
run when you first joined the organization. Since then, however,
substantial changes have taken place in the organization, as these have
been influenced by developments both from within and without the
company.
xxxx
The issues around agent recruiting are central to the intended objectives
hence the need for a Senior Managers’ meeting earlier last month when
Kevin O’Connor, SVP-Agency, took to the floor to determine from our
senior agency leaders what more could be done to bolster manpower
development. At earlier meetings, Kevin had presented information
where evidently, your Region was the lowest performer (on a per
Manager basis) in terms of recruiting in 2000 and, as of today, continues
to remain one of the laggards in this area.
While discussions, in general, were positive other than for certain
comments from your end which were perceived to be uncalled for, it
became clear that a one-on-one meeting with you was necessary to
ensure that you and management, were on the same plane. As gleaned
from some of your previous comments in prior meetings (both in group
and one-on-one), it was not clear that we were proceeding in the same
direction.
Kevin held subsequent series of meetings with you as a result, one of
which I joined briefly. In those subsequent meetings you reiterated
certain views, the validity of which we challenged and subsequently
found as having no basis.
With such views coming from you, I was a bit concerned that the rest of
the Metro North Managers may be a bit confused as to the directions the
company was taking. For this reason, I sought a meeting with everyone
in your management team, including you, to clear the air, so to speak.
This note is intended to confirm the items that were discussed at the
said Metro North Region’s Sales Managers meeting held at the 7/F
Conference room last 18 October.
xxxx
Issue # 2: "Some Managers are unhappy with their earnings and would
want to revert to the position of agents."
This is an often repeated issue you have raised with me and with Kevin.
For this reason, I placed the issue on the table before the rest of your
Region’s Sales Managers to verify its validity. As you must have noted,
no Sales Manager came forward on their own to confirm your statement
and it took you to name Malou Samson as a source of the same, an
allegation that Malou herself denied at our meeting and in your very
presence.
40
This only confirms, Greg, that those prior comments have no solid basis
at all. I now believe what I had thought all along, that these allegations
were simply meant to muddle the issues surrounding the inability of your
Region to meet its agency development objectives!
Issue # 3: "Sales Managers are doing what the company asks them to
do but, in the process, they earn less."
xxxx
All the above notwithstanding, we had your own records checked and we
found that you made a lot more money in the Year 2000 versus 1999. In
addition, you also volunteered the information to Kevin when you said
that you probably will make more money in the Year 2001 compared to
Year 2000. Obviously, your above statement about making "less money"
did not refer to you but the way you argued this point had us almost
believing that you were spouting the gospel of truth when you were not.
xxx
xxxx
All of a sudden, Greg, I have become much more worried about your
ability to lead this group towards the new direction that we have been
discussing these past few weeks, i.e., Manulife’s goal to become a major
agency-led distribution company in the Philippines. While as you claim,
you have not stopped anyone from recruiting, I have never heard you
proactively push for greater agency recruiting. You have not been
proactive all these years when it comes to agency growth.
xxxx
I cannot afford to see a major region fail to deliver on its developmental
goals next year and so, we are making the following changes in the
interim:
1. You will hire at your expense a competent assistant who can unload
you of much of the routine tasks which can be easily delegated. This
assistant should be so chosen as to complement your skills and help you
in the areas where you feel "may not be your cup of tea."
You have stated, if not implied, that your work as Regional Manager may
be too taxing for you and for your health. The above could solve this
problem.
xxxx
2. Effective immediately, Kevin and the rest of the Agency Operations
will deal with the North Star Branch (NSB) in autonomous fashion. x x x
I have decided to make this change so as to reduce your span of control
and allow you to concentrate more fully on overseeing the remaining
groups under Metro North, your Central Unit and the rest of the Sales
Managers in Metro North. I will hold you solely responsible for meeting
the objectives of these remaining groups.
xxxx
The above changes can end at this point and they need not go any
further. This, however, is entirely dependent upon you. But you have to
understand that meeting corporate objectives by everyone is primary
and will not be compromised. We are meeting tough challenges next
year, and I would want everybody on board. Any resistance or holding
back by anyone will be dealt with accordingly.6
Subsequently, de Dios wrote Tongko another letter, dated December 18,
2001, terminating Tongko’s services:
It would appear, however, that despite the series of meetings and
communications, both one-on-one meetings between yourself and SVP
Kevin O’Connor, some of them with me, as well as group meetings with
your Sales Managers, all these efforts have failed in helping you align
your directions with Management’s avowed agency growth policy.
xxxx
On account thereof, Management is exercising its prerogative under
Section 14 of your Agents Contract as we are now issuing this notice of
termination of your Agency Agreement with us effective fifteen days
from the date of this letter.7
Tongko responded by filing an illegal dismissal complaint with the
National Labor Relations Commission (NLRC) Arbitration Branch. He
essentially alleged – despite the clear terms of the letter terminating his
Agency Agreement – that he was Manulife’s employee before he was
illegally dismissed.8
Thus, the threshold issue is the existence of an employment relationship.
A finding that none exists renders the question of illegal dismissal moot;
a finding that an employment relationship exists, on the other hand,
necessarily leads to the need to determine the validity of the termination
of the relationship.
A. Tongko’s Case for Employment Relationship
Tongko asserted that as Unit Manager, he was paid an annual over-rider
not exceeding P50,000.00, regardless of production levels attained and
exclusive of commissions and bonuses. He also claimed that as Regional
Sales Manager, he was given a travel and entertainment allowance
of P36,000.00 per year in addition to his overriding commissions; he was
tasked with numerous administrative functions and supervisory authority
over Manulife’s employees, aside from merely selling policies and
recruiting agents for Manulife; and he recommended and recruited
insurance agents subject to vetting and approval by Manulife. He further
alleges that he was assigned a definite place in the Manulife offices
when he was not in the field – at the 3rd Floor, Manulife Center, 108
Tordesillas corner Gallardo Sts., Salcedo Village, Makati City – for which
he never paid any rental. Manulife provided the office equipment he
used, including tables, chairs, computers and printers (and even office
stationery), and paid for the electricity, water and telephone bills. As
Regional Sales Manager, Tongko additionally asserts that he was
required to follow at least three codes of conduct.9
B. Manulife’s Case – Agency Relationship with Tongko
Manulife argues that Tongko had no fixed wage or salary. Under the
Agreement, Tongko was paid commissions of varying amounts,
computed based on the premium paid in full and actually received by
Manulife on policies obtained through an agent. As sales manager,
Tongko was paid overriding sales commission derived from sales made
by agents under his unit/structure/branch/region. Manulife also points
out that it deducted and withheld a 10% tax from all commissions
Tongko received; Tongko even declared himself to be self-employed and
consistently paid taxes as such—i.e., he availed of tax deductions such
as ordinary and necessary trade, business and professional expenses to
which a business is entitled.
Manulife asserts that the labor tribunals have no jurisdiction over
Tongko’s claim as he was not its employee as characterized in the four-
fold test and our ruling in Carungcong v. National Labor Relations
Commission.10
The Conflicting Rulings of the Lower Tribunals
The labor arbiter decreed that no employer-employee relationship
existed between the parties. However, the NLRC reversed the labor
arbiter’s decision on appeal; it found the existence of an employer-
employee relationship and concluded that Tongko had been illegally
dismissed. In the petition for certiorari with the Court of Appeals (CA),
the appellate court found that the NLRC gravely abused its discretion in
its ruling and reverted to the labor arbiter’s decision that no employer-
employee relationship existed between Tongko and Manulife.
Our Decision of November 7, 2008
41
In our Decision of November 7, 2008, we reversed the CA ruling and
found that an employment relationship existed between Tongko and
Manulife. We concluded that Tongko is Manulife’s employee for the
following reasons:
1. Our ruling in the first Insular11 case did not foreclose the
possibility of an insurance agent becoming an employee of an
insurance company; if evidence exists showing that the
company promulgated rules or regulations that effectively
controlled or restricted an insurance agent’s choice of methods
or the methods themselves in selling insurance, an employer-
employee relationship would be present. The determination of
the existence of an employer-employee relationship is thus on
a case-to-case basis depending on the evidence on record.
2. Manulife had the power of control over Tongko, sufficient to
characterize him as an employee, as shown by the following
indicators:
2.1 Tongko undertook to comply with Manulife’s
rules, regulations and other requirements, i.e., the
different codes of conduct such as the Agent Code
of Conduct, the Manulife Financial Code of Conduct,
and the Financial Code of Conduct Agreement;
2.2 The various affidavits of Manulife’s insurance
agents and managers, who occupied similar
positions as Tongko, showed that they performed
administrative duties that established employment
with Manulife;12 and
2.3 Tongko was tasked to recruit some agents in
addition to his other administrative functions. De
Dios’ letter harped on the direction Manulife
intended to take, viz., greater agency recruitment as
the primary means to sell more policies; Tongko’s
alleged failure to follow this directive led to the
termination of his employment with Manulife.
The Motion for Reconsideration
A. The Insurance and the Civil Codes;
Manulife disagreed with our Decision and filed the present motion for
the Parties’ Intent and Established
reconsideration on the following GROUNDS:
Industry Practices
1. The November 7[, 2008] Decision violates Manulife’s right
We cannot consider the present case purely from a labor law
to due process by: (a) confining the review only to the issue of
perspective, oblivious that the factual antecedents were set in the
"control" and utterly disregarding all the other issues that had
insurance industry so that the Insurance Code primarily governs. Chapter
been joined in this case; (b) mischaracterizing the divergence
IV, Title 1 of this Code is wholly devoted to "Insurance Agents and
of conclusions between the CA and the NLRC decisions as
confined only to that on "control"; (c) grossly failing to
consider the findings and conclusions of the CA on the
majority of the material evidence, especially [Tongko’s]
declaration in his income tax returns that he was a "business
person" or "self-employed"; and (d) allowing [Tongko] to
repudiate his sworn statement in a public document.
2. The November 7[, 2008] Decision contravenes settled rules
in contract law and agency, distorts not only the legal
relationships of agencies to sell but also distributorship and
franchising, and ignores the constitutional and policy context
of contract law vis-à-vis labor law.
3. The November 7[, 2008] Decision ignores the findings of
the CA on the three elements of the four-fold test other than
the "control" test, reverses well-settled doctrines of law on
employer-employee relationships, and grossly misapplies the
"control test," by selecting, without basis, a few items of
evidence to the exclusion of more material evidence to support
its conclusion that there is "control."
4. The November 7[, 2008] Decision is judicial legislation,
beyond the scope authorized by Articles 8 and 9 of the Civil
Code, beyond the powers granted to this Court under Article
VIII, Section 1 of the Constitution and contravenes through
judicial legislation, the constitutional prohibition against
impairment of contracts under Article III, Section 10 of the
Constitution.
5. For all the above reasons, the November 7[, 2008] Decision
made unsustainable and reversible errors, which should be
corrected, in concluding that Respondent Manulife and
Petitioner had an employer-employee relationship, that
Respondent Manulife illegally dismissed Petitioner, and for
consequently ordering Respondent Manulife to pay Petitioner
backwages, separation pay, nominal damages and attorney’s
fees.13
THE COURT’S RULING
Brokers" and specifically defines the agents and brokers relationship with
the insurance company and how they are governed by the Code and
regulated by the Insurance Commission.
The Insurance Code, of course, does not wholly regulate the "agency"
that it speaks of, as agency is a civil law matter governed by the Civil
Code. Thus, at the very least, three sets of laws – namely, the Insurance
Code, the Labor Code and the Civil Code – have to be considered in
looking at the present case. Not to be forgotten, too, is the Agreement
(partly reproduced on page 2 of this Dissent and which no one disputes)
that the parties adopted to govern their relationship for purposes of
selling the insurance the company offers. To forget these other laws is to
take a myopic view of the present case and to add to the uncertainties
that now exist in considering the legal relationship between the
insurance company and its "agents."
The main issue of whether an agency or an employment relationship
exists depends on the incidents of the relationship. The Labor Code
concept of "control" has to be compared and distinguished with the
"control" that must necessarily exist in a principal-agent relationship. The
principal cannot but also have his or her say in directing the course of
the principal-agent relationship, especially in cases where the company-
representative relationship in the insurance industry is an agency.
a. The laws on insurance and agency
The business of insurance is a highly regulated commercial activity in the
country, in terms particularly of who can be in the insurance business,
who can act for and in behalf of an insurer, and how these parties shall
conduct themselves in the insurance business. Section 186 of the
Insurance Code provides that "No person, partnership, or association of
persons shall transact any insurance business in the Philippines except as
agent of a person or corporation authorized to do the business of
insurance in the Philippines." Sections 299 and 300 of the Insurance
Code on Insurance Agents and Brokers, among other provisions,
provide:
Section 299. No insurance company doing business in the Philippines,
nor any agent thereof, shall pay any commission or other compensation
to any person for services in obtaining insurance, unless such person
shall have first procured from the Commissioner a license to act as an
insurance agent of such company or as an insurance broker as
hereinafter provided.
No person shall act as an insurance agent or as an insurance broker in
the solicitation or procurement of applications for insurance, or receive
for services in obtaining insurance, any commission or other
compensation from any insurance company doing business in the
Philippines or any agent thereof, without first procuring a license so to
42
act from the Commissioner x x x The Commissioner shall satisfy himself
as to the competence and trustworthiness of the applicant and shall
have the right to refuse to issue or renew and to suspend or revoke any
such license in his discretion.1avvphi1.net
Section 300. Any person who for compensation solicits or obtains
insurance on behalf of any insurance company or transmits for a person
other than himself an application for a policy or contract of insurance to
or from such company or offers or assumes to act in the negotiating of
such insurance shall be an insurance agent within the intent of this
section and shall thereby become liable to all the duties, requirements,
liabilities and penalties to which an insurance agent is subject.
The application for an insurance agent’s license requires a written
examination, and the applicant must be of good moral character and
must not have been convicted of a crime involving moral turpitude.14 The
insurance agent who collects premiums from an insured person for
remittance to the insurance company does so in a fiduciary capacity, and
an insurance company which delivers an insurance policy or contract to
an authorized agent is deemed to have authorized the agent to receive
payment on the company’s behalf.15 Section 361 further prohibits the
offer, negotiation, or collection of any amount other than that specified
in the policy and this covers any rebate from the premium or any special
favor or advantage in the dividends or benefit accruing from the policy.
Thus, under the Insurance Code, the agent must, as a matter of
qualification, be licensed and must also act within the parameters of the
authority granted under the license and under the contract with the
principal. Other than the need for a license, the agent is limited in the
way he offers and negotiates for the sale of the company’s insurance
products, in his collection activities, and in the delivery of the insurance
contract or policy. Rules regarding the desired results (e.g., the required
volume to continue to qualify as a company agent, rules to check on the
parameters on the authority given to the agent, and rules to ensure that
industry, legal and ethical rules are followed) are built-in elements of
control specific to an insurance agency and should not and cannot be
read as elements of control that attend an employment relationship
governed by the Labor Code.
On the other hand, the Civil Code defines an agent as a "person [who]
binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of
the latter."16 While this is a very broad definition that on its face may
even encompass an employment relationship, the distinctions between
agency and employment are sufficiently established by law and
jurisprudence.
Generally, the determinative element is the control exercised over the
one rendering service. The employer controls the employee both in the
results and in the means and manner of achieving this result. The
principal in an agency relationship, on the other hand, also has the
prerogative to exercise control over the agent in undertaking the
assigned task based on the parameters outlined in the pertinent laws.
Under the general law on agency as applied to insurance, an agency
must be express in light of the need for a license and for the designation
by the insurance company. In the present case, the Agreement fully
serves as grant of authority to Tongko as Manulife’s insurance
agent.17 This agreement is supplemented by the company’s agency
practices and usages, duly accepted by the agent in carrying out the
agency.18 By authority of the Insurance Code, an insurance agency is for
compensation,19 a matter the Civil Code Rules on Agency presumes in
the absence of proof to the contrary.20 Other than the compensation, the
principal is bound to advance to, or to reimburse, the agent the agreed
sums necessary for the execution of the agency.21 By implication at least
under Article 1994 of the Civil Code, the principal can appoint two or
more agents to carry out the same assigned tasks,22 based necessarily
on the specific instructions and directives given to them.
With particular relevance to the present case is the provision that "In the
execution of the agency, the agent shall act in accordance with the
instructions of the principal."23 This provision is pertinent for purposes of
the necessary control that the principal exercises over the agent in
undertaking the assigned task, and is an area where the instructions can
intrude into the labor law concept of control so that minute consideration
of the facts is necessary. A related article is Article 1891 of the Civil Code
which binds the agent to render an account of his transactions to the
principal.
B. The Cited Case
The Decision of November 7, 2008 refers to the first Insular and
Grepalife cases to establish that the company rules and regulations that
an agent has to comply with are indicative of an employer-employee
relationship.24 The Dissenting Opinions of Justice Presbitero Velasco, Jr.
and Justice Conchita Carpio Morales also cite Insular Life Assurance Co.
v. National Labor Relations Commission (second Insular case)25 to
support the view that Tongko is Manulife’s employee. On the other hand,
Manulife cites the Carungcong case and AFP Mutual Benefit Association,
Inc. v. National Labor Relations Commission (AFPMBAI case)26 to support
its allegation that Tongko was not its employee.
A caveat has been given above with respect to the use of the rulings in
the cited cases because none of them is on all fours with the present
case; the uniqueness of the factual situation of the present case
prevents it from being directly and readily cast in the mold of the cited
cases. These cited cases are themselves different from one another; this
difference underscores the need to read and quote them in the context
of their own factual situations.
The present case at first glance appears aligned with the facts in the
Carungcong, the Grepalife, and the second Insular Life cases. A critical
difference, however, exists as these cited cases dealt with the proper
legal characterization of a subsequent management contract that
superseded the original agency contract between the insurance company
and its agent. Carungcong dealt with a subsequent Agreement making
Carungcong a New Business Manager that clearly superseded the
Agreement designating Carungcong as an agent empowered to solicit
applications for insurance. The Grepalife case, on the other hand, dealt
with the proper legal characterization of the appointment of the Ruiz
brothers to positions higher than their original position as insurance
agents. Thus, after analyzing the duties and functions of the Ruiz
brothers, as these were enumerated in their contracts, we concluded
that the company practically dictated the manner by which the Ruiz
brothers were to carry out their jobs. Finally, the second Insular Life
case dealt with the implications of de los Reyes’ appointment as acting
unit manager which, like the subsequent contracts in the Carungcong
and the Grepalife cases, was clearly defined under a subsequent
contract. In all these cited cases, a determination of the presence of the
Labor Code element of control was made on the basis of the stipulations
of the subsequent contracts.
In stark contrast with the Carungcong, the Grepalife, and the second
Insular Life cases, the only contract or document extant and submitted
as evidence in the present case is the Agreement – a pure agency
agreement in the Civil Code context similar to the original contract in the
first Insular Life case and the contract in the AFPMBAI case. And while
Tongko was later on designated unit manager in 1983, Branch Manager
in 1990, and Regional Sales Manager in 1996, no formal contract
regarding these undertakings appears in the records of the case. Any
such contract or agreement, had there been any, could have at the very
least provided the bases for properly ascertaining the juridical
relationship established between the parties.
These critical differences, particularly between the present case and the
Grepalife and the second Insular Life cases, should therefore
immediately drive us to be more prudent and cautious in applying the
rulings in these cases.
C. Analysis of the Evidence
c.1. The Agreement
The primary evidence in the present case is the July 1, 1977 Agreement
that governed and defined the parties’ relations until the Agreement’s
termination in 2001. This Agreement stood for more than two decades
and, based on the records of the case, was never modified or novated. It
assumes primacy because it directly dealt with the nature of the parties’
relationship up to the very end; moreover, both parties never disputed
its authenticity or the accuracy of its terms.
43
By the Agreement’s express terms, Tongko served as an "insurance
agent" for Manulife, not as an employee. To be sure, the Agreement’s
legal characterization of the nature of the relationship cannot be
conclusive and binding on the courts; as the dissent clearly stated, the
characterization of the juridical relationship the Agreement embodied is a
matter of law that is for the courts to determine. At the same time,
though, the characterization the parties gave to their relationship in the
Agreement cannot simply be brushed aside because it embodies their
intent at the time they entered the Agreement, and they were governed
by this understanding throughout their relationship. At the very least, the
provision on the absence of employer-employee relationship between the
parties can be an aid in considering the Agreement and its
implementation, and in appreciating the other evidence on record.
The parties’ legal characterization of their intent, although not
conclusive, is critical in this case because this intent is not illegal or
outside the contemplation of law, particularly of the Insurance and the
Civil Codes. From this perspective, the provisions of the Insurance Code
cannot be disregarded as this Code (as heretofore already noted)
expressly envisions a principal-agent relationship between the insurance
company and the insurance agent in the sale of insurance to the
public.1awph!1 For this reason, we can take judicial notice that as a
matter of Insurance Code-based business practice, an agency
relationship prevails in the insurance industry for the purpose of selling
insurance. The Agreement, by its express terms, is in accordance with
the Insurance Code model when it provided for a principal-agent
relationship, and thus cannot lightly be set aside nor simply be
considered as an agreement that does not reflect the parties’ true intent.
This intent, incidentally, is reinforced by the system of compensation the
Agreement provides, which likewise is in accordance with the production-
based sales commissions the Insurance Code provides.
Significantly, evidence shows that Tongko’s role as an insurance agent
never changed during his relationship with Manulife. If changes occurred
at all, the changes did not appear to be in the nature of their core
relationship. Tongko essentially remained an agent, but moved up in this
role through Manulife’s recognition that he could use other agents
approved by Manulife, but operating under his guidance and in whose
commissions he had a share. For want of a better term, Tongko perhaps
could be labeled as a "lead agent" who guided under his wing other
Manulife agents similarly tasked with the selling of Manulife insurance.
Like Tongko, the evidence suggests that these other agents operated
under their own agency agreements. Thus, if Tongko’s compensation
scheme changed at all during his relationship with Manulife, the change
was solely for purposes of crediting him with his share in the
commissions the agents under his wing generated. As an agent who was
recruiting and guiding other insurance agents, Tongko likewise moved
up in terms of the reimbursement of expenses he incurred in the course
of his lead agency, a prerogative he enjoyed pursuant to Article 1912 of
the Civil Code. Thus, Tongko received greater reimbursements for his
expenses and was even allowed to use Manulife facilities in his
interactions with the agents, all of whom were, in the strict sense,
Manulife agents approved and certified as such by Manulife with the
Insurance Commission.
That Tongko assumed a leadership role but nevertheless wholly
remained an agent is the inevitable conclusion that results from the
reading of the Agreement (the only agreement on record in this case)
and his continuing role thereunder as sales agent, from the perspective
of the Insurance and the Civil Codes and in light of what Tongko himself
attested to as his role as Regional Sales Manager. To be sure, this
interpretation could have been contradicted if other agreements had
been submitted as evidence of the relationship between Manulife and
Tongko on the latter’s expanded undertakings. In the absence of any
such evidence, however, this reading – based on the available evidence
and the applicable insurance and civil law provisions – must stand,
subject only to objective and evidentiary Labor Code tests on the
existence of an employer-employee relationship.
In applying such Labor Code tests, however, the enforcement of the
Agreement during the course of the parties’ relationship should be
noted. From 1977 until the termination of the Agreement, Tongko’s
occupation was to sell Manulife’s insurance policies and products. Both
parties acquiesced with the terms and conditions of the Agreement.
Tongko, for his part, accepted all the benefits flowing from the
Agreement, particularly the generous commissions.
Evidence indicates that Tongko consistently clung to the view that he
was an independent agent selling Manulife insurance products since he
invariably declared himself a business or self-employed person in his
income tax returns. This consistency with, and action made
pursuant to the Agreement were pieces of evidence that were
never mentioned nor considered in our Decision of November 7,
2008. Had they been considered, they could, at the very least, serve as
Tongko’s admissions against his interest. Strictly speaking, Tongko’s tax
returns cannot but be legally significant because he certified under oath
the amount he earned as gross business income, claimed business
deductions, leading to his net taxable income. This should be evidence of
the first order that cannot be brushed aside by a mere denial. Even on a
layman’s view that is devoid of legal considerations, the extent of his
annual income alone renders his claimed employment status doubtful.27
Hand in hand with the concept of admission against interest in
considering the tax returns, the concept of estoppel – a legal and
equitable concept28 – necessarily must come into play. Tongko’s previous
admissions in several years of tax returns as an independent agent, as
against his belated claim that he was all along an employee, are too
diametrically opposed to be simply dismissed or ignored. Interestingly,
Justice Velasco’s dissenting opinion states that Tongko was forced to
declare himself a business or self-employed person by Manulife’s
persistent refusal to recognize him as its employee.29 Regrettably, the
dissent has shown no basis for this conclusion, an
understandable omission since no evidence in fact exists on this
point in the records of the case. In fact, what the evidence shows is
Tongko’s full conformity with, and action as, an independent agent until
his relationship with Manulife took a bad turn.
Another interesting point the dissent raised with respect to the
Agreement is its conclusion that the Agreement negated any
employment relationship between Tongko and Manulife so that the
commissions he earned as a sales agent should not be considered in the
determination of the backwages and separation pay that should be given
to him. This part of the dissent is correct although it went on to twist this
conclusion by asserting that Tongko had dual roles in his relationship
with Manulife; he was an agent, not an employee, in so far as he sold
insurance for Manulife, but was an employee in his capacity as a
manager. Thus, the dissent concluded that Tongko’s backwages should
only be with respect to his role as Manulife’s manager.
The conclusion with respect to Tongko’s employment as a manager is, of
course, unacceptable for the legal, factual and practical reasons
discussed in this Resolution. In brief, the factual reason is grounded on
the lack of evidentiary support of the conclusion that Manulife exercised
control over Tongko in the sense understood in the Labor Code.
The legal reason, partly based on the lack of factual basis, is the
erroneous legal conclusion that Manulife controlled Tongko and was thus
its employee. The practical reason, on the other hand, is the havoc
that the dissent’s unwarranted conclusion would cause the insurance
industry that, by the law’s own design, operated along the lines of
principal-agent relationship in the sale of insurance.
c.2. Other Evidence of Alleged Control
A glaring evidentiary gap for Tongko in this case is the lack of evidence
on record showing that Manulife ever exercised means-and-manner
control, even to a limited extent, over Tongko during his ascent in
Manulife’s sales ladder. In 1983, Tongko was appointed unit manager.
Inexplicably, Tongko never bothered to present any evidence at all on
what this designation meant. This also holds true for Tongko’s
appointment as branch manager in 1990, and as Regional Sales Manager
in 1996. The best evidence of control – the agreement or directive
relating to Tongko’s duties and responsibilities – was never introduced as
part of the records of the case. The reality is, prior to de Dios’ letter,
Manulife had practically left Tongko alone not only in doing the business
of selling insurance, but also in guiding the agents under his wing. As
discussed below, the alleged directives covered by de Dios’ letter,
heretofore quoted in full, were policy directions and targeted results that
the company wanted Tongko and the other sales groups to realign with
in their own selling activities. This is the reality that the parties’
presented evidence consistently tells us.
44
What, to Tongko, serve as evidence of labor law control are the codes of
conduct that Manulife imposes on its agents in the sale of insurance. The
mere presentation of codes or of rules and regulations, however, is not
per se indicative of labor law control as the law and jurisprudence teach
us.
As already recited above, the Insurance Code imposes obligations on
both the insurance company and its agents in the performance of their
respective obligations under the Code, particularly on licenses and their
renewals, on the representations to be made to potential customers, the
collection of premiums, on the delivery of insurance policies, on the
matter of compensation, and on measures to ensure ethical business
practice in the industry.
The general law on agency, on the other hand, expressly allows the
principal an element of control over the agent in a manner consistent
with an agency relationship. In this sense, these control measures
cannot be read as indicative of labor law control. Foremost among these
are the directives that the principal may impose on the agent to achieve
the assigned tasks, to the extent that they do not involve the means and
manner of undertaking these tasks. The law likewise obligates the agent
to render an account; in this sense, the principal may impose on the
agent specific instructions on how an account shall be made, particularly
on the matter of expenses and reimbursements. To these extents,
control can be imposed through rules and regulations without intruding
into the labor law concept of control for purposes of employment.
From jurisprudence, an important lesson that the first Insular Life case
teaches us is that a commitment to abide by the rules and regulations of
an insurance company does not ipso facto make the insurance agent an
employee. Neither do guidelines somehow restrictive of the insurance
agent’s conduct necessarily indicate "control" as this term is defined in
jurisprudence. Guidelines indicative of labor law "control," as the
first Insular Life case tells us, should not merely relate to the
mutually desirable result intended by the contractual
relationship; they must have the nature of dictating the means or
methods to be employed in attaining the result, or of fixing the
methodology and of binding or restricting the party hired to the use of
these means. In fact, results-wise, the principal can impose production
quotas and can determine how many agents, with specific territories,
ought to be employed to achieve the company’s objectives. These are
management policy decisions that the labor law element of control
cannot reach. Our ruling in these respects in the first Insular Life case
was practically reiterated in Carungcong. Thus, as will be shown more
fully below, Manulife’s codes of conduct,30 all of which do not intrude into
the insurance agents’ means and manner of conducting their sales and
only control them as to the desired results and Insurance Code norms,
cannot be used as basis for a finding that the labor law concept of
control existed between Manulife and Tongko.
The dissent considers the imposition of administrative and managerial
functions on Tongko as indicative of labor law control; thus, Tongko as
manager, but not as insurance agent, became Manulife’s employee. It
drew this conclusion from what the other Manulife managers disclosed in
their affidavits (i.e., their enumerated administrative and managerial
functions) and after comparing these statements with the managers in
Grepalife. The dissent compared the control exercised by Manulife over
its managers in the present case with the control the managers in the
Grepalife case exercised over their employees by presenting the
following matrix:31
Duties of Manulife’s Manager
- to render or recommend prospective agents to be
licensed, trained and contracted to sell Manulife products
and who will be part of my Unit
- to coordinate activities of the agents under [the
managers’] Unit in [the agents’] daily, weekly and monthly
selling activities, making sure that their respective sales
targets are met;
- to conduct periodic training sessions for [the] agents to
further enhance their sales skill; and
- to assist [the] agents with their sales activities by way of
joint fieldwork, consultations and one-on-one evaluation
and analysis of particular accounts
Aside from these affidavits however, no other evidence exists regarding
the effects of Tongko’s additional roles in Manulife’s sales operations on
the contractual relationship between them.
To the dissent, Tongko’s administrative functions as recruiter, trainer, or
supervisor of other sales agents constituted a substantive alteration of
Manulife’s authority over Tongko and the performance of his end of the
relationship with Manulife. We could not deny though that Tongko
remained, first and foremost, an insurance agent, and that his additional
role as Branch Manager did not lessen his main and dominant role as
insurance agent; this role continued to dominate the relations between
Tongko and Manulife even after Tongko assumed his leadership role
among agents. This conclusion cannot be denied because it proceeds
from the undisputed fact that Tongko and Manulife never altered their
July 1, 1977 Agreement, a distinction the present case has with the
contractual changes made in the second Insular Life case. Tongko’s
results-based commissions, too, attest to the primacy he gave to his role
as insurance sales agent.
The dissent apparently did not also properly analyze and appreciate the
great qualitative difference that exists between:
 the Manulife managers’ role is to coordinate activities of the
agents under the managers’ Unit in the agents’ daily, weekly,
and monthly selling activities, making sure that their respective
sales targets are met.
 the District Manager’s duty in Grepalife is to properly
account, record, and document the company's funds, spot-
check and audit the work of the zone supervisors, conserve
the company's business in the district through
Duties of Grepalife’s Managers/Supervisors
"reinstatements," follow up the submission of weekly
remittance reports of the debit agents and zone supervisors,
- train understudies forpreserve
the position of district
company manager
property in good condition, train
understudies for the position of district managers, and
maintain his quota of sales (the failure of which is a ground for
termination).
- properly account, record and document the company’s funds,

spot-check and audit thethework
ZoneofSupervisor’s (also inxGrepalife)
the zone supervisors, xx has the duty to
direct and supervise the reports
sales activities
follow up the submission of weekly remittance of the of the debit agents
debit agents and zone under him, conserve company property through
supervisors
"reinstatements," undertake and discharge the functions of
absentee debit agents, spot-check the records of debit agents,
- direct and supervise the
and sales
insureactivities of the debit agents
proper documentation of sales and collections by
under him, x x x undertake and agents.
the debit discharge the functions of
absentee debit agents, spot-check the record of debit agents,
and insure proper documentation of sales and collections of
debit agents.These job contents are worlds apart in terms of "control." In Grepalife,
the details of how to do the job are specified and pre-determined; in the
present case, the operative words are the "sales target," the
methodology being left undefined except to the extent of being
"coordinative." To be sure, a "coordinative" standard for a manager
cannot be indicative of control; the standard only essentially describes
what a Branch Manager is – the person in the lead who orchestrates
activities within the group. To "coordinate," and thereby to lead and to
orchestrate, is not so much a matter of control by Manulife; it is simply a
statement of a branch manager’s role in relation with his agents from the
point of view of Manulife whose business Tongko’s sales group carries.
A disturbing note, with respect to the presented affidavits and Tongko’s
alleged administrative functions, is the selective citation of the portions
supportive of an employment relationship and the consequent omission
of portions leading to the contrary conclusion. For example, the following
portions of the affidavit of Regional Sales Manager John Chua, with
counterparts in the other affidavits, were not brought out in the Decision
of November 7, 2008, while the other portions suggesting labor law
control were highlighted. Specifically, the following portions of the
affidavits were not brought out:32
45
 1.a. I have no fixed wages or salary since my services are
compensated by way of commissions based on the computed
premiums paid in full on the policies obtained thereat;
1.b. I have no fixed working hours and employ my own
method in soliticing insurance at a time and place I see fit;
1.c. I have my own assistant and messenger who handle my
daily work load;
1.d. I use my own facilities, tools, materials and supplies in
carrying out my business of selling insurance;
xxxx
6. I have my own staff that handles the day to day operations
of my office;
7. My staff are my own employees and received salaries from
me;
xxxx
9. My commission and incentives are all reported to the
Bureau of Internal Revenue (BIR) as income by a self-
employed individual or professional with a ten (10) percent
creditable withholding tax. I also remit monthly for
professionals.
These statements, read with the above comparative analysis of the
Manulife and the Grepalife cases, would have readily yielded the
conclusion that no employer-employee relationship existed between
Manulife and Tongko.
Even de Dios’ letter is not determinative of control as it indicates the
least amount of intrusion into Tongko’s exercise of his role as manager
in guiding the sales agents. Strictly viewed, de Dios’ directives are
merely operational guidelines on how Tongko could align his operations
with Manulife’s re-directed goal of being a "big league player." The
method is to expand coverage through the use of more agents. This
requirement for the recruitment of more agents is not a means-and-
method control as it relates, more than anything else, and is directly
relevant, to Manulife’s objective of expanded business operations
through the use of a bigger sales force whose members are all on a
principal-agent relationship. An important point to note here is that
Tongko was not supervising regular full-time employees of Manulife
engaged in the running of the insurance business; Tongko was
effectively guiding his corps of sales agents, who are bound to Manulife
through the same Agreement that he had with Manulife, all the while
sharing in these agents’ commissions through his overrides. This is the
lead agent concept mentioned above for want of a more appropriate
term, since the title of Branch Manager used by the parties is really a
misnomer given that what is involved is not a specific regular branch of
the company but a corps of non-employed agents, defined in terms of
covered territory, through which the company sells insurance. Still
another point to consider is that Tongko was not even setting policies in
the way a regular company manager does; company aims and objectives
were simply relayed to him with suggestions on how these objectives
can be reached through the expansion of a non-employee sales force.
Interestingly, a large part of de Dios’ letter focused on income, which
Manulife demonstrated, in Tongko’s case, to be unaffected by the new
goal and direction the company had set. Income in insurance agency, of
course, is dependent on results, not on the means and manner of selling
– a matter for Tongko and his agents to determine and an area into
which Manulife had not waded. Undeniably, de Dios’ letter contained a
directive to secure a competent assistant at Tongko’s own expense.
While couched in terms of a directive, it cannot strictly be understood as
an intrusion into Tongko’s method of operating and supervising the
group of agents within his delineated territory. More than anything else,
the "directive" was a signal to Tongko that his results were
unsatisfactory, and was a suggestion on how Tongko’s perceived
weakness in delivering results could be remedied. It was a solution, with
an eye on results, for a consistently underperforming group; its obvious
intent was to save Tongko from the result that he then failed to grasp –
that he could lose even his own status as an agent, as he in fact
eventually did.
The present case must be distinguished from the second Insular Life
case that showed the hallmarks of an employer-employee relationship in
the management system established. These were: exclusivity of service,
control of assignments and removal of agents under the private
respondent’s unit, and furnishing of company facilities and materials as
well as capital described as Unit Development Fund. All these are
obviously absent in the present case. If there is a commonality in these
cases, it is in the collection of premiums which is a basic authority that
can be delegated to agents under the Insurance Code.
As previously discussed, what simply happened in Tongko’s case was the
grant of an expanded sales agency role that recognized him as leader
amongst agents in an area that Manulife defined. Whether this
consequently resulted in the establishment of an employment
relationship can be answered by concrete evidence that
corresponds to the following questions:
 as lead agent, what were Tongko’s specific functions and the
terms of his additional engagement;
 was he paid additional compensation as a so-called Area Sales
Manager, apart from the commissions he received from the
insurance sales he generated;
 what can be Manulife’s basis to terminate his status as lead
agent;
 can Manulife terminate his role as lead agent separately from
his agency contract; and
 to what extent does Manulife control the means and methods
of Tongko’s role as lead agent?
The answers to these questions may, to some extent, be deduced from
the evidence at hand, as partly discussed above. But strictly speaking,
the questions cannot definitively and concretely be answered through
the evidence on record. The concrete evidence required to settle these
questions is simply not there, since only the Agreement and the
anecdotal affidavits have been marked and submitted as evidence.
Given this anemic state of the evidence, particularly on the requisite
confluence of the factors determinative of the existence of employer-
employee relationship, the Court cannot conclusively find that the
relationship exists in the present case, even if such relationship only
refers to Tongko’s additional functions. While a rough deduction can be
made, the answer will not be fully supported by the substantial evidence
needed.
Under this legal situation, the only conclusion that can be made is that
the absence of evidence showing Manulife’s control over Tongko’s
contractual duties points to the absence of any employer-employee
relationship between Tongko and Manulife. In the context of the
established evidence, Tongko remained an agent all along; although his
subsequent duties made him a lead agent with leadership role, he was
nevertheless only an agent whose basic contract yields no evidence of
means-and-manner control.
This conclusion renders unnecessary any further discussion of the
question of whether an agent may simultaneously assume conflicting
dual personalities. But to set the record straight, the concept of a single
person having the dual role of agent and employee while doing the same
task is a novel one in our jurisprudence, which must be viewed with
caution especially when it is devoid of any jurisprudential support or
precedent. The quoted portions in Justice Carpio-Morales’
dissent,33 borrowed from both the Grepalife and the second Insular Life
cases, to support the duality approach of the Decision of November 7,
2008, are regrettably far removed from their context – i.e., the cases’
factual situations, the issues they decided and the totality of the rulings
in these cases – and cannot yield the conclusions that the dissenting
opinions drew.
46
The Grepalife case dealt with the sole issue of whether the Ruiz brothers’ dissent suggests as the dissenting opinions are as factually and as legally
appointment as zone supervisor and district manager made them erroneous as the Decision under reconsideration.
employees of Grepalife. Indeed, because of the presence of the element
of control in their contract of engagements, they were
In light of these conclusions, the sufficiency of Tongko’s failure to
considered Grepalife’s employees. This did not mean, however, that they
comply with the guidelines of de Dios’ letter, as a ground for termination
were simultaneously considered agents as well as employees
of Tongko’s agency, is a matter that the labor tribunals cannot rule upon
of Grepalife; the Court’s ruling never implied that this situation existed
in the absence of an employer-employee relationship. Jurisdiction over
insofar as the Ruiz brothers were concerned. The Court’s statement –
the matter belongs to the courts applying the laws of insurance, agency
the Insurance Code may govern the licensing requirements and other
and contracts.
particular duties of insurance agents, but it does not bar the application
of the Labor Code with regard to labor standards and labor relations –
simply means that when an insurance company has exercised control WHEREFORE, considering the foregoing discussion, we REVERSE our
over its agents so as to make them their employees, the relationship Decision of November 7, 2008, GRANTManulife’s motion for
between the parties, which was otherwise one for agency governed by reconsideration and, accordingly, DISMISS Tongko’s petition. No costs.
the Civil Code and the Insurance Code, will now be governed by the
Labor Code. The reason for this is simple – the contract of agency has SO ORDERED.
been transformed into an employer-employee relationship.

The second Insular Life case, on the other hand, involved the issue of
whether the labor bodies have jurisdiction over an illegal termination
dispute involving parties who had two contracts – first, an original
contract (agency contract), which was undoubtedly one for agency, and
another subsequent contract that in turn designated the agent acting
unit manager (a management contract). Both the Insular Life and the
labor arbiter were one in the position that both were agency contracts.
The Court disagreed with this conclusion and held that insofar as the
management contract is concerned, the labor arbiter has jurisdiction. It
is in this light that we remanded the case to the labor arbiter for further
proceedings. We never said in this case though that the insurance agent
had effectively assumed dual personalities for the simple reason that the
agency contract has been effectively superseded by the management
contract. The management contract provided that if the appointment
was terminated for any reason other than for cause, the acting unit
manager would be reverted to agent status and assigned to any unit.

The dissent pointed out, as an argument to support its employment

relationship conclusion, that any doubt in the existence of an employer-
employee relationship should be resolved in favor of the existence of the
relationship.34This observation, apparently drawn from Article 4 of the
Labor Code, is misplaced, as Article 4 applies only when a doubt exists in
the "implementation and application" of the Labor Code and its
implementing rules; it does not apply where no doubt exists as in a
situation where the claimant clearly failed to substantiate his claim of
employment relationship by the quantum of evidence the Labor Code
requires.

On the dissent’s last point regarding the lack of jurisprudential value of

our November 7, 2008 Decision, suffice it to state that, as discussed
above, the Decision was not supported by the evidence adduced and
was not in accordance with controlling jurisprudence. It should,
therefore, be reconsidered and abandoned, but not in the manner the
47
11
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 196426 August 15, 2011
MARTICIO SEMBLANTE and DUBRICK PILAR, Petitioners,
vs.
COURT OF APPEALS, 19th DIVISION, now SPECIAL FORMER
19th DIVISION, GALLERA DE MANDAUE / SPOUSES VICENTE
and MARIA LUISA LOOT, Respondents.
DECISION
VELASCO, JR., J.:
Before Us is a Petition for Review on Certiorari under Rule 45, assailing
and seeking to set aside the Decision1and Resolution2 dated May 29,
2009 and February 23, 2010, respectively, of the Court of Appeals (CA)
in CA-G.R. SP No. 03328. The CA affirmed the October 18, 2006
Resolution3 of the National Labor Relations Commission (NLRC), Fourth
Division (now Seventh Division), in NLRC Case No. V-000673-2004.
Petitioners Marticio Semblante (Semblante) and Dubrick Pilar (Pilar)
assert that they were hired by respondents-spouses Vicente and Maria
Luisa Loot, the owners of Gallera de Mandaue (the cockpit), as the
official masiador and sentenciador, respectively, of the cockpit sometime
in 1993.
As the masiador, Semblante calls and takes the bets from the gamecock
owners and other bettors and orders the start of the cockfight. He also
distributes the winnings after deducting the arriba, or the commission for
the cockpit. Meanwhile, as the sentenciador, Pilar oversees the proper
gaffing of fighting cocks, determines the fighting cocks’ physical
condition and capabilities to continue the cockfight, and eventually
declares the result of the cockfight.4
For their services as masiador and sentenciador, Semblante receives PhP
2,000 per week or a total of PhP 8,000 per month, while Pilar gets PhP
3,500 a week or PhP 14,000 per month. They work every Tuesday,
Wednesday, Saturday, and Sunday every week, excluding monthly
derbies and cockfights held on special holidays. Their working days start
at 1:00 p.m. and last until 12:00 midnight, or until the early hours of the
morning depending on the needs of the cockpit. Petitioners had both Following the denial by the NLRC of their Motion for Reconsideration, per
been issued employees’ identification cards5 that they wear every time Resolution dated January 12, 2007, petitioners went to the CA on a
they report for duty. They alleged never having incurred any infraction petition for certiorari. In support of their petition, petitioners argued that
and/or violation of the cockpit rules and regulations. the NLRC gravely abused its discretion in entertaining an appeal that was
not perfected in the first place. On the other hand, respondents argued
that the NLRC did not commit grave abuse of discretion, since they
On November 14, 2003, however, petitioners were denied entry into the
eventually posted their appeal bond and that their appeal was so
cockpit upon the instructions of respondents, and were informed of the
meritorious warranting the relaxation of the rules in the interest of
termination of their services effective that date. This prompted
justice.11
petitioners to file a complaint for illegal dismissal against respondents.
In its Decision dated May 29, 2009, the appellate court found for
In answer, respondents denied that petitioners were their employees
respondents, noting that referees and bet-takers in a cockfight need to
and alleged that they were associates of respondents’ independent
have the kind of expertise that is characteristic of the game to interpret
contractor, Tomas Vega. Respondents claimed that petitioners have no
messages conveyed by mere gestures. Hence, petitioners are akin to
regular working time or day and they are free to decide for themselves
independent contractors who possess unique skills, expertise, and talent
whether to report for work or not on any cockfighting day. In times
to distinguish them from ordinary employees. Further, respondents did
when there are few cockfights in Gallera de Mandaue, petitioners go to
not supply petitioners with the tools and instrumentalities they needed to
other cockpits in the vicinity. Lastly, petitioners, so respondents assert,
perform work. Petitioners only needed their unique skills and talents to
were only issued identification cards to indicate that they were free from
perform their job as masiador and sentenciador.12 The CA held:
the normal entrance fee and to differentiate them from the general
public.6
In some circumstances, the NLRC is allowed to be liberal in the
interpretation of the rules in deciding labor cases. In this case, the
In a Decision dated June 16, 2004, Labor Arbiter Julie C. Rendoque
appeal bond was filed, although late. Moreover, an exceptional
found petitioners to be regular employees of respondents as they
circumstance obtains in the case at bench which warrants a relaxation of
performed work that was necessary and indispensable to the usual trade
the bond requirement as a condition for perfecting the appeal. This case
or business of respondents for a number of years. The Labor Arbiter also
is highly meritorious that propels this Court not to strictly apply the rules
ruled that petitioners were illegally dismissed, and so ordered
and thus prevent a grave injustice from being done.
respondents to pay petitioners their backwages and separation pay.7
As elucidated by the NLRC, the circumstances obtaining in this case
Respondents’ counsel received the Labor Arbiter’s Decision on
wherein no actual employer-employee exists between the petitioners and
September 14, 2004. And within the 10-day appeal period, he filed the
the private respondents [constrain] the relaxation of the rules. In this
respondents’ appeal with the NLRC on September 24, 2004, but without
regard, we find no grave abuse attributable to the administrative body.
posting a cash or surety bond equivalent to the monetary award granted
by the Labor Arbiter.8
xxxx
It was only on October 11, 2004 that respondents filed an appeal bond
dated October 6, 2004. Hence, in a Resolution9 dated August 25, 2005, Petitioners are duly licensed "masiador" and "sentenciador" in the cockpit
the NLRC denied the appeal for its non-perfection. owned by Lucia Loot. Cockfighting, which is a part of our cultural
heritage, has a peculiar set of rules. It is a game based on the fighting
ability of the game cocks in the cockpit. The referees and bet-takers
Subsequently, however, the NLRC, acting on respondents’ Motion for
need to have that kind of expertise that is characteristic of the cockfight
Reconsideration, reversed its Resolution on the postulate that their
gambling who can interpret the message conveyed even by mere
appeal was meritorious and the filing of an appeal bond, albeit belated,
gestures. They ought to have the talent and skill to get the bets from
is a substantial compliance with the rules. The NLRC held in its
numerous cockfighting aficionados and decide which cockerel to put in
Resolution of October 18, 2006 that there was no employer-employee
the arena. They are placed in that elite spot where they can control the
relationship between petitioners and respondents, respondents having
game and the crowd. They are not given salaries by cockpit owners as
no part in the selection and engagement of petitioners, and that no
their compensation is based on the "arriba". In fact, they can offer their
separate individual contract with respondents was ever executed by
services everywhere because they are duly licensed by the GAB. They
petitioners.10
are free to choose which cockpit arena to enter and offer their expertise.
Private respondents cannot even control over the means and methods of
the manner by which they perform their work. In this light, they are akin
48
to independent contractors who possess unique skills, expertise and to control the employee’s conduct, which is the most important
talent to distinguish them from ordinary employees. element.18 1avvphi1

Furthermore, private respondents did not supply petitioners with the
tools and instrumentalities they needed to perform their work.
Petitioners only needed their talent and skills to be a "masiador" and
"sentenciador". As such, they had all the tools they needed to perform
their work. (Emphasis supplied.)
The CA refused to reconsider its Decision. Hence, petitioners came to
this Court, arguing in the main that the CA committed a reversible error
in entertaining an appeal, which was not perfected in the first place.
As found by both the NLRC and the CA, respondents had no part in
petitioners’ selection and management;19petitioners’ compensation was
paid out of the arriba (which is a percentage deducted from the total
bets), not by petitioners;20 and petitioners performed their functions as
masiador and sentenciador free from the direction and control of
respondents.21 In the conduct of their work, petitioners relied mainly on
their "expertise that is characteristic of the cockfight gambling,"22 and
were never given by respondents any tool needed for the performance
of their work.23

Respondents, not being petitioners’ employers, could never have

Indeed, the posting of a bond is indispensable to the perfection of an
dismissed, legally or illegally, petitioners, since respondents were without
appeal in cases involving monetary awards from the Decision of the
power or prerogative to do so in the first place. The rule on the posting
Labor Arbiter.13 Article 223 of the Labor Code provides:
of an appeal bond cannot defeat the substantive rights of respondents to
be free from an unwarranted burden of answering for an illegal dismissal
Article 223. Appeal. — Decisions, awards, or orders of the Labor Arbiter for which they were never responsible.1avvphi1
are final and executory unless appealed to the Commission by any or
both parties within ten (10) calendar days from receipt of such decisions,
Strict implementation of the rules on appeals must give way to the
awards, or orders. Such appeal may be entertained only on any of the
factual and legal reality that is evident from the records of this
following grounds:
case.24 After all, the primary objective of our laws is to dispense justice
and equity, not the contrary.
xxxx
WHEREFORE, We DENY this petition and AFFIRM the May 29, 2009
In case of a judgment involving a monetary award, an appeal by the Decision and February 23, 2010 Resolution of the CA, and the October
employer may be perfected only upon the posting of a cash or surety 18, 2006 Resolution of the NLRC.
bond issued by a reputable bonding company duly accredited by the
Commission in the amount equivalent to the monetary award in the
SO ORDERED.
judgment appealed from. (Emphasis supplied.)

Time and again, however, this Court, considering the substantial merits
of the case, has relaxed this rule on, and excused the late posting of, the
appeal bond when there are strong and compelling reasons for the
liberality,14such as the prevention of miscarriage of justice extant in the
case15 or the special circumstances in the case combined with its legal
merits or the amount and the issue involved.16 After all, technical rules
cannot prevent courts from exercising their duties to determine and
settle, equitably and completely, the rights and obligations of the
parties.17 This is one case where the exception to the general rule lies.

While respondents had failed to post their bond within the 10-day period
provided above, it is evident, on the other hand, that petitioners are NOT
employees of respondents, since their relationship fails to pass muster
the four-fold test of employment We have repeatedly mentioned in
countless decisions: (1) the selection and engagement of the employee;
(2) the payment of wages; (3) the power of dismissal; and (4) the power

49
12
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 192084 September 14, 2011
JOSE MEL BERNARTE, Petitioner,
vs.
PHILIPPINE BASKETBALL ASSOCIATION (PBA), JOSE
EMMANUEL M. EALA, and PERRY MARTINEZ,Respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review1 of the 17 December 2009 Decision2 and 5
April 2010 Resolution3 of the Court of Appeals in CA-G.R. SP No. 105406.
The Court of Appeals set aside the decision of the National Labor
Relations Commission (NLRC), which affirmed the decision of the Labor
Arbiter, and held that petitioner Jose Mel Bernarte is an independent
contractor, and not an employee of respondents Philippine Basketball
Association (PBA), Jose Emmanuel M. Eala, and Perry Martinez. The
Court of Appeals denied the motion for reconsideration.
The Facts
The facts, as summarized by the NLRC and quoted by the Court of
Appeals, are as follows:
Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they
were invited to join the PBA as referees. During the leadership of
Commissioner Emilio Bernardino, they were made to sign contracts on a
year-to-year basis. During the term of Commissioner Eala, however,
changes were made on the terms of their employment.
Complainant Bernarte, for instance, was not made to sign a contract
during the first conference of the All-Filipino Cup which was from
February 23, 2003 to June 2003. It was only during the second
conference when he was made to sign a one and a half month contract
for the period July 1 to August 5, 2003.
On January 15, 2004, Bernarte received a letter from the Office of the
Commissioner advising him that his contract would not be renewed citing
his unsatisfactory performance on and off the court. It was a total shock
for Bernarte who was awarded Referee of the year in 2003. He felt that
the dismissal was caused by his refusal to fix a game upon order of Ernie
De Leon.
On the other hand, complainant Guevarra alleges that he was invited to
join the PBA pool of referees in February 2001. On March 1, 2001, he
signed a contract as trainee. Beginning 2002, he signed a yearly contract
as Regular Class C referee. On May 6, 2003, respondent Martinez issued
a memorandum to Guevarra expressing dissatisfaction over his
questioning on the assignment of referees officiating out-of-town games.
Beginning February 2004, he was no longer made to sign a contract.
Respondents aver, on the other hand, that complainants entered into
two contracts of retainer with the PBA in the year 2003. The first
contract was for the period January 1, 2003 to July 15, 2003; and the
second was for September 1 to December 2003. After the lapse of the
latter period, PBA decided not to renew their contracts.
Complainants were not illegally dismissed because they were not
employees of the PBA. Their respective contracts of retainer were simply
not renewed. PBA had the prerogative of whether or not to renew their
contracts, which they knew were fixed.4
In her 31 March 2005 Decision,5 the Labor Arbiter6 declared petitioner an
employee whose dismissal by respondents was illegal. Accordingly, the
Labor Arbiter ordered the reinstatement of petitioner and the payment of
backwages, moral and exemplary damages and attorney’s fees, to wit:
WHEREFORE, premises considered all respondents who are here found
to have illegally dismissed complainants are hereby ordered to (a)
reinstate complainants within thirty (30) days from the date of receipt of
this decision and to solidarily pay complainants:
JOSE MEL RENATO
BERNARTE GUEVARRA
1. backwages from January P536,250.00 P211,250.00
1, 2004 up to the finality of
this Decision, which to date
is
2. moral damages 100,000.00 50,000.00
3. exemplary damages 100,000.00 50,000.00
4. 10% attorney's fees 68,625.00 36,125.00
TOTAL P754,875.00 P397,375.00
or a total of P1,152,250.00
The rest of the claims are hereby dismissed for lack of merit or basis.
SO ORDERED.7
In its 28 January 2008 Decision,8 the NLRC affirmed the Labor Arbiter’s
judgment. The dispositive portion of the NLRC’s decision reads:
WHEREFORE, the appeal is hereby DISMISSED. The Decision of Labor
Arbiter Teresita D. Castillon-Lora dated March 31, 2005 is AFFIRMED.
SO ORDERED.9
Respondents filed a petition for certiorari with the Court of Appeals,
which overturned the decisions of the NLRC and Labor Arbiter. The
dispositive portion of the Court of Appeals’ decision reads:
WHEREFORE, the petition is hereby GRANTED. The
assailed Decision dated January 28, 2008 and Resolutiondated August
26, 2008 of the National Labor Relations Commission
are ANNULLED and SET ASIDE. Private respondents’ complaint before
the Labor Arbiter is DISMISSED.
SO ORDERED.10
The Court of Appeals’ Ruling
The Court of Appeals found petitioner an independent contractor since
respondents did not exercise any form of control over the means and
methods by which petitioner performed his work as a basketball referee.
The Court of Appeals held:
While the NLRC agreed that the PBA has no control over the referees’
acts of blowing the whistle and making calls during basketball games, it,
nevertheless, theorized that the said acts refer to the means and
methods employed by the referees in officiating basketball games for the
illogical reason that said acts refer only to the referees’ skills. How could
a skilled referee perform his job without blowing a whistle and making
calls? Worse, how can the PBA control the performance of work of a
referee without controlling his acts of blowing the whistle and making
calls?
50
Moreover, this Court disagrees with the Labor Arbiter’s finding (as
affirmed by the NLRC) that the Contracts of Retainer show that
petitioners have control over private respondents.
xxxx
period elapsed. Said registered letter was dispatched from this office to
Manila CPO (RTS) under bill #6, line 7, page1, column 1, on September
8, 2005.12
Section 10, Rule 13 of the Rules of Court provides:
interest of substantial justice. We agree with the NLRC. The ends of
justice will be better served if we resolve the instant case on the merits
rather than allowing the substantial issue of whether petitioner is an
independent contractor or an employee linger and remain unsettled due
to procedural technicalities.

The existence of an employer-employee relationship is ultimately a

Neither do We agree with the NLRC’s affirmance of the Labor Arbiter’s
conclusion that private respondents’ repeated hiring made them regular
employees by operation of law.11
The Issues
SEC. 10. Completeness of service. – Personal service is complete upon
question of fact. As a general rule, factual issues are beyond the
actual delivery. Service by ordinary mail is complete upon the expiration
province of this Court. However, this rule admits of exceptions, one of
of ten (10) days after mailing, unless the court otherwise provides.
which is where there are conflicting findings of fact between the Court of
Service by registered mail is complete upon actual receipt by the
Appeals, on one hand, and the NLRC and Labor Arbiter, on the other,
addressee, or after five (5) days from the date he received the first
such as in the present case.18
notice of the postmaster, whichever date is earlier.

The main issue in this case is whether petitioner is an employee of
respondents, which in turn determines whether petitioner was illegally
dismissed.
Petitioner raises the procedural issue of whether the Labor Arbiter’s
decision has become final and executory for failure of respondents to
appeal with the NLRC within the reglementary period.
The Ruling of the Court
The petition is bereft of merit.
The Court shall first resolve the procedural issue posed by petitioner.
To determine the existence of an employer-employee relationship, case
The rule on service by registered mail contemplates two situations: (1)
law has consistently applied the four-fold test, to wit: (a) the selection
actual service the completeness of which is determined upon receipt by
and engagement of the employee; (b) the payment of wages; (c) the
the addressee of the registered mail; and (2) constructive service the
power of dismissal; and (d) the employer’s power to control the
completeness of which is determined upon expiration of five days from
employee on the means and methods by which the work is
the date the addressee received the first notice of the postmaster.13
accomplished. The so-called "control test" is the most important
indicator of the presence or absence of an employer-employee
Insofar as constructive service is concerned, there must be conclusive relationship.19
proof that a first notice was duly sent by the postmaster to the
addressee.14 Not only is it required that notice of the registered mail be
In this case, PBA admits repeatedly engaging petitioner’s services, as
issued but that it should also be delivered to and received by the
shown in the retainer contracts. PBA pays petitioner a retainer fee,
addressee.15 Notably, the presumption that official duty has been
exclusive of per diem or allowances, as stipulated in the retainer
regularly performed is not applicable in this situation. It is incumbent
contract. PBA can terminate the retainer contract for petitioner’s violation
upon a party who relies on constructive service to prove that the notice
of its terms and conditions.
was sent to, and received by, the addressee.16

Petitioner contends that the Labor Arbiter’s Decision of 31 March 2005
became final and executory for failure of respondents to appeal with the
NLRC within the prescribed period. Petitioner claims that the Labor
Arbiter’s decision was constructively served on respondents as early as
August 2005 while respondents appealed the Arbiter’s decision only on
31 March 2006, way beyond the reglementary period to appeal.
Petitioner points out that service of an unclaimed registered mail is
deemed complete five days from the date of first notice of the post
master. In this case three notices were issued by the post office, the last
being on 1 August 2005. The unclaimed registered mail was
consequently returned to sender. Petitioner presents the Postmaster’s
Certification to prove constructive service of the Labor Arbiter’s decision
on respondents. The Postmaster certified:
xxx
That upon receipt of said registered mail matter, our registry in charge,
Vicente Asis, Jr., immediately issued the first registry notice to claim on
July 12, 2005 by the addressee. The second and third notices were
issued on July 21 and August 1, 2005, respectively.
That the subject registered letter was returned to the sender (RTS)
because the addressee failed to claim it after our one month retention
However, respondents argue that the all-important element of control is
The best evidence to prove that notice was sent would be a certification
lacking in this case, making petitioner an independent contractor and not
from the postmaster, who should certify not only that the notice was
an employee of respondents.
issued or sent but also as to how, when and to whom the delivery and
receipt was made. The mailman may also testify that the notice was
actually delivered.17 Petitioner contends otherwise. Petitioner asserts that he is an employee
of respondents since the latter exercise control over the performance of
his work. Petitioner cites the following stipulations in the retainer
In this case, petitioner failed to present any concrete proof as to how,
contract which evidence control: (1) respondents classify or rate a
when and to whom the delivery and receipt of the three notices issued
referee; (2) respondents require referees to attend all basketball games
by the post office was made. There is no conclusive evidence showing
organized or authorized by the PBA, at least one hour before the start of
that the post office notices were actually received by respondents,
the first game of each day; (3) respondents assign petitioner to officiate
negating petitioner’s claim of constructive service of the Labor Arbiter’s
ballgames, or to act as alternate referee or substitute; (4) referee agrees
decision on respondents. The Postmaster’s Certification does not
to observe and comply with all the requirements of the PBA governing
sufficiently prove that the three notices were delivered to and received
the conduct of the referees whether on or off the court; (5) referee
by respondents; it only indicates that the post office issued the three
agrees (a) to keep himself in good physical, mental, and emotional
notices. Simply put, the issuance of the notices by the post office is not
condition during the life of the contract; (b) to give always his best effort
equivalent to delivery to and receipt by the addressee of the registered
and service, and loyalty to the PBA, and not to officiate as referee in any
mail. Thus, there is no proof of completed constructive service of the
basketball game outside of the PBA, without written prior consent of the
Labor Arbiter’s decision on respondents.
Commissioner; (c) always to conduct himself on and off the court
according to the highest standards of honesty or morality; and (6)
At any rate, the NLRC declared the issue on the finality of the Labor imposition of various sanctions for violation of the terms and conditions
Arbiter’s decision moot as respondents’ appeal was considered in the of the contract.
51
The foregoing stipulations hardly demonstrate control over the means
and methods by which petitioner performs his work as a referee
officiating a PBA basketball game. The contractual stipulations do not
pertain to, much less dictate, how and when petitioner will blow the
whistle and make calls. On the contrary, they merely serve as rules of
conduct or guidelines in order to maintain the integrity of the
professional basketball league. As correctly observed by the Court of
Appeals, "how could a skilled referee perform his job without blowing a
whistle and making calls? x x x [H]ow can the PBA control the
performance of work of a referee without controlling his acts of blowing
the whistle and making calls?"20
In Sonza v. ABS-CBN Broadcasting Corporation,21 which determined the
relationship between a television and radio station and one of its talents,
the Court held that not all rules imposed by the hiring party on the hired
party indicate that the latter is an employee of the former. The Court
held:
We find that these general rules are merely guidelines towards the
achievement of the mutually desired result, which are top-rating
television and radio programs that comply with standards of the
industry. We have ruled that:
Further, not every form of control that a party reserves to himself over
the conduct of the other party in relation to the services being rendered
may be accorded the effect of establishing an employer-employee
relationship. The facts of this case fall squarely with the case of Insular
Life Assurance Co., Ltd. v. NLRC. In said case, we held that:
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.22
We agree with respondents that once in the playing court, the referees
exercise their own independent judgment, based on the rules of the
game, as to when and how a call or decision is to be made. The referees
decide whether an infraction was committed, and the PBA cannot
overrule them once the decision is made on the playing court. The
referees are the only, absolute, and final authority on the playing court.
Respondents or any of the PBA officers cannot and do not determine
which calls to make or not to make and cannot control the referee when
he blows the whistle because such authority exclusively belongs to the
referees. The very nature of petitioner’s job of officiating a professional
basketball game undoubtedly calls for freedom of control by
respondents.
Moreover, the following circumstances indicate that petitioner is an
independent contractor: (1) the referees are required to report for work
only when PBA games are scheduled, which is three times a week spread
over an average of only 105 playing days a year, and they officiate
games at an average of two hours per game; and (2) the only
deductions from the fees received by the referees are withholding taxes.
In other words, unlike regular employees who ordinarily report for work
eight hours per day for five days a week, petitioner is required to report
for work only when PBA games are scheduled or three times a week at
two hours per game. In addition, there are no deductions for
contributions to the Social Security System, Philhealth or Pag-Ibig, which
are the usual deductions from employees’ salaries. These undisputed
circumstances buttress the fact that petitioner is an independent
contractor, and not an employee of respondents.
Furthermore, the applicable foreign case law declares 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.
In Yonan v. United States Soccer Federation, Inc.,23 the United States
District Court of Illinois held that plaintiff, a soccer referee, is an
independent contractor, and not an employee of defendant which is the
statutory body that governs soccer in the United States. As such, plaintiff
was not entitled to protection by the Age Discrimination in Employment
Act. The U.S. District Court ruled:
Generally, "if an employer has the right to control and direct the work of
an individual, not only as to the result to be achieved, but also as to
details by which the result is achieved, an employer/employee
relationship is likely to exist." The Court must be careful to distinguish
between "control[ling] the conduct of another party contracting party by
setting out in detail his obligations" consistent with the freedom of
contract, on the one hand, and "the discretionary control an employer
daily exercises over its employee’s conduct" on the other.
Yonan asserts that the Federation "closely supervised" his performance
at each soccer game he officiated by giving him an assessor, discussing
his performance, and controlling what clothes he wore while on the field
and traveling. Putting aside that the Federation did not, for the most
part, control what clothes he wore, the Federation did not supervise
Yonan, but rather evaluated his performance after matches. That the
Federation evaluated Yonan as a referee does not mean that he was an
employee. There is no question that parties retaining independent
contractors may judge the performance of those contractors to
determine if the contractual relationship should continue. x x x
It is undisputed that the Federation did not control the way Yonan
refereed his games.1âwphi1 He had full discretion and authority, under
the Laws of the Game, to call the game as he saw fit. x x x In a similar
vein, subjecting Yonan to qualification standards and procedures like the
Federation’s registration and training requirements does not create an
employer/employee relationship. x x x
A position that requires special skills and independent judgment weights
in favor of independent contractor status. x x x Unskilled work, on the
other hand, suggests an employment relationship. x x x Here, it is
undisputed that soccer refereeing, especially at the professional and
international level, requires "a great deal of skill and natural ability."
Yonan asserts that it was the Federation’s training that made him a top
referee, and that suggests he was an employee. Though substantial
training supports an employment inference, that inference is dulled
significantly or negated when the putative employer’s activity is the
result of a statutory requirement, not the employer’s choice. x x x
In McInturff v. Battle Ground Academy of Franklin,24 it was held that the
umpire was not an agent of the Tennessee Secondary School Athletic
Association (TSSAA), so the player’s vicarious liability claim against the
association should be dismissed. In finding that the umpire is an
independent contractor, the Court of Appeals of Tennesse ruled:
The TSSAA deals with umpires to achieve a result-uniform rules for all
baseball games played between TSSAA member schools. The TSSAA
does not supervise regular season games. It does not tell an official how
to conduct the game beyond the framework established by the rules.
The TSSAA does not, in the vernacular of the case law, control the
means and method by which the umpires work.
In addition, the fact that PBA repeatedly hired petitioner does not by
itself prove that petitioner is an employee of the former. For a hired
party to be considered an employee, the hiring party must have control
over the means and methods by which the hired party is to perform his
work, which is absent in this case. The continuous rehiring by PBA of
petitioner simply signifies the renewal of the contract between PBA and
petitioner, and highlights the satisfactory services rendered by petitioner
warranting such contract renewal. Conversely, if PBA decides to
discontinue petitioner’s services at the end of the term fixed in the
contract, whether for unsatisfactory services, or violation of the terms
and conditions of the contract, or for whatever other reason, the same
merely results in the non-renewal of the contract, as in the present case.
The non-renewal of the contract between the parties does not constitute
illegal dismissal of petitioner by respondents.
WHEREFORE, we DENY the petition and AFFIRM the assailed decision
of the Court of Appeals. SO ORDERED.
52
13
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
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.
DECISION
PERALTA, J.:
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 petitioner’s 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 P7,000.00. They also agreed that
he was entitled to an additional commission of P100.00 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 respondent’s 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
ofP2,000.00 for services rendered as a studio technician as well as moral
and exemplary damages.
Respondent’s 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
53
shall be entitled to draw advances of P7,000.00 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 P7,000.00 x 19.6 mos.=P133,000.00 + 1/12
thereof as 13th month pay of P11,083.33 + SILP P7,000/32.62
days=P214.59/day x 5=P1,072.96 x 1.58
yrs.=P1,695.27);separation pay of P22,750.00 (P7,000.00
x 3.25 yrs.);
2) To pay complainant's unpaid commission of P2,000.00;
3) To pay him moral and exemplary damages in the combined
amount of P75,000.00.
Other monetary claims of complainant are dismissed for lack of merit.7
The Labor Arbiter stated that petitioner’s denial of the employment
relationship cannot overcome respondent’s 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.
Respondent’s 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.)
Petitioner’s motion for reconsideration was denied for lack of merit by
the Court of Appeals in its Resolution12dated 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.
Petitioner’s 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
54
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
Arbiter’s 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 P7,000.00, with commission of P100.00
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 employer’s power to
control the employee’s conduct. The most important element is the
employer’s control of the employee’s 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 P7,000.00 (P3,500.00 every 15th of the
month and another P3,500.00 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 ofP7,000.00. 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.1âwphi1 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
petitioner’s claim that the wages paid were advances for respondent’s
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 former’s favor. The policy is to extend
55
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 employee’s 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 Arbiter’s 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.

56
14
Republic of the Philippines
SUPREME COURT
Baguio
FIRST DIVISION
G.R. No. 163700 April 18, 2012
CHARLIE JAO, Petitioner,
vs.
BCC PRODUCTS SALES INC., and TERRANCE TY, Respondents.
DECISION
BERSAMIN, J.:
The issue is whether petitioner was respondents’ employee or not.
Respondents denied an employer-employee relationship with petitioner,
who insisted the contrary.
Through his petition for review on certiorari, petitioner appeals the
decision promulgated by the Court of Appeals (CA) on February 27,
2004,1 finding no employee-employer relationship between him and
respondents, thereby reversing the ruling by the National Labor
Relations Commission (NLRC) to the effect that he was the employee of
respondents.
Antecedents
Petitioner maintained that respondent BCC Product Sales Inc. (BCC) and
its President, respondent Terrance Ty (Ty), employed him as comptroller
starting from September 1995 with a monthly salary of P20,000.00 to
handle the financial aspect of BCC’s business;2 that on October 19,1995,
the security guards of BCC, acting upon the instruction of Ty, barred him
from entering the premises of BCC where he then worked; that his
attempts to report to work in November and December 12, 1995 were
frustrated because he continued to be barred from entering the premises
of BCC;3 and that he filed a complaint dated December 28, 1995 for
illegal dismissal, reinstatement with full backwages, non-payment of
wages, damages and attorney’s fees.4
Respondents countered that petitioner was not their employee but the
employee of Sobien Food Corporation (SFC), the major creditor and
supplier of BCC; and that SFC had posted him as its comptroller in BCC
to oversee BCC’s finances and business operations and to look after
SFC’s interests or investments in BCC.5
Although Labor Arbiter Felipe Pati ruled in favor of petitioner on June 24,
1996,6 the NLRC vacated the ruling and remanded the case for further
proceedings.7 Thereafter, Labor Arbiter Jovencio Ll. Mayor rendered a
new decision on September 20, 2001, dismissing petitioner’s complaint
for want of an employer-employee relationship between the
parties.8 Petitioner appealed the September 20, 2001 decision of Labor
Arbiter Mayor.
On July 31, 2002, the NLRC rendered a decision reversing Labor Arbiter
Mayor’s decision, and declaring that petitioner had been illegally
dismissed. It ordered the payment of unpaid salaries, backwages and
13th month pay, separation pay and attorney’s fees.9 Respondents
moved for the reconsideration of the NLRC decision, but their motion for
reconsideration was denied on September 30, 2002.10 Thence,
respondents assailed the NLRC decision on certiorari in the CA.
Ruling of the CA
On February 27, 2004, the CA promulgated its assailed
decision,11 holding:
After a judicious review of the records vis-à-vis the respective posturing
of the contending parties, we agree with the finding that no employer-
employee relationship existed between petitioner BCC and the private
respondent. On this note, the conclusion of the public respondent must
be reversed for being issued with grave abuse of discretion.
"Etched in an unending stream of cases are the four (4) standards in
determining the existence of an employer-employee relationship,
namely, (a) the manner of selection and engagement of the putative
employee; (b) the mode of payment of wages; (c) the presence or
absence of power of dismissal; and, (d) the presence or absence of
control of the putative employee’s conduct." Of these powers the power
of control over the employee’s conduct is generally regarded as
determinative of the existence of the relationship.
Apparently, in the case before us, all these four elements are absent.
First, there is no proof that the services of the private respondent were
engaged to perform the duties of a comptroller in the petitioner
company. There is no proof that the private respondent has undergone a
selection procedure as a standard requisite for employment, especially
with such a delicate position in the company. Neither is there any proof
of his appointment nor is there any showing that the parties entered into
an employment contract, stipulating thereof that he will receive
P20,000.00/month salary as comptroller, before the private respondent
commenced with his work as such. Second, as clearly established on
record, the private respondent was not included in the petitioner
company’s payroll during the time of his alleged employment with the
former. True, the name of the private respondent Charlie Jao appears in
the payroll however it does not prove that he has received his
remuneration for his services. Notably, his name was not among the
employees who will receive their salaries as represented by the payrolls.
Instead, it appears therein as a comptroller who is authorized to approve
the same. Suffice it to state that it is rather obscure for a certified public
accountant doing the functions of a comptroller from September 1995 up
to December 1995 not to receive his salary during the said period. Verily,
such scenario does not conform with the usual and ordinary experience
of man. Coming now to the most controlling factor, the records
indubitably reveal the undisputed fact that the petitioner company did
not have nor did not exercise the power of control over the private
respondent. It did not prescribe the manner by which the work is to be
carried out, or the time by which the private respondent has to report for
and leave from work. As already stated, the power of control is such an
important factor that other requisites may even be disregarded.
In Sevilla v. Court of Appeals, the Supreme Court emphatically held,
thus:
"The "control test," under which the person for whom the
services are rendered reserves the right to direct not only the
end to be achieved but also the means for reaching such end, is
generally relied on by the courts."
We have carefully examined the evidence submitted by the private
respondent in the formal offer of evidence and unfortunately, other than
the bare assertions of the private respondent which he miserably failed
to substantiate, we find nothing therein that would decisively indicate
that the petitioner BCC exercised the fundamental power of control over
the private respondent in relation to his employment—not even the ID
issued to the private respondent and the affidavits executed by Bertito
Jemilla and Rogelio Santias. At best, these pieces of documents merely
suggest the existence of employer-employee relationship as intimated by
the NLRC. On the contrary, it would appear that the said sworn
statement provided a substantial basis to support the contention that the
private respondent worked at the petitioner BCC as SFC’s representative,
being its major creditor and supplier of goods and merchandise.
Moreover, as clearly pointed out by the petitioner in his Reply to the
private respondent’s Comment, it is unnatural for SFC to still employ the
private respondent "to oversee and supervise collections of account
receivables due SFC from its customers or clients" like the herein
petitioner BCC on a date later than December, 1995 considering that a
criminal complaint has already been instituted against him.
Sadly, the private respondent failed to sufficiently discharge the burden
of showing with legal certainty that employee-employer relationship
existed between the parties. On the other hand, it was clearly shown by
the petitioner that it neither exercised control nor supervision over the
57
conduct of the private respondent’s employment. Hence, the allegation
that there is employer-employee relationship must necessarily fail.
Consequently, a discussion on the issue of illegal dismissal therefore
becomes unnecessary.
WHEREFORE, premises considered, the petition is GRANTED. The
assailed Decision of the public respondent NLRC dated July 31, 2002 and
the Resolution dated September 30, 2002 are REVERSED and SET
ASIDE. Accordingly, the decision of the Labor Arbiter dated September
20, 2001 is hereby REINSTATED.
SO ORDERED.
After the CA denied petitioner’s motion for reconsideration on May 14,
2004,12 he filed a motion for extension to file petition for review, which
the Court denied through the resolution dated July 7, 2004 for failure to
render an explanation on why the service of copies of the motion for
extension on respondents was not personally made.13The denial
notwithstanding, he filed his petition for review on certiorari. The Court
denied the petition on August 18, 2004 in view of the denial of the
motion for extension of time and the continuing failure of petitioner to
render the explanation as to the non-personal service of the petition on
respondents.14 However, upon a motion for reconsideration, the Court
reinstated the petition for review on certiorari and required respondents
to comment.15
Issue
The sole issue is whether or not an employer-employee relationship
existed between petitioner and BCC. A finding on the existence of an
employer-employee relationship will automatically warrant a finding of
illegal dismissal, considering that respondents did not state any valid
grounds to dismiss petitioner.
Ruling
The petition lacks merit.
The existence of an employer-employee relationship is a question of fact.
Generally, a re-examination of factual findings cannot be done by the
Court acting on a petition for review on certiorari because the Court is
not a trier of facts but reviews only questions of law. Nor may the Court
be bound to analyze and weigh again the evidence adduced and
considered in the proceedings below.16 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.17
Here, the findings of the NLRC differed from those of the Labor Arbiter
and the CA. This conflict among such adjudicating offices compels the
Court’s exercise of its authority to review and pass upon the evidence
presented and to draw its own conclusions therefrom.
To prove his employment with BCC, petitioner offered the following: (a)
BCC Identification Card (ID) issued to him stating his name and his
position as "comptroller," and bearing his picture, his signature, and the
signature of Ty; (b) a payroll of BCC for the period of October 1-15,
1996 that petitioner approved as comptroller; (c) various bills and
receipts related to expenditures of BCC bearing the signature of
petitioner; (d) various checks carrying the signatures of petitioner and
Ty, and, in some checks, the signature of petitioner alone; (e) a court
order showing that the issuing court considered petitioner’s ID as proof
of his employment with BCC; (f) a letter of petitioner dated March 1,
1997 to the Department of Justice on his filing of a criminal case for
estafa against Ty for non-payment of wages; (g) affidavits of some
employees of BCC attesting that petitioner was their co-employee in
BCC; and (h) a notice of raffle dated December 5, 1995 showing that
petitioner, being an employee of BCC, received the notice of raffle in
behalf of BCC.18
Respondents denied that petitioner was BCC’s employee. They affirmed
that SFC had installed petitioner as its comptroller in BCC to oversee and
supervise SFC’s collections and the account of BCC to protect SFC’s
interest; that their issuance of the ID to petitioner was only for the
purpose of facilitating his entry into the BCC premises in relation to his
work of overseeing the financial operations of BCC for SFC; that the ID
should not be considered as evidence of petitioner’s employment in
BCC;19 that petitioner executed an affidavit in March 1996,20 stating,
among others, as follows:
1. I am a CPA (Certified Public Accountant) by profession but
presently associated with, or employed by, Sobien Food
Corporation with the same business address as abovestated;
2. In the course of my association with, or employment by,
Sobien Food Corporation (SFC, for short), I have been
entrusted by my employer to oversee and supervise collections
on account of receivables due SFC from its customers or
clients; for instance, certain checks due and turned over by
one of SFC’s customers is BCC Product Sales, Inc., operated or
run by one Terrance L. Ty, (President and General manager),
pursuant to, or in accordance with, arrangements or
agreement thereon; such arrangement or agreement is duly
confirmed by said Terrance Ty, as shown or admitted by him
in a public instrument executed therefor, particularly par. 2 of
that certain Counter-Affidavit executed and subscribed on
December 11, 1995, xerox copy of which is hereto attached,
duly marked as Annex "A" and made integral part hereof.
3. Despite such admission of an arrangement, or agreement
insofar as BCC-checks were delivered to, or turned over in
favor of SFC, Mr. Terrance Ty, in a desire to blemish my
reputation or to cause me dishonor as well as to impute unto
myself the commission of a crime, state in another public
instrument executed therefor in that:
"3. That all the said 158 checks were unlawfully appropriated by a
certain Charlie Jao absolutely without any authority from BCC and the
same were reportedly turned over by said Mr. Jao to a person who is not
an agent or is not authorized representative of BCC."
xerox copy of which document (Affidavit) is hereto attached, duly
marked as Annex "B" and made integral part hereof. (emphasis supplied)
and that the affidavit constituted petitioner’s admission of the
arrangement or agreement between BCC and SFC for the latter to
appoint a comptroller to oversee the former’s operations.
Petitioner counters, however, that the affidavit did not establish the
absence of an employer-employee relationship between him and
respondents because it had been executed in March 1996, or after his
employment with respondents had been terminated on December 12,
1995; and that the affidavit referred to his subsequent employment by
SFC following the termination of his employment by BCC.21
We cannot side with petitioner.
Our perusal of the affidavit of petitioner compels a conclusion similar to
that reached by the CA and the Labor Arbiter to the effect that the
affidavit actually supported the contention that petitioner had really
worked in BCC as SFC’s representative. It does seem more natural and
more believable that petitioner’s affidavit was referring to his
employment by SFC even while he was reporting to BCC as a comptroller
in behalf of SFC. As respondents pointed out, it was implausible for SFC
to still post him to oversee and supervise the collections of accounts
receivables due from BCC beyond December 1995 if, as he insisted, BCC
had already illegally dismissed him and had even prevented him from
entering the premises of BCC. Given the patent animosity and strained
relations between him and respondents in such circumstances, indeed,
how could he still efficiently perform in behalf of SFC the essential
responsibility to "oversee and supervise collections" at BCC? Surely,
respondents would have vigorously objected to any arrangement with
SFC involving him.
We note that petitioner executed the affidavit in March 1996 to refute a
statement Ty himself made in his own affidavit dated December 11,
1995 to the effect that petitioner had illegally appropriated some checks
without authority from BCC.22 Petitioner thereby sought to show that he
58
had the authority to receive the checks pursuant to the arrangements
between SFC and BCC. This showing would aid in fending off the
criminal charge respondents filed against him arising from his
mishandling of the checks. Naturally, the circumstances petitioner
adverted to in his March 1996 affidavit concerned those occurring before
December 11, 1995, the same period when he actually worked as
comptroller in BCC.
Further, an affidavit dated September 5, 2000 by Alfredo So, the
President of SFC, whom petitioner offered as a rebuttal witness, lent
credence to respondents’ denial of petitioner’s employment. So declared
in that affidavit, among others, that he had known petitioner for being
"earlier his retained accountant having his own office but did not hold
office" in SFC’s premises; that Ty had approached him (So) "looking for
an accountant or comptroller to be employed by him (Ty) in [BCC’s]
distribution business" of SFC’s general merchandise, and had later asked
him on his opinion about petitioner; and that he (So) had subsequently
learned that "Ty had already employed [petitioner] as his comptroller as
of September 1995."23
The statements of So really supported respondents’ position in that
petitioner’s association with SFC prior to his supposed employment by
BCC went beyond mere acquaintance with So. That So, who had earlier
merely "retained" petitioner as his accountant, thereafter employed
petitioner as a "retained" accountant after his supposed illegal dismissal
by BCC raised a doubt as to his employment by BCC, and rather
confirmed respondents’ assertion of petitioner being an employee of SFC
while he worked at BCC.
Moreover, in determining the presence or absence of an employer-
employee relationship, the Court has consistently looked for the
following incidents, to wit: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and
(d) the employer’s power to control the employee on the means and
methods by which the work is accomplished. The last element, the so-
called control test, is the most important element.24
Hereunder are some of the circumstances and incidents occurring while
petitioner was supposedly employed by BCC that debunked his claim
against respondents.
It can be deduced from the March 1996 affidavit of petitioner that
respondents challenged his authority to deliver some 158 checks to SFC.
Considering that he contested respondents’ challenge by pointing to the
existing arrangements between BCC and SFC, it should be clear that
respondents did not exercise the power of control over him, because he
thereby acted for the benefit and in the interest of SFC more than of
BCC.
In addition, petitioner presented no document setting forth the terms of
his employment by BCC.1âwphi1 The failure to present such agreement
on terms of employment may be understandable and expected if he was
a common or ordinary laborer who would not jeopardize his employment
by demanding such document from the employer, but may not square
well with his actual status as a highly educated professional.
Petitioner’s admission that he did not receive his salary for the three
months of his employment by BCC, as his complaint for illegal dismissal
and non-payment of wages25 and the criminal case for estafa he later
filed against the respondents for non-payment of wages26 indicated,
further raised grave doubts about his assertion of employment by BCC. If
the assertion was true, we are puzzled how he could have remained in
BCC’s employ in that period of time despite not being paid the first salary
of P20,000.00/month. Moreover, his name did not appear in the payroll
of BCC despite him having approved the payroll as comptroller.
Lastly, the confusion about the date of his alleged illegal dismissal
provides another indicium of the insincerity of petitioner’s assertion of
employment by BCC. In the petition for review on certiorari, he averred
that he had been barred from entering the premises of BCC on October
19, 1995,27 and thus was illegally dismissed. Yet, his complaint for illegal
dismissal stated that he had been illegally dismissed on December 12,
1995 when respondents’ security guards barred him from entering the
premises of BCC,28 causing him to bring his complaint only on December
29, 1995, and after BCC had already filed the criminal complaint against
him. The wide gap between October 19, 1995 and December 12, 1995
cannot be dismissed as a trivial inconsistency considering that the
several incidents affecting the veracity of his assertion of employment by
BCC earlier noted herein transpired in that interval.
With all the grave doubts thus raised against petitioner’s claim, we need
not dwell at length on the other proofs he presented, like the affidavits
of some of the employees of BCC, the ID, and the signed checks, bills
and receipts. Suffice it to be stated that such other proofs were easily
explainable by respondents and by the aforestated circumstances
showing him to be the employee of SFC, not of BCC.
WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals;
and ORDERS petitioner to pay the costs of suit.
SO ORDERED.
59
15
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 153511 July 18, 2012
LEGEND HOTEL (MANILA), owned by TITANIUM CORPORATION,
and/or, NELSON NAPUD, in his capacity as the President of
Petitioner Corporation, Petitioner,
vs.
HERNANI S. REALUYO, also known as JOEY ROA, Respondent.
DECISION
BERSAMIN, J.:
This labor case for illegal dismissal involves a pianist employed to
perform in the restaurant of a hotel. On August 9, 1999, respondent,
whose stage name was Joey R. Roa, filed a complaint for alleged unfair
labor practice, constructive illegal dismissal, and the
underpayment/nonpayment of his premium pay for holidays, separation
pay, service incentive leave pay, and 13111 month pay. He prayed for
attorney's fees, moral damages off P100,000.00 and exemplary damages
for P100,000.00.1
Respondent averred that he had worked as a pianist at the Legend
Hotel’s Tanglaw Restaurant from September 1992 with an initial rate of
P400.00/night that was given to him after each night’s performance; that
his rate had increased to P750.00/night; and that during his
employment, he could not choose the time of performance, which had
been fixed from 7:00 pm to 10:00 pm for three to six times/week. He
added that the Legend Hotel’s restaurant manager had required him to
conform with the venue’s motif; that he had been subjected to the rules
on employees’ representation checks and chits, a privilege granted to
other employees; that on July 9, 1999, the management had notified
him that as a cost-cutting measure his services as a pianist would no
longer be required effective July 30, 1999; that he disputed the excuse,
insisting that Legend Hotel had been lucratively operating as of the filing
of his complaint; and that the loss of his employment made him bring his
complaint.2
In its defense, petitioner denied the existence of an employer-employee
relationship with respondent, insisting that he had been only a talent
engaged to provide live music at Legend Hotel’s Madison Coffee Shop for On February 11, 2002, the CA set aside the decision of the
three hours/day on two days each week; and stated that the economic NLRC,6 holding:
crisis that had hit the country constrained management to dispense with
his services.
xxx
On December 29, 1999, the Labor Arbiter (LA) dismissed the complaint
Applying the above-enumerated elements of the employee-employer
for lack of merit upon finding that the parties had no employer-employee
relationship in this case, the question to be asked is, are those elements
relationship.3 The LA explained thusly:
present in this case?
xxx
The answer to this question is in the affirmative.
On the pivotal issue of whether or not there existed an employer-
xxx
employee relationship between the parties, our finding is in the negative.
The finding finds support in the service contract dated September 1,
1992 xxx. Well settled is the rule that of the four (4) elements of employer-
employee relationship, it is the power of control that is more decisive.
xxx
In this regard, public respondent failed to take into consideration that in
petitioner’s line of work, he was supervised and controlled by
Even if we grant the initial non-existence of the service contract, as
respondent’s restaurant manager who at certain times would require him
complainant suggests in his reply (third paragraph, page 4), the picture
to perform only tagalog songs or music, or wear barong tagalog to
would not change because of the admission by complainant in his letter
conform with Filipiniana motif of the place and the time of his
dated October 8, 1996 (Annex "C") that what he was receiving was
performance is fixed by the respondents from 7:00 pm to 10:00 pm,
talent fee and not salary.
three to six times a week. Petitioner could not choose the time of his
performance. xxx.
This is reinforced by the undisputed fact that complainant received his
talent fee nightly, unlike the regular employees of the hotel who are paid
As to the status of petitioner, he is considered a regular employee of
by monthly xxx.
private respondents since the job of the petitioner was in furtherance of
the restaurant business of respondent hotel. Granting that petitioner was
xxx initially a contractual employee, by the sheer length of service he had
rendered for private respondents, he had been converted into a regular
employee xxx.
And thus, absent the power to control with respect to the means and
methods by which his work was to be accomplished, there is no
employer-employee relationship between the parties xxx. xxx
xxx xxx In other words, the dismissal was due to retrenchment in order to
avoid or minimize business losses, which is recognized by law under
Article 283 of the Labor Code, xxx.
WHEREFORE, this case must be, as it is hereby, DISMISSED for lack of
merit.
xxx
SO ORDERED.4
WHEREFORE, foregoing premises considered, this petition is GRANTED.
xxx.7
Respondent appealed, but the National Labor Relations Commission
(NLRC) affirmed the LA on May 31, 2001.5
Issues
Respondent assailed the decision of the NLRC in the Court of Appeals
(CA) on certiorari. In this appeal, petitioner contends that the CA erred:
60
 I. XXX WHEN IT RULED THAT THERE IS THE EXISTENCE OF
EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE
PETITIONER HOTEL AND RESPONDENT ROA.
II. XXX IN FINDING THAT ROA IS A REGULAR EMPLOYEE AND
THAT THE TERMINATION OF HIS SERVICES WAS ILLEGAL.
THE CA LIKEWISE ERRED WHEN IT DECLARED THE
REINSTATEMENT OF ROA TO HIS FORMER POSITION OR BE
GIVEN A SEPARATION PAY EQUIVALENT TO ONE MONTH FOR
EVERY YEAR OF SERVICE FROM SEPTEMBER 1999 UNTIL
JULY 30, 1999 CONSIDERING THE ABSENCE OF AN
EMPLOYMENT RELATIONSHIP BETWEEN THE PARTIES.
III. XXX WHEN IT DECLARED THAT ROA IS ENTITLED TO
BACKWAGES, SERVICE INCENTIVE LEAVE AND OTHER
BENEFITS CONSIDERING THAT THERE IS NO EMPLOYER
EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES.
IV. XXX WHEN IT NULLIFIED THE DECISION DATED MAY 31,
2001 IN NLRC NCR CA NO. 023404-2000 OF THE NLRC AS
WELL AS ITS RESOLUTION DATED JUNE 29, 2001 IN FAVOR
OF HEREIN PETITIONER HOTEL WHEN HEREIN RESPONDENT
ROA FAILED TO SHOW PROOF THAT THE NLRC AND THE
LABOR ARBITER HAVE COMMITTED GRAVE ABUSE OF
DISCRETION OR LACK OF JURISDICTION IN THEIR
RESPECTIVE DECISIONS.
V. XXX WHEN IT OVERLOOKED THE FACT THAT THE
PETITION WHICH ROA FILED IS IMPROPER SINCE IT RAISED
QUESTIONS OF FACT.
VI. XXX WHEN IT GAVE DUE COURSE TO THE PETITION
FILED BY ROA WHEN IT IS CLEARLY IMPROPER AND SHOULD
HAVE BEEN DISMISSED OUTRIGHT CONSIDERING THAT A
PETITION FOR CERTIORARI UNDER RULE 65 IS LIMITED
ONLY TO QUESTIONS OR ISSUES OF GRAVE ABUSE OF
DISCRETION OR LACK OF JURISDICTION COMMITTED BY
THE NLRC OR THE LABOR ARBITER, WHICH ISSUES ARE NOT
PRESENT IN THE CASE AT BAR.
The assigned errors are divided into the procedural issue of whether or
not the petition for certiorari filed in the CA was the proper recourse;
and into two substantive issues, namely: (a) whether or not respondent
was an employee of petitioner; and (b) if respondent was petitioner’s
employee, whether he was validly terminated.
Ruling
The appeal fails.
Procedural Issue:
Certiorari was a proper recourse
Petitioner contends that respondent’s petition for certiorari was improper
as a remedy against the NLRC due to its raising mainly questions of fact
and because it did not demonstrate that the NLRC was guilty of grave
abuse of discretion.
The contention is unwarranted. There is no longer any doubt that a
petition for certiorari brought to assail the decision of the NLRC may
raise factual issues, and the CA may then review the decision of the
NLRC and pass upon such factual issues in the process.8 The power of
the CA to review factual issues in the exercise of its original jurisdiction
to issue writs of certiorari is based on Section 9 of Batas Pambansa Blg.
129, which pertinently provides that the CA "shall have the power to try
cases and conduct hearings, receive evidence and perform any and all
acts necessary to resolve factual issues raised in cases falling within its
original and appellate jurisdiction, including the power to grant and
conduct new trials or further proceedings."
Substantive Issue No. 1:
Employer-employee relationship existed between the parties
We next ascertain if the CA correctly found that an employer-employee
relationship existed between the parties.
The issue of whether or not an employer-employee relationship existed
between petitioner and respondent is essentially a question of fact.9 The
factors that determine the issue include who has the power to select the
employee, who pays the employee’s wages, who has the power to
dismiss the employee, and who exercises control of the methods and
results by which the work of the employee is accomplished.10 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,11 a finding that the relationship exists
must nonetheless rest on substantial evidence, which is that amount of
relevant evidence that a reasonable mind might accept as adequate to
justify a conclusion.12
Generally, the Court does not review factual questions, primarily because
the Court is not a trier of facts. However, where, like here, there is a
conflict between the factual findings of the Labor Arbiter and the NLRC,
on the one hand, and those of the CA, on the other hand, it becomes
proper for the Court, in the exercise of its equity jurisdiction, to review
and re-evaluate the factual issues and to look into the records of the
case and re-examine the questioned findings.13
A review of the circumstances reveals that respondent was, indeed,
petitioner’s employee. He was undeniably employed as a pianist in
petitioner’s Madison Coffee Shop/Tanglaw Restaurant from September
1992 until his services were terminated on July 9, 1999.
First of all, petitioner actually wielded the power of selection at the time
it entered into the service contract dated September 1, 1992 with
respondent. This is true, notwithstanding petitioner’s insistence that
respondent had only offered his services to provide live music at
petitioner’s Tanglaw Restaurant, and despite petitioner’s position that
what had really transpired was a negotiation of his rate and time of
availability. The power of selection was firmly evidenced by, among
others, the express written recommendation dated January 12, 1998 by
Christine Velazco, petitioner’s restaurant manager, for the increase of his
remuneration.14
Petitioner could not seek refuge behind the service contract entered into
with respondent. It is the law that defines and governs an employment
relationship, whose terms are not restricted to those fixed in the written
contract, for other factors, like the nature of the work the employee has
been called upon to perform, are also considered. The law affords
protection to an employee, and does not countenance any attempt to
subvert its spirit and intent. Any stipulation in writing can be ignored
when the employer utilizes the stipulation to deprive the employee of his
security of tenure. The inequality that characterizes employer-employee
relations generally tips the scales in favor of the employer, such that the
employee is often scarcely provided real and better options.15
Secondly, petitioner argues that whatever remuneration was given to
respondent were only his talent fees that were not included in the
definition of wage under the Labor Code; and that such talent fees were
but the consideration for the service contract entered into between
them.
The argument is baseless.
Respondent was paid P400.00 per three hours of performance from 7:00
pm to 10:00 pm, three to six nights a week. Such rate of remuneration
was later increased to P750.00 upon restaurant manager Velazco’s
recommendation. There is no denying that the remuneration
denominated as talent fees was fixed on the basis of his talent and skill
and the quality of the music he played during the hours of performance
each night, taking into account the prevailing rate for similar talents in
the entertainment industry.16
61
Respondent’s remuneration, albeit denominated as talent fees, was still
considered as included in the term wage in the sense and context of the
Labor Code, regardless of how petitioner chose to designate the
remuneration. Anent this, Article 97(f) of the Labor Code clearly states:
xxx wage paid to any employee shall mean the remuneration or
earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services
rendered or to be rendered, and includes the fair and reasonable value,
as determined by the Secretary of Labor, of board, lodging, or other
facilities customarily furnished by the employer to the employee.
Clearly, respondent received compensation for the services he rendered
as a pianist in petitioner’s hotel. Petitioner cannot use the service
contract to rid itself of the consequences of its employment of
respondent. There is no denying that whatever amounts he received for
his performance, howsoever designated by petitioner, were his wages.
It is notable that under the Rules Implementing the Labor Code and as
held in Tan v. Lagrama,17 every employer is required to pay his
employees by means of a payroll, which should show in each case,
among others, the employee’s rate of pay, deductions made from such
pay, and the amounts actually paid to the employee. Yet, petitioner did
not present the payroll of its employees to bolster its insistence of
respondent not being its employee.
That respondent worked for less than eight hours/day was of no
consequence and did not detract from the CA’s finding on the existence
of the employer-employee relationship. In providing that the " normal
hours of work of any employee shall not exceed eight (8) hours a day,"
Article 83 of the Labor Code only set a maximum of number of hours as
"normal hours of work" but did not prohibit work of less than eight
hours.
Thirdly, the power of the employer to control the work of the employee
is considered the most significant determinant of the existence of an
employer-employee relationship.18 This is the so-called control test, and
is premised on whether the person for whom the services are performed
reserves the right to control both the end achieved and the manner and
means used to achieve that end.19
Petitioner submits that it did not exercise the power of control over
respondent and cites the following to buttress its submission, namely:
(a) respondent could beg off from his nightly performances in the
restaurant for other engagements; (b) he had the sole prerogative to
play and perform any musical arrangements that he wished; (c) although
petitioner, through its manager, required him to play at certain times a
particular music or song, the music, songs, or arrangements, including
the beat or tempo, were under his discretion, control and direction; (d)
the requirement for him to wear barong Tagalog to conform with the
Filipiniana motif of the venue whenever he performed was by no means
evidence of control; (e) petitioner could not require him to do any other
work in the restaurant or to play the piano in any other places, areas, or
establishments, whether or not owned or operated by petitioner, during
the three hour period from 7:00 pm to 10:00 pm, three to six times a
week; and (f) respondent could not be required to sing, dance or play
another musical instrument.
A review of the records shows, however, that respondent performed his
work as a pianist under petitioner’s supervision and control. Specifically,
petitioner’s control of both the end achieved and the manner and means
used to achieve that end was demonstrated by the following, to wit:
a. He could not choose the time of his performance, which
petitioners had fixed from 7:00 pm to 10:00 pm, three to six
times a week;
b. He could not choose the place of his performance;
c. The restaurant’s manager required him at certain times to
perform only Tagalog songs or music, or to wear barong
Tagalog to conform to the Filipiniana motif; and
d. He was subjected to the rules on employees’ representation
check and chits, a privilege granted to other employees.
Relevantly, it is worth remembering that the employer need not actually
supervise the performance of duties by the employee, for it sufficed that
the employer has the right to wield that power.
Lastly, petitioner claims that it had no power to dismiss respondent due
to his not being even subject to its Code of Discipline, and that the
power to terminate the working relationship was mutually vested in the
parties, in that either party might terminate at will, with or without
cause.
The claim is contrary to the records. Indeed, the memorandum informing
respondent of the discontinuance of his service because of the present
business or financial condition of petitioner20 showed that the latter had
the power to dismiss him from employment.21
Substantive Issue No. 2:
Validity of the Termination
Having established that respondent was an employee whom petitioner
terminated to prevent losses, the conclusion that his termination was by
reason of retrenchment due to an authorized cause under the Labor
Code is inevitable.
Retrenchment is one of the authorized causes for the dismissal of
employees recognized by the Labor Code. It is a management
prerogative resorted to by employers to avoid or to minimize business
losses. On this matter, Article 283 of the Labor Code states:
Article 283. Closure of establishment and reduction of personnel. – The
employer may also terminate the employment of any employee due to
the installation of labor-saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on
the workers and the Ministry of Labor and Employment at least one (1)
month before the intended date thereof. xxx. In case of retrenchment to
prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year.
The Court has laid down the following standards that an employer
should meet to justify retrenchment and to foil abuse, namely:
(a) The expected losses should be substantial and not merely
de minimis in extent;
(b) The substantial losses apprehended must be reasonably
imminent;
(c) The retrenchment must be reasonably necessary and likely
to effectively prevent the expected losses; and
(d) The alleged losses, if already incurred, and the expected
imminent losses sought to be forestalled must be proved by
sufficient and convincing evidence.22
Anent the last standard of sufficient and convincing evidence, it ought to
be pointed out that a less exacting standard of proof would render too
easy the abuse of retrenchment as a ground for termination of services
of employees.23
62
Was the retrenchment of respondent valid?

In termination cases, the burden of proving that the dismissal was for a
valid or authorized cause rests upon the employer. Here, petitioner did
not submit evidence of the losses to its business operations and the
economic havoc it would thereby imminently sustain. It only claimed that
respondent’s termination was due to its "present business/financial
condition." This bare statement fell short of the norm to show a valid
retrenchment. Hence, we hold that there was no valid cause for the
retrenchment of respondent.

Indeed, not every loss incurred or expected to be incurred by an

employer can justify retrenchment.1âwphi1 The employer must prove,
among others, that the losses are substantial and that the retrenchment
is reasonably necessary to avert such losses. Thus, by its failure to
present sufficient and convincing evidence to prove that retrenchment
was necessary, respondent’s termination due to retrenchment is not
allowed.

The Court realizes that the lapse of time since the retrenchment might
have rendered respondent's reinstatement to his former job no longer
feasible. If that should be true, then petitioner should instead pay to him
separation pay at the rate of one. month pay for every year of service
computed from September 1992 (when he commenced to work for the
petitioners) until the finality of this decision, and full backwages from the
time his compensation was withheld until the finality of this decision.

WHEREFORE, we DENY the petition for review on certiorari, and AFFIRM

the decision of the Court of Appeals promulgated on February 11, 2002,
subject to the modification that should reinstatement be no longer
feasible, petitioner shall pay to respondent separation pay of one month
for every year of service computed from September 1992 until the
finality of this decision, and full backwages from the time his
compensation was withheld until the finality of this decision.

Costs of suit to be paid by the petitioners.

SO ORDERED.

63
16
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 199547 September 24, 2012
THE NEW PHILIPPINE SKYLANDERS, INC. and/or JENNIFER M.
ENANO-BOTE, Petitioners,
vs.
FRANCISCO N. DAKILA, Respondent.
RESOLUTION
PERLAS-BERNABE, J.:
The Petition for Review on Certiorari1 assails the August 31, 20112 and
November 23, 20113 Resolutions of the Court of Appeals (CA) in CA-G.R.
SP No. 113015 which affirmed the September 10, 2009 Decision4 and
December 15, 2009 Resolution5 of the National Labor Relations
Commission (NLRC) finding respondent Francisco N.Dakila (respondent
Dakila) to have been illegally dismissed.
The Factual Antecedents
Respondent Dakila was employed by petitionercorporation as early as
1987 and terminated for cause in April 1997 when the corporation was
sold. In May 1997, he was rehired as consultant by the petitioners under
a Contract for Consultancy Services6 dated April 30, 1997.
Thereafter, in a letter7 dated April 19, 2007, respondent Dakila informed
petitioners of his compulsory retirement effective May 2, 2007 and
sought for the payment of his retirement benefits pursuant to the
Collective Bargaining Agreement. His request, however, was not acted
upon. Instead, he was terminated from service effective May 1, 2007.
Consequently, respondent Dakila filed a complaint for constructive illegal
dismissal, non-payment of retirement benefits, under/non-payment of
wages and other benefits of a regular employee, and damages against
petitioners, The New Philippine Skylanders, Inc. and its President and
General Manager, Jennifer M. Eñano-Bote, before the NLRC. He averred,
among others, that the consultancy contract was a scheme to deprive
him of the benefits of regularization, claiming to have assumed tasks
necessary and desirable in the trade or business of petitioners and under
their direct control and supervision. In support of his claim, he
submitted, among others, copies of his time cards, Official Business
Itinerary Slips, Daily Attendance Sheets and other documents prescribing
the manner in which his tasks were to be accomplished under the control
of the petitioners and acknowledging his status as a regular employee of
the corporation.
On the other hand, petitioners, in their position paper,8 asserted that
respondent Dakilawas a consultant and not their regular employee. The
latter was not included in petitioners' payroll and paid a fixed amount
under the consultancy contract. He was not required to observe regular
working hours and was free to adopt means and methods to accomplish
his task except as to the results of the work required of him. Hence, no
employer-employee relationship existed between them. Moreover,
respondentDakila terminated his contract in a letter dated April 19, 2007,
thus, negating his dismissal.
Ruling of the Labor Arbiter
On May 28, 2008, Labor Arbiter Thomas T. Que, Jr. rendered a
Decision9 finding respondent Dakila to have been illegally dismissed and
ordered his reinstatement with full backwages computed from the time
of his dismissal on May 1, 2007 until his actual reinstatement as well as
the payment of his unpaid benefits under the Collective Bargaining
Agreement (CBA). He declared respondent Dakila to be a regular
employee on the basis of the unrebutted documentary evidence showing
that he was under the petitioners' direct control and supervision and
performed tasks that were either incidental or usually desirable and
necessary in the trade or business of petitioner corporation for a period
of ten years. Having been dismissed without cause and notice,
respondent Dakila was awarded moral and exemplary damages in the
amount of P 50,000.00 each. He is also entitled to avail of
thecorporation's retirement benefits upon his reinstatement.
Ruling of the NLRC
On appeal, the NLRC sustained the Labor Arbiter's (LA) finding that
respondent Dakila was a regular employee and that his dismissal was
illegal. However, it noted that since he was already beyond the
retirement age, his reinstatement was no longer feasible. As such, it
ordered the payment of his retirement pay to be computed from 1997
until the date of the decision. Moreover, it found respondent Dakila
entitled to reinstatement wages from the time petitioners received a
copy of the LA’s Decision on July 7, 2008 up to the date of the NLRC's
decision. Thus, it ordered the petitioners to pay respondent Dakila the
additional amount of P 278,508.33representing reinstatement wages and
retirement pay.10
The petitioners' motion for reconsideration having been denied in the
Resolution11 dated December 15, 2009, they filed a petition for
certiorari12 before the CA raising the following errors:
(1) the complaint should have been dismissed against
petitioner Jennifer M. Eñano-Bote absent any showing of bad
faith;
(2) respondent Dakila is not a regular employee;
(3) respondent was not illegally dismissed as it was the
respondent who resigned; and
(4) theLA’s monetary award has no basis.
Ruling of the CA
In the Resolution13 dated August 31, 2011, the CA dismissed the petition
for failure to show that the NLRC committed grave abuse of discretion in
affirming the LA's Decision. It found the factual findings of the LA and
the NLRC to be supported by substantial evidence and thus, should be
accorded respect and finality. Petitioners' motion for reconsideration
therefrom was likewise denied in the Resolution14 dated November 23,
2011.
Hence, the instant petition reiterating the arguments raised before the
CA.
Ruling of the Court
The issue of illegal dismissal is premised on the existence of an
employer-employee relationship between the parties herein. It is
essentially a question of fact, beyond the ambit of a petition for review
on certiorari under Rule 45 of the Rules of Court unless there is a clear
showing of palpable error or arbitrary disregard of evidence which does
not obtain in this case. Records reveal that both the LA and the NLRC, as
affirmed by the CA, have found substantial evidence to show that
respondent Dakila was a regular employee who was dismissed without
cause.
Following Article 279 of the Labor Code, an employee who is unjustly
dismissed from work is entitled to reinstatement without loss of seniority
rights and other privileges and to his full backwages computed from the
time he was illegally dismissed. However, considering that respondent
Dakila was terminated on May 1, 2007, or one (1) day prior to his
compulsory retirement on May 2, 2007, his reinstatement is no longer
feasible. Accordingly, the NLRC correctly held him entitled to the
64
payment of his retirement benefits pursuant to the CBA. On the other
hand, his backwages should be computed only for days prior to his
compulsory retirement which in this case is only a day. Consequently,
the award of reinstatement wages pending appeal must be deleted for
lack of basis.

Similarly, the Court finds no basis to hold petitioner Jennifer M. Eñano-

Bote, President and General Manager of The New Philippine Skylanders,
Inc., jointly and severally liable with the corporation for the payment of
the monetary awards. The mere lack of authorized or just cause to
terminate one's employment and the failure to observe due process do
not ipso facto mean that the corporate officer acted with malice or bad
faith.15 There must be independent proof of malice or bad faith which
was not established in this case. Perforce, petitioner Jennifer M. Eñano-
Bote cannot be made personally liable for the liabilities of the corporation
which, by legal fiction, has a personality separate and distinct from its
officers, stockholders and members. Moreover, for lack of factual and
legal bases, the awards of moral and exemplary damages cannot also be
sustained.161âwphi1

WHEREFORE, premises considered, the petition is PARTLY GRANTED.

The assailed August 31, 2011 and November 23, 2011 Resolutions of the
Court of Appeals in CA-G.R. SP No. 113015 are MODIFIED as follows:

(1) petitioner Jennifer M. Eñano-Bote is ABSOLVED from

liability for payment of respondent Francisco N. Dakila's
monetary awards;

(2) the awards of reinstatement wages pending appeal as well

as the moral and exemplary damages are ordered DELETED;
and

(3) the computation of backwages should be limited only for a

day prior to his compulsory retirement.

The rest of the decision stands.

SO ORDERED.

65
17
THIRD DIVISION
G.R. No. 171482, March 12, 2014
ASHMOR M. TESORO, PEDRO ANG AND GREGORIO
SHARP, Petitioners, v. METRO MANILA RETREADERS, INC.
(BANDAG) AND/OR NORTHERN LUZON RETREADERS, INC.
(BANDAG) AND/OR POWER TIRE AND RUBBER CORP.
(BANDAG), Respondents.
DECISION
ABAD, J.:
This case concerns the effect on the status of employment of employees
who entered into a Service Franchise Agreement with their employer.
The Facts and the Case
On various dates between 1991 and 1998, petitioners Ashmor M. Tesoro,
Pedro Ang, and Gregorio Sharp used to work as salesmen for
respondents Metro Manila Retreaders, Inc., Northern Luzon Retreaders,
Inc., or Power Tire and Rubber Corporation, apparently sister companies,
collectively called “Bandag.” Bandag offered repair and retread services
for used tires. In 1998, however, Bandag developed a franchising
scheme that would enable others to operate tire and retreading
businesses using its trade name and service system.
Petitioners quit their jobs as salesmen and entered into separate Service
Franchise Agreements (SFAs) with Bandag for the operation of their
respective franchises. Under the SFAs, Bandag would provide funding
support to the petitioners subject to a regular or periodic liquidation of
their revolving funds. The expenses out of these funds would be
deducted from petitioners’ sales to determine their incomes.
At first, petitioners managed and operated their respective franchises
without any problem. After a length of time, however, they began to
default on their obligations to submit periodic liquidations of their
operational expenses in relation to the revolving funds Bandag provided
them. Consequently, Bandag terminated their respective SFA.
Aggrieved, petitioners filed a complaint for constructive dismissal, non–
payment of wages, incentive pay, 13th month pay and damages against
Bandag with the National Labor Relations Commission (NLRC).
Petitioners contend that, notwithstanding the execution of the SFAs, they
remained to be Bandag’s employees, the SFAs being but a circumvention
of their status as regular employees.
For its part, Bandag pointed out that petitioners freely resigned from
their employment and decided to avail themselves of the opportunity to
be independent entrepreneurs under the franchise scheme that Bandag
had. Thus, no employer–employee relationship existed between
petitioners and Bandag.
On March 14, 2003 the Labor Arbiter rendered a Decision, dismissing the
complaint on the ground that no employer–employee relationship existed
between Bandag and petitioners. Upon petitioners’ appeal to the NLRC
the latter affirmed on June 30, 2003 the Labor Arbiter’s Decision. It also
denied petitioners’ motion for reconsideration. Undaunted, petitioners
filed a petition for certiorari under Rule 65 with the Court of Appeals
(CA) ascribing grave abuse of discretion. On July 29, 2005 the CA
rendered a Decision,1 dismissing the petition for lack of merit. It also
denied their motion for reconsideration on February 7, 2006.
Issue of the Case
The only issue presented in this case is whether or not petitioners
remained to be Bandag’s salesmen under the franchise scheme it
entered into with them.
Ruling of the Court
Franchising is a business method of expansion that allows an individual
or group of individuals to market a product or a service and to use of the
patent, trademark, trade name and the systems prescribed by the
owner.2 In this case, Bandag’s SFAs created on their faces an
arrangement that gave petitioners the privilege to operate and maintain
Bandag branches in the way of franchises, providing tire repair and
retreading services, with petitioners earning profits based on the
performance of their branches.
The question is: did petitioners remain to be Bandag’s employees after
they began operating those branches? The tests for determining
employer–employee relationship are: (a) the selection and engagement
of the employee; (b) the payment of wages; (c) the power of dismissal;
and (d) the employer’s power to control the employee with respect to
the means and methods by which the work is to be accomplished. The
last is called the “control test,” the most important element.3
When petitioners agreed to operate Bandag’s franchise branches in
different parts of the country, they knew that this substantially changed
their former relationships. They were to cease working as Bandag’s
salesmen, the positions they occupied before they ventured into running
separate Bandag branches. They were to cease receiving salaries or
commissions. Their incomes were to depend on the profits they made.
Yet, petitioners did not then complain of constructive dismissal. They
took their chances, ran their branches, Gregorio Sharp in La Union for
several months and Ashmor Tesoro in Baguio and Pedro Ang in
Pangasinan for over a year. Clearly, their belated claim of constructive
dismissal is quite hollow.
It is pointed out that Bandag continued, like an employer, to exercise
control over petitioners’ work. It points out that Bandag: (a) retained the
right to adjust the price rates of products and services; (b) imposed
minimum processed tire requirement (MPR); (c) reviewed and regulated
credit applications; and (d) retained the power to suspend petitioners’
services for failure to meet service standards.
But uniformity in prices, quality of services, and good business practices
are the essence of all franchises. A franchisee will damage the
franchisor’s business if he sells at different prices, renders different or
inferior services, or engages in bad business practices. These business
constraints are needed to maintain collective responsibility for faultless
and reliable service to the same class of customers for the same prices.
This is not the “control” contemplated in employer–employee
relationships. Control in such relationships addresses the details of day
to day work like assigning the particular task that has to be done,
monitoring the way tasks are done and their results, and determining the
time during which the employee must report for work or accomplish his
assigned task.
Franchising involves the use of an established business expertise,
trademark, knowledge, and training. As such, the franchisee is required
to follow a certain established system. Accordingly, the franchisors may
impose guidelines that somehow restrict the petitioners’ conduct which
do not necessarily indicate “control.” The important factor to consider is
still the element of control over how the work itself is done, not just its
end result.4
The Court held, in Tongko v. The Manufacturers Life Insurance Co.
(Phils.), Inc.,5 that, results–wise, the insurance company, as principal,
can impose production quotas upon its independent agents and
determine how many individual agents, with specific territories, such
independent agents ought to employ to achieve the company’s
objectives. These are management policy decisions that the labor law
element of control cannot reach. Petitioners’ commitment to abide by
Bandag’s policy decisions and implementing rules, as franchisees does
not make them its employees.
Petitioners cannot use the revolving funds feature of the SFAs as
evidence of their employer–employee relationship with Bandag. These
66
funds do not represent wages. They are more in the nature of capital
advances for operations that Bandag conceptualized to attract
prospective franchisees. Petitioners’ incomes depended on the profits
they make, controlled by their individual abilities to increase sales and
reduce operating costs.

The Labor Arbiter, the NLRC, and the CA, are unanimous that petitioners
were no longer “route salesmen, bringing previously ordered supplies
and goods to dealers, taking back returned items, collecting payments,
remitting them, etc. They were themselves then the dealers, getting
their own supply and bringing these to their own customers and sub–
dealers, if any.”

The rule in labor cases is that the findings of fact of quasi–judicial

bodies, like the NLRC, are to be accorded with respect, even finality, if
supported by substantial evidence. This is particularly true when passed
upon and upheld by the CA.6

WHEREFORE, the instant petition is DENIED. The Decision dated July

29, 2005 and Resolution dated February 7, 2006 of the Court of Appeals
in CA–G.R. SP 82447 are AFFIRMED.

SO ORDERED.

67
18
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 195190 July 28, 2014
ROYALE HOMES MARKETING CORPORATION, Petitioner,
vs.
FIDEL P. ALCANTARA [deceased], substituted by his
heirs, Respondent.
DECISION
DEL CASTILLO, J.:
Not every form of control that a hiring party imposes on the hired party
is indicative of employee-employer relationship. Rules and regulations
that merely serve as guidelines towards the achievement of a mutually
desired result without dictating the means and methods of accomplishing
it do not establish employer-employee relationship.1
This Petition for Review on Certiorari2 assails the June 23, 2010
Decision3 of the Court of Appeals (CA) in CA-G.R. SP No. 109998 which
(i) reversed and set aside the February 23, 2009 Decision4 of the
National Labor Relations Commission (NLRC), (ii) ordered petitioner
Royale Homes Marketing Corporation (Royale Homes) to pay respondent
Fidel P. Alcantara (Alcantara) backwages and separation pay, and (iii)
remanded the case to the Labor Arbiter for the proper determination and
computation of said monetary awards.
Also assailed in this Petition isthe January 18, 2011 Resolution5 of the CA
denying Royale Homes’ Motion for Reconsideration,6 as well as its
Supplemental7 thereto.
Factual Antecedents
In 1994, Royale Homes, a corporation engaged in marketing real
estates, appointed Alcantara asits Marketing Director for a fixed period of
one year. His work consisted mainly of marketing Royale Homes’
realestate inventories on an exclusive basis. Royale Homes reappointed
him for several consecutive years, the last of which covered the period
January 1 to December 31, 2003 where he held the position of Division 5
Vice-President-Sales.8
Proceedings before the Labor Arbiter
On December 17, 2003, Alcantara filed a Complaint for Illegal
Dismissal9 against Royale Homes and its President Matilde Robles,
Executive Vice-President for Administration and Finance Ma. Melinda
Bernardino, and Executive Vice- President for Sales Carmina Sotto.
Alcantara alleged that he is a regular employee of Royale Homes since
he is performing tasks that are necessary and desirable to its business;
that in 2003 the company gave him P1.2 million for the services he
rendered to it; that in the first week of November 2003, however, the
executive officers of Royale Homes told him that they were wondering
why he still had the gall to come to office and sit at his table;10 and that
the actsof the executive officers of Royale Homes amounted to his
dismissal from work without any valid or just cause and in gross
disregard of the proper procedure for dismissing employees. Thus, he
alsoimpleaded the corporate officers who, he averred, effected his
dismissal in bad faith and in an oppressive manner.
Alcantara prayed to be reinstated tohis former position without loss of
seniority rights and other privileges, as well as to be paid backwages,
moral and exemplary damages, and attorney’s fees. He further sought
that the ownership of the Mitsubishi Adventure with Plate No. WHD-945
be transferred to his name.
Royale Homes, on the other hand, vehemently denied that Alcantara is
its employee. It argued that the appointment paper of Alcantara isclear
that it engaged his services as an independent sales contractorfor a fixed
term of one year only. He never received any salary, 13th month pay,
overtime pay or holiday pay from Royale Homes as hewas paid purely on
commission basis. In addition, Royale Homes had no control on how
Alcantara would accomplish his tasks and responsibilities as he was free
to solicit sales at any time and by any manner which he may deem
appropriateand necessary. He is even free to recruit his own sales
personnel to assist him in pursuance of his sales target.
According to Royale Homes, Alcantara decided to leave the company
after his wife, who was once connectedwith it as a sales agent, had
formed a brokerage company that directly competed with its business,
and even recruited some of its sales agents. Although this was against
the exclusivity clause of the contract, Royale Homes still offered to
accept Alcantara’s wife back so she could continue to engage in real
estate brokerage, albeit exclusively for Royale Homes. In a special
management committee meeting on October 8,2003, however, Alcantara
announced publicly and openly that he would leave the company by the
end of October 2003 and that he would no longer finish the unexpired
term of his contract. He has decided to join his wifeand pursue their own
brokerage business. Royale Homes accepted Alcantara’s decision. It then
threw a despedidaparty in his honor and, subsequently, appointed a new
independent contractor. Two months after herelinquished his post,
however, Alcantara appeared in Royale Homes and submitted a letter
claiming that he was illegally dismissed.
Ruling of the Labor Arbiter
On September 7, 2005,the Labor Arbiter rendered a Decision11 holding
that Alcantara is an employee of Royale Homes with a fixed-term
employment period from January 1 to December 31, 2003 and that the
pre-termination of his contract was against the law.Hence, Alcantara is
entitled to an amount which he may have earned on the average for the
unexpired portion of the contract. With regard to the impleaded
corporate officers, the Labor Arbiter absolved them from any liability.
The dispositive portion of the Labor Arbiter’s Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered
ordering the respondent Royale Homes Marketing Corp. to pay the
complainant the total amount of TWO HUNDRED SEVENTY SEVEN
THOUSAND PESOS (P277,000.00) representing his
compensation/commission for the unexpired term of his contract.
All other claims are dismissed for lack of merit.
SO ORDERED.12
Both parties appealed the Labor Arbiter’s Decision to the NLRC. Royale
Homes claimed that the Labor Arbiter grievously erred inruling that there
exists an employer-employee relationship between the parties. It insisted
that the contract between them expressly statesthat Alcantara is an
independent contractor and not an ordinary employee. Ithad no control
over the means and methods by which he performed his work.
RoyaleHomes likewise assailed the award of P277,000.00 for lack of
basis as it did not pre-terminate the contract. It was Alcantara who
chose not to finish the contract.
Alcantara, for his part, argued that the Labor Arbiter erred in ruling that
his employment was for a fixed-term and that he is not entitled to
backwages, reinstatement, unpaid commissions, and damages.
Ruling of the National LaborRelations Commission
On February 23, 2009, the NLRC rendered its Decision,13 ruling that
Alcantara is not an employee but a mere independent contractor of
Royale Homes. It based its ruling mainly on the contract which does not
require Alcantara to observe regular working hours. He was also free to
68
adopt the selling methods he deemed most effective and can even
recruit sales agents to assist him in marketing the inventories of Royale
Homes. The NLRC also considered the fact that Alcantara was not
receiving monthly salary, but was being paid on commission basis as
stipulated in the contract. Being an independent contractor, the NLRC
concluded that Alcantara’s Complaint iscognizable by the regular courts.
The falloof the NLRC Decision reads:
WHEREFORE, premises considered, the Decision of Labor Arbiter Dolores
Peralta-Beley dated September 5, 2005 is REVERSED and SET ASIDE and
a NEW ONE rendered dismissing the complaint for lack of jurisdiction.
SO ORDERED.14
Alcantara moved for reconsideration.15 In a Resolution16 dated May 29,
2009, however, the NLRC denied his motion.
Alcantara thus filed a Petition for Certiorari17 with the CA imputing grave
abuse of discretion on the partof the NLRC in ruling that he is not an
employee of Royale Homes and that it is the regular courts which have
jurisdiction over the issue of whether the pre-termination of the contract
is valid.
Ruling of the Court of Appeals
On June 23, 2010, the CA promulgated its Decision18 granting Alcantara’s
Petition and reversing the NLRC’s Decision. Applying the four-fold and
economic reality tests, it held thatAlcantara is an employee of Royale
Homes. Royale Homes exercised some degree of control over Alcantara
since his job, as observed by the CA, is subject to company rules,
regulations, and periodic evaluations. He was also bound by the
company code of ethics. Moreover, the exclusivity clause of the contract
has made Alcantara economically dependent on Royale Homes,
supporting the theory that he is anemployee of said company.
The CA further held that Alcantara’s termination from employment was
without any valid or just cause, and it was carried out in violation of his
right to procedural due process. Thus, the CA ruled that he isentitled to
backwages and separation pay, in lieu of reinstatement.
Considering,however, that the CA was not satisfied with the
proofadduced to establish the amount of Alcantara’s annual salary, it
remanded the caseto the Labor Arbiter to determine the same and the
monetary award he is entitled to. With regard to the corporate officers,
the CA absolved them from any liability for want of clear proof that they
assented to the patently unlawful acts or that they are guilty of bad faith
orgross negligence. Thus:
WHEREFORE, in view of the foregoing, the instant PETITION is
GRANTED. The assailed decision of the National Labor Relations
Commission in NLRC NCR CASE NO. 00-12-14311-03 NLRC CA NO.
046104-05 dated February 23, 2009 as well as the Resolution dated May
29, 2009 are hereby SET ASIDE and a new one is entered ordering the
respondent company to pay petitioner backwages which shall be
computed from the time of his illegal termination in October 2003 up to
the finality of this decision, plus separation pay equivalent to one month
salary for every year of service. This case is REMANDED to the Labor
Arbiter for the proper determination and computation of back wages,
separation pay and other monetary benefits that petitioner is entitled to.
SO ORDERED.19
Royale Homes filed a Motion for Reconsideration20 and a Supplemental
Motion for Reconsideration.21 In a Resolution22 dated January 18, 2011,
however, the CA denied said motions.
Issues
Hence, this Petition where Royale Homes submits before this Court the
following issues for resolution:
A.
WHETHER THE COURT OF APPEALS HAS DECIDED THE
INSTANT CASE NOT IN ACCORD WITH LAW AND APPLICABLE
DECISIONS OF THE SUPREME COURT WHEN IT REVERSED
THE RULING OF THE NLRC DISMISSING THE COMPLAINT OF
RESPONDENT FOR LACK OF JURISDICTION AND
CONSEQUENTLY, IN FINDING THAT RESPONDENT WAS
ILLEGALLY DISMISSED[.]
B.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS
ERROR OF LAW IN DISREGARDING THE EN BANCRULING OF
THIS HONORABLE COURT IN THE CASEOF TONGKO VS.
MANULIFE, AND IN BRUSHING ASIDE THE APPLICABLE
RULINGS OF SONZA VS. ABS CBN AND CONSULTA V. CA[.]
C.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS
ERROR OF LAW IN DENYING THE MOTION FOR
RECONSIDERATION OF PETITIONER AND IN REFUSING TO
CORRECT ITSELF[.]23
Royale Homes contends that its contract with Alcantara is clear and
unambiguous −it engaged his services as an independent contractor.
This can be readily seen from the contract stating that no employer-
employee relationship exists between the parties; that Alcantara was
free to solicit sales at any time and by any manner he may deem
appropriate; that he may recruit sales personnel to assist him in
marketing Royale Homes’ inventories; and, thathis remunerations are
dependent on his sales performance.
Royale Homes likewise argues that the CA grievously erred in ruling that
it exercised control over Alcantara based on a shallow ground that his
performance is subject to company rules and regulations, code of ethics,
periodic evaluation, and exclusivity clause of contract. RoyaleHomes
maintains that it is expected to exercise some degree of control over its
independent contractors,but that does not automatically result in the
existence ofemployer-employee relationship. For control to be
consideredas a proof tending to establish employer-employee
relationship, the same mustpertain to the means and method of
performing the work; not on the relationship of the independent
contractors among themselves or their persons or their source of living.
Royale Homes further asserts that it neither hired nor wielded the power
to dismiss Alcantara. It was Alcantara who openly and publicly declared
that he was pre-terminating his fixed-term contract.
The pivotal issue to be resolved in this case is whether Alcantara was an
independent contractor or anemployee of Royale Homes.
Our Ruling
The Petition is impressed with merit.
The determination of whether a party who renders services to another is
an employee or an independent contractor involves an evaluation of
factual matters which, ordinarily, is not within the province of this Court.
In view of the conflicting findings of the tribunals below, however, this
Court is constrained to go over the factual matters involved in this
case.24
The juridical relationship of the parties based on their written contract
The primary evidence of the nature of the parties’ relationship in this
case is the written contract that they signed and executed in
pursuanceof their mutual agreement. While the existence of employer-
employee relationship is a matter of law, the characterization made by
the parties in their contract as to the nature of their juridical relationship
cannot be simply ignored, particularly in this case where the parties’
written contractunequivocally states their intention at the time they
69
entered into it. In Tongko v. The Manufacturers LifeInsurance Co.
(Phils.), Inc.,25 it was held that:
To be sure, the Agreement’s legal characterization of the nature of the
relationship cannot be conclusive and binding on the courts; x x x the
characterization of the juridical relationship the Agreement embodied is a
matter of law that is for the courts to determine. At the same time,
though, the characterization the parties gave to their relationship in the
Agreement cannot simply be brushed aside because it embodiestheir
intent at the time they entered the Agreement, and they were governed
by this understanding throughout their relationship. At the very least, the
provision on the absence of employer- employee relationship between
the parties can be an aid in considering the Agreement and its
implementation, and in appreciating the other evidence on record.26
In this case, the contract, duly signed and not disputed by the parties,
27
conspicuously provides that "no employer-employee relationship exists
between" Royale Homes and Alcantara, as well as his sales agents. It is
clear that they did not want to be bound by employer-employee
relationship atthe time ofthe signing of the contract. Thus:
January 24, 2003
MR. FIDEL P. ALCANTARA
13 Rancho I
Marikina City
Dear Mr. Alcantara,
This will confirm yourappointment as Division 5 VICE[-]PRESIDENTSALES
of ROYALE HOMES MARKETING CORPORATION effective January 1,
2003 to December 31, 2003.
Your appointment entails marketing our real estate inventories on an
EXCLUSIVE BASIS under such price, terms and condition to be provided
to you from time to time.
As such, you can solicit sales at any time and by any manner which you
deem appropriate and necessary to market our real estate inventories
subject to rules, regulations and code of ethics promulgated by the
company. Further, you are free to recruit sales personnel/agents to
assist you in marketing of our inventories provided that your
personnel/agents shall first attend the required seminars and briefing to
be conducted by us from time to time for the purpose of familiarizing
them of terms and conditionsof sale, the natureof property sold, etc.,
attendance of which shall be a condition precedent for their accreditation
by us.
That as such Division 5 VICE[-]PRESIDENT-SALES you shall be entitled
to:
1. Commission override of 0.5% for all option sales beginning
January 1, 2003 booked by your sales agents.
2. Budget allocation depending on your division’s sale
performance as per our budget guidelines.
3. Sales incentive and other forms of company support which
may be granted from time to time. It is understood, however,
that no employer-employee relationship exists between us,
that of your sales personnel/agents, and that you shall hold
our company x x x, its officers and directors, free and
harmless from any and all claims of liability and damages
arising from and/or incident to the marketing of our real estate
inventories.
We reserve, however, our right to terminate this agreement in case of
violation of any company rules and regulations, policies and code of
ethics upon notice for justifiable reason.
Your performance shall be subject toperiodic evaluation based on factors
which shall be determined by the management.
If you are amenable to the foregoing terms and conditions, please
indicate your conformity by signing on the space provided below and
return [to] us a duplicate copy of this letter, duly accomplished, to
constitute as our agreement on the matter.(Emphasis ours)
Since "the terms of the contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of itsstipulations
should control."28 No construction is even needed asthey already
expressly state their intention. Also, this Court adopts the observation of
the NLRC that it is rather strange on the part of Alcantara, an educated
man and a veteran sales broker who claimed to be receiving P1.2 million
as his annual salary, not to have contested the portion of the contract
expressly indicating that he is not an employee of Royale Homes if their
true intention were otherwise.
The juridical relationship of the parties based on Control Test
In determining the existence of an employer-employee relationship, this
Court has generally relied on the four-fold test, to wit: (1) the selection
and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the employer’s power to control the
employee with respect to the means and methods by which the work is
to be accomplished.29 Among the four, the most determinative factor in
ascertaining the existence of employeremployee relationship is the "right
of control test".30 "It is deemed to be such an important factor that the
other requisites may even be disregarded."31 This holds true where the
issues to be resolved iswhether a person who performs work for another
is the latter’s employee or is an independent contractor,32 as in this case.
For where the person for whom the services are performed reserves the
right to control not only the end to beachieved, but also the means by
which such end is reached, employer-employee relationship is deemed to
exist.33
In concluding that Alcantara is an employee of RoyaleHomes, the CA
ratiocinated that since the performance of his tasks is subject to
company rules, regulations, code of ethics, and periodic evaluation, the
element of control is present.
The Court disagrees.
Not every form of control is indicative of employer-employee
relationship.1âwphi1 A person who performs work for another and is
subjected to its rules, regulations, and code of ethics does not
necessarily become an employee.34 As long as the level of control does
not interfere with the means and methods of accomplishing the assigned
tasks, the rules imposed by the hiring party on the hired party do not
amount to the labor law concept of control that is indicative of employer-
employee relationship. In Insular Life Assurance Co., Ltd. v. National
Labor Relations Commission35 it was pronounced that:
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 employeremployee relationship unlike the
second, which address both the result and the means used to achieve it.
x x x36
In this case, the Court agrees with Royale Homes that the rules,
regulations, code of ethics, and periodic evaluation alluded to
byAlcantara do not involve control over the means and methods by
which he was to performhis job. Understandably, Royale Homes has to
fix the price, impose requirements on prospective buyers, and lay down
the terms and conditionsof the sale, including the mode of payment,
which the independent contractors must follow. It is also necessary for
Royale Homes to allocateits inventories among its independent
contractors, determine who has priority in selling the same, grant
commission or allowance based on predetermined criteria, and regularly
70
monitor the result of their marketing and sales efforts. But tothe mind of
this Court, these do not pertain to the means and methods of how
Alcantara was to perform and accomplish his task of soliciting sales.
They do not dictate upon him the details of how he would solicit sales or
the manner as to how he would transact business with prospective
clients. In Tongko, this Court held that guidelines or rules and
regulations that do notpertain to the means or methodsto be employed
in attaining the result are not indicative of control as understood inlabor
law. Thus:
From jurisprudence, an important lesson that the first Insular Lifecase
teaches us is that a commitment to abide by the rules and regulations of
an insurance company does not ipso factomake the insurance agent an
employee. Neither do guidelines somehow restrictive of the insurance
agent’s conduct necessarily indicate "control" as this term is defined in
jurisprudence. Guidelines indicative of labor law "control," as the first
Insular Lifecase tells us, should not merely relate to the mutually
desirable result intended by the contractual relationship; they must have
the nature of dictating the means or methods to beemployed in attaining
the result, or of fixing the methodology and of binding or restricting the
party hired to the use of these means.In fact, results-wise, the principal
can impose production quotas and can determine how many agents,
with specific territories, ought to be employed to achieve the company’s
objectives. These are management policy decisions that the labor law
element of control cannot reach. Our ruling in these respects in the first
Insular Lifecase was practically reiterated in Carungcong. Thus, as will be
shown more fully below, Manulife’s codes of conduct, all of which do not
intrude into the insurance agents’ means and manner of conducting their
sales and only control them as to the desired results and Insurance Code
norms, cannot be used as basis for a finding that the labor law concept
of control existed between Manulife and Tongko.37 (Emphases in the
original)
As the party claiming the existence of employer-employee relationship, it
behoved upon Alcantara to prove the elements thereof, particularly
Royale Homes’ power of control over the means and methods of
accomplishing the work.38 He, however, failed to cite specificrules,
regulations or codes of ethics that supposedly imposed control on his
means and methods of soliciting sales and dealing with prospective
clients. On the other hand, this case is replete with instances that negate
the element of control and the existence of employer-employee
relationship. Notably, Alcantara was not required to observe definite
working hours.39 Except for soliciting sales, RoyaleHomes did not assign
other tasks to him. He had full control over the means and methods of
accomplishing his tasks as he can "solicit sales at any time and by any
manner which [he may] deem appropriate and necessary." He
performed his tasks on his own account free from the control and
direction of Royale Homes in all matters connected therewith, except as
to the results thereof.40
Neither does the repeated hiring of Alcantara prove the existence of WHEREFORE, the instant Petition is hereby GRANTED. The June 23,
employer-employee relationship.41 As discussed above, the absence of 2010 Decision of the Court of Appeals in CA-G.R. SP No. 109998 is
control over the means and methodsdisproves employer-employee REVERSED and SET ASIDE. The February 23, 2009 Decision of the
relationship. The continuous rehiring of Alcantara simply signifies the National Labor Relations Commission is REINSTATED and AFFIRMED. SO
renewal of his contract with Royale Homes, and highlights his ORDERED.
satisfactory services warranting the renewal of such contract. Nor does
the exclusivity clause of contract establish the existence of the labor law
concept of control. In Consulta v. Court of Appeals,42 it was held that
exclusivity of contract does not necessarily result in employer-employee
relationship, viz:
x x x However, the fact that the appointment required Consulta to solicit
business exclusively for Pamana did not mean that Pamana exercised
control over the means and methods of Consulta’s work as the term
control is understood in labor jurisprudence. Neither did it make Consulta
an employee of Pamana. Pamana did not prohibit Consulta from
engaging in any other business, or from being connected with any other
company, for aslong as the business [of the] company did not compete
with Pamana’s business.43
The same scenario obtains in this case. Alcantara was not prohibited
from engaging in any other business as long as he does not sell projects
of Royale Homes’ competitors. He can engage in selling various other
products or engage in unrelated businesses.
Payment of Wages
The element of payment of wages is also absent in thiscase. As provided
in the contract, Alcantara’s remunerations consist only of commission
override of 0.5%, budget allocation, sales incentive and other forms of
company support. There is no proof that he received fixed monthly
salary. No payslip or payroll was ever presented and there is no proof
that Royale Homes deducted from his supposed salary withholding tax or
that it registered him with the Social Security System, Philippine Health
Insurance Corporation, or Pag-Ibig Fund. In fact, his Complaint merely
states a ballpark figure of his alleged salary of P100,000.00, more or
less. All of these indicate an independent contractual
relationship.44 Besides, if Alcantara indeed consideredhimself an
employee of Royale Homes, then he, an experienced and professional
broker, would have complained that he was being denied statutorily
mandated benefits. But for nine consecutive years, he kept mum about
it, signifying that he has agreed, consented, and accepted the fact that
he is not entitled tothose employee benefits because he is an
independent contractor.
This Court is, therefore,convinced that Alcantara is not an employee of
Royale Homes, but a mere independent contractor. The NLRC is,
therefore, correct in concluding that the Labor Arbiter has no jurisdiction
over the case and that the same is cognizable by the regular courts.
71
19
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 204944-45 December 3, 2014
FUJI TELEVISION NETWORK, INC., Petitioner,
vs.
ARLENE S. ESPIRITU, Respondent.
DECISION
LEONEN, J.:
It is the burden of the employer to prove that a person whose services it
pays for is an independent contractor rather than a regular employee
with or without a fixed term. That a person has a disease does not per
se entitle the employer to terminate his or her services. Termination is
the last resort. At the very least, a competent public health authority
must certify that the disease cannot be cured within six ( 6) months,
even with appropriate treatment.
We decide this petition for review1 on certiorari filed by Fuji Television
Network, Inc., seeking the reversal of the Court of Appeals’
Decision2 dated June 25, 2012, affirming with modification the
decision3 of the National Labor Relations Commission.
In 2005, Arlene S. Espiritu ("Arlene") was engaged by Fuji Television
Network, Inc. ("Fuji") asa news correspondent/producer4 "tasked to
report Philippine news to Fuji through its Manila Bureau field
office."5 Arlene’s 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.9She "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 of the National Labor Relations Commission, both parties filed separate
from liabilities and responsibilities under the employment contract.12 petitions for certiorari27 before the Court of Appeals. The Court of
Appeals consolidated the petitions and considered the following issues
for resolution:
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, 1) Whether or not Espirituis a regular employee or a fixed-
and separation pay."13 However, Arlene affixed her signature on the term contractual employee;
nonrenewal contract with the initials "U.P." for "under protest."14
2) Whether or not Espiritu was illegally dismissed; and
On May 6, 2009, the day after Arlene signed the non-renewal contract,
she filed a complaint for illegal dismissal and attorney’s fees with the
3) Whether or not Espirituis entitled to damages and attorney’s
National Capital Region Arbitration Branch of the National Labor
fees.28
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 In the assailed decision, the Court of Appeals affirmed the
she refused to sign.15 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
Arlene claimed that she was left with no other recourse but to sign the
backwages, 13th-month pay, mid-year and year-end bonuses,
non-renewal contract, and it was only upon signing that she was given
sick leave and vacation leave with pay until reinstated, moral
her salaries and bonuses, in addition to separation pay equivalent to four
damages, exemplary damages, attorney’sfees, and legal
(4) years.16
interest of 12% per annum of the total monetary
awards.29 The Court of Appeals ruled that:
In the decision17 dated September 10, 2009, Labor Arbiter Corazon C.
Borbolla dismissed Arlene’s complaint.18Citing Sonza v. ABS-CBN19 and
WHEREFORE, for lack of merit, the petition of Fuji Television Network,
applying the four-fold test, the Labor Arbiter held that Arlene was not
Inc. and Yoshiki Aoki is DENIED and the petition of Arlene S. Espiritu is
Fuji’s employee but an independent contractor.20
GRANTED. Accordingly, the Decision dated March 5, 2010 of the National
Labor Relations Commission, 6th Division in NLRC NCR Case No. 05-
Arlene appealed before the National Labor Relations Commission. In its 06811-09 and its subsequent Resolution dated April 26, 2010 are hereby
decision dated March 5, 2010, the National Labor Relations Commission AFFIRMED with MODIFICATIONS, as follows:
reversed the Labor Arbiter’s decision.21 It held that Arlene was a regular
employee with respect to the activities for which she was employed since
Fuji Television, Inc. is hereby ORDERED to immediately REINSTATE
she continuously rendered services that were deemednecessary and
Arlene S. Espiritu to her position as News Producer without loss of
desirable to Fuji’s business.22 The National Labor Relations Commission
seniority rights and privileges and to pay her the following:
ordered Fuji to pay Arlene backwages, computed from the date of her
illegal dismissal.23 The dispositive portion of the decision reads:
1. Backwages at the rate of $1,900.00 per month computed
from May 5, 2009 (the date of dismissal), until reinstated;
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 2. 13th Month Pay at the rate of $1,900.00 per annum from
is issued ordering respondents-appellees to pay complainant-appellant the date of dismissal, until reinstated;
backwages computed from the date of her illegal dismissal until finality
of this Decision. 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;
SO ORDERED.24
4. One and a half (1 1/2) months pay or $2,850.00 as year-
Arlene and Fuji filed separat emotions for reconsideration.25 Both end bonus per year from the date of dismissal, until
motions were denied by the National Labor Relations Commission for reinstated;
lack of merit in the resolution dated April 26, 2010.26 From the decision
72
 5. Sick leave of 30 days with pay or $1,900.00 per year from
the date of dismissal, until reinstated; and
6. Vacation leave with pay equivalent to 14 days or $1,425.00
per annum from date of dismissal, until reinstated.
7. The amount of P100,000.00 as moral damages;
8. The amount of P50,000.00 as exemplary damages;
9. Attorney’s 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
Commission’s 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
Arlene’s 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."49 It was Arlene who insisted that Fuji execute yearly
fixed-term contracts so that she could negotiate for annual increases in
her pay.50
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 Arlene’s 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 Arlene’s 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, Arlene’s 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 Arlene’s 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 attorney’s 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 Commission’s decision by awarding
reinstatement, damages, and attorney’s fees.
The petition should be dismissed.
I
Validity of the verification and certification against forum shopping
In its comment on Arlene’s 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 secretary’s
certificate to delegate his authority to sign the necessary pleadings,
including the verification and certification against forum shopping.69
73
On the other hand, Arlene points outthat the authority given to Mr. Shuji
Yano and Mr. Jin Eto in the secretary’s 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 Appeals cited the discussion in Uy
77
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 Peña 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 secretary’s certificate
quoting the board resolution that authorized Dela Peña.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 Peña’s 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
secretary’s 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
74
 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 Ota’s
secretary’s certificate,94 authorizing Shuji Yano and Jin Eto to represent
and sign for and on behalf of Fuji.95 The secretary’s certificate was duly
authenticated96by 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 Arlene’s manifestation, stating that Corazon was
properly authorized to sign. On the basis of the secretary’s 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 Corporation’s name, place and stead to determine,
propose, agree, decide, do, and perform any and all of the
following:
1. The possibility of amicable settlement or of
submission to alternative mode of dispute
resolution;
2. The simplification of the issue;
3. The necessity or desirability of amendments to
the pleadings;
4. The possibility of obtaining stipulation or
admission of facts and documents; and
5. Such other matters as may aid in the prompt
disposition of the action.99 (Emphasis in the original;
Italics omitted)
Shuji Yano executed a special power of attorney appointing Ms. Ma.
Corazon E. Acerden and Mr. Moises A. Rollera as his attorneys-in-
fact.100 The special power of attorney states:
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
Secretary’s 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 Arlene’s manifestation, Fuji argues that Shuji Yano
could further delegate his authority because the board resolution
empowered him to "act in the Corporation’s 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 Corazon’s
authority to sign. Arlene argues that the secretary’s 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 Yano’s 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 secretary’s 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]."106As pointed out by Fuji, Shuji Yano
and Jin Eto were also authorized to "act in the Corporation’s name, place
and stead to determine, propose, agree, decide, do, and perform anyand
75
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 secretary’s 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
Corazon’s 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 Fuji’s 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 Commission’s 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.118This 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 Commission’s 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 CA’s 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
76
appeal, of the NLRC decision challenged before it.129 (Emphasis in the
original)
Justice Brion’s 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 CA’s 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 Brion’s 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-à-vis the four-fold test show that an
employer-employee relationship existed, we then determine the status of
Arlene’s employment, i.e., whether she was a regular employee. Relative
to this, we shall analyze Arlene’s 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 Arlene’s work was necessary and
desirable to Fuji’s business or whether Fuji only needed the output of her
work. If the circumstances show that Arlene’s 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 Commission’s 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 attorney’s 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, Fuji’s payment of
separation pay equivalent to one (1) month’s 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)
77
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 one’s own responsibility according to one’s 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 former’s work,
the employees of the contractor and of the latter’s 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 contractor’s 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
78
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 bachelor’s 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 Master’s 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.
Fuji’s 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 employee’s
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 employer’s 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,
79
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 Sonza’s talent fee
amounted to P317,000.00 per month, which this court found to be a
substantial amount that indicatedhe was an independent contractor
rather than a regular employee.191 Meanwhile, Dumpit-Murillo’s monthly
salary was P28,000.00, 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-CBN’s 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.200Her 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 Arlene’s work necessary and desirable for Fuji’s 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 employee’s 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 employee’s 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 Corporation’s 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
80
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, including news
209
programming.210 It is based in Japan211 and has overseas offices to cover
international news.212
Based on the record, Fuji’s Manila Bureau Office is a small unit213 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 Arlene’s
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 [Fuji’s] regional office in
Thailand."218 She also had to report for work in Fuji’s 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 Arlene’s contract indicated
the necessity and desirability of her work in the usual course of Fuji’s
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 network’s 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 Fuji’s 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 petitioner’s work in
private respondent ABC’s business."225
With regard to Fuji’s argument that Arlene’s contract was for a fixed
term, the Court of Appeals cited Philips Semiconductors, Inc. v.
Fadriquela226 and held that where an employee’s 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)
Arlene’s 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 Commission’s 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 Arlene’s 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 Fuji’s assertion that Espiritu’s 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
Fuji’s position that it was Espiritu’s 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:
81
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 Arlene’s 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 PARTY’s 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 Whether the Court of Appeals properly modified
the services of an employee who has been found to be suffering from the National Labor Relations Commission’s decision
any disease and whose continued employment is prohibited by law or is when it awarded reinstatement, damages, and attorney’s fees
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)
The National Labor Relations Commission awarded separation pay in lieu
month salary or to one-half (1/2) month salary for every year of service,
of reinstatement, on the ground that the filing of the complaint for illegal
whichever is greater, a fraction of at least six (6) months being
dismissal may have seriously strained relations between the parties.
considered as one (1) whole year.
Backwages were also awarded, to be computed from date of dismissal
until the finality of the National Labor Relations Commission’s decision.
Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the Labor However, only backwages were included in the dispositive portion
Code provides: 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 Commission’s decision but
Sec. 8. Disease as a ground for dismissal.– Where the employee suffers
modified it by awarding moral and exemplary damages and attorney’s
from a disease and his continued employment is prohibited by law or
fees, and all other benefits Arlene was entitled to under her contract
prejudicial to his healthor to the health of his coemployees, the employer
with Fuji. The Court of Appeals also ordered reinstatement, reasoning
shall not terminate his employment unless there is a certification by a
that the grounds when separation pay was awarded in lieu of
competent public health authority that the disease is of such nature or at
reinstatement were not proven.241
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 Article 279 of the Labor Code provides:
but shall ask the employee to take a leave. The employer shall reinstate
such employee to his former position immediately upon the restoration
Art. 279. Security of tenure. In cases of regular employment, the
of his normal health.
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
For dismissal under Article 284 to bevalid, two requirements must be dismissed from work shall be entitled to reinstatement without loss of
complied with: (1) the employee’s disease cannot be cured within six (6) seniority rights and other privileges and to his full backwages, inclusive
months and his "continued employment is prohibited by law or of allowances, and to his other benefits or their monetary equivalent
prejudicial to his health as well as to the health of his co-employees"; computed from the time his compensation was withheld from him up to
and (2) certification issued by a competent public health authority that the time of his actual reinstatement. (Emphasis supplied)
even with proper medical treatment, the disease cannot be cured within
six (6) months.237 The burden of proving compliance with these
The Court of Appeals’ modification of the National Labor Relations
requisites is on the employer.238 Noncompliance leads to the conclusion
Commission’s decision was proper because the law itself provides that
that the dismissal was illegal.239
illegally dismissed employees are entitled to reinstatement, backwages
including allowances, and all other benefits.
There is no evidence showing that Arlene was accorded due process.
After informing her employer of her lung cancer, she was not given the
On reinstatement, the National Labor Relations Commission ordered
chance to present medical certificates. Fuji immediately concluded that
payment of separation pay in lieu of reinstatement, reasoning "that the
Arlene could no longer perform her duties because of chemotherapy. It
filing of the instant suit may have seriously abraded the relationship of
did not ask her how her condition would affect her work. Neither did it
the parties so as to render reinstatement impractical."242 The Court of
suggest for her to take a leave, even though she was entitled to sick
Appeals reversed this and ordered reinstatement on the ground that
leaves. Worse, it did not present any certificate from a competent public
separation pay in lieu of reinstatement is allowed only in several
health authority. What Fuji did was to inform her thather contract would
instances such as (1) when the employer has ceased operations; (2)
no longer be renewed, and when she did not agree, her salary was
when the employee’s position is no longer available; (3) strained
withheld. Thus, the Court of Appeals correctly upheld the finding of the
relations; and (4) a substantial period has lapsed from date of filing to
National Labor Relations Commission that for failure of Fuji to comply
date of finality.243
with due process, Arlene was illegally dismissed.240
On this matter, Quijano v. Mercury Drug Corp.244 is instructive:
VI
82
Well-entrenched is the rule that an illegally dismissed employee is I WAS SO SURPRISED . . . that at a time when I am at my lowest, being
entitled to reinstatement as a matter of right. . . . 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
To protect labor’s security of tenure, we emphasize that the doctrine of
deliver that news just a month after I informed you that I am sick. I was
"strained relations" should be strictly applied so as not to deprive an
asking for patience and understanding and your response was not to
illegally dismissed employee of his right to reinstatement. Every labor
RENEW my contract.252
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) Apart from Arlene’s 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
The Court of Appeals reasoned that strained relations are a question of
sign the non-renewal contract. Thus, there was legal basis for the Court
fact that must be supported by evidence.246 No evidence was presented
of Appeals to modify the National Labor Relations Commission’s decision.
by Fuji to prove that reinstatement was no longer feasible. Fuji did not
allege that it ceased operations or that Arlene’s position was no longer
available. Nothing in the records shows that Arlene’s reinstatement However, Arlene receivedher salary for May 2009.253 Considering that the
would cause an atmosphere of antagonism in the workplace. Arlene filed date of her illegal dismissal was May 5, 2009,254 this amount may be
her complaint in 2009. Five (5) years are not yet a substantial subtracted from the total monetary award. With regard to the award of
period247 to bar reinstatement. attorney’s fees, Article 111 of the Labor Code states that "[i]n cases of
unlawful withholding of wages, the culpable party may be assessed
attorney’s fees equivalent to ten percent of the amount of wages
On the award of damages, Fuji argues that Arlene is notentitled to the
recovered." Likewise, this court has recognized that "in actions for
award of damages and attorney’s fees because the non-renewal
recovery of wages or where an employee was forced to litigate and,
agreement contained a quitclaim, which Arlene signed. Quitclaims in
thus, incur expenses to protect his rights and interest, the award of
labor cases do not bar illegally dismissed employees from filing labor
attorney’s fees is legallyand morally justifiable."255 Due to her illegal
complaints and money claim. As explained by Arlene, she signed the
dismissal, Arlene was forced to litigate.
non-renewal agreement out of necessity. In Land and Housing
Development Corporation v. Esquillo,248this court explained: We have
heretofore explained that the reason why quitclaims are commonly In the dispositive portion of its decision, the Court of Appeals awarded
frowned upon as contrary to public policy, and why they are held to be legal interest at the rate of 12% per annum.256 In view of this court’s
ineffective to bar claims for the full measure of the workers’ legal rights, ruling in Nacar v. Gallery Frames,257 the legal interest shall be reducd to
is the fact that the employer and the employee obviously do not stand a rate of 6% per annum from July 1, 2013 until full satisfaction.
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
WHEREFORE, the petition is DENIED. The assailed Court of Appeals
face the harsh necessities of life. He thus found himself in no position to
decision dated June 25, 2012 is AFFIRMED with the modification that
resist money proffered. His, then, is a case of adherence, not of
backwages shall be computed from June 2009. Legal interest shall be
choice.249
computed at the rate of 6% per annum of the total monetary award
from date of finality of this decision until full satisfaction.
With regard to the Court of Appeals’ award of moral and exemplary
damages and attorney’s fees, this court has recognized in several cases
SO ORDERED.
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:
83
20
THIRD DIVISION
G.R. No. 176908, March 25, 2015
PURISIMO M. CABAOBAS, EXUPERIO C. MOLINA, GILBERTO V.
OPINION, VICENTE R. LAURON, RAMON M. DE PAZ, JR.,
ZACARIAS E. CARBO, JULITO G. ABARRACOSO, DOMINGO B.
GLORIA, AND FRANCISCO P. CUMPIO, Petitioners, v. PEPSI-COLA
PRODUCTS, PHILIPPINES, INC., Respondents.
DECISION
PERALTA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of
Court, assailing the Court of Appeals (CA) Decision1 dated July 31, 2006,
and its Resolution2 dated February 21, 2007 in CA-G.R. S.P. No. 81712.
The assailed decision denied the petition for certiorari filed by petitioners
Purisimo M. Cabaobas, Exuperio C. Molina, Gilberto V. Opinion, Vicente
R. Lauron, Ramon M. De Paz, Jr., Zacarias E. Carbo, Julito G.
Abarracoso, Domingo B. Gloria and Francisco P. Cumpio, seeking a
partial nullification of the Decision3 dated September 11, 2002 of the
National Labor Relations Commission (NLRC) in NLRC Certified Case No.
V-000001-2000.4 The NLRC dismissed petitioners' complaints for illegal
dismissal and declared the retrenchment program of respondent Pepsi-
Cola Products Philippines, Inc. as a valid exercise of management
prerogative.
The facts follow.
Respondent Pepsi-Cola Products Philippines, Inc. (PCPPI) is a domestic
corporation engaged in the manufacturing, bottling and distribution of
soft drink products, which operates plants all over the country, one of
which is the Tanauan Plant in Tanauan, Leyte.
In 1999, PCPPI’s Tanauan Plant allegedly incurred business losses in the
total amount of Twenty-Nine Million One Hundred Sixty-Seven Thousand
and Three Hundred Ninety (P29,167,390.00) Pesos. To avert further
losses, PCPPI implemented a company-wide retrenchment program
denominated as Corporate-wide Rightsizing Program (CRP) from 1999 to
2000, and retrenched forty-seven (47) employees of its Tanauan Plant
on July 31, 1999.
On September 24, 1999, twenty-seven (27) of said employees,5 led by
Anecito Molon (Molon, et al.), filed complaints for illegal dismissal before
the NLRC which were docketed as NLRC RAB Cases Nos. VIII-9-0432-99
to 9-0458-99, entitled “Molon, et al. v. Pepsi-Cola Products, Philippines,
Inc.”
On January 15, 2000, petitioners, who are permanent and regular
employees of the Tanauan Plant, received their respective letters,
informing them of the cessation of their employment on February 15,
2000, pursuant to PCPPI's CRP. Petitioners then filed their respective
complaints for illegal dismissal before the National Labor Relations
Commission Regional Arbitration Branch No. VIII in Tacloban City. Said
complaints were docketed as NLRC RAB VIII-03-0246-00 to 03-0259-00,
entitled “Kempis, et al. v. Pepsi-Cola Products, Philippines, Inc.”
In their Consolidated Position Paper,6 petitioners alleged that PCPPI was
not facing serious financial losses because after their termination, it
regularized four (4) employees and hired replacements for the forty-
seven (47) previously dismissed employees. They also alleged that
PCPPI's CRP was just designed to prevent their union, Leyte Pepsi-Cola
Employees Union-Associated Labor Union (LEPCEU-ALU), from becoming
the certified bargaining agent of PCPPI's rank-and-file employees.
In its Position Paper,7 PCPPI countered that petitioners were dismissed
pursuant to its CRP to save the company from total bankruptcy and
collapse; thus, it sent notices of termination to them and to the
Department of Labor and Employment. In support of its argument that
its CRP is a valid exercise of management prerogative, PCPPI submitted
audited financial statements showing that it suffered financial reverses in
1998 in the total amount of SEVEN HUNDRED MILLION
(P700,000,000.00) PESOS, TWENTY- SEVEN MILLION (P27,000,000.00)
PESOS of which was allegedly incurred in the Tanauan Plant in 1999.
On December 15, 2000, Labor Arbiter Vito C. Bose rendered a
Decision8 finding the dismissal of petitioners as illegal, the dispositive
portion of which reads:chanRoblesvirtualLawlibrary
WHEREFORE, premises duly considered, judgment is hereby rendered
finding the dismissal of the ten (10) complainants herein illegal.
Consequently, respondent Pepsi-Cola Products Phils., Inc. (PCPPI) is
ordered to reinstate them to their former positions without loss of
seniority rights and to pay them full backwages and other benefits
reckoned from February 16, 2000 until they are actually reinstated,
which as of date amounted to NINE HUNDRED FORTY-SEVEN
THOUSAND FIVE HUNDRED FIFTY-EIGHT PESOS AND THIRTY-TWO
CENTAVOS (P947,558.32) inclusive of the 10% attorney's fees.
Other claims are dismissed for lack of merit.
SO ORDERED.9cralawred
cralawlawlibrary
PCPPI appealed from the Decision of the Labor Arbiter to the Fourth
Division of the NLRC of Tacloban City. Meanwhile, the NLRC consolidated
all other cases involving PCPPI and its dismissed employees.
On September 11, 2002, the NLRC rendered a Consolidated
Decision,10 the dispositive portion of which
states:chanRoblesvirtualLawlibrary
WHEREFORE, judgment is hereby rendered:
(1) DECLARING, in NLRC Certified Case No. V-000001-2000 (NLRC NCR
CC No. 000171-99), Pepsi-Cola Products Philippines, Incorporated, not
guilty of union busting/unfair labor practice, and dismissing LEPCEU-
ALU's Notice of Strike dated July 19, 1999;ChanRoblesVirtualawlibrary
(2) DECLARING, in the subsumed NLRC Case No. 7-0301-99, LEPCEU-
ALU's strike on July 23, 1999 ILLEGAL for having been conducted
without legal authority and without observing the 7-day strike vote
notice requirement as provided in Section 2 and Section 7 of Rule XXII,
Book V of the Omnibus Rules Implementing Art. 263 (c) and (f) of the
Labor Code, but DENYING PEPSI-COLA's supplemental prayer to declare
loss of employment status of union leaders and some of its members as
identification of officers and members, and the knowing participation of
union officers in the illegal strike, or that of the officers and members in
illegal acts during the strike, have not been
established;ChanRoblesVirtualawlibrary
(3) DISMISSING in the subsumed NLRC Injunction Case No. V-000013-
99, LEPCEU-ALU's Petition for a Writ of Preliminary Injunction with
Prayer for the Issuance of Temporary Restraining Order, because Pepsi
Cola had already implemented its Corporate-wide CRP in the exercise of
management prerogative. Moreover, LEPCEU-ALU had adequate remedy
in law;ChanRoblesVirtualawlibrary
(4) DISMISSING, in subsumed case NLRC RAB VIII Cases Nos. 9-0432-
99 to 9-0459-99 (Molon, et al. vs. PCPPI) all the complaints for Illegal
Dismissal except that of Saunder Santiago T. Remandaban III, for having
been validly and finally settled by the parties, and ORDERING PEPSI
COLA Products Phils., Inc. to reinstate Saunder Santiago T. Remandaban
III to his former position without loss of seniority rights but without
backwages;ChanRoblesVirtualawlibrary
(5) Nullifying, in NLRC Consolidated Case No. V-000071-01
(RAB VIII cases nos. 3-0246-2000 to 3-0258-2000; Kempis, et
al. vs. PCPPI), the Executive Labor Arbiter's Decisions dated
December 15, 2000, and DISMISSING the complaints for illegal
dismissal, and in its stead DECLARING the retrenchment
84
program of Pepsi Cola Products Phils., Inc. pursuant to its CRP,
a valid exercise of management prerogatives; Further,
ORDERING Pepsi Cola Products Philippines, Inc. to pay the
following complainants their package separation benefits of 1 &
½ months salary for every year of service, plus commutation of
all vacation and sick leave credits in the respective amounts
hereunder indicated opposite their names:
1. ARTEMIO S. KEMPIS – P167,486.80
2. EXUPERIO C. MOLINA – 168,196.38
3. GILBERTO V. OPINION – 31,799.74
4. PURISIMO M. CABAOBAS – 165,466.09
5. VICENTE P. LAURON – 167,325.86
6. RAMON M. DE PAZ, JR. - 109,652.98
7. ZACARIAS E. CARBO – 160,376.47
8. JULITO C. ABARRACOSO – 161,366.44
9. DOMINGO B. GLORIA – 26,119.26
10. FRANCISCO P. CUMPIO – 165,204.41
(6) DECLARING, in NLRC Injunction Case No. V-000003-2001, Pepsi-
Cola's Petition for Injunction and Application for immediate issuance of
Temporary Restraining Order, moot and academic, and DISMISSING the
same; Further, DECLARING moot and academic all incidents to the case
of Kempis, et al. vs. PCPPI (NLRC Case No. V-000071-2000 relating to
the execution or implementation of the nullified Decision dated
December 15, 2000, and likewise, nullifying them.
All other claims and petitions are dismissed for want of merit.
SO ORDERED.11cralawlawlibrary
Petitioners and PCPPI filed their respective motions for reconsideration of
the consolidated decision, which the NLRC denied in a Resolution12 dated
September 15, 2003. Dissatisfied, petitioners filed a petition
for certiorari with the CA [docketed as CA-G.R. SP No. 81712 and raffled
to the Eighteenth (18th) Division]. On July 31, 2006, the CA rendered a
Decision, denying their petition and affirming the NLRC Decision dated
September 11, 2002, the dispositive portion of which
reads:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the petition filed in this case is
hereby DENIEDand the decision dated September 11, 2002, and the
resolution dated September 15, 2003, promulgated by the National
Labor Relations Commission, Fourth Division in NLRC Certified Case No.
V-000001-2000 (NCR CC. No. 000171-99) are hereby AFFIRMED.
SO ORDERED.13cralawlawlibrary
On February 21, 2007, the CA 18th Division issued a
Resolution14 denying petitioners' motion for reconsideration.
In contrast, when Molon, et al. earlier questioned the consolidated
decision of the NLRC via a petition for certiorari [docketed as CA-G.R. SP
No. 82354 and raffled to its Twentieth (20th) Division], the CA rendered
on March 31, 2006 a Decision15 granting their petition and reversing the
same NLRC Decision dated September 11, 2002, the dispositive portion
of which states:chanRoblesvirtualLawlibrary
IN LIGHT OF ALL THE FOREGOING, the instant petition
is GRANTED. The decision of the NLRC dated September 11, 2002 is
hereby REVERSED and SET ASIDE and judgment is rendered as
follows:
Declaring the strike conducted on July 23, 1999 as legal, it falling under
the exception of Article 263, Labor Code;ChanRoblesVirtualawlibrary
Declaring the manner by which the corporate rightsizing program or
retrenchment was effected by PEPSI-COLA to be contrary to the
prescribed rules and procedure;ChanRoblesVirtualawlibrary
Declaring that petitioners were illegally terminated. Their reinstatement
to their former positions or its equivalent is hereby ordered, without loss
of seniority rights and privileges and PEPSI-COLA is also ordered the
payment of their backwages from the time of their illegal dismissal up to
the date of their actual reinstatement. If reinstatement is not feasible
because of strained relations or abolition of their respective positions,
the payment of separation pay equivalent to 1 month salary for every
year of service, a fraction of at least 6 months shall be considered a
whole year. The monetary considerations received by some of the
employees shall be deducted from the total amount they ought to
receive from the company.
Attorney's fees equivalent to 10% of the amount which petitioners may
recover pursuant to Article 111 of the Labor Code is also awarded.
No pronouncement as to costs.
SO ORDERED.16cralawlawlibrary
Aggrieved, petitioners come before the Court in this petition for review
on certiorari assailing the CA 18th Division Decision dated July 31, 2006,
and its Resolution dated February 21, 2007 on these
grounds:chanRoblesvirtualLawlibrary
A.
THE HONORABLE COURT OF APPEALS, SPECIAL FORMER EIGHTEENTH
DIVISION, COMMITTED AN ERROR OF LAW WHEN IT IGNORED THE
EARLIER DECISION OF THE TWENTIETH DIVISION ON THE SAME
FACTUAL AND LEGAL ISSUES.chanroblesvirtuallawlibrary
B.
THE HONORABLE COURT OF APPEALS, SPECIAL FORMER EIGHTEENTH
DIVISION, COMMITTED AN ERROR OF LAW WHEN IT REFUSED TO
REVERSE THE DECISION OF THE NATIONAL LABOR RELATIONS
COMMISSION, FOURTH DIVISION, DESPITE PRIVATE RESPONDENT’S
FAILURE TO COMPLY WITH THE REQUISITES OF A VALID
RETRENCHMENT.chanroblesvirtuallawlibrary
C.
THE HONORABLE COURT OF APPEALS, SPECIAL FORMER EIGHTEENTH
DIVISION, COMMITTED AN ERROR OF LAW WHEN IT AFFIRMED THE
DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION,
FOURTH DIVISION, DECLARING AS LEGAL THE ILLEGAL DISMISSAL OF
PETITIONERS AND DISMISSING THEIR COMPLAINTS FOR ILLEGAL
DISMISSAL.17cralawlawlibrary
The three issues raised by petitioners boil down to the legality of their
dismissal pursuant to PCPPI's retrenchment program.
The petition has no merit.
During the pendency of the petition, the Court rendered a Decision dated
February 18, 2013 in the related case of Pepsi-Cola Products Philippines,
Inc. v. Molon,18 the dispositive portion of which
reads:chanRoblesvirtualLawlibrary
WHEREFORE, the petition is GRANTED. The assailed March 31, 2006
Decision and September 18, 2006 Resolution of the Court of Appeals in
CA-G.R. SP No. 82354 are hereby REVERSED and SET ASIDE.
Accordingly, the September 11, 2002 Decision of the National Labor
Relations Commission is hereby REINSTATED insofar as (1) it dismissed
subsumed cases NLRC-RAB VIII Case Nos. 9-0432-99 to 9-0458-99 and;
(2) ordered the reinstatement of respondent Saunder Santiago
Remandaban III without loss of seniority rights but without backwages
in NLRC-RAB VIII Case No. 9-0459-99.
SO ORDERED.
cralawlawlibrary
Subsumed cases NLRC-RAB VIII Case Nos. 9-0432-99 to 9-0458-99
pertain to the dismissal of the complaints for illegal dismissal filed by
Molon, et al., the 27 former co-employees of petitioners in PCPPI. On the
issue of whether the retrenchment of the petitioners' former co-
employees was in accord with law, the Court ruled that PCPPI had validly
implemented its retrenchment program,viz.:chanRoblesvirtualLawlibrary
Essentially, the prerogative of an employer to retrench its employees
must be exercised only as a last resort, considering that it will lead to the
loss of the employees' livelihood. It is justified only when all other less
drastic means have been tried and found insufficient or inadequate.
Corollary thereto, the employer must prove the requirements for a valid
retrenchment by clear and convincing evidence; otherwise, said ground
for termination would be susceptible to abuse by scheming employers
85
who might be merely feigning losses or reverses in their business
ventures in order to ease out employees. These requirements are:
(1) That retrenchment is reasonably necessary and likely to prevent
business losses which, if already incurred, are not merely de minimis, but
substantial, serious, actual and real, or if only expected, are reasonably
imminent as perceived objectively and in good faith by the employer;
(2) That the employer served written notice both to the employees and
to the Department of Labor and Employment at least one month prior to
the intended date of retrenchment;
(3) That the employer pays the retrenched employees separation pay
equivalent to one (1) month pay or at least one-half (½) month pay for
every year of service, whichever is higher;
(4) That the employer exercises its prerogative to retrench employees in
good faith for the advancement of its interest and not to defeat or
circumvent the employees’ right to security of tenure; and
(5) That the employer used fair and reasonable criteria in ascertaining
who would be dismissed and who would be retained among the
employees, such as status, efficiency, seniority, physical fitness, age, and
financial hardship for certain workers.
In due regard of these requisites, the Court observes that Pepsi had
validly implemented its retrenchment program:
(1) Records disclose that both the CA and the NLRC had already
determined that Pepsi complied with the requirements of substantial loss
and due notice to both the DOLE and the workers to be retrenched. The
pertinent portion of the CA’s March 31, 2006 Decision reads:
In the present action, the NLRC held that PEPSI-COLA’s financial
statements are substantial evidence which carry great credibility and
reliability viewed in light of the financial crisis that hit the country which
saw multinational corporations closing shops and walking away, or
adapting [sic] their own corporate rightsizing program. Since these
findings are supported by evidence submitted before the NLRC, we
resolve to respect the same. x x x x The notice requirement was also
complied with by PEPSI-COLA when it served notice of the corporate
rightsizing program to the DOLE and to the fourteen (14) employees
who will be affected thereby at least one (1) month prior to the date of
retrenchment. (Citations omitted)
It is axiomatic that absent any clear showing of abuse, arbitrariness or
capriciousness, the findings of fact by the NLRC, especially when
affirmed by the CA – as in this case – are binding and conclusive upon
the Court. Thus, given that there lies no discretionary abuse with respect
to the foregoing findings, the Court sees no reason to deviate from the
same.
(2) Records also show that the respondents had already been paid the
requisite separation pay as evidenced by the September 1999 quitclaims
signed by them. Effectively, the said quitclaims serve inter alia the
purpose of acknowledging receipt of their respective separation pays.
Appositely, respondents never questioned that separation pay arising
from their retrenchment was indeed paid by Pepsi to them. As such, the
foregoing fact is now deemed conclusive.
(3) Contrary to the CA’s observation that Pepsi had singled out members
of the LEPCEU-ALU in implementing its retrenchment program, records
reveal that the members of the company union (i.e., LEPCEU-UOEF#49)
were likewise among those retrenched.
Also, as aptly pointed out by the NLRC, Pepsi’s Corporate Rightsizing
Program was a company-wide program which had already been
implemented in its other plants in Bacolod, Iloilo, Davao, General Santos
and Zamboanga. Consequently, given the general applicability of its
retrenchment program, Pepsi could not have intended to decimate
LEPCEU-ALU’s membership, much less impinge upon its right to self-
organization, when it employed the same.
In fact, it is apropos to mention that Pepsi and its employees entered
into a collective bargaining agreement on October 17, 1995 which
contained a union shop clause requiring membership in LEPCEU-
UOEF#49, the incumbent bargaining union, as a condition for continued
employment. In this regard, Pepsi had all the reasons to assume that all
employees in the bargaining unit were all members of LEPCEU-
UOEF#49; otherwise, the latter would have already lost their
employment. In other words, Pepsi need not implement a retrenchment
program just to get rid of LEPCEU-ALU members considering that the
union shop clause already gave it ample justification to terminate them.
It is then hardly believable that union affiliations were even considered
by Pepsi in the selection of the employees to be retrenched.
Moreover, it must be underscored that Pepsi’s management exerted
conscious efforts to incorporate employee participation during the
implementation of its retrenchment program. Records indicate that Pepsi
had initiated sit-downs with its employees to review the criteria on which
the selection of who to be retrenched would be based. This is evidenced
by the report of NCMB Region VIII Director Juanito Geonzon which
states that “Pepsi’s] [m]anagement conceded on the proposal to review
the criteria and to sit down for more positive steps to resolve the issue.”
Lastly, the allegation that the retrenchment program was a mere
subterfuge to dismiss the respondents considering Pepsi’s subsequent
hiring of replacement workers cannot be given credence for lack of
sufficient evidence to support the same.
Verily, the foregoing incidents clearly negate the claim that the
retrenchment was undertaken by Pepsi in bad faith.
(5) On the final requirement of fair and reasonable criteria for
determining who would or would not be dismissed, records indicate that
Pepsi did proceed to implement its rightsizing program based on fair and
reasonable criteria recommended by the company supervisors.
Therefore, as all the requisites for a valid retrenchment are extant, the
Court finds Pepsi’s rightsizing program and the consequent dismissal of
respondents in accord with law.19cralawlawlibrary
In view of the Court's ruling in Pepsi-Cola Products Philippines, Inc. v.
Molon,20 PCPPI contends that the petition for review on certiorari should
be denied and the CA decision should be affirmed under the principle of
stare decisis.
The Court sustains PCPPI's contention.
The principle of stare decisis et non quieta movere (to adhere to
precedents and not to unsettle things which are established) is well
entrenched in Article 8 of the New Civil Code which states that judicial
decisions applying or interpreting the laws or the Constitution shall form
part of the legal system of the Philippines.
In Pepsi-Cola Products Philippines, Incorporated v. Pagdanganan,21 the
Court explained such principle in this wise:chanRoblesvirtualLawlibrary
The doctrine of stare decisis embodies the legal maxim that a principle
or rule of law which has been established by the decision of a court of
controlling jurisdiction will be followed in other cases involving a similar
situation. It is founded on the necessity for securing certainty and
stability in the law and does not require identity of or privity of parties.
This is unmistakable from the wordings of Article 8 of the Civil Code. It is
even said that such decisions “assume the same authority as the statute
itself and, until authoritatively abandoned, necessarily become, to the
extent that they are applicable, the criteria which must control the
actuations not only of those called upon to decide thereby but also of
those in duty bound to enforce obedience thereto.” Abandonment
thereof must be based only on strong and compelling reasons,
otherwise, the becoming virtue of predictability which is expected from
this Court would be immeasurably affected and the public’s confidence in
the stability of the solemn pronouncements diminished.22cralawlawlibrary
In Philippine Carpet Manufacturing Corporation v. Tagyamon,23 the Court
further held:chanRoblesvirtualLawlibrary
Under the doctrine of stare decisis, when a court has laid down a
principle of law as applicable to a certain state of facts, it will adhere to
that principle and apply it to all future cases in which the facts are
substantially the same, even though the parties may be different. Where
the facts are essentially different, however, stare decisis does not apply,
for a perfectly sound principle as applied to one set of facts might be
entirely inappropriate when a factual variant is
introduced.24cralawlawlibrary
Guided by the jurisprudence on stare decisis, the remaining question is
whether the factual circumstances of this present case are substantially
the same as the Pepsi-Cola Products Philippines, Inc. v. Molon
case.25cralawred
The Court rules in the affirmative.
86

There is no dispute that the issues, subject matters and causes of action
between the parties inPepsi-Cola Products Philippines, Inc. v.
Molon26 and the present case are identical, namely, the validity of
PCPPI's retrenchment program, and the legality of its employees'
termination. There is also substantial identity of parties because there is
a community of interest between the parties in the first case and the
parties in the second case, even if the latter was not impleaded in the
first case.27The respondents in Pepsi-Cola Products Philippines, Inc. v.
Molon28 are petitioners' former co-employees and co-union members of
LEPCEU-ALU who were also terminated pursuant to the PCPPI's
retrenchment program. The only difference between the two cases is the
date of the employees' termination, i.e., Molon, et al. belong to the first
batch of employees retrenched on July 31, 1999, while petitioners
belong to the second batch retrenched on February 15, 2000. That the
validity of the same PCPPI retrenchment program had already been
passed upon and, thereafter, sustained in the related case of Pepsi-Cola
Products Philippines, Inc. v. Molon,29 albeit involving different parties,
impels the Court to accord a similar disposition and uphold the legality of
same program. To be sure, the Court is well aware of the
pronouncement in Philippine Carpet Manufacturing Corporation v.
Tagyamon,30 that:chanRoblesvirtualLawlibrary
The doctrine though is not cast in stone for upon a showing that
circumstances attendant in a particular case override the great benefits
derived by our judicial system from the doctrine of stare decisis, the
Court is justified in setting it aside. For the Court, as the highest court of
the land, may be guided but is not controlled by precedent. Thus, the
Court, especially with a new membership, is not obliged to follow blindly
a particular decision that it determines, after re-examination, to call for a
rectification.cralawlawlibrary
However, abandonment of the ruling in Pepsi-Cola Products Philippines,
Inc. v. Molon31 on the same issue of the validity of PCPPI's retrenchment
program must be based only on strong and compelling reasons. After a
careful review of the records, the Court finds no such reasons were
shown to obtain in this case.
Even upon evaluation of petitioners' arguments on its supposed merits,
the Court still finds no reason to disturb the CA ruling that affirmed the
NLRC. In their petition for review on certiorari, petitioners argue that
PCPPI failed to prove that it was suffering from financial losses, and that
its financial statements were perplexing. In support of their argument,
they cite the observation of the Labor Arbiter that the alleged losses
amounting to P1.2 billion in PCPPI's audited financial statements
included those of two subsidiaries that were not yet in commercial
operation, interest payments on short-term and long-term debts, and the
adverse effect of the peso devaluation.32 They also cite the Dissenting
Opinion of Commissioner Edgardo M. Enerlan that the Majority decision
ignored the previous financial statement and relied on the new
document presented by PCPPI during the appeal stage, and that the
accountant admitted that the financial statement as of and for the year
ended June 30, 2000 and 1999 are still incomplete.33 They also insist
that PCPPI failed to explain its acts of regularizing four (4) employees
and hiring sixty-three (63) replacements and additional workers.
Petitioners' arguments are untenable.
At the outset, the issues petitioners raised would entail an inquiry into
the factual veracity of the evidence presented by the parties, the
determination of which is not the Court's statutory function. Indeed,
petitioners are asking the Court to sift through the evidence on record
and pass upon whether PCPPI had, in fact, suffered from serious
business losses. That task, however, would be contrary to the well-
settled principle that the Court is not a trier of facts, and cannot re-
examine and re-evaluate the probative value of the evidence presented
to the Labor Arbiter, and the NLRC, which formed the basis of the
questioned CA decision.34cralawred
At any rate, the Court finds that the September 11, 2002 NLRC Decision
has exhaustively discussed PCPPI's compliance with the requirement that
for a retrenchment to be valid, such must be reasonably necessary and
likely to prevent business losses which, if already incurred, are not
merelyde minimis, but substantial, serious, actual and real, to
wit:chanRoblesvirtualLawlibrary
More pertinent would have been SGV & Co.'s report to the stockholder.
It says:
The accompanying statement of assets, liabilities and home office
account of Tanauan Operations of Pepsi-Cola Products Philippines, Inc.
('company') as of June 30, 1999 and the related statement of income for
the year then ended, are integral parts of the financial statements of the
company taken as a whole. In 1999, the Company's Tanauan Operations
incurred a net loss of P29,167,390 as reported in such plant's financial
statement (ANNEX I) which forms part of the audited consolidated
financial statements as of and for the year ended June 30, 1999, to
which we have rendered our opinion dated October 28, 1999, attached
hereto as ANNEX II.
On the other hand, the accompanying financial statements as of and for
the year ended June 30, 2000 of the company's Tanauan Plant
operations, which reported a net loss P22,327,175 (ANNEX III)
areincluded in the financial statements of the company taken as a
whole as also hereto attached (as ANNEX IV). The financial statements
were accordingly derived from the Company's accounting records, with
certain adjustments and are subject to any additional adjustments as
may be disclosed upon the completion of an audit of the financial
statements of the company taken as a whole, which is currently in
progress. Since the audit of the company's financial statements as of and
for the year ended June 2000 has not yet been completed, we are
unable to express and we do not express our opinion on the statement
of assets, liabilities and home office account of Tanauan operations of
the company as of June 30, 2000 and the related statement if income for
the year then ended.
The statements of assets, liabilities and home office account and the
related statements of income of the company's Tanauan Operations are
not intended to be a complete presentation of the company's financial
statement as of end for the year ended June 30, 2000 and 1999.
The letter of SGV & Co. was accompanied by a consolidat[ed] statement
of Income and Deficit (supplementary schedule) showing a net loss of
P29,167,000. in the company's Tanauan Operations as of June 30, 1999,
and P22,328,000 as of June 2000. This illustrates that the income
statements and the balance sheets pertaining to the Tanauan Plant
Operations as prepared by Rodante F. Ramos were audited by SGV & Co.
This situation would have been avoided had the persistent requests for
ample opportunity to present evidence made by the respondent were not
persistently denied by the Executive Labor Arbiter.
At least the Income Statements and the Balance Sheets regularly
prepared and submitted by AVR-Asst. Controller Rodante Ramos to SGV
& Co. for audit are substantial evidence which carry great credibility and
responsibility viewed in the light of the financial crisis that hit the country
which saw multinational corporations closing shops and walking away, or
adapting their own corporate rightsizing programs.35cralawlawlibrary
The aforequoted NLRC ruling also explains why there is no merit in
Commissioner Enerlan's contention that the incomplete financial
statements as of and for the year ended June 30, 2000 and 1999 are
inconclusive to establish that PCPPI incurred serious business losses.
Given that the financial statements are incomplete, the independent
auditing firm, SGV & Co., aptly explained nonetheless that they were
derived from the PCPPI's accounting records, and were subject to further
adjustments upon the completion of the audit of financial statements of
the company taken as a whole, which was then in progress. The Court
thus agrees with the CA and the NLRC that the letter of SGV & Co.,
accompanied by a consolidated Statement of Income and Deficit showing
a net loss of P29,167,000. in the company's Tanauan Operations as of
June 30, 1999, and P22,328,000 as of June 2000,36 is sufficient and
convincing proof of serious business losses which justified PCPPI's
retrenchment program. After all, the settled rule in quasi-judicial
proceedings is that proof beyond reasonable doubt is not required in
determining the legality of an employer's dismissal of an employee, and
not even a preponderance of evidence is necessary, as substantial
evidence is considered sufficient.37 Substantial evidence is more than a
mere scintilla of evidence or relevant evidence as a reasonable mind
might accept as adequate to support a conclusion, even if other minds,
equally reasonable, might conceivably opine otherwise.38cralawred
There is likewise no merit in Commissioner Enerlan's dissenting opinion
that the majority decision ignored the previous financial statement and
relied on the new document presented by PCPPI during the appeal
stage. Such act of the majority is sanctioned by no less than Article 221
of the Labor Code, as amended, and Section 10, Rule VII of the 2011
NLRC Rules of Procedure which provide that in any proceeding before
the Commission or any of the Labor Arbiters, the rules of evidence
87
prevailing in courts of law or equity shall not be controlling and it is the
spirit and intention of the Code that the Commission and its members
and the Labor Arbiters shall use every and all reasonable means to
ascertain the facts in each case speedily and objectively and without
regard to technicalities of law or procedure, all in the interest of due
process.
On PCPPI's alleged failure to explain its acts of regularizing four (4)
employees and hiring sixty-thee (63) replacements and additional
workers, the Court upholds the NLRC's correct ruling
thereon,viz.:chanRoblesvirtualLawlibrary
Let Us squarely tackle this issue of replacements in the cases of the
complainants in this case. We bear in mind that replacements refer to
the regular workers subjected to retrenchment, occupying regular
positions in the company structure. Artemio Kempis, a filer mechanic
with a salary of P9,366.00 was replaced by Rogelio Castil. Rogelio Castil
was hired through an agency named Helpmate Janitorial Services.
Castil’s employer is Helpmate Janitorial Services. How can a janitorial
service employee perform function of a filer mechanic? How much does
Pepsi Cola pay Helpmate Janitorial Services for the contract of service?
These questions immediately come to mind. Being not a regular
employee of Pepsi Cola, he is not a replacement of Kempis. The idea of
rightsizing is to reduce the number of workers and related functions and
trim down, streamline, or simplify the structure of the organization to the
level of utmost efficiency and productivity in order to realize profit and
survive. After the CRP shall have been implemented, the desired size of
the corporation is attained. Engaging the services of service contractors
does not expand the size of the corporate structure. In this sense, the
retrenched workers were not replaced.
The same is true in the case of Exuperio C. Molina who was allegedly
replaced by Eddie Piamonte, an employee of, again, Helpmate Janitorial
Services; of Gilberto V. Opinion who was allegedly replaced by Norlito
Ulahay, an employee of Nestor Ortiga General Services; of Purisimo M.
Cabasbas who was allegedly replaced by Christopher Albadrigo, an
employee of Helpmate Janitorial Services; of Vicente R. Lauron who was
allegedly replaced by Wendylen Bron, an employee of Doublt “N”
General Services; of Ramon M. de Paz, who was disabled, and replaced
by Alex Dieta, an employee of Nestor Ortiga General Services; and of
Zacarias E. Carbo who was allegedly replaced by an employee of Double
“N” General Services. x x x39cralawlawlibrary
On petitioners' contention that the true motive of the retrenchment
program was to prevent their union, LEPCEU-ALU, from becoming the
certified bargaining agent of all the rank-and-file employees of PCPPI,
such issue of union-busting was duly resolved in the September 11, 2002
NLRC Decision, as follows:chanRoblesvirtualLawlibrary
The issue of union busting has been debunked by Us in the Certified
Notice of Strike Case No. V-000001-2000. We said in that case that Pepsi
Cola, in the selection of workers to be retrenched, did not take into
consideration union affiliation because the unit was supposed to be
composed of all members of good standing of LEPCEU-UOEF#49 there
being a “UNION SHOP” provision in the existing CBA. In the conciliation
conference, PEPSI COLA expressed its willingness to sit down with
unions and review the criteria. When this was suggested by the
conciliator, the idea was then and there rejected by the unions, giving
the impression that the real conflict was inter-union. There being no
cooperation from the unions, PEPSI COLA went on with the first batch of
retrenchment involving 47 workers. It bears stressing that all 47 workers
signed individual release and quitclaims and settled their complaints with
respondent Pepsi Cola, apparently with the assistance of LEPCEU-ALU. It
is awkward for LEPCEU-ALU to argue that a serious corporate-wide
rightsizing program cannot be implemented in PEPSI-COLA Tanauan
Plant because a nascent unrecognized union would probably be busted.
Even the Executive Labor Arbiter did not take this issue up in his
Decision. The issue does not merit consideration.40cralawlawlibrary
Significantly, the foregoing NLRC ruling was validated in Pepsi-Cola
Products Philippines, Inc. v. Molon,41 thus:chanRoblesvirtualLawlibrary
Mindful of their nature, the Court finds it difficult to attribute any act of
union busting or ULP on the part of Pepsi considering that it retrenched
its employees in good faith. As earlier discussed, Pepsi tried to sit-down
with its employees to arrive at mutually beneficial criteria which would
have been adopted for their intended retrenchment. In the same vein,
Pepsi’s cooperation during the NCMB-supervised conciliation conferences
can also be gleaned from the records. Furthermore, the fact that Pepsi’s
rightsizing program was implemented on a company-wide basis dilutes
respondents’ claim that Pepsi’s retrenchment scheme was calculated to
stymie its union activities, much less diminish its constituency. Therefore,
absent any perceived threat to LEPCEU-ALU’s existence or a violation of
respondents’ right to self-organization–as demonstrated by the foregoing
actuations–Pepsi cannot be said to have committed union busting or ULP
in this case.cralawlawlibrary
Finally, this case does not fall within any of the recognized
exceptions42 to the rule that only questions of law are proper in a
petition for review on certiorari under Rule 45 of the Rules of Court.
Settled is the rule that factual findings of labor officials, who are deemed
to have acquired expertise in matters within their respective jurisdiction,
are generally accorded not only respect but even finality, and bind us
when supported by substantial evidence.43 Certainly, it is not the Court's
function to assess and evaluate the evidence all over again, particularly
where the findings of both the CA and the NLRC coincide.44cralawred
WHEREFORE, the petition is DENIED. The Court of Appeals Decision
dated July 31, 2006, and its Resolution dated February 21, 2007 in CA-
G.R. SP No. 81712, are AFFIRMED.
SO ORDERED.chanroblesvirtuallawlibrary
88
21
Republic of the Philippines
SUPREME COURT
Baguio City
FIRST DIVISION
G.R. No. 199166 April 20, 2015
NELSON V. BEGINO, GENER DEL VALLE, MONINA A VILA-
LLORIN AND MA. CRISTINA SUMAYAO,Petitioners,
vs.
ABS-CBN CORPORATION (FORMERLY, ABS-CBN
BROADCASTING CORPORATION) AND AMALIA
VILLAFUERTE, Respondents.
DECISION
PEREZ, J.:
The existence of an employer-employee relationship is at the heart of
this Petition for Review on Certiorari filed pursuant to Rule 45 of the
Rules of Court, primarily assailing the 29 June 2011 Decision1 rendered
by the Fourth Division of the Court of Appeals (CA) in CA-G.R. SP No.
116928 which ruled out said relationship between the parties.
The Facts
Respondent ABS-CBN Corporation (formerly ABS-CBN Broadcasting
Corporation) is a television and radio broadcasting corporation which, for
its Regional Network Group in Naga City, employed respondent Amalia
Villafuerte (Villafuerte) as Manager. There is no dispute regarding the
fact that, thru Villafuerte, ABS-CBN engaged the services of petitioners
Nelson Begino (Begino) and Gener Del Valle (Del Valle) sometime in
1996 as Cameramen/Editors for TV Broadcasting. Petitioners Ma. Cristina
Sumayao (Sumayao) and Monina Avila-Llorin (Llorin) were likewise
similarly engaged as reporters sometime in 1996 and 2002, respectively.
With their services engaged by respondents thru Talent Contracts which,
though regularly renewed over the years, provided terms ranging from
three (3) months to one (1) year, petitioners were given Project
Assignment Forms which detailed, among other matters, the duration of
a particular project as well as the budget and the daily technical
requirements thereof. In the aforesaid capacities, petitioners were
tasked with coverage of news items for subsequent daily airings in
respondents’ TV Patrol Bicol Program.2
While specifically providing that nothing therein shall be deemed or ostensible fixed periods, this situation had gone on for years since TV
construed to establish an employer-employee relationship between the Patrol Bicol has continuously aired from 1996 onwards.7
parties, the aforesaid Talent Contracts included, among other matters,
provisions on the following matters: (a) the Talent’s creation and
In refutation of the foregoing assertions, on the other hand, respondents
performance of work in accordance with the ABS-CBN’s professional
argued that, although it occasionally engages in production and
standards and compliance with its policies and guidelines covering
generates programs thru various means, ABS-CBN is primarily engaged
intellectual property creators, industry codes as well as the rules and
in the business of broadcasting television and radio content. Not having
regulations of the Kapisanan ng mga Broadcasters sa Pilipinas (KBP) and
the full manpower complement to produce its own program, the
other regulatory agencies; (b) the Talent’s non-engagement in similar
company had allegedly resorted to engaging independent contractors
work for a person or entity directly or indirectly in competition with or
like actors, directors, artists, anchormen, reporters, scriptwriters and
adverse to the interests of ABS-CBN and non-promotion of any product
various production and technical staff, who offered their services in
or service without prior written consent; and (c) the results-oriented
relation to a particular program. Known in the industry as talents, such
nature of the talent’s work which did not require them to observe normal
independent contractors inform ABSCBN of their availability and were
or fixed working hours.3 Subjected to contractor’s tax, petitioners’
required to accomplish Talent Information Forms to facilitate their
remunerations were denominated as Talent Fees which, as of last
engagement for and appearance on designated project days. Given the
renewal, were admitted to be pegged per airing day at P273.35 for
unpredictability of viewer preferences, respondents argued that the
Begino, P 302.92 for Del Valle, P 323.08 for Sumayao and P 315.39 for
company cannot afford to provide regular work for talents with whom it
Llorin.4
negotiates specific or determinable professional fees on a per project,
weekly or daily basis, usually depending on the budget allocation for a
Claiming that they were regular employees of ABS-CBN, petitioners filed project.8
against respondents the complaint5docketed as Sub-RAB 05-04- 00041-
07 before the National Labor Relations Commission’s (NLRC) Sub-
Respondents insisted that, pursuant to their Talent Contracts and/or
Regional Arbitration Branch No. 5, Naga City. In support of their claims
Project Assignment Forms, petitioners were hired as talents, to act as
for regularization, underpayment of overtime pay, holiday pay, 13th
reporters and/or cameramen for TV Patrol Bicol for designated periods
month pay, service incentive leave pay, damages and attorney's fees,
and rates. Fully aware that they were not considered or to consider
petitioners alleged that they performed functions necessary and
themselves as employees of a particular production or film outfit,
desirable in ABS-CBN's business. Mandated to wear company IDs and
petitioners were supposedly engaged on the basis of the skills,
provided all the equipment they needed, petitioners averred that they
knowledge or expertise they already possessed and, for said reason,
worked under the direct control and supervision of Villafuerte and, at the
required no further training from ABS-CBN. Although petitioners were
end of each day, were informed about the news to be covered the
inevitably subjected to some degree of control, the same was allegedly
following day, the routes they were to take and, whenever the subject of
limited to the imposition of general guidelines on conduct and
their news coverage is quite distant, even the start of their workday. Due
performance, simply for the purpose of upholding the standards of the
to the importance of the news items they covered and the necessity of
company and the strictures of the industry. Never subjected to any
their completion for the success of the program, petitioners claimed that,
control or restrictions over the means and methods by which they
under pain of immediate termination, they were bound by the company’s
performed or discharged the tasks for which their services were
policy on, among others, attendance and punctuality.6
engaged, petitioners were, at most, briefed whenever necessary
regarding the general requirements of the project to be executed.9
Aside from the constant evaluation of their actions, petitioners were
reportedly subjected to an annual competency assessment alongside
Having been terminated during the pendency of the case, Petitioners
other ABS-CBN employees, as condition for their continued employment.
filed on 10 July 2007 a second complaint against respondents, for
Although their work involved dealing with emergency situations at any
regularization, payment of labor standard benefits, illegal dismissal and
time of the day or night, petitioners claimed that they were not paid the
unfair labor practice, which was docketed as Sub-RAB 05-08-00107-07.
labor standard benefits the law extends to regular employees. To avoid
Upon respondents’ motion, this complaint was dismissed for violation of
paying what is due them, however, respondents purportedly resorted to
the rules against forum shopping in view of the fact that the
the simple expedient of using said Talent Contracts and/or Project
determination of the issues in the second case hinged on the resolution
Assignment Forms which denominated petitioners as talents, despite the
of those raised in the first.10 On 19 December 2007, however, Labor
fact that they are not actors or TV hosts of special skills. As a result of
Arbiter Jesus Orlando Quiñones (Labor Arbiter Quiñones) resolved Sub-
this iniquitous situation, petitioners asseverated that they merely earned
RAB 05-04-00041-07 in favor of petitioners who, having rendered
an average of P7,000.00 to P8,000.00 per month, or decidedly lower
services necessary and related to ABS-CBN’s business for more than a
than the P21,773.00 monthly salary ABS-CBN paid its regular rank-and-
year, were determined to be its regular employees. With said conclusion
file employees. Considering their repeated re-hiring by respondents for
found to be buttressed by, among others, the exclusivity clause and
89
prohibitions under petitioners’ Talent Contracts and/or Project
Assignment Forms which evinced respondents’ control over
them,11 Labor Arbiter Quiñones disposed of the case in the following
wise:
WHEREFORE, finding merit in the causes of action set forth by the
complainants, judgment is hereby rendered declaring complainants
MONINA AVILA-LLORIN, GENER L. DEL VALLE, NELSON V. BEGINO and
MA. CRISTINA V. SUMAYAO, as regular employees of respondent
company, ABS-CBN BROADCASTING CORPORATION.
Accordingly, respondent ABS-CBN Broadcasting Corporation is hereby
ORDERED to pay complainants, subject to the prescriptive period
provided under Article 291 of the Labor Code, however applicable, the
total amount of Php2,440,908.36, representing salaries/wage
differentials, holiday pay, service incentive leave pay and 13th month
pay, to include 10% of the judgment award as attorney’s fees of the
judgment award (computation of the monetary awards are attached
hereto as integral part of this decision).
Moreover, respondents are directed to admit back complainants to work
under the same terms and conditions prevailing prior to their separation
or, at respondents' option, merely reinstated in the payroll.
Other than the above, all other claims and charges are ordered
DISMISSED for lack of merit.12
Aggrieved by the foregoing decision, respondents elevated the case on
appeal before the NLRC, during the pendency of which petitioners filed a
third complaint against the former, for illegal dismissal, regularization,
nonpayment of salaries and 13th month pay, unfair labor practice,
damages and attorney’s fees. In turn docketed as NLRC Case No. Sub-
RAB-V-05-03-00039-08, the complaint was raffled to Labor Arbiter
Quiñones who issued an Order dated 30 April 2008, inhibiting himself
from the case and denying respondents’ motion to dismiss on the
grounds of res judicata and forum shopping.13 Finding that respondents’
control over petitioners was indeed manifest from the exclusivity clause
and prohibitions in the Talent Contracts and/or Project Assignment
Forms, on the other hand, the NLRC rendered a Decision dated 31 March
2010, affirming said Labor Arbiter’s appealed decision.14 Undeterred by
the NLRC’s 31 August 2010 denial of their motion for
reconsideration,15 respondents filed the Rule 65 petition for certiorari
docketed before the CA as CA-G.R. SP No. 116928 which, in addition to
taking exceptions to the findings of the assailed decision, faulted
petitioners for violating the rule against forum shopping.16
On 29 June 2011, the CA rendered the herein assailed decision,
reversing the findings of the Labor Arbiter and the NLRC. Ruling out the
existence of forum shopping on the ground that petitioners' second and
third complaints were primarily anchored on their termination from
employment after the filing of their first complaint, the CA nevertheless
discounted the existence of an employer-employee relation between the
parties upon the following findings and conclusions: (a) petitioners, were
engaged by respondents as talents for periods, work and the program
specified in the Talent Contracts and/or Project Assignment Forms
concluded between them; (b) instead of fixed salaries, petitioners were
paid talent fees depending on the budget allocated for the program to
which they were assigned; (c) being mainly concerned with the result,
respondents did not exercise control over the manner and method by
which petitioner accomplished their work and, at most, ensured that they
complied with the standards of the company, the KBP and the industry;
and, (d) the existence of an employer-employee relationship is not
necessarily established by the exclusivity clause and prohibitions which
are but terms and conditions on which the parties are allowed to freely
stipulate.17
Petitioners’ motion for reconsideration of the foregoing decision was
denied in the CA's 3 October 2011 Resolution,18 hence, this petition.
The Issues
Petitioners seek the reversal of the CA’s assailed Decision and Resolution
on the affirmative of the following issues:
1. Whether or not the CA seriously and reversibly erred in not dismissing
respondents’ petition for certiorari in view of the fact that they did file a
Notice of Appeal at the NLRC level and did not, by themselves or through
their duly authorized representative, verify and certify the Memorandum
of Appeal they filed thereat, in accordance with the NLRC Rules of
Procedure; and 2. Whether or not the CA seriously and reversibly erred
in brushing aside the determination made by both the Labor Arbiter and
the NLRC of the existence of an employer-employee relationship
between the parties, despite established jurisprudence supporting the
same.
The Court's Ruling
The Court finds the petition impressed with merit.
Petitioners preliminarily fault the CA for not dismissing respondents’ Rule
65 petition for certiorari in view of the fact that the latter failed to file a
Notice of Appeal from the Labor Arbiter’s decision and to verify and
certify the Memorandum of Appeal they filed before the NLRC. While
concededly required under the NLRC Rules of Procedure, however, these
matters should have been properly raised during and addressed at the
appellate stage before the NLRC. Instead, the record shows that the
NLRC took cognizance of respondents’ appeal and proceeded to resolve
the same in favor of petitioners by affirming the Labor Arbiter’s decision.
Not having filed their own petition for certiorari to take exception to the
liberal attitude the NLRC appears to have adopted towards its own rules
of procedure, petitioners were hardly in the proper position to raise the
same before the CA or, for that matter, before this Court at this late
stage. Aside from the settled rule that a party who has not appealed is
not entitled to affirmative relief other than the ones granted in the
decision19 rendered, liberal interpretation of procedural rules on appeal
had, on occasion, been favored in the interest of substantive justice.20
Although the existence of an employer-employee relationship is, on the
other hand, a question of fact21 which is ordinarily not the proper subject
of a Rule 45 petition for review on certiorari like the one at bar, the
conflicting findings between the labor tribunals and the CA justify a
further consideration of the matter.22 To determine the existence of said
relation, case law has consistently applied the four-fold test, to wit: (a)
the selection and engagement of the employee; (b) the payment of
wages;(c) the power of dismissal; and (d) the employer's power to
control the employee on the means and methods by which the work is
accomplished.23 Of these criteria, the so-called "control test" is generally
regarded as the most crucial and determinative indicator of the presence
or absence of an employer-employee relationship. Under this test, an
employer-employee relationship is said to exist where the person for
whom the services are performed reserves the right to control not only
the end result but also the manner and means utilized to achieve the
same.24
In discounting the existence of said relationship between the parties, the
CA ruled that Petitioners' services were, first and foremost, engaged thru
their Talent Contracts and/or Project Assignment Forms which specified
the work to be performed by them, the project to which they were
assigned, the duration thereof and their rates of pay according to the
budget therefor allocated. Because they are imbued with public interest,
it cannot be gainsaid, however, that labor contracts are subject to the
police power of the state and are placed on a higher plane than ordinary
contracts. The recognized supremacy of the law over the nomenclature
of the contract and the stipulations contained therein is aimed at
bringing life to the policy enshrined in the Constitution to afford
protection to labor.25 Insofar as the nature of one’s employment is
concerned, Article 280 of the Labor Code of the Philippines also provides
as follows:
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 service to be performed is seasonal in nature and the
employment is for the duration of the season.
90
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph: Provided, That, any employee who has rendered
at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the
activity in which he is employed and his employment shall continue while
such actually exists.
It has been ruled that the foregoing provision contemplates four kinds of
employees, namely: (a) regular employees or those who have been
engaged to perform activities which are usually necessary or desirable in
the usual business or trade of the employer; (b) project employees or
those whose employment has been fixed for a specific project or
undertaking, the completion or termination of which has been
determined at the time of the engagement of the employee; (c) seasonal
employees or those who work or perform services which are seasonal in
nature, and the employment is for the duration of the season; and (d)
casual employees or those who are not regular, project, or seasonal
employees.26 To the foregoing classification of employee, jurisprudence
has added that of contractual or fixed term employee which, if not for
the fixed term, would fall under the category of regular employment in
view of the nature of the employee’s engagement, which is to perform
activity usually necessary or desirable in the employer’s business.27
The Court finds that, notwithstanding the nomenclature of their Talent
Contracts and/or Project Assignment Forms and the terms and condition
embodied therein, petitioners are regular employees of ABS-CBN. Time
and again, it has been ruled that the test to determine whether
employment is regular or not is the reasonable connection between the
activity performed by the employee in relation to the business or trade of
the employer.28 As cameramen/editors and reporters, petitioners were
undoubtedly performing functions necessary and essential to ABS-CBN’s
business of broadcasting television and radio content. It matters little
that petitioners’ services were engaged for specified periods for TV Patrol
Bicol and that they were paid according to the budget allocated therefor.
Aside from the fact that said program is a regular weekday fare of the
ABS-CBN’s Regional Network Group in Naga City, the record shows that,
from their initial engagement in the aforesaid capacities, petitioners were
continuously re-hired by respondents over the years. To the mind of the
Court, respondents’ repeated hiring of petitioners for its long-running
news program positively indicates that the latter were ABS-CBN’s regular
employees.
If the employee has been performing the job for at least one year, even
if the performance is not continuous or merely intermittent, the law
deems the repeated or continuing performance as sufficient evidence of
the necessity, if not indispensability of that activity in the
business.29 Indeed, an employment stops being co-terminous with
specific projects where the employee is continuously re-hired due to the
demands of the employer’s business.30When circumstances show,
moreover, that contractually stipulated periods of employment have
been imposed to preclude the acquisition of tenurial security by the
employee, this Court has not hesitated in striking down such
arrangements as contrary to public policy, morals, good customs or
public order.31 The nature of the employment depends, after all, on the
nature of the activities to be performed by the employee, considering the
nature of the employer’s business, the duration and scope to be done,
and, in some cases, even the length of time of the performance and its
continued existence.32 In the same manner that the practice of having
fixed-term contracts in the industry does not automatically make all
talent contracts valid and compliant with labor law, it has, consequently,
been ruled that the assertion that a talent contract exists does not
necessarily prevent a regular employment status.33
As cameramen/editors and reporters, it also appears that petitioners
were subject to the control and supervision of respondents which, first
and foremost, provided them with the equipments essential for the
discharge of their functions. Prepared at the instance of respondents,
petitioners’ Talent Contracts tellingly provided that ABS-CBN retained "all
creative, administrative, financial and legal control" of the program to
which they were assigned. Aside from having the right to require
petitioners "to attend and participate in all promotional or merchandising
campaigns, activities or events for the Program," ABS-CBN required the
former to perform their functions "at such locations and
Performance/Exhibition Schedules" it provided or, subject to prior notice,
as it chose determine, modify or change. Even if they were unable to
comply with said schedule, petitioners were required to give advance
notice, subject to respondents’ approval.34 However obliquely worded,
the Court finds the foregoing terms and conditions demonstrative of the
control respondents exercised not only over the results of petitioners’
work but also the means employed to achieve the same.
In finding that petitioners were regular employees, the NLRC further
ruled that the exclusivity clause and prohibitions in their Talent Contracts
and/or Project Assignment Forms were likewise indicative of
respondents’ control over them. Brushing aside said finding, however,
the CA applied the ruling in Sonza v. ABS-CBN Broadcasting
Corporation35 where similar restrictions were considered not necessarily
determinative of the existence of an employer-employee relationship.
Recognizing that independent contractors can validly provide his
exclusive services to the hiring party, said case enunciated that
guidelines for the achievement of mutually desired results are not
tantamount to control. As correctly pointed out by petitioners, however,
parallels cannot be expediently drawn between this case and that of
Sonza case which involved a well-known television and radio personality
who was legitimately considered a talent and amply compensated as
such. While possessed of skills for which they were modestly
recompensed by respondents, petitioners lay no claim to fame and/or
unique talents for which talents like actors and personalities are hired
and generally compensated in the broadcast industry.
Later echoed in Dumpit-Murillo v. Court of Appeals,36 this Court has
rejected the application of the ruling in the Sonza case to employees
similarly situated as petitioners in ABS-CBN Broadcasting Corporation v.
Nazareno.37The following distinctions were significantly observed
between employees like petitioners and television or radio personalities
like Sonza, to wit:
First. In the selection and engagement of respondents, no peculiar or
unique skill, talent or celebrity status was required from them because
they were merely hired through petitioner’s personnel department just
like any ordinary employee.
Second. The so-called "talent fees" of respondents correspond to wages
given as a result of an employer-employee
relationship.1âwphi1 Respondents did not have the power to bargain for
huge talent fees, a circumstance negating independent contractual
relationship.
Third. Petitioner could always discharge respondents should it find their
work unsatisfactory, and respondents are highly dependent on the
petitioner for continued work.
Fourth. The degree of control and supervision exercised by petitioner
over respondents through its supervisors negates the allegation that
respondents are independent contractors.
The presumption is that when the work done is an integral part of the
regular business of the employer and when the worker, relative to the
employer, does not furnish an independent business or professional
service, such work is a regular employment of such employee and not an
independent contractor. The Court will peruse beyond any such
agreement to examine the facts that typify the parties’ actual
relationship.38 (Emphasis omitted)
Rather than the project and/or independent contractors respondents
claim them to be, it is evident from the foregoing disquisition that
petitioners are regular employees of ABS-CBN. This conclusion is borne
out by the ineluctable showing that petitioners perform functions
necessary and essential to the business of ABS-CBN which repeatedly
employed them for a long-running news program of its Regional Network
Group in Naga City. In the course of said employment, petitioners were
provided the equipments they needed, were required to comply with the
Company's policies which entailed prior approval and evaluation of their
performance. Viewed from the prism of these considerations, we find
and so hold that the CA reversibly erred when it overturned the NLRC's
affirmance of the Labor Arbiter's finding that an employer-employee
relationship existed between the parties. Given the fact, however, that
Sub-RAB-V-05-03-00039-08 had not been consolidated with this case
and appears, for all intents and purposes, to be · pending still, the Court
finds that the reinstatement of petitioners ordered by said labor officer
91
and tribunal should, as a relief provided in case of illegal dismissal, be
left for determination in said case.

WHEREFORE, the Court of Appeals' assailed Decision dated 29 June

2011 and Resolution dated 3 October 2011 in CA-G.R. SP No. 116928
are REVERSED and SET ASIDE. Except for the reinstatement of Nelson
V. Begino, Gener Del Valle, Monina Avila-Llorin and Ma. Cristina
Sumayao, the National Labor and Relations Commission's 31 March 2010
Decision is, accordingly, REINSTATED.

SO ORDERED.

92
22
SECOND DIVISION
G.R. No. 200114, August 24, 2015
SOCIAL SECURITY SYSTEM, Petitioner, v. DEBBIE
UBAÑA, Respondent.
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari1 assails: 1) the July 29, 2011
Decision2 of the Court of Appeals (CA) denying the Petition
for Certiorari in CA-G.R. SP No. 110006 and affirming the March 6, 2007
Order3 of the Regional Trial Court (RTC) of Daet, Camarines Norte,
Branch 39 in Civil Case No. 7304; and 2) the CA's January 10, 2012
Resolution4 denying petitioner's Motion for Reconsideration of the herein
assailed Decision.
Factual Antecedents
On December 26, 2002, respondent Debbie Ubana filed a civil case for
damages against the DBP Service Corporation, petitioner Social Security
System (SSS), and the SSS Retirees Association5before the RTC of Daet,
Camarines Norte. The case was docketed as Civil Case No. 7304 and
assigned to RTC Branch 39.
In her Complaint,6 respondent alleged that in July 1995, she applied for
employment with the petitioner. However, after passing the
examinations and accomplishing all the requirements for employment,
she was instead referred to DBP Service Corporation for "transitory
employment." She took the pre-employment examination given by DBP
Service Corporation and passed the same. On May 20, 1996, she was
told to report for training to SSS, Naga City branch, for immediate
deployment to SSS Daet branch. On May 28, 1996, she was made to
sign a six-month Service Contract Agreement7 by DBP Service
Corporation, appointing her as clerk for assignment with SSS Daet
branch effective May 27, 1996, with a daily wage of only P171.00. She
was assigned as "Frontliner" of the SSS Members Assistance Section until
December 15, 1999. From December 16, 1999 to May 15, 2001, she was
assigned to the Membership Section as Data Encoder. On December 16,
2001, she was transferred to the SSS Retirees Association as Processor
at the Membership Section until her resignation on August 26, 2002. As
Processor, she was paid only P229.00 daily or P5,038.00 monthly, while
a regular SSS Processor receives a monthly salary of P18,622.00 or
P846.45 daily wage. Her May 28, 1996 Service Contract Agreement with
DBP Service Corporation was never renewed, but she was required to
work for SSS continuously under different assignments with a maximum
daily salary of only P229.00; at the same time, she was constantly
assured of being absorbed into the SSS plantilla. Respondent claimed
she was qualified for her position as Processor, having completed
required training and passed the SSS qualifying examination for
Computer Operations Course given by the National Computer Institute,
U.P. Diliman from May 16 to June 10, 2001, yet she was not given the
proper salary. Because of the oppressive and prejudicial treatment by
SSS, she was forced to resign on August 26, 2002 as she could no longer
stand being exploited, the agony of dissatisfaction, anxiety,
demoralization, and injustice. She asserted that she dedicated six years
of her precious time faithfully serving SSS, foregoing more satisfying
employment elsewhere, yet she was merely exploited and given empty
and false promises; that defendants conspired to exploit her and violate
civil service laws and regulations and Civil Code provisions on Human
Relations, particularly Articles 19, 20, and 21.8 As a result, she suffered
actual losses by way of unrealized income, moral and exemplary
damages, attorney's fees and litigation expenses.
Respondent prayed for an award of P572,682.67 actual damages
representing the difference between the legal and proper salary she
should have received and the actual salary she received during her six-
year stint with petitioner; P300,000.00 moral damages; exemplary
damages at the discretion of the court; P20,000.00 attorney's fees and
P1,000.00 appearance fees; and other just and equitable relief.
Petitioner and its co-defendants SSS Retirees Association and DBP
Service Corporation filed their respective motions to dismiss, arguing that
the subject matter of the case and respondent's claims arose out of
employer-employee relations, which are beyond the RTC's jurisdiction
and properly cognizable by the National Labor Relations Commission
(NLRC).
Respondent opposed the motions to dismiss, arguing that pursuant to
civil service rules and regulations, service contracts such as her Service
Contract Agreement with DBP Service Corporation should cover only a)
lump sum work or services such as janitorial, security or consultancy
services, and b) piece work or intermittent jobs of short duration not
exceeding six months on a daily basis.9She posited that her service
contract involved the performance of sensitive work, and not merely
janitorial, security, consultancy services, or work of intermittent or short
duration. In fact, she was made to work continuously even after the
lapse of her 6-month service contract. Citing Civil Service Commission
Memorandum Circular No. 40, respondent contended that the
performance of functions outside of the nature provided in the
appointment and receiving salary way below that received by regular
SSS employees amount to an abuse of rights; and that her cause of
action is anchored on the provisions of the Civil Code on Human
Relations.
Ruling of the Regional Trial Court
On October 1, 2003, the RTC issued an Order10 dismissing respondent's
complaint for lack of jurisdiction, stating that her claim for damages "has
a reasonable causal connection with her employer-employee relations
with the defendants"11 and "is grounded on the alleged fraudulent and
malevolent manner by which the defendants conspired with each other
in exploiting [her], which is a clear case of unfair labor practice,"12 falling
under the jurisdiction of the Labor Arbiter of the NLRC. Thus, it
decreed:cralawlawlibrary
WHEREFORE, premises considered, the aforementioned Motion to
Dismiss the complaint of the herein plaintiff for lack of jurisdiction is
hereby GRANTED. The above-entitled complaint is hereby DISMISSED.
SO ORDERED.13
Respondent moved for reconsideration. On March 6, 2007, the RTC
issued another Order14 granting respondent's motion for reconsideration.
The trial court held:cralawlawlibrary
Section 2(1), Art. K-B, 1987 Constitution, expressly provides that "the
civil service embraces all branches, subdivisions, instrumentalities, and
agencies of the government, including government-owned or controlled
corporation[s] with original charters." Corporations with original charters
are those which have been created by special law[s] and not through the
general corporation law. In contrast, labor law claims against
government-owned and controlled corporations without original charters
fall within the jurisdiction of the Department of Labor and Employment
and not the Civil Service Commission. (Light Rail Transit Authority vs.
Perfecto Venus, March 24, 2006.)
Having been created under an original charter, RA No. 1161 as amended
by R.A. 8282, otherwise known as the Social Security Act of 1997, the
SSS is governed by the provision[s] of the Civil Service Commission.
However, since the SSS denied the existence of an employer-employee
relationship, and the case is one for Damages, it is not the Civil Service
Commission that has jurisdiction to try the case, but the regular courts.
A perusal of the Complaint filed by the plaintiff against the defendant
SSS clearly shows that the case is one for Damages.
Paragraph 15 of her complaint states, thus:ChanRoblesvirtualLawlibrary
xxx. Likewise, they are contrary to the Civil Code provisions on human
relations which [state], among others, that Every person, must in the
exercise of his rights and in the performance of his duties, act with
93
justice, give everyone his due and observe honesty and good faith
(Article 19) and that Every person who, contrary to law, willfully or
negligently [causes] damages to another, shall indemnify the latter for
the same. (Art. 20)
"Article 19 provides a rule of conduct that is consistent with an orderly
and harmonious relationship between and among men and women It
codifies the concept of what is justice and fair play so that abuse of right
by a person will be prevented. Art. 20 speaks of general sanction for all
other provisions of law which do not especially provide their own
sanction. Thus, anyone, who, whether willfully or negligently, in the
exercise of his legal right or duty, causes damage to another, shall
indemnify his or her victim for injuries suffered thereby." (Persons and
Family Relations, Sta. Maria, Melencio, Jr. (2004) pp. 31-32.)
Wherefore, all premises considered, the Motion for Reconsideration is
hereby GRANTED. The case against defendant Social Security System
represented by its President is hereby reinstated in the docket of active
civil cases of this court.
SO ORDERED.15 [Italics in the original]
Petitioner moved for reconsideration, but the RTC stood its ground in its
June 24, 2009 Order16cralawrednad
Ruling of the Court of Appeals
In a Petition for Certiorari17 filed with the CA and docketed as CA-G.R. SP
No. 110006, petitioner sought a reversal of the RTC's June 24, 2009 and
March 6, 2007 Orders and the reinstatement of its original October 1,
2003 Order dismissing Civil Case No. 7304, insisting that the trial court
did not have jurisdiction over respondent's claims for "unrealized salary
income" and other damages, which constitute a labor dispute cognizable
only by the labor tribunals. Moreover, it claimed that the assailed Orders
of the trial court were issued with grave abuse of discretion. It argued
that the trial court gravely erred in dismissing the case only as against its
co-defendants DBP Service Corporation and SSS Retirees Association and
maintaining the charge against it, considering that its grounds for
seeking dismissal are similar to those raised by the two. It maintained
that DBP Service Corporation and SSS Retirees Association are legitimate
independent job contractors engaged by it to provide manpower services
since 2001, which thus makes respondent an employee of these two
entities and not of SSS; and that since it is not the respondent's
employer, then there is no cause of action against it.
On July 29, 2011, the CA issued the assailed Decision containing the
following pronouncement:cralawlawlibrary
Hence, petitioner seeks recourse before this Court via this Petition
for Certiorarichallenging the RTC Orders. For the resolution of this Court
is the sole issue of:cralawlawlibrary
WHETHER OR NOT THE RTC HAS JURISDICTION TO HEAR AND DECIDE
CIVIL CASE NO. 7304.
The petition is devoid of merits.
The rule is that, the nature of an action and the subject matter thereof,
as well as, which court or agency of the government has jurisdiction over
the same, are determined by the material allegations of the complaint in
relation to the law involved and the character of the reliefs prayed for,
whether or not the complainant/plaintiff is entitled to any or all of such
reliefs. A prayer or demand for relief is not part of the petition of the
cause of action; nor does it enlarge the cause of action stated or change
the legal effect of what is alleged. In determining which body has
jurisdiction over a case, the better policy is to consider not only the
status or relationship of the parties but also the nature of the action that
is the subject of their controversy.
A careful perusal of Ubana's Complaint in Civil Case No. 7304 unveils
that Ubana's claim is rooted on the principle of abuse of right laid in the
New Civil Code. She was claiming damages based on the alleged
exploitation [perpetrated] by the defendants depriving her of her rightful
income. In asserting that she is entitled to the damages claimed, [she]
invoked not the provisions of the Labor Code or any other labor laws but
the provisions on human relations under the New Civil Code. Evidently,
the determination of the respective rights of the parties herein, and the
ascertainment whether there were abuses of such rights, do not call for
the application of the labor laws but of the New Civil
Code. Apropos thereto, the resolution of the issues raised in the instant
complaint does not require the expertise acquired by labor officials. It is
the courts of general jurisdiction, which is the RTC in this case, which
has the authority to hear and decide Civil Case No. 7304.
Not every dispute between an employer and employee involves matters
that only labor arbiters and the NLRC can resolve in the exercise of their
adjudicatory or quasi-judicial powers. Where the claim to the principal
relief sought is to be resolved not by reference to the Labor Code or
other labor relations statute or a collective bargaining agreement but by
the general civil law, the jurisdiction over the dispute belongs to the
regular courts of justice and not to the Labor Arbiter and the NLRC. In
such situations, [resolution] of the dispute requires expertise, not in
labor management relations nor in wage structures and other terms and
conditions of employment, but rather in the application of the general
civil law. Clearly, such claims fall outside the area of competence or
expertise ordinarily ascribed to Labor Arbiters and the NLRC and the
rationale for granting jurisdiction over such claims to these agencies
disappears.
It is the character of the principal relief sought that appears essential in
this connection. Where such principal relief is to be granted under labor
legislation or a collective bargaining agreement, the case should fall
within the jurisdiction of the Labor Arbiter and the NLRC, even though a
claim for damages might be asserted as an incident to such claim.
The pivotal question is whether the Labor Code has any relevance to the
principal relief sought in the complaint. As pointed out earlier, Ubana did
not seek refuge from the Labor Code in asking for the award of
damages. It was the transgression of Article[s] 19 and 20 of the New
Civil Code that she was insisting in wagering this case. The primary relief
sought herein is for moral and exemplary damages for the abuse of
rights. The claims for actual damages for unrealized income are the
natural consequence for abuse of such rights.
While it is true that labor arbiters and the NLRC have jurisdiction to
award not only reliefs provided by labor laws, but also damages
governed by the Civil Code, these reliefs must still be based on an action
that has a reasonable causal connection with the Labor Code, other labor
statutes, or collective bargaining agreements. Claims for damages under
paragraph 4 of Article 217 must have a reasonable causal connection
with any of the claims provided for in the article in order to be
cognizable by the labor arbiter. Only if there is such a connection with
the other claims can the claim for damages be considered as arising
from employer-employee relations. In the present case, Ubana's claim
for damages is not related to any other claim under Article 217, other
labor statutes, or collective bargaining agreements.
All told, it is ineluctable that it is the regular courts that has [sic]
jurisdiction to hear and decide Civil Case No. 7304. In Tolosa v.
NLRC,18 the Supreme Court held that, "[i]t is not the NLRC but the
regular courts that have jurisdiction over action for damages, in which
the employer-employee relations is merely incidental, and in which the
cause of action proceeds from a different source of obligation such as
tort. Since petitioner's claim for damages is predicated on a quasi-delict
or tort that has no reasonable causal connection with any of the claims
provided for in Article 217, other labor statutes or collective bargaining
agreements, jurisdiction over the action lies with the regular courts not
with the NLRC or the labor arbiters." The same rule applies in this case.
WHEREFORE, premises considered, the instant petition is DENIED and
the Order dated March 6, 2007 of the Regional Trial Court, Branch 39 of
Daet, Camarines Norte in Civil Case No. 7304 is hereby AFFIRMED.
SO ORDERED.19
Petitioner filed a Motion for Reconsideration,20 but the CA denied the
same in its January 10, 2012 Resolution.21 Hence, the present Petition.
Issue
Petitioner simply submits that the assailed CA dispositions are contrary
to law and jurisprudence.
Petitioner's Arguments
Praying that the assailed CA dispositions be set aside and that the RTC's
October 1, 2003 Order dismissing Civil Case No. 7304 be reinstated,
petitioner essentially maintains in its Petition and Reply22 that
respondent's claims arose from and are in fact centered on her previous
employment. It maintains that there is a direct causal connection
94
between respondent's claims and her employment, which brings the
subject matter within the jurisdiction of the NLRC. Petitioner contends
that respondent's other claims are intimately intertwined with her claim
of actual damages which are cognizable by the NLRC. Moreover,
petitioner alleges that its existing manpower services agreements with
DBP Service Corporation and SSS Retirees Association are legitimate;
and that some of respondent's claims may not be entertained since
these pertain to benefits enjoyed by government employees, not by
employees contracted via legitimate manpower service providers. Finally,
petitioner avers that the nature and character of the reliefs prayed for by
the respondent are directly within the jurisdiction not of the courts, but
of the labor tribunals.
Respondent's Arguments
In her Comment,23 respondent maintains that her case is predicated not
on labor laws but on Articles 19 and 20 of the Civil Code for petitioner's
act of exploiting her and enriching itself at her expense by not paying
her the correct salary commensurate to the position she held within SSS.
Also, since there is no employer-employee relationship between her and
petitioner, as the latter itself admits, then her case is not cognizable by
the Civil Service Commission (CSC) either; that since the NLRC and the
CSC have no jurisdiction over her case, then it is only the regular courts
which can have jurisdiction over her claims. She argues that the CA is
correct in ruling that her case is rooted in the principle of abuse of rights
under the Civil Code; and that the Petition did not properly raise issues
of law.
Our Ruling
The Court denies the Petition.
In Home Development Mutual Fund v. Commission on Audit,24 it was
held that while they performed the work of regular government
employees, DBP Service Corporation personnel are not government
personnel, but employees of DBP Service Corporation acting as an
independent contractor. Applying the foregoing pronouncement to the
present case, it can be said that during respondent's stint with petitioner,
she never became an SSS employee, as she remained an employee of
DBP Service Corporation and SSS Retirees Association - the two being
independent contractors with legitimate service contracts with SSS.
Indeed, "[i]n legitimate job contracting, no employer-employee relation
exists between the principal and the job contractor's employees. The
principal is responsible to the job contractor's employees only for the
proper payment of wages."25cralawredcralawrednad
In her Complaint, respondent acknowledges that she is not petitioner's
employee, but that precisely she was promised that she would be
absorbed into the SSS plantilla after all her years of service with SSS;
and that as SSS Processor, she was paid only P229.00 daily or P5,038.00
monthly, while a regular SSS Processor receives a monthly salary of
P18,622.00, or P846.45 daily wage. In its pleadings, petitioner denied
the existence of an employer-employee relationship between it and
respondent; in fact, it insists on the validity of its service agreements
with DBP Service Corporation and SSS Retirees Association - meaning
that the latter, and not SSS, are respondent's true employers. Since both
parties admit that there is no employment relation between them, then
there is no dispute cognizable by the NLRC. Thus, respondent's case is
premised on the claim that in paying her only P229.00 daily - or
P5,038.00 monthly - as against a monthly salary of P18,622.00, or
P846.45 daily wage, paid to a regular SSS Processor at the time,
petitioner exploited her, treated her unfairly, and unjustly enriched itself
at her expense.
For Article 217 of the Labor Code to apply, and in order for the Labor
Arbiter to acquire jurisdiction over a dispute, there must be an employer-
employee relation between the parties thereto.chanrobleslaw
x x x It is well settled in law and jurisprudence that where no employer-
employee relationship exists between the parties and no issue is involved
which may be resolved by reference to the Labor Code, other labor
statutes or any collective bargaining agreement, it is the Regional Trial
Court that has jurisdiction, x x x The action is within the realm of civil
law hence jurisdiction over the case belongs to the regular courts. While
the resolution of the issue involves the application of labor laws,
reference to the labor code was only for the determination of the
solidary liability of the petitioner to the respondent where no employer-
employee relation exists. Article 217 of the Labor Code as amended
vests upon the labor arbiters exclusive original jurisdiction only over the
following:ChanRoblesvirtualLawlibrary
1. Unfair labor practices;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that
workers may file involving wages, rates of pay, hours of work and other
terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages
arising from employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including
questions involving legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare
and maternity benefits, all other claims, arising from employer-
employee relations, including those of persons in domestic or household
service, involving an amount exceeding five thousand pesos (P5,000.00)
regardless of whether accompanied with a claim for reinstatement.
In all these cases, an employer-employee relationship is an indispensable
jurisdictional requisite x x x.26
Since there is no employer-employee relationship between the parties
herein, then there is no labor dispute cognizable by the Labor Arbiters or
the NLRC.
There being no employer-employee relation or any other definite or
direct contract between respondent and petitioner, the latter being
responsible to the former only for the proper payment of wages,
respondent is thus justified in filing a case against petitioner, based on
Articles 19 and 20 of the Civil Code, to recover the proper salary due her
as SSS Processor. At first glance, it is indeed unfair and unjust that as,
Processor who has worked with petitioner for six long years, she was
paid only P5,038.00 monthly, or P229.00 daily, while a regular SSS
employee with the same designation and who performs identical
functions is paid a monthly salary of P18,622.00, or P846.45 daily wage.
Petitioner may not hide under its service contracts to deprive respondent
of what is justly due her. As a vital government entity charged with
ensuring social security, it should lead in setting the example by treating
everyone with justice and fairness. If it cannot guarantee the security of
those who work for it, it is doubtful that it can even discharge its
directive to promote the social security of its members in line with the
fundamental mandate to promote social justice and to insure the well-
being and economic security of the Filipino people.
In this jurisdiction, the "long honored legal truism of 'equal pay for equal
work'" has been "impregnably institutionalized;" "[p]ersons who work
with substantially equal qualifications, skill, effort and responsibility,
under similar conditions, should be paid similar salaries."27 "That public
policy abhors inequality and discrimination is beyond contention. Our
Constitution and laws reflect the policy against these evils. The
Constitution in the Article on Social Justice and Human Rights exhorts
Congress to 'give highest priority to the enactment of measures that
protect and enhance the right of all people to human dignity, reduce
social, economic, and political inequalities.' The very broad Article 19 of
the Civil Code requires every person, 'in the exercise of his rights and in
the performance of his duties, [to] act with justice, give everyone his
due, and observe honesty and good faith'."28cralawrednad
WHEREFORE, the Petition is DENIED. The assailed July 29, 2011
Decision and January 10, 2012 Resolution of the Court of Appeals in CA-
G.R. SP No. 110006 are AFFIRMED. The case is ordered remanded with
dispatch to the Regional Trial Court of Daet, Camarines Norte, Branch
39, for continuation of proceedings.
SO ORDERED.
95
23
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 118978 May 23, 1997
PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY, *
petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and GRACE DE
GUZMAN, respondents.
REGALADO, J.:
Seeking relief through the extraordinary writ of certiorari, petitioner
Philippine Telegraph and Telephone Company (hereafter, PT & T)
invokes the alleged concealment of civil status and defalcation of
company funds as grounds to terminate the services of an employee.
That employee, herein private respondent Grace de Guzman, contrarily
argues that what really motivated PT & T to terminate her services was
her having contracted marriage during her employment, which is
prohibited by petitioner in its company policies. She thus claims that she
was discriminated against in gross violation of law, such a proscription
by an employer being outlawed by Article 136 of the Labor Code.
Grace de Guzman was initially hired by petitioner as a reliever,
specifically as a "Supernumerary Project Worker," for a fixed period from
November 21, 1990 until April 20, 1991 vice one C.F. Tenorio who went
on maternity leave.1 Under the Reliever Agreement which she signed
with petitioner company, her employment was to be immediately
terminated upon expiration of the agreed period. Thereafter, from June
10, 1991 to July 1, 1991, and from July 19, 1991 to August 8, 1991,
private respondent's services as reliever were again engaged by
petitioner, this time in replacement of one Erlinda F. Dizon who went on
leave during both periods. 2 After August 8, 1991, and pursuant to their
Reliever Agreement, her services were terminated.
On September 2, 1991, private respondent was once more asked to join
petitioner company as a probationary employee, the probationary period
to cover 150 days. In the job application form that was furnished her to
be filled up for the purpose, she indicated in the portion for civil status
therein that she was single although she had contracted marriage a few
months earlier, that is, on May 26, 1991. 3
It now appears that private respondent had made the same
representation in the two successive reliever agreements which she
signed on June 10, 1991 and July 8, 1991. When petitioner supposedly
learned about the same later, its branch supervisor in Baguio City, Delia
M. Oficial, sent to private respondent a memorandum dated January 15,
1992 requiring her to explain the discrepancy. In that memorandum, she
was reminded about the company's policy of not accepting married
women for employment. 4
In her reply letter dated January 17, 1992, private respondent stated
that she was not aware of PT&T's policy regarding married women at the
time, and that all along she had not deliberately hidden her true civil
status. 5Petitioner nonetheless remained unconvinced by her
explanations. Private respondent was dismissed from the company
effective January 29, 1992, 6 which she readily contested by initiating a
complaint for illegal dismissal, coupled with a claim for non-payment of
cost of living allowances (COLA), before the Regional Arbitration Branch
of the National Labor Relations Commission in Baguio City.
At the preliminary conference conducted in connection therewith, private
respondent volunteered the information, and this was incorporated in
the stipulation of facts between the parties, that she had failed to remit
the amount of P2,380.75 of her collections. She then executed a
promissory note for that amount in favor of petitioner 7. All of these took
place in a formal proceeding and with the agreement of the parties
and/or their counsel.
On November 23, 1993, Labor Arbiter Irenarco R. Rimando handed down
a decision declaring that private respondent, who had already gained the
status of a regular employee, was illegally dismissed by petitioner. Her
reinstatement, plus payment of the corresponding back wages and
COLA, was correspondingly ordered, the labor arbiter being of the firmly
expressed view that the ground relied upon by petitioner in dismissing
private respondent was clearly insufficient, and that it was apparent that
she had been discriminated against on account of her having contracted
marriage in violation of company rules.
On appeal to the National Labor Relations Commission (NLRC), said
public respondent upheld the labor arbiter and, in its decision dated April
29, 1994, it ruled that private respondent had indeed been the subject of
an unjust and unlawful discrimination by her employer, PT & T.
However, the decision of the labor arbiter was modified with the
qualification that Grace de Guzman deserved to be suspended for three
months in view of the dishonest nature of her acts which should not be
condoned. In all other respects, the NLRC affirmed the decision of the
labor arbiter, including the order for the reinstatement of private
respondent in her employment with PT & T.
The subsequent motion for reconsideration filed by petitioner was
rebuffed by respondent NLRC in its resolution of November 9, 1994,
hence this special civil action assailing the aforestated decisions of the
labor arbiter and respondent NLRC, as well as the denial resolution of
the latter.
1. Decreed in the Bible itself is the universal norm that women should be
regarded with love and respect but, through the ages, men have
responded to that injunction with indifference, on the hubristic conceit
that women constitute the inferior sex. Nowhere has that prejudice
against womankind been so pervasive as in the field of labor, especially
on the matter of equal employment opportunities and standards. In the
Philippine setting, women have traditionally been considered as falling
within the vulnerable groups or types of workers who must be
safeguarded with preventive and remedial social legislation against
discriminatory and exploitative practices in hiring, training, benefits,
promotion and retention.
The Constitution, cognizant of the disparity in rights between men and
women in almost all phases of social and political life, provides a gamut
of protective provisions. To cite a few of the primordial ones, Section 14,
Article II 8on the Declaration of Principles and State Policies, expressly
recognizes the role of women in nation-building and commands the State
to ensure, at all times, the fundamental equality before the law of
women and men. Corollary thereto, Section 3 of Article XIII 9 (the
progenitor whereof dates back to both the 1935 and 1973 Constitution)
pointedly requires the State to afford full protection to labor and to
promote full employment and equality of employment opportunities for
all, including an assurance of entitlement to tenurial security of all
workers. Similarly, Section 14 of Article XIII 10 mandates that the State
shall protect working women through provisions for opportunities that
would enable them to reach their full potential.
2. Corrective labor and social laws on gender inequality have emerged
with more frequency in the years since the Labor Code was enacted on
May 1, 1974 as Presidential Decree No. 442, largely due to our country's
commitment as a signatory to the United Nations Convention on the
Elimination of All Forms of Discrimination Against Women (CEDAW). 11
Principal among these laws are Republic Act No. 6727 12 which explicitly
prohibits discrimination against women with respect to terms and
conditions of employment, promotion, and training opportunities;
Republic Act No. 6955 13 which bans the "mail-order-bride" practice for a
fee and the export of female labor to countries that cannot guarantee
protection to the rights of women workers; Republic Act No. 7192 14 also
known as the "Women in Development and Nation Building Act," which
affords women equal opportunities with men to act and to enter into
96
contracts, and for appointment, admission, training, graduation, and
commissioning in all military or similar schools of the Armed Forces of
the Philippines and the Philippine National Police; Republic Act No.
7322 15 increasing the maternity benefits granted to women in the
private sector; Republic Act No. 7877 16 which outlaws and punishes
sexual harassment in the workplace and in the education and training
environment; and Republic Act No. 8042, 17 or the "Migrant Workers and
Overseas Filipinos Act of 1995," which prescribes as a matter of
policy, inter alia, the deployment of migrant workers, with emphasis on
women, only in countries where their rights are secure. Likewise, it
would not be amiss to point out that in the Family Code, 18 women's
rights in the field of civil law have been greatly enhanced and expanded.
In the Labor Code, provisions governing the rights of women workers
are found in Articles 130 to 138 thereof. Article 130 involves the right
against particular kinds of night work while Article 132 ensures the right
of women to be provided with facilities and standards which the
Secretary of Labor may establish to ensure their health and safety. For
purposes of labor and social legislation, a woman working in a nightclub,
cocktail lounge, massage clinic, bar or other similar establishments shall
be considered as an employee under Article 138. Article 135, on the
other hand, recognizes a woman's right against discrimination with
respect to terms and conditions of employment on account simply of sex.
Finally, and this brings us to the issue at hand, Article 136 explicitly
prohibits discrimination merely by reason of the marriage of a female
employee.
3. Acknowledged as paramount in the due process scheme is the
constitutional guarantee of protection to labor and security of tenure.
Thus, an employer is required, as a condition sine qua non prior to
severance of the employment ties of an individual under his employ, to
convincingly establish, through substantial evidence, the existence of a
valid and just cause in dispensing with the services of such employee,
one's labor being regarded as constitutionally protected property.
On the other hand, it is recognized that regulation of manpower by the
company falls within the so-called management prerogatives, which
prescriptions encompass the matter of hiring, supervision of workers,
work assignments, working methods and assignments, as well as
regulations on the transfer of employees, lay-off of workers, and the
discipline, dismissal, and recall of employees. 19 As put in a case, an
employer is free to regulate, according to his discretion and best
business judgment, all aspects of employment, "from hiring to firing,"
except in cases of unlawful discrimination or those which may be
provided by law. 20
In the case at bar, petitioner's policy of not accepting or considering as
disqualified from work any woman worker who contracts marriage runs
afoul of the test of, and the right against, discrimination, afforded all
women workers by our labor laws and by no less than the Constitution.
Contrary to petitioner's assertion that it dismissed private respondent
from employment on account of her dishonesty, the record discloses
clearly that her ties with the company were dissolved principally because
of the company's policy that married women are not qualified for
employment in PT & T, and not merely because of her supposed acts of
dishonesty.
That it was so can easily be seen from the memorandum sent to private
respondent by Delia M. Oficial, the branch supervisor of the company,
with the reminder, in the words of the latter, that "you're fully aware
that the company is not accepting married women employee (sic), as it
was verbally instructed to you." 21 Again, in the termination notice sent
to her by the same branch supervisor, private respondent was made to
understand that her severance from the service was not only by reason
of her concealment of her married status but, over and on top of that,
was her violation of the company's policy against marriage ("and even
told you that married women employees are not applicable [sic] or
accepted in our company.") 22 Parenthetically, this seems to be the
curious reason why it was made to appear in the initiatory pleadings that
petitioner was represented in this case only by its said supervisor and
not by its highest ranking officers who would otherwise be solidarily
liable with the corporation. 23
Verily, private respondent's act of concealing the true nature of her
status from PT & T could not be properly characterized as willful or in
bad faith as she was moved to act the way she did mainly because she
wanted to retain a permanent job in a stable company. In other words,
she was practically forced by that very same illegal company policy into
misrepresenting her civil status for fear of being disqualified from work.
While loss of confidence is a just cause for termination of employment, it
should not be simulated. 24 It must rest on an actual breach of duty
committed by the employee and not on the employer's
caprices. 25 Furthermore, it should never be used as a subterfuge for
causes which are improper, illegal, or unjustified. 26
In the present controversy, petitioner's expostulations that it dismissed
private respondent, not because the latter got married but because she
concealed that fact, does have a hollow ring. Her concealment, so it is
claimed, bespeaks dishonesty hence the consequent loss of confidence in
her which justified her dismissal.
Petitioner would asseverate, therefore, that while it has nothing against
marriage, it nonetheless takes umbrage over the concealment of that
fact. This improbable reasoning, with interstitial distinctions, perturbs the
Court since private respondent may well be minded to claim that the
imputation of dishonesty should be the other way around.
Petitioner would have the Court believe that although private respondent
defied its policy against its female employees contracting marriage, what
could be an act of insubordination was inconsequential. What it submits
as unforgivable is her concealment of that marriage yet, at the same
time, declaring that marriage as a trivial matter to which it supposedly
has no objection. In other words, PT & T says it gives its blessings to its
female employees contracting marriage, despite the maternity leaves
and other benefits it would consequently respond for and which
obviously it would have wanted to avoid. If that employee confesses
such fact of marriage, there will be no sanction; but if such employee
conceals the same instead of proceeding to the confessional, she will be
dismissed. This line of reasoning does not impress us as reflecting its
true management policy or that we are being regaled with responsible
advocacy.
This Court should be spared the ennui of strained reasoning and the
tedium of propositions which confuse through less than candid
arguments. Indeed, petitioner glosses over the fact that it was its
unlawful policy against married women, both on the aspects of
qualification and retention, which compelled private respondent to
conceal her supervenient marriage. It was, however, that very policy
alone which was the cause of private respondent's secretive conduct
now complained of. It is then apropos to recall the familiar saying that
he who is the cause of the cause is the cause of the evil caused.
Finally, petitioner's collateral insistence on the admission of private
respondent that she supposedly misappropriated company funds, as an
additional ground to dismiss her from employment, is somewhat
insincere and self-serving. Concededly, private respondent admitted in
the course of the proceedings that she failed to remit some of her
collections, but that is an altogether different story. The fact is that she
was dismissed solely because of her concealment of her marital status,
and not on the basis of that supposed defalcation of company funds.
That the labor arbiter would thus consider petitioner's submissions on
this supposed dishonesty as a mere afterthought, just to bolster its case
for dismissal, is a perceptive conclusion born of experience in labor
cases. For, there was no showing that private respondent deliberately
misappropriated the amount or whether her failure to remit the same
was through negligence and, if so, whether the negligence was in nature
simple or grave. In fact, it was merely agreed that private respondent
execute a promissory note to refund the same, which she did, and the
matter was deemed settled as a peripheral issue in the labor case.
Private respondent, it must be observed, had gained regular status at
the time of her dismissal. When she was served her walking papers on
January 29, 1992, she was about to complete the probationary period of
150 days as she was contracted as a probationary employee on
September 2, 1991. That her dismissal would be effected just when her
probationary period was winding down clearly raises the plausible
conclusion that it was done in order to prevent her from earning security
of tenure. 27 On the other hand, her earlier stints with the company as
reliever were undoubtedly those of a regular employee, even if the same
were for fixed periods, as she performed activities which were essential
or necessary in the usual trade and business of PT & T. 28 The primary
97
standard of determining regular employment is the reasonable
connection between the activity performed by the employee in relation
to the business or trade of the employer. 29
As an employee who had therefore gained regular status, and as she
had been dismissed without just cause, she is entitled to reinstatement
without loss of seniority rights and other privileges and to full back
wages, inclusive of allowances and other benefits or their monetary
equivalent. 30 However, as she had undeniably committed an act of
dishonesty in concealing her status, albeit under the compulsion of an
unlawful imposition of petitioner, the three-month suspension imposed
by respondent NLRC must be upheld to obviate the impression or
inference that such act should be condoned. It would be unfair to the
employer if she were to return to its fold without any sanction
whatsoever for her act which was not totally justified. Thus, her
entitlement to back wages, which shall be computed from the time her
compensation was withheld up to the time of her actual reinstatement,
shall be reduced by deducting therefrom the amount corresponding to
her three months suspension.
4. The government, to repeat, abhors any stipulation or policy in the
nature of that adopted by petitioner PT & T. The Labor Code state, in no
uncertain terms, as follows:
Art. 136. Stipulation against marriage. — It shall be
unlawful for an employer to require as a condition of
employment or continuation of employment that a
woman shall not get married, or to stipulate
expressly or tacitly that upon getting married, a
woman employee shall be deemed resigned or
separated, or to actually dismiss, discharge,
discriminate or otherwise prejudice a woman
employee merely by reason of marriage.
This provision had a studied history for its origin can be traced to Section
8 of Presidential Decree No. 148, 31better known as the "Women and
Child Labor Law," which amended paragraph (c), Section 12 of Republic
Act No. 679, 32 entitled "An Act to Regulate the Employment of Women
and Children, to Provide Penalties for Violations Thereof, and for Other
Purposes." The forerunner to Republic Act No. 679, on the other hand,
was Act No. 3071 which became law on March 16, 1923 and which
regulated the employment of women and children in shops, factories,
industrial, agricultural, and mercantile establishments and other places of
labor in the then Philippine Islands.
It would be worthwhile to reflect upon and adopt here the rationalization
in Zialcita, et al. vs. Philippine Air Lines, 33a decision that emanated from
the Office of the President. There, a policy of Philippine Air Lines
requiring that prospective flight attendants must be single and that they
will be automatically separated from the service once they marry was
declared void, it being violative of the clear mandate in Article 136 of the Sec. 9. The State shall afford protection to labor,
Labor Code with regard to discrimination against married women. Thus: promote full employment and equality in
employment, ensure equal work opportunities
regardless of sex, race, or creed, and regulate the
Of first impression is the incompatibility of the
relations between workers and employees. The
respondent's policy or regulation with the codal
State shall assure the rights of workers to self-
provision of law. Respondent is resolute in its
organization, collective bargaining, security of
contention that Article 136 of the Labor Code applies
tenure, and just and humane conditions of work . . .
only to women employed in ordinary occupations
.
and that the prohibition against marriage of women
engaged in extraordinary occupations, like flight
attendants, is fair and reasonable, considering the Moreover, we cannot agree to the respondent's
pecularities of their chosen profession. proposition that termination from employment of
flight attendants on account of marriage is a fair and
reasonable standard designed for their own health,
We cannot subscribe to the line of reasoning
safety, protection and welfare, as no basis has been
pursued by respondent. All along, it knew that the
laid therefor. Actually, respondent claims that its
controverted policy has already met its doom as
concern is not so much against the continued
early as March 13, 1973 when Presidential Decree
employment of the flight attendant merely by reason
No. 148, otherwise known as the Women and Child
of marriage as observed by the Secretary of Labor,
Labor Law, was promulgated. But for the timidity of
but rather on the consequence of marriage-
those affected or their labor unions in challenging
pregnancy. Respondent discussed at length in the
the validity of the policy, the same was able to
instant appeal the supposed ill effects of pregnancy
obtain a momentary reprieve. A close look at Section
on flight attendants in the course of their
8 of said decree, which amended paragraph (c) of
employment. We feel that this needs no further
Section 12 of Republic Act No. 679, reveals that it is
discussion as it had been adequately explained by
exactly the same provision reproduced verbatim in
the Secretary of Labor in his decision of May 2,
Article 136 of the Labor Code, which was
1976.
promulgated on May 1, 1974 to take effect six (6)
months later, or on November 1, 1974.
In a vain attempt to give meaning to its position,
respondent went as far as invoking the provisions of
It cannot be gainsaid that, with the reiteration of the
Articles 52 and 216 of the New Civil Code on the
same provision in the new Labor Code, all policies
preservation of marriage as an inviolable social
and acts against it are deemed illegal and therefore
institution and the family as a basic social institution,
abrogated. True, Article 132 enjoins the Secretary of
respectively, as bases for its policy of non-marriage.
Labor to establish standards that will ensure the
In both instances, respondent predicates absence of
safety and health of women employees and in
a flight attendant from her home for long periods of
appropriate cases shall by regulation require
time as contributory to an unhappy married life. This
employers to determine appropriate minimum
is pure conjecture not based on actual conditions,
standards for termination in special occupations,
considering that, in this modern world, sophisticated
such as those of flight attendants, but that is
technology has narrowed the distance from one
precisely the factor that militates against the policy
place to another. Moreover, respondent overlooked
of respondent. The standards have not yet been
the fact that married flight attendants can program
established as set forth in the first paragraph, nor
their lives to adapt to prevailing circumstances and
has the Secretary of Labor issued any regulation
events.
affecting flight attendants.
Article 136 is not intended to apply only to women
It is logical to presume that, in the absence of said
employed in ordinary occupations, or it should have
standards or regulations which are as yet to be
categorically expressed so. The sweeping
established, the policy of respondent against
intendment of the law, be it on special or ordinary
marriage is patently illegal. This finds support in
occupations, is reflected in the whole text and
Section 9 of the New Constitution, which provides:
98
 supported by Article 135 that speaks of non-
discrimination on the employment of women.
The judgment of the Court of Appeals in Gualberto, et al. vs. Marinduque
Mining & Industrial Corporation 34considered as void a policy of the same
nature. In said case, respondent, in dismissing from the service the
complainant, invoked a policy of the firm to consider female employees
in the project it was undertaking as separated the moment they get
married due to lack of facilities for married women. Respondent further
claimed that complainant was employed in the project with an oral
understanding that her services would be terminated when she gets
married. Branding the policy of the employer as an example of
"discriminatory chauvinism" tantamount to denying equal employment
opportunities to women simply on account of their sex, the appellate
court struck down said employer policy as unlawful in view of its
repugnance to the Civil Code, Presidential Decree No. 148 and the
Constitution.
Under American jurisprudence, job requirements which establish
employer preference or conditions relating to the marital status of an
employee are categorized as a "sex-plus" discrimination where it is
imposed on one sex and not on the other. Further, the same should be
evenly applied and must not inflict adverse effects on a racial or sexual
group which is protected by federal job discrimination laws. Employment
rules that forbid or restrict the employment of married women, but do
not apply to married men, have been held to violate Title VII of the
United States Civil Rights Act of 1964, the main federal statute
prohibiting job discrimination against employees and applicants on the
basis of, among other things, sex. 35
all accounts inheres in the individual as an intangible and inalienable
right. 38 Hence, while it is true that the parties to a contract may
establish any agreements, terms, and conditions that they may deem
convenient, the same should not be contrary to law, morals, good
customs, public order, or public policy. 39 Carried to its logical
consequences, it may even be said that petitioner's policy against
legitimate marital bonds would encourage illicit or common-law relations
and subvert the sacrament of marriage.
Parenthetically, the Civil Code provisions on the contract of labor state
that the relations between the parties, that is, of capital and labor, are
not merely contractual, impressed as they are with so much public
interest that the same should yield to the common good. 40 It goes on to
intone that neither capital nor labor should visit acts of oppression
against the other, nor impair the interest or convenience of the
public. 41 In the final reckoning, the danger of just such a policy against
marriage followed by petitioner PT & T is that it strikes at the very
essence, ideals and purpose of marriage as an inviolable social institution
and, ultimately, of the family as the foundation of the nation. 42 That it
must be effectively interdicted here in all its indirect, disguised or
dissembled forms as discriminatory conduct derogatory of the laws of
the land is not only in order but imperatively required.
ON THE FOREGOING PREMISES, the petition of Philippine Telegraph and
Telephone Company is hereby DISMISSED for lack of merit, with double
costs against petitioner.
SO ORDERED.

Further, it is not relevant that the rule is not directed against all women
but just against married women. And, where the employer discriminates
against married women, but not against married men, the variable is sex
and the discrimination is unlawful. 36 Upon the other hand, a
requirement that a woman employee must remain unmarried could be
justified as a "bona fide occupational qualification," or BFOQ, where the
particular requirements of the job would justify the same, but not on the
ground of a general principle, such as the desirability of spreading work
in the workplace. A requirement of that nature would be valid provided it
reflects an inherent quality reasonably necessary for satisfactory job
performance. Thus, in one case, a no-marriage rule applicable to both
male and female flight attendants, was regarded as unlawful since the
restriction was not related to the job performance of the flight
attendants. 37

5. Petitioner's policy is not only in derogation of the provisions of Article

136 of the Labor Code on the right of a woman to be free from any kind
of stipulation against marriage in connection with her employment, but it
likewise assaults good morals and public policy, tending as it does to
deprive a woman of the freedom to choose her status, a privilege that by

99
24
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 162994 September 17, 2004
DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A.
TECSON, petitioners,
vs.
GLAXO WELLCOME PHILIPPINES, INC., Respondent.
RESOLUTION
TINGA, J.:
Confronting the Court in this petition is a novel question, with
constitutional overtones, involving the validity of the policy of a
pharmaceutical company prohibiting its employees from marrying
employees of any competitor company.
This is a Petition for Review on Certiorari assailing the Decision1 dated
May 19, 2003 and the Resolution dated March 26, 2004 of the Court of
Appeals in CA-G.R. SP No. 62434.2
Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo
Wellcome Philippines, Inc. (Glaxo) as medical representative on October
24, 1995, after Tecson had undergone training and orientation.
Thereafter, Tecson signed a contract of employment which stipulates,
among others, that he agrees to study and abide by existing company
rules; to disclose to management any existing or future relationship by
consanguinity or affinity with co-employees or employees of competing
drug companies and should management find that such relationship
poses a possible conflict of interest, to resign from the company.
The Employee Code of Conduct of Glaxo similarly provides that an
employee is expected to inform management of any existing or future
relationship by consanguinity or affinity with co-employees or employees
of competing drug companies. If management perceives a conflict of
interest or a potential conflict between such relationship and the
employee’s employment with the company, the management and the
employee will explore the possibility of a "transfer to another department
in a non-counterchecking position" or preparation for employment During the pendency of the grievance proceedings, Tecson was paid his
outside the company after six months. salary, but was not issued samples of products which were competing
with similar products manufactured by Astra. He was also not included in
product conferences regarding such products.
Tecson was initially assigned to market Glaxo’s products in the
Camarines Sur-Camarines Norte sales area.
Because the parties failed to resolve the issue at the grievance
machinery level, they submitted the matter for voluntary arbitration.
Subsequently, Tecson entered into a romantic relationship with Bettsy,
Glaxo offered Tecson a separation pay of one-half (½) month pay for
an employee of Astra Pharmaceuticals3(Astra), a competitor of Glaxo.
every year of service, or a total of P50,000.00 but he declined the offer.
Bettsy was Astra’s Branch Coordinator in Albay. She supervised the
On November 15, 2000, the National Conciliation and Mediation Board
district managers and medical representatives of her company and
(NCMB) rendered its Decision declaring as valid Glaxo’s policy on
prepared marketing strategies for Astra in that area.
relationships between its employees and persons employed with
competitor companies, and affirming Glaxo’s right to transfer Tecson to
Even before they got married, Tecson received several reminders from another sales territory.
his District Manager regarding the conflict of interest which his
relationship with Bettsy might engender. Still, love prevailed, and Tecson
Aggrieved, Tecson filed a Petition for Review with the Court of Appeals
married Bettsy in September 1998.
assailing the NCMB Decision.
In January 1999, Tecson’s superiors informed him that his marriage to
On May 19, 2003, the Court of Appeals promulgated its Decision denying
Bettsy gave rise to a conflict of interest. Tecson’s superiors reminded
the Petition for Review on the ground that the NCMB did not err in
him that he and Bettsy should decide which one of them would resign
rendering its Decision. The appellate court held that Glaxo’s policy
from their jobs, although they told him that they wanted to retain him as
prohibiting its employees from having personal relationships with
much as possible because he was performing his job well.
employees of competitor companies is a valid exercise of its
management prerogatives.4
Tecson requested for time to comply with the company policy against
entering into a relationship with an employee of a competitor company.
Tecson filed a Motion for Reconsideration of the appellate
He explained that Astra, Bettsy’s employer, was planning to merge with
court’s Decision, but the motion was denied by the appellate court in
Zeneca, another drug company; and Bettsy was planning to avail of the
its Resolution dated March 26, 2004.5
redundancy package to be offered by Astra. With Bettsy’s separation
from her company, the potential conflict of interest would be eliminated.
At the same time, they would be able to avail of the attractive Petitioners filed the instant petition, arguing therein that (i) the Court of
redundancy package from Astra. Appeals erred in affirming the NCMB’s finding that the Glaxo’s policy
prohibiting its employees from marrying an employee of a competitor
company is valid; and (ii) the Court of Appeals also erred in not finding
In August 1999, Tecson again requested for more time resolve the
that Tecson was constructively dismissed when he was transferred to a
problem. In September 1999, Tecson applied for a transfer in Glaxo’s
new sales territory, and deprived of the opportunity to attend products
milk division, thinking that since Astra did not have a milk division, the
seminars and training sessions.6
potential conflict of interest would be eliminated. His application was
denied in view of Glaxo’s "least-movement-possible" policy.
Petitioners contend that Glaxo’s policy against employees marrying
employees of competitor companies violates the equal protection clause
In November 1999, Glaxo transferred Tecson to the Butuan City-Surigao
of the Constitution because it creates invalid distinctions among
City-Agusan del Sur sales area. Tecson asked Glaxo to reconsider its
employees on account only of marriage. They claim that the policy
decision, but his request was denied.
restricts the employees’ right to marry.7
Tecson sought Glaxo’s reconsideration regarding his transfer and
They also argue that Tecson was constructively dismissed as shown by
brought the matter to Glaxo’s Grievance Committee. Glaxo, however,
the following circumstances: (1) he was transferred from the Camarines
remained firm in its decision and gave Tescon until February 7, 2000 to
Sur-Camarines Norte sales area to the Butuan-Surigao-Agusan sales
comply with the transfer order. Tecson defied the transfer order and
area, (2) he suffered a diminution in pay, (3) he was excluded from
continued acting as medical representative in the Camarines Sur-
attending seminars and training sessions for medical representatives,
Camarines Norte sales area.
100
and (4) he was prohibited from promoting respondent’s products which
were competing with Astra’s products.8
In its Comment on the petition, Glaxo argues that the company policy
prohibiting its employees from having a relationship with and/or
marrying an employee of a competitor company is a valid exercise of its
management prerogatives and does not violate the equal protection
clause; and that Tecson’s reassignment from the Camarines Norte-
Camarines Sur sales area to the Butuan City-Surigao City and Agusan del
Sur sales area does not amount to constructive dismissal.9
Glaxo insists that as a company engaged in the promotion and sale of
pharmaceutical products, it has a genuine interest in ensuring that its
employees avoid any activity, relationship or interest that may conflict
with their responsibilities to the company. Thus, it expects its employees
to avoid having personal or family interests in any competitor company
which may influence their actions and decisions and consequently
deprive Glaxo of legitimate profits. The policy is also aimed at preventing
a competitor company from gaining access to its secrets, procedures and
policies.10
It likewise asserts that the policy does not prohibit marriage per se but
only proscribes existing or future relationships with employees of
competitor companies, and is therefore not violative of the equal
protection clause. It maintains that considering the nature of its
business, the prohibition is based on valid grounds.11
According to Glaxo, Tecson’s marriage to Bettsy, an employee of Astra,
posed a real and potential conflict of interest. Astra’s products were in
direct competition with 67% of the products sold by Glaxo. Hence,
Glaxo’s enforcement of the foregoing policy in Tecson’s case was a valid
exercise of its management prerogatives.12 In any case, Tecson was
given several months to remedy the situation, and was even encouraged
not to resign but to ask his wife to resign form Astra instead.13
Glaxo also points out that Tecson can no longer question the assailed
company policy because when he signed his contract of employment, he
was aware that such policy was stipulated therein. In said contract, he
also agreed to resign from respondent if the management finds that his
relationship with an employee of a competitor company would be
detrimental to the interests of Glaxo.14
Glaxo likewise insists that Tecson’s reassignment to another sales area
and his exclusion from seminars regarding respondent’s new products
did not amount to constructive dismissal.
It claims that in view of Tecson’s refusal to resign, he was relocated
from the Camarines Sur-Camarines Norte sales area to the Butuan City-
Surigao City and Agusan del Sur sales area. Glaxo asserts that in
effecting the reassignment, it also considered the welfare of Tecson’s Specifically, this means that employees are expected:
family. Since Tecson’s hometown was in Agusan del Sur and his wife
traces her roots to Butuan City, Glaxo assumed that his transfer from the
a. To avoid having personal or family interest,
Bicol region to the Butuan City sales area would be favorable to him and
financial or otherwise, in any competitor supplier or
his family as he would be relocating to a familiar territory and minimizing
other businesses which may consciously or
his travel expenses.15
unconsciously influence their actions or decisions
and thus deprive Glaxo Wellcome of legitimate
In addition, Glaxo avers that Tecson’s exclusion from the seminar profit.
concerning the new anti-asthma drug was due to the fact that said
product was in direct competition with a drug which was soon to be sold
b. To refrain from using their position in Glaxo
by Astra, and hence, would pose a potential conflict of interest for him.
Wellcome or knowledge of Company plans to
Lastly, the delay in Tecson’s receipt of his sales paraphernalia was due
advance their outside personal interests, that of
to the mix-up created by his refusal to transfer to the Butuan City sales
their relatives, friends and other businesses.
area (his paraphernalia was delivered to his new sales area instead of
Naga City because the supplier thought he already transferred to
Butuan).16 c. To avoid outside employment or other interests
for income which would impair their effective job
performance.
The Court is tasked to resolve the following issues: (1) Whether the
Court of Appeals erred in ruling that Glaxo’s policy against its employees
marrying employees from competitor companies is valid, and in not d. To consult with Management on such activities or
holding that said policy violates the equal protection clause of the relationships that may lead to conflict of interest.
Constitution; (2) Whether Tecson was constructively dismissed.
1.1. Employee Relationships
The Court finds no merit in the petition.
Employees with existing or future relationships either by
consanguinity or affinity with co-employees of competing drug
The stipulation in Tecson’s contract of employment with Glaxo being
questioned by petitioners provides: companies are expected to disclose such relationship to the
… Management. If management perceives a conflict or potential
10. You agree to disclose to management any existing or conflict of interest, every effort shall be made, together by
future relationship you may have, either by consanguinity or management and the employee, to arrive at a solution within
affinity with co-employees or employees of competing drug six (6) months, either by transfer to another department in a
companies. Should it pose a possible conflict of interest in non-counter checking position, or by career preparation
management discretion, you agree to resign voluntarily from toward outside employment after Glaxo Wellcome. Employees
the Company as a matter of Company policy. must be prepared for possible resignation within six (6)
months, if no other solution is feasible.19
…17
No reversible error can be ascribed to the Court of Appeals when it ruled
that Glaxo’s policy prohibiting an employee from having a relationship
The same contract also stipulates that Tescon agrees to abide by the
with an employee of a competitor company is a valid exercise of
existing company rules of Glaxo, and to study and become acquainted
management prerogative.
with such policies.18 In this regard, the Employee Handbook of Glaxo
expressly informs its employees of its rules regarding conflict of interest:
Glaxo has a right to guard its trade secrets, manufacturing formulas,
marketing strategies and other confidential programs and information
1. Conflict of Interest
from competitors, especially so that it and Astra are rival companies in
the highly competitive pharmaceutical industry.
Employees should avoid any activity, investment relationship,
or interest that may run counter to the responsibilities which
The prohibition against personal or marital relationships with employees
they owe Glaxo Wellcome.
of competitor companies upon Glaxo’s employees is reasonable under
the circumstances because relationships of that nature might
101
compromise the interests of the company. In laying down the assailed
company policy, Glaxo only aims to protect its interests against the
possibility that a competitor company will gain access to its secrets and
procedures.
That Glaxo possesses the right to protect its economic interests cannot
be denied. No less than the Constitution recognizes the right of
enterprises to adopt and enforce such a policy to protect its right to
reasonable returns on investments and to expansion and
growth.20 Indeed, while our laws endeavor to give life to the
constitutional policy on social justice and the protection of labor, it does
not mean that every labor dispute will be decided in favor of the
workers. The law also recognizes that management has rights which are
also entitled to respect and enforcement in the interest of fair play.21
As held in a Georgia, U.S.A case,22 it is a legitimate business practice to
guard business confidentiality and protect a competitive position by
even-handedly disqualifying from jobs male and female applicants or
employees who are married to a competitor. Consequently, the court
ruled than an employer that discharged an employee who was married
to an employee of an active competitor did not violate Title VII of the
Civil Rights Act of 1964.23The Court pointed out that the policy was
applied to men and women equally, and noted that the employer’s
business was highly competitive and that gaining inside information
would constitute a competitive advantage.
The challenged company policy does not violate the equal protection
clause of the Constitution as petitioners erroneously suggest. It is a
settled principle that the commands of the equal protection clause are
addressed only to the state or those acting under color of its
authority.24 Corollarily, it has been held in a long array of U.S. Supreme
Court decisions that the equal protection clause erects no shield against
merely private conduct, however, discriminatory or wrongful.25 The only
exception occurs when the state29 in any of its manifestations or actions
has been found to have become entwined or involved in the wrongful
private conduct.27 Obviously, however, the exception is not present in
this case. Significantly, the company actually enforced the policy after
repeated requests to the employee to comply with the policy. Indeed,
the application of the policy was made in an impartial and even-handed
manner, with due regard for the lot of the employee.
In any event, from the wordings of the contractual provision and the
policy in its employee handbook, it is clear that Glaxo does not impose
an absolute prohibition against relationships between its employees and
those of competitor companies. Its employees are free to cultivate
relationships with and marry persons of their own choosing. What the
company merely seeks to avoid is a conflict of interest between the
employee and the company that may arise out of such relationships. As
succinctly explained by the appellate court, thus:
The policy being questioned is not a policy against marriage.
An employee of the company remains free to marry anyone of
his or her choosing. The policy is not aimed at restricting a
personal prerogative that belongs only to the individual.
However, an employee’s personal decision does not detract
the employer from exercising management prerogatives to
ensure maximum profit and business success. . .28
The Court of Appeals also correctly noted that the assailed company
policy which forms part of respondent’s Employee Code of Conduct and
of its contracts with its employees, such as that signed by Tescon, was
made known to him prior to his employment. Tecson, therefore, was
aware of that restriction when he signed his employment contract and
when he entered into a relationship with Bettsy. Since Tecson knowingly
and voluntarily entered into a contract of employment with Glaxo, the
stipulations therein have the force of law between them and, thus,
should be complied with in good faith."29 He is therefore estopped from
questioning said policy.
The Court finds no merit in petitioners’ contention that Tescon was
constructively dismissed when he was transferred from the Camarines
Norte-Camarines Sur sales area to the Butuan City-Surigao City-Agusan
del Sur sales area, and when he was excluded from attending the
company’s seminar on new products which were directly competing with
similar products manufactured by Astra. Constructive dismissal is defined
as a quitting, an involuntary resignation resorted to when continued
employment becomes impossible, unreasonable, or unlikely; when there
is a demotion in rank or diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes
unbearable to the employee.30 None of these conditions are present in
the instant case. The record does not show that Tescon was demoted or
unduly discriminated upon by reason of such transfer. As found by the
appellate court, Glaxo properly exercised its management prerogative in
reassigning Tecson to the Butuan City sales area:
. . . In this case, petitioner’s transfer to another place of
assignment was merely in keeping with the policy of the
company in avoidance of conflict of interest, and thus
valid…Note that [Tecson’s] wife holds a sensitive supervisory
position as Branch Coordinator in her employer-company
which requires her to work in close coordination with District
Managers and Medical Representatives. Her duties include
monitoring sales of Astra products, conducting sales drives,
establishing and furthering relationship with customers,
collection, monitoring and managing Astra’s inventory…she
therefore takes an active participation in the market war
characterized as it is by stiff competition among
pharmaceutical companies. Moreover, and this is significant,
petitioner’s sales territory covers Camarines Sur and
Camarines Norte while his wife is supervising a branch of her
employer in Albay. The proximity of their areas of
responsibility, all in the same Bicol Region, renders the conflict
of interest not only possible, but actual, as learning by one
spouse of the other’s market strategies in the region would be
inevitable. [Management’s] appreciation of a conflict of
interest is therefore not merely illusory and wanting in factual
basis…31
In Abbott Laboratories (Phils.), Inc. v. National Labor Relations
Commission,32 which involved a complaint filed by a medical
representative against his employer drug company for illegal dismissal
for allegedly terminating his employment when he refused to accept his
reassignment to a new area, the Court upheld the right of the drug
company to transfer or reassign its employee in accordance with its
operational demands and requirements. The ruling of the Court therein,
quoted hereunder, also finds application in the instant case:
By the very nature of his employment, a drug salesman or
medical representative is expected to travel. He should
anticipate reassignment according to the demands of their
business. It would be a poor drug corporation which cannot
even assign its representatives or detail men to new markets
calling for opening or expansion or to areas where the need
for pushing its products is great. More so if such
reassignments are part of the employment contract.33
As noted earlier, the challenged policy has been implemented by Glaxo
impartially and disinterestedly for a long period of time. In the case at
bar, the record shows that Glaxo gave Tecson several chances to
eliminate the conflict of interest brought about by his relationship with
Bettsy. When their relationship was still in its initial stage, Tecson’s
supervisors at Glaxo constantly reminded him about its effects on his
employment with the company and on the company’s interests. After
Tecson married Bettsy, Glaxo gave him time to resolve the conflict by
either resigning from the company or asking his wife to resign from
Astra. Glaxo even expressed its desire to retain Tecson in its employ
because of his satisfactory performance and suggested that he ask
Bettsy to resign from her company instead. Glaxo likewise acceded to his
repeated requests for more time to resolve the conflict of interest. When
the problem could not be resolved after several years of waiting, Glaxo
was constrained to reassign Tecson to a sales area different from that
handled by his wife for Astra. Notably, the Court did not terminate
Tecson from employment but only reassigned him to another area where
his home province, Agusan del Sur, was included. In effecting Tecson’s
transfer, Glaxo even considered the welfare of Tecson’s family. Clearly,
the foregoing dispels any suspicion of unfairness and bad faith on the
part of Glaxo.34
WHEREFORE, the Petition is DENIED for lack of merit. Costs against
petitioners. SO ORDERED.
102
25
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 164774 April 12, 2006
STAR PAPER CORPORATION, JOSEPHINE ONGSITCO &
SEBASTIAN CHUA, Petitioners,
vs.
RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E.
ESTRELLA, Respondents.
DECISION
PUNO, J.:
We are called to decide an issue of first impression: whether the policy
of the employer banning spouses from working in the same company
violates the rights of the employee under the Constitution and the Labor
Code or is a valid exercise of management prerogative.
At bar is a Petition for Review on Certiorari of the Decision of the Court
of Appeals dated August 3, 2004 in CA-G.R. SP No. 73477 reversing the
decision of the National Labor Relations Commission (NLRC) which
affirmed the ruling of the Labor Arbiter.
Petitioner Star Paper Corporation (the company) is a corporation
engaged in trading – principally of paper products. Josephine Ongsitco is
its Manager of the Personnel and Administration Department while
Sebastian Chua is its Managing Director.
The evidence for the petitioners show that respondents Ronaldo D.
Simbol (Simbol), Wilfreda N. Comia (Comia) and Lorna E. Estrella
(Estrella) were all regular employees of the company.1
Simbol was employed by the company on October 27, 1993. He met
Alma Dayrit, also an employee of the company, whom he married on
June 27, 1998. Prior to the marriage, Ongsitco advised the couple that
should they decide to get married, one of them should resign pursuant
to a company policy promulgated in 1995,2 viz.:
1. New applicants will not be allowed to be hired if in case Respondents later filed a complaint for unfair labor practice, constructive
he/she has [a] relative, up to [the] 3rd degree of relationship, dismissal, separation pay and attorney’s fees. They averred that the
already employed by the company. aforementioned company policy is illegal and contravenes Article 136 of
the Labor Code. They also contended that they were dismissed due to
their union membership.
2. In case of two of our employees (both singles [sic], one
male and another female) developed a friendly relationship
during the course of their employment and then decided to get On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the
married, one of them should resign to preserve the policy complaint for lack of merit, viz.:
stated above.3
[T]his company policy was decreed pursuant to what the respondent
Simbol resigned on June 20, 1998 pursuant to the company policy.4 corporation perceived as management prerogative. This management
prerogative is quite broad and encompassing for it covers hiring, work
assignment, working method, time, place and manner of work, tools to
Comia was hired by the company on February 5, 1997. She met Howard
be used, processes to be followed, supervision of workers, working
Comia, a co-employee, whom she married on June 1, 2000. Ongsitco
regulations, transfer of employees, work supervision, lay-off of workers
likewise reminded them that pursuant to company policy, one must
and the discipline, dismissal and recall of workers. Except as provided for
resign should they decide to get married. Comia resigned on June 30,
or limited by special law, an employer is free to regulate, according to
2000.5
his own discretion and judgment all the aspects of
employment.9 (Citations omitted.)
Estrella was hired on July 29, 1994. She met Luisito Zuñiga (Zuñiga),
also a co-worker. Petitioners stated that Zuñiga, a married man, got
On appeal to the NLRC, the Commission affirmed the decision of the
Estrella pregnant. The company allegedly could have terminated her
Labor Arbiter on January 11, 2002. 10
services due to immorality but she opted to resign on December 21,
1999.6
Respondents filed a Motion for Reconsideration but was denied by the
NLRC in a Resolution11 dated August 8, 2002. They appealed to
The respondents each signed a Release and Confirmation Agreement.
respondent court via Petition for Certiorari.
They stated therein that they have no money and property
accountabilities in the company and that they release the latter of any
claim or demand of whatever nature.7 In its assailed Decision dated August 3, 2004, the Court of Appeals
reversed the NLRC decision, viz.:
Respondents offer a different version of their dismissal. Simbol and
Comia allege that they did not resign voluntarily; they were compelled to WHEREFORE, premises considered, the May 31, 2002 (sic)12 Decision of
resign in view of an illegal company policy. As to respondent Estrella, she the National Labor Relations Commission is hereby REVERSED and SET
alleges that she had a relationship with co-worker Zuñiga who ASIDE and a new one is entered as follows:
misrepresented himself as a married but separated man. After he got her
pregnant, she discovered that he was not separated. Thus, she severed
(1) Declaring illegal, the petitioners’ dismissal from
her relationship with him to avoid dismissal due to the company policy.
employment and ordering private respondents to reinstate
On November 30, 1999, she met an accident and was advised by the
petitioners to their former positions without loss of seniority
doctor at the Orthopedic Hospital to recuperate for twenty-one (21)
rights with full backwages from the time of their dismissal until
days. She returned to work on December 21, 1999 but she found out
actual reinstatement; and
that her name was on-hold at the gate. She was denied entry. She was
directed to proceed to the personnel office where one of the staff
handed her a memorandum. The memorandum stated that she was (2) Ordering private respondents to pay petitioners attorney’s
being dismissed for immoral conduct. She refused to sign the fees amounting to 10% of the award and the cost of this
memorandum because she was on leave for twenty-one (21) days and suit.13
has not been given a chance to explain. The management asked her to
write an explanation. However, after submission of the explanation, she
On appeal to this Court, petitioners contend that the Court of Appeals
was nonetheless dismissed by the company. Due to her urgent need for erred in holding that:
money, she later submitted a letter of resignation in exchange for her
thirteenth month pay.8
103
 1. x x x the subject 1995 policy/regulation is violative of the
constitutional rights towards marriage and the family of
employees and of Article 136 of the Labor Code; and
2. x x x respondents’ resignations were far from voluntary.14
We affirm.
The 1987 Constitution15 states our policy towards the protection of labor
under the following provisions, viz.:
Article II, Section 18. The State affirms labor as a primary social
economic force. It shall protect the rights of workers and promote their
welfare.
xxx
Article XIII, Sec. 3. The State shall afford full protection to labor, local
and overseas, organized and unorganized, and promote full employment
and equality of employment opportunities for all.
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, 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.
The Civil Code likewise protects labor with the following provisions:
Art. 1700. The relation 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.
Art. 1702. In case of doubt, all labor legislation and all labor contracts
shall be construed in favor of the safety and decent living for the laborer.
The Labor Code is the most comprehensive piece of legislation protecting
labor. The case at bar involves Article 136 of the Labor Code which
provides:
Art. 136. It shall be unlawful for an employer to require as a condition of
employment or continuation of employment that a woman employee
shall not get married, or to stipulate expressly or tacitly that upon
getting married a woman employee shall be deemed resigned or
separated, or to actually dismiss, discharge, discriminate or otherwise
prejudice a woman employee merely by reason of her marriage.
Respondents submit that their dismissal violates the above provision.
Petitioners allege that its policy "may appear to be contrary to Article
136 of the Labor Code" but it assumes a new meaning if read together
with the first paragraph of the rule. The rule does not require the woman
employee to resign. The employee spouses have the right to choose who
between them should resign. Further, they are free to marry persons
other than co-employees. Hence, it is not the marital status of the
employee, per se, that is being discriminated. It is only intended to carry
out its no-employment-for-relatives-within-the-third-degree-policy which
is within the ambit of the prerogatives of management.16
It is true that the policy of petitioners prohibiting close relatives from
working in the same company takes the nature of an anti-nepotism
employment policy. Companies adopt these policies to prevent the hiring
of unqualified persons based on their status as a relative, rather than
upon their ability.17 These policies focus upon the potential employment
problems arising from the perception of favoritism exhibited towards
relatives.
With more women entering the workforce, employers are also enacting
employment policies specifically prohibiting spouses from working for the
same company. We note that two types of employment policies involve
spouses: policies banning only spouses from working in the same
company (no-spouse employment policies), and those banning all
immediate family members, including spouses, from working in the same
company (anti-nepotism employment policies).18
Unlike in our jurisdiction where there is no express prohibition on marital
discrimination,19 there are twenty state statutes20 in the United States
prohibiting marital discrimination. Some state courts21 have been
confronted with the issue of whether no-spouse policies violate their
laws prohibiting both marital status and sex discrimination.
In challenging the anti-nepotism employment policies in the United
States, complainants utilize two theories of employment discrimination:
the disparate treatment and the disparate impact. Under
the disparate treatment analysis, the plaintiff must prove that an
employment policy is discriminatory on its face. No-spouse employment
policies requiring an employee of a particular sex to either quit,
transfer, or be fired are facially discriminatory. For example, an
employment policy prohibiting the employer from hiring wives of male
employees, but not husbands of female employees, is discriminatory on
its face.22
On the other hand, to establish disparate impact, the complainants
must prove that a facially neutral policy has a disproportionate effect on
a particular class. For example, although most employment policies do
not expressly indicate which spouse will be required to transfer or leave
the company, the policy often disproportionately affects one sex.23
The state courts’ rulings on the issue depend on their interpretation of
the scope of marital status discrimination within the meaning of their
respective civil rights acts. Though they agree that the term "marital
status" encompasses discrimination based on a person's status as either
married, single, divorced, or widowed, they are divided on whether the
term has a broader meaning. Thus, their decisions vary.24
The courts narrowly25 interpreting marital status to refer only to a
person's status as married, single, divorced, or widowed reason that if
the legislature intended a broader definition it would have either chosen
different language or specified its intent. They hold that the relevant
inquiry is if one is married rather than to whom one is married. They
construe marital status discrimination to include only whether a person is
single, married, divorced, or widowed and not the "identity, occupation,
and place of employment of one's spouse." These courts have upheld
the questioned policies and ruled that they did not violate the marital
status discrimination provision of their respective state statutes.
The courts that have broadly26 construed the term "marital status" rule
that it encompassed the identity, occupation and employment of one's
spouse. They strike down the no-spouse employment policies based on
the broad legislative intent of the state statute. They reason that the no-
spouse employment policy violate the marital status provision because it
arbitrarily discriminates against all spouses of present employees without
regard to the actual effect on the individual's qualifications or work
performance.27 These courts also find the no-spouse employment policy
invalid for failure of the employer to present any evidence of business
necessity other than the general perception that spouses in the same
workplace might adversely affect the business.28 They hold that the
absence of such a bona fide occupational qualification29 invalidates
a rule denying employment to one spouse due to the current
employment of the other spouse in the same office.30 Thus, they rule
that unless the employer can prove that the reasonable demands of the
business require a distinction based on marital status and there is no
better available or acceptable policy which would better accomplish the
business purpose, an employer may not discriminate against an
employee based on the identity of the employee’s spouse.31 This is
known as thebona fide occupational qualification exception.
104
We note that since the finding of a bona fide occupational qualification
justifies an employer’s no-spouse rule, the exception is interpreted
strictly and narrowly by these state courts. There must be a compelling
business necessity for which no alternative exists other than the
discriminatory practice.32 To justify a bona fide occupational qualification,
the employer must prove two factors: (1) that the employment
qualification is reasonably related to the essential operation of the job
involved; and, (2) that there is a factual basis for believing that all or
substantially all persons meeting the qualification would be unable to
properly perform the duties of the job.33
The concept of a bona fide occupational qualification is not foreign in our
jurisdiction. We employ the standard ofreasonableness of the company
policy which is parallel to the bona fide occupational qualification
requirement. In the recent case of Duncan Association of
Detailman-PTGWO and Pedro Tecson v. Glaxo Wellcome
Philippines, Inc.,34 we passed on the validity of the policy of a
pharmaceutical company prohibiting its employees from marrying
employees of any competitor company. We held that Glaxo has a right to
guard its trade secrets, manufacturing formulas, marketing strategies
and other confidential programs and information from competitors. We
considered the prohibition against personal or marital relationships with
employees of competitor companies upon Glaxo’s
employeesreasonable under the circumstances because relationships of
that nature might compromise the interests of Glaxo. In laying down the
assailed company policy, we recognized that Glaxo only aims to protect
its interests against the possibility that a competitor company will gain
access to its secrets and procedures.35
The requirement that a company policy must be reasonable under the
circumstances to qualify as a valid exercise of management prerogative
was also at issue in the 1997 case of Philippine Telegraph and
Telephone Company v. NLRC.36 In said case, the employee was
dismissed in violation of petitioner’s policy of disqualifying from work any
woman worker who contracts marriage. We held that the company
policy violates the right against discrimination afforded all women
workers under Article 136 of the Labor Code, but established a
permissible exception, viz.:
[A] requirement that a woman employee must remain unmarried could
be justified as a "bona fide occupational qualification," or BFOQ,
where the particular requirements of the job would justify the same, but
not on the ground of a general principle, such as the desirability of
spreading work in the workplace. A requirement of that nature would be
valid provided it reflects an inherent quality reasonably necessary for
satisfactory job performance.37 (Emphases supplied.)
The cases of Duncan and PT&T instruct us that the requirement of
reasonableness must be clearly established to uphold the questioned
employment policy. The employer has the burden to prove the existence
of a reasonable business necessity. The burden was successfully As to respondent Estrella, the Labor Arbiter and the NLRC based their
discharged in Duncan but not in PT&T. ruling on the singular fact that her resignation letter was written in her
own handwriting. Both ruled that her resignation was voluntary and thus
valid. The respondent court failed to categorically rule whether Estrella
We do not find a reasonable business necessity in the case at bar.
voluntarily resigned but ordered that she be reinstated along with Simbol
and Comia.
Petitioners’ sole contention that "the company did not just want to have
two (2) or more of its employees related between the third degree by
Estrella claims that she was pressured to submit a resignation letter
affinity and/or consanguinity"38 is lame. That the second paragraph was
because she was in dire need of money. We examined the records of the
meant to give teeth to the first paragraph of the questioned rule39 is
case and find Estrella’s contention to be more in accord with the
evidently not the valid reasonable business necessity required by the
evidence. While findings of fact by administrative tribunals like the NLRC
law.
are generally given not only respect but, at times, finality, this rule
admits of exceptions,42 as in the case at bar.
It is significant to note that in the case at bar, respondents were hired
after they were found fit for the job, but were asked to resign when they
Estrella avers that she went back to work on December 21, 1999 but
married a co-employee. Petitioners failed to show how the marriage of
was dismissed due to her alleged immoral conduct. At first, she did not
Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then an
want to sign the termination papers but she was forced to tender her
employee of the Repacking Section, could be detrimental to its business
resignation letter in exchange for her thirteenth month pay.
operations. Neither did petitioners explain how this detriment will happen
in the case of Wilfreda Comia, then a Production Helper in the Selecting
Department, who married Howard Comia, then a helper in the cutter- The contention of petitioners that Estrella was pressured to resign
machine. The policy is premised on the mere fear that employees because she got impregnated by a married man and she could not stand
married to each other will be less efficient. If we uphold the questioned being looked upon or talked about as immoral43 is incredulous. If she
rule without valid justification, the employer can create policies based on really wanted to avoid embarrassment and humiliation, she would not
an unproven presumption of a perceived danger at the expense of an have gone back to work at all. Nor would she have filed a suit for illegal
employee’s right to security of tenure. dismissal and pleaded for reinstatement. We have held that in voluntary
resignation, the employee is compelled by personal reason(s) to
dissociate himself from employment. It is done with the intention of
Petitioners contend that their policy will apply only when one employee
relinquishing an office, accompanied by the act of abandonment. 44 Thus,
marries a co-employee, but they are free to marry persons other than
it is illogical for Estrella to resign and then file a complaint for illegal
co-employees. The questioned policy may not facially violate Article 136
dismissal. Given the lack of sufficient evidence on the part of petitioners
of the Labor Code but it creates a disproportionate effect and under the
that the resignation was voluntary, Estrella’s dismissal is declared illegal.
disparate impact theory, the only way it could pass judicial scrutiny is a
showing that it is reasonable despite the discriminatory, albeit
disproportionate, effect. The failure of petitioners to prove a legitimate IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R.
business concern in imposing the questioned policy cannot prejudice the SP No. 73477 dated August 3, 2004 isAFFIRMED.1avvphil.net
employee’s right to be free from arbitrary discrimination based upon
stereotypes of married persons working together in one company.40
SO ORDERED.
Lastly, the absence of a statute expressly prohibiting marital
discrimination in our jurisdiction cannot benefit the petitioners. The
protection given to labor in our jurisdiction is vast and extensive that we
cannot prudently draw inferences from the legislature’s silence41 that
married persons are not protected under our Constitution and declare
valid a policy based on a prejudice or stereotype. Thus, for failure of
petitioners to present undisputed proof of a reasonable business
necessity, we rule that the questioned policy is an invalid exercise of
management prerogative. Corollarily, the issue as to whether
respondents Simbol and Comia resigned voluntarily has become moot
and academic.
105
26
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. NO. 153477 March 6, 2007
DEL MONTE PHILIPPINES, INC., Petitioner,
vs.
LOLITA VELASCO, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before this Court is a Petition for Certiorari under Rule 45 seeking to
reverse and set aside the Decision1 dated July 23, 2001 of the Court of
Appeals (CA) in CA-G.R. SP No. 56571 which affirmed the Decision dated
May 27, 1999 of the National Labor Relations Commission (NLRC); and
the CA Resolution2 dated May 7, 2002 which denied the petitioner's
Motion for Reconsideration.
The facts of the case, as stated by the CA, are as follows:
Lolita M. Velasco (respondent) started working with Del Monte
Philippines (petitioner) on October 21, 1976 as a seasonal employee and
was regularized on May 1, 1977. Her latest assignment was as Field
Laborer.
On June 16, 1987, respondent was warned in writing due to her
absences. On May 4, 1991, respondent, thru a letter, was again warned
in writing by petitioner about her absences without permission and a
forfeiture of her vacation leave entitlement for the year 1990-1991 was
imposed against her.
On September 14, 1992, another warning letter was sent to respondent
regarding her absences without permission during the year 1991-1992.
Her vacation entitlement for the said employment year affected was
consequently forfeited.
In view of the said alleged absences without permission, on September
17, 1994, a notice of hearing was sent to respondent notifying her of the
charges filed against her for violating the Absence Without Official Leave
rule: that is for excessive absence without permission on August 15-18,
29-31 and September 1-10, 1994. The hearing was set on September
23, 1994.
Respondent having failed to appear on September 23, 1994 hearing,
another notice of hearing was sent to her resetting the investigation on
September 30, 1994. It was again reset to October 5, 1994.
On January 10, 1995, after hearing, the petitioner terminated the
services of respondent effective January 16, 1994 due to excessive
absences without permission.
Feeling aggrieved, respondent filed a case for illegal dismissal against
petitioner asserting that her dismissal was illegal because she was on the
family way suffering from urinary tract infection, a pregnancy-borne, at
the time she committed the alleged absences. She explained that for her
absence from work on August 15, 16, 17 & 18, 1994 she had sent an
application for leave to her supervisor, Prima Ybañez. Thereafter, she
went to the company hospital for check-up and was advised accordingly
to rest in quarters for four (4) days or on August 27 to 30, 1994. Still not
feeling well, she failed to work on September 1, 1994 and was again
advised two days of rest in quarters on September 2-3, 1994. Unable to
recover, she went to see an outside doctor, Dr. Marilyn Casino, and the
latter ordered her to rest for another five (5) consecutive days, or from
September 5 to 9, 1994. She declared she did not file the adequate leave
of absence because a medical certificate was already sufficient per
company policy. On September 10, 1994 she failed to report to work but
sent an application for leave of absence to her supervisor, Prima Ybañez,
which was not anymore accepted.3
On April 13, 1998, the Labor Arbiter dismissed the Complaint for lack of
merit. The Labor Arbiter held that the respondent was an incorrigible
absentee; that she failed to file leaves of absence; that her absences in
1986 and 1987 were without permission; that the petitioner gave the
respondent several chances to reform herself; and that the respondent
did not justify her failure to appear during the scheduled hearings and
failed to explain her absences.
Respondent appealed to the NLRC. On May 29, 1999, the NLRC issued
its Resolution, the dispositive portion of which reads:
WHEREFORE, foregoing considered, the instant decision is hereby
VACATED and a new one entered declaring the dismissal of complainant
as ILLEGAL. In consonance with Art. 279 of the Labor [Code], her
reinstatement with full backwages from the date of her termination from
employment to her actual reinstatement is necessarily decreed.4
The NLRC held that, under the company rules, the employee may make
a subsequent justification of her absenteeism, which she was able to do
in the instant case; that while it is not disputed that the respondent
incurred absences exceeding six (6) days within one employment year –
a ground for dismissal under the company rules – the petitioner actually
admitted the fact that the respondent had been pregnant, hence,
negating petitioner’s assertion that the respondent failed to give any
explanation of her absences; that the records bear the admission of
petitioner’s officer of the receipt of the hospital record showing the cause
of her absences ("RIQ advice" or "rest-in-quarters") for August 19-20,
1994 which, in turn, could already serve as reference in resolving the
absences on August 15 to 18; that the petitioner further admitted that
the respondent was under "RIQ advice" on September 2-3, 1994 and yet
insisted in including these dates among respondent’s 16 purported
unexplained absences; that it is sufficient notice for the petitioner, "a
plain laborer" with "unsophisticated judgment," to send word to her
employer through a co-worker on August 15 to 16, 1994 that she was
frequently vomiting; that the sheer distance between respondent’s home
and her workplace made it difficult to send formal notice; that
respondent even sent her child of tender age to inform her supervisor
about her absence on September 5, 1994 due to stomach ache, but her
child failed to approach the officer because her child felt ashamed, if not
mortified; that respondent’s narration that she had to bear pains during
her absences on September 21 to 27, 1994 is credible; that she dared
not venture through the roads for fear of forest creatures or predators;
that the petitioner is guilty of unlawfully discharging respondent on
account of her pregnancy under Article 137(2) of the Labor Code; and,
that petitioner’s reference to the previous absenteeism of respondent is
misplaced because the latter had already been penalized therefor.
Petitioner’s Motion for Reconsideration was denied on September 30,
1999.
The petitioner then appealed to the CA. On July 23, 2001, the CA
promulgated its Decision the dispositive portion of which states:
VIEWED IN THE LIGHT OF ALL THE FOREGOING, the instant petition is
DISMISSED, the Resolutions, dated May 27, 1999 and September 30,
1999 of the National Labor Relations Commission in NLRC CA No. M-
003926-98, are hereby AFFIRMED in toto.
SO ORDERED.5
In affirming the NLRC, the CA held that absences due to a justified cause
cannot be a ground for dismissal; that it is undisputed that the
respondent was pregnant at the time she incurred the absences in
question; that the certification issued by a private doctor duly
established this fact; that it was no less than petitioner’s company doctor
who advised the respondent to have rest-in-quarters for four days on
account of a pregnancy- related sickness; that it had been duly
established that respondent filed leaves of absence though the last had
been refused by the company supervisor; that the dismissal of an
106
employee due to prolonged absence with leave by reason of illness duly
established by the presentation of a medical certificate is not justified;
that it is undisputed that respondent’s sickness was pregnancy-related;
that under Article 137(2) of the Labor Code, the petitioner committed a
prohibited act in discharging a woman on account of her pregnancy.
On May 7, 2002, the CA denied petitioner’s Motion for Reconsideration.
Hence, the instant Petition raising the following issues:
I.
The court of appeals seriously erred In considering respondent’s
Excessive aWOPs as justified Simply on account of her pregnancy.
II.
THE COURT OF APPEALS SERIOUSLY ERRED IN NOT CONSIDERING
THAT RESPONDENT’S LATEST STRING OF ABSENCES INCURRED
WITHOUT ANY PRIOR PERMISSION, AND AS ABOVE SHOWN, WITHOUT
ANY VALID JUSTIFICATION, TAKEN TOGETHER WITH HER DAMAGING
awop history, established her gross and habitual neGlect of duties, a just
and valid ground for dismissal.
III.
The court of appeals seriously erred in holding that respondent’s
dismissal was in violation of article 137 (prohibiting an employer to
discharge an employee on account of her pregnancy).
IV.
The court of appeals seriously erred in awarding full backwages in favor
of respondent notwithstanding petitioner’s evident good faith.6
The essential question is whether the employment of respondent had
been validly terminated on the ground of excessive absences without
permission. Corollary to this is the question of whether the petitioner
discharged the respondent on account of pregnancy, a prohibited act.
The petitioner posits the following arguments: (a) The evidence
proffered by the respondent, to wit: (1) the Discharge Summary
indicating that she had been admitted to the Phillips Memorial Hospital
on August 23, 1994 and discharged on August 26, 1994, and that she
had been advised to "rest in quarters" for four days from August 27,
1994 to August 30, 1994, and (2) the Medical Certificate issued by Dr.
Marilyn M. Casino stating that respondent had sought consultation on
September 4, 2002 because of spasm in the left iliac region, and was
advised to rest for five days (from September 4, 1994 up to September
8, 1994), due to urinary tract infection, all in all establish respondent’s
sickness only from August 23, 1994 up to August 30, 1994 and from
September 4, 1994 up to September 8, 1994. In other words,
respondent was absent without permission on several other days which
were not supported by any other proof of illness, specifically, on August
15, 16, 17, 18, 31, 1994 and September 1, 2, 3, 9, and 10, 1994, and,
hence, she is guilty of ten unjustified absences; (b) Per Filflex Industrial
and Manufacturing Co. v. National Labor Relations Commission
(Filflex),7 if the medical certificate fails to refer to the specific period of
the employee’s absence, then such absences, attributable to chronic
asthmatic bronchitis, are not supported by competent proof and, hence,
they are unjustified. By parity of reasoning, in the absence of evidence
indicating any pregnancy-borne illness outside the period stated in
respondent’s medical certificate, such illness ought not to be considered
as an acceptable excuse for respondent’s excessive absences without
leave; (c) Respondent’s latest string of absences, taken together with
her long history of absenteeism without permission, established her
gross and habitual neglect of duties, as established by jurisprudence; (d)
The respondent was dismissed not by reason of her pregnancy but on
account of her gross and habitual neglect of duties. In other words, her
pregnancy had no bearing on the decision to terminate her employment;
and, (e) Her state of pregnancy per se could not excuse her from filing
prior notice for her absence.
Petitioner’s arguments are without merit.
First. The Filflex Industrial and Manufacturing Co. case is not applicable,
principally because the nature and gravity of the illness involved in that
case – chronic asthmatic bronchitis – are different from the conditions
that are present in the instant case, which is pregnancy and its related
illnesses.
The Court takes judicial notice of the fact that the condition of asthmatic
bronchitis may be intermittent, in contrast to pregnancy which is a
continuing condition accompanied by various symptoms and related
illnesses. Hence, as to the former, if the medical certificate or other
proof proffered by the worker fails to correspond with the dates of
absence, then it can be reasonably concluded that, absent any other
proof, such absences are unjustified. This is the ruling in Filflex which
cannot be applied in a straight-hand fashion in cases of pregnancy which
is a long-term condition accompanied by an assortment of related
illnesses.
In this case, by the measure of substantial evidence, what is controlling
is the finding of the NLRC and the CA that respondent was pregnant and
suffered from related ailments. It would be unreasonable to isolate such
condition strictly to the dates stated in the Medical Certificate or the
Discharge Summary. It can be safely assumed that the absences that are
not covered by, but which nonetheless approximate, the dates stated in
the Discharge Summary and Medical Certificate, are due to the
continuing condition of pregnancy and related illnesses, and, hence, are
justified absences.
As the CA and the NLRC correctly noted, it is not disputed that
respondent was pregnant and that she was suffering from urinary tract
infection, and that her absences were due to such facts. The petitioner
admits these facts in its Petition for Review.8 And, as the CA aptly held, it
was no less than the company doctor who advised the respondent to
have "rest-in-quarters" for four days on account of a pregnancy-related
sickness.9
On this note, this Court upholds and adopts the finding of the NLRC,
thus:
In this jurisdiction tardiness and absenteeism, like abandonment, are
recognized forms of neglect of duties, the existence of which justify the
dismissal of the erring employee. Respondent’s rule penalizing with
discharge any employee who has incurred six (6) or more absences
without permission or subsequent justification is admittedly within the
purview of the foregoing standard.
However, while it is not disputed that complainant incurred absences
exceeding six (6) days as she actually failed to report for work from
August 15-18, 23-26, 29-31, September 1-3, 5-10, 12-17, 21-24, 26-30,
and October 1-3, 1994, her being pregnant at the time these
absences were incurred is not questioned and is even admitted
by respondent. It thus puzzles us why respondent asserts complainant
failed to explain satisfactorily her absences on August 15-18, 29-31,
September 1-3 and 5-10, 1994, yet reconsidered the rest of her
absences for being covered with "rest-in-quarters" (RIQ) advice from its
hospital personnel when this advice was unquestionably issued in
consideration of the physiological and emotional changes complainant, a
conceiving mother, naturally developed. Medical and health reports
abundantly disclose that during the first trimester of pregnancy,
expectant mothers are plagued with morning sickness, frequent
urination, vomiting and fatigue all of which complainant was
similarly plagued with. Union official IBB Lesna’s observation on
complainant being [sic] apparently not feeling well during the
investigation conducted by respondent on October 5, 1994 even
remains in the records of said proceedings. For respondent to
isolate the absences of complainant in August and mid-
September, 1994 from the absences she incurred later in said
month without submitting any evidence that these were due to
causes not in manner associated with her [ ] condition renders
its justification of complainant’s dismissal clearly not convincing
under the circumstances.
107
Despite contrary declaration, the records bear the admission of
respondent’s P/A North Supervisor, PB Ybanez, of her receipt of
the hospital record showing complainant’s RIQ advice for
August 19-20, 1994 which could already serve as respondent’s
reference in resolving the latter’s absences on August 15 to 18,
1994. Respondent further admitted complainant was under RIQ
advice on September 2-3, 1994, yet, insisted in including these
dates among her 16 purported unexplained absences justifying
termination of her employment.10 (emphasis supplied)
Petitioner’s contention that the cause for the dismissal was gross and
habitual neglect unrelated to her state of pregnancy is unpersuasive.
The Court agrees with the CA in concluding that respondent’s sickness
was pregnancy-related and, therefore, the petitioner cannot terminate
respondent’s services because in doing so, petitioner will, in effect, be
violating the Labor Code which prohibits an employer to discharge an
employee on account of the latter’s pregnancy.11
Article 137 of the Labor Code provides:
Art. 137. Prohibited acts. – It shall be unlawful for any employer:
(1) To deny any woman employee the benefits provided for in
this Chapter or to discharge any woman employed by him for
the purpose of preventing her from enjoying any of the
benefits provided under this Code;
(2) To discharge such woman on account of her
pregnancy, while on leave or in confinement due to her
pregnancy; or
(3) To discharge or refuse the admission of such woman upon
returning to her work for fear that she may again be pregnant.
(Emphasis supplied)
supervisor refused to receive them; that she could not have filed prior
leaves due to her continuing condition; and that the petitioner, in the
last analysis, dismissed the respondent on account of her pregnancy, a
prohibited act.
Third. Petitioner’s reliance on the jurisprudential rule that the totality of
the infractions of an employee may be taken into account to justify the
dismissal, is tenuous considering the particular circumstances obtaining
in the present case. Petitioner puts much emphasis on respondent’s
"long history" of unauthorized absences committed several years
beforehand. However, petitioner cannot use these previous infractions to
lay down a pattern of absenteeism or habitual disregard of company
rules to justify the dismissal of respondent. The undeniable fact is that
during her complained absences in 1994, respondent was pregnant and
suffered related illnesses. Again, it must be stressed that respondent’s
discharge by reason of absences caused by her pregnancy is covered by
the prohibition under the Labor Code. Since her last string of absences is
justifiable and had been subsequently explained, the petitioner had no
legal basis in considering these absences together with her prior
infractions as gross and habitual neglect.
The Court is convinced that the petitioner terminated the services of
respondent on account of her pregnancy which justified her absences
and, thus, committed a prohibited act rendering the dismissal illegal.
In fine, the Court finds no cogent reason to disturb the findings of the
CA and the NLRC.
WHEREFORE, the petition is DENIED for lack of merit. The Decision
dated July 23, 2001 and the Resolution dated May 7, 2002 of the Court
of Appeals are AFFIRMED.
No pronouncement as to costs.
SO ORDERED.

Second. The petitioner stresses that many women go through pregnancy

and yet manage to submit prior notices to their employer, especially if
"there is no evidence on record indicating a condition of such gravity as
to preclude efforts at notifying petitioner of her absence from work in
series."12 But it must be emphasized that under petitioner’s company
rules, absences may be subsequently justified.13 The Court finds no
cogent reason to disturb the findings of the NLRC and the CA that the
respondent was able to subsequently justify her absences in accordance
with company rules and policy; that the respondent was pregnant at the
time she incurred the absences; that this fact of pregnancy and its
related illnesses had been duly proven through substantial evidence; that
the respondent attempted to file leaves of absence but the petitioner’s

108
27
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 168081 October 17, 2008
ARMANDO G. YRASUEGUI, petitioners,
vs.
PHILIPPINE AIRLINES, INC., respondents.
DECISION
REYES, R.T., J.:
THIS case portrays the peculiar story of an international flight steward
who was dismissed because of his failure to adhere to the weight
standards of the airline company.
He is now before this Court via a petition for review on
certiorari claiming that he was illegally dismissed. To buttress his stance,
he argues that (1) his dismissal does not fall under 282(e) of the Labor
Code; (2) continuing adherence to the weight standards of the company
is not a bona fide occupational qualification; and (3) he was
discriminated against because other overweight employees were
promoted instead of being disciplined.
After a meticulous consideration of all arguments pro and con, We
uphold the legality of dismissal. Separation pay, however, should be
awarded in favor of the employee as an act of social justice or based on
equity. This is so because his dismissal is not for serious misconduct.
Neither is it reflective of his moral character.
The Facts
Petitioner Armando G. Yrasuegui was a former international flight
steward of Philippine Airlines, Inc. (PAL). He stands five feet and eight
inches (5’8") with a large body frame. The proper weight for a man of
his height and body structure is from 147 to 166 pounds, the ideal
weight being 166 pounds, as mandated by the Cabin and Crew
Administration Manual1 of PAL.
The weight problem of petitioner dates back to 1984. Back then, PAL
advised him to go on an extended vacation leave from December 29,
1984 to March 4, 1985 to address his weight concerns. Apparently,
petitioner failed to meet the company’s weight standards, prompting
another leave without pay from March 5, 1985 to November 1985.
After meeting the required weight, petitioner was allowed to return to
work. But petitioner’s weight problem recurred. He again went on leave
without pay from October 17, 1988 to February 1989.
On April 26, 1989, petitioner weighed 209 pounds, 43 pounds over his
ideal weight. In line with company policy, he was removed from flight
duty effective May 6, 1989 to July 3, 1989. He was formally requested to
trim down to his ideal weight and report for weight checks on several
dates. He was also told that he may avail of the services of the company
physician should he wish to do so. He was advised that his case will be
evaluated on July 3, 1989.2
On February 25, 1989, petitioner underwent weight check. It was
discovered that he gained, instead of losing, weight. He was overweight
at 215 pounds, which is 49 pounds beyond the limit. Consequently, his
off-duty status was retained.
On October 17, 1989, PAL Line Administrator Gloria Dizon personally
visited petitioner at his residence to check on the progress of his effort
to lose weight. Petitioner weighed 217 pounds, gaining 2 pounds from
his previous weight. After the visit, petitioner made a commitment3 to
reduce weight in a letter addressed to Cabin Crew Group Manager
Augusto Barrios. The letter, in full, reads:
Dear Sir:
I would like to guaranty my commitment towards a weight loss from 217
pounds to 200 pounds from today until 31 Dec. 1989.
From thereon, I promise to continue reducing at a reasonable
percentage until such time that my ideal weight is achieved.
Likewise, I promise to personally report to your office at the designated
time schedule you will set for my weight check.
Respectfully Yours,
F/S Armando Yrasuegui4
Despite the lapse of a ninety-day period given him to reach his ideal
weight, petitioner remained overweight. On January 3, 1990, he was
informed of the PAL decision for him to remain grounded until such time
that he satisfactorily complies with the weight standards. Again, he was
directed to report every two weeks for weight checks.
Petitioner failed to report for weight checks. Despite that, he was given
one more month to comply with the weight requirement. As usual, he
was asked to report for weight check on different dates. He was
reminded that his grounding would continue pending satisfactory
compliance with the weight standards.5
Again, petitioner failed to report for weight checks, although he was
seen submitting his passport for processing at the PAL Staff Service
Division.
On April 17, 1990, petitioner was formally warned that a repeated
refusal to report for weight check would be dealt with accordingly. He
was given another set of weight check dates.6 Again, petitioner ignored
the directive and did not report for weight checks. On June 26, 1990,
petitioner was required to explain his refusal to undergo weight checks.7
When petitioner tipped the scale on July 30, 1990, he weighed at 212
pounds. Clearly, he was still way over his ideal weight of 166 pounds.
From then on, nothing was heard from petitioner until he followed up his
case requesting for leniency on the latter part of 1992. He weighed
at 219 pounds on August 20, 1992 and 205 pounds on November 5,
1992.
On November 13, 1992, PAL finally served petitioner a Notice of
Administrative Charge for violation of company standards on weight
requirements. He was given ten (10) days from receipt of the charge
within which to file his answer and submit controverting evidence.8
On December 7, 1992, petitioner submitted his Answer.9 Notably, he did
not deny being overweight. What he claimed, instead, is that his
violation, if any, had already been condoned by PAL since "no action has
been taken by the company" regarding his case "since 1988." He also
claimed that PAL discriminated against him because "the company has
not been fair in treating the cabin crew members who are similarly
situated."
On December 8, 1992, a clarificatory hearing was held where petitioner
manifested that he was undergoing a weight reduction program to lose
at least two (2) pounds per week so as to attain his ideal weight.10
On June 15, 1993, petitioner was formally informed by PAL that due to
his inability to attain his ideal weight, "and considering the utmost
leniency" extended to him "which spanned a period covering a total of
109
almost five (5) years," his services were considered terminated "effective
immediately."11
His motion for reconsideration having been denied,12 petitioner filed a
complaint for illegal dismissal against PAL.
Labor Arbiter, NLRC and CA Dispositions
On November 18, 1998, Labor Arbiter Valentin C. Reyes ruled13 that
petitioner was illegally dismissed. The dispositive part of the Arbiter
ruling runs as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered,
declaring the complainant’s dismissal illegal, and ordering the respondent
to reinstate him to his former position or substantially equivalent one,
and to pay him:
a. Backwages of Php10,500.00 per month from his dismissal on June 15,
1993 until reinstated, which for purposes of appeal is hereby set from
June 15, 1993 up to August 15, 1998 at P651,000.00;
b. Attorney’s fees of five percent (5%) of the total award.
SO ORDERED.14
The Labor Arbiter held that the weight standards of PAL are reasonable
in view of the nature of the job of petitioner.15 However, the weight
standards need not be complied with under pain of dismissal since his
weight did not hamper the performance of his duties.16 Assuming that it
did, petitioner could be transferred to other positions where his weight
would not be a negative factor.17 Notably, other overweight employees,
i.e., Mr. Palacios, Mr. Cui, and Mr. Barrios, were promoted instead of
being disciplined.18
Both parties appealed to the National Labor Relations Commission
(NLRC).19
On October 8, 1999, the Labor Arbiter issued a writ of execution
directing the reinstatement of petitioner without loss of seniority rights
and other benefits.20
On February 1, 2000, the Labor Arbiter denied21 the Motion to Quash
Writ of Execution22 of PAL.
On March 6, 2000, PAL appealed the denial of its motion to quash to the
NLRC.23
On June 23, 2000, the NLRC rendered judgment24 in the following tenor:
WHEREFORE, premises considered[,] the Decision of the Arbiter dated
18 November 1998 as modified by our findings herein, is hereby
AFFIRMED and that part of the dispositive portion of said decision
concerning complainant’s entitlement to backwages shall be deemed to
refer to complainant’s entitlement to his full backwages, inclusive of
allowances and to his other benefits or their monetary equivalent instead
of simply backwages, from date of dismissal until his actual
reinstatement or finality hereof. Respondent is enjoined to manifests
(sic) its choice of the form of the reinstatement of complainant, whether
physical or through payroll within ten (10) days from notice failing which,
the same shall be deemed as complainant’s reinstatement through
payroll and execution in case of non-payment shall accordingly be issued
by the Arbiter. Both appeals of respondent thus, are DISMISSEDfor
utter lack of merit.25
According to the NLRC, "obesity, or the tendency to gain weight
uncontrollably regardless of the amount of food intake, is a disease in
itself."26 As a consequence, there can be no intentional defiance or
serious misconduct by petitioner to the lawful order of PAL for him to
lose weight.27
Like the Labor Arbiter, the NLRC found the weight standards of PAL to
be reasonable. However, it found as unnecessary the Labor Arbiter
holding that petitioner was not remiss in the performance of his duties as
flight steward despite being overweight. According to the NLRC, the
Labor Arbiter should have limited himself to the issue of whether the
failure of petitioner to attain his ideal weight constituted willful defiance
of the weight standards of PAL.28
PAL moved for reconsideration to no avail.29 Thus, PAL elevated the
matter to the Court of Appeals (CA) via a petition for certiorari under
Rule 65 of the 1997 Rules of Civil Procedure.30
By Decision dated August 31, 2004, the CA reversed31 the NLRC:
WHEREFORE, premises considered, we hereby GRANT the petition. The
assailed NLRC decision is declared NULL and VOID and is hereby SET
ASIDE. The private respondent’s complaint is hereby DISMISSED. No
costs.
SO ORDERED.32
The CA opined that there was grave abuse of discretion on the part of
the NLRC because it "looked at wrong and irrelevant considerations"33 in
evaluating the evidence of the parties. Contrary to the NLRC ruling, the
weight standards of PAL are meant to be a continuing qualification for an
employee’s position.34 The failure to adhere to the weight standards is
an analogous cause for the dismissal of an employee under Article
282(e) of the Labor Code in relation to Article 282(a). It is not willful
disobedience as the NLRC seemed to suggest.35 Said the CA, "the
element of willfulness that the NLRC decision cites is an irrelevant
consideration in arriving at a conclusion on whether the dismissal is
legally proper."36 In other words, "the relevant question to ask is not one
of willfulness but one of reasonableness of the standard and whether or
not the employee qualifies or continues to qualify under this standard."37
Just like the Labor Arbiter and the NLRC, the CA held that the weight
standards of PAL are reasonable.38 Thus, petitioner was legally dismissed
because he repeatedly failed to meet the prescribed weight
standards.39 It is obvious that the issue of discrimination was only
invoked by petitioner for purposes of escaping the result of his dismissal
for being overweight.40
On May 10, 2005, the CA denied petitioner’s motion for
reconsideration.41 Elaborating on its earlier ruling, the CA held that the
weight standards of PAL are a bona fide occupational qualification which,
in case of violation, "justifies an employee’s separation from the
service."42
Issues
In this Rule 45 petition for review, the following issues are posed for
resolution:
I.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN
HOLDING THATPETITIONER’S OBESITY CAN BE A GROUND FOR
DISMISSAL UNDER PARAGRAPH (e) OF ARTICLE 282 OF THE LABOR
CODE OF THE PHILIPPINES;
II.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN
HOLDING THATPETITIONER’S DISMISSAL FOR OBESITY CAN BE
PREDICATED ON THE "BONA FIDE OCCUPATIONAL QUALIFICATION
(BFOQ) DEFENSE";
III.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN
HOLDING THATPETITIONER WAS NOT UNDULY DISCRIMINATED
AGAINST WHEN HE WAS DISMISSED WHILE OTHER OVERWEIGHT
110
CABIN ATTENDANTS WERE EITHER GIVEN FLYING DUTIES OR
PROMOTED;
IV.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT
BRUSHED ASIDE PETITIONER’S CLAIMS FOR REINSTATEMENT [AND]
WAGES ALLEGEDLY FOR BEING MOOT AND ACADEMIC.43 (Underscoring
supplied)
Our Ruling
I. The obesity of petitioner is a ground for dismissal under
Article 282(e) 44 of the Labor Code.
A reading of the weight standards of PAL would lead to no other
conclusion than that they constitute a continuing qualification of an
employee in order to keep the job. Tersely put, an employee may be
dismissed the moment he is unable to comply with his ideal weight as
prescribed by the weight standards. The dismissal of the employee
would thus fall under Article 282(e) of the Labor Code. As explained by
the CA:
x x x [T]he standards violated in this case were not mere "orders" of the
employer; they were the "prescribed weights" that a cabin crew
must maintain in order to qualify for and keep his or her position
in the company. In other words, they were standards that
establish continuing qualifications for an employee’s position. In this
sense, the failure to maintain these standards does not fall under Article
282(a) whose express terms require the element of willfulness in order
to be a ground for dismissal. The failure to meet the
employer’s qualifying standards is in fact a ground that does not
squarely fall under grounds (a) to (d) and is therefore one that falls
under Article 282(e) – the "other causes analogous to the foregoing."
Petitioner, though, advances a very interesting argument. He claims that
obesity is a "physical abnormality and/or illness."46 Relying on Nadura v.
Benguet Consolidated, Inc.,47 he says his dismissal is illegal:
Conscious of the fact that Nadura’s case cannot be made to fall squarely
within the specific causes enumerated in subparagraphs 1(a) to (e),
Benguet invokes the provisions of subparagraph 1(f) and says that
Nadura’s illness – occasional attacks of asthma – is a cause analogous to
them.
Even a cursory reading of the legal provision under consideration is
sufficient to convince anyone that, as the trial court said, "illness cannot
be included as an analogous cause by any stretch of imagination."
It is clear that, except the just cause mentioned in sub-paragraph 1(a),
all the others expressly enumerated in the law are due to the voluntary
and/or willful act of the employee. How Nadura’s illness could be
considered as "analogous" to any of them is beyond our understanding,
there being no claim or pretense that the same was contracted through
his own voluntary act.48
The reliance on Nadura is off-tangent. The factual milieu in Nadura is
substantially different from the case at bar.First, Nadura was not decided
under the Labor Code. The law applied in that case was Republic Act
(RA) No. 1787. Second, the issue of flight safety is absent in Nadura,
thus, the rationale there cannot apply here. Third, inNadura, the
employee who was a miner, was laid off from work because of illness,
i.e., asthma. Here, petitioner was dismissed for his failure to meet the
weight standards of PAL. He was not dismissed due to illness. Fourth,
the issue in Nadura is whether or not the dismissed employee is entitled
to separation pay and damages. Here, the issue centers on the propriety
of the dismissal of petitioner for his failure to meet the weight standards
of PAL.Fifth, in Nadura, the employee was not accorded due process.
Here, petitioner was accorded utmost leniency. He was given more than
four (4) years to comply with the weight standards of PAL.
offering a valid explanation. Thus, his fluctuating weight indicates
absence of willpower rather than an illness.
Petitioner cites Bonnie Cook v. State of Rhode Island, Department of
Mental Health, Retardation and Hospitals,52decided by the United States
Court of Appeals (First Circuit). In that case, Cook worked from 1978 to
1980 and from 1981 to 1986 as an institutional attendant for the
mentally retarded at the Ladd Center that was being operated by
respondent. She twice resigned voluntarily with an unblemished record.
Even respondent admitted that her performance met the Center’s
legitimate expectations. In 1988, Cook re-applied for a similar position.
At that time, "she stood 5’2" tall and weighed over 320 pounds."
Respondent claimed that the morbid obesity of plaintiff compromised her
ability to evacuate patients in case of emergency and it also put her at
greater risk of serious diseases.
Cook contended that the action of respondent amounted to
discrimination on the basis of a handicap. This was in direct violation of
Section 504(a) of the Rehabilitation Act of 1973,53 which incorporates the
remedies contained in Title VI of the Civil Rights Act of 1964.
Respondent claimed, however, that morbid obesity could never
constitute a handicap within the purview of the Rehabilitation Act.
Among others, obesity is a mutable condition, thus plaintiff could simply
lose weight and rid herself of concomitant disability.
The appellate Court disagreed and held that morbid obesity is a disability
under the Rehabilitation Act and that respondent discriminated against
Cook based on "perceived" disability. The evidence included expert
testimony that morbid obesity is a physiological disorder. It involves a
dysfunction of both the metabolic system and the neurological appetite –
suppressing signal system, which is capable of causing adverse effects
within the musculoskeletal, respiratory, and cardiovascular systems.
Notably, the Court stated that "mutability is relevant only in determining
the substantiality of the limitation flowing from a given impairment," thus
"mutability only precludes those conditions that an individual can easily
and quickly reverse by behavioral alteration."

By its nature, these "qualifying standards" are norms that apply prior to
and after an employee is hired. They apply prior to
employment because these are the standards a job applicant must
initially meet in order to be hired. They apply after hiring because an
employee must continue to meet these standards while on the job in
order to keep his job. Under this perspective, a violation is not one of the
faults for which an employee can be dismissed pursuant to pars. (a) to
(d) of Article 282; the employee can be dismissed simply because he no
longer "qualifies" for his job irrespective of whether or not the failure to
qualify was willful or intentional. x x x45
In the case at bar, the evidence on record militates against petitioner’s
Unlike Cook, however, petitioner is not morbidly obese. In the words of
claims that obesity is a disease. That he was able to reduce his weight
the District Court for the District of Rhode Island, Cook was sometime
from 1984 to 1992 clearly shows that it is possible for him to lose weight
before 1978 "at least one hundred pounds more than what is considered
given the proper attitude, determination, and self-discipline. Indeed,
appropriate of her height." According to the Circuit Judge, Cook weighed
during the clarificatory hearing on December 8, 1992, petitioner himself
"over 320 pounds" in 1988. Clearly, that is not the case here. At his
claimed that "[t]he issue is could I bring my weight down to ideal weight
heaviest, petitioner was only less than 50 pounds over his ideal weight.
which is 172, then the answer is yes. I can do it now."49
In fine, We hold that the obesity of petitioner, when placed in the
True, petitioner claims that reducing weight is costing him "a lot of
context of his work as flight attendant, becomes an analogous cause
expenses."50 However, petitioner has only himself to blame. He could
under Article 282(e) of the Labor Code that justifies his dismissal from
have easily availed the assistance of the company physician, per the
the service. His obesity may not be unintended, but is nonetheless
advice of PAL.51He chose to ignore the suggestion. In fact, he repeatedly
voluntary. As the CA correctly puts it, "[v]oluntariness basically means
failed to report when required to undergo weight checks, without
that the just cause is solely attributable to the employee without any
111
external force influencing or controlling his actions. This element runs
through all just causes under Article 282, whether they be in the nature
of a wrongful action or omission. Gross and habitual neglect, a
recognized just cause, is considered voluntary although it lacks the
element of intent found in Article 282(a), (c), and (d)."54
II. The dismissal of petitioner can be predicated on the bona fide
occupational qualification defense.
Employment in particular jobs may not be limited to persons of a
particular sex, religion, or national origin unless the employer can show
that sex, religion, or national origin is an actual qualification for
performing the job. The qualification is called a bona fide occupational
qualification (BFOQ).55 In the United States, there are a few federal and
many state job discrimination laws that contain an exception allowing an
employer to engage in an otherwise unlawful form of prohibited
discrimination when the action is based on a BFOQ necessary to the
normal operation of a business or enterprise.56
Petitioner contends that BFOQ is a statutory defense. It does not exist if
there is no statute providing for it.57Further, there is no existing BFOQ
statute that could justify his dismissal.58
Both arguments must fail.
First, the Constitution,59 the Labor Code,60 and RA No. 727761 or the
Magna Carta for Disabled Persons62 contain provisions similar to BFOQ.
Second, in British Columbia Public Service Employee Commission
(BSPSERC) v. The British Columbia Government and Service Employee’s
Union (BCGSEU),63 the Supreme Court of Canada adopted the so-called
"Meiorin Test" in determining whether an employment policy is justified.
Under this test, (1) the employer must show that it adopted the standard
for a purpose rationally connected to the performance of the job;64 (2)
the employer must establish that the standard is reasonably
necessary65 to the accomplishment of that work-related purpose; and (3)
the employer must establish that the standard is reasonably necessary in
order to accomplish the legitimate work-related purpose. Similarly,
in Star Paper Corporation v. Simbol,66 this Court held that in order to
justify a BFOQ, the employer must prove that (1) the employment
qualification is reasonably related to the essential operation of the job
involved; and (2) that there is factual basis for believing that all or
substantially all persons meeting the qualification would be unable to
properly perform the duties of the job.67
In short, the test of reasonableness of the company policy is used
because it is parallel to BFOQ.68 BFOQ is valid "provided it reflects an
inherent quality reasonably necessary for satisfactory job
performance."69
In Duncan Association of Detailman-PTGWTO v. Glaxo Wellcome
Philippines, Inc.,70 the Court did not hesitate to pass upon the validity of
a company policy which prohibits its employees from marrying
employees of a rival company. It was held that the company policy is
reasonable considering that its purpose is the protection of the interests
of the company against possible competitor infiltration on its trade
secrets and procedures.
Verily, there is no merit to the argument that BFOQ cannot be applied if
it has no supporting statute. Too, the Labor Arbiter,71 NLRC,72 and
CA73 are one in holding that the weight standards of PAL are reasonable.
A common carrier, from the nature of its business and for reasons of
public policy, is bound to observe extraordinary diligence for the safety
of the passengers it transports.74 It is bound to carry its passengers
safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for all the
circumstances.75
The law leaves no room for mistake or oversight on the part of a
common carrier. Thus, it is only logical to hold that the weight standards
of PAL show its effort to comply with the exacting obligations imposed
upon it by law by virtue of being a common carrier.
The business of PAL is air transportation. As such, it has committed itself
to safely transport its passengers. In order to achieve this, it must
necessarily rely on its employees, most particularly the cabin flight deck
crew who are on board the aircraft. The weight standards of PAL should
be viewed as imposing strict norms of discipline upon its employees.
In other words, the primary objective of PAL in the imposition of the
weight standards for cabin crew is flight safety. It cannot be gainsaid
that cabin attendants must maintain agility at all times in order to inspire
passenger confidence on their ability to care for the passengers when
something goes wrong. It is not farfetched to say that airline companies,
just like all common carriers, thrive due to public confidence on their
safety records. People, especially the riding public, expect no less than
that airline companies transport their passengers to their respective
destinations safely and soundly. A lesser performance is unacceptable.
The task of a cabin crew or flight attendant is not limited to serving
meals or attending to the whims and caprices of the passengers. The
most important activity of the cabin crew is to care for the safety of
passengers and the evacuation of the aircraft when an emergency
occurs. Passenger safety goes to the core of the job of a cabin
attendant. Truly, airlines need cabin attendants who have the necessary
strength to open emergency doors, the agility to attend to passengers in
cramped working conditions, and the stamina to withstand grueling flight
schedules.
On board an aircraft, the body weight and size of a cabin attendant are
important factors to consider in case of emergency. Aircrafts have
constricted cabin space, and narrow aisles and exit doors. Thus, the
arguments of respondent that "[w]hether the airline’s flight attendants
are overweight or not has no direct relation to its mission of transporting
passengers to their destination"; and that the weight standards "has
nothing to do with airworthiness of respondent’s airlines," must fail.
The rationale in Western Air Lines v. Criswell76 relied upon by petitioner
cannot apply to his case. What was involved there were two (2) airline
pilots who were denied reassignment as flight engineers upon reaching
the age of 60, and a flight engineer who was forced to retire at age 60.
They sued the airline company, alleging that the age-60 retirement for
flight engineers violated the Age Discrimination in Employment Act of
1967. Age-based BFOQ and being overweight are not the same. The
case of overweight cabin attendants is another matter. Given the
cramped cabin space and narrow aisles and emergency exit doors of the
airplane, any overweight cabin attendant would certainly have difficulty
navigating the cramped cabin area.
In short, there is no need to individually evaluate their ability to perform
their task. That an obese cabin attendant occupies more space than a
slim one is an unquestionable fact which courts can judicially recognize
without introduction of evidence.77 It would also be absurd to require
airline companies to reconfigure the aircraft in order to widen the aisles
and exit doors just to accommodate overweight cabin attendants like
petitioner.
The biggest problem with an overweight cabin attendant is the possibility
of impeding passengers from evacuating the aircraft, should the occasion
call for it. The job of a cabin attendant during emergencies is to speedily
get the passengers out of the aircraft safely. Being overweight
necessarily impedes mobility. Indeed, in an emergency situation,
seconds are what cabin attendants are dealing with, not minutes. Three
lost seconds can translate into three lost lives. Evacuation might slow
down just because a wide-bodied cabin attendant is blocking the narrow
aisles. These possibilities are not remote.
Petitioner is also in estoppel. He does not dispute that the weight
standards of PAL were made known to him prior to his employment. He
is presumed to know the weight limit that he must maintain at all
times.78 In fact, never did he question the authority of PAL when he was
repeatedly asked to trim down his weight. Bona fides exigit ut quod
convenit fiat. Good faith demands that what is agreed upon shall be
done. Kung ang tao ay tapat kanyang tutuparin ang
napagkasunduan.
Too, the weight standards of PAL provide for separate weight limitations
based on height and body frame for both male and female cabin
attendants. A progressive discipline is imposed to allow non-compliant
112
cabin attendants sufficient opportunity to meet the weight standards.
Thus, the clear-cut rules obviate any possibility for the commission of
abuse or arbitrary action on the part of PAL.
III. Petitioner failed to substantiate his claim that he was
discriminated against by PAL.
Petitioner next claims that PAL is using passenger safety as a convenient
excuse to discriminate against him.79We are constrained, however, to
hold otherwise. We agree with the CA that "[t]he element of
discrimination came into play in this case as a secondary position for the
private respondent in order to escape the consequence of dismissal that
being overweight entailed. It is a confession-and-avoidance position that
impliedly admitted the cause of dismissal, including the reasonableness
of the applicable standard and the private respondent’s failure to
comply."80 It is a basic rule in evidence that each party must prove his
affirmative allegation.81
Since the burden of evidence lies with the party who asserts an
affirmative allegation, petitioner has to prove his allegation with
particularity. There is nothing on the records which could support the
finding of discriminatory treatment. Petitioner cannot establish
discrimination by simply naming the supposed cabin attendants who are
allegedly similarly situated with him. Substantial proof must be shown as
to how and why they are similarly situated and the differential treatment
petitioner got from PAL despite the similarity of his situation with other
employees.
Indeed, except for pointing out the names of the supposed overweight
cabin attendants, petitioner miserably failed to indicate their respective
ideal weights; weights over their ideal weights; the periods they were
allowed to fly despite their being overweight; the particular flights
assigned to them; the discriminating treatment they got from PAL; and
other relevant data that could have adequately established a case of
discriminatory treatment by PAL. In the words of the CA, "PAL really had
no substantial case of discrimination to meet."82
We are not unmindful that findings of facts of administrative agencies,
like the Labor Arbiter and the NLRC, are accorded respect, even
finality.83 The reason is simple: administrative agencies are experts in
matters within their specific and specialized jurisdiction.84 But the
principle is not a hard and fast rule. It only applies if the findings of facts
are duly supported by substantial evidence. If it can be shown that
administrative bodies grossly misappreciated evidence of such nature so
as to compel a conclusion to the contrary, their findings of facts must
necessarily be reversed. Factual findings of administrative agencies do
not have infallibility and must be set aside when they fail the test of
arbitrariness.85
Here, the Labor Arbiter and the NLRC inexplicably misappreciated
evidence. We thus annul their findings.
To make his claim more believable, petitioner invokes the equal
protection clause guaranty86 of the Constitution. However, in the
absence of governmental interference, the liberties guaranteed by the
Constitution cannot be invoked.87 Put differently, the Bill of Rights is not
meant to be invoked against acts of private individuals.88 Indeed, the
United States Supreme Court, in interpreting the Fourteenth
Amendment,89 which is the source of our equal protection guarantee, is
consistent in saying that the equal protection erects no shield against
private conduct, however discriminatory or wrongful.90 Private actions,
no matter how egregious, cannot violate the equal protection
guarantee.91
IV. The claims of petitioner for reinstatement and wages are
moot.
As his last contention, petitioner avers that his claims for reinstatement
and wages have not been mooted. He is entitled to reinstatement and
his full backwages, "from the time he was illegally dismissed" up to the
time that the NLRC was reversed by the CA.92
At this point, Article 223 of the Labor Code finds relevance:
In any event, the decision of the Labor Arbiter reinstating a dismissed or
separated employee, insofar as the reinstatement aspect is concerned,
shall immediately be executory, even pending appeal. The employee
shall either be admitted back to work under the same terms and
conditions prevailing prior to his dismissal or separation or, at the option
of the employer, merely reinstated in the payroll. The posting of a bond
by the employer shall not stay the execution for reinstatement provided
herein.
The law is very clear. Although an award or order of reinstatement is
self-executory and does not require a writ of execution,93 the option to
exercise actual reinstatement or payroll reinstatement belongs to the
employer. It does not belong to the employee, to the labor tribunals, or
even to the courts.
Contrary to the allegation of petitioner that PAL "did everything under
the sun" to frustrate his "immediate return to his previous
position,"94 there is evidence that PAL opted to physically reinstate him
to a substantially equivalent position in accordance with the order of the
Labor Arbiter.95 In fact, petitioner duly received the return to work notice
on February 23, 2001, as shown by his signature.96
Petitioner cannot take refuge in the pronouncements of the Court in a
case97 that "[t]he unjustified refusal of the employer to reinstate the
dismissed employee entitles him to payment of his salaries effective from
the time the employer failed to reinstate him despite the issuance of a
writ of execution"98 and ""even if the order of reinstatement of the Labor
Arbiter is reversed on appeal, it is obligatory on the part of the employer
to reinstate and pay the wages of the employee during the period of
appeal until reversal by the higher court."99 He failed to prove that he
complied with the return to work order of PAL. Neither does it appear on
record that he actually rendered services for PAL from the moment he
was dismissed, in order to insist on the payment of his full backwages.
In insisting that he be reinstated to his actual position despite being
overweight, petitioner in effect wants to render the issues in the present
case moot. He asks PAL to comply with the impossible. Time and again,
the Court ruled that the law does not exact compliance with the
impossible.100
V. Petitioner is entitled to separation pay.
Be that as it may, all is not lost for petitioner.
Normally, a legally dismissed employee is not entitled to separation pay.
This may be deduced from the language of Article 279 of the Labor Code
that "[a]n 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." Luckily for petitioner, this is not an ironclad rule.
Exceptionally, separation pay is granted to a legally dismissed employee
as an act "social justice,"101 or based on "equity."102 In both instances, it
is required that the dismissal (1) was not for serious misconduct; and (2)
does not reflect on the moral character of the employee.103
Here, We grant petitioner separation pay equivalent to one-half (1/2)
month’s pay for every year of service.104 It should include regular
allowances which he might have been receiving.105 We are not blind to
the fact that he was not dismissed for any serious misconduct or to any
act which would reflect on his moral character. We also recognize that
his employment with PAL lasted for more or less a decade.
WHEREFORE, the appealed Decision of the Court of Appeals
is AFFIRMED but MODIFIED in that petitioner Armando G. Yrasuegui
is entitled to separation pay in an amount equivalent to one-half (1/2)
month’s pay for every year of service, which should include his regular
allowances. SO ORDERED.
113
28
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 192473 October 11, 2010
S.I.P. FOOD HOUSE and MR. and MRS. ALEJANDRO
PABLO, Petitioners,
vs.
RESTITUTO BATOLINA, ALMER CALUMPISAN, ARIES MALGAPO,
ARMANDO MALGAPO, FLORDELIZA MATIAS, PERCIVAL MATIAS,
ARWIN MIRANDA, LOPE MATIAS, RAMIL MATIAS, ALLAN STA.
INES,Respondents.
DECISION
BRION, J.:
We resolve the present petition for review on certiorari1 which seeks to
nullify the decision2 and resolution3 of the Court of Appeals (CA),
promulgated on November 27, 2009 and May 31, 2010, respectively, in
CA-G.R. SP No. 101651.4
The Antecedents
The facts are laid out in the assailed CA Decision and are summarized
below.
The GSIS Multi-Purpose Cooperative (GMPC) is an entity organized by
the employees of the Government Service Insurance System (GSIS).
Incidental to its purpose, GMPC wanted to operate a canteen in the new
GSIS Building, but had no capability and expertise in this area. Thus, it
engaged the services of the petitioner S.I.P. Food House (SIP), owned
by the spouses Alejandro and Esther Pablo, as concessionaire. The
respondents Restituto Batolina and nine (9) others (the respondents)
worked as waiters and waitresses in the canteen.
In February 2004, GMPC terminated SIP’s "contract as GMPC
concessionaire," because of GMPC’s decision "to take direct investment
in and management of the GMPC canteen;" SIP’s continued refusal to
heed GMPC’s directives for service improvement; and the alleged
interference of the Pablos’ two sons with the operation of the
canteen.5 The termination of the concession contract caused the
termination of the respondents’ employment, prompting them to file a
complaint for illegal dismissal, with money claims, against SIP and the
spouses Pablo.
The Compulsory Arbitration Proceedings
The Parties’ Positions
The respondents alleged before the labor arbiter that they were SIP
employees, who were illegally dismissed sometime in February and
March 2004. SIP did not implement Wage Order Nos. 5 to 11 for the
years 1997 to 2004. They did not receive overtime pay although they
worked from 6:30 in the morning until 5:30 in the afternoon, or other
employee benefits such as service incentive leave, and maternity benefit
(for their co-employee Flordeliza Matias). Their employee contributions
were also not remitted to the Social Security System.
To avoid liability, SIP argued that it operated the canteen in behalf of
GMPC since it had no authority by itself to do so. The respondents were
not its employees, but GMPC’s, as shown by their identification cards. It
claimed that GMPC terminated its concession and prevented it from
having access to the canteen premises as GSIS personnel locked the
place; GMPC then operated the canteen on its own, absorbing the
respondents for the purpose and assigning them to the same positions
they held with SIP. It maintained that the respondents were not
dismissed, but were merely prevented by GMPC from performing their
functions. For this reason, SIP posited that the legal obligations that
would arise under the circumstances have to be shouldered by GMPC.
The Labor Arbiter’s Decision
Labor Arbiter Francisco A. Robles rendered a Decision on June 30, 2005
dismissing the complaint for lack of merit.6 He found that the
respondents were GMPC’s employees, and not SIP’s, as there existed a
labor-only contracting relationship between the two entities. The labor
arbiter, however, opined that even if respondents were considered as
SIP’s employees, their dismissal would still not be illegal because the
termination of its contract to operate the canteen came as a surprise and
was against its will, rendering the canteen’s closure involuntary.
Arbiter Robles likewise denied the employees’ money claims. He ruled
that SIP is not liable for unpaid salaries because it had complied with the
minimum statutory requirement and had extended better benefits than
GMPC; although they were paid only P160.00 to PP220.00 daily, the
employees were provided with free board and lodging seven (7) days a
week. Neither were the respondents entitled to overtime pay as it was
highly improbable that they regularly worked beyond eight (8) hours
every day for a canteen that closes after 5:30 p.m.
The respondents brought their case, on appeal, to the National Labor
Relations Commission (NLRC).
The NLRC Ruling
In its Decision of August 30, 2007,7 the NLRC found that SIP was the
respondents’ employer, but it sustained the labor arbiter’s ruling that the
employees were not illegally dismissed as the termination of SIP’s
concession to operate the canteen constituted an authorized cause for
the severance of employer-employee relations. Furthermore, the
respondents’ admission that they applied with GMPC when it terminated
SIP’s concession is an indication that they were employees of SIP and
that they were terminating their employment relationship with it. As the
labor arbiter did, the NLRC regarded the closure of SIP’s canteen
operations involuntary, thus, negating the employees’ entitlement to
separation pay.8
For failure of SIP to present proof of compliance with the law on the
minimum wage, 13th month pay, and service incentive leave, the NLRC
awarded the respondents a total of P952,865.53 in salary and 13th
month pay differentials and service incentive leave pay.9 The NLRC,
however, denied the employees’ claim for overtime pay, holding that the
respondents failed to present evidence that they rendered two hours
overtime work every day of their employment with SIP.
SIP moved for, but failed to secure, a reconsideration of the NLRC
decision. It then elevated the case to the CA through a petition
for certiorari charging the NLRC with grave abuse of discretion in
rendering the assailed decision. Essentially, SIP argued that the NLRC
erred in declaring that it was the respondents’ employer who is liable for
their money claims despite its being a labor-only contractor of GMPC.
The CA Decision
In its Decision promulgated on November 27, 2009,10 the CA granted the
petition in part. While it affirmed the award, it found merit in SIP’s
objection to the NLRC computation and assumption that a month had
twenty-six (26) working days, instead of twenty (20) working days. The
CA recognized that in a government agency such as the GSIS, there are
only 20 official business days in a month. It noted that the respondents
presented no evidence that the employees worked even outside official
business days and hours. It accordingly remanded the case for a
recomputation of the award.
Finding substantial evidence in the records supporting the NLRC
conclusions, the CA brushed aside SIP’s argument that it could not have
been the employer of the respondents because it was a mere labor-only
contractor of GMPC. It sustained the NLRC’s findings that SIP was the
respondents’ employer.
114
SIP moved for reconsideration, but the CA denied the motion on May 31,
2010.11 Hence, the present petition.
The Petition
SIP seeks a reversal of the appellate court’s ruling that it was the
employer of the respondents, claiming that it was merely a labor-only
contractor of GMPC.
It insists that it could not be the respondents’ employer as it was not
allowed to operate a canteen in the GSIS building. It was the GMPC who
had the authority to undertake the operation. GMPC only engaged SIP’s
services because GMPC had no capability or competence in the area. SIP
points out that GMPC assumed responsibility for its acts in operating the
canteen; all businesses it transacted were under GMPC’s name, as well
as the business registration and other permits of the canteen, sales
receipts and vouchers for food purchased from the canteen; the
employees were issued individual ID cards by GMPC. In sum, SIP
contends that its arrangement with GMPC was one of
contractor/subcontractor governed by Article 106 of the Labor Code.
Lastly, it submits that it was not registered with the Department of Labor
and Employment as an independent contractor and, therefore, it is
presumed to be a labor-only contractor.
The Respondents’ Comment
Without being required by the Court, the respondents filed their
comment to SIP’s petition on August 3, 2010.12 They question the
propriety of the petition for review on certiorari raising only questions of
fact and not of law as required by Rule 45 of the Rules of Court. This
notwithstanding, they submit that the CA committed no error in
upholding the NLRC’s findings of facts which established that SIP was
the real employer of Batolina and the other complainants. Thus, SIP was
liable to them for their statutory benefits, although it was not made to
answer for their lost employment due to the involuntary nature of the
canteen’s closure.
The respondents pray that the petition be dismissed for lack of merit.
The Court’s Ruling
We first resolve the alleged impropriety of the petition.13 While it is the
general rule that the Court may not review factual findings of the CA, we
deem it proper to depart from the rule and examine the facts of the case
in view of the conflicting factual findings of the labor arbiter, on one
hand, and the NLRC and the CA, on the other.14 We, therefore, hold the
respondents’ position on this point unmeritorious.
We now consider the merits of the case.
The employer-employee relationship issue
We affirm the CA ruling that SIP was the respondents’ employer. The
NLRC decision, which the CA affirmed, states:
Respondents have been the concessionaire of GMPC canteen for nine (9)
years (Annex "A" of Complainants’ Sur-Rejoinder…., Records, 302).
During this period, complainants were employed at the said canteen
(Sinumpaang Salaysay of complainants, Records, p. 156). On February
29, 2004, respondents’ concession with GMPC was terminated (Annex
"C" of Respondents’ Answer and Position Paper, Records, p. 77). When
respondents were prevented from entering the premises as a result of
the termination of their concession, they sent a protest letter dated April
14, 2004 to GMPC thru their counsel. Pertinent portion of the letter:
We write this letter in behalf of our client Mr. & Mrs. Alejandro C. Pablo,
the concessionaires who used to occupy and/or rent the area for a
cafeteria/canteen at the 2nd Floor of the GSIS Building for the past
several years.
Last March 12, 2004, without any court writ or order, and with the aid of
your armed agents, you physically barredour clients & their
employees/helpers from entering the said premises and from performing
their usual duties of serving the food requirements of GSIS personnel
and others.
Clearly, no less than respondents, thru their counsel, admitted that
complainants herein were their employees.
That complainants were employees of respondents is further bolstered
by the fact that respondents do not deny that they were the ones who
paid complainants salary. When complainants charged them of
underpayment, respondents even interposed the defense of file (sic)
board and lodging given to complainants.
Furthermore, these IDs issued to complainants bear the signature of
respondent Alejandro C. Pablo (Annexes "J", "K", "M" to "M-2" of
complainant’s Reply. . ., Records, pp. 285 to 290). Likewise, the
memoranda issued to complainants regarding their absences without
leave were signed by respondent Alejandro C. Pablo (Annexes A, C, E, &
G, Ibid., Records, pp. 274, 276, 279, 282). All these pieces of evidence
clearly show that respondents are the employer of complainants. (Rollo,
pp. 87-88.)
xxxx
The CA ruled out SIP’s claim that it was a labor-only contractor or a
mere agent of GMPC. We agree with the CA; SIP and its proprietors
could not be considered as mere agents of GMPC because they exercised
the essential elements of an employment relationship with the
respondents such as hiring, payment of wages and the power of control,
not to mention that SIP operated the canteen on its own account as it
paid a fee for the use of the building and for the privilege of running the
canteen. The fact that the respondents applied with GMPC in February
2004 when it terminated its contract with SIP, is another clear indication
that the two entities were separate and distinct from each other. We
thus see no reason to disturb the CA’s findings.
The respondents’s money claims
We likewise affirm the CA ruling on the monetary award to Batolina and
the other complainants.1avvp++i1 The free board and lodging SIP
furnished the employees cannot operate as a set-off for the
underpayment of their wages. We held in Mabeza v. National Labor
Relations Commission15 that the employer cannot simply deduct from the
employee’s wages the value of the board and lodging without satisfying
the following requirements: (1) proof that such facilities are customarily
furnished by the trade; (2) voluntary acceptance in writing by the
employees of the deductible facilities; and (3) proof of the fair and
reasonable value of the facilities charged. As the CA aptly noted, it is
clear from the records that SIP failed to comply with these requirements.
On the collateral issue of the proper computation of the monetary
award, we also find the CA ruling to be in order. Indeed, in the absence
of evidence that the employees worked for 26 days a month, no need
exists to recompute the award for the respondents who were "explicitly
claiming for their salaries and benefits for the services rendered from
Monday to Friday or 5 days a week or a total of 20 days a month."16
In light of the foregoing, we find no merit in the petition.
WHEREFORE, premises considered, we hereby DISMISS the petition
for lack of merit. The assailed decision and resolution of the Court of
Appeals in CA-G.R. SP No. 101651, are AFFIRMED.
SO ORDERED.
115
29
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 172161 March 2, 2011
SLL INTERNATIONAL CABLES SPECIALIST and SONNY L.
LAGON, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, 4th DIVISION,
ROLDAN LOPEZ, EDGARDO ZUÑIGA and DANILO
CAÑETE, Respondents.
DECISION
MENDOZA, J.:
Assailed in this petition for review on certiorari are the January 11, 2006
Decision1 and the March 31, 2006 Resolution2 of the Court of
Appeals (CA), in CA-G.R. SP No. 00598 which affirmed with modification
the March 31, 2004 Decision3 and December 15, 2004 Resolution4 of the
National Labor Relations Commission (NLRC). The NLRC Decision found
the petitioners, SLL International Cables Specialist (SLL) and its
manager, Sonny L. Lagon(petitioners), not liable for the illegal dismissal
of Roldan Lopez, Danilo Cañete and Edgardo Zuñiga (private
respondents) but held them jointly and severally liable for payment of
certain monetary claims to said respondents.
A chronicle of the factual antecedents has been succinctly summarized
by the CA as follows:
Sometime in 1996, and January 1997, private respondents Roldan Lopez
(Lopez for brevity) and Danilo Cañete (Cañete for brevity), and Edgardo
Zuñiga (Zuñiga for brevity) respectively, were hired by petitioner Lagon
as apprentice or trainee cable/lineman. The three were paid the full
minimum wage and other benefits but since they were only trainees,
they did not report for work regularly but came in as substitutes to the
regular workers or in undertakings that needed extra workers to
expedite completion of work. After their training, Zuñiga, Cañete and
Lopez were engaged as project employees by the petitioners in their
Islacom project in Bohol. Private respondents started on March 15, 1997
until December 1997. Upon the completion of their project, their
employment was also terminated. Private respondents received the
amount of P145.00, the minimum prescribed daily wage for Region VII.
In July 1997, the amount of P145 was increased to P150.00 by the
Regional Wage Board (RWB) and in October of the same year, the latter
was increased to P155.00. Sometime in March 1998, Zuñiga and Cañete
were engaged again by Lagon as project employees for its PLDT
Antipolo, Rizal project, which ended sometime in (sic) the late
September 1998. As a consequence, Zuñiga and Cañete’s employment
was terminated. For this project, Zuñiga and Cañete received only the
wage of P145.00 daily. The minimum prescribed wage for Rizal at that
time was P160.00.
Sometime in late November 1998, private respondents re-applied in the
Racitelcom project of Lagon in Bulacan. Zuñiga and Cañete were re-
employed. Lopez was also hired for the said specific project. For this,
private respondents received the wage of P145.00. Again, after the
completion of their project in March 1999, private respondents went
home to Cebu City.
On May 21, 1999, private respondents for the 4th time worked with
Lagon’s project in Camarin, Caloocan City with Furukawa Corporation as
the general contractor. Their contract would expire on February 28,
2000, the period of completion of the project. From May 21, 1997-
December 1999, private respondents received the wage ofP145.00. At
this time, the minimum prescribed rate for Manila was P198.00. In
January to February 28, the three received the wage of P165.00. The
existing rate at that time was P213.00.
For reasons of delay on the delivery of imported materials from
Furukawa Corporation, the Camarin project was not completed on the
scheduled date of completion. Face[d] with economic problem[s], Lagon
was constrained to cut down the overtime work of its worker[s][,]
including private respondents. Thus, when requested by private
respondents on February 28, 2000 to work overtime, Lagon refused and
told private respondents that if they insist, they would have to go home
at their own expense and that they would not be given anymore time
nor allowed to stay in the quarters. This prompted private respondents
to leave their work and went home to Cebu. On March 3, 2000, private
respondents filed a complaint for illegal dismissal, non-payment of
wages, holiday pay, 13th month pay for 1997 and 1998 and service
incentive leave pay as well as damages and attorney’s fees.
In their answers, petitioners admit employment of private respondents
but claimed that the latter were only project employees[,] for their
services were merely engaged for a specific project or undertaking and
the same were covered by contracts duly signed by private respondents.
Petitioners further alleged that the food allowance ofP63.00 per day as
well as private respondents allowance for lodging house, transportation,
electricity, water and snacks allowance should be added to their basic
pay. With these, petitioners claimed that private respondents received
higher wage rate than that prescribed in Rizal and Manila.
Lastly, petitioners alleged that since the workplaces of private
respondents were all in Manila, the complaint should be filed there.
Thus, petitioners prayed for the dismissal of the complaint for lack of
jurisdiction and utter lack of merit. (Citations omitted.)
On January 18, 2001, Labor Arbiter Reynoso Belarmino (LA) rendered his
decision5 declaring that his office had jurisdiction to hear and decide the
complaint filed by private respondents. Referring to Rule IV, Sec. 1 (a) of
the NLRC Rules of Procedure prevailing at that time,6 the LA ruled that it
had jurisdiction because the "workplace," as defined in the said rule,
included the place where the employee was supposed to report back
after a temporary detail, assignment or travel, which in this case was
Cebu.
As to the status of their employment, the LA opined that private
respondents were regular employees because they were repeatedly hired
by petitioners and they performed activities which were usual, necessary
and desirable in the business or trade of the employer.
With regard to the underpayment of wages, the LA found that private
respondents were underpaid. It ruled that the free board and lodging,
electricity, water, and food enjoyed by them could not be included in the
computation of their wages because these were given without their
written consent.
The LA, however, found that petitioners were not liable for illegal
dismissal. The LA viewed private respondents’ act of going home as an
act of indifference when petitioners decided to prohibit overtime work.7
In its March 31, 2004 Decision, the NLRC affirmed the findings of the LA.
In addition, the NLRC noted that not a single report of project
completion was filed with the nearest Public Employment Office as
required
by the Department of Labor and Employment (DOLE) Department Order
No. 19, Series of 1993.8 The NLRC later denied9 the motion for
reconsideration10 subsequently filed by petitioners.
When the matter was elevated to the CA on a petition for certiorari, it
affirmed the findings that the private respondents were regular
employees. It considered the fact that they performed functions which
were the regular and usual business of petitioners. According to the CA,
they were clearly members of a work pool from which petitioners drew
their project employees.
The CA also stated that the failure of petitioners to comply with the
simple but compulsory requirement to submit a report of termination to
the nearest Public Employment Office every time private respondents’
employment was terminated was proof that the latter were not project
employees but regular employees.
116
The CA likewise found that the private respondents were underpaid. It
ruled that the board and lodging, electricity, water, and food enjoyed by
the private respondents could not be included in the computation of their
wages because these were given without their written consent. The CA
added that the private respondents were entitled to 13th month pay.
The CA also agreed with the NLRC that there was no illegal dismissal.
The CA opined that it was the petitioners’ prerogative to grant or deny
any request for overtime work and that the private respondents’ act of
leaving the workplace after their request was denied was an act of
abandonment.
In modifying the decision of the labor tribunal, however, the CA noted
that respondent Roldan Lopez did not work in the Antipolo project and,
thus, was not entitled to wage differentials. Also, in computing the
differentials for the period January and February 2000, the CA disagreed
in the award of differentials based on the minimum daily wage
of P223.00, as the prevailing minimum daily wage then was
only P213.00. Petitioners sought reconsideration but the CA denied it in
its March 31, 2006 Resolution.11
In this petition for review on certiorari,12 petitioners seek the reversal
and setting aside of the CA decision anchored on this lone:
GROUND/ASSIGNMENT OF ERROR
THE PUBLIC RESPONDENT NLRC COMMITTED A SERIOUS ERROR IN
LAW IN AWARDING WAGE DIFFERENTIALS TO THE PRIVATE
COMPLAINANTS ON THE BASES OF MERE TECHNICALITIES, THAT IS,
FOR LACK OF WRITTEN CONFORMITY x x x AND LACK OF NOTICE TO
THE DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE)[,] AND THUS,
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING WITH
MODIFICATION THE NLRC DECISION IN THE LIGHT OF THE RULING IN
THE CASE OF JENNY M. AGABON and VIRGILIO AGABON vs, NLRC, ET
AL., GR NO. 158963, NOVEMBER 17, 2004, 442 SCRA 573, [AND
SUBSEQUENTLY IN THE CASE OF GLAXO WELLCOME PHILIPPINES, INC.
VS.NAGAKAKAISANG EMPLEYADO NG WELLCOME-DFA (NEW –DFA), ET
AL., GR NO. 149349, 11 MARCH 2005], WHICH FINDS APPLICATION IN
THE INSTANT CASE BY ANALOGY.13
Petitioners reiterated their position that the value of the facilities that the
private respondents enjoyed should be included in the computation of
the "wages" received by them. They argued that the rulings in Agabon v.
NLRC14and Glaxo Wellcome Philippines, Inc. v. Nagkakaisang Empleyado
Ng Wellcome-DFA15 should be applied by analogy, in the sense that the
lack of written acceptance of the employees of the facilities enjoyed by
them should not mean that the value of the facilities could not be
included in the computation of the private respondents’ "wages."
On November 29, 2006, the Court resolved to issue a Temporary
Restraining Order (TRO) enjoining the public respondent from enforcing
the NLRC and CA decisions until further orders from the Court.
After a thorough review of the records, however, the Court finds no
merit in the petition.
This petition generally involves factual issues, such as, whether or not
there is evidence on record to support the findings of the LA, the NLRC
and the CA that private respondents were project or regular employees
and that their salary differentials had been paid. This calls for a re-
examination of the evidence, which the Court cannot entertain. Settled is
the rule that factual findings of labor officials, who are deemed to have
acquired expertise in matters within their respective jurisdiction, are
generally accorded not only respect but even finality, and bind the Court
when supported by substantial evidence. It is not the Court’s function to
assess and evaluate the evidence
all over again, particularly where the findings of both the Labor tribunals
and the CA concur. 16
As a general rule, on payment of wages, a party who alleges payment as
a defense has the burden of proving it.17Specifically with respect to labor
cases, the burden of proving payment of monetary claims rests on the
employer, the rationale being that the pertinent personnel files, payrolls,
records, remittances and other similar documents — which will show that
overtime, differentials, service incentive leave and other claims of
workers have been paid — are not in the possession of the worker but in
the custody and absolute control of the employer.18
In this case, petitioners, aside from bare allegations that private
respondents received wages higher than the prescribed minimum, failed
to present any evidence, such as payroll or payslips, to support their
defense of payment. Thus, petitioners utterly failed to discharge
the onus probandi.
Private respondents, on the other hand, are entitled to be paid the
minimum wage, whether they are regular or non-regular employees.
Section 3, Rule VII of the Rules to Implement the Labor
Code19 specifically enumerates those who are not covered by the
payment of minimum wage. Project employees are not among them.
On whether the value of the facilities should be included in the
computation of the "wages" received by private respondents, Section 1
of DOLE Memorandum Circular No. 2 provides that an employer may
provide subsidized meals and snacks to his employees provided that the
subsidy shall not be less that 30% of the fair and reasonable value of
such facilities. In such cases, the employer may deduct from the wages
of the employees not more than 70% of the value of the meals and
snacks enjoyed by the latter, provided that such deduction is with the
written authorization of the employees concerned.
Moreover, before the value of facilities can be deducted from the
employees’ wages, the following requisites must all be
attendant: first, proof must be shown that such facilities are customarily
furnished by the trade; second, the provision of deductible facilities must
be voluntarily accepted in writing by the employee; and finally, facilities
must be charged at reasonable value.20 Mere availment is not sufficient
to allow deductions from employees’ wages.21
These requirements, however, have not been met in this case. SLL failed
to present any company policy or guideline showing that provisions for
meals and lodging were part of the employee’s salaries. It also failed to
provide proof of the employees’ written authorization, much less show
how they arrived at their valuations. At any rate, it is not even clear
whether private respondents actually enjoyed said facilities.
The Court, at this point, makes a distinction between "facilities" and
"supplements." It is of the view that the food and lodging, or the
electricity and water allegedly consumed by private respondents in this
case were not facilities but supplements. In the case of Atok-Big Wedge
Assn. v. Atok-Big Wedge Co.,22 the two terms were distinguished from
one another in this wise:
"Supplements," therefore, constitute extra remuneration or special
privileges or benefits given to or received by the laborers over and above
their ordinary earnings or wages. "Facilities," on the other hand, are
items of expense necessary for the laborer's and his family's existence
and subsistence so that by express provision of law (Sec. 2[g]), they
form part of the wage and when furnished by the employer are
deductible therefrom, since if they are not so furnished, the laborer
would spend and pay for them just the same.
In short, the benefit or privilege given to the employee which constitutes
an extra remuneration above and over his basic or ordinary earning or
wage is supplement; and when said benefit or privilege is part of the
laborers' basic wages, it is a facility. The distinction lies not so much in
the kind of benefit or item (food, lodging, bonus or sick leave) given, but
in the purpose for which it is given.23 In the case at bench, the items
provided were given freely by SLL for the purpose of maintaining the
efficiency and health of its workers while they were working at their
respective projects.1avvphi1
For said reason, the cases of Agabon and Glaxo are inapplicable in this
case. At any rate, these were cases of dismissal with just and authorized
causes. The present case involves the matter of the failure of the
117
petitioners to comply with the payment of the prescribed minimum
wage.

The Court sustains the deletion of the award of differentials with respect
to respondent Roldan Lopez. As correctly pointed out by the CA, he did
not work for the project in Antipolo.

WHEREFORE, the petition is DENIED. The temporary restraining order

issued by the Court on November 29, 2006 is deemed, as it is hereby
ordered, DISSOLVED.

SO ORDERED.

118
30
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 176985 April 1, 2013
RICARDO E. VERGARA, JR., Petitioner,
vs.
COCA-COLA BOTTLERS PHILIPPINES, INC., Respondent.
DECISION
PERALTA, J.:
Before Us is a petition for review on certiorari under Rule 45 of the Rules
of Civil Procedure assailing the January 9, 2007 Decision1 and March 6,
2007 Resolution2 of the Court of Appeals (CA) in CA .. G.R. SP No.
94622, which affirmed the January 31, 2006 Decision3 and March 8,
2006 Resolution4 of the National Labor Relations Commission (NLRC)
modifying the September 30, 2003 Decision5 of the Labor Arbiter (LA) by
deleting the sales management incentives in the computation of
petitioner's retirement benefits.
Petitioner Ricardo E. Vergara, Jr. was an employee of respondent Coca-
Cola Bottlers Philippines, Inc. from May 1968 until he retired on January
31, 2002 as a District Sales Supervisor (DSS) for Las Piñas City, Metro
Manila. As stipulated in respondent’s existing Retirement Plan Rules and
Regulations at the time, the Annual Performance Incentive Pay of RSMs,
DSSs, and SSSs shall be considered in the computation of retirement
benefits, as follows: Basic Monthly Salary + Monthly Average
Performance Incentive (which is the total performance incentive earned
during the year immediately preceding ÷ 12 months) × No. of Years in
Service.6
Claiming his entitlement to an additional PhP474,600.00 as Sales
Management Incentives (SMI)7 and to the amount of PhP496,016.67
which respondent allegedly deducted illegally, representing the unpaid
accounts of two dealers within his jurisdiction, petitioner filed a
complaint before the NLRC on June 11, 2002 for the payment of his "Full
Retirement Benefits, Merit Increase, Commission/Incentives, Length of
Service, Actual, Moral and Exemplary Damages, and Attorney’s Fees."8
After a series of mandatory conference, both parties partially settled with
regard the issue of merit increase and length of service.9 Subsequently,
they filed their respective Position Paper and Reply thereto dealing on
the two remaining issues of SMI entitlement and illegal deduction.
On September 30, 2003, the LA rendered a Decision10 in favor of
petitioner, directing respondent to reimburse the amount illegally
deducted from petitioner’s retirement package and to integrate therein
his SMI privilege. Upon appeal of respondent, however, the NLRC
modified the award and deleted the payment of SMI.
Petitioner then moved to partially execute the reimbursement of illegal
deduction, which the LA granted despite respondent’s
opposition.11 Later, without prejudice to the pendency of petitioner’s
petition for certiorari before the CA, the parties executed a Compromise
Agreement12 on October 4, 2006, whereby petitioner acknowledged full
payment by respondent of the amount of PhP496,016.67 covering the
amount illegally deducted.
The CA dismissed petitioner’s case on January 9, 2007 and denied his
motion for reconsideration two months thereafter. Hence, this present
petition to resolve the singular issue of whether the SMI should be
included in the computation of petitioner’s retirement benefits on the
ground of consistent company practice. Petitioner insistently avers that
many DSSs who retired without achieving the sales and collection targets
were given the average SMI in their retirement package.
We deny.
This case does not fall within any of the recognized exceptions to the
rule that only questions of law are proper in a petition for review on
certiorari under Rule 45 of the Rules of Court. Settled is the rule that
factual findings of labor officials, who are deemed to have acquired
expertise in matters within their respective jurisdiction, are generally
accorded not only respect but even finality, and bind us when supported
by substantial evidence.13Certainly, it is not Our function to assess and
evaluate the evidence all over again, particularly where the findings of
both the CA and the NLRC coincide.
In any event, even if this Court would evaluate petitioner's arguments on
its supposed merits, We still find no reason to disturb the CA ruling that
affirmed the NLRC. The findings and conclusions of the CA show that the
evidence and the arguments of the parties had all been carefully
considered and passed upon. There are no relevant and compelling facts
to justify a different resolution which the CA failed to consider as well as
no factual conflict between the CA and the NLRC decisions.
Generally, employees have a vested right over existing benefits
voluntarily granted to them by their employer.14Thus, any benefit and
supplement being enjoyed by the employees cannot be reduced,
diminished, discontinued or eliminated by the employer.15 The principle
of non-diminution of benefits is actually founded on the Constitutional
mandate to protect the rights of workers, to promote their welfare, and
to afford them full protection.16 In turn, said mandate is the basis of
Article 4 of the Labor Code which states that "all doubts in the
implementation and interpretation of this Code, including its
implementing rules and regulations, shall be rendered in favor of
labor."17
There is diminution of benefits when the following requisites are present:
(1) the grant or benefit is founded on a policy or has ripened into a
practice over a long period of time; (2) the practice is consistent and
deliberate; (3) the practice is not due to error in the construction or
application of a doubtful or difficult question of law; and (4) the
diminution or discontinuance is done unilaterally by the employer.18
To be considered as a regular company practice, the employee must
prove by substantial evidence that the giving of the benefit is done over
a long period of time, and that it has been made consistently and
deliberately.19Jurisprudence has not laid down any hard-and-fast rule as
to the length of time that company practice should have been exercised
in order to constitute voluntary employer practice.20 The common
denominator in previously decided cases appears to be the regularity and
deliberateness of the grant of benefits over a significant period of
time.21 It requires an indubitable showing that the employer agreed to
continue giving the benefit knowing fully well that the employees are not
covered by any provision of the law or agreement requiring payment
thereof.22 In sum, the benefit must be characterized by regularity,
voluntary and deliberate intent of the employer to grant the benefit over
a considerable period of time.23
Upon review of the entire case records, We find no substantial evidence
to prove that the grant of SMI to all retired DSSs regardless of whether
or not they qualify to the same had ripened into company practice.
Despite more than sufficient opportunity given him while his case was
pending before the NLRC, the CA, and even to this Court, petitioner
utterly failed to adduce proof to establish his allegation that SMI has
been consistently, deliberately and voluntarily granted to all retired DSSs
without any qualification or conditions whatsoever. The only two pieces
of evidence that he stubbornly presented throughout the entirety of this
case are the sworn statements of Renato C. Hidalgo (Hidalgo) and
Ramon V. Velazquez (Velasquez), former DSSs of respondent who
retired in 2000 and 1998, respectively. They claimed that the SMI was
included in their retirement package even if they did not meet the sales
and collection qualifiers.24 However, juxtaposing these with the evidence
presented by respondent would reveal the frailty of their statements.
The declarations of Hidalgo and Velazquez were sufficiently countered by
respondent through the affidavits executed by Norman R. Biola (Biola),
119
Moises D. Escasura (Escasura), and Ma. Vanessa R. Balles 1-30 days, which is again, way below the required 90%. For receivables
(Balles).25 Biola pointed out the various stop-gap measures undertaken aged 31-60 days during said year, petitioner’s collection efficiency was at
by respondent beginning 1999 in order to arrest the deterioration of its an average of 56.17% per month, which is approximately half of the
accounts receivables balance, two of which relate to the policies on the required 100%. Worse, for receivables over 60 days old, petitioner’s
grant of SMI and to the change in the management structure of average collection efficiency per month was a reprehensively low
respondent upon its re-acquisition by San Miguel Corporation. Escasura 14.10% as against the required 100%.29
represented that he has personal knowledge of the circumstances behind
the retirement of Hidalgo and Velazquez. He attested that contrary to
The above data was repeatedly raised by respondent in its Rejoinder (To
petitioner’s claim, Hidalgo was in fact qualified for the SMI. As for
Complainant’s Reply) before the LA,30Memorandum of Appeal31 and
Velazquez, Escasura asserted that even if he (Velazquez) did not qualify
Opposition (To Complainant-Appellee’s Motion for
for the SMI, respondent’s General Manager in its Calamba plant still
Reconsideration)32 before the NLRC, and Comment (On the
granted his (Velazquez) request, along with other numerous
Petition),33 Memorandum (For the Private Respondent),34 and Comment
concessions, to achieve industrial peace in the plant which was then
(On the Motion for Reconsideration)35 before the CA. Instead of frontally
experiencing labor relations problems. Lastly, Balles confirmed that
rebutting the data, petitioner treated them with deafening silence; thus,
petitioner failed to meet the trade receivable qualifiers of the SMI. She
reasonably and logically implying lack of evidence to support the
also cited the cases of Ed Valencia (Valencia) and Emmanuel Gutierrez
contrary.
(Gutierrez), both DSSs of respondent who retired on January 31, 2002
and December 30, 2002, respectively. She noted that, unlike Valencia,
Gutierrez also did not receive the SMI as part of his retirement pay, since WHEREFORE, the petition is DENIED. The January 9, 2007 Decision and
he failed to qualify under the policy guidelines. The verity of all these March 6, 2007 Resolution of the Court of Appeals in CA-G.R. SP No.
statements and representations stands and holds true to Us, considering 94622, which affirmed the January 31, 2006 Decision and March 8, 2006
that petitioner did not present any iota of proof to debunk the Resolution of the NLRC deleting the LA's inclusion of sales management
same.1âwphi1 incentives in the computation of petitioner's retirement benefits, is
hereby AFFIRMED.
Therefore, respondent's isolated act of including the SMI in the
retirement package of Velazquez could hardly be classified as a company SO ORDERED.
practice that may be considered an enforceable obligation. To repeat,
the principle against diminution of benefits is applicable only if the grant
or benefit is founded on an express policy or has ripened into a practice
over a long period of time which is consistent and deliberate; it
presupposes that a company practice, policy and tradition favorable to
the employees has been clearly established; and that the payments
made by the company pursuant to it have ripened into benefits enjoyed
by them.26 Certainly, a practice or custom is, as a general rule, not a
source of a legally demandable or enforceable right.27 Company practice,
just like any other fact, habits, customs, usage or patterns of conduct,
must be proven by the offering party who must allege and establish
specific, repetitive conduct that might constitute evidence of habit or
company practice.28

To close, We rule that petitioner could have salvaged his case had he
step up to disprove respondent’s contention that he miserably failed to
meet the collection qualifiers of the SMI. Respondent argues that −

An examination of the Company’s aged trial balance reveals that

petitioner did not meet the trade receivable qualifier. On the contrary,
the said trial balance reveals that petitioner had a large amount of
uncollected overdue accounts. For the year 2001, his percentage
collection efficiency for current issuance was at an average of 13.5% a
month as against the required 70%. For the same, petitioner’s collection
efficiency was at an average of 60.25% per month for receivables aged
120
31
Republic of the Philippines
SUPREME COURT
Baguio City
THIRD DIVISION
G.R. No. 198783 April 15, 2013
ROYAL PLANT WORKERS UNION, Petitioner,
vs.
COCA-COLA BOTTLERS PHILIPPINES, INC.-CEBU
PLANT, Respondent.
DECISION
MENDOZA, J.:
Assailed in this petition is the May 24, 2011 Decision1 and the September
2, 2011 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No.
05200, entitled Coca-Cola Bottlers Philippines, Inc.-Cebu Plant v. Royal
Plant Workers Union, which nullified and set aside the June 11, 2010
Decision3 of the Voluntary Arbitration Panel (Arbitration Committee) in a
case involving the removal of chairs in the bottling plant of Coca-Cola
Bottlers Philippines, Inc. (CCBPI).
The Factual and Procedural
Antecedents
The factual and procedural antecedents have been accurately recited in
the May 24, 2011 CA decision as follows:
Petitioner Coca-Cola Bottlers Philippines, Inc. (CCBPI) is a domestic
corporation engaged in the manufacture, sale and distribution of
softdrink products. It has several bottling plants all over the country, one
of which is located in Cebu City. Under the employ of each bottling plant
are bottling operators. In the case of the plant in Cebu City, there are 20
bottling operators who work for its Bottling Line 1 while there are 12-14
bottling operators who man its Bottling Line 2. All of them are male and
they are members of herein respondent Royal Plant Workers Union
(ROPWU).
The bottling operators work in two shifts. The first shift is from 8 a.m. to
5 p.m. and the second shift is from 5 p.m. up to the time production
operations is finished. Thus, the second shift varies and may end beyond Thus, the process of arbitration continued and the parties appointed the
eight (8) hours. However, the bottling operators are compensated with chairperson and members of the Arbitration Committee as outlined in the
overtime pay if the shift extends beyond eight (8) hours. For Bottling CBA. Petitioner and respondent respectively appointed as members to
Line 1, 10 bottling operators work for each shift while 6 to 7 bottling the Arbitration Committee Mr. Raul A. Kapuno, Jr. and Mr. Luis Ruiz
operators work for each shift for Bottling Line 2. while they both chose Atty. Alice Morada as chairperson thereof. They
then executed a Submission Agreement which was accepted by the
Arbitration Committee on 01 October 2009. As contained in the
Each shift has rotations of work time and break time. Prior to September
Submission Agreement, the sole issue for arbitration is whether the
2008, the rotation is this: after two and a half (2 ½) hours of work, the
removal of chairs of the operators assigned at the
bottling operators are given a 30-minute break and this goes on until the
production/manufacturing line while performing their duties and
shift ends. In September 2008 and up to the present, the rotation has
responsibilities is valid or not.
changed and bottling operators are now given a 30-minute break after
one and one half (1 ½) hours of work.
Both parties submitted their position papers and other subsequent
pleadings in amplification of their respective stands. Petitioner argued
In 1974, the bottling operators of then Bottling Line 2 were provided
that the removal of the chairs is valid as it is a legitimate exercise of
with chairs upon their request. In 1988, the bottling operators of then
management prerogative, it does not violate the Labor Code and it does
Bottling Line 1 followed suit and asked to be provided also with chairs.
not violate the CBA it contracted with respondent. On the other hand,
Their request was likewise granted. Sometime in September 2008, the
respondent espoused the contrary view. It contended that the bottling
chairs provided for the operators were removed pursuant to a national
operators have been performing their assigned duties satisfactorily with
directive of petitioner. This directive is in line with the "I Operate, I
the presence of the chairs; the removal of the chairs constitutes a
Maintain, I Clean" program of petitioner for bottling operators, wherein
violation of the Occupational Health and Safety Standards, the policy of
every bottling operator is given the responsibility to keep the machinery
the State to assure the right of workers to just and humane conditions of
and equipment assigned to him clean and safe. The program reinforces
work as stated in Article 3 of the Labor Code and the Global Workplace
the task of bottling operators to constantly move about in the
Rights Policy.
performance of their duties and responsibilities.
Ruling of the Arbtration Committee
With this task of moving constantly to check on the machinery and
equipment assigned to him, a bottling operator does not need a chair
anymore, hence, petitioner’s directive to remove them. Furthermore, On June 11, 2010, the Arbitration Committee rendered a decision in
CCBPI rationalized that the removal of the chairs is implemented so that favor of the Royal Plant Workers Union (the Union) and against CCBPI,
the bottling operators will avoid sleeping, thus, prevent injuries to their the dispositive portion of which reads, as follows:
persons. As bottling operators are working with machines which consist
of moving parts, it is imperative that they should not fall asleep as to do
Wherefore, the undersigned rules in favor of ROPWU declaring that the
so would expose them to hazards and injuries. In addition, sleeping will
removal of the operators chairs is not valid. CCBPI is hereby ordered to
hamper the efficient flow of operations as the bottling operators would
restore the same for the use of the operators as before their removal in
be unable to perform their duties competently.
2008.4
The bottling operators took issue with the removal of the chairs.
The Arbitration Committee ruled, among others, that the use of chairs by
Through the representation of herein respondent, they initiated the
the operators had been a company practice for 34 years in Bottling Line
grievance machinery of the Collective Bargaining Agreement (CBA) in
2, from 1974 to 2008, and 20 years in Bottling Line 1, from 1988 to
November 2008. Even after exhausting the remedies contained in the
2008; that the use of the chairs by the operators constituted a company
grievance machinery, the parties were still at a deadlock with petitioner
practice favorable to the Union; that it ripened into a benefit after it had
still insisting on the removal of the chairs and respondent still against
been enjoyed by it; that any benefit being enjoyed by the employees
such measure. As such, respondent sent a Notice to Arbitrate, dated 16
could not be reduced, diminished, discontinued, or eliminated by the
July 2009, to petitioner stating its position to submit the issue on the
employer in accordance with Article 100 of the Labor Code, which
removal of the chairs for arbitration. Nevertheless, before submitting to
prohibited the diminution or elimination by the employer of the
arbitration the issue, both parties availed of the conciliation/mediation
employees’ benefit; and that jurisprudence had not laid down any rule
proceedings before the National Conciliation and Mediation Board
requiring a specific minimum number of years before a benefit would
(NCMB) Regional Branch No. VII. They failed to arrive at an amicable
constitute a voluntary company practice which could not be unilaterally
settlement.
withdrawn by the employer.
121
The Arbitration Committee further stated that, although the removal of
the chairs was done in good faith, CCBPI failed to present evidence
regarding instances of sleeping while on duty. There were no specific
details as to the number of incidents of sleeping on duty, who were
involved, when these incidents happened, and what actions were taken.
There was no evidence either of any accident or injury in the many years
that the bottling operators used chairs. To the Arbitration Committee, it
was puzzling why it took 34 and 20 years for CCBPI to be so solicitous of
the bottling operators’ safety that it removed their chairs so that they
would not fall asleep and injure themselves.
Finally, the Arbitration Committee was of the view that, contrary to
CCBPI’s position, line efficiency was the result of many factors and it
could not be attributed solely to one such as the removal of the chairs.
Not contented with the Arbitration Committee’s decision, CCBPI filed a
petition for review under Rule 43 before the CA.
Ruling of the CA
On May 24, 2011, the CA rendered a contrasting decision which nullified
and set aside the decision of the Arbitration Committee. The dispositive
portion of the CA decision reads:
WHEREFORE, premises considered, the petition is hereby GRANTED and
the Decision, dated 11 June 2010, of the Arbitration Committee in
AC389-VII-09-10-2009D is NULLIFIED and SET ASIDE. A new one is
entered in its stead SUSTAINING the removal of the chairs of the
bottling operators from the manufacturing/production line.5
The CA held, among others, that the removal of the chairs from the
manufacturing/production lines by CCBPI is within the province of
management prerogatives; that it was part of its inherent right to control
and manage its enterprise effectively; and that since it was the
employer’s discretion to constantly develop measures or means to
optimize the efficiency of its employees and to keep its machineries and
equipment in the best of conditions, it was only appropriate that it
should be given wide latitude in exercising it.
The CA stated that CCBPI complied with the conditions of a valid
exercise of a management prerogative when it decided to remove the
chairs used by the bottling operators in the manufacturing/production
lines. The removal of the chairs was solely motivated by the best
intentions for both the Union and CCBPI, in line with the "I Operate, I
Maintain, I Clean" program for bottling operators, wherein every bottling
operator was given the responsibility to keep the machinery and
equipment assigned to him clean and safe. The program would reinforce
the task of bottling operators to constantly move about in the
performance of their duties and responsibilities. Without the chairs, the
bottling operators could efficiently supervise these machineries’
operations and maintenance. It would also be beneficial for them
because the working time before the break in each rotation for each shift
was substantially reduced from two and a half hours (2 ½ ) to one and a
half hours (1 ½) before the 30-minute break. This scheme was clearly
advantageous to the bottling operators as the number of resting periods
was increased. CCBPI had the best intentions in removing the chairs
because some bottling operators had the propensity to fall asleep while
on the job and sleeping on the job ran the risk of injury exposure and
removing them reduced the risk.
The CA added that the decision of CCBPI to remove the chairs was not
done for the purpose of defeating or circumventing the rights of its
employees under the special laws, the Collective Bargaining Agreement
(CBA) or the general principles of justice and fair play. It opined that the
principles of justice and fair play were not violated because, when the
chairs were removed, there was a commensurate reduction of the
working time for each rotation in each shift. The provision of chairs for
the bottling operators was never part of the CBAs contracted between
the Union and CCBPI. The chairs were not provided as a benefit because
such matter was dependent upon the exigencies of the work of the
bottling operators. As such, CCBPI could withdraw this provision if it was
not necessary in the exigencies of the work, if it was not contributing to
the efficiency of the bottling operators or if it would expose them to
some hazards. Lastly, the CA explained that the provision of chairs to the
bottling operators cannot be covered by Article 100 of the Labor Code on
elimination or diminution of benefits because the employee’s benefits
referred to therein mainly involved monetary considerations or privileges
converted to their monetary equivalent.
Disgruntled with the adverse CA decision, the Union has come to this
Court praying for its reversal on the following GROUNDS
I
THAT WITH DUE RESPECT, THE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR IN HOLDING THAT A PETITION FOR REVIEW
UNDER RULE 43 OF THE RULES OF COURT IS THE PROPER REMEDY OF
CHALLENGING BEFORE SAID COURT THE DECISION OF THE
VOLUNTARY ARBITRATOR OR PANEL OF VOLUNTARY ARBITRATORS
UNDER THE LABOR CODE.
II
THAT WITH DUE RESPECT, THE COURT OF APPEALS GRAVELY ABUSED
ITS DISCRETION IN NULLIFYING AND SETTING ASIDE THE DECISION
OF THE PANEL OF VOLUNTARY ARBITRATORS WHICH DECLARED AS
NOT VALID THE REMOVAL OF THE CHAIRS OF THE OPERATORS IN THE
MANUFACTURING AND/OR PRODUCTION LINE.
In advocacy of its positions, the Union argues that the proper remedy in
challenging the decision of the Arbitration Committee before the CA is a
petition for certiorari under Rule 65. The petition for review under Rule
43 resorted to by CCBPI should have been dismissed for being an
improper remedy. The Union points out that the parties agreed to submit
the unresolved grievance involving the removal of chairs to voluntary
arbitration pursuant to the provisions of Article V of the existing CBA.
Hence, the assailed decision of the Arbitration Committee is a judgment
or final order issued under the Labor Code of the Philippines. Section 2,
Rule 43 of the 1997 Rules of Civil Procedure, expressly states that the
said rule does not cover cases under the Labor Code of the Philippines.
The judgments or final orders of the Voluntary Arbitrator or Panel of
Voluntary Arbitrators are governed by the provisions of Articles 260, 261,
262, 262-A, and 262-B of the Labor Code of the Philippines.
On the substantive aspect, the Union argues that there is no connection
between CCBPI’s "I Operate, I Maintain, I Clean" program and the
removal of the chairs because the implementation of the program was in
2006 and the removal of the chairs was done in 2008. The 30-minute
break is part of an operator’s working hours and does not make any
difference. The frequency of the break period is not advantageous to the
operators because it cannot compensate for the time they are made to
stand throughout their working time. The bottling operators get tired
and exhausted after their tour of duty even with chairs around. How
much more if the chairs are removed?
The Union further claims that management prerogatives are not absolute
but subject to certain limitations found in law, a collective bargaining
agreement, or general principles of fair play and justice. The operators
have been performing their assigned duties and responsibilities
satisfactorily for thirty (30) years using chairs. There is no record of poor
performance because the operators are sitting all the time. There is no
single incident when the attention of an operator was called for failure to
carry out his assigned tasks. CCBPI has not submitted any evidence to
prove that the performance of the operators was poor before the
removal of the chairs and that it has improved after the chairs were
removed. The presence of chairs for more than 30 years made the
operators awake and alert as they could relax from time to time. There
are sanctions for those caught sleeping while on duty. Before the
removal of the chairs, the efficiency of the operators was much better
and there was no recorded accident. After the removal of the chairs, the
efficiency of the operators diminished considerably, resulting in the
drastic decline of line efficiency.
Finally, the Union asserts that the removal of the chairs constitutes
violation of the Occupational Health and Safety Standards, which provide
that every company shall keep and maintain its workplace free from
hazards that are likely to cause physical harm to the workers or damage
to property. The removal of the chairs constitutes a violation of the State
policy to assure the right of workers to a just and humane condition of
work pursuant to Article 3 of the Labor Code and of CCBPI’s Global
122
Workplace Rights Policy. Hence, the unilateral withdrawal, elimination or
removal of the chairs, which have been in existence for more than 30
years, constitutes a violation of existing practice.
The respondent’s position
CCBPI reiterates the ruling of the CA that a petition for review under
Rule 43 of the Rules of Court was the proper remedy to question the
decision of the Arbitration Committee. It likewise echoes the ruling of the
CA that the removal of the chairs was a legitimate exercise of
management prerogative; that it was done not to harm the bottling
operators but for the purpose of optimizing their efficiency and CCBPI’s
machineries and equipment; and that the exercise of its management
prerogative was done in good faith and not for the purpose of
circumventing the rights of the employees under the special laws, the
CBA or the general principles of justice and fair play.
The Court’s Ruling
The decision in this case rests on the resolution of two basic questions.
First, is an appeal to the CA via a petition for review under Rule 43 of
the 1997 Rules of Civil Procedure a proper remedy to question the
decision of the Arbitration Committee? Second, was the removal of the
bottling operators’ chairs from CCBPI’s production/manufacturing lines a
valid exercise of a management prerogative?
The Court sustains the ruling of the CA on both issues.
Regarding the first issue, the Union insists that the CA erred in ruling
that the recourse taken by CCBPI in appealing the decision of the
Arbitration Committee was proper. It argues that the proper remedy in
challenging the decision of the Voluntary Arbitrator before the CA is by
filing a petition for certiorari under Rule 65 of the Rules of Court, not a
petition for review under Rule 43.
CCBPI counters that the CA was correct in ruling that the recourse it took
in appealing the decision of the Arbitration Committee to the CA via a
petition for review under Rule 43 of the Rules of Court was proper and in
conformity with the rules and prevailing jurisprudence.
A Petition for Review
under Rule 43 is the
proper remedy
CCBPI is correct. This procedural issue being debated upon is not novel.
The Court has already ruled in a number of cases that a decision or
award of a voluntary arbitrator is appealable to the CA via a petition for
review under Rule 43. The recent case of Samahan Ng Mga
Manggagawa Sa Hyatt (SAMASAH-NUWHRAIN) v. Hon. Voluntary
Arbitrator Buenaventura C. Magsalin and Hotel Enterprises of the
Philippines6 reiterated the well-settled doctrine on this issue, to wit:
In the case of Samahan ng mga Manggagawa sa Hyatt-NUWHRAIN-APL
v. Bacungan,7 we repeated the well-settled rule that a decision or award
of a voluntary arbitrator is appealable to the CA via petition for review
under Rule 43. We held that:
"The question on the proper recourse to assail a decision of a voluntary
arbitrator has already been settled in Luzon Development Bank v.
Association of Luzon Development Bank Employees, where the Court
held that the decision or award of the voluntary arbitrator or panel of
arbitrators should likewise be appealable to the Court of Appeals, in line
with the procedure outlined in Revised Administrative Circular No. 1-95
(now embodied in Rule 43 of the 1997 Rules of Civil Procedure), just like
those of the quasi-judicial agencies, boards and commissions
enumerated therein, and consistent with the original purpose to provide
a uniform procedure for the appellate review of adjudications of all
quasi-judicial entities.
Subsequently, in Alcantara, Jr. v. Court of Appeals, and Nippon Paint
Employees Union-Olalia v. Court of Appeals, the Court reiterated the
aforequoted ruling. In Alcantara, the Court held that notwithstanding
Section 2 of Rule 43, the ruling in Luzon Development Bank still stands.
The Court explained, thus:
‘The provisions may be new to the Rules of Court but it is far from being
a new law. Section 2, Rules 42 of the 1997 Rules of Civil Procedure, as
presently worded, is nothing more but a reiteration of the exception to
the exclusive appellate jurisdiction of the Court of Appeals, as provided
for in Section 9, Batas Pambansa Blg. 129, as amended by Republic Act
No. 7902:
(3) Exclusive appellate jurisdiction over all final judgments, decisions,
resolutions, orders or awards of Regional Trial Courts and quasi-judicial
agencies, instrumentalities, boards or commissions, including the
Securities and Exchange Commission, the Employees’ Compensation
Commission and the Civil Service Commission, except those falling within
the appellate jurisdiction of the Supreme Court in accordance with the
Constitution, the Labor Code of the Philippines under Presidential Decree
No. 442, as amended, the provisions of this Act and of subparagraph (1)
of the third paragraph and subparagraph (4) of the fourth paragraph of
Section 17 of the Judiciary Act of 1948.’
The Court took into account this exception in Luzon Development Bank
but, nevertheless, held that the decisions of voluntary arbitrators issued
pursuant to the Labor Code do not come within its ambit x x x."
Furthermore, Sections 1, 3 and 4, Rule 43 of the 1997 Rules of Civil
Procedure, as amended, provide:
"SECTION 1. Scope. - This Rule shall apply to appeals from judgments or
final orders of the Court of Tax Appeals and from awards, judgments,
final orders or resolutions of or authorized by any quasi-judicial agency
in the exercise of its quasi-judicial functions. Among these agencies are
the x x x, and voluntary arbitrators authorized by law.
xxxx
SEC. 3. Where to appeal. - An appeal under this Rule may be taken to
the Court of Appeals within the period and in the manner therein
provided, whether the appeal involves questions of fact, of law, or mixed
questions of fact and law.
SEC. 4. Period of appeal. - The appeal shall be taken within fifteen (15)
days from notice of the award, judgment, final order or resolution, or
from the date of its last publication, if publication is required by law for
its effectivity, or of the denial of petitioner’s motion for new trial or
reconsideration duly filed in accordance with the governing law of the
court or agency a quo. x x x. (Emphasis supplied.)’
Hence, upon receipt on May 26, 2003 of the Voluntary Arbitrator’s
Resolution denying petitioner’s motion for reconsideration, petitioner
should have filed with the CA, within the fifteen (15)-day reglementary
period, a petition for review, not a petition for certiorari.
On the second issue, the Union basically claims that the CCBPI’s decision
to unilaterally remove the operators’ chairs from the
production/manufacturing lines of its bottling plants is not valid because
it violates some fundamental labor policies. According to the Union, such
removal constitutes a violation of the 1) Occupational Health and Safety
Standards which provide that every worker is entitled to be provided by
the employer with appropriate seats, among others; 2) policy of the
State to assure the right of workers to a just and humane condition of
work as provided for in Article 3 of the Labor Code;8 3) Global Workplace
Rights Policy of CCBPI which provides for a safe and healthy workplace
by maintaining a productive workplace and by minimizing the risk of
accident, injury and exposure to health risks; and 4) diminution of
benefits provided in Article 100 of the Labor Code.9
Opposing the Union’s argument, CCBPI mainly contends that the removal
of the subject chairs is a valid exercise of management prerogative. The
123
management decision to remove the subject chairs was made in good
faith and did not intend to defeat or circumvent the rights of the Union
under the special laws, the CBA and the general principles of justice and
fair play.
Again, the Court agrees with CCBPI on the matter.
A Valid Exercise of
Management Prerogative
The Court has held that management is free to regulate, according to its
own discretion and judgment, all aspects of employment, including
hiring, work assignments, working methods, time, place, and manner of
work, processes to be followed, supervision of workers, working
regulations, transfer of employees, work supervision, lay-off of workers,
and discipline, dismissal and recall of workers. The exercise of
management prerogative, however, is not absolute as it must be
exercised in good faith and with due regard to the rights of labor.10
In the present controversy, it cannot be denied that CCBPI removed the
operators’ chairs pursuant to a national directive and in line with its "I
Operate, I Maintain, I Clean" program, launched to enable the Union to
perform their duties and responsibilities more efficiently. The chairs were
not removed indiscriminately. They were carefully studied with due
regard to the welfare of the members of the Union. The removal of the
chairs was compensated by: a) a reduction of the operating hours of the
bottling operators from a two-and-one-half (2 ½)-hour rotation period to
a one-and-a-half (1 ½) hour rotation period; and b) an increase of the
break period from 15 to 30 minutes between rotations.
Apparently, the decision to remove the chairs was done with good
intentions as CCBPI wanted to avoid instances of operators sleeping on
the job while in the performance of their duties and responsibilities and
because of the fact that the chairs were not necessary considering that
the operators constantly move about while working. In short, the
removal of the chairs was designed to increase work efficiency. Hence,
CCBPI’s exercise of its management prerogative was made in good faith
without doing any harm to the workers’ rights.
The fact that there is no proof of any operator sleeping on the job is of
no moment. There is no guarantee that such incident would never
happen as sitting on a chair is relaxing. Besides, the operators constantly
move about while doing their job. The ultimate purpose is to promote
work efficiency.
No Violation of Labor Laws
The rights of the Union under any labor law were not violated. There is
no law that requires employers to provide chairs for bottling operators.
The CA correctly ruled that the Labor Code, specifically Article
13211 thereof, only requires employers to provide seats for women. No
similar requirement is mandated for men or male workers. It must be
stressed that all concerned bottling operators in this case are men.
There was no violation either of the Health, Safety and Social Welfare
Benefit provisions under Book IV of the Labor Code of the Philippines. As
shown in the foregoing, the removal of the chairs was compensated by
the reduction of the working hours and increase in the rest period. The
directive did not expose the bottling operators to safety and health
hazards.
The Union should not complain too much about standing and moving
about for one and one-half (1 ½) hours because studies show that
sitting in workplaces for a long time is hazardous to one’s health. The
report of VicHealth, Australia,12 disclosed that "prolonged workplace
sitting is an emerging public health and occupational health issue with
serious implications for the health of our working population.
Importantly, prolonged sitting is a risk factor for poor health and early
death, even among those who meet, or exceed, national13 activity
guidelines." In another report,14 it was written:
Workers needing to spend long periods in a seated position on the job
such as taxi drivers, call centre and office workers, are at risk for injury
and a variety of adverse health effects.
The most common injuries occur in the muscles, bones, tendons and
ligaments, affecting the neck and lower back regions. Prolonged sitting:
● reduces body movement making muscles more likely to pull, cramp or
strain when stretched suddenly, causes fatigue in the back and neck
muscles by slowing the blood supply and puts high tension on the spine,
especially in the low back or neck, and
● causes a steady compression on the spinal discs that hinders their
nutrition and can contribute to their premature degeneration.
Sedentary employees may also face a gradual deterioration in health if
they do not exercise or do not lead an otherwise physically active life.
The most common health problems that these employees experience are
disorders in blood circulation and injuries affecting their ability to move.
Deep Vein Thrombosis (DVT), where a clot forms in a large vein after
prolonged sitting (eg after a long flight) has also been shown to be a
risk.
Workers who spend most of their working time seated may also
experience other, less specific adverse health effects. Common effects
include decreased fitness, reduced heart and lung efficiency, and
digestive problems. Recent research has identified too much sitting as an
important part of the physical activity and health equation, and suggests
we should focus on the harm caused by daily inactivity such as
prolonged sitting.
Associate professor David Dunstan leads a team at the Baker IDI in
Melbourne which is specifically researching sitting and physical activity.
He has found that people who spend long periods of time seated (more
than four hours per day) were at risk of:
● higher blood levels of sugar and fats,
● larger waistlines, and
● higher risk of metabolic syndrome
regardless of how much moderate to vigorous exercise they had.
In addition, people who interrupted their sitting time more often just by
standing or with light activities such as housework, shopping, and
moving about the office had healthier blood sugar and fat levels, and
smaller waistlines than those whose sitting time was not broken up.
Of course, in this case, if the chairs would be returned, no risks would be
involved because of the shorter period of working time. The study was
cited just to show that there is a health risk in prolonged sitting.
No Violation of the CBA
The CBA15 between the Union and CCBPI contains no provision
whatsoever requiring the management to provide chairs for the
operators in the production/manufacturing line while performing their
duties and responsibilities. On the contrary, Section 2 of Article 1 of the
CBA expressly provides as follows:
Article I
SCOPE
SECTION 2. Scope of the Agreement. All the terms and conditions of
employment of employees and workers within the appropriate bargaining
unit (as defined in Section 1 hereof) are embodied in this Agreement and
the same shall govern the relationship between the COMPANY and such
employees and/or workers. On the other hand, all such benefits and/or
privileges as are not expressly provided for in this Agreement but which
124
are now being accorded, may in the future be accorded, or might have Such benefits or privileges form part of the employees’ wage, salary or SO ORDERED.
previously been accorded, to the employees and/or workers, shall be compensation making them enforceable obligations.
deemed as purely voluntary acts on the part of the COMPANY in each
case, and the continuance and repetition thereof now or in the future, no
This Court has already decided several cases regarding the non-
matter how long or how often, shall not be construed as establishing an
diminution rule where the benefits or privileges involved in those cases
obligation on the part of the COMPANY. It is however understood that
mainly concern monetary considerations or privileges with monetary
any benefits that are agreed upon by and between the COMPANY and
equivalents. Some of these cases are: Eastern Telecommunication Phils.
the UNION in the Labor-Management Committee Meetings regarding the
Inc. v. Eastern Telecoms Employees Union,17 where the case involves the
terms and conditions of employment outside the CBA that have general
payment of 14th, 15th and 16th month bonuses; Central Azucarera De
application to employees who are similarly situated in a Department or in
Tarlac v. Central Azucarera De Tarlac Labor Union-NLU,18 regarding the
the Plant shall be implemented. [emphasis and underscoring supplied]
13th month pay, legal/special holiday pay, night premium pay and
vacation and sick leaves; TSPIC Corp. v. TSPIC Employees
As can be gleaned from the aforecited provision, the CBA expressly Union,19 regarding salary wage increases; and American Wire and Cable
provides that benefits and/or privileges, not expressly given therein but Daily Employees Union vs. American Wire and Cable Company,
which are presently being granted by the company and enjoyed by the Inc.,20 involving service awards with cash incentives, premium pay,
employees, shall be considered as purely voluntary acts by the Christmas party with incidental benefits and promotional increase.
management and that the continuance of such benefits and/or
privileges, no matter how long or how often, shall not be understood as
In this regard, the Court agrees with the CA when it resolved the matter
establishing an obligation on the company’s part. Since the matter of the
and wrote:
chairs is not expressly stated in the CBA, it is understood that it was a
purely voluntary act on the part of CCBPI and the long practice did not
convert it into an obligation or a vested right in favor of the Union. Let it be stressed that the aforequoted article speaks of non-diminution
of supplements and other employee benefits. Supplements arc privileges
given to an employee which constitute as extra remuneration besides his
No Violation of the general principles
or her basic ordinary earnings and wages. From this definition, We can
only deduce that the other employee benefits spoken of by Article 100
of justice and fair play pertain only to those which are susceptible of monetary considerations.
Indeed, this could only be the most plausible conclusion because the
cases tackling Article 100 involve mainly with monetary considerations or
The Court completely agrees with the CA ruling that the removal of the
privileges converted to their monetary equivalents.
chairs did not violate the general principles of justice and fair play
because the bottling operators’ working time was considerably reduced
from two and a half (2 ½) hours to just one and a half (1 ½) hours and xxxx
the break period, when they could sit down, was increased to 30
minutes between rotations. The bottling operators’ new work schedule is
Without a doubt, equating the provision of chairs to the bottling
certainly advantageous to them because it greatly increases their rest
operators Ds something within the ambit of "benefits'' in the context of
period and significantly decreases their working time. A break time of
Article 100 of the Labor Code is unduly stretching the coverage of the
thirty (30) minutes after working for only one and a half (1 ½) hours is a
law. The interpretations of Article 100 of the Labor Code do not show
just and fair work schedule.
even with the slightest hint that such provision of chairs for the bottling
operators may be sheltered under its mantle.21
No Violation of Article 100
Jurisprudence recognizes the exercise of management prerogatives.
of the Labor Code Labor Jaws also discourage interference with an employer's judgment in
the conduct of its business. For this reason, the Court often declines to
interfere in legitimate business decisions of employers. The law must
The operators’ chairs cannot be considered as one of the employee
protect not only the welfare of the employees, but also the right of the
benefits covered in Article 10016 of the Labor Code. In the Court’s view,
employers.22
the term "benefits" mentioned in the non-diminution rule refers to
monetary benefits or privileges given to the employee with monetary
equivalents. WHEREFORE, the petition is DENIED.

125
32
FIRST DIVISION
G.R. No. 192100, March 12, 2014
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS
(DPWH)1, Petitioner, v. ASIA PACIFIC INTEGRATED STEEL
CORPORATION,Respondent.
DECISION
VILLARAMA, JR., J.:
Before this Court is a petition for review on certiorari under Rule 45 of
the 1997 Rules of Civil Procedure, as amended, assailing the July 21,
2009 Decision2 of the Court of Appeals (CA) in CA–G.R. CV No. 90539.
The CA partially affirmed the September 21, 2007 Decision3 of the
Regional Trial Court (RTC), Branch 54, of Macabebe, Pampanga, and
reduced the annual legal interest awarded from 12% to 6% per annum.
Also assailed is the appellate court’s April 28, 2010 Resolution4 denying
petitioner’s motion for reconsideration.
As culled from the records, the following are the pertinent
facts:chanRoblesvirtualLawlibrary
Asia Pacific Integrated Steel Corporation (respondent) is the registered
owner of a 17,175–square meter property situated in Barangay Sta.
Monica, Municipality of San Simon, Province of Pampanga and covered
by Transfer Certificate of Title (TCT) No. 271813–R.5
On March 1, 2002, the Republic of the Philippines (petitioner) through
the Toll Regulatory Board (TRB) instituted expropriation proceedings
against the respondent over a portion of their property. The affected
area, consisting of 2,024 square meters, shall be traversed by the
expansion of the San Simon Interchange, an integral component of the
construction, rehabilitation and expansion of the North Luzon
Expressway (NLEX Project). Subsequently, petitioner filed an urgent ex–
parte motion for issuance of writ of possession, stating that it deposited
with the Land Bank of the Philippines (LBP) the amount of P607,200.00
(100% of the value of the property based on current zonal valuation of
the Bureau of Internal Revenue [BIR]) in accordance with Section 4(a) of
Republic Act No. 89746 (R.A. 8794), and hence the court has the
ministerial duty to place petitioner in possession pursuant to Section 2,
Rule 67 of the Rules of Civil Procedure.7
On March 19, 2002, the trial court issued an order granting petitioner’s
motion and directing the Register of Deeds of Pampanga to cause the
annotation of the writ of possession on TCT No. 271813–R.8
In its Answer with Opposition to the Motion for Issuance of Writ of
Possession,9 respondent questioned the TRB’s authority to expropriate
the subject property and objected to petitioner’s offered compensation
which respondent deems unjust because the basis thereof – the BIR
zonal valuation – was an unofficial valuation, being merely based on an
internal memorandum issued by BIR Revenue District No. 21, not by the
Asset Valuation Department of the BIR National Office. Respondent
asserted that just compensation should be at P3,036,000.00 or at
P1,500.00 per square meter plus consequential damages, considering
the fair market value and the industrial classification of the subject
property.
During the pre–trial conference, the parties agreed on TRB’s authority to
expropriate the subject property but disagreed as to the amount of just
compensation. Petitioner offered to pay P607,200.00 for the portion
taken but respondent made a counter–offer of P1,821,600.00. The
parties eventually agreed to submit the issue of just compensation to
three Commissioners composed of the Municipal Assessor of San Simon
as Chairman, and the RTC Branch Clerk of Court and the Register of
Deeds for the Province of Pampanga as Members.10
On June 1, 2004, the trial court granted respondent’s motion to
withdraw the P607,200.00 deposited by petitioner with the LBP as partial
payment for just compensation.11
On June 9, 2004, the Commissioners submitted their Report with the
following findings and recommendation:chanRoblesvirtualLawlibrary
The affected lot is within the area wherein the land use are residential,
commercial, and industrial (mixed land use), as per Vicinity Map hereto
attached as Annex “B”. The area is along MacArthur Highway, Quezon
Road, Municipal and Barangay Roads[.]
In the absence of bonafide sales transaction in the area, the Assessor’s
Office being aware of the actual conditions of subject property decided
to use opinion values in the determination of the current and fair market
value for the purpose of payment of just compensation.
OPINION VALUES
A. Real Estate Brokers/Independent Appraisers/Owners, etc.
1. Residential – ranging from P2,000.00 to P2,500.00 per square meter
2. Commercial – ranging from P2,500.00 to P3,000.00 per square meter
3. Industrial – ranging from P1,000.00 above per square meter
B. Banks and Financial Institutions
1. Residential – ranging from P1,000.00 to P2,000.00 per square meter
2. Commercial – ranging from P2,000.00 to P3,000.00 per square
meter
3. Residential – ranging from P1,000.00 to P1,500.00 per square meter
Appraisal conducted by the Assessor of San Simon, Pampanga for
various properties within the area, recommended an amount ranging
from P1,000.00 to P1,500.00, Philippine currency, per square meter,
depending on their proximity to the national roads, municipal roads, and
barangay roads, and the improvement/development put in place. The
amount of P1,000.00 to P1,500.00 was arrived at by the undersigned
commissioners due to the conversion of the subject property from
agricultural to industrial use as evidenced by the Order of Conversion
dated July 8, 1991, issued by Renato B. Padilla, Undersecretary,
Department of Agrarian Reform, a xerox copy of which is hereto
attached [as] Annex “C”.12
On September 23, 2004, an ocular inspection was conducted in the
presence of the parties’ representatives and their respective counsels,
during which the trial court noted the
following:chanRoblesvirtualLawlibrary
1. There is an existing toll plaza on the right lane of the expressway
facing the direction of Manila with blue colored roofing.
2. Comprised in the aforesaid toll plaza are three toll booths. The third
booth located on the extreme right facing Manila occupies a portion of
the expropriated portion of defendant’s property.
3. The expropriated portion which is shown in a sketch which was
marked as Exhibit H is indicated by its color: green. It has an area of
2,021 square meters. The remaining unexpropriated portion of
defendant’s land has an area of 15,151 square meters.
4. The unexpropriated portion of the land of defendant is presently very
much below the level of the expressway because the expressway was
upgraded. It is immediately adjacent to the existing expressway, located
as it is, on its right side facing Manila. It is swampy with little water.13
In its Decision, the trial court ruled as
follows:chanRoblesvirtualLawlibrary
x x x Although there was no documentary evidence attached to
substantiate the opinions of the banks and the realtors indicated in the
Commissioners’ Report, the Court finds the commissioners’
126
recommendation of the valuation of industrial lands at P1,000.00 to
P1,500.00 to be fair, absent any showing that the valuation is exorbitant
or otherwise unjustified. There was no fraud or prejudice that tainted
the report.
The Court finds the valuation of the Republic of the Philippines which
was pegged at Php300.00 per square meter to be very low. The zonal
valuation of the Bureau of Internal Revenue (Exhibits A and B with
submarkings) is merely a gauge or is necessary in the assessment of
correct transfer taxes by the said office. Furthermore the Department
Order No. 23–98 took effect only last February 2, 1998 which was four
(4) years prior to the filing of the complaint. The same is true with
Ordinance No. 17, Series of 1994 issued by the Sangguniang
Panlalawigan of Pampanga (Exhibit E) which was issued eight (8) years
also prior to the filing of the complaint.
Concerning the Deed of Absolute Sale (Exhibit C) notarized on July 19,
2002, the same was undated and pertains only to a right of way. An
easement of right of way transmits no rights except the easement itself.
Hence, the just compensation pertaining to easement of right of way
should be lower than that in the Deed of Absolute Sale. x x x
xxxx
Using the recommendation of the three (3) commissioners as guide, the
Court finds the amount of ONE THOUSAND THREE HUNDRED PESOS
(Php1,300.00) per square meter as just compensation for the property
subject of expropriation.
WHEREFORE, premises considered, judgment is
rendered:chanRoblesvirtualLawlibrary
1) Ordering the plaintiff to pay the defendant in the amount of TWO
MILLION TWENTY FOUR THOUSAND PESOS (Php2,024,000.00)
representing the net amount of just compensation after deducting the
partial payment of P607,200.00 based on the valuation of Php1,300.00
per square meter on the expropriated portion of the parcel of land [Lot
329–A of the subdivision, plan (LRC) Psd–246403, being a portion of lot
329, San Simon, LRC. Cad Rec. No. 1316] with an area of 2,024 square
meters situated in Sta. Monica, San Simon, Pampanga covered by
Transfer Certificate of Title No. 271813–R plus legal interest of 12% per
annum from the time of taking (March 21, 2002) until fully paid less
taxes due on the land.
2) Ordering the plaintiff to pay the costs and/or expenses in relation to
the transfer of ownership of the property in its favor from defendant Asia
Pacific Integrated Steel Corporation.
3) Condemning the property subject of expropriation free from all liens
and encumbrances for the construction, rehabilitation and expansion of
the North Luzon Expressway.
SO ORDERED.14
Petitioner appealed to the CA, arguing that the just compensation should
not be more than P300.00 per square meter and that the correct rate of
interest is 6% per annum.
The CA upheld the trial court’s ruling, reiterating the principle that the
determination of just compensation is an inherently judicial function. It
stressed that any valuation for just compensation laid down in statutes
merely serve as guides or factors and may not substitute the court’s own
judgment as to what amount should be awarded and how to arrive at
such amount.15
Further, the CA noted that petitioner itself admitted that the BIR zonal
valuation is only for the purpose of determining the correct amount of
transfer taxes. It held that while BIR zonal valuation may be a factor in
determining just compensation, the same is not a competent basis
thereof. Citing R.A. 8974, the CA pointed out the distinction between
provisional value as a precondition for the issuance of a writ of
possession and the payment of just compensation for the expropriated
property. While the provisional value is based on the zonal value as may
be determined by the BIR, just compensation is based on the prevailing
fair market value of the property. Necessarily, the zonal valuation of
properties is not equivalent to their fair market value.16
After examining the records, the CA found no reversible error in the trial
court’s determination of just compensation and held that the valuation of
P1,500.00 per square meter is more in consonance with the concept of
just compensation based upon due consideration of all evidence.
Thus:chanRoblesvirtualLawlibrary
It is equally settled that the valuation of a property in tax declarations
cannot be a substitute to just compensation. Elsewise stated, the
market value reflected in the tax declaration of the condemned property
is no longer conclusive. Accordingly, we cannot appreciate the herein
tax declaration in favor of the Republic.
Further, it is uncontested that the deed of sale dated July 19, 2002
between San Simon Realty, Inc. and the Republic pertained only to a
right of way, hence, the value thereof should be considerably lower.
Ordinance No. 17, as correctly found by the RTC, was issued on June 22,
1994 or eight (8) years prior to the institution of the herein complaint.
Certainly, the valuation of properties therein can by no means be
reflective of the current, prevailing and fair value of the subject
property. The Republic failed to present evidence to controvert he RTC’s
finding on the matter. Neither has it shown that the property sold
thereunder shares the same features as the herein subject property as to
warrant a similar valuation. We cannot, thus, yield to the Republic’s
submission that its evidence are the proper basis in determining just
compensation for Asia Pacific’s property.17
However, the CA modified the rate of interest imposed on the amount
due as just compensation from 12% to 6% in conformity with prevailing
jurisprudence.
On April 28, 2010, the CA denied petitioner’s motion for reconsideration,
stating that the argument on valuation by petitioner was merely a rehash
of what the CA had already passed upon.
Hence, this petition assailing the CA’s affirmance of the trial court’s
award of just compensation, the legal basis of which is allegedly
insufficient.
Petitioner argues that the evidence for determining the amount of just
compensation in expropriation cases should be on those factors provided
in Section 5 of R.A. 8974. Considering such factors and the evidence
submitted by the parties before the trial court, petitioner maintains that
just compensation for the subject property should be no more than the
zonal valuation (P300.00 per square meter), and in no case should it
amount to the market value of P1,300.00 per square meter adjudged by
the trial and appellate courts. Petitioner claims that such huge sum for
only 2,024–square meter portion of respondent’s 17,175–square meter
property, is unbelievably 433.4% more than the 1998 BIR zonal value for
an underdeveloped industrial land at the time of its taking.
On the other hand, respondent contends that no reversible error was
committed by the CA in affirming the trial court’s decision after
considering all the arguments raised by petitioner and the evidence on
record. It asserts that the main issue of just compensation and the
findings thereon by the trial court as affirmed by the CA is a question of
fact which should not be disturbed by this Court. Moreover, respondent
asserts that the determination by the trial court is entitled to the highest
respect considering that the judge has personal knowledge of the
condition of the subject property, having conducted an ocular inspection
on September 23, 2004.
We grant the petition.
As a rule, a petition for review under Rule 45 of the Rules of Court
covers only questions of law. Questions of fact are not reviewable and
cannot be passed upon by this Court in the exercise of its power to
review. The distinction between questions of law and questions of fact is
established. Aquestion of law exists when the doubt or difference
centers on what the law is on a certain state of facts. A question of fact,
on the other hand, exists if the doubt centers on the truth or falsity of
the alleged facts.18 This being so, the findings of fact of the CA are final
and conclusive and this Court will not review them on appeal.19
For a question to be one of law, the same must not involve an
examination of the probative value of the evidence presented by the
litigants or any of them. The resolution of the issue must rest solely on
what the law provides on the given set of circumstances.20 In this case,
127
the only legal issue raised by petitioner is whether the trial court based
its determination of just compensation on the factors provided under
existing laws and jurisprudence.
Section 5 of R.A. 8974 enumerates the standards for assessing the value
of expropriated land taken for national government infrastructure
projects, thus:chanRoblesvirtualLawlibrary
SECTION 5. Standards for the Assessment of the Value of the Land
Subject of Expropriation Proceedings or Negotiated Sale. – In order to
facilitate the determination of just compensation, the court may
consider, among other well–established factors, the following relevant
standards:chanRoblesvirtualLawlibrary
(a) The classification and use for which the property is suited;
(b) The developmental costs for improving the land;
(c) The value declared by the owners;
(d) The current selling price of similar lands in the vicinity;
(e) The reasonable disturbance compensation for the removal and/or
demolition of certain improvements on the land and for the value of the
improvements thereon;
(f) The size, shape or location, tax declaration and zonal valuation of
the land;
(g) The price of the land as manifested in the ocular findings, oral as
well as documentary evidence presented; and
(h) Such facts and events as to enable the affected property owners to
have sufficient funds to acquire similarly–situated lands of approximate
areas as those required from them by the government, and thereby
rehabilitate themselves as early as possible.
In this case, the trial court considered only (a) and (d): (1) the
classification of the subject property which is located in an area with
mixed land use (commercial, residential and industrial) and the
property’s conversion from agricultural to industrial land, and (2) the
current selling price of similar lands in the vicinity – the only factors
which the commissioners included in their Report. It also found the
commissioners’ recommended valuation of P1,000.00 to P1,500.00 per
square to be fair and just despite the absence of documentary
substantiation as said prices were based merely on the opinions of
bankers and realtors.
In National Power Corporation v. Manubay Agro–Industrial Development
Corporation,21 the recommended price of the city assessor was rejected
by this Court. The opinions of the banks and the realtors as reflected in
the computation of the market value of the property and in the
Commissioners’ Report, were not substantiated by any documentary
evidence.
Similarly, in National Power Corporation v. Diato–Bernal,22 this Court
rejected the valuation recommended by court–appointed commissioners
whose conclusions were devoid of any actual and reliable basis. The
market values of the subject property’s neighboring lots were found to
be mere estimates and unsupported by any corroborative documents,
such as sworn declarations of realtors in the area concerned, tax
declarations or zonal valuation from the BIR for the contiguous
residential dwellings and commercial establishments. Thus, we ruled that
a commissioners’ report of land prices which is not based on any
documentary evidence is manifestly hearsay and should be disregarded
by the court.
We find that the trial court did not judiciously determine the fair market
value of the subject property as it failed to consider other relevant
factors such as the zonal valuation, tax declarations and current selling
price supported by documentary evidence. Indeed, just compensation
must not be arrived at arbitrarily, but determined after an evaluation of
different factors.23
Just compensation is defined as the full and fair equivalent of the
property taken from its owner by the expropriator. The measure is not
the taker’s gain, but the owner’s loss. The word “just” is used to
intensify the meaning of the word “compensation” and to convey thereby
the idea that the equivalent to be rendered for the property to be taken
shall be real, substantial, full, and ample. Such “just”–ness of the
compensation can only be attained by using reliable and actual data as
bases in fixing the value of the condemned property.24 Trial courts are
required to be more circumspect in its evaluation of just compensation
due the property owner, considering that eminent domain cases involve
the expenditure of public funds.25
We agree with the trial court that it was not bound by the assessment
report of the commissioners and that it had the discretion to reject the
same and substitute its own judgment on its value as gathered from the
record, or it may accept the report/recommendation of the
commissioners in totoand base its judgment thereon. However, the
decision of the court must be based on all established rules, upon correct
legal principles and competent evidence.26 The court is proscribed from
basing its judgment on speculations and surmises.
Nonetheless, we cannot subscribe to petitioner’s argument that just
compensation for the subject property should not exceed the zonal
valuation (P300.00 per square meter).
In Republic v. Court of Appeals,27 we held that ––
The constitutional limitation of “just compensation” is considered to be
the sum equivalent to the market value of the property, broadly
described to be the price fixed by the seller in open market in the usual
and ordinary course of legal action and competition or the fair value of
the property as between one who receives, and one who desires to sell,
it fixed at the time of the actual taking by the government. x x x
Zonal valuation is just one of the indices of the fair market value of real
estate. By itself, this index cannot be the sole basis of “just
compensation” in expropriation cases.28 As this Court ruled in Leca
Realty Corporation v. Rep. of the Phils.29:chanRoblesvirtualLawlibrary
The Republic is incorrect, however, in alleging that the values were
exorbitant, merely because they exceeded the maximum zonal value of
real properties in the same location where the subject properties were
located. The zonal value may be one, but not necessarily the
sole, index of the value of a realty. National Power Corporation v.
Manubay Agro–Industrial held thus:
“x x x [Market value] is not limited to the assessed value of the property
or to the schedule of market values determined by the provincial or city
appraisal committee. However, these values may serve as factors to be
considered in the judicial valuation of the property.”
The above ruling finds support in EPZA v. Dulay in this wise:
“Various factors can come into play in the valuation of specific properties
singled out for expropriation. The values given by provincial assessors
are usually uniform for very wide areas covering several barrios or even
an entire town with the exception of the poblacion. Individual differences
are never taken into account. The value of land is based on such
generalities as its possible cultivation for rice, corn, coconuts or other
crops. Very often land described as ‘cogonal’ has been cultivated for
generations. Buildings are described in terms of only two or three classes
of building materials and estimates of areas are more often inaccurate
than correct. Tax values can serve as guides but cannot be absolute
substitutes for just compensation.” (Emphasis supplied.)
Among the factors to be considered in arriving at the fair market value of
the property are the cost of acquisition, the current value of like
properties, its actual or potential uses, and in the particular case of
lands, their size, shape, location, and the tax declarations thereon. The
measure is not the taker’s gain but the owner’s loss.30 To be just, the
compensation must be fair not only to the owner but also to the taker.31
It is settled that the final conclusions on the proper amount of just
compensation can only be made after due ascertainment of the
requirements set forth under R.A. 8974 and not merely based on the
declarations of the parties.32 Since these requirements were not
satisfactorily complied with, and in the absence of reliable and actual
data as bases in fixing the value of the condemned property, remand of
this case to the trial court is in order.
WHEREFORE, the petition for review on certiorari is GRANTED. The
Decision dated July 21, 2009 and Resolution dated April 28, 2010 of the
Court of Appeals in CA–G.R. CV No. 90539 are hereby SET ASIDE.
This case is remanded to the trial court for the proper determination of
just compensation, in conformity with this Decision.
SO ORDERED.
128
33
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 195466 July 2, 2014
ARIEL L. DAVID, doing business under the name and style
"YIELS HOG DEALER," Petitioner,
vs.
JOHN G. MACASIO, Respondent.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari1 the challenge to the
November 22, 2010 decision2 and the January 31, 2011 resolution3 of
the Court of Appeals (CA) in CA-G.R. SP No. 116003. The CA decision
annulled and set aside the May 26, 2010 decision4 of the National Labor
Relations Commission (NLRC)5 which, in turn, affirmed the April 30, 2009
Decision6 of the Labor Arbiter (LA). The LA's decision dismissed
respondent John G. Macasio's monetary claims.
The Factual Antecedents
In January 2009, Macasio filed before the LA a complaint7 against
petitioner Ariel L. David, doing business under the name and style "Yiels
Hog Dealer," for non-payment of overtime pay, holiday pay and 13th
month pay. He also claimed payment for moral and exemplary damages
and attorney’s fees. Macasio also claimed payment for service incentive
leave (SIL).8
Macasio alleged9 before the LA that he had been working as a butcher
for David since January 6, 1995. Macasio claimed that David exercised
effective control and supervision over his work, pointing out that David:
(1) set the work day, reporting time and hogs to be chopped, as well as
the manner by which he was to perform his work; (2) daily paid his
salary of P700.00, which was increased from P600.00 in 2007, P500.00
in 2006 and P400.00 in 2005; and (3) approved and disapproved his
leaves. Macasio added that David owned the hogs delivered for
chopping, as well as the work tools and implements; the latter also
rented the workplace. Macasio further claimed that David employs about
twenty-five (25) butchers and delivery drivers.
In his defense,10 David claimed that he started his hog dealer business in
2005 and that he only has ten employees. He alleged that he hired
Macasio as a butcher or chopper on "pakyaw" or task basis who is,
therefore, not entitled to overtime pay, holiday pay and 13th month pay
pursuant to the provisions of the Implementing Rules and Regulations
(IRR) of the Labor Code. David pointed out that Macasio: (1) usually
starts his work at 10:00 p.m. and ends at 2:00 a.m. of the following day
or earlier, depending on the volume of the delivered hogs; (2) received
the fixed amount of P700.00 per engagement, regardless of the actual
number of hours that he spent chopping the delivered hogs; and (3) was
not engaged to report for work and, accordingly, did not receive any fee
when no hogs were delivered.
Macasio disputed David’s allegations. He argued that, first, David did
11
not start his business only in 2005. He pointed to the Certificate of
Employment12 that David issued in his favor which placed the date of his
employment, albeit erroneously, in January 2000. Second, he reported
for work every day which the payroll or time record could have easily
proved had David submitted them in evidence.
Refuting Macasio’s submissions,13 David claims that Macasio was not his
employee as he hired the latter on "pakyaw" or task basis. He also
claimed that he issued the Certificate of Employment, upon Macasio’s
request, only for overseas employment purposes. He pointed to the
"Pinagsamang Sinumpaang Salaysay,"14 executed by Presbitero Solano
and Christopher (Antonio Macasio’s co-butchers), to corroborate his
claims.
In the April 30, 2009 decision,15 the LA dismissed Macasio’s complaint for
lack of merit. The LA gave credence to David’s claim that he engaged
Macasio on "pakyaw" or task basis. The LA noted the following facts to
support this finding: (1) Macasio received the fixed amount of P700.00
for every work done, regardless of the number of hours that he spent in
completing the task and of the volume or number of hogs that he had to
chop per engagement; (2) Macasio usually worked for only four hours,
beginning from 10:00 p.m. up to 2:00 a.m. of the following day; and (3)
the P700.00 fixed wage far exceeds the then prevailing daily minimum
wage of P382.00. The LA added that the nature of David’s business as
hog dealer supports this "pakyaw" or task basis arrangement.
The LA concluded that as Macasio was engaged on "pakyaw" or task
basis, he is not entitled to overtime, holiday, SIL and 13th month pay.
The NLRC’s Ruling
In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling.17 The
NLRC observed that David did not require Macasio to observe an eight
hour work schedule to earn the fixed P700.00 wage; and that Macasio
had been performing a non-time work, pointing out that Macasio was
paid a fixed amount for the completion of the assigned task, irrespective
of the time consumed in its performance. Since Macasio was paid by
result and not in terms of the time that he spent in the workplace,
Macasio is not covered by the Labor Standards laws on overtime, SIL
and holiday pay, and 13th month pay under the Rules and Regulations
Implementing the 13th month pay law.18
Macasio moved for reconsideration19 but the NLRC denied his motion in
its August 11, 2010 resolution,20 prompting Macasio to elevate his case
to the CA via a petition for certiorari.21
The CA’s Ruling
In its November 22, 2010 decision,22 the CA partly granted Macasio’s
certiorari petition and reversed the NLRC’s ruling for having been
rendered with grave abuse of discretion.
While the CA agreed with the LAand the NLRC that Macasio was a task
basis employee, it nevertheless found Macasio entitled to his monetary
claims following the doctrine laid down in Serrano v. Severino Santos
Transit.23The CA explained that as a task basis employee, Macasio is
excluded from the coverage of holiday, SIL and 13th month pay only if
he is likewise a "field personnel." As defined by the Labor Code, a "field
personnel" is one who performs the work away from the office or place
of work and whose regular work hours cannot be determined with
reasonable certainty. In Macasio’s case, the elements that characterize a
"field personnel" are evidently lacking as he had been working as a
butcher at David’s "Yiels Hog Dealer" business in Sta. Mesa, Manila
under David’s supervision and control, and for a fixed working schedule
that starts at 10:00 p.m.
Accordingly, the CA awarded Macasio’s claim for holiday, SIL and 13th
month pay for three years, with 10% attorney’s fees on the total
monetary award. The CA, however, denied Macasio’s claim for moral and
exemplary damages for lack of basis.
David filed the present petition after the CA denied his motion for
reconsideration24 in the CA’s January 31, 2011 resolution.25
The Petition
In this petition,26 David maintains that Macasio’s engagement was on a
"pakyaw" or task basis. Hence, the latter is excluded from the coverage
of holiday, SIL and 13th month pay. David reiterates his submissions
before the lower tribunals27 and adds that he never had any control over
the manner by which Macasio performed his work and he simply looked
on to the "end-result." He also contends that he never compelled
Macasio to report for work and that under their arrangement, Macasio
129
was at liberty to choose whether to report for work or not as other
butchers could carry out his tasks. He points out that Solano and Antonio
had, in fact, attested to their (David and Macasio’s) established
"pakyawan" arrangement that rendered a written contract unnecessary.
In as much as Macasio is a task basis employee – who is paid the fixed
amount of P700.00 per engagement regardless of the time consumed in
the performance – David argues that Macasio is not entitled to the
benefits he claims. Also, he posits that because he engaged Macasio on
"pakyaw" or task basis then no employer-employee relationship exists
between them.
Finally, David argues that factual findings of the LA, when affirmed by
the NLRC, attain finality especially when, as in this case, they are
supported by substantial evidence. Hence, David posits that the CA erred
in reversing the labor tribunals’ findings and granting the prayed
monetary claims.
The Case for the Respondent
Macasio counters that he was not a task basis employee or a "field
personnel" as David would have this Court believe.28 He reiterates his
arguments before the lower tribunals and adds that, contrary to David’s
position, theP700.00 fee that he was paid for each day that he reported
for work does not indicate a "pakyaw" or task basis employment as this
amount was paid daily, regardless of the number or pieces of hogs that
he had to chop. Rather, it indicates a daily-wage method of payment and
affirms his regular employment status. He points out that David did not
allege or present any evidence as regards the quota or number of hogs
that he had to chop as basis for the "pakyaw" or task basis payment;
neither did David present the time record or payroll to prove that he
worked for less than eight hours each day. Moreover, David did not
present any contract to prove that his employment was on task basis. As
David failed to prove the alleged task basis or "pakyawan" agreement,
Macasio concludes that he was David’s employee. Procedurally, Macasio
points out that David’s submissions in the present petition raise purely
factual issues that are not proper for a petition for review on certiorari.
These issues – whether he (Macasio) was paid by result or on "pakyaw"
basis; whether he was a "field personnel"; whether an employer-
employee relationship existed between him and David; and whether
David exercised control and supervision over his work – are all factual in
nature and are, therefore, proscribed in a Rule 45 petition. He argues
that the CA’s factual findings bind this Court, absent a showing that such
findings are not supported by the evidence or the CA’s judgment was
based on a misapprehension of facts. He adds that the issue of whether
an employer-employee relationship existed between him and David had
already been settled by the LA29 and the NLRC30 (as well as by the CA
per Macasio’s manifestation before this Court dated November 15,
2012),31 in his favor, in the separate illegal case that he filed against
David.
The Issue
The issue revolves around the proper application and interpretation of
the labor law provisions on holiday, SIL and 13th month pay to a worker
engaged on "pakyaw" or task basis. In the context of the Rule 65
petition before the CA, the issue is whether the CA correctly found the
NLRC in grave abuse of discretion in ruling that Macasio is entitled to
these labor standards benefits.
The Court’s Ruling
We partially grant the petition.
Preliminary considerations: the Montoya ruling and the factual-issue-bar
rule
In this Rule 45 petition for review on certiorari of the CA’s decision
rendered under a Rule 65 proceeding, this Court’s power of review is
limited to resolving matters pertaining to any perceived legal errors that
the CA may have committed in issuing the assailed decision. This is in
contrast with the review for jurisdictional errors, which we undertake in
an original certiorari action. In reviewing the legal correctness of the CA
decision, we examine the CA decision based on how it determined the
presence or absence of grave abuse of discretion in the NLRC decision
before it and not on the basis of whether the NLRC decision on the
merits of the case was correct.32 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.33
Moreover, the Court’s power in a Rule 45 petition limits us to a review of
questions of law raised against the assailed CA decision.34
In this petition, David essentially asks the question – whether Macasio is
entitled to holiday, SIL and 13th month pay. This one is a question of
law. The determination of this question of law however is intertwined
with the largely factual issue of whether Macasio falls within the rule on
entitlement to these claims or within the exception. In either case, the
resolution of this factual issue presupposes another factual matter, that
is, the presence of an employer-employee relationship between David
and Macasio.
In insisting before this Court that Macasio was not his employee, David
argues that he engaged the latter on "pakyaw" or task basis. Very
noticeably, David confuses engagement on "pakyaw" or task basis with
the lack of employment relationship. Impliedly, David asserts that their
"pakyawan" or task basis arrangement negates the existence of
employment relationship.
At the outset, we reject this assertion of the petitioner. Engagement on
"pakyaw" or task basis does not characterize the relationship that may
exist between the parties, i.e., whether one of employment or
independent contractorship. Article 97(6) of the Labor Code defines
wages as "xxx the remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission basis, or other method
of calculating the same, which is payable by an employer to an employee
under a written or unwritten contract of employment for work done or to
be done, or for services rendered or to be rendered[.]"35 In relation to
Article 97(6), Article 10136 of the Labor Code speaks of workers paid by
results or those whose pay is calculated in terms of the quantity or
quality of their work output which includes "pakyaw" work and other
non-time work.
More importantly, by implicitly arguing that his engagement of Macasio
on "pakyaw" or task basis negates employer-employee relationship,
David would want the Court to engage on a factual appellate review of
the entire case to determine the presence or existence of that
relationship. This approach however is not authorized under a Rule 45
petition for review of the CA decision rendered under a Rule 65
proceeding.
First, the LA and the NLRC denied Macasio’s claim not because of the
absence of an employer-employee but because of its finding that since
Macasio is paid on pakyaw or task basis, then he is not entitled to SIL,
holiday and 13th month pay. Second, we consider it crucial, that in the
separate illegal dismissal case Macasio filed with the LA, the LA, the
NLRC and the CA uniformly found the existence of an employer-
employee relationship.37
In other words, aside from being factual in nature, the existence of an
employer-employee relationship is in fact a non-issue in this case. To
reiterate, in deciding a Rule 45 petition for review of a labor decision
rendered by the CA under 65, the narrow scope of inquiry is whether the
CA correctly determined the presence or absence of grave abuse of
discretion on the part of the NLRC. In concrete question form, "did the
NLRC gravely abuse its discretion in denying Macasio’s claims simply
because he is paid on a non-time basis?"
At any rate, even if we indulge the petitioner, we find his claim that no
employer-employee relationship exists baseless. Employing the control
test,38 we find that such a relationship exist in the present case.
Even a factual review shows that Macasio is David’s employee
To determine the existence of an employer-employee relationship, four
elements generally need to be considered, namely: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power
130
of dismissal; and (4) the power to control the employee’s conduct. These
elements or indicators comprise the so-called "four-fold" test of
employment relationship. Macasio’s relationship with David satisfies this
test.
First, David engaged the services of Macasio, thus satisfying the element
of "selection and engagement of the employee." David categorically
confirmed this fact when, in his "Sinumpaang Salaysay," he stated that
"nag apply po siya sa akin at kinuha ko siya na chopper[.]"39 Also,
Solano and Antonio stated in their "Pinagsamang Sinumpaang
Salaysay"40 that "[k]ami po ay nagtratrabaho sa Yiels xxx na pag-aari ni
Ariel David bilang butcher" and "kilalanamin si xxx Macasio na isa ring
butcher xxx ni xxx David at kasama namin siya sa aming trabaho."
Second, David paid Macasio’s wages.Both David and Macasio
categorically stated in their respective pleadings before the lower
tribunals and even before this Court that the former had been paying the
latter P700.00 each day after the latter had finished the day’s task.
Solano and Antonio also confirmed this fact of wage payment in their
"Pinagsamang Sinumpaang Salaysay."41 This satisfies the element of
"payment of wages."
Third, David had been setting the day and time when Macasio should
report for work. This power to determine the work schedule obviously
implies power of control. By having the power to control Macasio’s work
schedule, David could regulate Macasio’s work and could even refuse to
give him any assignment, thereby effectively dismissing him.
And fourth, David had the right and power to control and supervise
Macasio’s work as to the means and methods of performing it. In
addition to setting the day and time when Macasio should report for
work, the established facts show that David rents the place where
Macasio had been performing his tasks. Moreover, Macasio would leave
the workplace only after he had finished chopping all of the hog meats
given to him for the day’s task. Also, David would still engage Macasio’s
services and have him report for work even during the days when only
few hogs were delivered for butchering.
Under this overall setup, all those working for David, including Macasio,
could naturally be expected to observe certain rules and requirements
and David would necessarily exercise some degree of control as the
chopping of the hog meats would be subject to his specifications. Also,
since Macasio performed his tasks at David’s workplace, David could
easily exercise control and supervision over the former. Accordingly,
whether or not David actually exercised this right or power to control is
beside the point as the law simply requires the existence of this power to
control 4243 or, as in this case, the existence of the right and opportunity
to control and supervise Macasio.44
In sum, the totality of the surrounding circumstances of the present case these provisions exempt workers paid on "pakyaw" or task basis from
sufficiently points to an employer-employee relationship existing the coverage of holiday, SIL and 13th month pay.
between David and Macasio.
In reversing the labor tribunals’ rulings, the CA similarly relied on these
Macasio is engaged on "pakyaw" or task basis provisions, as well as on Section 1, Rule V of the IRR of the Labor Code
and the Court’s ruling in Serrano v. Severino Santos Transit.46 These
labor law provisions, when read together with the Serrano ruling, exempt
At this point, we note that all three tribunals – the LA, the NLRC and the
those engaged on "pakyaw" or task basis only if they qualify as "field
CA – found that Macasio was engaged or paid on "pakyaw" or task basis.
personnel."
This factual finding binds the Court under the rule that factual findings of
labor tribunals when supported by the established facts and in accord
with the laws, especially when affirmed by the CA, is binding on this In other words, what we have before us is largely a question of law
Court. regarding the correct interpretation of these labor code provisions and
the implementing rules; although, to conclude that the worker is
exempted or covered depends on the facts and in this sense, is a
A distinguishing characteristic of "pakyaw" or task basis engagement, as
question of fact: first, whether Macasio is a "field personnel"; and
opposed to straight-hour wage payment, is the non-consideration of the
second, whether those engaged on "pakyaw" or task basis, but who are
time spent in working. In a task-basis work, the emphasis is on the task
not "field personnel," are exempted from the coverage of holiday, SIL
itself, in the sense that payment is reckoned in terms of completion of
and 13th month pay.
the work, not in terms of the number of time spent in the completion of
work.45 Once the work or task is completed, the worker receives a fixed
amount as wage, without regard to the standard measurements of time To put our discussion within the perspective of a Rule 45 petition for
generally used in pay computation. review of a CA decision rendered under Rule 65 and framed in question
form, the legal question is whether the CA correctly ruled that it was
grave abuse of discretion on the part of the NLRC to deny Macasio’s
In Macasio’s case, the established facts show that he would usually start
monetary claims simply because he is paid on a non-time basis without
his work at 10:00 p.m. Thereafter, regardless of the total hours that he
determining whether he is a field personnel or not.
spent at the workplace or of the total number of the hogs assigned to
him for chopping, Macasio would receive the fixed amount of P700.00
once he had completed his task. Clearly, these circumstances show a To resolve these issues, we need tore-visit the provisions involved.
"pakyaw" or task basis engagement that all three tribunals uniformly
found.
Provisions governing SIL and holiday pay
In sum, the existence of employment relationship between the parties is
Article 82 of the Labor Code provides the exclusions from the coverage
determined by applying the "four-fold" test; engagement on "pakyaw" or
of Title I, Book III of the Labor Code - provisions governing working
task basis does not determine the parties’ relationship as it is simply a
conditions and rest periods.
method of pay computation. Accordingly, Macasio is David’s employee,
albeit engaged on "pakyaw" or task basis.
Art. 82. Coverage.— The provisions of [Title I] shall apply to employees
in all establishments and undertakings whether for profit or not, but not
As an employee of David paid on pakyaw or task basis, we now go to
to government employees, managerial employees, field personnel,
the core issue of whether Macasio is entitled to holiday, 13th month, and
members of the family of the employer who are dependent on him for
SIL pay.
support, domestic helpers, persons in the personal service of another,
and workers who are paid by results as determined by the Secretary of
On the issue of Macasio’s entitlement to holiday, SIL and 13th month Labor in appropriate regulations.
pay
xxxx
The LA dismissed Macasio’s claims pursuant to Article 94 of the Labor
Code in relation to Section 1, Rule IV of the IRR of the Labor Code, and
"Field personnel" shall refer to non-agricultural employees who regularly
Article 95 of the Labor Code, as well as Presidential Decree (PD) No.
perform their duties away from the principal place of business or branch
851. The NLRC, on the other hand, relied on Article 82 of the Labor Code
office of the employer and whose actual hours of work in the field
and the Rules and Regulations Implementing PD No. 851. Uniformly,
131
cannot be determined with reasonable certainty. [emphases and
underscores ours]
Among the Title I provisions are the provisions on holiday pay (under
Article 94 of the Labor Code) and SIL pay (under Article 95 of the Labor
Code). Under Article 82,"field personnel" on one hand and "workers who
are paid by results" on the other hand, are not covered by the Title I
provisions. The wordings of Article82 of the Labor Code additionally
categorize workers "paid by results" and "field personnel" as separate
and distinct types of employees who are exempted from the Title I
provisions of the Labor Code.
The pertinent portion of Article 94 of the Labor Code and its
corresponding provision in the IRR47 reads:
Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular
daily wage during regular holidays, except in retail and service
establishments regularly employing less than (10) workers[.] [emphasis
ours]
xxxx
SECTION 1. Coverage. – This Rule shall apply to all employees except:
xxxx
(e)Field personnel and other employees whose time and performance is
unsupervised by the employer including those who are engaged on task
or contract basis, purely commission basis, or those who are paid a fixed
amount for performing work irrespective of the time consumed in the
performance thereof. [emphases ours]
On the other hand, Article 95 of the Labor Code and its corresponding
provision in the IRR48 pertinently provides:
Art. 95. Right to service incentive. (a) Every employee who has rendered
at least one year of service shall be entitled to a yearly service incentive
leave of five days with pay.
(b) This provision shall not apply to those who are already enjoying the
benefit herein provided, those enjoying vacation leave with pay of at
least five days and those employed in establishments regularly
employing less than ten employees or in establishments exempted from
granting this benefit by the Secretary of Labor and Employment after
considering the viability or financial condition of such establishment.
[emphases ours]
xxxx
Section 1. Coverage. – This rule shall apply to all employees except:
xxxx
(e) Field personnel and other employees whose performance is
unsupervised by the employer including those who are engaged on task
or contract basis, purely commission basis, or those who are paid a fixed
amount for performing work irrespective of the time consumed in the
performance thereof. [emphasis ours]
Under these provisions, the general rule is that holiday and SIL pay
provisions cover all employees. To be excluded from their coverage, an
employee must be one of those that these provisions expressly exempt,
strictly in accordance with the exemption. Under the IRR, exemption
from the coverage of holiday and SIL pay refer to "field personnel and
other employees whose time and performance is unsupervised by the
employer including those who are engaged on task or contract basis[.]"
Note that unlike Article 82 of the Labor Code, the IRR on holiday and SIL
pay do not exclude employees "engaged on task basis" as a separate
and distinct category from employees classified as "field personnel."
Rather, these employees are altogether merged into one classification of
exempted employees.
Because of this difference, it may be argued that the Labor Code may be
interpreted to mean that those who are engaged on task basis, per se,
are excluded from the SIL and holiday payment since this is what the
Labor Code provisions, in contrast with the IRR, strongly suggest. The
arguable interpretation of this rule may be conceded to be within the
discretion granted to the LA and NLRC as the quasi-judicial bodies with
expertise on labor matters.
However, as early as 1987 in the case of Cebu Institute of Technology v.
Ople49 the phrase "those who are engaged on task or contract basis" in
the rule has already been interpreted to mean as follows:
[the phrase] should however, be related with "field personnel" applying
the rule on ejusdem generis that general and unlimited terms are
restrained and limited by the particular terms that they follow xxx
Clearly, petitioner's teaching personnel cannot be deemed field personnel
which refers "to non-agricultural employees who regularly perform their
duties away from the principal place of business or branch office of the
employer and whose actual hours of work in the field cannot be
determined with reasonable certainty. [Par. 3, Article 82, Labor Code of
the Philippines]. Petitioner's claim that private respondents are not
entitled to the service incentive leave benefit cannot therefore be
sustained.
In short, the payment of an employee on task or pakyaw basis alone is
insufficient to exclude one from the coverage of SIL and holiday pay.
They are exempted from the coverage of Title I (including the holiday
and SIL pay) only if they qualify as "field personnel." The IRR therefore
validly qualifies and limits the general exclusion of "workers paid by
results" found in Article 82 from the coverage of holiday and SIL pay.
This is the only reasonable interpretation since the determination of
excluded workers who are paid by results from the coverage of Title I is
"determined by the Secretary of Labor in appropriate regulations."
The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus
Transport Systems, Inc., v. Bautista:
A careful perusal of said provisions of law will result in the conclusion
that the grant of service incentive leave has been delimited by the
Implementing Rules and Regulations of the Labor Code to apply only to
those employees not explicitly excluded by Section 1 of Rule V.
According to the Implementing Rules, Service Incentive Leave shall not
apply to employees classified as "field personnel." The phrase "other
employees whose performance is unsupervised by the employer" must
not be understood as a separate classification of employees to which
service incentive leave shall not be granted. Rather, it serves as an
amplification of the interpretation of the definition of field personnel
under the Labor Code as those "whose actual hours of work in the field
cannot be determined with reasonable certainty."
The same is true with respect to the phrase "those who are engaged on
task or contract basis, purely commission basis." Said phrase should be
related with "field personnel," applying the rule on ejusdem generis that
general and unlimited terms are restrained and limited by the particular
terms that they follow.
The Autobus ruling was in turn the basis of Serrano v. Santos Transit
which the CA cited in support of granting Macasio’s petition.
In Serrano, the Court, applying the rule on ejusdem generis50 declared
that "employees engaged on task or contract basis xxx are not
automatically exempted from the grant of service incentive leave, unless,
they fall under the classification of field personnel."51 The Court
explained that the phrase "including those who are engaged on task or
contract basis, purely commission basis" found in Section 1(d), Rule V of
Book III of the IRR should not be understood as a separate classification
of employees to which SIL shall not be granted. Rather, as with its
preceding phrase - "other employees whose performance is
unsupervised by the employer" - the phrase "including those who are
engaged on task or contract basis" serves to amplify the interpretation of
the Labor Code definition of "field personnel" as those "whose actual
hours of work in the field cannot be determined with reasonable
certainty."
132
In contrast and in clear departure from settled case law, the LA and the
NLRC still interpreted the Labor Code provisions and the IRR as
exempting an employee from the coverage of Title I of the Labor Code
based simply and solely on the mode of payment of an employee. The
NLRC’s utter disregard of this consistent jurisprudential ruling is a clear
act of grave abuse of discretion.52 In other words, by dismissing
Macasio’s complaint without considering whether Macasio was a "field
personnel" or not, the NLRC proceeded based on a significantly
incomplete consideration of the case. This action clearly smacks of grave
abuse of discretion.
Entitlement to holiday pay
Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA
and the NLRC had only taken counsel from Serrano and earlier cases,
they would have correctly reached a similar conclusion regarding the
payment of holiday pay since the rule exempting "field personnel" from
the grant of holiday pay is identically worded with the rule exempting
"field personnel" from the grant of SIL pay. To be clear, the phrase
"employees engaged on task or contract basis "found in the IRR on both
SIL pay and holiday pay should be read together with the exemption of
"field personnel."
In short, in determining whether workers engaged on "pakyaw" or task
basis" is entitled to holiday and SIL pay, the presence (or absence) of
employer supervision as regards the worker’s time and performance is
the key: if the worker is simply engaged on pakyaw or task basis, then
the general rule is that he is entitled to a holiday pay and SIL pay unless
exempted from the exceptions specifically provided under Article 94
(holiday pay) and Article95 (SIL pay) of the Labor Code. However, if the
worker engaged on pakyaw or task basis also falls within the meaning of
"field personnel" under the law, then he is not entitled to these monetary
benefits.
Entitlement to 13th month pay
With respect to the payment of 13th month pay however, we find that
the CA legally erred in finding that the NLRC gravely abused its
discretion in denying this benefit to Macasio.1âwphi1
The governing law on 13th month pay is PD No. 851.53
As with holiday and SIL pay, 13th month pay benefits generally cover all
employees; an employee must be one of those expressly enumerated to
be exempted. Section 3 of the Rules and Regulations Implementing P.D.
No. 85154enumerates the exemptions from the coverage of 13th month
pay benefits. Under Section 3(e), "employers of those who are paid on
xxx task basis, and those who are paid a fixed amount for performing a
specific work, irrespective of the time consumed in the performance
thereof"55 are exempted.
Note that unlike the IRR of the Labor Code on holiday and SIL pay,
Section 3(e) of the Rules and Regulations Implementing PD No. 851
exempts employees "paid on task basis" without any reference to "field
personnel." This could only mean that insofar as payment of the 13th
month pay is concerned, the law did not intend to qualify the exemption
from its coverage with the requirement that the task worker be a "field
personnel" at the same time.
WHEREFORE, in light of these considerations, we hereby PARTIALLY
GRANT the petition insofar as the payment of 13th month pay to
respondent is concerned. In all other aspects, we AFFIRM the decision
dated November 22, 2010 and the resolution dated January 31, 2011 of
the Court of Appeals in CA-G.R. SP No. 116003.
SO ORDERED.

Macasio does not fall under the classification of "field personnel"

Based on the definition of field personnel under Article 82, we agree with
the CA that Macasio does not fall under the definition of "field
personnel." The CA’s finding in this regard is supported by the
established facts of this case: first, Macasio regularly performed his
duties at David’s principal place of business; second, his actual hours of
work could be determined with reasonable certainty; and, third, David
supervised his time and performance of duties. Since Macasio cannot be
considered a "field personnel," then he is not exempted from the grant
of holiday, SIL pay even as he was engaged on "pakyaw" or task basis.

Not being a "field personnel," we find the CA to be legally correct when

it reversed the NLRC’s ruling dismissing Macasio’s complaint for holiday
and SIL pay for having been rendered with grave abuse of discretion.

133
34 Alexander R. 2007-2010- Quezon the requirements set under Section 413 of DOLE14 Memorandum Circular
2005 5 years P312.00 No. 215were not complied with.
Canlas City
Republic of the Philippines 2008- Quezon City
Jerry Q. August The respondents pointed out that Our Haus never presented any proof
SUPREME COURT 10 years 2009- Antipolo 2010- P342.00
Sabulao 1999 that they agreed in writing to the inclusion of their meals’ value in their
Manila Quezon City wages.16 Also, Our Haus failed to prove that the value of the facilities it
furnished was fair and reasonable.17 Finally, instead of deducting the
Bernardo N. 2007-2010- Quezon
SECOND DIVISION 1994 16 years P383.50 maximum amount of 70% of the value of the meals, Our Haus actually
Tenedero City
withheld its full value (which was Php290.00 per week for each
G.R. No. 204651 August 6, 2014 employee).18
Sometime in May 2010, Our Haus experienced financial distress. To
alleviate its condition, Our Haus suspended some of its construction The LA ruled in favor of Our Haus. He held that if the reasonable values
OUR HAUS REALTY DEVELOPMENT CORPORATION, Petitioner,
projects and asked the affected workers, including the respondents, to of the board and lodging would be taken into account, the respondents’
vs.
take vacation leaves.8 daily wages would meet the minimum wage rate.19 As to the other
ALEXANDER PARIAN, JAY C. ERINCO, ALEXANDER CANLAS,
BERNARD TENEDERO and JERRY SABULAO, Respondents. benefits, the LA found that the respondents were not able to
Eventually, the respondents were asked to report back to work but substantiate their claims for it.20
instead of doing so, they filed with the LA a complaint for underpayment
DECISION
of their daily wages. They claimed that except for respondent Bernardo The respondents appealed the LA’s decision to the NLRC, which in turn,
N. Tenedero, their wages were below the minimum rates prescribed in reversed it. Citing the case of Mayon Hotel & Restaurant v. Adana,21 the
BRION, J.: the following wage orders from 2007 to 2010: NLRC noted that the respondents did not authorize Our Haus in writing
to charge the values of their board and lodging to their wages. Thus, the
We resolve in this petition for review on certiorari1 the challenge to the 1. Wage Order No. NCR-13, which provides for a daily samecannot be credited.
May 7, 2012 decision2 and the November 27, 2012 resolution3 (assailed minimum wage rate of P362.00for the non-agriculture sector
CA rulings) of the Court of Appeals (CA) in CA-G.R. SP No. 123273. (effective from August 28, 2007 until June 13, 2008); and The NLRC also ruled that the respondents are entitled to their respective
These assailed CA rulings affirmed the July 20, 2011 decision4 and the proportionate 13th month payments for the year 2010 and SIL payments
December 2, 2011 resolution5 (NLRC rulings) of the National Labor for at least three years,immediately preceding May 31, 2010, the date
2. Wage Order No. NCR-14, which provides for a daily
Relations Commission (NLRC) in NLRC LAC No. 02-000489-11 (NLRC when the respondents leftOur Haus. However, the NLRC sustained the
minimum wage rate of P382.00for the non-agriculture sector
NCR Case No. 06-08544-10). The NLRC rulings in turn reversed and set LA’s ruling that the respondents were not entitled to overtime pay since
(effective from June 14, 2008 until June 30, 2010).
aside the December 10, 2010 decision6 of the labor arbiter (LA). the exact dates and times when they rendered overtime work had not
been proven.22
The respondents also alleged thatOur Haus failed to pay them their
Factual Antecedents
holiday, service incentive leave (SIL), 13th month and overtime pays.9
Our Haus moved for the reconsideration23 of the NLRC’s decision and
Respondents Alexander Parian, Jay Erinco, Alexander Canlas, Jerry submitted new evidence (the five kasunduans) to show that the
The Labor Arbitration Rulings respondents authorized Our Haus in writing to charge the values of their
Sabulao and Bernardo Tenederowere all laborers working for petitioner
Our Haus Realty Development Corporation (Our Haus), a company meals and lodging to their wages.
engaged in the construction business.The respondents’ respective Before the LA, Our Haus primarily argued that the respondents’ wages
employment records and daily wage rates from 2007 to 2010 are complied with the law’s minimum requirement. Aside from paying the The NLRC denied Our Haus’ motion, thus it filed a Rule 65 petition24 with
summarized in the table7 below: monetary amount of the respondents’ wages, Our Haus also subsidized the CA. In its petition, Our Haus propounded a new theory. It made a
their meals (3 times a day), and gave them free lodging near the distinction between deduction and charging. A written authorization is
construction project they were assigned to.10 In determining the total only necessary if the facility’s value will be deducted and will not be
Date Years of Year and Place of Daily amount of the respondents’ daily wages, the value of these benefits needed if it will merely be charged or included in the computation of
Name
Hired Service Assignment Rate should be considered, in line with Article 97(f)11 of the Labor Code. wages.25 Our Haus claimed that it did not actually deduct the values of
the meals and housing benefits. It only considered these in computing
Alexander M. October 2007-2010- Quezon
10 years P353.50 Our Haus also rejected the respondents’ other monetary claims for lack the total amount of wages paid to the respondents for purposes of
Parian 1999 City
of proof that they were entitled to it.12 compliance with the minimum wage law. Hence, the written
2008- Quezon City authorization requirement should not apply.
January
Jay C. Erinco 10 years 2009- Antipolo 2010- P342.00
2000 On the other hand, the respondents argued that the value of their meals
Quezon City Our Haus also asserted that the respondents’ claim for SIL pay should be
should not be considered in determining their wages’ total amount since
denied as this was not included in their pro formacomplaint. Lastly, it
134
questioned the respondents’entitlement to attorney’s fees because they
were not represented by a private lawyer but by the Public Attorney’s
Office (PAO).
The CA’s Ruling
The CA dismissed Our Haus’ certiorari petition and affirmed the NLRC
rulings in toto. It found no real distinction between deduction and
charging,26 and ruled that the legal requirements before any deduction
or charging can be made, apply to both. Our Haus, however, failed to
prove that it complied with any of the requirements laid down in Mabeza
v. National Labor Relations Commission.27 Accordingly, it cannot consider
the values of its meal and housing facilities in the computation of the
respondents’ total wages.
Also, the CA ruled that since the respondents were able to allege non-
payment of SIL in their position paper, and Our Haus, in fact, opposed it
in its various pleadings,28 then the NLRC properly considered it as part of
the respondents’ causes of action. Lastly, the CA affirmed the
respondent’s entitlement to attorney’s fees.29
Our Haus filed a motion for reconsideration but the CA denied its motion,
prompting it to file the present petition for review on certiorari under
Rule 45.
The Petition
Our Haus submits that the CA erred in ruling that the legal requirements
apply without distinction ―whether the facility’s value will be deducted
or merely included in the computation of the wages. At any rate, it
complied with the requirements for deductibility of the value of the
facilities. First, the five kasunduans executed by the respondents
constitute the written authorization for the inclusion of the board and
lodging’s values to their wages. Second, Our Haus only withheld the
amount of P290.00 which represents the food’s raw value; the weekly
cooking cost (cook’s wage, LPG, water) at P239.40 per person is a
separate expense that Our Haus did not withhold from the respondents’
wages.30 This disproves the respondents’claim that it deducted the full
amount of the meals’ value.
Lastly, the CA erred in ruling that the claim for SIL pay may still be
granted though not raised in the complaint; and that the respondents
are entitled to an award of attorney’s fees.31
The Case for the Respondents
The respondents prayed for the denial of the petition.32 They maintained
that the CA did not err inruling that the values of the board and lodging
cannot be deducted from their wages for failure to comply with the
requirements set by law.33 And though the claim for SIL pay was not
included in their pro forma complaint, they raised their claims in their
position paper and Our Haus had the opportunity to contradict it in its
pleadings.34
Finally, under the PAO law, the availment of the PAO’s legal services
does not exempt its clients from an award of attorney’s fees.35
The Court’s Ruling
We resolve to DENYthe petition.
The nature of a Rule 45 petition ― only questions of law
Basic is the rule that only questions of lawmay be raised in a Rule 45
petition.36 However, in this case, weare confronted with mixed questions
of fact and law that are subsumed under the issue of whether Our Haus
complied with the legal requirements on the deductibility of the value of
facilities. Strictly, factual issues cannot be considered under Rule 45
except in the course of resolving if the CA correctly determined whether
or not the NLRC committed grave abuse of discretion in considering and
appreciating the factual issues before it.37
In ruling for legal correctness, we have to view the CA decision in the
same context that the petition for certiorariit 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. This is the
approach that should bebasic in a Rule 45 review of a CA ruling in a
labor case. In question form, the question to ask in the present case is:
did the CA correctly determine that the NLRC did not commit grave
abuse of discretion in ruling on the case?38 We rule that the CA correctly
did.
No substantial distinction between deducting and charging a facility’s
value from the employee’s wage; the legal requirements for creditability
apply to both
To justify its non-compliance with the requirements for the deductibility
of a facility, Our Haus asks us to believe that there is a substantial
distinction between the deduction and the charging of a facility’s value to
the wages. Our Haus explains that in deduction, the amount of the wage
(which may already be below the minimum) would still be lessened by
the facility’s value, thus needing the employee’s consent. On the other
hand, in charging, there is no reduction of the employee’s wage since
the facility’s value will just be theoretically added to the wage for
purposes of complying with the minimum wage requirement.39
Our Haus’ argument is a vain attempt to circumvent the minimum wage
law by trying to create a distinction where none exists.
In reality, deduction and charging both operate to lessen the actual take-
home pay of an employee; they are two sides of the same coin. In both,
the employee receives a lessened amount because supposedly, the
facility’s value, which is part of his wage, had already been paid to him in
kind. As there is no substantial distinction between the two, the
requirements set by law must apply to both.
As the CA correctly ruled, these requirements, as summarized in Mabeza,
are the following:
a. proof must be shown thatsuch facilities are customarily
furnished by the trade;
b. the provision of deductiblefacilities must be voluntarily
accepted in writingby the employee; and
c. The facilities must be charged at fair and reasonable
value.40
We examine Our Haus’ compliance with each of these requirements in
seriatim.
a. The facility must be customarily furnished by the trade
In a string of cases, we have concluded that one of the badges to show
that a facility is customarily furnished by the trade is the existence of a
company policy or guideline showing that provisions for a facility were
designated as part of the employees’ salaries.41 To comply with this, Our
Haus presented in its motion for reconsideration with the NLRC the joint
sinumpaang salaysayof four of its alleged employees. These employees
averred that they were recipients of free lodging, electricity and water,
as well as subsidized meals from Our Haus.42
We agree with the NLRC’s finding that the sinumpaang salaysay
statements submitted by Our Haus are self-serving.1âwphi1 For one, Our
Haus only produced the documents when the NLRC had already earlier
determined that Our Haus failed to prove that it was traditionally giving
the respondents their board and lodging. This document did not state
whether these benefits had been consistently enjoyed by the rest of Our
Haus’ employees. Moreover, the records reveal that the board and
135
lodging were given on a per project basis. Our Haus did not show if
these benefits were also provided inits other construction projects, thus
negating its claimed customary nature. Even assuming the sinumpaang
salaysay to be true, this document would still work against Our Haus’
case. If Our Haus really had the practice of freely giving lodging,
electricity and water provisions to its employees, then Our Haus should
not deduct its values from the respondents’ wages. Otherwise, this will
run contrary to the affiants’ claim that these benefits were traditionally
given free of charge.
Apart from company policy, the employer may also prove compliance
with the first requirement by showing the existence of an industry-wide
practice of furnishingthe benefits in question among enterprises engaged
in the same line of business. If it were customary among construction
companies to provide board and lodging to their workers and treat their
values as part of their wages, we would have more reason to conclude
that these benefits were really facilities.
However, Our Haus could not really be expected to prove compliance
with the first requirement since the living accommodation of workers in
the construction industry is not simply a matter of business practice.
Peculiar to the construction business are the occupational safety and
health (OSH) services which the law itself mandates employers to
provide to their workers. This isto ensure the humane working conditions
of construction employees despite their constant exposure to hazardous
working environments. Under Section 16 of DOLE Department Order
(DO) No. 13, series of 1998,43 employers engaged in the construction
business are required to providethe following welfare amenities:
16.1 Adequate supply of safe drinking water
16.2 Adequate sanitaryand washing facilities
16.3 Suitable living accommodation for workers, and as may
be applicable, for their families
16.4 Separate sanitary, washing and sleeping facilitiesfor men
and women workers. [emphasis ours]
Moreover, DOLE DO No. 56, series of 2005, which sets out the guidelines
for the implementation ofDOLE DO No. 13, mandates that the cost of the
implementation of the requirements for the construction safety and
health of workers, shall be integrated to the overall project cost.44 The
rationale behind this isto ensure that the living accommodation of the
workers is not substandard and is strictly compliant with the DOLE’s OSH
criteria.
As part of the project cost that construction companies already charge to
their clients, the value of the housing of their workers cannot be charged
again to their employees’ salaries. Our Haus cannot pass the burden of
the OSH costs of its construction projects to its employees by deducting
it as facilities. This is Our Haus’ obligation under the law.
Lastly, even if a benefit is customarily provided by the trade, it must still
pass the purpose testset by jurisprudence. Under this test, if a benefit or
privilege granted to the employee is clearly for the employer’s
convenience, it will not be considered as a facility but a
supplement.45 Here, careful consideration is given to the nature of the
employer’s business in relation to the work performed by the employee.
This test is used to address inequitable situations wherein employers
consider a benefit deductible from the wages even if the factual
circumstances show that it clearly redounds to the employers’ greater
advantage.
While the rules serve as the initial test in characterizing a benefit as a
facility, the purpose test additionally recognizes that the employer and
the employee do not stand at the same bargaining positions on benefits
that must or must not formpart of an employee’s wage. In the ultimate
analysis, the purpose test seeks to prevent a circumvention of the
minimum wage law.
a1. The purpose test in jurisprudence
Under the law,46 only the value of the facilities may be deducted from
the employees’ wages but not the value of supplements. Facilities
include articles or services for the benefit of the employee or his family
but exclude tools of the trade or articles or services primarily for the
benefit of the employer or necessary to the conduct of the employer’s
business.47
The law also prescribes that the computation of wages shall exclude
whatever benefits, supplementsor allowances given to employees.
Supplements are paid to employees on top of their basic pay and are
free of charge.48 Since it does not form part of the wage, a supplement’s
value may not be includedin the determination of whether an employer
complied with the prescribed minimum wage rates.
In the present case, the board and lodging provided by Our Haus cannot
be categorized asfacilities but as supplements. In SLL International
Cables Specialist v. National Labor Relations Commission,49 this Court
was confronted with the issue on the proper characterization of the free
board and lodging provided by the employer. We explained:
The Court, at this point, makes a distinction between "facilities" and
"supplements". It is of the view that the food and lodging, or the
electricity and water allegedly consumed by private respondents in this
case were not facilities but supplements. In the case of Atok-Big Wedge
Assn. v. Atok-Big Wedge Co., the two terms were distinguished from one
another in this wise:
"Supplements", therefore, constitute extra remuneration or special
privileges or benefits given to or received by the laborers overand above
their ordinary earnings or wages. "Facilities", on the other hand, are
items of expense necessary for the laborer's and his family's existence
and subsistence so thatby express provision of law (Sec. 2[g]), they form
part of the wage and when furnished by the employer are deductible
therefrom, since if they are not so furnished, the laborer would spend
and pay for them just the same.
In short, the benefit or privilege given to the employee which constitutes
an extra remuneration above and over his basic or ordinary earning or
wage is supplement; and when said benefit or privilege is part of the
laborers' basic wages, it is a facility. The distinction lies not so much in
the kind of benefit or item (food, lodging, bonus or sick leave) given, but
in the purpose for which it is given.In the case at bench, the items
provided were given freely by SLLfor the purpose of maintaining the
efficiency and health of its workers while they were working attheir
respective projects.50
Ultimately, the real difference lies not on the kind of the benefit but on
the purpose why it was given by the employer. If it is primarily for the
employee’s gain, then the benefit is a facility; if its provision is mainly for
the employer’s advantage, then it is a supplement. Again, this is to
ensure that employees are protected in circumstances where the
employer designates a benefit as deductible from the wages even
though it clearly works to the employer’s greater convenience or
advantage.
Under the purpose test, substantial consideration must be given to the
nature of the employer’s business inrelation to the character or type of
work performed by the employees involved.
Our Haus is engaged in the construction business, a laborintensive
enterprise. The success of its projects is largely a function of the physical
strength, vitality and efficiency of its laborers. Its business will be
jeopardized if its workers are weak, sickly, and lack the required energy
to perform strenuous physical activities. Thus, by ensuring that the
workers are adequately and well fed, the employer is actually investing
on its business.
Unlike in office enterprises where the work is focused on desk jobs, the
construction industry relies heavily and directly on the physical capacity
and endurance of its workers. This is not to say that desk jobs do not
require muscle strength; wesimply emphasize that in the construction
business, bulk of the work performed are strenuous physical activities.
136
Moreover, in the construction business, contractors are usually faced
with the problem ofmeeting target deadlines. More often than not, work
is performed continuously, day and night, in order to finish the project
on the designated turn-over date. Thus, it will be more convenient to the
employer if itsworkers are housed near the construction site to ensure
their ready availability during urgent or emergency circumstances. Also,
productivity issues like tardiness and unexpected absences would be
minimized. This observation strongly bears in the present case since
three of the respondents are not residents of the National Capital
Region. The board and lodging provision might have been a substantial
consideration in their acceptance of employment in a place distant from
their provincial residences.
Based on these considerations, we conclude that even under the purpose
test, the subsidized meals and free lodging provided by Our Haus are
actually supplements. Although they also work to benefit the
respondents, an analysis of the nature of these benefits in relation to
Our Haus’ business shows that they were given primarily for Our Haus’
greater convenience and advantage. If weighed on a scale, the balance
tilts more towards Our Haus’ side. Accordingly, their values cannot be
considered in computing the total amount of the respondents’ wages.
Under the circumstances, the dailywages paid to the respondents are
clearly below the prescribed minimum wage rates in the years 2007-
2010.
b. The provision of deductible facilities must be voluntarily accepted in
writing by the employee
In Mayon Hotel, we reiterated that a facility may only be deducted from
the wage if the employer was authorized in writingby the concerned
employee.51 As it diminishes the take-home pay of an employee, the
deduction must be with his express consent.
Again, in the motion for reconsideration with the NLRC, Our Haus
belatedly submitted five kasunduans, supposedly executed by the
respondents, containing their conformity to the inclusion of the values of
the meals and housing to their total wages. Oddly, Our Haus only
offered these documents when the NLRC had already ruled that
respondents did not accomplish any written authorization, to allow
deduction from their wages. These five kasunduans were also undated,
making us wonder if they had reallybeen executed when respondents
first assumed their jobs.
Moreover, in the earlier sinumpaang salaysay by Our Haus’ four
employees, it was not mentioned that they also executed a
kasunduanfor their board and lodging benefits. Because of these
surrounding circumstances and the suspicious timing when the five
kasunduanswere submitted as evidence, we agree withthe CA that the
NLRC committed no grave abuse of discretion in disregarding these
documents for being self serving.
c. The facility must be charged at a fair and reasonable value Firstly, petitioner’s contention that the validity of Gutang’s dismissal
should not be determined because it had not been included in his
complaint before the NLRC is bereft of merit. The complaint of Gutang
Our Haus admitted that it deducted the amount of P290.00 per week
was a mere checklist of possible causes of action that he might have
from each of the respondents for their meals. But it now submits that it
against Roleda. Such manner of preparing the complaint was obviously
did not actually withhold the entire amount as it did not figure in the
designed to facilitate the filing of complaints by employees and laborers
computation the money it expended for the salary of the cook, the
who are thereby enabled to expediently set forth their grievances in a
water, and the LPG used for cooking, which amounts to P249.40 per
general manner. But the non-inclusion in the complaint of the issue on
week per person. From these, it appears that the total meal expense per
the dismissal did not necessarily mean that the validity of the dismissal
week for each person isP529.40,making Our Haus’ P290.00 deduction
could not be an issue.The rules of the NLRC require the submission of
within the 70% ceiling prescribed by the rules.
verified position papers by the parties should they fail to agree upon an
amicable settlement, and bar the inclusion of any cause of action not
However, Our Haus’ valuation cannotbe plucked out of thin air. The mentioned in the complaint or position paper from the time of their
valuation of a facility must besupported by relevant documents such as submission by the parties. In view of this, Gutang’s cause of action
receipts and company records for it to be considered as fair and should be ascertained not from a reading of his complaint alone but also
reasonable. In Mabeza, we noted: from a consideration and evaluation of both his complaint and position
paper.54
Curiously, in the case at bench, the only valuations relied upon by the
labor arbiter in his decision were figures furnished by the private The respondents’ entitlement to the other monetary benefits
respondent's own accountant, without corroborative evidence.On the
pretext that records prior to the July 16, 1990 earthquake were lost or
Generally a party who alleges payment as a defense has the burden of
destroyed, respondent failed to produce payroll records, receipts and
proving it.Particularly in labor cases, the burden of proving payment of
other relevant documents, where he could have, as has been pointedout
monetary claims rests on the employeron the reasoning that the
in the Solicitor General's manifestation, "secured certified copies thereof
pertinent personnel files, payrolls, records, remittances and other similar
from the nearest regional office of the Department of Labor, the SSS or
documents — which will show that overtime, differentials, service
the BIR".52 [emphasis ours]
incentive leave and other claims of workers have been paid — are not in
the possession of the worker but in the custody and absolute control of
In the present case, Our Haus never explained how it came up with the the employer.55
valuesit assigned for the benefits it provided; it merely listed its
supposed expenses without any supporting document. Since Our Haus is
Unfortunately, records will disclose the absence of any credible
using these additional expenses (cook’s salary, water and LPG) to
document which will show that respondents had been paid their 13th
support its claim that it did not withhold the full amount of the meals’
month pay, holiday and SIL pays. Our Haus merely presented a
value, Our Haus is burdened to present evidence to corroborate its
handwritten certification from its administrative officer that its employees
claim. The records however, are bereft of any evidence to support Our
automatically become entitled to five days of service incentive leave as
Haus’ meal expense computation. Eventhe value it assigned for the
soon as they pass probation. This certification was not even subscribed
respondents’ living accommodations was not supported by any
under oath. Our Haus could have at least submitted its payroll or copies
documentary evidence. Without any corroborative evidence, it cannot be
of the pay slips of respondents to show payment of these benefits.
said that Our Haus complied withthis third requisite.
However, it failed to do so.
A claim not raised in the pro forma complaint may still beraised in the
Respondents are entitled to attorney’s fees.
position paper.
Finally, we affirm that respondents are entitled to attorney’s fees. Our
Our Haus questions the respondents’ entitlement to SIL pay by pointing
Haus’ asserts that respondents’ availment of free legal services from the
out that this claim was not included in the pro forma complaint filed with
PAO disqualifies them from such award. We find this untenable.
the NLRC. However, we agree with the CA that such omission does not
bar the labor tribunals from touching upon this cause of action since this
was raised and discussed inthe respondents’ position paper. In Samar- It is settled that in actions for recovery of wages or where an employee
Med Distribution v. National Labor Relations Commission,53 we held: was forced to litigate and, thus, incur expenses to protect his rights and
interest, the award of attorney's fees is legally and morally
justifiable.56Moreover, under the PAO Law or Republic Act No. 9406, the
137
costs of the suit, attorney's fees and contingent fees imposed upon the
adversary of the PAO clients after a successful litigation shall be
deposited in the National Treasury as trust fund and shall be disbursed
for special allowances of authorized officials and lawyers of the PAO.57

Thus, the respondents are still entitled to attorney's fees. The attorney's
fees awarded to them shall be paid to the PAO. It serves as a token
recompense to the PAO for its provision of free legal services to litigants
who have no means of hiring a private lawyer.

WHEREFORE, in light of these considerations, we conclude that the

Court of Appeals correctly found that the National Labor Relations
Commission did not abuse its discretion in its decision of July 20, 2011
and Resolution of December 2, 2011.1âwphi1 Consequently we DENY
the petition and AFFIRM the Court of Appeals' decision dated May 7,
2012 and resolution dated November 27, 2012 in CA-G.R. SP No.
123273. No costs.

SO ORDERED.

138
35
cease its operations on October 10, 2003;
Republic of the Philippines
WHEREAS, all employees of the COMPANY on account of irreversible
SUPREME COURT
financial losses, will bedismissed from employment effective October 10,
Manila
2003;
SECOND DIVISION
In view thereof, the parties agree as follows:
G.R. No. 202961 February 4, 2015
EMER MILAN, RANDY MASANGKAY, WILFREDO JAVIER,
RONALDO DAVID, BONIFACIO MATUNDAN, NORA MENDOZA, et
al., Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, ·SOLID MILLS,
INC., and/or PHILIP ANG, Respondents.
DECISION
LEONEN, J.:
An employer is allowed to withhold terminal pay and benefits pending
the employee's return of its properties.
Petitioners are respondent Solid Mills, Inc.' s (Solid Mills)
employees.1 They are represented by the National Federation of Labor
Unions (NAFLU), their collective bargaining agent.2
As Solid Mills’ employees, petitionersand their families were allowed to
occupy SMI Village, a property owned by Solid Mills.3 According to Solid
Mills, this was "[o]ut of liberality and for the convenience of its
employees . . . [and] on the condition that the employees . . . would
vacate the premises anytime the Company deems fit."4
In September 2003, petitioners were informed that effective October 10,
2003, Solid Mills would cease its operations due to serious business
losses.5 NAFLU recognized Solid Mills’ closure due to serious business
losses in the memorandum of agreement dated September 1, 2003.6 The
memorandum of agreement provided for Solid Mills’ grant of separation
pay less accountabilities, accrued sick leave benefits, vacation leave
benefits, and 13th month pay to the employees.7 Pertinent portions of
the agreement provide:
WHEREAS, the COMPANYhas incurred substantial financial losses and is
currently experiencing further severe financial losses;
WHEREAS, in view of such irreversible financial losses, the COMPANY will
1. That UNION acknowledges that the COMPANY is
experiencing severe financial losses and as a consequence of
which, management is constrained to cease the company’s
operations.
2. The UNION acknowledges that under Article 283 of the
Labor Code, separation pay is granted to employees who are
dismissed due to closures or cessation of operations NOT DUE
to serious business losses.
3. The UNION acknowledges that in view of the serious
business losses the Company has been experiencing as seen in
their audited financial statements, employees ARE NOT
granted separation benefits under the law.
4. The COMPANY, by way of goodwill and in the spirit of
generosity agrees to grant financial assistance less
accountabilities to members of the Union based on length of
service to be computed as follows: (Italics in this paragraph
supplied)
Number of days - 12.625 for every year of service
5. In view of the above, the members of the UNION will
receive such financial assistance on an equal monthly
installments basis based on the following schedule:
First Check due on January 5, 2004 and every 5th of the
month thereafter until December 5, 2004.
6. The COMPANY commits to pay any accrued benefits the
Union members are entitled to, specifically those arising from
sick and vacation leave benefits and 13th month pay, less
accountabilities based on the following schedule:
One Time Cash Payment to bedistributed anywhere from. . . .
....
8. The foregoing agreement is entered into with full
knowledge by the parties of their rights under the law and
they hereby bind themselves not to conduct any concerted
action of whatsoever kind, otherwise the grant of financial
assistance as discussed above will be withheld.8 (Emphasis in
the original)
Solid Mills filed its Department of Labor and Employment termination
report on September 2, 2003.9
Later, Solid Mills, through Alfredo Jingco, sent to petitioners individual
notices to vacate SMI Village.10
Petitioners were no longer allowed to report for work by October 10,
2003.11 They were required to sign a memorandum of agreement with
release and quitclaim before their vacation and sick leave benefits, 13th
month pay, and separation pay would be released.12 Employees who
signed the memorandum of agreement were considered to have agreed
to vacate SMI Village, and to the demolition of the constructed houses
inside as condition for the release of their termination benefits and
separation pay.13 Petitioners refused to sign the documents and
demanded to be paid their benefits and separation pay.14
Hence, petitioners filed complaintsbefore the Labor Arbiter for alleged
non-payment of separation pay, accrued sick and vacation leaves, and
13th month pay.15 They argued that their accrued benefits and
separation pay should not be withheld becausetheir payment is based on
company policy and practice.16 Moreover, the 13th month pay is based
on law, specifically, Presidential Decree No. 851.17 Their possession of
Solid Mills property is not an accountability that is subject to clearance
procedures.18 They had already turned over to SolidMills their uniforms
and equipment when Solid Mills ceased operations.19
On the other hand, Solid Mills argued that petitioners’ complaint was
premature because they had not vacated its property.20
The Labor Arbiter ruled in favor of petitioners.21 According to the Labor
Arbiter, Solid Mills illegallywithheld petitioners’ benefits and separation
pay.22 Petitioners’ right to the payment of their benefits and separation
pay was vestedby law and contract.23 The memorandum of agreement
dated September 1, 2003 stated no condition to the effect that
petitioners must vacate SolidMills’ property before their benefits could be
given to them.24 Petitioners’ possession should not be construed as
petitioners’ "accountabilities" that must be cleared first before the
release of benefits.25 Their possession "is not by virtue of any employer-
employee relationship."26 It is a civil issue, which isoutside the
jurisdiction of the Labor Arbiter.27
139
The dispositive portion of the Labor Arbiter’s decision reads:
WHEREFORE, premises considered, judgment is entered ORDERING
respondents SOLID MILLS, INC. and/or PHILIP ANG (President), in solido
to pay the remaining 21 complainants:
1) 19 of which, namely EMER MILAN, RAMON MASANGKAY,
ALFREDO JAVIER, RONALDO DAVID, BONIFACIO MATUNDAN,
NORA MENDOZA, MYRNA IGCAS, RAUL DE LAS ALAS, RENATO
ESTOLANO, REX S. DIMAFELIX, MAURA MILAN, JESSICA
BAYBAYON, ALFREDO MENDOZA, ROBERTO IGCAS, ISMAEL
MATA, CARLITO DAMIAN, TEODORA MAHILOM, MARILOU
LINGA, RENATO LINGA their separation pay of 12.625 days’
pay per year of service, pro-rated 13th month pay for 2003
and accrued vacation and sick leaves, plus 12% interest p.a.
from date of filing of the leadcase/judicial demand on
12/08/03 until actual payment and/or finality;
2) the remaining 2 of which, complainants CLEOPATRA
ZACARIAS, as she already received on 12/19/03 her accrued
13th month pay for 2003, accrued VL/SL total amount
of P15,435.16, likewise, complainant Jerry L. Sesma as he
already received his accrued 13th month pay for 2003, SL/VL
in the total amount ofP10,974.97, shall be paid only their
separation pay of 12.625 days’ pay per year of service but also
with 12% interest p.a. from date of filing of the lead
case/judicial demand on 12/08/03 until actual payment and/or
finality, which computation as of date, amount to as shown in
the attached computation sheet.
3) Nine (9) individual complaintsviz., of Maria Agojo, Joey
Suarez, Ronaldo Vergara, Ronnie Vergara, Antonio R. Dulo,
Sr., Bryan D. Durano, Silverio P. Durano, Sr., Elizabeth Duarte
and Purificacion Malabanan are DISMISSED WITH PREJUDICE
due to amicable settlement, whereas, that of [RONIE
ARANAS], [EMILITO NAVARRO], [NONILON PASCO],
[GENOVEVA PASCO], [OLIMPIO A. PASCO] are DISMISSED
WITHOUT PREJUDICE, for lack of interest and/or failure to
prosecute.
The Computation and Examination unit is directed to cause the
computation of the award in Pars. 2 and 3 above.28(Emphasis in the
original)
Solid Mills appealed to the National Labor Relations Commission.29 It
prayed for, among others, the dismissal of the complaints against it and
the reversal of the Labor Arbiter’s decision.30
The National Labor Relations Commission affirmed paragraph 3 of the
Labor Arbiter’s dispositive portion, but reversed paragraphs 1 and 2.
Thus:
WHEREFORE, the Decision of Labor Arbiter Renaldo O. Hernandez dated
10/17/05 is AFFIRMED in so far as par. 3 thereof is concerned but
modified in that paragraphs 1 and 2 thereof are REVERSED and SET
ASIDE. Accordingly, the following complainants, namely: Emir Milan,
Ramon Masangkay, Alfredo Javier, Ronaldo David, Bonifacio Matundan,
Nora Mendoza, Myrna Igcas, Raul De Las Alas, Renato Estolano, Rex S.
Dimaf[e]lix, Maura Milan, Jessica Baybayon, Alfredo Mendoza, Roberto
Igcas, Cleopatra Zacarias and Jerry L. Sesma’s monetary claims in the
form of separation pay, accrued 13th month pay for 2003, accrued
vacation and sick leave pays are held in abeyance pending compliance of
their accountabilities to respondent company by turning over the subject
lots they respectively occupy at SMI Village Sucat
Muntinlupa City, Metro Manila to herein respondent company.31
The National Labor Relations Commission noted that complainants
Marilou Linga, Renato Linga, IsmaelMata, and Carlito Damian were
already paid their respective separation pays and benefits.32 Meanwhile,
Teodora Mahilom already retired longbefore Solid Mills’ closure.33 She
was already given her retirement benefits.34
The National Labor Relations Commission ruled that because of
petitioners’ failure to vacate Solid Mills’ property, Solid Mills was justified
in withholding their benefits and separation pay.35 Solid Mills granted the
petitioners the privilege to occupy its property on accountof petitioners’
employment.36 It had the prerogative toterminate such privilege.37 The
termination of Solid Mills and petitioners’ employer-employee relationship
made it incumbent upon petitioners to turn over the property to Solid
Mills.38
Petitioners filed a motion for partial reconsideration on October 18,
2010,39 but this was denied in the November 30, 2010 resolution.40
Petitioners, thus, filed a petition for certiorari41 before the Court of
Appeals to assail the National LaborRelations Commission decision of
August 31, 2010 and resolution of November 30, 2010.42
On January 31, 2012, the Court of Appeals issued a decision dismissing
petitioners’ petition,43 thus:
WHEREFORE, the petition is hereby ordered DISMISSED. 44
The Court of Appeals ruled thatSolid Mills’ act of allowing its employees
to make temporary dwellingsin its property was a liberality on its part. It
may be revoked any time at its discretion.45 As a consequence of Solid
Mills’ closure and the resulting termination of petitioners, the employer-
employee relationship between them ceased to exist. There was no more
reason for them to stay in Solid Mills’ property.46 Moreover, the
memorandum of agreement between Solid Mills and the union
representing petitioners provided that Solid Mills’ payment of employees’
benefits should be "less accountabilities."47
On petitioners’ claim that there was no evidence that Teodora Mahilom
already received her retirement pay, the Court of Appeals ruled that her
complaint filed before the Labor Arbiter did not include a claim for
retirement pay. The issue was also raised for the first time on appeal,
which is not allowed.48 In any case, she already retired before Solid Mills
ceased its operations.49
The Court of Appeals agreed with the National Labor Relations
Commission’s deletion of interest since it found that Solid Mills’ act of
withholding payment of benefits and separation pay was proper.
Petitioners’ terminal benefits and pay were withheld because of
petitioners’ failure to vacate Solid Mills’ property.50
Finally, the Court of Appeals noted that Carlito Damian already received
his separation pay and benefits.51 Hence, he should no longer be
awarded these claims.52
In the resolution promulgated on July 16, 2012, the Court of Appeals
denied petitioners’ motion for reconsideration.53
Petitioners raise in this petition the following errors:
I
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR WHEN IT RULED THAT
PAYMENT OF THE MONETARY CLAIMS OF PETITIONERS
SHOULD BE HELD IN ABEYANCE PENDING COMPLIANCE OF
THEIR ACCOUNTABILITIES TO RESPONDENT SOLID MILLS BY
TURNING OVER THE SUBJECT LOTS THEY RESPECTIVELY
OCCUPY AT SMI VILLAGE, SUCAT, MUNTINLUPA CITY.
II
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR WHEN IT UPHELD THE
RULING OF THE NLRC DELETING THE INTEREST OF 12% PER
ANNUM IMPOSED BY THE HONORABLE LABOR ARBITER
HERNANDEZ ON THE AMOUNTDUE FROM THE DATE OF
140
 FILING OF THE LEAD CASE/JUDICIAL DEMAND ON DECEMBER
8, 2003 UNTIL ACTUAL PAYMENT AND/OR FINALITY.
III
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR WHEN IT UPHELD THE
RULING OF THE NLRC DENYING THE CLAIM OF TEODORA
MAHILOM FOR PAYMENT OF RETIREMENT BENEFITS DESPITE
LACK OF ANY EVIDENCE THAT SHE RECEIVED THE SAME.
IV
WHETHER OR NOT PETITIONER CARLITO DAMIAN IS
ENTITLED TO HIS MONETARY BENEFITS FROM RESPONDENT
SOLID MILLS.54
Petitioners argue that respondent Solid Mills and NAFLU’s memorandum
of agreement has no provision stating that benefits shall be paid only
upon return of the possession of respondent Solid Mills’ property.55 It
only provides that the benefits shall be "less accountabilities," which
should not be interpreted to include such possession.56 The fact that
majority of NAFLU’s members were not occupants of respondent Solid
Mills’ property is evidence that possession of the property was not
contemplated in the agreement.57 "Accountabilities" should be
interpreted to refer only to accountabilities that wereincurred by
petitioners while they were performing their duties asemployees at the
worksite.58 Moreover, applicable laws, company practice, or policies do
not provide that 13th month pay, and sick and vacation leave pay
benefits, may be withheld pending satisfaction of liabilities by the
employee.59
Petitioners also point out thatthe National Labor Relations Commission
and the Court of Appeals have no jurisdiction to declare that petitioners’
act of withholding possession of respondent Solid Mills’ property is
illegal.60The regular courts have jurisdiction over this issue.61 It is
independent from the issue of payment of petitioners’ monetary
benefits.62
For these reasons, and because, according to petitioners, the amount of
monetary award is no longer in question, petitioners are entitled to 12%
interest per annum.63
Petitioners also argue that Teodora Mahilom and Carlito Damian are
entitled to their claims. They insistthat Teodora Mahilom did not receive
her retirement benefits and that Carlito Damian did not receive his
separation benefits.64
Respondents Solid Mills and Philip Ang,in their joint comment, argue that
petitioners’ failure to turn over respondentSolid Mills’ property
"constituted an unsatisfied accountability" for which reason "petitioners’
benefits could rightfully be withheld."65 The term "accountability" should
be given its natural and ordinary meaning.66 Thus, it should be
interpreted as "a state of being liable or responsible," or
"obligation."67 Petitioners’ differentiation between accountabilities
incurred while performing jobs at the worksite and accountabilities
incurred outside the worksite is baseless because the agreement with
NAFLUmerely stated "accountabilities," without qualification.68
On the removal of the award of 12% interest per annum, respondents
argue that such removal was proper since respondent Solid Mills was
justified in withholding the monetary claims.69 Respondents argue that
Teodora Mahilom had no more cause of action for retirement benefits
claim.70 She had already retired more than a decade before Solid Mills’
closure. She also already received her retirement benefits in
1991.71 Teodora Mahilom’s claim was also not included in the complaint
filed before the Labor Arbiter.It was improper to raise this claim for the
first time on appeal. In any case, Teodora Mahilom’s claim was asserted
long after the three-year prescriptive period provided in Article 291 of
the Labor Code.72
Lastly, according to respondents, it would be unjust if Carlito Damian
would be allowed to receive monetary benefits again, which he,
admittedly, already received from Solid Mills.73
I Petitioners’ claim that they have the right to the immediate release of
The National Labor Relations Commission may preliminarily determine
issues related to rights arising from an employer-employee relationship
The National Labor Relations Commission has jurisdiction to determine,
preliminarily, the parties’rights over a property, when it is necessary to
determine an issue related to rights or claims arising from an employer-
employee relationship.
Article 217 provides that the Labor Arbiter, in his or her original
jurisdiction, and the National Labor Relations Commission, in its
appellate jurisdiction, may determine issues involving claims arising from
employeremployee relations. Thus:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION.
– (1) Except as otherwise provided under this Code, the Labor Arbiters
shall have original and exclusive jurisdiction to hear and decide within
thirty (30) calendar days after the submission of the case by the parties
for decision without extension, even in the absence of stenographic
notes, the following cases involving workers, whether agricultural or
non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases
that workers may file involving wages, rates of pay, hours of
work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code,
including questions involving the legality of strikes and
lockouts; and
6. Except claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims, arising from
employer-employee relations including those of persons in
domestic or household service, involving an amount exceeding
five thousand pesos (P5,000.00), regardless of whether
accompanied with a claim for reinstatement.
(2) The Commission shall have exclusive appellate jurisdiction over all
cases decided by Labor Arbiters. (Emphasis supplied)
their benefits as employees separated from respondent Solid Mills is a
question arising from the employer-employee relationship between the
parties.
Claims arising from an employer-employee relationship are not limited to
claims by an employee. Employers may also have claims against the
employee, which arise from the same relationship. In Bañez v.
Valdevilla,74 this court ruled that Article 217 of the Labor Code also
applies to employers’ claim for damages, which arises from or is
connected with the labor issue. Thus: Whereas this Court in a number of
occasions had applied the jurisdictional provisions of Article 217 to claims
for damages filed by employees, we hold that by the designating clause
"arising from the employer-employee relations" Article 217 should apply
with equal force to the claim of an employer for actual damages against
its dismissed employee, where the basis for the claim arises from or is
necessarily connected with the factof termination, and should be entered
as a counterclaim in the illegal dismissal case.75
Bañez was cited in Domondon v. National Labor Relations
Commission.76 One of the issues in Domondonis whether the Labor
Arbiter has jurisdiction to decide an issue on the transfer of ownership of
141
a vehicle assigned to the employee. It was argued that only regular
courts have jurisdiction to decide the issue.77
This court ruled that since the transfer of ownership of the vehicle to the
employee was connected to his separation from the employer and arose
from the employer-employee relationship of the parties, the employer’s
claim fell within the LaborArbiter’s jurisdiction.78
As a general rule, therefore, a claim only needs to be sufficiently
connected to the labor issue raisedand must arise from an
employeremployee relationship for the labortribunals to have jurisdiction.
In this case, respondent Solid Mills claims that its properties are in
petitioners’ possession by virtue of their status as its employees.
Respondent Solid Mills allowed petitioners to use its property as an act of
liberality. Put in other words, it would not have allowed petitioners to use
its property had they not been its employees. The return of its properties
in petitioners’ possession by virtue of their status as employees is an
issue that must be resolved to determine whether benefits can be
released immediately. The issue raised by the employer is, therefore,
connected to petitioners’ claim for benefits and is sufficiently intertwined
with the parties’ employeremployee relationship. Thus, it is properly
within the labor tribunals’ jurisdiction.
II
Institution of clearance procedures has legal bases
Requiring clearance before the release of last payments to the employee
is a standard procedure among employers, whether public or private.
Clearance procedures are instituted to ensure that the properties, real or
personal, belonging to the employer but are in the possession of the
separated employee, are returned tothe employer before the employee’s
departure.
As a general rule, employers are prohibited from withholding wages from
employees. The Labor Code provides:
Art. 116. Withholding of wages and kickbacks prohibited.It shall be
unlawful for any person, directly or indirectly, to withhold any amount
from the wages of a worker or induce him to give up any part of his
wages by force, stealth, intimidation, threat or by any other means
whatsoever without the worker’s consent.
The Labor Code also prohibits the elimination or diminution of benefits.
Thus:
Art. 100. Prohibition against elimination or diminution of benefits.
Nothing in this Book shall be construed to eliminate or in any way
diminish supplements, or other employee benefits being enjoyed at the
time of promulgation of this Code.
However, our law supports the employers’ institution of clearance
procedures before the release of wages. As an exception to the general
rule that wages may not be withheld and benefits may not be
diminished, the Labor Code provides:
Art. 113. Wage deduction.No employer, in his own behalf or in behalf of
any person, shall make any deduction from the wages of his employees,
except:
1. In cases where the worker is insured with his consent by
the employer, and the deduction is to recompense the
employer for the amount paid by him as premium on the
insurance;
2. For union dues, in cases where the right of the worker or
his union to check-off has been recognized by the employer or
authorized in writing by the individual worker concerned; and
3. In cases where the employer is authorized by law or
regulations issued by the Secretary of Labor and Employment.
(Emphasis supplied)
The Civil Code provides that the employer is authorized to withhold
wages for debts due:
Article 1706. Withholding of the wages, except for a debt due, shall not
be made by the employer.
"Debt" in this case refers to any obligation due from the employee to the
employer. It includes any accountability that the employee may have to
the employer. There is no reason to limit its scope to uniforms and
equipment, as petitioners would argue.
More importantly, respondent Solid Mills and NAFLU, the union
representing petitioners, agreed that the release of petitioners’ benefits
shall be "less accountabilities."
"Accountability," in its ordinary sense, means obligation or debt. The
ordinary meaning of the term "accountability" does not limit the
definition of accountability to those incurred in the worksite. As long as
the debt or obligation was incurred by virtue of the employer-employee
relationship, generally, it shall be included in the employee’s
accountabilities that are subject to clearance procedures.
It may be true that not all employees enjoyed the privilege of staying in
respondent Solid Mills’ property. However, this alone does not imply that
this privilege when enjoyed was not a result of the employer-employee
relationship. Those who did avail of the privilege were employees of
respondent Solid Mills. Petitioners’ possession should, therefore, be
included in the term "accountability."
Accountabilities of employees are personal. They need not be uniform
among all employees in order to be included in accountabilities incurred
by virtue of an employer-employee relationship. Petitioners do not
categorically deny respondent Solid Mills’ ownership of the property, and
they do not claim superior right to it. What can be gathered from the
findings ofthe Labor Arbiter, National Labor Relations Commission, and
the Court ofAppeals is that respondent Solid Mills allowed the use of its
property for the benefit of petitioners as its employees. Petitioners were
merely allowed to possess and use it out of respondent Solid Mills’
liberality. The employer may, therefore, demand the property at will.79
The return of the property’s possession became an obligation or liability
on the part of the employees when the employer-employee relationship
ceased. Thus, respondent Solid Mills has the right to withhold petitioners’
wages and benefitsbecause of this existing debt or liability. In Solas v.
Power and Telephone Supply Phils., Inc., et al., this court recognized this
right of the employer when it ruled that the employee in that case was
not constructively dismissed.80 Thus:
There was valid reason for respondents’ withholding of petitioner’s salary
for the month of February 2000. Petitioner does not deny that he is
indebted to his employer in the amount of around 95,000.00.
Respondents explained that petitioner’s salary for the period of February
1-15, 2000 was applied as partial payment for his debt and for
withholding taxes on his income; while for the period of February 15-28,
2000, petitioner was already on absence without leave, hence, was not
entitled to any pay.81
The law does not sanction a situation where employees who do not even
assert any claim over the employer’s property are allowed to take all the
benefits out of their employment while they simultaneously withhold
possession of their employer’s property for no rightful reason.
Withholding of payment by the employer does not mean that the
employer may renege on its obligation to pay employees their wages,
termination payments, and due benefits. The employees’ benefits are
also not being reduced. It is only subjectedto the condition that the
employees return properties properly belonging to the employer. This is
only consistent with the equitable principle that "no one shall be unjustly
enriched or benefited at the expense of another."82
142
For these reasons, we cannot hold that petitioners are entitled to interest
of their withheldseparation benefits. These benefits were properly
withheld by respondent Solid Mills because of their refusal to return its
property.
III
labor and employer have social utility, and the law is not so biased that it
does not find a middle ground to give each their due.
Clearly, in this case, it is for the workers to return their housing in
exchange for the release of their benefits.1âwphi1 This is what they
agreed upon. It is what is fair in the premises.

Mahilom and Damian are not entitled to the benefits claimed WHEREFORE, the petition is DENIED. The Court of Appeals' decision is
AFFIRMED.
Teodora Mahilom is not entitled to separation benefits.

Both the National Labor Relations Commission and the Court of Appeals
found that Teodora Mahilom already retired long before respondent Solid
Mills’ closure. They found that she already received her retirement
benefits. We have no reason to disturb this finding. This court is not a
trier of facts. Findings of the National Labor Relations Commission,
especially when affirmed by the Court of Appeals, are binding upon this
court.83

Moreover, Teodora Mahilom’s claim for retirement benefits was not

included in her complaint filed before the Labor Arbiter. Hence, it may
not be raised in the appeal.

Similarly, the National Labor Relations Commission and the Court of

Appeals found that Carlito Damian already received his terminal benefits.
Hence, he may no longer claim terminal benefits. The fact that
respondent Solid Mills has not yet demolished Carlito Damian’s house in
SMI Village is not evidence that he did not receive his benefits. Both the
National Labor Relations Commission and the Court of Appeals found
that he executed an affidavit stating that he already received the
benefits.

A bsent any showing that the National Labor Relations Commission and
the Court of Appeals misconstrued these facts, we will not reverse these
findings.

Our laws provide for a clear preference for labor. This is in recognition of
the asymmetrical power of those with capital when they are left to
negotiate with their workers without the standards and protection of law.
In cases such as these, the collective bargaining unit of workers are able
to get more benefits and in exchange, the owners are able to continue
with the program of cutting their losses or wind down their operations
due to serious business losses. The company in this case did all that was
required by law.

The preferential treatment given by our law to labor, however, is not a

license for abuse.84 It is not a signal to commit acts of unfairness that
will unreasonably infringe on the property rights of the company. Both
143