[G.R. No. L-8967. May 31, 1956.

ANASTACIO VIAÑA, Petitioner, vs. ALEJO AL-LAGADAN and FILOMENA PIGA, Respondents.

DECISION

CONCEPCION, J.:

Petitioner Anastacio Viaña owned the fishing sailboat “Magkapatid”, which, in the night of
September 3, 1948, sunk in the waters between the province of Bataan and the island of
Corregidor, as a consequence of a collision with the USS “TINGLES”, a vessel of the U.S. Navy.
Inasmuch as Alejandro Al-Lagadan, a member of the crew of the “Magkapatid”, disappeared
with the craft, his parents, Respondent Alejo Al-Lagadan and Filomena Piga, filed the
corresponding claim for compensation under Act No. 3428. After appropriate proceedings, a
Referee of the Workmen’s Compensation Commission rendered a decision, dated February 23,
1953:chanroblesvirtuallawlibrary

“1. Ordering Mr. Anastacio Viaña to pay the above-named claimants through the Workmen’s
Compensation Commission, Manila, the sum of P1,560 in lump sum with interest at 6 per cent
from September 3, 1948 until fully paid; chan roblesvirtualawlibraryand.

“To pay the sum of P16 to the Workmen’s Compensation Commission as costs.”

Said decision was, on petition for review filed by Viaña, affirmed by the Workmen’s
Compensation Commissioner, on or about October 22, 1954, “with additional fee of P5.00”. Said
Commissioner, having subsequently denied a reconsideration of this action, Viaña has brought
the matter to us, for review by certiorari, upon the ground that this case does not fall within the
purview of Act No. 3428, because the gross income of his business for the year 1947 was
allegedly less than P10,000, and because Alejandro Al-Lagadan was, at the time of his death,
his (Petitioner’s) industrial partner, not his employee.

The first ground is untenable, Petitioner not having invoked it before the rendition of the
Referee’s decision on February 23, 1953. The objection to the application of Act No. 3428, upon
said ground, was made for the first time when Petitioner sought a review of said decision by the
Workmen’s Compensation Commissioner. The non- applicability of said Act to employers whose
gross income does not reach P20,000 is, however, a matter of defense, which cannot be
availed of unless pleaded in the employer’s answer to the claim for compensation filed by the
employee or his heirs. Petitioner herein having failed to do so, said defense may not now be
entertained (Rolan vs. Perez, 63 Phil., 80, 85-86).

As regards the second ground, Petitioner maintains, contrary to the finding of the Referee and
said Commissioner, that the deceased was his industrial partner, not employee. In this
connection, it is alleged in paragraph (6) of the petition:chanroblesvirtuallawlibrary

“That the practice observed then and now in engaging the services of crewmen of sailboats
plying between Mindoro and Manila is on a partnership basis, to wit:chanroblesvirtuallawlibrary
that the owner of the vessel, on one hand receives one-half of the earnings of the sailboat after
deducting the expenses for the maintenance of the crew, the other half is divided pro rata
among the members of the crew, the ‘patron’ or captain receiving four parts, the ‘piloto’ or next
in command three parts, the wheelsman or ‘timonel’ 1 1/2 parts and the rest of the members of
the crew one part each, as per Annex ‘B’ hereof.”

It appears that, before rendering his aforementioned decision, the Referee requested Mr.
Manuel O. Morente, an attorney of the Workmen’s Compensation Commission, “to look into and
inquire and determine the method of and the basis of engaging the services of crewmen for
sailboats (batel) of twenty (20) tons or more plying between Manila and Mariveles and moored
along Manila North Harbor”, and that, thereafter, said Atty. Morente
reported:chanroblesvirtuallawlibrary

“The basis of engaging the services of crewmen of a batel is determined in accordance with the
contract executed between the owner and the patron. The contract commonly followed is on a
share basis after deducting all the expenses incurred on the voyage. One half goes to the owner
of the batel and the other half goes to the patron and the members of the crew and divided
among themselves on a share basis also in accordance with their agreement with the patron
getting the lion’s share. The hiring of the crew is done by the patron himself. Usually, when a
patron enters into a contract with the owner of the batel, he has a crew ready with him.” (Italics
supplied.)

In sustaining the Referee’s finding to the effect that the deceased was an employee of Viaña,
the Workmen’s Compensation Commissioner said:chanroblesvirtuallawlibrary

“The trial referee found that there was an employer-employee relation between the Respondent
and the deceased, Alejandro Al-Lagadan, and the share which the deceased received at the
end of each trip was in the nature of ‘wages’ which is defined under section 39 of the
Compensation Act. This is so because such share could be reckoned in terms of money. In
other words, there existed the relation of employer and employee between the Respondent and
Alejandro Al-Lagadan at the time of the latter’s death.

“We believe that the trial referee did not err in finding the deceased an employee of the
Respondent. We cite the following cases which illustrate the point at
issue:chanroblesvirtuallawlibrary

‘The officers and crews of whaling and other fishing vessels who are to receive certain
proportions of produce of the voyage in lieu of wages; chan roblesvirtualawlibrary(Rice vs.
Austin, 17 Mass. 206; chan roblesvirtualawlibrary2Y & C. 61); chan
roblesvirtualawlibraryCaptains of merchant ships who, instead of wages, receive shares in the
profits of the adventure; chan roblesvirtualawlibrary(4 Maule & C. 240); chan
roblesvirtualawlibraryor who take vessels under an agreement to pay certain charges and
receive a share of the earnings; chan roblesvirtualawlibrary(Tagard vs. Loring, 16 Mass. 336, 8
Am. Dec. 140; chan roblesvirtualawlibraryWinsor vs. Cutts, 7 Greenl. Me. 261) have generally
been held not to be partners with the Respondent, and the like. Running a steamboat on shares
does not make the owners partners in respect to the vessel (The Daniel Koine, 35 Fed. 785);
chan roblesvirtualawlibraryso of an agreement between two parties to farm on shares; chan
roblesvirtualawlibrary(Hooloway vs. Brinkley, 42 Ga. 226); chan roblesvirtualawlibraryA seaman
who is to receive pay in proportion to the amount of fish caught is not a partner; chan
roblesvirtualawlibrary(Holdren vs. French, 68 Me. 241); chan roblesvirtualawlibrarysharing
profits in lieu of wages is not a partnership. There is no true contribution; chan
roblesvirtualawlibrary(Crawford vs. Austin, 34 Md. 49; chan roblesvirtualawlibraryWhitehill vs.
Shickle, 43 Mo. 538; chan roblesvirtualawlibrarySankey vs. Iron Works, 44 Ga. 228.)’“ (Italics
supplied.)

In other words, in the opinion of the Referee, as well as of said Commissioner, the mere fact
that Alejandro’s share in the understanding “could be reckoned in terms of money”, sufficed to
characterize him as an employee of Viaña. We do not share this view. Neither can we accept,
however, Petitioner’s theory to the effect that the deceased was his partner, not an employee,
simply because he (the deceased) shared in the profits, not in the losses. In determining the
existence of employer-employee relationship, the following elements are generally considered,
namely:chanroblesvirtuallawlibrary (1) the selection and engagement of the employee; chan
roblesvirtualawlibrary(2) the payment of wages; chan roblesvirtualawlibrary(3) the power of
dismissal; chan roblesvirtualawlibraryand (4) the power to control the employees’ conduct —
although the latter is the most important element (35 Am. Jur. 445). Assuming that the share
received by the deceased could partake of the nature of wages — on which we need not, and
do not, express our view — and that the second element, therefore, exists in the case at bar,
the record does not contain any specific data regarding the third and fourth elements.

With respect to the first element, the facts before us are insufficient to warrant a reasonable
conclusion, one way or the other. On the one hand, Atty. Morente said, in his aforementioned
report, that “the contract commonly followed is on a share basis cralaw The hiring of a crew is
done by the patron himself. Usually, when a patron enters into a contract with the owner of the
batel, he has a crew ready with him”. This statement suggests that the members of the crew are
chosen by the patron, seemingly, upon his sole responsibility and authority. It is noteworthy,
however, that said report referred to a practice commonly and “usually” observed in a given
place. The record is silent on whether such practice had been followed in the case under
consideration. More important still, the language used in said report may be construed as
intimating, not only that the “patron” selects and engages the crew, but, also, that the members
thereof are subject to his control and may be dismissed by him. To put it differently, the literal
import of said report is open to the conclusion that the crew has a contractual relation, not with
the owner of the vessel, but with the patron, and that the latter, not the former, is either their
employer or their partner.
Upon the other hand, the very allegations of the petition show otherwise, for Petitioner explicitly
averred therein that the deceased Alejandro Al-Lagadan was his “industrial partner”. This
implies that a contract of partnership existed between them and that, accordingly, if the crew
was selected and engaged by the “patron”, the latter did so merely as agent or representative of
Petitioner herein. Again, if Petitioner were a partner of the crew members, then neither the
former nor the patron could control or dismiss the latter.

In the interest of justice and equity, and considering that a decision on the merits of the issue
before us may establish an important precedent, it would be better to remand the case to the
Workmen’s Compensation Commission for further evidence and findings on the following
questions:chanroblesvirtuallawlibrary (1) who selected the crew of the “Magkapatid” and
engaged their services; chan roblesvirtualawlibrary(2) if selected and engaged by the “patron”,
did the latter act in his own name and for his own account, or on behalf and for the account of
Viaña; chan roblesvirtualawlibrary(3) could Viaña have refused to accept any of the crew
members chosen and engaged by the “patron”; chan roblesvirtualawlibrary(4) did Petitioner
have authority to determine the time when, the place where and/or the manner or conditions in
or under which the crew would work; chan roblesvirtualawlibraryand (5) who could dismiss its
members.

Wherefore, let the case be remanded to the Workmen’s Compensation Commission, for further
proceedings in conformity with this decision, without special pronouncement as to costs. SO
ORDERED.

G.R. No. L-9110 April 30, 1957

JOSEFA VDA. DE CRUZ, ET AL., plaintiffs-appellants,

vs.
THE MANILA HOTEL COMPANY, defendant-appellee.

Javier and Javier for appellants.

Government Corporate Counsel Ambrosio Padilla and Panfilo B. Morales for appellee.

BENGZON, J.:

On May 22, 1954 and for several years before, Tirso Cruz with his orchestra furnished music to
the Manila Hotel under the arrangement hereafter to be set forth. On that date the corporation
owning the Hotel gave written notice to its employees that beginning July 1, 1954 the Hotel
would be leased to the Bay View Hotel, and that those employees to be laid off would be
granted a separation gratuity computed according to specified terms and conditions.

Cruz and his musicians claimed the gratuity; but the Manila Hotel management denied their
claim saying they were not its employees. Wherefore they instituted this action in the Manila
court of first instance in December 1954.
On motion by defendant and after hearing the parties, the Hon. Francisco E. Jose, Judge,
issued an order dismissing the complaint on the ground that plaintiffs had no cause of action
against defendant since they were not its employees. Hence this appeal directly to this Court,
involving only questions of law. In the meantime Tirso Cruz the band leader died; he is now
substituted by his legal heirs. However for convenience we shall refer to him as if he were still a
party to the proceedings.

The complaint alleged that plaintiffs "were members of the orchestra which had been employed
by the defendant to furnish music in the Manila Hotel"; that they were employees of the Hotel,
and that contrary to the announcement (Annex A) promising gratuities to its "employees" the
Hotel Management had refused to pay plaintiffs. The complaint attached a Copy of the
announcement which partly reads as follows:

. . . . It is for this reason that the necessary authority has already been secured for the payment
of separation gratuity to the employees to be laid off as a result of the lease and who are not yet
entitled to either the optional or compulsory retirement insurance provided under Republic Act
No. 660, as amended, . . . .

The defendant filed a motion to dismiss alleging that plaintiffs were not its employees, under the
terms of the contract whereby they had rendered services to the hotel, copy of which was
attached as Exhibit 1. It also alleged plaintiffs did not fall within the terms of Annex A because
they were not, and never had been members of the Government Service Insurance System.
Plaintiffs replied to the motion, did not deny the terms of Exhibit 1, nor the allegations of non-
membership in the Government Service Insurance System; but insisted they were employees of
the Hotel.

The controversy could therefore be decided and it was decide in the light of the terms of Exhibit
1 and Annex A, plus the factual allegations expressly or impliedly admitted by the contending
parties.

At the outset the following consideration presents itself: plaintiffs' right is not predicated on some
statutory provision, but upon the offer or promise contained in Annex A. Such offer or promise
having been written by the defendant, it is logical to regard said defendant to in the best position
to state who were the employees contemplated in the aforesaid Annex A. The defendant
asserts these musicians were not included; therefore such assertion should be persuasive, if not
conclusive. Let it be emphasized that Annex A is not a contract, but a mere offer of gratuity, the
beneficiaries of which normally depended upon the free selection of the offeror.

Independently however of the Hotel's interpretation of its own announcement, and analyzing the
terms of Annex A, we notice that it extends to those employees of the Hotel who were "not yet
entitled to either the optional or compulsory retirement insurance provided under Republic Act
No. 660". And then we read that retirement insurance under Republic Act No. 660 is given only
to those insured with the Government Service Insurance System or the G.S.I.S.; and that the
herein plaintiffs were never members of (insured with) such Insurance System. Wherefore the
inevitable conclusion flows that even if these plaintiffs were "employees" of the Hotel in general,
they cannot claim to be beneficiaries under Annex A, because they could not qualify as
employees "who were not yet entitled to retirement insurance under the G.S.I.S." The quoted
portion of the announcement implied reference to employees insured by the Government
Insurance System.

Still going further, are these plaintiffs "employees" of the Hotel? None of them except Tirzo Cruz
and Ric Cruz, is mentioned in the contract Exhibit 1. None has submitted any contract or
appointment except said Exhibit 1. Obviously their connection with the Hotel was only thru Tirso
Cruz who was the leader of the orchestra; and they couldn't be in a better class than Tirso Cruz
who dealt with the Hotel. Was Tirso Cruz an employee? Or was he an independent contractor,
as held by the trial court?

It will be observed that by Annex 1 the Manila Hotel contracted or engaged the "services of your
orchestra" (of Tirso Cruz) composed of fifteen musicians including yourself plus Ric Cruz as
vocalist" at P250 per day, said orchestra to "play from 7:30 p.m. to closing time daily". What
pieces the orchestra shall play, and how the music shall be arranged or directed, the intervals
and other details — such are left to the leader's discretion. The music instruments, the music
papers and other paraphernalia are not furnished by the Hotel, they belong to the orchestra,
which in turn belongs to Tirso Cruz — not to the Hotel. The individual musicians, and the
instruments they have not been selected by the Hotel. It reserved no power to discharge any
musician. How much salary is given to the individual members is left entirely to "the orchestra"
or the leader. Payment of such salary is not made by the Hotel to the individual musicians, but
only a lump-sum compensation is given weekly to Tirso Cruz.

Considering the above features of the relationship, in connection with the tests indicated by
numerous authorities, it is our opinion that Tirso Cruz was not an employee of the Manila Hotel,
but one engaged to furnish music to said hotel for the price of P250.00 daily, in other words, an
independent contractor1 within the meaning of the law of master and servant.

An independent contractor is one who in rendering services, exercises an independent

employment or occupation and represents the will of his employer only as to the results of his
work and not as to the means whereby it is accomplished; one who exercising an independent
employment, contracts to do a piece of work according to his own methods, without being
subject to the control of his employer except as to the result of his work; and who engages to
perform a certain service for another, according to his own manner and methods, without being
subject to the control of his employer except as to the result of his work; and who engages to
perform a certain service for another, according to his own manner and method, free from the
control and direction of his employer in all matters connected with the performance of the
service, except as to the result of the work. (56 C. J. S. pp. 41-43.)

Among the factors to be considered are whether the contractor is carrying on an independent
business; whether the work is part of the employer's general business; the nature and extent of
the work; the skill required; the term and duration of the relationship; the right to assign the
performance of the work to another; the power to terminate the relationship; the existence of a
contract for the performance of a specified piece of work; the control and supervision of the
work; the employer's powers and duties with respect to the hiring, firing, and payment of the
contractor's servants; the control of the premises; the duty to supply the premises, tools,
appliances, material and labor; and the mode, manner, and terms of payment. (56 C. J. S. p.
46.) (Emphasis ours.)

Not being employees of the Manila Hotel, the plaintiff's have no cause of action against the
latter under Annex A. The order of dismissal is therefore affirmed, with costs against them. So
ordered.

G.R. No. L-12582 January 28, 1961

LVN PICTURES, INC., petitioner-appellant,

vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS,
respondents-appellees.

x---------------------------------------------------------x

G.R. No. L-12598 January 28, 1961

SAMPAGUITA PICTURES, INC., petitioner-appellant,

vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS,
respondents-appellees.

Nicanor S. Sison for petitioner-appellant.

Jaime E. Ilagan for respondent-appellee Court of Agrarian Relations.
Gerardo P. Cabo Chan for respondent-appellee Philippine Musicians Guild.

CONCEPCION, J.:

Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc. seek a review by certiorari
of an order of the Court of Industrial Relations in Case No. 306-MC thereof, certifying the
Philippine Musicians Guild (FFW), petitioner therein and respondent herein, as the sole and
exclusive bargaining agency of all musicians working with said companies, as well as with the
Premiere Productions, Inc., which has not appealed. The appeal of LVN Pictures, Inc., has been
docketed as G.R. No. L-12582, whereas G.R. No. L-12598 is the appeal of Sampaguita
Pictures, Inc. Involving as they do the same order, the two cases have been jointly heard in this
Court, and will similarly be disposed of.
In its petition in the lower court, the Philippine Musicians Guild (FFW), hereafter referred to as
the Guild, averred that it is a duly registered legitimate labor organization; that LVN Pictures,
Inc., Sampaguita Pictures, Inc., and Premiere Productions, Inc. are corporations, duly organized
under the Philippine laws, engaged in the making of motion pictures and in the processing and
distribution thereof; that said companies employ musicians for the purpose of making music
recordings for title music, background music, musical numbers, finale music and other incidental
music, without which a motion picture is incomplete; that ninety-five (95%) percent of all the
musicians playing for the musical recordings of said companies are members of the Guild; and
that the same has no knowledge of the existence of any other legitimate labor organization
representing musicians in said companies. Premised upon these allegations, the Guild prayed
that it be certified as the sole and exclusive bargaining agency for all musicians working in the
aforementioned companies. In their respective answers, the latter denied that they have any
musicians as employees, and alleged that the musical numbers in the filing of the companies
are furnished by independent contractors. The lower court, however, rejected this pretense and
sustained the theory of the Guild, with the result already adverted to. A reconsideration of the
order complained of having been denied by the Court en banc, LVN Pictures, inc., and
Sampaguita Pictures, Inc., filed these petitions for review for certiorari.

Apart from impugning the conclusion of the lower court on the status of the Guild members as
alleged employees of the film companies, the LVN Pictures, Inc., maintains that a petition for
certification cannot be entertained when the existence of employer-employee relationship
between the parties is contested. However, this claim is neither borne out by any legal provision
nor supported by any authority. So long as, after due hearing, the parties are found to bear said
relationship, as in the case at bar, it is proper to pass upon the merits of the petition for
certification.

It is next urged that a certification is improper in the present case, because, "(a) the petition
does not allege and no evidence was presented that the alleged musicians-employees of the
respondents constitute a proper bargaining unit, and (b) said alleged musicians-employees
represent a majority of the other numerous employees of the film companies constituting a
proper bargaining unit under section 12 (a) of Republic Act No. 875."

The absence of an express allegation that the members of the Guild constitute a proper
bargaining unit is fatal proceeding, for the same is not a "litigation" in the sense in which this
term is commonly understood, but a mere investigation of a non-adversary, fact finding
character, in which the investigating agency plays the part of a disinterested investigator
seeking merely to ascertain the desires of employees as to the matter of their representation. In
connection therewith, the court enjoys a wide discretion in determining the procedure necessary
to insure the fair and free choice of bargaining representatives by employees.1 Moreover, it is
alleged in the petition that the Guild it a duly registered legitimate labor organization and that
ninety-five (95%) percent of the musicians playing for all the musical recordings of the film
companies involved in these cases are members of the Guild. Although, in its answer, the LVN
Pictures, Inc. denied both allegations, it appears that, at the hearing in the lower court it was
merely the status of the musicians as its employees that the film companies really contested.
Besides, the substantial difference between the work performed by said musicians and that of
other persons who participate in the production of a film, and the peculiar circumstances under
which the services of that former are engaged and rendered, suffice to show that they constitute
a proper bargaining unit. At this juncture, it should be noted that the action of the lower court in
deciding upon an appropriate unit for collective bargaining purposes is discretionary (N.L.R.B. v.
May Dept. Store Co., 66 Sup. Ct. 468. 90 L. ed. 145) and that its judgment in this respect is
entitled to almost complete finality, unless its action is arbitrary or capricious (Marshall Field &
Co. v. N.L.R.B. [C.C.A. 19431, 135 F. 2d. 891), which is far from being so in the cases at bar.

Again, the Guild seeks to be, and was, certified as the sole and exclusive bargaining agency for
the musicians working in the aforesaid film companies. It does not intend to represent the other
employees therein. Hence, it was not necessary for the Guild to allege that its members
constitute a majority of all the employees of said film companies, including those who are not
musicians. The real issue in these cases, is whether or not the musicians in question are
employees of the film companies. In this connection the lower court had the following to say:

As a normal and usual course of procedure employed by the companies when a picture is to be
made, the producer invariably chooses, from the musical directors, one who will furnish the
musical background for a film. A price is agreed upon verbally between the producer and
musical director for the cost of furnishing such musical background. Thus, the musical director
may compose his own music specially written for or adapted to the picture. He engages his own
men and pays the corresponding compensation of the musicians under him.

When the music is ready for recording, the musicians are summoned through 'call slips' in the
name of the film company (Exh 'D'), which show the name of the musician, his musical
instrument, and the date, time and place where he will be picked up by the truck of the film
company. The film company provides the studio for the use of the musicians for that particular
recording. The musicians are also provided transportation to and from the studio by the
company. Similarly, the company furnishes them meals at dinner time.

During the recording sessions, the motion picture director, who is an employee of the company,
supervises the recording of the musicians and tells what to do in every detail. He solely directs
the performance of the musicians before the camera as director, he supervises the performance
of all the action, including the musicians who appear in the scenes so that in the actual
performance to be shown on the screen, the musical director's intervention has stopped.

And even in the recording sessions and during the actual shooting of a scene, the technicians,
soundmen and other employees of the company assist in the operation. Hence, the work of the
musicians is an integral part of the entire motion picture since they not only furnish the music
but are also called upon to appear in the finished picture.

The question to be determined next is what legal relationship exits between the musicians and
the company in the light of the foregoing facts.
We are thus called upon to apply R.A. Act 875. which is substantially the same as and patterned
after the Wagner Act substantially the same as a Act and the Taft-Hartley Law of the United
States. Hence, reference to decisions of American Courts on these laws on the point-at-issue is
called for.

Statutes are to be construed in the light of purposes achieved and the evils sought to be
remedied. (U.S. vs. American Tracking Association, 310 U.S. 534, 84 L. ed. 1345.) .

In the case of National Labor Relations Board vs. Hearts Publication, 322 U.S. 111, the United
States Supreme Court said the Wagner Act was designed to avert the 'substantial obstruction to
the free flow of commerce which results from strikes and other forms of industrial unrest by
eliminating the causes of the unrest. Strikes and industrial unrest result from the refusal of
employers' to bargain collectively and the inability of workers to bargain successfully for
improvement in their working conditions. Hence, the purposes of the Act are to encourage
collective bargaining and to remedy the workers' inability to bargaining power, by protecting the
exercise of full freedom of association and designation of representatives of their own choosing,
for the purpose of negotiating the terms and conditions of their employment.'

The mischief at which the Act is aimed and the remedies it offers are not confined exclusively to
'employees' within the traditional legal distinctions, separating them from 'independent
contractor'. Myriad forms of service relationship, with infinite and subtle variations in the term of
employment, blanket the nation's economy. Some are within this Act, others beyond its
coverage. Large numbers will fall clearly on one side or on the other, by whatever test may be
applied. Inequality of bargaining power in controversies of their wages, hours and working
conditions may characterize the status of one group as of the other. The former, when acting
alone may be as helpless in dealing with the employer as dependent on his daily wage and as
unable to resist arbitrary and unfair treatment as the latter.'

To eliminate the causes of labor dispute and industrial strike, Congress thought it necessary to
create a balance of forces in certain types of economic relationship. Congress recognized those
economic relationships cannot be fitted neatly into the containers designated as 'employee' and
'employer'. Employers and employees not in proximate relationship may be drawn into common
controversies by economic forces and that the very dispute sought to be avoided might involve
'employees' who are at times brought into an economic relationship with 'employers', who are
not their 'employers'. In this light, the language of the Act's definition of 'employee' or 'employer'
should be determined broadly in doubtful situations, by underlying economic facts rather than
technically and exclusively established legal classifications. (NLRB vs. Blount, 131 F [2d] 585.)

In other words, the scope of the term 'employee' must be understood with reference to the
purposes of the Act and the facts involved in the economic relationship. Where all the conditions
of relation require protection, protection ought to be given .

By declaring a worker an employee of the person for whom he works and by recognizing and
protecting his rights as such, we eliminate the cause of industrial unrest and consequently we
promote industrial peace, because we enable him to negotiate an agreement which will settle
disputes regarding conditions of employment, through the process of collective bargaining.

The statutory definition of the word 'employee' is of wide scope. As used in the Act, the term
embraces 'any employee' that is all employees in the conventional as well in the legal sense
expect those excluded by express provision. (Connor Lumber Co., 11 NLRB 776.).

It is the purpose of the policy of Republic Act 875; (a) To eliminate the causes of industrial
unrest by protecting the exercise of their right to self-organization for the purpose of collective
bargaining. (b) To promote sound stable industrial peace and the advancement of the general
welfare, and the best interests of employers and employees by the settlement of issues
respecting terms and conditions of employment through the process of collective bargaining
between employers and representatives of their employees.

The primary consideration is whether the declared policy and purpose of the Act can be
effectuated by securing for the individual worker the rights and protection guaranteed by the Act.
The matter is not conclusively determined by a contract which purports to establish the status of
the worker, not as an employee.

The work of the musical director and musicians is a functional and integral part of the enterprise
performed at the same studio substantially under the direction and control of the company.

In other words, to determine whether a person who performs work for another is the latter's
employee or an independent contractor, the National Labor Relations relies on 'the right to
control' test. Under this test an employer-employee relationship exist where the person for
whom the services are performed reserves the right to control not only the end to be achieved,
but also the manner and means to be used in reaching the end. (United Insurance Company,
108, NLRB No. 115.).

Thus, in said similar case of Connor Lumber Company, the Supreme Court said:.

'We find that the independent contractors and persons working under them are employees'
within the meaning of Section 2 (3) of its Act. However, we are of the opinion that the
independent contractors have sufficient authority over the persons working under their
immediate supervision to warrant their exclusion from the unit. We shall include in the unit the
employees working under the supervision of the independent contractors, but exclude the
contractors.'

'Notwithstanding that the employees are called independent contractors', the Board will hold
them to be employees under the Act where the extent of the employer's control over them
indicates that the relationship is in reality one of employment. (John Hancock Insurance Co.,
2375-D, 1940, Teller, Labor Dispute Collective Bargaining, Vol.).

The right of control of the film company over the musicians is shown (1) by calling the musicians
through 'call slips' in 'the name of the company; (2) by arranging schedules in its studio for
recording sessions; (3) by furnishing transportation and meals to musicians; and (4) by
supervising and directing in detail, through the motion picture director, the performance of the
musicians before the camera, in order to suit the music they are playing to the picture which is
being flashed on the screen.

Thus, in the application of Philippine statutes and pertinent decisions of the United States
Courts on the matter to the facts established in this case, we cannot but conclude that to
effectuate the policies of the Act and by virtue of the 'right of control' test, the members of the
Philippine Musicians Guild are employees of the three film companies and, therefore, entitled to
right of collective bargaining under Republic Act No. 875.

In view of the fact that the three (3) film companies did not question the union's majority, the
Philippine Musicians Guild is hereby declared as the sole collective bargaining representative
for all the musicians employed by the film companies."

We are fully in agreement with the foregoing conclusion and the reasons given in support
thereof. Both are substantially in line with the spirit of our decision in Maligaya Ship Watchmen
Agency vs. Associated Watchmen and Security Union, L-12214-17 (May 28, 1958). In fact, the
contention of the employers in the Maligaya cases, to the effect that they had dealt with
independent contractors, was stronger than that of the film companies in these cases. The third
parties with whom the management and the workers contracted in the Maligaya cases were
agencies registered with the Bureau of Commerce and duly licensed by the City of Manila to
engage in the business of supplying watchmen to steamship companies, with permits to engage
in said business issued by the City Mayor and the Collector of Customs. In the cases at bar, the
musical directors with whom the film companies claim to have dealt with had nothing
comparable to the business standing of said watchmen agencies. In this respect, the status of
said musical directors is analogous to that of the alleged independent contractor in Caro vs.
Rilloraza, L-9569 (September 30, 1957), with the particularity that the Caro case involved the
enforcement of the liability of an employer under the Workmen's Compensation Act, whereas
the cases before us are merely concerned with the right of the Guild to represent the musicians
as a collective bargaining unit. Hence, there is less reason to be legalistic and technical in these
cases, than in the Caro case.

Herein, petitioners-appellants cite, in support of their appeal, the cases of Sunripe Coconut
Product Co., Inc vs. CIR (46 Off. Gaz., 5506, 5509), Philippine Manufacturing Co. vs. Santos
Vda. de Geronimo, L-6968 (November 29, 1954), Viana vs. Al-Lagadan, L-8967 (May 31, 1956),
and Josefa Vda. de Cruz vs. The Manila Hotel Co. (53 Off. Gaz., 8540). Instead of favoring the
theory of said petitioners-appellants, the case of the Sunripe Coconut Product Co., Inc. is
authority for herein respondents-appellees. It was held that, although engaged as piece-
workers, under the "pakiao" system, the "parers" and "shellers" in the case were, not
independent contractor, but employees of said company, because "the requirement imposed on
the 'parers' to the effect that 'the nuts are pared whole or that there is not much meat wasted,' in
effect limits or controls the means or details by which said workers are to accomplish their
services" — as in the cases before us.

The nature of the relation between the parties was not settled in the Viana case, the same
having been remanded to the Workmen's Compensation Commission for further evidence.

The case of the Philippine Manufacturing Co. involved a contract between said company and
Eliano Garcia, who undertook to paint a tank of the former. Garcia, in turn engaged the services
of Arcadio Geronimo, a laborer, who fell while painting the tank and died in consequence of the
injuries thus sustained by him. Inasmuch as the company was engaged in the manufacture of
soap, vegetable lard, cooking oil and margarine, it was held that the connection between its
business and the painting aforementioned was purely casual; that Eliano Garcia was an
independent contractor; that Geronimo was not an employee of the company; and that the latter
was not bound, therefore, to pay the compensation provided in the Workmen's Compensation
Act. Unlike the Philippine Manufacturing case, the relation between the business of herein
petitioners-appellants and the work of the musicians is not casual. As held in the order appealed
from which, in this respect, is not contested by herein petitioners-appellants — "the work of the
musicians is an integral part of the entire motion picture." Indeed, one can hardly find modern
films without music therein. Hence, in the Caro case (supra), the owner and operator of
buildings for rent was held bound to pay the indemnity prescribed in the Workmen's
Compensation Act for the injury suffered by a carpenter while working as such in one of said
buildings even though his services had been allegedly engaged by a third party who had directly
contracted with said owner. In other words, the repair work had not merely a casual connection
with the business of said owner. It was a necessary incident thereof, just as music is in the
production of motion pictures.

The case of Josefa Vda. de Cruz vs. The Manila Hotel Co., L-9110 (April 30, 1957) differs
materially from the present cases. It involved the interpretation of Republic Act No. 660, which
amends the law creating and establishing the Government Service Insurance System. No labor
law was sought to be construed in that case. In act, the same was originally heard in the Court
of First Instance of Manila, the decision of which was, on appeal, affirmed by the Supreme
Court. The meaning or scope if the term "employee," as used in the Industrial Peace Act
(Republic Act No. 875), was not touched therein. Moreover, the subject matter of said case was
a contract between the management of the Manila Hotel, on the one hand, and Tirso Cruz, on
the other, whereby the latter greed to furnish the former the services of his orchestra, consisting
of 15 musicians, including Tirso Cruz, "from 7:30 p.m. to closing time daily." In the language of
this court in that case, "what pieces the orchestra shall play, and how the music shall be
arranged or directed, the intervals and other details — such are left to the leader's discretion."

This is not situation obtaining in the case at bar. The musical directors above referred to have
no such control over the musicians involved in the present case. Said musical directors control
neither the music to be played, nor the musicians playing it. The film companies summon the
musicians to work, through the musical directors. The film companies, through the musical
directors, fix the date, the time and the place of work. The film companies, not the musical
directors, provide the transportation to and from the studio. The film companies furnish meal at
dinner time.

What is more — in the language of the order appealed from — "during the recording sessions,
the motion picture director who is an employee of the company" — not the musical director —
"supervises the recording of the musicians and tells them what to do in every detail". The motion
picture director — not the musical director — "solely directs and performance of the musicians
before the camera". The motion picture director "supervises the performance of all the actors,
including the musicians who appear in the scenes, so that in the actual performance to be
shown in the screen, the musical director's intervention has stopped." Or, as testified to in the
lower court, "the movie director tells the musical director what to do; tells the music to be cut or
tells additional music in this part or he eliminates the entire music he does not (want) or he may
want more drums or move violin or piano, as the case may be". The movie director "directly
controls the activities of the musicians." He "says he wants more drums and the drummer plays
more" or "if he wants more violin or he does not like that.".

It is well settled that "an employer-employee relationship exists . . .where the person for whom
the services are performed reserves a right to control not only the end to be achieved but also
the means to be used in reaching such end . . . ." (Alabama Highway Express Co., Express Co.,
v. Local 612, 108S. 2d. 350.) The decisive nature of said control over the "means to be used", is
illustrated in the case of Gilchrist Timber Co., et al., Local No. 2530 (73 NLRB No. 210, pp.
1197, 1199-1201), in which, by reason of said control, the employer-employee relationship was
held to exist between the management and the workers, notwithstanding the intervention of an
alleged independent contractor, who had, and exercise, the power to hire and fire said workers.
The aforementioned control over the means to be used" in reading the desired end is
possessed and exercised by the film companies over the musicians in the cases before us.

WHEREFORE, the order appealed from is hereby affirmed, with costs against petitioners
herein. It is so ordered.

G.R. No. 77205 May 27, 1991

VALENTINO TORILLO, petitioner,

vs.
VICENTE LEOGARDO, JR., in his official capacity as Deputy Minister of Labor; the
HONORABLE MINISTER OF LABOR AND EMPLOYMENT; and ABERDEEN COURT, INC.,
respondents.

F.P. Pobre & Associates for petitioner.

Delos Reyes, Bonifacio, Delos Reyes for Aberdeen Court, Inc.

FERNAN, C.J.:

The main issue in this case is whether or not the award of backwages in addition to an award of
separation pay to an illegally dismissed employee whose reinstatement is no longer feasible is
proper.

Petitioner Valentino Torillo, alias "Lady Valerie," was employed as an organist by private
respondent Aberdeen Court, Inc. in October 1977 with a daily compensation of P115.00 for five
hour work a day. On July 2, 1978, he invited his co-employees for a night out in his hometown in
Rosario, Cavite in celebration of his birthday. Private respondent objected to such activity,
requesting its employees, if possible, to refrain from attending the affair because the following
day was a working day. Despite private respondent's objections, petitioner pushed through with
his birthday party.

Petitioner reported for work the next day, July 3. On July 4, 1978, private respondent, through
its Floor Manager, informed petitioner that he was being dismissed from his employment
effective that same day for having defied private respondent's order.

Consequently, on October 8, 1978 petitioner filed with the Ministry of Labor & Employment,
Region IV, a complaint against private respondent for illegal dismissal with prayer for
reinstatement with backwages, including payment of his unpaid wages from July 1 to July 3,
1978, holiday pay and premium pay from February to July 1, 1978. Private respondent tried to
justify petitioner's dismissal by claiming that the latter abandoned his work in failing to report for
duty after his birthday celebration.

On November 23, 1978, the Ministry of Labor, thru Director Francisco L. Estrella, ruled that
private respondent's theory of abandonment of work was without factual and legal basis as
petitioner reported for work on July 3, 1978 immediately following his birthday celebration; and
that his dismissal was without the required prior clearance. Finding petitioner's dismissal as
illegal, Director Estrella ordered private respondent Aberdeen Court, Inc. to reinstate petitioner
to his former position without loss of seniority rights and privileges with full backwages from date
of dismissal on July 4, 1978 until date of actual reinstatement and to pay petitioner his holiday
pay for seven (7) days plus his unpaid wages from July 1 to 3, 1978, However, petitioner's claim
for premium pay was dismissed for lack of merit.1

On December 14, 1978, private respondent Aberdeen Court, Inc. appealed to the Ministry of
Labor (Rollo, pp. 20-23) alleging that there was no factual or legal basis to support the subject
order and that said Director abused his discretion. Petitioner filed on January 3, 1979 his
opposition alleging that the appeal was frivolous and dilatory.

On February 13, 1986, or after seven (7) years, the Ministry of Labor and Employment, thru
Deputy Minister Vicente Leogardo, Jr., issued an order affirming that of Director Estrella with the
modification that in lieu of reinstatement, petitioner should be paid separation pay equivalent to
petitioner's wages for two (2) months.2 A motion for reconsideration dated March 21, 1986 was
filed by private respondent but this was denied in an order dated April 21, 1986.3 Undaunted,
private respondent filed a motion for leave to file second motion for reconsideration attaching
thereto the said second motion.4
Meanwhile, petitioner filed an urgent motion for execution and appointment of special sheriff
dated April 7, 19865 which was opposed by private respondent.6 Thereafter, the Ministry of
Labor, National Capital Region, thru its Officer-in-Charge, Romeo A. Young, issued a writ of
execution on May 13, 1986 directing the sheriff to execute the order of Deputy Minister
Leogardo, Jr.7 requiring private respondent to pay petitioner the total amount of P280,715.00
representing his backwages from July 4, 1978 to February 13, 1986, legal holiday pay for seven
days, separation pay of two (2) months and unpaid wages for three (3) days.

By virtue of said writ, personal properties of private respondent were levied upon. These
personal properties were to have been sold in a public auction scheduled on May 30, 19868
were it not for the motion to quash the writ of execution filed by private respondent on the
grounds that: first, its second motion for reconsideration has not yet been acted upon, second,
backwages should not be awarded to petitioner since the order of Deputy Minister Leogardo, Jr.
on February 13, 1986 stated that in lieu of reinstatement, petitioner should only be paid
separation pay equivalent to his wages for two (2) months, third, assuming that petitioner is
entitled to backwages, the law allows the employer to deduct from his backwages his income
earned elsewhere during the time he was out of work; and fourth, private respondent should be
present during the computation of the monetary award.9

Petitioner filed an opposition to this motion as well as a supplemental motion for execution citing
Section 2, Rule XV of the Implementing Rules & Regulations of the New Labor Code, which
states that the decision of the Secretary of Labor shall be immediately executory, pending
appeal, unless stayed by the order of the President of the Philippines.10

On May 30, 1986, Officer-in-charge Romeo A. Young of the Ministry of Labor, National Capital
Region, issued a restraining order enjoining the assigned sheriff from proceeding with the
auction sale of the levied properties of private respondent until further orders.11 However, on
July 23, 1986, he recalled the restraining order issued and directed the sheriff to proceed with
the execution.12

Thereafter, private respondent appealed to the Office of the Minister of Labor praying that the
July 23, 1986 Order be set aside and should private respondent be liable to pay backwages to
complainant, the same be computed following the guidelines set forth by this Court.13

On September 8, 1986, Deputy Minister Vicente Leogardo, Jr. issued an order setting aside the
order dated July 23, 1986, stating therein that the February 13, 1986 Order stands with the
clarification that the affirmative relief granted to complainant does not include the payment of
backwages. In addition, the writ of execution dated May 13, 1986 to enforce payment of
backwages in the amount of P280,715.00 was quashed.14

On September 11, 1986, petitioner filed a motion for reconsideration of said order but the same
was denied on November 12, 1986 by Minister of Labor Augusta Sanchez.15
Hence, this recourse by petitioner.

Preliminarily, it must be stressed that the illegality of petitioner's dismissal is a matter long
settled in the Order dated November 23, 1978 issued by Director Estrella, which on appeal, was
affirmed by then Deputy Minister Vicente Leogardo, Jr. on February 13, 1986. The finding of
illegality of dismissal having thus attained finality, petitioner now questions the scope and extent
of the reliefs granted to him by public respondent.

The dispute in the instant case arose when Deputy Minister Leogardo, Jr. issued an Order on
September 8, 198616 clarifying his previous Order of February 13, 198617 by declaring in the
clarificatory order that the dispositive portion of the Order of February 13, 1986 should not be
accorded the interpretation that backwages are likewise included as due the complainant
(petitioner) for the affirmative relief of backwages is available only where reinstatement is
ordered.

We find the clarificatory order erroneous in so far as it declared that the affirmative relief of
backwages is available only where reinstatement is ordered.18

A number of cases have already been decided by this Court whereby an illegally dismissed
employee is awarded both backwages and separation pay.

Article 280 (now Article 279) of the Labor Code provides that "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 . . . ." Backwages in general are granted on grounds of
equity for earnings which a worker or employee has lost due to his illegal dismissal.19
Reinstatement, on the other hand, means restoration to a state of condition from which one had
been removed or separated.20

Backwages and reinstatement are two reliefs given to an illegally dismissed employee. They are
separate and distinct from each other.1awp++i1 However, in the event that reinstatement is no
longer possible, separation pay is awarded to the employee. Thus, the award of separation pay
is in lieu of reinstatement and not of backwages. In other words, an illegally dismissed employee
is entitled to (1) either reinstatement, if viable, or separation pay if reinstatement is no longer
viable and (2) backwages.

The distinction between separation pay and backwages has been exhaustively discussed by
this Court in Santos vs. NLRC, et. al,21 wherein we held:

The normal consequences of a finding that an employee has been illegally dismissed are, firstly,
that the employee becomes entitled to reinstatement to his former position without loss of
seniority rights and, secondly, the payment of backwages corresponding to the period from his
illegal dismissal up to actual reinstatement. The statutory intent on this matter is clearly
discernible. Reinstatement restores the employee who was unjustly dismissed to the position
from which he was removed, that is, to his status quo ante dismissal, while the grant of
backwages allows the same employee to recover from the employer that which he had lost by
way of wages as a result of his dismissal. These twin remedies-reinstatement and payment of
backwages — make the dismissed employee whole who can then look forward to continued
employment. Thus do these two remedies give meaning and substance to the constitutional
right of labor to security of tenure. The two forms of relief are distinct and separate, one from the
other. Though the grant of reinstatement commonly carries with it an award of backwages, the
inappropriateness or non-availability of one does not carry with it the inappropriateness or non-
availability of the other. Separation pay was awarded in favor of petitioner Lydia Santos
because the NLRC found that her reinstatement was no longer feasible or appropriate. As the
term suggest, separation pay is the amount that an employee receives at the time of his
severance from the service and, as correctly noted by the Solicitor General in Comment, is
designed to provide the employee with "the wherewithal during the period that he is looking for
another employment." In the instant case, the grant of separate on pay was a substitute for
immediate and continued re-employment with the private respondent Bank. The grant of
separation pay did not redress the injury that is intended to be relieved by the second remedy of
backwages, that is, the loss of earnings that would have accrued to the dismissed employee
during the period between dismissal and reinstatement. Put a little differently, payment of
backwages is a form of relief that restores the income that was lost by reason of unlawful
dismissal; separation pay, in contrast, is oriented towards the immediate future, the transitional
period the dismissed employee must undergo before locating a replacement job.

In Hernandez vs. NLRC,22 involving an illegally dismissed employee, this Court held that
"petitioner should be paid backwages not exceeding three years without deduction and
separation pay in the amount of one month for every year of service." In another case, this
Court stated "the public respondent's order for the private respondents' reinstatement to their
former position is no longer possible under the circumstances. An award equivalent to three
years backwages plus separation pay to compensate for their illegal separation is thus
proper.23 Also in Asphalt & Cement Pavers, Inc. vs. Vicente Leogardo, Jr.,24 we held that "an
illegally dismissed employee is entitled to reinstatement to his previous position without loss of
seniority rights with backwages for a period of three (3) years without qualification or deduction.
If reinstatement is no longer feasible, the employer may be ordered to pay, in addition to
backwages, separation pay as provided by law."

In the light of the above rulings of this Court, petitioner, by reason of his illegal dismissal is
entitled to both separation pay and backwages. However, the amount of backwages shall be
based on the Mercury Drug Rule which limits backwages of illegally dismissed employees to an
amount equivalent to their wages for three (3) years, without qualification and deduction. The
Court has adopted the practice of fixing the amount of backwages at a reasonable level without
qualification and deduction so as to relieve the employees from proving their earnings during
their layoffs and the employer from submitting counter proofs and thus obviate the twin evils of
idleness on the part of the employees and attrition and undue delay in satisfying the award on
the part of the employer. This practice has been hailed as a realistic, reasonable and mutually
beneficial solution. An award of backwages equivalent to three years (where the case is not
terminated sooner) serves as the base figure for such award without deduction.25
Again, as we stated in Lepanto Consolidated Mining Company vs. Olegario,26: "The Court
serves notice on the National Labor Relations Commission (NLRC), labor arbiters and other
responsible officials of the Department of Labor and Employment to take their bearings from this
rule that illegally dismissed employees or laborers shall be entitled to reinstatement without loss
of seniority (rights) and payment of backwages of not more than three (3) years without any
qualification or deduction. Although this policy had been consistently adhered to by the Court
even after the passage of the present Labor Code, there are still many instances, as in this case
and other cases decided by the Court, where the labor arbiters and/or the NLRC still awarded
backwages beyond the 3-year limit set by the Court. The governing principle, which has given
consistency and stability to the law, is stare decisis et no movere (follow past precedent and do
not disturb what has been settled).27

With regards to petitioner's separation pay which was awarded to him in lieu of reinstatement,
he shall receive the amount equivalent to one month wage/salary for every year of service,
including the three-year period in which backwages are awarded. This finds support in the case
of Grolier International, Inc. vs. Amansec,28 wherein we held:

Thus, when the Court stated that private respondent was entitled to "separation pay based on
the applicable law or company practice, whichever is higher, effective as of the end of the above
three (3) year period," it meant only that in the computation of separation pay, the three (3) year
period in respect of which backwages are awarded, must be included (although private
respondent had not actually served during the last three (3) years). . .29

Furthermore, his actual service with private respondent for approximately nine (9) months,
counted from October 1977 to July 1978 shall be considered as one (1) year, in accordance
with Article 283 of the Labor Code, which provides that a fraction of at least six (6) months is
considered one (1) whole year.

Petitioner Valentino Torillo was illegally dismissed in 1978. This case has been pending for
almost thirteen (13) years. In the interest of justice and equity as well as to avoid any further
ambiguities, this Court shall fix the exact amount due petitioner. Thus, based on the records of
the case,30 we hold that the total amount due to petitioner is P146,255.37, computed as
follows:

1âwphi1
A. Backwages
P330,050.00*
2,779 days x 365 days x 3 years — P130,048.48
B. Holiday Pay — 1,610.00
C. Separation Pay
P330,050.00
2,779 x 30 days x 4 years — 14,251.89
D. Unpaid Wages from July 1 to 3, 1978 — 345.00
TOTALP146,55.37
WHEREFORE, the petition is granted. The decision in Labor Case No. R-4-STF-7-4525-78 is
hereby modified. Private respondent Aberdeen Court, Inc. is hereby ordered to pay petitioner
Valentino Torillo, the amount of P146,255.37 representing his backwages, separation pay,
holiday pay and unpaid wages by reason of his illegal dismissal. This decision is immediately
executory. Costs against private respondent.

SO ORDERED.

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 three hours/day on two days each week; and stated that the
economic crisis that had hit the country constrained management to dispense with his services.
On December 29, 1999, the Labor Arbiter (LA) dismissed the complaint for lack of merit upon
finding that the parties had no employer-employee relationship.3 The LA explained thusly:

xxx

On the pivotal issue of whether or not there existed an employer-employee relationship between
the parties, our finding is in the negative. The finding finds support in the service contract dated
September 1, 1992 xxx.

xxx

Even if we grant the initial non-existence of the service contract, as complainant suggests in his
reply (third paragraph, page 4), the picture would not change because of the admission by
complainant in his letter dated October 8, 1996 (Annex "C") that what he was receiving was
talent fee and not salary.

This is reinforced by the undisputed fact that complainant received his talent fee nightly, unlike
the regular employees of the hotel who are paid by monthly xxx.

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

WHEREFORE, this case must be, as it is hereby, DISMISSED for lack of merit.

SO ORDERED.4

Respondent appealed, but the National Labor Relations Commission (NLRC) affirmed the LA on
May 31, 2001.5

Respondent assailed the decision of the NLRC in the Court of Appeals (CA) on certiorari.

On February 11, 2002, the CA set aside the decision of the NLRC,6 holding:

xxx

Applying the above-enumerated elements of the employee-employer relationship in this case,

the question to be asked is, are those elements present in this case?

The answer to this question is in the affirmative.

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.

In this regard, public respondent failed to take into consideration that in petitioner’s line of work,
he was supervised and controlled by respondent’s restaurant manager who at certain times
would require him to perform only tagalog songs or music, or wear barong tagalog to conform
with Filipiniana motif of the place and the time of his performance is fixed by the respondents
from 7:00 pm to 10:00 pm, three to six times a week. Petitioner could not choose the time of his
performance. xxx.

As to the status of petitioner, he is considered a regular employee of private respondents since

the job of the petitioner was in furtherance of the restaurant business of respondent hotel.
Granting that petitioner was 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.

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.

xxx

WHEREFORE, foregoing premises considered, this petition is GRANTED. xxx.7

Issues

In this appeal, petitioner contends that the CA erred:

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

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

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.

G.R. No. 198782, October 19, 2016

ALLAN BAZAR, Petitioner, v. CARLOS A. RUIZOL, Respondent.

DECISION

PEREZ, J.:

This is a petition for review of the Decision1 and Resolution2 of the Court of Appeals in CA-G.R.
SP No. 00937-MIN dated 11 November 2010 and 8 September 2011, respectively.
The antecedent facts follow.

Respondent Carlos A. Ruizol (also identified as Carlos Ruisol in the Complaint, Labor Arbiter's
Decision and in other pleadings) was a mechanic at Norkis Distributors and assigned at the
Surigao City branch. He was terminated effective 27 March 2002. At the time of his termination,
respondent was receiving a monthly salary of P2,050.00 and was working from 8:00 a.m. to
5:00 p.m. with a one-hour meal break for six (6) days in a week. Respondent claimed that
petitioner Allan Bazar came from Tandag branch before he was assigned as a new manager in
the Surigao City branch. Respondent added that he was dismissed by petitioner because the
latter wanted to appoint his protege as a mechanic. Because of his predicament, respondent
filed a complaint before Regional Arbitration Branch No. XIII of the National Labor Relations
Commission (NLRC) in Butuan City for illegal dismissal and other monetary claims. An
Amended Complaint was filed on 12 August 2002 changing the name of the petitioner therein
from Norkis Display Center to Norkis Distributors, Inc. (NDI).

Petitioner, on the other hand, alleged that NDI is a corporation engaged in the sale, wholesale
and retail of Yamaha motorcycle units. Petitioner countered that respondent is not an employee
but a franchised mechanic of NDI pursuant to a retainership agreement. Petitioner averred that
respondent, being the owner of a motor repair shop, performed repair warranty service, back
repair of Yamaha units, and ordinary repair at his own shop. Petitioner maintained that NDI
terminated the retainership contract with respondent because they were no longer satisfied with
the latter's services.

On 8 October 2003,3 Executive Labor Arbiter Noel Augusto S. Magbanua ruled in favor of
respondent declaring him a regular employee of NDI and that he was illegally dismissed, to wit:

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WHEREFORE, judgment is hereby rendered:

Declaring [respondent] a regular employee of [NDI and petitioner];
Declaring [respondent's] dismissal illegal;
Ordering [NDI] to pay [respondent] Carlos A. Ruisol the total amount of TWO HUNDRED
THREE THOUSAND FIVE HUNDRED FIFTY ONE PESOS & 33/100 (P203,551.33)
representing his monetary award computed above.
Other claims of [respondent] are dismissed for lack of merit.4

The Labor Arbiter stressed that an employer-employee relationship existed in this case. He did
not give any weight to the unsworn contract of retainership based on the reason that it is a clear
circumvention of respondent's security of tenure.

On appeal, petitioner reiterated that there is no employer-employee relationship between NDI

and respondent because the latter is only a retainer mechanic of NDI. Finding merit in the
appeal, the NLRC reversed the ruling of the Labor Arbiter and dismissed the case for lack of
cause of action. The NLRC held that respondent failed to refute petitioner's allegation that he
personally owns a motor shop offering repair and check-up services to other customers and that
he worked on the units referred by NDI either at his own motor shop or at NDI's service shop.
The NLRC also ruled that NDI had no power of control and supervision over the means and
method by which respondent performed job as mechanic. The NLRC concluded that respondent
is bound to adhere to and respect the retainership contract wherein he declared and
acknowledged that he is not an employee of NDI.

Respondent filed a petition for certiorari before the Court of Appeals, submitting that the Labor
Arbiter's ruling had become final with respect to NDI because the latter failed to appeal the
same. � Respondent asserted that the NLRC erred in ruling that there is no employer-employee
relationship between the parties. Respondent also prayed for re'i?statement.

On 11 November 2010, the Court of Appeals:granted the petition. The Court of Appeals ruled
that petitioner had no legal personality to make the appeal for NDI. The Court of Appeals held
that te labor arbiter's decision with respect to NDI is final. The Court of Appeals found that there
was employer-employee relationship between respondent and NDI and that respondent was
unlawfully dismissed. Finally, the Court of Appeals awarded respondent separation pay in lieu of
reinstatement.

Petitioner sought reconsideration of the decision but its motion for reconsideration was denied.
Hence, this petition.

Before this Court, petitioner assigns the following alleged errors committed by the Court of
Appeals:

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THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN GRANTING THE PETITION
FOR CERTIORARI, AND REVERSING THE "DECISION" AND "RESOLUTION" (ANNEXES "A"
AND "B") OF THE NATIONAL LABOR RELATIONS COMMISSION - FIFTH DIVISION,
CAGAYAN DE ORO CITY, AS THE SAME ARE NOT IN ACCORDANCE WITH EXISTING
LAWS ANDIOR DECISIONS [PROMULGATED] BY THE HONORABLE SUPREME COURT.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FAILING TO APPLY THE.

DECISION OF THE HONORABLE SUPREME COURT THAT "JURISDICTION CANNOT BE
ACQUIRED OVER THE DEFENDANT WITHOUT SERVICE OF SUMMONS, EVEN IF HE
KNOWS OF THE CASE AGAINST HIM, UNLESS HE VOLUNTARILY SUBMITS TO THE
JURISDICTION OF THE COURT BY APPEARING THEREIN AS THROUGH HIS COUNSEL
FILING THE CORRESPONDING PLEADING IN THE CASE", PURSUANT TO THE RULING
OF THIS HONORABLE SUPREME COURT IN THE CASE OF "HABANA VS. VAMENTA, ET
AL., L-27091, JUNE 30, 1970."

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FAILING TO APPLY THE

LEGAL PRINCIPLE THAT "IT IS BASIC THAT A CORPORATION IS INVESTED BY LAW
WITH A [PERSONALITY] SEPARATE AND DISTINCT FROM THOSE OF THE PERSONS
COMPOSING IT AS WELL AS FROM THAT OF ANY OTHER LEGAL ENTITY TO WHICH IT
MAY BE RELATED.", PURSUANT TO THE RULING OF THE HONORABLE SUPREME
COURT IN THE CASE OF "ELCEE FARMS, INC. VS. NATIONAL LABOR RELATIONS
COMMISSION, 512 SCRA 602."

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FAILING TO APPLY THE

RULE REGARDING "DECLARATION AGAINST INTEREST", PURSUANT TO SECTION 38,
RULE 130 ON THE REVISED RULES ON EVIDENCE.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FAILING TO APPLY THE

DECISION OF THE HONORABLE SUPREME COURT THAT "LD. CARDS WHERE THE
WORDS "EMPLOYEE'S NAME" APPEAR PRINTED� THEREIN DO NOT PROVE
EMPLOYER� EMPLOYEE RELATIONSHIP WHERE SAID I.D. CARDS ARE ISSUED FOR
THE PURPOSE OF ENABLING CERTAIN "CONTRACTORS" SUCH AS SINGERS AND BAND
PERFORMERS, TO ENTER THE PREMISES OF AN ESTABLISHMENT", PURSUANT TO
THE RULING OF THIS HONORABLE SUPREME COURT IN THE CASE OF "TSPIC
CORPORATION VS. TSPIC EMPLOYEES UNION (FFE), 545 SCRA 215."

THE HONORABLE COURT OF APPEALS MANIFESTLY OVERLOOKED CERTAIN

RELEVANT AND UNDISPUTED FACTS THAT, IF PROPERLY CONSIDERED, WOULD
JUSTIFY A DIFFERENT CONCLUSION.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FAILING TO DECLARE

THAT "NORKIS DISTRIBUTORS, INC. IS NOT A PARTY IN THE INSTANT CASE."

THE HONORABLE COURT OF APPEALS GRAVELY ERRED� IN FAILING TO DECLARE

THAT "THE DECISION OF THE LABOR ARBITER IS NOT BINDING UPON NORKIS
DISTRIBUTORS, INC."

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT, "WITH

RESPECT TO NORKIS DISTRIBUTORS, INC., THE DECISION OF THE LABOR ARBITER
HAD ALREADY BECOME FINAL", FOR THE REASON THAT NO JURISDICTION HAD BEEN
ACQUIRED OVER NORKIS DISTRIBUTORS, INC. SINCE THERE WAS NO PROPER
SERVICE OF SUMMONS UPON THE CORPORATION.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN SETTING ASIDE THE

"DECISION" OF THE NATIONAL LABOR RELATIONS COMMISSION FIFTH DIVISION,
CAGAYAN DE ORO CITY, AND REINSTATING THE "DECISION" OF THE LABOR ARBITER,
AS RESPONDENT IS NOT AN EMPLOYEE OF NORKIS� DISTRIBUTORS, INC., BUT ONLY
A "RETAINER MECHANIC", JUST LIKE A RETAINER LAWYER WHO IS NOT AN EMPLOYEE
OF THE LAWYER'S CLIENT.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DECLARING THE :

EXISTENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP, SINCE THERE IS AN ABSENCE
OF EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN NORKIS DISTRIBUTORS, INC.
AND RESPONDENT RUIZOL.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DISREGARDING THE

"MASTERLIST OF ALL EMPLOYEES" OF NORKIS DISTRIBUTORS, INC. AS PROOF THAT
RESPONDENT RUIZOL IS NOT ITS EMPLOYEE.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE

"DECISION" OF THE LABOR ARBITER REGARDING THE AWARD OF 10% ATTORNEY'S�
FEES, FOR THE REASON THAT RESPONDENT WAS, AT THAT TIME, REPRESENTED BY
A PUBLIC LAWYER FROM THE PUBLIC ATTORNEY'S OFFICE OF BUTUAN CITY.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN REINSTATING THE

"DECISION" OF THE LABOR ARBITER, WHICH AWARDS BACKWAGES, SALARY
DIFFERENTIAL, 13TH MONTH PAY, SEPARATION PAY, SERVICE INCENTIVE LEAVE AND
ATTORNEY'S FEES, AS THERE IS NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN
NDI AND RESPONDENT RUIZOL.5

Petitioner first raises a question of procedure. Petitioner asserts that no summons was served
on NDI. Thus, NDI had no reason to appeal the adverse decision of the Labor Arbiter because
jurisdiction over its person was not acquired by the labor tribunal. Considering the foregoing,
petitioner maintains that he cannot be made personally liable for the monetary awards because
he has a personality separate and distinct from NDI.

We partly grant the petition.

The NLRC, despite ruling against an employer-employee relationship had nevertheless upheld
the jurisdiction of the Labor Arbiter over NDI. The NLRC ruled and we agree, thus:

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Indeed, NDI was impleaded as respondent in this case as clearly indicated in the amended
complaint filed by [respondent] on August 12, 2002, contrary to the belief of [NDI and petitioner].
And considering that the summons and other legal processes issued by the Regional Arbitration
Branch a quo were duly served to [petitioner] in his capacity as branch manager of NDI, the
Labor Arbiter had validly acquired jurisdiction over the juridical person of NDI.6

The Court of Appeals correctly added that the Labor Arbiter's ruling with respect to NDI has
become final and executory for the latter's failure to appeal within the reglementary period; and
that petitioner had no legal personality to appeal for and/or behalf of the corporation.

Interestingly, despite vehemently arguing that NDI was not bound by the ruling because it was
not impleaded as respondent to the complaint, petitioner in the same breath admits even if
impliedly NDI is covered by the ruling, arguing that there cannot be any illegal dismissal
because there is no employer-employee relationship between NDI and respondent. We are not
convinced.

We emphasize at the outset that the existence of an employer� employee relationship is

ultimately a question of fact. Only errors of law are generally reviewed by this Court. Factual
findings of administrative and quasi-judicial agencies specializing in their respective fields,
especially when affirmed by the Court of Appeals, must be accorded high respect, if not
finality.7 We here see an exception to the rule on the binding effect on us of the factual
conclusiveness of the quasi-judicial agency. The findings of the Labor Arbiter are in conflict with
that of the NLRC and Court of Appeals. We can thus look into the factual issues involved in this
case.

The four-fold test used in determining the, existence of 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.
method by which the work is to be accomplished.8chanrobleslaw

In finding that respondent was an employee of NDI, the Court of Appeals applied the four-fold
test in this wise:

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x x x First, the services of [respondent] was indisputably engaged by the [NDI] without the aid of
a third party. Secondly, the fact that the [respondent] was paid a retainer fee and on a per diem
basis does not altogether negate the existence of an [employer]-employee relationship. The
retainer agreement only provided the breakdown, of the [respondent's] monthly income. On a
more important note, the [NDI] did not present its payroll, which it could conveniently do, to
disprove the [respondent's] claim that he was their employee. x x x

Third, the [NDI's] power of dismissal can be [gleaned] from the termination of the [respondent]
although couched under the guise of the non-renewal of his contract with the company. Also,
the contract alone showed that the [respondent] provided service to Yamaha motorbikes
brought to the NDI service shop in accordance with the manual of the unit and subject to the
minimum standards set by the company. Also, tool kits were furnished to the mechanics which
they use in repairs and checking of the units conducted inside or in front of the Norkis Display
Center.9

Petitioner argues that respondent was not engaged as an employee but the parties voluntarily
executed a retainership contract where respondent became NDI's retainer mechanic; that
respondent was paid a retainer's fee similar to that of the services of lawyers; that the
termination of the retainership contract does not constitute illegal dismissal of the retained
mechanic; and that NDI is only interested in the outcome of respondent's work. Petitioner further
explained that respondent is free to use his own means and methods by which his work is to be
accomplished and the manual of the Yamaha motorbike unit is necessary in order to guide
respondent in the repairs of the motorbikes.
At the outset, respondent denied the existence of a retainership contract. Indeed, the contract
presented by NDI was executed by the latter and a certain Eusequio Adorable. The name
"Carlos Ruizol" was merely added as a retainer/franchised mechanic and the same was
unsigned. Assuming, however, that such a contract did exist, its provisions should not bind
respondent. We agree with the Labor Arbiter on the following points:

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Paragraph 5 and 6 of the unsworned contract of Retainership between [respondent] and [NDI
and petitioner] dated March 1, 1989 states as follows:ChanRoblesVirtualawlibrary
"5. That the franchised mechanic, though not an employee of the NDI agrees to observe and
abide by the rules and regulations by the NDI aims to maintain a good quality and efficient
service to customer.

6.) Franchised mechanic hereby acknowledge that he is not an employee of NDI, hence, not
entitled to Labor Standard benefits.
It bears stressing that the contents of the unsworn Contract of Retainership is a clear
circumvention of the security of tenure pursuant to Articles 279 and 280 of the Labor Code. The
agreement embodied in the said contract is contrary to law. thus [respondent] is not bound to
comply with the same.10chanroblesvirtuallawlibrary

NDI admitted to have engaged the services of respondent, although under the guise of a
retainership agreement. The fact of engagement does not exclude the power ofNDI to hire
respondent as its employee.

Assuming that respondent signed the retainership agreement, it is not indicative of his
employment status. It is the law that defines and governs an employment relationship, whose
terms are not restricted by 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.11chanrobleslaw

Petitioner claims that respondent was receiving 1!2,050.00 as his monthly retainer's fee as of
his termination in March 2002.� This fee is covered by the term "wages" and defined as
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 service rendered or to be
rendered.12 For services rendered to NDI, respondent received compensation. NDI could have
easily disproved that respondent was its employee by presenting the manner by which such
compensation was paid to respondent. NDI did not do so.
That NDI had the power to dismiss respondent was clearly evidenced by the fact that
respondent's services were terminated.

The control test is the most crucial and determinative indicator of the presence or absence of an
employer-employee relationship. Under the control test, an employer-employee relationship
exists where the person for whom the services are performed reserves the right to control not
only the end achieved, but also the manner and means to be used in reaching that
end.13chanrobleslaw

Petitioner asserts that NDI did not exercise the power of control over respondent because he is
free to use his own means and methods by which his work is to be accomplished. The records
show the contrary. It was shown that respondent had to abide by the standards sets by NDI in
conducting repair work on Yamaha motorbikes done in NDI's service shop. As a matter of fact,
on allegations that respondent failed to live up to the demands of the work, he was sent several
memoranda14 by NDI. We agree with the Labor Arbiter that the presence of control is evident
thus:

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This Branch agree with the complainants' contention that there is no contract and that he is a
regular employee as shown in Annexes "2" & "3" respectively of the respondents position paper,
as follows:ChanRoblesVirtualawlibrary
"Furthermore, you are directed and advice to religiously follow orders from your immediate
superior x x x
Failure on your part to submit a written explanation will be construed as a waiver of your right
and your case will be decided based on available information"

The above memo is so worded in a way that it unmistakably show that it is addressed to the
[respondent] who is an employee of [NDI]. It shows clearly the presence of the element of
"control" by [NDI and petitioner] over [respondent's] manner of
work.15chanroblesvirtuallawlibrary

Petitioner points out that respondent actually owns a motor repair shop where he performs
repair warranty service and back job repairs of Yamaha motorcycles for NDI and other clients.
This allegation was unsubstantiated. We cannot give credit to such claim.

Petitioner argues that the appellate court erred in holding that respondent is an employee of NDI
based on the identification card issued to him. While it is true that identification cards do not
prove employer� employee relationship, the application of the four-fold test in this case proves
that an employer-employee relationship did exist between respondent and NDI.

Since it was sufficiently established that petitioner is an employee of NDI, he is entitled to

security of tenure. He can only be dismissed for a just or authorized cause. Petitioner was
dismissed through a letter informing him of termination of contract of retainership which we
construe as a termination notice. For lack of a just or authorized cause coupled with failure to
observe the twin-notice rule in termination cases, respondent's dismissal is clearly illegal.

An illegally dismissed employee is entitled to two reliefs: backwages and reinstatement. The two
reliefs provided are separate and distinct. In instances where reinstatement is no longer feasible
because of strained relations between the employee and the employer, separation pay is
granted. In effect, an illegally dismissed employee is entitled to either reinstatement, if viable, or
separation pay if reinstatement is no longer viable, and backwages.16chanrobleslaw

Based on the foregoing, we affirm that NDI is not only liable for respondent's illegal dismissal,
but that the Labor Arbiter's decision against it had already become final and executory.

We now go to the liability of petitioner for payment of the monetary award.� There is solidary
liability when the obligation expressly so states, when the law so provides, or when the nature of
the obligation so requires.17� Settled is the rule that a director or officer shall only be
personally liable for the obligations of the corporation, if the following conditions concur: (1) the
complainant alleged in the complaint that the director or officer assented to patently unlawful
acts of the corporation, or that the officer was guilty of gross negligence or bad faith; and (2) the
complainant clearly and convincingly proved such unlawful acts, negligence or bad
faith.18chanrobleslaw

In the instant case, there is an allegation that petitioner dismissed respondent because he
wanted to hire his own mechanic. However, this remained to be an allegation absent sufficient
proof of motive behind respondent's termination. Petitioner may have directly issued the order to
dismiss respondent but respondent must prove with certainty bad faith on the part of petitioner.
No bad faith can be presumed from the lone fact that immediately after respondent's
termination, a new mechanic was hired. That the new mechanic was actually petitioner's
protege is a mere allegation with no proof. Therefore, petitioner, as branch manager, cannot be
held solidarily liable with NDI.

WHEREFORE, the instant Petition is PARTLY GRANTED. The Decision dated 11 November
2010 and Resolution dated 8 September 2011 of the Court of Appeals in CA-G.R. SP No.
00937-MIN reinstating the Decision of the Labor Arbiter declaring respondent Carlos Ruizol's
dismissal as illegal are AFFIRMED. Petitioner Allan Bazar is however ABSOLVED from the
liability adjudged against Norkis Distributors, Inc.

SO ORDERED.

G.R. No. 197899

JOAQUIN LU, Petitioner

vs
TIRSO ENOPIA, ROBERTO ABANES, ALEJANDRE BAGAS, SALVADOR BERNAL, SAMUEL
CAHAYAG, ALEJANDRO CAMPUGAN, RUPERTO CERNA, JR., REYNALDO CERNA, PETER
CERVANTES, LEONARDO CO ND ES TABLE, ROLANDO ESLOPOR, ROLLY FERNANDEZ,
EDDIE FLORES, ROLANDO FLORES, JUDITO FUDOLIN, LEO GRAPANI, FELIX HUBAHIB,
JERRY JUAGPAO, MARCIANO LANUTAN, JOVENTINO MATOBATO, ALFREDO MONIVA,
VICTORIANO ORTIZ, JR., RENALDO PIALAN, ALFREDO PRUCIA, PONCIANO REANDO,
HERMENIO REMEGIO, DEMETRIO RUAYA, EDGARDO RUSIANA, NESTOR SALILI,
VICENTE SASTRELLAS, ROMEO SUMAYANG, and DESIDERIO TABAY, Respondents

DECISION

PERALTA, J.:

Before us is a petition for review on certiorari filed by Joaquin Lu which seeks to reverse and set
aside the Decision1 dated October 22, 2010 and the Resolution2 dated May 12, 2011,
respectively, of the Court of Appeals issued in CA-G.R. SP No. 55486-MIN.

The facts of the case, as stated by the Court of Appeals, are as follows:

Petitioners (now herein respondents) were hired from January 20, 1994 to March 20, 1996 as
crew members of the fishing mother boat F/B MG-28 owned by respondent Joaquin "Jake" Lu
(herein petitioner Lu) who is the sole proprietor of Mommy Gina Tuna Resources [MGTR] based
in General Santos City. Petitioners and Lu had an income-sharing arrangement wherein 55%
goes to Lu, 45% to the crew members, with an additional 4% as "backing incentive." They also
equally share the expenses for the maintenance and repair of the mother boat, and for the
purchase of nets, ropes and payaos.

Sometime in August 1997, Lu proposed the signing of a Joint Venture Fishing Agreement
between them, but petitioners refused to sign the same as they opposed the one-year term
provided in the agreement. According to petitioners, during their dialogue on August 18, 1997,
Lu terminated their services right there and then because of their refusal to sign the agreement.
On the other hand, Lu alleged that the master fisherman (piado) Ruben Salili informed him that
petitioners still refused to sign the agreement and have decided to return the vessel F/B MG-28.

On August 25, 1997, petitioners filed their complaint for illegal dismissal, monetary claims and
damages. Despite serious efforts made by Labor Arbiter (LA) Arturo P. Aponesto, the case was
not amicably settled, except for the following matters: (1) Balansi 8 and 9; (2) 10% piado share;
(3) sud-anon refund; and (4) refund of payment of motorcycle in the amount of ₱15,000.00. LA
Aponesto further inhibited himself from the case out of "delicadeza," and the case was raffled to
LA Amado M. Solamo.

In their Position Paper, petitioners alleged that their refusal to sign the Joint Venture Fishing
Agreement is not a just cause for their termination. Petitioners also asked for a refund of the
amount of ₱8,700,407.70 that was taken out of their 50% income share for the repair and
maintenance of boat as well as the purchase of fishing materials, as Lu should not benefit from
such deduction.
On the other hand, Lu denied having dismissed petitioners, claiming that their relationship was
one of joint venture where he provided the vessel and other fishing paraphernalia, while
petitioners, as industrial partners, provided labor by fishing in the high seas. Lu alleged that
there was no employer-employee relationship as its elements were not present, viz.: it was the
piado who hired petitioners; they were not paid wages but shares in the catch, which they
themselves determine; they were not subject to his discipline; and respondent had no control
over the day-to-day fishing operations, although they stayed in contact through respondent's
radio operator or checker. Lu also claimed that petitioners should not be reimbursed for their
share in the expenses since it was their joint venture that shouldered these expenses.3

On June 30, 1998, the LA rendered a Decision4 dismissing the case for lack of merit finding that
there was no employer-employee relationship existing between petitioner and the respondents
but a joint venture.

In so ruling, the LA found that: (1) respondents were not hired by petitioner as the hiring was
done by the piado or master fisherman; (2) the earnings of the fishermen from the labor were in
the form of wages they earned based on their respective shares; (3) they were never disciplined
nor sanctioned by the petitioner; and, (4) the income-sharing and expense-splitting was no
doubt a working set up in the nature of an industrial partnership. While petitioner issued memos,
orders and directions, however, those who were related more on the aspect of management
and supervision of activities after the actual work was already done for purposes of order in
hauling and sorting of fishes, and thus, not in the nature of control as to the means and method
by which the actual fishing operations were conducted as the same was left to the hands of the
master fisherman.

The LA also ruled that the checker and the use of radio were for the purpose of monitoring and
supplying the logistics requirements of the fishermen while in the sea; and that the checkers
were also tasked to monitor the recording of catches and ensure that the proper sharing system
was implemented; thus, all these did not mean supervision on how, when and where to fish.

Respondents appealed to the National Labor Relations Commission (NLRC), which affirmed the
LA Decision in its Resolution5 dated March 12, 1999. Respondents' motion for reconsideration
was denied in a Resolution6 dated July 9, 1999.

Respondents filed a petition for certiorari with the CA which dismissed7 the same for having
been filed beyond the 60-day reglementary period as provided under Rule 65 of the Rules of
Court, and that the sworn certification of non-forum shopping was signed only by two (2) of the
respondents who had not shown any authority to sign in behalf of the other respondents. As
their motion for reconsideration was denied, they went to Us via a petition for certiorari assailing
the dismissal which We granted in a Resolution8 dated July 31, 2006 and remanded the case to
the CA for further proceedings.

Petitioner filed its Comment to the petition. The parties submitted their respective memoranda
as required by the CA.

On October 22, 2010, the CA rendered its assailed Decision reversing the NLRC, the decretal
portion of which reads as follows:

WHEREFORE, premises considered, the assailed March 12, 1999 Resolution of public
respondent National Labor Relations Commission (NLRC), Fifth Division, Cagayan de Oro City,
is hereby REVERSED and SET ASIDE, and a new one is entered.

Thus, private respondent Mommy Gina Tuna Resources (MGTR) thru its sole proprietor/general
manager, Joaquin T. Lu (Lu), is hereby ORDERED to pay each of the petitioners, namely,
TIRSO ENOPIA, ROBERTO ABANES, ALEJANDRE BAGAS, SALVADOR BERNAL,

SAMUEL CAHAYAG, ALEJANDRO CAMPUNGAN, RUPERTO CERNA, JR., REYNALDO

CERNA, PETER CERVANTES, LEONARDO CONDESTABLE, ROLANDO ESLOPOR, ROLLY
FERNANDEZ, EDDIE FLORES, ROLANDO FLORES, JUDITO FUDOLIN, LEO GRAPANI,
FELIX HUBAHIB, JERRY JUAGPAO, MARCIANO LANUTAN, JOVENTINO MATOBATO,
ALFREDO MONIVA, VICTORIANO ORTIZ, JR., RENALDO PIALAN, SEVERO PIALAN,
ALFREDO PRUCIA, POCIANO REANDO, HERMENIO REMEGIO, DEMETRIO RUAYA,
EDGARDO RUSIANA, NESTOR SALILI, RICHARD SALILI, SAMUEL SALILI, VICENTE
SASTRELLAS, ROMEO SUMAYANG and DESIDERIO TABAY the following:

(1) SEPARATION PAY (in lieu of the supposed reinstatement) equivalent to one (1) month pay
for every year of service reckoned from the very moment each petitioner was hired as
fishermen-crew member of FIB MG-28 by MGTR until the finality of this judgment. A fraction of
at least six (6) months shall be considered one (l) whole year. Any fraction below six months
shall be paid pro rata;

(2) FULL BACKWAGES (inclusive of all allowances and other benefits required by law or their
monetary equivalent) computed from the time they were dismissed from employment on August
18, 1997 until finality of this Judgment;

(3) EXEMPLARY DAMAGES in the sum of Fifty Thousand Pesos (₱50,000.00);

(4) ATTORNEY'S FEES equivalent to 10% of the total monetary award.

Considering that a person's income or earning is his "lifeblood," so to speak, i.e., equivalent to
life itself, this Decision is deemed immediately executory pending appeal should MGTR decide
to elevate this case to the Supreme Court.

Let this case be referred back to the Office of the Labor Arbiter for proper computation of the
awards.9

The CA found that petitioner exercised control over respondents based on the following: (1)
respondents were the fishermen crew members of petitioner's fishing vessel, thus, their services
to the latter were so indispensable and necessary that without them, petitioner's deep-sea
fishing industry would not have come to existence much less fruition; (2) he had control over the
entire fishing operations undertaken by the respondents through the master fisherman (piado)
and the assistant master fisherman (assistant piado) employed by him; (3) respondents were
paid based on a percentage share of the fish catch did not in any way affect their regular
employment status; and (4) petitioner had already invested millions of pesos in its deep-sea
fishing industry, hence, it is highly improbable that he had no control over respondents' fishing
operations.

Petitioner's motion for reconsideration was denied by the CA in its Resolution dated May 12,
2011.

Aggrieved, petitioner filed the instant petition for review on certiorari citing the following as
reasons for granting the same, to wit:

THE HONORABLE COURT OF APPEALS RENDERED THE ASSAILED DECISION

CONTRARY TO LAW AND LOGIC BY CITING THE ABSENCE OF PROOF OF REQUISITES
OF A VALID DISMISSAL AS BASIS FOR CONCLUDING THAT THE NLRC GRAVELY
ABUSED ITS DISCRETION.

II

THE HONORABLE COURT OF APPEALS EXCEEDED ITS JURISDICTION BY TREATING

RESPONDENTS' PETITION FOR CERTIORARI UNDER RULE 65 AS AN ORDINARY
APPEAL, AND BY INSISTING ON ITS OWN EVALUATION OF THE EVIDENCE.

III

THE HONORABLE COURT OF APPEALS RENDERED THE DECISION DATED 22 OCTOBER

2010 CONTRARY TO LAW AND THE EVIDENCE ON RECORD.

IV

THE HONORABLE COURT OF APPEALS HAS DEPARTED FROM THE ACCEPTED AND
USUAL COURSE OF JUDICIAL PROCEEDINGS BY MAKING ITS ASSAILED DECISION
IMMEDIATELY EXECUTORY PENDING APPEAL IN SPITE OF THE FACT THAT
RESPONDENTS DID NOT ASK FOR IMMEDIATE PAYMENT OF SEPARATION PAY AND
OTHER CLAIMS, AND DESPITE THE CLAIM OF RESPONDENTS THAT MOST OF THEM
ARE CURRENTLY EMPLOYED IN OTHER DEEP-SEA FISHING COMPANIES.10

Petitioner contends that no grave abuse of discretion can be attributed to the NLRC's finding
affirming that of the LA that the arrangement between petitioner and respondents was a joint
venture partnership; and that the CA, in assuming the role of an appellate body, had re-
examined the facts and re-evaluated the evidence thereby treating the case as an appeal
instead of an original action for certiorari under Rule 65.

We are not persuaded.

In Prince Transport, Inc. v. Garcia,11 We held:

The power of the CA to review NLRC decisions via a petition for certiorari under Rule 65 of the
Rules of Court has been settled as early as this Court's decision in St. Martin Funeral Homes v.
NLRC. In said case, the Court held that the proper vehicle for such review is a special civil
action for certiorari under Rule 65 of the said Rules, and that the case should be filed with the
CA in strict observance of the doctrine of hierarchy of courts. Moreover, it is already settled that
under Section 9 of Batas Pambansa Blg. 129, as amended by Republic Act No. 7902, the CA,
pursuant to the exercise of its original jurisdiction over petitions for certiorari, is specifically given
the power to pass upon the evidence, if and when necessary, to resolve factual issues. Section
9 clearly states:

xxxx

The Court of Appeals 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.x x x.

However, equally settled is the rule that factual findings of labor officials, who are deemed to
have acquired expertise in matters within their jurisdiction, are generally accorded not only
respect but even finality by the courts when supported by substantial evidence, i.e., the amount
of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.
But these findings are not infallible. When there is a showing that they were arrived at arbitrarily
or in disregard of the evidence on record, they may be examined by the courts. The CA can
grant the petition for certiorari if it finds that the NLRC, in its assailed decision or resolution,
made a factual finding not supported by substantial evidence. It is within the jurisdiction of the
CA, whose jurisdiction over labor cases has been expanded to review the findings of the
NLRC.12

Here, the LA's factual findings was affirmed by the NLRC, however, the CA found that the
latter's resolution did not critically examine the facts and rationally assess the evidence on hand,
and thus found that the NLRC gravely abused its discretion when it sustained the LA's decision
dismissing respondents' complaint for illegal dismissal on the ground of lack of merit.

The judicial function of the CA in the exercise of its certiorari jurisdiction over the NLRC extends
to the careful review of the NLRC's evaluation of the evidence because the factual findings of
the NLRC are accorded great respect and finality only when they rest on substantial
evidence.13 Accordingly, the CA is not to be restrained from revising or correcting such factual
findings whenever warranted by the circumstances simply because the NLRC is not infallible.
Indeed, to deny to the CA this power is to diminish its corrective jurisdiction through the writ of
certiorari.14

The main issue for resolution is whether or not an employer-employee relationship existed
between petitioner and respondents.

At the outset, We reiterate the doctrine that the existence of an employer-employee relationship
is ultimately a question of fact. Generally, We do not review errors that raise factual questions.
However, when there is a conflict among the factual findings of the antecedent deciding bodies
like the LA, the NLRC and the CA, it is proper, in the exercise of Our 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. In dealing with factual issues in labor cases, substantial
evidence or that amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion is sufficient.15

In determining the existence of an employer-employee relationship, the following elements are

considered: (1) the selection and engagement of the workers; (2) the power to control the
worker's conduct; (3) the payment of wages by whatever means; and (4) the power of
dismissal.16 We find all these elements present in this case.

It is settled that no particular form of evidence is required to prove the existence of an employer-
employee relationship. Any competent and relevant evidence to prove the relationship may be
admitted.17

In this case, petitioner contends that it was the piado who hired respondents, however, it was
shown by the latter's evidence that the employer stated in their Social Security System (SSS)
online inquiry system printouts was MGTR, which is owned by petitioner. We have gone over
these printouts and found that the date of the SSS remitted contributions coincided with the date
of respondents' employment with petitioner. Petitioner failed to rebut such evidence. Thus, the
fact that petitioner had registered the respondents with SSS is proof that they were indeed his
employees. The coverage of the Social Security Law is predicated on the existence of an
employer-employee relationship.18

Moreover, the records show that the 4% backing incentive fee which was divided among the
fishermen engaged in the fishing operations approved by petitioner was paid to respondents
after deducting the latter's respective vale or cash advance.19 Notably, even the piado's name
was written in the backing incentive fee sheet with the corresponding vale which was deducted
from his incentive fee. If indeed a joint venture was agreed upon between petitioner and
respondents, why would these fishermen obtain vale or cash advance from petitioner and not
from the piado who allegedly hired and had control over them.
It was established that petitioner exercised control over respondents. It should be remembered
that the control test merely calls for the existence of the right to control, and not necessarily the
exercise thereof. It is not essential that the employer actually supervises the performance of
duties by the employee. It is enough that the former has a right to wield the power.20

Petitioner admitted in his pleadings that he had contact with respondents at sea via the former's
radio operator and their checker. He claimed that the use of the radio was only for the purpose
of receiving requisitions for the needs of the fishermen in the high seas and to receive reports of
fish catch so that they can then send service boats to haul the same. However, such
communication would establish that he was constantly monitoring or checking the progress of
respondents' fishing operations throughout the duration thereof, which showed their control and
supervision over respondents' activities. Consequently, We give more credence to respondents'
allegations in their petition filed with the CA on how such control was exercised, to wit:

The private respondent (petitioner) controls the entire fishing operations. For each mother
fishing boat, private respondent assigned a master fisherman (pi ado) and assistant master
fisherman (assistant pi ado), who every now and then supervise the fishing operations. Private
respondent also assigned a checker and assistant checker based on the office to monitor and
contact every now and then the crew at sea through radio. The checker and assistant checker
advised then the private respondent of the condition. Based on the report of the checker, the
private respondent, through radio, will then instruct the "piado" how to conduct the fishing
operations.21

Such allegations are more in consonance with the fact that, as the CA found, MGTR had
already invested millions of pesos in its deep-sea fishing industry.

The payment of respondents' wages based on the percentage share of the fish catch would not
be sufficient to negate the employer-employee relationship existing between them. As held in
Ruga v. NLRC:22

x x x [I]t must be noted that petitioners received compensation on a percentage commission

based on the gross sale of the fish-catch, i.e., 13% of the proceeds of the sale if the total
proceeds exceeded the cost of the crude oil consumed during the fishing trip, otherwise, only
10% of the proceeds of the sale. Such compensation falls within the scope and meaning of the
term "wage" as defined under Article 97(f) of the Labor Code, thus:

(f) "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 included 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 x23
Petitioner wielded the power of dismissal over respondents when he dismissed them after they
refused to sign the joint fishing venture agreement.

The primary standard for 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.24 Respondents' jobs as fishermen-crew members of FIB MG 28 were
directly related and necessary to petitioner's deep-sea fishing business and they had been
performing their job for more than one year. We quote with approval what the CA said, to wit:

Indeed, it is not difficult to see the direct linkage or causal connection between the nature of
petitioners' (now respondents) work visa- vis MGTR's line of business. In fact, MGTR's line of
business could not possibly exist, let alone flourish without people like the fishermen crew
members of its fishing vessels who actually undertook the fishing activities in the high
seas.1âwphi1 Petitioners' services to MGTR are so indispensable and necessary that without
them MGTR's deep-sea fishing industry would not have come to existence, much less fruition.
Thus, We do not see any reason why the ruling of the Supreme Court in Ruga v. National Labor
Relations Commission should not apply squarely to the instant case, viz.:

x x x The hiring of petitioners to perform work which is necessary or desirable in the usual
business or trade of private respondent x x x [qualifies] them as regular employees within the
meaning of Article 28025 of the Labor Code as they were indeed engaged to perform activities
usually necessary or desirable in the usual fishing business or occupation of private
respondent.26

As respondents were petitioner's regular employees, they are entitled to security of tenure
under Section 3,27 Article XIII of the 1987 Constitution. It is also provided under Article 279 of
the Labor Code, that the right to security of tenure guarantees the right of employees to
continue in their employment absent a just or authorized cause for termination. Considering that
respondents were petitioner's regular employees, the latter's act of asking them to sign the joint
fishing venture agreement which provides that the venture shall be for a period of one year from
the date of the agreement, subject to renewal upon mutual agreement of the parties, and may
be pre-terminated by any of the parties before the expiration of the one-year period, is violative
of the former's security of tenure. And respondents' termination based on their refusal to sign
the same, not being shown to be one of those just causes for termination under Article 282,28
is, therefore, illegal.

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.29

Respondents who were unjustly dismissed from work are entitled to reinstatement and
backwages, among others. However, We agree with the CA that since most (if not all) of the
respondents are already employed in different deep-sea fishing companies, and considering the
strained relations between MGTR and the respondents, reinstatement is no longer viable. Thus,
the CA correctly ordered the payment to each respondent his separation pay equivalent to one
month for every year of service reckoned from the time he was hired as fishermen-crew
member of FIB MG-28 by MGTR until the finality of this judgment.

The CA correctly found that respondents are entitled to the payment of backwages from the
time they were dismissed until the finality of this decision.

The CA's award of exemplary damages to each respondent is likewise affirmed. Exemplary
damages are granted by way of example or correction for the public good if the employer acted
in a wanton, fraudulent, reckless, oppressive or malevolent manners.30

We also agree with the CA that respondents are entitled to attorney's fees in the amount of 10%
of the total monetary award.1âwphi1 It is settled that where an employee 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.31

The legal interest shall be imposed on the monetary awards herein granted at the rate of six
percent (6%) per annum from the finality of this judgment until fully paid.32

Petitioner's contention that there is no justification to incorporate in the CA decision the

immediate execution pending appeal of its decision is not persuasive. The petition for certiorari
filed with the CA contained a general prayer for such other relief and remedies just and
equitable under the premises. And this general prayer is broad enough to justify extension of a
remedy different from or together with the specific remedy sought.33 Indeed, a court may grant
relief to a party, even if the party awarded did not pray for it in his pleadings.34

WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated October 22,
2010 and the Resolution dated May 12, 2011 of the Court of Appeals in CA-G.R. SP No. 55486-
MIN are hereby AFFIRMED. The monetary awards which are herein granted shall earn legal
interest at the rate of six percent (6%) per annum from the date of the finality of this Decision
until fully paid.

SO ORDERED.