ART.
6 COVERAGE - ER-EE RELATIONSHIP LABOR STANDARD LAWS
A) DEFINITION
LVN PICTURES, INC. vs. PHILIPPINE MUSICIANS
Guild (FFW) and COURT OF INDUSTRIAL
RELATIONS
G.R. No. L-12582, January 28, 1961
CONCEPCION, J.:
FACTS: Philippine Musicians Guild alleged that LVN
Pictures, Inc., Sampaguita Pictures, Inc., and
Premiere Productions, Inc. are corporations
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.
Philippine Musicians Guild prayed that it be certified
as the sole and exclusive bargaining agency for all
musicians working in the aforementioned
companies (LVN Pictures, Inc., Sampaguita
Pictures, Inc., and Premiere Productions, Inc.) 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.
ISSUE: Whether or not the musicians are employees
of the film companies (LVN Pictures, Inc.,
Sampaguita Pictures, Inc., and Premiere
Productions, Inc).
HELD: YES. (Lower court findings upheld by the
SC): 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, which show the name of
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
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.
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 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.).
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.
The case of Josefa Vda. de Cruz vs. The Manila
Hotel Co., L-9110 (April 30, 1957) differs materially
from the present case. There, there 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
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 ART. 6 COVERAGE - ER-EE RELATIONSHIP
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 — "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.".
The decisive nature of said control over the "means
to be used" 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.
A.1 ELEMENTS
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
(i) VICENTE PEREZ vs. EUGENIO POMAR
G.R. No. L-1299 November 16, 1903
TORRES, J.:
FACTS: On August 27, 1902, Don Vicente Perez
filed in the CFI of Laguna a complaint against Don
Eugenio Pomar, as general agent of the Compañia
General de Tabacos. Perez alleged that Pomar as
agent of Compañia General de Tabacos verbally
requested Perez on the 8th of December, 1901, to
act as interpreter between himself and the military
authorities; that after the date mentioned Perez
continued to render such services up to and
including May 31, 1902; that he had accompanied
Pomar, during that time at conferences between
the latter and the colonel commanding the local
garrison, and with various officers and doctors
residing in the capital, and at conferences with
Captain Lemen in the town of Pilar. And that Pomar
on behalf of the company, offered to renumerate
Perez for the services rendered and that Perez, by
rendering the company such services, was obliged
to abandon his own business, the manufacture of
soap, and thereby suffered damages.
Pomar filed an answer asking for the dismissal of the
complaint. Pomar denied all the allegations in the
complaint. Pomar said that it was wholly untrue that
the company, and Pomar as its agent, had solicited
the services of the plaintiff as interpreter. That
Perez in these conferences acted as interpreter of
his own free will, without being requested to do so
by Pomar and without any offer of payment or
compensation; that therefore there existed no legal
relation whatever between the company and Perez.
That Pomar, when accepting the spontaneous,
voluntary and officious services of the Perez, did so
in his private capacity and not as agent of the
company. Pomar concluded by saying that he
answered in his individual capacity
ISSUE: Whether Pomar is obliged to pay the
continued service rendered by Perez.
HELD: YES. It is undisputed that there was no
written contract was entered into between the
parties for the employment of Perez as interpreter,
or that any other innominate contract was entered
into; but whether the plaintiff's services were
solicited or whether they were offered to the
defendant for his assistance, inasmuch as these
services were accepted and made use of by the
latter, we must consider that there was a tacit and
mutual consent as to the rendition of the
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 ART. 6 COVERAGE - ER-EE RELATIONSHIP
services. This gives rise to the obligation upon the
person benefited by the services to make
compensation therefor, since the bilateral
obligation to render services as interpreter, on the
one hand, and on the other to pay for the services
rendered, is thereby incurred. (Arts. 1088, 1089, and
1262 of the Civil Code). The supreme court of Spain
in its decision of February 12, 1889, holds, among
other things, "that not only is there an express and
tacit consent which produces real contract but
there is also a presumptive consent which is the
basis of quasi contracts, this giving rise to the
multiple juridical relations which result in obligations
for the delivery of a thing or the rendition of a
service."
Notwithstanding the denial of Pomar, it is
unquestionable that it was with his consent that
Perez rendered him services as interpreter, thus
aiding him at a time when, owing to the existence of
an insurrection in the province, the most disturbed
conditions prevailed. It follows, hence, that there
was consent on the part of both in the rendition of
such services as interpreter. Such service not being
contrary to law or to good custom, it was a perfectly
licit object of contract, and such a contract must
necessarily have existed between the parties, as
alleged by the plaintiff. (Art. 1271, Civil Code.)
Whether the service was solicited or offered, the
fact remains that Perez rendered to Pomar services
as interpreter. As it does not appear that he did this
gratuitously, the duty is imposed upon the
defendant, having accepted the benefit of the
service, to pay a just compensation therefor, by
virtue of the innominate contract of facio ut
des implicitly established.
The obligations arising from this contract are
reciprocal, and, apart from the general provisions
with respect to contracts and obligations, the
special provisions concerning contracts for lease of
services are applicable by analogy.
In this special contract, as determined by article
1544 of the Civil Code, one of the parties
undertakes to render the other a service for a price
certain. The tacit agreement and consent of both
parties with respect to the service rendered by the
plaintiff, and the reciprocal benefits accruing to
each, are the best evidence of the fact that there
was an implied contract sufficient to create a legal
bond, from which arose enforceable rights and
obligations of a bilateral character.
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
If it is a fact sufficiently proven that Pomar, on
various occasions consented to accept an
interpreter's services, rendered in his behalf and not
gratuitously, it is but just that he should pay a
reasonable remuneration therefor, because it is a
well-known principle of law that no one should be
permitted to enrich himself to the damage of
another.
The fact that no fixed or determined consideration
for the rendition of the services was agreed upon
does not necessarily involve a violation of the
provisions of article 1544 of the Civil Code, because
at the time of the agreement this consideration was
capable of being made certain.
The contract for lease of services is one in which
one of the parties undertakes to make some thing
or to render some service to the other for a certain
price, the existence of such a price being
understood, as this court has held not only when the
price has been expressly agreed upon but also when
it may be determined by the custom and frequent
use of the place in which such services were
rendered.
(ii) Location separation from control
STERLING PRODUCTS INTERNATIONAL, INC. vs.
LORETA C. SOL
G.R. No. L-19187 February 28, 1963
LABRADOR, J.:
FACTS: Loreta C. Sol charged the herein petitioners
Sterling Products International and its Radio
Director V. San Pedro with having committed an
unfair labor practice act. In her complaint she
alleged among others that she has been a regular
Radio Monitor of Sterling; that on January 8, 1960,
she filed a complaint against the said firm for
underpayment, money equivalent of her vacation
leave from 1952 to 1959, and Christmas bonus for
1959, equivalent to one-month salary. The
complaint resulted in her dismissal, without just
cause, on December 16, 1960.
Sterling denied the charges and by way of
affirmative defenses, alleged that complainant is an
independent contractor whose services were
retained by Sterling to submit reports of radio
monitoring work performed outside of their
(petitioners') office; that Sterling no longer required
Sol's services and therefore, it gave her notice of
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 ART. 6 COVERAGE - ER-EE RELATIONSHIP
termination, as it did in fact terminate her services,
as an independent contractor for good and
justifiable reasons and in accordance with business
requirements.
ISSUE: Whether Sol is an employee or an
independent contractor.
HELD: EMPLOYEE. Sol was directed to listen to
certain broadcasts, directing her, in the instructions
given her, when to listen and what to listen,
petitioners herein naming the stations to be listened
to, the hours of broadcasts, and the days when
listening was to be done. Sol had to follow these
directions. The mere fact that while performing the
duties assigned to her she was not under the
supervision of the petitioners does not render her a
contractor, because what she has to do, the hours
that she has to work and the report that she has to
submit all — these are according to instructions
given by the employer. It is not correct to say,
therefore, that she was an independent contractor,
for an independent contractor is one who does not
receive instructions as to what to do, how to do,
without specific instructions.
Finally, the very act of Sol in demanding vacation
leave, Christmas bonus and additional wages shows
that she considered herself an employee. A
contractor is not entitled to a vacation leave or to a
bonus nor to a minimum wage. This act of hers in
demanding these privileges are inconsistent with
the claim that she was an independent contractor.
(iii) Actual exercise of control
DY KEH BENG vs. INTERNATIONAL LABOR and
MARINE UNION OF THE PHILIPPINES, ET AL.
G.R. No. L-32245 May 25, 1979
DE CASTRO, J.:
FACTS: A charge of unfair labor practice was filed
against Dy Keh Beng, proprietor of a basket factory,
for discriminatory acts by dismissing Carlos N.
Solano and Ricardo Tudla for their union activities. In
his answer, Dy Keh Beng contended that he did not
know Tudla and that Solano was not his employee
because the latter came to the establishment only
when there was work which he did on pakiaw basis,
each piece of work being done under a separate
contract.
According to Dy Keh Beng, Solano was not his
employee for the following reasons:
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
1. Solano never stayed long enought at Dy's
establishment;
2. Solano had to leave as soon as he was
through with the order given him by Dy;
3. When there were no orders needing his
services there was nothing for him to do;
4. When orders came to the shop that his
regular workers could not fill it was then that
Dy went to his address in Caloocan and
fetched him for these orders; and
5. Solano's work with Dy's establishment was
not continuous. , 7
That these facts show that Solano and Tudla are only
piece workers, not employees. Petitioner really
anchors his contention of the non-existence of
employee-employer relationship on the control
test. Petitioner contends that the private
respondents "did not meet the control test in the
fight of the ... definition of the terms employer and
employee, because there was no evidence to show
that petitioner had the right to direct the manner
and method of respondent's work. 10 Moreover, it is
argued that petitioner's evidence showed that
"Solano worked on a pakiaw basis" and that he
stayed in the establishment only when there was
work.
ISSUE: Whether there existed an employee
employer relation between petitioner Dy Keh Beng
and the respondents Solano and Tudla .
HELD: YES. While this Court upholds the control
test 11 under which 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, " it finds no merit
with petitioner's arguments as stated above. It
should be borne in mind that the control test calls
merely for the existence of the right to control the
manner of doing the work, not the actual exercise of
the right. 12 Considering that the establishment of
Dy Keh Beng is "engaged in the manufacture of
baskets known as kaing, 13 it is natural to expect that
those working under Dy would have to observe,
among others, Dy's requirements of size and quality
of the kaing. Some control would necessarily be
exercised by Dy as the making of the kaing would be
subject to Dy's specifications. Parenthetically, since
the work on the baskets is done at Dy's
establishments, it can be inferred that the
proprietor Dy could easily exercise control on the
men he employed.
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 ART. 6 COVERAGE - ER-EE RELATIONSHIP
As to the contention that Solano was not an
employee because he worked on piece basis, this
Court agrees that circumstances must be
construed to determine indeed if payment by the
piece is just a method of compensation and does
not define the essence of the relation. Units of
time ... and units of work are in establishments like
respondent (sic) just yardsticks whereby to
determine rate of compensation, to be applied
whenever agreed upon. We cannot construe
payment by the piece where work is done in such an
establishment so as to put the worker completely at
liberty to turn him out and take in another at
pleasure.
At this juncture, it is worthy to note that judicial
notice of the fact that the so-called "pakyaw"
system mentioned in this case as generally
practiced in our country, is, in fact, a labor contract
-between employers and employees, between
capitalists and laborers.
(iv) Continuity of control
RJL MARTINEZ FISHING CORPORATION and/or
PENINSULA FISHING CORPORATION vs.
NATIONAL LABOR RELATIONS COMMISSION
FACTS:
Petitioner corporations are principally engaged in
the deep-sea fishing business. Since 1978, private
respondents were employed by them as stevedores
at Navotas Fish Port for the unloading of tuna fish
catch from petitioners' vessels and then loading
them on refrigerated vans for shipment abroad.
One day, private respondents Antonio Boticario,
and thirty (30) others, upon the premise that they
are petitioners' regular employees, filed a complaint
against petitioners for non-payment of overtime
pay, premium pay, legal holiday pay, emergency
allowance, 13th month pay, service incentive leave
pay and night shift differential.
Claiming that they were dismissed from
employment as a retaliatory measure for their
having failed the said complaint private
respondents filed on the said complaint, private
respondents filed on April 21, 1981 another
complaint against petitioners for Illegal Dismissal
and for Violation of Article 118 of the Labor Code, as
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
amended. Upon petitioners' motion, these two
cases were consolidated and tried jointly.
RJL and Peninsula contention: Petitioners contend
that private respondents are contract laborers
whose work terminated upon completion of each
unloading, and that in the absence of any boat
arrivals, private respondents did not work for
petitioners but were free to work or seek
employment with other fishing boat operators.
Hence, no ER-EE relationship exists.
Labor Arbiter ruled in favor of RJL and Peninsula.
Upon appeal, NLRC reversed the findings of the
Labor Arbiter, and resolved that there exists of
employer-employee relationship between the
parties.
Petitioners filed this instant recourse.
ISSUE:
Whether or not there is an employer-employee
relationship between the parties.
RULING:
Yes, an ER-EE relationship exists.
The issue of the existence of an employer-
employee relationship between the parties is
actually a question of fact, and the finding of the
NLRC on this point is bonding upon us, the
exceptions to the general rule being absent in this
case. Besides the continuity of employment is not
the determining factor, but rather whether the work
of the laborer is part of the regular business or
occupation of the employer. We are thus in accord
with the findings of respondent NLRC in this regard.
Although it may be that private respondents
alternated their employment on different vessels
when they were not assigned to petitioners' boats,
that did not affect their employee status. The
evidence also establishes that petitioners had a
fleet of fishing vessels with about 65 ship captains,
and as private respondents contended, when they
finished with one vessel, they were instructed to
wait for the next. As respondent NLRC had found:
We further find that the employer-employee
relationship between the parties herein is not co-
terminous with each loading and unloading job. As
earlier shown, respondents are engaged in the
business of fishing. For this purpose, they have a
fleet of fishing vessels. Under this situation,
5
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
respondents' activity of catching fish is a
continuous process and could hardly be considered
as seasonal in nature. So that the activities
performed by herein complainants, i.e. unloading
the catch of tuna fish from respondents' vessel and
then loading the same to refrigerated vans, are
necessary or desirable in the business of
respondents. This circumstances makes the
employment of complainants a regular one, in the
sense that it does not depend on any specific
project or seasonal activity.
The employment contract signed by Antonio
Boticario, which described him as "labor
contractor", is not really so inasmuch as wages
continued to be paid by petitioners and he and the
other workers were uniformly paid. He was merely
asked the petitioners to recruit other workers.
Besides, labor-contracting is prohibited under Sec.
9(b), Rule VIII, Book III — Rules and Regulations
Implementing the Labor Code as
amended. Directly in point and controlling is the
ruling in an analogous case, Philippine Fishing Boat
Officers and Engineers Union vs. CIR, reading:
The Court holds, therefore, that the
employer-employee relationship
existed between the parties
notwithstanding evidence to the
fact that even during the time that
they worked with respondent
company alternated their
employment on different vessels
when they were not assigned on the
company's vessels. For, "that during
the temporary layoff the laborers
are considered free to seek other
employment is natural, since the
laborers are not being paid, yet
must find means of support" and
such temporary cessation of
operations "should not mean
starvation for employees and their
families."
(v) The ultimate but not exclusive test (Santos)
ER-EE DISTINGUISHED FROM:
B) INDEPENDENT CONSTRUCTION
CONTRACTOR
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
CARO vs. LUCAS RILLORAZA and WORKMEN'S
COMPENSATION COMMISSION
FACTS:
Carmen Prieto de Caro owns a building located in
Manila. This building is intended or used for rental
(business) purposes, managed by her husband
Ramon Caro.
Ramon hired the services of Daniel dela Cruz (a job
contractor) to repair other parts of the building.
Dela Cruz, in turn, engaged the services of Lucas
Rilloraza, a carpenter to work on the job.
While working on the window railing of the building,
the wooden platform on which Rilloraza and another
carpenter were working collapsed and Rilloraza fell
to the ground and broke his leg. This injury resulted
in his temporary total disability for 6 months and
permanent partial disability of 5% of the broken leg.
Rilloraza is asking for compensation from the
petitioner for the injuries suffered.
Petitioner contends that Rilloraza is not his
employee, on the ground that Rilloraza was hired by
Daniel delaCruz, who, allegedly, is an independent
contractor.
Workmen’s Compensation Commission ruled in
favor of Rilloraza, stating that dela Cruz was, at
least, “merely an intermediary” and that petitioner is
the “real employer” of Rilloraza.
ISSUE:
Is Rilloraza the petitioner’s employee (within the
purview of the Workmen’s Compensation Act)?
YES
RULING:
The Court did not uphold petitioner’s contention
that Daniel dela Cruz was an independent
contractor, within the purview of the Workmen’s
Compensation Act. Petitioner did not prove that
dela Cruz had agreed to do a piece of work
“according to his own methods, without being
subject to the control of his employer.”
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 ART. 6 COVERAGE - ER-EE RELATIONSHIP
Pursuant to Workmen’s Compensation Act: When
an employee suffers personal injury from any
accident arising out of and in the course of his
employment, or contracts tuberculosis or other
illness directly caused by such employment, or
either aggravated by or the result of the nature of
such employment, his employer shall pay
compensationin the sums and to the person
hereinafter specified.. . . (Section 2.)
Further, the Court stated that dela Cruz does not
appear to have any office establishment, or even a
license to engage in business. Neither did he file a
bond to answer either for the fulfillment of his
contract with petitioner, or for satisfaction of such
as may arise by reason of injury in the course of
employment. We fail to see how dela Cruz could
possibly be regarded as an “independent
contractor”.
In the present case, the building in which Rilloraza
worked was found to be "intended or used for rental
(business) purposes." Petitioner, in turn had control
of such building, as manager. Obviously, the repair
of said building is part of the usual business of the
administration of the aforesaid properties, so
that the same may be suitable for the gainful
purpose above referred to.
Consequently, even if Rilloraza, who did the repair
work thereof, were a casual laborer, engaged
directly by De la Cruz, acting as an independent
contractor, which he is not, the former would still
be an employee of petitioner herein, within the
purview of the Workmen's Compensation Act,
and, hence, would be entitled to demand
compensation from him.
VICENTE UY CHAO vs. MANUEL AGUILAR and
ERNESTO RAMOS
FACTS:
Respondent Aguilar suffered physical injury as a
result of the sudden fall of the whole save of a
glassware store known as La Boda de Plata and
owned by the petitioner Uy Chao, while he
(respondent Aguilar) together with two other
laborers was on top of said eave removing the
galvanized iron sheets covering the frame of the
eave. In the afternoon of the same day respondent
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
Ramos engaged respondent Aguilar for the said
work.
Uy Chao contention: Ramos was an independent
contractor and the statutory employer of the
injured laborer, respondent Aguilar; so it should be
Ramos who should be held liable for the injuries
sustained by the laborer; and that he (the petitioner)
should be exempted from any liability.
ISSUE: Whether Uy Chao is the statutory employer
for the purposes of the Workmen's Compensation
Act. NO
RULING: NO ER-EE relationship exists.
SC held that there is no need of passing upon the
point whether respondent Ramos was an
independent contractor, because even if the
services of respondent Aguilar were engaged by
petitioner Uy Chao directly or through an agent or
contractor, still respondent Aguilar, the injured
laborer, is not entitled to compensation for the
simple reason that his employment was purely
casual and was not for the purposes of the
petitioner's business or occupation.
Section 39 (b) of Act No. 3428 otherwise as the
Workmen's Compensation Act, defines laborer as a
synonym of "Employee" and means every person
who has entered the employment of, or works
under a service or apprenticeship contract for an
employer. It does not include a person with those
employment is purely casual and is not for the
purposes of occupation or business of the
employer. . . . (Emphasis supplied.)
Clearly, the Workmen's Compensation Act does not
include an employment for labor that is purely
casual and is not for the purposes of the employer's
occupation or business.
The employment of respondent Aguilar to help in
the repair or replacement of the eave of a
commercial store owned by petitioner Uy Chao was
purely casual, because such work would occur only
when the said structure should be damaged or
broken. When it would be broken and repaired,
nobody could foresee. It may safely be stated that
the work on the eave would not be made at fixed
intervals. The employment of a carpenter and a
tinsmith for its repair or replacement was therefore
only occasional, sporadic and for a short time.
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 ART. 6 COVERAGE - ER-EE RELATIONSHIP
It is clear that the repair or dismantlement of the
eave was not for the purpose of the petitioner's
occupation or business. The petitioner was a
glassware dealer. He bought and sold glassware. It
is difficult to see the connection of the repair or
dismantlement with the buying and selling of
glassware.
RONALD CABE and PURITA CABE vs. SOTERO L.
TUMANG
FACTS:
Samuel Tamayo agreed in March, 1979 to construct
for the spouses Ronald Cabe and Purita Cabe their
residential house in accordance with the plans and
specifications prepared by an architect.
Tamayo started the work. The Cabes dispensed
with his services when he allegedly made certain
deviations from the plans. The house was finished
by other persons.
Tamayo sued the Cabes in the Regional Office of
the Department of Labor in Laoag City for the
recovery of payment of labor and materials. He filed
the case as head carpenter of his 18 co-workers,
whose wages he had advanced, and for
reimbursement of materials which he had
purchased.
The Assistant Regional Director for Arbitration
ordered the Cabes to pay Tamayo P6,400 as
contractual wages and P600 as reimbursement of
materials.
The Cabes assailed that decision by certiorari. They
contend that the Assistant Director acted without
jurisdiction.
ISSUE: Whether or not Tamayo was an employee of
the Cabes.
RULING: NO
NO. SC held that Tamayo was an independent
contractor and not an employee of the Cabes. The
Labor Regional Office and the National Labor
Relations Commission had no jurisdiction over his
claim. Their jurisdiction is confined to claims arising
from employer-employee relationship. Tamayo's
claim is cognizable by the municipal trial court.
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
C) ROVING INDEPENDENT PEDDLERS
SNOW WHITE ICE CREAM v EMILIO GARCIA
G.R. No. L-23727 November 29, 1971
FACTS:
Emilio Garcia worked as an ice drop vendor and paid
on commission basis of P0.02 per ice drop that he
sold, thereby earning approximately P7.00 a day,
seven days a week. As such vendor, his duties
consisted mainly of breaking into small pieces the
block of ice given to him, and placing them in the ice
drop push-cart to prevent the ice drops from
melting. Claimant, when not selling ice drops,
repaired broken down pushcarts belonging to the
respondent, being also a carpenter by occupation.
It was further shown that "1. Claimant was charged
P.03 by the respondent for every ice drop that he
gets which, in turn, he sells to the public at P.05
each; 2. Claimant returned the unsold ice drops with
full credit; and 3. Claimant was supplied by the
respondent with crushed ice, icepicks, salt, and cap
and ice drop pushcart bearing respondent's trade
name."4
ISSUE: whether the employer-employee
relationship existed between the claimant Emilio
Garcia who in his lifetime was an ice drop vendor
and petitioner Snow White Ice Cream and Ice Drop
Factory.
HELD: Yes, based on the governing principle of the
controlling test first announced by this Court
through Justice Makalintal in Investment Planning
Corporation v. Social Security System.2
Under the CONTROLLING TEST as clarified by
Justice Makalintal in the aforesaid Social Security
System v. Court of Appeals,5 the criterion is
whether the person or firm alleged to be the
employer can direct or require the party assertedly
enjoying the employee status to do a certain kind of
work and to specify the means and methods by
which the same is to be accomplished. As was
emphasized by Justice Makalintal in the above
decision: "The logic of the situation indeed dictates
that where the element of control is absent; where
a person who works, for another does so more or
less at his own pleasure and is not subject to definite
8
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
hours or conditions of work, and in turn is
compensated according to the result of his efforts
and not the amount thereof, we should not find that
the relationship of employer and employee
exists."6 From the facts as found, which we are not
at liberty to disregard, the deceased claimant was
an employee of petitioner. The circumstance that
the salesman is devoting his entire time to the
distribution of the one employer's product is, in
most lines, an indication that he is an
employee."7 The privilege of returning unsold ice
for credit tends to discredit the validity of the 'sale.'
However, the driver's business consisted not only of
orders received by the company but also of
whatever orders he himself could get. There was
some control, in that the driver had to begin work at
7 A.M. and quit before dark. He was held to be an
employee."
MAFINCO TRADING CORPORATION v BLAS F.
OPLE
G.R. No. L-37790 March 25, 1976
FACTS: For at least twenty years respondent
MAFINCO and its predecessor and/or principal, the
Manila-Cosmos Aerated Water Factory, have
entered into contracts with peddlers, under the
terms of which the latter buy from the former at a
special price, and sell in Manila, the former's soft
drink products. The distributor provides the peddler
with a delivery truck with the distributor answering
for the cost of fuel and maintenance. If a peddler
buys a certain number of cases or more a day, he is
entitled to a fixed amount of peddler's discount.
The peddler himself drives the truck but if he
engages a driver or helpers, the latter are his
employees and he assumes all the responsibilities of
an employer in relation to them. He also obtains at
his own expense all licenses and permits required by
law of salesmen.
The peddler clears his accounts with the distributor
at the end of each day, and unpaid accounts are
charged against the cash deposit or bond which he
gives the distributor upon the execution of the
peddling contract. He answers for damages caused
by him or his employees to third persons.
ISSUE: whether peddling contracts of this kind
entered into between the parties give rise to an
employer-employee relationship? Yes.
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
HELD: The ISSUE of whether respondents are
employees or independent contractors should
be resolved mainly in the light of their peddling
contracts.—Pro hoc vice the issue of whether
Repomanta and Moralde were employees of
Mafinco or were independent contractors should be
resolved mainly in the light of their peddling
contracts. A different approach would lead this
Court astray into the field of factual controversy
where its legal pronouncements would not rest on
solid grounds.
A contract whereby one engages to purchase
and sell soft drinks on trucks supplied by the
manufacturer but providing that other party
(peddler) shall have the right to employ his own
workers, shall post a bond to protect the
manufacturer against losses, shall be responsible
for damages caused to third persons, shall obtain
the necessary licenses and permits and bear the
expenses incurred in the sale of the soft drinks is
not a contract of employment.—We hold that
under their peddling contracts Repomanta and
Moralde were not employees of Mafinco but were
independent contractors as found by the NLRC and
its factfinder and by the committee appointed by
the Secretary of Labor to look into the status of
Cosmos and Mafinco peddlers. They were
distributors of Cosmos soft drinks with their own
capital and employees. Ordinarily, an employee or a
mere peddler does not execute a formal contract of
employment. He is simply hired and he works under
the direction and control of the employer.
Repomanta and Moralde voluntarily executed with
Mafinco formal peddling contracts which indicate
the manner in which they would sell Cosmos soft
drinks. That circumstance signifies that they were
acting as independent businessmen. They were free
to sign or not to sign that contract. If they did not
want to sell Cosmos products under the conditions
defined in that contract, they were free to reject it.
But having signed it, they were bound by its
stipulations and the consequences thereof under
existing labor laws. One such stipulation is the right
of the parties to terminate the contract upon 5 days’
prior notice. Whether the termination in this case
was an unwarranted dismissal of an employee, as
contended Repomanta and Moralde, is a point that
cannot be resolved without submission of evidence.
Using the contract itself as the sole criterion, the
termination should perforce be characterized as
9
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
simply the exercise of a right freely stipulated upon
by the parties.
Tests for determining the existence of
employer-employee relationship.—In
determining the existence of employer-employee
relationship, the following elements are generally
considered, namely: (1) the selection and
engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power
to control the employees’ conduct—although the
latter is the most important element.
Factors to determine existence of independent
contract relationship.—An independent
contractor is one who exercises independent
employment and contracts to do a piece of work
according to his own methods and without being
subject to control of his employer except as to the
result of the work. “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; tne 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; theduty to
supply the premises, tools appliances, material and
labor; and the mode, manner, and terms of
payment.”
Although peddling contract between contending
parties was resolved as one establishing
independent contractor relationship, one of the
parties therein may still petition the proper court
to reform the instrument, annul the same or
secure a declaration of the actual relationship
between the parties, sans the peddling
contract.—We are convinced that on the basis of
the peddling contract, no employer-employee
relationship was created. x x x However, this ruling
is without prejudice to the right of Repomanta and
Moralde and the other peddlers to sue in the proper
Court of First Instance and to ask for a reformation
of the instrument.
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
SOCIAL SECURITY SYSTEM vs. COURT OF
APPEALS
G.R. No. L-46058 December 14, 1987
FACTS: QTC, formerly U.S. Tobacco Corporation, is
a firm engaged in the manufacture and sale of
cigarettes. On 1972, QTC, as VENDOR, entered into
an agreement with CARREON, as VENDEE, the
salient provisions of which stipulate that
a) The VENDEE shall purchase one or more
brands of cigarettes of the VENDOR on
cash basis only, subject to the discretion of
the VENDOR as to the brand and quantity
thereof
b) The VENDEE shall sell the cigarettes herein
mentioned only within Quezon Province
and or such other places as may be
designated and or limited thereafter by the
VENDOR and only to residents of, or
retailers or jobbers doing, and having their
place of business in, said assigned territory,
strictly, at such prices set by the VENDOR
from time to time for the aforementioned
respective brands of cigarettes in the sale
thereof by the VENDEE in said assigned
territory.
c) The VENDEE is fully aware that a violation of
this particular paragraph will cause grave
and serious consequences to the VENDOR
and that he shall be liable for all damages
caused by said violation.
d) The VENDEE shall be solely responsible for
the cigarettes delivered to him by the
VENDOR as well as for the aforementioned
proceeds from the sale thereof, and any
loss thereof due to any cause shall be solely
for his own risk and account.
e) The VENDOR may loan a delivery truck or
trucks to the VENDEE, which truck or trucks
shall be used by the VENDEE exclusively in
connection with this contract and at all time
maintained by the said VENDEE in good
condition; and for as long as the VENDEE
may be allowed the use of the VENDOR's
truck or trucks, the VENDEE shall pay all the
expenses for gasoline, oil, repairs, operating
costs, maintenance, tires, spare parts, etc.,
but the VENDOR may at its discretion
10
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
assume the payment of major repair,
among others.
The contract with CARREON was terminated by
QTC. CARREON then filed a petition with the Social
Security Commission alleging that he was an
employee of QTC, and asking that QTC be ordered
to report him for coverage under the Social Security
Law QTC answered claiming that CARREON has not
been an employee but was an 'Independent
businessman.'
ISSUE: whether or not Romeo Carreon is an
employee or an independent contractor
HELD: Employee.
The existence of an employer-employee
relationship between Romeo Carreon and QTC
has been established, based on the following
"undisputed" FACTS as pointed out by the Solicitor
General, to wit:
(a) QTC assigned a definite sales territory for
Romeo Carreon;
(b) QTC provided Romeo Carreon with a delivery
truck for the exclusive use of the latter in his
sales activities;
(c) QTC dictated the price of the cigarettes sold by
Romeo Carreon;
(d) QTC prescribed what brand of cigarettes
Romeo Carreon could sell;
(e) QTC determined the persons to whom Romeo
Carreon could sell,
(f) QTC issued circulars and memoranda relative
to Romeo Carreon's sales activities;
(g) QTC required Romeo Carreon to submit to it
daily, weekly and monthly reports;
(h) QTC grounded Romeo Carreon for six months
in 1966;
(i) Romeo Carreon was supervised by sales
coordinators of QTC;
(j) Romeo Carreon was subject to payment of
damages and loss even of accrued rights for
any violation of instructions made by QTC in
relation to his sales activities; and
(k) Romeo Carreon was paid an allowance by QTC.
All these indicate control and supervision over
Carreon's work.
D) INDEPENDENT SALESMEN (PEDDLERS
CASES)
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
JUAN YSMAEL & COMPANY, INC v THE COURT
OF INDUSTRIAL RELATIONS
G.R. No. L-14280 May 30, 1960
FACTS:
The petitioning Union, a legitimate labor
organization duly registered with the Department of
Labor, filed a petition praying for the aforesaid
certification, upon the ground that it is a labor
organization composed of all the salesmen working
for the Ysmael Steel Manufacturing Co., which is
operated by the Company, as a subsidiary thereof,
both of which are employers of the aforementioned
salesmen; that there are in the Company two (2)
other labor unions, namely, the Ysmael Steel Labor
Organization (PAFLU), the membership of which is
composed mainly of manual factory workers (non-
supervisors), and the Ysmael Steel Employees
Union, the membership of which is composed of
supervisors, non-supervisors who are technical
employees, office non-technical employees and
clerical factory workers, and that the members of
petitioning Union are not included in or represented
by any of said two (2) unions in their collective
bargaining agreement with the Company, for the
economic factors affecting the members of
petitioning Union are different and they constitute a
separate and distinct union for an appropriate
bargaining unit.
The Company filed an answer objecting to the
petition denying EER upon the ground that the
members of petitioning Union are mere commission
agents or sales representatives, whose form of
selection and engagement is different from that of
the employees of the Company, for unlike such
employees, commission agents are not required to
undergo physical examination, to submit a police
clearance, and to punch the bundy clock, and are
not provided with identification cards. It is further
urged that commission agents are paid neither
wages nor salaries, but are granted commissions,
the amount of which depends on their sales, and
that their conduct as agents is not subject to the
control or supervision of the Company, which,
moreover, has no power of dismissal over them.
ISSUE: whether the members of petitioning Union
are employees of the Company, for purposes of
certification of the former as the sole and exclusive
11
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
bargaining representative of all the salesmen of the
latter.
HELD: there exists an employer-employee
relationship between the members of the
petitioning Union and the Company; that all the
salesmen working with the Company may
constitute a distinct and separate appropriate unit
for bargaining purposes with the Company; and
that the members of the petitioning Union
constitute the majority of the salesmen working for
the Company. The certification of the petitioning
Union, therefore, as the sole and exclusive
bargaining representative of all the salesmen
working with the Company is in order.
The difference in the manner of "selection and
engagement" does not prove, however, the alleged
absence of employer-employee relationship. Most
business enterprises have employees of different
classes, necessarily requiring different methods of
selection and contracts of services of various types,
without detracting from the existence of said
relationship. Besides, the very evidence for the
Company shows that commission agents are
dispensed from physical examination and from
punching the bundy clock because their duties are
extraneous to the factory work and they have no
fixed hours to contact their customers.
Again, the records disclose the following facts,
among others:
1. One who wishes to be a commission agent must
file an application therefor. Then he is given a
two-month probationary period, within which
technical men of the Company train him. On the
basis of his performance during said period, the
Company, thereafter, decides whether or not
he will be taken as a regular commission agent.
2. His duties as such include the following: (a) One
hundred per centum (100%) "loyalty to the
Company", and "disloyalty of any form or free-
lancing for any other company during their tour
of duty, will be sufficient cause for cutting
allowances and withdrawal of the authority to
sell for the Company." (b) He must check in at
8:00 a.m., to "report daily all visits made", and
"any misrepresentation with regard to coverage
will be sufficient cause for cutting allowances."
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
He was, also, required, before, to check in at
4:00 p.m., but subsequently, this requirement
was eliminated. (c) He "must list in his daily
report all items offered to customers, plus
results." (d) He "has to visit his accounts at least
twice every month", and "if he fails to visit an
account within two (2) months, he shall
automatically lose any claim to his account."
3. The Company directs the details of the work of
making sales, through a sales manager, under
whose authority commission agents are.
4. As the agents or salesmen report for work each
morning, they are given transportation
allowances of P1.50 or P2.00 each. They have,
also, a drawing allowance, the amount of which
varies depending upon past performances,
deductible from future commissions.
5. The Company exercises the power of dismissal:
(a) by cutting off these allowances, when the
agent makes a misrepresentation with regards
to coverage or report on daily visits made, or is
guilty of disloyalty in any form or free-lancing
for any other company during his tour of duty;
(b) by withdrawing the authority to sell in case
of such disloyalty or free-lanching, or when an
agent fails to make any reasonably good sale
within a reasonable period; and (c) by forcing
him to resign for any compelling reason, as the
company has done in the case of commission
agents Jose S. Esquivias, Melecio Data and
Felicidad Sinope.
6. The company has adopted the foregoing norms
unilaterally — generally by the promulgation of
pertinent rules — without the intervention or
consent of the agents, and without any
objection on their part. Both parties have
thereby indicated that the Company has full
authority to determine the manner and
conditions under which the agents shall
perform their duties. In other words, the
Company has control over the conduct of its
salesmen or agents. Thus, absence of any duty
on their part to keep regular office hours,
submit a police clearance and punch the bundy
clock, and of other additional duties, is due, not
12
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
to lack of power or authority to impose the
same, but merely to a policy of the management
which deems it, for the time being, either
unnecessary or inexpedient or both, owing to
the peculiar nature of the task of commission
agents.
7. All sales of products of Ysmael Steel
Manufacturing Company are seemingly
effected through the aforementioned salesmen
or commission agents. There are no other
persons, apart from the sales manager and
sales supervisor of the Company, charged with
the duty to sell therefor said products.
8. The salesmen or agents in question are,
according to the assistant general manager of
the Company, registered as members of the
Social Security System, established by Republic
Act No. 1161, as amended by Republic Act No.
1792, sections 9 and 8(d) of which reads:
xxx xxx xxx
SEC. 9. — Compulsory coverage. — Coverage in the
System shall be compulsory upon all employees
between the ages of sixteen and sixty years,
inclusive, if they have been for at least six months in
the service of an employer who is a member of the
System ... .
SEC. 8. — Terms defined. — For the purposes of this
Act, the following shall, unless the context indicates
otherwise, have the following meanings:
(d) Employee. — Any person who performs services
for an "employer" in which either or both mental and
physical efforts are used and who receives
compensation for such services.
Pursuant to section 2, paragraphs (c) and (d), of
Republic Act No. 875:
An employer includes any person acting in the
interest of an employer, directly or indirectly, but
shall not include any labor organization (otherwise
than when acting as an employer) or anyone acting
in the capacity of officer or agent of such labor
organization.(Sec. 2[c], Rep. Act No. 875.)
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
The term "employee" shall include any employee
and shall not be limited to the employee of a
particular employer unless the Act explicitly states
otherwise and shall include any individual whose
work has ceased as a consequence of, or in
connection with, any current labor dispute or
because of any labor practice and who has not
obtained any other substantially equivalent and
regular employment. (Sec. 2[d], id.)
In the light of the foregoing, it is our considered
opinion that the lower court did not err in holding
that the members of petitioning Union are
employees of the Company — within the purview of
the terms "employer" and "employee" as defined in
the Industrial Peace Act — for purposes of
certification of said union as the bargaining
representative of its salesmen or commission
agents.
INVESTMENT PLANNING CORP. vs. SSS
G.R. No. L-19124 November 18, 1967
FACTS:
Investment Planning Corp (The Corporation) is a
domestic corporation engaged in business
management and the sale of securities. It has two
classes of agents who sell its investment plans:
1. salaried employees who keep definite hours
and work under the control and supervision
of the company
2. registered representatives who work on
commission basis
The Corporations’s application for exemption of its
so-called registered representatives from the
compulsory coverage of the Social Security Act was
denied by the Social Securities Commission.
ISSUE:
WON the Corporation’s registered representatives
are employees within the meaning of the Social
Security Act (R.A. No. 1161 as amended).
HELD:
Section 8 (d) of R.A. No. 1161 defines the term
"employee" — for purposes of the Act — as
13
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
"any person who performs services for an
'employer' in which either or both mental and
physical efforts are used and who receives
compensation for such services, where there is,
employer-employee relationship." (As amended
by Sec.4, R.A. No. 2658).
These representatives are in reality commission
agents. According to the witness, these agents are
recruited and trained by him particularly for the job
of selling "'Filipinos Mutual Fund" shares, made to
undergo a test after such training and, if successful,
are given license to practice by the SEC. They then
execute an agreement with the Corporation with
respect to the sale of FMF shares to the general
public.
Among the features of said agreement which the
Commission considered pertinent to the issue are:
a) an agent is paid compensation for services
in the form of commission;
b) in the event of death or resignation he or his
legal representative shall be paid the
balance of the commission corresponding
to him;
c) he is subject to a set of rules and regulations
governing the performance of his duties
under the agreement;
d) he is required to put up a performance bond
e) his services may be terminated for certain
causes.
At the same time the Commission found from the
evidence and so stated in its resolution that:
· the agents are not required to report (for
work) at any time;
· they do not have to devote their time
exclusively to or work solely for petitioner;
· the time and the effort they spend in their
work depend entirely upon their own will
and initiative;
· they are not required to account for their
time nor submit a record of their activities;
· they shoulder their own selling expenses as
well as transportation; and
· they are paid their commission based on a
certain percentage of their sales."
The record also reveals that the commission earned
by an agent on his sales is directly deducted by him
from the amount he receives from the investor and
turns over to the company the amount invested
after such deduction is made. The majority of the
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
agents are regularly employed elsewhere — either
in the government or in private enterprises.
CORPORATION’S CONTENTION: The
commission agents, engaged under the terms
and conditions, are not employees but
independent contractors, as defined in Article
1713 of the Civil Code, which provides:
Art. 1713. By the contract for a piece of work the
contractor binds himself to execute a piece of
work for the employer, in consideration of a
certain price or compensation. The contractor
may either employ only his labor or skill, or also
furnish the material.
The work of the agents or registered
representatives more nearly approximates that
of an independent contractor than that of an
employee. The latter is paid for the labor he
performs, that is, for the acts of which such labor
consists; the former is paid for the result
thereof. Even if an agent of Corporation should
devote all of his time and effort trying to sell its
investment plans would not necessarily be entitled
to compensation therefor. His right to
compensation depends upon and is measured by
the tangible results he produces.
Where the element of control is absent; where a
person who works for another does so more or less
at his own pleasure and is not subject to definite
hours or conditions of work, and in turn is
compensated according to the result of his efforts
and not the amount thereof, we should not find that
the relationship of employer and employee exists.
In this case, the Court found nothing which would
indicate that the agents are under the control of the
Corporatin in respect of the means and methods
they employ in the performance of their work. The
fact that for certain specified causes the
relationship may be terminated (e.g., failure to meet
the annual quota of sales, inability to make any sales
production during a six-month period, conduct
detrimental to petitioner, etc.) does not mean that
such control exists, for the causes of termination
thus specified have no relation to the means and
methods of work that are ordinarily required of or
imposed upon employees.
EMPLOYEE vis-à-vis INDEPENDENT
CONTRACTOR
14
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
In the lease of services of hired servants or laborers,
the direct object of the contract is the lessor's labor;
the acts in which such labor consists, performed for
the benefit of the lessee, are taken into account
immediately. In work done by contract or for a fixed
price, the lessor's labor is indeed an important, a
most important factor; but it is not the direct object
of the contract, nor is it immediately taken into
account. The object which the parties consider,
which they bear in mind in order to determine the
cause of the contract, and upon which they really
give their consent, is not the labor but its result, the
complete and finished work, the aggregate of the
lessor's acts embodied in something material, which
is the useful object of the contract.
DR. RENATO SARA and ROMEO ARANA vs.
AGARRADO
G.R. No. 73199 October 26, 1988
FACTS:
DR. SARA et al owned a rice mill and begun to
engage in the buy and sell of palay and rice. They
entered into a verbal agreement with AGARRADO
where latter would be paid P2.00 commission per
sack of milled rice sold as well as a commission of
10% per kilo of palay purchased. Also, it was agreed
that AGARRADO would spend her own money for
the undertaking, but to enable her to carry out the
agreement more effectively, she was authorized to
borrow money from other persons, as in fact she
did, subject to reimbursement by petitioners.
AGARRADO filed with NLRC Regional Arbitration
Branch a complaint against DR. SARA et al for
unpaid commission and reimbursement of the
amounts she borrowed from various persons and of
her own money.
DR. SARA et al countered that the LA lacks
jurisdiction because there is no employer-employee
relationship between the parties. The commission
and reimbursement is governed by the law on
agency under the Civil Code and hence a purely civil
obligation cognizable by the regular courts.
ISSUE:
WON an employer-employee relationship exists
between DR. SARA et al and AGARRADO as to
warrant cognizance by the Labor Arbiter.
HELD: No.
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
To determine the existence of an employer-
employee relationship, the Court applied the four-
fold test:
1. the selection and engagement of the
employee
2. the payment of wages
3. the power of dismissal
4. the power to control the employee's
conduct
THE SELECTION AND ENGAGEMENT OF THE
EMPLOYEE
Although there was a selection and engagement of
AGARRADO in 1977, the verbal agreement between
the parties negated the existence of the other
requisites.
THE PAYMENT OF WAGES
The verbal agreement entered into by the parties
stipulated that AGARRADO would be paid a
commission of P2.00 per sack of milled rice sold as
well as a 10% commission on palay purchase. The
arrangement thus was explicitly on a commission
basis dependent on the volume of sale or purchase.
AGARRADO was not guaranteed any minimum
compensation nor was she allowed any drawing
account or advance of any kind against unearned
commissions. Her right to compensation depended
upon and was measured by the tangible results she
produced the quantity of rice sold and the quantity
of palay purchased.
THE POWER OF DISMISSAL
The power to terminate the relationship was
mutually vested upon the parties. Either may
terminate the business arrangement at will, with or
without cause.
THE POWER TO CONTROL THE EMPLOYEE'S
CONDUCT
Under the CONTROL TEST, an employer-employee
relationship exists if the "employer" has reserved
the right to control the "employee" not only as to the
result of the work done but also as to the means and
methods by which the same is to be accomplished.
Otherwise, no such relationship exists.
In this case, the means and methods of purchasing
and selling rice or palay by AGARRADO were totally
independent of DR. SARA et al’s control.
AGARRADO was never given capital by his
supposed employer but relied on her own resources
15
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
and if insufficient, she borrowed money from
others. DR. SARA et al did not supply AGARRADO
with tools and appliances needed to enable her to
carry her undertaking, except to authorize her to
borrow money from others, subject to
reimbursement.
Also, AGARRADO was not even obliged to sell the
palay she purchased to DR SARA et al. She was at
liberty to sell the palay to any trader offering higher
buying rates. She was thus free to sell it to anybody
whom she pleased.
AGARRADO worked for DR SARA at her own
pleasure and was not subject to definite hours or
conditions of work. She could even delegate the
task of buying and selling to others, if she so desired,
or simultaneously engaged in other means of
livelihood while selling and purchasing rice or palay.
AGARRADO WAS AN INDEPENDENT
CONTRACTOR
Under the conditions set forth in their agreement,
AGARRADO was an independent contractor, who
exercising independent employment, contracted to
do a piece of work according to her own method
and without being subject to the control of her
employer except as to the result of her work. She
was paid for the result of her labor, unlike an
employee who is paid for the labor he performs.
The verbal agreement devoid as it was of
any stipulations indicative of control leaves
no doubt that AGARRADO was not an
employee of petitioners but was rather an
independent contractor.
E) AGENCY
GUARDEX vs. NLRC
G.R. No. 66541 November 20, 1990
FACTS:
ESCANDOR is engaged in manufacture and sale of
fire-fighting equipment such as fire extinguishers,
fire hose cabinets and related products, and
building or fabrication of fire truck under the name
of Guardex Enterprises.
ORBETA, a freelance salesman learned that
ESCANDOR offered to fabricate a fire truck for
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
Rubberworld Inc. Inquiring about commission for
the sale of a fire truck, ORBETA received an answer
from ESCANDOR advising that it was P15,000 per
unit. Then, ORBETA offered to follow-up
ESCANDOR’s pending proposal to Rubberworld,
and asked for P250 as representation expenses.
In the meantime, ORBETA sold to other individuals
some of ESCANDOR’s fire extinguishers, receiving
travelling expenses in connection therewith as well
as the corresponding commissions. He then
dropped out of sight.
About seven months afterwards, ESCANDOR
herself finally concluded a contract with
Rubberworld. At this point, ORBETA suddenly
reappeared and asked for his commission.
ESCANDOR refused, saying that he had had nothing
to do with the offer, negotiation and consummation
of the sale.
ORBETA filed a complaint with the Ministry of Labor
for the unpaid commission. It was alleged that an
implied agency had been created between
ESCANDOR and ORBETA.
ISSUE: WON there is an agency constituted.
HELD: No.
ESCANDOR denied that she had ever given
ORBETA any such verbal authority. Indeed, months
prior to ORBETA’s approaching ESCANDOR, the
latter had already made a written offer of a fire
truck to Rubberworld. All that she consented to was
for ORBETA to "follow up" that pending offer. In
truth, it does not even appear that on the strength
of this "arrangement" — vague as it was — ORBETA
undertook the promised follow-up at all. He
reported nothing of his efforts or their fruits to
ESCANDOR. It was ESCANDOR who, in the months
that followed her initial meeting with ORBETA,
determinedly pushed the Rubberworld deal.
ORBETA was simply nowhere to be found.
Furthermore, it seems fairly evident that the
"representation allowance" of P250 was meant to
cover the expenses for the "follow-up" offered by
ORBETA — an ambiguous fact which does not of
itself suggest the creation of an agency and is not at
all inconsistent with the theory of its absence in this
case.
Assuming there is agency, such will not save the day
16
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
for ORBETA, because nothing in the record tends to
prove that he succeeded in carrying out its terms or
even as much as attempted to do so. The evidence
in fact clearly indicates otherwise.
The terms of ESCANDOR’s letter— assuming that it
was indeed an "authority to sell,"— are to the effect
that entitlement to the P15,000 commission is
contingent on the purchase by a customer of a fire
truck, the implicit condition being that the agent
would earn the commission if he was instrumental in
bringing the sale about. ORBETA certainly had
nothing to do with the sale of the fire truck, and is
not therefore entitled to any commission at all.
Furthermore, even if ORBETA is considered to have
been ESCANDOR’s agent for the time he was
supposed to "follow up" the offer to sell, such
agency would have been deemed revoked upon the
resumption of direct negotiations between
ESCANDOR and Rubberworld, ORBETA having in
the meantime abandoned all efforts (if indeed any
were exerted) to secure the deal in ESCANDOR’s
behalf.
Given the sole issue raised by the parties
concededly from the case’s inception (i.e., whether
or not ORBETA is ESCANDOR’s agent as regards
the sale of a fire truck to Rubberworld), the
competence to resolve the controversy did not
pertain to either the Labor Arbiter or the NLRC. The
jurisdiction only extends to cases arising from
employer-employee relationships.
CARUNGCONG vs NLRC
G.R. No. 118086
December 15, 1997
FACTS:
CARUNGCONG began as an agent of Sun Life
Assurance Company (SUNLIFE). Five years later,
she signed two (2) new agreements:
(1) Career Agents (or Unit Managers
Agreement), dealt with such matters as the
agent’s commissions, obligations,
limitations on his authority, and termination
of the agreement by death, or by written
notice with or without cause. It declared
that the Agent shall be an independent
contractor and none of the terms of the
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
agreement shall be construed as creating
an employer-employee relationship. [
(2) MANAGERS Supplementary
Agreement. Making explicit reference to
the first agreement, said second contract
explicitly described as a further agreement
contained provisions regarding
remuneration (overriding commissions in
accordance with a fixed schedule),
limitation of authority, and termination of
the agreement inter alia by written notice
without cause.
Subsequently, CARUNGCONG signed another
agreement naming her New Business Manager with
the function generally to manage a New Business
Office. The Agreement governed such matters as
the New Business Managers duties: limitations on
authority; compensation; expenses; termination of
relation, by among others, notice in writing with or
without cause. Alsoe, the latest Agreement
stressed that the New Business Manager in
performance of his duties, shall be considered an
independent contractor and not an employee of
Sun Life, and that (u)nder no circumstance shall the
New Business Manager and/or his employees be
considered employees of Sun Life.
CARUNGCONG was terminated due to the alleged
discrepancies in the reimbursement report. She
then instituted proceedings for vindication in the
Arbitration Branch of the NLRC.
SUNLIFE assert that jurisprudence and
CARUNGCONG’s admissions before the LA negate
the existence of an employment relationship.
Carungcong claims that although she was not, as
new business manager, required either to account
for her time or perform her duties in a fixed manner,
she was nonetheless an employee subject to the
control and supervision of Sun Life like any other
managerial employee.
ISSUE:
WON there is employer-employee relationship.
HELD: No.
Noteworthy is that this last agreement emphasized,
like the Career Agents Agreement first signed by
her, that in performance of her duties defined
17
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
herein, Carungcong would be considered an
independent contractor and not an employee of
Sun Life, and that (u)nder no circumstance shall the
New Business Manager and/or his employees be
considered employees of Sun Life.
It is germane to advert to the fact, which should by
now be apparent, that Carungcong was not your
ordinary run-of-the-mill employee, nor even your
average managerial employee or supervisor. Her
stated annual income from her occupation is
impressive by any standards: in excess
of P3,000,000.00, exclusive of overriding
commissions. Certainly, she may not be likened to
an ordinary person applying for employment, or an
ordinary employee striving to keep his job, under
the moral dominance of the hiring entity or
individual. By no means may Carungcong be
considered as dealing, or having dealt, with Sun Life
from an inferior position, as a disadvantage,
morally-dominated person. She must be deemed as
having transacted with Sun Life’s executives on
more or less equal terms. These considerations
impel concurrence with the conclusions of the
Commission which considered Carungcong an
independent contractor, not an employee of Sun
Life. As stated by the Commission:
A thorough review of the facts and evidence
compels us to rule in the negative on the
question of whether or not Carungcong is a
regular employee of Sun Life. She is an
independent contractor.
Her contracts/ agreement since she started as
insurance agent, then as unit manager and
finally as business/branch manager expressly
say so. Besides, it cannot be gainsaid that
complainant was never aware of the status as
such, for indicated in the very face of her latest
contract is the fact that she was accorded all
the chances she needed to seek professional
and legal advice relative thereto before she
signed the said contract.
Indeed, the agreements entered into by the
parties herein are the laws between the said
parties.
Moreover, it is true that complainant
Carungcong’s duties and functions derived
from her then existing agreements were made
subject to rules and regulations issued by
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
Sunlife, and for that matter, have likewise been
made subject of certain limitations imposed by
said company. Nonetheless, these are not
sufficient to accord the effect of establishing
employer-employee relationship absent in this
case. This is so because the insurance business
is not just any other ordinary business. It is one
that is imbued with public interest hence, it
must be governed by rules and regulations of
the state. The controls adverted to by
Carungcong are latent in the kind of business
she is into and are mainly aimed at promoting
the results the parties so desire and do not
necessarily create any employer-employee
relationships, where the employers controls
have to interfere in the methods and means by
which the employee would like to employ to
arrive at the desired results.
Carungcong admitted that she was free to work
as she pleases, at the place and time she felt
convenient for her to do so. She suffered no
interference whatsoever in relation to the
manner and methodology she used for her to
achieve her desired results.
For that matter, Carungcong was never paid a
fixed wage or salary but was mainly paid by
commissions, depending on the level and
volume of her performance/production, the
number of trained agents, when taken in and
assigned to her, being responsible for her
added income as she gets a certain percentage
from the said agents production as part of her
commission.
Also, in the second judgment of the Commission:
Her admissions completely diluted the
supposed potency or her theory that an
employer-employee relationship
existed. Complainant admitted that her
renumerations were based on her levels of
production. She admitted she could solicit
insurance anywhere or at any time she deemed
convenient. She never accounted for her
working time or that daily working hours were
never applicable to her situation. She gave
unequivocal testimony that she performed her
duties as a New Business Manager, i.e.,
monitoring, training, recruitment and sales, at
her own time and convenience, at however she
deemed convenient, and with whomsoever she
18
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
chose We cannot help but agree with Sunlife’s
submission that, plainly, CARUNGCONG alone
judged the elements of time, place and means
in the performance of her duties and
responsibilities.
Her theory of the case appears to be limited to
pointing out that the company issued rules and
regulations to which she should
conform. However, no showing has been made
that such rules and
regulations effectively and actually controlled
or restricted her choice of methods in
performing her duties as New Business
Manager. Without such proof, there can be no
plausible reason to believe that her contractual
declaration that she was an independent
contractor has been qualified.
INSULAR LIFE vs. NLRC
(G.R. No. 119930. March 12, 1998, March 12, 1998)
FACTS:
An agency contract was entered into between
Insular Life and Pantaleon de los Reyes. The contract
was for life insurance and annuities for which De los
Reyes would be paid compensation in the form of
commissions. The contract was prepared by Insular
Life in its entirety and De los Reyes merely signed
his conformity thereto. It contained the stipulation
that no employer-employee relationship shall be
created between the parties and that the agent shall
be free to exercise his own judgment as to time,
place and means of soliciting insurance. De los
Reyes however was prohibited by Insular Life from
working for any other life insurance company, and
violation of this stipulation was sufficient ground for
termination of the contract.
De los Reyes was appointed as Acting Unit Manager.
It was provided in the management contract that
the relation of the acting unit manager and/or the
agents of his unit to the company shall be that of
independent contractor. Later on he was dismissed.
He filed a complaint against Insular Life invoking
that he is an employee of the company.
Insular alleged the absence of employer-employee
relationship and claimed that De los Reyes was not
an employee but an independent contractor.
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
ISSUE: W/N an employer-employee relationship
exists between Insular and De los Reyes.
RULING: YES
The existence of an employer-employee
relationship cannot be negated by expressly
repudiating it in the management contract and
providing therein that the "employee" is an
independent contractor when the terms of the
agreement clearly show otherwise. For, the
employment status of a person is defined and
prescribed by law and not by what the parties say it
should be.
1ST TEST. De los Reyes was appointed as Acting Unit
Manager only upon recommendation of the District
Manager. This indicates that he was hired by Insular
Life because of the favorable endorsement of its
duly authorized officer.
2ND TEST. The payment of compensation by way of
commission does not militate against the
conclusion that De los Reyes was an employee of
Insular Life. Under Article 97 of the Labor Code,
"wage" shall mean "however designated, capable of
being expressed in terms of money, whether fixed
or ascertained on a time, task, price or commission
basis."
3RD TEST. Under the managership contract, De los
Reyes was obliged to work exclusively for petitioner
in life insurance solicitation and was imposed
premium production quotas. Of course, the acting
unit manager could not underwrite other lines of
insurance because his Permanent Certificate of
Authority was for life insurance only and for no
other. He was proscribed from accepting a
managerial or supervisory position in any other
office including the government without the written
consent of petitioner.
4TH TEST. De los Reyes could only be promoted to
permanent unit manager if he met certain
requirements and his promotion was
recommended by the petitioner's District Manager
and Regional Manager and approved by its Division
Manager. As Acting Unit Manager, De los Reyes
performed functions beyond mere solicitation of
insurance business for petitioner. As found by the
NLRC, he exercised administrative functions which
were necessary and beneficial to the business of
Insular Life. He was required to submit to the former
19
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
all completed applications for insurance. He is also
bound to turn over to the company immediately any
and all sums of money collected by him.
ROYALE HOMES MARKETING CORPORATION
vs. ALCANTARA
(G.R. No. 195190, July 28, 2014)
FACTS:
Royale Homes appointed Alcantara as its Marketing
Director for a fixed period of one year. His work
consisted mainly of marketing Royale Homes’ real
estate inventories on an exclusive basis. Royale
Homes reappointed him for several consecutive
years.
Later on, Alcantara filed a Complaint for Illegal
Dismissal against Royale Homes. He alleged that he
is a regular employee of Royale Homes since he is
performing tasks that are necessary and desirable
to its business.
Royale Homes denied that Alcantara is its
employee. It argued that the appointment paper of
Alcantara is clear that it engaged his services as an
independent sales contractor for a fixed term of
one year only. He never received any salary, 13th
month pay, overtime pay or holiday pay from Royale
Homes as he was paid purely on commission basis.
In addition, Royale Homes had no control on how
Alcantara would accomplish his tasks and
responsibilities as he was free to solicit sales at any
time and by any manner which he may deem
appropriate and necessary. He is even free to
recruit his own sales personnel to assist him in
pursuance of his sales target. Alcantara decided to
leave the company after his wife had formed a
brokerage company that directly competed with its
business.
Royal Homes further argued that it does not
exercise control over Alcantara based on a shallow
ground that his performance is subject to company
rules and regulations, code of ethics, periodic
evaluation, and exclusivity clause of contract.
Royale Homes maintains that it is expected to
exercise some degree of control over its
independent contractors, but that does not
automatically result in the existence of employer-
employee relationship.
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
The Labor Arbiter ruled that Alcantara is an
employee of Royale Homes with a fixed-term
employment period and that the pre-termination of
his contract was against the law.
The NLRC reversed the ruling and ruled that
Alcantara is not an employee but a mere
independent contractor of Royale Homes.
ISSUE: Whether Alcantara was an independent
contractor or an employee of Royale Homes.
RULING: Independent contractor
Construction of contract
While the existence of employer-employee
relationship is a matter of law, the characterization
made by the parties in their contract as to the
nature of their juridical relationship cannot be
simply ignored, particularly in this case where the
parties’ written contract unequivocally states their
intention at the time they entered into it. At the very
least, the provision on the absence of employer-
employee relationship between the parties can be
an aid in considering the Agreement and its
implementation, and in appreciating the other
evidence on record.
In this case, the contract duly signed and not
disputed by the parties, conspicuously provides
that "no employer-employee relationship exists
between" Royale Homes and Alcantara, as well as
his sales agents. It is clear that they did not want to
be bound by employer-employee relationship at the
time of the signing of the contract. Since "the terms
of the contract are clear and leave no doubt upon
the intention of the contracting parties, the literal
meaning of its stipulations should control."
It is rather strange on the part of Alcantara, an
educated man and a veteran sales broker who
claimed to be receiving ₱1.2 million as his annual
salary, not to have contested the portion of the
contract expressly indicating that he is not an
employee of Royale Homes if their true intention
were otherwise.
Control test
Not every form of control is indicative of employer-
employee relationship. A person who performs
work for another and is subjected to its rules,
20
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
regulations, and code of ethics does not necessarily
become an employee. As long as the level of control
does not interfere with the means and methods of
accomplishing the assigned tasks, the rules
imposed by the hiring party on the hired party do
not amount to the labor law concept of control that
is indicative of employer-employee relationship.
Logically, the line should be drawn between rules
that merely serve as guidelines towards the
achievement of the mutually desired result without
dictating the means or methods to be employed in
attaining it, and those that control or fix the
methodology and bind or restrict the party hired to
the use of such means. The first, which aim only to
promote the result, create no employer-employee
relationship unlike the second, which address both
the result and the means used to achieve it.
Guidelines indicative of labor law "control," should
not merely relate to the mutually desirable result
intended by the contractual relationship; they must
have the nature of dictating the means or methods
to be employed in attaining the result, or of fixing
the methodology and of binding or restricting the
party hired to the use of these means.
As the party claiming the existence of employer-
employee relationship, it behoved upon Alcantara
to prove the elements thereof, particularly Royale
Homes’ power of control over the means and
methods of accomplishing the work. He, however,
failed to cite specific rules, regulations or codes of
ethics that supposedly imposed control on his
means and methods of soliciting sales and dealing
with prospective clients.
Notably, Alcantara was not required to observe
definite working hours. Except for soliciting sales,
Royale Homes did not assign other tasks to him. He
had full control over the means and methods of
accomplishing his tasks as he can "solicit sales at
any time and by any manner which [he may] deem
appropriate and necessary." He performed his tasks
on his own account free from the control and
direction of Royale Homes in all matters connected
therewith, except as to the results thereof.
As to his hiring
Neither does the repeated hiring of Alcantara prove
the existence of employer-employee relationship.
The continuous rehiring of Alcantara simply
signifies the renewal of his contract with Royale
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
Homes, and highlights his satisfactory services
warranting the renewal of such contract. Nor does
the exclusivity clause of contract establish the
existence of the labor law concept of control.
Exclusivity of contract does not necessarily result in
employer-employee relationship.
Payment of wages
The element of payment of wages is also absent in
this case. Alcantara’s remunerations consist only of
commission override of 0.5%, budget allocation,
sales incentive and other forms of company
support. There is no proof that he received fixed
monthly salary. No payslip or payroll was ever
presented and there is no proof that Royale Homes
deducted from his supposed salary withholding tax
or that it registered him with the Social Security
System, Philippine Health Insurance Corporation, or
Pag-Ibig Fund. In fact, his Complaint merely states a
ballpark figure of his alleged salary of ₱100,000.00,
more or less. All of these indicate an independent
contractual relationship.
F) AGRICULTURAL TENANCY
DELOS REYES vs. ESPINELI
(G.R. No. L-28280-81, November 28, 1969)
FACTS:
Geronimo delos Reyes is the owner of a 200-
hectare coconut plantation where Belarmino is an
overseer. Belarmino took into the land respondents
Espineli et. al. However, Delos Reyes fired
Belarmino upon the suspicion that the latter had
been deceiving him in connivance with Espineli et.
al.
Alcantara and Espineli filed an action demanding the
delivery to them of the difference between the 1/7
share which petitioner delos Reyes had been giving
them and the 30% share to which they, as share
tenants, were allegedly entitled.
Delos Reyes contends that (1) there existed no
contractual relationship between him and Alcantara
and Espineli; (2) Alcantara and Espineli were not his
tenants. At the time they were taken into his land by
Belarmino, the latter was a mere laborer and
therefore without the requisite authority to
21
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
contract in his behalf, and it was only later that he
was promoted to the position of overseer.
ISSUE: W/N an employer-employee relationship
exists between Delos Reyes and Alcantara and
Espineli.
RULING: NO
"Agricultural tenancy" is the physical possession
by a person of land devoted to agriculture
belonging to, or legally possessed by, another for
the purpose of production through the labor of the
former and of the members of his immediate farm
household, in consideration of which the former
agrees to share the harvest with the latter, or to pay
a price certain or ascertainable, either in produce or
in money, or in both.
"Share tenancy" exists whenever two persons
agree on a joint undertaking for agricultural
production wherein one party furnishes the land
and the other his labor, with either or both
contributing any one or several of the items of
production, the tenant cultivating the land
personally with the aid of labor available from
members of his immediate farm household, and the
produce thereof to be divided between the
landholder and the tenant in proportion to their
respective contributions.
The characteristics of a share tenancy contract are:
(1) the parties are a landholder, who is a natural or
juridical person and is the owner, lessee,
usufructuary or legal possessor of agricultural land,
and a tenant who, himself and with the aid available
from within his immediate farm household,
cultivates the land which is the subject-matter of
the tenancy; (2) the subject-matter is agricultural
land; (3) the purpose of the contract is agricultural
production; and (4) the cause or consideration is
that the landholder and the share tenant would
divide the agricultural produce between themselves
in proportion to their respective contributions.
While the Agricultural Tenancy Act did not define
the term "agricultural laborer" or "agricultural
worker," the Agricultural Land Reform Code does. A
"farm worker" is "any agricultural wage, salary or
piece worker but is not limited to a farm worker of a
particular farm employer unless this Code explicitly
states otherwise, and any individual whose work has
ceased as a consequence of, or in connection with,
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
a current agrarian dispute or an unfair labor practice
and who has not obtained a substantially equivalent
and regular employment." The term includes "farm
laborer and/or farm employees."
This is not to say that agricultural workers or farm
laborers are industrial workers. Not by any means,
although they may both appear in the same
establishment. The difference lies in the kind of
work they do. Those whose labor is devoted to
purely agricultural work are agricultural laborers. All
others are industrial workers. Nonetheless, they
belong to the same class. Both are workers. Both are
employees.
We are here primarily interested in the basic
differences between a farm employer-farm worker
relationship and an agricultural sharehold tenancy
relationship. Both, of course, are leases, but there
the similarity ends. In the former, the lease is one of
labor, with the agricultural laborer as the lessor of
his services, and the farm employer as the lessee
thereof. In the latter, it is the landowner who is the
lessor, and the sharehold tenant is the lessee of
agricultural land. As lessee, he has possession of the
leased premises. But the relationship is more than a
mere lease. It is a special kind of lease, the law
referring to it as a "joint undertaking." For this
reason, not only the tenancy laws are applicable, but
also, in a suppletory way, the law on leases, the
customs of the place and the civil code provisions
on partnership. The share tenant works for that joint
venture. The agricultural laborer works for the farm
employer, and for his labor he receives a salary or
wage, regardless of whether the employer makes a
profit. On the other hand, the share tenant
participates in the agricultural produce. His share is
necessarily dependent on the amount of the
harvest.
Since the relationship between farm employer and
agricultural laborer is that of employer and
employee, the decisive factor is the control
exercised by the former over the latter. On the
other hand, the landholder has the "right to require
the tenant to follow those proven farm practices
which have been found to contribute towards
increased agricultural production and to use
fertilizer of the kind or kinds shown by proven farm
practices to be adapted to the requirements of the
land." This is but the right of a partner to protect his
interest, not the control exercised by an employer.
If landholder and tenant disagree as to farm
22
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
practices, the former may not dismiss the latter. It is
the court that shall settle the conflict according to
the best interests of both parties.
The record is devoid of evidentiary support for the
notion that the Alcantara and Espineli are farm
laborers. They do not observe set hours of work.
Delos Reyes has not laid down regulations under
which they are supposed to do their work. The
argument tendered is that they are guards.
However, it does not appear that they are under
obligation to report for duty to the Delos Reyes or
his agent. They do not work in shifts. Nor has the
Delos Reyes prescribed the manner by which
Alcantara and Espineli were and are to perform their
duties as guards. We do not find here that degree of
control and supervision evincive of an employer-
employee relationship. Furthermore, if Alcantara
and Espineli are guards, then they are not
agricultural laborers, because the duties and
functions of a guard are not agricultural in nature. It
is the Industrial Court that has jurisdiction over any
dispute that might arise between employer and
employee. Yet, Delos Reyes filed his complaint
against the Alcantara and Espineli in the Court of
Agrarian Relations.
G) LEASE CONTRACT
CITIZENS LEAGUE vs. ABBAS
(G.R. No. L-21212, September 23, 1966)
FACTS:
Spouses Geronimo were owners and operators of
auto-calesas where the members of the Union
Citizens League were drivers. They used to lease the
auto-calesas of the spouses on a daily rental basis.
However, they were unable to get the spouses to
recognize them as employees instead of lessees. To
bargain with it on that basis, the Union declared a
strike. Later on, they filed a complaint for unfair
labor practice refusal to bargain with them. The
spouses allege that there is no employer-employee
relationship that existed between the parties.
ISSUES: W/N an employer-employee exists
between Spouses Geronimo and the members of
the Citizen’s League.
RULING: YES
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
A driver of a jeep who operates the same under the
boundary system is considered an employee within
the meaning of the law and as such the case comes
under the jurisdiction of the Court of Industrial
Relations.
“The only features that would make the relationship
of lessor and lessee between the Spouses
Geronimo, owner of the jeeps, and the drivers,
members of the Citizen’s League union, are the fact
that they do not pay them any fixed wage but their
compensation is the excess of the total amount of
fares earned or collected by them over and above
the amount of P7.50 which they agreed to pay to
the respondent, and the fact that the gasoline
burned by the jeeps is for the account of the drivers.
These two features are not, however, sufficient to
withdraw the relationship, between them from that
of employer-employee, because the estimated
earnings for fares must be over and above the
amount they agreed to pay to the respondent for a
ten-hour shift or ten-hour a day operation of the
jeeps. Not having any interest in the business
because they did not invest anything in the
acquisition of the jeeps and did not participate in the
management thereof, their service as drivers of the
jeeps being their only contribution to the business,
the relationship of lessor and lessee cannot be
sustained."
JARDIN, et al. v NLRC and GOODMAN TAXI
(PHILJAMA INTERNATIONAL, INC.)
(G.R. No. 119268, February 23, 2000)
FACTS:
Petitioners were drivers of private respondent,
Philjama International Inc., a domestic corporation
engaged in the operation of "Goodman Taxi."
Petitioners used to drive private respondents
taxicabs every other day on a 24-hour work
schedule under the boundary system. Under this
arrangement, the petitioners earned an average of
P400.00 daily.
ISSUE:
Whether there is an ER-EE relationship between the
petitioners and private respondent.
HELD: YES
In a number of cases decided by this Court, we ruled
that the relationship between jeepney
23
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
owners/operators on one hand and jeepney drivers
on the other under the boundary system is that of
employer-employee and not of lessor-lessee. We
explained that in the lease of chattels, the lessor
loses complete control over the chattel leased
although the lessee cannot be reckless in the use
thereof, otherwise he would be responsible for the
damages to the lessor. In the case of jeepney
owners/operators and jeepney drivers, the former
exercise supervision and control over the latter. The
management of the business is in the owners hands.
The owner as holder of the certificate of public
convenience must see to it that the driver follows
the route prescribed by the franchising authority
and the rules promulgated as regards its operation.
Now, the fact that the drivers do not receive fixed
wages but get only that in excess of the so-called
"boundary" they pay to the owner/operator is not
sufficient to withdraw the relationship between
them from that of employer and employee. We have
applied by analogy the above stated doctrine to the
relationships between bus owner/operator and bus
conductor, auto-calesa owner/operator and driver,
and recently between taxi owners/operators and
taxi drivers. Hence, petitioners are undoubtedly
employees of private respondent because as taxi
drivers they perform activities which are usually
necessary or desirable in the usual business or
trade of their employer.
H) INDUSTRIAL PARTNERSHIP
RUGA, et al. v
NLRC and DE GUZMAN FISHING ENTERPRISES
and/or ARSENIO DE GUZMAN
(G.R. No. L-72654-61, January 22, 1990)
FACTS:
Petitioners were the fishermen-crew members of
7/B Sandyman II, one of several fishing vessels
owned and operated by private respondent De
Guzman Fishing Enterprises which is primarily
engaged in the fishing business. Petitioners
rendered service aboard said fishing vessel in
various capacities, as follows:
(1) Ruga and Parma - patron/pilot
(2) Calderon - chief engineer
(3) Bautu - second engineer
(4) Barbin - master fisherman
(5) Francisco - second fisherman
(6) Cervantes and Barbin - fishermen.
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
For services rendered in the conduct of private
respondent's regular business of "trawl" fishing,
petitioners were paid on percentage commission
basis in cash.
Petitioners alleged that they were directly hired by
private respondent; they had been employed from
8 to 15 years in various capacities; that private
respondent supervised and controlled the conduct
of their fishing operations as to the fixing of the
schedule of the fishing trips, the direction of the
fishing vessel, the volume or number of tubes of the
fish-catch the time to return to the fishing port; that
they were not allowed to join other outfits even the
other vessels owned by private respondent without
their permission; that they were compensated on
percentage commission basis of the gross sales of
the fish-catch which were delivered to them in cash;
and that they have to follow company policies, rules
and regulations imposed on them by private
respondent.
Private respondent charged petitioners of selling
their fish-catch at midsea to the prejudice of private
respondents.
Petitioners individually filed their complaints for
illegal dismissal (among others) with the then
Ministry (now Department) of Labor and
Employment.
Private respondents denied the employer-
employee relationship between them and
petitioners on the theory that private respondent
and petitioners were engaged in a joint venture.
The Labor Arbiter (LA) dismissing all the complaints
of petitioners on a finding that a "joint fishing
venture" and not one of employer-employee
relationship existed between private respondent
and petitioners.
NLRC affirmed the decision of the LA that a "joint
fishing venture" relationship exists.
ISSUE:
Whether the fishermen-crew members are
employees of its owner-operator.
HELD: YES
We have consistently ruled that in determining the
existence of an employer-employee relationship,
the elements that are generally considered are the
following (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power
of dismissal; and (d) the employer's power to control
the employee with respect to the means and
24
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
methods by which the work is to be
accomplished. The employment relation arises
from contract of hire, express or implied. 9 In the
absence of hiring, no actual employer-employee
relation could exist.
From the four (4) elements mentioned, We have
generally relied on the so-called right-of-control
test where the person for whom the services are
performed reserves a right to control not only the
end to be achieved but also the means to be used in
reaching such end. The test calls merely for the
existence of the right to control the manner of doing
the work, not the actual exercise of the right.
The case of Pajarillo vs. SSS invoked by the public
respondent as authority for the ruling that a "joint
fishing venture" existed between private
respondent and petitioners is not applicable in the
instant case. There is neither light of control nor
actual exercise of such right on the part of the boat-
owners in the Pajarillo case, where the Court found
that the pilots therein are not under the order of the
boat-owners as regards their employment; that
they go out to sea not upon directions of the boat-
owners, but upon their own volition as to when, how
long and where to go fishing; that the boat-owners
do not in any way control the crew-members with
whom the former have no relationship whatsoever;
that they simply join every trip for which the pilots
allow them, without any reference to the owners of
the vessel; and that they only share in their own
catch produced by their own efforts.
The aforementioned circumstances obtaining
in Pajarillo case do not exist in the instant case. The
conduct of the fishing operations was under the
control and supervision of private respondent's
operations manager. Matters dealing on the fixing
of the schedule of the fishing trip and the time to
return to the fishing port were shown to be the
prerogative of private respondent. While
performing the fishing operations, petitioners
received instructions from private respondent's
operations manager. They are told to report their
activities, their position, and the number of tubes of
fish-catch in one day. Clearly thus, the conduct of
the fishing operations was monitored by private
respondent thru the patron/pilot.
Records show that in the instant case, as
distinguished from the Pajarillo case where the
crew members are under no obligation to remain in
the outfit for any definite period as one can be the
crew member of an outfit for one day and be the
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
member of the crew of another vessel the next day,
the herein petitioners, on the other hand, were
directly hired by private respondent, through its
general manager and its operations manager and
have been under the employ of private respondent
for a period of 8-15 years in various capacities.
While tenure or length of employment is not
considered as the test of employment, nevertheless
the hiring of petitioners to perform work which is
necessary or desirable in the usual business or trade
of private respondent for a period of 8-15 years
qualify them as regular employees within the
meaning of Article 281 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.
Aside from performing activities usually necessary
and desirable in the business of private respondent,
it must be noted that petitioners received
compensation on a percentage commission based
on the gross sale of the fish-catch. Such
compensation falls within the scope and meaning of
the term "wage" as defined under Article 97(f) of the
Labor Code.
Even on the assumption that petitioners indeed sold
the fish-catch at midsea the act of private
respondent virtually resulting in their dismissal
evidently contradicts private respondent's theory of
"joint fishing venture" between the parties herein. A
joint venture, including partnership, presupposes
generally a parity of standing between the joint co-
venturers or partners, in which each party has an
equal proprietary interest in the capital or property
contributed and where each party exercises equal
lights in the conduct of the business.
It would be inconsistent with the principle of parity
of standing between the joint co-venturers as
regards the conduct of business, if private
respondent would outrightly exclude petitioners
from the conduct of the business without first
resorting to other measures consistent with the
nature of a joint venture undertaking, Instead of
arbitrary unilateral action, private respondent
should have discussed with an open mind the
advantages and disadvantages of petitioners'
action with its joint co-venturers if indeed there is a
"joint fishing venture" between the parties. But this
was not done in the instant case.
VILLAVILLA v CA, SOCIAL SECURITY
COMMISSION, REYNALDO MERCADO, and
MARCELO COSUCO
25
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
(G.R. No. 79664 August 11, 1992)
FACTS:
Arturo Villavilla was employed as "tripulante" (crew
member) of the fishing boat "F/B Saint Theresa".
When the boat sank, Arturo was not among the
known survivors.
Petitioner-Spouses Villavilla, parents of Arturo, filed
a petition with the Social Security Commission
against the owners of the fishing boat for death
compensation benefits of Arturo whom
respondents failed to register as their employee.
Petitioners assert that "fishermen-crew members
are individual employees and not industrial partners
as in the case at bar" so that the "mere presence of
Arturo Villavilla in the fishing boat of Mercado
makes him an employee of the employer.
Citing RJL Martinez Fishing Corporation vs.
NLRC, petitioners posit that "the main factor that
determines whether a person is an employee of the
employer is the kind of work being performed by
that person. If the work of the laborer is part of the
regular business or occupation of the employer, the
said laborer is a regular employee of the employer."
Petitioners thus contend that since Arturo was
recruited by Mercado himself as one of his
fishermen-crew members and that the crew
members were uniformly paid by Mercado, there
can be no other conclusion but that Arturo was an
employee of Mercado at the time his fishing boat
sank.
ISSUE:
Whether there was an employer-employee
relationship between petitioners' deceased son,
Arturo Villavilla, and herein private respondents.
HELD: There was no ER-EE relationship. What exists
is a Joint Venture.
The records disclose that the relationship between
Mercado and the crew members of the ship is one
positively showing the existence of a joint venture.
The arrangement between the boat owner and the
crew members, one of whom was petitioners' son,
partook of the nature of a joint venture: the crew
members did not receive fixed compensation as
they only shared in their catch; they ventured to the
sea irrespective of the instructions of the boat
owners, i.e., upon their own best judgment as to
when, how long, and where to go fishing; the boat
owners did not hire them but simply joined the
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
fishing expedition upon invitation of the ship
master, even without the knowledge of the boat
owner. In short, there was neither right of control
nor actual exercise of such right on the part of the
boat owner over his crew members.
BESA v TRAJANO, DIRECTOR OF THE BUREAU
OF LABOR RELATIONS
(G.R. No. 72409, December 29, 1986)
FACTS:
Petitioner seeks the resolution of the question as to
whether or not an employer-employee relationship
exists between herein petitioner and the seventeen
(17) shoeshiners-members of the respondent union,
who, if the relationship does exist, should be entitled
to the rights, privileges and benefits of an employee
as provided in the Labor Code.
ISSUE: Whether there is an ER-EE relationship
between petitioner BESA and the 17 shoe shiners.
HELD: An ER-EE relationship does not exist
between the 17 shoe shiners and petitioner, they are
partners.
The shoe shiner is distinct from a piece worker
because while the latter is paid for work
accomplished, he does not, however, contribute
anything to the capital of the employer other than
his service.
It is the employer of the piece worker who pays his
wages, while the shoe shiner in this instance is paid
directly by his customer.
The piece worker is paid for work accomplished
without regard or concern to the profit as derived
by his employer, but in the case of the shoe shiners,
the proceeds derived from the trade are always
divided share and share alike with respondent BESA.
The shoe shiner can take his share of the proceeds
everyday if he wanted to or weekly as is the practice
of Besa.
The employer of the piece worker supervises and
controls his work, but in the case of the shoe shiner,
respondent BESA does not exercise any degree of
control or supervision over their person and their
work. All these are not obtaining in the case of a
piece worker as he is in fact an employee in
contemplation of law, distinct from the shoe shiner
in this instance who, in relation to respondent BESA,
is a partner in the trade.
These shoe shiners are not employees of the
company, but are partners instead. This is due to the
26
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
fact that the owner/manager does not exercise
control and supervision over the shoe shiners. That
the shiners have their own customers from whom
they charge the fee and divide the proceeds equally
with the owner, which make the owner categorized
them as on purely commission basis.
I) ER-EE RELATIONSHIP CREATED BY LAW
1. INDIRECT EMPLOYER – ART. 107
(LIMITED)
G.R. No. 82868 August 5, 1991
DIOSCORO RABAGO, ET AL. vs. NLRC and
PHILIPPINE TUBERCULOSIS SOCIETY, INC.
G.R. No. 82932 August 5, 1991
ACE BUILDING CARE vs. NLRC, DIOSCORO
RABAGO
CRUZ, J.:
FACTS: In 1981, Ace Building Care (ABC) and the
Philippine Tuberculosis Society (PTS) entered into a
contract under which ABC would provide PTS with
janitorial and allied services for a stipulated
consideration, subject to such adjustment as might
be subsequently required by law. The contract was
renewed yearly until 1985, when the services were
placed under public bidding and a new contract was
awarded to another company, which then took over
from ABC.
On September 9, 1985, the forty-one (41) janitors of
ABC filed a complaint with the NLRC against both
ABC and PTS for unpaid wage differentials under
Wage Order Nos. 5 and 6, holiday premium pay,
damages and attorney's fees, reimbursement of
cash bond, incentive leave pay and bonus and
separation pay. ABC filed a cross-claim against PTS,
contending that the latter was liable for the
statutory increases, while PTS moved to dismiss on
the ground that it belonged to the public sector and
was not covered by the Labor Code.
On September 30,1987, Labor Arbiter Felipe T.
Garduque II ruled that the complainants were not
entitled to legal holiday pay and to reimbursement
of cash bond or separation pay except for five of
them who were allowed separation pay. The
decision also awarded incentive leave with pay
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
except for seven of them, who had worked less than
one year. The Labor Arbiter also held ABC and PTS
are jointly and severally liable for payment of the
wage differentials under Wage Orders Nos. 5 and 6.
Both ABC and PTSI appealed to the NLRC. On
appeal, the NLRC affirmed the decision with
respect to the award of separation pay and service
incentive leave with pay but held that it was ABC
alone that should pay the wage differentials under
Wage Orders Nos. 5 and 6.
The complainants and ABC filed their respective
motions for reconsideration and, upon denial
thereof, filed this consolidated petition for certiorari
with this Court.
ISSUES:
1. Whether or not ABC and PTS are jointly and
solidarily liable for the differential pay
required under Wage Orders Nos. 5 and 6;
(YES)
2. Whether or not PTS is exempt from
payment under the subject Wage Orders
because it is a public sector employer while
the Wage Orders cover only employers and
employees in the private sector; (NO)
3. Whether or not the individual respondents
are entitled to service incentive pay and
separation pay. (Yes, the decision of the
LA is reinstated with modification.)
RULING:
1. Yes, ABC and PTS are jointly and solidarily
liable. The first and common issue in these
two petitions has already been resolved by
this Court in Eagle Security Agency, Inc.
vs. NLRC, where we held:
Petitioners' solidary liability for the amounts
due the security guards finds support in
Articles 106, 107 and 109 of the Labor Code
which state that:
Art. 106. Contractor or subcontractor. -
Whenever an employer enters into a
contract with another person for the
performance of the former's work, the
27
 ART. 6 COVERAGE - ER-EE RELATIONSHIP LABOR STANDARD LAWS
employees of the contractor and of the Constitution (See Article II, Sec. 18 and
latters' subcontractor, if any, shall be paid in Article XIII, Sec. 3).
accordance with the provisions of this
Code. In the case at bar, it is beyond dispute that
the security guards are the employees of
In the event that the contractor or EAGLE (See Article VII, Sec. 2 of the
subcontractor fails to pay the wages of his Contract for Security Services; G.R. No.
employees in accordance with this Code, 81447, Rollo, p. 34). That they were assigned
the employer shall be jointly and severally to guard the premises of PTSI pursuant to
liable with his contractor or subcontractor the latter's contract with EAGLE and that
to such employees to the extent that he is neither of these two entities paid their wage
liable to employees directly employed by and allowance increases under the subject
him. wage orders are also admitted (See Labor
Arbiter's Decision, p. 2; G.R. No. 81447,
xxx xxx xxx Rollo, p. 75). Thus, the application of the
aforecited provisions of the Labor Code on
Art. 107. Indirect employer. - The provisions joint and several liability of the principal and
of the immediately preceding Article shall contractor is appropriate (See Del Rosario &
likewise apply to any person, partnership, Sons Logging Enterprises, Inc. v. NLRC, G.R.
association or corporation which, not being No. 64204, May 31,1985,136 SCRA 669).
an employer, contracts with an
independent contractor for the 2. No, PTS is not exempt. The definition of a
performance of any work, task, job or public sector employer relied upon by PTS is
project. relevant only for purposes of coverage
under the Employees' Compensation.
xxx xxx xxx
Moreover, the Labor Code provides that as
Art. 109. Solidary liability. - The provisions of used in Book Title II on Wages, the term
existing laws to the contrary "employer" includes "the Government and
notwithstanding, every employer or indirect all its branches, subdivisions and
employer shall be held responsible with his instrumentalities, all government-owned or
contractor or subcontractor for any controlled corporations and institutions
violation of this Code. For purposes of
(Article 97(b), Labor Code).
determining the extent of the civil liability
under this Chapter, they shall be considered
The wage orders do not apply to the direct
as direct employers.
employees of PTS who in fact are members of the
Government Service Insurance System. The
This joint and several liability of the
complainants in G.R. No. 82868 unquestionably
contractor and the principal is mandated by
belong to the private sector and for this reason are
the Labor Code to assure compliance of the
covered by the Social Security System. They are the
provisions therein including the statutory
indirect employees of the PTS and as such are
minimum wage (Article 99, Labor Code).
entitled to hold it liable, solidarity with their direct
The contractor is made liable by virtue of his
employer, for their unpaid wage differentials. In this
status as direct employer. The principal, on
sense, the PTS is correctly classified as an employer
the other hand, is made the indirect
coming under the private sector. The reference to it
employer of the contractor's employees for
as belonging to the public sector relates only to its
purposes of paying the employees their
direct employees "for purposes of coverage under
wages should the contractor be unable to
the Employees' Compensation Commission," not to
pay them. This joint and several liability
its indirect employees coming from the private
facilitates, if not guarantees, payment of
sector.
the workers' performance of any work, task,
job or project, thus giving the workers
ample protection as mandated by the 1987
28
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
3. Yes. We are satisfied that the complainants
were able to establish by Exhibit "B" their
length of service to entitle them to service
incentive leave with pay. The argument that
the affidavit is hearsay because the affiants
were not presented for cross-examination
is not persuasive because the rules of
evidence are not strictly observed in
proceedings before administrative bodies
like the NLRC, where decisions may be
reached on the basis of position papers
only. It is also worth noting that ABC has not
presented any evidence of its own to
disprove the complainant's claim. As the
Solicitor General correctly points out, it
would have been so easy to submit the
complainants' employment records, which
were in the custody of ABC, to show that
they had served for less than one year.
A slight modification must be made, though, in the
case of Norma Moreno Mangabat, who was denied
the service incentive leave with pay, possibly
through an oversight. Exhibit "B" shows that her
employment was from "7/79 to 12/81 and 3/84 to
7/84." Section 3 of Rule V, Book III of the Omnibus
Rules Implementing the Labor Code, provides that
the term "at least one year service" shall mean
service within 12 months, whether continuous or
broken, reckoned from the date the employee
started working.
The submission that the five complainants awarded
separation pay were not entitled thereto because
their terms expired it with the contract with PTS is
also not acceptable. ABC never offered any
evidence that the employment of the claimants was
co-terminal with the janitorial contract. We agree
that the termination of ABC's contract with PTS
resulted in a partial closure or cessation of
operations of ABC that called for the application (if
only by analogy) of Article 283 of the Labor Code
providing in part as follows:
... 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
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
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.
Our conclusion is that Ace Building Care and the
Philippine Tuberculosis Society are solidarily
liable to the complainants for their differential
pay under Wage Orders Nos. 5 and 6, PTS being
considered in the circumstances of this case to
be the indirect employer of workers in the
private sector. ABC is liable for the payment of
the separation pay and incentive leave pay of the
complainants mentioned in the challenged
decisions, with the modification only that Norma
Moreno Mangabat shall also be entitled to
service incentive leave with pay.
2. LABOR-ONLY CONTRACTOR
(COMPREHENSIVE) ART. 105-107
G.R. No. L-77629 May 9, 1990
KIMBERLY INDEPENDENT LABOR UNION
FOR SOLIDARITY vs. HON. FRANKLIN M.
DRILON, ET AL
REGALADO, J.:
FACTS: Kimberly-Clark Philippines, Inc.
(KIMBERLY) executed a three-year
collective bargaining agreement (CBA) with
United Kimberly-Clark Employees Union-
Philippine Transport and General Workers'
Organization (UKCEU-PTGWO) which
expired on June 30, 1986.
Within the 60-day freedom period prior to
the expiration of and during the
negotiations for the renewal of the
aforementioned CBA, some members of
the bargaining unit formed another union
called "Kimberly Independent Labor Union
for Solidarity, Activism and Nationalism-
Organized Labor Association in Line
Industries and Agriculture (KILUSAN-
OLALIA)."
On April 21, 1986, KILUSAN-OLALIA filed a
petition for certification election in Regional
Office No. IV, Ministry of Labor and
Employment (MOLE). KIMBERLY and
UKCEU-PTGWO did not object to the
holding of a certification election but
objected to the inclusion of 64 so-called
29
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
contractual workers whose employment
with KIMBERLY was coursed through an
independent contractor, Rank Manpower
Company (RANK), as among the qualified
voters.
Thereafter, KILUSAN-OLALIA declared a
strike at KIMBERLY's premises in San Pedro,
Laguna on May 23, 1986. But after the MOLE
assumed jurisdiction over the labor dispute
and issued an assumption order, KILUSAN-
OLALIA terminated its strike and picketing
activities effective June 1, 1986 after a
compliance agreement was entered into by
it with KIMBERLY.
On June 2, 1986, Med-Arbiter Bonifacio
Marasigan rendered a decision on the
certification election case and issued an
order declaring several employees who are
eligible to vote, including the 64 contractual
employees who are allegedly in the employ
of an independent contractor and who have
also worked for at least six (6) months as
appearing in the payroll month prior to the
filing of the instant petition.
On July 1, 1986, UKCEU-PTGWO won the
certification election with 266 votes. On
July 2, 1986, KILUSAN-OLALIA filed with the
med-arbiter a "Protest and Motion to Open
and Count Challenged Votes" on the ground
that the 64 workers are employees of
KIMBERLY within the meaning of Article
212(e) of the Labor Code. On July 7, 1986,
KIMBERLY filed an opposition to the protest
and motion, asserting that there is no
employer-employee relationship between
the casual workers and the company, and
that the med-arbiter has no jurisdiction to
rule on the issue of the status of the
challenged workers which is one of the
issues covered by the assumption order.
The med-arbiter opted not to rule on the
protest until the issue of regularization has
been resolved by MOLE.
On November 13, 1986, then Minister
Sanchez rendered a decision in BLR Case
and ruled, among others, that 1) the service
contract between RANK and Kimberly is
valid; 2) the casual employees not
performing janitorial and yard maintenance
services were deemed labor-only
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
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contractual and since labor-only
contracting is prohibited, such employees
were held to have attained the status of
regular employees, the regularization being
effective as of the date of the decision (i.e.
November 13, 1986), and 3) recognizing
UKCEU-PTGWO was the certified exclusive
bargaining representative of KIMBERLY's
employees.
ISSUE: Whether or not the 64 casual
workers became regular employees of
KIMBERLY at the time of the certification
election (July 1, 1986); hence, entitled to
vote thereon.
RULING: Yes.
We find and so hold that the former labor
minister gravely abused his discretion in
holding that those workers not engaged in
janitorial or yard maintenance service
attained the status of regular employees
only on November 13, 1986, which thus
deprived them of their constitutionally
protected right to vote in the certification
election and choose their rightful
bargaining representative.
The Labor Code defines who are regular
employees, as follows:
Art. 280. Regular and Casual
Employment. — The provisions of written
agreement to the contrary notwithstanding
and regardless of the oral agreements of
the parties, an employment shall be
deemed to be regular where the employee
has been engaged to perform activities
which are usually necessary or desirable in
the usual business or trade of the employer,
except where the employment has been
fixed for a specific project or under the
completion or termination of which has
been determined at the time of the
engagement of the employee or where the
work or services to be performed is
seasonal in nature and the employment is
for the duration of the season.
An employment shall be deemed to be
casual if it is not covered by the preceding
paragraph: Provided, That any employee
30
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
who has rendered at least one year of
service, whether such service is continuous
or broken, shall be considered a regular
employee with respect to the activity in
which he is employed and his employment
shall continue while such activity exists.
The law thus provides for two kinds of
regular employees, namely: (1) those who
are engaged to perform activities which are
usually necessary or desirable in the usual
business or trade of the employer; and (2)
those who have rendered at least one year
of service, whether continuous or broken,
with respect to the activity in which they are
employed. The individual petitioners
herein who have been adjudged to be
regular employees fall under the second
category. These are the mechanics,
electricians, machinists machine shop
helpers, warehouse helpers, painters,
carpenters, pipefitters and masons. It is not
disputed that these workers have been in
the employ of KIMBERLY for more than one
year at the time of the filing of the Petition
for certification election by KILUSAN-
OLALIA.
Owing to their length of service with the
company, these workers became regular
employees, by operation of law, one year
after they were employed by KIMBERLY
through RANK. While the actual
regularization of these employees entails
the mechanical act of issuing regular
appointment papers and compliance with
such other operating procedures as may be
adopted by the employer, it is more in
keeping with the intent and spirit of the law
to rule that the status of regular
employment attaches to the casual worker
on the day immediately after the end of his
first year of service. To rule otherwise, and
to instead make their regularization
dependent on the happening of some
contingency or the fulfillment of certain
requirements, is to impose a burden on the
employee which is not sanctioned by law.
That the first stated position is the situation
contemplated and sanctioned by law is
further enhanced by the absence of a
statutory limitation before regular status
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can be acquired by a casual employee. The
law is explicit. As long as the employee has
rendered at least one year of service, he
becomes a regular employee with
respect to the activity in which he is
employed. The law does not provide the
qualification that the employee must first
be issued a regular appointment or must
first be formally declared as such before he
can acquire a regular status. Obviously,
where the law does not distinguish, no
distinction should be drawn.
On the basis of the foregoing
circumstances, and as a consequence of
their status as regular employees, those
workers not perforce janitorial and yard
maintenance service were performance
entitled to the payment of salary
differential, cost of living allowance, 13th
month pay, and such other benefits
extended to regular employees under the
CBA, from the day immediately following
their first year of service in the company.
These regular employees are likewise
entitled to vote in the certification
election held in July 1, 1986. Consequently,
the votes cast by those employees not
performing janitorial and yard maintenance
services, which form part of the 64
challenged votes, should be opened,
counted and considered for the purpose of
determining the certified bargaining
representative.
With respect to the workers performing
janitorial and yard maintenance service
hired by KIMBERLY thru a service contract
executed with RANK, We do not find it
necessary to disturb the finding of then
Minister Sanchez holding as legal the said
service contract. Besides, we take judicial
notice of the general practice adopted in
several government and private institutions
and industries of hiring a janitorial service
on an independent contractor basis.
Furthermore, the occasional directives and
suggestions of KIMBERLY are insufficient to
erode primary and continuous control over
the employees of the independent
contractor. Lastly, the duties performed by
these workers are not independent and
integral steps in or aspects of the essential
31
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
operations of KIMBERLY which is engaged
in the manufacture of consumer paper
products and cigarette paper, hence said
workers cannot be considered regular
employees.
(Note: I only included facts and ruling in
connection with LabStan kay taas kayo siya
na case and more on LabRel topics siya.)
G.R. Nos. 97008-09 July 23, 1993
VIRGINIA G. NERI and JOSE CABELIN vs. NLRC
BELLOSILLO, J.:
FACTS: Petitioners Virginia G. Neri and Jose
Cabelin were hired by private respondent Building
Care Corporation (BCC), a corporation engaged in
providing technical, maintenance, engineering,
housekeeping, security and other specific services
to its clientele. They were assigned to work in the
Cagayan de Oro City Branch of private respondent
bank Far East Bank and Trust Company (FEBTC) on
1 May 1979 and 1 August 1980, respectively, Neri a
radio/telex operator and Cabelin as janitor, before
being promoted to messenger on 1 April 1989.
On 28 June 1989, petitioners instituted complaints
against FEBTC and BCC before Regional Arbitration
Branch No. 10 of the DOLE to compel the FEBTC to
accept them as regular employees and for it to pay
the differential between the wages being paid to
them by BCC and those received by FEBTC
employees with similar length of service.
On 16 November 1989, the Labor Arbiter dismissed
the complaint for lack of merit and ruled that BCC
had established that it had substantial capitalization
of P1 Million or a stockholder’s equity of P1.5 Million.
It was considered an independent contractor
because it proved it had substantial capital. Thus,
petitioners were held to be regular employees of
BCC, not FEBTC. On appeal, the NLRC affirmed this
decision and denied reconsideration of its
affirmance. Hence, this petition for certiorari.
ISSUE: Whether or not BCC is a "labor-only"
contractor; hence, FEBTC is considered the true
employer of the petitioners,
RULING: No. BCC is an independent contractor
because it had established that it has sufficient
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capitalization; thus, petitioners are employees of
BCC.
It is well-settled that there is "labor-only"
contracting where: (a) the person supplying
workers to an employer does not have substantial
capital or investment in the form of tools,
equipment, machineries, work premises, among
others; and, (b) the workers recruited and placed by
such person are performing activities which are
directly related to the principal business of the
employer.
Article 106 of the Labor Code defines "labor-only"
contracting thus —
Art. 106. Contractor or
subcontractor. — . . . . There is "labor-only"
contracting where the person supplying
workers to an employer does not have
substantial capital or investment in the form
of tools, equipment, machineries, work
premises, among others, and the workers
recruited by such persons are performing
activities which are directly related to the
principal business of such employer . . . .
Based on the foregoing, BCC cannot be
considered a "labor-only" contractor because it
has substantial capital. While there may be no
evidence that it has investment in the form of tools,
equipment, machineries, work premises, among
others, it is enough that it has substantial capital, as
was established before the Labor Arbiter as well as
the NLRC. In other words, the law does not require
both substantial capital and investment in the
form of tools, equipment, machineries, etc. This
is clear from the use of the conjunction "or". If the
intention was to require the contractor to prove that
he has both capital and the requisite investment,
then the conjunction "and" should have been used.
But, having established that it has substantial
capital, it was no longer necessary for BCC to
further adduce evidence to prove that it does not
fall within the purview of "labor-only"
contracting. There is even no need for it to refute
petitioners' contention that the activities they
perform are directly related to the principal
business of respondent bank.
Be that as it may, the Court has already taken
judicial notice of the general practice adopted in
several government and private institutions and
industries of hiring independent contractors to
32
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
perform special services. These services range
from janitorial, security and even technical or other
specific services such as those performed by
petitioners Neri and Cabelin. While these services
may be considered directly related to the principal
business of the employer, nevertheless, they are not
necessary in the conduct of the principal business
of the employer.
Even assuming ex argumenti that petitioners were
performing activities directly related to the principal
business of the bank, under the "right of control"
test they must still be considered employees of
BCC. In the case of petitioner Neri, it is admitted
that FEBTC issued a job description which detailed
her functions as a radio/telex operator. However, a
cursory reading of the job description shows that
what was sought to be controlled by FEBTC was
actually the end-result of the task, e.g., that the daily
incoming and outgoing telegraphic transfer of
funds received and relayed by her, respectively,
tallies with that of the register. The guidelines were
laid down merely to ensure that the desired end-
result was achieved. It did not, however, tell Neri
how the radio/telex machine should be operated.
Besides, petitioners do not deny that they were
selected and hired by BCC before being assigned to
work in the Cagayan de Oro Branch of FFBTC. BCC
likewise acknowledges that petitioners are its
employees. The record is replete with evidence
disclosing that BCC maintained supervision and
control over petitioners through its Housekeeping
and Special Services Division: petitioners reported
for work wearing the prescribed uniform of BCC;
leaves of absence were filed directly with BCC; and,
salaries were drawn only from BCC.
As a matter of fact, Neri even secured a certification
from BCC on 16 May 1986 that she was employed by
the latter. On the other hand, on 24 May 1988,
Cabelin filed a complaint for underpayment of
wages, non-integration of salary adjustments
mandated by Wage Orders Nos. 5 & 6 and R.A. 6640
as well as for illegal deduction against BCC alone
which was provisionally dismissed on 19 August
1988 upon Cabelin's manifestation that his money
claim was negligible.
More importantly, under the terms and conditions
of the contract, it was BCC alone which had the
power to reassign petitioners. Their deployment
to FEBTC was not subject to the bank's acceptance.
Cabelin was promoted to messenger because the
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FEBTC branch manager promised BCC that two (2)
additional janitors would be hired from the company
if the promotion was to be effected. Furthermore,
BCC was to be paid in lump sum unlike in the
situation in Philippine Bank of Communications
where the contractor, CESI, was to be paid at a daily
rate on a per person basis. And, the contract therein
stipulated that the CESI was merely to provide
manpower that would render temporary services.
In the case at bar, Neri and Cabelin were to
perform specific special services. Consequently,
petitioners cannot be held to be employees of
FEBTC as BCC "carries an independent business"
and undertaken the performance of its contract
with various clients according to its "own manner
and method, free from the control and
supervision" of its principals in all matters
"except as to the results thereof."
G.R. No. 126586. February 2, 2000
ALEXANDER VINOYA vs. NLRC
KAPUNAN, J.:
FACTS: Private respondent Regent Food
Corporation (RFC) is a domestic corporation
principally engaged in the manufacture and sale of
various food products. Private respondent Ricky
See, on the other hand, is the president of RFC.
Petitioner Alexander Vinoya worked with RFC as
sales representative until his services were
terminated on 25 November 1991.
On 3 December 1991, petitioner filed a case against
RFC before the Labor Arbiter for illegal dismissal
and non-payment of 13th month pay. The parties
presented conflicting versions of facts.
Contentions of Vinoya:
Petitioner Alexander Vinoya claims that he applied
and was accepted by RFC as sales representative
on 26 May 1990. On the same date, a company
identification card was issued to him by RFC.
Petitioner alleges that he reported daily to the office
of RFC, in Pasig City, to take the latter’s van for the
delivery of its products. According to petitioner,
during his employ, he was assigned to various
supermarkets and grocery stores where he booked
sales orders and collected payments for RFC. For
this task, he was required by RFC to put up a
monthly bond of P200.00 as security deposit to
33
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
guarantee the performance of his obligation as
sales representative.
Petitioner contends that he was under the direct
control and supervision of Mr. Dante So and Mr. Sadi
Lim, plant manager and senior salesman of RFC,
respectively. He avers that on 1 July 1991, he was
transferred by RFC to Peninsula Manpower
Company, Inc. ("PMCI"), an agency which provides
RFC with additional contractual workers pursuant to
a contract for the supply of manpower services
("Contract of Service"). After his transfer to PMCI,
petitioner was allegedly reassigned to RFC as sales
representative.
Subsequently, on 25 November 1991, he was
informed by Ms. Susan Chua, personnel manager of
RFC that his services were terminated and he was
asked to surrender his ID card. Petitioner was told
that his dismissal was due to the expiration of the
Contract of Service between RFC and PMCI.
Petitioner claims that he was dismissed from
employment despite the absence of any notice or
investigation.
Contentions of RFC:
RFC, on the other hand, maintains that no
employer-employee relationship existed between
petitioner and itself. It insists that petitioner is
actually an employee of PMCI, allegedly an
independent contractor, which had a Contract of
Service with RFC. To prove this fact, RFC presents
an Employment Contract signed by petitioner on 1
July 1991, wherein PMCI appears as his employer.
RFC denies that petitioner was ever employed by it
prior to 1 July 1991.
It avers that petitioner was issued an ID card so that
its clients and customers would recognize him as a
duly authorized representative of RFC. With regard
to the P200.00 pesos monthly bond posted by
petitioner, RFC asserts that it was required in order
to guarantee the turnover of his collection since he
handled funds of RFC.
While RFC admits that it had control and supervision
over petitioner, it argues that such was exercised in
coordination with PMCI. Finally, RFC contends that
the termination of its relationship with petitioner
was brought about by the expiration of the Contract
of Service between itself and PMCI and not because
petitioner was dismissed from employment.
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
Proceedings before the Labor Arbiter: (in favor
of Vinoya)
On 15 June 1994, the Labor Arbiter ruled that RFC
was the employer of the petitioner but denied the
latter’s claim for 13th month pay. The Labor Arbiter
concluded that: (1) Petitioner was originally with
RFC and was merely transferred to PMCI to be
deployed as an agency worker and then
subsequently reassigned to RFC as sales
representative; (2) RFC had direct control and
supervision over petitioner; (3) RFC actually paid for
the wages of petitioner although coursed through
PMCI; and, (4) Petitioner was terminated per
instruction of RFC.
Proceedings before the NLRC: (in favor of RFC)
On appeal, the NLRC reversed the findings of the
Labor Arbiter. The NLRC opined that PMCI is an
independent contractor because it has substantial
capital and, as such, is the true employer of
petitioner. The NLRC, thus, held PMCI liable for the
dismissal of petitioner.
Hence, this petition for certiorari.
ISSUES:
1. Whether or not PMCI is a labor-only
contractor and thus, not the true employer
of the petitioner Vinoya; (YES)
2. Whether petitioner was illegally dismissed.
(YES)
RULING:
1. Yes. PMCI is engaged in labor-only
contracting. Thus, it is RFC who is the
employer of petitioner Vinoya.
Labor-only contracting, a prohibited act, is an
arrangement where the contractor or
subcontractor merely recruits, supplies or
places workers to perform a job, work or service
for a principal. In labor-only contracting, the
following elements are present:
(a) The contractor or subcontractor does
not have substantial capital or investment
34
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
to actually perform the job, work or service
under its own account and responsibility;
(b) The employees recruited, supplied or
placed by such contractor or subcontractor
are performing activities which are directly
related to the main business of the principal.
On the other hand, permissible job contracting or
subcontracting refers to an arrangement whereby a
principal agrees to put out or farm out with a
contractor or subcontractor the performance or
completion of a specific job, work or service within
a definite or predetermined period, regardless of
whether such job, work or service is to be
performed or completed within or outside the
premises of the principal. A person is considered
engaged in legitimate job contracting or
subcontracting if the following conditions concur:
(a) The contractor or subcontractor carries
on a distinct and independent business and
undertakes to perform the job, work or
service on its own account and under its
own responsibility according to its own
manner and method, and free from the
control and direction of the principal in all
matters connected with the performance
of the work except as to the results thereof;
(b) The contractor or subcontractor has
substantial capital or investment; and
(c) The agreement between the principal
and contractor or subcontractor assures
the contractual employees entitlement to all
labor and occupational safety and health
standards, free exercise of the right to self-
organization, security of tenure, and social
and welfare benefits.
Previously, in the case of Neri vs. NLRC, we held
that in order to be considered as a job contractor it
is enough that a contractor has substantial capital.
In other words, once substantial capital is
established it is no longer necessary for the
contractor to show evidence that it has investment
in the form of tools, equipment, machineries, work
premises, among others. The rationale for this is
that Article 106 of the Labor Code does not require
that the contractor possess both substantial capital
and investment in the form of tools, equipment,
machineries, work premises, among others.
The Court further clarified the import of the Neri
decision in the subsequent case of Philippine Fuji
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Xerox Corporation vs. NLRC. In the said case,
petitioner Fuji Xerox implored the Court to apply the
Neri doctrine to its alleged job-contractor,
Skillpower, Inc., and declare the same as an
independent contractor. Fuji Xerox alleged that
Skillpower, Inc. was a highly capitalized venture
registered with the Securities and Exchange
Commission, the Department of Labor and
Employment, and the Social Security System with
assets exceeding P5,000,000.00 possessing at
least 29 typewriters, office equipment and service
vehicles, and its own pool of employees with 25
clerks assigned to its clients on a temporary basis.
Despite the evidence presented by Fuji Xerox the
Court refused to apply the Neri case and explained:
Petitioners cite the case of Neri v. NLRC, in
which it was held that the Building Care
Corporation (BCC) was an independent
contractor on the basis of finding that it had
substantial capital, although there was no
evidence that it had investments in the form
of tools, equipment, machineries and work
premises. But the Court in that case
considered not only the capitalization of the
BCC but also the fact that BCC was
providing specific special services
(radio/telex operator and janitor) to the
employer; that in another case, the Court
had already found that BCC was an
independent contractor; that BCC retained
control over the employees and the
employer was actually just concerned with
the end-result; that BCC had the power to
reassign the employees and their
deployment was not subject to the approval
of the employer; and that BCC was paid in
lump sum for the services it rendered.
These features of that case make it
distinguishable from the present one.
Not having shown the above circumstances
present in Neri, the Court declared
Skillpower, Inc. to be engaged in labor-only
contracting and was considered as a mere
agent of the employer.
From the two aforementioned decisions, it may be
inferred that it is not enough to show substantial
capitalization or investment in the form of tools,
equipment, machineries and work premises, among
others, to be considered as an independent
contractor. In fact, jurisprudential holdings are to
the effect that in determining the existence of an
35
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
independent contractor relationship, several
factors might be considered such as, but not
necessarily confined to, whether the contractor
is carrying on an independent business; the
nature and extent of the work; the skill required;
the term and duration of the relationship; the
right to assign the performance of specified
pieces of work; the control and supervision of the
workers; the power of the employer with respect
to the hiring, firing and payment of the workers
of the contractor; the control of the premises;
the duty to supply premises, tools, appliances,
materials and labor; and the mode, manner and
terms of payment.
Given the above standards and the factual milieu of
the case, the Court has to agree with the
conclusion of the Labor Arbiter that PMCI is
engaged in labor-only contracting.
First of all, PMCI does not have substantial
capitalization or investment in the form of tools,
equipment, machineries, work premises, among
others, to qualify as an independent contractor.
While it has an authorized capital stock of
P1,000,000.00, only P75,000.00 is actually paid-in,
which, to our mind, cannot be considered as
substantial capitalization. In the case of Neri, which
was promulgated in 1993, BCC had a capital stock
of P1,000,000.00 which was fully subscribed and
paid-for. Moreover, when the Neri case was
decided in 1993, the rate of exchange between the
dollar and the peso was only P27.30 to $1 while
presently it is at P40.390 to $1. The Court takes
judicial notice of the fact that in 1993, the economic
situation in the country was not as adverse as the
present, as shown by the devaluation of our peso.
With the current economic atmosphere in the
country, the paid-in capitalization of PMCI
amounting to P75,000.00 cannot be considered as
substantial capital and, as such, PMCI cannot qualify
as an independent contractor.
Second, PMCI did not carry on an independent
business nor did it undertake the performance of its
contract according to its own manner and method,
free from the control and supervision of its
principal, RFC. The evidence at hand shows that the
workers assigned by PMCI to RFC were under the
control and supervision of the latter. The Contract
of Service itself provides that RFC can require the
workers assigned by PMCI to render services even
beyond the regular eight hour working day when
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deemed necessary. Furthermore, RFC undertook to
assist PMCI in making sure that the daily time
records of its alleged employees faithfully reflect
the actual working hours. With regard to petitioner,
RFC admitted that it exercised control and
supervision over him. These are telltale indications
that PMCI was not left alone to supervise and
control its alleged employees. Consequently, it can
be concluded that PMCI was not an independent
contractor since it did not carry a distinct business
free from the control and supervision of RFC.
Third, PMCI was not engaged to perform a specific
and special job or service, which is one of the strong
indicators that an entity is an independent
contractor as explained by the Court in the cases of
Neri and Fuji. As stated in the Contract of Service,
the sole undertaking of PMCI was to provide RFC
with a temporary workforce able to carry out
whatever service may be required by it.[32] Such
venture was complied with by PMCI when the
required personnel were actually assigned to RFC.
Apart from that, no other particular job, work or
service was required from PMCI. Obviously, with
such an arrangement, PMCI merely acted as a
recruitment agency for RFC. Since the undertaking
of PMCI did not involve the performance of a
specific job, but rather the supply of manpower
only, PMCI clearly conducted itself as labor-only
contractor.
Lastly, in labor-only contracting, the employees
recruited, supplied or placed by the contractor
perform activities which are directly related to the
main business of its principal. In this case, the work
of petitioner as sales representative is directly
related to the business of RFC. Being in the business
of food manufacturing and sales, it is necessary for
RFC to hire a sales representative like petitioner to
take charge of booking its sales orders and
collecting payments for such. Thus, the work of
petitioner as sales representative in RFC can only be
categorized as clearly related to, and in the pursuit
of the latter’s business. Logically, when petitioner
was assigned by PMCI to RFC, PMCI acted merely
as a labor-only contractor.
Discussion of the SC in RULING that even arguing
that PMCI is an independent contractor, it is still
RFC which is the true employer of Vinoya
applying the four-fold test:
36
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
However, even granting that PMCI is an
independent contractor, as RFC adamantly
suggests, still, a finding of the same will not save the
day for RFC. A perusal of the Contract of Service
entered into between RFC and PMCI reveals that
petitioner is actually not included in the
enumeration of the workers to be assigned to RFC.
The following are the workers enumerated in the
contract: 1. Merchandiser; 2. Promo Girl; 3. Factory
Worker; and 4. Driver.
Obviously, the above enumeration does not include
the position of petitioner as sales representative.
This only shows that petitioner was never
intended to be a part of those to be contracted
out. However, RFC insists that despite the absence
of his position in the enumeration, petitioner is
deemed included because this has been agreed
upon between itself and PMCI. Such contention
deserves scant consideration. Had it really been the
intention of both parties to include the position of
petitioner they should have clearly indicated the
same in the contract. However, the contract is
totally silent on this point which can only mean that
petitioner was never really intended to be covered
by it.
Even if we use the "four-fold test" to ascertain
whether RFC is the true employer of petitioner the
same result would be achieved. In determining the
existence of employer-employee relationship the
following elements of the "four-fold test" are
generally considered, namely: (1) the selection and
engagement of the employee or the power to hire;
(2) the payment of wages; (3) the power to dismiss;
and (4) the power to control the employee. Of these
four, the "control test" is the most important. A
careful study of the evidence at hand shows that
RFC possesses the earmarks of being the employer
of petitioner.
With regard to the first element, the power to hire,
RFC denies any involvement in the recruitment and
selection of petitioner and asserts that petitioner
did not present any proof that he was actually hired
and employed by RFC.
It should be pointed out that no particular form of
proof is required to prove the existence of an
employer-employee relationship. Any competent
and relevant evidence may show the relationship. If
only documentary evidence would be required to
demonstrate that relationship, no scheming
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employer would ever be brought before the bar of
justice. In the case at bar, petitioner presented the
identification card issued to him on 26 May 1990 by
RFC as proof that it was the latter who engaged his
services. To our mind, the ID card is enough proof
that petitioner was previously hired by RFC prior to
his transfer as agency worker to PMCI. It must be
noted that the Employment Contract between
petitioner and PMCI was dated 1 July 1991. On the
other hand, the ID card issued by RFC to petitioner
was dated 26 May 1990, or more than one year
before the Employment Contract was signed by
petitioner in favor of PMCI. It makes one wonder
why, if petitioner was indeed recruited by PMCI as
its own employee on 1 July 1991, how come he had
already been issued an ID card by RFC a year
earlier? While the Employment Contract indicates
the word "renewal," presumably an attempt to show
that petitioner had previously signed a similar
contract with PMCI, no evidence of a prior contract
entered into between petitioner and PMCI was ever
presented by RFC. In fact, despite the demand
made by the counsel of petitioner for the
production of the contract which purportedly
shows that prior to 1 July 1991 petitioner was already
connected with PMCI, RFC never made a move to
furnish the counsel of petitioner a copy of the
alleged original Employment Contract. The only
logical conclusion which may be derived from such
inaction is that there was no such contract and that
the only Employment Contract entered into
between PMCI and petitioner was the 1 July 1991
contract and no other. Since, as shown by the ID
card, petitioner was already with RFC on 26 May
1990, prior to the time any Employment Contract
was agreed upon between PMCI and petitioner, it
follows that it was RFC who actually hired and
engaged petitioner to be its employee.
With respect to the payment of wages, RFC
disputes the argument of petitioner that it paid his
wages on the ground that petitioner did not submit
any evidence to prove that his salary was paid by it,
or that he was issued payslip by the company. On
the contrary RFC asserts that the invoices[39]
presented by it, show that it was PMCI who paid
petitioner his wages through its regular monthly
billings charged to RFC.
The Court takes judicial notice of the practice of
employers who, in order to evade the liabilities
under the Labor Code, do not issue payslips directly
to their employees. Under the current practice, a
37
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
third person, usually the purported contractor
(service or manpower placement agency), assumes
the act of paying the wage. For this reason, the lowly
worker is unable to show proof that it was directly
paid by the true employer. Nevertheless, for the
workers, it is enough that they actually receive their
pay, oblivious of the need for payslips, unaware of
its legal implications. Applying this principle to the
case at bar, even though the wages were coursed
through PMCI, we note that the funds actually
came from the pockets of RFC. Thus, in the end,
RFC is still the one who paid the wages of
petitioner albeit indirectly.
As to the third element, the power to dismiss, RFC
avers that it was PMCI who terminated the
employment of petitioner. The facts on record,
however, disprove the allegation of RFC. First of all,
the Contract of Service gave RFC the right to
terminate the workers assigned to it by PMCI
without the latter’s approval. In response to the
request of RFC, PMCI terminated petitioner from
service. As found by the Labor Arbiter, to which we
agree, the dismissal of petitioner was indeed made
under the instruction of RFC to PMCI.
The fourth and most important requirement in
ascertaining the presence of employer-employee
relationship is the power of control. The power of
control refers to the authority of the employer to
control the employee not only with regard to the
result of work to be done but also to the means and
methods by which the work is to be accomplished.
It should be borne in mind, that the "control test"
calls merely for the existence of the right to control
the manner of doing the work, and not necessarily
to the actual exercise of the right.[45] In the case at
bar, we need not belabor ourselves in discussing
whether the power of control exists. RFC already
admitted that it exercised control and supervision
over petitioner. RFC, however, raises the defense
that the power of control was jointly exercised with
PMCI. The Labor Arbiter, on the other hand, found
that petitioner was under the direct control and
supervision of the personnel of RFC and not PMCI.
We are inclined to believe the findings of the Labor
Arbiter which is supported not only by the
admission of RFC but also by the evidence on
record. Besides, to our mind, the admission of RFC
that it exercised control and supervision over
petitioner, the same being a declaration against
interest, is sufficient enough to prove that the
power of control truly exists.
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We, therefore, hold that an employer-employee
relationship exists between petitioner and RFC.
2. Yes, petitioner was illegally dismissed by its
employer -- RFC.
Since petitioner, due to his length of service, already
attained the status of a regular employee, he is
entitled to the security of tenure provided under the
labor laws. Hence, he may only be validly terminated
from service upon compliance with the legal
requisites for dismissal. Under the Labor Code, the
requirements for the lawful dismissal of an
employee are two-fold, the substantive and the
procedural aspects. Not only must the dismissal be
for a valid or authorized cause, the rudimentary
requirements of due process - notice and hearing
must, likewise, be observed before an employee
may be dismissed. Without the concurrence of the
two, the termination would, in the eyes of the law,
be illegal.
As the employer, RFC has the burden of proving
that the dismissal of petitioner was for a cause
allowed under the law and that petitioner was
afforded procedural due process. Sad to say, RFC
failed to discharge this burden. Indeed, RFC never
pointed to any valid or authorized cause under
the Labor Code which allowed it to terminate the
services of petitioner. Its lone allegation that the
dismissal was due to the expiration or completion of
contract is not even one of the grounds for
termination allowed by law. Neither did RFC show
that petitioner was given ample opportunity to
contest the legality of his dismissal. In fact, no
notice of such impending termination was ever
given him. Petitioner was, thus, surprised that he
was already terminated from employment without
any inkling as to how and why it came about.
Petitioner was definitely denied due process.
Having failed to establish compliance with the
requirements on termination of employment under
the Labor Code, the dismissal of petitioner is tainted
with illegality.
An employee who has been illegally dismissed is
entitled to reinstatement to his former position
without loss of seniority rights and to payment of
full backwages corresponding to the period from
his illegal dismissal up to actual reinstatement.
Petitioner is entitled to no less.
38
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
FILIPINAS SYNTHETIC FIBER CORPORATION
(FILSYN) vs. NLRTC
(J Bellosillo, 1st Division)
FACTS: FILSYN. a domestic corporation engaged in
the manufacture of polyester fiber, contracted with
De Lima Trading and General Services (DE LIMA) for
the performance of specific janitorial services at the
former's plant. Pursuant to the agreement Felipe
Loterte, among others, was deployed at FILSYN to
take care of the plants and maintain general
cleanliness around the premises.
Loterte sued FILSYN and DE LIMA as alternative
defendants for illegal dismissal, underpayment of
wages, non-payment of certain benefits alleging
that his gate pass was unceremoniously cancelled
and that he was dismissed after being accused of
posting an article in the bulletin board about the
secret understanding of FILSYN in blocking the
demand for increased wages.
The Labor Arbiter ruled in favor of Loterte. He was
classified as a regular employee on the ground that
he performed tasks usually necessary or desirable in
the main business of FILSYN. FILSYN was declared
to be the real employer of Loterte and DE LIMA as a
mere labor contractor. The NLRC affirmed the
Labor Arbiter in finding DE LIMA as a labor-only
contractor.
FILSYN contends that DE LIMA is not a labor-only
contractor with no substantial capital or investment.
In fact, it presented evidence showing that DE LIMA
is a corporation duly registered with the SEC with
substantial capitalization of P1,600,000.00,
P400,000.00 of which is actually subscribed. But,
assuming arguendo that DE LIMA is without
substantial capital or investment, FILSYN contends
that it cannot still be considered as the real
employer of Loterte since his work is not necessary
in the principal business of FILSYN which is the
manufacture of polyester.
ISSUE: Whether or not DE LIMA is a labor-only
contractor
RULING: DE LIMA is an independent job
contractor, not a mere labor-only contractor.
Under the Labor Code, two (2) elements must exist
for a finding of labor-only contracting: (a) the
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person supplying workers to an employer does not
have substantial capital or investment in the form of
tools, equipment, machineries, work premises,
among others, and (b) the workers recruited and
placed by such persons are performing activities
directly related to the principal business of such
employer.
The two (2) elements do not exist in the instant case.
As pointed out by FILSYN, DE LIMA is a going
concern duly registered with the Securities and
Exchange Commission with substantial
capitalization of P1,600,000.00, P400,000.00 of
which is actually subscribed. Hence, it cannot be
considered as engaged in labor-only contracting
being a highly capitalized venture. Moreover, while
the janitorial services performed by Felipe Loterte
pursuant to the agreement between FILSYN and DE
LIMA may be considered directly related to the
principal business of FILSYN which is the
manufacture of polyester fiber, nevertheless, they
are not necessary in its operation. On the contrary,
they are merely incidental thereto, as opposed to
being integral, without which production and
company sales will not suffer. Judicial notice has
already been taken of the general practice of hiring
janitorial services on an independent contractor
basis. Consequently, DE LIMA being an independent
job contractor, no direct employer- employee
relationship exists between FILSYN and Felipe
Loterte.
With respect to its liability, however, FILSYN cannot
totally exculpate itself from the fact that DE LIMA is
an independent job contractor. Notwithstanding
the lack of a direct employer-employee relationship
between FILSYN and Felipe Loterte, the former is
still jointly and severally liable with DE LIMA for
Loterte's monetary claims under Art. 109 of the
Labor Code19 which explicitly provides:
The provisions of existing laws to the contrary
notwithstanding, every employer or indirect
employer shall be held responsible with his
contractor or subcontractor for any violation of any
provision of this Code. For purposes of determining
the extent of their civil liability under this Chapter,
they shall be considered as direct employers.
This is, however, without prejudice to the right of
FILSYN to seek reimbursement from DE LIMA for
whatever amount it will have to pay Loterte.
39
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
COCA COLA BOTTLERS PHILS., INC. vs. NLRC
(J Bellosillo, 2nd Division)
FACTS: On 7 April 1986, COCA COLA entered into
a contract of janitorial services with Bacolod
Janitorial Services (BJS). On 26 October 1989,
COCA COLA hired private respondent Ramon
Canonicato as a casual employee and assigned him
to the bottling crew as a substitute for absent
employees. In April 1990, COCA COLA terminated
Canonicato's casual employment. Later that year,
COCA COLA availed of Canonicato's services, this
time as a painter in contractual projects which
lasted from fifteen (15) to thirty (30) days.
On 1 April 1991, Canonicato was hired as a janitor by
BJS which assigned him to COCA COLA
considering his familiarity with its premises. On 5
and 7 March 1992, Canonicato started painting the
facilities of COCA COLA and continued doing so
several months thereafter or so for a few days every
time until 6 to 25 June 1993.
Later, Canonicato submitted a complaint for
regularization against COCA COLA to the Labor
Arbiter. Without notifying BJS, Canonicato no
longer reported to his COCA COLA assignment. He
sent his sister Rowena to collect his salary from BJS.
BJS released his salary but advised Rowena to tell
Canonicato to report for work. Claiming that he was
barred from entering the premises of COCA COLA,
Canonicato met with the proprietress of BJS, Gloria
Lacson, who offered him assignments in other firms
which he however refused.
Canonicato later amended his complaint against
COCA COLA by citing instead as grounds therefor
illegal dismissal and underpayment of wages. He
included BJS therein as a co-respondent.
The Labor Arbiter ruled that there was no employer-
employee relationship between COCA COLA and
Ramon Canonicato because BJS was Canonicato's
real employer. It also ruled that BJS was a legitimate
job contractor, hence, any liability of COCA COLA
as to Canonicato's salary or wage differentials was
solidary with BJS in accordance with pars. 1 and 2 of
Art. 106, Labor Code. The NLRC rejected on appeal
the decision of the Labor Arbiter on the ground that
the janitorial services of Canonicato were found to
be necessary or desirable in the usual business or
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trade of COCA COLA. The NLRC accepted
Canonicato's proposition that his work with the BJS
was the same as what he did while still a casual
employee of COCA COLA. In so holding, the NLRC
applied Art. 280 of the Labor Code and declared
that Canonicato was a regular employee of COCA
COLA.
ISSUE: W/N an employer-employee relationship
exists between COCA COLA and Canonicato
RULING: Canonicato is an employee of BJS, not
of COCA COLA.
In determining the existence of an employer-
employee relationship it is necessary to determine
whether the following factors are present: (a) the
selection and engagement of the employee; (b) the
payment of wages; (c) the power to dismiss; and, (d)
the power to control the employee's conduct.
Notably, these are all found in the relationship
between BJS and Canonicato and not between
Canonicato and petitioner COCA COLA.
In the instant case, the selection and engagement of
the janitors for petitioner were done by BJS. The
application form and letter submitted by
Canonicato to BJS show that he acknowledged the
fact that it was BJS who did the hiring and not
petitioner. BJS paid the wages of Canonicato, as
evidenced by the fact that the latter even sent his
sister to BJS with a note authorizing her to receive
his pay.
Power of dismissal is also exercised by BJS and not
COCA COLA. BJS is the one that assigns the
janitors to its clients and transfers them when it sees
fit. Since BJS is the one who engages their services,
then it only follows that it also has the power to
dismiss them when justified under the
circumstances.
Lastly, BJS has the power to control the conduct of
the janitors. The supervisors of COCA COLA, being
interested in the result of the work of the janitors,
also gives suggestions as to the performance of the
janitors, but this does not mean that BJS has no
control over them. The interest of COCA COLA is
only with respect to the result of their work. On the
other hand, BJS oversees the totality of their
performance. The power of the employer to control
the work of the employee is said to be the most the
most significant determinant.
40
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
It is clear from these established circumstances that
NLRC should have recognized BJS as the employer
of Canonicato and not COCA COLA. This is
demanded by the fact that it did not disturb, and
therefore it upheld, the finding of the Labor Arbiter
that BJS was truly a legitimate job-contractor and
could by itself hire its own employees. The
Commission could not have reached any other
legitimate conclusion considering that BJS satisfied
all the requirements of a job-contractor under the
law, namely, (a) the ability to carry on an
independent business and undertake the contract
work on its own account under its own responsibility
according to its manner and method, free from the
control and direction of its principal or client in all
matters connected with the performance of the
work except as to the results thereof; and, (b) the
substantial capital or investment in the form of
tools, equipment, machinery, work premises, and
other materials which are necessary in the conduct
of its business.[25]
All told, there being no employer-employee
relationship between Canonicato and COCA
COLA, the latter cannot be validly ordered to
reinstate the former and pay him back wages.
VALLUM SECURITY SERVICES and BAGUIO
LEISURE CORPORATION (HYATT TERRACES
BAGUIO) vs. NLRC
(J Feliciano, 3rd Division)
FACTS: Baguio Leisure Corporation (Hyatt
Terraces Baguio) ("Hyatt Baguio") and petitioner
Vallum Security Services ("Vallum") entered into a
contract for security services under the terms of
which Vallum agreed to protect the properties and
premises of Hyatt Baguio by providing fifty (50)
security guards, on a 24-hour basis, a day. Later,
both agreed to the termination of the contract.
The private respondents, who were the security
guards provided by Vallum to Hyatt Baguio, were
informed by Vallum about the termination of the
contract. Private respondents were directed to
report to Vallum's head office for re-assignment.
They were also told that failure to report would be
taken to mean that they were no longer interested
in being re-assigned to some other client of Vallum.
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None of the private respondents reported at the
head office for re-assignment. Instead, private
respondents filed several complaints against Vallum
Security and Hyatt Baguio in the NLRC in Baguio
City for illegal dismissal and unfair labor practices;
for violation of labor standards relating to
underpayment of wages, premium holiday and
restday pay, uniform allowances and meal
allowances. They prayed for reinstatement with full
backwages. The several cases were consolidated
together.
The Labor Arbiter rendered a decision dismissing
the complaints. He found Vallum to be an
independent contractor and, consequently,
declined to hold Hyatt Baguio liable for dismissal of
private respondents. The NLRC reversed the Labor
Arbiter's decision, ordering Hyatt Terraces Baguio
to reinstate the complainants to their former
positions with full backwages limited to one (1) year.
ISSUE: Whether or not private respondent security
guards are employees of Hyatt Baguio.
RULING: The private respondent security guards
are employees of Hyatt Baguio. Vallum Security
is merely a labor-only contractor.
In determining whether a given set of
circumstances constitute or exhibit an employer-
employee relationship, the accepted rule is that the
elements or circumstances relating to the following
matters shall be examined and considered:
1. The selection and engagement of the employee;
2. The payment of wages;
3. The power of dismissal; and
4. The power to control the employees' conduct.
Of the above, control of the employees' conduct is
commonly regarded as the most crucial and
determinative indicator of the presence or absence
of an employer-employee relationship.
In respect of the selection and engagement of the
employees, the records here show that private
respondents filled up Hyatt employment application
forms and submitted the executed forms directly to
the Security Department of Hyatt Baguio. It appears
that these executed application forms were
returned to the respective applicants; nonetheless,
however, a few days after the applications to Hyatt
Baguio were submitted, Vallum sent letters of
acceptance to private respondents. Vallum do not
41
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
deny that private respondent had applied for
employment at Hyatt's Security Department and
that Security Department was used to process the
applications. Vallum argue that because the
premises to be secured were located in Baguio,
Vallum found it more advantageous to recruit
security guards from the Baguio area. Vallum’s
argument does not negate the fact that the process
of selection and engagement of private
respondents had been carried out in Hyatt Baguio
and subject to the scrutiny of officers and
employees of Hyatt Baguio.
In respect of the mode or manner of payment of
wages, private respondents submitted as evidence
423 pay slips which bore Hyatt Baguio's logo. These
pay slips show that it was Hyatt Baguio which paid
their wages directly. Such direct payment is an
indicator of an employer-employee relationship
between Hyatt Baguio and private respondents.
Vallum did not even provide Hyatt Baguio with
Vallum's own pay slips or payroll vouchers for such
direct payments. What clearly emerges is that Hyatt
Baguio discharged a function which was properly a
function of the employer.
Turning to the matter of location of the power of
dismissal, it is noted that the contract provided that
upon loss of confidence on the part of Hyatt Baguio
vis-a-vis any security guard furnished by Vallum,
such security guard "may be changed immediately
upon the request to [Vallum] by [Hyatt Baguio]."
Notwithstanding the terms of the formal contract
between petitioners, the NLRC found that, in
operative fact, it was Hyatt Baguio's Chief Security
Officer who exercised the power of enforcing
disciplinary measures over the security guards. In
the matter of termination of services of particular
security guards, Hyatt Baguio had merely used
Vallum as a channel to implement its decisions,
much as it had done in the process of selection and
recruitment of the guards.
Coming then to the location of the power of control
over the activities of the security guards, the
following factors lead us to the conclusion that
power was effectively located in Hyatt Baguio
rather than in Vallum:
(a) the assignments of particular security
guards was subject to the approval of Hyatt
Baguio's Chief Security Officer;
(b) promotions of the security guards from
casual to regular employees were approved or
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ratified by the Chief Security Officer of Hyatt
Baguio;
(c) Hyatt Baguio's Chief Security Officer
decided who among the various security guards
should be an duty or on call, as well as who, in cases
of disciplinary matters, should be suspended or
dismissed;
(d) the petitioners themselves admitted that
Hyatt Baguio, through its Chief Security Officer,
awarded citations to individual security guards for
meritorious services.
One final circumstance seems worthy of note:
orders received by private respondent security
guards were set forth on paper bearing the
letterheads of both Hyatt Baguio and Vallum. It
appears therefore, that Hyatt Baguio explicitly
purported, at the very least, to share with Vallum the
exercise of the power of control and supervision
with Vallum over the security guards, if indeed
Vallum was not functioning merely as an alter ego of
Hyatt Baguio in respect of the operations of the
security guards. In the ordinary course of business,
security guard agencies are engaged because of
their specialized capabilities in the matter of
physical security. It is a security agency's business
to know the most efficacious manner of protecting
and securing a particular place at a particular time.
In the case at bar, the functions performed by Hyatt
Baguio's Chief Security Officer were precisely the
duties which the head or senior officer of a
legitimate security agency would be exercising over
its own employees.
The relationship between Vallum and Hyatt Baguio
as actually conducted departed significantly from
the formal written terms of their agreement. It is
self-evident that the characterization in law of such
relationship cannot conclusively be made in terms
alone of the written agreement — which constitutes
but one factor out of many that the Court must take
into account — but must rest upon an examination
of the detailed facts of such relationship in the world
of time and space.
Vallum, in the specific circumstances of this case,
was not an independent contractor but was, rather,
a "labor-only" contractor. Vallum did not have a
branch office in Baguio City and that Hyatt Baguio
provided Vallum with offices at Hyatt's own
premises and allowed Vallum to use its Security
Department in the processing of applications. That
was the reason too why Vallum had stipulated that
42
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
Hyatt Baguio was to distribute the salaries of the
security guards directly to them and that Hyatt had
used its own corporate forms and pay slips in doing
so. The security guards were clearly performing
activities directly related to the business operations
of Hyatt Baguio, since the undertaking to safeguard
the person and belongings of hotel guests is one of
the obligations of a hotel vis-a-vis its guests and the
general public.
Where labor-only contracting exists in a given case,
the law itself implies or establishes an employer-
employee relationship between the employer (the
owner of the project or establishment) (here, Hyatt
Baguio) and the employees of the labor-only
contractor (here, Vallum) to prevent any violation or
circumvention of provisions of the Labor Code.
RELIGIOUS OF THE VIRGIN MARY vs. NLRC
(J Mendoza, 2nd Division)
FACTS: Private respondent Colegio de San Pascual
Baylon (CDSPB)[2] is a religious educational
institution owned by the Diocese of Malolos,
Bulacan, which operates two high school
departments (the Boys and the Girls departments)
in Obando, Meycauayan, Bulacan.
On July 18, 1983, CDSPB, represented by the Bishop
of Malolos, entered into an Agreement with
petitioner Religious of the Virgin Mary (RVM), a
religious congregation, whereby the latter was
designated to run, administer and operate the
[CDSPB] Girls Department. The Agreement was for
a term of 10 years. Pursuant to the terms of their
agreement, RVM hired teachers and administrative
personnel for the Girls Department under pro forma
appointment papers.
As likewise provided in the Agreement, RVM
received all the income from the Girls Department,
in the form of tuition fees and other charges, and
paid all the expenses for the operation of the
department.
On April 10, 1987, the Bishop of Malolos pre-
terminated the Agreement. As a result, RVM moved
out of the school premises, and CDSPB, through the
Bishop of Malolos and his representatives, took over
the administration of the Girls Department.
Apparently, the teaching and non-teaching
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personnel hired by RVM for school year 1986-1987
continued to render services even after the
Agreement was terminated, but they were not paid
their salaries for the month of May 1987. Hence,
they filed a complaint for unpaid salaries with the
NLRC-Regional Arbitration Branch III, naming
CDSPB and RVM as respondents.
Labor Arbiter Bernardo rendered a decision holding
CDSPB and RVM jointly and severally liable to
complainants for the payment of their salaries for
May 1987. He considered RVM as an independent
contractor and CDSPB as an indirect employer
since it actually exercised minimal supervision
although it could exercise substantial supervision
and control over respondent RVM, as it did when the
former preterminated the Agreement it had with
the latter. The NLRC adopted the findings of the
labor arbiter and affirmed his decision.
RVM contends that CDSPB is the employer of
complainants. It maintains that it is not an
independent contractor but merely the manager or
administrator of the Girls Department, and that
after the Agreement was terminated, it no longer
had any access to the income of the school to entitle
and enable it to pay the salaries of complainants.
ISSUE: Whether or not RVM is an independent
contractor and thus considered to be the employer
of the complainants
RULING: The Agreement shows that RVM
entered into the same not as an independent
contractor but as a manager or administrator of
the school. It thus appears that RVM was merely
the agent or administrator of CDSPB, and that
the complainants are the employees of CDSPB.
It is true that under the Agreement, RVM had the
sole responsibility and expense over the
administration, management and operation of the
Girls Department, as well as the authority to employ
teachers needed by the school, impose and collect
tuition fees, and pay the expenses of operations.
However, control and supervision over the school’s
operations remained in the hands of the Diocese of
Malolos, owner of CDSPB, represented by the Parish
Priest of Obando, Bulacan, who acted as school
director. The extent of his authority over the
management and operations of the school is clearly
shown in a memorandum issued by the Bishop of
Malolos which leaves no room for doubt that
43
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
CDSPB, as represented by the director, exercised
absolute control and supervision over the school’s
administration. Under it, the authority to hire,
discipline and terminate the employment of
personnel is vested in the director, as academic and
administrative head of the school.
CDSPB contends, however, that the designation of
the parish priest as director was not unilateral but by
mutual agreement between the diocese of Malolos
and RVM and that the designation merely makes
him, in effect, a member of the school
administration which is under the actual and direct
control and supervision of the congregation. This
argument has no merit. As the SC has consistently
ruled, the power of control is the most decisive
factor in determining the existence of an employer-
employee relationship.
In this case, CDSPB reserved the right to control and
supervise the operations of the Girls Department.
Although CDSPB exercised minimal supervision
over RVM, it could actually exercise substantial
supervision and control as it did when it
preterminated the Agreement. There was,
therefore, no basis in finding that RVM had a greater
degree of autonomy and independence in running
the affairs of the school.
Nor is there any merit in the claim that actual and
effective control was exercised by RVM since the
designation of the parish priest as director was a
mere formality, as he did perform functions which
are purely ministerial and figurative in nature. Time
and again, the SC has held that the control test only
requires the existence of the right to control the
manner of doing the work not necessarily the actual
exercise of the power by him, which he can
delegate. Indeed, although the letters of
appointment were signed by the
principal/representative of RVM, they bore the
name/letterhead of CDSPB and clearly indicated
therein that the employees were hired as
teachers/personnel by CDSPB, and not by RVM.
One other crucial fact to consider is that private
respondents-complainants continued to render
services beyond the termination date of the
Agreement. If they were indeed the employees of
RVM and not of CDSPB, their services should have
been terminated the moment the Agreement was
no longer in effect. Instead, CDSPB continued to
honor their respective employment
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
contracts/appointment papers and avail of their
services even after RVM turned over the schools
administration to CDSPB.
LAPANDAY AGRICULTURAL DEVELOPMENT
CORPORATION v COURT OF APPEALS
G.R. No. 112139 January 31, 2000
FACTS:
The evidence shows that in June 1986, Commando
Security Service Agency, Inc., and Lapanday
Agricultural Development Corporation entered into
a Guard Service Contract. Plaintiff provided
security guards in defendant's banana plantation.
Wage orders (Wage Order No. 5 and No. 6) were
promulgated and contained the following provision:
"In the case of contract for construction
projects and for security, janitorial and
similar services, the increase in the
minimum wage and allowances rates of the
workers shall be borne by the principal or
client of the construction/service
contractor and the contracts shall be
deemed amended accordingly, subject to
the provisions of Sec. 3 (b) of this order"
(Sec. 6 and Sec. 9, Wage Orders No. 5 and
6, respectively).
Commando demanded that its Guard Service
Contract with Lapanday be upgraded in compliance
with Wage Order Nos. 5 and 6. Lapanday refused.
Their Contract expired without the rate adjustment
called for Wage Order Nos. 5 and 6 being
implemented.
ISSUE:
Whether or not LAPANDAY (petitioner) is liable to
COMMANDO (respondent) for the wage
adjustments provided under Wage Order Nos. 5
and 6 and for attorney's fees
RULING:
NO. This Court held in Eagle Security,
Inc. vs. NLRC and Spartan Security and Detective
Agency, Inc. vs. NLRC that the joint and several
liability of the contractor and the principal is
mandated by the Labor Code to assure compliance
with the provisions therein including the minimum
wage. The contractor is made liable by virtue of his
status as direct employer. The principal, on the
other hand, is made the indirect employer of the
contractor's employees to secure payment of their
wages should the contractor be unable to pay them.
44
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
Even in the absence of an employer-employee
relationship, the law itself establishes one between
the principal and the employees of the agency for a
limited purpose i.e. in order to ensure that the
employees are paid the wages due them.
It is clear also from the foregoing that it is only when
contractor pays the increases mandated that it can
claim an adjustment from the principal to cover the
increases payable to the security guards. The
conclusion that the right of the contractor (as
principal debtor) to recover from the principal as
solidary co-debtor) arises only if he has paid the
amounts for which both of them are jointly and
severally liable is in line with Article 1217 of the Civil
Code
It will be seen that the liability of the petitioner to
reimburse the respondent only arises if and when
respondent actually pays its employees the
increases granted by Wage Order Nos. 5 and 6.
Payment, which means not only the delivery of
money but also the performance, in any other
manner, of the obligation,18 is the operative fact
which will entitle either of the solidary debtors to
seek reimbursement for the share which
corresponds to each of the debtors.
The records show that judgment was rendered by
Labor Arbiter holding both petitioner and private
respondent jointly and solidarily liable to the
security guards in a Decision. However, it is not
disputed that the private respondent has not
actually paid the security guards the wage increases
granted under the Wage Orders in question. Neither
is it alleged that there is an extant claim for such
wage adjustments from the security guards
concerned, whose services have already been
terminated by the contractor. Accordingly, private
respondent has no cause of action against
petitioner to recover the wage increases. Needless
to stress, the increases in wages are intended for
the benefit of the laborers and the contractor may
not assert a claim against the principal for salary
wage adjustments that it has not actually paid.
Otherwise, as correctly put by the respondent, the
contractor would be unduly enriching itself by
recovering wage increases, for its own benefit.
3. ART. 138 “HOSPITALITY GIRLS”
(COMPREHENSIVE)
J) UNION AS EMPLOYER
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
REYNALDO BAUTISTA vs. AMADO C. INCIONG
G.R. No. L-52824 March 16, 88
Petitioner was employed by Association of Labor
Unions (ALU) as 'Organizer' in 1972 with a starting
salary of P250.00 a month. As such he paid his
monthly SSS contributions, with the respondent as
his employer.
March 15, 1979 - he was left in the office of ALU
while his other co-organizers were in Cainta, Rizal
attending a certification election at Chrysler
Philippines, as he was not the organizer assigned in
said company.
March 16, 1979 - he went on sick leave for ten (10)
days. His SSS sickness benefit application form
signed by ALU's physician was given to ALU for
submission to the SSS. Complainant reported back
for work upon expiration of his leave but was
informed by ALU's Area Vice-President for Luzon of
his termination effective March 15, 1979. Hence, this
complaint. ALU filed a clearance application to
terminate complainant's services effective March
16, 1979 on the ground of abandonment of work.
Based on these findings, the Director ruled in favor
of the petitioner and ordered the respondent Union
to reinstate the petitioner to his former position
with full backwages and to pay him emergency
allowance, 13th month pay.
Respondent ALU appealed to the Ministry of Labor.
The respondent Deputy Minister set aside the order
of the Director and dismissed the petitioner's
complaint for lack of merit. In his order, the Deputy
Minister found that the petitioner was merely
accomodated by the respondent union after he was
dismissed by his former employer sometime in 1972
and that his membership coverage with the SSS
which shows that respondent ALU is the one paying
the employer's share in the premiums is not
conclusive proof that respondent is the petitioner's
employer because such payments were performed
by the respondent as a favor for all those who were
performing full time union activities with it to entitle
them to SSS benefits.
The Deputy Minister further ruled that the non-
existence of an employer-employee relationship
between the parties is bolstered by the fact that
respondent ALU is not an entity for profit but a duly
registered labor union whose sole purpose is the
representation of its bona fide organization units
where it is certified as such.
45
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
ISSUE: WON the petitioner is an employee of ALU.
May a Union become an employer itself?
HELD: YES.
There is nothing in the records which support the
Deputy minister's conclusion that the petitioner is
not an employee of respondent ALU. The mere fact
that the respondent is a labor union does not
mean that it cannot be considered an employer
of the persons who work for it. Much less should
it be exempted from the very labor laws which it
espouses as labor organization.
In case of Brotherhood Labor Unity Movement in
the Phillipines Zamora, we outlined the elements in
ascertaining an employer-employee relationship:
(a) the selection and engagement of the employee;
(b) the payment of wages; (c) the power of
dismissal; and (d) the employer's power to control
the employee with respect to the means and
methods by which the work is to be accomplished.
It is the so-called 'control test' that is the most
important element
In the case at bar, the Regional director correctly
found that the petitioner was an employee of the
respondent union as reflected in the latter's
individual payroll sheets and shown by the
petitioner's membership with the Social Security
System (SSS) and the respondent union's share of
remittances in the petitioner's favor.
Even more significant, is the respondent union's act
of filing a clearance application with the MOL to
terminate the petitioner's services. Bautista was
selected and hired by the Union. He was paid wages
by the Union. ALU had the power to dismiss him as
indeed it dismissed him. And definitely, the Union
tightly controlled the work of Bautista as one of its
organizers. There is absolutely no factual or legal
basis got deputy Minister Inciong's decision.
K) EMPLOYMENT WITH FOREIGN
EMBASSIES OR THOSE IMBUED WITH
PERSONALITY UNDER INTERNATIONAL
LAW
UNITED STATES OF AMERICA, et al. vs.
RODOLFO D. RODRIGO
(The case was consolidated with two other
different cases that involve State Immunity.)
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
Fabian Genove filed a complaint for damages
against petitioners Anthony Lamachia, et. al for his
dismissal as cook in the U.S. Air Force Recreation
Center at the John Hay Air Station in Baguio City.
It had been ascertained after investigation that
Genove had poured urine into the soup stock used
in cooking the vegetables served to the club
customers. Lamachia, as club manager, suspended
him and thereafter referred the case to a board of
arbitrators conformably to the collective bargaining
agreement between the Center and its employees.
The board unanimously found him guilty and
recommended his dismissal.
The defendants, joined by the United States of
America, moved to dismiss the complaint, alleging
that Lamachia, as an officer of the U.S. Air Force
stationed at John Hay Air Station, was immune from
suit for the acts done by him in his official capacity.
They argued that the suit was in effect against the
United States, which had not given its consent to be
sued.
This motion was denied by the respondent judge.
ISSUE: WON the Lamachia, et. Al, and the US
government may be sued by Genove for illegal
dismissal.
HELD: YES. Lamachia, the US are suable but not
liable (because dismissal of Genove was justified)
On state immunity: (very long discussion. Included
here are the relevant portions only)
The rule that a state may not be sued without its
consent, now expressed in Article XVI, Section 3, of
the 1987 Constitution, is one of the generally
accepted principles of international law that we
have adopted as part of the law of our land under
Article II, Section 2.
Even without such affirmation, we would still be
bound by the generally accepted principles of
international law under the doctrine of
incorporation. Under this doctrine, as accepted by
the majority of states, such principles are deemed
incorporated in the law of every civilized state as a
condition and consequence of its membership in
the society of nations.
While the doctrine appears to prohibit only suits
against the state without its consent, it is also
applicable to complaints filed against officials of
the state for acts allegedly performed by them in
the discharge of their duties. The rule is that if the
judgment against such officials will require the state
46
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
itself to perform an affirmative act to satisfy the
same, such as the appropriation of the amount
needed to pay the damages awarded against them,
the suit must be regarded as against the state itself
although it has not been formally impleaded. In such
a situation, the state may move to dismiss the
complaint on the ground that it has been filed
without its consent.
The consent of the state to be sued may be
manifested expressly or impliedly. Express consent
may be embodied in a general law or a special law.
Consent is implied when the state enters into a
contract or it itself commences litigation.
The above rules are subject to qualification. Express
consent is effected only by the will of the legislature
through the medium of a duly enacted statute. We
have held that not all contracts entered into by the
government will operate as a waiver of its non-
suability; distinction must be made between its
sovereign and proprietary acts. As for the filing of a
complaint by the government, suability will result
only where the government is claiming affirmative
relief from the defendant.
In the case of the United States of America, the
customary rule of international law on state
immunity is expressed with more specificity in the
RP-US Bases Treaty. Article III thereof provides as
follows:
It is mutually agreed that the United
States shall have the rights, power
and authority within the bases
which are necessary for the
establishment, use, operation and
defense thereof or appropriate for
the control thereof and all the
rights, power and authority within
the limits of the territorial waters
and air space adjacent to, or in the
vicinity of, the bases which are
necessary to provide access to
them or appropriate for their
control.
It bears stressing at this point that the above
observations do not confer on the United States of
America a blanket immunity for all acts done by it or
its agents in the Philippines. Neither may the other
petitioners claim that they are also insulated from
suit in this country merely because they have acted
as agents of the United States in the discharge of
their official functions.
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
There is no question that the United States of
America, like any other state, will be deemed to
have impliedly waived its non-suability if it has
entered into a contract in its proprietary or
private capacity. It is only when the contract
involves its sovereign or governmental capacity
that no such waiver may be implied. This was our
ruling in United States of America v. Ruiz, where the
transaction in question dealt with the improvement
of the wharves in the naval installation at Subic Bay.
As this was a clearly governmental function, we held
that the contract did not operate to divest the
United States of its sovereign immunity from suit.
On RULING that petitioners are suable:
Private respondent Genove was employed as a
cook in the Main Club located at the U.S. Air Force
Recreation Center, also known as the Open Mess
Complex, at John Hay Air Station. As manager of
this complex, petitioner Lamachia is responsible for
eleven diversified activities generating an annual
income of $2 million. Under his executive
management are three service restaurants, a
cafeteria, a bakery, a Class VI store, a coffee and
pantry shop, a main cashier cage, an administrative
office, and a decentralized warehouse which
maintains a stock level of $200,000.00 per month
in resale items. He supervises 167 employees, one of
whom was Genove, with whom the United States
government has concluded a collective bargaining
agreement.
From these circumstances, the Court can assume
that the restaurant services offered at the John
Hay Air Station partake of the nature of a
business enterprise undertaken by the United
States government in its proprietary capacity.
Such services are not extended to the American
servicemen for free as a perquisite of membership
in the Armed Forces of the United States. Neither
does it appear that they are exclusively offered to
these servicemen; on the contrary, it is well known
that they are available to the general public as well,
including the tourists in Baguio City, many of whom
make it a point to visit John Hay for this reason. All
persons availing themselves of this facility pay for
the privilege like all other customers as in ordinary
restaurants. Although the prices are concededly
reasonable and relatively low, such services are
undoubtedly operated for profit, as a commercial
and not a governmental activity.
The consequence of this finding is that the
petitioners cannot invoke the doctrine of state
47
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
immunity to justify the dismissal of the damage
suit against them by Genove. Such defense will
not prosper even if it be established that they
were acting as agents of the United States when
they investigated and later dismissed Genove.
For that matter, not even the United States
government itself can claim such immunity. The
reason is that by entering into the employment
contract with Genove in the discharge of its
proprietary functions, it impliedly divested itself of
its sovereign immunity from suit.
But these considerations notwithstanding, we hold
that the complaint against the petitioners in the
court below must still be dismissed. While suable,
the petitioners are nevertheless not liable. It is
obvious that the claim for damages cannot be
allowed on the strength of the evidence before us,
which we have carefully examined.
The dismissal of the private respondent was
decided upon only after a thorough investigation
where it was established beyond doubt that he had
polluted the soup stock with urine. The
investigation, in fact, did not stop there. Despite the
definitive finding of Genove's guilt, the case was still
referred to the board of arbitrators provided for in
the collective bargaining agreement. This board
unanimously affirmed the findings of the
investigators and recommended Genove's
dismissal. There was nothing arbitrary about the
proceedings. The petitioners acted quite properly in
terminating the private respondent's employment
for his unbelievably nauseating act. It is surprising
that he should still have the temerity to file his
complaint for damages after committing his utterly
disgusting offense.
JUSMAG PHILIPPINES vs. NLRC
The immunity from suit of the Joint United States
Military Assistance Group to the Republic of the
Philippines (JUSMAG-Philippines) is the pivotal
issue in the case at bench.
Private respondent was one of the seventy-four
(74) security assistance support personnel (SASP)
working at JUSMAG-Philippines. He had been with
JUSMAG from 1969 until his dismissal in 1992.
When dismissed, he held the position of Illustrator 2
and was the incumbent President of JUSMAG
PHILIPPINES-FILIPINO CIVILIAN EMPLOYEES
ASSOCIATION (JPFCEA), a labor organization duly
registered with the Department of Labor and
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
Employment. His services were terminated
allegedly due to the abolition of his position. He was
also advised that he was under administrative leave
although the same was not charged against his
leave.
Private respondent filed a complaint with the
Department of Labor and Employment on the
ground that he was illegally suspended and
dismissed from service by JUSMAG. He asked for
his reinstatement.
JUSMAG then filed a Motion to Dismiss invoking
its immunity from suit as an agency of the United
States. It further alleged lack of employer-employee
relationship and that it has no juridical personality to
sue and be sued.
Labor Arbiter dismissed the subject complaint " for
want of jurisdiction." Private respondent
appealed to the NLRC, assailing the ruling that
petitioner is immune from suit for alleged violation
of our labor laws.
The NLRC reversed the ruling of the Labor Arbiter
as it held that petitioner had lost its right not to be
sued. The resolution was predicated on two
grounds: (1) the principle of estoppel — that
JUSMAG failed to refute the existence of employer-
employee relationship under the "control test"; and
(2) JUSMAG has waived its right to immunity from
suit when it hired the services of private
respondent.
ISSUES: WON JUSMAG may be sued and WON
there was an employer-employee relationship
between JUSMAG and private respondent.
HELD: NO, JUSMAG was immune from suit as it was
performing a governmental function. Hence, no
need to determine the EE-ER relationship.
JUSMAG was created pursuant to the Military
Assistance Agreement between the Governments
of the RP and the USA. As agreed upon, JUSMAG
shall consist of Air, Naval and Army group, and its
primary task was to advise and assist the
Philippines, on air force, army and naval matters.
Article 14 of the 1947 Agreement provides, inter alia,
that "the cost of all services required by the Group,
including compensation of locally employed
interpreters, clerks, laborers, and other personnel,
except personal servants, shall be borne by the
Republic of the Philippines."
A Memorandum of Agreement was forged
between the Armed Forces of the Philippines and
48
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
JUSMAG-Philippines. The Agreement delineated
the terms of the assistance-in-kind of JUSMAG for
1991, the relevant parts of which read:
c. It is understood that SASP are
employees of the Armed Forces of
the Philippines (AFP).
Therefore, the AFP agrees to
appoint, for service with JUSMAG,
no more than 74 personnel to
designated positions with
JUSMAG.
d. SASP are under the total
operational control of the Chief,
JUSMAG-Philippines. The term
"Operational Control" includes, but
is not limited to, all personnel
administrative actions, such as:
hiring recommendations; firing
recommendations; position
classification; discipline; nomination
and approval of incentive awards;
and payroll computation.
A year later, the United States Embassy sent
another note of similar import to the Department of
Foreign Affairs (No. 227, dated April 8, 1992),
extending the funding agreement for the salaries of
SASP and security guards.
From the foregoing, it is apparent that when
JUSMAG took the services of private
respondent, it was performing a governmental
function on behalf of the United States pursuant
to the Military Assistance Agreement. Hence, we
agree with petitioner that the suit is, in effect, one
against the United States Government, albeit it was
not impleaded in the complaint. Considering that
the United States has not waived or consented to
the suit, the complaint against JUSMAG cannot not
prosper.
In this jurisdiction, we recognize and adopt the
generally accepted principles of international law as
part of the law of the land. Immunity of State from
suit is one of these universally recognized
principles. In international law, "immunity" is
commonly understood as an exemption of the state
and its organs from the judicial jurisdiction of
another state. This is anchored on the principle of
the sovereign equality of states under which one
state cannot assert jurisdiction over another in
violation.
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
Under the traditional rule of State immunity, a state
cannot be sued in the courts of another State,
without its consent or waiver.
Conversely, if the contract was entered into in
the discharge of its governmental functions, the
sovereign state cannot be deemed to have
waived its immunity from suit. Such is the case at
bench.
Prescinding from this premise, we need not
determine whether JUSMAG controls the
employment conditions of the private respondent.
We also hold that there appears to be no basis for
public respondent to rule that JUSMAG is stopped
from denying the existence of employer-employee
relationship with private respondent. On the
contrary, in its Opposition before the public
respondent, JUSMAG consistently contended that
the (74) SASP, including private respondent,
working in JUSMAG, are employees of the Armed
Forces of the Philippines.
We symphatize with the plight of private
respondent who had served JUSMAG for more than
twenty (20) years. Considering his length of service
with JUSMAG, he deserves a more compassionate
treatment. Unfortunately, JUSMAG is beyond the
jurisdiction of this Court. Nonetheless, the
Executive branch, through the Department of
Foreign Affairs and the Armed Forces of the
Philippines, can take the cudgel for private
respondent and the other SASP working for
JUSMAG, pursuant to the aforestated Military
Assistance Agreement.
INTERNATIONAL CATHOLIC IMMIGRATION
COMMISSION vs. HON. PURA CALLEJA
(WARNING: LONG case, Lels. Involves two cases
involving the International Catholic Migration
Commission (ICMC) and the International Rice
Research Institute, Inc. (IRRI). Related issue is
whether the immunity from suits granted to ICMC
and IRRI extend the application of Philippine labor
laws. The cases were consolidated because they
involve the same public respondent, the Director
Calleja of Bureau of Labor Relations, who ruled that
both ICMC and IRRI are not immune from Philippine
Labor Laws)
A. G.R. No. 85750 — the International Catholic
Migration Commission (ICMC) Case.
49
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
As an aftermath of the Vietnam War, the plight of
Vietnamese refugees fleeing from South Vietnam's
communist rule confronted the international
community.
In response to this crisis, an Agreement was forged
between the Philippine Government and the United
Nations High Commissioner for Refugees whereby
an operating center for processing Indo-Chinese
refugees for eventual resettlement to other
countries was to be established in Bataan.
ICMC was one of those accredited by the Philippine
Government to operate the refugee processing
center in Bataan. It was incorporated in New York,
USA, at the request of the Holy See, as a non-profit
agency involved in international humanitarian and
voluntary work. It is duly registered with the United
Nations Economic and Social Council and enjoys
Consultative Status, Category II. As an international
organization rendering voluntary and humanitarian
services in the Philippines, its activities are parallel
to those of the International Committee for
Migration (ICM) and the International Committee of
the Red Cross (ICRC).
Trade Unions of the Philippines and Allied Services
(TUPAS) filed with the then Ministry of Labor and
Employment a Petition for Certification Election
among the rank and file members employed by
ICMC. The latter opposed the petition on the
ground that it is an international organization
registered with the United Nations and, hence,
enjoys diplomatic immunity.
Med-Arbiter sustained ICMC and dismissed the
petition for lack of jurisdiction.
On appeal by TUPAS, Director Calleja of the Bureau
of Labor Relations (BLR), reversed the Med-
Arbiter's Decision and ordered the immediate
conduct of a certification election. At that time,
ICMC's request for recognition as a specialized
agency was still pending with the Department of
Foreign Affairs (DEFORAF).
Subsequently, however, the Philippine
Government, through the DEFORAF, granted
ICMC the status of a specialized agency with
corresponding diplomatic privileges and
immunities, as evidenced by a Memorandum of
Agreement between the Government and ICMC.
ICMC then sought the immediate dismissal of the
TUPAS Petition for Certification Election
invoking the immunity expressly granted but the
same was denied by respondent BLR Director
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
who, again, ordered the immediate conduct of a
pre-election conference.
Intervenor DEFORAF upholds ICMC'S claim of
diplomatic immunity and seeks an affirmance of the
DEFORAF determination that the BLR Order for a
certification election among the ICMC employees is
violative of the diplomatic immunity of said
organization.
Respondent BLR Director, on the other hand,
with whom the Solicitor General agrees, cites
State policy and Philippine labor laws to justify its
assailed Order, particularly, Article II, Section 18
and Article III, Section 8 of the 1987 Constitution;
and Articles 243 and 246 of the Labor Code, as
amended. In addition, she contends that a
certification election is not a litigation but a mere
investigation of a non-adversary, fact-finding
character. It is not a suit against ICMC its property,
funds or assets, but is the sole concern of the
workers themselves.
B. G.R. No. 89331 — (The International Rice Research
Institute [IRRI] Case).
The Philippine Government and the Ford and
Rockefeller Foundations signed a Memorandum of
Understanding establishing the International Rice
Research Institute (IRRI) at Los Baños, Laguna. It
was intended to be an autonomous,
philanthropic, tax-free, non-profit, non-stock
organization designed to carry out the principal
objective of conducting "basic research on the rice
plant, on all phases of rice production,
management, distribution and utilization with a view
to attaining nutritive and economic advantage or
benefit for the people of Asia and other major rice-
growing areas through improvement in quality and
quantity of rice."
Initially, IRRI was organized and registered with the
Securities and Exchange Commission as a private
corporation subject to all laws and regulations.
However, by virtue of Pres. Decree No. 1620,
promulgated on 19 April 1979, IRRI was granted
the status, prerogatives, privileges and
immunities of an international organization.
The Organized Labor Association in Line Industries
and Agriculture (OLALIA), is a legitimate labor
organization with an existing local union, the
Kapisanan ng Manggagawa at TAC sa IRRI
(Kapisanan, for short) in respondent IRRI.
50
 ART. 6 COVERAGE - ER-EE RELATIONSHIP LABOR STANDARD LAWS
The Kapisanan filed a Petition for Direct Article II of the Memorandum of Agreement
Certification Election with the Department of Labor between the Philippine Government and ICMC
and Employment (DOLE). provides that ICMC shall have a status "similar to
IRRI opposed the petition invoking Pres. Decree that of a specialized agency." The Convention on
No. 1620 conferring upon it the status of an the Privileges and Immunities of Specialized
international organization and granting it Agencies, adopted by the UN General Assembly
immunity from all civil, criminal and and concurred in by the Philippine Senate, explicitly
provides:
administrative proceedings under Philippine
laws. Art. III, Section 4. The specialized
Med-Arbiter upheld the opposition on the basis of agencies, their property and
Pres. Decree No. 1620 and dismissed the Petition for assets, wherever located and by
Direct Certification. whomsoever held, shall enjoy
immunity from every form of
On appeal, the BLR Director, who is the public legal process except insofar as in
respondent in the ICMC Case, set aside the Med- any particular case they have
Arbiter's Order and authorized the calling of a expressly waived their immunity.
certification election among the rank-and-file It is, however, understood that no
employees of IRRI. Said Director relied on Article waiver of immunity shall extend to
243 of the Labor Code, as amended, infra and any measure of execution.
Article XIII, Section 3 of the 1987 Constitution, and
held that "the immunities and privileges granted to IRRI is similarly situated, Pres. Decree No. 1620,
Article 3, is explicit in its grant of immunity, thus:
IRRI do not include exemption from coverage of our
Labor Laws." Reconsideration sought by IRRI was Art. 3. Immunity from Legal
denied. Process. — The Institute shall
On appeal, the Secretary of Labor set aside the BLR enjoy immunity from any penal,
Director's Order, dismissed the Petition for civil and administrative
Certification Election, and held that the grant of proceedings, except insofar as
specialized agency status by the Philippine that immunity has been expressly
Government to the IRRI bars DOLE from assuming waived by the Director-General of
and exercising jurisdiction over IRRI. the Institute or his authorized
representatives.
Hence, the present Petition for Certiorari filed by
Kapisanan alleging grave abuse of discretion by The foregoing opinions constitute a categorical
respondent Secretary of Labor in upholding IRRI's recognition by the Executive Branch of the
diplomatic immunity. Government that ICMC and IRRI enjoy
immunities accorded to international
Kapisanan contends that Article 3 of Pres. Decree organizations, which determination has been held
No. 1620 granting IRRI the status, privileges, to be a political question conclusive upon the Courts
prerogatives and immunities of an international in order not to embarrass a political department of
organization, invoked by the Secretary of Labor, is Government.
unconstitutional in so far as it deprives the Filipino
workers of their fundamental and constitutional It is a recognized principle of
right to form trade unions for the purpose of international law and under our
collective bargaining as enshrined in the 1987 system of separation of powers
Constitution. that diplomatic immunity is
essentially a political question and
ISSUE: WON the grant of diplomatic privileges and courts should refuse to look beyond
immunites to ICMC and IRRI extends to immunity a determination by the executive
from the application of Philippine labor laws. branch of the government, and
HELD: YES. where the plea of diplomatic
immunity is recognized and
There can be no question that diplomatic immunity
affirmed by the executive branch
has, in fact, been granted ICMC and IRRI.
of the government as in the case
at bar, it is then the duty of the
51
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
courts to accept the claim of
immunity upon appropriate
suggestion by the principal law
officer of the government.
The grant of immunity from local jurisdiction to
ICMC and IRRI is clearly necessitated by their
international character and respective purposes.
The objective is to avoid the danger of partiality and
interference by the host country in their internal
workings. The exercise of jurisdiction by the
Department of Labor in these instances would
defeat the very purpose of immunity, which is to
shield the affairs of international organizations, in
accordance with international practice, from
political pressure or control by the host country to
the prejudice of member States of the organization,
and to ensure the unhampered performance of
their functions.
ICMC's and IRRI's immunity from local
jurisdiction by no means deprives labor of its
basic rights, which are guaranteed by Article II,
Section 18, Article III, Section 8, and Article XIII,
Section 3, of the 1987 Constitution; and
implemented by Articles 243 and 246 of the Labor
Code, relied on by the BLR Director and by
Kapisanan.
For, ICMC employees are not without recourse
whenever there are disputes to be settled. Section
31 of the Convention on the Privileges and
Immunities of the Specialized Agencies of the
United Nations provides that "each specialized
agency shall make provision for appropriate modes
of settlement of: (a) disputes arising out of
contracts or other disputes of private character to
which the specialized agency is a party." Moreover,
pursuant to Article IV of the Memorandum of
Agreement between ICMC the the Philippine
Government, whenever there is any abuse of
privilege by ICMC, the Government is free to
withdraw the privileges and immunities
accorded.
Neither are the employees of IRRI without remedy in
case of dispute with management as, in fact, there
had been organized a forum for better
management-employee relationship as evidenced
by the formation of the Council of IRRI Employees
and Management (CIEM) wherein "both
management and employees were and still are
represented for purposes of maintaining mutual
and beneficial cooperation between IRRI and its
employees." The existence of this Union factually
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
and tellingly belies the argument that Pres. Decree
No. 1620, which grants to IRRI the status, privileges
and immunities of an international organization,
deprives its employees of the right to self-
organization.
The immunity granted being "from every form of
legal process except in so far as in any particular
case they have expressly waived their
immunity," it is inaccurate to state that a
certification election is beyond the scope of that
immunity for the reason that it is not a suit
against ICMC. A certification election cannot be
viewed as an independent or isolated process. It
could tugger off a series of events in the collective
bargaining process together with related incidents
and/or concerted activities, which could inevitably
involve ICMC in the "legal process," which includes
"any penal, civil and administrative proceedings."
The eventuality of Court litigation is neither
remote and from which international
organizations are precisely shielded to
safeguard them from the disruption of their
functions. Clauses on jurisdictional immunity are
said to be standard provisions in the constitutions of
international Organizations. "The immunity covers
the organization concerned, its property and its
assets. It is equally applicable to proceedings in
personam and proceedings in rem."
SOUTHEAST ASIAN FISHERIES DEVELOPMENT
CENTER-AQUACULTURE DEPT (SEAFDEC-
AQD), LACANILAO (CHIEF), CUEVAS (HEAD,
ADMIN DIV.), DELOS REYES (FINANCE
OFFICER) vs. NLRC and JUVENAL LAZAGA
G.R. No. 86773 February 14, 1992
FACTS: SEAFDEC-AQD is a department of an
international organization, the Southeast Asian
Fisheries Development Center, organized through
an agreement entered into in Bangkok, Thailand by
the governments of Malaysia, Singapore, Thailand,
Vietnam, Indonesia and the Philippines with Japan
as the sponsoring country.
Private respondent Juvenal Lazaga was employed
as a Research Associate on a probationary basis by
the SEAFDEC-AQD and was then appointed from
Senior External Affairs Officer to the position of
Professional III. Laterm he was designated as Head
of External Affairs Office with the same pay and
benefits.
52
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
Petitioner Lacanilao in his capacity as Chief of
SEAFDEC-AQD sent a notice of termination to
private respondent informing him that due to the
financial constraints being experienced by the
department, his services shall be terminated.
SEAFDEC-AQD failure to pay the separation pay.
Lazaga then filed a complaint against SEAFDEC for
non-payment of separation benefits plus moral
damages and attorney's fees with the NLRC.
SEAFDEC in their answer with counterclaim alleged
that the NLRC has no jurisdiction over the case
inasmuch as the SEAFDEC-AQD is an international
organization and that Lazaga must first secure
clearances from the proper departments for
property or money accountability before any claim
for separation pay will be paid, and which
clearances had not yet been obtained by Lazaga.
The labor arbiter rendered a decision in favor of
Lazaga. Thereafter, SEAFDEC instituted this
petition for certiorari alleging that the NLRC has no
jurisdiction to hear and decide Lazaga's complaint
since SEAFDEC-AQD is immune from suit owing to
its international character and the complaint is in
effect a suit against the State which cannot be
maintained without its consent.
ISSUE: WON the NLRC has jurisdiction.
HELD: NO.
SEAFDEC-AQD is an international agency beyond
the jurisdiction of public respondent NLRC. It was
established by the Governments of Burma,
Kingdom of Cambodia, Republic of Indonesia,
Japan, Kingdom of Laos, Malaysia. Republic of the
Philippines, Republic of Singapore, Kingdom of
Thailand and Republic of Vietnam. The Republic of
the Philippines became a signatory to the
Agreement establishing SEAFDEC on January
16,1968.
Being an intergovernmental organization, SEAFDEC
including its Departments (AQD), enjoys functional
independence and freedom from control of the
state in whose territory its office is located. They
must be deemed to possess a species of
international personality of their own." (Salonga and
Yap, PIL, 83 [1956 ed.])
Pursuant to its being a signatory to the Agreement,
the Republic of the Philippines agreed to be
represented by one Director in the governing
SEAFDEC Council and that its national laws and
regulations shall apply only insofar as its
contribution to SEAFDEC of "an agreed amount of
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
money, movable and immovable property and
services necessary for the establishment and
operation of the Center" are concerned. It expressly
waived the application of the Philippine laws on the
disbursement of funds of petitioner SEAFDEC-AQD
(Section 2, P.D. No. 292).
The then Minister of Justice likewise opined that
Philippine Courts have no jurisdiction over
SEAFDEC-AQD in Opinion No. 139, Series of 1984 —
4. One of the basic immunities of an
international organization is immunity from
local jurisdiction… The obvious reason for this
is that the subjection of such an organization
to the authority of the local courts would
afford a convenient medium thru which the
host government may interfere in their
operations or even influence or control its
policies and decisions of the organization;
besides, such subjection to local jurisdiction
would impair the capacity of such body to
discharge its responsibilities impartially on
behalf of its member-states.
NLRC's reliance in Lacanilao v. De Leon [1987] to
justify its assumption of jurisdiction over SEAFDEC
is misplaced. In the case, the court ruled:
We would note, finally, that the present
petition relates to a controversy between two
claimants to the same position; this is not a
controversy between the SEAFDEC on the
one hand, and an officer or employee, or a
person claiming to be an officer or employee,
of the SEAFDEC, on the other hand. There is
before us no question involving immunity
from the jurisdiction of the Court, there being
no plea for such immunity whether by or on
behalf of SEAFDEC, or by an official of
SEAFDEC with the consent of SEAFDEC.
WHEREFORE, finding SEAFDEC-AQD to be an
international agency beyond the jurisdiction of the
courts or local agency of the Philippine government,
the questioned decision and resolution of the NLRC
are hereby REVERSED and SET ASIDE for having
been rendered without jurisdiction.
L) COOPERATIVES
BATANGAS-I ELECTRIC COOPERATIVE LABOR
UNION vs. YOUNG (November 9, 1988)
53
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
NATURE: This refers to three (3) separate petitions
for certiorari under Rule 65. The same issue is
involved in these petitions.
FACTS:
G.R. No. 62386
On June 1, 1981, the Batangas-I Electric Cooperative
Union (UNION) filed with the Regional Office No. IV-
A, Ministry of Labor and Employment (now DOLE),
at San Pablo City, a petition for certification
election. The UNION are employees Batangas-I
Electric Cooperative Inc. (BATELEC). The Med-
Arbiter issued a resolution which gave due course
to the petition and ordered the holding of a
certification election. BATELEC filed a motion for
recon contending that there was a legal impediment
to the holding of a certification election considering
that the formation of a union in a cooperative is
illegal and invalid, the officers and members of the
union being the owners thereof. The Bureau of
Labor Relations through its Officer-in-Charge,
Romeo A. Young, granted the appeal and revoked
the Med-Arbiter's order mandating the holding of a
certification election. This Resolution, inter alia,
stated: Section 35, Presidential Decree 269, as
amended, readily shows that employees of an
electric cooperative who are themselves members
of the cooperative have no right to form or join a
labor organization for purposes of collective
bargaining.
G.R. No. 70880
On September 1, 1982, the Federation of Free
Workers (FFW) filed with the Regional Office IN,
Ministry of Labor and Employment (now DOLE), at
San Fernando, Pampanga, a petition for
certification election. It alleged that it is a legitimate
labor organization; that the Bulacan II Electric
Cooperative Inc. (BECO II) is engaged in the service
and supply of electric current and, therefore, an
employer under the provisions of the Labor Code.
BECO II filed its answer that to grant the petition
would be violative of Article 244 (now Article 243)
of the Labor Code and Section 35 of PD 269. It
contended, that since electric cooperatives are
subject to the supervision and control of the NEDA
pursuant to PD 269, as amended by PD 1645, BECO
II in effect is a government institution; and that there
is no representation issue as there is no other labor
organization involved except the FFW.
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
The Chief Med-Arbiter directed the holding of a
certification election. The Bureau of Labor
Relations. affirmed the questioned order.
BECO II filed the instant petition contending that
the public respondents acted with grave abuse of
discretion in ruling that under Article 244 (now
Article 243) of the Labor Code, members and part
owners of electric cooperatives are eligible to form,
join or assist labor organizations for purposes of
collective bargaining.
G.R. No. 74560
On October 1, 1985, the Federation of Free Workers
(FFW) ALECO I Chapter filed a petition for
certification election, alleging that it is a legitimate
labor onganization" and that the Albay Electric
Cooperative I (ALECO 1) is an electric cooperative
servicing electricity in the Province of Albay.
Intervenor ALECO I employees for a "NO-UNION
STAND") filed its position paper seeking the
dismissal of the petition, alleging that of the 63
signatories to the petition, 51 are not qualified to join
the union as they are members-consumers of the
ALECO I and are considered joint owners of the
cooperative pursuant to PD 269, and Art. II Sec. I of
the revised by laws of ALECO I. FFW in its reply
argued that the 51 disputed signatories to the
petition are regular rank and file employees and
workers of ALECO I and are entitled to self-
organization under Article 244 (now Article 243) of
the Labor Code.
The Med-Arbiter issued a calling for a certification
election. The Bureau of Labor Relations, rendered a
decision dismissing ALECO I’s appeal. Hence,
ALECO I filed the instant petition contending that
the public respondent erred in holding that the FFW
ALECO I CHAPTER whose members are
members/part owners of the cooperative are
eligible to join a labor organization for collective
bargaining.
ISSUE: WON employees of electric cooperatives
are qualified to form or join labor organizations for
purposes of collective bargaining.
HELD: NO if the employees are also members of the
cooperatives. YES if the employees are not
members.
Eligibility to form, join or assist labor organizations
for purposes of collective bargaining is governed by
Article 243 (formerly Article 244) of the Labor
Code, as amended, which provides:
54
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
Art. 243. Coverage and employees' right to self-
organization. — All persons employed in
commercial, industrial and agricultural
enterprises and in religious, charitable, medical,
or educational institutions whether operating for
profit or not, shall have the right to
selforganization and to form, join, or assist labor
organizations of their own choosing for
purposes of collective bargaining. Ambulant,
intermittent and itinerant workers, self-
employed people, rural workers and those
without any definite employers may form labor
organizations for their mutual aid and protection.
In Cooperative Rural Bank of Davao City, Inc. vs.
Pura Ferrer-Calleja, et al., (1988), it was held that an
employee of a cooperative who is a member and
co-owner thereof cannot invoke the right to
collective bargaining. The decision in the case, inter
alia, stated:
A cooperative, therefore, is by its nature
different from an ordinary business concern
being run either by persons, partnerships, or
corporations. Its owners and/or members are
the ones who run and operate the business while
the others are its employees. As above stated,
irrespective of the name of shares owned by its
member they are entitled to cast one vote each
in deciding upon the affair of the cooperative.
An employee therefore of such a cooperative
who is a member and co-owner thereof cannot
invoke the right to collective bargaining for
certainly an owner cannot bargain with himself
or his co-owners. Employees of cooperatives
who are themselves members of the
cooperative have no right to form or join labor
organizations for purposes of collective
bargaining for being themselves co-owners of
the cooperative.
However, in so far as it involves cooperatives
with employees who are not members or co-
owners thereof, certainly such employees are
entitled to exercise the rights of all workers to
organization, collective bargaining, negotiations
and others as are enshrined in the Constitution
and existing laws of the country.
Employees of a cooperative who are not members
thereof are entitled to exercise the rights of all
workers to form, join or assist labor organizations
for purposes of collective bargaining. Compliance
with the jurisdictional requirement makes it
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
mandatory on the part of the Bureau of Labor
Relations to order the certification election.
CENTRAL NEGROS ELECTRIC COOPERATIVE,
INC. (CENECO) vs. HON. SEC., DOLE, and
CENECO UNION OF RATIONAL EMPLOYEES
(CURE)
G.R. No. 94045 September 13, 1991
FACTS: On August 15, 1987, CENECO entered into
a collective bargaining agreement with CURE, a
labor union representing its rank-and-file
employees. On December 28, 1989, CURE wrote
CENECO proposing that negotiations be
conducted for a new collective bargaining
agreement (CBA). CENECO denied CURE's request
on the ground that employees who at the same time
are members of an electric cooperative are not
entitled to form or join a union.
Prior to the submission of the proposal for CBA
renegotiation, CURE members, in a general
assembly held on a Resolution that “all union
members shall withdraw, retract, or recall the union
members' membership from CENECO in order to
avail (of) the full benefits under the existing
Collective Bargaining Agreement entered into by
and between CENECO and CURE, and the
supposed benefits that our union may avail (of)
under the renewed CBA.
However, the withdrawal from membership was
denied by CENECO. By reason of the refusal to
renegotiate a new CBA, CURE filed a petition for
direct recognition or for certification election.
Med-Arbiter issued an order,6 granting the petition
for certification election. CENECO appealed to the
Department of Labor and Employment.
CENECO argues that respondent Secretary
committed a grave abuse of discretion in not
applying to the present case the doctrine
enunciated in the BATANGAS case that employees
of an electric cooperative who at the same time are
members of the electric cooperative are prohibited
from forming or joining labor unions for purposes of
a collective bargaining agreement.
ISSUE: WON the employees of CENECO who
withdrew their membership from the cooperative
are entitled to form or join CURE for purposes of the
negotiations for a CBA proposed by the latter.
HELD: YES
55
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
As to the withdrawal of membership. As
discussed by the Solicitor General, Article I, Section
9 of the Articles of Incorporation and By- Laws of
CENECO provides that "any member may withdraw
from membership upon compliance with such
uniform terms and conditions as the Board may
prescribe." The same section provides that upon
withdrawal, the member is merely required to
surrender his membership certificate and he is to be
refunded his membership fee less any obligation
that he has with the cooperative. There appears to
be no other condition or requirement imposed upon
a withdrawing member. Hence, there is no just
cause for petitioner's denial of the withdrawal from
membership of its employees who are also
members of the union. The right to join an
organization necessarily includes the equivalent
right not to join the same.
As to the right of self-organization. The right of
the employees to self-organization is a compelling
reason why their withdrawal from the cooperative
must be allowed. As pointed out by CURE, the
resignation of the member- employees is an
expression of their preference for union
membership over that of membership in the
cooperative. The avowed policy of the State to
afford fall protection to labor and to promote the
primacy of free collective bargaining mandates that
the employees' right to form and join unions for
purposes of collective bargaining be accorded the
highest consideration.
Membership in an electric cooperative which
merely vests in the member a right to vote during
the annual meeting becomes too trivial and
insubstantial vis-a-vis the primordial and more
important constitutional right of an employee to join
a union of his choice. Besides, the 390 employees of
CENECO, some of whom have never been
members of the cooperative, represent a very small
percentage of the cooperative's total membership
of 44,000. It is inconceivable how the withdrawal of
a negligible number of members could adversely
affect the business concerns and operations of
CENECO.
AIR SERVICES COOPERATIVE, and CAPT.
ANTONIO S. SARAEL vs. CA [G.R. No.
118693. July 23, 1998]
*this case revolves on procedure and not about er-
ee relationship
AMPARO-CANDOLITA-CONFESOR-ESTILLORE-GUMBOC-IBAY-JARON-LAVARES-MORTEJO-NARCA-SABRIDO
LABOR STANDARD LAWS
FACTS: Air Services Cooperative (the
Cooperative) is a duly registered entity involved in
the aviation business. It primarily services rural
areas in the transportation of farm products, control
of crop infestation, transport of patients and other
rural air services. Both the cooperatives co-
petitioner, Capt. Antonio S. Sarael, and respondent
Capt. Recarido Batican are members of the said
cooperative being its original cooperators.
In the course of the operation of the
cooperatives business, however, it appears that
respondent was allegedly reported to have been
illegally draining aviation fuel from the aircraft
assigned to him by the cooperatives client Stanfilco
(Dole Philippines, Inc.) for which reason Capt. Sarael
issued a memorandum dated January 20, 1993
calling his attention and directing him to cease and
desist from said practice. After considering
respondents explanation and conducting a
thorough investigation on the matter, the
cooperatives Board of Directors resolved to cancel
and revoke respondents membership in the
cooperative. After respondents expulsion, the
cooperatives client Stanfilco likewise filed a formal
criminal complaint for qualified theft against him on
March 26, 1993 for which a warrant of arrest had
been subsequently issued.
Aggrieved by his expulsion, respondent filed
before the NLRC a complaint both against the
cooperative and Capt. Sarael for illegal dismissal.
The Labor Arbiter decided in favor of respondent
declaring the latters dismissal from the cooperative
illegal and directing the cooperative through Capt.
Sarael to pay respondent the monetary awards set
forth therein.
Instead of interposing an appeal from said
adverse decision to the NLRC, petitioners, however,
filed a Petition for Certiorari, Prohibition and
Annulment of Judgment before the Regional Trial
Court. The trial court motu proprio dismissed the
foregoing petition for lack of jurisdiction. It
explained that a petition for certiorari before it is
not a substitute for an appeal to the NLRC which
recourse is specifically provided for under Article
223 of the Labor Code.
56
 ART. 6 COVERAGE - ER-EE RELATIONSHIP
Petitioners elevated the matter to the Court of
Appeals. The CA denied in due course to the
petition.
ISSUE: WON it is procedurally sound to impugn and
seek the annulment of the LA’s decision over the
dispute before the Regional Trial Court.
LABOR STANDARD LAWS
in the Code. For this reason, petitioners cannot
argue now that the NLRC is devoid of any corrective
power to rectify a supposed erroneous assumption
of jurisdiction by the Labor Arbiter and justify
recourse to the trial court.
That this is the rule is not without
reason. In Balais v. Velasco,[19] this Court declared:

HELD: NO Well-settled is the principle that regular courts have

Indeed, we find it odd that petitioners should
entertain the notion that the Labor Arbiters decision
may be assailed in the trial court when the law
clearly provides for the proper manner by which a
party may have such decision reviewed. Hence, in
Article 223 of The Labor Code, we find that:
ART. 223. Appeal. --- Decisions, awards, or orders
of the Labor Arbiter are final and executory unless
appealed to the Commission by any or both parties
within ten (10) calendar days from receipt of such
decisions, awards, or orders... [Underscoring
supplied].
Also, in Article 217 (b), the same Code states:
no jurisdiction to hear and decide questions which
arise and are incidental to the enforcement of
decisions, orders or awards rendered in labor cases
by appropriate officers and tribunals of the
Department of Labor and Employment. To hold
otherwise, is to sanction split jurisdiction which is
obnoxious to the orderly administration of
justice. As this rule has ripened into dogma, it, thus,
commands adherence not breach by the parties
concerned.
In the same vein, we clarified in Asuncion v.
National Labor Relations Commission that if a party
complains of a decision as being void, then the
proper remedy would have been to appeal said
judgment to the NLRC.

ART. 217. Jurisdiction of Labor Arbiters and the

Commission. --- WHEREFORE, the petition is hereby
xxx xxx xxx DENIED. CA is affirmed.

(b) The Commission shall have exclusive appellate

jurisdiction over all cases decided by Labor
Arbiters.

Recourse to the trial court by the petitioners was

not called for. Also, while the title of Article 223
seems to provide only for the remedy of appeal as
that term is understood in procedural law and as
distinguished from the office of certiorari,
nonetheless, a closer reading thereof reveals that it
is not as limited as understood by the
petitioners. Said provision provides:

ART. 223. Appeal. --- xxx Such appeal may be

entertained only on any of the following grounds:
(a) If there is prima facie evidence of abuse of
discretion on the part of the Labor Arbiter;

Abuse of discretion is admittedly within the

ambit of certiorari and its grant of review thereof to
the NLRC indicates the lawmakers intention to
broaden the meaning of appeal as that term is used
57
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