SUPREME COURT REPORTS ANNOTATED Rosario Brothers Inc. vs. Ople No. L-53590. July 31, 1984.

* ROSARIO BROTHERS INC. (MANILA COD DEPARTMENT STORE), petitioner, vs. HON. BLAS F. OPLE, THE NATIONAL LABOR RELATIONS COMMISSION, and LEONARDO LOVERIA, MARIETTA GALUT, LINDA TAPICERIA, JESUS S. OLIVER, CLARITA SANGLE, RICARDO ROXAS, ANTONIO MABUTOL, LUZ BAYNO, NESTOR SANCHEZ, TITO CASTALEDA, EDDIE RODRIGUEZ, MANUEL MEJES, FRANCISCA TAPICERIA, EDITHA BAYNO, ET. AL., respondents. Labor Law; Illegal Dismissal; Finality of appealed decision and issuance of execution proper, the petition to overturn it having been filed too late, and the decision having already been partially implemented.We cannot sustain the petition. It was filed on April 11, 1980 which was too late because the Labor Ministers decision of March 27, 1979, subject of this judicial review, had already become final. And, not only that. The questioned decision has already been partially implemented by the sheriff as shown by his return, dated July 17, 1979 (p. 96, rollo). What is left for execution is the balance of private respondents claim. _______________ * FIRST DIVISION. 73 VOL. 131, JULY 31, 1984 73 Rosario Brothers Inc. vs. Ople Same; Same; Employer-employee Relationship; How the existence of employer-employee relationship determined; Independent contractor, meaning of.Further, the petition is devoid of merit. As held in Mafinco Trading Corporation vs. Ople, 70 SCRA 139, the existence of employer-employee relationship is determined by the following elements, 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 employees conduct although the latter is the most important element. On the other hand, 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 subjected to control of his employer except as to the result of his work. Same; Same; Same; Elements to determine the existence of an employer-employee relationship, present in case at bar; Dismissal of workers, illegal.In the case at bar, as found by the public respondent, the selection and hiring of private respondents were done by the petitioner, through the master cutter of its tailoring department who was a regular employee. The procedure was modified when the employment of personnel in the tailoring department was made by the management itself after the applicants qualifications had been passed upon by a committee of four. Later, further approval by the Personnel Department was required. Private respondents received their weekly wages from petitioner on piece-

work basis which is within the scope and meaning of the term wage as defined under Article 97 (f) of the New Labor Code (PD 442). x x x Petitioner had the power to dismiss private respondents, as shown by the various memoranda issued for strict compliance by private respondents, violations of which, in extreme cases, are grounds for outright dismissal. In fact, they were dismissed on January 2, 1978, although, the dismissal was declared illegal by the Labor Arbiter. The case is pending appeal with the National Labor Relations Commission. Private respondents conduct in the performance of their work was controlled by petitioner, such as: (1) they were required to work from Monday through Saturday; (2) they worked on job orders without waiting for the deadline; (3) they were to observe cleanliness in their place of work and were not allowed to bring out tailoring shop patterns: and (4) they were subject to quality control by petitioner. Private respondents were allowed to register with the Social Security System (SSS) as employees of petitioner and premiums were deducted from their wages just like its other employees. And, withholding taxes were also deducted from their wages for transmittal to the Bureau of Internal Revenue (BIR). 74 74 SUPREME COURT REPORTS ANNOTATED Rosario Brothers Inc. vs. Ople Same; Same: Findings of administrative agencies generally accorded not only respect but finality: Reason; Decision and order of execution of public respondents not tainted with unfairness or arbitrariness that would amount to abuse of discretion or lack of jurisdiction.Well-established is the principle that findings of administrative agencies which have acquired expertise because their jurisdiction is confined to specific matters are generally accorded not only respect but even finality. Judicial review by this Court on labor cases do not go so far as to evaluate the sufficiency of the evidence upon which the Deputy Minister and the Regional Director based their determinations but are limited to issues of jurisdiction or grave abuse of discretion (Special Events & Central Shipping Office Workers Union vs. San Miguel Corporation, 122 SCRA 557). In the case at bar, the questioned decision and order of execution of public respondents are not tainted with unfairness or arbitrariness that would amount to abuse of discretion or lack of jurisdiction and, therefore, this Court finds no necessity to disturb, much less, reverse the same. PETITION for certiorari to review the decision of the National Labor Relations Commission. The facts are stated in the opinion of the Court Bueno & Primicias Law Office for petitioner. The Solicitor General for respondents. RELOVA, J.: The issue raised in this case is whether an employer-employee relationship exists between the petitioner and the private respondents. It is the submission of petitioner that no such relationship exists or has been created because the series of memoranda issued by petitioner to the private respondents

from 1973 to 1977 would reveal that it had no control and/or supervision over the work of the private respondents. Private respondents are tailors, pressers, stitchers and similar workers hired by the petitioner in its tailoring department (Modes Suburbia). Some had worked there since 1969 until their separation on January 2, 1978. For their services, they were paid weekly wages on piece-work basis, minus the 75 VOL. 131, JULY 31, 1984 75 Rosario Brothers Inc. vs. Ople withholding tax per Bureau of Internal Revenue (BIR) rules. Further, they were registered with the Social Security System (SSS) as employees of petitioner and premiums were deducted from their wages; they were also members of the Avenida-Cubao Manila COD Department Store Labor Union which has a Collective Bargaining Agreement with the company; and, they were required to report for work from Monday through Saturday and to stay in the tailoring shop for no less than eight (8) hours a day, unless no job order was given them after waiting for two to three hours, in which case, they may leave and may come back in the afternoon. Their attendance was recorded through a bundy clock just like the other employees of petitioner. A master cutter distributes job orders equally, supervises the work and sees to it that they were finished as soon as possible. Quoting from the comment of the Solicitor General, petitioner, in its memorandum, said Once the job orders and the corresponding materials were distributed to them, private respondents were on their own. They were free to do their jobs either in the petitioners shop or elsewhere at their option, without observing the regular working time of the company provided that they finished their work on time and in accordance with the specifications. As a matter of fact, they were allowed to contract other persons to do the job for them; and also to accept tailoring jobs from other establishments. (p. 202, Rollo) On September 7, 1977, the private respondents filed with the Regional Office of the Department (now Ministry) of Labor a complaint for violation of Presidential Decree 851 (13th month pay) and Presidential Decree 525, as amended by Presidential Decree 1123 (Emergency Living Allowance) against herein petitioner. After petitioner had filed its answer, the case was certified for compulsory arbitration to the Labor Arbiter who, after due hearing, rendered a decision on December 29, 1977 dismissing private respondents claims for unpaid emergency living allowance and 13th month pay, for lack of merit, upon finding that the complainants (herein private respondents) are not employees of the respondent (herein petitioner) within the meaning of Article 267(b) of the Labor Code. As a consequence, 76 76

SUPREME COURT REPORTS ANNOTATED Rosario Brothers Inc. vs. Ople the private respondents were dismissed on January 2, 1978 and this prompted them to file a complaint for illegal dismissal with the Ministry of Labor. Meanwhile, the National Labor Relations Commission (NLRC) affirmed the decision of the Labor Arbiter and dismissed private respondents appeal for lack of merit. However, upon appeal to the Minister of Labor, the latter reversed the resolution of the NLRC in a decision, dated March 27, 1979, holding that The decision appealed from must be reversed. It is clearly erroneous. Complainants and respondent are correct (sic) in considering their relationship as one between employees and employer. The labor arbiter should not have made a different finding. Complainants were employed as tailors, pressers, stitchers and coatmakers in the tailoring department of the respondent. They are hired through a master cutter and the department head and upon the approval of the personnel department and the management. They report to the shop from Monday to Saturday and record their attendance with a bundy clock. They are required to stay in the shop premises for no less than 8 hours a day unless no job is given them after waiting for two or three hours in which case, they are allowed to leave. The employees (tailors, pressers and stitchers) are paid by piece per week according to the rates established by the company. They are registered as employees with the Social Security System for which premiums are deducted from their wages. Taxes are also withheld from their wages pursuant to BIR rules. Moreover, they enjoy the benefits due to employees under their collective agreement with the company. The tailors are given deadlines on their assigned jobs. They are required to work on job orders as soon as these are given to them. The master cutter is ordered to watch out for tailors who postponed their assigned job up to the last few days of the deadline and to report violators for proper action. Tailors are also required to follow the company code of discipline and the rules and regulations of the tailoring department. Outright dismissal is meted on anyone who brings out company patterns. Under these facts, the existence of the employment relations can not be disputed. The respondent itself, in its very first position papers, accepts this fact. The labor arbiter certainly erred in making a different finding. 77 VOL. 131, JULY 31, 1984 77 Rosario Brothers Inc. vs. Ople However, respondent contends that the employees are excluded from the coverage of PD 525, 851 and 1123 because of the nature of their employment, there being no fixed time with regards to entry and

exit and no fixed number of days of work, with respect to said employees. We have, however, examined carefully the decrees and find absolutely no indication therein that the employees are indeed excluded. Nor are the rules implementing the decrees supportive of the respondents contention. On the contrary, the rules argue for the contrary view. Section 2 of the rules implementing PD 525 provides: The Decree shall apply to all employees of covered employers, regardless of their position, designation or employment status, and irrespective of the method by which their wages are paid, including temporary, casual, probationary, and seasonal employees and workers. And Section 3, of the rules implementing PD 851 provides that all employees of covered employers shall be entitled to benefits provided under the Decree x x x regardless of their position, designation or employment status, and irrespective of the method by which their wages are paid. Section 2 of the same rules explicitly provides that the rules apply to workers paid on piece-rate basis or those who are paid a standard amount for every piece or unit of work produced that is more or less regularly replicated, without regard to the time spent in producing the same. WHEREFORE, respondent is hereby ordered to pay the emergency allowances under PD 525 and 1123 and the 13th month pay under PD 851 from the date of the effectivity of said decrees but not earlier than September 7, 1974 to the following complainants: Leonardo Loveria, Editha Bayno, Fe Bonita, Ricardo Roxas, Marietta Galut, Mercedes Oliver, Antonio Mabutol, Clarita Sangle and Jesus Oliver; and the emergency allowances and 13th month pay under said decrees from the date of the effectivity of said decrees but not earlier than the date of the date of the start of their employment, as indicated in the parenthesis after their names, to the following complainants: Linda Tapiceria (July 14, 1975), Luz Bayno, (September 22, 1975), Tito Castaeda (October 20, 1976), Francisca Tapiceria (February 14, 1977), Manuel Mejes (February 20, 1977), Eddie Rodriguez (July 4, 1977) and Nestor Sanchez (July 22, 1977). The Socio-Economic Analyst of the National Labor Relations Commission is hereby directed to compute the amount of the awards stated in this order and to submit a report thereon within 20 calendar days from receipt of this order. (pp. 37-40, Rollo) 78 78 SUPREME COURT REPORTS ANNOTATED Rosario Brothers Inc. vs. Ople Thereafter, private respondents filed a motion for issuance of a writ of execution of the aforesaid decision of the Minister of Labor which was granted and, partially implemented. On February 28, 1980, the Labor Arbiter issued an order directing the Chief of the Research and Information Department of the Commission to designate a Socio-Economic Analyst to compute the balance of private respondents claims for the 13th month pay and emergency living allowance in accordance with respondent Ministers decision of March 27, 1979. Pursuant thereto, a report, dated March 4, 1980, was submitted computing the balance of private respondents claims for emergency living allowance and 13th month pay up to February 29, 1980 in the total amount of P71,131.14. A writ of execution was issued for the satisfaction of said amount. Hence, the filing of this petition for certiorari, praying, among others, to annul and set aside the

decision of public respondent Minister of Labor and to dismiss the claims of private respondents. We cannot sustain the petition. It was filed on April 11, 1980 which was too late because the Labor Ministers decision of March 27, 1979, subject of this judicial review, had already become final. And, not only that. The questioned decision has already been partially implemented by the sheriff as shown by his return, dated July 17, 1979 (p. 96, rollo). What is left for execution is the balance of private respondents claim. Further, the petition is devoid of merit. As held in Mafinco Trading Corporation vs. Ople, 70 SCRA 139, the existence of employer-employee relationship is determined by the following elements, 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 employees conduct although the latter is the most important element. On the other hand, 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 subjected to control of his employer except as to the result of his work. 1. In the case at bar, as found by the public respondent, the selection and hiring of private respondents were done by 79 VOL. 131, JULY 31, 1984 79 Rosario Brothers Inc. vs. Ople the petitioner, through the master cutter of its tailoring department who was a regular employee. The procedure was modified when the employment of personnel in the tailoring department was made by the management itself after the applicants qualifications had been passed upon by a committee of four. Later, further approval by the Personnel Department was required. 2. Private respondents received their weekly wages from petitioner on piece-work basis which is within the scope and meaning of the term wage as defined under Article 97(f) of the New Labor Code (PD 442), thus (f) Wage paid to any employee shall mean the remuneration or earnings, however, designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done or for services rendered or to be rendered, and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging or other facilities customarily furnished by the employer to the employee. x x x 3. Petitioner had the power to dismiss private respondents, as shown by the various memoranda issued for strict compliance by private respondents, violations of which, in extreme cases, are grounds for outright dismissal. In fact, they were dismissed on January 2, 1978, although, the dismissal was declared illegal by the Labor Arbiter. The case is pending appeal with the National Labor Relations

Commission. 4. Private respondents conduct in the performance of their work was controlled by petitioner, such as: (1) they were required to work from Monday through Saturday; (2) they worked on job orders without waiting for the deadline; (3) they were to observe cleanliness in their place of work and were not allowed to bring out tailoring shop patterns; and (4) they were subject to quality control by petitioner. 5. Private respondents were allowed to register with the Social Security System (SSS) as employees of petitioner and 80 80 SUPREME COURT REPORTS ANNOTATED Rosario Brothers Inc. vs. Ople premiums were deducted from their wages just like its other employees. And, withholding taxes were also deducted from their wages for transmittal to the Bureau of Internal Revenue (BIR). 6. Well-established is the principle that findings of administrative agencies which have acquired expertise because their jurisdiction is confined to specific matters are generally accorded not only respect but even finality. Judicial review by this Court on labor cases do not go so far as to evaluate the sufficiency of the evidence upon which the Deputy Minister and the Regional Director based their determinations but are limited to issues of jurisdiction or grave abuse of discretion (Special Events & Central Shipping Office Workers Union vs. San Miguel Corporation, 122 SCRA 557). In the case at bar, the questioned decision and order of execution of public respondents are not tainted with unfairness or arbitrariness that would amount to abuse of discretion or lack of jurisdiction and, therefore, this Court finds no necessity to disturb, much less, reverse the same. WHEREFORE, premises considered, the petition is dismissed for lack of merit. SO ORDERED. Melencio-Herrera, Plana, Gutierrez, Jr. and De la Fuente, JJ., concur. Teehankee (Chairman), J., took no part. Petition dismissed. Notes.An employee-employer 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 reading such end. (LVN Pictures, Inc. vs. Philippine Musicians Guild, 1 SCRA 132.) A person who is under the instruction, supervision and control of an employer is an employee of the latter and belies the claim that he is an independent contractor. (Sterling Products International, Inc. vs. Sol, 7 SCRA 446.) o0o [Rosario Brothers Inc. vs. Ople, 131 SCRA 72(1984)]

VOL. 147. JANUARY 7, 1987 49 Brotherhood Labor Unity Movement of the Philippines vs. Zamora No. L-48645. January 7, 1987.* BROTHERHOOD" LABOR UNITY MOVEMENT OF THE PHILIPPINES, ANTONIO CASBADILLO, PROSPERO TABLADA, ERNESTO BENGSON, PATRICIO SERRANO, ANTONIO B. BOBIAS, VIRGILIO ECHAS, DOMINGO PARINAS, NORBERTO GALANG, JUANITO NAVARRO, NESTORIO MARCELLANA, TEOFILO B. CACATIAN, RUFO L. EGUIA, CARLOS SUMOYAN, LAMBERTO RONQUILLO, ANGELITO AMANCIO, DANILO B. MATIAR, ET AL., petitioners, vs. HON. RONALDO B. ZAMORA, PRESIDENTIAL ASSISTANT FOR LEGAL AFFAIRS, OFFICE OF THE PRESIDENT, HON. AMADO G. INCIONG, UNDERSECRETARY OF LABOR, SAN MIGUEL CORPORATION, GENARO OLIVES, ENRIQUE CAMAHORT, FEDERICO OATE, ERNESTO VILLANUEVA, ANTONIO BOCALING and GODOFREDO CUETO, respondents. Labor Relations; Factors considered in determining employeremployee relationship.In determining the existence of an employeremployee relationship, the elements that are generally considered are the following: (a) the selection and engagement of the employee; (b) the payment of wages; (Q) the power of dismissal; and (d) the employers power to control the employee with respect to the means and methods by which the work is to be accomplished. It is the socalled control test that is the most important element. _______________ * SECOND DIVISION. 50 50 SUPREME COURT REPORTS ANNOTATED BrotherhoodLabor Unity Movement of the Philippines vs. Zamora Labor Relations; Criteria for determining existence of independent contractor relationship.The existence of an independent contractor relationship is generally estabished by the following criteria: whether or not the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of a specified piece of work; the control and supervision of the work to another; the employers power with respect to the hiring, firing, and payment of the contractors workers; the control of the premises; the duty to supply the premises tools, appliances, materials and laborer; and the mode, manner, and terms of payment. Ibid; Unfair Labor Practice; Where there is an existing CBA, a group of employees who wish to form

another union must follow Labor Code procedures.The respondent company had an existing collective bargaining agreement with the IBM Union which is the recognized collective bargaining representative at the respondents glass placed there being a recognized bargaining representative of all employees at the companys glass plant, the petitioners cannot merely form a union and demand bargaining. The Labor Code provides the proper procedure for the recognition of unions as sale bargaining representatives. This must be followed. PETITION to review the order of the Bureau of Labor Relations. The facts are stated in the opinion of the Court. Armando V. Ampil for petitioners. Siguion Reyna, Montecillo and Ongsiako Law Office for private respondents. GUTIERREZ, JR., J.: The elemental question in labor law of whether or not an employer-employee relationship exists between petitionersmembers of the Brotherhood Labor Unit Movement of the Philippines (BLUM) and respondent San Miguel Corporation, is the main issue in this petition. The disputed decision of public respondent Ronaldo Zamora, Presidential Assistant for Legal Affairs, contains a brief summary of the facts involved: 51 VOL. 147, JANUARY 7, 1987 51 Brotherhood Labor Unity Movement of the Philippines vs. Zamora 1. The records disclose that on July 11, 1969, BLUM filed a complaint with the now defunct Court of Industrial Relations, charging San Miguel Corporation, and the following officers: Enrique Camahort, Federico Oate, Feliciano Arceo, Melencio Eugenio, Jr., Ernesto Villanueva, Antonio Bocaling and Godofredo Cueto of unfair labor practice as set forth in Section 4 (a), sub-sections (1) and (4) of Republic Act No. 875 and of illegal dismissal. It was alleged that respondents ordered the individual complainants to disaffiliate from the complainant union; and that management dismissed the individual complainants when they insisted on their union membership. On their part, respondents moved for the dismissal of the complaint on the grounds that the complainants are not and have never been employees of respondent company but employees of the independent contractor; that respondent company has never had control over the means and methods followed by the independent contractor who enjoyed full authority to hire and control said employees; and that the individual complainants are barred by estoppel from asserting that they are employees of respondent company. While pending with the Court of Industrial Relations (CIR), pleadings and testimonial and documentary evidences were duly presented, although the actual hearing was delayed by several

postponements. The dispute was taken over by the National Labor Relations Commission (NLRC) with the decreed abolition of the CIR and the hearing of the case intransferably commenced on September 8, 1975. On February 9, 1976, Labor Arbiter Nestor C. Lim found for complainants which was concurred in by the NLRC in a decision dated June 28, 1976. The amount of backwages awarded, however, was reduced by NLRC to the equivalent of one (1) year salary. On appeal, the Secretary in a decision dated June 1, 1977, set aside the NLRC ruling, stressing the absence of an employeremployee relationship as borne out by the records of the case. x x x. The petitioners strongly argue that there exists an employer-employee relationship between them and the respondent company and that they were dismissed for unionism, an act constituting unfair labor practice for which respondents must be made to answer. 52 52 SUPREME COURT REPORTS ANNOTATED Brotherhood Labor Unity Movement of the Philippines vs. Zamora Unrebutted evidence and testimony on record establish that the petitioners are workers who have been employed at the San Miguel Parola Glass Factory since 1961, averaging about seven (7) years of service at the time of their termination. They worked as cargadores or pahinantes at the SMC Plant loading, unloading, piling or palleting empty bottles and wooden shells to and from company trucks and warehouses. At times, they accompanied the company trucks on their delivery routes. The petitioners first reported for work to Superintendent-inCharge Camahort. They were issued gate passes signed by Camahort and were provided by the respondent company with the tools, equipment and paraphernalia used in the loading, unloading, piling and hauling operation. Job orders emanated from Camahort. The orders are then transmitted to an assistant-officer-in-charge. In turn, the assistant informs the warehousemen and checkers regarding the same. The latter, thereafter, relays said orders to the capatazes or group leaders who then give orders to the workers as to where, when and what to load, unload, pile, pallet or clean. Work in the glass factory was neither regular nor continuous, depending wholly on the volume of bottles manufactured to be loaded and unloaded, as well as the business activity of the company. Work did not necessarily mean a full eight (8) hour day for the petitioners. However, work, at times, exceeded the eight (8) hour day and necessitated work on Sundays and holidays. For this, they were neither paid overtime nor compensation f or work on Sundays and holidays. Petitioners were paid every ten (10) days on a piece rate basis, that is, according to the number of cartons and wooden shells they were able to load, unload, or pile. The group leader notes down the number or volume of work that each individual worker has accomplished. This is then made the basis of a report or statement which is compared with the notes of the checker and warehousemen as to

whether or not they tally. Final approval of report is by officer-in-charge Camahort. The 53 VOL. 147, JANUARY 7, 1987 53 BrotherhoodLabor Unity Movement of the Philippines vs. Zamora pay check is given to the group leaders for encashment, distribution, and payment to the petitioners in accordance with payrolls prepared by said leaders. From the total earnings of the group, the group leader gets a participation or share of ten (10%) percent plus an additional amount from the earnings of each individual. The petitioners worked exclusively at the SMC plant, never having been assigned to other companies or departments of SMC plant, even when the volume of work was at its minimum. When any of the glass furnaces suffered a breakdown, making a shutdown necessary, the petitioners work was temporarily suspended. Thereafter, the petitioners would return to work at the glass plant. Sometime in January, 1969, the petitioner workersnumbering one hundred and forty (140) organized and affiliated themselves with the petitioner union and engaged in union activities. Believing themselves entitled to overtime and holiday pay, the petitioners pressed management, airing other grievances such as being paid below the minimum wage law, inhuman treatment, being forced to borrow at usurious rates of interest and to buy raffle tickets, coerced by withholding their salaries, and salary deductions made without their consent. However, their gripes and grievances were not heeded by the respondents. On February 6, 1969, the petitioner union filed a notice of strike with the Bureau of Labor Relations in connection with the dismissal of some of its members who were allegedly castigated for their union membership and warned that should they persist in continuing with their union activities they would be dismissed from their jobs. Several conciliation conferences were scheduled in order to thresh out their differences. On February 12, 1969, union member Rogelio Dipad was dismissed from work. At the scheduled conference on February 19, 1969, the complainant union through its officers headed by National President Artemio Portugal, Sr., presented a letter to the respondent company containing proposals and/or labor demands together with a request for recognition and collective bargaining. 54 54 SUPREME COURT REPORTS ANNOTATED BrotherhoodLabor Unity Movement of the Philippines vs. Zamora San Miguel refused to bargain with the petitioner union alleging that the workers are not their employees.

On February 20, 1969, all the petitioners were dismissed from their jobs and, thereafter, denied entrance to respondent companys glass factory despite their regularly reporting for work. A complaint for illegal dismissal and unfair labor practice was filed by the petitioners. The case reaches us now with the same issues to be resolved as when it had begun. The question of whether an employer-employee relationship exists in a certain situation continues to bedevil the courts. Some businessmen try to avoid the bringing about of an employer-employee relationship in their enterprises because that judicial relation spawns obligations connected with workmens compensation, social security, medicare, minimum wage, termination pay, and unionism. (Mafinco Trading Corporation v. Ople, 70 SCRA 139). 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 employers 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 (Investment Planning Corp. of the Phils. v. The Social Security System, 21 SCRA 924; Mafinco Trading Corp. v. Ople, supra, and Rosario Brothers, Inc. v. Ople, 131 SCRA 72). Applying the above criteria, the evidence strongly indicates the existence of an employer-employee relationship between petitioner workers and respondent San Miguel Corporation. The respondent asserts that the petitioners are employees of the Guaranteed Labor Contractor, an independent labor contracting firm. The facts and evidence on record negate respondent SMCs -claim. .The existence of an independent contractor relationship is generally established by the following criteria: whether or not 55 VOL. 147, JANUARY 7, 1987 55 Brotherhood Labor Unity Movement of the Philippines vs. Zamora the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of a specified piece of work; the control and supervision of the work to another; the employers power with respect to the hiring, firing and payment of the contractors workers; the control of the premises; the duty to supply the premises tools, appliances, materials and labor; and the mode, manner and terms of payment (56 CJS Master and Servant, Sec. 3(2), 46; See also 27 AM. Jur. Independent Contractor, Sec. 5, 485 and Anne., 75 ALR 7260727). None of the above criteria exists in the case at bar.

Highly unusual and suspect is the absence of a written contract to specify the performance of a specified piece of work, the nature and extent of the work and the term and duration of the relationship. The records fail to show that a large commercial outfit, such as the San Miguel Corporation, entered into mere oral agreements of employment or labor contracting where the same would involve considerable expenses and dealings with a large number of workers over a long period of time. Despite respondent companys allegations not an iota of evidence was offered to prove the same or its particulars. Such failure makes respondent SMCs stand subject to serious doubts. Uncontroverted is the fact that for an average of seven (7) years, each of the petitioners had worked continuously and exclusively for the respondent companys shipping and warehousing department. Considering the length of time that the petitioners have worked with the respondent company, there is justification to conclude that they were engaged to perform activities necessary or desirable in the usual business or trade of the respondent, and the petitioners are, therefore regular employees (Phil. Fishing Boat Officers and Engineers Union v. Court of Industrial Relations, 112 SCRA 159 and RJL Martinez Fishing Corporation v. National Labor Relations Commission, 127 SCRA 454). As we have found in RJL Martinez Fishing Corporation v. National Labor Relations Commission, (supra): 56 56 SUPREME COURT REPORTS ANNOTATED BrotherhoodLabor Unity Movement of the Philippines vs. Zamora x x x [T]he 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, 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 vessels and then loading the same to refrigerated vans, are necessary or desirable in the business of respondents. This circumstance makes the employment of complainants a regular one, in the sense that it does not depend on any specific project or seasonable activity. (NLRC Decision, p. 94, Rollo)." so is it with petitioners in the case at bar. In fact, despite past shutdowns of the glass plant for repairs, the petitioners, thereafter, promptly returned to their jobs, never having been replaced, or assigned elsewhere until the present controversy arose. The term of the petitioners employment appears indefinite. The continuity and habituality of petitioners work bolsters their claim of employee status vis-a-vis respondent company. Even under the assumption that a contract of employment had indeed been executed between respondent SMC and the alleged labor contractor, respondents case will, nevertheless, faiL Section 8, Rule VIII, Book III of the Implementing Rules of the Labor Code provides:

Job contracting.There is job contracting permissible under the Code if the following conditions are met: "(1) The contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof; and "(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of his business. 57 VOL. 147, JANUARY 7, 1987 57 BrotherhoodLabor Unity Movement of the Philippines vs. Zamora We find that Guaranteed and Reliable Labor contractors have neither substantial capital nor investment to qualify as an independent contractor under the law. The premises, tools, equipment and paraphernalia used by the petitioners in their jobs are admittedly all supplied by respondent company. It is only the manpower or labor force which the alleged contractors supply, suggesting the existence of a labor-only contracting scheme prohibited by law (Article 106, 109 of the Labor Code; Section 9(b), Rule VIII, Book III, Implementing Rules and Regulations of the Labor Code). In fact, even the alleged contractors office, which consists of a space at respondent companys warehouse, table, chair, typewriter and cabinet, are provided for by respondent SMC. It is therefore clear that the alleged contractors have no capital outlay involved in the conduct of its business, in the maintenance thereof or in the payment of its workers salaries. The payment of the workers wages is a critical factor in determining the actuality of an employeremployee relationship whether between respondent company and petitioners or between the alleged independent contractor and petitioners. It is important to emphasize that in a truly independent contractor-contractee relationship, the fees are paid directly to the manpower agency in lump sum without indicating or implying that the basis of such lump sum is the salary per worker multiplied by the number of workers assigned to the company. This is the rule in Social Security System v. Court of Appeals (39 SCRA 629, 635). The alleged independent contractors in the case at bar were paid a lump sum representing only the salaries the workers were entitled to, arrived at by adding the salaries of each worker which depend on the volume of work they had accomplished individually. These are based on payrolls, reports or statements prepared by the workers group leader, warehousemen and checkers, where they note down the number of cartons, wooden shells and bottles each worker was able to load, unload, pile or pallet and see whether they tally. The amount paid by respondent company to the alleged independent contractor considers no business expenses or capital outlay of the 58

58 SUPREME COURT REPORTS ANNOTATED Brotherhood Labor Unity Movement of the Philippines vs. Zamora latter. Nor is the profit or gain of the alleged contractor in the conduct of its business provided for as an amount over and above the workers wages. Instead, the alleged contractor receives a percentage from the total earnings of all the workers plus an additional amount corresponding to a percentage of the earnings of each individual worker, which, perhaps, accounts for the petitioners charge of unauthorized deductions from their salaries by the respondents. Anent the argument that the petitioners are not employees as they worked on piece basis, we merely have to cite our rulings in Dy Keh Beng v. International Labor and Marine Union of the Philippines (90 SCRA 161), as follows: '[C]ircumstances 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. " Article 106 of the Labor Code provides the legal effect of a labor-only contracting scheme, to wit: x x x the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. Firmly establishing respondent SMCs role as employer is the control exercised by it over the petitionersthat is, control in the means and methods/manner by which petitioners are to go about their work, as well as in disciplinary measures imposed by it. Because of the nature of the petitioners work as cargadores or pahinantes, supervision as to the means and manner of performing the same is practically nil. For, how many ways are there to load and unload bottles and wooden shells? The mere 59 VOL. 147, JANUARY 7, 1987 59 Bro therhood Labor Unity Movement of the Philippines us. Zamora concern of both respondent SMC and the alleged contractor is that the job of having the bottles and wooden shells brought to and from the warehouse be done. More evident and pronounced is respondent

companys right to control in the discipline of petitioners. Documentary evidence presented by the petitioners establish respondent SMCs right to impose disciplinary measures for violations or infractions of its rules and regulations as well as its right to recommend transfers and dismissals of the piece workers. The inter-office memoranda submitted in evidence prove the companys control over the petitioners. That respondent SMC has the power to recommend penalties or dismissal of the piece workers, even as to Abner Bungay who is alleged by SMC to be a representative of the alleged labor contractor, is the strongest indication of respondent companys right of control over the petitioners as direct employer. There is no evidence to show that the alleged labor contractor had such right of control or much less had been there to supervise or deal with the petitioners. The petitioners were dismissed allegedly because of the shutdown of the glass manufacturing plant. Respondent company would have us believe that this was a case of retrenchment due to the closure or cessation of operations of the establishment or undertaking. But such is not the case here. The respondents shutdown was merely temporary, one of its furnaces needing repair. Operations continued after such repairs, but the petitioners had already been refused entry to the premises and dismissed from respondents service. New workers manned their positions. It is apparent that the closure of respondents warehouse was merely a ploy to get rid of the petitioners, who were then agitating the respondent company for benefits, reforms and collective bargaining as a union. There is no showing that petitioners had been remiss in their obligations and inefficient in their jobs to warrant their separation. As to the charge of unfair labor practice because of SMCs refusal to bargain with the petitioners, it is clear that the respondent company had an existing collective bargaining agreement with the IBM union which is the recognized collec60 60 SUPREME COURT REPORTS ANNOTATED Brotherhood Labor Unity Movement of the Philippines vs. Zamora tive bargaining representative at the respondents glass plant. There being a recognized bargaining representative of all employees at the companys glass plant, the petitioners cannot merely form a union and demand bargaining. The Labor Code provides the proper procedure for the recognition of unions as sole bargaining representatives. This must be followed. WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED. The San Miguel Corporation is hereby ordered to REINSTATE petitioners, with three (3) years back-wages. However, where reinstatement is no longer possible, the respondent SMC is ordered to pay the petitioners separation pay equivalent to one (1) month pay for every year of service. SO ORDERED. Feria (Chairman), Fernan, Alampay and Paras, JJ., concur.

Petition granted. Note.Where it appears that the questioned employees were never separated from the service but their status is that of regular seasonable employees who are called to work from time to time mostly during summer season, and the nature of their relationship with the hotel is such that during off season they are temporarily laid off but during summer season they are re-employed or when their services are needed, and they are not strictly speaking separated from the service but are merely considered as on leave of absence without pay until they are reemployed, it is held that their employment relationship is never severed but only suspended, and, as such, they can be considered as in regular employment of the hotel. (Manila Hotel Company vs. Court of Industrial Relations, 9 SCRA 184.) o0o [Brotherhood Labor Unity Movement of the Philippines vs. Zamora, 147 SCRA 49(1987)]

SUPREME COURT REPORTS ANNOTATED Lopez vs. Metropolitan Waterworks and Sewerage System G.R. No. 154472. June 30, 2005.* ALEXANDER R. LOPEZ, HERMINIO D. PEA, SALVADOR T. ABUEL, GEORGE F. CABRERA, JOEL M. CARREON, DAMASO M. CERVANTEX, JR., RICARDO V. CUEVAS, ROBERTO S. DAGDAG, IRENEO V. DURAY, OMER S. ESPIRIDION, MANOLO V. FORONDA, RONITO R. FRIAS, ANGEL C. GARCIA, VICTORINO A. ILAGAN, DENNIS S. LEGADOS, MIGUEL J. LOPEZ, EMMANUEL R. MERILLO, EDGAR E. NATARTE, MAMERTO S. NEPOMUCENO, MARVIN R. PADURA, ROMEO C. RAMILO, ALBERTO R. RAMOS, JR., RONALDO A. SARMIENTO, ARMANDO S. SIONGCO, JOSE TEODY P. VELASCO, RICO P. VILLANUEVA, SAMUEL L. ZAPATERO, EDGARDO D. AGUDO, ROBERTO A. ARAA, BENJAMIN ASUNCION, JULIAN C. BACOD, EDWIN N. BORROMEO, ALBERTO T. BULAONG, DANIEL CADAOM, ROBERTO S. CAYETANO, ALFREDO C. CLAVIO, EDGARDO A. DABUET, NEIL DAVID, ALEXANDER B. ESTORES, NOEL GUILLEN, RODOLFO MAGNO, REY MANLEGRO, ROMEO V. MORALES, ROSAURO NADORA, EUGENIO M. ORITO, RONILO P. PAREDES, ADGARDO R. PINEDA, CARLITO SAMARTINO, ARTURO C. SARAOS, JR., JOHNEL L. TORRIBIO, ANTONIO A. VERGARA, JIMMY C. UNGSON, NOEL D. AMOYO, VIRGILIO L. AZARCON, RICARDO M. BROTONEL, EMERALDO C. CABAYA, JULIE G. CHAN, LUIS C. CLAVIO, LUIS T. CANIZO, ERNESTO F. DAVID, EDGAR B. DE VERA, REYNALDO A. DUMLAO, ARTURO R. DYCHITAN, ROMAN S. FAJARDO, BERNARDINO B. MACALDO, ROMEO D. MANASIS, JR., MARIO R. MANGALINDAN, VICTORIANO C. MARTINEZ, LEONARDO D. MIRALLES, ROGELIO E. PACER, ROSENDO L. PANGILINAN, NOLI H. POLINAG, DIOSDADO M. PUNZALAN, REYNALDO C. GATPO, CIRILO M. SANTOS, RAMON A. ZAMBRANA, PIO L. ASTORGA, ROLANDO G. CAGALIN _______________ * EN BANC. 429 VOL. 462, JUNE 30, 2005 429 Lopez vs. Metropolitan Waterworks and Sewerage System GAN, ANGELITO A. CAUDAL, FRANCISCO S. DELOS SANTOS, CARLOS E. LOMIBAO, ROMEO S. MALABANAN, LIBERATO B. MANGENTE, JULIAN M. MARTINEZ, BERNARDO S. MEDINA, MELVIN R. MENDEZ, ALBERT C. MIRADOR, RENEE S. OCAMPO, DAVID J. PASCUA, AMORSOLO M. PILARTA, ROLANDO C. REYES, GAVINO SAN GABRIEL, JR., PERCON F. SISON, PLARIDEL L. TANGLAO, RUBEN R. TAEDO, JR., RENATO G. TARUC, RONALDO D.C. VENTURA, ANGEL L. VERTUCIO, ERWIN T. VIDAD, WILLIAM M. AGANAON, ALEX P. MANABAT, FRANCISCO ALMONTE, RODRIGO C. ANTONIO, DOUGLAS R. AQUINO, REMEGIO R. ATIENZA, ABRAHAM C. BALICANTE, MELENCIO M. BAGNGUIS, JR., GERARDO T. BULAONG, MELITANTE I. CASTRO, MEDARDO S. CATACUTAN, VIRGILIO T. CATUBIG, JOSE S. CHIONG, NEL T. COLOBONG, FELIPE C.

COLLADO, RANDY T. CORTIGUERRA, ANTONIO D. DELA CRUZ, JESUS C. DINGLE, EDGARDO N. GARCIA, CELSO Z. GOLFO, NONITO V. FERNANDEZ, LARRY HIDALGO, FRANCISCO B. JAO, JR., CARLOS P. LAGLIVA, RICO L. LARRACAS, PEDRO V. ABARIDES, RUDY S. AGUINALDO, REGINALD F. ALCANTARA, SERAFIN ALCANTAR, JR., FELIX H. ALEJANDRO, MIGUEL ALTONAGA, JOSE T. AGUILAR, PEDRO AGUILAR, JR., NOEL A. ALIPIO, WILLIAM A. ALMAZAR, REYNALDO S.D. ALVAREZ, FLORIZEL M. AMBROCIO, JOSE A. ASPE, ROBERTO J. ARCEO, ERNESTO V. ARUTA, MILLARDO DL. ATENCIO, ERNESTO G. AVELINO, WENCESLAO C. BABEJAS, ARNOLD F. BALINGIT, HEBERT F. BARCELON, MARLON D. BORROZO, FLORENTINO BAS, JR., LEARNED A. BAUTISTA, ARMAN N. BORROMEO, CARLITO F. BARTOLO, CARLOS M. CABERTO, ARTURO S. CAJUCOM, DIEGO CALDERON, JR., WILLIAM A. CAMPOS, JORGE CANONIGO, JR., ANGELITO M. CAPARAC, EMMANUEL L. CAPIT, LAURO S. CASTRO, TOMEO B. CASTALONE, VERZNEV S. CATUBIG, ARMANDO CERVANTES, CALIXTO P. COLADA, JR., JONATHAN P. CORONEL, JOE 430 430 SUPREME COURT REPORTS ANNOTATED Lopez vs. Metropolitan Waterworks and Sewerage System NOEL P. CRUZ, FRANCISCO CRUZ, JR., MARIANO B. CRUZ, JR., JOSE J. DALUMPINES, SANITO S. DE JESUS, JOSE G. DE LEON, CRISANTO DE LOS REYES, EM-MANUEL C. DE VERA, RODOLFO DE VERA, JR., HERMAN C. DE VILLAR, IKE S. DELFIN, PEDRO E. DESIPEDA, ERAO A. DIONISIO, ALFREDO L. DUGAYO, REYNALDO V. DURAY, EUGENIO C. ELEAZAR, RAFAEL U. ENCINA, ORLANDO C. ESCOLAR, ALLAN P. ESPINA, LAURO S. ESPINA, ISRAEL F. FALLURIN, ORIEL A. FESTEJO, EDGARDO V. FIGUEROA, RALPH FLORES, FERDINAND B. FUGGAN, NOEL Z. GABOT, EDUARDO M. GALANG, VICENTE D. GALLARDO, FRESCO B. GALO, ROSAURO G. GAMBOA, MARIO S. GABRIEL, ROBERTO C. GAPASIN III, ROMUALDO GAPASIN, JR., DANILO C. GARCIA, RESTITUTO S. GARCIA, NOEL B. GATDULA, BENJIE S. GERONIMO, ARTURO R. GLORIOSO, ISIDRO S. GOMED, JR., MEDEL P. GREGORIO, REY T. HECHANOVA, VONREQUITO HERBUELA, CELSO F. IGNACIO, JR., CHARLIE S. IGNACIO, ILDEFONSO F. ILDEFONSO, GAUDENICO M. INTAL, RIZALITO M. INTAL, RENATO HERRERO, BIENVENIDO L. JAO, JR., FERDINAND P. LAGMAN, RENEIL M. LAREZA, ALMARIO M. LAXA, ARTHUR G. LEVISTE, ESTEBAN T. LEGARTO, RAMON G. LIWANAG, ELISEO A. LU, RAYMUNDO LUSTICA, JR., FERNANDO D. MABANTA, NESTOR F. MAGALLANES, EDWIN A. MAGPAYO, MICHAEL I. MAGRIA, ARIEL M. MALAPAD, RAMON O. MAMUCOD, FERDINAND P. MANINGAS, RONALD D.R. MANUEL, ROLANDO F. MAPUE, CHITO C. MARCO, ERNESTO S. MARCHAN, JOSEPH B. MARIANO, FRANCIS J. MARIMON, JOHN L. MARTEJA, JOSE E. MASE, JR., BERNARDO S. MEDINA, JOEREY B. MERIDOR, SUSANO S. MIRANDA, EDGARDO C. MONTOYA, MARLON B. MORADA, ROMEO R. DEL MUNDO, REYNALDO C. NAREDO, EDGARDO R. NEPOMUCENO, RODEL S. NEPOMUCENO, ROMMEL NIYO, ROMULO P. OLARTE, GEORGE N. OLAVERE, EDUARDO ONG, MARIO S. PAGSANJAN, RENALD C. PALAD, 431

VOL. 462, JUNE 30, 2005 431 Lopez vs. Metropolitan Waterworks and Sewerage System GAUDENCIO G. PEDROCHE, RONALDO DELA CRUZ PEREA, EDILBERTO C. PIGUL, ERNESTO PINGUL, AGNESIO D. QUEBRAL, JAMES M. QUINTO, RICARDO R. RAMOS, GENEROSO REGALADO, JR., EDUARDO L. REYES, RAMON C. REYES, LARRY S. RECAMADAS, ANTONIO B. REDONDO, FEDERICO M. RIVERA, ROBERTO I. ROCOMORA, FERNANDO P. RODRIGUEZ, HERNANDO S. RODRIGUEZ, ROMMEL D. ROXAS, CHRISTOPHER R. RUSTIA, ARNULFO T. JAMISON, MARIO G. SAN PEDRO, ELMER B. SANTOS, LEONARDO SEBASTIAN, JR., CARMENCITO M. SEXON, JOSE STA. ANA SIERRA, LLOYD Z. SINADJAN, RAMON S. SISIO, RAMIRO M. SOLIS, MANUEL C. SUAREZ, BENJAMIN TALAVERA, JR., OSCAR U. TAN, RICARDO S. TAN, AUGUSTUS V. TANDOC, ROBERTO L. TAEDO, ERNESTO R. TIBAY, CHARLIE P. TICSAY, REY DE VERE TIONGCO, VIVENCIO B. TOLENTINO, OSMUNDO S. TORRES, HILARIO L. VALDEZ, LEONARDO C. VALDEZ, PASTOR M. VALENCIA, EFREN VELASCO, EDMUNDO D. VICTA, FERDINAND VILLANUEVA, JOSE C. VILLANUEVA, JOSE ROMMEL VILLAMOR, OLIVER P. VILLANUEVA, VICTOR P. ZAFARALLA, HORACIO L. ZAPATERO, COENE C. ZAPITER, THE HEIRS OF ESTEBAN BALDOZA, RUBEN GALANG, FAUSTO S. CRUZ, REYNALDO BORJA, CRISANTO CAGALINGAN and ADRIANO VICTORIA, petitioners, vs. METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM, respondents. Labor Law; Court is committed to the policy of protecting the rights of the workers and promote their welfare and has always been quick to rise to defense in the rights of labor; Protection to labor extends to all of laborlocal and overseas, organized and unorganized in the public and private sectors.The Court has invariably affirmed that it will not hesitate to tilt the scales of justice to the labor class for no less than the Constitution dictates that the State . . . shall protect the rights of workers and promote their welfare. It is committed to this policy and has always been quick to rise to defense in the rights of labor, as in this case. Protection to labor, it 432 432 SUPREME COURT REPORTS ANNOTATED Lopez vs. Metropolitan Waterworks and Sewerage System has been said, extends to all of laborlocal and overseas, organized and unorganized, in the public and private sectors. Besides, there is no reason not to apply this principle in favor of workers in the government. The government, including government-owned and controlled corporations, as employers, should set the example in upholding the rights and interests of the working class. Same; Employer-employee Relationship; Four-fold Test to Determine the Existence of Employeremployee Relationship; Control test is the most important element.For purposes of determining the existence of employer-employee relationship, the Court has consistently adhered to the four-fold test,

namely: (1) whether the alleged employer has the power of selection and engagement of an employee; (2) whether he has control of the employee with respect to the means and methods by which work is to be accomplished; (3) whether he has the power to dismiss; and (4) whether the employee was paid wages. Of the four, the control test is the most important element. Same; Same; Same; The employment status of a person is defined and prescribed by law and not by what the parties say it should be.MWSS makes an issue out of the proviso in the Agreement that specifically denies the existence of employer-employee relationship between it and petitioners. It is axiomatic that the existence of an employer-employee relationship cannot be negated by expressly repudiating it in an agreement and providing therein that the employee is not an MWSS employee when the terms of the agreement and the surrounding circumstances show otherwise. The employment status of a person is defined and prescribed by law and not by what the parties say it should be. Same; Same; Same; It is not essential for the employer to actually supervise the performance of duties of the employee, it is enough that the former has a right to wield the power.The control test merely calls for the existence of the right to control, and not the exercise thereof. It is not essential for the employer to actually supervise the performance of duties of the employee, it is enough that the former has a right to wield the power. While petitioners were contract-collectors of MWSS, they were under the latters direction as to where and how to perform their collection and were even subject to disciplinary measures. Trainings were in fact conducted to ensure that petitioners are conversant of the procedures of the MWSS. 433 VOL. 462, JUNE 30, 2005 433 Lopez vs. Metropolitan Waterworks and Sewerage System Same; Same; Same; The primary standard of determining regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer.Petitioners are indeed regular employees of the MWSS. The primary standard of determining regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer. The connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety. Likewise, the repeated and continuing need for the performance of the job has been deemed sufficient evidence of the necessity, if not indispensability of the activity to the business. PETITION for review on certiorari of a decision of the Court of Appeals. The facts are stated in the opinion of the Court. Florencio C. Lameyra for petitioners. Anabella S. Altuna for respondent MWSS.

TINGA, J.: Take not from the mouth of labor the bread it has earned. Thomas Jefferson The constitutional protection to labor, a uniform feature of the last three Constitutions including the present one, is outstanding in its uniqueness and as a mandate for judicial activism. This petition asks for the review of the Court of Appeals Decision1 in C.A.-G.R. SP NO. 55263 entitled Alexander R. Lopez, et al. v. Metropolitan Waterworks and Sewerage System, which affirmed in toto the Civil Service Commissions _______________ 1 Promulgated on 26 July 2002 by the Special Third Division, Penned by Justice Josefina GuevaraSalonga, JJ. Bernardo P. Abesamis and Amelita G. Tolentino, concurring; Rollo, pp. 59-72. 434 434 SUPREME COURT REPORTS ANNOTATED Lopez vs. Metropolitan Waterworks and Sewerage System Resolutions2 denying petitioners claim for severance, retirement and terminal leave pay. By virtue of an Agreement,3 petitioners were engaged by the Metropolitan Waterworks and Sewerage System (MWSS) as collectors-contractors, wherein the former agreed to collect from the concessionaires of MWSS, charges, fees, assessments of rents for water, sewer and/or plumbing services which the MWSS bills from time to time.4 In 1997, MWSS entered into a Concession Agreement with Manila Water Service, Inc. and BenpressLyonnaise, wherein the collection of bills was transferred to said private concessionaires, effectively terminating the contracts of service between petitioners and MWSS. Regular employees of the MWSS, except those who had retired or opted to remain with the latter, were absorbed by the concessionaires. Regular employees of the MWSS were paid their retirement benefits, but not petitioners. Instead, they were refused said benefits, MWSS relying on a resolution5 of the Civil Service Commission (CSC) that contract-collectors of the MWSS are not its employees and therefore not entitled to the benefits due regular government employees. Petitioners filed a complaint with the CSC. In its Resolution dated 1 July 1999,6 the CSC denied their claims, stating that petitioners were engaged by MWSS through a contract of service, which explicitly provides that a bill collector-contractor is not an MWSS employee.7 Relying on Part V of CSC Memorandum Circular No. 38, Series of 1993, the CSC stated that contract services/job orders are not considered government services, which do not have to be submitted to the

_______________ 2 Resolution No. 991384 dated 1 July 1999 and Resolution No. 992074 dated 17 September 1999; id., at pp. 118-146. 3 Id., at pp. 248-265. 4 Art. I of the Agreement, id., at p. 249. 5 CSC Resolution No. 981668, 26 June 1996, id., at pp. 291-294. 6 Resolution No. 991384, id., at pp. 118-141. 7 Id., at pp. 134-135. 435 VOL. 462, JUNE 30, 2005 435 Lopez vs. Metropolitan Waterworks and Sewerage System CSC for approval, unlike contractual and plantilla appointments.8 Moreover, it found that petitioners were unable to show that they have contractual appointments duly attested by the CSC.9 In addition, the CSC stated that petitioners, not being permanent employees of MWSS and not included in the list submitted to the concessionaire, are not entitled to severance pay.10 Petitioners claims for retirement benefits and terminal leave pay were likewise denied. Petitioners sought reconsideration of the CSC Resolution, which was however denied by the CSC on 17 September 1999.11 According to the CSC, petitioners failed to present any proof that their appointments were contractual appointments submitted to the CSC for its approval.12 The CSC held, thus: WHEREFORE, the motion for Reconsideration of Alexander Lopez, et al. is hereby denied. Accordingly, CSC Resolution No. 99-1384 dated July 1, 1999 stands. However, this is not without prejudice to whatever rights and benefits they may have under the New Labor Code and other laws, if any.13 Aggrieved, petitioners filed a petition for review under Rule 43 of the Rules of Court with the Court of Appeals.14 In its Decision, the Court of Appeals narrowed down the issues presented by petitioners as follows: Whether or not the CSC erred in finding that petitioners are not contractual employees of the government and, hence, are not entitled to retirement and separation benefits.15 Affirming and generally reiterating the ruling of the CSC, the Court of Appeals held that the Agreement entered into by _______________

8 Id., at pp. 135-136. 9 Id., at p. 136. 10 Id., at p. 138. 11 CSC Resolution No. 992074, id., at pp. 143-146. 12 Id., at p. 145. 13 Id., at p. 146. 14 Id., at pp. 74-114. 15 Id., at p. 65. 436 436 SUPREME COURT REPORTS ANNOTATED Lopez vs. Metropolitan Waterworks and Sewerage System petitioners and MWSS was clear and unambiguous, and should be read and interpreted according to its literal sense.16 Hence, as per the terms of the agreement, petitioners were not MWSS employees. The Court of Appeals held that no other evidence was adduced by petitioners to substantiate their claim that their papers were forwarded to the CSC for attestation and approval.17 It added that in any event, as early as 26 June 1996, the CSC specifically stated that contract collectors are not MWSS employees and therefore not entitled to severance pay.18 The Court of Appeals held that petitioners are not similarly situated as the petitioner in the case of Chua v. Civil Service Commission19 since the contractual appointment was submitted to and approved by the CSC, while the former were not.20 Further, petitioners do not have creditable service for purposes of retirement, since their services were not supported by duly approved appointments.21 Lastly, the Court of Appeals held that petitioners were exempt from compulsory membership in the GSIS. Having made no monthly contributions remitted to the said office, petitioners are not entitled to the separation and/or retirement benefits that they are claiming.22 Petitioners now assert that the Court of Appeals rendered a decision not in accord with law and applicable jurisprudence, based on misapprehension of facts, and/or contrary to the evidence on record.23 Petitioners allege that while their hiring was made to appear to be on contractual basis, the contracts evidencing such hiring were submitted to and approved by the CSC. Later _______________

16 Id., at p. 67. 17 Id., at pp. 66-67. 18 Citing CSC Resolution No. 981668, id., at p. 69. 19 G.R. No. 88979, 7 February 1992, 206 SCRA 65. 20 Id., at p. 70. 21 As per Memorandum Circular 04, Series of 1994. 22 Rollo, p. 71. 23 Id., at p. 10. 437 VOL. 462, JUNE 30, 2005 437 Lopez vs. Metropolitan Waterworks and Sewerage System contracts, however, do not appear to have been submitted to the CSC for approval. To support its claim, petitioners presented two (2) sample agreements,24 both stamped approved and signed by CSC Regional Directors. While styled as individual contracts/agreements, petitioners insist that the same were actually treated by the MWSS as appointment papers.25 Petitioners claim that they were employees of the MWSS, and that the latter exercised control over them. They cite as manifestations of control the training requirements, the mandated procedures to be followed in making collections, MWSS close monitoring of their performance, as well as the latters power to transfer collectors from one branch to another.26 Moreover, they add that with the nature and extent of their work at the MWSS, they served as collectors of MWSS only.27 They stress that they have never provided collection services to customers as an independent business. In fact, they applied individually and were hired by MWSS one by one.28 They were provided with uniforms and identification cards, and received basic pay termed as commissions from which MWSS deducted withholding tax.29 The commissions were determined or computed by MWSS and paid to the collectors by payroll every fifteenth (15th) and last day of every month. In addition to the commission, collectors were given, among others, performance, mid-year and anniversary bonuses, hazard pay, thirteenth (13th) month pay, traveling allowance, cash gift, meal allowance and productivity pay.30 _______________ 24 Agreement dated 2 May 1983 in the name of Edgardo N. Garcia, id., at pp. 248-258; Agreement

dated 24 August 1979 in the name of Edilberto C. Pingul, id., at pp. 264-271. 25 Id., at p. 14. 26 Id., at pp. 15-16, 39. 27 Id., at p. 34-A. 28 Id., at p. 34. 29 Id., at pp. 16-17. 30 Per certification of one branch manager dated 20 June 1996, id., at p. 18. 438 438 SUPREME COURT REPORTS ANNOTATED Lopez vs. Metropolitan Waterworks and Sewerage System Petitioners claim that bill collectors were historically regarded as employees of National Waterworks and Sewerage Authority (NAWASA), the forerunner of MWSS.31 They cite the case of National Waterworks and Sewerage Authority v. NWSA Consolidated Labor Unions, et al.,32 wherein this Court supposedly declared the bill collectors of NAWASA as its employees and the commissions received by said collectors as salary.33 Likewise, they claim that by MWSS own acts, petitioners were its employees. To support this contention, they point to the identification cards (I.D.s) and certifications of employment issued by MWSS in their favor.34 There were also Records of Appointment, which referred to the contract-collectors as employees with corresponding service records.35 In view of the cited documents, petitioners assert that MWSS is estopped from denying their employment with the agency.36 Should there be doubt as to their status as employees, petitioners invoke the rule of liberal construction in favor of labor, and the constitutional policy of protection to labor.37 To further strengthen their case, petitioners refer to CSC Resolution 92-2008 dated 8 December 1992, which states in part: . . . . The fact that they were being hired directly and paid on commission basis by MWSS itself is indicative that they are government employees and should be entitled to the incentive awards. WHEREFORE, foregoing premises considered, the Commission resolves to rule that the ContractualCollectors of the Metropolitan Waterworks and Sewerage System (MWSS) are entitled to loyalty awards.38 _______________

31 Id., at p. 18. 32 128 Phil. 225; 21 SCRA 203 (1967). 33 Rollo, p. 40. 34 Id., at pp. 16-17. 35 Id., at p. 288. 36 Id., at p. 42. 37 Id., at p. 43. 38 Id., at p. 304. 439 VOL. 462, JUNE 30, 2005 439 Lopez vs. Metropolitan Waterworks and Sewerage System The same resolution was made the basis of the MWSS memorandum declaring contract-collectors government employees or personnel entitled to salary increases pursuant to the Salary Standardization Law I & II.39 Thus, petitioners claim that by MWSS and CSCs own acts and declarations, they were made to believe that they were employees of MWSS and as such were government employees.40 Petitioners invoke the case of Chua v. Civil Service Commission, et al.41 wherein Chua, a co-terminus employee of the National Irrigation Administration, sought to recover early retirement benefits but was denied the same. This Court, having observed that Chua was hired and re-hired in four (4) successive projects during a span of fifteen (15) years, was deemed a regular employee for purposes of retirement pay. Petitioners argue that in the same manner, in view of their considerable length of service to MWSS, they are entitled to their claimed benefits.42 In addition to the retirement/separation/terminal leave pay prayed for, petitioners claim moral damages for the alleged serious disturbance they suffered as a result of the denial of their claims. They also pray for the award of attorneys fees.43 For its part, the MWSS avers that the Court of Appeals did not err in sustaining the resolutions of the CSC denying petitioners claim for entitlement to severance, retirement and terminal leave pay. MWSS denies the existence of employer-employee relationship between itself and petitioners. Citing CSC Memorandum Circular No. 38 Series of 1993, MWSS avers that it has the authority to contract the services of another who is considered

_______________ 39 Id., at p. 232. 40 Id., at p. 46. 41 Supra note 19. 42 Rollo, pp. 52-55. 43 Id., at p. 55. 440 440 SUPREME COURT REPORTS ANNOTATED Lopez vs. Metropolitan Waterworks and Sewerage System not its employee.44 With respect to the matter of payment of wages, MWSS states that the commission given to petitioners does not fall within the definition of compensation as provided in Presidential Degree No. 1146 (P.D. 1146),45 or in the definition of the term under the Revised Administrative Code either.46 It adds that the issuance of I.D.s., certificates of recognition and loyalty awards as well as the grounds for termination of the Agreement could hardly be considered as control as the same had no relation to the means and methods to be employed by petitioners in collecting payments for MWSS.47 As for the training and orientation undergone by petitioners, MWSS claims that it is but logical for any entity which has contracted the services of another to orient the latter before actual performance of the service, more so if the entitys function is impressed with public service. The fact that collectors were given a regular time for remittance should likewise not be considered as a form of control. MWSS states that none of these requirements invades the collectors prerogative to adopt their own method/strategy in the matter of collection.48 On the grant of thirteenth (13th) month pay and other benefits to petitioners, MWSS claims that these were mere acts of benevolence and generosity.49 Pertinently, therefore, the issue to be resolved is whether or not petitioners were employees of the MWSS and, consequently, entitled to the benefits they claim. We find for the petitioners. _______________ 44 Id., at p. 578.

45 Revised Government Service Insurance Act of 1977. Sec. 2(i) thereof provides: Compensation the basic pay or salary received by an employee, pursuant to his employment appointments excluding per diems, bonuses, overtime pay and allowances. 46 Sec. 4, Chapter 1 (Title 1), Book IV, Executive Order No. 292. 47 Rollo, p. 580. 48 Id., at p. 580. 49 Id., at p. 582. 441 VOL. 462, JUNE 30, 2005 441 Lopez vs. Metropolitan Waterworks and Sewerage System The Court has invariably affirmed that it will not hesitate to tilt the scales of justice to the labor class for no less than the Constitution dictates that the State . . . shall protect the rights of workers and promote their welfare.50 It is committed to this policy and has always been quick to rise to defense in the rights of labor, as in this case.51 Protection to labor, it has been said, extends to all of laborlocal and overseas, organized and unorganized, in the public and private sectors.52 Besides, there is no reason not to apply this principle in favor of workers in the government. The government, including government-owned and controlled corporations, as employers, should set the example in upholding the rights and interests of the working class. The MWSS is a government owned and controlled corporation with its own charter, Republic Act No. 6234.53 As such, it is covered by the civil service54 and falls under the jurisdiction of the Civil Service Commission.55 CSC Memorandum Circular No. 38, Series of 1993, categorically made the distinction between contract of services/job orders and contractual and plantilla appointment, declaring that services rendered under contracts of services and job _______________ 50 Bataan Shipyard and Engineering Corporation v. National Labor Relations Commission, 336 Phil. 193, 205; 269 SCRA 199, 210 (1997); Sec. 18, Article II, 1987 CONSTITUTION. 51 Holiday Inn Manila v. National Labor Relations Commission, G.R. No. 109114, 14 September 1993, 226 SCRA 417, 423. 52 BERNAS, THE 1987 CONSTITUTION OF THE REPUBLIC OF THE PHILIPPINES, A

COMMENTARY, (2003), p. 1194, citing II RECORD 614, 693, 748-749; Sec. 3, Article XIII, 1987 CONSTITUTION. 53 An Act Creating the Metropolitan Waterworks and Sewerage System and Dissolving the National Waterworks and Sewerage Authority; and for Other Purposes. 54 Sec. 2 (1), Article IX, 1987 Constitution. 55 Corsiga v. Defensor, 439 Phil. 875, 883; 391 SCRA 267, 273 (2002). 442 442 SUPREME COURT REPORTS ANNOTATED Lopez vs. Metropolitan Waterworks and Sewerage System orders are non-government services which do not have to be submitted to the CSC for approval. This was followed by CSC Memorandum Circular No. 4, Series of 1994, which allowed the crediting of services for purposes of retirement only for such services supported by duly approved appointments. Subsequently, the CSC issued other resolutions applying the above-mentioned circulars, stating that while some functions may have been contracted out by a government agency, the persons contracted are not entitled to the benefits due to regular government employees.56 For purposes of determining the existence of employer-employee relationship, the Court has consistently adhered to the four-fold test, namely: (1) whether the alleged employer has the power of selection and engagement of an employee; (2) whether he has control of the employee with respect to the means and methods by which work is to be accomplished; (3) whether he has the power to dismiss; and (4) whether the employee was paid wages.57 Of the four, the control test is the most important element. A review of the circumstances surrounding the case reveals that petitioners are employees of MWSS. Despite the obvious attempt of MWSS to categorize petitioners as mere service providers, not employees, by entering into contracts for services, its actuations show that they are its employees, pure and simple. MWSS wielded its power of selection when it contracted with the individual petitioners, undertaking separate contracts or agreements. The same goes true for the power to dismiss. Although termed as causes for termination of the Agreement, a review of the same shows that the grounds indicated therein can similarly be grounds for termination of employment. _______________ 56 Rollo, pp. 136-137. 57 Tan v. Lagrama, 436 Phil. 191, 201; 387 SCRA 393, 399 (2002). 443

VOL. 462, JUNE 30, 2005 443 Lopez vs. Metropolitan Waterworks and Sewerage System Under the Agreement, MWSS may terminate it if the Collector-Contractor does or fails to do any of the following: Article VIIDuration, Termination and Penal Clauses. .... (a) Fails to collect at least eighty percent (80%) of bills issued within three (3) months from commencement of this Agreement or ninety percent (90%) within six (6) months after effectivity of this Agreement; (b) Erases, alters, or changes any figure on the bills or remittance receipt for purposes of defrauding either the concessioner or the MWSS. In case of termination of his services for any irregularity, there shall be no prejudice against any criminal action for which he may be liable; (c) Is discourteous, dishonest, arrogant or his conduct is inimial [sic] to the good name or image of the MWSS; (d) Fails to remit collections daily or to return uncollected bills daily; and (e) Fails to comply with any of the undertakings as provided for in this Agreement, and the Manual of Procedures mentioned in Article II hereof.58 (Emphasis Supplied) On the other hand, the Labor Code enumerates the just causes for termination of employment, thus: Art. 282. Termination by Employer.An employer may terminate an employment for any of the following causes: (a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work; (b) Gross and habitual neglect by the employee of his duties; (c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative; (d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and _______________ 58 Rollo, pp. 255-256. 444 444 SUPREME COURT REPORTS ANNOTATED

Lopez vs. Metropolitan Waterworks and Sewerage System (e) Other causes analogous to the foregoing. Obviously, failure to collect the payments of customers or remit the collections constitutes neglect of duty. Making erasures, alterations or changing of figures in the fees or collection receipts amounts to fraud. Lack of courtesy, dishonesty and arrogance are practically the same as misconduct. On the issue of remuneration, MWSS claims that the compensation received by petitioners does not fall under the definition of wages as provided in Section 2(i) of P.D. 1146,59 which is the basic pay or salary received by an employee, pursuant to his employment appointments, excluding per diems, bonuses, overtime pay and allowances; thus petitioners are not its employees. This assertion, however, simply begs the question. The provision is a simple statement of meaning, operating on the a priori premise or presumption that the recipient is already classified as an employee, and does not lay down any basis or standard for determining who are employees and who are not. On the other hand, relevant and appropriate is the definition of wages in the Labor Code, namely, that it is the remuneration, however designated, for work done or to be done, or for services rendered or to be rendered.60 The commissions due petitioners were based on the bills collected as per the schedule indicated in the Agreement.61 Significantly, MWSS granted petitioners benefits usually given to employees, to wit: COLA, meal, emergency, and traveling allowances, hazard pay, cash gift, and other bonuses.62 In an unabashed bid to claim credit for itself, MWSS professes that these additional benefits were its acts of benevolence and generosity.63 We are not impressed. _______________ 59 See note 45. 60 Art. 97(f), Labor Code. 61 Rollo, pp. 252-253. 62 Id., at p. 263. 63 Id., at p. 582. 445 VOL. 462, JUNE 30, 2005 445 Lopez vs. Metropolitan Waterworks and Sewerage System Petitioners rendered services to MWSS for which they were paid and given similar benefits due the other employees of MWSS. It is hard to imagine that MWSS was simply moved by the spirit of benevolence and generosity when it granted liberal benefits to petitioners. More so since MWSS is a

government owned and controlled corporation created for the proper operation and maintenance of waterworks system to insure an uninterrupted and adequate supply and distribution of potable water for domestic and other purposes and the proper operation and maintenance of sewerage systems.64 Its main function is to provide basic services to the public. The disposition of MWSS income is limited to the payment of its contractual and statutory obligations, expansion and development, and for the enhancement of its efficient operation.65 It was not in a position to distribute hard-earned income of the State merely to give expression to its supposed altruistic impulse, or to disburse funds not otherwise authorized by law or its charter. If MWSS was impelled by some force to give the benefits to petitioners, it must have been the force of good business sense. Obviously, the additional benefits were granted with the same motivation as good managers anywhere else haveto foster a good working relationship with the bill-collectors and incentivize them to raise the high level of their performance even higher. Now the aspect of control. MWSS makes an issue out of the proviso in the Agreement that specifically denies the existence of employer-employee relationship between it and petitioners. It is axiomatic that the existence of an employer-employee relationship cannot be negated by expressly repudiating it in an agreement and providing therein that the employee is not an MWSS employee66 when the terms of the agreement and the surrounding circumstances show otherwise. The employ_______________ 64 Section 1, Republic Act No. 6234. 65 Section 13, id. 66 Rollo, p. 134. 446 446 SUPREME COURT REPORTS ANNOTATED Lopez vs. Metropolitan Waterworks and Sewerage System ment status of a person is defined and prescribed by law and not by what the parties say it should be.67 In addition, the control test merely calls for the existence of the right to control, and not the exercise thereof. It is not essential for the employer to actually supervise the performance of duties of the employee, it is enough that the former has a right to wield the power.68 While petitioners were contract-collectors of MWSS, they were under the latters direction as to where and how to perform their collection and were even subject to disciplinary measures. Trainings were in fact conducted to ensure that petitioners are conversant of the procedures of the MWSS. Contrary to MWSS assertion that petitioners were free to adopt (their) own method/strategy in the matter of collection,69 the Agreement clearly provided that the procedure and/or manner of the collection of bills to be followed shall be in accordance with the provisions of the Manual of Procedures. Art. VI of the Agreement states:

Art. IIProcedure of Collection The procedure and/or manner of the collection of bills to be followed shall be in accordance with Provisions of the Manual of Procedures adopted on November 1, 1968, which is made an integral part of this Agreement as Annex A.70 Other manifestations of control are evident from the records. The power to transfer or reassign employees is a management prerogative exclusively enjoyed by employers. In this _______________ 67 Insular Life Assurance Co. Ltd. v. National Labor Relations Commission, 350 Phil. 919, 926; 287 SCRA 476, 483 (1998), citing Industrial Timber Corporation v. National Labor Relations Commission, 169 SCRA 341. 68 MAM Realty Development Corporation v. National Labor Relations Commission, 314 Phil. 838, 842; 244 SCRA 797, 800-801 (1995). 69 Rollo, p. 580. 70 Id., at p. 249. 447 VOL. 462, JUNE 30, 2005 447 Lopez vs. Metropolitan Waterworks and Sewerage System case, MWSS had free reign over the transfer of bill collectors from one branch to another.71 MWSS also monitored the performance of the petitioners and determined their efficiency ratings.72 MWSS contends that petitioners were free to engage in other occupations and were not limited by the Agreement. Suffice it to say, however, that the control measures installed by MWSS were restrictive enough to limit or even render illusory the other employment options of petitioners as their tasks took up most of their time, they being required to report and remit to MWSS almost twice daily. Interestingly in that regard, under the Agreement petitioners were allowed to render overtime work, and were given additional incentive commission for work so rendered as long as the same was authorized.73 Verily, the need to secure MWSS authorization before petitioners can render overtime work debunks its claim that they were allowed to work as and when they please. All these indicate that MWSS controlled the working hours of petitioners. Furthermore, petitioners did not have their own offices nor their own supplies and equipment. MWSS provides them with company stationeries, office space and equipment.74 Likewise, MWSS comported itself as the employer of petitioners, providing them with I.D.s. and certifications which declared them as employees of MWSS.75 It also deducted and remitted petitioners withholding taxes and Medicare

contributions.76 Presaging and lending precedental lift to the present adjudication is the recent ruling in Manila Water Company, Inc. v. Pea.77 In that case, Manila Water Company (Manila Water), _______________ 71 Id., at p. 302. 72 Id., at pp. 268-275. 73 Id., at p. 254. 74 Id., at p. 264. 75 Id., at pp. 203-206. 76 Id., at p. 288. 77 G.R. No. 158255, 8 July 2004, 434 SCRA 53. 448 448 SUPREME COURT REPORTS ANNOTATED Lopez vs. Metropolitan Waterworks and Sewerage System a concessionaire of MWSS, individually hired some of the former MWSS bill collectors to perform collection services for three (3) months. Subsequently, the bill collectors formed a corporation, Association Collectors Group, Inc. (ACGI) which was contracted by Manila Water to collect charges. Later, Manila Water asked the collectors to transfer to a newly formed corporation, First Classic Courier Services. Manila Water later terminated its contract with ACGI, as a result of which collectors who opted to remain with ACGI became unemployed. These bill collectors filed a complaint for illegal dismissal and money claims against Manila Water, claiming that they were its employees since all the methods and procedures of their collection were controlled by the latter. On the other hand, Manila Water contended that the bill collectors were employees of AGCI, an independent contractor.78 The Court ruled that the bill collectors were regular employees of Manila Water, debunking the latters claim that they worked for an independent contractor corporation, thus: First, ACGI does not have substantial capitalization or investment in the form of tools, equipment, machineries, work premises, and other materials, to qualify as an independent contractor. While it has an authorized capital stock of P1,000,000.00, only P62,500.00 is actually paid-in, which cannot be considered substantial capitalization. The 121 collectors subscribed to four shares each and paid only the amount of P625.00 in order to comply with the incorporation requirements. Further, private respondents reported daily to the branch office of the petitioner because ACGI has no office or work

premises. In fact, the corporate address of ACGI was the residence of its president, Mr. Herminio D. Pea. Moreover, in dealing with the consumers, private respondents used the receipts and identification cards issued by petitioner. Second, the work of the private respondents was directly related to the principal business or operation of the petitioner. Being in the business of providing water to the consumers in the East Zone, the collection of the charges therefor by private respondents _______________ 78 Id., at pp. 55-56. 449 VOL. 462, JUNE 30, 2005 449 Lopez vs. Metropolitan Waterworks and Sewerage System for the petitioner can only be categorized as clearly related to, and in the pursuit of the latters business. Lastly, ACGI did not carry on an independent business or undertake the performance of its service contract according to its own manner and method, free from the control and supervision of its principal, petitioner. Prior to private respondents alleged employment with ACGI, they were already working for petitioner, subject to its rules and regulations in regard to the manner and method of performing their tasks. This form of control and supervision never changed although they were already under the seeming employ of ACGI. Petitioner issued memoranda regarding the billing methods and distribution of books to the collectors; it required private respondents to report daily and to remit their collections on the same day to the branch office or to deposit them with Bank of the Philippine Islands; it monitored strictly their attendance as when a collector cannot perform his daily collection, he must notify petitioner or the branch office in the morning of the day that he will be absent; and although it was ACGI which ultimately disciplined private respondents, the penalty to be imposed was dictated by petitioner as shown in the letters it sent to ACGI specifying the penalties to be meted on the erring private respondents. These are indications that ACGI was not left alone in the supervision and control of its alleged employees. Consequently, it can be concluded that ACGI was not an independent contractor since it did not carry a distinct business free from the control and supervision of petitioner.79 Even under the four-fold test, the bill collectors proved to be employees of Manila Water. Thus, the Court held that: Even the four-fold test will show that petitioner is the employer of private respondents. The elements to determine the existence of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control the employees conduct. The most important element is the employers control of the employees conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it.

_______________ 79 Id., at pp. 60-61. 450 450 SUPREME COURT REPORTS ANNOTATED Lopez vs. Metropolitan Waterworks and Sewerage System We agree with the Labor Arbiter that in the three stages of private respondents services with the petitioner, i.e., (1) from August 1, 1997 to August 31, 1997; (2) from September 1, 1997 to November 30, 1997; and (3) from December 1, 1997 to February 8, 1999, the latter exercised control and supervision over the formers conduct. Petitioner contends that the employment of private respondents from August 1, 1997 to August 30, 1997 was only temporary and done to accommodate their request to be absorbed since petitioner was still undergoing a transition period. It was only when its business became settled that petitioner employed private respondents for a fixed term of three months. Although petitioner was not obliged to absorb the private respondents, by engaging their services, paying their wages in the form of commission, subjecting them to its rules and imposing punishment in case of breach thereof, and controlling not only the end result but the manner of achieving the same as well, an employment relationship existed between them. Notably, private respondents performed activities which were necessary or desirable to its principal trade or business. Thus, they were regular employees of petitioner, regardless of whether the engagement was merely an accommodation of their request . . . .80 (Italics Ours) In fine, the Court found that the so-called independent contractor did not have substantial capitalization or investment in the form of tools, equipment, machineries, work premises and other material to qualify as an independent contractor. Moreover, respondents therein reported daily to the Manila Water branch office and dealt with the consumers through receipts and I.D.s. issued by the latter. Likewise, their work was directly related to and in the pursuit of Manila Waters principal business. More importantly, the Court noted that ACGI did not carry a distinct business free from the control and supervision of Manila Water. _______________ 80 Id., at p. 62. 451 VOL. 462, JUNE 30, 2005

451 Lopez vs. Metropolitan Waterworks and Sewerage System The similarity between this case and the instant petition cannot be denied. For one, the respondents in said case are petitioners in this case.81 Second, the work set-up was essentially the same. While the bill collectors were individually hired, or eventually engaged through ACGI, they were under the direct control and supervision of the concessionaire, much like the arrangement between herein petitioners and MWSS. Third, they performed the same vital function of collection in both cases. Fourth, they worked exclusively for their employers. Hence, the bill collectors in the Manila Water case were declared employees of Manila Water despite the existence of a sham labor contractor. In the present case, petitioners were directly and individually hired by MWSS, the latter not resorting to the intermediary labor contractor artifice, but a mere a scrap of paper impudently declaring the bill collectors to be not employees of MWSS. With greater reason, therefore, should the actuality of the employer-employee relationship between MWSS and petitioners be recognized. The CSC, as well as the Court of Appeals, makes much of CSC Memorandum Circular No. 38, Series of 1993, which distinguishes between contract of services/job services and contractual appointment. The Circular provides: Contract of Services and Job Orders are different from Contractual appointment and Plantilla appointment of casual employees, respectively, which are required to be submitted to CSC for approval. Contracts of Services and Job Orders refer to employment described as follows: _______________ 81 Private respondents in the case are all petitioners in the present petition, to wit: Herminio D. Pena, Esteban B. Baldoza, Jorge D. Canonigo, Jr., Ike S. Delfin, Rizalino M. Intal, Rey T. Manlegro, John L. Marteja, Marlon B. Morada, Allan D. Espina, Eduardo Ong, Agnesio D. Quebral, Edmundo B. Victa, Victor C. Zafaralla, Edilberto C. Pingul, and Federico M. Rivera. 452 452 SUPREME COURT REPORTS ANNOTATED Lopez vs. Metropolitan Waterworks and Sewerage System 1. The contract covers lump sum work or services such as janitorial, security or consultancy services where no employer-employee relationship exist; 2. The job order covers piece of work or intermittent job of short duration not exceeding six months on a daily basis; 3. The contract of services and job orders are not covered by Civil Service Law, Rules and Regulations; [sic] but covered by COA rules; 4. The employees involved in the contracts or job orders do not enjoy the benefits enjoined by

government employees, such as PERA, COLA and RATA. 5. As the services rendered under contracts of services and job orders are not considered government services, they do not have to be submitted to the Civil Service Commission for approval.82 Clinging to its tenuous denial of petitioners employee status, the CSC avers that contractual employees are those with contractual appointment submitted to and attested by the CSC, unlike petitioners who failed to show that their appointments were duly attested by the CSC. The Court recognizes the authority of the CSC in promulgating circulars and memoranda concerning the civil service sector in line with its function as the central personnel agency of the Government.83 Nevertheless, it cannot turn a blind eye to a rather haphazard application and interpretation by the CSC of its own issuance, such as in this case. A careful review of the above-quoted circular shows that the relationship defined by the Agreement cannot fall within the purview of contract of services or job orders. Payments made by MWSS subscribers are the lifeblood of the company. Viewed in that context the work rendered by the petitioners is essential to the companys survival and growth. Alongside its public service thrust, the MWSS is an income-generating entity for the Government. It relies for the most part on the _______________ 82 Quoted in CSC Resolution No. 991384, Rollo, pp. 135-136. 83 Sec. 3, Article IX, 1987 Constitution. 453 VOL. 462, JUNE 30, 2005 453 Lopez vs. Metropolitan Waterworks and Sewerage System bill collections in order to sustain its operations. The task of collecting payments for the water supplied by the MWSS to its consumers does not deserve to be compared with mere janitorial, security or even consultancy work. It is not intermittent and seasonal, but rather continuous and increasing by reason of its indisputable essentiality. To lump petitioners with the run-of-the-mill service providers is to ignore the vital role they perform for the MWSS. Rightly so, as clearly indicated in the circular, employees involved in the contracts or job orders do not enjoy the benefits enjoyed by the petitioners which are the same benefits given to government employees. Petitioners are indeed regular employees of the MWSS. The primary standard of determining regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer. The connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety. Likewise, the repeated and continuing need for the performance of the job has been deemed sufficient evidence of the necessity, if not indispensability of the activity to the business.84 Some of the petitioners had rendered more than two decades of service to the MWSS. The continuous and repeated rehiring of these bill collectors indicate the necessity and desirability of their services, as

well as the importance of the role of bill collectors in the MWSS. We agree with the CSC when it stated that the authority of government agencies to contract services is an authority recognized under civil service rules.85 However, said authority cannot be used to circumvent the laws and deprive employees of such agencies from receiving what is due them. _______________ 84 De Leon v. National Labor Relations Commission, G.R. No. 70705, 21 August 1989, 176 SCRA 615, 621. 85 Rollo, p. 140. 454 454 SUPREME COURT REPORTS ANNOTATED Lopez vs. Metropolitan Waterworks and Sewerage System The CSC goes further to say that petitioners were unable to present proof that their appointments were contractual in nature and submitted to the CSC for its approval, and that submission to and approval of the CSC are important as these show that their services had been credited as government service.86 The point is of no moment. Petitioners were able to attach only two of such Agreements which bore the stamp of approval by the CSC and these are simply inadequate to prove that the other agreements were similarly approved. Even petitioners admit that subsequently such Agreements were no longer submitted to the CSC for its approval. Still, the failure to submit the documents for approval of the CSC cannot militate against the existence of employer-employee relationship between petitioners and MWSS. MWSS cannot raise its own inaction to buttress its adverse position. MWSS committed itself to pay severance and terminal leave pay to its regular employees.87 The guidelines88 thereof states that regular employees who have rendered at least a year of service and not eligible for retirement are entitled to severance pay equivalent to one (1) month basic pay for every full year of service.89 In view of the Courts finding that petitioners were employees of MWSS, the corresponding severance pay, in accordance with the guidelines, should be given to them. Terminal leave pay are likewise due petitioners, provided they meet the requirements therefor. However, petitioners in this case cannot avail of retirement benefits from the GSIS. When their services were engaged by _______________ 86 Id., at p. 145. 87 CSC Resolution No. 991384, quoting the Concession Agreements, id., at p. 119. 88 Guidelines in the Payment of the Mandatory Severance Pay Pursuant to Article 6.1 of the

Concession Agreement issued by MWSS on 31 July 1997, id., at p. 401. 89 Guidelines in the Payment of the Mandatory Severance Pay Pursuant to Article 6.1 of the Concession Agreement issued by MWSS on 31 July 1997, id., at p. 402. 455 VOL. 462, JUNE 30, 2005 455 Lopez vs. Metropolitan Waterworks and Sewerage System MWSS, they were not reported as its employees and hence no deductions were made against them for purpose of the GSIS contributions. It would be unjust to grant petitioners retirement benefits when there was no remittance of the employees or the employers share of contributions. The case of Chua v. Civil Service Commission90 relied upon by petitioners is not in point. There was no question that Chua was an employee, specifically a contractual/project employee of the National Irrigation Administration (NIA). The CSCs denial of her request for early retirement benefits was based on the CSCs conclusion that contractual employees are not covered by the Early Retirement Law.91 This Court held that co-terminus employees who have rendered years of continuous service such as Chuawho was continuously hired and rehired for four (4) successive times in a span of fifteen (15) yearsshould be included in the coverage of the Early Retirement Law as long as they comply with CSC regulations promulgated for such purpose. Underlying this grant of retirement benefits to Chua is the finding that her work with the NIA was recognized and accredited by the CSC as government service, that she paid her GSIS contributions throughout her service, and the fact that she applied for the benefit within the prescribed period.92 The differences between Chua and petitioners are readily apparent. The ruling in Chua concerns claims based on the Early Retirement Law. On the other hand, this case involves bill collectors who were hired by virtue of individual agreements, and who are now claiming payment of retirement, separation and terminal leave benefits. Petitioners services, admittedly, were not credited/recognized by the CSC. Likewise, the parties still dispute the nature of their relationship when petitioners made the claim for the benefits, unlike in the case of Chua where there was no question as to her status _______________ 90 G.R. No. 88979, 7 February 1992, 206 SCRA 65. 91 Republic Act No. 6683. 92 Supra note 85. 456 456

SUPREME COURT REPORTS ANNOTATED Lopez vs. Metropolitan Waterworks and Sewerage System as an employee of the NIA. Moreover, unlike Chua, petitioners in this case did not give any contribution for GSIS coverage, especially since retirement benefits come from the monthly contributions of GSIS members. Petitioners claim for damages and attorneys fees are similarly untenable. MWSS cannot be made liable for moral damages for the serious moral disturbance93 petitioners allegedly suffered as a result of the denial of the requested benefits because it was merely following the earlier resolution94 of the CSC. MWSS adherence to the position of the CSC is but logical. It is after all, the central personnel agency of the government, and its resolution at the time was valid and binding on MWSS. WHEREFORE, the petition is GRANTED IN PART. The Decision of the Court of Appeals in C.A.G.R. SP No. 55263, as well as the Civil Service Commissions Resolutions Nos. 991384 and 992074, are hereby REVERSED and SET ASIDE. MWSS is ordered to pay terminal leave pay and separation pay and/or severance pay to each of herein petitioners on the basis of remunerations/commissions, allowances and bonuses each were actually receiving at the time of termination of their employment as contract collectors of MWSS. Let the case be remanded to the Civil Service Commission for the computation of the above awards and the appropriate disposition in accordance with the pronouncements in this Decision. No pronouncement as to costs. SO ORDERED. Davide, Jr. (C.J.), Puno, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, Chico-Nazario and Garcia, JJ., concur. _______________ [Lopez vs. Metropolitan Waterworks and Sewerage System, 462 SCRA 428(2005)]

VOL. 237, SEPTEMBER 27, 1994 207 Manila Golf & Country Club, Inc. vs. IAC G.R. No. 64948. September 27, 1994.* MANILA GOLF & COUNTRY CLUB, INC. petitioner, vs. INTERMEDIATE APPELLATE COURT and FERMIN LLAMAR, respondents. Labor Law; Employer-Employee Relationship; Res Judicata; Certification Elections; A decision in a certification case does not foreclose all further dispute between the parties as to the existence, or nonexistence, of employer-employee relationship between them.Whatever the truth about these opposing contentions, which the record before the Court does not adequately disclose, the more controlling consideration would seem to be that, however final it may become, the decision in a certification case, by the very nature of that proceeding, is not such as to foreclose all further dispute between the parties as to the existence, or non-existence, of employer-employee relationship between them. Same; Same; Same; Essential requisites of res judicata, or the principle of bar by prior judgment.It is well settled that for res adjudicata, or the principle of bar by prior judgment, to apply, the following essential requisites must concur: (1) there must be a final judgment or order; (2) said judgment or order must be on the merits; (3) the court rendering the same must have jurisdiction over the subject matter and the parties; and (4) there must be between the two cases identity of parties, identity of subject matter and identity of cause of action. Same; Same; Same; Clearly implicit is that the action or proceedings in which is issued the prior judgment that would operate in bar of a subsequent action between the same parties for the same cause, be adversarial, or contentious.Clearly implicit in these requisites is that the action or proceedings in which is issued the prior Judgment that would operate in bar of a subsequent action between the same parties for the same cause, be adversarial, or contentious, one having opposing parties; (is) contested, as distinguished from an ex parte hearing or proceeding. *** of which the party seeking relief has given legal notice to the other party and afforded the latter an opportunity to contest it, and a certification case is not such a proceeding, as this Court has already ruled: A certification proceeding is not a litigation in the sense in which this term is commonly understood, but a mere _______________ * SECOND DIVISION. 208 208 SUPREME COURT REPORTS ANNOTATED Manila Golf & Country Club, Inc. vs. IAC

investigation of a non-adversary, fact-finding character, in which the investigating agency plays the part of a disinterested investigator seeking merely to ascertain the desires of the employees as to the matter of their representation. The court enjoys a wide discretion in determining the procedure necessary to insure the fair and free choice of bargaining representatives by the employees. Same; Same; No employer-employee relationship exists between golf clubs and persons rendering caddying services for the clubs members.Said Courts holding that upon the facts, there exists (or existed) a relationship of employer and employee between petitioner and private respondent is, however, another matter. The Court does not agree that said facts necessarily or logically point to such a relationship, and to the exclusion of any form of arrangements, other than of employment, that would make the respondents services available to the members and guests of the petitioner. As long as it is, the list made in the appealed decision detailing the various matters of conduct, dress, language, etc. covered by the petitioners regulations, does not, in the mind of the Court, so circumscribe the actions or judgment of the caddies concerned as to leave them little or no freedom of choice whatsoever in the manner of carrying out their services. In the very nature of things, caddies must submit to some supervision of their conduct while enjoying the privilege of pursuing their occupation within the premises and grounds of whatever club they do their work in. For all that is made to appear, they work for the club to which they attach themselves on sufferance but, on the other hand, also without having to observe any working hours, free to leave anytime they please, to stay away for as long as they like. It is not pretended that if found remiss in the observance of said rules, any discipline may be meted them beyond barring them from the premises which, it may be supposed, the Club may do in any case even absent any breach of the rules, and without violating any right to work on their part. All these considerations clash frontally with the concept of employment. Same; Same; Neither the clubs suggestion as to the rate of fees to be paid to caddies nor the implementation of a group rotation system indicates the caddies status as employees.The IAC would point to the fact that the Club suggests the rate of fees payable by the players to the caddies as still another indication of the latters status as employees. It seems to the Court, however, that the intendment of such fact is to the contrary, showing that the Club has not the measure of control over the incidents of the caddies work and compensation that an employer would possess. The Court agrees with petitioner that the group rotation system so-called, is less a measure of employee control than an assurance 209 VOL. 237, SEPTEMBER 27, 1994 209 Manila Golf & Country Club, Inc. vs. IAC that the work is fairly distributed, a caddy who is absent when his turn number is called simply losing his turn to serve and being assigned instead the last number for the day. PETITION for review of a decision of the then Intermediate Appellate Court. The facts are stated in the opinion of the Court.

Bito, Misa & Lozada for petitioner. Remberto Z. Evio for private respondent. NARVASA, C.J.: The question before the Court here is whether or not persons rendering caddying services for members of golf clubs and their guests in said clubs courses or premises are the employees of such clubs and therefore within the compulsory coverage of the Social Security System (SSS). That question appears to have been involved, either directly or peripherally, in three separate proceedings, all initiated by or on behalf of herein private respondent and his fellow caddies. That which gave rise to the present petition for review was originally filed with the Social Security Commission (SSC) via petition of seventeen (17) persons who styled themselves Caddies of Manila Golf and Country Club-PTCCEA for coverage and availment of benefits under the Social Security Act as amended, PTCCEA being the acronym of a labor organization, the Philippine Technical, Clerical, Commercial Employees Association, with which the petitioners claimed to be affiliated. The petition, docketed as SSC Case No. 5443, alleged in essence that although the petitioners were employees of the Manila Golf and Country Club, a domestic corporation, the latter had not registered them as such with the SSS. At about the same time, two other proceedings bearing on the same question were filed or were pending; these were: (1) a certification election case filed with the Labor Relations Division of the Ministry of Labor by the PTCCEA on behalf of the same caddies of the Manila Golf and Country Club, the case being titled Philippine Technical, Clerical, Commercial Association vs. Manila 210 210 SUPREME COURT REPORTS ANNOTATED Manila Golf & Country Club, Inc. vs. IAC Golf and Country Club and docketed as Case No. R4-LRDX-M-10-504-78; it appears to have been resolved in favor of the petitioners therein by Med-Arbiter Orlando S. Rojo, who was thereafter upheld by Director Carmelo S. Noriel, denying the Clubs motion for reconsideration;1 (2) a compulsory arbitration case initiated before the Arbitration Branch of the Ministry of Labor by the same labor organization, titled Philippine Technical, Clerical, Commercial Employes Association (PTCCEA), Fermin Lamar and Raymundo Jomok vs. Manila Golf and Country Club, Inc., Miguel Celdran, Henry Lim and Geronimo Alejo; it was dismissed for lack of merit by Labor Arbiter Cornelio T. Linsangan, a decision later affirmed on appeal by the National Labor Relations Commission on the ground that there was no employer-employee relationship between the petitioning caddies and the respondent Club.2 In the case before the SSC, the respondent Club filed answer praying for the dismissal of the petition,

alleging in substance that the petitioners, caddies by occupation, were allowed into the Club premises to render services as such to the individual members and guests playing the Clubs golf course and who themselves paid for such services; that as such caddies, the petitioners were not subject to the direction and control of the Club as regards the manner in which they performed their work; and hence, they were not the Clubs employees. Subsequently, all but two of the seventeen petitioners of their own accord withdrew their claim for social security coverage, avowedly coming to realize that indeed there was no employment relationship between them and the Club. The case continued, and was eventually adjudicated by the SSC after protracted proceedings only as regards the two holdouts, Fermin Llamar and Raymundo Jomok. The Commission dismissed the petition for lack of merit,3 ruling: *** that the caddys fees were paid by the golf players themselves and not by respondent club. For instance, petitioner Raymundo Jomok averred that for their services as caddies a caddys Claim Stub (Exh. 1-A) is issued by a player who will in turn hand over to management the other portion of the stub known as Caddy Ticket (Exh. 1) so that by _______________ 1 Rollo, pp. 215-216. 2 NCR Case No. AB-4-1771-79; Rollo, pp. 143-151. 3 In a unanimous resolution dated May 20, 1981 written by Chairman Adrian E. Cristobal. 211 VOL. 237, SEPTEMBER 27, 1994 211 Manila Golf & Country Club, Inc. vs. IAC this arrangement management will know how much a caddy will be paid (TSN, p. 80, July 23, 1980). Likewise, petitioner Fermin Llamar admitted that caddy works on his own in accordance with the rules and regulations (TSN, p. 24, February 26, 1980) but petitioner Jomok could not state any policy of respondent that directs the manner of caddying (TSN, pp. 76-77, July 23, 1980). While respondent club promulgates rules and regulations on the assignment, deportment and conduct of caddies (Exh. C) the same are designed to impose personal discipline among the caddies but not to direct or conduct their actual work. In fact, a golf player is at liberty to choose a caddy of his preference regardless of the respondent clubs group rotation system and has the discretion on whether or not to pay a caddy. As testified to by petitioner Llamar that their income depends on the number of players engaging their services and liberality of the latter (TSN, pp. 10-11, Feb. 26, 1980). This lends credence to respondents assertion that the caddies are never their employees in the absence of two elements, namely, (1) payment of wages and (2) control or supervision over them. In this connection, our Supreme Court ruled that in the determination of the existence of an employer-employee relationship, the control test shall be considered decisive (Philippine Manufacturing Co. vs. Geronimo and Garcia, 96 Phil. 276; Mansal vs. P.P. Gocheco Lumber Co., 96 Phil. 941; Viana vs. Al-lagadan, et al., 99 Phil. 408; Vda. de

Ang, et al. vs. The Manila Hotel Co., 101 Phil. 358, LVN Pictures Inc. vs. Phil. Musicians Guild, et al., L-12582, January 28, 1961, 1 SCRA 132. *** (reference being made also to Investment Planning Corporation Phil. vs. SSS, 21 SCRA 925). Records show that respondent club had reported for SS coverage Graciano Awit and Daniel Quijano, as bat unloader and helper, respectively, including their ground men, house and administrative personnel, a situation indicative of the latters concern with the rights and welfare of its employees under the SS law, as amended. The unrebutted testimony of Col. Generoso A. Alejo (Ret.) that the ID cards issued to the caddies were merely intended to identify the holders as accredited caddies of the club and privilege(d) to ply their trade or occupation within its premises which could be withdrawn anytime for loss of confidence. This gives us a reasonable ground to state that the defense posture of respondent that petitioners were never its employees is well taken.4 From this Resolution appeal was taken to the Intermediate Appellate Court by the union representing Llamar and Jomok. _______________ 4 Rollo, pp. 87-90. 212 212 SUPREME COURT REPORTS ANNOTATED Manila Golf & Country Club, Inc. vs. IAC After the appeal was docketed5 and some months before decision thereon was reached and promulgated, Raymundo Jomoks appeal was dismissed at his instance, leaving Fermin Llamar the lone appellant.6 The appeal ascribed two errors to the SSC: (1) refusing to suspend the proceedings to await judgment by the Labor Relations Division of National Capital Regional Office in the certification election case (R-4-LRD-M-10-504-78) supra, on the precise issue of the existence of employer-employee relationship between the respondent club and the appellants, it being contended that said issue was a function of the proper labor office; and (2) adjudging that self same issue in a manner contrary to the ruling of the Director of the Bureau of Labor Relations, which has not only become final but (has been) executed or (become) res adjudicata.7 The Intermediate Appellate Court gave short shrift to the first assigned error, dismissing it as of the least importance. Nor, it would appear, did it find any greater merit in the second alleged error. Although said Court reversed the appealed SSC decision and declared Fermin Llamar an employee of the Manila Golf and Country Club, ordering that he be reported as such for social security coverage and paid any corresponding benefits,8 it conspicuously ignored the issue of res adjudicata raised in said second assignment. Instead, it drew basis for the reversal from this Courts ruling in Investment

Planning Corporation of the Philippines vs. Social Security System, supra9 and declared that upon the evidence, the questioned employer-employee relationship between the Club and Fermin Llamar passed the so-called control test, established in that casei.e., whether the employer controls or has reserved the right to control the employee not only as to the result of the work to be done but also as to the means and methods by which the same is to be accomplished,the Clubs control over the caddies encompassing: _______________ 5 as AC-G.R. SP No. 13648. 6 Rollo, p. 52. 7 Id., at pp. 52-53. 8 Decision promulgated June 20, 1983, rendered by the First Special Cases Division, Rollo, pp. 48-58. 9 21 SCRA 925, 929; footnote 2. 213 VOL. 237, SEPTEMBER 27, 1994 213 Manila Golf & Country Club, Inc. vs. IAC (a) the promulgation of no less than twenty four (24) rules and regulations just about every aspect of the conduct that the caddy must observe, or avoid, when serving as such, any violation of any of which could subject him to disciplinary action, which may include suspending or cutting off his access to the club premises; (b) the devising and enforcement of a group rotation system whereby a caddy is assigned a number which designates his turn to serve a player; (c) the Clubs suggesting the rate of fees payable to the caddies. Deemed of little or no moment by the Appellate Court was the fact that the caddies were paid by the players, not by the Club, that they observed no definite working hours and earned no fixed income. It quoted with approval from an American decision10 to the effect that: whether the club paid the caddies and afterward collected from the players or the players themselves paid the caddies in the first instance, the caddies were still employees of the club. This, no matter that the case which produced this ruling had a slightly different factual cast, apparently having involved a claim for workmens compensation made by a caddy who, about to leave the premises of the club where he worked, was hit and injured by an automobile then negotiating the clubs private driveway. That same issue of res adjudicata, ignored by the IAC beyond bare mention thereof, as already pointed out, is now among the mainstays of the private respondents defense to the petition for review. Considered in the perspective of the incidents just recounted, it illustrates as well as anything can, why the practice of forum-shopping justly merits censure and punitive sanction. Because the same question

of employer-employee relationship has been dragged into three different fora, willy-nilly and in quick succession, it has birthed controversy as to which of the resulting adjudications must now be recognized as decisive. On the one hand, there is the certification case (R4-LRDX-M-10-504-78), where the decision of the Med-Arbiter found for the existence of employer-employee relationship between the parties, was affirmed by Director Carmelo S. Noriel, who ordered a certification _______________ 10 Indian Hill Club vs. Industrial Commission, et al., 140 NE 871, 872, 309 Ill. 271; Rollo, pp. 55-56. 214 214 SUPREME COURT REPORTS ANNOTATED Manila Golf & Country Club, Inc. vs. IAC election held, a disposition never thereafter appealed according to the private respondent; on the other, the compulsory arbitration case (NCR Case No. AB-4-1771-79), instituted by or for the same respondent at about the same time, which was dismissed for lack of merit by the Labor Arbiter, which was afterwards affirmed by the NLRC itself on the ground that there existed no such relationship between the Club and the private respondent. And, as if matters were not already complicated enough, the same respondent, with the support and assistance of the PTCCEA, saw fit, also contemporaneously, to initiate still a third proceeding for compulsory social security coverage with the Social Security Commission (SSC Case No. 5443), with the result already men-tioned. Before this Court, the petitioner Club now contends that the decision of the Med-Arbiter in the certification case had never become final, being in fact the subject of three pending and unresolved motions for reconsideration, as well as of a later motion for early resolution.11 Unfortunately, none of these motions is incorporated or reproduced in the record before the Court. And, for his part, the private respondent contends, not only that said decision had been appealed to and been affirmed by the Director of the BLR, but that a certification election had in fact been held, which resulted in the PTCCEA being recognized as the sole bargaining agent of the caddies of the Manila Golf and Country Club with respect to wages, hours of work, terms of employment, etc.12 Whatever the truth about these opposing contentions, which the record before the Court does not adequately disclose, the more controlling consideration would seem to be that, however final it may become, the decision in a certification case, by the very nature of that proceeding, is not such as to foreclose all further dispute between the parties as to the existence, or non-existence, of employer-employee relationship between them. It is well settled that for res adjudicata, or the principle of bar by prior judgment, to apply, the following essential requisites must concur: (1) there must be a final judgment or order; (2) said _______________ 11 Brief for Petitioner, p. 32; Rollo, p. 19.

12 Brief for Private Respondent, pp. 2-4; Rollo, p. 216. 215 VOL. 237, SEPTEMBER 27, 1994 215 Manila Golf & Country Club, Inc. vs. IAC judgment or order must be on the merits; (3) the court rendering the same must have jurisdiction over the subject matter and the parties; and (4) there must be between the two cases identity of parties, identity of subject matter and identity of cause of action.13 Clearly implicit in these requisites is that the action or proceedings in which is issued the prior Judgment that would operate in bar of a subsequent action between the same parties for the same cause, be adversarial, or contentious, one having opposing parties; (is) contested, as distinguished from an ex parte hearing or proceeding. *** of which the party seeking relief has given legal notice to the other party and afforded the latter an opportunity to contest it,14 and a certification case is not such a proceeding, as this Court has already ruled: A certification proceeding is not a litigation in the sense in which this term is commonly understood, but a mere investigation of a nonadversary, fact-finding character, in which the investigating agency plays the part of a disinterested investigator seeking merely to ascertain the desires of the employees as to the matter of their representation. The court enjoys a wide discretion in determining the procedure necessary to insure the fair and free choice of bargaining representatives by the employees.15 Indeed, if any ruling or judgment can be said to operate as res adjudicata on the contested issue of employer-employee relationship between present petitioner and the private respondent, it would logically be that rendered in the compulsory arbitration case (NCR Case No. AB-4-771-79, supra), petitioner having asserted, without dispute from the private respondent, that said issue was there squarely raised and litigated, resulting in a ruling of the Arbitration Branch (of the same Ministry of Labor) _______________ 13 Valencia vs. RTC of Quezon City, Br. 90, 184 SCRA 80, 90-91, citing Yusingco, et al., vs. Ong Hing Lian, 42 SCRA 589, and Deang vs. IAC, et al., 154 SCRA 250. 14 Blacks Law Dictionary, 5th edition, p. 40. 15 LVN Pictures, Inc. vs. Phil. Musicians Guild and CIR, 110 Phil. 725, citing N.L.R.B. vs. Botany Worsted Mills, 319 U.S. 751, 87 L. ed. 1705, and Southern S.S. Co. vs. N.L.R.B., 316 U.S. 31, 86 L. ed. 1246, and N.L.R.B. vs. A.J. Tower Co., 66 Sup. Ct. 1911; also Rothenberg on Labor Relations, p. 514. 216

216 SUPREME COURT REPORTS ANNOTATED Manila Golf & Country Club, Inc. vs. IAC that such relationship did not exist, and which ruling was thereafter affirmed by the National Labor Relations Commission in an appeal taken by said respondent.16 In any case, this Court is not inclined to allow private respondent the benefit of any doubt as to which of the conflicting rulings just adverted to should be accorded primacy, given the fact that it was he who actively sought them simultaneously, as it were, from separate fora, and even if the graver sanctions more lately imposed by the Court for forum-shopping may not be applied to him retroactively. Accordingly, the IAC is not to be faulted for ignoring private respondents invocation of res adjudicata; on the contrary, it acted correctly in doing so. Said Courts holding that upon the facts, there exists (or existed) a relationship of employer and employee between petitioner and private respondent is, however, another matter. The Court does not agree that said facts necessarily or logically point to such a relationship, and to the exclusion of any form of arrangements, other than of employment, that would make the respondents services available to the members and guests of the petitioner. As long as it is, the list made in the appealed decision detailing the various matters of conduct, dress, language, etc. covered by the petitioners regulations, does not, in the mind of the Court, so circumscribe the actions or judgment of the caddies concerned as to leave them little or no freedom of choice whatsoever in the manner of carrying out their services. In the very nature of things, caddies must submit to some supervision of their conduct while enjoying the privilege of pursuing their occupation within the premises and grounds of whatever club they do their work in. For all that is made to appear, they work for the club to which they attach themselves on sufferance but, on the other hand, also without having to observe any working hours, free to leave anytime they please, to stay away for as long as they like. It is not pretended that if found remiss in the observance of said rules, any discipline may be meted them beyond barring them from the premises which, it may be supposed, the Club may do in any case _______________ 16 Brief for Petitioner, pp. 32-36; Rollo, p. 202. 217 VOL. 237, SEPTEMBER 27, 1994 217 Manila Golf & Country Club, Inc. vs. IAC

even absent any breach of the rules, and without violating any right to work on their part. All these considerations clash frontally with the concept of employment. The IAC would point to the fact that the Club suggests the rate of fees payable by the players to the caddies as still another indication of the latters status as employees. It seems to the Court, however, that the intendment of such fact is to the contrary, showing that the Club has not the measure of control over the incidents of the caddies work and compensation that an employer would possess. The Court agrees with petitioner that the group rotation system so-called, is less a measure of employee control than an assurance that the work is fairly distributed, a caddy who is absent when his turn number is called simply losing his turn to serve and being assigned instead the last number for the day.17 By and large, there appears nothing in the record to refute the petitioners claim that: (Petitioner) has no means of compelling the presence of a caddy. A caddy is not required to exercise his occupation only in the premises of petitioner. He may work with any other golf club or he may seek employment as a caddy or otherwise with any entity or individual without restriction by petitioner.*** *** In the final analysis, petitioner has no way of compelling the presence of the caddies as they are not required to render a definite number of hours of work on a single day. Even the group rotation of caddies is not absolute because a player is at liberty to choose a caddy of his preference regardless of the caddys order in the rotation. It can happen that a caddy who has rendered services to a player on one day may still find sufficient time to work elsewhere. Under such circumstances, he may then leave the premises of petitioner and go to such other place of work that he wishes (sic). Or a caddy who is on call for a particular day may deliberately absent himself if he has more profitable caddying, or another, engagement in some other place. These are things beyond petitioners control and for which it imposes no direct sanctions on the caddies. ***18 WHEREFORE, the Decision of the Intermediate Appellate Court, review of which is sought, is reversed and set aside, it _______________ 17 Petition for Review, p. 4; Rollo, p. 18. 18 Id., Rollo, pp. 18-19. 218 218 SUPREME COURT REPORTS ANNOTATED People vs. Peralta

being hereby declared that the private respondent, Fermin Llamar, is not an employee of petitioner Manila Golf and Country Club and that petitioner is under no obligation to report him for compulsory coverage to the Social Security System. No pronouncement as to costs. SO ORDERED. Regalado and Mendoza, JJ., concur. Padilla, J., On official leave. Puno, J., No part. Judgment reversed and set aside. Notes.Res judicata doctrine does not apply to courts where prior decision was done by Board of Marine Inquiry. (Philippine American General Insurance Company, Inc. vs. Court of Appeals, 222 SCRA 155 [1993]) Dismissal of action on ground of lack of interest or failure to prosecute has the effect of judgment on the merits and constitutes res judicata. (Ilasco, Jr. vs. Court of Appeals, 228 SCRA 413 [1993]) o0o [Manila Golf & Country Club, Inc. vs. IAC, 237 SCRA 207(1994)]

VOL. 241, FEBRUARY 23, 1995 643 Cabalan Pastulan Negrito Labor Association vs. NLRC G.R. No. 106108. February 23, 1995.* CABALAN PASTULAN NEGRITO LABOR ASSOCIATION (CAPANELA) and JOSE ALVIZ, SR., petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and FERNANDO SANCHEZ, respondents. Labor Law; Labor Arbiter; Finality of Findings of Facts; Findings of fact and conclusions of the labor arbiter, as well as those of the NLRC should be considered as binding and conclusive upon the appellate courts when supported by substantial evidence.Indeed, findings of fact and conclusions of the labor arbiter, as well as those of the NLRC, or, for that matter, any other adjudicative body which can be considered as a trier of facts on specific matters within its field of expertise, should be considered as binding and conclusive upon the appellate courts. This is in addition to the fact that they were in a better position to assess and evaluate the credibility of the contending parties and the validity of their respective evidence. However, these doctrinal strictures hold true only when such findings and conclusions are supported by substantial evidence. Same; Employer-Employee Relationship; Petitioners, not being the employer, obviously could not arrogate unto themselves an employer's prerogatives of hiring and firing workers.Under their arrangement, CAPANELA, through its officers, could only impose disciplinary sanctions upon its members for infractions of its own rules and regulations, to the extent of ousting a member from the association when called for under the circumstances. Nonetheless, such termination of membership in the association, which could result in curtailment of the privilege of working at the Base inasmuch as employment therein was conditioned upon membership in CAPANELA, is not equivalent to the illegal dismissal from employment contemplated in our labor laws. Petitioners, not being the employer, obviously could not arrogate unto themselves an employer's prerogatives of hiring and firing workers. Same; Same; Essential Elements of Employer-Employee Relationship.Prevailing case law enumerates the essential elements of an employer-employee relationship as: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the power of control with regard to the means and methods by which _______________ * SECOND DIVISION. 644 644 SUPREME COURT REPORTS ANNOTATED Cabalan Pastulan Negrito Labor Association vs. NLRC

the work is to be accomplished, with the power of control being the most determinative factor. Same; Same; Same; Considering that petitioners cannot legally be considered as the employer of private respondent, it follows that it cannot be made liable as such nor be required to bear the responsibility for the legal consequences of the charge of illegal dismissal.It would, therefore, be inutile to discuss the matter of the legality or illegality of the dismissal of private respondent. Considering that petitioners cannot legally be considered as the employer of herein private respondent, it follows that it cannot be made liable as such nor be required to bear the responsibility for the legal consequences of the charge of illegal dismissal. Granting arguendo that private respondent was illegally dismissed, the action should properly be directed against the U.S. government which, through the Base authorities, was the true employer in this case. Same; Same; CAPANELA functioned as just an administrator of its Negrito members employed at the Base.In the present case, the setup was such that CAPANELA was merely tasked with organizing the Negritos to facilitate the orderly administration of work made available to them at the base facilities, that is, sorting scraps for recycling. CAPANELA recorded the attendance of its members and submitted the same to the Base authorities for the determination of wages due them and the preparation of the payroll. Payment of wages was coursed through CAPANELA but the funds therefor came from the coffers of the Base. Once inside the Base, control over the means and methods of work was exercised by the Base authorities. Accordingly, CAPANELA functioned as just an administrator of its Negrito members employed at the Base. Same; Same; CAPANELA's activities may at most be considered akin to that of labor-only contracting. From the legal standpoint, CAPANELA's activities may at most be considered akin to that of laboronly contracting, albeit of a special or peculiar type, wherein CAPANELA, operating like a contractor, merely acted as an agent or intermediary of the employer. Same; Same; Appeals; Perfection of an appeal within the period and in the manner prescribed by law is jurisdictional and non-compliance with such legal requirements is fatal and has the effect of rendering the judgment final and executory.We have no quarrel with the provision of Article 223 of the Labor Code which, in part and among others, requires that in case of a judgment involving a monetary award, an 645 VOL. 241, FEBRUARY 23, 1995 645 Cabalan Pastulan Negrito Labor Association vs. NLRC appeal by the employer may be perfected only upon posting of a cash or surety bond issued by a reputable bonding company duly accredited by the commission in the amount equivalent to the monetary award in the judgment appealed from. Perfection of an appeal within the period and in the manner prescribed by law is jurisdictional and non-compliance with such legal requirements is fatal and has the effect of rendering the judgment final and executory.

Same; Same; Same; Punctilious adherence to stringent technical rules may be relaxed in the interest of the working man, and should not defeat the complete and equitable resolution of the rights and obligations of the parties.However, in a number of recent cases, the Court has eased the requirement of posting a bond, as a condition for perfection of appeals in labor cases, when to do so would bring about the immediate and appropriate resolution of controversies on the merits without over-indulgence in technicalities, ever mindful of the underlying spirit and intention of the Labor Code to ascertain the facts of each case speedily and objectively without regard to technical rules of law and procedure, all in the interest of due process. Punctilious adherence to stringent technical rules may be relaxed in the interest of the working man, and should not defeat the complete and equitable resolution of the rights and obligations of the parties. Moreover, it is the duty of labor officials to consider their decisions and inquire into the correctness of execution, as supervening events may affect such execution. Same; Employer-Employee relationship; There was no employeremployee relationship between petitioner CAPANELA and private respondent Sanchez.In light of the circumstances in this case, the Solicitor General further suggests two ways of writing finis to this dispute, i.e., to reconsider public respondent's resolution of February 28,1992 and April 30, 1992 and reinstate petitioner's appeal to give the latter a chance to prove CAPANELA's insolvency or poverty, or to reverse the decision of the labor arbiter on the ground that there was no employer-employee relationship between petitioner CAPANELA and private respondent Sanchez. Harmonizing our evaluation of the facts of this case with the greater interests of social justice, and considering that the parties involved are those upon whose socioeconomic status we prefaced this opinion, we opt for the latter. PETITION for certiorari to review a decision of the National Labor Relations Commission. The facts are stated in the opinion of the Court. Isagani M, Jungco for petitioners. 646 646 SUPREME COURT REPORTS ANNOTATED Cabalan Pastulan Negrito Labor Association vs. NLRC Public Attorney's Office for private respondent. REGALADO, J.: A man said to the Universe, Behold, I am born! However, replied the Universe, The fact does not create in me A sense of obligation. To most, these familiar verses express the article of faith for self-reliance. To the racist in some countries, however, they mean that the world does not owe the Negroid or other colored people equal

solicitude. The neo-colonial in the Philippines would hold the Negrito or a member of indigenous cultural communities to the same social bondage. But our Constitution and our laws were precisely formulated under a sense of obligation to the marginalized and the underprivileged. Under such mandates, this Court has always accorded them scrupulous and compassionate attention. In now resolving their predicament in the case at bar, it calls once again on the old Castilian tenet: A l que la vida ha dado menos, dsele mas por la ley.1 In this petition for certiorari, the resolution of the National Labor Relations Commission (hereafter, NLRC) dated February 28, 19922 which dismissed the appeal of herein petitioners from the decision of the labor arbiter3 for failure to file a supersedeas bond, as well as its resolution dated April 30, 19924 denying their motion for reconsideration, are assailed for having been rendered with grave abuse of discretion. The antecedents of the present recourse, as culled from the records, are that herein private respondent, Fernando Sanchez, filed a complaint for illegal dismissal, non-payment of back _______________ 1 The contemporary version, of varying attributions, is that "he who is less favored in life must be more favored in law." 2 Annex A, Petition; Presiding Commissioner Lourdes C. Javier, ponente, with Commissioners Irineo B. Bernardo and Rogelio I. Rayala, concurring; Rollo, 11-13. 3 NLRC Case No. RAB III-01-1931-91; Original Record, 66-72. 4 Annex B, Petition; Rollo, 14-15. 647 VOL. 241, FEBRUARY 23, 1995 647 Cabalan Pastulan Negrito Labor Association vs. NLRC wages and other benefits on January 3, 1991 with Regional Office No. III of the Department of Labor and Employment in Olongapo City, originally docketed therein as NLRC Case No. RAB III 01-193191. The complaint, naming Cabalan Pastulan Negrito Labor Association (CAPANELA, for brevity) and its president, Jose Alviz, Sr., as respondents, alleged that the former was employed by CAPANELA as a foreman with a monthly salary of P3,245.70 from March, 1977 until he was illegally dismissed on January 1, 1990.5 Said complaint was later amended on February 22, 1991 to introduce the correction that private respondent was illegally dismissed on March 27, 1990 (instead of January 1,1990), and to further pray for reinstatement without loss of seniority rights and payment of full back wages and moral and exemplary damages.6 As no amicable settlement was arrived at during the mandatory pre-conference despite efforts exerted by the labor arbiter, the parties were required to simultaneously submit their

respective position papers and/or affidavits.7 The case was submitted for resolution on March 11, 1991 on the bases of said position papers and other evidence, but the parties were further allowed to submit their respective memoranda,8 after which the case was deemed submitted for decision on May 29, 1991.9 A decision was rendered on June 24, 1991 in favor of herein private respondent, declaring his dismissal illegal, and ordering herein petitioners, jointly and severally "1. To pay the backwages of complainant from March 24, 1990 until June 24, 1991 and for 15 months at P3,245.70 a month equals P48,685.50; 2. To immediately reinstate complainant to his former or equivalent position without loss of seniority rights and other privileges, and for this purpose, respondents are hereby ordered to submit proof of the physical or payroll reinstatement of the complainant within five (5) working days from receipt hereof, provided further that should rein _______________ 5 Original Record, 1. 6 Ibid., 23. 7 Ibid., 42. 8 Ibid., 44. 9 Ibid., 56. 648 648 SUPREME COURT REPORTS ANNOTATED Cabalan Pastulan Negrito Labor Association vs. NLRC statement (be) not feasible due to any supervening event, respondents are further ordered to pay the separation pay of complainant equivalent to one month salary for every year of service, a fraction of at least six (6) months service considered as one (1) whole year, in addition to his backwages; x x x." but dismissing the claim for moral and exemplary damages for want of substantial evidence.10 The records further reveal that private respondent subsequently filed a motion for the issuance of a writ of execution on July 15, 1991.11 This was opposed by CAPANELA12 through its new counsel, Atty. Isagani M. Jungco, who at the same time filed a memorandum of appeal13 in its behalf, although admittedly without posting a supersedeas bond because of want of funds of either CAPANELA or its president and co-petitioner Alviz, Sr. Private respondent, in his answer to CAPANELA's memorandum of appeal14 and reply to opposition to motion for execution,15 was unconvinced and adamantly insisted on the dismissal of the appeal due to non-perfection thereof for failure to comply with the legal

requirement of posting a cash or surety bond as a requisite for the perfection of an appeal. A partial writ of execution16 was issued by Labor Arbiter Saludares on August 15, 1991 ordering the physical or payroll reinstatement of private respondent. The sheriff's return of November 4, 1991, signed by Numeriano S. Reyes, Sheriff II of the NLRC Regional Arbitration Branch No. III, stated that the writ expired without any indication of private respondent having been reinstated.17 As stated at the outset, the NLRC dismissed the appeal on February 28,1992 for failure of petitioners to post the supersedeas bond required by law, stating that "(r)espondents' contention _______________ 10 Ibid., 72; per Labor Arbiter Dominador B. Saludares. 11 Ibid., 130. 12 Ibid., 148. 13 Ibid., 228. 14 Ibid., 158. 15 Ibid., 217. 16 Ibid., 222. 17 Ibid., 490. 649 VOL. 241, FEBRUARY 23, 1995 649 Cabalan Pastulan Negrito Labor Association vs. NLRC that it cannot post bond because it is insolvent deserve(s) scant consideration not being accompanied by proof there(of)," and denied petitioner's motion for reconsideration. The present controversy raises as principal issues for resolution by the Court whether or not (1) the dismissal of private respondent was legal, and (2) the appeal was perfected despite failure to file a supersedeas bond. Anent the first issue, before we delve into the matter of the alleged illegal dismissal of private respondent Sanchez by petitioner CAPANELA, it is evidently necessary to ascertain the existence of an employer-employee relationship between them. Petitioners asseverate that CAPANELA is an association composed of Negritos who worked inside the

American naval base in Subic Bay (hereinafter referred to as the Base). They initially received a daily wage of P 100.00 and thus earned, on the average, less than P3,000.00 per month. Said association organized the system of employment of members of this cultural community who were accorded special treatment concededly because of the occupancy of their ancestral lands as part of the operational area and military facility used by the Base authorities. CAPANELA, through its officers, saw to it that its members reported for work, recorded their attendance, and distributed the workers' salaries paid by the Base at the end of a specific pay period, without gaining any amount from such undertakings. Petitioner Alviz, Sr., for his part and as president of CAPANELA, was himself only an employee at the Base. In other words, neither CAPANELA nor its president was the employer of private respondent Sanchez; rather, it was the United States Government acting through the military base authorities.18 Contrarily, private respondent maintains that there existed an employer-employee relationship, as allegedly supported by the evidence on record, and that petitioners CAPANELA and Alviz, Sr. exercised control as employer over the means and methods by which the work was accomplished. He further argues that since the determination of the existence of an employer-employee relationship is a factual question, the findings of the labor officials thereon should be considered conclusive and _______________ 18 Rollo, 4-5. 650 650 SUPREME COURT REPORTS ANNOTATED Cabalan Pastulan Negrito Labor Association us. NLRC binding upon and respected by the appellate courts.19 It is hence clearly apparent that the judgment of the labor arbiter, as affirmed by respondent commission, declaring the dismissal of private respondent illegal and ordering the payment of back wages to him together with his payroll or physical reinstatement, was premised on the finding that there was an existing employer-employee relationship. Indeed, findings of fact and conclusions of the labor arbiter,20 as well as those of the NLRC,21 or, for that matter, any other adjudicative body which can be considered as a trier of facts on specific matters within its field of expertise,22 should be considered as binding and conclusive upon the appellate courts. This is in addition to the fact that they were in a better position to assess and evaluate the credibility of the contending parties and the validity of their respective evidence.23 However, these doctrinal strictures hold true only when such findings and conclusions are supported by substantial evidence.24 In the case at bar, we are hard put to find sufficient evidential support for public respondent's conclusion on the putative existence of an employer-employee relationship between petitioners

_______________ 19 Ibid., 29-30. 20 Lopez Sugar Corp. vs. Federation of Free Workers, et al., G.R. Nos. 75700-01, August 30, 1990, 189 SCRA 179; Philippine Airlines, Inc. vs. NLRC, et al., G.R. No. 106374, June 17, 1993, 223 SCRA 463. 21 Cando vs. NLRC, et al, G.R. No. 91344, September 14, 1990, 189 SCRA 666; Five J Taxi vs. NLRC, et al., G.R. No. 100138, August 5, 1992, 212 SCRA 225. 22 Baby Bus, Inc. vs. Minister of Labor, et al., G.R. No. 54223, February 26, 1988, 158 SCRA 221; Needle Queen Corp. vs. Nicolas, etc., G.R. Nos. 60741-43, December 22, 1989, 180 SCRA 568; San Miguel Corporation vs. Javate, et al., G.R. No. 54244, January 27 1992, 205 SCRA 469. 23 Mary Johnston Hospital, et al. vs. NLRC, et al, G.R. No. 73839, August 30, 1988, 165 SCRA 110; Philippine Telegraph and Telephone Corp. vs. NLRC, et al., G.R. No. 80600, 183 SCRA 451. 24 Cartagenas, et al. vs. Romago Electric Co., Inc., et al., G.R. No. 82973, September 15, 1989, 177 SCRA 637; Asian Construction and Development Corporation vs. NLRC, et al, G.R. No. 85866, July 24 1990, 187 SCRA 784; Tiu vs. NLRC, et al., G.R. 83433, November 12, 1992, 215 SCRA 541. 651 VOL. 241, FEBRUARY 23, 1995 651 Cabalan Pastulan Negrito Labor Association vs. NLRC and private respondent. We are accordingly persuaded that there is ample justification to disturb the findings of respondent NLRC and to hold that a reconsideration of its challenged resolutions is in order. A careful reevaluation of the documentary evidence of record belies the finding that CAPANELA, through its president and copetitioner, Jose Alviz, Sr., wielded control as an employer over private respondent. It will be noted that in his affidavit dated March 4, 1991,25 private respondent himself declared that through the intervention of CAPANELA, by way of its June 13, 1989 letter26 to Lt. Mark S. Kistner, he was cleared of the charge of larceny of U.S. government property. Thereafter, in an indorsement dated July 11, 1989 from the Director of Security, U.S. Navy Public Works Center, the recommendation for his reinstatement and the release of his gate pass to the Base was addressed to the Director, Investigation Section, U.S. Facility Security Department via the Director of the Contracts Administration Division.27 This only goes to show that CAPANELA had in fact no control over the continued employment of its members working in the U.S. naval base. For, after conducting its own investigation, CAPANELA could only intervene in behalf of its members facing charges through a recommendatory action or request for favorable consideration. It could not, on its own authority, exonerate such members from

the charges, much less effect their reinstatement without the approval of the Base authorities. Interestingly, in order to comply with the labor arbiter's decision of June 24, 1991, CAPANELA even had to write to the Resident Officer-inCharge of the Facility Support Contracts at Subic Bay recommending the reinstatement of private respondent to his former position.28 Under their arrangement, CAPANELA, through its officers, could only impose disciplinary sanctions upon its members for infractions of its own rules and regulations, to the extent of ousting a member from the association when called for under the _______________ 25 Original Record, 31-32. 26 Ibid., 33. 27 Ibid., 34. 28Ibid., 119. 652 652 SUPREME COURT REPORTS ANNOTATED Cabalan Pastulan Negrito Labor Association vs. NLRC circumstances. Nonetheless, such termination of membership in the association, which could result in curtailment of the privilege of working at the Base inasmuch as employment therein was conditioned upon membership in CAPANELA, is not equivalent to the illegal dismissal from employment contemplated in our labor laws. Petitioners, not being the employer, obviously could not arrogate unto themselves an employer's prerogatives of hiring and firing workers. As succinctly pointed out by the Solicitor General: "True, there was a stipulation to the effect that Fernando Sanchez was employed by petitioner CAPANELA, but the real employer was the United States government and petitioner was just a laboronly contractor.' Annexes 'G' and 'H' of CAPANELA's Memorandum on Appeal show that the award or contract of work was between CAPANELA and the United States government through the U.S. Navy. The same contract likewise clearly stipulated that CAPANELA was to 'provide labor and material to perform trash sorting services in the Base period for all work specified in Section C.' Annex A' of complainant Fernando Sanchez' Answer to petitioner's Memorandum on Appeal itself proves that the negotiation was between CAPANELA and the U.S. Navy, with the former supplying the labor and the U.S. government paying the wages. Since CAPANELA merely provided the labor force, it cannot be deduced therefrom that CAPANELA should also compensate the laborers; it is a case of non sequitur. In other words, the actual mechanical act of making payments was done by CAPANELA, but the monies therefor were provided and disbursements made by the disbursing officer of the U.S. Naval Supply Depot, Subic Bay (see Annexes 'G' and 'H')

"Moreover, ingress and egress in the work premises were controlled not by CAPANELA but by the U.S. Base authorities who could even reject entry of CAPANELA members then duly employed as part of the project, and impose disciplinary sanctions against them. Annex '1' of petitioners' Position Paper as respondent in the NLRC Case No. RAB-III-01-193 1-91, which was the letter of Lt. M.E. Kistner of the U.S. Navy, clearly proves this."29 (Italics in the original text.) Prevailing case law enumerates the essential elements of an employer-employee relationship as: (a) the selection and engage_______________ 29 Manifestation and Motion in Lieu of Comment of the Solicitor General, 7-8; Rollo, 74-75. 653 VOL. 241, FEBRUARY 23, 1995 653 Cabalan Pastulan Negrito Labor Association vs. NLRC ment of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the power of control with regard to the means and methods by which the work is to be accomplished, with the power of control being the most determinative factor.30 The Solicitor General pertinently illustrates the glaring absence of these elements in the present case: "x x x, as aforeshown, CAPANELA had no control of the premises as it was the U.S. naval authorities who had the power to issue passes or deny their issuance. In fact, CAPANELA did not have absolute control on the disciplinary measures to be imposed on its members employed in the Base. Annex '1' of CAPANELA's Position Paper submitted before the NLRC Regional Arbitration Branch established the U.S. Navy's right to impose disciplinary measures for violations or infractions of its rules and regulations as well as the right to recommend suspensions or dismissals of the workers. Moreover, it was not shown that CAPANELA had control of the means and methods or manner by which the workers were to go about their work. These are indeed strong indicia of the U.S. Navy's right of control over the workers as direct employer. "Third, there is evidence to prove that payment of wages was merely done through CAPANELA, but the source of payment was actually the U.S. government paying workers according to the volume of work accomplished on rates agreed upon between CAPANELA and the U.S. government. x x x."31 It would, therefore, be inutile to discuss the matter of the legality or illegality of the dismissal of private respondent. Considering that petitioners cannot legally be considered as the employer of herein private respondent, it follows that it cannot be made liable as such nor be required to bear the responsibility for the legal consequences of the charge of illegal dismissal. Granting arguendo that private respondent was illegally dismissed, the action should properly be directed against the U.S. govern-

_______________ 30 Hydro Resources Contractors Corp. vs. Pagalilauan, et al., G.R. No. 62909, April 18, 1989, 172 SCRA 399; Singer Sewing Machine Corp. vs. Drilon, et al., G.R. No. 91307, January 24, 1991, 193 SCRA 270; Villuga, et al. vs. NLRC, et al., G.R. No. 75038, August 23, 1993, 225 SCRA 537. 31 Rollo, 76-77. 654 654 SUPREME COURT REPORTS ANNOTATED Cabalan Pastulan Negrito Labor Association vs. NLRC ment which, through the Base authorities, was the true employer in this case. Neither can petitioners be deemed to have been engaged in permissible job contracting under the law, for failure to satisfy the following prescribed conditions: 1. The contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with performance of the work except as to the results thereof; and 2. The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials which are necessary in the conduct of his business.32 In the present case, the set-up was such that CAPANELA was merely tasked with organizing the Negritos to facilitate the orderly administration of work made available to them at the base facilities, that is, sorting scraps for recycling. CAPANELA recorded the attendance of its members and submitted the same to the Base authorities for the determination of wages due them and the preparation of the payroll. Payment of wages was coursed through CAPANELA but the funds therefor came from the coffers of the Base. Once inside the Base, control over the means and methods of work was exercised by the Base authorities. Accordingly, CAPANELA functioned as just an administrator of its Negrito members employed at the Base. From the legal standpoint, CAPANELA's activities may at most be considered akin to that of laboronly contracting, albeit of a special or peculiar type, wherein CAPANELA, operating like a contractor, merely acted as an agent or intermediary of the _______________ 32 Sec. 8, Rule VIII, Book III, Omnibus Rules Implementing the Labor Code; Associated AngloAmerican Tobacco Corp. vs. Hon. Clave, etc., et al., G.R. No. 50915, August 30, 1990, 189 SCRA 127. Cf. Aboitiz Shipping Employees Association vs. NLRC, et al., G.R. No. 50915, August 30, 1990, 189 SCRA 127. See Rhone-Poulenc Agrochemicals Philippines, Inc. vs. NLRC, et al., G.R. Nos. 10263335, January 19, 1993, 217 SCRA 249; Development Bank of the Philippines vs. NLRC, et al., G.R.

Nos. 100376-77, June 17, 1994, 233 SCRA 251. 655 VOL. 241, FEBRUARY 23, 1995 655 Cabalan Pastulan Negrito Labor Association vs. NLRC employer.33 The Solicitor General ramifies this aspect: "x x x, petitioner CAPANELA could not be classified as an 'independent contractor' because it was not shown that it has substantial capital or investments to qualify as such under the law. On the other hand, it was apparent that the premises, tools, equipment, and other paraphernalia used by the workers were all supplied by the U.S. government through the U.S. Navy. What CAPANELA supplied was only the local labor force, complainant Fernando Sanchez among them. It is therefore clear that CAPANELA had no capital outlay involved in the business or in the maintenance thereof."34 While it is not denied that an association or a labor organization or union can at times be an employer insofar as people hired by it to dispose of its business are concerned,35 the situation in this case is altogether different. A proper and necessary distinction should be made between the employees of CAPANELA who actually attended to its myriad functions as an association and its members who were employed in the jobsite inside the Base vis-avis CAPANELA's relative position as the employer of the former and a mere administrator with respect to the latter. On the matter of the perfection of an appeal from the decision of the NLRC, petitioners plead for a more considerate and humane application of the law as would allow their appeal to prosper despite non-posting of a supersedeas bond on account of their insolvency. To dismiss the appeal for failure to post said bond, petitioners aver, is tantamount to denial of the constitutionally guaranteed right of access to courts by reason of poverty.36 Private respondent, on the other hand, argues that perfec_______________ 33 Sec. 9, ibid., id.; Industrial Timber Corp., et al. vs. NLRC, et al., G.R. No. 83616, January 20, 1989, 202 SCRA 465; Baguio, et al. vs. NLRC, et al., G.R Nos. 79004-08, October 4, 1991, 202 SCRA 465; cf. Neri, et al. vs. NLRC, et al, G.R Nos. 97008-09, July 23, 1993, 224 SCRA 717. See also Arts. 106 and 107, Labor Code. 34 Rollo, 76, 35 Bautista vs. Inciong, etc., et al., G.R. No. 52824, March 16, 1988, 158 SCRA 665. 36 Rollo, 6-7. 656

656 SUPREME COURT REPORTS ANNOTATED Cabalan Pastulan Negrito Labor Association us. NLRC tion of an appeal within the reglementary period and in compliance with all requirements of the law therefor is jurisdictional. That petitioners do not have the funds for the premiums for posting a supersedeas bond or for a cash deposit, disdainfully says private respondent, "is not in the least our problem."37 We have no quarrel with the provision of Article 223 of the Labor Code which, in part and among others, requires that in case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon posting of a cash or surety bond issued by a reputable bonding company duly accredited by the commission in the amount equivalent to the monetary award in the judgment appealed from. Perfection of an appeal within the period and in the manner prescribed by law is jurisdictional38 and non-compliance with such legal requirements is fatal and has the effect of rendering the judgment final and executory.39 However, in a number of recent cases,40 the Court has eased the requirement of posting a bond, as a condition for perfection of appeals in labor cases, when to do so would bring about the immediate and appropriate resolution of controversies on the merits without over-indulgence in technicalities,41 ever mindful of the underlying spirit and intention of the Labor Code to ascertain the facts of each case speedily and objectively without regard to technical rules of law and procedure, all in the interest of due process.42 Punctilious adherence to stringent technical _______________ 37 Ibid., 28-29. 38 Periquet vs. NLRC, et al, G.R. No. 91298, June 22, 1990, 186 SCRA 724; Alto Sales Corp. vs. Intermediate Appellate Court, et al., G.R. No. 72763, May 29, 1991, 197 SCRA 618. 39 Chong Guan Trading vs. NLRC, et al., G.R. No. 81471, April 28, 1989, 172 SCRA 831; Andaya, et al. vs. NLRC, et al, G.R. Nos. 73726-28, August 2, 1990, 188 SCRA 253. 40 Erectors, Inc. vs. NLRC, et al., G.R. No. 93690, October 10, 1991, 202 SCRA 597; Blancaflor, et al. vs. NLRC, et al., G.R. No. 101013, February 2, 1993, 218 SCRA 366; Union of Filipino Workers vs. NLRC, et al., G.R. No. 98111, April 7, 1993, 221 SCRA 267. 41 YBL (Your Bus Lines), et al. vs. NLRC, et al., G.R. No. 93381, September 28, 1990, 190 SCRA 160; Rada vs. NLRC, et al., G.R. No. 96078, January 9, 1992, 205 SCRA 69; Star Angel Handicraft vs. NLRC, et al., G.R. No. 108914, September 20, 1994. 42 Art. 221, Labor Code. 657

VOL. 241, FEBRUARY 23, 1995 657 Cabalan Pastulan Negrito Labor Association vs. NLRC rules may be relaxed in the interest of the working man,43 and should not defeat the complete and equitable resolution of the rights and obligations of the parties.44 Moreover, it is the duty of labor officials to consider their decisions and inquire into the correctness of execution, as supervening events may affect such execution.45 The Solicitor General realistically assesses the situation, thus: "x x x As aforestated, above the technical consideration on whether failure to post a supersedeas bond was fatal to petitioners' appeal is the importance of first resolving whether there was indeed an employer-employee relationship in this case so as not to render the execution of the NLRC's resolution unenforceable or impossible to implement. x x x Besides, it is of public notice that the U.S. Navy had withdrawn from the Subic Base in view of the termination of the Bases Treaty. Even if CAPANELA were ordered to reinstate complainant Fernando Sanchez, this is obviously an impossible thing to perform as there is no longer any work to be done inside the Base. Nor is petitioner CAPANELA in a position to pay Sanchez's back wages considering that it was the U.S. Navy that paid his wages. x x x."46 In light of the circumstances in this case, the Solicitor General further suggests two ways of writing finis to this dispute, i.e., to reconsider public respondent's resolution of February 28, 1992 and April 30, 1992 and reinstate petitioner's appeal to give the latter a chance to prove CAPANELA's insolvency or poverty, or to reverse the decision of the labor arbiter on the ground that there was no employeremployee relationship between petitioner CAPANELA and private respondent Sanchez. Harmonizing our evaluation of the facts of this case with the greater interests of social justice, and considering that the parties involved are those _______________ 43 Vda. de Inguillo vs. Employees Compensation Commission, et al., G.R. No. 51543, June 6, 1989, 174 SCRA 19. 44 Rapid Manpower Consultants, Inc. vs. NLRC, et al., G.R. No. 88683, October 18,1990,190 SCRA 747; Ranara vs. NLRC, et al., G.R. No. 100969, August 14,1992, 212 SCRA 631; De Ysasi III vs. NLRC, et al., G.R. No. 104599, March 11, 1994, 231 SCRA 173. 45 Pacific Mills, Inc. vs. NLRC, et al., G.R. No. 88864, January 17, 1990, 181 SCRA 130. 46 Rollo, 78-79. 658 658

SUPREME COURT REPORTS ANNOTATED Cabalan Pastulan Negrito Labor Association vs. NLRC upon whose socio-economic status we prefaced this opinion, we opt for the latter. While this Court, when it finds that a lower court or quasijudicial body is in error, may simply and conveniently nullify the challenged decision, resolution or order and remand the case thereto for further appropriate action, it is well within the conscientious exercise of its broad review powers to refrain from doing so and instead choose to render judgment on the merits when all material facts have been duly laid before it as would buttress its ultimate conclusion, in the public interest and for the expeditious administration of justice, such as where the ends of justice would not be subserved by the remand of the case.47 IN VIEW OF ALL THE FOREGOING PREMISES, the resolutions of February 28, 1992 and April 30, 1992 of respondent National Labor Relations Commission are accordingly ANNULLED, and the adjudgment of Labor Arbiter Dominador B. Saludares in NLRC Case No. RAB III 01-1931-91 is hereby REVERSED and SET ASIDE. SO ORDERED. Narvasa (C.J., Chairman), Bidin, Puno and Mendoza, JJ., concur. Resolutions of the National Labor Relations Commission annulled; judgment of Labor Arbiter reversed and set aside. Notes.Although the application of the aforementioned fourfold test will not establish an employeremployee relationship, a person or employer who contracts with another for the performance of the former's work or of any work nevertheless becomes liable to the employees of the contractor. (RhonePoulenc Agrochemicals Philippines, Inc. vs. National Labor Relations Commission, 217 SCRA 249 [1993]) _______________ 47 Development Bank of the Philippines vs. Intermediate Appellate Court, et al., G.R. No. 73027, October 18, 1990, 190 SCRA 653; Roman Catholic Archbishop of Manila, et al. vs. Court of Appeals, et al., G.R. No. 77425, June 19, 1991, 198 SCRA 300. 659 VOL. 241, FEBRUARY 23, 1995 659 Oate vs. Abrogar

Technicality should not be allowed to stand in the way of equitably and completely resolving the rights and obligations of the parties. (Philippine-Singapore Ports Corporation vs. National Labor Relations Commission, 218 SCRA 77 [1993]) o0o [Cabalan Pastulan Negrito Labor Association vs. NLRC, 241 SCRA 643(1995)]

SUPREME COURT REPORTS ANNOTATED Sandigan Savings and Loan Bank, Inc. vs. NLRC G.R. No. 112877. February 26, 1996.* SANDIGAN SAVINGS and LOAN BANK, INC., and SANDIGAN REALTY DEVELOPMENT CORPORATION, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and ANITA M. JAVIER, respondents. Labor Standard; Employer-Employee Relationship; Elements; Right of Control Test.In determining the existence of an employer-employee relationship, the following elements are generally considered: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employers power to control the employee with respect to the means and methods by which the work is to be accomplished. This Court has generally relied on the so-called right of control test in making such a determination. 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 by which such end is reached, the relationship is deemed to exist. Stated differently, it is the power of control which is the most determinative factor. It is deemed to be such an important factor that the other requisites may even be disregarded. Thus, in the case of Cosmopolitan Funeral Homes, Inc. v. Maalat, it was held that to determine whether a person who performs work for another is the latters employee or is an independent contractor, the prevailing test is the right of control test. In the said case, the petitioner therein failed to prove that the contract with private respondent was that of a mere agency, an indication that subject person is free to accomplish his work on his own terms and may engage in other means of livelihood. Same; Same; Same; Same; No employer-employee relationship where the element of control is absent. Viewed in the light of the foregoing criteria, the features of the relationship between Javier and the Sandigan Realty, as may be gleaned from the facts described herein below by the Office of the Solicitor General, readily negate the existence of an employer-employee relationship between them, the element of control being noticeably absent. _______________ * FIRST DIVISION. 127 VOL. 254, FEBRUARY 26, 1996 127 Sandigan Savings and Loan Bank, Inc. vs. NLRC Same; Same; Same; Same; As a non-employee, Javier cannot be entitled to the right to security of tenure nor to backwages and separation pay as a consequence of her separation therefrom.As it appears that Sandigan Realty had no control over the conduct of Javier as a realty sales agent since its only concern or interest was in the result of her work and not in how it was achieved, there cannot now be any doubt that Javier was not an employee, much less a regular employee of the Sandigan Realty.

Hence, she cannot be entitled to the right to security of tenure nor to backwages and separation pay as a consequence of her separation therefrom. Same; Independent Contractor; Independent contractor is one where the control of the contracting party is only with respect to the result of the work.Evidently, the legal relation of Javier to the Sandigan Realty can be that of an independent contractor, where the control of the contracting party is only with respect to the result of the work, as distinguished from an employment relationship where the person rendering service is under the control of the hirer with respect to the details and manner of performance. Same; Same; Same; Same.In the case of Sara v. Agarrado, private respondent who sold palay and rice for the petitioners under an arrangement or agreement that the former would be paid P2.00 commission per sack of milled rice sold as well as a commission of 10% per kilo of palay purchased, and that she would spend her own money for the undertaking, and where she was shown to have worked for petitioners at her own pleasure, that she was not subject to definite hours or conditions of work, that 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, was held to be an independent contractor. Same; Same; Same; Same.By the same token, the private respondent in another case, who earns on a per head/talent commission basis and who works as she pleases, on her own schedule, terms and conditions was also held to be an independent contractor. Same; Same; Same; Same; Private respondent could not have been a regular employee but an independent contractor in relation to the petitioner Sandigan Realty and could not therefore be entitled to backwages and separation pay.Private respondent Anita Javier is clearly similarly placed as the private respondents in the above-cited 128 128 SUPREME COURT REPORTS ANNOTATED Sandigan Savings and Loan Bank, Inc. vs. NLRC cases. Hence, she could not have been a regular employee but an independent contractor in relation to the petitioner Sandigan Realty. As we hold that private respondent was not a regular employee of the Sandigan Realty and that she could not, therefore, be entitled to backwages and separation pay, we will necessarily have to limit our treatment of the alleged errors committed by the NLRC in the computation of the monetary award to that adjudged against the petitioner Sandigan Bank. But, first, we have to settle the question as to whether reinstatement or payment of separation pay in its stead is the proper relief to be accorded the private respondent, it appearing that neither the labor arbiter nor the NLRC made a definitive ruling on the matter. This has become especially more significant since private respondent, in her Comment and Memorandum, presses for an order of reinstatement to her former position, claiming that there is no sufficient basis for a grant of separation pay in lieu thereof. Same; Same; Same; Same; Private respondent is however entitled to security of tenure and has the right

to continue in employment until the same is terminated under conditions required by law in relation to Sandigan Bank.Private respondent Anita Javier, by virtue of her employment status, is, under the law entitled to security of tenure, which means that she has the right to continue in employment until the same is terminated under conditions required by law. Article 279 of the Labor Code, as amended, clearly provides that: Security of Tenure.In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by the Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement. There being a finding of illegal dismissal of private respondent Anita Javier, her reinstatement should follow as a matter of course, unless it be shown that the same is no longer possible, in which case, payment of separation pay will be ordered, in lieu thereof. In this case, we do not find any such showing or basis to preclude private respondents reinstatement. Same; Same; Same; Same; Petitioner bank is liable to private respondent for backwages inclusive of allowances and other benefits or their monetary equivalent computed from the time her compensa129 VOL. 254, FEBRUARY 26, 1996 129 Sandigan Savings and Loan Bank, Inc. vs. NLRC tion was withheld from her up to the time of her actual reinstatement, at the rate of her latest monthly salary and allowance.In effect, the petitioner bank is liable to private respondent only for backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from the time her compensation was withheld from her up to the time of her actual reinstatement, at the rate of her latest monthly salary and allowance which was in the total amount of P2,350.00 as shown by Javiers latest Notice of Salary Adjustment. However, earnings derived elsewhere by Javier from the date of dismissal up to the date of reinstatement, if there be any, should be deducted from said backwages. In this connection, it must be pointed out that the NLRC applied the old rule, otherwise known as the Mercury Drug Rule, and so, as to the rate of P2,400.00, no evidence was presented as basis. The rule that should apply in this case is that provided in Article 279 of the Labor Code, as amended by Section 34, Republic Act No. 6715, as aforequoted, which took effect on March 21, 1989, considering that the private respondents dismissal occurred thereafter, or on April 20, 1990. SPECIAL CIVIL ACTION in the Supreme Court. Certiorari. The facts are stated in the opinion of the Court. Minerva C. Genovea for petitioner. Vivar, Lopez & Fuentes Law Offices for private respondent. HERMOSISIMA, JR., J.:

This Petition for Certiorari, with prayer for the issuance of a temporary restraining order, seeks to review, modify and/or set aside the Resolution1 dated 24 September 1993 and the Resolution2 dated 19 November 1993 of public respondent National Labor Relations Commission (NLRC) in NLRC CAS RAB-III-05-1560-90. The former affirmed, with modification, the Decision3 of the Labor Arbiter of the NLRC Regional Arbitration Branch No. III while the latter denied the motion _______________ 1 Rollo, p. 25. 2 Rollo, p. 43. 3 Annex I, Petition; Rollo, pp. 75-86. 130 130 SUPREME COURT REPORTS ANNOTATED Sandigan Savings and Loan Bank, Inc. vs. NLRC to reconsider the former. Private respondent Anita M. Javier (hereinafter referred to as Javier) worked as a realty sales agent of the petitioner Sandigan Realty Development Corporation (hereinafter called the Sandigan Realty) from November 2, 1982 (or November 9, 1982)4 to November 30, 1986. Their agreement was that Javier would receive a 5% commission for every sale, or if no sale was made, she would receive a monthly allowance of P500.00. Subsequently, that is, on 1 December 1986, Javier was hired as a marketing collector of petitioner Sandigan Savings and Loan Bank (hereinafter called the Sandigan Bank) by Angel Andan, the President of both the Sandigan Bank and Sandigan Realty. Javiers monthly salary and allowance were initially in the amount of P788.00 and P585.00, respectively. These were adjusted thereafter (the latest adjustment having been made on 1 July 1989), to P1,840.00 per month as salary and to P510.00 as monthly allowance, per Notice of Salary Adjustment.5 Meanwhile, respondent Javier continued to be a realty sales agent of Sandigan Realty on the side, and while she still received the 5% commission on her sales, she no longer enjoyed the P500.00 monthly allowance. On 20 April 1990, Javier was advised by Angel Andan not to report for work anymore. This in effect was a notice of dismissal. The manner by which her dismissal was effected has been correctly described by the Solicitor General, thus: On April 20, 1990, around 8:30 in the morning, while performing her duties at the Bank, Javier saw and overheard petitioner Andan summon the Banks personnel officer, Mrs. Liberata G. Fajardo, and

instruct her to prepare her (Javiers) termination papers. Immediately thereafter, Andan changed his mind and told Mrs. Fajardo to prepare instead a resignation letter for Javier, _______________ 4 Manifestation and Motion in Lieu of Comment, p. 3; Rollo, p. 161. 5 Annex C, Petition; Rollo, p. 45. 131 VOL. 254, FEBRUARY 26, 1996 131 Sandigan Savings and Loan Bank, Inc. vs. NLRC saying, Ayaw ko na siyang makita sa susunod. Turning to private respondent, he said, Huwag na ninyong itanong kong anong dahilan, bastat gusto ko, ito ang desisyon ko. Naawa lang ako sa iyo noon kaya kita tinanggap. Ka Anita, huwag mong isipin na may kinalaman ang mga pangyayari kay Ditas, wala, wala, hindi iyon, bastat si Alice, iniskandalo na naman ako. xxx xxx xxx

In the afternoon, after she received P50,000.00 from one Mr. Ben Santos as full payment for a lot sold in Sta. Rita Village, Guiguinto, Bulacan, Andan ordered Reynaldo Bordado, her co-employee, to withdraw her commission of P10,000.00 from the account of the Realty, saying, Ibigay mo sa ka Anita yan para hindi na balikan dito.6 The advice of her termination notwithstanding, Javier reported for work at the bank on the next working day or on 23 April 1990. Though she signed the attendance sheet, she left when she could not find her table. On 18 May 1990, Javier filed a complaint against petitioners and Angel Andan with the NLRC Regional Arbitration Branch No. III at San Fernando, Pampanga, for illegal dismissal, seeking reinstatement and payment of backwages and moral and exemplary damages. On 6 October 1992, the labor arbiter rendered judgment in private respondents favor, the dispositive portion of which reads: WHEREFORE, considering the foregoing considerations, and for having unjustly dismissed Anita Javier from her employment, respondents are hereby directed to reinstate her to her former position as marketing collector of Sandigan Savings and Loan Bank and sales agent of Sandigan Realty Development Corporation, pay her full backwages from the time of her dismissal, plus 10% attorneys fee and all her monetary award, until her actual reinstatement, and P60,000.00 moral and exemplary damages to compensate for her mental pain and anguish, her social humiliation and besmirched reputation. Should reinstatement be rendered impossible by virtue of the abolition of her position as marketing collector, grant

_______________ 6 See Note 4, Rollo, pp. 161-162. 132 132 SUPREME COURT REPORTS ANNOTATED Sandigan Savings and Loan Bank, Inc. vs. NLRC her, in addition to backwages and other benefits, separation pay equivalent to one (1) month for every year of service until after this decision shall have become final and executory.7 On appeal, the NLRC affirmed the decision of the Labor Arbiter in its Resolution, dated 24 September 1993, but, deleting the award of damages and attorneys fees, provided the following monetary award of backwages and separation pay: Backwages: Fr: April 20, 1990-April 20, 1993 36 months Realty: P500.00 (allowance) x 36 P 18,000.00 Savings Bank: P2,400.00 x 36 P 86,400.00 TOTAL P104,400.00

Separation Pay:

Realty: Nov. 2, 1982-April 20, 1993 10 years

P500.00 (allowance) x 10 P 5,000.00 Savings Bank: Dec. 1, 1986-April 20, 1993 6 years

P2,400.00 x 6 P 14,400.00 GRAND TOTAL P123,800.00 The petitioners Motion for Reconsideration of the said Resolution, and that of the private respondent, were denied by the NLRC in its Resolution, dated 19 November 1993, the dispositive portion of which reads: It appearing that the issues raised by both parties in their Motions for Reconsideration were thoroughly discussed and duly passed upon in the questioned Resolution promulgated on September 24, 1993, the same are hereby denied for lack of merit with finality. No further motion for reconsideration shall be entertained.

The petitioners, thus, instituted this petition for certiorari, contending that the NLRC gravely and seriously abused its discretion in holding that: _______________ 7 See Note 3, Rollo, pp. 85-86. 133 VOL. 254, FEBRUARY 26, 1996 133 Sandigan Savings and Loan Bank, Inc. vs. NLRC 1. Javier is a regular employee of both Sandigan Realty and Sandigan Bank and entitled to backwages and separation pay from both; 2. Javier was receiving P2,400.00 a month from the bank and that she is entitled to separation pay for six years.8 The records disclose that petitioner Sandigan Bank no longer disputes the finding that Javier was dismissed by it and that she did not abandon her job thereat. In fact, it would have paid private respondent the monetary award representing backwages and separation pay adjudged against it in the assailed NLRC resolution, if only it found the same to be in the correct amount.9 Consequently, the issues in this case are: (1) whether or not the respondent NLRC abused its discretion in finding that private respondent was a regular employee of the petitioner Sandigan Realty, entitled to backwages and separation pay because of her alleged illegal separation therefrom; and (2) whether the computation of the monetary award owing to the private respondent, as contained in the assailed NLRC resolution, was attended with serious errors as to its bases both in fact and in law. In determining the existence of an employer-employee relationship, the following elements are generally considered: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employers power to control the employee with respect to the means and methods by which the work is to be accomplished.10 This Court has generally relied on the socalled right of control test in making such a determination. Where the person for whom the services are performed reserves a right to _______________ 8 Petition, p. 8; Rollo, p. 15. 9Ibid., pp. 7-8; Rollo, pp. 14-15. 10 Ruga v. NLRC, 181 SCRA 266, 273 [1990]; Aboitiz Shipping Employees Association v. NLRC, 186 SCRA 825, 829 [1990]; Cabalan Pastulan Negrito Labor Association v. NLRC, 241 SCRA 643, 652653 [1995]; MAM Realty Development Corporation v. NLRC, 244 SCRA 797, 800 [1995].

134 134 SUPREME COURT REPORTS ANNOTATED Sandigan Savings and Loan Bank, Inc. vs. NLRC control not only the end to be achieved but also the means by which such end is reached,11 the relationship is deemed to exist. Stated differently, it is the power of control which is the most determinative factor.12 It is deemed to be such an important factor that the other requisites may even be disregarded.13 Thus, in the case of Cosmopolitan Funeral Homes, Inc. v. Maalat, it was held that to determine whether a person who performs work for another is the latters employee or is an independent contractor, the prevailing test is the right of control test. In the said case, the petitioner therein failed to prove that the contract with private respondent was that of a mere agency, an indication that subject person is free to accomplish his work on his own terms and may engage in other means of livelihood.14 Viewed in the light of the foregoing criteria, the features of the relationship between Javier and the Sandigan Realty, as may be gleaned from the facts described herein below by the Office of the Solicitor General, readily negate the existence of an employer-employee relationship between them, the element of control being noticeably absent. Javier was hired in 1982 to sell houses or lots owned by the Realty. She was paid 5% commission for every lot or house sold. From 1982 up to 1986 when she was hired as a marketing collector of petitioner bank, she received from the Realty P500.00 monthly allowance if she was unable to make any sale. The P500.00 allowance ceased when she became a regular employee of the petitioner bank. Javier sold houses or lots according to the manner or means she chose to. The petitioner realty firm, while interested in the result of her work, had no control with respect to the details of how the sale of a house or lot was achieved. She was free to adopt her own selling methods or free to sell at her own time. (cf. Insular Life Assurance _______________ 11 Ruga v. NLRC, supra, p. 273. 12 Cabalan Pastulan Negrito Labor Association v. NLRC, supra, pp. 652-653. 13 Sara v. Agarrado, 166 SCRA 625; 630 [1988]. 14 187 SCRA 108, 113 [1990]. 135 VOL. 254, FEBRUARY 26, 1996

135 Sandigan Savings and Loan Bank, Inc. vs. NLRC Co., Ltd. v. NLRC, 179 SCRA 459 [1989]). Her obligation was merely to turn over the proceeds of each sale to the Realty and, in turn, the Realty paid her by the job, i.e., her commission, not by the hour. Moreover, selling houses and lots was merely her sideline or extra work for a sister company.15 As it appears that Sandigan Realty had no control over the conduct of Javier as a realty sales agent since its only concern or interest was in the result of her work and not in how it was achieved, there cannot now be any doubt that Javier was not an employee, much less a regular employee of the Sandigan Realty. Hence, she cannot be entitled to the right to security of tenure nor to backwages and separation pay as a consequence of her separation therefrom. Evidently, the legal relation of Javier to the Sandigan Realty can be that of an independent contractor, where the control of the contracting party is only with respect to the result of the work, as distinguished from an employment relationship where the person rendering service is under the control of the hirer with respect to the details and manner of performance.16 In the case of Sara v. Agarrado, private respondent who sold palay and rice for the petitioners under an arrangement or agreement that the former would be paid P2.00 commission per sack of milled rice sold as well as a commission of 10% per kilo of palay purchased,17 and that she would spend her own money for the undertaking, and where she was shown to have worked for petitioners at her own pleasure, that she was not subject to definite hours or conditions of work, that 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, was held _______________ 15 See Note 4; Rollo, pp. 166-167. 16 Perfecto Fernandez, LABOR RELATIONS LAW, pp. 22-23 [1985]. 17 See Note 13, p. 628. 136 136 SUPREME COURT REPORTS ANNOTATED Sandigan Savings and Loan Bank, Inc. vs. NLRC to be an independent contractor.18 By the same token, the private respondent in another case,19 who earns on a per head/talent

commission basis and who works as she pleases, on her own schedule, terms and conditions was also held to be an independent contractor. Private respondent Anita Javier is clearly similarly placed as the private respondents in the above-cited cases. Hence, she could not have been a regular employee but an independent contractor in relation to the petitioner Sandigan Realty. As we hold that private respondent was not a regular employee of the Sandigan Realty and that she could not, therefore, be entitled to backwages and separation pay, we will necessarily have to limit our treatment of the alleged errors committed by the NLRC in the computation of the monetary award to that adjudged against the petitioner Sandigan Bank. But, first, we have to settle the question as to whether reinstatement or payment of separation pay in its stead is the proper relief to be accorded the private respondent, it appearing that neither the labor arbiter nor the NLRC made a definitive ruling on the matter. This has become especially more significant since private respondent, in her Comment20 and Memorandum,21 presses for an order of reinstatement to her former position, claiming that there is no sufficient basis for a grant of separation pay in lieu thereof. We agree with the private respondent in this respect. Private respondent Anita Javier, by virtue of her employment status, is, under the law entitled to security of tenure, which means that she has the right to continue in employment until the same is terminated under conditions required by law. Article 279 of the Labor Code, as amended, clearly provides that: _______________ 18Id., p. 631. 19 Beech v. de Guzman, 187 SCRA 773, 775 [1990]. 20 Private Respondents Comment, Rollo, pp. 175-184. 21 Memorandum for Private Respondent, Rollo, pp. 212-219. 137 VOL. 254, FEBRUARY 26, 1996 137 Sandigan Savings and Loan Bank, Inc. vs. NLRC Security of Tenure.In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by the Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

There being a finding of illegal dismissal of private respondent Anita Javier, her reinstatement should follow as a matter of course, unless it be shown that the same is no longer possible, in which case, payment of separation pay will be ordered, in lieu thereof.22 In this case, we do not find any such showing or basis to preclude private respondents reinstatement. In effect, the petitioner bank is liable to private respondent only for backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from the time her compensation was withheld from her up to the time of her actual reinstatement, at the rate of her latest monthly salary and allowance which was in the total amount of P2,350.00 as shown by Javiers latest Notice of Salary Adjustment. However, earnings derived elsewhere by Javier from the date of dismissal up to the date of reinstatement, if there be any, should be deducted from said backwages.23 In this connection, it must be pointed out that the NLRC applied the old rule, otherwise known as the Mercury Drug Rule, and so, as to the rate of P2,400.00, no evidence was presented as basis. The rule that should apply in this case is that provided in Article 279 of the Labor Code, as amended by Section 34, Republic Act No. 6715, as aforequoted, which took effect on March 21, 1989, considering that the private respondents dismissal occurred thereafter, or on April 20, 1990. _______________ 22 De Ysasi III v. NLRC, 231 SCRA 173, 197 [1994]. 23 Gaco v. NLRC, 230 SCRA 260, 267 [1994] citing Pines City Education Center, et al., v. NLRC, et al., 227 SCRA 655. 138 138 SUPREME COURT REPORTS ANNOTATED Sandigan Savings and Loan Bank, Inc. vs. NLRC WHEREFORE, the petition is GRANTED. The assailed resolutions of the National Labor Relations Commission, dated 24 September 1993 and 19 November 1993, are hereby modified to conform both to our finding that private respondent was not a regular employee of Sandigan Realty Development Corporation but of the Sandigan Savings and Loan Bank, Inc. and to our determination respecting the monetary award to which the private respondent is entitled. The petitioner Sandigan Savings and Loan Bank, Inc. is hereby ordered to reinstate private respondent Anita Javier and to pay her backwages from April 20, 1990 up to the date of her actual reinstatement, less earnings derived elsewhere, if any. SO ORDERED. Bellosillo, Vitug and Kapunan, JJ., concur. Padilla (Chairman), J., See concurring and Dissenting Opinion. CONCURRING AND DISSENTING OPINION

PADILLA, J.: I concur in the ponencia of Mr. Justice Regino Hermosisima, Jr. including its holding that because of the illegal dismissal, the backwages to be awarded to the dismissed employee (Anita Javier) should be reckoned from the date of illegal dismissal to date of actual reinstatement (thereby departing from the Mercury Drug Rule). Article 279 of the Labor Code as amended by Rep. Act No. 6715 provides for such a period as the basis in the computation of backwages. I do not however agree to the deduction from backwages of income or salaries earned by the employee from elsewhere during the period of his illegal dismissal. As I stated in my separate opinion in Pines City Educational Center v. NLRC G.R. No. 96779, 10 November 1993, 227 SCRA 655: x x x. The amendment to Art. 279 of the Labor Code introduced by Rep. Act No. 6715 inserted the qualification full to the word 139 VOL. 254, FEBRUARY 26, 1996 139 Sandigan Savings and Loan Bank, Inc. vs. NLRC backwages. The intent of the law seems to be clear. The plain words of the statute provide that an employee who is unjustly dismissed is entitled to FULL backwages from the time of his dismissal to actual reinstatement. The law provides no qualification nor does it state that income earned by the employee during the period between his unjust dismissal and reinstatement should be deducted from such backwages. When the law does not provide, the Court should not improvise. It is further my view that the principle of unjust enrichment (if no deduction is allowed from backwages) does not apply in this case, for the following reasons: 1. The applicable provision of law should be construed in favor of labor. 2. The Labor Code is special law which should prevail over the Civil Code provisions on unjust enrichment. 3. The language employed by the statute and, therefore, its intent are clear. Where the unjust dismissal occurs after Rep. Act No. 6715 took effect, backwages must be awarded from the time the employee is unlawfully dismissed until the time he is actually reinstated. There is no provision authorizing deduction of any income earned by the employee during that period. The statutory formula was evidently crafted by the legislature not only for convenience and expediency in executing the monetary judgments in favor of the employees but also to prevent the employer from resorting to delaying tactics when the judgment is executed by pleading income earned by the employee before reinstatement as proper deductions from backwages. It is true that the dismissed employee may also resort to the same delaying tactics but when we consider the by and large inherent inequality of resources between employer and employee, the legislative formula would seem to be equitable. Besides and this we

cannot over-stressgiven the language of the law, the Court appears to have no alternative but to award such full backwages without deduction or qualification. Any other interpretation opens the Court to the charge of indulging in judicial legislation. I therefore vote to award private respondents Roland Picart and Lucia Chan full backwages from time of their unjust dismissal to their actual reinstatement, without deduction or qualification in accordance with the mandate of the law (Rep. Act No. 6715). Petition granted. 140 140 SUPREME COURT REPORTS ANNOTATED People vs. Esquila Note.Independent contractors are those who exercise independent employment, contracting to do a piece of work according to their own methods and without being subject to control of their employer except as to the result of their work. (Villuga vs. National Labor Relations Commission, 225 SCRA 537 [1993]) o0o [Sandigan Savings and Loan Bank, Inc. vs. NLRC, 254 SCRA 126(1996)]

G.R. No. 120506.October 28, 1996.* PHILIPPINE AIRLINES, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, HON. LABOR ARBITER CORNELIO LINSANGAN, UNICORN SECURITY SERVICES, INC., and FRED BAUTISTA, et al., respondents. Labor Law; Employer-Employee Relationship; Elements.We have pronounced in numerous cases that in determining the existence of an employer-employee relationship, the following elements are generally considered: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power to dismiss; and (4) the power to control the employees conduct. _______________ * THIRD DIVISION. 639 VOL. 263, OCTOBER 28, 1996 639 Philippine Airlines, Inc. vs. NLRC Same; Same; Security Guards; Jurisdiction; The Labor Arbiter has no jurisdiction over a claim filed where no employer-employee relationship existed between a company and the security guards assigned to it by a security service contractor.Even if we disregard the explicit covenant in said agreement that there exists no employer-employee relationship between CONTRACTOR and/or his guards on the one hand, and PAL on the other all other considerations confirm the fact that PAL was not the security guards employer. Analogous to the instant case is Canlubang Security Agency Corp. vs. NLRC. Considering then that no employer-employee relationship existed between PAL and the security guards, the Labor Arbiter had no jurisdiction over the claim in NLRC-NCR Case No. 00-11-06008-90. Same; Same; Same; Indirect Employers; Read together, Articles 106 and 109 of the Labor Code simply mean that the party with whom an independent contractor deals is solidarily liable with the latter for unpaid wages, and only to that extent and for that purpose that the latter is considered a direct employer.The Labor Arbiter cannot avoid the jurisdictional issue or justify his assumption of jurisdiction on the pretext that PAL was the indirect employer of the security guards under Article 107 in relation to Articles 106 and 109 of the Labor Code and, therefore, it is solidarily liable with USSI. We agree with the Solicitor General that these Articles are inapplicable to PAL under the facts of this case. While USSI is an independent contractor under the security service agreement and PAL may be considered an indirect employer, that status did not make PAL the employer of the security guards in every respect. As correctly posited by the Office of the Solicitor General, PAL may be considered an indirect employer only for purposes of unpaid wages since Article 106, which is applicable to the situation contemplated in Section 107, speaks of wages. The concept of indirect employer only relates or refers to the liability for unpaid wages. Read together, Articles 106 and 109 simply mean that that party with whom an independent contractor deals is solidarily liable with the latter for unpaid wages, and only to that extent and for that purpose that the latter is considered a direct employer. Same; Same; Same; Same; Words and Phrases; Wage, Defined.The term wage is defined in

Article 97(f) of the Labor Code as the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on 640 640 SUPREME COURT REPORTS ANNOTATED Philippine Airlines, Inc. vs. NLRC a time, task, piece, or commission basis, or other method of calculating the unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee. Same; Same; Same; Same; A breach of a security service agreement could only give rise to damages under the Civil Code, which is cognizable by the appropriate regular court of justice.No valid claim for wages or separation pay can arise from the security service agreement in question by reason of its termination at the instance of PAL. The agreement contains no provision for separation pay. A breach thereof could only give rise to damages under the Civil Code, which is cognizable by the appropriate regular court of justice. Same; Same; Same; Same; The Labor Arbiter commits grave abuse of discretion if he disregards the rule he is bound to observe, such as when he fails to resolve forthwith a motion to dismiss grounded on lack of jurisdiction, improper venue, res judicata or prescription.The Labor Arbiters lack of jurisdiction was too obvious from the allegations in the complaint and its annex (the security service agreement) in NLRC-NCR Case No. 00-11-06008-90. The Labor Arbiter then should have forthwith resolved the motion to dismiss and the supplemental motion to dismiss. As correctly pointed out by PAL, under Section 15 of Rule V of the New Rules of Procedure of the NLRC, any motion to dismiss on the ground of lack of jurisdiction, improper venue, res judicata, or prescription shall be immediately resolved by the Labor Arbiter by a written order. Yet, the Labor Arbiter did not, and it was only in his decision that he mentioned that the resolution of the motion to dismiss was deferred until this case is decided on the merits because the ground therefor was not indubitable. On this score the Labor Arbiter acted with grave abuse of discretion for disregarding the rules he was bound to observe. Same; Appeals; Pleadings and Practice; Negligence; Belief in good faith by an employer as to the exact date of its receipt of a decision renders excusable any negligence it might have committed; The higher interest of justice favors a relaxation of the rule on perfection of appeals in labor cases where there is a delay of only one day in the filing of the appeal, considered along with the fact that the 641 VOL. 263, OCTOBER 28, 1996 641

Philippine Airlines, Inc. vs. NLRC Labor Arbiter had no jurisdiction over the subject matter of the claim and that the security guards are not in fact entitled to separation pay under the security service agreement.We shall now turn to the issue of tardiness of the appeal. The record does indeed show that on the original copy of the Notice of Judgment/Final Order, there is stamped by the PAL Legal Department the date of its receipt of the decision, viz., AUG. 23 1991. It is not also denied by respondents that on the right upper hand corner of PALs copy of the Notice of Judgment/Final Orders, there is stamped the date of receipt thereof by PAL Legal Department, viz., AUG. 26 1991. PAL explained how this discrepancy occurred and how its counsel was misled into believing that PAL received a copy of the decision only on 26 August 1991. This belief in good faith rendered excusable any negligence it might have committed. Besides, the delay in the perfection of the appeal was only one day. Considering that the Labor Arbiter had no jurisdiction over the subject matter of NLRC-NCR Case No. 00-11-06008-90 and that the 16 security guards are not in fact entitled to separation pay under the security service agreement, the higher interest of justice favors a relaxation of the rule on perfection of appeals in labor cases. Same; Same; Same; While it is an established rule that the perfection of an appeal in the manner and within the period prescribed by law is not only mandatory but jurisdictional, and failure to perfect an appeal has the effect of rendering the judgment final and executory, it is equally settled that the NLRC may disregard the procedural lapse where there is an acceptable reason to excuse tardiness in the taking of the appeal.While it is an established rule that the perfection of an appeal in the manner and within the period prescribed by law is not only mandatory but jurisdictional, and failure to perfect an appeal has the effect of rendering the judgment final and executory, it is equally settled that the NLRC may disregard the procedural lapse where there is an acceptable reason to excuse tardiness in the taking of the appeal. Among the acceptable reasons recognized by this Court are (a) counsels reliance on the footnote of the notice of the decision of the Labor Arbiter that the aggrieved party may appeal . . . within ten (10) working days; (b) fundamental consideration of substantial justice; (c) prevention of miscarriage of justice or of unjust enrichment, as where the tardy appeal is from a decision granting separation pay which was already granted in an earlier final decision; and (d) special circumstances of the case combined with its legal merits or the amount and the issue 642 642 SUPREME COURT REPORTS ANNOTATED Philippine Airlines, Inc. vs. NLRC involved. A one-day delay in the perfection of the appeal was excused in Pacific Asia Overseas Shipping Corp. vs. NLRC, Insular Life Assurance Co. vs. NLRC, and City Fair Corp. vs. NLRC. Same; Same; Same; The Labor Arbiters lack of jurisdiction so palpably clear on the face of the complaint and the perpetuation of unjust enrichment if the appeal is disallowed are enough combination of reasons that warrant a relaxation of the rules on perfection of appeals in labor cases. In the instant case, the Labor Arbiters lack of jurisdiction so palpably clear on the face of the complaint and the perpetuation of unjust enrichment if the appeal is disallowed are enough combination of reasons that warrant a relaxation of the rules on perfection of appeals in labor cases.

SPECIAL CIVIL ACTION in the Supreme Court. Certiorari. The facts are stated in the opinion of the Court. Bienvenido T. Jamoralin, Jr. for petitioner. Romulo R. Candoy for private respondents. DAVIDE, JR.,J.: This is a petition for certiorari under Rule 65 of the Rules of Court to annul the decision of the Labor Arbiter dated 12 August 1991 in NLRC Case No. 00-11-06008-90 and the resolutions of public respondent National Labor Relations Commission (NLRC) promulgated on 27 October 1994 and 31 May 1995 dismissing the appeal filed by the petitioner and denying the motion for reconsideration, respectively. The dispute arose from these antecedents: On 23 December 1987, private respondent Unicorn Security Services, Inc. (USSI) and petitioner Philippine Airlines, Inc. (PAL) executed a security service agreement.1 USSI was designated therein as the CONTRACTOR. Among the pertinent terms and conditions of the agreement are as follows: _______________ 1 Original Records (OR), 6-13; Rollo, 50-57. 643 VOL. 263, OCTOBER 28, 1996 643 Philippine Airlines, Inc. vs. NLRC (4)The CONTRACTOR shall assign to PAL an initial force of EIGHTY ONE (81) bodies . . . which may be decreased or increased by agreement in writing . . . It is, of course, understood that the CONTRACTOR undertakes to pay the wages or salaries and cost of living allowance of the guards in accordance with the provisions of the Labor Code, as amended, the different Presidential Decrees, Orders and with the rules and regulations promulgated by competent authorities implementing said acts, assuming all responsibilities thereof . . . . xxx (6)Without any expense on the part of PAL, CONTRACTOR shall see to it that the guards assigned to PAL . . . are provided, at the expense of CONTRACTOR, with the necessary firearms, ammunitions and facilities needed for the rendition of the security services as aforesaid;

(7)CONTRACTOR shall select, engage and discharge the guards, employees, or agents, and shall otherwise direct and control their services herein provided or heretofore to be set forth or prescribed. The determination of wages, salaries and compensation of the guards or employees of the CONTRACTOR shall be within its full control but shall in no way contravene existing laws on the matter. It is further understood that CONTRACTOR as the employer of the security guards agrees to comply with all relevant laws and regulations, including compulsory coverage under the Social Security Act, Labor Code, as amended and the Medical Care Act, in its operations. Although it is understood and agreed between parties hereto that CONTRACTOR in the performance of its obligations under this Agreement, is subject to the control and direction of PAL merely as to the result as to be accomplished by the work or services herein specified, and not as to the means and methods for accomplishing such result, CONTRACTOR hereby warrants that it will perform such work or services in such manner as will achieve the result herein desired by PAL. (8)Discipline and administration of the security guards shall be the sole responsibility of the CONTRACTOR to the end that CONTRACTOR shall be able to render the desired security service requirements of PAL. CONTRACTOR, therefore, shall conform to such rules and regulations that may be issued by PAL. For this purpose, Annex A, which forms part of this Agreement, contains such rules and regulations and CONTRACTOR is expected to comply with them. At its discretion, PAL may, however, work out 644 644 SUPREME COURT REPORTS ANNOTATED Philippine Airlines, Inc. vs. NLRC with CONTRACTOR such rules and regulations before their implementation. (9)Should PAL at any time have any justifiable objection to the presence in its premises of any of CONTRACTORs officer, guard or agent under this Agreement, it shall send such objection in writing to CONTRACTOR and the latter shall immediately take proper action. (10)The security guards employed by CONTRACTOR in performing this Agreement shall be paid by the CONTRACTOR and it is distinctly understood that there is no employee-employer relationship between CONTRACTOR and/or his guards on the one hand, and PAL on the other. CONTRACTOR shall have entire charge, control and supervision of the work and services herein agreed upon, and PAL shall in no manner be answerable or accountable for any accident or injury of any kind which may occur to any guard or guards of the CONTRACTOR in the course of, or as a consequence of, their performance of work and services under this Agreement, or for any injury, loss or damage arising from the negligence of or carelessness of the guards of the CONTRACTOR or of anyone of its employ to any person or persons or to its or their property whether in the premises of PAL or elsewhere; and the CONTRACTOR hereby covenants and agrees to assume, as it does hereby assume, any and all liability or on account of any such injury, loss or damage, and shall indemnify PAL for any liability or expense it may incur by reason thereof and to hold PAL free and harmless from any such liability. xxx

(13)For and in consideration of the services to be rendered by CONTRACTOR under these presents, PAL shall pay CONTRACTOR the amount of PESOS NINE & 40/100 CTVS (P9.40) PER HOUR multiplied by 905 hours equivalent to PESOS TWO HUNDRED SEVENTY FIVE THOUSAND NINE HUNDRED NINE & 58/100 CTVS, Philippine currency,-(P275,909.58) the basis of eight (8) working hours per office/guard a day, Sundays and holidays included, the same to be payable on or before the 15th of each month for services on the first half of the month and on or before the end of the month for services for the 2nd half of the month. Nothing herein contained shall prevent the parties from meeting for a review of the rates should circumstances warrant. x x x645 VOL. 263, OCTOBER 28, 1996 645 Philippine Airlines, Inc. vs. NLRC (20)This Agreement shall take effect on 06 December 1987 and shall be in force for a period of SIX (6) MONTHS-05 JUNE 1988 thereafter it shall continue indefinitely unless sooner terminated upon thirty (30) days notice served upon by one party to the other, except as provided for in Articles 16, 17 & 18 hereof. Sometime in August of 1988, PAL requested 16 additional security guards. USSI provided what was requested; however, PAL insisted that what USSI did was merely to pick out 16 guards from the 86 already assigned by it and directed them to render overtime duty. On 16 February 1990, PAL terminated the security service agreement with USSI without giving the latter the 30-day prior notice required in paragraph 20 thereof. Instead, PAL paid each of the security guards actually assigned at the time of the termination of the agreement an amount equivalent to their one-month salary to compensate for the lack of notice. In November 1990, USSI, allegedly in its capacity as Trustee for Sixteen or so Security Guards, filed with the NLRC Arbitration Branch, National Capital Region, a complaint2 against PAL for the recovery of P75,600.00 representing termination pay benefit due the alleged 16 additional security guards, which PAL failed and refused to pay despite demands. It further asked for an award of not less than P15,000.00 for each of the 16 guards as damages for the delay in the performance of PALs obligation, and also for attorneys fees in an amount equivalent to 10% of whatever might be recovered. Pertinent portions of the complaint read as follows: 3.By virtue of said contract and upon its effectivity, respondent required eighty-six (86) security guards whom complainant USSI supplied; on or sometime in August 1989, respondent asked for sixteen (16) security guards to render twelve (12) hours each. 4.In February 1990 and for reasons of its own, respondent caused to terminate not only the contract but also the services of the security guards; in effecting such termination, said respondent caused to pay

the equivalent of one (1) months notice unto all the _______________ 2 OR, 2-4; Rollo, 46-48. 646 646 SUPREME COURT REPORTS ANNOTATED Philippine Airlines, Inc. vs. NLRC security guards, except the 16 who, as aforementioned were rendering 12 hours each from date of assignment up to and until their termination. 5.As computed, the termination pay benefits due the 16 security guards amount to P75,600.00, more or less, which, despite demands, respondent fails, neglects or refuses to pay, as it continue refusing, failing or neglecting to so do up to the present time. 6.Respondent has not only incurred in delay in the performance of its obligation but also contravened the tenor thereof; hence, complainants are, by law, entitled to be indemnified with damages for no less than P15,000.00 each for all complainants though the correct amount is left solely to the sound discretion of the Honorable Labor Arbiter. 7.Complainants are now compelled to litigate their plainly valid, just or demandable claim on account of which services of counsel have been required and thereby obligated themselves to pay, for and as attorneys fees, the sum equivalent to ten percent (10%) of whatever sums or sum may be recovered in the case. The complaint was docketed as NLRC-NCR Case No. 00-11-06008-90 and assigned to Labor Arbiter Cornelio L. Linsangan. PAL filed a motion to dismiss the complaint3 on the grounds that the Labor Arbiter had no jurisdiction over the subject matter or nature of the complaint and that USSI had no cause of action against PAL. In amplification thereof, PAL argued that the case involved the interpretation of the security service agreement, which is purely civil in character and falls outside of the Labor Arbiters jurisdiction. It is clear from Article 217 of the Labor Code that for claims to be within the jurisdiction of Labor Arbiters, they must arise from an employer-employee relationship. PAL claimed that USSI did not allege the existence of an employer-employee relationship between PAL and USSI or its guards, and that in fact, paragraph 10 of the agreement provides that there is no employer-employee relationship between the CONTRACTOR and/or his guards on the one hand and PAL on the other. _______________ 3 OR, 19-22; Rollo, 58-60.

647 VOL. 263, OCTOBER 28, 1996 647 Philippine Airlines, Inc. vs. NLRC In its Opposition,4 USSI pointed out that PAL forgot or overlooked the fact that insofar as labor standards, benefits, etc. have to be resolved or adjudicated, liability therefor is shifted to, or assumed by, respondent [herein petitioners] which, in law, has been constituted as an indirect employer. PAL filed a supplemental motion to dismiss5 wherein it cites the following reasons for the dismissal of the complaint: (1) the clear stipulations in the agreement (paragraphs 4 and 10) that there exists no employer-employee relationship between PAL on the one hand and USSI and the guards on the other; (2) there were no 16 additional guards, as the 16 guards who were required to render 12-hour shifts were picked out from the original 86 guards already assigned and were already given a one-month salary in lieu of the 30-day notice of termination of the agreement; (3) USSI had no legal personality to file the case as alleged trustee of the 16 security guards; and (4) the real parties in interest the 16 security guards never showed any interest in the case either by attending any hearing or conference, or by following up the status of the case. Attached to the supplemental motion to dismiss were, among other things, xerox copies of confirmation letters of USSI to PAL to show that no additional guards were in fact provided.6 Labor Arbiter Linsangan did not resolve the motion to dismiss and the supplemental motion to dismiss. On 12 August 1991, he handed down a decision7 ordering PAL to pay: (1) the sum of P75,600.00 representing the equivalent of one-months separation pay due the 16 individual security guards, plus 10% interest from the date of filing of the case until the whole obligation shall have been fully settled; (2) the sum of P5,000.00 by way of exemplary damages due each of _______________ 4 OR, 27-29. 5 Id., 48-58; Rollo, 64-74. 6 Id., 59-65; Id., 75-76. 7 Id., 66-71; Id., 40-45. 648 648 SUPREME COURT REPORTS ANNOTATED

Philippine Airlines, Inc. vs. NLRC the 16 security guards; and (3) another sum equivalent to 10% of the total award for and as attorneys fees. It was in that decision that Labor Arbiter Linsangan mentioned for the first time that the resolution of the motion to dismiss and supplemental motion to dismiss was deferred until [the] case is decided on the merits considering the ground not to be indubitable. In holding that he had jurisdiction over the case, he stated: As heretofore and invariably held in similar cases, the issue of whether or not Labor Arbiters have jurisdiction over money claims affecting security guards assigned by security agencies (like complainant herein) to their client-companies such as PAL is, more or less, settled, especially since, as the law views such as peculiar relationship, such money claims insofar as they have to be paid, are the ultimate responsibility of the client-firms. In effect, the security guards have been constituted as indirect employees of the client just as the client becomes the indirect employer of the guards. Art. 107 and 109 of the Labor Code expressly provide that . . . . To justify the awards, Labor Arbiter Linsangan opined: Evidence adduced clearly show that sometime in December 1987, aforementioned security service contract was executed, based on which the required number of security guards were assigned to, or posted at, the various premises of respondent PAL. Said number of security guards may, as the contract provides, be increased or reduced at respondents request, such that the original number of eighty-six (86) guards, an additional sixteen (16) were needed and, accordingly supplied who, pursuant to PALs instructions, were required to render twelve (12) hours each, per day. In February 1990, and for reasons of its own, PAL caused to terminate, as it did, the contract of security service. Unequivocably, it caused to pay the separation pay benefits of the 86-security guards for the equivalent amount of one (1) months pay. As to the additional 16, it failed and refused to grant similar equivalent, without any valid reasons therefor. As earlier stated, respondent opted to rely solely on the ground set forth in its Motion to Dismiss as well as Supplement thereto. It failed to file, despite directive made thereon, its position paper. 649 VOL. 263, OCTOBER 28, 1996 649 Philippine Airlines, Inc. vs. NLRC Neither did it submit, nor adduce, evidence (documentary or otherwise) to rebut or controvert complainants claims especially since the money equivalent of the one month separation pay due the 16 guards has been duly quantified as amounting to Seventy Five Thousand Six Hundred (P75,600.00) Pesos. Thus established, it is clear that there was absolutely no legal/justifiable reason why said 16 guards applied and who rendered 12 hours each per day had to be discriminated against.

Following PALs failure or refusal to pay, demands were made by complainant, asking at the same time why that was so. Conceivably, respondent has smarted itself on its mistaken belief that there was, as between the guards and itself, no employer-employee relationship and, hence, there is no legal basis for it to pay. If that was so, why did it pay separation pay unto the 86 regular employed guards. PAL being widely known as a progressively-minded employer, it should be the first to show good example for emulation. In this instant case, it did not; in fact, its actuations were not consistent with good faith. It should, therefore, be held liable for exemplary damages and having required complainant to litigate a plainly valid, just or demandable claim, an award for attorneys fees must perforce be assessed. On 3 September 1991, PAL filed its Appeal8 wherein it indicated that it received a copy of the decision on 26 August 1991. Attached thereto was a machine copy of the Notice of Judgment/Final Order, with the date of its receipt, i.e., 26 August 1991,9 having been stamped on the upper right hand corner by PALs Legal Department. USSI countered this Appeal with a motion for execution of judgment10 on the ground that since PAL, received a copy of the decision on the 23rd, not on the 26th, of August 1991 it had until 2 September 1991 to appeal; hence, the appeal interposed on 3 September was late by one day. The decision had then become final and executory. _______________ 8 OR, 73-89; Rollo, 82-105. 9 Id., 93. 10 Id., 105-106; Id., 102-103. 650 650 SUPREME COURT REPORTS ANNOTATED Philippine Airlines, Inc. vs. NLRC In its opposition11 to this motion, PAL insisted that it received a copy of the decision on 26 August 1991; thus, it had until 5 September 1991 to file its appeal. On 30 September 1991, Labor Arbiter Linsangan issued a writ of execution.12 On 1 October 1991, PAL filed a motion to quash13 the writ of execution. It tried to explain therein why it thought all along that it received a copy of the decision on 26 August 1991, thus: 4.Upon investigation the undersigned counsel learned that on 23 August 1991 (Friday) a servermessenger went to PAL Legal Department to serve said decision. The receiving clerks at that time were

all out of the office so that the server persuaded a secretary, Ms. April Rose del Rosario to receive the same, notwithstanding the fact that Ms. Del Rosario told him (server) that she was not authorized to receive documents for and in behalf of PAL. Ms. Del Rosario then stamped the date of receipt on the services copy without stamping (the date of receipt) PALs copy of the decision which was left by the server. Thereafter, Ms. Del Rosario placed PALs copy of the Decision on the incoming documents rack of the receiving clerk. Attached herewith is the affidavit of Ms. Del Rosario and as Annex A hereof. 5. On 26 August 1991 (Monday), the receiving clerk/messenger Mr. Greg Soriano upon finding the Decision among the documents in the incoming documents rack, immediately stamped Received 26 August 1991 thereon, on the honest and sincere belief that the same just arrived that day (26 August 1991). He then forwarded the same to the secretary of the undersigned counsel. Attached herewith is the affidavit of Mr. Greg Soriano marked as Annex B hereof. 6. The undersigned counsel believing that the said decision was received on 26 August 1991 reckoned/counted the ten (10) day period for appeal from said date. _______________ 11 Id., 108-109; Id., 104-105. 12 Id., 113-114; Id., 106-107. 13 Id., 116-117; Id., 109-110. 651 VOL. 263, OCTOBER 28, 1996 651 Philippine Airlines, Inc. vs. NLRC 7.Considering the foregoing circumstances, the undersigned counsels innocent reliance on the date of receipt stamped on the copy of the Decision furnished him was clearly due to an innocent mistake and/or excusable neglect. Hence, justice and equity dictates that respondent PAL should be considered to have filed its Appeal within the reglementary period for Appeal.14 On 8 October 1991, Labor Arbiter Linsangan issued an order15 denying the motion to quash. On 10 October 1991, PAL appealed16 to the NLRC the aforesaid order of 8 October 1991 on the ground that it was issued with grave abuse of discretion. In its resolution of 27 October 1994,17 the Second Division of the NLRC dismissed PALs appeal for having been filed out of time. It sustained the Labor Arbiters finding that PAL had received a copy of the decision on 23 August 1991, and hence the last day to appeal was 2 September 1991. It ruled that

whether or not the decision was received by an employee other than the receiving clerk or messenger was of no moment, as the proper performance of employees duties was PALs concern. On 31 May 1995, the NLRC denied the motion for reconsideration18 for the reason that it cannot accept PALs excuse as it may open the floodgates to abuse; and that the lapse of the period to appeal had already deprived the Commission of jurisdiction over the case.19 PAL then filed this special civil action for certiorari under Rule 65 of the Rules of Court alleging that (1) public respondents committed serious and patent error in failing to declare that the Labor Arbiter had no jurisdiction over the instant _______________ 14 OR, 115-116. 15 Id., 125. 16 Id., 128-143. 17 Per Commissioner Calaycay, V., with Commissioners Aquino, R. and Rayala, R., concurring; Rollo, 29-34. 18 Rollo, 177-185. 19 Id., 36-38. 652 652 SUPREME COURT REPORTS ANNOTATED Philippine Airlines, Inc. vs. NLRC case; (2) The Labor Arbiter gravely abused its discretion in ordering PAL to pay the separation pay of the 16 security guards assigned at PALs premises by USSI; and (3) respondent NLRC committed grave abuse of discretion in declaring PALs appeal to have been filed out of time. PAL argues that since USSIs cause of action was founded on the security service agreement, and that thereunder no employer-employee relationship existed between PAL and the security guards who were USSIs employees, the Labor Arbiter had no jurisdiction over the complaint. Moreover, assuming arguendo that the claims of the security guards were valid, USSI had no personality to file the complaint, for there is nothing whatsoever to show that it was expressly authorized by the security guards to act as their trustee. As to the second assigned error, PAL asserts that it is not liable to pay separation pay because (1) it was not the employer of the security guards; (2) even as an indirect employer, as held by the Labor Arbiter, its liability was limited to violations of labor standards law, and non-payment of the separation pay is

not a violation of the said law; (3) the security service agreement with USSI did not provide for payment of separation pay; (4) the payment made to the 86 security guards upon the termination of the agreement without the prior 30-day notice was not for separation pay but a benefit in lieu of the 30-day notice required under paragraph 20 of the agreement; and (5) since PAL was not the employer of the security guards, in no way could it terminate their services. In its third assigned error, PAL submits that rules of procedure ought not to be applied in a very rigid technical sense, since they are used only to help secure and not override substantial justice, especially in this case where the appeal was meritorious. Moreover, the delay in the perfection of the appeal, reckoned from the finding of the Labor Arbiter, was only one day; but if reckoned from what its counsel innocently believed to be PALs date of receipt of the decision, which was 26 August 1991, the appeal could be said to have been seasonably filed.653 VOL. 263, OCTOBER 28, 1996 653 Philippine Airlines, Inc. vs. NLRC In its Comment, USSI points out that the grounds relied upon by PAL are based on factual issue, namely, the discrimination made by PAL in paying the 86 and not the 16 security guards. It argues that the case touched upon the rights of the 16 security guards as employees; thus, the same was within the jurisdiction of the Labor Arbiter. As regards PALs plea for the relaxation of the rule on perfection of appeals, USSI contends that the negligence of PALs counsel should not be deemed compelling reason to warrant relaxation of the rule. In its Manifestation and Motion in Lieu of Comment,20 the Office of the Solicitor General agrees with PAL that the Labor Arbiter did not have jurisdiction over the complaint because there was no employeremployee relationship between PAL and the 16 security guards; that Articles 107 and 109 of the Labor Code which provide for joint and several liability for payment of wages by the direct and indirect employer find no application in the present case because the 16 security guards employed by USSI were not after unpaid wages; and that in the interest of justice and considering that the appeal was filed only one day late, the rule on perfection of appeals should have been relaxed to prevent a miscarriage of justice. In view of the stand of the Office of the Solicitor General, we advised public respondents to file their own comment if they so desired. In their Comment, the NLRC and Labor Arbiter Linsangan maintain that they had jurisdiction over the case because of Articles 107 and 109 of the Labor Code which constitute PAL as indirect employer of the 16 security guards, there being a question involving separation pay due the latter; that the 16 security guards were entitled to separation pay, because PAL paid the other 86 security guards when the service agreement was terminated; and that for the NLRC to excuse the delay of one day in filing the appeal would open the floodgates of abuse. The instant petition is impressed with merit. _______________

20 Rollo, 202-216. 654 654 SUPREME COURT REPORTS ANNOTATED Philippine Airlines, Inc. vs. NLRC We agree with petitioner PAL that the Labor Arbiter was without jurisdiction over the subject matter of NLRC-NCR Case No. 00-11-06008-90, because no employer-employee relationship existed between PAL and the security guards provided by USSI under the security service agreement, including the alleged 16 additional security guards. We have pronounced in numerous cases21 that in determining the existence of an employer-employee relationship, the following elements are generally considered: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power to dismiss; and (4) the power to control the employees conduct. In the instant case, the security service agreement between PAL and USSI provides the key to such consideration. A careful perusal thereof, especially the terms and conditions embodied in paragraphs 4, 6, 7, 8, 9, 10, 13 and 20 quoted earlier in this ponencia, demonstrates beyond doubt that USSI and not PAL was the employer of the security guards. It was USSI which (a) selected, engaged or hired and discharged the security guards; (b) assigned them to PAL according to the number agreed upon; (c) provided, at its own expense, the security guards with firearms and ammunitions; (d) disciplined and supervised them or controlled their conduct; (e) determined their wages, salaries, and compensation; and (f) paid them salaries or wages. Even if we disregard _______________ 21 Among others, see: Viana vs. Al-Lagadan, 99 Phil. 408, 411-412 [1956]; Social Security System vs. Court of Appeals, 39 SCRA 629, 636 [1971]; American President Lines vs. Clave, 114 SCRA 826, 832 [1982]; Besa vs. Trajano, 146 SCRA 501, 507 [1986]; Brotherhood Labor Unity Movement of the Philippines vs. Zamora, 147 SCRA 49, 54 [1987]; Bautista vs. Inciong, 158 SCRA 665, 668 [1988]; Agro Commercial Security Service Agency, Inc. vs. NLRC, 175 SCRA 790, 795 [1989]; Ruga vs. NLRC, 181 SCRA 266, 273 [1990]; Singer Sewing Machine Co. vs. Drilon, 193 SCRA 270, 275 [1991]; Canlubang Security Agency Corp. vs. NLRC, 216 SCRA 280, 284 [1992]; Vallum Security Services vs. NLRC, 224 SCRA 781, 785 [1993]; Air Material Wing Savings and Loan Association vs. NLRC, 233 SCRA 592, 594-595 [1994]. 655 VOL. 263, OCTOBER 28, 1996 655

Philippine Airlines, Inc. vs. NLRC the explicit covenant in said agreement that there exists no employer-employee relationship between CONTRACTOR and/or his guards on the one hand, and PAL on the other all other considerations confirm the fact that PAL was not the security guards employer. Analogous to the instant case is Canlubang Security Agency Corp. vs. NLRC.22 Considering then that no employer-employee relationship existed between PAL and the security guards, the Labor Arbiter had no jurisdiction over the claim in NLRC-NCR Case No. 00-11-06008-90. Article 217 of the Labor Code (P.D. No. 442), as amended, vests upon Labor Arbiters exclusive original jurisdiction only over the following: 1.Unfair labor practice cases; 2.Termination disputes; 3.If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and conditions of employment; 4.Claims for actual, moral, exemplary and other forms of damages arising from employer-employee relations; 5.Cases arising from any violation of Article 264 of this Code, including questions involving legality of strikes and lockouts; and 6.Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement. In all these cases, an employer-employee relationship is an indispensable jurisdictional requisite. The Labor Arbiter cannot avoid the jurisdictional issue or justify his assumption of jurisdiction on the pretext that PAL was the indirect employer of the security guards under Article 107 in relation to Articles 106 and 109 of the Labor Code and, _______________ 22 Supra, note 21. 656 656 SUPREME COURT REPORTS ANNOTATED Philippine Airlines, Inc. vs. NLRC

therefore, it is solidarily liable with USSI. We agree with the Solicitor General that these Articles are inapplicable to PAL under the facts of this case. Article 107 provides: ART.107.Indirect employer.The provisions of the immediately preceding Article shall likewise apply to any person, partnership, association or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job or project. The preceding Article referred to, which is Article 106, partly reads as follows: ART.106.Contractor or subcontractor.Whenever an employer enters into a contract with another person for the performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be paid in accordance with the provisions of this Code. In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. While USSI is an independent contractor under the security service agreement and PAL may be considered an indirect employer, that status did not make PAL the employer of the security guards in every respect. As correctly posited by the Office of the Solicitor General, PAL may be considered an indirect employer only for purposes of unpaid wages since Article 106, which is applicable to the situation contemplated in Section 107, speaks of wages. The concept of indirect employer only relates or refers to the liability for unpaid wages. Read together, Articles 106 and 109 simply mean that that party with whom an independent contractor deals is solidarily liable with the latter for unpaid wages, and only to that extent and for that purpose that the latter is considered a direct employer. The term wage is defined in Article 97(f) of the Labor Code as the remuneration or earnings, however 657 VOL. 263, OCTOBER 28, 1996 657 Philippine Airlines, Inc. vs. NLRC designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee. No valid claim for wages or separation pay can arise from the security service agreement in question by reason of its termination at the instance of PAL. The agreement contains no provision for separation pay. A breach thereof could only give rise to damages under the Civil Code, which is cognizable by the appropriate regular court of justice. Besides, there is no substantial proof that USSI in fact provided 16 additional guards. On the contrary, PAL was able to prove in the annexes attached to its supplemental

motion to dismiss that the 16 guards were actually picked out from the original group and were just required to render overtime service. The Labor Arbiters lack of jurisdiction was too obvious from the allegations in the complaint and its annex (the security service agreement) in NLRC-NCR Case No. 00-11-06008-90. The Labor Arbiter then should have forthwith resolved the motion to dismiss and the supplemental motion to dismiss. As correctly pointed out by PAL, under Section 15 of Rule V of the New Rules of Procedure of the NLRC, any motion to dismiss on the ground of lack of jurisdiction, improper venue, res judicata, or prescription shall be immediately resolved by the Labor Arbiter by a written order. Yet, the Labor Arbiter did not, and it was only in his decision that he mentioned that the resolution of the motion to dismiss was deferred until this case is decided on the merits because the ground therefor was not indubitable. On this score the Labor Arbiter acted with grave abuse of discretion for disregarding the rules he was bound to observe. We shall now turn to the issue of tardiness of the appeal. The record does indeed show that on the original copy of the 658 658 SUPREME COURT REPORTS ANNOTATED Philippine Airlines, Inc. vs. NLRC Notice of Judgment/Final Order,23 there is stamped by the PAL Legal Department the date of its receipt of the decision, viz., AUG. 23 1991. It is not also denied by respondents that on the right upper hand corner of PALs copy of the Notice of Judgment/Final Orders,24 there is stamped the date of receipt thereof by PAL Legal Department, viz., AUG. 26 1991. PAL explained how this discrepancy occurred and how its counsel was misled into believing that PAL received a copy of the decision only on 26 August 1991. This belief in good faith rendered excusable any negligence it might have committed. Besides, the delay in the perfection of the appeal was only one day. Considering that the Labor Arbiter had no jurisdiction over the subject matter of NLRC-NCR Case No. 00-11-06008-90 and that the 16 security guards are not in fact entitled to separation pay under the security service agreement, the higher interest of justice favors a relaxation of the rule on perfection of appeals in labor cases. While it is an established rule that the perfection of an appeal in the manner and within the period prescribed by law is not only mandatory but jurisdictional, and failure to perfect an appeal has the effect of rendering the judgment final and executory, it is equally settled that the NLRC may disregard the procedural lapse where there is an acceptable reason to excuse tardiness in the taking of the appeal.25 Among the acceptable reasons recognized by this Court are (a) counsels reliance on the footnote of the notice of the decision of the Labor Arbiter that the aggrieved party may appeal . . . within ten (10) working days;26 (b) fundamental consideration of substantial justice;27 (c) prevention of miscarriage of justice _______________

23 OR, 72. 24 OR, 93. 25 Chong Guan Trading vs. NLRC, 172 SCRA 831, 839 [1989]. 26 Id.; Firestone Tire and Rubber Co. vs. Lariosa, 148 SCRA 187, 190-191 [1987]. 27 Insular Life Assurance Co. vs. NLRC, 156 SCRA 740, 746 [1987]; see also the Resolution therein of 26 July 1988. Ruga vs. 659 VOL. 263, OCTOBER 28, 1996 659 Philippine Airlines, Inc. vs. NLRC or of unjust enrichment, as where the tardy appeal is from a decision granting separation pay which was already granted in an earlier final decision;28 and (d) special circumstances of the case combined with its legal merits29 or the amount and the issue involved.30 A one-day delay in the perfection of the appeal was excused in Pacific Asia Overseas Shipping Corp. vs. NLRC,31 Insular Life Assurance Co. vs. NLRC,32 and City Fair Corp. vs. NLRC.33 In the instant case, the Labor Arbiters lack of jurisdiction so palpably clear on the face of the complaint and the perpetuation of unjust enrichment if the appeal is disallowed are enough combination of reasons that warrant a relaxation of the rules on perfection of appeals in labor cases. WHEREFORE, the instant petition is hereby GRANTED. The questioned decision of the Labor Arbiter dated 12 August 1991 and the resolutions of the Second Division of the National Labor Relations Commission promulgated on 27 October 1994 and 31 May 1995 are hereby SET ASIDE, and NLRCNCR Case No. 00-11-06008-90 is DISMISSED. SO ORDERED. Narvasa (C.J., Chairman), Melo, Francisco and Panganiban, JJ., concur. Petition granted. _______________ [Philippine Airlines, Inc. vs. NLRC, 263 SCRA 638(1996)]

VOL. 321, DECEMBER 22, 1999 461 People vs. Bolasa G.R. No. 127864. December 22, 1999.* TRADERS ROYAL BANK, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and ROGELIO ESPAOLA, respondent. Labor Law; Employer-Employee Relationship; Elements.This Court has ruled that the existence of employer-employee relationship cannot be proved by merely showing the agreement of the parties. It is a question of fact which should be supported by substantial evidence. And in determining the existence of such relationship the elements usually considered are: (a) the selection of the employee; (b) the payment of wages; (c) the power of dismissal; and, (d) the _________________ * SECOND DIVISION. 468 468 SUPREME COURT REPORTS ANNOTATED Traders Royal Bank vs. National Labor Relations Commission power to control the employees conduct, with the control test generally assuming primacy in the overall consideration. Same; Same; The fact that an employees allegations were never controverted at any stage of the proceedings affirms that such averments were true.The above allegations contained in the position paper of Espaola were never refuted. TRB could have easily presented affidavits, written explanations or any other pleadings to defend itself and disprove Espaolas claims. However, the only evidence it ever presented was its service agreement with ROYAL. From the time TRB submitted its position paper to the Labor Arbiter up to the time it submitted its memorandum to the Supreme Court, not once did it deny that it designated Espaola as its driver. On the other hand, Espaola constantly reiterated in his pleadings that TRB supervised and controlled his work as its janitor-driver. The fact that Espaolas allegations were never controverted at any stage of the proceedings affirms that such averments were true. Furthermore, Rule 9, Sec. 11, of the Rules of Court, which supplements the NLRC rules, also provides that an allegation which is not specifically denied is deemed admitted. Same; Same; Independent Contractors; Even if a Service Contractor could very well be an independent contractor and that a particular employee appeared in its payroll, it will not be considered as the employer where its principal had control and supervision over the employees workthe principal should be considered as the employer.The NLRC therefore did not abuse its discretion in ruling that

Espaola was not the employee of ROYAL. On the contrary, it was the Labor Arbiter who came up with the erroneous conclusion. He disregarded the uncontroverted allegations of Espaola and hastily concluded that since ROYAL was an independent contractor, it was Espaolas direct employer. While it may be that ROYAL could very well be an independent contractoralthough it did not establish this fact with competent evidence to qualify it as suchand that Espaolas name appeared in its payroll, nevertheless, whatever role ROYAL had in this case, it was certainly not as the employer of Espaola. For the fact remains that it was TRB which had control and supervision over Espaolas work. Consequently, it should be considered as his employer. 469 VOL. 321, DECEMBER 22, 1999 469 Traders Royal Bank vs. National Labor Relations Commission Same; Illegal Dismissal; An illegally dismissed employee is entitled to back wages from the time he was dismissed to the time of his actual reinstatement.Since Espaola was illegally dismissed he is entitled to reinstatement with full back wages. The NLRC erred in ruling that he was only entitled to back wages from 16 March 1994 to 30 September 1996. An illegally dismissed employee is entitled to back wages from the time he was dismissed to the time of his actual reinstatement. However, the NLRCs ruling with regard to the salary differentials and 13th month pay differentials must be sustained. SPECIAL CIVIL ACTION in the Supreme Court. Certiorari. The facts are stated in the opinion of the Court. Bedona & Bedona Law Offices for petitioner. Oscar C. Tagamolila for private respondent. BELLOSILLO, J.: Whether an employer-employee relationship exists between petitioner Traders Royal Bank and private respondent Rogelio Espaolathis is the issue on which hinges the fate of private respondent who after twenty (20) years of service found himself jobless and deprived of his only means of livelihood. On 27 June 1974 Agro-Commercial Security Services Agency, Inc. (AGRO) assigned Rogelio Espaola to work as a janitor at the Iloilo Branch of petitioner Traders Royal Bank (TRB). This assignment was covered by Mission Order No. 29 dated 26 June 1974 which was duly issued by the Administrative Officer of AGRO, Alberto G. Espinosa.1 Sometime in 1982 Espaola was informed that he would be absorbed by a new agency, Royal Protective and Janitorial Services, Inc. (ROYAL), and that he would perform the same functions.2 However, since ROYAL was also managed and owned by the ________________

1 Records, p. 27. 2 Id., p. 22. 470 470 SUPREME COURT REPORTS ANNOTATED Traders Royal Bank vs. National Labor Relations Commission same people who previously handled AGRO, it did not give him separation pay or any other benefits. ROYAL also appointed Alberto G. Espinosa, AGROs former Administrative Officer, as its General Manager.3 On 15 July 1988 TRB and ROYAL executed a new service agreement whereby ROYAL would continue supplying janitor-ial services TRB for one year, beginning 23 March 1988.4 The contract also stated that if there was no notice to terminate at the end of the one (1) year period it would remain in force on a monthly basis. When the service agreement expired on 23 March 1989 TRB did not issue a termination notice. Instead, it continued to avail of ROYALs services on a monthly basis as stated in the contract. It was only on 4 February 1994 that TRB sent a letter to ROYAL apprising the latter of its desire to terminate the service agreement effective 16 March 1994.5 In turn, ROYAL sent a notice to private respondent Espaola informing him that due to TRBs decision to end their contract his services were no longer needed.6 After being dismissed ROYAL declined to give him any further assignment since his job was allegedly coterminous with its contract with TRB. On 24 March 1994 Espaola filed a case against ROYAL, TRB and Alberto Espinosa for illegal dismissal, illegal deduction, underpayment of wages, non-payment of overtime pay, premium pay for rest day, service incentive leave pay, 13th month pay and night shift differentials with a prayer for reinstatement and back wages. He also claimed moral and exemplary damages as well as attorneys fees.7 On 20 December 1995 the Labor Arbiter ruled in favor of TRB holding that Espaola had no cause of action against it as there was no employer-employee relationship between them. The Labor Arbiter further ruled that Espaola was _________________ 3 Ibid. 4 Id., p. 46. 5 Id., p. 83.

6 Id., p. 90. 7 Id., p. 21. 471 VOL. 321, DECEMBER 22, 1999 471 Traders Royal Bank vs. National Labor Relations Commission ROYALs employee but he was not entitled to any monetary award since he did not prove his claims of underpayment and illegal deductions against ROYAL.8 On appeal public respondent National Labor Relations Commission (NLRC) reversed the decision of the Labor Arbiter and ruled that Espaola was not an employee of ROYAL but of TRB. NLRC then ordered TRB to reinstate him and to pay him the total amount of P110,829.78 broken down as follows: P81,265.90 for back wages, P736.92 for ERA, P15,698.08 for salary differentials, P3,143.45 for 13th month pay and P10,075.00 for attorneys fees.9 After its motion for reconsideration was denied TRB filed this special civil action for certiorari contending that the NLRC gravely abused its discretion in reversing the Labor Arbiters decision and declaring Espaola to be its employee.10 Who was Espaolas real employer? If Espaola was ROYALs employee then he would have no recourse against TRB since his dismissal was caused by the legitimate termination of a service contract. But if he was really TRBs employee then he would be entitled to reinstatement and full back wages as he was illegally dismissed. To prove that Espaola was not its employee TRB cites Mission Order No. 29 signed by AGRO Administrative Officer Alberto G. Espinosa. The order stated that Rogelio Espaola would be assigned as janitor to TRBs Iloilo Branch. It also provided that his employment would be from 26 January 1974 until revoked.11 TRB argues that this proves that AGRO was Espaolas employer from 1974 to 1982. And when he agreed to be absorbed by ROYAL he became its employee from 1982 to 1994. Hence, he was never employed by TRB. To bolster its contention TRB refers to the provisions of its service agreement with ROYAL, dated 15 July 1988, which state that: ________________ 8 Id., p. 147. 9 Decision dated 9 October 1996; Rollo, pp. 38-48. 10 Id., pp. 24-25. 11 Records, p. 27.

472 472 SUPREME COURT REPORTS ANNOTATED Traders Royal Bank vs. National Labor Relations Commission 2. That the janitor and/or janitress assigned to the PARTY OF THE FIRST PART (petitioner) shall in no way be considered as employees of the PARTY OF THE FIRST PART and the PARTY OF THE SECOND PART (ROYAL) shall be responsible for the conduct and performance of its duties; 6. For and in consideration of the services to be rendered by the PARTY OF THE SECOND PART to the PARTY OF THE FIRST PART, the latter shall pay to the PARTY OF THE SECOND PART (under this agreement) the amount of TWO THOUSAND TWO HUNDRED FIFTY SEVEN & 32/100 ONLY (2,257.32), Philippine Currency, per month per janitress, the same payable in two (2) installments on the 15th and last day of every month. TRB asserts that aside from the agreement itself which reveals that it was ROYAL which provided the janitors salary, par. 2 thereof also states that the janitors were its own employees. Thus, Espaolas dismissal was the result of a valid termination of its service agreement with ROYAL. We are not convinced. This Court has ruled that the existence of employer-employee relationship cannot be proved by merely showing the agreement of the parties.12 It is a question of fact which should be supported by substantial evidence.13 And in determining the existence of such relationship the elements usually considered are: (a) the selection of the employee; (b) the payment of wages; (c) the power of dismissal; and, (d) the power to control the employees conduct, with the control test generally assuming primacy in the overall consideration.14 Who then had control over Espaolas conduct? Was it ROYAL or TRB? Between the two, we believe it was TRB. Espaola claimed in his position paper that ________________ 12 Tabas v. California Manufacturing Co., Inc., G.R. No. 80680, 26 January 1989, 169 SCRA 497. 13 Mutual Benefit Association v. NLRC, G.R. No. 102199, 28 January 1997, 267 SCRA 47. 14 Equitable Banking Corporation v. NLRC, G.R. No. 102467, 13 June 1997, 273 SCRA 352. 473 VOL. 321, DECEMBER 22, 1999 473 Traders Royal Bank vs. National Labor Relations Commission

Complainant, as previously stated, was required to work as a janitor and as a driver. Moreover, he was required to do his cleaning chores at night in order not to disturb the transaction of business at the bank during office hours. Thus, every night from Sunday to Thursday he was required to clean the bank premises of respondent TRB. From Monday to Friday he was required to drive TRBs armored car and pick up the children of respondent TRBs manager, Mrs. Erlinda Ocampo, then drive them to Angelicum School in Jaro, Iloilo City. Thereafter, he was required to stay in the bank premises until 5:00 P.M., except for lunch break, run errands and discharge other tasks and chores assigned to him by respondent TRBs employees. After 5:00 P.M. complainant was required to drive the above named officers of respondent TRB home. He usually got back to the bank between 6:00 P.M. to 7:00 P.M. Upon his arrival he would start cleaning the bank and, since the premises was big, it usually took about 2 hours or up to 9:00 P.M. to finish his cleaning. Because he had to work late and start working early and since his residence was in Sta. Barbara, Iloilo, where there was no public transportation at night, he had to sleep in the bank. His day-to-day work was monitored and supervised by respondent TRB.15 The above allegations contained in the position paper of Espaola were never refuted. TRB could have easily presented affidavits, written explanations or any other pleadings to defend itself and disprove Espaolas claims.16 However, the only evidence it ever presented was its service agreement with ROYAL. From the time TRB submitted its position paper to the Labor Arbiter up to the time it submitted its memorandum to the Supreme Court, not once did it deny that it designated Espaola as its driver. On the other hand, Espaola constantly reiterated in his pleadings that TRB supervised and controlled his work as its janitor-driver. The fact that Espaolas allegations were never controverted at any stage of the proceedings affirms that such averments were true.17 ________________ 15 Records, p. 23. 16 Megascope General Services v. NLRC, G.R. No. 109224, 19 June 1997, 274 SCRA 147. 17 Solid Engineering & Machine Works v. NLRC, G.R. No. 79496, 19 November 1991, 203 SCRA 699. 474 474 SUPREME COURT REPORTS ANNOTATED Traders Royal Bank vs. National Labor Relations Commission Furthermore, Rule 9, Sec. 11, of the Rules of Court, which supplements the NLRC rules, also provides that an allegation which is not specifically denied is deemed admitted.18 Besides, even if this Court relied on the service agreement, as espoused by TRB, it can still be seen that TRB was the one which controlled and supervised Espaola. Paragraph 3 of the contract states 3. That the PARTY OF THE FIRST PART shall have the direct control and supervision over their janitors and janitress conduct and performance in consonance with the preceding paragraph, with

minimum interference by the PARTY OF THE SECOND PART, provided however, that discipline and administration of these janitors and janitresses shall conform with the standards and policies of the PARTY OF THE FIRST PART x x x x TRB should, under the foregoing, be obviously deemed as Espaolas employer. Petitioner cites Filipino Synthetic Fiber Corp. (FILSYN) v. NLRC 19 in an effort to persuade this Court that the doctrine therein should be applied in the instant case. We do not agree. In FILSYN, the employees worked exclusively as janitors and were never required by FILSYN to perform any other task. Furthermore, there was no proof that FILSYN controlled the manner they worked. Hence, in that case, the Court ruled that the employer of the janitors was the De Lima Corporation, the janitorial agency, and not FILSYN. In the present case, however, Espaola not only worked as a janitor but he was also TRBs driver. Since 1974 he was required to drive TRBs armored car, bring and fetch the children of the banks manager to and from school, drive for its officers, and perform various errands assigned to him by TRB employees. Furthermore, FILSYN presented substantial evidence that the janitorial agency was an independent contractor. It presented De Limas Articles of Incorporation and proof of its ________________ 18 Sec. 3, New Rules of Procedure of the NLRC, 1990. 19 G.R. No. 113347, 14 June 1996, 357 SCRA 334. 475 VOL. 321, DECEMBER 22, 1999 475 Traders Royal Bank vs. National Labor Relations Commission capitalization amounting to almost P2,000,000. This was not done by TRB. Instead, it relied heavily on the aforementioned service agreement covering the period from 1988 to 1994. TRB did not even prove sufficiently that it was not Espaolas employer from 1974 to 1987. As a matter of fact, it was ROYAL which submitted documents to establish that it was an independent contractor. However, it alleged that it never knew that TRB utilized Espaola as its driver and compelled him to do other chores.20 ROYAL further claimed that it was TRB which had control and supervision over Espaola.21 Again, TRB never refuted this statement. Neither did it prove that ROYAL was the one which effectively controlled and supervised the manner Espaola worked. The NLRC therefore did not abuse its discretion in ruling that Espaola was not the employee of ROYAL. On the contrary, it was the Labor Arbiter who came up with the erroneous conclusion. He disregarded the uncontroverted allegations of Espaola and hastily concluded that since ROYAL was an independent contractor, it was Espaolas direct employer. While it may be that ROYAL could very well be an independent contractoralthough it did not establish this fact with competent evidence to

qualify it as suchand that Espaolas name appeared in its payroll,22 nevertheless, whatever role ROYAL had in this case, it was certainly not as the employer of Espaola. For the fact remains that it was TRB which had control and supervision over Espaolas work. Consequently, it should be considered as his employer. Since Espaola was illegally dismissed he is entitled to reinstatement with full back wages.23 The NLRC erred in ruling that he was only entitled to back wages from 16 March 1994 to 30 September 1996. An illegally dismissed employee is ________________ 20 Records, p. 34. 21 Id., p. 29. 22 Id., pp. 92-128. 23 Philippine Airlines v. NLRC, G.R. No. 11968, 28 July 1997, 276 SCRA 391. 476 476 SUPREME COURT REPORTS ANNOTATED Traders Royal Bank vs. National Labor Relations Commission entitled to back wages from the time he was dismissed to the time of his actual reinstatement.24 However, the NLRCs ruling with regard to the salary differentials and 13th month pay differentials must be sustained. WHEREFORE, the petition is DISMISSED. The assailed Decision of public respondent National Labor Relations Commission reversing that of the Labor Arbiter and ordering petitioner Traders Royal Bank to reinstate private respondent Rogelio Espaola and to pay him salary differentials of P15,698.00, 13th month pay differentials of P3,143.45 and attorneys fees of P10,075.43 is AFFIRMED, but with the modification that petitioner should pay private respondent full back wages from 16 March 1994 up to his actual reinstatement. Costs against petitioner. SO ORDERED. Mendoza, Quisumbing, Buena and De Leon, Jr., JJ., concur. Petition dismissed, judgment affirmed with modification. Notes.The test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subject to the control of the employer except only as to the result of the work. (Armed Forces of the Philippines Mutual Benefit Association, Inc. vs. National Labor Relations Commission, 267 SCRA

47 [1997]) The principal and the contractor are jointly and severally liable to the employees for the latters money claims. (Help-mate, Inc. vs. National Labor Relations Commission, 276 SCRA 315 [1997]) o0o [Traders Royal Bank vs. National Labor Relations Commission, 321 SCRA 467(1999)]

VOL. 387, AUGUST 15, 2002 393 Tan vs. Lagrama G.R. No. 151228. August 15, 2002.* ROLANDO Y. TAN, petitioner, vs. LEOVIGILDO LAGRAMA and THE HONORABLE COURT OF APPEALS, respondents. Labor Law; Employer-Employee Relationship; Four-Fold Test to Determine the Existence of an Employer-Employee Relationship.In determining whether there is an employer-employee relationship, we have applied a four-fold test, to wit: (1) whether the alleged employer has the power of selection and engagement of employees; (2) whether he has control of the employee with respect to the means and methods by which work is to be accomplished; (3) whether he has the power to dismiss; and (4) whether the employee was paid wages. Same; Same; Same; Of the four elements of the employer-employee relationship, the control test is the most important; Independent Contractor Defined.Of the four elements of the employer-employee relationship, the control test is the most important. Compared to an employee, an independent contractor is one who 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, 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. Hence, while an independent contractor enjoys independence and freedom from the control and supervision of his principal, an employee is subject to the employers power to control the means and methods by which the employees work is to be performed and accomplished. Same; Same; Same; Evidence shows that the employee performed his work as painter under the supervision and control of petitioner.In the case at bar, albeit petitioner Tan claims that private respondent Lagrama was an independent contractor and never his employee, the evidence shows that the latter performed his work as painter under the supervision and control of petitioner. Lagrama worked in a designated work area inside the Crown Theater of petitioner, for the use of which petitioner prescribed rules. The rules included the observance of cleanliness and hygiene and a prohibition against urinating in the work area and any place other than the toilet or the rest rooms. Petitioners control over Lagramas work extended not only to the use of the work area, but also to _______________ * SECOND DIVISION. 394 394 SUPREME COURT REPORTS ANNOTATED

Tan vs. Lagrama the result of Lagramas work, and the manner and means by which the work was to be accomplished. Same; Same; Same; The right to hire and fire is another important element of the employer-employee relationship.By stating that he had the right to fire Lagrama, petitioner in effect acknowledged Lagrama to be his employee. For the right to hire and fire is another important element of the employer-employee relationship. Indeed, the fact that, as petitioner himself said, he waited for Lagrama to report for work but the latter simply stopped reporting for work reinforces the conviction that Lagrama was indeed an employee of petitioner. Same; Same; Same; The primary standard for determining regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual trade or business of the employer.The primary standard for determining regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual trade or business of the employer. In this case, there is such a connection between the job of Lagrama painting billboards and murals and the business of petitioner. To let the people know what movie was to be shown in a movie theater requires billboards. Petitioner in fact admits that the billboards are important to his business. Same; Dismissals; Abandonment; Two Elements of Abandonment; The burden is on the employer to show a deliberate and unjustified refusal on the part of the employee to resume his employment without any intention of returning; Mere absence is not sufficient.Abandonment requires two elements: (1) the failure to report for work or absence without valid or justifiable reason, and (2) a clear intention to sever the employer-employee relationship, with the second element as the more determinative factor and being manifested by some overt acts. Mere absence is not sufficient. What is more, the burden is on the employer to show a deliberate and unjustified refusal on the part of the employee to resume his employment without any intention of returning. Same; Same; The employer has the burden of proving the lawfulness of his employees dismissal; No worker shall be dismissed except for a just or authorized cause provided by law and after due process; The illegality of the act of dismissal constitutes discharge without just cause, while illegality in the manner of dismissal is dismissal without due process.The second issue is whether private respondent Lagrama was illegally dismissed. To begin, the employer has the burden of proving the lawfulness of his employees dismissal. The validity of the charge must be clearly established in a manner consistent with due process. The Implementing Rules 395 VOL. 387, AUGUST 15, 2002 395 Tan vs. Lagrama of the Labor Code provide that no worker shall be dismissed except for a just or authorized cause provided by law and after due process. This provision has two aspects: (1) the legality of the act of dismissal, that is, dismissal under the grounds provided for under Article 282 of the Labor Code and (2)

the legality in the manner of dismissal. The illegality of the act of dismissal constitutes discharge without just cause, while illegality in the manner of dismissal is dismissal without due process. PETITION for review on certiorari of the decision and resolution of the Court of Appeals. The facts are stated in the opinion of the Court. Wilfredo D. Asis for petitioner. Public Attorneys Office for private respondent. MENDOZA, J.: This is a petition for review on certiorari of the decision,1 dated May 31, 2001, and the resolution,2 dated November 27, 2001, of the Court of Appeals in C.A.-G.R. SP. No. 63160, annulling the resolutions of the National Labor Relations Commission (NLRC) and reinstating the ruling of the Labor Arbiter which found petitioner Rolando Tan guilty of illegally dismissing private respondent Leovigildo Lagrama and ordering him to pay the latter the amount of P136,849.99 by way of separation pay, backwages, and damages. The following are the facts. Petitioner Rolando Tan is the president of Supreme Theater Corporation and the general manager of Crown and Empire Theaters in Butuan City. Private respondent Leovigildo Lagrama is a painter, making ad billboards and murals for the motion pictures shown at the Empress, Supreme, and Crown Theaters for more than 10 years, from September 1, 1988 to October 17, 1998. On October 17, 1998, private respondent Lagrama was summoned by Tan and upbraided: Nangihi na naman ka sulod sa imong drawinganan. (You again urinated inside your work _______________ 1 Per Justice Romeo J. Callejo, Sr. and concurred in by Justice Renato C. Dacudao and Justice Perlita J. Tria Tirona. 2 Id., Annex B; id., p. 57. 396 396 SUPREME COURT REPORTS ANNOTATED Tan vs. Lagrama area.) When Lagrama asked what Tan was saying, Tan told him, Ayaw daghang estorya. Dili ko gusto nga mo-drawing ka pa. Guikan karon, wala nay drawing. Gawas. (Dont say anything further. I dont want you to draw anymore. From now on, no more drawing. Get out.)

Lagrama denied the charge against him. He claimed that he was not the only one who entered the drawing area and that, even if the charge was true, it was a minor infraction to warrant his dismissal. However, everytime he spoke, Tan shouted Gawas (Get out), leaving him with no other choice but to leave the premises. Lagrama filed a complaint with the Sub-Regional Arbitration Branch No. X of the National Labor Relations Commission (NLRC) in Butuan City. He alleged that he had been illegally dismissed and sought reinvestigation and payment of 13th month pay, service incentive leave pay, salary differential, and damages. Petitioner Tan denied that Lagrama was his employee. He asserted that Lagrama was an independent contractor who did his work according to his methods, while he (petitioner) was only interested in the result thereof. He cited the admission of Lagrama during the conferences before the Labor Arbiter that he was paid on a fixed piece-work basis, i.e., that he was paid for every painting turned out as ad billboard or mural for the pictures shown in the three theaters, on the basis of a no mural/billboard drawn, no pay policy. He submitted the affidavits of other cinema owners, an amusement park owner, and those supervising the construction of a church to prove that the services of Lagrama were contracted by them. He denied having dismissed Lagrama and alleged that it was the latter who refused to paint for him after he was scolded for his habits. As no amicable settlement had been reached, Labor Arbiter Rogelio P. Legaspi directed the parties to file their position papers. On June 17, 1999, he rendered a decision, the dispositive portion of which reads: WHEREFORE, premises considered judgment is hereby ordered: 1. Declaring complainants [Lagramas] dismissal illegal and 2. Ordering respondents [Tan] to pay complainant the following: A. Separation Pay P 59,000.00 397

VOL. 387, AUGUST 15, 2002 397 Tan vs. Lagrama B. Backwages 47,200.00

(from 17 October 1998 to 17 June 1999)

C. 13th month pay (3 years) 17,700.00 D. Service Incentive Leave Pay (3 years)

2, 949.99 E. Damages 10,000.00

TOTAL

[P136,849.99] Complainants other claims are dismissed for lack of merit.3 Petitioner Rolando Tan appealed to the NLRC Fifth Division, Cagayan de Oro City, which, on June 30, 2000, rendered a decision4 finding Lagrama to be an independent contractor, and for this reason reversing the decision of the Labor Arbiter. Respondent Lagrama filed a motion for reconsideration, but it was denied for lack of merit by the NLRC in a resolution of September 29, 2000. He then filed a petition for certiorari under Rule 65 before the Court of Appeals. The Court of Appeals found that petitioner exercised control over Lagramas work by dictating the time when Lagrama should submit his billboards and murals and setting rules on the use of the work area and rest room. Although it found that Lagrama did work for other cinema owners, the appeals court held it to be a mere sideline insufficient to prove that he was not an employee of Tan. The appeals court also found no evidence of any intention on the part of Lagrama to leave his job or sever his employment relationship with Tan. Accordingly, on May 31, 2001, the Court of Appeals rendered a decision, the dispositive portion of which reads: IN THE LIGHT OF ALL THE FOREGOING, the Petition is hereby GRANTED. The Resolutions of the Public Respondent issued on June 30, 2000 and September 29, 2000 are ANNULLED. The Decision of the Honorable Labor Arbiter Rogelio P. Legaspi on June 17, 1999 is hereby REINSTATED. _______________

3 CA Rollo, p. 61. 4 Per Commissioner Oscar N. Abella and concurred in by Presiding Commissioner Salic B. Dumarpa and Commissioner Leon G. Gonzaga, Jr. 398 398 SUPREME COURT REPORTS ANNOTATED Tan vs. Lagrama Petitioner moved for a reconsideration, but the Court of Appeals found no reason to reverse its decision and so denied his motion for lack of merit.5 Hence, this petition for review on certiorari based on the following assignments of errors: I. With all due respect, the decision of respondent Court of Appeals in CA-G.R. SP NO. 63160 is bereft of any finding that Public Respondent NLRC, 5th Division, had no jurisdiction or exceeded it or otherwise gravely abused its discretion in its Resolution of 30 June 2000 in NLRC CA-No. M-00495099. II. With all due respect, respondent Court of Appeals, absent any positive finding on its part that the Resolution of 30 June 2000 of the NLRC is not supported by substantial evidence, is without authority to substitute its conclusion for that of said NLRC. III. With all due respect, respondent Court of Appeals discourse on freelance artists and painters in the decision in question is misplaced or has no factual or legal basis in the record. IV. With all due respect, respondent Court of Appeals opening statement in its decision as to employment, monthly salary of P1,475.00 and work schedule from Monday to Saturday, from 8:00 oclock in the morning up to 5:00 oclock in the afternoon as facts is not supported by the evidence on record. V. With all due respect, the case of Lambo, et al. v. NLRC, et al., 317 SCRA 420 [G.R. No. 111042, October 26, 1999] relied upon by respondent Court of Appeals is not applicable to the peculiar circumstances of this case.6 The issues raised boil down to whether or not an employer-employee relationship existed between petitioner and private respondent, and whether petitioner is guilty of illegally dismissing private respondent. We find the answers to these issues to be in the affirmative. _______________ 5 Annex B of the Petition for Review on Certiorari; Rollo, p. 57. 6 Petition, pp. 11-12; id., pp. 22-23. 399 VOL. 387, AUGUST 15, 2002

399 Tan vs. Lagrama I. In determining whether there is an employer-employee relationship, we have applied a four-fold test, to wit: (1) whether the alleged employer has the power of selection and engagement of employees; (2) whether he has control of the employee with respect to the means and methods by which work is to be accomplished; (3) whether he has the power to dismiss; and (4) whether the employee was paid wages.7 These elements of the employer-employee relationship are present in this case. First. The existence in this case of the first element is undisputed. It was petitioner who engaged the services of Lagrama without the intervention of a third party. It is the existence of the second element, the power of control, that requires discussion here. Of the four elements of the employer-employee relationship, the control test is the most important. Compared to an employee, an independent contractor is one who 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, 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.8 Hence, while an independent contractor enjoys independence and freedom from the control and supervision of his principal, an employee is subject to the employers power to control the means and methods by which the employees work is to be performed and accomplished. In the case at bar, albeit petitioner Tan claims that private respondent Lagrama was an independent contractor and never his employee, the evidence shows that the latter performed his work as painter under the supervision and control of petitioner. Lagrama _______________ 7 See Ramos v. Court of Appeals, G.R. No. 124354, April 11, 2002, 380 SCRA 467; Santos v. NLRC, 293 SCRA 113 (1998) citing Jimenez v. NLRC, 256 SCRA 84 (1996); Sandigan Savings and Loan Bank, Inc. v. NLRC, 254 SCRA 126 (1996); and Viana v. Al-Lagadan, 99 Phil. 408 (1956); Brotherhood Labor Unity Movement of the Philippines v. Zamora, 147 SCRA 49 (1987). 8 De los Santos v. NLRC, G.R. No. 121327, Dec. 20, 2001, 372 SCRA 723. 400 400 SUPREME COURT REPORTS ANNOTATED Tan vs. Lagrama worked in a designated work area inside the Crown Theater of petitioner, for the use of which petitioner

prescribed rules. The rules included the observance of cleanliness and hygiene and a prohibition against urinating in the work area and any place other than the toilet or the rest rooms.9 Petitioners control over Lagramas work extended not only to the use of the work area, but also to the result of Lagramas work, and the manner and means by which the work was to be accomplished. Moreover, it would appear that petitioner not only provided the workplace, but supplied as well the materials used for the paintings, because he admitted that he paid Lagrama only for the latters services.10 Private respondent Lagrama claimed that he worked daily, from 8 oclock in the morning to 5 oclock in the afternoon. Petitioner disputed this allegation and maintained that he paid Lagrama P1,475.00 per week for the murals for the three theaters which the latter usually finished in 3 to 4 days in one week.11 Even assuming this to be true, the fact that Lagrama worked for at least 3 to 4 days a week proves regularity in his employment by petitioner. Second. That petitioner had the right to hire and fire was admitted by him in his position paper submitted to the NLRC, the pertinent portions of which stated: Complainant did not know how to use the available comfort rooms or toilets in and about his work premises. He was urinating right at the place where he was working when it was so easy for him, as everybody else did and had he only wanted to, to go to the comfort rooms. But no, the complainant had to make a virtual urinal out of his work place! The place then stunk to high heavens, naturally, to the consternation of respondents and everyone who could smell the malodor. .... Given such circumstances, the respondents had every right, nay all the compelling reason, to fire him from his painting job upon discovery and _______________ 9 Sworn Statement of Rolando Tan, p. 2; CA Rollo, p. 81. 10 Id., pp. 1-3; id., pp. 164-166. 11 Id., p. 2; id., p. 81. 401 VOL. 387, AUGUST 15, 2002 401 Tan vs. Lagrama his admission of such acts. Nonetheless, though thoroughly scolded, he was not fired. It was he who stopped to paint for respondents.12

By stating that he had the right to fire Lagrama, petitioner in effect acknowledged Lagrama to be his employee. For the right to hire and fire is another important element of the employer-employee relationship.13 Indeed, the fact that, as petitioner himself said, he waited for Lagrama to report for work but the latter simply stopped reporting for work reinforces the conviction that Lagrama was indeed an employee of petitioner. For only an employee can nurture such an expectancy, the frustration of which, unless satisfactorily explained, can bring about some disciplinary action on the part of the employer. Third. Payment of wages is one of the four factors to be considered in determining the existence of employer-employee relation. Wages are defined as remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered.14 That Lagrama worked for Tan on a fixed piece-work basis is of no moment. Payment by result is a method of compensation and does not define the essence of the relation.15 It is a method of computing compensation, not a basis for determining the existence or absence of employer-employee relationship. One may be paid on the basis of results or time expended on the work, and may or may not acquire an employment status, depending on whether the elements of an employer-employee relationship are present or not.16 _______________ 12 NLRC Position Paper for Respondent [Tan], pp. 2-3; Rollo, pp. 72-73 (italics supplied). 13 See Ramos v. Court of Appeals, 321 SCRA 584 (1999); Austria v. NLRC, 312 SCRA 410 (1999). 14 LABOR CODE, ART. 97 (f). 15 Lambo v. NLRC, 317 SCRA 420 (1999) citing Villuga v. NLRC, 225 SCRA 537 (1993). 16 C.A. AZUCENA, EVERYONES LABOR CODE 59 (2000). 402 402 SUPREME COURT REPORTS ANNOTATED Tan vs. Lagrama The Rules Implementing the Labor Code require every employer to pay his employees by means of payroll.17 The payroll should show among other things, the employees rate of pay, deductions made, and the amount actually paid to the employee. In the case at bar, petitioner did not present the payroll to support his claim that Lagrama was not his employee, raising speculations whether his failure to do so proves that its presentation would be adverse to his case.18 The primary standard for determining regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual trade or business of the

employer.19 In this case, there is such a connection between the job of Lagrama painting billboards and murals and the business of petitioner. To let the people know what movie was to be shown in a movie theater requires billboards. Petitioner in fact admits that the billboards are important to his business.20 The fact that Lagrama was not reported as an employee to the SSS is not conclusive on the question of whether he was an employee of petitioner.21 Otherwise, an employer would be rewarded for his failure or even neglect to perform his obligation.22 Neither does the fact that Lagrama painted for other persons affect or alter his employment relationship with petitioner. That he did so only during weekends has not been denied by petitioner. On the other hand, Samuel Villalba, for whom Lagrama had rendered service, admitted in a sworn statement that he was told by Lagrama that the latter worked for petitioner.23 _______________ 17 Book III, Rule X, Sec. 6(a). 18 REVISED RULES ON EVIDENCE, RULE 131, 3(e). See Villaruel v. NLRC, 284 SCRA 399 (1998). 19 Ganzon v. NLRC, 321 SCRA 434 (1999); Bernardo v. NLRC, 310 SCRA 186 (1999). 20 NLRC Position Paper for Respondent [Tan], p. 4; Rollo, p. 74. 21 Lambo v. NLRC, 317 SCRA 420 (1999). 22 See Santos v. NLRC, 293 SCRA 113 (1998). 23 CA Rollo, p. 167. 403 VOL. 387, AUGUST 15, 2002 403 Tan vs. Lagrama Lagrama had been employed by petitioner since 1988. Under the law, therefore, he is deemed a regular employee and is thus entitled to security of tenure, as provided in Art. 279 of Labor Code: ART. 279. Security of Tenure.In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

This Court has held that if the employee has been performing the job for at least one year, even if not continuously but intermittently, the repeated and continuing need for its performance is sufficient evidence of the necessity, if not indispensability, of that activity to the business of his employer. Hence, the employment is also considered regular, although with respect only to such activity, and while such activity exists.24 It is claimed that Lagrama abandoned his work. There is no evidence to show this. Abandonment requires two elements: (1) the failure to report for work or absence without valid or justifiable reason, and (2) a clear intention to sever the employer-employee relationship, with the second element as the more determinative factor and being manifested by some overt acts.25 Mere absence is not sufficient. What is more, the burden is on the employer to show a deliberate and unjustified refusal on the part of the employee to resume his employment without any intention of returning.26 In the case at bar, the Court of Appeals correctly ruled: Neither do we agree that Petitioner abandoned his job. In order for abandonment to be a just and valid ground for dismissal, the employer _______________ 24 Conti v. NLRC, 271 SCRA 114 (1997) citing De Leon v. NLRC, 176 SCRA 615 (1989). 25 Hyatt Taxi Services Inc. v. Catinoy, G.R. No. 143204, June 26, 2001, 359 SCRA 686, citing Mendoza v. NLRC, 310 SCRA 846 (1999). 26 Labor v. NLRC, 248 SCRA 183 (1995). 404 404 SUPREME COURT REPORTS ANNOTATED Tan vs. Lagrama must show, by clear proof, the intention of the employee to abandon his job. . . . In the present recourse, the Private Respondent has not established clear proof of the intention of the Petitioner to abandon his job or to sever the employment relationship between him and the Private Respondent. On the contrary, it was Private Respondent who told Petitioner that he did not want the latter to draw for him and thereafter refused to give him work to do or any mural or billboard to paint or draw on. More, after the repeated refusal of the Private Respondent to give Petitioner murals or billboards to work on, the Petitioner filed, with the Sub-Regional Arbitration Branch No. X of the National Labor Relations Commission, a Complaint for Illegal Dismissal and Money Claims. Such act has, as the Supreme Court declared, negate any intention to sever employment relationship. . . .27 II.

The second issue is whether private respondent Lagrama was illegally dismissed. To begin, the employer has the burden of proving the lawfulness of his employees dismissal.28 The validity of the charge must be clearly established in a manner consistent with due process. The Implementing Rules of the Labor Code29 provide that no worker shall be dismissed except for a just or authorized cause provided by law and after due process. This provision has two aspects: (1) the legality of the act of dismissal, that is, dismissal under the grounds provided for under Article 282 of the Labor Code and (2) the legality in the manner of dismissal. The illegality of the act of dismissal constitutes discharge without just cause, while illegality in the manner of dismissal is dismissal without due process.30 In this case, by his refusal to give Lagrama work to do and ordering Lagrama to get out of his sight as the latter tried to explain his side, petitioner made it plain that Lagrama was dismissed. _______________ 27 CA Decision, p. 10; Rollo, p, 53. 28 EDI Staff Builders International, Inc. v. Magsino, G.R. No. 139430, June 20, 2001, 359 SCRA 212, citing Farrol v. Court of Appeals, 325 SCRA 331 (2000). 29 Book V, Rule XXIII, 2 and, again, in Book VI, Rule I, 2. 30 Shoemart, Inc. v. NLRC, 176 SCRA 385 (1989). 405 VOL. 387, AUGUST 15, 2002 405 Tan vs. Lagrama Urinating in a work place other than the one designated for the purpose by the employer constitutes violation of reasonable regulations intended to promote a healthy environment under Art. 282(1) of the Labor Code for purposes of terminating employment, but the same must be shown by evidence. Here there is no evidence that Lagrama did urinate in a place other than a rest room in the premises of his work. Instead of ordering his reinstatement as provided in Art. 279 of the Labor Code, the Labor Arbiter found that the relationship between the employer and the employee has been so strained that the latters reinstatement would no longer serve any purpose. The parties do not dispute this finding. Hence, the grant of separation pay in lieu of reinstatement is appropriate. This is of course in addition to the payment of backwages which, in accordance with the ruling in Bustamante v. NLRC,31 should be computed from the time of Lagramas dismissal up to the time of the finality of this decision, without any deduction or qualification. The Bureau of Working Conditions32 classifies workers paid by results into two groups, namely; (1) those whose time and performance is supervised by the employer, and (2) those whose time and performance is unsupervised by the employer. The first involves an element of control and supervision

over the manner the work is to be performed, while the second does not. If a piece worker is supervised, there is an employer-employee relationship, as in this case. However, such an employee is not entitled to service incentive leave pay since, as pointed out in Makati Haberdashery v. NLRC,33 and Mark Roche International v. NLRC,34 he is paid a fixed amount for work done, regardless of the time he spent in accomplishing such work. _______________ 31 265 SCRA 61 (1996). 32 Letter of the Bureau of Working Conditions to the Law Firm of Nittoreda and Nasser, June 26, 1990 cited in 1 AZUCENA, THE LABOR CODE WITH COMMENTS AND CASES 321 (1992). 33 179 SCRA 448 (1989). 34 313 SCRA 356 (1999) citing Omnibus Rules Implementing The Labor Code, Bk. III, Rule V, 1(d). 406 406 SUPREME COURT REPORTS ANNOTATED Santos vs. Lorenzo WHEREFORE, based on the foregoing, the petition is DENIED for lack of showing that the Court of Appeals committed any reversible error. The decision of the Court of Appeals, reversing the decision of the National Labor Relations Commission and reinstating the decision of the Labor Arbiter, is AFFIRMED with the MODIFICATION that the backwages and other benefits awarded to private respondent Leovigildo Lagrama should be computed from the time of his dismissal up to the time of the finality of this decision, without any deduction and qualification. However, the service incentive leave pay awarded to him is DELETED. SO ORDERED. Bellosillo (Chairman), Quisumbing and Corona, JJ., concur. Judgment affirmed with modification. Note.The power of control is the most decisive factor in determining the existence of an employeremployee relationship. (Religious of the Virgin Mary vs. National Labor Relations Commission, 316 SCRA 614 [1999]) o0o [Tan vs. Lagrama, 387 SCRA 393(2002)]

SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. Aballa G.R. No. 149011. June 28, 2005.* SAN MIGUEL CORPORATION, petitioner, vs. PROSPERO A. ABALLA, BONNY J. ABARING, EDWIN M. ADLA-ON, ALVIN C. ALCALDE, CELANIO D. ARROLLADO, EDDIE A. ARROLLADO, REYNALDO T. ASONG, RENE A. ASPERA, JOEL D. BALATERIA, JOSEPH D. BALATERIA, JOSE JOLLEN BALLADOS, WILFREDO B. BASAS, EDWIN E. BEATINGO, SONNY V. BERONDO, CHRISTOPHER D. BRIONES, MARLON D. BRIONES, JOEL C. BOOC, ENRIQUE CABALIDA, DIOSCORO R. CAHINOD, ERNESTO P. CAHINOD, RENANTE S. CAHINOD, RUDERICK R. CALIXTON, RONILO C. CALVEZ, PANCHO CAETE, JUNNY CASTEL, JUDY S. CELESTE, ROMEO CHUA, DANILO COBRA, ARMANDO C. DEDOYCO, JOEY R. DELA CRUZ, JOHN D. DELFIN, RENELITO P. DEON, ARNEL C. DE PEDRO, ORLANDO DERDER, CLIFFORD A. DESPI, RAMIE A. DESPI, SR., VICTOR A. DESPI, ROLANDO L. DINGLE, ANTONIO D. DOLORFINO, LARRY DUMA-OP, NOEL DUMOL, CHITO L. DUNGOG, RODERICK C. DUQUEZA, ROMMEL ESTREBOR, RIC E. GALPO, MANSUETO GILLE, MAXIMO L. HILA-US, GERARDO J. JIMENEZ, ROBERTLY Y. HOFILEA, ROBERTO HOFILEA, VICENTE INDENCIO, JONATHAN T. INVENTOR, PETER PAUL T. INVENTOR, JOEBERT G. LAGARTO, RENATO LAMINA, ALVIN LAS POBRES, ALBERT LAS POBRES, LEONARD LEMONCHITO, JERRY LIM, JOSE COLLY S. LUCERO, ROBERTO E. MARTIL, HERNANDO MATILLANO, VICENTE M. MATILLANO, TANNY C. MENDOZA, WILLIAM P. NAVARRO, WILSON P. NAVARRO, LEO A. OLVIDO, ROBERTO G. OTERO, BIENVENIDO C. PAROCHILIN, REYNALDO C. PAROCHILIN, RICKY PALANOG, BERNIE O. PILLO, ALBERTO O. PILLO, JOE-MARIE S. PUGNA, EDWIN G. RIBON, RAUL _______________ * THIRD DIVISION. 393 VOL. 461, JUNE 28, 2005 393 San Miguel Corporation vs. Aballa A. RUBIO, HENRY S. SAMILLANO, EDGAR SANTIAGO, ROLAND B. SANTILLANA, ROLDAN V. SAYAM, JOSEPH S. SAYSON, RENE SUARNABA, ELMAR TABLIGAN, JERRY D. TALITE, OSCAR TALITE, WINIFREDO TALITE, CAMILO N. TEMPOROSA, JOSE TEMPOROSA, RANDY TINGALA, TRISTAN A. TINGSON, ROGELIO TOMESA, DIONISE A. TORMIS, ADELINO C. UNTAL, FELIX T. UNTAL, RONILO E. VISTA, JOAN C. VIYO and JOSE JOFER C. VIYO and the COURT OF APPEALS, respondents. Actions; Pleadings and Practice; Certificate of Non-Forum Shopping; Procedural Rules and Technicalities; The general rule is that the certificate of non-forum shopping must be signed by all the plaintiffs or petitioners in a case and the signature of only one of them is insufficient; Strict compliance with the provisions regarding the certificate of non-forum shopping merely underscores its mandatory

nature in that the certification cannot be altogether dispensed with or its requirements completely disregarded but it does not thereby interdict substantial compliance with its provisions under justifiable circumstances.While the general rule is that the certificate of non-forum shopping must be signed by all the plaintiffs or petitioners in a case and the signature of only one of them is insufficient, this Court has stressed that the rules on forum shopping, which were designed to promote and facilitate the orderly administration of justice, should not be interpreted with such absolute literalness as to subvert its own ultimate and legitimate objective. Strict compliance with the provisions regarding the certificate of non-forum shopping merely underscores its mandatory nature in that the certification cannot be altogether dispensed with or its requirements completely disregarded. It does not, however, thereby interdict substantial compliance with its provisions under justifiable circumstances. Same; Same; Same; Same; Given the collective nature of the petition filed before the appellate court by ninety-seven persons, raising one common cause of action against a corporation, the execution by only three of them in behalf of the others of the certificate of non-forum shopping constitutes substantial compliance with the Rules; The merits of the substantive aspects of the case may also be deemed as special circumstance or compelling reason to take cognizance of 394 394 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. Aballa a petition although the certification against forum shopping was not executed and signed by all of the petitioners.Given the collective nature of the petition filed before the appellate court by herein private respondents, raising one common cause of action against SMC, the execution by private respondents Winifredo Talite, Renelito Deon and Jose Temporosa in behalf of all the other private respondents of the certificate of non-forum shopping constitutes substantial compliance with the Rules. That the three indeed represented their co-petitioners before the appellate court is, as it correctly found, subsequently proven to be true as shown by the signatures of the majority of the petitioners appearing in their memorandum filed before Us. Additionally, the merits of the substantive aspects of the case may also be deemed as special circumstance or compelling reason to take cognizance of a petition although the certification against forum shopping was not executed and signed by all of the petitioners. Same; Same; Same; Same; It is the appellate court which ultimately determines if the supporting documents are sufficient to make out a prima facie case.SMC goes on to argue that the petition filed before the CA is fatally defective as it was not accompanied by copies of all pleadings and documents relevant and pertinent thereto in contravention of Section 1, Rule 65 of the Rules of Court. This Court is not persuaded. The records show that private respondents appended the following documents to their petition before the appellate court: the September 23, 1997 Decision of the Labor Arbiter, their Notice of Appeal with Appeal Memorandum dated October 16, 1997 filed before the NLRC, the December 29, 1998 NLRC Decision, their Motion for Reconsideration dated March 26, 1999 filed with the NLRC and the September 10, 1999 NLRC Resolution. It bears stressing at any rate that it is the appellate court which ultimately determines if the supporting documents are sufficient to make out a prima facie case. It discerns whether on the basis of what have been submitted it could already judiciously determine the merits of the petition. In the case at bar, the CA found that the petition was adequately supported by

relevant and pertinent documents. Same; Same; Same; Same; Instances Where a Liberal Construction of the Rule on the Accomplishment of a Certificate of Non-Forum Shopping Allowed; Rules of procedure should indeed be viewed as mere tools designed to facilitate the attainment of justicetheir strict 395 VOL. 461, JUNE 28, 2005 395 San Miguel Corporation vs. Aballa and rigid application, which would result in technicalities that tend to frustrate rather than promote substantial justice, must always be eschewed.At all events, this Court has allowed a liberal construction of the rule on the accomplishment of a certificate of non-forum shopping in the following cases: (1) where a rigid application will result in manifest failure or miscarriage of justice; (2) where the interest of substantial justice will be served; (3) where the resolution of the motion is addressed solely to the sound and judicious discretion of the court; and (4) where the injustice to the adverse party is not commensurate with the degree of his thoughtlessness in not complying with the procedure prescribed. Rules of procedure should indeed be viewed as mere tools designed to facilitate the attainment of justice. Their strict and rigid application, which would result in technicalities that tend to frustrate rather than promote substantial justice, must always be eschewed. Administrative Law; When the findings of fact of the labor arbiter and the NLRC are not supported by substantial evidence or their judgment was based on a misapprehension of facts, the appellate court may make an independent evaluation of the facts of the case.The general rule, no doubt, is that findings of facts of an administrative agency which has acquired expertise in the particular field of its endeavor are accorded great weight on appeal. The rule is not absolute and admits of certain wellrecognized exceptions, however. Thus, when the findings of fact of the labor arbiter and the NLRC are not supported by substantial evidence or their judgment was based on a misapprehension of facts, the appellate court may make an independent evaluation of the facts of the case. Labor Law; Pleadings and Practice; Verification; That the verification where it is manifested that the one signing is one of the complainants and was causing the preparation of the complaint with the authority of my co-complainants indubitably shows that he was representing the rest of his cocomplainants in signing the verification in accordance with Section 7, Rule III of the 1990 NRLC Rules, now Section 8, Rule 3 of the 1997 NLRC Rules.A perusal of the complaint shows that the ninety seven complainants were being represented by their counsel of choice. Thus the first sentence of their complaint alleges: x x x complainants, by counsel and unto this Honorable Office respectfully state x x x. And the complaint was signed by Atty. Jose Max S. Ortiz as counsel for the complainants. 396 396

SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. Aballa Following Section 6, Rule III of the 1990 Rules of Procedure of the NLRC, now Section 7, Rule III of the 1999 NLRC Rules, Atty. Ortiz is presumed to be properly authorized by private respondents in filing the complaint. That the verification wherein it is manifested that private respondent Talite was one of the complainants and was causing the preparation of the complaint with the authority of my cocomplainants indubitably shows that Talite was representing the rest of his co-complainants in signing the verification in accordance with Section 7, Rule III of the 1990 NLRC Rules, now Section 8, Rule 3 of the 1999 NLRC Rules, which states: Section 7. Authority to bind party.Attorneys and other representatives of parties shall have authority to bind their clients in all matters of procedure; but they cannot, without a special power of attorney or express consent, enter into a compromise agreement with the opposing party in full or partial discharge of a clients claim. Same; Labor Only Contracting; Independent Contractors; The test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subject to the control of the employer, except only as to the results of the work; In labor-only contracting, the statute creates an employeremployee relationship for a comprehensive purposeto prevent a circumvention of labor laws.The test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subject to the control of the employer, except only as to the results of the work. In legitimate labor contracting, the law creates an employer-employee relationship for a limited purpose, i.e., to ensure that the employees are paid their wages. The principal employer becomes jointly and severally liable with the job contractor, only for the payment of the employees wages whenever the contractor fails to pay the same. Other than that, the principal employer is not responsible for any claim made by the employees. In labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal employer. 397 VOL. 461, JUNE 28, 2005 397 San Miguel Corporation vs. Aballa Same; Same; Same; The language of a contract is not determinative of the parties relationshipit is the totality of the facts and surrounding circumstances of the case.The Contract of Services between SMC and Sunflower shows that the parties clearly disavowed the existence of an employer-employee relationship between SMC and private respondents. The language of a contract is not, however, determinative of the parties relationship; rather it is the totality of the facts and surrounding circumstances of the case. A party cannot dictate, by the mere expedient of a unilateral declaration in a contract, the character of its business, i.e., whether as labor-only contractor or job contractor, it being

crucial that its character be measured in terms of and determined by the criteria set by statute. Same; Same; Same; Where it is shown that the workers daily time records were signed by the principal and control of the premises in which they worked was by the principal, these tend to disprove the independence of the contractor who engaged the services of the work-ers.Sunflower did not carry on an independent business or undertake the performance of its service contract according to its own manner and method, free from the control and supervision of its principal, SMC, its apparent role having been merely to recruit persons to work for SMC. Thus, it is gathered from the evidence adduced by private respondents before the labor arbiter that their daily time records were signed by SMC supervisors Ike Puentebella, Joemel Haro, Joemari Raca, Erwin Tumonong, Edison Arguello, and Stephen Palabrica, which fact shows that SMC exercised the power of control and supervision over its employees. And control of the premises in which private respondents worked was by SMC. These tend to disprove the independence of the contractor. Same; Same; Same; The circumstance that the contractors workers had been working alongside regular employees of the principal, performing identical jobs under the same supervisors, is another indicium of the existence of labor-only contractorship.Private respondents had been working in the aqua processing plant inside the SMC compound alongside regular SMC shrimp processing workers performing identical jobs under the same SMC supervisors. This circumstance is another indicium of the existence of a labor-only contractorship. 398 398 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. Aballa Same; Two Kinds of Regular Employees; Workers who were engaged in janitorial and messengerial tasks fall under the category of regular employees who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed, and are entitled to differential pay and benefits extended to other regular employees from the day immediately following their first year of service.The law of course 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. As for those of private respondents who were engaged in janitorial and messengerial tasks, they fall under the second category and are thus entitled to differential pay and benefits extended to other SMC regular employees from the day immediately following their first year of service. Same; Retrenchment; Words and Phrases; Where a particular department under a corporate group of companies was closed allegedly due to serious business reverses, this constitutes retrenchment by, and not closure of, the enterprise or the company.In the case at bar, a particular department under the SMC group of companies was closed allegedly due to serious business reverses. This constitutes retrenchment by, and not closure of, the enterprise or the company itself as SMC has not totally ceased operations but is still very much an on-going and highly viable business concern.

Same; Same; Requisites.Retrenchment is a management prerogative consistently recognized and affirmed by this Court. It is, however, subject to faithful compliance with the substantive and procedural requirements laid down by law and jurisprudence. For retrenchment to be considered valid the following substantial requirements must be met: (a) the losses expected should be substantial and not merely de minimis in extent; (b) the substantial losses apprehended must be reasonably imminent such as can be perceived objectively and in good faith by the employer; (c) the retrenchment must be reasonably necessary and likely to effectively prevent the expected losses; and (d) the alleged losses, if already incurred, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence. 399 VOL. 461, JUNE 28, 2005 399 San Miguel Corporation vs. Aballa Same; Same; The financial statements must be prepared and signed by independent auditors failing which they can be assailed as self-serving documents.In the discharge of these requirements, it is the employer who has the onus, being in the nature of an affirmative defense. Normally, the condition of business losses is shown by audited financial documents like yearly balance sheets, profit and loss statements and annual income tax returns. The financial statements must be prepared and signed by independent auditors failing which they can be assailed as self-serving documents. Same; Same; Damages; Where the dismissal is based on an authorized cause under Article 283 of the Labor Code but the employer failed to comply with the notice requirement, the sanction should be stiff as the dismissal process was initiated by the employers exercise of his management prerogative, as opposed to dismissal based on a just cause under Article 282.Where the dismissal is based on an authorized cause under Article 283 of the Labor Code but the employer failed to comply with the notice requirement, the sanction should be stiff as the dismissal process was initiated by the employers exercise of his management prerogative, as opposed to a dismissal based on a just cause under Article 282 with the same procedural infirmity where the sanction to be imposed upon the employer should be tempered as the dismissal process was, in effect, initiated by an act imputable to the employee. In light of the factual circumstances of the case at bar, this Court awards P50,000.00 to each private respondent as nominal damages. Same; Attorneys Fees; Although an express finding of facts and law is still necessary to prove the merit of the award of attorneys fees, there need not be any showing that the employer acted maliciously or in bad faith when it withheld the wagesthere need only be a showing that the lawful wages were not paid accordingly.With respect to attorneys fees, in actions for recovery of wages or where an employee was forced to litigate and thus incurred expenses to protect his rights and interests, a maximum of ten percent (10%) of the total monetary award by way of attorneys fees is justifiable under Article 111 of the Labor Code, Section 8, Rule VIII, Book III of its Implementing Rules, and paragraph 7, Article 2208 of the Civil Code. Although an express finding of facts and law is still necessary to prove the merit of the award, there need not be any showing that the employer acted maliciously or in bad faith when it withheld the

400 400 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. Aballa wages. There need only be a showing that the lawful wages were not paid accordingly, as in this case. PETITION for review on certiorari of the decision and resolution of the Court of Appeals. The facts are stated in the opinion of the Court. De Lima-Bohol & Meez Law Offices for petitioner. Jose Max S. Ortiz for private respondents. Filomeno B. Tan for Purok Sunflower Multi-Purpose Cooperative. CARPIO-MORALES, J.: Petitioner San Miguel Corporation (SMC), represented by its Assistant Vice President and Visayas Area Manager for Aquaculture Operations Leopoldo S. Titular, and Sunflower Multi-Purpose Cooperative (Sunflower), represented by the Chairman of its Board of Directors Roy G. Asong, entered into a oneyear Contract of Services1 commencing on January 1, 1993, to be renewed on a month to month basis until terminated by either party. The pertinent provisions of the contract read: 1. The cooperative agrees and undertakes to perform and/or provide for the company, on a nonexclusive basis for a period of one year the following services for the Bacolod Shrimp Processing Plant: A. Messengerial/Janitorial B. Shrimp Harvesting/Receiving C. Sanitation/Washing/Cold Storage2 _______________ 1 Rollo at pp. 278-286. 2 Annexed to the Service Contract is a detailed listing of the scope of the services to be provided to SMC: A. Shrimp Receiving/Harvesting - Assist in the crushing and loading of ice; 401

VOL. 461, JUNE 28, 2005 401 San Miguel Corporation vs. Aballa 2. To carry out the undertaking specified in the immediately preceding paragraph, the cooperative shall employ the necessary personnel and provide adequate equipment, materials, tools and _______________ - Receive the raw materials and put them into the chilling tanks; - Sort the shrimp according to standard quality specifications; - Pack the raw materials into styropor boxes/containers and assist on the delivery of the harvested raw materials to the processing plant; - Prepare harvest materials and equipment and clean them after use and - Perform other duties that the company may assign from time to time. B. Janitorial and Messengerial Services 1. Maintain, sanitize and clean the following: - Streets cemented and otherwise - Canals and floor area - Administration building offices and comfort rooms - Logistics/materials/warehouse building - Clinic and comfort room - Plant grounds/lawn 2. Maintain and Water the plants and trees 3. Haul and dispose garbage daily from designated waste containers within the compound to an area outside and far from the compound. 4. Perform messengerial activities within Bacolod City and other duties that may be assigned during office hours. C. Sanitation/Washing Services 1. Wash and sanitize boxes, chilling tanks, trays and other harvesting materials.

2. Store harvesting materials in the designated area after washing. 3. Load and unload boxes, trays, chilling tanks and other harvesting materials to be used during harvest schedule. 402 402 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. Aballa apparatus, to efficiently, fully and speedily accomplish the work and services undertaken by the cooperative. x x x 3. In consideration of the above undertaking the company expressly agrees to pay the cooperative the following rates per activity: A. Messengerial/Janitorial Monthly Fixed Service Charge of: Nineteen Thousand Five Hundred Pesos Only (P19,500.00) B. Harvesting/Shrimp Receiving.Piece rate of P0.34/kg. Or P100.00 minimum per person/activity whichever is higher, with provisions as follows: P25.00 Fixed Fee per person Additional meal allowance P15.00 every meal time in case harvest duration exceeds one meal. This will be pre-set every harvest based on harvest plan approved by the Senior Buyer. C. Sanitation/Washing and Cold Storage P125.00/person for 3 shifts. One-half of the payment for all services rendered shall be payable on the fifteenth and the other half, on the end of each month. The cooperative shall pay taxes, fees, dues and other impositions that shall become due as a result of this contract. The cooperative shall have the entire charge, control and supervision of the work and services herein agreed upon. x x x 4. There is no employer-employee relationship between the company and the cooperative, or the cooperative and any of its members, or the company and any members of the cooperative. The cooperative is an association of self-employed members, an independent contractor, and an entrepreneur. It is subject to the control and direction of the company only as to the result to be accomplished by the work or services herein specified, and not as to the work herein contracted. The cooperative and its members recognize that it is taking a business risk in accepting a fixed service fee to provide the services contracted for and its realization of profit or loss from its undertaking, in relation to all its other undertakings, will depend on how efficiently it deploys and fields its members and how they perform the work and manage its operations. 403

VOL. 461, JUNE 28, 2005 403 San Miguel Corporation vs. Aballa 5. The cooperative shall, whenever possible, maintain and keep under its control the premises where the work under this contract shall be performed. 6. The cooperative shall have exclusive discretion in the selection, engagement and discharge of its member-workers or otherwise in the direction and control thereof. The determination of the wages, salaries and compensation of the member-workers of the cooperative shall be within its full control. It is further understood that the cooperative is an independent contractor, and as such, the cooperative agrees to comply with all the requirements of all pertinent laws and ordinances, rules and regulations. Although it is understood and agreed between the parties hereto that the cooperative, in the performance of its obligations, is subject to the control or direction of the company merely as a (sic) result to be accomplished by the work or services herein specified, and not as to the means and methods of accomplishing such result, the cooperative hereby warrants that it will perform such work or services in such manner as will be consistent with the achievement of the result herein contracted for. xxx 8. The cooperative undertakes to pay the wages or salaries of its member-workers, as well as all benefits, premiums and protection in accordance with the provisions of the labor code, cooperative code and other applicable laws and decrees and the rules and regulations promulgated by competent authorities, assuming all responsibility therefor. The cooperative further undertakes to submit to the company within the first ten (10) days of every month, a statement made, signed and sworn to by its duly authorized representative before a notary public or other officer authorized by law to administer oaths, to the effect that the cooperative has paid all wages or salaries due to its employees or personnel for services rendered by them during the month immediately preceding, including overtime, if any, and that such payments were all in accordance with the requirements of law. xxx 12. Unless sooner terminated for the reasons stated in paragraph 9 this contract shall be for a period of one (1) year commencing on January 1, 1993. Thereafter, this Contract will be deemed renewed on a month-to-month basis until terminated by either party 404 404 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. Aballa by sending a written notice to the other at least thirty (30) days prior to the intended date of termination. x x x3 (Underscoring supplied)

Pursuant to the contract, Sunflower engaged private respondents to, as they did, render services at SMCs Bacolod Shrimp Processing Plant at Sta. Fe, Bacolod City. The contract was deemed renewed by the parties every month after its expiration on January 1, 1994 and private respondents continued to perform their tasks until September 11, 1995. In July 1995, private respondents filed a complaint before the NLRC, Regional Arbitration Branch No. VI, Bacolod City, praying to be declared as regular employees of SMC, with claims for recovery of all benefits and privileges enjoyed by SMC rank and file employees. Private respondents subsequently filed on September 25, 1995 an Amended Complaint4 to include illegal dismissal as additional cause of action following SMCs closure of its Bacolod Shrimp Processing Plant on September 15, 19955 which resulted in the termination of their services. SMC filed a Motion for Leave to File Attached Third Party Complaint6 dated November 27, 1995 to implead Sunflower as Third Party Defendant which was, by Order7 of December 11, 1995, granted by Labor Arbiter Ray Alan T. Drilon. In the meantime, on September 30, 1996, SMC filed before the Regional Office at Iloilo City of the Department of Labor and Employment (DOLE) a Notice of Closure8 of its aquaculture operations effective on even date, citing serious business losses. _______________ 3 Rollo at pp. 279-283. 4 Id., at pp. 114-117. 5 Id., at p. 502. 6 Id., at pp. 118-120. 7 Id., at p. 121. 8 Id., at p. 340. 405 VOL. 461, JUNE 28, 2005 405 San Miguel Corporation vs. Aballa By Decision of September 23, 1997, Labor Arbiter Drilon dismissed private respondents complaint for lack of merit, ratiocinating as follows: We sustain the stand of the respondent SMC that it could properly exercise its management prerogative

to contract out the preparation and processing aspects of its aquaculture operations. Judicial notice has already been taken regarding the general practice adopted in government and private institutions and industries of hiring independent contractors to perform special services. x x x xxx Indeed, the law allows job contracting. Job contracting is permissible under the Labor Code under specific conditions and we do not see how this activity could not be legally undertaken by an independent service cooperative like the third-party respondent herein. There is no basis to the demand for regularization simply on the theory that complainants performed activities which are necessary and desirable in the business of respondent. It has been held that the definition of regular employees as those who perform activities which are necessary and desirable for the business of the employer is not always determinative because any agreement may provide for one (1) party to render services for and in behalf of another for a consideration even without being hired as an employee. The charge of the complainants that third-party respondent is a mere labor-only contractor is a sweeping generalization and completely unsubstantiated. x x x In the absence of clear and convincing evidence showing that third-party respondent acted merely as a labor only contractor, we are firmly convinced of the legitimacy and the integrity of its service contract with respondent SMC. In the same vein, the closure of the Bacolod Shrimp Processing Plant was a management decision purely dictated by economic factors which was (sic) mainly serious business losses. The law recognizes the right of the employer to close his business or cease his operations for bonafide reasons, as much as it recognizes the right of the employer to terminate the employment of any employee due to closure or cessation of business operations, unless the closing is for the purpose of circumventing the provisions of the law on security of tenure. The decision of respondent SMC to close its Bacolod Shrimp Processing Plant, due to serious business losses which has (sic) 406 406 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. Aballa clearly been established, is a management prerogative which could hardly be interfered with. x x x The closure did affect the regular employees and workers of the Bacolod Processing Plant, who were accordingly terminated following the legal requisites prescribed by law. The closure, however, in so far as the complainants are concerned, resulted in the termination of SMCs service contract with their cooperative x x x9 (Italics supplied) Private respondents appealed to the NLRC. By Decision of December 29, 1998, the NLRC dismissed the appeal for lack of merit, it finding that

third party respondent Sunflower was an independent contractor in light of its observation that [i]n all the activities of private respondents, they were under the actual direction, control and supervision of third party respondent Sunflower, as well as the payment of wages, and power of dismissal.10 Private respondents Motion for Reconsideration11 having been denied by the NLRC for lack of merit by Resolution of September 10, 1999, they filed a petition for certiorari12 before the Court of Appeals (CA). Before the CA, SMC filed a Motion to Dismiss13 private respondents petition for non-compliance with the Rules on Civil Procedure and failure to show grave abuse of discretion on the part of the NLRC. SMC subsequently filed its Comment14 to the petition on March 30, 2000. By Decision of February 7, 2001, the appellate court reversed the NLRC decision and accordingly found for private respondents, disposing as follows: _______________ 9 Id., at pp. 504-507. 10 Id., at pp. 553-557. 11 Id., at pp. 559-563. 12 Id., at pp. 574-587. 13 CA Rollo at pp. 74-82. 14 Id., at pp. 108-142. 407 VOL. 461, JUNE 28, 2005 407 San Miguel Corporation vs. Aballa WHEREFORE, the petition is GRANTED. Accordingly, judgment is hereby RENDERED: (1) REVERSING and SETTING ASIDE both the 29 December 1998 decision and 10 September 1999 resolution of the National Labor Relations Commission (NLRC), Fourth Division, Cebu City in NLRC Case No. V-0361-97 as well as the 23 September 1997 decision of the labor arbiter in RAB Case No. 06-07-10316-95; (2) ORDERING the respondent, San Miguel Corporation, to GRANT petitioners: (a) separation pay in accordance with the computation given to the regular SMC employees working at its Bacolod Shrimp Processing Plant with full backwages, inclusive of allowances and other benefits or their monetary equivalent, from 11 September 1995, the time their actual compensation was withheld from them, up to the time of the finality of this decision; (b) differentials pays (sic) effective as of and

from the time petitioners acquired regular employment status pursuant to the disquisition mentioned above, and all such other and further benefits as provided by applicable collective bargaining agreement(s) or other relations, or by law, beginning such time up to their termination from employment on 11 September 1995; and ORDERING private respondent SMC to PAY unto the petitioners attorneys fees equivalent to ten (10%) percent of the total award. No pronouncement as to costs. SO ORDERED.15 (Italics supplied) Justifying its reversal of the findings of the labor arbiter and the NLRC, the appellate court reasoned: Although the terms of the non-exclusive contract of service between SMC and [Sunflower] showed a clear intent to abstain from establishing an employer-employee relationship between SMC and [Sunflower] or the latters members, the extent to which the parties successfully realized this intent in the light of the applicable law is the controlling factor in determining the real and actual relationship between or among the parties. xxx With respect to the power to control petitioners conduct, it appears that petitioners were under the direct control and supervision of SMC supervisors both as to the manner they performed their _______________ 15 Rollo at p. 22. 408 408 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. Aballa functions and as to the end results thereof. It was only after petitioners lodged a complaint to have their status declared as regular employees of SMC that certain members of [Sunflower] began to countersign petitioners daily time records to make it appear that they (petitioners) were under the control and supervision of [Sunflower] team leaders (rollo, pp. 523-527). x x x Even without these instances indicative of control by SMC over the petitioners, it is safe to assume that SMC would never have allowed the petitioners to work within its premises, using its own facilities, equipment and tools, alongside SMC employees discharging similar or identical activities unless it exercised a substantial degree of control and supervision over the petitioners not only as to the manner they performed their functions but also as to the end results of such functions. xxx

x x x it becomes apparent that [Sunflower] and the petitioners do not qualify as independent contractors. [Sunflower] and the petitioners did not have substantial capital or investment in the form of tools, equipment, implements, work premises, et cetera necessary to actually perform the service under their own account, responsibility, and method. The only work premises maintained by [Sunflower] was a small office within the confines of a small carinderia or refreshment parlor owned by the mother of its chair, Roy Asong; the only equipment it owned was a typewriter (rollo, pp. 525-525) and, the only assets it provided SMC were the bare bodies of its members, the petitioners herein (rollo, p. 523). In addition, as shown earlier, petitioners, who worked inside the premises of SMC, were under the control and supervision of SMC both as to the manner and method in discharging their functions and as to the results thereof. Besides, it should be taken into account that the activities undertaken by the petitioners as cleaners, janitors, messengers and shrimp harvesters, packers and handlers were directly related to the aquaculture business of SMC (See Guarin vs. NLRC, 198 SCRA 267, 273). This is confirmed by the renewal of the service contract from January 1993 to September 1995, a period of close to three (3) years. Moreover, the petitioners here numbering ninety seven (97), by itself, is a considerable workforce and raises the suspicion that the non-exclusive service contract between SMC and [Sunflower] was designed to evade the obligations inherent in an employer-employee 409 VOL. 461, JUNE 28, 2005 409 San Miguel Corporation vs. Aballa relationship (See Rhone-Poulenc Agrochemicals Philippines, Inc. vs. NLRC, 217 SCRA 249, 259). Equally suspicious is the fact that the notary public who signed the by-laws of [Sunflower] and its [Sunflower] retained counsel are both partners of the local counsel of SMC (rollo, p. 9). xxx With these observations, no other logical conclusion can be reached except that [Sunflower] acted as an agent of SMC, facilitating the manpower requirements of the latter, the real employer of the petitioners. We simply cannot allow these two entities through the convenience of a non-exclusive service contract to stipulate on the existence of employer-employee relation. Such existence is a question of law which cannot be made the subject of agreement to the detriment of the petitioners (Tabas vs. California Manufacturing, Inc., 169 SCRA 497, 500). xxx There being a finding of labor-only contracting, liability must be shouldered either by SMC or

[Sunflower] or shared by both (See Tabas vs. California Manufacturing, Inc., supra, p. 502). SMC however should be held solely liable for [Sunflower] became nonexistent with the closure of the aquaculture business of SMC. Furthermore, since the closure of the aquaculture operations of SMC appears to be valid, reinstatement is no longer feasible. Consistent with the pronouncement in Bustamante, et al. vs. NLRC, G.R. No. 111651, 28 November 1996, petitioners are thus entitled to separation pay (in the computation similar to those given to regular SMC employees at its Bacolod Shrimp Processing Plant) with full backwages, inclusive of allowances and other benefits or their monetary equivalent, from the time their actual compensation was withheld from them up to the time of the finality of this decision. This is without prejudice to differentials pays (sic) effective as of and from the time petitioners acquired regular employment status pursuant to the discussion mentioned above, and all such other and further benefits as provided by applicable collective bargaining agreement(s) or other relations, or by law, beginning such time up to their termi410 410 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. Aballa nation from employment on 11 September 1995.16 (Emphasis and italics supplied) SMCs Motion for Reconsideration17 having been denied for lack of merit by Resolution of July 11, 2001, it comes before this Court via the present petition for review on certiorari assigning to the CA the following errors: I THE COURT OF APPEALS GRAVELY ERRED IN GIVING DUE COURSE AND GRANTING RESPONDENTS PATENTLY DEFECTIVE PETITION FOR CERTIORARI. IN DOING SO, THE COURT OF APPEALS DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS. II THE COURT OF APPEALS GRAVELY ERRED IN RECOGNIZING ALL THE RESPONDENTS AS COMPLAINANTS IN THE CASE BEFORE THE LABOR ARBITER. IN DOING SO, THE COURT OF APPEALS DECIDED THIS CASE IN A MANNER NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT. III THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RESPONDENTS ARE EMPLOYEES OF SMC.

IV THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDNG (sic) THAT RESPONDENTS ARE NOT ENTITLED TO ANY RELIEF. THE CLOSURE OF THE BACOLOD SHRIMP PROCESSING PLANT WAS DUE TO SERIOUS BUSINESS LOSSES.18 (Italics supplied) _______________ 16 Id., at pp. 15-21-a. 17 Id., at pp. 623-637. 18 Id., at pp. 57-58. 411 VOL. 461, JUNE 28, 2005 411 San Miguel Corporation vs. Aballa SMC bewails the failure of the appellate court to outrightly dismiss the petition for certiorari as only three out of the ninety seven named petitioners signed the verification and certification against forumshopping. While the general rule is that the certificate of non-forum shopping must be signed by all the plaintiffs or petitioners in a case and the signature of only one of them is insufficient,19 this Court has stressed that the rules on forum shopping, which were designed to promote and facilitate the orderly administration of justice, should not be interpreted with such absolute literalness as to subvert its own ultimate and legitimate objective.20 Strict compliance with the provisions regarding the certificate of non-forum shopping merely underscores its mandatory nature in that the certification cannot be altogether dispensed with or its requirements completely disregarded.21 It does not, however, thereby interdict substantial compliance with its provisions under justifiable circumstances.22 Thus in the recent case of HLC Construction and Development Corporation v. Emily Homes Subdivision Homeowners Association,23 this Court held: Respondents (who were plaintiffs in the trial court) filed the complaint against petitioners as a group, represented by their homeowners association president who was likewise one of the plaintiffs, Mr. Samaon M. Buat. Respondents raised one cause of action which was the breach of contractual obligations and payment of damages. They shared a common interest in the subject matter of the case, _______________ 19 Docena v. Lapesura, 355 SCRA 658, 667 (2001). 20 Cavile v. Heirs of Clarita Cavile, 400 SCRA 255, 261-262 (2003) (citations omitted).

21 HLC Construction and Development Corporation v. Emily Homes Subdivision Homeowners Association, 411 SCRA 504, 508 (2003). 22 Cavile v. Heirs of Clarita Cavile, 400 SCRA 255, 262 (2003) (citation omitted). 23 411 SCRA 504 (2003). 412 412 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. Aballa being the aggrieved residents of the poorly constructed and developed Emily Homes Subdivision. Due to the collective nature of the case, there was no doubt that Mr. Samaon M. Buat could validly sign the certificate of non-forum shopping in behalf of all his co-plaintiffs. In cases therefore where it is highly impractical to require all the plaintiffs to sign the certificate of non-forum shopping, it is sufficient, in order not to defeat the ends of justice, for one of the plaintiffs, acting as representative, to sign the certificate provided that xxx the plaintiffs share a common interest in the subject matter of the case or filed the case as a collective, raising only one common cause of action or defense.24 (Emphasis and italics supplied) Given the collective nature of the petition filed before the appellate court by herein private respondents, raising one common cause of action against SMC, the execution by private respondents Winifredo Talite, Renelito Deon and Jose Temporosa in behalf of all the other private respondents of the certificate of non-forum shopping constitutes substantial compliance with the Rules.25 That the three indeed represented their co-petitioners before the appellate court is, as it correctly found, subsequently proven to be true as shown by _______________ 24 Id., at pp. 509-510. 25 Vide: Cavile v. Heirs of Clarita Cavile, 400 SCRA 255 (2003) where this Court found: We find that the execution by Thomas George Cavile, Sr. in behalf of all the other petitioners of the certificate of non-forum shopping constitutes substantial compliance with the Rules. All the petitioners, being relatives and co-owners of the properties in dispute, share a common interest thereon. They also share a common defense in the complaint for partition filed by the respondents. Thus, when they filed the instant petition, they filed it as a collective, raising only one argument to defend their rights over the properties in question. There is sufficient basis, therefore, for Thomas George Cavili, Sr. to speak for and in behalf of his co-petitioners that they have not filed any action or claim involving the same issues in another court or tribunal, nor is there other pending action or claim in another court or tribunal involving the same issues.

413 VOL. 461, JUNE 28, 2005 413 San Miguel Corporation vs. Aballa the signatures of the majority of the petitioners appearing in their memorandum filed before Us.26 Additionally, the merits of the substantive aspects of the case may also be deemed as special circumstance or compelling reason to take cognizance of a petition although the certification against forum shopping was not executed and signed by all of the petitioners.27 SMC goes on to argue that the petition filed before the CA is fatally defective as it was not accompanied by copies of all pleadings and documents relevant and pertinent thereto in contravention of Section 1, Rule 65 of the Rules of Court.28 This Court is not persuaded. The records show that private respondents appended the following documents to their petition before the appellate court: the September 23, 1997 Decision of the Labor Arbiter,29 their Notice of Appeal with Appeal Memorandum dated October 16, 1997 filed before the NLRC,30 _______________ 26 Rollo at p. 28. 27 Torres v. Specialized Packaging Development Corporation, 433 SCRA 455, 467 (2004); Cavile v. Heirs of Clarita Cavile, 400 SCRA 255, 262 (2003) (citation omitted). 28 SECTION 1. Petition for Certiorari.When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law and justice may require. The petition shall be accompanied by a certified true copy of the judgment, order or resolution subject thereof, copies of all pleadings and documents relevant and pertinent thereto, and a sworn certification of non-forum shopping as provided in the third paragraph of section 3, Rule 46. 29 CA Rollo at pp. 16-31. 30 Id., at pp. 33-47. 414

414 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. Aballa the December 29, 1998 NLRC Decision,31 their Motion for Reconsideration dated March 26, 1999 filed with the NLRC32 and the September 10, 1999 NLRC Resolution.33 It bears stressing at any rate that it is the appellate court which ultimately determines if the supporting documents are sufficient to make out a prima facie case.34 It discerns whether on the basis of what have been submitted it could already judiciously determine the merits of the petition.35 In the case at bar, the CA found that the petition was adequately supported by relevant and pertinent documents. At all events, this Court has allowed a liberal construction of the rule on the accomplishment of a certificate of non-forum shopping in the following cases: (1) where a rigid application will result in manifest failure or miscarriage of justice; (2) where the interest of substantial justice will be served; (3) where the resolution of the motion is addressed solely to the sound and judicious discretion of the court; and (4) where the injustice to the adverse party is not commensurate with the degree of his thoughtlessness in not complying with the procedure prescribed.36 Rules of procedure should indeed be viewed as mere tools designed to facilitate the attainment of justice. Their strict and rigid application, which would result in technicalities that tend to frustrate rather than promote substantial justice, must always be eschewed.37 SMC further argues that the appellate court exceeded its jurisdiction in reversing the decisions of the labor arbiter and _______________ 31 Id., at pp. 48-61. 32 Id., at pp. 63-67. 33 Id., at pp. 68-69. 34 Atillo v. Bombay, 351 SCRA 361, 369 (2001). 35 Ibid. 36 Manila Hotel Corporation v. Court of Appeals, 384 SCRA 520, 524 (2002) (citation omitted). 37 Serrano v. Galant Maritime Services, Inc., 408 SCRA 523, 528 (2003) (citations omitted). 415 VOL. 461, JUNE 28, 2005

415 San Miguel Corporation vs. Aballa the NLRC as findings of facts of quasi-judicial bodies like the NLRC are accorded great respect and finality, and that this principle acquires greater weight and application in the case at bar as the labor arbiter and the NLRC have the same factual findings. The general rule, no doubt, is that findings of facts of an administrative agency which has acquired expertise in the particular field of its endeavor are accorded great weight on appeal.38 The rule is not absolute and admits of certain well-recognized exceptions, however. Thus, when the findings of fact of the labor arbiter and the NLRC are not supported by substantial evidence or their judgment was based on a misapprehension of facts, the appellate court may make an independent evaluation of the facts of the case.39 SMC further faults the appellate court in giving due course to private respondents petition despite the fact that the complaint filed before the labor arbiter was signed and verified only by private respondent Winifredo Talite; that private respondents position paper40 was verified by only six41 out of the ninety seven complainants; and that their Joint-Affidavit42 was executed only by twelve43 of the complainants. _______________ 38 Pepsi-Cola Distributors of the Philippines, Inc. v. National Labor Relations Commission, 272 SCRA 267, 276 (1997); Trendline Employees Association-Southern Philippines Federation of Labor v. National Labor Relations Commission, 272 SCRA 172, 179 (1997) (citation omitted). 39 EMCO Plywood Corporation v. Abelgas, 427 SCRA 496, 515-516 (2004) (citations omitted); Villar v. National Labor Relations Commission, 331 SCRA 686, 692 (2000) (citation omitted). 40 Rollo at pp. 124-136. 41 Winifredo Talite, Camilo Temporosa, Arnel De Pedro, Jonathan Inventor, Ramie Despi and Roderick Duquesa. 42 Rollo at pp. 483-489. 43 Winifredo Talite, Jerry Talite, Clifford Despi, Joey de la Cruz, Jonathan Inventor, Ramie Despi, Arnel De Pedro, Leonardo Lemoncito, Camilo Temporosa, Renelito Deon, Jose Temporosa and Victor Despi. 416 416 SUPREME COURT REPORTS ANNOTATED

San Miguel Corporation vs. Aballa Specifically with respect to the Joint-Affidavit of private respondents, SMC asserts that it should not have been considered by the appellate court in establishing the claims of those who did not sign the same, citing this Courts ruling in Southern Cotabato Development and Construction, Inc. v. NLRC.44 SMCs position does not lie. A perusal of the complaint shows that the ninety seven complainants were being represented by their counsel of choice. Thus the first sentence of their complaint alleges: xxx complainants, by counsel and unto this Honorable Office respectfully state xxx. And the complaint was signed by Atty. Jose Max S. Ortiz as counsel for the complainants. Following Section 6, Rule III of the 1990 Rules of Procedure of the NLRC, now Section 7, Rule III of the 1999 NLRC Rules, Atty. Ortiz is presumed to be properly authorized by private respondents in filing the complaint. That the verification wherein it is manifested that private respondent Talite was one of the complainants and was causing the preparation of the complaint with the authority of my co-complainants indubitably shows that Talite was representing the rest of his co-complainants in signing the verification in accordance with Section 7, Rule III of the 1990 NLRC Rules, now Section 8, Rule 3 of the 1999 NLRC Rules, which states: Section 7. Authority to bind party.Attorneys and other representatives of parties shall have authority to bind their clients in all matters of procedure; but they cannot, without a special power of attorney or express consent, enter into a compromise agreement with the opposing party in full or partial discharge of a clients claim. (Italics supplied) As regards private respondents position paper which bore the signatures of only six of them, appended to it was an Au_______________ 44 280 SCRA 853 (1997). 417 VOL. 461, JUNE 28, 2005 417 San Miguel Corporation vs. Aballa thority/Confirmation of Authority45 signed by the ninety one others conferring authority to their counsel to file RAB Case No. 06-07-10316-95, entitled Winifredo Talite, et al. v. San Miguel Corporation presently pending before the sala of Labor Arbiter Ray Alan Drilon at the NLRC Regional Arbitration Branch No. VI in Bacolod City and appointing him as their retained counsel to represent them in the said case. That there has been substantial compliance with the requirement on verification of position papers

under Section 3, Rule V of the 1990 NLRC Rules of Procedure46 is not difficult to appreciate in light of the provision of Section 7, Rule V of the 1990 NLRC Rules, now Section 9, Rule V of the 1999 NLRC Rules which reads: Section 7. Nature of Proceedings.The proceedings before a Labor Arbiter shall be non-litigious in nature. Subject to the requirements of due process, the technicalities of law and procedure _______________ 45 Rollo at pp. 133-135. 46 Section 3. Submission of Position Papers/Memorandum.Should the parties fail to agree upon an amicable settlement, either in whole or in part, during the conferences, the Labor Arbiter shall issue an order stating therein the matters taken up and agreed upon during the conferences and directing the parties to simultaneously file their respective verified position papers. These verified position papers shall cover only those claims and causes of action raised in the complaint excluding those that may have been amicably settled, and shall be accompanied by all supporting documents including the affidavits of their respective witnesses which shall take the place of the latters direct testimony. The parties shall thereafter not be allowed to allege facts, or present evidence to prove facts, not referred to and any cause or causes of action not included in the complaint or position papers, affidavits and other documents. Unless otherwise requested in writing by both parties, the Labor Arbiter shall direct both parties to submit simultaneously their position papers/memorandum with the supporting documents and affidavits within fifteen (15) calendar days from the date of the last conference, with proof of having furnished each other with copies thereof. 418 418 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. Aballa and the rules obtaining in the courts of law shall not strictly apply thereto. The Labor Arbiter may avail himself of all reasonable means to ascertain the facts of the controversy speedily, including ocular inspection and examination of well-informed persons. (italics supplied) As regards private respondents Joint-Affidavit which is being assailed in view of the failure of some complainants to affix their signatures thereon, this Court quotes with approval the appellate courts ratiocinations: A perusal of the Southern Cotabato Development Case would reveal that movant did not quote the whole text of paragraph 5 on page 865 of 280 SCRA. The whole paragraph reads: Clearly then, as to those who opted to move for the dismissal of their complaints, or did not submit their affidavits nor appear during trial and in whose favor no other independent evidence was adduced, no award for back wages could have been validly and properly made for want of factual basis. There is

no showing at all that any of the affidavits of the thirty-four (34) complainants were offered as evidence for those who did not submit their affidavits, or that such affidavits had any bearing at all on the rights and interest of the latter. In the same vein, private respondents position paper was not of any help to these delinquent complainants. The implication is that as long as the affidavits of the complainants were offered as evidence for those who did not submit theirs, or the affidavits were material and relevant to the rights and interest of the latter, such affidavits may be sufficient to establish the claims of those who did not give their affidavits. Here, a reading of the joint affidavit signed by twelve (12) of the ninety-seven (97) complainants (petitioners herein) would readily reveal that the affidavit was offered as evidence not only for the signatories therein but for all of the complainants. (These ninety-seven (97) individuals were previously identified during the mandatory conference as the only complainants in the proceedings before the labor arbiter) Moreover, the affidavit touched on the common interest of all of the complainants as it supported their claim of the existence of an employer-employee relationship between them and 419 VOL. 461, JUNE 28, 2005 419 San Miguel Corporation vs. Aballa respondent SMC. Thus, the said affidavit was enough to prove the claims of the rest of the complainants.47 (Emphasis supplied, italics in the original) In any event, SMC is reminded that the rules of evidence prevailing in courts of law or equity do not control proceedings before the Labor Arbiter. So Article 221 of the Labor Code enjoins: ART. 221. Technical rules not binding and prior resort to amicable settlement.In any proceeding before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of law or equity shall not be controlling and it is the spirit and intention of this Code that the Commission and its members and the Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due process. x x x As such, their application may be relaxed to serve the demands of substantial justice.48 On the merits, the petition just the same fails. SMC insists that private respondents are the employees of Sunflower, an independent contractor. On the other hand, private respondents assert that Sunflower is a labor-only contractor. Article 106 of the Labor Code provides: ART. 106. Contractor or subcontracting.Whenever an employer enters into a contract with another person for the performance of the formers work, the employees of the contractor and of the latters

subcontractor, if any shall be paid in accordance with the provisions of this Code. _______________ 47 Rollo at p. 26. 48 Havtor Management Phils., Inc. v. National Labor Relations Commission, 372 SCRA 271, 274 (2001) (citation omitted); Samahan ng Manggagawa sa Moldex Products, Inc. v. National Labor Relations Commission, 324 SCRA 237, 252 (2000) (citation omitted). 420 420 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. Aballa In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under the Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code. There is labor-only contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No. 18, distinguishes between legitimate and labor-only contracting: Section 3. Trilateral Relationship in Contracting Arrangements.In legitimate contracting, there exists a trilateral relationship under which there is a contract for a specific job, work or service between the principal and the contractor or subcontractor, and a contract of employment between the contractor or subcontractor and its workers. Hence, there are three parties involved in these arrangements, the principal which decides to farm out a job or service to a contractor or subcontractor, the contractor or subcontractor which has the capacity to independently undertake the performance of the job, work or service, and the contractual workers engaged by the contractor or subcontractor to accomplish the job, work or service.

421 VOL. 461, JUNE 28, 2005 421 San Miguel Corporation vs. Aballa Section 5. Prohibition against labor-only contracting.Labor-only contracting is hereby declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal, and any of the following elements are present: i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and 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, or ii) The contractor does not exercise the right to control over the performance of the work of the contractual employee. The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor Code, as amended. Substantial capital or investment refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job, work or service contracted out. The right to control shall refer to the right reserved to the person for whom the services of the contractual workers are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end. The test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subject to the control of the employer, except only as to the results of the work.49 _______________ 49 New Golden City Builders & Development Corporation v. Court of Appeals, 418 SCRA 411, 417 (2003); Vinoya v. National Labor Relations Commission, 324 SCRA 469, 487 (2000) (citation omitted); Philippine Airlines, Inc. v. National Labor Relations Commission, 298 SCRA 430, 444 (1998) (citation omitted). 422 422

SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. Aballa In legitimate labor contracting, the law creates an employer-employee relationship for a limited purpose, i.e., to ensure that the employees are paid their wages. The principal employer becomes jointly and severally liable with the job contractor, only for the payment of the employees wages whenever the contractor fails to pay the same. Other than that, the principal employer is not responsible for any claim made by the employees.50 In labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal employer.51 The Contract of Services between SMC and Sunflower shows that the parties clearly disavowed the existence of an employer-employee relationship between SMC and private respondents. The language of a contract is not, however, determinative of the parties relationship; rather it is the totality _______________ 50 New Golden City Builders & Development Corporation v. Court of Appeals, 418 SCRA 411, 419 (2003) (citation omitted); San Miguel Corporation v. MAERC Integrated Services, Inc., 405 SCRA 579, 596 (2003) (citation omitted). 51 Manila Water Company, Inc. v. Pea, 434 SCRA 53, 61 (2004) (citation omitted); San Miguel Corporation v. MAERC Integrated Services, Inc., 405 SCRA 579, 596 (2003); Philippine Airlines, Inc. v. National Labor Relations Commission, 298 SCRA 430, 447 (1998) (citation omitted); Ponce v. National Labor Relations Commission, 293 SCRA 366, 375-376, (1998) (citations omitted); Tiu v. National Labor Relations Commission, 254 SCRA 1, 9 (1996) (citations omitted); Ecal v. National Labor Relations Commission, 195 SCRA 224, 231 (1991) (citation omitted); Philippine Bank of Communications v. National Labor Relations Commission, 146 SCRA 347, 356 (1986). 423 VOL. 461, JUNE 28, 2005 423 San Miguel Corporation vs. Aballa of the facts and surrounding circumstances of the case.52 A party cannot dictate, by the mere expedient of a unilateral declaration in a contract, the character of its business, i.e., whether as labor-only contractor or job contractor, it being crucial that its character be measured in terms of and determined by the criteria set by statute.53 SMC argues that Sunflower could not have been issued a certificate of registration as a cooperative if it

had no substantial capital.54 While indeed Sunflower was issued Certificate of Registration No. IL0-87555 on February 10, 1992 by the Cooperative Development Authority, this merely shows that it had at least P2,000.00 in paid-up share capital as mandated by Section 5 of Article 1456 of Republic Act No. 6938, otherwise known as the Cooperative Code, which amount cannot be considered substantial capitalization. What appears is that Sunflower does not have substantial capitalization or investment in the form of tools, equipment, machineries, work premises and other materials to qualify it as an independent contractor. _______________ 52 San Miguel Corporation v. MAERC Integrated Services, Inc, 405 SCRA 579, 589 (2003) (citation omitted), Bernardo v. National Labor Relations Commission, 310 SCRA 186, 205 (1999) (citation omitted). 53 De los Santos v. National Labor Relations Commission, 372 SCRA 723, 734 (2001). 54 Rollo at p. 76. 55 Id., at p. 287. 56 (5) No cooperative shall be registered unless the articles of cooperation is accompanied with the bonds of the accountable officers and a sworn statement of the treasurer elected by the subscribers showing that at least twenty-five per centum (25%) of the authorized share capital has been subscribed and at least twenty-five per centum (25%) of the total subscription has been paid: Provided, That in no case shall the paid-up share capital shall be less than Two thousand pesos (P2,000.00). 424 424 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. Aballa On the other hand, it is gathered that the lot, building, machineries and all other working tools utilized by private respondents in carrying out their tasks were owned and provided by SMC. Consider the following uncontroverted allegations of private respondents in the Joint Affidavit: [Sunflower], during the existence of its service contract with respondent SMC, did not own a single machinery, equipment, or working tool used in the processing plant. Everything was owned and provided by respondent SMC. The lot, the building, and working facilities are owned by respondent SMC. The machineries and equipments (sic) like washer machine, oven or cooking machine, sizer machine, freezer, storage, and chilling tanks, push carts, hydrolic (sic) jack, tables, and chairs were all owned by respondent SMC. All the boxes, trays, molding pan used in the processing are also owned by respondent SMC. The gloves and boots used by the complainants were also owned by respondent

SMC. Even the mops, electric floor cleaners, brush, hoose (sic), soaps, floor waxes, chlorine, liquid stain removers, lysol and the like used by the complainants assigned as cleaners were all owned and provided by respondent SMC. Simply stated, third-party respondent did not own even a small capital in the form of tools, machineries, or facilities used in said prawn processing xxx The alleged office of [Sunflower] is found within the confines of a small carinderia or refreshment (sic) owned by the mother of the Cooperative Chairman Roy Asong. x x x In said . . . office, the only equipment used and owned by [Sunflower] was a typewriter.57 And from the job description provided by SMC itself, the work assigned to private respondents was directly related to the aquaculture operations of SMC. Undoubtedly, the nature of the work performed by private respondents in shrimp harvesting, receiving and packing formed an integral part of the _______________ 57 Rollo at pp. 483-486. 425 VOL. 461, JUNE 28, 2005 425 San Miguel Corporation vs. Aballa shrimp processing operations of SMC. As for janitorial and messengerial services, that they are considered directly related to the principal business of the employer58 has been jurisprudentially recognized. Furthermore, Sunflower did not carry on an independent business or undertake the performance of its service contract according to its own manner and method, free from the control and supervision of its principal, SMC, its apparent role having been merely to recruit persons to work for SMC. Thus, it is gathered from the evidence adduced by private respondents before the labor arbiter that their daily time records were signed by SMC supervisors Ike Puentebella, Joemel Haro, Joemari Raca, Erwin Tumonong, Edison Arguello, and Stephen Palabrica, which fact shows that SMC exercised the power of control and supervision over its employees.59 And control of the premises in which private respondents worked was by SMC. These tend to disprove the independence of the contractor.60 More. Private respondents had been working in the aqua processing plant inside the SMC compound alongside regular SMC shrimp processing workers performing identical jobs under the same SMC supervisors.61 This circumstance is another indicium of the existence of a labor-only contractorship.62

_______________ 58 Coca Cola Bottlers Phils., Inc. v. National Labor Relations Commission, 307 SCRA 131, 137 (1999) (citation omitted); Neri v. National Labor Relations Commission, 224 SCRA 717, 722 (1993) (citation omitted); Guarin v. National Labor Relations Commission, 178 SCRA 267, 273 (1989) (citation omitted). 59 De los Santos v. National Labor Relations Commission, 372 SCRA 723, 732 (2001). 60 San Miguel Corporation v. MAERC Integrated Services, Inc., 405 SCRA 579, 590 (2003) (citation omitted). 61 Rollo at p. 485. 62 Vide: Philippine Bank of Communications v. National Labor Relations Commission (146 SCRA 347, 354) where this Court found: 426 426 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. Aballa And as private respondents alleged in their Joint Affidavit which did not escape the observation of the CA, no showing to the contrary having been proffered by SMC, Sunflower did not cater to clients other than SMC,63 and with the closure of SMCs Bacolod Shrimp Processing Plant, Sunflower likewise ceased to exist. This Courts ruling in San Miguel Corporation v. MAERC Integrated Services, Inc.64 is thus instructive. x x x Nor do we believe MAERC to have an independent business. Not only was it set up to specifically meet the pressing needs of SMC which was then having labor problems in its segregation division, none of its workers was also ever assigned to any other establishment, thus convincing us that it was created solely to service the needs of SMC. Naturally, with the severance of relationship between MAERC and SMC followed MAERCs cessation of operations, the loss of jobs for the whole MAERC workforce and the resulting actions instituted by the workers.65 (Italics supplied) All the foregoing considerations affirm by more than substantial evidence the existence of an employer-employee relationship between SMC and private respondents. _______________ Turning to the power to control Orpiadas conduct, it should be noted immediately that Orpiada performed his functions within the banks premises, and not within the office premises of CESI. As such, Orpiada must have been subject to at least the same control and supervision that the bank exercises over any other person physically within its premises and rendering services to or for the bank, in other words, any employee or staff member of the bank. It seems unreasonable to suppose that the

bank would have allowed Orpiada and the other persons assigned to the bank by CESI to remain within the banks premises and there render services to the bank, without subjecting them to a substantial measure of control and supervision x x x 63 Vide: Coca Cola Bottlers Phils., Inc. v. National Labor Relations Commission, 307 SCRA 131, 140 (1999). 64 405 SCRA 579 (2003). 65 Id., at pp. 595-596. 427 VOL. 461, JUNE 28, 2005 427 San Miguel Corporation vs. Aballa Since private respondents who were engaged in shrimp processing performed tasks usually necessary or desirable in the aquaculture business of SMC, they should be deemed regular employees of the latter66 and as such are entitled to all the benefits and rights appurtenant to regular employment.67 They should thus be awarded differential pay corresponding to the difference between the wages and benefits given them and those accorded SMCs other regular employees. Respecting the private respondents who were tasked with janitorial and messengerial duties, this Court quotes with approval the appellate courts ruling thereon: Those performing janitorial and messengerial services however acquired regular status only after rendering one-year service pursuant to Article 280 of the Labor Code. Although janitorial and messengerial services are considered directly related to the aquaculture business of SMC, they are deemed unnecessary in the conduct of its principal business; hence, the distinction (See Coca Cola Bottlers Phils., Inc. v. NLRC, 307 SCRA 131, 136-137 and Philippine Bank of Communications v. NLRC, supra, p. 359).68 The law of course 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.69 As for those of private respondents who were engaged in janitorial and messengerial tasks, they fall under the second category and are thus entitled to differential pay and benefits _______________ 66 Manila Water Company, Inc. v. Pea, 434 SCRA 53, 62 (2004). 67 Ecal v. National Labor Relations Commission, 195 SCRA 224, 234 (1991) (citations omitted).

68 Rollo at p. 21. 69 Kimberly Independent Union v. Drilon, 185 SCRA 190, 203 (1990). 428 428 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. Aballa extended to other SMC regular employees from the day immediately following their first year of service.70 Regarding the closure of SMCs aquaculture operations and the consequent termination of private respondents, Article 283 of the Labor Code provides: ART. 283. Closure of establishment and reduction of personnel.The employer may also terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Department of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. 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 to at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year. (Italics supplied) In the case at bar, a particular department under the SMC group of companies was closed allegedly due to serious business reverses. This constitutes retrenchment by, and not closure of, the enterprise or the company itself as SMC has not totally ceased operations but is still very much an ongoing and highly viable business concern.71 _______________ 70 Id., at p. 205. 71 Catatista v. National Labor Relations Commission, 247 SCRA 46, 51 (1995); Construction & Development Corporation of the Philippines v. Leogardo, Jr., 125 SCRA 863, 867 (1983). 429 VOL. 461, JUNE 28, 2005

429 San Miguel Corporation vs. Aballa Retrenchment is a management prerogative consistently recognized and affirmed by this Court. It is, however, subject to faithful compliance with the substantive and procedural requirements laid down by law and jurisprudence.72 For retrenchment to be considered valid the following substantial requirements must be met: (a) the losses expected should be substantial and not merely de minimis in extent; (b) the substantial losses apprehended must be reasonably imminent such as can be perceived objectively and in good faith by the employer; (c) the retrenchment must be reasonably necessary and likely to effectively prevent the expected losses; and (d) the alleged losses, if already incurred, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence.73 In the discharge of these requirements, it is the employer who has the onus, being in the nature of an affirmative defense.74 _______________ 72 EMCO Plywood Corporation v. Abelgas, 427 SCRA 496, 511 (2004) (citation omitted). 73 EMCO Plywood Corporation v. Abelgas, 427 SCRA 496, 508 (2004) (citation omitted); Philippine Tobacco Flue-Curing & Redrying Corporation v. National Labor Relations Commission, 300 SCRA 37, 55-56 (1998) (citation omitted); Somerville Stainless Steel Corporation v. National Labor Relations Commission, 287 SCRA 420, 430 (1998) (citation omitted); Edge Apparel, Inc. v. National Labor Relations Commission, 286 SCRA 302, 313 (1998) (citation omitted); San Miguel Jeepney Service v. National Labor Relations Commission, 265 SCRA 35, 44 (1996) (citation omitted); Catatista v. National Labor Relations Commission, 247 SCRA 46, 52 (1995) (citation omitted). 74 Somerville Stainless Steel Corporation v. National Labor Relations Commission, 287 SCRA 420, 432 (1998) (citation omitted); San Miguel Jeepney Service v. National Labor Relations Commission, 265 SCRA 35, 45 (1996) (citation omitted); Guerrero v. National Labor Relations Commission, 261 SCRA 301, 306 (1996) (citation omitted). 430 430 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. Aballa Normally, the condition of business losses is shown by audited financial documents like yearly balance sheets, profit and loss statements and annual income tax returns. The financial statements must be prepared and signed by independent auditors failing which they can be assailed as self-serving documents.75

In the case at bar, company losses were duly established by financial documents audited by Joaquin Cunanan & Co. showing that the aquaculture operations of SMCs Agribusiness Division accumulated losses amounting to P145,848,172.00 in 1992 resulting in the closure of its Calatrava Aquaculture Center in Negros Occidental, P11,393,071.00 in 1993 and P80,325,608.00 in 1994 which led to the closure of its San Fernando Shrimp Processing Plant in Pampanga and the Bacolod Shrimp Processing Plant in 1995. SMC has thus proven substantial business reverses justifying retrenchment of its employees. For termination due to retrenchment to be valid, however, the law requires that written notices of the intended retrenchment be served by the employer on the worker and on the DOLE at least one (1) month before the actual date of the retrenchment,76 in order to give employees some time to prepare for the eventual loss of their jobs, as well as to give DOLE the opportunity to ascertain the verity of the alleged cause of termination.77 _______________ 75 Asian Alcohol Corporation v. National Labor Relations Commission, 305 SCRA 417 (1999) (citations omitted). 76 EMCO Plywood Corporation v. Abelgas, 427 SCRA 496, 511-512 (2004) (citation omitted); San Miguel Corporation v. MAERC Integrated Services, Inc., 405 SCRA 579, 596 (2003) (citations omitted); Guerrero v. National Labor Relations Commission, 261 SCRA 301, 307 (1996). 77 EMCO Plywood Corporation v. Abelgas, 427 SCRA 496, 512 (2004) (citation omitted); Sebuguero v. National Labor Relations Commission, 248 SCRA 532, 545 (1995). 431 VOL. 461, JUNE 28, 2005 431 San Miguel Corporation vs. Aballa Private respondents, however, were merely verbally informed on September 10, 1995 by SMC Prawn Manager Ponciano Capay that effective the following day or on September 11, 1995, they were no longer to report for work as SMC would be closing its operations.78 Where the dismissal is based on an authorized cause under Article 283 of the Labor Code but the employer failed to comply with the notice requirement, the sanction should be stiff as the dismissal process was initiated by the employers exercise of his management prerogative, as opposed to a dismissal based on a just cause under Article 282 with the same procedural infirmity where the sanction to be imposed upon the employer should be tempered as the dismissal process was, in effect, initiated by an act imputable to the employee.79 In light of the factual circumstances of the case at bar, this Court awards P50,000.00 to each private

respondent as nominal damages. The grant of separation pay as an incidence of termination of employment due to retrenchment to prevent losses is a statutory obligation on the part of the employer and a demandable right on the part of the employee. Private respondents should thus be awarded separation pay equivalent to at least one (1) month pay or to at least one-half month pay for every year of service, whichever is higher, as mandated by Article 283 of the Labor Code or the separation pay awarded by SMC to other regular SMC employees that were terminated as a result of the retrenchment, depending on which is most beneficial to private respondents. Considering that private respondents were not illegally dismissed, however, no backwages need be awarded. It is well settled that backwages may be granted only when there is a _______________ 78 Rollo at 126. 79 JAKA Food Processing Corporation v. Pacot, G.R. No. 151378, March 28, 2005, 454 SCRA 119. 432 432 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. Aballa finding of illegal dismissal.80 The appellate court thus erred in awarding backwages to private respondents upon the authority of Bustamante v. NLRC,81 what was involved in that case being one of illegal dismissal. With respect to attorneys fees, in actions for recovery of wages or where an employee was forced to litigate and thus incurred expenses to protect his rights and interests,82 a maximum of ten percent (10%) of the total monetary award83 by way of attorneys fees is justifiable under Article 111 of the Labor Code,84 Section 8, Rule VIII, Book III of its Implementing Rules,85 and paragraph 7, Article 2208 of the Civil Code.86 Although an express finding of facts and law is still necessary to prove the merit of the award, there need not be any showing that the employer acted maliciously or in bad faith when _______________ 80 J.A.T. General Services v. National Labor Relations Commission, 421 SCRA 78, 91 (2004) (citation omitted). 81 265 SCRA 61, 71 (1996). 82 Manila Water v. Pea , 434 SCRA 53, 64-65 (2004) (citation omitted); Rasonable v. National Labor Relations Commission, 253 SCRA 815, 819 (1996) (citations omitted).

83 Reyes v. Court of Appeals, 409 SCRA 267, 284 (2003) (citations omitted); Marsaman Manning Agency, Inc. v. National Labor Relations Commission, 313 SCRA 88, 99 (1999). 84 ART. 111. Attorneys fees.(a) In cases of unlawful withholding of wages the culpable party may be assessed attorneys fees equivalent to ten percent of the amount of wages recovered. (b) It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings for the recovery of the wages, attorneys fees which exceed ten percent of the amount of wages recovered. 85 SEC. 8. Attorneys fees.Attorneys fees in any judicial or administrative proceedings for the recovery of wages shall not exceed 10% of the amount awarded. The fees may be deducted from the total amount due the winning party. 86 ART. 2208. In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs, cannot be recovered, except: x x x (7) In actions for the recovery of wages of household helpers, laborers and skilled workers. 433 VOL. 461, JUNE 28, 2005 433 San Miguel Corporation vs. Aballa it withheld the wages. There need only be a showing that the lawful wages were not paid accordingly, as in this case.87 Absent any evidence showing that Sunflower has been dissolved in accordance with law, pursuant to Rule VIII-A, Section 1988 of the Omnibus Rules Implementing the Labor Code, Sunflower is held solidarily liable with SMC for all the rightful claims of private respondents. WHEREFORE, the petition is DENIED. The assailed Decision dated February 7, 2001 and Resolution dated July 11, 2001 of the Court of Appeals are AFFIRMED with MODIFICATION. Petitioner San Miguel Corporation and Sunflower MultiPurpose Cooperative are hereby ORDERED to jointly and severally pay each private respondent differential pay from the time they became regular employees up to the date of their termination; separation pay equivalent to at least one (1) month pay or to at least one-half month pay for every year of service, whichever is higher, as mandated by Article 283 of the Labor Code or the separation pay awarded by SMC to other regular SMC employees that were terminated as a result of the retrenchment, depending on which is most beneficial to private respondents; and ten percent (10%) attorneys fees based on the herein modified award. _______________ 87 Reyes v. Court of Appeals, 409 SCRA 267, 283 (2003) (citations omitted). 88 SEC. 19. Solidary Liability.The principal shall be deemed as the direct employer of the

contractual employees and therefore, solidarily liable with the contractor or subcontractor for whatever monetary claims the contractual employees may have against the former in the case of violations as provided for in Sections 5 (Labor-Only contracting), 6 (Prohibitions), 8 (Rights of Contractual Employees) and 16 (Delisting) of these Rules. In addition, the principal shall also be solidarily liable in case the contract between the principal and contractor or subcontractor is preterminated for reasons not attributed to the fault of the contractor or subcontractor. 434 434 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. Aballa Petitioner San Miguel Corporation is further ORDERED to pay each private respondent the amount of P50,000.00, representing nominal damages for non-compliance with statutory due process. The award of backwages is DELETED. SO ORDERED. Panganiban (Chairman), Sandoval-Gutierrez, Corona and Garcia, JJ., concur. Petition denied, assailed decision and resolution affirmed with modification. Notes.The President of a corporation who actively manages the business falls within the meaning of an employer as contemplated by the Labor Code and may be held jointly and severally liable for the obligations of the corporation to its dismissed employees. (Naguiat vs. National Labor Relations Commission, 269 SCRA 564 [1997]) The principal test for determining whether an employee is a project employee or a regular employee is whether or not the project employee was assigned to carry out a specific project or undertaking, the duration and scope of which were specified at the time the employee was engaged for that project. (Nagusara vs. National Labor Relations Commission, 290 SCRA 249 [1998]) o0o [San Miguel Corporation vs. Aballa, 461 SCRA 392(2005)]

SUPREME COURT REPORTS ANNOTATED Acevedo vs. Advanstar Company, Inc. G.R. No. 157656. November 11, 2005.* ARNULFO C. ACEVEDO, petitioner, vs. ADVANSTAR COMPANY, INC., and/or FELIPE LOI, Manager, and TONY JALAPADAN, respondents. Appeals; Certiorari; Findings of Fact; Quasi-Judicial Bodies; Findings of facts of quasi-judicial bodies like NLRC, and affirmed by the Court of Appeals in due course, are conclusive on the Supreme Court, unless the aggrieved party establishes that grave abuse of discretion amounting to lack or excess or lack of jurisdiction was committed.The pivotal issues in this case are factual: (a) whether the respondent ACI was the employer of respondent Jalapadan; (b) whether the petitioner is the employee of respondent ACI; and (c) whether the petitioner resigned from his employment. Under Rule 45 of the Rules of Court, only questions of law may be raised in and resolved by this Court. The reason for this is that the Court is not a trier of facts; it is not to reexamine and calibrate the evidence on record. Moreover, findings of facts of quasi-judicial bodies like the NLRC, and affirmed by the CA in due course, are conclusive on this Court, unless the aggrieved party establishes that grave abuse of discretion amounting to excess or lack of jurisdiction was committed. Thus, in exceptional cases, this Court may delve into and resolve factual issues. Indeed, the Court has reviewed the records in this case and holds that the findings of the NLRC and that of the CA on substantial matters are contrary to the evidence on record. Labor Law; Employer-Employee Relationship; Labor-Only Contracting; Elements; Words and Phrases; Labor-only contracting is an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal.The pertinent provision of the Labor Code on labor-only contracting is paragraph 4 of Article 106, which provides: There is labor-only contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be re_______________ * SECOND DIVISION. 657 VOL. 474, NOVEMBER 11, 2005 657 Acevedo vs. Advanstar Company, Inc. sponsible to the workers in the same manner and extent as if the latter were directly employed by him. Rule VIII-A, Book III, Section 4(f) of the Omnibus Rules Implementing the Labor Code further defines labor-only contracting as an arrangement where the contractor or subcontractor merely recruits,

supplies or places workers to perform a job, work or service for a principal. In labor-only contracting, the following elements are present: (a) The contractor or subcontractor does not have substantial capital or investment to actually perform the job, work or service under its own account and responsibility; (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. Same; Same; Same; The labor-only contractor is considered merely as an agent of the employer, the employer having been made, by law, responsible to the employees of the labor-only contractor as if such employees had been directly employed by it.In such case, the law creates an employeeemployer relationship so that labor laws may not be circumvented. The principal employer becomes solidarily liable with the labor-only contractor for all the rightful claims of the employees. The laboronly contractor is considered merely as an agent of the employer, the employer having been made, by law, responsible to the employees of the labor-only contractor as if such employees had been directly employed by it. Same; Same; Same; Job Contracting or Sub-Contracting; Requisites; Words and Phrases; Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or farm out with the contractor or subcontractor the performance or completion of a specific job, work or service within a definite or predetermined period regardless of whether such job, work, service is to be performed or completed within or outside the premises of the principal.Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or farm out with the contractor or subcontractor the performance or completion of a specific job, work or service within a definite or predetermined period regardless of whether such job, work or service is to be performed or completed within or outside the premises of the principal. A person is considered engaging 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 subcontrac658 658 SUPREME COURT REPORTS ANNOTATED Acevedo vs. Advanstar Company, Inc. tor 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. Same; Same; Same; Same; The test to determine the existence of an independent contractorship is to determine whether the one who claims to be an independent contractor has been contracted to do the work according to his own methods and without being subject to the employers control except only as to the results.The test to determine the existence of an independent contractorship is whether one who claims to be an independent contractor has contracted to do the work according to his own

methods and without being subject to the employers control except only as to the results. Each case must be determined by its own facts and all the features of the relationship are to be considered. In the case of Vinoya v. NLRC, the Court declared that it is not enough to show substantial capitalization or investment in the form of tools, equipment, etc. to determine whether one is an independent contractor. Other factors that may be considered include the following: whether or not the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of specified pieces of work; the control and supervision of the work to another; the employers power with respect to the hiring, firing and payment of the contractors workers; the control of the premises; the duty to supply premises, tools, appliances, materials and labor; and the mode and manner or terms of payment. PETITION for review on certiorari of the decision and resolution of the Court of Appeals. The facts are stated in the opinion of the Court. Eliezer C. Bacho for petitioner. Senen O. Angeles for respondents. CALLEJO, SR., J.: The Advanstar Company, Inc. (ACI) was engaged in the distribution and sale of various brands of liquor and alcoholic spirits, including the Tanduay Brand. Felipe Loi was employed as its 659 VOL. 474, NOVEMBER 11, 2005 659 Acevedo vs. Advanstar Company, Inc. manager. To effectively launch its vigorous marketing operations, ACI hired several salesmen, one of whom was Tony Jalapadan. On September 1, 1994, ACI executed an Agreement for the Sale of Merchandise1 with Jalapadan for a period of one year, renewable for another year under the same terms and conditions. Under the agreement, the parties agreed, inter alia, that Jalapadan would promote and sell products of ACI, solicit from customers and outlets within his designated territory, collect payments from such customers and account the same to ACI. Jalapadan was provided with a 6-wheeler truck to facilitate the sale and delivery of products to customers and outlets from his base of operations in Ozamis City to Zamboanga del Sur and Zamboanga del Norte. Jalapadan was also authorized to employ and discharge a driver and other assistants as he deemed necessary. It was stipulated, however, that the hired hands would be considered his employees, and that he alone would be liable for their compensation and actual expenses, including meals while on duty. As of July 1997, Jalapadan had employed and fired 14 drivers. On August 5, 1997, Jalapadan hired Arnulfo Acevedo2 as the driver of the truck assigned to him by

ACI. Acevedo was tasked to sell and deliver stocks to outlets and customers, collect payments, and to maintain the truck in good and clean condition. He reported for work from 6:00 a.m. to 8:00 or 9:00 p.m.3 Aside from Acevedo, Jalapadan also hired a loader (kargador). Acevedo received a daily wage of P152.00 and was paid on a weekly basis. He also enjoyed sick leave privilege, which benefit was convertible into cash. Sometime in June 1998, he received from Jalapadan a salary differential for the period of December 1997 to June 1998, following a P15.00 increase in his daily wage. He received his wages from Jalapadan through vouchers approved by the latter.4 _______________ 1 CA Rollo, pp. 52-57. 2 Also spelled Acebedo. 3 CA Rollo, p. 29. 4 Ibid. 660 660 SUPREME COURT REPORTS ANNOTATED Acevedo vs. Advanstar Company, Inc. Sometime in July 1998, Acevedo failed to comply with Jalapadans instructions. At that time, they were on their way to Plaridel, Misamis Oriental on board the truck. Jalapadan ordered Acevedo to alight from the truck, and threatened to leave him behind to fend for himself. However, Jalapadan later asked him to return to work5 and the latter agreed. On October 7, 1998, Acevedo failed to report for work. The next day, Jalapadan inquired why he failed to check and wash the truck. Jalapadan berated Acevedo and ordered him to get his personal belongings and leave. Acevedo did as he was told. Later, Jalapadan urged Acevedo to go back to work, stating that they were one big family, but Acevedo refused.6 He then signed a Letter7 dated October 10, 1998, informing Jalapadan that he was resigning effective that date. However, on October 26, 1998, Acevedo filed a complaint against Jalapadan, ACI and its general manager, Felipe Loi, for illegal dismissal and for the recovery of backwages and other monetary benefits. In their position paper, respondents ACI and Loi averred that the complainant was Jalapadans employee as indicated in the agreement between Jalapadan and ACI. It was also pointed out that the Department of Labor and Employment had already ruled in Case No. 08-MA-A-8-230-91 that truck drivers and helpers of salesmen are the employees of such salesmen and not that of a marketing corporation. The respondents also averred that Acevedo was not dismissed; he abandoned his work and later voluntarily resigned as evidenced by his typewritten letter of resignation dated October 10, 1998

addressed to Jalapadan. The said letter was appended to the position paper.8 _______________ 5 CA Rollo, p. 40. 6 Id., at p. 72; TSN, 15 February 1999, p. 13. 7 Id., at p. 59. 8 CA Rollo, p. 51. 661 VOL. 474, NOVEMBER 11, 2005 661 Acevedo vs. Advanstar Company, Inc. During the hearing, Acevedo testified that on October 10, 1998, Loi, through the cashier, gave him P2,200.00 from his personal fund which, according to Loi, was only goodwill money.9 On March 24, 1999, the Labor Arbiter rendered judgment in favor of the complainant. The dispositive portion of the decision reads: WHEREFORE, couched on the foregoing considerations, judgment is hereby rendered: 1.) holding that there has been an employer-employee relationship between respondent Advanstar, Inc. and complainant Arnulfo Acevedo, with respondent Tony Jalapadan as agent of the respondent corporation arising from their relationship of labor-only contracting; 2.) declaring that complainants severance from employment is illegal, causing respondents to have the obligation of reinstating complainant Arnulfo Acevedo back to work without loss of seniority rights and other privileges, immediately even pending appeal; and, directing respondents to pay complainant his full backwages constituting his basic wage and 13th month pay, from the date when he was unlawfully dismissed up to the date of actual or payroll reinstatement of complainant, which partial amount is reflected in paragraph 3 hereof; 3.) ordering respondents Advanstar, Inc. and Tony Jalapadan to pay complainant, jointly and severally, the following: A. Partial backwages .. P30,014.07; and

B. Salary differentials due to unjustified reduction

1,500.00;

TOTAL ... P31,514.07; 4.) directing respondents to pay attorneys fees in the amount of ten (10) percent of the whole amount due complainant, jointly and severally; and 5.) dismissing all other claims of complainant for being divested of merit. SO ORDERED.10 _______________ 9 Id., at pp. 78-79; TSN, 15 February 1999, pp. 19-20. 10 CA Rollo, pp. 36-37. 662 662 SUPREME COURT REPORTS ANNOTATED Acevedo vs. Advanstar Company, Inc. The Labor Arbiter ruled that the agreement of Jalapadan and ACI was a mere subterfuge to escape the latters obligations and liabilities to its workers, including the complainant, hence, null and void for being contrary to public policy. Moreover, the agreement between the respondents cannot prevail over Articles 106 and 107 of the Labor Code of the Philippines. Thus, according to the Labor Arbiter, respondent Jalapadan was a labor-only contractor of respondent ACI, and as such, the employees of respondent Jalapadan were also its employees. The Labor Arbiter also ruled that the services rendered by the complainant were necessary and desirable to the business of respondent ACI.

The respondents appealed the decision to the National Labor Relations Commission (NLRC). They filed a Manifestation on May 23, 2000, alleging that respondent Jalapadan was an independent contractor of respondent ACI and that, based on Social Security System (SSS) records, the employer of the complainant was respondent Jalapadan. They also pointed out that the complainant submitted his handwritten letter of resignation on October 10, 1998. The respondents appended the following: (a) an affidavit executed by Jalapadan wherein he declared that he was the employer of the complainant and that respondent ACI allowed him to sell its products on a marked-up price as his commissions, aside from being granted other incentives; (b) the SSS records of the complainant; and (c) the complainants handwritten letter of resignation.11 The NLRC reversed the Labor Arbiters ruling. It held that the complainant was an employee of respondent Jalapadan, not of respondent ACI, and that he voluntarily resigned.12 However, the NLRC failed to resolve the issue of whether respondent Jalapadan was an independent contractor. The complainant filed a motion for reconsideration of the decision, reiterating his claim that although he signed the letters of resignation, he finished only the third _______________ 11 CA Rollo, pp. 84-95. 12 Rollo, pp. 59-65. 663 VOL. 474, NOVEMBER 11, 2005 663 Acevedo vs. Advanstar Company, Inc. grade and could not read, write or understand English.13 The NLRC denied the motion for lack of merit. Acevedo then filed a petition for certiorari with the Court of Appeals (CA) where he raised the following issues: A) THE HONORABLE COMMISSION GRAVELY ABUSED ITS DISCRETION IN RESOLVING THAT COMPLAINANT IS NOT AN EMPLOYEE OF RESPONDENT ADVANSTAR; B) THE HONORABLE COMMISSION SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT THE COMPLAINANT RESIGNED FROM HIS JOB; C) THE HONORABLE COMMISSION GRAVELY ABUSED ITS DISCRETION AND SERIOUSLY ERRED IN ADMITTING AND APPRECIATING EVIDENCE NOT ADDUCED BEFORE THE LABOR ARBITER; AND D) THE HONORABLE COMMISSION GRAVELY ABUSED ITS DISCRETION IN APPRECIATING THE ALLEGED TWO RESIGNATION LETTERS OF THE COMPLAINANT PRESENTED BY THE PRIVATE RESPONDENTS.14 The petitioner averred that respondent Jalapadan failed to adduce evidence to show that he had

substantial capital or investment in the form of tools, equipment, machineries, etc. as to classify him as an independent contractor. If, at all, respondent Jalapadan was a labor-only contractor for respondent ACI. In their Comment on the petition, the respondents reiterated that the petitioner was not dismissed from his employment; on the contrary, he abandoned his work and later resigned. They reiterated their stand that respondent Jalapadan was an independent contractor. On June 14, 2002, the CA rendered judgment dismissing the petition for lack of merit, holding that the petitioner voluntarily resigned from his job.15 However, it failed to resolve the other issues _______________ 13 Id., at p. 69. 14 CA Rollo, p. 11. 15 CA Rollo, pp. 96-109. 664 664 SUPREME COURT REPORTS ANNOTATED Acevedo vs. Advanstar Company, Inc. raised by the petitioner. The appellate court, likewise, denied the petitioners motion for reconsideration of its decision.16 The petitioner then filed a petition for review on certiorari with this Court, alleging that the CA committed grave abuse of its discretion amounting to excess or lack of jurisdiction in affirming the decision of the NLRC and in not reinstating the decision of the Labor Arbiter. The pivotal issues in this case are factual: (a) whether the respondent ACI was the employer of respondent Jalapadan; (b) whether the petitioner is the employee of respondent ACI; and (c) whether the petitioner resigned from his employment. Under Rule 45 of the Rules of Court, only questions of law may be raised in and resolved by this Court. The reason for this is that the Court is not a trier of facts; it is not to reexamine and calibrate the evidence on record. Moreover, findings of facts of quasijudicial bodies like the NLRC, and affirmed by the CA in due course, are conclusive on this Court, unless the aggrieved party establishes that grave abuse of discretion amounting to excess or lack of jurisdiction was committed. Thus, in exceptional cases, this Court may delve into and resolve factual issues. Indeed, the Court has reviewed the records in this case and holds that the findings of the NLRC and that of the CA on substantial matters are contrary to the evidence on record. On the first and second issues, the petitioner avers that respondent Jalapadan was a labor-only contractor, not an independent contractor, hence, merely an agent of respondent ACI. Consequently, the latter is responsible to the employees hired by respondent Jalapadan as if such employees had been

directly employed by it, and, as such, the respondents are solidarily liable for their valid claims. The petitioner notes that the respondents adopted a new defense in the NLRC: that respondent Jalapadan was an independent contractor and received from respondent ACI commissions or honoraria or incentives as compensation for his services. The _______________ 16 Id., at p. 122. 665 VOL. 474, NOVEMBER 11, 2005 665 Acevedo vs. Advanstar Company, Inc. respondents even claimed that their agreement was merely pro forma. The petitioner avers that the respondents failed to prove that Jalapadan had substantial capital, investment and tools to engage in job contracting. He insists that he was a labor-only contractor; hence, his employees are actually the employees of respondent ACI. The petitioner insists that applying the control test, Jalapadan was an employee of respondent ACI; the latter, through Jalapadan, its employee-agent, had supervision and control over the petitioner who drove the truck and maintained it in good condition, which Jalapadan was tasked to do under his agreement with respondent ACI. He posits that even if respondent ACI did not exercise control over Jalapadan, it is enough that it had the right to do so. The petitioner further asserts that he was employed by Jalapadan to drive the truck provided by respondent ACI for the marketing and delivery of its products to the customers in parts of Zamboanga del Norte and del Sur. The use of the truck was essential to the business of both Jalapadan and respondent ACI; thus, the petitioners job as driver of the truck was usual, necessary and desirable to both Jalapadan and respondent ACI. While the petitioner admits having received his wages from Jalapadan and that he was hired and fired by the latter, he insists that his wages must have been paid by respondent ACI through Jalapadan. He points out that he received a daily wage of P152.00 or a total of P3,648.00 a month, while the hired truck helper received P4,000.00 a month. However, Jalapadan received P3,590.00 as monthly compensation from respondent ACI under their agreement. Hence, the total amount of P7,648.00 Jalapadan paid the petitioner and the truck helper was much more than the monthly compensation he received from respondent ACI. The petitioner posited that since Jalapadan could not afford to pay his and the truck helpers wages, it was respondent ACI who must have been paying them. The petitioner asserts that the NLRC acted arbitrarily in taking cognizance of and considering his handwritten letter of resignation dated October 10, 1998 because respondent ACI submitted the 666 666

SUPREME COURT REPORTS ANNOTATED Acevedo vs. Advanstar Company, Inc. same to the NLRC only on appeal. He avers that he could not have understood the contents of the said letter because he merely affixed his thumbmarks thereon. He reiterates that he finished only the third grade and can neither read nor write. Moreover, he signed only one letter of resignation. Even then, it was not his intention to resign because he filed his complaint shortly after signing the said letter. The petitioner belittles the SSS records submitted by the respondents because as shown therein, Jalapadan paid his share of the premiums due only after October 1998. By way of Comment, the respondents aver that the issues raised by the petitioner are the same issues raised in and already resolved by the NLRC and the CA, whose decisions are in accord with the evidence on record and the law. The contentions of the petitioner are correct. The pertinent provision of the Labor Code on labor-only contracting is paragraph 4 of Article 106, which provides: There is labor-only contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. Rule VIII-A, Book III, Section 4(f) of the Omnibus Rules Implementing the Labor Code further defines labor-only contracting as an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal. In labor-only contracting, the following elements are present: (a) The contractor or subcontractor does not have substantial capital or investment to actually perform the job, work or service under its own account and responsibility; 667 VOL. 474, NOVEMBER 11, 2005 667 Acevedo vs. Advanstar Company, Inc. (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.17 In such case, the law creates an employee-employer relationship so that labor laws may not be

circumvented. The principal employer becomes solidarily liable with the labor-only contractor for all the rightful claims of the employees.18 The labor-only contractor is considered merely as an agent of the employer, the employer having been made, by law, responsible to the employees of the labor-only contractor as if such employees had been directly employed by it. On the other hand, permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or farm out with the contractor or subcontractor the performance or completion of a specific job, work or service within a definite or predetermined period regardless of whether such job, work or service is to be performed or completed within or outside the premises of the principal.19 A person is considered engaging 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 _______________ 17 Vinoya v. National Labor Relations Commission, G.R. No. 126586, 2 February 2000, 324 SCRA 469. 18 San Miguel Corporation v. MAERC Integrated Services, Inc., G.R. No. 144672, 10 July 2003, 405 SCRA 579. 19 Rule VIII-A, Book III, Section 4(d) of the Omnibus Rules Implementing the Labor Code. 668 668 SUPREME COURT REPORTS ANNOTATED Acevedo vs. Advanstar Company, Inc. (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.20 The test to determine the existence of an independent contractorship is whether one who claims to be an independent contractor has contracted to do the work according to his own methods and without being subject to the employers control except only as to the results.21 Each case must be determined by its own facts and all the features of the relationship are to be considered.22 In the case of Vinoya v. NLRC,23 the Court declared that it is not enough to show substantial

capitalization or investment in the form of tools, equipment, etc. to determine whether one is an independent contractor. Other factors that may be considered include the following: whether or not the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of specified pieces of work; the control and supervision of the work to another; the employers power with respect to the hiring, firing and payment of the contractors workers; the control of the premises; the duty to supply premises, tools, appliances, materials and labor; and the mode and manner or terms of payment.24 In the present case, the respondents failed to prove that respondent Jalapadan was an independent contractor. Indeed, the substantial evidence on record shows that he was merely a labor-only contractor. _______________ 20 Vinoya v. National Labor Relations Commission, supra. 21 New Golden City Builders and Development Corporation v. Court of Appeals, G.R. No. 154715, 11 December 2003, 418 SCRA 411. 22 Encyclopaedia Britannica (Phils.), Inc. v. National Labor Relations Commission, G.R. No. 87098, 4 November 1996, 264 SCRA 1. 23 Supra. 24 New Golden City Builders and Development Corporation, Inc. v. Court of Appeals, supra. 669 VOL. 474, NOVEMBER 11, 2005 669 Acevedo vs. Advanstar Company, Inc. First. The respondents failed to adduce a scintilla of evidence that respondent Jalapadan had any substantial capital or investment, such as tools and equipment, to perform the work contracted for. There is even no evidence that respondent Jalapadan had any assets, or that he maintained an office, staff or a terminal for the truck entrusted to him by respondent ACI. Second. Respondent Jalapadan bound and obliged himself to work exclusively for respondent ACI during the terms of the agreement. Third. Under the agreement, respondent ACI had the right to control not only the end to be attained but also the manner and means to be used in accomplishing that end or purpose. Aside from Jalapadans duties/obligations as salesman, respondent ACI could require him to perform other duties and obligations. Respondent Jalapadan was, likewise, mandated to obey all rules, regulations, orders, and instructions, whether oral or written, of respondent ACI. He was obliged to work only in the territory assigned to him, which may be altered at any time upon the discretion of ACI. He was also prohibited from overpricing or underpricing the products of respondent ACI, and was required to sell the same

according to the prices dictated solely by it. While Jalapadan was entitled to a monthly compensation of P3,590.00 payable on a bi-monthly basis and an unspecified commission based on booking sales fully remitted to respondent ACI, the latter had the absolute right to change, at any time, the amount and/or all the payments of such compensation and commission. Moreover, notice of such changes was only for information purposes. Furthermore, Jalapadan was obliged to inform respondent ACI of his activities, situation or whereabouts. Since he did not have any truck for the delivery of products to customers or outlets, he had to rely on the truck entrusted to him by respondent ACI or, in lieu thereof, a traveling allowance of P600.00 a month which could even be changed. Respondent Jalapadan was prohibited from incurring any other expenses unless permission was first secured from respondent ACI. He was prohibited from using the truck for purposes other than the performance of his duties and responsibilities under the agreement. Respondent Jalapadan was mandated to maintain the truck and its accessories in 670 670 SUPREME COURT REPORTS ANNOTATED Acevedo vs. Advanstar Company, Inc. clean and good order and condition. The agreement was for a period of one year, renewable under the same terms and conditions but the parties could terminate the agreement upon notice to the other. Moreover, while respondent ACI did not fix or impose any quota on respondent Jalapadan, it reserved the right to do so. Fourth. Respondent Jalapadan was obliged to pay the petitioners monthly wage of P3,648.00, as well as that of his helper, another P4,000.00 a month, totaling P7,648.00, exclusive of other expenses such as meals, gasoline, and the upkeep of the vehicle. On the other hand, respondent Jalapadan received from respondent ACI only P3,590.00 a month as compensation. He had no other means of income because he was obliged, under the agreement, to devote all his time for respondent ACI. Respondent Jalapadans claim that he sold the products of the respondent ACI for a marked-up price as his commission is belied by their agreement, which precisely prohibited him from selling such products at a different price. Respondent Jalapadan was only entitled to a commission based on their booked sales. Aside from the fact that such commission was not fixed, there is no evidence on record how much, if any, respondent Jalapadan received from the respondent ACI by way of commission. Considering all these, then, the Court concludes that the petitioners wages must have been paid for by respondent ACI through respondent Jalapadan, its labor-only contractor. On the third issue, the petitioner asserts that the NLRC and the CA erred in finding and declaring that he voluntarily resigned from his employment on October 10, 1998. He avers that the NLRC erred in considering his handwritten letter of resignation and his testimony in the Office of the Labor Arbiter. He asserts that the respondents submitted the letter only in the NLRC, thus, depriving him of his right to due process. Moreover, the contents of the letter were handwritten by respondent Jalapadan. He reiterates that he was not aware of the nature and legal effect of signing the said letter because he can neither read nor write and finished only third grade. Moreover, he maintains that he signed two letters of resignation, one typewritten and the other handwritten by respon-

671 VOL. 474, NOVEMBER 11, 2005 671 Acevedo vs. Advanstar Company, Inc. dent Jalapadan, and yet the NLRC ignored the typewritten one without any explanation. For their part, the respondents reiterate their stand (as sustained by the NLRC and the CA) that the petitioner abandoned his work and was not dismissed by respondent Jalapadan. The Court agrees with the rulings of the NLRC and the CA that the petitioner was not dismissed from employment. Upon careful review of the records, the Court finds that such rulings are in accord with the evidence: Nevertheless, assuming that complainant was a regular employee of Advanstar, this Commission finds his claim that he was illegally dismissed to be nebulous. The only incident from which complainant drew the conclusion that he was dismissed from work is when he was allegedly told to disembark from the vehicle. Nothing on record shows that he was terminated from work. On the contrary, complainant himself reveals that previously (in July 1995) he was also told to disembark to be left on the road by an angry Jalapadan, the latter went back to fetch him and told him that we are just one family. Evidently, [these] incidents were mere expressions of anger on the part of Jalapadan without intention of terminating his employment. Rather, it was complainant as admitted by himwho, this time, refused to return to work. 25 When he testified before the Labor Arbiter, the petitioner admitted that he was not dismissed from employment, thus: Q You alleged that you were terminated on October 8, 1998. Is that right? A Yes, Sir. Q Is it not a fact that you were the one who left while you were in the south? A

I was told by Tony Jalapadan to disembark from the van, so I took my personal belonging and I told him that Ill see him in our office at Ozamis City. Q You mean that was the reason why you were terminated when you were told to disembark? _______________ 25 CA Rollo, p. 44. 672 672 SUPREME COURT REPORTS ANNOTATED Acevedo vs. Advanstar Company, Inc. A When I told him that we would see each other in Ozamis City, he told me to go back because we were one family, but I did not go back anymore. Q These are the only words that made you conclude that you were terminated by Tony Jalapadan? A Yes, Sir. Q After that, where did you proceed? A I went to my family in Dipolog City.26 In fact, respondent Jalapadan appealed to the petitioner to go back to work, and the latter spurned such

plea. The Court finds, however, that contrary to the rulings of the NLRC and the CA, the petitioner did not resign from his employment. Reliance on the handwritten letter of resignation dated October 10, 1998 signed and thumbmarked by the petitioner is misplaced. The handwritten letter of resignation signed by the petitioner is inconsistent with the respondents claim that respondent Jalapadan was the petitioners employer. This is so because the said letter is addressed to Tanduay Corporation, and not to respondent Jalapadan, thus: TANDUAY CORPORATION OZAMIS BRANCH THRU: MR. TONY JALAPADAN, SALESMAN SIR: I HAVE THE HONOR TO TENDER MY RESIGNATION, EFFECTIVE OCT. 10, 1998, BY REASON THAT I AM SEARCHING FOR BETTER INCOME. BY VIRTUE THAT MY SALARY CURRENTLY IS NOT SUFFICIENT FOR MY FAMILY. HOPE AND PRAY FOR YOUR CONSIDERATION AND I REMAIN PRAYING FOR THE CONTINUOUS SUCCESS OF YOUR MOST PROGRESSIVE COMPANY AND I HAVE NO CLAIM WHATSOEVER. _______________ 26 Id., at pp. 71-73. 673 VOL. 474, NOVEMBER 11, 2005 673 Acevedo vs. Advanstar Company, Inc. HANDTHUMBMARK VERY TRULY YOURS,

_______(SGD.)________ HANDTHUMBM

ARKARNULFO ACEBEDO27 Neither the petitioner nor the respondents explained why the letter was addressed to Tanduay Corporation. Significantly, respondent Jalapadan did not deny the petitioners claim that the letter was handwritten by him (Jalapadan). If such claim were true, there is neither rhyme nor reason why Tanduay Corporation was its addressee. Moreover, it appears that the letter was coursed through respondent Jalapadan as salesman of the said corporation, which is antithetical to the respondents claim that he was the petitioners employer and an independent contractor of respondent ACI. IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision and Resolution of the Court of Appeals are REVERSED AND SET ASIDE. The Court declares respondent Tony Jalapadan as a labor-only contractor, and respondent Advanstar Company, Inc. as the principal employer of Petitioner Arnulfo C. Acevedo. The respondents are hereby ORDERED to allow the petitioner to report back for work as driver under the same terms and conditions existing before October 8, 1998, upon finality of this Decision. No costs. SO ORDERED. Puno (Actg. C.J., Chairman), Austria-Martinez and Tinga, JJ., concur. Chico-Nazario, J.,On Leave. Petition granted, judgment and resolution reversed and set aside. _______________ 27 CA Rollo, p. 95. 674 674 SUPREME COURT REPORTS ANNOTATED Dulay vs. Dulay Notes.Article 2180 of the Civil Code and not the Labor Code determines the liability of the principal employer in a civil suit for damages instituted by an injured person for any negligent act of the employees of the labor only contractor, consistent with the ruling that a finding that a contractor was a labor-only contractor is equivalent to a finding that an employer-employee relationship existed between the owner (principal contractor) and the labor-only contractor, including the latters workers. (National Power Corporation vs. Court of Appeals, 294 SCRA 209 [1998]) If there is a showing that the appellate courts findings of facts complained of are totally devoid of support in the record or that they are so glaringly erroneous as to constitute grave abuse of discretion, the Supreme Court must discard such erroneous findings of facts. (Mendezona vs. Ozamiz, 376 SCRA 482 [2002]) o0o [Acevedo vs. Advanstar Company, Inc., 474 SCRA 656(2005)]

VOL. 179, NOVEMBER 15, 1989 459 Insular Life Assurance Co., Ltd. vs. NLRC G.R. No. 84484. November 15, 1989.* INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO, respondents. Labor Relations; Employer-Employee Relationship; Independent Contractor; Control Test; Not every form of control over the conduct of the party hired in relation to the service rendered establishes employer-employee relationship.It is true that the control test expressed in the following pronouncement of the Court in the 1956 case of Viana vs. Alejo Al-Lagadan: x x x 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 employee conductalthough the latter is the most important element (35 Am. Jur. 445). x x x, has been followed and applied in later cases, some fairly recent. Indeed, it is without question a valid test of the character of a contract or agreement to render service. It should, however, be obvious that not every form of control that the hiring party reserves to himself over the conduct of the party hired in relation to the services rendered may be accorded the effect of establishing an employer-employee relationship between them in the legal or technical sense of the term. A line must be drawn somewhere, if the recognized distinction between an employee and an individual contractor is not to vanish altogether. Same; Same; Same; Same; Same; When an insurance agent is free to adopt his own selling methods or is free to sell insurance at his own time, he is an independent contractor.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. The distinction acquires particular relevance in the case of an enterprise affected with public interest, as is the business of insurance, and is on that account subject to regulation by the State with respect, not only to the ________________ * FIRST DIVISION. 460 460 SUPREME COURT REPORTS ANNOTATED Insular Life Assurance Co., Ltd. vs. NLRC

relations between insurer and insured but also to the internal affairs of the insurance company. Rules and regulations governing the conduct of the business are provided for in the Insurance Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected for an insurance company to promulgate a set of rules to guide its commission agents in selling its policies that they may not run afoul of the law and what it requires or prohibits. Of such a character are the rules which prescribe the qualifications of persons who may be insured, subject insurance applications to processing and approval by the Company, and also reserve to the Company the determination of the premiums to be paid and the schedules of payment. None of these really invades the agents contractual prerogative to adopt his own selling methods or to sell insurance at his own time and convenience, hence cannot justifiably be said to establish an employer-employee relationship between him and the Company. Same; Same; Same; An independent contractors claim for unpaid commission should be litigated in an ordinary civil suit.The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the petitioner, but a commission agent, an independent contractor whose claim for unpaid commissions should have been litigated in an ordinary civil action. The Labor Arbiter erred in taking cognizance of, and adjudicating, said claim, being without jurisdiction to do so, as did the respondent NLRC in affirming the Arbiters decision. This conclusion renders it unnecessary and premature to consider Basiaos claim for commissions on its merits. PETITION for certiorari and prohibition to review the resolution of the National Labor Relations Commissions. The facts are stated in the opinion of the Court. Tirol & Tirol for petitioner. Enojas, Defensor & Teodosio Cabado Law Offices for private respondent. NARVASA, J.: On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the Company) and Melecio T. Basiao entered into a contract1 by which: ________________ 1 Rollo, pp. 14-15. 461 VOL. 179, NOVEMBER 15, 1989 461 Insular Life Assurance Co., Ltd. vs. NLRC 1. Basiao was authorized to solicit within the Philippines applications for insurance policies and annuities in accordance with the existing rules and regulations of the Company; 2. he would receive compensation, in the form of commissions x x as provided in the Schedule of

Commissions of the contract to constitute a part of the consideration of x x (said) agreement; and 3. the rules in x x (the Companys) Rate Book and its Agents Manual, as well as all its circulars x x and those which may from time to time be promulgated by it, x x were made part of said contract. The contract also contained, among others, provisions governing the relations of the parties, the duties of the Agent, the acts prohibited to him, and the modes of termination of the agreement, viz.: RELATION WITH THE COMPANY. The Agent shall be free to exercise his own judgment as to time, place and means of soliciting insurance. Nothing herein contained shall therefore be construed to create the relationship of employee and employer between the Agent and the Company. However, the Agent shall observe and conform to all rules and regulations which the Company may from time to time prescribe. ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from giving, directly or indirectly, rebates in any form, or from making any misrepresentation or over-selling, and, in general, from doing or committing acts prohibited in the Agents Manual and in circulars of the Office of the Insurance Commissioner. TERMINATION. The Company may terminate the contract at will, without any previous notice to the Agent, for or on account of x x (explicitly specified causes). x x Either party may terminate this contract by giving to the other notice in writing to that effect. It shall become ipso facto cancelled if the Insurance Commissioner should revoke a Certificate of Authority previously issued or should the Agent fail to renew his existing Certificate of Authority upon its expiration. The Agent shall not have any right to any commission on renewal of premiums that may be paid after the termination of this agreement for any cause whatsoever, except when the termination is due to disability or death in line of service. As to commission corresponding to any balance of the first years premiums remaining unpaid at the termination of this agreement, the Agent shall be entitled to it if the balance of the first year premium is paid, less actual cost of collection, unless the termination is due to a violation of this contract, involving criminal liability or 462 462 SUPREME COURT REPORTS ANNOTATED Insular Life Assurance Co., Ltd. vs. NLRC breach of trust. ASSIGNMENT. No Assignment of the Agency herein created or of commissions or other compensations shall be valid without the prior consent in writing of the Company. x x. Some four years later, in April 1972, the parties entered into another contractan Agency Managers Contractand to implement his end of it Basiao organized an agency or office to which he gave the name M. Basiao and Associates, while concurrently fulfilling his commitments under the first contract with the Company.2

In May, 1979, the Company terminated the Agency Managers Contract. After vainly seeking a reconsideration, Basiao sued the Company in a civil action and this, he was later to claim, prompted the latter to terminate also his engagement under the first contract and to stop payment of his commissions starting April 1, 1980.3 Basiao thereafter filed with the then Ministry of Labor a complaint4 against the Company and its president. Without contesting the termination of the first contract, the complaint sought to recover commissions allegedly unpaid thereunder, plus attorneys fees. The respondents disputed the Ministrys jurisdiction over Basiaos claim, asserting that he was not the Companys employee, but an independent contractor and that the Company had no obligation to him for unpaid commissions under the terms and conditions of his contract.5 The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the underwriting agreement had established an employer-employee relationship between him and the Company, and this conferred jurisdiction on the Ministry of Labor to adjudicate his claim. Said officials decision directed payment of his unpaid commissions x x equivalent to the balance of the first years premium remaining unpaid, at the time of his termination, of all the insurance policies solicited by x x (him) in favor of the respondent company x x plus 10% ________________ 2 Rollo, p. 16. 3 Rollo, p. 17. 4 Docketed as RAB Case No. VI-0010-83. 5 Rollo, p. 17. 463 VOL. 179, NOVEMBER 15, 1989 463 Insular Life Assurance Co., Ltd. vs. NLRC attorneys fees.6 This decision was, on appeal by the Company, affirmed by the National Labor Relations Commission.7 Hence, the present petition for certiorari and prohibition. The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the Companys employee by virtue of the contract invoked by him, thereby placing his claim for unpaid commissions within the original and exclusive jurisdiction of the Labor Arbiter under the provisions of Section 217 of the Labor Code,8 or, contrarily, as the Company would have it, that under said contract Basiaos status was that of an independent contractor whose claim was thus cognizable, not by the Labor Arbiter

in a labor case, but by the regular courts in an ordinary civil action. The Companys thesis, that no employer-employee relation in the legal and generally accepted sense existed between it and Basiao, is drawn from the terms of the contract they had entered into, which, either expressly or by necessary implication, made Basiao the master of his own time and selling methods, left to his judgment the time, place and means of soliciting insurance, set no accomplishment quotas and compensated him on the basis of results obtained. He was not bound to observe any schedule of working hours or report to any regular station; he could seek and work on his prospects anywhere and at anytime he chose to, and was free to adopt the selling methods he deemed most effective. Without denying that the above were indeed the expressed or implicit conditions of Basiaos contract with the Company, the respondents contend that they do not constitute the decisive determinant of the nature of his engagement, invoking precedents to the effect that the critical feature distinguishing the ________________ 6 Id., pp. 18-22. 7 Rollo, pp. 23-27 8 which at that time conferred upon the Labor Arbiters such jurisdiction over, among others, x x all money claims of workers, including those based on non-payment or underpayment of wages, overtime compensation, separation pay and other benefits provided by law or appropriate agreement, except claims for employees compensation, social security, medicare and maternity benefits. 464 464 SUPREME COURT REPORTS ANNOTATED Insular Life Assurance Co., Ltd. vs. NLRC status of an employee from that of an independent contractor is control, that is, whether or not the party who engages the services of another has the power to control the latters conduct in rendering such services. Pursuing the argument, the respondents draw attention to the provisions of Basiaos contract obliging him to x x observe and conform to all rules and regulations which the Company may from time to time prescribe x x, as well as to the fact that the Company prescribed the qualifications of applicants for insurance, processed their applications and determined the amounts of insurance cover to be issued as indicative of the control, which made Basiao, in legal contemplation, an employee of the Company.9 It is true that the control test expressed in the following pronouncement of the Court in the 1956 case of Viana vs. Alejo Al-Lagadan:10 x x 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 conductalthough the latter is the most important element (35 Am. Jur. 445). x x, has been followed and applied in later cases, some fairly recent.11 Indeed, it is without question a valid test of the character of a contract or agreement to render service. It should, however, be obvious that not every form of control that the hiring party reserves to himself over the conduct of the party hired in relation to the services rendered may be accorded the effect of establishing an employer-employee relationship between them in the legal or technical sense of the term. A line must be drawn somewhere, if the recognized distinction between an employee and an individual contractor is not to vanish altogether. Realistically, it would be a rare contract of service that gives untram________________ 9 Respondents Comments; Rollo, pp. 47-52, 60-69. 10 99 Phil. 408, 411-412. 11 Feati University vs. Bautista, 18 SCRA 119; Dy Keh Beng vs. International Labor and Marine Union of the Phil., 90 SCRA 163; Rosario Bros. vs. Ople, 131 SCRA 72; National Mines and Allied Workers Union (NAMAWU) vs. Valero, 132 SCRA 578. 465 VOL. 179, NOVEMBER 15, 1989 465 Insular Life Assurance Co., Ltd. vs. NLRC melled freedom to the party hired and eschews any intervention whatsoever in his performance of the engagement. Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it. The distinction acquires particular relevance in the case of an enterprise affected with public interest, as is the business of insurance, and is on that account subject to regulation by the State with respect, not only to the relations between insurer and insured but also to the internal affairs of the insurance company.12 Rules and regulations governing the conduct of the business are provided for in the Insurance Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected for an insurance company to promulgate a set of rules to guide its commission agents in selling its policies that they may not run afoul of the law and what it requires or prohibits. Of such a character are the rules which prescribe the qualifications of persons who may be insured, subject insurance applications to processing and approval by the Company, and also reserve to the Company the determination of the premiums to be paid and the schedules of payment. None of these really invades the agents contractual prerogative to adopt his own selling methods or to sell insurance at his own time and convenience, hence cannot

justifiably be said to establish an employer-employee relationship between him and the company. There is no dearth of authority holding persons similarly placed as respondent Basiao to be independent contractors, instead of employees of the parties for whom they worked. In Mafinco Trading Corporation vs. Ople,13 the Court ruled that a person engaged to sell soft drinks for another, using a truck supplied by the latter, but with the right to employ his own workers, sell according to his own methods subject only to ________________ 12 43 Am. Jur. 2d, pp. 73-91. 13 70 SCRA 139. 466 466 SUPREME COURT REPORTS ANNOTATED Insular Life Assurance Co., Ltd. vs. NLRC prearranged routes, observing no working hours fixed by the other party and obliged to secure his own licenses and defray his own selling expenses, all in consideration of a peddlers discount given by the other party for at least 250 cases of soft drinks sold daily, was not an employee but an independent contractor. In Investment Planning Corporation of the Philippines vs. Social Security System,14 a case almost on all fours with the present one, this Court held that there was no employer-employee relationship between a commission agent and an investment company, but that the former was an independent contractor where said agent and others similarly placed were: (a) paid compensation in the form of commissions based on percentages of their sales, any balance of commissions earned being payable to their legal representatives in the event of death or registration; (b) required to put up performance bonds; (c) subject to a set of rules and regulations governing the performance of their duties under the agreement with the company and termination of their services for certain causes; (d) not required to report for work at any time, nor to devote their time exclusively to working for the company nor to submit a record of their activities, and who, finally, shouldered their own selling and transportation expenses. More recently, in Sara vs. NLRC,15 it was held that one who had been engaged by a rice miller to buy and sell rice and palay without compensation except a certain percentage of what he was able to buy or sell, did work at his own pleasure without any supervision or control on the part of his principal and relied on his own resources in the performance of his work, was a plain commission agent, an independent contractor and not an employee. The respondents limit themselves to pointing out that Basiaos contract with the Company bound him to observe and conform to such rules and regulations as the latter might from time to time prescribe. No showing has been made that any such rules or regulations were in fact promulgated, much less that any

rules existed or were issued which effectively con________________ 14 21 SCRA 924 (1967). 15 G.R. No. 73199, October 26, 1988. 467 VOL. 179, NOVEMBER 15, 1989 467 Insular Life Assurance Co., Ltd. vs. NLRC trolled or restricted his choice of methodsor the methods themselvesof selling insurance. Absent such showing, the Court will not speculate that any exceptions or qualifications were imposed on the express provision of the contract leaving Basiao x x x free to exercise his own judgment as to the time, place and means of soliciting insurance. The Labor Arbiters decision makes reference to Basiaos claim of having been connected with the Company for twenty-five years. Whatever this is meant to imply, the obvious reply would be that what is germane here is Basiaos status under the contract of July 2, 1968, not the length of his relationship with the Company. The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the petitioner, but a commission agent, an independent contractor whose claim for unpaid commissions should have been litigated in an ordinary civil action. The Labor Arbiter erred in taking cognizance of, and adjudicating, said claim, being without jurisdiction to do so, as did the respondent NLRC in affirming the Arbiters decision. This conclusion renders it unnecessary and premature to consider Basiaos claim for commissions on its merits. WHEREFORE, the appealed Resolution of the National Labor Relations Commission is set aside, and that complaint of private respondent Melecio T. Basiao in RAB Case No. VI-0010-83 is dismissed. No pronouncement as to costs. SO ORDERED. Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur. Resolution set aside. Complaint dismissed. Note.The existence of employer-employee relationship is determined by the following elements, namely: (1) selection and engagement of the employee; (b) payment of wages; (3) powers of dismissal; and (4) power of control the employees conduct although the latter is the most important element. (Besa vs. Trajano, 146 SCRA 501) o0o [Insular Life Assurance Co., Ltd. vs. NLRC, 179 SCRA 459(1989)]

VOL. 146, DECEMBER 29, 1986 501 Besa vs. Trajano No. L-72409. December 29, 1986.* MAMERTO S. BESA, doing business under the name and style of BESA'S CUSTOM BUILT SHOES, petitioner, vs. THE HONORABLE CRESENCIANO B. TRAJANO, DIRECTOR OF THE BUREAU OF LABOR RELATIONS, MINISTRY OF LABOR AND EMPLOYMENT, AND KAISAHAN NG MANGGAGAWANG PILIPINO (KAMPIL-KATIPUNAN), respondents. Labor Law; Certification election, void; Absence of employeremployee relationship between the 17 shoeshiners-voters and petitioner.The Office of the Solicitor General as counsel for public respondent agrees that in the present case, no employer-employee relationship exists. Same; Same; Same; Differences between a shoeshiner and a piece worker.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 f or 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's. 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 Mamerto B. Besa, is a partner in the trade. Consequently, employeremployee relationship between members of the Petitioning union and respondent Mamerto B. Besa being absent, the latter could not be held guilty of the unfair labor practice acts imputed against him." Same; Same; Same; Elements to determine the existence of employer-employee relationship.The Supreme Court in the Rosario ________________ * SECOND DIVISION, 502 502 SUPREME COURT REPORTS ANNOTATED Besa us. Trajano

Brothers case ruled that; "A basic factor underlying the exercise of rights under the Labor Code is the status of employment. It is important in the determination of who shall be included in a proposed bargaining unit because it is sine qua non. The fundamental and essential condition that a bargaining unit be composed of employees. Failure to establish this juridical relationship between the union members and the employer affects the legality of the union itself. It means the ineligibility of the union members to present a petition for certification election as well as to vote therein. Existence of employer-employee relationship is determined by the following elements, namely, a] selection and engagement of the employee; b] payment of wages; c] powers of dismissal; and d] power to control the employee's conduct although the latter is the most important element (Rosario Brothers Inc. vs. Ople, 131 SCRA 72, 1984)" PETITION to review the decision of the Director of the Bureau of Labor Relations. The facts are stated in the opinion of the Court. De Asis and Hernando Law Office for petitioner. Estebal M. Mendoza for private respondent. PARAS, J.: This petition questions the decision of the Director of the Bureau of Labor Relations in BLR Case No. A-8-165-85, which affirmed the appealed order of the Med-Arbiter, Labor Relations Division, NCR in NCR-LRD-M-1-044-85, a certification election case. More specifically, 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. Sometime in January, 1985, private respondent Kaisahan ng Mangagawang Pilipino (KAMPIL, for short) a legitimate labor union duly registered with the Ministry of Labor and Employment (MOLE, for short), filed a Petition for Certification Election, docketed as NCR-LRD-M-1-044-85 in the National Labor Relations Division of the National Capital 503 VOL. 146, DECEMBER 29, 1986 503 Besa vs. Trajano Region. Petitioner opposed it alleging that "1. There is no employer-employee relationship between Besa's and the petitioners-signatories to the petition; "2. The subject of the present petition had previously been decided by the defunct Court of Industrial Relations, and is therefore barred under the principle of res judicata;

"3. The petition fails to comply with the mandatory formal requirements under Sec. 2, Book V, of the Omnibus Rules Implementing the Labor Code; and "4. This Hon. Commission has no jurisdiction over the subject matter and parties to the petition." Acting on the Petition, the Opposition thereto, and the Reply to the Opposition, the Med-Arbiter on June 27, 1985, issued an order declaring that there was an employer-employee relationship between the parties and directed that an election be conducted. Petitioner appealed the order to the Director of BLR, citing among others the following reasons "1. That the subject of the present petition has previously been decided by the defunct Court of Industrial Relations, and is therefore barred under the principle of res judicata (CIR Case Nos. 2783, 2751 and 2949 ULP, December 21, 1965); "2. That on May 28, 1985, Director Severo Pucan of the Ministry of Labor and Employment, in dismissing the case for underpayment of commissions and non-payment of ECOLA, filed by the shoeshiners against Besa's Custombuilt Shoes, for lack of jurisdiction, declared that there was no employer-employee relationship between the shoeshiners and petitioner Besa's (Order in NCR-LSED1020-85); "Director Pucan's findings were based on a letter-opinion of the Director of the Bureau of Working Conditions of the MOLE (Annex "B-2", Petition for Certiorari). The legal ground therein cited was res judicata. x x x x

Appeal was dismissed by the Director of BLR as contained in his decision dated Sept. 27, 1985 upholding the finding of the Med-Arbiter that supervisors were appointed to oversee 504 504 SUPREME COURT REPORTS ANNOTATED Besa vs. Trajano the bootblacks' performance. It declared that such is a finding of fact that is entitled to respect and that res judicata does not lie as the parties and the causes of action in the certification election case are diff erent from the parties and causes of action in CIR Cases Nos. 2783-ULP 2751-ULP and 2949 ULP. Thus the Petition of the Union (KAMPIL) before the MedArbiter for the holding of the certification election was granted. While the preelection conference was in progress, petitioner herein (BESA'S) filed with Us with petition for certiorari with Prohibition and simultaneously filed with the Med-Arbiter a motion to suspend the pre-election conference. The petition filed before Us was dismissed for lack of merit but was reconsidered upon Motion of petitioner. In its Motion for Reconsideration, petitioner raised the following grounds: I

THE INSTANT PETITION PRESENTS QUESTIONS OF LAW AND SUBSTANCE TO MERIT THE CONSIDERATION OF THIS HONORABLE COURT. II THE QUESTIONED DECISION OF THE RESPONDENT DIRECTOR WAS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE AND THE SAME IS PURELY BASED ON SPECULATIONS, SURMISES AND CONJECTURES. III THE QUESTIONED DECISION OF THE RESPONDENT DIRECTOR IS CONTRARY TO LAW AND APPLICABLE DECISIONS OF THE SUPREME COURT ON THE MATTER. IV THE PETITION FOR CERTIFICATION ELECTION FILED BY RESPONDENT UNION WITH THE MINISTRY OF LABOR AND EMPLOYMENT FAILED TO COMPLY WITH THE MANDATORY REQUIREMENTS UNDER ARTICLE 258 OF THE LABOR CODE, AS AMENDED, AND ITS IMPLEMENTING RULES. 505 VOL. 146, DECEMBER 29, 1986 505 Besa vs. Trajano V THE RESPONDENT DIRECTOR ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN DECIDING THAT THERE EXISTS AN EMPLOYEREMPLOYEE RELATIONSHIP BETWEEN THE PETITIONER AND THE SHOESHINERMEMBERS OF THE RESPONDENT UNION. VI THE RESPONDENT DIRECTOR ACTED WITHOUT JURISDICTION IN TAKING COGNIZANCE OF THE BASIC PETITION CONSIDERING THAT THE SUBJECT MATTER AND THE PARTIES THEREOF HAVE BEEN DECIDED BY THE DEFUNCT COURT OF INDUSTRIAL RELATIONS AND IS THEREFORE BARRED BY THE PRINCIPLE OF RES ADJUDICATA. The main thrust of the instant petition is the question of employer-employee relationship between petitioner BESA'S and 17 of the members of the herein respondent Union who are designated as shoeshiners. During the certification election held on Nov. 26, 1985 at BESA'S, of the 53 eligible voters, 49 cast their votes. 33 voted for the union while 16 voted for no union. Among the 33 voters

who opted for a union 17 persons are shoeshiners while 16 persons are non-shoeshiners. The question of employer-employee relationship became a primodial consideration in resolving whether or not the subject shoeshiners have the juridical personality and standing to present a petition for certification election as well as to vote therein. It is the position of petitioner that if the shoeshiners are not considered as employees of Besa's the basic petition for certification election must necessarily be dismissed for failure to comply with the mandatory requirements of the Labor Code, as amended, that at least thirty (30%) percent of the employees must support the petition for certification election and that in order to be certified as the sole and exclusive bargaining agent, the union must be obtained a majority of the valid votes cast by eligible voters. In the instant case, if the 17 shoeshiners are declared ineligible and their votes are con506 506 SUPREME COURT REPORTS ANNOTATED Besa vs. Trajano sequently nullified the result of the certif ication election would be 16 "Yes" votes (33 minus 17) and 16 "No" votes, which is a tie. Since the respondent union did not obtain a clear majority for the "Yes" votes as required under Rule IV Sec. 8(f), of the Omnibus Rules of the Labor Code, it necessarily follows that the respondent union cannot be certified as the sole and exclusive bargaining agent of the workers of Besa's. The present petition merits Our consideration. The records of the case reveal that an employeremployee relationship does not exist between the 17 shoeshiners and petitioner. Be it noted that the defunct CIR in dismissing the cases for unfair labor practice filed by the shoeshiners against herein petitioner BESA declared in its Decision dated December 21, 1965 that: "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's. 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 Mamerto B. Besa, is a partner in the trade. Consequently, employeremployee relationship between members of the Petitioning union and respondent Mamerto B. Besa being absent, the latter could not be held guilty of the unfair labor practice acts imputed against him." (p. 6, Annex "B-1," of said Decision). Then too on Dec. 27, 1983, then Director Augusto Sanchez of the Bureau of Working Conditions,

MOLE, in response to a letter of petitioner relative to the implementation of wage Order No. 2 which provided for an increase both in minimum 507 VOL. 146, DECEMBER 29, 1986 507 Besa vs. Trajano wage and cost of living allowance, opined as follows: "Entitlement of the minimum requirements of the law particularly on wages and allowances presupposes the existence of employer-employee relationship which is determined by the concurrence of the following conditions: 1. right to hire 2. payment of wages 3. right to fire; and 4. control and supervision The most important condition to be considered is the exercise of control and supervision over the employees, per our conversation, the persons concerned under your query are the shoe shiners and based on the decision rendered by Associate Judge Emiliano Tabigne of the defunct Court of Industrial Relations, these shoe shiners are not employees of the company, but are partners instead. This is due to the 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. The attendant circumstances clearly show that there is no employer-employee relationship existing, and such, the owner/manager is not by law, under obligation to extend to those on purely commission basis the benefit of Wage Order No. 2. However, the law does not preclude the employer in giving such benefit to all its employees including those which may not be covered by the mandate of the law.'' (Letter dated December 27, 1985 addressed to petitioner Annex "B-2," Petition) The Office of the Solicitor General as counsel for public respondent agrees that in the present case, no employeremployee relationship exists. The Supreme Court in the Rosario Brothers case ruled that; "A basic factor underlying the exercise of rights under the Labor Code is the status of employment. It is important in the determination of who shall be included in a proposed bargaining unit because it is sine qua non. The fundamental and essential condition that a bargaining unit be composed of employees. Failure to establish this juridical relationship between the union members and the 508

508 SUPREME COURT REPORTS ANNOTATED Besa vs. Trajano employer affects the legality of the union itself. It means the ineligibility of the union members to present a petition for certification election as well as to vote therein. "Existence of employer-employee relationship is determined by the following elements, namely, a] selection and engagement of the employee; b] payment of wages; c] powers of dismissal; and d] power to control the employee's conduct although the latter is the most important element (Rosario Brothers Inc. vs. Ople, 131 SCRA 72, 1984)" WHEREFORE, judgment is hereby rendered giving due course to the Petition and declaring VOID the decision of the Director of the Bureau of Labor Relations dated September 27, 1985. The Petition in BLR Case No. A-8-165-85) (NCR-LRD-M1-044-85) is therefore hereby DISMISSED. SO ORDERED. Feria (Chairman), Fernan, Alampay, Gutierrez, Jr., JJ., concur. Decision void. Notes.A certification election is the sole concern of the workers. The only exception is where the employer has to file a petition for certification election pursuant to Article 259 of the Labor Code because it was requested to bargain collectively. Thereaf ter the role of the employer in the certification process ceases. It becomes merely a bystander. (Trade Unions of the Philippines and Allied Services (TUPAS) vs. Trajano, 120 SCRA 64.) All employees, regardless of period of employment, have the right to participate in a certification election. (Eastland Manufacturing Company, Inc. vs. Noriel, 111 SCRA 674.) o0o [Besa vs. Trajano, 146 SCRA 501(1986)]

SUPREME COURT REPORTS ANNOTATED Singer Sewing Machine Company vs. Drilon G.R. No. 91307. January 24, 1991.* SINGER SEWING MACHINE COMPANY, petitioner, vs. HON. FRANKLIN M. DRILON, MEDARBITER FELIX B. CHAGUILE, JR., and SINGER MACHINE COLLECTORS UNION-BAGUIO (SIMACUB), respondents. Labor Law; Employer-Employee Relationship; The following elements are generally considered in the determination of employer-employee relationship: (1) selection and engagement of the employee; (2) payment of wages; (3) the power of dismissal; and (4) the power to control the employees conduct. The present case mainly calls for the application of the control test, which if not satisfied, would lead us to conclude that no employer-employee relationship exists. Hence, if the union members are not employees, no right to organize for purposes of bargaining, nor to be certified as such bargaining agent can ever be recognized. The following elements are generally considered in the determination of the employer-employee relationship; (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 conductalthough the latter is the most important element (Mafinco Trading Corporation v. Ople, 70 SCRA 139 [1976]; Development Bank of the Philippines v. National Labor Relations Commission, 175 SCRA 537 [1989]; Rosario Brothers, Inc. v. Ople, 131 SCRA 72 [1984]; _______________ * THIRD DIVISION. 271 VOL. 193, JANUARY 24, 1991 271 Singer Sewing Machine Company vs. Drilon Broadway Motors Inc. v. NLRC, 156 SCRA 522 [1987]; Brotherhood Labor Unity Movement in the Philippines v. Zamora, 147 SCRA 49 [1986]). Same; Same; Same; Control-test; Independent Contractors; Employer-employee relationship does not exist between petitioner-company and its collecting agents considering that petitioner-company exercises control only with respect to the result or amount of collection and not with respect to the means and method of collection.The Agreement confirms the status of the collecting agent in this case as an independent contractor not only because he is explicitly described as such but also because the provisions permit him to perform collection services for the company without being subject to the control of the latter except only as to the result of his work. After a careful analysis of the contents of the agreement, we rule in favor of the petitioner. The requirement that collection agents utilize only receipt forms and report forms issued by the Company and that reports shall be submitted at least once a week is not necessarily an indication of control over the means by which the job of collection is to be performed. The agreement itself specifically explains that receipt forms shall be used for the purpose of

avoiding a co-mingling of personal funds of the agent with the money collected on behalf of the Company. Likewise, the use of standard report forms as well as the regular time within which to submit a report of collection are intended to facilitate order in office procedures. Even if the report requirements are to be called control measures, any control is only with respect to the end result of the collection since the requirements regulate the things to be done after the performance of the collection job or the rendition of the service. Same; Same; Same; Same; Same; The language of the agreement reveals that the designation as collection agent does not create an employment relationship and that the applicant is to be considered at all times as an independent contractor.A thorough examination of the facts of the case leads us to the conclusion that the existence of an employer-employee relationship between the Company and the collection agents cannot be sustained. The plain language of the agreement reveals that the designation as collection agent does not create an employment relationship and that the applicant is to be considered at all times as an independent contractor. This is consistent with the first rule of interpretation that the literal meaning of the stipulations in the contract controls (Article 1370, Civil Code; La Suerte Cigar and Cigarette Factory v. Director of Bureau of Labor Relations, 123 SCRA 679 [1983]). No such words as to hire and employ are present. 272 272 SUPREME COURT REPORTS ANNOTATED Singer Sewing Machine Company vs. Drilon Moreover, the agreement did not fix an amount for wages nor the required working hours. Compensation is earned only on the basis of the tangible results produced, i.e., total collections made (Sarra v. Agarrado, 166 SCRA 625 [1988]). In Investment Planning Corp. of the Philippines v. Social Security System, 21 SCRA 924 [1967] which involved commission agents, this Court had the occasion to rule, thus: We are convinced from the facts that the work of petitioners 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 x x x. xxx xxx xxx Even if an agent of petitioner should devote all of his time and effort trying to sell its investment plans he would not necessarily be entitled to compensation therefor. His right to compensation depends upon and is measured by the tangible results he produces. Same; Same; Same; Art. 280 of the Labor Code is not the yardstick for determining the existence of an employment relationship because it merely distinguishes between regular and casual employees.The Court finds the contention of the respondents that the union members are employees under Article 280 of the Labor Code to have no basis. The definition that regular employees are those who perform activities which are desirable and necessary for the business of the employer is not determinative in this case. Any agreement may provide that one party shall render services for and in behalf of another for a consideration (no matter how necessary for the latters business) even without being hired as an employee. This is precisely true in the case of an independent contractorship as well as in an agency agreement. The Court agrees with the petitioners argument that Article 280 is not the yardstick for determining the existence of an employment relationship because it merely distinguishes between two kinds of employees, i.e., regular employees and casual employees, for purposes of determining the

right of an employee to certain benefits, to join or form a union, or to security of tenure. Article 280 does not apply where the existence of an employment relationship is in dispute. Same; Same; Unions; Since private respondents are not employees of the company, they are not entitled to the constitutional right to join or form a labor organization for purposes of collective bargaining.The Court finds that since private respondents are not employees of the Company, they are not entitled to the constitutional right to join or form a labor organization for purposes of collective bargaining. Accordingly, there is no constitutional and legal basis for their union to be granted their petition for direct certification. This Court made this 273 VOL. 193, JANUARY 24, 1991 273 Singer Sewing Machine Company vs. Drilon pronouncement in La Suerte Cigar and Cigarette Factory v. Director of Bureau of Labor Relations, supra: x x x The question of whether employer-employee relationship exists is a primordial consideration before extending labor benefits under the workmens compensation, social security, medicare, termination pay and labor relations law. It is important in the determination of who shall be included in a proposed bargaining unit because it is the sine qua non, the fundamental and essential condition that a bargaining unit be composed of employees. Failure to establish this juridical relationship between the union members and the employer affects the legality of the union itself. It means the ineligibility of the union members to present a petition for certification election as well as to vote therein x x x. (At p. 689) PETITION for certiorari to review the order and resolution of the Department of Labor and Employment. The facts are stated in the opinion of the Court. Misa, Castro, Villanueva, Oposa, Narvasa & Pesigan for petitioner. Domogan, Lockey, Orate & Dao-ayan Law Office for private respondent. GUTIERREZ, JR., J.: This is a petition for certiorari assailing the order of MedArbiter Designate Felix B. Chaguile, Jr., the resolution of then Labor Secretary Franklin M. Drilon affirming said order on appeal and the order denying the motion for reconsideration in the case entitled In Re: Petition for Direct Certification as the Sole and Exclusive Collective Bargaining Agent of Collectors of Singer Sewing Machine Company-Singer Machine Collectors Union-Baguio (SIMACUB) docketed as OS-MA-A-7-119-89 (IRD Case No. 02-89 MED). On February 15, 1989, the respondent union filed a petition for direct certification as the sole and exclusive bargaining agent of all collectors of the Singer Sewing Machine Company, Baguio City

branch (hereinafter referred to as the Company). The Company opposed the petition mainly on the ground that the union members are actually not employees but are independent contractors as evidenced by the collection agency agreement which they signed. 274 274 SUPREME COURT REPORTS ANNOTATED Singer Sewing Machine Company vs. Drilon The respondent Med-Arbiter, finding that there exists an employer-employee relationship between the union members and the Company, granted the petition for certification election. On appeal, Secretary of Labor Franklin M. Drilon affirmed it. The motion for reconsideration of the Secretarys resolution was denied. Hence, this petition in which the Company alleges that public respondents acted in excess of jurisdiction and/or committed grave abuse of discretion in that: a) the Department of Labor and Employment (DOLE) has no jurisdiction over the case since the existence of employer-employee relationship is at issue; b) the right of petitioner to due process was denied when the evidence of the union members being commission agents was disregarded by the Labor Secretary; c) the public respondents patently erred in finding that there exists an employer-employee relationship; d) the public respondents whimsically disregarded the well-settled rule that commission agents are not employees but are independent contractors. The respondents, on the other hand, insist that the provisions of the Collection Agency Agreement belie the Companys position that the union members are independent contractors. To prove that union members are employees, it is asserted that they perform the most desirable and necessary activities for the continuous and effective operations of the business of the petitioner Company (citing Article 280 of the Labor Code). They add that the termination of the agreement by the petitioner pending the resolution of the case before the DOLE only shows the weakness of petitioners stand and was for the purpose of frustrating the constitutionally mandated rights of the members of private respondent union to self-organization and collective organization. They also contend that under Section 8, Rule 8, Book No. III of the Omnibus Rules Implementing the Labor Code, which defines job-contracting, they cannot legally qualify as independent contractors who must be free from control of the alleged employer, who carry independent businesses and who have substantial capital or investment in the form of equipment, tools, and the like necessary in the conduct of the business. The present case mainly calls for the application of the control 275 VOL. 193, JANUARY 24, 1991

275 Singer Sewing Machine Company vs. Drilon test, which if not satisfied, would lead us to conclude that no employer-employee relationship exists. Hence, if the union members are not employees, no right to organize for purposes of bargaining, nor to be certified as such bargaining agent can ever be recognized. The following elements are generally considered in the determination of the employer-employee relationship; (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 conductalthough the latter is the most important element (Mafinco Trading Corporation v. Ople, 70 SCRA 139 [1976]; Development Bank of the Philippines v. National Labor Relations Commission, 175 SCRA 537 [1989]; Rosario Brothers, Inc. v. Ople, 131 SCRA 72 [1984]; Broadway Motors Inc. v. NLRC, 156 SCRA 522 [1987]; Brotherhood Labor Unity Movement in the Philippines v. Zamora, 147 SCRA 49 [1986]). The Collection Agency Agreement defines the relationship between the Company and each of the union members who signed a contract. The petitioner relies on the following stipulations in the agreements: (a) a collector is designated as a collecting agent who is to be considered at all times as an independent contractor and not employee of the Company; (b) collection of all payments on installment accounts are to be made monthly or oftener; (c) an agent is paid his compensation for service in the form of a commission of 6% of all collections made and turned over plus a bonus on said collections; (d) an agent is required to post a cash bond of three thousand pesos (P3,000.00) to assure the faithful performance and observance of the terms and conditions under the agreement; (e) he is subject to all the terms and conditions in the agreement; (f) the agreement is effective for one year from the date of its execution and renewable on a yearly basis; and (g) his services shall be terminated in case of failure to satisfy the minimum monthly collection performance required, failure to post a cash bond, or cancellation of the agreement at the instance of either party unless the agent has a pending obligation or indebtedness in favor of the Company. Meanwhile, the respondents rely on other features to strengthen their position that the collectors are employees. They quote paragraph 2 which states that an agent shall utilize 276 276 SUPREME COURT REPORTS ANNOTATED Singer Sewing Machine Company vs. Drilon only receipt forms authorized and issued by the Company. They also note paragraph 3 which states that an agent has to submit and deliver at least once a week or as often as required a report of all collections made using report forms furnished by the Company. Paragraph 4 on the monthly collection quota required by the Company is deemed by respondents as a control measure over the means by which an agent is to perform his services. The nature of the relationship between a company and its collecting agents depends on the

circumstances of each particular relationship. Not all collecting agents are employees and neither are all collecting agents independent contractors. The collectors could fall under either category depending on the facts of each case. The Agreement confirms the status of the collecting agent in this case as an independent contractor not only because he is explicitly described as such but also because the provisions permit him to perform collection services for the company without being subject to the control of the latter except only as to the result of his work. After a careful analysis of the contents of the agreement, we rule in favor of the petitioner. The requirement that collection agents utilize only receipt forms and report forms issued by the Company and that reports shall be submitted at least once a week is not necessarily an indication of control over the means by which the job of collection is to be performed. The agreement itself specifically explains that receipt forms shall be used for the purpose of avoiding a co-mingling of personal funds of the agent with the money collected on behalf of the Company. Likewise, the use of standard report forms as well as the regular time within which to submit a report of collection are intended to facilitate order in office procedures. Even if the report requirements are to be called control measures, any control is only with respect to the end result of the collection since the requirements regulate the things to be done after the performance of the collection job or the rendition of the service. The monthly collection quota is a normal requirement found in similar contractual agreements and is so stipulated to encourage a collecting agent to report at least the minimum amount of proceeds. In fact, paragraph 5, section b gives a 277 VOL. 193, JANUARY 24, 1991 277 Singer Sewing Machine Company vs. Drilon bonus, aside from the regular commission every time the quota is reached. As a requirement for the fulfillment of the contract, it is subject to agreement by both parties. Hence, if the other contracting party does not accede to it, he can choose not to sign it. From the records, it is clear that the Company and each collecting agent intended that the former take control only over the amount of collection, which is a result of the job performed. The respondents contention that the union members are employees of the Company is based on selected provisions of the Agreement but ignores the following circumstances which respondents never refuted either in the trial proceedings before the labor officials nor in its pleadings filed before this Court. 1. The collection agents are not required to observe office hours or report to Singers office everyday except, naturally and necessarily, for the purpose of remitting their collections. 2. The collection agents do not have to devote their time exclusively for SINGER. There is no prohibition on the part of the collection agents from working elsewhere. Nor are these agents required to account for their time and submit a record of their activity.

3. The manner and method of effecting collections are left solely to the discretion of the collection agents without any interference on the part of Singer. 4. The collection agents shoulder their transportation expenses incurred in the collections of the accounts assigned to them. 5. The collection agents are paid strictly on commission basis. The amounts paid to them are based solely on the amounts of collection each of them make. They do not receive any commission if they do not effect any collection even if they put a lot of effort in collecting. They are paid commission on the basis of actual collections. 6. The commissions earned by the collection agents are directly deducted by them from the amount of collections they are able to effect. The net amount is what is then remitted to Singer. (Rollo, pp. 78) If indeed the union members are controlled as to the manner by which they are supposed to perform their collections, they should have explicitly said so in detail by specifically denying each of the facts asserted by the petitioner. As there seems to be no objections on the part of the respondents, the Court finds that they miserably failed to defend their position. A thorough examination of the facts of the case leads us to the 278 278 SUPREME COURT REPORTS ANNOTATED Singer Sewing Machine Company vs. Drilon conclusion that the existence of an employer-employee relationship between the Company and the collection agents cannot be sustained. The plain language of the agreement reveals that the designation as collection agent does not create an employment relationship and that the applicant is to be considered at all times as an independent contractor. This is consistent with the first rule of interpretation that the literal meaning of the stipulations in the contract controls (Article 1370, Civil Code; La Suerte Cigar and Cigarette Factory v. Director of Bureau of Labor Relations, 123 SCRA 679 [1983]). No such words as to hire and employ are present. Moreover, the agreement did not fix an amount for wages nor the required working hours. Compensation is earned only on the basis of the tangible results produced, i.e., total collections made (Sarra v. Agarrado, 166 SCRA 625 [1988]). In Investment Planning Corp. of the Philippines v. Social Security System, 21 SCRA 924 [1967] which involved commission agents, this Court had the occasion to rule, thus: We are convinced from the facts that the work of petitioners 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 x x x. xxx xxx xxx

Even if an agent of petitioner should devote all of his time and effort trying to sell its investment plans he would not necessarily be entitled to compensation therefor. His right to compensation depends upon and is measured by the tangible results he produces. Moreover, the collection agent does his work more or less at his own pleasure without a regular daily time frame imposed on him (Investment Planning Corporation of the Philippines v. Social Security System, supra; See also Social Security System v. Court of Appeals, 30 SCRA 210 [1969]). The grounds specified in the contract for termination of the relationship do not support the view that 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. (Investment Planning Corp. of the 279 VOL. 193, JANUARY 24, 1991 279 Singer Sewing Machine Company vs. Drilon Phil. v. Social Security System, supra) The last and most important element of the control test is not satisfied by the terms and conditions of the contracts. There is nothing in the agreement which implies control by the Company not only over the end to be achieved but also over the means and methods in achieving the end (LVN Pictures, Inc. v. Philippine Musicians Guild, 1 SCRA 132 [1961]). The Court finds the contention of the respondents that the union members are employees under Article 280 of the Labor Code to have no basis. The definition that regular employees are those who perform activities which are desirable and necessary for the business of the employer is not determinative in this case. Any agreement may provide that one party shall render services for and in behalf of another for a consideration (no matter how necessary for the latters business) even without being hired as an employee. This is precisely true in the case of an independent contractorship as well as in an agency agreement. The Court agrees with the petitioners argument that Article 280 is not the yardstick for determining the existence of an employment relationship because it merely distinguishes between two kinds of employees, i.e., regular employees and casual employees, for purposes of determining the right of an employee to certain benefits, to join or form a union, or to security of tenure. Article 280 does not apply where the existence of an employment relationship is in dispute. Even Section 8, Rule 8, Book III of the Omnibus Rules Implementing the Labor Code does not apply to this case. Respondents assert that the said provision on job contracting requires that for one to be considered an independent contractor, he must have substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of his business. There is no showing that a collection agent needs tools and machineries. Moreover, the provision must be viewed in relation to Article 106 of the Labor Code which provides: Art. 106. Contractor or subcontractor.Whenever an employer enters into a contract with another person for the performance of the formers work, the employees of the contractor and of the latters

subcontractor, if any, shall be paid in accordance with the provisions 280 280 SUPREME COURT REPORTS ANNOTATED Singer Sewing Machine Company vs. Drilon of this Code. In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. xxx xxx xxx

There is labor-only contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. (p. 20) It can readily be seen that Section 8, Rule 8, Book III and Article 106 are relevant in determining whether the employer is solidarily liable to the employees of an alleged contractor and/or subcontractor for unpaid wages in case it is proven that there is a job-contracting situation. The assumption of jurisdiction by the DOLE over the case is justified as the case was brought on appeal by the petitioner itself which prayed for the reversal of the Order of the MedArbiter on the ground that the union members are not its employees. Hence, the petitioner submitted itself as well as the issue of existence of an employment relationship to the jurisdiction of the DOLE which was faced with a dispute on an application for certification election. The Court finds that since private respondents are not employees of the Company, they are not entitled to the constitutional right to join or form a labor organization for purposes of collective bargaining. Accordingly, there is no constitutional and legal basis for their union to be granted their petition for direct certification. This Court made this pronouncement in La Suerte Cigar and Cigarette Factory v. Director of Bureau of Labor Relations, supra: 281 VOL. 193, JANUARY 24, 1991 281

Singer Sewing Machine Company vs. Drilon x x x The question of whether employer-employee relationship exists is a primordial consideration before extending labor benefits under the workmens compensation, social security, medicare, termination pay and labor relations law. It is important in the determination of who shall be included in a proposed bargaining unit because, it is the sine qua non, the fundamental and essential condition that a bargaining unit be composed of employees. Failure to establish this juridical relationship between the union members and the employer affects the legality of the union itself. It means the ineligibility of the union members to present a petition for certification election as well as to vote therein x x x. (At p. 689) WHEREFORE, the Order dated June 14, 1989 of Med-Arbiter Designate Felix B. Chaguile, Jr., the Resolution and Order of Secretary Franklin M. Drilon dated November 2, 1989 and December 14, 1989, respectively are hereby REVERSED and SET ASIDE. The petition for certification election is ordered dismissed and the temporary restraining order issued by the Court on December 21, 1989 is made permanent. SO ORDERED. Fernan (C.J., Chairman), Feliciano and Bidin, JJ., concur. Resolution and order reversed and set aside. Note.The existence of employer-employee relationship is determined by the following elements, namely, (a) selection and engagement of the employee; (b) payment of wages; (c) power of dismissal; and (d) power to control the employees conduct although the latter is the most important element. (Besa vs. Trajano, 146 SCRA 501.) o0o [Singer Sewing Machine Company vs. Drilon, 193 SCRA 270(1991)]

VOL. 398, FEBRUARY 27, 2003 301 Sy vs. Court of Appeals G.R. No. 142293. February 27, 2003.* VICENTE SY, TRINIDAD PAULINO, 6BS TRUCKING CORPORATION, and SBT1 TRUCKING CORPORATION, petitioners, vs. HON. COURT OF APPEALS and JAIME SAHOT, respondents. Labor Law; Labor Code; Employer-employee Relationship; Elements to determine the existence of an employment relationship.The elements to determine the existence of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control the employees conduct. The most important element is the employers control of the employees conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it. Same; Same; Same; Evidence; If doubt exists between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter.Time and again this Court has said that if doubt exists between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter. Here, we entertain no doubt. Private respondent since the beginning was an employee of, not an industrial partner in, the trucking business. Same; Same; Same; Same; Article 277 (b) of the Labor Code puts the burden of proving that the dismissal of an employee was for a valid or authorized cause on the employer, without distinction whether the employer admits or does not admit the dismissal; Requisites for an employees dismissal to be valid.In termination cases, the burden is upon the employer to show by substantial evidence that the termination was for lawful cause and validly made. Article 277(b) of the Labor Code puts the burden of ______________ * SECOND DIVISION. 1 Sometimes referred to as SB Trucking Corp. in some parts of the records. 302 302 SUPREME COURT REPORTS ANNOTATED Sy vs. Court of Appeals proving that the dismissal of an employee was for a valid or authorized cause on the employer, without distinction whether the employer admits or does not admit the dismissal. For an employees dismissal to be valid, (a) the dismissal must be for a valid cause, and (b) the employee must be afforded due

process. Same; Same; Same; Same; The requirement for a medical certificate under Article 284 of the Labor Code cannot be dispensed with.As this Court stated in Triple Eight Integrated Services, Inc. vs. NLRC, the requirement for a medical certificate under Article 284 of the Labor Code cannot be dispensed with; otherwise, it would sanction the unilateral and arbitrary determination by the employer of the gravity or extent of the employees illness and thus defeat the public policy in the protection of labor. Same; Same; Same; Same; Procedural due process was not observed in the separation of private respondent by the management of the trucking company; Employer required to furnish an employee with two written notices before the latter is dismissed.From the records, it clearly appears that procedural due process was not observed in the separation of private respondent by the management of the trucking company. The employer is required to furnish an employee with two written notices before the latter is dismissed: (1) the notice to apprise the employee of the particular acts or omissions for which his dismissal is sought, which is the equivalent of a charge; and (2) the notice informing the employee of his dismissal, to be issued after the employee has been given reasonable opportunity to answer and to be heard on his defense. PETITION for review on certiorari of a decision of the Court of Appeals. The facts are stated in the opinion of the Court. Albon & Serrano Law Office for petitioners. Cabio Law Offices and Associates for private respondent. QUISUMBING, J.: This petition for review seeks the reversal of the decision2 of the Court of Appeals dated February 29, 2000, in CA-G.R. SP No. 52671, affirming with modification the decision3 of the National ______________ 2 Rollo, pp. 9-17. 3 Id., at pp. 88-95. 303 VOL. 398, FEBRUARY 27, 2003 303 Sy vs. Court of Appeals Labor Relations Commission promulgated on June 20, 1996 in NLRC NCR CA No. 010526-96. Petitioners also pray for the reinstatement of the decision4 of the Labor Arbiter in NLRC NCR Case

No. 00-09-06717-94. Culled from the records are the following facts of this case: Sometime in 1958, private respondent Jaime Sahot5 started working as a truck helper for petitioners family-owned trucking business named Vicente Sy Trucking. In 1965, he became a truck driver of the same family business, renamed T. Paulino Trucking Service, later 6Bs Trucking Corporation in 1985, and thereafter known as SBT Trucking Corporation since 1994. Throughout all these changes in names and for 36 years, private respondent continuously served the trucking business of petitioners. In April 1994, Sahot was already 59 years old. He had been incurring absences as he was suffering from various ailments. Particularly causing him pain was his left thigh, which greatly affected the performance of his task as a driver. He inquired about his medical and retirement benefits with the Social Security System (SSS) on April 25, 1994, but discovered that his premium payments had not been remitted by his employer. Sahot had filed a week-long leave sometime in May 1994. On May 27th, he was medically examined and treated for EOR, presleyopia, herpertensive retinopathy G II (Annexes G-5 and G-3, pp. 48, 104, respectively),6 HPM, UTI, Osteoarthritis (Annex G-4, p. 105),7 and heart enlargement (Annex G, p. 107).8 On said grounds, Belen Paulino of the SBT Trucking Service management told him to file a formal request for extension of his leave. At the end of his week-long absence, Sahot applied for extension of his leave for the whole month of June, 1994. It was at this time when petitioners allegedly threatened to terminate his employment should he refuse to go back to work. At this point, Sahot found himself in a dilemma. He was facing dismissal if he refused to work. But he could not retire on pension ______________ 4 Id., at pp. 145-150. 5 Substituted herein by his wife Editha Sahot, Jaime Sahot died on May 1, 1996, per Certificate of Death, Rollo, p. 241. 6 Rollo, pp. 131, 133. 7 Id., at p. 132. 8 Id., at p. 128. 304 304 SUPREME COURT REPORTS ANNOTATED Sy vs. Court of Appeals

because petitioners never paid his correct SSS premiums. The fact remained he could no longer work as his left thigh hurt abominably. Petitioners ended his dilemma. They carried out their threat and dismissed him from work, effective June 30, 1994. He ended up sick, jobless and penniless. On September 13, 1994, Sahot filed with the NLRC NCR Arbitration Branch, a complaint for illegal dismissal, docketed as NLRC NCR Case No. 00-09-06717-94. He prayed for the recovery of separation pay and attorneys fees against Vicente Sy and Trinidad Paulino-Sy, Belen Paulino, Vicente Sy Trucking, T. Paulino Trucking Service, 6Bs Trucking and SBT Trucking, herein petitioners. For their part, petitioners admitted they had a trucking business in the 1950s but denied employing helpers and drivers. They contend that private respondent was not illegally dismissed as a driver because he was in fact petitioners industrial partner. They add that it was not until the year 1994, when SBT Trucking Corporation was established, and only then did respondent Sahot become an employee of the company, with a monthly salary that reached P4,160.00 at the time of his separation. Petitioners further claimed that sometime prior to June 1, 1994, Sahot went on leave and was not able to report for work for almost seven days. On June 1, 1994, Sahot asked permission to extend his leave of absence until June 30, 1994. It appeared that from the expiration of his leave, private respondent never reported back to work nor did he file an extension of his leave. Instead, he filed the complaint for illegal dismissal against the trucking company and its owners. Petitioners add that due to Sahots refusal to work after the expiration of his authorized leave of absence, he should be deemed to have voluntarily resigned from his work. They contended that Sahot had all the time to extend his leave or at least inform petitioners of his health condition. Lastly, they cited NLRC Case No. RE-4997-76, entitled Manuelito Jimenez, et al. vs. T. Paulino Trucking Service, as a defense in view of the alleged similarity in the factual milieu and issues of said case to that of Sahots, hence they are in pan materia and Sahots complaint ought also to be dismissed. The NLRC NCR Arbitration Branch, through Labor Arbiter Ariel Cadiente Santos, ruled that there was no illegal dismissal in 305 VOL. 398, FEBRUARY 27, 2003 305 Sy vs. Court of Appeals Sahots case. Private respondent had failed to report to work. Moreover, said the Labor Arbiter, petitioners and private respondent were industrial partners before January 1994. The Labor Arbiter concluded by ordering petitioners to pay financial assistance of P15,000 to Sahot for having served the company as a regular employee since January 1994 only. On appeal, the National Labor Relations Commission modified the judgment of the Labor Arbiter. It declared that private respondent was an employee, not an industrial partner, since the start. Private respondent Sahot did not abandon his job but his employment was terminated on account of his illness, pursuant to Article 2849 of the Labor Code. Accordingly, the NLRC ordered petitioners to pay private

respondent separation pay in the amount of P60,320.00, at the rate of P2,080.00 per year for 29 years of service. Petitioners assailed the decision of the NLRC before the Court of Appeals. In its decision dated February 29, 2000, the appellate court affirmed with modification the judgment of the NLRC. It held that private respondent was indeed an employee of petitioners since 1958. It also increased the amount of separation pay awarded to private respondent to P74,880, computed at the rate of P2,080 per year for 36 years of service from 1958 to 1994. It decreed: WHEREFORE, the assailed decision is hereby AFFIRMED with MODIFICATION. SB Trucking Corporation is hereby directed to pay complainant Jaime Sahot the sum of SEVENTY-FOUR THOUSAND EIGHT HUNDRED EIGHTY (P74,880.00) PESOS as and for his separation pay.10 Hence, the instant petition anchored on the following contentions: ______________ 9 ART. 284. Disease as ground for termination.An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his co-employees: Provided, That he is paid separation pay equivalent to at least one (1) month salary or to one-half month salary for every year of service, whichever is greater, a fraction of at least six (6) months being considered as one (1) whole year. 10 Rollo, p. 17. 306 306 SUPREME COURT REPORTS ANNOTATED Sy vs. Court of Appeals I RESPONDENT COURT OF APPEALS IN PROMULGATING THE QUESTION[ED] DECISION AFFIRMING WITH MODIFICATION THE DECISION OF NATIONAL LABOR RELATIONS COMMISSION DECIDED NOT IN ACCORD WITH LAW AND PUT AT NAUGHT ARTICLE 402 OF THE CIVIL CODE.11 II RESPONDENT COURT OF APPEALS VIOLATED SUPREME COURT RULING THAT THE NATIONAL LABOR RELATIONS COMMISSION IS BOUND BY THE FACTUAL FINDINGS OF THE LABOR ARBITER AS THE LATTER WAS IN A BETTER POSITION TO OBSERVE THE DEMEANOR AND DEPORTMENT OF THE WITNESSES IN THE CASE OF ASSOCIATION OF INDEPENDENT UNIONS IN THE PHILIPPINES VERSUS NATIONAL CAPITAL REGION (305

SCRA 233).12 III PRIVATE RESPONDENT WAS NOT DISMISS[ED] BY RESPONDENT SBT TRUCKING CORPORATION.13 Three issues are to be resolved: (1) Whether or not an employer-employee relationship existed between petitioners and respondent Sahot; (2) Whether or not there was valid dismissal; and (3) Whether or not respondent Sahot is entitled to separation pay. Crucial to the resolution of this case is the determination of the first issue. Before a case for illegal dismissal can prosper, an employer-employee relationship must first be established.14 Petitioners invoke the decision of the Labor Arbiter Ariel Cadiente Santos which found that respondent Sahot was not an employee but was in fact, petitioners industrial partner.15 It is con______________ 11 Id., at p. 32. 12 Id., at p. 37. 13 Id., at p. 42. 14 Palomado v. National Labor Relations Commission, 257 SCRA 680, 695 (1996). 15 The Labor Arbiter based this pronouncement on alleged res judicata. It appears that a decision was rendered in another case, NLRC Case No. RE 4997-76, where Labor Arbiter Crescencio J. Ramos declared that other drivers also in the same company, were declared to be industrial 307 VOL. 398, FEBRUARY 27, 2003 307 Sy vs. Court of Appeals tended that it was the Labor Arbiter who heard the case and had the opportunity to observe the demeanor and deportment of the parties. The same conclusion, aver petitioners, is supported by substantial evidence.16 Moreover, it is argued that the findings of fact of the Labor Arbiter was wrongly overturned by the NLRC when the latter made the following pronouncement: We agree with complainant that there was error committed by the Labor Arbiter when he concluded that complainant was an industrial partner prior to 1994. A computation of the age of complainant shows that he was only twenty-three (23) years when he started working with respondent as truck helper. How can we entertain in our mind that a twenty-three (23) year old man, working as a truck

helper, be considered an industrial partner. Hence we rule that complainant was only an employee, not a partner of respondents from the time complainant started working for respondent.17 Because the Court of Appeals also found that an employer-employee relationship existed, petitioners aver that the appellate courts decision gives an imprimatur to the illegal finding and conclusion of the NLRC. Private respondent, for his part, denies that he was ever an industrial partner of petitioners. There was no written agreement, no proof that he received a share in petitioners profits, nor was there anything to show he had any participation with respect to the running of the business.18 The elements to determine the existence of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control the employees conduct. The most important element is the employers control of the employees conduct, ______________ partners and not employees. Labor Arbiter Ariel Cadiente Santos adopted said findings. See Rollo, p. 114. 16 Consisting of the position paper of Petitioners and of a decision in a similar case decided by Labor Arbiter Crescencio J. Ramos in NLRC Case No. RG-4997-76, entitled Manuelito Jimenez, et al. versus T. Paulino Trucking Service. See Rollo, pp. 35, 112-121. 17 Rollo, pp. 91-92. 18 Id., at p. 236. 308 308 SUPREME COURT REPORTS ANNOTATED Sy vs. Court of Appeals not only as to the result of the work to be done, but also as to the means and methods to accomplish it.19 As found by the appellate court, petitioners owned and operated a trucking business since the 1950s and by their own allegations, they determined private respondents wages and rest day.20 Records of the case show that private respondent actually engaged in work as an employee. During the entire course of his employment he did not have the freedom to determine where he would go, what he would do, and how he would do it. He merely followed instructions of petitioners and was content to do so, as long as he was paid his wages. Indeed, said the CA, private respondent had worked as a truck helper and driver of petitioners not for his own pleasure but under the latters control.

Article 176721 of the Civil Code states that in a contract of partnership two or more persons bind themselves to contribute money, property or industry to a common fund, with the intention of dividing the profits among themselves.22 Not one of these circumstances is present in this case. No written agreement exists to prove the partnership between the parties. Private respondent did not contribute money, property or industry for the purpose of engaging in the supposed business. There is no proof that he was receiving a share in the profits as a matter of course, during the period when the trucking business was under operation. Neither is there any proof that he had actively participated in the management, administration and adoption of policies of the business. Thus, the NLRC and the CA did not err in reversing the finding of ______________ 19 Caurdanetaan Piece Workers Union v. Laguesma, 286 SCRA 401, 420 (1998); Maraguinot, Jr. v. NLRC, 284 SCRA 539, 552 (1998); AFP Mutual Benefit Association, Inc. v. NLRC, 267 SCRA 47, 57 (1997); Aurora Land Projects Corp. v. NLRC, 266 SCRA 48, 59 (1997); Encyclopedia Britannica (Phils.), Inc. v. NLRC, 264 SCRA 1, 6-7 (1996). 20 Rollo, p. 54. 21 ART. 1767. By the contract of partnership two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves. Two or more persons may also form a partnership for the exercise of a profession. 22 Afisco Insurance Corporation v. Court of Appeals, 302 SCRA 1, 13 (1999). 309 VOL. 398, FEBRUARY 27, 2003 309 Sy vs. Court of Appeals the Labor Arbiter that private respondent was an industrial partner from 1958 to 1994. On this point, we affirm the findings of the appellate court and the NLRC. Private respondent Jaime Sahot was not an industrial partner but an employee of petitioners from 1958 to 1994. The existence of an employer-employee relationship is ultimately a question of fact23 and the findings thereon by the NLRC, as affirmed by the Court of Appeals, deserve not only respect but finality when supported by substantial evidence. Substantial evidence is such amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.24 Time and again this Court has said that if doubt exists between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter.25 Here, we entertain no doubt. Private respondent since the beginning was an employee of, not an industrial partner in, the trucking business. Coming now to the second issue, was private respondent validly dismissed by petitioners?

Petitioners contend that it was private respondent who refused to go back to work. The decision of the Labor Arbiter pointed out that during the conciliation proceedings, petitioners requested respondent Sahot to report back for work. However, in the same proceedings, Sahot stated that he was no longer fit to continue working, and instead he demanded separation pay. Petitioners then retorted that if Sahot did not like to work as a driver anymore, then he could be given a job that was less strenuous, such as working as a checker. However, Sahot declined that suggestion. Based on the foregoing recitals, petitioners assert that it is clear that Sahot was not dismissed but it was of his own volition that he did not report for work anymore. In his decision, the Labor Arbiter concluded that: ______________ 23 Santos v. National Labor Relations Commission, 293 SCRA 113, 125 (1998). 24 Triple Eight Integrated Services, Inc. v. NLRC, 299 SCRA 608, 614 (1998). 25 Id., at pp. 614-15. 310 310 SUPREME COURT REPORTS ANNOTATED Sy vs. Court of Appeals While it may be true that respondents insisted that complainant continue working with respondents despite his alleged illness, there is no direct evidence that will prove that complainants illness prevents or incapacitates him from performing the function of a driver. The fact remains that complainant suddenly stopped working due to boredom or otherwise when he refused to work as a checker which certainly is a much less strenuous job than a driver.26 But dealing the Labor Arbiter a reversal on this score the NLRC, concurred in by the Court of Appeals, held that: While it was very obvious that complainant did not have any intention to report back to work due to his illness which incapacitated him to perform his job, such intention cannot be construed to be an abandonment. Instead, the same should have been considered as one of those falling under the just causes of terminating an employment. The insistence of respondent in making complainant work did not change the scenario. It is worthy to note that respondent is engaged in the trucking business where physical strength is of utmost requirement (sic). Complainant started working with respondent as truck helper at age twentythree (23), then as truck driver since 1965. Complainant was already fifty-nine (59) when the complaint was filed and suffering from various illness triggered by his work and age.

x x x27 In termination cases, the burden is upon the employer to show by substantial evidence that the termination was for lawful cause and validly made.28 Article 277(b) of the Labor Code puts the burden of proving that the dismissal of an employee was for a valid or authorized cause on the employer, without distinction whether the employer admits or does not admit the dismissal.29 For an employees dismissal to be valid, (a) the dismissal must be for a valid cause, and (b) the employee must be afforded due process.30 Article 284 of the Labor Code authorizes an employer to terminate an employee on the ground of disease, viz.: ______________ 26 Rollo, p. 149. 27 Id., at p. 93. 28 Supra, note 24 at p. 615. 29 Sevillana v. I.T. (International) Corp., 356 SCRA 451, 466 (2001). 30 Id., at p. 467. 311 VOL. 398, FEBRUARY 27, 2003 311 Sy vs. Court of Appeals Art. 284. Disease as a ground for terminationAn employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or prejudicial to his health as well as the health of his co-employees: x x x However, in order to validly terminate employment on this ground, Book VI, Rule I, Section 8 of the Omnibus Implementing Rules of the Labor Code requires: Sec. 8. Disease as a ground for dismissalWhere the employee suffers from a disease and his continued employment is prohibited by law or prejudicial to his health or to the health of his coemployees, the employer shall not terminate his employment unless there is a certification by competent public health authority that the disease is of such nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical treatment. If the disease or ailment can be cured within the period, the employer shall not terminate the employee but shall ask the employee to take a leave. The employer shall reinstate such employee to his former position immediately upon the restoration of his normal health. (Italics supplied).

As this Court stated in Triple Eight Integrated Services, Inc. vs. NLRC,31 the requirement for a medical certificate under Article 284 of the Labor Code cannot be dispensed with; otherwise, it would sanction the unilateral and arbitrary determination by the employer of the gravity or extent of the employees illness and thus defeat the public policy in the protection of labor. In the case at bar, the employer clearly did not comply with the medical certificate requirement before Sahots dismissal was effected. In the same case of Sevillana vs. I.T. (International) Corp., we ruled: Since the burden of proving the validity of the dismissal of the employee rests on the employer, the latter should likewise bear the burden of showing that the requisites for a valid dismissal due to a disease have been complied with. In the absence of the required certification by a competent public health authority, this Court has ruled against the validity of the employees dismissal. It is therefore incumbent upon the private respondents to prove by the quantum of evidence required by law that petitioner was not dismissed, or if dismissed, that the dismissal was not ille______________ 31 Supra, note 24 at p. 618. 312 312 SUPREME COURT REPORTS ANNOTATED Sy vs. Court of Appeals gal; otherwise, the dismissal would be unjustified. This Court will not sanction a dismissal premised on mere conjectures and suspicions, the evidence must be substantial and not arbitrary and must be founded on clearly established facts sufficient to warrant his separation from work.32 In addition, we must likewise determine if the procedural aspect of due process had been complied with by the employer. From the records, it clearly appears that procedural due process was not observed in the separation of private respondent by the management of the trucking company. The employer is required to furnish an employee with two written notices before the latter is dismissed: (1) the notice to apprise the employee of the particular acts or omissions for which his dismissal is sought, which is the equivalent of a charge; and (2) the notice informing the employee of his dismissal, to be issued after the employee has been given reasonable opportunity to answer and to be heard on his defense.33 These, the petitioners failed to do, even only for record purposes. What management did was to threaten the employee with dismissal, then actually implement the threat when the occasion presented itself because of private respondents painful left thigh. All told, both the substantive and procedural aspects of due process were violated. Clearly, therefore, Sahots dismissal is tainted with invalidity. On the last issue, as held by the Court of Appeals, respondent Jaime Sahot is entitled to separation pay.

The law is clear on the matter. An employee who is terminated because of disease is entitled to separation pay equivalent to at least one month salary or to one-half month salary for every year of service, whichever is greater x x x.34 Following the formula set in Art. 284 of the Labor Code, his separation pay was computed by the appellate court at P2,080 times 36 years (1958 to 1994) or P74,880. We agree with the computation, after noting that his last monthly salary was P4,160.00 so that one-half thereof is P2,080.00. Finding no reversible error nor grave abuse of discretion on the part of appellate court, we are constrained to sustain its decision. To avoid further delay in the payment due the separated worker, whose claim was ______________ 32 Supra, note 29 at 468. 33 Tiu v. NLRC, 251 SCRA 540, 551 (1992). 34 Labor Code, Art. 284, see note 9, supra. 313 VOL. 398, FEBRUARY 27, 2003 313 Sy vs. Court of Appeals filed way back in 1994, this decision is immediately executory. Otherwise, six percent (6%) interest per annum should be charged thereon, for any delay, pursuant to provisions of Civil Code. WHEREFORE, the petition is DENIED and the decision of the Court of Appeals dated February 29, 2000 is AFFIRMED. Petitioners must pay private respondent Jaime Sahot his separation pay for 36 years of service at the rate of one-half monthly pay for every year of service, amounting to P74,880.00, with interest of six per centum (6%) per annum from finality of this decision until fully paid. Costs against petitioners. SO ORDERED. Bellosillo (Chairman), Mendoza and Callejo, Sr., JJ., concur. Austria-Martinez, J., No part. Ponente in CA. Petition denied, judgment affirmed. Note.The power of control is the most decisive factor in determining the existence of an employeremployee relationship. (Religious of the Virgin Mary vs. National Labor Relations Commission, 316 SCRA 614 [1999]) o0o [Sy vs. Court of Appeals, 398 SCRA 301(2003)]

VOL. 240, JANUARY 17, 1995 139 Felix vs. Buenaseda G.R. No. 109704. January 17, 1995.* ALFREDO B. FELIX, petitioner, vs. DR. BRIGIDA BUENASEDA, in her capacity as Director, and ISABELO BANEZ, JR. in his capacity as Administrator, both of the National Center for Mental Health, and the CIVIL SERVICE COMMISSION, respondents. Medical Profession; Appointments; Security of Tenure; A residency or resident physician position in a medical specialty is never a permanent one, since residency connotes training and temporary status. The patent absurdity of petitioners posture is readily obvious. A residency or resident physician position in a medical specialty is never a permanent one. Residency connotes training and temporary status. It is the step taken by a physician right after post-graduate internship (and after _______________ * EN BANC. 140 140 SUPREME COURT REPORTS ANNOTATED Felix vs. Buenaseda hurdling the Medical Licensure Examinations) prior to his recognition as a specialist or sub-specialist in a given field. Same; Same; Same; The upward movement from residency to specialist rank, institutionalized in the residency training process, guarantees minimum standards and skills and ensures that the physician claiming to be a specialist will not be set loose on the community without the basic knowledge and skills of his specialty.A physician who desires to specialize in Cardiology takes a required three-year accredited residency in Internal Medicine (four years in DOH hospitals) and moves on to a two or three-year fellowship or residency in Cardiology before he is allowed to take the specialty examinations given by the appropriate accrediting college. In a similar manner, the accredited Psychiatrist goes through the same stepladder process which culminates in his recognition as a fellow or diplomate (or both) of the Psychiatry Specialty Board. This upward movement from residency to specialist rank, institutionalized in the residency training process, guarantees minimum standards and skills and ensures that the physician claiming to be a specialist will not be set loose on the community without the basic knowledge and skills of his specialty. Because acceptance and promotion requirements are stringent, competitive, and based on merit, acceptance to a first year residency program is no guaranty that the physician will complete the program. Attrition rates are high. Some programs are pyramidal. Promotion to the next post-graduate year is based on merit and performance

determined by periodic evaluations and examinations of knowledge, skills and bedside manner. Under this system, residents, specially those in university teaching hospitals enjoy their right to security of tenure only to the extent that they periodically make the grade, making the situation quite unique as far as physicians undergoing post-graduate residencies and fellowships are concerned. Same; Same; Same; The nature of the contracts of resident physicians meets traditional tests for determining employer-employee relationships, but because the focus of residency is training, they are neither here nor there.While physicians (or consultants) of specialist rank are not subject to the same stringent evaluation procedures, specialty societies require continuing education as a requirement for accreditation in good standing, in addition to peer review processes based on performance, mortality and morbidity audits, feedback from residents, interns and medical students and research output. The nature of the contracts of resident physicians meet traditional tests for determining employer-employee relationships, but because the focus of residency is training, they are neither here nor there. Moreover, stringent standards and requirements for renewal of specialist-rank positions or 141 VOL. 240, JANUARY 17, 1995 141 Felix vs. Buenaseda for promotion to the next post-graduate residency year are necessary because lives are ultimately at stake. Same; Same; Same; Reorganizations; A Medical Specialists insistence on being reverted back to the status quo prior to the reorganizations made pursuant to Executive Order No. 119as a senior resident physicianwould be akin to a college student asking to be sent back to high school and staying there. Petitioners insistence on being reverted back to the status quo prior to the reorganizations made pursuant to Executive Order No. 119 would therefore be akin to a college student asking to be sent back to high school and staying there. From the position of senior resident physician, which he held at the time of the government reorganization, the next logical step in the stepladder process was obviously his promotion to the rank of Medical Specialist I, a position which he apparently accepted not only because of the increase in salary and rank but because of the prestige and status which the promotion conferred upon him in the medical community. Such status, however, clearly carried with it certain professional responsibilities including the responsibility of keeping up with the minimum requirements of specialty rank, the responsibility of keeping abreast with current knowledge in his specialty and in Medicine in general, and the responsibility of completing board certification requirements within a reasonable period of time, The evaluation made by petitioners peers and superiors clearly showed that he was deficient in a lot of areas, in addition to the fact that at the time of his non-renewal, he was not even board-certified. Same; Same; Same; Same; Estoppel; An employee who neither pursued nor mentioned his objections to his change of status from permanent senior resident physician to temporary senior resident physician is estopped from insisting upon a right or claim which he had plainly abandoned when he enthusiastically accepted the promotion as Medical Specialist I (Temporary).We lay stress to the fact that petitioner made no attempt to oppose earlier renewals of his temporary Specialist I contracts in

1989 and 1990, clearly demonstrating his acquiescence toif not his unqualified acceptance ofthe promotion (albeit of a temporary nature) made in 1988. Whatever objections petitioner had against the earlier change from the status of permanent senior resident physician to temporary senior resident physician were neither pursued nor mentioned at or after his designation as Medical Specialist I (Temporary). He is therefore estopped from insisting upon a right or claim which he had plainly abandoned when he, from all indications, enthusiastically accepted the promotion, His negligence to assert his claim within a reasonable time, coupled with his failure to 142 142 SUPREME COURT REPORTS ANNOTATED Felix vs. Buenaseda repudiate his promotion to a temporary position, warrants a presumption, in the words of this Court in Tijam vs. Sibonghanoy, that he either abandoned (his claim) or declined to assert it. Same; Same; Same; Same; Same; Civil Service Law; Weighty reasons of public policy and convenience demand that any claim to any position in the civil service, permanent, temporary or otherwise, or any claim to a violation of the constitutional provision on security of tenure be made within a reasonable period of time.There are weighty reasons of public policy and convenience which demand that any claim to any position in the civil service, permanent, temporary or otherwise, or any claim to a violation of the constitutional provision on security of tenure be made within a reasonable period of time. An assurance of some degree of stability in the civil service is necessary in order to avoid needless disruptions in the conduct of public business. Delays in the statement of a right to any position are strongly discouraged. Same; Same; Same; Same; Same; Same; Laches; The essence of laches is the failure or neglect, for an unreasonable and unexplained length of time to do that which, by exercising due diligence, could or should have been done earlier.In the same token, the failure to assert a claim or the voluntary acceptance of another position in government, obviously without reservation, leads to a presumption that the civil servant has either given up his claim or has already settled into the new position. This is the essence of laches which is the failure or neglect, for an unreasonable and unexplained length of time to do that which, by exercising due diligence, could or should have been done earlier; it is the negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. Same; Same; Same; Same; Same; The change in designation from permanent resident physician to temporary resident physician was necessary to rectify a ludicrous situation whereby some government resident physicians were erroneously being classified as permanent resident physicians in spite of the inherently temporary nature of the designation.ln the specific case of the change in designation from permanent resident physician to temporary resident physician, a change was necessary, overall, to rectify a ludicrous situation whereby some government resident physicians were erroneously being classified as permanent resident physicians in spite of the inherently temporary nature of the designation.

143 VOL. 240, JANUARY 17, 1995 143 Felix vs. Buenaseda Same; Same; Same; Same; Same; The patient who consults with a physician of specialist rank should at least be safe in the assumption that the government physician of specialist rank: 1) has completed all necessary requirements of specialist training in his field; and 2) has been board-certified.The attempts by the Department of Health not only to streamline these positions but to make them conform to current standards of specialty practice is a step in a positive direction. The patient who consults with a physician of specialist rank should at least be safe in the assumption that the government physician of specialist rank: 1.) has completed all necessary requirements of specialist training in his field; and 2.) has been board certified. These fundamental requirements at least assure the public at large that those in government centers who claim to be specialists in specific areas of Medicine possess the minimum knowledge and skills required to fulfill that first and foremost maxim, embodied in the Hippocratic Oath, that they do their patients no harm. Primium non nocere. Same; Same; Same; Same; Same; Non-renewal of an appointment for a definite and renewable period does not involve dismissal but an expiration of term.Finally, it is crystal clear, from the facts of the case at bench, that the petitioner accepted a temporary appointment (Medical Specialist I). As respondent Civil Service Commission has correctly pointed out, the appointment was for a definite and renewable period which, when it was not renewed, did not involve a dismissal but an expiration of the petitioners term. PETITION for review of a resolution of the Civil Service Commission. The facts are stated in the opinion of the Court. Agustin J. Guillermo for petitioner. KAPUNAN, J.: Taking advantage of this Courts decisions involving the removal of various civil servants pursuant to the general reorganization of the government after the EDSA Revolution, petitioner assails his dismissal as Medical Specialist I of the National Center for Mental Health (formerly the National Mental Hospital) as illegal and violative of the constitutional provision on security of tenure allegedly because his removal was made pursuant to an invalid reorganization. 144 144 SUPREME COURT REPORTS ANNOTATED

Felix us. Buenaseda In Mendoza vs. Quisumbing1 and the consolidated cases involving the reorganization of various government departments and agencies we held: We are constrained to set aside the reorganizations embodied in these consolidated petitions because the heads of departments and agencies concerned have chosen to rely on their own concepts of unlimited discretion and progressive ideas on reorganization instead of showing that they have faithfully complied with the clear letter and spirit of the two Constitutions and the statutes affecting reorganization.2 In De Guzman vs. CSC,3 we upheld the principle, laid down by Justice J.B.L. Reyes in Cruz vs. Primicias4 that a valid abolition of an office neither results in a separation or removal, likewise upholding the corollary principle that if the abolition is void, the incumbent is deemed never to have ceased to hold office, in sustaining therein petitioners right to the position she held prior to the reorganization. The instant petition on its face turns on similar facts and issues, which is. that petitioners removal from a permanent position in the National Center for Mental Health as a result of the reorganization of the Department of Health was void. However, a closer look at the facts surrounding the instant petition leads us to a different conclusion. After passing the Physicians Licensure Examinations given by the Professional Regulation Commission in June of 1979, petitioner, Dr. Alfredo B. Felix, joined the National Center for Mental Health (then the National Mental Hospital) on May 26, 1980 as a Resident Physician with an annual salary of P15,264.00.5 In August of 1983, he was promoted to the position of Senior _______________ 1 186 SCRA 108 (1990). In these consolidated cases various civil servants adversely affected by the government wide reorganization challenged the validity of reorganizations of various government departments and agencies pursuant to the mandate granted by President Corazon Aquinos proclamation No. 1. See also Manalo v. CSC, infra. 2 Id., at 152153. 3 G.R. No. 106692, March 11, 1994. 4 Also cited in Mendoza, supra at 138. 5 Rollo, p. 42; Annex F. 145 VOL. 240, JANUARY 17, 1995 145

Felix vs. Buenaseda Resident Physician6 a position he held until the Ministry of Health reorganized the National Center for Mental Health (NCMH) in January of 1988, pursuant to Executive Order No. 119. Under the reorganization, petitioner was appointed to the position of Senior Resident Physician in a temporary capacity immediately after he and other employees of the NCMH allegedly tendered their courtesy resignations to the Secretary of Health.7 In August of 1988, petitioner was promoted to the position of Medical Specialist I (Temporary Status), which position was renewed the following year.8 In 1988, the Department of Health issued Department Order No. 347 which required board certification as a prerequisite for renewal of specialist positions in various medical centers, hospitals and agencies of the said department. Specifically, Department Order No. 347 provided that specialists working in various hospitals and branches of the Department of Health be recognized as Fellows of their respective specialty societies and/or Diplomates of their specialty boards or both. The Order was issued for the purpose of upgrading the quality of specialists in DOH hospitals by requiring them to pass rigorous theoretical and clinical (bedside) examinations given by recognized specialty boards, in keeping up with international standards of medical practice. Upon representation of the Chiefs of Hospitals of various government hospitals and medical centers, (then) Secretary of Health Alfredo Bengzon issued Department Order 478, series of 1991 amending Sec. 4 of Department Order No. 347 providing for an extension of appointments of Medical Specialist positions in cases where the termination of medical specialists who failed to meet the requirement for board certification might result in the disruption of hospital services. Department Order No. 478 issued the following guidelines: 1. As a general policy, the provision of Department Order No. 347, Sec. 4 shall apply unless the Chief of Hospital requests for _______________ 6 Id., at p. 43; Annex G. 7 Id., at p. 5. 8 Id. 146 146 SUPREME COURT REPORTS ANNOTATED Felix vs. Buenaseda exemption, certifies that its application will result in the disruption of the delivery service together with the steps taken to implement Section 4, and submit a plan of action, lasting no more than 3-years, for the eventual phase out of non-Board certified medical specialists.

2. Medical specialists recommended for extension of appointment shall meet the following minimum criteria: a. DOH medical specialist certified b. Has been in the service of the Department at least three (3) years prior to December 1988 c. Has applied or taken the specialty board examination. 3. Each recommendation for extension of appointment must be individually justified to show not only the qualification of the recommendee, but also what steps he has taken to be board certified. 4. Recommendation for extension of appointment shall be evaluated on a case to case basis. 5. As amended, the other provisions of Department Order No. 34/s. 1988 stands. Petitioner was one of the hundreds of government medical specialists who would have been adversely affected by Department Order No. 347 since he was not yet accredited by the Psychiatry Specialty Board. Under Department Order No. 478, extension of his appointment remained subject to the guidelines set by the said department order. On August 22, 1991, after reviewing petitioners service record and performance, the Medical Credentials Committee of the National Center for Mental Health recommended non-renewal of his appointment as Medical Specialist I, informing him of its decision on August 22,1991. He was, however, allowed to continue in the service, and receive his salary, allowances and other benefits even after being informed of the termination of his appointment. On November 25, 1991, an emergency meeting of the Chiefs of Service was held to discuss, among other matters, the petitioners case. In the said meeting Dr. Vismindo de Grecia, petitioners immediate supervisor, pointed out petitioners poor performance, frequent tardiness and inflexibility as among the factors responsible for the recommendation not to renew his appointment.9 With one exception, other department heads present in the _______________ 9 Id., at p. 100, Annex 2. 147 VOL. 240, JANUARY 17, 1995 147 Felix vs. Buenaseda meeting expressed the same opinion,10 and the overwhelming concensus was for non-renewal. The matter was thereafter referred to the Civil Service Commission, which on February 28, 1992 ruled that the temporary appointment (of petitioner) as Medical Specialist I can be terminated at any time . . . and that [a]ny renewal of such appointment is within the discretion of the appointing authority.11 Consequently, in a memorandum dated March 25, 1992 petitioner was advised by hospital authorities to vacate his cottage since he was no longer entitled to accommodation. Refusing to comply with said memorandum petitioner filed a petition with the Merit System Protection Board (MSPB) complaining about the alleged harassment by respondents and questioning the non-renewal of his appointment. In a Decision rendered on July 29, 1992, the (MSPB) dismissed petitioners complaint for lack of merit,

finding that: As an apparent incident of the power to appoint, the renewal of a temporary appointment upon or after its expiration is a matter largely addressed to the sound discretion of the appointing authority. In this case, there is no dispute that Complainant was a temporary employee and his appointment expired on August 22, 1991. This being the case, his re-appointment to his former position or the renewal of his temporary appointment would be determined solely by the proper appointing authority who is the Secretary, Department of Health upon the favorable recommendation of the Chief of Hospital III, NCMH. The Supreme Court in the case of Central Bank vs. Civil Service Commission, G.R. Nos. 8045556 dated April 10, 1989, held as follows: The power of appointment is essentially a political question involving considerations of wisdom which only the appointing authority can decide. In this light, Complainant therefore, has no basis in law to assail the non-renewal of his expired temporary appointment much less invoke the aid of this board for that purpose since this Board cannot substitute its judgment to that of the appointing authority nor direct the latter to issue an appointment in the complainants favor. Regarding the alleged Department Order secured by the complainant from the Department of Health (DOH), the Board finds the same inconsequential. Said Department Order merely allowed the extension of tenure of Medical Specialist I for a certain period but does _______________ 10 Id., at 100104. 11 CSC Resolution No. 92347, February 28, 1992. 148 148 SUPREME COURT REPORTS ANNOTATED Felix vs. Buenaseda not mandate the renewal of the expired appointment. The Board likewise finds as baseless complainants allegation of harassment. It should be noted that the subsistence, quarters and laundry benefits provided to the Complainant were in connection with his employment with the NCMH. Now that his employment ties with the said agency are severed, he eventually loses his right to the said benefits. Hence, the Hospital Management has the right to take steps to prevent him from the continuous enjoyment thereof, including the occupancy of the said cottage, after his cessation from office. In sum, the actuations of Dr. Buenaseda and Lt. Col. Balez are not shown to have been tainted with any legal infirmity, thus rendering as baseless, this instant complaint.

Said decision was appealed to the Civil Service Commission which dismissed the same in its Resolution dated December 1, 1992. Motion for Reconsideration was denied in CSC Resolution No. 93677 dated February 3, 1993, hence this appeal, in which petitioner interposes the following assignments of errors: I THE PUBLIC RESPONDENT CIVIL SERVICE COMMISSION ERRED IN HOLDING THAT BY SUBMITTING HIS COURTESY RESIGNATION AND ACCEPTING HIS TEMPORARY APPOINTMENT PETITIONER HAD EFFECTIVELY DIVESTED HIMSELF OF HIS SECURITY OF TENURE, CONSIDERING THE CIRCUMSTANCES OF SUCH COURTESY RESIGNATION AND ACCEPTANCE OF APPOINTMENT. II THE RESPONDENT COMMISSION ERRED IN NOT DECLARING THAT THE CONVERSION OF THE PERMANENT APPOINTMENT OF PETITIONER TO TEMPORARY WAS DONE IN BAD FAITH IN THE GUISE OF REORGANIZATION AND THUS INVALID, BEING VIOLATIVE OF THE PETITIONERS RIGHT OF SECURITY OF TENURE. Responding to the instant petition,12 the Solicitor General contends that 1) the petitioners temporary appointments after _______________ 12 See, COMMENT, p. 77, Rollo. 149 VOL. 240, JANUARY 17, 1995 149 Felix vs. Buenaseda the reorganization pursuant to E.O. No. 119 were valid and did not violate his constitutional right to security of tenure;13 2) petitioner is guilty of estoppel or laches, having acquiesced to such temporary appointments from 1988 to 1991;14 and 3) the respondent Commission did not act with grave abuse of discretion in affirming the petitioners non-renewal of his appointment at the National Center for Mental Health.15 We agree. The patent absurdity of petitioners posture is readily obvious. A residency or resident physician position in a medical specialty is never a permanent one. Residency connotes training and temporary status. It is the step taken by a physician right after post-graduate internship (and after hurdling the Medical Licensure Examinations) prior to his recognition as a specialist or sub-specialist in a given

field. A physician who desires to specialize in Cardiology takes a required three-year accredited residency in Internal Medicine (four years in DOH hospitals) and moves on to a two or threeyear fellowship or residency in Cardiology before he is allowed to take the specialty examinations given by the appropriate accrediting college. In a similar manner, the accredited Psychiatrist goes through the same stepladder process which culminates in his recognition as a fellow or diplomate (or both) of the Psychiatry Specialty Board.16 This upward movement from residency to specialist rank, institutionalized in the residency training process, guarantees minimum standards and skills and ensures that the physician claiming to be a specialist will not be set loose on the community without the basic knowledge and skills of his specialty, Because acceptance and promotion requirements are stringent, competitive, and based on merit, acceptance to a first year residency program is no guaranty that _______________ 13 Id., at 85. 14 Id., at 87. 15 Id., at 91. 16 In most government teaching hospitals, the old and virtually permanent resident-physician/seniorresident physician classification or staffing system has given way to a stepladder program (patterned after residency programs in the United States) where resident physicians move on from one postgraduate residency year to the next. 150 150 SUPREME COURT REPORTS ANNOTATED Felix vs. Buenaseda the physician will complete the program. Attrition rates are high. Some programs are pyramidal. Promotion to the next postgraduate year is based on merit and performance determined by periodic evaluations and examinations of knowledge, skills and bedside manner.17 Under this system, residents, specially those in university teaching hospitals18 enjoy their right to security of tenure only to the extent that they periodically make the grade, making the situation quite unique as far as physicians undergoing post-graduate residencies and fellowships are concerned. While physicians (or consultants) of specialist rank are not subject to the same stringent evaluation procedures,19 specialty societies require continuing education as a requirement for accreditation in good standing, in addition to peer review processes based on performance, mortality and morbidity audits, feedback from residents, interns and medical students and research output. _______________

17 In fact, some specialties like the Philippine College of Physicians (through its Specialty Board of Internal Medicine) have began to require residents to take accreditation examinations conducted by the college every year as a requirement for promotion. Program accreditation of residency programs is based on passing/attrition rates in these examinations, providing a steady impetus for maintaining standards set by the college. 18 The principal university teaching hospitals in Metro Manila include the UP-PGH, the UST Medical Center, the UERMMMC Hospital and the FEUNRMF. Government hospitals with a reputation for exacting residency programs include the Philippine Heart Center for Asia, the National Kidney Institute, and the National Orthopedic Hospital. Their reputations in this area are based on the consistent performance of their residents in various specialty board examinations, the quality of training specialists and consultants, and research output. 19 With the exception of the Department of Health, which has both permanent and temporary specialists on either a part-time or fulltime basis, consultants in most of the large hospitals and medical centers are not really employees of these hospitals. Large medical centers like the MCM, Makati Medical Center, etc., require purchase of a minimum number of stocks (usually exceeding P 100,000.00) as a prerequisite for attaining attending physician status. Acceptance is, moreover, highly selective, based on the quality of the applicants residency training program and school graduated from. Board certification is a universal requirement. In 1988, the DOH made board certification a requirement for renewal of specialist positions. 151 VOL. 240, JANUARY 17, 1995 151 Felix vs. Buenaseda The nature of the contracts of resident physicians meet traditional tests for determining employeremployee relationships, but because the focus of residency is training, they are neither here nor there. Moreover, stringent standards and requirements for renewal of specialist-rank positions or for promotion to the next post-graduate residency year are necessary because lives are ultimately at stake. Petitioners insistence on being reverted back to the status quo prior to the reorganizations made pursuant to Executive Order No. 119 would therefore be akin to a college student asking to be sent back to high school and staying there. From the position of senior resident physician, which he held at the time of the government reorganization, the next logical step in the stepladder process was obviously his promotion to the rank of Medical Specialist I, a position which he apparently accepted not only because of the increase in salary and rank but because of the prestige and status which the promotion conferred upon him in the medical community. Such status, however, clearly carried with it certain professional responsibilities including the responsibility of keeping up with the minimum requirements of specialty rank, the responsibility of keeping abreast with current knowledge in his specialty and in Medicine in general, and the responsibility of completing board certification requirements within a reasonable period of time. The evaluation made by petitioners peers and superiors clearly showed that he was deficient in a lot of areas, in addition to the fact that at the time of his non-renewal, he was not even board-certified.

It bears emphasis that at the time of petitioners promotion to the position of Medical Specialist I (temporary) in August of 1988, no objection was raised by him about the change of position or the temporary nature of the designation. The pretense of objecting to the promotion to specialist rank apparently came only as an afterthought, three years later, following the nonrenewal of his position by the Department of Health. We lay stress to the fact that petitioner made no attempt to oppose earlier renewals of his temporary Specialist I contracts in 1989 and 1990, clearly demonstrating his acquiescence toif not his unqualified acceptance ofthe promotion (albeit of a temporary nature) made in 1988. Whatever objections petitioner had against the earlier change from the status of permanent senior resident 152 152 SUPREME COURT REPORTS ANNOTATED Felix vs. Buenaseda physician to temporary senior resident physician were neither pursued nor mentioned at or after his designation as Medical Specialist I (Temporary). He is therefore estopped from insisting upon a right or claim which he had plainly abandoned when he, from all indications, enthusiastically accepted the promotion. His negligence to assert his claim within a reasonable time, coupled with his failure to repudiate his promotion to a temporary position, warrants a presumption, in the words of this Court in Tijam vs. Sibonghanoy,20 that he either abandoned (his claim) or declined to assert it. There are weighty reasons of public policy and convenience which demand that any claim to any position in the civil service, permanent, temporary or otherwise, or any claim to a violation of the constitutional provision on security of tenure be made within a reasonable period of time. An assurance of some degree of stability in the civil service is necessary in order to avoid needless disruptions in the conduct of public business. Delays in the statement of a right to any position are strongly discouraged.21 In the same token, the failure to assert a claim or the voluntary acceptance of another position in government, obviously without reservation, leads to a presumption that the civil servant has either given up his claim or has already settled into the new position. This is the essence of laches which is the failure or neglect, for an unreasonable and unexplained length of time to do that which, by exercising due diligence, could or should have been done earlier; it is the negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it.22 In fine, this petition, on its surface, seems to be an ordinary challenge against the validity of the conversion of petitioners position from permanent resident physician status to that of a temporary resident physician pursuant to the government reorganization after the EDSA Revolution. What is unique to _______________ 20 23 SCRA 35 (1968).

21 Unabia v. City Mayor, 99 Phil. 253, 257 (1956). 22 Cristobal v. Melchor, 78 SCRA 175, 182 (1977), citing Tijam, supra, note 19. 153 VOL. 240, JANUARY 17, 1995 153 Felix vs. Buenaseda petitioners averments is the fact that he hardly attempts to question the validity of his removal from his position of Medical Specialist I (Temporary) of the National Center for Mental Health, which is plainly the pertinent issue in the case at bench. The reason for this is at once apparent, for there is a deliberate and dishonest attempt to skirt the fundamental issue first, by falsely claiming that petitioner was forced to submit his courtesy resignation in 1987 when he actually did not; and second, by insisting on a right of claim clearly abandoned by his acceptance of the position of Medical Specialist I (temporary), which is hence barred by laches. The validity of the government reorganization of the Ministry of Health pursuant to E.O. 119 not being the real issue in the case at bench, we decline to make any further pronouncements relating to petitioners contentions relating to the effect on him of the reorganization except to say that in the specific case of the change in designation from permanent resident physician to temporary resident physician, a change was necessary, overall, to rectify a ludicrous situation whereby some government resident physicians were erroneously being classified as permanent resident physicians in spite of the inherently temporary nature of the designation. The attempts by the Department of Health not only to streamline these positions but to make them conform to current standards of specialty practice is a step in a positive direction. The patient who consults with a physician of specialist rank should at least be safe in the assumption that the government physician of specialist rank: 1.) has completed all necessary requirements of specialist training in his field; and 2.) has been board certified. These fundamental requirements at least assure the public at large that those in government centers who claim to be specialists in specific areas of Medicine possess the minimum knowledge and skills required to fulfill that first and foremost maxim, embodied in the Hippocratic Oath, that they do their patients no harm. Primium non nocere. Finally, it is crystal clear, from the facts of the case at bench, that the petitioner accepted a temporary appointment (Medical Specialist I). As respondent Civil Service Commission has correctly pointed out,23 the appointment was for a definite and renewable _______________ 23 Rollo, p. 22; Annex A. 154 154

SUPREME COURT REPORTS ANNOTATED Guillermo vs. Reyes, Jr. period which, when it was not renewed, did not involve a dismissal but an expiration of the petitioners term. ACCORDINGLY, the petition is hereby DISMISSED, for lack of merit SO ORDERED. Narvasa (C.J.), Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno, Vitug and Mendoza, JJ., concur. Petition dismissed. Note.It is the right and responsibility of the State to insure that the medical profession is not infiltrated by incompetents to whom patients may unwarily entrust their lives and health. (Department of Education, Culture and Sports vs. San Diego, 180 SCRA 533 [1989]) o0o [Felix vs. Buenaseda, 240 SCRA 139(1995)]

VOL. 324, FEBRUARY 2, 2000 437 Jo vs. National Labor Relations Commission G.R. No. 121605. February 2, 2000.* PAZ MARTIN JO and CESAR JO, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and PETER MEJILA, respondents. Labor Law; Employer-Employee Relationship; Evidence; The existence of an employer-employee relationship is ultimately a question of fact and that the findings thereon by the labor arbiter and the National Labor Relations Commission shall be accorded not only respect but even finality when supported by ample evidence.At the outset, we reiterate the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and that the findings thereon by the labor arbiter and the NLRC shall be accorded not only respect but even finality when supported by ample evidence. Same; Same; Elements; Control Test; The power of control refers to the existence of the power and not necessarily to the actual exercise thereofIn determining the existence of an employer-employee relationship, the following elements are considered: (1) the selection and engagement of the workers; (2) power of dismissal; (3) the payment of wages by whatever means; and (4) the power to control the workers conduct, with the latter assuming primacy in the overall consideration. The power of control refers to the existence of the power and not necessarily to the actual exercise thereof. It is not essential for the employer to actually supervise the performance of duties of the employee; it is enough that the employer has the right to wield that power. Same; Same; Barbers; Partnership; Absent a clear showing that a barbershop owner and a barber had intended to pursue a relationship of industrial partnership, the Court entertains no doubt that the latter was employed by the former as caretaker-barberundoubtedly, the services performed by a barber is related to, and in the pursuit of the principal business activity of the former.Absent a clear showing that petitioners and private respondent had intended to pursue a relationship of industrial partnership, we entertain no doubt that private respondent was employed by petitioners as caretaker-barber. _______________ * SECOND DIVISION. 438 438 SUPREME COURT REPORTS ANNOTATED Jo vs. National Labor Relations Commission Initially, petitioners, as new owners of the barbershop, hired private respondent as barber by absorbing

the latter in their employ. Undoubtedly, the services performed by private respondent as barber is related to, and in the pursuit of the principal business activity of petitioners. Later on, petitioners tapped private respondent to serve concurrently as caretaker of the shop. Certainly, petitioners had the power to dismiss private respondent being the ones who engaged the services of the latter. In fact, private respondent sued petitioners for illegal dismissal, albeit contested by the latter. As a caretaker, private respondent was paid by petitioners wages in the form of honorarium, originally, at the rate of one-third (1/3) of the shops net income but subsequently pegged at a fixed amount per month. As a barber, private respondent earned two-thirds (2/3) of the fee paid per haircut or shaving job done. Same; Abandonment; To constitute abandonment, there must be concurrence of the intention to abandon and some overt acts from which it may be inferred that the employee concerned has no more interest in working.With regard to the second issue, jurisprudence has laid out the rules regarding abandonment as a just and valid ground for termination of employment. To constitute abandonment, there must be concurrence of the intention to abandon and some overt acts from which it may be inferred that the employee concerned has no more interest in working. In other words, there must be a clear, deliberate and unjustified refusal to resume employment and a clear intention to sever the employer-employee relationship on the part of the employee. Same; Same; Evidence; Where the findings of the National Labor Relations Commission contradict those of the labor arbiter, the Supreme Court, in the exercise of its equity jurisdiction, may look into the records of the case and reexamine the questioned findings.In the case at bar, the labor arbiter was convinced that private respondent was not dismissed but left his work on his own volition because he could no longer bear the incessant squabbles with his co-worker. Nevertheless, public respondent did not give credence to petitioners claim that private respondent abandoned his job. On this score, public respondent gravely erred as hereunder discussed. At the outset, we must stress that where the findings of the NLRC contradict those of the labor arbiter, the Court, in the exercise of its equity jurisdiction, may look into the records of the case and reexamine the questioned findings. 439 VOL. 324, FEBRUARY 2, 2000 439 Jo vs. National Labor Relations Commission Same; Same; The rule that abandonment of work is inconsistent with the filing of a complaint for illegal dismissal does not apply where the complainant does not pray for reinstatement and just asks for separation pay instead.Public respondents assertion that the institution of the complaint for illegal dismissal manifests private respondents lack of intention to abandon his job is untenable. The rule that abandonment of work is inconsistent with the filing of a complaint for illegal dismissal is not applicable in this case. Such rule applies where the complainant seeks reinstatement as a relief. Corollarily, it has no application where the complainant does not pray for reinstatement and just asks for separation pay instead as in the present case. It goes without saying that the prayer for separation pay, being the alternative remedy to reinstatement, contradicts private respondents stance. That he was illegally dismissed is belied by his own pleadings as well as contemporaneous conduct. SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

The facts are stated in the opinion of the Court. Abragan & Abragan Law Offices for petitioners. Jaime L. Ballesta for private respondent. QUISUMBING, J.: This petition for certiorari seeks to set aside the Decision1 of National Labor Relations Commission (Fifth Division) promulgated on November 21, 1994, and its Resolution dated June 7, 1995, which denied petitioners motion for reconsideration. Private respondent Peter Mejila worked as barber on a piece-rate basis at Dinas Barber Shop. In 1970, the owner, Dina Tan, sold the barbershop to petitioners Paz Martin Jo and Cesar Jo. All the employees, including private respondent, were absorbed by the new owners. The name of the barbershop was changed to Windfield Barber Shop. _________________ 1 Penned by Commissioner Oscar M. Abella, and concurred by Presiding Commissioner Musib M. Buat and Commissioner Leon G. Gonzaga, Jr. 440 440 SUPREME COURT REPORTS ANNOTATED Jo vs. National Labor Relations Commission The owners and the barbers shared in the earnings of the barbershop. The barbers got two-thirds (2/3) of the fee paid for every haircut or shaving job done, while one-third (1/3) went to the owners of the shop. In 1977, petitioners designated private respondent as caretaker of the shop because the former caretaker became physically unfit. Private respondents duties as caretaker, in addition to his being a barber, were: (1) to report to the owners of the barbershop whenever the airconditioning units malfunctioned and/or whenever water or electric power supply was interrupted; (2) to call the laundry woman to wash dirty linen; (3) to recommend applicants for interview and hiring; (4) to attend to other needs of the shop. For this additional job, he was given an honorarium equivalent to one-third (1/3) of the net income of the shop. When the building occupied by the shop was demolished in 1986, the barbershop closed. But soon a place nearby was rented by petitioners and the barbershop resumed operations as Cesars Palace Barbershop and Massage Clinic. In this new location, private respondent continued to be a barber and caretaker, but with a fixed monthly honorarium as caretaker, to wit: from February 1986 to 1990 P700; from February 1990 to March 1991P800; and from July 1992 P1,300.

In November 1992, private respondent had an altercation with his co-barber, Jorge Tinoy. The bickerings, characterized by constant exchange of personal insults during working hours, became serious so that private respondent reported the matter to Atty. Allan Macaraya of the labor department. The labor official immediately summoned private respondent and petitioners to a conference. Upon investigation, it was found out that the dispute was not between private respondent and petitioners; rather, it was between the former and his fellow barber. Accordingly, Atty. Macaraya directed petitioners counsel, Atty. Prudencio Abragan, to thresh out the problem. During the mediation meeting held at Atty. Abragans office a new twist was added. Despite the assurance that he was not being driven out as caretaker-barber, private respondent demanded payment for several thousand pesos as his separa441 VOL. 324, FEBRUARY 2, 2000 441 Jo vs. National Labor Relations Commission tion pay and other monetary benefits. In order to give the parties enough time to cool off, Atty. Abragan set another conference but private respondent did not appear in such meeting anymore. Meanwhile, private respondent continued reporting for work at the barbershop. But, on January 2, 1993, he turned over the duplicate keys of the shop to the cashier and took away all his belongings therefrom. On January 8, 1993, he began working as a regular barber at the newly opened Goldilocks Barbershop also in Iligan City. On January 12, 1993, private respondent filed a complaint2 for illegal dismissal with prayer for payment of separation pay, other monetary benefits, attorneys fees and damages. Significantly, the complaint did not seek reinstatement as a positive relief. In a Decision dated June 15, 1993, the Labor Arbiter found that private respondent was an employee of petitioners, and that private respondent was not dismissed but had left his job voluntarily because of his misunderstanding with his co-worker.3 The Labor Arbiter dismissed the complaint, but ordered petitioners to pay private respondent his 13th month pay and attorneys fees. Both parties appealed to the NLRC. In a Decision dated November 21, 1994, it set aside the labor arbiters judgment. The NLRC sustained the labor arbiters finding as to the existence of employeremployee relationship between petitioners and private respondent, but it ruled that private respondent was illegally dismissed. Hence, the petitioners were ordered to reinstate private respondent and pay the latters backwages, 13th month pay, separation pay and attorneys fees, thus: For failure of respondents to observe due process before dismissing the complainant, We rule and hold that he was illegally terminated. Consequently, he should be reinstated and paid his _______________

2 Rollo, pp. 34-37. 3 Id. at 60-61. 442 442 SUPREME COURT REPORTS ANNOTATED Jo vs. National Labor Relations Commission backwages starting from January 1, 1993 up to the time of his reinstatement and payment of separation pay, should reinstatement not be feasible on account of a strained employer-employee relationship. As complainants income was mixed, (commission and caretaker), he becomes entitled to 13th month pay only in his capacity as caretaker at the last rate of pay given to him. With respect to separation pay, even workers paid on commission are given separation pay as they are considered employees of the company. Complainant should be adjudged entitled to separation pay reckoned from 1970 up to the time he was dismissed on December 31, 1992 at one-half month pay of his earning as a barber; and as a caretaker the same should be reckoned from 1977 up to December 31, 1992. As complainant has been assisted by counsel not only in the preparation of the complaint, position paper but in hearings before the Labor Arbiter a quo, attorneys fees equivalent to 10% of the money awards should likewise be paid to complainant. WHEREFORE, the decision appealed from is Vacated and Set Aside and a new one entered in accordance with the above findings and awards. SO ORDERED.4 Its motion for reconsideration having been denied in a Resolution dated June 7, 1995, petitioners filed the instant petition. The issues for resolution are as follows: 1. Whether or not there exists an employer-employee relationship between petitioners and private respondent. 2. Whether or not private respondent was dismissed from or had abandoned his employment. Petitioners contend that public respondent gravely erred in declaring that private respondent was their employee. They claim that private respondent was their partner in trade whose compensation was based on a sharing arrangement per haircut or shaving job done. They argue that private respon________________

4 Id. at 84. 443 VOL. 324, FEBRUARY 2, 2000 443 Jo vs. National Labor Relations Commission dents task as caretaker could be considered an employment because the chores are very minimal. At the outset, we reiterate the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and that the findings thereon by the labor arbiter and the NLRC shall be accorded not only respect but even finality when supported by ample evidence.5 In determining the existence of an employer-employee relationship, the following elements are considered: (1) the selection and engagement of the workers; (2) power of dismissal; (3) the payment of wages by whatever means; and (4) the power to control the workers conduct, with the latter assuming primacy in the overall consideration. The power of control refers to the existence of the power and not necessarily to the actual exercise thereof. It is not essential for the employer to actually supervise the performance of duties of the employee; it is enough that the employer has the right to wield that power.6 Absent a clear showing that petitioners and private respondent had intended to pursue a relationship of industrial partnership, we entertain no doubt that private respondent was employed by petitioners as caretaker-barber. Initially, petitioners, as new owners of the barbershop, hired private respondent as barber by absorbing the latter in their employ. Undoubtedly, the services performed by private respondent as barber is related to, and in the pursuit of the principal business activity of petitioners. Later on, petitioners tapped pri______________ 5 AFP Mutual Benefit Association, Inc. v. NLRC, 267 SCRA 47, 56 (1997); North Davao Mining Corp. v. NLRC, 254 SCRA 721, 731 (1996); Inter-Orient Maritime Enterprises, Inc. v. NLRC, 235 SCRA 268, 277 (1994); Loadstar Shipping Co., Inc. v. Gallo, 229 SCRA 654, 660 (1994); Great Pacific Life Assurance Corp. v. NLRC, 187 SCRA 694, 699 (1990). 6 Equitable Banking Corporation v. NLRC, 273 SCRA 352, 371 (1997); MAM Realty Development Corporation v. NLRC, 244 SCRA 797, 800-801 (1995); Zanotte Shoes v. NLRC, 241 SCRA 261, 265 (1995). 444 444

SUPREME COURT REPORTS ANNOTATED Jo vs. National Labor Relations Commission vate respondent to serve concurrently as caretaker of the shop. Certainly, petitioners had the power to dismiss private respondent being the ones who engaged the services of the latter. In fact, private respondent sued petitioners for illegal dismissal, albeit contested by the latter. As a caretaker, private respondent was paid by petitioners wages in the form of honorarium, originally, at the rate of one-third (1/3) of the shops net income but subsequently pegged at a fixed amount per month. As a barber, private respondent earned two-thirds (2/3) of the fee paid per haircut or shaving job done. Furthermore, the following facts indubitably reveal that petitioners controlled private respondents work performance, in that: (1) private respondent had to inform petitioners of the things needed in the shop; (2) he could only recommend the hiring of barbers and masseuses, with petitioners having the final decision; (3) he had to be at the shop at 9:00 a.m. and could leave only at 9:00 p.m. because he was the one who opened and closed it, being the one entrusted with the key.7 These duties were complied with by private respondent upon instructions of petitioners. Moreover, such task was far from being negligible as claimed by petitioners. On the contrary, it was crucial to the business operation of petitioners as shown in the preceding discussion. Hence, there was enough basis to declare private respondent an employee of petitioners. Accordingly, there is no cogent reason to disturb the findings of the labor arbiter and NLRC on the existence of employer-employee relationship between herein private parties. With regard to the second issue, jurisprudence has laid out the rules regarding abandonment as a just and valid ground for termination of employment. To constitute abandonment, there must be concurrence of the intention to abandon and some overt acts from which it may be inferred that the employee concerned has no more interest in working.8 In other words, there must be a clear, deliberate and unjustified re________________ 7 Id. at 56-58. 8 A Prime Security Services, Inc. v. NLRC, 220 SCRA 142, 145 (1993); Dagupan Bus Co., Inc. v. NLRC, 191 SCRA 328, 331 (1990). 445 VOL. 324, FEBRUARY 2, 2000 445 Jo vs. National Labor Relations Commission fusal to resume employment and a clear intention to sever the employer-employee relationship on the part of the employee.9 In the case at bar, the labor arbiter was convinced that private respondent was not dismissed but left his work on his own volition because he could no longer bear the incessant squabbles with his co-worker.

Nevertheless, public respondent did not give credence to petitioners claim that private respondent abandoned his job. On this score, public respondent gravely erred as hereunder discussed. At the outset, we must stress that where the findings of the NLRC contradict those of the labor arbiter, the Court, in the exercise of its equity jurisdiction, may look into the records of the case and reexamine the questioned findings.10 In this case, the following circumstances clearly manifest private respondents intention to sever his ties with petitioners. First, private respondent even bragged to his co-workers his plan to quit his job at Cesars Palace Barbershop and Massage Clinic as borne out by the affidavit executed by his former coworkers.11 Second, he surrendered the shops keys and took away all his things from the shop. Third, he did not report anymore to the shop without giving any valid and justifiable reason for his absence. Fourth, he immediately sought a regular employment in another barbershop, despite previous assurance that he could remain in petitioners employ. Fifth, he filed a complaint for illegal dismissal without praying for reinstatement. Moreover, public respondents assertion that the institution of the complaint for illegal dismissal manifests private re________________ 9 Tan v. NLRC, 211 SCRA 216, 221 (1997); Caete v. NLRC, 250 SCRA 259, 267 (1995); Reno Foods, Inc. v. NLRC, 249 SCRA 379, 386 (1995); Labor v. NLRC, 248 SCRA 183, 198 (1995); International School of Speech v. NLRC, 242 SCRA 382, 389 (1995); Santos v. NLRC, 166 SCRA 759, 764 (1988); Velasco v. Inciong, 164 SCRA 67, 74 (1988). 10 Industrial Timber Corporation v. NLRC, 273 SCRA 200, 209 (1997); Magcalas v. NLRC, 269 SCRA 453, 463 (1997). 11 Rollo, p. 61. 446 446 SUPREME COURT REPORTS ANNOTATED Jo vs. National Labor Relations Commission spondents lack of intention to abandon his job12 is untenable. The rule that abandonment of work is inconsistent with the filing of a complaint for illegal dismissal is not applicable in this case. Such rule applies where the complainant seeks reinstatement as a relief. Corollarily, it has no application where the complainant does not pray for reinstatement and just asks for separation pay instead13 as in the present case. It goes without saying that the prayer for separation pay, being the alternative remedy to reinstatement,14 contradicts private respondents stance. That he was illegally dismissed is belied by his own pleadings as well as contemporaneous conduct. We are, therefore, constrained to agree with the findings of the Labor Arbiter that private respondent

left his job voluntarily for reasons not attributable to petitioners. It was error and grave abuse of discretion for the NLRC to hold petitioners liable for illegal dismissal of private respondent. WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of public respondent NLRC are reversed and set aside. The decision of the Labor Arbiter dated June 15, 1993, is hereby reinstated. No costs. SO ORDERED. Bellosillo (Chairman), Mendoza, Buena and De Leon, Jr., JJ., concur. Petition granted. Notes.The fact that an insurance underwriter was required to solicit business exclusively for a mutual benefit association could hardly be considered as control in labor jurisprudence. (AFP Mutual Benefit Association, Inc. vs. National Labor Relations Commission, 267 SCRA 47 [1997]) _______________ 12 Id at 83. 13 A Prime Security Services, Inc. v. NLRC, supra, p. 145. 14 Bombase v. NLRC, 245 SCRA 496, 500 (1995). 447 VOL. 324, FEBRUARY 2, 2000 447 People vs. Alipayo Under the so-called right of control test, the person for whom the services are performed reserves a right to control, not only the end to be achieved, but the means to be used in reaching such an end. (Progress Homes vs. National Labor Relations Commission, 269 SCRA 274 [1997]) o0o [Jo vs. National Labor Relations Commission, 324 SCRA 437(2000)]

VOL. 324, FEBRUARY 2, 2000 469 Vinoya vs. National Labor Relations Commission G.R. No. 126586. February 2, 2000.* ALEXANDER VINOYA, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, REGENT FOOD CORPORATION AND/OR RICKY SEE (PRESIDENT), respondents. Labor Law; Employer-Employee Relationship; Labor-only Contracting; Elements; Words and Phrases; 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.Laboronly contracting, a prohibited act, is an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal. In labor-only contracting, the following elements are present: (a) The contractor or subcontractor does not have substantial capital or investment to actually perform the job, work or service under its own account and responsibility; (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. Same; Same; Same; Same; Same; 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.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 _______________ * FIRST DIVISION. 470 470 SUPREME COURT REPORTS ANNOTATED Vinoya vs. National Labor Relations Commission 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. Same; Same; Same; Factors Considered in Determining Existence of an Independent Contractor Relationship.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 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, too.s, appliances, materials and labor; and the mode, manner and terms of payment. Same; Same; Same; Judicial Notice; Devaluation; 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.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 paidfor. 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 471 VOL. 324, FEBRUARY 2, 2000 471 Vinoya vs. National Labor Relations Commission amounting to P75,000.00 cannot be considered as substantial capital and, as such, PMCI cannot qualify as an independent contractor. Same; Same; Same; Where the undertaking of a contractor does not involve the performance of a specific job, but rather the supply of manpower only, it clearly conducts itself as labor-only contractor. 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. 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. Same; Same; Same; Control Test; Tour-fold Test to Ascertain Whether a Firm is the True Employer of a Worker.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. Same; Same; Same; Evidence; If only documentary evidence would be required to demonstrate the existence of an employer-employee relationship, no scheming employer would ever be brought before the bar of justice.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 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 ser472 472 SUPREME COURT REPORTS ANNOTATED Vinoya vs. National Labor Relations Commission vices. 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. Same; Same; Same; Same; Judicial Notice; The Court takes judicial notice of the practice of employers who, in order to evade the liabilities under the Labor Code, do not issue pay slips directly to their employees.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 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. Same; Same; Same; Control Test; 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.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. 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 473 VOL. 324, FEBRUARY 2, 2000 473 Vinoya vs. National Labor Relations Commission declaration against interest, is sufficient enough to prove that the power of control truly exists. Same; Dismissals; Due Process; Not only must the dismissal be for a valid or authorized cause, the rudimentary requirements of due processnotice and hearingmust, likewise, be observed before an employee may be dismissed, otherwise the termination would, in the eyes of the law, be illegal.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 twofold, the substantive and the procedural aspects. Not only must the dismissal be for a valid or authorized cause, the rudimentary requirements of due processnotice and hearingmust, 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. SPECIAL CIVIL ACTION in the Supreme Court. Certiorari. The facts are stated in the opinion of the Court. Public Attorneys Office for petitioner. Manuel P. Roxas, Jr. for private respondents. KAPUNAN, J.: This petition for certiorari under Rule 65 seeks to annul and set aside the decision,1 promulgated on 21 June 1996, of the National Labor Relations Commission (NLRC) which reversed the decision2 of the Labor Arbiter, rendered on 15 June 1994, ordering Regent Food Corporation (RFC) to rein-

________________ 1 Penned by Commissioner Joaquin A. Tanodra and concurred in by Presiding Commissioner Lourdes C. Javier and Commissioner Ireneo B. Bernardo. 2 Penned by Labor Arbiter Alex Arcadio Lopez. 474 474 SUPREME COURT REPORTS ANNOTATED Vinoya vs. National Labor Relations Commission state Alexander Vinoya to his former position and pay him backwages. Private respondent Regent Food Corporation 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 and is being sued in that capacity. Petitioner Alexander Vinoya, the complainant, worked with RFC as sales representative until his services were terminated on 25 November 1991. The parties presented conflicting versions of facts. 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 card3 was issued to him by RFC. Petitioner alleges that he reported daily to the office of RFC, in Pasig City, to take the latters 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 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 (hereinafter referred to as the Contract of Service).4 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. _______________ 3 Annex F, Rollo, p. 45. 4 Annex D, Rollo, pp. 41-43. 475

VOL. 324, FEBRUARY 2, 2000 475 Vinoya vs. National Labor Relations Commission 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. Consequently, on 3 December 1991, petitioner filed a case against RFC before the Labor Arbiter for illegal dismissal and non-payment of 13th month pay.5 Private respondent Regent Food Corporation, 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 Service6 with RFC. To prove this fact, RFC presents an Employment Contract7 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 tle expiration of the Contract of Service between itself and PMCI and not because petitioner was dismissed from employment. On 3 December 1991, when petitioner filed a complaint for illegal dismissal before the Labor Arbiter, PMCI was initially impleaded as one of the respondents. However, petitioner thereafter withdrew his charge against PMCI and pursued his claim solely against RFC. Subsequently, RFC filed a third party complaint against PMCI. After considering both ver________________ 5 Comment of the Office of the Solicitor General, Rollo, pp. 147, 148. 6 Annex 2, Rollo, pp. 79, 82-84. 7 Id., at 79, 86-87. 476 476 SUPREME COURT REPORTS ANNOTATED Vinoya vs. National Labor Relations Commission sions of the parties, the Labor Arbiter rendered a decision,8 dated 15 June 1994, in favor of petitioner.

The Labor Arbiter concluded that RFC was the true employer of petitioner for the following reasons: (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. Thus, the Labor Arbiter decreed, as follows: ACCORDINGLY, premises considered respondent RFC is hereby declared guilty of illegal dismissal and ordered to immediately reinstate complainant to his former position without loss of seniority rights and other benefits and pay him backwages in the amount of P103,974.00. The claim for 13th month pay is hereby DENIED for lack of merit. This case, insofar as respondent PMCI [is concerned] is DISMISSED, for lack of merit. SO ORDERED.9 RFC appealed the adverse decision of the Labor Arbiter to the NLRC. In a decision,10 dated 21 June 1996, 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. The dispositive portion of the NLRC decision states: WHEREFORE, premises considered, the appealed decision is modified as follows: _________________ 8 Decision of the Labor Arbiter, Rollo, pp. 36-40. 9 Ibid. 10 Decision of the NLRC, Rollo, pp. 15-32. 477 VOL. 324, FEBRUARY 2, 2000 477 Vinoya vs. National Labor Relations Commission 1. Peninsula Manpower Company Inc. is declared as employer of the complainant; 2. Peninsula is ordered to pay complainant his separation pay of P3,354.00 and his proportionate 13th month pay for 1991 in the amount of P2,795.00 or the total amount of P6,149.00. SO ORDERED.11 Separate motions for reconsideration of the NLRC decision were filed by petitioner and PMCI. In a

resolution,12 dated 20 August 1996, the NLRC denied both motions. However, it was only petitioner who elevated the case before this Court. In his petition for certiorari, petitioner submits that respondent NLRC committed grave abuse of discretion in reversing the decision of the Labor Arbiter, and asks for the reinstatement of the latters decision. Principally, this petition presents the following issues: 1. Whether petitioner was an employee of RFC or PMCI. 2. Whether petitioner was lawfully dismissed. The resolution of the first issue initially boils down to a determination of the true status of PMCI, whether it is. a labor-only contractor or an independent contractor. In the case at bar, RFC alleges that PMCI is an independent contractor on the sole ground that the latter is a highly capitalized venture. To buttress this allegation, RFC presents a copy of the Articles of Incorporation and the Treasurers Affidavit13 submitted by PMCI to the Securities and Exchange Commission showing that it has an authorized capital stock of One Million Pesos (P1,000,000.00), of which Three Hundred Thousand Pesos (P300,000.00) is subscribed and Seventy-Five Thousand Pesos (P75,000.00) is paid-in. According to RFC, PMCI is a duly organized corporation engaged in the business of creating and hiring a pool of temporary personnel and, ______________ 11 Ibid. 12 Resolution of the NLRC, Rollo, pp. 33-35. 13 Annex 5, Rollo, pp. 121, 131-137. 478 478 SUPREME COURT REPORTS ANNOTATED Vinoya vs. National Labor Relations Commission thereafter, assigning them to its clients from time to time for such duration as said clients may require. RFC further contends that PMCI has a separate office, permit and license and its own organization. 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.14 In laboronly contracting, the following elements are present: (a) The contractor or subcontractor does not have substantial capital or investment to actually perform the job, work or service under its own account and responsibility;

(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.15 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.16 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; _______________ 14 Section 4(f), Rule VIII-A, Book III, of the Omnibus Rules Implementing the Labor Code. 15 Ibid. 16 Section 4(d), Rule VIII-A, Book III, of the Omnibus Rules Implementing the Labor Code. 479 VOL. 324, FEBRUARY 2, 2000 479 Vinoya vs. National Labor Relations Commission (b) The contractor or subcontractor has substantial capital or investment; and (b) 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.17 Previously, in the case of Neri vs. NLRC,18 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 rational 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.19 The decision of the Court in Neri, thus, states: Respondent BCC need not prove that it made investments in the form of tools, equipment, machineries, work premises, among others, because it has established that it has sufficient capitalization. The Labor Arbiter and the NLRC both determined that BCC had a capital stock of P1 million fully subscribed and paid for. BCC is therefore a highly capitalized venture and cannot be deemed engaged in labor-only

contracting.20 However, in declaring that Building Care Corporation (BCC) was an independent contractor, the Court considered not only the fact that it had substantial capitalization. The Court noted that BCC carried on an independent business and undertook the performance of its contract according to its own manner and method, free from the control and supervi_________________ 17 Ibid. 18 224 SCRA 717 (1993). 19 Id., at 721. 20 Id., at 720. 480 480 SUPREME COURT REPORTS ANNOTATED Vinoya vs. National Labor Relations Commission sion of its principal in all matters except as to the results thereof.21 The Court likewise mentioned that the employees of BCC were engaged to perform specific special services for its principal.22 Thus, the Court ruled that BCC was an independent contractor. The Court further clarified the import of the Neri decision in the subsequent case of Philippine Fuji Xerox Corporation vs. NLRC.23 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.24 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

______________ 21 Id., at 724. 22 Id. 23 254 SCRA 294 (1996). 24 Id., at 303. 481 VOL. 324, FEBRUARY 2, 2000 481 Vinoya vs. National Labor Relations Commission in lump sum for the services it rendered. These features of that case make it distinguishable from the present one.25 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 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.26 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 _______________ 25 Id.

26 Ponce, et al. vs. NLRC, et al., 293 SCRA 366 (1998). 482 482 SUPREME COURT REPORTS ANNOTATED Vinoya vs. National Labor Relations Commission 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 $127 while presently it is at P40.390 to $1.28 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 deemed necessary.29 Furthermore, RFC undertook to assist PMCI in making sure that the daily time records of its alleged employees faithfully reflect the actual working hours.30 With regard to petitioner, RFC admitted that it exercised control and supervision over him.31 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 ______________ 27 Source: The Manila Chronicle, Vol. XXXIII, No. 536, Friday, July 23, 1993. 28 Source: Today, No. 2, 198, Tuesday, 1 February 2000. 29 Annex 2, Rollo, pp. 79, 82-84. 30 Ibid. 31 Memorandum, Rollo, pp. 182, 191. 483 VOL. 324, FEBRUARY 2, 2000

483 Vinoya vs. National Labor Relations Commission 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 latters business. Logically, when petitioner was assigned by PMCI to RFC, PMCI acted merely as a labor-only contractor. Based on the foregoing, PMCI can only be classified as a labor-only contractor and, as such, cannot be considered as the employer of petitioner. 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: ________________ 32 Annex 2, Rollo, pp. 79, 82-84. 484 484 SUPREME COURT REPORTS ANNOTATED Vinoya vs. National Labor Relations Commission 1. Merchandiser 2. Promo Girl 3. Factory Worker 4. Driver33

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.34 Of these four, the control test is the most important.35 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. ________________ 33 Id., Annex A of the Contract of Service, at 84. 34 Rhone-Poulenc Agrochemicals Philippines, Inc. vs. NLRC, et al., 217 SCRA 249, 255 (1993). 35 Ibid. 485 VOL. 324, FEBRUARY 2, 2000 485 Vinoya vs. National Labor Relations Commission It should be pointed out that no particular form of proof is required to prove the existence of an employer-employee relationship.36 Any competent, and relevant evidence may show the relationship.37 If only documentary evidence would be required to demonstrate that relationship, no scheming employer would ever be brought before the bar of justice.38 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, _______________ 36 Caurdanetaan Piece Workers Union vs. Laguesma, et al., 286 SCRA 401, 426 (1998). 37 Ibid. 38 Id., citing Opulencia Ice Plant and Storage vs. NLRC, 228 SCRA 473 (1993). 486 486 SUPREME COURT REPORTS ANNOTATED Vinoya vs. National Labor Relations Commission 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 invoices39 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.40 Under the current practice, a third person, usually the purported contractor (service or manpower placement agency), assumes the act of paying the wage.41 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.42 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 latters approval. Quoted hereunder is the portion of the contract stating the power of RFC to dismiss,

to wit: _________________ 39 Annex 2, Rollo, pp. 79, 88-89. 40 Jang Lim, et al vs. NLRC, et al., G.R. No. 124630, February 19, 1999, 303 SCRA 432. 41 Ibid. 42 Id. 487 VOL. 324, FEBRUARY 2, 2000 487 Vinoya vs. National Labor Relations Commission 7. The First party (RFC) reserves the right to terminate the services of any worker found to be unsatisfactory without the prior approval of the second party (PMCI).43 In furtherance of the above provision, RFC requested PMCI to terminate petitioner from his employment with the company. 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.44 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.46 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. _______________ 43 Annex 2, Rollo, pp. 79, 82-84. 44 Zanotte Shoes vs. NLRC, 241 SCRA 261 (1995); Tiu vs. NLRC, 254 SCRA 1 (1996).

45 Ibid. 46 Memorandum, supra note 31. 488 488 SUPREME COURT REPORTS ANNOTATED Vinoya vs. National Labor Relations Commission We, therefore, hold that an employer-employee relationship exists between petitioner and RFC. Having determined the real employer of petitioner, we now proceed to ascertain the legality of his dismissal from employment. Since petitioner, due to his length of service, already attained the status of a regular employee,47 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,48 the rudimentary requirements of due processnotice and hearing49must, 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.50 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 ________________ 47 Article 280, Labor Code. 48 Articles 279, 281, 282-284, Labor Code. 49 Salaw vs. NLRC, 202 SCRA 7, 11 (1991). 50 Id., at 12, citing San Miguel Corporation vs. NLRC, 173 SCRA 314 (1989). 489

VOL. 324, FEBRUARY 2, 2000 489 Vinoya vs. National Labor Relations Commission 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.51 Petitioner is entitled to no less. WHEREFORE, the petition is GRANTED. The decision of the NLRC, dated 21 June 1996, as well as its resolution, promulgated on 20 August 1996, are ANNULLED and SET ASIDE. The decision of the Labor Arbiter, rendered on 15 June 1994, is hereby REINSTATED and AFFIRMED. SO ORDERED. Davide, Jr. (C.J., Chairman), Puno, Pardo and Ynares-Santiago, JJ., concur. Petition granted. Judgment annulled and set aside, that of the Labor Arbiter reinstated. Note.Article 2180 of the Civil Code and not the Labor Code determines the liability of the principal employer in a civil suit for damages instituted by an injured person for any negligent act of the employees of the labor-only contractor, consistent with the ruling that a finding that a contractor was a labor-only contractor is equivalent to a finding that an employer-employee relationship existed between the owner (principal contractor) and the labor-only contractor, including the latters workers. (National Power Corporation vs. Court of Appeals, 294 SCRA 209 [1998]) o0o [Vinoya vs. National Labor Relations Commission, 324 SCRA 469(2000)]

SUPREME COURT REPORTS ANNOTATED Development Bank of the Philippines vs. NLRC G.R. Nos. 100376-77. June 17, 1994.* DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, GODOFREDO MORILLO, JR., SUNDAY BACEA, ALFREDO COS and ROGELIO VILLANUEVA, respondents. Labor Law; Job Contracting; Indirect Employers; In job contracting, the principal is jointly and severally liable with the contractor and insolvency or unwillingness to pay by the contractor or direct employer is not a prerequisite for the joint and several liability of the principal.Petitioners interpretation of Article 106 of the Labor Code is quite misplaced. Nothing in said Article 106 indicates that insolvency or unwillingness to pay by the contractor or direct employer is a prerequisite for the joint and several liability of the principal or indirect employer. In fact, the rule is that in job contracting, the principal is jointly and severally liable with the contractor. The statutory basis for this joint and several liability is set forth in Articles 107 and 109 in relation to Article 106 of the Labor Code. There is no doubt that private respondents are entitled to the cash benefits due them. The petitioner is also, no doubt, liable to pay such benefits because the law mandates the joint and several liability of the principal and the contractor for the protection of labor. _______________ * SECOND DIVISION. 251 VOL. 233, JUNE 17, 1994 251 Development Bank of the Philippines vs. NLRC Same; Actions; Third-party Complaints; The Rules of Court are adopted suppletorily by the Revised NLRC Rules.ther may petitioner argue that it was not properly impleaded and hence, should not be made liable to the claims of private respondents. On this matter, petitioner cannot be absolved from responsibility. We sustain respondent Commissions holding that: Anent the Banks first issue, what we actually have here is a Third-Party Complaint, defined by Section 12, Rule 6 of the Rules of Court as a claim that a defending party may, with leave of court, file against a person not a party to the action, called the third-party defendant, for contribution, indemnity, subrogation or any other relief, in respect of his opponents claim (emphasis ours). Since Rule I, Section 3 of our 1986 Revised NLRC Rules adopts suppletorily the Rules of Court in the interest of expeditious labor justice and whenever practicable and convenient with the Security Agencys impleading the Bank for indemnity and subrogation considering that the complainants worked with the Bank to safeguard their premises, properties and their person (Record, p. 76), such a third-party complaint would therefore be proper. That the bank has not disputed liability on the admitted claims, but professes merely subsidiary, instead of solidary liability, we find its position here all the more, untenable.

Same; Same; Where no claim was made for wage differentials either in the complaint or in the position paper, no relief may be granted on such matters.We note that in the present case, there is no claim for wage differentials either in the complaints or in the position paper filed by private respondents before the labor arbiter. Accordingly, no relief may be granted on such matter. We, however, agree with the respondent Commission in its stand that private respondents are entitled to rest day and holiday pay (aside from the refund of their cash bond and the payment of their 13th month pay and service incentive leave pay for 1989). Private respondents position paper submitted before the labor arbiter properly raised the two (2) issues (rest and holiday pay) and included the same in their prayer for relief. The computation of the amount due each individual security guard can be made during the additional hearings ordered by the Commission. PETITION for certiorari to review a resolution of the National Labor Relations Commission. The facts are stated in the opinion of the Court. Vicente T. Cuison for petitioner. Tamondong, Wong, Cos & Associates for private respondent. 252 252 SUPREME COURT REPORTS ANNOTATED Development Bank of the Philippines vs. NLRC PADILLA, J.: This petition for review on certiorari (here treated as a petition for certiorari under Rule 65, Rules of Court) seeks to reverse and set aside the Resolution dated 11 June 1991 of respondent National Labor Relations Commission (NLRC) in NLRC NCR Case Nos. 00-09-03383-87 and 00-10-03562-87, denying petitioners motion for reconsideration, the dispositive part of which reads: Accordingly, the Banks motion for reconsideration is hereby denied. The responsible officers of the Bank and its counsel are hereby warned, under pain of contempt, that we shall not tolerate their further delaying the execution of the subject award.1 Private respondents Godofredo Morillo, Sunday Bacea, Alfredo Cos and Rogelio Villanueva were hired as security guards by Confidential Investigation and Security Corporation (CISCOR) on 19 May 1981, 21 August 1984, 22 January 1985, and 27 November 1985, respectively. In the course of their employment, private respondents were assigned to secure the premises of CISCORs clients, among them, the herein petitioner, Development Bank of the Philippines (DBP) which, in turn, assigned private respondents to secure one of its properties or assets, the Riverside Mills Corporation. On 11 August 1987, private respondent Villanueva resigned from CISCOR. On 15 August 1987, private respondents Morillo, Bacea and Cos followed suit in resigning from CISCOR. Thereafter, private respondents claimed from CISCOR the return of their cash bond and payment of their 13th month pay

and service incentive leave pay. For failure of CISCOR to grant their claims, private respondents Villanueva and Cos filed against CISCOR and its President/Manager Ernesto Medina NLRC NCR Case No. 00-10-3562-87 on 13 October 1987, while private respondents Morillo and Bacea filed NLRC NCR Case No. 00-09-3383-87 on 29 September 1987. In said two (2) cases, private respondents sought recovery of their cash bond, payment of 13th month pay, and their five-day service incentive leave pay. The two (2) cases were consolidated and assigned to Labor Arbiter Crescencio _______________ 1 Rollo, p. 61. 253 VOL. 233, JUNE 17, 1994 253 Development Bank of the Philippines vs. NLRC Iniego. In their position paper filed on 23 November 1987, private respondents (as complainants) alleged that they tendered their resignations in August 1987 upon the assurance of CISCOR that they would be paid the cash benefits due them. For failure of CISCOR to comply, private respondents claimed violations committed by CISCOR and Medina, specifically, the non-payment of their 13th month pay, five (5) day service incentive leave pay from the date of employment to the time of their separation, non-refund of their cash bond, non-payment of legal holiday pay and rest day pay. On the other hand, CISCOR and Medina in their position paper filed on 3 March 1988 admitted that private respondents were former security guards of CISCOR. They added, however, that sometime in 1987, petitioner allegedly formed its own security agency and pirated private respondents who tendered their voluntary resignations from CISCOR. Thereafter, when private respondents sought from CISCOR the return of their cash bond deposit, payment of 13th month pay and service incentive leave pay, CISCOR explained to private respondents that in view of the claim of petitioner that it incurred losses when private respondents and their other co-security guards secured the premises of Riverside Mills Corporation, private respondents, prior to the payment of their claims, were asked to first secure an individual/agency clearance from petitioner to show that no losses were incurred while they were guarding Riverside Mills Corporation. Instead of getting such clearance from the petitioner, private respondents secured their clearance from CISCORs detachment commander. Hence, for failure to secure the required clearance, private respondents cash bond deposit, their proportionate 13th month pay and service incentive leave pay were withheld to answer for liabilities incurred while private respondents were guarding Riverside Mills Corporation. On 10 March 1988, CISCOR filed a motion with leave to implead petitioner bank and averred therein that in view of its contract with the petitioner whereby, for a certain service fee, CISCOR undertook to guard petitioners premises, both CISCOR and petitioner, under the Labor Code, are jointly and severally liable to pay the salaries and other statutory benefits due the private respondents, petitioner being an indispensable party to

254 254 SUPREME COURT REPORTS ANNOTATED Development Bank of the Philippines vs. NLRC the case. On 11 March 1988, Labor Arbiter Iniego issued an order granting the aforesaid motion and including petitioner as one of the respondents therein. To this, private respondents filed their opposition and alleged, among others, that petitioner, not being an employer of the private respondents, was not a proper, necessary or indispensable party to the case. In answer, petitioner filed its position paper alleging therein that it was not made a respondent by the herein private respondents in their complaint, and that none of the original parties to the case (private respondents and CISCOR/Medina) interposed any claim against the petitioner. It further stated that it cannot be held liable to the claim of private respondents because there was no failure on the part of CISCOR and Medina to pay said claims. If CISCOR had apparently failed to pay private respondents claims, it was only due to the failure of private respondents to secure their individual clearance of accountability or agency clearance that there were no losses incurred while they were guarding Riverside Mills Corporation. On 12 July 1988, the Labor Arbiter rendered a decision, the dispositive part of which reads: WHEREFORE, judgment is hereby rendered ordering the respondents Confidential Investigation and Security Corporation, Mr. Ernesto Medina and Development Bank of the Philippines to pay the complainants the corresponding salary differential due them to be computed for the last three (3) years from the time they stopped working with the respondents sometime in August 1987. Confidential Investigation and Security Corporation is further ordered to return to the complainants their respective cash bond cited in this decision within a period of ten (10) days from receipt hereof.2 From the above decision, CISCOR and Medina appealed to the NLRC. Petitioner likewise filed its Motion for Reconsideration/ Appeal and prayed for the Labor Arbiter to modify his decision and make CISCOR and Medina solely liable for the claims of private respondents, and to declare the award for salary differentials as null and void. _______________ 2 Rollo, p. 30. 255 VOL. 233, JUNE 17, 1994 255

Development Bank of the Philippines vs. NLRC In its Resolution of 24 January 1991, the NLRC held the petitioner DBP, CISCOR and Medina, as jointly and severally liable, the pertinent part of which reads: WHEREFORE, the decision appealed from is hereby modified. All the respondents (Confidential Investigation and Security Corporation, Ernesto Medina and the Development Bank of the Philippines) are hereby adjudged jointly and severally liable to the admitted claims for 13th month pay, 5 days incentive leave, and refund of cash bond, and accordingly, immediate execution is hereby directed against any of the aforesaid respondents without prejudice to their having lawful recourse against each other. Anent the award of wage differential and the claim for rest day and legal holiday pay, the same are hereby remanded to the Arbitration Branch of origin for further hearing with the directive that it be completed in 20 days from the Arbitration Branchs receipt of this Order.3 Hence, this petition for review on certiorari, with petitioner DBP raising the following issues: 1. Whether or not the DBP is really liable for any of the claims of private respondents; 2. Whether or not the NLRC (or the Labor Arbiter) correctly applied Article 106 of the Labor Code; and 3. Whether or not the wage differential, rest day and legal holiday pay could and should be adjudicated in this case. The threshold and, in the ultimate analysis, the decisive issue raised by the present petition is whether petitioner was correctly held jointly and severally liable, alongside CISCOR and Medina, for the payment of the private respondents salary differentials, 13th month pay, service incentive leave pay, rest day pay, legal holiday pay, and the refund of their cash deposit. Petitioner posits that it is not the employer of private respondents and should thus not be held liable for the latters claims. In addition, it avers that it was not properly impleaded as it was CISCOR and Medina who filed the motion to implead petitioner, and not the private respondents, as complainants therein. Peti_______________ 3 Rollo, p. 44. 256 256 SUPREME COURT REPORTS ANNOTATED Development Bank of the Philippines vs. NLRC tioner even goes further by countering that, assuming arguendo, it was the indirect employer of private respondents, Article 106 of the Labor Code4 cannot be applied to the present case as there was no

failure on the part of CISCOR and Medina, as direct employer, to pay the claims of private respondents, but only a failure on the part of the latter to present the proper clearance to pave the way for the payment of the claims. It emphasizes that the term fails in Article 106 of the Labor Code implies insolvency or unwillingness of the direct employer to pay, which cannot be said of CISCOR and Medina as they have manifested their willingness to pay private respondents claims after they have presented proper clearance from accountability. We are not persuaded by petitioners arguments. Petitioners interpretation of Article 106 of the Labor Code is quite misplaced. Nothing in said Article 106 indicates that insolvency or unwillingness to pay by the contractor or direct employer is a prerequisite for the joint and several liability of the principal or indirect employer. In fact, the rule is that in job contracting, the principal is jointly and severally liable with the contractor. The statutory basis for this joint and several liability is set forth in Articles 1075 and 1096 in relation to Article 106 of _______________ 4 Article 106 reads in part: Whenever an employer enters into a contract with another person for the performance of the formers work, the employees of the contractor and of the subcontractor, if any, shall be paid in accordance with the provisions of this Code. In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. 5 Art. 107. Indirect employer.The provisions of the immediate preceding Article shall likewise apply to any person, partnership, association or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job or project. 6 Art. 109. Solidary liability.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 257 VOL. 233, JUNE 17, 1994 257 Development Bank of the Philippines vs. NLRC the Labor Code.7 There is no doubt that private respondents are entitled to the cash benefits due them. The petitioner is also, no doubt, liable to pay such benefits because the law mandates the joint and several liability of the principal and the contractor for the protection of labor. In Eagle Security Agency, Inc. vs. NLRC, this Court, explaining the aforesaid liability, held: This joint and several liability of the contractor and the principal is mandated by the Labor Code to assure compliance of the provisions therein including the statutory minimum wage [Article 99, Labor Code]. 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 contractors employees for purposes of paying the employees their wages should the contractor be unable to pay them. This joint and several liability facilitates, if not guarantees, payment of the workers performance of any work, task, job or project, thus giving the workers ample protection as mandated by the 1987 Constitution [See Article II Sec. 18 and Article XIII Sec. 3].8 Neither may petitioner argue that it was not properly impleaded and hence, should not be made liable to the claims of private respondents. On this matter, petitioner cannot be absolved from responsibility. We sustain respondent Commissions holding that: Anent the Banks first issue, what we actually have here is a Third-Party Complaint, defined by Section 12, Rule 6 of the Rules of Court as a claim that a defending party may, with leave of court, file against a person not a party to the action, called the third-party defendant, for contribution, indemnity, subrogation or any other relief, in respect of his opponents claim (emphasis ours). Since Rule I, Section 3 of our 1986 Revised NLRC Rules adopts suppletorily the Rules of Court in the interest of expeditious labor justice and whenever practi_______________ violation of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employer. 7 Philippine Fisheries Development Authority vs. National Labor Relations Commission, 213 SCRA 621, 627 (1992) citing Del Rosario and Sons Logging Enterprises, Inc. vs. NLRC, 136 SCRA 669 (1985); Baguio vs. NLRC, 202 SCRA 465 (1991); ECAL vs. NLRC, 195 SCRA 224 (1991). 8 173 SCRA 479, 485 (1989). 258 258 SUPREME COURT REPORTS ANNOTATED Development Bank of the Philippines vs. NLRC cable and convenient with the Security Agencys impleading the Bank for indemnity and subrogation considering that the complainants worked with the Bank to safeguard their premises, properties and their person (Record, p. 76), such a third-party complaint would therefore be proper. That the bank has not disputed liability on the admitted claims, but professes merely subsidiary, instead of solidary liability, we find its position here all the more, untenable.9 Finally, petitioner submits that wage differential, rest day and legal holiday pay should not be adjudicated in this case. The respondent Commission, however, observed: Regarding the question of wage differential, we note that the complaint (Record, p. 1), as well as the complainants Position Paper (Record, pp. 5-10) do not mention about any wage differential claim. We do not therefore see any basis with which we may, on sight, affirm the said award. We note though that

complainants position paper save technical arguments (that after all are not binding to us in this jurisdiction), sufficiently claims rest day and legal holiday pay, claims that were not strongly refuted by respondents. Impressed, although not convincingly, that the award on wage differential could have referred to the complainants claim for rest day and legal holiday pay, we therefore see the need to have the said claims subjected to further hearing but for a limited period of 20 days.10 We note that in the present case, there is no claim for wage differentials either in the complaints or in the position paper filed by private respondents before the labor arbiter. Accordingly, no relief may be granted on such matter. We, however, agree with the respondent Commission in its stand that private respondents are entitled to rest day and holiday pay (aside from the refund of their cash bond and the payment of their 13th month pay and service incentive leave pay for 1989). Private respondents position paper submitted before the labor arbiter properly raised the two (2) issues (rest and holiday pay) and included the same in their prayer for relief. The computation of the amount due each individual security guard can be made during the additional hearings ordered by the Commission. _______________ 9 Rollo, p. 48. 10 Id., p. 47. 259 VOL. 233, JUNE 17, 1994 259 Development Bank of the Philippines vs. NLRC WHEREFORE, premises considered, the questioned resolution of the respondent NLRC is hereby AFFIRMED with the modification that the additional hearing ordered by the NLRC shall not include wage differentials but shall be confined to legal holiday and rest day pay. Execution shall forthwith proceed as to the NLRC awards of 13th month pay, service incentive leave pay and return of private respondents cash bond. Petitioner and CISCOR/Medina are ORDERED to pay jointly and severally the claims of private respondents, as finally awarded by the NLRC, without prejudice to the right of reimbursement which petitioner or CISCOR/Medina may have against each other. SO ORDERED. Narvasa (C.J., Chairman), Regalado, Puno and Mendoza, JJ., concur. Resolution affirmed. Note.The existence of an employer-employee relationship is essentially a factual question and the NLRCs findings thereon are accorded great respect and even finality when the same are supported by substantial evidence (Cathedral School of Technology vs. National Labor Relations Commission, 214 SCRA 551 [1992]). o0o [Development Bank of the Philippines vs. NLRC, 233 SCRA 250(1994)]

SUPREME COURT REPORTS ANNOTATED United Special Watchman Agency vs. Court of Appeals G.R. No. 152476. July 8, 2003.* UNITED SPECIAL WATCHMAN AGENCY, petitioner, vs. The HONORABLE COURT OF APPEALS, CESAR PAMA, BENJAMIN PEREZ, JOSE ABRIAD, EDUARDO ALARBA, ANTONIO AVILA, OSCAR BERNARDO, JAIME COLUMBRES, MARIO COLUMBRES, RONNIE DESCUTODO, CONDORDIO EMPINO, NOEL FLAVIA, ANDRES GEDUCOS, PANFILO IHALAS, JUAN MIJARES, MARCELO MIJARES, CANESIO OMBAJIN, ANTONIO PAMA, CRISPULO PAMA, JR., DANILO PAMA, ESTAFANO PAMA, PEPITO PAMA, JR., ROMY PAMPOSA, JESUS PANIALES, DOMING PANIZALES, ARNALDO PEREZ, FIDEL PILOTON, CONCORDIO DE LOS REYES, VICENTE ROBLES, ALEJANDRO ROTAO, GERARDO SUMANGHID, NOEL SUPLIDO, MONICO TIEMPO, ALFREDO VELENZUELA, ARTURO VALENZUELA, ROMY VELARDE, ELISEO VILLAFLOR, and ARTEMIO VILLALOBOS, and the NATIONAL LABOR RELATIONS COMMISSION, respondents. Civil Procedure; Actions; Pleadings and Practice; Forum Shopping; Forum shopping exists when the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in an_______________ * THIRD DIVISION. 433 VOL. 405, JULY 8, 2003 433 United Special Watchman Agency vs. Court of Appeals other.Forum shopping exists when the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in another. There is forum shopping when there is an: (1) identity of the parties, or at least such parties as to represent the same interest in both actions; (2) identity of the rights asserted and relief prayed for, the relief being founded on the same set of facts; and (3) identity of the two preceding particulars such that any judgment rendered in the other action will amount to res judicata in the action under consideration, or will constitute litis pendentia. Same; Same; Same; Same; Forum shopping is not only contumacious but also deplorable because it adds to the congestion of the heavily burdened dockets of the courts.The rule explicitly prohibits a party against whom an adverse judgment has been rendered in one forum from seeking another forum in the hope of obtaining a favorable disposition in the latter. Forum shopping is not only contumacious but also deplorable because it adds to the congestion of the heavily burdened dockets of the courts. Same; Same; Same; Same; For resorting to forum shopping, the petition of USWA should be dismissed

with prejudice.Even if a party admits in the certification of non-forum shopping the existence of other related cases pending before another body, this does not exculpate such party who is obviously and deliberately seeking a more friendly forum for his case. For resorting to forum shopping, the petition of USWA should be dismissed with prejudice. Same; Same; Same; Certiorari; This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court where only questions of law are allowed.This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court where only questions of law are allowed. It is fundamental that (f)indings of facts of administrative bodies charged with their specific field of expertise, are afforded great weight by the courts, and in the absence of substantial showing that such findings are made from an erroneous estimation of the evidence presented, they are conclusive, and in the interest of stability of the governmental structure, should not be disturbed. PETITION for review on certiorari of a decision of the Court of Appeals. The facts are stated in the opinion of the Court. Jose T. Collado, Jr. for petitioner. David Bartido Loste for private respondents. 434 434 SUPREME COURT REPORTS ANNOTATED United Special Watchman Agency vs. Court of Appeals PUNO, J.: Assailed in this petition for certiorari under Rule 45 of the Revised Rules of Court is the decision of the Court of Appeals which dismissed the petition for certiorari filed by petitioner, United Special Watchman Agency (USWA). A complaint for illegal dismissal and payment of money claims was filed by respondent employees against USWA and Banco Filipino Savings and Mortgage Bank (BF). It stemmed from the termination of the Contract for Security Services1 entered into between USWA and BF. The parties agreed that the party terminating the CONTRACT shall give (a) THIRTY (30)-day notice prior to the date of termination to the other party.2 The contract took effect on 1 June 1994. However, on 3 June 1994, or two (2) days later, BF terminated the contract. The termination letter dated 3 June 1994, but received on June 17, advised USWA of the termination to take effect 30 days from receipt thereof.3 USWA alleged that, upon receipt of the letter, Mr. Angel Baliwag, its Operations Manager, immediately notified all the affected employees stationed at the BF branches about the termination of their contract. He advised them to report to the office for reassignment. Only thirty (30) out of the sixty-seven (67)

guards reported and they were given new assignments. Out of the remaining thirty-seven (37), twentyone (21) filed, on 4 August 1994, a complaint for illegal dismissal and payment of money claims against USWA and BF with the Regional Arbitration Branch of the National Labor Relations Commission (NLRC). On 29 August 1994, the complaint was amended to include all thirty-seven (37) employees. In the course of the proceedings, five (5) of the thirty-seven employees reported to the office and were given new posts.4 The employees claimed that they were put on a floating status. They denied that USWA, represented by Mr. Baliwag, notified them of the standing offer of the agency to reassign them to other _______________ 1 Rollo, pp. 129-131. 2 Id., at p. 130. 3 Id., at p. 132. 4 Id., at p. 401. 435 VOL. 405, JULY 8, 2003 435 United Special Watchman Agency vs. Court of Appeals clients after the termination of the contract with BF. Due to their dismissal, they prayed for separation pay. On 8 January 1998, the Labor Arbiter ordered USWA to pay the employees separation pay, and both USWA and BF to pay the salary differential and attorneys fees.5 On appeal, the NLRC, on 23 July 1998, remanded the case, finding the conclusions on the issues of illegal dismissal and wage differential by the Arbiter without sufficient basis.6 However, on 2 March 2000, a compromise settlement was reached between BF and the employees.7 The Arbiter approved the settlement in its decision dated 15 March 2000, and dismissed the complaint for illegal dismissal for lack of merit.8 Aggrieved, the employees filed an appeal with the NLRC. The NLRC ordered USWA to pay the employees their separation pay in light of its conclusion that there was no proof that the employees were notified to report for reassignment after the termination of the contract.9 The motion for reconsideration was denied on 14 September 2001.10 Thus, on 16 November 2001, USWA filed with the Court of Appeals a Petition for Certiorari under Rule 65 of the Revised Rules of Court. The petition was dismissed outright in a resolution by the appellate court11 because Gen. Rodrigo Ordoyo, the Managing Director who signed the certification of non-forum shopping, was not authorized by a board resolution of USWA and its co-petitioner BF. USWA filed a Motion for Reconsideration to which was attached its board resolution authorizing Ordoyo to sign the certification. The motion was likewise denied because only USWA gave the authorization although there were other petition-ers.12 The denial was received by USWA on 15 March 2002. On 18 March 2002, USWA filed a Second Motion for

Reconsideration with Leave of Court. It alleged that it was only USWA which intended to file the Petition for Certiorari, but the title included petitioner BF because they merely copied the title of the case from the NLRC _______________ 5 CA Rollo, p. 48. 6 Id., at p. 59. 7 Id., at p. 62. 8 Id., at p. 69. 9 Promulgated on 30 March 2001; Id., at p. 27. 10 Id., at p. 36. 11 Dated 28 November 2001 but received by petitioners on 5 December 2001, Rollo, p. 41. 12 6 March 2002, CA Rollo, p. 169. 436 436 SUPREME COURT REPORTS ANNOTATED United Special Watchman Agency vs. Court of Appeals decision.13 While the second motion for reconsideration was pending before the Court of Appeals, USWA filed the instant Petition for Certiorari under Rule 45 of the Revised Rules of Court.14 It was only on 27 June 2002 when the Court of Appeals dismissed the second motion for reconsideration on the ground that it is a prohibited pleading.15 USWA contends that the Court of Appeals erred when it did not give due course to its petition and prayed that the aforementioned resolutions of the appellate court dismissing the petition be an-nulled and the case be remanded to the same court.16 The respondent employees, in their comment, prayed that the petition be dismissed due to forum shopping and for lack of merit.17 We shall first resolve the procedural issue. The question is whether USWA is guilty of forum shopping when it filed the present petition with this Court while its second motion for reconsideration was pending before the Court of Appeals. Forum shopping exists when the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in another.18 There is forum shopping when there is an: (1)

identity of the parties, or at least such parties as to represent the same interest in both actions; (2) identity of the rights asserted and relief prayed for, the relief being founded on the same set of facts; and (3) identity of the two preceding particulars such that any judgment rendered in the other action will amount to res judicata in the action under consideration, or will constitute litis pendentia.19 USWA contends that it did not resort to forum shopping because the issues involved in the pleadings before the Court of Appeals and before this Court are different, viz.: _______________ 13 Rollo, p. 63. 14 On 29 April 2002. 15 CA Rollo, p. 288. 16 Rollo, pp. 11-37. 17 Id., at pp. 185-188. 18 Ayala Land, Inc. v. Valisno, 324 SCRA 522 (2000). 19 International School, Inc. (Manila) v. Court of Appeals, 309 SCRA 367 (1999). 437 VOL. 405, JULY 8, 2003 437 United Special Watchman Agency vs. Court of Appeals The motion for reconsideration and the subsequent motion for reconsideration with Leave of Court filed by the petitioner with the Honorable Court of Appeals sought the reconsideration of its earlier resolutions to give due course to the petition in the interest of justice and fair play since petitioner believed that it has strictly complied with its directives and that the dismissal was based on the caption of the pleading and not on the allegations therein(,) (w)hile the instant petition sought the remand of the case to the Honorable Court of Appeals for appropriate action.20 (emphases and italics in the original) We disagree. We cannot countenance the over stretched argument of USWA. Its two motions for reconsideration pray that the Court of Appeals give due course to the petition for certiorari filed before it. The petition before this Court seeks the remand of the case to the Court of Appeals for appropriate action. It is obvious however, that if we grant the petition and remand the case, we will be ordering the Court of Appeals to give due course to USWAs petition. This is precisely the object of its motion for reconsideration, as well as its second motion for reconsideration. To be sure, a second motion for reconsideration is a prohibited pleading.21 But this cannot save USWA from a blatant violation of the rule on forum shopping. The rule explicitly prohibits a party against whom an adverse judgment has been rendered in one forum from seeking another forum in the hope of obtaining a favorable

disposition in the latter.22 Forum shopping is not only contumacious23 but also deplorable because it adds to the congestion of the heavily burdened dockets of the courts.24 It matters not that USWA admitted the existence of the second motion for reconsideration pending with the Court of Appeals in the certification of non-forum shopping attached to its petition. In the case of Request for Consolidation of Civil Case No. 1169, RTC _______________ 20 Rollo, p. 199. 21 No party shall be allowed a second motion for reconsideration of a judgment or final order. (Section 5, Rule 37, Revised Rules of Court); Philgreen Trading Construction Corporation v. Court of Appeals, 271 SCRA 719 (1997). 22 Chemphil Export & Import Corporation v. Court of Appeals, 251 SCRA 257 (1995). 23 Equitable Banking Corporation v. National Labor Relations Commission, 272 SCRA 352 (1997). 24 Solid Homes, Inc. v. Court of Appeals, 271 SCRA 157 (1997). 438 438 SUPREME COURT REPORTS ANNOTATED United Special Watchman Agency vs. Court of Appeals Br. 45, San Jose, Occidental Mindoro with Civil Case No. 3640, RTC Br. 49, Cabanatuan City,25 we held that even if a party admits in the certification of non-forum shopping the existence of other related cases pending before another body, this does not exculpate such party who is obviously and deliberately seeking a more friendly forum for his case. For resorting to forum shopping, the petition of USWA should be dismissed with prejudice.26 But even on its merits, the petition of USWA cannot prosper. It is the contention of USWA that the respondents were not illegally dismissed, but that they refused to report to the office after the termination of the contract with BF. Allegedly, it was the fault of the respondents that they did not have any work assignment. There being no illegal dismissal, they argue that the NLRC erred in awarding separation pay to the employees. Again, we do not subscribe to this argument. This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court where only questions of law are allowed. It is fundamental that (f)indings of facts of administrative bodies charged with their specific field of expertise, are afforded great weight by the courts, and in the absence of substantial showing that such findings are made from an erroneous estimation of the evidence presented, they are conclusive, and in the interest of stability of the governmental structure, should not be disturbed.27 The NLRC, in its decision dated 30 March 2001,28 held:

x x x In the case at bar, it is not shown that complainants were given new assignments six (6) months after termination of the contract between respondents bank and security agency. Records further do not show that complainants were informed, verbally or in writing(,) that they will be given new guarding assignments. Respondent security agency, through Mr. Angel Baliwag, Operations Officer, testified that he sent a letter dated 22 May 1995 to Atty. Loste, complainants counsel, requesting addresses of the complainants but the latter stated that he does (sic) not know the addresses of complainants. We cannot give due merit to respondents statement since the letter request was made beyond the six (6) months allowable period to place complainants on a floating status (pp. 6-10, TSN, _______________ 25 364 SCRA 189 (2001). 26 Supra. 27 Ocampo v. Commission on Elections, 325 SCRA 636 (2000); Alfaro v. Court of Appeals, 363 SCRA 799 (2001). 28 Rollo, p. 118. 439 VOL. 405, JULY 8, 2003 439 United Special Watchman Agency vs. Court of Appeals taken on 30 May 1996). Moreover, we find unbelievable that respondent agency does not have any record of the complainants addresses being their employees.29 These findings of the NLRC are supported by the evidence on record. It was established that the respondents were put on a temporary off-detail, which exceeded the allowable period of six (6) months, amounting to constructive dismissal.30 There is thus no further need to dwell on the questions of fact raised in this petition. Proceeding from the fact that the dismissal of the employees was illegal, we next rule on the liability of USWA. Pursuant to a legitimate job contracting, USWA and BF are jointly and severally liable in the payment of the wages of the employees, and for violation of any provision of the Labor Code.31 We note that a compromise agreement of the employees was executed between BF and the employees.32 However, the compromise agreement dealt only with salary differential. It did not include nor does it preclude the award of separation pay. In light of the illegal dismissal of the respondents, USWA is liable to pay the respondents separation pay equivalent to one (1) month pay for every year of service.33 WHEREFORE, the petition of USWA is dismissed.

_______________ 29 Id., at p. 124. 30 Superstar Security Agency v. National Labor Relations Commission, 184 SCRA 74 (1990). 31 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. (Art. 109 of the Labor Code of the Philippines); x x x In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. (Art. 106) 32 Rollo, pp. 152-153. 33 Art. 279 of the Labor Code; Sec. 4[b], Rule I, Book VI, Rules Implementing the Labor Code; Hantex Trading Co., Inc., and/or Mariano Chua v. Court of Appeals, G.R. No. 148241, 27 September 2002, 390 SCRA 181. 440 440 SUPREME COURT REPORTS ANNOTATED Alarcon vs. Court of Appeals SO ORDERED. Panganiban, Sandoval-Gutierrez, Corona and Carpio-Morales, JJ., concur. Petition dismissed. Note.Certiorari as a special civil action can be availed of when: (a) the tribunal, board or officer exercising judicial functions has acted without or in excess of jurisdiction or with grave abuse of discretion amounting to lack or in excess of jurisdiction, and (b) there is no appeal, nor any plain, speedy and adequate remedy in the ordinary course of law for the purpose of annulling or modifying the proceeding. (Suntay vs. Cojuangco-Suntay, 300 SCRA 760 [1998]) o0o [United Special Watchman Agency vs. Court of Appeals, 405 SCRA 432(2003)]

G.R. No. 154715. December 11, 2003.* NEW GOLDEN CITY BUILDERS & DEVELOPMENT CORPORATION and MANUEL SY, petitioners, vs. COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, LITO GALLO, TEOFANES ANORA, RICARDO CENTINALES, ROBERTO QUIRINO, LORENZO DIVINAGRACIA, EUTIQUIO ANORA, TEOFILO ANORA, ANECITO VISTAL, DIONISIO VISTAL, ARNOLD DE VERA, ARNOLD PAGENIO, ROGELIO MELENCIO, CECILIANO MELENCIO, OLYMPIO NENIZA, MANUEL NENIZA, CASTOR ANORA, ROLAND TROBISO, FREDISVINDO DE VERA, ANTONIO ARTUGUE, RENE EPIZ, PACIANO ROSAUPAN, JANELO REPOLEDON and TORIBIO MELENCIO, respondents. Labor Law; Labor Only Contracting; Questions of Law; While the issue of labor-only contracting may involve some factual considerations, the existence of an employer-employee relation is nonetheless a question of law.Prefatorily, while the issue of labor-only contracting may involve some factual considerations, the existence of an employer-employee relation is nonetheless a question of law. Thus, it falls squarely within the ambit of this Courts judicial review. Same; Same; Job Contracting; Words and Phrases; Job Contracting, Explained.Under Section 8, Rule VIII, Book III, of the Omnibus Rules Implementing the Labor Code, an independent contractor is one who undertakes job contracting, i.e., a person who: (a) carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof; and (b) has substantial capital or investment in the form of tools, equipments, machineries, work premises, and other materials which are necessary in the conduct of the business. Jurisprudential holdings are to the effect that an determining the existence of an independent contractor relationship, several factors may be considered, such as, but not necessarily confined to, whether or not the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of specified pieces of work; the control and supervision of the work to another; the employers power with respect to the hiring, firing and pay_______________ * FIRST DIVISION. 412 412 SUPREME COURT REPORTS ANNOTATED New Golden City Builders & Development Corporation vs. Court of Appeals ment of the contractors workers; the control of the premises; the duty to supply premises, tools, appliances, materials and labor; and the mode, manner and terms of payment. Same; Same; Same; The test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do the work according to his own methods

and without being subjected to the control of the employer, except only to the results of the work.The test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subject to the control of the employer, except only to the results of the work. This is exactly the situation obtaining in the case at bar. Nilo Layno Builders hired its own employees, the private respondents, to do specialized work in the Prince David Project of the petitioner. The means and methods adopted by the private respondents were directed by Nilo Layno Builders except that, from time to time, the engineers of the petitioner visited the site to check whether the work was in accord with the plans and specifications of the principal. As admitted by Nilo G. Layno, he undertook the contract work on his own account and responsibility, free from interference from any other persons, except as to the results; that he was the one paying the salaries of private respondents; and that as employer of the private respondents, he had the power to terminate or dismiss them for just and valid cause. Indubitably, the Court finds that Nilo Layno Builders maintained effective supervision and control over the private complainants. Thus, it was plain conjecture on the part of the Labor Arbiter, the NLRC and the Court of Appeals to conclude that Nilo Layno Builders was a labor-only contractor merely because it does not have investment in the form of tools or machineries. They failed to appreciate the fact that Nilo Layno Builders had substantial capitalization for it did not only provide labor to do the specified project and pay their wages, but it furnished the materials to be used in the construction. Same; Same; Same; Judicial Notice; The Court has taken judicial notice of the general practice adopted in several government and private institutions and industries of hiring independent contractors to perform special services.In Neri v. NLRC, we held that the labor contractor which sufficiently proved that it had substantial capital was not engaged in labor-only contracting. Thus: 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 conjunc413 VOL. 418, DECEMBER 11, 2003 413 New Golden City Builders & Development Corporation vs. Court of Appeals tion and should have been used. Moreover, the Court has taken judicial notice of the general practice adopted in several government and private institutions and industries of hiring independent contractors to perform special services. Same; Same; Same; Indirect Employers; In legitimate job contracting, the law creates an employeremployee relationship for a limited purpose, i.e., to ensure that the employees are paid their wages other than that the principal employer is not resp onsible for any claim made by the employees, such as backwages and separation pay.Anent the second issue, we hold that there existed an employer-

employee relationship between petitioner and private respondents albeit for a limited purpose. In legitimate job contracting, the law creates an employer-employee relationship for a limited purpose, i.e., to ensure that the employees are paid their wages. The principal employer becomes jointly and severally liable with the job contractor only for the payment of the employees wages whenever the contractor fails to pay the same. Other than that, the principal employer is not responsible for any claim made by the employees. From the foregoing disquisition, the petitioner did not, as it could not, illegally dismisses the private complainants. Hence, it could not be held liable for backwages and separation pay. Nevertheless, it is jointly and severally liable with Nilo Layno Builders for the private complainants wages, in the same manner and extent that it is liable to its direct employees. PETITION for review on certiorari of a decision of the Court of Appeals. The facts are stated in the opinion of the Court. Fidel B. Escario, Jr. for petitioners. Julio F. Andres for private respondents. YNARES-SANTIAGO, J.: This is a petition for review under Rule 45 of the Rules of Court seeking the reversal of the decision1 of the Court of Appeals dated February 28, 2002, in CA-G.R. SP No. 65577, which dismissed the petition on the ground that there was no grave abuse of discretion on the part of the public respondent National Labor Relations Commission (NLRC) in ordering petitioner 10 reinstate private _______________ 1 Penned by Justice Bienvenido L. Reyes and concurred in by Justices Ma. Alicia Austria-Martinez (now Associate Justice of the Supreme Court) and Justice Roberto A. Barrios. 414 414 SUPREME COURT REPORTS ANNOTATED New Golden City Builders & Development Corporation vs. Court of Appeals respondents and to pay their full backwages from the dates of their dismissal to the dates of their reinstatement. The antecedent facts are as follows: On April 4, 1995, petitioner New Golden City Builders and Development Corporation, a corporation engaged in the construction business, entered into a construction contract with Prince David Development Corporation for the construction of a 17-storey office and residential condominium building along Katipunan Road, Loyola Heights, Quezon City, Metro Manila.2

Petitioner engaged the services of Nilo Layno Builders to do the specialized concrete works, form works and steel rebars works, in consideration of the total contract price of P5 Million. Pursuant to the contract, Nilo Layno Builders hired private respondents to perform work at the project. After the completion of the phase for which Nilo Layno Builders was contracted sometime in 1996, private respondents filed a complaint case against petitioner and its president, Manuel Sy, with the Arbitration Branch of the NLRC for unfair labor practice, non-payment of 13th month pay, non-payment of 5 days service incentive leave, illegal dismissal and severance pay in lieu of reinstatement. On August 30, 1999, Labor Arbiter Felipe Garduque rendered a decision finding that Nilo Layno Builders was a labor-only-contractor; thus, private respondents were deemed employees of the petitioner. The dispositive portion of the decision reads: WHEREFORE, premises considered, respondents New Golden City Builders and Development Corp. and/or Manuel Sy are hereby ordered to provide work as operator or steelman for herein respondents within six (6) months from receipt hereof, otherwise, the latter will be awarded separation pay equivalent to one month pay for every year of service, without loss of seniority rights but without backwages, and to pay them within ten (10) days from receipt hereof, their respective 13th month pay and service incentive leave pay. . . xxx xxx xxx

Complainants charges of illegal dismissal including their prayers for backwages and damages and unfair labor practice, and other monetary claims are hereby dismissed for lack of merit or withdrawn. SO ORDERED.3 _______________ 2 Rollo, pp. 139-150. 3 Id., pp. 198-200. 415 VOL. 418, DECEMBER 11, 2003 415 New Golden City Builders & Development Corporation vs. Court of Appeals Both parties appealed the decision of the Labor Arbiter to the NLRC. Petitioner maintained that Nilo Layno Builders was an independent contractor and that private respondents were not its employees. On the other hand, private respondents claimed that the Labor Arbiter erred in finding that they were not illegally dismissed and not entitled to recover monetary claims like premium pay for rest days, regular holidays and special holidays.

On March 19, 2001, the NLRC affirmed with modification the Labor Arbiters decision. As modified, the NLRC held that private respondents were illegally dismissed and ordered petitioner to reinstate them and to pay their full backwages. The dispositive portion of the decision reads: WHEREFORE, the decision appealed from is hereby MODIFIED to the extent that the respondents are hereby ordered to reinstate the complainants and to pay their full backwages from the dates of their dismissal to the dates of their reinstatement. The award to the complainants of their 13th month pay and service incentive leave pay is hereby AFFIRMED. SO ORDERED.4 Since petitioners motion for a reconsideration of the decision was denied in the resolution5 of May 10, 2001, it instituted a special civil action for certiorari with the Court of Appeals, alleging that the NLRC gravely abused its discretion in totally discarding uncontroverted evidence and in relying merely on conjectures and assumptions not supported by facts. On February 29, 2002, the Court of Appeals rendered judgment as follows: WHEREFORE, premises considered, the PETITION FOR CERTIORARI is hereby DENIED. SO ORDERED.6 Hence, this petition for review, raising the following arguments: _______________ 4 Id., p. 212, penned by Commissioner Ireneo B. Bernardo; concurred in by Presiding Commissioner Lourdes C. Javier and Commissioner Tito F. Genilo. 5 Id., pp. 215-216. 6 Id., p. 136. 416 416 SUPREME COURT REPORTS ANNOTATED New Golden City Builders & Development Corporation vs. Court of Appeals THE COURT OF APPEALS AND NLRC ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK AND/OR EXCESS OF JURISDICTION CONSIDERING THAT: 1. THE PRIVATE RESPONDENTS ARE NOT ENTITLED TO BACKWAGES BEYOND 7 APRIL 2000.

2. THE PRIVATE RESPONDENTS WERE NOT ILLEGALLY DISMISSED SINCE THERE EXISTS NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PETITIONERS AND THE PRIVATE RESPONDENTS BECAUSE THE LATTER WERE NOT ALL EMPLOYEES OF A LEGITIMATE INDEPENDENT LABOR CONTRACTOR. 3. NILO G. LAYNO BUILDERS IS A LEGITIMATE LABOR CONTRACTOR COMPLETE WITH ALL THE REQUIREMENTS SET BY LAW TO BE SUCH.7 Inextricably intertwined in the resolution of this instant petition is the determination of the issues of whether Nilo Layno Builders was an independent contractor or a labor-only contractor; and whether there existed an employer-employee relationship between petitioner and private respondents. In their Comment, private respondents contend that the issues presented by the petitioner were clearly factual in nature and, thus, should not be entertained by this Court.8 Prefatorily, while the issue of labor-only contracting may involve some factual considerations, the existence of an employeremployee relation is nonetheless a question of law. Thus, it falls squarely within the ambit of this Courts judicial review.9 The Court finds partial merit in the petition. Under Section 8, Rule VIII, Book III, of the Omnibus Rules Implementing the Labor Code, an independent contractor is one who undertakes job contracting, i.e., a person who: (a) carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the perfor_______________ 7 Id., p. 109. 8 Id., p. 240. 9 PAL v. National Labor Relations Commission, 358 Phil. 919, 938; 296 SCRA 214 (1998). 417 VOL. 418, DECEMBER 11, 2003 417 New Golden City Builders & Development Corporation vs. Court of Appeals mance of the work except as to the results thereof; and (b) has substantial capital or investment in the form of tools, equipments, machineries, work premises, and other materials which are necessary in the conduct of the business. Jurisprudential holdings are to the effect that an determining the existence of an independent contractor relationship, several factors may be considered, such as, but not necessarily confined to, whether or not the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the

performance of specified pieces of work; the control and supervision of the work to another; the employers power with respect to the hiring, firing and payment of the contractors workers; the control of the premises; the duty to supply premises, tools, appliances, materials and labor; and the mode, manner and terms of payment.10 Juxtaposing this provision vis--vis the facts of this case, we are convinced that Nilo Layno Builders is undertaking permissible labor or job contracting. Nilo Layno Builders is a duly licensed labor contractor carrying on an independent business for a specialized work that involves the use of some particular, unusual and peculiar skills and expertise, like concrete works, form works and steel rebars works. As a licensed labor contractor, it complied with the conditions set forth in Section 5, Rule VIIA, Book III, Rules to Implement the Labor Code, among others, proof of financial capability and list of equipment, tools, machineries and implements to be used in the business. Further, it entered into a written contract with the petitioner, a requirement under Section 3, Rule VII-A, Book III, Rules to Implement the Labor Code to assure the employees of the minimum labor standards and benefits provided by existing laws. The test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subject to the control of the employer, except only to the results of the work. _______________ 10 Ponce v. National Labor Relations Commission, 355 Phil. 103, 113; 293 SCRA 366 (1998); Religious of the Virgin Mary v. National Labor Relations Commission, 375 Phil. 75, 94; 316 SCRA 614 (1999); Escario v. National Labor Relations Commission, 388 Phil. 929, 939; 333 SCRA 257 (2000). 418 418 SUPREME COURT REPORTS ANNOTATED New Golden City Builders & Development Corporation vs. Court of Appeals This is exactly the situation obtaining in the case at bar. Nilo Layno Builders hired its own employees, the private respondents, to do specialized work in the Prince David Project of the petitioner. The means and methods adopted by the private respondents were directed by Nilo Layno Builders except that, from time to time, the engineers of the petitioner visited the site to check whether the work was in accord with the plans and specifications of the principal. As admitted by Nilo G. Layno, he undertook the contract work on his own account and responsibility, free from interference from any other persons, except as to the results; that he was the one paying the salaries of private respondents; and that as employer of the private respondents, he had the power to terminate or dismiss them for just and valid cause.11 Indubitably, the Court finds that Nilo Layno Builders maintained effective supervision and control over the private complainants. Thus, it was plain conjecture on the part of the Labor Arbiter, the NLRC and the Court of Appeals to

conclude that Nilo Layno Builders was a labor-only contractor merely because it does not have investment in the form of tools or machineries. They failed to appreciate the fact that Nilo Layno Builders had substantial capitalization for it did not only provide labor to do the specified project and pay their wages, but it furnished the materials to be used in the construction.12 In Neri v. NLRC,13 we held that the labor contractor which sufficiently proved that it had substantial capital was not engaged in labor-only contracting. Thus: 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. Moreover, the Court has taken judicial notice of the general practice adopted in several government and private institutions _______________ 11 Rollo, p. 82. 12 Id., p. 187. 13 G.R. Nos. 97008-09, 23 July 1993, 224 SCRA 717, 721. 419 VOL. 418, DECEMBER 11, 2003 419 New Golden City Builders & Development Corporation vs. Court of Appeals and industries of hiring independent contractors to perform special services.14 Anent the second issue, we hold that there existed an employer-employee relationship between petitioner and private respondents albeit for a limited purpose. In legitimate job contracting, the law creates an employer-employee relationship for a limited purpose, i.e., to ensure that the employees are paid their wages. The principal employer becomes jointly and severally liable with the job contractor only for the payment of the employees wages whenever the contractor fails to pay the same. Other than that, the principal employer is not responsible for any claim made by the employees.15 From the foregoing disquisition, the petitioner did not, as it could not, illegally dismisses the private complainants. Hence, it could not be held liable for backwages and separation pay.16 Nevertheless, it is

jointly and severally liable with Nilo Layno Builders for the private complainants wages, in the same manner and extent that it is liable to its direct employees. The pertinent provisions of the Labor Code read: ART. 106. Contractor or subcontractor.Whenever an employer enters into a contract with another person for the performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be paid in accordance with the provisions of this Code. In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. (Emphasis ours) xxx xxx xxx

ART. 107. Indirect employer.The provisions of the immediately preceding Article shall likewise apply to any person, partnership, associa_______________ 14 Filipinas Synthetic Fiber Corporation v. National Labor Relations Corporation, 327 Phil. 144, 149; 257 SCRA 334 (1996). 15 San Miguel Corporation v. MAERC Integrated Services, Inc., et al., G.R. No. 144672, 10 July 2003, 405 SCRA 579. 16 Philippine Airlines, Inc. v. National Labor Relations Commission, 384 Phil. 828, 841; 328 SCRA 273 (2000). 420 420 SUPREME COURT REPORTS ANNOTATED New Golden City Builders & Development Corporation vs. Court of Appeals tion or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job or project. In the case of Rosewood Processing, Inc. v. NLRC,17 it was held: The joint and several liability of the employer or principal was enacted to ensure compliance with the provisions of the Code, principally those on statutory minimum wage. The contractor or subcontractor is made liable by virtue of his or her status as a direct employer, and the principal as the indirect employer of the contractors employees. This liability facilitates, if not guarantees, payment of the workers compensation, thus, giving the workers ample protection as mandated by the 1987

Constitution. This is not unduly burdensome to the employer. Should the indirect employer be constrained to pay the workers, it can recover whatever amount it had paid in accordance with the terms of the service contract between itself and the contractor. This liability covers the payment of service incentive leave and 13th month pay18 of the private complainants during the time they were working at petitioners Prince David Project. So long as the work, task, job or project has been performed for petitioners benefit or on its behalf, the liability accrues for such period even if, later on, the employees are eventually transferred or reassigned elsewhere.19 WHEREFORE, in view of the foregoing, the petition is PARTLY GRANTED. The decision of the Court of Appeals in CA-G.R. SP No. 65577 is MODIFIED. Petitioner is ABSOLVED from liability for the payment of backwages to private respondents. However, he is ORDERED to pay, jointly and severally with Nilo Layno Builders, private complainants Service Incentive Leave Pay and 13th Month Pay. SO ORDERED. Davide, Jr. (C.J., Chairman), Panganiban, Carpio and Azcuna, JJ., concur. Petition partly granted. _______________ 17 352 Phil. 1013, 1033-1034; 290 SCRA 408 (1998). 18 Philippine American Life Insurance Company v. National Labor Relations Commission, 356 Phil. 434, 448-449; 295 SCRA 123 (1998). 19 Id. 421 VOL. 418, DECEMBER 11, 2003 421 Agan vs. Heirs of Sps. Andres Nueva and Diosdada Nueva Notes.The labor-only contractori.e. the person or intermediaryis considered merely as an agent of the employer, the employer having been made by the statute responsible to the employees of the labor-only contractor as if such employees had been directly employed by the employer. (Philippine Airlines, Inc. vs. National Labor Relations Commission, 296 SCRA 214 [1998]) 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. (Vinoya vs.

National Labor Relations Commission, 324 SCRA 469 [2000]) o0o [New Golden City Builders & Development Corporation vs. Court of Appeals, 418 SCRA 411(2003)]

VOL. 405, JULY 10, 2003 579 San Miguel Corporation vs. MAERC Integrated Services, Inc. G.R. No. 144672. July 10, 2003.* SAN MIGUEL CORPORATION, petitioner, vs. MAERC INTEGRATED SERVICES, INC.; and EMERBERTO ORQUE, ROGELIO PRADO, JR., EDDIE SELLE, ALEJANDRO ANNABIEZA, ANNIAS JUAMO-AS, CONSORCIO MANLOLOYO, ANANIAS ALCONTIN, REY GESTOPA, EDGARDO NUEZ, JUNEL CABATINGAN, PAUL DUMAQUETA, FELIMON ECHAVEZ, VITO SEALANA, DENECIA PALAO, ROBERTO LAPIZ, BALTAZAR LABIO, LEONARDO BONGO, EL CID ICALINA, JOSE DIOCAMPO, ADELO CANTILLAS, ISAIAS BRANZUELA, RAMON ROSALES, GAUDENCIO PESON, HECTOR CABAOG, _______________ 39 Ong vs. People, 342 SCRA 372, 387 [2000]. * SECOND DIVISION. 580 580 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. MAERC Integrated Services, Inc. EDGARDO DAGMAYAN, ROGELIO CRUZ, ROLANDO ESPINA, BERNARDINO REGIDOR, ARNELIO SUMALINOG, GUMERSINDO ALCONTIN, LORETO NUEZ, JOEBE BOY DAYON, CONRADO MESANQUE, MARCELO PESCADOR, MARCELINO JABAGAT, VICENTE DEVILLERES, VICENTE ALIN, RODOLFO PAHUGOT, RUEL NAVARES, DANILO ANABIEZA, ALEX JUEN, JUANITO GARCES, SILVINO LIMBAGA, AURELIO JURPACIO, JOVITO LOON, VICTOR TENEDERO, SASING MORENO, WILFREDO HORTEZUELA, JOSELITO MELENDEZ, ALFREDO GESTOPA, REGINO GABUYA, JORGE GAMUZARNO, LOLITO COCIDO, EFRAIM YUBAL, VENERANDO ROAMAR, GERARDO BUTALID, HIPOLITO VIDAS, VENGELITO FRIAS, VICENTE CELACIO, CORLITO PESTAAS, ERVIN HYROSA, ROMMEL GUERERO, RODRIGO ENERLAS, FRANCISCO CARBONILLA, NICANOR CUIZON, PEDRO BRIONES, RODOLFO CABALHUG, TEOFILO RICARDO, DANILO R. DIZON, ALBERTO EMBONG, ALFONSO ECHAVEZ, GONZALO RORACEA, MARCELO CARACINA, RAUL BORRES, LINO TONGALAMOS, ARTEMIO BONGO, JR., ROY AVILA, MELCHOR FREGLO, RAUL CABILLADA, EDDIE CATAB, MELENCIO DURANO, ALLAN RAGO, DOMINADOR CAPARIDA, JOVITO CATAB, ALBERT LASPIAS, ALEX ANABIEZA, NESTOR REYNANTE, EULOGIO GESTOPA, MARIO BOLO, EDERLITO A. BALOCANO, JOEL PEPITO, REYNALDO LUDIA, MANUEL CINCO, ALLAN AGUSTIN, PABLITO POLEGRATES, CLYDE PRADO, DINDO MISA, ROGER SASING, RAMON ARCALLANA, GABRIEL SALAS, EDWIN SASAN, DIOSDADO BARRIGA, MOISES SASAN, SINFORIANO CANTAGO, LEONARDO

MARTURILLAS, MARIO RANIS, ALEJANDRO RANIDO, JEROME PRADO, RAUL OYAO, VICTOR CELACIO, GERALDO ROQUE, ZOSIMO CARARATON, VIRGILIO ZANORIA, JOSE ZANORIA, ALLAN ZANORIA, VICTORINO SENO, TEODULO JUMAO-AS, ALEXANDER HERA, ANTHONY ARANETA, ALDRIN SUSON, VICTOR VERANO, RUEL SUFRERENCIA, ALFRED NAPARATE, WENCESLAO BACLOHON, EDUARDO LANGITA, FELIX ORDENEZA, ARSENIO LOGARTA, EDUARDO DELA VEGA, JOVENTINO CANOOG, ROGELIO ABAPO, RICARDO RAMAS, JOSE BANDIALAN, ANTONIO BASALAN, LYNDON BASALAN, WILFREDO ALIVIANO, BIENVENIDO ROSARIO, JESUS CAPANGPANGAN, RENATO MENDOZA, ALEJANDRO CATANDEJAN, 581 VOL. 405, JULY 10, 2003 581 San Miguel Corporation vs. MAERC Integrated Services, Inc. RUBEN TALABA, FILEMON ECHAVEZ, MARCELINO CARACENA, IGNAC1O MISA, FELICIANO AGBAY, VICTOR MAGLASANG, ARTURO HEYROSA, ALIPIO TIROL, ROSENDO MONDARES, ANICETO LUDIA, REYNALDO LAVANDERO, REUYAN HERCULANO, TEODULO NIQUE, EMERBERTO ORQUE, ZOSIMO BAOBAO, MEDARDO SINGSON, ANTONIO PATALINGHUG, ERNESTO SINGSON, ROBERTO TORRES, CESAR ESCARIO, LEODEGARIO DOLLECIN, ALBERTO ANOBA, RODRIGO BISNAR, ZOSIMO BINGAS, ROSALIO DURAN, SR., ROSALIO DURAN, JR., ROMEO DURAN, ANTONIO ABELLA, MARIANO REPOLLO, POLEGARPO DEGAMO, MARIO CEREZA, ANTONIO LAOROMILLA, PROCTUSO MAGALLANES, ELADIO TORRES, WARLITO DEMANA, HENRY GEDARO, DOISEDERIO GEMPERAO, ANICETO GEMPERAO, JERRY CAPAROSO, SERLITO NOYNAY, LUCIANO RECOPELACION, JUANITO GARCES, FELICIANO TORRES, RANILO VILLAREAL, FERMIN ALIVIANO, JUNJIE LAVISTE, TOMACITO DE CASTRO, JOSELITO CAPILINA, SAMUEL CASQUEJO, LEONARDO NATAD, BENJAMIN SAYSON, PEDRO INOC, EDWARD FLORES, EDWIN SASAN, JOSE REY INOT, EDGAR CORTES, ROMEO LOMBOG, NICOLAS RIBO, JAIME RUBIN, ORLANDO REGIS, RICKY ALCONZA, RUDY TAGALOG, VICTORINO TAGALOG, EDWARD COLINA, RONIE GONZAGA, PAUL CABILLADA, WILFREDO MAGALONA, JOEL PEPITO, PROSPERO MAGLASANG, ALLAN AGUSTIN, FAUSTO BARGAYO, NOMER SANCHEZ, JOLITO ALIN, BIRNING REGIDOR, GARRY DIGNOS, EDWIN DIGNOS, DARIO DIGNOS, ROGELIO DIGNOS, JIMMY CABIGAS, FERNANDO ANAJAO, ALEX FLORES, FERNANDO REMEDIO, TOTO MOSQUIDA, ALBERTO YAGONIA, VICTOR BARIQUIT, IGNACIO MISA, ELISEO VILLARENO, MANUEL LAVANDERO, VIRCEDE, MARIO RANIS, JAIME RESPONSO, MARIANITO AGUIRRE, MARCIAL HERUELA, GODOFREDO TUACAO, PERFECTO REGIS, ROEL DEMANA, ELMER CASTILLO, WINEFREDO CALAMOHOY, RUDY LUCERNAS, ANTONIO CAETE, EFRAIM YUBAL, JESUS CAPANGPANGAN, DAMIAN CAPANGPANGAN, TEOFILO CAPANGPANGAN, NILO CAPANGPANGAN, CORORENO CAPANGPANGAN, EMILIO MONDARES, PONCIANO AGANA, VICENTE DEVILLERES, MARIO ALIPAN, ROMANITO ALIPAN, ALDEON ROBINSON, FORTUNATO SOCO, CELSO COMPUESTO, WILLIAM 582

582 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. MAERC Integrated Services, Inc. ITORALDE, ANTONIO PESCADOR, JEREMIAS RONDERO, ESTROPIO PUNAY, LEOVIJILDO PUNAY, ROMEO QUILONGQUILONG, WILFREDO GESTOPA, ELISEO SANTOS, HENRY ORIO, JOSE YAP, NICANOR MANAYAGA, TEODORO SALINAS, ANICETO MONTERO, RAFAELITO VERZOSA, ALEJANDRO RANIDO, HENRY TALABA, ROMULO TALABA, DIOSDADO BESABELA, SYLVESTRE TORING, EDILBERTO PADILLA, ALLAN HEROSA, ERNESTO SUMALINOG, ARISTON VELASCO, JR., FERNANDO LOPEZ, ALFONSO ECHAVEZ, NICANOR CUIZON, DOMINADOR CAPARIDA, ZOSIMO CORORATION, ARTEMIO LOVERANES, DIONISIO YAGONIA, VICTOR CELOCIA, HIPOLITO VIDAS, TEODORO ARCILLAS, MARCELINO HABAGAT, GAUDIOSO LABASAN, LEOPOLDO REGIS, AQUILLO DAMOLE, WILLY ROBLE and NIEL ZANORIA, respondents. Labor law; National Labor Relations Commission; Appeals; Well-established is the principle that findings of fact of quasi-judicial bodies, like the NLRC, are accorded with respect, even finality, if supported by substantial evidence.We find no basis to overturn the Court of Appeals and the NLRC. Well-established is the principle that findings of fact of quasi-judicial bodies, like the NLRC, are accorded with respect, even finality, if supported by substantial evidence. Particularly when passed upon and upheld by the Court of Appeals, they are binding and conclusive upon the Supreme Court and will not normally be disturbed. Same; Employer-Employee Relationship; Factors to be considered in ascertaining an employeremployee relationship.This Court has invariably held that in ascertaining an employer-employee relationship, the following factors are considered: (a) the selection and engagement of employee; (b) the payment of wages; (c) the power of dismissal; and, (d) the power to control an employees conduct, the last being the most important. Same; Independent Contractor; It is not enough to show substantial capitalization or investment in the form of tools, equipment, machinery and work premises, etc., to be considered an independent contractor.However, in Vinoya v. NLRC, we clarified that it was not enough to show substantial capitalization or investment in the form of tools, equipment, machinery and work premises, etc., to be considered an independent contractor. In fact, jurisprudential holdings were to the effect that in determining the existence of an independent contractor relationship, several factors may be considered, such as, but not necessarily confined to, whether the contractor was carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the 583 VOL. 405, JULY 10, 2003 583 San Miguel Corporation vs. MAERC Integrated Services, Inc.

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. Same; Same; Distinction between an independent contractor and a labor-only contractor.On this point, we agree with petitioner as distinctions must be made. In legitimate job contracting, the law creates an employer-employee relationship for a limited purpose, i.e., to ensure that the employees are paid their wages. The principal employer becomes jointly and severally liable with the job contractor only for the payment of the employees wages whenever the contractor fails to pay the same. Other than that, the principal employer is not responsible for any claim made by the employees. On the other hand, in labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal employer. The principal employer therefore becomes solidarity liable with the labor-only contractor for all the rightful claims of the employees. PETITION for review on certiorari of a decision of the Court of Appeals. The facts are stated in the opinion of the Court. Estenzo, Paloma, Jamora and Solon Law Offices for petitioner. Reales Law Office for MAERC Corporation. Alfredo F. Go for respondents. BELLOSILLO, J.: TWO HUNDRED NINETY-ONE (291) workers filed their complaints (nine [9] complaints in all) against San Miguel Corporation (petitioner herein) and Maerc Integrated Services, Inc. (respondent herein), for illegal dismissal, underpayment of wages, non-payment of service incentive leave pays and other labor standards benefits, and for separation pays from 25 June to 24 October 1991. The complainants alleged that they were hired by San Miguel Corporation (SMC) through its agent or intermediary Maerc Integrated Services, Inc. (MAERC) to work in two (2) designated workplaces 584 584 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. MAERC Integrated Services, Inc. in Mandaue City: one, inside the SMC premises at the Mandaue Container Services, and another, in the Philphos Warehouse owned by MAERC. They washed and segregated various kinds of empty bottles

used by SMC to sell and distribute its beer beverages to the consuming public. They were paid on a per piece or pakiao basis except for a few who worked as checkers and were paid on daily wage basis. Complainants alleged that long before SMC contracted the services of MAERC a majority of them had already been working for SMC under the guise of being employees of another contractor, Jopard Services, until the services of the latter were terminated on 31 January 1988. SMC denied liability for the claims and averred that the complainants were not its employees but of MAERC, an independent contractor whose primary corporate purpose was to engage in the business of cleaning, receiving, sorting, classifying, etc., glass and metal containers. It appears that SMC entered into a Contract of Services with MAERC engaging its services on a nonexclusive basis for one (1) year beginning 1 February 1988. The contract was renewed for two (2) more years in March 1989. It also provided for its automatic renewal on a month-to-month basis after the two (2)-year period and required that a written notice to the other party be given thirty (30) days prior to the intended date of termination, should a party decide to discontinue with the contract. In a letter dated 15 May 1991, SMC informed MAERC of the termination of their service contract by the end of June 1991. SMC cited its plans to phase out its segregation activities starting 1 June 1991 due to the installation of labor and cost-saving devices. When the service contract was terminated, complainants claimed that SMC stopped them from performing their jobs; that this was tantamount to their being illegally dismissed by SMC who was their real employer as their activities were directly related, necessary and desirable to the main business of SMC; and, that MAERC was merely made a tool or a shield by SMC to avoid its liability under the Labor Code. MAERC for its part admitted that it recruited the complainants and placed them in the bottle segregation project of SMC but maintained that it was only conveniently used by SMC as an intermediary in operating the project or work directly related to the primary 585 VOL. 405, JULY 10, 2003 585 San Miguel Corporation vs. MAERC Integrated Services, Inc. business concern of the latter with the end in view of avoiding its obligations and responsibilities towards the complaining workers. The nine (9) cases1 were consolidated. On 31 January 1995 the Labor Arbiter rendered a decision holding that MAERC was an independent contractor.2 He dismissed the complaints for illegal dismissal but ordered MAERC to pay complainants separation benefits in the total amount of P2,334,150.00. MAERC and SMC were also ordered to jointly and severally pay complainants their wage differentials in the amount of P845,117.00 and to pay attorneys fees in the amount of P317,926.70.

The complainants appealed the Labor Arbiters finding that MAERC was an independent contractor and solely liable to pay the amount representing the separation benefits to the exclusion of SMC, as well as the Labor Arbiters failure to grant the Temporary Living Allowance of the complainants. SMC appealed the award of attorneys fees. The National Labor Relations Commission (NLRC) ruled in its 7 January 1997 decision that MAERC was a labor-only contractor and that complainants were employees of SMC.3 The NLRC also held that whether MAERC was a job contractor or a labor-only contractor, SMC was still solidarity liable with MAERC for the latters unpaid obligations, citing Art. 1094 of the Labor Code. Thus, the NLRC modified the judgment of the Labor Arbiter and held SMC jointly and severally liable with MAERC for complainants separation benefits. In addition, both respondents were ordered to pay jointly and severally an indemnity fee of P2,000.00 to each complainant. _______________ 1 RAB Case Nos. 06-1145-91; 06-1165-91; 06-1176-91; 07-1177-91; 07-1219-91; 07-1283-91; 081321-91; 09-1507-91 and 10-1584-91. 2 Decision penned by Labor Arbiter Antonio P. Villamor. 3 Decision penned by Commissioner Amorito V. Caete with Commissioner Irenea E. Ceniza concurring and Commissioner Bernabe S. Batuhan dissenting; Rollo, pp. 94-127. 4 Art. 109. Solidary Liability.x x x x 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. 586 586 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. MAERC Integrated Services, Inc. SMC moved for a reconsideration which resulted in the reduction of the award of attorneys fees from P317,926.70 to P84,511.70. The rest of the assailed decision was unchanged.5 On 12 March 1998, SMC filed a petition for certiorari with prayer for the issuance of a temporary restraining order and/or injunction with this Court which then referred the petition to the Court of Appeals. On 28 April 2000 the Court of Appeals denied the petition and affirmed the decision of the NLRC.6 The appellate court also denied SMCs motion for reconsideration in a resolution7 dated 26 July 2000. Hence, petitioner seeks a review of the Court of Appeals judgment before this Court.

Petitioner poses the same issues brought up in the appeals court and the pivotal question is whether the complainants are employees of petitioner SMC or of respondent MAERC. Relying heavily on the factual findings of the Labor Arbiter, petitioner maintained that MAERC was a legitimate job contractor. It directed this Courts attention to the undisputed evidence it claimed to establish this assertion: MAERC is a duly organized stock corporation whose primary purpose is to engage in the business of cleaning, receiving, sorting, classifying, grouping, sanitizing, packing, delivering, warehousing, trucking and shipping any glass and/or metal containers and that it had listed in its general information sheet two hundred seventy-eight (278) workers, twenty-two (22) supervisors, seven (7) managers/officers and a board of directors; it also voluntarily entered into a service contract on a non-exclusive basis with petitioner from which it earned a gross income of P42,110,568.24 from 17 October 1988 to 27 No-vember 1991; the service contract specified that MAERC had the selection, engagement and discharge of its personnel, employees or agents or otherwise in the direction and control thereof; MAERC admitted that it had machinery, equipment and fixed assets used _______________ 5 Resolution of the NLRC; Rollo, pp. 128-134. 6 Decision penned by Associate Justice Conchita Carpio Morales with Associate Justices Teodoro P. Regino and Jose L. Sabio, Jr. (Fifteenth Division) concurring, Annex A; Rollo, pp. 37-46. 7 Resolution penned by Associate Justice Conchita Carpio Morales with Associate Justices Eloy R. Bello, Jr. and Jose L. Sabio, Jr. (Fifteenth Division) concurring, Annex C, Rollo, pp. 62-63. 587 VOL. 405, JULY 10, 2003 587 San Miguel Corporation vs. MAERC Integrated Services, Inc. in its business valued at P4,608,080.00; and, it failed to appeal the Labor Arbiters decision which declared it to be an independent contractor and ordered it to solely pay the separation benefits of the complaining workers. We find no basis to overturn the Court of Appeals and the NLRC. Well-established is the principle that findings of fact of quasi-judicial bodies, like the NLRC, are accorded with respect, even finality, if supported by substantial evidence.8 Particularly when passed upon and upheld by the Court of Appeals, they are binding and conclusive upon the Supreme Court and will not normally be disturbed.9 This Court has invariably held that in ascertaining an employer-employee relationship, the following factors are considered: (a) the selection and engagement of employee; (b) the payment of wages; (c) the power of dismissal; and, (d) the power to control an employees conduct, the last being the most important.10 Application of the aforesaid criteria clearly indicates an employer-employee relationship between petitioner and the complainants.

Evidence discloses that petitioner played a large and indispensable part in the hiring of MAERCs workers. It also appears that majority of the complainants had already been working for SMC long before the signing of the service contract between SMC and MAERC in 1988. The incorporators of MAERC admitted having supplied and recruited workers for SMC even before MAERC was created.11 The NLRC also found that when MAERC was organized into a corporation in February 1988, the complainants who were then already working for SMC were made to go through the motion of applying _______________ 8 Travelaire and Tours Corporation v. NLRC, G.R. No. 131523, 20 August 1998, 294 SCRA 505. 9 Napocor v. Court of Appeals, G.R. No. 122195, 23 July 1998, 293 SCRA 130. 10 De los Santos v. NLRC, G.R. No. 121327, 20 December 2001, 372 SCRA 723; SSS v. Court of Appeals, G.R. No. 100388, 14 December 2000, 348 SCRA 1; Escario v. NLRC, G.R. No. 124055, 8 June 2000, 333 SCRA 257; Coca-Cola Bottlers Phils., Inc. v. National Labor Relations Commission, G.R. No. 120466,17 May 1999, 307 SCRA 131; Caurdanetann Piece Workers Union v. Laguesma, G.R. No. 114911, 24 February 1998, 286 SCRA 286. 11 Rollo, pp. 279-283. 588 588 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. MAERC Integrated Services, Inc. for work with Ms. Olga Ouano, President and General Manager of MAERC, upon the instruction of SMC through its supervisors to make it appear that complainants were hired by MAERC. This was testified to by two (2) of the workers who were segregator and forklift operator assigned to the Beer Marketing Division at the SMC compound and who had been working with SMC under a purported contractor Jopard Services since March 1979 and March 1981, respectively. Both witnesses also testified that together with other complainants they continued working for SMC without break from Jopard Services to MAERC. As for the payment of workers wages, it is conceded that MAERC was paid in lump sum but records suggest that the remuneration was not computed merely according to the result or the volume of work performed. The memoranda of the labor rates bearing the signature of a Vice-President and General Manager for the Vismin Beer Operations12 as well as a director of SMC13 appended to the contract of service reveal that SMC assumed the responsibility of paying for the mandated overtime, holiday and rest day pays of the MAERC workers.14 SMC also paid the employers share of the SSS and Medicare contributions, the 13th month pay, incentive leave pay and maternity benefits.15 In the lump sum received, MAERC earned a marginal amount representing the contractors share. These lend credence to the complaining workers assertion that while MAERC paid the wages of the complainants, it merely

acted as an agent of SMC. Petitioner insists that the most significant determinant of an employer-employee relationship, i.e., the right to control, is absent. The contract of services between MAERC and SMC provided that MAERC was an independent contractor and that the workers hired by it shall not, in any manner and under any circumstances, be considered employees of the Company, and that the Company has no control or supervision whatsoever over the conduct of the Contractor or any of its workers in respect to how they accomplish their work or perform the Contractors obligations under the Contract.16 _______________ 12 Ricardo F. Elizagaque. 13 Raymund E. Francisco. 14 Rollo, pp. 249, 256, 268-271. 15 Id., p. 255. 16 Id., pp. 245, 251. 589 VOL. 405, JULY 10, 2003 589 San Miguel Corporation vs. MAERC Integrated Services, Inc. In deciding the question of control, the language of the contract is not determinative of the parties relationship; rather, it is the totality of the facts and surrounding circumstances of each case.17 Despite SMCs disclaimer, there are indicia that it actively supervised the complainants. SMC maintained a constant presence in the workplace through its own checkers. Its asseveration that the checkers were there only to check the end result was belied by the testimony of Carlito R. Singson, head of the Mandaue Container Service of SMC, that the checkers were also tasked to report on the identity of the workers whose performance or quality of work was not according to the rules and standards set by SMC. According to Singson, it (was) necessary to identify the names of those concerned so that the management [referring to MAERC] could call the attention to make these people improve the quality of work.18 Viewed alongside the findings of the Labor Arbiter that the MAERC organizational set-up in the bottle segregation project was such that the segregators/cleaners were supervised by checkers and each checker was also under a supervisor who was in turn under a field supervisor, the responsibility of watching over the MAERC workers by MAERC personnel became superfluous with the presence of additional checkers from SMC. Reinforcing the belief that the SMC exerted control over the work performed by the segregators or

cleaners, albeit through the instrumentality of MAERC, were letters by SMC to the MAERC management. These were letters19 written by a certain Mr. W. Padin20 addressed to the President and General Manager of MAERC as well as to its head of operations,21 and a third letter22 from Carlito R. Singson also addressed to the President and General Manager of MAERC. More than just a mere written report of the number of bottles improperly cleaned and/or segregated, the letters named three (3) workers who were responsible for the rejection of several bottles, specified the infraction committed in the _______________ 17 41 Am Jur 2d, Independent Contractor, Sec. 10, p. 406. 18 TSN, Vol. IV, pp. 53-54, 59, 64, 73, cited in NLRC Decision, p. 25; Rollo, p. 118. 19 Rollo, pp. 261-263. 20 Inspector, Segregation Quality Control of San Miguel Corporation. 21 Mr. Lowell Tallo. 22 Rollo, p. 259. 590 590 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. MAERC Integrated Services, Inc. segregation and cleaning, then recommended the penalty to be imposed. Evidently, these workers were reported by the SMC checkers to the SMC inspector. While the Labor Arbiter dismissed these letters as merely indicative of the concern in the end-result of the job contracted by MAERC, we find more credible the contention of the complainants that these were manifestations of the right of petitioner to recommend disciplinary measures over MAERC employees. Although calling the attention of its contractors as to the quality of their services may reasonably be done by SMC, there appears to be no need to instruct MAERC as to what disciplinary measures should be imposed on the specific workers who were responsible for rejections of bottles. This conduct by SMC representatives went beyond a mere reminder with respect to the improperly cleaned/segregated bottles or a genuine concern in the outcome of the job contracted by MAERC. Control of the premises in which the contractors work was performed was also viewed as another phase of control over the work, and this strongly tended to disprove the independence of the contractor.23 In the case at bar, the bulk of the MAERC segregation activities was accomplished at the MAERC-owned PHILPHOS warehouse but the building along with the machinery and equipment in the facility was actually being rented by SMC. This is evident from the memoranda of labor rates which included rates for the use of forklifts and the warehouse at the PHILPHOS area, hence, the

NLRCs conclusion that the payment for the rent was cleverly disguised since MAERC was not in the business of renting warehouses and forklifts.24 Other instances attesting to SMCs supervision of the workers are found in the minutes of the meeting held by the SMC officers on 5 December 1988. Among those matters discussed were the calling of SMC contractors to have workers assigned to segregation to undergo and pass eye examination to be done by SMC EENT company doctor and a review of compensation/incentive system for segregators to improve the segregation activities.25 _______________ 23 41 Am Jur 2d, Independent Contractors, Sec. 14, p. 412. 24 NLRC Decision, p. 27; Rollo, p. 120. 25 NLRC Rollo, Vol. V, pp. 103-105. 591 VOL. 405, JULY 10, 2003 591 San Miguel Corporation vs. MAERC Integrated Services, Inc. But the most telling evidence is a letter by Mr. Antonio Ouano, Vice-President of MAERC dated 27 May 1991 addressed to Francisco Eizmendi, SMC President and Chief Executive Officer, asking the latter to reconsider the phasing out of SMCs segregation activities in Mandaue City. The letter was not denied but in fact used by SMC to advance its own arguments.26 _______________ 26 Rollo, pp. 279-283; Re: Contract of Services Washing and Segregation/Beer Bottles. Dear Mr. President, Per letter dated 15 May 1991, we were advised by your Vismin Physical Distribution Division, thru Director Mr. Danilo Flores, that effective 01 June 1991 our aforecited contract will be altogether terminated since SMCs bottle segregation activities will be phased out. Believing that SMC officers may have overlooked that grave repercussions of such a decision in so far as our end is concerned, we sent and made zealous letters to and requests for a conference with Mr. Flores, for us to reason earnestly to have such discretion reconsidered. Unfortunately, said letters and requests were met with not even a slightest response. Forced by this unexpected turn of events, we are compelled to raise this appeal to your office. Allow us then to narrate factual backdrops which may in the process, in exercise of equitable and fair judgment, may lead you to understand how oppressed our situation might be.

1. Way back in 1987, when SMC was faced with an impending Physical Bottle Segregation Division labor strike, SMC and us took hand-in-hand an arrangement to avoid the same. And you offered us to serve that Division. Frankly, we were disinclined then to accept your offer for the reason that such service or project needs not only substantial capital investment but likewise long term financial exposure and labor risks. However, relying on your express representations that you will assist us with a continued and healthy business relationship, more than sufficient enough for us to recover our investments, we took that offer you made. As a favorable consequence, among others, your labor problem was eluded and you earned in your control a very cooperative contractor in our person. 2. When our arrangement was reduced into contract form, certainly we could have objected to several stipulations unfavorable to us. However, again resting on your then sincere assurances that . . . as long as there is SMC there is segregation . . . and . . . beyond verbal contractual implementation . . . of said paper contract, we did no longer bother to contest and request to modify certain stipulations. Again, all because we have your word and that we 592 592 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. MAERC Integrated Services, Inc. Briefly, the letter exposed the actual state of affairs under which MAERC was formed and engaged to handle the segregation project _______________ trusted that your word is as good as if not better than a written contract. 3. True to your being a successful conglomerate, demands from your end, to more than improve our standards of performance and prompt delivery, were always things forthcoming. Among those you required of us are as follows, viz.: (a) Procure more forklifts; (b) Provide a concrete building; (c) Maintain efficient workers; (d) Put up cemented working areas; and, (e) Maintain reliable segregation equipment. And in compliance with your demands, and entertaining the belief of your continued support, we hastened to embark further financial or loan obligations if at all to conform to your criterion of what service under you should be. Thus, a. We purchased twelve (12) forklifts, communication, operation and office equipment. b. Workers salaries were standardized although we are receiving restricted margin from your rates. c. A warehouse and shed were constructed. d. We constructed a concrete road leading to and from our premises of work. So great (in our level) was our financial exposure that as of 31 December 1990 our Corporate Liabilities alone total FOUR MILLION THREE HUNDRED SEVENTY EIGHT THOUSAND

SIXTY NINE PESOS (P4,378,069.00). And how do we pay these obligations if and when our relationship will be terminated? Undeniably, we have machineries and equipment, and fixed assets which are valued at Four Million Six Hundred Eight Thousand Eighty Pesos (P4,608,080.00) as of 31 December 1991. And who would be liquid enough to re-imburse or buy these fixed assets and machineries and equipment from us if and when our services will be phased out? 3. San Miguel Corporation is already an institution. Certainly and frankly, its operation is even now associated or coupled with, to say the leastpublic, and, to say the mostpolitical and economic, interests. Working with us under his Contractual Service we have with you are Three Hundred (300) or more employees not to mention the overall family members totaling more than Two Thousand (2,000) 593 VOL. 405, JULY 10, 2003 593 San Miguel Corporation vs. MAERC Integrated Services, Inc. of SMC. It provided an account of how in 1987 Eizmendi approached the would-be incorporators of MAERC and offered them the business of servicing the SMC bottle-washing and segregation department in order to avert an impending labor strike. After initial reservations, MAERC incorporators accepted the offer and before long trial segregation was conducted by SMC at the PHILPHOS warehouse.27 The letter also set out the circumstances under which MAERC entered into the Contract of Services in 1988 with the assurances of the SMC President and CEO that the employment of MAERCs services would be long term to enable it to recover its investments. It was with this understanding that MAERC undertook borrowings from banking institutions and from affiliate corporations so that it _______________ peoplewomen and children at that. If you will pursue your notice to terminate and phase out our project, naturally you will abruptly dislocate more than Three Hundred (300) employees and, with them, you will be making restless and hungry more than Two Thousand (2,000) stomachs. And where shall we put these good number of people? Who will feed them? Would we not toy the hidden apprehension that they might eventually stage a very collective representation, stirring public and private sectoral sentimentsthe very problem we gathered hands to promptly solve at the inception? What is happening to the goodwill of SMC?

Do consideration of more profit could override SMCs moral values and blind it to leave out in the cold a number of employees and forget an old friend? These and maybe more are the areas of concern toe deeply make as basis for our appeal. And we do hope and pray that, with and of this letter, your generous consideration will be forthcoming. We remain, Very faithfully yours, Maerc Integrated Services Corporation By: Antonio M. Ouano Vice President, Internal Affairs

27 Report dated 9 June 1987 by Carlito R. Singson on the problems encountered during the first week (June 1-6, 1987) of trial segregation conducted at the PHILPHOS Warehouse; Rollo, pp. 257-258. 594 594 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. MAERC Integrated Services, Inc. could comply with the demands of SMC to invest in machinery and facilities. In sum, the letter attested to an arrangement entered into by the two (2) parties which was not reflected in the Contract of Services. A peculiar relationship mutually beneficial for a time but nonetheless ended in dispute when SMC decided to prematurely end the contract leaving MAERC to shoulder all the obligations to the workers. Petitioner also ascribes as error the failure of the Court of Appeals to apply the ruling in Neri v. NLRC.28 In that case, it was held that the law did not require one to possess both substantial capital and investment in the form of tools, equipment, machinery, work premises, among others, to be considered a job contractor. The second condition to establish permissible job contracting29 was sufficiently met if one possessed either attribute. Accordingly, petitioner alleged that the appellate court and the NLRC erred when they declared MAERC a labor-only contractor despite the finding that MAERC had investments amounting to P4,608,080.00 consisting of buildings, machinery and equipment. However, in Vinoya v. NLRC,30 we clarified that it was not enough to show substantial capitalization or investment in the form of tools, equipment, machinery and work premises, etc., to be considered an independent contractor. In fact, jurisprudential holdings were to the effect that in determining the existence of an independent contractor relationship, several factors may be considered, such as, but not necessarily confined to, whether the contrac-

_______________ 28 G.R. Nos. 97008-09, 23 July 1993, 224 SCRA 717. 29 Section 8, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code provides: Sec. 8. Job contracting.There is job contracting permissible under the Code if the following conditions are met: (1) The contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof; and, (2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of his business. 30 G.R. No. 126586, 2 February 2000, 324 SCRA 469. 595 VOL. 405, JULY 10, 2003 595 San Miguel Corporation vs. MAERC Integrated Services, Inc. tor was 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.31 In Neri, the Court considered not only the fact that respondent Building Care Corporation (BBC) had substantial capitalization but noted that BCC carried on an independent business and performed its contract according to its own manner and method, free from the control and supervision of its principal in all matters except as to the results thereof.32 The Court likewise mentioned that the employees of BCC were engaged to perform specific special services for their principal.33 The status of BCC had also been passed upon by the Court in a previous case where it was found to be a qualified job contractor because it was a big firm which services among others, a university, an international bank, a big local bank, a hospital center, government agencies, etc. Furthermore, there were only two (2) complainants in that case who were not only selected and hired by the contractor before being assigned to work in the Cagayan de Oro branch of FEBTC but the Court also found that the contractor maintained effective supervision and control over them. In comparison, MAERC, as earlier discussed, displayed the characteristics of a labor-only contractor. Moreover, while MAERCs investments in the form of buildings, tools and equipment amounted to more than P4 Million, we cannot disregard the fact that it was the SMC which required MAERC to undertake such investments under the understanding that the business relationship between petitioner and MAERC would be on a long term basis. Nor do we believe MAERC to have an independent

business. Not only was it set up to specifically meet the pressing needs of SMC which was then having labor problems in its segregation division, none of its workers was also ever assigned to any other _______________ 31 Id., citing Ponce v. National Labor Relations Commission, G.R. No. 124643, 30 July 1998, 293 SCRA 366. 32 Ibid. 33 Ibid. 596 596 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. MAERC Integrated Services, Inc. establishment, thus convincing us that it was created solely to service the needs of SMC. Naturally, with the severance of relationship between MAERC and SMC followed MAERCs cessation of operations, the loss of jobs for the whole MAERC workforce and the resulting actions instituted by the workers. Petitioner also alleged that the Court of Appeals erred in ruling that whether MAERC is an independent contractor or a labor-only contractor, SMC is liable with MAERC for the latters unpaid obligations to MAERCs workers. On this point, we agree with petitioner as distinctions must be made. In legitimate job contracting, the law creates an employer-employee relationship for a limited purpose, i.e., to ensure that the employees are paid their wages.34 The principal employer becomes jointly and severally liable with the job contractor only for the payment of the employees wages whenever the contractor fails to pay the same. Other than that, the principal employer is not responsible for any claim made by the employees. On the other hand, in labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the laboronly contractor as if such employees had been directly employed by the principal employer. The principal employer therefore becomes solidarity liable with the labor-only contractor for all the rightful claims of the employees. This distinction between job contractor and labor-only contractor, however, will not discharge SMC from paying the separation benefits of the workers, inasmuch as MAERC was shown to be a labor-only contractor; in which case, petitioners liability is that of a direct employer and thus solidarity liable with MAERC. SMC also failed to comply with the requirement of written notice to both the employees concerned and

the Department of Labor and Employment (DOLE) which must be given at least one (1) month before the intended date of retrenchment.35 The fines im_______________ 34 PBC v. National Labor Relations Commission, G.R. No. 66598, 19 December 1986, 146 SCRA 347. 35 Magnolia Dairy Products Corporation v. National Labor Relations Commission, G.R. No. 114952, 29 January 1996, 252 SCRA 483. 597 VOL. 405, JULY 10, 2003 597 San Miguel Corporation vs. MAERC Integrated Services, Inc. posed for violations of the notice requirement have varied.36 The measure of this award depends on the facts of each case and the gravity of the omission committed by the employer.37 For its failure, petitioner was justly ordered to indemnify each displaced worker P2,000.00. The NLRC and the Court of Appeals affirmed the Labor Arbiters award of separation pay to the complainants in the total amount of P2,334,150.00 and of wage differentials in the total amount of P845,117.00. These amounts are the aggregate of the awards due the two hundred ninety-one (291) complainants as computed by the Labor Arbiter. The following is a summary of the computation of the benefits due the complainants which is part of the Decision of the Labor Arbiter. SUMMARY

NAME

SALARY DIFFERENTIAL SEPARATION PAY TOTAL Case No. 06-1165-91

1. Rogelio Prado, Jr. P3,056.00 P8,190.00 P11,246.00 2. Eddie Selle 3,056.00 8,190.00 11,246.00 3. Alejandro Annabieza 3,056.00 8,190.00 11,246.00 4. Ananias Jumao-as 3,056.00

8,190.00 11,246.00 5. Consorcio Manloloyo 3,056.00 8,190.00 11,246.00 6. Anananias Alcotin 3,056.00 8,190.00 11,246.00 7. Rey Gestopa 2,865.00 8,190.00 11,055.00

8. Edgardo Nuez 2,865.00 8,190.00 11,055.00 9. Junel Cabatingan 2,865.00 8,190.00 11,055.00 10. Paul Dumaqueta 2,865.00 8,190.00 11,055.00 11. Felimon Echavez 2,843.00

8,190.00 10,673.00 12. Vito Sealana 2,843.00 8,190.00 10,673.00 13. Denecia Palao 2,843.00 8,190.00 10,673.00 14. Roberto Lapiz 3,056.00 8,190.00 11,246.00

15. Baltazar Labio 3,056.00 8,190.00 11,246.00 16. Leonardo Bongo 3,056.00 8,190.00 11,246.00 17. El Cid Icalina 3,056.00 8,190.00 11,246.00 18. Jose Diocampo 3,056.00

8,190.00 11,246.00 19. Adelo Cantillas 3,056.00 8,190.00 11,246.00 _______________ 36 Serrano v. National Labor Relations Commission, G.R. No. 117040, 27 January 2000, 323 SCRA 445. 37 Ibid. 598 598 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. MAERC Integrated Services, Inc. 20. Isaias Branzuela 3,056.00 8,190.00

11,246.00 21. Ramon Rosales 3,056.00 8,190.00 11,246.00 22. Gaudencio Peson 3,056.00 8,190.00 11,246.00 23. Hector Cabaog 3,056.00 8,190.00 11,246.00 24. Edgardo Dagmayan

3,056.00 8,190.00 11,246.00 25. Rogelio Cruz 3,056.00 8,190.00 11,246.00 26. Rolando Espina 3,056.00 8,190.00 11,246.00 27. Bernardino Regidor 3,056.00 8,190.00

11,246.00 28. Arnelio Sumalinog 3,056.00 8,190.00 11,246.00 29. Gumersindo Alcontin 3,056.00 8,190.00 11,246.00 30. Loreto Nuez 3,056.00 8,190.00 11,246.00 31. Joebe Boy Dayon

3,056.00 8,190.00 11,246.00 32. Conrado Mesanque 3,056.00 8,190.00 11,246.00 33. Marcelo Pescador 3,056.00 8,190.00 11,246.00 34. Marcelino Jabagat 3,056.00 8,190.00

11,246.00 35. Vicente Devilleres 3,056.00 8,190.00 11,246.00 36. Vicente Alin 3,056.00 8,190.00 11,246.00 37. Rodolfo Pahugot 3,056.00 8,190.00 11,246.00 38. Ruel Navares

3,056.00 8,190.00 11,246.00 39. Danilo Anabieza 3,056.00 8,190.00 11,246.00 40. Alex Juen 3,056.00 8,190.00 11,246.00 41. Juanito Garces 3,056.00 8,190.00

11,246.00 42. Silvino Limbaga 3,056.00 8,190.00 11,246.00 43. Aurelio Jurpacio 3,056.00 8,190.00 11,246.00 44. Jovito Loon 3,056.00 8,190.00 11,246.00 45. Victor Tenedero

3,056.00 8,190.00 11,246.00 46. Sasing Moreno 3,056.00 8,190.00 11,246.00 47. Wilfredo Hortezuela 3,056.00 8,190.00 11,246.00 48. Joselito Melendez 3,056.00 8,190.00

11,246.00 49. Alfredo Gestopa 3,056.00 8,190.00 11,246.00 50. Regino Gabuya 3,056.00 8,190.00 11,246.00 51. Jorge Gamuzarno 3,056.00 8,190.00 11,246.00 52. Lolito Cocido

3,056.00 8,190.00 11,246.00 53. Efraim Yubal 3,056.00 8,190.00 11,246.00 54. Venerando Roamar 3,056.00 8,190.00 11,246.00 55. Gerardo Butalid 3,056.00 8,190.00

11,246.00 56. Hipolito Vidas 3,056.00 8,190.00 11,246.00 57. Vengelito Frias 3,056.00 8,190.00 11,246.00 58. Vicente Celacio 3,056.00 8,190.00 11,246.00 59. Corlito Pestaas

3,056.00 8,190.00 11,246.00 60. Ervin Hyrosa 3,056.00 8,190.00 11,246.00 61. Rommel Guerero 3,056.00 8,190.00 11,246.00 62. Rodrigo Enerlas 3,056.00 8,190.00

11,246.00 63. Francisco Carbonilla 3,056.00 8,190.00 11,246.00 64. Nicanor Cuizon 3,056.00 8,190.00 11,246.00 65. Pedro Briones 3,056.00 8,190.00 11,246.00 599 VOL. 405, JULY 10, 2003

599 San Miguel Corporation vs. MAERC Integrated Services, Inc. 66. Rodolfo Cabalhug 3,056.00 8,190.00 11,246.00 67. Teofilo Ricardo 3,056.00 8,190.00 11,246.00 68. Danilo R. Dizon 3,056.00 8,190.00 11,246.00 69.

Alberto Embong 3,056.00 8,190.00 11,246.00 70. Alfonso Echavez 3,056.00 8,190.00 11,246.00 71. Gonzalo Roracea 3,056.00 8,190.00 11,246.00 72. Marcelo Caracina 3,056.00 8,190.00

11,246.00 73. Raul Borres 3,056.00 8,190.00 11,246.00 74. Lino Tongalamos 3,056.00 8,190.00 11,246.00 75. Artemio Bongo, Jr. 3,056.00 8,190.00 11,246.00 76.

Roy Avila 3,056.00 8,190.00 11,246.00 77. Melchor Freglo 3,056.00 8,190.00 11,246.00 78. Raul Cabillada 3,056.00 8,190.00 11,246.00 79. Eddie Catab 3,056.00 8,190.00

11,246.00 80. Melencio Durano 3,056.00 8,190.00 11,246.00 81. Allan Rago 3,056.00 8,190.00 11,246.00 82. Dominador Caparida 3,056.00 8,190.00 11,246.00 83.

Jovito Catab 3,056.00 8,190.00 11,246.00 84. Albert Laspias 3,056.00 8,190.00 11,246.00 85. Alex Anabieza 3,056.00 8,190.00 11,246.00 86. Nestor Reynante 3,056.00 8,190.00

11,246.00 87. Eulogio Estopa 3,056.00 8,190.00 11,246.00 88. Mario Bolo 3,056.00 8,190.00 11,246.00 89. Ederlito A. Balocano 3,056.00 8,190.00 11,246.00 90.

Joel Pepito 3,056.00 8,190.00 11,246.00 91. Reynaldo Ludia 3,056.00 5,460.00 8,516.00 92. Manuel Cinco 3,056.00 5,460.00 8,516.00 93. Allan Agustin 3,056.00 8,190.00

11,246.00 94. Pablito Polegrates 3,056.00 8,190.00 11,246.00 95. Clyde Prado 3,056.00 8,190.00 11,246.00 96. Dindo Misa 3,056.00 8,190.00 11,246.00 97.

Roger Sasing 3,056.00 8,190.00 11,246.00 98. Ramon Arcallana 3,056.00 8,190.00 11,246.00 99. Gabriel Salas 3,056.00 8,190.00 11,246.00 100. Edwin Sasan 3,056.00 8,190.00

11,246.00 101. Diosdado Barriga 3,056.00 8,190.00 11,246.00 102. Moises Sasan 3,056.00 8,190.00 11,246.00 103. Sinforiano Cantago 3,056.00 8,190.00 11,246.00 104.

Leonardo Marturillas 3,056.00 8,190.00 11,246.00 105. Mario Ranis 3,056.00 8,190.00 11,246.00 106. Alejandro Ranido 3,056.00 8,190.00 11,246.00 107. Jerome Prado 3,056.00 8,190.00

11,246.00 108. Raul Oyao 3,056.00 8,190.00 11,246.00 109. Victor Celacio 3,056.00 5,460.00 8,516.00 TOTAL P330,621.00 P884,520.00 P1,215,141.00 600 600 SUPREME COURT REPORTS ANNOTATED

San Miguel Corporation vs. MAERC Integrated Services, Inc. Case No. 07-1177-91 110. Gerardo Roque 3,056.00 5,460.00 8,516.00

Case No. 07-1176-91 111. Zosimo Cararaton 3,056.00 8,192.00 11,246.00

Case No. 07-1219-91 112. Virgilio Zanoria P3,056.00

P5,460.00 P8,516.00 113. Jose Zanoria 3,056.00 5,460.00 8,516.00 114. Allan Zanoria 3,056.00 5,460.00 8,516.00 115. Victorino Seno 3,056.00 5,460.00 8,516.00 116.

Teodulo Jumao-as 3,056.00 5,460.00 8,516.00 117. Alexander Hera 3,056.00 5,460.00 8,516.00 118. Anthony Araneta 3,056.00 5,460.00 8,516.00 119. Aldrin Suson 3,056.00

5,460.00 8,516.00 120. Victor Verano 3,056.00 5,460.00 8,516.00 121. Ruel Sufrerencia 3,056.00 5,460.00 8,516.00 122. Alfred Naparate 3,056.00 5,460.00 8,516.00 123.

Wenceslao Baclohon 3,056.00 8,190.00 11,246.00 124. Eduardo Langita 3,056.00 8,190.00 11,246.00 TOTAL P39,728.00 P76,440.00 P116,168.00

Case No. 07-1283-91 125. Feliz Ordeneza P2,816.00

P8,190.00 P11,006.00 126. Arsenio Logarta 3,056.00 8,190.00 11,246.00 127. Eduardo dela Vega 3,056.00 8,190.00 11,246.00 128. Joventino Canoog 3,056.00 8,190.00 11,246.00

TOTAL P11,984.00 P32,760.00 P44,744.00

Case No. 10-1584-91 129. Regelio Abapo P3,056.00 P8,190.00 P11,246.00

Case No. 08-1321-91 130. Ricardo Ramas P3,056.00 P8,190.00 P11,246.00

Case No. 09-1507-91 131. Jose Bandialan P2,816.00 P8,190.00 P11,006.00 132. Antonio Basalan 2,816.00 8,190.00 11,006.00 133. Lyndon Basalan 2,816.00 8,190.00 11,006.00 134. Wilfredo Aliviano

2,816.00 8,190.00 11,006.00 135. Bienvenido Rosario 2,816.00 8,190.00 11,006.00 136. Jesus Capangpangan 2,816.00 8,190.00 11,006.00 137. Renato Mendoza 2,816.00 8,190.00

11,006.00 138. Alejandro Catandejan 2,816.00 8,190.00 11,006.00 139. Ruben Talaba 2,816.00 8,190.00 11,006.00 601 VOL. 405, JULY 10, 2003 601 San Miguel Corporation vs. MAERC Integrated Services, Inc. 140. Filemon Echavez 2,816.00 8,190.00

11,006.00 141. Marcelino Caracena 2,816.00 8,190.00 11,006.00 142. Ignacio Misa 2,816.00 8,190.00 11,006.00 143. Feliciano Agbay 2,816.00 8,190.00 11,006.00 144.

Victor Maglasang 2,816.00 8,190.00 11,006.00 145. Arturo Heyrosa 2,816.00 8,190.00 11,006.00 146. Alipio Tirol 2,816.00 8,190.00 11,006.00 147. Rosendo Mondares 2,816.00 8,190.00

11,006.00 148. Aniceto Ludia 2,816.00 8,190.00 11,006.00 149. Reynaldo Lavandero 2,816.00 8,190.00 11,006.00 150. Reuyan Herculano 2,816.00 8,190.00 11,006.00 151.

Teodula Nique 2,816.00 8,190.00 11,006.00 TOTAL P59,136.00 P171,990.00 P231,126.00

Case No. 06-1145-91 152. Emerberto Orque P2,816.00 P8,190.00 P11,006.00 153. Zosimo Baobao 2,816.00

8,190.00 11,006.00 154. Medardo Singson 2,816.00 8,190.00 11,006.00 155. Antonio Patalinghug 2,816.00 8,190.00 11,006.00 156. Ernesto Singson 2,816.00 8,190.00 11,006.00 157.

Roberto Torres 2,816.00 8,190.00 11,006.00 158. Cesar Escario 2,816.00 8,190.00 11,006.00 159. Leodegario Dollecin 2,816.00 8,190.00 11,006.00 160. Alberto Anoba 2,816.00

8,190.00 11,006.00 161. Rodrigo Bisnar 2,816.00 8,190.00 11,006.00 162. Zosimo Bingas 2,816.00 8,190.00 11,006.00 163. Rosalio Duran, Sr. 2,816.00 8,190.00 11,006.00 164.

Rosalio Duran, Jr. 2,816.00 8,190.00 11,006.00 165. Romeo Duran 2,816.00 8,190.00 11,006.00 166. Antonio Abella 2,816.00 8,190.00 11,006.00 167. Mariano Repollo 2,816.00

8,190.00 11,006.00 168. Polegarpo Degamo 2,816.00 8,190.00 11,006.00 169. Mario Cereza 2,816.00 8,190.00 11,006.00 170. Antonio Laoronilla 2,816.00 8,190.00 11,006.00 171.

Proctuso Magallanes 2,816.00 8,190.00 11,006.00 172. Eladio Torres 2,816.00 8,190.00 11,006.00 173. Warlito Demana 2,816.00 8,190.00 11,006.00 174. Henry Gedaro 2,816.00

8,190.00 11,006.00 175. Doisederio Gemperao 2,816.00 8,190.00 11,006.00 176. Aniceto Gemperao 2,816.00 8,190.00 11,006.00 177. Jerry Caparoso 2,816.00 8,190.00 11,006.00 178.

Serlito Noynay 2,816.00 8,190.00 11,006.00 179. Luciano Recopelacion 2,816.00 8,190.00 11,006.00 180. Juanito Garces 2,816.00 8,190.00 11,006.00 181. Feliciano Torres 2,816.00

8,190.00 11,006.00 182. Ranilo Villareal 2,816.00 8,190.00 11,006.00 602 602 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. MAERC Integrated Services, Inc. 183. Fermin Aliviano 2,816.00 8,190.00 11,006.00 184. Junjie Laviste 2,816.00

8,190.00 11,006.00 185. Tomacito de Castro 2,816.00 8,190.00 11,006.00 186. Joselito Capilina 2,816.00 8,190.00 11,006.00 187. Samuel Casquejo 2,816.00 8,190.00 11,006.00

188. Leonardo Natad 2,816.00 8,190.00 11,006.00 189. Benjamin Sayson 2,816.00 8,190.00 11,006.00 190. Pedro Inoc 2,816.00 8,190.00 11,006.00 191. Edward Flores 2,816.00

8,190.00 11,006.00 192. Edwin Sasan 2,816.00 8,190.00 11,006.00 193. Jose Rey Inot 2,816.00 8,190.00 11,006.00 194. Edgar Cortes 2,816.00 8,190.00 11,006.00

195. Romeo Lombog 2,816.00 8,190.00 11,006.00 196. Nicolas Ribo 2,816.00 8,190.00 11,006.00 197. Jaime Rubin 2,816.00 8,190.00 11,006.00 198. Orlando Regis 2,816.00

8,190.00 11,006.00 199. Ricky Alconza 2,816.00 8,190.00 11,006.00 200. Rudy Tagalog 2,816.00 8,190.00 11,006.00 201. Victorino Tagalog 2,816.00 8,190.00 11,006.00

202. Edward Colina 2,816.00 8,190.00 11,006.00 203. Ronie Gonzaga 2,816.00 8,190.00 11,006.00 204. Paul Cabillada 2,816.00 8,190.00 11,006.00 205. Wilfredo Magalona 2,816.00

8,190.00 11,006.00 206. Joel Pepito 2,816.00 8,190.00 11,006.00 207. Prospero Maglasang 2,816.00 8,190.00 11,006.00 208. Allan Agustin 2,816.00 8,190.00 11,006.00

209. Fausto Bargayo 2,816.00 8,190.00 11,006.00 210. Nomer Sanchez 2,816.00 8,190.00 11,006.00 211. Jolito Alin 2,816.00 8,190.00 11,006.00 212. Birning Regidor 2,816.00

8,190.00 11,006.00 213. Garry Dignos 2,816.00 8,190.00 11,006.00 214. Edwin Dignos 2,816.00 8,190.00 11,006.00 215. Dario Dignos 2,816.00 8,190.00 11,006.00

216. Rogelio Dignos 2,816.00 8,190.00 11,006.00 217. Jimmy Cabigas 2,816.00 8,190.00 11,006.00 218. Fernando Anajao 2,816.00 8,190.00 11,006.00 219. Alex Flores 2,816.00

8,190.00 11,006.00 220. Fernando Remedio 2,816.00 8,190.00 11,006.00 221. Toto Mosquido 2,816.00 8,190.00 11,006.00 222. Alberto Yagonia 2,816.00 8,190.00 11,006.00

223. Victor Bariquit 2,816.00 8,190.00 11,006.00 224. Ignacio Misa 2,816.00 8,190.00 11,006.00 225. Eliseo Villareno 2,816.00 8,190.00 11,006.00 226. Manuel Lavandero 2,816.00

8,190.00 11,006.00 227. Vircede 2,816.00 8,190.00 11,006.00 228. Mario Ranis 2,816.00 8,190.00 11,006.00 603 VOL. 405, JULY 10, 2003 603 San Miguel Corporation vs. MAERC Integrated Services, Inc. 229. Jaime Responso

2,816.00 8,190.00 11,006.00 230. Marianito Aguirre 2,816.00 8,190.00 11,006.00 231. Marcial Heruela 2,816.00 8,190.00 11,006.00 232. Godofredo Tunacao 2,816.00 8,190.00

11,006.00 233. Perfecto Regis 2,816.00 8,190.00 11,006.00 234. Roel Demana 2,816.00 8,190.00 11,006.00 235. Elmer Castillo 2,816.00 8,190.00 11,006.00 236. Wilfredo Calamohoy

2,816.00 8,190.00 11,006.00 237. Rudy Lucernas 2,816.00 8,190.00 11,006.00 238. Antonio Caete 2,816.00 8,190.00 11,006.00 239. Efraim Yubal 2,816.00 8,190.00

11,006.00 240. Jesus Capangpangan 2,816.00 8,190.00 11,006.00 241. Damian Capangpangan 2,816.00 8,190.00 11,006.00 242. Teofilo Capangpangan 2,816.00 8,190.00 11,006.00 243. Nilo Capangpangan

2,816.00 8,190.00 11,006.00 244. Cororeno Capangpangan 2,816.00 8,190.00 11,006.00 245. Emilio Mondares 2,816.00 8,190.00 11,006.00 246. Ponciano Agana 2,816.00 8,190.00

11,006.00 247. Vicente Devilleres 2,816.00 8,190.00 11,006.00 248. Mario Alipan 2,816.00 8,190.00 11,006.00 249. Romanito Alipan 2,816.00 8,190.00 11,006.00 250. Aldeon Robinson

2,816.00 8,190.00 11,006.00 251. Fortunato Soco 2,816.00 8,190.00 11,006.00 252. Celso Compuesto 2,816.00 8,190.00 11,006.00 253. William Itoralde 2,816.00 8,190.00

11,006.00 254. Antonio Pescador 2,816.00 8,190.00 11,006.00 255. Jeremias Rondero 2,816.00 8,190.00 11,006.00 256. Estropio Punay 2,816.00 8,190.00 11,006.00 257. Leovijildo Punay

2,816.00 8,190.00 11,006.00 258. Romeo Quilongquilong 2,816.00 8,190.00 11,006.00 259. Wilfredo Gestopa 2,816.00 8,190.00 11,006.00 260. Eliseo Santos 2,816.00 8,190.00

11,006.00 261. Henry Orio 2,816.00 8,190.00 11,006.00 262. Jose Yap 2,816.00 8,190.00 11,006.00 263. Nicanor Manayaga 2,816.00 8,190.00 11,006.00 264. Teodoro Salinas

2,816.00 8,190.00 11,006.00 265. Aniceto Montero 2,816.00 8,190.00 11,006.00 266. Rafaelito Versoza 2,816.00 8,190.00 11,006.00 267. Alejandro Ranido 2,816.00 8,190.00

11,006.00 268. Henry Talaba 2,816.00 8,190.00 11,006.00 269. Romulo Talaba 2,816.00 8,190.00 11,006.00 270. Diosdado Besabela 2,816.00 8,190.00 11,006.00 271. Sylvestre Toring

2,816.00 8,190.00 11,006.00 272. Edilberto Padilla 2,816.00 8,190.00 11,006.00 273. Allan Herosa 2,816.00 8,190.00 11,006.00 274. Ernesto Sumalinog 2,816.00 8,190.00

11,006.00 604 604 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. MAERC Integrated Services, Inc. 275. Ariston Velasco, Jr. 2,816.00 8,190.00 11,006.00 276. Fernando Lopez 2,816.00 8,190.00 11,006.00 277. Alfonso Echavez 2,816.00 8,190.00

11,006.00 278. Nicanor Cuizon 2,816.00 8,190.00 11,006.00 279. Dominador Caparida 2,816.00 8,190.00 11,006.00 280. Zosimo Cororation 2,816.00 8,190.00 11,006.00 281.

Artemio Loveranes 2,816.00 8,190.00 11,006.00 282. Dionisio Yagonia 2,816.00 8,190.00 11,006.00 283. Victor Celocia 2,816.00 8,190.00 11,006.00 284. Hipolito Vidas 2,816.00 8,190.00

11,006.00 285. Teodoro Arcillas 2,816.00 8,190.00 11,006.00 286. Marcelino Habagat 2,816.00 8,190.00 11,006.00 287. Gaudioso Labasan 2,816.00 8,190.00 11,006.00 288.

Leopoldo Regis 2,816.00 8,190.00 11,006.00 289. Aquillo Damole 2,816.00 8,190.00 11,006.00 290. Willy Roble 2,816.00 8,190.00 11,006.00 TOTAL P391,424.00 P1,138,410.00 P1,529,834.00

RECAP CASE NO.

SALARY DIFFERENTIAL SEPARATION PAY TOTAL 06-1165-91 P330,621.00 P884,520.00 P1,215,141.00 07-1177-91 3,056.00 5,460.00 8,516.00 06-1176-91 3,056.00 8,190.00 11,246.00

07-1219-91 39,728.00 76,440.00 116,168.00 07-1283-91 11,984.00 32,760.00 44,744.00 10-1584-91 3,056.00 8,190.00 11,246.00 08-1321-91 3,056.00 8,190.00 11,246.00 09-1507-91 59,136.00

171,990.00 231,126.00 06-1145-91 391,424.00 1,138,410.00 1,529,834.00 GRAND TOTAL P845,117.00 P2,334,150.00 P3,179,267.00 However, certain matters have cropped up which require a review of the awards to some complainants and a recomputation by the Labor Arbiter of the total amounts. A scrutiny of the enumeration of all the complainants shows that some names38 appear twice by virtue of their being included in _______________ 38 The following are complainants in two (2) of the nine (9) consolidated cases: Juanito Garces, Edwin Sasan, Joel Pepito, Allan Agustin, Ignacio Misa, Mario Ranis, Efraim Yubal, Jesus Capangpangan, Vicente 605 VOL. 405, JULY 10, 2003 605 San Miguel Corporation vs. MAERC Integrated Services, Inc.

two (2) of the nine (9) consolidated cases. A check of the Labor Arbiters computation discloses that most of these names were awarded different amounts of separation pay or wage differential in each separate case where they were impleaded as parties because the allegations of the length and period of their employment for the separate cases, though overlapping, were also different. The records before us are incomplete and do not aid in verifying whether these names belong to the same persons but at least three (3) of those names, were found to have identical signatures in the complaint forms they filed in the separate cases. It is likely therefore that the Labor Arbiter erroneously granted some complainants separation benefits and wage differentials twice. Apart from this, we also discovered some names that are almost identical.39 It is possible that the minor variance in the spelling of some names may have been a typographical error and refer to the same persons although the records seem to be inconclusive. Furthermore, one of the original complainants40 was inadvertently omitted by the Labor Arbiter from his computations.41 The counsel for the complainants promptly filed a motion for inclusion/correction42 which motion was treated as an appeal of the Decision as the Labor Arbiter was prohibited by the rules of the NLRC from entertaining any motion at that stage of the proceed-ings.43 The NLRC for its part acknowledged the omission44 but both the Commission and subsequently the Court of Appeals failed to rectify the oversight in their decisions. Finally, the NLRC ordered both MAERC and SMC to pay P84,511.70 in attorneys fees which is ten percent (10%) of the salary differentials awarded to the complainants in accordance with Art. III of the Labor Code. The Court of Appeals also affirmed _______________ Devilleres, Alejandro Ranido, Alfonso Eschavez, Nicanor Cuizon, Dominador Caparida and Hipolito Vidas. 39 Marcelino Habagat and Marcelino Jabagat; Victor Celacio and Victor Celocia; Zosimo Cororation and Zosimo Coraraton; Filemon Echavez and Felimon Echavez. 40 Niel Zanoria. 41 NLRC Rollo, Vol. V, p. 156; Rollo, p. 148. 42 Id., pp. 215. 43 Id., p. 218. 44 NLRC Decision, p. 1; Rollo, p. 94. 606 606 SUPREME COURT REPORTS ANNOTATED San Miguel Corporation vs. MAERC Integrated Services, Inc.

the award. Consequently, with the recomputation of the salary differentials, the award of attorneys fees must also be modified. WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals dated 28 April 2000 and the Resolution dated 26 July 2000 are AFFIRMED with MODIFICATION. Respondent Maerc Integrated Services, Inc. is declared to be a labor-only contractor. Accordingly, both petitioner San Miguel Corporation and respondent Maerc Integrated Services, Inc., are ordered to jointly and severally pay complainants (private respondents herein) separation benefits and wage differentials as may be finally recomputed by the Labor Arbiter as herein directed, plus attorneys fees to be computed on the basis of ten percent (10%) of the amounts which complainants may recover pursuant to Art. 111 of the Labor Code, as well as an indemnity fee of P2,000.00 to each complainant. The Labor Arbiter is directed to review and recompute the award of separation pays and wage differentials due complainants whose names appear twice or are notably similar, compute the monetary award due to complainant Niel Zanoria whose name was omitted in the Labor Arbiters Decision and immediately execute the monetary awards as found in the Labor Arbiters computations insofar as those complainants whose entitlement to separation pay and wage differentials and the amounts thereof are no longer in question. Costs against petitioner. SO ORDERED. Austria-Martinez, Callejo, Sr. and Tinga, JJ., concur. Quisumbing, J., On leave. Petition denied, judgment affirmed with modification. Note.The power of control is the most decisive factor in determining the existence of an employeremployee relationship. (Religious of the Virgin Mary vs. National Labor Relations Commission, 316 SCRA 614 [1999]) o0o [San Miguel Corporation vs. MAERC Integrated Services, Inc., 405 SCRA 579(2003)]

VOL. 232, MAY 20, 1994 427 Manliguez vs. Court of Appeals G.R. No. 92598. May 20, 1994.* PURIFICACION Y. MANLIGUEZ, ANTONINA Y. LUIS and BENJAMIN C. YBANEZ, petitioners, vs. THE COURT OF APPEALS, ET AL., respondents. Actions; Jurisdiction; Property; Labor Law; Where no employer-employee relationship exists between petitioners and the other parties, and no issue is involved which may be resolved by reference to the Labor Code, other labor statutes, or any collective bargaining agreement, it is the Regional Trial Court that has jurisdiction.We find merit in the appeal. Firstly, respondent court erred in holding that the trial court does not have jurisdiction over the case filed by petitioners. It is at once evident that the Civil Case No. Ceb-6917 is not a labor case. No employer-employee relationship exists between petitioners and the other parties, and no issue is involved which may be resolved by reference to the Labor Code, other labor statutes, or any collective bargaining agreement. Neither can we characterize petitioners action before the court as arising out of a labor dispute. It was not brought to reverse or modify the judgment of the Department of Labor and Employment (DOLE). Neither did it question the validity of, or pray for, the quashal of the writ of execution against Inductocast. What is to be litigated in Civil Case No. Ceb-6917 is the issue of ownership over the Tipolo properties. Clearly, it is the RTC and not the labor department which can take cognizance of the case, as provided by B.P. Blg. 129. Same; Same; Same; Third-party claims; A person who claims to be the owner of property levied upon on execution may file a third-party claim with the sheriff or file a separate and independent action to vindicate his claim.The action taken by petitioners before the RTC asserting their ownership over the levied properties is mandated by Section 17, Rule 39 of the Revised Rules of Court. Time and again, we _______________ * SECOND DIVISION. 428 428 SUPREME COURT REPORTS ANNOTATED Manliguez vs. Court of Appeals have held that: Under Section 17, Rule 39, a third person who claims property levied upon on execution may vindicate such claim by action. x x x The right of a person who claims to be the owner of property levied upon on execution to file a third-party claim with the sheriff is not exclusive, and he may file an action to vindicate his claim even if the judgment creditor files an indemnity bond in favor of the sheriff to answer for any damages that may be suffered by the third-party claimant. By action,

as stated in the Rule, what is meant is a separate and independent action. Same; Same; Same; Writs of attachment; Levy and sale of property by virtue of a writ of attachment is law fill only when the levied property indubitably belongs to the defendant.Secondly, it is incorrect to argue that the trial court cannot take cognizance of Civil Case No. Ceb-6917 without interfering with the writ of attachment and writ of execution of a co-equal body. It is settled that the levy and sale of property by virtue of a writ of attachment is lawful only when the levied property indubitably belongs to the defendant. If property other than those of the defendant is attached and sold by the sheriff, he acts beyond the limits of his and the courts authority. PETITION for review on certiorari of a decision of the Court of Appeals. The facts are stated in the opinion of the Court. Rufino L. Remoreras for petitioners. Danilo L. Pilapil for private respondents. PUNO, J.: This is an appeal by certiorari from the Decision of the Court of Appeals,1 dated November 16, 1989, denying due course to and dismissing the petition in CA-G.R. SP No. 18017.2 The case at bench finds its roots in the Decision of the Department of Labor and Employment (Region VII), ordering Inductocast _______________ 1 Through its Special First Division, composed of Associate Justices Bonifacio A. Cacdac, Jr. (ponente and acting chairman), Cecilio L. Pe, and Jesus M. Elbinias. 2 Entitled Purificacion Y. Manliquez, et al. vs. Hon. Bernardo LI. Salas, et al.. 429 VOL. 232, MAY 20, 1994 429 Manliguez vs. Court of Appeals Cebu, a partnership based in Mandaue City, to pay its former employees a total of P232,908.00. As a consequence of the judgment, the labor departments regional sheriff levied the buildings and improvements standing on Lot 109, Plan 11-5121-Amd., at Tipolo, Mandaue City. The levied properties (hereinafter referred to as the Tipolo properties) were subsequently sold at public auction to said employees. On May 25, 1988, petitioners filed with the RTC of Cebu City, 7th Judicial Branch, a Complaint3

which sought the lifting of the levy over, and annulment of the sale of, the Tipolo properties. The Complaint was docketed as Civil Case No. Ceb-6917, and raffled to Branch 8 of the trial court. Petitioners therein alleged that: they are the owners of the Lot 109; they entered into a lease agreement with Inductocast Cebu over Lot 109; the lease contract provided that, except for machineries and equipment, all improvements introduced in the leased premises shall automatically be owned by the Lessor (petitioners) upon the expiration/ termination of the contract;4 the lease agreement was terminated by petitioners in November, 1980 due to non-payment of rentals by Inductocast Cebu;5 thereafter, petitioners took actual possession of and occupied the Tipolo properties. Petitioners likewise alleged in their Complaint that they became aware of the labor dispute involving Inductocast only after the impugned public auction sale.6 Atty. Danilo Pilapil, claiming to be the John Doe named in the Complaint, filed a motion to dismiss on the ground that the trial court had no jurisdiction over the case. The buyers of the Tipolo properties, as intervenors, also filed a motion to dismiss on the same ground. Both motions, which were opposed by petitioners, were denied. The intervenors, however, moved for reconsideration of the denial. In an Order dated April 18, 1989, the trial court granted _______________ 3 Entitled Purificacion Y. Manliquez, Antonina Y. Luis and Benjamin C. Ybaez represented by Taciana C. Ybaez vs. Emilio Lomontad, Celerino Villahermosa. Register of Deeds of Mandaue City, Mandaue City Assessor and John Doe. 4 Complaint, p. 3; Rollo, p. 60. 5 Annex E, Complaint; Rollo, p. 75. 6 Complaint, p. 5; Rollo, p. 62. 430 430 SUPREME COURT REPORTS ANNOTATED Manliguez vs. Court of Appeals the motion and dismissed Civil Case No. Ceb-6917. It held that the civil case is actually in the nature of a quashal of the levy and the certificate of sale, a case arising out of a dispute that was instituted by the previous employees of Inductocast before the Department of Labor and Employment, Region 7.7 Citing Pucan vs. Bengzon, 155 SCRA 692 (1987), it held it had no jurisdiction over the case since the levy and sale are connected with the case within the exclusive jurisdiction of the Department of Labor and Employment.8 Petitioners questioned the dismissal of their Complaint to the respondent Court of Appeals, through a petition for certiorari and preliminary injunction.9 The appellate court, in its impugned Decision,

denied the petition as it held: To Our minds, the issue on what forum the case must be tried or heard is a settled one. The Department of Labor is the agency upon which devolves the jurisdiction over disputes emanating from and in relation with labor controversies to the exclusion of the regular courts. The issue in the case at bar concerns the levy of a property in pursuance to a writ of execution, arising out of labor disputes. There can be no doubt that jurisdiction pertains to the Department of Labor. xxx xxx xxx

In the light of the factual antecedents and incidents that transpired in the hearing of this case at bar, the (trial court) correctly ruled that indeed the Department of Labor has jurisdiction over the case. Consequently, WE see no abuse of discretion let alone a grave one, amounting to lack or in excess of its jurisdiction correctible with a writ of certiorari. Indeed, the issue of granting or denying a motion to dismiss is addressed to the sound discretion of the court, and in the absence of a capricious and whimsical exercise of power, certiorari will not lie. Thus, this appeal where petitioners contend: THE RESPONDENT APPELLATE COURT ERRED IN HOLDING THAT THE DEPARTMENT OF LABOR HAS JURISDICTION ON THE SUBJECT MATTER AND NATURE OF THE CASE AS AGAINST _______________ 7 RTCs Order, dated April 18, 1989, p. 4; Rollo, p. 84. 8 Ibid. 9 Docketed as CA-G.R. SP No. 18017. 431 VOL. 232, MAY 20, 1994 431 Manliguez vs. Court of Appeals THE CIVIL COURT. We find merit in the appeal. Firstly, respondent court erred in holding that the trial court does not have jurisdiction over the case filed by petitioners. It is at once evident that the Civil Case No. Ceb-6917 is not a labor case. No employer-employee relationship exists between petitioners and the other parties, and no issue is involved which may be resolved by reference to the Labor Code, other labor statutes, or any collective bargaining agreement. Neither can we characterize petitioners action before the trial

court as arising out of a labor dispute. It was not brought to reverse or modify the judgment of the Department of Labor and Employment (DOLE). Neither did it question the validity of, or pray for, the quashal of the writ of execution against Inductocast. What is to be litigated in Civil Case No. Ceb-6917 is the issue of ownership over the Tipolo properties. Clearly, it is the RTC and not the labor department which can take cognizance of the case, as provided by B.P. Blg. 129 (An Act Reorganizing the Judiciary, Appropriating Funds Therefore, and For Other Purposes), thus: Sec. 19. Jurisdiction in civil cases.Regional Trial Courts shall exercise exclusive original jurisdiction: xxx (2) In all civil actions which involve the title to, or possession of real property, or any interest therein, except actions for forcible entry into and unlawful detainer of lands or buildings, original jurisdiction over which is conferred upon Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts; x x x The action taken by petitioners before the RTC asserting their ownership over the levied properties is mandated by Section 17, Rule 39 of the Revised Rules of Court. Time and again, we have held that: Under Section 17, Rule 39, a third person who claims property levied upon on execution may vindicate such claim by action. x x x The right of a person who claims to be the owner of property levied upon on execution to file a third-party claim with the sheriff is not exclusive, and he may file an action to vindicate his claim even if the judgment creditor files an indemnity bond in favor of the sheriff to answer for any damages that may be suffered by the third-party claimant. By action, 432 432 SUPREME COURT REPORTS ANNOTATED Manliguez vs. Court of Appeals as stated in the Rule, what is meant is a separate and independent action.10 Secondly, it is incorrect to argue that the trial court cannot take cognizance of Civil Case No. Ceb-6917 without interfering with the writ of attachment and writ of execution of a co-equal body. It is settled that the levy and sale of property by virtue of a writ of attachment is lawful only when the levied property indubitably belongs to the defendant. If property other than those of the defendant is attached and sold by the sheriff, he acts beyond the limits of his and the courts authority.11 In this regard, we held in the case of Uy, Jr. vs. Court of Appeals, 191 SCRA 275 (1991) that: The main issue in this case is whether or not properties levied and seized by virtue of a writ of

attachment and later by a writ of execution, were under custodia legis and therefore not subject to the jurisdiction of another co-equal court where a third party claimant claimed ownership of the same properties. The issue has long been laid to rest in the case of Manila Herald Publishing Co., Inc. v. Ramos (88 Phil. 94 [1951]) where the Court ruled that while it is true that property in custody of the law may not be interfered with, without the permission of the proper court, this rule is confined to cases where the property belongs to the defendant or one in which the defendant has proprietary interests. But when the Sheriff, acting beyond the bounds of his office seizes a strangers property, the rule does not apply and interference with his custody is not interference with another courts order of attachment. Also, in the more recent case of Santos vs. Bayhon, 199 SCRA 525 (1991), we stated, viz.: _______________ 10 Bayer vs. Agana, 63 SCRA 358 (1975); Abiera vs. Court of Appeals, supra; Lorenzana vs. Cayetano, 78 SCRA 485 (1977); Sampaguita Pictures, Inc. vs. Jalwindor Manufacturers, Inc., supra. 11 See Manila Herald Publishing Co., Inc. vs. Ramos, 88 Phil. 94 (1951); Abiera vs. Court of Appeals, supra; Sampaguita Pictures, Inc. vs. Jalwindor Manufacturers, Inc., supra; Escovilla, Jr. vs. Court of Appeals, 179 SCRA 108 (1989); Uy, Jr. vs. Court of Appeals, 191 SCRA 275 (1991); Santos vs. Bayhon, 199 SCRA 525 (1991). 433 VOL. 232, MAY 20, 1994 433 Manliguez vs. Court of Appeals The general rule that no court has the power to interfere by injunction with the judgments or decrees of another court with concurrent or coordinate jurisdiction possessing equal power to grant injunctive relief, applies only when no third-party claimant is involved x x x. When a third-party, or stranger to the action, asserts a claim over the property levied upon, the claimant may vindicate his claim by an independent action in the proper civil court which may stop the execution of the judgment on property not belonging to the judgment debtor (Citations omitted.) Finally, it must be noted that the Pucan case relied upon by respondent court is inapplicable to the case at bench which involves a third-party claim over property levied on execution. In Pucan, we enjoined the Regional Trial Court from acting on the petition for damages and prohibition against the enforcement of the writ of execution issued by the NCR director of the then Ministry of Labor and Employment in a labor case for the following reason: A perusal of the petition for damages and prohibition filed by Saulog Transit, Inc., in the lower court reveals that basically, what was being questioned was the legality or propriety of the alias writ of execution dated March 1, 1985, as well as the acts performed by the Ministry officials in implementing the same. In other words, the petition was actually in the nature of a motion to quash the writ; and with

respect to the acts of the Ministry officials, a case growing out of a labor dispute, as the acts complained of, were perpetrated during the execution of a decision of the then Minister of Labor and Employment. However characterized, jurisdiction over the petition pertains to the Labor Ministry, now Department and not the regular courts. This conclusion is evident, not only from the provisions of Article 224(b) of the Labor Code, but also of Article 218, as amended by Batas Pambansa Blg. 227 in connection with Article 255 of the same Code. x x x xxx xxx

Apparently, Saulog Transit, Inc. was misled by its own prayer for actual, moral and exemplary damages. It believed that such additional cause of action could clothe the petition with the mantle of a regular action cognizable by the regular courts. It was, of course, mistaken for the fact remains that the acts complained of are mere incidents of a labor dispute. Such prayer therefore did not alter the complexion of the case as one arising from a labor dispute, but was subsumed by the nature of the main case, over which the regular courts had no jurisdiction, much less the power to issue a temporary or 434 434 SUPREME COURT REPORTS ANNOTATED Manliguez vs. Court of Appeals permanent injunction or restraining order. x x x12 In fine, we prohibited the action before the trial court in Pucan because it attacked the regularity of the issuance of the alias writ of execution in the labor case, which is but an incident of the labor dispute. This is not so in the case at bench where the civil case filed by petitioners does not even collaterally attack the validity of the DOLES writ of attachment. On the contrary, petitioners in Civil Case No. Ceb-6917 pray for the trial courts ruling that the DOLEs judgment could not be validly executed on the Tipolo properties, which allegedly do not belong to Inductocast. IN VIEW WHEREOF, the petition for review is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No. 18017, dated November 16, 1989, is REVERSED and SET ASIDE. The Regional Trial Court of Cebu City, Branch 8 is ordered to try Civil Case Ceb-6917 on its merit. No costs. SO ORDERED. Padilla, Quiason and Vitug, JJ., concur. Narvasa (C.J.) and Regalado, J., On official leave. Petition granted; Reviewed decision reversed and set aside. Note.Jurisdiction of the court is determined by the statute in force at the time of the commencement of the action (Republic vs. Court of Appeals, 205 SCRA 356 [1992]; Tiongson vs. Court of Appeals, 214 SCRA 197 [1992]). o0o [Manliguez vs. Court of Appeals, 232 SCRA 427(1994)]

SUPREME COURT REPORTS ANNOTATED Georg Grotjahn GMBH & Co. vs. Isnani G.R. No. 109272. August 10, 1994.* GEORG GROTJAHN GMBH & CO., petitioner, vs. HON. LUCIA VIOLAGO ISNANI, Presiding Judge, Regional Trial Court, Makati, Br. 59; ROMANA R. LANCHINEBRE; and TEOFILO A. LANCHINEBRE, respondents. Actions; Jurisdiction; Labor Law; The jurisdiction of labor arbiters and the NLRC is limited to disputes arising from an employer-employee relationship which can only be resolved by reference to the Labor Code, other labor statutes, or their collective bargaining agreement.Firstly, the trial court should not have held itself without jurisdiction over Civil Case No. 92-2486. It is true that the loan and cash advances sought to be recovered by petitioner were contracted by private respondent ________________ * SECOND DIVISION. 217 VOL. 235, AUGUST 10, 1994 217 Georg Grotjahn GMBH & Co. vs. Isnani Romana Lanchinebre while she was still in the employ of petitioner. Nonetheless, it does not follow that Article 217 of the Labor Code covers their relationship. Not every dispute between an employer and employee involves matters that only labor arbiters and the NLRC can resolve in the exercise of their adjudicatory or quasi-judicial powers. The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes arising from an employer-employee relationship which can only be resolved by reference to the Labor Code, other labor statutes, or their collective bargaining agreement. Same; Same; Same; An action for recovery of a sum of money brought by employer, as creditor, against an employee, as debtor, falls under the jurisdiction of regular courts.Civil Case No. 92-2486 is a simple collection of a sum of money brought by petitioner, as creditor, against private respondent Romana Lanchinebre, as debtor. The fact that they were employer and employee at the time of the transaction does not negate the civil jurisdiction of the trial court. The case does not involve adjudication of a labor dispute but recovery of a sum of money based on our civil laws on obligation and contract. Same; Foreign Corporations; Parties; Doing business in the Philippines; A foreign corporation performing acts pursuant to its primary purpose and functions as regional/area headquarters for its home office is clearly doing business in the country.The trial court erred in holding that petitioner does not have capacity to sue in the Philippines. It is clear that petitioner is a foreign corporation doing business in the Philippines. Petitioner is covered by the Omnibus Investment Code of 1987. There is no

general rule or governing principle as to what constitutes doing or engaging in or transacting business in the Philip-pines. Each case must be judged in the light of its peculiar circumstances. In the case at bench, petitioner does not engage in commercial dealings or activities in the country because it is precluded from doing so by P.D. No. 218, under which it was established. Nonetheless, it has been continuously, since 1983, acting as a supervision, communications and coordination center for its home offices affiliates in Singapore, and in the process has named its local agent and has employed Philippine nationals like private respondent Romana Lanchinebre. From this uninterrupted performance by petitioner of acts pursuant to its primary purposes and functions as a regional/area headquarters for its home office, it is clear that petitioner is doing business in the country. Same; Same; Same; Estoppel; A party is estopped to challenge the personality of a corporation after having acknowledged the same by entering into a contract with it.Moreover, private respondents are 218 218 SUPREME COURT REPORTS ANNOTATED Georg Grotjahn GMBH & Co. vs. Isnani estopped from assailing the personality of petitioner. So we held in Merrill Lynch Futures, Inc. vs. Court of Appeals, 211 SCRA 824, 837, (1992): The rule is that a party is estopped to challenge the personality of a corporation after having acknowledged the same by entering into a contract with it. And the doctrine of estoppel to deny corporate existence applies to foreign as well as to domestic corporations; one who has dealt with a corporation of foreign origin as a corporate entity is estopped to deny its corporate existence and capacity. The principle will be applied to prevent a person contracting with a foreign corporation from later taking advantage of its noncompliance with the statutes chiefly in cases where such person has received the benefits of the contract, x x x. (Citations omitted.) Same; Same; Same; Misjoinder of parties is not ground for dismissal of an action.Finally, the trial court erred when it dismissed Civil Case No. 92-2486 on what it found to be the misjoinder of private respondent Teofilo Lanchinebre as party defendant. It is a basic rule that (m)isjoinder of parties is not ground for dismissal of an action. PETITION for review of a decision of the Regional Trial Court of Makati, Br. 59. The facts are stated in the opinion of the Court. A.M. Sison, Jr. & Associates for petitioner. Pedro L. Laso for private respondents. PUNO, J.: Petitioner impugns the dismissal of its Complaint for a sum of money by the respondent judge for lack of jurisdiction and lack of capacity to sue.

The records show that petitioner is a multinational company organized and existing under the laws of the Federal Republic of Germany. On July 6, 1983, petitioner filed an application, dated July 2, 1983,1 with the Securities and Exchange Commission (SEC) for the establishment of a regional or area headquarters in the Philippines, pursuant to Presidential Decree No. 218. The application was approved by the Board of Investments (BOI) on _______________ 1 Petition, Annex F; Rollo, pp. 41-43. 219 VOL. 235, AUGUST 10, 1994 219 Georg Grotjahn GMBH & Co. vs. Isnani September 6, 1983. Consequently, on September 20, 1983, the SEC issued a Certificate of Registration and License to petitioner.2 Private respondent Romana R. Lanchinebre was a sales representative of petitioner from 1983 to mid1992. On March 12, 1992, she secured a loan of twenty-five thousand pesos (P25,000.00) from petitioner. On March 26 and June 10, 1992, she made additional cash advances in the sum of ten thousand pesos (P10,000.00). Of the total amount, twelve thousand one hundred seventy pesos and thirty-seven centavos (P12,170.37) remained unpaid. Despite demand, private respondent Romana failed to settle her obligation with petitioner. On July 22, 1992, private respondent Romana Lanchinebre filed with the Arbitration Branch of the National Labor Relations Commission (NLRC) in Manila, a Complaint for illegal suspension, dismissal and non-payment of commissions against petitioner. On August 18, 1992, petitioner in turn filed against private respondent a Complaint for damages amounting to one hundred twenty thousand pesos (P120,000.00) also with the NLRC Arbitration Branch (Manila).3 The two cases were consolidated. On September 2, 1992, petitioner filed another Complaint for collection of sum of money against private respondents spouses Romana and Teofilo Lanchinebre which was docketed as Civil Case No. 92-2486 and raffled to the sala of respondent judge. Instead of filing their Answer, private respondents moved to dismiss the Complaint. This was opposed by petitioner. On December 21, 1992, respondent judge issued the first impugned Order, granting the motion to dismiss. She held, viz: Jurisdiction over the subject matter or nature of the action is conferred by law and not subject to the whims and caprices of the parties. Under Article 217 of the Labor Code of the Philippines, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the

case by the parties for decision, the following cases involving all workers, whether agricultural or nonagricultural: _______________ 2 Petition, Annex G; Rollo, p. 44. 3 P100,000.00 in damages for violation of Article 285 of the Labor Code, and P20,000.00 as Attorneys fees. 220 220 SUPREME COURT REPORTS ANNOTATED Georg Grotjahn GMBH & Co. vs. Isnani (4) claims for actual, moral, exemplary and other forms of damages arising from an employeremployee relations. x x x

(6) Except claims for employees compensation, social security, medicare and maternity benefits, all other claims arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether or not accompanied with a claim for reinstatement. In its complaint, the plaintiff (petitioner herein) seeks to recover alleged cash advances made by defendant (private respondent herein) Romana Lanchinebre while the latter was in the employ of the former. Obviously the said cash advances were made pursuant to the employer-employee relationship between the (petitioner) and the said (private respondent) and as such, within the original and exclusive jurisdiction of the National Labor Relations Commission. Again, it is not disputed that the Certificate of Registration and License issued to the (petitioner) by the Securities and Exchange Commission was merely for the establishment of a regional or area headquarters in the Philippines, pursuant to Presidential Decree No. 218 and its implementing rules and regulations. It does not include a license to do business in the Philippines. There is no allegation in the complaint moreover that (petitioner) is suing under an isolated transaction. It must be considered that under Section 4, Rule 8 of the Revised Rules of Court, facts showing the capacity of a party to sue or be sued or the authority of a party to sue or be sued in a representative capacity or the legal existence of an organized association of persons that is made a party must be averred. There is no averment in the complaint regarding (petitioners) capacity to sue or be sued. Finally, (petitioners) claim being clearly incidental to the occupation or exercise of (respondent) Romana Lanchinebres profession, (respondent) husband should not be joined as party defendant.4 On March 8, 1993, the respondent judge issued a minute Order denying petitioners Motion for

Reconsideration. Petitioner now raises the following assignments of errors: I THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE REGULAR COURTS HAVE NO JURISDICTION OVER DISPUTES _______________ 4 Order, dated December 21, 1992, pp. 1-2; Rollo, pp. 19-20. 221 VOL. 235, AUGUST 10, 1994 221 Georg Grotjahn GMBH & Co. vs. Isnani BETWEEN AN EMPLOYER AND AN EMPLOYEE INVOLVING THE APPLICATION PURELY OF THE GENERAL CIVIL LAW. II THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT PETITIONER HAS NO CAPACITY TO SUE AND BE SUED IN THE PHILIPPINES DESPITE THE FACT THAT PETITIONER IS DULY LICENSED BY THE SECURITIES AND EXCHANGE COMMISSION TO SET UP AND OPERATE A REGIONAL OR AREA HEAD-QUARTERS IN THE COUNTRY AND THAT IT HAS CONTI-NUOUSLY OPERATED AS SUCH FOR THE LAST NINE (9) YEARS. III THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE ERRONEOUS INCLUSION OF THE HUSBAND IN A COMPLAINT IS A FATAL DEFECT THAT SHALL RESULT IN THE OUTRIGHT DISMISSAL OF THE COMPLAINT. IV THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE HUSBAND IS NOT REQUIRED BY THE RULES TO BE JOINED AS A DEFENDANT IN A COMPLAINT AGAINST THE WIFE. There is merit to the petition. Firstly, the trial court should not have held itself without jurisdiction over Civil Case No. 92-2486. It is true that the loan and cash advances sought to be recovered by petitioner were contracted by private

respondent Romana Lanchinebre while she was still in the employ of petitioner. Nonetheless, it does not follow that Article 217 of the Labor Code covers their relationship. Not every dispute between an employer and employee involves matters that only labor arbiters and the NLRC can resolve in the exercise of their adjudicatory or quasi-judicial powers. The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes arising from an employer-employee relationship which can only be resolved by reference to the Labor Code, other labor statutes, or their collective bargaining agreement. In this regard, we held in the earlier case of Molave Motor Sales, Inc. vs. Laron, 129 SCRA 485 (1984), viz: 222 222 SUPREME COURT REPORTS ANNOTATED Georg Grotjahn GMBH & Co. vs. Isnani Before the enactment of BP Blg. 227 on June 1, 1982, Labor Arbiters, under paragraph 5 of Article 217 of the Labor Code had jurisdiction over all other cases arising from employer-employee relation, unless expressly excluded by this Code. Even then, the principle followed by this Court was that, although a controversy is between an employer and an employee, the Labor Arbiters have no jurisdiction if the Labor Code is not involved. In Medina vs. Castro-Bartolome, 116 SCRA 597, 604 in negating jurisdiction of the Labor Arbiter, although the parties were an employer and two employees, Mr. Justice Abad Santos stated: The pivotal question to Our mind is whether or not the Labor Code has any relevance to the reliefs sought by plaintiffs. For if the Labor Code has no relevance, any discussion concerning the statutes amending it and whether or not they have retroactive effect is unnecessary. xxx xxx x x x

And in Singapore Airlines Limited vs. Pao, 122 SCRA 671, 677, the following was said: Stated differently, petitioner seeks protection under the civil laws and claims no benefits under the Labor Code. The primary relief sought is for liquidated damages for breach of a contractual obligation. The other items demanded are not labor benefits demanded by workers generally taken cognizance of in labor disputes, such as payment of wages, overtime compensation or separation pay. The items claimed are the natural consequences flowing from breach of an obligation, intrinsically a civil dispute. x x x xxx xxx

In San Miguel Corporation vs. NLRC, 161 SCRA 719 (1988), we crystallized the doctrines set forth in the Medina, Singapore Airlines, and Molave Motors cases, thus: x x x The important principle that runs through these three (3) cases is that where the claim to the principal relief sought is to be resolved not by reference to the Labor Code or other labor relations

statute or a collective bargaining agreement but by the general civil law, the jurisdiction over the dispute belongs to the regular courts of justice and not to the Labor Arbiter and the NLRC. In such situations, resolutions of the dispute requires expertise, not in labor management relations nor in wage structures and other terms and conditions of employment, but rather in the application of the general civil law. Clearly, such claims fall outside the area of competence or expertise 223 VOL. 235, AUGUST 10, 1994 223 Georg Grotjahn GMBH & Co. vs. Isnani ordinarily ascribed to Labor Arbiters and the NLRC and the rationale for granting jurisdiction over such claims to these agencies disappears. Civil Case No. 92-2486 is a simple collection of a sum of money brought by petitioner, as creditor, against private respondent Romana Lanchinebre, as debtor. The fact that they were employer and employee at the time of the transaction does not negate the civil jurisdiction of the trial court. The case does not involve adjudication of a labor dispute but recovery of a sum of money based on our civil laws on obligation and contract. Secondly, the trial court erred in holding that petitioner does not have capacity to sue in the Philippines. It is clear that petitioner is a foreign corporation doing business in the Philippines. Petitioner is covered by the Omnibus Investment Code of 1987. Said law defines doing business, as follows: x x x shall include soliciting orders, purchases, service contracts, opening offices, whether called liaison offices or branches; appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the Philippines for a period or periods totalling one hundred eighty (180) days or more; participating in the management, supervision or control of any domestic business firm, entity or corporation in the Philippines, and any other act or acts that imply a continuity of commercial dealings or arrangements and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization.5 There is no general rule or governing principle as to what constitutes doing or engaging in or transacting business in the Philippines. Each case must be judged in the light of its peculiar circumstances.6 In the case at bench, petitioner does not engage in commercial dealings or activities in the country because it is precluded from doing so by P.D. No. 218, under which it was _______________ 5 Article 44, Chapter I, Book II, E.O. 226. 6 Top-Weld Manufacturing, Inc. vs. ECED, S.A., 138 SCRA 118 (1985). See Granger Associates vs. Microwave Systems, Inc., 189 SCRA 631 (1990).

224 224 SUPREME COURT REPORTS ANNOTATED Georg Grotjahn GMBH & Co. vs. Isnani established.7 Nonetheless, it has been continuously, since 1983, acting as a supervision, communications and coordination center for its home offices affiliates in Singapore, and in the process has named its local agent and has employed Philippine nationals like private respondent Romana Lanchinebre. From this uninterrupted performance by petitioner of acts pursuant to its primary purposes and functions as a regional/area headquarters for its home office, it is clear that petitioner is doing business in the country. Moreover, private respondents are estopped from assailing the personality of petitioner. So we held in Merrill Lynch Futures, Inc. vs. Court of Appeals, 211 SCRA 824, 837 (1992): The rule is that a party is estopped to challenge the personality of a corporation after having acknowledged the same by entering into a contract with it. And the doctrine of estoppel to deny corporate existence applies to foreign as well as to domestic corporations; one who has dealt with a corporation of foreign origin as a corporate entity is estopped to deny its corporate existence and capacity. The principle will be applied to prevent a person contracting with a foreign corporation from later taking advantage of its noncompliance with the statutes chiefly in cases where such person has received the benefits of the contract, x x x. (Citations omitted.) Finally, the trial court erred when it dismissed Civil Case No. 92-2486 on what it found to be the misjoinder of private respondent _______________ 7 In fact, under the Rules and Regulations implementing P.D. No. 218, the application for the establishment of a regional or area headquarters in the country must be accompanied by, among others, a certification from the principal officer of the foreign entity to the effect that the said foreign entity has been authorized by its board of directors or governing body to establish its regional headquarters in the Philippines, specifying that: a) The activities of the regional headquarters shall be limited to acting as supervisory communications and coordinating center for its affiliates, subsidiaries or branches of the region. (b) The headquarters will not derive any income from sources within the Philippines and will not participate in any manner in the management of any subsidiary or branch office the parent company might have in the Philippines; xxx xxx xxx 225 VOL. 235, AUGUST 10, 1994

225 Georg Grotjahn GMBH & Co. vs. Isnani Teofilo Lanchinebre as party defendant. It is a basic rule that (m)isjoinder of parties is not ground for dismissal of an action.8 Moreover, the Order of the trial court is based on Section 4(h), Rule 3 of the Revised Rules of Court, which provides: A married woman may not xxx be sued alone without joining her husband, except x x x if the litigation is incidental to the profession, occupation or business in which she is engaged, Whether or not the subject loan was incurred by private respondent as an incident to her profession, occupation or business is a question of fact. In the absence of relevant evidence, the issue cannot be resolved in a motion to dismiss. IN VIEW WHEREOF, the instant Petition is GRANTED. The Orders, dated December 21, 1992 and March 8, 1993, in Civil Case No. 92-2486 are REVERSED AND SET ASIDE. The RTC of Makati, Br. 59, is hereby ordered to hear the reinstated case on its merits. No costs. SO ORDERED. Narvasa (C.J., Chairman), Padilla, Regalado and Mendoza, JJ., concur. Petition granted. Orders reversed and set aside. Notes.Where the complaint alleges that the foreign corporation has an agent in the Philippines, summons can validly be served thereto even without prior evidence of the truth of such factual allegation. (Signetics Corporation vs. Court of Appeals, 225 SCRA 737 [1993]) Acceptance of benefits by an illegally dismissed employee is not necessarily construed to estop him from questioning the legality of his dismissal. (Zurbano, Sr. vs. National Labor Relations Commission, 228 SCRA 556 [1993]) o0o [Georg Grotjahn GMBH & Co. vs. Isnani, 235 SCRA 216(1994)]

SUPREME COURT REPORTS ANNOTATED Eviota vs. Court of Appeals G.R. No. 152121. July 29, 2003.* EDUARDO G. EVIOTA, petitioner, vs. THE HON. COURT OF APPEALS, THE HON. JOSE BAUTISTA, Presiding Judge of Branch 136, Regional Trial Court of Makati, and STANDARD CHARTERED BANK, respondents. Remedial Law; Actions; Jurisdiction; Not every controversy or money claim by an employee against the employer or vice-versa is within the exclusive jurisdiction of the labor arbiter.Case law has it that the nature of an action and the subject matter thereof, as well as which court has jurisdiction over the same, are determined by the material allegations of the complaint and the reliefs prayed for in relation to the law involved. Not every controversy or money claim by an employee against the employer or vice-versa is within the exclusive jurisdiction of the labor arbiter. A money claim by a worker against the employer or vice-versa is within the exclusive jurisdiction of the labor arbiter only if there is a reasonable causal connection between the claim asserted and employee-employer relation. Absent such a link, the complaint will be cognizable by the regular courts of justice. Same; Same; Same; Actions between employees and employer where the employer-employee relationship is merely incidental and the cause of action precedes from a different source of obligation is within the exclusive jurisdiction of the regular court.Actions between employees and employer where the employer-employee relationship is merely incidental and the cause of action precedes from a different source of obligation is within the exclusive jurisdiction of the regular court. In Georg Grotjahn GMBH & Co. v. Isnani, we held that the jurisdiction of the Labor Arbiter under Article 217 of the Labor Code, as amended, is limited to disputes arising from an employer-employee relationship which can only be resolved by reference to the Labor Code of the Philippines, other labor laws or their collective bargaining agreements. In Singapore Airlines Limited v. Pao, the complaint of the employer against the employee for damages for wanton justice and refusal without just cause to report for duty, and for having maliciously and with bad faith violated the terms and conditions of their agreement for a course of conversion training at the expense of the employer, we ruled that jurisdiction over the action belongs to the civil court. PETITION for review on certiorari of a decision of the Court of Appeals. _______________ * SECOND DIVISION. 395 VOL. 407, JULY 29, 2003 395 Eviota vs. Court of Appeals The facts are stated in the opinion of the Court.

Vicente D. Millora for petitioner. Sycip, Salazar, Hernandez and Gatmaitan for private respondent. CALLEJO, SR., J.: Before us is a petition for review on certiorari under Rule 45 of the Revised Rules of Court, of the Decision1 of the Court of Appeals in CA-G.R. SP No. 60141 denying the petition for certiorari filed by the petitioner praying the nullification of the Order of the Regional Trial Court of Makati, Branch 136.2 Sometime on January 26, 1998, the respondent Standard Chartered Bank and petitioner Eduardo G. Eviota executed a contract of employment under which the petitioner was employed by the respondent bank as Compensation and Benefits Manager, VP (M21). However, the petitioner abruptly resigned from the respondent bank barely a month after his employment and rejoined his former employer. On June 19, 1998, the respondent bank filed a complaint against the petitioner with the RTC of Makati City. The respondent bank alleged inter alia in its complaint that: 1. It is a foreign banking institution authorized to do business in the Philippines, with principal offices at the 5th Floor, Bankner Bldg., 6756 Ayala Avenue, Makati City. 2. Defendant Eduardo Eviota (Eviota) is a former employee of the Bank, and may be served with summons and other court processes at 8 Maple Street, Cottonwoods, Antipolo, Metro Manila. 3. On December 22, 1997, Eviota began negotiating with the Bank on his possible employment with the latter. Taken up during these negotiations were not only his compensation and benefit package, but also the nature and demands of his prospective position. The Bank made sure that Eviota was fully aware of all the terms and conditions of his possible job with the Bank. _______________ 1 Penned by Associate Justice Romeo A. Brawner, with Associate Justices Elvi John S. Asuncion and Juan Q. Enriquez, Jr. concurring. 2 Civil Case No. 98-1397 entitled Standard Chartered Bank v. Eduardo G. Eviota. The said order denied the petitioners motion to dismiss. 396 396 SUPREME COURT REPORTS ANNOTATED Eviota vs. Court of Appeals 4. On January 26, 1998, Eviota indicated his conformity with the Banks Offer of Employment by signing a written copy of such offer dated January 22, 1998 (the Employment Contract). A copy of the Employment Contract between Eviota and the Bank is hereto attached as Annex A. 5. Acting on the Employment Contract and on Eviotas uninhibited display of interest in assuming

his position, the Bank promptly proceeded to carry out the terms of the Employment Contract as well as to facilitate his integration into the workforce. Among others, the Bank: (a) renovated and refurbished the room which was to serve as Eviotas office; (b) purchased a 1998 Honda CR-V (Motor No. PEWED7P101101; Chassis No. PADRD 1830WV00108) for Eviotas use; (c) purchased a desktop IBM computer for Eviotas use; (d) arranged the takeout of Eviotas loans with Eviotas former employer; (e) released Eviotas signing bonus in the net amount of P300,000.00; (f) booked Eviotas participation in a Singapore conference on Y2K project scheduled on March 10 and 11, 1998; and (g) introduced Eviota to the local and regional staff and officers of the Bank via personal introductions and electronic mail. 6. The various expenses incurred by the Bank in carrying out the above acts are itemized below, as follows: a. Signing Bonus P 300,000.00 b. 1 Honda CR-V 800,000.00 c. IBM Desktop Computer 89,995.00 d. Office Reconfiguration 29,815.00 e. 2-Drawer Lateral File Cabinet

13,200.00 f. 1 Officers Chair 31,539.00 g. 1 Guest Chair 2,200.00 h. 1 Hanging Shelf 2,012.00 i. Staff Loan Processing

Title Verification 375.00 Cost of Appraisal Housing Loan 3,500.00

TOTAL P1,272,636.00 An itemized schedule of the above expenses incurred by the Bank is hereto attached as Annex B. 7. On February 25, 1998, Eviota assumed his position as Compensation and Benefits Manager with the Bank and began to discharge his duties. At one Human Resources (HR) Committee meeting held on March 3, 1998, Eviota energetically presented to senior management his projects for the year, thus raising the latters expectations. The same day, 397 VOL. 407, JULY 29, 2003 397 Eviota vs. Court of Appeals Eviota instructed the Banks HR Administrator to book him a flight for Singapore, where he was scheduled to participate in a Y2K project on March 10 and 11, 1998. Confident of Eviotas professed commitment to the Bank, the latter made the aforementioned airline booking for him. In addition, the Bank allowed Eviota access to certain sensitive and confidential information and documents concerning the Banks operations. 8. After leading the Bank to believe that he had come to stay, Eviota suddenly resigned his employment with immediate effect to re-join his previous employer. His resignation, which did not comply with the 30-day prior notice rule under the law and under the Employment Contract, was so unexpected that it disrupted plans already in the pipeline (e.g., the development of a salary/matrix grid and salary structure, and the processing of merit promotion recommendations), aborted meetings previously scheduled among Bank officers, and forced the Bank to hire the services of a third party to perform the job he was hired to do. For the services of this third party, the Bank had to pay a total of P208,807.50. A copy of a receipt for the above expenses is hereto attached as Annex C (See also, Annex B). 9. Aside from causing no small degree of chaos within the Bank by reason of his sudden resignation, Eviota made off with a computer diskette and other papers and documents containing confidential information on employee compensation and other Bank matters, such as the salary schedule of all Corporate and Institutional Banking officers and photocopies of schedules of benefits provided expatriates being employed by the Bank. 10. With the benefit of hindsight, the Bank realizes that it was simply used by Eviota as a mere leverage for his selfish efforts at negotiating better terms of employment with his previous employer. Worse, there is evidence to show that in his attempts to justify his hasty departure from the Bank and conceal the real reason for his move, Eviota has resorted to falsehoods derogatory to the reputation of the Bank. In particular, he has been maliciously purveying the canard that he had hurriedly left the Bank because it had failed to provide him support. His untruthful remarks have fairly depicted the Bank as a contract violator and an undesirable employer thus damaging the Banks reputation and business standing in the highly competitive banking community, and undermining its ability to recruit

and retain the best personnel in the labor market. 11. On March 16, 1998, the Bank made a written demand on Eviota to return the aforementioned computer diskette and other confidential documents and papers, reimburse the Bank for the various expenses incurred on his account as a result of his resignation (with legal interest), and pay damages in the amount of at least P500,000.00 for the inconvenience and work/program disruptions suffered by the Bank. 398 398 SUPREME COURT REPORTS ANNOTATED Eviota vs. Court of Appeals A copy of the Banks demand letter dated March 16, 1998 is hereto attached as Annex D. 12. In partial compliance with said demand, Eviota made arrangements with his previous employer to reimburse the Bank for the expenses incurred in connection with the Banks purchase of the Honda CR-V for his use. The Bank informed Eviota that in addition to the Honda CR-Vs purchase price of P848,000.00 (of which Eviota initially shouldered P48,000.00), incidental costs in the form of Processing Fees (P1,000.00), FPD/MCAR/98-155684 (P1,232.53) and Fund Transfer Price (P18,646.84) were incurred, bringing the total cost of the Honda CR-V to P868,881.38. On April 29, 1998, the Bank received two managers checks in the aggregate amount of P868,881.38, representing costs incurred in connection with the purchase of the Honda CR-V, inclusive of processing fees and other incidental costs. Previously, Eviota had returned his P300,000.00 signing bonus, less the P48,000.00 he had advanced for the Honda CR-Vs purchase price. 13. Eviota never complied with the Banks demand that he reimburse the latter for the other expenses incurred on his account, amounting to P360,562.12 (see, Annex B).3 The respondent bank alleged, by way of its causes of action against the petitioner, the following: First Cause of Action 14. Eviotas actions constitute a clear violation of Articles 19, 20 and 21 of Republic Act No. 386, as amended (the Civil Code). Assuming arguendo that Eviota had the right to terminate his employment with the Bank for no reason, the manner in and circumstances under which he exercised the same are clearly abusive and contrary to the rules governing human relations. 14.1. By his actions and representations, Eviota had induced the Bank to believe that he was committed to fulfilling his obligations under the Employment Contract. As a result, the Bank incurred expenses in carrying out its part of the contract (see Annexes B and C). Less reimbursements received from Eviota, the Bank is entitledto actual damages of P360,562.12. (See, Annex C). Second Cause of Action 15. Under Article 285 (a) of Presidential Decree No. 442, as amended (the Labor Code), an employee may terminate without just cause the employer-employee relationship by serving written notice on the em-

_______________ 3 Rollo,pp. 32-36. 399 VOL. 407, JULY 29, 2003 399 Eviota vs. Court of Appeals ployer at least one (1) month in advance. In addition, Section 13 of the Employment Contract specifically provides that: Your [i.e., Eviotas] employment may be terminated by either party giving notice of at least one month. (Annex A, p. 5.) 15.1. Eviotas failure to comply with the above requirement threw a monkey wrench into the Banks operationsEviotas sudden resignation aborted meetings previously scheduled among Bank officers and disrupted plans for a salary/merit review program and development of a salary structure and merit grid already in the pipeline. Hence, Eviota is liable to the Bank for damages in the amount of at least P100,000.00. Third Cause of Action 16. Eviotas false and derogatory statements that the Bank had failed to deliver what it had purportedly promised have besmirched the Banks reputation and depicted it as a contract violator and one which does not treat its employees properly. These derogatory statements have injured the Banks business standing in the banking community, and have undermined the Banks ability to recruit and retain the best personnel. Hence, plaintiff is entitled to moral damages of at least P2,000,000.00. 17. By way of example or correction for the public good, and to deter other parties from committing similar acts in the future, defendant should be held liable for exemplary damages of at least P1,000,000.00. 18. Eviotas actions have compelled plaintiff to obtain the services of undersigned counsel for a fee, in order to protect its interests. Hence, plaintiff is entitled to attorneys fees of at least P200,000.00.4 The respondent bank prayed, that after due proceedings, judgment be rendered in its favor as follows: WHEREFORE, it is respectfully prayed that judgment be rendered ordering the defendant to pay the plaintiff: 1. As actual damages, the amount of P360,562.12, representing expenses referred to in items c to i of par. 6 and the cost of the third-party services mentioned in par. 8; 2. For violating the 30-day notice requirement under the Labor Code and order (sic) the Employment Contract, damages in the amount of at least P100,000.00; 3. As moral damages, the amount of P2,000,000.00; 4. As exemplary damages, the amount of P1,000,000.00;

_______________ 4 Id.,at pp. 36-37. 400 400 SUPREME COURT REPORTS ANNOTATED Eviota vs. Court of Appeals 5. As attorneys fees, the amount of P200,000.00; and 6. Costs of the suit. Other just and equitable reliefs are likewise prayed for.5 The respondent bank appended to its complaint a copy of the petitioners employment contract. The petitioner filed a motion to dismiss the complaint on the ground that the action for damages of the respondent bank was within the exclusive jurisdiction of the Labor Arbiter under paragraph 4, Article 217 of the Labor Code of the Philippines, as amended. The petitioner averred that the respondent banks claim for damages arose out of or were in connection with his employer-employee relationship with the respondent bank or some aspect or incident of such relationship. The respondent bank opposed the motion, claiming that its action for damages was within the exclusive jurisdiction of the trial court. Although its claims for damages incidentally involved an employer-employee relationship, the said claims are actually predicated on the petitioners acts and omissions which are separately, specifically and distinctly governed by the New Civil Code. On November 29, 1999, the trial court issued an order denying the petitioners motion to dismiss, ratiocinating that the primary relief prayed for by the respondent bank was grounded on the tortious manner by which the petitioner terminated his employment with the latter, and as such is governed by the New Civil Code: The Court holds that here, since the primary relief prayed for by the plaintiff is for damages, grounded on the tortious manner by which the defendant terminated his employment with the company, the same are recoverable under the applicable provision of the Civil Code, the present controversy is removed from the jurisdiction of the Labor Arbiter and brings in within the purview of the regular courts.6 The petitioner filed a motion for reconsideration of the said order, but the court issued an order denying the same. The petitioner filed a petition for certiorari with the Court of Appeals for the nullification of the orders of the trial court, alleging that the court a quo committed grave abuse of its discretion amounting to excess or _______________ 5 Id.,at pp. 37-38.

6 Id., at p. 55. 401 VOL. 407, JULY 29, 2003 401 Eviota vs. Court of Appeals lack of jurisdiction in issuing the said orders. The petitioner further asserted that contrary to the ruling of the court, the respondent bank claimed damages in its complaint against the petitioner based on his employment contract, and not on tortious acts. On November 15, 2001, the CA promulgated a decision dismissing the petition, holding that the trial court and not the Labor Arbiter had exclusive jurisdiction over the action of the respondent bank. It held that the latters claims for damages were grounded on the petitioners sudden and unceremonious severance of his employment with the respondent bank barely a month after assuming office. With his motion for reconsideration of the decision having been denied by the CA, the petitioner filed his petition with this Court contending that: Suffice to state immediately that on the basis of the allegations in the complaint, it is the Labor Arbiter, not the Regional Trial Court, which has jurisdiction of the subject matter of the complaint in Civil Case No. 98-1397, the principal cause of action being the alleged omission of petitioner in giving notice to the respondent Bank employer of termination of their relationship; whereas the claims for other actual/moral/exemplary damages are well within the competence of the Labor Arbiter.7 The petition is barren of merit. Article 217 of the Labor Code of the Philippines, as amended by Rep. Act No. 6715 which took effect on March 21, 1989 reads: ART. 217. Jurisdiction of Labor Arbiters and the Commission.(a) Except as otherwise provided under this Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or nonagricultural: 1. Unfair labor practice cases; 2. Termination disputes; 3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and conditions of employment; _______________ 7 Id.,at p. 9.

402 402 SUPREME COURT REPORTS ANNOTATED Eviota vs. Court of Appeals 4. Claims for actual, moral, exemplary and other forms of damages arising from the employeremployee relations. Case law has it that the nature of an action and the subject matter thereof, as well as which court has jurisdiction over the same, are determined by the material allegations of the complaint and the reliefs prayed for in relation to the law involved. Not every controversy or money claim by an employee against the employer or vice-versa is within the exclusive jurisdiction of the labor arbiter. A money claim by a worker against the employer or viceversa is within the exclusive jurisdiction of the labor arbiter only if there is a reasonable causal connection between the claim asserted and employee-employer relation. Absent such a link, the complaint will be cognizable by the regular courts of justice.8 Actions between employees and employer where the employer-employee relationship is merely incidental and the cause of action precedes from a different source of obligation is within the exclusive jurisdiction of the regular court.9 In Georg Grotjahn GMBH & Co. v. Isnani,10 we held that the jurisdiction of the Labor Arbiter under Article 217 of the Labor Code, as amended, is limited to disputes arising from an employer-employee relationship which can only be resolved by reference to the Labor Code of the Philippines, other labor laws or their collective bargaining agreements. In Singapore Airlines Limited v. Pao,11 the complaint of the employer against the employee for damages for wanton justice and refusal without just cause to report for duty, and for having maliciously and with bad faith violated the terms and conditions of their agreement for a course of conversion training at the expense of the employer, we ruled that jurisdiction over the action belongs to the civil court: On appeal to this court, we held that jurisdiction over the controversy belongs to the civil courts. We stated that the action was for breach of a contractual obligation, which is intrinsically a civil dispute. We further stated that while seemingly the cause of action arose from employer-employee relations, the employers claim for damages is grounded on _______________ 8 Pepsi Cola Distributors of the Philippines, Inc. v. Gal-lang, 201 SCRA 695 (1991). 9 Baez v. Valdevilla, 331 SCRA 584 (2000). 10 235 SCRA 216 (1994). 11 122 SCRA 671 (1983). 403

VOL. 407, JULY 29, 2003 403 Eviota vs. Court of Appeals wanton failure and refusal without just cause to report to duty coupled with the averment that the employee maliciously and with bad faith violated the terms and conditions of the contract to the damage of the employer. Such averments removed the controversy from the coverage of the Labor Code of the Philippines and brought it within the purview of the Civil Law. Jurisprudence has evolved the rule that claims for damages under paragraph 4 of Article 217, to be cognizable by the Labor Arbiter, must have a reasonable causal connection with any of the claims provided for in that article. Only if there is such a connection with the other claims can the claim for damages be considered as arising from employer-employee relations.12 The claims were the natural consequences flowing from a breach of an obligation, intrinsically civil in nature. In Medina v. Castro-Bartolome,13 we held that a complaint of an employee for damages against the employer for slanderous remarks made against him was within the exclusive jurisdiction of the regular courts of justice because the cause of action of the plaintiff was for damages for tortious acts allegedly committed by the employer. The fact that there was between the parties an employer-employee relationship does not negate the jurisdiction of the trial court. In Singapore Airlines Ltd. v. Pao,14 we held that: Stated differently, petitioner seeks protection under the civil laws and claims no benefits under the Labor Code. The primary relief sought is for liquidated damages for breach of a contractual obligation. The other items demanded are not labor benefits demanded by workers generally taken cognizance of in labor disputes, such as payment of wages, overtime compensation or separation pay. The items claimed are the natural consequences flowing from breach of an obligation, intrinsically a civil dispute. In Dai-Chi Electronics Manufacturing Corporation v. Villarama, Jr.,15 the petitioner sued its employee Adonis Limjuco for breach of contract which reads: _______________ 12 Dai-Chi Electronics Manufacturing Corp. v. Villarama, Jr., 238 SCRA 267 (1994). 13 116 SCRA 597 (1982). 14 Supra. 15 Supra. 404

404 SUPREME COURT REPORTS ANNOTATED Eviota vs. Court of Appeals That for a period of two (2) years after termination of service from EMPLOYER, EMPLOYEE shall not in any manner be connected, and/or employed, be a consultant and/or be an informative body directly or indirectly, with any business firm, entity or undertaking engaged in a business similar to or in competition with that of the EMPLOYER.16 The petitioner alleged in its complaint with the trial court that: Petitioner claimed that private respondent became an employee of Angel Sound Philippines Corporation, a corporation engaged in the same line of business as that of petitioner, within two years from January 30, 1992, the date of private respondents resignation from petitioners employ. Petitioner further alleged that private respondent is holding the position of Head of the Material Management Control Department, the same position he held while in the employ of petitioner.17 The trial court dismissed the case for lack of jurisdiction over the subject matter because the cause of action for damages arose out of the parties employer-employee relationship. We reversed the order of the trial court and held, thus: Petitioner does not ask for any relief under the Labor Code of the Philippines. It seeks to recover damages agreed upon in the contract as redress for private respondents breach of his contractual obligation to its damage and prejudice (Rollo, p. 57). Such cause of action is within the realm of Civil Law, and jurisdiction over the controversy belongs to the regular courts. More so when we consider that the stipulation refers to the post-employment relations of the parties.18 In this case, the private respondents first cause of action for damages is anchored on the petitioners employment of deceit and of making the private respondent believe that he would fulfill his obligation under the employment contract with assiduousness and earnestness. The petitioner volte face when, without the requisite thirty-day notice under the contract and the Labor Code of the Philippines, as amended, he abandoned his office and rejoined his former employer; thus, forcing the private respondent to hire a replacement. The private respondent was left in a lurch, and its corporate plans and program in jeopardy and disarray. Moreover, the petitioner took off with the private respondents computer _______________ 16 See note 11, p. 268. 17 Id.,at p. 269. 18 Id.,at p. 270. 405

VOL. 407, JULY 29, 2003 405 Eviota vs. Court of Appeals diskette, papers and documents containing confidential information on employee compensation and other bank matters. On its second cause of action, the petitioner simply walked away from his employment with the private respondent sansany written notice, to the prejudice of the private respondent, its banking operations and the conduct of its business. Anent its third cause of action, the petitioner made false and derogatory statements that the private respondent reneged on its obligations under their contract of employment; thus, depicting the private respondent as unworthy of trust. It is evident that the causes of action of the private respondent against the petitioner do not involve the provisions of the Labor Code of the Philippines and other labor laws but the New Civil Code. Thus, the said causes of action are intrinsically civil. There is no causal relationship between the causes of action of the private respondents causes of action against the petitioner and their employer-employee relationship. The fact that the private respondent was the erstwhile employer of the petitioner under an existing employment contract before the latter abandoned his employment is merely incidental. In fact, the petitioner had already been replaced by the private respondent before the action was filed against the petitioner. IN LIGHT OF ALL THE FOREGOING, the Petition is DENIED. The Decision of the Court of Appeals dismissing the petition of the petitioner is AFFIRMED. SO ORDERED. Bellosillo (Chairman), Austria-Martinez and Tinga, JJ., concur. Quisumbing, J., On Official Leave. Petition denied, judgment affirmed. Note.The question of jurisdiction may be raised at any stage of the proceedings. (Pangilinan vs. Court of Appeals, 321 SCRA 51 [1999]) o0o [Eviota vs. Court of Appeals, 407 SCRA 394(2003)]