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Money Claims (Paragraph 5, Section 10 of RA 8042) Serrano v. Gallant Maritime Services, Inc., GR No.

167614, 24 March 2009 (Austria-Martinez) Yap v. Thenamaris Ships Management and Intermare Maritime Agencies, Inc., GR No. 179532, 30 May 2011 (Nachura) Guideposts of Labor Law (Social Justice, Equal Pay for Equal Work, Right to SelfOrganization) Calalang v. Williams, GR No. 47800, 2 December 1940 (Laurel) ISAE v. Quisumbing, GR No. 128845, 1 June 2000 (Kapunan) USTFU v. Bitonio, GR No. 131235, 16 November 1999 (Panganiban) Regulation of Recruitment and Placement Activities (Arts. 25-35) Sagun v. Sunace International Management Services, GR No. 179242, 23 February 2011 (Nachura) Apprenticeship (Arts. 57-72) Atlanta Industries v. Sebolino, GR No. 187320, 26 January 2011 (Brion) Handicapped Workers Bernardo v. NLRC, GR No. 122917, 12 July 1999 Non-Diminution Rule (Art. 100) Central Azucarera de Tarlac v. Central Azucarera de Tarlac Labor Union-NLU, GR No. 188949, 26 July 2010 (Nachura) Characteristics of Employer-Employee Relationship Sonza v. ABS-CBN Broadcasting Corporation, GR No. 138051, 10 June 2004 (Carpio) Dumpit-Murillo v. CA, GR No. 164652, 8 June 2007 (Quisumbing) Labor Contracting (Arts. 106-109) Philippine Airlines Inc. v. Ligan, GR No. 146408, 30 April 2009 (Carpio-Morales) Aliviado v. Procter & Gamble Philippines, Inc., GR No. 160506, 9 March 2010 (Del Castillo) Article 136 Zialcita, et al. v. PAL, RO4-3-3398-76, 20 February 1977 PT&T v. NLRC, GR No. 118978, 23 May 1997 (Regalado) Duncan Association of Detailman-PTGWO v. Glaxo Wellcome Philippines, GR No. 162994, 17 September 2004 (Tinga)

Money Claims (Paragraph 5, Section 10 of RA 8042)

Serrano v. Gallant Maritime Services, Inc., GR No. 167614, 24 March 2009 (Austria-Martinez)
Facts: Complainant Serrano was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Inc. under a POEA-approved contract as a Chief Officer for 12 months. On the date of his departure, he was constrained to accept a downgraded employment contract for the position of Second Officer upon the assurance that he would be made Chief Officer by the end of the following month. Because he was not made Chief Officer as promised, he refused to stay on as Second Officer and was repatriated to the Philippines with 9 months and 23 days remaining in his employment contract. He then filed a complaint for constructive dismissal and for payment of money claims with the Labor Arbiter against Gallant and Marlow. The LA declared Serranos dismissal as illegal and awarded him the amount equivalent to 3 months worth of salary for the unexpired portion of his term, following Paragraph 5, Section 10 of RA 8042. On appeal, the NLRC only corrected the LAs computation of the lump-sum salary awarded to Serrano, but affirmed the LA judgment in all other respects. Serrano moved for partial reconsideration and assailed the constitutionality of Section 10 of RA 8042. The CA subsequently affirmed the NLRC but skirted the constitutional issue raised by Serrano. Issue: W/N the clause or for 3 months for every year of the unexpired term, whichever is less, found in Section 10 (5) of RA 8042, violates Section 18 of Article II (The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare.), Section 1 of Article III (due process and equal protection clauses), and Section 3 of Article XIII (The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all.) of the 1987 Philippine Constitution. Ruling: YES, VIOLATIVE OF ARTICLE III SECTION 1 OF THE PHILIPPINE CONSTITUTION. The Court concludes that the subject clause contains a suspect classification in that, in the computation of the monetary benefits of fixed-term employees who are illegally discharged, it imposes a 3-month cap on the claim of OFWs with an unexpired portion of one year or more in their contracts, but none on the claims of other OFWs or local workers with fixed-term employment. The subject clause singles out one classification of OFWs and burdens it with a peculiar disadvantage. There being a suspect classification involving a vulnerable sector protected by the Constitution, the Court now subjects the classification to a strict judicial scrutiny, and determines whether it serves a compelling state interest

through the least restrictive means. When the challenge to a statute is premised on the perpetuation of prejudice against persons favored by the Constitution with special protectionsuch as the working class or a section thereofthe Court may recognize the existence of a suspect classification and subject the same to a strict judicial scrutiny. The subject clause has a discriminatory intent against, and invidious impact on, OFWs at three levels: First, OFWs with employment contracts of LESS THAN ONE YEAR vis--vis OFWs with employment contracts of ONE YEAR OR MORE; Second, among OFWs with employment contracts of MORE THAN ONE YEAR; and Third, OFWs vis--vis local workers WITH FIXED-PERIOD EMPLOYMENT. Under the first level, a review of previous jurisprudence shows that the subject clause classifies OFWs into two categories. The first category includes OFWs with fixed-period employment contracts of less than one year; in case of illegal dismissal, they are entitled to their salaries for the entire unexpired portion of their contract. The second category consists of OFWs with fixed-period employment contracts of one year or more; in case of illegal dismissal, they are entitled to monetary award equivalent to only three months per year of the unexpired portion of their contracts. This disparity becomes more aggravating when jurisprudence prior to the effectivity of RA 8042 is taken into account, wherein illegally dismissed OFWs, no matter how long the period of their employment contracts, were entitled to their salaries for the entire unexpired portions of their contracts. The enactment of the subject clause in RA 8042 introduced a differentiated rule of computation of the money claims of illegally dismissed OFWs based on their employment periods, in the process singling out one category whose contracts have an unexpired portion of one year or more and subjecting them to the peculiar disadvantage of having their monetary awards limited to their salaries for three months or for the unexpired portion thereof, whichever is less, but all the while sparing the other category from such prejudice, simply because the latters unexpired contracts fall short of one year. With respect to the second level, the subject clause applies in cases when the unexpired portion of the contract period is at least one year, which arithmetically requires that the original contract period be more than one year. Viewed in that light, the subject clause creates a sub-layer of discrimination among OFWs whose contract periods are for more than one year: those who are illegally dismissed with less than one year left in their contracts shall be entitled to their salaries for the entire unexpired portion thereof, while those who are illegally dismissed with one year or more remaining in their contracts shall be covered by the subject clause, and their monetary benefits limited to their salaries for 3 months only.

With respect to the third level: Prior to RA 8042, OFWs and local workers with fixed-term employment who were illegally discharged were treated alike in terms of the computation of their money claims: they were uniformly entitled to their salaries for the entire unexpired portions of their contracts. But with the enactment of RA 8042, specifically the adoption of the subject clause, illegally dismissed OFWs with an unexpired portion of one year or more in their employment contract have since been differently treated in that their money claims are subject to a 3-month cap, whereas no such limitation is imposed on local workers with fixed-term employment. Lastly, the Court dug deep into the records but found no compelling state interest that the subject clause may possibly serve. In fine, the Government has failed to discharge its burden of proving the existence of a compelling state interest that would justify the perpetuation of the discrimination against OFWs under the subject clause. There can never be a justification for any form of government action that alleviates the burden of one sector, but imposes the same burden on another sector, especially when the favored sector is composed of private businesses such as placement agencies, while the disadvantaged sector is composed of OFWs whose protection no less than the Constitution commands. The idea that private business interest can be elevated to the level of a compelling state interest is odious. Moreover, even if the purpose of the subject clause is to lessen the solidary liability of placement agencies vis--vis their foreign principals, there are mechanisms already in place that can be employed to achieve that purpose without infringing on the constitutional rights of OFWs. Petition granted. The clause or for three months for every year of the unexpired term, whichever is less, in the fifth paragraph of Section 10 of RA 8042 is declared unconstitutional. Subject clause being unconstitutional, Serrano is entitled to his salaries for the entire unexpired period of 9 months and 23 days of his contract, pursuant to law and jurisprudence prior to the enactment of RA 8042. To Filipino workers, the rights guaranteed under Section 18, Article II and Section 3, Article XIII translate to economic security and parity: all monetary benefits should be equally enjoyed by workers of similar category, while all monetary obligations should be borne by them in equal degree; none should be denied the protection of the laws which is enjoyed by, or spared the burden imposed on, others in like circumstances. Under the policy of social justice, the law bends over backward to accommodate the interests of the working class on the humane justification that those with less privilege in life should have more in law. And the obligation to afford protection to labor is incumbent not only on the legislative and executive branches but also on the judiciary to translate this pledge into a living reality. Social justice calls for the humanization of laws and the equalization of social and economic forces by the State so that

justice in its rational and objectively secular conception may at least be approximated. Congress retains its wide discretion in providing for a valid classification, and its policies should be accorded recognition and respect by the courts of justice except when they run afoul of the Constitution. The deference stops where the classification violates a fundamental right, or prejudices persons accorded special protection by the Constitution. When these violations arise, this Court must discharge its primary role as the vanguard of constitutional guarantees, and require a stricter and more exacting adherence to constitutional limitations. Rational basis should not suffice. Under most circumstances, the Court will exercise judicial restraint in deciding questions of constitutionality, recognizing the broad discretion given to Congress in exercising its legislative power. Judicial scrutiny would be based on the rational basis test, and the legislative discretion would be given deferential treatment. But if the challenge to the statute is premised on the denial of a fundamental right, or the perpetuation of prejudice against persons favored by the Constitution with special protection, judicial scrutiny ought to be more strict.

Yap v. Thenamaris Ships Management and Intermare Maritime Agencies, Inc., GR No. 179532, 30 May 2011 (Nachura)
Facts: Complainant Yap was hired as an electrician of M/T Seascout by Intermare in behalf of its principal, Vulture Shipping Ltd. for a duration of 12 months. While Yaps contract was still effective, the ship was sold for scrapping. The employees, including Yap, were informed that they had a choice whether to be transferred to other vessels or just go home. Yap received seniority bonus, vacation bonus, extra bonus, along with scrapping bonus, but with respect to the payment of his wage, he refused to accept the payment of one-month basic wage, insisting that he was entitled to the payment of the unexpired portion of his contract because he was illegally dismissed. He also stated that the opted for immediate transfer but none was made. Intermare and Thenamaris alleged that Yaps employment contract was validly terminated due to the sale of the vessel and no arrangement was made for Yaps transfer to Thenamaris other vessels. Thus, Yap filed with the Labor Arbiter a complaint for illegal dismissal with damages and attorneys fees. The LA ruled in Yaps favor, finding that he was constructively and illegally dismissed, and that Thenamaris and Intermare were in bad faith when they assured Yap of re-embarkation. It then stated that Yap was entitled to the unexpired portion of his contract, which was a period of nine months. The NLRC affirmed the LAs findings of constructive and illegal dismissal, and on the bad faith on the part of Thenamaris and Intermare, but it held that instead of an award of salaries corresponding to nine months, Yap was only entitled to salaries for three months as

provided under Section 10 of RA 8042. Upon Yaps motion for partial reconsideration, the NLRC modified its ruling, stating that Yap was indeed entitled to his salary corresponding to the unexpired portion of his contract. The CA then modified the NLRCs ruling, stating that Yap was only entitled to three months worth of basic salary. While the case was pending on appeal with the Supreme Court, the Supreme Court ruled on Serrano v. Gallant Maritime Services that the clause or for three months for every year of the expired term, whichever is less is unconstitutional. Issue: W/N the Serrano ruling should be applied to the present case. Ruling: YES. As a general rule, an unconstitutional act is not a law; it confers no rights; it imposes no duties; it affords no protection; it creates no office; it is inoperative as if it had not been passed at all. The general rule is supported by Article 7 of the Civil Code, which provides: Art. 7. Laws are repealed only by subsequent ones, and their violation or non-observance shall not be excused by disuse or practice to the contrary. The doctrine of operative fact serves as an exception to the aforementioned general rule. It only applies as a matter of equity and fair play. It nullifies the effects of an unconstitutional law by recognizing that the existence of a statute prior to a determination of unconstitutionality is an operative fact and may have consequences which cannot always be ignored. The past cannot always be erased by a new judicial declaration. This doctrine is applicable when a declaration of unconstitutionality will impose an undue burden on those who have relied on the invalid law. Following Serrano, this case should not be included in the aforementioned exception. After all, it was not the fault of Yap that he lost his job due to an act of illegal dismissal committed by Thenamaris and Intermare. To rule otherwise would be iniquitous to Yap and other OFWs, and would, in effect, send a wrong signal that principals/employers and recruitment/manning agencies may violate an OFWs security of tenure which an employment contract embodies and actually profit from such violation based on an unconstitutional provision of law. Yap awarded salaries for the entire unexpired portion of his employment contract consisting of nine months. As a rule, an unconstitutional act is not a law; it confers no rights; it imposes no duties; it affords no protection; it creates no office; it is inoperative as if it has not been passed at all.

Guideposts of Labor Law (Social Justice, Equal Pay for Equal Work, Right to Self-Organization)
Calalang v. Williams, GR No. 47800, 2 December 1940 (Laurel)
Facts: When the Mayor of Manila and the Acting Chief of Police of Manila enforced the recommendations of the National Traffic Commission to prohibit animal-drawn vehicles from certain streets in Manila for a period of one year from the opening of the Colgante Bridge to traffic, a petition for writ of prohibition against NTC Chairman Williams, stating that Commonwealth Act 548, pursuant to which the recommendations were made, is unconstitutional. Issue: W/N CA 548 constitutes an unlawful interference with business or trade and abridges the right to personal liberty and freedom of locomotion. Ruling: NO. CA 548 was passed by the National Assembly in the exercise of the paramount police power of the State. Said Act, by virtue of which the rules and regulations complained of were promulgated, aims to promote safe transit upon and avoid obstructions on national roads, in the interest and convenience of the public. In enacting said law, therefore, the National Assembly was prompted by considerations of public convenience and welfare. It was inspired by a desire to relieve congestion of traffic, which is, to say the least, a menace to public safety. Public welfare, then, lies at the bottom of the enactment of said law, and the State, in order to promote the general welfare, may interfere with personal liberty, with property, and with business and occupations. Persons and property may be subjected to all kinds of restraints and burdens, in order to secure the general comfort, health, and prosperity of the State. To this fundamental aim of our Government, the rights of the individual are subordinated. Liberty is a blessing without which life is a misery, but liberty should not be made to prevail over authority because then society will fall into anarchy. Neither should authority be made to prevail over liberty because then the individual will fall into slavery. The citizen should achieve this required balance of liberty and authority in his mind through education and personal discipline, so that there may be established the resultant equilibrium, which means peace and order and happiness for all. The moment greater authority is conferred upon the government, logically so much is withdrawn from the residuum of liberty which resides in the people. The paradox lies in the fact that the apparent curtailment of liberty is precisely the very means of insuring its preservation. Writ denied. Social justice is neither communism, nor despotism, nor atomism, nor anarchy, but the humanization of laws and the equalization of social and economic forces by the State so that justice in its rational and objectively secular conception may at least be approximated. Social justice means the promotion of the welfare of all the people, the adoption by the Government of

measures calculated to insure economic stability of all the competent elements of society, through the maintenance of a proper economic and social equilibrium in the interrelations of the members of the community, constitutionally, through the adoption of measures legally justifiable, or extraconstitutionally, through the exercise of powers underlying the existence of all governments on the time-honored principle of salus populi est suprema lex. Social justice, therefore, must be founded on the recognition of the necessity of interdependence among diverse and diverse units of a society and of the protection that should be equally and evenly extended to all groups as a combined force in our social and economic life, consistent with the fundamental and paramount objective of the state of promoting the health, comfort, and quiet of all persons, and of bringing about the greatest good to the greatest number.

ISAE v. Quisumbing, GR No. 128845, 1 June 2000 (Kapunan)

Facts: International School is a domestic educational institution established primarily for dependents of foreign diplomatic personnel and other temporary residents. As such, it hires both foreign and local teachers as members of its faculty, classifying them into (1) foreign-hires; and (2) local-hires. The foreign-hires get higher salaries and more benefits than their local counterparts, which is justified by the school with two significant economic disadvantages: (a) the dislocation factor, and (b) limited tenure. The local-hires decry this classification as being discriminatory. The DOLE initially ruled in favor of the school. Issues and Ruling: 1. W/N the point-of-hire classification employed by IS is discriminatory to Filipinos. YES. There is no reasonable distinction between the services rendered by foreignhires and local-hires. Although the school contends that ISAE has not adduced evidence that local-hires perform work equal to that of the foreign-hires, the presumption is that employees which have the same position and rank perform equal work. There is no evidence that foreign-hires perform 25% more efficiently or effectively than the local-hires. Both groups have similar functions and responsibilities, which they perform under similar working conditions. While the Court recognizes the need of the school to attract foreign-hires, salaries should not be used as an enticement to the prejudice of local-hires. The local-hires perform the same services as foreign-hires and they ought to be paid the same salaries as the latter. 2. W/N the foreign-hires should belong to the same bargaining unit as the localhires.

NO. The basic test of an asserted bargaining units acceptability is whether or not it is fundamentally the combination which will best assure to all employees the exercise of their collective bargaining rights. Although foreign-hires perform similar functions under the same working conditions as the local-hires, foreign-hires are accorded certain benefits not granted to local-hires. These benefits are reasonably related to their status as foreign-hires, and justify the exclusion of the former from the latter. To include foreign-hires in a bargaining unit with local-hires would not assure either group the exercise of their respective collective bargaining rights. Equal pay for equal workPersons who work with substantially equal qualifications, skill, effort, and responsibility, under similar conditions, should be paid similar salaries. Discrimination, particularly in terms of wages, is frowned upon by the Labor Code.

USTFU v. Bitonio, GR No. 131235, 16 November 1999 (Panganiban)

Facts: When a notice was posted that the UST Faculty Union was to hold its election of new officers on 5 October 1996, the old set of officers contested this notice because the Commission of Elections that the notice constituted was allegedly not in accordance with USTFUs constitution and by-laws. The Med-Arbiter issued a TRO enjoining the new officers from conducting the elections. The TRO notwithstanding, a general assembly was called for by the secretary general of the UST on 4 October 1996, where a new set of USTFU officers was elected by acclamation and clapping of hands. Some of the participants were not members of the USTFU. The new set of officers subsequently entered into another CBA with UST from June 1996 to May 2001. Acting upon the petition of the old officers, Director Bitonio, the Labor Secretary, held that the 4 October 1996 election was void. Issues and Ruling: 1. W/N the election of new officers was a legitimate exercise of USTFUs members right to self-organization. NO. The election is not binding, because it cannot be properly called a union election for the procedures laid down in the USTFUs CBL were not followed. a. The 4 October assembly was not called by the USTFU. It was merely a convocation of faculty clubs. It was not convened in accordance with the provision on general membership meetings as found in the USTFUs CBL. b. There was no Commission on Elections to oversee the election, as mandated by the USTFUs CBL.

c. The purported election was not done by secret balloting, in violation of the USTFUs CBL. 2. W/N the CBL of the USTFU was suspended during the 4 October 1996 elections. NO. The unions CBL is the fundamental law that governs the relationship between and among the members of the union. It is where the rights, duties and obligations, powers, functions, and authority of the officers as well as the members are defined. It is the organic law that determines the validity of acts done by any officer or member of the union. Without respect for the CBL, a union as a democratic institution degenerates into nothing more than a group of individuals governed by mob rule. Moreover, allowing a non-union member to initiate the suspension of a unions CBL, and non-union members to participate in a union election on the premise that the unions CBL had been suspended in the meantime, is incompatible with the freedom of association and protection of the right to organize. The ratification of a new CBA entered into by a union whose officers were elected not in accordance with the unions CBL does not validate the election of the said officers. Ratification of a new CBA ratifies the said CBAs new terms, not the issue of union leadershipa matter that should be decided only by union members in the proper forum at the proper time and after observance of proper procedures. Self-organization is a fundamental right guaranteed by the Philippine Constitution and the Labor Code. Employees have the right to form, join, or assist labor organizations for the purpose of collective bargaining or for their mutual aid and protection. Whether employed for a definite period or not, any employee shall be considered as such, beginning on his first day of service, for purposes of membership in a labor union. Corollary to this right is the prerogative not to join, affiliate with, or assist a labor union.

Regulation of Recruitment and Placement Activities (Arts. 25-35)

Sagun v. Sunace International Management Services, GR No. 179242, 23 February 2011 (Nachura)
Facts: Complainant Sagun filed before the POEA a complaint for the alleged violation of Articles 32 and 34(a) & (b) of the Labor Code against Sunace, alleging that she applied with the latter for the position of caretaker in Taiwan and was charged P30,000.00 in cash, P10,000.00 in the form of a promissory note, and NT$60,000.00 through salary deduction, in violation of the prohibition on excessive placement fees. She additionally claimed that she was promised to be employed as a caretaker but, at the job site, she worked as a domestic helper, and at the same

time, in a poultry farm. Sunace, on the other hand, denied Saguns claims, maintaining that it only collected the amount authorized by the POEA and for which the corresponding official receipt was issued, and stressed that it did not furnish or publish any false notice or information or document in relation to recruitment or employment as it was duly received, passed upon, and approved by the POEA. The POEA Administrator dismissed the complaint for lack of merit, because complainant failed to establish facts showing a violation of Article 32, since it was proven that the amount received by Sunace as placement fee was covered by an official receipt; or of Article 34(a) as it was not shown that Sunace charged excessive fees; and of Article 34(b) simply because Sunace processed Saguns papers as caretaker, the position she applied and was hired for. The Secretary of Labor then overturned the POEA decision and held Sunace liable for collection of excessive placement fees in violation of Article 34(a). It imposed the penalty of suspension of its license for two months, or in lieu thereof, the penalty of fine in the amount of P20,000.00. It was also ordered to refund Sagun the excess of the placement fee exacted from her. The Office of the President affirmed the Secretary of Labor, saying that it was immaterial that no evidence was presented to show the overcharging since the issuance of a receipt could not be expected. The CA then reversed the OP decision for lack of sufficient evidence. It then affirmed the POEA decision. Issue: W/N Sunace is liable for collection of excess placement fee from Sagun. Ruling: NO. In proceedings before administrative and quasi-judicial agencies, the quantum of evidence required to establish a fact is substantial evidence, or that level of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. To show the amount it collected as placement fee from Sagun, Sunace presented an acknowledgement receipt showing that Sagun paid and Sunace received P20,840.00. This notwithstanding, Sagun claimed that she paid more than this amount. In support of her allegation, she presented a photocopy of a promissory note she executed, and testified on the purported deductions made by her foreign employer. In the promissory note, Sagun promised to pay Sunace the amount of P10,000.00 that she borrowed for only two weeks. Sagun also explained that her foreign employer deducted from her salary a total amount of NT$60,000.00. She claimed that the P10,000.00 covered by the promissory note was never obtained as a loan but as part of the placement fee collected by Sunace. Moreover, she alleged that the salary deductions made by her foreign employer still formed part of the placement fee collected by Sunace. Although a receipt is not conclusive evidence, an exhaustive review of the records of this case fails to disclose any other evidence sufficient and strong enough to overturn the acknowledgement embodied in Sunaces receipt as to the amount it

actually received from Sagun. Having failed to adduce sufficient rebuttal evidence, Sagun is bound by the contents of the receipt issued by Sunace. The subject receipt remains as the primary or best evidence. To be sure, mere general allegations of payment of excessive placement fees cannot be given merit as the charge of illegal exaction is considered a grave offense which could cause the suspension or cancellation of the agencys license. They should be proven and substantiated by clear, credible, and competent evidence. Petition denied for lack of merit. While the Constitution is committed to the policy of social justice and to the protection of the working class, it should not be presumed that every dispute will automatically be decided in favor of labor.

Apprenticeship (Arts. 57-72)

Atlanta Industries v. Sebolino, GR No. 187320, 26 January 2011 (Brion)
Facts: Complainants Sebolino, Costales, Almoite, and Sagun, along with several others, filed complaints for illegal dismissal, regularization, underpayment, nonpayment of wages, and other money claims against Altanta Industries, Inc., which is a domestic corporation engaged in the manufacture of steel pipes. The complainants allege that they were already regular employees of Atlanta even before they entered into two separate, subsequent apprenticeship agreements with the said company. The first apprenticeship agreement was for a period of 5 months, after the expiration of which they entered into a second apprenticeship agreement with Atlanta for the training of a second skill. Now, they claim to have been illegally dismissed when the apprenticeship agreements expired. The Labor Arbiter ruled that the dismissal was indeed illegal and awarded the workers backwages, wage differentials, holiday pay, and service incentive leave pay. While the case was on appeal with the NLRC, Costales and Almoite, together with other workers allegedly entered into a compromise agreement wherein the workers were to be paid by Atlanta a specified amount as settlement and to acknowledge them as regular employees. The NLRC approved the said compromise agreement, withdrew the finding of illegal dismissal with respect to Sebolino and Sagun, and denied all the other claims. The CA overturned the NLRC decision and found that the complainants were already employees of Atlanta even before they entered into the apprenticeship agreements; that the said apprenticeship agreements were executed in violation of the law and the rules; that the positions occupied by the complainants are usually necessary and desirable in the companys main business; and that the compromise

agreement entered into by Costales and Almoite were not binding because they did not sign the agreement. Issues and Ruling: 1. W/N a second apprenticeship agreement is valid. NO. Even if the companys need to train its employees through apprenticeship is recognized, only the first apprenticeship agreement may be considered for the purpose. With the expiration of the first agreement and the retention of the employees, Atlanta had, to all intents and purposes, recognized the completion of their training and their acquisition of a regular employee status. To foist upon them the second apprenticeship agreement for a second skill which was not even mentioned in the agreement itself, is a violation of the Labor Codes rules and regulations and is an act manifestly unfair to the employees, to say the least. 2. W/N complainants were illegally dismissed. YES. The fact that the complainants were already rendering service to the company when they were made to undergo apprenticeship renders the apprenticeship agreements irrelevant. This reality is highlighted by the finding that the complainants occupied positions that are usually necessary and desirable in Atlantas usual business or trade, which characterize them as regular employees under Article 280 of the Labor Code. Thus, when they were dismissed without just or authorized cause, without notice, and without the opportunity to be heard, their dismissal was illegal under the law. Petition denied for lack of merit. CA decision affirmed.

Handicapped Workers
Bernardo v. NLRC, GR No. 122917, 12 July 1999
Facts: Between 1988 and 1993, Far East Bank and Trust Co. hired 56 deaf-mutes as Money Sorters and Counters through a uniformly worded agreement called Employment Contract for Handicapped Workers. This contract was renewed every six months, as per its stipulations. The contract also stated that the employment of the deaf-mutes was temporary, and they were a special type of workers apart from the regular employees; and that the provisions of Book Six of the Labor Code, particularly on regulation of employment and separation pay, are not applicable to them. 43 deaf-mutes who were hired as Money Sorters and Counters by FEBTC filed a case against the said company, arguing that they should be deemed as regular workers. The labor arbiter ruled in favor of FEBTC, stating that they could not be deemed regular employees, but only as special employees falling under Article 80

of the Labor Code. The NLRC affirmed the labor arbiter and stated additionally that the Magna Carta for Disabled Persons was not applicable considering the prevailing circumstances/milieu of the case. Issue: W/N the deaf-mutes have already become regular employees. Ruling: YES. At the outset, let it be known that the Court appreciates the nobility of FEBTCs effort to provide employment to physically impaired individuals and to make them more productive members of society. However, it cannot be allowed to elude the legal consequences of that effort, simply because it now deems their employment irrelevant. The facts, viewed in light of the Labor Code and the Magna Carta for Disabled Persons, indubitably show that the petitioners, except sixteen of them, should be deemed regular employees. As such, they have acquired legal rights that the Court is duty-bound to protect and uphold, not as a matter of compassion but as a consequence of law and justice. The stipulations in their employment contracts indubitably conform with Article 80 of the Labor Code, but succeeding events and the enactment of RA 7277 (the Magna Carta for Disabled Persons) justify the application of Article 280 of the Labor Code. FEBTC entered into the aforesaid contract with a total of 56 handicapped workers and renewed the contracts of 37 of them. In fact, two of them worked from 1988 to 1993. Verily, the renewal of the contracts of the handicapped workers and the hiring of others lead to the conclusion that their tasks were beneficial and necessary to the bank. More important, these facts show that they were qualified to perform the responsibilities of their positions. In other words, their disability did not render them unqualified or unfit for the tasks assigned to them. Section 5 of the Magna Carta for Disabled Persons mandates that a qualified disabled employee should be given the same terms and conditions of employment as a qualified ablebodied person. The fact that the employees were qualified disabled persons necessarily removes the employment contracts from the ambit of Article 80. Since the Magna Carta accords them the rights of qualified able-bodied persons, they are thus covered by Article 280 of the Labor Code. Without a doubt, the task of counting and sorting bills is necessary and desirable to the business of FEBTC. The contract signed by petitioners is akin to a probationary employment, during which the bank determined the employees fitness for the job. When the bank renewed the contract after the lapse of the six-month probationary period, the employees thereby became regular employees. No employer is allowed to determine indefinitely the fitness of its employees. As regular employees, the 27 petitioners are entitled to security of tenure; that is, their services may be terminated only for a just or authorized cause. Because FEBTC failed to show such cause, these 27 petitioners are deemed illegally dismissed and therefore entitled to backwages and reinstatement without loss of seniority rights and other privileges. Considering the allegation of FEBTC that the job of money sorting is no longer available because it has been assigned back to the tellers to whom it originally belonged, the said petitioners are hereby awarded separation pay in lieu of reinstatement.

In rendering this decision, the Court emphasizes not only the constitutional bias in favor of the working class, but also the concern of the State for the plight of the disabled. The noble objectives of the Magna Carta for Disabled Persons are not based merely on charity or accommodation, but on justice and the equal treatment of qualified persons, disabled or not. In the present case, the handicap of the petitioners is not a hindrance to their work. The eloquent proof of this statement is the repeated renewal of their employment contracts. Why then should they be dismissed, simply because they are physically impaired? The Court believes that, after showing their fitness for the work assigned to them, they should be treated and granted the same rights like any other regular employees. NLRC decision reversed, FEBTC ordered to pay backwages and separation pay to 27 petitioners. The Magna Carta for Disabled Persons mandates that qualified disabled persons be granted the same terms and conditions of employment as qualified able-bodied employees. Once they have attained the status of regular workers, they should be accorded all the benefits granted by law, notwithstanding written or verbal contracts to the contrary. This treatment is rooted not merely on charity or accommodation, but on justice for all. Articles 280 and 281 of the Labor Code put an end to the pernicious practice of making permanent casuals of our lowly employees by the simple expedient of extending to them probationary appointments, ad infinitum. A contract of employment is impressed with public interest. Provisions of applicable statutes are deemed written into the contract, and the parties are not at liberty to insulate themselves and their relationships from the impact of labor laws and regulations by simply contracting with each other. An employee is regular because of the nature of the work and the length of service, not because of the mode or even the reason for hiring them. The determination of whether employment is casual or regular does not depend on the will or word of the employer, and the procedure of hiring, but on the nature of the activities performed by the employee, and to some extent, the length of performance and its continued existence.

Non-Diminution Rule (Art. 100)

Central Azucarera de Tarlac v. Central Azucarera de Tarlac Labor Union-NLU, GR No. 188949, 26 July 2010 (Nachura)
Facts: Central Azucarera de Tarlac, in compliance with PD No. 851, had been granting its employees the mandatory thirteenth month pay since 1975. The formulas used were: 13th Month Pay = Total Basic Salary / 12 Total Basic Salary = Basic Monthly Salary + First Eight Hours Overtime Pay on Sunday and Legal/Special Holiday + Night Premium Pay + Vacation and Sick Leaves for each Year These formulas were used from 1975 until 2006, despite the fact that in 1976, the Supplementary Rules and Regulations Implementing PD 851 clarified that overtime pay, earnings, and other remuneration that are not part of the basic salary shall not be included in the computation of the 13th-month pay. In November 2004, Centrals Labor Union staged a strike. During the pendency of the strike, Central declared a temporary cessation of operations. In December 2005, all the striking union members were allowed to return to work. Subsequently, Central declared another temporary cessation of operation for April and May of 2006. The suspension of operations was lifted on June 2006, but the rank-and-file employees were allowed to report for work on a 15-day-per-month rotation basis that lasted until September 2006. In December 2006, Central gave the employees their 13th-month pay based on the employees total earnings during the year, divided by 12. The Labor Union objected to the computation, stating that Central did not adhere to the usual computation of the 13th-month pay. It claimed that the divisor should have been 8 instead of 12, because the employees worked only for 8 months in 2006. The union also asserted that there were some instances wherein the 13thmonth pay was actually less than their basic monthly pay. Central insists that the difference in the computation of the 13th-month pay was due to an error that was only discovered and rectified only after almost 30 years. It insists that the length of time during which an employer has performed a certain act beneficial to the employees does not prove that such an act was not done in error, and that for the claim of mistake to be negated, there must be a clear showing that the employer had freely, voluntarily, and continuously performed the act, knowing that he is under no obligation to do so. It asserts that such voluntariness was absent in this case.

Issue: W/N Central is permitted to change the formula for the 13th-month pay, which results to the reduction of the amounts being received by the workers, after almost 30 years of its implementation. Ruling: NO. The practice of Central in giving the 13th-month pay based on the employees gross annual earnings which included the basic monthly salary, premium pay for work on rest days and special holidays, night shift differential pay and holiday pay continued for almost thirty years, and has ripened into a company policy or practice which cannot be unilaterally withdrawn. Article 100 of the Labor Code, otherwise known as the Non-Diminution Rule, mandates that benefits given to employees cannot be taken back or reduced unilaterally by the employer because the benefit has become part of the employment contract, written or unwritten. The rule against diminution of benefits applies if it is shown that the grant of the benefit is based on an express policy or has ripened into a practice over a long period of time and that the practice is consistent and deliberate. Nevertheless, the rule will not apply if the practice is due to error in the construction or application of a doubtful or difficult question of law. But even in cases of error, it should be shown that the correction is done soon after discovery of the error. Centrals argument that the grant of the benefit was not voluntary and was due to error in the interpretation of what is included in the basic salary deserves scant consideration. No doubtful or difficult question of law is involved in this case. The guidelines set by the law are not difficult to decipher. The voluntariness of the grant of the benefit was manifested by the number of years the employer had paid the benefit to its employees. Central only changed its formula in the computation of the 13th-month pay after almost 30 years and only after the dispute between the management and employees erupted. Centrals act of changing the formula at this time cannot be sanctioned, as it indicates a badge of bad faith. Furthermore, Central cannot use the argument that it is suffering from financial losses to claim exemption from the coverage of the law on 13th-month pay, or to spare it from its erroneous unilateral computation of the 13th-month pay of its employees. Under Section 7 of the Rules and Regulations Implementing PD No. 851, distressed employers shall qualify for exemption from the requirement of the decree only upon prior authorization by the Secretary of Labor. In this case, no such prior authorization has been obtained by Central, thus, it is not entitled to claim such exemption. In 1987, the Revised Guidelines on the Implementation of the 13th-Month Pay Law was issued, and it specifically stated that the minimum 13th-month pay required by law shall not be less than one-twelfth of the total basic salary earned by an employee within a calendar year. Furthermore, the term basic salary of an employee for the purpose of computing the 13 th-month pay was interpreted to include all remuneration on earnings paid by the employer for services rendered, but does not include allowances and monetary benefits

which are not integrated as part o the regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime, premium, night differential and holiday pay, and cost-of-living allowances. However, these salary related benefits should be included as part of the basic salary in the computation of the 13th-month pay if, by individual or collective agreement, company practice or policy, the same are treated as part of the basic salary of the employees.

Characteristics of Employer-Employee Relationship

Sonza v. ABS-CBN Broadcasting Corporation, GR No. 138051, 10 June 2004 (Carpio)
Facts: In May 1994, ABS-CBN Broadcasting Corporation signed an agreement with the Mel and Jay Management and Development Corporation (MJMDC). ABS-CBN was represented by its corporate officers while MJMDC was represented by Sonza, as President and General Manager, and Carmela Tiangco, as EVP and Treasurer. In the said Agreement, MJMDC agreed to provide Sonzas services exclusively to ABS-CBN as talent for radio and television. For the first year, Sonzas services would be paid a monthly talent fee of P310,000.00 for the first year and P317,000.00 for the second and third years of the Agreement. On 1 April 1996, Sonza wrote a letter to ABS-CBNs President, Eugenio Lopez III, stating that their Agreement has been rescinded because of ABS-CBNs breach thereof. Sonza subsequently filed a complaint against ABS-CBN before the DOLE, complaining that ABS-CBN did not pay his salaries, separation pay, service incentive leave pay, 13th-month pay, signing bonus, travel allowance, and amounts due under the Employees Stock Option Plan. The LA subsequently dismissed Sonzas complaint for lack of jurisdiction, based on the absence of employer-employee relationship between ABS-CBN and Sonza. The NLRC and CA, on appeal, also dismissed Sonzas complaint. Issues and Ruling: 1. W/N an employer-employee relationship existed between ABS-CBN and Sonza. NO. The elements of an employer-employee relationship are: (1) (2) (3) The selection and engagement of the employee; The payment of wages; The power of dismissal; and


The employers power to control the employee on the means and methods by which the work is accomplished.

The last element, the so-called control test, is the most important element. The control test is the most important test our courts apply in distinguishing an employee from an independent contractor. This test is based on the extent of control the hirer exercises over a worker. The greater the supervision and control the hirer exercises, the more likely the worker is deemed an employee. The converse holds true as wellthe less control the hirer exercises, the more likely the worker is considered an independent contractor. First, Sonza contends that ABS-CBN exercised control over the means and methods of his work. His argument is misplaced. ABS-CBN engaged Sonzas services specifically to co-host the Mel & Jay programs. ABS-CBN did not assign any other work to Sonza. To perform his work, Sonza only needed his skills and talent. How Sonza delivered his lines, appeared on television, and sounded on radio were outside ABS-CBNs control. Sonza did not have to render eight hours of work per day. The Agreement required Sonza to attend only rehearsals and tapings of the shows, as well as pre-and post-production staff meetings. ABS-CBN could not dictate the contents of Sonzas script. However, the Agreement prohibited Sonza from criticizing in his shows ABS-CBN or its interests. The clear implication is that Sonza had a free hand on what to say or discuss in his shows provided he did not attack ABS-CBN or its interests. ABS-CBN was not involved in the actual performance that produced the finished product of Sonzas work. ABS-CBN did not instruct Sonza how to perform his job. ABS-CBN merely reserved the right to modify the program format and airtime schedule for more effective programming. ABS-CBNs sole concern was the quality of the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise control over the means and methods of performance of Sonzas work. Sonza claims that ABS-CBNs power not to broadcast his shows proves ABSCBNs power over the means and methods of the performance of his work. Although ABS-CBN did have the option not to broadcast Sonzas show, ABS-CBN was still obligated to pay Sonzas talent fees. Thus, even if ABS-CBN was completely dissatisfied with the means and methods of Sonzas performance of his work, ABSCBN could not dismiss or even discipline Sonza. All that ABS-CBN could do is not to broadcast Sonzas show but ABS-CBN must still pay his talent fees in full. This proves that ABS-CBNs control was limited only to the result of Sonzas work, whether to broadcast the final product or not. In either case, ABS-CBN must still pay Sonzas talent fees in full until the expiry of the Agreement. Sonza further contends that ABS-CBN exercised control over his work by supplying all equipment and crew. No doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the Mel & Jay programs. However, the

equipment, crew, and airtime are not the tools and instrumentalities Sonza needed to perform his job. What Sonza principally needed were his talent or skills and the costumes necessary for his appearance. Even though ABS-CBN provided Sonza with the place of work and the necessary equipment, Sonza was still an independent contractor since ABS-CBN did not supervise and control his work. ABSCBNs sole concern was for Sonza to display his talent during the airing of the programs. Second, Sonza claims that he was ABS-CBNs employee because the latter subjected him to its rules and standards of performance. The Agreement stipulates that Sonza shall abide with the rules and standards of performance covering talents of ABS-CBN. The Agreement does not require Sonza to comply with the rules and standards of performance prescribed for employees of ABS-CBN. The code of conduct imposed on Sonza under the Agreement refers to the Television and Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been adopted by ABS-CBN as its Code of Ethics. The KBP Code applies to broadcasters, not to employees of radio and television stations. Clearly, the rules and standards of performance referred to in the Agreement are those applicable to talents and not to employees of ABS-CBN. In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former. In this case, Sonza failed to show that these rules controlled his performance. The Court finds that these general rules are merely guidelines towards the achievement of the mutually desired result, which are top-rating television and radio programs that comply with standards of the industry. Lastly, Sonza insists that the exclusivity clause in the Agreement is the most extreme form of control which ABS-CBN exercised over him. This argument is futile. Being an exclusive talent does not by itself mean that Sonza is an employee of ABS-CBN. Even an independent contractor can validly provide his services exclusively to the hiring party. In the broadcast industry, exclusivity is not necessarily the same as control. The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry. This practice is not designed to control the means and methods of work of the talent, but simply to protect the investment of the broadcast station. The broadcast station normally spends substantial amounts of money, time, and effort in building up its talents as well as the programs they appear in and thus expects that said talents remain exclusive with the station for a commensurate period of time. Normally, a much higher fee is paid to talents who agree to work exclusively for a particular radio or television station. In short, the huge talent fees partially compensates for exclusivity, as in the present case. 2. W/N MJMDC, Sonzas agent, is a labor-only contractor. NO. In a labor-only contract, there are three parties involved: (1) the labor-only contractor; (2) the employee who is ostensibly under the employ of the labor-only

contractor; and (3) the principal who is deemed the real employer. Under this scheme, the labor-only contractor is the agent of the principal. The law makes the principal responsible to the employees of the labor-only contractor as if the principal itself directly hired or employed the employees. These circumstances are not present in this case. There are essentially only two parties involved under the Agreement, namely, Sonza and ABS-CBN. MJMDC merely acted as Sonzas agent. The records do not show that MJMDC acted as ABS-CBNs agent. MJMDC is a corporation organized and owned by Sonza and Tiangco. The President and General Manager of MJMDC is Sonza himself. It is absurd to hold that MJMDC, which is owned, controlled, headed, and managed by Sonza, acted as agent of ABS-CBN in entering into the Agreement with Sonza, who himself is represented by MJMDC. That would make MJMDC the agent of both ABS-CBN and Sonza. 3. W/N the practice of broadcast and entertaining industries of treating talents like Sonza as independent contractors is void for violating the right of labor to security of tenure. NO. The right of labor to security of tenure as guaranteed in the Constitution arises only if there is an employer-employee relationship under labor laws. Not every performance of services for a fee creates an employer-employee relationship. To hold that every person who renders service to another for a fee is an employeeto give meaning to the security of tenure clausewill lead to absurd results. Individuals with special skills, expertise, or talent enjoy the freedom to offer their services as independent contractors. The right to life and livelihood guarantees this freedom to contract as independent contractors. The right of labor to security of tenure cannot operate to deprive an individual, possessed with special skills, expertise, and talent, of his right to contract as an independent contractor. An individual like an artist or talent has a right to render his services without any one controlling the means and methods by which he performs his art or craft. This Court will not interpret the right of labor to security of tenure to compel artists and talents to render their services only as employees. If radio and television program hosts can render their services only as employees, the station owners and managers can dictate to the radio and television hosts what they say in their shows. This is not conducive to freedom of the press. Petition denied. Sonzas claims not based on the Labor Code, but the May 1994 Agreement, and his cause of action is therefore for breach of contract. The existence of an employer-employee relationship is a question of fact. Appellate courts accord the factual findings of the LA and the NLRC not only respect but also finality when supported by substantial evidence.

Dumpit-Murillo v. CA, GR No. 164652, 8 June 2007 (Quisumbing)

Facts: On 2 October 1995, Thelma Dumpit-Murillo was hired by Associated Broadcasting Company (ABC) as a newscaster and co-anchor for Balitang-Balita, an evening news program. On 30 September 1999, after four years of repeated renewals, Murillos talent contract expired. She sent a letter to the Vice President for News and Public Affairs of ABC, signifying her interest in renewing her contract subject to a salary increase. When she did not receive a reply, she demanded for a reinstatement to her former position, payment of unpaid services from 1 September until 20 October 1999 and full backwages, and payment of other benefits due to a regular employee starting 31 March 1996. ABC told her a check for her talent fee covering 16 September until 20 October 1999 had already been processed, but answered that her other claims had no basis in fact or in law. Murillo filed a claim with the NLRC RAB. The LA dismissed her complaint. Upon appeal, the NLRC reversed the LA, holding that an employer-employee relationship between the parties existed, and that Murillo was illegally dismissed. The NLRC also held that Murillo was entitled to reinstatement and backwages or separation pay, aside from 13th-month pay and service incentive leave pay, moral and exemplary damages, and attorneys fees. The CA reversed the NLRC decision on the ground that Murillo was a fixed-term employee, as was on her employment contract. Issues and Ruling: 1. W/N there was an employer-employee relationship between ABC and Murillo. YES. Murillo was a regular employee of ABC under contemplation of law. The assertion that a talent contract exists does not necessarily prevent a regular employment status. In the case at bar, an employer-employee relationship was created when ABC started to merely renew the contracts fifteen times, or for four consecutive years. Moreover, ABC had control over the performance of Murillos work. Murillos duties as enumerated in her contract indicate that ABC had control of her work. Aside from control, ABC also dictated the work assignments and payment of Murillos wages. ABC also had the power to dismiss her. All these being present, clearly, there existed an employer-employee relationship between Murillo and ABC. 2. W/N Murillo was illegally dismissed. YES. As a regular employee, Murillo is entitled to security of tenure and can be dismissed only for just cause and after due compliance with procedural due process. Since ABC did not observe due process in constructively dismissing Murillo, the latter was illegally dismissed.

CA decision set aside, NLRC decision affirmed. The practice of having fixed-term contracts in the industry does not automatically make all talent contracts valid and compliant with labor law. Elements of an employment relationship: (1) (2) (3) (4) The selection and engagement of the employee; The payment of wages; The power of dismissal; Employers power to control. The most important element is the employers control of the employees conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it.

Considering regular employment, the law provides for two kinds of employees, namely: (1) (2) Those who are engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer; Those who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed.

Regular status arises from either the nature of work of the employee or the duration of his employment.

Labor Contracting (Arts. 106-109)

Philippine Airlines Inc. v. Ligan, GR No. 146408, 30 April 2009 (Carpio-Morales)
Facts: Philippine Airlines and Synergy Services Corporation entered into an Agreement as principal and contractor, respectively, whereby Synergy undertook to provide loading, unloading, delivery of baggage and cargo and other related services to and from PALs aircraft at the Mactan Station. The Agreement expressly provided that Synergy was an independent contractor and that there would be no employer-employee relationship between Synergy and/or its employees on the one hand, and PAL on the other. Synergy assigned Ligan and the other respondents to PAL following the execution of the Agreement on 15 July 1991. On 3 March 1992, the respondents

filed complaints before the NLRC for underpayment, non-payment of premium pay for holidays, premium pays for rest days, service incentive leave pay, 13 th month pay and allowances, and for regularization of employment status with PAL against Synergy, PAL, and their respective officials. Benedicto Auxtero, on the other hand, filed a complaint against Synergy and PAL for illegal dismissal and reinstatement with full backwages. All the complaints were consolidated. The LA found Synergy to be an independent contractor and dismissed respondents complaint for regularization, but granted their money claims. On appeal, the NLRC declared that Synergy was a labor-only contractor and ordered PAL to accept respondents as its regular employees. Only PAL assailed the NLRC decision. The CA affirmed the NLRC. Issue: Whether Synergy is a mere labor-only contractor or a legitimate contractor. Ruling: Synergy is a LABOR-ONLY CONTRACTOR. According to Article 106 of the Labor 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. From the records of the case, it is gathered that the work performed by almost all of the respondentsloading and unloading of baggage and cargo of passengersis directly related to the main business of PAL. And the equipment used by respondents as station loaders, such as trailers and conveyors, are owned by PAL. The records also show that PAL failed to present evidence that Synergy had sufficient capital to engage in legitimate contracting. More significantly, however, is that respondents worked alongside PALs regular employees who were performing identical work. For labor-only contracting to exist, Section 5 of D.O. No. 18-02 requires any of two elements to be 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. Even if only one of the two elements is present, then there is labor-only contracting. While PAL claims that it was Synergys supervisors who actually

supervised respondents, it failed to present evidence thereon. It did not even specify who the Synergy supervisors assigned at the workplace were. PAL moreover admitted that it fixes the respondents work schedule as their work was dependent on the frequency of plane arrivals. As the NLRC found, PALs managers and supervisors approved respondents weekly work assignments, and respondents and other regular PAL employees were all referred to as station attendants of PALs cargo operation and airfreight services. Since respondents performed tasks which are usually necessary and desirable in PALs air transportation business, they should be deemed its regular employees and Synergy as a labor-only contractor. Court affirms the ruling of the NLRC and CA, ordering PAL to accept respondents as its regular employees and to give each of them salaries, allowances, and other employment benefits and privileges of a regular employee under the pertinent Collective Bargaining Agreement. One who claims to be an independent contractor has to prove that he contracted to do the work according to his own methods and without being subject to the employers control except only as to the results. An express provision in the Service Agreement that the contractor is an independent contractor and there would be no employer-employee relationship between contractor and its employees on one hand, and principal on the other hand is not legally binding and conclusive as contractual provisions are not valid determinants of the existence of such relationship. It is the totality of facts and surrounding circumstances of the case which is determinative of the parties relationship.

Aliviado v. Procter & Gamble Philippines, Inc., GR No. 160506, 9 March 2010 (Del Castillo)
Facts: P&G is principally engaged in the manufacture and production of different consumer and health products, which it sells on a wholesale basis to various supermarkets and distributors. To enhance consumer awareness and acceptance of the products, P&G entered into contracts with Promm-Gem and SAPS for the promotion and merchandising of its products. Aliviado and other petitioners worked as P&Gs merchandisers, and individually signed employment contracts with either Promm-Gem or SAPS for periods of more or less five months at a time. They were assigned at different outlets, supermarkets, and stores where they handled all the products of P&G, and received their wages from Promm-Gem or SAPS. Promm-Gem and SAPS imposed disciplinary measures on erring merchandisers. In December 1991, petitioners filed a complaint against P&G for regularization, service incentive leave pay, and other benefits, with damages. The

LA dismissed the case for lack of merit and ruled that there was no employeremployee relationship between the petitioners and P&G. He found that the selection and engagement of the petitioners, the payment of their wages, the power of dismissal and control with respect to the means and methods by which their work was accomplished, were all done by Promm-Gem/SAPS. He further found that Promm-Gem and SAPS were legitimate independent job contractors. The NLRC and the CA subsequently affirmed the LAs findings. Issue: W/N Promm-Gem and SAPS are legitimate job contractors. Ruling: Promm-Gem is a legitimate job contractor, while SAPS is a labor-only contractor. Therefore, the employees of SAPS are the employees of P&G, SAPS being merely the agent of P&G. Promm-Gem has shown evidence that it has substantial investment which relates to the work to be performed, such as authorized stock of P1M and a paid-in capital, or capital available for operations, of P500k; it has long-term assets worth over P400k and current assets worth over P700k; it maintained its own warehouse and office space with a floor area of 870 square meters; it had under its name three registered vehicles which were used for its promotional/merchandising business; and it has clients aside from P&G. Promm-Gem also supplied its complainantworkers with the relevant materials, such as markers, tapes, liners, and cutters, necessary for them to perform their work. Promm-Gem also issued them uniforms. Also, Promm-Gem already considered the complainants working under it as its regular, not merely contractual or project, employees. This negates, on the part of Promm-Gem, bad faith and intent to circumvent labor laws which factors have often been tipping points that lead the Court to strike down the employment practice or agreement concerned as contrary to public policy, morals, good customs, or public order. On the other hand, SAPS Articles of Incorporation shows that it has a paid-in capital of only little over P31k. There is no other evidence presented to show how much its working capital and assets are. Furthermore, there is no showing of substantial investment in tools, equipment, or other assets. It failed to show that its paid-in capital is sufficient for its 6-month contract period with P&G to generate its needed revenue to sustain its operations independently. Instead, it could be readily seen that its capital is not even sufficient for one months payroll, which is pegged at little over P44k. Furthermore, petitioners have been charged with the merchandising and promotion of the products of P&G, an activity that has already been considered by the Court as doubtlessly directly related to the manufacturing business, which is the principal business of P&G. Considering that SAPS has no substantial capital or investment and the workers it recruited are performing activities which are directly related to the principal business of P&G, SAPS is engaged in labor-only contracting.

Petition granted. Labor laws expressly prohibit labor-only contracting. To prevent its circumvention, the Labor Code establishes an employer-employee relationship between the employer and the employees of the labor-only contractor. There is labor-only contracting when the contractor or sub-contractor 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. Where labor-only contracting exists, the Labor Code itself establishes an employer-employee relationship between the employer and the employees of the labor-only contractor. The statute establishes this 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. In termination cases, the burden of proof rests upon the employer to show that the dismissal is for just and valid cause.

Article 136
Zialcita, et al. v. PAL, RO4-3-3398-76, 20 February 1977
Facts: Complainant Zialcita, an international flight stewardess of PAL, was discharged from the service on account of her marriage. In separating Zialcita, PAL invoked its policy which stated that flight attendants must be single, and shall be automatically separated from employment in the event they subsequently get married. They claimed that this policy was in accordance with Article 132 of the Labor Code. On the other hand, Zialcita questioned her termination on account of her marriage, invoking Article 136 of the same law. Issue: W/N Zialcita was validly terminated on account of her marriage. Ruling: NO. When Presidential Decree No. 148, otherwise known as the Women and Child Labor Law, was promulgated in 13 March 1973, PALs policy had met its doom. However, since no one challenged its validity, the said policy was able to obtain a momentary reprieve. Section 8 of PD148 is exactly the same

provision reproduced verbatim in Article 136 of the Labor Code, which was promulgated on 1 May 1974 and took effect six months later. Although Article 132 enjoins the Secretary of Labor to establish standards that will ensure the safety and health of women employees and in appropriate cases shall by regulation require employers to determine appropriate minimum standards for termination in special occupations, such as those of flight attendants, it is logical to presume that, in the absence of said standards or regulations which are yet to be established, the policy of PAL against marriage is patently illegal. Article 136 is not intended to apply only to women employed in ordinary occupations, or it should have categorically expressed so. The sweeping intendment of the law, be it on special or ordinary occupations, is reflected in the whole text and supported by Article 135 that speaks of non-discrimination on the employment of women.

PT&T v. NLRC, GR No. 118978, 23 May 1997 (Regalado)

Facts: Grace de Guzman was initially hired by PT&T as a reliever (or Supernumerary Project Worker). Under the Reliever Agreement, her employment would immediately be terminated upon expiration of the agreed period. After 8 August 1991, pursuant to their agreement, de Guzmans services were terminated. The following month, PT&T asked de Guzman to join the company as a probationary employee for 150 days. In the job application form, de Guzman indicated that she was single in her civil status although she had contracted marriage a few months earlier. When PT&T learned about the same, its branch supervisor sent de Guzman a memorandum requiring her to explain the discrepancy. In that memorandum, de Guzman was reminded about the companys policy of not accepting married women for employment. PT&T subsequently dismissed de Guzman and the latter filed a case for illegal dismissal. At the preliminary conference at the Regional Arbitration Branch of the NLRC, de Guzman admitted that she had failed to remit the amount ofP2,380.75 from her collections. The Labor Arbiter declared that de Guzman, who had already gained the status of a regular employee, was illegally dismissed by PT&T and ordered her reinstatement. The NLRC upheld the decision of the LA, modified with the qualification that de Guzman deserved to be suspended for three months in view of the dishonest nature of her acts which should not be condoned. Issue: W/N de Guzman was discriminated against on account of her marriage. Ruling: YES. PT&Ts policy of not accepting or considering as disqualified from work any woman who contracts marriage runs afoul the test of, and the right against, discrimination, afforded all women workers by our labor laws and by no less than the Constitution. Contrary to PT&Ts assertion that it dismissed de Guzman from employment on account of her dishonesty, the record discloses clearly that her

ties with the company were dissolved principally because of the companys policy that married women are not qualified for employment in PT&T, and not merely because of her supposed acts of dishonesty. Verily, de Guzmans act of concealing the true nature of her status from PT&T could not be properly characterized as willful or in bad faith as she was moved to act the way she did mainly because she wanted to retain a permanent job in a stable company. In other words, she was practically forced by that very same illegal policy into misrepresenting her civil status for fear of being disqualified from work. While loss of confidence is a just cause for termination of employment, it should not be simulated. It must rest on an actual breach of duty committed by the employee and not on the employers caprices. Furthermore, it should never be used as a subterfuge for causes which are improper, illegal, or unjustified. PT&T glosses over the fact that it was its unlawful policy against married women, both on the aspects of qualification and retention, which compelled de Guzman to conceal her supervenient marriage. It was, however, that very policy alone which was the cause of de Guzmans secretive conduct now complained of. It is then apropos to recall the familiar saying that he who is the cause of the cause is the cause of the evil caused. PT&Ts policy is not only in derogation of the provisions of Article 136 of the Labor Code on the right of a woman to be free from any kind of stipulation against marriage in connection with her employment, but it likewise assaults good morals and public policy, tending as it does to deprive a woman of the freedom to choose her status, a privilege that by all accounts inheres in the individual as an intangible and inalienable right. Hence, while it is true that the parties to a contract may establish any agreements, terms and conditions that they may deem convenient, the same should not be contrary to law, morals, good customs, public order, or public policy. Carried to its logical consequences, it may even be said that PT&Ts policy against legitimate marital bonds would encourage illicit or common-law relations and subvert the sacrament of marriage. De Guzman, it must be observed, had gained regular status at the time of her dismissal. When she was served her walking papers, she was about to complete the 150-day probationary period. That her dismissal would be effected just when her probationary period was winding down clearly raises the plausible conclusion that it was done in order to prevent her from earning security of tenure. On the other hand, her earlier stints with the company as reliever were undoubtedly those of a regular employee, even if the same were for fixed periods, as she performed activities which were essential or necessary in the usual trade and business of PT&T. As an employee who had therefore gained regular status, and as she had been dismissed without just cause, she is entitled to reinstatement without loss of seniority rights and other privileges and to full back wages, inclusive of allowances and other benefits or their monetary equivalent. However, as she had undeniably committed an act of dishonesty in concealing her status, albeit under the

compulsion of an unlawful imposition of PT&T, the three-month suspension imposed by NLRC must be upheld to obviate the impression or inference that such act should be condoned. It would be unfair to the employer if she were to return to its fold without any sanction whatsoever for her act which was not totally justified. Thus, her entitlement to back wages, which shall be computed from the time her compensation was withheld up to the time of her actual reinstatement, shall be reduced by deducting therefrom the amount corresponding to her three months suspension. Petition dismissed. An employer is free to regulate, according to his discretion and best business judgment, all aspects of employment, from hiring to firing, except in cases of unlawful discrimination or those which may be provided by law. The primary standard of determining regular employment is the reasonable connection between the activity performed by the employee in relation to the business or trade of the employer. The Civil Code provisions on the contract of labor state that the relations between the parties, that is, of capital and labor, are not merely contractual, impressed as they are with so much public interest that the same should yield to the common good. It goes on to intone that neither capital nor labor should visit acts of oppression against the other, nor impair the interest or convenience of the public. In the final reckoning, the danger of such a policy against marriage is that it strikes at the very essence, ideals, and purpose of marriage as an inviolable social institution and, ultimately, of the family as the foundation of the nation. That it must be effectively interdicted here in all its indirect, disguised, or dissembled forms as discriminatory conduct derogatory of the laws of the land is not only in order but imperatively required.

Duncan Association of Detailman-PTGWO v. Glaxo Wellcome Philippines, GR No. 162994, 17 September 2004 (Tinga)
Facts: Pedro A. Tecson, a medical representative hired by Glaxo Wellcome Philippines, signed a contract of employment which stipulates, among others, that he agrees to study and abide by existing company rules; to disclose to management any existing or future relationship by consanguinity or affinity with co-employees or employees of competing drug companies and should management find that such relationship poses a possible conflict of interest, to resign from the company. The Employee Code of Conduct of Glaxo similarly provides that an employee is expected to inform management of any existing or future relationship by consanguinity or affinity with co-employees or employees of competing drug companies. If management perceives a conflict of interest or a potential conflict between such relationship and the employees employment with the company, the management

and the employee will explore the possibility of a transfer to another department in a non-counterchecking position or preparation for employment outside the company after six months. Tecson was initially assigned to cover the Camarines Sur-Camarines Norte sales area. He then had a romantic relationship with Bettsy, a Branch Coordinator of Astra Pharmaceuticals, which is a competitor of Glaxo. As Branch Coordinator, she supervised the district managers and medical representatives of her company and prepared marketing strategies for Astra in that area. Tecson then received several reminders from his District Manager regarding the conflict of interest which may be brought about by his relationship with Bettsy. Notwithstanding those reminders, Tecson married Bettsy in September 1998. In 1999, Tecsons superiors informed him that his marriage to Bettsy gave rise to a conflict of interest and told him to choose which of them should resign from their jobs. When Glaxo moved to transfer Tecson to the Butuan-Surigao-Agusan del Sur sales area, Tecson brought the matter to Glaxos Grievance Committee. During the pendency of the grievance proceedings, Tecson was paid his salary, but was not issued samples of products which were competing with similar products manufactured by Astra. When the parties failed to resolve the issue at the grievance machinery level, they submitted the matter for voluntary arbitration. Glaxo offered Tecson a separation pay of onehalf month pay for every year of service, but he declined the offer. The NCMB subsequently declared Glaxos policy on relationships between its employees and person employed with competitor companies as valid, and affirmed Glaxos right to transfer Tecson to another sales territory. The CA affirmed the NCMB decision. Issues and Ruling: 1. W/N Glaxos policy against employees marrying employees of competitor companies violates the equal protection clause of the Constitution by creating invalid distinctions among employees on account only of marriage, thus restricting its employees right to marry. NO. The challenged company policy does not violate the equal protection clause of the Constitution. It is a settled principle that the commands of the equal protection clause are addressed only to the state or those acting under color of its authority. The equal protection clause erects no shield against merely private conduct, however discriminatory or wrongful. The only exception occurs when the state in any of its manifestations or actions has been found to have become entwined or involved in the wrongful private conduct. Obviously, the exception is not present in this case. Significantly, the company actually enforced the policy after repeated requests to the employee to comply with the policy. Indeed, the application of the policy was made in an impartial and even-handed manner, with due regard for the lot of the employee. Moreover, Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and information from competitors, especially so that it and Astra are rival companies in

the highly competitive pharmaceutical industry. The prohibition against personal or marital relationships with employees of competitor companies upon Glaxos employees is reasonable under the circumstances because relationships of that nature might compromise the interests of the company. In laying down the assailed company policy, Glaxo only aims to protect its interests against the possibility that a competitor company will gain access to its secrets and procedures. That Glaxo possesses the right to protect its economic interests cannot be denied. No less than the Constitution recognizes the right of enterprises to adopt and enforce such a policy to protect its right to reasonable returns on investments and expansion and growth. In any event, from the wordings of the contractual provision and the policy in its employee handbook, it is clear that Glaxo does not impose an absolute prohibition against relationships between its employees and those of competitor companies. Its employees are free to cultivate relationships with and marry persons of their own choosing. What the company merely seeks to avoid is a conflict of interest between the employee and the company that may arise out of such relationships. Lastly, the assailed company policy which forms part of Glaxos Employee Code of Conduct and of its contracts with its employees, such as that signed by Tecson, was made known to him prior to his employment. Tecson, therefore, was aware of that restriction when he signed his employment contract and when he entered into a relationship with Bettsy. Since Tecson knowingly and voluntarily entered into a contract of employment with Glaxo, the stipulations therein have the force of law between them and, thus, should be complied with in good faith. Tecson is estopped from questioning said policy. 2. W/N Tecson was constructively dismissed. NO. Glaxo properly exercised its management prerogative in reassigning Tecson to the Butuan City sales area. As noted earlier, the challenged policy has been implemented by Glaxo impartially and disinterestedly for a long period of time. In the case at bar, the record shows that Glaxo gave Tecson several chances to eliminate the conflict of interest brought about by his relationship with Bettsy. When their relationship was still in its initial stage, Tecsons supervisors at Glaxo constantly reminded him about its effects on his employment with the company and on the companys interests. After Tecson married Bettsy, Glaxo gave him time to resolve the conflict by either resigning from the company or asking his wife to resign from Astra. Glaxo even expressed its desire to retain Tecson in its employ because of his satisfactory performance and suggested that he ask Bettsy to resign from her company instead. Glaxo likewise acceded to his repeated requests for more time to resolve the conflict of interest. When the problem could not be resolved after several years of waiting, Glaxo was constrained to reassign Tecson to a sales area different from that handled by his wife for Astra. Notably, Glaxo did not terminate Tecson from employment but only reassigned him to another area where his home province, Agusan del Sur, was included. In effecting Tecsons

transfer, Glaxo even considered the welfare of Tecsons family. Clearly, the foregoing dispels any suspicion or unfairness and bad faith on the part of Glaxo. Petition denied for lack of merit. While our laws endeavor to give life to the constitutional policy on social justice and the protection of labor, it does not mean that every labor dispute will be decided in favor of the workers. The law also recognizes that management has rights which are also entitled to respect and enforcement in the interest of fair play. Constructive dismissal is defined as a quitting, an involuntary resignation resorted to when continued employment becomes impossible, unreasonable, or unlikely; when there is a demotion in rank or diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee.