CASES for LABOREL G.R. No.

124055 June 8, 2000

DECISION KAPUNAN, J.: Before this Court is a petition for certiorari under Rule 65, which seeks to annul and set aside the decision, promulgated on 10 May 1995, of the National Labor Relations Commission (NLRC). The assailed decision reversed the decision of the Labor Arbiter, and ruled that the petitioners are employees of Donna Louise Advertising and Marketing Associates, Inc. and ordered the reinstatement of petitioners and the payment of backwages. Private respondent California Marketing Co. Inc. (CMC) is a domestic corporation principally engaged in the manufacturing of food products and distribution of such products to wholesalers and retailers. Private respondent Donna Louise Advertising and Marketing Associates, Inc. (D.L. Admark) is a duly registered promotional firm. Petitioners worked as merchandisers for the products of CMC. Their services were terminated on 16 March 1992. The parties presented conflicting versions of the facts. Petitioners allege that they were employed by CMC as merchandisers. Among the tasks assigned to them were the withdrawing of stocks from the warehouse, the fixing of prices, price-tagging, displaying of merchandise, and the inventory of stocks. These were done under the control, management and supervision of CMC. The materials and equipment necessary in the performance of their job, such as price markers, gun taggers, toys, pentel pen, streamers and posters were provided by CMC. Their salaries were being paid by CMC. According to petitioners, the hiring, control and supervision of the workers and the payment of

ROLANDO E. ESCARIO, NESTOR ANDRES, CESAR AMPER, LORETO BALDEMOR, EDUARDO BOLONIA, ROMEO E. BOLONIA, ANICETO CADESIM, JOEL CATAPANG, NESTOR DELA CRUZ, EDUARDO DUNGO ESCARIO REY, ELIZALDE ESTASIO, CAROLINO M. FABIAN, RENATO JANER, EMER B. LIQUIGAN, ALEJANDRO MABAWAD, FERNANDO M. MAGTIBAY, DOMINADOR B. MALLILLIN, NOEL B. MANILA, VIRGILIO A. MANIO, ROMEO M. MENDOZA, TIMOTEO NOTARION, FREDERICK RAMOS, JOSEPH REYES, JESSIE SEVILLA, NOEL STO. DOMINGO, DODJIE TAJONERA, JOSELITO TIONLOC, ARNEL UMALI, MAURLIE C. VIBAR, ROLANDO ZALDUA, RODOLFO TUAZON, TEODORO LUGADA, MAURING MANUEL, MARCIANO VERGARA, JR., ARMANDO IBASCO, CAYETANO IBASCO, LEONILO MEDINA, JOSELITO ODO, MELCHOR BUELA, GOMER GOMEZ, HENRY PONCE, RAMON ORTIZ, JR., ANTONIO MIJARES, JR., MARIO DIZER, REYNANTE PEJO, ARNALDO RAFAEL, NELSON BERUELA, AUGUSTO RAMOS, RODOLFO VALENTIN, ANTONIO CACAM, VERNON VELASQUEZ, NORMAN VALLO, ALEJANDRO ORTIZ, ROSANO VALLO, ANDREW ESPINOSA, EDGAR CABARDO, FIDELES REYES, EDGARDO FRANCISCO, FERNANDO VILLARUEL, LEOPOLDO OLEGARIO, OSCAR SORIANO, GARY RELOS, DANTE IRANZO, RONALDO BACOLOR, RONALD ESGUERA, VICTOR ALVAREZ, JOSE MARCELO, DANTE ESTRELLADO, MELQUIADES ANGELES, GREGORIO TALABONG, ALBERT BALAO, ALBERT CANLAS, CAMILO VELASCO, PONTINO CHRISTOPHER, WELFREDO RAMOS, REYNALDO RODRIGUEZ, RAZ GARIZALDE, MIGUEL TUAZON, ROBERTO SANTOS, AND RICARDO MORTEL, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, CALIFORNIA MANUFACTURING CO. INC. AND DONNA LOUISE ADVERTISING AND MARKETING ASSOCIATES INCORPORATED, respondents.

salaries, were all coursed by CMC through its agent D.L. Admark in order for CMC to avoid its liability under the law. On 7 February 1992, petitioners filed a case against CMC before the Labor Arbiter for the regularization of their employment status. During the pendency of the case before the Labor Arbiter, D.L. Admark sent to petitioners notice of termination of their employment effective 16 March 1992. Hence, their complaint was amended so as to include illegal dismissal as cause of action. Thereafter, twenty-seven more persons joined as complainants. CMC filed a motion to implead as party-defendant D. L. Admark and at the same time the latter filed a motion to intervene. Both motions were granted. CMC, on the other hand, denied the existence of an employeremployee relationship between petitioner and itself. Rather, CMC contended that it is D.L. Admark who is the employer of the petitioners. While CMC is engaged in the manufacturing of food products and distribution of such to wholesalers and retailers, it is not allowed by law to engage in retail or direct sales to end consumers. It, however, hired independent job contractors such as D.L. Admark, to provide the necessary promotional activities for its product lines. For its part, D.L. Admark asserted that it is the employer of the petitioners. Its primary purpose is to carry on the business of advertising, promotion and publicity, the sales and merchandising of goods and services and conduct survey and opinion polls. As an independent contractor it serves several clients among which include Purefoods, Corona Supply, Firstbrand, Splash Cosmetics and herein private respondent California Marketing. On 29 July 1994, the Labor Arbiter rendered a decision finding that petitioners are the employees of CMC as they were engaged in

activities that are necessary and desirable in the usual business or trade of CMC.1 In justifying its ruling, the Labor Arbiter cited the case of Tabas vs. CMC which, likewise, involved private respondent CMC. In the Tabas case, this Court ruled that therein petitioner merchandisers were employees of CMC, to wit: There is no doubt that in the case at bar, Livi performs "manpower services," meaning to say, it contracts out labor in favor of clients. We hold that it is one not withstanding its vehement claims to the contrary and not- withstanding its vehement claims to the contrary, and notwithstanding the provision of the contract that it is "an independent contractor." The nature of ones business is not determined by self-serving appellations one attaches thereto but by the tests provided by statute and prevailing case law. The bare fact that Livi maintains a separate line of business does not extinguish the equal fact that it has provided California with workers to pursue the latters own business. In this connection, we do not agree that the petitioner has been made to perform activities "which are not directly related to the general business of manufacturing," Californias purported "principal operation activity. The petitioners had been charged with merchandising [sic] promotion or sale of the products of [California] in the different sales outlets in Metro Manila including task and occational [sic] price tagging," an activity that is doubtless, an integral part of the manufacturing business. It is not, then, as if Livi had served as its (Californias) promotions or sales arm or agent, or otherwise rendered a piece of work it (California) could not itself have done; Livi as a placement agency, had simply supplied it with manpower necessary to carry out its (Californias) merchandising activities, using its (Californias) premises and equipment.2 On appeal, the NLRC set aside the decision of the Labor Arbiter. It ruled that no employer-employee relationship existed between the petitioners and CMC. It, likewise, held that D.L. Admark is a

legitimate independent contractor, hence, the employer of the petitioners. Finding no valid grounds existed for the dismissal of the petitioners by D.L. Admark, it ordered their reinstatement. The dispositive portion of the decision reads: WHEREFORE, premises considered, the appealed judgment is modified. Intervenor DL ADMARK is ordered to reinstate the eighty one (81) complainants mentioned in the appealed decision to their former positions with backwages from March 16, 1992 until they are actually reinstated. The award of attorneys fees equivalent to ten (10%) of the award is deleted for lack of basis.3 Petitioners filed a motion for reconsideration but the same was denied by the NLRC for lack of merit. 4 Hence, this petition. In the main, the issue brought to fore is whether petitioners are employees of CMC or D.L. Admark. In resolving this, it is necessary to determine whether D.L. Admark is a labor-only contractor or an independent contractor. Petitioners are of the position that D.L. Admark is a labor-only contractor and cites this Courts ruling in the case of Tabas, which they claim is applicable to the case at bar for the following reasons: 1. The petitioners are merchandisers and the petitioners in the Tabas case are also merchandisers who have the same nature of work. 2. The respondent in this case is California Manufacturing Co. Inc. while respondent in the Tabas case is the same California Manufacturing Co. Inc.

3. The agency in the Tabas case is Livi Manpower Services. In this case, there are at least, three (3) agencies namely: the same Livi Manpower Services; the Rank Manpower Services and D.L. Admark whose participation is to give and pay the salaries of the petitioners and that the money came from the respondent CMC as in the Tabas case.lawphi1 4. The supervision, management and/or control rest upon respondent California Manufacturing Co. Inc. as found by the Honorable Labor Arbiter which is also, true in the Tabas Case.5 We cannot sustain the petition. Petitioners reliance on the Tabas case is misplaced. In said case, we ruled that therein contractor Livi Manpower Services was a mere placement agency and had simply supplied herein petitioner with the manpower necessary to carry out the companys merchandising activity. We, however, further stated that : It would have been different, we believe, had Livi been discretely a promotions firm, and that California had hired it to perform the latters merchandising activities. For then, Livi would have been truly the employer of its employees and California, its client. x x x.6 In other words, CMC can validly farm out its merchandising activities to a legitimate independent contractor. There is labor-only contracting when 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 person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others; and (b) The workers recruited and placed by such person are performing activities which are directly related to the principal business of the employer. 7 In contrast, there is permissible job contracting when a principal agrees to put out or farm out with a contractor or a subcontractor the performance or completion of a specific job, work or service within a definite or predetermined period, regardless of whether such job or work or service is to be performed or completed within or outside the premises of the principal. In this arrangement, the following conditions must concur: (a)....The contractor carries on a distinct and independent business and undertakes the contract work on his 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 his work except as to the results thereof; and (b)....The contractor has substantial capital or investment in the form of tools, equipment, machineries (sic), work premises, and other materials which are necessary in the conduct of his business.8 In the recent case of Alexander Vinoya vs. NLRC et al.,9 this Court ruled that in order to be considered an independent contractor it is not enough to show substantial capitalization or investment in the form of tools, equipment, machinery and work premises. In addition, the following factors need be considered: (a) whether the

contractor is carrying on an independent business; (b) the nature and extent of the work; (c) the skill required; (d) the term and duration of the relationship; (e) the right to assign the performance of specified pieces of work; (f) the control and supervision of the workers; (g) the power of the employer with respect to the hiring, firing and payment of workers of the contractor; (h) the control of the premises; (i) the duty to supply premises, tools, appliances, materials, and labor; and (j) the mode, manner and terms of payment.10 Based on the foregoing criterion, we find that D.L. Admark is a legitimate independent contractor. Among the circumstances that tend to establish the status of D.L. Admark as a legitimate job contractor are: 1) The SEC registration certificate of D.L. Admark states that it is a firm engaged in promotional, advertising, marketing and merchandising activities. 2) The service contract between CMC and D.L. Admark clearly provides that the agreement is for the supply of sales promoting merchandising services rather than one of manpower placement.11 3) D.L. Admark was actually engaged in several activities, such as advertising, publication, promotions, marketing and merchandising. It had several merchandising contracts with companies like Purefoods, Corona Supply, Nabisco Biscuits, and Licron. It was likewise engaged in the publication business as evidenced by it magazine the "Phenomenon."12 4) It had its own capital assets to carry out its promotion business. It then had current assets amounting to P6 million

and is therefore a highly capitalized venture.13 It had an authorized capital stock of P500,000.00. It owned several motor vehicles and other tools, materials and equipment to service its clients. It paid rentals of P30,020 for the office space it occupied. Moreover, by applying the four-fold test used in determining employer-employee relationship, the status of D.L. Admark as the true employer of petitioners is further established. The elements of this test are (1) the selection and engagement of employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employees conduct.14 As regards the first element, petitioners themselves admitted that they were selected and hired by D.L. Admark.15 As to the second element, the NLRC noted that D.L. Admark was able to present in evidence the payroll of petitioners, sample SSS contribution forms filed and submitted by D.L. Admark to the SSS, and the application for employment by R. de los Reyes, all tending to show that D.L. Admark was paying for the petitioners salaries. In contrast, petitioners did not submit an iota of evidence that it was CMC who paid for their salaries. The fact that the agreement between CMC and D.L. Admark contains the billing rate and cost breakdown of payment for core merchandisers and coordinators does not in any way establish that it was CMC who was paying for their salaries. As correctly pointed out by both CMC16 and the Office of the Solicitor General,17 such cost breakdown is a standard content of service contracts designed to insure that under the contract, employees of the job contractor will receive benefits mandated by law.

Neither did the petitioners prove the existence of the third element. Again petitioners admitted that it was D.L. Admark who terminated their employment.18 To prove the fourth and most important element of control, petitioners presented the memoranda of CMCs sales and promotions manager. The Labor Arbiter found that these memos "indubitably show that the complainants were under the supervision and control of the CMC people."19 However, as correctly pointed out by the NLRC, a careful scrutiny of the documents adverted to, will reveal that nothing therein would remotely suggest that CMC was supervising and controlling the work of the petitioners: x x x The memorandums (Exhibit "B") were addressed to the store or grocery owners telling them about the forthcoming sales promotions of CMC products. While in one of the memorandums a statement is made that "our merchandisers and demonstrators will be assigned to pack the premium with your stocks in the shelves x x x, yet it does not necessarily mean to refer to the complainants, as they claim, since CMC has also regular merchandisers and demonstrators. It would be different if in the memorandums were sent or given to the complainants and their duties or roles in the said sales campaign are therein defined. It is also noted that in one of the memorandums it was addressed to: "All regular merchandisers/demonstrators." x x x we are not convinced that the documents sufficiently prove employer-employee relationship between complainants and respondents CMC.20 The Office of the Solicitor General, likewise, notes that the documents fail to show anything that would remotely suggest control and supervision exercised by CMC over petitioners on the matter on how they should perform their work. The memoranda were addressed either to the store owners or "regular"

merchandisers and demonstrators of CMC. Thus, petitioners, who filed a complaint for regularization against respondent CMC, thereby, conceding that they are not regular employees of the latter, cannot validly claim to be the ones referred to in said memos.21 Having proven the existence of an employer-employee relationship between D.L. Admark and petitioners, it is no longer relevant to determine whether the activities performed by the latter are necessary or desirable to the usual business or trade of CMC. On the issue of illegal dismissal, we agree with the findings of the NLRC that D.L. Admark "admits having dismissed the petitioners for allegedly disowning and rejecting them as their employer." Undoubtedly, the reason given is not just cause to terminate petitioners.22 D.L. Admarks belated claim that the petitioners were not terminated but simply did not report to work23 is not supported by the evidence on record. Moreover, there is no showing that due process was afforded the petitioners. IN VIEW OF THE FOREGOING, finding no grave abuse of discretion on the part of the National Labor Relations Commission, the assailed decision is AFFIRMED in toto. SO ORDERED. Puno, Pardo, and Ynares-Santiago, Davide, Jr., C.J., (Chairman), on official leave abroad. JJ., concur.

SANDIGAN SAVINGS and LOAN BANK, INC., and SANDIGAN REALTY DEVELOPMENT CORPORATION,petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and ANITA M. JAVIER, respondents. DECISION 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 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. Javier's 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

G.R. No. 112877

February 26, 1996

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 oh 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 overhead petitioner Andan summon the Bank's personnel officer, Mrs. Liberata G. Fajardo, and instruct her to prepare her (Javier's) termination papers. Immediately thereafter, Andan changed his mind and told Mrs. Fajardo to prepare instead a resignation letter for Javier, saying, "Ayaw ko na siyang makita sa susnod." Turning to private respondent, he said, "Huwag na ninyong itanong kong anong dahilan, basta't 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, basta't si Alice, iniskandalo na naman ako. xxx xxx xxx

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 respondent's favor, the dispositive portion of which reads: WHEREFORE, considering the foregoing consideration, 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% attorney's 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 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

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

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 attorney's fees, provided the following monetary award of backwages and separation pay: "Backwages: Realty: Savings Bank: TOTAL Separation Pay: Realty: Savings Bank: GRAND TOTAL 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. Nov. 2, 1982-April 20, 1993 P500.00 (allowance) x 10 Dec. 1, 1986-April 20, 1993 P2,400.00 x 6 Fr: April 20, 1990-April 20, 1993 P500.00 (allowance) x 36 P2,400.00 x 36 -

The petitioners, thus, instituted this petition for certiorari, contending that the NLRC gravely and seriously abused its discretion in holding that: 1. Javier is a regular employee of both Sandigan Realty and Sandigan Bank and entitled to backwages and separation 36 months pay from both; P18,000.00 P86,400.00 2. Javier was receiving P2,400.00 a month from the bank and that she is entitled to separation pay for six years.8 P104,400.00 The records disclose that petitioner Sandigan Bank no longer disputes the finding that Javier was dismissed by it and that she did 10 years not abandon her job thereat. In fact, it would have paid private P5,000.00 respondent the monetary award representing backwages and 6 years separation pay adjudged against it in the assailed NLRC resolution, if only it found the same to be in the correct amount.9 P14,400.00 P123,800.00" 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 employer's 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 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, 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 ofCosmopolitan Funeral Homes, Inc. v. Maalat, it was held that "to determine whether a person who performs work for another is the latter's employee or is all 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 employeremployee 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 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 td 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 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: 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 respondent's 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 Javier's 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 respondent's dismissal occurred thereafter, or on April 20, 1990. 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.

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: xxx xxx xxx

The amendment to Art. 279 of the Labor Code introduced by Rep. Act No. 6715 inserted the qualification " full" to the word "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,

Separate Opinions PADILLA, J.: concurring and dissenting: 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.

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 reporting 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-stress given 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)."

INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO, respondents. 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 contract 1 by which: 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 ... as provided in the Schedule of Commissions" of the contract to "constitute a part of the consideration of ... (said) agreement;" and 3. the "rules in ... (the Company's) Rate Book and its Agent's Manual, as well as all its circulars ... and those which may from time to time be promulgated by it, ..." were made part of said contract.

G.R. No. 84484 November 15, 1989

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 Agent's 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 ... (explicitly specified causes). ... 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 year's 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 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. ... Some four years later, in April 1972, the parties entered into another contract an Agency Manager's Contract and 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 Manager's 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 complaint 4 against the Company and its president. Without

contesting the termination of the first contract, the complaint sought to recover commissions allegedly unpaid thereunder, plus attorney's fees. The respondents disputed the Ministry's jurisdiction over Basiao's claim, asserting that he was not the Company's 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 official's decision directed payment of his unpaid commissions "... equivalent to the balance of the first year's premium remaining unpaid, at the time of his termination, of all the insurance policies solicited by ... (him) in favor of the respondent company ..." plus 10% attorney's 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 Company's 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 Basiao's 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 Company's 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 implicit conditions of Basiao's 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 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 latter's conduct in rendering such services. Pursuing the argument, the respondents draw attention to the provisions of Basiao's contract obliging him to "... observe and conform to all rules and regulations which the Company may from time to time prescribe ...," 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 AlLagadan 10 ... In determining the existence of employeremployee relationship, the following elements are generally considered, namely: (1) the selection and

engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employees' conduct although the latter is the most important element (35 Am. Jur. 445). ... 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 untrammelled 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 agent's 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 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 peddler's 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 us. 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 Basiao's 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 controlled or restricted his choice of methods or the methods themselves of 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 "... free to exercise his own judgment as to the time, place and means of soliciting insurance." The Labor Arbiter's decision makes reference to Basiao's 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 Basiao's 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 Arbiter's decision. This conclusion renders it unnecessary and premature to consider Basiao's 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.

G.R. No. L-12582

January 28, 1961

LVN PICTURES, INC., petitioner-appellant, vs. PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS, respondents-appellees. x---------------------------------------------------------x G.R. No. L-12598 January 28, 1961

SAMPAGUITA PICTURES, INC., petitioner-appellant, vs. PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS, respondents-appellees. Nicanor S. Sison for petitioner-appellant. Jaime E. Ilagan for respondent-appellee Court of Agrarian Relations. Gerardo P. Cabo Chan for respondent-appellee Philippine Musicians Guild. CONCEPCION, J.: Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc. seek a review by certiorari of an order of the Court of Industrial Relations in Case No. 306-MC thereof, certifying the Philippine Musicians Guild (FFW), petitioner therein and respondent herein, as the sole and exclusive bargaining agency of all musicians working with said companies, as well as with the Premiere Productions, Inc., which has not appealed. The appeal of LVN Pictures, Inc., has been docketed as G.R. No. L-12582, whereas G.R. No. L-12598 is the appeal of Sampaguita Pictures, Inc. Involving as they do the same order, the two cases have been jointly heard in this Court, and will similarly be disposed of. In its petition in the lower court, the Philippine Musicians Guild (FFW), hereafter referred to as the Guild, averred that it is a duly registered legitimate labor organization; that LVN Pictures, Inc., Sampaguita Pictures, Inc., and Premiere Productions, Inc. are corporations, duly organized under the Philippine laws, engaged in the making of motion pictures and in the processing and distribution thereof; that said companies employ musicians for the purpose of making music recordings for title music, background music, musical numbers, finale music and other incidental music, without which a motion picture is incomplete; that ninety-five (95%)

percent of all the musicians playing for the musical recordings of said companies are members of the Guild; and that the same has no knowledge of the existence of any other legitimate labor organization representing musicians in said companies. Premised upon these allegations, the Guild prayed that it be certified as the sole and exclusive bargaining agency for all musicians working in the aforementioned companies. In their respective answers, the latter denied that they have any musicians as employees, and alleged that the musical numbers in the filing of the companies are furnished by independent contractors. The lower court, however, rejected this pretense and sustained the theory of the Guild, with the result already adverted to. A reconsideration of the order complained of having been denied by the Court en banc, LVN Pictures, inc., and Sampaguita Pictures, Inc., filed these petitions for review for certiorari. Apart from impugning the conclusion of the lower court on the status of the Guild members as alleged employees of the film companies, the LVN Pictures, Inc., maintains that a petition for certification cannot be entertained when the existence of employeremployee relationship between the parties is contested. However, this claim is neither borne out by any legal provision nor supported by any authority. So long as, after due hearing, the parties are found to bear said relationship, as in the case at bar, it is proper to pass upon the merits of the petition for certification. It is next urged that a certification is improper in the present case, because, "(a) the petition does not allege and no evidence was presented that the alleged musicians-employees of the respondents constitute a proper bargaining unit, and (b) said alleged musiciansemployees represent a majority of the other numerous employees of the film companies constituting a proper bargaining unit under section 12 (a) of Republic Act No. 875."

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

allege that its members constitute a majority of all the employees of said film companies, including those who are not musicians. The real issue in these cases, is whether or not the musicians in question are employees of the film companies. In this connection the lower court had the following to say: As a normal and usual course of procedure employed by the companies when a picture is to be made, the producer invariably chooses, from the musical directors, one who will furnish the musical background for a film. A price is agreed upon verbally between the producer and musical director for the cost of furnishing such musical background. Thus, the musical director may compose his own music specially written for or adapted to the picture. He engages his own men and pays the corresponding compensation of the musicians under him. When the music is ready for recording, the musicians are summoned through 'call slips' in the name of the film company (Exh 'D'), which show the name of the musician, his musical instrument, and the date, time and place where he will be picked up by the truck of the film company. The film company provides the studio for the use of the musicians for that particular recording. The musicians are also provided transportation to and from the studio by the company. Similarly, the company furnishes them meals at dinner time. During the recording sessions, the motion picture director, who is an employee of the company, supervises the recording of the musicians and tells what to do in every detail. He solely directs the performance of the musicians before the camera as director, he supervises the performance of all the action, including the musicians who

appear in the scenes so that in the actual performance to be shown on the screen, the musical director's intervention has stopped. And even in the recording sessions and during the actual shooting of a scene, the technicians, soundmen and other employees of the company assist in the operation. Hence, the work of the musicians is an integral part of the entire motion picture since they not only furnish the music but are also called upon to appear in the finished picture. The question to be determined next is what legal relationship exits between the musicians and the company in the light of the foregoing facts. We are thus called upon to apply R.A. Act 875. which is substantially the same as and patterned after the Wagner Act substantially the same as a Act and the Taft-Hartley Law of the United States. Hence, reference to decisions of American Courts on these laws on the point-at-issue is called for. Statutes are to be construed in the light of purposes achieved and the evils sought to be remedied. (U.S. vs. American Tracking Association, 310 U.S. 534, 84 L. ed. 1345.) . In the case of National Labor Relations Board vs. Hearts Publication, 322 U.S. 111, the United States Supreme Court said the Wagner Act was designed to avert the 'substantial obstruction to the free flow of commerce which results from strikes and other forms of industrial unrest by eliminating the causes of the unrest. Strikes and industrial unrest result from the refusal of employers' to bargain

collectively and the inability of workers to bargain successfully for improvement in their working conditions. Hence, the purposes of the Act are to encourage collective bargaining and to remedy the workers' inability to bargaining power, by protecting the exercise of full freedom of association and designation of representatives of their own choosing, for the purpose of negotiating the terms and conditions of their employment.' The mischief at which the Act is aimed and the remedies it offers are not confined exclusively to 'employees' within the traditional legal distinctions, separating them from 'independent contractor'. Myriad forms of service relationship, with infinite and subtle variations in the term of employment, blanket the nation's economy. Some are within this Act, others beyond its coverage. Large numbers will fall clearly on one side or on the other, by whatever test may be applied. Inequality of bargaining power in controversies of their wages, hours and working conditions may characterize the status of one group as of the other. The former, when acting alone may be as helpless in dealing with the employer as dependent on his daily wage and as unable to resist arbitrary and unfair treatment as the latter.' To eliminate the causes of labor dispute and industrial strike, Congress thought it necessary to create a balance of forces in certain types of economic relationship. Congress recognized those economic relationships cannot be fitted neatly into the containers designated as 'employee' and 'employer'. Employers and employees not in proximate relationship may be drawn into common controversies by economic forces and that the very dispute sought to be avoided might involve 'employees' who are at times brought into an economic relationship with 'employers',

who are not their 'employers'. In this light, the language of the Act's definition of 'employee' or 'employer' should be determined broadly in doubtful situations, by underlying economic facts rather than technically and exclusively established legal classifications. (NLRB vs. Blount, 131 F [2d] 585.) In other words, the scope of the term 'employee' must be understood with reference to the purposes of the Act and the facts involved in the economic relationship. Where all the conditions of relation require protection, protection ought to be given . By declaring a worker an employee of the person for whom he works and by recognizing and protecting his rights as such, we eliminate the cause of industrial unrest and consequently we promote industrial peace, because we enable him to negotiate an agreement which will settle disputes regarding conditions of employment, through the process of collective bargaining. The statutory definition of the word 'employee' is of wide scope. As used in the Act, the term embraces 'any employee' that is all employees in the conventional as well in the legal sense expect those excluded by express provision. (Connor Lumber Co., 11 NLRB 776.). It is the purpose of the policy of Republic Act 875; (a) To eliminate the causes of industrial unrest by protecting the exercise of their right to self-organization for the purpose of collective bargaining. (b) To promote sound stable industrial peace and the advancement of the general welfare, and the best interests of employers and employees by the settlement of issues respecting terms and conditions of

employment through the process of collective bargaining between employers and representatives of their employees. The primary consideration is whether the declared policy and purpose of the Act can be effectuated by securing for the individual worker the rights and protection guaranteed by the Act. The matter is not conclusively determined by a contract which purports to establish the status of the worker, not as an employee. The work of the musical director and musicians is a functional and integral part of the enterprise performed at the same studio substantially under the direction and control of the company. In other words, to determine whether a person who performs work for another is the latter's employee or an independent contractor, the National Labor Relations relies on 'the right to control' test. Under this test an employeremployee relationship exist where the person for whom the services are performed reserves the right to control not only the end to be achieved, but also the manner and means to be used in reaching the end. (United Insurance Company, 108, NLRB No. 115.). Thus, in said similar case of Connor Lumber Company, the Supreme Court said:. 'We find that the independent contractors and persons working under them are employees' within the meaning of Section 2 (3) of its Act. However, we are of the opinion that the independent contractors have sufficient authority over the persons working under their immediate supervision to warrant their

exclusion from the unit. We shall include in the unit the employees working under the supervision of the independent contractors, but exclude the contractors.' 'Notwithstanding that the employees are called independent contractors', the Board will hold them to be employees under the Act where the extent of the employer's control over them indicates that the relationship is in reality one of employment. (John Hancock Insurance Co., 2375-D, 1940, Teller, Labor Dispute Collective Bargaining, Vol.). The right of control of the film company over the musicians is shown (1) by calling the musicians through 'call slips' in 'the name of the company; (2) by arranging schedules in its studio for recording sessions; (3) by furnishing transportation and meals to musicians; and (4) by supervising and directing in detail, through the motion picture director, the performance of the musicians before the camera, in order to suit the music they are playing to the picture which is being flashed on the screen. Thus, in the application of Philippine statutes and pertinent decisions of the United States Courts on the matter to the facts established in this case, we cannot but conclude that to effectuate the policies of the Act and by virtue of the 'right of control' test, the members of the Philippine Musicians Guild are employees of the three film companies and, therefore, entitled to right of collective bargaining under Republic Act No. 875. In view of the fact that the three (3) film companies did not question the union's majority, the Philippine Musicians

Guild is hereby declared as the sole collective bargaining representative for all the musicians employed by the film companies." We are fully in agreement with the foregoing conclusion and the reasons given in support thereof. Both are substantially in line with the spirit of our decision in Maligaya Ship Watchmen Agency vs. Associated Watchmen and Security Union, L-12214-17 (May 28, 1958). In fact, the contention of the employers in theMaligaya cases, to the effect that they had dealt with independent contractors, was stronger than that of the film companies in these cases. The third parties with whom the management and the workers contracted in theMaligaya cases were agencies registered with the Bureau of Commerce and duly licensed by the City of Manila to engage in the business of supplying watchmen to steamship companies, with permits to engage in said business issued by the City Mayor and the Collector of Customs. In the cases at bar, the musical directors with whom the film companies claim to have dealt with had nothing comparable to the business standing of said watchmen agencies. In this respect, the status of said musical directors is analogous to that of the alleged independent contractor in Caro vs. Rilloraza, L-9569 (September 30, 1957), with the particularity that the Carocase involved the enforcement of the liability of an employer under the Workmen's Compensation Act, whereas the cases before us are merely concerned with the right of the Guild to represent the musicians as a collective bargaining unit. Hence, there is less reason to be legalistic and technical in these cases, than in the Caro case. Herein, petitioners-appellants cite, in support of their appeal, the cases of Sunripe Coconut Product Co., Inc vs. CIR (46 Off. Gaz., 5506, 5509), Philippine Manufacturing Co. vs. Santos Vda. de Geronimo, L6968 (November 29, 1954), Viana vs. Al-Lagadan, L-8967 (May 31, 1956), and Josefa Vda. de Cruz vs. The Manila Hotel Co. (53 Off.

Gaz., 8540). Instead of favoring the theory of said petitionersappellants, the case of the Sunripe Coconut Product Co., Inc. is authority for herein respondents-appellees. It was held that, although engaged as piece-workers, under the "pakiao" system, the "parers" and "shellers" in the case were, not independent contractor, but employees of said company, because "the requirement imposed on the 'parers' to the effect that 'the nuts are pared whole or that there is not much meat wasted,' in effect limits or controls the means or details by which said workers are to accomplish their services" as in the cases before us. The nature of the relation between the parties was not settled in the Viana case, the same having been remanded to the Workmen's Compensation Commission for further evidence. The case of the Philippine Manufacturing Co. involved a contract between said company and Eliano Garcia, who undertook to paint a tank of the former. Garcia, in turn engaged the services of Arcadio Geronimo, a laborer, who fell while painting the tank and died in consequence of the injuries thus sustained by him. Inasmuch as the company was engaged in the manufacture of soap, vegetable lard, cooking oil and margarine, it was held that the connection between its business and the painting aforementioned was purely casual; that Eliano Garcia was an independent contractor; that Geronimo was not an employee of the company; and that the latter was not bound, therefore, to pay the compensation provided in the Workmen's Compensation Act. Unlike the Philippine Manufacturing case, the relation between the business of herein petitionersappellants and the work of the musicians is not casual. As held in the order appealed from which, in this respect, is not contested by herein petitioners-appellants "the work of the musicians is an integral part of the entire motion picture." Indeed, one can hardly find modern films without music therein. Hence, in the Caro case (supra), the owner and operator of buildings for rent was held

bound to pay the indemnity prescribed in the Workmen's Compensation Act for the injury suffered by a carpenter while working as such in one of said buildings even though his services had been allegedly engaged by a third party who had directly contracted with said owner. In other words, the repair work had not merely a casual connection with the business of said owner. It was a necessary incident thereof, just as music is in the production of motion pictures. The case of Josefa Vda. de Cruz vs. The Manila Hotel Co., L-9110 (April 30, 1957) differs materially from the present cases. It involved the interpretation of Republic Act No. 660, which amends the law creating and establishing the Government Service Insurance System. No labor law was sought to be construed in that case. In act, the same was originally heard in the Court of First Instance of Manila, the decision of which was, on appeal, affirmed by the Supreme Court. The meaning or scope if the term "employee," as used in the Industrial Peace Act (Republic Act No. 875), was not touched therein. Moreover, the subject matter of said case was a contract between the management of the Manila Hotel, on the one hand, and Tirso Cruz, on the other, whereby the latter greed to furnish the former the services of his orchestra, consisting of 15 musicians, including Tirso Cruz, "from 7:30 p.m. to closing time daily." In the language of this court in that case, "what pieces the orchestra shall play, and how the music shall be arranged or directed, the intervals and other details such are left to the leader's discretion." This is not situation obtaining in the case at bar. The musical directors above referred to have no such control over the musicians involved in the present case. Said musical directors control neither the music to be played, nor the musicians playing it. The film companies summon the musicians to work, through the musical directors. The film companies, through the musical directors, fix the date, the time and the place of work. The film companies, not the

musical directors, provide the transportation to and from the studio. The film companies furnish meal at dinner time. What is more in the language of the order appealed from "during the recording sessions, the motion picture director who is an employee of the company" not the musical director "supervises the recording of the musicians and tells them what to do in every detail". The motion picture director not the musical director "solely directs and performance of the musicians before the camera". The motion picture director "supervises the performance of all the actors, including the musicians who appear in the scenes, so that in the actual performance to be shown in the screen, the musical director's intervention has stopped." Or, as testified to in the lower court, "the movie director tells the musical director what to do; tells the music to be cut or tells additional music in this part or he eliminates the entire music he does not (want) or he may want more drums or move violin or piano, as the case may be". The movie director "directly controls the activities of the musicians." He "says he wants more drums and the drummer plays more" or "if he wants more violin or he does not like that.". It is well settled that "an employer-employee relationship exists . . .where the person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such end . . . ." (Alabama Highway Express Co., Express Co., v. Local 612, 108S. 2d. 350.) The decisive nature of said control over the "means to be used", is illustrated in the case of Gilchrist Timber Co., et al., Local No. 2530 (73 NLRB No. 210, pp. 1197, 1199-1201), in which, by reason of said control, the employer-employee relationship was held to exist between the management and the workers, notwithstanding the intervention of an alleged independent contractor, who had, and exercise, the power to hire and fire said workers. The aforementioned control over the means to be used" in reading the desired end is possessed

and exercised by the film companies over the musicians in the cases before us. WHEREFORE, the order appealed from is hereby affirmed, with costs against petitioners herein. It is so ordered. Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Paredes and Dizon, JJ.,concur. Gutierrez David, J., took no part.

G.R. No. 138051

June 10, 2004

JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING CORPORATION, respondent. DECISION CARPIO, J.: The Case Before this Court is a petition for review on certiorari1 assailing the 26 March 1999 Decision2 of the Court of Appeals in CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza ("SONZA"). The Court of Appeals affirmed the findings of the National Labor Relations Commission ("NLRC"), which affirmed the Labor Arbiters dismissal of the case for lack of jurisdiction. The Facts

In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABSCBN") signed an Agreement ("Agreement") with the Mel and Jay Management and Development Corporation ("MJMDC"). ABS-CBN was represented by its corporate officers while MJMDC was represented by SONZA, as President and General Manager, and Carmela Tiangco ("TIANGCO"), as EVP and Treasurer. Referred to in the Agreement as "AGENT," MJMDC agreed to provide SONZAs services exclusively to ABS-CBN as talent for radio and television. The Agreement listed the services SONZA would render to ABS-CBN, as follows: a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays; b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.3 ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first year and P317,000 for the second and third year of the Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days of the month. On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III, which reads: Dear Mr. Lopez, We would like to call your attention to the Agreement dated May 1994 entered into by your goodself on behalf of ABS-CBN with our company relative to our talent JOSE Y. SONZA. As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs and career.

We consider these acts of the station violative of the Agreement and the station as in breach thereof. In this connection, we hereby serve notice of rescission of said Agreement at our instance effective as of date. Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount stipulated in paragraph 7 of the Agreement but reserves the right to seek recovery of the other benefits under said Agreement. Thank you for your attention. Very truly yours, (Sgd.) JOSE Y. SONZA President and Gen. Manager4 On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and Employment, National Capital Region in Quezon City. SONZA complained that ABS-CBN did not pay his salaries, separation pay, service incentive leave pay, 13th month pay, signing bonus, travel allowance and amounts due under the Employees Stock Option Plan ("ESOP"). On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship existed between the parties. SONZA filed an Opposition to the motion on 19 July 1996. Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his account at PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account with the same bank where ABS-CBN deposited SONZAs talent fees and other payments due him under the Agreement.

In his Order dated 2 December 1996, the Labor Arbiter5 denied the motion to dismiss and directed the parties to file their respective position papers. The Labor Arbiter ruled: In this instant case, complainant for having invoked a claim that he was an employee of respondent company until April 15, 1996 and that he was not paid certain claims, it is sufficient enough as to confer jurisdiction over the instant case in this Office. And as to whether or not such claim would entitle complainant to recover upon the causes of action asserted is a matter to be resolved only after and as a result of a hearing. Thus, the respondents plea of lack of employer-employee relationship may be pleaded only as a matter of defense. It behooves upon it the duty to prove that there really is no employer-employee relationship between it and the complainant. The Labor Arbiter then considered the case submitted for resolution. The parties submitted their position papers on 24 February 1997. On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion to Expunge Respondents Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBNs witnesses Soccoro Vidanes and Rolando V. Cruz. These witnesses stated in their affidavits that the prevailing practice in the television and broadcast industry is to treat talents like SONZA as independent contractors. The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of jurisdiction.6 The pertinent parts of the decision read as follows: xxx

While Philippine jurisprudence has not yet, with certainty, touched on the "true nature of the contract of a talent," it stands to reason that a "talent" as above-described cannot be considered as an employee by reason of the peculiar circumstances surrounding the engagement of his services. It must be noted that complainant was engaged by respondent by reason of his peculiar skills and talent as a TV host and a radio broadcaster. Unlike an ordinary employee, he was free to perform the services he undertook to render in accordance with his own style. The benefits conferred to complainant under the May 1994 Agreement are certainly very much higher than those generally given to employees. For one, complainant Sonzas monthly talent fees amount to a staggeringP317,000. Moreover, his engagement as a talent was covered by a specific contract. Likewise, he was not bound to render eight (8) hours of work per day as he worked only for such number of hours as may be necessary. The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to an employee is inconsequential. Whatever benefits complainant enjoyed arose from specific agreement by the parties and not by reason of employer-employee relationship. As correctly put by the respondent, "All these benefits are merely talent fees and other contractual benefits and should not be deemed as salaries, wages and/or other remuneration accorded to an employee, notwithstanding the nomenclature appended to these benefits. Apropos to this is the rule that the term or nomenclature given to a stipulated benefit is not controlling, but the intent of the parties to the Agreement conferring such benefit."

The fact that complainant was made subject to respondents Rules and Regulations, likewise, does not detract from the absence of employer-employee relationship. As held by the Supreme Court, "The line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means to achieve it." (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15, 1989). x x x (Emphasis supplied)7 SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor Arbiters decision. SONZA filed a motion for reconsideration, which the NLRC denied in its Resolution dated 3 July 1998. On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals assailing the decision and resolution of the NLRC. On 26 March 1999, the Court of Appeals rendered a Decision dismissing the case.8 Hence, this petition. The Rulings of the NLRC and Court of Appeals The Court of Appeals affirmed the NLRCs finding that no employeremployee relationship existed between SONZA and ABS-CBN.

Adopting the NLRCs decision, the appellate court quoted the following findings of the NLRC: x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an agent of complainant Sonza, the principal. By all indication and as the law puts it, the act of the agent is the act of the principal itself. This fact is made particularly true in this case, as admittedly MJMDC is a management company devoted exclusively to managing the careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C. Tiangco. (Opposition to Motion to Dismiss) Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and not between ABS-CBN and MJMDC. This is clear from the provisions of the May 1994 Agreement which specifically referred to MJMDC as the AGENT. As a matter of fact, when complainant herein unilaterally rescinded said May 1994 Agreement, it was MJMDC which issued the notice of rescission in behalf of Mr. Sonza, who himself signed the same in his capacity as President. Moreover, previous contracts between Mr. Sonza and ABSCBN reveal the fact that historically, the parties to the said agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994 Agreement, which is the latest Agreement executed between ABS-CBN and Mr. Sonza, that MJMDC figured in the said Agreement as the agent of Mr. Sonza. We find it erroneous to assert that MJMDC is a mere laboronly contractor of ABS-CBN such that there exist[s] employer-employee relationship between the latter and Mr. Sonza. On the contrary, We find it indubitable, that

MJMDC is an agent, not of ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly admitted by the latter and MJMDC in the May 1994 Agreement. It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular courts, the same being in the nature of an action for alleged breach of contractual obligation on the part of respondentappellee. As squarely apparent from complainantappellants Position Paper, his claims for compensation for services, 13th month pay, signing bonus and travel allowance against respondent-appellee are not based on the Labor Code but rather on the provisions of the May 1994 Agreement, while his claims for proceeds under Stock Purchase Agreement are based on the latter. A portion of the Position Paper of complainant-appellant bears perusal: Under *the May 1994 Agreement+ with respondent ABS-CBN, the latter contractually bound itself to pay complainant a signing bonus consisting of shares of stockswith FIVE HUNDRED THOUSAND PESOS (P500,000.00). Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower than the amount he was receiving prior to effectivity of (the) Agreement. Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel benefit amounting to at least One Hundred Fifty Thousand Pesos (P150,000.00) per year.

Thus, it is precisely because of complainant-appellants own recognition of the fact that his contractual relations with ABS-CBN are founded on the New Civil Code, rather than the Labor Code, that instead of merely resigning from ABSCBN, complainant-appellant served upon the latter a notice of rescission of Agreement with the station, per his letter dated April 1, 1996, which asserted that instead of referring to unpaid employee benefits, he is waiving and renouncing recovery of the remaining amount stipulated in paragraph 7 of the Agreement but reserves the right to such recovery of the other benefits under said Agreement. (Annex 3 of the respondent ABS-CBNs Motion to Dismiss dated July 10, 1996). Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock Purchase Agreement by respondent-appellee that complainantappellant filed his complaint. Complainant-appellants claims being anchored on the alleged breach of contract on the part of respondent-appellee, the same can be resolved by reference to civil law and not to labor law. Consequently, they are within the realm of civil law and, thus, lie with the regular courts. As held in the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 November 1994, an action for breach of contractual obligation is intrinsically a civil dispute.9 (Emphasis supplied) The Court of Appeals ruled that the existence of an employeremployee relationship between SONZA and ABS-CBN is a factual question that is within the jurisdiction of the NLRC to resolve.10 A special civil action for certiorari extends only to issues of want or excess of jurisdiction of the NLRC.11 Such action cannot cover an inquiry into the correctness of the evaluation of the evidence which served as basis of the NLRCs conclusion.12The Court of Appeals

added that it could not re-examine the parties evidence and substitute the factual findings of the NLRC with its own.13 The Issue In assailing the decision of the Court of Appeals, SONZA contends that: THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A FINDING.14 The Courts Ruling We affirm the assailed decision. No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming the NLRC ruling which upheld the Labor Arbiters dismissal of the case for lack of jurisdiction. The present controversy is one of first impression. Although Philippine labor laws and jurisprudence define clearly the elements of an employer-employee relationship, this is the first time that the Court will resolve the nature of the relationship between a television and radio station and one of its "talents." There is no case law stating that a radio and television program host is an employee of the broadcast station. The instant case involves big names in the broadcast industry, namely Jose "Jay" Sonza, a known television and radio personality,

and ABS-CBN, one of the biggest television and radio networks in the country. SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of ABS-CBN. On the other hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction because SONZA was an independent contractor. Employee or Independent Contractor? The existence of an employer-employee relationship is a question of fact. Appellate courts accord the factual findings of the Labor Arbiter and the NLRC not only respect but also finality when supported by substantial evidence.15 Substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.16 A party cannot prove the absence of substantial evidence by simply pointing out that there is contrary evidence on record, direct or circumstantial. The Court does not substitute its own judgment for that of the tribunal in determining where the weight of evidence lies or what evidence is credible.17 SONZA maintains that all essential elements of an employeremployee relationship are present in this case. Case law has consistently held that the elements of an employer-employee relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control the employee on the means and methods by which the work is accomplished.18 The last element, the so-called "control test", is the most important element.19 A. Selection and Engagement of Employee

ABS-CBN engaged SONZAs services to co-host its television and radio programs because of SONZAs peculiar skills, talent and celebrity status. SONZA contends that the "discretion used by respondent in specifically selecting and hiring complainant over other broadcasters of possibly similar experience and qualification as complainant belies respondents claim of independent contractorship." Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and celebrity status not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an independent contractual relationship. If SONZA did not possess such unique skills, talent and celebrity status, ABS-CBN would not have entered into the Agreement with SONZA but would have hired him through its personnel department just like any other employee. In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must consider all the circumstances of the relationship, with the control test being the most important element. B. Payment of Wages ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this mode of fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits and privileges "which he would not have enjoyed if he were truly the subject of a valid job contract."

All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were ABS-CBNs employee, there would be no need for the parties to stipulate on benefits such as "SSS, Medicare, x x x and 13th month pay"20 which the law automatically incorporates into every employer-employee contract.21 Whatever benefits SONZA enjoyed arose from contract and not because of an employer-employee relationship.22 SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the ordinary that they indicate more an independent contractual relationship rather than an employer-employee relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely because of SONZAs unique skills, talent and celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone possessed enough bargaining power to demand and receive such huge talent fees for his services. The power to bargain talent fees way above the salary scales of ordinary employees is a circumstance indicative, but not conclusive, of an independent contractual relationship. The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an independent contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have to turn over any talent fee accruing under the Agreement. C. Power of Dismissal For violation of any provision of the Agreement, either party may terminate their relationship. SONZA failed to show that ABS-CBN could terminate his services on grounds other than breach of contract, such as retrenchment to prevent losses as provided under labor laws.23

During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long as "AGENT and Jay Sonza shall faithfully and completely perform each condition of this Agreement."24 Even if it suffered severe business losses, ABS-CBN could not retrench SONZA because ABS-CBN remained obligated to pay SONZAs talent fees during the life of the Agreement. This circumstance indicates an independent contractual relationship between SONZA and ABSCBN. SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement to continue paying SONZAs talent fees during the remaining life of the Agreement even if ABS-CBN cancelled SONZAs programs through no fault of SONZA.25 SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement as an admission that he is not an employee of ABSCBN. The Labor Arbiter stated that "if it were true that complainant was really an employee, he would merely resign, instead." SONZA did actually resign from ABS-CBN but he also, as president of MJMDC, rescinded the Agreement. SONZAs letter clearly bears this out.26 However, the manner by which SONZA terminated his relationship with ABS-CBN is immaterial. Whether SONZA rescinded the Agreement or resigned from work does not determine his status as employee or independent contractor. D. Power of Control Since there is no local precedent on whether a radio and television program host is an employee or an independent contractor, we refer to foreign case law in analyzing the present case. The United States Court of Appeals, First Circuit, recently held in Alberty-Vlez v. Corporacin De Puerto Rico Para La Difusin Pblica

("WIPR")27 that a television program host is an independent contractor. We quote the following findings of the U.S. court: Several factors favor classifying Alberty as an independent contractor. First, a television actress is a skilled position requiring talent and training not available on-the-job. x x x In this regard, Alberty possesses a masters degree in public communications and journalism; is trained in dance, singing, and modeling; taught with the drama department at the University of Puerto Rico; and acted in several theater and television productions prior to her affiliation with "Desde Mi Pueblo." Second, Alberty provided the "tools and instrumentalities" necessary for her to perform. Specifically, she provided, or obtained sponsors to provide, the costumes, jewelry, and other image-related supplies and services necessary for her appearance. Alberty disputes that this factor favors independent contractor status because WIPR provided the "equipment necessary to tape the show." Albertys argument is misplaced. The equipment necessary for Alberty to conduct her job as host of "Desde Mi Pueblo" related to her appearance on the show. Others provided equipment for filming and producing the show, but these were not the primary tools that Alberty used to perform her particular function. If we accepted this argument, independent contractors could never work on collaborative projects because other individuals often provide the equipment required for different aspects of the collaboration. x x x Third, WIPR could not assign Alberty work in addition to filming "Desde Mi Pueblo." Albertys contracts with WIPR specifically provided that WIPR hired her "professional services as Hostess for the Program Desde Mi Pueblo." There is no evidence that WIPR assigned Alberty tasks in

addition to work related to these tapings. x x x28 (Emphasis supplied) Applying the control test to the present case, we find that SONZA is not an employee but an independent contractor. The control test is the most important test our courts apply in distinguishing an employee from an independent contractor.29 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 well the less control the hirer exercises, the more likely the worker is considered an independent contractor.30 First, SONZA contends that ABS-CBN exercised control over the means and methods of his work. SONZAs 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 ABSCBNs 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.31 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.32 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. We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZAs work.33 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."34 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 ABS-CBNs 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, or even with the quality or product 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.35 Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the obligation to continue paying in full SONZAs talent fees, did not amount to control over the means and methods of the performance of SONZAs work. ABS-CBN could not terminate or discipline SONZA even if the means and methods of performance of his work - how he delivered his lines and appeared on television did not meet ABS-CBNs approval. 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. In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court of Appeals ruled that vaudeville performers were independent contractors although the management reserved the right to delete objectionable features in their shows. Since the management did not have control over the manner of performance of the skills of the artists, it could only control the result of the work by deleting objectionable features.37

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.38 Even though ABS-CBN provided SONZA with the place of work and the necessary equipment, SONZA was still an independent contractor since ABSCBN did not supervise and control his work. ABS-CBNs sole concern was for SONZA to display his talent during the airing of the programs.39 A radio broadcast specialist who works under minimal supervision is an independent contractor.40 SONZAs work as television and radio program host required special skills and talent, which SONZA admittedly possesses. The records do not show that ABS-CBN exercised any supervision and control over how SONZA utilized his skills and talent in his shows. Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN subjected him to its rules and standards of performance. SONZA claims that this indicates ABS-CBNs control "not only [over] his manner of work but also the quality of his work." The Agreement stipulates that SONZA shall abide with the rules and standards of performance "covering talents"41 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 the COMPANY (ABS-CBN) as its Code of Ethics."42 The KBP code applies

to broadcasters, not to employees of radio and television stations. Broadcasters are not necessarily employees of radio and television stations. Clearly, the rules and standards of performance referred to in the Agreement are those applicable to talents and not to employees of ABS-CBN. In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former.43 In this case, SONZA failed to show that these rules controlled his performance. We find that these general rules are merely guidelines towards the achievement of the mutually desired result, which are top-rating television and radio programs that comply with standards of the industry. We have ruled that: Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the services being rendered may be accorded the effect of establishing an employeremployee relationship. The facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that: Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it.44 The Vaughan case also held that one could still be an independent contractor although the hirer reserved certain supervision to insure the attainment of the desired result. The hirer, however, must not

deprive the one hired from performing his services according to his own initiative.45 Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme form of control which ABS-CBN exercised over him. This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of ABS-CBN. Even an independent contractor can validly provide his services exclusively to the hiring party. In the broadcast industry, exclusivity is not necessarily the same as control. The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry.46 This practice is not designed to control the means and methods of work of the talent, but simply to protect the investment of the broadcast station. The broadcast station normally spends substantial amounts of money, time and effort "in building up its talents as well as the programs they appear in and thus expects that said talents remain exclusive with the station for a commensurate period of time."47 Normally, a much higher fee is paid to talents who agree to work exclusively for a particular radio or television station. In short, the huge talent fees partially compensates for exclusivity, as in the present case. MJMDC as Agent of SONZA SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which contracted out his services to ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that MJMDC is a "labor-only" contractor and ABS-CBN is his employer.

In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the employee who is ostensibly under the employ of the "labor-only" contractor; and (3) the principal who is deemed the real employer. Under this scheme, the "labor-only" contractor is the agent of the principal. The law makes the principal responsible to the employees of the "labor-only contractor" as if the principal itself directly hired or employed the employees.48 These circumstances are not present in this case. There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-CBN. MJMDC merely acted as SONZAs agent. The Agreement expressly states that MJMDC acted as the "AGENT" of SONZA. The records do not show that MJMDC acted as ABS-CBNs agent. MJMDC, which stands for Mel and Jay Management and Development Corporation, is a corporation organized and owned by SONZA and TIANGCO. The President and General Manager of MJMDC is SONZA himself. It is absurd to hold that MJMDC, which is owned, controlled, headed and managed by SONZA, acted as agent of ABS-CBN in entering into the Agreement with SONZA, who himself is represented by MJMDC. That would make MJMDC the agent of both ABS-CBN and SONZA. As SONZA admits, MJMDC is a management company devoted exclusively to managing the careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not engaged in any other business, not even job contracting. MJMDC does not have any other function apart from acting as agent of SONZA or TIANGCO to promote their careers in the broadcast and television industry.49 Policy Instruction No. 40 SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8 January 1979 finally settled the status of workers in the broadcast industry. Under this policy, the types of

employees in the broadcast industry are the station and program employees. Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law. There is no legal presumption that Policy Instruction No. 40 determines SONZAs status. A mere executive issuance cannot exclude independent contractors from the class of service providers to the broadcast industry. The classification of workers in the broadcast industry into only two groups under Policy Instruction No. 40 is not binding on this Court, especially when the classification has no basis either in law or in fact. Affidavits of ABS-CBNs Witnesses SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando Cruz without giving his counsel the opportunity to cross-examine these witnesses. SONZA brands these witnesses as incompetent to attest on the prevailing practice in the radio and television industry. SONZA views the affidavits of these witnesses as misleading and irrelevant. While SONZA failed to cross-examine ABS-CBNs witnesses, he was never prevented from denying or refuting the allegations in the affidavits. The Labor Arbiter has the discretion whether to conduct a formal (trial-type) hearing after the submission of the position papers of the parties, thus: Section 3. Submission of Position Papers/Memorandum xxx

These verified position papers shall cover only those claims and causes of action raised in the complaint excluding those that may have been amicably settled, and shall be accompanied by all supporting documents including the affidavits of their respective witnesses which shall take the place of the latters direct testimony. x x x Section 4. Determination of Necessity of Hearing. Immediately after the submission of the parties of their position papers/memorandum, the Labor Arbiter shall motu propio determine whether there is need for a formal trial or hearing. At this stage, he may, at his discretion and for the purpose of making such determination, ask clarificatory questions to further elicit facts or information, including but not limited to the subpoena of relevant documentary evidence, if any from any party or witness.50 The Labor Arbiter can decide a case based solely on the position papers and the supporting documents without a formal trial.51 The holding of a formal hearing or trial is something that the parties cannot demand as a matter of right.52 If the Labor Arbiter is confident that he can rely on the documents before him, he cannot be faulted for not conducting a formal trial, unless under the particular circumstances of the case, the documents alone are insufficient. The proceedings before a Labor Arbiter are non-litigious in nature. Subject to the requirements of due process, the technicalities of law and the rules obtaining in the courts of law do not strictly apply in proceedings before a Labor Arbiter. Talents as Independent Contractors ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat talents like SONZA

as independent contractors. SONZA argues that if such practice exists, it is void for violating the right of labor to security of tenure. The right of labor to security of tenure as guaranteed in the Constitution53 arises only if there is an employer-employee relationship under labor laws. Not every performance of services for a fee creates an employer-employee relationship. To hold that every person who renders services to another for a fee is an employee - to give meaning to the security of tenure clause - will lead to absurd results. Individuals with special skills, expertise or talent enjoy the freedom to offer their services as independent contractors. The right to life and livelihood guarantees this freedom to contract as independent contractors. The right of labor to security of tenure cannot operate to deprive an individual, possessed with special skills, expertise and talent, of his right to contract as an independent contractor. An individual like an artist or talent has a right to render his services without any one controlling the means and methods by which he performs his art or craft. This Court will not interpret the right of labor to security of tenure to compel artists and talents to render their services only as employees. If radio and television program hosts can render their services only as employees, the station owners and managers can dictate to the radio and television hosts what they say in their shows. This is not conducive to freedom of the press. Different Tax Treatment of Talents and Broadcasters The National Internal Revenue Code ("NIRC")54 in relation to Republic Act No. 7716,55 as amended by Republic Act No. 8241,56 treats talents, television and radio broadcasters differently. Under the NIRC, these professionals are subject to the 10% valueadded tax ("VAT") on services they render. Exempted from the VAT

are those under an employer-employee relationship.57 This different tax treatment accorded to talents and broadcasters bolters our conclusion that they are independent contractors, provided all the basic elements of a contractual relationship are present as in this case. Nature of SONZAs Claims SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service incentive leave, signing bonus, travel allowance, and amounts due under the Employee Stock Option Plan. We agree with the findings of the Labor Arbiter and the Court of Appeals that SONZAs claims are all based on the May 1994 Agreement and stock option plan, and not on the Labor Code. Clearly, the present case does not call for an application of the Labor Code provisions but an interpretation and implementation of the May 1994 Agreement. In effect, SONZAs cause of action is for breach of contract which is intrinsically a civil dispute cognizable by the regular courts.58 WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner. SO ORDERED. Davide, Jr., Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.

G.R. Nos. 92777-78 March 13, 1991 ISAGANI ECAL, CRISOLOGO ECAL, NELSON BUENAOBRA, NARDING BANDOGELIO, WILMER ECHAGUE, ROGELIO CASTILLO, ALFREDO FERNANDO, OLIGARIO BIGATA, ROBERTO FERRER AND HONESTO TANAEL, Represented by ISAGANI ECAL, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION), JIMMY MATCHUKA AND HI-LINE TIMBER, INC., respondents. Armando A. San Antonio for petitioners. Chicote Abad & Macaisip Law Offices for private respondents.

and Employment docketed as NLRC case No. RAB-03-09-0107-87 and No. RAB III-09-0116-87. In their complaints/position papers, petitioners alleged, among others, that they have been employed by Hi-Line as follows: Isagani Ecal, from February, 1986; Crisologo Ecal, Buenaobra, Bandogelio, Fernando, Bigata, Ferrer and Tanael, from March 3, 1986; and Castillo and Echague, from May 1, 1986; that except for Isagani Ecal, they were all receiving a salary of P 35.00 a day; that they were required to report for work 7 days a week including rest days, legal holidays, except Christmas and Good Friday from 7:00 A.M. to 7:00 P.M.; that they were not given living allowance, overtime pay, premium pay for rest days and legal holidays, 13th month pay and service incentive leave pay; and, that on June 6, 1987, they were not allowed to work and instead were informed that their services were no longer needed. Private respondents, on the other hand, denied the existence of an employer-employee relationship between the company and the petitioners claiming that the latter are under the employ of an independent contractor, petitioner Isagani Ecal, an employee of the company until his resignation on February 4, 1987. After submission of the supplemental position papers and other evidence by the parties, the labor arbiter rendered his decision dated June 10, 1988 finding no employer-employee relationship between the parties. Thus, he dismissed the two cases for lack of merit. 1 On appeal, public respondent National Labor Relations Commission (NLRC) affirmed the aforesaid decision of the labor arbiter in a resolution dated October 2, 1989. 2

GANCAYCO, J.:p Is there an employer-employee relationship between petitioners and private respondent Hi-Line Timber, Inc. or merely an employerindependent contractor relationship between said private respondent and petitioner Isagani Ecal with the other petitioners being mere contract workers of Ecal? In the case of the latter, is Ecal engaged in "job" contracting or "labor-only" contracting? What then is the extent of the liability of private respondent? These are the questions raised in this petition. This case traces its origin from two consolidated complaints for illegal dismissal and money claims filed by petitioners Isagani Ecal, Crisologo Ecal, Nelson Buenaobra, Narding Bandogelio, Wilmer Echague, Rogelio Castillo, Alfredo Fernando, Oligario Bigata, Roberto Ferrer and Honesto Tanael against private respondents HiLine Timber, Inc. (hereinafter referred to as Hi-Line) and Jimmy Matchuka, the company foreman, with the Department of Labor

The motion for reconsideration of petitioners was denied in a resolution dated March 12, 1990. 3 In this petition for certiorari, petitioners primarily question the finding of the public respondent NLRC that no employer-employee relationship existed between them and Hi-Line Timber, Inc. They contend that petitioner Isagani Ecal is not an independent contractor but a mere employee of Hi-Line Line. In response, the Solicitor General points out that the issue of whether or not an employer-employee relationship exists between the parties is a question of fact and the findings of the labor arbiter and the NLRC on this issue are conclusive upon this Court if they are supported by substantial evidence 4 as in this case. The NLRC ruled We have carefully examined and evaluated the basis of the decision of the Labor Arbiter and to Our mind his factual findings are indeed supported by substantial evidence. Thus, we cite a few of the clear and convincing evidence and record which compelled the Labor Arbiter to disregard the claim of the complainants that there was (an) employeremployee relationship between the contending parties. Firstly, the affidavit of respondents' personnel officer, Elizabeth Natividad, dated 22 April 1988, clearly attesting to the fact that complainants, except Isagani Ecal, who worked at their plant at Bocaue, Bulacan, from 24 April 1986 up to 4 February 1987 and who tendered his resignation on the latter date, were not at all employees of respondents; secondly, the payrolls of the respondents do not indicate that said

complainants were employees of the respondents; thirdly, the Sinumpaang Salaysay of Jose Mendoza, the Secretary-Treasurer of the Hi-Line Workers Union-Confederation of Free Laborers (CFL), a registered labor Union under Reg. Cert. No. (FED425)-6756-11, issued March, 1987, to the effect that none of the complainants, except Isagani Ecal, were listed as members of the union and/or employees of respondents; and lastly, two (2) Sinumpaang Salaysay dated 22 April 1988 executed by respondents' company guard Honorio T. Battung and Foreman Clemente S. Sales, respectively, attesting that it was only Isagani Ecal who worked with respondents but resigned on 4 February 1987 to work as (an) independent contractor. 5 Petitioners claim that the NLRC based its decision solely on the evidence aforestated and completely ignored the evidence they presented thus denying them due process. The Court carefully examined the records of the case and finds that the NLRC limited itself to a superficial evaluation of the relationship of the parties based mainly on the aforestated documents with emphasis on the company payrolls without regard to the particular circumstances of the case. The finding of the NLRC that Isagani Ecal is no longer an employee of Hi-Line line is amply supported by the evidence on record. His resignation letter dated February 4, 1987 stating "ako po ay magreresign na sa aking trabaho bilang "laborer" sapagka't nakita ko na mas malaki ang kikitain kung mangongontrata na lamang " 6speaks for itself. This was unsuccessfully rebutted by petitioners. To determine whether there exists an employer-employee relationship, the four-way test should be applied, namely: (1)

selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee's conductthe last being the most important element. 7 Neither the NLRC nor the labor arbiter utilized these guides in their disposition of the complaint. The records show that Hi-Line does not choose the workers but merely accepts whoever may be selected by petitioner Isagani Ecal. Petitioners are not included in the payroll. Instead a lump sum of P1,400.00 is given to Isagani Ecal or his representative Solomon de los Santos, every four days, to cover their wages for the period which the petitioners divide among themselves. Private respondents allege that Isagani Ecal customarily removes some of his laborers at the Hi-Line sawmill and assigns them to other sawmills; however, there was no evidence adduced to show that indeed Ecal regularly or even once transferred some of his workers to other sawmills. Petitioners worked at the company compound at Wakas, Bocaue, Bulacan, at least eight hours a day, for seven days a week so that it would be impossible for them to find time to work in some other sawmill. On June 6, 1987, the company unilaterally terminated the services of petitioners without notice allegedly on the ground that its contract with Isagani Ecal has already expired. As to the matter of control, it would seem that petitioners were mostly left on their own to devise the most expeditious way of segregating lumber materials as to sizes and of loading and unloading the same in the chamber for drying. However, their task is performed within the work premises of Hi-Line, specifically at its Kiln Drying Section, so it cannot be said that no amount of control and supervision is exerted upon them by the company through their foremen, private respondent Matchuka and Clemente S. Sales. Moreover, the very nature of the task performed by petitioners

requires very limited supervision as there are only so many ways of segregating lumber according to their sizes and of loading and unloading them in the dryer so that all that the company has to do is to check on the results of their work. The foregoing observation suggests that there is a certain relationship existing between the parties although a clear-cut characterization of such relationship whether it is an employeremployee relationship or an employer-independent contractor relationship is unavailing. Hence, a closer scrutiny of said relationship is in order. Petitioners urge that even assuming arguendo that Isagani Ecal is an independent contractor, he should be considered only a labor supplier who is deemed an agent of the company so that petitioners should enjoy the status of being its employees; therefore, Hi-Line should be held liable for illegally dismissing petitioners and for the non-payment of benefits due them. Private respondents, however, maintain that Isagani Ecal is an independent contractor or a job contractor. The Solicitor General adopts the theory that Ecal is an independent contractor. However, he faults the labor arbiter for his failure to determine the benefits due petitioners, an issue raised by the latter, on the ground that Hi-Line, being an indirect employer, is jointly and severally liable with Isagani Ecal to the extent of the work performed by the employees as if they were directly employed by it. He, therefore, seeks the remand of the case to the labor arbiter for determination of the unpaid benefits of petitioners. The pertinent provisions of the Labor Code, as amended, are: Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another

person for the performance of the former's work, the employees of the contractor and of the latter's subcontractor, if any, shall be paid in accordance with the provisions of this Code. 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 this Code. In so prohibiting or restricting, he may make appropriate distinctions between laboronly 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. 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. Under the provisions of Article 106, paragraphs 1 and 2, an employer who enters into a contract with a contractor for the performance of work for the employer does not thereby establish an employer-employee relationship between himself and the employees of the contractor. The law itself, however, creates such a relationship when a contractor fails to pay the wages of his employees in accordance with the Labor Code, and only for this limited purpose, i.e. to ensure that the latter will be paid the wages due them. 8 On the other hand, the legal effect of a finding that a contractor is merely a "labor only" contractor was explained in Philippine Bank of Communications vs. National Labor Relations Commission, et al., 9 . . . The "labor-only" contractor i.e., "the person or intermediary" is considered "merely as an agent of the employer." The employer is made by the statute responsible to the employees of the "labor only" contractor as if such employee had been directly employed by the employer. Thus, where "labor-only" contracting exists in a given

case, the statute itself implies or establishes an employer-employee relationship between the employer (the owner of the project) and the employees of the "labor-only" contractor, this time for a comprehensive purpose: "employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code." The law in effect holds both the employer and the 'labor-only' contractor responsible to the latter's employees for the more effective safeguarding of the employees' rights under the Labor Code. Sections 8 and 9, Rule VIII, Book III of the Omnibus Rules implementing the Labor Code set forth the distinctions between "job" contracting and "labor-only" contracting 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 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, equipments, machineries, work premises, and other materials which are necessary in the conduct of his business.

Sec. 9. Labor-only contracting (a) Any person who undertakes to supply workers to an employer shall be deemed to be engaged in labor-only contracting where such person: (1) Does not have substantial capital or investment in the form of tools, equipments, machineries, work premises and other materials; and (2) The workers recruited and placed by such person are performing activities which are directly related to the principal business or operations of the employer in which workers are habitually employed. (b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be considered merely as an agent or intermediary 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. xxx xxx xxx Applying the foregoing provisions, the Court finds petitioner Isagani Ecal to be a "labor-only" contractor, a mere supplier of manpower to Hi-Line. Isagani Ecal was only poor laborer at the time of his resignation on February 4, 1987 who cannot even afford to have his daughter treated for malnutrition. He resigned and became a

supplier of laborers for Hi-Line, because he saw an opportunity for him to earn more than what he was earning while still in the payroll of the company. At the same time, he continued working for the company as a laborer at the kiln drying section. He definitely does not have sufficient capital to invest in tools and machineries. Private respondents, however, claim that the business contracted by Ecal did not require the use of tools, equipment and machineries and the contracted task had to be executed in the premises of Hi-Line. Precisely, the job assigned to petitioners has to be executed within the work premises of Hi-Line where they use the machineries and equipment of the company for the drying of lumber materials. Even the company's personnel officer Elizabeth Natividad admitted that Ecal resigned in order to supply manpower to the company on a task basis. 10By the very allegations of private respondents, it is quite clear that Isagani Ecal only supplies manpower to Hi-Line within the context of "labor-only" contracting as defined by law. There is also no question that the task performed by petitioners is directly related to the business of Hi-Line. Petitioners were assigned to sort out the lumber materials whether wet or fresh kiln as to sizes and to carry them from the stockpile to the dryer where they are loaded for drying after which they are unloaded. The work of petitioners is an integral part of the operation of the sawmill of HiLine without which production and company sales will suffer. A finding that Isagani Ecal is a "labor-only" contractor is equivalent to a finding that an employer-employee relationship exists between the company and Ecal including the latter's "contract workers" herein petitioners, the relationship being such as provided by the law itself. 11 Indeed, the law prohibits "labor-only" contracting and creates an employer- employee relationship for the protection of the laborers. The Court had in fact observed that businessmen, with the aid of

lawyers, have tried to avoid the bringing about of an employeremployee relationship in some of their enterprises because that juridical relation spawns obligations connected with workmen's compensation, social security, medicare, minimum wage, termination pay and unionism. 12 This unscrupulous practice is quite evident in the case at bar. It is company policy that once an employee is assigned to the kiln drying section, he is no longer included in the payroll and is then paid on a task basis, even if he had long been employed with the company. Since the employee will no longer be included in the payroll, it becomes easy for the company to deny the regular employment of such a worker and is able to avoid whatever obligations it may have under an employer-employee relationship. Moreover, Hi-Line limits the period of undertaking to only four days presumably to make termination of the services of petitioners easier and to prevent them from attaining regular status. The company had no doubt taken advantage of these laborers in order to escape liability for benefits and privileges accruing to one holding a regular employment. Without a law prohibiting "labor-only" contracting to protect the rights of labor, these poor workers will always be at the mercy of the employer. Since petitioners perform tasks which are usually necessary or desirable in the main business of Hi-Line, they should be deemed regular employees of the latter 13 and as such are entitled to all the benefits and rights appurtenant to regular employment. Being regular employees, they should have been afforded due process prior to their dismissal. 14 Instead they were unceremoniously dismissed on June 6, 1987 when they were not allowed to enter the company's premises by the security guards. The argument of private respondents that the contract of Ecal with

the company expired cannot be sustained. Petitioners may only be dismissed for an authorized or just cause and after due process. At this juncture, We note that petitioners and private respondents allege conflicting dates of employment of the former. Petitioners claim that as early as March or May, 1986, they have already been working with Hi-Line Line, while private respondents contend that it was only in April, 1987 that they had been engaged by the company. This Court is not a trier of facts and there is not enough basis in the records to enable Us to come up with definite dates of employment. However, whatever be the date of their employment, petitioners will still be considered employees of the company. If petitioners had started their employment in 1986, they would have rendered more than 1 year of service at the time of their dismissal and, therefore, should be considered regular employees. Even if they have been engaged only in April of 1987, they will still be deemed regular employees for as earlier indicated, Isagani Ecal is a "labor-only" contractor and petitioners perform activities directly related to the principal business of Hi-Line Line. Petitioners, having been illegally dismissed on June 6, 1987, are entitled to backwages equivalent to three years without qualifications and deductions in line with prevailing jurisprudence. WHEREFORE, the decision of public respondent NLRC is hereby REVERSED and SET ASIDE. Private respondent Hi-Line Timber, Inc. is hereby ordered to reinstate petitioners to their former positions with backwages equivalent to three (3) years without deductions and qualifications. The records of the case are remanded to the labor arbiter for determination of the unpaid benefits due petitioners. No costs. SO ORDERED.

Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.

G.R. No. 111501 March 5, 1996 PHILIPPINE FUJI XEROX CORPORATION, JENNIFER A. BERNARDO, and ATTY. VICTORINO LUIS,petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (First Division), PAMBANSANG KILUSAN NG PAG-GAWA, (KILUSAN)-TUCP, PHILIPPINE XEROX EMPLOYEES UNION-KILUSAN and PEDRO GARADO, respondents.

MENDOZA, J.:p This is a petition for certiorari to set aside the decision of the NLRC, finding petitioner Philippine Fuji Xerox Corporation (Fuji Xerox) guilty of illegally dismissing private respondent Pedro Garado and ordering him reinstated. The NLRC decision reverses on appeal a decision of the Labor Arbiter finding private respondent to be an employee of another firm, the Skillpower, Inc., and not of petitioner Fuji Xerox. The question raised in this case is whether private respondent is an employee of Fuji Xerox (as the NLRC found) or of Skillpower, Inc. (as the Labor Arbiter found). For reasons to be hereafter explained, we hold that private respondent is an employee of Fuji Xerox and accordingly dismiss the petition for review of Fuji Xerox. The following are the facts.

On May 6, 1977, petitioner Fuji Xerox entered into an agreement under which Skillpower, Inc. supplied workers to operate copier machines of Fuji Xerox as part of the latter's "Xerox Copier Project" in its sales offices. Private respondent Pedro Garado was assigned as key operator at Fuji Xerox's branch. at Buendia, Makati, Metro Manila, in February of 1980. In February of 1983, Garado went on leave and his place was taken over by a substitute. Upon his return in March, he discovered that there was a spoilage of over 600 copies. Afraid that he might be blamed for the spoilage, he tried to talk a service technician of Fuji Xerox into stopping the meter of the machine. The technician refused Garado's request, but this incident came to the knowledge of Fuji Xerox which, on May 31, 1983, reported the matter to Skillpower, Inc. The next day, Skillpower, Inc. wrote Garado, ordering him to explain. In the meantime, it suspended him from work. Garado filed a complaint for illegal dismissal. The Labor Arbiter found that Garado applied for work to Skillpower, Inc.; that in 1980 he was employed and made to sign a contract; that although he received his salaries regularly from Fuji Xerox, it was Skillpower, Inc. which exercised control and supervision over his work; that Skillpower, Inc. had substantial capital and investments in machinery, equipment, and service vehicles, and assets totalling P5,008,812.43. On the basis of these findings the Labor Arbiter held in a decision rendered on October 30, 1986 that Garado was an employee of Skillpower, Inc., and that he had merely been assigned by Skillpower, Inc. to Fuji Xerox. Hence, the Labor Arbiter dismissed Garado's complaint. On the other hand, the NLRC found Garado to be infact an employee of petitioner Fuji Xerox and by it to have been illegally dismissed. The NLRC found that although Garado's request was

wrongful, dismissal would be a disproportionate penalty. The NLRC held that although Skillpower, Inc. had substantial capital assets, the fact was that the copier machines, which Garado operated, belonged to petitioner Fuji Xerox, and that although it was Skillpower, Inc. which had suspended Garado, the latter merely acted at the behest of Fuji Xerox. The NLRC found that Garado worked under the control and supervision of Fuji Xerox, which paid his salaries, and that Skillpower, Inc. merely acted as paymasteragent of Fuji Xerox. The NLRC held that Skillpower, Inc. was a laboronly contractor and Garado should be deemed to have been directly employed by Fuji Xerox, regardless of the agreement between it and Skillpower, Inc. Accordingly, the NLRC ordered: WHEREFORE, premises considered, the respondents are hereby ordered to immediately reinstate complainant Pedro Garado to his former position as key operator with three (3) years backwages, without qualification or reduction whatsoever . . . . Except as herein above MODIFIED, the appealed decision is hereby Affirmed. Hence the present petition. Fuji Xerox argues that Skillpower, Inc. is an independent contractor and that Garado is its employee for the following reasons: (1) Garado was recruited by Skillpower, Inc.; (2) The work done by Garado was not necessary to the conduct of the business of Fuji Xerox; (3) Garado's salaries and benefits were paid directly by Skillpower, Inc.;

(4) Garado worked under the control of Skillpower, Inc.; and (5) Skillpower, Inc. is a highly-capitalized business venture. The contentions are without merit. Fuji Xerox contends that Garado was actually recruited by Skillpower, Inc. as part of its personnel pool and later merely assigned to it (petitioner) . It is undisputed, however, that since 1980, 1 when Garado was first assigned to work at Fuji Xerox, he had never been assigned to any other company so much so that by 1984, he was already a member of the union which petitioned the company for his regularization. 2 From 1980 to 1984 he worked exclusively for petitioner. Indeed, he was recruited by Skillpower, Inc. solely for assignment to Fuji Xerox to work in the latter's Xerox Copier Project. 3 Petitioners claim that Skillpower, Inc. has other clients to whom it provided "temporary" services. That, however, is irrelevant. What is important is that once employed, Garado was never assigned to any other client of Skillpower, Inc. In fact, although under the agreement Skillpower, Inc. was supposed to provide only "temporary" services, Skillpower, Inc. actually supplied Fuji Xerox the labor which the latter needed for its Xerox Copier Project for seven (7) years, from 1977 to 1984. On January 1, 1983, private respondent signed a contract entitled "Appointment as Contract Worker," in which it was stated that private respondent's status was that of a contract worker for a definite period from January 1, 1983 to June 30, 1983. As such, private respondent's employment was considered temporary, to terminate automatically six (6) months afterwards, without

necessity of any notice and without entitling private respondent to separation or termination pay. Private respondent was made to understand that he was an employee of Skillpower, Inc., and not of the client to which he was assigned. Therefore, the termination of the contract or any renewal or extension thereof did not entitle him to become an employee of the client and the latter was not under any obligation to appoint him as such, "notwithstanding the total duration of the contract or any extension or renewal thereof." This is nothing but a crude attempt to circumvent the law and undermine the security of tenure of private respondent by employing workers under six-month contracts which are later extended indefinitely through renewals. As this Court held in the Philippine Bank of Communications v. NLRC: 4 It is not difficult to see that to uphold the contractual arrangement between the bank and CESI would in effect be to permit employers to avoid the necessity of hiring regular or permanent employees and to enable them to keep their employees indefinitely on a temporary or casual status, thus to deny them security of tenure in their jobs. Article 106 of the Labor Code is precisely designed to prevent such a result. Second. Petitioner contends that the service provided by Skillpower, Inc., namely, operating petitioners' xerox machine, is not directly related nor necessary to the business of selling and leasing copier machines of petitioner. Petitioners claim that their Xerox Copier Project is just for public service and is purely incidental to its business. What petitioners earn from the project is not even sufficient to defray their expenses, let alone bring profits to them. As such, the project is no different from other services which can legally be contracted out, such as security and janitorial services.

Petitioners contend that the copier service can be considered as part of their "housekeeping" tasks which can be let to independent contractors. 5 We disagree. As correctly held by the NLRC, at the very least, the Xerox Copier Project of petitioners promotes goodwill for the company . It may not generate income for the company but there are activities which a company may find necessary to engage in because they ultimately redound to its benefit. Operating the company's copiers at its branches advertises the quality of their products and promotes the company's reputation and public image. It also advertises the utility and convenience of having a copier machine. It is noteworthy that while not operated for profit the copying service is not intended either to be "promotional," as, indeed, petitioner charged a fee for the copies made. It is wrong to say that if a task is not directly related to the employer's business, or it falls under what may be considered "housekeeping activities," the one performing the task is a job contractor. The determination of the existence of an employeremployee relationship is defined by law according to the facts of each case, regardless of the nature of the activities involved. Third. Petitioners contend that it never exercised control over the conduct of private respondent. Petitioners allege that the salaries paid to Garado, as well as his employment records, vouchers and loanchecks from the SSS were coursed through Skillpower, Inc. In addition private respondent applied for vacation leaves to Skillpower, Inc. It is also contended that it was Skillpower, Inc. which twice required private respondent to explain why he should not be dismissed for the spoilage in Fuji Xerox's Buendia branch and suspended him pending the result of the investigation. According to petitioners,

although they conducted an administrative investigation, the purpose was only to determine the complicity of their own employees in the incident, if any, and any criminal liability of private respondent. This claim is belied by two letters written by Atty. Victorino H. Luis, Legal and Industrial Relations Officer of the company, to the union president, Nick Macaraig. The first letter, dated July 6, 1983, stated: This has reference to your various letters dated today on administrative case concerning Messrs. Crisostomo Cruz, Pedro Garado and Ms. Evelyn Abenes. In connection with the above and in the case likewise of Mr. Dionisio Guyala, please be advised that the proceedings against them are being carried out under the terms, and in accordance with the provisions of our Policy and Procedure on Employment Termination as well as Policy on Disciplinary Actions dated October 1, 1982, and not under the Grievance Machinery under our CBA. Your action apparently is premised on the assumption that we are now in the Grievance Stage, which is premature. If we have allowed the Union to participate in our Investigation and Administrative panels, it is only a concession on management's part in accordance with No. IV, Section B, Paragraph 3 of the abovecited policy on the investigation, the Personnel/Administrative Department may consult the Union whenever necessary.

We shall entertain grievances under our CBA Machinery only after decisions have been made on the foregoing cases and should you find the penalties imposed, if any, as unjust, unduly harsh, discriminating otherwise fit subject for grievance by the Union itself under the terms of our CBA. Accordingly, we are proceeding with our investigations on the administrative charges with or without your presence or that of the respondents if it is the latter's preference, as in the case of Crisostomo Cruz, to ignore the same. (Emphasis ours) The second letter, dated July 13, 1983, 6 read: You obviously persist in pursuing the misconception that our allowing your presence in the administrative proceedings against Messrs. Guyala, Cruz, et al. has set the Grievance Machinery under our CBA into play. We can only reiterate our statement in our letter of July 6 that we were implementing Policy and Procedures on Termination dated October 1, 1982 and that your presence in helping bolster the defense for the respondents was only with our forbearance in the spirit of cooperation in order to better ferret out the truth. The power or authority to impose discipline and disciplinary measures upon employees is a basic prerogative of Management, something that cannot be abdicated, much less ceded to a CBA Grievance Committee which is limited to settling disputes and misunderstanding as to interpretation, application,

or violation of any provisions of the CBA agreement . . . As likewise pointed out in our letter of July 6 recourse to Grievance may possibly be resorted to if in the Union's opinion a penalty imposed upon a respondent Union member is discriminating to the member or otherwise illegal, unduly harsh, and the like. Ultimately, the remedy lies in appeal to the NLRC, as in similar cases in the past. (Emphasis ours) These letters reveal the role which Fuji Xerox played in the dismissal of the private respondent. They dispel any doubt that Fuji Xerox exercised disciplinary authority over Garado and that Skillpower, Inc. issued the order of dismissal merely in obedience to the decision of petitioner. Fourth. Petitioner avers that Skillpower, Inc. is a highly-capitalized business venture, registered as an "independent employer" with the Securities and Exchange Commission as well as the Department of Labor and Employment. Skillpower, Inc. is a member of the Social Security System. In 1984 it had assets exceeding P5 million pesos and at least 20 typewriters, office equipment and service vehicles. It had employees of its own and a pool of 25 clerks assigned to clients on a temporary basis. Petitioners cite the case of Neri v. NLRC, 7 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 8 the Court had already found that the BCC was an independent contractor; that BCC retained control over the employees and the

employer was actually just concerned with the end-result; that BCC had the power to reassign the employees and their deployment was not subject to the approval of the employer; and that BCC was paid in lump sum for the services it rendered. These features of that case make it distinguishable from the present one. Here, the service being rendered by private respondent was not a specific or special skill that Skillpower, Inc. was in the business of providing. Although in the Neri case the telex machine operated by the employee belonged to the employer, the service was deemed permissible because it was specific and technical. This cannot be said of the service rendered by private respondent Garado. The Rules to Implement of the Labor Code, Book III, Rule VIII, 8, provide that there is job contracting when the following conditions are fulfilled: (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. Otherwise, according to Art. 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 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. Petitioner Fuji Xerox argues that Skillpower, Inc. had typewriters and service vehicles for the conduct of its business independently of the petitioner. But typewriters and vehicles bear no direct relationship to the job for which Skillpower, Inc. contracted its service of operating copier machines and offering copying services to the public. The fact is that Skillpower, Inc. did not have copying machines of its own. What it did was simply to supply manpower to Fuji Xerox. The phrase "substantial capital and investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of his business," in the Implementing Rules clearly contemplates tools, equipment, etc., which are directly related to the service it is being contracted to render. One who does not have an independent business for undertaking the job contracted for is just an agent of the employer. Fifth. The Agreement between petitioner Fuji Xerox and Skillpower, Inc. provides that Skillpower, Inc. is 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 Contractor's obligations under this AGREEMENT."

In Tabas v. California Manufacturing Company, Inc., 9 this Court held on facts similar to those in case at bar: There is no doubt that in the case at bar, Livi performs "manpower services," meaning to say, it contracts out labor in favor of clients. We hold that it is one notwithstanding its vehement claims to the contrary, and notwithstanding the provision of the contract that it is "an independent contractor." The nature of one's business is not determined by selfserving appellations one attaches thereto but by the tests provided by statute and prevailing case law. The bare fact that Livi maintains a separate line of business does not extinguish the equal fact that it has provided California with workers to pursue the latter's own business. In this connection, we do not agree that the petitioners had been made to perform activities "which are not directly related to the general business of manufacturing," California's purported "principal operation activity." The petitioners had been charged with "merchandising [sic] promotion or sale of the products of [California] in the different sales outlets in Metro Manila including task and occasional [sic] price tagging," an activity that is doubtless, an integral part of the manufacturing business. It is not, then, as if Livi had served as its (California's promotions or sales arm or agents, or otherwise, rendered a piece of work it (California) could not have itself done; Livi as a placement agency, had simply supplied it with the manpower necessary to carry out its (California's) merchandising activities, using its (California's) premises and equipment.

xxx xxx xxx The fact that the petitioners have allegedly admitted being Livi's "direct employees" in their complaints is nothing conclusive. For one thing, the fact that the petitioners were (are), will not absolve California since liability has been imposed by legal operation. For another, and as we indicated, the relations of parties must be judged from case to case and the decree of law, and not by declaration of parties. Skillpower, Inc. is, therefore, a "labor-only" contractor and Garado is not its employee. No grave abuse of discretion can thus be imputed to the NLRC for declaring petitioner Fuji Xerox guilty of illegal dismissal of private respondent. ACCORDINGLY, the petition for certiorari is DISMISSED for lack of merit. SO ORDERED. Regalado, Romero and Puno, JJ., concur.

G.R. No. 111501 March 5, 1996 PHILIPPINE FUJI XEROX CORPORATION, JENNIFER A. BERNARDO, and ATTY. VICTORINO LUIS,petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (First Division), PAMBANSANG KILUSAN NG PAG-GAWA, (KILUSAN)-TUCP,

PHILIPPINE XEROX EMPLOYEES UNION-KILUSAN and PEDRO GARADO, respondents.

blamed for the spoilage, he tried to talk a service technician of Fuji Xerox into stopping the meter of the machine. The technician refused Garado's request, but this incident came to the knowledge of Fuji Xerox which, on May 31, 1983, reported the matter to Skillpower, Inc. The next day, Skillpower, Inc. wrote Garado, ordering him to explain. In the meantime, it suspended him from work. Garado filed a complaint for illegal dismissal. The Labor Arbiter found that Garado applied for work to Skillpower, Inc.; that in 1980 he was employed and made to sign a contract; that although he received his salaries regularly from Fuji Xerox, it was Skillpower, Inc. which exercised control and supervision over his work; that Skillpower, Inc. had substantial capital and investments in machinery, equipment, and service vehicles, and assets totalling P5,008,812.43. On the basis of these findings the Labor Arbiter held in a decision rendered on October 30, 1986 that Garado was an employee of Skillpower, Inc., and that he had merely been assigned by Skillpower, Inc. to Fuji Xerox. Hence, the Labor Arbiter dismissed Garado's complaint. On the other hand, the NLRC found Garado to be infact an employee of petitioner Fuji Xerox and by it to have been illegally dismissed. The NLRC found that although Garado's request was wrongful, dismissal would be a disproportionate penalty. The NLRC held that although Skillpower, Inc. had substantial capital assets, the fact was that the copier machines, which Garado operated, belonged to petitioner Fuji Xerox, and that although it was Skillpower, Inc. which had suspended Garado, the latter merely acted at the behest of Fuji Xerox. The NLRC found that Garado worked under the control and supervision of Fuji Xerox, which paid his salaries, and that Skillpower, Inc. merely acted as paymasteragent of Fuji Xerox. The NLRC held that Skillpower, Inc. was a laboronly contractor and Garado should be deemed to have been directly

MENDOZA, J.:p This is a petition for certiorari to set aside the decision of the NLRC, finding petitioner Philippine Fuji Xerox Corporation (Fuji Xerox) guilty of illegally dismissing private respondent Pedro Garado and ordering him reinstated. The NLRC decision reverses on appeal a decision of the Labor Arbiter finding private respondent to be an employee of another firm, the Skillpower, Inc., and not of petitioner Fuji Xerox. The question raised in this case is whether private respondent is an employee of Fuji Xerox (as the NLRC found) or of Skillpower, Inc. (as the Labor Arbiter found). For reasons to be hereafter explained, we hold that private respondent is an employee of Fuji Xerox and accordingly dismiss the petition for review of Fuji Xerox. The following are the facts. On May 6, 1977, petitioner Fuji Xerox entered into an agreement under which Skillpower, Inc. supplied workers to operate copier machines of Fuji Xerox as part of the latter's "Xerox Copier Project" in its sales offices. Private respondent Pedro Garado was assigned as key operator at Fuji Xerox's branch. at Buendia, Makati, Metro Manila, in February of 1980. In February of 1983, Garado went on leave and his place was taken over by a substitute. Upon his return in March, he discovered that there was a spoilage of over 600 copies. Afraid that he might be

employed by Fuji Xerox, regardless of the agreement between it and Skillpower, Inc. Accordingly, the NLRC ordered: WHEREFORE, premises considered, the respondents are hereby ordered to immediately reinstate complainant Pedro Garado to his former position as key operator with three (3) years backwages, without qualification or reduction whatsoever . . . . Except as herein above MODIFIED, the appealed decision is hereby Affirmed. Hence the present petition. Fuji Xerox argues that Skillpower, Inc. is an independent contractor and that Garado is its employee for the following reasons: (1) Garado was recruited by Skillpower, Inc.; (2) The work done by Garado was not necessary to the conduct of the business of Fuji Xerox; (3) Garado's salaries and benefits were paid directly by Skillpower, Inc.; (4) Garado worked under the control of Skillpower, Inc.; and (5) Skillpower, Inc. is a highly-capitalized business venture. The contentions are without merit. Fuji Xerox contends that Garado was actually recruited by Skillpower, Inc. as part of its personnel pool and later merely assigned to it (petitioner) . It is undisputed, however, that since

1980, 1 when Garado was first assigned to work at Fuji Xerox, he had never been assigned to any other company so much so that by 1984, he was already a member of the union which petitioned the company for his regularization. 2 From 1980 to 1984 he worked exclusively for petitioner. Indeed, he was recruited by Skillpower, Inc. solely for assignment to Fuji Xerox to work in the latter's Xerox Copier Project. 3 Petitioners claim that Skillpower, Inc. has other clients to whom it provided "temporary" services. That, however, is irrelevant. What is important is that once employed, Garado was never assigned to any other client of Skillpower, Inc. In fact, although under the agreement Skillpower, Inc. was supposed to provide only "temporary" services, Skillpower, Inc. actually supplied Fuji Xerox the labor which the latter needed for its Xerox Copier Project for seven (7) years, from 1977 to 1984. On January 1, 1983, private respondent signed a contract entitled "Appointment as Contract Worker," in which it was stated that private respondent's status was that of a contract worker for a definite period from January 1, 1983 to June 30, 1983. As such, private respondent's employment was considered temporary, to terminate automatically six (6) months afterwards, without necessity of any notice and without entitling private respondent to separation or termination pay. Private respondent was made to understand that he was an employee of Skillpower, Inc., and not of the client to which he was assigned. Therefore, the termination of the contract or any renewal or extension thereof did not entitle him to become an employee of the client and the latter was not under any obligation to appoint him as such, "notwithstanding the total duration of the contract or any extension or renewal thereof." This is nothing but a crude attempt to circumvent the law and undermine the security of tenure of private respondent by

employing workers under six-month contracts which are later extended indefinitely through renewals. As this Court held in the Philippine Bank of Communications v. NLRC: 4 It is not difficult to see that to uphold the contractual arrangement between the bank and CESI would in effect be to permit employers to avoid the necessity of hiring regular or permanent employees and to enable them to keep their employees indefinitely on a temporary or casual status, thus to deny them security of tenure in their jobs. Article 106 of the Labor Code is precisely designed to prevent such a result. Second. Petitioner contends that the service provided by Skillpower, Inc., namely, operating petitioners' xerox machine, is not directly related nor necessary to the business of selling and leasing copier machines of petitioner. Petitioners claim that their Xerox Copier Project is just for public service and is purely incidental to its business. What petitioners earn from the project is not even sufficient to defray their expenses, let alone bring profits to them. As such, the project is no different from other services which can legally be contracted out, such as security and janitorial services. Petitioners contend that the copier service can be considered as part of their "housekeeping" tasks which can be let to independent contractors. 5 We disagree. As correctly held by the NLRC, at the very least, the Xerox Copier Project of petitioners promotes goodwill for the company . It may not generate income for the company but there are activities which a company may find necessary to engage in because they ultimately redound to its benefit. Operating the company's copiers at its branches advertises the quality of their products and promotes the company's reputation and public image.

It also advertises the utility and convenience of having a copier machine. It is noteworthy that while not operated for profit the copying service is not intended either to be "promotional," as, indeed, petitioner charged a fee for the copies made. It is wrong to say that if a task is not directly related to the employer's business, or it falls under what may be considered "housekeeping activities," the one performing the task is a job contractor. The determination of the existence of an employeremployee relationship is defined by law according to the facts of each case, regardless of the nature of the activities involved. Third. Petitioners contend that it never exercised control over the conduct of private respondent. Petitioners allege that the salaries paid to Garado, as well as his employment records, vouchers and loanchecks from the SSS were coursed through Skillpower, Inc. In addition private respondent applied for vacation leaves to Skillpower, Inc. It is also contended that it was Skillpower, Inc. which twice required private respondent to explain why he should not be dismissed for the spoilage in Fuji Xerox's Buendia branch and suspended him pending the result of the investigation. According to petitioners, although they conducted an administrative investigation, the purpose was only to determine the complicity of their own employees in the incident, if any, and any criminal liability of private respondent. This claim is belied by two letters written by Atty. Victorino H. Luis, Legal and Industrial Relations Officer of the company, to the union president, Nick Macaraig. The first letter, dated July 6, 1983, stated: This has reference to your various letters dated today on administrative case concerning Messrs.

Crisostomo Cruz, Pedro Garado and Ms. Evelyn Abenes. In connection with the above and in the case likewise of Mr. Dionisio Guyala, please be advised that the proceedings against them are being carried out under the terms, and in accordance with the provisions of our Policy and Procedure on Employment Termination as well as Policy on Disciplinary Actions dated October 1, 1982, and not under the Grievance Machinery under our CBA. Your action apparently is premised on the assumption that we are now in the Grievance Stage, which is premature. If we have allowed the Union to participate in our Investigation and Administrative panels, it is only a concession on management's part in accordance with No. IV, Section B, Paragraph 3 of the abovecited policy on the investigation, the Personnel/Administrative Department may consult the Union whenever necessary. We shall entertain grievances under our CBA Machinery only after decisions have been made on the foregoing cases and should you find the penalties imposed, if any, as unjust, unduly harsh, discriminating otherwise fit subject for grievance by the Union itself under the terms of our CBA. Accordingly, we are proceeding with our investigations on the administrative charges with or without your presence or that of the respondents if it is the latter's preference, as in the case of

Crisostomo Cruz, to ignore the same. (Emphasis ours) The second letter, dated July 13, 1983, 6 read: You obviously persist in pursuing the misconception that our allowing your presence in the administrative proceedings against Messrs. Guyala, Cruz, et al. has set the Grievance Machinery under our CBA into play. We can only reiterate our statement in our letter of July 6 that we were implementing Policy and Procedures on Termination dated October 1, 1982 and that your presence in helping bolster the defense for the respondents was only with our forbearance in the spirit of cooperation in order to better ferret out the truth. The power or authority to impose discipline and disciplinary measures upon employees is a basic prerogative of Management, something that cannot be abdicated, much less ceded to a CBA Grievance Committee which is limited to settling disputes and misunderstanding as to interpretation, application, or violation of any provisions of the CBA agreement . . . As likewise pointed out in our letter of July 6 recourse to Grievance may possibly be resorted to if in the Union's opinion a penalty imposed upon a respondent Union member is discriminating to the member or otherwise illegal, unduly harsh, and the like. Ultimately, the remedy lies in appeal to the NLRC, as in similar cases in the past. (Emphasis ours) These letters reveal the role which Fuji Xerox played in the dismissal of the private respondent. They dispel any doubt that Fuji Xerox

exercised disciplinary authority over Garado and that Skillpower, Inc. issued the order of dismissal merely in obedience to the decision of petitioner. Fourth. Petitioner avers that Skillpower, Inc. is a highly-capitalized business venture, registered as an "independent employer" with the Securities and Exchange Commission as well as the Department of Labor and Employment. Skillpower, Inc. is a member of the Social Security System. In 1984 it had assets exceeding P5 million pesos and at least 20 typewriters, office equipment and service vehicles. It had employees of its own and a pool of 25 clerks assigned to clients on a temporary basis. Petitioners cite the case of Neri v. NLRC, 7 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 8 the Court had already found that the BCC was an independent contractor; that BCC retained control over the employees and the employer was actually just concerned with the end-result; that BCC had the power to reassign the employees and their deployment was not subject to the approval of the employer; and that BCC was paid in lump sum for the services it rendered. These features of that case make it distinguishable from the present one. Here, the service being rendered by private respondent was not a specific or special skill that Skillpower, Inc. was in the business of providing. Although in the Neri case the telex machine operated by the employee belonged to the employer, the service was deemed

permissible because it was specific and technical. This cannot be said of the service rendered by private respondent Garado. The Rules to Implement of the Labor Code, Book III, Rule VIII, 8, provide that there is job contracting when the following conditions are fulfilled: (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. Otherwise, according to Art. 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 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.

Petitioner Fuji Xerox argues that Skillpower, Inc. had typewriters and service vehicles for the conduct of its business independently of the petitioner. But typewriters and vehicles bear no direct relationship to the job for which Skillpower, Inc. contracted its service of operating copier machines and offering copying services to the public. The fact is that Skillpower, Inc. did not have copying machines of its own. What it did was simply to supply manpower to Fuji Xerox. The phrase "substantial capital and investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of his business," in the Implementing Rules clearly contemplates tools, equipment, etc., which are directly related to the service it is being contracted to render. One who does not have an independent business for undertaking the job contracted for is just an agent of the employer. Fifth. The Agreement between petitioner Fuji Xerox and Skillpower, Inc. provides that Skillpower, Inc. is 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 Contractor's obligations under this AGREEMENT." In Tabas v. California Manufacturing Company, Inc., 9 this Court held on facts similar to those in case at bar: There is no doubt that in the case at bar, Livi performs "manpower services," meaning to say, it contracts out labor in favor of clients. We hold that it is one notwithstanding its vehement claims to the contrary, and notwithstanding the provision of the contract that it is "an independent contractor." The nature of one's business is not determined by self-

serving appellations one attaches thereto but by the tests provided by statute and prevailing case law. The bare fact that Livi maintains a separate line of business does not extinguish the equal fact that it has provided California with workers to pursue the latter's own business. In this connection, we do not agree that the petitioners had been made to perform activities "which are not directly related to the general business of manufacturing," California's purported "principal operation activity." The petitioners had been charged with "merchandising [sic] promotion or sale of the products of [California] in the different sales outlets in Metro Manila including task and occasional [sic] price tagging," an activity that is doubtless, an integral part of the manufacturing business. It is not, then, as if Livi had served as its (California's promotions or sales arm or agents, or otherwise, rendered a piece of work it (California) could not have itself done; Livi as a placement agency, had simply supplied it with the manpower necessary to carry out its (California's) merchandising activities, using its (California's) premises and equipment. xxx xxx xxx The fact that the petitioners have allegedly admitted being Livi's "direct employees" in their complaints is nothing conclusive. For one thing, the fact that the petitioners were (are), will not absolve California since liability has been imposed by legal operation. For another, and as we indicated, the relations of parties must be judged from case to

case and the decree of law, and not by declaration of parties. Skillpower, Inc. is, therefore, a "labor-only" contractor and Garado is not its employee. No grave abuse of discretion can thus be imputed to the NLRC for declaring petitioner Fuji Xerox guilty of illegal dismissal of private respondent. ACCORDINGLY, the petition for certiorari is DISMISSED for lack of merit. SO ORDERED. Regalado, Romero and Puno, JJ., concur.

BELLOSILLO, J.: Respondents are sued by two employees of Building Care Corporation, which provides janitorial and other specific services to various firms, to compel Far Bast Bank and Trust Company to recognize them as its regular employees and be paid the same wages which its employees receive. Building Care Corporation (BCC, for brevity), in the proceedings below, established that it had substantial capitalization of P1 Million or a stockholders equity of P1.5 Million. Thus the Labor Arbiter ruled that BCC was only job contracting and that consequently its employees were not employees of Far East Bank and Trust Company (FEBTC, for brevity). on appeal, this factual finding was affirmed by respondent National Labor Relations Commission (NLRC, for brevity). Nevertheless, petitioners insist before us that BCC is engaged in "labor-only" contracting hence, they conclude, they are employees of respondent FEBTC. Petitioners Virginia G. Neri and Jose Cabelin applied for positions with, and were hired by, respondent BCC, a corporation engaged in providing technical, maintenance, engineering, housekeeping, security and other specific services to its clientele. They were assigned to work in the Cagayan de Oro City Branch of respondent FEBTC on 1 May 1979 and 1 August 1980, respectively, Neri an radio/telex operator and Cabelin as janitor, before being promoted to messenger on 1 April 1989. On 28 June 1989, petitioners instituted complaints against FEBTC and BCC before Regional Arbitration Branch No. 10 of the Department of Labor and Employment to compel the bank to accept them as regular employees and for it to pay the differential between the wages being paid them by BCC and those received by FEBTC employees with similar length of service.

G.R. Nos. 97008-09 July 23, 1993 VIRGINIA G. NERI and JOSE CABELIN, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION FAR EAST BANK & TRUST COMPANY (FEBTC) and BUILDING CARE CORPORATION, respondents. R.L. Salcedo & Improso Law Office for petitioners. Bengzon, Zarnaga, Narciso, Cudala, Pecson, Bengzon & Jimenez for Bldg. Care Corp. Bautista, Picaso, Buyco, Tan & Fider for respondent FEBTC.

On 16 November 1989, the Labor Arbiter dismissed the complaint for lack of merit. 1 Respondent BCC was considered an independent contractor because it proved it had substantial capital. Thus, petitioners were held to be regular employees of BCC, not FEBTC. The dismissal was appealed to NLRC which on 28 September 1990 affirmed the decision on appeal. 2 On 22 October 1990, NLRC denied reconsideration of its affirmance, 3prompting petitioners to seek redress from this Court. Petitioners vehemently contend that BCC in engaged in "labor-only" contracting because it failed to adduce evidence purporting to show that it invested in the form of tools, equipment, machineries, work premises and other materials which are necessary in the conduct of its business. Moreover, petitioners argue that they perform duties which are directly related to the principal business or operation of FEBTC. If the definition of "labor-only" contracting 4 is to be read in conjunction with job contracting, 5 then the only logical conclusion is that BCC is a "labor only" contractor. Consequently, they must be deemed employees of respondent bank by operation of law since BCC is merely an agent of FEBTC following the doctrine laid down in Philippine Bank of Communications v. National Labor Relations Commission 6 where we ruled that 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; hence, FEBTC should be considered the employer of petitioners who are deemed its employees through its agent, "labor-only" contractor BCC. We cannot sustain the petition. 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. 7 BCC is therefore a highly capitalized venture and cannot be deemed engaged in "labor-only" contracting. It is well-settled that there is "labor-only" contracting where: (a) the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others; and, (b) the workers recruited and placed by such person are performing activities which are directly related to the principal business of the employer. 8 Article 106 of the Labor Code defines "labor-only" contracting thus Art. 106. Contractor or subcontractor. . . . . There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited by such persons are performing activities which are directly related to the principal business of such employer . . . . (emphasis supplied). Based on the foregoing, BCC cannot be considered a "labor-only" contractor because it has substantial capital. While there may be no evidence that it has investment in the form of tools, equipment, machineries, work premises, among others, it is enough that it has substantial capital, as was established before the Labor Arbiter as well as the NLRC. In other words, the law does not require both substantial capital and investment in the form of tools, equipment, machineries, etc. This is clear from the use of the conjunction "or". If the intention was to require the contractor to prove that he has both capital and the requisite investment, then the conjunction

"and" should have been used. But, having established that it has substantial capital, it was no longer necessary for BCC to further adduce evidence to prove that it does not fall within the purview of "labor-only" contracting. There is even no need for it to refute petitioners' contention that the activities they perform are directly related to the principal business of respondent bank. Be that as it may, the Court has already taken judicial notice of the general practice adopted in several government and private institutions and industries of hiring independent contractors to perform special services. 9These services range from 10 11 janitorial, security and even technical or other specific services such as those performed by petitioners Neri and Cabelin. While these services may be considered directly related to the principal business of the employer, 12 nevertheless, they are not necessary in the conduct of the principal business of the employer. In fact, the status of BCC as an independent contractor was previously confirmed by this Court in Associated Labor Unions-TUCP v. National Labor Relations Commission, 13 where we held thus The public respondent ruled that the complainants are not employees of the bank but of the company contracted to serve the bank. Building Care Corporation is a big firm which services, among others, a university, an international bank, a big local bank, a hospital center, government agencies, etc. It is a qualified independent contractor. The public respondent correctly ruled against petitioner's contentions . . . . (Emphasis supplied). Even assuming ex argumenti that petitioners were performing activities directly related to the principal business of the bank, under the "right of control" test they must still be considered

employees of BCC. In the case of petitioner Neri, it is admitted that FEBTC issued a job description which detailed her functions as a radio/telex operator. However, a cursory reading of the job description shows that what was sought to be controlled by FEBTC was actually the end-result of the task, e.g., that the daily incoming and outgoing telegraphic transfer of funds received and relayed by her, respectively, tallies with that of the register. The guidelines were laid down merely to ensure that the desired end-result was achieved. It did not, however, tell Neri how the radio/telex machine should be operated. In the Shipside case, 14 we ruled . . . . If in the course of private respondents' work (referring to the workers), SHIPSIDE occasionally issued instructions to them, that alone does not in the least detract from the fact that only STEVEDORES is the employer of the private respondents, for in legal contemplation, such instructions carry no more weight than mere requests, the privity of contract being between SHIPSIDE and STEVEDORES . . . . Besides, petitioners do not deny that they were selected and hired by BCC before being assigned to work in the Cagayan de Oro Branch of FFBTC. BCC likewise acknowledges that petitioners are its employees. The record is replete with evidence disclosing that BCC maintained supervision and control over petitioners through its Housekeeping and Special Services Division: petitioners reported for work wearing the prescribed uniform of BCC; leaves of absence were filed directly with BCC; and, salaries were drawn only from BCC. 15 As a matter of fact, Neri even secured a certification from BCC on 16 May 1986 that she was employed by the latter. On the other hand, on 24 May 1988, Cabelin filed a complaint for underpayment of

wages, non-integration of salary adjustments mandated by Wage Orders Nos. 5 & 6 and R.A. 6640 as well as for illegal deduction 16against BCC alone which was provisionally dismissed on 19 August 1988 upon Cabelin's manifestation that his money claim was negligible. 17 More importantly, under the terms and conditions of the contract, it was BCC alone which had the power to reassign petitioners. Their deployment to FEBTC was not subject to the bank's acceptance. Cabelin was promoted to messenger because the FEBTC branch manager promised BCC that two (2) additional janitors would be hired from the company if the promotion was to be effected. 18 Furthermore, BCC was to be paid in lump sum unlike in the situation in Philippine Bank of Communications 19 where the contractor, CESI, was to be paid at a daily rate on a per person basis. And, the contract therein stipulated that the CESI was merely to provide manpower that would render temporary services. In the case at bar, Neri and Cabelin were to perform specific special services. Consequently, petitioners cannot be held to be employees of FEBTC as BCC "carries an independent business" and undertaken the performance of its contract with various clients according to its "own manner and method, free from the control and supervision" of its principals in all matters "except as to the results thereof." 20 Indeed, the facts in Philippine Bank of Communications do not square with those of the instant case. Therein, the Court ruled that CESI was a "labor-only" contractor because upholding the contract between the contractor and the bank would in effect permit employers to avoid the necessity of hiring regular or permanent employees and would enable them to keep their employees indefinitely on a temporary or casual basis, thus denying them security of tenure in their jobs. This of course violates the Labor Code. BCC has not committed any violation. Also, the former case was for illegal dismissal; this case, on the other hand, is for

conversion of employment status so that petitioners can receive the same salary being given to regular employees of FEBTC. But, as herein determined, petitioners are not regular employees of FEBTC but of BCC. At any rate, the finding that BCC in a qualified independent contractor precludes us from applying the Philippine Bank of Communicationsdoctrine to the instant petition. The determination of employer-employee relationship involves factual findings. 21 Absent any grave abuse of discretion, and we find none in the case before us, we are bound by the findings of the Labor Arbiter as affirmed by respondent NLRC. IN VIEW OF THE FOREGOING, the Petition for Certiorari is DISMISSED. SO ORDERED. Cruz, Grio-Aquino, Davide, Jr. and Quiason, JJ., concur.