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Republic of the Philippines

G.R. No. 85279 July 28, 1989
Vicente T. Ocampo & Associates for petitioners.

Primarily, the issue raised in this petition is whether or not the Regional Trial Court can
enjoin the Social Security System Employees Association (SSSEA) from striking and
order the striking employees to return to work. Collaterally, it is whether or not
employees of the Social Security System (SSS) have the right to strike.
The antecedents are as follows:
On June 11, 1987, the SSS filed with the Regional Trial Court of Quezon City a
complaint for damages with a prayer for a writ of preliminary injunction against
petitioners, alleging that on June 9, 1987, the officers and members of SSSEA staged an
illegal strike and baricaded the entrances to the SSS Building, preventing non-striking
employees from reporting for work and SSS members from transacting business with the
SSS; that the strike was reported to the Public Sector Labor - Management Council,
which ordered the strikers to return to work; that the strikers refused to return to work;
and that the SSS suffered damages as a result of the strike. The complaint prayed that a
writ of preliminary injunction be issued to enjoin the strike and that the strikers be
ordered to return to work; that the defendants (petitioners herein) be ordered to pay
damages; and that the strike be declared illegal.
It appears that the SSSEA went on strike after the SSS failed to act on the union's
demands, which included: implementation of the provisions of the old SSS-SSSEA
collective bargaining agreement (CBA) on check-off of union dues; payment of accrued
overtime pay, night differential pay and holiday pay; conversion of temporary or
contractual employees with six (6) months or more of service into regular and permanent
employees and their entitlement to the same salaries, allowances and benefits given to
other regular employees of the SSS; and payment of the children's allowance of P30.00,
and after the SSS deducted certain amounts from the salaries of the employees and
allegedly committed acts of discrimination and unfair labor practices [Rollo, pp. 21-241].
The court a quo, on June 11, 1987, issued a temporary restraining order pending
resolution of the application for a writ of preliminary injunction [Rollo, p. 71.] In the
meantime, petitioners filed a motion to dismiss alleging the trial court's lack of
jurisdiction over the subject matter [Rollo, pp. 72-82.] To this motion, the SSS filed an
opposition, reiterating its prayer for the issuance of a writ of injunction [Rollo, pp. 209-
222]. On July 22,1987, in a four-page order, the court a quo denied the motion to dismiss
and converted the restraining order into an injunction upon posting of a bond, after
finding that the strike was illegal [Rollo, pp. 83- 86]. As petitioners' motion for the
reconsideration of the aforesaid order was also denied on August 14, 1988 [Rollo, p. 94],
petitioners filed a petition for certiorari and prohibition with preliminary injunction
before this Court. Their petition was docketed as G.R. No. 79577. In a resolution dated
October 21, 1987, the Court, through the Third Division, resolved to refer the case to the
Court of Appeals. Petitioners filed a motion for reconsideration thereof, but during its
pendency the Court of Appeals on March 9,1988 promulgated its decision on the referred
case [Rollo, pp. 130-137]. Petitioners moved to recall the Court of Appeals' decision. In
the meantime, the Court on June 29,1988 denied the motion for reconsideration in G.R.
No. 97577 for being moot and academic. Petitioners' motion to recall the decision of the
Court of Appeals was also denied in view of this Court's denial of the motion for
reconsideration [Rollo, pp. 141- 143]. Hence, the instant petition to review the decision of
the Court of Appeals [Rollo, pp. 12-37].
Upon motion of the SSS on February 6,1989, the Court issued a temporary restraining
order enjoining the petitioners from staging another strike or from pursuing the notice of
strike they filed with the Department of Labor and Employment on January 25, 1989 and
to maintain the status quo [Rollo, pp. 151-152].
The Court, taking the comment as answer, and noting the reply and supplemental reply
filed by petitioners, considered the issues joined and the case submitted for decision.
The position of the petitioners is that the Regional Trial Court had no jurisdiction to hear
the case initiated by the SSS and to issue the restraining order and the writ of preliminary
injunction, as jurisdiction lay with the Department of Labor and Employment or the
National Labor Relations Commission, since the case involves a labor dispute.
On the other hand, the SSS advances the contrary view, on the ground that the employees
of the SSS are covered by civil service laws and rules and regulations, not the Labor
Code, therefore they do not have the right to strike. Since neither the DOLE nor the
NLRC has jurisdiction over the dispute, the Regional Trial Court may enjoin the
employees from striking.
In dismissing the petition for certiorari and prohibition with preliminary injunction filed
by petitioners, the Court of Appeals held that since the employees of the SSS, are
government employees, they are not allowed to strike, and may be enjoined by the
Regional Trial Court, which had jurisdiction over the SSS' complaint for damages, from
continuing with their strike.
Thus, the sequential questions to be resolved by the Court in deciding whether or not the
Court of Appeals erred in finding that the Regional Trial Court did not act without or in
excess of jurisdiction when it took cognizance of the case and enjoined the strike are as
1. Do the employees of the SSS have the right to strike?
2. Does the Regional Trial Court have jurisdiction to hear the case initiated by the SSS
and to enjoin the strikers from continuing with the strike and to order them to return to
These shall be discussed and resolved seriatim
The 1987 Constitution, in the Article on Social Justice and Human Rights, provides that
the State "shall guarantee the rights of all workers to self-organization, collective
bargaining and negotiations, and peaceful concerted activities, including the right to strike
in accordance with law" [Art. XIII, Sec. 31].
By itself, this provision would seem to recognize the right of all workers and employees,
including those in the public sector, to strike. But the Constitution itself fails to expressly
confirm this impression, for in the Sub-Article on the Civil Service Commission, it
provides, after defining the scope of the civil service as "all branches, subdivisions,
instrumentalities, and agencies of the Government, including government-owned or
controlled corporations with original charters," that "[t]he right to self-organization shall
not be denied to government employees" [Art. IX(B), Sec. 2(l) and (50)]. Parenthetically,
the Bill of Rights also provides that "[tlhe right of the people, including those employed
in the public and private sectors, to form unions, associations, or societies for purposes
not contrary to law shall not abridged" [Art. III, Sec. 8]. Thus, while there is no question
that the Constitution recognizes the right of government employees to organize, it is silent
as to whether such recognition also includes the right to strike.
Resort to the intent of the framers of the organic law becomes helpful in understanding
the meaning of these provisions. A reading of the proceedings of the Constitutional
Commission that drafted the 1987 Constitution would show that in recognizing the right
of government employees to organize, the commissioners intended to limit the right to the
formation of unions or associations only, without including the right to strike.
Thus, Commissioner Eulogio R. Lerum, one of the sponsors of the provision that "[tlhe
right to self-organization shall not be denied to government employees" [Art. IX(B), Sec.
2(5)], in answer to the apprehensions expressed by Commissioner Ambrosio B. Padilla,
Vice-President of the Commission, explained:
MR. LERUM. I think what I will try to say will not take that long.
When we proposed this amendment providing for self-organization of
government employees, it does not mean that because they have the
right to organize, they also have the right to strike. That is a different
matter. We are only talking about organizing, uniting as a union. With
regard to the right to strike, everyone will remember that in the Bill of
Rights, there is a provision that the right to form associations or
societies whose purpose is not contrary to law shall not be abridged.
Now then, if the purpose of the state is to prohibit the strikes coming
from employees exercising government functions, that could be done
because the moment that is prohibited, then the union which will go on
strike will be an illegal union. And that provision is carried in Republic
Act 875. In Republic Act 875, workers, including those from the
government-owned and controlled, are allowed to organize but they are
prohibited from striking. So, the fear of our honorable Vice- President
is unfounded. It does not mean that because we approve this resolution,
it carries with it the right to strike. That is a different matter. As a
matter of fact, that subject is now being discussed in the Committee on
Social Justice because we are trying to find a solution to this problem.
We know that this problem exist; that the moment we allow anybody in
the government to strike, then what will happen if the members of the
Armed Forces will go on strike? What will happen to those people
trying to protect us? So that is a matter of discussion in the Committee
on Social Justice. But, I repeat, the right to form an organization does
not carry with it the right to strike. [Record of the Constitutional
Commission, vol. 1, p. 569].
It will be recalled that the Industrial Peace Act (R.A. No. 875), which was repealed by the
Labor Code (P.D. 442) in 1974, expressly banned strikes by employees in the
Government, including instrumentalities exercising governmental functions, but
excluding entities entrusted with proprietary functions:
.Sec. 11. Prohibition Against Strikes in the Government. The terms
and conditions of employment in the Government, including any
political subdivision or instrumentality thereof, are governed by law
and it is declared to be the policy of this Act that employees therein
shall not strike for the purpose of securing changes or modification in
their terms and conditions of employment. Such employees may belong
to any labor organization which does not impose the obligation to strike
or to join in strike:Provided, however, That this section shall apply only
to employees employed in governmental functions and not those
employed in proprietary functions of the Government including but not
limited to governmental corporations.
No similar provision is found in the Labor Code, although at one time it recognized the
right of employees of government corporations established under the Corporation Code to
organize and bargain collectively and those in the civil service to "form organizations for
purposes not contrary to law" [Art. 244, before its amendment by B.P. Blg. 70 in 1980],
in the same breath it provided that "[t]he terms and conditions of employment of all
government employees, including employees of government owned and controlled
corporations, shall be governed by the Civil Service Law, rules and regulations" [now
Art. 276]. Understandably, the Labor Code is silent as to whether or not government
employees may strike, for such are excluded from its coverage [Ibid]. But then the Civil
Service Decree [P.D. No. 807], is equally silent on the matter.
On June 1, 1987, to implement the constitutional guarantee of the right of government
employees to organize, the President issued E.O. No. 180 which provides guidelines for
the exercise of the right to organize of government employees. In Section 14 thereof, it is
provided that "[t]he Civil Service law and rules governing concerted activities and strikes
in the government service shall be observed, subject to any legislation that may be
enacted by Congress." The President was apparently referring to Memorandum Circular
No. 6, s. 1987 of the Civil Service Commission under date April 21, 1987 which, "prior
to the enactment by Congress of applicable laws concerning strike by government
employees ... enjoins under pain of administrative sanctions, all government officers and
employees from staging strikes, demonstrations, mass leaves, walk-outs and other forms
of mass action which will result in temporary stoppage or disruption of public service."
The air was thus cleared of the confusion. At present, in the absence of any legislation
allowing government employees to strike, recognizing their right to do so, or regulating
the exercise of the right, they are prohibited from striking, by express provision of
Memorandum Circular No. 6 and as implied in E.O. No. 180. [At this juncture, it must be
stated that the validity of Memorandum Circular No. 6 is not at issue].
But are employees of the SSS covered by the prohibition against strikes?
The Court is of the considered view that they are. Considering that under the 1987
Constitution "[t]he civil service embraces all branches, subdivisions, instrumentalities,
and agencies of the Government, including government-owned or controlled corporations
with original charters" [Art. IX(B), Sec. .2(l) see also Sec. 1 of E.O. No. 180 where the
employees in the civil service are denominated as "government employees"] and that the
SSS is one such government-controlled corporation with an original charter, having been
created under R.A. No. 1161, its employees are part of the civil service [NASECO v.
NLRC, G.R. Nos. 69870 & 70295, November 24,1988] and are covered by the Civil
Service Commission's memorandum prohibiting strikes. This being the case, the strike
staged by the employees of the SSS was illegal.
The statement of the Court in Alliance of Government Workers v. Minister of Labor and
Employment [G.R. No. 60403, August 3, 1:983, 124 SCRA 11 is relevant as it furnishes
the rationale for distinguishing between workers in the private sector and government
employees with regard to the right to strike:
The general rule in the past and up to the present is that 'the terms and
conditions of employment in the Government, including any political
subdivision or instrumentality thereof are governed by law" (Section
11, the Industrial Peace Act, R.A. No. 875, as amended and Article 277,
the Labor Code, P.D. No. 442, as amended). Since the terms and
conditions of government employment are fixed by law, government
workers cannot use the same weapons employed by workers in the
private sector to secure concessions from their employers. The
principle behind labor unionism in private industry is that industrial
peace cannot be secured through compulsion by law. Relations between
private employers and their employees rest on an essentially voluntary
basis. Subject to the minimum requirements of wage laws and other
labor and welfare legislation, the terms and conditions of employment
in the unionized private sector are settled through the process of
collective bargaining. In government employment, however, it is the
legislature and, where properly given delegated power, the
administrative heads of government which fix the terms and conditions
of employment. And this is effected through statutes or administrative
circulars, rules, and regulations, not through collective bargaining
agreements. [At p. 13; Emphasis supplied].
Apropos is the observation of the Acting Commissioner of Civil Service, in his position
paper submitted to the 1971 Constitutional Convention, and quoted with approval by the
Court in Alliance, to wit:
It is the stand, therefore, of this Commission that by reason of the
nature of the public employer and the peculiar character of the public
service, it must necessarily regard the right to strike given to unions in
private industry as not applying to public employees and civil service
employees. It has been stated that the Government, in contrast to the
private employer, protects the interest of all people in the public
service, and that accordingly, such conflicting interests as are present in
private labor relations could not exist in the relations between
government and those whom they employ. [At pp. 16-17; also quoted in
National Housing Corporation v. Juco, G.R. No. 64313, January
17,1985,134 SCRA 172,178-179].
E.O. No. 180, which provides guidelines for the exercise of the right to organize of
government employees, while clinging to the same philosophy, has, however, relaxed the
rule to allow negotiation where the terms and conditions of employment involved are not
among those fixed by law. Thus:
.SECTION 13. Terms and conditions of employment or improvements
thereof, except those that are fixed by law, may be the subject of
negotiations between duly recognized employees' organizations and
appropriate government authorities.
The same executive order has also provided for the general mechanism for the settlement
of labor disputes in the public sector to wit:
.SECTION 16. The Civil Service and labor laws and procedures,
whenever applicable, shall be followed in the resolution of complaints,
grievances and cases involving government employees. In case any
dispute remains unresolved after exhausting all the available remedies
under existing laws and procedures, the parties may jointly refer the
dispute to the [Public Sector Labor- Management] Council for
appropriate action.
Government employees may, therefore, through their unions or associations, either
petition the Congress for the betterment of the terms and conditions of employment which
are within the ambit of legislation or negotiate with the appropriate government agencies
for the improvement of those which are not fixed by law. If there be any unresolved
grievances, the dispute may be referred to the Public Sector Labor - Management Council
for appropriate action. But employees in the civil service may not resort to strikes, walk-
outs and other temporary work stoppages, like workers in the private sector, to pressure
the Govemment to accede to their demands. As now provided under Sec. 4, Rule III of
the Rules and Regulations to Govern the Exercise of the Right of Government-
Employees to Self- Organization, which took effect after the instant dispute arose, "[t]he
terms and conditions of employment in the government, including any political
subdivision or instrumentality thereof and government- owned and controlled
corporations with original charters are governed by law and employees therein shall not
strike for the purpose of securing changes thereof."
The strike staged by the employees of the SSS belonging to petitioner union being
prohibited by law, an injunction may be issued to restrain it.
It is futile for the petitioners to assert that the subject labor dispute falls within the
exclusive jurisdiction of the NLRC and, hence, the Regional Trial Court had no
jurisdiction to issue a writ of injunction enjoining the continuance of the strike. The Labor
Code itself provides that terms and conditions of employment of government employees
shall be governed by the Civil Service Law, rules and regulations [Art. 276]. More
importantly, E.O. No. 180 vests the Public Sector Labor - Management Council with
jurisdiction over unresolved labor disputes involving government employees [Sec. 16].
Clearly, the NLRC has no jurisdiction over the dispute.
This being the case, the Regional Trial Court was not precluded, in the exercise of its
general jurisdiction under B.P. Blg. 129, as amended, from assuming jurisdiction over the
SSS's complaint for damages and issuing the injunctive writ prayed for therein. Unlike
the NLRC, the Public Sector Labor - Management Council has not been granted by law
authority to issue writs of injunction in labor disputes within its jurisdiction. Thus, since it
is the Council, and not the NLRC, that has jurisdiction over the instant labor dispute,
resort to the general courts of law for the issuance of a writ of injunction to enjoin the
strike is appropriate.
Neither could the court a quo be accused of imprudence or overzealousness, for in fact it
had proceeded with caution. Thus, after issuing a writ of injunction enjoining the
continuance of the strike to prevent any further disruption of public service, the
respondent judge, in the same order, admonished the parties to refer the unresolved
controversies emanating from their employer- employee relationship to the Public Sector
Labor - Management Council for appropriate action [Rollo, p. 86].
In their "Petition/Application for Preliminary and Mandatory Injunction," and reiterated
in their reply and supplemental reply, petitioners allege that the SSS unlawfully withheld
bonuses and benefits due the individual petitioners and they pray that the Court issue a
writ of preliminary prohibitive and mandatory injunction to restrain the SSS and its
agents from withholding payment thereof and to compel the SSS to pay them. In their
supplemental reply, petitioners annexed an order of the Civil Service Commission, dated
May 5, 1989, which ruled that the officers of the SSSEA who are not preventively
suspended and who are reporting for work pending the resolution of the administrative
cases against them are entitled to their salaries, year-end bonuses and other fringe benefits
and affirmed the previous order of the Merit Systems Promotion Board.
The matter being extraneous to the issues elevated to this Court, it is Our view that
petitioners' remedy is not to petition this Court to issue an injunction, but to cause the
execution of the aforesaid order, if it has already become final.
WHEREFORE, no reversible error having been committed by the Court of Appeals, the
instant petition for review is hereby DENIED and the decision of the appellate court
dated March 9, 1988 in CA-G.R. SP No. 13192 is AFFIRMED. Petitioners'
"Petition/Application for Preliminary and Mandatory Injunction" dated December
13,1988 is DENIED.
Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

Republic of the Philippines
G.R. No. L-48645 January 7, 1987
MATIAR, ET AL., petitioners,
Armando V. Ampil for petitioners.
Siguion Reyna, Montecillo and Ongsiako Law Office for private respondents.

The elemental question in labor law of whether or not an employer-employee relationship
exists between petitioners-members of the "Brotherhood Labor Unit Movement of the
Philippines" (BLUM) and respondent San Miguel Corporation, is the main issue in this
petition. The disputed decision of public respondent Ronaldo Zamora, Presidential
Assistant for legal Affairs, contains a brief summary of the facts involved:
1. The records disclose that on July 11, 1969, BLUM filed a complaint
with the now defunct Court of Industrial Relations, charging San
Miguel Corporation, and the following officers: Enrique Camahort,
Federico Ofiate Feliciano Arceo, Melencio Eugenia Jr., Ernesto
Villanueva, Antonio Bocaling and Godofredo Cueto of unfair labor
practice as set forth in Section 4 (a), sub-sections (1) and (4) of
Republic Act No. 875 and of Legal dismissal. It was alleged that
respondents ordered the individual complainants to disaffiliate from the
complainant union; and that management dismissed the individual
complainants when they insisted on their union membership.
On their part, respondents moved for the dismissal of the complaint on
the grounds that the complainants are not and have never been
employees of respondent company but employees of the independent
contractor; that respondent company has never had control over the
means and methods followed by the independent contractor who
enjoyed full authority to hire and control said employees; and that the
individual complainants are barred by estoppel from asserting that they
are employees of respondent company.
While pending with the Court of Industrial Relations CIR pleadings and
testimonial and documentary evidences were duly presented, although
the actual hearing was delayed by several postponements. The dispute
was taken over by the National Labor Relations Commission (NLRC)
with the decreed abolition of the CIR and the hearing of the case
intransferably commenced on September 8, 1975.
On February 9, 1976, Labor Arbiter Nestor C. Lim found for
complainants which was concurred in by the NLRC in a decision dated
June 28, 1976. The amount of backwages awarded, however, was
reduced by NLRC to the equivalent of one (1) year salary.
On appeal, the Secretary in a decision dated June 1, 1977, set aside the
NLRC ruling, stressing the absence of an employer-mployee
relationship as borne out by the records of the case. ...
The petitioners strongly argue that there exists an employer-employee relationship
between them and the respondent company and that they were dismissed for unionism, an
act constituting unfair labor practice "for which respondents must be made to answer."
Unrebutted evidence and testimony on record establish that the petitioners are workers
who have been employed at the San Miguel Parola Glass Factory since 1961, averaging
about seven (7) years of service at the time of their termination. They worked as
"cargadores" or "pahinante" at the SMC Plant loading, unloading, piling or palleting
empty bottles and woosen shells to and from company trucks and warehouses. At times,
they accompanied the company trucks on their delivery routes.
The petitioners first reported for work to Superintendent-in-Charge Camahort. They were
issued gate passes signed by Camahort and were provided by the respondent company
with the tools, equipment and paraphernalia used in the loading, unloading, piling and
hauling operation.
Job orders emanated from Camahort. The orders are then transmitted to an assistant-
officer-in-charge. In turn, the assistant informs the warehousemen and checkers regarding
the same. The latter, thereafter, relays said orders to the capatazes or group leaders who
then give orders to the workers as to where, when and what to load, unload, pile, pallet or
Work in the glass factory was neither regular nor continuous, depending wholly on the
volume of bottles manufactured to be loaded and unloaded, as well as the business
activity of the company. Work did not necessarily mean a full eight (8) hour day for the
petitioners. However, work,at times, exceeded the eight (8) hour day and necessitated
work on Sundays and holidays. For this, they were neither paid overtime nor
compensation for work on Sundays and holidays.
Petitioners were paid every ten (10) days on a piece rate basis, that is, according to the
number of cartons and wooden shells they were able to load, unload, or pile. The group
leader notes down the number or volume of work that each individual worker has
accomplished. This is then made the basis of a report or statement which is compared
with the notes of the checker and warehousemen as to whether or not they tally. Final
approval of report is by officer-in-charge Camahort. The pay check is given to the group
leaders for encashment, distribution, and payment to the petitioners in accordance with
payrolls prepared by said leaders. From the total earnings of the group, the group leader
gets a participation or share of ten (10%) percent plus an additional amount from the
earnings of each individual.
The petitioners worked exclusive at the SMC plant, never having been assigned to other
companies or departments of SMC plant, even when the volume of work was at its
minimum. When any of the glass furnaces suffered a breakdown, making a shutdown
necessary, the petitioners work was temporarily suspended. Thereafter, the petitioners
would return to work at the glass plant.
Sometime in January, 1969, the petitioner workers numbering one hundred and forty
(140) organized and affiliated themselves with the petitioner union and engaged in union
activities. Believing themselves entitled to overtime and holiday pay, the petitioners
pressed management, airing other grievances such as being paid below the minimum
wage law, inhuman treatment, being forced to borrow at usurious rates of interest and to
buy raffle tickets, coerced by withholding their salaries, and salary deductions made
without their consent. However, their gripes and grievances were not heeded by the
On February 6, 1969, the petitioner union filed a notice of strike with the Bureau of Labor
Relations in connection with the dismissal of some of its members who were allegedly
castigated for their union membership and warned that should they persist in continuing
with their union activities they would be dismissed from their jobs. Several conciliation
conferences were scheduled in order to thresh out their differences, On February 12,
1969, union member Rogelio Dipad was dismissed from work. At the scheduled
conference on February 19, 1969, the complainant union through its officers headed by
National President Artemio Portugal Sr., presented a letter to the respondent company
containing proposals and/or labor demands together with a request for recognition and
collective bargaining.
San Miguel refused to bargain with the petitioner union alleging that the workers are not
their employees.
On February 20, 1969, all the petitioners were dismissed from their jobs and, thereafter,
denied entrance to respondent company's glass factory despite their regularly reporting
for work. A complaint for illegal dismissal and unfair labor practice was filed by the
The case reaches us now with the same issues to be resolved as when it had begun.
The question of whether an employer-employee relationship exists in a certain situation
continues to bedevil the courts. Some businessmen try to avoid the bringing about of an
employer-employee relationship in their enterprises because that judicial relation spawns
obligations connected with workmen's compensation, social security, medicare, minimum
wage, termination pay, and unionism. (Mafinco Trading Corporation v. Ople, 70 SCRA
In determining the existence of an employer-employee relationship, the elements that are
generally considered are the following: (a) the selection and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to
control the employee with respect to the means and methods by which the work is to be
accomplished. It. is the called "control test" that is the most important element
(Investment Planning Corp. of the Phils. v. The Social Security System, 21 SCRA 924;
Mafinco Trading Corp. v. Ople, supra,and Rosario Brothers, Inc. v. Ople, 131 SCRA 72).
Applying the above criteria, the evidence strongly indicates the existence of an employer-
employee relationship between petitioner workers and respondent San Miguel
Corporation. The respondent asserts that the petitioners are employees of the Guaranteed
Labor Contractor, an independent labor contracting firm.
The facts and evidence on record negate respondent SMC's claim.
The existence of an independent contractor relationship is generally established by the
following criteria: "whether or not the contractor is carrying on an independent business;
the nature and extent of the work; the skill required; the term and duration of the
relationship; the right to assign the performance of a specified piece of work; the control
and supervision of the work to another; the employer's power with respect to the hiring,
firing and payment of the contractor's workers; the control of the premises; the duty to
supply the premises tools, appliances, materials and labor; and the mode, manner and
terms of payment" (56 CJS Master and Servant, Sec. 3(2), 46; See also 27 AM. Jur.
Independent Contractor, Sec. 5, 485 and Annex 75 ALR 7260727)
None of the above criteria exists in the case at bar.
Highly unusual and suspect is the absence of a written contract to specify the
performance of a specified piece of work, the nature and extent of the work and the term
and duration of the relationship. The records fail to show that a large commercial outfit,
such as the San Miguel Corporation, entered into mere oral agreements of employment or
labor contracting where the same would involve considerable expenses and dealings with
a large number of workers over a long period of time. Despite respondent company's
allegations not an iota of evidence was offered to prove the same or its particulars. Such
failure makes respondent SMC's stand subject to serious doubts.
Uncontroverted is the fact that for an average of seven (7) years, each of the petitioners
had worked continuously and exclusively for the respondent company's shipping and
warehousing department. Considering the length of time that the petitioners have worked
with the respondent company, there is justification to conclude that they were engaged to
perform activities necessary or desirable in the usual business or trade of the respondent,
and the petitioners are, therefore regular employees (Phil. Fishing Boat Officers and
Engineers Union v. Court of Industrial Relations, 112 SCRA 159 and RJL Martinez
Fishing Corporation v. National Labor Relations Commission, 127 SCRA 454).
As we have found in RJL Martinez Fishing Corporation v. National Labor Relations
Commission (supra):
... [T]he employer-employee relationship between the parties herein is
not coterminous with each loading and unloading job. As earlier shown,
respondents are engaged in the business of fishing. For this purpose,
they have a fleet of fishing vessels. Under this situation, respondents'
activity of catching fish is a continuous process and could hardly be
considered as seasonal in nature. So that the activities performed by
herein complainants, i.e. unloading the catch of tuna fish from
respondents' vessels and then loading the same to refrigerated vans, are
necessary or desirable in the business of respondents. This circumstance
makes the employment of complainants a regular one, in the sense that
it does not depend on any specific project or seasonable activity.
(NLRC Decision, p. 94, Rollo).lwphl@it
so as it with petitioners in the case at bar. In fact, despite past shutdowns of the glass
plant for repairs, the petitioners, thereafter, promptly returned to their jobs, never having
been replaced, or assigned elsewhere until the present controversy arose. The term of the
petitioners' employment appears indefinite. The continuity and habituality of petitioners'
work bolsters their claim of employee status vis-a-vis respondent company,
Even under the assumption that a contract of employment had indeed been executed
between respondent SMC and the alleged labor contractor, respondent's case will,
nevertheless, fail.
Section 8, Rule VIII, Book III of the Implementing Rules of the Labor Code provides:
Job contracting. There is job contracting permissible under the Code
if the following conditions are met:
(1) The contractor carries on an independent business and undertakes
the contract work on his own account under his own responsibility
according to his own manner and method, free from the control and
direction of his employer or principal in all matters connected with the
performance of the work except as to the results thereof; and
(2) The contractor has substantial capital or investment in the form of
tools, equipment, machineries, work premises, and other materials
which are necessary in the conduct of his business.
We find that Guaranteed and Reliable Labor contractors have neither substantial capital
nor investment to qualify as an independent contractor under the law. The premises, tools,
equipment and paraphernalia used by the petitioners in their jobs are admittedly all
supplied by respondent company. It is only the manpower or labor force which the
alleged contractors supply, suggesting the existence of a "labor only" contracting scheme
prohibited by law (Article 106, 109 of the Labor Code; Section 9(b), Rule VIII, Book III,
Implementing Rules and Regulations of the Labor Code). In fact, even the alleged
contractor's office, which consists of a space at respondent company's warehouse, table,
chair, typewriter and cabinet, are provided for by respondent SMC. It is therefore clear
that the alleged contractors have no capital outlay involved in the conduct of its business,
in the maintenance thereof or in the payment of its workers' salaries.
The payment of the workers' wages is a critical factor in determining the actuality of an
employer-employee relationship whether between respondent company and petitioners or
between the alleged independent contractor and petitioners. It is important to emphasize
that in a truly independent contractor-contractee relationship, the fees are paid directly to
the manpower agency in lump sum without indicating or implying that the basis of such
lump sum is the salary per worker multiplied by the number of workers assigned to the
company. This is the rule inSocial Security System v. Court of Appeals (39 SCRA 629,
The alleged independent contractors in the case at bar were paid a lump sum representing
only the salaries the workers were entitled to, arrived at by adding the salaries of each
worker which depend on the volume of work they. had accomplished individually. These
are based on payrolls, reports or statements prepared by the workers' group leader,
warehousemen and checkers, where they note down the number of cartons, wooden shells
and bottles each worker was able to load, unload, pile or pallet and see whether they tally.
The amount paid by respondent company to the alleged independent contractor considers
no business expenses or capital outlay of the latter. Nor is the profit or gain of the alleged
contractor in the conduct of its business provided for as an amount over and above the
workers' wages. Instead, the alleged contractor receives a percentage from the total
earnings of all the workers plus an additional amount corresponding to a percentage of
the earnings of each individual worker, which, perhaps, accounts for the petitioners'
charge of unauthorized deductions from their salaries by the respondents.
Anent the argument that the petitioners are not employees as they worked on piece basis,
we merely have to cite our rulings in Dy Keh Beng v. International Labor and Marine
Union of the Philippines (90 SCRA 161), as follows:
"[C]ircumstances must be construed to determine indeed if payment by
the piece is just a method of compensation and does not define the
essence of the relation. Units of time . . . and units of work are in
establishments like respondent (sic) just yardsticks whereby to
determine rate of compensation, to be applied whenever agreed upon.
We cannot construe payment by the piece where work is done in such
an establishment so as to put the worker completely at liberty to turn
him out and take in another at pleasure."
Article 106 of the Labor Code provides the legal effect of a labor only contracting
scheme, to wit:
... the person or intermediary shall be considered merely as an agent of
the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
Firmly establishing respondent SMC's role as employer is the control exercised by it over
the petitioners that is, control in the means and methods/manner by which petitioners are
to go about their work, as well as in disciplinary measures imposed by it.
Because of the nature of the petitioners' work as cargadores or pahinantes, supervision as
to the means and manner of performing the same is practically nil. For, how many ways
are there to load and unload bottles and wooden shells? The mere concern of both
respondent SMC and the alleged contractor is that the job of having the bottles and
wooden shells brought to and from the warehouse be done. More evident and pronounced
is respondent company's right to control in the discipline of petitioners. Documentary
evidence presented by the petitioners establish respondent SMC's right to impose
disciplinary measures for violations or infractions of its rules and regulations as well as
its right to recommend transfers and dismissals of the piece workers. The inter-office
memoranda submitted in evidence prove the company's control over the petitioners. That
respondent SMC has the power to recommend penalties or dismissal of the piece workers,
even as to Abner Bungay who is alleged by SMC to be a representative of the alleged
labor contractor, is the strongest indication of respondent company's right of control over
the petitioners as direct employer. There is no evidence to show that the alleged labor
contractor had such right of control or much less had been there to supervise or deal with
the petitioners.
The petitioners were dismissed allegedly because of the shutdown of the glass
manufacturing plant. Respondent company would have us believe that this was a case of
retrenchment due to the closure or cessation of operations of the establishment or
undertaking. But such is not the case here. The respondent's shutdown was merely
temporary, one of its furnaces needing repair. Operations continued after such repairs, but
the petitioners had already been refused entry to the premises and dismissed from
respondent's service. New workers manned their positions. It is apparent that the closure
of respondent's warehouse was merely a ploy to get rid of the petitioners, who were then
agitating the respondent company for benefits, reforms and collective bargaining as a
union. There is no showing that petitioners had been remiss in their obligations and
inefficient in their jobs to warrant their separation.
As to the charge of unfair labor practice because of SMC's refusal to bargain with the
petitioners, it is clear that the respondent company had an existing collective bargaining
agreement with the IBM union which is the recognized collective bargaining
representative at the respondent's glass plant.
There being a recognized bargaining representative of all employees at the company's
glass plant, the petitioners cannot merely form a union and demand bargaining. The
Labor Code provides the proper procedure for the recognition of unions as sole
bargaining representatives. This must be followed.
Miguel Corporation is hereby ordered to REINSTATE petitioners, with three (3) years
backwages. However, where reinstatement is no longer possible, the respondent SMC is
ordered to pay the petitioners separation pay equivalent to one (1) month pay for every
year of service.
Feria (Chairman), Fernan, Alampay and Paras, JJ., concur.
Republic of the Philippines
G.R. Nos. 83380-81 November 15, 1989
INOCENCIO, petitioners,
(Labor Arbiter, Department of Labor and Employment, National Capital Region),
MARIA ANGELES, respondents.
Ledesma, Saludo & Associates for petitioners.
Pablo S. Bernardo for private respondents.

This petition for certiorari involving two separate cases filed by private respondents
against herein petitioners assails the decision of respondent National Labor Relations
Commission in NLRC CASE No. 7-2603-84 entitled "Sandigan Ng Manggagawang
Pilipino (SANDIGAN)-TUCP etc., et al. v. Makati Haberdashery and/or Toppers Makati,
et al." and NLRC CASE No. 2-428-85 entitled "Sandigan Ng Manggagawang Pilipino
(SANDIGAN)-TUCP etc., et al. v. Toppers Makati, et al.", affirming the decision of the
Labor Arbiter who jointly heard and decided aforesaid cases, finding: (a) petitioners
guilty of illegal dismissal and ordering them to reinstate the dismissed workers and (b)
the existence of employer-employee relationship and granting respondent workers by
reason thereof their various monetary claims.
The undisputed facts are as follows:
Individual complainants, private respondents herein, have been working for petitioner
Makati Haberdashery, Inc. as tailors, seamstress, sewers, basters (manlililip) and
"plantsadoras". They are paid on a piece-rate basis except Maria Angeles and Leonila
Serafina who are paid on a monthly basis. In addition to their piece-rate, they are given a
daily allowance of three (P 3.00) pesos provided they report for work before 9:30 a.m.
Private respondents are required to work from or before 9:30 a.m. up to 6:00 or 7:00 p.m.
from Monday to Saturday and during peak periods even on Sundays and holidays.
On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor organization of the
respondent workers, filed a complaint docketed as NLRC NCR Case No. 7-2603-84 for
(a) underpayment of the basic wage; (b) underpayment of living allowance; (c) non-
payment of overtime work; (d) non-payment of holiday pay; (e) non-payment of service
incentive pay; (f) 13th month pay; and (g) benefits provided for under Wage Orders Nos.
1, 2, 3, 4 and 5.

During the pendency of NLRC NCR Case No. 7-2603-84, private respondent Dioscoro
Pelobello left with Salvador Rivera, a salesman of petitioner Haberdashery, an open
package which was discovered to contain a "jusi" barong tagalog. When confronted,
Pelobello replied that the same was ordered by respondent Casimiro Zapata for his
customer. Zapata allegedly admitted that he copied the design of petitioner Haberdashery.
But in the afternoon, when again questioned about said barong, Pelobello and Zapata
denied ownership of the same. Consequently a memorandum was issued to each of them
to explain on or before February 4, 1985 why no action should be taken against them for
accepting a job order which is prejudicial and in direct competition with the business of
the company.
Both respondents allegedly did not submit their explanation and did not report for
Hence, they were dismissed by petitioners on February 4, 1985. They countered by filing a
complaint for illegal dismissal docketed as NLRC NCR Case No. 2-428-85 on February 5, 1985.

On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered judgment, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered in NLRC NCR Case No.
2-428-85 finding respondents guilty of illegal dismissal and ordering
them to reinstate Dioscoro Pelobello and Casimiro Zapata to their
respective or similar positions without loss of seniority rights, with full
backwages from July 4, 1985 up to actual reinstatement. The charge of
unfair labor practice is dismissed for lack of merit.
In NLRC NCR Case No. 7-26030-84, the complainants' claims for
underpayment re violation of the minimum wage law is hereby ordered
dismissed for lack of merit.
Respondents are hereby found to have violated the decrees on the cost
of living allowance, service incentive leave pay and the 13th Month
Pay. In view thereof, the economic analyst of the Commission is
directed to compute the monetary awards due each complainant based
on the available records of the respondents retroactive as of three years
prior to the filing of the instant case.

From the foregoing decision, petitioners appealed to the NLRC. The latter on March 30,
1988 affirmed said decision but limited the backwages awarded the Dioscoro Pelobello
and Casimiro Zapata to only one (1) year.

After their motion for reconsideration was denied, petitioners filed the instant petition
raising the following issues:

The first issue which is the pivotal issue in this case is resolved in favor of private
respondents. We have repeatedly held in countless decisions that the test of employer-
employee relationship is four-fold: (1) the selection and engagement of the employee; (2)
the payment of wages; (3) the power of dismissal; and (4) the power to control the
employee's conduct. It is the so called "control test" that is the most important
This simply means the determination of whether the employer controls or has reserved
the right to control the employee not only as to the result of the work but also as to the means and
method by which the same is to be accomplished.

The facts at bar indubitably reveal that the most important requisite of control is present.
As gleaned from the operations of petitioner, when a customer enters into a contract with
the haberdashery or its proprietor, the latter directs an employee who may be a tailor,
pattern maker, sewer or "plantsadora" to take the customer's measurements, and to sew
the pants, coat or shirt as specified by the customer. Supervision is actively manifested in
all these aspects the manner and quality of cutting, sewing and ironing.
Furthermore, the presence of control is immediately evident in this memorandum issued
by Assistant Manager Cecilio B. Inocencio, Jr. dated May 30, 1981 addressed to Topper's
Makati Tailors which reads in part:
4. Effective immediately, new procedures shall be followed:
A. To follow instruction and orders from the undersigned Roger
Valderama, Ruben Delos Reyes and Ofel Bautista. Other than this
person (sic) must ask permission to the above mentioned before giving
orders or instructions to the tailors.
B. Before accepting the job orders tailors must check the materials, job
orders, due dates and other things to maximize the efficiency of our
production. The materials should be checked (sic) if it is matched (sic)
with the sample, together with the number of the job order.
C. Effective immediately all job orders must be finished one day before
the due date. This can be done by proper scheduling of job order and if
you will cooperate with your supervisors. If you have many due dates
for certain day, advise Ruben or Ofel at once so that they can make
necessary adjustment on due dates.
D. Alteration-Before accepting alteration person attending on customs
(sic) must ask first or must advise the tailors regarding the due dates so
that we can eliminate what we call 'Bitin'.
E. If there is any problem regarding supervisors or co-tailor inside our
shop, consult with me at once settle the problem. Fighting inside the
shop is strictly prohibited. Any tailor violating this memorandum will
be subject to disciplinary action.
For strict compliance.

From this memorandum alone, it is evident that petitioner has reserved the right to control
its employees not only as to the result but also the means and methods by which the same
are to be accomplished. That private respondents are regular employees is further proven
by the fact that they have to report for work regularly from 9:30 a.m. to 6:00 or 7:00 p.m.
and are paid an additional allowance of P 3.00 daily if they report for work before 9:30
a.m. and which is forfeited when they arrive at or after 9:30 a.m.

Since private respondents are regular employees, necessarily the argument that they are
independent contractors must fail. As established in the preceding paragraphs, private
respondents did not exercise independence in their own methods, but on the contrary
were subject to the control of petitioners from the beginning of their tasks to their
completion. Unlike independent contractors who generally rely on their own resources,
the equipment, tools, accessories, and paraphernalia used by private respondents are
supplied and owned by petitioners. Private respondents are totally dependent on
petitioners in all these aspects.
Coming now to the second issue, there is no dispute that private respondents are entitled
to the Minimum Wage as mandated by Section 2(g) of Letter of Instruction No. 829,
Rules Implementing Presidential Decree No. 1614 and reiterated in Section 3(f), Rules
Implementing Presidential Decree 1713 which explicitly states that, "All employees paid
by the result shall receive not less than the applicable new minimum wage rates for eight
(8) hours work a day, except where a payment by result rate has been established by the
Secretary of Labor. ..."
No such rate has been established in this case.
But all these notwithstanding, the question as to whether or not there is in fact an
underpayment of minimum wages to private respondents has already been resolved in the
decision of the Labor Arbiter where he stated: "Hence, for lack of sufficient evidence to
support the claims of the complainants for alleged violation of the minimum wage, their
claims for underpayment re violation of the Minimum Wage Law under Wage Orders
Nos. 1, 2, 3, 4, and 5 must perforce fall."

The records show that private respondents did not appeal the above ruling of the Labor
Arbiter to the NLRC; neither did they file any petition raising that issue in the Supreme
Court. Accordingly, insofar as this case is concerned, that issue has been laid to rest. As
to private respondents, the judgment may be said to have attained finality. For it is a well-
settled rule in this jurisdiction that "an appellee who has not himself appealed cannot
obtain from the appellate court-, any affirmative relief other than the ones granted in the
decision of the court below. "

As a consequence of their status as regular employees of the petitioners, they can claim
cost of living allowance. This is apparent from the provision defining the employees
entitled to said allowance, thus: "... All workers in the private sector, regardless of their
position, designation or status, and irrespective of the method by which their wages are
paid. "

Private respondents are also entitled to claim their 13th Month Pay under Section 3(e) of
the Rules and Regulations Implementing P.D. No. 851 which provides:
Section 3. Employers covered. The Decree shall apply to all
employers except to:
xxx xxx xxx
(e) Employers of those who are paid on purely commission, boundary,
or task basis, and those who are paid a fixed amount for performing a
specific work, irrespective of the time consumed in the performance
thereof, except where the workers are paid on piece-rate basis in which
case the employer shall be covered by this issuance insofar as such
workers are concerned. (Emphasis supplied.)
On the other hand, while private respondents are entitled to Minimum Wage, COLA and
13th Month Pay, they are not entitled to service incentive leave pay because as piece-rate
workers being paid at a fixed amount for performing work irrespective of time consumed
in the performance thereof, they fall under one of the exceptions stated in Section 1(d),
Rule V, Implementing Regulations, Book III, Labor Code. For the same reason private
respondents cannot also claim holiday pay (Section 1(e), Rule IV, Implementing
Regulations, Book III, Labor Code).
With respect to the last issue, it is apparent that public respondents have misread the
evidence, for it does show that a violation of the employer's rules has been committed and
the evidence of such transgression, the copied barong tagalog, was in the possession of
Pelobello who pointed to Zapata as the owner. When required by their employer to
explain in a memorandum issued to each of them, they not only failed to do so but instead
went on AWOL (absence without official leave), waited for the period to explain to
expire and for petitioner to dismiss them. They thereafter filed an action for illegal
dismissal on the far-fetched ground that they were dismissed because of union activities.
Assuming that such acts do not constitute abandonment of their jobs as insisted by private
respondents, their blatant disregard of their employer's memorandum is undoubtedly an
open defiance to the lawful orders of the latter, a justifiable ground for termination of
employment by the employer expressly provided for in Article 283(a) of the Labor Code
as well as a clear indication of guilt for the commission of acts inimical to the interests of
the employer, another justifiable ground for dismissal under the same Article of the Labor
Code, paragraph (c). Well established in our jurisprudence is the right of an employer to
dismiss an employee whose continuance in the service is inimical to the employer's

In fact the Labor Arbiter himself to whom the explanation of private respondents was
submitted gave no credence to their version and found their excuses that said barong
tagalog was the one they got from the embroiderer for the Assistant Manager who was
investigating them, unbelievable.
Under the circumstances, it is evident that there is no illegal dismissal of said employees.
Thus, We have ruled that:
No employer may rationally be expected to continue in employment a
person whose lack of morals, respect and loyalty to his employer,
regard for his employer's rules, and appreciation of the dignity and
responsibility of his office, has so plainly and completely been bared.
That there should be concern, sympathy, and solicitude for the rights
and welfare of the working class, is meet and proper. That in
controversies between a laborer and his master, doubts reasonably
arising from the evidence, or in the interpretation of agreements and
writings should be resolved in the former's favor, is not an unreasonable
or unfair rule. But that disregard of the employer's own rights and
interests can be justified by that concern and solicitude is unjust and
unacceptable. (Stanford Microsystems, Inc. v. NLRC, 157 SCRA 414-
415 [1988] ).
The law is protecting the rights of the laborer authorizes neither oppression nor self-
destruction of the employer.
More importantly, while the Constitution is committed to the
policy of social justice and the protection of the working class, it should not be supposed that every
labor dispute will automatically be decided in favor of labor.

Finally, it has been established that the right to dismiss or otherwise impose discriplinary
sanctions upon an employee for just and valid cause, pertains in the first place to the
employer, as well as the authority to determine the existence of said cause in accordance
with the norms of due process.

There is no evidence that the employer violated said norms. On the contrary, private
respondents who vigorously insist on the existence of employer-employee relationship,
because of the supervision and control of their employer over them, were the very ones
who exhibited their lack of respect and regard for their employer's rules.
Under the foregoing facts, it is evident that petitioner Haberdashery had valid grounds to
terminate the services of private respondents.
WHEREFORE, the decision of the National Labor Relations Commission dated March
30, 1988 and that of the Labor Arbiter dated June 10, 1986 are hereby modified. The
complaint filed by Pelobello and Zapata for illegal dismissal docketed as NLRC NCR
Case No. 2-428-85 is dismissed for lack of factual and legal bases. Award of service
incentive leave pay to private respondents is deleted.
Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.