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, petitioner,
Eutiquio Bustamante insurance underwriter. Under their agreement. petitioner dismissed private
respondent for misrepresentation and for simultaneously selling insurance for another life insurance
company in violation of said agreement. respondent filed a complaint with the Office of the Insurance
commission for collection of sums of money. advised private respondent that it was the Department of
Labor and Employment that had jurisdiction over his complaint. LA for PR. The labor arbiter relied on
the Sales Agent's Agreement proviso that petitioner could assign private respondent a specific area of
responsibility and a production quota, and read it as signaling the existence of employer- employee
relationship between petitioner and private respondent. NLRC affirmed. whether there existed an
employer-employee relationship between petitioner and private respondent.
Issues: Is there employer-employee relationship? Does the NLRC have jurisdiction.
We hold, however, that respondent Commission misappreciated the facts of the case. Time and again,
the Court has applied the "four-fold" test in determining the existence of employer-employee
relationship. This test considers the following elements: (1) the power to hire; (2) the payment of
wages; (3) the power to dismiss; and (4) the power to control, the last being the most important
element. 11
Thus, the exclusivity restriction clearly springs from a regulation issued by the Insurance Commission,
and not from an intention by petitioner to establish control over the method and manner by which
private respondent shall accomplish his work.
PC was the employer of PR here. The PC was forced to close because of serious business losses. PR
were laid off but were also given a separation pay the equivalent of 12.5 days' pay for every year of
service, computed on their basic monthly pay, in addition to the commutation to cash of their unused
vacation and sick leaves. However, it appears that, during the life of the petitioner corporation, from
the beginning of its operations in 1981 until its closure in 1992, it had been giving separation pay
equivalent to thirty (30) days' pay for every year of service. Moreover, inasmuch as the region where
North Davao operated was plagued by insurgency and other peace and order problems, the employees
had to collect their salaries at a bank in Tagum, Davao del Norte, some 58 kilometers from their
workplace and about 2 1/2 hours' travel time by public transportation; this arrangement lasted from
1981 up to 1990.
Subsequently, a complaint was filed with respondent Labor Arbiter by respondent Wilfredo Guillema
and 271 other separated employees for: (1) additional separation pay of 17.5 days for every year of
service; (2) back wages equivalent to two days a month; (3) transportation allowance; (4) hazard pay;
(5) housing allowance; (6) food allowance; (7) post-employment medical clearance; and (8) future
medical allowance, all of which amounted to P58,022,878.31 as computed by private respondent. 5
On May 6, 1993, respondent Labor Arbiter rendered a decision ordering petitioner North Davao to pay
the complainants the following:
(a) Additional separation pay of 17.5 days for every year of service;
(b) Backwages equivalent to two (2) days a month times the number of years of service but not to
exceed three (3) years;
(c) Transportation allowance at P80 a month times the number of years of service but not to exceed
three (3) years
On appeal, respondent NLRC affirmed the decision in toto. Petitioner North Davao's motion for
reconsideration was likewise denied. Hence, this petition
Issue: Whether or not an employer whose business operations ceased due to serious business losses
or financial reverses is obliged to pay separation pay to its employees separated by reason of such
Whether or not private respondents are entitled to transportation expenses

NO. Art. 283 of the Labor Code In case of retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to serious business losses or financial
reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month
pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year.
the closure was due to business losses as in the instant case, in which the aggregate losses
amounted to over P20 billion the Labor Code does not impose any obligation upon the employer to
pay separation benefits, for obvious reasons.
Businessday Information Systems and Services, Inc. (BISSI) vs. NLRC, (supra). In said case, petitioner
BISSI, after experiencing financial reverses, decided "as a retrenchment measure" to lay-off some
employees which they paid a lesser amount as separation pay but when they finally ceased operations
after few months they paid the 2nd batch of employees who were laid off higher than what the 1 st batch
received. The SC ruled in the aforementioned case in favor of the laborers and declared that there
was impermissible discrimination against the private respondents in the payment of their separation
benefits. However, it is apparent here in case at bar that the facts were different. The Court noted
that BISSI continued to suffer losses even after the retrenchment of the first batch of employees:
clearly, business did not improve despite such drastic measure. That notwithstanding, when BISSI
finally shut down, it could well afford to (and actually did) pay off its remaining employees with MORE
separation benefits as compared with those earlier laid off; obviously, then, there was no reason for
BISSI to skimp on separation pay for the first batch of discharged employees. The fact that less
separation benefits ware granted when the company finally met its business death cannot be
characterized as discrimination. Such action was dictated not by a discriminatory management option
but by its complete inability to continue its business life due to accumulated losses. Indeed, one
cannot squeeze blood out of a dry stone. Nor water out of parched land. The fact that North Davao at
the point of its forced closure voluntarily paid any separation benefits at all, although not required by
law and 12.5-days worth at that, should have elicited admiration instead of condemnation.
Section 4, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code provides that:
Sec. 4. Place of payment. (a) As a general rule, the place of payment shall be at or near the place of
undertaking. Payment in a place other than the workplace shall be permissible only under the
following circumstances:
(1) When payment cannot be effected at or near the place of work by reason of the deterioration of
peace and order conditions, or by reason of actual or impending emergencies caused by fire, flood,
epidemic or other calamity rendering payment thereat impossible;
(2) When the employer provides free transportation to the employees back and forth; and
(3) Under any analogous circumstances; provided that the time spent by the employees in collecting
their wages shall be considered as compensable hours worked.
It is undisputed that because of security reasons, from the time of its operations, petitioner NDMC
maintained its policy of paying its workers at a bank in Tagum, Davao del Norte, which usually took the
workers about two and a half (2 1/2) hours of travel from the place of work and such travel time is not
Records also show that on February 12, 1992, when an inspection was conducted by the Department
of Labor and Employment at the premises of petitioner NDMC at Amacan, Maco, Davao del Norte, it
was found out that petitioners had violated labor standards law, one of which is the place of payment
of wages (p. 109, Vol. 1
WHEREFORE, judgment is hereby rendered MODIFYING the assailed Resolution by SETTING ASIDE and
deleting the award for "additional separation pay of 17.5 days for every year of service", and
AFFIRMING it in all other aspects. No costs.
RELATIONS, respondents.
Appeal by certiorari order of the Court of Industrial Relation. THE Philippine Air Lines is hereby ordered
to pay the four claimants. 140 days each, sick leave earned and accumulated free trip passes both
here and aboard subject to the above-mentioned plan the company may adopt. In order to effect early
payment of the Christmas bonus.

It appears that on May 4, 1950, PAL dismissed its above named four (4) employees, who are member
of the Philippine Air Lines Employees Association hereinafter referred to as PALEA and that on July
13, 1954, theCIR en banc passed resolution, in Case No. 465-V thereof, directing the reinstatement of
said employees "to their former or equivalent position in the company, with back wages from the date
of their reinstatement, and without prejudice to their seniority or other rights and privileges. This
resolution was affirmed by the Supreme Court, in G.R. No. L-8197, on October 31, 1958.
On January 14, 1959, said employees were reinstated and subsequently their backwages, computed at
the rate of their compensation at the time of the aforementioned dismissal, less the wages and
salaries earned by them elsewhere during the lay-off period, were paid to them. The employees
objected to this deduction and the CIR sustained them, in a Resolution dated May 22, 1960, which was
reversed by the Supreme Court, on July 26, 1960, in G.R. No. L-15544. Soon later, or on November 10,
1960, the PALEA moved for the execution of the CIR resolution of July 13, 1954, as regards the "other
rights and privileges" therein mentioned, referring, more specifically to: (1) Christmas bonus from 1950
to 1958; (2) accumulated sick leave; (3) transportation allowance during lay-off period; and (4)
accumulated free trip passes, both domestic and international. By an order dated October 8, 1962, the
CIR granted this motion, except as regards the sick leave of OnofreGrio and Bernardino Abarrientos,
and the transportation allowance, which were denied. Hence this appeal.
PAL maintains that the CIR has erred in acting as it did, because : (1) the aforementioned privileges
were not specifically mentioned in the CIR resolution of July 13, 1954; (2) the order of the CIR dated
October 8, 1962, had, allegedly, the effect of amending said resolution; and (3) the clause therein
"without prejudice to their seniority or other rights and privileges" should be construed prospectively,
not retroactively.
When to reckon the payment of wages and other benefits?
In ordering therein the "reinstatement" of said employees with "back wages from the date of their
dismissal to the date of their reinstatement, and without prejudice to their seniority or other rights and
privileges," it is obvious that the resolution intended to restore the employees to their status
immediately prior to their dismissal.
Hence, it directed , not only their reinstatement, but, also, the payment of their back wages during the
period of their lay-off thus referring necessarily to a period of time preceding their reinstatement
and the retention of "their seniority or other rights and privileges".Rights reinstatement, but at the
time? Certainly, not after their reinstatement, but at the time of their aforementioned dismissal.
, the CIR treated said employees as if they had not been absent from work and had been
uninterruptedly working during the lay-off period.1wph1
As a consequence, the employees involved in the case at bar are entitled to the Christmas bonus that
PAL had given to all of its employees during said period, for said bonus, having been paid regularly,
has become part of the compensation of the employees. 1 Said employees are, likewise, entitled to
transportation allowance and the corresponding sick leave privileges. These sick leave privileges are
subject, however, to the following qualifications, namely: (1) that the accumulated sick leave cannot
exceed 140 days, pursuant to the collective bargaining agreement between the PAL and the PALEA,
effective in 1959; and (2) that, pursuant to the same agreement, which denies sick leave privileges to
retired employees, OnofreGrio and Bernardino Abarrientos, who have retired, are not entitled to said
Decision affirmed.
PR entered into 2 contracts with the P.First he was merely an insurance agent. Next as 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. Under his first contract(3).anytime anywhere own means and method.
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. LA for PR and NLRC affirmed.
Issue Is there employer-employee relationship? Or is he just a independent contractor?

4 fold s test. 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 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."
Decision set aside.
June 9, 1976, private respondent Judico become a debit agent attached to the industrial life agency in
Cebu City. Private respondent Judico had definite work assignments including but not limited to
collection of premiums from policy holders and selling insurance to prospective clients. He was
assigned a definite place in the office to work on when he is not in the field; and in addition to
canvassing and making regular reports, he was burdened with the job of collection and to make regular
weekly report thereto for which an anemic performance would mean dismissal. Private respondent was
initially paid P 200. 00 as allowance for thirteen (13) weeks regardless of production and later a certain
percentage denominated as sales reserve of his total collections but not lesser than P 200.00.
Sometime in September 1981, complainant was promoted to the position of Zone Supervisor and was
given additional (supervisor's) allowance fixed at P110.00 per week. During the third week of
November 1981, he was reverted to his former position as debit agent but, for unknown reasons, not
paid so-called weekly sales reserve of at least P 200.00. Finally on June 28, 1982, PR was dismissed by
way of termination of his agency contract. Honorato Judico filed a complaint for illegal dismissal
against Grepalife, praying for award of money claims consisting of separation pay, unpaid salary and
13th month pay, refund of cash bond, moral and exemplary damages and attorney's fees. Both parties
appealed to the NLRC when a decision was rendered by the Labor Arbiter dismissing the complaint on
the ground that the employer-employee relations did not exist between the parties but ordered
Grepalife to pay complainant the sum of Pl,000.00 by reason of Christian Charity. On appeal, said
decision was reversed by the NLRC ruling that complainant is a regular employee as defined under Art.
281 of the Labor Code.

Whether there is an employer-employee relationship and whether insurance agents are

entitled to the employee benefits prescribed by the Labor Code.
Yes. Apply the four fold test. Element of control.
Investment Planning Corp. vs. SSS, 21 SCRA 294, an insurance company may have two classes of
agents who sell its insurance policies: (1) salaried employees who keep definite hours and work under
the control and supervision of the company; and (2) registered representatives who work on
commission basis. Decision affirmed.
Sometime in 1962, petitioner Cosmopolitan Funeral Homes, Inc. engaged the services of private
respondent Noli Maalat as a "supervisor" to handle the solicitation of mortuary arrangements, sales
and collections.
respondent Maalat was dismissed by the petitioner for commission of the following violations: (a)
Understatement of the reported contract price against the actual contract price charged to and paid by
the customers;
(b) Misappropriation of funds or collections by non-remittance of collections and non-issuance of
Official Receipt;

Maalat filed a complaint for illegal dismissal and non-payment of commissions.

LA for PR gving him full amount of separation pay. NLRC reversed or modified giving him of his
separation pay. The petitioner's motion for reconsideration was denied, hence, this petition for review
before this Court.
ISSUES: I s there EE Relationship? II. Whether or not there was equitable basis for the award of 1/2
month separation pay for every year of service.
In determining whether a person who performs work for another is the latter's employee or an
independent contractor, the prevailing test is the "right of control" test. Under this test, an
employer-employee relationship exists 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 that end.
The fact that the petitioner imposed and applied its rule prohibiting superiors from engaging in
other funeral business which it considered inimical to company interests proves that it had the
right of control and actually exercised its control over the private respondent. In other words,
Maalat worked exclusively for the petitioner. He is not allowed to have another livelihood. Worthy
of note too are two other company rules which provide that "negotiation and making of contract
with customers shall be done inside the office" and "signing of contract should be made
immediately before the cadaver or deceased is place in the casket."
However, mindful of the fact the complainant Noli Maalat has served respondent company for the
last twenty four (24) years, more or less, it is but proper to afford him some equitable relief,
consistent with the recent rulings of the Supreme Court, due to his past services with no known
previous record, and the ends of social and compassionate justice will thus be served if he is paid a
portion of his separation pay, equivalent to one-half (1/2) month every year of his service to said
company. (See Soco v. Mercantile Corporation, G.R. No. 53364-65, March 16, 1987; and Firestone,
et al, v. Lariosa et al., G.R. No. 70479, February 27, 1987). We are not inclined to grant
complainant his full month termination pay for every year of his service because, unlike in the
former Soco case, the misconduct of the employee merely involves infraction of company rules
while in the latter Firestone case it involves misconduct of a rank-and-file employee, although
similarly involving acts of dishonesty. (At pp. 65-66, Rollo)
We take exception, therefore, to the grant of separation pay to private respondent.
In Philippine Long Distance Telephone Company (PLDT) v. NLRC, (164 SCRA 671 [1988]), this Court
re-examined, the doctrine in the aforecited Firestone and Soco cases and other previous cases that
employees dismissed for cause are nevertheless entitled to separation pay on the ground of social
and compassionate justice. In abandoning this doctrine, the Court held, and we quote:
. . . We hold that henceforth separation pay shall be allowed as a measure of social justice only in
those instances where the employee is validly dismissed for causes other than serious misconduct
or those reflecting on his moral character. Where the reason for the valid dismissal is, for example,
habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with
a fellow worker, the employer may not be required to give the dismissed employee separation pay,
or financial assistance, or whatever other name it is called, on the ground of social justice.
A contrary rule would, as the petitioner correctly argues, have the effect of rewarding rather than
punishing the erring employee for his offense. . . .
The policy of social justice is not intended to countenance wrongdoing simply because it is
committed by the underprivileged. At best it may mitigate the penalty but it certainly will not
condone the offense. Compassion for the poor is an imperative of every humane society but only
when the recipient is not a rascal claiming an undeserved privilege. . . .
Decision affirmed with modification deleting the amount of separation pay.
DR. RENATO SARA and/or ROMEO ARANA petitioners,
Private respondent Cerila Agarrado was an attendant in the clinic of petitioner Dr. Renato Sara She
quit her job in 1973. Four years later, petitioners Dr. Sara and Romeo Arabia, being owners of a rice
mill and having begun to engage in the buy and sell of palay and rice, entered into a verbal
agreement with private respondent Agarrado whereby it was agreed that the latter would be paid
P2.00 commission per sack of milled rice sold as well as a commission of 10% per kilo of palay
purchased. It was further agreed that private respondent would spend her own money for the

undertaking, but to enable her to carry out the agreement more effectively, she was authorized to
borrow money from other persons, as in fact she did, subject to reimbursement by petitioners. In
1982, private respondent filed with the National Labor Relations Commission (NLRC) Regional
Arbitration Branch No. XI, Cotabato City, a complaint against petitioners for unpaid commission of
P4,598.00 on milled rice sold, P2,982.80 on palay sold, reimbursement of P17,500.00 which she
had borrowed from various persons and Pl,749.00 of her own money which petitioners allegedly
had not reimbursed. Petitioners raised the issue of lack of jurisdiction on the part of the Labor
Arbiter to take cognizance of the case, there being no employer-employee relationship between
the parties. Labor Arbiter Magno C. Cruz rendered a decision in favor of private respondent
ordering petitioners to pay all the claims amounting to P26,397.80. NLRC, affirmed the Labor
Arbiter's decision and dismissed the appeal. Their motion for reconsideration having been denied,
petitioners took the present recourse, maintaining lack of jurisdiction on the part of the Labor
Tribunal as well as grave abuse of discretion on its part in finding them liable to private
Whether an employer-employee relationship exists between petitioners and private
No. To determine the existence of an employer-employee relationship, this Court in a long line of
decisions has invariably applied the following four-fold test: [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. In the case at bar, we find that although there was a selection and
engagement of private respondent in 1977, the verbal agreement between the parties negated the
existence of the other requisites. The arrangement thus was explicitly on a commission basis
dependent on the volume of sale or purchase. The power to terminate the relationship was
mutually vested upon the parties.
Finally, noticeably absent from the agreement between the parties is the element of control.
Among the four (4) requisites, control is deemed the most important that the other requisites may
even be disregarded. Under the control test, an employer-employee relationship exists if the
"employer" has reserved the right to control the "employee" not only as to the result of the work
done but also as to the means and methods by which the same is to be accomplished. We observe
that the means and methods of purchasing and selling rice or palay by private respondent were
totally independent of petitioners' control. The absence of control is made more evident by the fact
that private respondent was not even obliged to sell the palay she purchased to petitioners. She
was at liberty to sell the palay to any trader offering higher buying rates. She was thus free to sell
it to anybody whom she pleased. Moreover, private respondent worked for petitioners at her own
pleasure and was not subject to definite hours or conditions of work. She could even delegate the
task of buying and selling to others, if she so desired, or simultaneously engaged in other means of
livelihood while selling and purchasing rice or palay. The instant petition for certiorari is granted.
DY KEH BENG, petitioner,
A charge of unfair labor practice was filed against Dy Keh Beng, proprietor of a basket factory, for
discriminatory acts within the meaning of Section 4(a), sub-paragraph (1) and (4). Republic Act No.
875, 3 by dismissing on September 28 and 29, 1960, respectively, Carlos N. Solano and Ricardo
Tudla for their union activities. Dy Keh Beng contended that he did not know Tudla and that Solano
was not his employee because the latter came to the establishment only when there was work
which he did on pakiaw basis, each piece of work being done under a separate contract. . The
Court of Industrial Relations in that case found Dy Keh Beng guilty of the unfair labor practice acts
alleged and order him to reinstate Carlos Solano and Ricardo Tudla to their former jobs with
backwages from their respective dates of dismissal until fully reinstated without loss to their right
of seniority and of such other rights already acquired by them and/or allowed by law.
Whether or not theres employer-employee relationship?
It should be borne in mind that the control test calls merely for the existence of the right to control
the manner of doing the work, not the actual exercise of the right. 12 Considering the finding by the

Hearing Examiner that the establishment of Dy Keh Beng is "engaged in the manufacture of
baskets known as kaing, 13 it is natural to expect that those working under Dy would have to
observe, among others, Dy's requirements of size and quality of thekaing. Some control would
necessarily be exercised by Dy as the making of the kaing would be subject to Dy's specifications.
Parenthetically, since the work on the baskets is done at Dy's establishments, it can be inferred
that the proprietor Dy could easily exercise control on the men he employed. (if payment by the
piece is just a method of compensation and does not define the essence of the relation.)
Nevertheless, considering that about eighteen (18) years have already elapsed from the time the
complainants were dismissed, The formula cans for fixing the award of backwages without
qualification and deduction to three years, "subject to deduction where there are mitigating
circumstances in favor of the employer but subject to increase by way of exemplary damages
where there are aggravating circumstances. 17
Decision modified (the award of backwages granted by the Court of Industrial Relations is herein
modified to an award of backwages for three years)
Judge of the Regional Trial Court, Branch XIV, Roxas City and POTENCIANO KAPUNAN,
SR., respondents
It is undisputed that Funtecha was a working student, being a part-time janitor and a scholar of
petitioner Filamer. Funtecha requested the driver-security guard, Allan Masa, and was allowed, to
take over the vehicle while the latter was on his way home one late afternoon. It is significant to
note that the place where Allan lives is also the house of his father, the school president, Agustin
Masa. Moreover, it is also the house where Funtecha was allowed free board while he was a
student of Filamer Christian Institute. Allan Masa turned over the vehicle to Funtecha only after
driving down a road, negotiating a sharp dangerous curb, and viewing that the road was clear.
According to Allan's testimony, a fast moving truck with glaring lights nearly hit them so that they
had to swerve to the right to avoid a collision. Upon swerving, they heard a sound as if something
had bumped against the vehicle, but they did not stop to check. Actually, the Pinoy jeep swerved
towards the pedestrian, Potenciano Kapunan who was walking in his lane in the direction against
vehicular traffic, and hit him which resulted to his death. The petitioner was sued for damages. CA
ruled in facvor of PR.
Issue whether or not Funtecha is an employee of P and warrants the latter to pay damages.
Yes. Funtecha is an employee of petitioner Filamer. He need not have an official appointment for a
driver's position in order that the petitioner may be held responsible for his grossly negligent act, it
being sufficient that the act of driving at the time of the incident was for the benefit of the
petitioner. Hence, the fact that Funtecha was not the school driver or was not acting within the
scope of his janitorial duties does not relieve the petitioner of the burden of rebutting the
presumption juris tantum that there was negligence on its part either in the selection of a servant
or employee, or in the supervision over him. The petitioner has failed to show proof of its having
exercised the required diligence of a good father of a family over its employees Funtecha and
ART. 2180 of the civil code.
PR was a faculty member teaching Filipino subjects at the PU. PR joined a union and did some
union activities (inciting others to join too) which prompted the PU to terminate the guise the
dropped of enrollees at the school. Her teaching load was gradually lessen and eventually, she was
not given any teaching assignment anymore. PR filed a case for illegal dismissal and payment of
back wages and other benefits computed from the day of the dismissal until her actual
reinstatement. She won but PU contested the grant and want to limit the payment because she

was employed already with other companies which is a substantial equivalent of his position as full
time instructor in said University.
Issue : Whether or not the work of the PR at central bank is substantially equivalent with her work
wih the PU.
Appellant's contention is that the employment of Aguirre in the Central Bank and his teaching load
in the Philippine College of Commerce are substantially equivalent to his former position in the
University. Upon the other hand, the resolution appealed reached the opposite conclusion for the
following reasons:
(a) Aguirre's work in the respondent university is that of a professor, ]while his work in the Central
Bank is clerical in nature;
(b) As professor Aguirre's maximum teaching period is five (5) hours daily; while in the bank he
works eight (8) hours a day;
(c) Although his work in the bank allows him to teach part time in the Philippine College of
Commerce for one hour, he could also do the same work even if he were employed in the
university; and
(d) Aguirre was receiving from the respondent university P5,400.00 a year, while he receives from
the Central Bank P3,000.00 a year only. This alone fact decides the issue, namely, that Aguirre's
position in the Central Bank is not substantially equivalent to his position in the Far Eastern
University. "Any employment at lower wage rate is not substantially equivalent employment"
[Willard, Inc. (1937 2 NLRB 1094, Moorseville Cotton Mills vs. NLRB (CCA-4, 1940), 2. Labor Cases.
18.576; 110 fed. (2d) 79; Puleski Veneer Corn. (1938) 10 NLRB 136; Quidnick Dye Works, Inc.
(1937) 2 NLRB 963].
Although Mr. Aguirre was, not a professor, but a full time instructor in the University, we agree with
the opinion of the lower court, sitting en banc. In addition to the circumstances relied upon by the
latter, one important factor, not mentioned in the resolution appealed from, is decisively in favor of
the conclusion therein reached, and that is that Mr. Aguirre is an instructor in Tagalog, and that, as
such, his position as researcher in the Central Bank has no future for him. The situation would
perhaps have been different had his line been economics. Inasmuch, however, as Mr. Aguirre has
especialized in the Tagalog dialect, his work as a researcher in the Central Bank is inferior to his job
as full time instructor in the University, not so much because his salary in the latter is substantially
bigger, even if we add thereto his emoluments in the Philippine College of Commerce, but,
specially, because of the future his position as instructor in the University offers him as a career,
which is non-existent in the Central Bank.
WHEREFORE, the resolution appealed from is hereby affirmed, with costs against petitioner. It is so
As a result of the death of Santiago Fabrigar, on June 28, 1956, his heirs in the person of Leonora
Fabrigar (common-law wife) and their children, filed a claim for compensation with the Workmen's
Compensation Commission against Iloilo Chinese Commercial School, Respondent." In this claim, it
was alleged that the cause of death was " pulmonary tuberculosis contractedduring and as a result
of his employment as janitor." The Hearing Officer of the WCC denied the claim and dismissed the
case, finding that the claimant failed to prove the casual effect of employment and death. On
appeal, the decision with the Workmen's Compensation Commission which, on November 12,
1959, rendered judgment reversing the decision of its Hearing Officer, making the following
findings of facts: That Santiago Fabrigar had been employed from 1947 to March 12, 1956, as a
janitor-messenger of the respondent Iloilo Chinese Commercial School, his work consisting of
sweeping and scrubbing the floors, cleaning the classrooms and the school premises, and other
janitorial chores; on March 11, 1956, preparatory to graduation day, he carried desks and chairs
from the classrooms to the auditorium, set the curtains and worked harder and faster than usual;
that although he felt shortness of breath and did not feel very well that day, he continued working

at the request of the overseer of respondent, that on the following day he reported for work, but on
March 13, he spat blood and stopped working; that from April 29, 1956 to May 15, 1956, he was
under treatment by Dr. Quirico Villareal "for far advanced pulmonary tuberculosis and for heart
disease"; and that previous to said treatment, he was attended by Dr. Jaranilla for pulmonary
tuberculosis. The Commission concluded that the short period of intervention between his last day
of work (March 13, 1956) when he spat blood and his death on June 28, 1956, due to pulmonary
tuberculosis, indicated that he had been suffering from such disease even during the time he was
employed by the respondent and considering the strenuous work he performed, his employment
as janitor aggravated his pre-existing illness; the sanitary inpector did not even examined the
deceased before and after death and ordered respondent to: (1) To pay to the claimant, for and in
behalf of her minor children by the deceased, namely, Carlito, Gloria, Rosita and Ernesto, all
surnamed Fabrigar, the amount of TWO THOUSAND FOUR HUNDRED NINETY SIX and 00/00 Pesos
(P2,496.00) as Death benefits; and (2) To pay to the Commission the amount of P25.00 as fees
pursuant to Section 55 of Act 3428, as amended. Hence, this certiorari.
A. Whether or not the respondents are entitled to death benefits.
B. Whether or not the deceased is an employee of the petitioner.
A. Yes. The facts of the case established by the respondent commission is clear that his
employment aggravated his pre-existing illness and brought about his death and the court find no
plausible reason for altering or disturbing the above factual findings of the Commission, in the
present appeal by certiorari.
Therefore under the law his heirs is entitled to such benefits.
B. The most important test of employer-employee relation is the power to control the employee's
conduct. The records disclose that the person in charge (encargado) of the respondent school
supervised the deceased in his work and had control over the manner he performed the same
which means he is an employee of the school.
IN VIEW HEREOF, the appeal interposed by the petitioner is dismissed, and the decision appealed
from is affirmed, with costs against the herein petitioner.
DANILO B. TABAS et al., petitioners,
This is a petition for nullification of the previous decision of the NLRC, reinstatement, payment of
various benefits, including minimum wage, overtime pay, holiday pay, thirteen-month pay, and
emergency cost of living allowance pay, against the respondent, CALIFORNIA MANUFACTURING
After more than a year of employment and on the belief by the petitioners that they already
became regular employees of the respondent company they filed petitions for payment of various
benefits due to them. During the pendency of the petition they were notified by California that
they would not be rehired. As a result, they filed an amended complaint charging California with
illegal dismissal. After the cases had been consolidated, the California Manufacturing Company
(California) filed a motion to dismiss as well as a position paper denying the existence of an
employer-employee relation between the petitioners and the company and, consequently, any
liability for payment of money claims. On motion of the petitioners, Livi Manpower Services, Inc.
was impleaded as a party-respondent. It appears that the petitioners were, prior to their stint with
California, employees of Livi Manpower Services, Inc. (Livi), which subsequently assigned them to
work as "promotional merchandisers" for the former firm pursuant to a manpower supply
agreement. Among other things, the agreement provided that California "has no control or
supervisions whatsoever over Livi's workers with respect to how they accomplish their work or
perform Californias obligation"; the Livi "is an independent contractor and nothing herein

contained shall be construed as creating between California and Livi the relationship of principalagent or employer-employee; that "it is hereby agreed that it is the sole responsibility of Livi to
comply with all existing as well as future laws, rules and regulations pertinent to employment of
labor" and that "California is free and harmless from any liability arising from such laws or from any
accident that may befall workers and employees of Livi while in the performance of their duties for
California. It was further expressly stipulated that the assignment of workers to California shall be
on a "seasonal and contractual basis" that "cost of living allowance and the 10 legal holidays will
be charged directly to California at cost " and that "payroll for the preceding week shall be
delivered by Livi at California's premises." The petitioners were then made to sign employment
contracts with durations of six months, upon the expiration of which they signed new agreements
with the same period, and so on. California admits having refused to accept the petitioners back to
work but deny liability thereof for the reason that it is not, to begin with, the petitioners employer
and that the "retrenchment" had been forced by business losses as well as expiration of
contracts. It appears that thereafter, Livi re-absorbed them into its labor pool on a "wait-in or
standby" status. The labor arbiter's decision, a decision affirmed on appeal, ruled against the
existence of any employer-employee relation between the petitioners and California ostensibly in
the light of the manpower supply contract, supra, and consequently, against the latter's liability as
and for the money claims demanded. In the same breath, however, the labor arbiter absolved Livi
from any obligation because the "retrenchment" in question was allegedly "beyond its control ." He
assessed against the firm, nevertheless, separation pay and attorney's fees. Hence, this petition.
Whether or not there has been an employee-employer relationship?
Whether the petitioners are Californias or Livis employee?
Who has Liability? California or Livi?
A. Yes. The existence of an employer-employees relation is a question of law and being such, it
cannot be made the subject of agreement. Hence, the fact that the manpower supply agreement
between Livi and California had specifically designated the former as the petitioners' employer and
had absolved the latter from any liability as an employer, will not erase either party's obligations
as an employer, if an employer-employee relation otherwise exists between the workers and either
firm. At any rate, since the agreement was between Livi and California, they alone are bound by it,
and the petitioners cannot be made to suffer from its adverse consequences. This Court has
consistently ruled that the determination of whether or not there is an employer-employee relation
depends upon four standards: (1) the manner of selection and engagement of the putative
employee; (2) the mode of payment of wages; (3) the presence or absence of a power of dismissal;
and (4) the presence or absence of a power to control the putative employee's conduct. Of the
four, the right-of-control test has been held to be the decisive factor. Furthermore, the Court need
not therefore consider whether it is Livi or California which exercises control over the petitioner visa-vis the four barometers referred to earlier, since by fiction of law, either or both shoulder
B. Petitioners are Californias employees and Livi is only an agent of the former. Under Art. 106 (4)
of the Labor Code There is 'labor-only' contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by such person
are performing activities which are directly related to the principal business of such employer. In
such cases, the person or intermediary shall be considered merely as an agent of the employer
who shall be responsible to the workers in the same manner and extent as if the latter were
directly employed by him. The "labor-only" contractor is considered "merely an agent of the
employer," 17 and liability must be shouldered by either one or shared by both. 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 petitioner's had been charged with
"merchandizing [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.
C. Under ART. 106 (1)Whenever an employee 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. (2)In the event that
the contractor or sub-contractor fails to pay wages of his employees in accordance with this Code,
the employer shall be jointly and severally liable with his contractor or sub-contractor 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. Notwithstanding the absence of a direct
employer-employee relationship between the employer in whose favor work had been contracted
out by a "labor-only" contractor, and the employees, the former has the responsibility, together
with the "labor-only" contractor, for any valid labor claims, 16 by operation of law. Neither Livi nor
California can therefore escape liability, that is, assuming one exists.
In addition, The records show that the petitioners bad been given an initial six-month contract,
renewed for another six months. Accordingly, under Article 281 of the Code, they had become
regular employees-of-California-and had acquired a secure tenure. Hence, they cannot be
separated without due process of law.
WHEREFORE, the petition is GRANTED. Judgment is hereby RENDERED: (1): SETTING ASIDE the
decision, dated March 20, 1987, and the resolution, dated August 19, 1987; (2) ORDERING the
respondent, the California Manufacturing Company, to REINSTATE the petitioners with full status
and rights of regular employees; and (3) ORDERING the respondent, the California Manufacturing
Company, and the respondents, Livi Manpower Service, Inc. and/or Lily-Victoria Azarcon, to PAY,
jointly and severally, unto the petitioners: (a) backwages and differential pays effective as and
from the time they had acquired a regular status under the second paragraph, of Section 281, of
the Labor Code, but not to exceed three (3) years, and (b) all such other and further benefits as
may be provided by existing collective bargaining agreement(s) or other relations, or by law,
beginning such time; and (4) ORDERING the private respondents to PAY unto the petitioners
attorney's fees equivalent to ten (10%) percent of all money claims hereby awarded, in addition to
those money claims. The private respondents are likewise ORDERED to PAY the costs of this suit.
Aurora vs NLRC
This petition for certiorari seeks the reversal of the Resolution 2 of public respondent National
Labor Relations Commission dated March 16, 1994 affirming with modification the decision of the
Labor Arbiter, dated May 25, 1992, finding petitioners liable to pay private respondent the total
amount of P195,624.00 as separation pay and attorney's fees.
Private respondent Honorio Dagui was hired by Doa Aurora Suntay Tanjangco in 1953 to take
charge of the maintenance and repair of the Tanjangco apartments and residential buildings. He
was to perform carpentry, plumbing, electrical and masonry work. Upon the death of Doa Aurora
Tanjangco in 1982, her daughter, petitioner Teresita Tanjangco Quazon, took over the
administration of all the Tanjangco properties. On June 8, 1991, private respondent Dagui received
the shock of his life when Mrs. Quazon suddenly told him: "Wala ka nang trabaho mula ngayon," on
the alleged ground that his work was unsatisfactory. On August 29, 1991, private respondent, who
was then already sixty-two (62) years old, filed a complaint for illegal dismissal with the Labor
On May 25, 1992, Labor Arbiter Ricardo C. Nora rendered judgment ordering to pay the
FOUR PESOS (P195,624.00) representing complainant's separation pay and the ten (10%) percent
attorney's fees within ten (10) days from receipt of this Decision.
Petitioners appealed to the National Labor Relations Commission. The Commission affirmed,
with modification ordering to pay the private respondent separation pay in the amount of
P88,920.00 instead of P177,840.00. The award of attorney's fees is deleted.
As a last recourse, petitioners filed the instant petition. Averring that private respondent is not
entitled to separation since he is not an employee of the respondents.
Whether or not private respondent Honorio Dagui was an employee of petitioners.

If he was, could he be considered a regular employee?

Whether or not he is illegally dismissed
A. Yes, private respondent is an employee of the petitioners. Section 8, Rule VIII, Book III of the
Implementing Rules and Regulations of the Labor Code provides in part:
There is job contracting permissible under the Code if the following conditions are met:
xxx xxx
(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
Honorio Dagui earns a measly sum of P180.00 a day (latest salary). Ostensibly, and by no stretch
of the imagination can Dagui qualify as a job contractor. No proof was adduced by the petitioners
to show that Dagui was merely a job contractor, and it is absurd to expect that private respondent,
with such humble resources, would have substantial capital or investment in the form of tools,
equipment, and machineries, with which to conduct the business of supplying Aurora Plaza with
manpower and services for the exclusive purpose of maintaining the apartment houses owned by
the petitioners herein. . Dagui, by the findings of both tribunals, was an employee of the
petitioners. We are not inclined to set aside these findings for factual findings of agencies
exercising quasi-judicial functions [like public respondent NLRC] are accorded not only respect but
even finality, aside from the consideration that this Court is essentially not a trier of facts. 9
Furthermore, Jurisprudence is firmly settled that whenever the existence of an employment
relationship is in dispute, four elements constitute the reliable yardstick: (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's conduct. 10 It is the so-called "control test," and that
is, whether the employer controls or has reserved the right to control the employee not only as to
the result of the work to be done but also as to the means and methods by which the same is to be
accomplished. All these elements are present in the case at bar
B. We find private respondent to be a regular employee, for Article 280 of the Labor Code provides:
(1)The provisions of written agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular where the employee has
been engaged to perform activities which are usually necessary or desirable in the usual business
or trade of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of the
engagement of the employee or where the work or services to be performed is seasonal in nature
and the employment is for the duration of the season.
(2)An employment shall be deemed to be casual if it is not covered by the preceding
paragraph: Provided, That, any employee who has rendered at least one year of service, whether
such service is continuous or broken, shall be considered a regular employee with respect to the
activity in which he is employed and his employment shall continue while such actually exists. As
can be gleaned from this provision, there are two kinds of regular employees, namely: (1) those
who are engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer; and (2) those who have rendered at least one year of service,
whether continuous or broken, with respect to the activity in which they are employed. Whichever
standard is applied, private respondent qualifies as a regular employee as aptly ruled by the Labor
Arbiter. The jobs assigned to private respondent as maintenance man, carpenter, plumber,
electrician and mason were directly related to the business of petitioners as lessors of residential
and apartment buildings. Moreover, such a continuing need for his services by herein petitioners is
sufficient evidence of the necessity and indispensability of his services to petitioners' business or
trade. Private respondent Dagui should likewise be considered a regular employee by the mere
fact that he rendered service for the Tanjangcos for more than one year, that is, beginning 1953
until 1982, under Doa Aurora; and then from 1982 up to June 8, 1991 under the petitioners, for a
total of twenty-nine (29) and nine (9) years respectively.
Petitioners argue, however, that even assuming arguendo that private respondent can be
considered an employee, he cannot be classified as a regular employee. He was merely a project
employee whose services were hired only with respect to a specific job and only while the same

exists, 22 thus falling under the exception of Article 280, paragraph 1 of the Labor Code. if truly,
private respondent was employed as a "project employee," petitioners should have submitted a
report of termination to the nearest public employment office every time his employment is
terminated due to completion of each project, as required by Policy Instruction No. 20, which
Project employees are not entitled to termination pay if they are terminated as a result of the
completion of the project or any phase thereof in which they are employed, regardless of the
number of project in which they have been employed by a particular construction company.
Moreover, the company is not required to obtain a clearance from the Secretary of Labor in
connection with such termination. What is required of the company is a report to the nearest Public
Employment Office for statistical purposes.
. Failure of the petitioners to comply with this simple, but nonetheless compulsory, requirement is
proof that Dagui is not a project employee.
C. Yes. Jurisprudence abound as to the rule that the twin requirements of due process, substantive
and procedural, must be complied with, before a valid dismissal exists. 28 Without which the
dismissal becomes void. 29
The twin requirements of notice and hearing constitute the essential elements of due process. This
simply means that the employer shall afford the worker ample opportunity to be beard and to
defend himself with the assistance of his representative, if he so desires. The law requires that the
employer must furnish the worker sought to be dismissed with two written noticesbefore
termination of employee can be legally effected: (1) notice which apprises the employee of the
particular acts or omissions for which his dismissal is sought; and (2) the subsequent notice which
informs the employee of the employer's decision to dismiss him. Failure to comply with the
requirements taints the dismissal with illegality.
It must be remembered that backwages and reinstatement are two reliefs that should be given to
an illegally dismissed employee. He is entitled to (1) either reinstatement, if viable, or separation
pay if reinstatement is no longer viable, and (2) backwages. 34 Payment of backwages is
specifically designed to restore an employee's income that was lost because of his unjust
dismissal. 35 On the other hand, payment of separation pay is intended to provide the employee
money during the period in which he will be looking for another employment. 36
Considering, however, that the termination of private respondent Dagui was made on June 8, 1991
or after the effectivity of the amendatory provision of Republic Act No. 6715 on March 21, 1989,
private respondent's backwages should be computed on the basis of said law.
The highest and most ranking officer of the corporation, which in this case is petitioner Teresita
Quazon as manager of Aurora Land Projects Corporation, can be held jointly and severally liable
with the corporation for the payment of the unpaid money claims of its employees who were
illegally dismissed.
Petitioners' liability for separation pay ought to be reckoned from 1982 when petitioner Teresita
Quazon, as manager of Aurora Plaza, continued to employ private respondent. From 1953 up to the
death of Doa Aurora sometime in 1982, private respondent's claim for separation pay should
have been filed in the testate or intestate proceedings of Doa Aurora. This is because the demand
for separation pay covered by the years 1953-1982 is actually a money claim against the estate of
Doa Aurora, which claim did not survive the death of the old woman. Thus, it must be filed
against her estate in accordance with Section 5, Rule 86 of the Revised Rules of Court.
WHEREFORE, the instant petition is partly GRANTED and the Resolution of the public respondent
National Labor Relations Commission dated March 16, 1994 is hereby MODIFIED in that the award
of separation pay against the petitioners shall be reckoned from the date private respondent was
re-employed by the petitioners in 1982, until June 8, 1991. In addition to separation pay, full
backwages are likewise awarded to private respondent, inclusive of allowances, and other benefits
or their monetary equivalent pursuant to Article 279 46 of the Labor Code, as amended by Section
34 of Republic Act No. 6715, computed from the time he was dismissed on June 8, 1991 up to the
finality of this decision, without deducting therefrom the earnings derived by private respondent
elsewhere during the period of his illegal dismissal
WILLIAM L. TIU, petitioner,

Petitioner, as operator of the D'Rough Riders Transportation, is engaged in the transportation of

passengers from Cebu City to the northern towns of Cebu. Private respondent worked in
petitioner's bus terminals as a "dispatcher," assisting and guiding passengers and carrying their
bags. Private respondent was paid a regular daily wage of P20.00.
Petitioner denies that private respondent was his employee. He alleges that he did not have the
power of selection and dismissal or the power of control over private respondent. According to
petitioner, private respondent, together with so-called "standbys," hung around his bus terminals,
assisting passengers with their baggage as "dispatchers." Petitioner claims that, in league with
"bad elements" in the locality who threatened to cause damage to his passenger buses and scare
passengers away if petitioner and other bus operators did not let them, private respondent and
other "standbys" forced passengers to hire them as baggage boys. Petitioner alleges that he had
no choice but to allow private respondent and other "standbys" to carry on their activities within
the premises of his bus terminals.2 He also claims he allowed them to do so even if their services
as so-called "dispatchers" were not needed in his business. Petitioner insists that as "dispatcher,"
private respondent worked in his own way, without supervision by him.
There was an agreement between the petitioner and the private respondent that if he is caught
inside the terminal he will be dismissed. He was caught taking bath and he was advised to leave
because he is no longer part of the company. On February 18, 1986, private respondent filed a
complaint, for illegal dismissal, violation of the Minimum Wage Law and non-payment of the cost of
living allowances, legal holiday pay, service incentive pay and separation pay, against petitioner.
The Labor Arbiter ordered petitioner to pay private respondent the sum of P25,076.96,
corresponding to the latter's differentials, 13th month pay and separation pay. On appeal, the
Labor Arbiter's decision was affirmed in toto by the NLRC. Hence this petition for certiorari.
Whether or not the private respondent is an employee of the petitioner
Yes HERMES DELA CRUZ is an employee of the petitioner. The said SC said, the question whether
an employer-employee relationship exists is a question of fact. As long as the findings of the labor
agencies on this question are supported by substantial evidence, the findings will not be disturbed
on review in this Court. Review in this Court concerning factual findings in labor cases is confined
to determining allegations of lack of jurisdiction or grave abuse of discretion. In the case at bar the
findings of the commissions were supported by substantial evidences.
On the contentions of the petitioner that Regino de la Cruz, father of private respondent, and the
private respondent were private contractors, the SC ruled as follows:
In determining whether there is an employer-employee relationship between the parties the
following questions must be considered: (a) who has the power of selection and engagement of the
employee? (b) who pays the wages of employee? (c) who has the power of dismissal? and; (d) who
has the power to control the employee's conduct?4 Of these powers the power of control over the
employees' conduct is generally regarded as determinative of the existence of the
relationship.5 The "control test," under which the person for whom the services are rendered
reserves the right to direct not only the end to be achieved but also the means for reaching such
end, is generally relied on by the courts.
While Regino dela Cruz took charge of the hiring of men and paid their wages, he did so as he was
told by petitioner. The payment of salaries and wages came from petitioner. Regino de la Cruz filled
up and signed daily time records for dispatchers and took disciplinary action against erring
employees in accordance with instructions given to him by petitioner. In sum, it cannot be said that
Regino de la Cruz was the employer of the "dispatchers" or that he was an independent contractor.
He was himself only an employee of petitioner.
Consequently, in the case at bar, the power is exercised by Regino de la Cruz but it is power which
is only delegated to him so that in truth the power inherently and primarily is possessed by
petitioner. De la Cruz is a mere supervisor, while petitioner is the real employer.

As held in Broadway Motors, Inc. v. NLRC,10 citing Philippine Bank of Communications

v. NLRC, 11 the "labor-only" contractor is a mere agent of the employer who is responsible to the
employees of the "labor-only" contractor as if such employees had been employed by him directly.
In such a case the statute establishes an employer-employee relationship between the employer
and the employees of the "labor-only" contractor to prevent any violation or circumvention of the
provisions of the Labor Code, by holding both the employer and the "labor-only" contractor
responsible to the employees.
For this reason, we hold that Regino de la Cruz can, at most, be considered a "labor-only"
contractor and, therefore, a mere agent of petitioner. As he is acting in behalf of petitioner, private
respondent Hermes de la Cruz is actually the employee of petitioner.
WHEREFORE, the petition is DENIED for lack of merit.
Private respondent Luis S. Salas was appointed "notarial and legal counsel" for petitioner Air
Material Wings Savings and Loan Association (AMWSLAI) in 1980. The appointment was renewed
for three years in an implementing order which provides that (1)Per approval of the Board en
banc in a regular meeting held on January 21, 1987, you are hereby reappointed as Notarial and
Legal Counsel of this association for a term of three years effective March 1, 1987, unless sooner
terminated from office for cause or as may be deemed necessary by the Board for the interest and
protection of the association. (2)Aside from notarization of loan & other legal documents, your
duties and responsibilities are hereby enumerated in the attached sheet, per Articles IX, Section 1d of the by-laws and those approved by the Board en banc. (3)Your monthly
compensation/retainer's fee remains the same. On January 9, 1990, the petitioner issued another
order reminding Salas of the approaching termination of his legal services under their contract.
This prompted Salas to lodge a complaint against AMWSLAI for separation pay, vacation and sick
leave benefits, cost of living allowances, refund of SSS premiums, moral and exemplary damages,
payment of notarial services rendered from February 1, 1980 to March 2, 1990, and attorney's
fees. Instead of filing an answer, AMWSLAI moved to dismiss for lack of jurisdiction. It averred that
there was no employer-employee relationship between it and Salas and that his monetary claims
properly fell within the jurisdiction of the regular courts. Most of Salas' claims were dismissed by
the labor arbiter in his decision dated November 21, 1991. It was there held that Salas was not
illegally dismissed and so not entitled to collect separation benefits. His claims for vacation leave,
sick leave, medical and dental allowances and refund of SSS premiums were rejected on the
ground that he was a managerial employee. He was also denied moral and exemplary damages for
lack of evidence of bad faith on the part of AMWSLAI. Neither was he allowed to collect his notarial
fees from 1980 up to 1986 because the claim therefor had already prescribed. However, the
petitioner was ordered to pay Salas his notarial fees from 1987 up to March 2, 1990, and attorney's
fee equivalent to 10% of the judgment award. On appeal, the decision was affirmed in toto by the
respondent Commission, prompting the petitioner to seek relief in this Court.

Whether or not Salas can be considered an employee of the petitioner company.
We have held in a long line of decisions that the elements of an employer-employee relationship
are: (1) selection and engagement of the employee; (2) payment of wages; (3) power of dismissal;
and (4) employer's own power to control employee's conduct. 3
The existence of such a relationship is essentially a factual question. The findings of the NLRC on
this matter are accorded great respect and even finality when the same are supported by
substantial evidence. 4
The terms and conditions set out in the letter-contract entered into by the parties on January 23,
1987, clearly show that Salas was an employee of the petitioner. His selection as the company
counsel was done by the board of directors in one of its regular meetings. The petitioner paid him a
monthly compensation/retainer's fee for his services. Though his appointment was for a fixed term
of three years, the petitioner reserved its power of dismissal for cause or as it might deem
necessary for its interest and protection. No less importantly, AMWSLAI also exercised its power of
control over Salas by defining his duties and functions as its legal counsel, to wit: 1)To act on all

legal matters pertinent to his Office. 2) To seek remedies to effect collection of overdue accounts of
members without prejudice to initiating court action to protect the interest of the association. 3) To
defend by all means all suit against the interest of the Association.
ACCORDINGLY, the appealed judgment of the NLRC is AFFIRMED, with the modification that the
award of notarial fees and attorney's fees is disallowed. It is so ordered.
ELIAS VILLUGA, et al, petitioners
and/or RODOLFO ZAPANTA, respondents.
Elias Villuga was employed as cutter in the tailoring shop owned by private respondent Rodolfo
Zapanta and known as Broad Street Tailoring located at Shaw Boulevard, Mandaluyong, Metro
Manila. As cutter, he was paid a fixed monthly salary of P840.00 and a monthly transportation
allowance of P40.00. In addition to his work as cutter, Villuga was assigned the chore of
distributing work to the shop's tailors or sewers when both the shop's manager and assistant
manager would be absent. He saw to it that their work conformed to the pattern he had prepared
and if not, he had them redone, repaired or resewn. The other petitioners were ironers, repairmen
and sewers. They were paid a fixed amount for every item ironed, repaired or sewn, regardless of
the time consumed in accomplishing the task. Petitioners did not fill up any time record since they
did not observe regular or fixed hours of work. They were allowed to perform their work at home
especially when the volume of work, which depended on the number of job orders, could no longer
be coped up with. From February 17 to 22, 1978, petitioner Villuga failed to report for work
allegedly due to illness. For not properly notifying his employer, he was considered to have
abandoned his work. In a complaint dated March 27, 1978, filed with the Regional Office of the
Department of Labor, Villuga claimed that he was refused admittance when he reported for work
after his absence, allegedly due to his active participation in the union organized by private
respondent's tailors. He further claimed that he was not paid overtime pay, holiday pay, premium
pay for work done on rest days and holidays, service incentive leave pay and 13th month pay.
Petitioners Renato Abistado, Jill Mendoza, Benjamin Brizuela and David Oro also claimed that they
were dismissed from their employment because they joined the Philippine Social Security Labor
Union (PSSLU). Petitioners Andres Abad, Norlito Ladia, Marcelo Aguilan, Nelia Brizuela, Flora
Escobido, Justilita Cabaneg and Domingo Saguit claimed that they stopped working because
private respondents gave them few pieces of work to do after learning of their membership with
PSSLU. All the petitioners laid claims under the different labor standard laws which private
respondent allegedly violated. On May 28, 1979, Labor Arbiter Ernilo V. Pealosa rendered a
decision ordering the dismissal of the complaint and other money claims except for Villuga's claim
for 13th month pay for the years 1976, 1977 and 1980 amounting to (P1, 248.66). All other 11
complaints were likewise dismissed for want of jurisdiction. On appeal, the National Labor Relations
Commission affirmed the questioned decision in a resolution. However, Commissioner Gabriel M.
Gatchalian rendered a dissenting opinion upholding employer-employee relationship as a piece
rate worker and the benefits must be granted. Hence, this petition for certiorari.
A. Whether or not Villuga is a managerial employee.
B. Whether or not there is an employer-employee relationship between 11 other petitioners
and private respondents.
A. No, he is not a managerial employee. Under Rule 1, Section 2(c), Book III of the Implementing
Rules of Labor Code, to be a member of a managerial staff, the following elements must concur or
co-exist, to wit: (1) that his primary duty consists of the performance of work directly related to
management policies; (2) that he customarily and regularly exercises discretion and independent
judgment in the performance of his functions; (3) that he regularly and directly assists in the
management of the establishment; and (4) that he does not devote his twenty per cent of his time
to work other than those described above.
Applying the above criteria to petitioner Elias Villuga's case, it is undisputed that his primary work
or duty is to cut or prepare patterns for items to be sewn, not to lay down or implement any of the

management policies. Yes, he distributes and assigns work to employees but such duty, though
involving discretion, is occasional and not regular or customary. He had also the authority to order
the repair or resewing of defective item but such authority is part and parcel of his function as
cutter. Elias Villuga does not participate in policy-making. Rather, the functions of his position
involve execution of approved and established policies. In other words, the functions of the
position are not managerial in nature if they only execute approved and established policies
leaving little or no discretion at all whether to implement said policies or not. Considering Villugas
absence without leave and any medical certificate, imposition of a sanction is justified, but surely,
not dismissal.
He should therefore be paid in addition to the 13th month pay, his overtime pay, holiday pay,
premium pay for holiday and rest day, and service incentive leave pay.
B. Yes. For an employer-employee relationship to exist, 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 power to control the employee's conduct." Considering that
petitioners who are either sewers, repairmen or ironer, have been in the employ of private
respondent as early as 1972 or at the latest in 1976, faithfully rendering services which are
desirable or necessary for the business of private respondent, and observing management's
approved standards set for their respective lines of work as well as the customers' specifications,
petitioners should be considered employees, not independent contractors. Independent
contractors are those who exercise independent employment, contracting to do a piece of work
according to their own methods and without being subjected to control of their employer except as
to the result of their work.
(a) in favor of petitioner Villuga, overtime pay, holiday pay, premium pay for holiday and rest day,
service incentive leave pay and separation pay, in addition to his 13th month pay; and
(b) in favor of the rest of the petitioners, their respective 13th month pay.
The case originated from a complaint filed with the Labor Arbiter by private respondent Celso B.
Balbastro against herein petitioners, MAM Realty Development Corporation ("MAM") and its Vice
President Manuel P. Centeno, for wage differentials, "ECOLA," overtime pay, incentive leave pay,
13th month pay (for the years 1988 and 1989), holiday pay and rest day pay. Balbastro alleged
that he was employed by MAM as a pump operator in 1982 and had since performed such work at
its Rancho Estate, Marikina, Metro Manila. He earned a basic monthly salary of P1,590.00 for seven
days of work a week that started from 6:00 a.m. to up until 6:00 p.m. daily. MAM countered that
Balbastro had previously been employed by Francisco Cacho and Co., Inc., the developer of Rancho
Estates. Sometime in May 1982, his services were contracted by MAM for the operation of the
Rancho Estates' water pump. He was engaged, however, not as an employee, but as a service
contractor, at an agreed fee of P1,590.00 a month. Similar arrangements were likewise entered
into by MAM with one Rodolfo Mercado and with a security guard of Rancho Estates III
Homeowners' Association. Under the agreement, Balbastro was merely made to open and close on
a daily basis the water supply system of the different phases of the subdivision in accordance with
its water rationing scheme. He worked for only a maximum period of three hours a day, and he
made use of his free time by offering plumbing services to the residents of the subdivision. He was
not at all subject to the control or supervision of MAM for, in fact, his work could so also be done
either by Mercado or by the security guard. On 23 May 1990, prior to the filing of the complaint,
MAM executed a Deed of Transfer, 1effective 01 July 1990, in favor of the Rancho Estates Phase III
Homeowners Association, Inc., conveying to the latter all its rights and interests over the water
system in the subdivision. In a decision, dated 23 December 1991, the Labor Arbiter dismissed the
complaint for lack of merit. On appeal to it, respondent National Labor Relations Commission
("NLRC") rendered judgment (a) setting aside the questioned decision of the Labor Arbiter and
ordered petitioner to pay jointly and severally complainant the sum of P86,641.05 as abovecomputed

A. Whether or not there has been an employer-employee relationship existed between
petitioners and respondents.
B. If there is, can petitioners be held jointly and severally liable for the money claims awarded
to private responden?
A. Yes. Once again, the matter of ascertaining the existence of an employer-employee relationship
is raised. Repeatedly, we have said that this factual issue is determined by: (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 result of the work to be done and to
the means and methods by which the work is to be accomplished. We see no grave abuse of
discretion on the part of NLRC in finding a full satisfaction, in the case at bench, of the criteria to
establish that employer-employee relationship. The power of control, the most important feature of
that relationship and, here, a point of controversy, refers merely to the existence of the power and
not to the actual exercise thereof. It is not essential for the employer to actually supervise the
performance of duties of the employee; it is enough that the former has a right to wield the
power. 4 It is hard to accede to the contention of petitioners that private respondent should be
considered totally free from such control merely because the work could equally and easily be
done either by Mercado or by the subdivision's security guard. Not without any significance is that
private respondent's employment with MAM has been registered by petitioners with the Social
Security System
B. No. The NLRC erred in holding Centeno jointly and severally liable with MAM. A corporation,
being a juridical entity, may act only through its directors, officers and employees. Obligations
incurred by them, acting as such corporate agents, are not theirs but the direct accountabilities of
the corporation they represent. Except in cases: 1. When directors and trustees or, in appropriate
cases, the officers of a corporation (a) vote for or assent to patently unlawful acts of the
corporation;(b) act in bad faith or with gross negligence in directing the corporate affairs;(c) are
guilty of conflict of interest to the prejudice of the corporation, its stockholders or members, and
other persons.
2. When a director or officer has consented to the issuance of watered stocks or who, having
knowledge thereof, did not forthwith file with the corporate secretary his written objection thereto.
3. When a director, trustee or officer has contractually agreed or stipulated to hold himself
personally and solidarily liable with the Corporation.
4 When a director, trustee or officer is made, by specific provision of law, personally liable for his
corporate action.
WHEREFORE, the order of 21 March 1994 is MODIFIED. The case is REMANDED to the NLRC for a
re-computation of private respondent's monetary awards, which, conformably with this opinion,
shall be paid solely by petitioner MAM Realty Development Corporation. No special pronouncement
on costs.
Private respondents filed a complaint for illegal dismissal and for various monetary claims,
including the recovery of damages and attorney's fees, against petitioners. Private respondents
averred that they started to work for petitioners on, respectively, the following dates: 1 Joseph
Lluz, March, 1985, 2 Noel Adarayan, Feb. 17, 1980, 3 Rogelio Sira, January, 1982, 4 Lolito Lluz,
March, 1982, 5 Virginia Heresano, May, 1987M, 6 Genelito Heresano, 20-Oct-87, 7 Carmelita de
Dios, January, 1975 1. they worked for a minimum of twelve hours daily, including Sundays and
holidays when needed; that they were paid on piece-work basis; that it "angered" petitioner
Lorenzo when they requested to be made members of the Social Security System ("SSS"); and
that, when they demanded an increase in their pay rates, they were prevented (starting 24

October 1988) from entering the work premises. Petitioners, in turn, claimed that their business
operations were only seasonal, normally twice a year, one in June (coinciding with the opening of
school classes) and another in December (during the Christmas holidays), when heavy job orders
would come in. Private respondents, according to petitioners, were engaged on purely contractual
basis and paid the rates conformably with their respective agreements. On 16 October 1989, Labor
Arbiter Benigno C. Villarente, Jr., rendered judgment in favor of the complainants declaring that
there was an employer-employee relationship between complainants and respondents and that the
former were regular employees of the latter. Accordingly, respondents are hereby directed to pay
all complainants their respective separation pay and attorneys fees. On appeal to NLRC decision
was affirmed and motion for consideration is denied. Hence, this petition for certiorari.
Whether or not there is an employer-employee relationship existed between the parties.
Yes. Well-settled is the rule that factual findings of the NLRC, particularly when they coincide with
that of the Labor Arbiter, are accorded respect, if not finality, and will not be disturbed absent any
showing that substantial evidence which might otherwise affect the result of the case has been
discarded. We see no reason, in this case at bench, for disturbing the findings of the Labor Arbiter
and the NLRC on the existence of an employer-employee relationship between herein private
parties. The work of private respondents is clearly related to, and in the pursuit of, the principal
business activity of petitioners. The indicia used for determining the existence of an employeremployee relationship, all extant in the case at bench, include (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 result of the work to be done and to the means and
methods by which the work to be done and to the means and methods by which the work is to be
accomplished. The requirement, so herein posed as an issue, refers to the existence of the right to
control and not necessarily to the actual exercise of the right. However, the grant of separation
pay should be set aside for there was no abandonment or dismissal for the express declaration by
the petitioners company to welcome back the employees, however, they are the ones who refuses
for unknown reason or for lack of legal and justifiable reasons.
WHEREFORE, the questioned findings and resolutions of respondents Labor Arbiter and NLRC are
MODIFIED by deleting the award of separation pay and the corresponding attorney's fees. No costs
RODITO NASAYAO, respondents.
Private respondent Rodito Nasayao claimed that sometime in May 1974, he was appointed plant
manager of the petitioner corporation, with an alleged compensation of P3,000.00, a month, or
25% of the monthly net income of the company, whichever is greater, and when the company
failed to pay his salary for the months of May, June, and July 1974, Rodito Nasayao filed a
complaint with the National Labor Relations Commission, Branch IV, for the recovery of said unpaid
varies. Petitioners denied that Rodito Nasayao was employed in the company as plant manager
with a fixed monthly salary of P3,000.00, instead was a joint venture, a sort of partnership, wherein
Rodito Nasayao was to keep the machinery in good working condition and, in return, he would get
the contracts from end-users for the installation of marble products, in which the company would
not interfere. He was to receive an amount equivalent to 25% of the net profits that the petitioner
corporation would realize, should there be any. Since there had been no profits during said period,
private respondent was not entitled to any amount. The case was submitted for voluntary
arbitration and the parties selected the herein respondent Jose T. Collado as voluntary arbitrator.
Petitioners asked him to desist from further hearing the case. However, , he still continued and
rendered judgment in favor of the complainant, ordering the herein petitioners to pay Rodito
Nasayao the amount of P9,000.00, within 10 days from notice. Petitioners appealed to the NLRC
which dismissed the appeal on the ground that the decision appealed from is final, unappealable
and immediately executory, and ordered the herein petitioners to comply with the decision of the

voluntary arbitrator. The petitioners are before the Court in the present recourse. As prayed for,
the Court issued a temporary restraining order.
A. Whether or not the decision of the voluntary arbitrator is appealable.
B. Whether or not the private respondent Rodito Nasayao was employed as plant manager of
petitioner Continental Marble Corporation with a monthly salary of P3,000.00 or 25% of its
monthly income, whichever is greater.
A. Yes. "Where there is patent and manifest abuse of discretion, the rule on unappealability of
awards of a voluntary arbitrator becomes flexible and it is the inherent power of the Courts to
maintain the people's faith in the administration of justice." In Oceanic Bic Division (FFW) vs.
Romero Inspite of statutory provisions making 'final' the decisions of certain administrative
agencies, we have taken cognizance of petitions questioning these decisions where want of
jurisdiction, grave abuse of discretion, violation of due process, denial of substantial justice, or
erroneous interpretation of the law were brought to our attention. Furthermore, Section 29 of
Republic Act No. 876 An appeal may be taken from an order made in a proceeding under this Act,
or from a judgment entered upon an award through certiorari proceedings, but such appeals shall
be limited to questions of law. The proceedings upon such an appeal, including the judgment
thereon shall be governed by the Rules of Court in so far as they are applicable.
B. No. We find the version of the petitioners to be more plausible and in accord with human nature
and the ordinary course of things. As pointed out by the petitioners, it was illogical for them to hire
the private respondent Rodito Nasayao as plant manager with a monthly salary of P3,000.00, an
amount which they could ill-afford to pay, considering that the business was losing, at the time he
was hired, and that they were about to close shop in a few months' time. Most of all, the element
of control is lacking. In Brotherhood Labor Unity Movement in the Philippines vs. Zamora, n
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 so-called
"control test" that is the most important element. In the instant case, it appears that the
petitioners had no control over the conduct of Rodito Nasayao in the performance of his work. He
decided for himself on what was to be done and worked at his own pleasure. He was not subject to
definite hours or conditions of work and, in turn, was compensated according to the results of his
own effort. Hence, there is no basis for an award of unpaid salaries or wages to Rodito Nasayao.
SC ruled that NLRCs decisions are REVERSED and SET ASIDE and another one entered DISMISSING
private respondent's complaints. The temporary restraning order heretofore isued by the Court is
made permanent. Without costs.