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Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 170087 August 31, 2006
ANGELINA FRANCISCO, Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO
ACEDO, DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the Decision and Resolution of
the Court of Appeals dated October 29, 2004 1 and October 7, 2005, 2 respectively, in CA-G.R. SP No. 78515 dismissing the
complaint for constructive dismissal filed by herein petitioner Angelina Francisco. The appellate court reversed and set aside the
Decision of the National Labor Relations Commission (NLRC) dated April 15, 2003, 3 in NLRC NCR CA No. 032766-02 which
affirmed with modification the decision of the Labor Arbiter dated July 31, 2002, 4 in NLRC-NCR Case No. 30-10-0-489-01, finding
that private respondents were liable for constructive dismissal.
In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as Accountant and Corporate
Secretary and was assigned to handle all the accounting needs of the company. She was also designated as Liaison Officer to the City
of Makati to secure business permits, construction permits and other licenses for the initial operation of the company. 5
Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents; neither did she attend any
board meeting nor required to do so. She never prepared any legal document and never represented the company as its Corporate
Secretary. However, on some occasions, she was prevailed upon to sign documentation for the company. 6
In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as accountant in lieu of petitioner. As
Acting Manager, petitioner was assigned to handle recruitment of all employees and perform management administration functions;
represent the company in all dealings with government agencies, especially with the Bureau of Internal Revenue (BIR), Social
Security System (SSS) and in the city government of Makati; and to administer all other matters pertaining to the operation of Kasei
Restaurant which is owned and operated by Kasei Corporation. 7
For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was P27,500.00 plus
P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation. 8
In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required to sign a prepared
resolution for her replacement but she was assured that she would still be connected with Kasei Corporation. Timoteo Acedo, the
designated Treasurer, convened a meeting of all employees of Kasei Corporation and announced that nothing had changed and that
petitioner was still connected with Kasei Corporation as Technical Assistant to Seiji Kamura and in charge of all BIR matters. 9
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to September 2001 for a total reduction
of P22,500.00 as of September 2001. Petitioner was not paid her mid-year bonus allegedly because the company was not earning well.
On October 2001, petitioner did not receive her salary from the company. She made repeated follow-ups with the company cashier but
she was advised that the company was not earning well. 10
On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was informed that she is no longer
connected with the company. 11
Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive dismissal before the
labor arbiter.
Private respondents averred that petitioner is not an employee of Kasei Corporation. They alleged that petitioner was hired in 1995 as
one of its technical consultants on accounting matters and act concurrently as Corporate Secretary. As technical consultant, petitioner

performed her work at her own discretion without control and supervision of Kasei Corporation. Petitioner had no daily time record
and she came to the office any time she wanted. The company never interfered with her work except that from time to time, the
management would ask her opinion on matters relating to her profession. Petitioner did not go through the usual procedure of
selection of employees, but her services were engaged through a Board Resolution designating her as technical consultant. The money
received by petitioner from the corporation was her professional fee subject to the 10% expanded withholding tax on professionals,
and that she was not one of those reported to the BIR or SSS as one of the companys employees. 12
Petitioners designation as technical consultant depended solely upon the will of management. As such, her consultancy may be
terminated any time considering that her services were only temporary in nature and dependent on the needs of the corporation.
To prove that petitioner was not an employee of the corporation, private respondents submitted a list of employees for the years 1999
and 2000 duly received by the BIR showing that petitioner was not among the employees reported to the BIR, as well as a list of
payees subject to expanded withholding tax which included petitioner. SSS records were also submitted showing that petitioners
latest employer was Seiji Corporation. 13
The Labor Arbiter found that petitioner was illegally dismissed, thus:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. finding complainant an employee of respondent corporation;
2. declaring complainants dismissal as illegal;
3. ordering respondents to reinstate complainant to her former position without loss of seniority rights and jointly and severally pay
complainant her money claims in accordance with the following computation:
a. Backwages 10/2001 07/2002 275,000.00
(27,500 x 10 mos.)
b. Salary Differentials (01/2001 09/2001) 22,500.00
c. Housing Allowance (01/2001 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00
f. 10% share in the profits of Kasei
Corp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
h. 10% Attorneys fees 87,076.50
P957,742.50
If reinstatement is no longer feasible, respondents are ordered to pay complainant separation pay with additional backwages that
would accrue up to actual payment of separation pay.
SO ORDERED. 14
On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter, the dispositive portion of which reads:
PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows:

1) Respondents are directed to pay complainant separation pay computed at one month per year of service in addition to full
backwages from October 2001 to July 31, 2002;
2) The awards representing moral and exemplary damages and 10% share in profit in the respective accounts of P100,000.00 and
P361,175.00 are deleted;
3) The award of 10% attorneys fees shall be based on salary differential award only;
4) The awards representing salary differentials, housing allowance, mid year bonus and 13th month pay are AFFIRMED.
SO ORDERED. 15
On appeal, the Court of Appeals reversed the NLRC decision, thus:
WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor Relations Commissions dated April 15,
2003 is hereby REVERSED and SET ASIDE and a new one is hereby rendered dismissing the complaint filed by private respondent
against Kasei Corporation, et al. for constructive dismissal.
SO ORDERED. 16
The appellate court denied petitioners motion for reconsideration, hence, the present recourse.
The core issues to be resolved in this case are (1) whether there was an employer-employee relationship between petitioner and private
respondent Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally dismissed.
Considering the conflicting findings by the Labor Arbiter and the National Labor Relations Commission on one hand, and the Court of
Appeals on the other, there is a need to reexamine the records to determine which of the propositions espoused by the contending
parties is supported by substantial evidence. 17
We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there has been no uniform test to determine the existence of an
employer-employee relation. Generally, courts have relied on the so-called right of control test where the person for whom the
services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such end.
In addition to the standard of right-of-control, the existing economic conditions prevailing between the parties, like the inclusion of the
employee in the payrolls, can help in determining the existence of an employer-employee relationship.
However, in certain cases the control test is not sufficient to give a complete picture of the relationship between the parties, owing to
the complexity of such a relationship where several positions have been held by the worker. There are instances when, aside from the
employers power to control the employee with respect to the means and methods by which the work is to be accomplished, economic
realities of the employment relations help provide a comprehensive analysis of the true classification of the individual, whether as
employee, independent contractor, corporate officer or some other capacity.
The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employers power to control the employee
with respect to the means and methods by which the work is to be accomplished; and (2) the underlying economic realities of the
activity or relationship.
This two-tiered test would provide us with a framework of analysis, which would take into consideration the totality of circumstances
surrounding the true nature of the relationship between the parties. This is especially appropriate in this case where there is no written
agreement or terms of reference to base the relationship on; and due to the complexity of the relationship based on the various
positions and responsibilities given to the worker over the period of the latters employment.
The control test initially found application in the case of Viaa v. Al-Lagadan and Piga, 19 and lately in Leonardo v. Court of Appeals,
20
where we held that there is an employer-employee relationship when the person for whom the services are performed reserves the
right to control not only the end achieved but also the manner and means used to achieve that end.
In Sevilla v. Court of Appeals, 21 we observed the need to consider the existing economic conditions prevailing between the parties, in
addition to the standard of right-of-control like the inclusion of the employee in the payrolls, to give a clearer picture in determining
the existence of an employer-employee relationship based on an analysis of the totality of economic circumstances of the worker.

Thus, the determination of the relationship between employer and employee depends upon the circumstances of the whole economic
activity, 22 such as: (1) the extent to which the services performed are an integral part of the employers business; (2) the extent of the
workers investment in equipment and facilities; (3) the nature and degree of control exercised by the employer; (4) the workers
opportunity for profit and loss; (5) the amount of initiative, skill, judgment or foresight required for the success of the claimed
independent enterprise; (6) the permanency and duration of the relationship between the worker and the employer; and (7) the degree
of dependency of the worker upon the employer for his continued employment in that line of business. 23
The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his continued
employment in that line of business. 24 In the United States, the touchstone of economic reality in analyzing possible employment
relationships for purposes of the Federal Labor Standards Act is dependency. 25 By analogy, the benchmark of economic reality in
analyzing possible employment relationships for purposes of the Labor Code ought to be the economic dependence of the worker on
his employer.
By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because she was under the direct
control and supervision of Seiji Kamura, the corporations Technical Consultant. She reported for work regularly and served in
various capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager and Corporate Secretary, with substantially
the same job functions, that is, rendering accounting and tax services to the company and performing functions necessary and
desirable for the proper operation of the corporation such as securing business permits and other licenses over an indefinite period of
engagement.
Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent corporation because she
had served the company for six years before her dismissal, receiving check vouchers indicating her salaries/wages, benefits, 13th
month pay, bonuses and allowances, as well as deductions and Social Security contributions from August 1, 1999 to December 18,
2000. 26 When petitioner was designated General Manager, respondent corporation made a report to the SSS signed by Irene
Ballesteros. Petitioners membership in the SSS as manifested by a copy of the SSS specimen signature card which was signed by the
President of Kasei Corporation and the inclusion of her name in the on-line inquiry system of the SSS evinces the existence of an
employer-employee relationship between petitioner and respondent corporation. 27
It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued employment in the
latters line of business.
In Domasig v. National Labor Relations Commission, 28 we held that in a business establishment, an identification card is provided not
only as a security measure but mainly to identify the holder thereof as a bona fide employee of the firm that issues it. Together with
the cash vouchers covering petitioners salaries for the months stated therein, these matters constitute substantial evidence adequate to
support a conclusion that petitioner was an employee of private respondent.
We likewise ruled in Flores v. Nuestro 29 that a corporation who registers its workers with the SSS is proof that the latter were the
formers employees. The coverage of Social Security Law is predicated on the existence of an employer-employee relationship.
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner never acted as Corporate
Secretary and that her designation as such was only for convenience. The actual nature of petitioners job was as Kamuras direct
assistant with the duty of acting as Liaison Officer in representing the company to secure construction permits, license to operate and
other requirements imposed by government agencies. Petitioner was never entrusted with corporate documents of the company, nor
required to attend the meeting of the corporation. She was never privy to the preparation of any document for the corporation,
although once in a while she was required to sign prepared documentation for the company. 30
The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001 affidavit has been allegedly withdrawn
by Kamura himself from the records of the case. 31 Regardless of this fact, we are convinced that the allegations in the first affidavit
are sufficient to establish that petitioner is an employee of Kasei Corporation.
Granting arguendo, that the second affidavit validly repudiated the first one, courts do not generally look with favor on any retraction
or recanted testimony, for it could have been secured by considerations other than to tell the truth and would make solemn trials a
mockery and place the investigation of the truth at the mercy of unscrupulous witnesses. 32 A recantation does not necessarily cancel
an earlier declaration, but like any other testimony the same is subject to the test of credibility and should be received with caution. 33
Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent Kasei Corporation. She was
selected and engaged by the company for compensation, and is economically dependent upon respondent for her continued
employment in that line of business. Her main job function involved accounting and tax services rendered to respondent corporation
on a regular basis over an indefinite period of engagement. Respondent corporation hired and engaged petitioner for compensation,

with the power to dismiss her for cause. More importantly, respondent corporation had the power to control petitioner with the means
and methods by which the work is to be accomplished.
The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month from January to September 2001.
This amounts to an illegal termination of employment, where the petitioner is entitled to full backwages. Since the position of
petitioner as accountant is one of trust and confidence, and under the principle of strained relations, petitioner is further entitled to
separation pay, in lieu of reinstatement. 34
A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. Constructive dismissal is an involuntary
resignation resulting in cessation of work resorted to when continued employment becomes impossible, unreasonable or unlikely;
when there is a demotion in rank or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer
becomes unbearable to an employee. 35 In Globe Telecom, Inc. v. Florendo-Flores, 36 we ruled that where an employee ceases to work
due to a demotion of rank or a diminution of pay, an unreasonable situation arises which creates an adverse working environment
rendering it impossible for such employee to continue working for her employer. Hence, her severance from the company was not of
her own making and therefore amounted to an illegal termination of employment.
In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex, race or creed. Even as we, in
every case, attempt to carefully balance the fragile relationship between employees and employers, we are mindful of the fact that the
policy of the law is to apply the Labor Code to a greater number of employees. This would enable employees to avail of the benefits
accorded to them by law, in line with the constitutional mandate giving maximum aid and protection to labor, promoting their welfare
and reaffirming it as a primary social economic force in furtherance of social justice and national development.
WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated October 29, 2004 and
October 7, 2005, respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision of the National Labor
Relations Commission dated April 15, 2003 in NLRC NCR CA No. 032766-02, is REINSTATED. The case is REMANDED to the
Labor Arbiter for the recomputation of petitioner Angelina Franciscos full backwages from the time she was illegally terminated until
the date of finality of this decision, and separation pay representing one-half month pay for every year of service, where a fraction of
at least six months shall be considered as one whole year.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 138051

June 10, 2004

JOSE Y. SONZA, petitioner,


vs.
ABS-CBN BROADCASTING CORPORATION, respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari1 assailing the 26 March 1999 Decision2 of the Court of Appeals in CA-G.R. SP
No. 49190 dismissing the petition filed by Jose Y. Sonza ("SONZA"). The Court of Appeals affirmed the findings of the National
Labor Relations Commission ("NLRC"), which affirmed the Labor Arbiters dismissal of the case for lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an Agreement ("Agreement") with the Mel and
Jay Management and Development Corporation ("MJMDC"). ABS-CBN was represented by its corporate officers while MJMDC was
represented by SONZA, as President and General Manager, and Carmela Tiangco ("TIANGCO"), as EVP and Treasurer. Referred to

in the Agreement as "AGENT," MJMDC agreed to provide SONZAs services exclusively to ABS-CBN as talent for radio and
television. The Agreement listed the services SONZA would render to ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.3
ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first year and P317,000 for the second and
third year of the Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III, which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994 entered into by your goodself on behalf of ABS-CBN
with our company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs and career. We
consider these acts of the station violative of the Agreement and the station as in breach thereof. In this connection, we
hereby serve notice of rescission of said Agreement at our instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount stipulated in paragraph 7 of the
Agreement but reserves the right to seek recovery of the other benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager4
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and Employment, National Capital
Region in Quezon City. SONZA complained that ABS-CBN did not pay his salaries, separation pay, service incentive leave pay, 13th
month pay, signing bonus, travel allowance and amounts due under the Employees Stock Option Plan ("ESOP").
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship existed between the
parties. SONZA filed an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his account at PCIBank, Quezon Avenue Branch,
Quezon City. In July 1996, ABS-CBN opened a new account with the same bank where ABS-CBN deposited SONZAs talent fees
and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter5 denied the motion to dismiss and directed the parties to file their respective
position papers. The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an employee of respondent company until April 15,
1996 and that he was not paid certain claims, it is sufficient enough as to confer jurisdiction over the instant case in this
Office. And as to whether or not such claim would entitle complainant to recover upon the causes of action asserted is a
matter to be resolved only after and as a result of a hearing. Thus, the respondents plea of lack of employer-employee
relationship may be pleaded only as a matter of defense. It behooves upon it the duty to prove that there really is no
employer-employee relationship between it and the complainant.
The Labor Arbiter then considered the case submitted for resolution. The parties submitted their position papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion to Expunge Respondents Annex 4 and Annex
5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBNs witnesses Soccoro Vidanes and Rolando V. Cruz. These witnesses

stated in their affidavits that the prevailing practice in the television and broadcast industry is to treat talents like SONZA as
independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of jurisdiction.6 The pertinent parts of
the decision read as follows:
xxx
While Philippine jurisprudence has not yet, with certainty, touched on the "true nature of the contract of a talent," it stands to
reason that a "talent" as above-described cannot be considered as an employee by reason of the peculiar circumstances
surrounding the engagement of his services.
It must be noted that complainant was engaged by respondent by reason of his peculiar skills and talent as a TV host
and a radio broadcaster. Unlike an ordinary employee, he was free to perform the services he undertook to render in
accordance with his own style. The benefits conferred to complainant under the May 1994 Agreement are certainly very
much higher than those generally given to employees. For one, complainant Sonzas monthly talent fees amount to a
staggering P317,000. Moreover, his engagement as a talent was covered by a specific contract. Likewise, he was not bound to
render eight (8) hours of work per day as he worked only for such number of hours as may be necessary.
The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to an employee is
inconsequential. Whatever benefits complainant enjoyed arose from specific agreement by the parties and not by
reason of employer-employee relationship. As correctly put by the respondent, "All these benefits are merely talent fees
and other contractual benefits and should not be deemed as salaries, wages and/or other remuneration accorded to an
employee, notwithstanding the nomenclature appended to these benefits. Apropos to this is the rule that the term or
nomenclature given to a stipulated benefit is not controlling, but the intent of the parties to the Agreement conferring such
benefit."
The fact that complainant was made subject to respondents Rules and Regulations, likewise, does not detract from
the absence of employer-employee relationship. As held by the Supreme Court, "The line should be drawn between rules
that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or
methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the
use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the
second, which address both the result and the means to achieve it." (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R.
No. 84484, November 15, 1989).
x x x (Emphasis supplied)7
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor Arbiters decision. SONZA
filed a motion for reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals assailing the decision and resolution
of the NLRC. On 26 March 1999, the Court of Appeals rendered a Decision dismissing the case.8
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRCs finding that no employer-employee relationship existed between SONZA and ABS-CBN.
Adopting the NLRCs decision, the appellate court quoted the following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an agent of complainant
Sonza, the principal. By all indication and as the law puts it, the act of the agent is the act of the principal itself. This fact is
made particularly true in this case, as admittedly MJMDC is a management company devoted exclusively to managing the
careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C. Tiangco. (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and not between ABSCBN and MJMDC. This is clear from the provisions of the May 1994 Agreement which specifically referred to MJMDC as
the AGENT. As a matter of fact, when complainant herein unilaterally rescinded said May 1994 Agreement, it was

MJMDC which issued the notice of rescission in behalf of Mr. Sonza, who himself signed the same in his capacity as
President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the parties to the said
agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994 Agreement, which is the latest Agreement
executed between ABS-CBN and Mr. Sonza, that MJMDC figured in the said Agreement as the agent of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-CBN such that there exist[s] employeremployee relationship between the latter and Mr. Sonza. On the contrary, We find it indubitable, that MJMDC is an agent,
not of ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly admitted by the latter and MJMDC in the May 1994
Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular courts, the same being
in the nature of an action for alleged breach of contractual obligation on the part of respondent-appellee. As squarely apparent
from complainant-appellants Position Paper, his claims for compensation for services, 13th month pay, signing bonus and
travel allowance against respondent-appellee are not based on the Labor Code but rather on the provisions of the May 1994
Agreement, while his claims for proceeds under Stock Purchase Agreement are based on the latter. A portion of the Position
Paper of complainant-appellant bears perusal:
Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound itself to pay
complainant a signing bonus consisting of shares of stockswith FIVE HUNDRED THOUSAND PESOS
(P500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower than the amount he
was receiving prior to effectivity of (the) Agreement.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel benefit amounting
to at least One Hundred Fifty Thousand Pesos (P150,000.00) per year.
Thus, it is precisely because of complainant-appellants own recognition of the fact that his contractual relations with ABSCBN are founded on the New Civil Code, rather than the Labor Code, that instead of merely resigning from ABS-CBN,
complainant-appellant served upon the latter a notice of rescission of Agreement with the station, per his letter dated April
1, 1996, which asserted that instead of referring to unpaid employee benefits, he is waiving and renouncing recovery of the
remaining amount stipulated in paragraph 7 of the Agreement but reserves the right to such recovery of the other benefits
under said Agreement. (Annex 3 of the respondent ABS-CBNs Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock Purchase Agreement
by respondent-appellee that complainant-appellant filed his complaint. Complainant-appellants claims being anchored on the
alleged breach of contract on the part of respondent-appellee, the same can be resolved by reference to civil law and not to
labor law. Consequently, they are within the realm of civil law and, thus, lie with the regular courts. As held in the case of
Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 November 1994, an action for breach of contractual
obligation is intrinsically a civil dispute.9 (Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and ABS-CBN is a factual
question that is within the jurisdiction of the NLRC to resolve.10 A special civil action for certiorari extends only to issues of want or
excess of jurisdiction of the NLRC.11 Such action cannot cover an inquiry into the correctness of the evaluation of the evidence which
served as basis of the NLRCs conclusion.12 The Court of Appeals added that it could not re-examine the parties evidence and
substitute the factual findings of the NLRC with its own.13
The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND REFUSING TO FIND
THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE THE
WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A FINDING.14
The Courts Ruling

We affirm the assailed decision.


No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming the NLRC ruling which upheld the
Labor Arbiters dismissal of the case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and jurisprudence define clearly the elements of an
employer-employee relationship, this is the first time that the Court will resolve the nature of the relationship between a television and
radio station and one of its "talents." There is no case law stating that a radio and television program host is an employee of the
broadcast station.
The instant case involves big names in the broadcast industry, namely Jose "Jay" Sonza, a known television and radio personality, and
ABS-CBN, one of the biggest television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of ABS-CBN. On the other hand,
ABS-CBN insists that the Labor Arbiter has no jurisdiction because SONZA was an independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a question of fact. Appellate courts accord the factual findings of the Labor
Arbiter and the NLRC not only respect but also finality when supported by substantial evidence.15 Substantial evidence means such
relevant evidence as a reasonable mind might accept as adequate to support a conclusion.16 A party cannot prove the absence of
substantial evidence by simply pointing out that there is contrary evidence on record, direct or circumstantial. The Court does not
substitute its own judgment for that of the tribunal in determining where the weight of evidence lies or what evidence is credible.17
SONZA maintains that all essential elements of an employer-employee relationship are present in this case. Case law has consistently
held that the elements of an employer-employee relationship are: (a) the selection and engagement of the employee; (b) the payment
of wages; (c) the power of dismissal; and (d) the employers power to control the employee on the means and methods by which the
work is accomplished.18 The last element, the so-called "control test", is the most important element.19
A. Selection and Engagement of Employee
ABS-CBN engaged SONZAs services to co-host its television and radio programs because of SONZAs peculiar skills, talent and
celebrity status. SONZA contends that the "discretion used by respondent in specifically selecting and hiring complainant over other
broadcasters of possibly similar experience and qualification as complainant belies respondents claim of independent contractorship."
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from ordinary
employees. The specific selection and hiring of SONZA, because of his unique skills, talent and celebrity status not possessed by
ordinary employees, is a circumstance indicative, but not conclusive, of an independent contractual relationship. If SONZA did not
possess such unique skills, talent and celebrity status, ABS-CBN would not have entered into the Agreement with SONZA but would
have hired him through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must consider all the
circumstances of the relationship, with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this mode of
fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits and
privileges "which he would not have enjoyed if he were truly the subject of a valid job contract."
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were ABS-CBNs
employee, there would be no need for the parties to stipulate on benefits such as "SSS, Medicare, x x x and 13th month pay"20 which
the law automatically incorporates into every employer-employee contract.21 Whatever benefits SONZA enjoyed arose from contract
and not because of an employer-employee relationship.22
SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the ordinary that they
indicate more an independent contractual relationship rather than an employer-employee relationship. ABS-CBN agreed to pay
SONZA such huge talent fees precisely because of SONZAs unique skills, talent and celebrity status not possessed by ordinary
employees. Obviously, SONZA acting alone possessed enough bargaining power to demand and receive such huge talent fees for his

services. The power to bargain talent fees way above the salary scales of ordinary employees is a circumstance indicative, but not
conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an independent contractor.
The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC
would have to turn over any talent fee accruing under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their relationship. SONZA failed to show that ABS-CBN
could terminate his services on grounds other than breach of contract, such as retrenchment to prevent losses as provided under labor
laws.23
During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long as "AGENT and Jay Sonza shall faithfully
and completely perform each condition of this Agreement."24 Even if it suffered severe business losses, ABS-CBN could not retrench
SONZA because ABS-CBN remained obligated to pay SONZAs talent fees during the life of the Agreement. This circumstance
indicates an independent contractual relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent fees. Plainly, ABSCBN adhered to its undertaking in the Agreement to continue paying SONZAs talent fees during the remaining life of the Agreement
even if ABS-CBN cancelled SONZAs programs through no fault of SONZA.25
SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement as an admission that he is not an employee of
ABS-CBN. The Labor Arbiter stated that "if it were true that complainant was really an employee, he would merely resign, instead."
SONZA did actually resign from ABS-CBN but he also, as president of MJMDC, rescinded the Agreement. SONZAs letter clearly
bears this out.26 However, the manner by which SONZA terminated his relationship with ABS-CBN is immaterial. Whether SONZA
rescinded the Agreement or resigned from work does not determine his status as employee or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and television program host is an employee or an independent contractor, we refer
to foreign case law in analyzing the present case. The United States Court of Appeals, First Circuit, recently held in Alberty-Vlez v.
Corporacin De Puerto Rico Para La Difusin Pblica ("WIPR")27 that a television program host is an independent contractor. We
quote the following findings of the U.S. court:
Several factors favor classifying Alberty as an independent contractor. First, a television actress is a skilled position
requiring talent and training not available on-the-job. x x x In this regard, Alberty possesses a masters degree in public
communications and journalism; is trained in dance, singing, and modeling; taught with the drama department at the
University of Puerto Rico; and acted in several theater and television productions prior to her affiliation with "Desde Mi
Pueblo." Second, Alberty provided the "tools and instrumentalities" necessary for her to perform. Specifically, she
provided, or obtained sponsors to provide, the costumes, jewelry, and other image-related supplies and services necessary for
her appearance. Alberty disputes that this factor favors independent contractor status because WIPR provided the "equipment
necessary to tape the show." Albertys argument is misplaced. The equipment necessary for Alberty to conduct her job as
host of "Desde Mi Pueblo" related to her appearance on the show. Others provided equipment for filming and producing the
show, but these were not the primary tools that Alberty used to perform her particular function. If we accepted this argument,
independent contractors could never work on collaborative projects because other individuals often provide the equipment
required for different aspects of the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming "Desde Mi Pueblo." Albertys contracts with WIPR
specifically provided that WIPR hired her "professional services as Hostess for the Program Desde Mi Pueblo." There is no
evidence that WIPR assigned Alberty tasks in addition to work related to these tapings. x x x28 (Emphasis supplied)
Applying the control test to the present case, we find that SONZA is not an employee but an independent contractor. The control test
is the most important test our courts apply in distinguishing an employee from an independent contractor.29 This test is based on the
extent of control the hirer exercises over a worker. The greater the supervision and control the hirer exercises, the more likely the
worker is deemed an employee. The converse holds true as well the less control the hirer exercises, the more likely the worker is
considered an independent contractor.30
First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.

SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to co-host the "Mel & Jay" programs. ABSCBN did not assign any other work to SONZA. To perform his work, SONZA only needed his skills and talent. How SONZA
delivered his lines, appeared on television, and sounded on radio were outside ABS-CBNs control. SONZA did not have to render
eight hours of work per day. The Agreement required SONZA to attend only rehearsals and tapings of the shows, as well as pre- and
post-production staff meetings.31 ABS-CBN could not dictate the contents of SONZAs script. However, the Agreement prohibited
SONZA from criticizing in his shows ABS-CBN or its interests.32 The clear implication is that SONZA had a free hand on what to say
or discuss in his shows provided he did not attack ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZAs work.33 ABSCBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved the right to modify the program format and airtime
schedule "for more effective programming."34 ABS-CBNs sole concern was the quality of the shows and their standing in the ratings.
Clearly, ABS-CBN did not exercise control over the means and methods of performance of SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power over the means and methods of the
performance of his work. Although ABS-CBN did have the option not to broadcast SONZAs show, ABS-CBN was still obligated to
pay SONZAs talent fees... Thus, even if ABS-CBN was completely dissatisfied with the means and methods of SONZAs
performance of his work, or even with the quality or product of his work, ABS-CBN could not dismiss or even discipline SONZA. All
that ABS-CBN could do is not to broadcast SONZAs show but ABS-CBN must still pay his talent fees in full.35
Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the obligation to continue paying in full SONZAs
talent fees, did not amount to control over the means and methods of the performance of SONZAs work. ABS-CBN could not
terminate or discipline SONZA even if the means and methods of performance of his work - how he delivered his lines and appeared
on television - did not meet ABS-CBNs approval. This proves that ABS-CBNs control was limited only to the result of SONZAs
work, whether to broadcast the final product or not. In either case, ABS-CBN must still pay SONZAs talent fees in full until the
expiry of the Agreement.
In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court of Appeals ruled that vaudeville performers were independent
contractors although the management reserved the right to delete objectionable features in their shows. Since the management did not
have control over the manner of performance of the skills of the artists, it could only control the result of the work by deleting
objectionable features.37
SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew. No doubt, ABS-CBN
supplied the equipment, crew and airtime needed to broadcast the "Mel & Jay" programs. However, the equipment, crew and airtime
are not the "tools and instrumentalities" SONZA needed to perform his job. What SONZA principally needed were his talent or skills
and the costumes necessary for his appearance.38 Even though ABS-CBN provided SONZA with the place of work and the necessary
equipment, SONZA was still an independent contractor since ABS-CBN did not supervise and control his work. ABS-CBNs sole
concern was for SONZA to display his talent during the airing of the programs.39
A radio broadcast specialist who works under minimal supervision is an independent contractor.40 SONZAs work as television and
radio program host required special skills and talent, which SONZA admittedly possesses. The records do not show that ABS-CBN
exercised any supervision and control over how SONZA utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN subjected him to its rules and standards of
performance. SONZA claims that this indicates ABS-CBNs control "not only [over] his manner of work but also the quality of his
work."
The Agreement stipulates that SONZA shall abide with the rules and standards of performance "covering talents"41 of ABS-CBN.
The Agreement does not require SONZA to comply with the rules and standards of performance prescribed for employees of ABSCBN. The code of conduct imposed on SONZA under the Agreement refers to the "Television and Radio Code of the Kapisanan ng
mga Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN) as its Code of Ethics."42 The KBP code
applies to broadcasters, not to employees of radio and television stations. Broadcasters are not necessarily employees of radio and
television stations. Clearly, the rules and standards of performance referred to in the Agreement are those applicable to talents and not
to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former.43 In this
case, SONZA failed to show that these rules controlled his performance. We find that these general rules are merely guidelines
towards the achievement of the mutually desired result, which are top-rating television and radio programs that comply with standards
of the industry. We have ruled that:

Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the services being
rendered may be accorded the effect of establishing an employer-employee relationship. The facts of this case fall squarely with the
case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually
desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it.44
The Vaughan case also held that one could still be an independent contractor although the hirer reserved certain supervision to insure
the attainment of the desired result. The hirer, however, must not deprive the one hired from performing his services according to his
own initiative.45
Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme form of control which ABS-CBN exercised
over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of ABS-CBN. Even an
independent contractor can validly provide his services exclusively to the hiring party. In the broadcast industry, exclusivity is not
necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry.46 This practice is not designed to
control the means and methods of work of the talent, but simply to protect the investment of the broadcast station. The broadcast
station normally spends substantial amounts of money, time and effort "in building up its talents as well as the programs they appear
in and thus expects that said talents remain exclusive with the station for a commensurate period of time."47 Normally, a much higher
fee is paid to talents who agree to work exclusively for a particular radio or television station. In short, the huge talent fees partially
compensates for exclusivity, as in the present case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which contracted out his services to ABS-CBN. The Labor
Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that MJMDC is a "labor-only"
contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the employee who is ostensibly under the
employ of the "labor-only" contractor; and (3) the principal who is deemed the real employer. Under this scheme, the "labor-only"
contractor is the agent of the principal. The law makes the principal responsible to the employees of the "labor-only contractor" as
if the principal itself directly hired or employed the employees.48 These circumstances are not present in this case.
There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-CBN. MJMDC merely acted as
SONZAs agent. The Agreement expressly states that MJMDC acted as the "AGENT" of SONZA. The records do not show that
MJMDC acted as ABS-CBNs agent. MJMDC, which stands for Mel and Jay Management and Development Corporation, is a
corporation organized and owned by SONZA and TIANGCO. The President and General Manager of MJMDC is SONZA himself. It
is absurd to hold that MJMDC, which is owned, controlled, headed and managed by SONZA, acted as agent of ABS-CBN in entering
into the Agreement with SONZA, who himself is represented by MJMDC. That would make MJMDC the agent of both ABS-CBN
and SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to managing the careers of SONZA and his broadcast
partner, TIANGCO. MJMDC is not engaged in any other business, not even job contracting. MJMDC does not have any other
function apart from acting as agent of SONZA or TIANGCO to promote their careers in the broadcast and television industry.49
Policy Instruction No. 40
SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8 January 1979 finally settled the status
of workers in the broadcast industry. Under this policy, the types of employees in the broadcast industry are the station and program
employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law. There is no legal presumption
that Policy Instruction No. 40 determines SONZAs status. A mere executive issuance cannot exclude independent contractors from

the class of service providers to the broadcast industry. The classification of workers in the broadcast industry into only two groups
under Policy Instruction No. 40 is not binding on this Court, especially when the classification has no basis either in law or in fact.
Affidavits of ABS-CBNs Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando Cruz without giving his counsel the
opportunity to cross-examine these witnesses. SONZA brands these witnesses as incompetent to attest on the prevailing practice in the
radio and television industry. SONZA views the affidavits of these witnesses as misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was never prevented from denying or refuting the allegations in the
affidavits. The Labor Arbiter has the discretion whether to conduct a formal (trial-type) hearing after the submission of the position
papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims and causes of action raised in the complaint excluding those that
may have been amicably settled, and shall be accompanied by all supporting documents including the affidavits of their
respective witnesses which shall take the place of the latters direct testimony. x x x
Section 4. Determination of Necessity of Hearing. Immediately after the submission of the parties of their position
papers/memorandum, the Labor Arbiter shall motu propio determine whether there is need for a formal trial or hearing. At
this stage, he may, at his discretion and for the purpose of making such determination, ask clarificatory questions to further
elicit facts or information, including but not limited to the subpoena of relevant documentary evidence, if any from any party
or witness.50
The Labor Arbiter can decide a case based solely on the position papers and the supporting documents without a formal trial.51 The
holding of a formal hearing or trial is something that the parties cannot demand as a matter of right.52 If the Labor Arbiter is confident
that he can rely on the documents before him, he cannot be faulted for not conducting a formal trial, unless under the particular
circumstances of the case, the documents alone are insufficient. The proceedings before a Labor Arbiter are non-litigious in nature.
Subject to the requirements of due process, the technicalities of law and the rules obtaining in the courts of law do not strictly apply in
proceedings before a Labor Arbiter.
Talents as Independent Contractors
ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat talents like SONZA as
independent contractors. SONZA argues that if such practice exists, it is void for violating the right of labor to security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution53 arises only if there is an employer-employee relationship
under labor laws. Not every performance of services for a fee creates an employer-employee relationship. To hold that every person
who renders services to another for a fee is an employee - to give meaning to the security of tenure clause - will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their services as independent contractors. The right to life
and livelihood guarantees this freedom to contract as independent contractors. The right of labor to security of tenure cannot operate to
deprive an individual, possessed with special skills, expertise and talent, of his right to contract as an independent contractor. An
individual like an artist or talent has a right to render his services without any one controlling the means and methods by which he
performs his art or craft. This Court will not interpret the right of labor to security of tenure to compel artists and talents to render their
services only as employees. If radio and television program hosts can render their services only as employees, the station owners and
managers can dictate to the radio and television hosts what they say in their shows. This is not conducive to freedom of the press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code ("NIRC")54 in relation to Republic Act No. 7716,55 as amended by Republic Act No. 8241,56
treats talents, television and radio broadcasters differently. Under the NIRC, these professionals are subject to the 10% value-added
tax ("VAT") on services they render. Exempted from the VAT are those under an employer-employee relationship.57 This different tax
treatment accorded to talents and broadcasters bolters our conclusion that they are independent contractors, provided all the basic
elements of a contractual relationship are present as in this case.

Nature of SONZAs Claims


SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service incentive leave, signing bonus,
travel allowance, and amounts due under the Employee Stock Option Plan. We agree with the findings of the Labor Arbiter and the
Court of Appeals that SONZAs claims are all based on the May 1994 Agreement and stock option plan, and not on the Labor
Code. Clearly, the present case does not call for an application of the Labor Code provisions but an interpretation and implementation
of the May 1994 Agreement. In effect, SONZAs cause of action is for breach of contract which is intrinsically a civil dispute
cognizable by the regular courts.58
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March 1999 in CA-G.R. SP No.
49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 192558

February 15, 2012

BITOY JAVIER (DANILO P. JAVIER), Petitioner,


vs.
FLY ACE CORPORATION/FLORDELYN CASTILLO, Respondents.
DECISION
MENDOZA, J.:
This is a petition under Rule 45 of the Rules of Civil Procedure assailing the March 18, 2010 Decision1 of the Court of Appeals (CA)
and its June 7, 2010 Resolution,2 in CA-G.R. SP No. 109975, which reversed the May 28, 2009 Decision3 of the National Labor
Relations Commission (NLRC) in the case entitled Bitoy Javier v. Fly Ace/Flordelyn Castillo,4 holding that petitioner Bitoy Javier
(Javier) was illegally dismissed from employment and ordering Fly Ace Corporation (Fly Ace) to pay backwages and separation pay
in lieu of reinstatement.
Antecedent Facts
On May 23, 2008, Javier filed a complaint before the NLRC for underpayment of salaries and other labor standard benefits. He
alleged that he was an employee of Fly Ace since September 2007, performing various tasks at the respondents warehouse such as
cleaning and arranging the canned items before their delivery to certain locations, except in instances when he would be ordered to
accompany the companys delivery vehicles, as pahinante; that he reported for work from Monday to Saturday from 7:00 oclock in
the morning to 5:00 oclock in the afternoon; that during his employment, he was not issued an identification card and payslips by the
company; that on May 6, 2008, he reported for work but he was no longer allowed to enter the company premises by the security
guard upon the instruction of Ruben Ong (Mr. Ong), his superior;5 that after several minutes of begging to the guard to allow him to
enter, he saw Ong whom he approached and asked why he was being barred from entering the premises; that Ong replied by saying,
"Tanungin mo anak mo;" 6 that he then went home and discussed the matter with his family; that he discovered that Ong had been
courting his daughter Annalyn after the two met at a fiesta celebration in Malabon City; that Annalyn tried to talk to Ong and convince
him to spare her father from trouble but he refused to accede; that thereafter, Javier was terminated from his employment without
notice; and that he was neither given the opportunity to refute the cause/s of his dismissal from work.
To support his allegations, Javier presented an affidavit of one Bengie Valenzuela who alleged that Javier was a stevedore or
pahinante of Fly Ace from September 2007 to January 2008. The said affidavit was subscribed before the Labor Arbiter (LA).7
For its part, Fly Ace averred that it was engaged in the business of importation and sales of groceries. Sometime in December 2007,
Javier was contracted by its employee, Mr. Ong, as extra helper on a pakyaw basis at an agreed rate of P 300.00 per trip, which was
later increased to P 325.00 in January 2008. Mr. Ong contracted Javier roughly 5 to 6 times only in a month whenever the vehicle of
its contracted hauler, Milmar Hauling Services, was not available. On April 30, 2008, Fly Ace no longer needed the services of Javier.
Denying that he was their employee, Fly Ace insisted that there was no illegal dismissal.8 Fly Ace submitted a copy of its agreement

with Milmar Hauling Services and copies of acknowledgment receipts evidencing payment to Javier for his contracted services
bearing the words, "daily manpower (pakyaw/piece rate pay)" and the latters signatures/initials.
Ruling of the Labor Arbiter
On November 28, 2008, the LA dismissed the complaint for lack of merit on the ground that Javier failed to present proof that he was
a regular employee of Fly Ace. He wrote:
Complainant has no employee ID showing his employment with the Respondent nor any document showing that he received the
benefits accorded to regular employees of the Respondents. His contention that Respondent failed to give him said ID and payslips
implies that indeed he was not a regular employee of Fly Ace considering that complainant was a helper and that Respondent
company has contracted a regular trucking for the delivery of its products.
Respondent Fly Ace is not engaged in trucking business but in the importation and sales of groceries. Since there is a regular hauler to
deliver its products, we give credence to Respondents claim that complainant was contracted on "pakiao" basis.
As to the claim for underpayment of salaries, the payroll presented by the Respondents showing salaries of workers on "pakiao" basis
has evidentiary weight because although the signature of the complainant appearing thereon are not uniform, they appeared to be his
true signature.
xxxx
Hence, as complainant received the rightful salary as shown by the above described payrolls, Respondents are not liable for salary
differentials. 9
Ruling of the NLRC
On appeal with the NLRC, Javier was favored. It ruled that the LA skirted the argument of Javier and immediately concluded that he
was not a regular employee simply because he failed to present proof. It was of the view that a pakyaw-basis arrangement did not
preclude the existence of employer-employee relationship. "Payment by result x x x is a method of compensation and does not define
the essence of the relation. It is a mere method of computing compensation, not a basis for determining the existence or absence of an
employer-employee relationship.10" The NLRC further averred that it did not follow that a worker was a job contractor and not an
employee, just because the work he was doing was not directly related to the employers trade or business or the work may be
considered as "extra" helper as in this case; and that the relationship of an employer and an employee was determined by law and the
same would prevail whatever the parties may call it. In this case, the NLRC held that substantial evidence was sufficient basis for
judgment on the existence of the employer-employee relationship. Javier was a regular employee of Fly Ace because there was
reasonable connection between the particular activity performed by the employee (as a "pahinante") in relation to the usual business
or trade of the employer (importation, sales and delivery of groceries). He may not be considered as an independent contractor because
he could not exercise any judgment in the delivery of company products. He was only engaged as a "helper."
Finding Javier to be a regular employee, the NLRC ruled that he was entitled to a security of tenure. For failing to present proof of a
valid cause for his termination, Fly Ace was found to be liable for illegal dismissal of Javier who was likewise entitled to backwages
and separation pay in lieu of reinstatement. The NLRC thus ordered:
WHEREFORE, premises considered, complainants appeal is partially GRANTED. The assailed Decision of the labor arbiter is
VACATED and a new one is hereby entered holding respondent FLY ACE CORPORATION guilty of illegal dismissal and nonpayment of 13th month pay. Consequently, it is hereby ordered to pay complainant DANILO "Bitoy" JAVIER the following:
1. Backwages -P 45,770.83
2. Separation pay, in lieu of reinstatement - 8,450.00
3. Unpaid 13th month pay (proportionate) - 5,633.33
TOTAL -P 59,854.16
All other claims are dismissed for lack of merit.

SO ORDERED.11
Ruling of the Court of Appeals
On March 18, 2010, the CA annulled the NLRC findings that Javier was indeed a former employee of Fly Ace and reinstated the
dismissal of Javiers complaint as ordered by the LA. The CA exercised its authority to make its own factual determination anent the
issue of the existence of an employer-employee relationship between the parties. According to the CA:
xxx
In an illegal dismissal case the onus probandi rests on the employer to prove that its dismissal was for a valid cause. However, before
a case for illegal dismissal can prosper, an employer-employee relationship must first be established. x x x it is incumbent upon
private respondent to prove the employee-employer relationship by substantial evidence.
xxx
It is incumbent upon private respondent to prove, by substantial evidence, that he is an employee of petitioners, but he failed to
discharge his burden. The non-issuance of a company-issued identification card to private respondent supports petitioners contention
that private respondent was not its employee.12
The CA likewise added that Javiers failure to present salary vouchers, payslips, or other pieces of evidence to bolster his contention,
pointed to the inescapable conclusion that he was not an employee of Fly Ace. Further, it found that Javiers work was not necessary
and desirable to the business or trade of the company, as it was only when there were scheduled deliveries, which a regular hauling
service could not deliver, that Fly Ace would contract the services of Javier as an extra helper. Lastly, the CA declared that the facts
alleged by Javier did not pass the "control test."
He contracted work outside the company premises; he was not required to observe definite hours of work; he was not required to
report daily; and he was free to accept other work elsewhere as there was no exclusivity of his contracted service to the company, the
same being co-terminous with the trip only.13 Since no substantial evidence was presented to establish an employer-employee
relationship, the case for illegal dismissal could not prosper.
The petitioners moved for reconsideration, but to no avail.
Hence, this appeal anchored on the following grounds:
I.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER WAS
NOT A REGULAR EMPLOYEE OF FLY ACE.
II.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER IS
NOT ENTITLED TO HIS MONETARY CLAIMS.14
The petitioner contends that other than its bare allegations and self-serving affidavits of the other employees, Fly Ace has nothing to
substantiate its claim that Javier was engaged on a pakyaw basis. Assuming that Javier was indeed hired on a pakyaw basis, it does not
preclude his regular employment with the company. Even the acknowledgment receipts bearing his signature and the confirming
receipt of his salaries will not show the true nature of his employment as they do not reflect the necessary details of the commissioned
task. Besides, Javiers tasks as pahinante are related, necessary and desirable to the line of business by Fly Ace which is engaged in
the importation and sale of grocery items. "On days when there were no scheduled deliveries, he worked in petitioners warehouse,
arranging and cleaning the stored cans for delivery to clients."15 More importantly, Javier was subject to the control and supervision of
the company, as he was made to report to the office from Monday to Saturday, from 7:00 oclock in the morning until 5:00 oclock in
the afternoon. The list of deliverable goods, together with the corresponding clients and their respective purchases and addresses,
would necessarily have been prepared by Fly Ace. Clearly, he was subjected to compliance with company rules and regulations as
regards working hours, delivery schedule and output, and his other duties in the warehouse.16

The petitioner chiefly relied on Chavez v. NLRC,17 where the Court ruled that payment to a worker on a per trip basis is not significant
because "this is merely a method of computing compensation and not a basis for determining the existence of employer-employee
relationship." Javier likewise invokes the rule that, "in controversies between a laborer and his master, x x x doubts reasonably arising
from the evidence should be resolved in the formers favour. The policy is reflected is no less than the Constitution, Labor Code and
Civil Code."18
Claiming to be an employee of Fly Ace, petitioner asserts that he was illegally dismissed by the latters failure to observe substantive
and procedural due process. Since his dismissal was not based on any of the causes recognized by law, and was implemented without
notice, Javier is entitled to separation pay and backwages.
In its Comment,19 Fly Ace insists that there was no substantial evidence to prove employer-employee relationship. Having a service
contract with Milmar Hauling Services for the purpose of transporting and delivering company products to customers, Fly Ace
contracted Javier as an extra helper or pahinante on a mere "per trip basis." Javier, who was actually a loiterer in the area, only
accompanied and assisted the company driver when Milmar could not deliver or when the exigency of extra deliveries arises for
roughly five to six times a month. Before making a delivery, Fly Ace would turn over to the driver and Javier the delivery vehicle with
its loaded company products. With the vehicle and products in their custody, the driver and Javier "would leave the company premises
using their own means, method, best judgment and discretion on how to deliver, time to deliver, where and [when] to start, and
manner of delivering the products."20
Fly Ace dismisses Javiers claims of employment as baseless assertions. Aside from his bare allegations, he presented nothing to
substantiate his status as an employee. "It is a basic rule of evidence that each party must prove his affirmative allegation. If he claims
a right granted by law, he must prove his claim by competent evidence, relying on the strength of his own evidence and not upon the
weakness of his opponent."21 Invoking the case of Lopez v. Bodega City,22 Fly Ace insists that in an illegal dismissal case, the burden
of proof is upon the complainant who claims to be an employee. It is essential that an employer-employee relationship be proved by
substantial evidence. Thus, it cites:
In an illegal dismissal case, the onus probandi rests on the employer to prove that its dismissal of an employee was for a valid cause.
However, before a case for illegal dismissal can prosper, an employer-employee relationship must first be established.
Fly Ace points out that Javier merely offers factual assertions that he was an employee of Fly Ace, "which are unfortunately not
supported by proof, documentary or otherwise."23 Javier simply assumed that he was an employee of Fly Ace, absent any competent or
relevant evidence to support it. "He performed his contracted work outside the premises of the respondent; he was not even required to
report to work at regular hours; he was not made to register his time in and time out every time he was contracted to work; he was not
subjected to any disciplinary sanction imposed to other employees for company violations; he was not issued a company I.D.; he was
not accorded the same benefits given to other employees; he was not registered with the Social Security System (SSS) as petitioners
employee; and, he was free to leave, accept and engage in other means of livelihood as there is no exclusivity of his contracted
services with the petitioner, his services being co-terminus with the trip only. All these lead to the conclusion that petitioner is not an
employee of the respondents."24
Moreover, Fly Ace claims that it had "no right to control the result, means, manner and methods by which Javier would perform his
work or by which the same is to be accomplished."25 In other words, Javier and the company driver were given a free hand as to how
they would perform their contracted services and neither were they subjected to definite hours or condition of work.
Fly Ace likewise claims that Javiers function as a pahinante was not directly related or necessary to its principal business of
importation and sales of groceries. Even without Javier, the business could operate its usual course as it did not involve the business of
inland transportation. Lastly, the acknowledgment receipts bearing Javiers signature and words "pakiao rate," referring to his earned
salaries on a per trip basis, have evidentiary weight that the LA correctly considered in arriving at the conclusion that Javier was not
an employee of the company.
The Court affirms the assailed CA decision.
It must be noted that the issue of Javiers alleged illegal dismissal is anchored on the existence of an employer-employee relationship
between him and Fly Ace. This is essentially a question of fact. Generally, the Court does not review errors that raise factual
questions. However, when there is conflict among the factual findings of the antecedent deciding bodies like the LA, the NLRC and
the CA, "it is proper, in the exercise of Our equity jurisdiction, to review and re-evaluate the factual issues and to look into the records
of the case and re-examine the questioned findings."26 In dealing with factual issues in labor cases, "substantial evidence that amount
of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion is sufficient."27
As the records bear out, the LA and the CA found Javiers claim of employment with Fly Ace as wanting and deficient. The Court is
constrained to agree. Although Section 10, Rule VII of the New Rules of Procedure of the NLRC28 allows a relaxation of the rules of

procedure and evidence in labor cases, this rule of liberality does not mean a complete dispensation of proof. Labor officials are
enjoined to use reasonable means to ascertain the facts speedily and objectively with little regard to technicalities or formalities but
nowhere in the rules are they provided a license to completely discount evidence, or the lack of it. The quantum of proof required,
however, must still be satisfied. Hence, "when confronted with conflicting versions on factual matters, it is for them in the exercise of
discretion to determine which party deserves credence on the basis of evidence received, subject only to the requirement that their
decision must be supported by substantial evidence."29 Accordingly, the petitioner needs to show by substantial evidence that he was
indeed an employee of the company against which he claims illegal dismissal.
Expectedly, opposing parties would stand poles apart and proffer allegations as different as chalk and cheese. It is, therefore,
incumbent upon the Court to determine whether the party on whom the burden to prove lies was able to hurdle the same. "No
particular form of evidence is required to prove the existence of such employer-employee relationship. Any competent and relevant
evidence to prove the relationship may be admitted.http://www.lawphil.net/judjuris/juri2009/may2009/gr_179652_2009.html - fnt31
Hence, while no particular form of evidence is required, a finding that such relationship exists must still rest on some substantial
evidence. Moreover, the substantiality of the evidence depends on its quantitative as well as its qualitative aspects."30 Although
substantial evidence is not a function of quantity but rather of quality, the x x x circumstances of the instant case demand that
something more should have been proffered. Had there been other proofs of employment, such as x x x inclusion in petitioners
payroll, or a clear exercise of control, the Court would have affirmed the finding of employer-employee relationship."31
In sum, the rule of thumb remains: the onus probandi falls on petitioner to establish or substantiate such claim by the requisite
quantum of evidence.32 "Whoever claims entitlement to the benefits provided by law should establish his or her right thereto x x x."33
Sadly, Javier failed to adduce substantial evidence as basis for the grant of relief.
In this case, the LA and the CA both concluded that Javier failed to establish his employment with Fly Ace. By way of evidence on
this point, all that Javier presented were his self-serving statements purportedly showing his activities as an employee of Fly Ace.
Clearly, Javier failed to pass the substantiality requirement to support his claim. Hence, the Court sees no reason to depart from the
findings of the CA.
While Javier remains firm in his position that as an employed stevedore of Fly Ace, he was made to work in the company premises
during weekdays arranging and cleaning grocery items for delivery to clients, no other proof was submitted to fortify his claim. The
lone affidavit executed by one Bengie Valenzuela was unsuccessful in strengthening Javiers cause. In said document, all Valenzuela
attested to was that he would frequently see Javier at the workplace where the latter was also hired as stevedore.34 Certainly, in
gauging the evidence presented by Javier, the Court cannot ignore the inescapable conclusion that his mere presence at the workplace
falls short in proving employment therein. The supporting affidavit could have, to an extent, bolstered Javiers claim of being tasked
to clean grocery items when there were no scheduled delivery trips, but no information was offered in this subject simply because the
witness had no personal knowledge of Javiers employment status in the company. Verily, the Court cannot accept Javiers statements,
hook, line and sinker.
The Court is of the considerable view that on Javier lies the burden to pass the well-settled tests to determine the existence of an
employer-employee relationship, viz: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employees conduct. Of these elements, the most important criterion is 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
methods by which the result is to be accomplished.35
In this case, Javier was not able to persuade the Court that the above elements exist in his case.1avvphi1 He could not submit
competent proof that Fly Ace engaged his services as a regular employee; that Fly Ace paid his wages as an employee, or that Fly Ace
could dictate what his conduct should be while at work. In other words, Javiers allegations did not establish that his relationship with
Fly Ace had the attributes of an employer-employee relationship on the basis of the above-mentioned four-fold test. Worse, Javier was
not able to refute Fly Aces assertion that it had an agreement with a hauling company to undertake the delivery of its goods. It was
also baffling to realize that Javier did not dispute Fly Aces denial of his services exclusivity to the company. In short, all that Javier
laid down were bare allegations without corroborative proof.
Fly Ace does not dispute having contracted Javier and paid him on a "per trip" rate as a stevedore, albeit on a pakyaw basis. The Court
cannot fail to note that Fly Ace presented documentary proof that Javier was indeed paid on a pakyaw basis per the acknowledgment
receipts admitted as competent evidence by the LA. Unfortunately for Javier, his mere denial of the signatures affixed therein cannot
automatically sway us to ignore the documents because "forgery cannot be presumed and must be proved by clear, positive and
convincing evidence and the burden of proof lies on the party alleging forgery."36
Considering the above findings, the Court does not see the necessity to resolve the second issue presented.

One final note. The Courts decision does not contradict the settled rule that "payment by the piece is just a method of compensation
and does not define the essence of the relation."37 Payment on a piece-rate basis does not negate regular employment. "The term
wage is broadly defined in Article 97 of the Labor Code as remuneration or earnings, capable of being expressed in terms of money
whether fixed or ascertained on a time, task, piece or commission basis. Payment by the piece is just a method of compensation and
does not define the essence of the relations. Nor does the fact that the petitioner is not covered by the SSS affect the employeremployee relationship. However, in determining whether the relationship is that of employer and employee or one of an independent
contractor, each case must be determined on its own facts and all the features of the relationship are to be considered."38 Unfortunately
for Javier, the attendant facts and circumstances of the instant case do not provide the Court with sufficient reason to uphold his
claimed status as employee of Fly Ace.
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 be automatically decided in favor of labor. Management also has its rights which are entitled to respect
and enforcement in the interest of simple fair play. Out of its concern for the less privileged in life, the Court has inclined, more often
than not, toward the worker and upheld his cause in his conflicts with the employer. Such favoritism, however, has not blinded the
Court to the rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and the applicable
law and doctrine.39
WHEREFORE, the petition is DENIED. The March 18, 2010 Decision of the Court of Appeals and its June 7, 2010 Resolution, in
CA-G.R. SP No. 109975, are hereby AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 87700 June 13, 1990
SAN MIGUEL CORPORATION EMPLOYEES UNION-PTGWO, DANIEL S.L. BORBON II, HERMINIA REYES,
MARCELA PURIFICACION, ET AL., petitioners,
vs.
HON. JESUS G. BERSAMIRA, IN HIS CAPACITY AS PRESIDING JUDGE OF BRANCH 166, RTC, PASIG, and SAN
MIGUEL CORPORATION, respondents.
Romeo C. Lagman for petitioners.
Jardeleza, Sobrevinas, Diaz, Mayudini & Bodegon for respondents.

MELENCIO-HERRERA, J.:
Respondent Judge of the Regional Trial Court of Pasig, Branch 166, is taken to task by petitioners in this special civil action for
certiorari and Prohibition for having issued the challenged Writ of Preliminary Injunction on 29 March 1989 in Civil Case No. 57055
of his Court entitled "San Miguel Corporation vs. SMCEU-PTGWO, et als."
Petitioners' plea is that said Writ was issued without or in excess of jurisdiction and with grave abuse of discretion, a labor dispute
being involved. Private respondent San Miguel Corporation (SanMig. for short), for its part, defends the Writ on the ground of
absence of any employer-employee relationship between it and the contractual workers employed by the companies Lipercon
Services, Inc. (Lipercon) and D'Rite Service Enterprises (D'Rite), besides the fact that the Union is bereft of personality to represent
said workers for purposes of collective bargaining. The Solicitor General agrees with the position of SanMig.
The antecedents of the controversy reveal that:
Sometime in 1983 and 1984, SanMig entered into contracts for merchandising services with Lipercon and D'Rite (Annexes K and I,
SanMig's Comment, respectively). These companies are independent contractors duly licensed by the Department of Labor and
Employment (DOLE). SanMig entered into those contracts to maintain its competitive position and in keeping with the imperatives of

efficiency, business expansion and diversity of its operation. In said contracts, it was expressly understood and agreed that the workers
employed by the contractors were to be paid by the latter and that none of them were to be deemed employees or agents of SanMig.
There was to be no employer-employee relation between the contractors and/or its workers, on the one hand, and SanMig on the other.
Petitioner San Miguel Corporation Employees Union-PTWGO (the Union, for brevity) is the duly authorized representative of the
monthly paid rank-and-file employees of SanMig with whom the latter executed a Collective Bargaining Agreement (CBA) effective
1 July 1986 to 30 June 1989 (Annex A, SanMig's Comment). Section 1 of their CBA specifically provides that "temporary,
probationary, or contract employees and workers are excluded from the bargaining unit and, therefore, outside the scope of this
Agreement."
In a letter, dated 20 November 1988 (Annex C, Petition), the Union advised SanMig that some Lipercon and D'Rite workers had
signed up for union membership and sought the regularization of their employment with SMC. The Union alleged that this group of
employees, while appearing to be contractual workers supposedly independent contractors, have been continuously working for
SanMig for a period ranging from six (6) months to fifteen (15) years and that their work is neither casual nor seasonal as they are
performing work or activities necessary or desirable in the usual business or trade of SanMig. Thus, it was contended that there exists
a "labor-only" contracting situation. It was then demanded that the employment status of these workers be regularized.
On 12 January 1989 on the ground that it had failed to receive any favorable response from SanMig, the Union filed a notice of strike
for unfair labor practice, CBA violations, and union busting (Annex D, Petition).
On 30 January 1989, the Union again filed a second notice of strike for unfair labor practice (Annex F, Petition).
As in the first notice of strike. Conciliatory meetings were held on the second notice. Subsequently, the two (2) notices of strike were
consolidated and several conciliation conferences were held to settle the dispute before the National Conciliation and Mediation Board
(NCMB) of DOLE (Annex G, Petition).
Beginning 14 February 1989 until 2 March 1989, series of pickets were staged by Lipercon and D'Rite workers in various SMC plants
and offices.
On 6 March 1989, SMC filed a verified Complaint for Injunction and Damages before respondent Court to enjoin the Union from:
a. representing and/or acting for and in behalf of the employees of LIPERCON and/or D'RITE for the purposes of
collective bargaining;
b. calling for and holding a strike vote, to compel plaintiff to hire the employees or workers of LIPERCON and
D'RITE;
c. inciting, instigating and/or inducing the employees or workers of LIPERCON and D'RITE to demonstrate and/or
picket at the plants and offices of plaintiff within the bargaining unit referred to in the CBA,...;
d. staging a strike to compel plaintiff to hire the employees or workers of LIPERCON and D'RITE;
e. using the employees or workers of LIPERCON AND D'RITE to man the strike area and/or picket lines and/or
barricades which the defendants may set up at the plants and offices of plaintiff within the bargaining unit referred to
in the CBA ...;
f. intimidating, threatening with bodily harm and/or molesting the other employees and/or contract workers of
plaintiff, as well as those persons lawfully transacting business with plaintiff at the work places within the
bargaining unit referred to in the CBA, ..., to compel plaintiff to hire the employees or workers of LIPERCON and
D'RITE;
g. blocking, preventing, prohibiting, obstructing and/or impeding the free ingress to, and egress from, the work
places within the bargaining unit referred to in the CBA .., to compel plaintiff to hire the employees or workers of
LIPERCON and D'RITE;
h. preventing and/or disrupting the peaceful and normal operation of plaintiff at the work places within the
bargaining unit referred to in the CBA, Annex 'C' hereof, to compel plaintiff to hire the employees or workers of
LIPERCON and D'RITE. (Annex H, Petition)

Respondent Court found the Complaint sufficient in form and substance and issued a Temporary Restraining Order for the purpose of
maintaining the status quo, and set the application for Injunction for hearing.
In the meantime, on 13 March 1989, the Union filed a Motion to Dismiss SanMig's Complaint on the ground of lack of jurisdiction
over the case/nature of the action, which motion was opposed by SanMig. That Motion was denied by respondent Judge in an Order
dated 11 April 1989.
After several hearings on SanMig's application for injunctive relief, where the parties presented both testimonial and documentary
evidence on 25 March 1989, respondent Court issued the questioned Order (Annex A, Petition) granting the application and enjoining
the Union from Committing the acts complained of, supra. Accordingly, on 29 March 1989, respondent Court issued the
corresponding Writ of Preliminary Injunction after SanMig had posted the required bond of P100,000.00 to answer for whatever
damages petitioners may sustain by reason thereof.
In issuing the Injunction, respondent Court rationalized:
The absence of employer-employee relationship negates the existence of labor dispute. Verily, this court has
jurisdiction to take cognizance of plaintiff's grievance.
The evidence so far presented indicates that plaintiff has contracts for services with Lipercon and D'Rite. The
application and contract for employment of the defendants' witnesses are either with Lipercon or D'Rite. What could
be discerned is that there is no employer-employee relationship between plaintiff and the contractual workers
employed by Lipercon and D'Rite. This, however, does not mean that a final determination regarding the question of
the existence of employer-employee relationship has already been made. To finally resolve this dispute, the court
must extensively consider and delve into the manner of selection and engagement of the putative employee; the
mode of payment of wages; the presence or absence of a power of dismissal; and the Presence or absence of a power
to control the putative employee's conduct. This necessitates a full-blown trial. If the acts complained of are not
restrained, plaintiff would, undoubtedly, suffer irreparable damages. Upon the other hand, a writ of injunction does
not necessarily expose defendants to irreparable damages.
Evidently, plaintiff has established its right to the relief demanded. (p. 21, Rollo)
Anchored on grave abuse of discretion, petitioners are now before us seeking nullification of the challenged Writ. On 24 April 1989,
we issued a Temporary Restraining Order enjoining the implementation of the Injunction issued by respondent Court. The Union
construed this to mean that "we can now strike," which it superimposed on the Order and widely circulated to entice the Union
membership to go on strike. Upon being apprised thereof, in a Resolution of 24 May 1989, we required the parties to "RESTORE the
status quo ante declaration of strike" (p. 2,62 Rollo).
In the meantime, however, or on 2 May 1989, the Union went on strike. Apparently, some of the contractual workers of Lipercon and
D'Rite had been laid off. The strike adversely affected thirteen (13) of the latter's plants and offices.
On 3 May 1989, the National Conciliation and Mediation Board (NCMB) called the parties to conciliation. The Union stated that it
would lift the strike if the thirty (30) Lipercon and D'Rite employees were recalled, and discussion on their other demands, such as
wage distortion and appointment of coordinators, were made. Effected eventually was a Memorandum of Agreement between SanMig
and the Union that "without prejudice to the outcome of G.R. No. 87700 (this case) and Civil Case No. 57055 (the case below), the
laid-off individuals ... shall be recalled effective 8 May 1989 to their former jobs or equivalent positions under the same terms and
conditions prior to "lay-off" (Annex 15, SanMig Comment). In turn, the Union would immediately lift the pickets and return to work.
After an exchange of pleadings, this Court, on 12 October 1989, gave due course to the Petition and required the parties to submit their
memoranda simultaneously, the last of which was filed on 9 January 1990.
The focal issue for determination is whether or not respondent Court correctly assumed jurisdiction over the present controversy and
properly issued the Writ of Preliminary Injunction to the resolution of that question, is the matter of whether, or not the case at bar
involves, or is in connection with, or relates to a labor dispute. An affirmative answer would bring the case within the original and
exclusive jurisdiction of labor tribunals to the exclusion of the regular Courts.
Petitioners take the position that 'it is beyond dispute that the controversy in the court a quo involves or arose out of a labor dispute
and is directly connected or interwoven with the cases pending with the NCMB-DOLE, and is thus beyond the ambit of the public
respondent's jurisdiction. That the acts complained of (i.e., the mass concerted action of picketing and the reliefs prayed for by the
private respondent) are within the competence of labor tribunals, is beyond question" (pp. 6-7, Petitioners' Memo).

On the other hand, SanMig denies the existence of any employer-employee relationship and consequently of any labor dispute
between itself and the Union. SanMig submits, in particular, that "respondent Court is vested with jurisdiction and judicial competence
to enjoin the specific type of strike staged by petitioner union and its officers herein complained of," for the reasons that:
A. The exclusive bargaining representative of an employer unit cannot strike to compel the employer to hire and
thereby create an employment relationship with contractual workers, especially were the contractual workers were
recognized by the union, under the governing collective bargaining agreement, as excluded from, and therefore
strangers to, the bargaining unit.
B. A strike is a coercive economic weapon granted the bargaining representative only in the event of a deadlock in a
labor dispute over 'wages, hours of work and all other and of the employment' of the employees in the unit. The
union leaders cannot instigate a strike to compel the employer, especially on the eve of certification elections, to hire
strangers or workers outside the unit, in the hope the latter will help re-elect them.
C. Civil courts have the jurisdiction to enjoin the above because this specie of strike does not arise out of a labor
dispute, is an abuse of right, and violates the employer's constitutional liberty to hire or not to hire. (SanMig's
Memorandum, pp. 475-476, Rollo).
We find the Petition of a meritorious character.
A "labor dispute" as defined in Article 212 (1) of the Labor Code includes "any controversy or matter concerning terms and conditions
of employment or the association or representation of persons in negotiating, fixing, maintaining, changing, or arranging the terms and
conditions of employment, regardless of whether the disputants stand in the proximate relation of employer and employee."
While it is SanMig's submission that no employer-employee relationship exists between itself, on the one hand, and the contractual
workers of Lipercon and D'Rite on the other, a labor dispute can nevertheless exist "regardless of whether the disputants stand in the
proximate relationship of employer and employee" (Article 212 [1], Labor Code, supra) provided the controversy concerns, among
others, the terms and conditions of employment or a "change" or "arrangement" thereof (ibid). Put differently, and as defined by law,
the existence of a labor dispute is not negative by the fact that the plaintiffs and defendants do not stand in the proximate relation of
employer and employee.
That a labor dispute, as defined by the law, does exist herein is evident. At bottom, what the Union seeks is to regularize the status of
the employees contracted by Lipercon and D'Rite in effect, that they be absorbed into the working unit of SanMig. This matter
definitely dwells on the working relationship between said employees vis-a-vis SanMig. Terms, tenure and conditions of their
employment and the arrangement of those terms are thus involved bringing the matter within the purview of a labor dispute. Further,
the Union also seeks to represent those workers, who have signed up for Union membership, for the purpose of collective bargaining.
SanMig, for its part, resists that Union demand on the ground that there is no employer-employee relationship between it and those
workers and because the demand violates the terms of their CBA. Obvious then is that representation and association, for the purpose
of negotiating the conditions of employment are also involved. In fact, the injunction sought by SanMig was precisely also to prevent
such representation. Again, the matter of representation falls within the scope of a labor dispute. Neither can it be denied that the
controversy below is directly connected with the labor dispute already taken cognizance of by the NCMB-DOLE (NCMB-NCR- NS01- 021-89; NCMB NCR NS-01-093-83).
Whether or not the Union demands are valid; whether or not SanMig's contracts with Lipercon and D'Rite constitute "labor-only"
contracting and, therefore, a regular employer-employee relationship may, in fact, be said to exist; whether or not the Union can
lawfully represent the workers of Lipercon and D'Rite in their demands against SanMig in the light of the existing CBA; whether or
not the notice of strike was valid and the strike itself legal when it was allegedly instigated to compel the employer to hire strangers
outside the working unit; those are issues the resolution of which call for the application of labor laws, and SanMig's cause's of
action in the Court below are inextricably linked with those issues.
The precedent in Layno vs. de la Cruz (G.R. No. L-29636, 30 April 1965, 13 SCRA 738) relied upon by SanMig is not controlling as
in that case there was no controversy over terms, tenure or conditions, of employment or the representation of employees that called
for the application of labor laws. In that case, what the petitioning union demanded was not a change in working terms and conditions,
or the representation of the employees, but that its members be hired as stevedores in the place of the members of a rival union, which
petitioners wanted discharged notwithstanding the existing contract of the arrastre company with the latter union. Hence, the ruling
therein, on the basis of those facts unique to that case, that such a demand could hardly be considered a labor dispute.
As the case is indisputably linked with a labor dispute, jurisdiction belongs to the labor tribunals. As explicitly provided for in Article
217 of the Labor Code, prior to its amendment by R.A. No. 6715 on 21 March 1989, since the suit below was instituted on 6 March
1989, Labor Arbiters have original and exclusive jurisdiction to hear and decide the following cases involving all workers including

"1. unfair labor practice cases; 2. those that workers may file involving wages, hours of work and other terms and conditions of
employment; ... and 5. cases arising from any violation of Article 265 of this Code, including questions involving the legality of striker
and lockouts. ..." Article 217 lays down the plain command of the law.
The claim of SanMig that the action below is for damages under Articles 19, 20 and 21 of the Civil Code would not suffice to keep the
case within the jurisdictional boundaries of regular Courts. That claim for damages is interwoven with a labor dispute existing
between the parties and would have to be ventilated before the administrative machinery established for the expeditious settlement of
those disputes. To allow the action filed below to prosper would bring about "split jurisdiction" which is obnoxious to the orderly
administration of justice (Philippine Communications, Electronics and Electricity Workers Federation vs. Hon. Nolasco, L-24984, 29
July 1968, 24 SCRA 321).
We recognize the proprietary right of SanMig to exercise an inherent management prerogative and its best business judgment to
determine whether it should contract out the performance of some of its work to independent contractors. However, 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 (Section 3, Article XIII, 1987 Constitution) equally call for recognition and protection. Those contending
interests must be placed in proper perspective and equilibrium.
WHEREFORE, the Writ of certiorari is GRANTED and the Orders of respondent Judge of 25 March 1989 and 29 March 1989 are
SET ASIDE. The Writ of Prohibition is GRANTED and respondent Judge is enjoined from taking any further action in Civil Case No.
57055 except for the purpose of dismissing it. The status quo ante declaration of strike ordered by the Court on 24 May 1989 shall be
observed pending the proceedings in the National Conciliation Mediation Board-Department of Labor and Employment, docketed as
NCMB-NCR-NS-01-02189 and NCMB-NCR-NS-01-093-83. No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 185251

October 2, 2009

RAUL G. LOCSIN and EDDIE B. TOMAQUIN, Petitioners,


vs.
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, Respondent.
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari under Rule 45 seeks the reversal of the May 6, 2008 Decision1 and November 4, 2008
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 97398, entitled Philippine Long Distance Telephone Company v.
National Labor Relations Commission, Raul G. Locsin and Eddie B. Tomaquin. The assailed decision set aside the Resolutions of the
National Labor Relations Commission (NLRC) dated October 28, 2005 and August 28, 2006 which in turn affirmed the Decision
dated February 13, 2004 of the Labor Arbiter. The assailed resolution, on the other hand, denied petitioners motion for
reconsideration of the assailed decision.
The Facts
On November 1, 1990, respondent Philippine Long Distance Telephone Company (PLDT) and the Security and Safety Corporation of
the Philippines (SSCP) entered into a Security Services Agreement3 (Agreement) whereby SSCP would provide armed security guards
to PLDT to be assigned to its various offices.
Pursuant to such agreement, petitioners Raul Locsin and Eddie Tomaquin, among other security guards, were posted at a PLDT office.

On August 30, 2001, respondent issued a Letter dated August 30, 2001 terminating the Agreement effective October 1, 2001.4
Despite the termination of the Agreement, however, petitioners continued to secure the premises of their assigned office. They were
allegedly directed to remain at their post by representatives of respondent. In support of their contention, petitioners provided the
Labor Arbiter with copies of petitioner Locsins pay slips for the period of January to September 2002.5
Then, on September 30, 2002, petitioners services were terminated.
Thus, petitioners filed a complaint before the Labor Arbiter for illegal dismissal and recovery of money claims such as overtime pay,
holiday pay, premium pay for holiday and rest day, service incentive leave pay, Emergency Cost of Living Allowance, and moral and
exemplary damages against PLDT.
The Labor Arbiter rendered a Decision finding PLDT liable for illegal dismissal. It was explained in the Decision that petitioners were
found to be employees of PLDT and not of SSCP. Such conclusion was arrived at with the factual finding that petitioners continued to
serve as guards of PLDTs offices. As such employees, petitioners were entitled to substantive and procedural due process before
termination of employment. The Labor Arbiter held that respondent failed to observe such due process requirements. The dispositive
portion of the Labor Arbiters Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering respondent Philippine Long Distance and Telephone
Company (PLDT) to pay complainants Raul E. Locsin and Eddie Tomaquin their separation pay and back wages computed as follows:
NAME

SEPARATION PAY

BACKWAGES

1. Raul E. Locsin

P127,500.00

P240,954.67

2. Eddie B. Tomaquin

P127,500.00

P240,954.67

P736,909.34
All other claims are DISMISSED for want of factual basis.
Let the computation made by the Computation and Examination Unit form part of this decision.
SO ORDERED.
PLDT appealed the above Decision to the NLRC which rendered a Resolution affirming in toto the Arbiters Decision.
Thus, PDLT filed a Motion for Reconsideration of the NLRCs Resolution which was also denied.
Consequently, PLDT filed a Petition for Certiorari with the CA asking for the nullification of the Resolution issued by the NLRC as
well as the Labor Arbiters Decision. The CA rendered the assailed decision granting PLDTs petition and dismissing petitioners
complaint. The dispositive portion of the CA Decision provides:
WHEREFORE, the instant Petition for Certiorari is GRANTED. The Resolutions dated October 28, 2005 and August 28, 2006 of the
National Labor Relations Commission are ANNULLED and SET ASIDE. Private respondents complaint against Philippine Long
Distance Telephone Company is DISMISSED.
SO ORDERED.
The CA applied the four-fold test in order to determine the existence of an employer-employee relationship between the parties but did
not find such relationship. It determined that SSCP was not a labor-only contractor and was an independent contractor having
substantial capital to operate and conduct its own business. The CA further bolstered its decision by citing the Agreement whereby it
was stipulated that there shall be no employer-employee relationship between the security guards and PLDT.

Anent the pay slips that were presented by petitioners, the CA noted that those were issued by SSCP and not PLDT; hence, SSCP
continued to pay the salaries of petitioners after the Agreement. This fact allegedly proved that petitioners continued to be employees
of SSCP albeit performing their work at PLDTs premises.
From such assailed decision, petitioners filed a motion for reconsideration which was denied in the assailed resolution.
Hence, we have this petition.
The Issues
1. Whether or not; complainants extended services to the respondent for one (1) year from October 1, 2001, the effectivity of
the termination of the contract of complainants agency SSCP, up to September 30, 2002, without a renewed contract,
constitutes an employer-employee relationship between respondent and the complainants.
2. Whether or not; in accordance to the provision of the Article 280 of the Labor Code, complainants extended services to the
respondent for another one (1) year without a contract be considered as contractual employment.
3. Whether or not; in accordance to the provision of the Article 280 of the Labor Code, does complainants thirteen (13) years
of service to the respondent with manifestation to the respondent thirteen (13) years renewal of its security contract with the
complainant agency SSCP, can be considered only as "seasonal in nature" or fixed as [specific projects] or undertakings and
its completion or termination can be dictated as [controlled] by the respondent anytime they wanted to.
4. Whether or not; complainants from being an alleged contractual employees of the respondent for thirteen (13) years as they
were then covered by a contract, becomes regular employees of the respondent as the one (1) year extended services of the
complainants were not covered by a contract, and can be considered as direct employment pursuant to the provision of the
Article 280 of the Labor Code.
5. Whether or not; the Court of Appeals committed grave abuse of discretion when it set aside and [annulled] the labor
[arbiters] decision and of the NLRCs resolution declaring the dismissal of the complainant as illegal.6
The Courts Ruling
This petition is hereby granted.
An Employer-Employee
Relationship Existed Between the Parties
It is beyond cavil that there was no employer-employee relationship between the parties from the time of petitioners first assignment
to respondent by SSCP in 1988 until the alleged termination of the Agreement between respondent and SSCP. In fact, this was the
conclusion that was reached by this Court in Abella v. Philippine Long Distance Telephone Company,7 where we ruled that petitioners
therein, including herein petitioners, cannot be considered as employees of PLDT. It bears pointing out that petitioners were among
those declared to be employees of their respective security agencies and not of PLDT.
The only issue in this case is whether petitioners became employees of respondent after the Agreement between SSCP and respondent
was terminated.
This must be answered in the affirmative.
Notably, respondent does not deny the fact that petitioners remained in the premises of their offices even after the Agreement was
terminated. And it is this fact that must be explained.
To recapitulate, the CA, in rendering a decision in favor of respondent, found that: (1) petitioners failed to prove that SSCP was a
labor-only contractor; and (2) petitioners are employees of SSCP and not of PLDT.
In arriving at such conclusions, the CA relied on the provisions of the Agreement, wherein SSCP undertook to supply PLDT with the
required security guards, while furnishing PLDT with a performance bond in the amount of PhP 707,000. Moreover, the CA gave
weight to the provision in the Agreement that SSCP warranted that it "carry on an independent business and has substantial capital or
investment in the form of equipment, work premises, and other materials which are necessary in the conduct of its business."

Further, in determining that no employer-employee relationship existed between the parties, the CA quoted the express provision of
the Agreement, stating that no employer-employee relationship existed between the parties herein. The CA disregarded the pay slips
of Locsin considering that they were in fact issued by SSCP and not by PLDT.
From the foregoing explanation of the CA, the fact remains that petitioners remained at their post after the termination of the
Agreement. Notably, in its Comment dated March 10, 2009,8 respondent never denied that petitioners remained at their post until
September 30, 2002. While respondent denies the alleged circumstances stated by petitioners, that they were told to remain at their
post by respondents Security Department and that they were informed by SSCP Operations Officer Eduardo Juliano that their salaries
would be coursed through SSCP as per arrangement with PLDT, it does not state why they were not made to vacate their posts.
Respondent said that it did not know why petitioners remained at their posts.
Rule 131, Section 3(y) of the Rules of Court provides:
SEC. 3. Disputable presumptions.The following presumptions are satisfactory if uncontradicted, but may be contradicted and
overcome by other evidence:
xxxx
(y) That things have happened according to the ordinary course of nature and the ordinary habits of life.
In the ordinary course of things, responsible business owners or managers would not allow security guards of an agency with whom
the owners or managers have severed ties with to continue to stay within the business premises. This is because upon the termination
of the owners or managers agreement with the security agency, the agencys undertaking of liability for any damage that the security
guard would cause has already been terminated. Thus, in the event of an accident or otherwise damage caused by such security guards,
it would be the business owners and/or managers who would be liable and not the agency. The business owners or managers would,
therefore, be opening themselves up to liability for acts of security guards over whom the owners or managers allegedly have no
control.
At the very least, responsible business owners or managers would inquire or learn why such security guards were remaining at their
posts, and would have a clear understanding of the circumstances of the guards stay. It is but logical that responsible business owners
or managers would be aware of the situation in their premises.
We point out that with respondents hypothesis, it would seem that SSCP was paying petitioners salaries while securing respondents
premises despite the termination of their Agreement. Obviously, it would only be respondent that would benefit from such a situation.
And it is seriously doubtful that a security agency that was established for profit would allow its security guards to secure respondents
premises when the Agreement was already terminated.
From the foregoing circumstances, reason dictates that we conclude that petitioners remained at their post under the instructions of
respondent. We can further conclude that respondent dictated upon petitioners that the latter perform their regular duties to secure the
premises during operating hours. This, to our mind and under the circumstances, is sufficient to establish the existence of an
employer-employee relationship. Certainly, the facts as narrated by petitioners are more believable than the irrational denials made by
respondent. Thus, we ruled in Lee Eng Hong v. Court of Appeals:9
Evidence, to be believed, must not only proceed from the mouth of a credible witness, but it must be credible in itself such as the
common experience and observation of mankind can approve as probable under the circumstances. We have no test of the truth of
human testimony, except its conformity to our knowledge, observation and experience. Whatever is repugnant to these belongs to the
miraculous and is outside judicial cognizance (Castaares v. Court of Appeals, 92 SCRA 568 [1979]).
To reiterate, while respondent and SSCP no longer had any legal relationship with the termination of the Agreement, petitioners
remained at their post securing the premises of respondent while receiving their salaries, allegedly from SSCP. Clearly, such a
situation makes no sense, and the denials proffered by respondent do not shed any light to the situation. It is but reasonable to
conclude that, with the behest and, presumably, directive of respondent, petitioners continued with their services. Evidently, such are
indicia of control that respondent exercised over petitioners.
Such power of control has been explained as the "right to control not only the end to be achieved but also the means to be used in
reaching such end."10 With the conclusion that respondent directed petitioners to remain at their posts and continue with their duties, it
is clear that respondent exercised the power of control over them; thus, the existence of an employer-employee relationship.

In Tongko v. The Manufacturers Life Insurance Co. (Phils.) Inc.,11 we reiterated the oft repeated rule that control is the most important
element in the determination of the existence of an employer-employee relationship:
In the determination of whether an employer-employee relationship exists between two parties, this Court applies the four-fold test to
determine the existence of the elements of such relationship. In Pacific Consultants International Asia, Inc. v. Schonfeld, the Court set
out the elements of an employer-employee relationship, thus:
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
employers power to control the employees conduct. It is the so-called "control test" which constitutes the most important index of
the existence of the employer-employee relationship 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. Stated otherwise, 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 means to be used in reaching such end.
Furthermore, Article 106 of the Labor Code contains a provision on contractors, to wit:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the performance of the
formers work, the employees of the contractor and of the latters subcontractor, if any, shall be paid in accordance with the provisions
of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer
shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under
the contract, in the same manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting-out of labor to protect the
rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between laboronly contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties
involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this
Code.1avvphi1
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. (Emphasis supplied.)
Thus, the Secretary of Labor issued Department Order No. 18-2002, Series of 2002, implementing Art. 106 as follows:
Section 5. Prohibition against labor-only contracting.Labor-only contracting is hereby declared prohibited. For this purpose, laboronly contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to
perform a job, work or service for a principal, and any of the following elements are present:
(i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to
be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities
which are directly related to the main business of the principal; or
(ii) the contractor does not exercise the right to control over the performance of the work of the contractual employee.
The foregoing provisions shall be without prejudice to the application of Article 248 (C) of the Labor Code, as amended.
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment,
implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or
completion of the job, work or service contracted out.
The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers are performed, to
determine not only the end to be achieved, but also the manner and means to be used in reaching that end.
On the other hand, Sec. 7 of the department order contains the consequence of such labor-only contracting:

Section 7. Existence of an employer-employee relationship.The contractor or subcontractor shall be considered the employer of the
contractual employee for purposes of enforcing the provisions of the Labor Code and other social legislation. The principal, however,
shall be solidarily liable with the contractor in the event of any violation of any provision of the Labor Code, including the failure to
pay wages.
The principal shall be deemed the employer of the contractual employee in any of the following cases as declared by a competent
authority:
(a) where there is labor-only contracting; or
(b) where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions) hereof. (Emphasis
supplied.)
Evidently, respondent having the power of control over petitioners must be considered as petitioners employerfrom the termination
of the Agreement onwardsas this was the only time that any evidence of control was exhibited by respondent over petitioners and in
light of our ruling in Abella.12 Thus, as aptly declared by the NLRC, petitioners were entitled to the rights and benefits of employees
of respondent, including due process requirements in the termination of their services.
Both the Labor Arbiter and NLRC found that respondent did not observe such due process requirements. Having failed to do so,
respondent is guilty of illegal dismissal.
WHEREFORE, we SET ASIDE the CAs May 6, 2008 Decision and November 4, 2008 Resolution in CA-G.R. SP No. 97398. We
hereby REINSTATE the Labor Arbiters Decision dated February 13, 2004 and the NLRCs Resolutions dated October 28, 2005 and
August 28, 2006.
No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 179652

March 6, 2012

PEOPLE'S BROADCASTING SERVICE (BOMBO RADYO PHILS., INC.), Petitioner,


vs.
THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT, THE REGIONAL DIRECTOR, DOLE
REGION VII, and JANDELEON JUEZAN, Respondents.
RESOLUTION
VELASCO, JR., J.:
In a Petition for Certiorari under Rule 65, petitioner Peoples Broadcasting Service, Inc. (Bombo Radyo Phils., Inc.) questioned the
Decision and Resolution of the Court of Appeals (CA) dated October 26, 2006 and June 26, 2007, respectively, in C.A. G.R. CEB-SP
No. 00855.
Private respondent Jandeleon Juezan filed a complaint against petitioner with the Department of Labor and Employment (DOLE)
Regional Office No. VII, Cebu City, for illegal deduction, nonpayment of service incentive leave, 13th month pay, premium pay for
holiday and rest day and illegal diminution of benefits, delayed payment of wages and noncoverage of SSS, PAG-IBIG and
Philhealth.1 After the conduct of summary investigations, and after the parties submitted their position papers, the DOLE Regional
Director found that private respondent was an employee of petitioner, and was entitled to his money claims.2 Petitioner sought
reconsideration of the Directors Order, but failed. The Acting DOLE Secretary dismissed petitioners appeal on the ground that
petitioner submitted a Deed of Assignment of Bank Deposit instead of posting a cash or surety bond. When the matter was brought
before the CA, where petitioner claimed that it had been denied due process, it was held that petitioner was accorded due process as it

had been given the opportunity to be heard, and that the DOLE Secretary had jurisdiction over the matter, as the jurisdictional
limitation imposed by Article 129 of the Labor Code on the power of the DOLE Secretary under Art. 128(b) of the Code had been
repealed by Republic Act No. (RA) 7730.3
In the Decision of this Court, the CA Decision was reversed and set aside, and the complaint against petitioner was dismissed. The
dispositive portion of the Decision reads as follows:
WHEREFORE, the petition is GRANTED. The Decision dated 26 October 2006 and the Resolution dated 26 June 2007 of the Court
of Appeals in C.A. G.R. CEB-SP No. 00855 are REVERSED and SET ASIDE. The Order of the then Acting Secretary of the
Department of Labor and Employment dated 27 January 2005 denying petitioners appeal, and the Orders of the Director, DOLE
Regional Office No. VII, dated 24 May 2004 and 27 February 2004, respectively, are ANNULLED. The complaint against petitioner
is DISMISSED.4
The Court found that there was no employer-employee relationship between petitioner and private respondent. It was held that while
the DOLE may make a determination of the existence of an employer-employee relationship, this function could not be co-extensive
with the visitorial and enforcement power provided in Art. 128(b) of the Labor Code, as amended by RA 7730. The National Labor
Relations Commission (NLRC) was held to be the primary agency in determining the existence of an employer-employee relationship.
This was the interpretation of the Court of the clause "in cases where the relationship of employer-employee still exists" in Art.
128(b).5
From this Decision, the Public Attorneys Office (PAO) filed a Motion for Clarification of Decision (with Leave of Court). The PAO
sought to clarify as to when the visitorial and enforcement power of the DOLE be not considered as co-extensive with the power to
determine the existence of an employer-employee relationship.6 In its Comment,7 the DOLE sought clarification as well, as to the
extent of its visitorial and enforcement power under the Labor Code, as amended.
The Court treated the Motion for Clarification as a second motion for reconsideration, granting said motion and reinstating the
petition.8 It is apparent that there is a need to delineate the jurisdiction of the DOLE Secretary vis--vis that of the NLRC.
Under Art. 129 of the Labor Code, the power of the DOLE and its duly authorized hearing officers to hear and decide any matter
involving the recovery of wages and other monetary claims and benefits was qualified by the proviso that the complaint not include a
claim for reinstatement, or that the aggregate money claims not exceed PhP 5,000. RA 7730, or an Act Further Strengthening the
Visitorial and Enforcement Powers of the Secretary of Labor, did away with the PhP 5,000 limitation, allowing the DOLE Secretary to
exercise its visitorial and enforcement power for claims beyond PhP 5,000. The only qualification to this expanded power of the
DOLE was only that there still be an existing employer-employee relationship.
It is conceded that if there is no employer-employee relationship, whether it has been terminated or it has not existed from the start,
the DOLE has no jurisdiction. Under Art. 128(b) of the Labor Code, as amended by RA 7730, the first sentence reads,
"Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of employeremployee still exists, the Secretary of Labor and Employment or his duly authorized representatives shall have the power to issue
compliance orders to give effect to the labor standards provisions of this Code and other labor legislation based on the findings of
labor employment and enforcement officers or industrial safety engineers made in the course of inspection." It is clear and beyond
debate that an employer-employee relationship must exist for the exercise of the visitorial and enforcement power of the DOLE. The
question now arises, may the DOLE make a determination of whether or not an employer-employee relationship exists, and if so, to
what extent?
The first portion of the question must be answered in the affirmative.
The prior decision of this Court in the present case accepts such answer, but places a limitation upon the power of the DOLE, that is,
the determination of the existence of an employer-employee relationship cannot be co-extensive with the visitorial and enforcement
power of the DOLE. But even in conceding the power of the DOLE to determine the existence of an employer-employee relationship,
the Court held that the determination of the existence of an employer-employee relationship is still primarily within the power of the
NLRC, that any finding by the DOLE is merely preliminary.
This conclusion must be revisited.
No limitation in the law was placed upon the power of the DOLE to determine the existence of an employer-employee relationship.
No procedure was laid down where the DOLE would only make a preliminary finding, that the power was primarily held by the
NLRC. The law did not say that the DOLE would first seek the NLRCs determination of the existence of an employer-employee
relationship, or that should the existence of the employer-employee relationship be disputed, the DOLE would refer the matter to the

NLRC. The DOLE must have the power to determine whether or not an employer-employee relationship exists, and from there to
decide whether or not to issue compliance orders in accordance with Art. 128(b) of the Labor Code, as amended by RA 7730.
The DOLE, in determining the existence of an employer-employee relationship, has a ready set of guidelines to follow, the same guide
the courts themselves use. The elements to determine the existence of an employment relationship are: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; (4) the employers power to control the
employees conduct.9 The use of this test is not solely limited to the NLRC. The DOLE Secretary, or his or her representatives, can
utilize the same test, even in the course of inspection, making use of the same evidence that would have been presented before the
NLRC.
The determination of the existence of an employer-employee relationship by the DOLE must be respected. The expanded visitorial
and enforcement power of the DOLE granted by RA 7730 would be rendered nugatory if the alleged employer could, by the simple
expedient of disputing the employer-employee relationship, force the referral of the matter to the NLRC. The Court issued the
declaration that at least a prima facie showing of the absence of an employer-employee relationship be made to oust the DOLE of
jurisdiction. But it is precisely the DOLE that will be faced with that evidence, and it is the DOLE that will weigh it, to see if the same
does successfully refute the existence of an employer-employee relationship.
If the DOLE makes a finding that there is an existing employer-employee relationship, it takes cognizance of the matter, to the
exclusion of the NLRC. The DOLE would have no jurisdiction only if the employer-employee relationship has already been
terminated, or it appears, upon review, that no employer-employee relationship existed in the first place.
The Court, in limiting the power of the DOLE, gave the rationale that such limitation would eliminate the prospect of competing
conclusions between the DOLE and the NLRC. The prospect of competing conclusions could just as well have been eliminated by
according respect to the DOLE findings, to the exclusion of the NLRC, and this We believe is the more prudent course of action to
take.
This is not to say that the determination by the DOLE is beyond question or review.1avvphi1 Suffice it to say, there are judicial
remedies such as a petition for certiorari under Rule 65 that may be availed of, should a party wish to dispute the findings of the
DOLE.
It must also be remembered that the power of the DOLE to determine the existence of an employer-employee relationship need not
necessarily result in an affirmative finding. The DOLE may well make the determination that no employer-employee relationship
exists, thus divesting itself of jurisdiction over the case. It must not be precluded from being able to reach its own conclusions, not by
the parties, and certainly not by this Court.
Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully empowered to make a determination as to the
existence of an employer-employee relationship in the exercise of its visitorial and enforcement power, subject to judicial review, not
review by the NLRC.
There is a view that despite Art. 128(b) of the Labor Code, as amended by RA 7730, there is still a threshold amount set by Arts. 129
and 217 of the Labor Code when money claims are involved, i.e., that if it is for PhP 5,000 and below, the jurisdiction is with the
regional director of the DOLE, under Art. 129, and if the amount involved exceeds PhP 5,000, the jurisdiction is with the labor arbiter,
under Art. 217. The view states that despite the wording of Art. 128(b), this would only apply in the course of regular inspections
undertaken by the DOLE, as differentiated from cases under Arts. 129 and 217, which originate from complaints. There are several
cases, however, where the Court has ruled that Art. 128(b) has been amended to expand the powers of the DOLE Secretary and his
duly authorized representatives by RA 7730. In these cases, the Court resolved that the DOLE had the jurisdiction, despite the amount
of the money claims involved. Furthermore, in these cases, the inspection held by the DOLE regional director was prompted
specifically by a complaint. Therefore, the initiation of a case through a complaint does not divest the DOLE Secretary or his duly
authorized representative of jurisdiction under Art. 128(b).
To recapitulate, if a complaint is brought before the DOLE to give effect to the labor standards provisions of the Labor Code or other
labor legislation, and there is a finding by the DOLE that there is an existing employer-employee relationship, the DOLE exercises
jurisdiction to the exclusion of the NLRC. If the DOLE finds that there is no employer-employee relationship, the jurisdiction is
properly with the NLRC. If a complaint is filed with the DOLE, and it is accompanied by a claim for reinstatement, the jurisdiction is
properly with the Labor Arbiter, under Art. 217(3) of the Labor Code, which provides that the Labor Arbiter has original and
exclusive jurisdiction over those cases involving wages, rates of pay, hours of work, and other terms and conditions of employment, if
accompanied by a claim for reinstatement. If a complaint is filed with the NLRC, and there is still an existing employer-employee
relationship, the jurisdiction is properly with the DOLE. The findings of the DOLE, however, may still be questioned through a
petition for certiorari under Rule 65 of the Rules of Court.

In the present case, the finding of the DOLE Regional Director that there was an employer-employee relationship has been subjected
to review by this Court, with the finding being that there was no employer-employee relationship between petitioner and private
respondent, based on the evidence presented. Private respondent presented self-serving allegations as well as self-defeating evidence.10
The findings of the Regional Director were not based on substantial evidence, and private respondent failed to prove the existence of
an employer-employee relationship. The DOLE had no jurisdiction over the case, as there was no employer-employee relationship
present. Thus, the dismissal of the complaint against petitioner is proper.
WHEREFORE, the Decision of this Court in G.R. No. 179652 is hereby AFFIRMED, with the MODIFICATION that in the exercise
of the DOLEs visitorial and enforcement power, the Labor Secretary or the latters authorized representative shall have the power to
determine the existence of an employer-employee relationship, to the exclusion of the NLRC.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 184885

March 7, 2012

ERNESTO G. YMBONG, Petitioner,


vs.
ABS-CBN BROADCASTING CORPORATION, VENERANDA SY AND DANTE LUZON, Respondents.
DECISION
VILLARAMA, JR., J.:
Before us is a Rule 45 Petition seeking to set aside the August 22, 2007 Decision1 and September 18, 2008 Resolution2 of the Court of
Appeals (CA) in CA-G.R. SP No. 86206 declaring petitioner to have resigned from work and not illegally dismissed.
The antecedent facts follow:
Petitioner Ernesto G. Ymbong started working for ABS-CBN Broadcasting Corporation (ABS-CBN) in 1993 at its regional station in
Cebu as a television talent, co-anchoring Hoy Gising and TV Patrol Cebu. His stint in ABS-CBN later extended to radio when ABSCBN Cebu launched its AM station DYAB in 1995 where he worked as drama and voice talent, spinner, scriptwriter and public affairs
program anchor.
Like Ymbong, Leandro Patalinghug also worked for ABS-CBN Cebu. Starting 1995, he worked as talent, director and scriptwriter for
various radio programs aired over DYAB.
On January 1, 1996, the ABS-CBN Head Office in Manila issued Policy No. HR-ER-016 or the "Policy on Employees Seeking Public
Office." The pertinent portions read:
1. Any employee who intends to run for any public office position, must file his/her letter of resignation, at least thirty (30)
days prior to the official filing of the certificate of candidacy either for national or local election.
xxxx
3. Further, any employee who intends to join a political group/party or even with no political affiliation but who intends to
openly and aggressively campaign for a candidate or group of candidates (e.g. publicly speaking/endorsing candidate,
recruiting campaign workers, etc.) must file a request for leave of absence subject to managements approval. For this
particular reason, the employee should file the leave request at least thirty (30) days prior to the start of the planned leave
period.
x x x x3 [Emphasis and underscoring supplied.]

Because of the impending May 1998 elections and based on his immediate recollection of the policy at that time, Dante Luzon,
Assistant Station Manager of DYAB issued the following memorandum:
TO : ALL CONCERNED
FROM : DANTE LUZON
DATE : MARCH 25, 1998
SUBJECT : AS STATED
Please be informed that per company policy, any employee/talent who wants to run for any position in the coming election will have
to file a leave of absence the moment he/she files his/her certificate of candidacy.
The services rendered by the concerned employee/talent to this company will then be temporarily suspended for the entire
campaign/election period.
For strict compliance.4 [Emphasis and underscoring supplied.]
Luzon, however, admitted that upon double-checking of the exact text of the policy and subsequent confirmation with the ABS-CBN
Head Office, he saw that the policy actually required suspension for those who intend to campaign for a political party or candidate
and resignation for those who will actually run in the elections.5
After the issuance of the March 25, 1998 Memorandum, Ymbong got in touch with Luzon. Luzon claims that Ymbong approached
him and told him that he would leave radio for a couple of months because he will campaign for the administration ticket. It was only
after the elections that they found out that Ymbong actually ran for public office himself at the eleventh hour. Ymbong, on the other
hand, claims that in accordance with the March 25, 1998 Memorandum, he informed Luzon through a letter that he would take a few
months leave of absence from March 8, 1998 to May 18, 1998 since he was running for councilor of Lapu-Lapu City.
As regards Patalinghug, Patalinghug approached Luzon and advised him that he will run as councilor for Naga, Cebu. According to
Luzon, he clarified to Patalinghug that he will be considered resigned and not just on leave once he files a certificate of candidacy.
Thus, Patalinghug wrote Luzon the following letter on April 13, 1998:
Dear Mr. Luzon,
Im submitting to you my letter of resignation as your Drama Production Chief and Talent due to your companys policy that every
person connected to ABS-CBN that should seek an elected position in the government will be forced to resigned (sic) from his
position. So herewith Im submitting my resignation with a hard heart. But Im still hoping to be connected again with your
prestigious company after the election[s] should you feel that Im still an asset to your drama production department. Im looking
forward to that day and Im very happy and proud that I have served for two and a half years the most stable and the most prestigious
Radio and TV Network in the Philippines.
As a friend[,] wish me luck and Pray for me. Thank you.
Very Truly Yours,
(Sgd.)
Leandro "Boy" Patalinghug6
Unfortunately, both Ymbong and Patalinghug lost in the May 1998 elections.
Later, Ymbong and Patalinghug both tried to come back to ABS-CBN Cebu. According to Luzon, he informed them that they cannot
work there anymore because of company policy. This was stressed even in subsequent meetings and they were told that the company
was not allowing any exceptions. ABS-CBN, however, agreed out of pure liberality to give them a chance to wind up their
participation in the radio drama, Nagbabagang Langit, since it was rating well and to avoid an abrupt ending. The agreed winding-up,
however, dragged on for so long prompting Luzon to issue to Ymbong the following memorandum dated September 14, 1998:

TO : NESTOR YMBONG
FROM : DANTE LUZON
SUBJECT : AS STATED
DATE : 14 SEPT. 1998
Please be reminded that your services as drama talent had already been automatically terminated when you ran for a local government
position last election.
The Management however gave you more than enough time to end your drama participation and other involvement with the drama
department.
It has been decided therefore that all your drama participation shall be terminated effective immediately. However, your involvement
as drama spinner/narrator of the drama "NAGBA[BA]GANG LANGIT" continues until its writer/director Mr. Leandro Patalinghug
wraps it up one week upon receipt of a separate memo issued to him.7
Ymbong in contrast contended that after the expiration of his leave of absence, he reported back to work as a regular talent and in fact
continued to receive his salary. On September 14, 1998, he received a memorandum stating that his services are being terminated
immediately, much to his surprise. Thus, he filed an illegal dismissal complaint8 against ABS-CBN, Luzon and DYAB Station
Manager Veneranda Sy. He argued that the ground cited by ABS-CBN for his dismissal was not among those enumerated in the Labor
Code, as amended. And even granting without admitting the existence of the company policy supposed to have been violated,
Ymbong averred that it was necessary that the company policy meet certain requirements before willful disobedience of the policy
may constitute a just cause for termination. Ymbong further argued that the company policy violates his constitutional right to
suffrage.9
Patalinghug likewise filed an illegal dismissal complaint10 against ABS-CBN.
ABS-CBN prayed for the dismissal of the complaints arguing that there is no employer-employee relationship between the company
and Ymbong and Patalinghug. ABS-CBN contended that they are not employees but talents as evidenced by their talent contracts.
However, notwithstanding their status, ABS-CBN has a standing policy on persons connected with the company whenever they will
run for public office.11
On July 14, 1999, the Labor Arbiter rendered a decision12 finding the dismissal of Ymbong and Patalinghug illegal, thus:
WHEREFORE, in the light of the foregoing, judgment is rendered finding the dismissal of the two complainants illegal. An order is
issued directing respondent ABS[-]CBN to immediately reinstate complainants to their former positions without loss of seniority
rights plus the payment of backwages in the amount of P200,000.00 to each complainant.
All other claims are dismissed.
SO ORDERED.13
The Labor Arbiter found that there exists an employer-employee relationship between ABS-CBN and Ymbong and Patalinghug
considering the stipulations in their appointment letters/talent contracts. The Labor Arbiter noted particularly that the appointment
letters/talent contracts imposed conditions in the performance of their work, specifically on attendance and punctuality, which
effectively placed them under the control of ABS-CBN. The Labor Arbiter likewise ruled that although the subject company policy is
reasonable and not contrary to law, the same was not made known to Ymbong and Patalinghug and in fact was superseded by another
one embodied in the March 25, 1998 Memorandum issued by Luzon. Thus, there is no valid or authorized cause in terminating
Ymbong and Patalinghug from their employment.
In its memorandum of appeal14 before the National Labor Relations Commission (NLRC), ABS-CBN contended that the Labor
Arbiter has no jurisdiction over the case because there is no employer-employee relationship between the company and Ymbong and
Patalinghug, and that Sy and Luzon mistakenly assumed that Ymbong and Patalinghug could just file a leave of absence since they are
only talents and not employees. In its Supplemental Appeal,15 ABS-CBN insisted that Ymbong and Patalinghug were engaged as radio
talents for DYAB dramas and personality programs and their contract is one between a self-employed contractor and the hiring party
which is a standard practice in the broadcasting industry. It also argued that the Labor Arbiter should not have made much of the
provisions on Ymbongs attendance and punctuality since such requirement is a dictate of the programming of the station, the slating

of shows at regular time slots, and availability of recording studios not an attempt to exercise control over the manner of his
performance of the contracted anchor work within his scheduled spot on air. As for the pronouncement that the company policy has
already been superseded by the March 25, 1998 Memorandum issued by Luzon, the latter already clarified that it was the very policy
he sought to enforce. This matter was relayed by Luzon to Patalinghug when the latter disclosed his plans to join the 1998 elections
while Ymbong only informed the company that he was campaigning for the administration ticket and the company had no inkling that
he will actually run until the issue was already moot and academic. ABS-CBN further contended that Ymbong and Patalinghugs
"reinstatement" is legally and physically impossible as the talent positions they vacated no longer exist. Neither is there basis for the
award of back wages since they were not earning a monthly salary but paid talent fees on a per production/per script basis. Attached to
the Supplemental Appeal is a Sworn Statement16 of Luzon.
On March 8, 2004, the NLRC rendered a decision17 modifying the labor arbiters decision. The fallo of the NLRC decision reads:
WHEREFORE, premises considered, the decision of Labor Arbiter Nicasio C. Aninon dated 14 July 1999 is MODIFIED, to wit:
Ordering respondent ABS-CBN to reinstate complainant Ernesto G. Ymbong and to pay his full backwages computed from 15
September 1998 up to the time of his actual reinstatement.
SO ORDERED.18
The NLRC dismissed ABS-CBNs Supplemental Appeal for being filed out of time. The NLRC ruled that to entertain the same would
be to allow the parties to submit their appeal on piecemeal basis, which is contrary to the agencys duty to facilitate speedy disposition
of cases. The NLRC also held that ABS-CBN wielded the power of control over Ymbong and Patalinghug, thereby proving the
existence of an employer-employee relationship between them.
As to the issue of whether they were illegally dismissed, the NLRC treated their cases differently. In the case of Patalinghug, it found
that he voluntarily resigned from employment on April 21, 1998 when he submitted his resignation letter. The NLRC noted that
although the tenor of the resignation letter is somewhat involuntary, he knew that it is the policy of the company that every person
connected therewith should resign from his employment if he seeks an elected position in the government. As to Ymbong, however,
the NLRC ruled otherwise. It ruled that the March 25, 1998 Memorandum merely states that an employee who seeks any elected
position in the government will only merit the temporary suspension of his services. It held that under the principle of social justice,
the March 25, 1998 Memorandum shall prevail and ABS-CBN is estopped from enforcing the September 14, 1998 memorandum
issued to Ymbong stating that his services had been automatically terminated when he ran for an elective position.
ABS-CBN moved to reconsider the NLRC decision, but the same was denied in a Resolution dated June 21, 2004.19
Imputing grave abuse of discretion on the NLRC, ABS-CBN filed a petition for certiorari20 before the CA alleging that:
I.
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AND SERIOUSLY MISAPPRECIATED THE
FACTS IN NOT HOLDING THAT RESPONDENT YMBONG IS A FREELANCE RADIO TALENT AND MEDIA
PRACTITIONERNOT A "REGULAR EMPLOYEE" OF PETITIONERTO WHOM CERTAIN PRODUCTION WORK HAD
BEEN OUTSOURCED BY ABS-CBN CEBU UNDER AN INDEPENDENT CONTRACTORSHIP SITUATION, THUS
RENDERING THE LABOR COURTS WITHOUT JURISDICTION OVER THE CASE IN THE ABSENCE OF EMPLOYMENT
RELATIONS BETWEEN THE PARTIES.
II.
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION IN DECLARING RESPONDENT YMBONG TO BE
A REGULAR EMPLOYEE OF PETITIONER AS TO CREATE A CONTRACTUAL EMPLOYMENT RELATION BETWEEN
THEM WHEN NONE EXISTS OR HAD BEEN AGREED UPON OR OTHERWISE INTENDED BY THE PARTIES.
III.
EVEN ASSUMING THE ALLEGED EMPLOYMENT RELATION TO EXIST FOR THE SAKE OF ARGUMENT, RESPONDENT
NLRC IN ANY CASE COMMITTED A GRAVE ABUSE OF DISCRETION IN NOT SIMILARLY UPHOLDING AND
APPLYING COMPANY POLICY NO. HR-ER-016 IN THE CASE OF RESPONDENT YMBONG AND DEEMING HIM AS
RESIGNED AND DISQUALIFIED FROM FURTHER ENGAGEMENT AS A RADIO TALENT IN ABS-CBN CEBU AS A

CONSEQUENCE OF HIS CANDIDACY IN THE 1998 ELECTIONS, AS RESPONDENT NLRC HAD DONE IN THE CASE OF
PATALINGHUG.
IV.
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AND DENIED DUE PROCESS TO PETITIONER IN
REFUSING TO CONSIDER ITS SUPPLEMENTAL APPEAL, DATED OCTOBER 18, 1999, "FOR BEING FILED OUT OF
TIME" CONSIDERING THAT THE FILING OF SUCH A PLEADING IS NOT IN ANY CASE PROSCRIBED AND
RESPONDENT NLRC IS AUTHORIZED TO CONSIDER ADDITIONAL EVIDENCE ON APPEAL; MOREOVER, TECHNICAL
RULES OF EVIDENCE DO NOT APPLY IN LABOR CASES.
V.
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION IN GRANTING THE RELIEF OF
REINSTATEMENT AND BACKWAGES TO RESPONDENT YMBONG SINCE HE NEVER OCCUPIED ANY "REGULAR"
POSITION IN PETITIONER FROM WHICH HE COULD HAVE BEEN "ILLEGALLY DISMISSED," NOR ARE ANY OF THE
RADIO PRODUCTIONS IN WHICH HE HAD DONE TALENT WORK FOR PETITIONER STILL EXISTING. INDEED, THERE
IS NO BASIS WHATSOEVER FOR THE AWARD OF BACKWAGES TO RESPONDENT YMBONG IN THE AMOUNT OF
P200,000.00 CONSIDERING THAT, AS SHOWN BY THE UNCONTROVERTED EVIDENCE, HE WAS NOT EARNING A
MONTHLY "SALARY" OF "P20,000.00," AS HE FALSELY CLAIMS, BUT WAS PAID TALENT FEES ON A "PER
PRODUCTION/PER SCRIPT" BASIS WHICH AVERAGED LESS THAN P10,000.00 PER MONTH IN TALENT FEES ALL IN
ALL.21
On August 22, 2007, the CA rendered the assailed decision reversing and setting aside the March 8, 2004 Decision and June 21, 2004
Resolution of the NLRC. The CA declared Ymbong resigned from employment and not to have been illegally dismissed. The award
of full back wages in his favor was deleted accordingly.
The CA ruled that ABS-CBN is estopped from claiming that Ymbong was not its employee after applying the provisions of Policy No.
HR-ER-016 to him. It noted that said policy is entitled "Policy on Employees Seeking Public Office" and the guidelines contained
therein specifically pertain to employees and did not even mention talents or independent contractors. It held that it is a complete
turnaround on ABS-CBNs part to later argue that Ymbong is only a radio talent or independent contractor and not its employee. By
applying the subject company policy on Ymbong, ABS-CBN had explicitly recognized him to be an employee and not merely an
independent contractor.
The CA likewise held that the subject company policy is the controlling guideline and therefore, Ymbong should be considered
resigned from ABS-CBN. While Luzon has policy-making power as assistant radio manager, he had no authority to issue a
memorandum that had the effect of repealing or superseding a subsisting policy. Contrary to the findings of the Labor Arbiter, the
subject company policy was effective at that time and continues to be valid and subsisting up to the present. The CA cited
Patalinghugs resignation letter to buttress this conclusion, noting that Patalinghug openly admitted in his letter that his resignation
was in line with the said company policy. Since ABS-CBN applied Policy No. HR-ER-016 to Patalinghug, there is no reason not to
apply the same regulation to Ymbong who was on a similar situation as the former. Thus, the CA found that the NLRC overstepped its
area of discretion to a point of grave abuse in declaring Ymbong to have been illegally terminated. The CA concluded that there is no
illegal dismissal to speak of in the instant case as Ymbong is considered resigned when he ran for an elective post pursuant to the
subject company policy.
Hence, this petition.
Petitioner argues that the CA gravely erred: (1) in upholding Policy No. HR-ER-016; (2) in upholding the validity of the termination
of Ymbongs services; and (3) when it reversed the decision of the NLRC 4th Division of Cebu City which affirmed the decision of
Labor Arbiter Nicasio C. Anion.22
Ymbong argues that the subject company policy is a clear interference and a gross violation of an employees right to suffrage. He is
surprised why it was easy for the CA to rule that Luzons memorandum ran counter to an existing policy while on the other end, it did
not see that it was in conflict with the constitutional right to suffrage. He also points out that the issuance of the March 25, 1998
Memorandum was precisely an exercise of the management power to which an employee like him must respect; otherwise, he will be
sanctioned for disobedience or worse, even terminated. He was not in a position to know which between the two issuances was correct
and as far as he is concerned, the March 25, 1998 Memorandum superseded the subject company policy. Moreover, ABS-CBN cannot
disown acts of its officers most especially since it prejudiced his property rights.23

As to the validity of his dismissal, Ymbong contends that the ground relied upon by ABS-CBN is not among the just and authorized
causes provided in the Labor Code, as amended. And even assuming the subject company policy passes the test of validity under the
pretext of the right of the management to discipline and terminate its employees, the exercise of such right is not without bounds.
Ymbong avers that his automatic termination was a blatant disregard of his right to due process. He was never asked to explain why he
did not tender his resignation before he ran for public office as mandated by the subject company policy.24
Ymbong likewise asseverates that both the Labor Arbiter and the NLRC were consistent in their findings that he was illegally
dismissed. It is settled that factual findings of labor administrative officials, if supported by substantial evidence, are accorded not only
great respect but even finality.25
ABS-CBN, for its part, counters that the validity of policies such as Policy No. HR-ER-016 has long been upheld by this Court which
has ruled that a media company has a right to impose a policy providing that employees who file their certificates of candidacy in any
election shall be considered resigned.26 Moreover, case law has upheld the validity of the exercise of management prerogatives even if
they appear to limit the rights of employees as long as there is no showing that management prerogatives were exercised in a manner
contrary to law.27 ABS-CBN contends that being the largest media and entertainment company in the country, its reputation stems not
only from its ability to deliver quality entertainment programs but also because of neutrality and impartiality in delivering news.28
ABS-CBN further argues that nothing in the company policy prohibits its employees from either accepting a public appointive
position or from running for public office. Thus, it cannot be considered as violative of the constitutional right of suffrage. Moreover,
the Supreme Court has recognized the employers right to enforce occupational qualifications as long as the employer is able to show
the existence of a reasonable business necessity in imposing the questioned policy. Here, Policy No. HR-ER-016 itself states that it
was issued "to protect the company from any public misconceptions" and "[t]o preserve its objectivity, neutrality and credibility."
Thus, it cannot be denied that it is reasonable under the circumstances.29
ABS-CBN likewise opposes Ymbongs claim that he was terminated. ABS-CBN argues that on the contrary, Ymbongs unilateral act
of filing his certificate of candidacy is an overt act tantamount to voluntary resignation on his part by virtue of the clear mandate found
in Policy No. HR-ER-016. Ymbong, however, failed to file his resignation and in fact misled his superiors by making them believe
that he was going on leave to campaign for the administration candidates but in fact, he actually ran for councilor. He also claims to
have fully apprised Luzon through a letter of his intention to run for public office, but he failed to adduce a copy of the same.30
As to Ymbongs argument that the CA should not have reversed the findings of the Labor Arbiter and the NLRC, ABS-CBN
asseverates that the CA is not precluded from making its own findings most especially if upon its own review of the case, it has been
revealed that the NLRC, in affirming the findings of the Labor Arbiter, committed grave abuse of discretion amounting to lack or
excess of jurisdiction when it failed to apply the subject company policy in Ymbongs case when it readily applied the same to
Patalinghug.31
Essentially, the issues to be resolved in the instant petition are: (1) whether Policy No. HR-ER-016 is valid; (2) whether the March 25,
1998 Memorandum issued by Luzon superseded Policy No. HR-ER-016; and (3) whether Ymbong, by seeking an elective post, is
deemed to have resigned and not dismissed by ABS-CBN.
Policy No. HR-ER-016 is valid.
This is not the first time that this Court has dealt with a policy similar to Policy No. HR-ER-016. In the case of Manila Broadcasting
Company v. NLRC,32 this Court ruled:
What is involved in this case is an unwritten company policy considering any employee who files a certificate of candidacy for any
elective or local office as resigned from the company. Although 11(b) of R.A. No. 6646 does not require mass media commentators
and announcers such as private respondent to resign from their radio or TV stations but only to go on leave for the duration of the
campaign period, we think that the company may nevertheless validly require them to resign as a matter of policy. In this case, the
policy is justified on the following grounds:
Working for the government and the company at the same time is clearly disadvantageous and prejudicial to the rights and interest not
only of the company but the public as well. In the event an employee wins in an election, he cannot fully serve, as he is expected to
do, the interest of his employer. The employee has to serve two (2) employers, obviously detrimental to the interest of both the
government and the private employer.
In the event the employee loses in the election, the impartiality and cold neutrality of an employee as broadcast personality is suspect,
thus readily eroding and adversely affecting the confidence and trust of the listening public to employers station.33

ABS-CBN, like Manila Broadcasting Company, also had a valid justification for Policy No. HR-ER-016. Its rationale is embodied in
the policy itself, to wit:
Rationale:
ABS-CBN BROADCASTING CORPORATION strongly believes that it is to the best interest of the company to continuously remain
apolitical. While it encourages and supports its employees to have greater political awareness and for them to exercise their right to
suffrage, the company, however, prefers to remain politically independent and unattached to any political individual or entity.
Therefore, employees who [intend] to run for public office or accept political appointment should resign from their positions, in order
to protect the company from any public misconceptions. To preserve its objectivity, neutrality and credibility, the company reiterates
the following policy guidelines for strict implementation.
x x x x34 [Emphasis supplied.]
We have consistently held that so long as a companys management prerogatives are exercised in good faith for the advancement of
the employers interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or under
valid agreements, this Court will uphold them.35 In the instant case, ABS-CBN validly justified the implementation of Policy No. HRER-016. It is well within its rights to ensure that it maintains its objectivity and credibility and freeing itself from any appearance of
impartiality so that the confidence of the viewing and listening public in it will not be in any way eroded. Even as the law is solicitous
of the welfare of the employees, it must also protect the right of an employer to exercise what are clearly management prerogatives.
The free will of management to conduct its own business affairs to achieve its purpose cannot be denied.361wphi1
It is worth noting that such exercise of management prerogative has earned a stamp of approval from no less than our Congress itself
when on February 12, 2001, it enacted Republic Act No. 9006, otherwise known as the "Fair Election Act." Section 6.6 thereof reads:
6.6. Any mass media columnist, commentator, announcer, reporter, on-air correspondent or personality who is a candidate for
any elective public office or is a campaign volunteer for or employed or retained in any capacity by any candidate or political
party shall be deemed resigned, if so required by their employer, or shall take a leave of absence from his/her work as such during
the campaign period: Provided, That any media practitioner who is an official of a political party or a member of the campaign staff of
a candidate or political party shall not use his/her time or space to favor any candidate or political party. [Emphasis and underscoring
supplied.]
Policy No. HR-ER-016 was not superseded by the March 25, 1998 Memorandum
The CA correctly ruled that though Luzon, as Assistant Station Manager for Radio of ABS-CBN, has policy-making powers in
relation to his principal task of administering the networks radio station in the Cebu region, the exercise of such power should be in
accord with the general rules and regulations imposed by the ABS-CBN Head Office to its employees. Clearly, the March 25, 1998
Memorandum issued by Luzon which only requires employees to go on leave if they intend to run for any elective position is in
absolute contradiction with Policy No. HR-ER-016 issued by the ABS-CBN Head Office in Manila which requires the resignation, not
only the filing of a leave of absence, of any employee who intends to run for public office. Having been issued beyond the scope of his
authority, the March 25, 1998 Memorandum is therefore void and did not supersede Policy No. HR-ER-016.
Also worth noting is that Luzon in his Sworn Statement admitted the inaccuracy of his recollection of the company policy when he
issued the March 25, 1998 Memorandum and stated therein that upon double-checking of the exact text of the policy statement and
subsequent confirmation with the ABS-CBN Head Office in Manila, he learned that the policy required resignation for those who will
actually run in elections because the company wanted to maintain its independence. Since the officer who himself issued the subject
memorandum acknowledged that it is not in harmony with the Policy issued by the upper management, there is no reason for it to be a
source of right for Ymbong.
Ymbong is deemed resigned when he ran for councilor.
As Policy No. HR-ER-016 is the subsisting company policy and not Luzons March 25, 1998 Memorandum, Ymbong is deemed
resigned when he ran for councilor.
We find no merit in Ymbongs argument that "[his] automatic termination x x x was a blatant [disregard] of [his] right to due process"
as he was "never asked to explain why he did not tender his resignation before he ran for public office as mandated by [the subject
company policy]."37 Ymbongs overt act of running for councilor of Lapu-Lapu City is tantamount to resignation on his part. He was
separated from ABS-CBN not because he was dismissed but because he resigned. Since there was no termination to speak of, the

requirement of due process in dismissal cases cannot be applied to Ymbong. Thus, ABS-CBN is not duty-bound to ask him to explain
why he did not tender his resignation before he ran for public office as mandated by the subject company policy.
In addition, we do not subscribe to Ymbongs claim that he was not in a position to know which of the two issuances was correct.
Ymbong most likely than not, is fully aware that the subsisting policy is Policy No. HR-ER-016 and not the March 25, 1998
Memorandum and it was for this reason that, as stated by Luzon in his Sworn Statement, he only told the latter that he will only
campaign for the administration ticket and not actually run for an elective post. Ymbong claims he had fully apprised Luzon by letter
of his plan to run and even filed a leave of absence but records are bereft of any proof of said claim. Ymbong claims that the letter
stating his intention to go on leave to run in the election is attached to his Position Paper as Annex "A," a perusal of said pleading
attached to his petition before this Court, however, show that Annex "A" was not his letter to Luzon but the September 14, 1998
Memorandum informing Ymbong that his services had been automatically terminated when he ran for a local government position.
Moreover, as pointed out by ABS-CBN, had Ymbong been truthful to his superiors, they would have been able to clarify to him the
prevailing company policy and inform him of the consequences of his decision in case he decides to run, as Luzon did in
Patalinghugs case.
WHEREFORE, the petition for review on certiorari is DENIED for lack of merit.
With costs against petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 126297

February 11, 2008

PROFESSIONAL SERVICES, INC., petitioner,


vs.
THE COURT OF APPEALS and NATIVIDAD and ENRIQUE AGANA, respondents,
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - x
G.R. No. 126467

February 11, 2008

NATIVIDAD (Substituted by her children MARCELINO AGANA III, ENRIQUE AGANA, JR., EMMA AGANA ANDAYA,
JESUS AGANA, and RAYMUND AGANA) and ENRIQUE AGANA, petitioners,
vs.
THE COURT OF APPEALS and JUAN FUENTES, respondents,
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - x
G.R. No. 127590

February 11, 2008

MIGUEL AMPIL, petitioner,


vs.
THE COURT OF APPEALS and NATIVIDAD AGANA and ENRIQUE AGANA, respondents.
RESOLUTION
SANDOVAL-GUTIERREZ, J.:
As the hospital industry changes, so must the laws and jurisprudence governing hospital liability. The immunity from medical
malpractice traditionally accorded to hospitals has to be eroded if we are to balance the interest of the patients and hospitals under the
present setting.

Before this Court is a motion for reconsideration filed by Professional Services, Inc. (PSI), petitioner in G.R. No. 126297, assailing the
Courts First Division Decision dated January 31, 2007, finding PSI and Dr. Miguel Ampil, petitioner in G.R. No. 127590, jointly and
severally liable for medical negligence.
A brief revisit of the antecedent facts is imperative.
On April 4, 1984, Natividad Agana was admitted at the Medical City General Hospital (Medical City) because of difficulty of bowel
movement and bloody anal discharge. Dr. Ampil diagnosed her to be suffering from "cancer of the sigmoid." Thus, on April 11, 1984,
Dr. Ampil, assisted by the medical staff1 of Medical City, performed an anterior resection surgery upon her. During the surgery, he
found that the malignancy in her sigmoid area had spread to her left ovary, necessitating the removal of certain portions of it. Thus,
Dr. Ampil obtained the consent of Atty. Enrique Agana, Natividads husband, to permit Dr. Juan Fuentes, respondent in G.R. No.
126467, to perform hysterectomy upon Natividad.
Dr. Fuentes performed and completed the hysterectomy. Afterwards, Dr. Ampil took over, completed the operation and closed the
incision. However, the operation appeared to be flawed. In the corresponding Record of Operation dated April 11, 1984, the attending
nurses entered these remarks:
sponge count lacking 2
announced to surgeon searched done (sic) but to no avail continue for closure.
After a couple of days, Natividad complained of excruciating pain in her anal region. She consulted both Dr. Ampil and Dr. Fuentes
about it. They told her that the pain was the natural consequence of the surgical operation performed upon her. Dr. Ampil
recommended that Natividad consult an oncologist to treat the cancerous nodes which were not removed during the operation.
On May 9, 1984, Natividad, accompanied by her husband, went to the United States to seek further treatment. After four (4) months of
consultations and laboratory examinations, Natividad was told that she was free of cancer. Hence, she was advised to return to the
Philippines.
On August 31, 1984, Natividad flew back to the Philippines, still suffering from pains. Two (2) weeks thereafter, her daughter found a
piece of gauze protruding from her vagina. Dr. Ampil was immediately informed. He proceeded to Natividads house where he
managed to extract by hand a piece of gauze measuring 1.5 inches in width. Dr. Ampil then assured Natividad that the pains would
soon vanish.
Despite Dr. Ampils assurance, the pains intensified, prompting Natividad to seek treatment at the Polymedic General Hospital. While
confined thereat, Dr. Ramon Gutierrez detected the presence of a foreign object in her vagina -- a foul-smelling gauze measuring 1.5
inches in width. The gauze had badly infected her vaginal vault. A recto-vaginal fistula had formed in her reproductive organ which
forced stool to excrete through the vagina. Another surgical operation was needed to remedy the situation. Thus, in October 1984,
Natividad underwent another surgery.
On November 12, 1984, Natividad and her husband filed with the Regional Trial Court, Branch 96, Quezon City a complaint for
damages against PSI (owner of Medical City), Dr. Ampil and Dr. Fuentes.
On February 16, 1986, pending the outcome of the above case, Natividad died. She was duly substituted by her above-named children
(the Aganas).
On March 17, 1993, the trial court rendered judgment in favor of spouses Agana finding PSI, Dr. Ampil and Dr. Fuentes jointly and
severally liable. On appeal, the Court of Appeals, in its Decision dated September 6, 1996, affirmed the assailed judgment with
modification in the sense that the complaint against Dr. Fuentes was dismissed.
PSI, Dr. Ampil and the Aganas filed with this Court separate petitions for review on certiorari. On January 31, 2007, the Court,
through its First Division, rendered a Decision holding that PSI is jointly and severally liable with Dr. Ampil for the following
reasons: first, there is an employer-employee relationship between Medical City and Dr. Ampil. The Court relied on Ramos v. Court of
Appeals,2 holding that for the purpose of apportioning responsibility in medical negligence cases, an employer-employee relationship
in effect exists between hospitals and their attending and visiting physicians; second, PSIs act of publicly displaying in the lobby of
the Medical City the names and specializations of its accredited physicians, including Dr. Ampil, estopped it from denying the
existence of an employer-employee relationship between them under the doctrine of ostensible agency or agency by estoppel; and
third, PSIs failure to supervise Dr. Ampil and its resident physicians and nurses and to take an active step in order to remedy their
negligence rendered it directly liable under the doctrine of corporate negligence.

In its motion for reconsideration, PSI contends that the Court erred in finding it liable under Article 2180 of the Civil Code, there
being no employer-employee relationship between it and its consultant, Dr. Ampil. PSI stressed that the Courts Decision in Ramos
holding that "an employer-employee relationship in effect exists between hospitals and their attending and visiting physicians for the
purpose of apportioning responsibility" had been reversed in a subsequent Resolution.3 Further, PSI argues that the doctrine of
ostensible agency or agency by estoppel cannot apply because spouses Agana failed to establish one requisite of the doctrine, i.e.,
that Natividad relied on the representation of the hospital in engaging the services of Dr. Ampil. And lastly, PSI maintains that the
doctrine of corporate negligence is misplaced because the proximate cause of Natividads injury was Dr. Ampils negligence.
The motion lacks merit.
As earlier mentioned, the First Division, in its assailed Decision, ruled that an employer-employee relationship "in effect" exists
between the Medical City and Dr. Ampil. Consequently, both are jointly and severally liable to the Aganas. This ruling proceeds from
the following ratiocination in Ramos:
We now discuss the responsibility of the hospital in this particular incident. The unique practice (among private hospitals) of
filling up specialist staff with attending and visiting "consultants," who are allegedly not hospital employees, presents
problems in apportioning responsibility for negligence in medical malpractice cases. However, the difficulty is only more
apparent than real.
In the first place, hospitals exercise significant control in the hiring and firing of consultants and in the conduct of their
work within the hospital premises. Doctors who apply for "consultant" slots, visiting or attending, are required to submit
proof of completion of residency, their educational qualifications; generally, evidence of accreditation by the appropriate
board (diplomate), evidence of fellowship in most cases, and references. These requirements are carefully scrutinized by
members of the hospital administration or by a review committee set up by the hospital who either accept or reject the
application. This is particularly true with respondent hospital.
After a physician is accepted, either as a visiting or attending consultant, he is normally required to attend clinicopathological conferences, conduct bedside rounds for clerks, interns and residents, moderate grand rounds and
patient audits and perform other tasks and responsibilities, for the privilege of being able to maintain a clinic in the
hospital, and/or for the privilege of admitting patients into the hospital. In addition to these, the physicians
performance as a specialist is generally evaluated by a peer review committee on the basis of mortality and morbidity
statistics, and feedback from patients, nurses, interns and residents. A consultant remiss in his duties, or a consultant
who regularly falls short of the minimum standards acceptable to the hospital or its peer review committee, is
normally politely terminated.
In other words, private hospitals hire, fire and exercise real control over their attending and visiting "consultant" staff. While
"consultants" are not, technically employees, a point which respondent hospital asserts in denying all responsibility
for the patients condition, the control exercised, the hiring, and the right to terminate consultants all fulfill the
important hallmarks of an employer-employee relationship, with the exception of the payment of wages. In assessing
whether such a relationship in fact exists, the control test is determining. Accordingly, on the basis of the foregoing,
we rule that for the purpose of allocating responsibility in medical negligence cases, an employer-employee
relationship in effect exists between hospitals and their attending and visiting physicians. This being the case, the
question now arises as to whether or not respondent hospital is solidarily liable with respondent doctors for petitioners
condition.
The basis for holding an employer solidarily responsible for the negligence of its employee is found in Article 2180 of the
Civil Code which considers a person accountable not only for his own acts but also for those of others based on the formers
responsibility under a relationship of partia ptetas.
Clearly, in Ramos, the Court considered the peculiar relationship between a hospital and its consultants on the bases of certain factors.
One such factor is the "control test" wherein the hospital exercises control in the hiring and firing of consultants, like Dr. Ampil, and
in the conduct of their work.
Actually, contrary to PSIs contention, the Court did not reverse its ruling in Ramos. What it clarified was that the De Los Santos
Medical Clinic did not exercise control over its consultant, hence, there is no employer-employee relationship between them. Thus,
despite the granting of the said hospitals motion for reconsideration, the doctrine in Ramos stays, i.e., for the purpose of allocating
responsibility in medical negligence cases, an employer-employee relationship exists between hospitals and their consultants.

In the instant cases, PSI merely offered a general denial of responsibility, maintaining that consultants, like Dr. Ampil, are
"independent contractors," not employees of the hospital. Even assuming that Dr. Ampil is not an employee of Medical City, but an
independent contractor, still the said hospital is liable to the Aganas.
In Nograles, et al. v. Capitol Medical Center, et al.,4 through Mr. Justice Antonio T. Carpio, the Court held:
The question now is whether CMC is automatically exempt from liability considering that Dr. Estrada is an independent
contractor-physician.
In general, a hospital is not liable for the negligence of an independent contractor-physician. There is, however, an exception
to this principle. The hospital may be liable if the physician is the "ostensible" agent of the hospital. (Jones v. Philpott, 702 F.
Supp. 1210 [1988]) This exception is also known as the "doctrine of apparent authority." (Sometimes referred to as the
apparent or ostensible agency theory. [King v. Mitchell, 31 A.D.3rd 958, 819 N.Y. S.2d 169 (2006)].
xxx
The doctrine of apparent authority essentially involves two factors to determine the liability of an independent contractorphysician.
The first factor focuses on the hospitals manifestations and is sometimes described as an inquiry whether the hospital acted
in a manner which would lead a reasonable person to conclude that the individual who was alleged to be negligent was an
employee or agent of the hospital. (Diggs v. Novant Health, Inc., 628 S.E.2d 851 (2006) citing Hylton v. Koontz, 138 N.C.
App. 629 (2000). In this regard, the hospital need not make express representations to the patient that the treating
physician is an employee of the hospital; rather a representation may be general and implied. (Id.)
The doctrine of apparent authority is a specie of the doctrine of estoppel. Article 1431 of the Civil Code provides that
"[t]hrough estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be denied
or disproved as against the person relying thereon." Estoppel rests on this rule: "Whether a party has, by his own declaration,
act, or omission, intentionally and deliberately led another to believe a particular thing true, and to act upon such belief, he
cannot, in any litigation arising out of such declaration, act or omission, be permitted to falsify it. (De Castro v. Ginete, 137
Phil. 453 [1969], citing Sec. 3, par. A, Rule 131 of the Rules of Court. See also King v. Mitchell, 31 A.D.3rd 958, 819
N.Y.S.2d 169 [2006]).
xxx
The second factor focuses on the patients reliance. It is sometimes characterized as an inquiry on whether the plaintiff acted
in reliance upon the conduct of the hospital or its agent, consistent with ordinary care and prudence. (Diggs v. Novant Health,
Inc.)
PSI argues that the doctrine of apparent authority cannot apply to these cases because spouses Agana failed to establish proof of
their reliance on the representation of Medical City that Dr. Ampil is its employee.
The argument lacks merit.
Atty. Agana categorically testified that one of the reasons why he chose Dr. Ampil was that he knew him to be a staff member of
Medical City, a prominent and known hospital.
Q

Will you tell us what transpired in your visit to Dr. Ampil?

A Well, I saw Dr. Ampil at the Medical City, I know him to be a staff member there, and I told him about the case of
my wife and he asked me to bring my wife over so she could be examined. Prior to that, I have known Dr. Ampil, first, he
was staying in front of our house, he was a neighbor, second, my daughter was his student in the University of the East
School of Medicine at Ramon Magsaysay; and when my daughter opted to establish a hospital or a clinic, Dr. Ampil was one
of our consultants on how to establish that hospital. And from there, I have known that he was a specialist when it comes to
that illness.
Atty. Agcaoili

On that particular occasion, April 2, 1984, what was your reason for choosing to contact Dr. Ampil in connection with your
wifes illness?
A First, before that, I have known him to be a specialist on that part of the body as a surgeon; second, I have known him to
be a staff member of the Medical City which is a prominent and known hospital. And third, because he is a neighbor, I
expect more than the usual medical service to be given to us, than his ordinary patients.5
Clearly, PSI is estopped from passing the blame solely to Dr. Ampil. Its act of displaying his name and those of the other physicians in
the public directory at the lobby of the hospital amounts to holding out to the public that it offers quality medical service through the
listed physicians. This justifies Atty. Aganas belief that Dr. Ampil was a member of the hospitals staff. It must be stressed that
under the doctrine of apparent authority, the question in every case is whether the principal has by his voluntary act placed
the agent in such a situation that a person of ordinary prudence, conversant with business usages and the nature of the
particular business, is justified in presuming that such agent has authority to perform the particular act in question.6 In these
cases, the circumstances yield a positive answer to the question.
The challenged Decision also anchors its ruling on the doctrine of corporate responsibility.7 The duty of providing quality medical
service is no longer the sole prerogative and responsibility of the physician. This is because the modern hospital now tends to organize
a highly-professional medical staff whose competence and performance need also to be monitored by the hospital commensurate
with its inherent responsibility to provide quality medical care.8 Such responsibility includes the proper supervision of the
members of its medical staff. Accordingly, the hospital has the duty to make a reasonable effort to monitor and oversee the
treatment prescribed and administered by the physicians practicing in its premises.
Unfortunately, PSI had been remiss in its duty. It did not conduct an immediate investigation on the reported missing gauzes to the
great prejudice and agony of its patient. Dr. Jocson, a member of PSIs medical staff, who testified on whether the hospital conducted
an investigation, was evasive, thus:
Q

We go back to the operative technique, this was signed by Dr. Puruganan, was this submitted to the hospital?

Yes, sir, this was submitted to the hospital with the record of the patient.

Was the hospital immediately informed about the missing sponges?

That is the duty of the surgeon, sir.

Q As a witness to an untoward incident in the operating room, was it not your obligation, Dr., to also report to the
hospital because you are under the control and direction of the hospital?
A

The hospital already had the record of the two OS missing, sir.

If you place yourself in the position of the hospital, how will you recover.

You do not answer my question with another question.

Did the hospital do anything about the missing gauzes?

The hospital left it up to the surgeon who was doing the operation, sir.

Did the hospital investigate the surgeon who did the operation?

I am not in the position to answer that, sir.

Q You never did hear the hospital investigating the doctors involved in this case of those missing sponges, or did
you hear something?
xxxxxx
A I think we already made a report by just saying that two sponges were missing, it is up to the hospital to make the
move.

Atty. Agana
Precisely, I am asking you if the hospital did a move, if the hospital did a move.
A

I cannot answer that.

Court
By that answer, would you mean to tell the Court that you were aware if there was such a move done by the hospital?
A I cannot answer that, your honor, because I did not have any more follow-up of the case that happened until
now.9
The above testimony obviously shows Dr. Jocsons lack of concern for the patients. Such conduct is reflective of the hospitals
manner of supervision. Not only did PSI breach its duty to oversee or supervise all persons who practice medicine within its
walls, it also failed to take an active step in fixing the negligence committed. This renders PSI, not only vicariously liable for the
negligence of Dr. Ampil under Article 2180 of the Civil Code, but also directly liable for its own negligence under Article 2176.
Moreover, there is merit in the trial courts finding that the failure of PSI to conduct an investigation "established PSIs part in the
dark conspiracy of silence and concealment about the gauzes." The following testimony of Atty. Agana supports such findings,
thus:
Q You said you relied on the promise of Dr. Ampil and despite the promise you were not able to obtain the said record.
Did you go back to the record custodian?
A

I did not because I was talking to Dr. Ampil. He promised me.

After your talk to Dr. Ampil, you went to the record custodian?

A I went to the record custodian to get the clinical record of my wife, and I was given a portion of the records
consisting of the findings, among them, the entries of the dates, but not the operating procedure and operative
report.10
In sum, we find no merit in the motion for reconsideration.
WHEREFORE, we DENY PSIs motion for reconsideration with finality.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 186621

March 12, 2014

SOUTH EAST INTERNATIONAL RATTAN, INC. and/or ESTANISLAO1 AGBAY, Petitioners,


vs.
JESUS J. COMING, Respondent.
DECISION
VILLARAMA, JR., J.:
Before the Court is a petition for review on certiorari under Rule 45 to reverse and set aside the Decision2 dated February 21, 2008
and Resolution3 dated February 9, 2009 of the Court of Appeals (CA) in CA-GR. CEB-SP No. 02113.

Petitioner South East International Rattan, Inc. (SEIRI) is a domestic corporation engaged in the business of manufacturing and
exporting furniture to various countries with principal place of business at Paknaan, Mandaue City, while petitioner Estanislao Agbay,
as per records, is the President and General Manager of SEIRI.4
On November 3, 2003, respondent Jesus J. Coming filed a complaint5 for illegal dismissal, underpayment of wages, non-payment of
holiday pay, 13th month pay and service incentive leave pay, with prayer for reinstatement, back wages, damages and attorneys fees.
Respondent alleged that he was hired by petitioners as Sizing Machine Operator on March 17, 1984. His work schedule is from 8:00
a.m. to 5:00 p.m. Initially, his compensation was on "pakiao" basis but sometime in June 1984, it was fixed at P150.00 per day which
was paid weekly. In 1990, without any apparent reason, his employment was interrupted as he was told by petitioners to resume work
in two months time. Being an uneducated person, respondent was persuaded by the management as well as his brother not to
complain, as otherwise petitioners might decide not to call him back for work. Fearing such consequence, respondent accepted his
fate. Nonetheless, after two months he reported back to work upon order of management.6
Despite being an employee for many years with his work performance never questioned by petitioners, respondent was dismissed on
January 1, 2002 without lawful cause. He was told that he will be terminated because the company is not doing well financially and
that he would be called back to work only if they need his services again. Respondent waited for almost a year but petitioners did not
call him back to work. When he finally filed the complaint before the regional arbitration branch, his brother Vicente was used by
management to persuade him to withdraw the case.7
On their part, petitioners denied having hired respondent asserting that SEIRI was incorporated only in 1986, and that respondent
actually worked for SEIRIs furniture suppliers because when the company started in 1987 it was engaged purely in buying and
exporting furniture and its business operations were suspended from the last quarter of 1989 to August 1992. They stressed that
respondent was not included in the list of employees submitted to the Social Security System (SSS). Moreover, respondents brother,
Vicente Coming, executed an affidavit8 in support of petitioners position while Allan Mayol and Faustino Apondar issued notarized
certifications9 that respondent worked for them instead.10
With the denial of petitioners that respondent was their employee, the latter submitted an affidavit11 signed by five former co-workers
stating that respondent was one of the pioneer employees who worked in SEIRI for almost twenty years.
In his Decision12 dated April 30, 2004, Labor Arbiter Ernesto F. Carreon ruled that respondent is a regular employee of SEIRI and
that the termination of his employment was illegal. The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent South East (Intl.) Rattan, Inc. to pay
complainant Jesus J. Coming the following:
1. Separation pay

P114,400.00

2. Backwages

P 30,400.00

3. Wage differential

P 15,015.00

4. 13th month pay

P 5,958.00

5. Holiday pay

P 4,000.00

6. Service incentive leave pay

P 2,000.00

Total award

P171,773.00

The other claims and the case against respondent Estanislao Agbay are dismissed for lack of merit.
SO ORDERED.13

Petitioners appealed to the National Labor Relations Commission (NLRC)-Cebu City where they submitted the following additional
evidence: (1) copies of SEIRIs payrolls and individual pay records of employees;14 (2) affidavit15 of SEIRIs Treasurer, Angelina
Agbay; and (3) second affidavit16 of Vicente Coming.
On July 28, 2005, the NLRCs Fourth Division rendered its Decision,17 the dispositive portion of which states:
WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby SET ASIDE and VACATED and a new one entered
DISMISSING the complaint.
SO ORDERED.18
The NLRC likewise denied respondents motion for reconsideration.19
Respondent elevated the case to the CA via a petition for certiorari under Rule 65.
By Decision dated February 21, 2008, the CA reversed the NLRC and ruled that there existed an employer-employee relationship
between petitioners and respondent who was dismissed without just and valid cause.
The CA thus decreed:
WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The assailed Decision dated July 28, 2005 issued by the
National Labor Relations Commission (NLRC), Fourth Division, Cebu City in NLRC Case No. V-000625-2004 is REVERSED and
SET ASIDE. The Decision of the Labor Arbiter dated April 30, 2004 is REINSTATED with MODIFICATION on the computation of
backwages which should be computed from the time of illegal termination until the finality of this decision.
Further, the Labor Arbiter is directed to make the proper adjustment in the computation of the award of separation pay as well as the
monetary awards of wage differential, 13th month pay, holiday pay and service incentive leave pay.
SO ORDERED.20
Petitioners filed a motion for reconsideration but the CA denied it under Resolution dated February 9, 2009.
Hence, this petition raising the following issues:
6.1
WHETHER UNDER THE FACTS AND EVIDENCE ON RECORD, THE FINDING OF THE HONORABLE COURT OF
APPEALS THAT THERE EXISTS EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN PETITIONERS AND RESPONDENT
IS IN ACCORD WITH LAW AND APPLICABLE DECISIONS OF THIS HONORABLE COURT.
6.2
WHETHER THE HONORABLE COURT OF APPEALS CORRECTLY APPRECIATED IN ACCORDANCE WITH
APPLICABLE LAW AND JURISPRUDENCE THE EVIDENCE PRESENTED BY BOTH PARTIES.
6.3
WHETHER UNDER THE FACTS AND EVIDENCE PRESENTED, THE FINDING OF THE HONORABLE COURT OF
APPEALS THAT PETITIONERS ARE LIABLE FOR ILLEGAL DISMISSAL OF RESPONDENT IS IN ACCORD WITH
APPLICABLE LAW AND JURISPRUDENCE.
6.4
WHETHER UNDER THE FACTS PRESENTED, THE RULING OF THE HONORABLE COURT OF APPEALS THAT THE
BACKWAGES DUE THE RESPONDENT SHOULD BE COMPUTED FROM THE TIME OF ILLEGAL TERMINATION UNTIL
THE FINALITY OF THE DECISION IS SUPPORTED BY PREVAILING JURISPRUDENCE.21

Resolution of the first issue is paramount in view of petitioners denial of the existence of employer-employee relationship.
The issue of whether or not an employer-employee relationship exists in a given case is essentially a question of fact. As a rule, this
Court is not a trier of facts and this applies with greater force in labor cases.22 Only errors of law are generally reviewed by this
Court.23 This rule is not absolute, however, and admits of exceptions. For one, the Court may look into factual issues in labor cases
when the factual findings of the Labor Arbiter, the NLRC, and the CA are conflicting.24 Here, the findings of the NLRC differed from
those of the Labor Arbiter and the CA, which compels the Courts exercise of its authority to review and pass upon the evidence
presented and to draw its own conclusions therefrom.25
To ascertain the existence of an employer-employee relationship jurisprudence has invariably adhered to the four-fold test, to wit: (1)
the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the
employees conduct, or the so-called "control test."26 In resolving the issue of whether such relationship exists in a given case,
substantial evidence that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion is
sufficient. Although no particular form of evidence is required to prove the existence of the relationship, and any competent and
relevant evidence to prove the relationship may be admitted, a finding that the relationship exists must nonetheless rest on substantial
evidence.27
In support of their claim that respondent was not their employee, petitioners presented Employment Reports to the SSS from 1987 to
2002, the Certifications issued by Mayol and Apondar, two affidavits of Vicente Coming, payroll sheets (1999-2000), individual pay
envelopes and employee earnings records (1999-2000) and affidavit of Angelina Agbay (Treasurer and Human Resources Officer).
The payroll and pay records did not include the name of respondent. The affidavit of Ms. Agbay stated that after SEIRI started its
business in 1986 purely on export trading, it ceased operations in 1989 as evidenced by Certification dated January 18, 1994 from the
Securities and Exchange Commission (SEC); that when business resumed in 1992, SEIRI undertook only a little of manufacturing;
that the company never hired any workers for varnishing and pole sizing because it bought the same from various suppliers, including
Faustino Apondar; respondent was never hired by SEIRI; and while it is true that Mr. Estanislao Agbay is the company President, he
never dispensed the salaries of workers.28
In his first affidavit, Vicente Coming averred that:
6. [Jesus Coming] is a furniture factory worker. In 1982 to 1986, he was working with Ben Mayol as round core
maker/splitter.
7. Thereafter, we joined Okay Okay Yard owned by Amelito Montececillo. This is a rattan trader with business address near
Cebu Rattan Factory on a "Pakiao" basis.
8. However, Jesus and I did not stay long at Okay Okay Yard and instead we joined Eleuterio Agbay in Labogon, Cebu in
1989. In 1991, we went back to Okay Okay located near the residence of Atty. Vicente de la Serna in Mandaue City. We
were on a "pakiao" basis. We stayed put until 1993 when we resigned and joined Dodoy Luna in Labogon, Mandaue City as
classifier until 1995. In 1996[,] Jesus rested. It was only in 1997 that he worked back. He replaced me, as a classifier in
Rattan Traders owned by Allan Mayol. But then, towards the end of the year, he left the factory and relaxed in our place of
birth, in Sogod, Cebu.
9. It was only towards the end of 1999 that Jesus was taken back by Allan Mayol as sizing machine operator. However, the
work was off and on basis. Not regular in nature, he was harping a side line job with me knowing that I am now working with
Faustino Apondar that supplies rattan furnitures [sic] to South East (Intl) Rattan, Inc. As a brother, I allowed Jesus to work
with me and collect the proceeds of his services as part of my collectibles from Faustino Apondar since I was on a "pakiao"
basis. He was working at his pleasure. Which means, he works if he likes to? That will be until 10:00 oclock in the evening.
x x x x29
The Certification dated January 20, 2004 of Allan Mayol reads:
This is to certify that I personally know Jesus Coming, the brother of Vicente Coming. Jesus is a rattan factory worker and he was
working with me as rattan pole sizing/classifier of my business from 1997 up to part of 1998 when he left my factory at will. I took
him back towards the end of 1999, this time as a sizing machine operator. In all these years, his services are not regular. He works
only if he likes to.30
Faustino Apondar likewise issued a Certification which states:

This is to certify that I am a maker/supplier of finished Rattan Furniture. As such, I have several rattan furniture workers under me,
one of whom is Vicente Coming, the brother of Jesus Coming.
That sometime in 1999, Vicente pleaded to me for a side line job of his brother, Jesus who was already connected with Allan Mayol.
Having vouched for the integrity of his brother and knowing that the job is temporary in character, I allowed Jesus to work with his
brother Vicente. However, the proceeds will be collected together with his brother Vicente since it was the latter who was working
with me. He renders services to his brother work only after the regular working hours but off and on basis.31
On the other hand, respondent submitted the affidavit executed by Eleoterio Brigoli, Pedro Brigoli, Napoleon Coming, Efren Coming
and Gil Coming who all attested that respondent was their co-worker at SEIRI.
Their affidavit reads:
We, the undersigned, all of legal ages, Filipino, and resident[s] of Cebu, after having been duly sworn to in accordance with law,
depose and say:
That we are former employees of SOUTH EAST RATTAN which is owned by Estan Eslao Agbay;
That we personally know JESUS COMING considering that we worked together in one company SOUTH EAST RATTANT [sic];
That we together with JESUS COMING are all under the employ of ESTAN ESLAO AGBAY considering that the latter is the one
directly paying us and holds the absolute control of all aspects of our employment;
That it is not true that JESUS COMING is under the employ of one person other than ESTAN ESLAO AGBAY OF SOUTH EAST
RATTAN;
That Jesus Coming is one of the pioneer employees of SOUTH EAST RATTAN and had been employed therein for almost twenty
years;
That we executed this affidavit to attest to the truth of the foregoing facts and to deny any contrary allegation made by the company
against his employment with SOUTH EAST RATTAN.32
In his decision, Labor Arbiter Carreon found that respondents work as sizing machine operator is usually necessary and desirable to
the rattan furniture business of petitioners and their failure to include respondent in the employment report to SSS is not conclusive
proof that respondent is not their employee. As to the affidavit of Vicente Coming, Labor Arbiter Carreon did not give weight to his
statement that respondent is not petitioners employee but that of one Faustino Apondar. Labor Arbiter Carreon was not convinced
that Faustino Apondar is an independent contractor who has a contractual relationship with petitioners.
In reversing the Labor Arbiter, the NLRC reasoned as follows:
First complainant alleged that he worked continuously from March 17, 1984 up to January 21, 2002.1wphi1 Records reveal however
that South East (Intl.) Rattan, Inc. was incorporated only last July 18, 1986 (p. 55 records)[.] Moreover, when they started to actually
operate in 1987, the company was engaged purely on "buying and exporting rattan furniture" hence no manufacturing employees were
hired. Furthermore, from the last quarter of 1989 up to August of 1992, the company suspended operations due to economic reverses
as per Certification issued by the Securities and Exchange Commission (p. 56 records)[.]
Second, for all his insistence that he was a regular employee, complainant failed to present a single payslip, voucher or a copy of a
company payroll showing that he rendered service during the period indicated therein. x x x
From the above established facts we are inclined to give weight and credence to the Certifications of Allan Mayol and Faustino
Apondar, both suppliers of finished Rattan Furniture (pp. 442-43, records). It appears that complainant first worked with Allan Mayol
and later with Faustino Apondar upon the proddings of his brother Vicente. Vicentes affidavit as to complainants employment
history was more detailed and forthright. x x x
xxxx
In the case at bar, there is likewise substantial evidence to support our findings that complainant was not an employee of respondents.
Thus:

1. Complainants name does not appear in the list of employees reported to the SSS.
2. His name does not also appear in the sample payrolls of respondents employees.
3. The certification of Allan Mayol and Fasutino Apondar[,] supplier of finished rattan products[,] that complainant had at
one time or another worked with them.
4. The Affidavit of Vicente Coming, complainants full brother[,] attesting that complainant had never been an employee of
respondent. The only connection was that their employer Faustino Apondar supplies finished rattan products to
respondents.33
On the other hand, the CA gave more credence to the declarations of the five former employees of petitioners that respondent was
their co-worker in SEIRI. One of said affiants is Vicente Comings own son, Gil Coming. Vicente averred in his second affidavit that
when he confronted his son, the latter explained that he was merely told by their Pastor to sign the affidavit as it will put an end to the
controversy. Vicente insisted that his son did not know the contents and implications of the document he signed. As to the absence of
respondents name in the payroll and SSS employment report, the CA observed that the payrolls submitted were only from January 1,
1999 to December 29, 2000 and not the entire period of eighteen years when respondent claimed he worked for SEIRI. It further noted
that the names of the five affiants, whom petitioners admitted to be their former employees, likewise do not appear in the aforesaid
documents. According to the CA, it is apparent that petitioners maintained a separate payroll for certain employees or willfully
retained a portion of the payroll.
x x x As to the "control test", the following facts indubitably reveal that respondents wielded control over the work performance of
petitioner, to wit: (1) they required him to work within the company premises; (2) they obliged petitioner to report every day of the
week and tasked him to usually perform the same job; (3) they enforced the observance of definite hours of work from 8 oclock in the
morning to 5 oclock in the afternoon; (4) the mode of payment of petitioners salary was under their discretion, at first paying him on
pakiao basis and thereafter, on daily basis; (5) they implemented company rules and regulations; (6) [Estanislao] Agbay directly paid
petitioners salaries and controlled all aspects of his employment and (7) petitioner rendered work necessary and desirable in the
business of the respondent company.34
We affirm the CA.
In Tan v. Lagrama,35 the Court held that the fact that a worker was not reported as an employee to the SSS is not conclusive proof of
the absence of employer-employee relationship. Otherwise, an employer would be rewarded for his failure or even neglect to perform
his obligation.36
Nor does the fact that respondents name does not appear in the payrolls and pay envelope records submitted by petitioners negate the
existence of employer-employee relationship. For a payroll to be utilized to disprove the employment of a person, it must contain a
true and complete list of the employee.37 In this case, the exhibits offered by petitioners before the NLRC consisting of copies of
payrolls and pay earnings records are only for the years 1999 and 2000; they do not cover the entire 18-year period during which
respondent supposedly worked for SEIRI.
In their comment to the petition filed by respondent in the CA, petitioners emphasized that in the certifications issued by Mayol and
Apondar, it was shown that respondent was employed and working for them in those years he claimed to be working for SEIRI.
However, a reading of the certification by Mayol would show that while the latter claims to have respondent under his employ in
1997, 1998 and 1999, respondents services were not regular and that he works only if he wants to. Apondars certification likewise
stated that respondent worked for him since 1999 through his brother Vicente as "sideline" but only after regular working hours and
"off and on" basis. Even assuming the truth of the foregoing statements, these do not foreclose respondents regular or full-time
employment with SEIRI. In effect, petitioners suggest that respondent was employed by SEIRIs suppliers, Mayol and Apondar but no
competent proof was presented as to the latters status as independent contractors.
In the same comment, petitioners further admitted that the five affiants who attested to respondents employment with SEIRI are its
former workers whom they describe as "disgruntled workers of SEIRI" with an axe to grind against petitioners, and that their
execution of affidavit in support of respondents claim is "their very way of hitting back the management of SEIRI after disciplinary
measures were meted against them."38 This allegation though was not substantiated by petitioners. Instead, after the CA rendered its
decision reversing the NLRCs ruling, petitioners subsequently changed their theory by denying the employment relationship with the
five affiants in their motion for reconsideration, thus:
x x x Since the five workers were occupying and working on a leased premises of the private respondent, they were called workers of
SEIRI (private respondent). Such admission however, does not connote employment. For the truth of the matter, all of the five
employees of the supplier assigned at the leased premises of the private respondent. Because of the recommendation of the private

respondent with regards to the disciplinary measures meted on the five workers, they wanted to hit back against the private
respondent. Their motive to implicate private respondent was to vindicate. Definitely, they have an axe to grind against the private
respondent. Mention has to be made that despite the dismissal of these five (5) witnesses from their service, none of them ever went to
the National Labor [Relations] Commission and invoked their rights, if any, against their employer or at the very least against the
respondent. The reason is obvious, since they knew pretty well that they were not employees of SEIRI but rather under the employ of
Allan Mayol and Faustino Apondar, working on a leased premise of respondent. x x x39
Petitioners admission that the five affiants were their former employees is binding upon them. While they claim that respondent was
the employee of their suppliers Mayol and Apondar, they did not submit proof that the latter were indeed independent contractors;
clearly, petitioners failed to discharge their burden of proving their own affirmative allegation.40 There is thus no showing that the
five former employees of SEIRI were motivated by malice, bad faith or any ill-motive in executing their affidavit supporting the
claims of respondent.
In any controversy between a laborer and his master, doubts reasonably arising from the evidence are resolved in favor of the
laborer.41
As a regular employee, respondent enjoys the right to security of tenure under Article 27942 of the Labor Code and may only be
dismissed for a just43 or authorized44 cause, otherwise the dismissal becomes illegal.
Respondent, whose employment was terminated without valid cause by petitioners, is entitled to reinstatement without loss of
seniority rights and other privileges and to his full back wages, inclusive of allowances and other benefits or their monetary
equivalent, computed from the time his compensation was withheld from him up to the time of his actual reinstatement. Where
reinstatement is no longer viable as an option, back wages shall be computed from the time of the illegal termination up to the finality
of the decision. Separation pay equivalent to one month salary for every year of service should likewise be awarded as an alternative
in case reinstatement in not possible.45
WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated February 21, 2008 and Resolution dated
February 9, 2009 of the Court of Appeals in CA-G.R. No. CEB-SP No. 02113 are hereby AFFIRMED and UPHELD.
Petitioners to pay the costs of suit.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Baguio City
FIRST DIVISION
G.R. No. 192998

April 2, 2014

BERNARD A. TENAZAS, JAIME M. FRANCISCO and ISIDRO G. ENDRACA, Petitioners,


vs.
R. VILLEGAS TAXI TRANSPORT and ROMUALDO VILLEGAS, Respondents.
DECISION
REYES, J.:
This is a petition for review on certiorari1 filed under Rule 45 of the Rules of Court, assailing the Decision2 dated March 11, 2010 and
Resolution3 dated June 28, 2010 of the Court of Appeals (CA) in CA-G.R. SP No. 111150, which affirmed with modification the
Decision4 dated June 23, 2009 of the National Labor Relations Commission (NLRC) in NLRC LAC Case No. 07-002648-08.
The Antecedent Facts
On July 4, 2007, Bernard A. Tenazas (Tenazas) and Jaime M. Francisco (Francisco) filed a complaint for illegal dismissal against R.
Villegas Taxi Transport and/or Romualdo Villegas (Romualdo) and Andy Villegas (Andy) (respondents). At that time, a similar case

had already been filed by Isidro G. Endraca (Endraca) against the same respondents. The two (2) cases were subsequently
consolidated.5
In their position paper,6 Tenazas, Francisco and Endraca (petitioners) alleged that they were hired and dismissed by the respondents
on the following dates:
Name

Date of Hiring

Date of Dismissal

Salary

Bernard A. Tenazas

10/1997

07/03/07

Boundary System

Jaime M. Francisco

04/10/04

06/04/07

Boundary System

Isidro G. Endraca

04/2000

03/06/06

Boundary System7

Relaying the circumstances of his dismissal, Tenazas alleged that on July 1, 2007, the taxi unit assigned to him was sideswiped by
another vehicle, causing a dent on the left fender near the driver seat. The cost of repair for the damage was estimated at P500.00.
Upon reporting the incident to the company, he was scolded by respondents Romualdo and Andy and was told to leave the garage for
he is already fired. He was even threatened with physical harm should he ever be seen in the companys premises again. Despite the
warning, Tenazas reported for work on the following day but was told that he can no longer drive any of the companys units as he is
already fired.8
Francisco, on the other hand, averred that his dismissal was brought about by the companys unfounded suspicion that he was
organizing a labor union. He was instantaneously terminated, without the benefit of procedural due process, on June 4, 2007.9
Endraca, for his part, alleged that his dismissal was instigated by an occasion when he fell short of the required boundary for his taxi
unit. He related that before he was dismissed, he brought his taxi unit to an auto shop for an urgent repair. He was charged the amount
of P700.00 for the repair services and the replacement parts. As a result, he was not able to meet his boundary for the day. Upon
returning to the company garage and informing the management of the incident, his drivers license was confiscated and was told to
settle the deficiency in his boundary first before his license will be returned to him. He was no longer allowed to drive a taxi unit
despite his persistent pleas.10
For their part, the respondents admitted that Tenazas and Endraca were employees of the company, the former being a regular driver
and the latter a spare driver. The respondents, however, denied that Francisco was an employee of the company or that he was able to
drive one of the companys units at any point in time.11
The respondents further alleged that Tenazas was never terminated by the company. They claimed that on July 3, 2007, Tenazas went
to the company garage to get his taxi unit but was informed that it is due for overhaul because of some mechanical defects reported by
the other driver who takes turns with him in using the same. He was thus advised to wait for further notice from the company if his
unit has already been fixed. On July 8, 2007, however, upon being informed that his unit is ready for release, Tenazas failed to report
back to work for no apparent reason.12
As regards Endraca, the respondents alleged that they hired him as a spare driver in February 2001. They allow him to drive a taxi unit
whenever their regular driver will not be able to report for work. In July 2003, however, Endraca stopped reporting for work without
informing the company of his reason. Subsequently, the respondents learned that a complaint for illegal dismissal was filed by
Endraca against them. They strongly maintained, however, that they could never have terminated Endraca in March 2006 since he
already stopped reporting for work as early as July 2003. Even then, they expressed willingness to accommodate Endraca should he
wish to work as a spare driver for the company again since he was never really dismissed from employment anyway.13
On May 29, 2008, the petitioners, by registered mail, filed a Motion to Admit Additional Evidence.14 They alleged that after diligent
efforts, they were able to discover new pieces of evidence that will substantiate the allegations in their position paper. Attached with
the motion are the following: (a) Joint Affidavit of the petitioners;15 (2) Affidavit of Good Faith of Aloney Rivera, a co-driver;16 (3)
pictures of the petitioners wearing company shirts;17 and (4) Tenazas Certification/Record of Social Security System (SSS)
contributions.18
The Ruling of the Labor Arbiter
On May 30, 2008, the Labor Arbiter (LA) rendered a Decision,19 which pertinently states, thus:

In the case of complainant Jaime Francisco, respondents categorically denied the existence of an employer-employee relationship. In
this situation, the burden of proof shifts to the complainant to prove the existence of a regular employment. Complainant Francisco
failed to present evidence of regular employment available to all regular employees, such as an employment contract, company ID,
SSS, withholding tax certificates, SSS membership and the like.
In the case of complainant Isidro Endraca, respondents claim that he was only an extra driver who stopped reporting to queue for
available taxi units which he could drive. In fact, respondents offered him in their Position Paper on record, immediate reinstatement
as extra taxi driver which offer he refused.
In case of Bernard Tenazas, he was told to wait while his taxi was under repair but he did not report for work after the taxi was
repaired. Respondents[,] in their Position Paper, on record likewise, offered him immediate reinstatement, which offer he refused.
We must bear in mind that the complaint herein is one of actual dismissal. But there was no formal investigations, no show cause
memos, suspension memos or termination memos were never issued. Otherwise stated, there is no proof of overt act of dismissal
committed by herein respondents.
We are therefore constrained to rule that there was no illegal dismissal in the case at bar.
The situations contemplated by law for entitlement to separation pay does [sic] not apply.
WHEREFORE, premises considered, instant consolidated complaints are hereby dismissed for lack of merit.
SO ORDERED.20
The Ruling of the NLRC
Unyielding, the petitioners appealed the decision of the LA to the NLRC. Subsequently, on June 23, 2009, the NLRC rendered a
Decision,21 reversing the appealed decision of the LA, holding that the additional pieces of evidence belatedly submitted by the
petitioners sufficed to establish the existence of employer-employee relationship and their illegal dismissal. It held, thus:
In the challenged decision, the Labor Arbiter found that it cannot be said that the complainants were illegally dismissed, there being
no showing, in the first place, that the respondent [sic] terminated their services. A portion thereof reads:
"We must bear in mind that the complaint herein is one of actual dismissal. But there were no formal investigations, no show cause
memos, suspension memos or termination memos were never issued. Otherwise stated, there is no proof of overt act of dismissal
committed by herein respondents.
We are therefore constrained to rule that there was no illegal dismissal in the case at bar."
Issue: [W]hether or not the complainants were illegally dismissed from employment.
It is possible that the complainants Motion to Admit Additional Evidence did not reach the Labor Arbiters attention because he had
drafted the challenged decision even before they submitted it, and thereafter, his staff attended only to clerical matters, and failed to
bring the motion in question to his attention. It is now up to this Commission to consider the complainants additional evidence.
Anyway, if this Commission must consider evidence submitted for the first time on appeal (Andaya vs. NLRC, G.R. No. 157371, July
15, 2005), much more so must it consider evidence that was simply overlooked by the Labor Arbiter.
Among the additional pieces of evidence submitted by the complainants are the following: (1) joint affidavit (records, p. 51-52) of the
three (3) complainants; (2) affidavit (records, p. 53) of Aloney Rivera y Aldo; and (3) three (3) pictures (records, p. 54) referred to by
the complainant in their joint affidavit showing them wearing t-shirts bearing the name and logo of the respondents company.
xxxx
WHEREFORE, the decision appealed from is hereby REVERSED. Respondent Rom[u]aldo Villegas doing business under the name
and style Villegas Taxi Transport is hereby ordered to pay the complainants the following (1) full backwages from the date of their
dismissal (July 3, 2007 for Tena[z]as, June 4, 2004 for Francisco, and March 6, 2006 for Endraca[)] up to the date of the finality of
this decision[;] (2) separation pay equivalent to one month for every year of service; and (3) attorneys fees equivalent to ten percent
(10%) of the total judgment awards.

SO ORDERED.22
On July 24, 2009, the respondents filed a motion for reconsideration but the NLRC denied the same in its Resolution23 dated
September 23, 2009.
The Ruling of the CA
Unperturbed, the respondents filed a petition for certiorari with the CA. On March 11, 2010, the CA rendered a Decision,24 affirming
with modification the Decision dated June 23, 2009 of the NLRC. The CA agreed with the NLRCs finding that Tenazas and Endraca
were employees of the company, but ruled otherwise in the case of Francisco for failing to establish his relationship with the company.
It also deleted the award of separation pay and ordered for reinstatement of Tenazas and Endraca. The pertinent portions of the
decision read as follows:
At the outset, We declare that respondent Francisco failed to prove that an employer-employee relationship exists between him and R.
Transport. If there is no employer-employee relationship in the first place, the duty of R. Transport to adhere to the labor standards
provisions of the Labor Code with respect to Francisco is questionable.
xxxx
Although substantial evidence is not a function of quantity but rather of quality, the peculiar environmental circumstances of the
instant case demand that something more should have been proffered. Had there been other proofs of employment, such as Franciscos
inclusion in R.R.
Transports payroll, this Court would have affirmed the finding of employer-employee relationship.1wphi1 The NLRC, therefore,
committed grievous error in ordering R. Transport to answer for Franciscos claims.
We now tackle R. Transports petition with respect to Tenazas and Endraca, who are both admitted to be R. Transports employees. In
its petition, R. Transport puts forth the theory that it did not terminate the services of respondents but that the latter deliberately
abandoned their work. We cannot subscribe to this theory.
xxxx
Considering that the complaints for illegal dismissal were filed soon after the alleged dates of dismissal, it cannot be inferred that
respondents Tenazas and Endraca intended to abandon their employment. The complainants for dismissal are, in themselves, pleas for
the continuance of employment. They are incompatible with the allegation of abandonment. x x x.
For R. Transports failure to discharge the burden of proving that the dismissal of respondents Tenazas and Endraca was for a just
cause, We are constrained to uphold the NLRCs conclusion that their dismissal was not justified and that they are entitled to back
wages. Because they were illegally dismissed, private respondents Tenazas and Endraca are entitled to reinstatement and back wages x
x x.
xxxx
However, R. Transport is correct in its contention that separation pay should not be awarded because reinstatement is still possible and
has been offered. It is well[-]settled that separation pay is granted only in instances where reinstatement is no longer feasible or
appropriate, which is not the case here.
xxxx
WHEREFORE, the Decision of the National Labor Relations Commission dated 23 June 2009, in NLRC LAC Case No. 07-00264808, and its Resolution dated 23 September 2009 denying reconsideration thereof are AFFIRMED with MODIFICATION in that the
award of Jaime Franciscos claims is DELETED. The separation pay granted in favor of Bernard Tenazas and Isidro Endraca is,
likewise, DELETED and their reinstatement is ordered instead.
SO ORDERED.25 (Citations omitted)
On March 19, 2010, the petitioners filed a motion for reconsideration but the same was denied by the CA in its Resolution26 dated
June 28, 2010.

Undeterred, the petitioners filed the instant petition for review on certiorari before this Court on July 15, 2010.
The Ruling of this Court
The petition lacks merit.
Pivotal to the resolution of the instant case is the determination of the existence of employer-employee relationship and whether there
was an illegal dismissal. Remarkably, the LA, NLRC and the CA had varying assessment on the matters at hand. The LA believed
that, with the admission of the respondents, there is no longer any question regarding the status of both Tenazas and Endraca being
employees of the company. However, he ruled that the same conclusion does not hold with respect to Francisco whom the respondents
denied to have ever employed or known. With the respondents denial, the burden of proof shifts to Francisco to establish his regular
employment. Unfortunately, the LA found that Francisco failed to present sufficient evidence to prove regular employment such as
company ID, SSS membership, withholding tax certificates or similar articles. Thus, he was not considered an employee of the
company. Even then, the LA held that Tenazas and Endraca could not have been illegally dismissed since there was no overt act of
dismissal committed by the respondents.27
On appeal, the NLRC reversed the ruling of the LA and ruled that the petitioners were all employees of the company. The NLRC
premised its conclusion on the additional pieces of evidence belatedly submitted by the petitioners, which it supposed, have been
overlooked by the LA owing to the time when it was received by the said office. It opined that the said pieces of evidence are
sufficient to establish the circumstances of their illegal termination. In particular, it noted that in the affidavit of the petitioners, there
were allegations about the companys practice of not issuing employment records and this was not rebutted by the respondents. It
underscored that in a situation where doubt exists between evidence presented by the employer and the employee, the scales of justice
must be tilted in favor of the employee. It awarded the petitioners with: (1) full backwages from the date of their dismissal up to the
finality of the decision; (2) separation pay equivalent to one month of salary for every year of service; and (3) attorneys fees.
On petition for certiorari, the CA affirmed with modification the decision of the NLRC, holding that there was indeed an illegal
dismissal on the part of Tenazas and Endraca but not with respect to Francisco who failed to present substantial evidence, proving that
he was an employee of the respondents. The CA likewise dismissed the respondents claim that Tenazas and Endraca abandoned their
work, asseverating that immediate filing of a complaint for illegal dismissal and persistent pleas for continuance of employment are
incompatible with abandonment. It also deleted the NLRCs award of separation pay and instead ordered that Tenazas and Endraca be
reinstated.28
"Well-settled is the rule that the jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the Revised Rules of
Court is limited to reviewing only errors of law, not of fact, unless the factual findings complained of are completely devoid of support
from the evidence on record, or the assailed judgment is based on a gross misapprehension of facts."29 The Court finds that none of
the mentioned circumstances is present in this case.
In reviewing the decision of the NLRC, the CA found that no substantial evidence was presented to support the conclusion that
Francisco was an employee of the respondents and accordingly modified the NLRC decision. It stressed that with the respondents
denial of employer-employee relationship, it behooved Francisco to present substantial evidence to prove that he is an employee
before any question on the legality of his supposed dismissal becomes appropriate for discussion. Francisco, however, did not offer
evidence to substantiate his claim of employment with the respondents. Short of the required quantum of proof, the CA correctly ruled
that the NLRCs finding of illegal dismissal and the monetary awards which necessarily follow such ruling lacked factual and legal
basis and must therefore be deleted.
The action of the CA finds support in Anonas Construction and Industrial Supply Corp., et al. v. NLRC, et al.,30 where the Court
reiterated:
[J]udicial review of decisions of the NLRC via petition for certiorari under Rule 65, as a general rule, is confined only to issues of lack
or excess of jurisdiction and grave abuse of discretion on the part of the NLRC. The CA does not assess and weigh the sufficiency of
evidence upon which the LA and the NLRC based their conclusions. The issue is limited to the determination of whether or not the
NLRC acted without or in excess of its jurisdiction, or with grave abuse of discretion in rendering the resolution, except if the findings
of the NLRC are not supported by substantial evidence.31 (Citation omitted and emphasis ours)
It is an oft-repeated rule that in labor cases, as in other administrative and quasi-judicial proceedings, "the quantum of proof necessary
is substantial evidence, or such amount of relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion."32 "[T]he burden of proof rests upon the party who asserts the affirmative of an issue."33 Corollarily, as Francisco was
claiming to be an employee of the respondents, it is incumbent upon him to proffer evidence to prove the existence of said
relationship.

"[I]n determining the presence or absence of an employer-employee relationship, the Court has consistently looked for the following
incidents, to wit: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employers power to control the employee on the means and methods by which the work is accomplished. The last element, the socalled control test, is the most important element."34
There is no hard and fast rule designed to establish the aforesaid elements. Any competent and relevant evidence to prove the
relationship may be admitted. Identification cards, cash vouchers, social security registration, appointment letters or employment
contracts, payrolls, organization charts, and personnel lists, serve as evidence of employee status.35
In this case, however, Francisco failed to present any proof substantial enough to establish his relationship with the respondents. He
failed to present documentary evidence like attendance logbook, payroll, SSS record or any personnel file that could somehow depict
his status as an employee. Anent his claim that he was not issued with employment records, he could have, at least, produced his
social security records which state his contributions, name and address of his employer, as his co-petitioner Tenazas did. He could
have also presented testimonial evidence showing the respondents exercise of control over the means and methods by which he
undertakes his work. This is imperative in light of the respondents denial of his employment and the claim of another taxi operator,
Emmanuel Villegas (Emmanuel), that he was his employer. Specifically, in his Affidavit,36 Emmanuel alleged that Francisco was
employed as a spare driver in his taxi garage from January 2006 to December 2006, a fact that the latter failed to deny or question in
any of the pleadings attached to the records of this case. The utter lack of evidence is fatal to Franciscos case especially in cases like
his present predicament when the law has been very lenient in not requiring any particular form of evidence or manner of proving the
presence of employer-employee relationship.
In Opulencia Ice Plant and Storage v. NLRC,37 this Court emphasized, thus:
No particular form of evidence is required to prove the existence of an employer-employee relationship. Any competent and relevant
evidence to prove the relationship may be admitted. For, if only documentary evidence would be required to show that relationship, no
scheming employer would ever be brought before the bar of justice, as no employer would wish to come out with any trace of the
illegality he has authored considering that it should take much weightier proof to invalidate a written instrument.38
Here, Francisco simply relied on his allegation that he was an employee of the company without any other evidence supporting his
claim. Unfortunately for him, a mere allegation in the position paper is not tantamount to evidence.39 Bereft of any evidence, the CA
correctly ruled that Francisco could not be considered an employee of the respondents.
The CAs order of reinstatement of Tenazas and Endraca, instead of the payment of separation pay, is also well in accordance with
prevailing jurisprudence. In Macasero v. Southern Industrial Gases Philippines,40 the Court reiterated, thus:
[A]n illegally dismissed employee is entitled to two reliefs: backwages and reinstatement.1wphi1 The two reliefs provided are
separate and distinct. In instances where reinstatement is no longer feasible because of strained relations between the employee and
the employer, separation pay is granted. In effect, an illegally dismissed employee is entitled to either reinstatement, if viable, or
separation pay if reinstatement is no longer viable, and backwages.
The normal consequences of respondents illegal dismissal, then, are reinstatement without loss of seniority rights, and payment of
backwages computed from the time compensation was withheld up to the date of actual reinstatement. Where reinstatement is no
longer viable as an option, separation pay equivalent to one (1) month salary for every year of service should be awarded as an
alternative. The payment of separation pay is in addition to payment of backwages.41 (Emphasis supplied)
Clearly, it is only when reinstatement is no longer feasible that the payment of separation pay is ordered in lieu thereof. For instance, if
reinstatement would only exacerbate the tension and strained relations between the parties, or where the relationship between the
employer and the employee has been unduly strained by reason of their irreconcilable differences, it would be more prudent to order
payment of separation pay instead of reinstatement.42
This doctrine of strained relations, however, should not be used recklessly or applied loosely43 nor be based on impression alone. "It
bears to stress that reinstatement is the rule and, for the exception of strained relations to apply, it should be proved that it is likely that
if reinstated, an atmosphere of antipathy and antagonism would be generated as to adversely affect the efficiency and productivity of
the employee concerned."44
Moreover, the existence of strained relations, it must be emphasized, is a question of fact. In Golden Ace Builders v. Talde,45 the
Court underscored:

Strained relations must be demonstrated as a fact, however, to be adequately supported by evidencesubstantial evidence to show
that the relationship between the employer and the employee is indeed strained as a necessary consequence of the judicial
controversy.46 (Citations omitted and emphasis ours)
After a perusal of the NLRC decision, this Court failed to find the factual basis of the award of separation pay to the petitioners. The
NLRC decision did not state the facts which demonstrate that reinstatement is no longer a feasible option that could have justified the
alternative relief of granting separation pay instead.
The petitioners themselves likewise overlooked to allege circumstances which may have rendered their reinstatement unlikely or
unwise and even prayed for reinstatement alongside the payment of separation pay in their position paper.47 A bare claim of strained
relations by reason of termination is insufficient to warrant the granting of separation pay. Likewise, the filing of the complaint by the
petitioners does not necessarily translate to strained relations between the parties. As a rule, no strained relations should arise from a
valid and legal act asserting ones right.48 Although litigation may also engender a certain degree of hostility, the understandable
strain in the parties relation would not necessarily rule out reinstatement which would, otherwise, become the rule rather the
exception in illegal dismissal cases.49 Thus, it was a prudent call for the CA to delete the award of separation pay and order for
reinstatement instead, in accordance with the general rule stated in Article 27950 of the Labor Code.
Finally, the Court finds the computation of the petitioners' backwages at the rate of P800.00 daily reasonable and just under the
circumstances. The said rate is consistent with the ruling of this Court in Hyatt Taxi Services, Inc. v. Catinoy,51 which dealt with the
same matter.
WHEREFORE, in view of the foregoing disquisition, the petition for review on certiorari is DENIED. The Decision dated March 11,
2010 and Resolution dated June 28, 2010 of the Court of Appeals in CA-G.R. SP No. 111150 are AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Baguio City
FIRST DIVISION
G.R. No. 199166

April 20, 2015

NELSON V. BEGINO, GENER DEL VALLE, MONINA A VILA-LLORIN AND MA. CRISTINA SUMAYAO, Petitioners,
vs.
ABS-CBN CORPORATION (FORMERLY, ABS-CBN BROADCASTING CORPORATION) AND AMALIA
VILLAFUERTE, Respondents.
DECISION
PEREZ, J.:
The existence of an employer-employee relationship is at the heart of this Petition for Review on Certiorari filed pursuant to Rule 45
of the Rules of Court, primarily assailing the 29 June 2011 Decision1 rendered by the Fourth Division of the Court of Appeals (CA) in
CA-G.R. SP No. 116928 which ruled out said relationship between the parties.
The Facts
Respondent ABS-CBN Corporation (formerly ABS-CBN Broadcasting Corporation) is a television and radio broadcasting corporation
which, for its Regional Network Group in Naga City, employed respondent Amalia Villafuerte (Villafuerte) as Manager. There is no
dispute regarding the fact that, thru Villafuerte, ABS-CBN engaged the services of petitioners Nelson Begino (Begino) and Gener Del
Valle (Del Valle) sometime in 1996 as Cameramen/Editors for TV Broadcasting. Petitioners Ma. Cristina Sumayao (Sumayao) and
Monina Avila-Llorin (Llorin) were likewise similarly engaged as reporters sometime in 1996 and 2002, respectively. With their
services engaged by respondents thru Talent Contracts which, though regularly renewed over the years, provided terms ranging from
three (3) months to one (1) year, petitioners were given Project Assignment Forms which detailed, among other matters, the duration
of a particular project as well as the budget and the daily technical requirements thereof. In the aforesaid capacities, petitioners were
tasked with coverage of news items for subsequent daily airings in respondents TV Patrol Bicol Program.2

While specifically providing that nothing therein shall be deemed or construed to establish an employer-employee relationship
between the parties, the aforesaid Talent Contracts included, among other matters, provisions on the following matters: (a) the
Talents creation and performance of work in accordance with the ABS-CBNs professional standards and compliance with its
policies and guidelines covering intellectual property creators, industry codes as well as the rules and regulations of the Kapisanan ng
mga Broadcasters sa Pilipinas (KBP) and other regulatory agencies; (b) the Talents non-engagement in similar work for a person or
entity directly or indirectly in competition with or adverse to the interests of ABS-CBN and non-promotion of any product or service
without prior written consent; and (c) the results-oriented nature of the talents work which did not require them to observe normal or
fixed working hours.3 Subjected to contractors tax, petitioners remunerations were denominated as Talent Fees which, as of last
renewal, were admitted to be pegged per airing day at P273.35 for Begino, P 302.92 for Del Valle, P 323.08 for Sumayao and P
315.39 for Llorin.4
Claiming that they were regular employees of ABS-CBN, petitioners filed against respondents the complaint5 docketed as Sub-RAB
05-04- 00041-07 before the National Labor Relations Commissions (NLRC) Sub-Regional Arbitration Branch No. 5, Naga City. In
support of their claims for regularization, underpayment of overtime pay, holiday pay, 13th month pay, service incentive leave pay,
damages and attorney's fees, petitioners alleged that they performed functions necessary and desirable in ABS-CBN's business.
Mandated to wear company IDs and provided all the equipment they needed, petitioners averred that they worked under the direct
control and supervision of Villafuerte and, at the end of each day, were informed about the news to be covered the following day, the
routes they were to take and, whenever the subject of their news coverage is quite distant, even the start of their workday. Due to the
importance of the news items they covered and the necessity of their completion for the success of the program, petitioners claimed
that, under pain of immediate termination, they were bound by the companys policy on, among others, attendance and punctuality.6
Aside from the constant evaluation of their actions, petitioners were reportedly subjected to an annual competency assessment
alongside other ABS-CBN employees, as condition for their continued employment. Although their work involved dealing with
emergency situations at any time of the day or night, petitioners claimed that they were not paid the labor standard benefits the law
extends to regular employees. To avoid paying what is due them, however, respondents purportedly resorted to the simple expedient
of using said Talent Contracts and/or Project Assignment Forms which denominated petitioners as talents, despite the fact that they are
not actors or TV hosts of special skills. As a result of this iniquitous situation, petitioners asseverated that they merely earned an
average of P7,000.00 to P8,000.00 per month, or decidedly lower than the P21,773.00 monthly salary ABS-CBN paid its regular rankand-file employees. Considering their repeated re-hiring by respondents for ostensible fixed periods, this situation had gone on for
years since TV Patrol Bicol has continuously aired from 1996 onwards.7
In refutation of the foregoing assertions, on the other hand, respondents argued that, although it occasionally engages in production
and generates programs thru various means, ABS-CBN is primarily engaged in the business of broadcasting television and radio
content. Not having the full manpower complement to produce its own program, the company had allegedly resorted to engaging
independent contractors like actors, directors, artists, anchormen, reporters, scriptwriters and various production and technical staff,
who offered their services in relation to a particular program. Known in the industry as talents, such independent contractors inform
ABSCBN of their availability and were required to accomplish Talent Information Forms to facilitate their engagement for and
appearance on designated project days. Given the unpredictability of viewer preferences, respondents argued that the company cannot
afford to provide regular work for talents with whom it negotiates specific or determinable professional fees on a per project, weekly
or daily basis, usually depending on the budget allocation for a project.8
Respondents insisted that, pursuant to their Talent Contracts and/or Project Assignment Forms, petitioners were hired as talents, to act
as reporters and/or cameramen for TV Patrol Bicol for designated periods and rates. Fully aware that they were not considered or to
consider themselves as employees of a particular production or film outfit, petitioners were supposedly engaged on the basis of the
skills, knowledge or expertise they already possessed and, for said reason, required no further training from ABS-CBN. Although
petitioners were inevitably subjected to some degree of control, the same was allegedly limited to the imposition of general guidelines
on conduct and performance, simply for the purpose of upholding the standards of the company and the strictures of the industry.
Never subjected to any control or restrictions over the means and methods by which they performed or discharged the tasks for which
their services were engaged, petitioners were, at most, briefed whenever necessary regarding the general requirements of the project to
be executed.9
Having been terminated during the pendency of the case, Petitioners filed on 10 July 2007 a second complaint against respondents, for
regularization, payment of labor standard benefits, illegal dismissal and unfair labor practice, which was docketed as Sub-RAB 05-0800107-07. Upon respondents motion, this complaint was dismissed for violation of the rules against forum shopping in view of the
fact that the determination of the issues in the second case hinged on the resolution of those raised in the first.10 On 19 December
2007, however, Labor Arbiter Jesus Orlando Quiones (Labor Arbiter Quiones) resolved Sub-RAB 05-04-00041-07 in favor of
petitioners who, having rendered services necessary and related to ABS-CBNs business for more than a year, were determined to be
its regular employees. With said conclusion found to be buttressed by, among others, the exclusivity clause and prohibitions under
petitioners Talent Contracts and/or Project Assignment Forms which evinced respondents control over them,11 Labor Arbiter
Quiones disposed of the case in the following wise:

WHEREFORE, finding merit in the causes of action set forth by the complainants, judgment is hereby rendered declaring
complainants MONINA AVILA-LLORIN, GENER L. DEL VALLE, NELSON V. BEGINO and MA. CRISTINA V. SUMAYAO, as
regular employees of respondent company, ABS-CBN BROADCASTING CORPORATION.
Accordingly, respondent ABS-CBN Broadcasting Corporation is hereby ORDERED to pay complainants, subject to the prescriptive
period provided under Article 291 of the Labor Code, however applicable, the total amount of Php2,440,908.36, representing
salaries/wage differentials, holiday pay, service incentive leave pay and 13th month pay, to include 10% of the judgment award as
attorneys fees of the judgment award (computation of the monetary awards are attached hereto as integral part of this decision).
Moreover, respondents are directed to admit back complainants to work under the same terms and conditions prevailing prior to their
separation or, at respondents' option, merely reinstated in the payroll.
Other than the above, all other claims and charges are ordered DISMISSED for lack of merit.12
Aggrieved by the foregoing decision, respondents elevated the case on appeal before the NLRC, during the pendency of which
petitioners filed a third complaint against the former, for illegal dismissal, regularization, nonpayment of salaries and 13th month pay,
unfair labor practice, damages and attorneys fees. In turn docketed as NLRC Case No. Sub-RAB-V-05-03-00039-08, the complaint
was raffled to Labor Arbiter Quiones who issued an Order dated 30 April 2008, inhibiting himself from the case and denying
respondents motion to dismiss on the grounds of res judicata and forum shopping.13 Finding that respondents control over
petitioners was indeed manifest from the exclusivity clause and prohibitions in the Talent Contracts and/or Project Assignment Forms,
on the other hand, the NLRC rendered a Decision dated 31 March 2010, affirming said Labor Arbiters appealed decision.14
Undeterred by the NLRCs 31 August 2010 denial of their motion for reconsideration,15 respondents filed the Rule 65 petition for
certiorari docketed before the CA as CA-G.R. SP No. 116928 which, in addition to taking exceptions to the findings of the assailed
decision, faulted petitioners for violating the rule against forum shopping.16
On 29 June 2011, the CA rendered the herein assailed decision, reversing the findings of the Labor Arbiter and the NLRC. Ruling out
the existence of forum shopping on the ground that petitioners' second and third complaints were primarily anchored on their
termination from employment after the filing of their first complaint, the CA nevertheless discounted the existence of an employeremployee relation between the parties upon the following findings and conclusions: (a) petitioners, were engaged by respondents as
talents for periods, work and the program specified in the Talent Contracts and/or Project Assignment Forms concluded between
them; (b) instead of fixed salaries, petitioners were paid talent fees depending on the budget allocated for the program to which they
were assigned; (c) being mainly concerned with the result, respondents did not exercise control over the manner and method by which
petitioner accomplished their work and, at most, ensured that they complied with the standards of the company, the KBP and the
industry; and, (d) the existence of an employer-employee relationship is not necessarily established by the exclusivity clause and
prohibitions which are but terms and conditions on which the parties are allowed to freely stipulate.17
Petitioners motion for reconsideration of the foregoing decision was denied in the CA's 3 October 2011 Resolution,18 hence, this
petition.
The Issues
Petitioners seek the reversal of the CAs assailed Decision and Resolution on the affirmative of the following issues:
1. Whether or not the CA seriously and reversibly erred in not dismissing respondents petition for certiorari in view of the fact that
they did file a Notice of Appeal at the NLRC level and did not, by themselves or through their duly authorized representative, verify
and certify the Memorandum of Appeal they filed thereat, in accordance with the NLRC Rules of Procedure; and 2. Whether or not
the CA seriously and reversibly erred in brushing aside the determination made by both the Labor Arbiter and the NLRC of the
existence of an employer-employee relationship between the parties, despite established jurisprudence supporting the same.
The Court's Ruling
The Court finds the petition impressed with merit.
Petitioners preliminarily fault the CA for not dismissing respondents Rule 65 petition for certiorari in view of the fact that the latter
failed to file a Notice of Appeal from the Labor Arbiters decision and to verify and certify the Memorandum of Appeal they filed
before the NLRC. While concededly required under the NLRC Rules of Procedure, however, these matters should have been properly
raised during and addressed at the appellate stage before the NLRC. Instead, the record shows that the NLRC took cognizance of
respondents appeal and proceeded to resolve the same in favor of petitioners by affirming the Labor Arbiters decision. Not having
filed their own petition for certiorari to take exception to the liberal attitude the NLRC appears to have adopted towards its own rules

of procedure, petitioners were hardly in the proper position to raise the same before the CA or, for that matter, before this Court at this
late stage. Aside from the settled rule that a party who has not appealed is not entitled to affirmative relief other than the ones granted
in the decision19 rendered, liberal interpretation of procedural rules on appeal had, on occasion, been favored in the interest of
substantive justice.20
Although the existence of an employer-employee relationship is, on the other hand, a question of fact21 which is ordinarily not the
proper subject of a Rule 45 petition for review on certiorari like the one at bar, the conflicting findings between the labor tribunals and
the CA justify a further consideration of the matter.22 To determine the existence of said relation, case law has consistently applied
the four-fold test, to wit: (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 on the means and methods by which the work is accomplished.23 Of these criteria,
the so-called "control test" is generally regarded as the most crucial and determinative indicator of the presence or absence of an
employer-employee relationship. Under this test, an employer-employee relationship is said to exist where the person for whom the
services are performed reserves the right to control not only the end result but also the manner and means utilized to achieve the
same.24
In discounting the existence of said relationship between the parties, the CA ruled that Petitioners' services were, first and foremost,
engaged thru their Talent Contracts and/or Project Assignment Forms which specified the work to be performed by them, the project
to which they were assigned, the duration thereof and their rates of pay according to the budget therefor allocated. Because they are
imbued with public interest, it cannot be gainsaid, however, that labor contracts are subject to the police power of the state and are
placed on a higher plane than ordinary contracts. The recognized supremacy of the law over the nomenclature of the contract and the
stipulations contained therein is aimed at bringing life to the policy enshrined in the Constitution to afford protection to labor.25
Insofar as the nature of ones employment is concerned, Article 280 of the Labor Code of the Philippines also provides as follows:
ART. 280. Regular and Casual Employment. 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 service to be performed is seasonal in nature and the employment is for the
duration of the season.
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.
It has been ruled that the foregoing provision contemplates four kinds of employees, namely: (a) regular employees or those who have
been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer; (b) project
employees or those whose 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; (c) seasonal employees or those who work or perform services
which are seasonal in nature, and the employment is for the duration of the season; and (d) casual employees or those who are not
regular, project, or seasonal employees.26 To the foregoing classification of employee, jurisprudence has added that of contractual or
fixed term employee which, if not for the fixed term, would fall under the category of regular employment in view of the nature of the
employees engagement, which is to perform activity usually necessary or desirable in the employers business.27
The Court finds that, notwithstanding the nomenclature of their Talent Contracts and/or Project Assignment Forms and the terms and
condition embodied therein, petitioners are regular employees of ABS-CBN. Time and again, it has been ruled that the test to
determine whether employment is regular or not is the reasonable connection between the activity performed by the employee in
relation to the business or trade of the employer.28 As cameramen/editors and reporters, petitioners were undoubtedly performing
functions necessary and essential to ABS-CBNs business of broadcasting television and radio content. It matters little that petitioners
services were engaged for specified periods for TV Patrol Bicol and that they were paid according to the budget allocated therefor.
Aside from the fact that said program is a regular weekday fare of the ABS-CBNs Regional Network Group in Naga City, the record
shows that, from their initial engagement in the aforesaid capacities, petitioners were continuously re-hired by respondents over the
years. To the mind of the Court, respondents repeated hiring of petitioners for its long-running news program positively indicates that
the latter were ABS-CBNs regular employees.
If the employee has been performing the job for at least one year, even if the performance is not continuous or merely intermittent, the
law deems the repeated or continuing performance as sufficient evidence of the necessity, if not indispensability of that activity in the
business.29 Indeed, an employment stops being co-terminous with specific projects where the employee is continuously re-hired due
to the demands of the employers business.30 When circumstances show, moreover, that contractually stipulated periods of
employment have been imposed to preclude the acquisition of tenurial security by the employee, this Court has not hesitated in
striking down such arrangements as contrary to public policy, morals, good customs or public order.31 The nature of the employment

depends, after all, on the nature of the activities to be performed by the employee, considering the nature of the employers business,
the duration and scope to be done, and, in some cases, even the length of time of the performance and its continued existence.32 In the
same manner that the practice of having fixed-term contracts in the industry does not automatically make all talent contracts valid and
compliant with labor law, it has, consequently, been ruled that the assertion that a talent contract exists does not necessarily prevent a
regular employment status.33
As cameramen/editors and reporters, it also appears that petitioners were subject to the control and supervision of respondents which,
first and foremost, provided them with the equipments essential for the discharge of their functions. Prepared at the instance of
respondents, petitioners Talent Contracts tellingly provided that ABS-CBN retained "all creative, administrative, financial and legal
control" of the program to which they were assigned. Aside from having the right to require petitioners "to attend and participate in all
promotional or merchandising campaigns, activities or events for the Program," ABS-CBN required the former to perform their
functions "at such locations and Performance/Exhibition Schedules" it provided or, subject to prior notice, as it chose determine,
modify or change. Even if they were unable to comply with said schedule, petitioners were required to give advance notice, subject to
respondents approval.34 However obliquely worded, the Court finds the foregoing terms and conditions demonstrative of the control
respondents exercised not only over the results of petitioners work but also the means employed to achieve the same.
In finding that petitioners were regular employees, the NLRC further ruled that the exclusivity clause and prohibitions in their Talent
Contracts and/or Project Assignment Forms were likewise indicative of respondents control over them. Brushing aside said finding,
however, the CA applied the ruling in Sonza v. ABS-CBN Broadcasting Corporation35 where similar restrictions were considered not
necessarily determinative of the existence of an employer-employee relationship. Recognizing that independent contractors can
validly provide his exclusive services to the hiring party, said case enunciated that guidelines for the achievement of mutually desired
results are not tantamount to control. As correctly pointed out by petitioners, however, parallels cannot be expediently drawn between
this case and that of Sonza case which involved a well-known television and radio personality who was legitimately considered a
talent and amply compensated as such. While possessed of skills for which they were modestly recompensed by respondents,
petitioners lay no claim to fame and/or unique talents for which talents like actors and personalities are hired and generally
compensated in the broadcast industry.
Later echoed in Dumpit-Murillo v. Court of Appeals,36 this Court has rejected the application of the ruling in the Sonza case to
employees similarly situated as petitioners in ABS-CBN Broadcasting Corporation v. Nazareno.37 The following distinctions were
significantly observed between employees like petitioners and television or radio personalities like Sonza, to wit:
First. In the selection and engagement of respondents, no peculiar or unique skill, talent or celebrity status was required from them
because they were merely hired through petitioners personnel department just like any ordinary employee.
Second. The so-called "talent fees" of respondents correspond to wages given as a result of an employer-employee
relationship.1wphi1 Respondents did not have the power to bargain for huge talent fees, a circumstance negating independent
contractual relationship.
Third. Petitioner could always discharge respondents should it find their work unsatisfactory, and respondents are highly dependent on
the petitioner for continued work.
Fourth. The degree of control and supervision exercised by petitioner over respondents through its supervisors negates the allegation
that respondents are independent contractors.
The presumption is that when the work done is an integral part of the regular business of the employer and when the worker, relative
to the employer, does not furnish an independent business or professional service, such work is a regular employment of such
employee and not an independent contractor. The Court will peruse beyond any such agreement to examine the facts that typify the
parties actual relationship.38 (Emphasis omitted)
Rather than the project and/or independent contractors respondents claim them to be, it is evident from the foregoing disquisition that
petitioners are regular employees of ABS-CBN. This conclusion is borne out by the ineluctable showing that petitioners perform
functions necessary and essential to the business of ABS-CBN which repeatedly employed them for a long-running news program of
its Regional Network Group in Naga City. In the course of said employment, petitioners were provided the equipments they needed,
were required to comply with the Company's policies which entailed prior approval and evaluation of their performance. Viewed from
the prism of these considerations, we find and so hold that the CA reversibly erred when it overturned the NLRC's affirmance of the
Labor Arbiter's finding that an employer-employee relationship existed between the parties. Given the fact, however, that Sub-RABV-05-03-00039-08 had not been consolidated with this case and appears, for all intents and purposes, to be pending still, the Court
finds that the reinstatement of petitioners ordered by said labor officer and tribunal should, as a relief provided in case of illegal
dismissal, be left for determination in said case.

WHEREFORE, the Court of Appeals' assailed Decision dated 29 June 2011 and Resolution dated 3 October 2011 in CA-G.R. SP No.
116928 are REVERSED and SET ASIDE. Except for the reinstatement of Nelson V. Begino, Gener Del Valle, Monina Avila-Llorin
and Ma. Cristina Sumayao, the National Labor and Relations Commission's 31 March 2010 Decision is, accordingly, REINSTATED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 195466

July 2, 2014

ARIEL L. DAVID, doing business under the name and style "YIELS HOG DEALER," Petitioner,
vs.
JOHN G. MACASIO, Respondent.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari1 the challenge to the November 22, 2010 decision2 and the January 31, 2011
resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 116003. The CA decision annulled and set aside the May 26, 2010
decision4 of the National Labor Relations Commission (NLRC)5 which, in turn, affirmed the April 30, 2009 Decision6 of the Labor
Arbiter (LA). The LA's decision dismissed respondent John G. Macasio's monetary claims.
The Factual Antecedents
In January 2009, Macasio filed before the LA a complaint7 against petitioner Ariel L. David, doing business under the name and style
"Yiels Hog Dealer," for non-payment of overtime pay, holiday pay and 13th month pay. He also claimed payment for moral and
exemplary damages and attorneys fees. Macasio also claimed payment for service incentive leave (SIL).8
Macasio alleged9 before the LA that he had been working as a butcher for David since January 6, 1995. Macasio claimed that David
exercised effective control and supervision over his work, pointing out that David: (1) set the work day, reporting time and hogs to be
chopped, as well as the manner by which he was to perform his work; (2) daily paid his salary of P700.00, which was increased from
P600.00 in 2007, P500.00 in 2006 and P400.00 in 2005; and (3) approved and disapproved his leaves. Macasio added that David
owned the hogs delivered for chopping, as well as the work tools and implements; the latter also rented the workplace. Macasio
further claimed that David employs about twenty-five (25) butchers and delivery drivers.
In his defense,10 David claimed that he started his hog dealer business in 2005 and that he only has ten employees. He alleged that he
hired Macasio as a butcher or chopper on "pakyaw" or task basis who is, therefore, not entitled to overtime pay, holiday pay and 13th
month pay pursuant to the provisions of the Implementing Rules and Regulations (IRR) of the Labor Code. David pointed out that
Macasio: (1) usually starts his work at 10:00 p.m. and ends at 2:00 a.m. of the following day or earlier, depending on the volume of
the delivered hogs; (2) received the fixed amount of P700.00 per engagement, regardless of the actual number of hours that he spent
chopping the delivered hogs; and (3) was not engaged to report for work and, accordingly, did not receive any fee when no hogs were
delivered.
Macasio disputed Davids allegations.11 He argued that, first, David did not start his business only in 2005. He pointed to the
Certificate of Employment12 that David issued in his favor which placed the date of his employment, albeit erroneously, in January
2000. Second, he reported for work every day which the payroll or time record could have easily proved had David submitted them in
evidence.
Refuting Macasios submissions,13 David claims that Macasio was not his employee as he hired the latter on "pakyaw" or task basis.
He also claimed that he issued the Certificate of Employment, upon Macasios request, only for overseas employment purposes. He
pointed to the "Pinagsamang Sinumpaang Salaysay,"14 executed by Presbitero Solano and Christopher (Antonio Macasios cobutchers), to corroborate his claims.

In the April 30, 2009 decision,15 the LA dismissed Macasios complaint for lack of merit. The LA gave credence to Davids claim
that he engaged Macasio on "pakyaw" or task basis. The LA noted the following facts to support this finding: (1) Macasio received the
fixed amount of P700.00 for every work done, regardless of the number of hours that he spent in completing the task and of the
volume or number of hogs that he had to chop per engagement; (2) Macasio usually worked for only four hours, beginning from 10:00
p.m. up to 2:00 a.m. of the following day; and (3) the P700.00 fixed wage far exceeds the then prevailing daily minimum wage of
P382.00. The LA added that the nature of Davids business as hog dealer supports this "pakyaw" or task basis arrangement.
The LA concluded that as Macasio was engaged on "pakyaw" or task basis, he is not entitled to overtime, holiday, SIL and 13th month
pay.
The NLRCs Ruling
In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling.17 The NLRC observed that David did not require Macasio to
observe an eight hour work schedule to earn the fixed P700.00 wage; and that Macasio had been performing a non-time work,
pointing out that Macasio was paid a fixed amount for the completion of the assigned task, irrespective of the time consumed in its
performance. Since Macasio was paid by result and not in terms of the time that he spent in the workplace, Macasio is not covered by
the Labor Standards laws on overtime, SIL and holiday pay, and 13th month pay under the Rules and Regulations Implementing the
13th month pay law.18
Macasio moved for reconsideration19 but the NLRC denied his motion in its August 11, 2010 resolution,20 prompting Macasio to
elevate his case to the CA via a petition for certiorari.21
The CAs Ruling
In its November 22, 2010 decision,22 the CA partly granted Macasios certiorari petition and reversed the NLRCs ruling for having
been rendered with grave abuse of discretion.
While the CA agreed with the LAand the NLRC that Macasio was a task basis employee, it nevertheless found Macasio entitled to his
monetary claims following the doctrine laid down in Serrano v. Severino Santos Transit.23 The CA explained that as a task basis
employee, Macasio is excluded from the coverage of holiday, SIL and 13th month pay only if he is likewise a "field personnel." As
defined by the Labor Code, a "field personnel" is one who performs the work away from the office or place of work and whose regular
work hours cannot be determined with reasonable certainty. In Macasios case, the elements that characterize a "field personnel" are
evidently lacking as he had been working as a butcher at Davids "Yiels Hog Dealer" business in Sta. Mesa, Manila under Davids
supervision and control, and for a fixed working schedule that starts at 10:00 p.m.
Accordingly, the CA awarded Macasios claim for holiday, SIL and 13th month pay for three years, with 10% attorneys fees on the
total monetary award. The CA, however, denied Macasios claim for moral and exemplary damages for lack of basis.
David filed the present petition after the CA denied his motion for reconsideration24 in the CAs January 31, 2011 resolution.25
The Petition
In this petition,26 David maintains that Macasios engagement was on a "pakyaw" or task basis. Hence, the latter is excluded from the
coverage of holiday, SIL and 13th month pay. David reiterates his submissions before the lower tribunals27 and adds that he never
had any control over the manner by which Macasio performed his work and he simply looked on to the "end-result." He also contends
that he never compelled Macasio to report for work and that under their arrangement, Macasio was at liberty to choose whether to
report for work or not as other butchers could carry out his tasks. He points out that Solano and Antonio had, in fact, attested to their
(David and Macasios) established "pakyawan" arrangement that rendered a written contract unnecessary. In as much as Macasio is a
task basis employee who is paid the fixed amount of P700.00 per engagement regardless of the time consumed in the performance
David argues that Macasio is not entitled to the benefits he claims. Also, he posits that because he engaged Macasio on "pakyaw" or
task basis then no employer-employee relationship exists between them.
Finally, David argues that factual findings of the LA, when affirmed by the NLRC, attain finality especially when, as in this case, they
are supported by substantial evidence. Hence, David posits that the CA erred in reversing the labor tribunals findings and granting the
prayed monetary claims.
The Case for the Respondent

Macasio counters that he was not a task basis employee or a "field personnel" as David would have this Court believe.28 He reiterates
his arguments before the lower tribunals and adds that, contrary to Davids position, the P700.00 fee that he was paid for each day that
he reported for work does not indicate a "pakyaw" or task basis employment as this amount was paid daily, regardless of the number
or pieces of hogs that he had to chop. Rather, it indicates a daily-wage method of payment and affirms his regular employment status.
He points out that David did not allege or present any evidence as regards the quota or number of hogs that he had to chop as basis for
the "pakyaw" or task basis payment; neither did David present the time record or payroll to prove that he worked for less than eight
hours each day. Moreover, David did not present any contract to prove that his employment was on task basis. As David failed to
prove the alleged task basis or "pakyawan" agreement, Macasio concludes that he was Davids employee. Procedurally, Macasio
points out that Davids submissions in the present petition raise purely factual issues that are not proper for a petition for review on
certiorari. These issues whether he (Macasio) was paid by result or on "pakyaw" basis; whether he was a "field personnel"; whether
an employer-employee relationship existed between him and David; and whether David exercised control and supervision over his
work are all factual in nature and are, therefore, proscribed in a Rule 45 petition. He argues that the CAs factual findings bind this
Court, absent a showing that such findings are not supported by the evidence or the CAs judgment was based on a misapprehension
of facts. He adds that the issue of whether an employer-employee relationship existed between him and David had already been settled
by the LA29 and the NLRC30 (as well as by the CA per Macasios manifestation before this Court dated November 15, 2012),31 in
his favor, in the separate illegal case that he filed against David.
The Issue
The issue revolves around the proper application and interpretation of the labor law provisions on holiday, SIL and 13th month pay to
a worker engaged on "pakyaw" or task basis. In the context of the Rule 65 petition before the CA, the issue is whether the CA
correctly found the NLRC in grave abuse of discretion in ruling that Macasio is entitled to these labor standards benefits.
The Courts Ruling
We partially grant the petition.
Preliminary considerations: the Montoya ruling and the factual-issue-bar rule
In this Rule 45 petition for review on certiorari of the CAs decision rendered under a Rule 65 proceeding, this Courts power of
review is limited to resolving matters pertaining to any perceived legal errors that the CA may have committed in issuing the assailed
decision. This is in contrast with the review for jurisdictional errors, which we undertake in an original certiorari action. In reviewing
the legal correctness of the CA decision, we examine the CA decision based on how it determined the presence or absence of grave
abuse of discretion in the NLRC decision before it and not on the basis of whether the NLRC decision on the merits of the case was
correct.32 In other words, we have to be keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC
decision challenged before it.33
Moreover, the Courts power in a Rule 45 petition limits us to a review of questions of law raised against the assailed CA decision.34
In this petition, David essentially asks the question whether Macasio is entitled to holiday, SIL and 13th month pay. This one is a
question of law. The determination of this question of law however is intertwined with the largely factual issue of whether Macasio
falls within the rule on entitlement to these claims or within the exception. In either case, the resolution of this factual issue
presupposes another factual matter, that is, the presence of an employer-employee relationship between David and Macasio.
In insisting before this Court that Macasio was not his employee, David argues that he engaged the latter on "pakyaw" or task basis.
Very noticeably, David confuses engagement on "pakyaw" or task basis with the lack of employment relationship. Impliedly, David
asserts that their "pakyawan" or task basis arrangement negates the existence of employment relationship.
At the outset, we reject this assertion of the petitioner. Engagement on "pakyaw" or task basis does not characterize the relationship
that may exist between the parties, i.e., whether one of employment or independent contractorship. Article 97(6) of the Labor Code
defines wages as "xxx the remuneration or earnings, however designated, capable of being expressed in terms of money, whether
fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an
employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or
to be rendered[.]"35 In relation to Article 97(6), Article 10136 of the Labor Code speaks of workers paid by results or those whose pay
is calculated in terms of the quantity or quality of their work output which includes "pakyaw" work and other non-time work.
More importantly, by implicitly arguing that his engagement of Macasio on "pakyaw" or task basis negates employer-employee
relationship, David would want the Court to engage on a factual appellate review of the entire case to determine the presence or
existence of that relationship. This approach however is not authorized under a Rule 45 petition for review of the CA decision
rendered under a Rule 65 proceeding.

First, the LA and the NLRC denied Macasios claim not because of the absence of an employer-employee but because of its finding
that since Macasio is paid on pakyaw or task basis, then he is not entitled to SIL, holiday and 13th month pay. Second, we consider it
crucial, that in the separate illegal dismissal case Macasio filed with the LA, the LA, the NLRC and the CA uniformly found the
existence of an employer-employee relationship.37
In other words, aside from being factual in nature, the existence of an employer-employee relationship is in fact a non-issue in this
case. To reiterate, in deciding a Rule 45 petition for review of a labor decision rendered by the CA under 65, the narrow scope of
inquiry is whether the CA correctly determined the presence or absence of grave abuse of discretion on the part of the NLRC. In
concrete question form, "did the NLRC gravely abuse its discretion in denying Macasios claims simply because he is paid on a nontime basis?"
At any rate, even if we indulge the petitioner, we find his claim that no employer-employee relationship exists baseless. Employing
the control test,38 we find that such a relationship exist in the present case.
Even a factual review shows that Macasio is Davids employee
To determine the existence of an employer-employee relationship, four elements generally need to be considered, namely: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the
employees conduct. These elements or indicators comprise the so-called "four-fold" test of employment relationship. Macasios
relationship with David satisfies this test.
First, David engaged the services of Macasio, thus satisfying the element of "selection and engagement of the employee." David
categorically confirmed this fact when, in his "Sinumpaang Salaysay," he stated that "nag apply po siya sa akin at kinuha ko siya na
chopper[.]"39 Also, Solano and Antonio stated in their "Pinagsamang Sinumpaang Salaysay"40 that "[k]ami po ay nagtratrabaho sa
Yiels xxx na pag-aari ni Ariel David bilang butcher" and "kilalanamin si xxx Macasio na isa ring butcher xxx ni xxx David at kasama
namin siya sa aming trabaho."
Second, David paid Macasios wages.Both David and Macasio categorically stated in their respective pleadings before the lower
tribunals and even before this Court that the former had been paying the latter P700.00 each day after the latter had finished the days
task. Solano and Antonio also confirmed this fact of wage payment in their "Pinagsamang Sinumpaang Salaysay."41 This satisfies the
element of "payment of wages."
Third, David had been setting the day and time when Macasio should report for work. This power to determine the work schedule
obviously implies power of control. By having the power to control Macasios work schedule, David could regulate Macasios work
and could even refuse to give him any assignment, thereby effectively dismissing him.
And fourth, David had the right and power to control and supervise Macasios work as to the means and methods of performing it. In
addition to setting the day and time when Macasio should report for work, the established facts show that David rents the place where
Macasio had been performing his tasks. Moreover, Macasio would leave the workplace only after he had finished chopping all of the
hog meats given to him for the days task. Also, David would still engage Macasios services and have him report for work even
during the days when only few hogs were delivered for butchering.
Under this overall setup, all those working for David, including Macasio, could naturally be expected to observe certain rules and
requirements and David would necessarily exercise some degree of control as the chopping of the hog meats would be subject to his
specifications. Also, since Macasio performed his tasks at Davids workplace, David could easily exercise control and supervision
over the former. Accordingly, whether or not David actually exercised this right or power to control is beside the point as the law
simply requires the existence of this power to control 4243 or, as in this case, the existence of the right and opportunity to control and
supervise Macasio.44
In sum, the totality of the surrounding circumstances of the present case sufficiently points to an employer-employee relationship
existing between David and Macasio.
Macasio is engaged on "pakyaw" or task basis
At this point, we note that all three tribunals the LA, the NLRC and the CA found that Macasio was engaged or paid on "pakyaw"
or task basis. This factual finding binds the Court under the rule that factual findings of labor tribunals when supported by the
established facts and in accord with the laws, especially when affirmed by the CA, is binding on this Court.

A distinguishing characteristic of "pakyaw" or task basis engagement, as opposed to straight-hour wage payment, is the nonconsideration of the time spent in working. In a task-basis work, the emphasis is on the task itself, in the sense that payment is
reckoned in terms of completion of the work, not in terms of the number of time spent in the completion of work.45 Once the work or
task is completed, the worker receives a fixed amount as wage, without regard to the standard measurements of time generally used in
pay computation.
In Macasios case, the established facts show that he would usually start his work at 10:00 p.m. Thereafter, regardless of the total
hours that he spent at the workplace or of the total number of the hogs assigned to him for chopping, Macasio would receive the fixed
amount of P700.00 once he had completed his task. Clearly, these circumstances show a "pakyaw" or task basis engagement that all
three tribunals uniformly found.
In sum, the existence of employment relationship between the parties is determined by applying the "four-fold" test; engagement on
"pakyaw" or task basis does not determine the parties relationship as it is simply a method of pay computation. Accordingly, Macasio
is Davids employee, albeit engaged on "pakyaw" or task basis.
As an employee of David paid on pakyaw or task basis, we now go to the core issue of whether Macasio is entitled to holiday, 13th
month, and SIL pay.
On the issue of Macasios entitlement to holiday, SIL and 13th month pay
The LA dismissed Macasios claims pursuant to Article 94 of the Labor Code in relation to Section 1, Rule IV of the IRR of the Labor
Code, and Article 95 of the Labor Code, as well as Presidential Decree (PD) No. 851. The NLRC, on the other hand, relied on Article
82 of the Labor Code and the Rules and Regulations Implementing PD No. 851. Uniformly, these provisions exempt workers paid on
"pakyaw" or task basis from the coverage of holiday, SIL and 13th month pay.
In reversing the labor tribunals rulings, the CA similarly relied on these provisions, as well as on Section 1, Rule V of the IRR of the
Labor Code and the Courts ruling in Serrano v. Severino Santos Transit.46 These labor law provisions, when read together with the
Serrano ruling, exempt those engaged on "pakyaw" or task basis only if they qualify as "field personnel."
In other words, what we have before us is largely a question of law regarding the correct interpretation of these labor code provisions
and the implementing rules; although, to conclude that the worker is exempted or covered depends on the facts and in this sense, is a
question of fact: first, whether Macasio is a "field personnel"; and second, whether those engaged on "pakyaw" or task basis, but who
are not "field personnel," are exempted from the coverage of holiday, SIL and 13th month pay.
To put our discussion within the perspective of a Rule 45 petition for review of a CA decision rendered under Rule 65 and framed in
question form, the legal question is whether the CA correctly ruled that it was grave abuse of discretion on the part of the NLRC to
deny Macasios monetary claims simply because he is paid on a non-time basis without determining whether he is a field personnel or
not.
To resolve these issues, we need tore-visit the provisions involved.
Provisions governing SIL and holiday pay
Article 82 of the Labor Code provides the exclusions from the coverage of Title I, Book III of the Labor Code - provisions governing
working conditions and rest periods.
Art. 82. Coverage. The provisions of [Title I] shall apply to employees in all establishments and undertakings whether for profit or
not, but not to government employees, managerial employees, field personnel, members of the family of the employer who are
dependent on him for support, domestic helpers, persons in the personal service of another, and workers who are paid by results as
determined by the Secretary of Labor in appropriate regulations.
xxxx
"Field personnel" shall refer to non-agricultural employees who regularly perform their duties away from the principal place of
business or branch office of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty.
[emphases and underscores ours]
Among the Title I provisions are the provisions on holiday pay (under Article 94 of the Labor Code) and SIL pay (under Article 95 of
the Labor Code). Under Article 82,"field personnel" on one hand and "workers who are paid by results" on the other hand, are not

covered by the Title I provisions. The wordings of Article82 of the Labor Code additionally categorize workers "paid by results" and
"field personnel" as separate and distinct types of employees who are exempted from the Title I provisions of the Labor Code.
The pertinent portion of Article 94 of the Labor Code and its corresponding provision in the IRR47 reads:
Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage during regular holidays, except in retail and
service establishments regularly employing less than (10) workers[.] [emphasis ours]
xxxx
SECTION 1. Coverage. This Rule shall apply to all employees except:
xxxx
(e)Field personnel and other employees whose time and performance is unsupervised by the employer including those who are
engaged on task or contract basis, purely commission basis, or those who are paid a fixed amount for performing work irrespective of
the time consumed in the performance thereof. [emphases ours]
On the other hand, Article 95 of the Labor Code and its corresponding provision in the IRR48 pertinently provides:
Art. 95. Right to service incentive. (a) Every employee who has rendered at least one year of service shall be entitled to a yearly
service incentive leave of five days with pay.
(b) This provision shall not apply to those who are already enjoying the benefit herein provided, those enjoying vacation leave with
pay of at least five days and those employed in establishments regularly employing less than ten employees or in establishments
exempted from granting this benefit by the Secretary of Labor and Employment after considering the viability or financial condition of
such establishment. [emphases ours]
xxxx
Section 1. Coverage. This rule shall apply to all employees except:
xxxx
(e) Field personnel and other employees whose performance is unsupervised by the employer including those who are engaged on task
or contract basis, purely commission basis, or those who are paid a fixed amount for performing work irrespective of the time
consumed in the performance thereof. [emphasis ours]
Under these provisions, the general rule is that holiday and SIL pay provisions cover all employees. To be excluded from their
coverage, an employee must be one of those that these provisions expressly exempt, strictly in accordance with the exemption. Under
the IRR, exemption from the coverage of holiday and SIL pay refer to "field personnel and other employees whose time and
performance is unsupervised by the employer including those who are engaged on task or contract basis[.]" Note that unlike Article 82
of the Labor Code, the IRR on holiday and SIL pay do not exclude employees "engaged on task basis" as a separate and distinct
category from employees classified as "field personnel." Rather, these employees are altogether merged into one classification of
exempted employees.
Because of this difference, it may be argued that the Labor Code may be interpreted to mean that those who are engaged on task basis,
per se, are excluded from the SIL and holiday payment since this is what the Labor Code provisions, in contrast with the IRR, strongly
suggest. The arguable interpretation of this rule may be conceded to be within the discretion granted to the LA and NLRC as the
quasi-judicial bodies with expertise on labor matters.
However, as early as 1987 in the case of Cebu Institute of Technology v. Ople49 the phrase "those who are engaged on task or
contract basis" in the rule has already been interpreted to mean as follows:
[the phrase] should however, be related with "field personnel" applying the rule on ejusdem generis that general and unlimited terms
are restrained and limited by the particular terms that they follow xxx Clearly, petitioner's teaching personnel cannot be deemed field
personnel which refers "to non-agricultural employees who regularly perform their duties away from the principal place of business or
branch office of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty. [Par. 3,

Article 82, Labor Code of the Philippines]. Petitioner's claim that private respondents are not entitled to the service incentive leave
benefit cannot therefore be sustained.
In short, the payment of an employee on task or pakyaw basis alone is insufficient to exclude one from the coverage of SIL and
holiday pay. They are exempted from the coverage of Title I (including the holiday and SIL pay) only if they qualify as "field
personnel." The IRR therefore validly qualifies and limits the general exclusion of "workers paid by results" found in Article 82 from
the coverage of holiday and SIL pay. This is the only reasonable interpretation since the determination of excluded workers who are
paid by results from the coverage of Title I is "determined by the Secretary of Labor in appropriate regulations."
The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport Systems, Inc., v. Bautista:
A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive leave has been delimited by
the Implementing Rules and Regulations of the Labor Code to apply only to those employees not explicitly excluded by Section 1 of
Rule V. According to the Implementing Rules, Service Incentive Leave shall not apply to employees classified as "field personnel."
The phrase "other employees whose performance is unsupervised by the employer" must not be understood as a separate classification
of employees to which service incentive leave shall not be granted. Rather, it serves as an amplification of the interpretation of the
definition of field personnel under the Labor Code as those "whose actual hours of work in the field cannot be determined with
reasonable certainty."
The same is true with respect to the phrase "those who are engaged on task or contract basis, purely commission basis." Said phrase
should be related with "field personnel," applying the rule on ejusdem generis that general and unlimited terms are restrained and
limited by the particular terms that they follow.
The Autobus ruling was in turn the basis of Serrano v. Santos Transit which the CA cited in support of granting Macasios petition.
In Serrano, the Court, applying the rule on ejusdem generis50 declared that "employees engaged on task or contract basis xxx are not
automatically exempted from the grant of service incentive leave, unless, they fall under the classification of field personnel."51 The
Court explained that the phrase "including those who are engaged on task or contract basis, purely commission basis" found in Section
1(d), Rule V of Book III of the IRR should not be understood as a separate classification of employees to which SIL shall not be
granted. Rather, as with its preceding phrase - "other employees whose performance is unsupervised by the employer" - the phrase
"including those who are engaged on task or contract basis" serves to amplify the interpretation of the Labor Code definition of "field
personnel" as those "whose actual hours of work in the field cannot be determined with reasonable certainty."
In contrast and in clear departure from settled case law, the LA and the NLRC still interpreted the Labor Code provisions and the IRR
as exempting an employee from the coverage of Title I of the Labor Code based simply and solely on the mode of payment of an
employee. The NLRCs utter disregard of this consistent jurisprudential ruling is a clear act of grave abuse of discretion.52 In other
words, by dismissing Macasios complaint without considering whether Macasio was a "field personnel" or not, the NLRC proceeded
based on a significantly incomplete consideration of the case. This action clearly smacks of grave abuse of discretion.
Entitlement to holiday pay
Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA and the NLRC had only taken counsel from Serrano and
earlier cases, they would have correctly reached a similar conclusion regarding the payment of holiday pay since the rule exempting
"field personnel" from the grant of holiday pay is identically worded with the rule exempting "field personnel" from the grant of SIL
pay. To be clear, the phrase "employees engaged on task or contract basis "found in the IRR on both SIL pay and holiday pay should
be read together with the exemption of "field personnel."
In short, in determining whether workers engaged on "pakyaw" or task basis" is entitled to holiday and SIL pay, the presence (or
absence) of employer supervision as regards the workers time and performance is the key: if the worker is simply engaged on pakyaw
or task basis, then the general rule is that he is entitled to a holiday pay and SIL pay unless exempted from the exceptions specifically
provided under Article 94 (holiday pay) and Article95 (SIL pay) of the Labor Code. However, if the worker engaged on pakyaw or
task basis also falls within the meaning of "field personnel" under the law, then he is not entitled to these monetary benefits.
Macasio does not fall under the classification of "field personnel"
Based on the definition of field personnel under Article 82, we agree with the CA that Macasio does not fall under the definition of
"field personnel." The CAs finding in this regard is supported by the established facts of this case: first, Macasio regularly performed
his duties at Davids principal place of business; second, his actual hours of work could be determined with reasonable certainty; and,

third, David supervised his time and performance of duties. Since Macasio cannot be considered a "field personnel," then he is not
exempted from the grant of holiday, SIL pay even as he was engaged on "pakyaw" or task basis.
Not being a "field personnel," we find the CA to be legally correct when it reversed the NLRCs ruling dismissing Macasios
complaint for holiday and SIL pay for having been rendered with grave abuse of discretion.
Entitlement to 13th month pay
With respect to the payment of 13th month pay however, we find that the CA legally erred in finding that the NLRC gravely abused
its discretion in denying this benefit to Macasio.1wphi1
The governing law on 13th month pay is PD No. 851.53
As with holiday and SIL pay, 13th month pay benefits generally cover all employees; an employee must be one of those expressly
enumerated to be exempted. Section 3 of the Rules and Regulations Implementing P.D. No. 85154 enumerates the exemptions from
the coverage of 13th month pay benefits. Under Section 3(e), "employers of those who are paid on xxx task basis, and those who are
paid a fixed amount for performing a specific work, irrespective of the time consumed in the performance thereof"55 are exempted.
Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the Rules and Regulations Implementing PD No.
851 exempts employees "paid on task basis" without any reference to "field personnel." This could only mean that insofar as payment
of the 13th month pay is concerned, the law did not intend to qualify the exemption from its coverage with the requirement that the
task worker be a "field personnel" at the same time.
WHEREFORE, in light of these considerations, we hereby PARTIALLY GRANT the petition insofar as the payment of 13th month
pay to respondent is concerned. In all other aspects, we AFFIRM the decision dated November 22, 2010 and the resolution dated
January 31, 2011 of the Court of Appeals in CA-G.R. SP No. 116003.
SO ORDERED.