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ASSIGNMENT #2 CASE DIGESTS


EMPLOYER-EMPLOYEE RELATIONSHIP

UNITED PEPSI-COLA SUPERVISORY UNION


(UPSU), petitioner,
vs.
HON. BIENVENIDO E. LAGUESMA and PEPSI-COLA
PRODUCTS, PHILIPPINES, INC. respondents.
FACTS: Petitioner is a union of supervisory employees. It
appears that on March 20, 1995 the union filed a petition for
certification election on behalf of the route managers at PepsiCola Products Philippines, Inc. However, its petition was
denied by the med-arbiter and, on appeal, by the Secretary of
Labor and Employment, on the ground that the route managers
are managerial employees and, therefore, ineligible for union
membership under the first sentence of Art. 245 of the Labor
Code, which provides:
Ineligibility of managerial employees to join any labor
organization; right of supervisory employees.
Managerial employees are not eligible to join, assist
or form any labor organization. Supervisory
employees shall not be eligible for membership in a
labor organization of the rank-and-file employees but
may join, assist or form separate labor organizations
of their own.
Petitioner brought this suit challenging the validity of the order
dated August 31, 1995, as reiterated in the order dated
September 22, 1995, of the Secretary of Labor and
Employment. Its petition was dismissed by the Third Division
for lack of showing that respondent committed grave abuse of
discretion. But petitioner filed a motion for reconsideration,
pressing for resolution its contention that the first sentence of
Art. 245 of the Labor Code, so far as it declares managerial
employees to be ineligible to form, assist or join unions,
contravenes Art. III, 8 of the Constitution which provides:
The right of the people, including those employed in
the public and private sectors, to form unions,
associations, or societies for purposes not contrary to
law shall not be abridged.
ISSUES: (1) whether the route managers at Pepsi-Cola
Products Philippines, Inc. are managerial employees and (2)
whether Art. 245, insofar as it prohibits managerial employees
from forming, joining or assisting labor unions, violates Art. III,
8 of the Constitution.

employees. Supervisory employees are those who, in


the interest of the employer, effectively recommend
such managerial actions if the exercise of such
authority is not merely routinary or clerical in nature
but requires the use of independent judgment. All
employees not falling within any of the above
definitions are considered rank-and-file employees for
purposes of this Book.
The term "manager" generally refers to "anyone who is
responsible for subordinates and other organizational
resources."
FIRST-LINE MANAGERS The lowest level in an
organization at which individuals are responsible for
the work of others is called first-line or first-level
management. First-line managers direct operating
employees only; they do not supervise other
managers. Examples of first-line managers are the
"foreman" or production supervisor in a manufacturing
plant, the technical supervisor in a research
department, and the clerical supervisor in a large
office. First-level
managers
are
often
called
supervisors.
MIDDLE
MANAGERS

The
term middle
management can refer to more than one level in an
organization. Middle managers direct the activities of
other managers and sometimes also those of
operating employees. Middle managers' principal
responsibilities are to direct the activities that
implement their organizations' policies and to balance
the demands of their superiors with the capacities of
their subordinates. A plant manager in an electronics
firm is an example of a middle manager.
TOP MANAGERS Composed of a comparatively
small group of executives, top management is
responsible for the overall management of the
organization. It establishes operating policies and
guides the organization's interactions with its
environment. Typical titles of top managers are "chief
executive
officer," "president," and "senior
vicepresident." Actual titles vary from one organization to
another and are not always a reliable guide to
membership
in
the
highest
management
2
classification.

HELD:1. Yes, route managers are considered managerial


employees. We have in this case an expert's view that the
employees concerned are managerial employees within the
purview of Art. 212 which provides:

As can be seen from this description, a distinction exists


between those who have the authority to devise, implement
and control strategic and operational policies (top and middle
managers) and those whose task is simply to ensure that such
policies are carried out by the rank-and-file employees of an
organization
(first-level
managers/supervisors).
What
distinguishes them from the rank-and-file employees is that
they act in the interest of the employer in supervising such
rank-and-file employees.

(m) "managerial employee" is one who is vested with


powers or prerogatives to lay down and execute
management policies and/or to hire, transfer,
suspend, lay off, recall, discharge, assign or discipline

"Managerial employees" may therefore be said to fall into two


distinct categories: the "managers" per se, who compose the
former group described above, and the "supervisors" who form
the latter group. Whether they belong to the first or the second

kapisanan ng mga kargador sa pier

category,
managers, vis-a-vis employers,
employees.

are,

likewise,

Unlike supervisors who basically merely direct operating


employees in line with set tasks assigned to them, route
managers are responsible for the success of the company's
main line of business through management of their respective
sales teams. Such management necessarily involves the
planning, direction, operation and evaluation of their individual
teams and areas which the work of supervisors does not entail.
The route managers cannot thus possibly be classified as
mere supervisors because their work does not only involve, but
goes far beyond, the simple direction or supervision of
operating employees to accomplish objectives set by those
above them. They are not mere functionaries with simple
oversight functions but business administrators in their own
right.
2. No, Art. 245, insofar as it prohibits managerial employees
from forming, joining or assisting labor unions, does not violate
Art. III, 8 of the Constitution
Art. 245. Ineligibility of managerial employees to join
any
labor
organization; right
of
supervisory
employees. Managerial employees are not eligible
to join, assist or form any labor organization.
Supervisory employees shall not be eligible for
membership in a labor organization of the rank-andfile employees but may join, assist or form separate
labor organizations of their own.
This provision is the result of the amendment of the Labor
Code in 1989 by R.A. No. 6715, otherwise known as the
Herrera-Veloso Law. Unlike the Industrial Peace Act or the
provisions of the Labor Code which it superseded, R.A. No.
6715 provides separate definitions of the terms "managerial"
and "supervisory employees," as follows:
Art. 212. Definitions. . . .
(m) "managerial employee" is one who is vested with
powers or prerogatives to lay down and execute
management policies and/or to hire transfer, suspend,
lay off, recall, discharge, assign or discipline
employees. Supervisory employees are those who, in
the interest of the employer, effectively recommend
such managerial actions if the exercise of such
authority is not merely routinary or clerical in nature
but requires the use of independent judgment. All
employees not falling within any of the above
definitions are considered rank-and-file employees for
purposes of this Book.
Although the definition of "supervisory employees" seems to
have been unduly restricted to the last phrase of the definition
in the Industrial Peace Act, the legal significance given to the
phrase "effectively recommends" remains the same. In fact,
the distinction between top and middle managers, who set
management policy, and front-line supervisors, who are merely
responsible for ensuring that such policies are carried out by

30

the rank and file, is articulated in the present definition. When


read in relation to this definition in Art. 212(m), it will be seen
that Art. 245 faithfully carries out the intent of the Constitutional
Commission in framing Art. III, 8 of the fundamental law.
Nor is the guarantee of organizational right in Art. III, 8
infringed by a ban against managerial employees forming a
union. The right guaranteed in Art. III, 8 is subject to the
condition that its exercise should be for purposes "not contrary
to law." In the case of Art. 245, there is a rational basis for
prohibiting managerial employees from forming or joining labor
organizations. As Justice Davide, Jr., himself a constitutional
commissioner, said in his ponencia inPhilips Industrial
31
Development, Inc. v. NLRC:
In the first place, all these employees, with the
exception of the service engineers and the sales force
personnel, are confidential employees. Their
classification as such is not seriously disputed by
PEO-FFW; the five (5) previous CBAs between PIDI
and PEO-FFW explicitly considered them as
confidential employees. By the very nature of their
functions, they assist and act in a confidential
capacity to, or have access to confidential matters of,
persons who exercise managerial functions in the
field of labor relations. As such, the rationale behind
the ineligibility of managerial employees to form,
assist or joint a labor union equally applies to them.
In Bulletin
Co., Inc. v. Hon. Augusto Sanchez,
elaborated on this rationale, thus:

this

Publishing
Court

. . . The rationale for this inhibition


has been stated to be, because if
these managerial employees would
belong to or be affiliated with a
Union, the latter might not be
assured of their loyalty to the Union
in view of evident conflict of
interests. The Union can also
become company-dominated with
the
presence
of
managerial
32
employees in Union membership.
To be sure, the Court in Philips Industrial was dealing with the
right of confidential employees to organize. But the same
reason for denying them the right to organize justifies even
more the ban on managerial employees from forming unions.
After all, those who qualify as top or middle managers are
executives who receive from their employers information that
not only is confidential but also is not generally available to the
public, or to their competitors, or to other employees. It is
hardly necessary to point out that to say that the first sentence
of Art. 245 is unconstitutional would be to contradict the
decision in that case.
WHEREFORE, the petition is DISMISSED.

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Separate Opinions
DAVIDE, JR., J., concurring and dissenting;
I concur with the majority that the "route managers" of private
respondent
Pepsi-Cola
Products
Philippines,
Inc.
are managerial employees. However, I respectfully submit that
contrary to the majority's holding, Article 245 of the Labor Code
is unconstitutional, as it abridges Section 8, Article III of the
Constitution.
It is then indubitably clear from the foregoing that the intent of
the Constitutional Commission was to abrogate the law
prohibiting managerial employees from joining, assisting, or
forming unions or labor organizations. In this regard, there is
absolutely no need to decipher the intent of the framers of the
1987 Constitution vis-a-vis Article 245 (originally 246) of the
Labor Code, there being no ambiguity or vagueness in the
wording of the present Section 8, Article III of the 1987
Constitution. The provision is clear and written in simple
language; neither were there any confusing debates thereon.
More importantly, the purpose of Commissioner Lerum's
amendments was unequivocal: he did not merely intend an
implied repeal, but an express repeal of the offending article of
the Labor Code. The approval of the amendments left no doubt
whatsoever, as faithfully disclosed in the Records of the
Constitutional Commission, that all employees meaning rankand-file, supervisory and managerial whether from the
public or the private sectors, have the right to form unions for
purposes not contrary to law.

40

employer. Company officers will join forces with the


supervisors and rank-and-file. Management and labor will
become a solid phalanx with bargaining rights that could be
41
enforced against the owner of the company. The basic
opposing forces in the industry will not be management and
labor but the operating group on the one hand and the
stockholder and bondholder group on the other. The industrial
problem defined in the Labor Code comes down to a contest
over a fair division of the gross receipts of industry between
42
these two groups. And this will certainly bring ill-effects on
our economy.
VITUG, J., separate concurring and dissenting;
I submit, with due respect, that the members of petitioning
union, not really being "managerial employees" in the true
sense of the term, are not disqualified from forming or joining
labor organizations under Article 245 of the Labor Code.
I submit, accordingly, that, firstly, the members of petitioner
union or the so-called route managers, being no more than
supervisory employees, can lawfully organize themselves into
a labor union within the meaning of the Labor Code, and
that, secondly, the questioned provision of Article 245 of the
Labor Code has not been revoked by the 1987 Constitution.
(CLAU)

It is then indubitably clear from the foregoing that the intent of


the Constitutional Commission was to abrogate the law
prohibiting managerial employees from joining, assisting, or
forming unions or labor organizations. In this regard, there is
absolutely no need to decipher the intent of the framers of the
1987 Constitution vis-a-vis Article 245 (originally 246) of the
Labor Code, there being no ambiguity or vagueness in the
wording of the present Section 8, Article III of the 1987
Constitution. The provision is clear and written in simple
language; neither were there any confusing debates thereon.
More importantly, the purpose of Commissioner Lerum's
amendments was unequivocal: he did not merely intend an
implied repeal, but an express repeal of the offending article of
the Labor Code. The approval of the amendments left no doubt
whatsoever, as faithfully disclosed in the Records of the
Constitutional Commission, that all employees meaning rankand-file, supervisory and managerial whether from the
public or the private sectors, have the right to form unions for
purposes not contrary to law.
PUNO, J., separate concurring;
To declare Article 245 of the Labor Code unconstitutional cuts
deep into our existing industrial life and will open the
floodgates to unionization at all levels of the industrial
hierarchy. Such a ruling will wreak havoc on the existing set-up
between management and labor. If all managerial employees
will be allowed to unionize, then all who are in the payroll of the
company, starting from the president, vice-president, general
managers and everyone, with the exception of the directors,
may
go
on
strike
or
picket
the

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SONZA vs. ABS-CBN


Facts: ABS-CBN signed an Agreement with Mel and Jay
Management and Development Corporation (MJMDC).
Referred to in the Agreement as AGENT, MJMDC agreed to
provide Sonzas services exclusively to ABS-CBN as talent for
radio and television. Sonza wrote a letter to ABS-CBN,
informing them that he irrevocably resigns in view of recent
events concerning his programs and career. The acts of the
station are violative of the Agreement and such letter will serve
as a notice rescission of said Agreement. It also stated that he
is waiving and renouncing recovery of the remaining amount
stipulated but reserves the right to seek recovery of the other
benefits under said Agreement.
Sonza filed a complaint against ABS-CBN before the DOLE.
He complained for non-payment of 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). ABS-CBN filed a
Motion to Dismiss on the ground that no employer-employee
relationship existed between the parties but the Labor Arbiter
denied the motion to dismiss. The Labor Arbiter then
considered the case submitted for resolution and rendered his
Decision dismissing the complaint for lack of jurisdiction.
Sonza appealed to the NLRC which rendered its Decision
affirming the Labor Arbiters decision. Sonza filed a motion for
reconsideration, which the NLRC denied as well. Hence this
present petition.
Issue: WON there is an employer-employee relationship
between Sonza and ABS-CBN.
Ruling: There is no employer-employee relationship between
Sonza and ABS-CBN.
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.
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.
All the talent fees and benefits paid to Sonza were the result of
negotiations that led to the Agreement. If Sonza were ABSCBNs employee, there would be no need for the parties to
stipulate on benefits which the law automatically incorporates
into every employer-employee contract. Whatever benefits he
enjoyed arose from contract and not because of an employeremployee 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.
Even if it suffered severe business losses, ABS-CBN could not
retrench Sonza because ABS-CBN remained obligated to pay
his talent fees during the life of the Agreement. This
circumstance indicates an independent contractual relationship
between Sonza and ABS-CBN.
ABS-CBN engaged Sonzas services specifically to co-host the
Mel & Jay programs. ABS-CBN did not assign any other work
to Sonza. To perform his work, SONZA only needed his skills
and talent. Sonza had a free hand on what to say or discuss in
his shows provided he did not attack ABS-CBN or its interests.
ABS-CBN did not instruct Sonza how to perform his job.
Clearly, ABS-CBN did not exercise control over the means and
methods of performance of Sonzas work. ABS-CBNs control
was limited only to the result of Sonzas work, whether to
broadcast the final product or not.
Sonza further contends that ABS-CBN exercised control over
his work by supplying all equipment and crew. No doubt, ABSCBN 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. A radio broadcast specialist who works
under minimal supervision is an independent contractor. The
records do not show that ABS-CBN exercised any supervision
and control over how Sonza utilized his skills and talent in his
shows.
Sonza urges us to rule that he was ABS-CBNs employee
because ABS-CBN subjected him to its rules and standards of
performance. The Agreement stipulates that Sonza shall abide
with the rules and standards of performance covering talents
of ABS-CBN. The Agreement does not require Sonza to
comply with the rules and standards of performance prescribed
for employees of ABS-CBN. The code imposed on Sonza
refers to KBP code. The KBP code applies to broadcasters, not
to employees of radio and television stations. Broadcasters
are not necessarily employees of radio and television stations.
Lastly, Sonza insists that the exclusivity clause in the
Agreement is the most extreme form of control which ABSCBN exercised over him. Being an exclusive talent does not by
itself mean that Sonza is an employee of ABS-CBN. 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.
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. (DEUS)

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G.R. No. 169136

July 14, 2006

ASIATIC DEVELOPMENT CORPORATION, petitioner,


vs.
SPOUSES WELLINGTON and FLORDELIZA
BROGADA, respondents.
FACTS: Respondents Wellington and Flordeliza Brogada are
the parents of Fermin B. Brogada who was allegedly employed
4
by petitioner Asiatic Development Corporation from July 1994
up to his death in November 14, 1996. Respondents filed with
the SSC a petition for social security coverage and payment of
contributions in order to avail of the benefits accruing from the
death of Fermin. They alleged that Fermin worked as survey
aide under Engr. Bienvenido Orense, petitioners geodetic
engineer. Fermin was working on a project with Engr. Orense
for one of petitioners clients when he was shot and killed.
Petitioner denied its liability. It argued that there was no
employer-employee relationship between it and Fermin. It
claimed that Fermin was the employee of Engr. Orense.
ISSUE: WON ee-er relationship exists.
HELD: The issue of whether or not an employer-employee
relationship exists in a given case is essentially a question of
6
fact. In petitions for review on certiorari under Rule 45, only
questions of law may be raised by the parties and passed upon
7
by this Court. Factual findings of quasi-judicial bodies like the
SSC, when adopted and confirmed by the CA and if supported
by substantial evidence, are accorded respect and even finality
8
by this Court. While this Court has recognized several
9
exceptions to this rule, none of these exceptions finds
application here.
Both the SSC and CA found that Fermin was petitioners
employee. Thus, petitioner is liable for unpaid social security
contributions.
Petitioners claims are a mere reiteration of arguments
unsuccessfully raised before the SSC and the CA. No
compelling reason whatsoever is shown by petitioner for this
Court to reverse the SSCs findings and conclusions, as
affirmed by the CA. (FAITH)

ANDRES VILLAVILLA and ESTER GADIENTE VILLAVILLA


vs. CA
TOPIC: employer-employee relationship
FACTS:
Arturo Villavilla, son of petitioners, was employed as
"tripulante" (crew member) of the fishing boat "F/B Saint
Theresa". When the boat sank off in Palawan, he was not
among the known survivors of that sinking and had been
missing since then. The his parents, herein petitioners, filed a
petition with the Social Security Commission against Reynaldo
Mercado and Marcelino Cosuco, owners of the ill-fated fishing
boat, for death compensation benefits of Arturo whom
respondents failed to register as their employee.
Social Security System (SSS) filed a petition in intervention
showed that "F/B Saint Theresa", owned by Marcelino Cosuco
and operated by Reynaldo Mercado, was a registered
member-employer, and that in the event petitioners succeeded
in proving the employment of Arturo with private respondents,
the latter should be held liable in damages equivalent to the
benefits due the petitioners for failure to report Arturo for
coverage pursuant to Social Security Act.
Respondent Cosuco denied all and that he already sold the
fishing boat to respondent Mercado.
Social Security Commission issued an Order dismissing the
petition for lack of cause of action. The same was affirmed by
CA.
ISSUE:
1. Whether there was an employer-employee relationship
between petitioners' deceased son, Arturo Villavilla
2.whether there was a violation of the Social Security Act, as
amended, by private respondents for not registering Arturo
Villavilla with the System as their employee as mandated by
law.
HELD:
1. An employee is defined as a "person who performs services
for an employer in which either or both mental and physical
efforts are used and who receives compensation for such
services, where there is an employer-employee relationship"
(Sec. 8[d], Rep. Act 1161, as amended by Rep. Act 2658). In
the present case, neither the pilots nor the crew-members
receive compensation from boat-owners. They only share in
their own catch produced by their own efforts. There is no
showing that outside of their one third share, the boat-owners
have anything to do with the distribution of the rest of the catch
among the pilots and the crew members. The latter perform no
service for the boat-owners, but mainly for their own benefit.
In the undertaking in question, the boat-owners obviously are
not responsible for the wage, salary, or fee of the pilot and
crew-members. Their sole participation in the venture is the
furnishing or delivery of the equipment used for fishing, after
which, they merely wait for the boat's return and receive their
share in the catch, if there is any. For his part, a person who
joins the outfit is entitled to a share or participation in the fruit
of the fishing trip. If it gives no return, the men get nothing. It
appears to us therefore that the undertaking is in the nature of
a joint venture, with the boat-owner supplying the boat and its
equipment (sic), and the pilot and crew-members contributing
the necessary labor, and the parties getting specific shares for
their respective contributions.

kapisanan ng mga kargador sa pier

The existence of employer-employee relationship are not


present in the case at bar. As mentioned earlier, private
respondent Reynaldo Mercado had no connection with the
selection and engagement of Arturo Villavilla; exercised no
power of dismissal over Arturo Villavilla; neither had he any
power of control or had reserved the right to control Arturo
Villavilla as to the result of the work to be done as well as the
means and methods by which the same is to be accomplished,
and there was no such uniform salary involved.
2. In the case before Us, it is clear that there was no employeremployee relationship between petitioner's son Arturo and
private respondent Mercado, much less private respondent
Cosuco. As such, Arturo could not be made subject of
compulsory coverage under the Social Security Act; hence,
private respondents cannot be said to have violated said law
when they did not register him with the Social Security System.
A fortiori, respondent as well as intervenor are not answerable
to petitioners for any death benefits under the law.. (KICIANG)

Miguel v. JCT Group, Inc.


Facts:
Glorious Sun was a garment exporter until it folded up.
Thereafter, De Soleil & American Inter-Fashion Corp. (AIFC)
took over Glorious Suns manufacturing plant, facilities &
equipment & absorbed its employees, including the petitioners.
Following the EDSA Revolution, the PCGG sequestered De
Soleil & AIFC & took over their assets & operations. JCT
Group, Inc. (JCT) & De Soleil executed a Management &
Operating Agreement (MOA) for the purpose of servicing De
Soleils export quota & preserve its profitability. When the
MOA expired, De Soleil ceased business operations,
effectively terminating petitioners employment. Petitioners
filed complaints for illegal dismissal & payment of backwages &
other monetary claims before the NLRC against De Soleil,
AIFC, PCGG, Glorious Sun, JCT, & Cuevas. The Labor
Arbiter decided in favor of petitioners. The NLRC modified the
labor arbiters decision by absolving Glorious Sun from liability
& dismissing respondents appeal. The CA reversed the
decision & remanded the case to the Labor Arbiter for further
proceedings. It found no factual basis for the ruling that JCT
had become the employer of petitioners after the cessation of
operations of Glorious Sun.
Issue:
Whether the labor arbiter & the NLRC gravely abused their
discretion when they ruled in favor of petitioners without
determining the existence of an Er-Ee relationship between
them & respondents
Held:
Yes. In finding for petitioners, the labor arbiter considered
them regular employees for the reason that they performed
duties, responsibilities & functions necessary & desirable to the
business of garments manufacturing & exportation & had been
also working for more than a year at the time of the cessation
of business operation. Save for this conclusion, the labor
arbiter made no determination whether there was Er-Ee
relationship between respondents & petitioners &, if so,
whether the former assumed the obligations of the latters
previous employers. The NLRC decision is also silent on the
basis for its ruling that JCT became the employer of petitioners
after Glorious Sun ceased operations, save for its conclusion
that petitioners were absorbed by, or their work continued
under JCT.
The defense of respondents is anchored on an alleged lack of
ErEe relationship w/ petitioners as stipulated in the formers
MOA w/ De Soleil. JCT further claims that any relationship w/
De Soleil & the latters employees was severed upon the
termination of the MOA. It is therefore imperative to determine
the nature of the MOA --- whether or not it partook only of a
consultancy agreement, in which no ErEe relationship existed
between respondents & petitioners.
The test for determining an ErEe relationship hinges on
resolving who has the power to select employees, who pays
their wages, who has the power to dismiss them, & who
exercises control in the methods & the results by w/c the work
is accomplished. The last factor, the control test, is the most
important. In resolving the status of a MOA, the test for
determining an ErEe relationship has to be applied.
Indeed, the only way to find out whether Respondents JCT &
Cuevas are liable to petitioners is by remanding the case to the
lower court. Petition denied, assailed decision affirmed. (LORI)

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WACK WACK GOLF & COUNTRY CLUB, Petitioners,


vs.
NATIONAL LABOR RELATIONS COMMISSION, MARTINA
G. CAGASAN, CARMENCITA F. DOMINGUEZ, and
BUSINESS STAFFING AND MANAGEMENT, INC.,
Respondent
FACTS:
A fire destroyed a large portion of the main clubhouse of the
Wack Wack Golf and Country Club (Wack Wack), including its
kitchen. In view of the reconstruction of the whole clubhouse
complex, Wack Wack filed a notice with the DOLE on April 14,
1997 that it was going to suspend the operations of the Food
and Beverage (F & B) Department one (1) month thereafter.
Notices to 54 employees were also sent out, informing them
that they need not report for work anymore after April 14, 1997
but that they would still be paid their salaries up to May 14,
1997. They were further told that they would be informed once
full operations in Wack Wack resume. Wack Wack Golf
Employees Union and Wack wack officers made an agreement
that:

The affected employees of F & B who are members of


the UNION hereby agree to accept the special
separation benefit package agreed upon between the
CLUB management on the one hand, and the UNION
officers and the UNION lawyer on the other, in the
amount equivalent to one-and-one-half months salary
for every year of service, regardless of the number of
years of service rendered. That, in addition, said
employees shall also receive the other benefits due
them, namely, the cash equivalent of unused vacation
and sick leave credits, proportionate 13th month pay;
and other benefits, if any, computed without premium;
All qualified employees who may have been
separated from the service under the above package
shall be considered under a priority basis for
employment by concessionaires and/or contractors,
and even by the Club upon full resumption of
operations, upon the recommendation of the UNION.
The Club may even persuade an employee-applicant
for availment under the package to remain on his/her
job, or be assigned to another position.

that the said respondents were no longer employees of Wack


Wack when they filed their complaints with the Labor Arbiter?
HELD:
YES. It must be recalled that said respondents availed of the
special separation package offered by the petitioner. This
special separation package was thought of and agreed by the
two parties (Wack Wack and the Union) after a series of
discussions and negotiations to avert any labor unrest due to
the closure of Wack Wack. Priority was given to the employees
of the F & B Department, but was, likewise, offered to the other
employees who may wish to avail of the separation package
due to the reconstruction of Wack Wack.
The respondents signed their respective release and
quitclaims after receiving their money benefits. When the
respondents voluntarily signed their quitclaims and accepted
the separation package offered by the petitioner, they,
thenceforth, already ceased to be employees of the petitioner.
Nowhere does it appear in the Agreement that the petitioner
assured the respondents of continuous employment in Wack
Wack. Qualified employees were given priority in being hired
by its concessionaires and/or contractors such as BSMI when
it entered into a management contract with the petitioner. The
right to hire and fire is another element of the employeremployee relationship which actually existed between the
respondents and BSMI, and not with Wack Wack. There being
no employer-employee relationship between the petitioner and
respondents Cagasan and Dominguez, the latter have no
cause of action for illegal dismissal and damages against the
petitioner. Consequently, the petitioner cannot be validly
ordered to reinstate the respondents and pay them their claims
for backwages.
NLRCs ruling that BSMI is a labor-only contractor hence, the
petitioner is principally liable is not correct. BSMI is an
independent contractor. It had provided management services
to various industrial and commercial business establishments.
Its Articles of Incorporation proves its sufficient capitalization.
(NICOLE)

Respondents Dominguez and Cagasan availed of the benefits.


Wack Wack entered into a Management Contract with
Business Staffing and Management, Inc. (BSMI), a corporation
engaged in the business as Management Service Consultant
undertaking and managing for a fee projects. Pursuant to the
agreement, BSMI hired the respondents. However, BSMI saw
that the positions of Cagasan and Dominguez were redundant
as this was being handled by another department. The two
were terminated. Respondents file an illegal dismissal case
before the Labor Arbiter but dismissed it. When appealed to
NLRC, it reversed the decision of the Arbiter and said that the
respondents be reinstated. Hence, appeal.
ISSUE:
Does NLRC committed grave abuse of discretion in ordering
Wack Wack to reinstate the respondents Cagasan and
Dominguez with backwages when indubitable evidence shows

kapisanan ng mga kargador sa pier

PHILIPPINE GLOBAL COMMUNICATIONS, INC., petitioner,


vs. RICARDO DE VERA, respondent.
GARCIA, J.:
Facts:
Petitioner Philippine Global Communications, Inc. (PhilCom), is
a corporation engaged in the business of communication
services and allied activities, while respondent Ricardo De
Vera is a physician by profession whom petitioner enlisted to
attend to the medical needs of its employees. At the crux of
the controversy is Dr. De Veras status vis a vis petitioner when
the latter terminated his engagement.
It appears that on 15 May 1981, De Vera, via a letter, offered
his services to the petitioner, therein proposing his plan of
works required of a practitioner in industrial medicine.
The parties agreed and formalized respondents proposal in a
document denominated as RETAINERSHIP CONTRACT[4]
which will be for a period of one year subject to renewal, it
being made clear therein that respondent will cover the
retainership the Company previously had with Dr. K. Eulau
and that respondents retainer fee will be at P4,000.00 a
month. Said contract was renewed yearly.[5] The retainership
arrangement went on from 1981 to 1994 with changes in the
retainers fee. However, for the years 1995 and 1996, renewal
of the contract was only made verbally.
The turning point in the parties relationship surfaced in
December 1996 when Philcom, thru a letter[6] bearing on the
subject boldly written as TERMINATION RETAINERSHIP
CONTRACT, informed De Vera of its decision to discontinue
the latters retainers contract with the Company effective at
the close of business hours of December 31, 1996 because
management has decided that it would be more practical to
provide medical services to its employees through accredited
hospitals near the company premises.
PETITIONER's claim
On 22 January 1997, De Vera filed a complaint for illegal
dismissal before the National Labor Relations Commission
(NLRC), alleging that that he had been actually employed by
Philcom as its company physician since 1981 and was
dismissed without due process. He averred that he was
designated as a company physician on retainer basis for
reasons allegedly known only to Philcom. He likewise
professed that since he was not conversant with labor laws, he
did not give much attention to the designation as anyway he
worked on a full-time basis and was paid a basic monthly
salary plus fringe benefits, like any other regular employees of
Philcom.
Labor arbiter
On 21 December 1998, Labor Arbiter Ramon Valentin C.
Reyes came out with a decision[7] dismissing De Veras
complaint for lack of merit, on the rationale that as a retained
physician under a valid contract mutually agreed upon by the
parties, De Vera was an independent contractor and that he
was not dismissed but rather his contract with [PHILCOM]
ended when said contract was not renewed after December
31, 1996.
NLRC
On De Veras appeal to the NLRC, the latter, in a decision[8]
dated 23 October 2000, reversed (the word used is modified)

that of the Labor Arbiter, on a finding that De Vera is Philcoms


regular employee and accordingly directed the company to
reinstate him to his former position without loss of seniority
rights and privileges and with full backwages from the date of
his dismissal until actual reinstatement.
CA
Philcom then went to the Court of Appeals on a petition for
certiorari. On 12 September 2002, the Court of Appeals
rendered a decision,[10] modifying that of the NLRC by
deleting the award of traveling allowance, and ordering
payment of separation pay to De Vera in lieu of reinstatement.
Hence, Philcoms present recourse on its main submission
that Issue
Whether an employer-employee relationship exists between
petitioner and respondent.
Held
In a long line of decisions,[15] the Court, in determining the
existence of an employer-employee relationship, 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, considered
to be the most important element.
1) The tenor of his letter indicates that the complainant was
proposing to extend his time with the respondent and seeking
additional compensation for said extension. This shows that
the respondent PHILCOM did not have control over the
schedule of the complainant as it [is] the complainant who is
proposing his own schedule and asking to be paid for the
same. This is proof that the complainant understood that his
relationship with the respondent PHILCOM was a retained
physician and not as an employee. If he were an employee he
could not negotiate as to his hours of work.
After more than ten years of services to PHILCOM, the
complainant never bothered to ask the respondent to remit his
SSS contributions. This clearly shows that the complainant
never considered himself an employee of PHILCOM and thus,
respondent need not remit anything to the SSS in favor of the
complainant.[18]
Clearly, the elements of an employer-employee relationship
are wanting in this case. We may add that the records are
replete with evidence showing that respondent had to bill
petitioner for his monthly professional fees.[19] It simply runs
against the grain of common experience to imagine that an
ordinary employee has yet to bill his employer to receive his
salary.
Remarkably absent from the parties arrangement is the
element of control, whereby the employer has reserved the
right to control the employee not only as to the result of the
work done but also as to the means and methods by which the
same is to be accomplished.[21]
Here, petitioner had no control over the means and methods
by which respondent went about performing his work at the
company premises. He could even embark in the private
practice of his profession, not to mention the fact that
respondents work hours and the additional compensation
therefor were negotiated upon by the parties.[22] In fine, the

kapisanan ng mga kargador sa pier

parties themselves practically agreed on every terms and


conditions of respondents engagement, which thereby
negates the element of control in their relationship.
2) The appellate courts premise that regular employees are
those who perform activities which are desirable and
necessary for the business of the employer is not
determinative in this case. For, we take it that any agreement
may provide that one party shall render services for and in
behalf of another, no matter how necessary for the latters
business, even without being hired as an employee. This
set-up is precisely true in the case of an independent
contractorship as well as in an agency agreement.
3) Buttressing his contention that he is a regular employee of
petitioner, respondent invokes Article 157 of the Labor Code,
and argues that he satisfies all the requirements thereunder.
The provision relied upon reads:
ART. 157. Emergency medical and dental services. It shall
be the duty of every employer to furnish his employees in any
locality with free medical and dental attendance and facilities
consisting of:
(a)

The services of a full-time registered nurse


when the number of employees exceeds fifty
(50) but not more than two hundred (200)
except when the employer does not maintain
hazardous workplaces, in which case the
services of a graduate first-aider shall be
provided for the protection of the workers,
where no registered nurse is available. The
Secretary of Labor shall provide by
appropriate regulations the services that
shall be required where the number of
employees does not exceed fifty (50) and
shall determine by appropriate order
hazardous workplaces for purposes of this
Article;

(b)

The services of a full-time registered nurse, a


part-time physician and dentist, and an
emergency clinic, when the number of
employees exceeds two hundred (200) but
not more than three hundred (300); and

(c)

The services of a full-time physician, dentist


and full-time registered nurse as well as a
dental clinic, and an infirmary or emergency
hospital with one bed capacity for every one
hundred (100) employees when the number
of employees exceeds three hundred (300).

Respondent takes no issue on the fact that petitioners


business of telecommunications is not hazardous in nature. As
such, what applies here is the last paragraph of Article 157
which, to stress, provides that the employer may engage the
services of a physician and dentist on retained basis, subject
to such regulations as the Secretary of Labor may prescribe.
The successive retainership agreements of the parties
definitely hue to the very statutory provision relied upon by
respondent.
With the recognition of the fact that petitioner consistently
engaged the services of respondent on a retainer basis, as
shown by their various retainership contracts, so can
petitioner put an end, with or without cause, to their
retainership agreement as therein provided.[27]
WHEREFORE, the petition is GRANTED and the challenged
decision of the Court of Appeals REVERSED and SET ASIDE.
The 21 December 1998 decision of the labor arbiter is
REINSTATED. (ROBERT)

Had only respondent read carefully the very statutory provision


invoked by him, he would have noticed that in non-hazardous
workplaces, the employer may engage the services of a
physician on retained basis. As correctly observed by the
petitioner, while it is true that the provision requires employers
to engage the services of medical practitioners in certain
establishments depending on the number of their employees,
nothing is there in the law which says that medical practitioners
so engaged be actually hired as employees,[24] adding that
the law, as written, only requires the employer to retain, not
employ, a part-time physician who needed to stay in the
premises of the non-hazardous workplace for two (2)
hours.[25]

kapisanan ng mga kargador sa pier

JARDIN VS. NLRC


G.R. No. 119268. February 23, 2000
FACTS:
Petitioners were drivers of private respondent, Philjama
International Inc., a domestic corporation engaged in the
operation of "Goodman Taxi." Petitioners used to drive private
respondents taxicabs every other day on a 24-hour work
schedule under the boundary system. Private respondent
admittedly regularly deducts from petitioners daily earnings the
amount of P30.00 supposedly for the washing of the taxi units.
Believing that the deduction is illegal, petitioners decided to
form a labor union to protect their rights and interests. Private
respondent, upon learning about the plan of petitioners,
refused to let petitioners drive their taxicabs.
Petitioner filed with the Labor Arbiter a complaint against
private respondent for unfair labor practice, illegal dismissal
and illegal deduction of washing fees. The Labor Arbiter
dismissed said complaint for lack of merit. On appeal to the
NLRC, set aside the judgment of the Labor Arbiter. A first
motion for reconsideration was filed by the private respondent
but was dismissed. Another motion for reconsideration was
filed but this time, NLRC granted aforesaid second motion for
reconsideration ruling that it lacks jurisdiction over the case as
petitioners and private respondent have no employeremployee relationship.
Expectedly, petitioners sought reconsideration of the labor
tribunals decision which was denied. Hence, the instant
petition.
ISSUE:

The management of the business is in the owners hands. The


owner as holder of the certificate of public convenience must
see to it that the driver follows the route prescribed by the
franchising authority and the rules promulgated as regards its
operation. Now, the fact that the drivers do not receive fixed
wages but get only that in excess of the so-called "boundary"
they pay to the owner/operator is not sufficient to withdraw the
relationship between them from that of employer and
employee. Hence, petitioners are undoubtedly employees of
private respondent because as taxi drivers they perform
activities which are usually necessary or desirable in the usual
business or trade of their employer.
As consistently held by this Court, termination of employment
must be effected in accordance with law. The just and
authorized causes for termination of employment are
enumerated under Articles 282, 283 and 284 of the Labor
Code. The requirement of notice and hearing is set-out in
Article 277 (b) of the said Code. Hence, petitioners, being
employees of private respondent, can be dismissed only for
just and authorized cause, and after affording them notice and
hearing prior to termination. In the instant case, private
respondent had no valid cause to terminate the employment of
petitioners. Neither were there two (2) written notices sent by
private respondent informing each of the petitioners that they
had been dismissed from work. These lack of valid cause and
failure on the part of private respondent to comply with the
twin-notice requirement underscored the illegality surrounding
petitioners dismissal.
Under the law, an employee who is unjustly dismissed from
work shall be entitled to reinstatement without loss of seniority
rights and other privileges and to his full backwages, inclusive
of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement.
(SYLVESTER)

Whether or not there is an existence of an employer-employee


relationship.
RULING:
YES. There is an existence of an employer-employee
relationship.
In the determination the existence of employer-employee
relationship, the following are the four-fold test: (1) the
selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power of control
the employees conduct.
In a number of cases decided by this Court, we ruled that the
relationship between jeepney owners/operators on one hand
and jeepney drivers on the other under the boundary system is
that of employer-employee and not of lessor-lessee. We
explained that in the lease of chattels, the lessor loses
complete control over the chattel leased although the lessee
cannot be reckless in the use thereof, otherwise he would be
responsible for the damages to the lessor. In the case of
jeepney owners/operators and jeepney drivers, the former
exercise supervision and control over the latter.

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MANILA GOLF & COUNTRY CLUB, INC., petitioner,


vs.
INTERMEDIATE APPELLATE COURT and FERMIN
LLAMAR, respondents.
FACTS: This case originally involved three separate
proceedings, all initiated by or on behalf of herein private
respondent and his fellow caddies. That which gave rise to the
present petition for review was originally filed with the Social
Security Commission (SSC) via petition of seventeen (17)
persons who styled themselves "Caddies of Manila Golf and
Country Club-PTCCEA" for coverage and availment of benefits
under the Social Security Act as amended, "PTCCEA"
being the acronym of a labor organization, the "Philippine
Technical, Clerical, Commercial Employees Association," with
which the petitioners claimed to be affiliated. The petition,
docketed as SSC Case No. 5443, alleged in essence that
although the petitioners were employees of the Manila Golf
and Country Club, a domestic corporation, the latter had not
registered them as such with the SSS.
In the case before the SSC, the respondent Club filed answer
praying for the dismissal of the petition, alleging in substance
that the petitioners, caddies by occupation, were allowed into
the Club premises to render services as such to the individual
members and guests playing the Club's golf course and who
themselves paid for such services; that as such caddies, the
petitioners were not subject to the direction and control of the
Club as regards the manner in which they performed their
work; and hence, they were not the Club's employees.
Subsequently, all but two of the seventeen petitioners of their
own accord withdrew their claim for social security coverage,
avowedly coming to realize that indeed there was no
employment relationship between them and the Club. The
case continued, and was eventually adjudicated by the SSC
after protracted proceedings only as regards the two holdouts,
Fermin Llamar and Raymundo Jomok. The Commission
dismissed the petition for lack of merit.
From this Resolution appeal was taken to the Intermediate
appellate Court which declared Fermin Llamar an employee of
the Manila Gold and Country Club, ordering that he be
reported as such for social security coverage and paid any
corresponding benefits,
ISSUE: Whether or not persons rendering caddying services
for members of golf clubs and their guests in said clubs'
courses or premises are the employees of such clubs and
therefore within the compulsory coverage of the Social Security
System (SSS).

over the incidents of the caddies' work and compensation that


an employer would possess.
The Court agrees with petitioner that the group rotation system
so-called, is less a measure of employer control than an
assurance that the work is fairly distributed, a caddy who is
absent when his turn number is called simply losing his turn to
serve and being assigned instead the last number for the
17
day.
By and large, there appears nothing in the record to refute the
petitioner's claim that:
(Petitioner) has no means of compelling the
presence of a caddy. A caddy is not required
to exercise his occupation in the premises of
petitioner. He may work with any other golf
club or he may seek employment a caddy or
otherwise with any entity or individual without
restriction by petitioner. . . .
. . . In the final analysis, petitioner has no
was of compelling the presence of the
caddies as they are not required to render a
definite number of hours of work on a single
day. Even the group rotation of caddies is
not absolute because a player is at liberty to
choose a caddy of his preference regardless
of the caddy's order in the rotation.
It can happen that a caddy who has
rendered services to a player on one day
may still find sufficient time to work
elsewhere. Under such circumstances, he
may then leave the premises of petitioner
and go to such other place of work that he
wishes (sic). Or a caddy who is on call for a
particular day may deliberately absent
himself if he has more profitable caddying, or
another, engagement in some other place.
These are things beyond petitioner's control
and for which it imposes no direct sanctions
18
on the caddies. . . .
WHEREFORE, the Decision of the Intermediate Appellant
Court, review of which is sought, is reversed and set aside, it
being hereby declared that the private respondent, Fermin
Llamar, is not an employee of petitioner Manila Golf and
Country Club and that petitioner is under no obligation to report
him for compulsory coverage to the Social Security System. No
pronouncement as to costs. (CLAU)

HELD:No, persons rendering caddying services for members


of golf clubs and their guests in said clubs' courses or premises
are not employees of such clubs and therefore not within the
compulsory coverage of the Social Security System (SSS).
The IAC would point to the fact that the Club suggests the rate
of fees payable by the players to the caddies as still another
indication of the latter's status as employees. It seems to the
Court, however, that the intendment of such fact is to the
contrary, showing that the Club has not the measure of control

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FELIX VS. BUENASEDA


G.R. No. 109704 January 17, 1995
FACTS:
This is a petition assailing the petitioners dismissal as Medical
Specialist I of the National Center for Mental Health as illegal
and violative of the constitutional provision on security of
tenure.
Petitioner joined the NCMH as a Resident Physician in June
1979. Shortly, he was promoted as Senior Resident Physician
until the Ministry of Health reorganized the NCMH pursuant to
E.O. 119. Under the reorganization, he was appointed to the
position of Senior Resident Physician in a temporary capacity.
On August 1988, he was elevated to the position of Medical
Specialist I (Temporary Status) which was renewed the
following year.

at the time of petitioner's promotion to the position of Medical


Specialist I (temporary) in August of 1988, no objection was
raised by him about the change of position or the temporary
nature of designation.
The failure to assert a claim or the voluntary acceptance of
another position in government, obviously without reservation,
leads to a presumption that the civil servant has either given up
his claim of has already settled into the new position.
Finally, it is crystal clear, from the facts of the case at bench,
that the petitioner accepted a temporary appointment (Medical
Specialist I). As respondent Civil Service Commission has
correctly pointed out, the appointment was for a definite and
renewable period which, when it was not renewed, did not
involve a dismissal but an expiration of the petitioner's term.
(SYLVESTER)

The Dept. of Health issued Department Order No. 347 which


required board certification as prerequisite for renewal of
specialist positions in various medical centers and it also
extend appointments of Medical Specialist positions in cases
where the termination of medical specialist who failed to meet
the requirements for board certification.
On August 20, 1991, after reviewing petitioner's service record,
non-renewal of petitioners appointment as Medical Specialist I
was recommended. He was, however, allowed to continue in
the service, and receive his salary, allowances and other
benefits even after being informed of the termination of his
appointment. Soon, he was advised by the hospital authorities
to vacate his cottage. The petitioner filed a petition with the
Merit System Protection Board alleging harassment by
respondents; however, it was later dismissed for lack of merit.
Said decision was appealed to the Civil Service Commission
which dismissed the same including the Motion for
Reconsideration the petitioner has filed after which brought this
appeal.
ISSUE:
Whether or not the petitioner was illegally dismissed from his
position and that it is not a violative of his constitutional right of
security of tenure.
RULING:
NO. The petitioner was not illegally dismissed. The Solicitor
General is correct in contending that the petitioners temporary
appointment after the reorganization were valid and did not
violate his constitutional right of security of tenure. Petitioner is
guilty of estoppels or laches.
Stringent standards and requirements for renewal of specialistrank positions or for promotion to the next post-graduate
residency year are necessary because lives are ultimately at
stake. Petitioners insistence on being reverted back to the
status quo prior to the reorganizations would therefore be akin
to a college student asking to be sent to high school and
staying there.
He is estopped from insisting upon a right or claim which he
had plainly abandoned when he, from all indications,
enthusiastically accepted the promotion. It bears emphasis that

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G.R. No. 148508 : May 20, 2004


R TRANSPORT CORPORATION,, Petitioner, v. ROGELIO
EJANDRA, Respondent.
FACTS: Private respondent Rogelio Ejandra worked as a bus
driver of petitioner bus corporation got almost six years. One
day, he was apprehended by an LTO officer for obstruction of
traffic for which his license was confiscated. Ejendra
immediately reported the incident to his manager, Mr. Oscar
Pasquin, who gave him P500 to redeem his license but was
able to retrieve his license only after a week.
Later on, when Ejandra informed his manager that he was
ready to report for work, he was told that the company was still
studying whether to allow him to drive again. Private
respondent was likewise accused of causing damage to the
bus he used to drive. Petitioner claimed that private
respondent, a habitual absentee, abandoned his job. Petitioner
further argued that private respondent was not an employee
because theirs was a contract of lease and not of employment,
with petitioner being paid on commission basis.
ISSUES:
1.) WON respondent abandoned his work; WON petitioner was
the lessor of private respondent; that, as such, the termination
of the contract of lease of services did not require petitioner to
respect private respondents rights to notice and hearing.
HELD: Under Section 1, Rule 45 of the 1997 Rules of Civil
Procedure, a petition for review shall only raise questions of
law considering that the findings of fact of the Court of Appeals
are, as a general rule, conclusive upon and binding on this
Court. This doctrine applies with greater force in labor cases
where the factual findings of the labor tribunals are affirmed by
the Court of Appeals. The reason is because labor officials are
deemed to have acquired expertise in matters within their
jurisdiction and therefore, their factual findings are generally
accorded not only respect but also finality, and are binding on
this Court.
In the case at bar, the labor arbiter,the NLRC and the Court of
Appeals were unanimous in finding that private respondent
worked as a driver of one of the buses of petitioner and was
paid on a 10% commission basis. After he was apprehended
for a traffic violation, his license was confiscated. When he
informed petitioners general manager of such fact, the latter
gave him money to redeem his license. He went to the LTO
office everyday but it was only after a week that he was able to
get back his license. When he reported back to work,
petitioners manager told him to wait until his services were
needed again. Considering himself dismissed, private
respondent filed a complaint for illegal dismissal against
petitioner.
We have no reason to disturb all these factual findings
because they are amply supported by substantial evidence.
Denying the existence of an employer-employee relationship,
petitioner insists that the parties agreement was for a contract
of lease of services. We disagree. Petitioner is barred to

negate the existence of an employer-employee relationship. In


its petition filed before this Court, petitioner invoked our rulings
on the right of an employer to dismiss an employee for just
cause. Petitioner maintained that private respondent was
justifiably dismissed due to abandonment of work. By adopting
said rulings, petitioner impliedly admitted that it was in fact the
employer of private respondent. According to the control test,
the power to dismiss an employee is one of the indications of
an employer-employee relationship. Petitioners claim that
private respondent was legally dismissed for abandonment
was in fact a negative pregnant: an acknowledgement that
there was no mutual termination of the alleged contract of
lease and that private respondent was its employee. The fact
that petitioner paid private respondent on commission basis did
not rule out the presence of an employee-employer
relationship. Article 97(f) of the Labor Code clearly provides
that an employees wages can be in the form of commissions.
2.) WON respondent was dismissed with just cause.
HELD: NO. According to petitioner, private respondent
abandoned his job and lied about the confiscation of his
license. To constitute abandonment, two elements must
concur: (1) the failure to report for work or absence without
valid or justifiable reason and (2) a clear intention to sever the
employer-employee relationship. Of the two, the second
element is the more determinative factor and should be
manifested by some overt acts. Mere absence is not sufficient.
It is the employer who has the burden of proof to show a
deliberate and unjustified refusal of the employee to resume
his employment without any intention of returning.[15
In the instant case, petitioner fell short of proving the
requisites. To begin with, petitioners absence was justified
because the LTO, Guadalupe Branch, did not release his
license until after a week. This was the unanimous factual
finding of the labor tribunals and the Court of Appeals.
In addition to the fact that petitioner had no valid cause to
terminate private respondent from work, it violated the latters
right to procedural due process by not giving him the required
notice and hearing. Section 2, Rule XXIII, Book V of
Department Order No. 9 provides for the procedure for
dismissal for just or authorized cause:
SEC. 2. Standards of due process; requirement of
notice. In all cases of termination of employment, the following
standards of due process shall be substantially observed:
I. For termination of employment based on just causes as
defined in Article 282 of the Code:
(a) A written notice served on the employee specifying the
ground or grounds for termination, and giving to said employee
reasonable opportunity within which to explain his side;
(b) A hearing or conference during which the employee
concerned, with the assistance of counsel if the employee so
desires, is given opportunity to respond to the charge, present
his evidence or rebut the evidence presented against him; and

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(c ) A written notice of termination served on the employee


indicating that upon due consideration of all the circumstances,
grounds have been established to justify his termination. In
case of termination, the foregoing notices shall be served on
the employees last known address.
II. For termination of employment as based on authorized
causes defined in Article 283 of the Code, the requirements of
due process shall be deemed complied with upon service of a
written notice to the employee and the appropriate Regional
Office of the Department at least thirty days before the
effectivity of the termination, specifying the ground or grounds
for termination.
III. If termination is brought about by the completion of the
contract or phase thereof, no prior notice is required. If the
termination is brought about by the failure of an employee to
meet the standards of the employer in case of probationary
employment, it shall be sufficient that a written notice is served
the employee within a reasonable time from the effective date
of termination. (FAITH)

INSULAR LIFE ASSURANCE CO., LTD., Petitioner, vs.


NLRC
FACTS: Petitioner entered into an agency contract with
respondent Pantaleon de los Reyes authorizing the latter to
solicit within the Philippines applications for life insurance and
annuities for which he would be paid compensation in the form
of commissions. The contract was prepared by petitioner in its
entirety and De los Reyes merely signed his conformity
thereto. It contained the stipulation that no employer-employee
relationship shall be created between the parties and that the
agent shall be free to exercise his own judgment as to time,
place and means of soliciting insurance. De los Reyes
however was prohibited by petitioner from working for any
other life insurance company, and violation of this stipulation
was sufficient ground for termination of the contract. Aside
from soliciting insurance for the petitioner, private respondent
was required to submit to the former all completed applications
for insurance within ninety (90) consecutive days, deliver
policies, receive and collect initial premiums and balances of
first year premiums, renewal premiums, deposits on
applications and payments on policy loans. Private respondent
was also bound to turn over to the company immediately any
and all sums of money collected by him. In a written
communication by petitioner to respondent De los Reyes, the
latter was urged to register with the Social Security System as
a self-employed individual as provided under PD No. 1636.
Then petitioner and private respondent entered into another
contract where the latter was appointed as Acting Unit
Manager under its office the Cebu DSO V (157). As such, the
duties and responsibilities of De los Reyes included the
recruitment, training, organization and development within his
designated territory of a sufficient number of qualified,
competent and trustworthy underwriters, and to supervise and
coordinate the sales efforts of the underwriters in the active
solicitation of new business and in the furtherance of the
agencys assigned goals. It was similarly provided in the
management contract that the relation of the acting unit
manager and/or the agents of his unit to the company shall be
that of independent contractor. If the appointment was
terminated for any reason other than for cause, the acting unit
manager would be reverted to agent status and assigned to
any unit.
As in the previous agency contract, De los Reyes together with
his unit force was granted freedom to exercise judgment as to
time, place and means of soliciting insurance. Aside from
soliciting insurance, De los Reyes was also expressly obliged
to participate in the companys conservation program.. As long
as he was unit manager in an acting capacity, De los Reyes
was prohibited from working for other life insurance companies
or with the government. He could not also accept a managerial
or supervisory position in any firm doing business in the
Philippines without the written consent of petitioner.
Private respondent worked concurrently as agent and Acting
Unit Manager until he was notified by petitioner on 18
November 1993 that his services were terminated effective 18
December 1993. On 7 March 1994 he filed a complaint before
the Labor Arbiter on the ground that he was illegally dismissed
and that he was not paid his salaries and separation pay.
Respondent NLRC decided that respondent De los Reyes was
under the effective control of petitioner in the critical and most
important aspects of his work as Unit Manager. Both petitioner
and respondent NLRC treated the agency contract and the
management contract entered into between petitioner and De
los Reyes as contracts of agency.

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ISSUE: Whether or not there is an existing employer-employee


relationship between the two parties despite written contractual
disavowals.

Almirez v. Infinite Loop Technology Corp.


GR No. 162401, 31 Jan 2006
Carpio-Morales, J.

HELD: It is axiomatic that the existence of an employeremployee relationship cannot be negated by expressly
repudiating it in the management contract and providing
therein that the employee is an independent contractor when
the terms of agreement clearly show otherwise.
In determining the status of the management contract, the fourfold test on employment earlier mentioned has to be applied.
so-called four-fold test, i.e., (a) selection and engagement of
employee, (b) payment of wages, (c) power of dismissal, and,
(d) power of control, De los Reyes was not an employee but an
independent contractor.
First test, a look at the provisions of the contract shows that
private respondent was appointed as Acting Unit Manager only
upon recommendation of the District Manager. This indicates
that private respondent was hired by petitioner because of the
favorable endorsement of its duly authorized officer. The very
designation of the appointment of private respondent as acting
unit manager obviously implies a temporary employment status
which may be made permanent only upon compliance with
company standards such as those enumerated under Sec. 6 of
the management contract.[9]
On the second test, The managers contract unquestionably
demonstrate that the performance requirement imposed on De
los Reyes was applicable quarterly while his entitlement to the
free portion (P300) and the validated portion (P1,200) was
monthlystarting on the first month of the twelve (12) months of
the appointment.It is worth considering that the payment of
compensation by way of commission does not militate against
the conclusion that private respondent was an employee of
petitioner. Under Art. 97 of the Labor Code, wage shall mean
however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, price or
commission basis.
On the third and fourth test, as to the matter involving the
power of dismissal and control by the employer, the latter of
which is the most important of the test, petitioner asserts that
its termination of De los Reyes was but an exercise of its
inherent right as principal under the contracts and that the
rules and guIdelines it set forth in the contract cannot, by any
stretch of imagination, be deemed as an exercise of control
over the private respondent as these were merely directives
that fixed the desired result without dictating the means or
method to be employed in attaining it. The following factual
findings of the NLRC however contradict such claims.
A perusal of the appointment of complainant as Acting Unit
Manager reveals that: 1. Complainant was to exclusively serve
respondent company.; 2. Complainant was required to meet
certain manpower and production quotas.; 3. Respondent
(herein petitioner) controlled the assignment and removal of
soliciting agents to and from complainants unit.

Facts:
Petitioner Almirez was hired as a Refinery Senior Process
Design Engineer for a specific project by respondent Infinite
Loop through its General Manager Rabino who, by letter to
petitioner, furnished the details of her employment which
included the Scope of Professional Services. Subsequently,
petitioner, through counsel, wrote Rabino demanding that
respondent compensate her the total amount of her contract.
Rabino wrote petitioner that the project proponent, Arrox
Resources Corp., have encountered re-organization & have
not yet paid Infinite Loop for the project. Petitioner filed a
complaint against Infinite Loop & Rabino before the NLRC for
breach of contract of employment. Infinite Loop moved to
dismiss the complaint on the ground that the NLRC has no
jurisdiction over the parties & the subject matter as there was
no ErEe relationship between them since the contract they
entered into was one of services & not of employment. The
Labor Arbiter held that there was an ErEe relationship between
the parties based on paragraph 6 of the Scope of Professional
Services which showed that the companys management team
exercises control over the means & methods in the
performance of petitioners duties. The NLRC, finding that an
ErEe relation between the parties existed, dismissed
respondents appeal. The CA finding that petitioner was hired
to render professional services for a specific project & her
cause of action is for a sum of money on account of Infinite
Loops alleged breach of contractual obligation to pay her
agreed professional fee, held that no ErEr relationship existed
between the parties, hence, the NLRC & the Labor Arbiter
have no jurisdiction over the complaint.

Exclusivity of service, control of assignments and removal of


agents under private respondents unit, collection of premiums,
furnishing of company facilities and materials as well as capital
described as Unit Development Fund are but hallmarks of the
management system in which herein private respondent
worked. This obtaining, there is no escaping the conclusion
that private respondent Pantaleon de los Reyes was an
employee of herein petitioner. (KICIANG)

Issue:
Whether an ErEe relation existed between the parties
Held:
No. To ascertain the existence of an ErEe relationship,
jurisprudence has invariably applied the 4-fold test, to wit: (1)
the manner of selection & engagement; (2) the payment of
wages; (3) the presence of absence of the power of dismissal;
& (4) the presence of absence of the power of control. Of
these 4, the last one, the so called control test is commonly
regarded as the most crucial & determinative indicator of the
presence of absence of an ErEe relationship.
Under the control test, an ErEe relationship exists where the
person for whom the services are performed reserves the right
to control not only the end achieved, but also the manner &
means to be used in reaching that end.
From the scope of petitioners professional services, there is
no showing of a power of control over petitioner. The services
to be performed by her specified what she needed to achieve
but not on how she was to go about it.
Contrary to the finding of the Labor Arbiter, as affirmed by the
NLRC, above-quoted paragraph No. 6 of the "Scope of
[petitioners] Professional Services" requiring her to "[m]ake
reports and recommendations to the company management
team regarding work progress, revisions and improvement of
process design on a regular basis as required by company

15

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management team" does not "show that the companys


management team exercises control over the means and
methods in the performance of her duties as Refinery Process
Design Engineer." Having hired petitioners professional
services on account of her "expertise and qualifications" as
petitioner herself proffers in her Position Paper, the company
naturally expected to be updated regularly of her "work
progress," if any, on the project for which she was specifically
hired.
A payslip cannot prove the existence of an ErEe relationship
between the parties. The designation of the payments to
petitioner as salaries is not determinative of the existence of
an ErEe relationship. Salary is a general term defined as a
remuneration for services given. It is the contract of
engagement of services which is the law between the parties.
Even petitioner concedes rendering service "based on the
contract," which, as reflected earlier, is bereft of a showing of
power of control, the most crucial and determinative indicator
of the presence of an employer-employee relationship. (LORI)

DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitionersappellants,


vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE,
INC., ELISEO S.CANILAO, and SEGUNDINA NOGUERA,
respondents-appellees.

FACTS:
Lessor Noguera enter into a contract of lease with Tourist
World Services (TWS) for the establishment of a main branch.
Sevilla was made solidarily liable for the prompt payment of
monthly rents. However,Sevilla was found connected with the
firms rival company and since the branch office was anyhow
losing, the Tourist World Service considered closing down its
office. TWS terminated the lease contract with Noguera. The
corporate secretary, went over to the branch office finding the
premises locked, and, being unable to contact Lina Sevilla, he
padlocked the premises on June 4, 1962 to protect the
interests of the Tourist World Service. When neither the
appellant Lina Sevilla nor any of her employees could enter the
locked premises, a complaint wall filed by the herein appellants
against the appellees with a prayer for the issuance of
mandatory preliminary injunction.
Lina Sevilla claims that a joint bussiness venture was entered
into by and between her and appellee TWS with offices at the
Ermita branch office and that she was not an employee of the
TWS to the end that her relationship with TWS was one of a
joint business venture. On one hand, TWS contend that the
appellant was an employee of the appellee Tourist World
Service, Inc. and as such was designated manager. The trial
court held that TWS is the true lessee and that SEvilla is only
its employee. Hence, appeal.
ISSUE:
Whether or not there is an employer-employee relationship
between TWS and Sevilla?
HELD:
YES. There has been no uniform test to determine the
evidence of an employer-employee relation. In general, we
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." However, we have considered,
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, in determining the
existence of an employer-employee relationship. The records
will show that the petitioner, Lina Sevilla, was not subject to
control by the private respondent Tourist World Service, Inc.,
either as to the result of the enterprise or as to the means
used. She even made herself solidarily liable in paying rentals
that an ordinary employee will not do.
The relationship here was a principal-agent but this does not
mean that TWS may revoke this anytime. it is one coupled with
an interest, the agency having been created for mutual
interest, of the agent and the principal. We rule therefore, that
for its unwarranted revocation of the contract of agency, the
private respondent, Tourist World Service, Inc., should be
sentenced to pay moral damages for breach of contract under
Articles 21 & 2219 of the Civil Code. (NICOLE)

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INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs.


NATIONAL LABOR RELATIONS COMMISSION and
MELECIO BASIAO, respondents.
NARVASA, J.:
FACTS
On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter
simply called the Company) and Melecio T. Basiao entered
1
into a contract by which: Basiao was "authorized to solicit
within the Philippines applications for insurance policies and
annuities in accordance with the existing rules and regulations"
of the Company;
The contract also contained, among others, provisions
governing the relations of the parties, i.e. the Agent shall be
free to exercise his own judgment as to time, place and means
of soliciting insurance. Nothing herein contained shall therefore
be construed to create the relationship of employee and
employer between the Agent and the Company. However, the
Agent shall observe and conform to all rules and regulations
which the Company may from time to time prescribe.
Some four years later, in April 1972, the parties entered into
another contract an Agency Manager's Contract and to
implement his end of it Basiao organized an agency or office to
which he gave the name M. Basiao and Associates, while
concurrently fulfilling his commitments under the first contract
2
with the Company.
In May, 1979, the Company terminated the Agency Manager's
Contract. After vainly seeking a reconsideration, Basiao sued
the Company in a civil action and this, he was later to claim,
prompted the latter to terminate also his engagement under the
first contract and to stop payment of his commissions starting
3
April 1, 1980.
Basiao thereafter filed with the then Ministry of Labor a
4
complaint against the Company and its president. Without
contesting the termination of the first contract, the complaint
sought to recover commissions allegedly unpaid thereunder,
plus attorney's fees.

percentages of their sales, any balance of commissions earned


being payable to their legal representatives in the event of
death or registration; (b) required to put up performance bonds;
(c) subject to a set of rules and regulations governing the
performance of their duties under the agreement with the
company and termination of their services for certain causes;
(d) not required to report for work at any time, nor to devote
their time exclusively to working for the company nor to submit
a record of their activities, and who, finally, shouldered their
own selling and transportation expenses.
The respondents limit themselves to pointing out that Basiao's
contract with the Company bound him to observe and conform
to such rules and regulations as the latter might from time to
time prescribe. No showing has been made that any such rules
or regulations were in fact promulgated, much less that any
rules existed or were issued which effectively controlled or
restricted his choice of methods or the methods themselves
of selling insurance. Absent such showing, the Court will not
speculate that any exceptions or qualifications were imposed
on the express provision of the contract leaving Basiao "... free
to exercise his own judgment as to the time, place and means
of soliciting insurance."
The Labor Arbiter's decision makes reference to Basiao's claim
of having been connected with the Company for twenty-five
years. Whatever this is meant to imply, the obvious reply would
be that what is germane here is Basiao's status under the
contract of July 2, 1968, not the length of his relationship with
the Company.
The Court, therefore, rules that under the contract invoked by
him, Basiao was not an employee of the petitioner, but a
commission agent, an independent contractor whose claim for
unpaid commissions should have been litigated in an ordinary
civil action. The Labor Arbiter erred in taking cognizance of,
and adjudicating, said claim, being without jurisdiction to do so,
as did the respondent NLRC in affirming the Arbiter's decision.
This conclusion renders it unnecessary and premature to
consider Basiao's claim for commissions on its merits.
(ROBERT)

The respondents disputed the Ministry's jurisdiction over


Basiao's claim, asserting that he was not the Company's
employee, but an independent contractor and that the
Company had no obligation to him for unpaid commissions
under the terms and conditions of his contract.
ISSUE
Whether Basiao is a company employee or an independent
contractor.
HELD
Yes. In Investment Planning Corporation of the Philippines us.
14
Social Security System a case almost on all fours with the
present one, this Court held that there was no employeremployee relationship between a commission agent and an
investment company, but that the former was an independent
contractor where said agent and others similarly placed were:
(a) paid compensation in the form of commissions based on

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CHAVEZ VS. NLRC


G.R. No. 146530. January 17, 2005

YES. There is an employer-employee relationship between the


respondent company and the petitioner.

FACTS:

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; and (4) the employers power to control the
employees conduct. The most important element is the
employers control of the employees conduct, not only as to
the result of the work to be done, but also as to the means and
methods to accomplish it. All the four elements are present in
this case.

Pedro Chavez was the truck driver of Supreme Packaging,


Inc., a business manufacturing cartons and other packaging
materials for export and distribution. Initially, the petitioner was
paid the sum of P350.00 per trip. This was later adjusted
to P480.00 per trip and, at the time of his alleged dismissal, the
petitioner was receiving P900.00 per trip.
Sometime in 1992, the petitioner expressed to respondent
Alvin Lee, respondent companys plant manager, his (the
petitioners) desire to avail himself of the benefits that the
regular employees were receiving such as overtime pay,
nightshift differential pay, and 13th month pay, among others.
Although he promised to extend these benefits to the
petitioner, respondent Lee failed to actually do so.
On February 20, 1995, the petitioner filed a complaint for
regularization with the Regional Arbitration in San Fernando,
Pampanga. Before the case could be heard, respondent
company terminated the services of the petitioner.
Consequently, on May 25, 1995, the petitioner filed an
amended complaint against the respondents for illegal
dismissal, unfair labor practice and non-payment of overtime
pay, nightshift differential pay, 13th month pay, among others.
The Labor Arbiter rendered decision finding the respondents
guilty of illegal dismissal. The Labor Arbiter declared that the
petitioner was a regular employee of the respondent company
as he was performing a service that was necessary and
desirable to the latters business. Respondent then filed an
appeal with the NLRC. The later ruled affirming the decision of
the labor arbiter. A motion for reconsideration was filed by the
respondent, at this time, NLRC reversed its earlier decision
holding that no employer-employee relationship existed
between the respondent company and the petitioner.Thus,
dismissing the petitioners complaint for illegal dismissal. The
petitioner sought reconsideration but it was denied by the
NLRC. He then filed a petition for certiorari to this court but
was referred to the CA.

First, it was the respondents who engaged the services of the


petitioner without the intervention of a third party. Second,
Wages are defined as remuneration or earnings, however
designated, capable of being expressed in terms of money,
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 service rendered or to be rendered. That the
petitioner was paid on a per trip basis is not significant.
Third, the respondents power to dismiss the petitioner was
inherent in the fact that they engaged the services of the
petitioner as truck driver. Fourth, of the four elements of the
employer-employee relationship, the control test is the most
important. Although the respondents denied that they
exercised control over the manner and methods by which the
petitioner accomplished his work, a careful review of the
records shows that the latter performed his work as truck driver
under the respondents supervision and control.
These circumstances, to the Courts mind, prove that the
respondents exercised control over the means and methods by
which the petitioner accomplished his work as truck driver of
the respondent company.
This established the existence of an employer-employee
relationship between the respondent company and the
petitioner. (SYLVESTER)

The Court of Appeals held that the respondents failed to


discharge their burden to show that the petitioners dismissal
was for a valid and just cause and declaring the respondent
guilty of illegal dismissal and the decision of the Labor Arbiter
was reinstated. A motion for reconsideration was filed by the
respondent, CA made a complete turn around. Consequently,
the CA reinstated the July 10, 1998 Decision of the NLRC
dismissing the petitioners complaint for illegal dismissal.
Hence, the recourse to this court by the petitioner.
ISSUE:
Whether or not there existed an employer-employee
relationship between the respondent company and the
petitioner.
RULING:

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SAN MIGUEL CORPORATION, petitioner


vs.
PROSPERO A. ABALLA, et al
FACTS: Petitioner San Miguel Corporation (SMC) and
Sunflower Multi-Purpose Cooperative (Sunflower) entered into
1
a one-year Contract of Services commencing on January 1,
1993, to be renewed on a month to month basis until
terminated by either party. The pertinent provisions of the
contract read:
1. The cooperative agrees and undertakes to perform and/or
provide for the company, on a non-exclusive basis for a period
of one year the following services for the Bacolod Shrimp
Processing Plant: A. Messengerial/Janitorial; B. Shrimp
2
Harvesting/Receiving; C. Sanitation/Washing/Cold Storage
2 the cooperative shall employ the necessary personnel and
provide adequate equipment, materials, tools and apparatus,
to efficiently, fully and speedily accomplish the work and
services undertaken by the cooperative. xxx
3. x x x The cooperative shall have the entire charge, control
and supervision of the work and services herein agreed upon.
xxx
4. There is no employer-employee relationship between the
company and the cooperative, or the cooperative and any of its
members, or the company and any members of the
cooperative. x x x
8. The cooperative undertakes to pay the wages or salaries of
its member-workers x x x
Pursuant to the contract, Sunflower engaged private
respondents to, as they did, render services at SMCs Bacolod
Shrimp Processing Plant at Sta. Fe, Bacolod City. The contract
was deemed renewed by the parties every month after its
expiration on January 1, 1994 and private respondents
continued to perform their tasks until September 11, 1995.
In July 1995, private respondents filed a complaint before the
NLRC, Regional Arbitration Branch No. VI, Bacolod City,
praying to be declared as regular employees of SMC, with
claims for recovery of all benefits and privileges enjoyed by
SMC rank and file employees.
Private respondents subsequently filed on September 25, 1995
4
an Amended Complaint to include illegal dismissal as
additional cause of action following SMCs closure of its
5
Bacolod Shrimp Processing Plant on September 15, 1995
which resulted in the termination of their services.
Labor Arbiter Drilon dismissed private respondents complaint
for lack of merit.
Private respondents appealed to the NLRC.
By Decision of December 29, 1998, the NLRC dismissed the
appeal for lack of merit, it finding that third party respondent
Sunflower was an independent contractor in light of its
observation that "[i]n all the activities of private respondents,
they were under the actual direction, control and supervision of
third party respondent Sunflower, as well as the payment of
wages, and power of dismissal."
Private respondents filed a petition for certiorari before the
Court of Appeals. The CA reversed the NLRC decision and
accordingly found for private respondents.
ISSUE: Whether or not employer-employee relationship exists
between SMC and private respondents.

HELD: Yes, there exists an employer-employee relationship


between SMC and respondents. The Contract of Services
between SMC and Sunflower shows that the parties clearly
disavowed the existence of an employer-employee relationship
between SMC and private respondents. The language of a
contract is not, however, determinative of the parties
relationship; rather it is the totality of the facts and surrounding
circumstances of the case. A party cannot dictate, by the mere
expedient of a unilateral declaration in a contract, the character
of its business, i.e., whether as labor-only contractor or job
contractor, it being crucial that its character be measured in
terms of and determined by the criteria set by statute.
SMC argues that Sunflower could not have been issued a
certificate of registration as a cooperative if it had no
54
substantial capital.
While indeed Sunflower was issued Certificate of Registration
55
No. IL0-875 on February 10, 1992 by the Cooperative
Development Authority, this merely shows that it had at least
P2,000.00 in paid-up share capital as mandated by Section 5
56
of Article 14 of Republic Act No. 6938, otherwise known as
the Cooperative Code, which amount cannot be considered
substantial capitalization.
What appears is that Sunflower does not have substantial
capitalization or investment in the form of tools, equipment,
machineries, work premises and other materials to qualify it as
an independent contractor.
On the other hand, it is gathered that the lot, building,
machineries and all other working tools utilized by private
respondents in carrying out their tasks were owned and
provided by SMC.
And from the job description provided by SMC itself, the work
assigned to private respondents was directly related to the
aquaculture operations of SMC. Undoubtedly, the nature of the
work performed by private respondents in shrimp harvesting,
receiving and packing formed an integral part of the shrimp
processing operations of SMC. As for janitorial and
messengerial services, that they are considered directly related
58
to the principal business of the employer has been
jurisprudentially recognized.
Furthermore, Sunflower did not carry on an independent
business or undertake the performance of its service contract
according to its own manner and method, free from the control
and supervision of its principal, SMC, its apparent role having
been merely to recruit persons to work for SMC.
Thus, it is gathered from the evidence adduced by private
respondents before the labor arbiter that their daily time
59
records were signed by SMC supervisors. And control of the
premises in which private respondents worked was by SMC.
These tend to disprove the independence of the contractor.
More, Private respondents had been working in the aqua
processing plant inside the SMC compound alongside regular
SMC shrimp processing workers performing identical jobs
under the same SMC supervisors. This circumstance is
another indicium of the existence of a labor-only
contractorship.
All the foregoing considerations affirm by more than substantial
evidence the existence of an employer-employee relationship
between SMC and private respondents.

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Since private respondents who were engaged in shrimp


processing performed tasks usually necessary or desirable in
the aquaculture business of SMC, they should be deemed
66
regular employees of the latter and as such are entitled to all
67
the benefits and rights appurtenant to regular employment.
They should thus be awarded differential pay corresponding to
the difference between the wages and benefits given them and
those accorded SMCs other regular employees.
Those performing janitorial and messengerial services
however acquired regular status only after rendering one-year
service pursuant to Article 280 of the Labor Code.

LOPEZ VS. MWSS


G.R. No. 154472. June 30, 2005

The law of course provides for two kinds of regular employees,


namely: (1) those who are engaged to perform activities which
are usually necessary or desirable in the usual business or
trade of the employer; and (2) those who have rendered at
least one year of service, whether continuous or broken, with
respect to the activity in which they are employed.

In 1997, MWSS entered into a Concession Agreement with


Manila Water Service, Inc. and Benpress-Lyonnaise, wherein
the collection of bills was transferred to said private
concessionaires, effectively terminating the contracts of service
between petitioners and MWSS. Regular employees of the
MWSS, except those who had retired or opted to remain with
the latter, were absorbed by the concessionaires. Regular
employees of the MWSS were paid their retirement benefits,
but not petitioners.

As for those of private respondents who were engaged in


janitorial and messengerial tasks, they fall under the second
category and are thus entitled to differential pay and benefits
extended to other SMC regular employees from the day
immediately following their first year of service.
WHEREFORE, the petition is DENIED. The assailed Decision
dated February 7, 2001 and Resolution dated July 11, 2001 of
the Court of Appeals are AFFIRMED with MODIFICATION.
Petitioner San Miguel Corporation and Sunflower MultiPurpose Cooperative are hereby ORDERED to jointly and
severally pay each private respondent differential pay from the
time they became regular employees up to the date of their
termination; separation pay equivalent to at least one (1)
month pay or to at least one-half month pay for every year of
service, whichever is higher, as mandated by Article 283 of the
Labor Code or the separation pay awarded by SMC to other
regular SMC employees that were terminated as a result of the
retrenchment, depending on which is most beneficial to private
respondents; and ten percent (10%) attorneys fees based on
the herein modified award.
Petitioner San Miguel Corporation is further ORDERED to pay
each private respondent the amount of P50,000.00,
representing nominal damages for non-compliance with
statutory due process.
The award of backwages is DELETED.
SO ORDERED. (CLAU)

FACTS:
Petitioners were engaged by the Metropolitan Waterworks and
Sewerage System (MWSS) as collectors-contractors, wherein
the former agreed to collect from the concessionaires of
MWSS, charges, fees, assessments of rents for water, sewer
and/or plumbing services which the MWSS bills from time to
time.

Petitioners filed a complaint with the CSC but was denied


including the petitioners claim for retirement benefits and
terminal leave pay were likewise denied. Petitioner sought
reconsideration but was also denied. Discontented with the
decision of the CSC, the petitioners filed a petition for review
with the Court of Appeals. The latter affirmed the ruling of the
CSC and ruled that Agreement entered into by petitioners and
MWSS was clear and unambiguous, and should be read and
interpreted according to its literal sense.
Petitioners now assert that the Court of Appeals rendered a
decision not in accord with law and applicable jurisprudence.
ISSUE:
Whether or not petitioners were employees of the MWSS and
consequently entitled to the benefits they claim.
RULING:
YES. The herein petitioners were employees of the MWSS.
For purposes of determining the existence of employeremployee relationship, the Court has consistently adhered to
the four-fold test, namely: (1) whether the alleged employer
has the power of selection and engagement of an employee;
(2) whether he has control of the employee with respect to the
means and methods by which work is to be accomplished; (3)
whether he has the power to dismiss; and (4) whether the
employee was paid wages. Of the four, the control test is the
most important element.
A review of the circumstances surrounding the case reveals
that petitioners are employees of MWSS. MWSS wielded its
power of selection when it contracted with the individual
petitioners, undertaking separate contracts or agreements.
The same goes true for the power to dismiss. Although termed
as causes for termination of the Agreement, a review of the
same shows that the grounds indicated therein can similarly be
grounds for termination of employment.

20

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On the issue of remuneration, MWSS claims that the


compensation received by petitioners does not fall under the
definition of wages as provided in Section 2(i) of P.D. 1146,
which is the basic pay or salary received by an employee,
pursuant to his employment appointments, excluding per
diems, bonuses, overtime pay and allowances; thus
petitioners are not its employees. This assertion, however,
simply begs the question. The provision is a simple statement
of meaning, operating on the a priori premise or presumption
that the recipient is already classified as an employee, and
does not lay down any basis or standard for determining who
are employees and who are not. Significantly, MWSS granted
petitioners benefits usually given to employees, to wit: COLA,
meal, emergency, and traveling allowances, hazard pay, cash
gift, and other bonuses.
Now the aspect of control, It is axiomatic that the existence of
an employer-employee relationship cannot be negated by
expressly repudiating it in an agreement and providing therein
that the employee is not an MWSS employee when the terms
of the agreement and the surrounding circumstances show
otherwise. The employment status of a person is defined and
prescribed by law and not by what the parties say it should be.
Although petitioner was not obliged to absorb the private
respondents, by engaging their services, paying their wages in
the form of commission, subjecting them to its rules and
imposing punishment in case of breach thereof, and controlling
not only the end result but the manner of achieving the same
as well, an employment relationship existed between them.
Petitioners are indeed regular employees of the MWSS. The
primary standard of determining regular employment is the
reasonable connection between the particular activity
performed by the employee in relation to the usual business or
trade of the employer. The connection can be determined by
considering the nature of the work performed and its relation to
the scheme of the particular business or trade in its
entirety. The repeated and continuing need for the
performance of the job has been deemed sufficient evidence of
the necessity, if not indispensability of the activity to the
business. (SYLVESTER)

LAZARO V. SSS
FACTS: Private respondent Rosalina M. Laudato (Laudato)
filed a petition before the SSC for social security coverage and
remittance of unpaid monthly social security contributions
against her three (3) employers. Among the respondents was
herein petitioner Angelito L. Lazaro (Lazaro), proprietor of
Royal Star Marketing (Royal Star), which is engaged in the
business of selling home appliances. Laudato alleged that
despite her employment as sales supervisor of the sales
agents for Royal Star from April of 1979 to March of 1986,
Lazaro had failed during the said period, to report her to the
SSC for compulsory coverage or remit Laudatos social
security contributions.
Lazaro denied that Laudato was a sales supervisor of
Royal Star, averring instead that she was a mere sales agent
whom he paid purely on commission basis. Lazaro
also maintained that Laudato was not subjected to definite
hours and conditions of work. As such, Laudato could not be
deemed an employee of Royal Star.
After the parties submitted their respective position papers, the
SSC promulgated a Resolutionruling in favor of
Laudato. Applying the control test, it held that Laudato was
an employee of Royal Star, and ordered Royal Star to pay the
unremitted social security contributions of Laudato.
ISSUE: It is argued that Royal Star had no control over
Laudatos activities, and that under the so-called control test,
Laudato could not be deemed an employee.
HELD: It is an accepted doctrine that for the purposes of
coverage under the Social Security Act, the determination of
employer-employee relationship warrants the application of the
control test, that is, whether the employer controls or has
reserved the right to control the employee, not only as to the
result of the work done, but also as to the means and methods
[14]
by which the same is accomplished.
The SSC, as sustained
by the Court of Appeals, applying the control test found that
Laudato was an employee of Royal Star. We find no reversible
error.
Lazaros arguments are nothing more but a mere
reiteration of arguments unsuccessfully posed before two
bodies: the SSC and the Court of Appeals. They likewise put
to issue factual questions already passed upon twice below,
rather than questions of law appropriate for review under a
Rule 45 petition. The determination of an employer-employee
relationship depends heavily on the particular factual
circumstances attending the professional interaction of the
[15]
parties. The Court is not a trier of facts and accords great
weight to the factual findings of lower courts or agencies
[16]
whose function is to resolve factual matters.
Lazaros arguments may be dispensed with by
applying precedents. Suffice it to say, the fact that Laudato
was paid by way of commission does not preclude the
establishment
of
an
employer-employee
[17]
relationship. In Grepalife v. Judico, the Court upheld the
existence of an employer-employee relationship between the
insurance company and its agents, despite the fact that the
compensation that the agents on commission received was not
paid by the company but by the investor or the person

21

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[18]

insured.
The relevant factor remains, as stated earlier,
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
[19]
same is to be accomplished.
Neither does it follow that a person who does not observe
normal
hours
of
work
cannot
be
deemed
an
employee. In Cosmopolitan
Funeral
Homes,
Inc.
v.
[20]
Maalat, the employer similarly denied the existence of an
employer-employee relationship, as the claimant according to
it, was a supervisor on commission basis who did not
observe normal hours of work. This Court declared that there
was an employer-employee relationship, noting that [the]
supervisor, although compensated on commission basis, [is]
exempt from the observance of normal hours of work for his
compensation is measured by the number of sales he
[21]
makes.
It should also be emphasized that the SSC, also as
upheld by the Court of Appeals, found that Laudato was a
[22]
sales supervisor and not a mere agent.
As such, Laudato
oversaw and supervised the sales agents of the company, and
thus was subject to the control of management as to how she
implements its policies and its end results. We are disinclined
to reverse this finding, in the absence of countervailing
evidence from Lazaro and also in light of the fact that
Laudatos calling cards from Royal Star indicate that she is
indeed a sales supervisor. (FAITH)

EDDIE DOMASIG,Petitioner,
RELATIONS COMMISSION.

vs.

NATIONAL

LABOR

FACTS:
Complainant alleged that he started working with the
respondent on July 6, 1986 as Salesman when the company
was still named Cato Garments Corporation; that three (3)
years ago, because of a complaint against respondent by its
workers, it changed its name to Cata Garments Corporation;
and that on August 29, 1992, he was dismissed when
respondent learned that he was being pirated by a rival
corporation which offer he refused. Prior to his dismissal,
complainant alleged that he was receiving a salary of
P1,500.00 a month plus commission. On September 3, 1992
he filed the instant complaint.
Respondent denied complainants claim that he is a regular
employee contending that he is a mere commission agent who
receives a commission. The Labor Arbiter held that
complainant was illegally dismissed and entitled to
reinstatement and backwages as well as underpayment of
salary; 13th month pay; service incentive leave and legal
holiday. On Appeal, the NLRC found that decision of the Labor
Arbiter not supported by evidence on record.
ISSUE: Whether or not there exists an employer-employee
relationship between private respondents and petitioner.
HELD: It has long been established that in administrative and
quasi-judicial proceedings, substantial evidence is sufficient as
a basis for judgment on the existence of employer-employee
relationship. 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.
In a business establishment, an identification card is usually
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, we agree with the labor
arbiter that these matters constitute substantial evidence
adequate to support a conclusion that petitioner was indeed an
employee of private respondent.
Having been in the employ of private respondents continuously
for more than one year, under the law, petitioner is considered
a regular employee. Proof beyond reasonable doubt is not
required as a basis for judgment on the legality of an
employers dismissal of an employee, nor even preponderance
of evidence for that matter, substantial evidence being
sufficient. Petitioners contention that private respondents
terminated his employment due to their suspicion that he was
being enticed by another firm to work for it was not refuted by
private respondents. The labor arbiters conclusion that
petitioners dismissal is therefore illegal, is not necessarily
arbitrary or erroneous. It is entitled to great weight and respect.
(KICIANG)

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Abante, Jr. v. Lamadrid Bearing & Parts Corp.


GR No. 159890, 28 mar 2004
Ynares-Santiago, J.
Facts:
Petitioner was employed by respondent company Lamadrid as
a salesman earning a commission of 3% of the total paid-up
sales covering Mindanao. Aside from selling merchadise, he
was also tasked to collect payments from his various
customers. Respondent corporation had complete control over
his work because its President frequently directed him to report
to a particular area for his sales & collection activities, &
occasionally required him to go to Manila to attend
conferences. When he was confronted by respondent over
some bad accounts, he was warned that if he did not issued
his own checks to cover said bad accounts, his commissions
will not be released & he will lose his job. Petitioner issued
personal checks in favor of respondent corporation on
condition that the same shall not be deposited for clearing &
that they shall be offset against his periodic commissions. Due
to financial difficulties, petitioner applied for a loan w/ the SSS.
When he learned that he was not covered by the SSS, he
brought the matter to respondent. The latter berated him &
consequently deposited the personal checks which were
dishonored by the drawee bank due to Account Closed.
Petitioner was sent a letter by respondent, demanding that he
make good the dishonored checks. Petitioner wrote back
offering that the amount be charged to the commissions that
he earned as commission salesman. While doing his usual
rounds as commission salesman, petitioner was handed by his
customers a letter from respondent company warning them not
to deal w/ petitioner since it no longer recognized him as a
commission salesman. Petitioner filed a complaint for illegal
dismissal w/ money claims against respondent company & its
president. Respondents countered that petitioner was not its
employee but a freelance salesman on commission basis.

relied on his own resources to perform his functions.


Respondent company did not prescribe the manner of selling
the merchandise; he was left alone to adopt any style or
strategy to entice his customers. While it is true that he
occasionally reported to the Manila office to attend
conferences on marketing strategies, it was intended not to
control the manner and means to be used in reaching the
desired end, but to serve as a guide and to upgrade his skills
for a more efficient marketing performance. As correctly
observed by the appellate court, reports on sales, collection,
competitors, market strategies, price listings and new offers
relayed by petitioner during his conferences to Manila do not
indicate that he was under the control of respondent.
Moreover, petitioner was free to offer his services to other
companies engaged in similar or related marketing activities as
evidenced by the certifications issued by various customers.
Where a person who works for another does so more or less at
his own pleasure and is not subject to definite hours or
conditions of work, and in turn is compensated according to the
result of his efforts and not the amount thereof, no relationship
of employer-employee exists.
Petitioners contention that Art. 280 is a crucial factor in
determining the existence of an employment relationship is
wrong. Said provision merely distinguishes between two kinds
of employees, i.e., regular employees and casual employees,
for purposes of determining their rights to certain benefits, such
as to join or form a union, or to security of tenure. Article 280
does not apply where the existence of an employment
relationship is in dispute. (LORI)

Based on the position papers submitted by the parties, the


Labor Arbiter declared respondents liable to pay petitioner
separation pay, backwages, unpaid commissions, refund of
deductions, damages, & attorneys fees. The NLRC reversed
the decision & dismissed the case for lack of cause of action.
The CA affirmed the NLRC decision. It concluded that there
was no ErEe relationship since the control-test was wanting
in the case.
Issue:
Whether petitioner, as a commission salesman, is an
employee of respondent corporation
Held:
No. Applying the control test, an employer-employee
relationship is notably absent in this case. It is undisputed that
petitioner Abante was a commission salesman who received
3% commission of his gross sales. Yet no quota was imposed
on him by the respondent; such that a dismal performance or
even a dead result will not result in any sanction or provide a
ground for dismissal. He was not required to report to the office
at any time or submit any periodic written report on his sales
performance and activities. Although he had the whole of
Mindanao as his base of operation, he was not designated by
respondent to conduct his sales activities at any particular or
specific place. He pursued his selling activities without
interference or supervision from respondent company and

23

kapisanan ng mga kargador sa pier

INDEPENDENT CONTRACTOR &


LABOR-ONLY CONTRACTOR
ASIAN ALCOHOL CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FOURTH
DIVISION, CEBU CITY and ERNESTO A. CARIAS,
ROBERTO C. MARTINEZ, RAFAEL H. SENDON, CARLOS
A. AMACIO, LEANDRO O. VERAYO and ERENEO S.
TORMO, respondents.
FACTS:
Parsons family, who originally owned the controlling stocks in
Asian Alcohol, sold their majority rights to Prior Holdings, Inc.
(Prior Holdings). The next month, Prior Holdings took over its
management and operation. To thwart losses, they
implemented organizational plan and other cost-saving
measures including termination of 117 employees. The six (6)
private respondents are members of the union whose positions
were abolished due to redundancy. They received individual
notices of termination effective November 30, 1992. They were
paid the equivalent of one month salary for every year of
service as separation pay and all other benefits. However,
respondents filed an illegal dismissal case with the Labor
Arbiter. They alleged that Asian Alcohol used the retrenchment
program as a subterfuge for union busting. They claimed that
they were singled out for separation by reason of their active
participation in the union. They also asseverated that Asian
Alcohol was not bankrupt as it has engaged in an aggressive
scheme of contractual hiring. The Arbiter dismissed the case.
Appealed to NLRC, it reversed the decision of the Arbiter.
Therefore, Asian Alcohol appealed.
ISSUE:
Whether or not private respondents were illegally dismissed?
HELD:
NO. The right of management to dismiss workers during
periods of business recession and to install labor saving
devices to prevent losses is governed by Art. 283 of the labor
Code. Redundancy exists when the service capability of the
work force is in excess of what is reasonably needed to meet
the demands on the enterprise. Retrenchment and redundancy
are just causes for the employer to terminate the services of
workers to preserve the viability of the business. In exercising
its right, however, management must faithfully comply with the
substantive and procedural requirements laid down law and
jurisprudence.
It should be observed that Article 283 of the Labor Code uses
the phrase "retrenchment to prevent losses". In its ordinary
connotation, this phrase means that retrenchment must be
undertaken by the employer before losses are actually
sustained. We have, however, interpreted the law to mean that
the employer need not keep all his employees until after his
losses shall have materialized. Otherwise, the law could be
vulnerable of attack as undue taking of property for the benefit
of another. (NICOLE)

(This case is quiet long and entails various topics that might be
helpful in understanding various labor concepts. I suggest that
this case be read in full text, most especially the discussion on
SC's ruling.)
MANILA ELECTRIC COMPANY, petitioner, vs. THE
HONORABLE SECRETARY OF LABOR LEONARDO
QUISUMBING AND MERALCO EMPLOYEES AND
WORKERS ASSOCIATION (MEWA), respondents.
MARTINEZ, J.:
Facts:
MEWA is the duly recognized labor organization of the rankand-file employees of MERALCO.
On September 7, 1995, MEWA informed MERALCO of its
intention to re-negotiate the terms and conditions of their
existing 1992-1997 Collective Bargaining Agreement (CBA)
covering the remaining period of two years starting from
December 1, 1995 to November 30, 1997. MERALCO signified
its willingness to re-negotiate through its letter dated October
17, 1995[2] and formed a CBA negotiating panel for the
purpose. Thereafter, collective bargaining negotiations
proceeded. However, despite the series of meetings between
the negotiating panels of MERALCO and MEWA, the parties
failed to arrive at terms and conditions acceptable to both of
them.
On April 23, 1996, MEWA filed a Notice of Strike with the
National Capital Region Branch of the National Conciliation
and Mediation Board (NCMB) of the Department of Labor and
Employment (DOLE) on the grounds of bargaining deadlock
and unfair labor practices. Faced with the imminence of a
strike, MERALCO on May 2, 1996, filed an Urgent Petition with
the Department of Labor and Employment praying that the
Secretary assume jurisdiction over the labor dispute and to
enjoin the striking employees to go back to work.
The Labor Secretary granted the petition and assumed
jurisdiction over the labor case.
Dissatisfied with the decision, petitioner filed this petition
contending that the Secretary of Labor gravely abused his
discretion:
1). . . in awarding wage increases of P2,200.00 for 1996 and
P2,200.00 for 1997;
2) . . . in awarding the following economic benefits:
a.
Two months Christmas bonus;
b.
Rice Subsidy and retirement benefits for retirees;
c.
Loan for the employees cooperative;
d.
Social benefits such as GHSIP and HMP for
dependents, employees cooperative and housing equity
assistance loan;
e.
Signing bonus;
f.
Integration of the Red Circle Rate Allowance
g.
Sick leave reserve of 15 days
h.
The 40-day union leave;
i.
High pole/high voltage and towing allowance;
and
j.
Benefits for collectors

24

kapisanan ng mga kargador sa pier

3) . . . in expanding the scope of the bargaining unit to all


regular rank and file employees hired by the company in all its
offices and operating centers and those it may employ by
reason of expansion, reorganization or as a result of
operational exigencies;
4) . . . in ordering for a closed shop when his original order for
a maintenance of membership arrangement was not
questioned by the parties;

to substantiate. In fact, as against the unions unsubstantiated


Yuletide consumption claim, MERALCO adduced evidence in
the form of historical consumption data showing that a lengthy
consumption does not tend to rise during the Christmas
period.[24] Additionally, the All-Asia Capital Report was
nothing more than a newspaper report that did not show any
specific breakdown or computations. While the union claimed
that its cited figure is based on MERALCOs 10-year income
stream,[25] no data or computation of this 10-year stream
appear in the record.

5) . . . in ordering that Meralco should consult the union before


any contracting out for more than six months;
6) . . . in decreeing that the union be allowed to have
representation in policy and decision making into matters
affecting personnel welfare, rights and benefits as well as
duties;
7) . . . in ruling for the inclusion of all terms and conditions of
employment in the collective bargaining agreement;
8) . . . in exercising discretion in determining the retroactivity of
the CBA;
The union disputes the allegation of MERALCO that the
Secretary abused his discretion in issuing the assailed orders
arguing that he acted within the scope of the powers granted
him by law and by the Constitution.
Issue:
WON Sec of Labor decided the case brought before him with
grave abuse of discretion
Held:
In this case we believe that the more appropriate and available
standard - and one does not require a constitutional
interpretation - is simply the standard of reasonableness. In
laymans terms, reasonableness implies the absence of
arbitrariness;[16] in legal parlance, this translates into the
exercise of proper discretion and to the observance of due
process.

Both parties extensely discussed the factors that the decision


maker should consider in making a wage award. To our mind,
the best way in approaching this task holistically is to consider
the available objective facts, including, where applicable,
factors such as the bargaining history of the company, the
trends and amounts of arbitrated and agreed wage awards and
the companys previous CBAs, and industry trends in general.
As a rule, affordability or capacity to pay should be taken into
account but cannot be the sole yardstick in determining the
wage award, especially in a public utility like MERALCO. In
considering a public utility, the decision maker must always
take into account the public interest aspects of the case;
MERALCOs income and the amount of money available for
operating expenses - including labor costs - are subject to
State regulation. We must also keep in mind that high
operating costs will certainly and eventually be passed on to
the consuming public as MERALCO has bluntly warned in its
pleadings.
After considering the various factors the parties cited, we
believe that the interests of both labor and management are
best served by a wage increase of P1,900.00 per month for the
first year and another P1,900.00 per month for the second year
of the two-year CBA term. Our reason for this is that these
increases sufficiently protects the interest of the worker as they
are roughly 15% of the monthly average salary of
P11,600.00.[26] They likewise sufficiently consider the
employers costs and its overall wage structure, while at the
same time, being within the range that will not disrupt the wage
trends in Philippine industries. (ROBERT)

We find, based on our consideration of the parties positions


and the evidence on record, that the Secretary of Labor
disregarded and misappreciated evidence, particularly with
respect to the wage award. The Secretary of Labor apparently
also acted arbitrarily and even whimsically in considering a
number of legal points; even the Solicitor General himself
considered that the Secretary gravely abused his discretion on
at least three major points: (a) on the signing bonus issue; (b)
on the inclusion of confidential employees in the rank and file
bargaining unit, and (c) in mandating a union security closedshop regime in the bargaining unit.
We find after considering the records that the Secretary
gravely abused his discretion in making this wage award
because he disregarded evidence on record. Where he
considered MERALCOs evidence at all, he apparently
misappreciated this evidence in favor of claims that do not
have evidentiary support. To our mind, the MERALCO
projection had every reason to be reliable because it was
based on actual and undisputed figures for the first six months
of 1996.[23] On the other hand, the union projection was based
on a speculation of Yuletide consumption that the union failed

25

kapisanan ng mga kargador sa pier

PHILIPPINE AIRLINES vs. LIGAN


Facts: Petitioner Philippine Airlines (PAL) and Synergy
Services Corporation (Synergy) entered into an Agreement
whereby Synergy undertook to "provide loading, unloading,
delivery of baggage and cargo and other related services to
and from petitioner's aircraft. The agreement specified a
scope of services including the stipulation that the contractor
shall furnish all the necessary capital, workers, materials,
facilities, supplies, equipment and tools. It expressly provided
that Synergy was "an independent contractor and that there
would be no employer-employee relationship between the
contractor and/or its employees on one hand, and owner, on
the other.

on one hand, and petitioner on the other" is not legally binding


and conclusive as contractual provisions are not valid
determinants of the existence of such relationship, for it is the
totality of the facts and surrounding circumstances of the case
which is determinative of the parties' relationship.
The control test element echoes the prevailing jurisprudential
trend elevating such element as a primary determinant of
employer-employee relationship in job contracting agreements.
(DEUS)

Respondents assigned by Synergy to petitioner filed


complaints against petitioner for underpayment, non-payment
of premium pay for holidays, premium pay for rest days,
service incentive leave pay, 13th month pay and allowances,
and for regularization of employment status with petitioner,
they claiming to be "performing duties for the benefit of
petitioner since their job is directly connected with its
business." The labor arbiter found Synergy an independent
contractor and dismissed respondents complaints but granted
their money claims.
On appeal by respondents to the NLRC, the decision was
vacated and set aside, declaring that respondent Synergy is a
labor-only contractor and ordering PAL to accept, as its regular
employees, all the complainants, and to give each of them the
salaries, allowances and other employment benefits and
privileges of a regular employee. Thus, this present petition.
Issue: WON Synergy is a job-only contractor or a legitimate
contractor.
Ruling: Synergy is a job-only contractor.
For labor-only contracting to exist, any of the two elements
should be present:
(1) 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
(2) The contractor does not exercise the right to control over
the performance of the work of the contractual employee.
Even if only one of the two elements is present then, there is
labor-only contracting.
It is gathered that the work performed by almost all of the
respondents is directly related to the main business of
petitioner and the equipment used by respondents are owned
by petitioner. While petitioner steadfastly asserted before the
Labor Arbiter and the NLRC that Synergy has a substantial
capital to engage in legitimate contracting, it failed to present
evidence thereon. More significantly, however, is that
respondents worked alongside petitioner's regular employees
who were performing identical work.
The express provision in the Agreement that Synergy was an
independent contractor and there would be "no employeremployee relationship between Synergy and/or its employees

26

kapisanan ng mga kargador sa pier

JEROMIE D. ESCASINAS and EVAN RIGOR


SINGCO, Petitioners,
vs.
SHANGRI-LA'S MACTAN ISLAND RESORT and DR.
JESSICA J.R. PEPITO, Respondents.
FACTS: Registered nurses Jeromie D. Escasinas and Evan
Rigor Singco (petitioners) were engaged in 1999 and 1996,
respectively, by Dr. Jessica Joyce R. Pepito (respondent
doctor) to work in her clinic at respondent Shangri-las Mactan
Island Resort (Shangri-la) in Cebu of which she was a retained
physician.
In late 2002, petitioners filed with the National Labor Relations
Commission (NLRC) Regional Arbitration Branch No. VII
1
(NLRC-RAB No. VII) a complaint for regularization,
underpayment of wages, non-payment of holiday pay, night
shift differential and 13th month pay differential against
respondents, claiming that they are regular employees of
Shangri-la. The case was docketed as RAB Case No. 07-112089-02.
Shangri-la claimed, however, that petitioners were not its
employees but of respondent doctor whom it retained via
2
Memorandum of Agreement (MOA) pursuant to Article 157 of
the Labor Code, as amended.
Respondent doctor for her part claimed that petitioners were
already working for the previous retained physicians of
Shangri-la before she was retained by Shangri-la; and that she
maintained petitioners services upon their request.
3

By Decision of May 6, 2003, Labor Arbiter Ernesto F. Carreon


declared petitioners to be regular employees of Shangri-la. The
Arbiter thus ordered Shangri-la to grant them the wages and
benefits due them as regular employees from the time their
services were engaged.
Shangri-la and respondent doctor appealed to the NLRC. the
NLRC granted Shangri-las and respondent doctors appeal
and dismissed petitioners complaint for lack of merit, it finding
that no employer-employee relationship exists between
petitioner and Shangri-la.
Petitioners thereupon brought the case to the Court of Appeals
5
which, by Decision of May 22, 2007, affirmed the NLRC
Decision that no employer-employee relationship exists
between Shangri-la and petitioners. The appellate court
concluded that all aspects of the employment of petitioners
being under the supervision and control of respondent doctor
and since Shangri-la is not principally engaged in the business
of providing medical or healthcare services, petitioners could
not be regarded as regular employees of Shangri-la.
ISSUE: Whether respondent doctor can be considered a
legitimate independent contractor
HELD: Yes.
Sec. 8. Job contracting. There is job contracting
permissible under the Code if the following conditions are met:

(1) The contractor carries on an independent


business and undertakes the contract work on his
own account under his own responsibility according to
his own manner and method, free from the control
and direction of his employer or principal in all matters
connected with the performance of the work except as
to the results thereof; and
(2) The contractor has substantial capital or
investment in the form of tools, equipment,
machineries, work premises, and other materials
which are necessary in the conduct of his business.
Sec. 9. Labor-only contracting. (a) Any person who
undertakes to supply workers to an employer shall be deemed
to be engaged in labor-only contracting where such person:
(1) Does not have substantial capital or
investment in the form of tools,
equipment, machineries, work premises
and other materials; and
(2) The workers recruited and placed by
such persons are performing activities
which are directly related to the principal
business or operations of the employer in
which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby
prohibited and the person acting as contractor shall
be considered merely as an agent or intermediary of
the employer who shall be responsible to the workers
in the same manner and extent as if the latter were
directly employed by him.
(c) For cases not falling under this Article, the
Secretary of Labor shall determine through
appropriate orders whether or not the contracting out
of labor is permissible in the light of the circumstances
of each case and after considering the operating
needs of the employer and the rights of the workers
involved. In such case, he may prescribe conditions
and restrictions to insure the protection and welfare of
the workers. (Emphasis supplied)
The existence of an independent and permissible contractor
relationship is generally established by considering the
following determinants: whether the contractor is carrying on
an independent business; the nature and extent of the work;
the skill required; the term and duration of the relationship; the
right to assign the performance of a specified piece of work;
the control and supervision of the work to another; the
employer's power with respect to the hiring, firing and payment
of the contractor's workers; the control of the premises; the
duty to supply the premises, tools, appliances, materials and
11
labor; and the mode, manner and terms of payment.
On the other hand, existence of an employer- employee
relationship is established by the presence of the following
determinants: (1) the selection and engagement of the
workers; (2) power of dismissal; (3) the payment of wages by

27

kapisanan ng mga kargador sa pier

whatever means; and (4) the power to control the worker's


conduct, with the latter assuming primacy in the overall
12
consideration.
Against the above-listed determinants, the Court holds that
respondent doctor is a legitimate independent contractor.
That Shangri-la provides the clinic premises and medical
supplies for use of its employees and guests does not
necessarily prove that respondent doctor lacks substantial
capital and investment. Besides, the maintenance of a clinic
and provision of medical services to its employees is required
under Art. 157, which are not directly related to Shangri-las
principal business operation of hotels and restaurants.
As to payment of wages, respondent doctor is the one who
underwrites the following: salaries, SSS contributions and
13
other benefits of the staff ; group life, group personal accident
14
insurance and life/death insurance for the staff with minimum
benefit payable at 12 times the employees last drawn salary,
as well as value added taxes and withholding taxes, sourced
from her P60,000.00 monthly retainer fee and 70% share of
the service charges from Shangri-las guests who avail of the
clinic services. It is unlikely that respondent doctor would report
petitioners as workers, pay their SSS premium as well as their
15
wages if they were not indeed her employees.
With respect to the supervision and control of the nurses and
clinic staff, it is not disputed that a document, "Clinic Policies
16
and Employee Manual" claimed to have been prepared by
respondent doctor exists, to which petitioners gave their
17
conformity and in which they acknowledged their co-terminus
employment status. It is thus presumed that said document,
and not the employee manual being followed by Shangri-las
regular workers, governs how they perform their respective
tasks and responsibilities.
As Shangri-la does not control how the work should be
performed by petitioners, it is not petitioners employer.
WHEREFORE, the petition is hereby DENIED. The Decision of
the Court of Appeals dated May 22, 2007 and the Resolution
dated July 10, 2007 are AFFIRMED. (CLAU)

COCA-COLA vs. DELA CRUZ


Facts: Respondents, route helpers assigned to work in
petitioner Coca-Cola Bottlers trucks, filed a consolidated suit
against the latter. Respondents state that they were hired
either by the petitioner or by its contractors, but they do not
enjoy the full remuneration, benefits and privileges granted to
the petitioners regular sales force. They argued that the
services they render are necessary and desirable in the regular
business of the petitioner and that the petitioners contracts of
services with Peerless and Excellent are in the nature of
"labor-only" contracts prohibited by law.
In defense, the petitioner contended that it entered into
contracts of services with Peerless and Excellent to provide
allied services. Under these contracts, Peerless and Excellent
retained the right to select, hire, dismiss, supervise, control and
discipline and pay the salaries of all personnel they assign to
the petitioner. Petitioner posited that there is no employeremployee relationship between the company and the
respondents and belied the respondents submission that their
jobs are usually necessary and desirable in its main business
as a softdrinks manufacturer and the respondents tasks of
handling, loading and unloading of the manufactured softdrinks
are not part of the manufacturing process.
Issue: WON Excellent and Peerless are independent
contractors or labor-only contractors.
Ruling: Excellent and Peerless are labor-only contractors.
There is "labor-only" contracting where the person supplying
workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed
by such persons are performing activities which are directly
related to the principal business of such employer. In such
cases, the person or intermediary shall be considered merely
as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the alter were
directly employed by him
On the matter of labor-only contracting, DO 18-02, Section 5,
implemented by DOLE, provides:
Prohibition against labor-only contracting. - Labor-only
contracting is hereby declared prohibited x x x labor-only
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 sufficient
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 contract between the principal and the contractor is not the
final word on how the contracted workers relate to the principal
and the purported contractor; the relationships must be tested
on the basis of how they actually operate.

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kapisanan ng mga kargador sa pier

Excellent and Peerless were not independently selling and


distributing company products, using their own equipment,
means and methods of selling and distribution; they only
supplied the manpower that helped the company in the
handing of products for sale and distribution. Respondents who
served as route helpers were really engaged in functions
directly related to the overall business of the petitioner. They
were under the companys supervision and control since sales
and distribution were in fact not the purported contractors
independent, discrete and separable activities, but were
component parts of sales and distribution operations that the
company controlled in its softdrinks business.
Peerless and Excellent were mere suppliers of labor who had
no sufficient capitalization and equipment to undertake sales
and distribution of softdrinks as independent activities separate
from the manufacture of softdrinks, and who had no control
and supervision over the contracted personnel. They are
therefore labor-only contractors. Consequently, the contracted
personnel, engaged in component functions in the main
business of the company under the latters supervision and
control, cannot but be regular company employees. In these
lights, the petition is totally without merit and hence must be
denied. (DEUS)

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION,
GODOFREDO MORILLO, JR., SUNDAY BACEA, ALFREDO
COS and ROGELIO VILLANUEVA, respondents.
FACTS: Private respondents Godofredo Morillo, Sunday
Bacea, Alfredo Cos and Rogelio Villanueva were hired as
security guards by Confidential Investigation and Security
Corporation ("CISCOR"). They were assigned to secure the
premises of Development Bank of the Philippines ("DBP")Riverside Mills Corporation.
Respondents resigned from CISCOR and claimed the return of
their cash bond and payment of their 13th month pay and
service incentive leave pay, but CISCOR failed to pay.
CISCOR claimed that it incurred losses when respondents
secured the premises of Riverside Mills Corporation. Hence,
they were asked to first secure an individual/agency clearance
from petitioner to show that no losses were incurred while they
were guarding Riverside Mills Corporation.
Instead of getting such clearance from the petitioner, private
respondents secured their clearance from CISCORs
detachment commander. Hence, for failure to secure the
required clearance, private respondents cash bond deposit,
their proportionate 13th month pay and service incentive leave
pay were withheld to answer for liabilities incurred while private
respondents were guarding Riverside Mills Corporation.
CISCOR filed a motion with leave to implead petitioner bank
and averred therein that in view of its contract with the
petitioner whereby, for a certain service fee, CISCOR
undertook to guard petitioners premises, both CISCOR and
petitioner, under the Labor Code, are jointly and severally
liable to pay the salaries and other statutory benefits due the
private respondents, petitioner being an indispensable party to
the case. Respondents filed their opposition and alleged,
among others, that petitioner, not being an employer of the
private respondents, was not a proper, necessary or
indispensable party to the case.
ISSUE: Whether or not the DBP is really liable for any of the
claims of private respondents
HELD: Petitioners interpretation of Article 106 of the Labor
Code is quite misplaced. Nothing in said Article 106 indicates
that insolvency or unwillingness to pay by the contractor or
direct employer is a prerequisite for the joint and several
liability of the principal or indirect employer. In fact, the rule is
that in job contracting, the principal is jointly and severally
liable with the contractor. The statutory basis for this joint and
5
6
several liability is set forth in Articles 107 and 109 in relation
7
to Article 106 of the Labor Code. There is no doubt that
private respondents are entitled to the cash benefits due them.
The petitioner is also, no doubt, liable to pay such benefits
because the law mandates the joint and several liability of the
principal and the contractor for the protection of labor. In Eagle
Security Agency, Inc. vs. NLRC, this Court, explaining the
aforesaid liability, held:

29

kapisanan ng mga kargador sa pier

This joint and several liability of the


contractor and the principal is mandated by
the Labor Code to assure compliance of the
provisions therein including the statutory
minimum wage [Article 99, Labor Code]. The
contractor is made liable by virtue of his
status as direct employer. The principal, on
the other hand, is made the indirect
employer of the contractors employees for
purposes of paying the employees their
wages should the contractor be unable to
pay them. This joint and several liability
facilitates, if not guarantees, payment of the
workers performance of any work, task, job
or project, thus giving the workers ample
protection as mandated by the 1987
Constitution [See Article II Sec. 18 and
Article XIII Sec. 3]. (FAITH)

UNITED SPECIAL WATCHMAN AGENCY vs CA


FACTS: The Contract for Security Services[1]entered into
between USWA and Banco Filipino Savings and Mortgage
Bank (BF) took effect on 1 June 1994. However, on 3 June
1994, or two (2) days later, BF terminated the contract. The
termination letter dated 3 June 1994, but received on June 17,
advised USWA of the termination to take effect 30 days from
receipt thereof.
USWA alleged that, upon receipt of the letter, Mr. Angel
Baliwag, its Operations Manager, immediately notified all the
affected employees stationed at the BF branches about the
termination of their contract. He advised them to report to the
office for reassignment. Only thirty (30) out of the sixty-seven
(67) guards reported and they were given new assignments.
Out of the remaining thirty-seven (37), twenty-one (21) filed, on
4 August 1994, a complaint for illegal dismissal and payment of
money claims against USWA and BF with the Regional
Arbitration Branch of the National Labor Relations Commission
(NLRC). On 29 August 1994, the complaint was amended to
include all thirty-seven (37) employees. In the course of the
proceedings, five (5) of the thirty-seven employees reported to
the office and were given new posts.[4]
The Labor Arbiter ordered USWA to pay the employees
separation pay, and both USWA and BF to pay the salary
differential and attorneys fees. On appeal, the NLRC, on 23
July 1998, remanded the case, finding the conclusions on the
issues of illegal dismissal and wage differential by the Arbiter
without sufficient basis. However a compromise settlement
was reached between BF and the employees.[7]The Arbiter
approved the settlement. Aggrieved, the employees filed an
appeal with the NLRC. The NLRC ordered USWA to pay the
employees their separation pay in light of its conclusion that
there was no proof that the employees were notified to report
for reassignment after the termination of the contract.
ISSUE:
HELD: It is fundamental that (f)indings of facts of administrative
bodies charged with their specific field of expertise, are
afforded great weight by the courts, and in the absence of
substantial showing that such findings are made from an
erroneous estimation of the evidence presented, they are
conclusive, and in the interest of stability of the governmental
structure, should not be disturbed.The NLRC, in its decision
established that the respondents were put on a temporary offdetail, which exceeded the allowable period of six (6) months,
amounting to constructive dismissal.There is thus no further
need to dwell on the questions of fact raised in this petition.
Proceeding from the fact that the dismissal of the employees
was illegal and pursuant to a legitimate job contracting, USWA
and BF are jointly and severally liable in the payment of the
wages of the employees, and for violation of any provision of
the Labor Code. We note that a compromise agreement of the
employees was executed between BF and the employees.
However, the compromise agreement dealt only with salary
differential. It did not include nor does it preclude the award of
separation pay. In light of the illegal dismissal of the
respondents, USWA is liable to pay the respondents
separation pay equivalent to one (1) month pay for every year
of service. (KICIANG)

30

kapisanan ng mga kargador sa pier

New Golden City Builders & Development Corp. v. CA


GR No. 154715, 11 Dec 2003
Ynares-Santiago, J.

according to his own methods and without being subject to


the control of the employer, except only to the results of
the work.
This is exactly the situation obtaining in the case at bar.
Nilo Layno Builders hired its own employees, the private
respondents, to do specialized work in the Prince David
Project of the petitioner. The means and methods adopted
by the private respondents were directed by Nilo Layno
Builders except that, from time to time, the engineers of
the petitioner visited the site to check whether the work
was in accord with the plans and specifications of the
principal. As admitted by Nilo G. Layno, he undertook the
contract work on his own account and responsibility, free
from interference from any other persons, except as to the
results; that he was the one paying the salaries of private
respondents; and that as employer of the private
respondents, he had the power to terminate or dismiss
them for just and valid cause. Indubitably, the Court finds
that Nilo Layno Builders maintained effective supervision
and control over the private complainants.

Facts:
Petitioner, a corporation engaged in the construction business,
entered into a construction contract w/ Prince David Devt
Corp. It engaged the services of Nilo Layno Builders to do the
specialized concrete works. Pursuant to the contract Nilo
Layno Builders hired private respondents to perform work at
the project. After completion of the phase for which NLB was
contracted, private respondents filed a complaint against
petitioner & its president for unfair labor practice, nonpayment
th
of 13 month pay, illegal dismissal, & severance pay in lieu of
reinstatement. The Labor Arbiter found that NLB was a laboronly contractor; thus, private respondents were deemed
employees of the petitioner. It ordered petitioner to provide
work for private respondents or pay separation pay. The
monetary claims of private respondents were dismissed for
lack of merit. Both parties appealed to the NLRC w/c held that
private respondents were illegally dismissed & ordered
petitioner to reinstate them & to pay their full backwages. The
petition for certiorari filed by petitioner was denied by the CA.

Thus, it was plain conjecture on the part of the Labor


Arbiter, the NLRC and the Court of Appeals to conclude
that Nilo Layno Builders was a labor-only contractor
merely because it does not have investment in the form of
tools or machineries. They failed to appreciate the fact that
Nilo Layno Builders had substantial capitalization for it did
not only provide labor to do the specified project and pay
their wages, but it furnished the materials to be used in the
construction.

Issue:
1) Whether Nilo Layno Builders was an independent
contractor or a labor-only contractor
2) Whether an ErEe relationship existed between petitioner &
private respondents
Held:
1) Independent contractor. Under Section 8, Rule VIII, Book
III, of the Omnibus Rules Implementing the Labor Code,
an independent contractor is one who undertakes job
contracting, i.e., a person who: (a) carries on an
independent business and undertakes the contract work
on his own account under his own responsibility according
to his own manner and method, free from the control and
direction of his employer or principal in all matters
connected with the performance of the work except as to
the results thereof; and (b) has substantial capital or
investment in the form of tools, equipments, machineries,
work premises, and other materials which are necessary
in the conduct of the business.
Juxtaposing this provision vis--vis the facts of this case,
Nilo Layno Builders is undertaking permissible labor or job
contracting. Nilo Layno Builders is a duly licensed labor
contractor carrying on an independent business for a
specialized work that involves the use of some particular,
unusual and peculiar skills and expertise, like concrete
works, form works and steel rebars works. As a licensed
labor contractor, it complied with the conditions set forth in
Section 5, Rule VII-A, Book III, Rules to Implement the
Labor Code, among others, proof of financial capability
and list of equipment, tools, machineries and implements
to be used in the business. Further, it entered into a
written contract with the petitioner, a requirement under
Section 3, Rule VII-A, Book III, Rules to Implement the
Labor Code to assure the employees of the minimum
labor standards and benefits provided by existing laws.
The test to determine the existence of independent
contractorship is whether one claiming to be an
independent contractor has contracted to do the work

2)

Yes. There existed an employer-employee relationship


between petitioner and private respondents albeit for a
limited purpose.
In legitimate job contracting, the law creates an employeremployee relationship for a limited purpose, i.e., to ensure
that the employees are paid their wages. The principal
employer becomes jointly and severally liable with the job
contractor only for the payment of the employees wages
whenever the contractor fails to pay the same. Other than
that, the principal employer is not responsible for any
claim made by the employees.
From the foregoing disquisition, the petitioner did not, as it
could not, illegally dismissed the private complainants.
Hence, it could not be held liable for backwages and
separation pay. Nevertheless, it is jointly and severally
liable with Nilo Layno Builders for the private
complainants wages, in the same manner and extent that
it is liable to its direct employees.
This liability covers the payment of service incentive leave
th
and 13 month pay of the private complainants during the
time they were working at petitioners Prince David Project.
So long as the work, task, job or project has been
performed for petitioners benefit or on its behalf, the
liability accrues for such period even if, later on, the
employees are eventually transferred or reassigned
elsewhere. (LORI)

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kapisanan ng mga kargador sa pier

PCi Automation v. NLRC


GR No. 115920, Jan 29, 1996
Puno, J.
252 SCRA 493

WILLIAM L. TIU, petitioner, vs. NATIONAL LABOR


RELATIONS COMMISSION and HERMES DELA CRUZ,
respondents.
MENDOZA, J.:

(NICOLE)
Facts:
Petitioner, as operator of the D'Rough Riders Transportation, is
engaged in the transportation of passengers from Cebu City to
the northern towns of Cebu. Private respondent worked in
petitioner's bus terminals as a "dispatcher," assisting and
guiding passengers and carrying their bags.
Petitioner denies that private respondent was his employee.
He alleges that he did not have the power of selection and
dismissal nor the power of control over private respondent.
According to petitioner, private respondent, together with socalled "standbys," hung around his bus terminals, assisting
passengers with their baggages as "dispatchers." Petitioner
alleges that he had no choice but to allow private respondent
and other "standbys" to carry on their activities within the
premises of his bus terminals.2 He also claims he allowed
them to do so even if their services as so-called "dispatchers"
were not needed in his business. Petitioner insists that as
"dispatcher," private respondent worked in his own way,
without supervision by him.
The Labor Arbiter and the NLRC found private respondent to
be an employee of petitioner.
Issue:
Won an employer-employee relationship existed between
petitioner and private respondent
Held:
We agree with the finding that an employer-employee
relationship existed between petitioner and private respondent,
such finding being supported by substantial evidence.
Petitioner has failed to refute the evidence presented by
private respondent. He points to his Chief Dispatcher, Regino
de la Cruz, as the one who exercised the powers of an
employer over the "dispatchers." Petitioner argues that under
an agreement with Regino de la Cruz, it is the latter who
selects and engages the "dispatchers," dictates their time,
supervises the performance of their work, and pays their
wages. He further argues that the "disciplinary memorandum"
issued by him was not addressed to private respondent but to
Regino de la Cruz, as employer of private respondent, to
remind him regarding the discipline of the "dispatchers."
Petitioner's contention is without merit. In determining whether
there is an employer-employee relationship between the
parties the following questions must be considered: (a) who
has the power of selection and engagement of the employee?
(b) who pays the wages of employee? (c) who has the power
of dismissal? and; (d) who has the power to control the
employee's conduct?4 Of these powers the power of control
over the employees' conduct is generally regarded as
determinative of the existence of the relationship.
Indeed the "control test" only requires the existence of the right
to control the manner of doing the work in a person, not
necessarily the actual exercise of the power by him, which he
can delegate. Consequently, in the case at bar, the power is
exercised by Regino de la Cruz but it is power which is only
delegated to him so that in truth the power inherently and

32

kapisanan ng mga kargador sa pier

primarily is possessed by petitioner. De la Cruz is a mere


supervisor, while petitioner is the real employer.
Petitioner does not claim that Regino de la Cruz and his
dispatchers were independent contractors. Even if this be his
contention, however, the argument would still be without merit.
Job contracting is permissible only if the following conditions
are met: (1) the contractor carries on an independent business
and undertakes the contract work on his own account under
his own responsibility according to his own manner and
method, free from the control and direction of his employer or
principal in all matters connected with the performance of the
work except as to the results thereof; and (2) the contractor
has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials
which are necessary in the conduct of his business. In the
absence of these requisites, what exists is a "labor-only"
contract under which the person acting as contractor is
considered merely an agent or intermediary of the employer
who is responsible to the workers in the same manner and to
the same extent as if they had been directly employed by him.9
For this reason, we hold that Regino de la Cruz can, at most,
be considered a "labor-only" contractor and, therefore, a mere
agent of petitioner. As he is acting in behalf of petitioner,
private respondent Hermes de la Cruz is actually the employee
of petitioner. (ROBERT)

GALLEGO vs. BAYER


Facts: Gallego was contracted by Bayer Philippines as crop
protection technician to promote and market Bayer products by
making farm visits to convince the farmers to buy their
products. Petitioners employment came to a halt, prompting
him to seek another employment, but was reemployed by
Product Image which is actually performing the same task as
crop protection technician. Gallego was directed to submit a
resignation letter and was ordered to quit, calling for him to
return all pieces of service equipment, in which he refused. He
continued performing his duties and received compensation.
He received a memorandum that he will be transferred to
Luzon and that he heard that respondents spread rumors that
reached the dealers in Antique that he is no longer connected
with Bayer and any transaction with him will not be honored.
Believing he was terminated, he instituted a complaint before
the NLRC. Respondents Bayer and Guillermo denied the
existence of employment relationship, while respondents
Product Image and Bergonia admitted that the petitioner was
hired as contractual employee and that he has stopped
reporting for work among other things. The Labor Arbiter
declared that respondents were guilty of illegal dismissal. On
appeal by the respondents, the NLRC reversed the Arbiters
decision and contended that petitioner was not dismissed but
has abandoned his employment by failure to report on his
duties. Hence, this petition for review.
Issue: Whether Product Image is a labor-only contractor and
Bayer should be deemed petitioners principal employer.
Ruling: Permissible job contracting or subcontracting refers to
an arrangement whereby a principal agrees to farm out with a
contractor or subcontractor the performance of a specific job,
work, or service within a definite or predetermined period,
regardless of whether such job, work or, service is to be
performed or completed within or outside the premises of the
principal. Under this arrangement, the following conditions
must be met: (a) the contractor carries on a distinct and
independent business and undertakes the contract work on his
account under his own responsibility according to his own
manner and method, free from the control and direction of his
employer or principal in all matters connected with the
performance of his work except as to the results thereof; (b)
the contractor has substantial capital or investment; and (c)
the agreement between the principal and contractor or
subcontractor assures the contractual employees entitlement
to all labor and occupational safety and health standards, free
exercise of the right to self-organization, security of tenure, and
social welfare benefits.
The court finds substantial evidence to support that Product
Image is a legitimate job or independent contractor.
Among the circumstances that establish the status of Product
Image as a legitimate job contractor are: (1) Product Image
had, during the period in question, a contract with Bayer for the
promotion and marketing of Bayer products; and (2) Product
Image has an independent business and provides services
nationwide to big companies such as Ajinomoto Philippines
and Procter and Gamble Corporation. Product Image also
posted a bond to answer for any claim of its employees for
unpaid wages and other benefits that may arise out of the
implementation of its contract with Bayer.

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kapisanan ng mga kargador sa pier

As to the question of Product Image being the employer of


petitioner, the existence of an employer-employee relationship
is determined on the basis of four standards, namely: (1) the
manner of selection and engagement of the putative employee;
(2) the mode of payment of wages; (3) the presence or
absence of power of dismissal; and (4) the presence or
absence of control of the putative employees conduct. Most
determinative among these factors is the so-called control
test.
If at all, the only control measure retained by Bayer over
petitioner was to act as his de facto supervisor in certifying to
the veracity of the accomplishment reports he submitted to
Product Image. This is by no means the kind of control that
establishes an employer-employee relationship as it pertains
only to the results and not the manner and method of doing the
work. It would be a rare contract of service that gives
untrammelled freedom to the party hired and eschews any
intervention whatsoever in his performance of the engagement.
Surely, it would be foolhardy for any company to completely
give the reins and totally ignore the operations it has
contracted out. In fine, Product Image is ineluctably the
employer of petitioner. (DEUS)

34

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