1 20 Cases FT

1.
Labor application of the doctrine of piercing the veil of corporate fiction

SECOND DIVISION
G.R. No. 177493, March 19, 2014
ERIC GODFREY STANLEY LIVESEY, Petitioner, v. BINSWANGER PHILIPPINES, INC. AND KEITH ELLIOT,
Respondents.
DECISION
BRION, J.:
We resolve this petition for review on certiorari1 assailing the decision2 dated August 18, 2006 and the
resolution3 dated March 29, 2007 of the Court of Appeals (CA) in CAG.R. SP No. 94461.
The Antecedents
In December 2001, petitioner Eric Godfrey Stanley Livesey filed a complaint for illegal dismissal with money
claims4 against CBB Philippines Strategic Property Services, Inc. (CBB) and Paul Dwyer. CBB was a domestic
corporation engaged in real estate brokerage and Dwyer was its President.
Livesey alleged that on April 12, 2001, CBB hired him as Director and Head of Business Space Development,
with a monthly salary of US$5,000.00; shareholdings in CBBs offshore parent company; and other benefits. In
August 2001, he was appointed as Managing Director and his salary was increased to US$16,000.00 a month.
Allegedly, despite the several deals for CBB he drew up, CBB failed to pay him a significant portion of his
salary. For this reason, he was compelled to resign on December 18, 2001. He claimed CBB owed him
US$23,000.00 in unpaid salaries.
CBB denied liability. It alleged that it engaged Livesey as a corporate officer in April 2001: he was elected Vice
President (with a salary of P75,000.00/month), and thereafter, he became President (at P1,200,000.00/year).
It claimed that Livesey was later designated as Managing Director when it became an extension office of its
principal in Hongkong.5
On December 17, 2001, Livesey demanded that CBB pay him US$25,000.00 in unpaid salaries and, at the same
time, tendered his resignation. CBB posited that the labor arbiter (LA) had no jurisdiction as the complaint
involved an intracorporate dispute.
In his decision dated September 20, 2002,6 LA Jaime M. Reyno found that Livesey had been illegally dismissed.
LA Reyno ordered CBB to reinstate Livesey to his former position as Managing Director and to pay him
US$23,000.00 in accrued salaries (from July to December 2001), and US$5,000.00 a month in back salaries
from January 2002 until reinstatement; and 10% of the total award as attorneys fees.
Thereafter, the parties entered into a compromise agreement7 which LA Reyno approved in an order dated
November 6, 2002.8 Under the agreement, Livesey was to receive US$31,000.00 in full satisfaction of LA
Reynos decision, broken down into US$13,000.00 to be paid by CBB to Livesey or his authorized
representative upon the signing of the agreement; US$9,000.00 on or before June 30, 2003; and US$9,000.00
on or before September 30, 2003. Further, the agreement provided that unless and until the agreement is
fully satisfied, CBB shall not: (1) sell, alienate, or otherwise dispose of all or substantially all of its assets or
business; (2) suspend, discontinue, or cease its entire, or a substantial portion of its business operations; (3)
substantially change the nature of its business; and (4) declare bankruptcy or insolvency.
CBB paid Livesey the initial amount of US$13,000.00, but not the next two installments as the company ceased
operations. In reaction, Livesey moved for the issuance of a writ of execution. LA Eduardo G. Magno granted
the writ,9 but it was not enforced. Livesey then filed a motion for the issuance of an alias writ of execution,10
alleging that in the process of serving respondents the writ, he learned that respondents, in a clear and willful
attempt to avoid their liabilities to complainant x x x have organized another corporation, [Binswanger]
Philippines, Inc.11 He claimed that there was evidence showing that CBB and Binswanger Philippines, Inc.
(Binswanger) are one and the same corporation, pointing out that CBB stands for Chesterton Blumenauer
Binswanger.12 Invoking the doctrine of piercing the veil of corporate fiction, Livesey prayed that an alias writ of
execution be issued against respondents Binswanger and Keith Elliot, CBBs former President, and now
Binswangers President and Chief Executive Officer (CEO).
The Compulsory Arbitration Rulings
In an order13 dated March 22, 2004, LA Catalino R. Laderas denied Liveseys motion for an alias writ of
execution, holding that the doctrine of piercing the corporate veil was inapplicable in the case. He explained
that the stockholders of the two corporations were not the same. Further, LA Laderas stressed that LA
Reynos decision had already become final and could no longer be altered or modified to include additional
respondents.
Livesey filed an appeal which the National Labor Relations Commission (NLRC) granted in its decision14 dated
September 7, 2005. It reversed LA Laderas March 22, 2004 order and declared the respondents jointly and
severally liable with CBB for LA Reynos decision15 of September 20, 2002 in favor of Livesey. The respondents
moved for reconsideration, filed by an Atty. Genaro S. Jacosalem,16 not by their counsel of record at the time,
Corporate Counsels Philippines, Law Offices. The NLRC denied the motion in its resolution of January 6, 2006.17
The respondents then sought relief from the CA through a petition for certiorari under Rule 65 of the Rules of
Court.
The respondents charged the NLRC with grave abuse of discretion for holding them liable to Livesey and in
exercising jurisdiction over an intracorporate dispute. They maintained that Binswanger is a separate and
distinct corporation from CBB and that Elliot signed the compromise agreement in CBBs behalf, not in his
personal capacity. It was error for the NLRC, they argued, when it applied the doctrine of piercing the veil of
corporate fiction to the case, despite the absence of clear evidence in that respect.
For his part, Livesey contended that the petition should be dismissed outright for being filed out of time. He
claimed that the respondents counsel of record received a copy of the NLRC resolution denying their motion
for reconsideration as early as January 19, 2006, yet the petition was filed only on May 15, 2006. He insisted
that in any event, there was ample evidence supporting the application of the doctrine of piercing the veil of
corporate fiction to the case.
The CA Decision
The CA granted the petition,18 reversed the NLRC decision19 of September 7, 2005 and reinstated LA Laderas
order20 of March 22, 2004. The CA found untenable Liveseys contention that the petition for certiorari was
filed out of time, stressing that while there was no valid substitution or withdrawal of the respondents former
counsel, the NLRC impliedly recognized Atty. Jacosalem as their new counsel when it resolved the motion for
reconsideration which he filed.
On the merits of the case, the CA disagreed with the NLRC finding that the respondents are jointly and
severally liable with CBB in the case. It emphasized that the mere fact that Binswanger and CBB have the same
President is not in itself sufficient to pierce the veil of corporate fiction of the two entities, and that although
Elliot was formerly CBBs President, this circumstance alone does not make him answerable for CBBs
liabilities, there being no proof that he was motivated by malice or bad faith when he signed the compromise
agreement in CBBs behalf; neither was there proof that Binswanger was formed, or that it was operated, for
the purpose of shielding fraudulent or illegal activities of its officers or stockholders or that the corporate veil
was used to conceal fraud, illegality or inequity at the expense of third persons like Livesey.
Livesey moved for reconsideration, but the CA denied the motion in its resolution dated March 29, 2007.21
Hence, the present petition.
The Petition
Livesey prays for a reversal of the CA rulings on the basis of the following
arguments:chanRoblesvirtualLawlibrary
1. The CA erred in not denying the respondents petition for certiorari dated May 12, 2006 for being filed out
of time.
Livesey assails the CAs reliance on the Courts pronouncement in Rinconada Telephone Co., Inc. v. Hon.
Buenviaje22 to justify its ruling that the receipt on March 17, 2006 by Atty. Jacosalem of the NLRCs denial of
the respondents motion for reconsideration was the reckoning date for the filing of the petition for certiorari,
not the receipt of a copy of the same resolution on January 19, 2006 by the respondents counsel of record,
the Corporate Counsels Philippines, Law Offices. The cited Courts pronouncement
reads:chanRoblesvirtualLawlibrary
In view of respondent judges recognition of Atty. Santos as new counsel for petitioner without even a valid
substitution or withdrawal of petitioners former counsel, said new counsel logically awaited for service to him
of any action taken on his motion for reconsideration. Respondent judges sudden change of posture in
insisting that Atty. Maggay is the counsel of record is, therefore, a whimsical and capricious exercise of
discretion that prevented petitioner and Atty. Santos from taking a timely appeal[.]23
With the above citation, Livesey points out, the CA opined that a copy of the NLRC resolution denying the
respondents motion for reconsideration should have been served on Atty. Jacosalem and no longer on the
counsel of record, so that the sixty (60)day period for the filing of the petition should be reckoned from
March 17, 2006 when Atty. Jacosalem secured a copy of the resolution from the NLRC (the petition was filed
by a Jeffrey Jacosalem on May 15, 2006).24 Livesey submits that the CAs reliance on Rinconada was
misplaced. He argues that notwithstanding the signing by Atty. Jacosalem of the motion for reconsideration, it
was only proper that the NLRC served a copy of the resolution on the Corporate Counsels Philippines, Law
Offices as it was still the respondents counsel at the time.25 He adds that Atty. Jacosalem never participated in
the NLRC proceedings because he did not enter his appearance as the respondents counsel before the labor
agency; further, he did not even indicate his office address on the motion for reconsideration he signed.
2. The CA erred in not applying the doctrine of piercing the veil of corporate fiction to the case.
Livesey bewails the CAs refusal to pierce Binswangers corporate veil in his bid to make the company and
Elliot liable, together with CBB, for the judgment award to him. He insists that CBB and Binswanger are one
and the same corporation as shown by the overwhelming evidence he presented to the LA, the NLRC and
the CA, as follows:chanRoblesvirtualLawlibrary
a. CBB stands for Chesterton Blumenauer Binswanger.26
b. After executing the compromise agreement with him, through Elliot, CBB ceased operations following a
transaction where a substantial amount of CBB shares changed hands. Almost simultaneously with CBBs
closing (in July 2003), Binswanger was established with its headquarters set up beside CBBs office at Unit 501,
5/F Peninsula Court Building in Makati City.27
c. Key CBB officers and employees moved to Binswanger led by Elliot, former CBB President who became
Binswangers President and CEO; Ferdie Catral, former CBB Director and Head of Operations; Evangeline
Agcaoili and Janet Pei.
d. Summons served on Binswanger in an earlier labor case was received by Binswanger using CBBs receiving
stamp.28
e. A Leslie Young received on August 23, 2003 an online query on whether CBB was the same as Blumaneuver
Binswanger (BB). Signing as Web Editor, Binswanger/CBB, Young replied via email:29
We are known as either CBB (Chesterton Blumenauer Binswanger) or as Chesterton Petty Ltd. in the
Philippines. Contact info for our office in Manila is as follows:
Manila Philippines
CBB Philippines
Unit 509, 5th Floor
Peninsula Court, Paseo de Roxas corner
Makati Avenue
1226 Makati City
Philippines
Contact: Keith Elliot
f. In a letter dated August 21, 2003,30 Elliot noted a Binswanger bid solicitation for a project with the Philippine
National Bank (PNB) which was actually a CBB project as shown by a CBB draft proposal to PNB dated January
24, 2003.31
g. The affidavit32 dated October 1, 2003 of Hazel de Guzman, another former CBB employee who also filed an
illegal dismissal case against the company, attested to the existence of Liveseys documentary evidence in his
own case and who deposed that at one time, Elliot told her of CBBs plan to close the corporation and to
organize another for the purpose of evading CBBs liabilities.
h. The findings33 of facts of LA Veneranda C. Guerrero who ruled in De Guzmans favor that bolstered his own
evidence in the present case.
3. The CA erred in not holding Elliot liable for the judgment award.
Livesey questions the CAs reliance on Laperal Development Corporation v. Court of Appeals,34 Sunio, et al. v.
NLRC, et al.,35 and Palay, Inc., et al. v. Clave, etc., et al.,36 in support of its ruling that Elliot is not liable to him
for the LAs award. He argues that in these cases, the Court upheld the separate personalities of the
corporations and their officers/employees because there was no evidence that the individuals sought to be
held liable were in bad faith or that there were badges of fraud in their actions against the aggrieved party or
parties in said cases. He reiterates his submission to the CA that the circumstances of the present case are
different from those of the cited cases. He posits that the closure of CBB and its immediate replacement by
Binswanger could not have been possible without Elliots guiding hand, such that when CBB ceased
operations, Elliot (CBBs President and CEO) moved to Binswanger in the same position. More importantly,
Livesey points out, as signatory for CBB in the compromise agreement between him (Livesey) and CBB, Elliot
knew that it had not been and would never be fully satisfied.
Livesey thus laments Elliots devious scheme of leaving him an unsatisfied award, stressing that Elliot was the
chief orchestrator of CBB and Binswangers fraudulent act of evading the full satisfaction of the compromise
agreement. In this light, he submits that the Courts ruling in A.C. Ransom Labor UnionCCLU v. NLRC,37 which
deals with the issue of who is liable for the workers backwages when a corporation ceases operations, should
apply to his situation.
The Respondents Position
Through their comment38 and memorandum,39 the respondents pray that the petition be denied for the
following reasons:chanRoblesvirtualLawlibrary
1. The NLRC had no jurisdiction over the dispute between Livesey and CBB/Dwyer as it involved an intra
corporate controversy; under Republic Act No. 8799, the Regional Trial Court exercises jurisdiction over the
case.
As shown by the records, Livesey was appointed as CBBs Managing Director during the relevant period and
was also a shareholder, making him a corporate officer.
2. There was no employeremployee relationship between Livesey and Binswanger. Under Article 217 of the
Labor Code, the labor arbiters and the NLRC have jurisdiction only over disputes where there is an employer
employee relationship between the parties.
3. The NLRC erred in applying the doctrine of piercing the veil of corporate fiction to the case based only on
mere assumptions. Point by point, they take exception to Liveseys submissions as
follows:chanRoblesvirtualLawlibrary
a. The email statement in reply to an online query of Young (CBBs Web Editor) that CBB is known as
Chesterton Blumenauer Binswanger or Chesterton Petty. Ltd. to establish a connection between CBB
and Binswanger is inconclusive as there was no mention in the statement of Binswanger Philippines,
Inc.
b. The affidavit of De Guzman, former CBB Associate Director, who also resigned from the company like
Livesey, has no probative value as it was selfserving and contained only misrepresentation of facts,
conjectures and surmises.
c. When Binswanger was organized and incorporated, CBB had already been abandoned by its Board of
Directors and no longer subsidized by CBBHongkong; it had no business operations to work with.
d. The mere transfer of Elliot and Catral from CBB to Binswanger is not a ground to pierce the corporate
veil in the present case absent a clear evidence supporting the application of the doctrine. The NLRC
applied the doctrine on the basis only of LA Guerreros decision in the De Guzman case.
e. The respondents petition for certiorari was filed on time. Atty. Jacosalem, who was presumed to have
been engaged as the respondents counsel, was deemed to have received a copy of the NLRC
resolution (denying the motion for reconsideration) on March 17, 2006 when he requested and
secured a copy from the NLRC. The petition was filed on May 15, 2006 or fiftynine (59) days from
March 17, 2006. Atty. Jacosalem may have failed to indicate his address on the motion for
reconsideration he filed but that is not a reason for him to be deprived of the notices and processes of
the case.
The Courts Ruling

The procedural question
The respondents petition for certiorari before the CA was filed out of time. The sixty (60)day filing period
under Rule 65 of the Rules of Court should have been counted from January 19, 2006, the date of receipt of a
copy of the NLRC resolution denying the respondents motion for reconsideration by the Corporate Counsels
Philippines, Law Offices which was the respondents counsel of record at the time. The respondents cannot
insist that Atty. Jacosalems receipt of a copy of the resolution on March 17, 2006 as the reckoning date for
the filing of the petition as we shall discuss below.
The CA chided the NLRC for serving a copy of the resolution on the Corporate Counsels Philippines, Law
Offices, instead of on Atty. Jacosalem as it believed that the labor tribunal impliedly recognized Atty.
Jacosalem as the respondents counsel when it acted on the motion for reconsideration that he signed. As we
see it, the fault was not on the NLRC but on Atty. Jacosalem himself as he left no forwarding address with the
NLRC, a serious lapse that even he admitted.40 This is a matter that cannot just be taken for granted as it
betrays a careless legal representation that can cause adverse consequences to the other party.
To our mind, Atty. Jacosalems nonobservance of a simple, but basic requirement in the practice of law lends
credence to Liveseys claim that the lawyer did not formally enter his appearance before the NLRC as the
respondents new counsel; if it had been otherwise, he would have supplied his office address to the NLRC.
Also, had he exercised due diligence in the performance of his duty as counsel, he could have inquired earlier
with the NLRC and should not have waited as late as March 17, 2006 about the outcome of the respondents
motion for reconsideration which was filed as early as October 28, 2005.
To reiterate, the filing of the respondents petition for certiorari should have been reckoned from January 19,
2006 when a copy of the subject NLRC resolution was received by the Corporate Counsels Philippines, Law
Offices, which, as of that date, had not been discharged or had withdrawn and therefore remained to be the
respondents counsel of record. Clearly, the petition for certiorari was filed out of time. Section 6(a), Rule III of
the NLRC Revised Rules of Procedure provides that [f]or purposes of appeal, the period shall be counted from
receipt of such decisions, resolutions, or orders by the counsel or representative of record.
We now come to the issue of whether the NLRC had jurisdiction over the controversy between Livesey and
CBB/Dwyer on the ground that it involved an intracorporate dispute.
Based on the facts of the case, we find this issue to have been rendered academic by the compromise
agreement between Livesey and CBB and approved by LA Reyno.41 That CBB reneged in the fulfillment of its
obligation under the agreement is no reason to revive the issue and further frustrate the full settlement of the
obligation as agreed upon.
The substantive aspect of the case
Even if we rule that the respondents appeal before the CA had been filed on time, we believe and so hold that
the appellate court committed a reversible error of judgment in its challenged decision.
The NLRC committed no grave abuse of discretion in reversing LA Laderas ruling as there is substantial
evidence in the records that Livesey was prevented from fully receiving his monetary entitlements under the
compromise agreement between him and CBB, with Elliot signing for CBB as its President and CEO. Substantial
evidence is more than a scintilla; it means such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.42
Shortly after Elliot forged the compromise agreement with Livesey, CBB ceased operations, a corporate event
that was not disputed by the respondents. Then Binswanger suddenly appeared. It was established almost
simultaneously with CBBs closure, with no less than Elliot as its President and CEO. Through the confluence of
events surrounding CBBs closure and Binswangers sudden emergence, a reasonable mind would arrive at the
conclusion that Binswanger is CBBs alter ego or that CBB and Binswanger are one and the same corporation.
There are also indications of badges of fraud in Binswangers incorporation. It was a business strategy to
evade CBBs financial liabilities, including its outstanding obligation to Livesey.
The respondents impugned the probative value of Liveseys documentary evidence and insist that the NLRC
erred in applying the doctrine of piercing the veil of corporate fiction in the case to avoid liability. They
consider the NLRC conclusions as mere assumptions.
We disagree.
It has long been settled that the law vests a corporation with a personality distinct and separate from its
stockholders or members. In the same vein, a corporation, by legal fiction and convenience, is an entity
shielded by a protective mantle and imbued by law with a character alien to the persons comprising it.43
Nonetheless, the shield is not at all times impenetrable and cannot be extended to a point beyond its reason
and policy. Circumstances might deny a claim for corporate personality, under the doctrine of piercing the
veil of corporate fiction.
Piercing the veil of corporate fiction is an equitable doctrine developed to address situations where the
separate corporate personality of a corporation is abused or used for wrongful purposes.44 Under the
doctrine, the corporate existence may be disregarded where the entity is formed or used for nonlegitimate
purposes, such as to evade a just and due obligation, or to justify a wrong, to shield or perpetrate fraud or to
carry out similar or inequitable considerations, other unjustifiable aims or intentions,45 in which case, the
fiction will be disregarded and the individuals composing it and the two corporations will be treated as
identical.46
In the present case, we see an indubitable link between CBBs closure and Binswangers incorporation. CBB
ceased to exist only in name; it reemerged in the person of Binswanger for an urgent purpose to avoid
payment by CBB of the last two installments of its monetary obligation to Livesey, as well as its other
financial liabilities. Freed of CBBs liabilities, especially that owing to Livesey, Binswanger can continue, as it
did continue, CBBs real estate brokerage business.
Liveseys evidence, whose existence the respondents never denied, converged to show this continuity of
business operations from CBB to Binswanger. It was not just coincidence that Binswanger is engaged in the
same line of business CBB embarked on: (1) it even holds office in the very same building and on the very
same floor where CBB once stood; (2) CBBs key officers, Elliot, no less, and Catral moved over to Binswanger,
performing the tasks they were doing at CBB; (3) notwithstanding CBBs closure, Binswangers Web Editor
(Young), in an email correspondence, supplied the information that Binswanger is now known as either
CBB (Chesterton Blumenauer Binswanger or as Chesterton Petty, Ltd., in the Philippines; (4) the use of
Binswanger of CBBs paraphernalia (receiving stamp) in connection with a labor case where Binswanger was
summoned by the authorities, although Elliot claimed that he bought the item with his own money; and (5)
Binswangers takeover of CBBs project with the PNB.
While the ostensible reason for Binswangers establishment is to continue CBBs business operations in the
Philippines, which by itself is not illegal, the close proximity between CBBs disestablishment and Binswangers
coming into existence points to an unstated but urgent consideration which, as we earlier noted, was to evade
CBBs unfulfilled financial obligation to Livesey under the compromise agreement.47
This underhanded objective, it must be stressed, can only be attributed to Elliot as it was apparent that
Binswangers stockholders had nothing to do with Binswangers operations as noted by the NLRC and which
the respondents did not deny.48 Elliot was well aware of the compromise agreement between Livesey and
CBB, as he agreed and accepted the terms of the agreement49 for CBB. He was also well aware that the last
two installments of CBBs obligation to Livesey were due on June 30, 2003 and September 30, 2003. These
installments were not met and the reason is that after the alleged sale of the majority of CBBs shares of stock,
it closed down.
With CBBs closure, Livesey asked why people would buy into a corporation and simply close it down
immediately thereafter?50 The answer to pave the way for CBBs reappearance as Binswanger. Elliots
guiding hand, as Livesey puts it, is very much evident in CBBs demise and Binswangers creation. Elliot knew
that CBB had not fully complied with its financial obligation under the compromise agreement. He made sure
that it would not be fulfilled when he allowed CBBs closure, despite the condition in the agreement that
unless and until the Compromise Amount has been fully settled and paid by the Company in favor of Mr.
Livesey, the Company shall not x x x suspend, discontinue, or cease its entire or a substantial portion of its
business operations[.]51
What happened to CBB, we believe, supports Liveseys assertion that De Guzman, CBBs former Associate
Director, informed him that at one time Elliot told her of CBBs plan to close the corporation and organize
another for the purpose of evading CBBs liabilities to Livesey and its other financial liabilities.52 This wrongful
intent we cannot and must not condone, for it will give a premium to an iniquitous business strategy where a
corporation is formed or used for a nonlegitimate purpose, such as to evade a just and due obligation.53 We,
therefore, find Elliot as liable as Binswanger for CBBs unfulfilled obligation to Livesey.
WHEREFORE, premises considered, we hereby GRANT the petition. The decision dated August 18, 2006 and
the Resolution dated March 29, 2007 of the Court of Appeals are SET ASIDE. Binswanger Philippines, Inc. and
Keith Elliot (its President and CEO) are declared jointly and severally liable for the second and third
installments of CBBs liability to Eric Godfrey Stanley Livesey under the compromise agreement dated October
14, 2002. Let the case record be remanded to the National Labor Relations Commission for execution of this
Decision.
Costs against the respondents.
SO ORDERED.
Carpio, (Chairperson), Del Castillo, Perez, and Reyes,* JJ., concu
2. Art. 4 (doubt in interpretation), Art. 282 (termination)

THIRD DIVISION
G.R. No. 211497, March 18, 2015
HOCHENG PHILIPPINES CORPORATION, Petitioner, v. ANTONIO M. FARRALES, Respondent.
DECISION
REYES, J.:
Before this Court on Petition for Review on Certiorari1 is the Decision2 dated October 17, 2013 of the Court of
Appeals (CA) in CA-G.R. SP No. 125103, which reversed the Decision3 dated February 29, 2012 and Resolution4
dated May 7, 2012 of the National Labor Relations Commission (NLRC) in NLRC LAC No. 08-002249-11, and
reinstated with modifications the Decision5 dated April 29, 2011 of the Labor Arbiter (LA) in NLRC Case No.
RAB-IV-03-00618-10-C, which found that respondent Antonio M. Farrales (Farrales) was illegally dismissed by
Hocheng Philippines Corporation (HPC). The fallo of the appellate decision reads:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the Decision of the Labor Arbiter dated April 29, 2011 in NLRC Case No.
RAB-IV-03-00618-10-C is reinstated with modifications. Private respondent Hocheng Philippines Corporation
is liable to pay [Farrales] the following:chanRoblesvirtualLawlibrary
(1)
(2)
(3)
(4)
Full backwages from date of dismissal on February 15, 2010 until date of decision equivalent to
P276,466.67;
Separation pay of one (1) month salary per year of service for a period of twelve years equivalent to
P228,800.00;
Appraisal year-end bonus in the sum of P11,000.00; and,
Attorneys fees equivalent to 10% of the total award.
SO ORDERED.6
The Facts
Farrales was first employed by HPC on May 12, 1998 as Production Operator, followed by promotions as (1)
Leadman in 2004, (2) Acting Assistant Unit Chief in 2007, and (3) Assistant Unit Chief of Production in 2008, a
supervisory position with a monthly salary of ?17,600.00. He was a consistent recipient of citations for
outstanding performance, as well as appraisal and year-end bonuses.7chanroblesvirtuallawlibrary
On December 2, 2009, a report reached HPC management that a motorcycle helmet of an employee, Reymar
Solas (Reymar), was stolen at the parking lot within its premises on November 27, 2009. On December 3,
2009, Security Officer Francisco Paragas III confirmed a video sequence recorded on closed-circuit television
(CCTV) around 3:00 p.m. on November 27, 2009 showing Farrales taking the missing helmet from a parked
motorcycle, to wit:chanRoblesvirtualLawlibrary
a. At around 3:07:44, [Farrales] was seen walking towards the motorcycle parking lot;chanrobleslaw
b. At around 3:08:47, [Farrales] walked back towards the pedestrian gate of the company, passing by the
motorcycle parking lot;chanrobleslaw
c. At around 3:08:51, [Farrales] walked back towards the motorcycle parking lot and returned to the
pedestrian gate;chanrobleslaw
d. At around 3:09:10, [Farrales] called on the person of Andy Lopega and instructed him to get the helmet
he was pointing at; [and]
e. At around 3:09:30, Andy gave the helmet to [Farrales].8
Later that day, HPC sent Farrales a notice to explain his involvement in the alleged theft. The investigation was
supported by the employees union, ULO-Hocheng.9Below is Farrales explanation, as summarized by the
CA:chanRoblesvirtualLawlibrary
On November 27, 2009, [Farrales] borrowed a helmet from his co-worker Eric Libutan (Eric) since they reside
in the same barangay. They agreed that Eric could get it at the house of [Farrales] or the latter could return it
the next time that they will see each other. Eric told him that his motorcycle was black in color. As there were
many motorcycles with helmets, he asked another employee, Andy Lopega (Andy) who was in the parking
area where he could find Erics helmet. Andy handed over to him the supposed helmet which he believed to
be owned by Eric, then he went home.
On November 28, 2009, at around 6 oclock in the morning, he saw Eric at their barangay and told him to get
the helmet. But Eric was in a rush to go to work, he did not bother to get it.
In the morning of December 3, 2009, upon seeing Eric in the workplace, [Farrales] asked him why he did not
get the helmet from his house. Eric told him that, Hindi po sa akin yung nakuha nyong helmet. [Farrales] was
shocked and he immediately phoned the HPCs guard to report the situation that he mistook the helmet which
he thought belonged to Eric. After several employees were asked as to the ownership of the helmet, he finally
found the owner thereof, which is Jun Reyess (Jun) nephew, Reymar, who was with him on November 27,
2009. [Farrales] promptly apologized to Jun and undertook to return the helmet the following day and
explained that it was an honest mistake. These all happened in the morning of December 3, 2009; [Farrales]
did not know yet that HPC will send a letter demanding him to explain.10
A hearing was held on December 10, 2009 at 1:00 p.m. Present were Farrales, Eric Libutan (Eric), Andy Lopega
(Andy), Jun Reyes, Antonio Alinda, a witness, and Rolando Garciso, representing ULO-Hocheng. From Andy it
was learned that at the time of the alleged incident, he was already seated on his motorcycle and about to
leave the company compound when Farrales approached and asked him to hand to him a yellow helmet
hanging from a motorcycle parked next to him. When Andy hesitated, Farrales explained that he owned it, and
so Andy complied. But Eric had specifically told Farrales that his helmet was colored red and black and his
motorcycle was a black Honda XRM-125 with plate number 8746-DI, parked near the perimeter fence away
from the walkway to the pedestrian gate. The CCTV showed Farrales instructing Andy to fetch a yellow helmet
from a blue Rossi 110 motorcycle with plate number 3653-DN parked in the middle of the parking lot,
opposite the location given by Eric. Farrales in his defense claimed he could no longer remember the details of
what transpired that time, nor could he explain why he missed Erics specific
directions.11chanroblesvirtuallawlibrary
On February 15, 2010, the HPC issued a Notice of Termination12 to Farrales dismissing him for violation of
Article 69, Class A, Item No. 29 of the HPC Code of Discipline, which provides that stealing from the company,
its employees and officials, or from its contractors, visitors or clients, is akin to serious misconduct and fraud
or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative, which are just causes for termination of employment under Article 282 of the Labor Code.
On March 25, 2010, Farrales filed a complaint for illegal dismissal, non-payment of appraisal and mid-year
bonuses, service incentive leave pay and 13th month pay. He also prayed for reinstatement, or in lieu thereof,
separation pay with full backwages, plus moral and exemplary damages and attorneys fees. During the
mandatory conference, HPC paid Farrales ?10,914.51, representing his 13th month pay for the period of
January to February 2010 and vacation leave/sick leave conversion. Farrales agreed to waive his claim for
incentive bonus.13chanroblesvirtuallawlibrary
On April 29, 2011, the LA ruled in favor of Farrales,14 the fallo of which is as
WHEREFORE, PREMISES CONSIDERED, all the respondents Hocheng Phils. Corporation, Inc. Sam Chen[g] and
Judy Geregale are found guilty of illegal dismissal and ordered jointly and severally to pay complainant the
following:chanRoblesvirtualLawlibrary
1. Full backwages from date of dismissal on February 15, 2010 until date of decision equivalent to
P276,466.67.
2. Separation pay of one (1) month salary per year of service for a period of twelve years equivalent to
P228,800.00.
3. Appraisal year-end bonus in the sum of P11,000.00.
4. Moral damages in the sum of P200,000.00.
5. Exemplary damages in the sum of P100,000.00.
6. 10% of all sums owing as attorneys fees or the amount of P81,626.67.
SO ORDERED.15
On appeal by HPC,16 the NLRC reversed the LA,17 and denied Farrales motion for reconsideration, finding
substantial evidence of just cause to terminate Farrales.18chanroblesvirtuallawlibrary
On petition for certiorari to the CA,19 Farrales sought to refute the NLRCs factual finding that he committed
theft, as well as to question NLRCs jurisdiction over HPCs appeal for non-payment of appeal fees. But the CA
found that HPC was able to perfect its appeal by posting a bond equivalent to the monetary award of
?897,893.37 and paying the appeal fees by postal money order in the amount of
?520.00.20chanroblesvirtuallawlibrary
Concerning the substantive issues, the appellate court agreed with the LA that Farrales act of taking Reymars
helmet did not amount to theft, holding that HPC failed to prove that Farrales conduct was induced by a
perverse and wrongful intent to gain, in light of the admission of Eric that he did let Farrales borrow one of his
two helmets, only that Farrales mistook Reymars helmet as the one belonging to him.
Petition for Review to the Supreme Court
In this petition, HPC raises the following grounds for this Courts review:chanRoblesvirtualLawlibrary
A. THE HONORABLE [CA] PLAINLY ERRED AND ACTED CONTRARY TO EXISTING LAW AND JURISPRUDENCE
IN REVERSING THE DECISION OF THE [NLRC] AND DECLARING ILLEGAL THE DISMISSAL FOR [HPCs]
ALLEGED FAILURE TO PROVE THE EXISTENCE OF JUST CAUSE.
1. THERE IS SUBSTANTIAL EVIDENCE TO SHOW THAT [FARRALES] COMMITTED THEFT IN [HPCs]
PREMISES.
2. THEFT IS A JUST CAUSE FOR TERMINATION.
3. BY COMMITTING THEFT, [FARRALES], BEING A SUPERVISORIAL EMPLOYEE, FORFEITED THE
TRUST REPOSED IN HIM BY [HPC], THUS RENDERING HIM DISMISSIBLE FOR LOSS OF CONFIDENCE.
B. IN DECLARING ILLEGAL THE DISMISSAL OF [FARRALES], THE HONORABLE [CA] VIOLATED DOCTRINES
LAID DOWN BY THE SUPREME COURT.
1. COURTS CANNOT SUBSTITUTE THEIR JUDGMENT FOR THAT OF THE MANAGEMENT.
2. COURTS MUST ACCORD DUE RESPECT TO THE FINDINGS OF ADMINISTRATIVE AGENCIES.21
Chiefly, HPC insists that since the complaint below involves an administrative case, only substantial evidence,
not proof of guilt beyond reasonable doubt, is required to prove the guilt of Farrales;22 that what the CA has
done is substitute its judgment for that of the NLRC, which is vested with statutory duty to make factual
determinations based on the evidence on record.23chanroblesvirtuallawlibrary
Ruling of the Court
The Court resolves to deny the petition.
To validly dismiss an employee, the law requires the employer to prove the existence of any of the valid or
authorized causes,24 which, as enumerated in Article 282 of the Labor Code, are: (a) serious misconduct or
willful disobedience by the employee of the lawful orders of his employer or the latters representative in
connection with his work; (b) gross and habitual neglect by the employee of his duties; (c) fraud or willful
breach by the employee of the trust reposed in him by his employer or his duly authorized representative; (d)
commission of a crime or offense by the employee against the person of his employer or any immediate
member of his family or his duly authorized representative; and (e) other causes analogous to the foregoing.25
As a supervisorial employee, Farrales is admittedly subject to stricter rules of trust and confidence, and thus
pursuant to its management prerogative HPC enjoys a wider latitude of discretion to assess his continuing
trustworthiness, than if he were an ordinary rank-and-file employee.26 HPC therefore insists that only
substantial proof of Farrales guilt for theft is needed to establish the just causes to dismiss him, as the NLRC
lengthily asserted in its decision.
Article 4 of the Labor Code mandates that all doubts in the implementation and interpretation of the
provisions thereof shall be resolved in favor of labor. Consistent with the States avowed policy to afford
protection to labor, as Article 3 of the Labor Code and Section 3, Article XIII of the 1987 Constitution have
enunciated, particularly in relation to the workers security of tenure, the Court held that [t]o be lawful, the
cause for termination must be a serious and grave malfeasance to justify the deprivation of a means of
livelihood. This is merely in keeping with the spirit of our Constitution and laws which lean over backwards in
favor of the working class, and mandate that every doubt must be resolved in their favor.27 Moreover, the
penalty imposed on the erring employee ought to be proportionate to the offense, taking into account its
nature and surrounding circumstances.
The Court has always taken care, therefore, that the employer does not invoke any baseless justification,
much less management prerogative, as a subterfuge by which to rid himself of an undesirable worker,28 and
thus in exceptional cases the Court has never hesitated to delve into the NLRCs factual conclusions where
evidence was found insufficient to support them, or too much was deduced from the bare facts submitted by
the parties, or the LA and the NLRC came up with conflicting positions, as is true in this
case.29chanroblesvirtuallawlibrary
As aptly pointed out by the LA, while HPC has the onus probandi that the taking of Reymars helmet by
Farrales was with intent to gain, it failed to discharge this burden, as shown by the following circumstances:
Farrales sought and obtained the permission of Eric, his co-employee as well as barangay co-resident, to
borrow his helmet; at the parking lot, Farrales asked another employee, Andy, to fetch a yellow helmet from
one of the parked motorcycles, mistakenly thinking it belonged to Eric (whom he knew owned two helmets);
the following day, November 28, Farrales asked Eric why he had not dropped by his house to get his helmet,
and Eric replied that Farrales got the wrong helmet because he still had his other helmet with him; Farrales
immediately sought the help of the company guards to locate the owner of the yellow helmet, who turned out
to be Reymar; Farrales apologized to Reymar for his mistake, and his apology was promptly accepted.30 All
these circumstances belie HPCs claim that Farrales took Reymars helmet with intent to gain, the LA said.
In ruling that Farrales dismissal by HPC was attended with utmost malice and bad faith as to justify an award
of moral and exemplary damages and attorneys fees, the LA stated that [i]t is succinctly clear that [the]
respondents [therein] tried to blow out of proportions the indiscretion of [Farrales] for reasons known only to
them, and moreover, [f]inding that the dismissal on the ground of theft is unavailing, [the] respondents
[therein] immediately offered [Farrales] his former position when he filed [his] complaint. What does this act
of [the] respondents [therein] speak [of]?31chanroblesvirtuallawlibrary
On the other hand, the NLRC found that Farrales lied, first, when he told Andy, then already astride his
motorbike at the parking area and about to leave the company premises, that the yellow helmet belonged to
him,32 and second, when he claimed that Eric was his neighbor, although they were not. It ruled as doubtful
Farrales hazy recollection about what happened that afternoon at the parking lot, since he could not even
give a description of the motorcycle from which he took the yellow helmet. These circumstances, the NLRC
determined, comprise substantial proof belying Farrales claim of good faith. As a supervisory employee, he
held a position of high responsibility in the company making him accountable to stricter rules of trust and
confidence than an ordinary employee, and under Article 282 of the Labor Code, he is guilty of a serious
misconduct and a willful breach of trust. The NLRC went on to cite a settled policy that in trying to protect the
rights of labor, the law does not authorize the oppression or self-destruction of the employer. Management
also has its own rights, which as such, are entitled to respect and enforcement in the interest of simple fair
play.33chanroblesvirtuallawlibrary
But the Court agrees with the CA that Farrales committed no serious or willful misconduct or disobedience to
warrant his dismissal. It is not disputed that Farrales lost no time in returning the helmet to Reymar the
moment he was apprised of his mistake by Eric, which proves, according to the CA, that he was not possessed
of a depravity of conduct as would justify HPCs claimed loss of trust in him. Farrales immediately admitted his
error to the company guard and sought help to find the owner of the yellow helmet, and this, the appellate
court said, only shows that Farrales did indeed mistakenly think that the helmet he took belonged to Eric.
It is not, then, difficult to surmise that when Farrales told Andy that the yellow helmet was his, his intent was
not to put up a pretence of ownership over it and thus betray his intent to gain, as the NLRC held, but rather
simply to assuage Andys reluctance to heed his passing request to reach for the helmet for him; Andy, it will
be recalled, was at that moment already seated in his motorbike and about to drive out when Farrales made
his request. As to Farrales claim that he and Eric were neighbors, suffice it to say that as the CA noted, they
resided in the same barangay, and thus, loosely, were neighbors.
The CA also pointed out that although the alleged theft occurred within its premises, HPC was not prejudiced
in any way by Farrales conduct since the helmet did not belong to it but to Reymar. In light of Article 69, Class
A, Item No. 29 of the HPC Code of Discipline, this observation may be irrelevant, although it may be that the
LA regarded it as proving HPCs bad faith.
Theft committed by an employee against a person other than his employer, if proven by substantial evidence,
is a cause analogous to serious misconduct.34 Misconduct is improper or wrong conduct, it is the transgression
of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and
implies wrongful intent and not mere error in judgment. The misconduct to be serious must be of such grave
and aggravated character and not merely trivial or unimportant. Such misconduct, however serious, must,
nevertheless, be in connection with the employees work to constitute just cause for his
separation.35chanroblesvirtuallawlibrary
But where there is no showing of a clear, valid and legal cause for termination of employment, the law
considers the case a matter of illegal dismissal.36 If doubts exist between the evidence presented by the
employer and that of the employee, the scales of justice must be tilted in favor of the latter. The employer
must affirmatively show rationally adequate evidence that the dismissal was for a justifiable
cause.37chanroblesvirtuallawlibrary
Nonetheless, the Court agrees with the CAs dismissal of the award of moral and exemplary damages for lack
of merit. There is no satisfactory proof that the concerned officers of HPC acted in bad faith or with malice in
terminating Farrales. Notwithstanding the LAs assertion to this effect, Farrales bare allegations of bad faith
deserve no credence, and neither is the mere fact that he was illegally dismissed sufficient to prove bad faith
on the part of HPCs officers.38 But concerning the award of attorneys fees, Farrales was dismissed for a flimsy
charge, and he was compelled to litigate to secure what is due him which HPC unjustifiably withheld.
WHEREFORE, premises considered, the petition for review is DENIED.
SO ORDERED.
Velasco, Jr., (Chairperson), Peralta, Villarama, Jr., and Jardeleza, JJ., concur.cralawlawlibrary
3. Art. 13(b), Illegal Recruitment

THIRD DIVISION
G.R. No. 205153, September 09, 2015
PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. SUZETTE ARNAIZ A.K.A. "BABY ROSAL", Accused-Appellant.
DECISION
VILLARAMA, JR., J.:
On appeal is the June 25, 2012 Decision1 of the Court of Appeals (CA) in CA-G.R. CR.-H.C. No. 04762 affirming
the conviction of appellant Suzette Arnaiz a.k.a. "Baby Rosal" for illegal recruitment in large scale and two
counts of estafa.chanrobleslaw
Facts
In Criminal Case No. 02-199399, appellant Suzette Arnaiz, Ruel P. Garcia and Chita Lorenzo were charged with
the crime of illegal recruitment committed in large scale and by a syndicate. In Criminal Case No. 02-199404,
appellant and her two co-accused were charged with estafa. In Criminal Case No. 02-199406, appellant and
her two co-accused were also charged with estafa.
Appellant pleaded not guilty to the charges against her. Trial on the merits ensued.
Prosecution witness Edenelda Cayetano testified that she learned that appellant was recruiting workers for
Australia. On December 16, 1999, Cayetano gave appellant P30,000 for the processing of her papers. She gave
another P40,000 on January 19, 2000, P30,000 on February 4, 2000, and $500 on March 8, 2000. However, she
was not able to leave for Australia. She then confronted appellant, who tried to refund the amount by issuing
a check for P175,000. Unfortunately, Cayetano was not able to recover her money since the account was
already closed.2
Witness Napoleon Bunuan testified that in June 2000, he went to appellant's travel agency, Florida Travel and
Tours located in Manila after learning that it was recruiting factory workers for South Korea. On June 6, 2000,
Bunuan gave appellant P45,000 believing that he will be deployed soon. On June 19, 2000, he gave appellant
another P25,000 for which he was issued a receipt, even though he had no employment contract. Bunuan
again paid P20,000 but this time he was not given a receipt. After paying a total of P90,000, Bunuan
discovered that appellant sent 26 persons to Korea but all were sent back to the Philippines. He went to
appellant's office only to find out that it was already padlocked.3
Another witness, Flerminio Cantor, Jr., testified that he went to appellant's office sometime in May 2000 to
apply as a factory worker in Korea. He gave appellant the total amount of P110,000 evidenced by cash
vouchers. When he arrived in Korea, he was sent back by the Immigration Officer after confirming that his visa
and passport were fake. Cantor, Jr. reported back to appellant, who promised that she will change Cantor, Jr.'s
name in the passport. He later found out that appellant was arrested by the National Bureau of Investigation.4
During trial, all the complainants identified appellant in open court as Suzette Arnaiz also known as
Baby/Rosita Rosal to whom they gave their money.5
The Labor and Employment Officer of the Philippine Overseas Employment Administration (POEA), Mildred N.
Versoza, confirmed that based on the records of their office, appellant and Florida Travel and Tours were not
licensed to recruit workers for deployment abroad.6
On the other hand, appellant testified that her office was only a travel agency and they only processed the
issuance of visas in the different embassies in the Philippines. She claimed that Bunuan went to her office in
June 2000 with Julie Landicho, and it was Landicho who recruited Bunuan and assisted him in getting a visa
from their office. Appellant averred that Bunuan went to their office with Cantor, Jr. who said that his brother
in Korea instructed him to get a Korean visa. Two weeks later, Bunuan and Cantor, Jr. were able to get their
visas after paying P65,000, covering the airfare, consultancy and visa assistance fees. The two were able to
leave for Korea but were held at the airport. Appellant claimed that she was able to refund Bunuan and
Cantor, Jr. the amount of P135,000 each.7 She asserted that the signature appearing on the voucher was that
of her secretary Suzette Arnaiz who is now residing abroad, and insisted that her name is Rosita Rosal.8
In its Decision,9 the Regional Trial Court (RTC) found appellant guilty of illegal recruitment in large scale in
Criminal Case No. 02-199399. Appellant was sentenced to life imprisonment and ordered to pay a fine of
P500,000. The RTC also found appellant guilty of estafa in Criminal Case No. 02-199404 and sentenced her to
an indeterminate penalty of 4 years and 2 months of prision correccional as minimum, to 14 years of reclusion
temporal as maximum. She was ordered to pay the amount of P70,000 as payment for the sums paid by
Bunuan. The RTC likewise found appellant guilty of estafa in Criminal Case No. 02-199406 and sentenced her
to an indeterminate penalty of 4 years and 2 months of prision correccional as minimum, to 15 years of
reclusion temporal as maximum. She was ordered to pay Cantor, Jr. the amount of P100,000.
The RTC held that the prosecution was able to establish that appellant undertook recruitment activities and
promised employment abroad to the complainants without a valid license or authority to engage in
recruitment and placement of workers.
On the estafa charges, the RTC noted the elements of the crime of estafa under Article 315(2)(a) of the
Revised Penal Code, as amended, and held that appellant, by her false pretenses that she can deploy the
complainants for work abroad, was able to induce them to part with their money which caused them damage.
We note, however, that the fallo of the RTC Decision convicted appellant of two counts of estafa under Article
315(1)(b) of the Revised Penal Code, as amended.
Appellant appealed to the CA.
The CA denied the appeal and affirmed the conviction of appellant for illegal recruitment in large scale and
two counts of estafa. However, it reduced the penalty of imprisonment imposed in Criminal Case No. 02199404 to an indeterminate penalty of 6 months and 1 day of prision correccional as minimum, to 10 years of
prision mayor as maximum. Appellant was also ordered to refund to Bunuan the reduced amount of P45,000.
In affirming appellant's conviction for illegal recruitment in large scale, the CA cited the testimonies of the
complainants that appellant led them to believe that she had the power to send them to work in Korea and
Australia. They were required to submit their bio-data and passports. They were also asked to give substantial
amounts of money on several occasions for the processing of their visas and other documents necessary for
deployment. Still, they were not able to leave the country and work abroad. Efforts to have their money
refunded also failed, said the CA.
On the estafa charges, the CA ruled that the elements of estafa under Article 315(2)(a) of the Revised Penal
Code, as amended, were present. The CA again noted the clear and categorical testimonies of the
complainants that they were made to believe that appellant had the authority to send them to work in
Australia and Korea, for which reason they gave her substantial amounts of money.
Hence, this appeal.chanrobleslaw
Issue
The essential issue is whether appellant's guilt was proven beyond reasonable doubt.chanrobleslaw
Our Ruling
We rule in the affirmative. The appeal lacks merit.
Section 6 of Republic Act No. 8042 (RA 8042) defines illegal recruitment as
SEC. 6. Definition. - For purposes of this Act, illegal recruitment shall mean any act of canvassing, enlisting,
contracting, transporting, utilizing, hiring, or procuring workers and includes referring, contract services,
promising or advertising for employment abroad, whether for profit or not, when undertaken by a nonlicensee or non-holder of authority contemplated under Article 13(f) of Presidential Decree No. 442, as
amended, otherwise known as the Labor Code of the Philippines: Provided, That any such non-licensee or nonholder who, in any manner, offers or promises for a fee employment abroad to two or more persons shall be
deemed so engaged. It shall likewise include the following acts, whether committed by any person, whether a
non-licensee, non-holder, licensee or holder of authority:
xxxx
(m) Failure to reimburse expenses incurred by the worker in connection with his documentation and
processing for purposes of deployment, in cases where the deployment does not actually take place without
the worker's fault. Illegal recruitment when committed by a syndicate or in large scale shall be considered an
offense involving economic sabotage.
Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or more persons
conspiring or confederating with one another. It is deemed committed in large scale if committed against
three (3) or more persons individually or as a group.ChanRoblesVirtualawlibrary
To constitute illegal recruitment in large scale, three elements must concur: (a) the offender has no valid
license or authority required by law to enable him to lawfully engage in recruitment and placement of
workers; (b) the offender undertakes any of the activities within the meaning of "recruitment and placement"
under Article 13(b) of the Labor Code, or any of the prohibited practices under Article 34 of the said Code
(now Section 6 of RA 8042); and (c) the offender committed the same against three or more persons,
individually or as a group.10
Article 13(b) of the Labor Code defines recruitment and placement as "any act of canvassing, enlisting,
contracting, transporting, utilizing, hiring or procuring workers; and includes referrals, contract services,
promising or advertising for employment, locally or abroad, whether for profit or not." In the simplest terms,
illegal recruitment is committed by persons who, without authority from the government, give the impression
that they have the power to send workers abroad for employment purposes.11
The elements of illegal recruitment in large scale were proven in this case. One, appellant has no valid license
or authority to engage in recruitment and placement of workers. The Labor and Employment Officer of the
POEA, Mildred N. Versoza, confirmed that based on the records of their office, appellant and Florida Travel
and Tours were not licensed to recruit workers for deployment abroad. Two, appellant clearly engaged in
recruitment activities and promised employment abroad to the complainants as proven by their testimonies.
Three, appellant committed illegal recruitment against three persons.
Thus, we uphold appellant's conviction for illegal recruitment in large scale. We also agree with the RTC and
CA in imposing the penalty of life imprisonment and ordering appellant to pay a fine of P500,000 for being in
conformity with Section 712 of RA 8042.
Appellant insists on the veracity of her own testimony in claiming that the prosecution failed to prove that she
is guilty of illegal recruitment in large scale. Her testimony, however, was rejected by the RTC which found the
testimonies of the complainants credible and truthful.13 Settled is the rule that the findings and conclusion of
the trial court on the credibility of witnesses are entitled to great respect because the trial courts have the
advantage of observing the demeanor of witnesses as they testify.14 The CA likewise believed the
complainants' testimonies and found them to be clear and categorical.15 The determination by the trial court
of the credibility of witnesses, when affirmed by the appellate court, as in this case, is accorded full weight and
credit as well as great respect, if not conclusive effect.16
We also agree with the CA that appellant is guilty of two counts of estafa under Article 315(2)(a) of the
Revised Penal Code, as amended. It is settled that a person may be charged and convicted separately of illegal
recruitment under RA 8042, in relation to the Labor Code, and estafa under Article 315(2)(a) of the Revised
Penal Code.17 Article 315(2)(a) of the Revised Penal Code, as amended, defines estafa
as:chanRoblesvirtualLawlibrary
ART. 315. Swindling (estafa). - Any person who shall defraud another by any of the means mentioned
hereinbelow x x x:
xxxx
2. By means of any of the following false pretenses or fraudulent acts executed prior to or simultaneously with
the commission of the fraud:
(a) By using a fictitious name, or falsely pretending to possess power, influence, qualifications, property,
credit, agency, business or imaginary transactions; or by means of other similar
deceits.ChanRoblesVirtualawlibrary
The elements of estafa are: (a) that the accused defrauded another by abuse of confidence or by means of
deceit, and (b) that damage or prejudice capable of pecuniary estimation is caused to the offended party or
third person.18 These elements were proven in this case. By means of deceit, appellant made complainants
believe that she had the proper authority to send them to work in Australia and Korea, for which reason they
gave her substantial amounts of money. Appellant clearly misled the complainants who believed she had the
power to send them to work in Australia and Korea. They were required to submit their bio-data and
passports, and were asked to give substantial amounts of money for the processing of their visas and other
documents necessary for deployment. Efforts to recover their money after they were not deployed for the
promised work abroad failed resulting to monetary damages on their part.
The penalty for estafa depends on the amount defrauded. Per Article 315 of the Revised Penal
Code:chanRoblesvirtualLawlibrary
ART. 315. Swindling (estafa). - Any person who shall defraud another by any of the means mentioned
hereinbelow shall be punished by:
1st. The penalty of prision correccional in its maximum period to prision mayor in its minimum period, if the
amount of the fraud is over 12,000 pesos but does not exceed 22,000 pesos; and if such amount exceeds the
latter sum, the penalty provided in this paragraph shall be imposed in its maximum period, adding one year
for each additional 10,000 pesos; but the total penalty which may be imposed shall not exceed twenty years.
In such cases, and in connection with the accessory penalties which may be imposed and for the purpose of
the other provisions of this Code, the penalty shall be termed prision mayor or reclusion temporal, as the case
may be.ChanRoblesVirtualawlibrary
The prescribed penalty for estafa under Article 315 of the Revised Penal Code, when the amount of fraud is
over P12,000 but not exceeding P22,000, is prision correccional maximum to prision mayor minimum (i.e.,
from 4 years, 2 months, and 1 day to 8 years). Under the Indeterminate Sentence Law, the minimum term
shall be within the range of the penalty next lower to that prescribed by the Revised Penal Code, or anywhere
within prision correccional minimum and medium (i.e., from 6 months and 1 day to 4 years and 2 months).19
The maximum term under the Indeterminate Sentence Law shall be that which, in view of attending
circumstances, could be properly imposed under the rules of the Revised Penal Code. To compute the
minimum, medium, and maximum periods of the prescribed penalty for estafa when the amount of fraud
exceeds P12,000, the time included in prision correccional maximum to prision mayor minimum shall be
divided into three equal portions, with each portion forming a period. Following this computation, the
minimum period for prision correccional maximum to prision mayor minimum is from 4 years, 2 months and 1
day to 5 years, 5 months and 10 days; the medium period is from 5 years, 5 months and 11 days to 6 years, 8
months and 20 days; and the maximum period is from 6 years, 8 months and 21 days to 8 years. Any
incremental penalty (i.e., one year for every P10,000 in excess of P22,000) shall thus be added to anywhere
from 6 years, 8 months and 21 days to 8 years, at the discretion of the court, provided that the total penalty
does not exceed 20 years.20
Based on the foregoing discussion, the RTC and the CA correctly sentenced appellant to suffer an
indeterminate penalty of 4 years and 2 months of prision correccional as minimum to 15 years of reclusion
temporal as maximum in Criminal Case No. 02-199406. The CA was also correct in imposing an indeterminate
penalty of 6 months and 1 day of prision correccional as minimum to 10 years of prision mayor as maximum in
Criminal Case No. 02-199404.
Interest at the rate of 6% per annum shall also be paid by appellant to Bunuan and Cantor, Jr. from the time
the Informations (February 8, 2002) were filed until the amounts paid by them are fully paid.21
WHEREFORE, we DISMISS the appeal. We AFFIRM with MODIFICATIONS the Decision dated June 25, 2012 of
the Court of Appeals in CA-G.R. CR.-H.C. No. 04762 to read as follows:
1. In Criminal Case No. 02-199399, appellant Suzette Arnaiz a.k.a. "Baby Rosal" is found guilty beyond
reasonable doubt of the crime of illegal recruitment in large scale and is hereby sentenced to suffer the
penalty of life imprisonment and to pay a fine of P500,000.
reasonable doubt of the crime of estafa under Article 315(2)(a) of the Revised Penal Code, as
amended, and is hereby sentenced to suffer an indeterminate penalty of 6 months and 1 day of prision
correccional as minimum to 10 years of prision mayor as maximum. Appellant is further ordered to
indemnify Napoleon R. Bunuan in the amount of P45,000 as actual damages, with legal interest of 6%
per annum computed from the filing of the Information, i.e., February 8, 2002, until the amount is fully
paid.
reasonable doubt of the crime of estafa under Article 315(2)(a) of the Revised Penal Code, as
amended, and is hereby sentenced to suffer an indeterminate penalty of 4 years and 2 months of
prision correccional as minimum to 15 years of reclusion temporal as maximum. Appellant is further
ordered to indemnify Herminio Cantor, Jr. in the amount of P100,000 as actual damages, with legal
interest of 6% per annum computed from the filing of the Information, i.e., February 8, 2002, until the
amount is fully paid.
With costs against the appellant.
SO ORDERED.chanroblesvirtuallawlibrary
Velasco, Jr., (Chairperson), Peralta, Perez,* and Leonen,**JJ., concur.
4. Art. 13(b), Illegal Recruitment

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 208686
July 1, 2015
PEOPLE OF THE PHILIPPINES, Appellee,

vs.
ALELIE TOLENTINO a.k.a. "Alelie Tolentino y Hernandez," Appellant.
DECISION
CARPIO, J.:
This is an appeal from the 29 November 2012 Decision1 of the Court of Appeals in CA-G.R. CR-HC No. 04558,
affirming the trial court's decision, finding appellant Alelie Tolentino (appellant) guilty beyond reasonable
doubt of illegal recruitment and estafa.
The Facts
Appellant was charged with illegal recruitment and five (5) counts of estafa under Article 315, paragraph 2(a)
of the Revised Penal Code. The Informations against appellant read:
CRIM. CASE NO. 02-755
The undersigned Assistant City Prosecutor accuses ALELIE TOLENTINO of the crime of Illegal Recruitment
committed as follows:
That on or about [or sometime in] the last week of August, 2001 and 1st week of November, 2001 and
thereafter, in the City of Muntinlupa, Philippines and within the jurisdiction of this Honorable Court, the
above-named accused jointly with NARCISA SANTOS did then and there willfully, unlawfully and feloniously
advertise for employment, enlist, contract and promise employment to the following persons: LEDERLE
PANESA, ORLANDO LAYOSO, JIMMY LEJOS, MARCELINO LEJOS and DONNA MAGBOO for a fee without first
securing license and/or permit from the government agency concerned.
Contrary to law.2
The undersigned Assistant City Prosecutor accuses ALELIE TOLENTINO of the crime of Estafa under Art. 315
Par. 2(a) of the Revised Penal Code, as amended, committed as follows:
That on or about or sometime in the first week of August 2001 and thereafter, in the City of Muntinlupa,
Philippines and within the jurisdiction of this Honorable Court, the above-named accused, by means of deceit,
fraudulent acts and false pretenses executed prior to or simultaneously with the commission of the fraud, did
[then] and there willfully, unlawfully and feloniously defraud one LEDERLE PANESA, in the following manner:
accused represented to the said complainant that she could secure work for the said complainant at Korea
and she is capable of processing the travel visa and other documents for her travel and employment at Korea
and demanded from the said complainant to pay the amount of P75,000.00 as placement fee; accused well
knew that such representations were false and made only to induce complainant to part with her money as in
fact complainant gave and delivered the amount of P15,000.00 as partial payment to the accused; and
accused once in possession of the said amount, did then and there willfully, unlawfully and feloniously
misappropriate, misapply and convert the same to her own personal use and benefit to the damage and
prejudice of the said complainant in the amount of P15,000.00.
Contrary to law.3
That on or about or sometime in the first week of November, 2001 and thereafter, in the City of Muntinlupa,
Philippines and within the jurisdiction of this Honorable Court, the above-named accused conspiring and
confederating with NARCISA SANTOS, and both of them mutually helping and aiding one another, by means of
deceit, fraudulent acts and false pretenses executed prior to or simultaneously with the commission of the
fraud, did [then] and there willfully, unlawfully and feloniously defraud one ORLANDO LAYOSO, in the
following manner: accused represented to the said complainant that she could secure work for the said
complainant at Korea and she is capable of processing the travel visa and other documents for [his] travel and
employment at Korea and demanded from the said complainant to pay the amount of P80,000.00 as
placement fee; accused well knew that such representations were false and made only to induce complainant
to part with [his] money as in fact complainant gave and delivered the amount of P35,000.00 as partial
payment to the accused; and accused once in possession of the said amount, did then and there willfully,
unlawfully and feloniously misappropriate, misapply and convert the same to her own personal use and
benefit to the damage and prejudice of the said complainant in the amount of P35,000.00.
Contrary to law.4
fraud, did [then] and there willfully, unlawfully and feloniously defraud one DONNA MAGBOO, in the following
manner: accused represented to the said complainant that she could secure work for the said complainant at
Korea and she is capable of processing the travel visa and other documents for her travel and employment at
Korea and demanded from the said complainant to pay the amount of P80,000.00 as placement fee; accused
well knew that such representations were false and made only to induce complainant to part with her money
as in fact complainant gave and delivered the amount of P35,000.00 as partial payment to the accused; and
accused once in possession of the said amount, did then and there willfully, unlawfully and feloniously
misappropriate, misapply and convert the same to her own personal use and benefit to the damage and
prejudice of the said complainant in the amount of P35,000.00.
Contrary to law.5
Par. 2(a) of the Revised Penal Code, as amended, committed as follows: That on or about or sometime in the
first week of November, 2001 and thereafter, in the City of Muntinlupa, Philippines and within the jurisdiction
of this Honorable Court, the above-named accused conspiring and confederating with NARCISA SANTOS, and
both of them mutually helping and aiding one another, by means of deceit, fraudulent acts and false pretenses
executed prior to or simultaneously with the commission of the fraud, did [then] and there willfully, unlawfully
and feloniously defraud one JIMMY LEJOS, in the following manner: accused represented to the said
complainant that she could secure work for the said complainant at Korea and she is capable of processing the
travel visa and other documents for [his] travel and employment at Korea and demanded from the said
complainant to pay the amount of P80,000.00 as placement fee; accused well knew that such representations
were false and made only to induce complainant to part with [his] money as in fact complainant gave and
delivered the amount of P35,000.00 as partial payment to the accused; and accused once in possession of the
said amount, did then and there willfully, unlawfully and feloniously misappropriate, misapply and convert the
same to her own personal use and benefit to the damage and prejudice of the said complainant in the amount
of P35,000.00.
Contrary to law.6
fraud, did [then] and there willfully, unlawfully and feloniously defraud one MARCELINO LEJOS, in the
following manner: accused represented to the said complainant that she could secure work for the said
complainant at Korea and she is capable of processing the travel visa and other documents for [his] travel and
employment at Korea and demanded from the said complainant to pay the amount of P80,000.00 as
placement fee; accused well knew that such representations were false and made only to induce complainant
to part with [his] money as in fact complainant gave and delivered the amount of P20,000.00 as partial
payment to the accused; and accused once in possession of the said amount, did then and there willfully,
unlawfully and feloniously misappropriate, misapply and convert the same to her own personal use and
benefit to the damage and prejudice of the said complainant in the amount of P20,000.00.
Contrary to law.7
Private complainants Orlando Layoso, Donna Magboo, Jimmy Lejos, and Marcelino Lejos8 alleged that
sometime in the first week of November 2001, they had a meeting with appellant Alelie Tolentino (appellant)
in her office at the 3rd floor, Arevalo Building, Alabang, Muntinlupa City. Appellant told them the procedure
for overseas employment and offered them assistance to find work abroad for a fee of P80,000. Appellant
showed them pictures of those she allegedly helped find work abroad and told them that they would be
earning $630 monthly as factory workers in Korea. When asked about her license to recruit overseas workers,
appellant told private complainants that she would show it to them at some other time. On 14 November
2001, private complainants again met with appellant at her office and each of them gave appellant P20,000 as
partial payment of the agreed fee, which included expenses for medical examination and processing of their
documents for work in Korea. Appellant promised to secure their visas and employment contracts within
three months.
On 30 January 2002, private complainants met with appellant, who was accompanied by a certain Narcisa
Santos, at Wendys in Arquiza Street, Manila for signing of contract. However, the names written on the
employment contracts were not private complainants names. Appellant explained that the contracts were
supposedly for other applicants who sought her services but later backed out. Appellant assured them that
original contracts bearing their names would subsequently be provided. Private complainants signed the
contracts and paid P15,000 each as their second partial payment.
On 7 February 2002, private complainants received information that the Criminal Investigation and Detection
Group arrested appellant for illegal recruitment. When private complainants confronted appellant at the
Manila City Hall where she was held, they demanded the return of their payments amounting to P35,000
each, except for Marcelino Lejos whose total payment only amounted to P20,000. Appellant denied the
charges against her and promised them that they would get their money back. Subsequently, private
complainants were able to secure a certification from the Philippine Overseas Employment Administration
(POEA) that appellant was not licensed to recruit workers for overseas employment.
Another complainant, Lederle Panesa, alleged that in August 2001, she met with appellant, who offered her
work in Korea for a placement fee of P75,000. On 7 September 2001, Panesa gave appellant P15,000 as initial
payment. Appellant assured Panesa that she would be leaving for Korea on the second week of November
2001 and that the balance of the placement fee could be paid upon her receipt of the visa. However, after said
meeting, Panesa no longer heard from appellant, which prompted Panesa to visit appellants office. Appellant
informed Panesa that there were no job openings in Korea at that time. Appellant offered Panesa employment
in other countries such as Malaysia and Palau, but Panesa refused the offer and demanded the return of her
money. Nevertheless, appellant was able to persuade Panesa to wait until December 2001. Appellant never
contacted Panesa thereafter. On 7 February 2002,Panesa was informed that appellant was apprehended for
illegal recruitment. Panesa proceeded to the Office of the City Prosecutor in Manila, but failed to confront
appellant. It was only then that Panesa learned about appellant not being authorized by the POEA to recruit
workers for overseas employment.
For the defense, appellant was presented as the lone witness. Appellant denied the charges against her. She
testified that she was introduced to private complainants by a certain Cezar Manonson and that the owner of
the office she is renting is her relative. Private complainants allegedly sought her help regarding possible work
in Korea and that she merely explained the procedure for overseas employment to them. She was hesitant to
help them because she does not recruit workers as she herself was also applying for work as factory worker
through Narcisa Santos. She admitted having received money from private complainants and issuing receipts
for the payments, upon instructions from Narcisa Santos. She confirmed her signature on the petty cash
vouchers she issued to private complainants, evidencing their payments. She testified that she gave the
payments to Narcisa Santos. However, she admitted that she does not have proof that she indeed turned over
the money to Narcisa Santos.
On 9 June 2010, the trial court rendered a decision, the dispositive portion of which reads: WHEREFORE, the
Court finds accused Alelie (also known as Alelie Tolentino) guilty beyond reasonable doubt of the offense of
large scale illegal recruitment, which constitutes economic sabotage in Criminal Case Case No. 02-755 and
sentences her to life imprisonment and to pay a fine of P500,000.00; and five counts of estafa under Article
315 2(a) of the Revised Penal Code, as amended, in the following criminal cases and sentences her, as follows:
In Criminal Case No. 02-756, an indeterminate penalty of six months of arresto mayor in its maximum to four
years two months and one day of prision correccional in its maximum as the maximum period, and to pay the
private complainant the amount of P5,000.00 as and for moral damages. Accused is further ordered to return
the amount of P15,000.00 she illegally collected from the private complainant.
In Criminal Case Nos. 02-757, 02-758 and 02-759, an indeterminate penalty [of] six months of arresto mayor in
its maximum to twelve years of prision mayor in its maximum, and to pay the private complainants
individually each in the amount of P15,000.00 as and for moral damages. Accused is further ordered to return
the amount of P35,000.00 she illegally collected each from the private complainants.
In Criminal Case No. 02-760, an indeterminate penalty of six months of arresto mayor in its maximum as the
minimum period to six years and one day of prision mayor in its minimum as the maximum period, and to pay
the private complainant the amount of P8,000.00 as and for moral damages. Accused is further ordered to
return the amount of P20,000.00 she illegally collected from the private complainant.
Her full period of preventive imprisonment shall be credited in her favor in accordance with Article 29 of the
Revised Penal Code.
SO ORDERED.9
The Ruling of the Court of Appeals
On appeal, the Court of Appeals affirmed the trial courts decision. The Court of Appeals held that the
prosecution adequately proved that appellant engaged in illegal recruitment in large scale. The Court of
Appeals noted that appellant admitted that she had no authority or valid license to engage in recruitment and
placement of workers. The testimonies and the documentary evidence submitted by the prosecution showed
that appellant led complainants to believe that she had the power or ability to send private complainants to
Korea to work as factory workers and that the latter were convinced to give their payment to appellant in
order to be employed. Appellant even issued petty cash vouchers acknowledging receipt of private
complainants payment and she made them sign Trainee Agreements, which were purportedly their contract
with their Korean employer. Based on the facts and evidence presented, the Court of Appeals concluded that
appellant clearly engaged in illegal recruitment activities. Appellants claim that it was Narcisa Santos who
recruited the private complainants and who profited from the illegal transaction was disregarded by the Court
of Appeals for lack of evidence. The Court of Appeals noted that it was appellant who dealt directly with
private complainants.
On the charge of estafa, the Court of Appeals likewise upheld appellants conviction for said crime. The
evidence presented to prove appellants liability for illegal recruitment also established her liability for estafa.
The Court of Appeals ruled that a person may be charged and convicted separately of illegal recruitment under
Republic Act No. 8042 (RA 8042) in relation to the Labor Code, and estafa under Article 315, paragraph 2(a) of
the Revised Penal Code.
Hence, this appeal.
The Court's Ruling

We find the appeal without merit. The Court of Appeals was correct in affirming the ruling of the trial court
that the appellants guilt of the crimes she was accused of was clearly established by the witnesses and the
evidence of the prosecution.
Illegal Recruitment in Large Scale
Article 13(b) of the Labor Code defines recruitment and placement as "any act of canvassing, enlisting,
contracting, transporting, utilizing, hiring or procuring workers, and includes referrals, contract services,
promising or advertising for employment, locally or abroad, whether for profit or not."
Illegal recruitment, on the other hand is defined under Article 38 of the Labor Code as follows: ART. 38. Illegal
Recruitment
(a) Any recruitment activities, including the prohibited practices enumerated under Article 34of this
Code, to be undertaken by non-licensees or non-holders of authority shall be deemed illegal and
punishable under Article 39 of this Code. The Department of Labor and Employment or any law
enforcement officer may initiate complaints under this Article.
(b) Illegal recruitment when committed by a syndicate or in large scale shall be considered an offense
involving economic sabotage and shall be penalized in accordance with Article 39 hereof. Illegal
recruitment is deemed committed by a syndicate if carried out by a group of three (3) or more persons
conspiring and/or confederating with one another in carrying out any unlawful or illegal transaction,
enterprise or scheme defined under the first paragraph hereof. Illegal recruitment is deemed
committed in large scale if committed against three (3) or more persons individually or as a group.
(c) The Secretary of Labor and Employment or his duly authorized representatives shall have the power
to cause the arrest and detention of such non-licensee or non-holder of authority if after investigation
it is determined that his activities constitute a danger to national security and public order or will lead
to further exploitation of job-seekers. The Secretary shall order the search of the office or premises
and seizure of documents, paraphernalia, properties and other implements used in illegal recruitment
activities and the closure of companies, establishments and entities found to be engaged in the
recruitment of workers for overseas employment, without having been licensed or authorized to do so.
(Emphases supplied)
Illegal recruitment, as defined under Article 38 of the Labor Code, encompasses recruitment activities for both
local and overseas employment. However, illegal recruitment under this article is limited to recruitment
activities undertaken by non-licensees or non-holders of authority.10 Thus, under the Labor Code, to
constitute illegal recruitment in large scale, three elements must concur:
1. The accused undertook any recruitment activity defined under Art. 13 (b) or any prohibited practice
enumerated under Art. 34 of the Labor Code.
2. He did not have the license or the authority to lawfully engage in the recruitment and placement of
workers.
3. He committed the same against three or more persons, individually or as a group.11
RA 8042,12 otherwise known as the "Migrant Workers and Overseas Filipinos Act of 1995," established a
higher standard of protection and promotion of the welfare of the migrant workers, their families and
overseas Filipinos in distress. RA 8042 also broadened the concept of illegal recruitment for overseas
employment and increased the penalties, especially for Illegal Recruitment in Large Scale and Illegal
Recruitment Committed by a Syndicate, which are considered offenses involving economic sabotage.13 Part II
of RA 8042 defines and penalizes illegal recruitment for employment abroad, whether undertaken by a nonlicensee or non-holder of authority or by a licensee or holder of authority.
Section 6 of RA 8042 provides for the definition of illegal recruitment, while Section 7 enumerates the
penalties therefor, thus:
SEC. 6. Definition. For purposes of this Act, illegal recruitment shall mean any act of canvassing, enlisting,
contracting, transporting, utilizing, hiring, or procuring workers and includes referring, contract services,
promising or advertising for employment abroad, whether for profit or not, when undertaken by a nonlicensee or non-holder of authority contemplated under Article 13(f) of Presidential Decree No. 442, as
amended, otherwise known as the Labor Code of the Philippines: Provided, That any such non-licensee or nonholder who, in any manner, offers or promises for a fee employment abroad for two or more persons shall be
deemed so engaged. It shall likewise include the following acts, whether committed by any person, whether a
non-licensee, non-holder, licensee or holder of authority:
(a) To charge or accept directly or indirectly any amount greater than that specified in the schedule of
allowable fees prescribed by the Secretary of Labor and Employment, or to make a worker pay any
amount greater than that actually received by him as a loan or advance;
(b) To furnish or publish any false notice or information or document in relation to recruitment or
employment;
(c) To give any false notice, testimony, information or document or commit any act of
misrepresentation for the purpose of securing a license or authority under the Labor Code;
(d) To induce or attempt to induce a worker already employed to quit his employment in order to offer
him another unless the transfer is designed to liberate a worker from oppressive terms and conditions
of employment;
(e) To influence or attempt to influence any person or entity not to employ any worker who has not
applied for employment through his agency;
(f) To engage in the recruitment or placement of workers in jobs harmful to public health or morality or
to the dignity of the Republic of the Philippines;
(g) To obstruct or attempt to obstruct inspection by the Secretary of Labor and Employment or by his
duly authorized representative;
(h) To fail to submit reports on the status of employment, placement vacancies, remittance of foreign
exchange earnings, separation from jobs, departures and such other matters or information as may be
required by the Secretary of Labor and Employment;
(i) To substitute or alter to the prejudice of the worker, employment contracts approved and verified
by the Department of Labor and Employment from the time of actual signing thereof by the parties up
to and including the period of the expiration of the same without the approval of the Department of
Labor and Employment;
(j) For an officer or agent of a recruitment or placement agency to become an officer or member of the
Board of any corporation engaged in travel agency or to be engaged directly or indirectly in the
management of a travel agency;
(k) To withhold or deny travel documents from applicant workers before departure for monetary or
financial considerations other than those authorized under the Labor Code and its implementing rules
and regulations;
(l) Failure to actually deploy without valid reason as determined by the Department of Labor and
Employment; and
(m) Failure to reimburse expenses incurred by the worker in connection with his documentation and
processing for purposes of deployment, in cases where the deployment does not actually take place
without the workers fault. Illegal recruitment when committed by a syndicate or in large scale shall be
considered an offense involving economic sabotage.
Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or more persons
conspiring or confederating with one another. It is deemed committed in large scale if committed against
three (3) or more persons individually or as a group.
The persons liable for the above offenses are the principals, accomplices and accessories. In case of juridical
persons, the officers having control, management or direction of their business shall be liable.
SEC. 7. Penalties.
(a) Any person found guilty of illegal recruitment shall suffer the penalty of imprisonment of not less
than six (6) years and one (1) day but not more than twelve (12) years and a fine of not less than Two
hundred thousand pesos (P200,000.00) nor more than Five hundred thousand pesos (P500,000.00).
(b) The penalty of life imprisonment and a fine of not less than Five hundred thousand pesos
(P500,000.00) nor more than One million pesos (P1,000,000.00) shall be imposed if illegal recruitment
constitutes economic sabotage as defined herein.
Provided, however, That the maximum penalty shall be imposed If the person illegally recruited is less than
eighteen (18) years of age or committed by a non-licensee or non-holder of authority. (Emphases supplied)
Unlike illegal recruitment as defined under the Labor Code which is limited to recruitment activities
undertaken by non-licensees or non-holders of authority, under Article 6 of RA 8042, illegal recruitment (for
overseas employment) may be committed not only by non-licensees or non-holders of authority but also by
licensees or holders of authority. Article 6 enumerates thirteen acts or practices [(a) to (m)] which constitute
illegal recruitment, whether committed by any person, whether a non-licensee, non-holder, licensee or holder
of authority. Except for the last two acts [(l) and (m)] on the list under Article 6 of RA8042, the first eleven acts
or practices are also listed in Article 3414 of the Labor Code under the heading "Prohibited practices." Thus,
under Article 34 of the Labor Code, it is unlawful for any individual, entity, licensee or holder of authority to
engage in any of the enumerated prohibited practices, but such acts or practices do not constitute illegal
recruitment when undertaken by a licensee or holder of authority. However, under Article 38(A) of the Labor
Code, when a non-licensee or non-holder of authority undertakes such "prohibited practices," he or she is
liable for illegal recruitment. RA 8042 broadened the definition of illegal recruitment for overseas employment
by including thirteen acts or practices which now constitute as illegal recruitment, whether committed by a
non-licensee, non-holder, licensee or holder of authority.
Under RA 8042, a non-licensee or non-holder of authority commits illegal recruitment for overseas
employment in two ways: (1) by any act of canvassing, enlisting, contracting, transporting, utilizing, hiring, or
procuring workers, and includes referring, contract services, promising or advertising for employment abroad,
whether for profit or not; and (2) by undertaking any of the acts enumerated under Section 6 of RA 8042. On
the other hand, a licensee or holder of authority is also liable for illegal recruitment for overseas employment
when he or she undertakes any of the thirteen acts or practices [(a) to (m)] listed under Section 6 of RA 8042.
To constitute illegal recruitment in large scale, the offense of illegal recruitment must be committed against
three or more persons, individually or as a group.
In this case, the prosecution sufficiently proved that appellant engaged in large-scale illegal recruitment.
First, appellant is a non-licensee or non-holder of authority. Part of the evidence submitted by the prosecution
is a POEA Certification15 dated 10 March 2003, stating that appellant is not licensed by the POEA to recruit
workers for overseas employment. Appellant admitted that she has no valid license or authority required by
law to lawfully engage in recruitment and placement of workers.
Second, despite the absence of a license or authority to undertake recruitment activities, appellant gave the
impression that she has the power or ability to secure work for private complainants in Korea. Private
complainants Orlando Layoso, Donna Magboo, and Jimmy Lejos all testified that appellant promised them
work as factory workers in Korea and induced them to pay placement fees, which included the expenses for
medical examination and the processing of their documents for work in Korea. Appellant even showed
pictures of previous applicants, whom she allegedly helped find work abroad. Appellant also explained to
them the procedure for overseas employment and promised them that she would secure their visas and
employment contracts within three months. The testimonies of Orlando Layoso, Donna Magboo, and Jimmy
Lejos were corroborated by private respondents Marcelino Lejos and Lederle Panesa, whose Affidavits of
Complaint were adopted as their direct testimonies.
This Court has held in several cases that an accused who represents to others that he could send workers
abroad for employment, even without the authority or license to do so, commits illegal recruitment.16
Third, there are at least three victims in this case which makes appellant liable for large-scale illegal
recruitment.
Appellant denies that she gave private complainants the distinct impression that she had the power or ability
to send them abroad for work. She insists that she herself had been applying then as a factory worker in Korea
through Narcisa Santos, who had previously deployed her as domestic helper in Hongkong. Although appellant
admits having received payments from private complainants and issuing receipts, she submits that she did so
only upon the instructions of Narcisa Santos, to whom she turned over the money collected from private
complainants.
The Court is not swayed by appellants contentions. As found by the trial court and the appellate court, it was
clearly established that appellant dealt directly with the private complainants: she explained to them the
procedure for overseas employment; she charged them placement fees to cover their medical examination
and the processing of their travel documents; she issued petty cash vouchers with her signature,
acknowledging receipts of their payments; she promised the eventual release of their visas and employment
contracts; and she made them sign Trainee Agreements, purportedly their contract with their Korean
employer. Clearly, appellant, despite being a non-licensee or non-holder of authority, engaged in recruitment
activities, making her liable for illegal recruitment.
Well-settled is the rule that the trial court, having the opportunity to observe the witnesses and their
demeanor during the trial, can best assess the credibility of the witnesses and their testimonies.17 Appellants
mere denial cannot prevail over the positive and categorical testimonies of the complainants.18 The trial
courts findings are accorded great respect unless the trial court has overlooked or misconstrued some
substantial facts, which if considered might affect the result of the case.19 Furthermore, factual findings of the
trial court, when affirmed by the Court of Appeals, are deemed binding and conclusive.20
Thus, we affirm the finding of both the trial court and the appellate court that appellant is guilty beyond
reasonable doubt of illegal recruitment in large scale. However, we modify the penalty imposed.
The penalty imposed by the trial court in this case for large-scale illegal recruitment, which constitutes
economic sabotage, is life imprisonment and a fine of P500,000. Section 7 of RA 8042 provides that the
penalty of life imprisonment and a fine of not less than P500,000 nor more than P1,000,000 shall be imposed
if illegal recruitment constitutes economic sabotage. Said article further provides that the maximum penalty
shall be imposed if committed by a non-licensee or non-holder of authority. Thus, the proper penalty in this
case is life imprisonment and a fine of P1,000,000.
Estafa
We likewise affirm appellants conviction for five counts of estafa under Article 315(2)(a) of the Revised Penal
Code. It is settled that a person, for the same acts, may be convicted separately for illegal recruitment under
RA 8042 (or the Labor Code), and estafa under Article 315(2)(a)21 of the Revised Penal Code.22
The elements of estafa are: (1) the accused defrauded another by abuse of confidence or by means of deceit;
and (2) the offended party or a third party suffered damage or prejudice capable of pecuniary estimation.23 In
this case, the prosecution proved beyond reasonable doubt that appellant deceived private complainants into
believing that she had the authority and capability to send them to Korea for employment, despite her not
being licensed by the POEA to recruit workers for overseas employment. She even showed them pictures of
past applicants whom she allegedly sent abroad for work. She also assured them that she would be able to
secure their visas and employment contracts once they pay the placement fee. Because of the assurances
given by appellant, private complainants paid appellant a portion of the agreed placement fee, for which
appellant issued petty cash vouchers24 with her signature, evidencing her receipt of the payments. Clearly,
these acts of appellant constitute estafa punishable under Article 315 (2)(a) of the Revised Penal Code.
The penalty for estafa depends on the amount defrauded. Article 315 of the Revised Penal Code provides:
ART. 315. Swindling (estafa). Any person who shall defraud another by any of the means mentioned
hereinbelow shall be punished by:
1st. The penalty of prision correccional in its maximum period to prision mayor in its minimum period, if the
amount of the fraud is over 12,000 pesos but does not exceed 22,000 pesos, and if such amount exceeds the
latter sum, the penalty provided in this paragraph shall be imposed in its maximum period, adding one year
for each additional 10,000 pesos; but the total penalty which may be imposed shall not exceed twenty years.
In such cases, and in connection with the accessory penalties which may be imposed and for the purpose of
the other provisions of this Code, the penalty shall be termed prision mayor or reclusion temporal, as the case
may be;
xxxx
Thus, when the amount of fraud is over P12,000 but not exceeding P22,000, the penalty imposed is prision
correccional in its maximum period to prision mayor in its minimum period, i.e., from 4 years, 2 months and 1
day to 8 years. Under the Indeterminate Sentence Law, the minimum term shall be within the range of the
penalty next lower to that prescribed by the Revised Penal Code, which is prision correccional in its minimum
to medium period. The time included in this penalty is from 6 months and 1 day to 4 years and 2 months.
When the amount of fraud exceeds P22,000, the penalty shall be imposed in its maximum period, and adding
one year for every P10,000 in excess of P22,000. But, the total penalty imposed should not exceed 20 years.
The maximum term under the Indeterminate Sentence Law is that which, in view of the attending
circumstances, could be properly imposed under the Revised Penal Code. The range of penalty under Article
315 is composed of only two periods. To compute the maximum period of the indeterminate sentence, the
total number of years included in the two periods should be divided into three equal portions, with each
portion forming a period. Following this computation, the minimum, medium, and maximum periods of the
prescribed penalty are:
1. Minimum Period 4 years, 2 months and 1 day to 5 years, 5 months and 10 days;
2. Medium Period 5 years, 5 months and 11 days to 6 years, 8 months and 20 days;
3. Maximum Period 6 years, 8 months and 21 days to 8 years.
Any incremental penalty, i.e. one year for every P10,000 in excess of P22,000, shall be added to anywhere
from6 years, 8 months and 21 days to 8 years, at the courts discretion, provided the total penalty does not
exceed 20 years.25
We find that the penalty imposed by the trial court, and affirmed by the appellate court, is not in accord with
the penalty prescribed.1wphi1 The trial court erroneously imposed the minimum period of "six months of
arresto mayor in its maximum." Hence, we modify the penalty imposed on the five counts of estafa and we
delete the moral damages awarded for having no basis in law. Considering the number of victims defrauded,
we find that a minimum period of 2 years of prision correccional is appropriate.
In Criminal Case No. 02-756, where the amount defrauded is P15,000, and in the absence of any mitigating or
aggravating circumstance, the maximum term shall be taken from the medium period of the penalty
prescribed (i.e. 5 years, 5 months and 11 days to 6 years, 8 months and 20 days). Appellant should be
sentenced to 2 years of prision correccional as minimum to 6 years and 1 day of prision mayor as maximum.
In Criminal Case Nos. 02-757, 02-758, and 02-759, where the amount defrauded is P35,000 each, the
maximum period (anywhere from 6 years, 8 months and 21 days to 8 years) shall be imposed, plus the
incremental penalty of one year (additional 1 year imprisonment for the P10,000 in excess of P22,000). We fix
the maximum term at 7 years of prision mayor. Adding the incremental penalty of 1 year to the maximum
term, appellant should be sentenced in each of these cases to 2 years of prision correccional as minimum to 8
years of prision mayor as maximum.
In Criminal Case No. 02-760, where the amount defrauded is P20,000, appellant should be sentenced to 2
years of prision correccional as minimum to 6 years and 1 day of prision mayor as maximum.
Furthermore, appellant should indemnify private complainants for the amounts paid to her, with legal interest
at the rate of 6% per annum, from the time of demand, which shall be deemed as the same day the
Informations were filed against appellant, until the amounts are fully paid.26 WHEREFORE, we AFFIRM WITH
MODIFICATIONS the Decision dated 29 November 2012 of the Court of Appeals in CA-G.R. CRHC No. 04558 to
read as follows:
1. In Criminal Case No. 02-755, appellant Alelie Tolentino is found GUILTY beyond reasonable doubt of
illegal recruitment in large scale, constituting economic sabotage, as defined and penalized in Section 6
and Section 7(b) of RA 8042. She is sentenced to suffer the penalty of life imprisonment and is ordered
to pay a fine of One Million Pesos (P1,000,000).
estafa, as defined and penalized in Article 315(2)(a) of the Revised Penal Code. She is sentenced to
suffer the indeterminate penalty of 2 years of prision correccional as minimum to 6 years and 1 day of
prision mayor as maximum. She is ordered to indemnify private complainant Lederle Panesa in the
amount of Fifteen Thousand Pesos (P15,000) as actual damages, with legal interest of six percent (6%)
per annum from 28 June 2002, until the said amount is fully paid.
suffer the indeterminate penalty of 2 years of prision correccional as minimum to 8 years of prision
mayor as maximum. She is ordered to indemnify private complainant Orlando Layoso in the amount of
Thirty Five Thousand Pesos (P35,000) as actual damages, with legal interest of six percent (6%) per
annum from 28 June 2002, until the said amount is fully paid.
4. In Criminal Case No. 02-758,appellant Alelie Tolentino is found GUILTY beyond reasonable doubt of
mayor as maximum. She is ordered to indemnify private complainant Donna Magboo in the amount of
mayor as maximum. She is ordered to indemnify private complainant Jimmy Lejos in the amount of
suffer the indeterminate penalty of 2 years of prision correccional as minimum to 6 years and 1 day of
prision mayor as maximum. She is ordered to indemnify private complainant Marcelino Lejos in the
amount of Twenty Thousand Pesos (P20,000) as actual damages, with legal interest of six percent (6%)
per annum from 28 June 2002, until the said amount is fully paid.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
5. Art. 17, Jurisdiction (Intra-corporate dispute; corporate officer)

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 201298
February 5, 2014
RAUL C. COSARE, Petitioner,

vs.
BROADCOM ASIA, INC. and DANTE AREVALO, Respondents.
DECISION
REYES, J.:
Before the Court is a petition for review on certiorari1 under Rule 45 of the Rules of Court, which assails the
Decision2 dated November 24, 2011 and Resolution3 dated March 26, 2012 of the Court of Appeals (CA) in
CA-G.R. SP. No. 117356, wherein the CA ruled that the Regional Trial Court (RTC), and not the Labor Arbiter
(LA), had the jurisdiction over petitioner Raul C. Cosare's (Cosare) complaint for illegal dismissal against
Broadcom Asia, Inc. (Broadcom) and Dante Arevalo (Arevalo), the President of Broadcom (respondents).
The Antecedents
The case stems from a complaint4 for constructive dismissal, illegal suspension and monetary claims filed with
the National Capital Region Arbitration Branch of the National Labor Relations Commission (NLRC) by Cosare
against the respondents.
Cosare claimed that sometime in April 1993, he was employed as a salesman by Arevalo, who was then in the
business of selling broadcast equipment needed by television networks and production houses. In December
2000, Arevalo set up the company Broadcom, still to continue the business of trading communication and
broadcast equipment. Cosare was named an incorporator of Broadcom, having been assigned 100 shares of
stock with par value of P1.00 per share.5 In October 2001, Cosare was promoted to the position of Assistant
Vice President for Sales (AVP for Sales) and Head of the Technical Coordination, having a monthly basic net
salary and average commissions of P18,000.00 and P37,000.00, respectively.6
Sometime in 2003, Alex F. Abiog (Abiog) was appointed as Broadcoms Vice President for Sales and thus,
became Cosares immediate superior. On March 23, 2009, Cosare sent a confidential memo7 to Arevalo to
inform him of the following anomalies which were allegedly being committed by Abiog against the company:
(a) he failed to report to work on time, and would immediately leave the office on the pretext of client visits;
(b) he advised the clients of Broadcom to purchase camera units from its competitors, and received
commissions therefor; (c) he shared in the "under the-table dealings" or "confidential commissions" which
Broadcom extended to its clients personnel and engineers; and (d) he expressed his complaints and disgust
over Broadcoms uncompetitive salaries and wages and delay in the payment of other benefits, even in the
presence of office staff. Cosare ended his memo by clarifying that he was not interested in Abiogs position,
but only wanted Arevalo to know of the irregularities for the corporations sake.
Apparently, Arevalo failed to act on Cosares accusations. Cosare claimed that he was instead called for a
meeting by Arevalo on March 25, 2009, wherein he was asked to tender his resignation in exchange for
"financial assistance" in the amount of P300,000.00.8 Cosare refused to comply with the directive, as signified
in a letter9 dated March 26, 2009 which he sent to Arevalo.
On March 30, 2009, Cosare received from Roselyn Villareal (Villareal), Broadcoms Manager for Finance and
Administration, a memo10 signed by Arevalo, charging him of serious misconduct and willful breach of trust,
and providing in part:
1. A confidential memo was received from the VP for Sales informing me that you had directed, or at
the very least tried to persuade, a customer to purchase a camera from another supplier. Clearly, this
action is a gross and willful violation of the trust and confidence this company has given to you being
its AVP for Sales and is an attempt to deprive the company of income from which you, along with the
other employees of this company, derive your salaries and other benefits. x x x.
2. A company vehicle assigned to you with plate no. UNV 402 was found abandoned in another place
outside of the office without proper turnover from you to this office which had assigned said vehicle to
you. The vehicle was found to be inoperable and in very bad condition, which required that the vehicle
be towed to a nearby auto repair shop for extensive repairs.
3. You have repeatedly failed to submit regular sales reports informing the company of your activities
within and outside of company premises despite repeated reminders. However, it has been observed
that you have been both frequently absent and/or tardy without proper information to this office or
your direct supervisor, the VP for Sales Mr. Alex Abiog, of your whereabouts.
4. You have been remiss in the performance of your duties as a Sales officer as evidenced by the fact
that you have not recorded any sales for the past immediate twelve (12) months. This was inspite of
the fact that my office decided to relieve you of your duties as technical coordinator between
Engineering and Sales since June last year so that you could focus and concentrate [on] your activities
in sales.11
Cosare was given forty-eight (48) hours from the date of the memo within which to present his explanation on
the charges. He was also "suspended from having access to any and all company files/records and use of
company assets effective immediately."12 Thus, Cosare claimed that he was precluded from reporting for
work on March 31, 2009, and was instead instructed to wait at the offices receiving section. Upon the specific
instructions of Arevalo, he was also prevented by Villareal from retrieving even his personal belongings from
the office.
On April 1, 2009, Cosare was totally barred from entering the company premises, and was told to merely wait
outside the office building for further instructions. When no such instructions were given by 8:00 p.m., Cosare
was impelled to seek the assistance of the officials of Barangay San Antonio, Pasig City, and had the incident
reported in the barangay blotter.13
On April 2, 2009, Cosare attempted to furnish the company with a Memo14 by which he addressed and
denied the accusations cited in Arevalos memo dated March 30, 2009. The respondents refused to receive
the memo on the ground of late filing, prompting Cosare to serve a copy thereof by registered mail. The
following day, April 3, 2009, Cosare filed the subject labor complaint, claiming that he was constructively
dismissed from employment by the respondents. He further argued that he was illegally suspended, as he
placed no serious and imminent threat to the life or property of his employer and co-employees.15
In refuting Cosares complaint, the respondents argued that Cosare was neither illegally suspended nor
dismissed from employment. They also contended that Cosare committed the following acts inimical to the
interests of Broadcom: (a) he failed to sell any broadcast equipment since the year 2007; (b) he attempted to
sell a Panasonic HMC 150 Camera which was to be sourced from a competitor; and (c) he made an
unauthorized request in Broadcoms name for its principal, Panasonic USA, to issue an invitation for Cosares
friend, one Alex Paredes, to attend the National Association of Broadcasters Conference in Las Vegas, USA.16
Furthermore, they contended that Cosare abandoned his job17 by continually failing to report for work
beginning April 1, 2009, prompting them to issue on April 14, 2009 a memorandum18 accusing Cosare of
absence without leave beginning April 1, 2009.
The Ruling of the LA
On January 6, 2010, LA Napoleon M. Menese (LA Menese) rendered his Decision19 dismissing the complaint
on the ground of Cosares failure to establish that he was dismissed, constructively or otherwise, from his
employment. For the LA, what transpired on March 30, 2009 was merely the respondents issuance to Cosare
of a show-cause memo, giving him a chance to present his side on the charges against him. He explained:
It is obvious that [Cosare] DID NOT wait for respondents action regarding the charges leveled against him in
the show-cause memo. What he did was to pre-empt that action by filing this complaint just a day after he
submitted his written explanation. Moreover, by specifically seeking payment of "Separation Pay" instead of
reinstatement, [Cosares] motive for filing this case becomes more evident.20
It was also held that Cosare failed to substantiate by documentary evidence his allegations of illegal
suspension and non-payment of allowances and commissions.
Unyielding, Cosare appealed the LA decision to the NLRC.
The Ruling of the NLRC
On August 24, 2010, the NLRC rendered its Decision21 reversing the Decision of LA Menese. The dispositive
portion of the NLRC Decision reads:
WHEREFORE, premises considered, the DECISION is REVERSED and the Respondents are found guilty of Illegal
Constructive Dismissal. Respondents BROADCOM ASIA, INC. and Dante Arevalo are ordered to pay [Cosares]
backwages, and separation pay, as well as damages, in the total amount of P1,915,458.33, per attached
Computation.
SO ORDERED.22
In ruling in favor of Cosare, the NLRC explained that "due weight and credence is accorded to [Cosares]
contention that he was constructively dismissed by Respondent Arevalo when he was asked to resign from his
employment."23 The fact that Cosare was suspended from using the assets of Broadcom was also inconsistent
with the respondents claim that Cosare opted to abandon his employment.
Exemplary damages in the amount of P100,000.00 was awarded, given the NLRCs finding that the termination
of Cosares employment was effected by the respondents in bad faith and in a wanton, oppressive and
malevolent manner. The claim for unpaid commissions was denied on the ground of the failure to include it in
the prayer of pleadings filed with the LA and in the appeal.
The respondents motion for reconsideration was denied.24 Dissatisfied, they filed a petition for certiorari
with the CA founded on the following arguments: (1) the respondents did not have to prove just cause for
terminating the employment of Cosare because the latters complaint was based on an alleged constructive
dismissal; (2) Cosare resigned and was thus not dismissed from employment; (3) the respondents should not
be declared liable for the payment of Cosares monetary claims; and (4) Arevalo should not be held solidarily
liable for the judgment award.
In a manifestation filed by the respondents during the pendency of the CA appeal, they raised a new
argument, i.e., the case involved an intra-corporate controversy which was within the jurisdiction of the RTC,
instead of the LA.25 They argued that the case involved a complaint against a corporation filed by a
stockholder, who, at the same time, was a corporate officer.
The Ruling of the CA
On November 24, 2011, the CA rendered the assailed Decision26 granting the respondents petition. It agreed
with the respondents contention that the case involved an intra-corporate controversy which, pursuant to
Presidential Decree No. 902-A, as amended, was within the exclusive jurisdiction of the RTC. It reasoned:
Record shows that [Cosare] was indeed a stockholder of [Broadcom], and that he was listed as one of its
directors. Moreover, he held the position of [AVP] for Sales which is listed as a corporate office. Generally, the
president, vice-president, secretary or treasurer are commonly regarded as the principal or executive officers
of a corporation, and modern corporation statutes usually designate them as the officers of the corporation.
However, it bears mentioning that under Section 25 of the Corporation Code, the Board of Directors of
[Broadcom] is allowed to appoint such other officers as it may deem necessary. Indeed, [Broadcoms] By-Laws
provides:
Article IV
Officer
Section 1. Election / Appointment Immediately after their election, the Board of Directors shall formally
organize by electing the President, the Vice-President, the Treasurer, and the Secretary at said meeting.
The Board, may, from time to time, appoint such other officers as it may determine to be necessary or proper.
xxx
We hold that [the respondents] were able to present substantial evidence that [Cosare] indeed held a
corporate office, as evidenced by the General Information Sheet which was submitted to the Securities and
Exchange Commission (SEC) on October 22, 2009.27 (Citations omitted and emphasis supplied)
Thus, the CA reversed the NLRC decision and resolution, and then entered a new one dismissing the labor
complaint on the ground of lack of jurisdiction, finding it unnecessary to resolve the main issues that were
raised in the petition. Cosare filed a motion for reconsideration, but this was denied by the CA via the
Resolution28 dated March 26, 2012. Hence, this petition.
The Present Petition
The pivotal issues for the petitions full resolution are as follows: (1) whether or not the case instituted by
Cosare was an intra-corporate dispute that was within the original jurisdiction of the RTC, and not of the LAs;
and (2) whether or not Cosare was constructively and illegally dismissed from employment by the
respondents.
The Courts Ruling
The petition is impressed with merit.
Jurisdiction over the controversy
As regards the issue of jurisdiction, the Court has determined that contrary to the ruling of the CA, it is the LA,
and not the regular courts, which has the original jurisdiction over the subject controversy. An intra-corporate
controversy, which falls within the jurisdiction of regular courts, has been regarded in its broad sense to
pertain to disputes that involve any of the following relationships: (1) between the corporation, partnership or
association and the public; (2) between the corporation, partnership or association and the state in so far as
its franchise, permit or license to operate is concerned; (3) between the corporation, partnership or
association and its stockholders, partners, members or officers; and (4) among the stockholders, partners or
associates, themselves.29 Settled jurisprudence, however, qualifies that when the dispute involves a charge of
illegal dismissal, the action may fall under the jurisdiction of the LAs upon whose jurisdiction, as a rule, falls
termination disputes and claims for damages arising from employer-employee relations as provided in Article
217 of the Labor Code. Consistent with this jurisprudence, the mere fact that Cosare was a stockholder and an
officer of Broadcom at the time the subject controversy developed failed to necessarily make the case an
intra-corporate dispute.
In Matling Industrial and Commercial Corporation v. Coros,30 the Court distinguished between a "regular
employee" and a "corporate officer" for purposes of establishing the true nature of a dispute or complaint for
illegal dismissal and determining which body has jurisdiction over it. Succinctly, it was explained that "[t]he
determination of whether the dismissed officer was a regular employee or corporate officer unravels the
conundrum" of whether a complaint for illegal dismissal is cognizable by the LA or by the RTC. "In case of the
regular employee, the LA has jurisdiction; otherwise, the RTC exercises the legal authority to adjudicate.31
Applying the foregoing to the present case, the LA had the original jurisdiction over the complaint for illegal
dismissal because Cosare, although an officer of Broadcom for being its AVP for Sales, was not a "corporate
officer" as the term is defined by law. We emphasized in Real v. Sangu Philippines, Inc.32 the definition of
corporate officers for the purpose of identifying an intra-corporate controversy. Citing Garcia v. Eastern
Telecommunications Philippines, Inc.,33 we held:
" Corporate officers in the context of Presidential Decree No. 902-A are those officers of the corporation who
are given that character by the Corporation Code or by the corporations by-laws. There are three specific
officers whom a corporation must have under Section 25 of the Corporation Code. These are the president,
secretary and the treasurer. The number of officers is not limited to these three. A corporation may have such
other officers as may be provided for by its by-laws like, but not limited to, the vice-president, cashier, auditor
or general manager. The number of corporate officers is thus limited by law and by the corporations bylaws."34 (Emphasis ours)
In Tabang v. NLRC,35 the Court also made the following pronouncement on the nature of corporate offices:
It has been held that an "office" is created by the charter of the corporation and the officer is elected by the
directors and stockholders. On the other hand, an "employee" usually occupies no office and generally is
employed not by action of the directors or stockholders but by the managing officer of the corporation who
also determines the compensation to be paid to such employee.36 (Citations omitted)
As may be deduced from the foregoing, there are two circumstances which must concur in order for an
individual to be considered a corporate officer, as against an ordinary employee or officer, namely: (1) the
creation of the position is under the corporations charter or by-laws; and (2) the election of the officer is by
the directors or stockholders. It is only when the officer claiming to have been illegally dismissed is classified
as such corporate officer that the issue is deemed an intra-corporate dispute which falls within the jurisdiction
of the trial courts.
To support their argument that Cosare was a corporate officer, the respondents referred to Section 1, Article
IV of Broadcoms by-laws, which reads:
ARTICLE IV
OFFICER
Section 1. Election / Appointment Immediately after their election, the Board of Directors shall formally
organize by electing the President, the Vice-President, the Treasurer, and the Secretary at said meeting.
The Board may, from time to time, appoint such other officers as it may determine to be necessary or proper.
Any two (2) or more compatible positions may be held concurrently by the same person, except that no one
shall act as President and Treasurer or Secretary at the same time.37 (Emphasis ours)
This was also the CAs main basis in ruling that the matter was an intra-corporate dispute that was within the
trial courts jurisdiction.
The Court disagrees with the respondents and the CA. As may be gleaned from the aforequoted provision, the
only officers who are specifically listed, and thus with offices that are created under Broadcoms by-laws are
the following: the President, Vice-President, Treasurer and Secretary. Although a blanket authority provides
for the Boards appointment of such other officers as it may deem necessary and proper, the respondents
failed to sufficiently establish that the position of AVP for Sales was created by virtue of an act of Broadcoms
board, and that Cosare was specifically elected or appointed to such position by the directors. No board
resolutions to establish such facts form part of the case records. Further, it was held in Marc II Marketing, Inc.
v. Joson38 that an enabling clause in a corporations by-laws empowering its board of directors to create
additional officers, even with the subsequent passage of a board resolution to that effect, cannot make such
position a corporate office. The board of directors has no power to create other corporate offices without first
amending the corporate by-laws so as to include therein the newly created corporate office.39 "To allow the
creation of a corporate officer position by a simple inclusion in the corporate by-laws of an enabling clause
empowering the board of directors to do so can result in the circumvention of that constitutionally wellprotected right [of every employee to security of tenure]."40
The CAs heavy reliance on the contents of the General Information Sheets41, which were submitted by the
respondents during the appeal proceedings and which plainly provided that Cosare was an "officer" of
Broadcom, was clearly misplaced. The said documents could neither govern nor establish the nature of the
office held by Cosare and his appointment thereto. Furthermore, although Cosare could indeed be classified as
an officer as provided in the General Information Sheets, his position could only be deemed a regular office,
and not a corporate office as it is defined under the Corporation Code. Incidentally, the Court noticed that
although the Corporate Secretary of Broadcom, Atty. Efren L. Cordero, declared under oath the truth of the
matters set forth in the General Information Sheets, the respondents failed to explain why the General
Information Sheet officially filed with the Securities and Exchange Commission in 2011 and submitted to the
CA by the respondents still indicated Cosare as an AVP for Sales, when among their defenses in the charge of
illegal dismissal, they asserted that Cosare had severed his relationship with the corporation since the year
2009.
Finally, the mere fact that Cosare was a stockholder of Broadcom at the time of the cases filing did not
necessarily make the action an intra- corporate controversy. "Not all conflicts between the stockholders and
the corporation are classified as intra-corporate. There are other facts to consider in determining whether the
dispute involves corporate matters as to consider them as intra-corporate controversies."42 Time and again,
the Court has ruled that in determining the existence of an intra-corporate dispute, the status or relationship
of the parties and the nature of the question that is the subject of the controversy must be taken into
account.43 Considering that the pending dispute particularly relates to Cosares rights and obligations as a
regular officer of Broadcom, instead of as a stockholder of the corporation, the controversy cannot be deemed
intra-corporate. This is consistent with the "controversy test" explained by the Court in Reyes v. Hon. RTC, Br.
142,44 to wit:
Under the nature of the controversy test, the incidents of that relationship must also be considered for the
purpose of ascertaining whether the controversy itself is intra-corporate. The controversy must not only be
rooted in the existence of an intra-corporate relationship, but must as well pertain to the enforcement of the
parties correlative rights and obligations under the Corporation Code and the internal and intra-corporate
regulatory rules of the corporation. If the relationship and its incidents are merely incidental to the
controversy or if there will still be conflict even if the relationship does not exist, then no intra-corporate
controversy exists.45 (Citation omitted)
It bears mentioning that even the CAs finding46 that Cosare was a director of Broadcom when the dispute
commenced was unsupported by the case records, as even the General Information Sheet of 2009 referred to
in the CA decision to support such finding failed to provide such detail.
All told, it is then evident that the CA erred in reversing the NLRCs ruling that favored Cosare solely on the
ground that the dispute was an intra-corporate controversy within the jurisdiction of the regular courts.
The charge of constructive dismissal
Towards a full resolution of the instant case, the Court finds it appropriate to rule on the correctness of the
NLRCs ruling finding Cosare to have been illegally dismissed from employment.
In filing his labor complaint, Cosare maintained that he was constructively dismissed, citing among other
circumstances the charges that were hurled and the suspension that was imposed against him via Arevalos
memo dated March 30, 2009. Even prior to such charge, he claimed to have been subjected to mental torture,
having been locked out of his files and records and disallowed use of his office computer and access to
personal belongings.47 While Cosare attempted to furnish the respondents with his reply to the charges, the
latter refused to accept the same on the ground that it was filed beyond the 48-hour period which they
provided in the memo.
Cosare further referred to the circumstances that allegedly transpired subsequent to the service of the memo,
particularly the continued refusal of the respondents to allow Cosares entry into the companys premises.
These incidents were cited in the CA decision as follows:
On March 31, 2009, [Cosare] reported back to work again. He asked Villareal if he could retrieve his personal
belongings, but the latter said that x x x Arevalo directed her to deny his request, so [Cosare] again waited at
the receiving section of the office. On April 1, 2009, [Cosare] was not allowed to enter the office premises. He
was asked to just wait outside of the Tektite (PSE) Towers, where [Broadcom] had its offices, for further
instructions on how and when he could get his personal belongings. [Cosare] waited until 8 p.m. for
instructions but none were given. Thus, [Cosare] sought the assistance of the officials of Barangay San
Antonio, Pasig who advised him to file a labor or replevin case to recover his personal belongings. x x x.48
(Citation omitted)
It is also worth mentioning that a few days before the issuance of the memo dated March 30, 2009, Cosare
was allegedly summoned to Arevalos office and was asked to tender his immediate resignation from the
company, in exchange for a financial assistance of P300,000.00.49 The directive was said to be founded on
Arevalos choice to retain Abiogs employment with the company.50 The respondents failed to refute these
claims.
Given the circumstances, the Court agrees with Cosares claim of constructive and illegal dismissal.
"[C]onstructive dismissal occurs when there is cessation of work because continued employment is rendered
impossible, unreasonable, or unlikely as when there is a demotion in rank or diminution in pay or when a clear
discrimination, insensibility, or disdain by an employer becomes unbearable to the employee leaving the latter
with no other option but to quit."51 In Dimagan v. Dacworks United, Incorporated,52 it was explained:
The test of constructive dismissal is whether a reasonable person in the employees position would have felt
compelled to give up his position under the circumstances. It is an act amounting to dismissal but is made to
appear as if it were not. Constructive dismissal is therefore a dismissal in disguise. The law recognizes and
resolves this situation in favor of employees in order to protect their rights and interests from the coercive
acts of the employer.53 (Citation omitted)
It is clear from the cited circumstances that the respondents already rejected Cosares continued involvement
with the company. Even their refusal to accept the explanation which Cosare tried to tender on April 2, 2009
further evidenced the resolve to deny Cosare of the opportunity to be heard prior to any decision on the
termination of his employment. The respondents allegedly refused acceptance of the explanation as it was
filed beyond the mere 48-hour period which they granted to Cosare under the memo dated March 30, 2009.
However, even this limitation was a flaw in the memo or notice to explain which only further signified the
respondents discrimination, disdain and insensibility towards Cosare, apparently resorted to by the
respondents in order to deny their employee of the opportunity to fully explain his defenses and ultimately,
retain his employment. The Court emphasized in King of Kings Transport, Inc. v. Mamac54 the standards to be
observed by employers in complying with the service of notices prior to termination:
[T]he first written notice to be served on the employees should contain the specific causes or grounds for
termination against them, and a directive that the employees are given the opportunity to submit their
written explanation within a reasonable period. "Reasonable opportunity" under the Omnibus Rules means
every kind of assistance that management must accord to the employees to enable them to prepare
adequately for their defense. This should be construed as a period of at least five (5) calendar days from
receipt of the notice to give the employees an opportunity to study the accusation against them, consult a
union official or lawyer, gather data and evidence, and decide on the defenses they will raise against the
complaint. Moreover, in order to enable the employees to intelligently prepare their explanation and
defenses, the notice should contain a detailed narration of the facts and circumstances that will serve as basis
for the charge against the employees. A general description of the charge will not suffice. Lastly, the notice
should specifically mention which company rules, if any, are violated and/or which among the grounds under
Art. 282 is being charged against the employees.55 (Citation omitted, underscoring ours, and emphasis
supplied)
In sum, the respondents were already resolute on a severance of their working relationship with Cosare,
notwithstanding the facts which could have been established by his explanations and the respondents full
investigation on the matter. In addition to this, the fact that no further investigation and final disposition
appeared to have been made by the respondents on Cosares case only negated the claim that they actually
intended to first look into the matter before making a final determination as to the guilt or innocence of their
employee. This also manifested from the fact that even before Cosare was required to present his side on the
charges of serious misconduct and willful breach of trust, he was summoned to Arevalos office and was asked
to tender his immediate resignation in exchange for financial assistance.
The clear intent of the respondents to find fault in Cosare was also manifested by their persistent accusation
that Cosare abandoned his post, allegedly signified by his failure to report to work or file a leave of absence
beginning April 1, 2009. This was even the subject of a memo56 issued by Arevalo to Cosare on April 14, 2009,
asking him to explain his absence within 48 hours from the date of the memo. As the records clearly indicated,
however, Arevalo placed Cosare under suspension beginning March 30, 2009. The suspension covered access
to any and all company files/records and the use of the assets of the company, with warning that his failure to
comply with the memo would be dealt with drastic management action. The charge of abandonment was
inconsistent with this imposed suspension. "Abandonment is the deliberate and unjustified refusal of an
employee to resume his employment. To constitute abandonment of work, two elements must concur: (1)
the employee must have failed to report for work or must have been absent without valid or justifiable
reason; and (2) there must have been a clear intention on the part of the employee to sever the employeremployee relationship manifested by some overt act."57 Cosares failure to report to work beginning April 1,
2009 was neither voluntary nor indicative of an intention to sever his employment with Broadcom. It was
illogical to be requiring him to report for work, and imputing fault when he failed to do so after he was
specifically denied access to all of the companys assets. As correctly observed by the NLRC:
[T]he Respondent[s] had charged [Cosare] of abandoning his employment beginning on April 1, 2009.
However[,] the show-cause letter dated March 3[0], 2009 (Annex "F", ibid) suspended [Cosare] from using not
only the equipment but the "assets" of Respondent [Broadcom]. This insults rational thinking because the
Respondents tried to mislead us and make [it appear] that [Cosare] failed to report for work when they had in
fact had [sic] placed him on suspension. x x x.58
Following a finding of constructive dismissal, the Court finds no cogent reason to modify the NLRC's monetary
awards in Cosare's favor. In Robinsons Galleria/Robinsons Supermarket Corporation v. Ranchez,59 the Court
reiterated that an illegally or constructively dismissed employee is entitled to: (1) either reinstatement, if
viable, or separation pay, if reinstatement is no longer viable; and (2) backwages.60 The award of exemplary
damages was also justified given the NLRC's finding that the respondents acted in bad faith and in a wanton,
oppressive and malevolent manner when they dismissed Cosare. It is also by reason of such bad faith that
Arevalo was correctly declared solidarily liable for the monetary awards.
WHEREFORE, the petition is GRANTED. The Decision dated November 24, 2011 and Resolution dated March
26, 2012 of the Court of Appeals in CA-G.R. SP. No. 117356 are SET ASIDE. The Decision dated August 24, 2010
of the National Labor Relations Commission in favor of petitioner Raul C. Cosare is AFFIRMED.
SO ORDERED.
BIENVENIDO L. REYES
Associate Justice
6. Art. 40/DO No. 75-06, Alien Employment Permit

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 191455
March 12, 2014
DREAMLAND HOTEL RESORT and WESTLEY J. PRENTICE, Petitioners,

vs.
STEPHEN B. JOHNSON, Respondent.
DECISION
REYES, J.:
Before the Court is a Petition for Review on Certiorari1 assailing the December 14, 20092 and February 11,
20103 Resolutions of the Court of Appeals (CA) in CA-G.R. SP No. 111693 which dismissed outright the petition
for certiorari on technical grounds.
Dreamland Hotel Resort (Dreamland) and its President, Westley J. Prentice (Prentice) (petitioners) alleged the
following facts in the instant petition:
9. Dreamland is a corporation duly registered with the Securities and Exchange Commission on January 15,
2003 to exist for a period of fifty [50] years with registration number SEC A 1998-6436. Prentice is its current
President and Chief Executive Officer. It is engaged in the hotel, restaurant and allied businesses. Dreamland is
presently undertaking operations of its business at National Highway, Sto. Tomas, Matain Subic, Zambales,
2209.
10. Respondent Stephen B. Johnson is an Australian citizen who came to the Philippines as a
businessman/investor without the authority to be employed as the employee/officer of any business as he
was not able to secure his Alien Employment Permit ["AEP" for brevity], which fact was duly supported by the
Certification dated March 14, 2008 of the Department of Labor and Employment ["DOLE" for brevity] Regional
Director, Regional Office No. III, San Fernando City, Pampanga,
x x x.
11. As a fellow Australian citizen, Johnson was able to convince Prentice to accept his offer to invest in
Dreamland and at the same time provide his services as Operations Manager of Dreamland with a promise
that he will secure an AEP and Tax Identification Number ["TIN" for brevity] prior to his assumption of work.
12. Sometime on June 21, 2007, Prentice and Johnson entered into an Employment Agreement, which
stipulates among others, that the [sic] Johnson shall serve as Operations Manager of Dreamland from August
1, 2007 and shall serve as such for a period of three (3) years.
13. Before entering into the said agreement[,] Prentice required the submission of the AEP and TIN from
Johnson. Johnson promised that the same shall be supplied within one (1) month from the signing of the
contract because the application for the TIN and AEP were still under process. Thus[,] it was agreed that the
efficacy of the said agreement shall begin after one (1) month or on August 1, 2007. x x x.
14. On or about October 8, 2007, Prentice asked on several occasions the production of the AEP and TIN from
Johnson. Johnson gave excuses and promised that he is already in possession of the requirements. Believing
the word of Johnson, Dreamland commenced a dry run of its operations.
15. Johnson worked as a hotel and resort Operations Manager only at that time. He worked for only about
three (3) weeks until he suddenly abandoned his work and subsequently resigned as Operations Manager
starting November 3, 2007. He never reported back to work despite several attempts of Prentice to clarify his
issues. x x x.4
On the other hand, respondent Stephen B. Johnson (Johnson) averred that:
4. There is also no truth to the allegation that it was [Johnson] who "offered" and "convinced" petitioner
Prentice to "invest" in and provide his services to petitioner Dreamland Hotel Resort x x x. The truth of the
matter is that it was petitioners who actively advertised for a resort manager for Dreamland Hotel. x x x
5. It was in response to these advertisements that private respondent Johnson contacted petitioners to
inquire on the terms for employment offered. It was Prentice who offered employment and convinced
Johnson to give out a loan, purportedly so the resort can be completed and operational by August 2007.
Believing the representations of petitioner Prentice, private respondent Johnson accepted the employment as
Resort Manager and loaned money to petitioners [consisting of] his retirement pay in the amount of One
Hundred Thousand US Dollars (USD 100,000.00) to finish construction of the resort. x x x.
6. From the start of August 2007, as stipulated in the Employment Agreement, respondent Johnson already
reported for work. It was then that he found out to his dismay that the resort was far from finished. However,
he was instructed to supervise construction and speak with potential guests. He also undertook the overall
preparation of the guestrooms and staff for the opening of the hotel, even performing menial tasks (i.e.
inspected for cracked tiles, ensured proper grout installation, proper lighting and air-conditioning unit
installation, measured windows for curtain width and showers for shower curtain rods, unloaded and installed
mattresses, beddings, furniture and appliances and even ironed and hung guest room curtains).
xxxx
8. As [Johnson] remained unpaid since August 2007 and he has loaned all his money to petitioners, he asked
for his salary after the resort was opened in October 2007 but the same was not given to him by petitioners.
[Johnson] became very alarmed with the situation as it appears that there was no intention to pay him his
salary, which he now depended on for his living as he has been left penniless. He was also denied the benefits
promised him as part of his compensation such as service vehicles, meals and insurance.
9. [Johnson] was also not given the authority due to him as resort manager. Prentice countermanded his
orders to the staff at every opportunity. Worse, he would even be berated and embarrassed in front of the
staff. Prentice would go into drunken tiffs, even with customers and [Johnson] was powerless to prohibit
Prentice. It soon became clear to him that he was only used for the money he loaned and there was no real
intention to have him as resort manager of Dreamland Hotel.
10. Thus, on November 3, 2007, after another embarrassment was handed out by petitioner Prentice in front
of the staff, which highlighted his lack of real authority in the hotel and the disdain for him by petitioners,
respondent Johnson was forced to submit his resignation, x x x. In deference to the Employment Agreement
signed, [Johnson] stated that he was willing to continue work for the three month period stipulated therein.
11. However, in an SMS or text message sent by Prentice to [Johnson] on the same day at around 8:20 pm, he
was informed that " I consider [yo]ur resignation as immediate". Despite demand, petitioners refused to pay
[Johnson] the salaries and benefits due him.5
On January 31, 2008, Johnson filed a Complaint for illegal dismissal and non-payment of salaries, among
others, against the petitioners.
On May 23, 2008, the Labor Arbiter (LA) rendered a Decision6 dismissing Johnsons complaint for lack of merit
with the finding that he voluntarily resigned from his employment and was not illegally dismissed. We quote:
There [is] substantial evidence on record that [Johnson] indeed resigned voluntarily from his position by his
mere act of tendering his resignation and immediately abandoned his work as Operations Manager from the
time that he filed said resignation letter on November 3, 2007 and never returned to his work up to the filing
of this case. Evidence on record also show that [Johnson] only served as Operations Manager for a period of
three (3) weeks after which he tendered his voluntary resignation and left his job. This fact was not denied or
questioned by him. His claim that there was breach of employment contract committed by the respondents
and that he was not refunded his alleged investment with the respondent Dreamland Hotel and Resort were
not properly supported with substantial evidence and besides these issues are not within the ambit of
jurisdiction of this Commission.
There being competent, concrete and substantial evidence to confirm the voluntary resignation of [Johnson]
from his employment, there was no illegal dismissal committed against him and for him to be entitled to
reinstatement to his former position and backwages.
xxxx
WHEREFORE, premises considered, let this case be as it is hereby ordered DISMISSED for lack of merit.
All the money claims of the complainant are likewise ordered dismissed for lack of legal basis.
SO ORDERED.7
Dissatisfied, Johnson appealed to the National Labor Relations Commission (NLRC). The NLRC rendered its
Decision8 on April 30, 2009, the dispositive portion of which reads:
WHEREFORE, the decision appeared from is hereby REVERSED. Respondent Wes[t]ley Prentice and/or
Dreamland Resort & Hotel, Inc[.] are hereby ordered to pay [Johnson] the following:
1. Backwages computed at [P]60,000.00 monthly from November
3, 2007 up to the finality of this decision;
2. Separation pay equivalent to one months salary, or [P]60,000.00;
3. Unpaid salaries from August 1, 2007 to November 1, 2007 amounting to a total of [P]172,800.00.
SO ORDERED.9
The NLRC also noted the following:
Insofar as the charge of abandonment against [Johnson] is concerned, it is significant that the contention that
[Johnson] received a total of [P]172,000.00 from the [petitioners] since July 2007 is not supported by the
evidence x x x submitted by the [petitioners]. Except for a promissory note x x x for [P]2,200.00, the pieces of
evidence in question do not bear [Johnsons] signature, and do not therefore constitute proof of actual receipt
by him of the amounts stated therein. Thus, based on the evidence and on the admission by [Johnson] that he
received the amount of [P]5,000.00 from the [petitioners], it appears that [Johnson] received a total of only
[P]7,200.00 from the [petitioners]. Since based on the Employment Agreement, his employment commenced
on August 1, 2007, it follows that as of November 3, 2007, when he tendered his resignation, the [petitioners]
had failed to pay him a total of [P]172,800.00 representing his unpaid salaries for three months ([P]60,000.00
x 3 mos. = [P]180,000.00 [P]7,200 = [P]172,800.00). Even the most reasonable employee would consider
quitting his job after working for three months and receiving only an insignificant fraction of his salaries. There
was, therefore, not an abandonment of employment nor a resignation in the real sense, but a constructive
dismissal, which is defined as an involuntary resignation resorted to when continued employment is rendered
impossible, unreasonable or unlikely x x x. Consequently, [Johnson] is entitled to reinstatement with full
backwages. However, due to the strained relation between the parties, which renders his reinstatement
inadvisable, separation pay may be awarded in lieu of reinstatement.10
Consequently, the petitioners elevated the NLRC decision to the CA by way of Petition for Certiorari with
Prayer for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction under Rule 47.
In the assailed Resolution11 dated December 14, 2009, the CA dismissed the petition for lack of proof of
authority and affidavit of service of filing as required by Section 13 of the 1997 Rules of Procedure. The
subsequent motion for reconsideration filed by the petitioners was likewise denied by the CA in a
Resolution12 dated February 11, 2010.
Undaunted, the petitioners filed before this Court the present Petition for Review on Certiorari, raising the
following issues, viz:
A.
THE HONORABLE [CA] COMMITTED A REVERSIBLE ERROR IN PROMULGATING ITS FIRST RESOLUTION
(DECEMBER 14, 2009) WHICH OUTRIGHTLY DISMISSED PETITIONERS PETITION FOR CERTIORARI.
B.
THE HONORABLE [CA] COMMITTED A REVERSIBLE ERROR IN PROMULGATING ITS SECOND RESOLUTION
(FEBRUARY 11, 2010) WHICH DENIED FOR LACK OF MERIT PETITIONERS MOTION FOR
RECONSIDERATION.
C.
THE HONORABLE [CA] COMMITTED A REVERSIBLE ERROR IN NOT GIVING DUE CONSIDERATION TO THE
MERITS OF THE PETITIONERS PETITION AND IN NOT GRANTING THEIR PRAYER FOR TEMPORARY
RESTRAINING ORDER[.]13
The petition is partially granted.
At its inception, the Court takes note of the Resolutions dated December 14, 2009 and February 11, 2010 of
the CA dismissing the Petition for Certiorari due to the following infirmities:
1. The affiant has no proof of authority to file the petition in behalf of petitioner Dreamland.
2. The petition has no appended affidavit of service to show proof of service of filing as required by
Sec. 13 of the 1997 Rules of Civil Procedure.14
To justify their stance that the CA should have considered the merits of the case, instead of dismissing merely
on procedural grounds, the petitioners cited numerous cases wherein the Court has decided to waive the
strict application of the Rules in the interest of substantial justice.15 While "[u]tter disregard of [the rules of
procedure] cannot justly be rationalized by harking on the policy of liberal construction,"16 the Court
recognizes badges of inequity present in the case at bar, which would be seemingly branded with approval
should the Court turn a blind eye and dismiss this petition on procedural grounds alone.
"While it is desirable that the Rules of Court be faithfully observed, courts should not be so strict about
procedural lapses that do not really impair the proper administration of justice. If the rules are intended to
ensure the proper and orderly conduct of litigation, it is because of the higher objective they seek which are
the attainment of justice and the protection of substantive rights of the parties. Thus, the relaxation of
procedural rules, or saving a particular case from the operation of technicalities when substantial justice
requires it, as in the instant case, should no longer be subject to cavil."17
Time and again, this Court has emphasized that procedural rules should be treated with utmost respect and
due regard, since they are designed to facilitate the adjudication of cases to remedy the worsening problem of
delay in the resolution of rival claims and in the administration of justice. "From time to time, however, we
have recognized exceptions to the Rules but only for the most compelling reasons where stubborn obedience
to the Rules would defeat rather than serve the ends of justice."18 "It is true that procedural rules may be
waived or dispensed with in the interest of substantial justice."19
Brushing aside technicalities, in the utmost interest of substantial justice and taking into consideration the
varying and conflicting factual deliberations by the LA and the NLRC, the Court shall now delve into the merits
of the case.
The petitioners contend that the employment of Johnson as operations manager commenced only on October
8, 2007 and not on August 1, 2007. However, the employment contract categorically stated that the "term of
employment shall commence on [August 1, 2007]." Furthermore, the factual allegations of Johnson that he
actually worked from August 1, 2007 were neither sufficiently rebutted nor denied by the petitioners. As
Johnson has specifically set forth in his reply before the LA:
Although the resort did not open until approximately 8th October 2007, [Johnsons] employment began, as
per Employment Agreement, on 1st August 2007. During the interim period[, Johnson] was frequently
instructed by [Prentice] to supervise the construction staff and speak with potential future guests who visited
the site out of curiosity. Other duties carried out by [Johnson] prior to [the] opening included the overall
preparation of the guest rooms for eventual occupation ensuring cracked tiles were replaced, ensuring grout
was properly installed between tiles, ensuring all lighting and air conditioning [were] functioning, measuring
windows for curtain width, measuring showers for shower curtain rods and installing shower curtains. Other
duties included the unloading, carrying and installation of mattresses, bedding[s], TVs, refrigerators and other
furnishings and ironing curtains x x x.20
Notably, it was only in their Motion for Reconsideration21 of the NLRC decision where the petitioners
belatedly disagreed that Johnson performed the abovementioned tasks and argued that had Johnson done the
tasks he enumerated, those were tasks foreign and alien to his position as operations manager and [were
done] without their knowledge and consent.22
Nevertheless, Prentice did not deny that he ordered Johnson to speak with potential guests of the hotel. In
fact, the petitioners admitted and submitted documents23 which showed that Johnson has already taken his
residence in the hotel as early as July 2007a part of Johnsons remuneration as the hotel operations
manager. In presenting such documents, the petitioners would want to impress upon the Court that their act
of accommodating Johnson was merely due to his being a fellow Australian national.
As it could not be determined with absolute certainty whether or not Johnson rendered the services he
mentioned during the material time, doubt must be construed in his favor for the reason that "the consistent
rule is that if doubt exists between the evidence presented by the employer and that by the employee, the
scales of justice must be tilted in favor of the latter."24 What is clear upon the records is that Johnson had
already taken his place in the hotel since July 2007.
For the petitioners failure to disprove that Johnson started working on August 1, 2007, as stated on the
employment contract, payment of his salaries on said date, even prior to the opening of the hotel is
warranted.
The petitioners also maintain that they have paid the amount of P7,200.00 to Johnson for his three weeks of
service from October 8, 2007 until November 3, 2007, the date of Johnsons resignation,25 which Johnson did
not controvert. Even so, the amount the petitioners paid to Johnson as his three-week salary is significantly
deficient as Johnsons monthly salary as stipulated in their contract is P60,000.0026. Thus, the amount which
Johnson should have been paid is P45,000.00 and not P7,200.00. In light of this deficiency, there is more
reason to believe that the petitioners withheld the salary of Johnson without a valid reason. If they indeed
believed that Johnson deserves to be paid only for three-week worth of service as operations manager, then
they should still have paid him the amount due for three weeks of work rendered.
Another argument posited by the petitioners is that the employment contract executed by the parties is
inefficacious because the employment contract is subject to the presentation of Johnson of his Alien
Employment Permit (AEP) and Tax Identification Number (TIN).
Again, this statement is wanting of merit.
Johnson has adduced proof that as a permanent resident, he is exempted from the requirement of securing an
AEP as expressed under Department Order No. 75-06, Series of 2006 of the Department of Labor and
Employment (DOLE), which we quote:
Rule I- Coverage and Exemption
xxxx
2. Exemption. The following categories of foreign nationals are exempt from securing an employment permit:
xxxx
2.7 Resident foreign nationals
Furthermore, Johnson submitted a Certification27 from DOLE Regional Office III, stating that he is exempted
from securing an AEP as a holder of Permanent Resident Visa. Consequently, the condition imposed upon
Johnsons employment, if there is any, is in truth without effect to its validity.
Anent the requirement of securing a TIN to make the contract of employment efficacious, records show that
Johnson secured his TIN only on December 200728 after his resignation as operations manager. Nevertheless,
this does not negate the fact that the contract of employment had already become effective even prior to
such date.
In addition to the foregoing, there is no stipulation in the employment contract itself that the same shall only
be effective upon the submission of AEP and TIN. The petitioners did not present any proof to support this
agreement prior to the execution of the employment contract. In the case of Ortaez v. CA29, the Court held:
Spoken words could be notoriously unreliable unlike a written contract which speaks of a uniform language.
Thus, under the general rule in Section 9 of Rule 130 of the Rules of Court, when the terms of an agreement
were reduced to writing, as in this case, it is deemed to contain all the terms agreed upon and no evidence of
such terms can be admitted other than the contents thereof. x x x.30 (Citations omitted)
As regards the NLRC findings that Johnson was constructively dismissed and did not abandon his work, the
Court is in consonance with this conclusion with the following basis:
Even the most reasonable employee would consider quitting his job after working for three months and
receiving only an insignificant fraction of his salaries. There was, therefore, not an abandonment of
employment nor a resignation in the real sense, but a constructive dismissal, which is defined as an
involuntary resignation resorted to when continued employment is rendered impossible, unreasonable or
unlikely x x x.31
The petitioners aver that considering that Johnson tendered his resignation and abandoned his work, it is his
burden to prove that his resignation was not voluntary on his part.32
With this, the Court brings to mind its earlier ruling in the case of SHS Perforated Materials, Inc. v. Diaz33
where it held that:
"There is constructive dismissal if an act of clear discrimination, insensibility, or disdain by an employer
becomes so unbearable on the part of the employee that it would foreclose any choice by him except to
forego his continued employment. It exists where there is cessation of work because continued employment is
rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank and a diminution in
pay."34
It is impossible, unreasonable or unlikely that any employee, such as Johnson would continue working for an
employer who does not pay him his salaries. Applying the Courts pronouncement in Duldulao v. CA35, the
Court construes that the act of the petitioners in not paying Johnson his salaries for three months has become
unbearable on the latters part that he had no choice but to cede his employment with them. The Court
quotes the pertinent sections of Johnsons resignation letter which reflects the real reason why he was
resigning as operations manager of the hotel:
I hereby tender my resignation to you, Mr[.] Wes Prentice, Dreamland Resort, Subic, Zambales, Philippines.
Since joining Dreamland Resort & Hotel over three months ago I have put my heart and soul into the business.
I have donated many hours of my personal time. I have frequently worked seven days a week and twelve to
thirteen hours a day. I am now literally penniless, due totally to the fact that I have lent you and your
resort/hotel well over $200,000AU (approx 8million pesos) and your non-payment of wages to me from 1st
August 2007 as per Employment Agreement. x x x.36 (Emphasis and underscoring ours)
The above preceding statement only goes to show that while it was Johnson who tendered his resignation, it
was due to the petitioners acts that he was constrained to resign. The petitioners cannot expect Johnson to
tolerate working for them without any compensation.
Since Johnson was constructively dismissed, he was illegally dismissed. As to the reliefs granted to an
employee who is illegally dismissed, Golden Ace Builders v. Talde37 referring to Macasero v. Southern
Industrial Gases Philippines38 is instructive:
Thus, an illegally dismissed employee is entitled to two reliefs: backwages and reinstatement. The two reliefs
provided are separate and distinct. In instances where reinstatement is no longer feasible because of strained
relations between the employee and the employer, separation pay is granted. In effect, an illegally dismissed
employee is entitled to either reinstatement, if viable, or separation pay if reinstatement is no longer viable,
and backwages.
The normal consequences of respondents illegal dismissal, then, are reinstatement without loss of seniority
rights, and payment of backwages computed from the time compensation was withheld up to the date of
actual reinstatement. Where reinstatement is no longer viable as an option, separation pay equivalent to one
(1) month salary for every year of service should be awarded as an alternative. The payment of separation pay
is in addition to payment of backwages.39 (Emphasis and underscoring supplied)
The case of Golden Ace further provides:
"The accepted doctrine is that separation pay may avail in lieu of reinstatement if reinstatement is no longer
practical or in the best interest of the parties. Separation pay in lieu of reinstatement may likewise be awarded
if the employee decides not to be reinstated." x x x
Under the doctrine of strained relations, the payment of separation pay is considered an acceptable
alternative to reinstatement when the latter option is no longer desirable or viable. On one hand, such
payment liberates the employee from what could be a highly oppressive work environment.1wphi1 On the
other hand, it releases the employer from the grossly unpalatable obligation of maintaining in its employ a
worker it could no longer trust.40
In the present case, the NLRC found that due to the strained relations between the parties, separation pay is
to be awarded to Johnson in lieu of his reinstatement.
The NLRC held that Johnson is entitled to backwages from November 3, 2007 up to the finality of the decision;
separation pay equivalent to one month salary; and unpaid salaries from August 1, 2007 to November 1, 2007
amounting to a total of P172,800.00.41
While the Court agrees with the NLRC that the award of separation pay and unpaid salaries is warranted, the
Court does not lose sight of the fact that the employment contract states that Johnson's employment is for a
term of three years.
Accordingly, the award of backwages should be computed from November 3, 2007 to August 1, 2010 - which
is three years from August 1, 2007. Furthermore, separation pay is computed from the commencement of
employment up to the time of termination, including the imputed service for which the employee is entitled
to backwages.42 As one-month salary is awarded as separation pay for every year of service, including
imputed service, Johnson should be paid separation pay equivalent to his three-month salary for the threeyear contract.
WHEREFORE, the Resolutions dated December 14, 2009 and February 11, 2010 of the Court of Appeals in CAG.R. SP No. 111693 are hereby SET ASIDE. The Decision of the NLRC dated April 30, 2009 in NLRC LAC No. 07002711-08 is REINSTATED and AFFIRMED with MODIFICATIONS in the computation of backwages and
separation pay. Dreamland Hotel Resort and Westley Prentice are ORDERED to PAY Stephen Johnson
backwages of P60,000.00 per month which should be computed from November 3, 2007 to August 1, 2010
less the P.7,200.00 already paid to him. Likewise, separation pay of P180.000.00, representing Stephen
Johnson's three-year contract should be awarded.
SO ORDERED.
BIENVENIDO L. REYES
Associate Justice
7. Control that is indicative of an employer-employee relationship

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 195190
July 28, 2014
ROYALE HOMES MARKETING CORPORATION, Petitioner,

vs.
FIDEL P. ALCANTARA [deceased], substituted by his heirs, Respondent.
DECISION
DEL CASTILLO, J.:
Not every form of control that a hiring party imposes on the hired party is indicative of employee-employer
relationship. Rules and regulations that merely serve as guidelines towards the achievement of a mutually
desired result without dictating the means and methods of accomplishing it do not establish employeremployee relationship.1
This Petition for Review on Certiorari2 assails the June 23, 2010 Decision3 of the Court of Appeals (CA) in CAG.R. SP No. 109998 which (i) reversed and set aside the February 23, 2009 Decision4 of the National Labor
Relations Commission (NLRC), (ii) ordered petitioner Royale Homes Marketing Corporation (Royale Homes) to
pay respondent Fidel P. Alcantara (Alcantara) backwages and separation pay, and (iii) remanded the case to
the Labor Arbiter for the proper determination and computation of said monetary awards.
Also assailed in this Petition isthe January 18, 2011 Resolution5 of the CA denying Royale Homes Motion for
Reconsideration,6 as well as its Supplemental7 thereto.
Factual Antecedents
In 1994, Royale Homes, a corporation engaged in marketing real estates, appointed Alcantara asits Marketing
Director for a fixed period of one year. His work consisted mainly of marketing Royale Homes realestate
inventories on an exclusive basis. Royale Homes reappointed him for several consecutive years, the last of
which covered the period January 1 to December 31, 2003 where he held the position of Division 5 VicePresident-Sales.8
Proceedings before the Labor Arbiter
On December 17, 2003, Alcantara filed a Complaint for Illegal Dismissal9 against Royale Homes and its
President Matilde Robles, Executive Vice-President for Administration and Finance Ma. Melinda Bernardino,
and Executive Vice- President for Sales Carmina Sotto. Alcantara alleged that he is a regular employee of
Royale Homes since he is performing tasks that are necessary and desirable to its business; that in 2003 the
company gave him P1.2 million for the services he rendered to it; that in the first week of November 2003,
however, the executive officers of Royale Homes told him that they were wondering why he still had the gall
to come to office and sit at his table;10 and that the actsof the executive officers of Royale Homes amounted
to his dismissal from work without any valid or just cause and in gross disregard of the proper procedure for
dismissing employees. Thus, he alsoimpleaded the corporate officers who, he averred, effected his dismissal in
bad faith and in an oppressive manner.
Alcantara prayed to be reinstated tohis former position without loss of seniority rights and other privileges, as
well as to be paid backwages, moral and exemplary damages, and attorneys fees. He further sought that the
ownership of the Mitsubishi Adventure with Plate No. WHD-945 be transferred to his name.
Royale Homes, on the other hand, vehemently denied that Alcantara is its employee. It argued that the
appointment paper of Alcantara isclear that it engaged his services as an independent sales contractorfor a
fixed term of one year only. He never received any salary, 13th month pay, overtime pay or holiday pay from
Royale Homes as hewas paid purely on commission basis. In addition, Royale Homes had no control on how
Alcantara would accomplish his tasks and responsibilities as he was free to solicit sales at any time and by any
manner which he may deem appropriateand necessary. He is even free to recruit his own sales personnel to
assist him in pursuance of his sales target.
According to Royale Homes, Alcantara decided to leave the company after his wife, who was once
connectedwith it as a sales agent, had formed a brokerage company that directly competed with its business,
and even recruited some of its sales agents. Although this was against the exclusivity clause of the contract,
Royale Homes still offered to accept Alcantaras wife back so she could continue to engage in real estate
brokerage, albeit exclusively for Royale Homes. In a special management committee meeting on October
8,2003, however, Alcantara announced publicly and openly that he would leave the company by the end of
October 2003 and that he would no longer finish the unexpired term of his contract. He has decided to join his
wifeand pursue their own brokerage business. Royale Homes accepted Alcantaras decision. It then threw a
despedidaparty in his honor and, subsequently, appointed a new independent contractor. Two months after
herelinquished his post, however, Alcantara appeared in Royale Homes and submitted a letter claiming that
he was illegally dismissed.
Ruling of the Labor Arbiter
On September 7, 2005,the Labor Arbiter rendered a Decision11 holding that Alcantara is an employee of
Royale Homes with a fixed-term employment period from January 1 to December 31, 2003 and that the pretermination of his contract was against the law.Hence, Alcantara is entitled to an amount which he may have
earned on the average for the unexpired portion of the contract. With regard to the impleaded corporate
officers, the Labor Arbiter absolved them from any liability.
The dispositive portion of the Labor Arbiters Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Royale Homes
Marketing Corp. to pay the complainant the total amount of TWO HUNDRED SEVENTY SEVEN THOUSAND
PESOS (P277,000.00) representing his compensation/commission for the unexpired term of his contract.
All other claims are dismissed for lack of merit.
SO ORDERED.12
Both parties appealed the Labor Arbiters Decision to the NLRC. Royale Homes claimed that the Labor Arbiter
grievously erred inruling that there exists an employer-employee relationship between the parties. It insisted
that the contract between them expressly statesthat Alcantara is an independent contractor and not an
ordinary employee. Ithad no control over the means and methods by which he performed his work.
RoyaleHomes likewise assailed the award of P277,000.00 for lack of basis as it did not pre-terminate the
contract. It was Alcantara who chose not to finish the contract.
Alcantara, for his part, argued that the Labor Arbiter erred in ruling that his employment was for a fixed-term
and that he is not entitled to backwages, reinstatement, unpaid commissions, and damages.
Ruling of the National LaborRelations Commission
On February 23, 2009, the NLRC rendered its Decision,13 ruling that Alcantara is not an employee but a mere
independent contractor of Royale Homes. It based its ruling mainly on the contract which does not require
Alcantara to observe regular working hours. He was also free to adopt the selling methods he deemed most
effective and can even recruit sales agents to assist him in marketing the inventories of Royale Homes. The
NLRC also considered the fact that Alcantara was not receiving monthly salary, but was being paid on
commission basis as stipulated in the contract. Being an independent contractor, the NLRC concluded that
Alcantaras Complaint iscognizable by the regular courts.
The falloof the NLRC Decision reads:
WHEREFORE, premises considered, the Decision of Labor Arbiter Dolores Peralta-Beley dated September 5,
2005 is REVERSED and SET ASIDE and a NEW ONE rendered dismissing the complaint for lack of jurisdiction.
SO ORDERED.14
Alcantara moved for reconsideration.15 In a Resolution16 dated May 29, 2009, however, the NLRC denied his
motion.
Alcantara thus filed a Petition for Certiorari17 with the CA imputing grave abuse of discretion on the partof the
NLRC in ruling that he is not an employee of Royale Homes and that it is the regular courts which have
jurisdiction over the issue of whether the pre-termination of the contract is valid.
Ruling of the Court of Appeals
On June 23, 2010, the CA promulgated its Decision18 granting Alcantaras Petition and reversing the NLRCs
Decision. Applying the four-fold and economic reality tests, it held thatAlcantara is an employee of Royale
Homes. Royale Homes exercised some degree of control over Alcantara since his job, as observed by the CA, is
subject to company rules, regulations, and periodic evaluations. He was also bound by the company code of
ethics. Moreover, the exclusivity clause of the contract has made Alcantara economically dependent on Royale
Homes, supporting the theory that he is anemployee of said company.
The CA further held that Alcantaras termination from employment was without any valid or just cause, and it
was carried out in violation of his right to procedural due process. Thus, the CA ruled that he isentitled to
backwages and separation pay, in lieu of reinstatement. Considering,however, that the CA was not satisfied
with the proofadduced to establish the amount of Alcantaras annual salary, it remanded the caseto the Labor
Arbiter to determine the same and the monetary award he is entitled to. With regard to the corporate
officers, the CA absolved them from any liability for want of clear proof that they assented to the patently
unlawful acts or that they are guilty of bad faith orgross negligence. Thus:
WHEREFORE, in view of the foregoing, the instant PETITION is GRANTED. The assailed decision of the National
Labor Relations Commission in NLRC NCR CASE NO. 00-12-14311-03 NLRC CA NO. 046104-05 dated February
23, 2009 as well as the Resolution dated May 29, 2009 are hereby SET ASIDE and a new one is entered
ordering the respondent company to pay petitioner backwages which shall be computed from the time of his
illegal termination in October 2003 up to the finality of this decision, plus separation pay equivalent to one
month salary for every year of service. This case is REMANDED to the Labor Arbiter for the proper
determination and computation of back wages, separation pay and other monetary benefits that petitioner is
entitled to.
SO ORDERED.19
Royale Homes filed a Motion for Reconsideration20 and a Supplemental Motion for Reconsideration.21 In a
Resolution22 dated January 18, 2011, however, the CA denied said motions.
Issues
Hence, this Petition where Royale Homes submits before this Court the following issues for resolution:
A.
WHETHER THE COURT OF APPEALS HAS DECIDED THE INSTANT CASE NOT IN ACCORD WITH LAW AND
APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT REVERSED THE RULING OF THE NLRC
DISMISSING THE COMPLAINT OF RESPONDENT FOR LACK OF JURISDICTION AND CONSEQUENTLY, IN
FINDING THAT RESPONDENT WAS ILLEGALLY DISMISSED[.]
B.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN DISREGARDING THE EN
BANCRULING OF THIS HONORABLE COURT IN THE CASEOF TONGKO VS. MANULIFE, AND IN BRUSHING
ASIDE THE APPLICABLE RULINGS OF SONZA VS. ABS CBN AND CONSULTA V. CA[.]
C.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN DENYING THE MOTION
FOR RECONSIDERATION OF PETITIONER AND IN REFUSING TO CORRECT ITSELF[.]23
Royale Homes contends that its contract with Alcantara is clear and unambiguous it engaged his services as
an independent contractor. This can be readily seen from the contract stating that no employer-employee
relationship exists between the parties; that Alcantara was free to solicit sales at any time and by any manner
he may deem appropriate; that he may recruit sales personnel to assist him in marketing Royale Homes
inventories; and, thathis remunerations are dependent on his sales performance.
Royale Homes likewise argues that the CA grievously erred in ruling that it exercised control over Alcantara
based on a shallow ground that his performance is subject to company rules and regulations, code of ethics,
periodic evaluation, and exclusivity clause of contract. RoyaleHomes maintains that it is expected to exercise
some degree of control over its independent contractors,but that does not automatically result in the
existence ofemployer-employee relationship. For control to be consideredas a proof tending to establish
employer-employee relationship, the same mustpertain to the means and method of performing the work;
not on the relationship of the independent contractors among themselves or their persons or their source of
living.
Royale Homes further asserts that it neither hired nor wielded the power to dismiss Alcantara. It was
Alcantara who openly and publicly declared that he was pre-terminating his fixed-term contract.
The pivotal issue to be resolved in this case is whether Alcantara was an independent contractor or
anemployee of Royale Homes.
Our Ruling
The Petition is impressed with merit.
The determination of whether a party who renders services to another is an employee or an independent
contractor involves an evaluation of factual matters which, ordinarily, is not within the province of this Court.
In view of the conflicting findings of the tribunals below, however, this Court is constrained to go over the
factual matters involved in this case.24
The juridical relationship of the parties based on their written contract
The primary evidence of the nature of the parties relationship in this case is the written contract that they
signed and executed in pursuanceof their mutual agreement. While the existence of employer-employee
relationship is a matter of law, the characterization made by the parties in their contract as to the nature of
their juridical relationship cannot be simply ignored, particularly in this case where the parties written
contractunequivocally states their intention at the time they entered into it. In Tongko v. The Manufacturers
LifeInsurance Co. (Phils.), Inc.,25 it was held that:
To be sure, the Agreements legal characterization of the nature of the relationship cannot be conclusive and
binding on the courts; x x x the characterization of the juridical relationship the Agreement embodied is a
matter of law that is for the courts to determine. At the same time, though, the characterization the parties
gave to their relationship in the Agreement cannot simply be brushed aside because it embodiestheir intent at
the time they entered the Agreement, and they were governed by this understanding throughout their
relationship. At the very least, the provision on the absence of employer- employee relationship between the
parties can be an aid in considering the Agreement and its implementation, and in appreciating the other
evidence on record.26
In this case, the contract,27 duly signed and not disputed by the parties, conspicuously provides that "no
employer-employee relationship exists between" Royale Homes and Alcantara, as well as his sales agents. It is
clear that they did not want to be bound by employer-employee relationship atthe time ofthe signing of the
contract. Thus:
January 24, 2003
MR. FIDEL P. ALCANTARA
13 Rancho I
Marikina City
Dear Mr. Alcantara,

This will confirm yourappointment as Division 5 VICE[-]PRESIDENTSALES of ROYALE HOMES MARKETING
CORPORATION effective January 1, 2003 to December 31, 2003.
Your appointment entails marketing our real estate inventories on an EXCLUSIVE BASIS under such price,
terms and condition to be provided to you from time to time.
As such, you can solicit sales at any time and by any manner which you deem appropriate and necessary to
market our real estate inventories subject to rules, regulations and code of ethics promulgated by the
company. Further, you are free to recruit sales personnel/agents to assist you in marketing of our inventories
provided that your personnel/agents shall first attend the required seminars and briefing to be conducted by
us from time to time for the purpose of familiarizing them of terms and conditionsof sale, the natureof
property sold, etc., attendance of which shall be a condition precedent for their accreditation by us.
That as such Division 5 VICE[-]PRESIDENT-SALES you shall be entitled to:
1. Commission override of 0.5% for all option sales beginning January 1, 2003 booked by your sales
agents.
2. Budget allocation depending on your divisions sale performance as per our budget guidelines.
3. Sales incentive and other forms of company support which may be granted from time to time. It is
understood, however, that no employer-employee relationship exists between us, that of your sales
personnel/agents, and that you shall hold our company x x x, its officers and directors, free and
harmless from any and all claims of liability and damages arising from and/or incident to the marketing
of our real estate inventories.
We reserve, however, our right to terminate this agreement in case of violation of any company rules and
regulations, policies and code of ethics upon notice for justifiable reason.
Your performance shall be subject toperiodic evaluation based on factors which shall be determined by the
management.
If you are amenable to the foregoing terms and conditions, please indicate your conformity by signing on the
space provided below and return [to] us a duplicate copy of this letter, duly accomplished, to constitute as our
agreement on the matter.(Emphasis ours)
Since "the terms of the contract are clear and leave no doubt upon the intention of the contracting parties,
the literal meaning of itsstipulations should control."28 No construction is even needed asthey already
expressly state their intention. Also, this Court adopts the observation of the NLRC that it is rather strange on
the part of Alcantara, an educated man and a veteran sales broker who claimed to be receiving P1.2 million as
his annual salary, not to have contested the portion of the contract expressly indicating that he is not an
employee of Royale Homes if their true intention were otherwise.
The juridical relationship of the parties based on Control Test
In determining the existence of an employer-employee relationship, this Court has generally relied on 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 employers power to control the employee with respect to the means and
methods by which the work is to be accomplished.29 Among the four, the most determinative factor in
ascertaining the existence of employeremployee relationship is the "right of control test".30 "It is deemed to
be such an important factor that the other requisites may even be disregarded."31 This holds true where the
issues to be resolved iswhether a person who performs work for another is the latters employee or is an
independent contractor,32 as in this case. For where the person for whom the services are performed
reserves the right to control not only the end to beachieved, but also the means by which such end is reached,
employer-employee relationship is deemed to exist.33
In concluding that Alcantara is an employee of RoyaleHomes, the CA ratiocinated that since the performance
of his tasks is subject to company rules, regulations, code of ethics, and periodic evaluation, the element of
control is present.
The Court disagrees.
Not every form of control is indicative of employer-employee relationship.1wphi1 A person who performs
work for another and is subjected to its rules, regulations, and code of ethics does not necessarily become an
employee.34 As long as the level of control does not interfere with the means and methods of accomplishing
the assigned tasks, the rules imposed by the hiring party on the hired party do not amount to the labor law
concept of control that is indicative of employer-employee relationship. In Insular Life Assurance Co., Ltd. v.
National Labor Relations Commission35 it was pronounced that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of
the mutually desired result without dictating the means or methods to be employed in attaining it, and those
that control or fix the methodology and bind or restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employeremployee relationship unlike the second, which
address both the result and the means used to achieve it. x x x36
In this case, the Court agrees with Royale Homes that the rules, regulations, code of ethics, and periodic
evaluation alluded to byAlcantara do not involve control over the means and methods by which he was to
performhis job. Understandably, Royale Homes has to fix the price, impose requirements on prospective
buyers, and lay down the terms and conditionsof the sale, including the mode of payment, which the
independent contractors must follow. It is also necessary for Royale Homes to allocateits inventories among
its independent contractors, determine who has priority in selling the same, grant commission or allowance
based on predetermined criteria, and regularly monitor the result of their marketing and sales efforts. But
tothe mind of this Court, these do not pertain to the means and methods of how Alcantara was to perform
and accomplish his task of soliciting sales. They do not dictate upon him the details of how he would solicit
sales or the manner as to how he would transact business with prospective clients. In Tongko, this Court held
that guidelines or rules and regulations that do notpertain to the means or methodsto be employed in
attaining the result are not indicative of control as understood inlabor law. Thus:
From jurisprudence, an important lesson that the first Insular Lifecase teaches us is that a commitment to
abide by the rules and regulations of an insurance company does not ipso factomake the insurance agent an
employee. Neither do guidelines somehow restrictive of the insurance agents conduct necessarily indicate
"control" as this term is defined in jurisprudence. Guidelines indicative of labor law "control," as the first
Insular Lifecase tells us, should not merely relate to the mutually desirable result intended by the contractual
relationship; they must have the nature of dictating the means or methods to beemployed in attaining the
result, or of fixing the methodology and of binding or restricting the party hired to the use of these means.In
fact, results-wise, the principal can impose production quotas and can determine how many agents, with
specific territories, ought to be employed to achieve the companys objectives. These are management policy
decisions that the labor law element of control cannot reach. Our ruling in these respects in the first Insular
Lifecase was practically reiterated in Carungcong. Thus, as will be shown more fully below, Manulifes codes of
conduct, all of which do not intrude into the insurance agents means and manner of conducting their sales
and only control them as to the desired results and Insurance Code norms, cannot be used as basis for a
finding that the labor law concept of control existed between Manulife and Tongko.37 (Emphases in the
original)
As the party claiming the existence of employer-employee relationship, it behoved upon Alcantara to prove
the elements thereof, particularly Royale Homes power of control over the means and methods of
accomplishing the work.38 He, however, failed to cite specificrules, regulations or codes of ethics that
supposedly imposed control on his means and methods of soliciting sales and dealing with prospective clients.
On the other hand, this case is replete with instances that negate the element of control and the existence of
employer-employee relationship. Notably, Alcantara was not required to observe definite working hours.39
Except for soliciting sales, RoyaleHomes did not assign other tasks to him. He had full control over the means
and methods of accomplishing his tasks as he can "solicit sales at any time and by any manner which [he may]
deem appropriate and necessary." He performed his tasks on his own account free from the control and
direction of Royale Homes in all matters connected therewith, except as to the results thereof.40
Neither does the repeated hiring of Alcantara prove the existence of employer-employee relationship.41 As
discussed above, the absence of control over the means and methodsdisproves employer-employee
relationship. The continuous rehiring of Alcantara simply signifies the renewal of his contract with Royale
Homes, and highlights his satisfactory services warranting the renewal of such contract. Nor does the
exclusivity clause of contract establish the existence of the labor law concept of control. In Consulta v. Court of
Appeals,42 it was held that exclusivity of contract does not necessarily result in employer-employee
relationship, viz:
x x x However, the fact that the appointment required Consulta to solicit business exclusively for Pamana did
not mean that Pamana exercised control over the means and methods of Consultas work as the term control
is understood in labor jurisprudence. Neither did it make Consulta an employee of Pamana. Pamana did not
prohibit Consulta from engaging in any other business, or from being connected with any other company, for
aslong as the business [of the] company did not compete with Pamanas business.43
The same scenario obtains in this case. Alcantara was not prohibited from engaging in any other business as
long as he does not sell projects of Royale Homes competitors. He can engage in selling various other
products or engage in unrelated businesses.
Payment of Wages
The element of payment of wages is also absent in thiscase. As provided in the contract, Alcantaras
remunerations consist only of commission override of 0.5%, budget allocation, sales incentive and other forms
of company support. There is no proof that he received fixed monthly salary. No payslip or payroll was ever
presented and there is no proof that Royale Homes deducted from his supposed salary withholding tax or that
it registered him with the Social Security System, Philippine Health Insurance Corporation, or Pag-Ibig Fund. In
fact, his Complaint merely states a ballpark figure of his alleged salary of P100,000.00, more or less. All of
these indicate an independent contractual relationship.44 Besides, if Alcantara indeed consideredhimself an
employee of Royale Homes, then he, an experienced and professional broker, would have complained that he
was being denied statutorily mandated benefits. But for nine consecutive years, he kept mum about it,
signifying that he has agreed, consented, and accepted the fact that he is not entitled tothose employee
benefits because he is an independent contractor.
This Court is, therefore,convinced that Alcantara is not an employee of Royale Homes, but a mere
independent contractor. The NLRC is, therefore, correct in concluding that the Labor Arbiter has no
jurisdiction over the case and that the same is cognizable by the regular courts.
WHEREFORE, the instant Petition is hereby GRANTED. The June 23, 2010 Decision of the Court of Appeals in
CA-G.R. SP No. 109998 is REVERSED and SET ASIDE. The February 23, 2009 Decision of the National Labor
Relations Commission is REINSTATED and AFFIRMED. SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice
8. Art. 82, relative to Arts. 94-95 and 97, Pakyaw or task basis
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 195466
July 2, 2014
ARIEL L. DAVID, doing business under the name and style "YIELS HOG DEALER," Petitioner,
vs.
JOHN G. MACASIO, Respondent.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari1 the challenge to the November 22, 2010 decision2 and the
January 31, 2011 resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 116003. The CA decision annulled
and set aside the May 26, 2010 decision4 of the National Labor Relations Commission (NLRC)5 which, in turn,
affirmed the April 30, 2009 Decision6 of the Labor Arbiter (LA). The LA's decision dismissed respondent John G.
Macasio's monetary claims.
The Factual Antecedents
In January 2009, Macasio filed before the LA a complaint7 against petitioner Ariel L. David, doing business
under the name and style "Yiels Hog Dealer," for non-payment of overtime pay, holiday pay and 13th month
pay. He also claimed payment for moral and exemplary damages and attorneys fees. Macasio also claimed
payment for service incentive leave (SIL).8
Macasio alleged9 before the LA that he had been working as a butcher for David since January 6, 1995.
Macasio claimed that David exercised effective control and supervision over his work, pointing out that David:
(1) set the work day, reporting time and hogs to be chopped, as well as the manner by which he was to
perform his work; (2) daily paid his salary of P700.00, which was increased from P600.00 in 2007, P500.00 in
2006 and P400.00 in 2005; and (3) approved and disapproved his leaves. Macasio added that David owned the
hogs delivered for chopping, as well as the work tools and implements; the latter also rented the workplace.
Macasio further claimed that David employs about twenty-five (25) butchers and delivery drivers.
In his defense,10 David claimed that he started his hog dealer business in 2005 and that he only has ten
employees. He alleged that he hired Macasio as a butcher or chopper on "pakyaw" or task basis who is,
therefore, not entitled to overtime pay, holiday pay and 13th month pay pursuant to the provisions of the
Implementing Rules and Regulations (IRR) of the Labor Code. David pointed out that Macasio: (1) usually starts
his work at 10:00 p.m. and ends at 2:00 a.m. of the following day or earlier, depending on the volume of the
delivered hogs; (2) received the fixed amount of P700.00 per engagement, regardless of the actual number of
hours that he spent chopping the delivered hogs; and (3) was not engaged to report for work and, accordingly,
did not receive any fee when no hogs were delivered.
Macasio disputed Davids allegations.11 He argued that, first, David did not start his business only in 2005. He
pointed to the Certificate of Employment12 that David issued in his favor which placed the date of his
employment, albeit erroneously, in January 2000. Second, he reported for work every day which the payroll or
time record could have easily proved had David submitted them in evidence.
Refuting Macasios submissions,13 David claims that Macasio was not his employee as he hired the latter on
"pakyaw" or task basis. He also claimed that he issued the Certificate of Employment, upon Macasios request,
only for overseas employment purposes. He pointed to the "Pinagsamang Sinumpaang Salaysay,"14 executed
by Presbitero Solano and Christopher (Antonio Macasios co-butchers), to corroborate his claims.
In the April 30, 2009 decision,15 the LA dismissed Macasios complaint for lack of merit. The LA gave credence
to Davids claim that he engaged Macasio on "pakyaw" or task basis. The LA noted the following facts to
support this finding: (1) Macasio received the fixed amount of P700.00 for every work done, regardless of the
number of hours that he spent in completing the task and of the volume or number of hogs that he had to
chop per engagement; (2) Macasio usually worked for only four hours, beginning from 10:00 p.m. up to 2:00
a.m. of the following day; and (3) the P700.00 fixed wage far exceeds the then prevailing daily minimum wage
of P382.00. The LA added that the nature of Davids business as hog dealer supports this "pakyaw" or task
basis arrangement.
The LA concluded that as Macasio was engaged on "pakyaw" or task basis, he is not entitled to overtime,
holiday, SIL and 13th month pay.
The NLRCs Ruling
In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling.17 The NLRC observed that David did not
require Macasio to observe an eight hour work schedule to earn the fixed P700.00 wage; and that Macasio
had been performing a non-time work, pointing out that Macasio was paid a fixed amount for the completion
of the assigned task, irrespective of the time consumed in its performance. Since Macasio was paid by result
and not in terms of the time that he spent in the workplace, Macasio is not covered by the Labor Standards
laws on overtime, SIL and holiday pay, and 13th month pay under the Rules and Regulations Implementing the
13th month pay law.18
Macasio moved for reconsideration19 but the NLRC denied his motion in its August 11, 2010 resolution,20
prompting Macasio to elevate his case to the CA via a petition for certiorari.21
The CAs Ruling
In its November 22, 2010 decision,22 the CA partly granted Macasios certiorari petition and reversed the
NLRCs ruling for having been rendered with grave abuse of discretion.
While the CA agreed with the LAand the NLRC that Macasio was a task basis employee, it nevertheless found
Macasio entitled to his monetary claims following the doctrine laid down in Serrano v. Severino Santos
Transit.23 The CA explained that as a task basis employee, Macasio is excluded from the coverage of holiday,
SIL and 13th month pay only if he is likewise a "field personnel." As defined by the Labor Code, a "field
personnel" is one who performs the work away from the office or place of work and whose regular work hours
cannot be determined with reasonable certainty. In Macasios case, the elements that characterize a "field
personnel" are evidently lacking as he had been working as a butcher at Davids "Yiels Hog Dealer" business in
Sta. Mesa, Manila under Davids supervision and control, and for a fixed working schedule that starts at 10:00
p.m.
Accordingly, the CA awarded Macasios claim for holiday, SIL and 13th month pay for three years, with 10%
attorneys fees on the total monetary award. The CA, however, denied Macasios claim for moral and
exemplary damages for lack of basis.
David filed the present petition after the CA denied his motion for reconsideration24 in the CAs January 31,
2011 resolution.25
The Petition
In this petition,26 David maintains that Macasios engagement was on a "pakyaw" or task basis. Hence, the
latter is excluded from the coverage of holiday, SIL and 13th month pay. David reiterates his submissions
before the lower tribunals27 and adds that he never had any control over the manner by which Macasio
performed his work and he simply looked on to the "end-result." He also contends that he never compelled
Macasio to report for work and that under their arrangement, Macasio was at liberty to choose whether to
report for work or not as other butchers could carry out his tasks. He points out that Solano and Antonio had,
in fact, attested to their (David and Macasios) established "pakyawan" arrangement that rendered a written
contract unnecessary. In as much as Macasio is a task basis employee who is paid the fixed amount of
P700.00 per engagement regardless of the time consumed in the performance David argues that Macasio is
not entitled to the benefits he claims. Also, he posits that because he engaged Macasio on "pakyaw" or task
basis then no employer-employee relationship exists between them.
Finally, David argues that factual findings of the LA, when affirmed by the NLRC, attain finality especially when,
as in this case, they are supported by substantial evidence. Hence, David posits that the CA erred in reversing
the labor tribunals findings and granting the prayed monetary claims.
The Case for the Respondent
Macasio counters that he was not a task basis employee or a "field personnel" as David would have this Court
believe.28 He reiterates his arguments before the lower tribunals and adds that, contrary to Davids position,
the P700.00 fee that he was paid for each day that he reported for work does not indicate a "pakyaw" or task
basis employment as this amount was paid daily, regardless of the number or pieces of hogs that he had to
chop. Rather, it indicates a daily-wage method of payment and affirms his regular employment status. He
points out that David did not allege or present any evidence as regards the quota or number of hogs that he
had to chop as basis for the "pakyaw" or task basis payment; neither did David present the time record or
payroll to prove that he worked for less than eight hours each day. Moreover, David did not present any
contract to prove that his employment was on task basis. As David failed to prove the alleged task basis or
"pakyawan" agreement, Macasio concludes that he was Davids employee. Procedurally, Macasio points out
that Davids submissions in the present petition raise purely factual issues that are not proper for a petition for
review on certiorari. These issues whether he (Macasio) was paid by result or on "pakyaw" basis; whether he
was a "field personnel"; whether an employer-employee relationship existed between him and David; and
whether David exercised control and supervision over his work are all factual in nature and are, therefore,
proscribed in a Rule 45 petition. He argues that the CAs factual findings bind this Court, absent a showing that
such findings are not supported by the evidence or the CAs judgment was based on a misapprehension of
facts. He adds that the issue of whether an employer-employee relationship existed between him and David
had already been settled by the LA29 and the NLRC30 (as well as by the CA per Macasios manifestation
before this Court dated November 15, 2012),31 in his favor, in the separate illegal case that he filed against
David.
The Issue
The issue revolves around the proper application and interpretation of the labor law provisions on holiday, SIL
and 13th month pay to a worker engaged on "pakyaw" or task basis. In the context of the Rule 65 petition
before the CA, the issue is whether the CA correctly found the NLRC in grave abuse of discretion in ruling that
Macasio is entitled to these labor standards benefits.
The Courts Ruling
We partially grant the petition.
Preliminary considerations: the Montoya ruling and the factual-issue-bar rule
In this Rule 45 petition for review on certiorari of the CAs decision rendered under a Rule 65 proceeding, this
Courts power of review is limited to resolving matters pertaining to any perceived legal errors that the CA
may have committed in issuing the assailed decision. This is in contrast with the review for jurisdictional
errors, which we undertake in an original certiorari action. In reviewing the legal correctness of the CA
decision, we examine the CA decision based on how it determined the presence or absence of grave abuse of
discretion in the NLRC decision before it and not on the basis of whether the NLRC decision on the merits of
the case was correct.32 In other words, we have to be keenly aware that the CA undertook a Rule 65 review,
not a review on appeal, of the NLRC decision challenged before it.33
Moreover, the Courts power in a Rule 45 petition limits us to a review of questions of law raised against the
assailed CA decision.34
In this petition, David essentially asks the question whether Macasio is entitled to holiday, SIL and 13th
month pay. This one is a question of law. The determination of this question of law however is intertwined
with the largely factual issue of whether Macasio falls within the rule on entitlement to these claims or within
the exception. In either case, the resolution of this factual issue presupposes another factual matter, that is,
the presence of an employer-employee relationship between David and Macasio.
In insisting before this Court that Macasio was not his employee, David argues that he engaged the latter on
"pakyaw" or task basis. Very noticeably, David confuses engagement on "pakyaw" or task basis with the lack of
employment relationship. Impliedly, David asserts that their "pakyawan" or task basis arrangement negates
the existence of employment relationship.
At the outset, we reject this assertion of the petitioner. Engagement on "pakyaw" or task basis does not
characterize the relationship that may exist between the parties, i.e., whether one of employment or
independent contractorship. Article 97(6) of the Labor Code defines wages as "xxx the remuneration or
earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on
a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an
employer to an employee under a written or unwritten contract of employment for work done or to be done,
or for services rendered or to be rendered[.]"35 In relation to Article 97(6), Article 10136 of the Labor Code
speaks of workers paid by results or those whose pay is calculated in terms of the quantity or quality of their
work output which includes "pakyaw" work and other non-time work.
More importantly, by implicitly arguing that his engagement of Macasio on "pakyaw" or task basis negates
employer-employee relationship, David would want the Court to engage on a factual appellate review of the
entire case to determine the presence or existence of that relationship. This approach however is not
authorized under a Rule 45 petition for review of the CA decision rendered under a Rule 65 proceeding.
First, the LA and the NLRC denied Macasios claim not because of the absence of an employer-employee but
because of its finding that since Macasio is paid on pakyaw or task basis, then he is not entitled to SIL, holiday
and 13th month pay. Second, we consider it crucial, that in the separate illegal dismissal case Macasio filed
with the LA, the LA, the NLRC and the CA uniformly found the existence of an employer-employee
relationship.37
In other words, aside from being factual in nature, the existence of an employer-employee relationship is in
fact a non-issue in this case. To reiterate, in deciding a Rule 45 petition for review of a labor decision rendered
by the CA under 65, the narrow scope of inquiry is whether the CA correctly determined the presence or
absence of grave abuse of discretion on the part of the NLRC. In concrete question form, "did the NLRC gravely
abuse its discretion in denying Macasios claims simply because he is paid on a non-time basis?"
At any rate, even if we indulge the petitioner, we find his claim that no employer-employee relationship exists
baseless. Employing the control test,38 we find that such a relationship exist in the present case.
Even a factual review shows that Macasio is Davids employee
To determine the existence of an employer-employee relationship, four elements generally need to be
considered, namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employees conduct. These elements or indicators
comprise the so-called "four-fold" test of employment relationship. Macasios relationship with David satisfies
this test.
First, David engaged the services of Macasio, thus satisfying the element of "selection and engagement of the
employee." David categorically confirmed this fact when, in his "Sinumpaang Salaysay," he stated that "nag
apply po siya sa akin at kinuha ko siya na chopper[.]"39 Also, Solano and Antonio stated in their "Pinagsamang
Sinumpaang Salaysay"40 that "[k]ami po ay nagtratrabaho sa Yiels xxx na pag-aari ni Ariel David bilang
butcher" and "kilalanamin si xxx Macasio na isa ring butcher xxx ni xxx David at kasama namin siya sa aming
trabaho."
Second, David paid Macasios wages.Both David and Macasio categorically stated in their respective pleadings
before the lower tribunals and even before this Court that the former had been paying the latter P700.00 each
day after the latter had finished the days task. Solano and Antonio also confirmed this fact of wage payment
in their "Pinagsamang Sinumpaang Salaysay."41 This satisfies the element of "payment of wages."
Third, David had been setting the day and time when Macasio should report for work. This power to
determine the work schedule obviously implies power of control. By having the power to control Macasios
work schedule, David could regulate Macasios work and could even refuse to give him any assignment,
thereby effectively dismissing him.
And fourth, David had the right and power to control and supervise Macasios work as to the means and
methods of performing it. In addition to setting the day and time when Macasio should report for work, the
established facts show that David rents the place where Macasio had been performing his tasks. Moreover,
Macasio would leave the workplace only after he had finished chopping all of the hog meats given to him for
the days task. Also, David would still engage Macasios services and have him report for work even during the
days when only few hogs were delivered for butchering.
Under this overall setup, all those working for David, including Macasio, could naturally be expected to
observe certain rules and requirements and David would necessarily exercise some degree of control as the
chopping of the hog meats would be subject to his specifications. Also, since Macasio performed his tasks at
Davids workplace, David could easily exercise control and supervision over the former. Accordingly, whether
or not David actually exercised this right or power to control is beside the point as the law simply requires the
existence of this power to control 4243 or, as in this case, the existence of the right and opportunity to control
and supervise Macasio.44
In sum, the totality of the surrounding circumstances of the present case sufficiently points to an employeremployee relationship existing between David and Macasio.
Macasio is engaged on "pakyaw" or task basis
At this point, we note that all three tribunals the LA, the NLRC and the CA found that Macasio was engaged
or paid on "pakyaw" or task basis. This factual finding binds the Court under the rule that factual findings of
labor tribunals when supported by the established facts and in accord with the laws, especially when affirmed
by the CA, is binding on this Court.
A distinguishing characteristic of "pakyaw" or task basis engagement, as opposed to straight-hour wage
payment, is the non-consideration of the time spent in working. In a task-basis work, the emphasis is on the
task itself, in the sense that payment is reckoned in terms of completion of the work, not in terms of the
number of time spent in the completion of work.45 Once the work or task is completed, the worker receives a
fixed amount as wage, without regard to the standard measurements of time generally used in pay
computation.
In Macasios case, the established facts show that he would usually start his work at 10:00 p.m. Thereafter,
regardless of the total hours that he spent at the workplace or of the total number of the hogs assigned to him
for chopping, Macasio would receive the fixed amount of P700.00 once he had completed his task. Clearly,
these circumstances show a "pakyaw" or task basis engagement that all three tribunals uniformly found.
In sum, the existence of employment relationship between the parties is determined by applying the "fourfold" test; engagement on "pakyaw" or task basis does not determine the parties relationship as it is simply a
method of pay computation. Accordingly, Macasio is Davids employee, albeit engaged on "pakyaw" or task
basis.
As an employee of David paid on pakyaw or task basis, we now go to the core issue of whether Macasio is
entitled to holiday, 13th month, and SIL pay.
On the issue of Macasios entitlement to holiday, SIL and 13th month pay
The LA dismissed Macasios claims pursuant to Article 94 of the Labor Code in relation to Section 1, Rule IV of
the IRR of the Labor Code, and Article 95 of the Labor Code, as well as Presidential Decree (PD) No. 851. The
NLRC, on the other hand, relied on Article 82 of the Labor Code and the Rules and Regulations Implementing
PD No. 851. Uniformly, these provisions exempt workers paid on "pakyaw" or task basis from the coverage of
holiday, SIL and 13th month pay.
In reversing the labor tribunals rulings, the CA similarly relied on these provisions, as well as on Section 1,
Rule V of the IRR of the Labor Code and the Courts ruling in Serrano v. Severino Santos Transit.46 These labor
law provisions, when read together with the Serrano ruling, exempt those engaged on "pakyaw" or task basis
only if they qualify as "field personnel."
In other words, what we have before us is largely a question of law regarding the correct interpretation of
these labor code provisions and the implementing rules; although, to conclude that the worker is exempted or
covered depends on the facts and in this sense, is a question of fact: first, whether Macasio is a "field
personnel"; and second, whether those engaged on "pakyaw" or task basis, but who are not "field personnel,"
are exempted from the coverage of holiday, SIL and 13th month pay.
To put our discussion within the perspective of a Rule 45 petition for review of a CA decision rendered under
Rule 65 and framed in question form, the legal question is whether the CA correctly ruled that it was grave
abuse of discretion on the part of the NLRC to deny Macasios monetary claims simply because he is paid on a
non-time basis without determining whether he is a field personnel or not.
To resolve these issues, we need tore-visit the provisions involved.
Provisions governing SIL and holiday pay
Article 82 of the Labor Code provides the exclusions from the coverage of Title I, Book III of the Labor Code provisions governing working conditions and rest periods.
Art. 82. Coverage. The provisions of [Title I] shall apply to employees in all establishments and undertakings
whether for profit or not, but not to government employees, managerial employees, field personnel,
members of the family of the employer who are dependent on him for support, domestic helpers, persons in
the personal service of another, and workers who are paid by results as determined by the Secretary of Labor
in appropriate regulations.
xxxx
"Field personnel" shall refer to non-agricultural employees who regularly perform their duties away from the
principal place of business or branch office of the employer and whose actual hours of work in the field cannot
be determined with reasonable certainty. [emphases and underscores ours]
Among the Title I provisions are the provisions on holiday pay (under Article 94 of the Labor Code) and SIL pay
(under Article 95 of the Labor Code). Under Article 82,"field personnel" on one hand and "workers who are
paid by results" on the other hand, are not covered by the Title I provisions. The wordings of Article82 of the
Labor Code additionally categorize workers "paid by results" and "field personnel" as separate and distinct
types of employees who are exempted from the Title I provisions of the Labor Code.
The pertinent portion of Article 94 of the Labor Code and its corresponding provision in the IRR47 reads:
Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage during regular holidays,
except in retail and service establishments regularly employing less than (10) workers[.] [emphasis ours]
xxxx
SECTION 1. Coverage. This Rule shall apply to all employees except:
xxxx
(e)Field personnel and other employees whose time and performance is unsupervised by the employer
including those who are engaged on task or contract basis, purely commission basis, or those who are paid a
fixed amount for performing work irrespective of the time consumed in the performance thereof. [emphases
ours]
On the other hand, Article 95 of the Labor Code and its corresponding provision in the IRR48 pertinently
provides:
Art. 95. Right to service incentive. (a) Every employee who has rendered at least one year of service shall be
entitled to a yearly service incentive leave of five days with pay.
(b) This provision shall not apply to those who are already enjoying the benefit herein provided, those
enjoying vacation leave with pay of at least five days and those employed in establishments regularly
employing less than ten employees or in establishments exempted from granting this benefit by the Secretary
of Labor and Employment after considering the viability or financial condition of such establishment.
[emphases ours]
xxxx
Section 1. Coverage. This rule shall apply to all employees except:
xxxx
(e) Field personnel and other employees whose performance is unsupervised by the employer including those
who are engaged on task or contract basis, purely commission basis, or those who are paid a fixed amount for
performing work irrespective of the time consumed in the performance thereof. [emphasis ours]
Under these provisions, the general rule is that holiday and SIL pay provisions cover all employees. To be
excluded from their coverage, an employee must be one of those that these provisions expressly exempt,
strictly in accordance with the exemption. Under the IRR, exemption from the coverage of holiday and SIL pay
refer to "field personnel and other employees whose time and performance is unsupervised by the employer
including those who are engaged on task or contract basis[.]" Note that unlike Article 82 of the Labor Code,
the IRR on holiday and SIL pay do not exclude employees "engaged on task basis" as a separate and distinct
category from employees classified as "field personnel." Rather, these employees are altogether merged into
one classification of exempted employees.
Because of this difference, it may be argued that the Labor Code may be interpreted to mean that those who
are engaged on task basis, per se, are excluded from the SIL and holiday payment since this is what the Labor
Code provisions, in contrast with the IRR, strongly suggest. The arguable interpretation of this rule may be
conceded to be within the discretion granted to the LA and NLRC as the quasi-judicial bodies with expertise on
labor matters.
However, as early as 1987 in the case of Cebu Institute of Technology v. Ople49 the phrase "those who are
engaged on task or contract basis" in the rule has already been interpreted to mean as follows:
[the phrase] should however, be related with "field personnel" applying the rule on ejusdem generis that
general and unlimited terms are restrained and limited by the particular terms that they follow xxx Clearly,
petitioner's teaching personnel cannot be deemed field personnel which refers "to non-agricultural employees
who regularly perform their duties away from the principal place of business or branch office of the employer
and whose actual hours of work in the field cannot be determined with reasonable certainty. [Par. 3, Article
82, Labor Code of the Philippines]. Petitioner's claim that private respondents are not entitled to the service
incentive leave benefit cannot therefore be sustained.
In short, the payment of an employee on task or pakyaw basis alone is insufficient to exclude one from the
coverage of SIL and holiday pay. They are exempted from the coverage of Title I (including the holiday and SIL
pay) only if they qualify as "field personnel." The IRR therefore validly qualifies and limits the general exclusion
of "workers paid by results" found in Article 82 from the coverage of holiday and SIL pay. This is the only
reasonable interpretation since the determination of excluded workers who are paid by results from the
coverage of Title I is "determined by the Secretary of Labor in appropriate regulations."
The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport Systems, Inc., v. Bautista:
A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive leave
has been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to those
employees not explicitly excluded by Section 1 of Rule V. According to the Implementing Rules, Service
Incentive Leave shall not apply to employees classified as "field personnel." The phrase "other employees
whose performance is unsupervised by the employer" must not be understood as a separate classification of
employees to which service incentive leave shall not be granted. Rather, it serves as an amplification of the
interpretation of the definition of field personnel under the Labor Code as those "whose actual hours of work
in the field cannot be determined with reasonable certainty."
The same is true with respect to the phrase "those who are engaged on task or contract basis, purely
commission basis." Said phrase should be related with "field personnel," applying the rule on ejusdem generis
that general and unlimited terms are restrained and limited by the particular terms that they follow.
The Autobus ruling was in turn the basis of Serrano v. Santos Transit which the CA cited in support of granting
Macasios petition.
In Serrano, the Court, applying the rule on ejusdem generis50 declared that "employees engaged on task or
contract basis xxx are not automatically exempted from the grant of service incentive leave, unless, they fall
under the classification of field personnel."51 The Court explained that the phrase "including those who are
engaged on task or contract basis, purely commission basis" found in Section 1(d), Rule V of Book III of the IRR
should not be understood as a separate classification of employees to which SIL shall not be granted. Rather,
as with its preceding phrase - "other employees whose performance is unsupervised by the employer" - the
phrase "including those who are engaged on task or contract basis" serves to amplify the interpretation of the
Labor Code definition of "field personnel" as those "whose actual hours of work in the field cannot be
determined with reasonable certainty."
In contrast and in clear departure from settled case law, the LA and the NLRC still interpreted the Labor Code
provisions and the IRR as exempting an employee from the coverage of Title I of the Labor Code based simply
and solely on the mode of payment of an employee. The NLRCs utter disregard of this consistent
jurisprudential ruling is a clear act of grave abuse of discretion.52 In other words, by dismissing Macasios
complaint without considering whether Macasio was a "field personnel" or not, the NLRC proceeded based on
a significantly incomplete consideration of the case. This action clearly smacks of grave abuse of discretion.
Entitlement to holiday pay
Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA and the NLRC had only taken counsel
from Serrano and earlier cases, they would have correctly reached a similar conclusion regarding the payment
of holiday pay since the rule exempting "field personnel" from the grant of holiday pay is identically worded
with the rule exempting "field personnel" from the grant of SIL pay. To be clear, the phrase "employees
engaged on task or contract basis "found in the IRR on both SIL pay and holiday pay should be read together
with the exemption of "field personnel."
In short, in determining whether workers engaged on "pakyaw" or task basis" is entitled to holiday and SIL
pay, the presence (or absence) of employer supervision as regards the workers time and performance is the
key: if the worker is simply engaged on pakyaw or task basis, then the general rule is that he is entitled to a
holiday pay and SIL pay unless exempted from the exceptions specifically provided under Article 94 (holiday
pay) and Article95 (SIL pay) of the Labor Code. However, if the worker engaged on pakyaw or task basis also
falls within the meaning of "field personnel" under the law, then he is not entitled to these monetary benefits.
Macasio does not fall under the classification of "field personnel"
Based on the definition of field personnel under Article 82, we agree with the CA that Macasio does not fall
under the definition of "field personnel." The CAs finding in this regard is supported by the established facts
of this case: first, Macasio regularly performed his duties at Davids principal place of business; second, his
actual hours of work could be determined with reasonable certainty; and, third, David supervised his time and
performance of duties. Since Macasio cannot be considered a "field personnel," then he is not exempted from
the grant of holiday, SIL pay even as he was engaged on "pakyaw" or task basis.
Not being a "field personnel," we find the CA to be legally correct when it reversed the NLRCs ruling
dismissing Macasios complaint for holiday and SIL pay for having been rendered with grave abuse of
discretion.
Entitlement to 13th month pay
With respect to the payment of 13th month pay however, we find that the CA legally erred in finding that the
NLRC gravely abused its discretion in denying this benefit to Macasio.1wphi1
The governing law on 13th month pay is PD No. 851.53
As with holiday and SIL pay, 13th month pay benefits generally cover all employees; an employee must be one
of those expressly enumerated to be exempted. Section 3 of the Rules and Regulations Implementing P.D. No.
85154 enumerates the exemptions from the coverage of 13th month pay benefits. Under Section 3(e),
"employers of those who are paid on xxx task basis, and those who are paid a fixed amount for performing a
specific work, irrespective of the time consumed in the performance thereof"55 are exempted.
Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the Rules and Regulations
Implementing PD No. 851 exempts employees "paid on task basis" without any reference to "field personnel."
This could only mean that insofar as payment of the 13th month pay is concerned, the law did not intend to
qualify the exemption from its coverage with the requirement that the task worker be a "field personnel" at
the same time.
WHEREFORE, in light of these considerations, we hereby PARTIALLY GRANT the petition insofar as the
payment of 13th month pay to respondent is concerned. In all other aspects, we AFFIRM the decision dated
November 22, 2010 and the resolution dated January 31, 2011 of the Court of Appeals in CA-G.R. SP No.
116003.
SO ORDERED.
ARTURO D. BRION
Associate Justice
9. Retirement and overtime work

FIRST DIVISION
G.R. No. 175869, April 18, 2016
ROBINA FARMS CEBU/UNIVERSAL ROBINA CORPORATION, Petitioner, v. ELIZABETH VILLA, Respondent.
DECISION
BERSAMIN, J.:
The employer appeals the decision promulgated on September 27, 2006,1 whereby the Court of Appeals (CA)
dismissed its petition for certiorari and affirmed with modification the adverse decision of the National Labor
Relations Commission (NLRC) declaring it liable for the illegal dismissal of respondent employee.
Antecedents
Respondent Elizabeth Villa brought against the petitioner her complaint for illegal suspension, illegal dismissal,
nonpayment of overtime pay, and nonpayment of service incentive leave pay in the Regional Arbitration
Branch No. VII of the NLRC in Cebu City.
In her verified position paper,2 Villa averred that she had been employed by petitioner Robina Farms as sales
clerk since August 1981; that in the later part of 2001, the petitioner had enticed her to avail herself of the
company's special retirement program; that on March 2, 2002, she had received a memorandum from Lily
Ngochua requiring her to explain her failure to issue invoices for unhatched eggs in the months of January to
February 2002; that she had explained that the invoices were not delivered on time because the delivery
receipts were delayed and overlooked; that despite her explanation, she had been suspended for 10 days
from March 8, 2012 until March 19, 2002; that upon reporting back to work, she had been advised to cease
working because her application for retirement had already been approved; that she had been subsequently
informed that her application had been disapproved, and had then been advised to tender her resignation
with a request for financial assistance; that she had manifested her intention to return to work but the
petitioner had confiscated her gate pass; and that she had since then been prevented from entering the
company premises and had been replaced by another employee.
The petitioner admitted that Villa had been its sales clerk at Robina Farms. It stated that on December 12,
2001, she had applied for retirement under the special privilege program offered to its employees in Bulacan
and Antipolo who had served for at least 10 years; that in February 2002, her attention had been called by
Anita Gabatan of the accounting department to explain her failure to issue invoices for the unhatched eggs for
the month of February; that she had explained that she had been busy; that Gabatan had referred the matter
to Florabeth Zanoria who had in turn relayed the matter to Ngochua; and that the latter had then given Villa
the chance to explain, which she did.
The petitioner added that after the administrative hearing Villa was found to have violated the company rule
on the timely issuance of the invoices that had resulted in delay in the payment of buyers considering that the
payment had depended upon the receipt of the invoices; that she had been suspended from her employment
as a consequence; that after serving the suspension, she had returned to work and had followed up her
application for retirement with Lucina de Guzman, who had then informed her that the management did not
approve the benefits equivalent to 86% of her salary rate applied for, but only 1/2 month for every year of
service; and that disappointed with the outcome, she had then brought her complaint against the petitioners.3
On April 21, 2003, Labor Arbiter Violeta Ortiz-Bantug rendered her decision4 finding that Villa had not been
dismissed from employment, holding thusly:
chanRoblesvirtualLawlibrary
Complainant's application, insofar the benefits are concerned, was not approved which means that while her
application for retirement was considered, management was willing to give her retirement benefits equivalent
only to half-month pay for every year of service and not 86% of her salary for every year of service as
mentioned in her application. Mrs. De Guzman suggested that if she wanted to pursue her supposed
retirement despite thereof, she should submit a resignation letter and include therein a request for financial
assistance. We do not find anything illegal or violative in the suggestion made by Mrs. De Guzman. There was
no compulsion since the choice was left entirely to the complainant whether to pursue it or
not.5ChanRoblesVirtualawlibrary
Although ordering Villa's reinstatement, the Labor Arbiter denied her claim for backwages and overtime pay
because she had not adduced evidence of the overtime work actually performed. The Labor Arbiter declared
that Villa was entitled to service incentive leave pay for the period of the last three years counted from the
filing of her complaint because the petitioner did not refute her claim thereon. Thus, the Labor Arbiter
disposed as follows:
WHEREFORE, premises considered, judgment is hereby rendered ordering respondents ROBINA FARMS CEBU
(a Division of UNIVERSAL ROBINA CORPORATION) and LILY NGOCHUA to REINSTATE complainant to her
former position without loss of seniority rights and privileges within ten (10) days from receipt of this decision
but without payment of backwages. Respondents are also ordered to pay complainant SEVEN THOUSAND ONE
HUNDRED NINETY FOUR PESOS (P7,194.00) as service incentive leave pay benefits.
The other claims are dismissed for lack of merit.
SO ORDERED.6ChanRoblesVirtualawlibrary
The parties respectively appealed to the NLRC.
Judgment of the NLRC
On February 23, 2005, the NLRC rendered its judgment dismissing the appeal by the petitioner but granting
that of Villa,7 to wit:
WHEREFORE, premises considered, the appeal of respondents is hereby DISMISSED for non-perfection while
the appeal of complainant is hereby GRANTED. The decision of the Labor Arbiter is REVERSED and SET ASIDE
and a new one ENTERED declaring complainant to have been illegally dismissed. Consequently, respondents
are hereby directed to immediately reinstate complainant to her former position without loss of seniority
rights and other privileges within ten (10) days from receipt of this decision and to pay complainant the
following sums, to wit:
10. Art. 97(f), meals and lodging

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 204651
August 6, 2014
OUR HAUS REALTY DEVELOPMENT CORPORATION, Petitioner,

vs.
ALEXANDER PARIAN, JAY C. ERINCO, ALEXANDER CANLAS, BERNARD TENEDERO and JERRY SABULAO,
Respondents.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari1 the challenge to the May 7, 2012 decision2 and the
November 27, 2012 resolution3 (assailed CA rulings) of the Court of Appeals (CA) in CA-G.R. SP No. 123273.
These assailed CA rulings affirmed the July 20, 2011 decision4 and the December 2, 2011 resolution5 (NLRC
rulings) of the National Labor Relations Commission (NLRC) in NLRC LAC No. 02-000489-11 (NLRC NCR Case
No. 06-08544-10). The NLRC rulings in turn reversed and set aside the December 10, 2010 decision6 of the
labor arbiter (LA).
Factual Antecedents
Respondents Alexander Parian, Jay Erinco, Alexander Canlas, Jerry Sabulao and Bernardo Tenederowere all
laborers working for petitioner Our Haus Realty Development Corporation (Our Haus), a company engaged in
the construction business.The respondents respective employment records and daily wage rates from 2007 to
2010 are summarized in the table7 below:
Name
Date Hired
Years of
Service
Year and Place of Assignment
Daily
Rate
Alexander M.
Parian
October
1999
10 years
2007-2010- Quezon City
P353.50
Jay C. Erinco
January
2000
10 years
2008- Quezon City 2009- Antipolo

2010- Quezon City
P342.00
Alexander R.
Canlas
2005
5 years
P312.00
Jerry Q. Sabulao
August
10 years
2008- Quezon City 2009- Antipolo
P342.00
1999
Bernardo N.
Tenedero
1994
2010- Quezon City

16 years
P383.50
Sometime in May 2010, Our Haus experienced financial distress. To alleviate its condition, Our Haus
suspended some of its construction projects and asked the affected workers, including the respondents, to
take vacation leaves.8
Eventually, the respondents were asked to report back to work but instead of doing so, they filed with the LA a
complaint for underpayment of their daily wages. They claimed that except for respondent Bernardo N.
Tenedero, their wages were below the minimum rates prescribed in the following wage orders from 2007 to
2010:
1. Wage Order No. NCR-13, which provides for a daily minimum wage rate of P362.00for the nonagriculture sector (effective from August 28, 2007 until June 13, 2008); and
2. Wage Order No. NCR-14, which provides for a daily minimum wage rate of P382.00for the nonagriculture sector (effective from June 14, 2008 until June 30, 2010).
The respondents also alleged thatOur Haus failed to pay them their holiday, service incentive leave (SIL), 13th
month and overtime pays.9
The Labor Arbitration Rulings
Before the LA, Our Haus primarily argued that the respondents wages complied with the laws minimum
requirement. Aside from paying the monetary amount of the respondents wages, Our Haus also subsidized
their meals (3 times a day), and gave them free lodging near the construction project they were assigned to.10
In determining the total amount of the respondents daily wages, the value of these benefits should be
considered, in line with Article 97(f)11 of the Labor Code.
Our Haus also rejected the respondents other monetary claims for lack of proof that they were entitled to
it.12
On the other hand, the respondents argued that the value of their meals should not be considered in
determining their wages total amount since the requirements set under Section 413 of DOLE14
Memorandum Circular No. 215 were not complied with.
The respondents pointed out that Our Haus never presented any proof that they agreed in writing to the
inclusion of their meals value in their wages.16 Also, Our Haus failed to prove that the value of the facilities it
furnished was fair and reasonable.17 Finally, instead of deducting the maximum amount of 70% of the value
of the meals, Our Haus actually withheld its full value (which was Php290.00 per week for each employee).18
The LA ruled in favor of Our Haus. He held that if the reasonable values of the board and lodging would be
taken into account, the respondents daily wages would meet the minimum wage rate.19 As to the other
benefits, the LA found that the respondents were not able to substantiate their claims for it.20
The respondents appealed the LAs decision to the NLRC, which in turn, reversed it. Citing the case of Mayon
Hotel & Restaurant v. Adana,21 the NLRC noted that the respondents did not authorize Our Haus in writing to
charge the values of their board and lodging to their wages. Thus, the samecannot be credited.
The NLRC also ruled that the respondents are entitled to their respective proportionate 13th month payments
for the year 2010 and SIL payments for at least three years,immediately preceding May 31, 2010, the date
when the respondents leftOur Haus. However, the NLRC sustained the LAs ruling that the respondents were
not entitled to overtime pay since the exact dates and times when they rendered overtime work had not been
proven.22
Our Haus moved for the reconsideration23 of the NLRCs decision and submitted new evidence (the five
kasunduans) to show that the respondents authorized Our Haus in writing to charge the values of their meals
and lodging to their wages.
The NLRC denied Our Haus motion, thus it filed a Rule 65 petition24 with the CA. In its petition, Our Haus
propounded a new theory. It made a distinction between deduction and charging. A written authorization is
only necessary if the facilitys value will be deducted and will not be needed if it will merely be charged or
included in the computation of wages.25 Our Haus claimed that it did not actually deduct the values of the
meals and housing benefits. It only considered these in computing the total amount of wages paid to the
respondents for purposes of compliance with the minimum wage law. Hence, the written authorization
requirement should not apply.
Our Haus also asserted that the respondents claim for SIL pay should be denied as this was not included in
their pro formacomplaint. Lastly, it questioned the respondentsentitlement to attorneys fees because they
were not represented by a private lawyer but by the Public Attorneys Office (PAO).
The CAs Ruling
The CA dismissed Our Haus certiorari petition and affirmed the NLRC rulings in toto. It found no real
distinction between deduction and charging,26 and ruled that the legal requirements before any deduction or
charging can be made, apply to both. Our Haus, however, failed to prove that it complied with any of the
requirements laid down in Mabeza v. National Labor Relations Commission.27 Accordingly, it cannot consider
the values of its meal and housing facilities in the computation of the respondents total wages.
Also, the CA ruled that since the respondents were able to allege non-payment of SIL in their position paper,
and Our Haus, in fact, opposed it in its various pleadings,28 then the NLRC properly considered it as part of the
respondents causes of action. Lastly, the CA affirmed the respondents entitlement to attorneys fees.29
Our Haus filed a motion for reconsideration but the CA denied its motion, prompting it to file the present
petition for review on certiorari under Rule 45.
The Petition
Our Haus submits that the CA erred in ruling that the legal requirements apply without dis nc on whether
the facilitys value will be deducted or merely included in the computation of the wages. At any rate, it
complied with the requirements for deductibility of the value of the facilities. First, the five kasunduans
executed by the respondents constitute the written authorization for the inclusion of the board and lodgings
values to their wages. Second, Our Haus only withheld the amount of P290.00 which represents the foods raw
value; the weekly cooking cost (cooks wage, LPG, water) at P239.40 per person is a separate expense that Our
Haus did not withhold from the respondents wages.30 This disproves the respondentsclaim that it deducted
the full amount of the meals value.
Lastly, the CA erred in ruling that the claim for SIL pay may still be granted though not raised in the complaint;
and that the respondents are entitled to an award of attorneys fees.31
The Case for the Respondents
The respondents prayed for the denial of the petition.32 They maintained that the CA did not err inruling that
the values of the board and lodging cannot be deducted from their wages for failure to comply with the
requirements set by law.33 And though the claim for SIL pay was not included in their pro forma complaint,
they raised their claims in their position paper and Our Haus had the opportunity to contradict it in its
pleadings.34
Finally, under the PAO law, the availment of the PAOs legal services does not exempt its clients from an
award of attorneys fees.35
The Courts Ruling
We resolve to DENYthe petition.
The nature of a Rule 45 pe
on only ques ons of law
Basic is the rule that only questions of lawmay be raised in a Rule 45 petition.36 However, in this case, weare
confronted with mixed questions of fact and law that are subsumed under the issue of whether Our Haus
complied with the legal requirements on the deductibility of the value of facilities. Strictly, factual issues
cannot be considered under Rule 45 except in the course of resolving if the CA correctly determined whether
or not the NLRC committed grave abuse of discretion in considering and appreciating the factual issues before
it.37
In ruling for legal correctness, we have to view the CA decision in the same context that the petition for
certiorariit ruled upon was presented to it; we have to examine the CA decision from the prism of whether it
correctly determined the presence or absence of grave abuse of discretion in the NLRC decision before it, not
on the basis of whether the NLRC decision, on the merits of the case, was correct. In other words, we have to
be keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision
challenged before it. This is the approach that should bebasic in a Rule 45 review of a CA ruling in a labor case.
In question form, the question to ask in the present case is: did the CA correctly determine that the NLRC did
not commit grave abuse of discretion in ruling on the case?38 We rule that the CA correctly did.
No substantial distinction between deducting and charging a facilitys value from the employees wage; the
legal requirements for creditability apply to both
To justify its non-compliance with the requirements for the deductibility of a facility, Our Haus asks us to
believe that there is a substantial distinction between the deduction and the charging of a facilitys value to
the wages. Our Haus explains that in deduction, the amount of the wage (which may already be below the
minimum) would still be lessened by the facilitys value, thus needing the employees consent. On the other
hand, in charging, there is no reduction of the employees wage since the facilitys value will just be
theoretically added to the wage for purposes of complying with the minimum wage requirement.39
Our Haus argument is a vain attempt to circumvent the minimum wage law by trying to create a distinction
where none exists.
In reality, deduction and charging both operate to lessen the actual take-home pay of an employee; they are
two sides of the same coin. In both, the employee receives a lessened amount because supposedly, the
facilitys value, which is part of his wage, had already been paid to him in kind. As there is no substantial
distinction between the two, the requirements set by law must apply to both.
As the CA correctly ruled, these requirements, as summarized in Mabeza, are the following:
a. proof must be shown thatsuch facilities are customarily furnished by the trade;
b. the provision of deductiblefacilities must be voluntarily accepted in writingby the employee; and
c. The facilities must be charged at fair and reasonable value.40
We examine Our Haus compliance with each of these requirements in seriatim.
a. The facility must be customarily furnished by the trade
In a string of cases, we have concluded that one of the badges to show that a facility is customarily furnished
by the trade is the existence of a company policy or guideline showing that provisions for a facility were
designated as part of the employees salaries.41 To comply with this, Our Haus presented in its motion for
reconsideration with the NLRC the joint sinumpaang salaysayof four of its alleged employees. These
employees averred that they were recipients of free lodging, electricity and water, as well as subsidized meals
from Our Haus.42
We agree with the NLRCs finding that the sinumpaang salaysay statements submitted by Our Haus are selfserving.1wphi1 For one, Our Haus only produced the documents when the NLRC had already earlier
determined that Our Haus failed to prove that it was traditionally giving the respondents their board and
lodging. This document did not state whether these benefits had been consistently enjoyed by the rest of Our
Haus employees. Moreover, the records reveal that the board and lodging were given on a per project basis.
Our Haus did not show if these benefits were also provided inits other construction projects, thus negating its
claimed customary nature. Even assuming the sinumpaang salaysay to be true, this document would still work
against Our Haus case. If Our Haus really had the practice of freely giving lodging, electricity and water
provisions to its employees, then Our Haus should not deduct its values from the respondents wages.
Otherwise, this will run contrary to the affiants claim that these benefits were traditionally given free of
charge.
Apart from company policy, the employer may also prove compliance with the first requirement by showing
the existence of an industry-wide practice of furnishingthe benefits in question among enterprises engaged in
the same line of business. If it were customary among construction companies to provide board and lodging to
their workers and treat their values as part of their wages, we would have more reason to conclude that these
benefits were really facilities.
However, Our Haus could not really be expected to prove compliance with the first requirement since the
living accommodation of workers in the construction industry is not simply a matter of business practice.
Peculiar to the construction business are the occupational safety and health (OSH) services which the law itself
mandates employers to provide to their workers. This isto ensure the humane working conditions of
construction employees despite their constant exposure to hazardous working environments. Under Section
16 of DOLE Department Order (DO) No. 13, series of 1998,43 employers engaged in the construction business
are required to providethe following welfare amenities:
16.1 Adequate supply of safe drinking water
16.2 Adequate sanitaryand washing facilities
16.3 Suitable living accommodation for workers, and as may be applicable, for their families
16.4 Separate sanitary, washing and sleeping facilitiesfor men and women workers. [emphasis ours]
Moreover, DOLE DO No. 56, series of 2005, which sets out the guidelines for the implementation ofDOLE DO
No. 13, mandates that the cost of the implementation of the requirements for the construction safety and
health of workers, shall be integrated to the overall project cost.44 The rationale behind this isto ensure that
the living accommodation of the workers is not substandard and is strictly compliant with the DOLEs OSH
criteria.
As part of the project cost that construction companies already charge to their clients, the value of the
housing of their workers cannot be charged again to their employees salaries. Our Haus cannot pass the
burden of the OSH costs of its construction projects to its employees by deducting it as facilities. This is Our
Haus obligation under the law.
Lastly, even if a benefit is customarily provided by the trade, it must still pass the purpose testset by
jurisprudence. Under this test, if a benefit or privilege granted to the employee is clearly for the employers
convenience, it will not be considered as a facility but a supplement.45 Here, careful consideration is given to
the nature of the employers business in relation to the work performed by the employee. This test is used to
address inequitable situations wherein employers consider a benefit deductible from the wages even if the
factual circumstances show that it clearly redounds to the employers greater advantage.
While the rules serve as the initial test in characterizing a benefit as a facility, the purpose test additionally
recognizes that the employer and the employee do not stand at the same bargaining positions on benefits
that must or must not formpart of an employees wage. In the ultimate analysis, the purpose test seeks to
prevent a circumvention of the minimum wage law.
a1. The purpose test in jurisprudence
Under the law,46 only the value of the facilities may be deducted from the employees wages but not the
value of supplements. Facilities include articles or services for the benefit of the employee or his family but
exclude tools of the trade or articles or services primarily for the benefit of the employer or necessary to the
conduct of the employers business.47
The law also prescribes that the computation of wages shall exclude whatever benefits, supplementsor
allowances given to employees. Supplements are paid to employees on top of their basic pay and are free of
charge.48 Since it does not form part of the wage, a supplements value may not be includedin the
determination of whether an employer complied with the prescribed minimum wage rates.
In the present case, the board and lodging provided by Our Haus cannot be categorized asfacilities but as
supplements. In SLL International Cables Specialist v. National Labor Relations Commission,49 this Court was
confronted with the issue on the proper characterization of the free board and lodging provided by the
employer. We explained:
The Court, at this point, makes a distinction between "facilities" and "supplements". It is of the view that the
food and lodging, or the electricity and water allegedly consumed by private respondents in this case were not
facilities but supplements. In the case of Atok-Big Wedge Assn. v. Atok-Big Wedge Co., the two terms were
distinguished from one another in this wise:
"Supplements", therefore, constitute extra remuneration or special privileges or benefits given to or received
by the laborers overand above their ordinary earnings or wages. "Facilities", on the other hand, are items of
expense necessary for the laborer's and his family's existence and subsistence so thatby express provision of
law (Sec. 2[g]), they form part of the wage and when furnished by the employer are deductible therefrom,
since if they are not so furnished, the laborer would spend and pay for them just the same.
In short, the benefit or privilege given to the employee which constitutes an extra remuneration above and
over his basic or ordinary earning or wage is supplement; and when said benefit or privilege is part of the
laborers' basic wages, it is a facility. The distinction lies not so much in the kind of benefit or item (food,
lodging, bonus or sick leave) given, but in the purpose for which it is given.In the case at bench, the items
provided were given freely by SLLfor the purpose of maintaining the efficiency and health of its workers while
they were working attheir respective projects.50
Ultimately, the real difference lies not on the kind of the benefit but on the purpose why it was given by the
employer. If it is primarily for the employees gain, then the benefit is a facility; if its provision is mainly for the
employers advantage, then it is a supplement. Again, this is to ensure that employees are protected in
circumstances where the employer designates a benefit as deductible from the wages even though it clearly
works to the employers greater convenience or advantage.
Under the purpose test, substantial consideration must be given to the nature of the employers business
inrelation to the character or type of work performed by the employees involved.
Our Haus is engaged in the construction business, a laborintensive enterprise. The success of its projects is
largely a function of the physical strength, vitality and efficiency of its laborers. Its business will be jeopardized
if its workers are weak, sickly, and lack the required energy to perform strenuous physical activities. Thus, by
ensuring that the workers are adequately and well fed, the employer is actually investing on its business.
Unlike in office enterprises where the work is focused on desk jobs, the construction industry relies heavily
and directly on the physical capacity and endurance of its workers. This is not to say that desk jobs do not
require muscle strength; wesimply emphasize that in the construction business, bulk of the work performed
are strenuous physical activities.
Moreover, in the construction business, contractors are usually faced with the problem ofmeeting target
deadlines. More often than not, work is performed continuously, day and night, in order to finish the project
on the designated turn-over date. Thus, it will be more convenient to the employer if itsworkers are housed
near the construction site to ensure their ready availability during urgent or emergency circumstances. Also,
productivity issues like tardiness and unexpected absences would be minimized. This observation strongly
bears in the present case since three of the respondents are not residents of the National Capital Region. The
board and lodging provision might have been a substantial consideration in their acceptance of employment in
a place distant from their provincial residences.
Based on these considerations, we conclude that even under the purpose test, the subsidized meals and free
lodging provided by Our Haus are actually supplements. Although they also work to benefit the respondents,
an analysis of the nature of these benefits in relation to Our Haus business shows that they were given
primarily for Our Haus greater convenience and advantage. If weighed on a scale, the balance tilts more
towards Our Haus side. Accordingly, their values cannot be considered in computing the total amount of the
respondents wages. Under the circumstances, the dailywages paid to the respondents are clearly below the
prescribed minimum wage rates in the years 2007-2010.
b. The provision of deductible facilities must be voluntarily accepted in writing by the employee
In Mayon Hotel, we reiterated that a facility may only be deducted from the wage if the employer was
authorized in writingby the concerned employee.51 As it diminishes the take-home pay of an employee, the
deduction must be with his express consent.
Again, in the motion for reconsideration with the NLRC, Our Haus belatedly submitted five kasunduans,
supposedly executed by the respondents, containing their conformity to the inclusion of the values of the
meals and housing to their total wages. Oddly, Our Haus only offered these documents when the NLRC had
already ruled that respondents did not accomplish any written authorization, to allow deduction from their
wages. These five kasunduans were also undated, making us wonder if they had reallybeen executed when
respondents first assumed their jobs.
Moreover, in the earlier sinumpaang salaysay by Our Haus four employees, it was not mentioned that they
also executed a kasunduanfor their board and lodging benefits. Because of these surrounding circumstances
and the suspicious timing when the five kasunduanswere submitted as evidence, we agree withthe CA that the
NLRC committed no grave abuse of discretion in disregarding these documents for being self serving.
c. The facility must be charged at a fair and reasonable value
Our Haus admitted that it deducted the amount of P290.00 per week from each of the respondents for their
meals. But it now submits that it did not actually withhold the entire amount as it did not figure in the
computation the money it expended for the salary of the cook, the water, and the LPG used for cooking, which
amounts to P249.40 per week per person. From these, it appears that the total meal expense per week for
each person is P529.40,making Our Haus P290.00 deduction within the 70% ceiling prescribed by the rules.
However, Our Haus valuation cannotbe plucked out of thin air. The valuation of a facility must besupported
by relevant documents such as receipts and company records for it to be considered as fair and reasonable. In
Mabeza, we noted:
Curiously, in the case at bench, the only valuations relied upon by the labor arbiter in his decision were figures
furnished by the private respondent's own accountant, without corroborative evidence.On the pretext that
records prior to the July 16, 1990 earthquake were lost or destroyed, respondent failed to produce payroll
records, receipts and other relevant documents, where he could have, as has been pointedout in the Solicitor
General's manifestation, "secured certified copies thereof from the nearest regional office of the Department
of Labor, the SSS or the BIR".52 [emphasis ours]
In the present case, Our Haus never explained how it came up with the valuesit assigned for the benefits it
provided; it merely listed its supposed expenses without any supporting document. Since Our Haus is using
these additional expenses (cooks salary, water and LPG) to support its claim that it did not withhold the full
amount of the meals value, Our Haus is burdened to present evidence to corroborate its claim. The records
however, are bereft of any evidence to support Our Haus meal expense computation. Eventhe value it
assigned for the respondents living accommodations was not supported by any documentary evidence.
Without any corroborative evidence, it cannot be said that Our Haus complied withthis third requisite.
A claim not raised in the pro forma complaint may still beraised in the position paper.
Our Haus questions the respondents entitlement to SIL pay by pointing out that this claim was not included in
the pro forma complaint filed with the NLRC. However, we agree with the CA that such omission does not bar
the labor tribunals from touching upon this cause of action since this was raised and discussed inthe
respondents position paper. In Samar-Med Distribution v. National Labor Relations Commission,53 we held:
Firstly, petitioners contention that the validity of Gutangs dismissal should not be determined because it had
not been included in his complaint before the NLRC is bereft of merit. The complaint of Gutang was a mere
checklist of possible causes of action that he might have against Roleda. Such manner of preparing the
complaint was obviously designed to facilitate the filing of complaints by employees and laborers who are
thereby enabled to expediently set forth their grievances in a general manner. But the non-inclusion in the
complaint of the issue on the dismissal did not necessarily mean that the validity of the dismissal could not be
an issue.The rules of the NLRC require the submission of verified position papers by the parties should they fail
to agree upon an amicable settlement, and bar the inclusion of any cause of action not mentioned in the
complaint or position paper from the time of their submission by the parties. In view of this, Gutangs cause of
action should be ascertained not from a reading of his complaint alone but also from a consideration and
evaluation of both his complaint and position paper.54
The respondents entitlement to the other monetary benefits
Generally a party who alleges payment as a defense has the burden of proving it.Particularly in labor cases,
the burden of proving payment of monetary claims rests on the employeron the reasoning that the pertinent
personnel files, payrolls, records, remittances and other similar documents which will show that overtime,
differentials, service incentive leave and other claims of workers have been paid are not in the possession
of the worker but in the custody and absolute control of the employer.55
Unfortunately, records will disclose the absence of any credible document which will show that respondents
had been paid their 13th month pay, holiday and SIL pays. Our Haus merely presented a handwritten
certification from its administrative officer that its employees automatically become entitled to five days of
service incentive leave as soon as they pass probation. This certification was not even subscribed under oath.
Our Haus could have at least submitted its payroll or copies of the pay slips of respondents to show payment
of these benefits. However, it failed to do so.
Respondents are entitled to attorneys fees.
Finally, we affirm that respondents are entitled to attorneys fees. Our Haus asserts that respondents
availment of free legal services from the PAO disqualifies them from such award. We find this untenable.
It is settled that in actions for recovery of wages or where an employee was forced to litigate and, thus, incur
expenses to protect his rights and interest, the award of attorney's fees is legally and morally justifiable.56
Moreover, under the PAO Law or Republic Act No. 9406, the costs of the suit, attorney's fees and contingent
fees imposed upon the adversary of the PAO clients after a successful litigation shall be deposited in the
National Treasury as trust fund and shall be disbursed for special allowances of authorized officials and
lawyers of the PAO.57
Thus, the respondents are still entitled to attorney's fees. The attorney's fees awarded to them shall be paid to
the PAO. It serves as a token recompense to the PAO for its provision of free legal services to litigants who
have no means of hiring a private lawyer.
WHEREFORE, in light of these considerations, we conclude that the Court of Appeals correctly found that the
National Labor Relations Commission did not abuse its discretion in its decision of July 20, 2011 and Resolution
of December 2, 2011.1wphi1 Consequently we DENY the petition and AFFIRM the Court of Appeals' decision
dated May 7, 2012 and resolution dated November 27, 2012 in CA-G.R. SP No. 123273. No costs.
SO ORDERED.
ARTURO D. BRION
Associate Justice
11. Art. 100, non-diminution rule

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 181806
March 12, 2014
WESLEYAN UNIVERSITY-PHILIPPINES, Petitioner,

vs.
WESLEYAN UNIVERSITY-PHILIPPINES FACULTY and STAFF ASSOCIATION, Respondent.
DECISION
DEL CASTILLO, J.:
A Collective Bargaining Agreement (CBA) is a contract entered into by an employer and a legitimate labor
organization concerning the terms and conditions of employment.1 Like any other contract, it has the force of
law between the parties and, thus, should be complied with in good faith.2 Unilateral changes or suspensions
in the implementation of the provisions of the CBA, therefore, cannot be allowed without the consent of both
parties.
This Petition for Review on Certiorari3 under Rule 45 of the Rules of Court assails the September 25, 2007
Decision4 and the February 5, 2008 Resolution5 of the Court of Appeals (CA) in CA-G.R. SP No. 97053.
Factual Antecedents
Petitioner Wesleyan University-Philippines is a non-stock, non-profit educational institution duly organized
and existing under the laws of the Philippines.6 Respondent Wesleyan University-Philippines Faculty and Staff
Association, on the other hand, is a duly registered labor organization7 acting as the sole and exclusive
bargaining agent of all rank-and-file faculty and staff employees of petitioner.8
In December 2003, the parties signed a 5-year CBA9 effective June 1, 2003 until May 31, 2008.10
On August 16, 2005, petitioner, through its President, Atty. Guillermo T. Maglaya (Atty. Maglaya), issued a
Memorandum11 providing guidelines on the implementation of vacation and sick leave credits as well as
vacation leave commutation. The pertinent portions of the Memorandum read:
1. VACATION AND SICK LEAVE CREDITS
Vacation and sick leave credits are not automatic. They have to be earned. Monthly, a qualified
employee earns an equivalent of 1.25 days credit each for VL and SL. Vacation Leave and Sick Leave
credits of 15 days become complete at the cut off date of May 31 of each year. (Example, only a total
of 5 days credit will be given to an employee for each of sick leave [or] vacation leave, as of month end
September, that is, 4 months from June to September multiplied by 1.25 days). An employee,
therefore, who takes VL or SL beyond his leave credits as of date will have to file leave without pay for
leaves beyond his credit.
2. VACATION LEAVE COMMUTATION
Only vacation leave is commuted or monetized to cash. Vacation leave commutation is effected after
the second year of continuous service of an employee. Hence, an employee who started working June
1, 2005 will get his commutation on May 31, 2007 or thereabout.12
On August 25, 2005, respondents President, Cynthia L. De Lara (De Lara) wrote a letter13 to Atty. Maglaya
informing him that respondent is not amenable to the unilateral changes made by petitioner.14 De Lara
questioned the guidelines for being violative of existing practices and the CBA,15 specifically Sections 1 and 2,
Article XII of the CBA, to wit:
ARTICLE XII
VACATION LEAVE AND SICK LEAVE
SECTION 1. VACATION LEAVE - All regular and non-tenured rank-and-file faculty and staff who are entitled to
receive shall enjoy fifteen (15) days vacation leave with pay annually.
1.1 All unused vacation leave after the second year of service shall be converted into cash and be paid to the
entitled employee at the end of each school year to be given not later than August 30 of each year.
SECTION 2. SICK LEAVE - All regular and non-tenured rank-and-file faculty and staff shall enjoy fifteen (15) days
sick leave with pay annually.16
On February 8, 2006, a Labor Management Committee (LMC) Meeting was held during which petitioner
advised respondent to file a grievance complaint on the implementation of the vacation and sick leave
policy.17 In the same meeting, petitioner announced its plan of implementing a one-retirement policy,18
which was unacceptable to respondent.
Ruling of the Voluntary Arbitrator
Unable to settle their differences at the grievance level, the parties referred the matter to a Voluntary
Arbitrator. During the hearing, respondent submitted affidavits to prove that there is an established practice
of giving two retirement benefits, one from the Private Education Retirement Annuity Association (PERAA)
Plan and another from the CBA Retirement Plan. Sections 1, 2, 3 and 4 of Article XVI of the CBA provide:
ARTICLE XVI
SEPARATION, DISABILITY AND RETIREMENT PAY
SECTION 1. ELIGIBILITY FOR MEMBERSHIP - Membership in the Plan shall be automatic for all full-time, regular
staff and tenured faculty of the University, except the University President. Membership in the Plan shall
commence on the first day of the month coincident with or next following his statement of Regular/Tenured
Employment Status.
SECTION 2. COMPULSORY RETIREMENT DATE - The compulsory retirement date of each Member shall be as
follows:
a. Faculty The last day of the School Year, coincident with his attainment of age sixty (60) with at
least five (years) of unbroken, credited service.
b. Staff Upon reaching the age of sixty (60) with at least five (5) years of unbroken, credited service.
SECTION 3. OPTIONAL RETIREMENT DATE - A Member may opt for an optional retirement prior to his
compulsory retirement. His number of years of service in the University shall be the basis of computing x x x
his retirement benefits regardless of his chronological age.
SECTION 4. RETIREMENT BENEFIT - The retirement benefit shall be a sum equivalent to 100% of the members
final monthly salary for compulsory retirement.
For optional retirement, the vesting schedule shall be:
x x x x19
On November 2, 2006, the Voluntary Arbitrator rendered a Decision20 declaring the one-retirement policy
and the Memorandum dated August 16, 2005 contrary to law. The dispositive portion of the Decision reads:
WHEREFORE, the following award is hereby made:
1. The assailed University guidelines on the availment of vacation and sick leave credits and vacation
leave commutation are contrary to law. The University is consequently ordered to reinstate the earlier
scheme, practice or policy in effect before the issuance of the said guidelines on August 16, 2005;
2. The "one retirement" policy is contrary to law and is hereby revoked and rescinded. The University is
ordered x x x to resume and proceed with the established practice of extending to qualified employees
retirement benefits under both the CBA and the PERAA Plan.
3. The other money claims are denied.21
Ruling of the Court of Appeals
Aggrieved, petitioner appealed the case to the CA via a Petition for Review under Rule 43 of the Rules of
Court.
On September 25, 2007, the CA rendered a Decision22 finding the rulings of the Voluntary Arbitrator
supported by substantial evidence. It also affirmed the nullification of the one-retirement policy and the
Memorandum dated August 16, 2005 on the ground that these unilaterally amended the CBA without the
consent of respondent.23 Thus:
WHEREFORE, the instant appeal is DISMISSED for lack of merit.
SO ORDERED.24
Petitioner moved for reconsideration but the same was denied by the CA in its February 5, 2008 Resolution.25
Issues
Hence, this recourse by petitioner raising the following issues:
a.
Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrators ruling that
the Affidavits submitted by Respondent WU-PFSA are substantial evidence as defined by the rules and
jurisprudence that would substantiate that Petitioner WU-P has long been in the practice of granting its
employees two (2) sets of Retirement Benefits.
b.
a university practice of granting its employees two (2) sets of Retirement Benefits had already been
established as defined by the law and jurisprudence especially in light of the illegality and lack of authority of
such alleged grant.
c.
it is incumbent upon Petitioner WU-P to show proof that no Board Resolution was issued granting two (2) sets
of Retirement Benefits.
d.
Whether x x x the [CA] committed grave and palpable error in revoking the 16 August 2005 Memorandum of
Petitioner WU-P for being contrary to extant policy.26
Petitioners Arguments
Petitioner argues that there is only one retirement plan as the CBA Retirement Plan and the PERAA Plan are
one and the same.27 It maintains that there is no established company practice or policy of giving two
retirement benefits to its employees.28 Assuming, without admitting, that two retirement benefits were
released,29 petitioner insists that these were done by mere oversight or mistake as there is no Board
Resolution authorizing their release.30 And since these benefits are unauthorized and irregular, these cannot
ripen into a company practice or policy.31 As to the affidavits submitted by respondent, petitioner claims that
these are self-serving declarations,32 and thus, should not be given weight and credence.33
In addition, petitioner claims that the Memorandum dated August 16, 2005, which provides for the guidelines
on the implementation of vacation and sick leave credits as well as vacation leave commutation, is valid
because it is in full accord with existing policy.34
Respondents Arguments
Respondent belies the claims of petitioner and asserts that there are two retirement plans as the PERAA
Retirement Plan, which has been implemented for more than 30 years, is different from the CBA Retirement
Plan.35 Respondent further avers that it has always been a practice of petitioner to give two retirement
benefits36 and that this practice was established by substantial evidence as found by both the Voluntary
Arbitrator and the CA.37
As to the Memorandum dated August 16, 2005, respondent asserts that it is arbitrary and contrary to the CBA
and existing practices as it added qualifications or limitations which were not agreed upon by the parties.38
Our Ruling
The Petition is bereft of merit.
The Non-Diminution Rule found in Article 10039 of the Labor Code explicitly prohibits employers from
eliminating or reducing the benefits received by their employees. This rule, however, applies only if the
benefit is based on an express policy, a written contract, or has ripened into a practice.40 To be considered a
practice, it must be consistently and deliberately made by the employer over a long period of time.41
An exception to the rule is when "the practice is due to error in the construction or application of a doubtful or
difficult question of law."42 The error, however, must be corrected immediately after its discovery;43
otherwise, the rule on Non-Diminution of Benefits would still apply.
The practice of giving two retirement
benefits to petitioners employees is
supported by substantial evidence.
In this case, respondent was able to present substantial evidence in the form of affidavits to support its claim
that there are two retirement plans. Based on the affidavits, petitioner has been giving two retirement
benefits as early as 1997.44 Petitioner, on the other hand, failed to present any evidence to refute the veracity
of these affidavits. Petitioners contention that these affidavits are self-serving holds no water. The retired
employees of petitioner have nothing to lose or gain in this case as they have already received their
retirement benefits. Thus, they have no reason to perjure themselves. Obviously, the only reason they
executed those affidavits is to bring out the truth. As we see it then, their affidavits, corroborated by the
affidavits of incumbent employees, are more than sufficient to show that the granting of two retirement
benefits to retiring employees had already ripened into a consistent and deliberate practice.
Moreover, petitioners assertion that there is only one retirement plan as the CBA Retirement Plan and the
PERAA Plan are one and the same is not supported by any evidence. There is nothing in Article XVI of the CBA
to indicate or even suggest that the "Plan" referred to in the CBA is the PERAA Plan. Besides, any doubt in the
interpretation of the provisions of the CBA should be resolved in favor of respondent. In fact, petitioners
assertion is negated by the announcement it made during the LMC Meeting on February 8, 2006 regarding its
plan of implementing a "one-retirement plan." For if it were true that petitioner was already implementing a
one-retirement policy, there would have been no need for such announcement. Equally damaging is the
letter-memorandum45 dated May 11, 2006, entitled "Suggestions on the defenses we can introduce to justify
the abolition of double retirement policy," prepared by the petitioners legal counsel.
These circumstances, taken together, bolster the finding that the two-retirement policy is a practice.1wphi1
Thus, petitioner cannot, without the consent of respondent, eliminate the two-retirement policy and
implement a one-retirement policy as this would violate the rule on non-diminution of benefits.
As a last ditch effort to abolish the two-retirement policy, petitioner contends that such practice is illegal or
unauthorized and that the benefits were erroneously given by the previous administration. No evidence,
however, was presented by petitioner to substantiate its allegations.
Considering the foregoing disquisition, we agree with the findings of the Voluntary Arbitrator, as affirmed by
the CA, that there is substantial evidence to prove that there is an existing practice of giving two retirement
benefits, one under the PERAA Plan and another under the CBA Retirement Plan.
The Memorandum dated August 16,
2005 is contrary to the existing CBA.
Neither do we find any reason to disturb the findings of the CA that the Memorandum dated August 16, 2005
is contrary to the existing CBA.
Sections 1 and 2 of Article XII of the CBA provide that all covered employees are entitled to 15 days sick leave
and 15 days vacation leave with pay every year and that after the second year of service, all unused vacation
leave shall be converted to cash and paid to the employee at the end of each school year, not later than
August 30 of each year.
The Memorandum dated August 16, 2005, however, states that vacation and sick leave credits are not
automatic as leave credits would be earned on a month-to-month basis. This, in effect, limits the available
leave credits of an employee at the start of the school year. For example, for the first four months of the
school year or from June to September, an employee is only entitled to five days vacation leave and five days
sick leave.46 Considering that the Memorandum dated August 16, 2005 imposes a limitation not agreed upon
by the parties nor stated in the CBA, we agree with the CA that it must be struck down.
In closing, it may not be amiss to mention that when the provision of the CBA is clear, leaving no doubt on the
intention of the parties, the literal meaning of the stipulation shall govem.47
However, if there is doubt in its interpretation, it should be resolved in favor of labor,48 as this is mandated by
no less than the Constitution.49
WHEREFORE, the Petition is hereby DENIED. The assailed September 25, 2007 Decision and the February 5,
2008 Resolution of the Court of Appeals in CA-G.R. SP No. 97053 are hereby AFFIRMED.
SO ORDERED.

Associate Justice
12. Art. 100, no policy but with company practice

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 160827
June 18, 2014
NETLINK COMPUTER INCORPORATED, Petitioner,

vs.
ERIC DELMO, Respondent.
DECISION
BERSAMIN, J.:
In the absence of a written agreement between the employer and the employee that sales commissions shall
be paid in a foreign currency, the latter has the right to be paid in such foreign currency once the same has
become an established practice of the former. The rate of exchange at the time of payment, not the rate of
exchange at the time of the sales, controls.
Antecedents
On November 3, 1991, Netlink Computer, Inc. Products and Services (Netlink) hired Eric S. Delmo (Delmo) as
account manager tasked to canvass and source clients and convince them to purchase the products and
services of Netlink. Delmo worked in the field most of the time. He and his fellow account managers were not
required to accomplish time cards to record their personal presence in the office of Netlink.1 He was able to
generate sales worth P35,000,000.00, more or less, from which he earned commissions amounting to
P993,558.89 and US$7,588.30. He then requested payment of his commissions, but Netlink refused and only
gave him partial cash advances chargeable to his commissions. Later on, Netlink began to nitpick and fault
find, like stressing his supposed absences and tardiness. In order to force him to resign, Netlink issued several
memoranda detailing his supposed infractions of the companys attendance policy. Despite the memoranda,
Delmo continued to generate huge sales for Netlink.2
On November 28, 1996, Delmo was shocked when he was refused entry into the company premises by the
security guard pursuant to a memorandum to that effect. His personal belongings were still inside the
company premises and he sought their return to him. This incident prompted Delmo to file a complaint for
illegal dismissal.3
In its answer to Delmos complaint,Netlink countered that there were guidelines regarding company working
time and its utilization and how the employees time would be recorded. Allegedly, all personnel were
required to use the bundy clock to punch in and out in the morning, and in and out in the afternoon. Excepted
from the rules were the company officers, and the authorized personnel in the field project assignments.
Netlink claimed that it would be losing on the business transactions closed by Delmo due to the high costs of
equipment, and in fact his biggest client had not yet paid. Netlink pointed out that Delmo had becomevery lax
in his obligations, with the other account managers eventually having outperformed him. Netlink asserted that
warning, reprimand, and suspension memoranda were given to employees who violated company rules and
regulations, but such actions were considered as a necessary management tool to instill discipline.4
On September 23, 1998, the Labor Arbiter ruled against Netlink and in favor of Delmo, to wit:
WHEREFORE, judgment is hereby rendered declaring complainant as illegally and unjustly dismissed and
respondents are ordered to reinstate complainant to his former position without loss of seniority rights with
full backwages and other benefits and respondents are hereby ordered to pay complainant as follows:
P161,000.00
- Backwages, basic pay and allowances from Nov. 1996 to Sept. 1998
15,000.00
- 13th month pay for 1996 to 1998
993,558.89
- unpaid commissions
P1,169,558.89
- Total
plus US$7,588.30 - unpaid commissions

plus 10% attorneys fees
The reinstatement aspect is immediately executory even pending appeal. In case reinstatement is no longer
feasible, complainant shall be paid separation pay of one-month pay for every year of service. All other claims
are hereby dismissed.
SO ORDERED.5
Decision of the NLRC
On appeal, the National Labor Relations Commission (NLRC) modified the decision of the Labor Arbiter by
setting aside the backwages and reinstatement decreed by the Labor Arbiter due to the existence of valid and
just causes for the termination of Delmos employment, to wit: WHEREFORE, premises considered, the
decision of the Labor Arbiter a quo is hereby SET ASIDEand a new one ENTERED, ordering the respondentsappellantsto pay the following:
1. TWO THOUSAND PESOS (P2,000.00) as indemnity for failure to observe procedural due process;
2. Unpaid commission in the amount of P993,558.89;
3. US$7,588.30 as unpaid commission;
4. P15,000.00 representing the 13th month pay for 1996, 1997, and 1998;
5. 10% attorneys fees of the total amount awarded.

SO ORDERED.6
The NLRC denied the motion for reconsideration, after which Netlink filed a petition for certiorariin the CA.
Judgment of the CA
On May 9, 2003, the CA promulgated its assailed decision upholding the NLRCs ruling subject to
modifications,7 viz:
In the present case, since the payment of the commission is made to depend on the future and uncertain
event which is the payment of the accounts by the persons who have transacted business with the
petitioner, without payment by the former to the latter, the obligation to pay the commission has not yet
arisen.
The evidence on record shows that the ALCATEL, private respondents biggest client has not paid fully the
amount it owes to the petitioner as of March 10, 1998. (Rollo, pp. 101, 397, 398) The obligation therefore, on
the part of the petitioner to pay the private respondent for his commission for the said unpaid account has not
yet arisen. Thus it is a grave abuse of discretion on the part of the public respondent to make petitioner liable
to the private respondent for the payment of the said commission, when it is clear on the record, as We have
discussed above, that the obligation therefor has not yet arisen.
Perusal of the records, likewise, show that petitioner failed to refute by evidence that the private respondent
is not entitled to the P993, 558.89 commission. Petitioner however claimed that since the amounts out of
which the commission will be taken has not yet been paid fully, petitioner must, likewise, not be made liable
for the said commission. However, public respondent committed grave abuse of discretion when it disregard
the evidence on record which is not disputed by the private respondent that out of the total commissions of
the private respondent, petitioner has paid the petitioner in the amount of P216,799.45 in the form of
advance payment. (Rollo, p. 12)
In view of the foregoing discussions, therefore, the advance payment made by the petitioner in favorof the
private respondent in the amount of P216, 799.45 must be deducted to the P993, 558.89 unpaid commission
of the private respondent. The difference amounting to P776, 779.44 must likewise be deducted to the
amount of P4, 066.19 which represents the amount which the petitioner had admitted as the net commission
payable to private respondent. The difference thereof amounting to P772, 713.25 shall represent the unpaid
commission which shall be payable to the private respondent by the petitioner upon payment of the accounts
out of which such commission shall be taken.
We, likewise, agree with the petitioner that the private respondent is not entitled to 13th month pay in the
years 1997 and 1998. The order of the public respondent making the petitioner liable to the private
respondent for the 13th month pay of the latter in the years 1997 and 1998 is contrary to its findings that
there are valid and just cause for the termination of the private respondent from employment, although
private respondent was not given his right to due process. (Rollo, pp. 32-33) The rule applicable in the present
case is the decision of the Supreme Court in the case of Sebuguero vs National Labor Relations Commission
[248 SCRA 532, 547 (1995)] where it was ruled that "where the dismissal of an employee is in fact for a just
and valid cause and is so proven to be but he is not accorded his right to due process,i.e., he was not furnished
the twin requirements of notice and the opportunityto be heard, the dismissal shall be upheld but the
employer must be sanctioned for non-compliance with the requirements of or for failureto observe due
process." Hence, petitioner should not be made to pay the 13th month pay to private respondent whose
employment was terminated for cause but without due process in 1996.
xxxx
Thus, private respondent is entitled only to a 13th month pay computed pro-rata from January 1996 to
November 1996 which as properly computed by the petitioner amounts to P4, 584.00. (Rollo, p. 11)
With respect to the other arguments of the petitioner, this Court is not persuaded. Petitioner failed to refute
by evidence that private respondent is not entitled to the commissions payable in US dollars. Neither is there
any reason for us to agree with the petitioner that the computation of these commissions must be based on
the value of [the] Peso in relation to a Dollar at the time of sale. As properly observed by the Labor Arbiter a
quo, viz: "Likewise the devaluation of the peso cannot be used as a shield against the complainant because
that should have been the lookout of the respondent company in providing for such a clause that in case of
devaluation, the price agreed upon should be at the exchange rate when the contract of sale had been
consummated. For the lack of foresight and inefficiency of the respondent company and as regards its
contracts or agreements with its clientele, the complainant should not be made to suffer." (Labor Arbiter
Ricardo Olairez Decision, September 23, 1998, pp. 11-12, Rollo,pp. 328-329) In this regardtherefore, We
uphold the well settled rule that "the findings of facts of the NLRC, particularly where the NLRC and the Labor
Arbiter are in agreement, are deemed binding and conclusive upon the Court." (Permex, Inc. vs National Labor
Relations Commission, 323 SCRA 121, 126).
xxxx
WHEREFORE, premises considered, the assailed Resolutions are hereby AFFIRMED with MODIFICATION,
ordering the petitioner to pay the private respondent the following:
1. TWO-THOUSAND PESOS (P2,000.00) as indemnity for failure to observe procedural due process;
2. P4,066.19 representing the unpaid commissions that have accrued in favor of the private
respondent;
3. P776,779.44 payable to the private respondent upon payment of the accounts out of which the said
amount will be taken;
4. P4,584.00 representing the unpaid 13th month pay of the private respondent;
5. US$7,588.30 as unpaid commission;
6. 10% attorneys fees of the total amount awarded excluding the amount contained in the No.3 of this
Order.
SO ORDERED.
Issues
Hence, this appeal.
Netlink submits that the CA committed a palpable and reversible error of law in not holding that the applicable
exchange rate for computing the US dollar commissions of Delmo should be the rates prevailing at the time
when the sales were actually generated, not the rates prevailing at the time of the payment; and in awarding
attorneys fees.
In his comment,8 Delmo counters that because he had earned in US dollars it was only fair that his
commissions be paid in US dollars; that Netlink should not be allowed to flip-flop after it had paid commissions
in US dollar on the sales generated by its sales agents on US-dollar denominated transactions; and that
attorneys fees were warranted because of the unanimous finding that there was violation of procedural due
process.
In its reply,9 Netlink maintains that the commissions of Delmo should be based on sales generated, actually
paid by and collected from the customers; that commissions must be paid on the basis of the conversion of
the US dollar to the Philippine peso at the time of sale; and that no cogent and justifiable reason existed for
the award of attorneys fees.
To be considered for resolution are,therefore, the following, namely: (1) whether or not the payment of the
commissions should be in US dollars; and (2) whether or not the award ofattorneys fees was warranted.
Ruling of the Court
The appeal lacks merit.
As a general rule, all obligations shall be paid in Philippine currency. However, the contracting parties may
stipulate that foreign currencies may be used for settling obligations. This is pursuant to Republic Act No.
8183,10 which provides as follows:
Section 1. All monetary obligations shall be settled in the Philippine currency which is legal tender in the
Philippines. However, the parties may agree that the obligation ortransaction shall be settled in any other
currency at the time of payment.
We remarked in C.F. Sharp & Co. v. Northwest Airlines, Inc.11 that the repeal of Republic Act No. 529 had the
effect of removing the prohibition on the stipulation of currency other than Philippine currency, such that
obligations or transactions could already be paid in the currency agreed upon by the parties. However, both
Republic Act No. 529 and Republic Act No. 8183 did not stipulate the applicable rate of exchange for the
conversion of foreign currency-incurred obligations to their peso equivalent. It follows, therefore, that the
jurisprudence established under Republic Act No. 529 with regard to the rate of conversion remains
applicable. In C.F. Sharp, the Court cited Asia World Recruitment,Inc. v. NLRC,12 to the effect that the real
value of the foreign exchange-incurred obligation up to the date of itspayment should be preserved.
There was no written contract between Netlink and Delmo stipulating that the latters commissions would be
paid in US dollars.1wphi1 The absence of the contractual stipulation notwithstanding, Netlink was still liable
to pay Delmo in US dollars because the practice of paying its sales agents in US dollars for their US dollardenominatedsales had become a company policy. This was impliedly admitted by Netlink when it did not
refute the allegation that the commissions earned by Delmo and its other sales agents had been paid in US
dollars. Instead of denying the allegation, Netlink only sought a declaration that the US dollar commissions be
paid using the exchange rate at the time of sale. The principle of non-diminution of benefits, which has been
incorporated in Article 10013 of the Labor Code, forbade Netlink from unilaterally reducing, diminishing,
discontinuing or eliminating the practice. Verily, the phrase "supplements, or other employee benefits" in
Article 100 is construed to mean the compensation and privileges received by an employee aside from regular
salaries or wages.
With regard to the length of timethe company practice should have been observed to constitute a voluntary
employer practice that cannot be unilaterally reduced, diminished, discontinued or eliminated by the
employer, we find that jurisprudence has not laid down any rule requiring a specific mmimum number of
years. In Davao Fruits Corporation v. Associated Labor Unions,14 the company practice lasted for six years. In
Davao Integrated Port Stevedoring Services v. Abarquez,15 the employer, for three years and nine months,
approved the commutation to cash of the unenjoyed portion of the sick leave with pay benefits of its
intermittent workers. In Tiangco v. Leogardo, Jr.,16 the employer carried on the practice of giving a fixed
monthly emergency allowance from November 1976 to February 1980, or three years and four months. In
Sevilla Trading Company v. Semana, 17 the employer kept the practice of including non-basic benefits such as
paid leaves for unused sick leave and vacation in the computation of their 13th-month pay for at least two
years.
With the payment of US dollar commissions having ripened into a company practice, there is no way that the
commissions due to Delmo were to be paid in US dollars or their equivalent in Philippine currency determined
at the time of the sales. To rule otherwise would be to cause an unjust diminution of the commissions due and
owing to Delmo.
Finally, we affirm the following justification of the CA in granting attorney's fees to Delmo, viz: The award of
attorney's fees must, likewise, be upheld in line of (sic) the decision of the Supreme Court in the case of
Consolidated Rural Bank (Cagayan Valley), Inc. vs. National Labor Relations Commission, 301 SCRA 223, 235,
where it was held that "in actions for recovery of wages or where an employee was forced to litigate and thus
incur expenses to protect her rights and interests, even if not so claimed, an award of attorney's fees
equivalent to ten percent (10%) of the total award is legally and morally justifiable. There is no doubt that in
the present case, the private respondent has incurred expenses for the protection and enforcement of his
right to his commissions.18
WHEREFORE, the Court DENIES the petition for review on certiorari; AFFIRMS the decision promulgated on
May 9, 2003; and ORDERS the petitioner to pay the costs of suit.
SO ORDERED
LUCAS P. BERSAMIN
Associate Justice
13. Bonuses generally not part of wages

FIRST DIVISION
G.R. No. 162021
June 16, 2014
MEGA MAGAZINE PUBLICATIONS, INC., JERRY TIU, AND SARITA V. YAP, Petitioners,
vs.
MARGARET A. DEFENSOR, Respondent.
DECISION
BERSAMIN, J.:
In labor cases, the rules on the degree of proof are enforced not as stringently as in other cases in order to
better serve the higher ends of justice. This lenity is intended to afford to the employee every opportunity to
level the playing field.
The Case
Being now assailed is the amended decision promulgated on November 19, 2003,1 whereby the Court of
Appeals (CA) reconsidered its original disposition, and granted the petition for certiorari filed by respondent
Margaret A. Defensor (respondent) by annulling and setting aside the adverse resolutions dated July 31, 2002
and March 31, 2003 issued by the National Labor Relations Commission (NLRC).
Antecedents
Petitioner Mega Magazine Publications, Inc. (MMPI) first employed the respondent as an Associate Publisher
in 1996, and later promoted her as a Group Publisher with a monthly salary of P60,000.00.2
In a memorandum dated February 25, 1999, the respondent proposed to MMPIs Executive Vice-President
Sarita V. Yap (Yap) year-end commissions for herself and a special incentive plan for the Sales Department.3
The proposed schedule of the respondents commissions would be as follows:
1. MMPI Total revenue at P28-P29 M 0.05% outright commission
5. MMPI Total revenue at P41M up 0.1% outright commission
while the proposed schedule of the special incentive plan would be the following:
1. MMPI Total revenue at P28-P29 M P5,000 each by year-end

5. MMPI Total revenue at P41M up P10,000 each by year-end Plus incentive trip abroad
Yap made marginal notes of her counter-proposals on her copy of the respondents memorandum dated
February 25, 1999 itself,4 crossing out proposed items 1 and 2 from the schedule of the respondents
commissions, and proposing instead that outright commissions be at 0.1% of P35-P38 million in accordance
with proposed item 3; and crossing out proposed items 1 and 2 from the schedule of the special incentive
plan, and writing "start here" and "stet" in reference to item 3. Yap also wrote on the memorandum: "Marge,
if everything is ok w/ you, draft something for me to sign "; "You can also announce that at 5 M net for
MMPI [acc to my computation, achievable if they only meet their month min. quota] we can declare 14th
month pay for entire company."5
The respondent sent another memorandum on April 5, 1999 setting out the 1999 advertisement sales, target
and commissions, and proposing that the schedule of her outright commissions should start at .05% of P34.5
million total revenue, or P175,000.00;6 and further proposing that the special incentives be given when total
revenues reached P35-P38 million.
On August 31, 1999, the respondent sent Yap a report on sales and sales targets.7
On October 1999, the respondent tendered her letter of resignation effective at the end of December
1999.1wphi1 Yap accepted the resignation.8 Before leaving MMPI, the respondent sent Yap another report
on the sales and advertising targets for 1999.9 On December 8, 1999, Yap responded with a "formalization" of
her approval of the 1999 special incentive scheme proposed by the respondent through her memorandum
dated February 25, 1999,10 revising anew the schedule by starting commissions at.05% of P35-P38 million
gross advertising revenue (including barter), and the proposed special incentives at P35-P38 million with
P8,500.00 bonus.11
The respondent replied to Yap, pointing out that her memorandum dated April 5, 1999 had been the result of
Yaps own comments on the special incentive scheme she had proposed, and that she had assumed that Yap
had been amenable to the proposal when she did not receive any further reaction from the latter.12
On May 2000, after the respondent had left the company, she filed a complaint for payment of bonus and
incentive compensation with damages,13 specifically demanding the payment ofP271,264.68 as sales
commissions, P60,000.00 as 14th month pay, and P8,500.00 as her share in the incentive scheme for the
advertising and sales staff.14
In a decision dated February 5, 2001,15 the Labor Arbiter (LA) dismissed the respondents complaint, ruling
that the respondent had not presented any evidence showing that MMPI had agreed or committed to the
terms proposed in her memorandum of April 5, 1999; that even assuming that the petitioners had agreed to
her terms, the table she had submitted justifying a gross revenue of P36,216,624.07 was not an official
account by MMPI;16 and that the petitioners had presented a 1999 statement of income and deficit prepared
by the auditing firm of Punongbayan & Araullo showing MMPIs gross revenue for 1999 being only
P31,947,677.00.17
Decision of the NLRC
The respondent appealed, but the NLRC denied the appeal for its lack of merit,18 with the NLRC concurring
with the LAs ruling that there had been no agreement between the petitioners and the respondent on the
terms and conditions of the incentives reached.
The respondent filed a motion for reconsideration and a supplement to the motion for
reconsideration.1wphi1 In the supplement, she included a motion to admit additional evidence (i.e., the
affidavit of Lie Tabingo who had worked as a traffic clerk in the Advertising Department of MMPI and had
been in charge of keeping track of the advertisements placed with MMPI) on the ground that such evidence
had been "unavailable during the hearing as newly discovered evidence in a motion for new trial".19
The NLRC denied the respondents motions for reconsideration.20
Judgment of the CA
The respondent brought a special civil action for certiorari in the CA.
In its decision promulgated on August 28, 2003,21 the CA dismissed the respondents petition for certiorari
and upheld the resolutions of the NLRC.
On motion for reconsideration by the respondent, however, the CA promulgated on November 19, 2003 its
assailed amended decision granting the motion for reconsideration and giving due course to the respondents
petition for certiorari; annulling the challenged resolutions of the NLRC; and remanding the case to the NLRC
for the reception of additional evidence. The CA opined that the NLRC had committed a grave abuse of
discretion in finding that there had been no special incentive scheme approved and implemented for 1999,22
and in disallowing the respondent from presenting additional evidence that was crucial in establishing her
claim about MMPIs gross revenue.23 The amended decision disposed as follows:
WHEREFORE, premises considered, the motion for reconsideration is hereby GRANTED. Our Decision of
August 28, 2003 is hereby RECONSIDERED AND SET ASIDE. A new judgment is hereby entered GIVING DUE
COURSE to the petition and GRANTING the writ prayed for. Accordingly, the challenged Resolutions of the
NLRC in NLRC NCR 00-03-61361-00 (CA No. 028358-01) dated July 31, 2002 and March 31, 2003 are hereby
ANNULLED and SET ASIDE. The case is hereby remanded to the NLRC for reception of additional evidence on
appeal as prayed for by petitioner and for proper proceedings in accordance with Our disquisitions herein.
The denial of the claim for 14th month pay is sustained for lack of evidentiary basis.
No pronouncement as to costs.
SO ORDERED.24
The petitioners and the respondent sought reconsideration of the CAs amended decision, but the CA denied
their motions through the resolution promulgated on February 4, 2004.25
Issues
Hence, this appeal by petition for review on certiorari, with the petitioners urging that the CA erred in ruling
that
I. RESPONDENT CAN INTRODUCE EVIDENCE THAT IS NOT NEWLY-DISCOVERED FOR THE FIRST TIME ON
APPEAL.
II. A [REMAND] OF THE CASETO THE NLRC FOR FURTHER RECEPTION OF EVIDENCE IS JUSTIFIED BY
REASON OF DEARTH OF EVIDENCE TO PROVE THAT TARGET GROSS SALES OR REVENUES
WEREACTUALLY MET AS TO ENTITLE RESPONDENT TO THE INCENTIVE BONUS FOR THE SUBJECT
PERIOD/YEAR.26
The petitioners argue that the circumstances of the case did not warrant the relaxation of the rules of
procedure in order to allow the submission of the memorandum and the affidavit of Tabingo to the LA and the
NLRC. They contend that the respondent had sought to introduce in the proceedings before the LA Tabingos
memorandum dated December 10, 1999 addressed to the Accounting Department stating that the "gross
revenue from all publications was P36,022,624.07, while net revenue was P32,551,890.58";27 that Tabingos
affidavit was meant to validate her memorandum; that such pieces of evidence sought to prove that MMPIs
target gross sales had been met, and would then entitle the respondent to her claims of commissions and
special incentives; that the LA actually considered but did not give any weight or value to Tabingos
memorandum in resolving the respondents claims; that any affidavit from Tabingo that the respondent
intended to introduce would be merely corroborative of the evidence already presented, like the table
purportedly showing MMPIs gross revenue for 1999; and that such evidence was already considered by the
NLRC in resolving the appeal.28
The important issue is whether or not the respondent was entitled to the commissions and the incentive
bonus being claimed.
Ruling
The appeal is partly meritorious.
The grant of a bonus or special incentive, being a management prerogative, is not a demandable and
enforceable obligation, except when the bonus or special incentive is made part of the wage, salary or
compensation of the employee,29 or is promised by the employer and expressly agreed upon by the
parties.30 By its very definition, bonus is a gratuity or act of liberality of the giver,31 and cannot be considered
part of an employees wages if it is paid only when profits are realized or a certain amount of productivity is
achieved. If the desired goal of production or actual work is not accomplished, the bonus does not accrue.
Due to the nature of the bonus or special incentive being a gratuity or act of liberality on the part of the giver,
the respondent could not validly insist on the schedule proposed in her memorandum of April 5, 1999
considering that the grant of the bonus or special incentive remained a management prerogative. However,
the Court agrees with the CAs ruling that the petitioners had already exercised the management prerogative
to grant the bonus or special incentive. At no instance did Yap flatly refuse or reject the respondents request
for commissions and the bonus or incentive. This is plain from the fact that Yap even "bargained" with the
respondent on the schedule of the rates and the revenues on which the bonus or incentive would be pegged.
What remained contested was only the schedule of the rates and the revenues. In her initial memorandum of
February 25, 1999, the respondent had suggested the following schedule, namely: (a) 0.05% outright
commission on total revenue of P28-P29 million; (b) 0.075% on P30-P34 million; (c) 0.1% on P35-P38 million;
(d) 0.1% on P39-P41 million pesos; and (f) 0.1% on P41 million or higher, but Yap had countered by revising
the schedule to start at 0.1% as outright commissions on a total revenue of P35-P38 million, and the special
incentive bonus to start at revenues of P35-P38 million. Moreover, on December 8, 1999, Yap sent to the
respondent a memorandum entitled Re: Formalization of my handwritten approval of 1999 Incentive scheme
dated 25 February 1999. Such actuations and actions by Yap indicated that, firstly, the petitioners had already
acceded to the grant of the special incentive bonus; and, secondly, the only issue still to be threshed out was
at which point and at what rate the respondents outright commissions and the special incentive bonus for the
sales staff should be given.
For sure, Yaps memorandum dated December 8, 1999, aside from being the petitioners categorical
admission of the grant of the commissions and the bonus or incentives, laid down the petitioners own
schedule of the commissions and the bonus or incentives,32 to wit:
Re: Formalization of my handwritten approval of 1999 incentive scheme dated 25 February 1999
1999 Incentive Scheme for Group Publisher
MMPI Gross Advertising Revenue P35-38 M .05%
(includes barter)
P39-41 M .075%
P41 M
up 1%
Commissionable ad revenue is net of advertising agency commission and absorbed production costs.1avvphi1
Commission will be paid in bartered goods and cash in direct proportion to percentage of cash and bartered
goods revenue for the year. This amount will be paid by January 30, 2000 if the documents (contracts, P.O.s)
to support the gross revenue claim are in order and submitted to Finance.
Group Incentive for Sale and Traffic Team
MMPI Gross Advertising Revenue P35-38 M P8,500.00 each
P39-41 M P10,000.00 each
P41 M up P10,000.00 each
+ incentive trip abroad
Concerning the remand of the case to the NLRC for reception of additional evidence at the instance of the
respondent, we hold that the CA committed a reversible error. Although, as a rule, the submission to the NLRC
of additional evidence like documents and affidavits is not prohibited, so that the NLRC may properly consider
such evidence for the first time on appeal,33 the circumstances of the case did not justify the application of
the rule herein.
The additional evidence the respondent has sought to be admitted (i.e., Tabingos affidavit executed on
October 14, 2002) was already attached to the pleadings filed in the NLRC, and was part of the records
thereat. Its introduction was apparently aimed to rebut the petitioners claim that its gross revenue was only
P31,947,677.00 and did not reach the minimum P35 million necessary for the grant of the respondents
outright commissions and the special incentive bonus for the sales staff (inclusive of the respondent).
Tabingos affidavit corroborated her memorandum to the Accounting Department dated December 10, 1999
stating that MMPIs revenue for 1999 was P36,216,624.07.341wphi1
Confronted with the conflicting claims on MMPIs gross revenue realized in 1999, the question is which
evidence must be given more weight?
The resolution of the question requires the re-examination and calibration of evidence.35 Such reexamination and calibration, being of a factual nature, ordinarily lies beyond the purview of the Courts
authority in this appeal. Yet, because the documents are already before the Court, we hereby treat the
situation as an exception in order to resolve the question promptly and finally instead of still remanding the
case to the CA for the reevaluation and calibration.
We start by observing that the degree of proof required in labor cases is not as stringent as in other types of
cases.36 This liberal approach affords to the employee every opportunity to level the playing field in which her
employer is pitted against her. Here, on the one hand, were Tabingos memorandum and affidavit indicating
that MMPIs revenues in 1999 totaled P36,216,624.07, and, on the other, the audit report showing MMPIs
gross revenues amounting to only P31,947,677.00 in the same year. That the audit report was rendered by the
auditing firm of Punongbayan & Araullo did not make it weightier than Tabingos memorandum and affidavit,
for only substantial evidence that amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion37 was required in labor adjudication. Moreover, whenever the evidence
presented by the employer and that by the employee are in equipoise, the scales of justice must tilt in favor of
the latter.38For purposes of determining whether or not the petitioners gross revenue reached the minimum
target of P35 million, therefore, Tabingos memorandum and affidavit sufficed to positively establish that it
did, particularly considering that Tabingos memorandum was made in the course of the performance of her
official tasks as a traffic clerk of MMPI. In her affidavit, too, Tabingo asserted that her issuance of the
memorandum was pursuant to MMPIs year-end procedures, an assertion that the petitioners did not refute.
In any event, Tabingos categorical declaration in her affidavit that "[because] of that achievement, as part of
the Sales and Traffic Team of MMPI, in addition to my other bonuses that year, I received P8,500.00 in gift
certificates as my share in the Group Incentive for the Sales and Traffic Team for gross advertising revenue of
P35 to P38 million xxx,"39 aside from the petitioners not refuting it, was corroborated by the 1999 Advertising
Target sent by the respondent to Yap on December 2, 1999, in which the respondent reported a gross revenue
of P36,216,624.07 as of December 1, 1999.40
Accordingly, the Court concludes that the respondent was entitled to her 0.05% outright commissions and to
the special incentive bonus of P8,500.00 based on MMPI having reached the minimum target of P35 million in
gross revenues paid in "bartered goods and cash in direct proportion to percentage of cash and bartered
goods revenue for the year," as provided in Yaps memorandum of December 8, 1999.41
WHEREFORE, the Court REVERSES AND SETS ASIDE the amended decision promulgated on November 19,
2003; ENTERS a new decision granting respondent Margaret A. Defensors claim for outright commissions in
the amount of P 181,083 .12 and special incentive bonus of P8,500.00, or a total of 1!189,583.12; and DIRECTS
petitioner Mega Magazine Publications, Inc. to pay the costs of suit.
SO ORDERED.
LUCAS P. BERSAMIN
Associate Justice
14. Art 106-109, Labor only contracting

THIRD DIVISION
G.R. No. 209418, December 07, 2015
W.M. MANUFACTURING, INC., Petitioner, v. RICHARD R. DALAG AND GOLDEN ROCK MANPOWER
SERVICES, Respondent.
DECISION
VELASCO JR., J.:
Nature of the Case
For consideration is the amended petition for review under Rule 45 of the Rules of Court, assailing the
February 21, 2013 Decision1 and September 17, 2013 Amended Decision2 of the Court of Appeals (CA) in CAG.R. SP No. 122425,3 which declared petitioner W.M. Manufacturing, Inc. (WM MFG) and respondent Golden
Rock Manpower Services (Golden Rock) solidarily liable to respondent Richard R. Dalag (Dalag) for the latter's
alleged illegal dismissal from employment.
The Facts
On January 3, 2010, petitioner, as client, and respondent Golden Rock, as contractor, executed a contract
denominated as "Service Agreement,"4 which pertinently reads:
SERVICE AGREEMENT
KNOW ALL MEN BY THESE PRESENTS
xxxx
The CONTRACTOR shall render, undertake, perform and employ the necessary number of workers as the
CLIENT may need, at such dates and times as the CLIENT may deem necessary.
The CLIENT shall have the right to request for replacement to relieve such workers as the need arises for any
reason whatsoever and the CONTRACTOR undertakes to furnish a replacement immediately as possible.
xxxx
There shall be no employer-employee relationship between the CLIENT, on the one hand, and the persons
assigned by the CONTRACTOR to perform the services called for hereunder, on the other hand.
In view of this, CONTRACTOR agrees to hold the CLIENT free from any liability, cause(s) o(f) action and/or
claims which may failed (sic) by said workers including but not limited to those arising from injury or death of
any kind of nature that may be sustained by them while in the performance of their assigned tasks.
The CONTRACTOR hereby warrants compliance with the provisions of the Labor Code of the Philippines as well
as with all other presidential decrees, general orders, letters of instruction, laws rules and regulations
pertaining to the employment of a labor now existing or which may hereafter be enacted, including the
payment of wages, allowances, bonuses, and other fringe benefits, and the CLIENT shall not in any way be
responsible for any claim for personal injury or death, for wages, allowances, bonuses and other fringe
benefits, made either by the said personnel or by third parties, whether or not such injury, death or claim by
third parties, whether or not such injury, death or claim arises out of, or in any way connected with, the
performance of personnel's duties.
The CLIENT shall have the right to report to the CONTRACTOR and protest any untoward act, negligence,
misconduct, malfeasance or nonfeasance of the said personnel and the contractor alone shall have the right to
discipline the said personnel.
The CONTRACTOR shall fully and faithfully comply with the provisions of the New Labor Code, as well as with
other laws, rules and regulations, pertaining to the employment of labor which is now existing or which
hereafter be promulgated or enacted.
In relation to the Service Agreement, Golden Rock, on April 26, 2010, engaged the services of respondent
Dalag as a factory worker to be assigned at petitioner's factory. For this purpose, respondents inked a fivemonth Employment Contract For Contractual Employees (Employment Contract)5 that reads:
EMPLOYMENT CONTRACT FOR CONTRACTUAL EMPLOYEES Dear Mr./Ms. Richard Dalag,
[Golden Rock] hire(s) you as a contractual worker/employee to work at WM MFG under these
conditions:chanRoblesvirtualLawlibrary
1) You will hold the position as (sic) Factory Worker.
2) Your employment as a CONTRACTUAL EMPLOYEE takes effect on April 26, 2010 to Sept. 26, 2010. You will
receive a salary of P328.00 per day payable weekly/15'h (sic) day monthly of the calendar month.
xxxx
7) Your employment as a CONTRACTUAL EMPLOYEE may be terminated at any time for any cause, which may
arise due to inability to learn and undertake duties and responsibilities of the position you are being employed
for, inefficiency, violation of company rules, policies and regulations, personnel reduction and recession
business. In either event, you will be given a notice of termination during your working hours/day.
The company undertakes to pay your compensation for the days actually worked and the company shall not
be liable for the period of the contract not run for any separation pay.
Notwithstanding the five-month duration stipulated in the contract, respondent Dalag would allege in his
complaint for illegal dismissal6 that on August 7, 2010, one of WM MFCs security guards prevented him from
going to his work station and, instead, escorted him to the locker room and limited his activity to withdrawing
his belongings therefrom. Having been denied entry to his work station without so much as an explanation
from management, Dalag claimed that he was illegally dismissed, his employment having been terminated
without either notice or cause, in violation of his right to due process, both substantive and procedural.
Dalag further claimed that his assignment at WM MFG as side seal machine operator was necessary and
desirable for the company's plastic manufacturing business, making him a regular employee entitled to
benefits under such classification.7 He likewise alleged that WM MFG and Golden Rock engaged in the illegal
act of labor-only contracting based on the following circumstances: that all the equipment, machine and tools
that he needed to perform his job were furnished by WM MFG; that the jobs are to be performed at WM
MFCs workplace; and that he was under the supervision of WM MFCs team leaders and supervisors.
The complaint, docketed as LAC No. 03-000673-11, was lodged against WM MFG, Golden Rock, Jocelyn
Hernando (Hernando), Watson Nakague (Nakague) and Pablo Ong (Ong), the latter three individuals as officers
of the impleaded companies. In their joint position paper, therein respondents argued that Dalag was not
dismissed and that, on the contrary, it was he who abandoned his work. They offered as proof WM MFG's
memos8 addressed to Dalag, which ordered him to answer within 24-hours the accusations relating to the
following alleged infractions: gross negligence, qualified theft, malicious mischief, incompetence, grave
misbehaviour, insubordination, dishonesty, and machine sabotage.9 Based on the memos and the affidavits
submitted by his former co-workers,10 Dalag repeatedly failed to immediately report to management the
breakdowns of the side-seal machine he was assigned to operate; that he did not report that the machine's
thermocouple wire and conveyor belt needed repair, causing the damage on the belt to worsen and for the
wire to eventually break; and that he pocketed spare parts of petitioner's machines without company
management's consent.
Memo 2010-19 dated August 7, 2010, the final memo WM MFG attempted to serve Dalag, pertinently reads:11
Samakaluwid, matapos ang isinagawang imbestigasyon tungkol sa mga insidenteng kinasangkutan mo.
Napagdesisyunan na ng Management na magbaba ng Final Decision na ikaw ay patawan ng suspension at
pinagrereport sa Golden Rock Agency, ito ay clahil sa mga alegasyon na nagpapatunay na ikaw ay nagkasala at
lumabag sa Patakaran ng kumpanyang ito.
Dalag, however, allegedly refused to receive the memos, and instead turned his back on his superiors,
informing them that he will no longer return, and then walked away. And on that very same day, WM MFG,
through a letter addressed to Golden Rock, informed the manpower company of its intention to exercise its
right to ask for replacement employees under the Service Agreement. As per the letter, WM MFG no longer
needed Dalag's services.12
The parties would later file their respective replies in support of the allegations and arguments raised in their
position papers.13
On January 24, 2011, Labor Arbiter Eduardo G. Magno rendered a Decision14 in LAC No. 03-000673-11
dismissing Dalag's complaint. The dispositive portion of the Decision reads:
WHEREFORE, the Complaint is hereby DISMISSED for lack of merit.
However, respondents are hereby ordered to pay his unpaid wages for three days in the amount of P1,212.00
SO ORDERED.
Citing Machica v. Roosevelt Center Services, Inc.,15 the Labor Arbiter ratiocinated that the burden of proving
actual dismissal is upon the shoulders of the party alleging it; and that WM MFG and Golden Rock can only be
burdened to justify a dismissal if it, indeed, took place. Unfortunately for Dalag, the Labor Arbiter did not find
substantial evidence to sustain a finding that he was, in the first place, actually dismissed from employment.
As observed by the Labor Arbiter:16
Records show that complainant [Dalag] last reported for work on August 6, 2010 and filed his complaint for
illegal dismissal on August 9, 2010. However, [Dalag] failed to establish the fact of his alleged dismissal on
August 07, 2010.
As established by respondents [WM MFG, Golden Rock, Hernando, Nakague, and Ong], [Dalag] was hired by
[Golden Rock] as contractual employee on April 26, 2010 until September 26, 2010 and was assigned at its
client [WM MFG].
[Dalag] failed to present any letter of termination of his employment by his employer [Golden Rock].
A party alleging a critical fact must support his allegation with substantial evidence for any decision based on
unsubstantiated allegation cannot stand as it will offend due process.
There is no illegal dismissal to speak of where the employee was not notified that he had been dismissed from
his employment nor he was prevented from returning to his work. (words in brackets added, citations
omitted)
Plainly, between WM MFG and Golden Rock, the Labor Arbiter considered the latter as Dalag's true employer.
Thus, Dalag's termination from employment, if any, ought to come not from WM MFG but from Golden Rock.
Without such termination, actual or constructive, Dalag's complaint cannot prosper for there was no dismissal
to begin with, legal or otherwise.
Obviously aggrieved by the Labor Arbiter's ruling, Dalag interposed an appeal with the National Labor
Relations Commission (NLRC).
Rulings of the NLRC
On May 31,2011, Dalag obtained a favorable ruling from the NLRC through its Decision17 in NLRC NCR CASE
NO. 08-11002-10, which granted his appeal in the following wise:
WHEREFORE, in view of the foregoing premises, the appeal of the complainant is GRANTED. The assailed
Decision dated January 24, 2011 is hereby REVERSED and SET ASIDE. Judgment is now rendered declaring
complainant to have been illegally terminated from employment. Respondents W.M Manufacturing, Inc., et.
al., are hereby ordered to reinstate immediately complainant to his former position without loss of seniority
rights and privileges computed from the time he was actually dismissed or his compensation withheld up to
the time of actual reinstatement, which as of the decision, amounted to a total of One Hundred Seven
Thousand Seven Hundred Thirty-Nine and 73/100 Pesos (P107,739.73), as computed by the NLRC
Computation Unit, exclusive of the complainant's unpaid wages from August 4-6, 2010, in the amount of
P1,212.00 as previously awarded.
All other claims are hereby dismissed for lack of merit.
SO ORDERED.
In siding with respondent Dalag, the NLRC determined that Dalag's true employer was WM MFG, who merely
engaged respondent Golden Rock as a labor-only contractor. To arrive at this conclusion, the NLRC utilized the
control test, thusly:18
x x x [T]he employment contract of the complainant only showed that [Golden Rocld] hired [Dalag] as a factory
worker to be assigned to [WM MFG] and by all indications, Golden Rock did not provide technical or special
services [WM MFG]. Moreover, [WM MFG and Golden Rock] did not deny that the machines or tools used by
the complainant, including the work premises, belonged to respondent [WM MFG], and not to the agency.
[WM MFG]'s control and supervision over the work of [Dalag] is indeed explicit, and as stated by [Dalag] he
was supervised not by Golden Rock but by the team leaders and supervisors of [WM MFG]. And not only that,
based on the evidence submitted by respondent [WM MFG], it was the latter who even took the pains of
investigating the alleged infractions of [Dalag]. By [WM MFG and Golden Rock]'s own allegation, it was [WM
MFG] who issued memos to [Dalag] directing him to explain several infractions allegedly committed. All those
notices and memoranda, which according to [WM MFG] [Dalag] refused to receive, emanated from [WM
MFG], and not from Golden Rock. This only demonstrates that the complainant is not an employee of [Golden
Rock] but of [WM MFG].

The so-called "control test" in determining employer-employee relationship is applicable in the instant case. In
this case, [WM MFG] reserved the right to control the complainant not only as to the result of the work to be
done but also to the means and methods by which the same is to be accomplished. Hence, clearly, there is an
employer-employee between [WM MFG] and [Dalag].
Aside from applying the control test, the Commission likewise gave credence to Dalag's postulation that
several other factors point to Golden Rock's nature as a labor-only contractor, a mere agent. The NLRC
outlined these considerations as follows: that Golden Rock supplied WM MFG with employees that perform
functions that are necessary, desirable, and directly related to the latter's main business;19 that there is an
absence of proof that Golden Rock is involved in permissible contracting services20 and that it carries on an
independent business for undertaking job contracts other than to WM MFG;21 and that both WM MFG and
Golden Rock even jointly submitted pleadings to the NLRC, with the same submission and defenses, and even
under the same representation.22 On account of these circumstances, the NLRC deemed the contractual
relation between WM MFG and Golden Rock as one of labor-only contracting, akin to that of a principal and
his agent. In light of this determination, the NLRC held that they are, therefore, jointly and severally liable23 to
WM MFG's illegally dismissed employees that were supplied by Golden Rock.
Dalag, having been prevented from reporting to work without just cause and without being afforded the
opportunity to be heard, is one of such illegally dismissed employees to whom Golden Rock and petitioner are
solidarily liable, so the NLRC ruled. In its initial findings, the NLRC held that the attempt to serve Dalag copies
of the memoranda did not constitute sufficient notice for there was no proof of service or even of an attempt
thereof. The Commission explained that assuming for the sake of argument that Dalag, indeed, refused to
receive copies of the memos personally served, WM MFG's remedy was then to serve them through
registered mail in order to be considered as compliance with the procedural requirement of notice.24 WM
MFG's failure to comply with the same then resulted in Dalag being deprived of his procedural due process
right.
Moreover, assuming even further that there was no deviation from procedure, the NLRC held that the
contents of the memos offered by petitioner in evidence do not amount to valid cause for they merely
constituted allegations, not proof, of Dalag's infractions. As noted by the NLRC, no formal investigation
followed the attempt to serve Dalag copies of the memoranda. Thus, to the mind of the Commission, the
veracity of the allegations in the memoranda were not verified and cannot, therefore, be taken at face
value.25cralawred
Dalag's legal victory, however, would be short-lived, for eventually, WM MFG and Nakague would jointly move
for reconsideration, which would be granted by the NLRC.
In its second Decision26 promulgated on September 20, 2011, the NLRC absolved Dalag's alleged employers
from liability, as follows:
WHEREFORE, in view of the foregoing premises, the Motion for Reconsideration is hereby, GRANTED. The
assailed Decision dated May 31, 2011 is hereby REVERSED andSET ASIDE. The Decision of Labor Arbiter
Eduardo G. Magno dated January 24, 2011 is hereby REINSTATED.
SO ORDERED.
To justify the turnabout, the NLRC took into consideration Certificate of Registration No. NCR-CFO-0911100809-00327 dated August 27, 2009 and issued by the Department of Labor and Employment (DOLE) to Golden
Rock pursuant to Department Order No. 18-02, s. 2002,28 and Articles 106-109 of the Labor Code, on jobcontracting.29 The said certificate, along with the copy of the Service Agreement between WM MFG and
Golden Rock and Dalag's Employment Contract, was submitted for the first time as attachments to WM MFG
and Nakague's motion for reconsideration, but were, nevertheless, admitted by the NLRC in the interest of
substantial justice.30
With the introduction of these new pieces of evidence, the commission ruled anew that its previous
observationthat there was an absence of proof that Golden Rock is a legitimate job contractorhas
effectively been refuted. What is more, the NLRC no longer relied solely on the control test and instead
applied the four-fold test in ascertaining Dalag's true employer. And in reviewing its earlier Decision, the NLRC
noted that it is Golden Rock who paid Dalag's salaries and wages; that under the Service Agreement, it
reserved unto itself the power to dismiss Dalag; and that it has sole control over the exercise of Dalag's
employment.31
The NLRC then proceeded to reiterate the Labor Arbiter's position that for the employer's burden to prove
that its dismissal of an employee was for just cause to arise, the employee must first demonstrate that he was,
in the first place, actually dismisseda fact which Dalag failed to establish. Lastly, the NLRC noted that Dalag
reported for work for only three (3) months and cannot, therefore, be considered a regular employee.32
Rulings of the Court of Appeals
Expectedly, the September 20, 2011 NLRC Decision prompted Dalag to elevate the case to the CA via a Rule 65
petition for certiorari, docketed as CA-G.R. SP No. 122425, alleging that the commission committed grave
abuse of discretion when it reversed its own ruling. Specifically, Dalag argued that it was highly irregular for
the Commission to have admitted the documents belatedly offered by WM MFG as evidence,33 and insisted
that the NLRC did not err in its first Decision finding that he was illegally dismissed.34 Meanwhile, WM MFG
and Nakague would counter that the petition to the CA ought to be dismissed outright since Dalag failed to file
a motion for reconsideration of the NLRC's second Decision, a condition sine qua non for filing a petition for
certiorari under Rule 65. They likewise point to the Entry of Judgment35 issued by the NLRC, signifying that the
second Decision of the NLRC has already attained finality. To modify the same would then violate the doctrine
on the immutability of judgments.
On February 21, 2013, the appellate court rendered a Decision favoring Dalag in the following wise:
WHEREFORE, the petition is GRANTED. The Decision Dated September 20, 2011 of the National Labor
Arbiter's Commission, Second Division in NLRC NCR 08-11002-10 (LAC No. 03-000673-11) is
hereby REVERSED and SET ASIDE. The NLRC's Decision dated May 31, 2011 is REINSTATED.
Dispensing with the procedural arguments, the CA struck down the contentions of both parties relating to the
rigid application of procedural rules.37 It held that rules of evidence prevailing in courts of law or equity are
not binding in labor cases,38 and allow the admission of additional evidence not presented before the Labor
Arbiter, and submitted before the NLRC for the first time on appeal,39 as in WM MFCs case.
As regards the alleged availability of a plain, speedy, and adequate remedy at Dalag's disposal that bars the
filing of a petition for certiorari, the CA held that technical rules may be relaxed in this regard in the interest of
substantial justice.40 To quote the appellate court:
In this case, a liberal construction of the rules is called for as records show that petitioner filed the petition as
a pauper litigant. Technical rules of procedure may be relaxed to serve the demands of substantial justice
particularly in labor cases, where the prevailing principle is that technical rules shall be liberally construed in
favor of the working class in accordance with the demands of substantial justice. Rules of procedure should
also not be applied in a very rigid technical sense in labor cases in order that technicalities would not stand in
the way of equitably and completely resolving the rights and obligations of the parties. (citations omitted)
On to the merits, the CA discussed that Golden Rock's Certificate of Registration is not conclusive evidence
that the company is an independent contractor.41 More controlling for the CA was the failure of Golden Rock
to prove the concurrence of the requisites of a legitimate independent job contractor according to
jurisprudence.42 Absent proof that Golden Rock has substantial capital and that it exercised control over Dalag,
the CA held that petitioner and Golden Rock miserably failed to establish the latter's status as a legitimate
independent contractor.43 Finally, the appellate court did not give credence to petitioner's claim of
abandonment since it failed to discharge the burden of proving Dalag's unjustified refusal to return to work.44
Unfazed, WM MFG and Nakague moved for reconsideration of the CA's ruling. On September 17, 2013, the CA
rendered an Amended Decision partially granting the motion and modifying the decretal portion of its earlier
ruling in the following wise:
WHEREFORE, the Motion for Reconsideration is PARTIALLY GRANTED. The Decision, dated February 21, 2013
of this Court which reads:
WHEREFORE, the petition is GRANTED. The Decision Dated September 20, 2011 of the National Labor Arbiter's
Commission, Second Division in NLRC NCR 08-11002-10 (LAC No. 03-000673-11) is hereby REVERSED and SET
ASIDE. The NLRC's Decision dated May 31, 2011 is REINSTATED.
SO ORDERED.
is hereby AMENDED to read:
WHEREFORE, the petition is GRANTED. The Decision Dated September 20, 2011 of the National Labor Arbiter's
Commission, Second Division in NLRC NCR 08-11002-10 (LAC No. 03-000673-11) is hereby REVERSED and SET
ASIDE. The NLRC's Decision dated May 31, 2011 is REINSTATED insofar as the liability of Golden Rock
Manpower Services and W.M. Manufacturing, Inc. are concerned. The company officers, Watson Nakague and
Pablo Ong are absolved of liability.
SO ORDERED.
15. Art 106, Labor only contractor

SECOND DIVISION
G.R. No. 208451, February 03, 2016
MANILA MEMORIAL PARK CEMETERY, INC., Petitioner, v. EZARD D. LLUZ, NORMAN CORRAL, ERWIN
FUGABAN, VALDIMAR BALISI, EMILIO FABON, JOHN MARK APLICADOR, MICHAEL CURIOSO, JUNLIN
ESPARES, GAVINO FARINAS, AND WARD TRADING AND SERVICES, Respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari1 assailing the Decision2 dated 21 January 2013 and the Resolution3
dated 17 July 2013 of the Court of Appeals (CA) in CA-G.R. SP No. 119237.chanRoblesvirtualLawlibrary
The Facts
On 23 February 2006, petitioner Manila Memorial Park Cemetery, Inc. (Manila Memorial) entered into a
Contract of Services with respondent Ward Trading and Services (Ward Trading). The Contract of Services
provided that Ward Trading, as an independent contractor, will render interment and exhumation services
and other related work to Manila Memorial in order to supplement operations at Manila Memorial Park,
Paranaque City.
Among those assigned by Ward Trading to perform services at the Manila Memorial Park were respondents
Ezard Lluz, Norman Corral, Erwm Fugaban, Valdimar Balisi, Emilio Fabon, John Mark Aplicador, Michael
Curioso, Junlin Espares, and Gavino Farinas (respondents). They worked six days a week for eight hours daily
and were paid P250 per day.
On 26 June 2007, respondents filed a Complaint4 for regularization and Collective Bargaining Agreement
benefits against Manila Memorial; Enrique B. Lagdameo, Manila Memorial's Executive Vice-President and
Director in Charge for Overall Operations, and Ward Trading. On 6 August 2007, respondents filed an
amended complaint to include illegal dismissal, underpayment of 13th month pay, and payment of attorney's
fees.
Respondents alleged that they asked Manila Memorial to consider them as regular workers within the
appropriate bargaining unit established in the collective bargaining agreement by Manila Memorial and its
union, the Manila Memorial Park Free Workers Union (MMP Union). Manila Memorial refused the request
since respondents were employed by Ward Trading, an independent labor contractor. Thereafter,
respondents joined the MMP Union. The MMP Union, on behalf of respondents, sought their regularization
which Manila Memorial again declined. Respondents then filed the complaint. Subsequently, respondents
were dismissed by Manila Memorial. Thus, respondents amended the complaint to include the prayer for their
reinstatement and payment of back wages.
Meanwhile, Manila Memorial sought the dismissal of the complaint for lack of jurisdiction since there was no
employer-employee relationship. Manila Memorial argued that respondents were the employees of Ward
Trading.
In a Decision5 dated 29 March 2010, the Labor Arbiter dismissed the complaint for failing to prove the
existence of an employer-employee relationship. The dispositive portion of the Decision
states:ChanRoblesVirtualawlibrary
WHEREFORE, premises considered, judgment is hereby rendered dismissing the above-entitled case for
complainants' lack of employer-employee relationship with respondent Manila Memorial Park Cemetery, Inc.
SO ORDERED.6chanroblesvirtuallawlibrary
Respondents appealed7 to the NLRC. In a Decision8 dated 30 September 2010, the NLRC reversed the Labor
Arbiter's findings. The NLRC ruled that Ward Trading was a labor-only contractor and an agent of Manila
Memorial. The dispositive portion of the Decision states:ChanRoblesVirtualawlibrary
WHEREFORE, premises considered, complainants' appeal is GRANTED. The assailed Decision of Labor Arbiter
Geobel A. Bartolabac dated March 29, 2010 is MODIFIED. It is hereby declared that complainants were regular
employees of respondent Manila Memorial Park Cemetery, Inc. and entitled to the benefits provided for
under the CBA between the latter and the Manila Memorial Park Free Workers Union.
Respondent Manila Memorial Park Cemetery, Inc. is ordered to pay wage differentials to complainants as
follows:ChanRoblesVirtualawlibrary
1. Ezard D. Lluz -
P43,982.79
2. Norman Corral -
P29,765.67
3. Erwin Fugaban -
P28,634.67
4. Valdimar Balisi -
P20,310.33
5. Emilio Fabon -
P43,982.79
6. John Mark Aplicador

P43,982.79
7. Michael Curioso -
P43,982.79
8. Ju[n]lin Espares -
P43,982.79
9. Gavino Farinas -
P43,982.79
Manila Memorial filed a Motion for Reconsideration which was denied in a Resolution10 dated 31 January
2011.
Thereafter, Manila Memorial filed an appeal with the CA. In a Decision dated 21 January 2013, the CA affirmed
the ruling of the NLRC. The CA found the existence of an employer-employee relationship between Manila
Memorial and respondents. The dispositive portion of the Decision states:ChanRoblesVirtualawlibrary
WHEREFORE, in view of the foregoing, the instant Petition for Certiorari is DENIED. The Decision, dated
September 30, 2010 and the Resolution, dated January 31, 2011, rendered by the National Labor Relations
Commission (NLRC) in NLRC LAC No. 06-001267-10 are AFFIRMED.
Manila Memorial then filed a Motion for Reconsideration which was denied by the CA in a Resolution dated 17
July 2013.
Hence, the instant petition.chanRoblesvirtualLawlibrary
The Issue
The main issue for our resolution is whether or not an employer-employee relationship exists between Manila
Memorial and respondents for the latter to be entitled to their claim for wages and other
benefits.chanRoblesvirtualLawlibrary
The Court's Ruling
The petition lacks merit.
Manila Memorial contends that Ward Trading has total assets in excess of P1.4 million, according to Ward
Trading's financial statements for the year 2006, proving that it has sufficient capitalization to qualify as a
legitimate independent contractor. Manila Memorial insists that nowhere is it provided in the Contract of
Services that Manila Memorial controls the manner and means by which respondents accomplish the results
of their work. Manila Memorial states that the company only wants its contractors and the latter's employees
to abide by company rules and regulations.
Respondents, on the other hand, assert that they are regular employees of Manila Memorial since Ward
Trading cannot qualify as an independent contractor but should be treated as a mere labor-only contractor.
Respondents state that (1) there is enough proof that Ward Trading does not have substantial capital,
investment, tools and the like; (2) the workers recruited and placed by the alleged contractors performed
activities that were related to Manila Memorial's business; and (3) Ward Trading does not exercise the right to
control the performance of the work of the contractual employees.
As a general rule, factual findings of the CA are binding upon this Court. One exception to this rule is when the
factual findings of the former are contrary to those of the trial court, or the lower administrative body, as the
case may be. This Court is obliged to resolve an issue of fact due to the conflicting findings of the Labor Arbiter
on one hand, and the NLRC and the CA on the other.
In order to determine whether there exists an employer-employee relationship between Manila Memorial and
respondents, relevant provisions of the labor law and rules must first be reviewed. Article 106 of the Labor
Code states:ChanRoblesVirtualawlibrary
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for
the performance of the former's work, the employees of the contractor and of the latter's subcontractor, if
any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with
this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in the same manner and extent that he is
liable to employees directly employed by him.
The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contractingout of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he
may make appropriate distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the parties involved shall be
considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision
of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such person are performing activities which are directly
related to the principal business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the workers in the same manner
and extent as if the latter were directly employed by him. (Emphasis supplied)
Sections 3, 5 and 7 of Department Order No. 18-0212 distinguish between legitimate and labor-only
contracting and assume the existence of an employer-employee relationship if found to be engaged in laboronly contracting. The provisions state:ChanRoblesVirtualawlibrary
xxxx
Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a
trilateral relationship under which there is a contract for a specific job, work or service between the principal
and the contractor or subcontractor, and a contract of employment between the contractor or subcontractor
and its workers. Hence, there are three parties involved in these arrangements, the principal which decides to
farm out a job or service to a contractor or subcontractor, the contractor or subcontractor which has the
capacity to independently undertake the performance of the job, work or service, and the contractual workers
engaged by the contractor or subcontractor to accomplish the job, work or service.
xxxx
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For
this purpose, 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 substantial capital or investment which relates to the job,
work or service to be performed and the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the main business of the principal; or
ii) The contractor does not exercise the right to control over the performance of the work of the contractual
employee.
The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor Code, as
amended.
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the
contractor or subcontractor in the performance or completion of the job, work or service contracted out.
The "right to control" shall refer to the right reserved to the person for whom the services of the contractual
workers are performed, to determine not only the end to be achieved, but also the manner and means to be
used in reaching that end.
xxxx
Section 7. Existence of an employer-employee relationship. - The contractor or subcontractor shall be

considered the employer of the contractual employee for purposes of enforcing the provisions of the Labor
Code and other social legislation. The principal, however, shall be solidarity liable with the contractor in the
event of any violation of any provision of the Labor Code, including the failure to pay wages.
The principal shall be deemed the employer of the contractual employee in any of the following cases as
declared by a competent authority:ChanRoblesVirtualawlibrary
(a) where there is labor-only contracting; or
(b) where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions) hereof.
(Emphasis supplied)
It is clear from these provisions that contracting arrangements for the performance of specific jobs or services
under the law and its implementing rules are allowed. However, contracting must be made to a legitimate and
independent job contractor since labor rules expressly prohibit labor-only contracting.
Labor-only contracting exists when 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:
1)
2)
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
The contractor does not exercise the right to control the performance of the work of the contractual
employee.13
In the present case, Manila Memorial entered into a Contract of Services with Ward Trading, a single
proprietorship owned by Emmanuel Mayor Ward with business address in Las Pias City on 23 February 2006.
In the Contract of Services, it was provided that Ward Trading, as the contractor, had adequate workers and
substantial capital or investment in the form of tools, equipment, machinery, work premises and other
materials which were necessary in the conduct of its business.
However, a closer look at the Contract of Services reveals that Ward Trading does not have substantial capital
or investment in the form of tools, equipment, machinery, work premises and other materials since it is
Manila Memorial which owns the equipment used in the performance of work needed for interment and
exhumation services. The pertinent provision in the Contract of Services which shows that Manila Memorial
owns the equipment states:ChanRoblesVirtualawlibrary
The COMPANY shall [sell] to the contractor the COMPANY owned equipment in the amount of ONE MILLION
FOUR HUNDRED THOUSAND PESOS ONLY (Php 1,400,000.00) payable in two (2) years or a monthly payment
of FIFTY EIGHT THOUSAND THREE HUNDRED THIRTY FIVE PESOS ONLY (Php 58,335.00) to be deducted from
the CONTRACTOR'S billing.14chanroblesvirtuallawlibrary
Just by looking at the provision, it seems that the sale was a regular business transaction between two parties.
However, Manila Memorial did not present any evidence to show that the sale actually pushed through or
that payments were made by Ward Trading to prove an ordinary arms length transaction. We agree with the
NLRC in its findings:ChanRoblesVirtualawlibrary
While the above-cited provision of the Contract of Service implies that respondent MMPCI would sell subject
equipment to Ward at some future time, the former failed to present any contract of sale as proof that,
indeed, it actually sold said equipment to Ward. Likewise, respondent MMPCI failed to present any
"CONTRACTOR'S billing" wherein the purported monthly installment of P58,335.00 had been deducted, to
prove that Ward truly paid the same as they fell due. In a contract to sell, title is retained by the vendor until
full payment of the price.

Moreover, the Contract of Service provides that:ChanRoblesVirtualawlibrary
"5. The COMPANY reserves the right to rent all or any of the CONTRACTOR'S equipment in the event the
COMPANY requires the use of said equipment, x x x."
This provision is clear proof that Ward does not have an absolute right to use or enjoy subject equipment,
considering that its right to do so is subject to respondent MMPCI's use thereof at any time the latter requires
it. Such provision is contrary to Article 428 of the Civil Code, which provides that "The owner has the right to
enjoy and dispose of a thing, without other limitation than those established by law." It is plain to see that
Ward is not the owner of the equipment worth P1,400,000.00 that is being actually and directly used in the
performance of the services contracted out.
Further, the Service Contract states that:ChanRoblesVirtualawlibrary
"For its part, the COMPANY agrees to provide the following:
a) Area to store CONTRACTOR'S equipment and materials
b) Office space for CONTRACTOR'S staff and personnel"
This provision is clear proof that even the work premises actually and directly used by Ward in the
performance of the services contracted out is owned by respondent MMPCI.15chanroblesvirtuallawlibrary
Also, the difference in the value of the equipment in the total amount of P1,400,000.00 can be glaringly seen
in Ward Trading's financial statements for the year 2006 when compared to its 2005 financial statements. It is
significant to note that these financial statements were submitted by Manila Memorial without any
certification that these financial statements were actually audited by an independent certified public
accountant. Ward Trading's Balance Sheet16 as of 31 December 2005 showed that it had assets in the amount
of P441,178.50 and property and equipment with a net book value of P86,026.50 totaling P534,705. A year
later, Ward Trading's Balance Sheet17 ending in 31 December 2006 showed that it had assets in the amount of
P57,084.70 and property and equipment with a net book value of Pl,426,468 totaling P1,491,052.70. Ward
Trading, in its Income Statements18 for the years 2005 and 2006, only earned a net income of P53,800 in the
year ending 2005 and P68,141.50 in 2006. Obviously, Ward Trading could not have raised a substantial capital
of P1,400,000.00 from its income alone without the inclusion of the equipment owned and allegedly sold by
Manila Memorial to Ward Trading after they signed the Contract of Services on 23 February 2006.
Further, the records show that Manila Memorial and Enrique B. Lagdameo admitted that respondents
performed various interment services at its Sucat, Paranaque branch which were directly related to Manila
Memorial's business of developing, selling and maintaining memorial parks and interment functions. Manila
Memorial even retained the right to control the performance of the work of the employees concerned. As
correctly observed by the CA:ChanRoblesVirtualawlibrary
A perusal of the Service Contract would reveal that respondent Ward is still subject to petitioner's control as it
specifically provides that although Ward shall be in charge of the supervision over individual respondents, the
exercise of its supervisory function is heavily dependent upon the needs of petitioner Memorial Park,
particularly:ChanRoblesVirtualawlibrary
"It is also agreed that:
a) The CONTRACTOR'S supervisor will conduct a regular inspection of grave sites/areas being dug to ensure
compliance with the COMPANY'S interment schedules and other related ceremonies.
b) The CONTRACTOR will provide enough manpower during peak interment days including Sundays and
Holidays.
c) The CONTRACTOR shall schedule off-days for its workers in coordination with the COMPANY'S schedule of
interment operation.
d) The CONTRACTOR shall be responsible for any damage done to lawn/s and/or structure/s resulting from its
operation, which must be restored to its/their original condition without delay and at the expense of
CONTRACTOR."
The contract further provides that petitioner has the option to take over the functions of Ward's personnel if it
finds any part or aspect of the work or service provided to be unsatisfactory, thus:ChanRoblesVirtualawlibrary
"6.1 It is hereby expressly agreed and understood that, at any time during the effectivity of this CONTRACT
and its sole determination, the COMPANY may take over the performance of any of the functions mentioned
in Paragraph I above, in any of the following cases:chanRoblesvirtualLawlibrary
xxx
c. If the COMPANY finds the performance of the CONTRACTOR in any part or aspect of the grave digging works
or other services provided by it to be unsatisfactory."
It is obvious that the aforementioned provision leaves respondent Ward at the mercy of petitioner Memorial
Park as the contract states that the latter may take over if it finds any part of the services to be below its
expectations, including the manner of its performance. x x x.19chanroblesvirtuallawlibrary
The NLRC also found that Ward Trading's business documents fell short of sound business practices. The
relevant portion in the NLRC's Decision states:ChanRoblesVirtualawlibrary
It is also worth noting that while Ward has a Certificate of Business Name Registration issued by the
Department of Trade and Industry on October 24, 2003 and valid up to October 24, 2008, the same expressly
states that it is not a license to engage in any kind of business, and that it is valid only at the place indicated
therein, which is Las Pias City. Hence, the same is not valid in Paranaque City, where Ward assigned
complainants to perform interment services it contracted with respondent MMPCI. It is also noted that the
Permit, which was issued to Ward by the Office of the Mayor of Las Pias City on October 28, 2003, was valid
only up to December 31, 2003. Likewise, the Sanitary Permit to Operate, which was issued to Ward by the
Office of the City Health Officer of the Las Pias City Health Office on October 28, 2003, expired on December
31, 2003. While respondents MMPCI and Lagdameo were able to present copies of the above-mentioned
documents, they failed to present any proof that Ward is duly registered as [a] contractor with the
Department of Labor and Employment.20chanroblesvirtuallawlibrary
Section 11 of Department Order No. 18-02, which mandates registration of contractors or subcontractors with
the DOLE, states:ChanRoblesVirtualawlibrary
Section 11. Registration of Contractors or Subcontractors. - Consistent with authority of the Secretary of Labor
and Employment to restrict or prohibit the contracting out of labor through appropriate regulations, a
registration system to govern contracting arrangements and to be implemented by the Regional Office is
hereby established.
The Registration of contractors and subcontractors shall be necessary for purposes of establishing an effective
labor market information and monitoring.
Failure to register shall give rise to the presumption that the contractor is engaged in labor-only contracting.
For failing to register as a contractor, a presumption arises that one is engaged in labor-only contracting unless
the contractor overcomes the burden of proving that it has substantial capital, investment, tools and the
like.21chanroblesvirtuallawlibrary
In this case, however, Manila Memorial failed to adduce evidence to prove that Ward Trading had any
substantial capital, investment or assets to perform the work contracted for. Thus, the presumption that Ward
Trading is a labor-only contractor stands. Consequently, Manila Memorial is deemed the employer of
respondents. As regular employees of Manila Memorial, respondents are entitled to their claims for wages
and other benefits as awarded by the NLRC and affirmed by the CA.
WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 21 January 2013 and the Resolution dated
17 July 2013 of the Court of Appeals in CA-G.R. SP No. 119237.
SO ORDERED.
Velasco, Jr.,*Del Castillo, and Mendoza, JJ., concur.
Leonen, J., on leave.
16. Art 106 Labor contracting

THIRD DIVISION
G.R. Nos. 173254-55 & 173263, January 13, 2016
DIAMOND FARMS, INC., Petitioner, v. SOUTHERN PHILIPPINES FEDERATION OF LABOR (SPFL)-WORKERS
SOLIDARITY OF DARBMUPCO/DIAMOND-SPFL, DIAMOND FARMS AGRARIAN REFORM BENEFICIARIES
MULTI-PURPOSE COOPERATIVE (DARBMUPCO), VOLTER LOPEZ, RUEL ROMERO, PATRICK) CAPRECHO, REY
DIMACALI, ELESIO EMANEL, VICTOR SINGSON, NILDA DIMACALI, PREMITIVO* DIAZ, RUDY VISTAL, ROGER
MONTERO, JOSISIMO GOMEZ AND MANUEL MOSQUERA, Respondents.
DECISION
JARDELEZA, J.:
We resolve in this Petition for Review1 under Rule 45 of the Rules of Court, the issue of who among Diamond
Farms, Inc. ("DFI"), Diamond Farms Agrarian Reform Beneficiaries Multi-Purpose Cooperative ("DARBMUPCO")
and the individual contractors2 ("respondent-contractors") is the employer of the 400 employees
("respondent-workers").
DFI challenges the March 31, 2006 Decision3 and May 30, 2006 Resolution4 of the Court Appeals, Special
Twenty-Second Division, Cagayan De Oro City for being contrary to law and jurisprudence. The Decision
dismissed DFI's Petition for Certiorari in C.A.-G.R. SP Nos. 53806 and 61607 and granted DARBMUPCO's
Petition for Certiorari in C.A.-G.R. SP No. 59958. It declared DFI as the statutory employer of the respondentworkers.
The Facts
DFI owns an 800-hectare banana plantation ("original plantation") in Alejal, Carmen, Davao.5 Pursuant to
Republic Act No. 6657 or the Comprehensive Agrarian Reform Law of 1988 ("CARL"), commercial farms shall
be subject to compulsory acquisition and distribution,6 thus the original plantation was covered by the law.
However, the Department of Agrarian Reform ("DAR") granted DFI a deferment privilege to continue
agricultural operations until 1998.7 Due to adverse marketing problems and observance of the so-called "layfollow" or the resting of a parcel of land for a certain period of time after exhaustive utilization, DFI closed
some areas of operation in the original plantation and laid off its employees.8 These employees petitioned the
DAR for the cancellation of DFI's deferment privilege alleging that DFI already abandoned its area of
operations.9 The DAR Regional Director recalled DFI's deferment privilege resulting in the original plantation's
automatic compulsory acquisition and distribution under the CARL.10 DFI filed a motion for reconsideration
which was denied. It then appealed to the DAR Secretary.11
In the meantime, to minimize losses, DPI offered to give up its rights and interest over the original plantation
in favor of the government by way of a Voluntary Offer to Sell.12 The DAR accepted DFI's offer to sell the
original plantation. However, out of the total 800 hectares, the DAR only approved the disposition of 689.88
hectares. Hence, the original plantation was split into two: 689.88 hectares were sold to the government
("awarded plantation") and the remaining 200 hectares, more or less, were retained by DPI ("managed
area").13 The managed area is subject to the outcome of the appeal on the cancellation of the deferment
privilege before the DAR Secretary.
On January 1, 1996, the awarded plantation was turned over to qualified agrarian reform beneficiaries
("ARBs") under the CARL. These ARBs are the same farmers who were working in the original plantation. They
subsequently organized themselves into a multi-purpose cooperative named "DARBMUPCO," which is one of
the respondents in this case.14
On March 27, 1996, DARBMUPCO entered into a Banana Production and Purchase Agreement ("BPPA")15 with
DFI.16 Under the BPPA, DARBMUPCO and its members as owners of the awarded plantation, agreed to grow
and cultivate only high grade quality exportable bananas to be sold exclusively to DPI.17 The BPPA is effective
for 10 years.18
On April 20, 1996, DARBMUPCO and DFI executed a "Supplemental to Memorandum Agreement" ("SMA").19
The SMA stated that DFI shall take care of the labor cost arising from the packaging operation, cable
maintenance, irrigation pump and irrigation maintenance that the workers of DARBMUPCO shall conduct for
DFI's account under the BPPA.20
From the start, DARBMUPCO was hampered by lack of manpower to undertake the agricultural operation
under the BPPA because some of its members were not willing to work.21 Hence, to assist DARBMUPCO in
meeting its production obligations under the BPPA, DFI engaged the services of the respondent-contractors,
who in turn recruited the respondent-workers.22
The engagement of the respondent-workers, as will be seen below, started a series of labor disputes among
DARBMUPCO, DFI and the respondent-contractors.
CA. G.R. SP No. 53806
On February 10, 1997, respondent Southern Philippines Federation of Labor ("SPFL")a legitimate labor
organization with a local chapter in the awarded plantationfiled a petition for certification election in the
Office of the Med-Arbiter in Davao City.23 SPFL filed the petition on behalf of some 400 workers (the
respondent-workers in this petition) "jointly employed by DFI and DARBMUPCO" working in the awarded
plantation.
DARBMUPCO and DFI dented that they are the employers of the respondent-workers. They claimed, instead,
that the respondent-workers are the employees of the respondent-contractors.24
In an Order dated May 14, 1997,25 the Med-Arbiter granted the petition for certification election. It directed
the conduct of certification election and declared that DARBMUPCO was the employer of the respondentworkers. The Order stated that "whether the said workers/employees were hired by independent contractors
is of no moment. What is material is that they were hired purposely to work on the 689.88 hectares banana
plantation [the awarded plantation] now owned and operated by DARBMUPCO."26
DARBMUPCO appealed to the Secretary of Labor and Employment ("SOLE"). In a Resolution dated February
18, 1999,27 the SOLE modified the decision of the Med-Arbiter. The SOLE held that DFI, through its manager
and personnel, supervised and directed the performance of the work of the respondent-contractors. The SOLE
thus declared DFI as the employer of the respondent-workers.28
DFI filed a motion for reconsideration which the SOLE denied in a Resolution dated May 4, 1999.29
On June 11, 1999, DFI elevated the case to the Court of Appeals ("CA") via a Petition for Certiorari30 under Rule
65 of the Rules of Court. The case was raffled to the CA's former Twelfth Division and was docketed as C.A.G.R. SP No. 53806.
CA.-G.R. SP No. 59958
Meanwhile, on June 20, 199731 and September 15, 1997,32 SPFL, together with more than 300 workers, filed a
case for underpayment of wages, nonpayment of 13th month pay and service incentive leave pay and
attorney's fees against DFI, DARBMUPCO and the respondent-contractors before the National Labor Relations
Commission ("NLRC") in Davao City. DARBMUPCO averred that it is not the employer of respondent-workers;
neither is DFI. It asserted that the money claims should be directed against the true employerthe
respondent-contractors.33
In a Decision dated January 22, 1999,34 the Labor Arbiter ("LA") held that die respondent-contractors are
"labor-only contractors." The LA gave credence to the affidavits of the other contractors35 of DFI (who are not
party-respondents in this petition) asserting that DFI engaged their services, and supervised and paid their
laborers. The affidavits also stated that the contractors had no dealings with DARBMUPCO, except that their
work is done in the awarded plantation.36
The LA held that, under the law, DFI is deemed as the statutory employer of all the respondent-workers.37 The
LA dismissed the case against DARBMUPCO and the respondent-contractors.38
DFI appealed to the NLRC. In a Resolution dated May 24, 1999,39 the NLRC Fifth Division modified the Decision
of the LA and declared that DARBMUPCO and DFI are the statutory employers of the workers rendering
services in the awarded plantation and the managed area, respectively.40 It adjudged DFI and DARBMUPCO as
solidarity liable with the respondent-contractors for the monetary claims of the workers, in proportion to their
net planted area.41
DARBMUPCO filed a motion for reconsideration which was denied.42 It filed a second motion for
reconsideration in the NLRC, which was also denied for lack of merit and for being barred under the NLRC
Rules of Procedure.43 Hence, DARBMUPCO elevated the case to the CA by way of a Petition for Certiorari.44
The case was docketed as CA.-G.R. SP. No. 59958.
The former Eleventh Division of the CA consolidated C.A. G.R. SP. No. 59958 and C.A.-G.R. SP No. 53806 in a
Resolution dated January 27, 2001.45
C.A.-G.R. SPNo. 61607
Pursuant to the May 4, 1999 Resolution of the SOLE approving the conduct of certification election, the
Department of Labor and Employment ("DOLE") conducted a certification election on October 1, 1999.46 On
even date, DFI filed an election protest47 before the Med-Arbiter arguing that the certification election was
premature due to the pendency of a petition for certiorari before the CA assailing the February 18, 1999 and
May 4, 1999 Resolutions of the SOLE (previously discussed in C.A.-G.R. SP No. 53806).
In an Order dated December 15, 1999,48 the Med-Arbiter denied DFI's election protest, and certified SPFLWorkers Solidarity of DARBMUPCO/DIAMOND-SPFL ("WSD-SPFL") as the exclusive bargaining representative
of the respondent-workers. DPI filed a Motion for Reconsideration49 which the Med-Arbiter treated as an
appeal, and which the latter elevated to the SOLE.
In a Resolution dated July 18, 2000,50 the SOLE dismissed the appeal. The Resolution stated that the May 4,
1999 Resolution directing the conduct of certification election is already final and executory on June 4, 1999. It
pointed out that the filing of the petition for certiorari before the CA assailing the February 18, 1999 and May
4, 1999 Resolutions does not stay the conduct of the certification election because the CA did not issue a
restraining order.51 DFI filed a Motion for Reconsideration but the motion was denied.52
On October 27, 2000, DFI filed a Petition for Certiorari53 before the CA, docketed as C.A.-G.R. SP No. 61607.
In a Resolution dated August 2, 2005,54 the CA Twenty-Third Division consolidated C.A.-G.R. SP No. 61607 with
C.A.-G.R. SP. No. 59958 and C.A. G.R. SP No. 53806.
The Assailed CA Decision and Resolution
The CA was confronted with two issues:55
(1)
"Whether DFI or DARBMUPCO is the statutory employer of the [respondent-workers] in these petitions;
and
(2)
Whether or not a certification election may be conducted pending the resolution of the petition for
certiorari filed before this Court, the main issue of which is the identity of the employer of the
[respondent-workers] in these petitions."
On the first issue, the CA agreed with the ruling of the SOLE56 that DFI is the statutory employer of the
respondent-workers. It noted that the DFI hired the respondent-contractors, who in turn procured their own
men to work in the land owned by DARBMUPCO. Further, DFI admitted that the respondent-contractors
worked under the direction and supervision of DFI's managers and personnel. DFI also paid for the
respondent-contractors' services.57 The CA said that the fact that the respondent-workers worked in the land
owned by DARBMUPCO is immaterial. "Ownership of the land is not one of the four (4) elements generally
considered to establish employer-employee relationship."58
The CA also ruled that DFI is the true employer of the respondent-workers because the respondentcontractors are not independent contractors.59 The CA stressed that in its pleadings before the Med-Arbiter,
the SOLE, and the CA, DFI revealed that DARBMUPCO lacks manpower to fulfill the production requirements
under the BPPA. This impelled DFI to hire contractors to supply labor enabling DARBMUPCO to meet its quota.
The CA observed that while the various agencies involved in the consolidated petitions sometimes differ as to
who the statutory employer of the respondent-workers is, they are uniform in finding that the respondentcontractors are labor-only contractors.60
On the second issue, the CA reiterated the ruling of the SOLE61 that absent an injunction from the CA, the
pendency of a petition for certiorari does not stay the holding of the certification election.62 The challenged
Resolution of the SOLE is already final and executory as evidenced by an Entry of Judgment dated July 14,
1999; hence, the merits of the case can no longer be reviewed.63
The CA thus held in its Decision dated March 31, 2006:
WHEREFORE, premises considered, this Court hereby ORDERS:
(1)
the DISMISSAL of the petitions in C.A.-G.R. SP No. 53806 and C.A.-G.R. SP No. 61607; and
(2)
the GRANTING of the petition in C.A.-G.R. SP No. 59958 and the SETTING ASIDE of the assailed
resolutions of the NLRC dated 24 May 1999, 30 July 1999 and 26 June 2000, respectively.
DFI filed a Motion for Reconsideration of the CA Decision which was denied in a Resolution dated May 30,
2006.65
DFI is now before us by way of Petition for Review on Certiorari praying that DARBMUPCO be declared the
true employer of the respondent-workers.
DARBMUPCO filed a Comment66 maintaining that under the control test, DFI is the true employer of the
respondent-workers.
Respondent-contractors filed a Verified Explanation and Memorandum67 asserting that they were labor-only
contractors; hence, they are merely agents of the true employer of the respondent-workers.
SPFL did not file any comment or memorandum on behalf of the respondent-workers.68
The Issue
The issue before this Court is who among DFI, DARBMUPCO and the respondent-contractors is the employer
of the respondent-workers.
Our Ruling
We deny the petition.
This case involves job contracting, a labor arrangement expressly allowed by law. Contracting or
subcontracting is an arrangement whereby a principal (or employer) agrees to put out or farm out with a
contractor or subcontractor the performance or completion 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.69 It involves a trilateral relationship among the principal or
employer, the contractor or subcontractor, and the workers engaged by the contractor or subcontractor.70
Article 106 of the Labor Code of the Philippines71 (Labor Code) explains the relations which may arise between
an employer, a contractor, and the contractor's employees,72 thus:
ART. 106. Contractor or subcontracting. - Whenever an employer enters into a contract with another person
for the performance of the formers work, the employees of the contractor and of the latter's subcontractor, if
any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with
this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in the same manner and extent that he is
liable to employees directly employed by him.
The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting
out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he
may make appropriate distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the parties involved shall be
considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision
of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among others,
and the workers recruited and placed by such person are performing activities which are directly related to
the principal business of such employer. In such cases, the person or intermediary shall be considered merely
as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the
latter were directly employed by him.
The Omnibus Rules Implementing the Labor Code73 distinguishes between permissible job contracting (or
independent contractorship) and labor-only contracting. Job contracting is 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.74
In contrast, job contracting shall be deemed as labor-only contracting, an arrangement prohibited by law, if a
person who undertakes to supply workers to an employer:
(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 person are performing activities which are directly related to
the principal business or operations of the employer in which workers are habitually employed.75
As a general rule, a contractor is presumed to be a labor-only contractor, unless such contractor overcomes
the burden of proving that it has the substantial capital, investment, tools and the like.76
Based on the conditions for permissible job contracting, we rule that respondent-contractors are labor-only
contractors.
There is no evidence showing that respondent-contractors are independent contractors. The respondentcontractors, DFI, and DARBMUPCO did not offer any proof that respondent-contractors were not engaged in
labor-only contracting. In this regard, we cite our ruling in Caro v. Rilloraza,77 thus:
"In regard to the first assignment of error, the defendant company pretends to show through Venancio Nasol's
own testimony that he was an independent contractor who undertook to construct a railway line between
Maropadlusan and Mantalisay, but as far as the record shows, Nasol did not testify that the defendant
company had no control over him as to the manner or methods he employed in pursuing his work. On the
contrary, he stated that he was not bonded, and that he only depended upon the Manila Railroad for money
to be paid to his laborers. As stated by counsel for the plaintiffs, the word 'independent contractor' means
'one who exercises independent employment and contracts to do a piece of work according to his own
methods and without being subject to control of his employer except as to result of the work.' furthermore, if
the employer claims that the workmen is an independent contractor, for whose acts he is not responsible, the
burden is on him to show his independence.
Tested by these definitions and by the fact that the defendant has presented piactically no evidence to
determine whether Venancio Nasol was in reality an independent contractor or not, we are inclined to think
that he is nothing but an intermediary between the defendant and certain laborers. It is indeed difficult to
find that Nasol is an independent contractor; a person who possesses no capital or money of his own to pay
his obligations to them, who files no bond to answer for any fulfillment of his contract with his employer and
specially subject to the control and supervision of his employer, falls short of the requisites or conditions
necessary for the common and independent contractor."78 (Citations omitted; Emphasis supplied.)
To support its argument that respondent-contractors are the employers of respondent-workers, and not
merely labor-only contractors, DFI should have presented proof showing that respondent-contractors carry on
an independent business and have sufficient capitalization. The record, however, is bereft of showing of even
an attempt on the part of DFI to substantiate its argument.
DFI cannot cite the May 24, 1999 Resolution of the NLRC as basis that respondent-contractors are
independent contractors. Nowhere in the NLRC Resolution does it say that the respondent-contractors are
independent contractors. On the contrary, the NLRC declared that "it was not clearly established on record
that said [respondent-]contractors are independent, xxx."79
Further, respondent-contractors admit, and even insist that they are engaged in labor-only contracting. As will
be seen below, respondent-contractors made the admissions and declarations on two occasions: first was in
their Formal Appearance of Counsel and Motion for Exclusion of Individual Party-Respondents filed before the
LA; and second was in their Verified Explanation and Memorandum filed before this Court.
Before the LA, respondent-contractors categorically stated that they are "labor-only" contractors who have
been engaged by DFI and DARBMUPCO.80 They admitted that they do not have substantial capital or
investment in the form of tools, equipment, machineries, work premises and other materials, and they
recruited workers to perform activities directly related to the principal operations of their employer.81
Before this Court, respondents-contractors again admitted that they are labor-only contractors. They narrated
that:
1. Herein respondents, Voltaire Lopez, Jr., et al., were commissioned and contracted by petitioner,
Diamond Farms, Inc. (DFI) to recruit farm workers, who are the complaining [respondent-workers]
(as represented by Southern Philippines Federation of Labor (SPFL) in this appeal by certiorari), in
order to perform specific farm activities, such as pruning, dcleafing, fertilizer application, bud inject,
stem spray, drainage, bagging, etc., on banana plantation lands awarded to private respondent,
Diamond Farms Agrarian Reform Beneficiaries Multi-Purpose Cooperative (DARBMUPCO) and on
banana planted lands owned and managed by petitioner, DFI.
2. All farm tools, implements and equipment necessary to performance of such farm activities were
supplied by petitioner DFI to respondents Voltaire Lopez, Jr., et. al. as well as to respondents-SPFL, et.
al. Herein respondents Voltaire Lopez, Jr. et. al. had no adequate capital to acquire or purchase such
tools, implements, equipment, etc.
3. Herein respondents Voltaire Lopez, Jr., et. al. as well as rcspondents-SPFL, et. al. were being directly
supervised, controlled and managed by petitioner DFI farm managers and supervisors, specifically on
work assignments and performance targets. DFI managers and supervisors, at their sole discretion
and prerogative, could directly hire and terminate any or all of the respondents-SPFL, et. al., including
any or all of the herein respondents Voltaire Lopez, Jr., et. al.
4. Attendance/Time sheets of respondents-SPFL, et. al. were being prepared by herein respondents
Voltaire Lopez, Jr., et. al., and correspondingly submitted to petitioner DFI. Payment of wages to
respondents-SPFL, et. al. were being paid for by petitioner DFI thru herein respondents Voltaire Lopez,
[Jr.], et. al. The latter were also receiving their wages/salaries from petitioner DFI for
monitoring/leading/recruiting the respondents- SPFL, et. al.
5. No monies were being paid directly by private respondent DARBMUPCO to respondents-SPFL, et al.,
nor to herein respondents Voltaire Lopez, [Jr.], et. al. Nor did respondent DARBMUPCO directly
intervene much less supervise any or all of [the] respondents- SPFL, et. al. including herein respondents
Voltaire Lopez, Jr.. et. al.82 (Emphasis supplied.)
The foregoing admissions are legally binding on respondent-contractors.83 Judicial admissions made by parties
in the pleadings, or in the course of the trial or other proceedings in the same case are conclusive and so does
not require further evidence to prove them.84 Here, the respondent-contractors voluntarily pleaded that they
are labor-only contractors; hence, these admissions bind them.
A finding that a contractor is a labor-only contractor is equivalent to a declaration that there is an employeremployee relationship between the principal, and the workers of the labor-only contractor; the labor-only
contractor is deemed only as the agent of the principal.85 Thus, in this case, respondent-contractors are the
labor-only contractors and either DFI or DARBMUPCO is their principal.
We hold that DFI is the principal.
Under Article 106 of the Labor Code, a principal or employer refers to the person who enters into an
agreement with a job contractor, either for the performance of a specified work or for the supply of
manpower.86 In this regard, we quote with approval the findings of the CA, to wit:
The records show that it is DFI which hired the individual [respondent-contractors] who in turn hired their
own men to work in the 689.88 hectares land of DARBMUPCO as well as in the managed area of the
plantation. DFI admits [that] these [respondent-contractors] worked under the direction and supervision of
the DFI. managers and personnel. DFI paid the [respondent-contractors] for the services rendered in the
plantation and the [respondent-contractors] in turn pay their workers after they [respondent-contractors]
received payment from DFI xxx DARBMUPCO did not have anything to do with the hiring, supervision and
payment of the wages of the workers-respondents thru the contractors-respondents. xxx87 (Emphasis
supplied.)
DFI does not deny that it engaged the services of the respondent-contractors. It does not dispute the claims of
respondent-contractors that they sent their billing to DFI for payment; and that DFI's managers and personnel
are in close consultation with the respondent-contractors.88
DFI cannot argue that DARBMUPCO is the principal of the respondent-contractors because it (DARBMUPCO)
owns the awarded plantation where respondent-contractors and respondent-workers were working;89 and
therefore DARBMUPCO is the ultimate beneficiary of the employment of the respondent-workers.90

That DARBMUPCO owns the awarded plantation where the respondent-contractors and respondent-workers
were working is immaterial. This does not change the situation of the parties. As correctly found by the CA,
DFI, as the principal, hired the respondent-contractors and the latter, in turn, engaged the services of the
respondent-workers.91 This was also the unanimous finding of the SOLE,92 the LA,93 and the NLRC.94 Factual
findings of the NLRC, when they coincide with the LA and affirmed by the CA are accorded with great weight
and respect and even finality by this Court.95
Alilin v. Petron Corporation96 is applicable. In that case, this Court ruled that the presence of the power of
control on the part of the principal over the workers of the contractor, under the facts, prove the employeremployee relationship between the former and the latter, thus:
[A] finding that a contractor is a 'labor-only' contractor is equivalent to declaring that there is an employeremployee relationship between the principal and the employees of the supposed contractor." In this case, the
employer-employee relationship between Pctron and petitioners becomes all the more apparent due to the
presence of the power of control on the part of the former over the latter.
It was held in Orozco v. The Fifth Division of the Hon. Court of Appeals that:
This Court has constantly adhered to the "fourfold test" to determine whether there exists an employeremployee relationship between the parties. The four elements of an employment relationship are: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
power to control the employee's conduct.
Of these four elements, it is the power to control which is the most crucial and most determinative factor,
so important, in fact, that, the other elements may even be disregarded.
Hence, the facts that petitioners were hired by Romeo or his father and that their salaries were paid by them
do not detract from the conclusion that there exists an employer-employee relationship between the parties
due to Pctron's power of control over the petitioners. One manifestation of the power of control is the power
to transfer employees from one work assignment to another. Here, Petron could order petitioners to do work
outside of their regular "maintenance/utility" job. Also, petitioners were required to report for work everyday
at the bulk plant, observe an 8:00 a.m. to 5:00 p.m. daily work schedule, and wear proper uniform and safety
helmets as prescribed by the safety and security measures being implemented within the bulk plant. All these
imply control. In an industry where safety is of paramount concern, control and supervision over sensitive
operations, such as those performed by the petitioners, are inevitable if not at all necessary. Indeed, Petron
deals with commodities that are highly volatile and flammable which, if mishandled or not properly attended
to, may cause serious injuries and damage to property and the environment. Naturally, supervision by Petron
is essential in every aspect of its product handling in order not to compromise the integrity, quality and safety
of the products that it distributes to the consuming public.97 (Citations omitted; Emphasis supplied)
That DFI is the employer of the respondent-workers is bolstered by the CA's finding that DFI exercises control
over the respondent-workers.98 DFI, through its manager and supervisors provides for the work assignments
and performance targets of the respondent-workers. The managers and supervisors also have the power to
directly hire and terminate the respondent-workers.99 Evidently, DFI wields control over the respondentworkers.
Neither can DFI argue that it is only the purchaser of the bananas produced in the awarded plantation under
the BPPA,100 and that under the terms of the BPPA, no employer-employee relationship exists between DFI
and the respondent-workers,101 to wit:
UNDERTAKING OF THE FIRST PARTY
xxx
3. THE FIRST PARTY [DARBMUPCO] shall be responsible for the proper conduct, safety, benefits and general
welfare of its members working in the plantation and specifically render free and harmless the SECOND PARTY
[DPI] of any expense, liability or claims arising therefrom. It is clearly recognized, by the FIRST PARTY that its
members and other personnel utilized in the performance of its function under this agreement are not
employees of the SECOND PARTY.102 (Emphasis supplied)
In labor-only contracting, it is the law which creates an employer-employee relationship between the principal
and the workers of the labor-only contractor.103
Inasmuch as it is the law that forms the employment ties, the stipulation in the BPPA that respondent-workers
are not employees of DFI is not controlling, as the proven facts show otherwise. The law prevails over the
stipulations of the parties. Thus, in Tabas v. California Manufacturing Co., Inc.,104 we held that:
The existence of an employer-employees relation is a question of law and being such, it cannot be made the
subject of agreement. Hence, the fact that the manpower supply agreement between Livi and California had
specifically designated the former as the petitioners' employer and had absolved the latter from any liability as
an employer, will not erase either party's obligations as an employer, if an employer-employee relation
otherwise exists between the workers and either firm. xxx105 (Emphasis supplied.)
Clearly, DFI is the true employer of the respondent-workers; respondent-contractors are only agents of DFI.
Under Article 106 of the Labor Code, DFI shall be solidarily liable with the respondent-contractors for the
rightful claims of the respondent-workers, to the same manner and extent, as if the latter are directly
employed by DFI.106
WHEREFORE, the petition is DENIED for lack of merit. The March 31, 2006 Decision and the May 30, 2006
Resolution of the Court of Appeals in C.A.-G.R. SP Nos. 53806, 61607 and 59958 are hereby AFFIRMED.
Velasco, Jr., (Chairperson), Leonardo-De Castro,**Peralta, and Villarama, Jr., JJ., concur.
17. Arts. 106-109, labor-only contracting

SECOND DIVISION
G.R. No. 182255, June 15, 2015
PETRON CORPORATION, Petitioner, v. ARMZ CABERTE, ANTONIO CABERTE, JR., MICHAEL SERVICIO,* ARIEL
DEVELOS, ADOLFO GESTUPA, ARCHIE PONTERAS, ARNOLD BLANCO, DANTE MARIANO,* VIRGILIO
GALOROSA, AND CAMILO TE,* Respondents.
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari1 assails the November 14, 2007 Decision2 of the Court of Appeals (CA) in
CA-G.R. SP No. 82356 which reversed the May 14, 2003 Decision3 and November 27, 2003 Resolution4 of the
National Labor Relations Commission (NLRC) in NLRC Case No. V-000329-2002. The NLRC affirmed the March
7, 2002 Decision5 of the Labor Arbiter dismissing the Complaints for illegal dismissal and payment of monetary
claims filed by respondents Armz Caberte (Caberte), Antonio Caberte, Jr. (Caberte Jr.), MichaeServicio
(Servicio), Ariel Develos (Develos), Adolfo Gestupa (Gestupa), Archie Ponteras (Ponteras), Arnold Blanco
(Blanco), Dante Mariano (Mariano), Virgilio Galorosa (Galorosa) and Camilo Te (Te) against petitioner Petron
Corporation (Petron), ABC Contracting Services (ABC), and its owner Antonio B. Caberte, Sr. (Caberte Sr.).
Likewise assailed is the CA Resolution6 dated March 4, 2008 which denied Perron's Motion for
Reconsideration.
Factual Antecedents
Petron is a domestic corporation engaged in the manufacture and distribution to the general public of various
petroleum products. In pursuance of its business, Petron owns and operates several bulk plants in the country
for receiving, storing and distributing its products.
On various dates from 1979 to 1998, respondents were hired to work at Petron's Bacolod Bulk Plant in San
Patrick, Bacolod City, Negros Occidental as LPG/Gasul fillers, maintenance crew, warehousemen, utility
workers and tanker receiving crew.
For the periods from March 1, 1996 to February 28, 1999 and November 1, 1996 to June 30, 1999, Petron and
ABC, a labor contracting business owned and operated by Caberte Sr., entered into a Contract for Services7
and a Contract for LPG Assistance Services.8 Under both service contracts, ABC undertook to provide utility
and maintenance services to Petron in its Bacolod Bulk Plant.
On July 2, 1999, respondents Caberte, Caberte Jr., Servicio, Develos, Gestupa, Ponteras, Blanco and Mariano
filed before the Labor Arbiter a Complaint9 for illegal dismissal, underpayment of wages and non-payment of
allowances, 13th month pay, overtime pay, holiday pay, service incentive leave pay, moral and exemplary
damages and attorney's fees against Petron, ABC and Caberte Sr., docketed as NLRC RAB VI Case No. 06-0710588-99. Subsequently, respondents Galorosa and Te separately filed similar Complaints10 docketed as NLRC
RAB VI Case No. 06-07-10675-99 and RAB Case No. 06-09-10785-99, respectively. The three Complaints were
consolidated in an Order11 dated October 25, 1999 of the Labor Arbiter.
Respondents averred that even before Petron engaged ABC as contractor in 1996, most of them had already
been working for Petron for years. However, every time Petron engages a new contractor, it would designate
such new contractor as their employer. Despite such arrangement, Petron exercised control and supervision
over their work, the performance of which is necessary and desirable in its usual trade and business.
Respondents added that ABC is a mere labor-only contractor which had no substantial capital and investment,
and had no control over the manner and method on how they accomplished their work. Thus, Petron is their
true employer. On July 1, 1999, however, Petron no longer allowed them to enter and work in the premises of
its Bacolod Bulk Plant. Hence, the complaints for illegal dismissal.
On the other hand, Petron asserted that ABC is an independent contractor which supplied the needed
manpower for the maintenance of its bulk handling premises and offices, as well as for tanker assistance in the
receiving and re-filling of its LPG products; that among the workers supplied by ABC were respondents, except
Caberte Jr., who does not appear to be one of those assigned by ABC to work for it; that it has no direct
control and supervision over respondents who were tasked to perform work required by the service contracts
it entered into with ABC; and, that it cannot allow the continuous employment of respondents beyond the
expiration of the contracts with ABC. To prove the legitimacy and capacity of ABC as an independent
contractor, Petron submitted the following documents: (1) Contractor's Pre-Qualification Statement;12 (2)
Petron's Conflict of Interest Policy signed by Caberte Sr., as proprietor of ABC;13 (3) ABC's Certificate of
Registration issued by the Bureau of Internal Revenue (BIR);14 (4) Value-Added Tax Return for the year 1995;15
(5) BIR Confirmation Receipt;16 (6) Caberte Sr.'s Tax Identification Number (TIN) issued by the BIR;17 (7)
Caberte Sr.'s Individual Income Tax Return for the years 199318 and 1994;19 (8) ABC's Audited Financial
Statements for the years 1992,20 199321 and 1994;22 (9) ABC's Mayor's Permit for the year 1995;23 and, (10)
ABC's Certificate of Registration of Business Name issued by the Department of Trade and Industry (DTI).24 In
addition, it averred that ABC, as a contractor, had duly posted a performance bond25 and took out insurance
policies26 against liabilities. Petron likewise presented affidavits27 of two Petron employees stating that
respondents do not perform activities related to Petron's business operation but only tasks which are
intermittent and which can be contracted out. Also submitted were affidavits28 of three former employees of
ABC attesting to the fact that during their stint in Petron, they used materials such as floor polisher, floor wax,
broom, dustpan, cleaning rags and other equipment owned by ABC to accomplish their tasks and that they
worked under the supervision of Caberte Sr., through the latter's designated overall supervisor, respondent
Caberte. Petron further revealed that ABC/Caberte Sr. has the power to hire and fire respondents and was the
one paying their wages.
In a Decision29 dated March 7, 2002, Executive Labor Arbiter Danilo C. Acosta (LA Acosta) held that ABC is an
independent contractor that has substantial capital and that respondents were its employees. He likewise
ruled that ABC's cessation of operation is a force majeure that justifies respondents' dismissal. Nonetheless,
LA Acosta awarded respondents separation pay based on the applicable minimum wage rate at the time of
expiration of the contracts of service. He, however, denied the claims for overtime pay and night shift
differential pay for lack of merit. The dispositive portion of the Decision reads:chanroblesvirtuallawlibrary
Conformably with the foregoing, respondent ABC is hereby ORDERED TO PAY EACH COMPLAINANT, namely,
complainants Antonio Caberte, Jr., Armz M. Caberte, Michael Servicio, Ariel Develos, Adolfo Gestupa, Archie
Ponteras, Arnold Blanco, Dante Mirano, Virgilio Galorosa and Camilo Te, separation pay of one month for
every year of service.
All other claims and the claims against respondent PETRON are hereby ORDERED DISMISSED for lack of merit.
SO ORDERED.30cralawlawlibrary
Proceedings before the National Labor Relations Commission

Respondents appealed to the NLRC where they insisted that they are regular employees of Petron since ABC is
a labor-only contractor.
In a Decision31 dated May 14, 2003, the NLRC affirmed the ruling of the Labor Arbiter after it found that ABC is
not a mere labor contractor but a legitimate independent contractor. In so ruling, the NLRC took into account
the following: (1) ABC/Caberte Sr. has the power of control over respondents as Caberte Sr. was the one
controlling and supervising respondents in their work. While Petron intervened at times, the same was limited
to safety precautions due to the hazardous nature of the products the workers were dealing with; (2) ABC
possessed sufficient capital and equipment per the various documents that Petron submitted showing the
former's financial capability to maintain its status as an accredited contractor of the latter. In fact, Caberte Sr.
was even able to establish ABC's Bacolod City Office; and, (3) ABC/Caberte Sr. has the power to hire and
dismiss respondents. Hence, the dispositive portion of the Decision, viz:chanroblesvirtuallawlibrary
WHEREFORE, premises considered, this appeal is DISMISSED and the decision of the Executive Labor Arbiter is
AFFIRMED.
Respondents filed a Motion for Reconsideration which was, however, denied in the NLRC Resolution33 dated
November 27, 2003.
Proceedings before the Court of Appeals
Aggrieved, respondents filed a Petition for Certiorari34 before the CA ascribing upon the NLRC grave abuse of
discretion amounting to lack or in excess of jurisdiction in holding that they are not employees of Petron.
The CA, in a Decision35 dated November 14, 2007, found merit in respondents' Petition. It ruled that ABC is
engaged in labor-only contracting because: first, it did not have substantial capital or investment in the form
of tools, equipment, implements, machineries and work premises, actually and directly used in the
performance or completion of the job it contracted out from Petron; second, the work assigned to
respondents were directly related to Petron's business; and, third, the nature of Petron's business requires it
to exercise control over the performance of respondents' work. Consequently, the CA declared respondents as
Petron's regular employees. And since Petron did not comply with the requirements under the Labor Code
when it terminated their employment, respondents were illegally dismissed and therefore entitled to
reinstatement without loss of seniority rights and other privileges, with the alternative relief of separation pay
in lieu of reinstatement, and to full backwages, inclusive of allowances, and to other benefits or their
monetary equivalent computed from the time compensation was withheld up to the time of actual
reinstatement. The CA, however, denied respondents' claims for moral and exemplary damages in the
absence of bad faith in Petron's act of dismissing them but awarded respondents 10% attorney's fees for
having to litigate to protect their interests. The dispositive portion of the Decision
reads:chanroblesvirtuallawlibrary
WHEREFORE, in view of the foregoing, the decision of the National Labor Relations Commission dated May 14,
2003, in NLRC Case No. V-000329-2002, affirming the March 7, 2002 Decision of Executive Labor Arbiter
Danilo C. Acosta of the Sub-Regional Arbitration Branch VI, Bacolod City, is hereby REVERSED.
Respondent Petron Corporation is ordered to reinstate Armz Caberte, Antonio Caberte, Jr., Michael Servicio,
Ariel Develos, Adolfo Gestupa, Archie Ponteras, Arnold Blanco, Dante Mirano, Virgilio Galorosa and Camilo Te
to their former positions with the same rights and benefits and the same salary rates as its regular employees.
Respondent Petron Corporation is likewise ordered to pay petitioner's attorney's fees equivalent to ten
percent (10%) of the monetary award.
All other claims are dismissed for lack of merit.
Costs against private respondent Petron.
Petron's Motion for Reconsideration37 was denied by the CA in its Resolution38 dated March 4, 2008. Hence,
this present recourse.chanRoblesvirtualLawlibrary
Issues
Petron presents the following grounds for review:chanroblesvirtuallawlibrary
XXX THE COURT OF APPEALS SERIOUSLY ERRED AND DECIDED A QUESTION OF SUBSTANCE IN A MANNER NOT
IN ACCORD WITH LAW AND WITH APPLICABLE JURISPRUDENCE IN FINDING THAT ABC CONTRACTING
SERVICES IS A MERE LABOR-ONLY CONTRACTOR AND IN HOLDING THAT RESPONDENTS ARE THUS REGULAR
EMPLOYEES OF THE COMPANY CONSIDERING THAT:
A. THERE IS A LEGITIMATE SERVICE CONTRACTING AGREEMENT BETWEEN THE COMPANY AND ABC
CONTRACTING SERVICES;
B. THE CONTRACTED SERVICES THAT RESPONDENTS PERFORMED ARE NOT DIRECTLY RELATED AND
NECESSARY OR DESIRABLE TO THE COMPANY'S PRINCIPAL BUSINESS;
C. ABC CONTRACTING SERVICES CARRIES ON AN INDEPENDENT BUSINESS AND POSSESSES SUBSTANTIAL
CAPITAL AND INVESTMENT;
D. RESPONDENTS ARE EMPLOYEES OF ABC CONTRACTING SERVICES.39
Petron asserts that ABC, as an independent contractor, rendered janitorial, utility and LPG assistance services
by virtue of legitimate contracts entered into by and between them. As such, the services rendered by
respondents were purely maintenance and utility works which are not directly related, necessary and
desirable to Petron's main business.
Petron likewise insists that ABC is not a labor-only contractor as it carries on an independent business and
uses its own equipment, tools, materials and supplies in the performance of its contracted services. Further, it
asserts that ABC wielded and exercised the power of selection or engagement, payment of wages, discipline or
dismissal, and of control over respondents.chanRoblesvirtualLawlibrary
Our Ruling
The Petition has no merit.
Labor-only contracting and permissible job contracting, defined; a contractor is presumed by law to be a laboronly contractor; anyone claiming the supposed status of an independent contractor bears the burden of
proving the same.
As defined under Article 106 of the Labor Code, labor-only contracting, a prohibited act, is an arrangement
where the contractor, who does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, supplies workers to an employer and the workers recruited are
performing activities which are directly related to the principal business of such employer.
Permissible or legitimate job contracting or subcontracting, on the other hand, "refers to an arrangement
whereby a principal agrees to put out or farm out with the contractor or subcontractor the performance or
completion 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. A
person is considered engaged in legitimate job contracting or subcontracting if the following conditions
concur: (a) the contractor carries on a distinct and independent business and partakes 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 the 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."40
To determine whether a contractor is engaged in labor-only contracting or permissible job contracting, "the
totality of the facts and the surrounding circumstances of the case are to be considered."41
Petron contends that the CA erred in ruling that ABC is a labor-only contractor since respondents failed to
prove that ABC is not an independent contractor. The contention, however, is incorrect. The law presumes a
contractor to be a labor-only contractor and the employees are not expected to prove the negative fact that
the contractor is a labor-only contractor.42 Thus, it is not respondents but Petron which bears the burden of
establishing that ABC is not a labor-only contractor but a legitimate independent contractor. As held in Alilin v.
Petron Corporation,43 "where the principal is the one claiming that the contractor is a legitimate contractor,
the burden of proving the supposed status of the contractor rests on the principal."
Petron failed to overcome the presumption that ABC is a labor-only contractor.
Foremost, Petron banks on the contracts of services it entered into with ABC. It contends that the said
contracts were legitimate business transactions and were not only for the purpose of ABC providing
manpower or labor-only to Petron, but rather for specific services pertaining to janitorial, utility and LPG
assistance.
Suffice it to state, however, that Petron cannot place reliance on the contracts it entered into with ABC since
these are not determinative of the true nature of the parties' relationship. As held in Babas v. Lorenzo
Shipping Corporation,44 the character of the business, whether as labor-only contractor or as a job contractor,
should be determined by the criteria set by statute and the parties cannot dictate by the mere expedience of a
unilateral declaration in a contract the character of their business.
Next, Petron endeavours to prove that ABC is a legitimate independent contractor.
To restate, a contractor is deemed to be a labor-only contractor if the following elements are present: (i) the
contractor does not have substantial capital or investment to actually perform the job, work or service under
its own account and responsibility; and (ii) the employees recruited, supplied or placed by such contractor are
performing activities which are directly related to the main business of the principal.45 Conversely, in proving
that ABC is not a labor-only contractor, it is incumbent upon Petron to show that ABC has substantial capital or
investment and that respondents were performing activities which were not directly related to Petron's
principal business.
To show that ABC has substantial capital or investment, Petron submitted, among others, ABC's BIR Certificate
of Registration, VAT Return, BIR Confirmation Receipt, TIN, Individual Income Tax Return, Mayor's Permit and
DTI Certificate of Registration. However, the Court observes that these documents are not conclusive evidence
of ABC's financial capability. At most, they merely show that ABC is engaged in business and licensed by the
appropriate government agencies.
As for the financial statements presented, it appears that only the audited financial statements of ABC for the
years 1992, 1993 and 1994 were submitted. As aptly observed by the CA, these documents cannot be given
much credence considering that the service contracts between Petron and ABC commenced in 1996 and
ended in 1999. However, no audited financial statements for the years material to this case (1996, 1997, 1998
and 1999) were submitted. Also, as per record, ABC was obligated to submit to Petron at least once every two
years its latest audited financial statements, among others, as a requirement for the retention of its status as
an accredited contractor of Petron.46 If it is true that ABC continued to possess its financial qualification after
1994, Petron should have presented ABC's financial statements for the said years which are presumed to be in
Petron's possession considering that they are part of the requirements that it itself set for its accredited
contractors.
Neither does the performance bond taken out by ABC serve as significant evidence of its substantial capital. As
aptly explained by the CA:chanroblesvirtuallawlibrary
The performance bond posted by ABC Contracting Services likewise fails to convince us that the former has
substantial capital or investment inasmuch as it was not shown that the performance bond in the amount of
P596,799.51 was enough to cover not only payrolls, rentals and equipment but also possible damages to the
equipment and to third parties and other contingent liabilities. Moreover, this Court takes judicial notice that
bonds of this nature are issued upon payment of a small percentage as premium without necessarily requiring
any guarantee.
If at all, the bond was a convenient smoke screen to disguise the real nature of ABC's employment as an agent
of Petron.47cralawlawlibrary
Anent substantial investment in the form of equipment, tools, implements, machineries and work premises,
Petron likewise failed to show that ABC possessed the same. Instead, what is evident in the records was that
ABC had been renting a forklift from Petron in order to carry out the job of respondents.48 This only shows
that ABC does not own basic equipment needed in the performance of respondents' job. Similarly and again as
correctly held by the CA, the fact that ABC leased a property for the establishment of its Bacolod office is
immaterial since it was not shown that it was used in the performance or completion of the job contracted
out. "Substantial capital or investment," under Section 5, Rule VIII-A, Book III of the Omnibus Rules
Implementing the Labor Code (Implementing Rules), as amended by Department Order No. 18-02,49 does not
include those which are not actually and directly used in the performance of the job contracted out.
Going now to the activities performed by respondents, Petron avers that the same were not necessary or
desirable to its principal business. In fact, the service contracts it entered into with ABC clearly referred to
respondents' functions as maintenance and utility works only which are remote to its principal business of
manufacturing and distributing petroleum products.
The Court finds otherwise. Gestupa, Ponteras, Develos, Blanco and Mariano were LPG fillers and maintenance
crew; Caberte was an LPG operator supervisor; Te was a warehouseman and utility worker; and Servicio and
Galorosa were tanker receiving crew and utility workers. Undoubtedly, the work they rendered were directly
related to Petron's main business, vital as they are in the manufacture and distribution of petroleum products.
Besides, some of the respondents were already working for Petron even before it engaged ABC as a contractor
in 1996. Albeit it was made to appear that they were under the different contractors that Petron engaged over
the years, respondents have been regularly performing the same tasks within the premises of Petron. This
"the repeated and continuing need for the performance of the job is sufficient evidence of the necessity, if not
indispensability of the activity to the business."50
What further militates against Perron's claim that ABC, as an alleged independent contractor, is the true
employer of respondents, is the fact that Petron has the power of control over respondents in the
performance of their work. It bears stressing that the power of control merely calls for the existence of the
right to control and not necessarily the exercise thereof.51 Here, Petron admitted in its Position Paper that the
supervision of a Petron employee is required over LPG and tanker assistance jobs for inventory control and
safety checking purposes. It explained that due to the hazardous nature of its products, constant checking of
the procedures in their handling is essential considering the high possibility of fatal accidents. It also admitted
that it was the one supplying the needed materials and equipment in discharging these functions to better
insure the integrity, quality and safety of its products.
From the foregoing, it is clear that Petron failed to discharge its burden of proving that ABC is not a labor-only
contractor. Consequently, and as warranted by the facts, the Court declares ABC as a mere labor-only
contractor. "A finding that a contractor is a 'labor-only' contractor is equivalent to declaring that there is an
employer-employee relationship between the principal and the employees of the supposed contractor, and
the 'labor-only' contractor is considered as a mere agent of the principal, the real employer."52 Accordingly in
this case, Petron is declared to be the true employer of respondents who are considered regular employees in
view of the fact that they have been regularly performing activities which are necessary and desirable to the
usual business of Petron for a number of years.
Respondents, except Antonio Caberte, Jr., were illegally dismissed.
With respect to respondents' dismissal, Petron claimed that the same sprang from the termination or
conclusion of the service contracts it entered into with ABC. As earlier held, respondents are considered
regular employees. In cases of regular employment, an employer may only terminate the services of an
employee for just or authorized causes under the law.53 As the reason given by Petron dismissing respondents
does not constitute a just or authorized cause for termination,54 the latter are declared to have been illegally
dismissed. Respondents are thus entitled to all the remedies of an illegally dismissed employee, i.e.,
backwages and reinstatement, or if no longer feasible, separation pay. The CA is thus correct in ruling that
respondents are entitled to reinstatement without loss of seniority rights and other privileges. However, if
reinstatement is no longer feasible, respondents are entitled to receive separation pay equivalent to one
month salary for every year of service. In addition, respondents are entitled to full backwages from the time
they were not allowed to work on July 1, 1999 up to actual reinstatement or finality of this Decision as the
case may be.
An exception must be taken, however, with respect to Caberte Jr. From the beginning, Petron disputes the
fact he ever worked for Petron. Therefore, before his case against Petron can prosper, Caberte Jr. must first
establish that an employer-employee relationship existed between them since it is basic that the issue of
illegal dismissal is premised on the existence of such relationship between the parties.55 Unfortunately,
nowhere in the records does it show that he indeed worked for Petron. Consequently, his complaint should be
dismissed.
WHEREFORE, the petition is DENIED. The November 14, 2007 Decision and the March 4, 2008 Resolution of
the Court of Appeals in CA-G.R. SP No. 82356 are MODIFIED in that: (1) the Complaint of respondent Antonio
Caberte, Jr. against petitioner Petron Corporation is dismissed; and (2) petitioner Petron Corporation is
ordered to reinstate all of the respondents, except for Antonio Caberte, Jr., to their former positions with the
same rights and benefits and the same salary rates as its regular employees, or if reinstatement is no longer
feasible, to separation pay equivalent to one month salary for every year of service and to pay them their full
backwages from July 1, 1999 until actual reinstatement or upon finality of this Decision as the case may be, as
well as attorney's fees equivalent to 10% of the monetary award, with costs against Petron Corporation.
Carpio, (Chairperson), Brion, Mendoza, and Leonen, JJ., concur.
18. Arts. 106-109, legitimate job contracting

THIRD DIVISION
G.R. No. 186114, October 07, 2015
CHEVRON (PHILS.), INC., Petitioner, v. VITALIANO C GALIT, SJS AND SONS CONSTRUCTION CORPORATION
AND MR. REYNALDO SALOMON, Respondents.
DECISION
PERALTA J.:*
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the reversal
and setting aside of the Decision1 and Resolution2 of the Court of Appeals (CA), dated December 8, 2008 and
January 20, 2009, respectively, in CA-G.R. SP No. 104713. The assailed CA Decision reversed and set aside the
Decision dated January 31, 2008 and the Resolution dated May 27, 2008 of the National Labor Relations
Commission (NLRC), Second Division in NLRC NCR (Case No.) 00-03-02399-06 (CA No. 051468-07), while the
questioned CA Resolution denied petitioner's Motion for Reconsideration.
The factual and procedural antecedents of the case are as follows:chanRoblesvirtualLawlibrary
On March 20, 2006, herein respondent (Galit) filed against Caltex Philippines, Inc., now Chevron (Phils.), Inc.,
SJS and Sons Construction Corporation (SJS), and its president, Reynaldo Salomon (Salomon),3 a Complaint4 for
illegal dismissal, underpayment/non-payment of 13th month pay, separation pay and emergency cost of living
allowance. The Complaint was filed with the NLRC National Capital Region, North Sector Branch in Quezon
City.
In his Position Paper,5 Galit alleged that: he is a regular and permanent employee of Chevron since 1982,
having been assigned at the company's Pandacan depot; he is an "all-around employee" whose job consists of
cleaning the premises of the depot, changing malfunctioning oil gaskets, transferring oil from containers and
other tasks that management would assign to him; in the performance of his duties, he was directly under the
control and supervision of Chevron supervisors; on January 15, 2005, he was verbally informed that his
employment is terminated but was promised that he will be reinstated soon; for several months, he followed
up his reinstatement but was not given back his job.
In its Position Paper,6 SJS claimed that: it is a company which was established in 1993 and was engaged in the
business of providing manpower to its clients on a "per project/contract" basis; Galit was hired by SJS in 1993
as a project employee and was assigned to Chevron, as a janitor, based on a contract between the two
companies; contrary to Galit's allegation, he started working for SJS only in 1993; the manpower contract
between SJS and Chevron eventually ended on November 30, 2004 which resulted in the severance of Galit's
employment; SJS finally closed its business operations in December 2004; it retired from doing business in
Manila on January 21, 2005; Galit was paid separation pay of P11,000.00.
On the other hand, petitioner contended in its Position Paper with Motion to Dismiss7 that: it entered into two
(2) contracts for-janitorial services with SJS from May 1, 2001 to April 30, 2003 and from June 1, 2003 to June
1, 2004; under these contracts, SJS undertook to "assign such number of its employees, upon prior .agreement
with [petitioner], as would be sufficient to fully and effectively render the work and services undertaken" and
to "supply the equipment, tools and materials, which shall, by all means, be effective and efficient, at its own
expense, necessary for the performance" of janitorial services; Galit, who was employed by SJS, was assigned
to petitioner's Pandacan depot as a janitor; his wages and all employment benefits were paid by SJS; he was
subject to the supervision, discipline and control of SJS; on November 30, 2004, the extended contract
between petitioner and SJS expired; subsequently, a new contract for janitorial services was awarded by
petitioner to another independent contractor; petitioner was surprised that Galit filed an action impleading it;
despite several conferences, the parties were not able to arrive at an amicable settlement.
On October 31, 2006, the Labor Arbiter (LA) assigned to the case rendered a Decision,8 the dispositive portion
of which reads as follows:cralawlawlibrary
WHEREFORE, judgment is hereby rendered DISMISSING the Complaint against respondent Chevron for lack of
jurisdiction, and against respondents SJS and Reynaldo Salomon for lack of merit. For equity and
compassionate consideration, however, respondent SJS is hereby ordered to pay the complainant a separation
pay at the rate of a half-month salary for every year of service that the complainant had with respondent SJS.
SO ORDERED.9
chanrobleslaw
The LA found that SJS is a legitimate contractor and that it was Galit's employer, not petitioner. The LA
dismissed Galit's complaint for illegal dismissal against petitioner for lack of jurisdiction on the ground that
there was no employer-employee relationship between petitioner and Galit. The LA likewise dismissed the
complaint against SJS and Salomon for lack of merit on the basis of his finding that Galit's employment with
SJS simply expired as a result of the completion of the project for which he was engaged.
Aggrieved, herein respondent filed an appeal10 with the NLRC.
On January 31, 2008, the NLRC rendered its Decision11 and disposed as follows:cralawlawlibrary
WHEREFORE, premises considered, the decision under review is hereby, MODIFIED.
Respondent SJS and Sons Construction Corporation is ordered to pay the complainant, severance
compensation, at the rate of one (1) month salary for every year of service. In all other respects, the appealed
decision so stands as AFFIRMED.
SO ORDERED.12
chanrobleslaw
The NLRC affirmed the findings of the LA that SJS was a legitimate job contractor and that it was Galit's
employer. However,"the NLRC found that Gal it was a regular, and not a project employee, of SJS, whose
employment was effectively terminated when SJS ceased to operate.
Herein respondent tiled a Motion for Reconsideration,13 but the NLRC denied it in its Resolution14 dated May
27, 2008.
Respondent then filed a petition for certiorari with the CA assailing the above NLRC Decision and Resolution.
On December 8, 2008, the CA promulgated its assailed Decision, the dispositive portion of which reads,
thus:cralawlawlibrary
WHEREFORE, premises considered, the petition is GRANTED. The Decision dated January 31, 2008 and the
Resolution dated May 27, 2008 of the NLRC, Second Division in NLRC NCR [Cast No.] 00-03-02399-06 (CA No.
051468-07) are REVERSED and SET ASIDE. Judgment is rendered declaring private respondent Chevron Phils,
guilty of illegal dismissal and ordering petitioner Galit's reinstatement without loss of seniority rights and
other privileges and payment of his full backwages, inclusive of allowances and to other benefits or their
monetary equivalents computed from the time compensation was withheld up to the time of actual
reinstatement. Private respondent Chevron Phils, is also hereby ordered to pay 10% of the amount due
petitioner Galit as attorney's fees.
SO ORDERED.15
chanrobleslaw
Contrary to the- findings of the LA and the NLRC, the CA held that SJS was a labor-only contractor, that
petitioner is Galit's actual employer and that the latter was unjustly dismissed from his employment.
Herein petitioner filed a motion for reconsideration, but the CA denied it in its Resolution dated January 20,
2009.
Hence, the present petition for review on certiorari based on the following grounds:cralawlawlibrary
I.
WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THAT THE
DISMISSAL OF RESPONDENT WAS ILLEGAL CONSIDERING THAT:chanRoblesvirtualLawlibrary
A. THE FINDINGS OF FACT OF TFIE LABOR ARBITER A QUO AND THE NATIONAL LABOR RELATIONS
COMMISSION ARE ALREADY BINDING UPON THE HONORABLE COURT OF APPEALS.
B. THERE IS NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE COMPANY AND RESPONDENT HEREIN.
C. PETITIONER SJS IS A. LEGITIMATE INDEPENDENT CONTRACTOR.
II.
CONSIDERING THAT THERE IS NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE COMPANY AND
RESPONDENT HEREIN, THE HONORABLE COURT OF APPEALS' AWARD OF REINSTATEMENT, BACKWAGES, AND
ATTORNEY'S FEES AGAINST THE COMPANY HAS NO LEGAL BASIS.16chanrobleslaw
On September 19, 2012, this Court issued a Resolution17 directing petitioner to implead SJS as partyrespondent on the ground that it is an indispensable party without whom no final determination can be had of
this case.
In a Motion18 dated November 21, 2012, petitioner manifested its compliance with this Court's September 19,
2012 Resolution. In addition, it prayed that Salomon be also impleaded as party-respondent
Acting on petitioner's above Motion, this Court issued another Resolution19 on June 19, 2013, stating that SJS
and Salomon are impleaded as parties-respondents and are required to comment on the petition for review
on certiorari.
However, despite due notice sent to SJS and Salomon at their last known addresses, copies of the above
Resolution were returned unserved. Hence, on October 20, 2014, the Court, acting on Galit's plea for early
resolution of the case, promulgated a Resolution20 resolving to dispense with the filing by SJS and Salomon of
their respective comments.
The Court will, thus, proceed to resolve the instant petition.
At the outset, the Court notes that the first ground raised by petitioner consists of factual issues. It is settled
that this Court is not a trier of facts, and this applies with greater force in labor cases.21 Corollary thereto, this
Court has held in a number of cases that factual findings of administrative or quasi-judicial bodies, which are
deemed to have acquired expertise in matters within their respective jurisdictions, are generally accorded not
only respect but even finality, and bind the Court when supported by substantial evidence.22 However, it is
equally settled that the.foregoing principles admit of certain exceptions, to wit: (1) the findings are grounded
entirely on speculation, surmises or conjectures; (2) the inference made is manifestly mistaken, absurd or
impossible; (3) there is grave abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5)
the findings of fact are conflicting; (6) in making its findings, the Court of Appeals went beyond the issues of
the case, or its findings are contrary to the admissions of both appellant and appellee; (7) the findings are
contrary to those of the trial court; (8) the findings are conclusions without citation of specific evidence on
which they are based; (9) the facts set forth in the petition, as well as in petitioners main and reply briefs, are
not disputed by respondent; (10) the findings of fact are premised on the supposed absence of evidence and
contradicted by the evidence on record; and (11) the Court of Appeals manifestly overlooked certain relevant
facts not disputed by the parties, which, if properly considered, would justify a different conclusion.23 In the
instant case, the Court gives due course to the instant petition considering that the findings of fact and
conclusions of law of the LA and the NLRC differ from those of the CA.
Thus, the primordial question that confronts the Court is whether there existed an employer-employee
relationship between petitioner and Galit, and whether the former is liable to the latter for the termination of
his employment. Corollary to this, is the issue of whether or not SJS is an independent contractor or a labor
only contractor.
To ascertain the existence of an employer-employee relationship, jurisprudence has invariably adhered to the
four-fold test, to wit: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employee's conduct, or the so-called "control test."24 Of
these four, the last one is the most important.25 The so-called "control test" is commonly regarded as the most
crucial and determinative indicator of the presence or absence of an employer-employee relationship.26 Under
the control test, an employer-employee 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 and means to be used
in reaching that end.27
In the instant case, the true nature of Galit's employment is evident from the Job Contract between petitioner
and SJS, pertinent portions of which are reproduced hereunder:cralawlawlibrary
xxxx
1.1 The CONTRACTOR [SJS] shall provide the following specific services to the COMPANY [petitioner]:
xxxx
1. Scooping of slop of oil water separator
2. Cleaning of truck parking area/drum storage area and pier
xxxx
4.1 In the fulfillment of its obligations to the COMPANY, the CONTRACTOR shall select and hire its workers.
The CONTRACTOR alone shall be responsible for the payment of their wages and other employment benefits
and likewise for the safeguarding of their health and safety in accordance with existing laws- and regulations.
Likewise, the CONTRACTOR shall be responsible for the discipline and/or dismissal of these workers.
4.2 The CONTRACTOR shall retain the right to control the manner and the means of performing the work, with
the COMPANY having the control or direction only as to the results to be accomplished.
xxxx
4.4 It is understood that, for the above reasons, these workers shall be considered as the employees of the
CONTRACTOR. Under no circumstances, shall these workers be deemed directly or indirectly as the employees
of the COMPANY.
xxxx
5.1 The CONTRACTOR shall maintain efficient and effective discipline over any and all employees it may utilize
in performing its obligations under this CONTRACT, x x x
5.2 The COMPANY shall in no manner be answerable or accountable for any incident or injury which may
occur to any worker or personnel of .the CONTRACTOR during the time and consequent upon the
performance of the work and services under this Agreement, nor for any injury, loss or damage arising from
fault, negligence or carelessness of the CONTRACTOR or anyone of its workers to any person or persons or to
his or their property; and the CONTRACTOR covenants and agrees to assume, as it does hereby assume, all
liabilities for any such injury, loss or damage and to make the COMPANY free and blameless therefrom, x x x
5.3. The CONTRACTOR shall be responsible for any loss or damage that may be incurred upon the products,
properties and installations of the COMPANY during the effectivity of this Contract which are due to the
unreasonable or negligent act of the CONTRACTOR, its agents or its workers.
xxxx
6.1 The CONTRACTOR shall at its own expense maintain with a reputable insurance company, acceptable to
the CQMPANY, a comprehensive liability insurance in the amount required by the COMPANY to cover claims
for bodily injury, death or property damage caused to any person or persons by an act or omission of the
CONTRACTOR or any of its employees, agents or representatives.
xxxx
x x x [T]he CONTRACTOR agrees and undertakes:chanRoblesvirtualLawlibrary
xxxx
b. To submit satisfactory proof to the COMPANY that it has registered its personnel/workers assigned to
perform the work and services herein required with the Social Security System, Medicare and other
appropriate agencies for purposes of the Labor Code as well as other laws, decrees, rules and regulations.
c. To pay the wages or salaries of its personnel/workers as well as benefits, premia and protection in
accordance with the provisions of the Labor Code and other applicable laws, decrees, rules and regulations
promulgated by competent authority, xxx
d. To assign such number of its employees, upon prior agreement with the COMPANY, as would be sufficient
to fully and effectively render the work and services herein undertaken, xxx
e. To supply the equipment, tools and materials, which shall, by all means, be effective and efficient, at its own
expense, necessary for the performance of the services under this Contract.28chanrobleslaw
The foregoing provisions of the Job Contract between petitioner and SJS demonstrate that the latter
possessed the following earmarks of an employer, to wit: (1) the power of selection and engagement of
employees, under.Sections 4.1 and 6.1(d); (2) the payment of wages, under Sections 4.1 and 6.1(c); (3) the
power to discipline and dismiss, under Section 4.1; and, (4) the power to control the employee's conduct,
under Sections 4.1, 4.2, and 5.1.
As to SJS' power of selection and engagement, Galit himself admitted in his own affidavit that it was SJS which
assigned him to work at Chevron's Pandacan depot.29 As such, there is no question that it was SJS which
selected and engaged Galit as its employee.
With respect to the payment of wages, the Court finds no error in the findings of the LA that Galit admitted
that it was SJS which paid his wages. While Galit claims that petitioner was the one which actually paid his
wages and that SJS was merely used as a conduit, Galit failed to present evidence to this effect. Galit, likewise,
failed to present sufficient proof to back up his claim that it was petitioner, and not SJS, which actually paid his
SSS, Philhealth and Pag-IBIG premiums. On the contrary, it is .unlikely that SJS would report Galit as its worker,
pay his SSS, Philhealth and Pag-IBIG premiums, as well as his wages, if it were not true that he was indeed its
employee.30 In the same manner, the Quitclaim and Release,31 which was undisputedly signed by Galit,
acknowledging receipt of his separation pay from SJS, is an indirect admission or recognition of the fact that
the latter was indeed his employer. Again, it would be unlikely for SJS to pay Galit his separation pay if it is not
the latter's employer.
Galit also did not dispute the fact that he was dismissed from employment by reason of the termination of the
service contract between SJS and petitioner. In other words, it was not petitioner which ended his
employment. He was dismissed therefrom because petitioner no longer renewed its contract with SJS and that
the latter subsequently ceased to operate.
Anent the power of control, the Court again finds no cogent reason to depart from the findings of the NLRC
that in case of matters that needed to be addressed with respect to employee performance, petitioner dealt
directly with SJS and not with the employee concerned. In any event, it is settled that such power merely calls
for the existence of the right to control and not necessarily the exercise thereof. In the' present case, the Job
Contract between petitioner and SJS clearly provided that SJS "shall retain the right to control the manner and
the means of performing the work, with [petitioner] having the control or direction only as to the results to be
accomplished."32
In addition, it would bear to point out that contrary to the ruling of the CA, the work performed by Galit,
which is the "scooping of slop of oil water separator,"33 has no direct relation to petitioner's business, which is
the importation, refining and manufacture of petroleum products. The Court defers to the findings of both the
LA and the NLRC that the job performed by Galit, which essentially consists of janitorial services, may be
incidental or desirable to petitioner's main activity but it is not necessary and directly related to it.
As to whether or not SJS is an independent contractor, jurisprudence has invariably ruled that an independent
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, and 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.34 This embodies what has long been jurisprudentially recognized as the control test, as discussed
above. In the instant case, SJS presented evidence to show that it had an independent business by paying
business taxes and fees and that it was registered as an employer with the Social Security System. Moreover,
there was no evidence to show that SJS and its employees were ever subject to the control of petitioner. On
the contrary, as shown above, SJS possessed the right to control its employees' manner and means of
performing their work , including herein respondent Galit.
As to its capital, there is no dispute that SJS generated an income of P1,523,575.81 for the year 2004.35 In Neri
v. National Labor Relations Commission,36 this Court held that a business venture which had a capitalization of
P1,000,000.00 was considered as highly capitalized and cannot be deemed engaged in labor-only contracting.
In the present case, while SJS' income of more than P1,500,000.00 was not shown to be equivalent to its
authorized capital stock, such income is an indication of how much capital was put into its business to
generate such amount of revenue. Thus, the Court finds no sufficient reason to disturb the findings of the LA
and the NLRC that SJS had substantial capital.
WHEREFORE, the instant petition is GRANTED. The assailed Decision and Resolution of the Court of Appeals,
dated December 8, 2008 and January 20, 2009, respectively, are REVERSED and SET ASIDE. The Decision of the
National Labor Relations Commission, dated January 31, 2008 in NLRC NCR' [Case No.] 00-03-02399-06 (CA No.
051468-07) is REINSTATED.
Villarama, Jr., Perlas-Bernabe,** Leonen,*** and Jardeleza, JJ., concur.
19. Arts. 106-109, labor-only contractor

SECOND DIVISION
G.R. No. 201494, July 29, 2015
MARITES R. CUSAP, Petitioner, v. ADIDAS PHILIPPINES, INC., (ADIDAS), PROMOTION RESOURCES & INTERMARKETING EXPONENTS, INC. (PRIME) AND JC ATHLETES, INC. (JCA), Respondents.
DECISION
BRION, J.:
We resolve petitioner Marites R. Cusap's appeal1 from the September 21, 2011 decision2 and February 20,
2012 resolution3 of the Court of Appeals in CA-G.R. SP No. 104725.
The Antecedents
On January 21, 2003, the petitioner and 27 other employees (complainants) filed a complaint for illegal
dismissal4 against the respondents Adidas Philippines Inc. (Adidas) and Promotion Resources Inter-Marketing
Exponents, Inc. (PRIME). The complainants later amended the complaint to include JC Athletes, Inc. (JCA), as a
respondent.5 They prayed for reinstatement with back wages, separation pay (should reinstatement be no
longer feasible), 13th month pay, service incentive leave pay, and damages.
Through their "Magkasanib na Sinumpaang Salaysay,"6 the complainants alleged that they were regular
employees of Adidas after having worked as promo girls and stockmen at the company's various rented
outlets for years, ranging from one year to seven years; the earliest employed (June 1, 1995) was Nova Toque
while the latest was Aquilino Banaag (September 21, 2000). The petitioner was hired on October 28,
1995.7ChanRoblesVirtualawlibrary
The record shows that Adidas is engaged in the manufacture and marketing of different lines of shoes and
other sporting goods and apparel in the Philippines.8 After its contract with its former distributor, World
Sports, Inc. (WOSI) allegedly expired, it contracted9 JCA to be its exclusive distributor nationwide for one year
or from January 1, 2002 to December 31, 2002. In turn, JCA entered into a Promotional Contract10 with PRIME
to meet the promotional requirements in the distribution of Adidas products. PRIME supposedly assigned the
complainants to JCA for the purpose.
The complainants claimed that they were dismissed from employment on December 9, 2002, when the service
contract between PRIME and JCA was terminated. This notwithstanding, they argued that Adidas was their
real employer, not PRIME which, they believed, was merely a recruitment agency supplying Adidas with
manpower. PRIME was being used, they further claimed, to conceal the actual employment relationship
between them and Adidas.
They pointed out that for the years that they were employed, they worked for Adidas, under the supervision
and control of Adidas and JCA personnel. They stressed that their work was related to and in pursuit of Adidas'
principal business activity (the marketing of its products), thereby making them regular employees of the
company. This was their reason for demanding their regularization by Adidas.
Further, the complainants maintained that JCA was a mere alter ego of Adidas and was being used to further
muddle the employment relationship between them and Adidas. JCA's actual role as a dummy (together with
PRIME) for Adidas, the complainants explained, was evidenced by the fact that JCA and Adidas occupied the
same office. JCA took the place of WOSI as distributor of Adidas products.
Elaborating on their "muddled" employment status in relation with Adidas, the complainants bewailed that
JCA was erroneously identified as "distributor" of Adidas products as no evidence showed that JCA purchased
the Adidas products they were selling.11 Under their supposed Distribution Agreement, the "Distributor shall
purchase the Products only from Adidas or any other sources expressly designated by Adidas and sell the
Products in its own name and for its own account x x x."12ChanRoblesVirtualawlibrary
The complainants asserted that the products they were selling at various outlets remained the property and
under the control of Adidas - it was Adidas that provided the warehouse where the products were stored, that
leased the outlets from department stores, and that provided regular training to them.13 Also, the proceeds of
the sales were directly deposited to the bank account of Adidas. Moreover, their salaries and other monetary
benefits supposedly paid by PRIME were charged to the account of Adidas, as indicated in their payslips.14
They argued that if JCA purchased the products being sold and were already its property, there was no point
to still charge complainants' wages and benefits to the Adidas' account.
These circumstances, complainants stressed, confirmed their position that JCA and PRIME were only
intermediaries of Adidas and were used to conceal Adidas' identity as their real employer.
To substantiate their assertion that PRIME was just an intermediary of Adidas, they submitted documentary
proof that it was not even a registered corporation, labor recruiter, or agency when it supposedly entered into
a contract with JCA; neither with the Securities and Exchange Commission15 nor with the Department of Trade
and Industry.16 It was registered as a "job contractor/subcontractor" only on May 20, 2002.17 They thus
maintained that PRIME was just a labor-only contractor at the time it claimed it had employed them for its
supposed undertaking with JCA.
In defense, Adidas argued that in 2002, it amended its Articles of Incorporation18 to enable it to engage in
the retail business without the need to contract the services of distributors such as JCA, following the
approval by the Board of Investments of the application of its mother company, Adidas Solomon AG, to
operate as a foreign retailer in the country. As a consequence, it no longer renewed its Distribution Agreement
with JCA when it expired on December 31, 2002.
Necessarily, it maintained, the Promotion Contract between JCA and PRIME was also terminated, resulting in
the complainants' dismissal. However, for purposes of proper inventory, accounting and turnover of products,
it agreed with JCA for a hold-over period of three months ending March 31, 2003.
Also, Adidas turned down the complainants' demand for regularization as they were employees of PRIME. It
claimed it was PRIME who exercised control over their work; at most, the supervision it exercised over the
complainants was only to provide them guidelines in aid of their marketing work. It added that neither could it
satisfy their money claims because they were legally dismissed when their contracts with PRIME expired.
For its part, JCA prayed for the dismissal of the complaint as far as it was concerned in view of what it claimed
- its valid job contract with PRIME, the complainants' employer. It averred that it was PRIME who exercised
the power to select, engage, and dismiss the complainants, and who assumed the obligation to pay their
wages. To bolster its position, JCA presented quitclaim and release papers executed by some employees in
favor ofPRIME.19ChanRoblesVirtualawlibrary
JCA added that whatever liability it had with the complainants was limited to satisfying their unpaid wages to
the extent of the work performed under its Promotion Contract with PRIME. However, PRIME'S payment of its
monetary obligations to the complainants extinguished its liability towards them.
As its co-respondents did, PRIME denied liability, contending that it hired the complainants as contractual
employees for its project with JCA to promote Adidas products. It maintained that their employment was
terminated when its contract with JCA expired and was not renewed. Thus, the petitioner and the other
complainants were not illegally dismissed and were not therefore entitled to reinstatement and back wages.
On the issue of its legal personality as an independent contractor, it submitted certificates of registration from
the DTI,20 DOLE,21 and SEC22 to establish that it had been in operation earlier than May 20, 2002.
The Rulings on Compulsory Arbitration
In a decision23 dated February 23, 2004, Labor Arbiter (LA) Elias H. Salinas dismissed the complaint for lack of
merit, holding that PRIME was the complainants' employer as it was PRIME who hired them to work under its
Promotions Contract with JCA. LA Salinas found the complainants' dismissal valid in view of the termination
and nonrenewal of the contract.
LA Salinas denied the complainants' money claims, finding that PRIME had shown that it paid their 13th month
pay and service incentive leave pay. However, for reasons of equity and humanitarian considerations, LA
Salinas awarded the petitioner and the complainants financial assistance of one-half month's salary for every
year of service.
The petitioner and 15 of the other complainants appealed. The 15 however moved to withdraw their appeal,
which the National Labor Relations Commission (NLRC) granted in its decision24 of January 23, 2008, leaving
only the petitioner to pursue the case. Eventually, NLRC denied the appeal. It also denied the petitioner's
motion for reconsideration, prompting her to seek recourse from the CA through a petition for certiorari. She
charged the NLRC with grave abuse of discretion in rejecting her appeal and motion for reconsideration; as it
was, she lamented, contrary to law and jurisprudence.
The CA Decision
Before the CA, the petitioner reiterated her position in compulsory arbitration that Adidas was her employer,
not JCA or PRIME, since the two entities were mere dummies/intermediaries or were labor-only contractors of
Adidas. She insisted that JCA and PRIME carried out - under their respective contracts - Adidas' merchandising
activities using Adidas' premises and equipment with PRIME'S purported employees working under the
supervision and control of Adidas' personnel.
The CA 10th Division denied the petition in its September 21, 201125 decision and affirmed the assailed NLRC
rulings as they were not rendered with grave abuse of discretion. It held that the rulings were supported by
evidence establishing PRIME to be a "legitimate job contractor" as it possessed substantial capital to finance
its promotions undertaking with JCA. The evidence, the CA explained, consisted of remittances to Philhealth,
SSS and Pag-ibig26 which showed that PRIME fulfilled its obligations toward its employees under the
government's welfare programs.
Applying the four-fold employer-employee relationship test,27 the CA found PRIME to be the complainants'
and the petitioner's employer as it was PRIME which (1) hired the complainants;28 (2) paid their wages;29 (3)
dismissed them upon the expiration of the contract for which they were hired; and (4) exercised control over
them with respect to the conduct of the work to be performed.30ChanRoblesVirtualawlibrary
Consequently, the CA brushed aside the random certificates of attendance in Adidas seminars31 of some of the
complainants to prove that Adidas was their employer, agreeing with NLRC finding that the "certificates only
establish the fact that complainants attended the seminars for product knowledge, service quality, and retail
service."32ChanRoblesVirtualawlibrary
The petitioner moved for reconsideration of the CA decision, to no avail, as the CA denied the motion in its
February 20, 2012 resolution.33ChanRoblesVirtualawlibrary
The Petition
The petitioner now asks this Court to reverse the CA rulings, contending that the appeals court seriously erred
and gravely abused its discretion when it held that she was an employee of PRIME, not of Adidas, and was
validly dismissed, contrary to law and applicable jurisprudence.
Before the Court, the petitioner reiterates the arguments she presented to the CA, particularly the following
factual narration:
1. She applied at Adidas in its former address at Estrata 200, Emerald Avenue, Ortigas Center City. After
the interviews made by Ms. Cornelia Indon (Head Concession, World of Sports Inc.) and Mr. Enrique
Victoria (Adidas Sales Manager), they ordered her to proceed to the office of PRIME and from there
she was given a letter of introduction ("intro letter") addressed to the outlet where she was assigned.
2. She was assigned to different Adidas outlets and she, together with her co-employees, were
supervised by Adidas managers and supervisors Cornelia Indon, Sonny Niebres (Managing Director)
and Philip Go (President). It was not PRIME who supervised them; neither was it JCA.
3. The sales in the outlets were deposited directly to the bank account of Adidas and not to JCA or PRIME
bank accounts.
4. The products being sold and the tools she used in the performance of her duty were owned by Adidas.
Adidas was also the one that paid the rents in the stores where it has concessions.
5. She continued to work in different Adidas outlets for more than seven years.
The petitioner submits that Adidas, JCA and PRIME failed to refute the above narration or to present any
evidence to the contrary. Citing Lakas sa Industriya ng Kapatirang Haligi ng Alyansa-Pinagbuklod ng
Manggawang Promo ng Burlingame v. Burlingame Corporation,34 she argues that as promo girl, her work is
directly related to Adidas' principal business or operations, which makes her a regular employee of the
company.
On the other hand, she points out, JCA and PRIME did not carry on an independent business or undertook the
performance of their service contracts according to their own manner and methods, free from the control and
supervision of the principal Adidas. The two entities, she insists, were mere labor-only contractors.
It is thus clear, the petitioner submits, that an employer-employee relationship existed between her and
Adidas. Accordingly, she prays that: (1) she be declared a regular employee of Adidas; (2) Adidas be ordered
(a) to reinstate her with full back wages or to pay her back wages and separation pay if reinstatement is no
longer feasible; (b) to grant her moral and exemplary damages, plus attorney's fees; and (3) JCA and PRIME be
declared jointly and solidarity liable with Adidas for all her other money claims.
The Case for the Respondents
In its Comment35 filed on June 7, 2012, Adidas asks for the dismissal of the petition, arguing principally that
the petitioner failed to present any cogent reason to reverse the CA factual conclusions upholding the labor
tribunals' ruling that the petitioner was an employee of PRIME and was not illegally dismissed.
To support its position, Adidas submits that the arguments relied upon by the petitioner are substantially
identical with those raised in her certiorari petition with the CA, which do not merit further consideration as
they had already been correctly passed upon by the appellate court.
Adidas bewails the petitioner's repeated reference to her regular employment with it and not with PRIME,
"adducing in evidence only her self-serving Salaysay which simply stated her baseless claims."36 On the other
hand, it was able to present proof, together with JCA and PRIME, showing that PRIME was the petitioner's
employer, it being, like JCA, an independent and distinct business entity.
The respondents JCA and PRIME opted not to comment on the petition, despite being required by the Court to
do so.37ChanRoblesVirtualawlibrary
The Court's Ruling
We find merit in the petition based on the evidence on record.
The evidence relied upon by LA Salinas, the NLRC, and the CA was insufficient to support their conclusion that
the petitioner was an employee of PRIME. On the contrary, the evidence points to Adidas as the petitioner's
and the complainants' real employer.
PRIME is a labor-only contractor; JCA an agent/intermediary of Adidas
One of the criteria the CA cited as a basis of its conclusion that PRIME was a legitimate job contractor was its
possession of "substantial capital to finance its undertakings,"38 yet it was silent on what these undertakings
were. It merely said: "We reached this conclusion based on records which showed PRIME has fulfilled its
obligations towards its employees as regards remittances to Philhealth, the SSS and Pag-ibig."39 The CA
conclusion, to our mind, fell short of establishing that PRIME satisfied the substantial-capital requirement for
legitimate job contractors under the law and the rules.
Article 106 of the Labor Code provides that "There is 'labor-only' contracting where the person supplying
workers to an employer does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by such person are
performing activities which are directly related to the principal business of the employer. In such cases, the
person or intermediary shall be considered merely an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by him. (emphasis supplied)
Sec. 5. Department Order No. 18-02, s. of 2002, implementing Articles 106 to 109 of the Labor Code, prohibits
labor-only contracting and defines it as "an arrangement where the contractor or sub-contractor merely
recruits, supplies or places workers to perform a job, work or service for a principal, and any of the following is
present: (i) The contractor or subcontractor does not have substantial capital or investment which relates to
the job, work or service to be performed and the workers recruited, supplied or placed by such contractor or
sub-contractor are performing activities which are directly related to the principal business of the employer; or
(ii) the contractor does not exercise the right to control over the performance of the work of the contractual
employee, x x x 'substantial capital or investment' refers to capital stocks and subscribed capitalization in the
case of corporations, tools, equipment, implements, machineries and work premises, actually and directly
used by the contractor or subcontractor in the performance or completion of the job, work or service
contracted out." (emphasis supplied)
Aside from PRIME'S remittances of employee contributions to Philhealth, SSS, and Pag-ibig and the payment
for the complainants' and the petitioner's wages, we find no indication, except mostly general statements
from Adidas, PRIME and JCA, that PRIME possessed substantial capital or investment to operate as a
legitimate job contractor or subcontractor.
According to Adidas, not only did PRIME have substantial capital or investment to run its own business
operations independent of its clients, it also has sufficient capability to control and supervise its employees.
Yet it offered no proof to substantiate its claim,40 other than its recognition of PRIME'S capability to fulfill its
obligations towards its employees.
The same thing is true with PRIME. It likewise offered no proof of how or in what manner its purported
substantial capital financed its "promotional and inter-marketing business"41 with JCA, except to say that in
the pursuit of its business operations, "it has complied with all the requirements of law anent the rights,
privileges and benefits of its employees."42ChanRoblesVirtualawlibrary
For its part, JCA relied principally on its promotional contract with PRIME to avoid liability, saying that the
terms of their service agreement demonstrate the earmarks of an employer under the four-fold employeremployee relationship test.43 It also presented no proof of how or in what manner PRIME carried out its
undertaking under the contract; although like Adidas, it acknowledged PRIME'S payment of the petitioners'
and the complainants' wages, and remittances to Philhealth, SSS, and Pag-ibig.
While the payment of wages and workers' benefits is one of the determinants of an employer-employee
relationship, we do not find it a reliable basis in this case. In fact, a closer look at the payslips44 of PRIME'S
supposed employees reveals that the complainants' salaries and benefits were under the account of Adidas,45
giving credence to their claim that their compensation was charged to Adidas. If indeed JCA and PRIME were
an independent contractor and a subcontractor, respectively, why would the name "ADIDAS" still appear on
the payslips of PRIME'S employees.
The answer lies in the fact that Adidas avoided being identified as the complainants' direct employer so that it
would not have to bear the consequences of the complainants' and the petitioner's regularization. Notably,
the records show46 that these complainants and the petitioner were engaged not only in 2002, but much
earlier; some were even hired in 1995, including the petitioner, who started selling Adidas products on
October 28, 1995. In fact, LA Salinas relied on the complainants' several years of service of selling Adidas
products in awarding financial assistance to them.
Under these circumstances, we have reason to believe that PRIME, the supposed JCA subcontractor, just
assumed the act of paying the complainants' wages and benefits on behalf of Adidas, indicating thereby that it
was a mere agent of Adidas or a labor-only contractor.47ChanRoblesVirtualawlibrary
In the light of the complete absence of proof that PRIME applied its "substantial capital or investment" in
performing the promotional job it contracted with JCA, we find credence in the petitioner's submission that
the products she was selling remained to be the property and under the control of Adidas; that it was Adidas
who owned the warehouse where they were stored; that leased the sales outlets from department stores;
and that provided regular training to her and to the other complainants. The record shows that this particular
claim by the petitioner had not been disputed by either Adidas or JCA.
Moreover, if in fact Adidas entered a distribution agreement with JCA, we wonder why the products the
petitioner and the other supposed "contractual employees" were selling were retained and remained to be
under the control of Adidas, and also, why the proceeds of the sales went into Adidas' bank account. The
answer is because JCA itself is not an independent contractor. It was merely an agent or intermediary of
Adidas, despite the distribution agreement between them which they did not even honor since, as required
under Section 2.2 of the agreement,48 the distributor shall purchase the Adidas products and sell them in its
own name and for its own account.
Although Adidas claims that by virtue of the agreement, JCA did not purchase but rather had in its custody and
safekeeping different Adidas products, for distribution to different sales outlets in the country,49 nowhere in
the record does it appear that the agreement had been amended to allow such arrangement. Neither has it
been shown how or in what manner the distribution was to be done. It was not also shown who managed and
provided the storage places and the sales outlets for the products.
Again, in the absence of evidence that JCA had the wherewithal to undertake its distribution agreement with
Adidas, except to enter into a promotions contract with PRIME, we find merit in the petitioner's contention
that Adidas and JCA, at a time, held office in the same address; and that Adidas provided the storage places
and the outlets for the distribution of its products, not PRIME or JCA. As the petitioner points out, formerly it
was WOSI and later JCA which acted as agent of Adidas. The record bears out her observations.
The petitioner performed activities necessary to the principal business of Adidas
Thus, the petitioner and the complainants (who withdrew from the case) were performing activities that were
necessary to market the products that Adidas itself manufactured. They sold these products for several years,
starting in June 1995 until December 9, 2000. While Adidas explains that it amended its articles of
incorporation in October 2002 to engage in retail, it cannot be denied that in 1995 it was already in the retail
business through its agents WOSI and JCA and labor-only contractor PRIME. Thus, the petitioner had become
an Adidas regular employee a long time before she was supposedly made a "contractual employee" of PRIME.
Adidas exercised control and supervision over the performance of the petitioner's work
In the absence of evidence showing how or in what manner PRIME carried out its promotion work under its
contract with JCA and how it provided the necessary requirements for such undertaking (such as the
maintenance of storage areas and engagement of sales outlets), we likewise find merit in the petitioner's
submission that it was Adidas who exercised control and supervision over the petitioner's work performance,
through its Sales Manager Sonny Niebres, its President Philip Go, and even Cornelia Indon, head of the WOSI
concession.
In sum, we hold that PRIME failed to satisfy the four-fold employer-employee relationship test,50 making it a
labor-only contractor under the law and the rules. Like JCA, it was merely an agent of Adidas, notwithstanding
the quitclaims of some of the complainants in its favor. Adidas, therefore, is petitioner's real employer who
shall be responsible to her in the same manner and extent as if she were directly employed by the
company.51 In this light, we find the petitioner to have been illegally dismissed, there being obviously no
valid cause to and absent due process in her dismissal.
Consequently, the petitioner is entitled under the law52 to reinstatement, without loss of seniority rights and
other privileges, and with full back wages. Should reinstatement no longer be feasible, she shall be entitled to
full back wages and separation pay at one month's pay for every year of service. However, her claim for other
monetary benefits is denied as she failed to refute LA Salinas' ruling that she had been paid her 13th month
pay and service incentive leave pay.
Further, we find the respondents to have shown bad faith in the petitioner's dismissal as it resulted from the
prohibited labor-only contracting arrangement imposed on her since October 28, 1995. Thus, the petitioner is
also entitled to damages and to attorney's fees as she was compelled to litigate to protect her rights. Under
the circumstances, we deem an award to the petitioner of P50,000.00 each in moral and exemplary damages,
plus ten percent attorney's fees reasonable, to be paid jointly and solidarity by Adidas, PRIME, and JCA.
WHEREFORE, premises considered, the petition is GRANTED. The assailed decision and resolution of the Court
of Appeals are SET ASIDE. The respondent Adidas Philippines, Inc., is ORDERED to reinstate the petitioner
Marites R. Cusap to her former position without loss of seniority rights and other privileges, and to pay her
back wages from her illegal dismissal on December 9, 2002, up to her actual reinstatement; and should
reinstatement no longer be feasible, to pay her back wages and separation pay at one month's pay for every
year of service.
Adidas Philippines, Inc., Promotion Resources & Inter-Marketing Exponents, Inc., and JC Athletes Inc., are
ORDERED to pay the petitioner, jointly and solidarity, moral damages of P50,000.00, exemplary damages of
P50,000.00 and 10% of all the sums due under this Decision as attorney's fees.
SO ORDERED.cralawlawlibrary
Carpio, (Chairperson), Mendoza, Perlas-Bernabe,* and Leonen, JJ., concur.chanrobleslaw
20. Arts. 106-109/DO 18-A, Nature of labor-only contractor
SECOND DIVISION
G.R. No. 177592
June 9, 2014
AVELINO S. ALILIN, TEODORO CALESA, CHARLIE HINDANG, EUTIQUIO GINDANG, ALLAN SUNGAHID,
MAXIMO LEE, JOSE G. MORA TO, REX GABILAN, AND EUGEMA L. LAURENTE, Petitioners,
vs.
PETRON CORPORATION, Respondent.
DECISION
DEL CASTILLO, J.:
A contractor is presumed to be a labor-only contractor, unless it proves that it has the substantial capital,
investment, tools and the like. However, where the principal is the one claiming that the contractor is a
legitimate contractor, the burden of proving the supposed status of the contractor rests on the principal.1
This Petition for Review on Certiorari2 assails the Decision3 dated May 10, 2006 of the Court of Appeals (CA)
in CA-G.R. SP No. 01291 which granted the Petition for Certiorari filed therewith, reversed and set aside the
February 18, 2005 Decision4 and August 24, 2005 Resolution5 of the National Labor Relations Commission
(NLRC) in NLRC Case No. V-000481-2003 and dismissed the Complaint for illegal dismissal filed by petitioners
Avelino Alilin (Alilin), Teodoro Calesa (Calesa), Charlie Hindang (Hindang), Eutiquio Gindang (Gindang), Allan
Sungahid (Sungahid), Maximo Lee (Lee), Jose G. Morato (Morato), Rex Gabilan (Gabilan) and Eugema L.
Laurente (Laurente) against respondent Petron Corporation (Petron). Also assailed in this Petition is the CA
Resolution6 dated March 30, 2007 which denied petitioners Motion for Reconsideration7 and Supplemental
Motion for Reconsideration.8
Factual Antecedents
Petron is a domestic corporation engaged in the oil business. It owns several bulk plants in the country for
receiving, storing and distributing its petroleum products.
In 1968, Romualdo D. Gindang Contractor, which was owned and operated by Romualdo D. Gindang
(Romualdo), started recruiting laborers for fielding to Petrons Mandaue Bulk Plant. When Romualdo died
in1989, his son Romeo D. Gindang (Romeo), through Romeo D. Gindang Services(RDG), took over the business
and continued to provide manpower services to Petron. Petitioners were among those recruited by Romualdo
D. Gindang Contractor and RDG to work in the premises of the said bulk plant, with the corresponding dates of
hiring and work duties, to wit:
Employees
Date of Hiring
Duties
Eutiquio Gindang
1968
utility/tanker receiver/barge loader/warehouseman/mixer
Eugema L. Laurente
June 1979
telephone operator/order taker
Teodoro Calesa
August 1, 1981
utility/tanker receiver/barge loader/sounder/gauger
Rex Gabilan
July 1, 1987
warehouseman/forklift driver/tanker receiver/barge loader
Charlie T. Hindang
September 18, 1990 utility/tanker receiver/barge loader/sounder/gauger
Allan P. Sungahid
September 18, 1990 filler/sealer/painter/tanker receiver/utility
Maximo S. Lee
September 18, 1990 gasul filler/painter/utility
Avelino S. Alilin
July 16, 1992
Jose Gerry M. Morato March 16, 1993
carpenter/driver
cylinder checker/tanker receiver/grass cutter/janitor/utility
On June 1, 2000, Petron and RDG entered into a Contract for Services9 for the period from June 1, 2000 to
May 31, 2002, whereby RDG undertook to provide Petron with janitorial, maintenance, tanker receiving,
packaging and other utility services in its Mandaue Bulk Plant. This contract was extended on July 31, 2002 and
further extended until September 30, 2002. Upon expiration thereof, no further renewal of the service
contract was done.
Alleging that they were barred fromcontinuing their services on October 16, 2002, petitioners Alilin, Calesa,
Hindang, Gindang, Sungahid, Lee, Morato and Gabilan filed a Complaint10 for illegal dismissal, underpayment
of wages, damages and attorneys fees against Petron and RDG on November 12, 2002. Petitioner Laurente
filed another Complaint11 for illegal dismissal, underpayment of wages, non-payment of overtime pay, holiday
pay, premium pay for holiday, rest day, 13th month pay, service incentive leave pay, allowances, separation
pay, retirement benefits, damages and attorneys fees against Petron and RDG. The said complaints were later
consolidated.
Petitioners did not deny that RDG hired them and paid their salaries. They, however, claimed that the latter is
a labor-only contractor, which merely acted as an agent of Petron, their true employer. They asseverated that
their jobs, which are directly related to Petrons business, entailed them to work inside the premises of Petron
using the required equipment and tools furnished by it and that they were subject to Petrons supervision.
Claiming to be regular employees, petitioners thus asserted that their dismissal allegedly in view of the
expiration of the service contract between Petron and RDG is illegal.
RDG corroborated petitioners claim that they are regular employees of Petron. It alleged that Petron directly
supervised their activities; they performed jobs necessary and desirable to Petrons business; Petron provided
petitioners with supplies, tools and equipment used in their jobs; and that petitioners workplace since the
start of their employment was at Petrons bulk plant in Mandaue City. RDG denied liability over petitioners
claim of illegal dismissal and further argued that Petron cannot capitalize on the service contract to escape
liability.
Petron, on the other hand, maintained that RDG is an independent contractor and the real employer of the
petitioners. It was RDG which hired and selected petitioners, paid their salaries and wages, and directly
supervised their work. Attesting to these were two former employees of RDG and Petrons Mandaue Terminal
Superintendent whose joint affidavit12 and affidavit,13 respectively, were submitted by Petron. Anent its
allegation that RDG is an independent contractor, Petron presented the following documents: (1) RDGs
Certificate of Registration issued by the Department of Labor and Employment (DOLE) on December 27,
2000;14 (2) RDGs Certificate of Registration of Business Name issued by the Department of Trade and
Industry (DTI) on August 18, 2000;15 (3) Contractors Pre-Qualification Statement;16 (4) Conflict of Interest
Statement signed by Romeo Gindang as manager of RDG;17 (5) RDGs Audited Financial Statements for the
years 199818 199919 and 2000;20 (6) RDGs Mayors Permit for the years 200021 and 2001;22 (7) RDGs
Certificate of Accreditation issued by DTI in October 1991;23 (8) performance bond24 and insurance policy25
posted to insure against liabilities; (9) Social Security System (SSS) Online Inquiry System Employee
Contributions and Employee Static Information;26 and, (10) Romeos affidavit27 stating that he had paid the
salaries of his employees assigned to Petron for the period of November 4, 2001 to December 31, 2001.
Petron argued that with the expiration of the service contract it entered with RDG, petitioners term of
employment has concomitantly ended. And not being the employer, Petron cannot be held liable for
petitioners claim of illegal dismissal.
In a Decision28 dated June 12, 2003,the Labor Arbiter ruled that petitioners are regular employees of Petron.
It found that their jobs were directly related to Petrons business operations; they worked under the
supervision of Petrons foreman and supervisor; and they were using Petrons tools and equipment in the
performance of their works. The Labor Arbiter also found that Petron merely utilized RDG in its attempt to
hide the existence of employee-employer relationship between it and petitioners and avoid liability under
labor laws. And there being no showing that petitioners dismissal was for just or authorized cause, the Labor
Arbiter declared them to have been illegally dismissed. Petron was thus held solidarily liable with Romeo for
the payment of petitioners separation pay (in lieu of reinstatement due to strained relations with Petron)
fixed at one month pay for every year of service and backwages computed on the basis of the last salary rate
at the time of dismissal. The dispositive portion of the Decision reads: WHEREFORE, premises considered,
judgment is hereby rendered ordering the respondents Petron Corporation and Romeo Gindang to pay the
complainants as follows:
1. Teodoro Calesa
P 136,890.00
2. Eutiquio Gindang
P 202,800.00
3. Charlie T. Gindang
P 91,260.00
4. Allan P. Sungahid
P 91,260.00
5. Jose Gerry Morato
P 76,050.00
6. Avelino A. Alilin
P 95,680.00
7. Rex S. Gabilan
P 106,470.00
8. Maximo S. Lee
P 91,260.00
9. Eugema Minao Laurente P 150,800.00

Total award
P1,042,470.00
The other claims are dismissed for lack of merit.

SO ORDERED.29
Proceedings before the National Labor Relations Commission
Petron continued to insist that there is no employer-employee relationship between it and petitioners. The
NLRC, however, was not convinced. In its Decision30 of February 18, 2005, the NLRC ruled that petitioners are
Petrons regular employees because they are performing job assignments which are germane to its main
business. Thus:
WHEREFORE, premises considered, the Decision of the Labor Arbiter is hereby affirmed. It is understood that
the grant of backwages shall be until finality of the Decision.
The appeal of respondent Petron Corporation is hereby DISMISSED for lack of merit.
SO ORDERED.31
The NLRC also denied Petrons Motion for Reconsideration in its Resolution32 of August 24, 2005.
Proceedings before the Court of Appeals
Petron filed a Petition for Certiorari with prayer for the issuance of a temporary restraining order or writ of
injunction before the CA. The said court resolved to grant the injunction.33 Hence, a Writ of Preliminary
Injunction34 to restrain the implementation of the February 18, 2005 Decision and August 24, 2005 Resolution
of the NLRC was issued on March 3, 2006.
In a Decision35 dated May 10, 2006, the CA found no employer-employee relationship between the parties.
According to it, the records of the case do not show that petitioners were directly hired, selected or employed
by Petron; that their wages and other wage related benefits were paid by the said company; and that Petron
controlled the manner by which they carried out their tasks. On the other hand, RDG was shown to be
responsible for paying petitioners wages. In fact, SSS records show that RDG is their employer and actually the
one remitting their contributions thereto. Also, two former employees of RDG who were likewise assigned in
the Mandaue Bulk Plant confirmed by way of a joint affidavit that it was Romeo and his brother Alejandre
Gindang who supervised their work, not Petrons foreman or supervisor. This was even corroborated by the
Terminal Superintendent of the Mandaue Bulk Plant.
The CA also found RDG to be an independent labor contractor with sufficient capitalization and investment as
shown by its financial statement for year-end 2000. In addition, the works for which RDG was contracted to
provide were menial which were neither directly related nor sensitive and critical to Petrons principal
business. The CA disposed of the case as follows:
WHEREFORE, the Petition is GRANTED. The February 18, 2005 Decision and the August 24, 2005 Resolution of
the Fourth Division of the National Labor Relations Commission in NLRC Case No. V-000481-2003, entitled
"Teodoro Calesa et al. vs. Petron Corporation and R.D. Gindang Services", having been rendered with grave
abuse of discretion amounting to excess of jurisdiction, are hereby REVERSED and SET ASIDE and a NEW ONE
is entered DISMISSING private respondents complaint against petitioner. It is so ordered.36
Petitioners filed a Motion for Reconsideration37 insisting that Petron illegally dismissed them; that RDG is a
labor-only contractor; and that they performed jobs which are sensitive to Petrons business operations. To
support these, they attached to their Supplemental Motion for Reconsideration38 Affidavits39 of former
employees of Petron attesting to the fact that their jobs were critical to Petrons business operations and that
they were carried out under the control of a Petron employee.
Petitioners motions were, however, denied by the CA in a Resolution40 dated March 30, 2007.
Hence, this Petition.
Issue
The primary issue to be resolved in this case is whether RDG is a legitimate job contractor. Upon such finding
hinges the determination of whether an employer-employee relationship exists between the parties as to
make Petron liable for petitioners dismissal.
Our Ruling
The Petition is impressed with merit. The conflicting findings of the Labor Arbiter and the NLRC on one hand,
and of the CA on the other, constrains the Court to review the factual issues involved in this case.
As a general rule, the Court does not review errors that raise factual questions.41 Nonetheless, while it is true
that the determination of whether an employer-employee relationship existed between the parties basically
involves a question of fact, the conflicting findings of the Labor Arbiter and the NLRC on one hand, and of the
CA on the other, constrains the Court to review and reevaluate such factual findings.42
Labor-only contracting, distinguished
from permissible job contracting.
The prevailing rule on labor-only contracting at the time Petron and RDG entered into the Contract for
Services in June 2000 is DOLE Department Order No. 10, series of 1997,43 the pertinent provision of which
reads:
Section 4. x x x
xxxx
(f) "Labor-only contracting" prohibited under this Rule is an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal and
the following elements are present:
(i) The contractor or subcontractor does not have substantial capital or investment to actually perform
the job, work or service under its own account and responsibility; and
(ii) 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.
xxxx
Section 6. Permissible contracting or subcontracting. - Subject to the conditions set forth in Section 3 (d) and
(e) and Section 5 hereof, the principal may engage the services of a contractor or subcontractor for the
performance of any of the following:
(a) Works or services temporarily or occasionally needed to meet abnormal increase in the demand of
products or services, provided that the normal production capacity or regular workforce of the
principal cannot reasonably cope with such demands;
(b) Works or services temporarily or occasionally needed by the principal for undertakings requiring
expert or highly technical personnel to improve the management or operations of an enterprise;
(c) Services temporarily needed for the introduction or promotion of new products, only for the
duration of the introductory or promotional period;
(d) Works or services not directly related or not integral to the main business or operation of the
principal, including casual work, janitorial, security, landscaping, and messengerial services, and work
not related to manufacturing processes in manufacturing establishments;
(e) Services involving the public display of manufacturers products which do not involve the act of
selling or issuance of receipts or invoices;
(f) Specialized works involving the use of some particular, unusual or peculiar skills, expertise, tools or
equipment the performance of which is beyond the competence of the regular workforce or
production capacity of the principal; and
(g) Unless a reliever system is in place among the regular workforce, substitute services for absent
regular employees, provided that the period of service shall be coextensive with the period of absence
and the same is made clear to the substitute employee at the time of engagement. The phrase "absent
regular employees" includes those who are serving suspensions or other disciplinary measures not
amounting to termination of employment meted out by the principal, but excludes those on strike
where all the formal requisites for the legality of the strike have been prima facie complied with based
on the records filed with the National Conciliation and Mediation Board.
"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."44 Labor-only contracting, on the other hand, is a prohibited act, defined as "supplying
workers to an employer who does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by such person are
performing activities which are directly related to the principal business of such employer."45 "[I]n
distinguishing between prohibited labor-only contracting and permissible job contracting, the totality of the
facts and the surrounding circumstances of the case shall be considered."46 Generally, the contractor is
presumed to be a labor-only contractor, unless such contractor overcomes the burden of proving that it has
the substantial capital, investment, tools and the like. However, where the principal is the one claiming that
the contractor is a legitimate contractor, as in the present case, said principal has the burden of proving that
supposed status.47 It is thus incumbent upon Petron, and not upon petitioners as Petron insists,48 to prove
that RDG is an independent contractor.
Petron failed to discharge the burden of
proving that RDG is a legitimate
contractor. Hence, the presumption that
RDG is a labor-only contractor stands.
Here, the audited financial statements and other financial documents of RDG for the years 1999 to 2001
establish that it does have sufficient working capital to meet the requirements of its service contract. In fact,
the financial evaluation conducted by Petron of RDGs financial statements for years 1998-2000 showed RDG
to have a maximum financial capability of Php4.807 Million as of December 1998,49 and Php1.611 Million as
of December 2000.50 Petron was able to establish RDGs sufficient capitalization when it entered into the
service contract in 2000. The Court stresses though that this determination of RDGs status as an independent
contractor is only with respect to its financial capability for the period covered by the financial and other
documents presented. In other words, the evidence adduced merely proves that RDG was financially qualified
as a legitimate contractor but only with respect to its last service contract with Petron in the year 2000.
As may be recalled, petitioners have rendered work for Petron for a long period of time even before the
service contract was executed in 2000. The respective dates on which petitioners claim to have started
working for Petron, as well as the fact that they have rendered continuous service to it until October 16, 2002,
when they were prevented from entering the premises of Petrons Mandaue Bulk Plant, were not at all
disputed by Petron. In fact, Petron even recognized that some of the petitioners were initially fielded by
Romualdo Gindang, the father of Romeo, through RDGs precursor, Romualdo D.Gindang Contractor, while
the others were provided by Romeo himself when he took over the business of his father in 1989.1wphi1
Hence, while Petron was able to establish that RDG was financially capable as a legitimate contractor at the
time of the execution of the service contract in 2000, it nevertheless failed to establish the financial capability
of RDG at the time when petitioners actually started to work for Petron in 1968, 1979, 1981, 1987, 1990,1992
and 1993.
Sections 8 and 9,Rule VIII, Book III51 of the implementing rules of the Labor Code, in force since 1976 and
prior to DOLE Department Order No. 10, series of 1997,52 provide that for job contracting to be permissible,
one of the conditions that has to be met is that the contractor must have substantial capital or investment.
Petron having failed to show that this condition was met by RDG, it can be concluded, on this score alone, that
RDG is a mere labor-only contractor. Otherwise stated, the presumption that RDG is a labor-only contractor
stands due to the failure of Petron to discharge the burden of proving the contrary.
The Court also finds, as will be discussed below, that the works performed by petitioners were directly related
to Petrons business, another factor which negates Petrons claim that RDG is an independent contractor.
Petrons power of control over
petitioners exists in this case.
"[A] finding that a contractor is a labor-only contractor is equivalent to declaring that there is an employeremployee relationship between the principal and the employees of the supposed contractor."53 In this case,
the employer employee relationship between Petron and petitioners becomes all the more apparent due to
the presence of the power of control on the part of the former over the latter.
It was held in Orozco v. The Fifth Division of the Hon. Court of Appeals54 that:
This Court has constantly adhered to the "four-fold test" to determine whether there exists an employeremployee relationship between the parties. The four elements of an employment relationship are: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
power to control the employees conduct.
Of these four elements, it is the power to control which is the most crucial and most determinative factor, so
important, in fact, that, the other elements may even be disregarded." (Emphasis supplied)
Hence, the facts that petitioners were hired by Romeo or his father and that their salaries were paid by them
do not detract from the conclusion that there exists an employer-employee relationship between the parties
due to Petrons power of control over the petitioners. One manifestation of the power of control is the power
to transfer employees from one work assignment to another.55 Here, Petron could order petitioners to do
work outside of their regular "maintenance/utility" job. Also, petitioners were required to report for work
everyday at the bulk plant, observe an 8:00 a.m. to 5:00 p.m. daily work schedule, and wear proper uniform
and safety helmets as prescribed by the safety and security measures being implemented within the bulk
plant. All these imply control. In an industry where safety is of paramount concern, control and supervision
over sensitive operations, such as those performed by the petitioners, are inevitable if not at all necessary.
Indeed, Petron deals with commodities that are highly volatile and flammable which, if mishandled or not
properly attended to, may cause serious injuries and damage to property and the environment. Naturally,
supervision by Petron is essential in every aspect of its product handling in order not to compromise the
integrity, quality and safety of the products that it distributes to the consuming public.
Petitioners already attained regular
status as employees of Petron.
Petitioners were given various work assignments such as tanker receiving, barge loading, sounding, gauging,
warehousing, mixing, painting, carpentry, driving, gasul filling and other utility works. Petron refers to these
work assignments as menial works which could be performed by any able-bodied individual. The Court finds,
however, that while the jobs performed by petitioners may be menial and mechanical, they are nevertheless
necessary and related to Petrons business operations. If not for these tasks, Petrons products will not reach
the consumers in their proper state. Indeed, petitioners roles were vital inasmuch as they involve the
preparation of the products that Petron will distribute to its consumers.
Furthermore, while it may be true that any able-bodied individual can perform the tasks assigned to
petitioners, the Court notes the undisputed fact that for many years, it was the same able-bodied individuals
(petitioners) who performed the tasks for Petron. The engagement of petitioners for the same works for a
long period of time is a strong indication that such works were indeed necessary to Petrons business. In view
of these, and considering further that petitioners length of service entitles them to become regular
employees under the Labor Code, petitioners are deemed by law to have already attained the status as
Petrons regular employees. As such, Petron could not terminate their services on the pretext that the service
contract it entered with RDG has already lapsed. For one, and as previously discussed, such regular status had
already attached to them even before the execution of the service contract in 2000. For another, the same
does not constitute a just or authorized cause for a valid dismissal of regular employees.
In sum, the Court finds that RDG is a labor-only contractor. As such, it is considered merely as an agent of Petron.
Consequently, the employer-employee relationship which the Court finds to exist in this case is between petitioners as
employees and Petron as their employer. Petron therefore, being the principal employer and RDG, being the labor-only
contractor, are solidarily liable for petitioners' illegal dismissal and monetary claims.56
WHEREFORE, the Petition is GRANTED. The May 10, 2006 Decision and March 30, 2007 Resolution of the Court of
Appeals in CA-G.R. SP No. 01291 are REVERSED and SET ASIDE. The February 18, 2005 Decision and August 24, 2005
Resolution of the National Labor Relations Commission in NLRC Case No. V-000481-2003 are hereby REINSTATED and
AFFIRMED.
SO ORDERED.

Associate Justice

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1.

Labor application of the doctrine of piercing the veil of corporate fiction

The Courts Ruling

2. Art. 4 (doubt in interpretation), Art. 282 (termination)

3. Art. 13(b), Illegal Recruitment

4. Art. 13(b), Illegal Recruitment

PEOPLE OF THE PHILIPPINES, Appellee,

The Court's Ruling

5. Art. 17, Jurisdiction (Intra-corporate dispute; corporate officer)

RAUL C. COSARE, Petitioner,

6. Art. 40/DO No. 75-06, Alien Employment Permit

March 12, 2014

DREAMLAND HOTEL RESORT and WESTLEY J. PRENTICE, Petitioners,

7. Control that is indicative of an employer-employee relationship

July 28, 2014

ROYALE HOMES MARKETING CORPORATION, Petitioner,

Dear Mr. Alcantara,

9. Retirement and overtime work

10. Art. 97(f), meals and lodging

OUR HAUS REALTY DEVELOPMENT CORPORATION, Petitioner,

Year and Place of Assignment

2007-2010- Quezon City

2008- Quezon City 2009- Antipolo

2007-2010- Quezon City

2008- Quezon City 2009- Antipolo

2010- Quezon City

2007-2010- Quezon City

on only ques ons of law

11. Art. 100, non-diminution rule

March 12, 2014

WESLEYAN UNIVERSITY-PHILIPPINES, Petitioner,

MARIANO C. DEL CASTILLO

12. Art. 100, no policy but with company practice

June 18, 2014

NETLINK COMPUTER INCORPORATED, Petitioner,

- 13th month pay for 1996 to 1998

plus US$7,588.30 - unpaid commissions

5. 10% attorneys fees of the total amount awarded.

13. Bonuses generally not part of wages

June 16, 2014

2. MMPI Total revenue at P30-P34 M P7,000 each by year-end

14. Art 106-109, Labor only contracting

Rock] but of [WM MFG].

15. Art 106, Labor only contractor

6. John Mark Aplicador

Section 7. Existence of an employer-employee relationship. - The contractor or subcontractor shall be

full payment of the price.

16. Art 106 Labor contracting

therefore DARBMUPCO is the ultimate beneficiary of the employment of the respondent-workers.90

17. Arts. 106-109, labor-only contracting

Proceedings before the National Labor Relations Commission

18. Arts. 106-109, legitimate job contracting

19. Arts. 106-109, labor-only contractor

20. Arts. 106-109/DO 18-A, Nature of labor-only contractor

utility/tanker receiver/barge loader/warehouseman/mixer

telephone operator/order taker

utility/tanker receiver/barge loader/sounder/gauger

warehouseman/forklift driver/tanker receiver/barge loader

September 18, 1990 utility/tanker receiver/barge loader/sounder/gauger

September 18, 1990 filler/sealer/painter/tanker receiver/utility

September 18, 1990 gasul filler/painter/utility

July 16, 1992

Jose Gerry M. Morato March 16, 1993