Topics:

Employer-Employee Relationship, Management Prerogative, History & Structure of the

Labor Code, Arts. 1-7 of the Labor Code

Cases:
Duncan vs Glaxo
GR 162994, Sep. 17, 2004

Uy vs Buenao, 484 SCRA 628
GR 159119, Mar. 14, 2006
Light Railway vs Venus, 485 SCRA 361
GR 163782, Mar. 24, 2006

Ebro vs NLRC, 261 SCRA 399

GR 110187

National Mines & Allied Workers' Union (NAMAWU), et. al. Vs. San Ildefonso College-RVM, et.
al. G.R. No. 125039. November 20, 1998
Insular Life vs NLRC 287 SCRA 476
GR 119930, Mar. 12, 1998

Lazaro vs SSS 435 SCRA 472
GR 138254, July 30, 2004
Domasig vs NLRC 261 SCRA 779

Phil. Global vs De Vera 459 SCRA 260

GR 157214, June 7, 2005

Mla Electric vs Quisumbing 302 SCRA 173
GR 127598, Jan 27, 1999
Coca cola vs NLRC 307 SCRA 131
GR 120466, May 17, 1999




















DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A. TECSON, petitioners, In January 1999, Tecsons superiors informed him that his marriage to Bettsy gave rise to a
vs. conflict of interest. Tecsons superiors reminded him that he and Bettsy should decide which
GLAXO WELLCOME PHILIPPINES, INC., Respondent. one of them would resign from their jobs, although they told him that they wanted to retain
him as much as possible because he was performing his job well.
R E S O L U T I O N
Tecson requested for time to comply with the company policy against entering into a
TINGA, J.: relationship with an employee of a competitor company. He explained that Astra, Bettsys
employer, was planning to merge with Zeneca, another drug company; and Bettsy was
planning to avail of the redundancy package to be offered by Astra. With Bettsys separation
Confronting the Court in this petition is a novel question, with constitutional overtones,
from her company, the potential conflict of interest would be eliminated. At the same time,
involving the validity of the policy of a pharmaceutical company prohibiting its employees
they would be able to avail of the attractive redundancy package from Astra.
from marrying employees of any competitor company.

1 In August 1999, Tecson again requested for more time resolve the problem. In September
This is a Petition for Review on Certiorari assailing the Decision dated May 19, 2003 and
2 1999, Tecson applied for a transfer in Glaxos milk division, thinking that since Astra did not
the Resolution dated March 26, 2004 of the Court of Appeals in CA-G.R. SP No. 62434.
have a milk division, the potential conflict of interest would be eliminated. His application
was denied in view of Glaxos "least-movement-possible" policy.
Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome Philippines,
Inc. (Glaxo) as medical representative on October 24, 1995, after Tecson had undergone
In November 1999, Glaxo transferred Tecson to the Butuan City-Surigao City-Agusan del Sur
training and orientation.
sales area. Tecson asked Glaxo to reconsider its decision, but his request was denied.

Thereafter, Tecson signed a contract of employment which stipulates, among others, that he
Tecson sought Glaxos reconsideration regarding his transfer and brought the matter to
agrees to study and abide by existing company rules; to disclose to management any existing
Glaxos Grievance Committee. Glaxo, however, remained firm in its decision and gave Tescon
or future relationship by consanguinity or affinity with co-employees or employees of
until February 7, 2000 to comply with the transfer order. Tecson defied the transfer order
competing drug companies and should management find that such relationship poses a
and continued acting as medical representative in the Camarines Sur-Camarines Norte sales
possible conflict of interest, to resign from the company.
area.

The Employee Code of Conduct of Glaxo similarly provides that an employee is expected to
During the pendency of the grievance proceedings, Tecson was paid his salary, but was not
inform management of any existing or future relationship by consanguinity or affinity with
issued samples of products which were competing with similar products manufactured by
co-employees or employees of competing drug companies. If management perceives a
Astra. He was also not included in product conferences regarding such products.
conflict of interest or a potential conflict between such relationship and the employees
employment with the company, the management and the employee will explore the
possibility of a "transfer to another department in a non-counterchecking position" or Because the parties failed to resolve the issue at the grievance machinery level, they
preparation for employment outside the company after six months. submitted the matter for voluntary arbitration. Glaxo offered Tecson a separation pay of
one-half () month pay for every year of service, or a total of 50,000.00 but he declined the
offer. On November 15, 2000, the National Conciliation and Mediation Board (NCMB)
Tecson was initially assigned to market Glaxos products in the Camarines Sur-Camarines
rendered its Decision declaring as valid Glaxos policy on relationships between its employees
Norte sales area.
and persons employed with competitor companies, and affirming Glaxos right to transfer
Tecson to another sales territory.
Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of Astra
3
Pharmaceuticals (Astra), a competitor of Glaxo. Bettsy was Astras Branch Coordinator in
Aggrieved, Tecson filed a Petition for Review with the Court of Appeals assailing the
Albay. She supervised the district managers and medical representatives of her company and
NCMB Decision.
prepared marketing strategies for Astra in that area.

On May 19, 2003, the Court of Appeals promulgated its Decision denying the Petition for
Even before they got married, Tecson received several reminders from his District Manager
Review on the ground that the NCMB did not err in rendering its Decision. The appellate
regarding the conflict of interest which his relationship with Bettsy might engender. Still, love
court held that Glaxos policy prohibiting its employees from having personal relationships
prevailed, and Tecson married Bettsy in September 1998. 4
with employees of competitor companies is a valid exercise of its management prerogatives.
Tecson filed a Motion for Reconsideration of the appellate courts Decision, but the motion Glaxo also points out that Tecson can no longer question the assailed company policy
5
was denied by the appellate court in its Resolution dated March 26, 2004. because when he signed his contract of employment, he was aware that such policy was
stipulated therein. In said contract, he also agreed to resign from respondent if the
Petitioners filed the instant petition, arguing therein that (i) the Court of Appeals erred in management finds that his relationship with an employee of a competitor company would be
14
affirming the NCMBs finding that the Glaxos policy prohibiting its employees from marrying detrimental to the interests of Glaxo.
an employee of a competitor company is valid; and (ii) the Court of Appeals also erred in not
finding that Tecson was constructively dismissed when he was transferred to a new sales Glaxo likewise insists that Tecsons reassignment to another sales area and his exclusion from
6
territory, and deprived of the opportunity to attend products seminars and training sessions. seminars regarding respondents new products did not amount to constructive dismissal.

Petitioners contend that Glaxos policy against employees marrying employees of competitor It claims that in view of Tecsons refusal to resign, he was relocated from the Camarines Sur-
companies violates the equal protection clause of the Constitution because it creates invalid Camarines Norte sales area to the Butuan City-Surigao City and Agusan del Sur sales area.
distinctions among employees on account only of marriage. They claim that the policy Glaxo asserts that in effecting the reassignment, it also considered the welfare of Tecsons
7
restricts the employees right to marry. family. Since Tecsons hometown was in Agusan del Sur and his wife traces her roots to
Butuan City, Glaxo assumed that his transfer from the Bicol region to the Butuan City sales
They also argue that Tecson was constructively dismissed as shown by the following area would be favorable to him and his family as he would be relocating to a familiar territory
15
circumstances: (1) he was transferred from the Camarines Sur-Camarines Norte sales area to and minimizing his travel expenses.
the Butuan-Surigao-Agusan sales area, (2) he suffered a diminution in pay, (3) he was
excluded from attending seminars and training sessions for medical representatives, and (4) In addition, Glaxo avers that Tecsons exclusion from the seminar concerning the new anti-
he was prohibited from promoting respondents products which were competing with Astras asthma drug was due to the fact that said product was in direct competition with a drug
8
products. which was soon to be sold by Astra, and hence, would pose a potential conflict of interest for
him. Lastly, the delay in Tecsons receipt of his sales paraphernalia was due to the mix-up
In its Comment on the petition, Glaxo argues that the company policy prohibiting its created by his refusal to transfer to the Butuan City sales area (his paraphernalia was
employees from having a relationship with and/or marrying an employee of a competitor delivered to his new sales area instead of Naga City because the supplier thought he already
16
company is a valid exercise of its management prerogatives and does not violate the equal transferred to Butuan).
protection clause; and that Tecsons reassignment from the Camarines Norte-Camarines Sur
sales area to the Butuan City-Surigao City and Agusan del Sur sales area does not amount to The Court is tasked to resolve the following issues: (1) Whether the Court of Appeals erred in
9
constructive dismissal. ruling that Glaxos policy against its employees marrying employees from competitor
companies is valid, and in not holding that said policy violates the equal protection clause of
Glaxo insists that as a company engaged in the promotion and sale of pharmaceutical the Constitution; (2) Whether Tecson was constructively dismissed.
products, it has a genuine interest in ensuring that its employees avoid any activity,
relationship or interest that may conflict with their responsibilities to the company. Thus, it The Court finds no merit in the petition.
expects its employees to avoid having personal or family interests in any competitor
company which may influence their actions and decisions and consequently deprive Glaxo of The stipulation in Tecsons contract of employment with Glaxo being questioned by
legitimate profits. The policy is also aimed at preventing a competitor company from gaining petitioners provides:
10
access to its secrets, procedures and policies.

It likewise asserts that the policy does not prohibit marriage per se but only proscribes
existing or future relationships with employees of competitor companies, and is therefore
10. You agree to disclose to management any existing or future relationship you
not violative of the equal protection clause. It maintains that considering the nature of its
11 may have, either by consanguinity or affinity with co-employees or employees of
business, the prohibition is based on valid grounds.
competing drug companies. Should it pose a possible conflict of interest in
management discretion, you agree to resign voluntarily from the Company as a
According to Glaxo, Tecsons marriage to Bettsy, an employee of Astra, posed a real and matter of Company policy.
potential conflict of interest. Astras products were in direct competition with 67% of the
products sold by Glaxo. Hence, Glaxos enforcement of the foregoing policy in Tecsons case 17
12
was a valid exercise of its management prerogatives. In any case, Tecson was given several
months to remedy the situation, and was even encouraged not to resign but to ask his wife
13
to resign form Astra instead.
The same contract also stipulates that Tescon agrees to abide by the existing company rules The prohibition against personal or marital relationships with employees of competitor
18
of Glaxo, and to study and become acquainted with such policies. In this regard, the companies upon Glaxos employees is reasonable under the circumstances because
Employee Handbook of Glaxo expressly informs its employees of its rules regarding conflict relationships of that nature might compromise the interests of the company. In laying down
of interest: the assailed company policy, Glaxo only aims to protect its interests against the possibility
that a competitor company will gain access to its secrets and procedures.
1. Conflict of Interest
That Glaxo possesses the right to protect its economic interests cannot be denied. No less
Employees should avoid any activity, investment relationship, or interest that may than the Constitution recognizes the right of enterprises to adopt and enforce such a policy
run counter to the responsibilities which they owe Glaxo Wellcome. to protect its right to reasonable returns on investments and to expansion and
20
growth. Indeed, while our laws endeavor to give life to the constitutional policy on social
justice and the protection of labor, it does not mean that every labor dispute will be decided
Specifically, this means that employees are expected:
in favor of the workers. The law also recognizes that management has rights which are also
21
entitled to respect and enforcement in the interest of fair play.
a. To avoid having personal or family interest, financial or otherwise, in
any competitor supplier or other businesses which may consciously or 22
As held in a Georgia, U.S.A case, it is a legitimate business practice to guard business
unconsciously influence their actions or decisions and thus deprive Glaxo
confidentiality and protect a competitive position by even-handedly disqualifying from jobs
Wellcome of legitimate profit.
male and female applicants or employees who are married to a competitor. Consequently,
the court ruled than an employer that discharged an employee who was married to an
b. To refrain from using their position in Glaxo Wellcome or knowledge of 23
employee of an active competitor did not violate Title VII of the Civil Rights Act of 1964. The
Company plans to advance their outside personal interests, that of their Court pointed out that the policy was applied to men and women equally, and noted that the
relatives, friends and other businesses. employers business was highly competitive and that gaining inside information would
constitute a competitive advantage.
c. To avoid outside employment or other interests for income which
would impair their effective job performance. The challenged company policy does not violate the equal protection clause of the
Constitution as petitioners erroneously suggest. It is a settled principle that the commands of
d. To consult with Management on such activities or relationships that the equal protection clause are addressed only to the state or those acting under color of its
24
may lead to conflict of interest. authority. Corollarily, it has been held in a long array of U.S. Supreme Court decisions that
the equal protection clause erects no shield against merely private conduct, however,
25 29
1.1. Employee Relationships discriminatory or wrongful. The only exception occurs when the state in any of its
manifestations or actions has been found to have become entwined or involved in the
27
wrongful private conduct. Obviously, however, the exception is not present in this case.
Employees with existing or future relationships either by consanguinity or affinity Significantly, the company actually enforced the policy after repeated requests to the
with co-employees of competing drug companies are expected to disclose such employee to comply with the policy. Indeed, the application of the policy was made in an
relationship to the Management. If management perceives a conflict or potential impartial and even-handed manner, with due regard for the lot of the employee.
conflict of interest, every effort shall be made, together by management and the
employee, to arrive at a solution within six (6) months, either by transfer to
another department in a non-counter checking position, or by career preparation In any event, from the wordings of the contractual provision and the policy in its employee
toward outside employment after Glaxo Wellcome. Employees must be prepared handbook, it is clear that Glaxo does not impose an absolute prohibition against relationships
19
for possible resignation within six (6) months, if no other solution is feasible. between its employees and those of competitor companies. Its employees are free to
cultivate relationships with and marry persons of their own choosing. What the company
merely seeks to avoid is a conflict of interest between the employee and the company that
No reversible error can be ascribed to the Court of Appeals when it ruled that Glaxos policy may arise out of such relationships. As succinctly explained by the appellate court, thus:
prohibiting an employee from having a relationship with an employee of a competitor
company is a valid exercise of management prerogative.
The policy being questioned is not a policy against marriage. An employee of the
company remains free to marry anyone of his or her choosing. The policy is not
Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and aimed at restricting a personal prerogative that belongs only to the individual.
other confidential programs and information from competitors, especially so that it and Astra However, an employees personal decision does not detract the employer from
are rival companies in the highly competitive pharmaceutical industry.
 exercising management prerogatives to ensure maximum profit and business By the very nature of his employment, a drug salesman or medical representative is
28
success. . . expected to travel. He should anticipate reassignment according to the demands of
their business. It would be a poor drug corporation which cannot even assign its
The Court of Appeals also correctly noted that the assailed company policy which forms part representatives or detail men to new markets calling for opening or expansion or
of respondents Employee Code of Conduct and of its contracts with its employees, such as to areas where the need for pushing its products is great. More so if such
33
that signed by Tescon, was made known to him prior to his employment. Tecson, therefore, reassignments are part of the employment contract.
was aware of that restriction when he signed his employment contract and when he entered
into a relationship with Bettsy. Since Tecson knowingly and voluntarily entered into a As noted earlier, the challenged policy has been implemented by Glaxo impartially and
contract of employment with Glaxo, the stipulations therein have the force of law between disinterestedly for a long period of time. In the case at bar, the record shows that Glaxo gave
29
them and, thus, should be complied with in good faith." He is therefore estopped from Tecson several chances to eliminate the conflict of interest brought about by his relationship
questioning said policy. with Bettsy. When their relationship was still in its initial stage, Tecsons supervisors at Glaxo
constantly reminded him about its effects on his employment with the company and on the
The Court finds no merit in petitioners contention that Tescon was constructively dismissed companys interests. After Tecson married Bettsy, Glaxo gave him time to resolve the conflict
when he was transferred from the Camarines Norte-Camarines Sur sales area to the Butuan by either resigning from the company or asking his wife to resign from Astra. Glaxo even
City-Surigao City-Agusan del Sur sales area, and when he was excluded from attending the expressed its desire to retain Tecson in its employ because of his satisfactory performance
companys seminar on new products which were directly competing with similar products and suggested that he ask Bettsy to resign from her company instead. Glaxo likewise acceded
manufactured by Astra. Constructive dismissal is defined as a quitting, an involuntary to his repeated requests for more time to resolve the conflict of interest. When the problem
resignation resorted to when continued employment becomes impossible, unreasonable, or could not be resolved after several years of waiting, Glaxo was constrained to reassign
unlikely; when there is a demotion in rank or diminution in pay; or when a clear Tecson to a sales area different from that handled by his wife for Astra. Notably, the Court
discrimination, insensibility or disdain by an employer becomes unbearable to the did not terminate Tecson from employment but only reassigned him to another area where
30
employee. None of these conditions are present in the instant case. The record does not his home province, Agusan del Sur, was included. In effecting Tecsons transfer, Glaxo even
show that Tescon was demoted or unduly discriminated upon by reason of such transfer. As considered the welfare of Tecsons family. Clearly, the foregoing dispels any suspicion of
34
found by the appellate court, Glaxo properly exercised its management prerogative in unfairness and bad faith on the part of Glaxo.
reassigning Tecson to the Butuan City sales area:
WHEREFORE, the Petition is DENIED for lack of merit. Costs against petitioners.
. . . In this case, petitioners transfer to another place of assignment was merely in
keeping with the policy of the company in avoidance of conflict of interest, and SO ORDERED.
thus validNote that [Tecsons] wife holds a sensitive supervisory position as
Branch Coordinator in her employer-company which requires her to work in close Puno, Austria-Martinez, Callejo, Sr., and Chico-Nazario*, JJ., concur.
coordination with District Managers and Medical Representatives. Her duties
include monitoring sales of Astra products, conducting sales drives, establishing

and furthering relationship with customers, collection, monitoring and managing
Astras inventoryshe therefore takes an active participation in the market war
characterized as it is by stiff competition among pharmaceutical companies.
Moreover, and this is significant, petitioners sales territory covers Camarines Sur
and Camarines Norte while his wife is supervising a branch of her employer in
Albay. The proximity of their areas of responsibility, all in the same Bicol Region,
renders the conflict of interest not only possible, but actual, as learning by one
spouse of the others market strategies in the region would be inevitable.
[Managements] appreciation of a conflict of interest is therefore not merely
illusory and wanting in factual basis
31

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In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission, which involved
a complaint filed by a medical representative against his employer drug company for illegal
dismissal for allegedly terminating his employment when he refused to accept his
reassignment to a new area, the Court upheld the right of the drug company to transfer or
reassign its employee in accordance with its operational demands and requirements. The
ruling of the Court therein, quoted hereunder, also finds application in the instant case:
ATTY. ANDREA UY and FELIX YUSAY, Petitioners, An amicable settlement of the case failed. On September 28, 1999, respondent Bueno filed a
vs. Manifestation for the early resolution of her complaint alleging that Countrywide Rural Bank
AMALIA A. BUENO, Respondent. was already under receivership with the Philippine Deposit Insurance Commission (PDIC) and
she wanted the favorable decision submitted to the PDIC for consideration. On November
D E C I S I O N 18, 1999, with only the position paper of respondent Bueno and without awaiting the reply
of the Postmaster of Bacolod City as to whether Countrywide Rural Bank and its co-
5
respondents received the order to submit their respective position papers, the Labor Arbiter
PUNO, J.:
rendered a decision in favor of respondent Bueno. He found the verbal and summary
termination of the services of respondent Bueno to be without valid cause and in violation of
The finding of illegal dismissal against petitioner Atty. Andrea Uy made by the Court of Article 277(b) of the Labor Code. Also, the Labor Arbiter held that as a regular employee of
Appeals is challenged in this petition for review on certiorari under Rule 45 of the Rules of Countrywide Rural Bank, respondent Bueno was protected by the security of tenure
Court. provision or Article 279 of the Labor Code. He awarded separation pay in lieu of
reinstatement and back wages. In addition, he granted moral and exemplary damages for the
The facts are as follows: bad faith and/or malice that attended the manner of termination of respondent Bueno.
Finally, for being forced to litigate, the Labor Arbiter awarded attorneys fees of 10% in
6
Countrywide Rural Bank of La Carlota, Inc. (Countrywide Rural Bank) in Marbel, Koronadal accordance with Article 111 of the Labor Code. He disposed, viz:
City, South Cotabato, is a private banking corporation duly licensed and organized to engage
in rural banking operations that offers a wide-range of deposit, financial and lending services WHEREFORE, premises considered, respondent Countrywide Rural Bank of La Carlota, Inc.
through its network of branches nationwide. In April 1998, Countrywide Rural Bank and individual respondent Atty. Andrea Uy are solidarily liable [to] complainant Amalia
experienced liquidity problems. A group of its depositors, alarmed at the imminent prospect Bueno to pay the sum of PESOS EIGHT HUNDRED ELEVEN THOUSAND TWO HUNDRED
of not being able to recover their deposits and other investments, organized themselves into (P811,200.00) ONLY representing her monetary awards and attorneys fees.
a committee of depositors. The committee elected petitioner Felix Yusay as Chairman,
petitioner Andrea Uy as Secretary, Manu Gidwani as Vice-Chairman and Pompeyo Querubin All other claims are dismissed for lack of merit.
1
as Treasurer.
On May 24, 2000 petitioner Uy filed her Notice of Appeal and Memorandum of Appeal with
On January 18, 1999, the depositors of Countrywide Rural Bank (not the committee of the Fifth Division of the NLRC in Cagayan de Oro City. She assailed the decision of the Labor
depositors led by petitioner Yusay) met at the Marbel Branch. Marlon V. Juesna, the Vice- Arbiter on the grounds of denial of due process and serious errors in the findings of fact.
Chairman of the Board of Countrywide Rural Bank, presided over the meeting. In the course Finding that the appealed decision was received on February 10, 2000 but only appealed on
of the meeting, respondent Amalia A. Bueno stood up and announced that her services as May 18, 2000, the NLRC in its resolution dated July 31, 2000, dismissed the appeal for being
Branch Manager of Marbel Branch were terminated by petitioner Uy. Petitioner Uy, who was 7
filed out of time. It ruled that the decision had become final and executory.
in the meeting, confirmed respondent Buenos declaration. She did not elaborate on the
basis of the termination explaining that it involved internal problems that could not be 8
2 On August 28, 2000, petitioners Uy and Yusay filed a Motion for Reconsideration alleging
discussed with the depositors.
that they never held office where a copy of the decision was served and that they only
received their copy of the decision on May 9, 2000. On December 21, 2001, the NLRC granted
The day after or on January 19, 1999, respondent Bueno filed a case for illegal dismissal and their motion and absolved petitioner Uy from liability as it found petitioners Uy and Yusay to
prayed for reinstatement with payment of full back wages, damages and attorneys fees be mere depositors of Countrywide Rural Bank on the basis of the evidence submitted by
against Countrywide Rural Bank, Miguel Mendoza, Primo Esleyer, Marlon Juesna, and respondent Bueno herself, i.e., the minutes of the meeting of the depositors of Countrywide
petitioners Uy and Felix Yusay before the Labor Arbiter of the Sub-Regional Arbitration 9
Rural Banks Marbel Branch held on January 18, 1999. It disposed, viz:
Branch No. XI of the National Labor Relations Commission (NLRC) in General Santos City.
Petitioners Uy and Yusay were sued in their capacity as Interim President and Corporate
WHEREFORE, the above resolution is Reversed and Set Aside. In lieu thereof, a new judgment
Secretary, and Interim Board Chairman, respectively. Miguel Mendoza, Primo Esleyer and
is rendered modifying the appealed decision of the Labor Arbiter, dated November 18, 1999,
Marlon Juesna were sued as Chairman, Vice-Chairman and Executive Vice-President,
3 in that the portion thereof directing individual Atty. Andrea Uy to personally pay complainant
respectively, of the Board of Countrywide Rural Bank. Respondent Bueno alleged that she
Amalia Bueno her monetary award is deleted for lack of factual and legal basis.
was employed by Countrywide Rural Bank on November 12, 1996 until her termination on
4
January 18, 1999.
On February 8, 2002, respondent Bueno filed a Motion for Reconsideration on grounds of
serious errors in the findings of fact and in the application of law. On March 22, 2002, the
NLRC denied the motion for lack of merit as the issues raised had been "extensively treated
 10
and discussed in the resolution sought to be reconsidered." Thus, respondent Bueno We immediately note that the Countrywide Rural Bank failed to appeal its liability over the
appealed to the Court of Appeals (CA) imputing on the part of the NLRC grave abuse of illegal dismissal of the respondent before the NLRC, the CA and this Court. Such failure to
15
discretion amounting to lack of or in excess of jurisdiction for (1) admitting the appeal and perfect an appeal has the effect of rendering the judgment final and executory as to it.
exculpating petitioner Uy from monetary liability, and (2) declaring that petitioner Uy was
not an officer of Countrywide Rural Bank. We now come to the liability of petitioner Uy. The findings of the Labor Arbiter, the NLRC and
the CA as to the liability of petitioner Uy are conflicting, thus, the application of the exception
The CA resolved both issues in favor of respondent Bueno. Anent the first, it held that to the rule that only legal issues may be raised in a petition for review on certiorari under
16
petitioners Uy and Yusay filed their appeal out of time emphasizing the rules on perfection of Rule 45 of the Rules of Court.
appeals, presumption of regularity in the performance of official duties and substantiation by
competent evidence on allegation of non-receipt of pleadings. It observed that Countrywide First, the Labor Arbiter found her solidarily liable with Countrywide Rural Bank, thus:
Rural Bank and its co-respondents received the initial processes relative to the case. Anent
the second, the CA found the individual respondents in the complaint that included
x x x Record reveals that she was verbally and summarily terminated on January 18, 1999 in
petitioners Uy and Yusay to be officers of Countrywide Rural Bank. Its bases were (a) the
an unconventional manner by individual respondent ATTY. ANDREA UY (Interim President
categorical admission in their appeal before the NLRC that they were officers of Countrywide
11 and Corporate Secretary) by announcing and confirming said termination during the
Rural Bank, (b) the October 10, 2000 resolution of the NLRC in another case, which "already
depositors meeting held at the Marbel Branch office, without valid cause and in violation of
settled the issue" of their being officers of Countrywide Rural Bank, (c) the termination of
the procedures outlined in Art. 277(b) of the Labor Code in terminating the services of an
respondent Bueno by petitioner Uy, which the latter did not dispute, and (d) the issuance of
employee.
a Memorandum of Termination in an attempt to legitimize the verbal dismissal of
12
respondent Bueno. Thus, the CA disposed on January 24, 2003, viz:
x x x
WHEREFORE, premises considered, the instant petition is hereby GRANTED. The assailed
resolutions of public respondent Commission dated December 21, 2001 and March 22, 2002, Corporate directors and officers are solidarily liable with the corporation for the termination
are ordered SET ASIDE and NULLIFIED. The resolution of public respondent Commission of employment of employees only if the termination is done with malice or in bad faith
13
dated July 31, 2000 is AFFIRMED in its entirety. (Progress Homes vs. NLRC, 269 SCRA 274). The dismissal of complainant was attended with
malice or bad faith when she was summarily terminated and announced during the
14 depositors meeting by individual respondent Atty. Andrea Uy (Interim President and
Aggrieved, petitioners Uy and Yusay filed their February 12, 2003 Motion for 17
Corporate Secretary).
Reconsideration, which the CA denied on May 26, 2003. Hence, this petition for review
before the Court, which presents the following issues:
Second,the NLRC, after reconsidering its earlier pronouncement that petitioner Uy had lost
her appeal for filing it beyond the mandatory reglementary period, held her not liable with
WHETHER OR NOT THE RESPONDENT HONORABLE COURT OF APPEALS ERRED IN ITS
Countrywide Rural Bank, thus:
FINDINGS THAT THE NATIONAL LABOR RELATIONS COMMISSION HAS GRAVELY ABUSED ITS
DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN ISSUING THE
RESOLUTIONS DATED 21 DECEMBER 2001 AND 22 MARCH 2002. From her own evidence, the minutes of depositors meeting held on January 18, 1999 at the
banks Marbel Branch (Annex "C", complainants position paper), it was shown clearly that
individual respondents were mere depositors of respondent bank. They were only elected as
WHETHER OR NOT THE COURT OF APPEALS ERRED IN ITS FINDING THAT SUMMONS WAS
officers of the Interi[m] Board of Directors created by the group or association of depositors
PROPERLY SERVED ON THE PETITIONERS.
with the sole task to rehabilitate respondent bank. The excerpts from the minutes of meeting
are quoted hereunder, to wit:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN AFFIRMING THAT THE PETITIONERS
ARE OFFICERS OF THE BANK.
x x x

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT THE
Mr. Michael Viray asked Atty. Uy who are you by the way? What group do you belong to?
DISMISSAL OF PRIVATE RESPONDENT WAS DONE IN BAD FAITH.
You did not introduce yourself to us.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN ITS FINDING THAT
Atty. Uy answered that she is also a depositor like them and they formed an association of
PETITIONERS ARE SOLIDARILY LIABLE WITH THE COUNTRYWIDE RURAL BANK OF LA CARLOTA
depositors in Bacolod and signified their intention to buy the bank thru equity swap as
INC.
required by BSP. They formed the Interim Board and volunteered to rehabilitate the bank. [Mrs.] Bueno interrupted. "Thats precisely why I questioned if the Interim Board is
18 21
The Interi[m] Board elected her as the President. sanctioned by BSP or SEC to avoid confusion on who to deal with."

Finally, the CA reversed and found against petitioner Uy, where her liability was viewed, Clearly, even respondent Bueno was uncertain as to the exact role of the Interim Board that
thus: elected petitioner Uy as Interim President and Corporate Secretary. She herself questioned
the personality of the Interim Board in the management of Countrywide Rural Bank even
x x x It is crystal clear based on the facts and records of the case that individual private while she alleged that petitioner Uy as its Interim President and Corporate Secretary caused
respondents were officers of co-private respondent bank. In fact, they themselves have her dismissal. More significantly, there is no evidence that the committee of depositors that
categorically admitted in their appeal before the public respondent Commission that they elected petitioner Uy as Interim President and Corporate Secretary was recognized by the
were corporate officers of the co-respondent bank. Bangko Sentral ng Pilipinas, and hence had the legal authority to act for the bank.

Significantly, the resolution made by the public respondent Commission in its decision in the Lacking this evidence, the act of petitioner Uy in dismissing respondent cannot be deemed an
case titled "Arlene Villanueva vs. Countrywide Rural Bank of La Carlota (Marbel Branch) act as an officer of the bank. Consequently, it cannot be held that there existed an employer-
and/or Atty. Andrea Uy (Corp. Sec.) and Felix Yusay (Board Chairman)" docketed as NLRC CA employee relationship between petitioner Uy and respondent Bueno when the former
No. M-005740-2000 (RAB 11-01-50043-99) dated October 10, 2000, has already settled the allegedly dismissed the latter. This requirement of employer-employer relationship is
issue that private respondent Uy was indeed then the Corporate Secretary of respondent jurisdictional for the provisions of the Labor Code, specifically Book VI thereof, on Post-
bank, and that respondent Uy has indicated her executive office address to the same address Employment, to apply. Since the employer-employee relationship between petitioner Uy and
where the summons was served to her in the illegal dismissal case filed against her by the respondent Bueno was not established, the labor arbiter never acquired jurisdiction over
petitioner. petitioner Uy. Consequently, whether petitioner Uy was properly served with summons is
immaterial. Likewise, that she terminated the services of respondent Bueno in bad faith and
with malice is of no moment. Her liability, if any, should be determined in another forum.
The abovementioned admission made by the private respondents was further bolstered by
the fact of private respondent Uy terminating the services of petitioner as an employee of
co-respondent bank which fact of termination was not disputed by private respondent Uy.
19 IN VIEW WHEREOF, the petition is GRANTED. The Court of Appeals Decision dated January
24, 2003 and Resolution dated May 26, 2003 in CA-G.R. SP No. 70672, which found petitioner
20 Atty. Andrea Uy solidarily liable with Countrywide Rural Bank of Carlota, Inc. in Marbel,
Whether petitioner Uy should be held solidarily liable with Countrywide Rural Bank in the
Koronadal City, South Cotabato, are REVERSED. No costs.
illegal dismissal of respondent Bueno, depends on the jurisdiction of the Labor Arbiter over
the case at bar.
SO ORDERED.
The records show that petitioner Uy was a mere depositor of the bank who was elected
Interim President and Corporate Secretary by a committee of depositors to protect their REYNATO S. PUNO
interests given the bad state of Countrywide Rural Banks affairs. In his findings, the Labor Associate Justice
Arbiter mentioned the meeting of the depositors on January 18, 1999 but he failed to
account for the exact personality of petitioner Uy whose statement relative to her role in the
affairs of Countrywide Rural Bank was related in the minutes of the same meeting. It was
only through the NLRC that petitioner Uys role was established, i.e., that she was one of the
depositors of Countrywide Rural Bank who formed themselves into a group or association
indicating their intention to help rehabilitate Countrywide Rural Bank. This part of the
minutes of the meeting is revealing:

Mr. Viray commented that they were not informed of this Interim Board. Atty. Uy glance[d]
at ex-Manager Bueno to which Mrs. Bueno announced that the Branch did not [receive] any
written Memorandum as to the composition/members of this Interim Board.


Mrs. Viray requested Atty. Uy and Mr. Juesna to name the members of this Interim Board.

Mr. Juesna enumerated the names of Mr. Felix Yusay as the Chairman, Atty. Andrea Uy as the
President and Corporate Secretary, etc.
LIGHT RAIL TRANSIT AUTHORITY, Petitioner, 1. Effective on the COMMENCEMENT DATE, METRO shall accept and take over
vs. from the AUTHORITY [LRTA] the management, maintenance and operation of the
PERFECTO H. VENUS, JR., BIENVENIDO P. SANTOS, JR., RAFAEL C. ROY, NANCY C. RAMOS, commissioned and tested portion of the [Light Rail Transit] System x x x [par. 2.02];
SALVADOR A. ALFON, NOEL R. SANTOS, MANUEL A. FERRER, SALVADOR G. ALINAS,
RAMON D. LOFRANCO, AMADOR H.POLICARPIO, REYNALDO B. GENER, and BIENVENIDO G. 2. The AUTHORITY [LRTA] shall pay METRO the MANAGEMENT FEE as follows x x x
ARPILLEDA, Respondents. [par. 5.01];

x-----------------------------x 3. In rendering these services, METRO shall apply its best skills and judgment, in
attaining the objectives of the [Light Rail Transit] System in accordance with
G.R. No. 163881 March 24, 2006 accepted professional standards. It shall exercise the required care, diligence and
efficiency in the discharge of its duties and responsibilities and shall work for the
METRO TRANSIT ORGANIZATION, INC., Petitioner, best interest of the [Light Rail Transit] System and the AUTHORITY [LRTA] [par.
vs. 2.03];
COURT OF APPEALS, PERFECTO H. VENUS, JR., BIENVENIDO P. SANTOS, JR., RAFAEL C. ROY,
NANCY C. RAMOS, SALVADOR A. ALFON, NOEL R. SANTOS, MANUEL A. FERRER, SALVADOR 4. METRO shall be free to employ such employees and officers as it shall deem
G. ALINAS, RAMON D. LOFRANCO, AMADOR H. POLICARPIO, and REYNALDO B. necessary in order to carry out the requirements of [the] Agreement. Such
GENER, Respondents. employees and officers shall be the employees of METRO and not of the
AUTHORITY [LRTA]. METRO shall prepare a compensation schedule and the
D E C I S I O N corresponding salaries and fringe benefits of [its] personnel in consultation with
the AUTHORITY [LRTA] [par. 3.05];
PUNO, J.:
5. METRO shall likewise hold the AUTHORITY [LRTA] free and harmless from any
and all fines, penalties, losses and liabilities and litigation expenses incurred or
Before us are the consolidated petitions of Light Rail Transit Authority (LRTA) and Metro
suffered on account of and by reason of death, injury, loss or damage to
Transit Organization, Inc. (METRO), seeking the reversal of the Decision of the Court of
passengers and third persons, including the employees and representatives of the
Appeals directing them to reinstate private respondent workers to their former positions
AUTHORITY [LRTA], except where such death, injury, loss or damage is attributable
without loss of seniority and other rights and privileges, and ordering them to jointly and
to a defect or deficiency in the design of the system or its equipment [par. 3.06].
severally pay the latter their full back wages, benefits, and moral damages. The LRTA and
METRO were also ordered to jointly and severally pay attorneys fees equivalent to ten
percent (10%) of the total money judgment. Pursuant to the above Agreement, petitioner METRO hired its own employees, including
herein private respondents. Petitioner METRO thereafter entered into a collective bargaining
agreement with Pinag-isang Lakas ng Manggagawa sa METRO, Inc. National Federation of
Petitioner LRTA is a government-owned and controlled corporation created by Executive
Labor, otherwise known as PIGLAS-METRO, INC. NFL KMU (Union), the certified exclusive
Order No. 603, Series of 1980, as amended, to construct and maintain a light rail transit
collective bargaining representative of the rank-and-file employees of petitioner METRO.
system and provide the commuting public with an efficient, economical, dependable and
safe transportation. Petitioner METRO, formerly Meralco Transit Organization, Inc., was a
qualified transportation corporation duly organized in accordance with the provisions of the Meanwhile, on June 9, 1989, petitioners LRTA and METRO executed a Deed of Sale where
2
Corporation Code, registered with the Securities and Exchange Commission, and existing petitioner LRTA purchased the shares of stocks in petitioner METRO. However, petitioners
under Philippine laws. LRTA and METRO continued with their distinct and separate juridical personalities. Hence,
when the above ten (10)-year Agreement expired on June 8, 1994, they renewed the same,
initially on a yearly basis, and subsequently on a monthly basis.
It appears that petitioner LRTA constructed a light rail transit system from Monumento in
Kalookan City to Baclaran in Paraaque, Metro Manila. To provide the commuting public with
an efficient and dependable light rail transit system, petitioner LRTA, after a bidding process, On July 25, 2000, the Union filed a Notice of Strike with the National Conciliation and
entered into a ten (10)-year Agreement for the Management and Operation of the Metro Mediation Board National Capital Region against petitioner METRO on account of a
Manila Light Rail Transit System from June 8, 1984 until June 8, 1994 with petitioner deadlock in the collective bargaining negotiation. On the same day, the Union struck. The
1
METRO. The Agreement provided, among others, that power supply switches in the different light rail transit substations were turned off. The
members of the Union picketed the various substations. They completely paralyzed the
operations of the entire light rail transit system. As the strike adversely affected the mobility
of the commuting public, then Secretary of Labor Bienvenido E. Laguesma issued on that
 3
same day an assumption of jurisdiction order directing all the striking employees "to return
1. Perfecto H. Venus, Jr. P247,724.36
to work immediately upon receipt of this Order and for the Company to accept them back
4
under the same terms and conditions of employment prevailing prior to the strike."
2. Bienvenido P. Santos, Jr. 247,724.36
5
In their memorandum, Department of Labor and Employment Sheriffs Feliciano R. Orihuela, 3. Rafael C. Roy 247,724.36
Jr., and Romeo P. Lemi reported to Sec. Laguesma that they tried to personally serve the
Order of assumption of jurisdiction to the Union through its officials and members on July 26,
4. Nancy [C.] Ramos 254,282.62
2000, but the latter refused to receive the same. The sheriffs thus posted the Order in the
different stations/terminals of the light rail transit system. Further, the Order of assumption
6 5. Salvador A. Alfon 257,764.62
of jurisdiction was published on the July 27, 2000 issues of the Philippine Daily Inquirer and
7
the Philippine Star.
6. Noel R. Santos 221,897.58

Despite the issuance, posting, and publication of the assumption of jurisdiction and return to 7. Manuel A. Ferrer 250,534.78
work order, the Union officers and members, including herein private respondent workers,
failed to return to work. Thus, effective July 27, 2000, private respondents, Perfecto Venus, 8. Salvador G. [Alinas] 253,454.88
Jr., Bienvenido P. Santos, Jr., Rafael C. Roy, Nancy C. Ramos, Salvador A. Alfon, Noel R.
Santos, Manuel A. Ferrer, Salvador G. Alinas, Ramon D. Lofranco, Amador H. Policarpio,
9. Ramon D. Lofranco 253,642.18
Reynaldo B. Gener, and Bienvenido G. Arpilleda, were considered dismissed from
employment.
10. Amador H. Policarpio 256,609.22

In the meantime, on July 31, 2000, the Agreement for the Management and Operation of the 11. Reynaldo B. Gener 255,094.56
Metro Manila Light Rail Transit System between petitioners LRTA and METRO expired. The
Board of Directors of petitioner LRTA decided not to renew the contract with petitioner TOTAL P2,746,453.52
METRO and directed the LRTA management instead to immediately take over the
management and operation of the light rail transit system to avert the mass transportation
crisis. 3. Ordering respondents Metro Transit Organization, Inc. and Light Rail Transit
Authority to jointly and severally pay each of the complainants the amount
On October 10, 2000, private respondents Venus, Jr., Santos, Jr., and Roy filed a complaint of P50,000.00 as moral damages.
for illegal dismissal before the National Labor Relations Commission (NLRC) and impleaded
both petitioners LRTA and METRO. Private respondents Ramos, Alfon, Santos, Ferrer, Alinas, 4. Ordering respondents Metro Transit Organization, Inc. and Light Rail Transit
Lofranco, Policarpio, Gener, and Arpilleda follwed suit on December 1, 2000. Authority to jointly and severally pay the complainants attorneys fees equivalent
to ten percent (10%) of the total money judgment.
On October 1, 2001, Labor Arbiter Luis D. Flores rendered a consolidated judgment in favor
8
of the private respondent workers SO ORDERED.

WHEREFORE, judgment is hereby rendered in favor of the complainants and against the The complaint filed by Bienvenido G. Arpilleda, although initially consolidated with the main
respondents, as follows: case, was eventually dropped for his failure to appear and submit any document and position
9
paper.
1. Declaring that the complainants were illegally dismissed from employment and
ordering their reinstatement to their former positions without loss of seniority and On May 29, 2002, on appeal, the NLRC found that the striking workers failed to heed the
other rights and privileges. return to work order and reversed and set aside the decision of the labor arbiter. The suit
against LRTA was dismissed since "LRTA is a government-owned and controlled corporation
10
2. Ordering respondents Metro Transit Organization, Inc. and Light Rail Transit created by virtue of Executive Order No. 603 with an original charter" and "it ha[d] no
11
Authority to jointly and severally pay the complainants their other benefits and full participation whatsoever with the termination of complainants employment." In fine, the
backwages, which as of June 30, 2001 are as follows: cases against the LRTA and METRO were dismissed, respectively, for lack of jurisdiction and
for lack of merit.
On December 3, 2002, the NLRC denied the workers Motion for Reconsideration "[t]here Employment, since petitioner LRTA is a government-owned and controlled corporation with
being no showing that the Commission committed, (and that) the Motion for an original charter, Executive Order No. 603, Series of 1980, as amended.
Reconsideration was based on, palpable or patent errors, and the fact that (the) said motion
is not under oath." In contrast, petitioner METRO is covered by the Labor Code despite its later acquisition by
13
petitioner LRTA. In Lumanta v. National Labor Relations Commission, this Court ruled that
On a petition for certiorari however, the Court of Appeals reversed the NLRC and reinstated labor law claims against government-owned and controlled corporations without original
the Decision rendered by the Labor Arbiter. Public respondent appellate court declared the charter fall within the jurisdiction of the Department of Labor and Employment and not the
workers dismissal as illegal, pierced the veil of separate corporate personality and held the Civil Service Commission. Petitioner METRO was originally organized under the Corporation
LRTA and METRO as jointly liable for back wages. Code, and only became a government-owned and controlled corporation after it was
acquired by petitioner LRTA. Even then, petitioner METRO has no original charter, hence, it is
Hence, these twin petitions for review on certiorari of the decision of public respondent the Department of Labor and Employment, and not the Civil Service Commission, which has
appellate court filed by LRTA and METRO which this Court eventually consolidated. jurisdiction over disputes arising from the employment of its workers. Consequently, the
terms and conditions of such employment are governed by the Labor Code and not by the
Civil Service Rules and Regulations.
In the main, petitioner LRTA argues that it has no employer-employee relationship with
private respondent workers as they were hired by petitioner METRO alone pursuant to its
ten (10)-year Agreement for the Management and Operation of the Metro Manila Light Rail We therefore hold that the employees of petitioner METRO cannot be considered as
Transit System with petitioner METRO. Private respondent workers recognized that their employees of petitioner LRTA. The employees hired by METRO are covered by the Labor
employer was not petitioner LRTA when their certified exclusive collective bargaining Code and are under the jurisdiction of the Department of Labor and Employment, whereas
representative, the Pinag-isang Lakas ng Manggagawa sa METRO, Inc. National Federation the employees of petitioner LRTA, a government-owned and controlled corporation with
of Labor, otherwise known as PIGLAS-METRO, INC. NFL KMU, entered into a collective original charter, are covered by civil service rules. Herein private respondent workers cannot
bargaining agreement with petitioner METRO. Piercing the corporate veil of METRO was have the best of two worlds, e.g., be considered government employees of petitioner LRTA,
unwarranted, as there was no competent and convincing evidence of any wrongful, yet allowed to strike as private employees under our labor laws. Department of Justice
fraudulent or unlawful act on the part of METRO, and, more so, on the part of LRTA. Opinion No. 108, Series of 1999, issued by then Secretary of Justice Serafin R. Cuevas on
whether or not employees of petitioner METRO could go on strike is persuasive
Petitioner LRTA further contends that it is a government-owned and controlled corporation
with an original charter, Executive Order No. 603, Series of 1980, as amended, and thus We believe that METRO employees are not covered by the prohibition against strikes
under the exclusive jurisdiction only of the Civil Service Commission, not the NLRC. applicable to employees embraced in the Civil Service. It is not disputed, but in fact
conceded, that METRO employees are not covered by the Civil Service. This being so, METRO
employees are not covered by the Civil Service law, rules and regulations but are covered by
Private respondent workers, however, submit that petitioner METRO was not only fully-
the Labor Code and, therefore, the rights and prerogatives granted to private employees
owned by petitioner LRTA, but all aspects of its operations and administration were also
thereunder, including the right to strike, are available to them.
strictly controlled, conducted and directed by petitioner LRTA. And since petitioner METRO is
a mere adjunct, business conduit, and alter ego of petitioner LRTA, their respective corporate
veils must be pierced to satisfy the money claims of the illegally dismissed private Moreover, as noted by Secretary Benjamin E. Diokno, of the Department of Budget and
respondent employees. Management, in his letter dated February 22, 1999, the employees of METRO are not
entitled to the government amelioration assistance authorized by the President pursuant to
Administrative Order No. 37 for government employees, because the employees of METRO
We agree with petitioner LRTA. Section 2 (1), Article IX B, 1987 Constitution, expressly
are not government employees since Metro, Inc. "could not be considered as GOCC as
provides that "[t]he civil service embraces all branches, subdivisions, instrumentalities, and 14
defined under Section 3 (b) of E.O. 518 x x x x"
agencies of the Government, including government-owned or controlled corporations with
original charters." Corporations with original charters are those which have been created by
special law and not through the general corporation law. Thus, in Philippine National Oil Indeed, there was never an intention to consider the employees of petitioner METRO as
Company Energy Development Corporation v. Hon. Leogrado, we held that "under the government employees of petitioner LRTA as well neither from the beginning, nor until the
present state of the law, the test in determining whether a government-owned or controlled end. Otherwise, they could have been easily converted from being employees in the private
corporation is subject to the Civil Service Law is the manner of its creation such that sector and absorbed as government employees covered by the civil service when petitioner
government corporations created by special charter are subject to its provisions while those LRTA acquired petitioner METRO in 1989. The stubborn fact is that they remained private
12
incorporated under the general Corporation Law are not within its coverage." There should employees with rights and prerogatives granted to them under the Labor Code, including the
be no dispute then that employment in petitioner LRTA should be governed only by civil right to strike, which they exercised and from which the instant dispute arose.
service rules, and not the Labor Code and beyond the reach of the Department of Labor and
We likewise hold that it is inappropriate to pierce the corporate veil of petitioner METRO. 3. The aforesaid control and breach of duty must proximately cause the injury or
In Del Rosario v. National Labor Relations Commission, we ruled that "[u]nder the law a unjust loss complained of.
corporation is bestowed juridical personality, separate and distinct from its stockholders. But
when the juridical personality of the corporation is used to defeat public convenience, justify The absence of any one of these elements prevents piercing the corporate veil. In applying
wrong, protect fraud or defend crime, the corporation shall be considered as a mere the instrumentality or alter ego doctrine, the courts are concerned with reality and not
association of persons, and its responsible officers and/or stockholders shall be held form, with how the corporation operated and the individual defendants relationship to that
individually liable. For the same reasons, a corporation shall be liable for the obligations of a operation."
stockholder, or a corporation and its successor-in-interest shall be considered as one and the
liability of the former shall attach to the latter. But for the separate juridical personality of a
Here, the records do not show that control was used to commit a fraud or wrong. In fact, it
corporation to be disregarded, the wrongdoing must be clearly and convincingly established.
15 appears that piercing the corporate veil for the purpose of delivery of public service, would
It cannot be presumed." In Del Rosario, we also held that the "substantial identity of the
16 lead to a confusing situation since the outcome would be that Metro will be treated as a
incorporators of the two corporations does not necessarily imply fraud."
mere alter ego of LRTA, not having a separate corporate personality from LRTA, when dealing
with the issue of strike, and a separate juridical entity not covered by the Civil Service when it
In the instant case, petitioner METRO, formerly Meralco Transit Organization, Inc., was comes to other matters. Under the Constitution, a government corporation is either one with
originally owned by the Manila Electric Company and registered with the Securities and original charter or one without original charter, but never both.
18

Exchange Commission more than a decade before the labor dispute. It then entered into a
ten-year agreement with petitioner LRTA in 1984. And, even if petitioner LRTA eventually
In sum, petitioner LRTA cannot be held liable to the employees of petitioner METRO.
purchased METRO in 1989, both parties maintained their separate and distinct juridical
personality and allowed the agreement to proceed. In 1990, this Court, in Light Rail Transit
Authority v. Commission on Audit, even upheld the validity of the said With regard the issue of illegal dismissal, petitioner METRO maintains that private
17
agreement. Consequently, the agreement was extended beyond its ten-year period. In respondent workers were not illegally dismissed but should be deemed to have abandoned
1995, METROs separate juridical identity was again recognized when it entered into a their jobs after defying the assumption of jurisdiction and return-to-work order issued by the
collective bargaining agreement with the workers union. All these years, METROs distinct Labor Secretary. Private respondent workers, on the other hand, submit that they could not
corporate personality continued quiescently, separate and apart from the juridical immediately return to work as the light rail transit system had ceased its operations.
personality of petitioner LRTA.
We find for the private respondent workers. In Batangas Laguna Tayabas Bus Co. v. National
19
The labor dispute only arose in 2000, after a deadlock occurred during the collective Labor Relations Commission, we said that the five-day period for the strikers to obey the
bargaining between petitioner METRO and the workers union. This alone is not a Order of the Secretary of Justice and return to work was not sufficient as "some of them may
justification to pierce the corporate veil of petitioner METRO and make petitioner LRTA liable have left Metro Manila and did not have enough time to return during the period given by
20 21
to private respondent workers. There are no badges of fraud or any wrongdoing to pierce the petitioner, which was only five days." In Batangas Laguna Tayabas Bus Co., we further held
corporate veil of petitioner METRO.

On this point, the Department of Justice Opinion No. 108, Series of 1999, issued by then The contention of the petitioner that the private respondents abandoned their position is
Secretary of Justice Serafin R. Cuevas is once again apropos: also not acceptable. An employee who forthwith takes steps to protest his lay-off cannot by
any logic be said to have abandoned his work.
Anent the issue of piercing the corporate veil, it was held in Concept Builders, Inc. v.
NLRC (G.R. No. 108734, May 29, 1996, 257 SCRA 149, 159) that the test in determining the For abandonment to constitute a valid cause for termination of employment, there must be a
applicability of the doctrine of piercing the veil of corporate fiction is as follows: deliberate, unjustified refusal of the employee to resume his employment. This refusal must
be clearly established. As we stressed in a recent case, mere absence is not sufficient; it must
be accompanied by overt acts unerringly pointing to the fact that the employee simply does
"1. Control, not mere majority or complete stock control, but complete
not want to work anymore.
domination, not only of finances but of policy and business practice in respect to
the transaction attacked so that the corporate entity as to this transaction had at
the time no separate mind, will or existence of its own; In the instant case, private respondent workers could not have defied the return-to-work
order of the Secretary of Labor simply because they were dismissed immediately, even
before they could obey the said order. The records show that the assumption of jurisdiction
2. Such control must have been used by the defendant to commit fraud or wrong,
and return-to-work order was issued by Secretary of Labor Bienvenido E. Laguesma on July
to perpetuate the violation of a statutory or other positive legal duty, or dishonest
25, 2000. The said order was served and posted by the sheriffs of the Department of Labor
and unjust act in contravention of plaintiffs legal rights; and
and Employment the following day, on July 26, 2000. Further, the said order of assumption of
jurisdiction was duly published on July 27, 2000, in the Philippine Daily Inquirer and
the Philippine Star. On the same day also, on July 27, 2000, private respondent workers were
dismissed. Neither could they be considered as having abandoned their work. If petitioner
METRO did not dismiss the strikers right away, and instead accepted them back to work, the
management agreement between petitioners LRTA and METRO could still have been
extended and the workers would still have had work to return to.

IN VIEW WHEREOF, the Decision of public respondent Court of Appeals is AFFIRMED insofar
as it holds Metro Transit Organization, Inc. liable for the illegal dismissal of private
respondents and orders it to pay them their benefits and full back wages and moral damages.
Further, Metro Transit Organization, Inc. is ordered to pay attorneys fees equivalent to ten
percent (10%) of the total money judgment. The petition of the Light Rail Transit Authority is
GRANTED, and the complaint filed against it for illegal dismissal is DISMISSED for lack of
merit.


SO ORDERED.


REYNATO S. PUNO
Associate Justice




























JOSE G. EBRO III, petitioner, d. For just and authorized causes expressly provided for or authorized by
vs. law,
NATIONAL LABOR RELATIONS COMMISSION, INTERNATIONAL CATHOLIC MIGRATION
COMMISSION, JON DARRAH, ALEX DY-REYES, CARRIE WILSON, and MARIVIC e. For reasons of inadequate or deficient professional performance based
SOLIVEN, respondents. on relevant guidelines and procedures relating to the position,

f. In cases where, as a member of the PRPC community, ICMC is directed

to take action.
MENDOZA, J.:
If either party wishes to terminate employment, a notice of two (2)
This is a petition for certiorari to set aside the order dated October 13, 1992 and the weeks should be given in writing to the party.
1
resolution dated March 3, 1993 of the National Labor Relations Commission (NLRC).
After six months, ICMC notified petitioner that effective December 21, 1985, the latter's
The antecedent facts are as follows: services were terminated for his failure to meet the requirements of "1. classroom
performance . . . up to the standards set in the Guide for Instruction; 2. regular attendance in
Private respondent International Catholic Migration Commission (ICMC) is a non-profit the mandated teacher training, and in the schedule team meetings, one-on-one conferences
agency engaged in international humanitarian and voluntary work. It is duly registered with with the supervisor, etc.; and 3. compliance with ICMC and PRPC policies and procedures."
the United National Economic and Social Council (ECOSOC) and enjoys Consultative Status,
Category II. It was one of the agencies accredited by the Philippine Government to operate On February 4, 1986, petitioner filed a complaint for illegal dismissal, unfair labor practice,
the refugee processing center at Sabang, Morong, Bataan. underpayment of wages, accrued leave pay, 14th month pay, damages, attorney's fees., and
expenses of litigation. The complaint was filed against private respondents ICMC and its
On June 24, 1985, private respondent ICMC employed petitioner Jose G. Ebro III to teach Project Director Jon Darrah, Personnel Officer Alex Dy-Reyes, Program Officer of the Cultural
"English as a Second Language and Cultural Orientation Training Program" at the refugee Orientation Program Carrie Wilson, and Supervisor of the Cultural Orientation Program
processing center. The employment contract provided in pertinent part: Marivic Soliven. Petitioner alleged that there was no objective evaluation of his performance
to warrant his dismissal and that he should have been considered a regular employee from
the start because ICMC failed to acquaint him with the standards under which he must
Salary: Your monthly salary for the first 6 months probationary period is
qualify as such. He prayed for reinstatement with backwages; P3,155.00 for probationary and
P3,155.00 inclusive of cost of living allowance. Upon being made regular
P3,445.00 for regular salary adjustments; value of lodging or dormitory privileges; cost of
after successful completion of the six (6) months probationary period
insurance coverage for group life, medical, death, dismemberment and disability benefits;
your monthly salary will be adjusted to P3,445.00 inclusive of cost of
moral, and exemplary, and nominal damages plus interest on the above claims with
living allowance
attorney's fees.

xxx xxx xxx

Answering the complaint, ICMC claimed that petitioner failed to quality for regular
employment because he showed no interest in improving his professional performance both
Termination of Employment: Employment may be terminated by ICMC in in and out of the classroom after he had been periodically evaluated (observation summary
any of the following situations: from August 20 to October 2, 1985 and evaluation summary of December 14, 1985); that
petitioner was paid his salary up to December 31, 1985, two weeks pay in lieu of notice, and
a A cessation or reduction in program operations, by Department of State 14th month pay pro-rata; and that his accrued leave balance already been converted to cash.
order,
After the parties had formally offered their evidence, private respondents submitted their
b. Unsuccessful completion of probationary period, at any time during memorandum on July 31, 1989 in which, among other things, they invoked ICMC's diplomatic
that period, immunity on the basis of the Memorandum of Agreement signed on July 15, 1988 between
the Philippines government and ICMC.
c For due cause, in cases of violation of provisions detailed in ICMC
Personnel Policies and administrative regulations, The Labor Arbiter held that petitioner's legal immunity under the Memorandum could not be
given retroactive effect since "[that would] deprive complainant's property right without due
process and impair the obligation of contract of employment." In addition, he expressed g) Upon the same consideration, whether private respondents may be
doubt about petitioner's legal immunity on the ground that it was provided for by agreement considered estopped from claiming immunity.
and not through an act of Congress. Accordingly, the Labor Arbiter ordered ICMC to reinstate
petitioner as regular teacher without loss of seniority rights and to pay him one year The basic issue in this case is whether the Memorandum of Agreement executed on July 15,
backwages, other benefits, and ten percent attorney's fees for a total sum of P70,944.85. 1988 ICMC immunity from suit. The Court holds it did. Consequently, both the Labor Arbiter
and the NLRC had no jurisdiction over the case.
Both parties appealed to the NLRC. On August 13, 1990, petitioner moved to dismiss private
respondent's appeal because of the latter's failure to post a cash/surety bond. In its order of First. Petitioner's contention that the Memorandum of Agreement is not an act of Congress
October 13, 1992, however, the NLRC ordered the case dismissed on the ground that, under which is needed to "repeal or supersede" the provision of the Labor Code on the jurisdiction
the Memorandum of Agreement between the Philippine government and ICMC, the latter of the NLRC and of the Labor Arbiter is untenable. The grant of immunity to ICMC is in virtue
was immune from suit. of the Convention on the Privileges and Immunities of Specialized Agencies of the United
Nations, adopted by the UN General Assembly on November 21, 1947, and concurred in by
Petitioner moved for reconsideration, arguing among other things, that the Memorandum of the Philippine Senate on May 17, 1949. This Convention has the force and effect of law,
Agreement could not be given retroactive effect and that in any case ICMC had waived its considering that under the Constitution, the Philippines adopts the generally accepted
3
immunity by consenting to be sued. principles of international law as part of the law of the land. The Memorandum of
Agreement in question merely carries out the Philippine government's obligation under the
4
However, petitioner's motion was denied by the NLRC in its resolution dated March 4, Convention. In International Catholic Migration Commission v. Calleja, this Court explained
2
1993. Hence this petitioner presenting the following issues: the grant of immunity to ICMC in this wise:

a) Whether private respondents have perfected their appeal and whether The grant of immunity from local jurisdiction to ICMC . . . is clearly
public respondent may, on appeal, entertain or review private necessitated by their international character and respective purposes.
respondents' claim of immunity; The objective is to avoid the danger of partiality and interference by the
host country in their internal workings. The exercise of jurisdiction by the
Department of Labor in these instances would defeat the very purpose of
b) Whether a mere Memorandum of Agreement entered into by the
immunity, which is to shield the affairs of international organizations, in
Secretary of Foreign Affairs with respondent International Catholic
accordance with international practice, from political pressure or control
Migration Commission, which is not a law, can divest the Labor Arbiter
by the host country to the prejudice of member State of the organization,
and the National Labor Relations Commission of their jurisdiction over
and to ensure the unhampered performance of their functions.
the subject matter and over the persons of respondents in the pending
case;
Second. Petitioner argues that in any case ICMC's immunity can not apply because this case
was filed below before the signing of the Memorandum on July 15, 1988. Petitioner cites in
c) Whether the Memorandum of Agreement may be given retroactive
support the statement of this Court in the aforesaid case of International Catholic Migration
effect; 5 6
Commission v. Calleja, distinguishing that case from an earlier case also involving ICMC,
wherein the NLRC, as well as the Court, took cognizance of a complaint against ICMC for
d) Whether the dismissal of the based on the claim of immunity will payment of salary for the unexpired portion of a six-month probationary. The Court held:
7

deprive petitioner of his property without due process of law;

[N]ot only did the facts of said controversy [ICMC v. NLRC, 169 SCRA 606
e) Whether the dismissal of the case based on the claim of immunity will (1989)] occur between 1983-1985, or before the grant to ICMC on 15 July
result in the impairment of the obligations assumed by respondent 1988 of the status of a specialized agency with corresponding immunities,
International Catholic Migration Commission under its contract of but also because ICMC in that case did not invoke its immunity and,
employment with petitioner; therefore, may be deemed to have waived it, assuming that during that
period (1983-1985) it was tacitly recognized as enjoying such immunity.
f) Assuming for the sake of argument that the Memorandum of
Agreement has validly conferred immunity on private respondent's Here, according to petitioner, his employment and subsequent dismissal by ICMC
whether they may be considered as having waived such immunity; took place in 1985, prior to the execution of the Memorandum of Agreement on
July 15, 1988 and, therefore, like in the 1989 ICMC case, the Memorandum should
not be made to apply to him.
This Court did not really reject ICMC's invocation of immunity for causes of action accruing of the Government to ensure the observance of Philippine laws, rules and
prior to the execution of the Memorandum. It left open the possibility that ICMC may have regulations, facilitate the proper administration of justice and prevent
been tacitly enjoying diplomatic immunity beforehand. It is important to note that in the the occurrences of any abuse of the privileges and immunities granted is
1989 case ICMC did not invoke its immunity notwithstanding the fact that the Memorandum officials and alien employees in Article III of this Agreement of the
8
took effect while the case was pending before the Court. Commission.

Moreover, in the 1990 ICMC case, ICMC's immunity was in fact upheld despite the fact that 2. In the event that the Government determines that there has been an
at the case arose, the Memorandum recognizing ICMC's status as a specialized agency had abuse of the privileges and immunities granted under this Agreement,
not yet been signed. In that case, the petition for certification election among its rank and file consultations shall be held between the Government and the
employees was filed on July 14, 1986 and the order directing a certification election was Commission to determine whether any such abuse has occurred and, if
made when ICMC's request for recognition as a specialized agency was still pending in the so, the Government shall withdraw the privileges and immunities granted
Department of Foreign Affairs. Yet this Court held that the subsequent execution of the the Commission and its officials.
Memorandum was a bar to the granting of the petition for certification election.
WHEREFORE, the petitioner is DISMISSED for lack of merit.
The scope of immunity of the ICMC contained in the Convention on the Privileges and
Immunities of the Specialized Agencies of the United Nations is instructive. Art. III, 4 of the SO ORDERED.
Convention provides for immunity from "every form of legal process." Thus, even if private
respondents had been served summons and subpoenas prior to the execution of the
Regalado, Romero, Puno and Torres, Jr., JJ., concur.
Memorandum, they, as officers of ICMC, can claim immunity under the same in order to
prevent enforcement of an adverse judgment, since a writ of execution is "a legal process"
9
within the meaning of Article III, 4.


Third. Another question is whether ICMC can invoke its immunity because it only did so in its

memorandum before the Labor Arbiter. It is contended that ICMC waived its immunity in any

event. Art III 4 of the Convention on the Privileges and Immunities of the Specialized

Agencies of the United Nations requires, however, that the waiver of the privilege must be

express. There was no such waiver of immunity in this case. Nor can ICMC be estopped from

claiming diplomatic immunity since estoppel does not operate to confer jurisdiction to a
10
tribunal that has none over a cause of action.


Fourth. Finally, neither can it be said that recognition of ICMC's immunity from suit deprives
petitioner of due process. As pointed out in International Catholic Commission
11
v. Calleja, petitioner is not exactly without remedy for whatever violation of rights it may
have suffered for the following reason:

Section 31 of the Convention on the Privileges and Immunities of the
Specialized Agencies of the United Nations provides that "each
specialized agency shall make provision for appropriate modes of
settlement of: (a) disputes arising out of contracts or other disputes of
private character to which the specialized agency is a party." Moreover,
pursuant to Article IV of the Memorandum of Agreement between ICMC
and the Philippine Government, whenever there is any abuse of privilege
by ICMC, the Government is free to withdraw the privileges and
immunities accorded. Thus:

Article IV. Cooperation with Government Authorities. 1. The
Commission shall cooperate at all times with the appropriate authorities
NATIONAL MINES AND ALLIED WORKERS' UNION (NAMAWU), JULIETA ARROYO, AGNES DE No amicable settlement having been reached by the parties, they filed the required
GUZMAN, CARMELITA RAYMUNDO, SAMMY ISRAEL, GUILLERMO DELA CRUZ, NESTOR position papers, and the labor arbiter conducted trial on the merits. Three of the
VALLESTEROS, NOEL ARANDA, DANIEL RESTORIA, TEODORO CATUIRA, MARCELITA SIERVO, complainants testified on their behalf: ARROYO, Teodoro Catuira, and Agnes de Guzman.
CECILIA OLDAN, LEO RIO, MELINDA ODISTE, EMERITA DELA CRUZ, ARMINA DAGAR, Private respondents presented their sole witness, Dolores Matienzo.
CORAZON GALVEZ, BELEN BUAN, REMEDIOS VASQUEZ, MORENA VELGADO, MA. LUISA
AMICAN, MARILOU CANELAS, ANALYN JESUSA, and DIVINA RERNARDO, petitioners, The individual petitioners asserted that they were regular employees for having rendered
vs. service for more than a year. They were thus entitle to security of tenure notwithstanding
SAN ILDEFONSO COLLEGE-RVM SISTERS ADMINISTRATION; SISTER MARIA AURORA the annual renewal of their contract with the COLLEGE.
LLOREN, (RVM Directress); and THE NATIONAL LABOR RELATIONS COMMISSION
(NLRC), respondents.
The COLLEGE maintained otherwise, claiming that the individual petitioners, with the
exception of ARROYO, were either part-time or probationary employees who had each
DAVIDE, JR., J.: rendered less than three years of service. Their contracts of employment were for a fixed
period, the renewal of which were always subject to their respective performance. Their
In this petition for certiorari under Rule 65 of the Rules of Court, petitioners seek to set aside last employment contract indicated the expiration in March 1991. For the school year
1
the decision of the National Labor Relations Commission (NLRC) in NLRC Case No. RAB-IV- 1991-1992, the COLLEGE chose not to renew their contract, and petitioners were
2
4-3710-91-RI and its resolution denying the motion for reconsideration. individually notified thereof. In the case of ARROYO, the COLLEGE maintained that while
she had served for more than three years and was thus a permanent employee, she lost
Petitioner National Mines and Allied Workers' Union (NAMAWU) is the certified bargaining that status when she requested to teach on a part-time basis to enable her to complete her
agent of the rank and file employees of private respondent San Ildefonso College master's degree. The COLLEGE acted within its rights when it refused to renew the fixed
(hereafter COLLEGE). Petitioner Juliet Arroyo (hereafter ARROYO) was the president of the year-to-year contracts of the individual petition; it cannot, therefore, be held guilty of
San Ildefonso College Association of Faculty and Personnel (SICAFP), an affiliate of illegal dismissal or unfair labor practice.
NAMAWU. The remaining petitioners were teachers and employees of the COLLEGE.
Private respondent Sister Maria Aurora Lloren is the directress of the COLLEGE. The COLLEGE further asserted that all money claims due the individual petitioners had
been paid even beyond the amount prescribed by law. The minimun daily wage was then
In February 1991, ARROYO, a "tenured teacher" who later became a part-time teacher, P89.00 or an aggregate of P1,943.16 a month. Petitioners were receiving a monthly pay of
3
asked that she be allowed to teach on a full-time basis. The COLLEGE, however, denied her at least P1,994 for a regular five-day-work week, with the exclusion of Saturdays and
request for her failure to "make use of the privilege" of her study leave in the two years Sundays. Upon the effectivity of Wage Order No. IV-01, they were entitled to an increase of
4
she was allowed to do so. The following month, the other individual petitioners, who P327.50, which the COLLEGE could not then afford. Nonetheless, each individual petitioner
were issued yearly appointment, were informed of the non-renewal of their respective was eventually paid P2,229.25, an amount higher than what was due them, through the
contracts. Government Assistance to Private Education. Anent the tenure pay, the COLLEGE
contended that the individual petitioners were not entitled to such pay because they were
not tenured teachers. It refused payment for the service incentive leave pay, since all the
In April 1991, the SICAFP was formalized into a labor union and affiliated with NAMAWU.
individual petitioners had availed of their service incentive leave.
5
On 11 April 1991, the individual petitioners and NAMAWU filed a complaint for illegal 8
In his decision of 12 April 1994, Labor Arbiter Pedro Ramos made the following findings of
dismissal, unfair labor practice, forced resignation, harassment, underpayment of wages,
fact:
non-payment of service incentive leave pay, and violation of Wage Order No. IV-1. They
demanded reinstatement and payment of back wages and other monetary claims. The
complaint was subsequently amended to include tenure pay as an additional claim.
6 Complainants used to be the part-time or probationary employee
teaching in the different departments of the respondent school, whose
7 names, date hired, date terminated and salary received are, as follows:
On 15 April 1991, NAMAWU filed a petition for certification election. The COLLEGE did not
oppose the petition. A certification election was held, and NAMAWU was chosen as the
bargaining agent of the rank and file employees. 1. AGNES DE GUZMAN.

Later, or on 27 May 1991, the individual petitioners wrote private respondents indicating Appointed as college teacher on a part-time basis
their desire to return to work, but private respondents refused to take them back. effective June 1998 October 1988 with monthly
basic salary and LA integrated P520.65;
 appointed as college teacher on part-time basis appointed as a college teacher on a part-time
effective November 1988 to March 1989 with a status effective Nov. 1989 to March 1990 with a
monthly basic salary of P1,041.24; basic pay of P895.71;

appointed as college teachers on a part-time basis appointed as a college [teacher] on a part-time

effective June 1989 to October 1989 with a monthly basis effective November 5, 1990 to March 31, 1991
basic pay of P1,205.04; with a basic pay of P1,222.84 with additional load
paid in the amount of P611.42 of a total of
appointed as college teacher on a part-time basis P1,834.26;
effective November 1989 to March 1990 with a
monthly basic pay of P1,506.40; 5. CARMELITA RAYMUNDO

appointed as college teacher on part-time basis appointed as a college teacher on a part-time

effective June 1990 to october 1990 with a monthly basis effective June1988 to October 1988 with a
basic pay of P1,542.10; basic pay and LA integrated [of] P776.60;

appointed as college teacher on a part-time basis appointed as a college teacher on a part-time

effective Nov. 3, 1990 to March 31, 1991, with a status effective Nov. 1989 to March 1990 with a
monthly basic pay of P1,233.68: basic pay of P1,434.25;

2. JULIETA ARROYO appointed as a college teacher on a part-time

basis effective November 5, 1990 to March 31, 1991
from June 1, 1965 worked on permanent status with a basic pay of P1,542.86 with additional load;
up to March 1988;
6. [MARCELITA] SIERVO
appointed as college teacher on a part-time basis
effective June 1988 up to March 27, 1991. appointed as H.E. teacher on a part-time basis
effective June 1990 to March 1991 with a basic pay
3. TEODORO CATUIRA of P864.84;

appointed as High School Teacher on a 7. NESTOR VALLESTERO

probationary status effective June 1989 to March
1990 with a monthly basic pay of P1,944.00; appointed as H.E. teacher on a part-time basis
effective June 1990 to March 1991 with a basic pay
appointed as classroom teacher on a of P875.13;
probationary status effective June 1990 to March
1991 with a monthly basic pay of P1,9[9]4.00 with 8. REMEDIOS VASQUEZ.
additional load or part of SAC paid in the amount of
P315.10 or a total of P2,309.10; appointed as a Grade School Teacher on a
probationary status effective March 1989 to June
4. SAMMY ISRAEL 1990 with a basic pay of P1,974.00;

appointed as a college teacher on a part-time appointed as classroom teacher on a

basis effective June 1989 to October 1989 with a probationary status effective June 1990 to March
basic pay of P308.00 per subject;
1991 with a basic pay of P1,994.00 plus P30.00 for 1991 with a basic pay of P1,994.00 plus P113.00 for
advisory; advisory, and P284.70 as additional load;

9. CORAZON GALVEZ 14. LEO RIO

appointed as grade school teacher on a appointed as classroom teacher on a

probationary status effective June 1989 to March probationary status effective June 1990 to March
1990 with a basic pay of P1,944.00 plus P30.00 as 1991 with a basic pay of P1,994.00 plus P113.00 as
advisory; advisory and P284.70 as additional load;

appointed as classroom teacher on a 15. CECILIA OLDAN

probationary status effective June 1990 to March
1991 with a basic pay of P1,9[9]4.00 plus P30.00 as appointed as classroom teacher on a
advisory; probationary status effective June 1990 to March
1991 with a basic pay of P1,994.00 plus P115.00 as
10. LUISA AMICAN advisory;

appointed as classroom teacher on a 16. MELINDA ODISTE

probationary status effective June 1990 to March
1991 with a basic pay of P1,944.00 plus P30.00 as appointed as classroom teacher on a full-time
advisory; basis effective June 1988 to March 1989 with a basic
pay with LA integrated [of] P1,398.00 plus P30.00 as
11. MARILOU CANELAS advisory pay and P222.72 for additional load or a
total of P1,650.72;
appointed as Grade School Teacher on a
probationary status effective June 1989 to March appointed as High School teacher on a
1990 with basic pay of P1,944.00 plus P30.00 as probationary status effective June 1990 to March
advisory; 1991 with a basic pay of P1,958.00 plus P30.00 as
advisory pay and P70.00 as catechral in-charge or a
appointed as classroom teacher on a total of P2,058.00;
probationary status effective June 1990 to March
1991 with a basic pay of P1,994.00 plus P30.00 for appointed as High School Teacher on a
advisory; probationary status effective June 1990 to March
1991 with a basic pay of P2,008.00 plus P115.00 for
12. MORENA VELGADO advisory, P47.71 for additional load and P200.00
[for] other assignment;
appointed as classroom teacher on a
probationary status effective June 1990 to March 17. GUILLERMO DE LA CRUZ
1991 with a basic pay of P1,994.00 plus P30.00 for
advisory; appointed as college teacher on a part-time basis
effective June 1990 to March 1991 with a basic pay
13. EMERITA DE LA CRUZ of P308.00 per subject;

appointed as classroom teacher on a 18. BELEN BUAN

probationary status effective June 1990 to March
 appointed as classroom teacher on a and/or illegal dismissal, as
probationary status from June 1, 1988 up to March charged.
11, 1991, with the last basic pay of P2,006.00/mo.;
2. Ordering the criminal
19. ANALYN JESUSA prosecution of respondent
Directress S. Ma. Aurora Lloren
appointed as classroom teacher on a for having committed unfair
probationary status from June 1, 1988 up to March labor practice;
11, 1991, with the latest basic pay of P1,994.00/mo.
3. Ordering the respondents to
The other five [sic] individual complainants, namely; Nel Aranda, Daniel cease and desist from further
Retoria, Armina Dagar and Divina Bernando did not sign the complaint committing the unfair labor
and [are] therefore not included as complainants. practice complained of;

The Labor Arbiter held that private respondents were guilty of illegal dismissal, as well as 4. Ordering the respondents to
unfair labor practice interfering with the organization of the individual petitioners' labor reinstate all the complainants to
union. The contracts of employment in question were not bilateral agreements, but rather their former positions without
letters of appointment. When the COLLEGE opted not to renew the appointments it merely loss of seniority rights and other
invoked the expiration of the period fixed in the appointments without giving any other privileges, under the same term
reason or granting the teachers concerned an opportunity to explain their side. The and conditions obtaining at the
probationary employees were not even informed of their performance rating when they time of their separation from the
were denied renewal of their appointment. The non-renewal of the appointments was service, either physically or in the
timely made while individual petitioners were in the process of organizing themselves into payroll, at the option of the
a union, affiliating with NAMAWU, and preparing a petition for certification election. These respondents, immediately upon
acts of the COLLEGE amounted to union busting. receipt of this decision;

As to the underpayment of the minimum wage and the corresponding salary adjustments 5. Ordering the respondents to
under Wage Order No. IV-01, the Labor Arbiter found the computation of the COLLEGE pay the full back wages of all the
erroneous, since it was based on the compensation of an employee paid on a daily basis. complainants from date of illegal
The individual petitioners were all paid monthly, which required a different (unreadable). separation from the service and
With the property computation, i.e., by considering the number of days in a month and not up to actual reinstatement,
the actual number of working days, they were entitled to a differential pay. computed partially from School
Year 1991-1992 up to School Year
1993-1994, in the amounts
But, as to the incentive leave pay, the Labor Arbiter agreed with the COLLEGE that the
indicated below;
individual petitioners were no longer entitled to such pay, it being a common practice in
educational institutions that teachers were given a Christmas vacation beyond five days
with pay. This was sufficient compliance with the law. 6. Ordering the respondents to
pay the complainants their salary
differentials under R.A. 6727 and
The labor arbiter then decreed as follows:
Wage Order No. IV-01 in the
amount computed below;
WHEREFORE, in view of all the foregoing considerations, judgment is
hereby rendered, as follows:
COMPUTATION OF AWARDS

1. Declaring the respondents

A. PART- TIME TEACHERS: BACK WAGES R.A 6727 & W.O.
guilty of unfair labor Practice
IV-01 SALARY 9. Emerita de la Cruz 103,344.00 8,560.00

DIFFERENTIAL 10. Leo Rio 103,344.00 8,560.00

1. Agnes de Guzman P37,010.40 11. [Cecilia] Oldan 103,344.00 8,560.00

2. Julieta Arroyo 9,630.00 12. [Melinda] Odiste 103,344.00 21,135.00

3. Sammy Israel 36,685.20 TOTAL P1,240,128.00 P154,499.00

4. Carmelita Raymundo 46,285.80 or a Grand Total of ONE MILLION FOUR HUNDRED

THIRTY-ONE THOUSAND ONE HUNDRED SEVENTY
5. M[a]rcelita Siervo 25,945.20 EIGHT & 50/100 PESOS (P1,431,178.50).

6. Nestor Vallesteros 26,253.90 NOTE: Computation of salary differentials under R.A.

6727 and W.O. No. IV-01 refers only to Probationary
Teachers who were paid on monthly basis.
7. Guillermo de la Cruz 9,240.00

Part-Time Teachers paid per subject are not included

TOTAL P191,050.50
in the computation for lack of sufficient datas [sic],
like rate per subject and hours of work, etc.

7. Dismissing the claim for
B. PROBATIONARY BACK WAGES R.A. 6727 & W.O. incentive leave pay for lack of
merit.
TEACHERS: IV-01 SALARY
On appeal, the NLRC reversed the decision of the Labor Arbiter and dismissed the
DIFFERENTIALS complaint. It declared that the individual petitioners, with exception of ARROYO, were not
regular employees and, therefore, not protected by the law on security of tenure. It cited
9
1. Teodoro Catuira P103,344.00 P15,094.00 our decision in University of Sto. Tomas v. NLRC, where we referred to the Manual of
Regulations for Private Schools in determining when a private school teacher could be
deemed a permanent employee and therefore be entitled to security of tenure. We ruled
2. Remedios Vasquez 103,344.00 15,094.00 that permanent status can only acquired by a full-time teacher who has rendered three
consecutive years of satisfactory service. In the instance case, the individual petitioners,
3. Corazon Galvez 103,344.00 15,094.00 except ARROYO, were hired either on a part-time or probationary basis. Their contract was
for a fixed period. Besides, they were not able to render service for three consecutive
4. Marilou Canelas 103,344.00 15,094.00 years. As to petitioner Analyn Jesusa, the NLRC held that she was not a proper party, since
she was not hired as a teacher but as a secretary; moreover, she had already received her
10
separation pay.
5. Belen [Buan] 103,344.00 15,094.00

As to ARROYO, while the NLRC clarified that she did not abandon her permanent status
6. Analyn Jesusa 103,344.00 15,094.00
when she requested to teach on a part-time basis, she was terminated from work for
cause. Her failure to prove that she actually pursued a master's degree during her two-year
7. Luisa Amican 103,344.00 8,560.00 study leave was a breach of the trust and confidence reposed upon her by the COLLEGE.
Under the rules and regulations of the Manila Archdiocese and Parochial School
8. Morena Velgado 103,344.00 8,560.00
Association, of which the COLLEGE was a member, her lack of a master's degree was a valid We agree with the OSG that the individual petitioners, with the exception of ARROYO,
ground for dismissal. were legally dismissed.

The NLRC upheld the COLLEGE's computation of the basic salary which was based on the The charge of unfair labor practice was not substantiated by sufficient evidence. Other
actual number of working days. It cited the case of Philippines Air Lines Employees than the allegations that the non-renewal of petitioners' appointment coincided with the
11
Association (PALEA) v. Philippines Air Lines, (PAL), where we ruled that the number of off period they were campaigning for the transformation of their association into a union and
days are not to be counted because the employees are not required to work on said days. that among those dismissed were the president, vice president, and secretary of the union,
no substantial evidence was offered to clearly show that the COLLEGE committed acts to
Finally, the NLRC absolved the COLLEGE and Sister Lloren of unfair labor practice, for it was prevent the exercise of the employees' right to self-organization.
not clearly established that the individual petitioners were dismissed because of their
union activities. On the contrary, the COLLEGE did not even oppose the petition for It is not disputed that the individual petitioners were appointments were not renewed
certification election. after the expiration thereof in March 1991. It was only in that following month that the
union was formally formed and affiliated with NAMAWU, and the petition for certification
12
Their motion for reconsideration having been denied, petitioners filed the instant election was filed. The record shows that the notices of non-renewal were received on
13
petition. They claim that the NLRC committed grave abuse of discretion in finding that the March 27 and April 3, 1991. Besides, petitioners failed to controvert the COLLEGE's claim
COLLEGE and Sister Lloren were not guilty of illegal dismissal and unfair labor practice, and that the appointments of other teachers who were union members were renewed.
in not awarding them salary differentials. Likewise, the COLLEGE did not oppose the petition for certification election.

The private respondents fully agree with the NLRC. They also clarify that petitioners Noel On the issue of whether the individual petitioners were permanent employees, it is the
Aranda, Daniel Restoria, Armina Dagal, Divina Bernardo, and Analyn Jesusa are no longer Manual of Regulations for Private Schools, and not the Labor Code, which is applicable.
14
proper parties. In the Labor Arbiter's decision, the first four petitioners were dropped as This was settled in University of Sto. Tomas v. NLRC, where we explicitly ruled that for a
complainants for their failure to sign the complaint. Petitioners never questioned this private school teacher to acquire permanent status in employment and, therefore, be
ruling, which therefore became final. As to Jesusa, the NLRC excluded her as a complainant entitled to security of tenure, the following requisites must concur: (1) the teacher is a full-
after a finding that she was hired as a secretary, and not as a teacher of the COLLEGE, and time teacher; (2) the teacher must have rendered three (3) consecutive years of service;
15
that she had already received her separation pay. and (3) such service must have been satisfactory.

The Office of the Solicitor General (OSG) moves for the dismissal of the petition except as Eleven of the individual petitioners were full-time teachers during the school year 1990-
16
to ARROYO. It maintains that all the individual petitioners, except ARROYO, were legally 1991, but only two, namely, Odiste and Buan had rendered three consecutive years of
dismissed. As to ARROYO, it submits that the reason why she failed to complete her service. There is no showing, however, that the two were on a full-time basis during those
master's degree could not be solely attributed to her. She initially requested a leave of three years and that their services were satisfactory. Evidently, not one of the said teachers
absence, but the COLLEGE suggested that she teach on a part-time basis because it was in can be considered to have acquired a permanent status.
need of teachers at that time. The evidence also indicate that her dismissal was without
due process. With regard to the individual petitioners' claim for salary differential, the As to ARROYO, it is undisputed that she had been teaching in the COLLEGE since 1965 and
same is not warranted, as the computation adopted by the COLLEGE which excluded had obtained a permanent status; she became a part-time teacher, however, from June
Saturdays and Sundays was correct. 1988 to March 1991.

In its own comment, the NLRC moves for the dismissal of the petition and asserts that its We are not persuaded by private respondents' argument that ARROYO lost her permanent
challenged decision is supported by the applicable laws and jurisprudence. Anent the status when she requested to teach on a part-time basis. The reason for the request was
contrary position taken by the OSG with respect to ARROYO, it alleges that ARROYO was that she wanted to pursue a master's degree. The COLLEGE approved the request, and the
afforded an opportunity to prove that she actually completed her master's degree; she, study leave was extended for another year. It would have been unjust and unreasonable to
however, chose not to. It underscores the fact that a master's degree was a pre-requisite allow ARROYO to pursue her master's degree, from which the COLLEGE would have also
before she could be considered a regular teacher. benefited in terms of her higher learning and experience, and at the same time penalize
her with the loss of permanent status. It would as well be absurd and illogical to maintain
It must be noted at the outset that, as pointed out by the private respondents, five of the that by teaching on a part-time basis after obtaining the permission to take up a master's
named petitioners Noel Arandia, Daniel Restoria, Armina Dagar, Divina Bernardo, and degree, ARROYO relinquished her permanent status.
Analyn Jesusa are no longer proper parties in this petition because their exclusion as
complainants below had never been questioned and had therefore become final.
When ARROYO subsequently requested that she continue teaching on a full-time basis, Where 262 days =
private respondents in its letter of 27 March 1991 refused, citing as reason her failure "to
make use of the privilege granted [her] by the administration regarding [her] study leave in 250 days ordinary working days
the past four semesters." This letter served as notice of ARROYO's termination from
employment. No further notice was served. It must be emphasized that the letter did not
10 days Regular holidays
indicate that a master's degree was necessary for ARROYO to continue her service, as now
claimed by the COLLEGE. In fact, apart from its mere allegation, the COLLEGE failed to
prove that a master's degree was a pre-requisite for ARROYO's teaching position. ARROYO, 2 days Special days (If considered paid; If actually
a permanent teacher, could only be dismissed for just cause and only after being afforded
17 18
due process, in light of paragraph (b), Article 277 of the Labor Code. worked, this is equivalent to 2.6 days)

It is well-settled that the due process contemplated by the law requires twin notices. The
first notice apprises the employee of the particular acts or omissions for which his dismissal
is sought, which may be loosely considered as the proper charge; while the second inform 262 days Total equivalent number of days.
the employee of the employer's decision to dismiss him. The latter must come only after
the employee is given a reasonable period from receipt of the first notice within which to
answer the charge, and ample opportunity to be heard and defend himself with the Applied to the individual petitioners who were on a full-time basis and were
19
assistance of his representative, if he so desires. receiving a monthly salary of P1,994 as against the then applicable minimum
wage of P1,943.16, we see no violation of R.A. No. 6727.

ARROYO's dismissal was substantively and procedurally flawed. It was effected without
just cause and due process. Consequently, her termination from employment was void. Neither was there a violation of Wage Order No. IV-01, which increased the daily minimum
She is, therefore, entitled to reinstatement to her former position without loss of seniority wage by P15.00. The delayed adjustment given by the COLLEGE to comply with that Wage
rights and other privileges, full back wages inclusive of allowances, and other benefits or Order was sufficient compliance with the law. Applying the formula prescribed in
their monetary equivalent computed from the date of her actual dismissal to the date of paragraph (d), Section 6 of the Implementing Rules of R.A. No. 6727, the individual
actual reinstatement.
20 petitioners who were full-time teachers were entitled to a salary increase of P327.50,
starting 7 November 1990 when Wage Order No. IV-01 took effect until March 1991 when
their respective contracts of employment expired. When computed, the salary differential
As to the issue of minimun wage under R.A. No, 6727 and Wage Order No. IV-01, we see no due each of them amounts to P1,637.50. The record shows that each full-time teacher was
reason to depart from the ruling of the NLRC. This case is analogous to that of PALEA v. 23
belatedly paid a lump sum of P2,011.14, higher than what was due them.
21
PAL. One of the issues involved therein was the computation of the basic daily wage of
the airlines monthly-salaried employees. In resolving this issue, we ruled that off-days are
rest days for the worker, Since he is not required to work on such days, he cannot demand The record further shows that the petitioners who were part-time teachers were paid
corresponding pay. Should he work on an off-day, our labor laws reward him with a certain amounts. However, as held by the Labor Arbiter, they cannot be awarded salary
premium higher than what he receives when he works on his regular working day. It differentials for "lack of sufficient data, like rate per subject and hours of work."
follows that the divisor in computing his basic daily wage should be the actual working
days in a year. The number of off-days is not to be counted precisely because he is not WHEREFORE, the decision of the National Labor Relations Commission in NLRC Case No.
22
required to work on said days. RAB-IV-4-3710-91-RI is AFFIRMED, subject to the modification that private respondent San
Ildefonso College is DIRECTED to (1) reinstate petitioner JULIETA ARROYO to her former
Sec. 6 of the Rules Implementing R.A. No. 6727 prescribes the formula in computing the position at the time of her dismissal, or to any equivalent position if reinstatement to such
monthly minimum wage. The individual petitioners belong to the category of paragraph (d) position is no longer feasible, without of loss of seniority rights and benefits that may be
thereof, which states: due her; and (2) pay her back wages from the date of her actual dismissal to the date of her
actual reinstatement.
For those who do not work and are not considered paid on Saturdays
and Sundays or rest days: No pronouncement as to costs.

EMR [Equivalent Monthly Rate] = (ADR [Average Daily Wage Rate] x SO ORDERED.

262 days) / 12 Bellosillo, Vitug and Quisumbing, JJ., concur.

INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs. NATIONAL LABOR RELATIONS that no employer-employee relationship shall be created between the parties and that the
COMMISSION (Fourth Division, Cebu City), LABOR ARBITER NICASIO P. ANINON and agent shall be free to exercise his own judgment as to time, place and means of soliciting
PANTALEON DE LOS REYES, respondents. insurance. De los Reyes however was prohibited by petitioner from working for any other life
insurance company, and violation of this stipulation was sufficient ground for termination of
D E C I S I O N the contract. Aside from soliciting insurance for the petitioner, private respondent was
required to submit to the former all completed applications for insurance within ninety (90)
BELLOSILLO, J.: consecutive days, deliver policies, receive and collect initial premiums and balances of first
year premiums, renewal premiums, deposits on applications and payments on policy loans.
On 17 June 1994 respondent Labor Arbiter dismissed for lack of jurisdiction NLRC RAB- Private respondent was also bound to turn over to the company immediately any and all sums
VII Case No. 03-0309-94 filed by private respondent Pantaleon de los Reyes against petitioner of money collected by him. In a written communication by petitioner to respondent De los
Insular Life Assurance Co., Ltd. (INSULAR LIFE), for illegal dismissal and nonpayment of salaries Reyes, the latter was urged to register with the Social Security System as a self-
[5]
and back wages after findings no employer-employee relationship between De los Reyes and employed individual as provided under PD No. 1636.
[1]
petitioner INSULAR LIFE. On appeal by private respondent, the order of dismissal was On 1 March 1993 petitioner and private respondent entered into another
reversed by the National Labor Relations Commission (NLRC) which ruled that respondent De [6]
contract where the latter was appointed as Acting Unit Manager under its office the Cebu
[2]
los Reyes was an employee of petitioner. Petitioners motion for reconsideration having been DSO V (157). As such, the duties and responsibilities of De los Reyes included the recruitment,
denied, the NLRC remanded the case to the Labor Arbiter for hearing on the merits. training, organization and development within his designated territory of a sufficient number
Seeking relief through this special civil action for certiorari with prayer for a restraining of qualified, competent and trustworthy underwriters, and to supervise and coordinate the
order and/or preliminary injunction, petitioner now comes to us praying for annulment of the sales efforts of the underwriters in the active solicitation of new business and in the
decision of respondent NLRC dated 3 March 1995 and its Order dated 6 April 1995 denying the furtherance of the agencys assigned goals. It was similarly provIded in the management
motion for reconsideration of the decision. It faults NLRC for acting without jurisdiction and/or contract that the relation of the acting unit manager and/or the agents of his unit to the
with grave abuse of discretion when, contrary to established facts and pertinent law and company shall be that of independent contractor. If the appointment was terminated for any
jurisprudence, it reversed the decision of the Labor Arbiter and held instead that the complaint reason other than for cause, the acting unit manager would be reverted to agent status and
was properly filed as an employer-employee relationship existed between petitioner and assigned to any unit. As in the previous agency contract, De los Reyes together with his unit
private respondent. force was granted freedom to exercise judgment as to time, place and means of soliciting
insurance. Aside from being granted override commissions, the acting unit manager was given
Petitioner reprises the stand it assumed below that it never had any employer-employee production bonus, development allowance and a unit development financing scheme
relationship with private respondent, this being an express agreement between them in the euphemistically termed financial assistance consisting of payment to him of a free portion
agency contracts, particularly reinforced by the stipulation therein de los Reyes was allowed of P300.00 per month and a valIdate portion of P1,200.00. While the latter amount was
discretion to devise ways and means to fulfill his obligations as agent and would be paid deemed as an advance against expected commissions, the former was not and would be freely
commission fees based on his actual output. It further insists that the nature of this work status given to the unit manager by the company only upon fulfillment by him of certain manpower
as described in the contracts had already been squarely resolved by the Court in the earlier and premium quota requirements. The agents and underwriters recruited and trained by the
[3]
case of Insular Life Assurance Co., Ltd. v. NLRC and Basiao where the complainant therein, acting unit manager would be attached to the unit but petitioner reserved the right to
Melecio Basiao, was similarly situated as respondent De los Reyes in that he was appointed determine if such assignment would be made or, for any reason, to reassign them elsewhere.
first as an agent and then promoted as agency manager, and the contracts under which he was
appointed contained terms and conditions Identical to those of De los Reyes. Petitioner Aside from soliciting insurance, De los Reyes was also expressly obliged to participate in
concludes that since Basiao was declared by the Court to be an independent contractor and the companys conservation program, i.e., preservation and maintenance of existing insurance
not an employee of petitioner, there should be no reason why the status of De los Reyes policies, and to accept moneys duly receipted on agents receipts provided the same were
herein vis--vis petitioner should not be similarly determined. turned over to the company. As long as he was unit manager in an acting capacity, De los Reyes
was prohibited from working for other life insurance companies or with the government. He
We reject the submissions of petitioner and hold that respondent NLRC acted could not also accept a managerial or supervisory position in any firm doing business in the
appropriately within the bounds of the law. The records of the case are replete with telltale Philippines without the written consent of petitioner.
indicators of an existing employer-employee relationship between the two parties despite
written contractual disavowals. Private respondent worked concurrently as agent and Acting Unit Manager until he was
notified by petitioner on 18 November 1993 that his services were terminated effective 18
These facts are undisputed: on 21 August 1992 petitioner entered into an agency December 1993. On 7 March 1994 he filed a complaint before the Labor Arbiter on the ground
[4]
contract with respondent Pantaleon de los Reyes authorizing the latter to solicit within the that he was illegally dismissed and that he was not paid his salaries and separation pay.
Philippines applications for life insurance and annuities for which he would be paid
compensation in the form of commissions. The contract was prepared by petitioner in its Petitioner filed a motion to dismiss the complaint of De los Reyes for lack of jurisdiction,
entirety and De los Reyes merely signed his conformity thereto. It contained the stipulation citing the absence of employer-employee relationship. it reasoned out that based on the
criteria for determining the existence of such relationship or the so-called four-fold test, i.e., A look at the provisions of the contract shows that private respondent was appointed as
[8]
(a) selection and engagement of employee, (b) payment of wages, (c) power of dismissal, and, Acting Unit Manager only upon recommendation of the District Manager. This indicates that
(d) power of control, De los Reyes was not an employee but an independent contractor. private respondent was hired by petitioner because of the favorable endorsement of its duly
authorized officer. But, this approbation could only have been based on the performance of
On 17 June 1994 the motion of petitioner was granted by the Labor Arbiter and the case De los Reyes with petitioner was nothing more than a trial or probationary period for his
was dismissed on the ground that the element of control was not sufficiently established since eventual appointment as Acting Unit Manager of petitioner. Then, again, the very designation
the rules and guidelines set by petitioner in its agency agreement with respondent De los Reyes of the appointment of private respondent as acting unit manager obviously implies a
were formulated only to achieve the desired result without dictating the means or methods of temporary employment status which may be made permanent only upon compliance with
attaining it. company standards such as those enumerated under Sec. 6 of the management contract.
[9]

Respondent NLRC however appreciated the evidence from a different perspective. It On the matter of payment of wages, petitioner points out that respondent was
determined that respondent De los Reyes was under the effective control of petitioner in the compensated strictly on commission basis, the amount of which was totally dependent on his
critical and most important aspects of his work as Unit Manager. This conclusion was derived total output. But, the managers contract speaks differently. Thus
from the provisions in the contract which appointed private respondent as Acting Unit
Manager, to wit: (a) De los Reyes was to serve exclusively the company, therefore, he was not 4. Performance Requirements.- To maintain your appointment as Acting Unit
an independent contractor; (b) he was required to meet certain manpower and Manager you must meet the following manpower and production requirements:
production quota; and, (c) petitioner controlled the assignment to and removal of soliciting
agents from his unit.
Quarter Active Calendar Year
The NLRC also took into account other circumstances showing that petitioner exercised Production Agents Cumulative FYP
employers prerogatives over De los Reyes, e.g., (a) limiting the work of respondent De los Production
Reyes to selling a life insurance policy known as Salary Deduction Insurance only to members
of the Philippine National Police, public and private school teachers and other employees of ST
1 2 P125,000
private companies; (b) assigning private respondent to a particular place and table where he ND
2 3 250,000
worked whenever he has not in the field; (c) paying private respondent during the period of RD
3 4 375,000
twelve (12) months of his appointment as Acting Unit Manager the amount of P1,500.00 as TH
4 5 500,000
Unit Development Financing of which 20% formed his salary and the rest, i.e., 80%, as advance
of his expected commissions; and (d) promising that upon completion of certain requirements,
he would be promoted to Unit Manager with the right of petitioner to revert him to agent 5.4 Unit Development Financing (UDF). As an Acting Unit Manager you shall be
status when warranted. given during the first 12 months of your appointment a financial assistance which is
composed of two parts:
Parenthetically, both petitioner and respondent NLRC treated the agency contract and
the management contract entered into between petitioner and De los Reyes as contracts of 5.4.1 Free Portion amounting to P300 per month, subject to your
agency. We however hold otherwise. Unquestionably there exist major distinctions between meeting prescribed minimum performance requirement on manpower and
the two agreements. While the first has the earmarks of an agency contract, the second is far premium production. The free portion is not payable by you.
removed from the concept of agency in that provided therein are conditionalities that indicate
an employer-employee relationship. the NLRC therefore was correct in finding that private
respondent was an employee of petitioner, but this holds true only insofar as the management 5.4.2 Validate Portion amounting to P1,200 per month, also
contract is concerned. In view thereof, he Labor Arbiter has jurisdiction over the case. subject to meeting the same prescribed minimum performance requirements
on manpower and premium production. The valIdated portion is an advance
It is axiomatic that the existence of an employer-employee relationship cannot be against expected compensation during the UDF period and thereafter as may
negated by expressly repudiating it in the management contract and providing therein that the be necessary.
employee is an independent contractor when the terms of agreement clearly show otherwise.
For, the employment status of a person is defined and prescribed by law and not by what the The above provisions unquestionably demonstrate that the performance requirement
[7]
parties say it should be. In determining the status of the management contract, the four-fold imposed on De los Reyes was applicable quarterly while his entitlement to the free portion
test on employment earlier mentioned has to be applied. (P300) and the validated portion (P1,200) was monthly starting on the first month of the twelve
(12) months of the appointment. Thus, it has to be admitted that even before the end of the
Petitioner contends that De los Reyes was never required to go through the pre-
first quarter and prior to the so-called quarterly performance evaluation, private respondent
employment procedures and that the probationary employment status was reserved only to
employees of petitioner. On this score, it insists that the first requirement of selection and was already entitled to be paid both the free and validated portions of the UDF every month
because his production performance could not be determined until after the lapse of the
engagement of the employee was not met.
quarter involved. This indicates quite clearly that the unit managers quarterly performance corresponding Companys Agents Receipt to be provIded you for this purpose and to be
had no bearing at all on his entitlement at least to the free portion of the UDF which for all covered by such rules and accounting regulations the Company may issue from time to time
intents and purposes comprised the salary regularly paid to him by petitioner. Thus it cannot on the matter. Payments received by you shall be turned over to the Companys designated
be validly claimed that the financial assistance consisting of the free portion of the UDF was District or Service Office clerk or directly to the Home Office not later than the next working
purely dependent on the premium production of the agent. Be that as it may, it is worth day from receipt thereof x x x x
considering that the payment of compensation by way of commission does not militate against
the conclusion that private respondent was an employee of petitioner. Under Art. 97 of the Petitioner would have us apply our ruling in Insular Life Assurance Co., Ltd. v. NLRC and
Labor Code, wage shall mean however designated, capable of being expressed in terms of [12]
Basiao to the instant case under the doctrine of stare decisis, postulating that both cases
[10]
money, whether fixed or ascertained on a time, task, price or commission basis x x x x involve parties similarly situated and facts which are almost Identical.
As to the matter involving the power of dismissal and control by the employer, the latter But we are not convinced that the cited case is on all fours with the case at bar. In Basiao,
of which is the most important of the test, petitioner asserts that its termination of De los the agent was appointed Agency Manager under an Agency Manager Contract. To implement
Reyes was but an exercise of its inherent right as principal under the contracts and that the his end of the agreement, Melecio Basiao organized an agency office to which he gave the
rules and guIdelines it set forth in the contract cannot, by any stretch of imagination, be name M. Basiao and Associates. The Agency Manager Contract practically contained the same
deemed as an exercise of control over the private respondent as these were merely directives terms and conditions as the Agency Contract earlier entered into, and the Court observed that
that fixed the desired result without dictating the means or method to be employed in drawn from the terms of the contract they had entered into, (which) either expressly or by
[11]
attaining it. The following factual findings of the NLRC however contradict such claims: necessary implication, Basiao (was) made the master of his own time and selling methods, left
to his own judgment the time, place and means of soliciting insurance, set no
A perusal of the appointment of complainant as Acting Unit Manager reveals that: accomplishment quotas and compensated him on the bases of results obtained. He was not
bound to observe any schedule of working hours or report to any regular station; he could seek
1. Complainant was to exclusively serve respondent company. Thus it is and work on his prospects anywhere and anytime he chose to and was free to adopt the selling
provIded: x x x 7..7 Other causes of Termination: This Appointment may likewise be methods he deemed most effective. Upon these premises, Basiao was considered as agent an
terminated for any of the following causes: x x x 7..7..2. Your entering the service of independent contractor of petitioner INSULAR LIFE.
the government or another life insurance company; 7..7..3. Your accepting a Unlike Basiao, herein respondent De los Reyes was appointed Acting Unit Manager, not
managerial or supervisory position in any firm doing business in the Philippines agency manager. There is not evidence that to implement his obligations under the
without the written consent of the Company; x x x management contract, De los Reyes had organized an office. Petitioner in fact has admitted
that it provIded De los Reyes a place and a table at its office where he reported for and worked
2. Complainant was required to meet certain manpower and whenever he was not out in the field. Placed under petitioners Cebu District Service Office, the
production quotas. unit was given a name by petitioner De los Reyes and Associates and assigned Code No. 11753
and Recruitment No. 109398. Under the managership contract, De los Reyes was obliged to
3. Respondent (herein petitioner) controlled the assignment and removal of work exclusively for petitioner in life insurance solicitation and was imposed premium
soliciting agents to and from complainants unit, thus: x x x 7..2. Assignment of Agents: production quotas. Of course, the acting unit manager could not underwrite other lines of
Agents recruited and trained by you shall be attached to your unit unless for reasons insurance because his Permanent Certificate of Authority was for life insurance only and for
of Company policy, no such assignment should be made. The Company retains the no other. He was proscribed from accepting a managerial or supervisory position in any other
exclusive right to assign new soliciting agents appointed and assigned to the saId unit office including the government without the written consent of petitioner. De los Reyes could
x x x x only be promoted to permanent unit manager if he met certain requirements and his
promotion was recommended by the petitioners District Manager and Regional Manager and
approved by its Division Manager. As Acting Unit Manager, De los Reyes performed functions
It would not be amiss to state the respondents duty to collect the companys premiums
beyond mere solicitation of insurance business for petitioner. As found by the NLRC, he
using company receipts under Sec. 7.4 of the management contract is further evIdence of
exercised administrative functions which were necessary and beneficial to the business of
petitioners control over respondent, thus:
INSULAR LIFE.
xxxx [13]
In Great Pacific Life Insurance Company v. NLRC which is closer in application
that Basiao to this present controversy, we found that the relationships of the Ruiz brothers
7.4 Acceptance and Remittance of Premiums. x x x x the Company hereby authorizes you to and Grepalife were those of employer-employee. First, their work at the time of their dismissal
accept and receive sums of money in payment of premiums, loans, deposits on applications, as zone supervisor and district manager was necessary and desirable to the usual business of
with or without interest, due from policy holders and applicants for insurance, and the like, the insurance company. They were entrusted with supervisory, sales and other functions to
specially from policyholders of business solicited and sold by the agents attached to your unit guard Grepalifes business interests and to bring in more clients to the company, and even with
provIded however, that all such payments shall be duly receipted by you on the
administrative functions to ensure that all collections, reports and data are faithfully brought
to the company x x x x A cursory reading of their respective functions as enumerated in their
contracts reveals that the company practically dictates the manner by which their jobs are to
be carried out x x x x We need elaborate no further.

Exclusivity of service, control of assignments and removal of agents under private

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

WHEREFORE, the petition of Insular Life Assurance Company, Ltd., is DENIED and the
Decision of the National Labor Relations Commission dated 3 March 1995 and its Order of 6
April 1996 sustaining it are AFFIRMED. Let this case be REMANDED to the Labor Arbiter a
quo who is directed to hear and dispose of this case with deliberate dispatch in light of the
views expressed herein.

SO ORDERED.

Davide, Jr. (Chairman), Vitug, Panganiban and Quisumbing, JJ., concur.

ANGELITO L. LAZARO, Proprietor of Royal Star Marketing, petitioner, agent who was paid purely on commission basis, not included in the company payroll, and
vs. who neither observed regular working hours nor accomplished time cards.
SOCIAL SECURITY COMMISSION, ROSALINA LAUDATO, SOCIAL SECURITY SYSTEM and THE
HONORABLE COURT OF APPEALS, respondents. In its assailed Decision, the Court of Appeals noted that Lazaro's arguments were a reprise of
10
those already presented before the SSC. Moreover, Lazaro had not come forward with
particulars and specifics in his petition to show that the Commission's ruling is not supported
11
by substantial evidence. Thus, the appellate court affirmed the finding that Laudato was an
employee of Royal Star, and hence entitled to coverage under the Social Security Law.
D E C I S I O N
Before this Court, Lazaro again insists that Laudato was not qualified for social security
coverage, as she was not an employee of Royal Star, her income dependent on a generation
12
of sales and based on commissions. It is argued that Royal Star had no control over
Laudato's activities, and that under the so-called "control test," Laudato could not be
13
deemed an employee.
TINGA, J.:

1 It is an accepted doctrine that for the purposes of coverage under the Social Security Act, the
Before us is a Petition for Review under Rule 45, assailing the Decision of the Court of
2 determination of employer-employee relationship warrants the application of the "control
Appeals Fifteenth Division in CA-G.R. Sp. No. 40956, promulgated on 20 November 1998,
test," that is, whether the employer controls or has reserved the right to control the
which affirmed two rulings of the Social Security Commission ("SSC") dated 8 November 1995
employee, not only as to the result of the work done, but also as to the means and methods
and 24 April 1996. 14
by which the same is accomplished. The SSC, as sustained by the Court of Appeals, applying
the control test found that Laudato was an employee of Royal Star. We find no reversible
Private respondent Rosalina M. Laudato ("Laudato") filed a petition before the SSC for social error.
security coverage and remittance of unpaid monthly social security contributions against her
three (3) employers. Among the respondents was herein petitioner Angelito L. Lazaro
Lazaro's arguments are nothing more but a mere reiteration of arguments unsuccessfully
("Lazaro"), proprietor of Royal Star Marketing ("Royal Star"), which is engaged in the business
3 posed before two bodies: the SSC and the Court of Appeals. They likewise put to issue factual
of selling home appliances. Laudato alleged that despite her employment as sales supervisor
questions already passed upon twice below, rather than questions of law appropriate for
of the sales agents for Royal Star from April of 1979 to March of 1986, Lazaro had failed
review under a Rule 45 petition. The determination of an employer-employee relationship
during the said period, to report her to the SSC for compulsory coverage or remit Laudato's
4 depends heavily on the particular factual circumstances attending the professional
social security contributions. 15
interaction of the parties. The Court is not a trier of facts and accords great weight to the
16
factual findings of lower courts or agencies whose function is to resolve factual matters.
Lazaro denied that Laudato was a sales supervisor of Royal Star, averring instead that she
was a mere sales agent whom he paid purely on commission basis. Lazaro also maintained
Lazaro's arguments may be dispensed with by applying precedents. Suffice it to say, the fact
that Laudato was not subjected to definite hours and conditions of work. As such, Laudato
5 that Laudato was paid by way of commission does not preclude the establishment of an
could not be deemed an employee of Royal Star. 17
employer-employee relationship. In Grepalife v. Judico, the Court upheld the existence of
an employer-employee relationship between the insurance company and its agents, despite
After the parties submitted their respective position papers, the SSC promulgated the fact that the compensation that the agents on commission received was not paid by the
6 7
a Resolution dated 8 November 1995 ruling in favor of Laudato. Applying the "control test," 18
company but by the investor or the person insured. The relevant factor remains, as stated
it held that Laudato was an employee of Royal Star, and ordered Royal Star to pay the earlier, whether the "employer" controls or has reserved the right to control the "employee"
unremitted social security contributions of Laudato in the amount of Five Thousand Seven not only as to the result of the work to be done but also as to the means and methods by
Pesos and Thirty Five Centavos (P5,007.35), together with the penalties totaling Twenty Two which the same is to be accomplished.
19

Thousand Two Hundred Eighteen Pesos and Fifty Four Centavos (P22,218.54). In addition,
Royal Star was made liable to pay damages to the SSC in the amount of Fifteen Thousand Six
Neither does it follow that a person who does not observe normal hours of work cannot be
Hundred Eighty Pesos and Seven Centavos (P15,680.07) for not reporting Laudato for social 20
8 deemed an employee. In Cosmopolitan Funeral Homes, Inc. v. Maalat, the employer
security coverage, pursuant to Section 24 of the Social Security Law.
similarly denied the existence of an employer-employee relationship, as the claimant
9
according to it, was a "supervisor on commission basis" who did not observe normal hours of
After Lazaro's Motion for Reconsideration before the SSC was denied, Lazaro filed a Petition work. This Court declared that there was an employer-employee relationship, noting that
for Review with the Court of Appeals. Lazaro reiterated that Laudato was merely a sales "[the] supervisor, although compensated on commission basis, [is] exempt from the
observance of normal hours of work for his compensation is measured by the number of WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of Appeals dated
21
sales he makes." 20 November 1998 is AFFIRMED. Costs against petitioner.

It should also be emphasized that the SSC, also as upheld by the Court of Appeals, found that SO ORDERED.
22
Laudato was a sales supervisor and not a mere agent. As such, Laudato oversaw and
supervised the sales agents of the company, and thus was subject to the control of Puno, Chairman, Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.
management as to how she implements its policies and its end results. We are disinclined to
reverse this finding, in the absence of countervailing evidence from Lazaro and also in light of

the fact that Laudato's calling cards from Royal Star indicate that she is indeed a sales

supervisor.


The finding of the SSC that Laudato was an employee of Royal Star is supported by
substantial evidence. The SSC examined the cash vouchers issued by Royal Star to
23
Laudato, calling cards of Royal Star denominating Laudato as a "Sales Supervisor" of the
24
company, and Certificates of Appreciation issued by Royal Star to Laudato in recognition of
25
her unselfish and loyal efforts in promoting the company. On the other hand, Lazaro has
failed to present any convincing contrary evidence, relying instead on his bare assertions. The
Court of Appeals correctly ruled that petitioner has not sufficiently shown that the SSC's
ruling was not supported by substantial evidence.

A piece of documentary evidence appreciated by the SSC is Memorandum dated 3 May 1980
of Teresita Lazaro, General Manager of Royal Star, directing that no commissions were to be
given on all "main office" sales from walk-in customers and enjoining salesmen and sales
26
supervisors to observe this new policy. The Memorandum evinces the fact that, contrary to
Lazaro's claim, Royal Star exercised control over its sales supervisors or agents such as
Laudato as to the means and methods through which these personnel performed their work.

Finally, Lazaro invokes our ruling in the 1987 case of Social Security System v. Court of
27
Appeals that a person who works for another at his own pleasure, subject to definite hours
or conditions of work, and is compensated according to the result of his effort is not an
28
employee. The citation is odd for Lazaro to rely upon, considering that in the cited case, the
Court affirmed the employee-employer relationship between a sales agent and the cigarette
29
firm whose products he sold. Perhaps Lazaro meant instead to cite our 1969 ruling in the
30
similarly-titled case of Social Security System v. Court of Appeals, also cited in the later
eponymous ruling, whose disposition is more in accord with Lazaro's argument.


Yet, the circumstances in the 1969 case are very different from those at bar. Ruling on the

question whether jockeys were considered employees of the Manila Jockey Club, the Court

noted that the jockeys were actually subjected to the control of the racing steward, whose
31
authority in turn was defined by the Games and Amusements Board. Moreover, the jockey's

choice as to which horse to mount was subject to mutual agreement between the horse
32
owner and the jockey, and beyond the control of the race club. In the case at bar, there is

no showing that Royal Star was similarly precluded from exerting control or interference over

the manner by which Laudato performed her duties. On the contrary, substantial evidence as

found by the SSC and the Court of Appeals have established the element of control

determinative of an employer-employee relationship. We affirm without hesitation.


EDDIE DOMASIG, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (SECOND We find the decision of the Labor Arbiter not supported by evidence on record. The issue of
DIVISION), CATA GARMENTS CORPORATION and/or OTTO ONG and CATALINA whether or not complainant was a commission agent was not fully resolved in the assailed
CO, respondents. decision. It appears that the Labor Arbiter failed to appreciate the evidences submitted by
respondent as Annexes B and B-1 (Rollo pp. 22-27) in support of its allegation as regard[s] the
D E C I S I O N nature of complainants employment. Neither is there a showing that the parties were
required to adduce further evidence to support their respective claim. The resolution of the
PADILLA, J.: nature of complainants employment is vital to the case at bar considering that it would be
determinative to his entitlement of monetary benefits. The same is similarly true as regard
This petition for certiorari under Rule 65 of the Rules of Court seeks to nullify and set the claim [sic] for unpaid commission. The amount being claim [sic] for unpaid commission as
[1]
aside the Resolution of respondent National Labor Relations Commission (NLRC) rendered big as it is requires substantial proof to establish the entitlement of the complainant to the
on 20 September 1994 remanding the records of the case to the arbitration branch of origin same. We take note of the respondents claim that while they admit that complainant has an
for further proceedings. unpaid commission due him, the same is only for his additional sale of 4,027 pieces at regular
price and 1,047 pieces at bargain price for a total sum of (P20,135.00 + 2,655.00)
The antecedent facts as narrated by public respondent in the assailed resolution are as or P22,820.00 as appearing in the list of Sales and unpaid commission (Annex C and C-1'
follows: Appeal, Rollo pp. 100-102). Said amount according to respondent is being withheld by them
pending the accounting of money collected by complainant from his two (2) buyers which
The complaint was instituted by Eddie Domasig against respondents Cata Garments was not remitted to them. Considering the conflicting version of the parties regarding the
Corporation, a company engaged in garments business and its owner/manager Otto Ong and issues on hand, it was incumbent on the Labor Arbiter to conduct further proceedings
Catalina Co for illegal dismissal, unpaid commission and other monetary thereon. The ends of justice would better be served if both parties are given the opportunity
[3]
claim[s]. Complainant alleged that he started working with the respondent on July 6, 1986 as to ventilate further their positions.
Salesman when the company was still named Cato Garments Corporation; that three (3)
years ago, because of a complaint against respondent by its workers, it changed its name to In their comment on the petition at bar, private respondents agree with the finding of
Cata Garments Corporation; and that on August 29, 1992, he was dismissed when the NLRC that the nature of petitioners employment with private respondents is vital to the
respondent learned that he was being pirated by a rival corporation which offer he refused. case as it will determine the monetary benefits to which he is entitled. They further aver that
Prior to his dismissal, complainant alleged that he was receiving a salary of P1,500.00 a the evidence presented upon which the labor arbiter based her decision is insufficient, so that
month plus commission. On September 3, 1992 he filed the instant complaint. the NLRC did not commit grave abuse of discretion in remanding the case to the arbitration
branch of origin for further proceedings.
Respondent denied complainants claim that he is a regular employee contending that he is a
The comment of the Solicitor General is substantially the same as that of private
mere commission agent who receives a commission of P5.00 per piece of article sold at
respondents, i.e., there is no sufficient evidence to prove employer-employee relationship
regular price and P2.50 per piece sold in [sic] bargain price; that in addition to commission,
between the parties. Furthermore, he avers that the order of the NLRC to the labor arbiter for
complainant received a fixed allowance of P1,500.00 a month; that he had no regular time
further proceedings does not automatically translate to a protracted trial on the merits for
schedule; and that the company come [sic] into existence only on September 17, 1991. In
such can be faithfully complied with through the submission of additional documents or
support of its claim that complainant is a commission agent, respondent submitted as
pleadings only.
Annexes B and B-1 the List of Sales Collections, Computation of Commission due, expenses
incurred, cash advances received for the month of January and March 1992 (Rollo pp. 22- The only issue to be resolved in this petition is whether or not the NLRC gravely abused
27). Respondent further contends that complainant failed to turn over to the respondent his its discretion in vacating and setting aside the decision of the labor arbiter and remanding the
collection from two (2) buyers as per affidavit executed by these buyers (Rollo pp. 28-29) and case to the arbitration branch of origin for further proceedings.
for which, according to respondent it initiated criminal proceedings against the complainant.
In essence, respondent NLRC was not convinced that the evidence presented by the
petitioner, consisting of the identification card issued to him by private respondent
The Labor Arbiter held that complainant was illegally dismissed and entitled to reinstatement
corporation and the cash vouchers reflecting his monthly salaries covering the months stated
and backwages as well as underpayment of salary; 13th month pay; service incentive leave
therein, settled the issue of employer-employee relationship between private respondents
and legal holiday. The Arbiter also awarded complainant his claim for unpaid commission in
[2] and petitioner.
the amount of P143,955.00.
It has long been established that in administrative and quasi-judicial proceedings,
Private respondents appealed the decision of the labor arbiter to public respondent. As substantial evidence is sufficient as a basis for judgment on the existence of employer-
aforesaid, the NLRC resolved to remand the case to the labor arbiter for further proceeding. It employee relationship. No particular form of evidence is required to prove the existence of
declared as follows: such employer-employee relationship. Any competent and relevant evidence to prove the
[4]
relationship may be admitted.
 Substantial evidence has been defined to be such relevant evidence as a reasonable private respondents. The labor arbiters conclusion that petitioners dismissal is therefore
mind might accept as adequate to support a conclusion, and its absence is not shown by illegal, is not necessarily arbitrary or erroneous. It is entitled to great weight and respect.
stressing that there is contrary evidence on record, direct or circumstantial, for the appellate
court cannot substitute its own judgment or criterion for that of the trial court in determining It was error and grave abuse of discretion for the NLRC to remand the case for further
wherein lies the weight of evidence or what evidence is entitled to belief.
[5] proceedings to determine whether or not petitioner was private respondents employee.This
would only prolong the final disposition of the complaint. It is stressed that, in labor cases,
In a business establishment, an identification card is usually provided not only as a simplification of procedures, without regard to technicalities and without sacrificing the
security measure but mainly to identify the holder thereof as a bona fide employee of the firm fundamental requisites of due process, is mandated to ensure the speedy administration of
[8]
that issues it. Together with the cash vouchers covering petitioners salaries for the months justice.
stated therein, we agree with the labor arbiter that these matters constitute substantial
evidence adequate to support a conclusion that petitioner was indeed an employee of private After all, Article 218 of the Labor Code grants the Commission and the labor arbiter broad
respondent. powers, including issuance of subpoena, requiring the attendance and testimony of witnesses
or the production of such documentary evidence as may be material to a just determination
Section 4, Rule V of the Rules of Procedure of the National Labor Relations Commission of the matter under investigation.
provides thus:
Additionally, the National Labor Relations Commission and the labor arbiter have
authority under the Labor Code to decide a case based on the position papers and documents
Section 4. Determination of Necessity of Hearing. Immediately after the submission of the [9]
submitted without resorting to the technical rules of evidence.
parties of their position papers/memoranda, the Labor Arbiter shall motu propio determine
whether there is need for a formal trial or hearing. At this stage, he may, at his discretion and However, in view of the need for further and correct computation of the petitioners
for the purpose of making such determination, ask clarificatory questions to further elicit commissions in the light of the exhibits presented and the dismissal of the criminal cases filed
facts or information, including but not limited to the subpoena of relevant documentary against petitioner, the labor arbiter is required to undertake a new computation of the
evidence, if any, from any party or witness. commissions to which petitioner may be entitled, within thirty (30) days from submission by
the parties of all necessary documents.
It is clear from the law that it is the arbiters who are authorized to determine whether or not
WHEREFORE, the resolutions of the public respondent dated 20 September 1994 and 9
there is a necessity for conducting formal hearings in cases brought before them for
November 1994 are SET ASIDE. The decision of the labor arbiter dated 19 May 1993 is
adjudication. Such determination is entitled to great respect in the absence of
[6] REINSTATED and AFFIRMED subject to the modification above-stated as regards a re-
arbitrariness. computation by the labor arbiter of the commissions to which petitioner maybe actually
entitled.
In the case at bar, we do not believe that the labor arbiter acted arbitrarily. Contrary to
the finding of the NLRC, her decision at least on the existence of an employer-employee SO ORDERED.
relationship between private respondents and petitioner, is supported by substantial evidence
Bellosillo, Vitug, Kapunan, and Hermosisima, Jr., JJ., concur.
on record.

The list of sales collection including computation of commissions due, expenses incurred
and cash advances received (Exhibits B and B-1) which, according to public respondent, the
labor arbiter failed to appreciate in support of private respondents allegation as regards the
nature of petitioners employment as a commission agent, cannot overcome the evidence of
the ID card and salary vouchers presented by petitioner which private respondents have not
denied. The list presented by private respondents would even support petitioners allegation
that, aside from a monthly salary of P1,500.00, he also received commissions for his work as a
salesman of private respondents.

Having been in the employ of private respondents continuously for more than one year,
under the law, petitioner is considered a regular employee. Proof beyond reasonable doubt is
not required as a basis for judgment on the legality of an employers dismissal of an employee,
nor even preponderance of evidence for that matter, substantial evidence being
[7]
sufficient. Petitioners contention that private respondents terminated his employment due
to their suspicion that he was being enticed by another firm to work for it was not refuted by

PHILIPPINE GLOBAL COMMUNICATIONS, INC., petitioner, being made clear therein that respondent will cover "the retainership the Company
vs. previously had with Dr. K. Eulau" and that respondents "retainer fee" will be at P4,000.00 a
5
RICARDO DE VERA, respondent. month. Said contract was renewed yearly. The retainership arrangement went on from 1981
to 1994 with changes in the retainers fee. However, for the years 1995 and 1996, renewal of
D E C I S I O N the contract was only made verbally.

GARCIA, J.: The turning point in the parties relationship surfaced in December 1996 when Philcom, thru
6
a letter bearing on the subject boldly written as "TERMINATION RETAINERSHIP
CONTRACT", informed De Vera of its decision to discontinue the latters "retainers contract
Before us is this appeal by way of a petition for review on certiorari from the 12 September
1 2 with the Company effective at the close of business hours of December 31, 1996" because
2002 Decision and the 13 February 2003 Resolution of the Court of Appeals in CA-G.R. SP
management has decided that it would be more practical to provide medical services to its
No. 65178, upholding the finding of illegal dismissal by the National Labor Relations
employees through accredited hospitals near the company premises.
Commission against petitioner.

On 22 January 1997, De Vera filed a complaint for illegal dismissal before the National Labor
As culled from the records, the pertinent facts are:
Relations Commission (NLRC), alleging that that he had been actually employed by Philcom
as its company physician since 1981 and was dismissed without due process. He averred that
Petitioner Philippine Global Communications, Inc. (PhilCom), is a corporation engaged in the he was designated as a "company physician on retainer basis" for reasons allegedly known
business of communication services and allied activities, while respondent Ricardo De Vera is only to Philcom. He likewise professed that since he was not conversant with labor laws, he
a physician by profession whom petitioner enlisted to attend to the medical needs of its did not give much attention to the designation as anyway he worked on a full-time basis and
employees. At the crux of the controversy is Dr. De Veras status vis a vis petitioner when the was paid a basic monthly salary plus fringe benefits, like any other regular employees of
latter terminated his engagement. Philcom.

3
It appears that on 15 May 1981, De Vera, via a letter dated 15 May 1981, offered his On 21 December 1998, Labor Arbiter Ramon Valentin C. Reyes came out with a
services to the petitioner, therein proposing his plan of works required of a practitioner in 7
decision dismissing De Veras complaint for lack of merit, on the rationale that as a "retained
industrial medicine, to include the following: physician" under a valid contract mutually agreed upon by the parties, De Vera was an
"independent contractor" and that he "was not dismissed but rather his contract with
1. Application of preventive medicine including periodic check-up of employees; [PHILCOM] ended when said contract was not renewed after December 31, 1996".

8
2. Holding of clinic hours in the morning and afternoon for a total of five (5) hours On De Veras appeal to the NLRC, the latter, in a decision dated 23 October 2000, reversed
daily for consultation services to employees; (the word used is "modified") that of the Labor Arbiter, on a finding that De Vera is Philcoms
"regular employee" and accordingly directed the company to reinstate him to his former
3. Management and treatment of employees that may necessitate hospitalization position without loss of seniority rights and privileges and with full backwages from the date
including emergency cases and accidents; of his dismissal until actual reinstatement. We quote the dispositive portion of the decision:

4. Conduct pre-employment physical check-up of prospective employees with no WHEREFORE, the assailed decision is modified in that respondent is ordered to reinstate
additional medical fee; complainant to his former position without loss of seniority rights and privileges with full
backwages from the date of his dismissal until his actual reinstatement computed as follows:

5. Conduct home visits whenever necessary;

Backwages:
6. Attend to certain medical administrative function such as accomplishing medical
forms, evaluating conditions of employees applying for sick leave of absence and a) Basic Salary
subsequently issuing proper certification, and all matters referred which are From Dec. 31, 1996 to Apr. 10, 2000 = 39.33 mos.
medical in nature. P44,400.00 x 39.33 mos. P1,750,185.00

The parties agreed and formalized respondents proposal in a document denominated 13th Month Pay:
b) 145,848.75
4
as RETAINERSHIP CONTRACT which will be for a period of one year subject to renewal, it 1/12 of P1,750,185.00
 Under Rule 45 of the Rules of Court, only questions of law may be reviewed by this Court in
Travelling allowance:
c) 39,330.00 decisions rendered by the Court of Appeals. There are instances, however, where the Court
P1,000.00 x 39.33 mos.
departs from this rule and reviews findings of fact so that substantial justice may be served.
The exceptional instances are where:

GRAND TOTAL P1,935,363.75
"xxx xxx xxx (1) the conclusion is a finding grounded entirely on speculation, surmise and
conjecture; (2) the inference made is manifestly mistaken; (3) there is grave abuse of
The decision stands in other aspects. discretion; (4) the judgment is based on a misapprehension of facts; (5) the findings of fact
are conflicting; (6) the Court of Appeals went beyond the issues of the case and its findings
are contrary to the admissions of both appellant and appellees; (7) the findings of fact of the
SO ORDERED.
Court of Appeals are contrary to those of the trial court; (8) said findings of facts are
conclusions without citation of specific evidence on which they are based; (9) the facts set
With its motion for reconsideration having been denied by the NLRC in its order of 27 forth in the petition as well as in the petitioners main and reply briefs are not disputed by
9
February 2001, Philcom then went to the Court of Appeals on a petition for certiorari, the respondents; and (10) the findings of fact of the Court of Appeals are premised on the
thereat docketed as CA-G.R. SP No. 65178, imputing grave abuse of discretion amounting to supposed absence of evidence and contradicted by the evidence on record."
12

lack or excess of jurisdiction on the part of the NLRC when it reversed the findings of the
labor arbiter and awarded thirteenth month pay and traveling allowance to De Vera even as
As we see it, the parties respective submissions revolve on the primordial issue of whether
such award had no basis in fact and in law.
an employer-employee relationship exists between petitioner and respondent, the existence
13
10
of which is, in itself, a question of fact well within the province of the NLRC. Nonetheless,
On 12 September 2002, the Court of Appeals rendered a decision, modifying that of the given the reality that the NLRCs findings are at odds with those of the labor arbiter, the
NLRC by deleting the award of traveling allowance, and ordering payment of separation pay 14
Court, consistent with its ruling in Jimenez vs. National Labor Relations Commission, is
to De Vera in lieu of reinstatement, thus: constrained to look deeper into the attendant circumstances obtaining in this case, as
appearing on record.
WHEREFORE, premises considered, the assailed judgment of public respondent, dated 23
October 2000, is MODIFIED. The award of traveling allowance is deleted as the same is 15
In a long line of decisions, the Court, in determining the existence of an employer-
hereby DELETED. Instead of reinstatement, private respondent shall be paid separation pay employee relationship, has invariably adhered to the four-fold test, to wit: [1] the selection
computed at one (1) month salary for every year of service computed from the time private and engagement of the employee; [2] the payment of wages; [3] the power of dismissal; and
respondent commenced his employment in 1981 up to the actual payment of the backwages [4] the power to control the employees conduct, or the so-called "control test", considered
and separation pay. The awards of backwages and 13th month pay STAND. to be the most important element.

SO ORDERED. Applying the four-fold test to this case, we initially find that it was respondent himself who
sets the parameters of what his duties would be in offering his services to petitioner. This is
16
In time, Philcom filed a motion for reconsideration but was denied by the appellate court in borne by no less than his 15 May 1981 letter which, in full, reads:
11
its resolution of 13 February 2003.
"May 15, 1981
Hence, Philcoms present recourse on its main submission that -
Mrs. Adela L. Vicente
THE COURT OF APPEALS ERRED IN SUSTAINING THE DECISION OF THE NATIONAL LABOR Vice President, Industrial Relations
RELATIONS COMMISSION AND RENDERING THE QUESTIONED DECISION AND RESOLUTION IN PhilCom, Paseo de Roxas
A WAY THAT IS NOT IN ACCORD WITH THE FACTS AND APPLICABLE LAWS AND Makati, Metro Manila
JURISPRUDENCE WHICH DISTINGUISH LEGITIMATE JOB CONTRACTING AGREEMENTS FROM
THE EMPLOYER-EMPLOYEE RELATIONSHIP. M a d a m :

We GRANT. I shall have the time and effort for the position of Company physician with your corporation
if you deemed it necessary. I have the necessary qualifications, training and experience
required by such position and I am confident that I can serve the best interests of your To carry out your memo effectively and to provide a systematic and workable time schedule
employees, medically. which will serve the best interests of both the present and absent employee, may I propose
an extended two-hour service (1:00-3:00 P.M.) during which period I can devote ample time
My plan of works and targets shall cover the duties and responsibilities required of a to both groups depending upon the urgency of the situation. I shall readjust my private
practitioner in industrial medicine which includes the following: schedule to be available for the herein proposed extended hours, should you consider this
proposal.
1. Application of preventive medicine including periodic check-up of
employees; As regards compensation for the additional time and services that I shall render to the
employees, it is dependent on your evaluation of the merit of my proposal and your
confidence on my ability to carry out efficiently said proposal.
2. Holding of clinic hours in the morning and afternoon for a total of five
(5) hours daily for consultation services to employees;
The tenor of this letter indicates that the complainant was proposing to extend his time with
the respondent and seeking additional compensation for said extension. This shows that the
3. Management and treatment of employees that may necessitate
respondent PHILCOM did not have control over the schedule of the complainant as it [is] the
hospitalization including emergency cases and accidents;
complainant who is proposing his own schedule and asking to be paid for the same. This is
proof that the complainant understood that his relationship with the respondent PHILCOM
4. Conduct pre-employment physical check-up of prospective employees was a retained physician and not as an employee. If he were an employee he could not
with no additional medical fee; negotiate as to his hours of work.

5. Conduct home visits whenever necessary; The complainant is a Doctor of Medicine, and presumably, a well-educated person. Yet, the
complainant, in his position paper, is claiming that he is not conversant with the law and did
6. Attend to certain medical administrative functions such as not give much attention to his job title- on a retainer basis. But the same complainant
accomplishing medical forms, evaluating conditions of employees admits in his affidavit that his service for the respondent was covered by a retainership
applying for sick leave of absence and subsequently issuing proper contract [which] was renewed every year from 1982 to 1994. Upon reading the contract
certification, and all matters referred which are medical in nature. dated September 6, 1982, signed by the complainant himself (Annex C of Respondents
Position Paper), it clearly states that is a retainership contract. The retainer fee is indicated
On the subject of compensation for the services that I propose to render to the corporation, thereon and the duration of the contract for one year is also clearly indicated in paragraph 5
you may state an offer based on your belief that I can very well qualify for the job having of the Retainership Contract. The complainant cannot claim that he was unaware that the
worked with your organization for sometime now. contract was good only for one year, as he signed the same without any objections. The
complainant also accepted its renewal every year thereafter until 1994. As a literate person
and educated person, the complainant cannot claim that he does not know what contract he
I shall be very grateful for whatever kind attention you may extend on this matter and hoping signed and that it was renewed on a year to year basis.
17
that it will merit acceptance, I remain
The labor arbiter added the indicia, not disputed by respondent, that from the time he
Very truly yours, started to work with petitioner, he never was included in its payroll; was never deducted any
contribution for remittance to the Social Security System (SSS); and was in fact subjected by
(signed) petitioner to the ten (10%) percent withholding tax for his professional fee, in accordance
RICARDO V. DE VERA, M.D." with the National Internal Revenue Code, matters which are simply inconsistent with an
employer-employee relationship. In the precise words of the labor arbiter:
Significantly, the foregoing letter was substantially the basis of the labor arbiters finding that
there existed no employer-employee relationship between petitioner and respondent, in "xxx xxx xxx After more than ten years of services to PHILCOM, the complainant would have
addition to the following factual settings: noticed that no SSS deductions were made on his remuneration or that the respondent was
deducting the 10% tax for his fees and he surely would have complained about them if he
The fact that the complainant was not considered an employee was recognized by the had considered himself an employee of PHILCOM. But he never raised those issues. An
complainant himself in a signed letter to the respondent dated April 21, 1982 attached as ordinary employee would consider the SSS payments important and thus make sure they
Annex G to the respondents Reply and Rejoinder. Quoting the pertinent portion of said would be paid. The complainant never bothered to ask the respondent to remit his SSS
letter: contributions. This clearly shows that the complainant never considered himself an employee
of PHILCOM and thus, respondent need not remit anything to the SSS in favor of the activity in which he is employed and his employment shall continue while such activity
18
complainant." exists.

Clearly, the elements of an employer-employee relationship are wanting in this case. We may Parenthetically, the position of company physician, in the case of petitioner, is usually
add that the records are replete with evidence showing that respondent had to bill petitioner necessary and desirable because the need for medical attention of employees cannot be
19
for his monthly professional fees. It simply runs against the grain of common experience to foreseen, hence, it is necessary to have a physician at hand. In fact, the importance and
imagine that an ordinary employee has yet to bill his employer to receive his salary. desirability of a physician in a company premises is recognized by Art. 157 of the Labor Code,
which requires the presence of a physician depending on the number of employees and in
We note, too, that the power to terminate the parties relationship was mutually vested on the case at bench, in petitioners case, as found by public respondent, petitioner employs
20
both. Either may terminate the arrangement at will, with or without cause. more than 500 employees.

Finally, remarkably absent from the parties arrangement is the element of control, whereby Going back to Art. 280 of the Labor Code, it was made therein clear that the provisions of a
the employer has reserved the right to control the employee not only as to the result of the written agreement to the contrary notwithstanding or the existence of a mere oral
work done but also as to the means and methods by which the same is to be accomplished.
21 agreement, if the employee is engaged in the usual business or trade of the employer, more
so, that he rendered service for at least one year, such employee shall be considered as
a regular employee. Private respondent herein has been with petitioner since 1981 and his
Here, petitioner had no control over the means and methods by which respondent went
employment was not for a specific project or undertaking, the period of which was pre-
about performing his work at the company premises. He could even embark in the private
determined and neither the work or service of private respondent seasonal. (Emphasis by the
practice of his profession, not to mention the fact that respondents work hours and the
22 CA itself).
additional compensation therefor were negotiated upon by the parties. In fine, the parties
themselves practically agreed on every terms and conditions of respondents engagement,
which thereby negates the element of control in their relationship. For sure, respondent has We disagree to the foregoing ratiocination.
never cited even a single instance when petitioner interfered with his work.
The appellate courts premise that regular employees are those who perform activities which
Yet, despite the foregoing, all of which are extant on record, both the NLRC and the Court of are desirable and necessary for the business of the employer is not determinative in this
Appeals ruled that respondent is petitioners regular employee at the time of his separation. case. For, we take it that any agreement may provide that one party shall render services for
and in behalf of another, no matter how necessary for the latters business, even without
being hired as an employee. This set-up is precisely true in the case of an independent
Partly says the appellate court in its assailed decision:
contractorship as well as in an agency agreement. Indeed, Article 280 of the Labor Code,
quoted by the appellate court, is not the yardstick for determining the existence of an
Be that as it may, it is admitted that private respondents written retainer contract was employment relationship. As it is, the provision merely distinguishes between two (2) kinds
renewed annually from 1981 to 1994 and the alleged renewal for 1995 and 1996, when it of employees, i.e., regular and casual. It does not apply where, as here, the very existence of
was allegedly terminated, was verbal. an employment relationship is in dispute.
23

Article 280 of the Labor code (sic) provides: Buttressing his contention that he is a regular employee of petitioner, respondent invokes
Article 157 of the Labor Code, and argues that he satisfies all the requirements thereunder.
The provisions of written agreement to the contrary notwithstanding and regardless of the The provision relied upon reads:
oral agreements of the parties, an employment shall be deemed to be regular where the
employee has been engaged to perform in the usual business or trade of the employer, ART. 157. Emergency medical and dental services. It shall be the duty of every employer to
except where the employment has been fixed for a specific project or undertaking the furnish his employees in any locality with free medical and dental attendance and facilities
completion or termination of which has been determined at the time of the engagement of consisting of:
the employee or where the work or services to be performed is seasonal in nature and the
employment is for the duration of the season.
(a) The services of a full-time registered nurse when the number of employees
exceeds fifty (50) but not more than two hundred (200) except when the employer
An employment shall be deemed to be casual if it is not covered by the preceding does not maintain hazardous workplaces, in which case the services of a graduate
paragraph: Provided, That, any employee who has rendered at least one (1) year of service, first-aider shall be provided for the protection of the workers, where no registered
whether such is continuous or broken, shall be considered a regular with respect to the nurse is available. The Secretary of Labor shall provide by appropriate regulations
the services that shall be required where the number of employees does not
 exceed fifty (50) and shall determine by appropriate order hazardous workplaces With the recognition of the fact that petitioner consistently engaged the services of
for purposes of this Article; respondent on a retainer basis, as shown by their various "retainership contracts", so can
petitioner put an end, with or without cause, to their retainership agreement as therein
27
(b) The services of a full-time registered nurse, a part-time physician and dentist, provided.
and an emergency clinic, when the number of employees exceeds two hundred
(200) but not more than three hundred (300); and We note, however, that even as the contracts entered into by the parties invariably provide
for a 60-day notice requirement prior to termination, the same was not complied with by
(c) The services of a full-time physician, dentist and full-time registered nurse as petitioner when it terminated on 17 December 1996 the verbally-renewed retainership
well as a dental clinic, and an infirmary or emergency hospital with one bed agreement, effective at the close of business hours of 31 December 1996.
capacity for every one hundred (100) employees when the number of employees
28
exceeds three hundred (300). Be that as it may, the record shows, and this is admitted by both parties, that execution of
the NLRC decision had already been made at the NLRC despite the pendency of the present
In cases of hazardous workplaces, no employer shall engage the services of a physician or recourse. For sure, accounts of petitioner had already been garnished and released to
29
dentist who cannot stay in the premises of the establishment for at least two (2) hours, in the respondent despite the previous Status Quo Order issued by this Court. To all intents and
case of those engaged on part-time basis, and not less than eight (8) hours in the case of purposes, therefore, the 60-day notice requirement has become moot and academic if not
those employed on full-time basis. Where the undertaking is nonhazardous in nature, the waived by the respondent himself.
physician and dentist may be engaged on retained basis, subject to such regulations as the
Secretary of Labor may prescribe to insure immediate availability of medical and dental WHEREFORE, the petition is GRANTED and the challenged decision of the Court of Appeals
treatment and attendance in case of emergency. REVERSED and SET ASIDE. The 21 December 1998 decision of the labor arbiter is
REINSTATED.
Had only respondent read carefully the very statutory provision invoked by him, he would
have noticed that in non-hazardous workplaces, the employer may engage the services of a No pronouncement as to costs.
physician "on retained basis." As correctly observed by the petitioner, while it is true that the
provision requires employers to engage the services of medical practitioners in certain SO ORDERED.
establishments depending on the number of their employees, nothing is there in the law
24
which says that medical practitioners so engaged be actually hired as employees, adding
Panganiban, (Chairman), Corona, and Carpio-Morales, JJ., concur.
that the law, as written, only requires the employer "to retain", not employ, a part-time
Sandoval-Gutierrez, J., on official leave.
physician who needed to stay in the premises of the non-hazardous workplace for two (2)
25
hours.


Respondent takes no issue on the fact that petitioners business of telecommunications is

not hazardous in nature. As such, what applies here is the last paragraph of Article 157

which, to stress, provides that the employer may engage the services of a physician and

dentist "on retained basis", subject to such regulations as the Secretary of Labor may

prescribe. The successive "retainership" agreements of the parties definitely hue to the very

statutory provision relied upon by respondent.


Deeply embedded in our jurisprudence is the rule that courts may not construe a statute that
is free from doubt. Where the law is clear and unambiguous, it must be taken to mean
exactly what it says, and courts have no choice but to see to it that the mandate is
26
obeyed. As it is, Article 157 of the Labor Code clearly and unequivocally allows employers in
non-hazardous establishments to engage "on retained basis" the service of a dentist or
physician. Nowhere does the law provide that the physician or dentist so engaged thereby
becomes a regular employee. The very phrase that they may be engaged "on retained basis",
revolts against the idea that this engagement gives rise to an employer-employee
relationship.

MANILA ELECTRIC COMPANY, petitioner,
Collectors - no need for cash bond, no
vs.
need to reduce quota and
Hon. SECRETARY OF LABOR LEONARDO QUISUMBING and MERALCO EMPLOYEES and
MAPL
WORKERS ASSOCIATION (MEWA), respondent.
exclude confidential
R E S O L U T I O N CBU - include
employees

YNARES-SANTIAGO, J.: Union security - maintenance of membership closed shop

In the Decision promulgated on January 27, 1999, the Court disposed of the case as follows: Contracting out - no need to consult union consult first

WHEREFORE, the petition is granted and the orders of public respondent Secretary All benefits - existing terms and conditions all terms
of Labor dated August 19, 1996 and December 28, 1996 are set aside to the extent
set forth above. The parties are directed to execute a Collective Bargaining Retroactivity - Dec. 28, 1996-Dec. 27, 199(9) from Dec. 1, 1995
Agreement incorporating the terms and conditions contained in the unaffected
portions of the Secretary of Labor's orders of August 19, 1996 and December 28,
Dissatisfied with the Decision, some alleged members of private respondent union (Union for
1996, and the modifications set forth above. The retirement fund issue is
brevity) filed a motion for intervention and a motion for reconsideration of the said Decision.
remanded to the Secretary of Labor for reception of evidence and determination of 2
1 A separate intervention was likewise made by the supervisor's union (FLAMES ) of petitioner
the legal personality of the MERALCO retirement fund. 3
corporation alleging that it has bona fide legal interest in the outcome of the case. The Court
required the "proper parties" to file a comment to the three motions for reconsideration but
The modifications of the public respondent's resolutions include the following: the Solicitor-General asked that he be excused from filing the comment because the
4
"petition filed in the instant case was granted" by the Court. Consequently, petitioner filed
its own consolidated comment. An "Appeal Seeking Immediate Reconsideration" was also
Secretary's 5
filed by the alleged newly elected president of the Union. Other subsequent pleadings were
January 27, 1999 decision
resolution
filed by the parties and intervenors.

Wages - P1,900.00 for 1995-96 P2,200.00

The issues raised in the motions for reconsideration had already been passed upon by the
Court in the January 27, 1999 decision. No new arguments were presented for consideration
X'mas bonus - modified to one month 2 months
of the Court. Nonetheless, certain matters will be considered herein, particularly those
involving the amount of wages and the retroactivity of the Collective Bargaining Agreement
Retirees - remanded to the Secretary granted
(CBA) arbitral awards.
Loan to coops - denied granted
Petitioner warns that if the wage increase of P2,200.00 per month as ordered by the
GHSIP, HMP and Secretary is allowed, it would simply pass the cost covering such increase to the consumers
Housing loans - granted up to P60,000.00 granted through an increase in the rate of electricity. This is a non sequitur. The Court cannot be
threatened with such a misleading argument. An increase in the prices of electric current
Signing bonus - denied granted needs the approval of the appropriate regulatory government agency and does not
automatically result from a mere increase in the wages of petitioner's employees. Besides,
Union leave - 40 days (typo error) 30 days this argument presupposes that petitioner is capable of meeting a wage increase. The All Asia
Capital report upon which the Union relies to support its position regarding the wage issue
cannot be an accurate basis and conclusive determinant of the rate of wage increase. Section
High - not apply to those who are members of a team
45 of Rule 130 Rules of Evidence provides:
voltage/pole not exposed to the risk

Commercial lists and the like. Evidence of statements of matters of interest to

persons engaged in an occupation contained in a list, register, periodical, or other
published compilation is admissible as tending to prove the truth of any relevant
 matter so stated if that compilation is published for use by persons engaged in that retroactive effect. However, the parties dispute the reckoning period when retroaction shall
occupation and is generally used and relied upon by them therein. commence. Petitioner claims that the award should retroact only from such time that the
14
Secretary of Labor rendered the award, invoking the 1995 decision in Pier 8 case where the
15
Under the afore-quoted rule, statement of matters contained in a periodical, may be Court, citing Union of Filipino Employees v. NLRC, said:
admitted only "if that compilation is published for use by persons engaged in that occupation
and is generally used and relied upon by them therein." As correctly held in our Decision The assailed resolution which incorporated the CBA to be signed by the parties was
dated January 27, 1999, the cited report is a mere newspaper account and not even a promulgated on June 5, 1989, the expiry date of the past CBA. Based on the
commercial list. At most, it is but an analysis or opinion which carries no persuasive weight provision of Section 253-A, its retroactivity should be agreed upon by the parties.
for purposes of this case as no sufficient figures to support it were presented. Neither did But since no agreement to that effect was made, public respondent did not abuse
anybody testify to its accuracy. It cannot be said that businessmen generally rely on news its discretion in giving the said CBA a prospective effect. The action of the public
items such as this in their occupation. Besides, no evidence was presented that the respondent is within the ambit of its authority vested by existing law.
publication was regularly prepared by a person in touch with the market and that it is
generally regarded as trustworthy and reliable. Absent extrinsic proof of their accuracy, these On the other hand, the Union argues that the award should retroact to such time granted by
6
reports are not admissible. In the same manner, newspapers containing stock quotations 16
the Secretary, citing the 1993 decision of St. Luke's.
7
are not admissible in evidence when the source of the reports is available. With more
reason, mere analyses or projections of such reports cannot be admitted. In particular, the
Finally, the effectivity of the Order of January 28, 1991, must retroact to the date of
source of the report in this case can be easily made available considering that the same is
the expiration of the previous CBA, contrary to the position of petitioner. Under
necessary for compliance with certain governmental requirements.
the circumstances of the case, Article 253-A cannot be properly applied to herein
case. As correctly stated by public respondent in his assailed Order of April 12,
Nonetheless, by petitioner's own allegations, its actual total net income for 1996 was P5.1 1991 dismissing petitioner's Motion for Reconsideration
8
billion. An estimate by the All Asia financial analyst stated that petitioner's net operating
income for the same year was about P5.7 billion, a figure which the Union relies on to
Anent the alleged lack of basis for the retroactivity provisions awarded;
support its claim. Assuming without admitting the truth thereof, the figure is higher than the
we would stress that the provision of law invoked by the Hospital, Article
P4.171 billion allegedly suggested by petitioner as its projected net operating income. The
253-A of the Labor Code, speaks of agreements by and between the
P5.7 billion which was the Secretary's basis for granting the P2,200.00 is higher than the
parties, and not arbitral awards . . .
actual net income of P5.1 billion admitted by petitioner. It would be proper then to increase
this Court's award of P1,900.00 to P2,000.00 for the two years of the CBA award. For 1992,
the agreed CBA wage increase for rank-and-file was P1,400.00 and was reduced to Therefore, in the absence of a specific provision of law prohibiting retroactivity of
P1,350.00; for 1993; further reduced to P1,150.00 for 1994. For supervisory employees, the the effectivity of arbitral awards issued by the Secretary of Labor pursuant to
agreed wage increase for the years 1992-1994 are P1,742.50, P1,682.50 and P1,442.50, Article 263(g) of the Labor Code, such as herein involved, public respondent is
respectively. Based on the foregoing figures, the P2,000.00 increase for the two-year period deemed vested with plenary and discretionary powers to determine the effectivity
awarded to the rank-and-file is much higher than the highest increase granted to supervisory thereof.
9
employees. As mentioned in the January 27, 1999 Decision, the Court does "not seek to
17
enumerate in this decision the factors that should affect wage determination" because In the 1997 case of Mindanao Terminal, the Court applied the St. Luke's doctrine and ruled
collective bargaining disputes particularly those affecting the national interest and public that:
service "requires due consideration and proper balancing of the interests of the parties to
10
the dispute and of those who might be affected by the dispute." The Court takes judicial In St. Luke's Medical Center v. Torres, a deadlock also developed during the CBA
notice that the new amounts granted herein are significantly higher than the weighted negotiations between management and the union. The Secretary of Labor assumed
average salary currently enjoyed by other rank-and-file employees within the community. It jurisdiction and ordered the retroaction of the CBA to the date of expiration of the
should be noted that the relations between labor and capital is impressed with public previous CBA. As in this case, it was alleged that the Secretary of Labor gravely
11
interest which must yield to the common good. Neither party should act oppressively abused its discretion in making his award retroactive. In dismissing this contention
12
against the other or impair the interest or convenience of the public. Besides, matters of this Court held:
13
salary increases are part of management prerogative.
Therefore, in the absence of a specific provision of law prohibiting
On the retroactivity of the CBA arbitral award, it is well to recall that this petition had its retroactive of the effectivity of arbitral awards issued by the Secretary of
origin in the renegotiation of the parties' 1992-1997 CBA insofar as the last two-year period Labor pursuant to Article 263(g) of the Labor Code, such as herein
thereof is concerned. When the Secretary of Labor assumed jurisdiction and granted the
arbitral awards, there was no question that these arbitral awards were to be given
 involved, public respondent is deemed vested with plenary and no business interest or legal obligation. Courts should not be utilized as a tool to compel any
discretionary powers to determine the effectivity thereof. person to grant loans to another nor to force parties to undertake an obligation without
justification. On the contrary, it is the government that has the obligation to render financial
The Court in the January 27, 1999 Decision, stated that the CBA shall be "effective for a assistance to cooperatives and the Cooperative Code does not make it an obligation of the
22
period of 2 years counted from December 28, 1996 up to December 27, 1999." employer or any private individual.
Parenthetically, this actually covers a three-year period. Labor laws are silent as to when an
arbitral award in a labor dispute where the Secretary had assumed jurisdiction by virtue of Anent the 40-day union leave, the Court finds that the same is a typographical error. In order
Article 263 (g) of the Labor Code shall retroact. In general, a CBA negotiated within six to avoid any confusion, it is herein declared that the union leave is only thirty (30) days as
months after the expiration of the existing CBA retroacts to the day immediately following granted by the Secretary of Labor and affirmed in the Decision of this Court.
such date and if agreed thereafter, the effectivity depends on the agreement of the
18
parties. On the other hand, the law is silent as to the retroactivity of a CBA arbitral award or The added requirement of consultation imposed by the Secretary in cases of contracting out
that granted not by virtue of the mutual agreement of the parties but by intervention of the for six (6) months or more has been rejected by the Court. Suffice it to say that the employer
government. Despite the silence of the law, the Court rules herein that CBA arbitral awards is allowed to contract out services for six months or more. However, a line must be drawn
granted after six months from the expiration of the last CBA shall retroact to such time between management prerogatives regarding business operationsper se and those which
agreed upon by both employer and the employees or their union. Absent such an agreement affect the rights of employees, and in treating the latter, the employer should see to it that
as to retroactivity, the award shall retroact to the first day after the six-month period its employees are at least properly informed of its decision or modes of action in order to
following the expiration of the last day of the CBA should there be one. In the absence of a attain a harmonious labor-management relationship and enlighten the workers concerning
CBA, the Secretary's determination of the date of retroactivity as part of his discretionary 23
their rights. Hiring of workers is within the employer's inherent freedom to regulate and is a
powers over arbitral awards shall control. valid exercise of its management prerogative subject only to special laws and agreements on
24
the matter and the fair standards of justice. The management cannot be denied the faculty
It is true that an arbitral award cannot per se be categorized as an agreement voluntarily of promoting efficiency and attaining economy by a study of what units are essential for its
entered into by the parties because it requires the interference and imposing power of the operation. It has the ultimate determination of whether services should be performed by its
State thru the Secretary of Labor when he assumes jurisdiction. However, the arbitral award personnel or contracted to outside agencies. While there should be mutual consultation,
25
can be considered as an approximation of a collective bargaining agreement which would eventually deference is to be paid to what management decides. Contracting out of
19 26
otherwise have been entered into by the parties. The terms or periods set forth in Article services is an exercise of business judgment or management prerogative. Absent proof that
253-A pertains explicitly to a CBA. But there is nothing that would prevent its application by management acted in a malicious or arbitrary manner, the Court will not interfere with the
27
analogy to an arbitral award by the Secretary considering the absence of an applicable law. exercise of judgment by an employer. As mentioned in the January 27, 1999 Decision, the
28
Under Article 253-A: "(I)f any such agreement is entered into beyond six months, the parties law already sufficiently regulates this matter. Jurisprudence also provides adequate
shall agree on the duration of retroactivity thereof." In other words, the law contemplates limitations, such that the employer must be motivated by good faith and the contracting out
retroactivity whether the agreement be entered into before or after the said six-month should not be resorted to circumvent the law or must not have been the result of malicious
29
period. The agreement of the parties need not be categorically stated for their acts may be or arbitrary actions. These are matters that may be categorically determined only when an
considered in determining the duration of retroactivity. In this connection, the Court actual suit on the matter arises.
considers the letter of petitioner's Chairman of the Board and its President addressed to their
stockholders, which states that the CBA "for the rank-and-file employees covering the period WHEREFORE, the motion for reconsideration is PARTIALLY GRANTED and the assailed
20
December 1, 1995 to November 30, 1997 is still with the Supreme Court," as indicative of Decision is MODIFIED as follows: (1) the arbitral award shall retroact from December 1, 1995
petitioner's recognition that the CBA award covers the said period. Earlier, petitioner's to November 30, 1997; and (2) the award of wage is increased from the original amount of
negotiating panel transmitted to the Union a copy of its proposed CBA covering the same One Thousand Nine Hundred Pesos (P1,900.00) to Two Thousand Pesos (P2,000.00) for the
21
period inclusive. In addition, petitioner does not dispute the allegation that in the past CBA years 1995 and 1996. This Resolution is subject to the monetary advances granted by
arbitral awards, the Secretary granted retroactivity commencing from the period petitioner to its rank-and-file employees during the pendency of this case assuming such
immediately following the last day of the expired CBA. Thus, by petitioner's own actions, the advances had actually been distributed to them. The assailed Decision is AFFIRMED in all
Court sees no reason to retroact the subject CBA awards to a different date. The period is other respects.1wphi1.nt
herein set at two (2) years from December 1, 1995 to November 30, 1997.
SO ORDERED.
On the allegation concerning the grant of loan to a cooperative, there is no merit in the
union's claim that it is no different from housing loans granted by the employer. The award
Davide, Jr., C.J., Melo, Kapunan and Pardo, JJ., concur.
of loans for housing is justified because it pertains to a basic necessity of life. It is part of a
privilege recognized by the employer and allowed by law. In contrast, providing seed money
for the establishment of the employee's cooperative is a matter in which the employer has
COCA COLA BOTTLERS PHILS., INC., petitioner, 3. The Second Party shall supply the necessary utensils, equipment and
vs. supervision, and it shall only employ the services of fifteen (15) honest,
NATIONAL LABOR RELATIONS COMMISSION and RAMON B. CANONICATO, respondents. reliable, carefully screened, cooperative and trained personnel, who are
in good faith, in the performance of its herein undertaking . . . .

4. The Second Party hereby guarantees against unsatisfactory
BELLOSILLO, J.: workmanship. Minor repair of comfort rooms are free of charge provided
the First Party will supply the necessary materials for such repairs at its
expense. As may be necessary, the Second Party shall also report on such
This petition for certiorari under Rule 65 of the Revised Rules of Court assails the 3 January
1 part or areas of the premises covered by this contract which may require
1995 decision of the National Labor Relations Commission (NLRC) holding that private
repairs from time to time . . . (emphasis supplied).
respondent Ramon B. Canonicato is a regular employee of petitioner Coca Cola Bottlers Phils.
Inc. (COCA COLA) entitled to reinstatement and back wages. The NLRC reversed the decision
2
of the Labor Arbiter of 28 April 1994 which declared that no employer-employee Every year thereafter a service contract was entered into between the parties under similar
4
relationship existed between COCA COLA and Canonicato thereby foreclosing entitlement to terms and conditions until about May 1994.
reinstatement and back wages.1wphi1.nt
On 26 October 1989 COCA COLA hired private respondent Ramon Canonicato as a casual
On 7 April 1986 COCA COLA entered into a contract of janitorial services with Bacolod employee and assigned him to the bottling crew as a substitute for absent employees. In
3
Janitorial Services (BJS) stipulating among others April 1990 COCA COLA terminated Canonicato's casual employment. Later that year COCA
COLA availed of Canonicato's services, this time as a painter in contractual projects which
5
lasted from fifteen (15) to thirty (30) days.
That the First Party (COCA COLA) desires to engage the services of the
Second Party (BJS), as an Independent Contractor, to perform and 6
provide for the maintenance, sanitation and cleaning services for the On 1 April 1991 Canonicato was hired as a janitor by BJS which assigned him to COCA COLA
areas hereinbelow mentioned, all located within the aforesaid building of considering his familiarity with its premises. On 5 and 7 March 1992 Canonicato started
the First Party . . . . painting the facilities of COCA COLA and continued doing so several months thereafter or so
7
for a few days every time until 6 to 25 June 1993.
1. The scope of work of the Second Party includes all floors, walls, doors,
vertical and horizontal areas, ceiling, all windows, glass surfaces, Goaded by information that COCA COLA employed previous BJS employees who filed a
partitions, furniture, fixtures and other interiors within the aforestated complaint against the company for regularization pursuant to a compromise
8
covered areas. agreement, Canonicato submitted a similar complaint against COCA COLA to the Labor
9
Arbiter on 8 June 1993. The complaint was docketed as RAB Case No. 06-06-10337-93.
2. Except holidays which are rest days, the Second Party will undertake
daily the following: 1) Sweeping, damp-mopping, spot scrubbing and Without notifying BJS, Canonicato no longer reported to his COCA COLA assignment starting
10
polishing of floors; 2) Cleaning, sanitizing and disinfecting agents to be 29 June 1993. On 15 July 1993 he sent his sister Rowena to collect his salary from BJS. BJS
used on commodes, urinals and washbasins, water spots on chrome and released his salary but advised Rowena to tell Canonicato to report for work. Claiming that
other fixtures to be checked; 3) Cleaning of glass surfaces, windows and he was barred from entering the premises of COCA COLA on either 14 or 15 July 1993,
glass partitions that require daily attention; 4) Cleaning and dusting of Canonicato met with the proprieties of BJS, Gloria Lacson, who offered him assignments in
11
horizontal and vertical surfaces; 5) Cleaning of fixtures, counters, panels other firms which he however refused.
and sills; 6) Clean, pick-up cigarette butts from sandburns and ashtrays
and trash receptacles; 7) Trash and rubbish disposal and burning. On 23 July 1993 Canonicato amended his complaint against COCA COLA by citing instead as
grounds therefor illegal dismissal and underpayment of wages. He included BJS therein as a
12
In addition, the Second Party will also do the following once a week, to co-respondent. On 28 September 1993 BJS sent him a letter advising him to report for
wit: 1) Cleaning, waxing and polishing of lobbies and offices; 2) Washing work within three (3) days from receipt, otherwise, he would be considered to have
13
of windows, glasses that require cleaning; 3) Thorough disinfecting and abandoned his job.
cleaning of toilets and washrooms.
On 28 April 1994 the Labor Arbiter ruled that: (a) there was no employer-employee
relationship between COCA COLA and Ramon Canonicato because BJS was Canonicato's real
employer; (b) BJS was a legitimate job contractor, hence, any liability of COCA COLA as to pertinent question that may arise will no longer deal with whether there exists an
Canonicato's salary or wage differentials was solidary with BJS in accordance with pars. 1 and employment bond but whether the employee may be considered regular or casual as to
2 of Art. 106, Labor Code; (c) COCA COLA and BJS must jointly and severally pay Canonicato deserve the application of Art. 280 of the Labor Code.
his wage differentials amounting to P2,776.80 and his 13th month salary of P1,068.00,
including ten (10%) percent attorney's fees in the sum of P384.48. The Labor Arbiter also It is an altogether different matter when the very existence of an employment relationship is
ordered that all other claims by Canonicato against COCA COLA be dismissed for lack of in question. This was the issue generated by Canonicato's application for regularization of his
employer-employee relationship; that the complaint for illegal dismissal as well as all the employment with COCA COLA and the subsequent denial by the latter of an employer-
other claims be likewise dismissed for lack of merit; and that COCA COLA and BJS deposit employee relationship with the applicant. It was error therefore for the NLRC to apply Art.
P4,429.28 with the Department of Labor Regional Arbitration Branch Office within ten (10) 280 of the Labor Code in determining the existence of an employment relationship of the
14
days from receipt of the decision. parties herein, especially in light of our explicit holding in Singer Sewing Machine Company
20
v. Drilon that
The NLRC rejected on appeal the decision of the Labor Arbiter on the ground that the
janitorial services of Canonicato were found to be necessary or desirable in the usual . . . . [t]he definition that regular employees are those who perform
business or trade of COCA COLA. The NLRC accepted Canonicato's proposition that his work activities which are desirable and necessary for the business of the
with the BJS was the same as what he did while still a casual employee of COCA COLA. In so employer is not determinative in this case. Any agreement may provide
holding the NLRC applied Art. 280 of the Labor Code and declared that Canonicato was a that one party shall render services for and in behalf of another for a
regular employee of COCA COLA and entitled to reinstatement and payment of P18,105.10 in consideration (no matter how necessary for the latter's business) even
15
back wages. without being hired as an employee. This is precisely true in the case of
an independent contractorship as well as in an agency agreement. The
On 26 May 1995 the NLRC denied COCA COLA's motion for reconsideration for lack of Court agrees with the petitioner's argument that Article 280 is not the
16
merit. Hence, this petition, assigning as errors: (a) NLRC's finding that janitorial services yardstick for determining the existence of an employment relationship
were necessary and desirable in COCA COLA's trade and business; (b) NLRC's application of because it merely distinguishes between two kinds of employees, i.e.,
Art. 280 of the Labor Code in resolving the issue of whether an employment relationship regular employees and casual employees, for purposes of determining
existed between the parties; (c) NLRC's ruling that there was an employer-employee the right of an employee to certain benefits, to join or form a union, or to
relationship between petitioner and Canonicato despite its virtual affirmance that BJS was a security of tenure. Article 280 does not apply where the existence of an
legitimate job contractor; (d) NLRC's declaration that Canonicato was a regular employee of employment relationship is in dispute.
petitioner although he had rendered the company only five (5) months of casual
employment; and, (e) NLRC's order directing the reinstatement of Canonicato and the In determining the existence of an employer-employee relationship it is necessary to
17
payment to him of six (6) months back wages. determine whether the following factors are present: (a) the selection and engagement of
the employee; (b) the payment of wages; (c) the power to dismiss; and, (d) the power to
21
We find good cause to sustain petitioner. Findings of fact of administrative offices are control the employee's conduct. Notably, these are all found in the relationship between
generally accorded respect by us and no longer reviewed for the reason that such factual BJS and Canonicato and not between Canonicato and petitioner COCA COLA. As the Solicitor-
22
findings are considered to be within their field of expertise. Exception however is made, as in General manifested
this case, when the NLRC and the Labor Arbiter made contradictory findings.
In the instant case, the selection and engagement of the janitors for
We perceive at the outset the disposition of the NLRC that janitorial services are necessary petitioner were done by BJS. The application form and letter submitted
and desirable to the trade or business of petitioner COCA COLA. But this is inconsistent with by private respondent (Canonicato) to BJS show that he acknowledged
18
our pronouncement in Kimberly Independent Labor Union v. Drilon where the Court took the fact that it was BJS who did the hiring and not petitioner . . . .
judicial notice of the practice adopted in several government and private institutions and
industries of hiring janitorial services on an "independent contractor basis." In this respect, BJS paid the wages of private respondent, as evidenced by the fact that
although janitorial services may be considered directly related to the principal business of an on July 15, 1993, private respondent sent his sister to BJS with a note
employer, as with every business, we deemed them unnecessary in the conduct of the authorizing her to receive his pay.
19
employer's principal business.
Power of dismissal is also exercised by BJS and not petitioner. BJS is the
This judicial notice, of course, rests on the assumption that the independent contractor is a one that assigns the janitors to its clients and transfers them when it sees
legitimate job contractor so that there can be no doubt as to the existence of an employer- fit. Since BJS is the one who engages their services, then it only follows
employee relationship between the contractor and the worker. In this situation, the only
 27
that it also has the power to dismiss them when justified under the therefor. All told, there being no employer-employee relationship between Canonicato and
circumstances. COCA COLA, the latter cannot be validly ordered to reinstate the former and pay him back
wages.
Lastly, BJS has the power to control the conduct of the janitors. The
supervisors of petitioner, being interested in the result of the work of the WHEREFORE, the petition is GRANTED. The NLRC decision of 3 January 1995 declaring Ramon
janitors, also give suggestions as to the performance of the janitors, but B. Canonicato a regular employee of petitioner Coca Cola Bottlers Phils., Inc., entitled to
this does not mean that BJS has no control over them. The interest of reinstatement and back wages is REVERSED and SET ASIDE. The decision of the Labor Arbiter
petitioner is only with respect to the result of their work. On the other of 28 April 1994 finding no employer-employee relationship between petitioner and private
hand, BJS oversees the totality of their performance. respondent but directing petitioner Coca Cola Bottlers Phils., Inc., instead and Bacolod
Janitorial Services to pay jointly and severally Ramon B. Canonicato P2,776.80 as wage
The power of the employer to control the work of the employee is said to be the most differentials, P1,068.00 as 13th month pay and P384.48 as attorney's fees, is
significant determinant. Canonicato disputed this power of BJS over him by asserting that his REINSTATED.1wphi1.nt
employment with COCA COLA was not interrupted by his application with BJS since his duties
before and after he applied for regularization were the same, involving as they did, working SO ORDERED.
in the maintenance department and doing painting tasks within its facilities. Canonicato cited
the Labor Utilization Reports of COCA COLA showing his painting assignments. These reports, Puno, Mendoza and Quisumbing, JJ., concur.
however, are not expressive of the true nature of the relationship between Canonicato and
COCA COLA; neither do they detract from the fact that BJS exercised real authority over
Buena, J., is on leave.
Canonicato as its employee.

Moreover, a closer scrutiny of the reports reveals that the painting jobs were performed by
Canonicato sporadically, either in a few days within a month and only for a few months in a
23
year. This infrequency or irregularity of assignments countervails Canonicato's submission
that he was assigned specifically to undertake the task of painting the whole year round. If
anything, it hews closely to the assertion of BJS that it assigned Canonicato to these jobs to
maintain and sanitize the premises of petitioner COCA COLA pursuant to its contract of
24
services with the company.

It is clear from these established circumstances that NLRC should have recognized BJS as the
employer of Canonicato and not COCA COLA. This is demanded by the fact that it did not
disturb, and therefore it upheld, the finding of the Labor Arbiter that BJS was truly a
legitimate job-contractor and could by itself hire its employees. The Commission could not
have reached any other legitimate conclusion considering that BJS satisfied all the
requirements of a job-contractor under the law, namely, (a) the ability to carry on an
independent business and undertake the contract work on its own account under its own
responsibility according to its own manner and method, free from the control and direction
of its principal or client in all matters connected with the performance of the work except as
to the results thereof; and, (b) the substantial capital or investment in the form of tools,
equipment, machinery, work premises, and other materials which are necessary in the
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conduct of its business.

It is to be noted that COCA COLA is not the only client of BJS which has its roster of clients
like San Miguel Corporation, Distileria Bago Incorporated, University of Negros Occidental-
Recolletos, University of St. La Salle, Riverside College, College Assurance Plan Phil., Inc., and
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Negros Consolidated Farmers Association, Inc. This is proof enough that BJS has the
capability to carry on its business of janitorial services with big establishments aside from
petitioner and has sufficient capital or materials necessary