FIRST DIVISION
Commission (NLRC), Fifth Division, in Cagayan de Oro City, which docketed the case
G.R. No. 122653 December 12, 1997
PURE FOODS CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, RODOLFO CORDOVA, VIOLETA
CRUSIS, ET AL., *respondents.
DAVIDE, JR., J.:
The crux of this petition for certiorari is the issue of whether employees hired for a definite
period and whose services are necessary and desirable in the usual business or trade
of the employer are regular employees.
The private respondents (numbering 906) were hired by petitioner Pure Foods
Corporation to work for a fixed period of five months at its tuna cannery plant in Tambler,
General Santos City. After the expiration of their respective contracts of employment in
June and July 1991, their services were terminated. They forthwith executed a "Release
and Quitclaim" stating that they had no claim whatsoever against the petitioner.
On 29 July 1991, the private respondents filed before the National Labor Relations
Commission (NLRC) Sub-Regional Arbitration Branch No. XI, General Santos City, a
complaint for illegal dismissal against the petitioner and its plant manager, Marciano
Aganon. 1 This case was docketed as RAB-11-08-50284-91.
On 23 December 1992, Labor Arbiter Arturo P. Aponesto handed down a
decision 2 dismissing the complaint on the ground that the private respondents were
mere contractual workers, and not regular employees; hence, they could not avail of the
law on security of tenure. The termination of their services by reason of the expiration of
their contracts of employment was, therefore, justified. He pointed out that earlier he had
dismissed a case entitled "Lakas ng Anak-Pawis-NOWM v. Pure Foods Corp." (Case
No. RAB-11-02-00088-88) because the complainants therein were not regular
employees of Pure Foods, as their contracts of employment were for a fixed period of
five months. Moreover, in another case involving the same contractual workers of Pure
Foods (Case No. R-196-ROXI-MED-UR-55-89), then Secretary of Labor Ruben Torres
held, in a Resolution dated 30 April 1990, that the said contractual workers were not
regular employees.
The Labor Arbiter also observed that an order for private respondents' reinstatement
would result in the reemployment of more than 10,000 former contractual employees of
the petitioner. Beside, by executing a "Release and Quitclaim," the private respondents
had waived and relinquished whatever right they might have against the petitioner.
The private respondents appealed from the decision to the National Labor Relations
as NLRC CA No. M-001323-93.
On 28 October 1994, the NLRC affirmed the Labor Arbiter's decision. 3 However, on
private respondents' motion for reconsideration, the NLRC rendered another decision on
30 January 1995 4 vacating and setting aside its decision of 28 October 1994 and holding
that the private respondent and their co-complainants were regular employees. It
declared that the contract of employment for five months was a "clandestine scheme
employed by [the petitioner] to stifle [private respondents'] right to security of tenure" and
should therefore be struck down and disregarded for being contrary to law, public policy,
and morals. Hence, their dismissal on account of the expiration of their respective
contracts was illegal.
Accordingly, the NLRC ordered the petitioner to reinstate the private respondents to their
former position without loss of seniority rights and other privileges, with full back wages;
and in case their reinstatement would no longer be feasible, the petitioner should pay
them separation pay equivalent to one-month pay or one-half-month pay for every year
of service, whichever is higher, with back wages and 10% of the monetary award as
attorney's fees.
Its motion for reconsideration having been denied, 5 the petitioner came to this Court
contending that respondent NLRC committed grave abuse of discretion amounting to
lack of jurisdiction in reversing the decision of the Labor Arbiter.
The petitioner submits that the private respondents are now estopped from questioning
their separation from petitioner's employ in view of their express conformity with the five-
month duration of their employment contracts. Besides, they fell within the exception
provided in Article 280 of the Labor Code which reads: "[E]xcept where the employment
has been fixed for a specific project or undertaking the completion or termination of which
has been determined at the time of the engagement of the employee." Moreover, the
first paragraph of the said article must be read and interpreted in conjunction with the
proviso in the second paragraph, which reads: "Provided that any employee who has
rendered at least one year of service, whether such service is continuous or broken, shall
be considered a regular employee with respect to the activity in which he is employed .
. ." In the instant case, the private respondents were employed for a period of five months
only. In any event, private respondents' prayer for reinstatement is well within the purview
of the "Release and Quitclaim" they had executed wherein they unconditionally released
the petitioner from any and all other claims which might have arisen from their past
employment with the petitioner.
In its Comment, the Office of the Solicitor General (OSG) advances the argument that
the private respondents were regular employees, since they performed activities
necessary and desirable in the business or trade of the petitioner. The period of
employment stipulated in the contracts of employment was null and void for being
contrary to law and public policy, as its purpose was to circumvent the law on security of
Page 1 of 42
tenure. The expiration of the contract did not, therefore, justify the termination of their
employment.
The OSG further maintains that the ruling of the then Secretary of Labor and Employment
in LAP-NOWM v. Pure Foods Corporation is not binding on this Court; neither is that
ruling controlling, as the said case involved certification election and not the issue of the
nature of private respondents' employment. It also considers private respondents'
quitclaim as ineffective to bar the enforcement for the full measure of their legal rights.
The private respondents, on the other hand, argue that contracts with a specific period
of employment may be given legal effect provided, however, that they are not intended
to circumvent the constitutional guarantee on security of tenure. They submit that the
practice of the petitioner in hiring workers to work for a fixed duration of five months only
to replace them with other workers of the same employment duration was apparently to
prevent the regularization of these so-called "casuals," which is a clear circumvention of
the law on security of tenure.
We find the petition devoid of merit.
Article 280 of the Labor Code defines regular and casual employment as follows:
Art. 280. Regular and Casual Employment. — The provisions of written
agreement to the contrary notwithstanding and regardless of the oral
argument of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where
the work or services to be performed is seasonal in nature and the
employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph; Provided, That, any employee who has rendered
at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the
activity in which he is employed and his employment shall continue
while such activity exists.
Thus, the two kinds of regular employees are (1) those who are engaged to perform
activities which are necessary or desirable in the usual business or trade of the employer;
and (2) those casual employees who have rendered at least one year of service, whether
continuous or broken, with respect to the activity in which they are employed.6
In the instant case, the private respondents' activities consisted in the receiving, skinning,
loining, packing, and casing-up of tuna fish which were then exported by the petitioner.
Indisputably, they were performing activities which were necessary and desirable in
petitioner's business or trade.
Contrary to petitioner's submission, the private respondents could not be regarded as
having been hired for a specific project or undertaking. The term "specific project or
undertaking" under Article 280 of the Labor Code contemplates an activity which is not
commonly or habitually performed or such type of work which is not done on a daily basis
but only for a specific duration of time or until completion; the services employed are then
necessary and desirable in the employer's usual business only for the period of time it
takes to complete the project.7
The fact that the petitioner repeatedly and continuously hired workers to do the same
kind of work as that performed by those whose contracts had expired negates petitioner's
contention that those workers were hired for a specific project or undertaking only.
Now on the validity of private respondents' five-month contracts of employment. In the
leading case of Brent School, Inc. v. Zamora, 8 which was reaffirmed in numerous
subsequent cases, 9 this Court has upheld the legality of fixed-term employment. It ruled
that the decisive determinant in term employment should not be the activities that the
employee is called upon to perform but the day certain agreed upon by the parties for
the commencement and termination of their employment relationship. But, this Court
went on to say that where from the circumstances it is apparent that the periods have
been imposed to preclude acquisition of tenurial security by the employee, they should
be struck down or disregarded as contrary to public policy and morals.
Brent also laid down the criteria under which term employment cannot be said to be in
circumvention of the law on security of tenure:
1) The fixed period of employment was knowingly and voluntarily agreed upon by the
parties without any force, duress, or improper pressure being brought to bear upon the
employee and absent any other circumstances vitiating his consent; or
2) It satisfactorily appears that the employer and the employee dealt with each other on
more or less equal terms with no moral dominance exercised by the former over the
latter. 10
None of these criteria had been met in the present case. As pointed out by the private
respondents:
[I]t could not be supposed that private respondents and all other so-
called "casual" workers of [the petitioner] KNOWINGLY and
VOLUNTARILY agreed to the 5-month employment contract. Cannery
workers are never on equal terms with their employers. Almost always,
Page 2 of 42
 they agree to any terms of an employment contract just to get employed
considering that it is difficult to find work given their ordinary
qualifications. Their freedom to contract is empty and hollow because
theirs is the freedom to starve if they refuse to work as casual or
contractual workers. Indeed, to the unemployed, security of tenure has
no value. It could not then be said that petitioner and private
respondents "dealt with each other on more or less equal terms with no
moral dominance whatever being exercised by the former over the
latter. 10
The petitioner does not deny or rebut private respondents' averments (1) that the main
bulk of its workforce consisted of its so-called "casual" employees; (2) that as of July
1991, "casual" workers numbered 1,835; and regular employee, 263; (3) that the
company hired "casual" every month for the duration of five months, after which their
services were terminated and they were replaced by other "casual" employees on the
same five-month duration; and (4) that these "casual" employees were actually doing
work that were necessary and desirable in petitioner's usual business.
As a matter of fact, the petitioner even stated in its position paper submitted to the Labor
Arbiter that, according to its records, the previous employees of the company hired on a
five-month basis numbered about 10,000 as of July 1990. This confirms private
respondents' allegation that it was really the practice of the company to hire workers on
a uniformly fixed contract basis and replace them upon the expiration of their contracts
with other workers on the same employment duration.
This scheme of the petitioner was apparently designed to prevent the private
respondents and the other "casual" employees from attaining the status of a regular
employee. It was a clear circumvention of the employees' right to security of tenure and
to other benefits like minimum wage, cost-of-living allowance, sick leave, holiday pay,
and 13th month pay. 11 Indeed, the petitioner succeeded in evading the application of
labor laws. Also, it saved itself from the trouble or burden of establishing a just cause for
terminating employees by the simple expedient of refusing to renew the employment
contracts.
The five-month period specified in private respondents' employment contracts having
been imposed precisely to circumvent the constitutional guarantee on security of tenure
should, therefore, be struck down or disregarded as contrary to public policy or
morals. 12 To uphold the contractual arrangement between the petitioner and the private
respondents would, in effect, permit the former to avoid hiring permanent or regular
employees by simply hiring them on a temporary or casual basis, thereby violating the
employees' security of tenure in their jobs. 13
The execution by the private respondents of a "Release and Quitclaim" did not preclude
them from questioning the termination of their services. Generally, quitclaims by laborers
are frowned upon as contrary to public policy and are held to be ineffective to bar
recovery for the full measure of the workers' rights. 14 The reason for the rule is that the
employer and the employee do not stand on the same footing. 15
Notably, the private respondents lost not time in filing a complaint for illegal dismissal.
This act is hardly expected from employees who voluntarily and freely consented to their
dismissal. 16
The NLRC was, thus, correct in finding that the private respondents were regular
employees and that they were illegally dismissed from their jobs. Under Article 279 of
the Labor Code and the recent jurisprudence, 17 the legal consequence of illegal
dismissal is reinstatement without loss of seniority rights and other privileges, with full
back wages computed from the time of dismissal up to the time of actual reinstatement,
without deducting the earnings derived elsewhere pending the resolution of the case.
However, since reinstatement is no longer possible because the petitioner's tuna
cannery plant had, admittedly, been close in November 1994, 18 the proper award is
separation pay equivalent to one month pay or one-half month pay for every year of
service, whichever is higher, to be computed from the commencement of their
employment up to the closure of the tuna cannery plant. The amount of back wages must
be computed from the time the private respondents were dismissed until the time
petitioner's cannery plant ceased operation. 19
WHEREFORE, for lack of merit, the instant petition is DISMISSED and the challenged
decision of 30 January 1995 of the National Labor Relations Commission in NLRC CA
No. N-001323-93 is hereby AFFIRMED subject to the above modification on the
computation of the separation pay and back wages.
SO ORDERED.
EN BANC
G.R. No. L-48494 February 5, 1990
BRENT SCHOOL, INC., and REV. GABRIEL DIMACHE, petitioners,
vs.
RONALDO ZAMORA, the Presidential Assistant for Legal Affairs, Office of the
President, and DOROTEO R. ALEGRE, respondents.
Quasha, Asperilla, Ancheta, Peña & Nolasco for petitioners.
Mauricio G. Domogon for respondent Alegre.
NARVASA, J.:
Page 3 of 42
The question presented by the proceedings at bar 1 is whether or not the provisions of
the Labor Code, 2 as amended,3 have anathematized "fixed period employment" or
employment for a term.
The root of the controversy at bar is an employment contract in virtue of which Doroteo
R. Alegre was engaged as athletic director by Brent School, Inc. at a yearly
compensation of P20,000.00. 4 The contract fixed a specific term for its existence, five
(5) years, i.e., from July 18, 1971, the date of execution of the agreement, to July 17,
1976. Subsequent subsidiary agreements dated March 15, 1973, August 28, 1973, and
September 14, 1974 reiterated the same terms and conditions, including the expiry date,
as those contained in the original contract of July 18, 1971. 5
Some three months before the expiration of the stipulated period, or more precisely on
April 20,1976, Alegre was given a copy of the report filed by Brent School with the
Department of Labor advising of the termination of his services effective on July 16,
1976. The stated ground for the termination was "completion of contract, expiration of
the definite period of employment." And a month or so later, on May 26, 1976, Alegre
accepted the amount of P3,177.71, and signed a receipt therefor containing the phrase,
"in full payment of services for the period May 16, to July 17, 1976 as full payment of
contract."
However, at the investigation conducted by a Labor Conciliator of said report of
termination of his services, Alegre protested the announced termination of his
employment. He argued that although his contract did stipulate that the same would
terminate on July 17, 1976, since his services were necessary and desirable in the usual
business of his employer, and his employment had lasted for five years, he had acquired
the status of a regular employee and could not be removed except for valid cause. 6 The
Regional Director considered Brent School's report as an application for clearance to
terminate employment (not a report of termination), and accepting the recommendation
of the Labor Conciliator, refused to give such clearance and instead required the
reinstatement of Alegre, as a "permanent employee," to his former position without loss
of seniority rights and with full back wages. The Director pronounced "the ground relied
upon by the respondent (Brent) in terminating the services of the complainant (Alegre) .
. . (as) not sanctioned by P.D. 442," and, quite oddly, as prohibited by Circular No. 8,
series of 1969, of the Bureau of Private Schools. 7
Brent School filed a motion for reconsideration. The Regional Director denied the motion
and forwarded the case to the Secretary of Labor for review. 8 The latter sustained the
Regional Director. 9 Brent appealed to the Office of the President. Again it was rebuffed.
That Office dismissed its appeal for lack of merit and affirmed the Labor Secretary's
decision, ruling that Alegre was a permanent employee who could not be dismissed
except for just cause, and expiration of the employment contract was not one of the just
causes provided in the Labor Code for termination of services. 10
The School is now before this Court in a last attempt at vindication. That it will get here.
The employment contract between Brent School and Alegre was executed on July 18,
1971, at a time when the Labor Code of the Philippines (P.D. 442) had not yet been
promulgated. Indeed, the Code did not come into effect until November 1, 1974, some
three years after the perfection of the employment contract, and rights and obligations
thereunder had arisen and been mutually observed and enforced.
At that time, i.e., before the advent of the Labor Code, there was no doubt whatever
about the validity of term employment. It was impliedly but nonetheless clearly
recognized by the Termination Pay Law, R.A. 1052, 11 as amended by R.A.
1787. 12 Basically, this statute provided that—
In cases of employment, without a definite period, in a commercial, industrial, or
agricultural establishment or enterprise, the employer or the employee may
terminate at any time the employment with just cause; or without just cause in the
case of an employee by serving written notice on the employer at least one month
in advance, or in the case of an employer, by serving such notice to the employee
at least one month in advance or one-half month for every year of service of the
employee, whichever is longer, a fraction of at least six months being considered
as one whole year.
The employer, upon whom no such notice was served in case of termination of
employment without just cause, may hold the employee liable for damages.
The employee, upon whom no such notice was served in case of termination of
employment without just cause, shall be entitled to compensation from the date of
termination of his employment in an amount equivalent to his salaries or wages
corresponding to the required period of notice.
There was, to repeat, clear albeit implied recognition of the licitness of term employment.
RA 1787 also enumerated what it considered to be just causes for terminating an
employment without a definite period, either by the employer or by the employee without
incurring any liability therefor.
Prior, thereto, it was the Code of Commerce which governed employment without a fixed
period, and also implicitly acknowledged the propriety of employment with a fixed period.
Its Article 302 provided that —
In cases in which the contract of employment does not have a fixed
period, any of the parties may terminate it, notifying the other thereof
one month in advance.
The factor or shop clerk shall have a right, in this case, to the salary
corresponding to said month.
Page 4 of 42
 The salary for the month directed to be given by the said Article 302 of the Code
of Commerce to the factor or shop clerk, was known as the mesada (from mes,
Spanish for "month"). When Article 302 (together with many other provisions of
the Code of Commerce) was repealed by the Civil Code of the Philippines,
Republic Act No. 1052 was enacted avowedly for the precise purpose of
reinstating the mesada.
Now, the Civil Code of the Philippines, which was approved on June 18, 1949 and
became effective on August 30,1950, itself deals with obligations with a period in section
2, Chapter 3, Title I, Book IV; and with contracts of labor and for a piece of work, in
Sections 2 and 3, Chapter 3, Title VIII, respectively, of Book IV. No prohibition against
term-or fixed-period employment is contained in any of its articles or is otherwise
deducible therefrom.
It is plain then that when the employment contract was signed between Brent School and
Alegre on July 18, 1971, it was perfectly legitimate for them to include in it a stipulation
fixing the duration thereof Stipulations for a term were explicitly recognized as valid by
this Court, for instance, in Biboso v. Victorias Milling Co., Inc., promulgated on March 31,
1977, 13 and J. Walter Thompson Co. (Phil.) v. NLRC, promulgated on December 29,
1983. 14 The Thompson case involved an executive who had been engaged for a fixed
period of three (3) years. Biboso involved teachers in a private school as regards whom,
the following pronouncement was made:
What is decisive is that petitioners (teachers) were well aware an the
time that their tenure was for a limited duration. Upon its termination,
both parties to the employment relationship were free to renew it or to
let it lapse. (p. 254)
Under American law 15 the principle is the same. "Where a contract specifies the period
of its duration, it terminates on the expiration of such period." 16 "A contract of
employment for a definite period terminates by its own terms at the end of such period." 17
The status of legitimacy continued to be enjoyed by fixed-period employment contracts
under the Labor Code (Presidential Decree No. 442), which went into effect on
November 1, 1974. The Code contained explicit references to fixed period
employment, or employment with a fixed or definite period. Nevertheless, obscuration of
the principle of licitness of term employment began to take place at about this time
Article 320, entitled "Probationary and fixed period employment," originally stated that
the "termination of employment of probationary employees and those employed WITH A
FIXED PERIOD shall be subject to such regulations as the Secretary of Labor may
prescribe." The asserted objective to was "prevent the circumvention of the right of the
employee to be secured in their employment as provided . . . (in the Code)."
Article 321 prescribed the just causes for which an employer could terminate
"an employment without a definite period."
And Article 319 undertook to define "employment without a fixed period" in the following
manner: 18
An employment shall be deemed to be without a definite period for
purposes of this Chapter where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual
business or trade of the employer, except where the employment has
been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the
engagement of the employee or where the work or service to be
performed is seasonal in nature and the employment is for the duration
of the season.
The question immediately provoked by a reading of Article 319 is whether or not a
voluntary agreement on a fixed term or period would be valid where the employee "has
been engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer." The definition seems a non sequitur. From the
premise — that the duties of an employee entail "activities which are usually necessary
or desirable in the usual business or trade of the employer the" — conclusion does not
necessarily follow that the employer and employee should be forbidden to stipulate any
period of time for the performance of those activities. There is nothing essentially
contradictory between a definite period of an employment contract and the nature of the
employee's duties set down in that contract as being "usually necessary or desirable in
the usual business or trade of the employer." The concept of the employee's duties as
being "usually necessary or desirable in the usual business or trade of the employer" is
not synonymous with or identical to employment with a fixed term. Logically, the decisive
determinant in term employment should not be the activities that the employee is called
upon to perform, but the day certain agreed upon by the parties for the commencement
and termination of their employment relationship, a day certain being understood to be
"that which must necessarily come, although it may not be known
when." 19 Seasonalemployment, and employment for a particular project are merely
instances employment in which a period, where not expressly set down, necessarily
implied.
Of course, the term — period has a definite and settled signification. It means, "Length
of existence; duration. A point of time marking a termination as of a cause or an activity;
an end, a limit, a bound; conclusion; termination. A series of years, months or days in
which something is completed. A time of definite length. . . . the period from one fixed
date to another fixed date . . ." 20 It connotes a "space of time which has an influence on
an obligation as a result of a juridical act, and either suspends its demandableness or
produces its extinguishment." 21 It should be apparent that this settled and familiar notion
of a period, in the context of a contract of employment, takes no account at all of the
nature of the duties of the employee; it has absolutely no relevance to the character of
Page 5 of 42
his duties as being "usually necessary or desirable to the usual business of the
employer," or not.
Subsequently, the foregoing articles regarding employment with "a definite period" and
"regular" employment were amended by Presidential Decree No. 850, effective
December 16, 1975.
Article 320, dealing with "Probationary and fixed period employment," was altered
by eliminating the reference to persons "employed with a fixed period," and was
renumbered (becoming Article 271). The article 22 now reads:
. . . Probationary employment.—Probationary employment shall not
exceed six months from the date the employee started working, unless
it is covered by an apprenticeship agreement stipulating a longer
period. The services of an employee who has been engaged in a
probationary basis may be terminated for a just cause or when he fails
to qualify as a regular employee in accordance with reasonable
standards made known by the employer to the employee at the time of
his engagement. An employee who is allowed to work after a
probationary period shall be considered a regular employee.
Also amended by PD 850 was Article 319 (entitled "Employment with a fixed
period," supra) by (a) deleting mention of employment with a fixed or definite period, (b)
adding a general exclusion clause declaring irrelevant written or oral agreements "to the
contrary," and (c) making the provision treat exclusively of "regular" and "casual"
employment. As revised, said article, renumbered 270, 23 now reads:
. . . Regular and Casual Employment.—The provisions of written
agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where
the work or service to be employed is seasonal in nature and the
employment is for the duration of the season.
An employment shall be deemed to he casual if it is not covered by the
preceding paragraph: provided,that, any employee who has rendered
at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the
activity in which he is employed and his employment shall continue
while such actually exists.
The first paragraph is identical to Article 319 except that, as just mentioned, a
clause has been added, to wit: "The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreements of the parties .
. ." The clause would appear to be addressed inter alia to agreements fixing a
definite period for employment. There is withal no clear indication of the intent
to deny validity to employment for a definite period. Indeed, not only is the
concept of regular employment not essentially inconsistent with employment for
a fixed term, as above pointed out, Article 272 of the Labor Code, as amended
by said PD 850, still impliedly acknowledged the propriety of term employment:
it listed the "just causes" for which "an employer may terminate employment
without a definite period," thus giving rise to the inference that if the employment
be with a definite period, there need be no just cause for termination thereof if
the ground be precisely the expiration of the term agreed upon by the parties for
the duration of such employment.
Still later, however, said Article 272 (formerly Article 321) was further amended by Batas
Pambansa Bilang 130, 24 to eliminate altogether reference to employment without a
definite period. As lastly amended, the opening lines of the article (renumbered 283),
now pertinently read: "An employer may terminate an employment for any of the following
just causes: . . . " BP 130 thus completed the elimination of every reference in the Labor
Code, express or implied, to employment with a fixed or definite period or term.
It is in the light of the foregoing description of the development of the provisions of the
Labor Code bearing on term or fixed-period employment that the question posed in the
opening paragraph of this opinion should now be addressed. Is it then the legislative
intention to outlaw stipulations in employment contracts laying down a definite period
therefor? Are such stipulations in essence contrary to public policy and should not on
this account be accorded legitimacy?
On the one hand, there is the gradual and progressive elimination of references to term
or fixed-period employment in the Labor Code, and the specific statement of the
rule 25 that—
. . . Regular and Casual Employment.— The provisions of written
agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where
the work or service to be employed is seasonal in nature and the
employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph: provided,that, any employee who has rendered
Page 6 of 42
 at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the
activity in which he is employed and his employment shall continue
while such actually exists.
There is, on the other hand, the Civil Code, which has always recognized, and continues
to recognize, the validity and propriety of contracts and obligations with a fixed or definite
period, and imposes no restraints on the freedom of the parties to fix the duration of a
contract, whatever its object, be it specie, goods or services, except the general
admonition against stipulations contrary to law, morals, good customs, public order or
public policy. 26 Under the Civil Code, therefore, and as a general proposition, fixed-term
employment contracts are not limited, as they are under the present Labor Code, to those
by nature seasonal or for specific projects with pre-determined dates of completion; they
also include those to which the parties by free choice have assigned a specific date of
termination.
Some familiar examples may be cited of employment contracts which may be neither for
seasonal work nor for specific projects, but to which a fixed term is an essential and
natural appurtenance: overseas employment contracts, for one, to which, whatever the
nature of the engagement, the concept of regular employment will all that it implies does
not appear ever to have been applied, Article 280 of the Labor Code not withstanding;
also appointments to the positions of dean, assistant dean, college secretary, principal,
and other administrative offices in educational institutions, which are by practice or
tradition rotated among the faculty members, and where fixed terms are a necessity,
without which no reasonable rotation would be possible. Similarly, despite the provisions
of Article 280, Policy, Instructions No. 8 of the Minister of Labor 27 implicitly recognize
that certain company officials may be elected for what would amount to fixed periods, at
the expiration of which they would have to stand down, in providing that these officials,"
. . . may lose their jobs as president, executive vice-president or vice-president, etc.
because the stockholders or the board of directors for one reason or another did not re-
elect them."
There can of course be no quarrel with the proposition that where from the circumstances
it is apparent that periods have been imposed to preclude acquisition of tenurial security
by the employee, they should be struck down or disregarded as contrary to public policy,
morals, etc. But where no such intent to circumvent the law is shown, or stated otherwise,
where the reason for the law does not exist, e.g., where it is indeed the employee himself
who insists upon a period or where the nature of the engagement is such that, without
being seasonal or for a specific project, a definite date of termination is a sine qua non,
would an agreement fixing a period be essentially evil or illicit, therefore anathema?
Would such an agreement come within the scope of Article 280 which admittedly was
enacted "to prevent the circumvention of the right of the employee to be secured in . . .
(his) employment?"
As it is evident from even only the three examples already given that Article 280 of the
Labor Code, under a narrow and literal interpretation, not only fails to exhaust the gamut
of employment contracts to which the lack of a fixed period would be an anomaly, but
would also appear to restrict, without reasonable distinctions, the right of an employee
to freely stipulate with his employer the duration of his engagement, it logically follows
that such a literal interpretation should be eschewed or avoided. The law must be given
a reasonable interpretation, to preclude absurdity in its application. Outlawing the whole
concept of term employment and subverting to boot the principle of freedom of contract
to remedy the evil of employer's using it as a means to prevent their employees from
obtaining security of tenure is like cutting off the nose to spite the face or, more relevantly,
curing a headache by lopping off the head.
It is a salutary principle in statutory construction that there exists a valid
presumption that undesirable consequences were never intended by a
legislative measure, and that a construction of which the statute is fairly
susceptible is favored, which will avoid all objecionable mischievous,
undefensible, wrongful, evil and injurious consequences. 28
Nothing is better settled than that courts are not to give words a
meaning which would lead to absurd or unreasonable consequences.
That s a principle that does back to In re Allen decided oil October 27,
1903, where it was held that a literal interpretation is to be rejected if it
would be unjust or lead to absurd results. That is a strong argument
against its adoption. The words of Justice Laurel are particularly apt.
Thus: "The fact that the construction placed upon the statute by the
appellants would lead to an absurdity is another argument for rejecting
it. . . ." 29
. . . We have, here, then a case where the true intent of the law is clear
that calls for the application of the cardinal rule of statutory construction
that such intent of spirit must prevail over the letter thereof, for whatever
is within the spirit of a statute is within the statute, since adherence to
the letter would result in absurdity, injustice and contradictions and
would defeat the plain and vital purpose of the statute. 30
Accordingly, and since the entire purpose behind the development of legislation
culminating in the present Article 280 of the Labor Code clearly appears to have been,
as already observed, to prevent circumvention of the employee's right to be secure in his
tenure, the clause in said article indiscriminately and completely ruling out all written or
oral agreements conflicting with the concept of regular employment as defined therein
should be construed to refer to the substantive evil that the Code itself has singled out:
agreements entered into precisely to circumvent security of tenure. It should have no
application to instances where a fixed period of employment was agreed upon knowingly
and voluntarily by the parties, without any force, duress or improper pressure being
brought to bear upon the employee and absent any other circumstances vitiating his
consent, or where it satisfactorily appears that the employer and employee dealt with
each other on more or less equal terms with no moral dominance whatever being
exercised by the former over the latter. Unless thus limited in its purview, the law would
Page 7 of 42
be made to apply to purposes other than those explicitly stated by its framers; it thus
becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and
unintended consequences.
Such interpretation puts the seal on Bibiso 31 upon the effect of the expiry of an agreed
period of employment as still good rule—a rule reaffirmed in the recent case of Escudero
vs. Office of the President (G.R. No. 57822, April 26, 1989) where, in the fairly analogous
case of a teacher being served by her school a notice of termination following the
expiration of the last of three successive fixed-term employment contracts, the Court
held:
Reyes (the teacher's) argument is not persuasive. It loses sight of the
fact that her employment was probationary, contractual in nature, and
one with a definitive period. At the expiration of the period stipulated in
the contract, her appointment was deemed terminated and the letter
informing her of the non-renewal of her contract is not a condition
sine qua non before Reyes may be deemed to have ceased in the
employ of petitioner UST. The notice is a mere reminder that Reyes'
contract of employment was due to expire and that the contract would
no longer be renewed. It is not a letter of termination. The interpretation
that the notice is only a reminder is consistent with the court's finding
in Labajo supra. ...32
Paraphrasing Escudero, respondent Alegre's employment was terminated upon the
expiration of his last contract with Brent School on July 16, 1976 without the necessity of
any notice. The advance written advice given the Department of Labor with copy to said
petitioner was a mere reminder of the impending expiration of his contract, not a letter of
termination, nor an application for clearance to terminate which needed the approval of
the Department of Labor to make the termination of his services effective. In any case,
such clearance should properly have been given, not denied.
WHEREFORE, the public respondent's Decision complained of is REVERSED and SET
ASIDE. Respondent Alegre's contract of employment with Brent School having lawfully
terminated with and by reason of the expiration of the agreed term of period thereof, he
is declared not entitled to reinstatement and the other relief awarded and confirmed on
appeal in the proceedings below. No pronouncement as to costs.
SO ORDERED.
SECOND DIVISION
G.R. No. 204944-45 December 3, 2014
FUJI TELEVISION NETWORK, INC., Petitioner,
vs.
ARLENE S. ESPIRITU, Respondent.
DECISION
LEONEN, J.:
It is the burden of the employer to prove that a person whose services it pays for is an
independent contractor rather than a regular employee with or without a fixed term. That
a person has a disease does not per se entitle the employer to terminate his or her
services. Termination is the last resort. At the very least, a competent public health
authority must certify that the disease cannot be cured within six ( 6) months, even with
appropriate treatment.
We decide this petition for review1 on certiorari filed by Fuji Television Network, Inc.,
seeking the reversal of the Court of Appeals’ Decision2 dated June 25, 2012, affirming
with modification the decision3 of the National Labor Relations Commission.
In 2005, Arlene S. Espiritu ("Arlene") was engaged by Fuji Television Network, Inc.
("Fuji") asa news correspondent/producer4 "tasked to report Philippine news to Fuji
through its Manila Bureau field office."5 Arlene’s employment contract initially provided
for a term of one (1) year but was successively renewed on a yearly basis with salary
adjustment upon every renewal.6 Sometime in January 2009, Arlenewas diagnosed with
lung cancer.7She informed Fuji about her condition. In turn, the Chief of News Agency of
Fuji, Yoshiki Aoki, informed Arlene "that the company will have a problem renewing her
contract"8 since it would be difficult for her to perform her job.9 She "insisted that she was
still fit to work as certified by her attending physician."10
After several verbal and written communications,11 Arlene and Fuji signed a non-renewal
contract on May 5, 2009 where it was stipulated that her contract would no longer be
renewed after its expiration on May 31, 2009. The contract also provided that the parties
release each other from liabilities and responsibilities under the employment contract. 12
In consideration of the non-renewal contract, Arlene "acknowledged receipt of the total
amount of US$18,050.00 representing her monthly salary from March 2009 to May 2009,
year-end bonus, mid-year bonus, and separation pay."13 However, Arlene affixed her
signature on the nonrenewal contract with the initials "U.P." for "under protest."14
On May 6, 2009, the day after Arlene signed the non-renewal contract, she filed a
complaint for illegal dismissal and attorney’s fees with the National Capital Region
Arbitration Branch of the National Labor Relations Commission. She alleged that she
was forced to sign the nonrenewal contract when Fuji came to know of her illness and
that Fuji withheld her salaries and other benefits for March and April 2009 when she
refused to sign.15
Page 8 of 42
Arlene claimed that she was left with no other recourse but to sign the non-renewal
contract, and it was only upon signing that she was given her salaries and bonuses, in
addition to separation pay equivalent to four (4) years.16
In the decision17 dated September 10, 2009, Labor Arbiter Corazon C. Borbolla
dismissed Arlene’s complaint.18Citing Sonza v. ABS-CBN19 and applying the four-fold
test, the Labor Arbiter held that Arlene was not Fuji’s employee but an independent
contractor.20
Arlene appealed before the National Labor Relations Commission. In its decision dated
March 5, 2010, the National Labor Relations Commission reversed the Labor Arbiter’s
decision.21 It held that Arlene was a regular employee with respect to the activities for
which she was employed since she continuously rendered services that were
deemednecessary and desirable to Fuji’s business.22 The National Labor Relations
Commission ordered Fuji to pay Arlene backwages, computed from the date of her illegal
dismissal.23 The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered GRANTING the
instant appeal. The Decision of the Labor Arbiter dated 19 September 2009 is hereby
REVERSED and SET ASIDE, and a new one is issued ordering respondents-appellees
to pay complainant-appellant backwages computed from the date of her illegal dismissal
until finality of this Decision.
SO ORDERED.24
Arlene and Fuji filed separat emotions for reconsideration.25 Both motions were denied
by the National Labor Relations Commission for lack of merit in the resolution dated April
26, 2010.26 From the decision of the National Labor Relations Commission, both parties
filed separate petitions for certiorari27 before the Court of Appeals. The Court of Appeals
consolidated the petitions and considered the following issues for resolution:
1) Whether or not Espirituis a regular employee or a fixed-term contractual
employee;
2) Whether or not Espiritu was illegally dismissed; and
3) Whether or not Espirituis entitled to damages and attorney’s fees.28
In the assailed decision, the Court of Appeals affirmed the National Labor
Relations Commission with the modification that Fuji immediately reinstate
Arlene to her position as News Producer without loss of seniority rights, and pay
her backwages, 13th-month pay, mid-year and year-end bonuses, sick leave
and vacation leave with pay until reinstated, moral damages, exemplary
damages, attorney’sfees, and legal interest of 12% per annum of the total
monetary awards.29 The Court of Appeals ruled that:
WHEREFORE, for lack of merit, the petition of Fuji Television Network, Inc. and Yoshiki
Aoki is DENIED and the petition of Arlene S. Espiritu is GRANTED. Accordingly, the
Decision dated March 5, 2010 of the National Labor Relations Commission, 6th Division
in NLRC NCR Case No. 05-06811-09 and its subsequent Resolution dated April 26, 2010
are hereby AFFIRMED with MODIFICATIONS, as follows:
Fuji Television, Inc. is hereby ORDERED to immediately REINSTATE Arlene S. Espiritu
to her position as News Producer without loss of seniority rights and privileges and to
pay her the following:
1. Backwages at the rate of $1,900.00 per month computed from May 5, 2009
(the date of dismissal), until reinstated;
2. 13th Month Pay at the rate of $1,900.00 per annum from the date of dismissal,
until reinstated;
3. One and a half (1 1/2) months pay or $2,850.00 as midyear bonus per year
from the date of dismissal, until reinstated;
4. One and a half (1 1/2) months pay or $2,850.00 as year-end bonus per year
from the date of dismissal, until reinstated;
5. Sick leave of 30 days with pay or $1,900.00 per year from the date of
dismissal, until reinstated; and
6. Vacation leave with pay equivalent to 14 days or $1,425.00 per annum from
date of dismissal, until reinstated.
7. The amount of ₱100,000.00 as moral damages;
8. The amount of ₱50,000.00 as exemplary damages;
9. Attorney’s fees equivalent to 10% of the total monetary awards herein stated;
and
10. Legal interest of twelve percent (12%) per annum of the total monetary
awards computed from May 5, 2009, until their full satisfaction.
The Labor Arbiter is hereby DIRECTED to make another recomputation of the above
monetary awards consistent with the above directives.
SO ORDERED.30
Page 9 of 42
In arriving at the decision, the Court of Appeals held that Arlene was a regular employee
because she was engaged to perform work that was necessary or desirable in the
business of Fuji,31 and the successive renewals of her fixed-term contract resulted in
regular employment.32
According to the Court of Appeals, Sonzadoes not apply in order to establish that Arlene
was an independent contractor because she was not contracted on account of any
peculiar ability, special talent, or skill.33 The fact that everything used by Arlene in her
work was owned by Fuji negated the idea of job contracting.34
The Court of Appeals also held that Arlene was illegally dismissed because Fuji failed to
comply with the requirements of substantive and procedural due process necessary for
her dismissal since she was a regular employee.35
The Court of Appeals found that Arlene did not sign the non-renewal contract voluntarily
and that the contract was a mere subterfuge by Fuji to secure its position that it was her
choice not to renew her contract. She was left with no choice since Fuji was decided on
severing her employment.36
Fuji filed a motion for reconsideration that was denied in the resolution37 dated December
7, 2012 for failure to raise new matters.38
Aggrieved, Fuji filed this petition for review and argued that the Court of Appeals erred
in affirming with modification the National Labor Relations Commission’s decision,
holding that Arlene was a regular employee and that she was illegally dismissed. Fuji
also questioned the award of monetary claims, benefits, and damages.39
Fuji points out that Arlene was hired as a stringer, and it informed her that she would
remain one.40 She was hired as an independent contractor as defined in Sonza.41 Fuji
had no control over her work.42 The employment contracts were executed and renewed
annually upon Arlene’s insistence to which Fuji relented because she had skills that
distinguished her from ordinary employees.43 Arlene and Fuji dealt on equal terms when
they negotiated and entered into the employment contracts.44 There was no illegal
dismissal because she freely agreed not to renew her fixed-term contract as evidenced
by her e-mail correspondences with Yoshiki Aoki.45 In fact, the signing of the non-renewal
contract was not necessary to terminate her employment since "such employment
terminated upon expiration of her contract."46 Finally, Fuji had dealt with Arlene in good
faith, thus, she should not have been awarded damages.47
Fuji alleges that it did not need a permanent reporter since the news reported by Arlene
could easily be secured from other entities or from the internet. 48 Fuji "never controlled
the manner by which she performed her functions."49It was Arlene who insisted that Fuji
execute yearly fixed-term contracts so that she could negotiate for annual increases in
her pay.50
Fuji points out that Arlene reported for work for only five (5) days in February 2009, three
(3) days in March 2009, and one (1) day in April 2009.51 Despite the provision in her
employment contract that sick leaves in excess of 30 days shall not be paid, Fuji paid
Arlene her entire salary for the months of March, April, and May; four(4) months of
separation pay; and a bonus for two and a half months for a total of
US$18,050.00.52 Despite having received the amount of US$18,050.00, Arlene still filed
a case for illegal dismissal.53
Fuji further argues that the circumstances would show that Arlene was not illegally
dismissed. The decision tonot renew her contract was mutually agreed upon by the
parties as indicated in Arlene’s e-mail54 dated March 11, 2009 where she consented to
the non-renewal of her contract but refused to sign anything.55 Aoki informed Arlene in
an e-mail56 dated March 12, 2009 that she did not need to sign a resignation letter and
that Fuji would pay Arlene’s salary and bonus until May 2009 as well as separation pay.57
Arlene sent an e-mail dated March 18, 2009 with her version of the non-renewal
agreement that she agreed to sign this time.58 This attached version contained a
provision that Fuji shall re-hire her if she was still interested to work for Fuji.59 For Fuji,
Arlene’s e-mail showed that she had the power to bargain.60
Fuji then posits that the Court of Appeals erred when it held that the elements of an
employer-employee relationship are present, particularly that of control;61 that Arlene’s
separation from employment upon the expiration of her contract constitutes illegal
dismissal;62 that Arlene is entitled to reinstatement;63 and that Fuji is liable to Arlene for
damages and attorney’s fees.64
This petition for review on certiorari under Rule 45 was filed on February 8, 2013. 65 On
February 27, 2013, Arlene filed a manifestation66 stating that this court may not take
jurisdiction over the case since Fuji failed to authorize Corazon E. Acerden to sign the
verification.67 Fuji filed a comment on the manifestation68 on March 9, 2013.
Based on the arguments of the parties, there are procedural and substantive issues for
resolution:
I. Whether the petition for review should be dismissed as Corazon E. Acerden,
the signatory of the verification and certification of non forum shopping of the
petition, had no authority to sign the verification and certification on behalf of
Fuji;
II. Whether the Court of Appeals correctly determined that no grave abuse of
discretion was committed by the National Labor Relations Commission when it
ruled that Arlene was a regular employee, not an independent contractor, and
that she was illegally dismissed; and
Page 10 of 42
 III. Whether the Court of Appeals properly modified the National Labor Relations
Commission’s decision by awarding reinstatement, damages, and attorney’s
fees.
The petition should be dismissed.
I
Validity of the verification and certification against forum shopping
In its comment on Arlene’s manifestation, Fuji alleges that Corazon was authorized to
sign the verification and certification of non-forum shopping because Mr. Shuji Yano was
empowered under the secretary’s certificate to delegate his authority to sign the
necessary pleadings, including the verification and certification against forum shopping.69
On the other hand, Arlene points outthat the authority given to Mr. Shuji Yano and Mr.
Jin Eto in the secretary’s certificate is only for the petition for certiorari before the Court
of Appeals.70 Fuji did not attach any board resolution authorizing Corazon orany other
person tofile a petition for review on certiorari with this court.71 Shuji Yano and Jin Eto
could not re-delegate the power thatwas delegated to them.72 In addition, the special
power of attorney executed by Shuji Yano in favor of Corazon indicated that she was
empowered to sign on behalf of Shuji Yano, and not on behalf of Fuji.73
The Rules of Court requires the
submission of verification and
certification against forum shopping
Rule 7, Section 4 of the 1997 Rules of Civil Procedure provides the requirement of
verification, while Section 5 of the same rule provides the requirement of certification
against forum shopping. These sections state:
SEC. 4. Ver if ica tio n. — Except when otherwise specifically required by law or rule,
pleadings need not be under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that the
allegations therein are true and correct of his knowledge and belief.
A pleading required to be verifiedwhich containsa verification based on "information and
belief," or upon "knowledge, information and belief," or lacks a proper verification, shall
be treated as an unsigned pleading.
SEC. 5. Certification against forum shopping.— The plaintiff or principal party shall certify
under oath in the complaint orother initiatory pleading asserting a claim for relief or in a
sworn certification annexed thereto and simultaneously filed therewith: (a) that he has
not theretofore commenced any action or filed any claim involving the same issues in
any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such
other action or claim is pending therein; (b) if there is such other pending action or claim,
a complete statement of the present status thereof; and (c) if he should thereafter learn
that the same or similar action or claim has been filed or is pending, he shall report that
fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory
pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere
amendment of the complaint or other initiatory pleading but shall be cause for the
dismissal of the case without prejudice, unless otherwise provided, upon motion and
after hearing. The submission of a false certification or non-compliance with any of the
undertakings therein shall constitute indirect contempt ofcourt, without prejudice to the
corresponding administrative and criminalactions. If the acts of the party or his counsel
clearly constitute willful and deliberate forum shopping, the same shall be ground for
summary dismissal with prejudice and shall constitute direct contempt, as well as a
cause for administrative sanctions.
Section 4(e) of Rule 4574 requires that petitions for review should "contain a sworn
certification against forum shopping as provided in the last paragraph of section 2, Rule
42." Section 5 of the same rule provides that failure to comply with any requirement in
Section 4 is sufficient ground to dismiss the petition.
Effects of non-compliance
Uy v. Landbank75 discussed the effect of non-compliance with regard to verification and
stated that:
[t]he requirement regarding verification of a pleading is formal, not jurisdictional. Such
requirement is simply a condition affecting the form of pleading, the non-compliance of
which does not necessarily render the pleading fatally defective. Verification is simply
intended to secure an assurance that the allegations in the pleading are true and correct
and not the product of the imagination or a matter of speculation, and that the pleading
is filed in good faith. The court may order the correction of the pleading if the verification
is lacking or act on the pleading although it is not verified, if the attending circumstances
are such that strict compliance with the rules may be dispensed with inorder that the
ends of justice may thereby be served.76 (Citations omitted)
Shipside Incorporated v. Court of Appeals77 cited the discussion in Uy and differentiated
its effect from non-compliance with the requirement of certification against forum
shopping:
On the other hand, the lack of certification against forum shopping is generally not
curable by the submission thereof after the filing of the petition. Section 5, Rule 45 of the
1997 Rules of Civil Procedure provides that the failure of the petitioner tosubmit the
Page 11 of 42
required documents that should accompany the petition, including the certification
against forum shopping, shall be sufficient ground for the dismissal thereof. The same
rule applies to certifications against forum shopping signed by a person on behalf of a
corporation which are unaccompanied by proof that said signatory is authorized to file a
petition on behalf of the corporation.78 (Emphasis supplied) Effects of substantial
compliance with the requirement of verification and certification against forum shopping
Although the general rule is that failure to attach a verification and certification against
forum shopping isa ground for dismissal, there are cases where this court allowed
substantial compliance.
In Loyola v. Court of Appeals,79 petitioner Alan Loyola submitted the required certification
one day after filing his electoral protest.80 This court considered the subsequent filing as
substantial compliance since the purpose of filing the certification is to curtail forum
shopping.81
In LDP Marketing, Inc. v. Monter,82 Ma. Lourdes Dela Peña signed the verification and
certification against forum shopping but failed to attach the board resolution indicating
her authority to sign.83 In a motion for reconsideration, LDP Marketing attached the
secretary’s certificate quoting the board resolution that authorized Dela Peña. 84 Citing
Shipside, this court deemed the belated submission as substantial compliance since LDP
Marketing complied with the requirement; what it failed to do was to attach proof of Dela
Peña’s authority to sign.85 Havtor Management Phils., Inc. v. National Labor Relations
Commission86 and General Milling Corporation v. National Labor Relations
Commission87 involved petitions that were dismissed for failure to attach any document
showing that the signatory on the verification and certification against forum-shopping
was authorized.88 In both cases, the secretary’s certificate was attached to the motion
for reconsideration.89 This court considered the subsequent submission of proof
indicating authority to sign as substantial compliance. 90 Altres v. Empleo91 summarized
the rules on verification and certification against forum shopping in this manner:
For the guidance of the bench and bar, the Court restates in capsule form the
jurisprudential pronouncements . . . respecting non-compliance with the requirement on,
or submission of defective, verification and certification against forum shopping:
1) A distinction must be made between non-compliance with the requirement on
or submission of defective verification, and noncompliance with the requirement
on or submission of defective certification against forum shopping.
2) As to verification, non-compliance therewith or a defect therein does not
necessarily render the pleading fatally defective. The court may order its
submission or correction or act on the pleading if the attending circumstances
are such that strict compliance with the Rule may be dispensed with in order
that the ends of justice may be served thereby.
3) Verification is deemed substantially complied with when one who has ample
knowledge to swear to the truth of the allegations in the complaint or petition
signs the verification, and when matters alleged in the petition have been made
in good faith or are true and correct.
4) As to certification against forum shopping, non-compliance therewith or a
defect therein, unlike in verification, is generally not curable by its subsequent
submission or correction thereof, unless there is a need to relax the Rule on the
ground of "substantial compliance" or presence of "special circumstances or
compelling reasons."
5) The certification against forum shopping must be signed by all the plaintiffs
or petitioners in a case; otherwise, those who did not sign will be dropped as
parties to the case. Under reasonable or justifiable circumstances, however, as
when all the plaintiffs or petitioners share a common interest and invoke a
common cause of action or defense, the signature of only one of them inthe
certification against forum shopping substantially complies with the Rule.
6) Finally, the certification against forum shopping must be executed by the
party-pleader, not by his counsel. If, however, for reasonable or justifiable
reasons, the party-pleader is unable to sign, he must execute a Special Power
of Attorney designating his counsel of record to sign on his behalf.92
There was substantial compliance
by Fuji Television Network, Inc.
Being a corporation, Fuji exercises its power to sue and be sued through its board of
directors or duly authorized officers and agents. Thus, the physical act of signing the
verification and certification against forum shopping can only be done by natural persons
duly authorized either by the corporate by-laws or a board resolution.93
In its petition for review on certiorari, Fuji attached Hideaki Ota’s secretary’s
certificate,94 authorizing Shuji Yano and Jin Eto to represent and sign for and on behalf
of Fuji.95 The secretary’s certificate was duly authenticated96 by Sulpicio Confiado,
Consul-General of the Philippines in Japan. Likewise attached to the petition is the
special power of attorney executed by Shuji Yano, authorizing Corazon to sign on his
behalf.97 The verification and certification against forum shopping was signed by
Corazon.98
Arlene filed the manifestation dated February 27, 2013, arguing that the petition for
review should be dismissed because Corazon was not duly authorized to sign the
verification and certification against forum shopping.
Page 12 of 42
Fuji filed a comment on Arlene’s manifestation, stating that Corazon was properly
authorized to sign. On the basis of the secretary’s certificate, Shuji Yano was empowered
to delegate his authority.
Quoting the board resolution dated May 13, 2010, the secretary's certificate states:
(a) The Corporation shall file a Petition for Certiorari with the Court of Appeals,
against Philippines’ National Labor Relations Commission ("NLRC") and Arlene
S. Espiritu, pertaining to NLRC-NCR Case No. LAC 00-002697-09, RAB No. 05-
06811-00 and entitled "Arlene S. Espiritu v. Fuji Television Network, Inc./Yoshiki
Aoki", and participate in any other subsequent proceeding that may necessarily
arise therefrom, including but not limited to the filing of appeals in the
appropriate venue;
(b) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby authorized,
to verify and execute the certification against nonforum shopping which may be
necessary or required to be attached to any pleading to [sic] submitted to the
Court of Appeals; and the authority to so verify and certify for the Corporation in
favor of the said persons shall subsist and remain effective until the termination
of the said case;
....
(d) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby authorized,
to represent and appear on behalf the [sic] Corporation in all stages of the [sic]
this case and in any other proceeding that may necessarily arise thereform [sic],
and to act in the Corporation’s name, place and stead to determine, propose,
agree, decide, do, and perform any and all of the following:
1. The possibility of amicable settlement or of submission to alternative
mode of dispute resolution;
2. The simplification of the issue;
3. The necessity or desirability of amendments to the pleadings;
4. The possibility of obtaining stipulation or admission of facts and
documents; and
5. Such other matters as may aid in the prompt disposition of the
action.99 (Emphasis in the original; Italics omitted)
Shuji Yano executed a special power of attorney appointing Ms. Ma. Corazon E. Acerden
and Mr. Moises A. Rollera as his attorneys-in-fact.100 The special power of attorney
states:
That I, SHUJI YANO, of legal age, Japanese national, with office address at 2-4-8 Daiba,
Minato-Ku, Tokyo, 137-8088 Japan, and being the representative of Fuji TV, INc., [sic]
(evidenced by the attached Secretary’s Certificate) one of the respondents in NLRC-
NCR Case No. 05-06811-00 entitled "Arlene S. Espiritu v. Fuji Television Network,
Inc./Yoshiki Aoki", and subsequently docketed before the Court of Appeals asC.A. G.R.
S.P. No. 114867 (Consolidated with SP No. 114889) do hereby make, constitute and
appoint Ms. Ma. Corazon E. Acerden and Mr. Moises A. Rolleraas my true and lawful
attorneys-infact for me and my name, place and stead to act and represent me in the
above-mentioned case, with special power to make admission/s and stipulations and/or
to make and submit as well as to accept and approve compromise proposals upon such
terms and conditions and under such covenants as my attorney-in-fact may deem fit,
and to engage the services of Villa Judan and Cruz Law Officesas the legal counsel to
represent the Company in the Supreme Court;
The said Attorneys-in-Fact are hereby further authorized to make, sign, execute and
deliver such papers ordocuments as may be necessary in furtherance of the power thus
granted, particularly to sign and execute the verification and certification of non-forum
shopping needed to be filed.101 (Emphasis in the original)
In its comment102 on Arlene’s manifestation, Fuji argues that Shuji Yano could further
delegate his authority because the board resolution empowered him to "act in the
Corporation’s name, place and stead to determine, propose, agree, decided [sic], do and
perform any and all of the following: . . . such other matters as may aid in the prompt
disposition of the action."103 To clarify, Fuji attached a verification and certification
against forum shopping, but Arlene questions Corazon’s authority to sign. Arlene argues
that the secretary’s certificate empowered Shuji Yano to file a petition for certiorari before
the Court of Appeals, and not a petition for review before this court, and that since Shuji
Yano’s authority was delegated to him, he could not further delegate such power.
Moreover, Corazon was representing Shuji Yano in his personal capacity, and not in his
capacity as representative of Fuji.
A review of the board resolution quoted in the secretary’s certificate shows that Fuji shall
"file a Petition for Certiorari with the Court of Appeals"104 and "participate in any other
subsequent proceeding that may necessarily arise therefrom, including but not limited to
the filing of appeals in the appropriate venue,"105 and that Shuji Yano and Jin Eto are
authorized to represent Fuji "in any other proceeding that may necessarily arise
thereform [sic]."106 As pointed out by Fuji, Shuji Yano and Jin Eto were also authorized
to "act in the Corporation’s name, place and stead to determine, propose, agree, decide,
do, and perform anyand all of the following: . . . 5. Such other matters as may aid in the
prompt disposition of the action."107
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Considering that the subsequent proceeding that may arise from the petition for certiorari
with the Court of Appeals is the filing of a petition for review with this court, Fuji
substantially complied with the procedural requirement.
On the issue of whether Shuji Yano validly delegated his authority to Corazon, Article
1892 of the Civil Code of the Philippines states:
ART. 1892. The agent may appoint a substitute if the principal has not prohibited him
from doing so; but he shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without designating the person, and the
person appointed was notoriously incompetent or insolvent. All acts of the
substitute appointed against the prohibition of the principal shall be void.
The secretary’s certificate does not state that Shuji Yano is prohibited from appointing a
substitute. In fact, heis empowered to do acts that will aid in the resolution of this case.
This court has recognized that there are instances when officials or employees of a
corporation can sign the verification and certification against forum shopping without a
board resolution. In Cagayan Valley Drug Corporation v. CIR,108 it was held that:
In sum, we have held that the following officials or employees of the company can sign
the verification and certification without need of a board resolution: (1) the Chairperson
of the Board of Directors, (2) the President of a corporation, (3) the General Manager or
Acting General Manager, (4) Personnel Officer, and (5) an Employment Specialist in a
labor case.
109
While the above cases do not provide a complete listing of authorized signatories to
the verification and certification required by the rules, the determination of the sufficiency
of the authority was done on a case to case basis. The rationale applied in the foregoing
cases is to justify the authority of corporate officers or representatives of the corporation
to sign the verification or certificate against forum shopping, being ‘in a position to verify
the truthfulness and correctness of the allegations in the petition.’ 110
Corazon’s affidavit111 states that she is the "office manager and resident interpreter of
the Manila Bureau of Fuji Television Network, Inc."112 and that she has "held the position
for the last twenty-three years."113
As the office manager for 23 years,Corazon can be considered as having knowledge of
all matters in Fuji’s Manila Bureau Office and is in a position to verify "the truthfulness
and the correctness of the allegations in the Petition."114
Thus, Fuji substantially complied with the requirements of verification and certification
against forum shopping.
Before resolving the substantive issues in this case, this court will discuss the procedural
parameters of a Rule 45 petition for review in labor cases.
II
Procedural parameters of petitions for review in labor cases
Article 223 of the Labor Code115 does not provide any mode of appeal for decisions of
the National Labor Relations Commission. It merely states that "[t]he decision of the
Commission shall be final and executory after ten (10) calendar days from receipt thereof
by the parties." Being final, it is no longer appealable. However, the finality of the National
Labor Relations Commission’s decisions does not mean that there is no more recourse
for the parties.
In St. Martin Funeral Home v. National Labor Relations Commission,116 this court cited
several cases117 and rejected the notion that this court had no jurisdiction to review
decisions of the National Labor Relations Commission. It stated that this court had the
power to review the acts of the National Labor Relations Commission to see if it kept
within its jurisdiction in deciding cases and alsoas a form of check and balance. 118 This
court then clarified that judicial review of National Labor Relations Commission decisions
shall be by way of a petition for certiorari under Rule 65. Citing the doctrine of hierarchy
of courts, it further ruled that such petitions shall be filed before the Court of Appeals.
From the Court of Appeals, an aggrieved party may file a petition for review on certiorari
under Rule 45.
A petition for certiorari under Rule 65 is an original action where the issue is limited to
grave abuse of discretion. As an original action, it cannot be considered as a continuation
of the proceedings of the labor tribunals.
On the other hand, a petition for review on certiorari under Rule 45 is a mode of appeal
where the issue is limited to questions of law. In labor cases, a Rule 45 petition is limited
toreviewing whether the Court of Appeals correctly determined the presence or absence
of grave abuse of discretion and deciding other jurisdictional errors of the National Labor
Relations Commission.119
In Odango v. National Labor Relations Commission,120 this court explained that a petition
for certiorari is an extraordinary remedy that is "available only and restrictively in truly
exceptional cases"121 and that its sole office "is the correction of errors of jurisdiction
including commission of grave abuse of discretion amounting to lack or excess of
jurisdiction."122 A petition for certiorari does not include a review of findings of fact since
the findings of the National Labor Relations Commission are accorded finality.123 In
cases where the aggrieved party assails the National Labor Relations Commission’s
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findings, he or she must be able to show that the Commission "acted capriciously and
whimsically or in total disregard of evidence material to the controversy."124
When a decision of the Court of Appeals under a Rule 65 petition is brought to this court
by way of a petition for review under Rule 45, only questions of law may be decided
upon. As held in Meralco Industrial v. National Labor Relations Commission:125
This Court is not a trier of facts. Well-settled is the rule that the jurisdiction of this Court
ina petition for review on certiorari under Rule 45 of the Revised Rules of Court is limited
to reviewing only errors of law, not of fact, unless the factual findings complained of are
completely devoid of support from the evidence on record, or the assailed judgment is
based on a gross misapprehension of facts. Besides, factual findings of quasi-judicial
agencies like the NLRC, when affirmed by the Court of Appeals, are conclusive upon the
parties and binding on this Court.126
Career Philippines v. Serna,127 citing Montoya v. Transmed,128 is instructive on the
parameters of judicial review under Rule 45:
As a rule, only questions of law may be raised in a Rule 45 petition. In one case, we
discussed the particular parameters of a Rule 45 appeal from the CA’s Rule 65 decision
on a labor case, as follows:
In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast
with the review for jurisdictional error that we undertake under Rule 65. Furthermore,
Rule 45 limits us to the review of questions of law raised against the assailed CA
decision. In ruling for legal correctness, we have to view the CA decision in the same
context that the petition for certiorari it ruled upon was presented to it; we have to
examine the CA decision from the prism of whether it correctly determined the presence
or absence of grave abuse of discretion in the NLRC decision before it, not on the basis
of whether the NLRC decision on the merits of the case was correct. In other words, we
have to be keenly aware that the CA undertook a Rule 65 review, not a review on appeal,
of the NLRC decision challenged before it.129 (Emphasis in the original)
Justice Brion’s dissenting opinion in Abott Laboratories, PhiIippines v.
Aicaraz130 discussed that in petitions for review under Rule 45, "the Court simply
determines whether the legal correctness of the CA’s finding that the NLRC ruling . . .
had basis in fact and in Iaw."131 In this kind of petition, the proper question to be raised
is, "Did the CA correctly determine whether the NLRC committed grave abuse of
discretion in ruling on the case?"132
Justice Brion’s dissenting opinion also laid down the following guidelines:
If the NLRC ruling has basis in the evidence and the applicable law and jurisprudence,
then no grave abuse of discretion exists and the CA should so declare and, accordingly,
dismiss the petition. If grave abuse of discretion exists, then the CA must grant the
petition and nullify the NLRC ruling, entering at the same time the ruling that isjustified
under the evidence and the governing law, rules and jurisprudence. In our Rule 45
review, this Court must denythe petition if it finds that the CA correctly
acted.133 (Emphasis in the original)
These parameters shall be used in resolving the substantive issues in this petition.
III
Determination of employment status; burden of proof
In this case, there is no question thatArlene rendered services to Fuji. However, Fuji
alleges that Arlene was an independent contractor, while Arlene alleges that she was a
regular employee. To resolve this issue, we ascertain whether an employer-employee
relationship existed between Fuji and Arlene.
This court has often used the four-fold test to determine the existence of an employer-
employee relationship. Under the four-fold test, the "control test" is the most
important.134 As to how the elements in the four-fold test are proven, this court has
discussed that:
[t]here is no hard and fast rule designed to establish the aforesaid elements. Any
competent and relevant evidence to prove the relationship may be admitted.
Identification cards, cash vouchers, social security registration, appointment letters or
employment contracts, payrolls, organization charts, and personnel lists, serve as
evidence of employee status.135
If the facts of this case vis-à-vis the four-fold test show that an employer-employee
relationship existed, we then determine the status of Arlene’s employment, i.e., whether
she was a regular employee. Relative to this, we shall analyze Arlene’s fixed-term
contract and determine whether it supports her argument that she was a regular
employee, or the argument of Fuji that she was an independent contractor. We shall
scrutinize whether the nature of Arlene’s work was necessary and desirable to Fuji’s
business or whether Fuji only needed the output of her work. If the circumstances show
that Arlene’s work was necessary and desirable to Fuji, then she is presumed to be a
regular employee. The burden of proving that she was an independent contractor lies
with Fuji.
In labor cases, the quantum of proof required is substantial evidence. 136 "Substantial
evidence" has been defined as "such amount of relevant evidence which a reasonable
mind might accept as adequate to justify a conclusion."137
If Arlene was a regular employee, we then determine whether she was illegally
dismissed. In complaints for illegal dismissal, the burden of proof is on the employee to
prove the fact of dismissal.138 Once the employee establishes the fact of dismissal,
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supported by substantial evidence, the burden of proof shifts tothe employer to show that
there was a just or authorized cause for the dismissal and that due process was
observed.139
IV
Whether the Court of Appeals correctly affirmed the National Labor
Relations Commission’s finding that Arlene was a regular employee
Fuji alleges that Arlene was anindependent contractor, citing Sonza v. ABS-CBN and
relying on the following facts: (1) she was hired because of her skills; (2) her salary was
US$1,900.00, which is higher than the normal rate; (3) she had the power to bargain with
her employer; and (4) her contract was for a fixed term. According to Fuji, the Court of
Appeals erred when it ruled that Arlene was forcedto sign the non-renewal agreement,
considering that she sent an email with another version of the non-renewal
agreement.140 Further, she is not entitled tomoral damages and attorney’s fees because
she acted in bad faith when she filed a labor complaint against Fuji after receiving
US$18,050.00 representing her salary and other benefits.141 Arlene argues that she was
a regular employee because Fuji had control and supervision over her work. The news
events that she covered were all based on the instructions of Fuji.142 She maintains that
the successive renewal of her employment contracts for four (4) years indicates that her
work was necessary and desirable.143 In addition, Fuji’s payment of separation pay
equivalent to one (1) month’s pay per year of service indicates that she was a regular
employee.144 To further support her argument that she was not an independent
contractor, she states that Fuji owns the laptop computer and mini-camera that she used
for work.145 Arlene also argues that Sonza is not applicable because she was a plain
reporter for Fuji, unlike Jay Sonza who was a news anchor, talk show host, and who
enjoyed a celebrity status.146 On her illness, Arlene points outthat it was not a ground for
her dismissal because her attending physician certified that she was fit to work. 147
Arlene admits that she signed the non-renewal agreement with quitclaim, not because
she agreed to itsterms, but because she was not in a position to reject the non-renewal
agreement. Further, she badly needed the salary withheld for her sustenance and
medication.148 She posits that her acceptance of separation pay does not bar filing of a
complaint for illegal dismissal.149
Article 280 of the Labor Code provides that:
Art. 280. Regular and casual employment.The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph; Provided, That, any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which heis employed and his employment shall continue
while such activity exist.
This provision classifies employees into regular, project, seasonal, and casual. It further
classifies regular employees into two kinds: (1) those "engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer";
and (2) casual employees who have "rendered at least one year of service, whether such
service is continuous or broken."
Another classification of employees, i.e., employees with fixed-term contracts, was
recognized in Brent School, Inc. v. Zamora150 where this court discussed that:
Logically, the decisive determinant in the term employment should not be the activities
that the employee is called upon to perform, but the day certain agreed upon by the
parties for the commencement and termination of their employment relationship, a day
certainbeing understood to be "that which must necessarily come, although it may not
be known when."151 (Emphasis in the original)
This court further discussed that there are employment contracts where "a fixed term is
an essential and natural appurtenance"152 such as overseas employment contracts and
officers in educational institutions.153
Distinctions among fixed-term
employees, independent contractors,
and regular employees
GMA Network, Inc. v. Pabriga154 expounded the doctrine on fixed term contracts laid
down in Brentin the following manner:
Cognizant of the possibility of abuse in the utilization of fixed term employment contracts,
we emphasized in Brentthat where from the circumstances it is apparent that the periods
have been imposed to preclude acquisition of tenurial security by the employee, they
should be struck down as contrary to public policy or morals. We thus laid down
indications or criteria under which "term employment" cannot be said to be in
circumvention of the law on security of tenure, namely:
1) The fixed period of employment was knowingly and voluntarily agreed upon by the
parties without any force, duress, or improper pressure being brought to bear upon the
employee and absent any other circumstances vitiating his consent; or
2) It satisfactorily appears that the employer and the employee dealt with each other on
more or less equal terms with no moral dominance exercised by the former or the latter.
Page 16 of 42
These indications, which must be read together, make the Brent doctrine applicable only
in a few special cases wherein the employer and employee are on more or less in equal
footing in entering into the contract. The reason for this is evident: whena prospective
employee, on account of special skills or market forces, is in a position to make demands
upon the prospective employer, such prospective employee needs less protection than
the ordinary worker. Lesser limitations on the parties’ freedom of contract are thus
required for the protection of the employee.155(Citations omitted)
For as long as the guidelines laid down in Brentare satisfied, this court will recognize the
validity of the fixed-term contract.
In Labayog v. M.Y. San Biscuits, Inc.,156 this court upheld the fixedterm employment of
petitioners because from the time they were hired, they were informed that their
engagement was for a specific period. This court stated that:
[s]imply put, petitioners were notregular employees. While their employment as mixers,
packers and machine operators was necessary and desirable in the usual business
ofrespondent company, they were employed temporarily only, during periods when there
was heightened demand for production. Consequently, there could have been no illegal
dismissal when their services were terminated on expiration of their contracts. There was
even no need for notice of termination because they knew exactly when their contracts
would end. Contracts of employment for a fixed period terminate on their own at the end
of such period.
Contracts of employment for a fixed period are not unlawful. What is objectionable is the
practice of some scrupulous employers who try to circumvent the law protecting workers
from the capricious termination of employment.157 (Citation omitted)
Caparoso v. Court of Appeals158 upheld the validity of the fixed-term contract of
employment. Caparoso and Quindipan were hired as delivery men for three (3) months.
At the end of the third month, they were hired on a monthly basis. In total, they were
hired for five (5) months. They filed a complaint for illegal dismissal.159 This court ruled
that there was no evidence indicating that they were pressured into signing the fixed-
term contracts. There was likewise no proof that their employer was engaged in hiring
workers for five (5) months onlyto prevent regularization. In the absence of these facts,
the fixed-term contracts were upheld as valid.160 On the other hand, an independent
contractor is defined as:
. . . one who carries on a distinct and independent business and undertakes to perform
the job, work, or service on its own account and under one’s own responsibility according
to one’s own manner and method, free from the control and direction of the principal in
all matters connected with the performance of the work except as to the results thereof.161
In view of the "distinct and independent business" of independent contractors, no
employer-employee relationship exists between independent contractors and their
principals. Independent contractors are recognized under Article 106 of the Labor Code:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with
another person for the performance of the former’s work, the employees of the contractor
and of the latter’s subcontractor, if any, shall be paid in accordance with the provisions
of this Code.
....
The Secretary of Labor and Employment may, by appropriate regulations, restrict or
prohibit the contracting-out of labor to protect the rights of workers established under this
Code. In so prohibiting or restricting, he may make appropriate distinctions between
labor-only contracting and job contracting as well as differentiations within these types
of contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer
does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to the principal business
of such employer. In such cases, the person or intermediary shall be considered merely
as an agent of the employer who shall be responsible to the workers in the same manner
and extent as if the latterwere directly employed by him.
In Department Order No. 18-A, Seriesof 2011, of the Department of Labor and
Employment, a contractor is defined as having:
Section 3. . . .
....
(c) . . . an arrangement whereby a principal agrees to put out or farm out with a contractor
the performance or completion of a specific job, work or service within a definite or
predetermined period, regardless of whether such job, work or service is to be performed
or completed within oroutside the premises of the principal.
This department order also states that there is a trilateral relationship in legitimate job
contracting and subcontracting arrangements among the principal, contractor, and
employees of the contractor. There is no employer-employee relationship between the
contractor and principal who engages the contractor’s services, but there is an employer-
employee relationship between the contractor and workers hired to accomplish the work
for the principal.162
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Jurisprudence has recognized another kind of independent contractor: individuals with ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS
unique skills and talents that set them apart from ordinary employees. There is no
trilateral relationship in this case because the independent contractor himself or herself ....
performs the work for the principal. In other words, the relationship is bilateral.
LABOR
In Orozco v. Court of Appeals,163 Wilhelmina Orozco was a columnist for the Philippine
Daily Inquirer. This court ruled that she was an independent contractor because of her
Section 3. The State shall afford full protection to labor, local and overseas, organized
"talent, skill, experience, and her unique viewpoint as a feminist advocate."164 In addition,
and unorganized, and promote full employment and equality of employment
the Philippine Daily Inquirer did not have the power of control over Orozco, and she
opportunities for all.
worked at her own pleasure.165

It shall guarantee the rights of all workers to self-organization, collective bargaining and
Semblante v. Court of Appeals166 involved a masiador167 and a sentenciador.168 This
negotiations, and peaceful concerted activities, including the right to strike in accordance
court ruled that "petitioners performed their functions as masiadorand sentenciador free
with law. They shall be entitled to security of tenure, humane conditions of work, and a
from the direction and control of respondents"169 and that the masiador and sentenciador
living wage. They shall also participate in policy and decision-making processes affecting
"relied mainly on their ‘expertise that is characteristic of the cockfight
their rights and benefits as may be provided by law.
gambling.’"170 Hence, no employer-employee relationship existed.

Bernarte v. Philippine Basketball Association171 involved a basketball referee. This court The State shall promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes, including
ruled that "a referee is an independent contractor, whose special skills and independent
conciliation, and shall enforce their mutual compliance therewith to foster industrial
judgment are required specifically for such position and cannot possibly be controlled by
peace.
the hiring party."172

In these cases, the workers were found to be independent contractors because of their The State shall regulate the relations between workers and employers, recognizing the
unique skills and talents and the lack of control over the means and methods in the right of labor to its just share in the fruits of production and the right of enterprises to
performance of their work. reasonable returns on investments, and to expansion and growth.

Apart from the constitutional guarantee of protection to labor, Article 1700 of the Civil
In other words, there are different kinds of independent contractors: those engaged in
Code states:
legitimate job contracting and those who have unique skills and talents that set them
apart from ordinary employees.
ART. 1700. The relations between capital and labor are not merely contractual. They are
so impressed with public interest that labor contracts must yield to the common good.
Since no employer-employee relationship exists between independent contractors and
Therefore, such contracts are subject to the special laws on labor unions, collective
their principals, their contracts are governed by the Civil Code provisions on contracts
and other applicable laws.173 bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor
and similar subjects.

A contract is defined as "a meeting of minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some service."174 Parties
are free to stipulate on terms and conditions in contracts as long as these "are not
contrary to law, morals, good customs, public order, or public policy." 175 This
presupposes that the parties to a contract are on equal footing. Theycan bargain on
terms and conditions until they are able to reach an agreement.
On the other hand, contracts of employment are different and have a higher level of
regulation because they are impressed with public interest. Article XIII, Section 3 of the
1987 Constitution provides full protection to labor:
In contracts of employment, the employer and the employee are not on equal footing.
Thus, it is subject to regulatory review by the labor tribunals and courts of law. The law
serves to equalize the unequal. The labor force is a special class that is constitutionally
protected because of the inequality between capital and labor.176 This presupposes that
the labor force is weak. However, the level of protection to labor should vary from case
to case; otherwise, the state might appear to be too paternalistic in affording protection
to labor. As stated in GMA Network, Inc. v. Pabriga, the ruling in Brent applies in cases
where it appears that the employer and employee are on equal footing.177 This
recognizes the fact that not all workers are weak. To reiterate the discussion in GMA
Network v. Pabriga:

Page 18 of 42
The reason for this is evident: when a prospective employee, on account of special skills
or market forces, is in a position to make demands upon the prospective employer, such
prospective employee needs less protection than the ordinary worker. Lesser limitations
on the parties’ freedom of contract are thus required for the protection of the employee.178
The level of protection to labor mustbe determined on the basis of the nature of the work,
qualifications of the employee, and other relevant circumstances.
For example, a prospective employee with a bachelor’s degree cannot be said to be on
equal footing witha grocery bagger with a high school diploma. Employees who qualify
for jobs requiring special qualifications such as "[having] a Master’s degree" or "[having]
passed the licensure exam" are different from employees who qualify for jobs that require
"[being a] high school graduate; withpleasing personality." In these situations, it is clear
that those with special qualifications can bargain with the employer on equal footing.
Thus, the level of protection afforded to these employees should be different.
Fuji’s argument that Arlene was an independent contractor under a fixed-term contract
is contradictory. Employees under fixed-term contracts cannot be independent
contractors because in fixed-term contracts, an employer-employee relationship exists.
The test in this kind of contract is not the necessity and desirability of the employee’s
activities, "but the day certain agreed upon by the parties for the commencement and
termination of the employment relationship."179 For regular employees, the necessity and
desirability of their work in the usual course of the employer’s business are the
determining factors. On the other hand, independent contractors do not have employer-
employee relationships with their principals. Hence, before the status of employment can
be determined, the existence of an employer-employee relationship must be established.
The four-fold test180 can be used in determining whether an employeremployee
relationship exists. The elements of the four-fold test are the following: (1) the selection
and engagement of the employee; (2) the payment of wages; (3) the power of dismissal;
and (4) the power of control, which is the most important element.181
The "power of control" was explained by this court in Corporal, Sr. v. National Labor
Relations Commission:182
The power to control refers to the existence of the power and not necessarily to the actual
exercise thereof, nor is it essential for the employer to actually supervise the performance
of duties of the employee. It is enough that the employer has the right to wield that
power.183 (Citation omitted)
Orozco v. Court of Appeals further elucidated the meaning of "power of control" and
stated the following:
Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the means or
methods to be employed in attaining it, and those that control or fix the methodology and
bind or restrict the party hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee relationship unlike the second, which
address both the result and the means used to achieve it. . . .184 (Citation omitted)
In Locsin, et al. v. Philippine Long Distance Telephone Company,185 the "power of
control" was defined as "[the] right to control not only the end to be achieved but also the
means to be used in reaching such end."186
Here, the Court of Appeals applied Sonza v. ABS-CBN and Dumpit Murillo v. Court of
Appeals187 in determining whether Arlene was an independent contractor or a regular
employee.
In deciding Sonza and Dumpit-Murillo, this court used the four-fold test. Both cases
involved newscasters and anchors. However, Sonza was held to be an independent
contractor, while Dumpit-Murillo was held to be a regular employee.
Comparison of the Sonza and
Dumpit-Murillo cases using
the four-fold test
Sonza was engaged by ABS-CBN in view of his "unique skills, talent and celebrity status
not possessed by ordinary employees."188 His work was for radio and television
programs.189 On the other hand, Dumpit-Murillo was hired by ABC as a newscaster and
co-anchor.190 Sonza’s talent fee amounted to ₱317,000.00 per month, which this court
found to be a substantial amount that indicatedhe was an independent contractor rather
than a regular employee.191Meanwhile, Dumpit-Murillo’s monthly salary was ₱28,000.00,
a very low amount compared to what Sonza received.192
Sonza was unable to prove that ABS-CBN could terminate his services apart from breach
of contract. There was no indication that he could be terminated based on just or
authorized causes under the Labor Code. In addition, ABS-CBN continued to pay his
talent fee under their agreement, even though his programs were no longer
broadcasted.193 Dumpit-Murillo was found to have beenillegally dismissed by her
employer when they did not renew her contract on her fourth year with ABC.194
In Sonza, this court ruled that ABS-CBN did not control how Sonza delivered his lines,
how he appeared on television, or how he sounded on radio.195 All that Sonza needed
was his talent.196 Further, "ABS-CBN could not terminate or discipline SONZA even if the
means and methods of performance of his work . . . did not meet ABS-CBN’s
approval."197 In Dumpit-Murillo, the duties and responsibilities enumerated in her contract
was a clear indication that ABC had control over her work.198
Application of the four-fold test
Page 19 of 42
The Court of Appeals did not err when it relied on the ruling in Dumpit-Murillo and
affirmed the ruling of the National Labor Relations Commission finding that Arlene was
a regular employee. Arlene was hired by Fuji as a news producer, but there was no
showing that she was hired because of unique skills that would distinguish her from
ordinary employees. Neither was there any showing that she had a celebrity status. Her
monthly salary amounting to US$1,900.00 appears tobe a substantial sum, especially if
compared to her salary whenshe was still connected with GMA. 199 Indeed, wages may
indicate whether oneis an independent contractor. Wages may also indicate that an
employee is able to bargain with the employer for better pay. However, wages should
not be the conclusive factor in determining whether one is an employee or an
independent contractor.
Fuji had the power to dismiss Arlene, as provided for in paragraph 5 of her professional
employment contract.200 Her contract also indicated that Fuji had control over her work
because she was required to work for eight (8) hours from Monday to Friday, although
on flexible time.201 Sonza was not required to work for eight (8) hours, while Dumpit-
Murillo had to be in ABC to do both on-air and off-air tasks.
On the power to control, Arlene alleged that Fuji gave her instructions on what to
report.202 Even the mode of transportation in carrying out her functions was controlled by
Fuji. Paragraph 6 of her contract states:
6. During the travel to carry out work, if there is change of place or change of place of
work, the train, bus, or public transport shall be used for the trip. If the Employee uses
the private car during the work and there is an accident the Employer shall not be
responsible for the damage, which may be caused to the Employee.203
Thus, the Court of Appeals did not err when it upheld the findings of the National Labor
Relations Commission that Arlene was not an independent contractor.
Having established that an employer-employee relationship existed between Fuji and
Arlene, the next questions for resolution are the following: Did the Court of Appeals
correctly affirm the National Labor Relations Commission that Arlene had become a
regular employee? Was the nature of Arlene’s work necessary and desirable for Fuji’s
usual course of business?
Arlene was a regular employee
with a fixed-term contract
The test for determining regular employment is whether there is a reasonable connection
between the employee’s activities and the usual business of the employer. Article 280
provides that the nature of work must be "necessary or desirable in the usual business
or trade of the employer" as the test for determining regular employment. As stated in
ABS-CBN Broadcasting Corporation v. Nazareno:204
In determining whether an employment should be considered regular or non-regular, the
applicable test is the reasonable connection between the particular activity performed by
the employee in relation to the usual business or trade of the employer. The standard,
supplied by the law itself, is whether the work undertaken is necessary or desirable in
the usual business or trade of the employer, a fact that can be assessed by looking into
the nature of the services rendered and its relation to the general scheme under which
the business or trade is pursued in the usual course. It is distinguished from a specific
undertaking that is divorced from the normal activities required incarrying on the
particular business or trade.205
However, there may be a situation where an employee’s work is necessary but is not
always desirable inthe usual course of business of the employer. In this situation, there
is no regular employment.
In San Miguel Corporation v. National Labor Relations Commission,206 Francisco de
Guzman was hired to repair furnaces at San Miguel Corporation’s Manila glass plant. He
had a separate contract for every furnace that he repaired. He filed a complaint for illegal
dismissal three (3) years after the end of his last contract. 207 In ruling that de Guzman
did not attain the status of a regular employee, this court explained:
Note that the plant where private respondent was employed for only seven months is
engaged in the manufacture of glass, an integral component of the packaging and
manufacturing business of petitioner. The process of manufacturing glass requires a
furnace, which has a limited operating life. Petitioner resorted to hiring project or fixed
term employees in having said furnaces repaired since said activity is not regularly
performed. Said furnaces are to be repaired or overhauled only in case of need and after
being used continuously for a varying period of five (5) to ten (10) years. In 1990, one of
the furnaces of petitioner required repair and upgrading. This was an undertaking distinct
and separate from petitioner's business of manufacturing glass. For this purpose,
petitioner must hire workers to undertake the said repair and upgrading. . . .
....
Clearly, private respondent was hired for a specific project that was not within the regular
business of the corporation. For petitioner is not engaged in the business of repairing
furnaces. Although the activity was necessary to enable petitioner to continue
manufacturing glass, the necessity therefor arose only when a particular furnace reached
the end of its life or operating cycle. Or, as in the second undertaking, when a particular
furnace required an emergency repair. In other words, the undertakings where private
respondent was hired primarily as helper/bricklayer have specified goals and purposes
which are fulfilled once the designated work was completed. Moreover, such
undertakings were also identifiably separate and distinct from the usual, ordinary or
regular business operations of petitioner, which is glass manufacturing. These
undertakings, the duration and scope of which had been determined and made known
to private respondent at the time of his employment, clearly indicated the nature of his
employment as a project employee.208
Page 20 of 42
Fuji is engaged in the business of broadcasting,209 including news programming.210 It is
based in Japan211 and has overseas offices to cover international news.212
Based on the record, Fuji’s Manila Bureau Office is a small unit 213 and has a few
employees.214 As such, Arlene had to do all activities related to news gathering. Although
Fuji insists that Arlene was a stringer, it alleges that her designation was "News
Talent/Reporter/Producer."215
A news producer "plans and supervises newscast . . . [and] work[s] with reporters in the
field planning and gathering information. . . ."216 Arlene’s tasks included "[m]onitoring and
[g]etting [n]ews [s]tories, [r]eporting interviewing subjects in front of a video
camera,"217 "the timely submission of news and current events reports pertaining to the
Philippines[,] and traveling [sic] to [Fuji’s] regional office in Thailand."218 She also had to
report for work in Fuji’s office in Manila from Mondays to Fridays, eight (8) hours per
day.219 She had no equipment and had to use the facilities of Fuji to accomplish her
tasks.
The Court of Appeals affirmed the finding of the National Labor Relations Commission
that the successive renewals of Arlene’s contract indicated the necessity and desirability
of her work in the usual course of Fuji’s business. Because of this, Arlene had become
a regular employee with the right to security of tenure.220 The Court of Appeals ruled that:
Here, Espiritu was engaged by Fuji as a stinger [sic] or news producer for its Manila
Bureau. She was hired for the primary purpose of news gathering and reporting to the
television network’s headquarters. Espiritu was not contracted on account of any peculiar
ability or special talent and skill that she may possess which the network desires to make
use of. Parenthetically, ifit were true that Espiritu is an independent contractor, as
claimed by Fuji, the factthat everything that she uses to perform her job is owned by the
company including the laptop computer and mini camera discounts the idea of job
contracting.221
Moreover, the Court of Appeals explained that Fuji’s argument that no employer-
employee relationship existed in view of the fixed-term contract does not persuade
because fixed-term contracts of employment are strictly construed.222 Further, the pieces
of equipment Arlene used were all owned by Fuji, showing that she was a regular
employee and not an independent contractor.223
The Court of Appeals likewise cited Dumpit-Murillo, which involved fixed-term contracts
that were successively renewed for four (4) years.224 This court held that "[t]his repeated
engagement under contract of hire is indicative of the necessity and desirability of the
petitioner’s work in private respondent ABC’s business."225
With regard to Fuji’s argument that Arlene’s contract was for a fixed term, the Court of
Appeals cited Philips Semiconductors, Inc. v. Fadriquela226 and held that where an
employee’s contract "had been continuously extended or renewed to the same position,
with the same duties and remained in the employ without any interruption,"227 then such
employee is a regular employee. The continuous renewal is a scheme to prevent
regularization. On this basis, the Court of Appeals ruled in favor of Arlene.
As stated in Price, et al. v. Innodata Corp., et al.:228
The employment status of a person is defined and prescribed by law and not by what
the parties say it should be. Equally important to consider is that a contract of
employment is impressed with public interest such that labor contracts must yield to the
common good. Thus, provisions of applicable statutes are deemed written into the
contract, and the parties are not at liberty to insulate themselves and their relationships
from the impact of labor laws and regulations by simply contracting with each
other.229 (Citations omitted)
Arlene’s contract indicating a fixed term did not automatically mean that she could never
be a regular employee. This is precisely what Article 280 seeks to avoid. The ruling in
Brent remains as the exception rather than the general rule.
Further, an employee can be a regular employee with a fixed-term contract. The law
does not preclude the possibility that a regular employee may opt to have a fixed-term
contract for valid reasons. This was recognized in Brent: For as long as it was the
employee who requested, or bargained, that the contract have a "definite date of
termination," or that the fixed-term contract be freely entered into by the employer and
the employee, then the validity of the fixed-term contract will be upheld.230
V
Whether the Court of Appeals correctly affirmed
the National Labor Relations Commission’s finding of illegal dismissal
Fuji argues that the Court of Appeals erred when it held that Arlene was illegally
dismissed, in view of the non-renewal contract voluntarily executed by the parties. Fuji
also argues that Arlene’s contract merely expired; hence, she was not illegally
dismissed.231
Arlene alleges that she had no choice but to sign the non-renewal contract because Fuji
withheldher salary and benefits.
With regard to this issue, the Court of Appeals held:
We cannot subscribe to Fuji’s assertion that Espiritu’s contract merely expired and that
she voluntarily agreed not to renew the same. Even a cursory perusal of the subject Non-
Renewal Contract readily shows that the same was signed by Espiritu under protest.
Page 21 of 42
What is apparent is that the Non-Renewal Contract was crafted merely as a subterfuge
to secure Fuji’s position that it was Espiritu’s choice not to renew her contract.232
As a regular employee, Arlene was entitled to security of tenure and could be dismissed
only for just or authorized causes and after the observance of due process.
The right to security of tenureis guaranteed under Article XIII, Section 3 of the 1987
Constitution: ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS
....
LABOR
....
It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance
with law. They shall be entitled to security of tenure, humane conditions of work, and a
living wage. They shall also participate in policy and decision-making processes affecting
their rights and benefits as may be provided by law.
Article 279 of the Labor Code also provides for the right to security of tenure and states
the following:
Art. 279. Security of tenure.In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause of when authorized by this
Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his actual reinstatement.
Thus, on the right to security of tenure, no employee shall be dismissed, unless there
are just orauthorized causes and only after compliance with procedural and substantive
due process is conducted.
Even probationary employees are entitled to the right to security of tenure. This was
explained in Philippine Daily Inquirer, Inc. v. Magtibay, Jr.:233
Within the limited legal six-month probationary period, probationary employees are still
entitled to security of tenure. It is expressly provided in the afore-quoted Article 281 that
a probationary employee may be terminated only on two grounds: (a) for just cause, or
(b) when he fails to qualify as a regular employee in accordance with reasonable
standards made known by the employer to the employee at the time of his
engagement.234 (Citation omitted)
The expiration of Arlene’s contract does not negate the finding of illegal dismissal by Fuji.
The manner by which Fuji informed Arlene that her contract would no longer be renewed
is tantamount to constructive dismissal. To make matters worse, Arlene was asked to
sign a letter of resignation prepared by Fuji.235 The existence of a fixed-term contract
should not mean that there can be no illegal dismissal. Due process must still be
observed in the pre-termination of fixed-term contracts of employment.
In addition, the Court of Appeals and the National Labor Relations Commission found
that Arlene was dismissed because of her health condition. In the non-renewal
agreement executed by Fuji and Arlene, it is stated that:
WHEREAS, the SECOND PARTY is undergoing chemotherapy which prevents her from
continuing to effectively perform her functions under the said Contract such as the timely
submission of news and current events reports pertaining to the Philippines and travelling
[sic] to the FIRST PARTY’s regional office in Thailand.236 (Emphasis supplied)
Disease as a ground for termination is recognized under Article 284 of the Labor Code:
Art. 284. Disease as ground for termination. An employer may terminate the services of
an employee who has been found to be suffering from any disease and whose continued
employment is prohibited by law or is prejudicial to his health as well as to the health of
his co-employees: Provided, That he is paid separation pay equivalent to at least one (1)
month salary or to one-half (1/2) month salary for every year of service, whichever is
greater, a fraction of at least six (6) months being considered as one (1) whole year.
Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the Labor Code provides:
Sec. 8. Disease as a ground for dismissal.– Where the employee suffers from a disease
and his continued employment is prohibited by law or prejudicial to his healthor to the
health of his coemployees, the employer shall not terminate his employment unless there
is a certification by a competent public health authority that the disease is of such nature
or at such a stage that it cannot be cured within a period of six (6) months even with
proper medical treatment. If the disease or ailment can be cured within the period, the
employer shall not terminate the employee but shall ask the employee to take a leave.
The employer shall reinstate such employee to his former position immediately upon the
restoration of his normal health.
For dismissal under Article 284 to bevalid, two requirements must be complied with: (1)
the employee’s disease cannot be cured within six (6) months and his "continued
employment is prohibited by law or prejudicial to his health as well as to the health of his
co-employees"; and (2) certification issued by a competent public health authority that
even with proper medical treatment, the disease cannot be cured within six (6)
months.237 The burden of proving compliance with these requisites is on the
employer.238 Noncompliance leads to the conclusion that the dismissal was illegal.239
Page 22 of 42
There is no evidence showing that Arlene was accorded due process. After informing
her employer of her lung cancer, she was not given the chance to present medical
certificates. Fuji immediately concluded that Arlene could no longer perform her duties
because of chemotherapy. It did not ask her how her condition would affect her work.
Neither did it suggest for her to take a leave, even though she was entitled to sick leaves.
Worse, it did not present any certificate from a competent public health authority. What
Fuji did was to inform her thather contract would no longer be renewed, and when she
did not agree, her salary was withheld. Thus, the Court of Appeals correctly upheld the
finding of the National Labor Relations Commission that for failure of Fuji to comply with
due process, Arlene was illegally dismissed.240
VI
Whether the Court of Appeals properly modified
the National Labor Relations Commission’s decision
when it awarded reinstatement, damages, and attorney’s fees
The National Labor Relations Commission awarded separation pay in lieu of
reinstatement, on the ground that the filing of the complaint for illegal dismissal may have
seriously strained relations between the parties. Backwages were also awarded, to be
computed from date of dismissal until the finality of the National Labor Relations
Commission’s decision. However, only backwages were included in the dispositive
portion because the National Labor Relations Commission recognized that Arlene had
received separation pay in the amount of US$7,600.00. The Court of Appeals affirmed
the National Labor Relations Commission’s decision but modified it by awarding moral
and exemplary damages and attorney’s fees, and all other benefits Arlene was entitled
to under her contract with Fuji. The Court of Appeals also ordered reinstatement,
reasoning that the grounds when separation pay was awarded in lieu of reinstatement
were not proven.241
Article 279 of the Labor Code provides:
Art. 279. Security of tenure. In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by this
Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his actual reinstatement.
(Emphasis supplied)
The Court of Appeals’ modification of the National Labor Relations Commission’s
decision was proper because the law itself provides that illegally dismissed employees
are entitled to reinstatement, backwages including allowances, and all other benefits.
On reinstatement, the National Labor Relations Commission ordered payment of
separation pay in lieu of reinstatement, reasoning "that the filing of the instant suit may
have seriously abraded the relationship of the parties so as to render reinstatement
impractical."242 The Court of Appeals reversed this and ordered reinstatement on the
ground that separation pay in lieu of reinstatement is allowed only in several instances
such as (1) when the employer has ceased operations; (2) when the employee’s position
is no longer available; (3) strained relations; and (4) a substantial period has lapsed from
date of filing to date of finality.243
On this matter, Quijano v. Mercury Drug Corp.244 is instructive:
Well-entrenched is the rule that an illegally dismissed employee is entitled to
reinstatement as a matter of right. . . .
To protect labor’s security of tenure, we emphasize that the doctrine of "strained
relations" should be strictly applied so as not to deprive an illegally dismissed employee
of his right to reinstatement. Every labor dispute almost always results in "strained
relations" and the phrase cannot be given an overarching interpretation, otherwise, an
unjustly dismissed employee can never be reinstated.245 (Citations omitted)
The Court of Appeals reasoned that strained relations are a question of fact that must be
supported by evidence.246No evidence was presented by Fuji to prove that reinstatement
was no longer feasible. Fuji did not allege that it ceased operations or that Arlene’s
position was no longer available. Nothing in the records shows that Arlene’s
reinstatement would cause an atmosphere of antagonism in the workplace. Arlene filed
her complaint in 2009. Five (5) years are not yet a substantial period247 to bar
reinstatement.
On the award of damages, Fuji argues that Arlene is notentitled to the award of damages
and attorney’s fees because the non-renewal agreement contained a quitclaim, which
Arlene signed. Quitclaims in labor cases do not bar illegally dismissed employees from
filing labor complaints and money claim. As explained by Arlene, she signed the non-
renewal agreement out of necessity. In Land and Housing Development Corporation v.
Esquillo,248 this court explained: We have heretofore explained that the reason why
quitclaims are commonly frowned upon as contrary to public policy, and why they are
held to be ineffective to bar claims for the full measure of the workers’ legal rights, is the
fact that the employer and the employee obviously do not stand on the same footing.
The employer drove the employee to the wall. The latter must have to get holdof money.
Because, out of a job, he had to face the harsh necessities of life. He thus found himself
in no position to resist money proffered. His, then, is a case of adherence, not of
choice.249
With regard to the Court of Appeals’ award of moral and exemplary damages and
attorney’s fees, this court has recognized in several cases that moral damages are
awarded "when the dismissal is attended by bad faith or fraud or constitutes an act
oppressive to labor, or is done in a manner contrary to good morals, good customs or
Page 23 of 42
public policy."250 On the other hand, exemplary damages may be awarded when the
dismissal was effected "in a wanton, oppressive or malevolent manner."251
The Court of Appeals and National Labor Relations Commission found that after Arlene
had informed Fuji of her cancer, she was informed that there would be problems in
renewing her contract on account of her condition. This information caused Arlene
mental anguish, serious anxiety, and wounded feelings that can be gleaned from the
tenor of her email dated March 11, 2009. A portion of her email reads:
I WAS SO SURPRISED . . . that at a time when I am at my lowest, being sick and very
weak, you suddenly came to deliver to me the NEWS that you will no longer renew my
contract.1awp++i1 I knew this will come but I never thought that you will be so ‘heartless’
and insensitive to deliver that news just a month after I informed you that I am sick. I was
asking for patience and understanding and your response was not to RENEW my
contract.252
Apart from Arlene’s illegal dismissal, the manner of her dismissal was effected in an
oppressive approach withher salary and other benefits being withheld until May 5, 2009,
when she had no other choice but to sign the non-renewal contract. Thus, there was
legal basis for the Court of Appeals to modify the National Labor Relations Commission’s
decision.
However, Arlene receivedher salary for May 2009.253 Considering that the date of her
illegal dismissal was May 5, 2009,254 this amount may be subtracted from the total
monetary award. With regard to the award of attorney’s fees, Article 111 of the Labor
Code states that "[i]n cases of unlawful withholding of wages, the culpable party may be
assessed attorney’s fees equivalent to ten percent of the amount of wages recovered."
Likewise, this court has recognized that "in actions for recovery of wages or where an
employee was forced to litigate and, thus, incur expenses to protect his rights and
interest, the award of attorney’s fees is legallyand morally justifiable."255 Due to her illegal
dismissal, Arlene was forced to litigate.
In the dispositive portion of its decision, the Court of Appeals awarded legal interest at
the rate of 12% per annum.256 In view of this court’s ruling in Nacar v. Gallery
Frames,257 the legal interest shall be reducd to a rate of 6% per annum from July 1, 2013
until full satisfaction.
WHEREFORE, the petition is DENIED. The assailed Court of Appeals decision dated
June 25, 2012 is AFFIRMED with the modification that backwages shall be computed
from June 2009. Legal interest shall be computed at the rate of 6% per annum of the
total monetary award from date of finality of this decision until full satisfaction.
SO ORDERED.
FIRST DIVISION
G.R. No. 164315 July 3, 2009
ALCATEL PHILIPPINES, INC., and YOLANDA DELOS REYES, Petitioners,
vs.
RENE R. RELOS, Respondent.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review1 of the 31 March 2004 Decision2 and 14 June
2004 Resolution3 of the Court of Appeals in CA-G.R. SP No. 75965. In its 31 March 2004
Decision, the Court of Appeals set aside the 20 February 2002 Decision4 of the National
Labor Relations Commission (NLRC) and reinstated the 24 September 1998
Decision5 of the Labor Arbiter which declared respondent Rene R. Relos (respondent) a
regular employee of petitioner Alcatel Philippines, Inc. (Alcatel). In its 14 June 2004
Resolution, the Court of Appeals denied the motion for reconsideration of Alcatel and
petitioner Yolanda Delos Reyes (petitioner Delos Reyes).
The Facts
Alcatel is a domestic corporation primarily engaged in the business of installation and
supply of telecommunications equipment. Petitioner Delos Reyes was a former
Administrative Officer of Alcatel.
On 4 January 1988, Alcatel offered respondent "temporary employment as
Estimator/Draftsman – Civil Works to assist in the preparation of manholes and conduit
design for the proposal preparation for PLDT X-5 project for the period 4 January 1988
to 28 February 1988."6 On 1 March 1988, Alcatel again offered respondent "temporary
employment as Estimator/Draftsman to assist in the PLDT’s X-4 IOT project for the
period 1 March 1988 to 30 April 1988."7
Subsequently, Alcatel undertook the PLDT 1342 project (project) which involved the
installation of microwave antennas and towers in Eastern Visayas and Eastern Mindanao
for the Philippine Long Distance Company. On 1 February 1991, Alcatel offered
respondent "temporary employment as Civil Works Inspector, to assist in the
implementation of the PLDT 1342 Project, for the period 1 February 1991 to 31 March
1991."8 Upon the expiration of his contract, respondent was again offered temporary
employment this time as Civil Works Engineer from 1 April 1991 to 30 September
1991.9 Respondent was offered temporary employment in the same capacity five more
times from 1 October 1991 to 31 July 1992.10 Then, on 1 August 1992, Alcatel hired
respondent as "project employee for the PLDT 1342 project to work as Civil Engineer
from the period of 1 August 1992 to 31 July 1993."11 Alcatel renewed respondent’s
Page 24 of 42
contract twice from 1 August 1993 to 31 December 1993.12 In a letter dated 22 December
1993,13 Alcatel informed respondent that the civil works portion of the project was near
completion; however, the remaining works encountered certain delays and had not been
completed as scheduled. Alcatel then extended respondent’s employment for another
three months or until 31 March 1994. Thereafter, Alcatel employed respondent as a Site
Inspector until 31 December 1995.14
On 11 December 1995, Alcatel informed respondent that the project would be completed
on 31 December 1995 and that his contract with Alcatel would expire on the same
day.15 Alcatel asked respondent to settle all his accountabilities with the company and
advised him that he would be called if it has future projects that require his expertise.
In March 1997, respondent filed a complaint for illegal dismissal, separation pay, unpaid
wages, unpaid overtime pay, damages, and attorney’s fees against Alcatel. Respondent
alleged that he was a regular employee of Alcatel and that he was dismissed during the
existence of the project.
In its 24 September 1998 Decision, the Labor Arbiter declared that respondent was a
regular employee of Alcatel. The Labor Arbiter also ruled that respondent was illegally
dismissed and, therefore, entitled to back wages. The Labor Arbiter’s Decision provides:
WHEREFORE, premises considered, judgment is hereby rendered, finding that [sic]
complainant to be a regular employee and finding further that [sic] complainant to have
been illegally dismissed from employment and ordering respondents, jointly and
severally, to pay complainant the following:
1. Backwages from the time he was illegally dismissed until his actual
reinstatement in the amount of THREE HUNDRED FORTY EIGHT THOUSAND
PESOS (₱348,000.00). The award of backwages shall be re-computed once
this decision has become final;
2. Money claims in the total amount of FOURTEEN THOUSAND TWO
HUNDRED FORTY PESOS (₱14,240.00);
3. Attorney’s fees of ten (10%) percent of the total monetary award.
SO ORDERED.16
Alcatel appealed to the NLRC.
In its 20 February 2002 Decision, the NLRC reversed the Labor Arbiter’s Decision and
dismissed respondent’s complaint for illegal dismissal. The NLRC declared that
respondent was a project employee and that respondent was not illegally dismissed but
that his employment contract expired.
Respondent filed a motion for reconsideration. In its 19 December 2002 Order,17 the
NLRC denied respondent’s motion.
Respondent appealed to the Court of Appeals.
In its 31 March 2004 Decision, the Court of Appeals set aside the NLRC’s Decision and
reinstated the Labor Arbiter’s Decision.
Alcatel filed a motion for reconsideration. In its 14 June 2004 Resolution, the Court of
Appeals denied Alcatel’s motion.
Hence, this petition.
The Ruling of the Labor Arbiter
The Labor Arbiter declared that, since respondent was repeatedly hired by Alcatel,
respondent performed functions that were necessary and desirable in the usual business
or trade of Alcatel. The Labor Arbiter concluded that respondent belonged to the "work
pool of non-project employees" of Alcatel.
As to the project, the Labor Arbiter noted that respondent’s employment contracts did
not specify the project’s completion date. The Labor Arbiter said that a short extension
of respondent’s employment contract was believable, but an extension up to 1995, when
respondent was originally engaged only from 1 February to 31 March 1991, was
unbelievable. The Labor Arbiter also said that Alcatel’s unsubstantiated claim, that the
project was merely extended for "unavoidable causes," was absurd. The Labor Arbiter
concluded that there was really no fixed duration of the project and that Alcatel used the
periods of employment as a facade to show that respondent was only a project
employee.
The Ruling of the NLRC
The NLRC set aside the Labor Arbiter’s ruling and declared that respondent was a
project employee. The NLRC said respondent was assigned to carry out a specific
project or undertaking and the duration of his services was always stated in his
employment contracts. The NLRC also pointed out that, by the nature of Alcatel’s
business, respondent would remain a project employee regardless of the number of
projects for which he had been employed. Since respondent was a project employee,
the NLRC said he was not illegally dismissed, but that his dismissal was brought about
by the expiration of his employment contract.
The Ruling of the Court of Appeals
Page 25 of 42
The Court of Appeals set aside the NLRC’s decision and reinstated the Labor Arbiter’s
ruling. The Court of Appeals declared that respondent was a regular employee of Alcatel
because (1) respondent was assigned to positions and performed tasks that were
necessary to the main line and business operations of Alcatel; (2) respondent was
repeatedly hired and contracted, continuously and for prolonged periods, with his
employment contracts renewed each time they fell due; and (3) Alcatel did not report the
termination of the projects with the nearest public employment office. The Court of
Appeals also said that, although respondent’s employment contracts specified that he
was being engaged for a specific period, there was no clear provision on the actual scope
of the project for which respondent was engaged or the actual length of time that the
project was going to last. The Court of Appeals concluded that Alcatel imposed the
periods of employment to preclude respondent from acquiring tenurial security.
The Issues
Alcatel raises the following issues:
1. Whether respondent was a regular employee or a project employee; and
2. Whether respondent was illegally dismissed.
The Ruling of the Court
The petition is meritorious.
Alcatel argues that respondent was a project employee because he worked on distinct
projects with the terms of engagement and the specific project made known to him at the
time of the engagement. Alcatel clarifies that respondent’s employment was coterminous
with the project for which he was hired and, therefore, respondent was not illegally
dismissed but was validly dismissed upon the expiration of the term of his project
employment. Alcatel explains that its business relies mainly on the projects it enters into
and thus, it is constrained to hire project employees to meet the demands of specific
projects.
On the other hand, respondent insists that he is a regular employee because he was
assigned by Alcatel on its various projects since 4 January 1988 performing functions
desirable or necessary to Alcatel’s business. Respondent adds that his employment
contracts were renewed successively by Alcatel for seven years. Respondent contends
that, even assuming that he was a project employee, he became a regular employee
because he was re-hired every termination of his employment contract and he performed
functions necessary to Alcatel’s business. Respondent also claims that he was illegally
dismissed because he was dismissed during the existence of the project.
The principal test for determining whether a particular employee is a project employee
or a regular employee is whether the project employee was assigned to carry out a
specific project or undertaking, the duration and scope of which were specified at the
time the employee is engaged for the project.18 "Project" may refer to a particular job or
undertaking that is within the regular or usual business of the employer, but which is
distinct and separate and identifiable as such from the undertakings of the company.
Such job or undertaking begins and ends at determined or determinable
times.191avvphi1
In our review of respondent’s employment contracts, we are convinced that respondent
was a project employee. The specific projects for which respondent was hired and the
periods of employment were specified in his employment contracts. The services he
rendered, the duration and scope of each employment are clear indications that
respondent was hired as a project employee.
We do not agree with respondent that he became a regular employee because he was
continuously rehired by Alcatel every termination of his contract. In Maraguinot, Jr. v.
NLRC,20 we said:
A project employee or a member of a work pool may acquire the status of a regular
employee when the following concur:
1) There is a continuous rehiring of project employees even after the
cessation of a project; and
2) The tasks performed by the alleged "project employee" are vital, necessary
and indispensable to the usual business or trade of the employer.21 (Emphasis
ours)
While respondent performed tasks that were clearly vital, necessary and indispensable
to the usual business or trade of Alcatel, respondent was not continuously rehired by
Alcatel after the cessation of every project. Records show that respondent was hired by
Alcatel from 1988 to 1995 for three projects, namely the PLDT X-5 project, the PLDT X-
4 IOT project and the PLDT 1342 project. On 30 April 1988, upon the expiration of
respondent’s contract for the PLDT X-4 IOT project, Alcatel did not rehire respondent
until 1 February 1991, or after a lapse of 33 months, for the PLDT 1342 project.
Alcatel’s continuous rehiring of respondent in various capacities from February 1991 to
December 1995 was done entirely within the framework of one and the same project ―
the PLDT 1342 project. This did not make respondent a regular employee of Alcatel as
respondent was not continuously rehired after the cessation of a project. Respondent
remained a project employee of Alcatel working on the PLDT 1342 project.
The employment of a project employee ends on the date specified in the employment
contract. Therefore, respondent was not illegally dismissed but his employment
terminated upon the expiration of his employment contract. Here, Alcatel employed
respondent as a Site Inspector until 31 December 1995.
Page 26 of 42
WHEREFORE, we GRANT the petition. We SET ASIDE the 31 March 2004 Decision (a) Responsible for the airing of local commercials; and
and 14 June 2004 Resolution of the Court of Appeals and REINSTATE the 20 February
2002 Decision and 19 December 2002 Order of the National Labor Relations (b) Logging/monitoring of national commercials (satellite)
Commission.
2) Acting as Transmitter/VTR men:
SO ORDERED.
(a) Prepare tapes for local airing;
FIRST DIVISION
(b) Actual airing of commercials;
G.R. No. 176419 November 27, 2013
(c) Plugging of station promo;
GMA NETWORK, INC., Petitioner,
vs.
(d) Logging of transmitter reading; and
CARLOS P. PABRIGA, GEOFFREY F. ARIAS, KIRBY N. CAMPO, ARNOLD L.
LAGAHIT, and ARMANDO A. CATUBIG, Respondents.
(e) In case of power failure, start up generator set to resume program;
DECISION
3) Acting as Maintenance staff;
LEONARDO-DE CASTRO, J.:
(a) Checking of equipment;
This is a Petition for Review on Certiorari filed by petitioner GMA Network Inc. assailing
the Decision1 of the Court of Appeals dated September 8, 2006 and the subsequent (b) Warming up of generator;
Resolution2 dated January 22 2007 denying reconsideration in CA-G.R. SP No. 73652.
(c) Filling of oil, fuel, and water in radiator; and
The Court of Appeals summarized the facts of the case as follows:
4) Acting as Cameramen
On July 19 1999 due to the miserable working conditions private respondents were
forced to file a complaint against petitioner before the National Labor Relations On 4 August 1999, petitioner received a notice of hearing of the complaint. The following
Commission Regional Arbitration Branch No. VII Cebu City assailing their respective day, petitioner’s Engineering Manager, Roy Villacastin, confronted the private
employment circumstances as follows: respondents about the said complaint.

NAME DATE HIRED POSITION On 9 August 1999, private respondents were summoned to the office of petitioner’s Area
Manager, Mrs. Susan Aliño, and they were made to explain why they filed the complaint.
Carlos Pabriga 2 May 1997 Television Technicians The next day, private respondents were barred from entering and reporting for work
Geoffrey Arias 2 May 1997 Television Technicians without any notice stating the reasons therefor.

Kirby Campo 1 Dec. 1993 Television Technicians

Arnold Laganit 11 Feb. 1996 Television Technicians
Armand Catubig 2 March 1997 Television Technicians
Private respondents were engaged by petitioner to perform the following activities, to wit:
On 13 August 1999, private respondents, through their counsel, wrote a letter to Mrs.
Susan Aliño requesting that they be recalled back to work.
On 23 August 1999, a reply letter from Mr. Bienvenido Bustria, petitioner’s head of
Personnel and Labor Relations Division, admitted the non-payment of benefits but did
not mention the request of private respondents to be allowed to return to work.

1) Manning of Technical Operations Center:

Page 27 of 42
On 15 September 1999, private respondents sent another letter to Mr. Bustria reiterating
their request to work but the same was totally ignored. On 8 October 1999, private
respondents filed an amended complaint raising the following additional issues: 1) Unfair
Labor Practice; 2) Illegal dismissal; and 3) Damages and Attorney’s fees.
On 23 September 1999, a mandatory conference was set to amicably settle the dispute
between the parties, however, the same proved to be futile. As a result, both of them
were directed to file their respective position papers.
On 10 November 1999, private respondents filed their position paper and on 2 March
2000, they received a copy of petitioner’s position paper. The following day, the Labor
Arbiter issued an order considering the case submitted for decision.3
In his Decision dated August 24, 2000, the Labor Arbiter dismissed the complaint of
respondents for illegal dismissal and unfair labor practice, but held petitioner liable for
13th month pay. The dispositive portion of the Labor Arbiter’s Decision reads:
WHEREFORE, the foregoing premises considered, judgment is hereby rendered
dismissing the complaints for illegal dismissal and unfair labor practice.
Respondents are, however, directed to pay the following complainants their
proportionate 13th month pay, to wit:
1. Kirby Campo P 7,716.04
2. Arnold Lagahit 7,925.98
3. Armand Catubig 4,233.68
4. Carlos Pabriga 4,388.19
5. Geoffrey Arias 4,562.01
₱28,826.14
10% Attorney’s fees 2,882.61
GRAND TOTAL ₱31,708.75
4
All other claims are, hereby, dismissed for failure to substantiate the same.
Respondents appealed to the National Labor Relations Commission (NLRC). The NLRC
reversed the Decision of the Labor Arbiter, and held thus:
WHEREFORE, we make the following findings:
a) All complainants are regular employees with respect to the particular activity to which
they were assigned, until it ceased to exist. As such, they are entitled to payment of
separation pay computed at one (1) month salary for every year of service;
b) They are not entitled to overtime pay and holiday pay; and
c) They are entitled to 13th month pay, night shift differential and service incentive leave
pay.
For purposes of accurate computation, the entire records are REMANDED to the
Regional Arbitration Branch of origin which is hereby directed to require from respondent
the production of additional documents where necessary.
Respondent is also assessed the attorney’s fees of ten percent (10%) of all the above
awards.5
Petitioner elevated the case to the Court of Appeals via a Petition for Certiorari. On
September 8, 2006, the appellate court rendered its Decision denying the petition for
lack of merit.
Petitioner filed the present Petition for Review on Certiorari, based on the following
grounds:
I.
THE COURT OF APPEALS GRAVELY ERRED FINDING RESPONDENTS
ARE REGULAR EMPLOYEES OF THE PETITIONER AND ARE NOT
PROJECT EMPLOYEES.
II.
THE COURT OF APPEALS GRAVELY ERRED IN AWARDING SEPARATION
PAY TO RESPONDENTS ABSENT A FINDING THAT RESPONDENTS WERE
ILLEGALLY DISMISSED.
III.
THE COURT OF APPEALS GRAVELY ERRED IN AWARDING NIGHT SHIFT
DIFFERENTIAL PAY CONSIDERING THE ABSENCE OF EVIDENCE WHICH
WOULD ENTITLE THEM TO SUCH AN AWARD.
IV.
Page 28 of 42
 THE COURT OF APPEALS GRAVELY ERRED IN AWARDING ATTORNEY’S
FEES TO RESPONDENTS.6
The parties having extensively elaborated on their positions in their respective
memoranda, we proceed to dispose of the issues raised.
Five Classifications of Employment
At the outset, we should note that the nature of the employment is determined by law,
regardless of any contract expressing otherwise. The supremacy of the law over the
nomenclature of the contract and the stipulations contained therein is to bring to life the
policy enshrined in the Constitution to afford full protection to labor. Labor contracts,
being imbued with public interest, are placed on a higher plane than ordinary contracts
and are subject to the police power of the State.7
Respondents claim that they are regular employees of petitioner GMA Network, Inc. The
latter, on the other hand, interchangeably characterize respondents’ employment as
project and fixed period/fixed term employment. There is thus the need to clarify the
foregoing terms.
The terms regular employment and project employment are taken from Article 280 of the
Labor Code, which also speaks of casual and seasonal employment:
ARTICLE 280. Regular and casual employment. – The provisions of written agreement
to the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or services to be performed is
seasonal in nature and employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph: Provided, That, any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his employment shall continue
while such activity actually exist.
A fifth classification, that of a fixed term employment, is not expressly mentioned in the
Labor Code. Nevertheless, this Court ruled in Brent School, Inc. v. Zamora,8 that such a
contract, which specifies that employment will last only for a definite period, is not per se
illegal or against public policy.
Whether respondents are regular or project employees
Pursuant to the above-quoted Article 280 of the Labor Code, employees performing
activities which are usually necessary or desirable in the employer’s usual business or
trade can either be regular, project or seasonal employees, while, as a general rule,
those performing activities not usually necessary or desirable in the employer’s usual
business or trade are casual employees. The reason for this distinction may not be
readily comprehensible to those who have not carefully studied these provisions: only
employers who constantly need the specified tasks to be performed can be justifiably
charged to uphold the constitutionally protected security of tenure of the corresponding
workers. The consequence of the distinction is found in Article 279 of the Labor Code,
which provides:
ARTICLE 279. Security of tenure. – In cases of regular employment, the employer shall
not terminate the services of an employee except for a just cause or when authorized by
this Title. An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the
time of his actual reinstatement.
On the other hand, the activities of project employees may or may not be usually
necessary or desirable in the usual business or trade of the employer, as we have
discussed in ALU-TUCP v. National Labor Relations Commission,9and recently
reiterated in Leyte Geothermal Power Progressive Employees Union-ALU-TUCP v.
Philippine National Oil Company-Energy Development Corporation.10 In said cases, we
clarified the term "project" in the test for determining whether an employee is a regular
or project employee:
It is evidently important to become clear about the meaning and scope of the term
"project" in the present context. The "project" for the carrying out of which "project
employees" are hired would ordinarily have some relationship to the usual business of
the employer. Exceptionally, the "project" undertaking might not have an ordinary or
normal relationship to the usual business of the employer. In this latter case, the
determination of the scope and parameters of the "project" becomes fairly easy. It is
unusual (but still conceivable) for a company to undertake a project which has absolutely
no relationship to the usual business of the company; thus, for instance, it would be an
unusual steel-making company which would undertake the breeding and production of
fish or the cultivation of vegetables. From the viewpoint, however, of the legal
characterization problem here presented to the Court, there should be no difficulty in
designating the employees who are retained or hired for the purpose of undertaking fish
culture or the production of vegetables as "project employees," as distinguished from
ordinary or "regular employees," so long as the duration and scope of the project were
determined or specified at the time of engagement of the "project employees." For, as is
evident from the provisions of Article 280 of the Labor Code, quoted earlier, the principal
test for determining whether particular employees are properly characterized as "project
employees" as distinguished from "regular employees," is whether or not the "project
employees" were assigned to carry out a "specific project or undertaking," the duration
Page 29 of 42
(and scope) of which were specified at the time the employees were engaged for that
project.
In the realm of business and industry, we note that "project" could refer to one or the
other of at least two (2) distinguishable types of activities. Firstly, a project could refer to
a particular job or undertaking that is within the regular or usual business of the employer
company, but which is distinct and separate, and identifiable as such, from the other
undertakings of the company. Such job or undertaking begins and ends at determined
or determinable times. The typical example of this first type of project is a particular
construction job or project of a construction company. A construction company ordinarily
carries out two or more [distinct] identifiable construction projects: e.g., a twenty-five-
storey hotel in Makati; a residential condominium building in Baguio City; and a domestic
air terminal in Iloilo City. Employees who are hired for the carrying out of one of these
separate projects, the scope and duration of which has been determined and made
known to the employees at the time of employment, are properly treated as "project
employees," and their services may be lawfully terminated at completion of the project.
Corporation v. National Labor Relations Commission,13 respondent was hired to repair
furnaces, which are needed by San Miguel Corporation to manufacture glass, an integral
component of its packaging and manufacturing business. The Court, finding that
respondent is a project employee, explained that San Miguel Corporation is not engaged
in the business of repairing furnaces. Although the activity was necessary to enable
petitioner to continue manufacturing glass, the necessity for such repairs arose only
when a particular furnace reached the end of its life or operating cycle. Respondent
therein was therefore considered a project employee.
In the case at bar, as discussed in the statement of facts, respondents were assigned to
the following tasks:
1) Manning of Technical Operations Center:
(a) Responsible for the airing of local commercials; and

(b) Logging/monitoring of national commercials (satellite)

The term "project" could also refer to, secondly, a particular job or undertaking that is not
within the regular business of the corporation. Such a job or undertaking must also be
identifiably separate and distinct from the ordinary or regular business operations of the 2) Acting as Transmitter/VTR men:
employer. The job or undertaking also begins and ends at determined or determinable
times. x x x.11 (Emphases supplied, citation omitted.) (a) Prepare tapes for local airing;

Thus, in order to safeguard the rights of workers against the arbitrary use of the word (b) Actual airing of commercials;
"project" to prevent employees from attaining the status of regular employees, employers
claiming that their workers are project employees should not only prove that the duration (c) Plugging of station promo;
and scope of the employment was specified at the time they were engaged, but also that
there was indeed a project. As discussed above, the project could either be (1) a
particular job or undertaking that is within the regular or usual business of the employer (d) Logging of transmitter reading; and
company, but which is distinct and separate, and identifiable as such, from the other
undertakings of the company; or (2) a particular job or undertaking that is not within the (e) In case of power failure, start up generator set to resume program;
regular business of the corporation. As it was with regard to the distinction between a
regular and casual employee, the purpose of this requirement is to delineate whether or 3) Acting as Maintenance staff;
not the employer is in constant need of the services of the specified employee. If the
particular job or undertaking is within the regular or usual business of the employer
(a) Checking of equipment;
company and it is not identifiably distinct or separate from the other undertakings of the
company, there is clearly a constant necessity for the performance of the task in
question, and therefore said job or undertaking should not be considered a project. (b) Warming up of generator;

Brief examples of what may or may not be considered identifiably distinct from the
business of the employer are in order. In Philippine Long Distance Telephone Company
v. Ylagan,12 this Court held that accounting duties were not shown as distinct, separate
and identifiable from the usual undertakings of therein petitioner PLDT. Although
essentially a telephone company, PLDT maintains its own accounting department to
which respondent was assigned. This was one of the reasons why the Court held that
respondent in said case was not a project employee. On the other hand, in San Miguel
(c) Filling of oil, fuel, and water in radiator; and
4) Acting as Cameramen14
These jobs and undertakings are clearly within the regular or usual business of the
employer company and are not identifiably distinct or separate from the other
undertakings of the company. There is no denying that the manning of the operations

Page 30 of 42
center to air commercials, acting as transmitter/VTR men, maintaining the equipment,
and acting as cameramen are not undertakings separate or distinct from the business of
a broadcasting company.
Petitioner’s allegation that respondents were merely substitutes or what they call pinch-
hitters (which means that they were employed to take the place of regular employees of
petitioner who were absent or on leave) does not change the fact that their jobs cannot
be considered projects within the purview of the law. Every industry, even public offices,
has to deal with securing substitutes for employees who are absent or on leave. Such
tasks, whether performed by the usual employee or by a substitute, cannot be
considered separate and distinct from the other undertakings of the company. While it is
management’s prerogative to device a method to deal with this issue, such prerogative
is not absolute and is limited to systems wherein employees are not ingeniously and
methodically deprived of their constitutionally protected right to security of tenure. We
are not convinced that a big corporation such as petitioner cannot device a system
wherein a sufficient number of technicians can be hired with a regular status who can
take over when their colleagues are absent or on leave, especially when it appears from
the records that petitioner hires so-called pinch-hitters regularly every month.
In affirming the Decision of the NLRC, the Court of Appeals furthermore noted that if
respondents were indeed project employees, petitioner should have reported the
completion of its projects and the dismissal of respondents in its finished projects:
There is another reason why we should rule in favor of private respondents. Nowhere in
the records is there any showing that petitioner reported the completion of its projects
and the dismissal of private respondents in its finished projects to the nearest Public
Employment Office as per Policy Instruction No. 2015 of the Department of Labor and
Employment [DOLE]. Jurisprudence abounds with the consistent rule that the failure of
an employer to report to the nearest Public Employment Office the termination of its
workers’ services everytime a project or a phase thereof is completed indicates that said
workers are not project employees.
In the extant case, petitioner should have filed as many reports of termination as there
were projects actually finished if private respondents were indeed project employees,
considering that the latter were hired and again rehired from 1996 up to 1999. Its failure
to submit reports of termination cannot but sufficiently convince us further that private
respondents are truly regular employees. Important to note is the fact that private
respondents had rendered more than one (1) year of service at the time of their dismissal
which overturns petitioner’s allegations that private respondents were hired for a specific
or fixed undertaking for a limited period of time.16 (Citations omitted.)
We are not unaware of the decisions of the Court in Philippine Long Distance Telephone
Company v. Ylagan17 and ABS-CBN Broadcasting Corporation v. Nazareno18 which held
that the employer’s failure to report the termination of employees upon project completion
to the DOLE Regional Office having jurisdiction over the workplace within the period
prescribed militates against the employer’s claim of project employment, even outside
the construction industry. We have also previously stated in another case that the Court
should not allow circumvention of labor laws in industries not falling within the ambit of
Policy Instruction No. 20/Department Order No. 19, thereby allowing the prevention of
acquisition of tenurial security by project employees who have already gained the status
of regular employees by the employer’s conduct.19
While it may not be proper to revisit such past pronouncements in this case, we
nonetheless find that petitioner’s theory of project employment fails the principal test of
demonstrating that the alleged project employee was assigned to carry out a specific
project or undertaking, the duration and scope of which were specified at the time the
employee is engaged for the project.20
The Court of Appeals also ruled that even if it is assumed that respondents are project
employees, they would nevertheless have attained regular employment status because
of their continuous rehiring:
Be that as it may, a project employee may also attain the status of a regular employee if
there is a continuous rehiring of project employees after the stoppage of a project; and
the activities performed are usual [and] customary to the business or trade of the
employer. The Supreme Court ruled that a project employee or a member of a work pool
may acquire the status of a regular employee when the following concur:
1) There is a continuous rehiring of project employees even after cessation of a
project; and
2) The tasks performed by the alleged project employee are vital, necessary
and indispensable to the usual business or trade of the employer.
The circumstances set forth by law and the jurisprudence is present in this case. In fine,
even if private respondents are to be considered as project employees, they attained
regular employment status, just the same.21 (Citation omitted.)
Anent this issue of attainment of regular status due to continuous rehiring, petitioner
advert to the fixed period allegedly designated in employment contracts and reflected in
vouchers. Petitioner cites our pronouncements in Brent, St. Theresa’s School of
Novaliches Foundation v. National Labor Relations Commission, 22 and Fabela v. San
Miguel Corporation,23 and argues that respondents were fully aware and freely entered
into agreements to undertake a particular activity for a specific length of time.24 Petitioner
apparently confuses project employment from fixed term employment. The discussions
cited by petitioner in Brent, St. Theresa’s and Fabela all refer to fixed term employment,
which is subject to a different set of requirements.
Whether the requisites of a valid fixed term employment are met
Page 31 of 42
As stated above, petitioner interchangeably characterizes respondents’ service as
project and fixed term employment. These types of employment, however, are not the
same. While the former requires a project as restrictively defined above, the duration of
a fixed-term employment agreed upon by the parties may be any day certain, which is
understood to be "that which must necessarily come although it may not be known
when."25 The decisive determinant in fixed-term employment is not the activity that the
employee is called upon to perform but the day certain agreed upon by the parties for
the commencement and termination of the employment relationship.26
Cognizant of the possibility of abuse in the utilization of fixed-term employment contracts,
we emphasized in Brent that where from the circumstances it is apparent that the periods
have been imposed to preclude acquisition of tenurial security by the employee, they
should be struck down as contrary to public policy or morals.27 We thus laid down
indications or criteria under which "term employment" cannot be said to be in
circumvention of the law on security of tenure, namely:
1) The fixed period of employment was knowingly and voluntarily agreed upon by
the parties without any force, duress, or improper pressure being brought to bear
upon the employee and absent any other circumstances vitiating his consent; or
2) It satisfactorily appears that the employer and the employee dealt with each other
on more or less equal terms with no moral dominance exercised by the former or
the latter.28 (Citation omitted.)
These indications, which must be read together, make the Brent doctrine applicable only
in a few special cases wherein the employer and employee are on more or less in equal
footing in entering into the contract. The reason for this is evident: when a prospective
employee, on account of special skills or market forces, is in a position to make demands
upon the prospective employer, such prospective employee needs less protection than
the ordinary worker. Lesser limitations on the parties’ freedom of contract are thus
required for the protection of the employee. These indications were applied in Pure
Foods Corporation v. National Labor Relations Commission,29 where we discussed the
patent inequality between the employer and employees therein:
[I]t could not be supposed that private respondents and all other so-called "casual"
workers of [the petitioner] KNOWINGLY and VOLUNTARILY agreed to the 5-month
employment contract. Cannery workers are never on equal terms with their employers.
Almost always, they agree to any terms of an employment contract just to get employed
considering that it is difficult to find work given their ordinary qualifications. Their freedom
to contract is empty and hollow because theirs is the freedom to starve if they refuse to
work as casual or contractual workers. Indeed, to the unemployed, security of tenure has
no value. It could not then be said that petitioner and private respondents "dealt with
each other on more or less equal terms with no moral dominance whatever being
exercised by the former over the latter.
To recall, it is doctrinally entrenched that in illegal dismissal cases, the employer has the
burden of proving with clear, accurate, consistent, and convincing evidence that the
dismissal was valid.30 It is therefore the employer which must satisfactorily show that it
was not in a dominant position of advantage in dealing with its prospective employee.
Thus, in Philips Semiconductors (Phils.), Inc. v. Fadriquela,31 this Court rejected the
employer’s insistence on the application of the Brent doctrine when the sole justification
of the fixed terms is to respond to temporary albeit frequent need of such workers:
We reject the petitioner’s submission that it resorted to hiring employees for fixed terms
to augment or supplement its regular employment "for the duration of peak loads" during
short-term surges to respond to cyclical demands; hence, it may hire and retire workers
on fixed terms, ad infinitum, depending upon the needs of its customers, domestic and
international. Under the petitioner's submission, any worker hired by it for fixed terms of
months or years can never attain regular employment status. x x x.
Similarly, in the case at bar, we find it unjustifiable to allow petitioner to hire and rehire
workers on fixed terms, ad infinitum, depending upon its needs, never attaining regular
employment status. To recall, respondents were repeatedly rehired in several fixed term
contracts from 1996 to 1999. To prove the alleged contracts, petitioner presented cash
disbursement vouchers signed by respondents, stating that they were merely hired as
pinch-hitters. It is apparent that respondents were in no position to refuse to sign these
vouchers, as such refusal would entail not getting paid for their services. Plainly,
respondents as "pinch-hitters" cannot be considered to be in equal footing as petitioner
corporation in the negotiation of their employment contract.
In sum, we affirm the findings of the NLRC and the Court of Appeals that respondents
are regular employees of petitioner.1âwphi1 As regular employees, they are entitled to
security of tenure and therefore their services may be terminated only for just or
authorized causes. Since petitioner failed to prove any just or authorized cause for their
termination, we are constrained to affirm the findings of the NLRC and the Court of
Appeals that they were illegally dismissed.
Separation Pay, Night Shift Differential and Attorney’s Fees
Petitioner admits that respondents were not given separation pay and night shift
differential. Petitioner, however, claims that respondents were not illegally dismissed and
were therefore not entitled to separation pay. As regards night shift differential, petitioner
claims that its admission in its August 23, 1999 letter as to the nonpayment thereof is
qualified by its allegation that respondents are not entitled thereto. Petitioner points out
that respondents failed to specify the period when such benefits are due, and did not
present additional evidence before the NLRC and the Court of Appeals.32
In light, however, of our ruling that respondents were illegally dismissed, we affirm the
findings of the NLRC and the Court of Appeals that respondents are entitled to separation
pay in lieu of reinstatement. We quote with approval the discussion of the Court of
Appeals:
Page 32 of 42
However, since petitioner refused to accept private respondents back to work,
reinstatement is no longer practicable. Allowing private respondents to return to their
work might only subject them to further embarrassment, humiliation, or even harassment.
Thus, in lieu of reinstatement, the grant of separation pay equivalent to one (1) month
pay for every year of service is proper which public respondent actually did. Where the
relationship between private respondents and petitioner has been severely strained by
reason of their respective imputations of accusations against each other, to order
reinstatement would no longer serve any purpose. In such situation, payment of
separation pay instead of reinstatement is in order.33 (Citations omitted.)
As regards night shift differential, the Labor Code provides that every employee shall be
paid not less than ten percent (10%) of his regular wage for each hour of work performed
between ten o’clock in the evening and six o’clock in the morning. 34 As employees of
petitioner, respondents are entitled to the payment of this benefit in accordance with the
number of hours they worked from 10:00 p.m. to 6:00 a.m., if any. In the Decision of the
NLRC affirmed by the Court of Appeals, the records were remanded to the Regional
Arbitration Branch of origin for the computation of the night shift differential and the
separation pay. The Regional Arbitration Branch of origin was likewise directed to require
herein petitioner to produce additional documents where necessary. Therefore, while we
are affirming that respondents are entitled to night shift differential in accordance with
the number of hours they worked from 10:00 p.m. to 6:00 a.m., it is the Regional
Arbitration Branch of origin which should determine the computation thereof for each of
the respondents, and award no night shift differential to those of them who never worked
from 10:00 p.m. to 6:00 a.m.
It is also worthwhile to note that in the NLRC Decision, it was herein petitioner GMA
Network, Inc. (respondent therein) which was tasked to produce additional documents
necessary for the computation of the night shift differential. This is in accordance with
our ruling in Dansart Security Force & Allied Services Company v. Bagoy,35where we
held that it is entirely within the employer's power to present such employment records
that should necessarily be in their possession, and that failure to present such evidence
must be taken against them.
Petitioner, however, is correct that the award of attorney's fees is contrary to
jurisprudence. In De las Santos v. Jebsen Maritime Inc.,36 we held:
Likewise legally correct is the deletion of the award of attorney's fees, the NLRC having
failed to explain petitioner's entitlement thereto. As a matter of sound policy, an award of
attorney's fees remains the exception rather than the rule. It must be stressed, as aptly
observed by the appellate court, that it is necessary for the trial court, the NLRC in this
case, to make express findings of facts and law that would bring the case within the
exception. In fine, the factual, legal or equitable justification for the award must be set
forth in the text of the decision. The matter of attorney's fees cannot be touched once
and only in the fallo of the decision, else, the award should be thrown out for being
speculative and conjectural. In the absence of a stipulation, attorney's fees are ordinarily
not recoverable; otherwise a premium shall be placed on the right to litigate. They are
not awarded every time a party wins a suit. (Citations omitted.)
In the case at bar, the factual basis for the award of attorney's fees was not discussed in
the text of NLRC Decision. We are therefore constrained to delete the same.
WHEREFORE the Decision of the Court of Appeals dated September 8, 2006 and the
subsequent Resolution denying reconsideration dated January 22, 2007 in CA-G.R. SP
No. 73652, are hereby AFFIRMED with the MODIFICATION that the award of attorney's
fees in the affirmed Decision of the National Labor Relations Commission is hereby
DELETED.
SO ORDERED.
FIRST DIVISION
G.R. No. 161366 June 16, 2009
SYCIP, GORRES, VELAYO & COMPANY, Petitioner,
vs.
CAROL DE RAEDT, Respondent.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review1 challenging the 7 October 2003 Decision2 and
17 December 2003 Resolution3 of the Court of Appeals in CA-G.R. SP No. 59916. The
Court of Appeals reversed the 16 February 2000 Decision4 of the National Labor
Relations Commission and partially reinstated the 14 July 1999 Decision5 of Labor
Arbiter Monroe C. Tabingan holding that respondent Carol De Raedt (De Raedt) was
illegally dismissed by petitioner Sycip, Gorres, Velayo & Company (SGV).
The Facts
Sometime in June 1989, the Philippine Government and the Commission for European
Communities (Commission) entered into a Financing Memorandum whereby the
Commission undertook to provide financial and technical assistance for the
implementation of rural micro projects in five provinces of the Cordillera area in Northern
Luzon. Consequently, the Central Cordillera Agricultural Programme (CECAP) project
was launched to be implemented by the Department of Agriculture (DA).
Page 33 of 42
On 22 May 1989, the DA contracted Travers Morgan International Ltd. (TMI) to provide
the required technical assistance services for CECAP.
On 1 July 1989, TMI and SGV entered into a Sub-Consultancy Agreement for the latter
to undertake part of the technical assistance services requirements of the CECAP. SGV
would provide for the Technical Assistance Services. Hence, SGV proposed qualified
consultants as defined by the Terms of Reference.
The acceptance and appointment of the proposed consultants to the project were subject
to the unanimous approval of the TMI, the DA and the Commission. For the position of
Sociologist, SGV proposed Felino Lorente (Lorente). However, Thomas Gimenez
(Gimenez) of the DA disputed the qualifications of Lorente and recommended instead
De Raedt.
Martin Tull (Tull) of TMI replied to Gimenez that TMI would consider De Raedt for the
sociologist position. Thus, Gimenez volunteered to call De Raedt to advise her of a
possible assignment to the CECAP.
Eventually, the DA advised SGV that De Raedt’s nomination, among others, had been
approved by the Commission and the DA and that she was expected to start her
assignment on 3 July 1989.
On 6 July 1989, De Raedt wrote SGV expressing her conformity to the consultancy
contract, thus she was advised to sign the same. De Raedt signed the contract on 14
July 1989 but her start-up date with the CECAP was moved to 15 August 1989 with the
approval of the DA because she was in Thailand to finish an assignment.
While the CECAP was in progress, TMI received verbal and written complaints from the
project staff regarding De Raedt’s performance and working relations with them.
An investigation was then conducted by the TMI on the above complaints. Thereafter,
the TMI confirmed that De Raedt’s retention would be counter-productive to the progress
of the project because a number of project staff found it difficult to work with her. Thus,
the TMI directed SGV to withdraw De Raedt from the CECAP.
In compliance with TMI’s instructions, SGV facilitated De Raedt’s withdrawal from the
CECAP.
De Raedt filed a case against SGV for illegal dismissal and damages before the
Arbitration Branch of the NLRC.
The Labor Arbiter rendered a decision in favor of De Raedt.
SGV appealed the decision of the Labor Arbiter to the NLRC, which rendered judgment
in favor of SGV.
De Raedt filed a petition for certiorari with the Court of Appeals, which reversed the NLRC
in a Decision promulgated on 7 October 2003.
SGV filed a motion for reconsideration, which was denied by the Court of Appeals in its
Resolution dated 17 December 2003.
Hence, this petition.
The Ruling of the Labor Arbiter
The Labor Arbiter found De Raedt as an employee of SGV. How she conducted herself
and how she carried out the project were dependent on and prescribed by SGV and TMI,
respectively. The Labor Arbiter further ruled that SGV is considered as the employer of
De Raedt since it acted indirectly in the interest of TMI, the entity directly in-charge of
the CECAP project for which De Raedt was hired. Moreover, the Labor Arbiter found
SGV as the entity which is the source of De Raedt’s income and other benefits.1avvphi1
The Labor Arbiter found no sufficient valid ground to terminate De Raedt’s services
although procedural due process was observed. The dispositive portion of the 14 July
1999 Decision of the Labor Arbiter reads:
WHEREFORE, judgment is hereby rendered declaring complainant to have been
illegally dismissed by respondent. Consequently, respondent Sycip, Gorres & Velayo
and Co. is hereby ordered to pay complainant the following:
a) Unpaid salaries corresponding to the unexpired portion of the contract in the
amount of Eight Hundred Two Thousand (₱802,000.00) Pesos;
b) Moral damages in the amount of Two Hundred Fifty Thousand (₱250,000.00)
Pesos;
c) Exemplary damages in the amount of One Hundred Thousand (₱100,000.00)
Pesos;
d) 10% of the total award as attorney’s fees amounting to One Hundred Fifteen
Thousand Two Hundred Pesos (₱115,200.00).
The computations of which are hereto attached as Annex "A" and made an integral part
hereof.
SO ORDERED.6
Page 34 of 42
The Ruling of the NLRC
The NLRC reversed the ruling of the Labor Arbiter and found that there was no employer-
employee relationship between SGV and De Raedt.
The NLRC agreed with the Labor Arbiter’s finding that SGV had no discretion in the
selection of De Raedt for the position of Sociologist in the CECAP. The selection was
made by the TMI, upon recommendation of Gimenez of the DA, to be approved by the
DA and the Commission. The engagement of De Raedt was coursed through SGV.
The payment of De Raedt’s service fee was done through SGV but the funds came from
the TMI as shown by SGV’s billings to TMI for De Raedt’s professional fee.
As regards the power of dismissal, SGV merely implemented TMI’s instructions to
withdraw De Raedt from the CECAP.
The NLRC found that SGV did not exercise control over De Raedt’s work. The Sub-
Consultancy Agreement between TMI and SGV clearly required De Raedt to work
closely with and under the direction and supervision of both the Team leader and the
Project Coordinator.
Hence, SGV’s participation is to merely monitor her attendance, through time records,
for the payment of her retainer fee and to validate the time she expended in the project
with her written reports.
The following circumstances also indicated that no employment relationship existed
between the parties: (1) De Raedt was engaged on a contract basis; (2) the letter-
agreement between the parties clearly states that there is no employer-employee
relationship between the parties and that De Raedt was at all times to be considered an
independent contractor; and (3) De Raedt was allowed to engage in other employment
during all the time she was connected with the project.
The dispositive portion of the 16 February 2000 Decision of the NLRC reads:
WHEREFORE, premises considered, the assailed decision of the Labor Arbiter is
REVERSED and SET ASIDE and the complaint is DISMISSED for lack of jurisdiction.
SO ORDERED.7
The Ruling of the Court of Appeals
The Court of Appeals reversed the ruling of the NLRC and reinstated the decision of the
Labor Arbiter insofar as the latter found De Raedt as an employee of SGV.
The Court of Appeals found that based on the letter-agreement between the parties,
SGV engaged De Raedt for the project on a contract basis for 40 months over a period
of five years during which she was to work full time. She could not engage in any other
employment. In fact, she had to resign from her teaching job at the University of the
Philippines. She could not leave her place of assignment without SGV’s consent. She
must maintain an accurate record of the time she spent on the job, and prepare reports
which may be required by her team leader and SGV. Whether actual supervision of her
work had turned out to be minimal or not, SGV reserved the right to exercise it at any
time. Further, SGV asserted its right to terminate her services.8
The Court of Appeals found that De Raedt was removed from the project because of
personality differences, which is not one of the grounds for a valid dismissal of an
employee.9
The dispositive portion of the 7 October 2003 Decision of the Court of Appeals reads:
IN VIEW OF THE FOREGOING, the assailed decision of the NLRC dated February 16,
2000 is REVERSED, and a new one ENTERED partially REINSTATING the Decision of
Labor Arbiter Monroe Tabing[a]n on July 14, 1999, by affirming paragraph (a) thereof,
deleting paragraph (b) and (c), and reducing the award of attorney’s fees in paragraph
(d) to 5% of the principal award.
SO ORDERED.10
The Issue
The issue in this case is whether De Raedt was an employee of SGV. If so, whether De
Raedt was illegally dismissed by SGV.
The Ruling of the Court
The petition is meritorious.
The existence of an employer-employee relationship is ultimately a question of fact. As
a general rule, factual issues are beyond the province of this Court. However, this rule
admits of exceptions, one of which is where there are conflicting findings of fact, such as
in the present case. Consequently, this Court shall scrutinize the records to ascertain the
facts for itself.11
To determine the existence of an employer-employee relationship, case law has
consistently applied the four-fold test, to wit: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s
power to control the employee on the means and methods by which the work is
accomplished. The so-called "control test" is the most important indicator of the presence
or absence of an employer-employee relationship.12
Page 35 of 42
A. Selection and Engagement of the Employee
De Raedt was contracted by SGV as part of the latter’s obligation under the Sub-
Consultancy Agreement with TMI, which was in turn contracted by the DA to provide the
services required for the foreign-assisted CECAP project. De Raedt was neither engaged
by SGV as an ordinary employee, nor was she picked by SGV from a pool of consultants
already working for SGV. Hence, SGV engaged De Raedt’s services precisely because
SGV had an existing Sub-Consultancy Agreement with TMI to provide such
services.1avvphi1
The Labor Arbiter and the NLRC both agree that SGV had no discretion in the selection
of De Raedt for the position of Sociologist in the CECAP. The selection was made by the
TMI, upon recommendation of Gimenez of the DA, to be approved by the DA and the
Commission. The engagement of De Raedt was merely coursed through SGV.
Moreover, SGV’s first choice for the Sociologist position was Lorente. However, Gimenez
recommended De Raedt to SGV. De Raedt’s testimony proves that her appointment was
ultimately the DA’s decision, and not SGV’s, thus:
Q Madam Witness, how did you come to know the vacancy here in CECAP project for
a position of project Sociologist?
A I was contacted when I was in Honolulu. I was contacted by the firm Sarmiento and
Company who asked me if I would list myself for the position of project sociologist for
the CECAP project in 1987 when it was discussed by the NGO’s in the Cordillera and
finally I was contacted by the SGV. They asked me if I am interested in the position
project sociologist. I was also contacted by Mr. Gimenez to ask me if SGV had
contacted me regarding the position.
Q So among the informants who gave you an idea that the position of project
sociologist is the project director himself, is it not?
A He informed me that I have been considered by the Department of Agriculture
for the position of project sociologist.
Q Before you were considered for the position of (sic) the Department of Agriculture,
did you give them an application?
A No, sir.
Q Do you know who gave your name to them?
A Not sure, may be the Department of Agriculture or Sarmiento, because I was asked
by the consultancy firm Sarmiento if I would be willing to list with their business
consultants for the CECAP project and this was before the bidding and Sarmiento did
not make the bidding for the project.
Q Sarmiento is different from SGV is that correct?
A Yes, sir.13 (Emphasis supplied)
B. Payment of Wages
The letter-agreement between the parties specifies the consideration for De Raedt’s
services as a retainer fee payable for every day of completed service in the project. In
addition to this, monthly subsistence and housing allowances and medical insurance
were to be given to De Raedt. The retainer fees and privileges given to De Raedt are not
commonly given to ordinary employees, who receive basic monthly salaries and other
benefits under labor laws.
The Court notes that the retainer fees paid by SGV to De Raedt ultimately came from its
"client," TMI. De Raedt was aware that the source of the funds was the grant from the
Commission. By the terms of the Sub-Consultancy Agreement, TMI paid SGV
remuneration of the fixed unit rate component of the part services.
However, whatever amount SGV received from TMI did not necessarily entitle De Raedt
to the entire amount. In the parties’ letter-agreement, SGV made it clear that payments
made by TMI "should not be construed as being due [De Raedt] since these items are
intended for the administration, overhead expenses, and other related expenses of
[SGV] in the development, management, and supervision of [De Raedt’s] assignment."
C. Power of Dismissal
Under the letter-agreement between the parties, SGV may terminate De Raedt’s
services "at anytime that the contract between the Department of Agriculture –
Government of the Philippines and Travers Morgan International, Consulting Engineers,
Planners and Management Consultants is terminated for any cause whatsoever."
De Raedt failed to show that SGV could terminate her services on grounds other than
the end of the contract between the DA as implementing agency of the CECAP and TMI
or the termination by TMI of the contract with SGV, such as retrenchment to prevent
losses as provided under labor laws.14
Further, under the parties’ agreement, should De Raedt decide to leave the project for
any reason whatsoever other than a reasonable cause beyond her control which
prevents her from performing the required services, De Raedt shall be liable for
liquidated damages for breach of contract, in an amount equivalent to the retainer fee for
a period of one month. This pre-termination with penalty clause in the parties’ agreement
clearly negates the existence of an employment relationship between the parties. If De
Page 36 of 42
Raedt were indeed SGV’s employee, she should have been able to resign for whatever
professional or personal reason at anytime, even prior to the end of the contract between
the DA and TMI or between TMI and SGV, without incurring any liability for such
resignation.
Besides, it was TMI, through Tull, which instructed SGV to disengage De Raedt from the
project. Terminating De Raedt’s services was beyond SGV’s control, as SGV had no
choice but to comply with the directive of its client (TMI). Clearly, De Raedt’s retention
as a Sociologist in the CECAP project was dependent on TMI’s and DA’s decisions. In
his letter dated 14 June 1991 addressed to SGV, Tull wrote the following:
Notwithstanding a number of staff on the project, all employed by the Department of
Agriculture, have confirmed that they have found it difficult to work with Mrs de Raedt
over the past few months which supports the earlier advice from the Department of
Agriculture.
In the circumstances I consider we have no alternative but to replace Mrs de
Raedt. Would you please make arrangement for her to be withdrawn from the project by
the end of June 1991. Payment of staff fees and housing allowances under the project
in respect of Mrs de Raedt will be paid up to 30th June 1991.15 (Emphasis supplied)
D. Power of Control
The letter-agreement between the parties required De Raedt to maintain an accurate
time record, notify SGV of delays in De Raedt’s schedule, secure a prior clearance to
leave place of assignment, and prepare reports. These requirements hardly show that
SGV exercises control over the means and methods in the performance of De Raedt’s
duties as a Sociologist of the CECAP. SGV was not concerned with De Raedt’s ways of
accomplishing her work as a Sociologist. Rather, SGV naturally expected to be updated
regularly of De Raedt’s "work progress," if any, on the project for which she was
specifically engaged16 to ensure SGV’s compliance with the terms and conditions of the
Sub-Consultancy Agreement with TMI. The services to be performed by her specified
what she needed to achieve but not on how she was to go about it.17
In sum, there existed no employer-employee relationship between the parties. De Raedt
is an independent contractor, who was engaged by SGV to render services to SGV’s
client TMI, and ultimately to DA on the CECAP project, regarding matters in the field of
her special knowledge and training for a specific period of time. Unlike an ordinary
employee, De Raedt received retainer fees and benefits such as housing and
subsistence allowances and medical insurance. De Raedt’s services could be terminated
on the ground of end of contract between the DA and TMI, and not on grounds under
labor laws. Though the end of the contract between the DA and TMI was not the ground
for the withdrawal of De Raedt from the CECAP, De Raedt was disengaged from the
project upon the instruction of SGV’s client, TMI. Most important of all, SGV did not
exercise control over the means and methods by which De Raedt performed her duties
as Sociologist. SGV did impose rules on De Raedt, but these were necessary to ensure
SGV’s faithful compliance with the terms and conditions of the Sub-Consultancy
Agreement it entered into with TMI.
WHEREFORE, the Court GRANTS the petition. The Court SETS ASIDE the 7 October
2003 Decision and 17 December 2003 Resolution of the Court of Appeals in CA-G.R.
SP No. 59916 and REINSTATES the 16 February 2000 Decision of the National Labor
Relations Commission.
SO ORDERED.
SECOND DIVISION
G.R. No. 175501 October 4, 2010
MANILA WATER COMPANY, INC., Petitioner,
vs.
JOSE J. DALUMPINES, EMMANUEL CAPIT, ROMEO B. CASTOLONE, MELITANTE
CASTRO, NONITO FERNANDEZ, ARNULFO JAMISON, ARTHUR LAVISTE,
ESTEBAN LEGARTO, SUSANO MIRANDA, RAMON C. REYES, JOSE SIERRA,
BENJAMIN TALAVERA, MOISES ZAPATERO, EDGAR PAMORAGA, BERNARDO
S. MEDINA, MELENCIO M. BAONGUIS, JR., JOSE AGUILAR, ANGEL C. GARCIA,
JOSE TEODY P. VELASCO, AUGUSTUS J. TANDOC, ROBERTO DAGDAG, MIGUEL
LOPEZ, GEORGE CABRERA, ARMAN BORROMEO, RONITO R. FRIAS, ANTONIO
VERGARA, RANDY CORTIGUERRA, and FIRST CLASSIC COURIER SERVICES,
INC., Respondents.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court,
assailing the Decision1dated September 12, 2006 and the Resolution2 dated November
17, 2006 of the Court of Appeals (CA) in CA-G.R. SP No. 94909.
The facts of the case are as follows:
By virtue of Republic Act No. 8041, otherwise known as the "National Water Crisis Act
of 1995," the Metropolitan Waterworks and Sewerage System (MWSS) was given the
authority to enter into concession agreements allowing the private sector in its
operations. Petitioner Manila Water Company, Inc. (Manila Water) was one of two private
concessionaires contracted by the MWSS to manage the water distribution system in the
east zone of Metro Manila. The east service area included the following towns and cities:
Mandaluyong, Marikina, Pasig, Pateros, San Juan, Taguig, Makati, parts of Quezon City
and Manila, Angono, Antipolo, Baras, Binangonan, Cainta, Cardona, Jala-Jala, Morong,
Pililla, Rodriguez, Tanay, Taytay, Teresa, and San Mateo.3
Page 37 of 42
Under the concession agreement, Manila Water undertook to absorb the regular
employees of MWSS listed by the latter effective August 1, 1997. Individual respondents,
with the exception of Moises Zapatero (Zapatero) and Edgar Pamoraga (Pamoraga),
were among the one hundred twenty-one (121) employees not included in the list of
employees to be absorbed by Manila Water. Nevertheless, Manila Water engaged their
services without written contract from August 1, 1997 to August 31, 1997.4
On September 1, 1997, individual respondents signed a three (3)-month contract to
perform collection services on commission basis for Manila Water’s branches in the east
zone.5
On November 21, 1997, before the expiration of the contract of services, the 121 bill
collectors formed a corporation duly registered with the Securities and Exchange
Commission (SEC) as the "Association Collector’s Group, Inc." (ACGI). ACGI was one
of the entities engaged by Manila Water for its courier service. However, Manila Water
contracted ACGI for collection services only in its Balara Branch.6
In December 1997, Manila Water entered into a service agreement with respondent First
Classic Courier Services, Inc. (FCCSI) also for its courier needs. The service agreements
between Manila Water and FCCSI covered the periods 1997 to 1999 and 2000 to
2002.7 Earlier, in a memorandum dated November 28, 1997, FCCSI gave a deadline for
the bill collectors who were members of ACGI to submit applications and letters of intent
to transfer to FCCSI. The individual respondents in this case were among the bill
collectors who joined FCCSI and were hired effective December 1, 1997.8
On various dates between May and October 2002, individual respondents were
terminated from employment. Manila Water no longer renewed its contract with FCCSI
because it decided to implement a "collectorless" scheme whereby Manila Water
customers would instead remit payments through "Bayad Centers."9 The aggrieved bill
collectors individually filed complaints for illegal dismissal, unfair labor practice,
damages, and attorney’s fees, with prayer for reinstatement and backwages against
petitioner Manila Water and respondent FCCSI. The complaints were consolidated and
jointly heard.10
Respondent bill collectors alleged that their employment under Manila Water had four
(4) stages: (a) from August 1, 1997 to August 31, 1997; (b) from September 1, 1997 to
November 30, 1997; (c) in November 1997 when FCCSI was incorporated; and (d) after
November 1977 when FCCSI came in. While in MWSS, and thereafter in Manila Water
and FCCSI, respondent bill collectors were made to perform the following functions: (1)
delivery of bills to customers; (2) collection of payments from customers; and (3) delivery
of disconnection notice to customers. They were also allowed to effect disconnection
and were given tools for this purpose.11
Respondent bill collectors averred that when Manila Water issued their individual
contracts of service for three months in September 1997, there was already an attempt
to make it appear that respondent bill collectors were not its employees but independent
contractors. Respondent bill collectors stressed that they could not qualify as
independent contractors because they did not have an independent business of their
own, tools, equipment, and capitalization, but were purely dependent on the wages they
earned from Manila Water, which was termed as "commission."12
Respondent bill collectors alleged that Manila Water had complete supervision over their
work and their collections, which they had to remit daily to the former. They also
maintained that the incorporation of ACGI did not mean that they were not employees of
Manila Water. Furthermore, they alleged that they suffered injustice when Manila Water
imposed upon them the work set-up that caused them to be emotionally depressed
because those who were not assigned to the Balara Branch under Manila Water’s
contract with ACGI were forced to join FCCSI to retain their employment. They argued
that the entry of FCCSI did not change the employer-employee relationship of
respondent bill collectors with Manila Water.13
Respondent bill collectors insisted that they remained employees of Manila Water even
after the entry of FCCSI. The latter did not qualify as a legitimate labor contractor since
it had no substantial capital. FCCSI only had a paid-up capital of one hundred thousand
pesos (₱100,000.00), out of the four hundred thousand pesos (₱400,000.00) authorized
capital. FCCSI relied mainly on what Manila Water would pay, from which it deducted an
agency fee, and it had no other clients on collection. They were forced to transfer to
FCCSI when their service contracts with Manila Water was about to expire on November
30, 1997. FCCSI was engaged in labor-only contracting which is prohibited by law.14
Respondent bill collectors averred that even under the four-fold test of employer-
employee relationship, it appeared that Manila Water was their true employer based on
the following circumstances: (1) it was Manila Water who engaged their services as bill
collectors when it took over the operations of the east zone from MWSS on August 1,
1997; (2) it was Manila Water which paid their wages in the form of commissions every
fifteenth (15th) and thirtieth (30th) day of each month; (3) Manila Water exercised the
power of dismissal over them as bill collectors as evidenced by the instances surrounding
their termination as set forth in their respective affidavits, and by the individual clearances
issued to them not by FCCSI but by Manila Water, stating that the same was "issued in
connection with his termination of contract as Contract Collector of Manila Water
Company"; and (4) their work as bill collectors was clearly related to the principal
business of Manila Water.15
Respondent FCCSI, on the other hand, claimed that it is an independent contractor
engaged in the business of providing messengerial or courier services, and it fulfills the
criteria set forth under Department Order No. 10, Series of 1997. 16 It was issued a
certificate of registration by the Department of Labor and Employment (DOLE) as an
independent contractor. It was incorporated and registered with the SEC in November
1995. It was duly registered with the Department of Transportation and Communication
(DOTC) and the Office of the Mayor of Makati City for authority to operate. It has sufficient
capital in the form of tools, equipment, and machinery as attested to by the Postal
Regulation Committee of the DOTC after conducting an ocular inspection. It provides
Page 38 of 42
similar services to Philippine Long Distance Telephone Company, Smart 2. SUSANO MIRANDA - - - - - - - - - ₱36,400.00
Telecommunications, Inc., and Home Cable, Inc. Under the terms and conditions of its
service agreement with Manila Water, FCCSI has the power to hire, assign, discipline, 3. EDGAR PAMORAGA - - - - - - - - - ₱29,120.00
or dismiss its own employees, as well as control the means and methods of
accomplishing the assigned tasks, and it pays the wages of the employees.17 4. ARTHUR G. LAVISTI - - - - - - - - - ₱36,400.00
5. BENJAMIN TALAVERA, JR. - - - - ₱36,400.00
The termination of employment of respondent bill collectors upon the expiration of
FCCSI’s contract with Manila Water did not mean the automatic termination or 6. JOSE S.A. SIERRA - - - - - - - - - - - ₱36,400.00
suspension of the employer-employee relationship between FCCSI and respondent bill
7. MELITANTE D. CASTRO - - - - - - ₱36,400.00
collectors. Their termination after their six (6) month floating status, which was allowed
by law, was due to the non-renewal of FCCSI’s agreement with Manila Water and its 8. BERNARDO S. MEDINA - - - - - - - ₱36,400.00
inability to enter into a similar contract requiring the skills of respondent bill collectors. 18
9. MELENCIO BAONGUIS - - - - - - - ₱36,400.00
Petitioner Manila Water, for its part, denied that there was an employer-employee 10. NONITO V. FERNANDEZ - - - - - - ₱36,400.00
relationship between its company and respondent bill collectors. Based on the
agreement between FCCSI and Manila Water, respondent bill collectors are the 11. LEGARTO ESTEBAN - - - - - - - - - ₱36,400.00
employees of the former, as it is the former that has the right to select/hire, discipline,
supervise, and control. FCCSI has a separate and distinct legal personality from Manila 12. ROMEO B. CASTALONE - - - - - - ₱36,400.00
Water, and it was duly registered as an independent contractor before the DOLE.19 13. RAMON C. REYES - - - - - - - - - - - ₱36,400.00

Petitioner further claimed that individual service contracts signed by respondent bill 14. MOISES L. ZAPATERO - - - - - - - - ₱29,120.00
collectors for a 3-month period with Manila Water were valid and legal. The fact that the 15. JOSE T. AGUILAR - - - - - - - - - - - ₱36,400.00
duration of the engagement was stated on the face of the contract dispels any bad faith
on the part of the company. Fixed term contracts are allowed by law. Furthermore, 16. ARNULFO T. JAMISON - - - - - - - ₱36,400.00
respondent bill collectors’ allegation that the incorporation of ACGI was made as a
condition of their continued employment was unfounded. They transferred to FCCSI on 17. ANGEL C. GARCIA - - - - - - - - - - - ₱36,400.00
their own volition.20
18. JOSE TEODY P. VELASCO - - - - - ₱36,400.00

Petitioner Manila Water also averred that, under its organizational structure, there was 19. AUGUSTUS J. TANDOC - - - - - - - ₱36,400.00
no regular plantilla position of bill collector, which was the main reason why respondent
bill collectors were not included in the list of MWSS employees absorbed by the 20. EMMANUEL L. CAPIT - - - - - - - - ₱36,400.00
company. The company’s out-sourcing of courier needs to an independent contractor 21. WILLIAM AGANON - - - - - - - - - - ₱87,360.00
was valid and legal.
22. ROBERTO S. DAGDAG - - - - - - - - ₱36,400.00
On September 27, 2004, the Labor Arbiter (LA) rendered a decision, 21 the dispositive 23 MIGUEL J. LOPEZ - - - - - - - - - - - - ₱36,400.00
portion of which reads:
24. GEORGE CABRERA - - - - - - - - - - ₱36,400.00
WHEREFORE, premises considered, the complaints against respondent Manila Water
25. BORROMEO ARMAN - - - - - - - - - ₱36,400.00
Company, Inc. is dismissed for lack of jurisdiction due to want of employer-employee
relationship. Respondent First Classic Courier Services is hereby ordered to pay 26. RONITO R. FRIAS - - - - - - - - - - - - ₱36,400.00
complainants separation pay equivalent to one (1) month pay for every year of service,
to wit: 27. ANTONIO A. VERGARA - - - - - - - ₱36,400.00
28. RANDY T. CORTIGUERRA - - - - - ₱36,400.00
1. JOSE P. DALUMPINES - - - - - - - - ₱36,400.00

Page 39 of 42
 TOTAL - - - - - - - ₱1,055,600.00
SO ORDERED.22
Respondent bill collectors and FCCSI filed their separate appeals with the National Labor
Relations Commission (NLRC). On March 15, 2006, the NLRC rendered a
decision23 affirming in toto the decision of the LA. Respondent bill collectors filed a motion
for reconsideration, but the same was denied in a resolution24 dated April 28, 2006.
Disgruntled, respondent bill collectors filed a petition for certiorari under Rule 65 of the
Rules of Court before the CA. On September 12, 2006, the CA rendered a Decision, the
dispositive portion of which reads:
WHEREFORE, premises considered, the present petition is hereby GIVEN DUE
COURSE and the writ prayed for accordingly GRANTED. Consequently, the assailed
Decision dated March 15, 2006 and Resolution dated April 28, 2006 of the National Labor
Relations Commission are hereby ANNULED and SET ASIDE. A new judgment is
hereby entered (a) declaring the petitioners as employees of private respondent Manila
Water Company, Inc., and their termination as bill collectors as illegal; and (b) ordering
private respondent Manila Water Company, Inc. to pay the petitioners separation pay
equivalent to one (1) month for every year of service. In addition, private respondent
Manila Water Company, Inc. is liable to pay ten percent (10%) of the total amount
awarded as attorney’s fees.
No pronouncement as to costs.
SO ORDERED.25
Petitioner Manila Water and respondent bill collectors filed a motion for reconsideration.
However, the CA denied their respective motions for reconsideration in a Resolution
dated November 17, 2006.
Hence, this petition.
Petitioner Manila Water presented the following issues for resolution, whether the CA
erred (1) in ruling that an employment relationship exists between respondent bill
collectors and petitioner Manila Water; (2) in its application of Manila Water Company,
Inc. v. Peña26 to the instant case; and (3) in ruling that respondent FCCSI is not a bona
fide independent contractor.27
The petition is bereft of merit.
In this case, the LA, the NLRC, and the CA reached different conclusions of law albeit
agreeing on the same set of facts. It was in their interpretation and appreciation of the
evidence that they differed. The CA ruled that respondent FCCSI was a labor-only
contractor and that respondent bill collectors are employees of petitioner Manila Water,
while the LA and the NLRC ruled otherwise.
"Contracting" or "subcontracting" refers to an arrangement whereby a principal agrees
to put out or farm out with a contractor or subcontractor the performance or completion
of a specific job, work, or service within a definite or predetermined period, regardless of
whether such job, work, or service is to be performed or completed within or outside the
premises of the principal.28
Contracting and subcontracting arrangements are expressly allowed by law but are
subject to regulation for the promotion of employment and the observance of the rights
of workers to just and humane conditions of work, security of tenure, self-organization,
and collective bargaining.29 In legitimate contracting, the trilateral relationship between
the parties in these arrangements involves the principal which decides to farm out a job
or service to a contractor or subcontractor, which has the capacity to independently
undertake the performance of the job, work, or service, and the contractual workers
engaged by the contractor or subcontractor to accomplish the job, work, or service.30
Job contracting is permissible only if the following conditions are met: 1) the contractor
carries on an independent business and undertakes the contract work on his own
account under his own responsibility according to his own manner and method, free from
the control and direction of his employer or principal in all matters connected with the
performance of the work except as to the results thereof; and 2) the contractor has
substantial capital or investment in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in the conduct of the business. 31
On the other hand, the Labor Code expressly prohibits "labor-only" contracting. Article
106 of the Code provides that there is labor-only contracting where the person supplying
workers to an employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the workers recruited
and placed by such person are performing activities which are directly related to the
principal business of the employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the workers
in the same manner and to the same extent as if the latter were directly employed by
him.32
Department Order No. 18-02, Series of 2002, enunciates that labor-only contracting
refers to an arrangement where the contractor or subcontractor merely recruits, supplies,
or places workers to perform a job, work, or service for a principal, and any of the
following elements are present: (i) the contractor or subcontractor does not have
substantial capital or investment which relates to the job, work, or service to be performed
and the employees recruited, supplied, or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal; or
(ii) the contractor does not exercise the right to control the performance of the work of
the contractual employee.33
Page 40 of 42
"Substantial capital or investment" refers to capital stocks and subscribed capitalization
in the case of corporations, tools, equipment, implements, machineries, and work
premises, actually and directly used by the contractor or subcontractor in the
performance or completion of the job, work, or service contracted out. The "right to
control"refers to the right reserved to the person for whom the services of the contractual
workers are performed, to determine not only the end to be achieved, but also the
manner and means to be used in reaching that end.34
In the instant case, the CA found that FCCSI is a labor-only contractor. Based on the
factual findings of the CA, FCCSI does not have substantial capital or investment to
qualify as an independent contractor, viz.:
FCCSI was incorporated on November 14, 1995, with an authorized capital stock of
₱400,000.00, of which only ₱100,000.00 is actually paid-in. Going by the pronouncement
in Peña, such capitalization can hardly be considered substantial. FCCSI and Manila
Water make much of the 17 April 1997 letter of Postal Regulation Committee Chairman
Francisco V. Ontalan, Jr. to DOTC Secretary Arturo T. Enrile recommending the renewal
and/or extension of authority to FCCSI to operate private messengerial delivery services,
which states in part:
"Ocular inspection conducted on its office premises and evaluation of the documents
submitted, the firm during the six (6) months operation has generated employment to
thirty six (36) messengers, and four (4) office personnel.
"The office equipt [sic] with modern facilities such as computers, printers, electric
typewriter, working table, telephone lines, airconditioning unit, pigeon holes, working
tables and delivery vehicles such as a Suzuki van and three (3) motorcycles. The firm’s
audited financial statement for the period ending 31 December 1996 [shows] that it
earned a net income of ₱253,000.00. x x x."
The above document only proves that FCCSI has no sufficient investment in the form of
tools, equipment and machinery to undertake contract services for Manila Water
involving a fleet of around 100 collectors assigned to several branches and covering the
service area of Manila Water customers spread out in several cities/towns of the East
Zone. The only rational conclusion is that it is Manila Water that provides most if not all
the logistics and equipment including service vehicles in the performance of the
contracted service, notwithstanding that the contract between FCCSI and Manila Water
states that it is the Contractor which shall furnish at its own expense all materials, tools
and equipment needed to perform the tasks of collectors. Moreover, it must be
emphasized that petitioners who are "trained collectors" performed tasks that cannot be
simply categorized as "messengerial." In fact, these are the very functions they were
already discharging even before they joined FCCSI which "invited" or "solicited" their
placement just about the expiration of their three (3)-month contract with Manila Water
on November 28, 1997. The Agreement between FCCSI and Manila Water provides that
FCCSI shall "field the required number of trained collectors to the following Customer
Relations Branch Office": Cubao, España, San Juan-Mandaluyong, Marikina, Pasig,
Taguig-Pateros and Makati.351avvphi1
As correctly ruled by the CA, FCCSI’s capitalization may not be considered substantial
considering that it had close to a hundred collectors covering the east zone service area
of Manila Water customers. The allegation in the position paper of FCCSI that it serves
other companies’ courier needs does not "cure" the fact that it has insufficient
capitalization to qualify as independent contractor. Neither did FCCSI prove its allegation
by substantial evidence other than by their self-serving declarations. What is evident is
that it was Manila Water that provided the equipment and service vehicles needed in the
performance of the contracted service, even if the contract between FCCSI and Manila
Water stated that it was the Contractor which shall furnish at its own expense all
materials, tools, and equipment needed to perform the tasks of collectors.
Based on the four-fold test of employer-employee relationship, Manila Water emerges
as the employer of respondent collectors. The elements to determine the existence of an
employment relationship are: (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the employer's power to control
the employee's conduct. The most important of these elements is the employer's control
of the employee's conduct, not only as to the result of the work to be done, but also as
to the means and methods to accomplish it.36
The factual circumstances in the instant case are essentially the same as those cited in
Manila Water Company, Inc. v. Hermiño Peña.37 In that case, 121 bill collectors, headed
by Peña, filed a complaint for illegal dismissal against Manila Water. The bill collectors
formed ACGI which was registered with the SEC. Manila Water, in opposing the claim of
the bill collectors, claimed that there was no employer-employee relationship with the
latter. It averred that the bill collectors were employees of ACGI, a separate entity
engaged in collection services, an independent contractor which entered into a service
contract for the collection of Manila Water’s accounts. The Court ruled that ACGI was
not an independent contractor but was engaged in labor-only contracting, and as such,
is considered merely an agent of Manila Water.38
The Court ratiocinated that: First, ACGI does not have substantial capitalization or
investment in the form of tools, equipment, machineries, work premises, and other
materials to qualify as an independent contractor. Second, the work of the bill collectors
was directly related to the principal business or operation of Manila Water. Being in the
business of providing water to the consumers in the east zone, the collection of the
charges by the bill collectors for the company can only be categorized as related to, and
in the pursuit of, the latter's business. Lastly, ACGI did not carry on an independent
business or undertake the performance of its service contract in its own manner and
using its own methods, free from the control and supervision of its principal, Manila
Water. Since ACGI is obviously a labor-only contractor, the workers it supplied are
considered employees of the principal. Furthermore, the activities performed by the bill
collectors were necessary or desirable to Manila Water's principal trade or business;
thus, they are regular employees of the latter. Since Manila Water failed to comply with
Page 41 of 42
the requirements of termination under the Labor Code, the dismissal of the bill collectors Costs against petitioner.SO ORDERED.
was tainted with illegality.39

The similarity between the instant case and Peña is very evident. First, the work set-up
between the respondent contractor FCCSI and respondent bill collectors is the same as
in Peña. Respondent bill collectors were individually hired by the contractor, but were
under the direct control and supervision of the concessionaire. Second, they performed
the same function of courier and bill collection services. Third, the element of control
exercised by Manila Water over respondent bill collectors is essentially the same as in
Peña, manifested in the following circumstances, viz.: (a) respondent bill collectors
reported daily to the branch offices of Manila Water to remit their collections with the
specified monthly targets and comply with the collection reporting procedures prescribed
by the latter; (b) respondent bill collectors, except for Pamoraga and Zapatero, were
among the 121 collectors who incorporated ACGI; (c) Manila Water continued to pay
their wages in the form of commissions even after the employees alleged transfer to
FCCSI. Manila Water paid the respondent bill collectors their individual commissions,
and the lump sum paid by Manila Water to FCCSI merely represented the agency fee;
and (d) the certification or individual clearances issued by Manila Water to respondent
bill collectors upon the termination of the service contract with FCCSI. The certification
stated that respondents were contract collectors of Manila Water and not of FCCSI.
Thus, this Court agrees with the findings of the CA that if, indeed, FCCSI was the true
employer of the bill collectors, it should have been the one to issue the certification or
individual clearances.

It should be remembered that the control test merely calls for the existence of the right
to control, and not necessarily the exercise thereof. It is not essential that the employer
actually supervises the performance of duties of the employee. It is enough that the
former has a right to wield the power.40

Respondent bill collectors are, therefore, employees of petitioner Manila Water. It cannot
be denied that the tasks performed by respondent bill collectors are directly related to
the principal business or trade of Manila Water. Payments made by the subscribers are
the lifeblood of the company, and the respondent bill collectors are the ones who collect
these payments.

The primary standard of determining regular employment is the reasonable connection

between the particular activity performed by the employee in relation to the usual
business or trade of the employer. In this case, the connection is obvious when we
consider the nature of the work performed and its relation to the scheme of the particular
business or trade in its entirety. Finally, the repeated and continuing need for the
performance of the job is sufficient evidence of the necessity, if not indispensability of
the activity to the business.41

WHEREFORE, in view of the foregoing, the Decision dated September 12, 2006 and the
Resolution dated November 17, 2006 of the Court of Appeals in CA-G.R. SP No. 94909
are hereby AFFIRMED.

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