CAPITOL MEDICAL CENTER, INC. and DR. THELMA NAVARETTE-CLEMENTE vs. DR. CESAR MERIS [G.R. No.

155098 September 16, 2005] p:CARPIO MORALES, J.:

DOCTRINE: Employment is not merely a contractual relationship.
FACTS: In 1974, Capitol Medical Center, Inc. hired Dr. Cesar Meris, one of its stockholders, as in charge of its Industrial
Service Unit at a monthly salary of ₱10,270. Until the closure of the ISU in 1992, Dr. Meris performed dual functions
of providing medical services to Capitol’s employees and health workers, as well as to employees and workers of
companies having retainer contracts with it. In March 1992, Dr. Meris received from Capitol’s president and chairman
of the board, Dr. Thelma Clemente, a notice advising him of the management’s decision to close the ISU and his
termination, due to the “almost extinct demand for direct medical services by the private and semi-government
corporations in providing health care for their employees.”
Dr. Meris, believing that the notice of closure was a mere ploy for his ouster in view of his refusal to retire, filed on a
complaint against Capitol and Dr. Clemente for illegal dismissal and reinstatement with claims for backwages,
moral and exemplary damages, plus attorney’s fees.
LABOR ARBITER: found for Capitol. It held that the abolition of the ISU was a valid and lawful exercise of
management prerogatives and there was convincing evidence to show that ISU was being operated at a loss.
NLRC: Modified the Labor Arbiter’s decision. It held that in the exercise of Capitol’s management prerogatives, it had
the right to close the ISU even if it was not suffering business losses in light of Article 283 of the Labor Code and
jurisprudence. NLRC set aside the Labor Arbiter’s directive for the payment of retirement benefits to Dr. Meris
because he did not retire. Instead, it ordered the payment of separation pay as provided under Article 283 as he was
discharged due to closure of ISU, to be charged against the retirement fund.
CA: found that Dr. Meris was illegally dismissed. It held that Capitol’s evidence failed to meet the standard of a
sufficient and adequate proof of loss necessary to justify the abolition of the ISU. ISU was not in fact abolished, its
operation and management having merely changed hands from Dr. Meris to Dr. Clemente; and that there was a
procedural lapse in terminating the services of Dr. Meris, no written notice to DOLE of the abolition having been
made, thereby violating the requirement embodied in Article 283.
ISSUE: W/N the CA acted with grave abuse of discretion in NOT UPHOLDING Capitol’s MANAGEMENT
PREROGATIVE TO ABOLISH THE ISU.
HELD: NO. Work is a necessity that has economic significance deserving legal protection. The social justice and
protection to labor provisions in the Constitution dictate so.
Employers are also accorded rights and privileges to assure their self-determination and independence and
reasonable return of capital. This mass of privileges comprises the so-called management prerogatives. Although
they may be broad and unlimited in scope, the State has the right to determine whether an employer’s privilege is
exercised in a manner that complies with the legal requirements and does not offend the protected rights of labor.
One of the rights accorded an employer is the right to close an establishment or undertaking; one of the authorized
causes in terminating employment of workers, the only limitation being that the closure must not be for the
purpose of circumventing the provisions on termination of employment embodied in the Labor Code.

ART. 283. Closure of establishment and reduction of personnel. – The employer may also terminate the employment
of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the
closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and
Employment at least 1 month before the intended date thereof.

In case of termination due to the installation of labor saving devices or redundancy, the worker affected shall be
entitled to a separation pay equivalent to at least his 1 month pay or to at least 1 month pay for every year of
service, whichever is higher. In case retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business losses or financial reverses, the separation
pay shall be equivalent to 1 month pay or at least 1/2 month pay for every year of service, whichever is higher. A
fraction of at least 6 months shall be considered 1 whole year.
The phrase "closures or cessation of operations of establishment or undertaking" includes a partial or total closure
or cessation.
As long as the company’s exercise of the same is in good faith to advance its interest and not for the purpose of
defeating or circumventing the rights of employees under the law or a valid agreement, such exercise will be
upheld. Clearly then, the right to close an establishment or undertaking may be justified on grounds other than
business losses but it cannot be an unbridled prerogative to suit the whims of the employer.
The ultimate test of the validity of closure or cessation of establishment or undertaking is that it must be bona
fide in character. And the burden of proving such falls upon the employer. 40
In the case at bar, Capitol failed to sufficiently prove its good faith in closing the ISU.
From the letter of Dr. Clemente to Dr. Meris, it is gathered that the abolition of the ISU was due to the "almost extinct
demand for direct medical service by the private and semi-government corporations in providing health care for their
employees;" and that such extinct demand was brought about by "the existing trend of industrial companies
allocating their health care requirements to HMOs or thru a tripartite arrangement with medical insurance carriers
and designated hospitals."
The records of the case, however, fail to impress that there was indeed extinct demand for the medical services
rendered by the ISU. (proof: ISU’s Annual Report for the fiscal years 1986 to 1991; UNCONTROVERTED)
If there was extinct demand for the ISU medical services as what Capitol and Dr. Clemente purport to convey, why the
number of client companies of the ISU increased from 11 to 18 from 1986 to 1991, as well as the number of patients
from both industrial corporations and Capitol employees, they did not explain.
The "Analysis of Income and Expenses" adduced by Capitol showing that the ISU incurred losses from July 1990 to
February 1992, was prepared by its internal auditor Vicenta Fernandez, a relative of Dr. Clemente, and not by an
independent external auditor, hence, not beyond doubt. It is the financial statements audited by independent
external auditors which constitute the normal method of proof of the profit and loss performance of a company.
At all events, the claimed losses are contradicted by the accounting records of Capitol itself which show that ISU had
increasing revenue from 1989 to 1991.
The existence of business losses is not required to justify the closure or cessation of establishment or undertaking as
a ground to terminate employment of employees. Even if the ISU were not incurring losses, its abolition or closure
could be justified on other grounds like that proffered by Capitol – extinct demand. Capitol failed, however, to
present sufficient and convincing evidence to support such claim of extinct demand.
The closure of ISU then surfaces to be contrary to the provisions of the Labor Code on termination of employment.
The termination of the services of Dr. Meris not having been premised on a just or authorized cause, he is entitled to
either reinstatement or separation pay if reinstatement is no longer viable, and to backwages.
HOWEVER, reinstatement is not feasible in case of a strained employer-employee relationship or when the work
or position formerly held by the dismissed employee no longer exists, as in the instant case. Dr. Meris is thus
entitled to payment of separation pay at the rate of 1 month salary for every year of his employment, and full
backwages from the time of his dismissal from April 30, 1992 until the expiration of his term as Chief of ISU or his
mandatory retirement, whichever comes first.
BITOY JAVIER (DANILO JAVIER) vs. FLY ACE CORPORATION/FLORDELYN CASTILLO
[G.R. No. 192558 February 15, 2012] p:MENDOZA, J.:
FACTS: Bitoy Javier was an employee of Fly Ace since September 2007, performing various tasks at the latter’s
warehouse such as cleaning and arranging the canned items before their delivery to certain locations, except in
instances when he would be ordered to accompany the company’s delivery vehicles, as pahinante. He reported for
work from Monday to Saturday from 7:00am- 5:00pm. During his employment, he was not issued an ID and payslips
by the company. Then, on May 6, 2008, he reported for work but he was no longer allowed to enter the company
premises by the security guard upon the instruction of Ruben Ong, his superior. Javier later discovered that Ong had
been courting his daughter, Annalyn, after the two met at a fiesta celebration in Malabon City. Annalyn tried to talk
to Ong and convince him to spare her father from trouble but he refused to accede. Thereafter, Javier was
terminated from his employment without notice.
Thus, Javier filed a complaint before the NLRC for underpayment of salaries and other labor standard benefits. To
support his allegations, Javier presented an affidavit of one Bengie Valenzuela who alleged that Javier was a
pahinante of Fly Ace from September 2007 to January 2008. The said affidavit was subscribed before the Labor
Arbiter.
FLY ACE: averred that it was engaged in the business of importation and sales of groceries. Javier was contracted by
its employee, Ong, as extra helper on a pakyaw basis at an agreed rate of P300/trip, which was later increased to
P325. Ong contracted Javier roughly 5 to 6 times only in a month whenever the vehicle of its contracted hauler,
Milmar Hauling Services, was not available. Fly Ace no longer needed the services of Javier. Denying that he was
their employee, Fly Ace insisted that there was no illegal dismissal.
LABOR ARBITER: dismissed the complaint on the ground that Javier failed to present proof that he was a regular
employee of Fly Ace. Javier has no employee ID showing his employment with Fly Ace, nor any document showing
that he received the benefits accorded to regular employees of Fly Ace. Fly Ace is not engaged in trucking business
but in the importation and sales of groceries.
NLRC: found in favor of Javier. NLRC was of the view that a pakyaw-basis arrangement did not preclude the
existence of employer-employee relationship. "Payment by result is a mere method of computing compensation, not
a basis for determining the existence or absence of an employer-employee relationship. In this case, the NLRC held
that substantial evidence was sufficient basis for judgment on the existence of the employer-employee relationship.
Javier was a regular employee of Fly Ace because there was reasonable connection between the particular activity
performed by the employee in relation to the usual business or trade of the employer (importation, sales and
delivery of groceries).
CA: reinstated the dismissal of Javier’s complaint as ordered by the LA. In an illegal dismissal case, the onus
probandi rests on the employer to prove that its dismissal was for a valid cause. However, before a case for illegal
dismissal can prosper, an employer-employee relationship must first be established. It is incumbent upon Bitoy to
prove the employee-employer relationship by substantial evidence, but he failed to discharge his burden. The non-
issuance of a company-issued identification card to Bitoy supports the contention that Bitoy was not its employee.
Further, it found that Javier’s work was not necessary and desirable to the business or trade of the company. Lastly,
the CA declared that the facts alleged by Javier did not pass the "control test."
ISSUE: W/N the initial burden of proving existence of an employer-employee relationship falls on the EMPLOYEE.
HELD: YES, and Javier’s claim of employment with Fly Ace as wanting and deficient. In dealing with factual issues in
labor cases, "substantial evidence – that amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion – is sufficient."
Although Sec. 10, Rule VII of the New Rules of Procedure of the NLRC allows a relaxation of the rules of procedure
and evidence in labor cases, this rule of liberality does not mean a complete dispensation of proof. Labor officials
are enjoined to use reasonable means to ascertain the facts speedily and objectively with little regard to
technicalities or formalities, but nowhere in the rules are they provided a license to completely discount evidence, or
the lack of it. The quantum of proof required must still be satisfied.
No particular form of evidence is required to prove the existence of such employer-employee relationship. Any
competent and relevant evidence to prove the relationship may be admitted. Hence, while no particular form of
evidence is required, a finding that such relationship exists must still rest on some substantial evidence. Moreover,
the substantiality of the evidence depends on its quantitative as well as its qualitative aspects."
In sum, the rule of thumb remains: the onus probandi falls on petitioner to establish or substantiate such claim by
the requisite quantum of evidence. "Whoever claims entitlement to the benefits provided by law should establish his
or her right thereto." Sadly, Javier failed to adduce substantial evidence as basis for the grant of relief.
In this case, the LA and the CA both concluded that Javier failed to establish his employment with Fly Ace. By way of
evidence on this point, all that Javier presented were his self-serving statements purportedly showing his activities as
an employee of Fly Ace. Clearly, Javier failed to pass the substantiality requirement to support his claim. Hence, the
Court sees no reason to depart from the findings of the CA.
The lone affidavit executed by one Bengie Valenzuela was unsuccessful in strengthening Javier’s cause. In said
document, all Valenzuela attested to was that he would frequently see Javier at the workplace where the latter was
also hired as stevedore. Javier’s mere presence at the workplace falls short in proving employment therein.

The Court is of the considerable view that on Javier lies the burden to pass the well-settled tests to determine the
existence of an employer-employee relationship, viz:
(1) the selection and engagement of the employee;
(2) the payment of wages;
(3) the power of dismissal; and
(4) the power to control the employee’s conduct. *most important

In this case, Javier was not able to persuade the Court that the above elements exist in his case. He could not submit
competent proof that Fly Ace engaged his services as a regular employee, that Fly Ace paid his wages as an
employee, or that Fly Ace could dictate what his conduct should be while at work. In other words, Javier’s
allegations did not establish that his relationship with Fly Ace had the attributes of an employer-employee
relationship on the basis of the above-mentioned four-fold test. Worse, Javier was not able to refute Fly Ace’s
assertion that it had an agreement with a hauling company to undertake the delivery of its goods. It was also baffling
to realize that Javier did not dispute Fly Ace’s denial of his services’ exclusivity to the company. In short, all that Javier
laid down were bare allegations without corroborative proof.

The Court’s decision does not contradict the settled rule that "payment by the piece is just a method of
compensation and does not define the essence of the relation." Payment on a piece-rate basis does not negate
regular employment. "The term ‘wage’ is broadly defined in Article 97 of the Labor Code as remuneration or
earnings, capable of being expressed in terms of money whether fixed or ascertained on a time, task, piece or
commission basis. Payment by the piece is just a method of compensation and does not define the essence of the
relations.

While the Constitution is committed to the policy of social justice and the protection of the working class, it should
not be supposed that every labor dispute will be automatically decided in favor of labor. Management also has its
rights which are entitled to respect and enforcement in the interest of simple fair play. Out of its concern for the less
privileged in life, the Court has inclined, more often than not, toward the worker and upheld his cause in his conflicts
with the employer. Such favoritism, however, has not blinded the Court to the rule that justice is in every case for the
deserving, to be dispensed in the light of the established facts and the applicable law and doctrine. 39
ALILEM CREDIT COOPERATIVE, INC., vs. SALVADOR BANDIOLA, JR. [G.R. No. 173489 February 25, 2013]
P: PERALTA, J.:
DOCTRINE: Only substantial evidence is required in an administrative proceeding; substantial evidence – that amount
of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion – is sufficient."
FACTS: Salvador Bandiola, Jr. was employed by Alilem Credit Cooperative, Inc. as bookkeeper. Alilem’s Board of
Directors received a letter from a certain Napoleon Gao-ay reporting the alleged immoral conduct and unbecoming
behavior of Bandiola by having an illicit relationship with Napoleon’s sister, Thelma Palma. Upon preliminary, the
Board received evidence of Bandiola’s alleged extramarital affair. Bandiola denied the accusation against him. He
claimed that the accusation was a result of the insecurity felt by some members of the cooperative and of the Board
because of his growing popularity owing to his exemplary record as an employee. Thelma executed an affidavit
likewise denying the allegations of extra-marital affair.
Meanwhile, the Board received a petition from about 50 members of the cooperative asking the relief of Bandiola
due to his illicit affair with Thelma. In its Summary Investigation Report, the Ad Hoc Committee concluded that
Bandiola was involved in an extra-marital affair with Thelma. After due hearing, the Board decided to terminate
Bandiola’s services as bookkeeper, without any compensation or benefit except the unpaid balance of his regular
salary for services actually rendered. Thus, Bandiola filed a Complaint for Illegal Dismissal against Alilem before the
Regional Arbitration Branch of the NLRC.
LABOR ARBITER: dismissed the complaint for lack of merit. The LAfound Bandiola to have been validly dismissed
from employment for violation of the cooperative’s Personnel Policy, specifically "the commission of acts that bring
discredit to the cooperative organization, especially, but not limited to conviction of any crime, illicit marital affairs,
scandalous acts inimical to established and accepted social mores."
NLRC: declared Alilem guilty of illegal dismissal. The NLRC found the Personnel Policy to be of questionable
existence and validity because it was unnumbered. Even assuming that Bandiola had an extra-marital affair with a
married woman, the latter is not his fellow worker in the business establishment. Thus, Bandiola’s dismissal was not
founded on any of the just causes for termination of employment under Article 282 of the Labor Code, as
amended.
CA: While considering Bandiola’s act a serious misconduct, it refused to consider it sufficient to justify his dismissal,
because it was not done in the performance of his duties as would make him unfit to continue working for
petitioner. Petitioner’s motion for reconsideration was likewise denied.
ISSUE: W/N Alilem adequately proved that Bandiola indeed engaged in extra-marital affairs, an act which
petitioner considers as would bring discredit to the cooperative.
HELD: YES. The employer’s evidence consists of sworn statements of either relatives or friends of Thelma and
respondent. They either had direct personal knowledge of the illicit relationship or revealed circumstances indicating
the existence of such relationship. “The credibility of the persons who bore witness against him can hardly be
questioned because some of these persons are relatives or friends of either [respondent] or his lover.”
While respondent’s act of engaging in extra--marital affairs may be considered personal to him and does not directly
affect the performance of his assigned task as bookkeeper, aside from the fact that the act was specifically provided
for by petitioner’s Personnel Policy as one of the grounds for termination of employment, said act raised concerns to
petitioner as the Board received numerous complaints and petitions from the cooperative members themselves
asking for the removal of respondent because of his immoral conduct.
Before the services of an employee can be validly terminated, the employer must furnish him two written notices:
(a) a written notice served on the employee specifying the ground or grounds for termination, and giving the
employee reasonable opportunity to explain his side; and (b) a written notice of termination served on the
employee indicating that upon due consideration of all the circumstances, grounds have been established to justify
his termination." In this case, Bandiola was adequately afforded the opportunity to defend himself and explain the
accusation against him. Upon receipt of the complaint, petitioner conducted a preliminary investigation and even
created an Ad Hoc Committee to investigate the matter. Respondent was directed to explain either in writing or by a
personal confrontation with the Board why he should not be terminated for engaging in illicit affair.
CHERRY PRICE, STEPHANIE DOMINGO, and LOLITA ARBILERA v. INNODATA PHILS. INC.
[G.R. No. 178505. September 30, 2008] p:CHICO-NAZARIO, J.:
DOCTRINE: In case of doubt or ambiguity, LIBERAL INTERPRETATION of law in favor of workers.
FACTS: Innodata was a domestic corporation engaged in the data encoding and data conversion business. Petitioners
Cherry Price, Stephanie Domingo, and Lolita Arbilera were employed as formatters by INNODATA. The parties
executed an employment contract, stipulating that the contract shall be for a period of one year. According to
INNODATA, petitioners’ employment already ceased due to the end of their contract. In 2000, petitioners filed a
Complaint for illegal dismissal and damages against respondents. Petitioners claimed that they should be
considered regular employees since their positions as formatters were necessary and desirable to the usual business
of INNODATA as an encoding, conversion and data processing company. Petitioners finally argued that they could not
be considered project employees considering that their employment was not coterminous with any project, the
termination of which was predetermined.
INNODATA: explained that due to the wide range of services rendered to its clients, INNODATA was constrained to
hire new employees for a fixed period of not more than one year. Petitioners were not illegally dismissed, for their
employment was terminated due to the expiration of the terms of employment, which is for a limited period only.
LABOR ARBITER: held that as formatters, petitioners occupied jobs that were necessary, desirable, and indispensable
to the data processing and encoding business of INNODATA. By the very nature of their work, they should be
considered regular employees of INNODATA, who were entitled to security of tenure. Thus, their termination for no
just or authorized cause was illegal.
NLRC: absolved INNODATA of the charge of illegal dismissal. NLRC found that petitioners were not regular
employees, but were fixed-term employees as stipulated in their respective contracts of employment. The
determining factor of such fixed-term contracts is not the duty of the employee but the day certain agreed upon by
the parties for the commencement and termination of the employment relationship. The NLRC observed that the
petitioners freely and voluntarily entered into the fixed-term employment contracts with INNODATA. Hence,
INNODATA was not guilty of illegal dismissal when it terminated petitioners’ employment upon the expiration of their
contracts. The NLRC denied petitioners’ Motion for Reconsideration.
CA: sustained the ruling of NLRC, holding that petitioners were not illegally dismissed. INNODATA and petitioners
dealt with each other on more or less equal terms, with no moral dominance exercised by the former on latter.
Petitioners were therefore bound by the stipulations in their contracts terminating their employment after the lapse
of the fixed term. In fixed-term contracts, the stipulated period of employment is governing and not the nature
thereof. Consequently, even though petitioners were performing functions that are necessary or desirable in the
usual business or trade of the employer, petitioners did not become regular employees because their employment
was for a fixed term. The periods in petitioners’ contracts of employment were not imposed to preclude petitioners
from acquiring security of tenure. INNODATA did not commit illegal dismissal for terminating petitioners’
employment upon the expiration of their contracts.
ISSUE: W/N petitioners were hired by INNODATA under valid fixed-term employment contracts.
HELD: NO. There were no valid fixed-term contracts and petitioners were regular employees of the INNODATA who
could not be dismissed except for just or authorized cause.
The employment status of a person is defined and prescribed by law and not by what the parties say it should be. 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.

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 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 exists.
Based on the afore-quoted provision, the following employees are accorded regular status:
(1) those who are engaged to perform activities which are necessary or desirable in the usual business or trade of the
employer, regardless of the length of their employment; and
(2) those who were initially hired as casual employees, but have rendered at least one year of service, whether
continuous or broken, with respect to the activity in which they are employed.

While this Court has recognized the validity of fixed-term employment contracts, it has consistently held that this is
the exception rather than the general rule. More importantly, a fixed-term employment is valid only under certain
circumstances. In Brent, the Court identified several circumstances wherein a fixed-term is an essential and natural
appurtenance, to wit: overseas employment contracts, 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.
As a matter of fact, the Court, in its oft-quoted decision in Brent, also issued a stern admonition that where, from the
circumstances, it is apparent that the period was imposed to preclude the acquisition of tenurial security by the
employee, then it should be struck down as being contrary to law, morals, good customs, public order and public
policy. After considering petitioners’ contracts in their entirety, as well as the circumstances surrounding petitioners’
employment at INNODATA, the Court is convinced that the terms fixed therein were meant only to circumvent
petitioners’ right to security of tenure and are, therefore, invalid.
The contracts of employment submitted by respondents are highly suspect for not only being ambiguous, but also
for appearing to be tampered with. The Court notes that the attempt to change the beginning date of effectivity of
petitioners’ contracts was very crudely done. The alterations are very obvious, and they have not been initialed by
the petitioners to indicate their assent to the same. If the contracts were truly fixed-term contracts, then a change in
the term or period agreed upon is material and would already constitute a novation of the original contract.
Such modification and denial by respondents as to the real beginning date of petitioners’ employment contracts
render the said contracts ambiguous. Obviously, respondents wanted to make it appear that petitioners worked for
INNODATA for a period of less than one year. The only reason the Court can discern from such a move on
respondents’ part is so that they can preclude petitioners from acquiring regular status based on their employment
for one year. Nonetheless, the Court emphasizes that it has already found that petitioners should be considered
regular employees of INNODATA by the nature of the work they performed as formatters, which was necessary in the
business or trade of INNODATA. Hence, the total period of their employment becomes irrelevant.

Even assuming that petitioners’ length of employment is material, given respondents’ muddled assertions, this Court
adheres to its pronouncement in Villanueva v. NLRC to the effect that where a contract of employment, being a
contract of adhesion, is ambiguous, any ambiguity therein should be construed strictly against the party who
prepared it. The Court is, thus, compelled to conclude that petitioners’ contracts of employment became effective on
February 16, 1999, and that they were already working continuously for INNODATA for a year.
“6.4 The EMPLOYEE or the EMPLOYER may pre-terminate this CONTRACT, with or without cause, by giving at least Fifteen – (15) [day] notice to
that effect. Provided, that such pre-termination shall be effective only upon issuance of the appropriate clearance in favor of the said
EMPLOYEE.”

Pursuant to the afore-quoted provisions, petitioners have no right at all to expect security of tenure, even for the supposedly one-year period
of employment provided in their contracts, because they can still be pre-terminated (1) upon the completion of an unspecified project; or (2)
with or without cause, for as long as they are given a three-day notice. Such contract provisions are repugnant to the basic tenet in labor law
that no employee may be terminated except for just or authorized cause.

Under Section 3, Article XVI of the Constitution, it is the policy of the State to assure the workers of security of tenure and free them from the
bondage of uncertainty of tenure woven by some employers into their contracts of employment. This was exactly the purpose of the legislators
in drafting Article 280 of the Labor Code – to prevent the circumvention by unscrupulous employers of the employee’s right to be secure in his
tenure by indiscriminately and completely ruling out all written and oral agreements inconsistent with the concept of regular employment.
BEST WEAR GARMENTS and/or WARREN PARDILLA vs. ADELAIDA DE LEMOS and CECILE OCUBILLO,
[G.R. No. 191281 December 5, 2012] p: VILLARAMA, J.:
DOCTRINE: Management Rights are likewise protected.
FACTS: Cecile Ocubillo and Adelaida De Lemos were hired as sewers on piece-rate basis by Best Wear Garments in
1993 and 1994, respectively. In 2004, De Lemos filed a complaint for illegal dismissal with prayer for backwages and
other accrued benefits. Ocubillo filed a similar complaint. The two alleged that Sitosta, the General Manager of Best
Wear, arbitrarily transferred them to other areas of operation of petitioner’s garments company, which they said
amounted to constructive dismissal as it resulted in less earnings for them. After two months, De Lemos was again
transferred to a "different operation where she could not earn as much as before because by-products require long
period of time to finish." She averred that the reason for her transfer was her refusal "to render overtime work up to
7:00 p.m." On her part, Ocubillo alleged that her transfer was precipitated by her having "incurred excessive
absences since 2001." Sitosta also allegedly required her to render overtime work up to 7:00 p.m. which she refused
"because she was only paid up to 6:25 p.m." Further, when prodded for separation pay, Sitosta explained to both De
Lemos and Ocubillo that the company had no existing policy on granting separation pay, and hence he could not
act on their request. De Lemos never reported back to work since March 2004, while Ocubillo failed to report for
work from October 2004 to the present.
LABOR ARBITER: held that complainants were constructively, nay, illegally dismissed from employment. Labor
Arbiter ruled that since respondents neither resigned nor abandoned their jobs, the ambiguities in the circumstances
surrounding their dismissal are resolved in favor of the workers.
NLRC: dismissed respondents’ complaints. The NLRC found no basis for the charge of constructive dismissal. We find
more credible respondents’ assertion that complainants’ transfer was a valid exercise of management prerogative.
The company points out that it is engaged in the business of garments manufacturing as a sub-contractor. That, the
kind of work it performs is dependent into with its client which specifies the work it has to perform. And, that
corollary thereto, the work to be performed by its employees will depend on the work specifications in the
contract. Thus, if complainants have been assigned to different operations, it was pursuant to the requirements of
its contracts.
It is to be noted that it was only in 2004 that the cases were filed by complainant De Lemos and Ocubillo. It may not
be amiss to state that the date of filing jibe with respondents’ allegation that sometime in February and March 2004,
complainants intimated their intention to resign and demanded for payment of separation pay but was not favorably
acted upon by management. Be that as it may, considering that complainants were not dismissed by respondents,
they should be ordered to report back to work without backwages and for the respondents to accept them.
CA: found no valid and legitimate business reason for the transfer order which entailed the reduction of
respondents’ earnings. Moreover, the unauthorized absences of respondents did not warrant a finding of
abandonment in view of the length of their service with the company and the difficulty in finding similar
employment. The CA further invoked the rule that an employee who forthwith takes steps to protest his layoff cannot
by any logic be said to have abandoned his work.
ISSUE: W/N the company was guilty of constructive illegal dismissal
HELD: NO. The right of employees to security of tenure does not give them vested rights to their positions to the
extent of depriving management of its prerogative to change their assignments or to transfer them. Thus, an
employer may transfer or assign employees from one office or area of operation to another, provided there is no
demotion in rank or diminution of salary, benefits, and other privileges, and the action is not motivated by
discrimination, made in bad faith, or effected as a form of punishment or demotion without sufficient cause. 16
[Blue Dairy Corporation v. NLRC] The managerial prerogative to transfer personnel must be exercised without grave
abuse of discretion, bearing in mind the basic elements of justice and fair play. In particular, the employer must be
able to show that the transfer is not unreasonable, inconvenient or prejudicial to the employee; nor does it involve a
demotion in rank or a diminution of his salaries, privileges and other benefits. Should the employer fail to overcome
this burden of proof, the employee’s transfer shall be tantamount to constructive dismissal, which has been
defined as a quitting because continued employment is rendered impossible, unreasonable or unlikely; as an offer
involving a demotion in rank and diminution in pay.
Likewise, constructive dismissal exists when an act of clear discrimination, insensibility or disdain by an employer has
become so unbearable to the employee leaving him with no option but to forego with his continued employment.
CA erred in reversing the NLRC’s ruling that respondents were not constructively dismissed.
Being piece-rate workers assigned to individual sewing machines, respondents’ earnings depended on the quality
and quantity of finished products. That their work output might have been affected by the change in their specific
work assignments does not necessarily imply that any resulting reduction in pay is tantamount to constructive
dismissal. Workers under piece-rate employment have no fixed salaries and their compensation is computed on
the basis of accomplished tasks.
As admitted by respondent De Lemos, some garments or by-products took a longer time to finish so they could not
earn as much as before. Also, the type of sewing jobs available would depend on the specifications made by the
clients of the company. Under these circumstances, it cannot be said that the transfer was unreasonable,
inconvenient or prejudicial to the respondents. Such deployment of sewers to work on different types of garments
as dictated by present business necessity is within the ambit of management prerogative which, in the absence of
bad faith, ill motive or discrimination, should not be interfered with by the courts.
The records are bereft of any showing of clear discrimination, insensibility or disdain on the part of petitioners in
transferring respondents to perform a different type of sewing job. It is unfair to charge petitioners with constructive
dismissal simply because the respondents insist that their transfer to a new work assignment was against their will.
We have long stated that "the objection to the transfer being grounded on solely upon the personal inconvenience or
hardship that will be caused to the employee by reason of the transfer is not a valid reason to disobey an order of
transfer." That respondents eventually discontinued reporting for work after their plea to be returned to their former
work assignment was their personal decision, for which the petitioners should not be held liable particularly as the
latter did not, in fact, dismiss them.

The constitutional policy of providing full protection to labor is not intended to oppress or destroy management.
While the Constitution is committed to the policy of social justice and the protection of the working class, it should
not be supposed that every labor dispute will be automatically decided in favor of labor. Management also has its
rights which are entitled to respect and enforcement in the interest of simple fair play. Thus, where management
prerogative to transfer employees is validly exercised, as in this case, courts will decline to interfere.

[G.R. Nos. 158786 & 158789 October 19, 2007]

TOYOTA MOTOR PHILS. CORP. WORKERS ASSOCIATION (TMPCWA), et. al. vs. NLRC p: VELASCO, JR., J.:
FACTS: In 1999, the Union filed a petition for certification election among the Toyota rank and file employees with
the National Conciliation and Mediation Board (NCMB). Upon appeal, the DOLE Secretary granted the Union’s prayer,
and directed the immediate holding of the certification election. Toyota’s plea for reconsideration was denied, and
the certification election was conducted. Med-Arbiter Order certified the Union as the sole and exclusive bargaining
agent of all the Toyota rank and file employees. Toyota challenged said Order via an appeal to the DOLE Secretary.
In the meantime, the Union submitted its CBA proposals to Toyota, but the latter refused to negotiate in view of its
pending appeal. Consequently, the Union filed a notice of strike on with the NCMB, based on Toyota’s refusal to
bargain. NCMB-NCR converted the notice of strike into a preventive mediation case on the ground that the issue of
whether or not the Union is the exclusive bargaining agent of all Toyota rank and file employees was still unresolved
by the DOLE Secretary.
Then, on February 21, 2001, 135 Union officers and members failed to render the required overtime work, and
instead marched to and staged a picket in front of the BLR office in Intramuros, Manila. The Union, through a letter,
requested that its members be allowed to be absent on February 22, 2001 to attend the hearing, but this was denied
by Toyota. Despite denial of the Union’s request, more than 200 employees staged mass actions on February 22
and 23, 2001 in front of the BLR and the DOLE offices, to protest the partisan and anti-union stance of Toyota.
The deliberate absence of the employees on February 22 to 23, 2001 resulted in huge losses of P53,849,991 on the
part of Toyota. Thereafter, Toyota terminated the employment of 227 employees for participation in concerted
actions in violation of its Code of Conduct and for misconduct under Article 282 of the Labor Code.
In reaction, the Union went on strike on March 17, 2001. Subsequently, from March 28, 2001 to April 12, 2001, the
Union intensified its strike by barricading the gates of Toyota’s Bicutan and Sta. Rosa plants. The strikers prevented
workers who reported for work from entering the plants. Toyota filed a petition for injunction with a prayer for the
issuance of a TRO with the NLRC. It sought free ingress to and egress from its Bicutan and Sta. Rosa manufacturing
plants. NLRC issued a TRO against the Union.
Meanwhile, Toyota filed a petition to declare the strike illegal with the NLRC arbitration branch, and prayed that the
erring Union officers, directors, and members be dismissed. The DOLE Secretary assumed jurisdiction over the labor
dispute and issued an Order certifying the labor dispute to the NLRC. In said Order, the DOLE Secretary directed all
striking workers to return to work at their regular shifts by April 16, 2001. On the other hand, it ordered Toyota to
accept the returning employees under the same terms and conditions obtaining prior to the strike or at its option,
put them under payroll reinstatement. The parties were also enjoined from committing acts that may worsen the
situation.
The Union ended the strike on April 12, 2001. The union members and officers tried to return to work on April 16,
2001 but were told that Toyota opted for payroll-reinstatement authorized by the Order of the DOLE Secretary.
Meanwhile, on May 23, 2001, despite the issuance of the DOLE Secretary’s certification Order, several payroll-
reinstated members of the Union staged a protest rally in front of Toyota’s Bicutan Plant bearing placards and
streamers in defiance of the April 10, 2001 Order.
Then, on May 28, 2001, around 44 Union members staged another protest action in front of the Bicutan Plant. At the
same time, some 29 payroll-reinstated employees picketed in front of the Santa Rosa Plant’s main entrance, and
were later joined by other Union members.
Notwithstanding repeated orders to file its position paper, the Union still failed to submit its position paper.
Consequently, the NLRC issued an Order directing the Union to submit its position paper on the scheduled hearing;
otherwise, the case shall be deemed submitted for resolution based on the evidence on record. The Union still failed
to do so. Subsequently, the NLRC, in its August 9, 2001 Decision, declared the strikes staged by the Union on
February 21 to 23, 2001 and May 23 and 28, 2001 as illegal. The NLRC considered the mass actions staged on
February 21 to 23, 2001 illegal as the Union failed to comply with the procedural requirements of a valid strike under
Art. 263 of the Labor Code. After the DOLE Secretary assumed jurisdiction over the Toyota dispute on April 10, 2001,
the Union again staged strikes on May 23 and 28, 2001. The NLRC found the strikes illegal as they violated Art. 264 of
the Labor Code which proscribes any strike or lockout after jurisdiction is assumed over the dispute by the President
or the DOLE Secretary.
ISSUE:) W/N the mass actions committed by the Union on different occasions are illegal strikes
HELD: YES. The alleged protest rallies in front of the offices of BLR and DOLE Secretary and at the Toyota plants
constituted illegal strikes

Noted authority on labor law, Ludwig Teller, lists six categories of an illegal strike, viz:
(1) [when it] is contrary to a specific prohibition of law, such as strike by employees performing governmental
functions; or
(2) [when it] violates a specific requirement of law[, such as Article 263 of the Labor Code on the requisites of a valid
strike]; or
(3) [when it] is declared for an unlawful purpose, such as inducing the employer to commit an unfair labor practice
against non-union employees; or
(4) [when it] employs unlawful means in the pursuit of its objective, such as a widespread terrorism of non-strikers
[for example, prohibited acts under Art. 264(e) of the Labor Code]; or
(5) [when it] is declared in violation of an existing injunction[, such as injunction, prohibition, or order issued by the
DOLE Secretary and the NLRC under Art. 263 of the Labor Code]; or
(6) [when it] is contrary to an existing agreement, such as a no-strike clause or conclusive arbitration clause. 33

A strike means any temporary stoppage of work by the concerted action of employees as a result of an industrial or
labor dispute. A labor dispute, in turn, includes any controversy or matter concerning terms or conditions of
employment or the association or representation of persons in negotiating, fixing, maintaining, changing, or
arranging the terms and conditions of employment, regardless of whether the disputants stand in the proximate
relation of the employer and the employee.
The protest actions undertaken by the Union officials and members on February 21 to 23, 2001 are not valid and
proper exercises of their right to assemble and ask government for redress of their complaints, but are illegal strikes
in breach of the Labor Code. The Union’s position is weakened by the lack of permit from the City of Manila to hold
"rallies." Shrouded as demonstrations, they were in reality temporary stoppages of work perpetrated through the
concerted action of the employees who deliberately failed to report for work on the convenient excuse that they will
hold a rally at the BLR and DOLE offices in Intramuros, Manila
With respect to the strikes committed from March 17 to April 12, 2001, those were initially legal as the legal
requirements were met. However, on March 28 to April 12, 2001, the Union barricaded the gates of the Bicutan and
Sta. Rosa plants and blocked the free ingress to and egress from the company premises. TThe acts of the Union
officers and members are in palpable violation of Art. 264(e), which proscribes acts of violence, coercion, or
intimidation, or which obstruct the free ingress to and egress from the company premises. Undeniably, the strikes
from March 28 to April 12, 2001 were illegal.
It is explicit from the directive by the Secretary that the Union and its members shall refrain from engaging in any
activity that might exacerbate the tense labor situation in Toyota, which certainly includes concerted actions. This
was not heeded by the Union and the individual respondents who staged illegal concerted actions on May 23 and 28,
2001 in contravention of the Order of the DOLE Secretary that no acts should be undertaken by them to aggravate
the "already deteriorated situation."
The general rule is that when just causes for terminating the services of an employee under Art. 282 of the Labor
Code exist, the employee is not entitled to separation pay. The apparent reason behind the forfeiture of the right to
termination pay is that lawbreakers should not benefit from their illegal acts. The dismissed employee, however, is
entitled to "whatever rights, benefits and privileges [s/he] may have under the applicable individual or collective
bargaining agreement with the employer or voluntary employer policy or practice" or under the Labor Code and
other existing laws. This means that the employee, despite the dismissal for a valid cause, retains the right to receive
from the employer benefits provided by law, like accrued service incentive leaves. With respect to benefits granted
by the CBA provisions and voluntary management policy or practice, the entitlement of the dismissed employees to
the benefits depends on the stipulations of the CBA or the company rules and policies.
As in any rule, there are exceptions. One exception where separation pay is given even though an employee is validly
dismissed is when the court finds justification in applying the principle of social justice well entrenched in the 1987
Constitution.
We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances
where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral
character.
The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the
underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense. Compassion for the
poor is an imperative of every humane society but only when the recipient is not a rascal claiming an undeserved
privilege. Social justice cannot be permitted to be refuge of scoundrels any more than can equity be an impediment
to the punishment of the guilty. Those who invoke social justice may do so only if their hands are clean and their
motives blameless and not simply because they happen to be poor. This great policy of our Constitution is not meant
for the protection of those who have proved they are not worthy of it, like the workers who have tainted the cause of
labor with the blemishes of their own character. 67
In all of the foregoing situations, the Court declined to grant termination pay because the causes for dismissal
recognized under Art. 282 of the Labor Code were serious or grave in nature and attended by willful or wrongful
intent or they reflected adversely on the moral character of the employees.
We therefore find that in addition to serious misconduct, in dismissals based on other grounds under Art. 282 like
willful disobedience, gross and habitual neglect of duty, fraud or willful breach of trust, and commission of a crime
against the employer or his family, separation pay should not be conceded to the dismissed employee.

One last point to consider—it is high time that employer and employee cease to view each other as adversaries
and instead recognize that theirs is a symbiotic relationship, wherein they must rely on each other to ensure the
success of the business.
When they consider only their own self-interests, and when they act only with their own benefit in mind, both
parties suffer from short-sightedness, failing to realize that they both have a stake in the business. The employer
wants the business to succeed, considering the investment that has been made. The employee in turn, also wants
the business to succeed, as continued employment means a living, and the chance to better one’s lot in life.
It is clear then that they both have the same goal, even if the benefit that results may be greater for one party than
the other. If this becomes a source of conflict, there are various, more amicable means of settling disputes and of
balancing interests that do not add fuel to the fire, and instead open avenues for understanding and cooperation
between the employer and the employee.
Even though strikes and lockouts have been recognized as effective bargaining tools, it is an antiquated notion that
they are truly beneficial, as they only provide short-term solutions by forcing concessions from one party; but staging
such strikes would damage the working relationship between employers and employees, thus endangering the
business that they both want to succeed. The more progressive and truly effective means of dispute resolution lies in
mediation, conciliation, and arbitration, which do not increase tension but instead provide relief from them. In the
end, an atmosphere of trust and understanding has much more to offer a business relationship than the traditional
enmity that has long divided the employer and the employee.

MA. WENELITA TIRAZONA vs. PHILIPPINE EDS TECHNO- SERVICE INC. (PET INC.) AND/OR KEN KUBOTA, MAMORU
ONO and JUNICHI HIROSE [G.R. No. 169712, January 20, 2009] p: CHICO-NAZARIO, J.:
FACTS: Wenelita Tirazona, being the Administrative Manager of Philippine EDS Techno-Service, Inc., was a
managerial employee, who held a position of trust and confidence. After PET officers/directors called her attention to
her improper handling of a situation involving a rank-and-file employee, she claimed that she was denied due
process for which she demanded P2 million indemnity from PET and its officers/directors, coupled with a threat of a
lawsuit if the same was not promptly paid within five days.. Tirazona admitted to reading a confidential letter
addressed to PET officers/directors containing the legal opinion of the counsel of PET regarding her case. Both the
NLRC and the CA found that Tirazona was validly terminated from her employment on the ground that she willfully
breached the trust and confidence reposed in her by her employer.
SC concluded that Tirazona has given PET more than enough reasons to distrust her. The arrogance and hostility she
has shown towards the company and her stubborn, uncompromising stance in almost all instances justify the
company’s termination of her employment. Moreover, Tirazona’s reading of what was supposed to be a confidential
letter between the counsel and directors of the PET, even if it concerns her, only further supports her employer’s
view that she cannot be trusted. In fine, the Court cannot fault the actions of PET in dismissing petitioner.
TIRAZONA: moved for reconsideration, arguing that the Court failed to consider the length of her service to PET in
affirming her termination from employment. She prayed that her dismissal be declared illegal. Alternatively, should
the Court uphold the legality of her dismissal, Tirazona pleaded that she be awarded separation pay and retirement
benefits, out of humanitarian considerations.
SCMR: denied Tirazona’s Motion for Reconsideration, as the same did not present any substantial arguments that
would warrant a modification of our previous ruling. (Thus, Tirazona filed the instant Motion for Leave to File a
Second Motion for Reconsideration, raising essentially the same arguments and prayers contained in her first
Motion for Reconsideration.)
ISSUE: W/N Tirazon should be entitled to separation pay and retirement benefits
HELD: NO. As a general rule, an employee who has been dismissed for any of the just causes enumerated under
Article 2821 of the Labor Code is not entitled to separation pay. Only unjustly dismissed employees are entitled to
retirement benefits and other privileges including reinstatement and backwages.
Although by way of exception, the grant of separation pay or some other financial assistance may be allowed to an
employee dismissed for just causes on the basis of equity, separation pay shall be allowed as a measure of social
justice only in those instances where the employee is validly dismissed for causes other than serious misconduct
or those reflecting on his moral character. A contrary rule would have the effect of rewarding rather than punishing
the erring employee for his offense. We do not agree that the punishment is his dismissal only and that the
separation pay has nothing to do with the wrong he has committed.
The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the
underprivileged. At best, it may mitigate the penalty, but it certainly will not condone the offense. Compassion for
the poor is an imperative of every humane society but only when the recipient is not a rascal claiming an undeserved
privilege. Social justice cannot be permitted to be a refuge of scoundrels any more than can equity be an impediment
to the punishment of the guilty. Those who invoke social justice may do so only if their hands are clean and their
motives blameless and not simply because they happen to be poor. This great policy of our Constitution is not meant
for the protection of those who have proved they are not worthy of it, like the workers who have tainted the cause of
labor with the blemishes of their own character. In accordance with the above pronouncements, Tirazona is not
entitled to the award of separation pay. The award of separation pay or any other kind of financial assistance to
Tirazona, under the guise of compassionate justice, is not warranted in this case. To hold otherwise would only
cause a disturbance of the sound jurisprudence on the matter and a perversion of the noble dictates of social justice.
REPUBLIC OF THE PHILIPPINES, represented by SSC and SSS vs. ASIAPRO COOPERATIVE
[G.R. No. 172101, November 23, 2007] p: CHICO-NAZARIO, J.:
FACTS: Asiapro is a cooperative composed of owners-members of two categories, to wit: (1) regular member, who is
entitled to all the rights and privileges of membership; and (2) associate member, who has no right to vote and be
voted upon and shall be entitled only to such rights and privileges provided in its by-laws. Its primary objectives are
to provide savings and credit facilities and to develop other livelihood services for its owners-members.
1
ART. 282. Termination by employer. - An employer may terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized
representatives; and
(e) Other causes analogous to the foregoing.
The owners-members do not receive compensation or wages from Asiapro. Instead, they receive a share in the
service surplus which the Asiapro earns from different areas of trade it engages in. The owners-members get their
income from the service surplus generated by the quality and amount of services they rendered, which is
determined by the Board of Directors of Asiapro.
Asiapro entered into several service contracts with Stanfilco. In order to enjoy the benefits under the Social Security
Law of 1997, the owners-members of the Asiapro, who were assigned to Stanfilco, requested the services of the
latter to register them with SSS as self-employed and to remit their contributions as such. Also, to comply with
Section 19-A of RA 1161, as amended by RA 8282, the SSS contributions of the said owners-members were equal to
the share of both the employer and the employee.
However, SSS sent a letter to Asiapro, informing the latter that based on the Service Contracts it executed with
Stanfilco, Asiapro is actually a manpower contractor supplying employees to Stanfilco. For that reason, it is an
employer of its owners-members working with Stanfilco. Thus, Asiapro should register itself with SSS as an employer
and make the corresponding report and remittance of premium contributions in accordance with the Social Security
Law of 1997. Asiapro asserted that it is not an employer because its owners-members are the cooperative itself;
hence, it cannot be its own employer. SSS again sent a letter to Asiapro, ordering the latter to register as an employer
and report its owners-members as employees for compulsory coverage with SSS. Asiapro continuously ignored the
demand of SSS. Thus, SSS filed a Petition before SSC against Asiapro and Stanfilco, praying that they be directed to
register as an employer, to report Asiapro’s owners-members as covered employees under the compulsory
coverage of SSS, and to remit the necessary contributions in accordance with the Social Security Law of 1997.
SSC: denied Asiapro’s Motion to Dismiss; CA: rendered a Decision granting the petition filed by the Asiapro. CA
dismissed the petition-complaint of SSS.
REPUBLIC: claim that SSC has jurisdiction over the petition-complaint filed before it by SSS as it involved an issue of
whether or not a worker is entitled to compulsory coverage under the SSS Law. Section 5 of RA 1161 expressly
confers upon SSC the power to settle disputes on compulsory coverage, benefits, contributions and penalties thereon
or any other matter related thereto. Likewise, Section 9 of the same law clearly provides that SSS coverage is
compulsory upon all employees.
Petitioners similarly assert that granting arguendo that there is a prior need to determine the existence of an
employer-employee relationship between Asiapro and its owners-members, said issue does not preclude SSC from
taking cognizance of the aforesaid petition-complaint. Considering that the principal relief sought in the said petition-
complaint has to be resolved by reference to the Social Security Law and not to the Labor Code or other labor
relations statutes, therefore, jurisdiction over the same solely belongs to petitioner SSC.
Finally, petitioners contend that there is an employer-employee relationship between Asiapro and its owners-
members. Asiapro is the employer of its owners-members considering that it undertook to provide services to
Stanfilco, the performance of which is under the full and sole control of the respondent cooperative.
ASIAPRO: alleges that its owners-members own the cooperative, thus, no employer-employee relationship can arise
between them. The persons of the employer and the employee are merged in the owners-members themselves.
Likewise, Asiapro’s owners-members even requested Asiapro to register them with SSS as self-employed individuals.
Hence, SSC has no jurisdiction over the petition-complaint filed before it by SSS.
Asiapro claims that the question of whether an employer-employee relationship exists between it and its owners-
members is a legal and not a factual issue as the facts are undisputed and need only to be interpreted by the
applicable law and jurisprudence.
ISSUE: W/N an employer-employee relationship exists between Asiapro and its owners-members, which would
consequently give SSC jurisdiction over Asiapro.
HELD: YES, there is an employer-employee relationship between Asiapro and its owners-member. Consequently, SSC
has jurisdiction over the petition-complaint filed before it by SSS. The question on the existence of an employer-
employee relationship is not within the exclusive jurisdiction of the NLRC. Article 217 of the Labor Code
enumerating the jurisdiction of the Labor Arbiters and the NLRC provides that:

ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. - (a)

6. Except claims for Employees’ Compensation, Social Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relations, including those of persons in domestic or household service, involving an
amount exceeding P5,000, regardless of whether accompanied with a claim for reinstatement.

Although the aforesaid provision speaks merely of claims for Social Security, it would necessarily include issues on
the coverage thereof, because claims are undeniably rooted in the coverage by the system. Hence, the question on
the existence of an employer-employee relationship for the purpose of determining the coverage of the Social
Security System is explicitly excluded from the jurisdiction of the NLRC and falls within the jurisdiction of the SSC
which is primarily charged with the duty of settling disputes arising under the Social Security Law of 1997.
On the basis thereof, considering that the petition-complaint of SSS involved the issue of compulsory coverage of the
owners-members of the respondent cooperative, this Court agrees with SSC when it declared in its Order that as an
incident to the issue of compulsory coverage, it may inquire into the presence or absence of an employer-employee
relationship without need of waiting for a prior pronouncement or submitting the issue to the NLRC for prior
determination. Since both SSC and the NLRC are independent bodies and their jurisdiction are well-defined by the
separate statutes creating them, SSC has the authority to inquire into the relationship existing between the worker
and the person or entity to whom he renders service to determine if the employment, indeed, is one that is
excepted by the Social Security Law of 1997 from compulsory coverage.

In determining the existence of an employer-employee relationship, the following elements are considered:
(1) the selection and engagement of the workers;
(2) the payment of wages by whatever means;
(3) the power of dismissal; and
(4) the power to control the worker’s conduct, with the latter assuming primacy in the overall consideration.

The most important element 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. The power of control refers to the existence
of the power and not necessarily to the actual exercise thereof. It is not 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. All the aforesaid elements are present in this case.
(1) It is expressly provided in the Service Contracts that Asiapro has the exclusive discretion in the selection and
engagement of the owners-members, as well as its team leaders who will be assigned at Stanfilco; (2) The so-called
shares in the service surplus given by Asiapro to its owners-members were in reality wages, as the same were
equivalent to an amount not lower than that prescribed by existing labor laws, rules and regulations, including the
wage order applicable to the area and industry. It cannot be doubted then that those stipends or shares in the
service surplus are indeed wages, because these are given to the owners-members as compensation in rendering
services to Asiapro’s client, Stanfilco; (3)It is stated in the Service Contracts that Asiapro has the power to
investigate, discipline and remove the owners-members and its team leaders who were rendering services at
Stanfilco; (4) It is Asiapro which has the sole control over the manner and means of performing the services under
the Service Contracts with Stanfilco as well as the means and methods of work. Also, Asiapro is solely and entirely
responsible for its owners-members, team leaders and other representatives at Stanfilco. All these clearly prove
that, indeed, there is an employer-employee relationship between Asiapro and its owners-members.
Asiapro must not be allowed to deny its employment relationship with its owners-members by invoking the
questionable Service Contracts provision, when in actuality, it does exist. The existence of an employer-employee
relationship cannot be negated by expressly repudiating it in a contract, when the terms and surrounding
circumstances show otherwise. The employment status of a person is defined and prescribed by law and not by what
the parties say it should be.
It is settled that the contracting parties may establish such stipulations, clauses, terms and conditions as they want,
and their agreement would have the force of law between them. However, the agreed terms and conditions must not
be contrary to law, morals, customs, public policy or public order.
PRUDENTIAL BANK and TRUST COMPANY vs.CLARITA REYES [G.R. No. 141093 February 20, 2001]
P:GONZAGA-REYES, J.:
FACTS: Clarita Reyes held the position of Assistant Vice President in the foreign department of Prudential Bank,
tasked with the duties, among others, to collect checks drawn against overseas banks payable in foreign currency and
to ensure the collection of foreign bills or checks purchased, including the signing of transmittal letters covering the
same. The auditors of the Bank discovered that two checks in the amount of US$109,650 and US$115,000 received
by the Bank on April 6, 1989, drawn by the Sanford Trading against HSBC-Singapore in favor of Filipinas Tyrom, were
not sent out for collection to HSBC on the alleged order of Reyes, until the said checks became stale. Upon
investigation, the Board of Directors of the Bank resolved not to re-elect Reyes any longer to the position of assistant
president pursuant to the Bank's By-laws, as “the findings have given rise to the Bank's loss of trust and confidence in
Reyes, the same being acts of serious misconduct in the performance of your duties resulting in monetary loss to
the Bank.”
Thus, Reyes filed a complaint for illegal suspension and illegal dismissal with prayer for damages.
LABOR ARBITER: found the dismissal of Reyes to be without factual and legal basis. Thus, judgment is rendered
ordering the bank to pay her back wages for three years in the amount of P540,000 (P15,000.00 x 36 mos.). In lieu of
reinstatement, the Bank is also ordered to pay Reyes separation pay, and profit sharing and unpaid fringe benefits, as
well as Attorney's fees.
NLRC: reversed the Labor Arbiter's decision in its Resolution; denied Reyes’ Motion for Reconsideration. Thus, Reyes
filed a petition for certiorari before the Supreme Court. The subject petition was referred to the Court of Appeals for
appropriate action and disposition.
CA: held in favor of Reyes. The CA reversed and set aside the resolution of the NLRC. dismissed
ISSUE: W/N the NLRC has jurisdiction over the complaint for illegal dismissal; (
PRUDENTIAL BANK: seeks refuge behind the argument that the dispute is an intra-corporate controversy concerning
the non-election of Reyes to the position of Assistant Vice-President of the Bank, which falls under the exclusive and
original, jurisdiction of the SEC (now the RTC) under Section 5 of PD 902-A. More specifically, the Bank contends that
Reyes is a corporate officer, an elective position under the corporate by-laws and her non-election is an intra-
corporate controversy cognizable by the SEC invoking lengthily a number of this Court's decisions.
Petitioner Bank can no longer raise the issue of jurisdiction under the principle of estoppel. The Bank participated in
the proceedings from start to finish. It filed its position paper with the Labor Arbiter. When the decision of the Labor
Arbiter was adverse to it, the Bank appealed to the NLRC. When the NLRC decided in its favor, the bank said nothing
about jurisdiction. Even before the Court of Appeals, it never questioned the proceedings on the ground of lack of
jurisdiction. It was only when the Court of Appeals ruled in favor of private respondent did it raise the issue of
jurisdiction. The Bank actively participated in the proceedings before the Labor Arbiter, the NLRC and the Court of
Appeals. While it is true that jurisdiction over the subject matter of a case may be raised at any time of the
proceedings, this rule presupposes that laches or estoppel has not supervened. In this regard, Bañaga vs.
Commission on the Settlement of Land Problems, 11 is most enlightening. The Court therein stated:
"This Court has time and again frowned upon the undesirable practice of a party submitting his case for
decision and then accepting the judgment, only if favorable, and attacking it for lack of jurisdiction when
adverse. Here, the principle of estoppel lies. Hence, a party may be estopped or barred from raising the
question of jurisdiction for the first time in a petition before the Supreme Court when it failed to do so in the
early stages of the proceedings."
Undeterred, the Bank also contends that estoppel cannot lie considering that "from the beginning, petitioner Bank
has consistently asserted in all its pleadings at all stages of the proceedings that respondent held the position of
Assistant Vice President, an elective position which she held by virtue of her having been elected as such by the
Board of Directors." As far as the records before this Court reveal however, such an assertion was made only in the
appeal to the NLRC and raised again before the Court of Appeals, not for purposes of questioning jurisdiction but to
establish that private respondent's tenure was subject to the discretion of the Board of Directors and that her non-
reelection was a mere expiration of her term. The Bank insists that private respondent was elected Assistant Vice
President sometime in 1990 to serve as such for only one year. This argument will not do either and must be
rejected.
It appears that private respondent was appointed Accounting Clerk by the Bank on July 14, 1963. From that position
she rose to become supervisor. Then in 1982, she was appointed Assistant Vice-President which she occupied until
her illegal dismissal on July 19, 1991. The bank's contention that she merely holds an elective position and that in
effect she is not a regular employee is belied by the nature of her work and her length of service with the Bank. As
earlier stated, she rose from the ranks and has been employed with the Bank since 1963 until the termination of her
employment in 1991. As Assistant Vice President of the foreign department of the Bank, she is tasked, among others,
to collect checks drawn against overseas banks payable in foreign currency and to ensure the collection of foreign
bills or checks purchased, including the signing of transmittal letters covering the same. It has been stated that "the
primary standard of determining regular employment is the reasonable connection between the particular activity
performed by the employee in relation to the usual trade or business of the employer. 12 Additionally, "an employee is
regular because of the nature of work and the length of service, not because of the mode or even the reason for
hiring them."13 As Assistant Vice-President of the Foreign Department of the Bank she performs tasks integral to the
operations of the bank and her length of service with the bank totaling 28 years speaks volumes of her status as a
regular employee of the bank. In fine, as a regular employee, she is entitled to security of tenure; that is, her services
may be terminated only for a just or authorized cause. 14 This being in truth a case of illegal dismissal, it is no wonder
then that the Bank endeavored to the very end to establish loss of trust and confidence and serious misconduct on
the part of private respondent but, as will be discussed later, to no avail.
This brings us to the second issue wherein the Bank insists that it has presented substantial evidence to prove the
breach of trust on the part of private respondent warranting her dismissal. On this point, the Court of Appeals
disagreed and set aside the findings of the NLRC that Reyes deliberately withheld the release of the two dollar
checks; that she is guilty of conflict of interest that she waived her right to due process for not attending the hearing;
and that she was dismissed based on loss of trust and confidence. We quote pertinent portions of the decision, to
wit:
"FIRST: Respondent Bank heavily relied on the testimony and affidavit of Remittance Clerk Joven' in trying to
establish loss of confidence. However, Joven's allegation that petitioner instructed her to hold the subject
two dollar checks amounting to $224,650.00 falls short of the requisite proof to warrant petitioner's
dismissal. Except for Joven's bare assertion to withhold the dollar checks per petitioner's instruction,
respondent Bank failed to adduce convincing evidence to prove bad faith and malice. It bears emphasizing
that respondent Bank's witnesses merely corroborate Joven's testimony.
Upon this point, the rule that proof beyond reasonable doubt is not required to terminate an employee on
the charge of loss of confidence and that it is sufficient that there is some basis for such loss of confidence, is
not absolute. The right of an employer to dismiss employees on the ground that it has lost its trust and
confidence in him must not be exercised arbitrarily and without just cause. For loss of trust and confidence to
be valid ground for an employee's dismissal, it must be substantial and not arbitrary, and must be founded on
clearly established facts sufficient to warrant the employee's separation from work (Labor vs. NLRC, 248
SCRA 183).
SECOND. Respondent Bank's charge of deliberate withholding of the two dollar checks finds no support in
the testimony of Atty. Jocson, Chairman of the Investigating Committee. On cross examination, Atty. Jocson
testified that the documents themselves do not show any direct withholding (pp. 186-187, Rollo). There
being conflict in the statement of witnesses, the court must adopt the testimony which it believes to be true
(U.S. vs. Losada, 18 Phil. 90).
THIRD. Settled is the rule that when the conclusions of the Labor Arbiter are sufficiently substantiated by the
evidence on record, the same should be respected by appellate tribunals since he is in a better position to
assess and evaluate the credibility of the contending parties (Ala Mode Garments, Inc. vs. NLRC, 268 SCRA
497). In this regard, the Court quotes with approval the following disquisition of Labor Arbiter Linsangan,
thus:
This Office has repeatedly gone over the records of the case and painstakingly examined the
testimonies of respondent bank's witnesses. One thing was clearly established: that the legality of
complainant's dismissal based on the first ground stated in respondent's letter of termination (exh.
25-J, supra) will rise or fall on the credibility of Miss Joven who undisputedly is the star witness for
the bank. It will be observed that the testimonies of the bank's other witnesses, Analiza Castillo,
Dante Castor and Antonio Ragasa pertaining to the non-release of the dollar checks and their
corresponding transmittal letters were all anchored on what was told them by Ms. Joven, that is: she
was instructed by complainant to hold the release of subject checks. In a nutshell, therefore, the
issue boils down to who between complainant and Ms. Joven is more credible.
After painstakingly examining the testimonies of Ms. Joven and respondent's other witnesses' this
Office finds the evidence still wanting in proof of complainant's guilt. This Office had closely observed
the demeanor of Ms. Joven while testifying on the witness stand and was not impressed by her
assertions. The allegation of Ms. Joven in that her non-release of the dollar checks was upon the
instruction of complainant Reyes is extremely doubtful. In the first place, the said instruction
constitutes a gross violation of the bank's standard operating procedure. Moreover, Ms. Joven was
fully aware that the instruction, if carried out, will greatly prejudice her employer bank. It was
incumbent upon Ms. Joven not only to disobey the instruction but even to report the matter to
management, if same was really given to her by complainant.
Our doubt on the veracity of Ms. Joven's allegation even deepens as we consider the fact that when
the non-release of the checks was discovered by Ms. Castillo the former contented herself by
continuously not taking any action on the two dollar checks. Worse, Ms. Joven even impliedly told by
Ms. Castillo (sic) to ignore the two checks and just withhold their release. In her affidavit Ms. Castillo
said:
'4. When I asked Cecille Joven what I was supposed to do with those checks, she said the
same should be held as per instruction of Mrs. Reyes.' (Exh. "14", supra).
The evidence shows that it was only on 16 May 1990 that Ms. Joven broke her silence on the matter
despite the fact that on 15 November 1989, at about 8:00 p.m. the complainant, accompanied by
driver Celestino Banito, went to her residence and confronted her regarding the non-release of the
dollar checks. It took Ms. Joven eighteen (18) months before she explained her side on the
controversy. As to what prompted her to make her letter of explanation was not even mentioned.
On the other hand, the actions taken by the complainant were spontaneous. When complainant was
informed by Mr. Castor and Ms. Castillo regarding the non-release of the checks sometime in
November, 1989 she immediately reported the matter to Vice President Santos, Head of the Foreign
Department. And as earlier mentioned, complainant went to the residence of Ms. Joven to confront
her. In this regard, Celestino Bonito, complainant's driver, stated in his affidavit, thus:
'1. Sometime on November 15, 1989 at about 7:00 o'clock in the evening, Mrs. Clarita Tan
Reyes and I were in the residence of one Ms. Cecille Joven, then a Processing Clerk in the
Foreign Department of Prudential Bank;
2. Ms. Cecille Joven, her mother, myself, and Mrs. Clarita Tan Reyes were seated in the sala
when the latter asked the former, Ms. Cecille Joven, how it came about that the two dollar
checks which she was then holding with the transmittal letters, were found in a plastic
envelope kept day-to-day by the former;
3. Hesitatingly, Cecille Joven said: "Eh, Mother (Mrs. Tan Reyes had been intimately called
Mother in the Bank) akala ko bouncing checks yon mga yon.
4. Mrs. Clarita Tan Reyes, upon hearing those words, was surprised and she said: "Ano,
papaano mong alam na bouncing na hindi mo pa pinadadala:
5. Mrs. Cecille Joven turned pale and was not able to answer.'
There are other factors that constrain this Office to doubt even more the legality of complainant's
dismissal based on the first ground stated in the letter of dismissal. The non-release of the dollar
checks was reported to top management sometime on 15 November 1989 when complainant,
accompanied by Supervisor Dante Castor and Analiza Castillo, reported the matter to Vice President
Santos. And yet, it was only on 08 March 1991, after a lapse of sixteen (16) months from the time the
non-release of the checks was reported to the Vice President, that complainant was issued a
memorandum directing her to submit an explanation. And it took the bank another four (4) months
before it dismissed complainant.
The delayed action taken by respondent against complainant lends credence to the assertion of the
latter that her dismissal was a mere retaliation to the criminal complaints she filed against the bank's
top officials.
It clearly appears from the foregoing that the complainant herein has no knowledge of, much less
participation in, the non-release of the dollar checks under discussion. Ms. Joven is solely responsible
for the same. Incidentally, she was not even reprimanded by the bank.
 FOURTH. Respondent Bank having failed to furnish petitioner necessary documents imputing loss of
confidence, petitioner was not amply afforded opportunity to prepare an intelligent answer. The Court finds
nothing confidential in the auditor's report and the affidavit of Transmittal Clerk Joven. Due process dictates
that management accord the employees every kind of assistance to enable him to prepare adequately for his
defense, including legal representation.
The issue of conflict of interest not having been covered by the investigation, the Court finds it irrelevant to
the charge."15
We uphold the findings of the Court of Appeals that the dismissal of private respondent on the ground of loss of trust
and confidence was without basis. The charge was predicated on the testimony of Ms. Joven and we defer to the
findings of the Labor Arbiter as confirmed and adopted by the Court of Appeals on the credibility of said witness. This
Court is not a trier of facts and will not weigh anew the evidence already passed upon by the Court of Appeals. 16
On the third issue, the Bank questions the award of full backwages and other benefits from July 19, 1991 up to the
finality of this judgment; separation pay equivalent to one (1) month salary for every year of service in lieu of
reinstatement; and attorney's fees equivalent to ten (10%) percent of the total award. The Bank argues, in the main,
that private respondent is not entitled to full backwages in view of the fact that she did not bother to appeal that
portion of the labor arbiter's judgment awarding back wages limited to three years. It must be stressed that private
respondent filed a special civil action for certiorari to review the decision of the NLRC 17 and not an ordinary appeal.
An ordinary appeal is distinguished from the remedy of certiorari under Rule 65 of the Revised Rules of Court in that
in ordinary appeals it is settled that a party who did not appeal cannot seek affirmative relief other than the ones
granted in the decision of the court below. 18 On the other hand, resort to a judicial review of the decisions of the
National Labor Relations Commission in a petition for certiorari under Rule 65 of Rules of Court is confined to issues
of want or excess of jurisdiction and grave abuse of discretion. 19 In the instant case, the Court of Appeals found that
the NLRC gravely abused its discretion in finding that the private respondent's dismissal was valid and so reversed the
same. Corollary to the foregoing, the appellate court awarded backwages in accordance with current jurisprudence.
Indeed, jurisprudence is clear on the amount of backwages recoverable in cases of illegal dismissal. Employees
illegally dismissed prior to the effectivity of Republic Act No. 6715 on March 21, 1989 are entitled to backwages up to
three (3) years without deduction or qualification, while those illegally dismissed after are granted full backwages
inclusive of allowances and other benefits or their monetary equivalent from the time their actual compensation was
withheld from them up to the time of their actual reinstatement. 20 Considering that private respondent was
terminated on July 19, 1991, she is entitled to full backwages from the time her actual compensation was withheld
from her (which, as a rule, is from the time of her illegal dismissal) up to the finality of this judgment (instead of
reinstatement) considering that reinstatement is no longer feasible as correctly pointed out by the Court of Appeals
on account of the strained relations brought about by the litigation in this case. Since reinstatement is no longer
viable, she is also entitled to separation pay equivalent to one (1) month salary for every year of service. 21 Lastly,
since private respondent was compelled to file an action for illegal dismissal with the labor arbiter, she is likewise
entitled to attorney's fees22 at the rate above-mentioned. There is no room to argue, as the Bank does here, that its
liability should be mitigated on account of its good faith and that private respondent is not entirely blameless. There
is no showing that private respondent is partly at fault or that the Bank acted in good faith in terminating an
employee of twenty-eight years. In any event, Article 279 of Republic Act No. 6715 23 clearly and plainly provides for
"full backwages" to illegally dismissed employees.1âwphi1.nêt
WHEREFORE, the instant petition for review on certiorari is DENIED, and the assailed Decision of the Court of
Appeals, dated October 15, 1999, is AFFIRMED.

FONTERRA BRANDS PHILS., INC. vs. LEONARDO LARGADO and TEOTIMO ESTRELLADO,
[G.R. No. 205300, March 18, 2015] p: VELASCO, JR., J.:
FACTS: Fonterra Brands Phils., Inc. contracted the services of Zytron Marketing and Promotions Corp. for the
marketing and promotion of its milk and dairy products. Pursuant to the contract, Zytron provided Fonterra with
trade merchandising representatives, including Leonardo Largado and Teotimo Estrellado. The engagement of their
services began on September 15, 2003 and May 27, 2002, respectively, and ended on June 6, 2006.
On May 3, 2006, Fonterra sent Zytron a letter terminating its promotions contract, effective June 5, 2006. Fonterra
then entered into an agreement for manpower supply with A.C. Sicat Marketing and Promotional Services. Desirous
of continuing their work as TMRs, Largado and Estrellado submitted their job applications with A.C. Sicat, which hired
them for a term of five months, beginning June 7, 2006 up to November 6, 2006.
When respondents’ 5-month contracts with A.C. Sicat were about to expire, they allegedly sought renewal thereof,
but were allegedly refused. This prompted respondents to file complaints for illegal dismissal, regularization, non-
payment of service incentive leave and 13th month pay, and actual and moral damages, against Zytron and A.C.
Sicat.
LABOR ARBITER: dismissed the complaint and ruled that: (1) respondents were not illegally dismissed; and (2) they
were consecutively employed by Zytron and A.C. Sicat, not by Fonterra.
NLRC: affirmed the Labor Arbiter, finding that respondents’ separation from Zytron was brought about by the
execution of the contract between Fonterra and A.C. Sicat where the parties agreed to absorb Zytron’s personnel,
including respondents. Respondents also failed to present any evidence that they protested this set-up. Furthermore,
respondents failed to refute the allegation that they voluntarily refused to renew their contract with A.C. Sicat. Also,
respondents did not assert any claim against Zytron and A.C. Sicat.
CA: found that A.C. Sicat satisfies the requirements of legitimate job contracting, but Zytron does not. According to
the CA: (1) Zytron’s paid-in capital of P250,000 cannot be considered as substantial capital; (2) its Certificate of
Registration was issued by the DOLE months after respondents’ supposed employment ended; and (3) its claim that
it has the necessary tools and equipment for its business is unsubstantiated. Therefore, according to the CA,
respondents were Fonterra’s employees.
Additionally, the CA held that respondents were illegally dismissed since Fonterra itself failed to prove that their
dismissal is lawful. However, the illegal dismissal should be reckoned from the termination of their supposed
employment with Zytron on June 6, 2006. Furthermore, respondents’ transfer to A.C. Sicat is tantamount to a
completely new engagement by another employer. Lastly, the termination of their contract with A.C. Sicat arose from
the expiration of their respective contracts with the latter. The CA, thus, ruled that Fonterra is liable to respondents
and ordered the reinstatement of respondents without loss of seniority rights, with full backwages, and other
benefits from the time of their illegal dismissal up to the time of their actual reinstatement.
ISSUE: W/N Zytron is a labor-only contractor
HELD: As regards the CA’s conclusion that Zytron is not a legitimate job contractor, We are of the view that such is
IMMATERIAL to the resolution of the illegal dismissal issue. We find that respondents voluntarily terminated their
employment with Zytron, contrary to their allegation that their employment with Zytron was illegally terminated.
The termination of respondents’ employment with Zytron was brought about by the cessation of their contracts with
the latter. Respondents were the ones who refused to renew their contracts with Zytron, and the NLRC’s finding that
they themselves acquiesced to their transfer to A.C. Sicat. This being the case, Zytron cannot be said to have illegally
dismissed respondents, contrary to the findings of the CA.

As regards respondents’ employment with A.C. Sicat and its termination via non-renewal of their contracts,
considering that in labor-only contracting, the law creates an employer-employee relationship between the principal
and the labor-only contractor’s employee as if such employees are directly employed by the principal employer, and
considers the contractor as merely the agent of the principal, 7 it is proper to dispose of the issue on A.C. Sicat’s status
as a job contractor first before resolving the issue on the legality of the cessation of respondents’ employment.

ISSUE: W/N A.C. Sicat is a labor-only contractor

HELD: NO. The SC found that A.C. Sicat was a legitimate job contractor.

A person is considered engaged in legitimate job contracting or subcontracting if the following conditions concur:
1.The contractor or subcontractor carries on a distinct and independent business and undertakes to perform the job,
work or service on its own account and under its own responsibility according to its own manner and method, and
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;
2.The contractor or subcontractor has substantial capital or investment; and
3.The agreement between the principal and contractor or subcontractor assures the contractual employees
entitlement to all labor and occupational safety and health standards, free exercise of the right to self-organization,
security of tenure, and social and welfare benefits.

On the other hand, contracting is prohibited when the contractor or subcontractor merely recruits, supplies or
places workers to perform a job, work or service for a principal and if any of the following elements are present,
thus:
1.The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or
service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal; or
2.The contractor does not exercise the right to control over the performance of the work of the contractual
employee.
The CA correctly found that A.C. Sicat is engaged in legitimate job contracting. It duly noted that A.C. Sicat was able
to prove its status as a legitimate job contractor for having presented the following evidence, to wit: 1.Certificate of
Business Registration; 2.Certificate of Registration with the Bureau of Internal Revenue; 3.Mayor’s Permit;
4.Certificate of Membership with the Social Security System; 5.Certificate of Registration with the Department of
Labor and Employment; 6.Company Profile; and 7.Certifications issued by its clients.
Furthermore, A.C. Sicat has substantial capital, having assets totaling P5,926,155.76 as of December 31, 2006. Also,
its Agreement with Fonterra clearly sets forth that A.C. Sicat shall be liable for the wages and salaries of its
employees or workers, including benefits, premiums, and protection due them, as well as remittance to the proper
government entities of all withholding taxes, SSS, and Medicare premiums, in accordance with relevant laws.
Fonterra’s issuance of Merchandising Guidelines, stock monitoring and inventory forms, and promo mechanics, for
compliance and use of A.C. Sicat’s employees assigned to them, does not establish that Fonterra exercises control
over A.C. Sicat. These were imposed only to ensure the effectiveness of the promotion services to be rendered by
the merchandisers as it would be risky, if not imprudent, for any company to completely entrust the performance of
the operations it has contracted out.
These sufficiently show that A.C. Sicat carries out its merchandising and promotions business, independent of
Fonterra’s business.

The termination of respondents’ employment with the latter was simply brought about by the expiration of their employment
contracts. Foremost, respondents were fixed-term employees. As previously held by this Court, 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
predetermined dates of completion; they also include those to which the parties by free choice have assigned a specific date of
termination. The determining factor of such contracts is not the duty of the employee but the day certain agreed upon by the
parties for the commencement and termination of the employment relationship.

In the case at bar, it is clear that respondents were employed by A.C. Sicat as project employees. In their employment contract
with the latter, it is clearly stated that "A.C. Sicat is temporarily employing respondents as TMRs effective June 6[, 2006 under the
following terms and conditions: The need for your service being only for a specific project, your temporary employment will be
for the duration only of said project of our client, namely to promote FONTERRA BRANDS products x x x which is expected to be
finished on or before Nov. 06, 2006." 13

Respondents, by accepting the conditions of the contract with A.C. Sicat, were well aware of and even acceded to the condition
that their employment thereat will end on said pre-determined date of termination. They cannot now argue that they were
illegally dismissed by the latter when it refused to renew their contracts after its expiration. This is so since the non-renewal of
their contracts by A.C. Sicat is a management prerogative, and failure of respondents to prove that such was done in bad faith
militates against their contention that they were illegally dismissed.