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ESCARIO ET AL. VS.

NLRC
G.R. No. 160302 September 27, 2010

DOCTRINE: Payment of wages as a component of the four-fold test in determining employer-


employee relationship.

KAPUNAN, J.:

FACTS: Petitioners are merchandisers of California Marketing Co. Inc. (CMC). Among the
tasks assigned to them were the withdrawing of stocks from the warehouse, the fixing of prices,
price-tagging, displaying of merchandise, and the inventory of stocks. These were done under the
control, management and supervision of CMC. The materials and equipment necessary in the
performance of their job were provided by CMC. Their salaries were being paid by CMC.
According to petitioners, the hiring, control and supervision of the workers and the payment of
salaries, were all coursed by CMC through its agent D.L. Admark in order for CMC to avoid its
liability under the law. On 7 February 1992, petitioners filed a case against CMC before the
Labor Arbiter for the regularization of their employment status. During the pendency of the case
before the Labor Arbiter, D.L. Admark sent to petitioners notice of termination of their
employment effective 16 March 1992. Hence, their complaint was amended so as to include
illegal dismissal as cause of action.
CMC denied the existence of an employer-employee relationship between petitioner and
itself. Rather, CMC contended that it is D.L. Admark who is the employer of the petitioners.
The Labor Arbiter ruled that there was an employer-employee relationship between CMC and
the petitioners. However, the NLRC set aside the decision, ruled that there was no such
relationship and that D.L. Admark was a legitimate independent contractor.

ISSUE: Whether or not the petitioners are employees of CMC?

RULING: No. The Supreme Court ruled that there is no employer-employee relationship
between the CMC and the petitioners, rather, the latter are employees of agent D.L. Admark. By
applying the four-fold test used in determining employer-employee relationship, the status of
D.L. Admark as the true employer of petitioners is established. Among the elements of this test
is the payment of wages. In the case at bar, the NLRC noted that D.L. Admark was able to
present in evidence the payroll of petitioners, sample SSS contribution forms filed and submitted
by D.L. Admark to the SSS, and the application for employment by R. de los Reyes, all tending
to show that D.L. Admark was paying for the petitioners’ salaries. In contrast, petitioners did not
submit an iota of evidence that it was CMC who paid for their salaries. The fact that the
agreement between CMC and D.L. Admark contains the billing rate and cost breakdown of
payment for core merchandisers and coordinators does not in any way establish that it was CMC
who was paying for their salaries. As correctly pointed out by both CMC 16 and the Office of the
Solicitor General,17 such cost breakdown is a standard content of service contracts designed to
insure that under the contract, employees of the job contractor will receive benefits mandated by
law. Thus, the petitioners are employees of D.L. Admark, not of CMC.
RADIO COMMUNICATIONS OF THE PHILIPPINES INC. VS. SECRETARY OF
LABOR
G.R. No. 77959 January 9, 1989

DOCTRINE: Individual written authorization as pre-requisite to wage deduction is not


applicable strictly to deductions of employees with their knowledge and consent and authorized
by law.

REGALADO, J.:

FACTS: Radio Communications of the Philippines, Inc. (RCPI), a domestic corporation


engaged in the telecommunications business, filed with the National Wages Council an
application for exemption from the coverage of Wage Order No. 1. The application was opposed
by respondent labor organization United RCPI Communications Labor Association - Federation
of Unions of Rizal (URCPICLA-FUR). The application was subsequently disapproved with
finality. RCPI was ordered to pay its covered employees the mandatory living allowance of
P2.00 daily effective March 22, 1981.
In its Motion for Immediate Issuance of Writ of Execution, URCPICLA-FUR reiterated
its claim for said union service fee in an amount equivalent to 20% of the total backpay due its
members for having successfully prosecuted its claim for payment of wages and for
reimbursement of expenses incurred by FUR. Director Pucan issued an Order awarding to
URCPICLA-FUR and FUR 15% as union service fees. Despite notice, RCPI paid in full the
covered employees without deducting the union service fee. The Secretary of Labor
consequently issued an order holding RCPI as solely liable for 10% of the awarded amounts as
attorney's fees.

ISSUE: Whether or not RCPI can invoke lack of an individual written authorization from the
employees as a shield for its fraudulent refusal to pay the service fee of URCPICLA-FUR?

RULING: No. The Supreme Court ruled that RCPI cannot invoke the lack of an individual
written authorization from the employees as a shield for its fraudulent refusal to pay the service
fee of URCPICLA-FUR. Indeed, Article 222 of the Labor Code requires an individual written
authorization as a prerequisite to wage deductions seeks to protect the employee against
unwarranted practices that would diminish his compensation without his knowledge and
consent. However, the deductions required of the petitioner and the employees do not run
counter to the express mandate of the law since the same are not unwarranted or without their
knowledge and consent. Also, the deductions for the union service fee in question are authorized
by law and do not require individual check-off authorizations. Thus, RCPI is solely liable and is
required to pay the 10% union service fee of URCPICLA-FUR.
APODACA VS. NLRC
G.R. No. 80039 April 18, 1989

DOCTRINE: ART. 113. Wage Deduction. — No employer, in his own behalf or in behalf of
any person, shall make any deduction from the wages of his employees, except: (a) In cases
where the worker is insured with his consent by the employer, and the deduction is to
recompense the employer for the amount paid by him as premium on the insurance. (b) For
union dues, in cases where the right of the worker or his union to checkoff has been recognized
by the employer or authorized in writing by the individual worker concerned; and (c) In cases
where the employer is authorized by law or regulations issued by the Secretary of Labor.

GANCAYCO, J.:

FACTS: Ernesto Apodaca, employee of Intrans Phils., Inc., was persuaded by respondent Jose
Mirasol to subscribe to 1,500 shares of respondent corporation at ₽100 per share or a total of
₽150,000. Apodaca made an initial payment of ₽37,500. Apodaca subsequently resigned and
instituted with the NLRC a complaint against private respondents for the payment of his unpaid
wages, cost of living allowance, the balance of his gasoline and representation expenses, and his
bonus compensation. Private respondents admitted that there is due to Apodaca ₽17,060.07 but
this was applied to the unpaid balance of his subscription in the amount of ₽95,439.93. Apodaca
questioned the set-off alleging that there was no call or notice for the payment of the unpaid
subscription and that, accordingly, the alleged obligation is not enforceable. The Labor Arbiter
ruled in favor of Apodaca. On appeal, NLRC reversed the decision and held that a stockholder
who fails to pay his unpaid subscription on call becomes a debtor of the corporation and that the
set-off of said obligation against the wages and others due to petitioner is not contrary to law,
morals and public policy.

ISSUE: Whether or not the corporation can validly offset the unpaid shared in lieu of the wages?

HELD: No. The Supreme Court held that the NLRC has no jurisdiction to determine such intra-
corporate dispute between the stockholder and the corporation as in the matter of unpaid
subscriptions. Assuming arguendo that the NLRC may exercise jurisdiction over the said subject
matter under the circumstances of this case, the unpaid subscriptions are not due and payable
until a call is made by the corporation for payment. Moreover, assuming that there was a call for
payment of the unpaid subscription, the NLRC cannot validly set it off against the wages and
other benefits due Apodaca. Article 113 of the Labor Code allows such a deduction from the
wages of the employees by the employer, only in three instances, to wit: (a) In cases where the
worker is insured with his consent by the employer, and the deduction is to recompense the
employer for the amount paid by him as premium on the insurance; (b) For union dues, in cases
where the right of the worker or his union to checkoff has been recognized by the employer or
authorized in writing by the individual worker concerned; and (c) In cases where the employer is
authorized by law or regulations issued by the Secretary of Labor. Thus, the private respondents
are ordered to pay Apodaca the amount of P17,060.07 plus legal interest computed from the time
of the filing of the complaint on December 19, 1986.
METROPOLITAN BANK AND TRUST COMPANY EMPLOYEES VS. NLRC
G.R. No. 102636 September 10, 1993

DOCTRINE: Wage Distortion means a situation where an increase in prescribed wage rates
results in the elimination or severe contradiction of intentional quantitative differences in wage
or salary rates between and among employee groups in an establishment as to effectively
obliterate the distinctions embodied in such wage structure based on skills, length of service, or
other logical bases of differentiation.

VITUG, J.:

FACTS: Metropolitan Bank & Trust Company entered into a collective bargaining agreement
with Metropolitan Bank & Trust Company Employees Union-ALU-TUCP (MBTCEU), granting
a monthly P900 wage increase effective 01 January 1989, P600 wage increase 01 January 1990,
and P200 wage increase effective 01 January 1991. Only regular employees as of 01 January
1989 were given the increase to the exclusion of probationary employees. Upon the effectivity of
Republic Act No. 6727 a month later, the bank gave the P25 increase per day, or P750 a month,
to its probationary employees and to those who had been promoted to regular or permanent
status before 01 July 1989 but whose daily rate was P100 and below. The bank refused to give
the same increase to its regular employees who were receiving more than P100 per day and
recipients of the P900 CBA increase.
Contending that the bank's implementation of Republic Act 6727 resulted in the
categorization of the employees into (a) the probationary employees as of 30 June 1989 and
regular employees receiving P100 or less a day who had been promoted to permanent or regular
status before 01 July 1989, and (b) the regular employees as of 01 July 1989, whose pay was
over P100 a day, and that, between the two groups, there emerged a substantially reduced salary
gap, the MBTCEU sought from the bank the correction of the alleged distortion in pay. In order
to avert an impeding strike, the bank petitioned the Secretary of Labor to assume jurisdiction
over the case. The Labor Arbiter ruled that the bank should restore to complainants and their
members the Nine Hundred (P900.00) Pesos CBA wage gap they used to enjoy over non-regular
employees as of January 1, 1989 by granting them a Seven Hundred Fifty (P750.00) Pesos
monthly increase effective July 1, 1989. On appeal, the NLRC reversed said decision.
ISSUE: Whether or not the implementation by the bank of Republic Act No. 6727, mandating an
increase in pay of P25 per day for certain employees in the private sector, created a distortion
that would require an adjustment under said law in the wages of the latter's other various groups
of employees?
HELD: Yes. Under the Rules Implementing Republic Act 6727, wage distortion means a
situation where an increase in prescribed wage rates results in the elimination or severe
contradiction of intentional quantitative differences in wage or salary rates between and among
employee groups in an establishment as to effectively obliterate the distinctions embodied in
such wage structure based on skills, length of service, or other logical bases of differentiation. In
the case at bar, there is a wage distortion arising from the bank's implementation of the P25 wage
increase. In keeping then with the intendment of the law and the agreement of the parties
themselves, along with the often repeated rule that all doubts in the interpretation and
implementation of labor laws should be resolved in favor of labor, the Supreme Court ruled that
an acceptable quantitative difference between and among the CBA agreed work levels must be
approximated. It found that the formula offered and incorporated in Wage Order No. IV-02
issued on 21 May 1991 by the Regional Tripartite Wages and Productivity Commission for
correction of pay scale structures in case of wage distortion to well be the appropriate measure to
balance the respective contentions of the parties in this instance, to wit:

Minimum Wage = % x Prescribed = Distortion


—————— Increased Adjustment
Actual Salary

Thus, the decision of the Labor Arbiter is REINSTATED subject to the MODIFICATION that
the wage distortion in question be corrected in accordance with the formula as above-stated.